White House trade adviser Peter Navarro on CEOs concerned about recession risks, trade in 2020

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White House trade adviser Peter Navarro on CEOs concerned about recession risks, trade in 2020

White House trade adviser Peter Navarro discusses ‘phase one’ of U.S.-China trade deal and the outlook for the U.S. economy in 2020.

This is a rush transcript from " Your World with Neil Cavuto," January 2, 2020. This copy may not be in its final form and may be updated.

Charles Payne: Stocks rocking as we kick off the new year. Still more records broken on Wall Street as the bulls charge into 2020, the Dow now closing in on 29,000. Welcome, everyone. I’m Charles Payne, in for Neil Cavuto, and this is Your World. We’re going to talk to a White House adviser, Peter Navarro, in just a moment why he’s bullish on this economy, but first, our market pros on the first trading day of the new year, Frances Newton Stacey, FOX News -- Fox Business’s Susan Li, and we’ve got trader Stephen Gilford, aka the Sarge, outside the New York Stock Exchange. Let me start with you, Sarge, because what’s the atmosphere like down there? This is an electric start to the new year.

Stephen Gilford: It sure is. We have some records once again, but let’s take it all in stride. We realize that tomorrow is the last day of the typical Santa Claus rally. We are expecting some volatility throughout this quarter even if it evens off towards the end of the year. Personally, I'll probably take a little off the top tomorrow as I get ready for a January that, let’s face it, Q4 earnings season could get a little rough. It probably will be. You’re going to have a temper tantrum based on what the Fed does with their expansion program in -- towards the end of March. So, there are reasons to be a little more cautious over the next three months.

Charles Payne: Although, you know, Susan, in the meantime, you know, listen, our viewers aren’t in and out like a professional trader like Sarge, and they’ve got to be thrilled. And the big question many people are saying, you know, “Should I get in?” I mean, because this is a market that closed at the all-time high today, the all --

Susan Li: Yeah.

Charles Payne: -- the session high today. Same thing on Tuesday. It was a lackluster, lazy, lethargic session, and it roared into the close

Susan Li: [laughs] Yes, that’s right, and that’s a bullish sign, by the way, that when investors are willing to hold risk, they are willing to put their money to use in the markets. Look at this. Fourth-best decade over the past century. Usually when the S&P 500 rallies around 25, 29 percent that we’ve seen -- best year in six years -- that usually means another positive year to follow. In fact, 65 percent of the time we’ve seen another up year. So, I think Goldman Sachs has it right when he says -- when they say that the U.S. economy is recession-proof.

Charles Payne: You know, Frances Newton Stacy, I know, like Sarge, you have some concerns, but by the same token, you know, trying to pinpoint the tops or assuming that something is done -- it can be folly. I mean, this is the longest rally in history, and it doesn’t have to end because of old age.

Frances Newton Stacey: That’s true [laughs], not ending because of old age. No, I think that what’s really happening here, and what investors need to know, is the Fed is putting a lot of money into the economy and into circulation at the moment, and that’s always going to support equity prices. For how long, we don’t know. All bull markets come to end at some point in time, but right now we have less volatility, and we have a lot of movement in the equities. As far as should you get in right after an all-time high, that’s never a great time to get in, because the propensity to fall even a little bit is there. But it looks like as long as the Fed is going to continuously put money into circulation, then that definitely supports stock prices going forward.

Charles Payne: Sarge, I want to go back to you, because I kind of disagree on the idea that the average person is going to not get in or pinpoint, because let me tell you something. If you don’t get in when things are good -- I know people; I’ve dealt with individual investors for 30 years -- you’re not going to buy when we’re down a thousand points in one week. So, you’ve got a choice. And let’s talk about the fundamentals, because they look pretty good. You know, we heard that small businesses are doing extremely well, small-business wages are through the roof, blue-collar wages are through the roof. Seven million job openings, 1.26 million more openings than unemployed. That’s the kind of momentum that doesn’t change overnight, does it?

Susan Li: No, it doesn’t change overnight

Stephen Gilford: No, and the economy is strong right now, but I do believe that going towards the end of the year, we’re going to -- we’re going into the election, right? Now, if Donald Trump does well in the polls, that’s obviously a positive for business. Even if his opponents do well in the polls, if it’s a Bloomberg or a Biden, that might not be bad for business, but if you start pricing in higher regulations and increased taxes, that’s very bad for business, and we’ll have to take our chunk off. Now, if there’s also inflation towards the end of the year, what do they do if the Fed -- let’s say the markets start pricing at higher interest rates going into January of next year, or into the election. That changes the whole ballgame.

Charles Payne: That does, but those are all assumptions --

Stephen Gilford: -- complex.

Charles Payne: -- that have not happened yet, though, right? Those are all assumptions that haven’t happened.

Stephen Gilford: No --

Charles Payne: Right now --

Stephen Gilford: I don’t expect a down year for the markets.

Charles Payne: Right now, we came into today --

Stephen Gilford: I expect maybe 8 to 13 percent for the markets.

Charles Payne: -- with China’s central bank putting in another $100 billion into the economy. So, Susan, I know -- listen, there’s always possibilities of things going wrong, but at this moment, the things that are working, the foundation of this rally -- you know, we can become over-bought occasionally, but the foundation is pretty good.

Susan Li: Yeah. Well, again, the deck has been cleared, as has been mentioned, because China is liquidating once again, adding stimulus to the economy, and they’re slowing their growth at -- we’re looking at the slowest growth rate in China in 30 years, and they haven’t even cut interest rates throughout that time. So, if China is liquifying and adding more cash to the system, that doesn’t just stay in China, mind you, like 2008. That goes around the world, and you can bet your bottom dollar that that money is coming here to the U.S. as well.

Charles Payne: All right. In the meantime, there’s a survey from CES --

Stephen Gilford: Actually, I have to add --

Charles Payne: -- from around the world that finds that risk of recession continues to linger here at the top. Of course, recession concerns for business leaders in this country have been a concern as well. Frances Newton Stacy, recession 2020. Do you see a possibility of that?

Frances Newton Stacey: No, what it really looks like now is that we have a little bit of decelerating growth. We don't know how much of that was attributed to the China trade scenario, so we’re going to have to see some economic numbers improve, particularly in the manufacturing index and, you know, the business spending and stuff like that to substantiate these equity prices. However, in the meantime, the Fed is really filling in, so we do see that growth is slowing a little bit, and inflation is likely to tick up. Now, inflation ticking up -- it depends on how much as to how much it affects equity prices, but also, the labor markets are very strong, but sometimes those can kind of compress the profit margins for companies, and it can affect earnings. None of these things happen overnight, but we’re going to watch it very carefully to see if these numbers continue to substantiate where we are from a valuation perspective at these market levels.

Charles Payne: Right. All right, we’ll see. Hey, thank you all very much.

Stephen Gilford: Can I add to that, Charles?

Charles Payne: Happy New Year. We’ve got to go. Sarge, I’m sorry, buddy, but we’ll -- you’ll be back on sometime this week.

Frances Newton Stacey: Thanks, Charles.

Charles Payne: We’ll hash it out some more. Thank you very much. Meanwhile, business leaders may be worried about a possible recession, and they’re concerned about trade in 2020, but my next guest, well, doesn’t appear all that worried, White House trade adviser Peter Navarro. Peter, I know you must be bursting.

Peter Navarro: Get those bitters off your set, Charles.

Charles Payne: [laughs] Man, you must be bursting at the seams, because I know you want to say, “I told you so, I told you so.”

Peter Navarro: [laughs] Oh, my, my, my. Hey, you know, my forecasting streak on the line here now. You know, I -- day after the election, I said 25,000 on the Dow. Everybody said I was crazy. July, I said 30,000 on the Dow if we got USMCA passed and interest rates down, and we’re going to -- 330 points today; we’re getting closer to that. I am bullish, and the reason why I’m bullish is because of the underlying strength of what I call the GDP growth engine, Charles. You know, it’s like four things that drive this economy, right? Consumption, investment, government spending, and exports. Every one of those under President Donald J. Trump is hitting on all cylinders.

Charles Payne: Yeah.

Peter Navarro: You know, the consumer, right? Low unemployment; rising wages; high optimism. That’s going to be the anchor of 2020. But you also have five trade deals that are going to kick in in force in 2020 with Japan, South Korea, Canada, Mexico, and China. Right? Score that for exports. Here’s my sleeper, Charles. I don’t know, there wasn’t enough attention paid to passage of the appropriations bill and the National Defense Authorization Act a couple weeks ago. That is a built-in, beautiful fiscal floor for growth in 2020. And of course, investment, which lagged a bit in 2019 --

Charles Payne: Sure.

Peter Navarro: -- hey, it’s coming to the greatest economy in the world right now --

Charles Payne: So --

Peter Navarro: -- and the trade policy encourages it to come here because people know that we want production here, and if we don’t get it, they get tariffs.

Charles Payne: Peter, let me go over some of those things you said, because you’re absolutely right. We learned earlier in the week that our goods deficit with the rest of the world, the best it’s been in three years as our exports increase and our imports decline, particularly from China. You know, household formation is up. Consumer spending strong, wages strong, and people are saving money. Savings rate around 8 percent, so they’ve got dry powder.

Peter Navarro: Saving and spending. Beautiful.

Charles Payne: Saving and spending, an amazing combination. The spending is pegged to our wages, right? As long as wages are going up, people are going out and spending that extr money. Here’s what these bears, the professional bears, keep saying, and you heard a couple of them, is that -- well, you know, because you just said the magic word “tariffs,” none are ever going to admit the tariffs work. They will never admit.

Peter Navarro: Yeah.

Charles Payne: Two years ago, we heard it was going to be Smoot-Hawley. It has not been Smoot-Hawley. Our economy did not go down 50 percent; our unemployment rate did not go from 6 percent to 25 percent. It is not 1933, 1932. But businesses are holding back. They are holding back, and that’s got some people anxious that, you know what, maybe --

Peter Navarro: Not sure they’re holding back that much more in 2020.

Charles Payne: You think they’re going to unleash their spending?

Peter Navarro: I think they’re going to unleash. I think what turned things around, Charles, was that jobs report, that blow-out jobs report, which basically finished off any doubt that we were going to have a good 2020. And again, you know, the smart money is going to look at what I told you about with that government spending with the appropriations bill and --

Charles Payne: Yeah, but the flip side of that, though, Peter -- I’m going to jump in here. The flip side of that, though, is the smart money is saying, “Hey, the spending” -- the -- our debt, the ticking time bomb --

Peter Navarro: Yeah, well --

Charles Payne: -- the Republicans talked about every single day when President Obama was in office. No one's talking about now. Is it still --

Peter Navarro: Let's make that --

Charles Payne: -- a ticking timebomb?

Peter Navarro: Yeah. Let's make that a short conversation. Until you see the bond market tell you it's a ticking bomb, it isn't a ticking time bomb. It's basically putting in a beautiful fiscal floor to grow. And, you know, as the director of the Office of Trade and Manufacturing Policy, I'm particularly heartened by the nature of those expenditures because we got a really solid defense budget now. And, you know, I go around the country, places like the Philly Shipyard or the combat vehicle plants in, like, Lima, Ohio or York, Pennsylvania, the shipbuilding up in Marinette, Wisconsin, these are the places where line item by line item in the defense budget, the blue wall states --

Charles Payne: Right.

Peter Navarro: -- the Midwest is --

Charles Payne: Right.

Peter Navarro: -- absolutely booming. And this is what people don't understand about President Trump. He not only does all the things at the macrolevel, right -- deregulation, tax cuts, unleashing the energy sector, good trade policy -- he works at the microlevel, one job at a time. He really takes a personal interest in job creation. And so, you see in the in these factories around the country where there's steel, aluminum, combat vehicles, shipyards, whatever, these are where this this economy really derives --

Charles Payne: Well --

Peter Navarro: -- its underlying strength. And that's one of the untold stories of 2019 that I hope we can tell in 2020.

Charles Payne: Well, you're going to have to keep telling it. I don't think anyone -- I don't think the people that said you were wrong are ever going to admit that, "You know what --

Peter Navarro: [laughs]

Charles Payne: -- that this thing is working." The media is never going to admit it. But I've got to tell you, Peter Navarro, I got to let you go, but you deserve a bow in the victory lap, my friend.

Peter Navarro: Hey, 2020 is going to be a great year, Charles Payne. And you're going to do a great job all through the year. I look forward to talking as much as we can.

Charles Payne: We'll see you soon. You know, it's --

Peter Navarro: Bye-bye.

Charles Payne: -- not just investors, by the way, seeing green. Try Bernie Sanders. He might not be leading his rivals in the presidential race, but he is leading them big time in a money race. Could that be enough to win the race? Next.

[commercial break]

Charles Payne: Bernie Sanders fired-up in Iowa today, and firing up the fundraising, bringing over $34 million in the fourth quarter, well ahead of his 2020 rivals. Now, keep in mind, we are still awaiting for the final numbers from Liz Warren. So, if Bernie's breaking out with the cash, can he break out in the polls? Let's get the read from Patrice Onwuka from Independent Women's Forum; McClatchy White House reporter, Francesca Chambers; and Democratic strategist, Jason Nichols. Let me start with you, Patrice. I -- the number is phenomenal. It really is phenomenal. He's got five million individual donors.

Patrice Onwuka: [affirmative]

Charles Payne: And I got to tell you, there's something about Bernie Sanders, since the heart scare, that it feels like he's become more formidable. He's got a wind in his sails. I think he's got a shot at this, at winning the Democratic nomination.

Patrice Onwuka: You know, Charles, I wouldn't have agreed with you two or three months ago, but I do now. He has demonstrated that he is a resilient candidate and a formidable candidate. And, actually, reporters are taking a second look at him, which says that, you know, he shouldn't be dismissed. I mean, when you look at the support, financially, he's getting small-dollar donors coming in and supporting him, $18.00, on average. But he's -- he got something like 40,000 new donors on the last day of the quarter. So, it suggests that people are also taking -- voters are taking a look at him and thinking maybe Sanders can be the one to go up against President Trump.

Charles Payne: You know, Francesca, and the story's not just Bernie Sanders. I mean, Mayor Pete, $24 million dollars; Andrew Yang, over $12 million. And to -- I mean, if I'm reading this right, it feels like you've got a dynamic here where grassroots Democrats are rejecting the establishment candidates and going for the -- you know, something different, something new, which is not unusual. We're seeing this around the world, politically.

Francesca Chambers: Well, we still haven't seen some of the other candidates' fundraising numbers, yet, today. So, I'll wait for that to weigh in, entirely, on that. But as far as beat booted -- Pete Buttigieg is concerned, Charles, you know, his campaign is feeling really good today, they told me. They feel like those are really strong numbers heading into Iowa, which is a state which is very important to his campaign. He's currently campaigning in New Hampshire, over the weekend, but then he'll be back to Iowa to barnstorm. People may not realize this, but his last day as mayor was December 31st. So, he had nothing but time, all of January, to be campaigning, while some of his competitors, like Bernie Sanders, Elizabeth Warren, and Amy Klobuchar might find themselves back in Washington for a significant amount of time during that Senate impeachment trial.

Charles Payne: You know, Jason, of course, Mayor Pete's feeling good about himself. He raised more money than Joe Biden did. Again, you know, my thesis is that as the establishment's behind Biden, and the rationale, he can beat Trump in a general election. But I think it's being rejected by the grassroots in the party.

Jason Nichols: Yeah, but I'm not so sure that I would put Pete Buttigieg in the category of "grassroots politicians," like someone like a Bernie Sanders. And I think that Bernie Sanders' number, I think the most important part was 5 million individual donors. If someone who makes $30,000 dollars is willing to give you $18 dollars, that's a big amount, versus people giving the maximum amount allowable. And you heard, in the last debate, when Buttigieg, they were talking about his wine cellar and [laughs] all of that kind of stuff.

Charles Payne: Yeah.

Jason Nichols: So, I think that he's getting bigger donations, but I don't think he necessarily has the grassroots support that someone like Bernie Sanders has.

Charles Payne: Well, whoever the eventual nominee is, they're going to need, Patrice, a lot of money. President Trump, himself --

Patrice Onwuka: Oh, yeah.

Charles Payne: -- 46 million in the last quarter, I think, coupled with the RNC, we may be looking at a number north of $200 million. So --

Patrice Onwuka: Wow.

Charles Payne: -- you know, what do you make of it? The -- President Trump also doing extraordinarily well with small donors.

Patrice Onwuka: Yeah, he's doing very well. And when you consider the cash on hand, I believe over $100 million, he has a lot of money that he can play with. He also has the benefit of being the sitting president and a media that is obsessed with anything Trump. So, you know, he can get his policies out there. He can continue to be in the forefront of voters' minds, while all of these candidates on the Democratic ticket, they have to spend money to vie against different competitors just to be able to get some of the air in the room that impeachment has not taken.

Charles Payne: Francesca, it's all about the money now, and it's pouring in on both sides. What what do you make of that? I mean, is that a sign of more engagement by, you know, a passionate engagement by the public?

Francesca Chambers: Well, you can, most likely, expect to see more, depending on who wins in Iowa. After Bernie Sanders came very close to beating Hillary Clinton in Iowa last time, the money just started pouring in for him. He had nearly double in the month afterwards. And the same thing goes for New Hampshire, as well. So, as the candidates compete in the Iowas, New Hampshires, South Carolinas, Nevadas, I think you'll also start to see the money start to break for the people who are perceived as having the longevity to be able to put back into their campaigns.

Charles Payne: And on that note, Jason, you know, you take a deep -- even a little deeper look into Bernie Sanders and the way these folks work. The top employer for these folks were Amazon, Starbucks, Wal-Mart, Target. I mean, these are places where they're trying to get unions. These are places with, like, three million workers. It just, it really seems to sound like whatever his message is, it's resonating with the folks who work at these places because the demonization of Amazon, for instance, has been a key across the Democratic platform.

Jason Nichols: But I think that people want health care, something that he's been devoted to. People want some of the issues that he's been talking about in terms of climate. I think that that's resonating with voters and across income level but mainly with working and middle-class voters. And I think that's why Joe -- excuse me -- Bernie Sanders has been staying steady at -- in all of these states. When you look at Joe Biden, he's up and down in different states, whether he's up in Nevada, he's up in South Carolina, he's down in some of the New England states and --

Charles Payne: Yeah.

Jason Nichols: -- but you look at Bernie Sanders, he is steady through all of those states at about 20 percent.

Charles Payne: He has been steady.

Jason Nichols: And I disagree, Charles -- real quick, I just want to say it's not all about the money. Bloomberg would be winning if it were all about the money and --

Charles Payne: No, not having the money. But I think the idea that you can raise that much money from those many small donors suggests that they'll probably also go to the poll, into the poll and pull a lever. Patrice, Francesca, Jason, thank you all very much. Happy New Year. We've got an exciting year --

Female Speaker: Happy New Year.

Charles Payne: -- ahead of us. We'll talk again.

Female Speaker: Happy New Year.

Jason Nichols: Happy New Year, guys.

Charles Payne: So, after an Iranian-backed militia smashed their way into the U.S. Embassy compound in Iraq, a former top State Department official under Obama says it's all President Trump's fault. More on that right after this.

[commercial break]

A former State Department official under President Obama, Wendy Sherman, is blaming President Trump in an op-ed for that U.S. Embassy attack by Iranian-backed militia. Former State Department official, Christian Whiton, joins me now to discuss. The rationale, Christian, I'm sure you read the op-ed. What are your thoughts?

Christian Whiton: Yeah. Well, clearly, it's blaming the victim. It's blaming America First. This isn't that much of a surprise coming from a progressive like Wendy Sherman. She pointed out she was an Obama official. She was the key negotiator behind the worst deal ever negotiated, the Iran nuclear deal, which involved giving billions and billions to the mullahs in Tehran, putting a plane with more than $1 billion in currency, sending it to Tehran in the middle of the night like you're paying off some drug lord, having the same effect which is only to encourage the violence. Incidentally, Wendy Sherman, who would like to be Joe Biden's secretary of state, also in a previous administration, the Clinton administration, organized what was previously the worst deal ever made which was paying off North Korea hundreds of millions of dollars in energy assistance easily monetized to supposedly give up their nuclear weapons; and of course, they didn't do that. So, this is a woman who has paid off two regimes and brought them much closer to being nuclear powers. Really, she shouldn't be showing her face in public.

Charles Payne: You know, Christian, what I don't get is when President Trump talked about brining troops back from the Middle East a lot of folks on the left became hawks, military hawks, all of a sudden. And then when he's talked about, you know, securing our embassy and fighting back, preventing a Benghazi, they say he's trying to start a war. I mean, it's you know -- listen, I get the opposition, but at some point, pick a side.

Christian Whiton: Right. It's a lot of hypocrisy and a lot of crocodile tears, "Oh, the Kurds. The poor Kurds." You know, Donald Trump never actually promised them their own ethnonationalist state of creating a second Kurdistan in Syria. And yet, because he fulfilled a pledge to kill ISIS and then begin withdrawing our forces, or at least right-sizing the force we have in Syria and Iraq, he got a lot of criticism for that. So really, I mean, this is the problem, is that the left doesn't really have a coherent national security policy other than paying off our opponents and just seems to, you know how much, have a policy of orange man bad. Their instinctively against Trump, even when he does things that are good.

Charles Payne: Are you surprised at how quickly the militia turn tail when we show, you know, some strength? I think maybe the [unintelligible] was that we were going to hunker down inside the embassy and not fight back at all, and hopefully that they would, at some point, disperse. But we showed a little bit of strength in Iran.

Christian Whiton: Charles, you're right, and that's what the Iranians are used to. They're used to America backing down, and we've done it under presidents of both parties going back to when they really didn't pay a price for taking our diplomats hostage in '79, for blowing up the marine barracks in Lebanon in '83, for taking U.S. officials hostage, torturing and killing some in Beirut in the 1980s, blowing up the Khobar Towers in the '90s and killing a lot of Americans in Iraq. Iran has gotten away with a lot. And really, Trump is the first president seriously to push back on them. And I think they were stunned; and actually, they withdrew. I mean, I assume we had a lot of forces on the way to take care of business as necessary. But they, frankly, turned tail and ran just on the threat of that.

Charles Payne: I'm going to ask you about a piece in the New York Times when they refer to the embassy attackers as mourners. It was a tweet, I think. They came under a lot of criticism because anyone who knows the area and understands what was going on there knew that this was an orchestrated attack planned by Iran and to deliberately upset America. But once again, they sort of portrayed these folks as mourners, as victims, and America is somehow the bad person, bad entity there.

Christian Whiton: Right. And that's the New York Times, the "newspaper" that's just basically recycling Iranian propaganda. And this isn't just a one-off mistake. This is the same media organization, again, that called Al-Baghdadi --

Charles Payne: Yeah.

Christian Whiton: -- the leader of ISIS whom we killed earlier or killed last year, that called him a "austere religious scholar." That was the head of the premier terrorist jihadist organization in the world.

Charles Payne: Yeah. That's amazing.

Christian Whiton: Now they're doing the same about people who are attacking our embassy. It's really quite disappointing.

Charles Payne: Happy New Year, Christian. Thank you very much.

Christian Whiton: Happy New Year.

Charles Payne: Well, with just a month to go until the Iowa caucus, many caucus goers still are not sure who they're going to go for. Does that spell trouble for Democrats?

[commercial break]

Charles Payne: Lebanon saying it played no official in the escape of former Nissan CEO Carlos Ghosn from Japan, as speculation continues to swirl around how he pulled off this amazing getaway, possibly in a musical instrument case. We’ll be right back. [commercial break]

Charles Payne: Democratic presidential hopefuls Bernie Sanders and Andrew Yang both holding campaign events in this hour. As candidates now turn their focus toward the Iowa caucus, Fox News’ own Peter Doocy is in Iowa with more on what they’re up to. Peter?

Peter Doocy: Charles, Bernie Sanders blew all of his Democratic rivals out of the water today with a big reveal. His fourth-quarter fundraising: $34.5 million. That is almost $10 million more than Mayor Pete Buttigieg made in that time, and it’s almost $12 million more than Joe Biden made during that quarter. And so, now Joe Biden is here for his first event of 2020 -- the primary season is officially upon us -- and he’s trying to convince Iowans to go caucus for him this time next month by trying to convince them that the economy is struggling.

[begin video clip]

Joe Biden: Economy is hurting the middle class and working class very badly, number one. They’re really struggling. Everyone is entitled to be treated with dignity.

[end video clip]

Peter Doocy: Elizabeth Warren still hasn’t given us fourth-quarter fundraising numbers, so we don’t know how she will or won’t fit into the top tier in that department, and as she has tried to stabilize softer poll numbers than she had this summer, she’s been talking less about Medicare for All, but she insists that’s just a coincidence.

[begin video clip]

Elizabeth Warren: I take questions, and I go wherever the questions take me. And so, sometimes we have questions about gun violence, sometimes we have questions about climate -- [end video clip]

Peter Doocy: And the campaign trail is going to be a little less crowded between now and Iowa caucus day because Julian Castro decided to call it quits. One of the most memorable moments of the Castro campaign was when he challenged Joe Biden on the debate stage in Houston about his age, but a few months later, as the dust has settled, Castro is going home, and Joe Biden has a bus with his name on it in Iowa. Charles?

Charles Payne: Yeah, you get the feeling there was some old bad blood there. Peter, thank you very much. So, the Iowa caucus is just a month away. A new report is saying many likely caucus-goers are still undecided. What does that say about the Democratic field? Real Clear Politics Phil Wegmann joins me now. Phil, you know, I think Iowa is sort of infamous for these late decision-making hits, all the money that goes in there, and it’s where you’ve got to have a good ground game. Bernie Sanders almost pulled off the upset last time around, but he’s not -- he’s got to do a lot better now.

Phil Wegmann: And this time around he does have a much better ground game. He’s not just hopping from one state to another state with an insurgent campaign. Instead, he has the infrastructure to really make a challenge there, and we see that he’s in second place, according to the Real Clear Politics average. But like you said at the top, it does finally seem real now that 2020 is finally hear, and it’s going to be real next month when in Iowa and New Hampshire voters finally go to the caucuses to make their choice. The problem is that a lot of those voters are choosing between their first, second, and third favorite options, because while the DNC wanted to have a natural winnowing before these contests with their debates, we still have 14 candidates in the race right now.

Charles Payne: We have 14 in the race, but I think right now only five have qualified for the next debate. There were maybe six in the last debate. It feels like -- you know, whether you like the process or not, I could certainly see where some Democrats could be complaining about it. Maybe we’re starting to really get down to the real candidates who have a real, authentic chance, and that feels like about six names right now.

Phil Wegmann: Yeah, and what we’ve got to watch for here right now is to see when the cold wars will end. So far, we’ve seen Pete Buttigieg and Joe Biden play nice together, we’ve seen an unofficial nonaggression pact between Bernie Sanders and Elizabeth Warren, but at some point, this has to end, because as soon as a progressive candidate or a sort of centrist candidate combines or, you know, consolidates that wing of the party, we’re going to see this race accelerate even more. And I think we saw a little bit of an end to, you know, that nonaggression when over the weekend Pete Buttigieg seemed to take a shot at Joe Biden for his son’s role in Burisma. You know, Hunter Biden was on this Ukraine oil and gas company’s board even though he doesn’t know anything about oil, gas, or relations in the Ukraine. So, eventually, though, they’re going to have to stop pulling punches, and they’re going to have to differentiate if they want to be the nominee. What changes here, you know, after this? You know, do we -- after Iowa, if there aren’t any major upsets, do we -- will we see a massive falloff? Will we then see also a consolidation? Because you can sense in some of these debates, you know, where you have cliques developing, or, you know, it felt like some folks were working for a VP spot more than a presidential spot. Could that sort of -- we could see that hasten, start to speed up a little bit?

Phil Wegmann: I think so, because eventually, after Iowa, some of these candidates are going to have to look in the mirror, because voters and donors from around the country are actually looking in to see whether or not their message resonate and whether or not they have that infrastructure to get things done. And this is why I think Iowa is so interesting, because while Pete Buttigieg is number one according to the Real Clear Politics average right now, you know, two things should keep him up at night. First, the fact that Bernie Sanders is behind him by just two points and Joe Biden behind by just three points, but according to the Des Moines Register, another thing should keep him up, which is that over 60 percent of voters in Iowa say that they are open to changing their mind. So, eventually, you know, we’re going to have a nominee, and I think Iowa is going to be the first answer to the question of whether or not the Democratic Party is going to move farther to the left with a progressive candidate, or they’re going to play it safe with a more moderate centrist.

Charles Payne: This sounds like a real free-for-all. Phil, thank you very much. Appreciate it.

Phil Wegmann: Thank you, sir.

Charles Payne: More threats from NoKo. “No problem,” says President Trump.

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Charles Payne: What, me worry? President Trump downplaying the latest nuclear threats from North Korea and Kim Jong-un. But is he right to do that? Let's ask retired Colonel David Hunt. Colonel Hunt, thanks for joining us.

David Hunt: Hi.

Charles Payne: Hi. So, the threats have been out there. We were going to get a Christmas gift. That did not materialize. President Trump suggesting, for a long time, that he and Kim Jong-un have a different sort of special relationship, that sort of has been a safeguard. Certainly, the provocations dropped dramatically over the last year or two. But we know Kim Jong-un wants something desperately, at this point.

David Hunt: Yeah. I think it was worth the try for the president, twice, to make the trip and try to have a relationship with the head of a terrorist nation. It seems like it doesn't work. The reason for this not working, it's not Kim's call. It's his military and his intelligence services that run that country and, of course, China. The other issue is the problem is always going to be not U.S. and North Korea, but North Korea and South Korea. There's only 30 miles separating North and South Korea, the largest artillery, and not -- and rockets' concentration in the world, across 137-mile-wide Demilitarized Zone. And they are with seconds away from being able to kill about 10 million people. So that's always the issue of what you do with that capability. And, to this day, we haven't solved it.

Charles Payne: But there has been talk about, you know, officially ending the war, getting rid of the Demilitarized Zone. We know South Korea's leader has been really wooing, or attempting to woo, Kim Jong-un. He seems a more open --

David Hunt: Yeah.

Charles Payne: -- to reconciliation than his prior -- than prior South Korean leaders.

David Hunt: Yes, he certainly is. The issue, for this, is China. China does not want a unified North and South Korea for a couple of reasons. One is they don't want -- they don't want refugees flowing into China. And they love, as does Russia, having a state like North Korea to do dirty work. So, the Chinese are never going to be okay with that combination. And they have a big vote to play.

Charles Payne: All right. But China also understands Dr. Frankenstein, at one point, lost control of his monster. Let me ask you about this.

David Hunt: Well --

Charles Payne: I'm not sure -- I'm not sure if you saw these --

David Hunt: -- fair enough.

Charles Payne: -- photos, these pictures, right? Kim Jong-un, he released them there in North Korean state TV. That's him riding the white horse.

David Hunt: Yeah.

Charles Payne: We always know that means a new --

David Hunt: Yeah.

Charles Payne: -- policy announcement, a big missile. And they've been talking about a new missile, as well, maybe an ICBM that that can be pinpointed, you know, instead of just flying far. They can zero-in on targets or a miniaturized rise nuclear warhead.

David Hunt: Yeah, nothing says progress like a fat man on a white horse --

Charles Payne: [laughs]

David Hunt: -- right? I mean, it's --

Charles Payne: I think --

David Hunt: -- it's awful. It's an awful thing to [unintelligible]. Yeah, there'll be something that'll come up, some provocation. Got it. But we still -- we still the most powerful nation in the world at the end of that road of North Korea's annihilation. So, there's all this provocation talk. It's dangerous. They are a nuke state and they're a terrorist state. But the way to get at North Korea has always, and will be for -- unfortunately, is through China.

Charles Payne: All right. So, in the meantime, though, the sanctions appear to be binding somewhat. It's just -- well, it's -- I only got 30 seconds. But do you think, ultimately, it ends up in a military confrontation?

David Hunt: No, I -- no, I do not. They know better. But, again, a wild man with -- get that close to Seoul, Korea is always a problem. But I do not see us with a confrontation because, at the end of that, again, North Korea and China know that that's the end of North Korea.

Charles Payne: Colonel Hunt, happy New Year. Thank you very much.

David Hunt: Happy New Year. Thank you.

Charles Payne: Rudy Giuliani says that he's open to testifying in the Senate impeachment trial. Is that something Democrats and Republicans should worry about?

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Rudy Giuliani: I would testify. I would do demonstrations, like give lectures. I'd give summations. Or, I'd do what I do best: I'd try the case.

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Charles Payne: President Trump's personal attorney, Rudy Giuliani, saying that he would testify in any Senate impeachment trial. Should that have both sides worried? Attorney, Debbie Hines, joins me now. Debbie, thanks for joining us.

Debbie Hines: Thank you.

Charles Payne: So, you know, listen, Rudy certainly has the pedigree –

Debbie Hines: [laughs]

Charles Payne: -- but would it be wise, in your mind?

Debbie Hines: I don't think either side wants Rudy Giuliani to testify. I mean, here's the deal: if you want a witness to testify, you want to put up forth your best witnesses, in any trial. So, that means you want to put on witnesses who are competent, who are going to be reliable, who are consistent with what they've already said, and who are, most importantly, credible. And even those on Team Trump don't believe Rudy Giuliani is credible. I mean, William Barr has already told the president that he should distance himself from Giuliani. Senator Graham, Lindsey Graham has already said that he doesn't really feel that Rudy's all that reliable. And you know, over the break you've already had senators, Republican senators who have distanced themselves. And that's all because they don't believe that he's a credible person and he's really, to be quite honest, more like a loose cannon that's the least likeliest person that you'd want testifying in any particular trial. But if you were looking at the tape that you just played, I mean, he wasn't even coherent. He was rambling, to the extent that --

Charles Payne: I didn't see that much, though. I mean, I hear what you're saying. I didn't see him, you know, incoherent at that point. And let's be honest, I mean, he's got one heck of a track record as a prosecutor, as a mayor, and President Trump loves the fact that he's a fighter. We'll see what happens there. But I want to find out about some other folks in your mind. Mulvaney.

Debbie Hines: -- okay.

Charles Payne: Mulvaney's name has come up. And on the other side, of course, Republicans are saying, "Hey, what about, you know, Joe Biden? What about Hunter Biden?" So, if we, if we unleash all of these witnesses, if this is the route we go down, could we see some of these names?

Debbie Hines: Well, in order to be a witness, you have to have some relevance with respect to the proceedings, and I don't think that Hunter Biden or Joe Biden have anything to do with the articles of impeachment that have been brought forth, whether there's been abuse of power or whether there has been abuse of, with respect to Congress. Those are the issues that are in the case, not what Hunter Biden or Joe Biden had to do with Ukraine.

Charles Payne: Well, but it's all centered on a phone call, though, that was made because President Trump says he was concerned that our national security, that there was an abuse of the Executive Branch by Joe Biden and his son. So, it would seem central to his defense in what we, what we all read in that transcript.

Debbie Hines: No, I don't think -- well, it would be up to the presiding judge, Chief Justice Roberts, if it's timely to that. But in my opinion, I don't think it's relevant to the issues that are going to be presented in the case. And so now Mulvaney, there's another one. You might want him to testify, and he's already went on the record as saying that "Oh, this is how it works. This is how things are supposed to happen." But as to the Bidens, I just don't see how they have any relevance to the articles or the issues that are in the case. They're peripherally involved in it, but they don't have any relevance to whether or not the president violated one or both of the articles of impeachment that are being presented against him.

Charles Payne: All right. Well, I mean, you know, let's talk about Nancy Pelosi for a moment.

Debbie Hines: Okay.

Charles Payne: Many people believe that she did not want to get into this in the first place, that she was sort of pushed there by the left wing of her party, the far-left wing of her party. And now she's stuck between a rock and a hard place. Should she try to make this a quick process? Or does she continue to hold on to these articles, haggling over procedure in the Senate, and hoping, I guess, that things change? Because I can tell you right now, it feels like there's been some serious political, negative political damage to the Democratic Party since this, since she said she was going to hold on to this and since this process began.

Debbie Hines: I think Nancy Pelosi is one of the most astute politicians ever in history, and I don't think that what she's doing is really going to backlash against her. I think she waited to make her move. No, she did not want to go ahead and press for impeachment in the beginning. But as she saw, Trump gave her no choice but to do that. So, I think we're going to see it play out. But if I were betting against Trump or Pelosi, I would be betting in Nancy Pelosi's favor because I think she knows what she's doing, and I think she has a plan. It may not be that it's readily available to the American people and to those of watching as it's playing out --

Charles Payne: Right.

Debbie Hines: -- for those people that are being polled, but I think that she definitely has a plan. She is not winging it.

Charles Payne: Oh, she's not winging it?

Debbie Hines: No.

Charles Payne: All right.

Debbie Hines: Definitely not.

Charles Payne: Okay, Debbie. Thank you very much.

Debbie Hines: Thank you for having me.

Charles Payne: See you soon. Illinois, folks, becoming the 11th state to make marijuana legal, and that state has high hopes sells will bring in the high times.

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Charles Payne: Marijuana shops turning away customers in Illinois after the Land of Lincoln became the 11th state to legalize pot. Mike Tobin is at a marijuana shop in Chicago with the latest. Mike.

Mike Tobin: Well, you mentioned that it's the 11th state. So, 10 states have gone before Illinois, and demand is certainly not the problem. You can see behind me people are still lined up outside on the street. And the dispensaries, for a second day, have now run out of weed. The one behind me now is selling only the edibles, things like gummies, that are laced with THC. Now, two years ago, the Illinois cannabis growers were serving 40,000 in the medical marijuana community; last year, it was 80,000. Now suddenly their market is open to everyone of age in a state of 12 million.

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Female Speaker: The state of Illinois, like other states, will have a problem only because there is only 19 growers right now. There'll be more added in the next few months, and over the next six to 12 months there'll be more coming online. But expect to have waits from six to 12 months from now.

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Mike Tobin: Now, the lieutenant governor in the state of Illinois, Juliana Stratton, was one of the first at the counter. She bought some edibles. She and lieutenant -- she and Governor J. B. Pritzker have argued that possession convictions disproportionately target minorities. Now, the users say legal pot is more expensive because street dealers don't pay taxes or deal with regulations. But they say the regulations give them comfort.

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Male Speaker: It's a lot more expensive here, so. On the street, it's a little bit cheaper. All the taxes and stuff like that. But this, a little bit safer.

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Mike Tobin: Now, the state is expected to get somewhere around $500 million in revenue from legal pot sales; however, the deficit is in the billions, so pot sales will help the problem but won't really solve all the severe financial problems that Illinois has. Charles.

Charles Payne: And Mike, before I let you go, I was reading come into the studio $3.2 million in sales today. It sounds like a low number, but maybe that's because everyone was sort of caught flatfooted because of the demand?

Mike Tobin: It does sound like it. You had some 77,000 customers show up in one day. And remember at the top the reporter, talking about last year with medical sales they were dealing with or meeting the demand for some 80,000 people over the course of a year. So, there's only so many growers out there and there's only so much they can grow in the short period of time. They're hoping somewhere around six months to start meeting demand. Charles.

Charles Payne: All right. Thank you very much. The 11th state, folks, to legalize marijuana.

Mike Tobin: [unintelligible]

Charles Payne: Well, that's it for me today. Another monster day in the stock market. Dow Jones Industrial Average, that is a monster, monster day no matter how you cut it up, 330 points. The economy is on fire. And guess what? We're going to be on fire tomorrow because I'm out and Neil is back. But don't forget, you can join me on Making Money on the Fox Business channel at 2:00 p.m. Hope you had a great New Year's.

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