SUNDAY MORNING FUTURES

Is a US 'mission creep' underway in Iraq?

Rep. Trent Franks on shift in objectives

 

This is a rush transcript from "Sunday Morning Futures," August 17, 2014. This copy may not be in its final form and may be updated.

MARIA BARTIROMO, HOST: Good morning. Are we in the throes of mission creep in Iraq? Hi everyone, I'm Maria Bartiromo. This is "Sunday Morning Futures." First advisers, then air drops and then airstrikes and then 130 more so- called assessors. Now with a mountain mission over, we target a dam in Mosul. Is all this drip, drip, dripping putting us slowly but surely back inside of Iraq for the long haul? We'll talk to a member of the House Armed Services Committee about that.

Then, Russia sending aid into Ukraine as Ukrainian troops fight to take back cities from the separatists. At the same time, Putin reportedly supplying those rebels with more weaponry. So what are his true intentions in this ongoing turf war?

And Rick Perry indicted. Did he really abuse power or is this political game play, Texas style? Our panel on that, and yet another Lois Lerner e-mail plot twist. That and a lot more as we look ahead on "Sunday Morning Futures."

And good morning, everyone. A series of U.S. airstrikes and humanitarian air lifts this past week breaking ISIS' siege of the religious minorities. It was holding prisoner on a mountain in Northern Iraq. But President Obama says our latest mission in Iraq is not over just yet. Brand-new air strikes this weekend near Mosul dam appear to be backing up the president's claim. The dam is near Erbil. Is Iraq largest ISIS captured it last month?

Trent Franks is a member of the House Armed Services Committee and he joins us right now. Congressman Franks, good to have you on the program. Thank you so much for joining us.

REP. TRENT FRANKS, R-ARIZ., HOUSE ARMED SERVICES COMMITTEE: Thank you, Maria.

BARTIROMO: So, what's your sense of this? I know you sent a videotaped message to the president. It feels like this is a drip, drip. Is there any reason to believe that the U.S. is not going to be fully engaged in Iraq for the long haul at this point?

FRANKS: Well, Maria, I'm afraid there is going to be the drip, drip that you mentioned. There is a moment in the life of nearly every problem, when it is big enough to be seen by reasonable people and still small enough to be addressed effectively without too much trouble. And unfortunately, this president has a bewildering way of letting that window pass. And certainly, that's what's happened here. And because of the tragedy that we tried, as you know, in the video to warn him of, significant time before it got as bad as it is, now we're in a humanitarian crisis there that is very significant.

And unfortunately, the narrative that the siege has been broken is really a false one, because the largest percentage of those that are Christians or Yazidis that are being beheaded and persecuted in some horrifying way are not on the mountain. They're everywhere in the area. And it's bewildering to me that Nineveh, you know, the ancient city of Nineveh can survive the judgment of God and 8,000 years of disastrous difficulty and yet they can't survive six years of Barack Obama.

BARTIROMO: Yes.

FRANKS: And I'm just really concerned about the whole situation, to say the least.

BARTIROMO: And I want to ask you really what needs to be done now, to see some progress. We've got a lot to talk about with you, Congressman Franks. Stay with us. Because we first want to take a look at this past week, as we witnessed the first U.S. airstrike on U.S.-made equipment being used by ISIS in Iraq. How could this captured hardware complicate our current involvement now?

FOX News correspondent Leland Vittert is with us, filling in for the vacationing Eric Shawn this morning. He joins us live with that angle. Good morning, Leland.

LELAND VITTERT, FOX NEWS FOREIGN CORRESPONDENT: Well, good morning. A lot of complications for the U.S. Military and the Kurdish. When the U.S. left soldiers there in Iraq back in 2011, they left billions of dollars in hardware, as those soldiers left, with the Iraqi army in that new country to look after. And as we have seen over the past few months, despite all the fancy gear and American training, the Iraqi military proved its fighting prowess as wanting at best. Losing battle after battle of ISIS terrorists and leaving behind all that military hardware from the Americans, which has then been picked up by the ISIS terrorists.

Now we are learning that many of the air strikes carried out by the United States and Iraq is against U.S. military hardware that had been captured by ISIS. This includes things like MRAP vehicles that cost U.S. taxpayers half a million dollars apiece and now we are paying to blow them up. ISIS also captured 155 millimeter howitzers, many equipped with the GPS aiming systems, not to mention thousands of machine guns plus humvees that once belonged to the United States and then the Iraqis now ISIS. Putting this in perspective for a minute, as we know, ISIS overran many of the Kurdish positions with lightning speed. And that's because the Kurds' weapons are simply ineffective against the U.S.-made weaponry. And remember, ISIS is fighting a two-front war as they try to build out the Islamic State. On their west is the Iraqis and Kurds. But on the east is Syria, where ISIS started. Recent reports now show that ISIS fighters are taking all of that fancy U.S. weaponry, captured in Iraq, back to Syria, to help in their fight against President Assad -- Maria.

BARTIROMO: This is an amazing element to this story, Leland. Thank you very much. More now with Congressman Franks. And congressman, what do you say about that, the fact that all of this high-tech equipment that is the U.S.' equipment has been left in Iraq and now ISIS has gotten their hands on it.

FRANKS: Well, you know, Maria, when we withdrew from Iraq, there was no status of forces agreement at all. And consequently, made this very situation almost inevitable. Barack Obama said that we leave behind a sovereign, stable, self-reliant Iraq. But what he really left behind was an invitation to terrorists the world over to come in and have at it. And even to gain the kinds of weaponry that they have gained. And now ISIS is no longer just a terrorist group that incidentally has ideology that makes al Qaeda look like a bunch of cub scouts.

BARTIROMO: Yes.

FRANKS: They're becoming an army. And it's very disconcerting. Because when you let evil desecrate the innocent, as he has done here, all too soon that evil knocks on your own door. And I'm afraid there are implications here for America that are something that we need to consider carefully.

BARTIROMO: I'm glad you mentioned the status of forces agreement. Many guests who have joined me before have discussed this, because at that time, we had an opportunity to ensure that our military's exit from Iraq was protected in terms of the future. Explain to our audience the status of forces agreement and what went wrong there.

FRANKS: Well, in almost every conflict like this, we have -- in the past had a status of forces agreement when we left a particular country. And that meant that we had a stabilizing force behind. It meant we had cooperation with the existing government. And instead of just leaving a vacuum of confusion in this case. And what would have happened is we would have had the forces on the ground, we would have seen this coming much sooner. It is astonishing to me how every difficult crisis in the world seems to catch Barack Obama by complete surprise. He usually hears it on Fox, I guess. But the reality is that just the smallest amount of resistance when ISIS first entered Iraq would have prevented all of this horrifying tragedy. And now, ironically, we have the Kurds and the French to thank as much as anyone in the world for somehow being there to -- as the best they could be for these innocent people that are -- have been so desecrated and tortured in such horrifying ways.

BARTIROMO: What can the U.S. do at this point, given the mistakes that have been made already, and also, do you see ISIS as a threat -- direct threat to America?

FRANKS: Well, that's the right question, and I think the -- to answer the first question first, the first thing we have to do is to engage with the Iraqi central government as much as we can and also the Kurdish government to make sure that they're capable of defending themselves in every way. And then we have to do whatever it takes to neutralize ISIS in Iraq. Because it will grow into a very dangerous situation.

The ideology of this thing is something that we overlook. But it invites terrorists all over the world to come and join the ISIS movement. And that's exactly what's happened. And if we don't interdict that, then, yes, it has a direct threat potential to the United States of America. You know, when two airplanes hit two buildings, we kind of woke up. But it seems like this administration has gone back to sleep.

BARTIROMO: All right, Congressman. We'll be watching the developments. Thanks very much for joining us.

FRANKS: Thank you.

BARTIROMO: We'll talk with you soon, Congressman Trent Franks joining us.

Not much optimism meanwhile coming out of peace talks in Cairo as the deadline for a temporary cease-fire between Israel and Hamas looms over Gaza. We'll talk to a governor who just is back from a solidarity mission to Israel. He'll tell us what he learned. That's next.

You can follow me on twitter @MariaBartiromo @SundayFutures. Let us know what you want to hear from New York Governor Andrew Cuomo. Stay with us as we look ahead on "Sunday Morning Futures."

(COMMERCIAL BREAK)

BARTIROMO: The cease-fire between Israel and Hamas that started on Wednesday is set to expire tomorrow. The temporary truce was meant to give Israelis, Palestinians and their Egyptian mediators time to work out a more durable peace talk. Indirect negotiations are resuming in Cairo today. But as the deadline looms, a Palestinian negotiator says key sticking points remain. So what are the realistic odds of reaching a more permanent cease-fire? Joining me on the phone right now is a man who just got an up-close look at the situation and a face-to-face meeting with the Israeli prime minister and he is New York Governor Andrew Cuomo. Governor, good to have you on the program. Thanks so much for joining us.

GOV. ANDREW CUOMO, D-N.Y. (on the phone): Good morning, Maria. Thanks very much. Thanks for having me on.

BARTIROMO: So you're just back from Israel. What did you learn, what did you see, Governor?

CUOMO: Well, there's no doubt that this is an extraordinary difficult time for the entire region. And Israel is in a difficult position militarily and a difficult position politically. It's highly complex. Always has been. But it seems it's even more difficult now. And what people forget is, Israel is vulnerable. And Israel is under attack, and Israel has real threat that it has to deal with. So we wanted to make sure that side of the equation was also noted.

There's a new -- relatively new situation in Israel, where we now have an extensive network of tunnels that were dug from Gaza to Israel. Highly sophisticated tunnels that were reinforced, they had wiring in them. So this is now a new front that Israel has to deal with. People talk about the military sophistication of Israel and the iron dome, et cetera. They have a whole new problem now, which are these underground tunnels. And people come from Gaza.

BARTIROMO: And these tunnels were a lot bigger and more sophisticated than you expected, right? We're looking at video of you walking through the tunnels. Hamas built these tunnels as easy access into Israel. What can you tell us about the tunnels?

CUOMO: When I first heard about the tunnels, when you read about them, Maria, they sound like -- in understanding Gaza, you think they're dug tunnels that people crawl through. That's not what they are at all. They're highly sophisticated. These were well-engineered. They were very expensive. Hundreds of millions of pounds of material have gone into them. And they have networks that comes from Gaza into Israel. They weren't really aware of it. So now they have to go through a situation to discover these tunnels, find out -- design a defense system against the tunnels. So it's difficult.

And Hamas is a real opponent, and their tactics are highly problematic. Three thousand missiles shot at Israel. That's a real situation. And then the way Hamas uses the population makes it problematic not only from a military point of view but from a political point of view. So -- and you put that in the scope of the region that you were talking about earlier with this whole rise of this extremism and ISIS and Muslim Brotherhood and the United States needs Israel even more than ever as a strategic ally, because the region has real issues.

BARTIROMO: Yes, really extraordinary. Governor, it seems very presidential of you to make this trip to Israel while the president, Barack Obama, was in Martha's Vineyard playing golf. Is this foreshadowing your plans for 2016?

CUOMO: I thought it was gubernatorial. Of me, Maria. More than presidential of me. I've been to Israel many times before. I was in the Clinton administration, and I worked with Israel. As you know, being a New Yorker, we have a special connection with Israel. Being a New Yorker who went through 9/11, we have a special sensitivity to terrorist attacks. And the real pain and suffering that's caused. So that was the tone that we brought. I brought a bipartisan delegation which I was excited about.

We brought the assembly leader, Sheldon Silver. We brought the Senate leader Dean Skelos, he's a republican, and Senator Jeff Kline. So we brought the business community. I brought my brothers in law, Kenneth Cole and Howard Mayer and Neil Cole came. So it was really a united New York front politically, culturally, saying to Israel, we understand your situation and we stand with you.

BARTIROMO: And you stand with them during this very important time of crisis. Let me ask you, Governor, have you spoken to Secretary Clinton, and has she indicated to you that she may not run for president, which, of course, would open the path up for you?

CUOMO: I have not had any conversation like that with Secretary Clinton. I chatted with her, but not about that.

BARTIROMO: And how are you feeling about the upcoming gubernatorial election in November?

CUOMO: You know, take nothing for granted. I'm working very hard. But I feel good about the job we have done here in the state of New York. And I'm eager to go through once again with the accomplishment that we have had in this state. Turned it around dramatically from a financial point of view, governmental point of view. So I feel good about that.

BARTIROMO: Governor, even as you have and we have seen your ads, the start-up plan in terms of trying to lure business to New York, we have seen the attacks against you from the skeptics. What do you want voters to know, governor, about the Moreland Commission and your handling of it?

CUOMO: Well, on the Moreland Commission, I've come up with an ethics reform plan and get legislation passed. They did just that. Met with top law enforcement people in the state of New York. They came up with a plan. We had a robust reform agenda. We didn't get it all passed. But we got a good percentage of it passed. More to do, you know, cleaning up government is not something that is a process more than a finite destination. And if there are any questions about the submission or how it operated, fine. You know, I -- we're working with prosecutors on the referral of the cases. And that's part of the process. But did we get everything accomplished we wanted, no. But did we make significant headway, yes. And they did a very good job.

BARTIROMO: Governor, good to have you on the program. Thanks so much for your time today.

CUOMO: Thanks for having me on, Maria.

BARTIROMO: We'll see you soon. Governor Andrew Cuomo just back from his trip to Israel.

Despite all the volatility overseas, Wall Street just keeps on keeping on. Is it still the right place for your money? We will ask one of the world's top investment advisers next as we look ahead on "Sunday Morning Futures."

(COMMERCIAL BREAK)

BARTIROMO: Welcome back. Wall Street remains unfazed by the turmoil in the Middle East and elsewhere. Stocks continuing to stay in the plus column. Following long-term patterns of record growth, both the Dow and the S&P 500 ending this past week in the plus column. Mohamed El-Erian is chief economic adviser for Allianz SE and former CEO of PIMCO and he joins us right now in Washington. Mohamed, good to see you. Thanks so much for joining us.

MOHAMED EL-ERIAN, CHIEF ECONOMIC ADVISOR, ALLIANZ SE: Thank you, Maria.

BARTIROMO: So, what do you think? We've got unrest in Iraq, we've got Putin driving through Ukraine. We've got ISIS on the run. And harassing. And beheading people. And yet the markets are focused on something else.

EL-ERIAN: Yes. Almost perverse. And we've got even a longer list. We've got weak Europe, weak Japan, weak China. And I think there are three reasons, Maria, why the markets are not paying attention. In fact, if anything, the markets are treating bad news as good news to the level of complacency. Let me explain. The first reason is that while the news is bad, it's not bad enough. It's not bad enough to take us to a tipping point, economically or financially. The second reason is the loss of liquidity.

And most recently, companies are putting their record cash to work through merger and acquisitions. So the market is awash with liquidity. And thirdly and most importantly, there's this faith in the Federal Reserve. This notion that the Federal Reserve is the market's best friend. And therefore, if bad news means that the Fed has to remain engaged in providing liquidity, the market treats that as good news.

BARTIROMO: But what are the implications then? I mean, for the fundamentals of the global economy. What are the implications, for example, of what's happening in Russia and the impact on Europe? Europe is the U.S.' largest trading partner. I mean, as we focus on the Federal Reserve and the Fed keeping interest rates so low, are we missing something but not focusing on the impact to the world economy?

EL-ERIAN: Yes, we are. We are missing the widening gap between valuations that are up here and fundamentals that are down here. The problem with everything you cited in your program so far is that they fundamentally undermine global growth. And therefore, they undermine corporate profitability and corporate earnings and down the line, that will impact share prices. Ukraine is particularly worrisome, because we are now involved in a process of sanction and counter-sanction that are creeping towards disrupting the supply of energy. So if there isn't a de- escalation, then we risk pushing Russia, Ukraine and Western Europe into recession and that would result in a global recession. That's why it's very important to deescalate tensions there.

BARTIROMO: But that's not happening, right? I mean, in terms of Russia as an investment, we're going to talk with Jim Grant in a little while. A while back, he said he would be buying Russia, because he thinks the valuations are so attractive.

EL-ERIAN: Yes. I wouldn't be. I think that people underestimate how difficult it is to walk back from what's going on. And like you said, it's drip, drip, drip. People may not notice, but cumulatively, you're getting closer to the point where this could be significantly disruptive for the economy, global economy, and therefore, disruptive for financial markets.

BARTIROMO: Would you change your investment recommendation today as a result of what we're seeing in international waters?

EL-ERIAN: Yes, I would book some profits, markets have done extremely well. Whether it's the equity market or the bond market. I would keep some cash. I think the optionality that cash provides you is really important. And those are the two things I would do. I would simply take some risk off, have a little bit of cash, have a little bit of dry powder, because I think that we are looking at a more volatile phase down the road.

BARTIROMO: Let me ask you about a near-term issue. And that is, it's a big week for central bankers. You've got Janet Yellen going to Wyoming. The Jackson Hole event. She'll be the keynote on Thursday. On Friday, Mario Draghi speaks. What are you expecting out of this meeting that kicks off on Thursday? Is this going to be a catalyst for markets?

EL-ERIAN: I don't think so. I think what they're going to tell us is what markets know, which is they intend to be accommodative, that they worry about the real economy, they worry about the labor market. What we would like them to address is this tradeoff between stimulating the economy today and taking the risk of financial disruptions down the road. That tradeoff is getting more and more -- uncomfortable. And that is the issue really that everybody would like the central banks to discuss. But I doubt they'll do that. I think they're just going to focus on why it's important to continue to support the economy today.

BARTIROMO: What's the biggest global risk to the economy in the U.S., Mohamed, real quick?

EL-ERIAN: I think it's that the global economy weakens so much that we find we cannot be a good house in a weak neighborhood.

BARTIROMO: Which is, of course, what we have been. And the safety of the U.S. has continued to lure assets here. Mohamed, always wonderful to have you on the program. Thank you so much for joining us today.

EL-ERIAN: Thank you.

BARTIROMO: We'll see you soon. Mohamed El Erian joining us.

Ukrainian forces making a major push against pro-Russian rebels in the nation's east. What's next for this war-torn nation as we look ahead on "Sunday Morning Futures"? We'll be right back.

(COMMERCIAL BREAK)

(NEWSBREAK)

BARTIROMO: Thank you so much, Leland.

Ukraine reporting one of its fighter jets has been shot down by pro- Russian separatists. The plane was apparently supporting Ukrainian ground troops forcing their way into a rebel-controlled city. Meanwhile, a Russian aid convoy being checked as it heads toward Ukraine with Kiev suspicious that the vehicles might be cover for military intervention.

As the crisis escalates between east and west, are we seeing the beginnings of a new Cold War?

Joining me now is Fox News contributor Marvin Kalb. During his time at NBC, he served as its chief diplomatic correspondent and as a moderator of "Meet the Press."

Marvin, good to have you on the program. What's your sense of what's happening today in Russia and post that convoy being checked, and, of course, Ukraine forces destroying some of that Russian convoy?

KALB: Well, that's, I think, the heart of the problem right now. And as usual, the secret, the story, is always in the Kremlin and, I think, in this case, in Putin's mind.

What is it ultimately that he wants? If he is seeking total control over Ukraine, he could have had it months and months ago. He seems to want political authority over Ukraine, without having the ultimate responsibility for running it all.

But at this particular point, there is an odd story unfolding. The Ukrainian president says that Ukraine went against Russian forces on Ukrainian territory and that the Ukraine actually destroyed that Russian military convoy. The Russians say this is all a fantasy, that it didn't happen, that it's all made up.

I doubt that. I think that something serious happened, and we're not paying enough attention to it.

And there's another aspect of this, as well, Maria. And that is that Putin himself appears to be on somewhat shaky political grounds. He was in Crimea this week. He was to do a major speech and Moscow television did not carry it. Why?

BARTIROMO: Hm. why didn't they carry it? You think that people are beginning -- I mean, his approval rating is still soaring, though, right, Marvin?

KALB: His approval rating is still at 84 percent. That has to do with the takeover of Crimea and the whipping up of a great deal of national dis- fervor throughout Russia. But, nevertheless, for those of us who are a little bit Kremlinologists here, you have to ask the question, here is a man who always wants to be on television, always wants to be in the middle of everything. And yet he had the opportunity in Crimea, the emotional location of Crimea, to be on television once again, to state his case, and for some reason, still mysterious, he didn't get that opportunity. And I'm wondering what, in fact, is going on in the Kremlin right now?

BARTIROMO: What do you think the U.S.'s next move is? I mean, it's pretty clear that Putin is not taking the U.S. and these sanctions seriously. Is there a role for the U.S.? What should we be doing?

KALB: You know, I don't agree with you on that, Maria. I think that they are being taken seriously. And that's one of the reasons that Putin decided to counter-sanction the American sanctions by imposing food stuff sanctions. That is a weird strategy on his part.

And for the U.S. right now, the U.S. appears to be continuing to press him. Whether the idea behind the president's policy is literally to unseat Putin from power or simply to change his policy is still not clear. It may be that one is, in fact, going to end up as the other, the unseating of Putin.

BARTIROMO: Well, look ahead for us and try to navigate how this plays out. I mean, clearly, we're looking at 1 million people leaving or dropping out of the population in Russia every year. He needs the petroleum products of Ukraine. Next week, the president of Ukraine may call early parliamentary elections, following last month's collapse of the governing coalition.

Do we get any news out of that? And, actually, that's happening Friday August 22. And how would you -- how would you expect this to play out?

KALB: Well, I think that, obviously, it plays out at the political level. But the economic level is going to be extremely important in this. What we are hearing from people who know Russia very well is that the Russian people, right now, at one level, which is the middle level and down, which is most of the people, they are now beginning to feel a pinch. Things are beginning to cost more. There were fewer things on the shelf. They have to find some person to blame, and in Russia, there's only one person who gets the credit and ultimately one person who gets the blame. And that's Putin.

And that goes back to my earlier point, that you are now at a point where you are seeing some shakiness in Putin's political position. And whether he is capable of retaining his ground, we will see over the next couple of months.

BARTIROMO: Yeah. All right. We'll leave it there. Marvin, thanks very much for your insights. We appreciate your time today.

KALB: Not at all. Thank you, Maria.

BARTIROMO: Thank you so much.

Let's get a look at what's coming up on "MediaBuzz", top of the hour, Howie Kurtz, in 20 minutes.

Hi, Howie.

HOWARD KURTZ, HOST, "MEDIABUZZ": Hi, Maria. We have got a full plate, from the coverage of Robin Williams' suicide to Chuck Todd taking over "Meet the Press" to all the hype surrounding Hillary's "hug it out" strategy. But we're going to spend much of the program on Ferguson, Missouri, in the wake of the new renewed violence there early this morning, the arrest of the two reporters, the heavy focus on what some people saw as police over-militarization and overreaction, and then, on Friday, the dramatic shift in the narrative when that video of Michael Brown, the teenager who was killed, in, you know, apparently robbing a convenience store and how that has changed the storyline, even though police say it didn't have anything to do with his killing; the officer who shot Brown didn't know he was a suspect in that shoplifting.

BARTIROMO: Such an unbelievable story. Howie, we'll be there. We'll see you in 20 minutes on "MediaBuzz."

Meanwhile, we've got a great panel ahead. We want to get to them. The political fallout across the spectrum could be epic. Texas Governor Rick Perry indicted on felony charges of abuse of power. Our panel will kick off with that as we're looking ahead on "Sunday Morning Futures." Stay with us.

(COMMERCIAL BREAK)

BARTIROMO: Rick Perry becoming the first Texas governor indicted in nearly 100 years for allegedly abusing his power against a public prosecutor who refused to resign after a drunken driving arrest. There is her photo when she was arrested. Perry calling the case, quote, "a farce." But could it impact a possible White House run in 2016?

I want to bring in our panel right now. Keith McCullough is CEO of Hedgeye Risk Management. Judith Miller is adjunct fellow at the Manhattan Institute for Policy Research and a Pulitzer-Prize-winning author and journalist and a Fox News contributor. And James Grant is a financial author and analyst. He is the founder and editor of Grant's Interest Rate Observer. And I am honored to have the three of you here at the table. Thanks so much for joining us.

Rick Perry indicted. Do you believe it? What do you think about this, Judy?

MILLER: You know, I think, when David Axelrod, who is Obama's -- was Obama's campaign director, tweets out a message that says "This looks awfully sketchy" is the word he used, I think that's telling you something.

I think, to most people who read what's going on in Texas, it looks like Texas politics. And also, I don't like special prosecutors. I think they have a tendency to get out of hand. If you look at what he's accused of, which is basically trying to rein in an office and a person he doesn't like, it's not clear that he's abused his authority. And as for the grand jury indictment, well, you know, you can indict a ham sandwich, as they said. Rick Perry has now become ham on rye.

(LAUGHTER)

BARTIROMO: Well, I mean, look, she was arrested for drunk driving. He said, resign or I'm going to cut funding. She didn't resign. He cut funding. And then they indict him. So...

(UNKNOWN): Ham sandwich. Isn't it perfect?

BARTIROMO: Let's move on to the IRS for a moment. Because now we get another judge basically saying, look, we want to know what happened with these crashed computers and how is it possible that all this -- all of these e-mails are missing? Is this one step closer to actually getting our hands on this information? What do you think, Keith?

MCCULLOUGH: I doubt it. I mean, at the end of the day, it's like transparency, accountability, what? You don't really have it. You really don't have it. And any time you want to get it, you get this next little rabbit hole that you have to go down. And at the end of the day, I think people are getting tired of it. They're getting tired about reading about Rick Perry this morning. They're just getting generally tired of the whole lack of transparency and accountability in America.

BARTIROMO: People want accountability and transparency. no doubt about it. And that's what we need to see in Russia, as well, Jim Grant. I spoke to you, what -- what was is it, a couple months ago -- when you said, "I would be buying Russia."

GRANT: Well, I am. I did. I own it.

(LAUGHTER)

I mean, investing is about, you know, handicapping probabilities. It's about seeing value and judging that value in the context of available options. And as the man said, successful investing is about having everyone agree with you later.

So in Russia, Russia sells in aggregate on a so-called exchange-traded fund for about five times earnings, which is Wall Street talk for really cheap.

BARTIROMO: Yeah...

GRANT: The dominant bank in Russia, Spurt (ph) Bank, trades for 3 1/2 times earnings. That's preferred stock. It yields almost 6 percent, discount to net asset value of the bank of about 20 odd percent. Compare this to the dominant banks in Zimbabwe and Pakistan and Argentina, and Russia alone is the financial pariah.

BARTIROMO: And compare that to the valuations in the U.S., which are trading at, what, 17 times earnings or something for the S&P 500.

GRANT: So it might just be that Mohamed El-Erian, whom you interviewed earlier, is correct, and that one ought to pay no -- pay no heed to these values, because the world is such a dodgy place. But the world is -- it's a world of sin and sorrow, right, always. There is always risk. But here is an anomalous outlying value proposition. And my view is that this too will pass.

BARTIROMO: Does it -- does it concern you that the U.S. market has not been impacted very much by what's happening in Iraq, by what's happening in Russia, Gaza? Does that surprise you?

GRANT: Well, I think that we are in unique territory in America in that this is the first time that we have had low interest rates and -- and both a rhetorical and a financial campaign by the central authorities to lift up or levitate financial asset values.

We have had low interest rates before, of course. But never before have we had a central bank that is actually pushing for higher stock prices, along with this program of low interest rates. So this is -- this is untrodden ground.

BARTIROMO: Yeah, and you call that central planning.

(LAUGHTER)

I want to get your take on the Fed and what we're going to hear next week, because we've got the big Fed meeting this week. Janet Yellen and other big wigs headed to Jackson Hole, Wyoming. Any hints as to when rates are going to start moving?

Our panel will look ahead on that as we continue on "Sunday Morning Futures." Back in a moment.

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BARTIROMO: And we're back with our panel, Keith McCullough, Judy Miller, Jim Grant.

Judy, let's talk about Iraq for a second. ISIS getting more powerful. Should the U.S. be worried?

MILLER: Well, of course the U.S. should be worried. And it's nice to see that the president is, even from Martha's Vineyard.

BARTIROMO: He's coming back to Washington.

MILLER: Right, he's coming back today. But the problem is he's had a good week last week. We somehow got 40,000 people off a mountain, Yazidis who were threatened. He also got rid of Nouri al-Maliki, the prime minister, who was really at the heart of the Iraqi problem and the dysfunction.

But now he has to explain to the American people why ISIS is really a threat to us and to the Western world. And I think Americans get this and he won't have to push hard, and that there already are boots on the ground, 125,000 Peshmergas; the Iraqi army, which, under new leadership, can be turned around, but they need intelligence and special forces. We've got 900 people there -- 900 already. Obama has to explain why they're there and why it's important to make this fight.

BARTIROMO: I'll tell you, for the first time this week, the markets seemed to really take notice, Keith, of what's going on internationally. But you're still not a buyer here?

MCCULLOUGH: Well, I mean, the good news is bad and the bad news is good thing is getting, you know, rightly confusing at this point.

(LAUGHTER)

But, at the end of the day, though, I think what people -- you know, and this is going to hit Obama squarely in the forehead much more than any geopolitical issue in the back half of the year. And that's that the economy may be slowing to basically half of what Wall Street consensus thinks.

BARTIROMO: We've got a 4 percent GDP number, Keith.

MCCULLOUGH: In the second quarter, yeah. If you just go backwards and tell yourself that, then you'd be fine and you can have a ham sandwich, too. But at the end...

(LAUGHTER)

At the end of the day, what we could be in the middle of here is an early cycle slowdown at the very least in housing, U.S. consumer, we've been seeing this throughout the year. And as we go into the Fed meeting, both in Jackson Hole and the September meeting, what I think the Fed is going to do is what they do. They react dovishly in the face of dovish or downward surprises in the economy.

So the bond market goes higher; interest rates go lower. Interest rates lowered does not simulate the economy -- just news flash on that. And at the end of the day, Obama is going to have to deal with a much slower economy than what he thinks he has in the back half of the year.

BARTIROMO: And yet the market continues at all-time highs. What -- what gives, Jim Grant?

GRANT: Muscle memory.

(LAUGHTER)

BARTIROMO: Muscle memory? OK.

GRANT: I mean, I think one gets back, also, to the expectation of more and more dollars flooding out of the Central Bank's pumps. You know, the market is arithmetically overvalued with respect to revenue, with respect to earnings, with respect to stock market valuations, percentage of GDP. All this is true. It does not mean it can't go higher. And I think people are banking on the fact that the -- the Federal Reserve is your silent or not-so-silent partner in this endeavor.

BARTIROMO: Are you selling into any strength, then?

GRANT: I am doing nothing except talking to you at the moment.

(LAUGHTER)

MCCULLOUGH: I would. I mean, look -- I mean, this week we put up a note that said you should go to 50 percent cash. That is far and away, you know, the highest position we've had in cash in two years. Why would you go into an economic slowdown just praying and hoping -- and, by the way, hope is not a risk management process...

BARTIROMO: Right.

MCCULLOUGH: ... that Obama is going to basically tell you that the economy is good when it's half of what he thinks it is. I just don't think that that's going to fly. The cycle is really the catalyst.

MILLER: I don't know. Look at everywhere else. The United States still looks pretty good because...

(CROSSTALK)

BARTIROMO: That's true.

MILLER: ... I think there's a lot of foreign money flowing into our markets, our real estate. We see it.

MCCULLOUGH: I think that that's back to the same argument, though, that Jim said. People fundamentally believe that, as long as it's not a crisis, then the U.S. looks better than Russia. I mean, at some point, at the all-time bubble high in terms of valuations, that starts to matter when growth surprises on the downside. If you think that that's the catalyst after 62 months of an economic expansion, we start to slow and you can't just buy them and make money every time.

BARTIROMO: It's great analysis. Let's take a short break. When we come back, the one thing to watch for the week ahead on "Sunday Morning Futures." Stay with us.

(COMMERCIAL BREAK)

BARTIROMO: Welcome back. We're back with our panel. The one thing to watch for the upcoming week. Jim Grant, Judy Miller, Keith McCullough.

What's your one thing, Keith?

MCCULLOUGH: Jackson Hole, the central planning event of the year. The unelected come upon us and they're hopefully -- I'm looking for some divine intervention. Because, at some point, she's going to have to prove that she can rebend economic gravity, I suppose.

But, again, with economic growth slowing and the bond market -- you're agreeing on that -- I can't wait to hear what she has to say next.

BARTIROMO: Judy, what's your one thing?

MILLER: I'm looking at Brussels and Berlin to see whether or not our European allies can de-escalate the crisis in Ukraine, which can really flare up again and drag us all down and Russia with it.

BARTIROMO: Jim, what do you think?

GRANT: I'm looking for reaction from the most extraordinary piece in The Wall Street Journal last week by James Schlesinger, concerning the electromagnetic pulse threat to this country. Imagine a nuclear bomb going off and destroying the electrical grid.

So the idea is that you can fix this before it happens for the cost of $2 billion. I read this thing; I was just -- I'd heard about it -- I was thunderstruck at the facts as presented and am dying to know whether the world cares.

BARTIROMO: Wow, that is a -- that is a big story. And we will focus on that. I'm glad you brought it up for our viewers.

Thanks, everybody, really appreciate it. I was going to say Jackson Hole, as well. I'm going to instead pick Hewlett Packard and Home Depot earnings. It will give a sense of the consumer. I'll see you next week. Have a great rest of your Sunday. I'm Maria Bartiromo.

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