Loudermilk: It looks more promising that there may not be a partial shutdown, lots of activity with Pence and Mulvaney

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Loudermilk: It looks more promising that there may not be a partial shutdown, lots of activity with Pence and Mulvaney

Georgia Republican Rep. Barry Loudermilk says there appears to be more activity on Capitol Hill to move the spending bill forward.

This is a rush transcript from "Your World," December 21, 2018. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: Read it and weep.

Welcome, everybody. I'm Neil Cavuto. And this is "Your World."

And what in the world is going on with stocks? Once pristine and going up, up, up and away, they are slip-sliding away. And the NASDAQ is now officially in a bear market, thanks to a fall today of 3 percent, that average rich in technology names, like Amazon and Apple and Netflix and a host of other high flyers that were rules the roost, now getting kicked in the you know what.

The issue seems to come back to a market that just cannot find a floor. You could blame the potential shutdown, but that's not exclusively it. You could blame the Federal Reserve talking increasingly about still raising rates, but that's not only it. You could talk about a world softening and fast, but that's not completely it.

What is going on here is a sense of order. Get out of the way before more sell orders come in. And that has the NASDAQ, as I said, into bear market territory, a slide of better than 20 percent from highs reached last August. That's a significant development, because it follows the likes of transportation stocks, the Dow Transports, which tend to portend how the economy overall will do.

And it also follows what's been happening with an average that closely monitors small company stocks. So you have three averages that are in bear market territory. The S&P 500 and the Dow so far, even with their incredible skids today, are still a couple of percentage points away.

But what is doing it and what is going to reverse it? Forget about a Santa Claus rally. Now a lot of investors are saying Santa, really?

To FBN's Kristina Partsinevelos at the NASDAQ, where they're battling a ferocious bear -- Kristina.

KRISTINA PARTSINEVELOS, CORRESPONDENT: Yes, you're 100 percent right.

And like the traders that I spoke to today, it doesn't really have to do with the government shutdown. It has to do with this fear in 2019, this fear of an economic slowdown. So you're seeing a sell-off in risky stocks, like you mentioned, the tech sector, which is bringing the NASDAQ down.

So, let's start with some of those names. Some of the major laggards on the tech sector that I checked right before, we had Facebook down, Amazon down 5.2 percent that we're seeing. So, it's at $1,372.

Another big mover is Google. Google, we saw just within the past 24 hours today down 3 percent, so below $1,000. It has entered bear market territory as well. So you're seeing that on your screen right across the board when it comes to tech stocks.

But let's bring some green out there. Let's talk about some of the positives. I want to mention Nike. The reason being is Nike today, they released their earnings. They saw sales go up 10 percent for the quarter. They talked about a lot of strength in North America and even more strength in China, the fact that trade hasn't really hit them.

So we're seeing their stock, their share price up about 7 percent at $72.42. And we got to bring it back to oil, because that is on a lot of investors' minds, the fact that it is still trending below $50 U.S. a barrel, big concerns about economic slowdown, but more so a supply glut.

And so that's bringing down the price of oil. So it's a good time for shoppers across the board, because the last I checked from AAA, the average gas price right now is $2.35 a gallon. And another big mover -- and because this is something I talked to with my parents -- gold, we're seeing gold climb steadily over the last five months, often seen as a safe haven.

It's a little bit lower today, but, nonetheless, gold. And, as you can see, NASDAQ, tech taking it down -- back to you, Neil.

CAVUTO: All right, Kristina, thank you very much.

A couple of developments as Kristina was speaking, we're learning now that investors in the most recent week have pulled $35 billion from equity funds. Largely, this sort of thing feeds on itself. Sometimes, it's not rational. Many will argue, and especially the bulls that are still out there, that it's not right.

It is what it is. I pass it along. Other percipient comments may be coming from Peter Navarro, the president's trade adviser, commenting in Japan on what's happening with these ongoing trade negotiations between the United States and China. Not much, apparently.

He's saying that the permanent economic agreement after 90 days cease-fire in trade tensions doesn't look very likely. Goes on to say, it would be very difficult to score such a deal without China being ready to make a meaningful turnaround in its procedures, the way it runs things.

And that doesn't seem to be in the offing. Add to that the government -- the government shutdown fears. Now, this has never been a big factor here. Sadly, markets have gotten used to that sort of thing. So even the news, as Shep was pointing out in the prior hour, that the vice president was on Capitol Hill and might cobble together a last-second agreement, did little to move the needle on that.

We're going to be going there shortly.

I do want to first get a read from market watchers John Layfield and Adam Lashinsky and finally Charlie Gasparino on what's rattling folks there.

Add them all up, Adam, and it was just -- just a sense of, let's just get out of the way of this, right?

ADAM LASHINSKY, EXECUTIVE EDITOR, FORBES: Yes, Neil.

I wrote down five of the stocks that we have been talking about so far. And I'm going to put three in the rational category, two in the irrational category.

Nike did well. So their stock did well. Apple and Facebook have had problems, so you understand why they're going down. But Netflix and Amazon have been chugging along. And so that tells you this market is confused and angry and scared. And, as you said, let's -- let's get out of here and let's stop -- let's stop talking about this now, is what these investors are saying.

CAVUTO: You know, John Layfield, when you follow this, of course, this has been a market that has done very, very well under Donald Trump. It's up about 23 percent since his election.

It's given up a lot of ground here, but what is going on there? Is any of this a reflection of either confidence in him or the headwinds he's facing on government-related stuff, on an exodus a key staff members? Any of that apply?

JOHN LAYFIELD, CONTRIBUTOR: I think a lot of it is about President Trump.

Look, a lot of the earnings that we have this Christmas season are because of President Trump with the higher corporate -- the lower corporate tax rate and higher earnings going forward. We're at about 23 percent corporate earnings right now. The problem is going forward.

And there's a lot of uncertainty. And that also is due to President Trump. These comments that he's made recently about Syria, Afghanistan, General Mattis resigning, that has very little to do with the market, but it has a lot do with his methodology.

And his methodology scares a lot of people because of the way he's dealing with the Chinese. And we believe that -- at least the market believes that this could be a very protracted battle going forward. And I think that's why the markets are so scared here.

CAVUTO: We were down, Charlie Gasparino, about 320 points. And we added a quick hundred to that on these reports that Peter Navarro, the president's trade adviser, was saying it will be difficult for the U.S. and China to arrive at a permanent economic agreement after this 90 day cease-fire

That just sort of greased the skids. It wasn't the sole reason.

CHARLIE GASPARINO, CORRESPONDENT: Yes.

CAVUTO: But it is calling into question these talks and whether there's progress. And we could be surprised. But more to the point, this is the same week we learned that China itself is slowing.

So, even if a deal is scored, there are worries about whether China can deliver the goods, right?

GASPARINO: Yes, it's a great point.

And there's a lot of -- a lot of stuff going on, a global slowdown, trade worries, a tariff war with China, the Fed easing -- excuse me -- tightening, both on the short end and the long end, right? They're raising interest rates on the short end. They're selling their balance sheet on the long end. They're doing that in the face of a trade war.

I will say this. If you look at the Dow, look at the Dow from this time last year to now, we just had passed a huge fiscal stimulus, the massive corporate tax cut, which should be keeping -- keeping businesses going. But guess what? The Dow has been -- is lower actually than it was a year ago.

Now, what happened in that year that -- in addition to the corporate tax cuts? Well, guess what. We entered into a protracted trade war with China and others. So, I will say this. You are wondering why the Dow is trading down and the markets are trading down?

They are acting very rationally to a very irrational person when it comes to trade. And that's Peter Navarro. He goes out there, says there's going to be...

LASHINSKY: Oh, I thought it was Donald Trump, Charlie.

GASPARINO: No, that's Peter Navarro, because Peter -- because Donald could listen to Peter Navarro as the hawk on this, and -- or he can listen to Larry Kudlow, who's the more...

(CROSSTALK)

GASPARINO: .. in my view, is better on this end.

CAVUTO: Well, I do want to posit that all of this selling was well in place before the Navarro comments. I understand what you're talking about.

But, Adam, let me get your take on the technology front you're an expert on, because a lot of people look at this and say, all right, Apple 40 percent from its highs, that's getting kind of kooky. That's getting kind of crazy. Google under 1,000 bucks, that's getting a little unreal. Amazon losing 4 percent today, on the day when the numbers are looking good on the shopping numbers and revenue are looking good.

LASHINSKY: Yes.

CAVUTO: So now this sort of picks up a frenetic activity that, if you step back, doesn't seem to have any reason, but what do you -- what do you think?

LASHINSKY: Well, I think it's the situation where each of these is different, which makes it even -- which makes it that much harder to analyze.

So there's real concerns about Apple's iPhone growth slowing. They changed the way they're going to report it. That really freaked out investors, more than I expected it to, Neil. Netflix has a ton of debt. They have been chugging along, but there have been concerns about them, about how long they can keep that going, and in a negative environment, this is what happens.

Amazon is confounding. I mean, it's just always highly valued, but the business is going great. But this is what happens when people are in this kind of mood, I think.

CAVUTO: Yes, I hear you.

John Layfield, is your sense that people are overdoing it? I mean, it's one thing to sell off in a largely -- I know the slowdown fears, when the week started with China, et cetera, with Germany having a contracting quarter, Japan having a contracting quarter, but enough already.

What's driving it?

LAYFIELD: I think there could be enough overdoing it.

Yes, you look at Apple, which Adam talked about, in addition to the iPhone sales, the problem with Apple going forward -- and this has to do with the market as a whole -- is if these tariffs go to $267 billion, this extra $267 billion, this completely disrupts Apple's global supply chain.

GASPARINO: Absolutely.

LAYFIELD: And so this -- this absolutely kills Apple. If that doesn't happen, Apple is a great guy right here.

So, the uncertainty -- you have Brexit, with Europe just falling apart, you have this trade war, and you have so much uncertainty coming out of the White House, nobody knows what's going on. The rules of the games keep changing.

GASPARINO: We have had this uncertainty. And this is the problem. This is what -- the point I was trying to make before. We have had this uncertainty for about a year.

There's been a year of uncertainty. Peter Navarro just didn't crop up today. He's been touting this -- this trade -- these trade policies for a year. And the markets hate them. They hate the protectionist stuff.

It's one thing to go after China on I.P. theft and to get a coalition of the willing to surround them and try to stop them from doing this. It's another thing from isolating them, isolating our other partners.

CAVUTO: All right.

GASPARINO: And all that is Peter Navarro.

CAVUTO: All right, well, we have a lot of factors here to blame here.

We're following it all for you here. We should point out that, with the NASDAQ now in bear market territory, everyone seems to focus on the other two behemoths. That is the Dow Jones industrials and, of course, the S&P 500.

Other averages have gone into bear market territory, in other words, falling 20 percent from their highs. They include the Dow Transportation average. A lot of people watch that because that's all about the stocks that make this stuff that carry stuff, like trains and truckers and planes, that keep the economy going.

So if they're having a tough time, people read into that, well, if we're not transporting as much of the stuff that gets the economy going, then where are we going?

And then, of course, there's the issue with the Russell 2000. That's an index of largely small companies stocks, it now in bear market territory to the tune of about 26 percent down from its highs. Two-thirds of the issues within those issues are down in excess of 35 percent.

Now, it doesn't always hold that the others follow in suit. And, by the way, even when they do, oftentimes, they just add a few more percentage points to a sell-off, but not all the time. Even if they were to go into bear market territory, there's no real sign here that the others would quickly mean an escalating in sales.

One of the things that happened was, in the 1970s, during the oil crises, when we quickly went into a bear market, and ultimately, over the '70s, we surrendered half the market's value in little more than three years. That was then. A lot of people saying, gosh, we hope it's not now.

To the focus on now and whether we see a government shutdown and how that could affect trading. Again, I want to stress here, at the corner of Wall and Broad, this was kind of a non-event. I don't want to minimize it. But, sadly, these guys have gotten used to this, as maybe have a lot of Americans.

Nevertheless, there are signs that they're doing everything they can to avoid that from happening at midnight tonight.

Peter Doocy on Capitol Hill with more on that.

Hey, Peter.

PETER DOOCY, CORRESPONDENT: Neil, the vice president is sitting in his ceremonial office right now in the Senate. He just left a meeting at Chuck Schumer's office.

It is unusual for the Democratic minority leader to host the vice president and his team. But that's what just happened. We're not sure how long Pence is going to stick around. He couldn't be the tie-breaking vote if there winds up being a tie.

But right now, in the Senate, this motion to advance a package that combines wall funding and disaster funding is underwater, 44 yes votes to advance, 46 no votes. And the majority leader, Mitch McConnell, has left this vote open now for more than three-and-a-half-hours.

They're trying to get members who went home back here. He told us a little while ago that he's hoping to have an announcement soon. Lindsey Graham, one of the Trump White House's biggest allies in the Congress, tweeted a little while ago he's ready to dig in the fight for border wall money.

But there is already some talk about needing to pare down the president's demand for $5 billion in border wall money.

(BEGIN VIDEO CLIP)

SEN. RICHARD SHELBY, R-ALA.: You would have to ask some president exactly where his number is. You don't throw it up on the table.

But I believe that he's flexible, if -- he would meet the Democrats at least halfway. That's a pretty good deal.

(END VIDEO CLIP)

DOOCY: Well, the only way a deal can get done, according to the Republican whip in the Senate, John Cornyn, is if Nancy Pelosi and Chuck Schumer work it out with Trump, who wasn't satisfied with the continuing resolution the Senate already passed, because it had no new wall money in it.

(BEGIN VIDEO CLIP)

SEN. MARK WARNER, D-VA.: The remarkable thing is, that had virtually unanimous support in the Senate when the -- it was passed by a voice vote.

That was something the Republican leadership had convinced the president was the right way forward. And in many ways, the irony of this -- and I feel some empathy for my Republican colleagues.

(END VIDEO CLIP)

DOOCY: And I just talked to a Republican member of the House of Representatives, who said that, if this Senate bill goes down tonight, he doesn't think that Congress is going to come back for more votes until January -- Neil.

CAVUTO: All right, Peter, thank you very much.

John Roberts at the White House on just how far the president is willing to go.

He was intimating that, for quite a while, this could drag on, right?

JOHN ROBERTS, CORRESPONDENT: Yes, he said that, if it shuts down, it could be shut down for a long time.

But they are trying hard to avoid a shutdown. Peter mentioned that Mick Mulvaney, the vice president, and Jared Kushner were all up there in Chuck Schumer's office trying to find out if they can hammer out some sort of deal.

And I'm getting indications from the White House that this $5.7 billion that was contained in the House measure that passed last night is not a hard-and-fast number. Don't forget the president was willing to accept $1.6 billion, plus a $1 billion slush fund, earlier this week.

I was told that the number of 1.6 might be something that's doable, if the president could get agreement on that. And don't forget, the White House was negotiating with Chuck Schumer, who came up with a package of $1.3 billion.

But Chuck Schumer, on the Senate floor, certainly giving no quarter to the president over this whole idea of a shutdown. Listen here.

(BEGIN VIDEO CLIP)

SEN. CHUCK SCHUMER, D-N.Y., MINORITY LEADER: To top it all off, President Trump has thrown a temper tantrum and now has us careening towards a Trump shutdown over Christmas.

(END VIDEO CLIP)

ROBERTS: Now, President Trump is trying to put the shoe on the other foot, after, just 10 days ago, in that Oval Office meeting with Nancy Pelosi and Chuck Schumer, saying, hey, I will happily take the blame for a government shutdown over border security.

The president saying at a -- at a bill signing ceremony, after meeting with the Senate Republican leadership earlier in the day, if there is a shutdown, it's the Democrats' fault. Listen here.

(BEGIN VIDEO CLIP)

PRESIDENT DONALD TRUMP: So, we need border security. And the Republicans in the Senate, as you know, are taking it up today. And it's really up to the Democrats, totally up to the Democrats as to whether or not we have a shutdown.

It's possible that we will have a shutdown. I would say the chances are probably very good, because I don't think Democrats care so much about maybe this issue.

(END VIDEO CLIP)

ROBERTS: So, where we are right now, as Peter was saying, Mitch McConnell might have an announcement sometime in the next little while. They're trying to get enough votes to what's called get on the bill.

And if they can bring it to the floor in the Senate, then somebody can off for an amendment say, well, instead of $5.7 billion, how about we do 1.6? And if that can pass the Senate -- and that did have Democratic support earlier in the week -- well, then maybe they kick that back to the House.

And if the House can get a quick vote on it, you get that to the president's desk, he signs it, and maybe we have already avoid a government shutdown. But who knows what's going to happen? Again, it's the emoji, right?

CAVUTO: It's amazing.

But how did the president go from saying he would own this shutdown if he forced the point, it would be on him, he wouldn't put and blame Chuck Schumer and Nancy Pelosi, to doing a 180 and doing just that today?

ROBERTS: That's a very good question, Neil.

(LAUGHTER)

CAVUTO: OK.

ROBERTS: I suspect the president, because he's not in the Oval Office, is up in the residence. And maybe he's watching.

So, Mr. President, you got my number. If you can explain that one, give me a call.

CAVUTO: All right. Let me know if you hear anything.

ROBERTS: All right.

(LAUGHTER)

CAVUTO: All right.

In the meantime, we have got Oklahoma Republican Senator James Lankford. He was with the president earlier today.

Senator, it does seem odd. Whatever people's views of this fight over the security along the wall and funding, the president said he would take the heat for that, then -- then pointed fingers at Democrats.

Do you?

SEN. JAMES LANKFORD, R-OKLA.: And you know what? Here's -- here's the challenge that the president had.

When he talked to Nancy and to Chuck Schumer, the focus was, if they're both going to try to block it. And Nancy Pelosi was saying, there's no way it gets through the House. Then it's going to be on him.

But it turned around and, actually, it did get through the House and came back over, what they said would never happen. And so now there's a small group in the Senate. Obviously, all Democrats are blocking it to be able to move over here.

So,the challenge is that now what? It's not moving here. It's not able to get the traction. So we have got to be able to negotiate this out and be able to figure out how we're going to do border security, how we're going to be able to fund the government.

And I think there are some clear paths to get there. Now it's just a matter of everyone sitting down and actually getting it resolved and saying, yes, this is a clear path to get there, let's do it.

CAVUTO: All right, but you don't find it odd that the president is now pointing fingers?

LANKFORD: No, I -- I -- I take it -- when he said, it'll be my fault on it is, he was saying, if you want to show that the government over border security, I would gladly be able to shut it down over border security, because I want to be known as the president that went to bat -- went to bat for border security.

That's how I took that statement. But we can go back and replay it.

CAVUTO: Yes, I guess we can.

(CROSSTALK)

CAVUTO: All right, it is what it is.

LANKFORD: Yes.

CAVUTO: But let me get your sense whether Republicans are frustrated, because it looked earlier in the week, Senator, that the president was willing to go with this temporary extension that would keep the government lights on through February, maybe fight this battle another day.

Then maybe he heard from his base. I don't know. But things changed. What happened?

LANKFORD: You know, it's -- it's hard to be able to tell what happened.

I would tell you, when you talk about Republicans all received that -- myself and several other Republicans didn't like doing the C.R., voted against the voice vote for it, said, no, this was the wrong direction to go. We should do the full appropriations.

We're very, very close to that. That has a lot of negotiated priorities that are in it. And I think we can resolve it. That's the one that we talked about before with the $1.6 billion that Chuck Schumer said, I'm OK with everything in it, except for the $1 billion slush fund.

That tells me we need to be negotiating over that $1 billion slush fund and figure how to be able to resolve that. But everything else seemed to be settled issues.

So, why would we do a continuing resolution to February, fight this a few months from now, when we can resolve it right now, if we just stayed at it and negotiated longer?

CAVUTO: You know, Senator, the president has been very fond -- and quite rightly so, given the market's performance up until the last few months -- to brag about the markets and how well they're doing.

They're -- they're not doing nearly as well right now. And the Nasdaq's in a bear market.

LANKFORD: Right.

CAVUTO: A host of other stocks are in a bear market, or worse.

But he's not talking about it much, outside of maybe putting a lot of the blame on the Federal Reserve.

LANKFORD: Right.

CAVUTO: What do you think of that?

LANKFORD: Yes, that's what I have heard mostly, is the issue about Federal Reserve. The president is upset about interest rate hikes.

I think it is a combination of the interest rate hikes that Wall Street never likes.

CAVUTO: Do you think he's to blame for any of this?

LANKFORD: No, I don't think -- the interest rate hikes, no, are not his fault.

(CROSSTALK)

LANKFORD: Obviously, that's the other side of it.

CAVUTO: No, that's not what I said.

Do you think he's to blame or he's seeding doubts in people on Wall Street? Because they liked what he was doing, but he seems increasingly either distracted or angry or concerned about staffing, that people are coming and going, the latest the defense secretary.

Do you think he bears any responsibility for what's going on?

LANKFORD: So, you know a lot more about this than I do on it.

But my comment was going to be that part of it is the interest rate hike. The other part of it is the trade issues.

CAVUTO: Right.

LANKFORD: And I think the instability is really on the trade side. And that's clearly on the president.

The president has said, trust me, I'm going to work out better trade deals.

And I think the market is getting nervous on that trust me portion of it and trying to be able to resolve what's going to happen in China long-term, because our economies are inextricably linked at that point. What's going to happen with Brexit, and what effect does that have?

CAVUTO: All right.

LANKFORD: Obviously, the view of the E.U. and the U.K. -- are they going to have an agreement? Are they going to be able to negotiate with us?

Currently, the E.U. doesn't want us in a trade deal with the U.K.

CAVUTO: OK.

LANKFORD: So, we do.

CAVUTO: All right, and a lot of -- a lot of uncertainties, to your point.

Senator, thank you very, very much. I hope you have a merry Christmas.

LANKFORD: Yes, merry Christmas as well.

CAVUTO: And that you're not working Christmas Day. All right.

We have a lot more coming up here.

What happened with Jim Mattis leaving, the defense secretary of the United States? What we're learning behind the scenes that's raising questions in the weeks and months ahead -- after this.

(COMMERCIAL BREAK)

CAVUTO: All right, he wasn't just any Cabinet official.

James "Mad Dog" Mattis, as he was known, the defense secretary, was widely loved in and outside of the White House, and certainly within the Defense Department itself.

Our Jennifer Griffin with the ticktock on what happened and what happens now.

Hey, Jennifer.

JENNIFER GRIFFIN, CORRESPONDENT: Hi, Neil.

Well, I'm told he hates that "Mad Dog" Mattis nickname.

But I'm told also to expect more resignations here at the Pentagon. Mattis says he will stay on the job until February 28 to ensure a smooth transition. A lot can happen between now and then. The Pentagon expects to be tested by America's enemies in the wake of Mattis' resignation.

Yesterday, I was told that U.S. CENTCOM Commander General Joe Votel felt punched in the gut after hearing the president's plan to pull out of Syria. And now the president is planning to ask his military planners to pull about 7,000, or half, of the U.S. troops out of Afghanistan.

It's not clear who will take the job of defense secretary if the president sticks to his plan to pull out of Syria. General Jack Keane has already said he won't take the job, even though he is reported to be the president's first choice.

(BEGIN VIDEO CLIP)

JACK KEANE, ANALYST: I have no place to go back into public service, Martha.

MARTHA MACCALLUM, HOST: And that's final?

KEANE: That's final.

(END VIDEO CLIP)

GRIFFIN: Senator Tom Cotton is mentioned as a top choice as well.

Cotton is a former Army captain who served in Iraq and Afghanistan. Hard to imagine him overseeing a pullout from Syria, given his past experience. He signed a letter with other senators -- quote -- "The withdrawal of American presence from Syria also bolsters two other adversaries to the United States, Iran and Russia. Your administration must not repeat the same mistakes that previous administrations have made and concede to these bad actors."

Most likely, Mattis' deputy, Patrick Shanahan. who spent the past three decades at Boeing and became a Trump favorite when he backed the president's idea for a Space Force, which the Pentagon for the most part opposed, he will be asked to stay on as acting defense secretary -- Neil.

CAVUTO: All right, Jennifer, thank you. Great reporting, as always, Jennifer Griffin.

As Jennifer started speaking, you might have seen some interesting video there. It was of Mike Pence, the vice president, of course, leaving a meeting that he was having with Jared Kushner and Mick Mulvaney, the OMB director, who is also going to be the acting chief of staff for the president.

They were meeting with Chuck Schumer, looking at ways to avoid a government shutdown that could be little more than seven-and-a-half-hours away. We don't know what transpired at that or whether they came up with some sort of a continuing resolution that would keep the government lights on.

Doesn't look like much progress was made. But it's still early. We will keep you posted.

Also, reaction to the Mattis departure right now and what it could mean in our ongoing war on terror and our position in the Middle East, with the president set to pull troops out of Syria and Afghanistan, the former commander of the USS Cole, Kirk Lippold.

Commander, very good to have you.

What do you make of all this?

KIRK LIPPOLD, FORMER COMMANDER, USS COLE: Well, thanks, Neil.

First and foremost, no one is indispensable. That said, General Mattis' resignation is obviously going to leave a huge hole within the Department of Defense, because there's going to be a ripple effect.

Obviously, he had a fundamental difference in the foreign policy view of the world from the president. Therefore, he chose on his timing and conditions when he would resign.

The president, I think, like his predecessor, unfortunately, is really not looking through the second- and third-order effects that is going to happen. The Middle East especially abhors a vacuum. When you look at taking those troops out of Syria, we have made an investment there.

He evidently made this call after talking to President Erdogan in Turkey. They're getting ready to invade. There is a strategic risk that Turkey, in going after the Kurds, could accidentally or even on purpose kill an American, which we cannot afford to have.

Looking at Afghanistan, over there, we have an investment. That region, if you look at why were there, it's amongst what we call the arc of instability, China, Pakistan, Afghanistan, and then Iran.

We need to be there. And, specifically, several administrations now, until we address the root cause of why Afghanistan continues to have problems, which resides squarely in Pakistan and the intelligence service there, we are not going to solve the Afghanistan problem.

And that's why we need to stay.

CAVUTO: All right, now, the president obviously disagrees with that.

To be fair to the president, he had telegraphed this as he was running for president, felt we had worn out our welcome and this had gone on too long in Syria and Afghanistan.

I guess there was some concern that he didn't more aggressively bounce this off his defense aides and the rest, who were apparently shocked by this.

But, having said that, he has argued, the president's argued, Commander, that ISIS has been defeated, we don't have to worry about it anymore. Do you share that view?

LIPPOLD: I do not. ISIS is not defeated.

Until they are totally wiped out, there is still a possibility that they could reconstitute. The United States brings unique logistics, communications and military capability to absolutely go after ISIS and destroy them.

They need to be wiped out in toto, done in coordination, in certain cases, with Russia and the Syrians and the Turks. But, nonetheless, ISIS needs to be wiped out. Until they leave, there is risk. And we don't want to have that risk, especially given the investment that we have had there.

CAVUTO: Well, by that definition, our soldiers would be there forever. You never can be certain, right?

LIPPOLD: I think you can. I think we will reach a point where we could destroy ISIS. Obviously, we have made tremendous progress over the last year-and-a-half, thanks to President Trump.

But I think that pulling out like this, based upon a phone call with Turkey, not informing our allies who have also made an investment there, I think that's what introduces risk. Who's going to take over? What's the Iranian reaction going to be?

Once again, we're giving them a window of opportunity to insert themselves and have regional influence there surrounding once again an ally, Saudi Arabia. We don't need to be doing that in that particular region in Syria.

CAVUTO: Commander, thank you very much. I hope you have a very safe and happy Christmas.

LIPPOLD: Thank you, Neil. You have a merry Christmas as well.

CAVUTO: All right, Commander Kirk Lippold.

All right, we do know now that the vice president is meeting with Speaker Paul Ryan, also the Freedom Caucus chair, Mark Meadows ,Jim Jordan also, again, some of the key conservative leaders in the House of Representatives.

They're doing everything they can. This was from earlier before, when the vice president was leaving his chat with Chuck Schumer in the Senate. Apparently, there is no go here so far for even a continuing resolution to keep the government going beyond midnight tonight, when at least a quarter of it will shut down, not all of it, a quarter of it.

We will have more after this.

(COMMERCIAL BREAK)

CAVUTO: A record number of Americans are simply trying to, well, get somewhere for the holiday. Good luck with that, a massive storm blocking them, and it could get worse.

We're on it after this.

(COMMERCIAL BREAK)

CAVUTO: All right, Washington ready to shut down. A lot of folks just want to take off anywhere and leave crowded airports.

Good luck on that.

We have got FOX News' Jacqui Heinrich at the mad dash to get to grandma's or anywhere at New York's La Guardia Airport.

JACQUI HEINRICH, CORRESPONDENT: Hey, Neil.

Well, if there's any silver lining, yesterday was supposed to be a worst day to travel than today. And, so far, we're pretty much on pace with that. We're seeing fewer impacts today than we were yesterday around this time.

But, of course, the MiseryMap on FlightAware is lit up like a Christmas tree. And guess who's in the number one spot? That's right. We are, right here at La Guardia, with more than 600 delays and 44 cancellations so far.

In the number two spot in Chicago. New York and JFK are battling it out for number three. You can thank the storm system that's been snarling travel here in the Northeast.

But, of course, misery loves company. Across the country today, more than 4,800 delays and more than 300 cancellations. Still, the numbers are more or less better than yesterday. There were 8,400 delays, slightly fewer cancellations at 260 across the U.S.

What better time, right, than a record-breaking holiday to have a storm like this one? AAA says more than 112 million travelers are heading out of town this holiday season. That's up more than 4 percent from last year.

(BEGIN VIDEO CLIP)

JONATHAN PERRY, HOLIDAY TRAVELER: No, I would probably be more frustrated if it was trying to get to family, you know? No, I got to go back to work.

(LAUGHTER)

PERRY: And then, when we got here, found out that it was even delayed even more than the app said, so...

HEINRICH: So, what are you going to do to kill time?

PERRY: Drink.

(END VIDEO CLIP)

HEINRICH: But it's not just the runways that are backed up today. More Americans are traveling by car this holiday season than ever before; 102 million people are hitting the roads.

That means travel up to four times longer than a normal drive in many cities across the country. Atlanta, New York, Boston, Houston, and Detroit are the top five worst places to be driving right now.

And while I'm hitting you with the bad news, I might as well give you the rest of it. Tomorrow and Sunday are projected to be busier days to travel than both yesterday and today. So, no matter where you're going, make sure you allow for a lot of extra time.

And, of course, that corny saying goes, pack your patience -- Neil.

CAVUTO: I like that. Jacqui, thank you very, very much, Jacqui Heinrich.

All right, let's go to Fox News meteorologist Rick Reichmuth on the type of weather that's causing all these delays, how long it lasts.

What are we looking at, Rick?

RICK REICHMUTH, METEOROLOGIST: Yes, it's a really big storm. It's been impacting us since yesterday. And we still have at least probably about another 18 hours to go until it's gone.

Saturday and Sunday, maybe more people traveling, but the weather will be better almost everywhere across the country. This is -- we had yesterday the tornadoes cross parts of Florida, a really broad storm system down from parts of the Caribbean up to Canada, primarily rain, but on the backside of it and in the higher elevations, we will see a little bit of snow.

Here's how the future radar plays out, really heavy rain across the Boston area still for much of the evening, and then this is kind of out of here. By tomorrow morning, most of it is gone, except for parts of Maine.

But take a look at this. The temperatures begin to drop and the winds are still going to be in place. And because that wind, we will still see a few delays across the airports across the Northeast tomorrow, but, overall, most of the country looking good, really clear all across the central part of the country.

And that activity still goes across much of the Pacific Northwest. Take a look at Sunday, overall, again, not that bad, more moisture across the Pacific Northwest.

As far as precipitation over the next few days, so if you have snow where you are, then you have a good chance you're going to have a white Christmas.

I know, Neil, in Jersey, you care a lot about that. Not going to be the case. We just have rain across the coast. That's this rain today, maybe a quick little flurry Sunday night into Monday, but for the most part we will see that snow across far interior sections.

And then out across the West, especially across parts of the Four Corners, might have a white Christmas in Arizona, my home state -- Neil.

CAVUTO: You just love rubbing it in, don't you?

All right.

(LAUGHTER)

REICHMUTH: I know. I know you want it. It's not going to happen this year.

(LAUGHTER)

CAVUTO: All right, my friend, thank you very, very much, Rick Reichmuth.

All right, we could be looking at a partial government shutdown in a matter of hours. So you saw the vice president leaving a meeting there.

You ever wonder who that guy was near him, not Mick Mulvaney, that other guy? Our Chad Pergram. He's -- he's like Zelig, everywhere.

(COMMERCIAL BREAK)

CAVUTO: All right, who is that with Chad Pergram?

You're going to be seeing the vice president of the United States, and with him right now -- they don't walk slowly. We just slowed this down, so you can appreciate what an aggressive reporter -- there he is, Chad Pergram.

(LAUGHTER)

CAVUTO: Isn't he amazing?

He's with us right now.

That was the vice president coming back from that powwow with Chuck Schumer. I don't think anything came of it, Chad. But, obviously, you were trying to find out what did.

What did you find out?

CHAD PERGRAM, CORRESPONDENT: Well, we're trying to see what is happening now on Capitol Hill.

It's only natural that, you get just a few hours away from a partial government shutdown, and some of the gear boxes start to move around here. So there was a meeting on the Senate side with the vice president, Mick Mulvaney, the budget director, acting chief of staff, and also Jared Kushner.

They met in Chuck Schumer's office. The vice president then retreated to his office in the Senate. He is the president of the Senate. I said, are they negotiating something here? I was told, no, not at this point.

He might be needed to break a tie. Now, what's going on in the Senate right now is, they are more than four hours into a procedural vote just to call up the House bill. This is the bill that the House passed yesterday with budget money for the wall. They haven't been able to do that yet. That vote is still open. Pence might be needed to break a tie.

Now, what you saw on the video was, I followed the vice president across the Capitol, through the Rotunda. He is now in the ceremonial office on the House side with House Speaker Paul Ryan. Mulvaney is there, also Jared Kushner.

And so we're trying to see if the dam is about to break, you know, what might start to happen.

I hollered at Paul Ryan about a half-hour ago if there was going to be a shutdown, if they were going to start exchanging offers. And he didn't comment at all. Nobody in that coterie of folks who went into Ryan's office that you saw on the video, none of them commented on any questions that any reporter, myself included, asked.

But it's only natural that you would get right up to the snubbing post here and there starts to be a little bit action. The key, though, is, they have to get that bill up in the Senate. If they don't, they can't even consider it. And that's the impasse right now, Neil.

CAVUTO: All right, so the odds are that we have a shutdown at midnight tonight?

PERGRAM: Possibly. But, again, they can move really quick.

CAVUTO: All right.

PERGRAM: We started to hear the idea that they might add a little bit of money. But can they get that through the Senate, get the Democrats to relent, and then move it through the House of Representatives?

CAVUTO: You know, it's how you blended in with the crowd, like you were one of the negotiators. It was brilliant, tour de force.

(LAUGHTER)

CAVUTO: All right.

PERGRAM: Well, that's -- that's part of trying to be part of the group here, absolutely.

CAVUTO: Yes, I tell you, I envy you, buddy. If I were there, they would just say, no, we don't need the catering.

(CROSSTALK)

PERGRAM: ... out of the way, though.

CAVUTO: All right, great job. Great job.

PERGRAM: Thank you.

CAVUTO: All right, Chad Pergram.

So, all the more reason to be watching us live tomorrow at 10:00 a.m. Eastern time, when we kick things off on the latest movements in Washington. We could be some hours into a government shutdown then.

We will tell you what would be shut down, who is affected, whether you are affected, how long it could last, and the political fallout for the parties -- again, all of that 10:00 a.m. live tomorrow.

I know what you're thinking. What about the holidays? I'm here for you, America.

(LAUGHTER)

CAVUTO: You're welcome.

(COMMERCIAL BREAK)

CAVUTO: All right, this just moments ago.

This is Mike Pence, the vice president, leaving that meeting with Paul Ryan, I think Mark Meadows as well, the House Freedom Caucus leader. He's trying to cobble together something with the various leaders on the Hill, Chuck Schumer a little earlier on the Senate.

You can see Jared Kushner there, Mick Mulvaney, the acting chief of staff for the president and also the budget director. Each side is trying to do something to prove it's the other side who's to blame for what would be the third shutdown under this president.

But, sadly enough, it's kind of routine. We see this quite often.

To historian Doug Wead on who ultimately takes the blame, if there is such a thing in times like these.

Good to see you, Doug.

Who does?

DOUG WEAD, FORMER ADVISER TO PRESIDENT GEORGE H.W. BUSH: Hi.

(LAUGHTER)

WEAD: It's unpredictable, Neil.

Just when they think they got it figured out, it can switch the other way.

CAVUTO: Right.

WEAD: Like, Obama thought he had it figured out in 2013. The next year, the Republicans took the Senate. So it's unpredictable.

I have run the numbers. And, in general, the Democrats tend to win because the media has to interpret this, and the media tends to favor Democrats. But the last one, Trump was -- tilted his way.

(LAUGHTER)

CAVUTO: Yes, that one, they put on Chuck Schumer.

I mean, it's interesting, though, that these things are more common than we think. Their duration tends to be short. Of course, we had a doozy under Barack Obama for 16 days.

But I'm wondering whether people just get used to it, and there's no longer a scarlet letter attached to it, and that's why neither side feels they have to give, because there's very little political pain, especially something like this, that would only be a partial shutdown.

The president arguing to his base that it's important to his base and a passionate point for his base. Democrats just as convinced they're stopping him on it is just as important.

What do you think?

WEAD: I think there's a lot of political pain associated with this.

I think a transcendent theme is taking place here. We don't like our presidents to lie to us. But the American people are very cynical, read my lips, no new taxes, you can keep your own doctor, I didn't have sex with that woman, Saddam Hussein tried to buy uranium in Africa.

The Democrats would like to see Donald Trump not keep his promise about the wall. And I think what Donald Trump is doing here, he's making a very clear message for his base in years to come and maybe 2020: I tried to get the wall. I was willing to shut down the government to get the wall. They stopped me from getting the wall.

I think that is what is going on.

CAVUTO: Then why doesn't he embrace it? Last week, he was very forceful on that point, saying, I will own this shutdown, what have you.

And now, all of a sudden, a week later, it's on Chuck and Nancy and all that.

(LAUGHTER)

CAVUTO: And you could make the argument, well, that's a very strong-willed position to take, Mr. President, you own it, you're going to go with it, you're doing the Jack Kennedy thing that success has 1,000 authors, and failure is an orphan.

(LAUGHTER)

CAVUTO: But at least go out there.

He's not doing that.

WEAD: Yes. No, he's not doing that. He's changed on that, I will agree.

(LAUGHTER)

WEAD: But think he sees himself: I promised jobs. I got jobs. I promised Jerusalem as the -- for our embassy. I got Jerusalem. I promised energy independence.

CAVUTO: Absolutely.

WEAD: I got it.

So I think he's got to somehow make it clear: I tried for that wall. It wasn't my fault.

I think that's some of the drama that's going on.

CAVUTO: All right, a lot of drama.

All right, Doug, thank you very much. Merry Christmas.

WEAD: Thank you. Merry Christmas, Neil.

CAVUTO: All right.

Someone who might know the president's thinking on all this, because he met with him, he's next.

(COMMERCIAL BREAK)

CAVUTO: All right, back on Capitol Hill, where, say this, the vice president is getting his steps in today.

When I hear the doctor say, you know, Neil, you got to walk 10,000 steps, I had no idea that that was all in a day. But, apparently, that's the deal. And the vice president has satisfied that demand, going back and forth between the Senate and the House side of the Capitol. He's back on the Senate side right now.

Paul Ryan is going to be there as well. This is moments ago, Paul Ryan. That looked like Jared Kushner with him. But these meetings have been going back and forth to avoid a shutdown later tonight.

Georgia Republican Congressman Barry Loudermilk with us right now.

Congressman, what are the odds, you think, that everything shuts down, or at least the part of the government that's vulnerable to shutting down, happens tonight?

REP. BARRY LOUDERMILK, R-GA.: Well, I mean, it's a smaller part, but any part is not good.

But, at this point, it looks a little more promising that we may come to a deal, just of because of the activity we're seeing. I don't have any concrete information. But, as you mentioned, the vice president and Mick Mulvaney just walked through Statuary Hall toward the Senate.

I know that they were meeting with House leadership. Shortly thereafter, Paul Ryan headed that way. There's a lot of flurry of activity on the floor. We're speaking with the different groups and caucuses talking together.

So, the good thing is, they're talking. So that's a step in the right direction, because this whole thing has been held up by folks just not willing to -- to come together and compromise.

CAVUTO: Yes, I hear you.

Now, this is very similar, it seems to me, sir, that, when you were putting together -- that's Mick Mulvaney with the vice president and Jared Kushner earlier -- you were putting together something that would keep the government going through the first week of February.

It looked at the time that the president was going along, and then he slapped that down and said he wasn't.

When you met with the president, among a small group that did, was it your understanding that he was going to maintain that, that, if I don't $5 billion for this wall or security funding at that, I'm going to let this government shut down?

LOUDERMILK: Well, that was our understanding, is, is, look, this is a national security issue. We have to secure the border. He's very committed to that.

When we went over there to meet with him, we were just there to say, Mr. President, we agree this is of such importance, we're willing to stay here through the holidays, if we have to, to get this done, to let him know that, if that's the stance he wants to take, we have got his back, and the Republicans in the House have his back.

And we showed we did yesterday. What he said was, he wants Congress to provide some funding to get moving on this wall project. I don't think he's locked into necessarily the $5 billion. He may go with $1.6 billion, but without the restrictions that Democrats wanted to put on.

I think he could do a lot with that.

CAVUTO: All right, so when they're -- when they're looking at $1.3 billion, he's willing to talk 1.6?

LOUDERMILK: I would think so.

I mean, he didn't put a dollar figure on it.

(CROSSTALK)

LOUDERMILK: But it's with the restrictions.

CAVUTO: Well, that's interesting. But it's not -- he's not wedded to the $5 billion, sir, right?

LOUDERMILK: I don't -- I don't think so.

CAVUTO: OK.

LOUDERMILK: And I think it's more -- the more -- the greater concern are the restrictions.

You know, it's one thing to get $5 billion, but if you're restricted from actually building the steel slat barrier he wants to build, then what good is it?

So I think as long as there's not the restrictions, and he can move on it, that would be acceptable. The other option is to -- is to use the military, use the Corps of Engineers.

But, Neil, as we have seen so far, regardless of what this president tries to do, if he does that, some judge somewhere is going to try to stop him. So...

CAVUTO: All right, we will watch very closely.

You're right. It's fast-moving. We will see what happens.

I hope you don't have to work through Christmas, because we fear that we would have to work through Christmas.

(LAUGHTER)

CAVUTO: But, seriously, Congressman, thank you very much. Hope you have a wonderful Christmas yourself.

LOUDERMILK: All right. Merry Christmas, Neil. Thank you.

CAVUTO: To you as well.

All right, so that's where we stand. It's good thing we're live tomorrow morning, 10:00 a.m. Eastern time, as we always are, because we're focusing not only on what's happening in that building, but how it could affect something else.

Did you -- did you notice this? The emergence of a bear. You see that bear? It's a metaphor for what's going on in the markets, for the Nasdaq, for two-thirds of the S&P 500 stocks, for a third of the Dow 30 stocks, down 20 percent or more from their highs.

And that bear is knocking on your door. If you don't watch us tomorrow at 10:00 a.m., heaven forbid.

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