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Quest Means Business
Dow Closes Sharply Down; Global Markets Tumble; Where to Invest in Market Mayhem; Ebola Fears; Ebola Airline Concerns; Major Sell-Off Hits Global Markets; Netflix Shares Plummet; Airline Stocks Down
Aired October 15, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: The closing bell is ringing on Wall Street. It's been a dreadful day in Europe, a truly awful day for the markets in
the United States. They may look happy, but investors most certainly are not. It's Wednesday, it's the 15th of October.
Tonight, stocks deeper into the red. Fears for growth send investors hurtling for the exits.
Other economic woes: oil prices are down, airline shares are down, and a huge takeover is in trouble. Think of it as the perfect storm.
Mohamed El-Erian says that. He'll be with us shortly.
Whichever way you look at it, whether in New York or in Europe, a dreadful day on the markets.
I'm Richard Quest, I mean business.
Good evening. A few moments ago, the markets came to a close for this Wednesday. There is no trading taking place, at least in equities,
anywhere in the world, and you may be grateful for that after the stomach- churning session that we have just endured.
Look at the numbers. The Dow Jones closed just seconds ago. It's closed down more than 173 points. It's the way the day traded. At the
open, it was down 300 points. It never really recovered. Its worst point of the day was down over 400 points just after lunch. The selling was
brutal.
The Dow Jones has now lost more than 5 percent in the past five days of straight losses. In other words, nearly all the gains of 2014 have been
erased in October. We know October is a difficult month, but what's happened this week has been exceptional.
The sell-off in the US follows a dismal day across Europe. Down, down, down, down, down, down, and on it went from New York through to
London, Frankfurt, Paris, the Athens market, Madrid, and Milan.
Just take a look at how the trading on the FTSE, which was down 2.8 percent, and now compare it over the past six months, hitting reasonable
highs here, and then this long, slow -- actually, not long and slow -- long and fast -- tail-off. It's the same story in Germany, where the DAX over
the past six months, this dramatic fall-off.
But in all the markets that we've got so far, let's look at the Paris -- I'm sorry, the Athens market in Greece. Fears over plans to exit the
bailout early, uncertainty over the survival of the Greek government, sent the Greek stock market tanking.
And if you want to see just how weird the day can get, look at these hiccups that suddenly take place right in the middle of the day. The
market fell 10 percent, and it closed down 6.25 percent. The Greek prime minister has called for an emergency cabinet meeting to discuss the
economy.
While we look at these numbers, Teddy Weisberg is with Seaport Securities, joins me now. Teddy, the market --
TEDDY WEISBERG, SEAPORT SECURITIES: Yes?
QUEST: -- I mean, down 400 points at one moment. Nothing really happened today to justify this sort of reaction, but we've seen it all
week. What is going on?
WEISBERG: Well, it's a number of things. You can almost pick your poison. It's the Ebola scare which, in fact, is making people very, very
nervous. It's the eurozone, which you just talked about, and the European markets. But the -- just the lack of any kind of economic growth coming
out of Europe.
It could be the Fed ending its quantitative easing, even though it's been long-predicted and it's been going on for months. The reality is, it
ends this month, and that clearly signals a major change, as far as I'm concerned, in Fed monetary policy. We had some weak economic --
QUEST: Right.
WEISBERG: -- weak economic news in the US today. It's sort of a perfect storm --
QUEST: Right.
WEISBERG: -- if you will, of events, with a market that was priced to perfection.
QUEST: Now, if those are the -- if you like, if those are the ingredients of the cake, then --
WEISBERG: Right.
QUEST: -- and nothing's really going to change in the immediate future, we are looking, if you're right, Teddy, for many more days of this
sort of volatility that we've seen this week.
WEISBERG: Well, yes. And everybody got a little complacent, we all got a little lazy, and unfortunately, they never ring a bell, as you know
and as your viewers know, and these events come together at perhaps all at the right or the wrong time, and the momentum clearly swings to the
negative side, and then you have to mix in programmed trading --
QUEST: Right.
WEISBERG: -- no short sale rules, all of which tends to put fuel on the volatility momentum.
QUEST: Teddy, we're at the Exchange tomorrow, QUEST MEANS BUSINESS comes from the New York Stock Exchange. I look forward to seeing you and
shaking your hand --
WEISBERG: And I, you.
QUEST: -- in person tomorrow.
WEISBERG: Thank you.
QUEST: Teddy Weisberg joining us. Now, the reason this sell-off is so alarming is because it's not just limited to stocks. Brent oil prices
are close to four-year lows. You're going to hear from the International Energy Agency on that. Normally, oil price falling is good for economies,
it makes energy cheaper, and that's good for growth. We'll discuss why that's not the case.
Volatility is spiking, pushing multiyear highs. That certainly is good maybe for traders, but not for long-term investors. And US bond
yields are collapsing, which of course means the price goes up. The yields on the ten-year Treasury has fallen well below 2 percent, its lowest level
since May of last year. Investors are looking for safety. It's a case of risk off in favor of bonds.
Now, these turbulent times in the global stock markets have investors scrambling for a safe place to park their money. Mohamed El-Erian is the
chief economic advisor for Allianz. He joins me from Irvine, California.
Mohamed, well, I need you to tell me in this -- in these ingredients of this cake that I'm talking about tonight, which for you is the most
significant and most important?
MOHAMED EL-ERIAN, CHIEF ECONOMIC ADVISOR, ALLIANZ: There are three significant issues going on, all of which have destabilized the construct,
the paradigm that investors were comfortable with.
Remember what had happened? Fundamentals were sluggish, but prices were driven up here. They were decoupled by the action of central banks.
And in the last few weeks, including today, the perfect storm occurred.
First, fundamentals instead of converging and validating prices, they got worse, particularly in Europe, particularly in Germany. Second,
volatility returned to the markets, which meant people were less willing to put cash to work.
And then the middle, the wedge, the central banks, the confidence that markets have in that was eroded when Mr. Draghi was not able to implement
the sort of policies that markets had unreasonably expected. And there's a lot of divisions, both within the ECB and outside.
QUEST: Right.
EL-ERIAN: So, what you're seeing right now is that the paradigm is changing. And when paradigms change, technical disruptions occur,
liquidity disappears, and we get the incredibly wild markets that we saw today, Richard.
QUEST: So, is this a time for rebalancing of portfolios? Is it a time for rethinking structures? Or is this just something that market
participants get up to, and the normal investors, the ordinary investor, should just sit quietly?
EL-ERIAN: Well, it depends where the normal investor is sitting. If they are 100 percent in equities, it's a very different position than if
they're well diversified.
The biggest fear, Richard, is that this financial volatility is going to be an additional headwind to the real economy. And if that occurs, then
fundamentals will weaken, and then what will happen at that point is not only do prices come down, they will overshoot the fundamentals.
So, it's really important that this financial instability, this excessive risk-taking that's now being covered, that this does not
contaminate the fundamentals. If it does, then investors are facing not only volatility, but they're facing more downward pressure.
QUEST: Right, but that's a similar, to some extent, to 2008, 2009, because there comes a point when fundamentals cannot withstand a market
either in such volatile fervor or such sharp falls. Now, we're a long way off that, I think you'd probably agree at the moment. But eventually, this
overwhelms the fundamentals.
EL-ERIAN: Correct. But 2008 was what's called a sudden stop. Or if you think of it as a massive heart attack. Why? Because the payments and
settlement system that is absolutely critical to any economy was under threat.
Today, this is about risk outside the banking system. This is about the risk that has migrated to non-bank institution, and it's a different
type of risk. So, I think it is disruptive, but it's not 2008.
QUEST: Right. If it's not 2008, and the -- you eloquently and elegantly gone through the various issues behind it, what does it take to
soothe the balm, to ease the nerves, whichever analogy you wish to use this evening?
EL-ERIAN: So, the central banks will try to do it immediately. I would not be surprised if in the next 24 to 48 hours, you're going to hear
lots of soothing talk from the central banks. And that's what they've been doing all along.
The problem is that central banks are carrying an excessive policy burden with imperfect tools. So, I'm not quite sure the markets will be as
happy to hear about the central banks. What they really -- what the markets really want, is they want governments around the world to step up
to their policy responsibility, and governments, unfortunately, have not done so.
QUEST: Mohamed El-Erian. Good of you to talk to us tonight, sir. Thank you very much, much appreciated.
EL-ERIAN: Thank you.
QUEST: Now, as we continue, one of the issues that we were talking about there is the question of Ebola. A second woman's caught Ebola in the
United States. Earlier this week, she was on a flight, and authorities are trying to contain the disease. The global transportation system, is that
now at risk of fear, worry, concern as a result? QUEST MEANS BUSINESS.
(RINGS BELL)
(COMMERCIAL BREAK)
QUEST: Within the markets, airline shares were off very sharply, all the major US carriers, American, United, IAG in Europe, and Air France,
some falling as much as 6 to 10 percent. And all this as a second health care worker in Dallas has contracted Ebola.
Her name's Amber Vincent. She's 29 years old. She's a nurse at Texas Health Presbyterian Hospital in Dallas. She had a fever on Tuesday. Ms.
Vincent and her sick colleague had treated the late Thomas Eric Duncan, the Ebola patient from Liberia who passed away last week.
Now, it's all adding to concerns among health officials, one of the crucial factors, she took a commercial flight the day before she was
diagnosed. The flight went from Dallas to Cleveland and back again.
In Britain, David Cameron has held a video conference on the Ebola crisis and other matters with the president of the United States, the
German chancellor, the French president, and Italy's prime minister. The second meeting scheduled for Thursday.
In Spain, the nursing assistant who was the first person to contract Ebola in Europe, is thankfully doing much better. Teresa Romero Ramos is
in serious condition. She is stable, according to her doctors, and they're planning on setting up contagious disease reference centers in each of
Spain's regions.
Amber Vincent, the second Dallas nurse to catch Ebola, took a flight before she began to show symptoms of the disease. It was Frontier's 11 --
Frontier Airlines 1143, it went originally from Dallas to Cleveland, then the return flight, of course, from Cleveland back to Dallas.
She traveled three days earlier. The whole reason was to go and visit family. CNN's Elizabeth Cohen is in Dallas and joins me now. There's so
much to cover, so we'll have to go at it at a fair old clip, Elizabeth. First and foremost, what on Earth was she thinking, getting on a plane
within a period where she had knew -- or should have known that she was supposed to have restricted movement?
ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: It's interesting, Richard, we don't know the answer to that. Did the authorities tell her
not to travel and she traveled anyway? Or is it possible they didn't tell her not to travel?
And I will say, when she went from Dallas to Cleveland, they didn't know that health care workers were getting sick. Authorities weren't even
tracking health care workers. So I would not be surprised if when she left Dallas to go to Ohio, nobody told her anything.
QUEST: Right. Now, if that is the case -- and of course, we wish Amber Vincent only the best in terms of her treatment -- but if we talk
about this wider issue, now, of travel and airline passengers, 130-odd passengers, are we getting to the point not of panic, but where the public
is now so greatly concerned in the United States?
COHEN: It's interesting, my colleague, Gary Tuchman, he was out at the subdivision where Amber Vincent lives, and one of the moms who lives in
that subdivision told him that she had several nurses who would babysit for her children, and she said, "No more nurses. I don't want nurses
babysitting for my children." And Gary related this story to me.
I think that that's very interesting. Of course, there's no reason to just bar nurses from your home, but I think that's probably what's going
through some people's minds, is that they're scared.
QUEST: And is there -- I've heard lots of rumors, if you go online, you see just about every rumor known to man and beast -- but I've heard
lots of rumors that the disease is mutating, that somehow either it's becoming either to catch, or the incubation period is not what we thought.
It may not be airborne. Is there any talk in medical circles of a mutation?
COHEN: I don't think anyone thinks it already has mutated. Could it mutate? Sure, that's a possibility. And this is a certain kind of virus
that actually mutates relatively easily.
But if we look at the people who are getting Ebola, the nurses, these nurses were in the room with him as he was vomiting and had diarrhea. It
doesn't -- you don't need airborne contact, they had contact with his bodily fluids and were not wearing proper protective equipment, we've since
learned. So, that's not a strange way to get Ebola. That's a very predictable way to get Ebola.
QUEST: Final brief thought -- when you say that, Elizabeth, when you say that fact with your experience and your knowledge, are you horrified?
COHEN: Oh, yes. I'm horrified that months ago the CDC put out there how to use protective equipment and what protective equipment to use and
all of the rules and regs, and it seems that they weren't followed.
But I will also tell you, Richard, it's a little bit horrifying to me that the CDC thought by just putting it out there and sending e-mails and
putting it on their website and holding some webinars that sort of like that, hospitals were going to get it.
Hospitals in the United States don't have a great track record with safety. One out of 25 patients in US hospitals comes down with an
infection that they acquire in the hospital. So, one out of 25 patients in the hospital gets an infection from the hospital. That's not a great track
record.
So to think that all of a sudden, hospitals everywhere would know how to control Ebola and keep their health care workers from getting sick.
Pretty unlikely.
QUEST: Thank you for joining us. As always, good to have your views on it.
COHEN: Thanks
QUEST: Thank you very much. The idea that patients who had contracted Ebola were not showing symptoms and flew on commercial carriers
has now become a major concern for the health authorities, the airports, the regulators.
Mary Schiavo is the former inspector general for the US Department and Transportation. And Mary, you and I once again have to discuss this, or at
least the aviation industry, thank you for joining us.
They've got to find 130 passengers. They can do it, that's going to be, perhaps in many ways, the easy part. The harder part is going to be
preventing some sort of worry by every airline passenger that the person they're sitting next to could have Ebola.
MARY SCHIAVO, FORMER INSPECTOR GENERAL, US DEPARTMENT OF TRANSPORTATION: That's exactly right, Richard. You really hit it on the
head. They can find every passenger, because since September 11, 2001, we have positive identification of persons who board our flights. So, they'll
be able to find them, and they'll take care of that particular flight.
But the problem is, is we don't have any laws or authority in place to really prevent it. They could have put this nurse under an official
quarantine order, and then in some states, and this comes down to state law, in some states it's a felony if you violate it, in some states it's a
misdemeanor.
But this nurse wasn't put on any such order. And by the way, there's no Federal Aviation regulations that govern this. They punt it to the CDC.
And when that nurse boarded the plane, what also happened is the CDC's credibility was shot. I don't think the American public will trust them
now.
QUEST: Really? But as Elizabeth says, the CDC put the information out there, but it's by no means clear this hospital actually implemented
it.
SCHIAVO: Right.
QUEST: So, without getting into the nitty-gritty of who said what, where, when and why, because let's face it, Emory in Nebraska in other
hospitals around the world have successfully contained and treated --
SCHIAVO: Right.
QUEST: -- Ebola patients. I want to know, from your view, is the aviation industry worried, terrified, not by Ebola patients getting
onboard, but by passengers who are worried about an effect?
SCHIAVO: Well, no. I think they're worried about both. Certainly they're worried about Ebola patients. We've already had aircraft workers
in New York picketing and we've had flight attendants, many statements from their various unions.
Because they're the ones on the front lines, they're handing the drinks and picking up the trash and cleaning up the messes. They're the
ones on the front line as well. So, they are concerned about the virus.
But I think passengers will start staying away. And that's what they've done. They've done it in other things in the past. In SARS, I had
to travel the world during SARS, and this is how I had to travel. And once you see people boarding like this, the rest of the people are going to --
if they don't have to travel. You and I have to.
I think that's going to have pretty big impact, and it's because they don't trust that the planes are clean, and they shouldn't, because there's
no regulation.
QUEST: Mary, we'll talk more about it. Good to see you as always, thank you. Mary Schiavo joining us.
SCHIAVO: Thank you.
QUEST: That's one reason, of course, as Mary was saying, about the airlines, it's not surprising that that the airline stocks fell very
sharply. IAG was down, as indeed was United and American Airlines.
Now, the fear that's been created has also created mayhem on the markets. You do not get may chances to look at a Dow chart like this.
We'll return to the New York Stock Exchange in a moment. This is CNN.
(COMMERCIAL BREAK)
QUEST: The numbers make sorry reading whichever way you look at it. Now, let's put this into perspective and talk to the best in the business.
Alison Kosik is at the New York Stock Exchange, Paul La Monica is CNN Money's digital correspondent and joins us now.
There's so many things we could talk about, but we do need to discuss this rout on the market. And Alison, the -- what it takes, how serious it
is. Are traders worried?
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: I was down there today many times -- I'm up here on the floor right now -- but down there many times.
They do not seem worried. In fact, many traders are telling me, look, this isn't a panic kind of selling that we saw today.
They know that by looking at the volume. The volume was heavy, but it wasn't overly heavy into that panic stage. In fact, they were saying
buying opportunity, buying opportunity.
And when the market came back, one of the traders walked up to me and said, you know what? I should've bought more before.
PAUL LA MONICA, CNN MONEY DIGITAL CORRESPONDENT: I think that's a great point. Obviously, they're always going to say it's a buying
opportunity. I think they're kind of conditioned to say that by now.
But the memory of people, it's so short. Everyone's acting as if we've never had a sell-off like this before. Granted, the last correction
was three years ago, but it was 2011, it was during this bull market. We had a correction, and we moved on, and we still went to higher highs.
QUEST: Well, we did, but arguably -- and this is where I need both of you to just jump in and tell me I'm wrong -- arguably, the circumstances --
ISIS, oil, Ebola, slow growth in Europe -- this is a much more -- let's start with you, Paul -- this is a much more --
KOSIK: Yes.
QUEST: -- we'll go to Paul first -- noxious, toxic mix, or cocktail.
(CROSSTALK)
KOSIK: Yes, there's that --
QUEST: Some --
KOSIK: There's that snowball effect going on, Richard, where you have -- you mentioned it, you had Ebola, you have ISIS, you have what's
happening in Europe, you have worries about deflation, not just in Europe, but in here in the US. You've got mediocre data --
QUEST: Right, but --
KOSIK: -- coming out of the US.
QUEST: -- that's my point, Alison. That's my point. And that's why I'm suggesting, Paul, you might be wrong.
LA MONICA: Right. To play devil's advocate, Ebola is obviously the huge wild card. It is ridiculously scary. We don't know if it's going to
be a pandemic or not. And that is a very difficult thing, I think, for Wall Street to try and put numbers on.
But Europe, we've been through European recessions, now, what? This would be the third time in several years. We've kind of done this before.
And even ISIS, not to be glib, conflict in the Middle East is something that traders --
(CROSSTALK)
KOSIK: But the thing is we're on the --
LA MONICA: -- have lived with forever.
KOSIK: But we're on the cusp of the Fed changing the landscape, right Paul? We've got the Fed pulling out of stimulus. We've got the Fed
talking about raising interest rates. That's where things are changing, don't you think?
LA MONICA: Oh, without question. And I think -- you're right, definitely. With the Fed finally pulling back on QE, that's a bit of an
unknown. We're going to see what's going to happen when the Fed takes the training wheels off. But when I think what's really important here, so we
don't spread too much fear --
QUEST: Right.
LA MONICA: -- we're coming off of all-time highs. This is healthy, it's needed.
QUEST: All right.
LA MONICA: We were up so much last year that a 10 percent pullback after a 30 percent gain in 2013, I don't think that's the end of the world.
QUEST: I need to just ask you, Paul, briefly, about Netflix.
LA MONICA: Yes.
QUEST: What happened? I think the shares are down some 18 percent.
LA MONICA: Yes, Netflix, it's a classic case of a momentum stock --
QUEST: Twenty-five percent.
LA MONICA: -- drop.
(QUEST RINGS BELL)
LA MONICA: When momentum goes in the wrong direction, look out below.
(LAUGHTER)
LA MONICA: Everyone loves Netflix as a company, they think it's a great service, "House of Cards," "Orange is the New Black." But guess
what? Subscriber growth is slowing a little bit. They talked about price increases possibly hurting. You've got more competition.
And this is a company that's priced for perfection. You can't miss if you're Netflix. Netflix -- the guidance isn't very good, and we have this
huge sell-off that's going to happen. That's -- it happens with all momentum stocks.
QUEST: Momentum stocks. Alison, finally, I want to show what happened to airline stocks today in the United States. If you show the
numbers there. You've got American, which has eked out a small gain. United down 1.5 percent. IAG, which is British Airways, there, and Iberia,
down 3.5. Air France-KLM down 3.5. So, the market is simply betwixt and between, Alison, isn't it?
KOSIK: Yes. And there you have it, the transports, you've got the transports today really taking it on the chin because of the Ebola fear in
the background. But that, once again, was not the overarching reason that you saw this sell-off and the swings today.
One trader telling me, I think at this point, investors are going to be exhausted. He would be surprised if he sees the same thing that
happened today happen tomorrow, Richard.
QUEST: We will both -- all three of us be here tomorrow --
LA MONICA: I don't think our hearts can take it --
QUEST: Sorry.
LA MONICA: -- if we have another morning like this one.
(LAUGHTER)
KOSIK: I know.
QUEST: It was quite extraordinary, wasn't it? Straight out of the gate, the bell rings, off 300 points. Thank you very much, Alison. See
you tomorrow at the Exchange. Paul.
LA MONICA: Thank you.
QUEST: Good to see you, sir.
LA MONICA: Good to see you as always.
QUEST: Thank you. Now, one of the reasons that we factored in was the price of oil, and it's hitting four-year lows. OPEC shows no signs of
slowdown in production, and a Saudi prince is speaking out. We'll have the news headlines ahead for you, and then, we're all about oil. "Oil" be
seeing you.
(RINGS BELL)
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in a just moment. This is CNN and on this network the news always comes
first.
U.S. officials have said that the second nurse to have contracted the Ebola virus should not have boarded a commercial flight. Twenty-nine-year-
old Amber Vinson was on the team that treated Thomas Duncan who died of Ebola in a Dallas Hospital a week ago as she flew on a plane from Cleveland
to Dallas and then became symptomatic the day following.
U.S. stock markets fell and managed to close well above the session lows. The Dow was down more than 400 points at one stage. European stock
markets all closed sharply in the red.
The Pentagon's warning the Syrian town of Kobani could still fall despite an increase barrage of airstrikes against ISIS. It estimates the
strikes have killed hundreds of ISIS fighters in the area so far. Kurdish fighters took advantage of the new wave of strikes and have attacked ISIS
positions.
When Oscar Pistorius shot and killed Reeva Steenkamp, he ruined her family according to what Steenkamp's cousin said during a tearful testimony
on the third day of the athlete's sentencing hearing. A South Africa judge will decide Pistorius' punishment in a matter of days.
Oil prices have followed the trend in the markets. They are now sharply lower. They've moved deeper into the red. And as we told you last
night, Brent is close to a four-year low. If you join me at the Super Screen, you'll see the chart and we'll show you exactly. Now this is the
year-to-date, and once you see this, I can give some perspective to it. Oil producers are not cutting back on supply. This is despite this very
dramatic fall off. I mean, if you just take the math from there and look at the way it's gone. You have it holding steady over there, then this
dramatic one way, pretty much, movement on the market.
All this happens as the Saudi Prince Alwaleed bin Talal, furious with the Saudi government, -- he's written to the Saudi oil minister saying
falling prices could be a catastrophe. Well of course that catastrophe for Saudi might arguably be the engine of growth elsewhere. Well at the same
time, Russia's finance minister today admitted Russia will be selling off some of its foreign reserves because this sharp fall in price - which
incidentally correlates almost exactly to the movement of the ruble which is struggling from the falling oil price. The two are feeding - it's known
as a feedback loop. It's something that's affecting everyone - from finance ministers to chief executives to you and me when we're paying for
petrol and gasoline, and the people indeed on the streets of Moscow.
(BEGIN VIDEOCLIP)
Male, VIA INTERPRETER: America is lowering the oil price. What will happen next? I think it is directed especially against Russia. It is some
kind of new sanctions. Time will show what happens next.
MAURICIO CARDENAS, COLOMBIAN FINANCE MINISTER: I'm concerned too. I'm concerned too. But, you know, there is a good side of it to consumers,
not just here in the U.S. or everywhere in the world -- in Colombia as well because we charge consumers the international market price. We don't
subsidize gasoline.
STEVE PRUETT, PRESIDENT AND CEO, ELEVATION RESOURCES: So most of us in the oil business seen an equilibrium for the price of oil in the $80 to
$100 range. Above that, demand destruction occurs and people cut back their usage as they did in 2008, and below that, the rigs get laid down and
we produce less.
(END VIDEOCLIP)
QUEST: Antoine Halff is the head of oil for the International Energy Agency joins me now from Paris. Good evening, sir. Thank you for joining
us on a late evening in Paris.
ANTOINE HALFF, OIL INDUSTRY & MARKETS DIVISION HEAD, IEA: (Inaudible).
QUEST: Why - this four - I mean we can put any one of reasons to it - demand is lower, supply is maintained. But how worrying is this fall, when
consumers say `it's cheaper gas, I'm not worried!'
HALFF: Well, I think the real worry is about a few years from now, because right now it doesn't sound like the price is low enough to hold
back some production, but it might hold back investment if people get convinced that these declining prices are going to stick. So we might have
a cycle of low investment and then lighter supply a few years down the road - that would be the concern.
QUEST: So, right - but that's in the future - that lower supply as people turn away from it. What to you, sir, is the main reason for this
fall in price? Is it lower growth on the demand side or is it a glut on the supply side, for example, because of fracking and others?
HALFF: Well, it's a combination of the two. Supply growth has been just phenomenal and keeps going up and up, and people get surprised. We
keep revising our expectations of supply upwards. Supply from the U.S. is just flowing through the roof and this is a new kind of supply -
unconventional supply from the U.S. which now is the top oil producer - liquids producer in the world, ahead of Saudi Arabia and Russia. But that
was to some extent, we've grown used to being supplied by the outside on the supply. What's been more surprising perhaps in the market is how
sharply, how abruptly demand has slowed. So demand in the second quarter really fell to a trickle, and we're now forecasting for this year the
slowest growth since 2008.
QUEST: Right. Now, in that scenario, I mean, look, you know - classic economics 101 supply continues robustly, demand falls off, price
collapses. You don't need to be a Nobel Laureate to work that in the sense of the great picture. But I need your help, sir - which side of the
equation changes? Does OPEC cut production to boost the price?
HALFF: Well there's a couple of reasons why OPEC is not going to cut production in our view - right now at least. I think one of the reasons is
that they reckon that the growth in supply is all got from unconventional sources in the U.S. which are pretty high costs. And also, which I expect
it to be more price-elastic than conventional production. It takes a lot of continuing investment to keep production from the U.S. oil (inaudible)
running. I think it - this is going to be the calculation in real (ph) than elsewhere in OPEC countries. Why should we cut production? Can't our
export revenues subsidize high-cost production in the U.S. when these guys -
QUEST: Right.
HALFF: -- are more vulnerable to high prices - to low prices - than we are?
QUEST: Do you think -
HALFF: Now the other reason is -
QUEST: -- Well, just on that point, do you think --
HALFF: Yes.
QUEST: -- the Saudis and the OPEC countries are deliberately maintaining high productive levels, hoping to push the higher-cost U.S.
production out of the basket? Out of the window?
HALFF: Well, there's a lot of conspiracy theories out there about what the Saudis and others are doing. But I think that's a fairly rational
explanation of what could be going on. The other thing is, that because of the high production on the U.S., the OPEC producers are facing a
diminishing market - not only in the U.S., but also in Europe. You know the new production in America has backed out imports, it's also backing out
(putting force) in Europe because European refiners can no longer compete with U.S. refiners. And with Saudi refiners, Russian refiners which are
upgrading and exporting more products, Indian refiners which have been expanding capacity and Chinese refiners. So we have less imports into the
U.S., less imports, less imports into Europe and you have now -
QUEST: Right.
HALFF: -- OPEC producers fighting for market share in Asia. To do so, they've been lowering their prices, cutting their prices, engaging in a bit
of a price war. So that's kind of a very conflicted agenda.
QUEST: Right.
HALFF: They might want higher prices but they need to expand market share.
QUEST: Thank you, sir. Beautifully and elegantly put to us to night.
HALFF: You're welcome.
QUEST: And we'll talk more about it in the future. This price of oil is something we will follow closely on "Quest Means Business." Thank you,
sir. Now, we're going to stay with oil - oil of a different kind when we come back. We're going to be examining the oil that's on the walls of what
may be one of Europe's artiest hotels. "Quest Means Business."
(COMMERCIAL BREAK)
QUEST: Now, assuming that you haven't been completely put off by travel by all the various woes around the world, a "Business Traveller"
update for you. If you are traveling through London, then the Frieze Art Fair is underway, if you can on Wednesday. And here's a taste of what you
can see at this year's Frieze. This is part of an interesting installation. It's called a GartenKinder. That's indeed I'm sure you were
well aware, and of course those of you in the know will recognize the Belgian artist Carsten Hollis' work on the GartenKinder. And here we have
a gentleman standing by a painting - well, you can tell that it's a gentleman standing and you can tell it's a painting. It's called Shadow 15
2014. It's by the Briton John Stezaker. This one's called Stack Eight. One, 2, 3, 4, 5, 6, 7, 8, 9, 10 - which is a bit odd considering it's more
than 8 there. It's by Michael Landy. He's best known for once destroying all his possessions in the name of art in a disused department store.
Fine. Well, in Copenhagen, the Danish designer Per Arnoldi is also making use of a former department store to display his work. But in this
particular case, it's not only the department store, you can now stay there as well - as a hotel. Don't take it too seriously.
(BEGIN VIDEOCLIP)
QUEST: This is the Skt. Petri Hotel in Copenhagen where art, design and the hotel all come together. It was once a beloved Danish department
store - the former shell of Daells Varehus. It's now been given a new lease on life. Bold colors, simple lines, striking modern art. It's a
hotel with classic Scandi design. And if this art hotel doesn't take its art too seriously - well that's down to this man - Per Arnoldi.
PER ARNOLDI, ARTIST AND DESIGNER: Look at what we have in front. It's deliberate.
QUEST: You have used a word there that I rarely hear when people start talking about design. I hear lots of heifel (ph) and art in hotels.
I hear lots of people talk about messages and this, that and the other - but you just said - fun.
ARNOLDI: (LAUGHTER). I said we had a little fun. In hotel, art is a decorative element. You're not trying to tell anybody anything about
existentialism, that we're all going to die, as though life short and cruel. (LAUGHTER). I mean, that's not where we are. That's not where we
are. This is hospitality.
QUEST: Why do want nine large porcelain vases?
ARNOLDI: (LAUGHTER).
QUEST: What was the series?
ARNOLDI: (LAUGHTER). Nothing. Nothing. I think we did 20. But I sold the rest. (LAUGHTER). So we just - that was what we - I mean, nobody
can grasp them now. But I think that's not thinking - that's a practicality.
QUEST: So there's no -
ARNOLDI: So that's the thing of the Scandinavian thing - we are practical people, you know. It's not a fantasy thing and there's not a lot
of mystery here. Not a lot of mystery.
QUEST: So you weren't trying to tell me something about society with nine vases on the wall?
ARNOLDI: Why would a designer tell you anything about society? I'm just trying to make you feel good, maybe smile, maybe laugh and feel at
home - feel welcome.
QUEST: It's a balance - striking design that's also strictly functional.
ARNOLDI: It's organized. We're organized here.
QUEST: Scandinavian design is very much followed and in vogue at the moment. Why is that do you think?
ARNOLDI: The serious answer is that in a crisis - when the crisis is on, which it is, you probably want to buy something that's not too
elaborate where you feel that the design has been minimized - kept at a minimum. So, don't splurge. Then of course this job selling Scandinavian
design. This is a modern European city. We are not all on the Faroe Islands or the Shetland Islands. But of course that's the image. I work a
lot in Japan and they are very taken with the idea that we have this Nordic, dangerous, cold, cottage life. We've just been sold well.
(LAUGHTER).
QUEST: Let's go upstairs and look at (inaudible). Now this is one of the corridors in the hotel and --
ARNOLDI: Yes, definite.
QUEST: -- but your art is here - you did these pieces?
ARNOLDI: Yes, I did these pieces.
QUEST: What were you - what were you thinking?
ARNOLDI: This a decorative piece - nobody's crying, screaming or begging or praying or anything difficult here. This is a hotel corridor
for Christ's sake. Find you a room and pray that the key works.
(LAUGHTER)
ARNOLDI: That's hotel philosophy. Do you hear that?
(END VIDEOCLIP)
QUEST: (LAUGHTER). That is the most honest assessment of hotel art I've ever heard. Hats off to him. Nobody - or you just tried to get you a
hotel room and praying that your key works. As for this, well I'm sure you've got some views @Richardquest, @Richardquest. No, maybe perhaps not
- we ought not to leave that one. All right. Jenny Harrison is at the World Weather Center. Well, Jenny, you have some extremely nasty weather
and serious things heading in our direction.
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: Well, there is actually. Richard, you're right this is at the hurricane of course. It is
right now actually a category four hurricane, and of course I'm talking about this one - Gonzalo. And it's working its way towards Bermuda, but
you can see it's some pretty large storms - storm system, and in fact the winds has just dropped actually. It turned to 5 kilometers an hour ago -
they were 215. But that actually showed the way - is the way - things should be going. In the next 24 and 48 hours by which time it should
actually be across Bermuda. But it should actually continue to weaken as it heads towards the north.
But of course Bermuda is very well geared up for storms even of this size, so hopefully there won't be a huge amount of damage. You can see all
the computer models bar one are pretty much in agreement for the actual track that the storm system will actually be taking. And of course
there'll be quite a bit of heavy rain coming with the storm system as well. There we go - just show that. And what you will notice is this line of
rain coming in from the West - now that is actually a front clearing away from the United States, and so that really is steering this particular
hurricane towards Bermuda.
This is it - it has already produced some pretty heavy rain across areas in the South, and it will continue this Wednesday to work its way
through the Northeast of the U.S. You can see the rain that's come down in the last few hours - 136 millimeters to Alabama, we've had 120 millimeters
even in Atlanta in Georgia, 65 millimeters of rain. So, that storm system still to continue to clear away from the northeast, pushing into New
England. But it's actually weakening as it continues to work its way eastwards. Meanwhile in Europe, a bit early to say whether that remained
as what will be a hurricane at some point - whether it makes it across towards Europe. But it could well do. So watch out to see what happens in
the next few days. But still some very heavy rain again across southern and southeastern areas. So, again, a couple of heavy totals to bring you.
This in Slovenia - 101 millimeters and across in Croatia 61. So the system as it works its way eastwards of course has been producing these heavy
amounts of rain. Very strong winds coming in with the next storm system, and we're going to see literally band of rain after band of rain. The
warnings though remain across these central areas. That's where it should be heaviest. But you can see here what I mean about the heavy rain coming
through in a band after band. So, again we do expect to see some pretty high totals here. When it comes to temperatures on Thursday, well, nothing
too surprising. It's not too cold and it's certainly not too warm - 24 in Rome, 18 Celsius in London. Richard.
QUEST: Keep an eye on that hurricane. So when's hurricane season end by the way, just remind me - I keep forgetting.
HARRISON: Well, you know, it's November really -
QUEST: Right.
HARRISON: -- when we say it's due to come to an end.
QUEST: Right. So you keep your pencil sharpened. Thank you very much. Ms. Harrison - Jenny Harrison. A vocal critic of the way women are
portrayed in video games is being silenced or at least attempted to be silenced with the threat of violence. I'll tell you about a speech by a
young woman that was supposed to take place at Utah University. Today it didn't because of an alarming e-mail to the school's office.
(COMMERCIAL BREAK)
QUEST: What started as an online backlash against feminist critics of the videogame industry has now turned into threats of a school shooting at
university in Utah. This is Anita Sarkeesian who's been vocal about the portrayal of women in video games. When she was to be giving a speech at
the Utah State University today. But she's canceled that speech after school staff received an e-mail threatening in their words, "the deadliest
school shooting in American history." Ugly things are being said on Twitter, the two camps have opposing hashtags. #Gamergate - Gamergate is
against the feminists, and #Stopgamergate is for those in favor. You get the idea. Well, Brianna Wu is a games developer who says she was forced to
leave her home over the weekend after receiving targeted threats on Twitter. She joins me now from Boston. What did you say that appears to
have enraged the lunatics out there?
BRIANNA WU, VIDEO GAME DESIGNER: You know, it's very silly. I posed a name, making fun of - one of my fans sent me a name, and it made very
gentle fun of Gamergaters and I posted it. And, you know, as a response to that pro-Gamergater people and the site 4chan ended up making thousands of
names targeting me, and it escalated to death threats actually.
QUEST: But what are they objecting to? Because I mean in an era of free speech, what do they say is - I mean I can't understand why people -
you know - you've made a valid point that the portrayal of women in video games or in online games is offensive or discriminatory. Well, honest
people can disagree on that point -
WU: Right.
QUEST: -- but they're going further than that.
WU: Yes. I think it's a - what you're seeing is a response that's completely out of proportion to the issues at hand. You know, what Anita
and what, you know, people like me in the industry are talking about are we really just want women portrayed in a better way, --
QUEST: So what was -
WU: -- and as a result of that, I think - yes go ahead -
QUEST: Why do you think - I mean, I understand what you want the portrayal of women and, you know, less scantily-clad women basically just
beating the bejeebies out of each other or being portrayed in a sexual way. But what do you think there is such a visceral response against you?
WU: Well, I want to back up just one second and I want to say like that's not actually what a lot of us want. Like what we want is for women
to simply be portrayed as people.
QUEST: Right.
WU: Like it's much simpler than that. You know, very often we're the girlfriend or, you know, someone that's kidnapped for the male hero to come
save or even someone that's murdered. You know, so the male hero is filled with anger. So, the issues we actually want are much simpler. You asked
why this is happening - I think the reason is, you know, for 30 years now, videogames has really been perceived as a boy's club. You know, you got
videogames made by men for men. And I think in 2014 where almost half of the videogame players are women, I think you're seeing some very insecure
guys like feeling very threatened by that and, you know, lashing out at us being in their space.
QUEST: We'll have to leave it there. We will talk more about this. Thank you for coming in and talking about it. Please come back again,
we'll discuss this and we'll follow it closely.
WU: Absolutely.
QUEST: I appreciate your time tonight. Thank you. And we'll have a "Profitable Moment" after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." It's tempting to talk about the markets and what happened today, and perhaps maybe tomorrow we'll be
looking at that. But this is a cake that's baking, and we don't really know how it's going to work out over the next 24 hours. What we have just
heard in the last ten minutes is a fascinating discussion between #Gamergate and Stopgamergate. The portrayal of women in videogames -
whether it be sexist, the sort of games, the sort of roles they play. But now the abuse, the threats, the death threats being made against women who
are trying to stop it. Just our discussion in the studio in the break told me that this was clearly something that requires further thought on both
sides. And even my producer who started looking this today, has received the most vitriolic abuse as a result of these comments. You want to take
somebody on? @richardquest. And that's "Quest Means Business" for tonight. I'm Richard Quest. Whatever you're up to in the hours ahead,
(RINGS BELL) hope it's profitable. I'll see you tomorrow.
END
