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Quest Means Business
Dow Continues Wild Ride; Rocky October for Global Markets; Sell-Off on European Markets; Market Analysis; Eurozone Problems Remain Unresolved; Airline Stocks Rebound; White House Opposes Ebola Travel Ban; Ebola Fears; Tomorrow Transformed: Skype Aims to End Language Barrier
Aired October 16, 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: Another day on Wall Street, the Dow is down -- no, it's just eking out a volatile day as the closing bell is ringing.
That's the way the market traded on Thursday, it's the 16th of October, the market is down more than 30 points.
Consider today the calm after the storm. Don't let the numbers fool you -- it's been an exceptionally volatile day on the market.
Think about blaming Europe? We're going to to tell you tonight about the problems in Europe that are weighing heavy on the global economy.
And when we talk about advertising, well, they're starting to get frugal on Google.
I'm Richard Quest, tonight, we come live from the New York Stock Exchange, where of course I mean business.
And a very good evening to you from the heart of global capitalism. It doesn't get much more capitalistic than this, the New York Stock
Exchange. We start the program every night with the closing bell. Well, we decided this being the week that it's been, we really did have to be
here to understand what is happening in the markets.
And tonight, during the course of the program, we are going to make sense, or at least our experts are going to make sense, we're going to give
it some perspective. You're going to hopefully understand why this has been the week and a half when the markets decided that volatility was
returning.
This is the way the big board and the market traded. It started off a truly awful day. The market was down very sharply. Then, we had a little
bit of a blip up, comes down again, up again, and down again, and that has been the hallmark of the course of the whole day. Volume just shy of 900
million shares, but the market down 28.3 at the end of the session.
Put this together for the week overall, and you really do start to see a week that was torrid and -- on Monday, the Dow was down 223 points. It
was the heavy losses -- heavy losses -- in the final minutes of trading.
Then on Tuesday, we just lost 6 points on the Dow. By Wednesday, the Dow was done as much as 400 points during the session. It fell below
16,000. It ended the day down 173 points. And if you take a look at today's trading once again, just going back one or two gains, down 25
points. But the graph is what really shows why we are here and the volatility of it.
Many of the major markets also had similar volatility. The world in many cases has slipped into class correction territory. What does it mean?
Well, a correction is down 10 percent. That's the traditional view. Global markets have been pummeled in October, and only half the way
through.
This is how it is. The Dow, down more than 5 percent. The FTSE in London, down 7 percent. The Xetra DAX, down almost 10 percent. And the
Nikkei in Tokyo, down nearly 20 -- nearly 9 percent. So, some perspective, our two guests. Ben Willis is with us.
BEN WILLIS, SENIOR FLOOR BROKER, PRINCETON SECURITIES GROUP: How are you, sir?
QUEST: And Alan is with us as well.
ALAN VALDES, DIRECTOR OF FLOOR TRADING, DME SECURITIES: How are you, sir?
QUEST: Good to see, gentlemen, both of you. Now, why? What's going on?
WILLIS: This is the market's reaction -- the stock market's reaction to the currency wars that are taking place in the central banks throughout
the world. The United States --
QUEST: But that's not new!
WILLIS: Exactly, it's not new. So, why do you sell off if the fundamentals are still good? All we're watching is the currency wars. It
started with the pressure on the dollar-based commodities, meaning oil, which started the pressure of the downside. It's the correction we've been
waiting for for two years. We finally get it, there's no reason to panic.
VALDES: I think a lot has to do with emotions. I mean, emotions --
QUEST: Emotions?
VALDES: -- are moving everything right now.
QUEST: But a market is all about emotion by definition.
VALDES: Well, these are emotions on steroids right now. You've got it from every part of the globe. You've got Europe looking really, really
bad. You've got events out of Africa looking poor. The Mid East and here in America. So, they're all -- it's like a tsunami of fear.
QUEST: But why this -- what the viewer really wants to know -- what I want to know -- why on an average week in October does it happen?
VALDES: It always happens like that. There's no rhyme or reason. Look at the 20s and the 30s, same thing. They want it to work, and all of
a sudden, it started going down.
WILLIS: It's a seasonal effect, where everybody's sort of anticipating, so it's a built-in effect. It started with September.
September traditionally is the worst month of the year. October, because of the history, 1987. So, that's part of the nervousness. But that also
has to do with money assets that are applied to active money managers that have not been performing.
QUEST: Are we seeing a correction, or are we seeing a crack?
VALDES: I think you're seeing a crack. I don't think you're seeing a major correction. I think you're seeing a crack.
WILLIS: We saw a correction, and that's a good thing. We started with -- the correction started it by sector, it started in the social
media, it started in the biotechs, it's worked its way into the major averages, if you will, because of the oil -- because of the impact of --
QUEST: Right.
WILLIS: -- energy on the major indices. But that's your buying opportunity. But there's nothing wrong with a correction --
(CROSSTALK)
QUEST: Oh! And it --
WILLIS: It's OK --
QUEST: -- it's -- it's -- it's --
WILLIS: Do you prune the rose bushes? Do you cut the grass? It's all part of a natural correction in a market that's necessary.
QUEST: It only took you a few minutes before you came up with a buying opportunity. You'll be telling me to buy on the dips next.
VALDES: You know what? I'd just stay and wait for the dust settle before I'd start buying right now.
WILLIS: I said yesterday on CNN on two different levels it was a buying opportunity. You're going to look back in December and realize you
should have been buying when everybody else was panicking. If the market is emotional, that's when you should be stoic and not react to the
emotions.
VALDES: I think you've got to watch what the Feds do. I think that's going to be the big catalyst. See what the Feds are going to do in a
couple weeks, and then we'll know which way the market's going, but otherwise, I'd stay on the sidelines.
WILLIS: I'm not on the sidelines. This is an opportunity. You're never going to pick a bottom. You need to be in the market.
QUEST: All right.
WILLIS: You need to be averaging -- if you bought it a month ago, why would you buy it today?
QUEST: All right, so, final questions to you gentlemen. The viewer watching, whether they're watching in Beirut or Birmingham or wherever --
Bratislava, wherever, they need to know whether we're seeing something that is deep, meaningful and important, or froth off the top.
VALDES: I think anytime it moves like this, it is meaningful, but I think in the long run, the market's OK. You look at the ten year,
yesterday it dropped below 2 percent. Where are you going to get that, except in the market?
WILLIS: We're seeing an art form. This is not science. These are the central banks, who went into quantitative easing led by the United
States of America, who seems to be doing it massively. Draghi not so much.
QUEST: In one word, because we're talking about it next on this program: Europe. The issues of Europe. In one word, your -- and not a
rude word -- your opinion on Europe?
VALDES: Deflation.
WILLIS: Euro mistake.
QUEST: Deflation and euro mistake is the view from the New York Stock Exchange. When we come back, we're going to show how European chickens
have come home to roost. It's QUEST MEANS BUSINESS at the New York Stock Exchange. Good evening.
(COMMERCIAL BREAK)
QUEST: Welcome back, QUEST MEANS BUSINESS, we're at the New York Stock Exchange. We are attempting to make sense of what's been an
extremely turbulent, difficult, and somewhat discombobulating few days in international markets.
You heard the bull and you heard the bear. You heard the trader who says "buy," you heard the trader who says "sit on the sidelines." Well,
one of the reasons, of course, that there's been so much dislocation is Europe. Take a look at the European markets and how they closed.
The FTSE closed down a quarter of a percent. The Xetra DAX ticked up at the close. It was down for most of the session, eking out at the end.
The CAC 40 down over half a percent, Zurich down more than 1 percent. The Swiss government cut growth forecasts for this year.
Further south into the periphery, as we used to call it. I'm not sure you'd say these -- you'd describe Italy as the periphery, but the MIB down
1.2, the, IBEX down 1.7. Athens continued a 6 percent drop from the previous session with another 2.2 percent.
All in all, banking stocks took hits across the continent on fears of exposure to Southern Europe. That's the European point of view. Alison
Kosik is with me here at the Exchange.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Hi.
QUEST: This is very, very -- difficult. It's great to be here with you, by the way.
KOSIK: Yes, I love it.
QUEST: On your territory.
KOSIK: I can see just how tall you are, Richard. How tall are you? I'll tell you how tall I am. I'm five feet half inch. How tall are you?
QUEST: You're five what?
KOSIK: Five foot half inch.
QUEST: I'm -- well, the director wants us to stand back-to-back.
(LAUGHTER)
QUEST: All right.
KOSIK: But I'm wearing these, so this is why I'm not getting any height today. I'm wearing Converse, yes.
QUEST: I have my good, solid, brogues.
KOSIK: Well, those are much better.
QUEST: All right, let's talk about the markets.
KOSIK: Let's.
QUEST: I'll come back to you a little bit --
KOSIK: Oh, no, no, no.
QUEST: So, what is happening here? Because you heard in the last -- this difficulty between one side and the other. Buy on the dips,
something's going on. Which is it tonight?
KOSIK: Oh, it's definitely buy on the dips. I've been talking with traders throughout the past week and a half who say, look, this is a huge
buying opportunity, and you saw that happen today. You saw it happen -- when you saw these dips, you saw those buyers come back to the market.
QUEST: But look, I want to talk about this. What causes, Alison, a market to do that, then that, then that, then that, then that? There's no
obviously rhyme or reason.
KOSIK: No. Well, this is a market that's kind of feeding on itself, isn't it?
QUEST: Exactly.
KOSIK: With a lot of the negative information coming in. Talking about Europe, nothing real positive coming out of Europe, and think of it,
we're in -- we're knee-deep in third quarter earning season. What's really going to be telling is how these companies fare, where Europe is concerned.
We want to see what their guidance is like, knowing how the slowdown is happening in Europe.
QUEST: I'm just looking out of the corner of my eye, and I see Google has missed. We're going to be talking about that.
KOSIK: OK.
QUEST: Is that likely to be a driver in the next 24 hours and so on?
KOSIK: I can't see why not. You know what? I'm seeing this market - -
QUEST: Netflix, for example, yesterday, was a big driver on the market.
KOSIK: Yes, you're seeing the market really latch onto the negative data, and it's being accentuated, I think.
QUEST: Right.
KOSIK: Of course, anything positive, they'll latch onto that, too. You think about Bullard talking about QE, hey. Then you saw the market go
up.
QUEST: Alison, thank you very much, indeed.
KOSIK: You got it.
QUEST: Good to see you.
KOSIK: OK.
QUEST: Alison Kosik --
KOSIK: Thank you.
QUEST: -- joining me on the Exchange. Now, we've heard countless warnings -- you heard it in the earlier part of this program, you just
heard it now -- about the questions of the weakening in Europe being a major factor in the sell-off.
What, of course, time and again, people simply saying "weakness in Europe" doesn't address the issue of what the underlying reasons are. What
is it about Europe that is so difficult? Which economic chickens have come home to roost? Or maybe they haven't ever actually left the coop.
The first, of course, structural reforms. Italy and France facing a show --
(ROOSTER CROWS)
QUEST: -- there's the chicken on its way. Italy and France facing a showdown with the European Commission over its budget plan. Then you have
the next chicken in the air.
(ROOSTER CROWS)
QUEST: Flown home. Banking reforms. The ECB's admitted this week banks are still weak. And finally, the big turkey, if it could fly, the
chicken --
(ROOSTER CROWS)
QUEST: -- "whatever it" -- thank you. "Whatever it takes," the ECB, Mario Draghi, he said "whatever it takes" last year, but he's simply not
able to implement it, and there is many questions of whether the ECB can actually deliver on its promise to restore or at least to get inflation
back up to target and restore growth. Yesterday on this program, you heard a derogation of the ECB's position from Diane Swonk.
(BEGIN VIDEO CLIP)
DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: Still chewing gum and rubber bands. This is still not a functional currency zone, and that's
what we're being -- what's being revealed today.
And if that was -- it was always put on Mario Draghi being able to break the law and do whatever it takes, and on Angela Merkel delivering
Germany to back up the rest of the bonds in the region, and that's not what we're seeing right now. In fact, we're seeing push back.
(END VIDEO CLIP)
QUEST: We need to put this in perspective. How lucky we are today, Stephanie Flanders is with us, global market strategist at JPMorgan Asset
Management. Stephanie, good to have you in to help us understand in this special program what is going on from the European perspective.
You heard the chickens coming home to roost. Why has it taken Europe so long? And of course, it was inevitable it was going to go wrong.
STEPHANIE FLANDERS, GLOBAL MARKET STRATEGIST, JPMORGAN ASSET MANAGEMENT: Well, I've been enjoying your chickens, because I think you've
identified the key issues. I guess the interesting question, when you look at what's going on in markets, is that Europe faces some really tough
challenges.
It faced some really tough challenges at the start of the year, it also faced tough challenges in the summer. Why investors have decided to
focus on them quite so closely in the last few weeks, I think, is a bit of a question.
We've seen a slowdown in the European recovery. We knew we were going to have a sort of moderate to mediocre recovery, or we thought we knew. We
haven't seen that, or at least we're starting to see a loss of momentum going through from the summer.
And we've seen the European Central Bank say it was going to do some more, so that was a positive --
QUEST: Right.
FLANDERS: -- at the end of the summer. The problem is that, as you know, Mario Draghi, the head of the ECB, he said "we'll do whatever it
takes," but you know what? Whatever the ECB can do is not enough to fix Europe's problems. We need those other pieces --
QUEST: Right.
FLANDERS: -- to come into place. I'm a little bit more optimistic than maybe some in the markets in that I think that banking piece is maybe
going to fall into place over the next few months.
QUEST: Right, but --
FLANDERS: The Europeans have been terribly slow to fix their banking problems, but there is some sight of that now in the next few weeks.
What'll be key is some of the language coming out of these governments, and there, I think it's right that we're still going to see a lot of negative
headlines. We need to see --
QUEST: All right, let me --
FLANDERS: -- more progress.
QUEST: Let me jump in there, because what I hear you say is, with perhaps the exception of the banking, bearing in mind that France and Italy
both present their budgets today to the European Commission, there are still questions on structural reform. Why haven't those governments that
need to, recognizing the risks, got on with it further and faster?
FLANDERS: You know what I think it is, Richard? It's that you had in the middle of the crisis, you had what actually the sort of bureaucrats
quite like, it's that there's a sense of crisis, and the politicians are looking over the abyss, and then they do the difficult things, because
they're looking over the edge of the abyss.
The problem with the last few months, you might say, is although those problems were still there, the debt stock was still great, the structural
reform still needed to happen, there was no real pressure --
QUEST: Right.
FLANDERS: -- coming from the markets to do something about it. One positive side to the last few weeks is I think it will add a bit of
pressure to the politicians. What needs to happen, though, is not just these reforming governments, who are trying to do their bit. Matteo Renzi
in Italy is trying to push through reform of the labor market, for example. You also need --
QUEST: All right.
FLANDERS: -- support to come from the European Central Bank and others, everyone to do their bit.
QUEST: Are you tonight -- I mean, you suggested you are more optimistic than some participants in the market, that optimism is based
upon what, finally, Stephanie?
FLANDERS: Well, I think one -- part of it is I think there's been an overreaction. Frankly, I wouldn't have normally considered myself an
optimist about Europe.
(LAUGHTER)
FLANDERS: I think there's some real debt problems, there's some real issues to deal with. Some of my colleagues would say I'm a terminal
pessimist about Europe. But I think the reaction of the last few weeks is overdone.
We're going to have a few positive things happen over the next few months, which might take us back to where we were, which was not such a
great place, but at least it was moving forward. I think we'll be moving forward when we go into 2015.
QUEST: Stephanie Flanders joining me from London this evening. Stephanie, we thank you for that.
Now, the -- one note to bring to your attention. Airline shares have rebounded somewhat from -- sharply from Wednesday's losses. Take a look at
the numbers and you'll see exactly how things have gone. IAG, which of course owns British Airways and -- British Airways, Iberia, and Vueling, is
up 4.5 percent. Air France-KLM is up 6.3 percent, Lufthansa is up 2.5, Easy Jet is up 3.7.
The White House today made it clear that it was still opposed to a travel ban on West Africa. We need to talk about this from a CEO's point
of view, from somebody who is doing business in the region, big business in the region.
Bill Scotting is the chief executive of ArcelorMittal Mining. The company has an iron ore mine right on the border between Liberia and
Guinea. Bill joins me now on the line from London. Bill, you are absolutely deep into the trenches of knowing the severity, the difficulties
of the Ebola crisis, both the personal, the human and, of course, the corporate. What's the situation as you see it?
BILL SCOTTING, CEO, ARCELORMITTAL MINING (via telephone): Yes, Richard. Look, it's a terrible virus, having a devastating impact on those
economies in that region. But at the same time, within our operations, we've had no loss of production. We've continued to operate and have been
able to do that, fortunately, we're able to protect our employees.
QUEST: You've been able to protect your employees. Now, how far do you fear this international backlash that's -- the prospective travel bans,
people saying stop all people traveling to and from West Africa. As a chief exec tonight, Bill, does that make sense to you?
SCOTTING: Well, no, Richard. Look, we've been following the World Health Organization's guidelines. We've stopped non-essential travel to
Liberia. But as I've said, we've operated, we have a lot of protocols in place, with a lot of effort to understand the virus, brought in experts to
advise us, set up protocols and so on.
It's -- these countries do not have the infrastructure and the capability to get on top of this, and that's why it's essential that the
international community supports them. In that regard, we're very grateful, I think, and hopeful that the support --
QUEST: Right.
SCOTTING: -- that's been promised is coming in at this time.
QUEST: The concept that we've heard, isolate Ebola, not isolate the countries, do you fear that there is this wind of build a bridge around
them -- or build a wall around these countries. If not exactly -- don't abandon them, but at least the fear factor is starting to get -- starting
to become dominant. Is that something you're seeing?
SCOTTING: I think it goes in cycles. Bad news raises fear, but at the same time, the international community is starting to step up. The
Americans are coming into Liberia, with the military. We heard 700 were on site at the end of last week. That's critical to build the facilities in
country to treat people. Equally, in Sierra Leone --
QUEST: Right.
SCOTTING: -- we've got the UK military coming in to support it. So, this support's coming in, and that's critical, because these countries,
they need the medical facilities to get the sick people out of the communities, off the street, into care, and that's the first step in
stopping the -- or containing the virus and stopping more sick people giving it to their relatives and friends.
QUEST: Bill, we'll talk more about it. Thank you, sir, for taking time to talk to us. We always need to see -- we need to get the
perspective from people like yourselves who are absolutely in the trenches of having to deal with it, both humanely -- and from a company point of
view. Thank you, Bill, for joining us tonight.
When we come back, parlez-vous francais? Sprechen Sie Deutsch? Well, after the break, Tomorrow Transformed, I'm going to show you technology
that it doesn't matter what you speak, I guarantee you, we will understand each other. It's QUEST MEANS BUSINESS, we're at the New York Stock
Exchange.
(COMMERCIAL BREAK)
QUEST: So, the trading day comes to an end, although, I have to tell you, I can remember the day when this floor would be absolutely packed with
trading papers and little pieces of debris. And unfortunately for this poor gentleman, we appear to be getting in the way. We'll be out of your
way in a second, sir. Or maybe I should just be offering to assist instead of just being unhelpful.
When we talk about language, well, we're all familiar with doing battle in a foreign country. Do you understand me? The old English adage,
speak slowly and shout and they'll soon understand.
Well now, there's new technology which makes all that redundant. Because I promise you, watch this following report, and you will have a
glance of how tomorrow will be transformed.
(BEGIN VIDEOTAPE)
QUEST: It wasn't long ago, if you wanted to talk to someone who spoke another language, it required a lot of patience. You painfully looked up
those words you couldn't pronounce or didn't understand in multilanguage dictionaries, like this.
Today, it is au revoir, Auf Wiedersehen, adios to the book. Because there are computer programs and mobile apps, they'll do all the tricky
translation for us.
Good evening, Chris. This is Richard in Madrid, how are you tonight?
QUEST (voice-over): I'm having a conversation with Chris Wendt.
COMPUTER VOICE: Wie geht es Ihnen heute Abend?
CHRIS WENDT, PRINCIPAL GROUP PROGRAM MANAGER, MICROSOFT: Mir geht's gut.
QUEST: He works on translation technology for Microsoft. Chris speaks German, I speak English. Skype, a division of Microsoft, is doing
the translation.
COMPUTER VOICE: I'm here in the state of Washington.
GURDEEP PALL, CORPORATE VP, SKYPE: Three hundred million people use Skype to talk to each other, connecting hearts and minds and connecting
with other people. And translators are also about connecting people. It's about bridging gaps that exist between people and bring them together in
closer, so there's a match for match.
QUEST: This is the future. Let's see how we got here. Machine translation research began decades ago. Only in the past ten years has it
become mainstream.
VIKRAM DENDI, MICROSOFT RESEARCH: All I do is just point it at that sign, and it translates the sign for me.
QUEST: With mobile apps and websites, you enter text, such as "Where's the kitchen?" and it's translated instantly.
COMPUTER VOICE: The kitchen is near the end of this hallway on your left. Catch you later.
QUEST: At Microsoft research, this is what translation research looks like today. Robot, offering directions. And an audio lab to study how
human hearing works.
DENDI: That's very important, because when you try to recognize speech, you really need to understand how microphones work and how you can
actually focus on the right places.
QUEST: The Skype translator also has social media in its database to make the translations less literal, more colloquial.
COMPUTER VOICE: I'm a little afraid of this election in Scotland.
QUEST: This isn't available to the public yet. I had an opportunity to demo the new device.
QUEST (on camera): The prospect of being able to sit and have a conversation like this is really quite a remarkable advancement.
PALL: With this technology, you can go anywhere, and you know that you'll be able to understand what other people are saying and express
yourself and you have that confidence.
QUEST (voice-over): The Skype translator is scheduled to be out in beta at the end of the year with just a few languages and more to be added
later.
QUEST (on camera): It's not just family or friends, this could be used for serious business negotiation.
QUEST (voice-over): Just imagine the impact this could have on the way we conduct business across borders.
PALL: The idea that people don't understand each other and -- it's just, it's going to be a thing of the past, in the same way it's hard to
imagine a world before you were able to travel to different places and quickly, whether it be in a car or a plane. We never think about, wow,
those are the dark ages when people couldn't understand each other. That's where we're headed.
(END VIDEOTAPE)
QUEST: And that, of course, is Tomorrow Transformed. You can spend a lot of time telling people and watching people about how to do something,
then finally, you've just got to get on and do it yourself.
When QUEST MEANS BUSINESS continues at the Stock Exchange, more on what's happening in the global economy, helping you understand the trash
that's going on and whether it's serious. You're better at it than I am.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest at the New York Stock Exchange. There's more QUEST MEANS BUSINESS in just a moment. This is CNN and, on
this network, the news always comes first.
(BEGIN VIDEO CLIP)
QUEST (voice-over): Health officials in the United States were today drilled at a congressional hearing in response to the Ebola crisis. It
comes after nurse Amber Vinson flew in a commercial plane even though she had called to ask the Centers for Disease Control if she could fly while
showing some symptoms of the virus. Apparently no one said she couldn't.
Coalition airstrikes are helping turn the tide in the battle for Kobani. U.S. military, whilst the situation remains tenuous, Kurdish
fighters have managed to retake part of the city and town. They say they've killed at least 33 ISIS fighters in the past 24 hours.
Oscar Pistorius is expected to learn his fate soon for the culpable homicide of Reeva Steenkamp during the fourth day of his sentencing
hearing, Steenkamp's cousin testified about the devastating impact her death has had on the family. The judge in the case will decide what
punishment Pistorius will receive.
And desperate search and rescue operations continue in Nepal. A deadly snowstorm in the Himalayas has left at least 27 people dead, three
people are missing and more than 200 others have had to be rescued.
(END VIDEO CLIP)
(MUSIC PLAYING)
QUEST: Good evening from the New York Stock Exchange, where we're trying to make sense, give some analysis and some perspective on the market
movements that have taken place. If you really want to get an idea of just how the past few days, the past week or so, you can see it encapsulated in
this one day's trading session. Very sharply down, a little bit up, then down, back up, down, up, down -- and we close the session down 24.5 points.
France's president believes he has two reasons for this volatility and instability: the geopolitical risks in Ukraine and the Middle East and the
Ebola virus. President Hollande was among leaders at the Milan summit. Mr. Hollande said time to start rethinking and rebooting Europe's economic
policies.
(BEGIN VIDEO CLIP)
FRANCOIS HOLLANDE, PRESIDENT OF FRANCE (through translator): Launching growth is the best way of stabilizing the markets. We are out of
the most severe phase of the Eurozone crisis, but Europe has not got back onto a path of growth. It is living for a phase of stagnation. And when
an economy is in stagnation, there is inevitably more unemployment and lower purchasing power.
(END VIDEO CLIP)
QUEST: Feels like deja vu all over again. The European Commission has vowed that the ECB -- Mario Draghi has vowed to do whatever it takes to
stabilize the Greek economy. Greek boring costs soared this week. Investors worried about an early bailout and an early exit. The "FT's"
chief economics commentator Martin Wolf joins me now live. Martin is at CNN in New York.
And Martin, how prescient of you, Martin. Your book is "The Shifts and the Shocks: What We've Learned --and Have Still to Learn -- from the
Financial Crisis."
Martin Wolf, have we learned anything?
MARTIN WOLF, "FINANCIAL TIMES": Yes, I think we've learned something, but we haven't learned enough to fix it. So -- and that's particularly
true of Europe and indeed a lot of the book is about the European crisis. And it argues that they had made some progress in eliminating the worst
critical aspects.
But the fundamental problems of the Eurozone have in no way been resolved. It's -- the growth is very weak. It remains very unbalanced and
the worry's about to return, a situation in which Spain, Italy, other countries could borrow more cheaply than the U.S. is not likely to last and
a crisis could easily return.
QUEST: You see, that's the -- are you surprised, Martin, bearing in mind you've covered this with such detail and such clarity?
Are you surprised that they haven't learned the lessons, that they haven't gone further six years on?
WOLF: No, I'm not because particularly in Europe, the political difficulty of constructing a workable system to escape from the crisis is
it remains overwhelming . There are just such deep and fundamental disagreements about the causes of the crisis, about how to deal with it,
which remain, which haven't been resolved.
So it's all been a system of papering it over. And I have to say Mario Draghi at the ECB has done a magnificent job, the ultimate confidence
trick I think of it, but he's reestablished a certain amount of very fragile confidence. But the underlying solutions have never been proved to
generate demand, generate adjustment, generate a path out of the long stagnation.
QUEST: If you're right and I guess you are, then this crisis in Europe continues to weigh down on global economics simply by the sheer size
of the European Union and the European market. And the United States, basically remains the principle engine.
WOLF: Yes. I think the first part of your point is unambiguously correct. Nobody really expects dynamic growth from Europe. Even very weak
growth will be nice. And the U.S. itself is nothing like as dynamic as we would normally expect it to be in a recovery phase.
So even if it grows say 3 percent, well, given the depth of its own crisis, I mean, it's recovering, it isn't much. Usually in a recovery
phase, you get growth of 4 percent, 5 percent or even 6 percent in the U.S. And meanwhile -- and it's very important to stress this -- the emerging
economies are in difficulty. China is slowing. Brazil is completely flat. We still have to see what happens in India and then there are all these
geopolitical events.
So given the -- I think the markets were over bought. I mean, because of probably of all the monetary aggression that the markets were right for
correction. In fact, I was mildly astonished they hadn't already.
So I don't think there's anything surprising that this correction is occurring. The only question is how bad could it become?
QUEST: And the only question finally, briefly, in funny sort of ways, I guess you started to write the next book, since it certainly ain't over
yet, Martin.
WOLF: Well, no, that -- it's all in the book and I'm not going to go into this all over. It's too painful.
QUEST: Martin Wolf, always lovely to have you on QUEST MEANS BUSINESS. Thank you, sir. It's " The Shifts and the Shocks: What We've
Learned -- and Have Still to Learn -- from the Financial Crisis."
Thank you, sir, for joining us on tonight's program.
The impact of sanctions against Russia on both sides, Russia and the European Union, but they are hurting economies generally. Lithuania's
foreign minister has now insisted Europe should continue to sanction Russia. I spoke to him at the IMF meetings. And he was quite clear,
sanctions must be maintained and if necessary increased.
(BEGIN VIDEOTAPE)
LINAS LINKEVICIUS, FOREIGN MINISTER, LITHUANIA: If you're asking what could be done, we should extend pressure on the Russia --
QUEST: How? How?
LINKEVICIUS: -- against sanctions and also support the Ukranian government.
This is two channels --
(CROSSTALK)
QUEST: But the Ukrainian government, as the IMF will tell you, has already had a large amount of financial help. Technical help is coming
from the European Union. The trade agreement is in place with the E.U. There's been --
LINKEVICIUS: -- partially in place, partially postponed, as you know.
QUEST: But the opportunities are there now. So I don't know what more you would like to see.
LINKEVICIUS: Well, we'd like to see universal process. We'd like to see countries --
QUEST: Do you want to see Ukraine put on a path to E.U. membership?
LINKEVICIUS: Look, they have to decide. And we respect their decision. Since they decided to go this way, they made a choice, it should
just mean it's their problem, you know. We cannot be just observers at a soccer match. No, we have to assist them and help and this is exactly what
we have to do.
QUEST: One question I've wanted to always -- to continue to ask ministers from your part of the world --
LINKEVICIUS: It's the same world, you know.
QUEST: -- it is the same world, but from where I'm sitting it's --
LINKEVICIUS: OK.
QUEST: -- from what I meant. We've talked many times about the potential and the risk and the opportunity of threat from Russia to Baltic
States.
Do you believe that there is a real risk and threat to your country?
LINKEVICIUS: Well, as I said, we're members of NATO.
QUEST: Exactly.
LINKEVICIUS: I do believe, I have no doubt to security guarantees provided by our organizations, our NATO. After the summit in Newport, you
know, it was very successful. So as minister of foreign affairs, as former minister of defense, I'm really well informed. It's really measures I
think and very serious. But as I say, our people are nervous, sometimes uncertain. And they need some more insurance.
And because of the situation around.
(END VIDEOTAPE)
QUEST: That, of course, is the economic situation, back on the markets, a 20 percent plunge in stock at Netflix. That of course happened
as competitors licked their chops at the prospect of renewed competition. There are some major developments happening in media. And we'll explain to
you what they are after the break.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
QUEST: Welcome back. We're at the New York Stock Exchange, making sense of some extremely volatile days and economic uncertainties.
Now Google, like everyone else it seems that growth in mobile remains the Holy Grail. Joining me now to discuss Google's third quarter earnings,
which have just been released within the last half an hour, our business correspondent Samuel Burke.
What did they say, Google?
SAMUEL BURKE, CNN CORRESPONDENT: Well, Richard, if you Googled the word "disappointing" right now, I think you would find Google's earnings
appear in the search engine, very simple story here.
On the one hand, the amount of paid clicks is going up. More people are clicking their advertisements. But on the other hand, the amount that
they're paying for those is going down. It fell about 2 percent actually. The reason why is because, yes, they have more ads on mobile, which the
market theoretically likes. But people just won't pay as much for those clicks on mobile. So they're being frugal with Google.
QUEST: All right. Is this something that Google anticipated and therefore can correct or at least adapt to?
Or is this out of the blue?
BURKE: No, I think they knew that this was going to happen. Maybe they didn't think that it would happen at quite this rate, that the amount
would drop this much.
But what they have on their side, Richard, is that people are going to be spending more and more time on their mobile phones. They already are,
and that's going to keep on increasing. And people are buying more and more on mobile phones. So this, over time, may not work against Google,
this mobile click.
They could actually be in Google's favor in the long term, but they need more people spending more time on their mobile phones.
QUEST: Samuel Burke with the Google story, we'll talk more about that in the days ahead.
Now I want you to have a look at the television that you're looking at the moment, well, you can see what you can see. You can see there's a
power cord and if you're watching us on cable and satellite, there is a cable box and there is a cord to the cable.
Well, now imagine cutting that cord. No, don't do it just yet. Cut that and you'll lose us.
But cutting the cord to the cable company or the satellite company is a terrifying prospect for companies like CBS and CNN's own parent company,
TimeWarner, and nervous until very recently. Now media companies are actually starting to think the unthinkable. Let's cut the cord. The fall
in Netflix shares was after a missing subscriber growth targets. What's more rattling is the fact that two powerful competitors have changed the
rules.
CBS today announced a new subscription service for the Internet, CBS All Access. It'll cost $6 a month and promises to provide live TV and
thousands of on-demand shows.
And yesterday HBO said it was launching a stand-alone service without HBO Go. CNN's media correspondent is Brian Stelter. He joins me now from
CNN New York.
Brian, we have known for years those of us in the industry that at some point the media companies would have to wean themselves off the drug,
if you like, of distribution cable and satellite money.
Has that time arrived?
BRIAN STELTER, CNN HOST: Some people think it has. I'm a little more skeptical though, Richard. I just spoke to Les Moonves, the CEO of CBS,
and he talks at length about how he believes he's trying to monetize his content in every way he can. You might say that they -- to continue with
your drug analogy there, that there are lots of different ways to get the drug. And of course it is very addicting. People watch a whole lot of
television. So if he can get people to keep paying for cable but then also pay six bucks a month for this new product, well, that's even better for
him.
QUEST: In your view with your experience, at the moment, it's not an either-or; you can have both. But the long-term trend would suggest one
will prevail. I'm guess it's the stand-alone Internet provision of service.
STELTER: Well, I believe that these big media companies like TimeWarner, which owns CNN and HBO, have a lot of power to -- in order to
control how this plays out in the coming years. For example, we saw HBO come out and say they're going to sell me HBO in the future via the
Internet, via my phone or via the computer, not just through cable or satellite. That's a big deal.
But on the other hand, TimeWarner then also announced on the very same day they were going to sell the rights to every episode of "Friends" ever
produced to Netflix. If they truly believe that Netflix was a big threat, I don't think they'd be selling episodes of friends to Netflix.
So I guess what I'm trying to say is that they have a lot of power, a lot of different spigots. They can either tighten or open up in order to
control how the future happens.
QUEST: And we must be honest brokers here, Brian, as always. It's a debate that's going on in our own company at the very highest levels. I
mean, whether or not for example CNN, the provision of CNN or TBS or TNT or any, Cartoon Network, what's -- whether it's provided online or on cable or
on satellite --
(CROSSTALK)
STELTER: Well, all of the above. And I think it's about all of the above, Richard. I think these companies, these CEOs are placing multiple
bets. It's as if they're at the roulette table. They've got $100 on red, which is cable and satellite. But they're going to put $10 on black and
they're going to put $10 on 00, that way no matter what happens, they're protected.
QUEST: Unless of course -- I've tried to work out if they'll actually go the entire board. But you had it there. Brian Stelter, listen, Brian,
I could still do exactly that and I'd manage to lose the lot. People always said to me what's the best tip of the day and I'd say not from me.
Thanks, Brian.
When we come back from the New York Stock Exchange, what did you have for lunch today? I guarantee you whatever you spent for it, if it was in a
European or U.S. or major market, it would feed a family in the developing world for a long time. Let's talk about it next.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
QUEST: Amid all the talk of Ebola and the desperate situation there, there is another epidemic that's also in need of urgent action. And we
heard a great deal about it today.
Today's World Food Day. Well, a part of World Food Day is the recognition, the core of it is 842 million people go hungry every day. The
fashion designer Michael Kors, who's been on this program last year, talking about it, has now joined up with Halle Berry to provide meals to
hungry children. Halle Berry traveled to Nicaragua and she saw the problem of hungry children, those in most desperate need, first-hand.
(BEGIN VIDEO CLIP)
HALLE BERRY, ACTRESS AND ACTIVIST: I had an opportunity to do my small little part. You know, if everybody just did their small little
part, we could probably end this epidemic. So it's about getting the word out there and asking everybody, hey, come join and come do your one little
part in this. That's what I can do if I can help inspire other people to do their little part. And that's actually a big par.
(END VIDEO CLIP)
QUEST: What of course is abundantly clear is that as the Ebola crisis worsens in West Africa, as more parents and families lose breadwinners and
they lose those heads of households, as more children are left as orphans, so the food crisis will become even worse in desperate situations. I sat
down with Michael Kors and Halle Berry. And we started discussing this with why they were interested, why they've become so keen about this cause
in the first place.
(BEGIN VIDEOTAPE)
BERRY: I think being a parent, there's nothing more horrifying to me than knowing that children are going to bed hungry and that children are
starving or children are suffering, not that I don't care about the world. But children in particular has a -- that's a tough issue for me to accept.
So I thought if I can get involved and help in some way, big or small, then I felt like it was something that I had to do.
And going there and seeing those children and taking my daughter with me to see those children affirmed that.
QUEST: The thing that's so annoying about this particular issue is that it's not that difficult to solve.
MICHAEL KORS, DESIGNER: Well, the food that -- we have the food.
QUEST: Yes. We could actually do it.
BERRY: Right.
KORS: We can do it.
QUEST: And that's both frustrating, it's annoying, it's infuriating.
How would you describe it?
KORS: It's all of the above, but at the same time, we actually can accomplish it. So because quite frankly, this is not -- we're not talking
about -- you don't need to be a doctor. You don't need to be a scientist. You don't need to be a politician. The food's there. We can let people
know that this is an issue still. We can raise the awareness. We can know that, you know what, when you have that $5 cappuccino, if you skip it one
day, that's a month's worth of meals for a kid in school. That's an unbelievable --
(CROSSTALK)
KORS: -- have a lemonade stand, make a difference. Don't have to be rich; don't have to be a politician; don't have to be powerful.
QUEST: Ebola is very much the issue of the moment, globally. We've covered it a great deal on QUEST MEANS BUSINESS. We've been -- we've heard
from the World Bank president that the potential for catastrophe -- if that happens, God forbid, your work becomes that much more important, doesn't
it?
BERRY: Right. Well, and like you said earlier, if that's even possible that this work becomes more important, but it does become more
important. And I'm happy to know that the World Food Programme will be right there. They've been there from the beginning. They were there eight
days after this epidemic broke out in a stronger way and I believe that they will be there, doing the best that they can do.
KORS: And it'll become, quite frankly, when you think about the fact that you're going to have children in West Africa with everything else
going on, I mean, it should -- it should -- the last thing you want to think is we're also going to have to deal with starvation and nutrition and
to be able to remember that this is not going to go away. It's just getting worse. So to raise the awareness and raise the noise, that's
important.
QUEST: Finally, it's rare that we give people the blunt opportunity to tell me what it is you want me to do.
(LAUGHTER)
QUEST: Don't hang back what it is you want me to do.
KORS: Very simply, you know, we all take too many pictures of ourselves. There's a zillion selfies out there and you know what, you can
go into a Michael Kors store. You can get one of these fabulous T-shirts that Halle and I are wearing. We will gift it to you and then if you post
a selfless selfie, which isn't that a great idea? That you have fun but at the same time you're giving back, I will personally, for the month of
October, I will donate 100 meals for every selfie that's put up.
QUEST: Hang on. You ready for this?
KORS: I'm ready.
QUEST: You ready for this?
KORS: I'm ready and I want --
BERRY: Bring your checkbook. You're ready.
KORS: I know. I'm ready. I'm ready, you know. But I have to tell you, I think it's so important --
(CROSSTALK)
KORS: But you know what, I have to tell you I believe -- I've always believed that fashion can change people's spirit and the simple truth is I
think you have fun and give back. And this is a way to do that.
(END VIDEOTAPE)
QUEST: And here is the T-shirt. The picture is now going to be taken by Bob. It will be tweeted with the hashtag. Michael Kors will provide
100 meals, which is about $25. And for this particular tweet, I will match Michael's donation and a bit more.
And you should be watching as well to join in.
We'll have a "Profitable Moment" in just a moment. QUEST MEANS BUSINESS at the stock exchange.
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(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment": well, it is a correction or is it something more serious? You've heard the views today from those in the
know. A correction most people seem to agree and one where it could be seen as a buying opportunity by on the dips. But you also heard today from
Stephanie Flanders (ph) from Martin Wolf, from the traders, complete and utter disbelief. And it is crediting of the European position. People do
not believe that Europe is getting its act together far or fast enough. And that is one of the ways the big weight on the market today. The market
will recover. Of that, have no doubt. The question is will Europe be along for the ride or is Europe destined for subpar growth?
And that's QUEST MEANS BUSINESS for this Thursday night. I'm Richard Quest at the New York Stock Exchange. Whatever you're up to in the hours
ahead, I hope it's profitable. I'll see you tomorrow.
END
