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Quest Means Business
Obama Tells Trump "Stop Whining"; State Department, FBI Deny "Quid Pro Quo" Over Clinton Email; Obama: Trump's Claims of Rigged Election "Unprecedented"; Corporate earnings Help Rush U.S. Stocks Higher; Yahoo Beats Wall Street Earnings Estimates Since Revealing Breach. Aired 4-5p ET
Aired October 18, 2016 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00] RICHARD QUEST, CNN ANCHOR: The last few seconds of the Dow ringing and bringing trading to a close. The gentleman over there is going
to hit the gavel. Oh, look at that. We thought it was going to be wimpy but it wasn't. It was a robust gavel that brought trading to a close with
the Dow up the best part of half a percentage point. And today, it's Tuesday. It's October the 18th.
Tonight, stop whining. U.S. President tells Donald Trump there is no chance of a rigged election. Let's see what our guests have to say about
that.
Searching for a shred of good news, Yahoo earnings are out any minute and during this hour. And click your heals together and click on to a kick
starter. A new campaign to save the ruby red slippers. We'll find out how. I'm Richard Quest, we have an hour together and I mean business.
Good evening, stop whining and start respecting the democratic process. That was the message from President Obama today to Donald Trump. He is
referring to the Republican presidential hopeful statement that the U.S. election system is rigged. Now it all happened while the president was
hosting the Italian Prime Minister, Matteo Renzi, at the White House. The Italians know a thing or two about funny elections. And during the press
conference, the U.S. president said MR. Trump's claims are completely out of line.
(BEGIN VIDEO CLIP)
BARACK OBAMA, U.S. PRESIDENT: I have never seen in my lifetime or in modern political history any presidential candidate trying to discredit the
elections and the election process before votes have even taken place. It is unprecedented. And by the way, it doesn't really show the kind of
leadership and toughness that you want out of a president. He started whining before the game is even over. If whenever things are going badly
for you, and you lose, you start blaming somebody else. Then you don't have what it takes to be in this job. I advise MR. Trump to stop whining
and go try to make his case to get votes.
(END VIDEO CLIP)
QUEST: Michelle Kaczynski live for us tonight at the White House. Michelle, you've covered the White House up there a while. Where you
surprised at the way the president took the bait?
MICHELLE KOSINSKI, CNN WHITE HOUSE CORRESPONDENT: I would say yes and no. This is certainly not his most strident or lengthy criticism of Donald
Trump. In fact, just a week ago we heard something that did surprise us. I mean, the president positioned this speech to be an epic take down of
virtually everything Trump has said. But when you look at the setting today, this was in the rose garden and yes, he was taking questions from
reporters, but he's standing there alongside the Italian Prime Minister. The fact that he took these questions on the election on Donald Trump and
ran with them in the way he did. Use that kind of criticizing language and put on his kind of incredulous face that he uses when he answers these
questions sometimes. I mean, that was interesting that now the president is clearly willing to go there with some of these criticisms. And even
when he sort of steps away from the Oval Office and being very presidential during a foreign state visit.
QUEST: OK, but Michelle, are they -- amongst in the seat of power, whether it be the president, or Congress, or the leadership that you talk to, are
they concerned at these allegations and the damaging effect it could be having so soon before an election?
[16:05:00] KOSINSKI: Not really, this is something that is worth questioning. This is the debate in Washington. What -- first of all, the
first thing that people ask is what is the evidence that the elections could be rigged? What about hacking? How does that factor in. But really
because elections are so decentralized and there has been no evidence of significant tampering in an American election, you know people even
Republicans now have been putting down some of these Donald Trump remarks. And the way he says it is very strident, too. He says things line the
election, it's rigged. Republicans are looking askance at statements like that.
But then the question becomes, well what effect do those statements have on the populace? And what could that lead to after the election? Could it
even lead to violence? Right now that's kind of in the what if stage of debate. At this point there's no evidence that is going to lead to some
kind of unrest here in the United States. Obviously, some people have that kind of in the back of their mind though. That that is a concern. In
fact, the president was asked about that today, in the White House of course is quick to put down any kind of speculation about that.
QUEST: Michelle, thank you. Michelle Kosinski who is at the White House for us tonight watching over events there. The president also said the
latest controversy over Hillary Clinton's use of a private email server is in his words overblown. Documents released on Monday suggest that a top
official at the State Department by the name of Patrick Kennedy, tried to persuade the FBI to declassified an email was from Clinton's private
server. Now, in doing so he apparently the FBI was promised more jobs, or more posts in crucial areas. The FBI and the State Department say there
was no quid pro quo that was offered. The state department spokesperson, John Kirby, told CNN, the claims have no basis in reality.
(BEGIN VIDEO CLIP)
JOHN KIRBY, U.S. STATE DEPARTMENT SPOKESPERSON: Not only is there no proof, it's absolutely not true. Completely false allegations. It just
didn't happen that way. Now what did happen, half of what you said is right. Pat Kennedy did call the FBI and try to get a little bit better
understanding about why they wanted one particular email classified secret. We didn't see it that way. We didn't think it needed to be classified.
But the FBI held firm to their position. The email remained classified. And that email redacted is on our website. You can go look for it
yourself. But there was no bargain sought by the FBI. There was no bargain rendered.
(END VIDEO CLIP)
QUEST: Jim Sciutto joins me now from Washington. Jim, I have tried my best, good sir, to follow this story during the day to see who said what,
when, where, and why, and I'm failing.
JIM SCIUTTO, CNN CHIEF U.S. SECURITY CORRESPONDENT: So in short it is somewhat complicated. Let's walk it back. This was one email of Hillary
Clinton's and the question was whether or not to raise the classification. The FBI wanted to upgrade the classification as John Kirby said there to
secret. Patrick Kennedy, the undersecretary for management of the State Department, contacted the FBI and disagreed. Said in effect, this one
doesn't need to be upgraded. It is true that this kind of conversation happens in what is called the interagency between the agency like the State
Department and the FBI, it does happen.
The trouble with the email is one, that an FBI official uses the term quid pro quo in his description of what went on. Now the difficulty here though
is that different FBI officials interviewed about this have said different things. One of them said, the State Department proposed a quid pro quo.
Saying, "Hey, you keep this email at this lower level of classification maybe we can help you out somewhere else." Another FBI official said,
"Listen we'll help you out here, if you help us out there."
I should know, Richard, before I let you speak again, in the end the email was upgraded so there was no quid pro quo. In other words, at least the
offer whatever it was, didn't work. And two there were no there were no extra FBI agents sent overseas, which was the proposal -- depends on who
you believe where it came from -- that was offered as the exchange.
QUEST: Does this amount to anything in the grand scheme of November 8?
SCIUTTO: That is a good question. We don't know for sure. Trump is certainly going to make hay of this tomorrow night. Because if you were
searching for an email to prove something or to give the whiff of something of something unsavory, this would be the email. One, it involves
classification. Two, in involves -- imagine this Richard Quest -- Benghazi. The email was about Benghazi. It couldn't get better than that
from the Republican side. Now on the flipside, from the Democratic side, they can say, listen, you have even the FBI witnesses to this,
contradicting themselves somewhat.
[16:10:08] One saying the FBI proposes, the other one saying the State Department did. And they can also say rightfully, that this kind of
discussion goes on. I had a security clearance for a couple of years when I worked inside government. There's often a debate as to what's classified
and what isn't. So that kind of conversation goes on. But listen, when you have the presidential candidate running for office who had a private
server, who clearly was exchanging classified information at times on that private email server, and email exchange like this, is certainly going to
come out in the campaign. Whether voters have heard enough of it and want to move on, that we won't know until election day.
QUEST: Jim, thank you for making sense of it for us tonight. We appreciate it.
SCIUTTO: Thank you.
QUEST: Sally Kohn is a political commentator and Hillary Clinton supporter joins me now. Betsy McCaughey, a senior fellow at the London Center for
Policy Research and a Trump supporter. And they'll be no fisticuffs.
I want a straightforward answer that doesn't involve you replying about Hillary Clinton' emails. I want to know, Betsy, do you believe the
election is rigged?
BETSY MCCAUGHEY, FORMER LIEUTENANT GOVERNOR OF NEW YORK: In the sense that the media are overwhelmingly favoring one candidate versus the another,
Donald Trump is articulating that, it's true, and almost everyone in America knows it's true. For example, 89 percent of political
contributions made by members of the media go to the Democratic Party, not the Republican Party. Secondly, in the treatment of something such as
these allegations about the women. The "New York Times" has behaved extraordinarily irresponsibly. Printing allegations that have not even an
iota of fact behind them. Putting them on the front page.
QUEST: But in terms of the mechanics of elections.
MCCAUGHEY: Aside from the media bias, there is certainly evidence that there is some corruption. For example, the New York City Election
Commissioner just came out last week -- this is a very big city -- and the New York City election Commissioner, Alan Schulkin, came out last week and
said, we've a lot of election fraud in New York City. And of course I saw it when I was running for office here myself. That is true in some of the
largest cities in the United States. And Pew Foundation was found that one out of eight voter registrations in the country is either somebody who is
dead, or it's a duplicate, or it's an illegal voter.
I've never seen those statistics.
MCCAUGHEY: It was in the "Washington Post."
SALLY KOHN, COLUMNIST, THE DAILY BEAST: The ones that I've seen show that you are more likely to be struck by lightning in this country than to
commit voter fraud. That the incidences of voter fraud, where it's been looked at, have been less than 00000 -- I don't have time for the zeros. I
think at this point you're more likely to be groped by Donald Trump then you are to be someone committing voter fraud.
QUEST: You have about 35 seconds to get to that part of the story. But Betsy as a good strong point, doesn't she? A dispassionate look at the
media, and I will throw the "New York Times" into here. I mean, sometimes even when I'm reading it on the subway into work, you do think that they do
appear to become partisan to a large extent to a large extent.
KOHN: Well, look, two things. First of all, if you believe that fact checking is partisan, then I suppose we're redefining the notion of fact
checking. The simple truth is that Donald Trump has stretched the truth over and over again. And so the media by trying to do its job --
MCCAUGHEY: That's my big fault with crooked Hillary.
KOHN: Can I actually make another point here? Which is to Betsy's point. Up through June in this entire election, Donald Trump received four times
more media coverage than Hillary Clinton. And whereas Hillary Clinton's coverage was about 80 --
[CROSSTALK]
KOHN: -- no, no, wait, wait, wait. Wait, hang on.
[CROSSTALK]
KOHN: -- but that's what I'm saying. So we're not going that it's covered, but also Hillary Clinton about 80 percent of her coverage was
negative, versus 46 percent of Trump's coverage being negative. So let's be clear. He has overwhelmingly benefited from playing the media, using
the media, and now that suddenly they don't like -- you see that there is the media is trying to call out the truth, he complains and whines. That's
childish.
QUEST: With the exception of 1960 --
Well, let me point out Al Franken's Senate seat, for example. Which he won by a mere 312 votes. There were suggestions there that perhaps some of
those votes were illegally cast. What the Pew Foundation --
KOHN: No one found it. It wasn't proven.
MCCAUGHEY: But let me just point out. The Pew Foundation and the "Washington Post" published a study that actually analyze post facto the
illegal votes that were cast and where they went. And 80 percent went to Democratic candidates in 2008.
[CROSSTALK]
Nobody surely is suggesting that the actual outcome of the entire U.S. presidential election would be coveted.
[16:15:00] KOHN: Excuse me, I believe Donald Trump alleging that. He suggesting --
MCCAUGHEY: I'd like to correct that.
QUEST: Ladies --
MCCAUGHEY: He's suggesting that in certain parts of the country --
QUEST: Let's move onto the economy.
MCCAUGHEY: Ah, good.
KOHN: OK.
QUEST: The economy.
We're now in the final stages of this campaign, and the presidential election is supposed to be about the economy. Do you believe that Hillary
Clinton's plan has resonated or has it just bored? Has she just basically thrown so much out there. A policy for every, including cutting your
toenails.
KOHN: I haven't seen the cutting your toenails policy. I have seen her policy to do something about abject poverty. Her policy to cut taxes and
build the middle class. Her policy to rebuild our schools. Her policy to create programs for --
QUEST: It's not --
[CROSSTALK]
KOHN: Yes, but let's be clear. If you want to talk about the media, 11 percent of the coverage in this election has been about issues. So the
simple fact is that any time Donald Trump tweets something about who knows what and whatever, we all talk about that.
QUEST: Well, --
[CROSSTALK]
QUEST: The e-mail scandals, that are just as much of an issue.
KOHN: Scandal. It says biggest scandal because the media in its search for balance has felt that it needs to find something to hammer Hillary on.
And so well look, we just did equal time. Donald Trump said that the entire democratic system is invalid. And Hillary, there's one email that
an underling is arguing about, and we cover them equally. That's the problem.
MCCAUGHEY: I'm thrilled that we're moving on to the economy, because this is Trump's strongest Avenue.
QUEST: Not according to the University of Pennsylvania's Wharton school --
MCCAUGHEY: Really.
QUEST: -- and his tax policy. With its latest reports --
MCCAUGHEY: But I'd like to address that. Even that report if you read it will say -- you'll see that it says Hillary Clinton's economic plan
provides to mechanisms for private-sector job growth.
QUEST: it also says, Donald Trump's policies, as you have read the report, will increase the deficit long term. The report, it will increase the
deficit long term.
MCCAUGHEY: Yes and I'd like to address that. Because just like Reagan did, what Trump is doing is slashing corporate tax rates and deregulating
to spur economic growth. And he is will live with a transition deficit, just as Reagan did, because we are never going to pay down the debt by
scrimping and saving. We're going to pay it down by creating more growth. Right now Republicans --
[CROSSTALK]
MCCAUGHEY: In 1991, we had more revenue and we were reducing the deficit.
KOHN: Republicans who have hammered Barack Obama on the deficit --
QUEST: Just a minute.
KOHN: Yes, yes.
QUEST: Final question. What does each candidate have to do tomorrow night -- please tell me what your candidate has to do not what the other
candidate doesn't have to do?
MCCAUGHEY: Yes, Donald Trump has to deliver a strong message that his economic policies will produce more take home pay, more economic growth in
this country, and that his immigration policies will spare American workers, people already in this country, from unfair job competition as
immigrants come in and take their jobs away, which they are doing.
QUEST: And not lose his cool.
MCCAUGHEY: That's right.
KOHN: Hillary Clinton just has to be herself and show that she is the person with the experience, the vision, the temperament to be president of
the United States. And frankly, the only one who is serious enough for this job and taking the job seriously.
QUEST: Well, we got through it without any fisticuffs.
KOHN: No fisticuffs.
QUEST: Good to see you, thank you very much indeed.
We will turn our agenda to Wall Street there was optimism. A slew of solid corporate results that are pushing stocks higher. Interestingly, the
earnings season is well and truly under way. Yahoo results are out and they weren't bad. The only issue is of course, whether Verizon will still
want to buy the company after the mega hack. This is QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
[16:20:04] QUEST: Strong corporate earnings are fueling a mini rally on Wall Street at the moment. The Dow shot up 120 points at the open. Now I
didn't manage to hold on all of it, but most of it. The Dow closed up 75 at the close. And we've seen better than expected numbers from Netflix and
Goldman Sachs. Netflix was yesterday. Goldman Sachs was before -- so that's yesterday. That was before the bell. Goldman Sachs 58 percent
improvement and an extremely strong performance largely on the back of trading and that boosted the market.
Yahoo earnings have just been released. And the beleaguered company, it beat expectations. Now the quarterly profit more than doubled to $163
million. The stocks slightly up afterhours in trading. But the core question, of course, because Yahoo is in the process of being acquired by
Verizon, and after the mega hack, hundreds of millions of personal details have been hacked. What does that do? Were very lucky tonight. Uncle Paul
La Monica is here. The guru. Paul, what do they say?
PAUL R. LA MONICA, CNNMONEY CORRESPONDENT: We're not getting much out of Yahoo or Marissa Mayer, because they're not doing a conference call. But
this is what Marissa Mayer did say in the earnings release. "We remain very confident not only in the value of our business, but also in the value
of Yahoo products bring to our users lives." They say they're busy preparing for integration with Verizon. And that they take deep
responsibility in protecting users and the security of their information. Working hard to retain, not regain, retain their trust.
QUEST: So we know, we don't need to parse the problems of Yahoo, they are well known. This question, because Verizon only recently has said that
there are still unanswered questions about the effect on Yahoo.
LA MONICA: Correct, and there has been some speculation that Verizon might want to try and negotiate for a lower price for the deal. Maybe even walk
away altogether. The latest we're hearing is it doesn't sound like Verizon is going to completely ditch this deal, it seemed though that they need to
iron out what exactly going forward. How big of a problem is this going to be in terms of Yahoo is lost users. But they don't really know yet.
QUEST: Let's talk about the earnings season. Netflix, I mean, Netflix blew everybody away, and the share price is up 20 percent in a day, I can't
remember a day like that for stocks.
LA MONICA: Yes, Netflix it often happens to them. They are a very volatile stock, and what's interesting here is so many people got bearish
on them and they were proven wrong, international subscribers in particular. Really big gains there.
QUEST: Then you have Goldman this morning with a much better than expected numbers. But we take the earnings season so far, I know we've only had 50
or so companies, but 80 percent of them have reported better than expected. Can we say the earnings recession is over?
LA MONICA: We are almost at that point. The latest I've seen is that it is possible that we have S&P 500 profits going up in the third quarter. If
it doesn't happen this quarter it will most likely happen in the fourth quarter. Because comparisons to last year should be pretty easy to beat
and we are seeing evidence that the consumer is spending, which should help a lot of retailers and other big companies.
QUEST: As I understand it at the moment, we do have this issue -- I won't say virtuous cycle -- but you got revenue and earnings both rising.
QUEST: Yes, that is very important and very healthy for the market. We've this long period where companies could cut their way to prosperity. No one
really likes it when you're laying off people and boosting your earnings in that regard. We want to see revenue growth. Real demand for products and
services, we're starting to see it.
QUEST: But 80 percent of those surveyed -- or I think it's getting up towards 80 percent, may be just slightly less -- believe the Fed will move
in December.
LA MONICA: I think the Fed is going to move in December.
QUEST: It will be a year since the last move.
LA MONICA: it will be a year from the last move. So it will be a welcome president elect. We're not going to possibly make your job a little bit
more difficult. Because I think the Fed wants to raise rates through 2017 if it can as well.
QUEST: Good to see you, sir.
LA MONICA: Thank you.
QUEST: Thank you very much indeed.
The newsletter, the QUEST MEANS BUSINESS newsletter. It's published just as the New York market closes, but before Asia actually opens. Today,
writing about Hillary Clinton's potential vice presidential picks. She was looking at business leaders. She was looking at CEOs, or considering.
Even Tim Cook, Bill Gates and Muhtar Kent. CNNMoney.com/quest, where you can subscribe. Incidentally, also on the newsletter, you will find my
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[16:25:02] If you want to beat me up over the head on something we've done on the program, subscribe to the newsletter, and then send me an email,
while The Blackberry still works.
Day two for the battle of Mosul. We'll tell you about the smoke that's rising outside the besieged city. The troops are making advances. We're
going to be live in Iraq after the break. It's QUEST means business and you're always welcome.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in just a moment. When the Vilonia Parliament stands in the way of a massive trade
deal between Europe and Canada, what does that mean?
And the Smithsonian museum has a suggested donation for you, $300,000 -- not all from one person -- but it would save the ruby red slippers from
"The Wizard of Oz."
Before all of that you're watching CNN, and here on this network we guarantee the news always comes first.
President Obama is mocking Donald Trump's claims that the presidential election is rigged. At a news conference with the Italian Prime Minister,
Barack Obama said, the Republican nominee is griping about an invented conspiracy.
(BEGIN VIDEO CLIP)
BARACK OBAMA, U.S. PRESIDENT: I have never seen in my lifetime or in modern political history any presidential candidate trying to discredit the
elections and the election process before votes have even taken place. It is unprecedented. He started whining before the game is even over. If
whenever things are going badly for you, and you lose, you start blaming somebody else. Then you don't have what it takes to be in this job.
(END VIDEO CLIP)
QUEST: A 72 hour cease fire is due to begin in Yemen just over 24 hours from now. The UN says the pause in fighting is designed to allow aid to be
distributed throughout the country. There are 10,000 people killed in the violence that raged for nearly two years.
Iraqi forces have dropped more than 70 million leaflets over ISIS held areas t inside the country. The leaflets are calling for militants to put
down their weapons and surrender. Right now Iraqi led forces are mounting a massive assault on the ISIS stronghold of Mosul.
[16:30:00] President Obama says he is confident ISIS will be defeated in Mosul. The battle to retake the city from the terrorist group is now into
its second day. The Iraqi military says it continues to make advances on ISIS territories. The Peshmerga commander has told CNN. He expects it
will take two months to complete the operation. CNN's senior international correspondent, Ben Wedeman is with us now live from Irbil in Iraq. Ben,
from what you're hearing from those that have been to the front tonight, what are they saying?
BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Certainly there has been progress, Richard. Yesterday Kurdish forces were able to take 200
square kilometers and nine villages. Today the major push is being done by the Iraqi army. They are approaching from the south as well as the east of
Mosul. They are currently fighting outside of a town of Qaraqosh. Traditionally a Christian town of about 50,000 people all of them have
fled. So the battle rages there and the Iraqi forces are encountering the usual methods used by ISIS, suicide bombers, snipers, booby-traps and truck
bombs.
QUEST: For those people, for those civilians such as there are, who are still in Mosul, do we have any idea what they're doing? As the battle gets
ever closer, what is their outlook?
WEDEMAN: Their outlook in the short term is not very good. The Pentagon saying today that they believe many of those inside Mosul are essentially
being held as human shields and that's what I saw in June in Fallujah. The same thing. Thousands of people essentially hostages of ISIS. Of course
you have the additional problems of fuel running short in the city. There are many people that have simply run out of cash to buy food as well.
In addition, there is danger of military action. There have been repeated airstrikes, artillery bombardment on the edges of the city. Many people
have heeded what they read in the leaflets dropped by the Iraqi military over the city, which is to stay inside, don't go near any ISIS positions.
But for the most part, it seems they are just hunkering down. We have not seen yet a flood of people leaving the city. A few hundred have, but at
this point the numbers are fairly small, Richard.
QUEST: Finally, Ben, as I'm looking at where you are in Irbil tonight, I was thinking this last night when we spoke to you. I mean, the lights are
on in Irbil, the traffic is moving, and you know it must feel surreal that you're not that far from this hell hole of fighting. But as much as it
can, life seems to be going on in Irbil.
WEDEMAN: Yes, we're a good 75 kilometers to the east of Mosul and this is a city that seems to be going on life as usual. I'm on the balcony of a
suite in a five-star hotel. The electricity is on 24 hours a day. Keep in mind, however, that Iraqis have gone through an awful lot in the last few
decades and they do cherish normal life to the extent that is possible. So yes, here and here in Irbil, restaurants are full, there's traffic late
into the night, but it's not far away where it is the exact opposite, Richard.
QUEST: Again, Ben, thank you so much. You've brought the reality of the situation on both sides to us and we're grateful. Thank you. Ben Wedeman
joining us from Irbil.
Yahoo's results came out. Will be back to our business agenda. Look, profits were up. There is no word on the Verizon deal, but we do need to
understand parlous fate of Yahoo, after the break.
[16:35:00] (COMMERCIAL BREAK)
QUEST: I guess the beleaguered shareholders of Yahoo will take whatever good news they can, and Yahoo is trading 1.5 percent higher after hours.
The third quarter results beat Wall Street expectations. The future of Yahoo remains murky.
I'm going to put this into context for you. Let's just imagine Yahoo's search history, which is riddled and shows the wronged turns and the missed
opportunities. So if you look at Yahoo and the most recent search of course, is the data breach. One of the largest data breaches in history.
Some 500 million user accounts stolen in 2014 that you can read about. Now the data breach puts Yahoo's Verizon deal into 4.8 billion into some doubt.
Verizon can renegotiate or pull out. The Verizon general council has said there is a reasonable basis to assume the deal will be affected. But it is
worth mentioning, there is not really a word about that in today's results.
And to put it into context, whatever Yahoo may be suffering now, just remember back in 2008, do a quick search on that and you will see it comes
up with the Microsoft deal. Microsoft offered nearly $45 billion, $45 billion in 2008. That is nearly ten times the current Verizon deal. And
then Yahoo said the offer was substantially undervalued the company.
Let's put this into perspective. Russ Gerber joins me now from Los Angeles. He's the president and chief executive of Gerber Kawasaki Wealth
Management. Has long called for Yahoo to be broken up and sold off. Good to see you Russ. So these results are -- one can't say they're
encouraging, you know they're better than expected. But we're not being given any more details about the hack or how it affects the Verizon deal.
What can you tell us?
RUSS GERBER, CEO, GERBER KAWASAKI WEALTH MANAGEMENT: I think there is a concerted effort to not have this be a big deal. Because Marissa Mayer is
trying to get this thing sold and get out of there with her $100 million payout without a disaster. And the ship is so broken here at Yahoo, so
they goosed earnings up as well as they can. They're down playing the issues they have to try to maximize the potential of getting this deal done
as soon as possible.
QUEST: Right, but for somebody like yourself, who has long sought a breakup of Yahoo on behalf of other investors. I mean, at least she's
selling it off. Which is exactly what people like you wanted her to do in the first place.
GERBER: That's correct. And she is. The problem is that she's done it from a position of weakness versus a position of strength may be a few
years back. And basically every attempt she's made to add shareholder value has actually decreased shareholder value. I think that company would
have better served selling maybe a year or two ago.
QUEST: Right, but that a case, Ross, I'm not being difficult here, but that's a case of should of, could have, would have, and you didn't. So now
you are where you stand. Do you believe that Verizon will progress with the deal? Or do you think they have a strong case either for abandoning it
or going back and ask were something off the price?
GERBER: No, I mean, Verizon is going to finish this deal and it would be hard for them to say that the data breach has materially affected the value
of Yahoo. Because quite frankly, the value of Yahoo is pretty immaterial. So I think the real issue is, what can they salvage from this deal that
will really benefit Tim Armstrong and the AOL team at Verizon.
[16:40:00] And I think that there's some value there. I just kind of feel like it's diminishing quickly.
QUEST: Where does Yahoo sit in the Verizon firmament? I mean, with all of the other things that it's got, whether it's Huff Post, all of the other
bits of Verizon, the content rich -- everybody wants content. Where does Yahoo sit, do you think?
GERBER: I think that that's the exact strategy they're trying to employ at Verizon, which is a pivot away from basically cell phone service, which is
a very mature business. To services, video and ad content and generation. They're very, very focused on the video ad business and delivering the ads
to their 100 million or so subscribers or whatever they have. So I think this is a good move for them, it's just a lot of pieces that have to
eventually come together and I don't know if they're that good at doing this.
QUEST: One point though, we've trashed Yahoo to some extent, but if you actually look at the numbers, whether it be for Yahoo Finance, Yahoo News.
Yahoo is consistently in the top three to five, sometimes like in Yahoo Finance, the number one visited site. So is not as if it's a basket case.
It may be corporately or financially a basket case, but it's content is not.
GERBER: Yes, I agree with you. And I do think the two most valuable areas are sports and of course finance. But the recent changes to the finance
site I actually really don't like. And so it's not just about having the properties that are so visited today. Our people going to visit them in
five years or three years from now and are they going to stay relevant in rapidly changing technology landscape. And that's what I'm worried about
with them.
QUEST: We're very grateful, sir, that you came in this afternoon and this evening to help us understand it, thank you.
GERBER: My pleasure.
QUEST: Commodity stocks helped European markets pushed higher. Take a look at the numbers and you will understand what I mean. The best of the
day was in Germany where -- well actually it was in Paris, Germany and Paris -- was 1.32 and 1.22. It helps, Richard, if you read all of the
numbers before you make a comment. And the FTSE eked out three quarters of a percentage point gain.
It appears Europe's trade deal with Canada will not be getting approval, at least not today. EU ministers failed to come to an agreement a week before
it was set to be signed during an EU/Canadian summit. The protests are against the deal that have been held in the past week in Paris. Now last
week Belgium was unable to get its approval after one of the Belgian regions Vilonia, voted against it. The EU Trade Commissioner says, failure
to make this deal happen could have wide reaching ramifications.
(BEGIN VIDEO CLIP)
CECILIA MALMSTROM, EU TRADE COMMISSIONER: If we can't sign with Canada, of course the rest of the world will ask themselves is Europe a reliable
partner? So we will have consequences for our trade policy.
(END VIDEO CLIP)
QUEST: After meeting with the Italian Prime Minister, Matteo Renzi, in Washington, Barack Obama said, these kind of trade deals and other measures
to boost growth are important to Europe's overall well-being.
(BEGIN VIDEO CLIP)
BARACK OBAMA, U.S. PRESIDENT: My hope will be that the debate broadens as Europe moves forward around how to grow more quickly, put more people back
to work, see incomes rise, create a greater momentum and optimism. Because I do believe that there is a connection between stagnation and some of the
less constructive populist impulses that have been rising up.
(END VIDEO CLIP)
QUEST: Now from Cambridge, Massachusetts, where joined from Harvard, Professor Ken Rogoff. Ken, how good to see you sir, nice to have you,
thank you.
So the Canadian EU deal, the Belgians looked like they were about to scupper that particular deal in some shape or form. If they do cobble it
together as many suspect they will, the under lying antitrade trend continues, doesn't it?
KEN ROGOFF, PROFESSOR OF ECONOMICS, HARVARD UNIVERSITY: It absolutely does, I think president Obama hit the nail on the head with why deals like
this are needed now. If you don't have them, there is a lot of backsliding. There is huge anti-trade, anti-immigration, very populist
impulses. And if you don't have something like this creating a barrier to putting up more protectionism, you will get it.
[16:45:00] QUEST: But if you have protests in Paris, and you have the government base which I saying we're worried about the protections in a
certain deal with Canada, you see the elites may be ahead of the populous?
ROGOFF: It is never easy to get trade deals through. They're usually knife edge. And if you put them up to a vote it's very tough. We're
talking about Canada EU, I think the U.S., the EU in this environment it will be harder given the campaign we have seen for president.
QUEST: Donald Trump is making huge scores in his debates about the extent of the U.S. trade deficit, $7-800,000 billion. He talks about it
frequently. Is that a number that is of concern bearing in mind the dollar is very strong and the U.S. having no difficulty financing its current
count?
ROGOFF: No, I don't think in itself, The U.S. deficits are a huge concern, I think the fact is the rest of the world is desperate to hold U.S. assets,
considered relatively safe, and they lend the United States the money at phenomenally low interest rates. Yes, of course it is a concern that the
quality of job growth has been weak and demand from overseas is not as strong as it is.
I've got to tell you, we put up a wall of trade with China and it might make the trade deficit look better, but it will drive prices up massively.
QUEST: And while we're talking on the big issues of trade, The U.S. Trade Representative Michael Froman speaking in Europe just this week, you may
have seen what he said about how it is impossible for the U.S. to negotiate with the U.K. on a post-Brexit trade agreement, because no one knows that
U.K. EU deal will look like. So how worried are you that the Brexit overhang on trade is just -- it just continues to pull down all of the
various trade negotiations?
ROGOFF: I don't know that so much as that when the U.K. did this, the Brexiteers said don't worry, we'll get a good deal on all these trade
negotiations. But I have got to tell now is a very bad time to be doing trade negotiations, the populism is very strong. The leadership against it
is not strong. I would be very concerned about what the U.K. is going to get.
I think the bigger problem for the U.S. is simply that even though a Europe-U.S. deal in some sense is very minor compared to the deal with
Asia, because they're very similar economies, versus Asia which is a very different one. It is just toxic, the environment right now after Trump,
after Sanders, very successfully campaigned against trade. And secretary Clinton has been just hanging on for dear life defending her early
positions which were pro-globalization.
QUEST: Thank you, good to see you, sir.
Nearly 80 years after Judy Garland danced up the yellow brick road, her ruby red slippers have fallen into some repair. And now the Smithsonian is
making an appeal to save the world's most famous pair of shoes. We'll go over the rainbow after you enjoy some "MAKE, CREATE, INNOVATE".
[16:50:00] (COMMERCIAL BREAK)
QUEST: Just tap your heels together three times, and think to yourself "there is no place like home".
The most famous shoes in the world. The ruby red slippers from the "Wizard of Oz". Maybe not these, but the ones in the Smithsonian are in need of
saving. Oh my, oh my, lions and tigers and bears. The Smithsonian says they need $300,000 to repair a pair of shoes. Why are they so important?
77 years ago, Dorothy had to fend off that wicked witch of the west to keep her slippers.
(BEGIN VIDEO CLIP)
WICKED WITCH OF THE WEST, WIZARD OF OZ: The ruby slippers what have you done with them? Give them back to me or I'll --
GOOD WITCH OF THE NORTH, WIZARD OF OZ: It's too late, there they are, and there they'll stay.
WICKED WITCH OF THE WEST: Give me back my slippers, I'm the only one that knows how to use them, they're of no use to you, give them back to me.
Give them back.
GOOD WITCH OF THE NORTH: Keep tight inside of them, their magic must be very powerful, or she would not want them so badly.
(END VIDEO CLIP)
QUEST: Oh, powerful magic, now the Smithsonian says its crowdfunding to make sure the slippers are preserved for generations to come. So far the
campaign is surging down the yellow brick road towards its goal. A Kickstarter appeal raised $75,000 in just a few hours. Ryan Lintelman is
the Smithsonian's entertainment curator, he joins me now from Washington. Sir, why Kickstarter for the red slippers?
RYAN LINTELMAN, ENTERTAINMENT CURATOR, SMITHSONIAN: These shoes, like you said, are the only pair owned by the American people. So what we want
today do with the Kickstarter campaign was give the American people a chance to contribute to the restoration of the shoes and the conservation
and display of these shoes that matter to so many people. It's a great platform.
QUEST: But the Smithsonian is not -- I know you're strapped for cash on the big projects, but you're not hard up for $300,000 to repair some
slippers. So how much of this is really also about involvement? You want people to be involved?
LINTELMAN: That is exactly it. A lot of the money will go to this, it's very complicated process to conserve and build a new case for the shoes,
but it is a great opportunity to get people to contribute to something that really matters to them. So many people have great memories of the "Wizard
of Oz" with friends and family at the holidays, and the magic of Hollywood as represented with these shows. So we want to give the people an
opportunity to have some ownership of that.
QUEST: I've got to ask you. What are you doing with $300,000? I mean -- this is -- I have a feeling I will learn more about preservation of shoes
than I wish to, however, why do you need $300,000 to build a case to hold a pair of shoes?
LINTELMAN: Museum conversation is very complicated process. You need highly trained experts who can analyze the material types. And really
figure out what the best way to care for these is. This is a very early type of plastic used to make the sequins. It is a very complicated thing
to be able to analyze. It has never been attempted on this scale and we want to give those people the tools they need to be able to figure what is
going to keep the ruby slippers on display for years to come.
Because we want everybody to be able to see them. The case they will go into in our new exhibition in 2018 is also going to be state of the art.
Totally sealed, and anoxic so that all of the light and humidity and temperature changes that hurt the slippers over time will be mitigated and
so we'll stop that deterioration and save them.
QUEST: And finally, the Smithsonian relies on private donations and a lot of corporate money, I assume maybe some corporate money, a shoe
manufacturer or something might come in and decide to have the ruby red slippers sponsored by.
LINTELMAN: So far we wanted this to be a people centered campaign. That is why we picked Kickstarter and we hope everyone will go there and make a
contribution there. As small as a dollar or up to the higher levels where you get some of the great rewards that we are offering. We really want it
to just be something for the American people.
[16:55:00] QUEST: Well, I am sure there will be others who will join as well. The red slippers one of the most sought after artifacts at the
Smithsonian, thank you for joining us.
We will have a Profitable Moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's Profitable Moment. Even for an economic nerd like me, getting excited by trade agreements is pretty difficult. However, the
failure or potential collapse of the Canadian EU CETA deal, the Comprehensive Economic Trade Agreement is the most far reaching and ever
negotiated by the EU with another body is serious stuff.
And all because there are protests in Paris and the Wallonia region in Belgian is up in arms about it. If they can't get CETA through, and I
think they will, they will cobble together some deal, it merely reinforces the view that the populous uprising that we're hearing on things like the
Transpacific and the of course, TTIP. European Transatlantic Trade Partnership.
Getting these trade deals through is becoming almost impossible. And that doesn't seem likely to change any time soon. Only a fool, it seems,
actually goes in favor of a trade agreement if they want to get reelected. That is QUEST MEANS BUSINESS for tonight. I'm Richard Quest in New York.
Whatever you're up to in the hours ahead, do I hope it is profitable. I'll see you tomorrow.
END
