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Quest Means Business
Dow, Nasdaq, S&P 500 Close at New Highs; Tax Bill Means Short-Term Pain for Some Firms; Europe Rewrites Financial Rules; Fed Weighs Up Trumps Tax Bill; How to Keep New Year's Resolutions. Aired 4-5p ET
Aired January 03, 2018 - 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 HOST: Closing bell ringing on Wall Street. The Dow Jones is giving up just a couple of points. But still the best
part of 100 points to the good. It is a record on the Dow, the Nasdaq and the S&P. And yes, they're trying to break the gavel, but they can't. It
was a strong, firm, robust gavel. Trading is over today, Wednesday, January the 3rd.
So, U.S. stocks hitting new highs as the president is feuding with his former Chief of Staff. Ian Bremmer tells us what worries him in and makes
sense of the last 24 hours.
Businesses saying they'll lose billions of dollars in the short term as a result of the president's tax cuts. Grover Norquist will be with me live
on the program tonight.
And sweeping changes to the financial rules in Europe. It's called MiFID II. It might sound boring, but the goal is to head off the next financial
crisis. We'll talk about that tonight, as well. I'm Richard Quest live from the world's financial capital, New York City, where I mean business.
Good evening. Tonight, there is no stopping the markets. Stocks on Wall Street have just closed at new all-time highs. Brushing off another worry,
and other set of Twitter feeds from the President of the United States.
An extraordinary 24 hours in Washington, whether it's the president's threat of nuclear war, or more palace intrigue at the White House.
Investors aren't letting it get in the way. Astonishing statements, firstly from President Donald Trump, with the president saying his former
Chief of Staff -- former chief strategist, Steve Bannon had lost his mind. It came after Bannon was quoted criticizing Mr. Trump's son, accusing him
of treasonable behavior.
And then we got news that Bannon's predecessor on the Trump campaign, Paul Manafort, is suing the Justice Department and the special counsel, Robert
Mueller. Accusing them of overstepping their authority after he was indicted. And in the past few minutes, we've heard the White House defend
the president's mental fitness after he taunted Kim Jong-un on Twitter.
Jeremy Diamond is in Washington for us tonight. I don't often say this, Jeremy, but I'm slightly speechless for a question. So where does one
begin to make sense of the tweets of the past 24 hours and the statement we got from the president?
JEREMY DIAMOND, CNN WHITE HOUSE REPORTER: Well, we've certainly seen the president, you know, engage in ways that he is very much used to, just like
he did in 2017. It's going to be the same for 2018. He's certainly set that tone for the year to come. As far as his Twitter habits, he certainly
was firing off against North Korea's leader, taunting him with this statement that his nuclear button is bigger than Kim Jong-un's. That
statement defended by the White House Press Secretary today who insisted that the President was not taunting, but simply defending the American
people's interests. And she said that if there is any person's mental fitness Americans should Kim Jong-un's, which, again, raise questions about
that tweet.
But the focus of the briefing today was largely surrounding Steve Bannon and his comments in which he suggested that the meeting that the
president's son, his son-in-law and his former campaign chairman took with the Russian lawyer back in the summer of 2016 was treasonous. So, the
president's statement there, furious was how White House Press Secretary, Sarah Sanders, described the president's state of mind.
He suggested Steve Bannon has lost his mind since leaving the White House. But despite that he's still talking to him over the last several months.
Sarah Sanders confirming that the president spoke with Steve Bannon as recently as last month. So, despite the fact that he was fired in August
and allegedly lost his mind, as the president says, the president has, of course, continued to retain his counsel, his close counsel, even. The
question is now, will that change, going into 2018? Particularly going into this period of the 2018 midterms when Bannon's political strategist
persona, and that part of him, his relationship with the president could, of course, again come to the fore.
QUEST: Jeremy, a quick question. The issue of which of all these tweets - - the North Korea tweet, with rocket man and my nuclear button is bigger than yours. The statement about Steve Bannon.
[16:05:01] The book that has come out suggesting treasonous behavior comment from Bannon. What do we make of it, in the sense that it's only
January the 3rd.
DIAMOND: It's only January the 3rd and it means that we have to buckle up I think for a 2018 that's going to be just as raucous and rowdy and just as
much as a roller coaster, frankly, as 2017 was. Listen, there's a lot that's going to come to the fore here again. The midterms, of course, are
going to bring out that counter-punching political campaign persona that we've seen from the president. There's also going to be developments on
the Russia front that could furthermore enrage the president, and, of course, these questions over some of his aides and how he's going to behave
with them, like Steve Bannon and like others, perhaps as well. So, a lot to watch out for in 2018. It's certainly not going to be a boring year --
Richard.
QUEST: Thanks. Jeremy Diamond joining me from Washington.
Now the Eurasia Group says the Trump White House is not one of their top risks for 2018. A possible accident with North Korea is on the list,
however. Ian Bremmer is the president of the Eurasia group and joins me. Good to see you, sir.
IAN BREMMER, PRESIDENT, EURASIA GROUP: Richard, happy new year.
QUEST: Happy new year to you. I saw your tweet a moment or two ago concerning Donald Trump and the Bannon -- how serious do you rate this
latest issue between Donald Trump, Steve Bannon? Not so much because of the disagreement between them, but what it says about the state of the
White House?
BREMMER: Well, two things. One is that those that were concerned about Bannon as economic nationalists with influence behind the scenes that would
be damaging to the United States, very much the strongest antiestablishment figure with a global view that was advising Trump. He's clearly on the
outs, right? And secondarily, a lot of people said Trump, the authoritarian. Trump going to smash democracy. Bannon was the guy that
really wanted the strongman executive that was concerned about the deep state. That was the biggest danger for draining the swamp and the special
interests. Ain't going to happen, right? And there are other people that are mostly -- the Seb Gorkas are gone. So many of the people that made you
think that Trump was a closet authoritarian. You know, just a year later they're not there.
QUEST: OK. But we then have to balance this really nasty sort of spat between Bannon and Trump with the rocket man, the tweet last night,
basically saying -- not basically he did say -- my nuclear weapon is bigger than yours.
BREMMER: Yes, look, I absolutely believe this is great for ratings. I mean, if this is what Trump is going to do on January 3rd with 16 tweets
like this, we've got so much stuff to cover.
QUEST: But how significant is it? I mean, I'm not --
BREMMER: No, it's not. It's odd. My tweets don't appear -- Trump's tweets are not in my top issue report.
QUEST: But Trump's policies on North Korea --
BREMMER: Right.
QUEST: -- must be a risk in 2018.
BREMMER: They are. The question is to what extent Trump's tweets actually reflect policy. He tweeted a lot about building a wall, the Mexicans were
going to pay for. And then he did a 180, the likes of which no American president in history has ever done. He talked about fire and fury with the
North Koreans, and they would not be allowed to develop an ICBM that would hit the continental United States. That sounds like a red line. They have
already tested a bunch of those. What has Trump done? The most important news on North Korea in the last 48 hours, the South Koreans and North
Koreans are now directly talking by the phone and it looks like the North Koreans will send an athletic delegation to the Olympics. That's actually
meaningful.
QUEST: So what for you is the biggest risk as we look forward to 2018?
BREMMER: His links to Trump's tweets.
QUEST: Ah. Now --
BREMMER: I've got something here.
QUEST: A bit of sophistries from --
BREMMER: That's for you. This is the fact that a year ago, people thought his tweets matter, and that included leaders all over the world. And now
they increasingly don't. He's the president, the little president that cried wolf. And the fact is that that reality that they don't listen, so
they don't believe, they don't trust the American president, has created enormous opportunity for other countries, for rogue states and actors. And
most importantly, for the Chinese to actually play a much bigger role in the world order. That's an enormous change.
QUEST: OK. The tweet per se --
BREMMER: Right.
QUEST: -- may not be.
BREMMER: Correct.
QUEST: But the policies or the management of this administration is what you say -- I'm not putting words in your mouth. Are you saying that the
management of policies with this administration is a risk in 2018?
BREMMER: I would argue on national security, not so much. Because frankly, he has let the generals do most of it. Whether it's on NATO or
it's on Syria or Afghanistan or Iraq. And those policies have largely been successful and consistent with what you would have seen under Hillary
Clinton. But on trade and on American commitment to multilateral institutions, whether it's Paris or the Trans-Pacific Partnership or you
name it, that's really taken a hit under Trump. And it's changed the way countries around the world, including very important allies of the U.S.,
think about America.
QUEST: The world market. This market --
BREMMER: Fantastic.
QUEST: It rises in spite of, not because of.
BREMMER: I think it rises -- you say that North Korea last time you and I talked -- let's say it was a two percent chance it was going to blow up.
Now it's a 10 percent chance. The markets are going to react to that, because people are still making money in South Korea. Markets react to
Brexit referendum on a certain date, yes or no, I can get the percentage and I know it's going to happen there. This is -- the fact that there's a
foreboding around 20 different things around the world that are more likely to blow up, markets aren't going to take a hit until after it happens.
QUEST: Good to see you, sir.
BREMMER: My pleasure.
QUEST: After the break, we will those markets that we've just been talking about. Peter Tuckman will join us from the New York Stock Exchange.
Putting into perspective what can we expect? It's QUEST MEANS BUSINESS at the start of a new year.
(COMMERCIAL BREAK)
QUEST: Welcome back. It's QUEST MEANS BUSINESS. For the first part of our program, you might have been wondering how the markets have been
trading in all of this seeming disarray in Washington. Well this tells its own story. Record high on the Dow. Record high on the S&P. Record high
on the Nasdaq. All on the basis of some solid economic numbers. Which means we have to look at this -- not barely. We are on to day two. And we
have one Dow, and if you think we were in the 60s and the 70s at the end of last year, it makes you realize exactly -- now if you look at the market
sentiment on greed and fear. It's inching up very slightly toward greed again. The Dow needs a gain of just a half percentage point to reach
25,000.
Peter Tuchman is with me from the New York Stock Exchange. Peter, good to have you and good to see you. We talked earlier today. Obviously, 25, I
know you've got the hats made. It's not question of if, it's a question of when.
PETER TUCHMAN, FLOOR TRADER, QUATTRO M. SECURITIES: When.
QUEST: But I am fascinated by this continued resilience of the market. Today we saw a classic example of it. In the face of more disarray, and
vitriolic tweets out of Washington and the president.
TUCHMAN: You know what, we're just seeing a continuation of what we saw all last year. Every time something completely dysfunctional and bizarre
comes out of the behavior out of Washington, we think that it's going to have some major market affect. And as you and I have seen and watched all
year long, whether it's an intraday headline, which causes some small anxiety or fear, net-net at the end of the day it's completely -- the
market disengages it. Today was a perfect example as we march on. Day two 2018, with potential for this market to go, oh, my god, what's coming out
of Washington, and perhaps we should be anxious about it.
[16:15:00] The market is forging on. We're up 100 points, we're closing at record highs across the board. I don't think the market really cares
what's coming out of Washington. I think this tax reform thing -- I think all the economic data is proving to us way more important in valuation.
QUEST: Now, Peter, there is -- there is essentially a question, of course, that many firms are going -- big companies are going to take a loss in the
first quarter because they've lost their tax credits and they're going to take a charge. So, we're not going to see the full effect of the tax cut
until later in the year, are we?
TUCHMAN: You know what, that's a little out of my wheelhouse, Richard. I really don't know that. All I can tell you is that if you just watch,
these are real numbers, and I always say this, real numbers, real valuation. Someone is buying these stocks at these high levels. Right?
The banks are high. A lot of the infrastructure stocks are high. Cat tractor, McDonald's, Disney, trading at an all-time high here. Nasdaq
breaking through 7,000 yesterday. Up another 50 today. So, somebody's buying these stocks at these prices. They're seeing value. Whatever
happens as far as, you know, who is going to realize what benefits, when, I don't know that. But the markets telling us that they're going to realize
profit and valuation in a big way, and they're betting on it.
QUEST: Peter, see you tomorrow at the stock exchange. Looking forward to seeing you.
TUCHMAN: 25,000 Dow. Look forward to it, Richard.
QUEST: Get the hats ready.
TUCHMAN: I will be ready for you, buddy.
QUEST: Good.
U.S. firms handing the extra cash to their employees after President Trump slashed company tax rates. American Airlines, Southwest and U.S. Bancorp
are now following the lead. It was set by AT&T, Bank of America, Comcast and Wells Fargo. It's one-time bonuses or pay raises. Now in the short-
term, some companies saying the complex effects that I was just alluding to, will hit their profits. BP, Shell, Goldman, all say that earnings will
have a setback in the next quarterly report, because they are going to take a charge because of the lack of their tax credits. Grover Norquist is the
president for Americans for Tax Reform. Grover, good to see you, as always, sir.
GROVER NORQUIST, PRESIDENT, AMERICANS FOR TAX REFORM: Yes.
QUEST: And we -- now, let's just clarify. You know, fair dues, the tax bill is now law. But it's going to take a while for corporations to reap
the benefits. It will be the second part of 2017 -- 2018. Do you agree?
NORQUIST: As you were saying, some companies, yes, because they have -- you're bringing some money back. You had deemed repatriation. You're
going to be paying taxes on money that was parked overseas. And you're losing some deductions and credits. But there are a lot of companies that
pay something close to that 35 percent. They're saying rates down. And also, the 28 million smaller companies, the sub Chapter S corporations,
partnerships, sole proprietorships. They're going to see lower rates, as well.
QUEST: Let me ask, how damaging is it for you to see this disagreeable spat between the president and his former chief strategist? Steve Bannon.
NORQUIST: Completely irrelevant. I mean, what -- the fundamentals on American economic policy are set by the National Labor Relations Board.
Undoing of Obama's massive pro-union agenda. Pulling that back changes, the labor market to the United States. The FCC undoing the effort to
catalyze all of our telecommunications. That with deregulation movements, those are real, those are in place. Those have nothing to do with Steve
Bannon or whatever. And lower marginal tax rates, a 35 percent rate down to 21 percent, that's permanent.
QUEST: Let's talk about this. Because late in December, we were talking about it in the office. And the reality is, even though there's only one
major legislative accomplishment, the tax bill, there is a wholesale change. And some would say better, others would say worse, in American
industry. The deregulation that you're talking about, it's almost by stealth, but it is reforming and remaking U.S. manufacturing and industry.
NORQUIST: It's only by stealth, because some foolish people in the press have focused on the silly stuff, and the sparkling lights over here. And
not focused on the real things. We had a Supreme Court appointment that passed. That took effect. We now have five votes on the Supreme Court to
make unionization voluntary in the public sector. That decision is coming down in June. That's huge.
QUEST: OK. But --
NORQUIST: It's not a secret. It's huge.
QUEST: No, I understand. And I understand that if you take mining, if you take energy companies, if you take an entire variety --
NORQUIST: Drilling in Anwar -- drilling in Anwar is part of this budget deal.
QUEST: But how much of all of this is going to be change in haste, repent at leisure -- when the environmental effects start to be felt.
[16:20:00] When the poverty levels start to rise as a result. When we start to see that much of this regulation -- I'll grant you, a lot of it
was unnecessary. A lot of it was. But the speed of this change is indecent, some would suggest.
NORQUIST: Well, what we changed on the FCC regulations were for two years under Clinton -- Obama, rather -- they dramatically change the rules. And
we put them back to the rules we've been living on going back to Clinton's days. So, the only thing radical was what Obama did and we stopped that.
We returned labor law to the previous 50 years of labor law instead of Obama's power grab on behalf of labor unions. So, if you want to know what
it's going to be like, we've been there before. We're going back to reasonable labor law, reasonable telecommunications law. Ones we've dealt
with and lived with for decades. Ditto the questions of drilling and looking for energy on federal lands. We're going back to reasonable laws
that we used to have. The radicalness of the Obama administration was missed by some people, only when you undo it is it clear how crazy it was.
QUEST: Grover, thank you. We always love having you on the program. Please come back again.
NORQUIST: Good to be with you.
QUEST: Good to see you. Thank you.
Now we stay in Washington. Paul Manafort's indictment for money laundering was the first major shoe to drop in Robert Mueller's Russia investigation.
Now Manafort is suing Mueller and the Department of Justice, saying the special counsel has overstepped his authority. Oh, legal expert Jeffrey
Toobin is here.
JEFFREY TOOBIN, CNN CHIEF LEGAL ANALYST: Don't sigh. It's very interesting.
QUEST: No, I was -- it's fascinating. The reason I was -- because I'm trying to frame a question that is neutral as possible that basically says
does this case have merit.
TOOBIN: Unlikely. But not impossible. The special prosecutor is an unusual beast in American law. Most federal crime -- all federal crimes
are prosecuted by the United States Department of Justice. But in circumstances when there are conflicts of interest with the president of
the United States, who is the supervisor of the Department of Justice, they establish an outsider, a special counsel, as it's called here. Sometimes
called special prosecutor, independent counsel. In the legal structure has sometimes been open to challenge, of these outside prosecutors.
QUEST: He must believe that there's a case there. Because this came out of the blue today, didn't it?
TOOBIN: Well, you know, way back in 1987 when Oliver North was under investigation by a different special prosecutor, North's lawyers also sued
to have that prosecutor's authority struck down. I actually worked on that. I was one of the prosecution team. We won that case. I think
Muller will win this case as well in all likelihood. Not in certainty. But I think it just illustrates how much Mueller is going to be attacked
throughout his entire tenure.
QUEST: So, as we look at this -- I was looking at the book, the Wolf book that has just come out.
TOOBIN: Yes.
QUEST: There is the quote about, you know, they're going to go after the sons and the sons are going to be open like an egg.
TOOBIN: Right.
QUEST: Is it your feeling, is it your view that that is where this I going?
TOOBIN: Well to me from a legal perspective, the most chilling part of what Steve Bannon said to Michael Wolf in this book is he said, they are
going to look at Deutsche Bank. Because Deutsche Bank was the fulcrum of the Trump/Kushner financial empire. And you know, as we all know, Donald
Trump has never turned over his taxes. He has never disclosed the full extent of his financial interests. But Deutsche Bank really does, I think,
hold the key. And if Bannon is right that Muller is going to go after what is in Deutsche Bank. You know, the Deutsche Bank records.
QUEST: After the bank or the people who own the accounts or both?
QUEST: Well, no. The people who own the accounts. I don't think Deutsche Bank is itself is a target. I'm glad you clarified that.
QUEST: Because they have had lots of problems in terms of money issues.
TOOBIN: Well, and it's no coincidence that President Trump having been rejected by all the big banks, turn to Deutsche Bank. But if Mueller
starts rooting around in Jared Kushner's dealings with Deutsche Bank. If Donald Trump's dealings with Deutsche Bank, that's where the peril could be
really great.
QUEST: Good to see you. Didn't even have time to get to treasonous behavior.
TOOBIN: Yes, well I think that was use in a colloquial sense, not a legal sense.
QUEST: All right. Thank you.
TOOBIN: Good to see you.
QUEST: Jeffrey Toobin,
Turning to Europe, now. The biggest regulatory change in the European financial markets in a decade. Now look, it's called MiFID II. Look there
we have it. MiFID II.
[16:25:00] it's arguably the most complicated, some would say the most boring, but it certainly the most far-reaching reform and it runs to some
7,000 pages. More than a million clauses. It is designed to shine a light on transactions aimed at proving transparency. So, there's going to more
transaction data from traders have to be actually put out. Limits on dark pools. These are investment pools which are trading off exchange. No one
really knows who is behind the transactions. And the banks will charge separately for brokerage services and research. The idea there, of course,
is to avoid the conflicts of interest.
The only problem is -- as Rebecca Healey joins me now from Liquidnet. A financial trading platform that connects investors. The only problem is
that it's so complicated and so difficult that even implementing MiFID II has been a task unto itself, hasn't it?
REBECCA HEALEY, LIQUIDNET: It has been a difficult task. But I think what we really need to do is keep it simple. I know there are lots of pages
around MiFID II, and it's a hefty team of regulation. But what we need to look at are the full key principles. Really this is, as you rightly say,
it's about greater transparency. It's about making sure that there is harmonized regulation across Europe. And it's really about improving and
getting a better for investors by improving investor protection in Europe.
QUEST: If we're not back at Dodd/Frank and the Volcker Rule, it was all supposed to do thing. Even Sarbanes-Oxley in a previous generation. They
were all designed to protect consumers and protect the markets. And they were all felt to be too difficult for their own good. Some are saying
MiFID II -- bearing in mind of course, that the futures
HEALEY: No, I hear what you're saying, but really, what we're looking at now is there is far greater demand for accountability and transparency.
That's actually coming from end investors. One of the things that's been particularly striking to me -- so I've been covering MiFID for the last
seven, believe it or not. But in conversations that we've been having with 800 asset managers across the globe, those are starting to see --
previously they might have looked at MiFID II as a bit anti-competitive.
But now they're starting to realize there's real opportunity here to differentiate and deliver a better deal for end investors. So, they are
choosing to become MiFID-aligned rather than necessarily having to be MiFID-compliant. And those are people that are sitting in the U.S. who
clearly don't fall under the direct regulation of ESMA or the European regulators.
QUEST: The fascinating part here is, and I would like to get your assessment. You know, anybody who has got a bank account where they ring
you up after you've been with the bank for 15 years and they still ring you up to find out who you are to make sure that you are who you say you are.
Even though there been -- know your customer idea, and all of this. How do you ensure MiFID II doesn't become a box ticking exercise designed to
supposedly protect investors, but in reality, is just a rote form that can be avoided?
HEALEY: There is a lot of red tape. There is no two ways getting about that. But I think what we need to start focusing on is the innovation that
will be delivered as a result of MiFID II. By separating out research and execution service. Then it means to actually end investors starts seeing
how asset managers are spending their money. They can start making better decisions. Part of the problem has been it has been a very opaque way of
doing business. And that means that individuals aren't able to distinguish the services that they want. Where they can get the better-quality
investments.
QUEST: Delighted that you've come and help us understand MiFID II. and please, were going to need you again to understand what this beast is all
about.
HEALEY: It will be my pleasure. Thank you, Richard.
QUEST: Thank you very much, MiFID II.
In a moment, we return to Washington. A breathless day at the White House, even by Donald Trump's standards. We need to understand and make sense of
it all. It's QUEST MEANS BUSINESS
(COMMERCIAL BREAK)
[16:31:39] QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. When the fed assesses the impact of President
Trump's tax reforms, and new year's solutions. Making them is the easy part. You've got to keep them. An executive coach is going to tell me the
do's and don'ts of that.
Before all of this, it's CNN, and on this network the news and facts always come first.
President Donald Trump is blasting his former chief strategist Steve Bannon, saying in a statement, not a tweet, that Bannon has lost his mind
and has nothing to do with the White House. Reaction came as excerpts from the new book quoted Bannon who called the June 2016 Trump Tower meeting
treasonous.
Former Trump campaign manager, Paul Manafort is now suing the US Justice Department. The lawsuit challenges the broad authority of the special
counsel Robert Mueller, alleges that the Justice Department violated the law and appointing him. Manafort has been indicted on several charges
including money laundering.
For the first time in almost 2 years, North Korea called South Korea on a special hotline across the demilitarized zone. We know little of what was
said, during the 20-minute call but both Koreas have said they want to talk about sending a North Korean team to the Winter Olympics in Pyeongchang.
The head of Iran's Revolutionary Guards now claims antigovernment protests are over, and that the main troublemakers in their words have been
arrested. That word from the semiofficial Fars news agency after six days of unrest. The protester grown to become the largest since mass
demonstrations in 2009.
The Canadian man who was freed in October after five years in Taliban captivity is in police custody in Ottawa. Joshua Boyle was arrested and is
facing 15 charges, including sexual assault and unlawful confinement. His next court hearing is set for Monday.
So, to the apparent war of words between President Donald Trump and his former chief strategist, Steve Bannon. The White House Press Secretary
said Mr. Trump was livid at the quotes attributed to Bannon.
(BEGIN VIDEO CLIP)
SARAH SANDERS, WHITE HOUSE PRESS SECRETARY: I think furious, disgusted would probably certainly fit when you make such outrageous claims and
completely false claims against the president, his administration and his family.
(END VIDEO CLIP)
CNN's White House reporter, Stephen Collinson is in Washington. Joins me now. I will bet you didn't see this one coming on January 3.
STEPHEN COLLINSON, CNN WHITE HOUSE REPORTER: Well, I actually wrote a story on January the 1st saying that 2018 was going to be even more crazy
than 2017. I didn't realize it was going to be as wild and whirling as this already.
It is a stunning sort of day in Washington. You have an open field raging between Trump who more than anything was the sort of philosophical guru of
his populist, nationalist camp general election campaign, Richard.
Quest: Right.
[16:35:00] COLLINSON: It is absolutely amazing.
QUEST: let's go through this in a quick-fire round if we may. Firstly, Trump's statement
the Brown was never one on one with him in the oval office much, wasn't that important to the administration. True or false?
COLLINSON: Not true. Bannon had walk in privileges in the oval office, he had a West Wing office very close to Trump, he's even been speaking to
Trump ever since he left in June. He spoke most recently to Trump by phone the White House said in early December.
QUEST: Trump's decision to issue a statement on this, not do it on Twitter. Significant?
COLLINSON: Yes, definitely. He doesn't do that very often. Usually takes as you know straight to his phone, this is one of the most stunning
statements that we have ever seen from a president. He basically said that Bannon did not just lose his job, he lost his mind.
QUEST: Finally, the whole question of why he did it? Why put out this statement in the same way as do tweet about the nuclear button? Well let's
focus on the statement first. Why didn't he just let it lie?
COLLINSON: I think the answer to that question is the same answer to the question about the nuclear button. Both Bannon and Kim Jong-on made the
mistake, if you like, trying to be the biggest thing in the Trump presidency than Trump himself. Trump does not like to share limelight. He
doesn't like to be challenged. When Kim Jong-un started talking about his nuclear button Trump just couldn't resist coming out there and saying I got
a much more bigger nuclear button than you, and mine works.
When Bannon challenged Trump, went after his family, it was almost certain that he would come back very, very hard and that is exactly what he did in
that statement.
QUEST: Great to have you to interpret it for us. Thank you, Stephen. Good to see you.
The minutes were the last fed meeting shed more light on why members were split on raising rates. Some have concerns about how quickly rates could
be raised in the year ahead. Inflation could still be too low. There were fears about market stability if monetary policy stays too easy for too
long. And now the new wildcard. The tax cuts.
The Fed says that the tax cut's impact on business is uncertain. Glenn Hubbard was chair of the George W. Bush Council of Economic Advisors, now
Dean of Columbia Business School. Good to see you, sir, thank you.
GLENN HUBBARD, FORMER CHAIR, GEORGE W. BUSH COUNCIL OF ECONOMIC ADVISORS: Likewise, sure.
QUEST: All right, uncertain as to the effects of this tax cut, but they go on to say they are sure -- they talk about likely to be used for dividends
and buybacks.
HUBBARD: I think the fed minutes showed some uncertainty, but also showed an upgrade in forecasts as a result of the tax cut. I think the tax law
change will boost investment, but yes, it will also raise dividends and share buybacks. It will do all of the above.
QUEST: And in that case what do you see as being a beneficial aspect, in the short term maybe not that great because as you were talking earlier in
the program many large companies are going to have to take a tax charge for losing tax credits. But in the longer-term what do you envisage, the
effect on the GDP is going to be?
HUBBARD: In the longer-term you have two things happening, one is a lower cost of capital for business investment, and the other a greater incentive
for all companies were layer U.S. or foreign to invest in the United States. On balance GDP growth could be higher by say 2/10 to 3/10 of a
percentage point per year. That is not a new order of the ages, but it is about the best policy can do.
QUEST: Everything that I hear and see and read suggest this idea of getting to four or five or six percent GDP growth, the only reason I raise
it is because the president talks about those sorts of numbers. But the idea of getting to four percent GDP growth is not going to happen.
HUBBARD: Well, you know, anything can happen in a particular quarter. But if you look for long-run sustained growth in the U.S., I think a number
like three is more plausible. And even that is a bit aspirational. But three is much different than two, which is what we were stuck in before.
So, I think going from 2 to 3 is really big deal, if we get higher that is great. I just don't see it.
QUEST: No. And yet at the same time, the markets -- let's take today for example. Records on all three of the markets in a time when internecine
warfare seems to have broken out between the president and his former chief strategist. And she is becoming more bellicose on the issue of nuclear war
with North Korea. Explain this.
HUBBARD: I think markets are treating a lot of this as noise, kind of high-frequency political chatter. And are focusing on earnings and U.S.
growth. If you chatter goes from rhetoric to a harsher reality, markets will definitely react. But I think at the moment people are focused on
growth and profits, both of which look pretty good.
[16:40:00] QUEST: On the infrastructure question, because now everybody turns around and says what's next? It is going to be a balance between
whether you have another go for healthcare reform, do you go for infrastructure where there may be bipartisan approach. Which do you go
for? If you were in the White House what would you be advising?
HUBBARD: I think you need to do both, but I think it makes sense to do an infrastructure plan first. The problem is the devil lies in the details.
One, it is going to have to be paid for and the question will be where else in the budget are you going to change? And the biggest issue with
infrastructure is not even money, it is regulation. And a lot of that is at the state and local level. So, it will be hard for President Trump to
really get his arms around it but that's where he should start.
QUEST: But this idea of an infrastructure package, traditionally infrastructure is done for one of two reasons, it's either falling apart or
you need an economic stimulus. The U.S. does not need an economic stimulus, I think you and I could probably agree on that. In fact, it
might actually be detrimental because obviously the Fed would raise rates accordingly and faster.
But the question of decrepit infrastructure is real here.
HUBBARD: I think that is really the point, Richard, one, it is going to be raising long-term productivity by making infrastructure better, and second
it gives businesses a sense of sustained demand. Infrastructure should not be about stimulus or shovel ready projects, it is about making sure that
demand is there for the long term, and that the supply side of the economy works with a real infrastructure.
QUEST: So, if we take 2018 and it's great to have you on the program tonight, a chance to really get into some of these issues, what worries you
most? I mean for the first time in probably a decade we do have synchronistic growth. Europe is growing, Japan is growing, the U.K., well,
they have Brexit issues. But everybody is at least growing. World trade still remains a problem of protectionism.
What worries you this year?
HUBBARD: On balance I am optimistic for all the reasons that you just outlined. But if I looked at worries, we've had unconventional monetary
policy around the world that is starting to normalize, at least in the United States and soon elsewhere. That's uncharted territory. We have
geopolitical risks like North Korea. So, there are things to worry about but on balance growth looks good in 2018.
QUEST: Allow me to invite you to be joining us more frequently in the year ahead. Thank you.
HUBBARD: Thanks, my pleasure.
QUEST: It's all about handmade jewelry, vintage home decoration or even wedding invites, it's what makes Etsy to become a multimillion dollar
business. After the break, it's QUEST MEANS BUSINESS in New York.
(COMMERCIAL BREAK)
[16:45:00] QUEST: And so, you have searched the Internet for handmade goods or craft supplies, and you're probably well familiar with Etsy. It
was founded in 2005. It had just three employees. Today is a multimillion dollar company, it is listed on NASDAQ, as we look at TRADERS, we take a
closer look at Etsy.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: A New York City skyline comes to life on paper. Thanks to London-based artist Cecily Vessy. Her signature sketches travel far and
wide, by way of Etsy, an online creative marketplace.
CECILY VESSY, ARTIST: When I started my business eight years ago, I was looking for a way to be able to sell my products that wasn't just market
stores. And I wanted to sell online. But at that time there wasn't a place to sell online. Etsy provided a very affordable platform and it was
just an obvious choice for me.
UNIDENTIFIED MALE: For more than a decade, Etsy has been providing a digital
traders of vintage clothes and jewelry, hand-made items and craft supplies.
ANNETTE PICARDO, MANAGING DIRECTOR, ETSY U.K.: From 2005 when we started out and Etsy was run by a team of three people, that is now over 800
employees across the world. And we have grown to 1.9 million sellers. And almost 32 million buyers. And that is across almost every country in the
world.
UNIDENTIFIED MALE: In 2016, Etsy says it made almost $3 billion in gross merchandise sales. With international sales making up a third of the
total.
PICARDO: When we look at our main six categories, which are jewelry, clothing, accessories, home and living, art and collectibles, paper and
party goods, and craft supplies, those six categories make up $155 billion market opportunity.
UNIDENTIFIED MALE: The trade-onomics of a creative economy is open for re- invention. The consumer trend continues to move away from mass production, to customized and hand-made goods. With a global online retail sector
expected to reach nearly $3 trillion by 2018, the digital economy will continue to connect craftsmen to consumers in a way not seen before.
Enabling those with traditional skills and micro entrepreneurs to trade globally.
PICARDO: Our mission at Etsy is to keep commerce human, and we believe in an increasingly commoditized world, in an increasingly automated world, you
can't commoditize human connection. You can't automate creativity. And that's it at the core of what we do, and makes Esty such a unique
marketplace.
(END VIDEOTAPE)
QUEST: As we continue tonight on QUEST MEANS BUSINESS, Weight Watchers is pulling and more star power to give the brand even more sparkle, the chief
executive the Weight Watchers International is with us in the C suite after the break.
[16:50:00] (COMMERCIAL BREAK)
QUEST: As we continue tonight, now Weight Watchers shares lost a bit today after winning more than 8 percent on Tuesday. DJ Khaled his joining the
firm as a social media ambassador. The weight loss firm is hoping to repeat Oprah affect. They stock jumped in 2015 after Oprah Winfrey bought
a 10 percent stake in the company, and subscriber growth took off in 2017.
Mindy Grossman is the president and chief executive of Weight Watchers. Good to see you.
MINDY GROSSMAN, PRESIDENT AND CHIEF EXECUTIVE, WEIGHT WATCHERS: Good to be here.
QUEST: We need to start with the Oprah purchase of the stake and coming on board as spokesman, ambassador, whatever one wants to face. That was
incredibly significant for the company, wasn't it?
GROSSMAN: So, it was a combination, certainly, of Oprah and her philosophy about living life fully and wellness and where the company wanted to go
from just being perceived as a diet and weight loss company to a more holistic health and wellness brand. And Oprah -- who would not want Oprah
as a board member.
QUEST: But if all you do is have the face in the name, and you haven't changed anything else.
GROSSMAN: No, that's what I'm saying. You have to change everything underneath it. So, it started with beyond the scale and the programs from
the behavioral science of the programs to the integration of activity, to the integration of mindfulness, to the content in our meeting rooms, to our
actual technology itself. And enabling people to really be able to manage their lives in a more healthy and effective way.
QUEST: DJ Khaled coming on board, what does that give you?
GROSSMAN: Sit back for a second, and think about it. From the time Weight Watchers started what was it about? It was about the behavior science of
understanding how to eat healthier. Initially, to lose weight. Today just to be healthier and lose weight, if you were to want to.
Number two, community. Starting with a home community and community and the support of that community and inspiring the community is inherently the
essence of what we do. And what is incredible about DJ Khaled is that is who she is. He wants to get healthier, he wants to get healthier for his
son, Assad. And he wants to inspire his legions of people to get healthier, as well.
QUEST: So, this is not just about losing weight any more. This is about, as you say, mindfulness, wellness and all of the things --
GROSSMAN: It has to be. You know if you think about it, everybody asked me who our competition is, and the reality is that our competition is
people thinking they can do this themselves. Only 5 percent of the people use a commercial weight loss program. So, I want to be a partner to the
other 95 percent who want to be healthier, who may want to lose weight, and we could be there partner.
QUEST: So, when you see -- and I was just looking before we came on air, the share price. That is a barometer of your success.
GROSSMAN: That's what I'm here for.
QUEST: From 11 up to whatever it is today, 300 percent rise.
GROSSMAN: Right.
QUEST: You know, initially, that was on the back of Oprah. But I note -- if you look at the graph, it does continue to rise. There you go. You can
see it there. You can see the Oprah purchase. You see a bit of a dip, when you have some poor numbers. Then you see it continuing to rise.
GROSSMAN: Here's what you have to think about. There has to be a core fundamental platform that's sustainable and successful. Right? You have
to prove success. One, proven weight loss on the planet. But now so much more than that. Effective communities. If you look at Connect, which is
our internal Instagram, Facebook, as well as our other social platforms. Very powerful, people inspiring other people. And the success of
integrating our content and building a state of our technology for tracking.
QUEST: How do you keep it going? Naysayers, as you can hear them too, say, well, they've done that now. They won't be able to keep it going.
GROSSMAN: Yes. You have to build on sustainable momentum and success.
QUEST: How?
GROSSMAN: Well, Freestyle, which is our new program that launched, it has some other names in some other markets, it is the newest, most successful
and the simplest in the most sustainable program in the history of the company. There are
now over 200 additional foods with zero points. It basically allows people to live their day and manage their food in a way.
So, one of the things I love about Weight Watchers, especially coming from the fashion world --
QUEST: You're the CEO, so I suppose you do.
GROSSMAN: Coming for the fashion world where everything was about lifestyle, what I love about what we do is its livability. It is a program
that you can integrate into your life, with your family. You can go out. You can travel.
[16:55:00] and we have what we call Agile Innovation. And we have to keep innovating on that platform, keep building on community, and then we have
to really be focused on personalization going forward. So how do we make everyone feel it's their weight loss --
QUEST: Might need a bit of attention to -- make sure the suit is fitting.
GROSSMAN: We have an app for that, that is incredibly effective. Technology integration, and what technology has enabled us to do to really
integrate into people's lives, I think the brands of the future, the companies of the future, the ones that are going to have sustained momentum
are the ones that are really going to bring meaning and purpose to people. In my feeling is that if we can continue to have the financial success that
we have and return on financial equity, it also means that we are giving a tremendous return on human equity and were helping people.
QUEST: Good to see you. Thank you for coming and talking.
GROSSMAN: Thank you.
QUEST: I really appreciate it. And hopefully you can give me a bit of advice later. Getting a bit snug around the waist.
We will have a Profitable Moment after the break. It's QUEST MEANS BUSINESS, live from New York.
(COMMERCIAL BREAK)
QUEST: Tonight's Profitable Moment. There is something truly fascinating about Weight Watchers that you heard us talk about in the program. Started
in 1963 and manages all these years later to turn itself around, find a new lease on life. And I think what you heard from the chief executive on this
program tonight is that you can't just change the look, the name in the face if you like, of the product like with Oprah or DJ Khaled, you have to
change what is underneath as well. And that is what is fascinating about Weight Watchers, 300 percent gain in share price. And the market seems to
think there is more ahead. And by the way, I do not have Weight Watchers shares.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it's profitable.
END
