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Quest Means Business
Dow Down Right Before Closing; Elon Musk Launches His Tesla into Space; Steve Wynn is Out of Casino Empire. Aired 4-5p ET
Aired February 07, 2018 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(CLOSING BELL RINGING)
[16:00:57] RICHARD QUEST, CNN HOST: Closing Dow ringing on Wall Street. The Dow literally just turned negative in the few seconds before the bell
started ringing. It's an example of the topsy-turvy day. But oh, look at that. Yes, you don't want to argue with that. A strong gavel -- yes, I
told you, they do want to make sense of today, but today is over on the markets. It's Wednesday, it's February, the 7th.
The Trump rally, the President is now commenting for the first time on the market volatility. Elon Musk launched the Tesla into space. Their
investors want to know how many Teslas he can build, the results for his company in this hour.
And Steve Wynn steps down. Regulators say, the growth of his business will go ahead.
So, I am Richard Quest, live in the World's Financial Capital, New York, I mean business even on a day when the Dow is down.
Good evening, the story of the day in New York, volatility which continue to cast a spell over the stock market. Major swings are the new normal.
That much we've talked about over the course of the week, and now, the Dow is trying to claw its way back from Monday's nightmarish session.
However, the Dow gains evaporated. They had recovered from the 100-point loss at the open, so join me over at the trading post and all will become
clear. Look, three reds -- red, please is the color of the day, but the Dow had been up very sharply up throughout the course of the session, over
200 points, now at about 508-point range throughout the course of the day, but we all closing down off 19 points, but barely changed there. The S&P
is also down as indeed is the NASDAQ.
Let's put this in perspective, the Dow is Dow around 6 percent from the record, I mean you could arguably make the point that year to date, it is
up 1 percent but I think that will be somewhat of a specious argument to make. No records on the Dow and the S&P, but just let's put this into
perspective because we are already at the beginning of February, and you think about it, we've got 14 records on the S&P, the Dow 11, the NASDAQ,
13. These are the reasons why we are seeing the volatility today, however, how this translates from the market sentiment we are now way down there.
This is a good graphic element of the VIX index, 18. We're now down at extreme fear and the market's volatility is part of the equation to.
So, Cristina Alesci is at the New York Stock Exchange. We need to understand, what happened? I mean, I know the last hour, the last 20
minutes is always crucial, but we literally saw those gains just ebb away?
CRISTINA ALESCI, CORRESPONDENT, CNN: Well, this is -- as you said, this is the new normal. We're going to see these swings and this volatility back
in the market, but today, for the most part, Richard, as you mentioned, we were in the green. There were some buyers in the market, perhaps picking
over the wreckage of the last couple of days, trying to find some bargains there.
But you know, based on the conversations that I have had with investors and traders, this is a market that perhaps is testing a bottom trying to find
where the comfortable place to sort of bounce around. I think investors are going to be keenly focused on what the Fed does and any signals from
the Fed or any of the Fed governors from this point forward. In fact, when interest rates, I'm sorry, when yields came up today, on the 10-year, you
did see some nervousness out there, so I think that's what investors are going to be paying attention to going forward.
QUEST: Okay, so the interesting thing -- I just want to pick up on this. From what we saw today, anybody, Cristina, the thought this was over,
because of a 500-point rally yesterday on a back of a -- I can see you smiling already, perhaps anybody would even think that, this is not over.
ALESCI: No. This is the beginning. This is the very beginning of what we're going to see over the course of the next couple of days and weeks.
Now, the question is, you know, is the bull market definitely over? Or is this is a buying opportunity? That's the big question and anybody who says
they have the answer to that, I don't think should be believed. I think it's going to be very difficult to read what the market is really doing and
we're living in an age where you have, like we talked about earlier today, the passive money which are computer algorithms and computerized trading
going against perhaps passive money that may have cooler head, maybe in it for a little longer term versus the passive money that is going to be
triggered at these levels and we're going to see these big spikes and big losses.
QUEST: So, just as so we're all talking -- we're not comparing apples with oranges, when we talk about the correction, I mean, definitionally, we can
talk about it from the all-time high, the 52-week high. There are various ways we can define it, but the length of time that we would consider a
correction before we would call the bull market over, that is also up for definition?
ALESCI: Right, exactly, so they are going to have -- traders and investors are going to have to see whether or not you know, how much time that this
definitely takes and how many times we reached that point to your exact point.
We haven't reached the actual correction on a close yet. It's only been in for a day. So, again, these are all things that investors are going to be
looking at. They are not -- now, the time when they are going to focus on the micro and not so much the macro, right? They are going to be looking
at these levels. They are going to be talking about testing a bottom and for the most part, the macro of what is going on in Washington and
elsewhere, you know, that's not going to be as important to this market as the real traders and investors who play in it every day.
QUEST: Cristina, thank you. Joining us from the Exchange. An excellent analysis on what is happening. The volatility is slowly subsiding.
Now, at least during the course of today, the VIX, which is the main volatility index is down more than 20 percent. So, when you look at the
sort of swings that we saw and you put this into context, 508 was the swing, but it compares to Tuesday which has 1,167 -- 1,597 on Monday, so
the volatility has eased off. It's the smallest swing of the week so far.
Josh Silva of Harvest Volatility Management will help us understand the significance of volatility. Ordinary investments I mean, frankly common
sense, finds it extremely difficult to understand this love affair that market makers have with volatility.
JOSH SILVA, ANALYST, HARVEST VOLATILITY MANAGEMENT: Yes, volatility is you know, it's how much stock moves in a day or how much you know, we think it
is going to move or do not think it is good to move, and it sort of becomes as I would like to say, it's a mean reverting thing or mean reverting
instrument.
So, you can actually pinpoint and say, you know, volatility S&P is usually around 15, it gets as low as 10. If it goes up to 20 or 30. It tells you
something about what is happening in the markets.
(CROSSTALK)
QUEST: But this is (inaudible), this volatility that we are seeing comes because of computers trading, seeing a trend for a split second, making it
exacerbate and then arguably within five minutes, reversing that trend and sending the market in the opposite direction.
SILVA: Yes, I would agree with that. And the way that those automated trading programs work is the more volatile the market gets, the less
involved they are in the market. So, they widen out their bid offer spreads. They provide less liquidity the higher the volatility of the
market and we saw that on Monday when we saw sort of like a mini correction around three o'clock in the afternoon and then we saw it come back up as
the traders, when vol gets high during the middle of the market, their computers, they just turn their computers off for a second, reset and go
from there.
QUEST: Let's talk about that. So, you are telling us that there are times when the big portfolio managers, the investment houses do say, "All right,
suspend the algorithms. Suspend high-frequency stuff. It is time for me to get my hands dirty and put the rubber gloves on."
SILVA: Right, most of those aren't run by big houses -- trading houses like the investment banks. Those are run more by trading firms that you
hear about out in the street. I mean, I am an old Chicago life pit trader. We used to do stuff like that in the futures markets. The people like me
do not exist anymore. We used to be on trading desks, putting up blocks. They do not exist anymore. You are now living in a world where you know,
there is maybe 10 or 15 large high-frequency trading who is providing liquidity in the market and when you have highball, you do not have a level
head that says, "You know what, I am going to buy this stock down 10 percent because this is crazy."
QUEST: Good to see you, sir. Thank you for understanding our sentiment.
SILVA: You're welcome.
QUEST: Please, we need you to come back again and help us understand on these difficult days because frankly, ordinary people find it absolutely
bizarre that the stall that they are staring in the way of a moving train that, you know, nobody seems to be at the wheel or the helm. Thank you,
sir.
Global markets are yet to settle down completely, more big moves in Europe. Look at the way they moved. What you are seeing here is the reaction from
Asia and Europe to the Tuesday session, the Tuesday -- so they're all up more than 1 percent.
Chinese stocks fell once again, but that was on the back of their own -- frolic of their own.
Breaking news now from Jerusalem, the Prime Minister Benjamin Netanyahu says he is innocent while acknowledging reports that the Israeli police
chiefs are set to recommend indicting him on corruption charges.
The police have not yet officially issued a recommendation. CNN's Ian Lee joins us from Jerusalem. Who are the Israeli police recommending
indictment to?
IAN LEE, CORRESPONDENT, CNN: Richard, this goes to the Attorney General and that's a big if they do actually go forward with this indictment. They
haven't signaled one way or another. This is coming from local media, but the indictment would go to the Attorney General and then it would be up to
the Attorney General to decide whether to move forward with an indictment, which would trigger a very long legal process.
The Prime Minister did get out ahead of this by releasing a video on social media and in that, he pointed out, he said that the law saw that the person
who decides, if there is sufficient evidence against the Prime Minister is the Attorney General and he has to confer it with the state attorney's
office, the state attorney said recently in the Knesset, Israel's parliament that half the recommendations from the police end in nothing, so
he is trying to reassure his supporters that this is a long battle.
He still says, insists that there is nothing and so, really, Richard, what do these cases revolve around? They revolve around bribery and breach of
trust.
First, you have Case 1000 where the Prime Minister allegedly received inappropriate gifts from a businessman, and then you have Case 2000 where
the Prime Minister allegedly colluded with an owner of a newspaper in return for that newspaper toning down the negative coverage. The Prime
Minister would allegedly reduce the circulation of arrival.
So, these are the two cases that the Prime Minister has been investigated. He has been questioned by police several times over the course of months
and so we are waiting to see what the police come forward with that, Richard.
QUEST: Now, just -- while we wait because understanding the machinations of politics in Israel can be extremely difficult. This Prime Minister has
a way of winning elections and being reelected even though those who are voting for him often say they do not like him.
LEE: You cannot count out the Prime Minister Benjamin Netanyahu. This is a person who is probably one of the most astute politicians in Israel's
history and that is what has given him the longevity in politics as well as being the Prime Minister. So, when people point to this and yes, if the
Attorney General does come forward with an indictment, he is going to likely have a lot of political pressure against him.
But there is also -- he won't be kicked out of office until the court comes up with its final decision and this is also a big if, this is looking far
down the line, possibly years, their final decision will ultimately lead to what happens to them, but there is a lot of process to go between now and
then.
QUEST: Right.
LEE: And this Prime Minister will definitely put up a fight.
QUEST: Okay, but I think it was former Prime Minister Olmert who went through the same sort of process that lasted many years, but did eventually
hear the sound of the prison door clicking behind him.
LEE: That is true and so Israel does have a history of putting Prime Ministers in prison and the former Prime Minister Olmert was recently
released from prison and so, it definitely could happen but you know, it really does come to this political pressure -- will Prime Minister
Netanyahu step down if he is indicted by the Attorney General? All signals right now point to no. He said he is not going to. He reassures that he
is innocent of anything. There is nothing there. But you are right, Richard. This is something that could go many different ways and we have
seen in the past, Israeli Prime Ministers going to prison.
QUEST: Thank you. Ian Lee joining me from Jerusalem and there's more reaction on that piece. We'll come back immediately.
As we continue tonight, Rupert Murdoch bought the Wall Street Journal, Jeff Bezos bought the Washington Post. Now, a lesser known billionaire, but a
billionaire nonetheless is buying one of America's biggest newspapers and a buskin of journalism on the West Coast.
So, a newspaper's job, so they say is to report the news, not be the news. Today, the LA Times is its own front-page story.
Billionaire Patrick Soon Shiong reaches deal to buy LA Times. The price is half a billion. It caps a chaotic period for the paper has been in the
news for all the wrong reasons. So, it has gone through three editors-in- chief in less than six months. Its staff have gone through turbulent talks on forming a union and its publishers, so there you've got the editors-in-
chiefs, you've got the journalists and you've got the publisher on leave over harassment allegations that he is now being cleared of any wrongdoing.
Dylan Byers is in Los Angeles and joins me now. All the news that is fit to print and what are people making of the LA Times being sold to this
billionaire.
DYLAN BYERS, CORRESPONDENT, CNN: Well you know, they do not know exactly what to make of it yet, Richard, and the reason for that is this. First of
all, the LA Times is coming out of a period of extraordinary chaos as you just outlined in the period of ownership under Michael Ferro who is the
publisher of Tronc, what was formally known as the Tribune Company. It has been chaotic. It has been really problematic.
You have seen editors come and go, you've seen the suspension of the publisher. More than anything, you've seen an immense amount of antipathy
toward Michael Ferro, toward the deputies that he put in place at the Los Angeles Times, so in that respect coming out from under his ownership is a
good thing, but who is Patrick Soon Shiong? What does he mean for the paper?
If you look at his record in the healthcare industries, he is a biotech billionaire. If you look at his record on Wall Street, it is not very
good. Shares of his two companies have dropped more than 80 percent since he went public with them. He is a very controversial figure, and so what
he intends to do with the La Times is anyone's guess.
QUEST: Rich men and women seems to be mainly men, love buying newspapers. Robert Maxwell in the UK. Rupert Murdoch, all over the world. Hearst in
the US. Does this chap fancy himself as a sort of a latter-day Randolph Hearst or a Rupert Murdoch? Do we know anything about what he is going to
do with one of the most respected newspapers in America?
BYERS: No, there is absolutely nothing to indicate that he does. You know, when Jeff Bezos bought the Washington Post and mind you, when Bezos
bought the Post, he bought it for $250 million, which is half of what Patrick Soon Shoing is paying for the LA Times. Bezos came in with a sort
of mission about the importance of journalism and the significance of journalism. John Henry did a similar thing when he bought the Boston
Globe. We have not seen any of that from Soon Shiong and in fact, Soon Shiong was brought in as an investor at Tronc at the behest -- or sorry, at
the request, rather of the former publisher who is so controversial, so now, the idea that Soon Shiong is somehow a white knight is going to come
in and reestablish the Los Angeles Times as a robust, powerful paper, both in Los Angeles and nationally. I just do not see that happening.
The question is can he at least sort of be a steward for the paper? Give it the money it needs to continue doing some of the great journalism that
it has done in recent years.
QUEST: But the fascinating part about that point, Dylan, this is, I mean, this is a golden age for newspapers and by that, I mean online as well as
hard copy in the United States. Look at the battle which is raging between the New York Times and the Washington Post with the Wall Street Journal
joining in, the Boston Globe popping in when relevant, the Miami Herald coming, but they are all on the Donald Trump administration story at each
other's throats.
BYERS: This, Richard is really the important question. It is the question of what is the identity of the Los Angeles Times? Do you believe that you
have the sort of financial and intellectual capital to claim a stake in the political game or the financial gain that is so well covered by the New
York Times, the Washington Post, the Wall Street Journal, those other papers you mentioned? Or do you want to take a different tack and be a
sort of a local paper? Do you want to serve solely the Los Angeles community? There is also a third option and I think it is something that
Los Angeles and indeed the entire state of California is in desperate need of, which is laying a claim to the really powerful industries that are out
here that are driving a national conversation -- Hollywood, Silicon Valley, California as a political alternative to the Trump administration.
You know, coverage of those sorts of areas which have both local and national interest could be an interesting play for the Los Angeles Times.
Again, I am not sure Soon Shiong, given his sort of business background and priorities, I am not sure that's the game he intends to play.
QUEST: Fascinating. I am still one of the old foggies that enjoy reading the morning paper and hard copy. Thank you, Dylan. Dylan Byers joining us
now.
BYERS: Thank you.
QUEST: News just in, 21st Century Fox shares are up in after-hours trading. (Inaudible) reported a 5 percent rise in quarterly revenues and
Snap, that's of course SnapChat, the stock is up a whopping -- I am not making this up, no, I promise you, I am not. It is up 47 percent after
yesterday's gains resulted -- which followed Wall Street's expectations and beating.
Quarterly Snap sales were up 72 percent. Clare Sebastian is with us and so, what's up with 21st Century.
CLARE SEBASTIAN, CORRESPONDENT, CNN: Other than (jukebox)?
QUEST: Bearing in mind, 21st Century Fox is selling or attempting to sell most of the company to Disney.
SEBASTIAN: Right, and that's a fact. You know, yes, they did beat on estimates. Yes, their after-hour trading seems to be reversing the day's
decline, but really what everyone cares about is the future.
And we did get a bit of an update from there and they've released this now. They say that the Disney deal, they expect to complete 12 to 18 months from
the December, so you know, certainly that means that this maybe one of a handful of earnings report that we have left from 21st Century Fox in its
current form.
They also said, despite that setback that we saw last month over the Sky deal in the UK where the regulators issued a provisional recommendation
that it was in the public interest, they said, they still expect that to be approved by June 30th. I think there are bigger questions hanging over
that.
(CROSSTALK)
QUEST: And you say that is June 30th?
SEBASTIAN: Right, so the final report from the CMA, the Competition in Markets Authority is out in May and they think they would.
(CROSSTALK)
QUEST: But there is no reason to believe the CMA is going to suddenly as change its mind.
SEBASTIAN: They appear to be optimistic in their.
QUEST: Right, right. Much more interested, I mean, that deal will all take its place.
SEBASTIAN: Disney could come in and yes.
QUEST: Snap. Well, Disney had -- Disney's results were out as well, they weren't terribly exciting and the stock was down in the day when everybody
else was up.
SEBASTIAN: Yes. So, you know, they still have a lot of work to do before this deal is approved.
QUEST: Snap.
SEBASTIAN: Well, we were talking about 47.5 percent, Richard, and you are probably still under water.
QUEST: I am. Twenty-seven percent. To the two of you who has enjoyed my discomfiture, the schadenfreude of my Snap, remember, I bought it at 27. I
am still comfortably seven bucks and change under water per share.
SEBASTIAN: Right, and the stock is still in a bear market. The number I have been watching all day is 21.6, so still at around $20.00 per share, so
it is still more than 20 percent down from its peak when you when you bought it, unfortunately. But this is all about the future as well for
Snap. What are they going to do.
QUEST: But what justifies this rise today? Not just -- I am not counting it is eight or ten or 12 percent, but what justifies 40 percent or 50
percent?
SEBASTIAN: Well, there would be expectations in their earnings the first time ever. They are also redesigning the app that is expected to roll out
in full by the end of the first quarter. They say that the testing has gone well for that and if you test the market, so user growth was up. That
was at 187 million, it was the best user growth they'd had in a pretty long time and you know, I think there's a fair amount of optimism.
But when you get a rise like that, it has to start it from a pretty low base when it comes to expectations.
QUEST: Thank you. Busy day. Lots of stocks, you keep us informed. Thank you.
SnapChat puts augmented reality in your pocket, for fun. One company taking it further. It's trying to take the guest (workout) with the
shopping that is allowing consumers to see products in their own surroundings. Isa Soares reports.
(VIDEOCLIP STARTS)
ISA SOARES, CORRESPONDENT, CNN: Furnishing your home to perfection was once fraught with hypothetical decisions. Will the sofa look good here?
Will it fit? Now, that is changing.
Augment is a platform which enables retailers to show their products in the real world. On the screen of a smart phone or tablet via an app. It is
transforming the way we shop.
UNIDENTIFIED MALE: If you take a regular retailer, they don't have the content. They don't know what is a 3D model and so when we come in, we
give them the keys to get that in their app right away.
And as you see, it is really a volume representation, so you can look inside it, you can get closer or further.
SOARES: Augmented reality hit the mainstream with the Japanese video game Pokemon Go, which recorded up to 65 million monthly active users last year.
UNIDENTIFIED MALE: To that point, I could come to a company enterprise and tell them we do augmented reality and they would say, "Oh, yes, like
Pokemon Go." Yes, exactly like Pokemon Go, but useful for you.
SOARES: According to DigiCapital, the market for augmented and virtual reality technology is expected to reach $108 billion globally by 2021. In
recent months, both Apple and Google released augmented reality developer kits for their devices.
UNIDENTIFIED MALE: For our customers, when they start using augmented reality, what they see is that they get for their own customers who in
return (inaudible), they have more engagement, so people stay like three times longer on their website. They have more conversion that can range
between 30 percent more or 100 percent more depending on the type of product.
SOARES: (Inaudible) shared the Swedish homeware brand, IKEA adopted augmented reality in stalls worldwide. They are not the only ones to start
building the technology in-house. But Augment believe there is a place for them at the table.
UNIDENTIFIED MALE: The program comes when you need 12,000 or tens of thousands of products and when you need to keep up with the evolution of
the technology. We have started a long time ago. We have now more than 4 million downloads of our application, which (inaudible) is quite huge. We
have the biggest deployment in sales people with Unilever, Coca-Cola, Colgate which are our customers, and in retail, we are in more than 10
different retailer apps.
SOARES: And it keeps evolving. Augment want to bring holograms into real space. In this case, a shop assistant advising a buyer on a pair of living
room chairs.
UNIDENTIFIED MALE: Today, Augment has been able to show a product in the real environment, soon we want to be able to invite someone in that space
so that you can be with or talk together about what you've been (inaudible). We went from desktop to laptop to smart phone, and next step,
we want to have the information even closer to you, which means in front of you and once we are there, we will be able to interact with everything in a
completely new way.
(VIDEOCLIP ENDS)
QUEST: The best of Frontiers. When we return tonight, the mystery of the volatility in the market remains. Now, we are going to look for the clues
that will lead to three prime suspects. After the break.
And I am Richard Quest, there is more Quest Means Business in just a moment, but we are going to be looking at the factors that led to this
historic market volatility and Steve Wynn is out, but the probe into his casino projects continues as we continue tonight, this is CNN. And on this
network, the facts (inaudible).
The Israeli Prime Minister Benjamin Netanyahu has acknowledged reports that Israel's police chiefs are set to recommend indicting him on corruption
charges. On Facebook, Netanyahu says he is innocent. The police have not yet officially issued any recommendation.
The Prime Minister calls for calm saying, there is nothing.
The US Senate leaders have reached a deal to fund the US government for two years. It is unclear if the House will agree to the same deal. The White
House says it needs specifics before it can back the plan.
The deal would lose military spending, but it doesn't address immigration.
The German Chancellor Angela Merkel is a step closer to forming a coalition with her center-left rivals, the Social Democratic Party has confirmed, it
has reached a deal with the center-right Christian Democratic Union. The breakthrough ends months of political uncertainty.
Rescue workers continue to search a high rise building in Hualien, Taiwan for any earthquake survivors. The authorities fear, dozens of people may
be trapped inside the building which is tilting dangerously to the side and is being propped up by giant beams.
The quake on Tuesday has killed so far eight people and more than 260 have been injured.
The US economic fundamentals are strong, so getting to the bottom of the market's wild swings remains a mystery for many. We need to understand and
look at the prime suspects as to who has done -- who has done what in terms of it. Now, when we look exactly and to see exactly what has been
happening overall, we need to consider the suspects.
Suspect number one, these are the three suspects -- volatility, electronic trading and the Trump economy. Suspect number one is volatility.
Volatility and leverage. And if you look at what happens with that, you see, it does not touch the (pit), so what happens on that? So, volatility
is the key form to begin, then once you have gone from volatility, you have to look at electronic trading. Volatility plus electronic trading could
all create an entire environment that is completely different.
Than you have to add in the Donald Trump economy. What the Donald Trump economy has done, of course, is to create more. So, Mr. Trump is going to
expand. There we go, what Donald Trump has done with his statement or his tweets today. He says, "In the old days, when good news was reported, the
stock market would go up. Today, when good news is reported, the stock market goes down. Big mistake. And we have so much good -- great news
about the economy." Which one is the key culprit here? Is it volatility? Is it electronic trading? Is it the Trump economy?
Ken Rogoff is a detective who is going to help us understand. Which is it, Ken? Which causes the misery and mayhem that we are undergoing at the
moment?
KENNETH ROGOFF, AMERICAN ECONOMIST: Well, a bit of all of them. I think, we have had this great situation with the global economy is growing,
inflation has been low. Everything has been very calm and that justifies high stock prices. We have very, very high stock prices, and I think some
of this pullback, these are things, not very, very good, but just very good. That may sound odd, it is not necessarily we are having a
catastrophe, but the stock price isn't going like this, so a little bit of this is, is a recalibration.
QUEST: Okay, I want to parse this out into two specific areas. Let's first of all talk about the strength of the US economy. Donald Trump says,
you know, good news normally has the economy rising, big mistake. But of course, the market's fall predicated on the wages and the earnings and the
labor report -- it's just the opposite side of the same coin.
ROGOFF: Yes, I mean, I think that the market is really concerned about is not just wages going up, which is good, but are we finally hitting a wall?
There have been lots of demand. Growth has been going up. Output has been going up. But as it starts to turn into inflation, which isn't really
doing anyone any good. It means, the Federal Reserve has to raise interest rates, and that makes stock prices look worse.
QUEST: You give me an assessment. What is the strength of the US economy at the moment? It seems when you look at the numbers besides debt which is
rising, but if you look at the growth of 2.3 percent to 2.6 percent; unemployment is up four point something percent, inflation might hit target
by 2020. There does not seem to be too much to be concerned about.
ROGOFF: It is pretty good. The question is, is it good enough to justify how high stock prices have been?
QUEST: Which then brings us onto the second bit, the volatility and the computer trading that causes the ugliness of the movements.
ROGOFF: Yes, I am mean, this is stock that moves so fast and I have to say for amateur investors, like most of us, it is very hard to get in front of
these things, but the market has not only been high, it's been just sort of steadily meandering up and has not had these big swings and I think people
are reassessing now, maybe not just -- they don't know how high it is, but maybe it's a little scarier than they thought, so people also pull back for
that reason.
QUEST: Good the setting turn into a self-fulfilling prophecy?
ROGOFF: Well, the buying has turned into a self-fulfilling process, so surely it can wind back a little bit, but the fundamentals do seem pretty
good. Sometimes, we when you see a collapse, it reveals something. The whole global economy is doing well. I mean, the story is pretty good, but
again that does not mean stock prices can just go up at 20 percent indefinitely.
QUEST: I am just going to go for this one then feel free to -- how wise is it for a President to comment on the stock market as it goes up?
ROGOFF: Well, it's fine to take credit for going up, but then you have to take credit for it going down at the same time and I think it is sort of a
fool's game to you know, say, "Look at the stock market. They love me," because the next moment, they might not. You should look at the economy
which is doing pretty well. I mean, a lot of that was doing pretty well before President Trump took office.
QUEST: Should we be worried about Jerome Powell now at the helm of the Fed?
ROGOFF: Well, I think he is a good man replacing a good woman in Janet Yellen, but.
QUEST: There is a huge but there. I can feel it coming up.
ROGOFF: Well, he is an unknown. You know, I think the markets would have rather see Janet Yellen continue because she is a known quantity and Powell
is very good, but he will have his own ideas that will shape things and the Federal Reserve is so powerful, especially its influence over the market.
QUEST: Good to see you, sir. Thank you.
ROGOFF: Thank you.
QUEST: Thank you. Investors seem unmoved by Tesla earnings right now. Shares are relatively flat after the company posted record fourth quarter
revenue and a positive outlook for this year.
Elon Musk's auto maker reported record sales of its Model S and the Model X-cars and said, it is on track to meet Model 3 production goals.
It's not only stocks that are moving, sometimes, it's exchanges themselves.
The NASDAQ is moving up town. The NASDAQ President joins me in a moment.
Quest Means Business. With trading at its most volatile for years, the NASDAQ is moving its headquarters. It is moving a few blocks uptown here
in New York to the famous MarketSite in Time Square.
Nelson Griggs is the President of the NASDAQ Stock Exchange. Good to see you, sir.
I have a confession to make. I have a confession. I always thought that building that has your name on it on Time Square. I always thought about
was your headquarters.
NELSON GRIGGS, PRESIDENT, NASDAQ: Right, right. Well, it's a great point, Richard and I'd say, for the last 15 years or so, the MarketSite in Time
Square has really been our headquarters for our listed clients and a lot of my employees, but we do also -- our official headquarters is actually
downtown.
QUEST: So why -- I mean, other than maybe to save money on a bit of real estate and rationalize all the buildings that you've got, why make this
move? Why is it significant in the cutthroat battle that you how between yourself and say the big board, the NYC or other exchanges?
GRIGGS: Well, I would say one, the timing was right to do the analysis because our lease was coming up downtown. We're thrilled to have a process
to get all of our employees in one location to be able to show really the breadth of what we do, but most importantly for me and the business that I
focus on, the listed client business. We have a very dynamic offering today here in Time Square, a lot of great visibility assets, but with the
expanded footprint we will have here, the building is a much larger event space. We will have more room for broadcast and again, just a better
client experience and we're really excited about it.
QUEST: And let's talk about the ability of the exchanges to handle this level of volatility. Now, having been through 2008 and 2009, having had
the flash crush and all of these other ones, you have put in place -- all the markets have put in place the ability to handle well over billion plus
share days.
GRIGGS: Absolutely, correct. So, if you look at the last three days, let's say, volume was probably about 30 percent to 4 percent more than
normal, so the peak day was about 13 billion shares. Today, we got much back got closer to normal level about 7.5 billion shares where a normal day
might be between 6 and 6.5, so the markets operate exceptionally well as I think you know, Richard and your audience does, there are market circuit
breakers and individual limit up limit down bands and very -- the market circuit breakers were not touched and also the limit up limit down where
there's only a handful of stocks. So, the market has actually operated very well.
QUEST: It's functioning and operating logistically well, but you have got to admit, now, it is a very strange new world. This allows us to see
hundred-point swings in markets. Largely on the back of what I would like to describe as algorithms and (inaudible) repeated trading, but it does
mean that these markets are on just about autopilot.
GRIGGS: Well, I would say also, you have to compare the level of the market with that. So, the drop we have had here does not even register
really in the top 100 drops that we have seen over time.
So, although the point number is very high on a percentage basis, it is again, it is significant and I don't want discount that, but it is not
something that is -- we are not in the crash range.
QUEST: No, but we are -- I mean, I have stopped and watched the markets over the last few days or whatever, we are in a situation where they all
being driven by automatic trading of one description or another, and to that extent, you know, it's my word, I don't necessarily expect you to
agree with me, but they are on autopilot.
GRIGGS: Well, there are definitely individuals behind those program trades, the algorithms -- construct the algorithms, and they make
adjustment to their algorithms throughout the trading day, so I think individuals are making the decisions; without a doubt the computerized
nature of trading, the speed of trading can make some of the velocity be increased, but at the end of the day, they are all individuals who are
really controlling those capital decisions.
QUEST: Nelson, when you've got new studios up and running, we will be over to have a look and Quest Means Business needs to come from the NASDAQ.
GRIGGS: Can't wait to have you.
QUEST: Thank you very much indeed.
GRIGGS: Thanks, Richard.
QUEST: You can't beat a good hat. My trusty -- well, it's only a Fedora, but it's sort of a Fedora versus a Trilby. If you see what I mean, but I
have worn this one for a good few years.
Now, over in Spain, people have been trusting one hat company since 1885. No, this hat is not that old. Today, their hats are all over the world.
It is the latest in our series of entrepreneurs that are reshaping global trade.
(VIDEOCLIP STARTS)
UNIDENTIFIED MALE: In Brooklyn's Borough Park, the neighborhood's Jewish community is head over heels over felt hats made from Spain.
MIGUEL GARCIA GUTIERREZ, MANAGING DIRECTOR, ROCHE FACTORY: Our main customers are related to some communities that value the use of the hat
like for example, the Jewish community that for them it is a real obligation to wear it.
UNIDENTIFIED MALE: ISESA was founded in 1885 when two entrepreneurs decided to make hats for Seville civilians. Today, the company's largest
markets are Jewish communities in the United States.
GARCIA GUTIERREZ: For the Jewish market, our main target is to keep the quality all over because we understand that the quality and regularity of
our product is the main value that we have for them. Of course, people -- their relationship between our distributors and try to make it tighter in
the future.
Also, in the areas that are not covered, we try to cover them with e- commerce.
UNIDENTIFIED MALE: Last year, the company says it turned over $5.6 million, double what it was five years ago, thanks to modernized production
and inventive design.
GARCIA GUTIERREZ: Our challenge to survive really in a very globalized world. There are more and more players now entering in the market coming
from different countries. Our target is really to (base) our competition in research and development, really creating new products and being really
flexible and of course, being as efficient as we can.
UNIDENTIFIED MALE: By 2022, global sales of hats, handbags, jewelry and shoes are set to bring in $633 billion. With hat and cap sales alone,
projected to reach $7 billion by the end of this year.
Research shows the United States is ahead of the rest in market size. Thanks to a growing need for some protection, sports, hard hats for
construction and fashion trends.
During their 130 years in business, ISESA has seen the house market fluctuates significantly, but e-commerce is giving them a future to look
forward to.
GARCIA GUTIERREZ: The company is really decided to invest in e-commerce and also social media because all of that helps make our image more and
more known and more and more international and also to develop new ways of distribution.
UNIDENTIFIED MALE: With trade and commerce constantly evolving, adapting is key. Something the company plans to keep doing for years to come.
GARCIA GUTIERREZ: We have already lived 130 years. Our success would be at least to survive another hundred years more.
(VIDEOCLIP ENDS)
QUEST: Coming up on tonight's program, Wynn Resort stocks climbs. The sexual harassment allegations have forced Steve Wynn to give up being chief
executive and the market liked that decision.
Shares in Wynn Resort soared as the chief executive, Steve Wynn announced he wants to step down from being CEO of the company he has created. The
stock was up almost 9 percent. Mr. Wynn is facing sexual misconduct allegations, and he said in a statement, "As I have reflected upon the
environment this one has created, one in which a rush to judgment takes precedence of everything else, including the facts. I have reached the
conclusion I cannot continue to be effective in my current roles."
When asked for (inaudible), the Massachusetts Gaming Commission has confirmed Wynn's departure won't hold an investigation into his company's
suitability to run a casino there.
Rick Velotta is the gaming and tourism reporter at the Las Vegas Review Journal, joins me from Las Vegas. How big a person in Vegas folklore, in
Vegas business life is Steve Wynn?
RICK VELOTTA, REPORTER, LAS VEGAS REVIEW JOURNAL Steve Wynn is no doubt is the top of the heap as far as Las Vegas is concerned. Whenever you think
about how Las Vegas has regenerated itself over the years, Steve Wynn's name always comes up.
He was the one who started the Mirage in 1989, built Treasure Island, built the Bellagio -- everybody knows what his product looks like, and everybody
knows what that name means on the side of the building.
QUEST: Now, he was always -- I mean, he is a man of a certain age, so he not going to last forever in that sense, so ignoring for one second the
fact -- the method or the reason why he has resigned so quickly, but this company, the Wynn company was always going to have a problem with whoever
came after Steve Wynn.
VELOTTA: Well, I would think so, but at the same time he has a lot of energy. He has a lot of creativity still left in him. Even just a few
weeks ago, he was talking about some of the projects that he planned to build both at the Wynn Las Vegas campus and across Las Vegas Boulevard,
better known as "The Strip," had another property planned, so he was in the mode of creativity and wanted to do something more.
QUEST: The idea now that he has gone and this Chief Operating Officer takes over. I mean, is there is fear that the properties will suffer or
that Las Vegas will feel the effect in some way?
VELOTTA: A number of number analysts have said that it cannot be a Wynn without Steve Wynn and I think that was confirmed by a number of analysts
these last few days. They are afraid that whatever product he has is not going to be able to live up to the standards that have been going on for
30-plus years.
So, yes, there is definitely some concern about that out there, as far as Las Vegas is concerned, I think that there is a lot of other competitors
out there that are going to pick up the slack as much they can, but losing Steve Wynn's creativity is definitely a loss.
QUEST: Fascinating because also we've got Massachusetts, where the Attorney General is saying, he is looking into allegations there. Is there
a likelihood of any activity by the officials in Las Vegas against Steve Wynn on the back of these allegations?
VELOTTA: Definitely. The State Gaming Control Board today affirmed that, yes, in fact the investigation that they have started is going to go
forward. We are expecting the same results coming out of Macau and also his own Board of Directors has an independent group of directors that are
looking at the allegations as well. They should continue on as well.
QUEST: Rick, Las Vegas is so wonderful in the sense of the glitz and the glamour, but I mean, I don't want to burst the bubble, but you know as well
as I do, the money is made in Macau.
VELOTTA: Yes, it is. It is absolutely true. With 70 percent to 80 percent of Wynn Resorts' money comes from Macau.
QUEST: And how does Las Vegas and Macau coexist in the world of gambling these days do you think? Because Las Vegas is so famous and yet Macau is
brutal when it comes to gambling.
VELOTTA: I think that a lot of people recognize that Macau has actually learned a lot from Las Vegas, they have kind of duplicated some of things
that we have got here. Their convention centers, there is entertainment. There is attraction for family audiences, so they saw what Las Vegas had
and decided to try to duplicate as much as they could, and it seems like they have been very successful.
The fact is that there are more gamblers in Macau that have a lot more money and therefore, there is going to be a lot of revenue that's is going
to be generated from that location rather than in Las Vegas.
QUEST: They will never get the phrase, "What happens in Las Vegas, stays in Las Vegas."
VELOTTA: That is true, they will not.
QUEST: And we are grateful that what is happening at the moment didn't stay there because you told us all about it. Good to see you, sir. I
appreciate it. Thank you very much.
VELOTTA: Thanks very much for having me.
QUEST: Now, the final check of the market as we come to an end. Tonight, the volatility continues. The Dow swung to range of more than 500 points.
It was a late sell off that turned it turtle. It went just beneath the line, down 20 points at 24,893.
Volatility is starting to rub away, though the VIX was down 20 percent.
We will have a profitable moment after the break.
Tonight's profitable moment, Donald Trump refers to the old days when stock markets went up on good news. He says that the latest moves are a big
mistake. Most presidents usually find its best not to talk about the stock market, for the very simple reason that it is two sides of the same coin.
Mr. Trump needs to remember that the reason it went down is because the economy is getting better, interest rates may go up and the situation was
perhaps made worse by the tax cuts he introduced. And that's Quest is Business for tonight. I am Richard Quest in New York. Whatever you're up
to for the hours ahead, I hope it is profitable. I will be with you tomorrow from London.
END
