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Quest Means Business
Greece Battles Deadly Wildfires as Prime Minister Declares Three Days of Mourning; Hundreds Missing in Laos After Dam Collapse; Syrian Jet Downed After Entering Israeli Airspace; Tour De France Riders Sprayed with Tear Gas; Lira Plummets as Central Bank Defiantly Holds Rates; European Markets Lifted By Auto Stocks; Peugeot Soars as Turnaround Strategy Bears Fruit; AT&T Reports First Earnings Since Buying Time Warner; Nasdaq Falls After Hitting Intraday High; Alphabet Shares Hit Record After Earnings; Layoffs to Continue at Tronc-Owned Publications; Social Media Influencer Enters into Wine Business. Aired 4-5p ET
Aired July 24, 2018 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: The ringing on Wall Street, very strong performance by all the major industries, the Dow and the S&P
are quite sharp, three quarters of a percent, looking to see if it makes 300 hundred on the Dow Jones. We still have after hours in this session,
off of this state - sir, you're being pervious - but a good strong gavel that's brought trading to an end. The day is over. It's Tuesday, July
24th.
Tonight, Donald Trump says tariffs are the greatest. And some companies on Wall Street are begging to tip off. Ivanka Trump quits her day job and
focusing on public policy, and Turkey's big freeze shocks the Forex office. What happened to the Turkish lira today?
I'm Richard Quest, live in the world's financial capital, New York City where of course, I mean business.
Good evening, today, both sides of the Trump tariff argument were laid bare for all to see. The President - President Trump that is, took to the
podium and to Twitter to defend his trade war with the rest of the world. At the same time, corporate America started to produce earnings that
painted a very different picture when it comes to tariffs.
The day before meeting EU leaders that are due to meet him at the White House, the President said, "Tariffs are the greatest." He went on to claim
that the US is being treated like a piggy bank which he reinforced at a rally in Kansas City.
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: They have some of the greatest lobbying teams ever put together, you've got to stop the President
from putting tariffs on these countries and these companies. they are ripping off the United States. You've got to stop them. Just remember,
we're going to do something that honestly, nobody else could do. This country is doing better than it's ever done before economically, this is
the time to take off the rip off of tariffs. We have to do it.
(END VIDEO CLIP)
QUEST: The core point that he says, the economy is doing brilliantly and this is the time to have the tariff trade war. The markets, well, remained
unfazed by what they saw - because the whole of course of the day, I mean, you have a couple of blips along the way, but it still closed up 196 o
three quarters of a percentage gain over 25,000. So the market giving what seems to be a tacit approval; however, you've got the President on one side
and you have the earnings reports which tell a completely different story when it comes to tariffs.
And if we want to really look at this issue, look no further than Whirlpool. Whirlpool and its washing machines. Initially, they welcomed
the tariffs because the original tariffs were against imported washing machines, but look at how things have changed for Whirlpool now.
Join me as we do the weekly wash. Now, Whirlpool have welcomed what it saw as being good tariffs when it came to washing machines. However, the
shares are down very sharply at the moment for one simple reason, Whirlpool is now suffering the costs of higher raw materials as a result of steel
tariffs.
There are other companies that are also - that are finding the effect. Harley-Davidson. We know the problem with Harley-Davidson. We know the
problem with Harley. It's very simple. They are being tariffed in Europe and elsewhere in the world and they are having to pay more for their steel.
So the profits forecast has been through the ringer and it's been shrinking by 10%. Harley-Davidson has problems, and if you really want the whole
picture for it, look no further than Goldman Sachs. Now, Goldman themselves haven't been affected directly, but Goldman Sachs has been
pouring cold water on the whole tariffs question as it relates to corporate America. Goldman is warning an all out trade war will drain earnings for
US firms.
It doesn't matter which way you look at it. The companies are now sending a very firm message that there are problems, and Goldman has written, if
tensions spread and the 10% tariff were implemented on all US imports, our earnings per estimate would fall by 15%. It's really clear. The washing
lines the story. Paul La Monica and Clare Sebastian are here with me.
Those three, Harley, Goldman, and Whirlpool, Paul.
[16:05:09]
PAUL LA MONICA, CORRESPONDENT, CNN: Well, as you point out, Goldman Sachs, their results are going to be eroded by the taxes necessarily, but a dire
warning about corporate profits and when you look at what happened with Whirlpool, this is a company that cheered the prospect of tariffs at first,
because they thought it would make them more competitive against Korean manufacturers of washers and dryers, other Asian manufacturers, but now,
the steel and aluminum tariffs are hurting their business and that's why that stock, you need a lot of bleach to make it look good. It was down 15%
today, Richard.
CLARE SEBASTIAN, CORRESPONDENT, CNN: And I think this is a measure of the complexity of the trade environment that we now see, Richard. These two
companies are being hit in multiple ways, so with Whirlpool, first it was a good thing, now it's a bad thing. With Harley, it's not just the EU that
they have to deal with tariffs, it's also the input cost of steel and aluminum tariffs, so they are being buffeted from all sides, and I think
that's why we're starting to see this drop in earnings.
LA MONICA: But at least with Harley-Davidson, it's the type of thing where we're back to that somewhat strange - the news could have been worse sort
of environment. Harley's stock actually rallied today because the sales in Europe and other international markets were up. I think people were
expecting a lot worse than that.
QUEST: But I want to focus on this seeming difference between the President who says tariffs are great and he says, "Now is the time, Paul,
the economy is strong enough, now is the time to take on this issue."
LA MONICA: It's a little bit perplexing to me how he says at the same time the economy is great, which is doing extremely well, but that we need to
start a trade war with just about everyone in order to make the economy get even better, because I mean, what does he realistically want? Five percent
GDP growth? Six percent? I mean, we're not China. You do that, the Feds are going to start raising rates pretty aggressively and he's not going to
like that one bit.
I think that we have seen, and I think this is why the market rallied today despite the Whirlpool results, the market is tuning out the President once
again. They know this is all a negotiating tactic.
QUEST: Pause on that moment while we listen to Peter Tuchman talking to me earlier at the stock exchange in "Quest Express."
(BEGIN VIDEO CLIP)
PETER TUCHMAN, FLOOR TRADER, QUATTRO M SECURITIES: The question is, are we trading earnings? Okay what is people's focus? Are we trading strong
earnings? Are we trading geopolitical risk? And the market is telling us that we are trading strong earnings because there is so much political
risk. We have a wild card coming out of Washington. We have all these potential stuff with Iran. We have this stuff going on with Russia and we
have tariffs and trade wars, right?
QUEST: And we're still up.
TUCHMAN: And we're still up. We're not up - just up, we're up a lot.
(END VIDEO CLIP)
QUEST: But Clare, if the market is trading earnings, and the earnings are good, the market isn't factoring in this tariff warning. I mean, the
market took Alphabet's $5 billion fine in its stride.
SEBASTIAN: Right, and I think the earnings seasons has been really good, but Richard, we're not at the end of this trade dispute. There are still
other wild cards out there, other shoes to drop. Don't forget, Jean-Claude Juncker, the head of the EU Commission is going to Washington this week to
try and talk about these auto tariffs. We've got a potential more - another $200 billion in tariffs in Chinese goods. Jamie Dimon, the CEO of
JP Morgan told Christine Romans this week that if you get that $200 billion on Chinese goods, that could reverse the games that Trump has created in
this economy.
And so, there are a couple of sides to this.
LA MONICA: It's still too soon, I think, don't you agree, Clare. I mean, I think the issue is that companies are going to report their third quarter
results in October and have a much better sense of what our 2019 outlook is going to look like, that's the time to be wondering, are we in a full blown
trade war because there's a lot that's going on.
QUEST: We are.
LA MONICA: There's a lot that's going to happen though between now and October with regards to whether or not we get those auto tariffs, whether
or not the US and China actually decide to have more meaningful discussions and then walk some of these back. I mean, if this escalates, October could
be one of those scary, ugly Octobers.
If Trump and the rest of the world make nice, we've got Peter Tuchman talking about more record highs and you get another hat.
QUEST: Thank you. We continue tonight, the Trump administration is offering $12 billion in emergency aid to American farmers affected by the
trade war. The plan is already getting some criticism. Republican lawmakers or some of them are blaming the President for the tariff war and
say that farmers need trade not aid.
CNN's Jeremy Diamond has the latest for me from the White House. It's $12 billion or so it would then now seem, how is it going to be divvied up?
How is it divided?
JEREMY DIAMOND, WHITE HOUSE REPORTER, CNN: Well, it's going to be nearly $12 billion, this is the emergency aid package that is going to be coming
from the Department of Agriculture. They have made clear that this is going to come from existing funds. They are not looking for new funds from
Congress. They haven't broken down exactly which farmers will get how much money, but it is going to be in different forms.
One of them is going to be some direct grants to farmers, then there's going to be the government buying up some surplus goods from certain
agricultural producers, and then there's also going to be a trade promotion portion of this where they are going to try and expand the export market
for a lot of these US farmers.
[16:10:09]
DIAMOND: So, this is all collaborate - yes, go ahead. Go ahead, Richard.
QUEST: Yes, but let's just be clear, they're only doing this because of the effect on things like soybeans and other commodities because of the
tariffs.
DIAMOND: Absolutely. This is 100% as a result ultimately of the President's trade war as we can, I think, now probably call it. This is a
direction that the President has been heading. He's drawn these retaliatory tariffs from China, from the European Union, Canada, Mexico - a
whole range of the United States top trading partners, and that's why we are seeing the impact on some of these farmers, and so now, the Trump
administration trying to step in to mitigate some of that damage, but as you were saying earlier, Republicans on Capitol Hill are saying, "Look, we
don't want a financial backstop to this problem. We'd like you to eliminate these tariffs, Mr. President."
QUEST: Jeremy, thank you. Jeremy Diamond at the White House and here on the studio, we've gone from washing line to these. We have to talk a lot
about this. This is soybean. And the American Soybean Association says it hopes the bailout program is one part of a long-term plan. Joe Steinkamp
is the Vice President and Joe joins me on the line now.
$12 billion, it won't go far and Joe, your members are suffering rather badly because prices have fallen to almost historic lows.
JOE STEINKAMP, VICE PRESIDENT, AMERICAN SOYBEAN ASSOCIATION: Yes we were down over $2.00 a bushel on our soybean and for my farm, that's going to
amount to a couple of hundred thousand dollars less gross income and I was kind of counting on that to send my last daughter to college.
QUEST: Now, how much of this is because of the tariffs? Explain to our viewers how the tariffs say for example, from China, are affecting your
cost of soybeans bearing in mind that China still needs the soybeans?
STEINKAMP: Well, we all know that China needs - imports about 85% of all the soybeans they eat in their country and about 35% of them have been
coming from the United States, so that 35% of their needs whereas coming from the United States amounts to about one-third of our entire soybean
crop out of the United States, so if we lose some percentage of that amount, then we're - that's going to cost us a lot of pain and suffering at
the farm level right here in the United States.
QUEST: Right. Now, the President said today, tariffs are great. Do you agree with him?
STEINKAMP: Tariffs are his way of negotiating with the Chinese. We would prefer that he negotiated with them in a different way besides using food
as our weapon. We're all about expanding more trade, not limiting trade. Soybeans are a great place so we could expand more trade with China and
help the deficit that the United States have with China.
So, we prefer to repeal the tariffs is our big goal because we spent the last 25 years building the Chinese market up to buy more and more soybeans,
and we don't want to lose our position as the most reliable supplier in the world.
QUEST: On this question, what - and I hear what you say about your own personal loss of revenue or income and how that will affect your family
budgeting, but the President is asking pretty much everybody to bear with him for what he would say is a greater picture of rebalancing trade in
America's favor.
That doesn't sound like it's going to fly with farmers in the mid-West.
STEINKAMP: It's going to be very difficult for the farmers in the mid-West to weather the storm. Farmers are appreciative that he's thinking about a
short-term fix, but the farmers in the mid-West farm their lands for many, many years in a row like other international farmers do and we can't think
just short term. We have to think long-term, so we want him to rebuild those markets in China and not to mention, work on bilateral trade
agreements with Vietnam and the Philippines and Japan, other places that we might build a fill stone of this gap so that's where we want our President
to get rolling on these bilateral agreements.
QUEST: Joe, thank you, sir. Good to see - speak to you. Let's keep in touch, so we can find out more about how your crop's doing and how to
settle with you.
STEINKAMP: Very good.
QUEST: Thank you, sir.
STEINKAMP: Thank you.
QUEST: The Chief Executive of JP Morgan Chase, Jamie Dimon says that while trade disputes - disputes could hurt the economy, the good times shall
continue, but not just in the United States. Jamie Dimon spoke exclusively of course to our own Christine Romans.
(BEGIN VIDEO TAPE)
CHRISTINE ROMANS, HOST, CNN: We talk about the economy and how strong it is. I report on the economic figures and they're good. They're really
good. Where are we in the cycle would you guess right now? I mean, there's some people who say, "Oh, it's overheating. We're due for a
recession." And there are others who say, "Look, this is the second longest bull market in history."
[16:15:12]
ROMANS: And the economy is very strong right now.
JAMIE DIMON, CEO, JP MORGAN CHASE: Yes, it is strong. It is getting stronger and this notion that somehow it's the longest ever and will have
to turn, we'll of course we'll turn one day. If you say, when is the recession? There will be a recession, but it looks like, if you look at
the economy, households have a lot of their net worth is back up, their affordable income is back up, their housing formation is going up. Housing
is in short supply, so it's going to be tailwind for the economy.
People are going back to work. Unemployment is nearing almost all-time lows, companies have plenty of capital, cash and capability. Sentiment has
been quite good. Consumer and business sentiment is quite good, and ...
ROMANS: Wages has not done it yet, but you think it will?
DIMON: I think you're seeing it right now. I think it's just catching up. Because the growth was so slow that normally, growth would be much faster
and wages were kicking much quicker. I think it's happening, just slower, and so you may very well have this going for a couple more years.
Now, obviously, geopolitics can always interfere. I think the trade issue is serious that may actually cause a slowdown and change confidence and
change in people invest et cetera, but so far, it looks like it's quite strong. And by the way, that's actually globally. Global unemployment is
about to hit all-time lows. India is growing 7%, China is growing 6%, Europe is going to almost 2% - Europe, which we didn't expect to grow that
fast, Brazil has gotten from negative four to plus one and maybe improving from there and the United States is going from two, it looks like this
quarter, we are going to hit a much bigger number, and is this sustainable? Yes. It is possibly sustainable.
(END VIDEO TAPE)
QUEST: Jamie Dimon of JP Morgan Chase. As we continue tonight, airlines come together to protest against disruption caused by striking French air
traffic controllers. And Ivanka Trump falls out of fashion quite literally. The President's daughter and senior adviser says, her future
isn't in running her clothing company.
Ivanka Trump has announced she is shutting down her clothing company. The First Daughter and senior presidential adviser tells that she plans to
pursue a career in public policy and doesn't know if she will ever return to the business. That particular business has been hit with boycotts and
controversy time and again. Cristina Alesci is following the developments. Why now?
CRISTINA ALESCI, CORRESPONDENT, CNN: Sources close to me tell me that Ivanka increasingly grew frustrated that the company couldn't capitalize on
growth opportunities because it had to operate with these restrictions to make sure ...
[16:20:16]
ALESCI: ... they didn't trip any ethical violations. They couldn't do deals overseas. They had to get special permission to do new domestic
deals. It was very frustrating and what's the point of operating under those restrictions if she wasn't going to come back, right? That's the
line from people close to Ivanka, at least.
But in reality, her brand was being hit. I mean, sales were up a little bit after the - actually, the sales were up a lot after the election, but
since then, they did decline and they declined because of all of these controversies, anti-Trump groups really targeting the brand.
QUEST: So what happened? The 18 employees, I assume they'll be paid off and lose their jobs?
ALESCI: Yes, she was actually at the offices today addressing all of these, talking to the employees - they're going to be - those 18 are going
to be laid off, but it is a relatively small company because remember, this is a licensing business, right? It's not actually manufacturing the
clothing itself, and she was criticized about that.
The administration is touting Made in America, Made in America, well, all of her clothing is made outside of the US, predominantly in Asia. So there
was a lot of criticism around that.
QUEST: If we look, and you've looked at this in some detail. If we look at how the Presidency has been for the Trump empire overall, now, I
understand one can't equate public service at the highest levels of duty with making a few bucks, but the reality is, it's not done well for the
business.
ALESCI: It hasn't. With the exception of the Trump Hotel in Washington, DC, with that exception, which is a big part of the Trump portfolio, but
you're right. You would think that the company would do - both companies, both Ivanka's company and the Trump organization, the President's company,
both of them would be doing a lot better. In fact, because of all of the anti-Trump sentiment out there, they have been hit, but I have to tell you,
sources inside and outside say they think that after he leaves office and the public sentiment turns around that there will be a huge boom to that
particular business because Ivanka's won't be around.
QUEST: So she's looking forward to her life in public policy. Does this mean politics?
ALESCI: That is a speculation. So everybody sees this as maybe she's trying to shed all of her business connections because she doesn't want any
more trouble because she's looking to go into politics.
QUEST: Oh, everybody knows this is where it's going.
ALESCI: That's the word on the street. We'll have to see if it actually happens, but there has been reports that Ivanka and Jared had a deal that
one of them would try and make a run for some kind of elected office, so the idea that one of them would go for it has been out there. I would have
to say though, what's interesting in the middle of all of this is that this puts a spotlight on Jared. He still owns a big part of his company's
assets, or his family's company's asset.
QUEST: Yes, I'm sure in that building on Fifth Avenue.
ALESCI: Exactly. Well, he shed his interests in that.
QUEST: Oh, yes, right.
ALESCI: But you know, why isn't he divesting? Why isn't he removing those potential conflicts? Those potential for negative headlines. So for me
that's the interesting part of the story as well as what she does next.
QUEST: Keep watching it.
ALESCI: Thank you, Richard. Thank you.
QUEST: Thank you. The signs of summer are everywhere - sunshine, holidays, and striking French air traffic controllers. Four airlines have
had enough. AIG, which is the parent of Iberia, BA and others; RyanAir, easyJet and Wizz have told the European Commission the strikes are
restricting the freedom of movement within the EU.
They aren't allowed to fly over France during strikes. Now, RyanAir is dealing with the strikes of its own. Irish pilots went on strike today
while cabin crew are going on strike in Spain, Portugal and Belgium on Wednesday and Thursday.
Liz Blackshaw is campaigns director of the International Transport Workers Federation representing unions around the world. She joins me now from
London. Nobody wishes to deny anybody the right to strike, however, French air traffic controllers seem to take a perverse delight in ruining Europe's
vacations at the wrong moment.
LIZ BLACKSHAW, CAMPAIGNS DIRECTOR, INTERNATIONAL TRANSPORT WORKERS FEDERATION: Well, Richard, I mean, that's a very interesting point and
obviously, the air traffic controller situation is very well documented and air traffic controller shortage is very well documented and those issues
will remain.
What's more interesting from our perspective is that the continued unrest in sole aviation more broadly is now being played out in a very anti-union
company like RyanAir who only last December agreed to change their policy on recognizing unions and actually bargaining with trade unions and
clearly, the fact that unions in at least four jurisdictions to date have already gone through lawful balloting processes to take workers out on
strike to actually get their grievances heard in a meaningful way demonstrates that this is a company that hasn't yet worked out ...
[16:25:16]
BLACKSHAW: ... how to deliver industrial relations that ensure continued passenger ...
QUEST: Hang on a second, hang on. Hang on. All right, I'll go with you so far on that. RyanAir clearly has had its industrial relations issues
has agreed to accept unions in some cases and is still having problems, but the members who are going on strike against RyanAir are taking it out on
the traveling public at a time of summer vacations.
BLACKSHAW: Well, again, Richard, that is an important point and you know, the first response I would make is no trade union or worker member trade
union actually take industrial action lightly. This is not a play that RyanAir could not fix, they could not change. For months now, they've sat
down with unions and really concentrated on a framework for negotiations instead of actually dealing with the issues that their workers themselves
are saying they want to have resolved.
So for the last few months now, RyanAir has sat down with unions and that's a great step forward. We welcome that development, but until it actually
addresses the fundamental problems that workers are facing in their day to day work life, it's not going to achieve equilibrium or achieve effective
industrial relations.
QUEST: So, the issues of RyanAir, I mean, besides usual pay and some difficult working conditions, what is the core of it? What is the core of
the membership's problems against RyanAir?
BLACKSHAW: Well, 80% of the cabin crew workforce through national representatives came together just a few weeks ago in Dublin to list out
their demands and Richard, as you rightly say, things like pay, they're always at the top of the list. But this is much more fundamental, we're
dealing with a very precarious workforce that are locked into long-term agency contracts that have very fundamental things like being able to have
a drink of water when they are looking after passengers on board a flight, being deprived unless they pay for it.
There are some very, very fundamental issues here in the whole business model. We're also dealing with a company that for 30 years has prided
itself in excluding unions from their day to day operations, so for that same leadership to now be spearheading the change and transformation in
industrial relations, it's questionable for us.
QUEST: Good to see you, thank you, Liz for joining us from London. I appreciate it. Thank you. As we continue tonight, inflation soaring, the
lira is plunging and Turkey's Central Bank has decided to hold fire. Some suspect that President Erdogan is behind it all.
[16:30:15]
(COMMERCIAL BREAK)
[16:30:00] RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Hello, I'm Richard Quest, there's more QUEST MEANS BUSINESS in just a moment. When Peugeot
does something that GM could never actually do that makes money, how to -- hopeful.
And he's made his name by sitting on social media, and now one of Instagram's top influences tell us it's time we got a real job or a proper
job. As we continue, this is Cnn and on this network, the facts and the news always come first.
In Greece, rapidly spreading flames and forced residents to flee. Some people are escaping directly into the sea. The nation is battling the
worst wildfire it's seen in more than a decade, at least 74 people have been killed.
The Greek Prime Minister has announced three days of national mourning, meanwhile the Olympiacos football team says it will donate more than $1.5
million to help those affected. And Melissa Bell said some areas have air- dropping completely destroyed.
(BEGIN VIDEO CLIP)
MELISSA BELL, CNN: Very cozy here, one of the five fires that continues to range uncontrolled or for now untamed is one of the focuses yet, especially
the fire brigade. But there are four others, one to the west of Athens, but also on Crete and Corinth.
And you can see really how ferocious the fire must have been here, how quickly it engulfed this particular town. As you said, 40 kilometers from
Athens, it was a holiday town, it was the kind of place people came to the beach.
It was the kind of place they have holiday homes and there's very little of it left.
(END VIDEO CLIP)
QUEST: Hundreds of people in southern Laos are missing and more than 6,000 are homeless in the wake of catastrophic flooding caused by a collapsed
dam. According to state media, the dam was still under construction and Laotians blame the collapse on excessive rainfall.
Israel's Prime Minister Benjamin Netanyahu is defending the downing of a Syrian war plane today, saying Israel won't tolerate any violation of
territory it controls. Israel's military says it fired two patriot missiles at the jet after it crossed two kilometers into Israeli airspace.
Syria said the jet was conducting an operation against terrorist groups. The Tour de France was temporarily halted when some riders were accidently
sprayed with tear gas.
Local police was spraying the gas to break a protest by farmers along the route. It took about 15 minutes for the cyclists to be treated and again
the race was restarted.
A short decision from Turkey's central bank is pushing the country closer to a currency crisis. Interest rates, well, widely expected to go up to
protect against rising inflation, seriously rising inflation and a weak lira. However, interest rates by the central bank remained unchanged.
And that's raised speculation that President Erdogan maybe influencing by the two policies. After all, he once called interest rates "the mother and
father of all evil." You can see what happened and you'll see.
Markets overall were completely stunned by the move. The lira, the Turkish lira -- you don't often see that, well, in currencies you do so, I mean,
the numbers may have a two, but that's a really sharp dramatic fall, just sort of back up again and hold its own.
And it was down by as much as 4 percent. And Turkey's benchmark interest rate stands at 17 and three-quarter percent. Many expected it to hit 18
and the three quarters. So bear in mind the relationship between the interest rates and inflation.
And you start to get an idea of how bad the problem is. Inflation at the moment with a benchmark at 17 inflation is at tonight watering 15.4
percent, three times the official target. James Jeffrey is a former U.S. ambassador to Turkey, he joins me from Aspen.
I think I've stated the underlying economics relatively fairly there, would you agree?
JAMES JEFFREY, FORMER UNITED STATES AMBASSADOR TO TURKEY: You hit all the numbers right on the head, Richard and it's good to be back on your show.
[16:35:00] QUEST: It's good to have you, sir. So how bad is the economic situation? Should the central bank have raised rates to -- as an anti-
inflationary measure. And related to that, do you believe the failure to do so was because of political presidential pressure?
JEFFREY: Let me start with the first question, yes, they should have restarted as you remember far more dramatically about two months ago, when
they didn't raise rates, the lira really sunk and then they had to raise it by 300 basis points -- 3 percent.
And they stabilized it of course just before the elections. Well, elections are over, President Erdogan's party and Erdogan personally have
won or secured what we would consider victories. And it could be that he's exercising some kind of moral suasion on the central bank.
But technically, it is still independent, even though his powers have grown and he has replaced the economics -- former prime -- deputy Prime Minister
Simsek with his son-in-law who was the Energy Minister Mr. Albayrak now is Finance Minister.
But again, Albayrak has talked about the need for keeping interest rates high as well and keeping the central bank independent. So we can't really
determine yet what the political reasons are.
QUEST: And getting rid of inflation is difficult, but we know how to do it. Volcker showed us that 30 odd years ago. You raise rates and you
squeeze it out of the system. But Turkey cannot live with an inflation rate of 14 percent or 15 percent in a low inflation environment in the rest
of the world.
JEFFREY: That is true, but in my experience going back to the early 1980s, serving in Turkey, it has made a virtue out of high inflation, yet, the
economy keeps on growing and depending on whether you look at the non-medal or the purchasing power of parity, rate and see the 17s or the 13s largest
economy in the world with almost 7.4 percent growth last year.
It's overheating, but again, Turkey has managed to write out these crisis before.
QUEST: Did that suggest that you don't expect action and you do expect that it will write it out this time again?
JEFFREY: Part of writing it out, Richard, is sooner or later they realize they have to raise interest rates which they did with a vengeance again two
months ago. So in the end, you're right, the laws of monetary supply and demand are no different than oil or anything else.
They've got to make interest rates go up to get the lira back in better shape with the dollar and euro.
QUEST: Of course, a high inflation does inflate away a lot of debt in the process. That's not exactly a recipe for success in many cases. But it
can be a useful policy in cases where there is an overburden of debt in the market.
JEFFREY: You're a better economist than me, but generally, I think that's risky thinking. Also in terms of public debt, Turkey is in a pretty good
shape. And Turkey also has a very large current account deficit which inflation tends to exacerbate and it is very dependent upon foreign
investment which has been fleeing the country, and that's the problem, that's a rob.
QUEST: Good to see you, ambassador, thank you, I appreciate it very much.
JEFFREY: Thank you.
QUEST: European traders were in a poignant mood, every major market closed up and there was still earnings and one of Europe's largest car makers
which helped lift spirits in Paris -- look at Paris, it's up -- the Dax all the best of today.
Peugeot shares rocking at 15 percent, its recent acquisitions Opel and Vauxhall have turned huge profits. A year after GM offloaded them for
being unprofitable. Alanna Petroff is with me from London. So GM toiled in the fields with Opel for decades and lost money.
And it came to the view that probably nobody could. So what did Peugeot do that they didn't?
ALANNA PETROFF, CNNMONEY SENIOR REPORTER: Peugeot is getting the job done here, Richard. What they did is a very simple formula, cut costs, raise
prices and sell profit-making cars. Now, let's look specifically at the cost-cutting side.
This was crucial. Let's pull up the points here about a few of the key things that they did. First of all, there was exit packages. Voluntary
exit packages that they offered to employees, they didn't want to force anyone out.
On top of that, they cut back their spending on marketing, they renegotiated supplier contracts to get cheaper parts and they've started
using PSA car parts.
[16:40:00] So when you think about an acquisition and bringing a new business into the parent company, you think about what synergies you can
achieve. This was the synergy, they started using PSA car parts --
QUEST: Oh, hang on a second, Alanna, hang on. None of that is rocket science in terms of manufacturing in the sense that -- so -- but it doesn't
-- it begs the question, why was GM unable to do all of those things, but Peugeot was able to do it and do it successfully?
PETROFF: It's a very good question, Richard, it seems simple, it kind of is simple. But GM just wasn't focused on Europe during the last few years.
The analyst that I spoke to said that Peugeot that Vauxhall and Opel were just after-thought in the grand equation.
GM was focusing on many other things, and they just couldn't get their acts together in Europe, they didn't understand the market dynamics, they
weren't even setting the right target. So when PSA group came in, took over this business, they really strained things out, they were very focused
on Europe, they understand the European market and they really turned things around much faster than anyone expected.
QUEST: Let's say they can manage to do it for another quarter and another year. One quarter -- that's not a Summer make as they say --
PETROFF: That's true --
QUEST: Alanna Petroff, thank you. Trading on Wall Street, there's -- over there, earnings don't stop results from our parent company AT&T are in, and
we're looking for clues about its plans to build a media empire. It's always good fun when you have to talk about your own company. Brian
Stelter will be with me after the break.
Come and join me, Brian, to discuss exactly what happened, we can put the boots in.
(COMMERCIAL BREAK)
QUEST: We've been talking so much about earnings, well, a strong wave of earnings pushed stocks higher and when the trading posts -- now, you've got
two -- the Dow is up strongly, the S&P not so strongly. But the Nasdaq barely lost ground.
So down -- the lighting man, green, please, even though we have one that is lower, we're definitely going with the green across the no records, the
Nasdaq could have potentially added, but as you can see, it fell at the last hurdle. After that close and a record high, the massive fine from the
EU didn't damage the business.
[16:45:00] The fine is now accounted for, but of course, there will be appeals and who knows how that might actually happen. And allow me to say
for the first time results in from AT&T; parent company of this network. AT&T's earnings bigger quotations, revenue did not.
And now, everybody wants to know what is the plan? What is the plan, Brian Stelter?
BRIAN STELTER, CNN SENIOR MEDIA CORRESPONDENT: You're not going to ask me, are you?
QUEST: No, I thought I might.
STELTER: OK, well, try.
QUEST: Good. What's the plan? What did you -- what did you only hear earnings for?
STELTER: Certainly, Randall Stephenson and the CEO of AT&T is talking about this being a transitional moment for the company. Not only was the
Time Warner takeover completed, about two weeks at the end of the earnings season, the company also bought a big ad tech company.
You know, the future of AT&T as it's laid out by Stephenson is a four-part company. Wireless of course is the biggest part, but now it's also a media
company and it really wants to be an advertising technology company and that part is really still in its infancy.
I think what Stephenson is really trying to say on this earnings though is, give us a minute, we've just taken over "Time Warner", now called Warner
Media, we're working on bringing content and distribution together and we're going to see it looks like it in the months to come.
But in terms of the quarterly earnings, like you said, it's a mixture report, the stocks down 2 percent, but the earnings per share did beat
forecast.
QUEST: OK, the reality is though, the other parts of this company, the Telco part of it --
STELTER: Right --
QUEST: And the sheer size of AT&T dwarfs in terms of revenue anything coming from the Warner Media.
STELTER: Oh, yes, absolutely, I mean, totally, this company in the quarter, 138 billion in revenue, of that the media enterprise is relatively
small, but the company is saying that "Hbo" had a strong quarter of subscriber growth and that our part of the company Turner which includes
Cnn, Tnt, Tbs, et cetera, also has solid -- what they're calling solid revenue in our growth, our sales growth and subscriber growth.
Look, the cable business is getting hotter and hotter, and AT&T has a piece of that as well. There are some subscriber declines on the cable business,
they're trying to push people into streaming bundles instead and there were some signs of progress this quarter.
QUEST: Would you agree that what we are seeing though and witnessing is a great experiment, in the sense that AT&T's bought us and are working out
what to do with us in a nice possible way.
STELTER: I think experiment is a fair word, look at AT&T versus Verizon, Verizon is a cheap competitor --
QUEST: What happened --
STELTER: And Verizon is going in a very different direction.
QUEST: I mean, we had results from Verizon today --
STELTER: Right --
QUEST: They were solid, the stock didn't do any of that. And in fact, if you look at the stock, there's a lot going on, on the Dow --
STELTER: Right --
QUEST: It's done nothing for years.
STELTER: Well, Verizon strategy is all about the network. Just improve the wireless network and gain subscribers that way. AT&T is going a
different direction trying to bring content together on its network. Verizon though is saying, we don't think we need to buy a media company, we
don't need to do anything like that, we're going to go in this technology direction.
Two very different paths for two different wireless companies.
QUEST: All right, let me invite you to speculate on those two different paths. At the end of the day --
STELTER: Right --
QUEST: If you don't have a good self signal or have got a strong growth path --
STELTER: And you've got nothing.
QUEST: And you've got nothing.
STELTER: Right.
QUEST: You'll just be going round in circles.
STELTER: I want to watch your show, but I can't, then I'll --
QUEST: Exactly!
STELTER: Right --
QUEST: But if you haven't got any content --
STELTER: Right --
QUEST: Does content matter? Look, content is king, but does content matter if you are the provider?
STELTER: Well, I think what AT&T is going to try to do in let's say three years is create unique experiences on your phone that you can only have if
you're an AT&T customer. But I don't know what that looks like yet, and I think -- I don't know what the bosses do, that is the experiment that
you're describing.
AT&T has an interesting bit of wisdom that I think they're applying to the media world which is they already have hundreds of millions of customer
relationships. Netflix increasingly can brag about the same thing. But the "Hbo's" of the world, they don't have that.
AT&T is going to challenge "Hbo", but a lot of other media companies, even outside the AT&T orbit to rapidly gain its subscriber base. And that's
something that applies in technology, in entertainment, also in journalism. You look at the struggles of local newspapers, it's all about subscriber
relationships --
QUEST: Thank you for reminding me, I was negligent, Tronc.
STELTER: Well, that's the other big story --
QUEST: Tronc, the "New York Daily News" --
STELTER: Yes --
QUEST: Lost half its employees --
STELTER: Yes --
QUEST: In the newsroom. They bought it for a dollar --
STELTER: Right --
QUEST: Zuckerman owned it for years --
STELTER: Yes --
QUEST: Great institutions dwindle.
STELTER: And this is what we're seeing across the country. This example was particularly shocking because half the staffers are raised and let go
on a single day. Now, the remaining cyber got to move forward with this same New York City tabloid.
But I think this is related to AT&T. It's related because every single media company, whether you're a newsroom with a famous newspaper front page
or whether you're "Hbo" or Cnn, it's all about the mobile phone, it's all about reaching people on the mobile phone.
So if you're a Tronc or if you've got another struggling newspaper owner, you've got to figure out new ways to get people to subscribe and care about
you on the phone.
So many local papers are missing that opportunity right now, they're not figuring out what the future looks like because they're so focused on
trying to hold on to what they have now which is a declining print newspaper business.
[16:50:00] So let's hope those remaining staffers at the "Daily News", they can figure out this device, maybe AT&T and Verizon can help them.
QUEST: Great to have you on the program, sir.
STELTER: Good to see you.
QUEST: Thank you very much --
STELTER: Thanks a lot --
QUEST: Brian Stelter. Now, to talk about on the device, the day's business headlines in 90 seconds and our daily briefing podcast. Twice a
day we update it before and after the bell, you ask Alexa or your Google home device, CnnMoney flash briefing is happening every week day.
As we continue, time is running out for social media influences, according to this social media influence, find out it's got a proper job after the
break.
(COMMERCIAL BREAK)
QUEST: One of Instagram's biggest so-called influences actually admits they are on the way out. The fat Jewish whose real name is Joshua
Ostrovsky says it's time to find a real job, and as Chloe Melas tells us, well, that's exactly what he did.
(BEGIN VIDEOTAPE)
CHLOE MELAS, CNN ENTERTAINMENT REPORTER (on camera): Is it a hair spray or you saved that?
JOSHUA OSTROVSKY, INSTAGRAM CELEBRITY: No, although I did do -- I had hair sprayed today, the erection is natural, but you know, for special things.
MELAS: Yes --
OSTROVSKY: I look for sure it doesn't like go placid at all.
MELAS (voice-over): That's Joshua Ostrovsky, you probably know him as the Fat Jewish, he's notorious for his absurd antics.
OSTROVSKY: This is a party old party, let's kill the birds.
MELAS: And he's hugely popular on Instagram with more than 10 million followers, but he's also been at the center of controversy. In 2015, he
was accused of plagiarism, stealing jokes and reposting them to his account.
Ostrovsky says he was just sharing stuff he thought his followers would like and often didn't even know where the jokes originally came from. He's
since promised to reattribute his post.
And while you might think of the Fat Jewish as the internet class clowns, these days he's focused on something else entirely, Rose.
OSTROVSKY: The large audience like know -- you know what they want, you're running a huge focus group every day. For younger people like -- even in
things like fun stars, something like you know, you know what brand you want.
You walk into a store and you say like I want Tito's, I want baked beans -- I know what -- you know, I know what I drink. But when it came to wine,
and specifically for Rose at the time, no one can name a Rose, at least not anyone that we knew or anyone that we would want to like hang out with
authority with --
MELAS: Great --
OSTROVSKY: Wine --
[16:55:00] MELAS: Oliver Cohen is Ostrovsky's co-founder.
OLIVER COHEN, ENTREPRENEUR: They kind of asked us the question like could we be the Tito's or the great Rose or even wine?
MELAS: Ostrovsky, Cohen and two others founded Swish Beverages in 2015. The popularity of their White Girl Rose and Babe Can Wine caught the
attention of Anheuser-Busch who acquired a minority stake in the company.
COHEN: When they first reached out, we weren't surprised because that's largely because we specifically like kind of got in their way. Like we
always imagine the can will sort of be the beer of wine. It feels like a beer, it's the occasions of a beer, but it's great, it tastes better, it's
more fun, it can maybe get you a little more drunk.
MELAS (on camera): You look at the can, say Rose, you look at the wine White Girl Rose, you call yourself the Fat Jewish, how are those things --
they're teetering on that line of maybe border line offensive.
COHEN: People get offended by a lot of things. Our intention has never been to alienate or screw anyone --
OSTROVSKY: Have an equal opportunity. Like I'm making fun of everyone equally. First and foremost, myself, like I am a giant adult infant baby
with like an erection, you know what I mean? And a pair of like real trio for all. Like --
COHEN: Or you can sell fat in his name.
OSTROVSKY: That's what I'm saying, like no one is more down to actually -- like to actually roast themselves than me. How bad can you feel about
yourself when it's me making fun of you? Like look at us.
(END VIDEOTAPE)
QUEST: We'll take a profitable moment, it will happen after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment -- the president of the United States tweeted today and said tariffs are great. Now, try asking Whirlpool whose
shares were up some 13 to 14 percent because they're being hit by tariffs, but it's on the machinery and on the exports.
Well, maybe Harley-Davidson whose margins are being strongly squeezed because they're being tariffed to Europe and they're paying more. We're
getting an example from Goldman Sachs that more and more companies in the earnings season are warning about the effects of tariffs.
And to be sure it would still be a good earnings season -- oh, yes, and the numbers will be strong and good. But look underneath and you cannot make
the argument that tariffs are great when companies are now saying tariffs are going to be causing them problems.
And we haven't even got to the worst of it yet with the auto tariffs for Europe and the greater tariffs for China. So let's keep a really close eye
on this earnings season and let's look specifically for those comments that tell us what's really happening and when the tariffs are that great.
And that's QUEST MEANS BUSINESS for tonight, I am Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it's profitable.
We'll do it again tomorrow.
END
