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Quest Means Business
IMF Managing Director Says Risks Are On The Downside; Disney Shares Are Set To Close At A Record High; Uber Is Preparing For One Of The Biggest IPOs Ever Made; Sudan's Military Council Says it Won't Extradite Deposed President Omar al-Bashir; New U.K. Anti-Terrorism Laws Go into Effect; Trump Considers Dumping Migrants into Sanctuary Cities; Sudan's Military Council Says It Will Prosecute Their Ousted President Al-Bashir, But Will Not Extradite Him. New U.K. Anti-Terrorism Laws Go Into Effect Which Restricts U.K. Citizens And Nationals From Traveling To Conflict Zones. U.S. President Donald Trump Confirms Reports He's Considering A Highly Controversial Plan To Release Illegal Immigrants Into Sanctuary Cities. Aired: 3-4p ET
Aired April 12, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST, QUEST MEANS BUSINESS: We are in the last hour of trade before the bell rings and it's all over and it's the end
of week as well. It is a Friday, the market has opened higher. Disney has a lot to do with this. We're going to discuss Disney a lot over the course
of the program and other ones but as you can see, the market is higher. And these are the reasons why.
Christine Lagarde tells me tonight the risks are on the downside. We will be live at the IMF Spring Meetings. Disney Plus is a big positive for
investors. The stocks having its best days in decades. And investor season is here. Jamie Dimon has good reasons to smile. JPMorgan is one of
the reasons the market is up so sharply. So I'm Richard Quest. Tonight, live in London where of course, I mean business.
Good evening. Tonight, Christine Lagarde, the Managing Director of the IMF tells me there was an incredible sense of relief at the G-20 yesterday,
when Europe pulled the emergency brake on Brexit. That relief will short lived, she says, if world leaders don't prepare for more economic risks on
the horizon.
Now she was talking to me at the Spring Meetings were underway in Washington. And the IMF Chief predicted the following: precarious recovery
later this year, if disputes - trade disputes, particularly between the world's largest economies have not been resolved; then there will be great
your problems, and she warned lead us to fix the roof while the sun is shining. That was the warning last year.
Now, she says it's time to get on with it. Twelve months later, Christine Lagarde says, too few have been heeding her advice and getting out the
ladder and getting on the roof and the storm clouds are now gathering over the global economy.
Speaking to me earlier on "The Express," the Managing Director said that despite all these risks, there is hope in the months ahead.
(BEGIN VIDEOTAPE)
CHRISTINE LAGARDE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND: Yes, we agree that the risks are skewed to the downside. We have also revised
slightly our forecast for this year, and if you look at growth last year, we had 3.6 percent. This year we're forecasting 3.3 percent with a
discount that is pretty much across the board with advanced economies and emerging and developing countries equally dragging these numbers down.
However, and that's where there is a little bit of hope, we anticipate a pickup in the second half of this year to go back to the 3.6 percent in
2020. But that is predicated on actually us collectively trying to fix the risks that have been created, and you've mentioned some of them. The big
one is trade tensions that are being addressed, but not yet conclusively. The second one is related to geopolitics and to particular country events.
Clearly you are in one of the countries that is a big cloud on the horizon at the moment. And we are not -- you know, we are at the mercy of
financial market movements as well, which would clearly have an impact on particularly capital flow movements, particularly to emerging market
economies.
QUEST: And Managing Director, you're in the other country, where when we talk about trade, there are the issues there. I mean, at the end of the
day, the worsening trade relations, perhaps led by the U.S. administration, it's not helping matters, would you agree?
LAGARDE: The trade tensions are weighing on the forecast. They're weighing on the confidence of investors because most people wonder what
will be the terms under which they trade, they invest and they organize their supply chain. Once they know you know, whatever the outcome, at
least they can organize themselves.
But for the moment the fact that it's under threat in the process of being negotiated, but yet not completely resolved, is a big question mark for
them.
QUEST: I noticed yesterday in your press conference, the weather was back. And you were quoting Mark Twain about the number of -- what different types
of weather. Well, I've got a quote, a Mark Twain quote for you in return. He of course said, "Don't put off until tomorrow, what you can do the day
after." And isn't that exactly the problem at the moment? Everybody' is putting on not until tomorrow, but until a week next Thursday.
[15:05:02] LAGARDE: I think there is a bit of that, Richard. The fact that you know when I said a year ago, "When the sun is shining, fix the
roof," some countries started the process, but there is plenty that needs to be done in order to really beef up the competitiveness and the
productivity that particularly the advanced economies are lagging -- are lacking at the moment.
So structural reforms absolutely need to be conducted with renewed vigor, and when it comes to the trade tensions, they really have to be addressed.
The system needs fixing. There's no question about it. It needs to be improved. The WTO system needs improving and needs to be made more
efficient so that trade is fair, is mutually beneficial for those in the trade. But action is really needed.
(END VIDEOTAPE)
QUEST: The Managing Director of the IMF, Christine Lagarde talking to me. The warning signs that she is talking about are flashing more urgently for
Europe's economy after a week of disappointing numbers.
Today, Reuters reports that German government is to halve its 2019 growth forecasts. The ECB, of course, at the last meeting kept rates on hold and
announced they will be doing so through this year, at least. And certainly, reinvesting for as long thereafter. And the IMF, just got its
growth forecast for the Eurozone.
With this ringing in our ears, Pierre Moscovici is the European Commissioner for Economic Affairs. He joins me now from the Spring
Meetings in Washington. I think you'd agree, Commissioner, I think you'd agree that the scenario for Europe at the moment does not look or the
outlook does not look particularly good.
PIERRE MOSCOVICI, EUROPEAN COMMISSIONER FOR ECONOMIC AFFAIRS: Yes, I do agree. We are not in a recession. We're not threatened by recession. I
think that our fundamentals are solid, but certainly we are at the end of an expansion period and the slowdown is there and we need to monitor the
downside risk. I would concur with Christine Lagarde and this is why we must be prepared to do that.
Today, two out of the three main Eurozone economies are slowing down, with of course, very different situation. Italy is nearby zero. And Germany,
we will see what their forecast is. We will see what our own forecast is. The key there is slow down as well for tiny reasons and also for structural
reasons. And so this is why we must think and anticipate on what our policy response is going to be.
QUEST: What can it be? I mean, the ECB is doing just about all it can and rates are just about at zero, I suppose you could have a bit more negative
rates on the reserve side to boost things, but there's nothing much more to be done there. So it really is up to governments to either spend or
reform.
MOSCOVICI: I do agree. Monetary policy is accommodative. We know that it's going to stay competitive. But as Mario Draghi says himself, monetary
policy is not the only game or the only player in town. That's why we must have also an adaptive response from the fiscal side.
First, when we enter into economic bad times, we need to see whether we are rigorous or whether we are flexible. Second, it's clear that we must have
different answers, according to the situation of the economy. Those who have a high debt level must fix the roof and they must certainly have a
serious fiscal effort.
Those who have a high room of maneuver, because they have surpluses, whether external or fiscal, such as Germany or Netherlands, I think they
must use these room of maneuvers in order to invest for their own sake and for the sake of the euro.
And finally, we absolutely need to deepen our Eurozone and to move to a Eurozone budget. I think on this, we need to reflect first, and then to
take action when needed. We have the time. We are not again threatened by recession. But it's good to think from now.
QUEST: There's no evidence, though, that those indebted countries will do anything. And there's certainly no evidence that Germany or the
Netherlands will be prepared to take up the fiscal slack. So ask you, Commissioner, is Europe and the Eurozone really going to be relegated to
stagnant growth?
MOSCOVICI: The Eurozone is not a problem for the world economy, but the Eurozone today is the growth which is between one and 1.5 percent, and
that's not enough. We were above our potential, now we are at our potential and we need to raise the potential. That's why the productivity,
competitiveness, structural reforms are of course of the essence and that's why also, we need to cooperate and to define a common answer to problems
that our countries face differently.
[15:10:13] MOSCOVICI: And again, I know the Italian problem. I know some reluctance coming from Germany, from Netherlands, but we need to overcome
that because we are a union, because the Euro is a single currency and because a single currency must be as well on stability, but also on
convergence with a better governance.
QUEST: As this mandate for this Commission comes to an end in the next five, six months, do you wish you had been able to do more -- more of the
policies that you and I talked about at the beginning of the Commission? Obviously, a lot of it was taken up with Brexit, but a lot of time was
taken up just dealing with the internal structures of how the union works.
MOSCOVICI: I think we can be proud because Europe is now out of the economic crisis, because our public finances are sound, because our debt is
globally reducing, and because we have introduced flexibility in the governance of our public finances, and I really think that was the right
way to act.
But on the other hand, we must not be self-satisfied, and I'm not self- satisfied. I think in progress, in deepening the Eurozone, we have not moved fast enough and far enough. We are probably going to design the
first Eurozone budget by this summer, but I'm quite sure that in the future, we need to be much more ambitious.
And so I think that after the European election, we'll see what the political spectrum is; it will be time to take new initiative, and this
commission will be active and I will be active until the last day of the mandate.
QUEST: Good to see you as always, sir. Thank you. Thank you very much. Now, as we continue. The Dow is up more than 200 points, take a look at
the numbers. And the reasons of course -- there's two reasons for such a strong gain. One is JPMorgan, which we'll talk about later, and the other
is the House of the Mouse and the flying elephant. Disney shares are set to close at a record high after the company revealed its streaming
platform. This is an artist's impression of Disney shareholders right now, and how they are celebrating.
And all because of Disney Plus -- the cost of Disney Plus, it will have more than 500 movies and seven and a half thousand TV episodes when it
launches in the U.S. this November, including the upcoming "Star Wars" TV series, "The Simpsons" and recent blockbusters like "Captain Marvel." But
this is the reason, it'll cost $6.99 a month. Now, it's $2.00 less than Netflix -- Netflix Basic. It's cheaper -- Hulu is cheaper at $5.99, but it
doesn't have as much and YouTube TV is by far the most expensive at $49.99. But you see, that's where Walt Disney places it.
Brian Stelter is following the story. Brian, is the price the reason why, in your view, the stock has risen so sharply. We are up 10 percent of the
day.
BRIAN STELTER, CNN CHIEF MEDIA CORRESPONDENT: You know, there were audible gasps in the room when the price was announced at Disney's Investor Day.
This was a happy surprise to many of the observers of this ongoing Disney story. And that's a big part of the reason why the stock has jumped today.
It's actually nearing its high for the day almost more than 11 percent at this point edging closer to 12%. So it's been doing well all day.
Investors have been waiting for this for more than a year, Richard. They've wanted to know, what is Disney's battle plan in this streaming war?
Frankly, they've been waiting a very long time to hear it. There have been a lot of curiosity. But now we know. It's going to launch in November in
North America, two years from now, it'll be around the world.
QUEST: Brian, you cover this stuff morning, noon and night -- is Disney on the right track here? It has a huge library, but it doesn't have ongoing
content in the same way. It's putting a billion into, you were telling me on "Express," they're putting a billion into content. Netflix is spending
$8 billion, $9 billion, $10 billion, $11 billion, $12 billion. Admittedly, a lot of that is not particularly very good. So you know -- I mean, how
many of the Netflix things do you actually watch?
STELTER: Maybe three of them. Yes, I have to admit I do not gorge at the Netflix buffet. I only have a few, but they keep me paying every month and
that's the goal. I think if anybody can get me to also pay another seven bucks a month, it's going to be Disney.
Disney has a lot of competitive advantages here. From the theme parks to the cruise ships to the cable networks. They have a lot of ways to promote
this new service. They'll be able to start you at $7.00 a month and then obviously raise the price over time. They'll bundle Hulu in with it
together and make it bigger in that way. So Disney has a lot of levers it can pull. They have a lot of opportunities here.
[15:15:08] STELTER: I think the concern, the only concern I really hear among Wall Street analysts is that Netflix is so far ahead, and that's
going to create a challenge for Disney, for Warner Media, our parent company, for Comcast, for all the rest. Every media company wants to look
more like Netflix, but it's going to be a challenge for all of them.
QUEST: Right. Well I -- as we continue and I am using the Stelter index.
STELTER: What's that?
QUEST: In the future. Well, you said earlier on "Express" how many services you expect to buy over the last few -- so as we cover this in the
days, weeks and months, and years ahead, the Stelter index will never be far from my reading, and so I've just had it. But seriously, there's going
to be tears before bedtime with one of them.
STELTER: Yes. I mean, I agree with you in the same way that the cable model is under intense pressure and we're seeing some of the smaller cable
providers, you know, people that operate smaller cable channels start to really struggle. We will see that in the streaming as well. There will be
smaller niche streaming services that will not succeed. In fact, some of them have already closed up shop in the past year. That's because these
behemoths like Disney have a lot of power.
Look at what Disney is doing. They bought Rupert Murdoch's assets at Fox. They're taking "The Simpsons," for example from Fox. They're putting it in
Disney Plus. That is a lot of power that Disney has behind this new streaming service. And look, Bob Iger, he's betting the whole house on
this plan. He says this is a transformational moment for Disney. It's going to be exciting to see how it does or doesn't do in the first few
years.
QUEST: Brian, thank you. Brian Stelter in New York, we thank you. Now Uber is poised to make its Wall Street debut with one small caveat. The
company may never actually make a profit. How can this be with so many subscribers, so many people using it? We do need to understand this a lot
more and we will, after the break.
(COMMERCIAL BREAK)
QUEST: Uber is preparing for one of the biggest IPOs ever made by a tech company arguably ever all. It hasn't been the smoothest of journeys.
There have been allegations of sexism from the company, so the exodus of top management. So is the ride hailing firm a bargain or a dodgy deal?
Well, here is a -- I've called it my Uber. Now let's take a look under the hood as the American say or the bonnet as I would put it. So the first
thing we need to note of course, is what exactly is there. It's the issue of slower growth.
[15:20:04] QUEST: Now, there'll be flat revenues over the past three quarters, and that slow growth, you have to ask, is it systemic? Or is it
somehow cyclical? Then you get a truly horrific number. $1.8 billion the year it lost. And that's an unprecedented sum to be admitting that you've
actually lost the best part of $2 billion before you get into an IPO. And then you have this wonderful little quote in the document, "We may not
achieve profitability."
When you read it, the strict constructional definition would suggest it's never going to make a profit. But Uber admits it, it may never make a
bean, and it says expenses will increase significantly. Cole Smead is the Managing Director at Smead Capital Management. As I look at this, it is
not exactly a ringing indication of why I should invest my money in this company. So what am I missing?
COLE SMEAD, MANAGING DIRECTOR, SMEAD CAPITAL MANAGEMENT: What you're missing is everything about the environment of today in U.S. equity
markets, the capital markets at large. You're talking about Uber here, as you mentioned, they don't make a profit. You just got done with your prior
segment talking about this idea of Disney or a company that's had a lot of success in content versus Netflix, who shows a gap net income profit. But
if you actually look at it from a free cash flow perspective, is losing over $3 billion a year.
So why are these random things that somewhat rational people are going on right now? Well, when people are buying the 10-year Treasury at 2.40
percent, it argues that there's a lot of stupid things going on in the market. So I'll give you a couple other examples because we touched
equities. We talked a little about the U.S. government, Treasury markets, but there's venture money flowing into things like home food delivery,
right now and there's a bunch of groups like Freshly and Grubhub and HelloFresh that would love to be there and that's really just feeding the
profits of Google because they acquire their clients by digital search. But like Uber, they make no money in those businesses. The home food
delivery can't make any money.
QUEST: Okay, I see that but you know, if there is to be an element of sanity in all of this. These companies like Uber are clearly not a
dividend play. There will never be a dividend out of that company in my lifetime or yours. But at some point, at some point, I'm old enough to
remember the dot com boom and bust, the path -- that wonderful phrase, you'll probably remember, "The path to profitability." At some point,
you've got to make money.
SMEAD: Well, in economic history? Yes. In today's environment, or like you said, in the dot com bubble, many people would say no, and let me let
me give you an example of what you highlighted. In '99, at that time, it was the -- we had more unprofitable IPOs in U.S. equity markets than we'd
ever had in the history of the U.S. equity markets. Well, guess what? Today, we are going to capsize that prior peak and in this era, we are
going to produce the most unprofitable IPOs in U.S. stock market history.
So, what this is indicative of is it is nothing short of a financial euphoria. Does this have to look and feel and taste exactly like '99? No,
it does not and no financial euphoria is identical. For example, the nifty 50 in 1972 was 50 Blue Chip American stocks, technology and conceptually
oriented investments got killed three years prior, when the Onyx or the go- go era ended, and the Blue Chips got over capitalized.
So the rhymes are there. The problem is it shows you how willing investors are to seek a questionable return in today's environment.
QUEST: Uber makes a great company. Uber provides cars, but will it provide a good investment?
SMEAD: I just took an Uber down here to the studio. I'm sitting in here in Seattle, Washington, as we speak. As a customer, do I enjoy their
service? Yes, because they're terribly underpricing the goods they provide in society, because a bunch of investors are willing to put up the capital
to cover those losses. The question is, will the capital markets continue to provide capital to these business models and the beautiful part of it
is, time and time again, capital markets change, the flow of money changes, and people wake up five years later deciding to do different things, and if
you're not profitable, you have no say over that future.
QUEST: Cole, good to see you, sir. Let's talk again more on these issues in the future.
SMEAD: Thank you.
QUEST: It's much appreciated of you taking the time. Now, the rolled out -- the U.S. rolled out to new 5G plans on Friday. President Trump and his
top telecom regulator are committing $20 billion to rural broadband. Portions of the airwaves will also be auctioned off to allow for faster
networks.
[15:25:02] QUEST: Donald Trump says the move is necessary to help America cross the 5G finish line.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: We cannot allow any other country to outcompete the United States in this powerful industry of
the future. We are leading by so much in so many different industries of that type and we just can't let that happen. The race to 5G is a race
America must win.
(END VIDEO CLIP)
QUEST: Sarah is with me. Sarah Westwood is at the White House. Fine, good talking. But is he going to put any heft behind it to actually make
it happen?
SARAH WESTWOOD, CNN WHITE HOUSE REPORTER: Well, you mentioned that $20 billion fund that the administration hopes will incentivize the growth of
5G in the U.S. The Trump administration also making the argument that the deregulatory steps that they've taken will help lower the barriers for
these companies to try to get in on 5G.
What is happening though is you are seeing other countries like China start to make steps in their 5G development and that is why the Trump
administration is pressing so hard because they want to get ahead of countries like China like South Korea in the race for 5G.
There was some confusion a few months ago earlier this year when President Trump's campaign manager Brad Parscale came out and he sort of issued this
full throated endorsement of a plan that would involve the government having a much larger role in developing 5G networks and it was thought that
that was President Trump's position because the campaign was saying that and the White House had to come out and clarify and say no, President Trump
prefers a 100 percent private sector, private solution to this and so there has been a little bit of drama on this front previously, Richard.
QUEST: Sarah, we're going to -- the 5G battle, you and I will talk about many times, I suspect before this finally comes rushing. Have a good
weekend. Thank you.
WESTWOOD: Thank you.
QUEST: As we continue, coming up, the game is set, the players are poised and what's left of them anyways, soon "The Game of Thrones" will come to an
end. This is a phenomenon on TV. We'll talk about it later.
[15:30:00]
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest, there's more QUEST MEANS BUSINESS in just a moment. But before we get to it, this is CNN and here on this network,
the facts always come first.
Sudan's ruling military council says it will prosecute the ousted President Omar al Bashir, but it will not extradite him. He faces charges for crimes
against humanity and war crimes at the International Criminal Court. UN Human Rights Office is calling on Sudan to cooperate with the ICC.
The actions to the arrest of WikiLeaks founder Julian Assange keep coming in. Now, the UN Agency for Human Rights is calling on the authorities to
make sure that Assange gets a fair trial. He was arrested in Ecuador's Embassy in London on Thursday and has since been charged in the U.S.
extradition.
His extradition hearing is set for May the 2nd. But legal experts expect that this will take many months and probably years. And news into CNN, the
Secret Service in the United States is responding to an incident outside the White House. They say a man lit himself on fire moments ago.
He's been given first aid, they said there's no threat into the president and we're not fully aware of just what condition the person is in.
Starting today, the British Home Secretary has new powers to restrict U.K. nationals and residents from traveling to conflict zones.
Those who do, face up to ten years in jail when they return to Britain. The government says this gives police the powers they need to disrupt
terrorist plots early. The U.S. President Donald Trump confirms reports he's considering a highly controversial plan to release illegal immigrants
into so-called sanctuary cities.
He says it's because Democrats won't go along with his immigration policies, singling out California's governor in particular. The critics
say he's using human beings as a political pawn.
And episode 9 of "Star Wars" has a title, "The Rise of Skywalker". It will be the final film of Disney's trilogy. The first trailer was revealed to
"Star Wars" fans a couple of hours ago in Chicago. The film itself is to be released on December the 20th.
Our top story, the IMF's Managing Director has issued a stark warning to leaders at the Spring meeting in Washington. Christine Lagarde says
countries must resolve their trade differences or risk suffering a fragile economy -- economic recovery later this year. She spoke to me a few hours
ago where she described the tolls that trade wars are taking on the world economy.
(BEGIN VIDEO CLIP)
CHRISTINE LAGARDE, MANAGING DIRECTOR, IMF: The trade tensions are weighing on the forecast, they're weighing on the confidence of investors because
most people wonder what will be the terms under which they trade, they invest and they organize their supply chain. Once they know, you know,
whatever the outcome, at least, they can organize themselves.
(END VIDEO CLIP)
QUEST: All week, CNN's Eleni Giokos has been listening to the leaders concern at the World Bank and IMF meetings. Eleni is with me, and now from
Washington. You know, I've heard a lot of this before, last year, and the year before --
ELENI GIOKOS, CNN BUSINESS CORRESPONDENT: Right --
QUEST: And in fact, this refrain of things are getting worse and we need to do something. But is there any indication, Eleni, from those you've
been talking to that they're going to do anything?
GIOKOS: Oh, that's the million-dollar question, right? What are they going to do? I mean I keep hearing complaints, so Christine Lagarde was also
talking about self-inflicted wounds, and now is not the time to do that, that we have to actually work together.
We've been talking to the Euro group as well, again, we've got to work together. We have to find a way to increase economic growth and to, you
know, get around the negotiating table. I spoke to some of my Greek colleagues as well, very similar stuff coming through.
The Africans are saying exactly the same that it's a fragile moment and everyone is just really worried about externalities that are going to
impact the economies. But guess what? There's no real plan in place apart from making sure that you got good policies and you've got strong
institutions. I don't know if that's going to be enough to weather any new storm.
QUEST: How weird is it that obviously the largest offender on the trade front is the United States. Steven Mnuchin is obviously there --
GIOKOS: Yes --
QUEST: Jerome Powell is obviously there as well. But at the end of the day, President Trump is the one who is prosecuting most of the trade
tensions in the world at the moment.
GIOKOS: Exactly, when you put -- you know, you get a conference together of finance ministers and central bankers, you know, and all the guys that I
understand, you know, macroeconomic side of things, and even understand what it means and what trade means to the rest of the world.
[15:35:00] I think there's consensus that you know, you've got to adhere to certain rules that of course, are going to dictate how the world
economy is going to play out in the next few years. But then when you've got politicians into the fray as well, and looking at their own agenda,
then that kind of changes the conversation.
And I guess that's what people are saying in terms of Brexit, I think people here say, well, we know from an economic perspective, the
consequences are going to be dire from a trade war perspective. It makes absolutely no sense to become protectionist, because open markets actually
help economic growth.
So that's the kind of interesting thing that what's happening here and I think people understand is in the politicians on the other end that it
becomes problematic.
QUEST: There's a new leader at the World Bank, David Malpass, he took office. The World Bank and the --
GIOKOS: Yes --
QUEST: And the IMF are complimentary in their responsibilities and roles. But David Malpass, you and I were talking yesterday has criticized of
course much of the work. What's the gossip about what's going to happen at the World Bank?
GIOKOS: Well, listen he had a fantastic first, you know, press conference and he's been just a few days into his official role and he was -- you
know, he admitted that he's got a lot to learn. But the gossip is the role of China, and he actually alluded to this in his press conference with us.
And he was saying that, you know, it's great, China, we've got a great relationship, we've got to work, we've got to cooperate, but and the big
'but', they've got to make sure that they offer transparent loans to the rest of the world, they're going to be looking at that.
And get this as well, that China's role in the World Bank has been evolving, and remember the conversation, Richard, a few years ago when you
were here as well that everyone was saying, you know, what is China's role going to be in the World Bank as a new power?
He was saying there are going to have --
QUEST: Right --
GIOKOS: A big shareholder, there are a bigger shareholder, they are playing a bigger role and they're not so much a borrower as they are a
shareholder right now. So it seems like they're going to want to work together with him. Who knows?
QUEST: When do you go back to -- when do you go back home to South Africa?
GIOKOS: I'm coming to see you first in New York, Richard, next week, so I'll see you soon. I'm really going back next week --
QUEST: Well, we look forward to having -- to grilling you into doing a bit of work on the -- and joining me in New York. Many thanks, safe journey
back up to New York --
GIOKOS: Yes, see you soon --
QUEST: It is the most wonderful time of the year, and it's all about red and green. Not that season, this is earnings season. Coming up next, a
report from the banking giant to today's startup.
[15:40:00] (COMMERCIAL BREAK)
QUEST: We have a tale of two sets of banking earnings and Wall Street is watching with great attention. JPMorgan is rallying, well, not surprising
its record profits revenues beat expectations. Wells Fargo which just seems to go from misery to misery is going to be lower by more than 1
percent because it lowered guidance on its 2019 outlook.
Matt Egan is in New York. JPMorgan Chase is a power house of a banking giant. Wells Fargo, some would say is a dogwood fleas.
MATT EGAN, CNN BUSINESS SENIOR WRITER: Richard, JPMorgan is firing on all cylinders right now. While it feels like Wells Fargo just can't get out of
its own way. JPMorgan reported record revenue and record profits this morning on what the CEO Jamie Dimon credited for robust consumer spending.
And you know, they -- he talked up -- really struck a very optimistic note on the economy. He said despite the global geopolitical uncertainties, the
U.S. economy continues to grow. He pointed to robust financial markets, higher employment, higher wages and moderate inflation.
And even the weaker part of JPMorgan that fixed income and trading revenue, that wasn't down by as much as Wall Street had feared. And so we're seeing
the stock move higher. Wells Fargo as you alluded to, you know painted an entirely different picture.
Wells Fargo's profits were up but its revenue was down. And despite the strong economy that Jamie Dimon talked about, deposits were lower, and so
were loans. Wells Fargo offered very few details about its CEO search, you'll recall that Tim Sloan stepped down abruptly as CEO late last month.
The bank said that it has hired a search firm to search for his successor. And you mentioned the outlook, Wells Fargo downgraded its outlook --
QUEST: Right --
EGAN: For net interest income for 2019 and that has really weighed on the stock which we're seeing move sharply lower today.
QUEST: Matt, the reality is that, I mean, it is leadership in these cases. Wells Fargo is a bank that has been poorly led over many years which led to
scandals, which were inappropriately dealt with, and the result is -- JPMorgan Chase has Jamie Dimon, that -- the story ends there.
EGAN: You're right, you're right. Jamie Dimon is so much of what this JPMorgan is all about and it's just superior management, superior
execution. And so that showed up again today and it's getting rewarded by Wall Street. And Wells Fargo as you mentioned, you know, they made a CEO
change about two and a half years ago, they went with Tim Sloan, someone who was there, he was a veteran for more than three decades.
And Tim Sloan really struggled to move the bank beyond its crisis. And now they have an interim CEO, it's Allen Parker, he used to be the general
counsel over there at Wells Fargo. And they're searching for a successor. Warren Buffett; the leading shareholder at Wells Fargo has come out and
said that they need to hire an outsider and someone who is not from Wall Street.
QUEST: Right --
EGAN: And so the stock will probably be under pressure until they can find a successor.
QUEST: Matt, what do you think -- what do we -- what should we be looking for during this earnings season? First of all, two parts of that question,
is it an important earnings season bearing in mind what we saw the last time and they're all important at one level, actually they only happen
once a quarter, but is this an important one, and if it is, what are we looking for?
EGAN: Well, so -- I think it is an important one as they all are. But more so because we've seen the stock market really rally dramatically since
Christmas eve. And so, you know, the banks and all of the companies, really, have to justify those higher prices by showing that they continue
to make money.
The banks in particular are under pressure from rates, and that is what -- that's exactly what Wells Fargo talked about when they lowered their
outlook. The problem is that the yield curve has become flatter, the Federal Reserve said that they will -- won't be raising interest rates
likely for the rest of the year. And so that makes it harder for banks to make money, and that is going to be a headwind for these stocks going
forward.
QUEST: Now, we talked many more times, I do like the look of our new home at Hudson Yards in New York which is where you're speaking to me from, very
nice, good to see you, sir, thank you, have a good weekend.
EGAN: I'll be sure to show you around when you get here.
QUEST: With a cup of tea, please, two lumps. Thank you. The big corporate deal of the day, Chevron is buying Anadarko Petroleum, it's a $33
billion deal. Anadarko focuses on exploration and producing crude oil and natural gas. The deal strengthens Chevron's shale production stakes in the
U.S.
But look at the -- look at the way the market reacted. Anadarko went up 14 percent, it was actually up about 20 percent or 30 percent at one point.
Chevron on the other hand closes off or heads down to a close, down 6.5 percent.
[15:45:00] Clearly, the market doesn't like what it sees on that particular one. The deal helped boost oil prices which again rose around 1
percent, Brent is now more than 30 percent so far this year, and it is with the exception of a minor blip in March, it has been a pretty much a one way
bet all the way up.
The oil rich country of Venezuela, there are constant blackouts to way of life, thanks to the economic turmoil there. In the past few minutes, the
U.S. has just announced new sanctions on companies doing business with Venezuela. David McKenzie is with me in Caracas. David, how do these new
sanctions differ really in terms of the strength from what's already there?
DAVID MCKENZIE, CNN INTERNATIONAL CORRESPONDENT: Well, Richard, they keep on trying to squeeze particularly the oil industry here as much as they
can. And oil output here in Venezuela has dropped to around 860,000 barrels a day. That's really very low compared to historic highs.
And we went out to the oil-rich region in the west of the country, region, we just saw an industry that's completely imploding.
(BEGIN VIDEOTAPE)
MCKENZIE (voice-over): Venezuelan oil workers giving us a rare look inside their crumbling industry. They brought us to San Fernando(ph) Oil fields.
It's risky speaking out, they could be fired or detained by Venezuelan intelligence. But they want the truth to get out.
Populism finished all of this, he says. Do you see this? Nothing works anymore. The government finished us completely. They say success of
Venezuelan regimes used state oil company PDVSA as a slush fund for socialist programs and their own personal gain.
This entire coastline is just covered in oil sludge. The regime blames the collapse of the oil industry on the U.S., but it's been collapsing for
years. Trump administration sanctions could make it worse. The U.S. was PDVSA's biggest customer. In March, the U.S. bought zero barrels of oil,
the first time since the '70s.
And the retired oil workers who helped build this company say they gave decades of their lives for almost nothing. Some say they are forced to eat
dog food. They say their pensions worth around $5 a month.
UNIDENTIFIED MALE (through translator): It's outrageous, look at us, he says, we don't have money for medication, for food. Soon, we'll have to
bring our dead colleagues to this protest.
UNIDENTIFIED MALE (through translator): Normal? Not normal if you're living in this country, he says.
UNIDENTIFIED MALE (through translator): I want America to take up Maduro, to get him out of here, he says, he's stealing from the people. He's
taking food from us.
MCKENZIE: Now, they're taking for themselves. Last week, looters ransacked this pharmacy looking for medicine in nearby Maracaibo, a mob
spent two days tearing a hotel apart, they even ripped out the carpets. The true scale of Venezuela's crisis becomes clear when the sun sets.
Business leaders say it's like the walking dead, a zombie economy with 80 percent of businesses closed here in this energy rich region. People are
left to shelter in their homes in darkness.
(END VIDEOTAPE)
MCKENZIE: Well, Richard, those new sanctions are affecting businesses and entities including oil transport ships. They were announced by Secretary
of State Pompeo, who is in the region to try and pressure -- pile on the pressure further economically and politically on the Venezuelan State,
Richard?
QUEST: David McKenzie, fascinating, one quick word, David. Are you -- wherever you're staying, whatever hotel, do you also have power cuts, is
there no power at night?
MCKENZIE: Well, there have been power outages even in international hotels in Caracas. But they call it the bubble here, Richard, and you can get
services and goods in the capital now. The Metro is running, generally the electricity is doing better, and the water, that would be a political win
for the regime.
But get outside of Caracas, outside of that bubble in cities like Maracaibo, you really can see that the rest of the country is struggling,
and --
QUEST: Right --
MCKENZIE: And they think they really prioritize the capital because the press is often based here and people -- you know, if they get angry in the
capital, they certainly will have big problems, Richard.
QUEST: David, thank you, David in Caracas. When we come back, two dozen or dozens of Emmys(ph) raked in hundreds of millions of dollars and
captivated audiences worldwide for almost a decade. Now a "Game of Thrones" is finally coming to an end.
[15:50:00] (COMMERCIAL BREAK)
QUEST: OK, that music might mean a lot to many of you, to most of you. "The Game of Thrones" is set for its final act this Sunday. The biggest TV
and cultural phenomenon of the decade begins its final season. The final six episodes will bring one of the most expensive, most watched and most
lauded programs of the past decade to a close, except for me.
In the full interest of journalistic disclosure, I have never watched a single episode. I couldn't tell a stark from a Lannister or a Tele(ph)
from a Targaryens(ph), I'm sure I mispronounced that. So in a way that the producer of this program wishes the ritual humiliation, well, the shows
lead character, John Snow, you could say, I know nothing.
And then we want you to join the conversation. Get out your phones and go to cnn.com-slash-join. Tonight, we're asking who will end up on the iron
throne? You see the choices, I'm not even going to attempt them. Stark, Lannisters, Greyjoys, all the ones that I can't pronounce.
None of this means anything to me. Nothing. Foreign language, but still I want you to go to cnn.com and vote so I can hold my own when I talk to my
boss on Monday morning. And I'll tell you, as you vote, if you vote for the last one on the right, it means you probably don't watch it either.
I should say "HBO" and CNN, we both belong to the same kingdom, out of Warner media, my heart swells with joy. Luckily, CNN's Zain Asher does
know something about "Game of Thrones" and she looks at how "HBO" and the world have been preparing for this show's last, final, ultimate, never to
be repeated season.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: They're coming.
ZAIN ASHER, CNN CORRESPONDENT: In the Kingdom of Westeros, Winter is finally here.
UNIDENTIFIED MALE: I promise to fight for the living.
ASHER: "HBO's" fantasy drama "Game of Thrones" launches its long-awaited final season someday and fans and actors alike are bracing for the end of
an era in television history.
GWENDOLINE CHRISTIE, ACTRESS: It's devastating and it's awful. But in many regards, it's one of the most exciting things I've read and been a
part of.
UNIDENTIFIED MALE: It's actually quite hard to remember life before "Game of Thrones". But from my perspective, it's been nothing but fun.
[15:55:00] ASHER: In the eight years since its debut, "Game of Thrones" has shattered records, drawing millions of viewers worldwide every week,
winning dozens of Emmy Awards and inspiring countless ads, products and accessories from companies looking to cash in on the massive global hit.
UNIDENTIFIED FEMALE: It's exciting, it's thrilling, it's dangerous and you never know what's going to happen.
ASHER: "HBO" invests heavily in a stunning visuals, epic battle themes and creative story-telling that draws viewers far and wide. "Variety Magazine"
reports that the show's budget averaged $15 million an episode for its final season.
UNIDENTIFIED FEMALE: You know, we're not American, we're not European, we're a world that anyone can belong to.
ASHER: The show has also become a cultural phenomenon that's parodied in late night comedy.
UNIDENTIFIED MALE: I just need to know, do people hate me?
(LAUGHTER)
ASHER: And referenced by the U.S. president and his former opponent.
UNIDENTIFIED MALE: Which is closer to reality of life and politics. Which TV show?
HILLARY CLINTON, FORMER SECRETARY OF STATE: Probably "Game of Thrones".
(CHEERS)
ASHER: From politicians --
ANDERSON COOPER, CNN: I am obsessed with "Game of Thrones" --
ASHER: To the press, "Game of Thrones" fanfare knows no bounds.
COOPER: I'm Anderson Cooper, Winter is coming.
ASHER: Zain Asher, CNN, New York.
(END VIDEOTAPE)
QUEST: But according to most of you, the Targaryens are going to -- again, their first -- get to the top, 62 percent of you say that or you may just
be in sympathy with myself. From the "Game of Thrones" to the markets and I'll show you how things will finish the day.
We are just seconds away, government is away from the closing bell, and the Dow is set to close around 250 points, 257 points higher. Disney is up
more than 11 percent at a record high, Disney at the top, United Healthcare, but look at the rest of them, a good spread across the board,
profitable moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment, Disney has announced a Disney Plus, we now know the price, the battle is joined for the magic kingdom that knows
how to make money left, right and center. Be warned, this is a battle royal that will play for years and the casualties, when they happen will be
deep in money, will be lost, but probably not from Disney.
And that's QUEST MEANS BUSINESS for tonight, I am Richard Quest in London.
(BELL RINGING)
Whatever you're up to in the hours ahead, I hope it's profitable.
END
