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Quest Means Business
Triple Records On The Cards For The U.S. Markets; Arch Rivals Ford And VW, Setting Aside Rivalries Working On Electric Self-Driving Cars. Aired 3-4p ET
Aired July 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: An hour to go, 60 minutes left of trading on the last day of the trading week. And
that over here, there we have the Dow Jones. That tells the story. The Dow is way up, 188. We are three quarters of a percentage point higher.
Across the board, markets are higher and they are at records and these are the reasons why.
Stocks are surging with hopes of a rate cut and with earnings season right around the corner. We have records. Rivals collaborating. The arch
rivals Ford and VW, setting aside rivalries, working on electric self- driving cars. And for the first time President Trump bashes Bitcoin. Crypto supporters say the publicity is you just aren't going to buy. We
are live in the world's financial capital, New York City on Friday, it is July the 12th. I am Richard Quest, and yes, I mean business.
Hello. Good evening to you. As we begin the final hour of trading, we have triple records on the cards for the U.S. markets. Green is the color
of the day, wherever we look. That is what we are seeing. They are -- you have the Dow, you have the S&P 500, you have the NASDAQ all are on course
to close at their highest levels records so far.
Just take a look. I want to show you, you have to see this in some detail. The Dow is now up 184 points. It is a gain of just over half a percent.
But it isn't just about at the highest level of the day. Over here you have the triple stack, and just look. The Dow is a record the S&P is a
record, and look at that number. Get in there. That number 3,009. That's the first time we've -- it looks like we're going to close over 3000.
And let's not forget down here at the bottom. The NASDAQ is also at a record high. Understanding this, why? Because think about it, all week,
we know the Fed is looking to cut interest rates and probably will cut interest rates in their meeting in two weeks' time or three weeks' time.
But does that justify such a strong rally across all markets?
Matt Egan is with me. Answer the question. Does it justify what we are seeing in the market today?
MATT EGAN, CNN BUSINESS LEAD WRITER: Richard, maybe not because you have to remember the Fed is not doing this from a place of strength. The Fed is
doing this because it's worried about the trade war, it is worried about weak inflation. So it is interesting to see the market have such a strong
risk on reaction to this.
QUEST: All right, so maybe all major all of this AB InBev, you have seen has just -- we just had the statement from AB InBev about why they pulled
their -- they were selling a minority stake in the Asia subsidiary. It's complicated. They were selling a minority stake in the Asia subsidiary.
It was meant to price this morning.
EGAN: It was meant to price very soon, and it was going to be the biggest IPO of the entire year around the world. This is the Asia Pacific
business. And they were looking to raise between $8 billion and $10 billion at the high end that actually would have been the biggest IPO --
food and beverage IPO ever.
Now, what happened is they say that they've decided not to go forward. What's interesting is they cited prevailing market conditions, which I
don't know, Richard, look pretty good right now. We have all-time highs in the U.S. stock market. We've got the Fed talking about easier and easier
money.
QUEST: They were already pricing that at the lower end over the last couple of days, which begs the question -- because I just read the
statements and I thought, "Hang on a second, prevailing market conditions. What are you all about?"
EGAN: Right. They also said other factors.
QUEST: What?
EGAN: Now, the other factors might be -- they may be they were not getting the kind of valuation that they wanted.
QUEST: But hang on, hang on. But hang on. I mean, this was fully subscribed, as I understood it, they had fully subscribed it. The
institutions have taken up their allotments and had sold more. This something smelly going on here.
[15:05:10] EGAN: It is very surprising. And I think we're seeing that in the market, right? I mean, we saw the stock fall about three or four
percent on this news because people thought this was a done deal, in part because you know, they really need to raise money.
You know, don't forget, their balance sheet has a ton of debt on it, over $100 billion. That's because they had to borrow heavily when they took
over SAB Miller, and so the hope was they would use this cash from spinning off of minority stake of the Asia Pacific business to clean up that balance
sheet a little bit.
Just, you know, 10 days ago, they looked like they were going forward with this, and now not so much. It's a surprise.
QUEST: Something weird.
EGAN: It's a surprise.
QUEST: Surprise indeed. The sort of thing as you say, prevailing market conditions, and Matt Cheslock, Matthew Cheslock is me from the stock
exchange. So it looks as though, all right, we've got it 55 minutes to go. But it looks as though three records, the NASDAQ, the Dow and the S&P.
Matt, does the news this week, justify this exuberance?
MATTHEW CHESLOCK, EQUITY TRADER, VIRTU FINANCIAL: Absolutely. I mean, we've got the Fed backstopping us, at least for the foreseeable future.
We've got some earnings, you know, that pre-announcements that haven't been great, but those affected individual stocks only. They haven't spoiled the
whole market run up here.
Now we're starting to see new sectors take control here. Look at the transports over the last couple days. They're far from their all-time
highs. They're starting to get a little bit of a bid here. And that's where we're seeing money coming out of maybe pharma and coming into a new
sector, which is transports. These are the type of moves that have insulated this market for so long.
QUEST: The transports were down as a correction. So the transports -- and interestingly, we've seen a divergence between the transports and the
industrials, which is quite unusual.
CHESLOCK: Yes, it absolutely is. You know, transports are usually pretty leading indicator and you know, they're far behind they're not touching
they're all-time highs. They're not even close, as I mentioned. So you know, if we can start to see them start to really rally here, most of us
probably based on the U.S.-China trade talk, we could see even further highs here.
QUEST: Right, but that makes sense, doesn't it? Because the transports are the industrials and the manufacturing and so forth. The shipping and
the like, and they are exactly the sectors that will be clobbered at the moment. Is there real business being done here? Or is this just the
market bidding itself higher?
CHESLOCK: Yes, it's just bidding itself higher. Volume is quite light. Next week, we touched off major earnings season, financials are going to be
the lead, some Big Tech names. You know, I saw Netflix is out for next week, too. So people have enough to focus on so they're probably go into
this weekend with a smile, happy their portfolios performed, all-time highs. What's not the love right now?
QUEST: All right, but, Matthew, actually, no, let's not go into the weekend on a gloomy note. Do the omens look good for this rally to continue to you
think?
CHESLOCK: Yes, I mean, it certainly seems to be the case. If you haven't pre-announced, we've already had the second largest pre-announcement to the
negative side since 2006. And that hasn't affected the market.
So the problem is, if you haven't pre-announced, if you're a company that's reporting earnings, you're going to be punished. You should have done this
already. You've had built in excuses. So you know, let's keep it coming and you know, why not take out all-time highs every day. It's a nice
feeling in the summer.
QUEST: That's perfectly put. Have a good weekend, get some sun and get yourself out and enjoy it. Thank you very much.
CHESLOCK: You too.
QUEST: It is QUEST MEANS BUSINESS. We are going to watch the market closely because it's a long time since we've had three records in a row.
The market has turned. It likes what it is seeing, and the triple stack of the Dow, the S&P and the NASDAQ.
When we return rivals for world domination -- are partners -- a fast changing auto market. Volkswagen and Ford say they're building the future
and that calls for to team work. Also, it's called made in Germany, the brand is facing a crisis of trust. The negative headlines are multiplying
on the German economy seems to be under pressure. In a moment.
(COMMERCIAL BREAK)
[15:11:45] QUEST: The multibillion dollar car share scheme, the former arch rivals Volkswagen and Ford are coming closer together to build
electric and self-driving cars. Now, Volkswagen is putting up $2.6 billion into Ford's autonomous vehicle company Argo. Ford says it will use VW
parts in its future electric cars. Julia Chatterley spoke to the CEOs of both firms.
(BEGIN VIDEO CLIP)
HERBERT DIESS, CEO, VOLKSWAGEN: Autonomous is really big thing for all automotive and also for the whole industry for transportation. And it's
big investment. It takes a long time. It's huge resources being put in. It's a race. So you have to be probably not first but first, second or
third. And it requires a lot of resources.
We decided that it makes sense to join forces with someone first and then later, we decided that Ford would be the appropriate partner. Ford
combined with the startup team makes us really competitive --
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Ahead of the race, now, Jim, do you think in this?
JIM HACKETT, CEO, FORD: Well, I think the way you have to think of this technology is it learns. And so if you get it in a scale world, it is
going to learn faster. So this is how platforms kind of win or lose.
And so I'm really excited about the news that VW and Ford now have the largest platform potential with this emergent technology.
CHATTERLEY: And then you said cars embedding this technology in Ford cars by 2021, Elon Musk said autonomous taxis by 2020, a million of them on the
road. You're both smiling. Is that too ambitious? Or can we talk in this kind of timeframe? Where do we need to set our horizons here?
DIESS: I would be bit more conservative. I don't know.
HACKETT: I am nodding. I agree.
DIESS: Many problems still unsolved. Weather conditions, complexity of environment. Safety, safety, safety. There's a lot in stake. And I think
there's some progress made. Yes. But I will see. My estimation is that we will see two next hardware generation until we really succeed, so it's a
long way to go.
CHATTERLEY: There's many challenges for the industry. It's an exciting time. It's a challenging one. Trade of course and potential crossfire
between the two nations.
As a European car maker, do you see this move and the closer ties with a U.S. company like Ford as political insurance here?
DIESS: It has a political aspect as well. Also, I have to say the business logic which drives us know combining our light commercial vehicle
business worldwide, but focused on Europe, Latin America, South Africa makes a lot of sense.
The rationale behind this is solid, I would say. Also joining forces on the EV business makes a lot of sense. This is going to happen here in
America, combining our resources makes us hugely competitive and EVs, I would say we can disclose the same figures.
But I have to say yes, we are relatively weak in America. We are a small player, about four percent market share. We are very big in China, 18
percent market share and becoming more American, more of an American player and also part of this American society is an important rationale for us.
[15:15:14] CHATTERLEY: Mary Barra over at GM came under severe pressure from President Trump, as a result of some of the cutbacks that she said
were necessary in order to transition to meet customer demands in the future. Do you think his sort of big giants in this industry, the CEOs,
that you kind of need to all stand together and defend the industry at this moment?
HACKETT: Go ahead. I'm near that argument, you know, constantly inside Ford, because as we were changing the portfolio of products, we thought
there's a number of interests that you have to balance not only shareholders, but the employees.
We're an egalitarian culture. Ford has always kind of live this way. So we were able, as we were changing the portfolio to shift workers in
production around so that there weren't any casualties of job loss there.
The interesting thing in in Europe, though, as we've had to do the same thing, we've had to let go a larger group of people, it hasn't been dealt
with for 30 years. So I'm hopeful that we get this right. This won't be the kind of thing that that persists in our industry.
But I do think these are moments of inflection. And that's why there's stress on the production and employment is because the technology is
changing.
CHATTERLEY: Have they become a political football, too?
HACKETT: There's so many jobs associated with our category. And I think that's where the President's got the right attitude is that, he is --
really, that constituent needs protection, because these are such important jobs.
CHATTERLEY: Our next debate for CNN is going to be held in Detroit. What do you want to hear politicians, whether it's President Trump or whether
it's the Democrats here saying about the industry, because we've had criticism from both sides, for U.S. companies trying to retrench here and
trying to face the future?
HACKETT: Well, from my perspective, I've looked forward to hosting them in Detroit because this is an important renaissance in our city there that
Detroit has really come a long way. The automotive industry has had a big hand, of course, in its creation, and now its resurgence.
For example, Ford has invested downtown, in the old train station. We're going to rehab that in an area called Cork Town. My message to them is,
you really need to understand the kind of innovation investments that we face. And if we hedge any of that, you know, if we make it difficult, we
will lose to countries like China or states in my case that are more technically savvy.
So they've got to understand the degree of shifts that are happening with propulsion and autonomy, and make it easier. We have legislation that has
to be passed to make the regulatory environment better. We have to have incentives, because some of this investment is way ahead of the demand.
These are things that I hope they give.
CHATTERLEY: And Herbert, as a European CEO that wants to sell more cars to U.S. consumers. What do you want to hear from these guys?
DIESS: I would say, as a European CEO, our footprint is really global and free trade is what we need also to get the best cost for the best price to
the customers. Customers will be very happy to get the best possible car, and also cars in the future, even if they are then being able to drive
along autonomously or electric that doesn't change this role model, so free trade is really necessary to get the best cars and the most competitive
industries.
(END VIDEO CLIP)
QUEST: Two CEOs talking to Julia Chatterley, CNN's Peter Valdes-Dapena is with me. This is -- the way in which these car companies and it's pretty
much only in the car company area that we're seeing such tie ups of rivals, why are they doing it?
PETER VALDES-DAPENA, CNN BUSINESS SENIOR AUTO WRITER: Well, the auto industry even in the best of times, ever is a tough capital intensive
industry. We invest a lot in new products and new crossovers and SUVs. But now you have this other big change happening as well. You've got
competitors like WayMo, Tesla, and tech companies out in California, threatening to take over the new generation of vehicles.
So companies have to prepare for that while at the same time maintaining their investment in their current products. So in order to get to that
future stuff that's not really profitable yet, but they need to do. Well, then it make sense to start doing team ups like this.
QUEST: Yes, but it's -- you're teaming up with your competitor. I mean, at the end of the day -- all right, so I suppose you start looking at which
competitor is least competitive in a particular market as such.
DAPENA: Which one has the right kind of overlaps and not overlap, if you will, right?
QUEST: Exactly. Because Volkswagen and Ford, arguably Europe and the United States, the VW does well in this country.
DAPENA: The VW does okay in this this country. They're certainly doing better. They have a nice factory in Chattanooga. They've got some good
products in Europe, but they could use some help in Europe with commercial vans, which you might remember was the first part of this tie up. Ford
supplying commercial vans to Volkswagen, so it goes back and forth.
[15:20:13] QUEST: So why didn't the car companies get into bed more with the tech companies? Because there you have perhaps a natural alliance,
where you do bring different skills, these two competitors just basically agreeing that my enemy, the enemy is my friend.
DAPENA: Right. Well, you're right there, the enemy is my friend. But also there are more ways to work together I think, when you're talking
about vehicle companies. There's more understanding. There's a sort of a common language that you both understand and speak.
I don't mean English and German, but auto industry, language and production language. So I think there's a lot more synergy there than there is
necessarily with a tech company.
QUEST: Good to see you, sir. Thank you very much indeed. Thank you. Have a good weekend. It has been a rough week. Europe's economic
powerhouse.
Now, if you're just Germany -- we're staying with cars because particularly of course in Germany, if you look at the headlines, they make grim reading
for Germany's once untouchable giants on the economy.
Daimler, for example, profit warnings, the fourth in a year. Four from Daimler in a year and a massive quarterly loss. BASF says it's also losing
and they're going to have huge -- and a huge embarrassing retreat by Deutsche Bank, not only retreating from equities, but also 18,000 jobs to
go and add in Bayer, and you've also got facing more lawsuits over its subsidiary, Monsanto, makers of the famous weed killer Roundup.
According to "The Wall Street Journal," a third of all DAX companies have announced profit warnings, job cuts and have legal or have legal issues.
It's not surprising that over the course of a week that have seen markets rally on both sides of the Atlantic, the DAX has been down pretty much
consecutively all week.
If you add in the trade war, then when Germany suffers, so does everybody else. The 2020 Eurozone growth is now being cut. All right. It's not a
huge from what 1.5 to 1.4 percent, but it is a bellwether, when Germany's economic machine suffers, everybody else does, too.
Carsten Brzeski is the Chief Economist at the German arm of ING Bank. He joins me now from -- via Skype from Frankfurt. These warnings and this
downgrade of growth. This is starting to get of great concern, because Germany is the industrial engine for a large part of European growth.
CARSTEN BRZESKI, CHIEF ECONOMIST, GERMAN ARM OF ING BANK (via Skype): Definitely, I think it's getting bleaker and it's getting serious now. I
think, you know, when you look back, Richard, a year ago, everything was still fine. Now, we've gone through a downswing, a downturn of the entire
industry since the summer of last year until now.
It started off with a couple of one-offs. Strange, strange apologies like in the car industry, too little water in the rivers. But now it's getting
serious. We now start to see there are layoffs. And it starts affecting the domestic economy, which up to now has shielded Germany from a
downswing.
But we see a weakening of the labor market. We see a drop in consumption. And this is why I'm really getting worried about the state of the German
economy.
QUEST: Okay, so we saw a rebound in numbers in the last quarter, but I was reading your note on that, you said that's just a sort of a bit more of
inventory buildup from a rundown, and actually, the improvement in the economic performance is not likely to be sustainable.
BRZESKI: No, because up until now, we had solid domestic fundamentals and there was strong consumption. There was even the hope that companies would
start to invest more due to digitalization, due to low interest rates, and they should have led to a pick up and the rebound in growth in the second
half of this year.
We now see that the structural problems in the industry, plus the continued uncertainty coming from trade means that companies and also households are
somehow you know, drawing back their investment and consumption plans.
QUEST: So what policies can be put in place? Obviously, the ECB is continuing its QE at a phenomenal rate and will do so for the foreseeable
future. But if you look at fiscal policy, notorious, the Germans won't spend. Is it time to unlock some of that prudence?
BRZESKI: Oh, it definitely is. I think in the short run, everyone will look on the ECB and I think Mario Draghi will once again deliver. We will
see further easing like what had been announced from the Fed, probably I guess, a rate cut, maybe a restart of QE, but this one won't make a big
difference.
What could make a big difference in Germany and in the rest of the Eurozone would be fiscal stimulus. So Germany will have to change its mind. There
still a high fiscal surplus in Germany. There are negative interest rates.
So you know, investors are giving money to Germany in order to borrow from the government. So this will have to change, otherwise, we're going to see
really a longer period of stagnation and they continue forward with recession.
[15:25:35] QUEST: But, Carsten, as long as I can remember, if you go back to the former Finance Minister, they didn't want to spend and every time
you suggested fiscal stimulus, it was almost as if you'd suggested doing something indecent.
BRZESKI: It is the holy black zero, the fiscal surplus. But listen, the situation is getting more severe. And now, really, once this industrial
slowdown really hits the domestic economy, it starts hitting the labor market, count on it, the government will do something. It will never do as
much as economists would like it to see. But I think we will see a gradual shift towards more fiscal spending.
QUEST: Carsten, great to have you on the program. Thank you. We will need your help in the weeks and months ahead to understand what's happening
in Europe's largest economy. Thank you, sir. It's appreciated. Have a good weekend.
The stage of uncertainty of a trade is one of the factors that kept European markets well and truly under pressure this session. Well, the
season overall. London and Frankfurt closed flat. But remember, that is I think, unless I'm mistaken the DAX has been down every day this week.
Paris eked out a modest gain. Zurich was the worst performance by far. Investors reacted to soft data on Chinese trade. This is QUEST MEANS
BUSINESS, a day in which we are looking at potentially three records across all the major indices in New York.
(COMMERCIAL BREAK)
[15:30:00] RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Hello, I'm Richard Quest, a lot more QUEST MEANS BUSINESS in a moment on a day of record. At
a press conference, apparently, it wasn't enough to say the Labor Secretary's job Acosta resigned this morning. And women are parachuted
into save the day in times of crisis according to our guests.
It's called the Glass Cliff. Of course, with a cliff, who knows if you end up falling over. This is CNN on a Friday and on this network, the facts
always come first. President Trump has announced that his Labor Secretary Alex Acosta has resigned. Acosta has come under scrutiny for his previous
handling of a plea deal with Jeffrey Epstein who was this week indicted on new charges relating to alleged sex crimes involving minors.
And the president has confirmed that immigration raids are to begin on Sunday. Mr. Trump says they will focus on criminals as much as possible,
and the rates are expected to take place in at least ten cities over multiple days. Opponents say it will tear families apart.
U.K. police say they've launched investigation into the alleged leaking of diplomatic cables involving the former British Ambassador to the United
States. Sir Kim Darroch resigned this week after telegrams were leaked in which he said the Trump administration was "inept" and "clumsy".
And the U.K. sending a warship, the HMS Duncan to the Persian Gulf while Iran is demanding Britain returns the tanker that was seized off Gibraltar.
Otherwise, it says the U.K. will play a dangerous game with no end in sight.
Brazil's President Jair Bolsonaro says he's considering one of his sons to become the country's next ambassador to Washington. Eduardo Bolsonaro is
currently a congressman for Sao Paulo State, he's friendly with President Trump's children, according to his father. Bolsonaro added, it's up to his
son to accept the job.
You just heard President Trump's Labor Secretary Alex Acosta stepping down, following the furore over his role in a controversial plea deal for the
financier Jeffrey Epstein. The deal took place in 2008 when he agreed to plead guilty on prostitution charges. He served 13 months in prison, in
doing so, he headed off the threat of serious prosecution on federal charges of sex with under-age girls.
Standing side-by-side, the president said Secretary Acosta had been a superb Labor Secretary.
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: He's done a fantastic job. He's a friend of everybody in the administration, and I got a call this
morning early from Alex, and I think he did a very good job yesterday under a lot of pressure, he did a fantastic job and he explained it.
He made a deal that people are happy with, and then 12 years later, they're not happy with it. You'll have to figure all of that out, but the fact is,
he has been a fantastic Secretary of Labor.
ALEXANDER ACOSTA, OUTGOING U.S. SECRETARY OF LABOR: I have seen coverage of this case that is over 12 years old that has input and vetting at
multiple levels at the Department of Justice. And as I look forward, I do not think it is right and fair for this administration's Labor Department
to have Epstein as the focus rather than the incredible economy that we have today.
(END VIDEO CLIP)
QUEST: Sara Westwood; CNN's White House reporter, Sara is with me now, she's in Milwaukee, Wisconsin, where the president is visiting. Now, Sara,
come on, this is a rum business. The man resigns, but the president wants to say good-bye and announce it with him standing next to him. What
messaging is going on here?
SARA WESTWOOD, CNN WHITE HOUSE REPORTER: Well, Richard, President Trump has publicly stood by Secretary Acosta throughout this entire period of
scrutiny on Acosta's involvement in that shockingly lenient plea deal that Jeffrey Epstein got the president though, had gone from publicly urging
Acosta to defend himself from praising his Labor Secretary to privately questioning whether Acosta had done enough at that Wednesday press
conference in which he explained his reasoning for extending that plea deal to Epstein's defense team.
And also questioning whether the scrutiny of Acosta was going to continue to build and build. There were some fears among White House aides,
Richard, that there would be more disclosures from that deal, things that weren't previously known to the public. For example, it was just recently
that the "Miami Herald"; the newspaper in Florida reported details about that deal that started this period of --
[15:35:00] QUEST: Right --
WESTWOOD: Scrutiny among them, that victims at the time weren't notified of the plea deal, that's something President Trump fixated on once he
learned more about this case, Richard.
QUEST: So, how damaging has this whole business been to the president if damaging at all, because if I listen to what Mr. Trump says, he said he
didn't really like Epstein, and Epstein was actually thrown out of Mar-a- Lago some years ago, and I haven't heard or seen him for the last 15 years.
WESTWOOD: Right, so we see that President Trump is trying to publicly distance himself from Jeffrey Epstein. Obviously, there are reports that
the two of them at one point in time many years ago had a social relationship, and so there have been questions about that. So, President
Trump is trying to put some distance between that, confirming several other people's accounts that some decade-plus ago, President Trump kicked Jeffrey
Epstein out of Mar-a-Lago, his Florida club because of some unspecified incident that took place there.
So, the Acosta's presence in the cabinet could have continued to raise questions about Jeffrey Epstein in relation to Trump and his
administration. This really eliminates what could have become a much larger headache for the Trump administration --
QUEST: All right --
WESTWOOD: But clearly, the president was prepared to stand by Acosta and he made clear today, Richard, that it was Acosta's decision to resign that
Trump did not make that choice for him.
QUEST: Good to see you, Sara, thank you, and it looks like it's a lovely day where you are, thank you. Ten oil rigs have been evacuated on the Gulf
of Mexico as tropical storm Barry is approaching, and crude prices are now near their highest levels since May.
Both Brent and WTI have been pushed higher by the threats to production in the U.S. from the storms. There's also the political tensions in the
Middle East. Johnny D., John Defterios is with me in London tonight. John, look, we're over 60 on WTI and prices are elevated. But should we be
worried when we know and can spot to a specific incident like a hurricane? Then you sort of know --
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: Well, Richard --
QUEST: Well, it unwinds itself afterwards.
DEFTERIOS: Well, we have a nasty cocktail being shaken right now in the energy market because you have two factors to the point you raised, so we
have the escalation of tensions in the Gulf right now between Iran and the U.K., and Barry bearing down on the Louisiana energy sector.
Let's cover that. And I think it's an important point to make. This is very different than the climate during Hurricane Katrina back in 2005.
This is a major oil and gas hub for the United States, 1.8 million barrels a day of production and a huge LNG export sector. The latest number show
us that they're going to evacuate 257 oil and gas platforms, and as you suggested in the lead in there, about half the oil rigs, 21 active, they're
going to evacuate ten of those right now.
So, the risk is clearly there, and then meanwhile, we have the U.K. and Iran ratcheting things up. Iran saying we want our tanker back, we're
better than 2 million barrels, I don't think that's going to happen off the coast of Gibraltar. And the U.K. is sending a bigger warship to escort
tankers out of the Straits of Hormuz.
Not a surprise rivalry near a seven-week high, we're knocking on the door, 67 for the international benchmark, Richard, and at the end of May, we're
at $70 a barrel. One of these things if they escalate could turn this market well past $70 a barrel. Everybody knows it, but there's a glut --
QUEST: All right --
DEFTERIOS: In the market.
QUEST: All right, yes, that's the point. There's a glut in the market, and as you and I have discussed, this glut is largely because of U.S.
production which, of course, is rampant, but that continues. There's no mechanism to stop that as long as prices are high, the market forces,
they'll continue to produce it.
DEFTERIOS: Well, you hit the nail on the head here. Whether it's OPEC on Thursday or the international energy agency on Friday, they both have the
same message that the U.S. is roaring ahead. So, we know under the OPEC bus agreement, in that OPEC meeting, they're going to continue their cuts
of 1.2 million barrels a day to the first quarter of 2020.
But Richard, the IEA suggest you need to cut another 800,000 to 900,000 --
QUEST: But --
DEFTERIOS: Barrels. To your point, let's bring up the graphic for a second here. Look at the surge of the United States, 11 million barrels
last year, over 12 million barrels in 2019, going to over 13 million barrels in 2020. So, Saudi and Russia is not fighting the United States,
they're serving as the shock absorber here, Richard --
QUEST: But hang on --
DEFTERIOS: The U.S. is not holding back at $60 a barrel.
QUEST: Right, but let me just -- John, because bring up that graphic again and you'll see --
DEFTERIOS: Yes --
QUEST: There is no mechanism for that 12.4 million barrels. There's no artificial mechanism for that to be reduced in the way that OPEC can agree
to cut. U.S. production will stay at that level as long as it's commercially viable, which is a big difference.
[15:40:00] DEFTERIOS: Well, I posed this question to the Saudi oil minister last week, basically said, if you're going to take oil out of the
market, it's going to keep the price between $60 to $65 a barrel. That is a sweet spot for U.S. shale production, and his answer was, look, when this
shale boom started, we were producing about nine and a half million barrels a day.
We're producing 10 right now, it'd be much rather we produce at a level that's consistent at $60 a barrel rather than flooding the market and
trying to wash out the shale producers which the previous Saudi Minister tried four, five years ago and it didn't work.
So, they have to make space for the U.S. producers and try to buffer the big expansion that we see Texas, Louisiana, the Dakotas.
QUEST: Fascinating, John, thank you, have a good weekend, sir, have a good weekend.
DEFTERIOS: Thank you.
QUEST: When the going gets tough, call in the woman. That's what Christine Lagarde wants to do in terms of crisis, how women climb the glass
cliff of leadership in just a moment.
(COMMERCIAL BREAK)
QUEST: Studies show that in times of crisis, it is women who are put in charge, as Christine Lagarde put it memorably.
(BEGIN VIDEO CLIP)
CHRISTINE LAGARDE, CHAIRWOMAN, INTERNATIONAL MONETARY FUND: Whenever the situation is really bad, you call in the woman.
(END VIDEO CLIP)
QUEST: Women can break through the glass ceiling only to face situations with high risks of failure. Some people call it the glass cliff.
Christine Lagarde, for example, becoming the ECB post where she will face mounting challenges as she balances the various different competing demands
between the commission, the parliament and the council.
Theresa May became Prime Minister in the wake of the Brexit referendum. She's only a matter of weeks away from being replaced, and Carol Bartz was
named head of Yahoo! in 2009 where she juggled sinking ad revenues and a slumping stock price out after two and a half years.
Jane Stevenson leads the Global CEO Succession practice at the consulting firm Korn Ferry, she joins me now from the CNN center in Atlanta. OK, all
these women, I mean, they may be this concept of the glass cliff, but you know, they all went for the job. It's not like they were dragooned and
found. They all applied, fought hard to get to it, so what's the point?
[15:45:00] JANE STEVENSON, GLOBAL LEADER FOR CEO SUCCESSION, KORN FERRY: Well, I think the point is that we need to make sure that we're utilizing
and harnessing the power of women and women are good for business. There are a lot of -- there are a lot of studies that show that gender diversity
increases the value of a business and the financial results.
But if women are only given the opportunity to lead glass cliff-type situations, where the probability for failure is extraordinarily high, and
its heroism that enables success, then we really lose the opportunity to get the value of women.
QUEST: I see, but that's suggesting that somehow when these Hobsonian choices jobs come up, these phenomenally difficult, that the selection
committee, usually men, only choose women because they think, well, why not because it's a -- it's a fruitless task.
STEVENSON: Well, wouldn't that be unfortunate.
QUEST: Oh, yes --
STEVENSON: Who are --
QUEST: No, right, but I'm saying --
STEVENSON: Choose women --
QUEST: But you know, right, it would be very unfortunate, but if this glass cliff exists, is it because no one else wants it or those who are
selecting think actually women have better talents, which is it?
STEVENSON: Well, I think it's a little bit of both. So, frankly, boards have to make a selection, and if they have a limited choice, they're going
to take more risk and get the best risk that they think they can, and sometimes that's the only opportunity that a woman has to jump for it, so
she does.
And there are a number of situations where that has been extremely successful, and if you look at Mary Barra at General Motors, if you look at
a few years ago that Angela Ahrendts at Burberry, if you look at a number of situations other than that.
There are a lot of really successful situations as well. In fact, we looked at 57 women CEOs in our women's CEO speak-study founded by
Rockefeller that really showed an inordinately high capability set. In fact, when we looked at those 57 women against our best in-class CEO norms,
they scored at the 97 percent higher or above. So, it's not a -- it's not a strictly dismal story.
QUEST: I can certainly see and agree that this idea that women have to believe and perceive that they have to perform further, harder and faster
and better because they've got to prove themselves at a level that perhaps men seemingly do not.
But does that mean they're being set up for failure, and if they are, and if they are being set up for failure -- say, for example, Theresa May, she
came in with one job to get Brexit done, and she failed by her own definition. But Christine Lagarde has been a tremendous success at the IMF
--
STEVENSON: Yes --
QUEST: And World Bank, arguably less so as a Finance Minister of France.
STEVENSON: Well, I think there are -- I think there are two issues at hand here. One is that when there are so few women in top leadership positions,
there are a bit of an endangered species, right? There's 6 percent on the best year, and it's been 4 percent to 6 percent over the last five years
depending on what moment in time you look at it.
And the fact is that these are scarce resources, and in the business world, if we were looking at other kinds of assets, we would want to leverage
those and we would want to make them count. So, there's an opportunity here for businesses to actually look at women earlier on.
What we found in the women's CEO Speak-Study --
QUEST: Right --
STEVENSON: Is that there are some key traits and characteristics that can be identified actually as early as late 20s and early 30s. And if
organizations look at those potential --
QUEST: All right --
STEVENSON: Characteristics, and they're able to actually --
QUEST: Yes --
STEVENSON: Build the strength of operating --
QUEST: Right --
STEVENSON: Capabilities in real jobs, I think we'll see a very different result and we'll see more women succeeding and in larger numbers.
QUEST: Jane, we'll talk more about this in the future, it's an important subject, thank you very much for joining us, appreciate it. Now --
STEVENSON: OK --
QUEST: As we continue tonight, you and me, you can keep your new fangled bitcoin, says Donald Trump, there's nothing quite like a good old fashioned
-- oh, there it is, it's a dollar. It's real, no, I promise you, it is, very well, I've got you this, but it is real.
[15:50:00] (COMMERCIAL BREAK)
QUEST: President Trump says he is not a fan of bitcoin and the cryptocurrencies. For reasons unknown, he tweeted a volume of criticism of
digital currencies. He said, they are not money, there are highly volatile and can facilitate unlawful activity.
And as for Libra which is the virtual currency Facebook says it's launching, the president said it would have little standing or
dependability. The U.S. dollar, he says will always be the most dominant currency in the world. My next guest tweeted in response, "can't buy
better publicity than this." Michael Casey is cryptocurrency --
MICHAEL CASEY, ADVISORY BOARD CHAIRMAN, COINDESK: Good to see you, Richard --
QUEST: What did you mean by that?
CASEY: Well, I mean, look, first of all, if you think about bitcoin from its price perspective and where a lot of people at the moment in its life
are focused on, they're treating it as, it's called Digital Gold, right?
It's a vehicle for hedging against a political risk, essentially and owning it as a speculative asset in that regard. He's a politician who is
basically laying out the fact that there's political risk --
QUEST: And --
CASEY: He's putting it on the table, everyone is talking about it, it's good for the whole conversation around bitcoin.
QUEST: And I was surprised with Jerome Powell yesterday, specifically said when asked, you know, did bitcoin present a systemic risk? He said, not at
the moment, it's like people using it like gold.
CASEY: Right, so you've got, you know, a perfect storm, right? You had Jerome Powell reminding people that it is a speculative asset, that it's a
story of gold. And all these people who have treated gold as a way to protect themselves against the likes of Donald Trump, and I don't mean
Donald Trump specifically, I mean, literally against governments, have now been told by the leader of the most important central bank in the world,
that this is in fact the vehicle you can use.
QUEST: Yes, listen to what he said, listen to what our leader of the most --
CASEY: Sure --
QUEST: Important central --
CASEY: Sure --
QUEST: Bank in the world said.
(BEGIN VIDEO CLIP)
JEROME POWELL, CHAIRMAN, U.S. FEDERAL RESERVE: Libra raises a lot of serious concerns, and those would include around privacy, money laundering,
consumer protection, financial stability and those are going to need to be thoroughly and publicly assessed and evaluated before this proceeds.
And I think one of the notable features of the project is that the supervision and regulation of it would fall in many -- in front of many
different agencies, state, national and international. And we need to get our arms around that for starters.
(END VIDEO CLIP)
QUEST: Why does Libra present these problems more so than say bitcoin?
CASEY: Well, I mean, for one, it is going to be having a KYC system, which is to say, it's going to be identifying people who are participating in the
process. There are entry points into it with dollars. So right now, even if you are a bitcoin wallet provider and you are somebody who is -- or an
exchange, you are on-ramping people in the U.S. or in Europe, wherever you happen to be, you have to deal with local authorities for that part where
the on-ramp from dollars into bitcoin exists, that's right.
He's talking about a global network that's doing this on multiple levels, and so he's thinking about multiplying on many terms the existing issues,
that exchanges first.
[15:55:00] But bitcoin itself underneath it isn't necessarily very regulated.
QUEST: Regulation or I mean, they're trying to hold back the tide in the sense that they know they've got to do something -- but let's be blunt,
cryptocurrencies are not going to go away. It's not a question of their existence, it's a question of how you regulate it.
CASEY: Absolutely, the idea that you could hold back something that now has 50 million users around the world that has just countless different
developers developing or that has a massive, enormous network of computers running behind it. I mean, this is unstoppable code essentially, because
nobody controls it, that's precisely why you can't stop this.
QUEST: You can have a gold, you can a bitcoin or a crypto or you can have the real thing. Fiat backed by in God we trust which you're going to
choose.
CASEY: Well, I mean, let's be clear, in God we trust or in math we trust. There're various ways you can spin this. At the end of the day, all money
is a fiction, right? All money is a story we tell each other, and if it happens to be a more appropriate one for the digital economy, so be it.
QUEST: You didn't take the dollar, it's going back in my pocket.
CASEY: Thought it was a gift --
QUEST: Again, you had your chance, we'll have a profitable moment after the break. The markets are a record, all three of them.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment, and very profitable, look at that. The Dow is at a record, the S&P is at a record, the Nasdaq is at a record.
We haven't seen that for some time. And the reason, of course, in fact, the Dow is at the highest point of the day. What can one say about it? It
is Fed instigated. It is Fed, and it is Fed executed.
How long this lasts, of course, depends on what sort of corporate earnings follow on through in the days and weeks ahead. Bearing in mind, we know
the economy is going to slow down. The U.S. economy slowing, the European economy is slowing down.
So, once again, we can say it's chicken and egg, did the markets demand it from the Fed or did the Fed come to the rescue of the markets? It doesn't
really matter, the reality is the same. Once again, the U.S. Central Bank is propping up the market through liquidity on the promise of cheaper
interest rates.
I'm not sure it matters, it's the middle of Summer and the markets are up, and everybody is feeling good which is just the time for me to say, 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.
(BELL RINGING)
The bell is ringing, records! The day is done.
END
