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Quest Means Business
The U.S. Economy Takes Its Foot Off The Gas Just As The Fed Gets Ready To Make Its Move On Rates; U.S. Justice Department Has Just Given The Green Light To Sprint And T-Mobile Merger; Softbank Is Launching A Second Massive Tech Fund; Shipwreck off Libyan Coast Kills More Than 100 Migrants; 67 Rescued Migrants Arrive In Malta; Democrats Want Grand Jury Evidence from Mueller Report; Trump: Will Reciprocate On French Digital Service Tax; Hail and Mudslide Force Tour De France to End Stage Early; Huge Gold Heist at Brazil Airport; 15,000 Protesters Stage Sit-In at Hong Kong Airport; Hong Kong Business Leaders Voice Concern amid Unrest; Democrats Take Aim at Silicon Valley; 2020 Candidate Buttigieg Lays Out Economic Plan; Buttigieg: America Deserves a Raise; "Fortnite" World Cup Kicks Off In New York; Braving The Skies With The Breitling Jet Team; Breitling CEO on Building A Private Jet Team; Breitling CEO on Transforming a 135-Year-Old Brand; Breitling CEO: 2020 Is Our "Big" Year For Women's Watches; S&P 500 and NASDAQ Set To Close at Record Highs; European Stocks Finish the Week Higher. Aired 3-4p ET
Aired July 26, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ZAIN ASHER, CNN INTERNATIONAL HOST: A bit of a lackluster day there on the Dow. The Dow is up by 41 points despite the fact that we got GDP coming in
at a solid 2.1 percent. The NASDAQ and the S&P 500 are at record highs. The Dow though has been weighed down by industrial stocks, a lot of those
companies concerned about a looming trade war. Those the markets, my friend, and these are the reasons why.
The U.S. economy takes its foot off the gas just as the Fed gets ready to make its move on rates. And shares in T-Mobile and Sprint are surging as I
speak. Their massive cellphone merger is no longer on hold. It has been approved by the Justice Department and when it comes to threats on trade,
Donald Trump is now putting French wine on the menu. We will explain why. Live from the world's financial capital here in New York City. It is
Friday, July the 26th. I'm Zain Asher and this is QUEST MEANS BUSINESS.
All right, welcome everybody. Tonight, growth flows in the world's biggest economy. The U.S. GDP growth fell in the second quarter, down one
percentage point from the first three months of the year. That number the still slightly better than what analysts had been expecting, a fall in
business sentiment; investment rather balanced out strong increases in consumer and government spending.
President Trump is partly blaming the Fed for the weak number. He says the USA is set to the zoom. Our Cristina Alesci is following it also.
Cristina, when you look at this in context of other GDP numbers that you've gotten since Trump has been President, this is actually the slowest
increase. Just walk us through why.
CRISTINA ALESCI, CNN BUSINESS POLITICS AND BUSINESS CORRESPONDENT: So, part of it has to do with this looming trade war. Businesses do not have
confidence in making investments, and that's usually a leading indicator. So, the consumer is usually the last to know that the party is over. And
CEOs are reluctant to make decisions, they are reluctant to make investments, which really weighed down this growth number.
Trump is out there hitting the Fed. It's not the Feds fault. It's the fact that he has launched this protracted trade war with China. He has not
been able to reach a deal, in addition to the fact that he cut taxes on corporate America in an attempt to boost growth. It doesn't look like that
that really is sustainable, because it looks like we've -- we're weaning off the effects of that.
ASHER: So when you look at the GDP numbers, specifically, you talk about business investment being slightly lower. But then at the same time, you
also have consumer spending being one area that's doing much better than people have been anticipating. Walk us through why.
ALESCI: Really unexpectedly strong consumer spending number. I mean, everybody thought it was going to be strong, but it was even stronger than
expectations. And part of that has to do with like the booming stock market. So, people feel good. There's an incredible amount of optimism.
In fact, there are some numbers that show that consumers are buying more durable goods, that they're making long term investments.
But again, this is against the backdrop of the business environment and business spending not being as strong. And typically, when I spoke to the
economists this week, they were telling me that consumer spending is sort of a lagging indicator.
So, the consumers are the last to know that the economy isn't as strong as what would appear to be now. Look, I think we have real challenges for
growth going forward. I think even if we do get a resolution or some kind of a deal with China, I think there are real questions about how the
slowing global growth environment really impacts the U.S. And I think that's going to continue to be a big question.
Politically, though, it's really difficult for Trump to sustain and meet that three percent growth target that he has before the 2020 election.
There is going to be a lot of pressure to do that.
ASHER: Right, so how might other candidates in the Democratic field 2020 capitalize on this?
ALESCI: They're going to hit him hard. They're going to hit him hard on the tax cuts, because that, again, was supposed to benefit the average
American by -- the line from the administration was you cut taxes on corporations, they'll hire more, they'll give people more wage increases,
and that doesn't appear to be the case.
So, the Democrats will come out and say, "Hey, look, you gave corporations this big tax cut. Where are the benefits for the average person? Where is
the wage inflation? The meaningful wage inflation ..." and I think that's where you -- you already heard Joe Biden say it.
ASHER: Right. All right, Cristina Alesci, thank you so much.
ALESCI: Thank you.
ASHER: Have a have a great weekend. Okay, so today's GDP report comes just five days before the Fed will announce its decision on interest rates.
The New York Stock Exchange floor trader Peter Tuchman told CNN investors are ready and waiting for a cut.
(BEGIN VIDEO CLIP)
[15:05:01] PETER TUCHMAN, FLOOR BROKER, QUATTRO M. SECURITIES: GDP numbers were good. Business investment is down. Manufacturing down. So, I think
they're responding to potential global slowdown, and that's why they're actually lowering it. The market is loving it right now, right? The Dow
at 27, 200. The S&P having a really banner day here, up almost 20 handles.
So, the market tells us, in my opinion, what it thinks of these moves, of these big economic moves and they're loving it. People are buying this
valuation. So, it seems good to me.
(END VIDEO CLIP)
ASHER: And Wall Street is putting together an economic puzzle to really figure out what exactly the Fed is going to be doing next week. These are
the pieces we had already. Markets. Markets have certainly been fairly strong and stable, but that's largely because investors are expecting the
Fed to cut rates.
Jobs. Jobs is another area, again, strong but of course pay is lagging. And global factors. We actually heard this week, the European Central Bank
is preparing fresh stimulus and that gets us through today's new piece, U.S. GDP. We've been seeing economic reports from retail sales to durable
goods orders, that gave us an idea what it would look like.
There are still two key pieces missing, which we will actually get on Tuesday, inflation, how fast the cost of goods is rising; and of course,
consumer confidence, how Americans feel about the future of the economy. That fell last month. Neither of those is likely to change what's already
on the table. A lot of people are saying they really do anticipate a rate cut this time around. The question is, of course, how deep will that rate
cut be?
Joining me now is the Founder and President of MacroPolicy Perspectives, Julia Coronado. Julia, thank you so much for being with us.
JULIA CORONADO, FOUNDER AND PRESIDENT, MACROPOLICY PERSPECTIVES: My pleasure.
ASHER: So, just walk us through how this two percent -- 2.1 percent GDP that we just got actually affects the Fed's decision making? Does it make
their decision harder at all? Even though everyone is anticipating a rate cut.
CORONADO: So, there's a couple of things in the report. One is the growth picture, which looks fine. The consumer spending which you just
highlighted looks resilient. Investment is a worry spot and that does tend to be the leading indicator. So, that's a concern that reflects the global
slowdown. Maybe it is one reason for the Fed to get ahead of that and ease policy a bit.
The other aspect of the report was the inflation. So, we got a preview of that. You mentioned we're going to get the details on Tuesday, but we it
came in unexpectedly low. And that has been the story throughout the recovery. Inflation is just persistently low, it's lower than they want it
to be. It's a reason to, at a minimum, just recalibrate policy a little bit.
ASHER: So, when you think about the fact that business investment isn't where -- either the government or some economist had been anticipating or
hoping, how does that factor into how much they cut rates by?
CORONADO: Well, so you know, that's been a debate and we've gotten mixed signals from the Fed about whether they'll cut 25 basis points, whether
they'll cut 50 basis points. I think that they've signaled pretty clearly they're going to cut 25. I think 50 would be a big surprise.
There isn't an emergency here. There isn't a recessionary threat looming. It's more of a let's get ahead of it. They're calling it an insurance rate
cut. Let's get ahead of these risks and ease policy and keep markets well supported before those risks really hit the numbers, hit hiring and hit the
consumer. So, for that reason, I think they'll go a little bit more gradually.
ASHER: Okay. So when you think about the economy overall, I mean it's doing well, maybe the 2.1 percent wasn't what we got in first quarter 2019,
but it's still a solid number, nonetheless. Is the Fed thinking purely at this point governed by trade war fears?
CORONADO: No, there's -- they point to a few factors. One is the trade wars and the uncertainty that brings and we can see that weighing on
business investment. They're hearing it from their contacts. We're seeing it in the numbers. The other is what you already mentioned, the global
slowdown. You know, whether the trade war is the primary cause, there's a pretty pronounced global slowdown.
We heard from ECB and Mario Draghi. This is a worrisome picture, certainly for Europe, for China, for Asia. So, that's going to affect us. It
already is affecting us through trade. Trade was exports and imports, both down pretty significantly in the first half.
ASHER: There's a lot who are saying the recession fears in the U.S. are not necessarily valid.
CORONADO: Right. There aren't flashing recessionary indicators in the U.S. So far, the picture of U.S. resilience is intact in the data, but
that's what the Fed wants to ensure stays there.
ASHER: They said it's an insurance policy.
CORONADO: It is insurance policy. So, it's not the beginning of a long rate cutting cycle. If all goes well, it's a rate cut here, maybe another
one down the road. Keep the train on the tracks. Don't wait until those recessionary factors are hitting you upside the head.
ASHER: Right. Right, right. Get ahead of the problem. So, when you think about consumer spending, I mean, yes, this is sort of a two-pronged
GDP report whereby consumer spending turned out pretty well.
CORONADO: Yes.
ASHER: Business investment, not so great. Why -- what is behind the growth in consumer spending?
CORONADO: So, consumers are feeling good. The labor market is strong. Wage gains are decent, they're not fabulous, but they're okay. Consumer
confidence is pretty good.
[15:10:10] CORONADO: So, consumers are feeling, you know, they're feeling good about their economic prospects. They're spending at a reasonable
pace. It's not really as much of a boom as today's numbers probably indicate. There's volatility in the numbers, just look at the first half
of as a whole, and it is two and a half, slightly above two and a half percent spending. That's kind of where the consumer has been. They've
been really rock solid, very stable and that's very important.
If you can't -- you're not going to get a recession if the consumer stays on track. So, the whole idea, I think, of getting ahead of this risk is
short circuit that hit to confidence.
ASHER: I see. And when you think about the S&P 500, even though the Dow - - we don't have it up there anymore -- but even though the Dow was sort of a bit lackluster today, when you think about the S&P 500 and the NASDAQ
both in record territories, what's behind that boost?
CORONADO: Well, I mean, there's two things. One, I think the fact that we are learning yet again that interest rates are going to be low for as far
as we can possibly see that is a sort of the discount rate at which we apply to future earnings. That boosts the stock market.
So, you've got the combination of the U.S. looks pretty resilient and interest rates are going to stay low for as far as we can see. Therefore,
that gives you some good valuations. They may be a little optimistic. They are not discounting any of those recessionary possibilities or that
global slowdown hitting.
And actually, we are seeing that in the earnings reports. Right? Some of the earnings haven't been meeting expectations. There's some guidance,
especially with companies exposed to that global economy -- haven't been -- you know, we're not in double digit earnings territory. So, we'll have to
see how that evolves as the year progresses.
ASHER: Julia, thank you so much. Appreciate you being with us.
CORONADO: My pleasure.
ASHER: So, GDP is just one factor and investors are watching. Let's take a look at the Dow. It has been a bit of an up and down day as I was saying
earlier. Big industrial names like Caterpillar, Boeing and 3M are actually pulling the Dow back. But the S&P 500 and the NASDAQ as Julia and I were
just talking about are both on pace as I speak for record closes. That's partly thanks to the better than expected GDP report, also strong earnings
from Twitter and Google's parent company, Alphabet. We'll have a little bit more on that with our Clare Sebastian a little bit later on in the
show.
And Sprint and T-Mobile have been trying to merge for more than a year. The U.S. Justice Department has just given the green light. One more
agency and several lawsuits remain in the way though. And Hong Kong protestors chart a new course to make their message heard, staging a sit-in
at the city's International Airport. We will bring you the latest developments after the break.
(COMMERCIAL BREAK)
ASHER: The third and fourth largest wireless carriers in the U.S. has struck a deal with the Justice Department to complete their merger. Shares
of Sprint and T-Mobile are rallying. The two companies argued they need to merge in order to take on Verizon and AT&T. AT&T, by the way, of course,
owns CNN. Brian Fung is following this story from Washington for us. So Brian, just walk us through the terms of this deal.
BRIAN FUNG, CNN TECH REPORTER: Yes, let's talk a little bit about what is going to happen as a result of this settlement involving the Justice
Department. Sprint, T-Mobile and Dish Network, which is going to become the nation's new next fourth wireless carrier by picking up Sprint, and
it's prepaid segments including Boost Mobile and Virgin Mobile.
Now, that's not the only thing that's happening here. As a result of the settlement agreed with D.O.J., Sprint and T-Mobile will -- the new T-Mobile
will give Dish access to its network for a period of seven years. That's to help the new carrier owned by Dish gain traction as it tries to become a
viable fourth competitor here.
Now, we also have, you know, about nine million of these subscribers shifting from Sprint to Dish and I think, you know, one big question moving
forward is going to be is that going to be enough subscribers to really make Dish a viable fourth here, particularly because these subscribers are
going to be prepaid subscribers, not postpaid subscribers which tend to be a little bit more lucrative and valuable for a wireless carrier.
ASHER: Okay, so Dish is going to benefit. The only question is how much will they benefit? But in terms of what the new T-Mobile has to gain,
obviously Sprint has been struggling, so the new T-Mobile, what do they have to gain in terms of being able to compete with AT&T, which is number
one in America, and Verizon, which is number two.
FUNG: Well, was the result of this deal, the new T-Mobile will have about 92 million subscribers, that's about as many as AT&T currently has at 93
million. So, it really puts T-Mobile within striking distance of some of the big two wireless carriers in the United States.
And T-Mobile says with this deal, it will be able to spread next generation 5G mobile data to across the United States on a much faster basis than it
would otherwise. Now, you also have a group of states that are suing to block this deal saying that's not what's going to happen here that in fact,
prices are going to go up over the long term because you now have a reduction competition due to the fact that T-Mobile has now gotten bigger,
and the fourth competitor Dish is much smaller.
ASHER: Brian Fung. Thank you so much. Softbank is launching a second massive tech fund. This one will be called Vision Fund 2 and will be done
without money from the Saudi Kingdom. Instead, the likes of Apple, Foxconn, Microsoft and the Kazakhstan will contribute more than $100
billion to invest in startups working specifically on artificial intelligence.
The First Vision Fund has been a resounding success. Profit is actually up more than 300 percent in the fiscal year -- in the last fiscal year. Its
greatest hit so far might actually be Uber. The Vision Fund made a big bet at a discount while Uber was going through a series of PR problems. It
paid off when Uber finally went public earlier this year.
It also actually has a slice of Slack as well. The fund actually bought into Slack at about $5 billion valuations since its IPO. Slack is worth
more than three times that. The Vision Fund was also in early on WeWork. Reports say WeWork could be aiming to go public this fall. It would be the
year's second biggest IPO, only behind Uber.
Jerry Colonna is a venture capitalist who built some of the original tech investment funds working with Softbank back in the 90s. His book is called
"Reboot: Leadership and the Art of Growing Up." Jerry, I have to say first of all, I really thoroughly enjoyed your book, we'll get to that at a
different date though, but --
JERRY COLONNA, COFOUNDER AND CEO, REBOOT: Well, thank you.
ASHER: When it comes to specifically, this Vision Fund 2, just walk us through the investment strategy because there is a target on AI. Why?
COLONNA: I think it's pretty obvious that AI and more specifically machine learning represent the future of technology. It represents the future of
innovation, if you will. And Masayoshi Son has always been on the leading edge and way out in front. Sometimes a little scary, sometimes a little
risky, but always been out in front in recognizing what the next trends are coming.
[15:20:06] COLONNA: And I think he did it in Vision 1. And I think he's going to do it again in Vision 2.
ASHER: So how much control will the founders actually have over the investment strategy now that they're obviously not going to be working with
Saudi Arabia anymore?
COLONNA: I don't know the terms of the LP agreement. I don't know the terms that they have here. But it would surprise me if there's any
dramatic change in Vision 2 than there was in Vision 1.
ASHER: So, how did this Vision 2 -- actually both funds really changed the relationship between startups, corporations, and investors? Walk us
through that.
COLONNA: Yes, I think that that's the thing to really focus on here. What we're talking about is a magnitude of investment in that, you know, 20
years ago, 30 years ago, when I started in this business, we weren't talking about these numbers, you know, $108 billion fund was just not
something that was seen before.
And with that kind of investing power, what you're seeing is significant investments $10 billion investments at a time, that really alter the
trajectory and the timeframe it takes to launch a business.
This really challenges and changes the way the normal trajectory for a company to unfold, and then there's a corollary challenge, of course, which
is it challenges leaders, it challenges the business leaders to grow in different ways in a much more rapid pace.
ASHER: So what effect does that have on Silicon Valley culturally?
COLONNA: I think that's really a fascinating question right now. One of the biggest concerns I would have and to be clear, one of the things I do
right now is I coach many of these CEOs. And one of the challenges that they all have, is that we're raising the ante. We're raising the
definition of what does it mean to be successful?
And so if I take a -- I mean, it sounds wonderful, if I take $100 million investment in a third round of investment in my company, I have to have a
significant exit in order to generate a return on investment for my investors to satisfy the LPs who are in this fund, let alone the folks who
are driving Softbank Vision 2.
That changes the dynamic and one of the concerns I would have is, are we then forcing inadvertently, unconsciously forcing, kind of the worst
behaviors that we have seen of late in Silicon Valley, where there's just a heavy, heavy emphasis on return on investment and less of an emphasis on
building a long-term sustainable and ultimately ethical responsible business?
ASHER: All right, Jerry Colonna, live for us, thank you so much. Appreciate it. Have a great weekend.
COLONNA: Thank you for having me.
ASHER: You're welcome. Okay, so tech titans, Google and Amazon capped off a busy week for FAANG stocks. Google parent, Alphabet shocked investors
with better than expected earnings. The rebound from a weak first quarter has actually -- shares up 10 percent.
Amazon, a surprise too, ended a full quarter streak of record profits after spending more than $800 million in the second quarter speeding up shipping
for Prime members. The miss has shares down, you can see here at around one and a half percent. Clare Sebastian is joining us live now to talk
about Amazon more specifically.
So, when you think about just how much Amazon has been spending, just what they're spending trajectory has been that's really hurt them when it comes
to profit.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: So this quarter was yes, it was all about the one day shipping. As you say, they spent more than $800
million, more than is crucial, because $800 million is what they projected it would cost and has proved to be more expensive. They've said because of
transitioning in their fulfillment centers, because of moving product nearer to customers. All of this is a seismic shift to the vast
distribution network.
The CFO compared it to when they first launched Fulfillment by Amazon when they move beyond books and media into a broad range of products that they
sell now. So, this is a big issue. Plus they say they're only in the middle of this journey. This is going to go on for multiple quarters.
The profit deceleration is something of a big deal. Because is this taking us back, Zain, to the kind of a high growth, high investment, slightly
lower profit model that Amazon has really come to define. And I think that's why we see the share price down a little bit today. We had become
used to the profits going up for a number of quarters now.
ASHER: And Amazon is also one of obviously many tech companies that are facing regulatory scrutiny. Obviously, that's not necessarily impacted in
these specific results, though.
SEBASTIAN: No.
ASHER: We didn't see that.
SEBASTIAN: They barely mentioned it. But that doesn't mean it's not a cloud on the horizon. Certainly, we've seen this week with the FTC fine
that was leveled on Facebook. There were rumors that the FTC might be looking into Amazon. We know the Department of Justice has launched a
broader investigation into Big Tech and antitrust concerns.
[15:25:00] SEBASTIAN: Plus, we had the Treasury Secretary Steven Mnuchin this week saying singling out quite starkly Amazon saying that it had
ruined retail. That it was responsible for the demise of multiple smaller retailers.
So, clearly Amazon is in the sights of the administration. But for now, I think in the short term, certainly for investors, the bigger challenge
there is how they going to maintain their market leadership position and how much they're going to have to spend to do that.
ASHER: And let's talk about Donald Trump tweeting today. Guys, can we put up the tweet? Actually, Donald Trump tweeted about France's digital tax on
American companies. I actually can't read that without my contact lenses. The font is so small, but Clare, Donald Trump is basically talking here
about the fact that France has just leveled a digital tax on several great American companies.
He is talking about retaliating. Walk us through how he plans to retaliate. I mean, obviously, he didn't mention specifics, but what are
his options?
SEBASTIAN: Well, he kind of did. He said, his last sentence there, he said, "I've always said American wine is better than French wine." From
the subtext, of course, the President doesn't drink. But I think that the implication there is that since it's clear that the French law, the three
percent levy on the biggest tech firms unfairly in his eyes targets American companies, given that they are the biggest. He wants to retaliate
by the implication being putting a tariff on French products.
Now, this is in theory possible. The U.S. has launched a Section 301 investigation into this this digital tax. That's the same kind of
investigation that allowed them to put tariffs on Chinese goods. It's about unfair commerce discriminating against American companies.
So you know, this is a possibility. Does this now set up another front in this global trade war that we're seeing? I think that's the big question.
ASHER: Clare Sebastian, live for us. Thank you so much. All right. Still to come here on QUEST MEANS BUSINESS. Welcome to Hong Kong, 15,000
protesters stage a sit-in at one of the world's busiest airports as the standoff with the government shows no signs of slowing down. That's next.
(COMMERCIAL BREAK)
[15:30:00]
ASHER: Hello everyone, I'm Zain Asher. Coming up on the next half hour of QUEST MEANS BUSINESS, one of the world's busiest international airport is
taken by protesters. We'll show you the incredible pictures from Hong Kong.
And now we had the Cricket World Cup and the FIFA Women's World Cup. It is time for the Fortnite World Cup as well. We meet two teenagers who are
making money worthy of any professional athlete. These are the headlines for you at CNN at this hour.
A ship wreck off the coast of Libya has killed as many as 150 migrants. Like thousands before them, they attempted the risky journey across
Mediterranean in search of a better life in Europe. In Malta, 67 migrants were rescued at sea, were brought ashore by the armed forces on Friday.
And U.S. House Democrats now asking a federal court to release the unredacted Mueller report and grand jury evidence from key witnesses. The
top Democrat on the House Judiciary Committee says the House needs the material so it can decide whether to start impeachment proceedings against
the President.
U.S. President Donald Trump says America will issue a substantial reciprocal action in response to France adopting a new digital tax. The
tax targets companies such as Facebook and Amazon. The Trump administration says they unfairly targets American companies.
And today's stage of a Tour de France was unexpectedly cut short when a freak hailstorm and mudslides made the course impossible. The race ended
about 25 kilometers earlier than expected, allowing Colombian rider, Egan Bernal, to take the lead as yellow jersey.
And armed robbers in Brazil got away with 750 kilograms of gold and other precious metals, worth at least $30 million. It happened at the Sao Paulo
Airport Cargo Terminal. The robbers who took two airport workers hostage ultimately releasing them.
Visitors to Hong Kong's international airport were greeted by a remarkable spectacle on Friday. 15,000 protesters stormed the arrival halls causing
mass disruption at one of the world's busiest airports.
Flight attendants and airport staffs joined in on the 11-hour protest to condemn Hong Kong's government and police force. Many are still there late
into the night, Hong Kong time. It comes after suspected gang members carried out violent attacks on anti-government protesters last week.
In a day (ph) unrest Hong Kong authorities are trying to reassure international tourists and investors. They say, "Hong Kong is a welcoming
city for investors and visitors, and a safe city for travelers. The vast majority of people taking part in processions do so in a peaceful and
orderly manner."
Those words there seem to be soothing the fears of business owners in Hong Kong. Some are saying that after weeks of unrest, they fear the worst.
(BEGIN VIDEO CLIP)
CHAN KING, HONG KONG CHINESE IMPORTERS AND EXPORTERS ASSOCIATION (through translation): The economy of Hong Kong has been affected in a big way.
Our export in June saw a decrease of 9 percentage points from the last year. And we are really concerned about this. If the situation continues,
the economy will be in big trouble.
(END VIDEO CLIP)
ASHER: Isaac Stone Fish is with me. He's a senior fellow at the Asia Society. Thank you so much for being with us. So, and -- was it seem
protests across Hong Kong, several months now. Is Hong Kong's status as a major financial hub in Asia under threat as a result of this?
ISAAC STONE FISH, SENIOR FELLOW, ASIA SOCIETY: I think it's a threat as a result of the protest. I think there's a lot of constituents on the
Chinese mainland, especially in places like Shanghai and Tianjin which would love to see international companies that were headquartered in Hong
Kong, move to the mainland and that they don't feel like they need Hong Kong to act as a gateway anymore.
ASHER: So then, in terms of business investment in Hong Kong, are people actually rethinking whether or not Hong Kong is the right place for them to
invest their money as a result of this?
FISH: Can certainly imagine people getting off their flights from London and New York on Friday and seeing thousands of protesters protesting
peacefully, nonetheless, but thousands of protesters and thinking, wow, this is not the financial center that I thought.
That said, I think a lot of people do appreciate the rule of law in Hong Kong and recognize that if this were to happen in places like Shanghai or
Tianjin, police would crack down quite shortly (ph) on the protesters and that's not good for business either.
ASHER: Right, right.
FISH: Good for PR reasons and also for the idea of, oh, if we need a summary judgment here, we can't trust the police and the party to act in
our interest.
ASHER: That's interesting. So you're giving a different perspective there. But in terms of a resolution coming out of this very quickly,
that's obviously going to be important for people who have their money in Hong Kong.
[15:35:00] FISH: Certainly and that's not something that I or any of them should be holding their breath about. This really feels like it's going to
be a story for the next several months, if not longer. There's no easy solution to this.
And what the people in Hong Kong want and what many in the Hong Kong government and the Chinese government want are quite different. And I
think the remarkable thing about Hong Kong is that it will probably manage to remain quite a stable place both culturally, politically and
financially. I mean, less politically, but certainly culturally and financially while this turmoil continues.
ASHER: So you see it's quite resilient financially then?
FISH: Exactly.
ASHER: And then when you think about this -- you know, we've been obviously taking about from the macro perspective, businesses or companies
might, might be rethinking whether or not Hong Kong is the right place for them to do business, but what about businesses on the ground?
I mean, we heard just a sound bite of a gentleman talking about how -- just the fact that you have thousands of protesters closing the streets in some
of the busiest parts of Hong Kong, for ordinary small businesses on the ground, that's got to be an absolute nightmare.
FISH: I think it does. I mean, I think the positive side, you do have people coming in and out which for certain consumer businesses can be
helpful. But I think this is a large period of uncertainty. And uncertainty can really be a total buzz kill for certain investors. So I
think for local businesses that feel like they need to be able to predictively plot out what their future is, this is certainly not a good
time for them.
ASHER: And if Hong Kong isn't as resilient as you and I believe it is, let's just play devil's advocate for a second, and people do sort of
rethink whether or not it is the right place for them to do businesses and companies start pulling out their money. What kind of effect does that
have on the region?
FISH: I think it's excellent for Singapore, which has always been the best alternative for Hong Kong because it has a strong legal system as long as
you stay away from the ruling family, strong legal system and high living standards. And I think it could also be beneficial for other cities across
China depending on the macro with U.S.-China trade war.
I think it will have the worst effect for other countries around Hong Kong that do see, you know, that any sort of kind of deep financial start (ph)
pieces of them going through Hong Kong and of course, not good for the Hong Kong people themselves.
ASHER: What would you say that a resolution actually looks like in this scenario?
FISH: I think it would probably at this point be the resignation and apology of the current chief executive --
ASHER: Carrie Lam?
FISH: -- Carrie Lam, along with something from the protesters agreeing to say back down. I don't necessarily see that happening and it's also kind
of the, if you give an inch, take a mile fear.
ASHER: Right.
FISH: There's so many possibilities if Carrie Lam steps down and there's elements the protesters as you swath (ph) the protesters who want more.
So, I mean, it's -- part of I guess what we try to do is predict the future. It's really hard to know what's going to happen, but my best guess
is that this is just going to continue without a resolution.
ASHER: Well, she certainly digging her hill when it came to the exhibition bill. So, we'll see what she does this time. Thank you so much.
Appreciate you being with us.
All right, so up, Democrats are ready to take on big tech. This time, as Pete Buttigieg blasting Silicon Valley for ignoring workers' rights.
That's next.
(COMMERCIAL BREAK)
[15:40:49] ASHER: The field (ph) of 2020 Democratic hopeful is setting their sights on big tech as well. Pete Buttigieg is calling out Silicon
Valley for failing to recognize workers rights. It's all part of his new economic plan aimed to protect the employees and boosting paychecks. In a
campaign ad laying out the plan, Mayor Pete asked his supporters call him, said America's economic recovery has not lifted the ordinary worker. I
want you to listen to this.
(BEGIN VIDEO CLIP)
MAYOR PETE BUTTIGIEG (D) PRESIDENTIAL CANDIDATE: Economic progress has to mean that we are actually earning enough to live well. We were promised a
rising tide that would lift all boats. Sure enough, GDP went up, businesses boomed, stock market grew over decades, but our paychecks didn't
show it. Our incomes have basically stayed flat. That is why today, I'm sharing a plan that fights to get Americans the pay raise we deserve.
Does America deserve a raise?
UNIDENTIFIED SPEAKERS (in unison): Yes.
(END VIDEO CLIP)
ASHER: And Vanessa Yurkevich joins us live now. So, just walk us through what his plans are in terms of specifics. How is he trying to protect
workers?
VANESSA YURKEVICH, CNN CORRESPONDENT: It's very comprehensive. It's directed at the American worker, just some top line items off the bat.
He's going to guarantee American workers the right to join the union. He's introducing multimillion dollar penalties for employers that interfere in
union elections or workers rights.
He's allowing companies -- excuse me, he's allowing workers to collectively bargain directly with their companies and he's renewing calls for that $15
federal minimum wage with indexed wage growth.
And so, this is something that policy -- labor policy experts have been calling for, for years. And it's quite ambitious. So if, you know, Pete
Buttigieg makes it all the way to the White House, this is going to be a very ambitious plan that he's going to try to push through.
ASHER: This is not just the $15 minimum wage federally, he also wants to make sure that men and women have equal pay in this country. But, how does
he plan on making sure that happens?
YURKEVICH: He wants to make it public. So every big company out there, he would make it mandatory that these companies report publicly the wage
discrepancies between men and women. Obviously, giving people a look at how they're doing in the marketplace.
He's also supporting existing bills that are already out there, the Paycheck Fairness Act, which passed through the House, would ban employers
from using an employee salary history to determine their wages.
So he's really why the sweeping plan, but really targeting special groups like women and also minorities who have a harder time catching up to wages
as it begins with.
ASHER: And a lot of people talks about this idea of the gig economy, the so called sort of Uber and Lyft drivers, how they're hurt by the fact that
they're contractors and not necessarily forgoing employees. What's Mayor Pete saying about that?
YURKEVICH: This is a really big part of this policy proposal. He's calling out big tech companies by name, Google, Lyft, Uber, saying that
you're hiring contractors which is limiting them to what their rights are, being able to apply for full benefits. So what his proposal is, is
actually making it so that these contractors can unionize, can collective bargain and then will have stronger rights within these companies.
What's really interesting, though, to point out is that Mayor Pete had a huge big fund raising quarter in the second quarter about $25 million. A
lot of that money came from Silicon Valley, from the Silicon Valley executives that he is now --
ASHER: Oh, boy.
YURKEVICH: -- proposing this plan for. So it will be interesting how things go in the future, yes.
ASHER: And then he's not really the only sort of Democratic candidate that's sort of using big tech as a punching bag. Obviously, Tulsi Gabbard
is fighting a lawsuit against Google. I mean, just walk us through that.
YURKEVICH: And it's not just the Democrats. Republicans, you know, President Trump just tweeting today that Apple is not going to be getting a
discount on their parts that they get from China. But, yes, Democrats very much speaking to big tech warn trying to break up big tech companies,
including Amazon, saying they have a monopoly on the marketplace.
So, I think that we're going to be hearing a lot more of this as the stage sort of gets smaller in terms of the candidates that are going to be out
there because, you know, tech companies are being squeeze from all sides right now. They're very much in the forefront of the news with these new
regulations that are --
[15:45:05] ASHER: Privacy issues --
YURKEVICH: Exactly.
ASHER: -- internationally with the E.U. fines as well.
YURKEVICH: And I just think that presidential candidates are going to realize that this is an opportunity for them to start rolling out some
policies, continue to roll out some policies that target this issue.
ASHER: Well, we've got the CNN debates next week. We shall see what they say.
YURKEVICH: Yes.
ASHER: Vanessa Yurkevich, live for us. Thank you so much.
And don't forget as, I just said, the next Democratic debates will be live on CNN on Tuesday and Wednesday next week. See the feels of Democratic
candidates there. Coverage begins 8:00 p.m. Eastern time here in the United States. But, actually, you can see it again if you miss those times
at around 7:00 a.m. London time, the next day, of course, only on CNN. Trust me guys, you will not want to miss it.
Step right up and choose your player. The Fortnite World Cup is happening right now in New York. 100 of the world's top gamers have come to battle
out for part of a $30 million prize pool. Many of them already making a career out of the video game. CNN talked to two teenagers taking home six
figures a year for playing Fortnite.
(BEGIN VIDEO CLIP)
NOAM ACKENINE, FAZE MEGGA, FORNITE PRO PLAYER: My name is Noam and people know me as FaZe Megga.
DANIEL WALSH, FAZE DUBS, FORTNITE PRO PLAYER: My name is Daniel Walsh and everyone knows me as FaZe Dubs.
ACKENINE: My old name used to be like Meggatroll, but like -- it didn't seem like professional for me, so I just sort to down to like Megga so it
will look way cleaner.
WALSH: Right now, I make about $80,000 a year. And from tournaments I've made like over $100,000.
ACKENINE: I make like 120K, like this year, and especially with the World Cup coming up, I know I can make -- me and Dubs can make like even more.
WALSH: I definitely take this as my career because right now it's really competitive and we're in all of these tournaments. But like later, I plan
to like be more on like the content side and do streaming and like YouTube and stuff.
ACKENINE: Yes, in five years, I also see myself like streaming, doing YouTube, and also playing pro.
Like I'm one of the youngest pro Fortnite players that qualified for the World Cup and it just feels amazing.
WALSH: I have grinding and I have put in the time so I know I am one of the best and I know I can win the tournament.
ACKENINE: Yes, it was like really unexpected like knowing the prize pool which was like really big. But me and Dubs, we've been like grinding for a
while.
WALSH: To become like a really good duo, you have to put a lot of hours in and gain chemistry because if you don't have chemistry, you could be two of
the best players, but if you don't have chemistry together, you can't be one of the best.
ACKENINE: It's definitely a little weird for like 18 year olds and 20 years olds like qualify, but at the same time, we've all been playing
Fortnite for like the same amount of time and we've been screaming for about the same time.
WALSH: Fortnite definitely impacted my school because my grades started going down, but I was like making a lot of money so it was like hard for
me. I switched to online school right after I qualified for World Cup.
KYLE WALSH, FAZE DUBS BROTHER: I'm Kyle Walsh. I'm FaZe Dubs's older brother and I'm super proud of him. This is a big deal. For me and my
family, not a lot of people know, we don't come from much, like I live with a single mom and we live in like a townhouse. So, first and foremost, it
would be crazy and Daniel keeps saying and he's like, we're going to -- I'm going to buy us a house.
AARON ACKENINE, FAZE MEGGAS BROTHER: Getting millions in the house out of nowhere, it's going to be crazy. I know he's not going to spend it crazy
but, you know, my mom's been close to losing her house so he says -- he always he's going to help her first. So I think it's real humble of him.
Yes, it's hard when work is so important and they're making so much money that like our parents don't really see it. You have to convince your
parents, yes, this is important, this is their career.
K. WALSH: Some good boys right here.
D. WALSH: Let's go.
N. ACKENINE: Let's go.
(END VIDEO CLIP)
ASHER: When we come back, a watch company has been taking to the skies. CEO of Breitling on what's ahead at his corporate jet team. That's next.
(COMMERCIAL BREAK)
[15:51:53] ASHER: You may remember from watching this program yesterday that Richard finally got his top gun moment. He took off with the
Breitling jet team on a flight like no other, full of daring spins, plenty of G-force and breakneck speeds. Through it all, Richard was a trooper.
He made it out of one piece, but he says he's keeping his day job.
Before sitting up, Richard spoke with Breitling CEO who also oversees the company's luxury watches. He told Richard why Breitling is so committed to
its feet and what time piece we should look for in 2020.
(BEGIN VIDEOTAPE)
GEORGES KERN, CEO, BREITLING: We're working with the jet team since 17 years and we are the only corporation in the world having a private jet
team, which we use to host clients or journalists and giving them the experience you're going to have today. And of course, as we have these
strong roots in aviation, having such a platform was always very important for the brand.
RICHARD QUEST, CNN HOST: It's not cost-effective though, is it? I mean, I don't know if any other company that has one, two, three, four, five, six,
seven.
KERN: Indeed, it's usually expensive. And the problem is -- I mean, you wouldn't have any Formula One team with just one sponsor. Mercedes has
more sponsors on their car than just Mercedes, as well as Ferrari.
In particular, when you need to transport these planes, just transporting these seven planes, for instance, Dubai, for sure, would cost us 1.5
million. So this is why we're trying now to look also for additional sponsors to help us in internationalizing, I would say, the jet team.
QUEST: Talk about the business. You, having very clear strategy which is you simplified the line, you have increased the range at the same time, and
-- within the marketing. But at the moment, just stick with the watches. What is the strategy now?
KERN: Well, we use, I would say, in the recent past last 20 years, really to concentrate on an aviation, but writing historically was more than that.
We are the number one manufacturer of pilots watches and we will remain the number one manufacturer of pilots watches in the world. But, we did also -
- we covered also two more areas, sea and land with products of the '40s and '50s, which we've been relaunching over the last couple of weeks and
months.
QUEST: You've been CEO for 18 months, give or take, and the average CEO's life is three years -- three to four years. Now, you came in, you did a
massive transformation. Let's say that's now in place, but you should be seeing evidence of that. Are you?
KERN: We are. We are. We are very happy to see gross, double digit gross and -- in all regions, even in our established markets, which was very
important for us, but of course, also in Asia where we invest substantially.
QUEST: And expanding, obviously, China, women's watches. I mean, you know, women don't necessarily want as large a time piece.
[15:55:07] Are you prepared to make concessions and go smaller, neater, more nimble?
KERN: Yes. Next year would be a big women's year. And we have many new products as the pilot. Breitling has been very strong in the '90s and the
early 2000s with women watches, but with sports women's watches, not with elegant women's watches and this is (INAUDIBLE).
QUEST: So, finally, in the future, how would you say you're going to divide the company between elegance and sport?
KERN: The beauty is we can do both, really. We have credibility and the history in both segments. The women's market is essentially 60 percent of
the global watch market, so more than man. So, there's a potential here. But I think, again, it would be -- I would say, very well balanced.
(END VIDEO CLIP)
ASHER: And at this moment left the trade on "Wall Street." S&P 500 and the NASDAQ are on pace for a record close. We will have the final numbers
and the closing bell right after this. Don't go away.
(COMMERCIAL BREAK)
ASHER: Well, we are in the last few moments of trading on "Wall Street." Let's look at the Dow first. We're up only 50 points or so, partly because
of low volumes contributing to the days up and down, sort of seesaw moves. Investors are digesting mixed media report in the United States. Growth
fell, but it was still better than expected.
Comments from the President, his top economic adviser cause a little bit of a dip earlier in the day. You see the slivers of red there. Larry Kudlow
says we shouldn't expect a grand deal with China next week.
And let's take a look at the broader markets before we're going to leave you, the S&P 500 and the NASDAQ are, as I speak, at record highs with just
one minute left in the trading day. Both are up around 2 percent for the week. Those gains are partly thanks to Google's parent company Alphabet
and Twitter showing strong second quarter earnings.
European stocks also finished the week higher. U.K. and Swiss stocks were the best gainers. Market there still riding harder after the ECB hinted
that more monetary stimulus is on the way, Thursday.
OK. That is "Quest Means Business." I'm Zain Asher coming to you live from New York. The closing bell is ringing as I speak on "Wall Street" and
"The Lead with Jake Tapper" starts right now.
[16:00:00]
END
