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Quest Means Business
Impeachment Proceedings Moving At A Rapid Pace In Washington; Christine Lagarde Tells Richard Quest That Impeachment Could Create Major Economic Disruption; WeWork Has Finally Postponed Its Ipo. Aired 3-4p ET
Aired September 30, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:16]
PAULA NEWTON, CNN INTERNATIONAL HOST: Efficient little rally underway on the Dow. This is the final hour of trading on Wall Street. We'll see if
we can push through to 27,000 in the next hour. As you can see there, stocks firmly in the green on this last day of the third quarter. Here is
what's moving the markets.
Christine Lagarde tells our Richard Quest that impeachment could create major economic disruption. I'll speak with Mohamed El-Erian to know what
lies ahead.
Saudi Arabia's Crown Prince warns of a global economic collapse if the world goes to war with Iran.
And this just isn't going to work. WeWork has finally postponed its IPO.
Live from the world's financial capital, New York City. It's Monday, September the 30th. I'm Paula Newton, in for Richard Quest and this is
QUEST MEANS BUSINESS.
Tonight, impeachment proceedings moving at a rapid pace in Washington. It's a city consumed by the investigation that House Democrats have opened
into President Donald Trump who is now demanding to meet the whistleblower who outed his conversation with the Ukrainian President.
Meantime, the outgoing head of the IMF tells CNN economic consequences could soon follow the political fireworks erupting in the U.S. Capitol.
(BEGIN VIDEO CLIP)
CHRISTINE LAGARDE, OUTGOING MANAGING DIRECTOR OF INTERNATIONAL MONETARY FUND: It could very well create massive disruption, and I think it would
undermine the U.S. leadership.
(END VIDEO CLIP)
NEWTON: Okay, Democrats in the House can forget their congressional recess this week. The Chairman of the House Intelligence Committee says his panel
is moving swiftly on hearings, and of course, those all-important subpoenas.
Adam Schiff says the whistleblower will testify very soon. Lawmakers can also expect to hear from the former U.S. Special Envoy to Ukraine, Kurt
Volker. That's on Thursday, and on Friday, sources say the Inspector General who handled the whistleblower's complaint, Michael Atkinson, will
testify to the Intelligence Committee in private and that is key.
Now in the past few moments, Donald Trump went back on the offensive from the White House claiming that he was the victim of a conspiracy.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: So Adam Schiff made up a phony call and he read it to Congress and he read it to the people of the
United States. And it's a disgrace. This whole thing is a disgrace.
(END VIDEO CLIP)
NEWTON: Now, our Senior Congressional Correspondent, Manu Raju has been following all of this from Capitol Hill. I mean, Manu, the tick tock of
this is moving very quickly and we know the Democrats are being very deliberate about this.
And yet all are they convinced that this is still the right thing to do, because there is of course still that corner of Democrats saying, are we
sure we want to go through with this? Will this be okay for the 2020 campaign?
MANU RAJU, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Well, there are Democrats overwhelmingly in the House who do support an Impeachment
Inquiry, but when it comes to actual Articles of Impeachment, actually voting to impeach this President, making this the third President in U.S.
history to get impeached, now that is a different question that has not yet united this party, but in the matter of weeks ahead that could presumably
change.
Now Democrats on the House Intelligence Committee do plan to move forward rapidly. We could expect subpoenas soon for Rudy Giuliani, the President's
personal attorney who went to and tried to reach out to Ukraine officials and urged Ukraine officials to investigate the Biden, someone who was
mentioned himself in that whistleblower complaint.
Also other officials consume be hit with subpoenas. Already, the State Department -- the U.S. State Department has already been hit with the
subpoena from Democrats to turn over records and also scheduled depositions for five State Department officials who were mentioned in that complaint.
Now in addition to that, I just had a chance to talk to Mark Warner, the Vice Chairman of the Senate Intelligence Committee, which is also
investigating this matter saying that they want to get to the bottom of this issue.
(BEGIN VIDEO CLIP)
SEN. MARK WARNER (D-VA): There are an awful lot of questions raised by the whistleblower's complaint. It touches on a wide variety of areas and wide
variety of areas that if they all prove to be true, I think, open a whole lot of legal questions.
But again, let's take this step by step. Let's -- I'm not going to jump to conclusions. I want to try to treat this process with the respect and
fairness that everyone deserves.
I wish we'd see that same kind of respect for the process coming out of the White House.
(END VIDEO CLIP)
RAJU: And when I asked the Senator about whether he is concerned about the whistleblower's safety he said, quote, "Any rational person would be
concerned about the whistleblower's safety after the President's comments" and his committee along with the U.S. Intelligence Committee both want to
talk to the whistleblower although that date has not yet been scheduled -- Paula.
[15:05:07]
NEWTON: It's certainly a point of concern when you start talking about all of that. It is quite serious. Another point of concern, of course, is the
fact that the President is fighting back and fighting back hard.
I've been interested --
RAJU: Paula, I lost your audio there. But I believe you're talking about what the House Democrats are planning on doing in the days ahead, but
expect this investigation to move forward, to wrap up, presumably, by Thanksgiving time as the Democrats want to make a decision on whether or
not to impeach this President -- Paula.
NEWTON: Manu Raju will continue to follow, as we say these fast moving developments for us on Capitol Hill. Appreciate it. And now the
Impeachment Inquiry into Donald Trump does more than just threaten his presidency.
It also raises new questions over the chance of the U.S.-China trade deal. Wall Street is busy trying to guess that the pressure on Mr. Trump to make
some kind of a deal more or less likely. I don't need to remind anyone that the jury is out on that. The trade deal, the President already agreed
with Mexico and Canada could be in jeopardy though. Ratifying it depends on backing from the Democratic-led House at a time when cross-party
cooperation seems ever more unlikely.
And major legislation could also get sidelined like the effort to reduce prescription drug prices for millions of Americans. Now with that deal in
the balance and trade disputes growing ever louder. Christine Lagarde spoke to Richard Quest and had this warning.
(BEGIN VIDEO CLIP)
LAGARDE: You know, I lived through Watergate. And I was actually working on the Hill as a little intern of a member of the House Judiciary
Committee, Bill Cohen.
And I could see in those days, how much energy, focus, brainpower was actually spent on the Watergate issues. If this is going to be the same
again, I can only imagine how much more energy, brainpower and focus there will be on those purely political issues, which will be a complete
distraction from focusing on the economy, producing values, the wellbeing of people.
I respect what is going on. And I have no opinion and no view because I'm not an American.
But from an economic point of view and from the global economic point of view, it could very well create a massive disruption. And I think it would
undermine the U.S. leadership.
(END VIDEO CLIP)
NEWTON: Okay, some blunt comments there. Lagarde covered a lot of ground with Richard. You can see the whole interview on Wednesday's program, same
time, same place, only right here on QUEST MEANS BUSINESS.
And we want to get, of course, our expert view on all of these matters. Mohamed El-Erian is Chief Economic Adviser at Allianz. Let's deal first
with the impeachment. The market so calm about this, why?
MOHAMED EL-ERIAN, CHIEF ECONOMIC ADVISER, ALLIANZ: Because it has seen political news before and the right trade has been to just sidestep that.
The assumption is even if the House moves forward, the Senate won't.
So right now the markets --
NEWTON: To a real threat of impeachment as Manu was saying, we've got this inquiry, but the actual impeachment won't come to a head.
EL-ERIAN: Correct. And then there's a second view, and you mentioned it is that the market now believes that the likelihood of a trade deal has
gone up. So put those two things together and the market is very relaxed about it.
NEWTON: And which would be good reasons at this point in time, except for the fact that we still don't even have a trade deal gone through on USMCA
and that's already been negotiated.
EL-ERIAN: And except that the rest of the world is slowing very rapidly in Europe, in particular, to U.S. has to continue to be the engine of growth,
and you need to put more gas in the growth, in that engine.
And right now, we're looking at paralysis on Capitol Hill to really get through this. So I think in the short term, the market is right to be
calm.
But if you take it longer term, because there's real question marks about how we keep this rally going.
NEWTON: One way that some people believe to keep the rally going is of course that trade deal with China. Stephen Schwarzman says this is brand
new territory for you as politics. He is the Blackstone CEO, of course, and he is known for his close ties with the Trump administration. I want
you to listen to what he told, Richard.
(BEGIN VIDEO CLIP)
STEPHEN A. SCHWARZMAN, CEO, BLACKSTONE: It's been a sort of an unprecedented level of hostility. And you know, I've been around a long
time, and I've never seen a situation where there was an election and the day after, you know, there's some outcry and, you know, attempt to sort of
take down, you know, the next President and so I don't know what ever stops this over a four-year period, frankly.
RICHARD QUEST, CNN INTERNATIONAL HOST, QUEST MEANS BUSINESS: That's where I was getting at -- that of course is the important bit, isn't it because
it may not be a full year period. It may be an eight-year period after next year. What's gone wrong here? I mean, why has the well become so
poisoned?
SCHWARZMAN: I have difficulty understanding it because in my life, you know, when your team loses an election, which happens with some frequency,
it's a like a British system, the king is dead, long live the king, there's always a new king. In this case, it just didn't take and so we're in new
territory.
[15:10:10]
SCHWARZMAN: At least over the last more or less 50 to 60 years since World War II, and not having a significant part of a political establishment, not
getting on board with a new administration.
QUEST: You have been very closely involved with the administration, the President of China through your own work, of course, in China.
I'm aware the last line of your chapter on this, is only time will tell.
SCHWARZMAN: Yes.
QUEST: The time honored phrase, only time will tell. Do you think the administration wants a deal?
SCHWARZMAN: Well, I think yes. You know, they haven't explained their position extremely well. But basically, what they're looking for is
equivalency, and right now, tariffs and taxes measured between the two countries, that it's about three times as much for the U.S. to bring goods
into China, as it is for China to bring goods to the United States.
And I think the administration just believes that's unfair. The reason they believe that is it is unfair.
QUEST: But is the negotiating strategy, negotiation by tweet. Is that really working?
SCHWARZMAN: Well, I guess the way to think about it, is that nothing's worked for 70 years. And so with that timeframe, you know, I think it's
hard to know exactly what an optimum strategy is. I think, because I talk to, you know, the Chinese and they understand that there's a need for
rebalancing, I think President Xi has said that publicly.
And so the question is, how do you do that? How fast does it happen? And how, how impactful is it over what time frame?
(END VIDEO CLIP)
NEWTON: You know, Mohamed, I'm glad he used the word impactful, because some people are trying to figure out what does the deal look like.
Remember, that is a man who speaks to the President, sometimes two to three times a week. What do you take from his comments, and in terms of vis-a-
vis the China trade deal?
EL-ERIAN: So I think he's right in terms of economics. But he didn't go into the other area, which is really complicated, which is national
security.
So in terms of the economics, it's very clear that there are genuine grievances, that it hasn't been a level playing field. There's the sense
in Washington that nothing has worked -- to quote him, nothing has worked for 70 years, so let's try something different.
And if it were just about economics, I'd be quite optimistic that we can resolve this through a durable trade deal. My worry is that the longer it
has taken, the more than national security aspect has played in.
And there's a feeling right now that this is about much more than economics. And it's that balance between economics where you could solve
it relatively easily. And national security was a lot harder. And we're going to see as the market still believes this is an economic issue.
NEWTON: And you can see that the Trump administration is trying to straddle that as well. I have two words, right, Howdy Modi. That was the
only thing you needed to say to understand that the Trump administration is grappling with that. What about this issue, Mohamed that we've entered a
different time? A lot of people are talking about the decoupling with China, do you think that's a possibility?
EL-ERIAN: So think of us pressing a pause button on globalization.
NEWTON: Okay.
EL-ERIAN: And it's still an open question whether we are pressing the rewind button or not. We haven't yet. We've come close. So when you
heard about the possibility of restrictions on investment flows, that's another step towards deglobalization.
NEWTON: And that was a rumor they wanted to put out there that Peter Navarro, the trade adviser to the President quashed today. He said, fake
news.
EL-ERIAN: I know. And I think the reason why he said fake news because the market on Friday thought, okay, so we have a trade war, then you can
have an overlay of an investment war, which means a currency war is next. And that's why the market reacted so negatively.
And my understanding is, that's why they came out and squashed it today. But the market is very sensitive. Once the trade were to be contained, but
it doesn't want it to expand on investment war and a currency war because that would mean global recession.
NEWTON: And let's talk a little bit about the -- I mean, other countries like Japan are watching the currencies as well, the currency war and how
Trump has reacted to a strong dollar really worries him. Let's talk a little bit about the broader market, though.
We've got a tidy rally, as I said, going on today, nothing seems to be affecting these markets. And yet what worries you now, is this money on
the sidelines still?
EL-ERIAN: So what's amazing about what's going on is that whether you invested in fixed income, the safe asset, or whether you've invested in
equities, the risky asset, you've made money on both. And that tells you that this is very unusual.
So today, oil is having a horrible day, at a time when equities are doing great. So all the correlations have broken down. And I think that what's
priced into markets is a hand off on policy. The market believes less in monetary policy, which is what has carried us so far and more in fiscal
policy, they believe that we're going to get a fiscal package out of Germany. And that is what is being priced in.
[15:15:20]
NEWTON: Germany might work. But on that fiscal policy, I have less than less confidence that anywhere else, including obviously, the United States,
given the paralysis on Capitol Hill, that there's going to be any fiscal policy, do you need that crisis to get a fiscal policy in so many different
corners? And look what's happening in Germany. They are at a crisis level, right? We're at negative rates there. And that's what's motivated
them to finally look at that fiscal piece.
EL-ERIAN: Yes. And the economy is contracting. The problem is that the argument isn't so straightforward, because they have a trade, or we have an
economy that's doing really badly, and an internal oriented economy is doing great. The unemployment rate is still very low. Capacity
utilization is stretched.
So it is not obvious. If you're German, that fiscal policy matters, especially because who is going to benefit is the other European countries,
and you don't want once again, to be carrying the burden for --
So it is not -- I don't think the fiscal policy is going to materialize as much as markets hope right now.
NEWTON: And before I let you go, we never asked you open-ended questions. Is there anything that you've been looking at in the last few days or weeks
that you say, this is what people are missing?
EL-ERIAN: So I think people are missing that we are losing confidence in Central Banks. And I think that's a big issue, because Central Banks have
carried us, and remember, they're not subject to the political mess. They can move interest rates without going to parliaments. You can't do fiscal
policy without going to parliaments.
And there's a sense that the Central Banks have carried the burden for too long. And now there's somewhere between ineffective and counterproductive.
And that's a really scary concept.
NEWTON: Yes, counterproductive is a catastrophe. Really.
EL-ERIAN: Yes. And we are seeing that when the ECB itself says we've got to look into the effects of negative interest rates, you know, that they've
realized that the unintended consequences of this medicine may be greater now than the benefits of this matters.
NEWTON: Yes, I don't understand why they didn't get that from Japan earlier. Right? Am I right or am I wrong on that, but okay, there we are.
And Christine Lagarde gets to inherit all of that. Mohamed, thank you so much. So appreciate you coming in.
Now it's decided WeWork doesn't work, at least not for now. The office sharing startup pulls it's much anticipated IPO.
And Saudi Arabia's Crown Prince is calling for tougher international action against Iran, saying without it, oil prices will go sky high.
(COMMERCIAL BREAK)
[15:20:10]
NEWTON: WeWork is in fact now postponing its IPO. The shared office company has given up its controversial plan to go public, which resulted in
CEO Adam Neumann stepping down. Now, it was facing intense scrutiny over its corporate governance, as well as questions, of course about its
financial health.
Paul La Monica joins us. Okay, you did predict it. You say who didn't, that is your answer to me, but you did say that, look, this IPO just isn't
going to work likely for this year. What kind of hard work do they have to do over the course of the next two or three quarters to get this company in
a position where it could go public?
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, I think that WeWork now has to really prove to Wall Street that this is a company with a legitimate
business model that can withstand a possible economic downturn, which might be coming in 2020 or 2021.
It also proved why does any real estate company need to have a WeWork as an intermediary, a middleman? One of the biggest criticisms I hear from a lot
of people is that office management companies, if they were smart, they could wake up and just start supplying many of the same services that
WeWork already does to their tenants and then you don't need a WeWork because that's the thing that's always troubled me and a lot of other
people who follow this company.
It's not a tech company. It's a real estate company that has Silicon Valley love and buzz and Adam Neumann wackiness, but it isn't a tech
company. This isn't Apple.
NEWTON: It sounds like you're saying it was talked up a bit too much, which leaves a lot of questions for the involvement of, let's say Softbank
at this point in time, and that whole structure of what are the venture capitalists doing? What are they doing when a company is held private?
And at what point do you actually have an IPO that has the value that it's been chatted up to have for so many years?
LA MONICA: Yes, and I think Softbank, there are legitimate criticisms of that particular company because they were burned on Uber, now on WeWork as
well, you could argue that the company that through the Vision Fund helped incubate unprofitable companies that had a lot of hype, charismatic
founders, but not much there other than that.
You know, I think Uber, the jury is still out on whether or not it's a company that can have long term success outside of ride sharing, perhaps
with Uber Eats and other delivery services.
But you know, you look at all the money that Uber has lost, you look at WeWork, it lost nearly $2 billion last year, another $900 million or so the
first half of this year, and this is a good economy, not maybe a great economy, but it's not a recession yet. How is a company like WeWork going
to do in an actual downturn?
NEWTON: Yes. And that's if you get even a little bit of softening on the gig economy. Quickly, Paul, the IPO market right now. You'd have to be --
you have to have a very safe bet to actually have the guts to go for it now.
LA MONICA: Yes, I think you know, when you look at Airbnb, I mean, they're potentially saying 2020 I think they're smart enough to realize that going
now might be a little dicey, because we've seen what's happened with Uber with Lyft, with Peloton, with SmileDirect Club, all of these companies that
had unicorn valuations that have stumbled, you need to be profitable, or in a very good niche, like Zoom Video, for example, is a company that has done
well because there's a lot of hype about web conferencing and how that's a good business to be in.
So there are obviously pockets of companies that are well -- Beyond Meats is another, but you know, I think right now, it's a very difficult time for
startups.
NEWTON: Yes. Which will affect obviously a lot of those IPOs getting to market right now. Paul La Monica, thanks so much appreciate it.
Now, Britain's Finance Minister says a no deal Brexit is still possible. Yes, he said that, even though remember, Parliament passed a law designed
to prevent that.
In a BBC interview, Sajid Javid he said he thinks, he knows a way around it. The Benn Act requires the Prime Minister to either get an E.U.
withdrawal deal or ask the E.U. to put back Britain's leaving date.
Boris Johnson has repeatedly called the Benn Act, the Surrender Bill. Javid said the law makes it harder for the U.K. to reach an agreement with
the E.U.
Chris Southworth is the Director at the U.K. International Chamber of Commerce. He joins me now from London. You join a long list of long
suffering people who need to try and make sense of what is going on with Brexit.
Now, it doesn't seem like the government has been listening to anything your organization has said for months and months and months. How
terrifying is it to think that a month to go you might still be at a no deal even against the will of Parliament? Or do you think in some way,
shape or form even that is more certainty than businesses had in three and a half years?
CHRIS SOUTHWORTH, DIRECTOR, U.K. INTERNATIONAL CHAMBER OF COMMERCE: Yes, we're in an extraordinary time here in the U.K., no question about it. I
mean, I've never seen all the business groups so unified as we've had over the last three years off years.
And you know, it's true to say that actually, you know, the Brexiteers if you like are just not listening to what businesses are saying. So really,
the companies that are the most engaged in the planning process are all still saying, plan for the worst and hope for the best, which is an
incredible thing to say, coming from a place like the U.K. , but that's the truth.
[15:25:21]
NEWTON: Can you give me anything anecdotal whether you want to name the companies or not -- and for lack of a better term, are they freaking out?
SOUTHWORTH: Business leaders here are absolutely frustrated. It depends a little bit on who you talk to. Of course, some sectors, Brexit has already
happened in the finance services, insurance and pharma, where companies have had to get their licenses and shift assets over to Europe a year ago.
In many ways Brexit now is just a formality. But where we're all concerned is in the manufacturing supply chains. It's the tier two, tier three
companies, the SMEs, small companies is where the greatest risk are.
And survey after survey says the same thing that 70 percent are unprepared. And of course, that has all sorts of impacts potentially for both the
larger companies, but also for the economy as a whole.
NEWTON: Yes, those companies don't have the spare brainpower, the spare resources to actually have that contingency. If you did end up with some
type of a new deal, and I hate to say it, a month from now, how damaging do you think that would be to Britain PLC going forward literally in the years
to come, whether it's a relationship with the E.U. or the relationship with anyone else you trade with?
SOUTHWORTH: Yes, there's no question that a no deal is the worst case scenario, we've always argued from the International Chamber of Commerce
that the best option is to stay in the single market. And the second best option is to stay as close as possible to the single marketing and Customs
Union.
No deal is the worst possible scenario. It means hard borders. And it means a stiffening of the sort of border processes. And that means all
sorts of additional cost for companies and disruptions of supply chains.
You know, so I think from a company point of view, that's the main concern. And the best thing you can do now is really keep minds focused particularly
on borders and tariffs.
But the U.K. is a very resilient economy, I would really stress that the U.K. will bounce back. You know, from the business community's points of
view, it's always been clear, there'll be a hit from Brexit on the economy. But it's a question of how big will that hit be? And how long will it be
before the U.K. bounces back?
But we've also got to remember that Brexit on the 31st of October, whenever it happens, if it happens, is only the beginning of a very long road in
terms of renegotiating trade partnerships and relationships all over the world.
So you know, we're talking about at least 5, 10, 15, 20 years of further uncertainty beyond the Brexit deadline.
NEWTON: And we will see who has the stomach for that going forward. Chris, thanks so much as we continue to check in on the consequences of
this story. Appreciate it.
Simmering tensions between regional rivals, one of them now warning that a war in the Middle East could shatter the global economy.
(COMMERCIAL BREAK)
[15:30:00]
NEWTON: Hello, I'm Paula Newton, and there's more QUEST MEANS BUSINESS in a moment when Saudi Arabia's Crown Prince is warning that oil prices could
hit unimaginable highs if the world doesn't get tough with Iran. And Elon Musk tells us about the best design decision he's ever made, and it has
nothing to do with Tesla. Before that though, these are the headlines at this hour.
U.S. President Donald Trump calls the impeachment inquiry against him a disgrace. Speaking at the White House a short time ago, he said his July
call to the Ukrainian president was, in his words, perfect. Earlier, he tweeted that he deserves to meet the whistleblower who he called his
accuser. The whistleblower's attorney says the president's comments have caused him to fear for his client's safety.
Prime Minister Boris Johnson has been forced to deny that he touched a female journalist's thigh at an event 20 years ago. And separately,
newspaper reports are questioning the nature of his relationship with an American businesswoman when he was mayor of London and whether her firm
received public funds. Johnson denies there was anything improper.
Hong Kong police are warning that Tuesday, China's National Day will be dangerous. They say four months of protests are now one step closer to
terrorism. Over the weekend, thousands of protesters marched in the streets of Hong Kong, some hurled petrol bombs and set fires. Police
responded with tear gas and water cannons.
Police in Saudi Arabia say the personal bodyguard of King Salman was shot dead Saturday following a dispute with a friend. The funeral for royal
guard Major General Abdulaziz al-Faghm was held Sunday in Mecca. Police say the friend who shot al-Faghm died in a shoot-out with police following
that attack.
FIFA has ruled that Cardiff City must pay the French team Nantes 6 million euros for the transfer of Emiliano Sala. The striker died in a plane crash
over the English Channel in January as he was on his way to join his new team. The dispute between the two clubs centered around whether Sala was a
Cardiff or Nantes player at the time of his death.
Saudi Arabia's Crown Prince says the global economy will suffer if the world doesn't act firmly against Iran. Now, in a U.S. TV interview on the
weekend, Prince Mohammad Bin Salman blamed Iran for the recent attack on Saudi oil facilities, calling it an act of war. He warned that a regional
war could collapse the global economy.
(BEGIN VIDEO CLIP)
MOHAMMAD BIN SALMAN, CROWN PRINCE OF SAUDI ARABIA (through translator): If the world does not take a strong and firm action to deter Iran, we will see
further escalations that will threaten world interests. Oil supplies will be disrupted and oil prices will jump to unimaginably high numbers that we
haven't seen in our lifetimes.
(END VIDEO CLIP)
NEWTON: Unimaginably high. Let's have a look at oil to see how prices have gone this year. And as you can see there, year to date, they've
basically been trading in a range or are now at the lower point of that range, and that's Brent crude, WTI really tracing about the same steps
throughout the year.
CNN's Nic Robertson joins me now from London. It was a really interesting interview, I'm sure you listened very carefully. In terms of him actually
exposing the kingdom and saying, look, we're vulnerable here, I was kind of taken aback by that. As much as his desire is to get that international
consensus against Iran, why put yourself out there when you're basically saying, yes, our energy system is completely vulnerable here, and it could
collapse the whole world economy?
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Because precisely that, because he wants the international support, you know, 30 percent of
the world's oil traded, plus, it comes from the Gulf region, 20 percent of the world's trade goes through the Gulf region, 4 percent of the world's
GDP comes from the Gulf region.
[15:35:00]
Collapse that, you impact the global economy. That's the fundamental point. But the reality is and the reality was borne out in that strike on
the Abqaiq in Khurais Oil Fields in Saudi Arabia just a couple of weeks ago, very simply, they are exposed. And it doesn't matter whether the
Crown Prince acknowledges it or not. Somebody's got the satellite imagery.
Somebody knows the GPS coordinates that the equipment on the ground could do it again and could have an even more devastating impact if they took out
well heads and such like.
So, you know, I think it's kind of -- this is something he cannot cover up, and he needs that international support to head it off in the future.
NEWTON: Yes, and again, one of the interesting comments he made was about Jamal Khashoggi, "The Washington Post" journalist who was essentially
assassinated. He says despite a UN report and CIA reports, perhaps to the contrary that he had nothing to do with it whatsoever. But he says that he
holds his government or his kingdom responsible.
You know, when you look at it through what his ambitions are, economically and otherwise for his country, how much of a setback has this been for him?
And in fact, the entire year.
ROBERTSON: Sure. Look, it put a stain on the kingdom. It put a stain on his reputation. You know, he was going to deliver the 2030 vision for the
country, sort of an economic reform, jobs for all the young population, a diversification from hydrocarbon. This is what he was going to deliver.
But this gave an entirely different message, a very negative message about the Crown Prince. I think what he's done in this interview is to try to
acknowledge some of it without however providing the transparency to get the international community full confidence that he is going to be able to
follow through on what he said he'll do, which is take action against those responsible. That's what he said.
You know, because they were Saudi citizens that committed this murder, you know, and as a leader in Saudi Arabia, he feels responsible and he will act
on that responsibility. But in the past year, and if you look immediately after the killing of Jamal Khashoggi, there was an economic forum in Saudi
Arabia and that there were fewer people attending that because of the -- because of the killing.
So, it's an uphill struggle for Saudi Arabia to kind of rebuild those bridges and rebuild that level of confidence. That's what the Crown Prince
is trying to do here. And so, you know, it has set him back. It has set back his plans and what he hopes to do and limited his capacity to achieve
it.
How much confidence will really be restored by this statement? Some -- but I think a lot of people expect him to go further.
NEWTON: Yes, and not even to mention, of course, we have the Saudi Aramco who wants to try and go public in the near future as well. Nic Robertson
continues to follow this from London. I appreciate it.
Now, it seems like nothing is forever, at least not in the world of fashion. New evidence of the turmoil in retailing as online shopping takes
over.
(COMMERCIAL BREAK)
[15:40:00]
NEWTON: Forever 21, the fashion chain for teens is filing for bankruptcy. Now, the company says it plans to close more than 170 stores in the U.S.
and most of its outlets in Asia, Europe and Canada. It will continue operations though in Mexico and Latin America. Clare Sebastian has been
following the story today.
Perhaps not a big surprise. I must say, you pointed out to me this morning why I was always so exhausted going into Forever 21. It was always so
overwhelming. And that has to do with a business plan that really did not go anywhere good.
CLARE SEBASTIAN, CNN BUSINESS REPORTER: Right, it's like -- I mean, there are external factors. There are the headwinds that we know affect retail,
things like people shifting online, people shifting away from malls. Yes, they are victims of that as well, but they have also made decisions that,
you know, I think precipitated their own decline as well.
They expanded really rapidly. There's interesting stats in the bankruptcy filing itself. In 2005, they had seven international stores, by 2015,
there was 251.
NEWTON: Wow --
SEBASTIAN: They had, you know, 500-plus in the United States. They were huge as well. You were talking about how overwhelming it is. These stores
were -- the average was 38,000 square foot. That's really kind of the average size of a supermarket, not a clothing store.
So they're dealing with really high rents with managing the inventory and stores like that. It makes them much less nimble when things don't go
their way, which is exactly what happened in Europe and Asia. They didn't really respond well to the kind of designs, the kind of merchandize they
had and they couldn't turn it around quick enough because they had so much of it out there. So, I think that's really the core of what we're seeing
here.
NEWTON: It's caused a tremor as well in the commercial real estate world.
SEBASTIAN: Oh, yes, for sure. They are -- this is a big mall tenant. They are the seventh biggest tenant for Simon Property Group, which is the
biggest mall owner in the States. Brooke Hill probably partner is there, their fifth biggest tenant. So, it's about -- you know, for Simon, it's
about 2 percent of rents overall.
So, they're not as big as stores like say the anchor tenants and the like - -
NEWTON: It's still going to matter going into --
SEBASTIAN: But it still matters --
NEWTON: Yes --
SEBASTIAN: Because it might not be the last shoe to drop as well, and you know, we've seen in the past that these mall owners, they really care.
They cared enough in the case of Aeropostale to come in, in the case of Simon Property Group and actually invest in this failing -- sort of to stop
it from failing.
So, I think, you know, there has been some speculation that, that could happen here. The CEO of Simon Property Group didn't rule out that he could
do it again in the future.
NEWTON: He'd need the real estate money, the rent --
SEBASTIAN: Yes --
NEWTON: The money that badly -- two of the things though I want to talk to you about with this story though, this whole discussion of disposable
fashion --
SEBASTIAN: Yes --
NEWTON: Is that really the route to be going under -- and obviously, the lack of a real dynamic digital or online business.
SEBASTIAN: So, two interesting things. This is -- it's like a more recent trend, I will say, and actually the shift to online, and that big
circulation within retail, people are now looking for sustainable fashion. And that is not sadly what Forever 21 is.
They are the kind of store where, you know, kids back in my day would go and buy, you know, another $5 T-shirt every single weekend. That is not
what young people today increasingly are looking for. They want to invest in items that they don't even have to throw away. It's a more kind of
climate-oriented consumer, I would say. And you know, that they were on the wrong side of that for sure. So, you know, that is another part of
this.
NEWTON: And of course, again, the online --
SEBASTIAN: Right --
NEWTON: They're going to try and expand on that.
SEBASTIAN: They are going to --
NEWTON: Yes --
SEBASTIAN: Expand, then this is interesting because they are not actually doing as badly as you might think, 16 percent of their sales are e-
commerce. And I -- and they say that we're lagging behind our peers, but actually H&M was only 14.5 percent last year.
So, they're not doing too badly, but they are obviously targeting more and they have to be more nimble, and they have to, you know, do better with
mobile.
NEWTON: Yes, and we'll see in the next few quarters how it survives and in what form. Clare Sebastian, thanks so much for coming in. Now, move over,
London and Paris. Outer space might soon become the hottest destination for travelers, not for Clare and I, I can assure you, we're not going
anywhere. But you will hear from Elon Musk after this break.
(COMMERCIAL BREAK)
[15:45:00]
NEWTON: Elon Musk says SpaceX could take passengers into space by next year. Yes, next year. And the cost could be billions lower than
originally thought. Now, on the weekend, the Silicon Valley billionaire unveiled a prototype of the rocket he says will launch his Starship to
Mars. Rachel Crane is here with me. I mean, this is fascinating.
I was -- I want to hear how he thinks he's going to get there in a year, especially since we're not anywhere close, we don't think so far and how
much it's going to cost.
RACHEL CRANE, CNN BUSINESS INNOVATION & SPACE CORRESPONDENT: Right. Well, so the timeline to getting people in orbit, you know, he's saying a year.
Who knows if that will be a little slippery? But he says that in the next two months, they'll be sending the prototype Starship up 20 kilometers.
And then they'll try to send it to orbit six months after, and then hopefully, you know, humans will be flying it, that's the timeline within a
year. But take a listen to what he had to say.
(BEGIN VIDEO CLIP)
ELON MUSK, CHIEF EXECUTIVE OFFICER, TESLA & SPACEX: I think this is the first time we have real hardware of something that is capable, with a
little evolution, of being something that could create a self-sustaining city on Mars and a base on the moon. Absolutely.
CRANE: And you said tonight that you might be flying people in a year in this thing?
MUSK: If the development continues to improve exponentially, then I think we could -- we could be sending people to orbit before the end of next
year. You know, within a year, approximately.
CRANE: But SpaceX hasn't put a human in space yet. How are you guys going to do this in a year?
MUSK: Well, we will be putting people into orbit soon. We will be transporting astronauts for NASA in, probably -- I don't know, three or
four months to the Space Station.
CRANE: Yes, and on that point, NASA administrator Jim Bridenstine tweeted yesterday, saying that he was very --
MUSK: Yes --
CRANE: Excited about the event today, but he also said, quote, "commercial crew is years behind schedule and it's time to deliver." Did you take that
--
MUSK: Did he say commercial crew or SOS?
CRANE: He said commercial crew --
MUSK: Oh, OK, geez.
CRANE: I mean, interchangeable. No, but how do you respond to that, and did you take that as a dig?
(LAUGHTER)
MUSK: Well, I mean, first of all, everything in aerospace is years behind, OK? It's really a question of relatively speaking which one is more late.
So, the hardware for the how to aboard demonstration for a Crew Dragon, it'll be there in October. The hardware for the first crew flights will be
there in November.
And so, most of the work that is required from now through flight of NASA astronauts is a long series of safety reviews. So, it's not really
hardware-related. And it's really going as fast as we can make it go. If there's some way just to make it go faster, I would make it go faster.
CRANE: Let's talk about funding. You've said in the past that Starship would cost between $2 billion and $10 billion. Are you still looking at
that price tag?
MUSK: I think it's actually --
CRANE: You laugh.
MUSK: Yes, it's a big range. I mean, I think it's probably closer to $2 billion or $3 billion than it is to $10 billion.
CRANE: Is that because of the switch to steel?
MUSK: The switch to steel is quite -- it's fundamental. You know, I think that's -- literally, that might be the best design decision I've ever made.
I can't think of a better one. The steel is lighter than the carbon fiber solution or lighter than aluminum solution and costs 2 percent as much. So
--
[15:50:00]
CRANE: In hindsight, do you wish that you would use steel --
MUSK: Absolutely, a no brainer.
CRANE: The climate crisis. We've seen protests all over the globe this month, mostly led by young people like Greta Thunberg.
MUSK: Yes --
CRANE: Does the public outcry, does that increase the urgency for what you guys are doing here?
MUSK: Well, I mean, I really view what we're doing here as making life multi-planetary as opposed to escaping. I mean, I think like 99 percent of
our resources should be on making sure that the future on earth is good. But I think at least 1 percent of our resources should be on making life
multi-planetary and extending consciousness out to other planets.
Both for the defensive reason of preserving the light of consciousness into the future as well as the adventure, the excitement -- I find personally
more motivating than the defensive argument.
CRANE: So, you prefer to be an optimist rather than a pessimist.
MUSK: I mean, I think excitement and adventure and a sense of possibility about the future are incredibly important, otherwise why live?
(END VIDEO CLIP)
CRANE: And Paula, what I think is so interesting is that switch from carbon fiber to steel, him saying that it's the best decision he's ever
made -- design decision. But it's important to note that they were able to create that prototype, weld it out of the steel, not in a factory but
outside in just a month.
So, it just shows how easy it is to work with this material. And also, carbon fiber costs about $130,000 per ton. But steel is just $125 a ton.
So, that's how they're able to -- or Musk says that they'll be able to keep the budget closer to $2 billion to $3 billion versus that $10 billion
number.
NEWTON: Yes, and that's extraordinary that, that has been obviously such a component of why he's able to get there sooner and keep the cost down. So,
you guys were in Texas, you were -- he was obviously very warm there --
CRANE: Yes --
NEWTON: You were telling me, how does Texas feel about being at the very center of all of this?
CRANE: Well, so where this location, this factory for SpaceX is located is in Boca Chica, Texas, it's right outside of Brownsville, about 45 minutes.
But there's a town in Boca Chica, there are residents living right there. And this prototype is in their backyard or front yard, depending on where -
-
NEWTON: You can literally open up --
CRANE: Early, I was in some of the residents' homes. You see it from their living room --
NEWTON: Gosh --
CRANE: You see it from their kitchen, and not only do you see it, they have to vacate any time they're doing a serious test. So SpaceX has
offered to buy their property, three times the value. But a lot of the homeowners, they're not wanting to sell or they wanting to sell for a
higher price tag.
But Elon Musk, he's very focused on fairness, doesn't want to pay, you know, an unfair price. So the residents, they all met after this meeting,
after this unveiling of the prototype to hear more from Musk himself about what the plans are for that space court -- for that SpaceX location.
They're planning to build another one of these prototypes in just a couple of months there.
So, a lot of activity will be happening in the coming years in Boca Chica, Texas as a result of SpaceX's activity there. And you know, the residents
very divided on if you know, they're enthusiastic or if they're also willing to give up their property.
NEWTON: Yes, and some of them may just have a front row seat to history though, which is also probably what they're hoping.
CRANE: Exactly.
NEWTON: Rachel Crane, thanks so much for bringing that story to us, appreciate it. Now, Hong Kong will soon be waking up for what could be a
very traumatic day of protests as China marks the 70th anniversary of the People's Republic. During the last few months of protests, dozens of
employees at the Airline Cathay Pacific have lost their jobs because they say they expressed support for the pro-Democracy movement.
Andrew Stevens speaks to staff who say the company is in the grip of what they call white terror.
(BEGIN VIDEOTAPE)
ANDREW STEVENS, CNN CORRESPONDENT (voice-over): Rebecca Sy worked as cabin crew at Cathay Dragon for 17 years. It was her first and only job.
REBECCA SY, FORMER FLIGHT ATTENDANT: I really love my job. To me, it's very special.
STEVENS: On August 21, Rebecca was fired.
SY: They asked me only one question. Does this Facebook belong to you? I said, yes. They immediately said, I'm sorry, I have to go for the process,
now, I will announce that you're being terminated with immediate effect.
STEVENS: She says she was never told why she was sacked.
SY: I was shocked, very disappointed, frustrated.
STEVENS: Rebecca has participated in some legal protests, but says her Facebook page did not violate the code of conduct. Rebecca also
represented about 2,000 Cathay Dragon cabin crew in her union and says she had good relations with the company until the Hong Kong protests.
Protests, which forced the airport to close, cancelling hundreds of Cathay flights. Cathay has cracked down on staff involved in demonstrations. The
airline itself is under pressure from China, its most important market. Beijing has banned any Cathay staff who are involved in protests from
flying into China.
The hard line from Cathay has had a chilling effect, say staff, they call it white terror. This Cathay staff member who supports the protests spoke
to CNN on the condition of anonymity.
[15:55:00]
UNIDENTIFIED MALE: In terms of white terror, I would say it feels unsafe, it's uncertain. Me and some of my colleagues, we returned to say, there
were no -- is it our last day today? Because tomorrow when we come, we may not even be able to get into the building anymore.
STEVENS: Cathay recently revised its staff code of conduct which includes posts on social media, staff are told to speak up if they see a breach of
the code. Employees tell CNN that dozens of workers have been fired.
(on camera): In response to CNN, Cathay says they don't comment on specific cases. But the dismissals are always in strict accordance with
the terms of their relevant employment contracts. They added that they required to follow regulations prescribed by the authorities in mainland
China. There is no ground for compromise.
(voice-over): And it's not just the airlines that are caught up in the protests.
UNIDENTIFIED MALE: It's also spreading to other sectors. It creates an atmosphere of fear among the workers that you have to be in line with the
political stand of the company.
STEVENS: Many of Hong Kong's biggest companies including its biggest bank, HSBC are now publicly condemning the violent protests and calling for a
peaceful resolution. But it's clear that the protests are moving from the streets to the officers and factories of Hong Kong.
In this new, less defined battle line, it's freedom of speech that's coming under threat. Andrew Stevens, CNN, Hong Kong.
(END VIDEOTAPE)
NEWTON: All right, we're in the last few moments of trade here, and as you can see, we're off the session highs, but the market is still doing fairly
well, especially given a lot of headwinds when it comes to either impeachment discussion or trade with China. We want to hand you over now
to Jake Tapper and "THE LEAD" who has more on those developments in the impeachment inquiry.
BROOKE BALDWIN, CNN HOST: Breaking news. We have just learned that the House Intelligence Committee has now subpoenaed or issued a subpoena for
the president's personal lawyer Rudy Giuliani. Let's go straight to Manu Raju up on Capitol Hill with the breaking news. Manu, tell me more.
RAJU: Yes, we had been expecting this move, a dramatic move, escalating this impeachment inquiry by the house, led by the House Intelligence
Committee. Just moments ago, they announced -- they issued a subpoena to the president's personal attorney Rudy Giuliani, demanding he turn over
documents as part of their investigation by October 15th.
Now, what the Democrats are asking for are communications and other efforts that Giuliani was involved with to urge Ukrainian officials to launch an
investigation into the president's political rival, former Vice President Joe Biden. They say in this letter that -- citing comments that Giuliani
even made on CNN, telling our colleague Chris Cuomo when he acknowledged, saying, of course, I did ask Ukraine to look into Joe Biden.
Now, in this letter, they break down a number of different categories of documents that they want Giuliani to turn over documents from over the last
couple -- more than two years. So, that's why they're giving him two weeks to provide all this documentation. Now, in addition to that, there are --
the chairmen of these three committees, it's the House Intelligence Committee led by Adam Schiff, but also the whole -- House Foreign Affairs
Committee led by Eliot Engel and House Oversight Committee led by Elijah Cummings.
They've sent letters to three of Giuliani's business associates seeking depositions of these individuals. So, what we're seeing more broadly here,
Brooke, is an escalation by this committee, which has already -- you know, these committees have already sent subpoenas over to the State Department
asking to turn over documents relating to this effort, to apparently urge Ukraine government to investigate the Bidens, also seeking depositions from
former State Department officials.
The House Intelligence Committee separately wants to talk to the Intelligence Community's Inspector General once again. So, we're starting
to see the pieces come together of a rapidly escalating impeachment probe. And the latest example going very close to the president's inner orbit.
This committee sending a subpoena to the president's personal attorney, telling him to turn over these documents. And the question now is will
Rudy Giuliani cooperate? He's said mixed things about whether he would do just that, and whether the committee will actually seek his testimony, it's
unclear if they take that route. But at the moment, they want documents and they want those documents within the next two weeks, Brooke.
BALDWIN: Manu Raju breaking the news on Giuliani and the subpoena, Manu, thank you. Kylie Atwood is at the State Department for us, and Kylie, I've
got less than 60 seconds, we know that Rudy Giuliani's name was mentioned in the same breath as the Attorney General when you read the transcript of
the call between Zelensky and Trump.
Just remind us how integral he was in these relations with the Ukraine?
KYLIE ATWOOD, CNN NATIONAL SECURITY REPORTER: Well, Rudy Giuliani is arguably the integral player here. He is the one who has connected
President Trump on the political side. He has encouraged the investigation by Ukrainian officials into Joe Biden, into his son Hunter Biden.
And then, of course, we have the formal government side, the Trump administration, the Trump White House. And the question is, where do those
two areas conflict with one another? And that's what they want to learn about. They want to know what the State Department was specifically doing
with Rudy Giuliani. He has said --
[16:00:00]
END
