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QUEST MEANS BUSINESS

Obama Will Send Military Support to Iraq; Blackberry in the Black; Interview with the CEO of T-Mobile

Aired June 19, 2014 - 16:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


PAULA NEWTON, CNN ANCHOR: Many markets flat as the closing bell rings on Wall Street. It's Thursday, June 19th -- targeted action for Iraq.

Obama says he'll send military support but not combat troops.

Putting the black in the Blackberry -- a rare profit for the smartphone maker and -- one word -- $1,000,000 -- the app that takes

messaging back to the basics. I'm Paula Newton and this is "Quest Means Business."

Barack Obama says Iraq must heal itself if it's going to see off the threat of ISIS. Now, the President says the U.S. is not going back into

combat in Iraq, but he's sending hundreds of military advisors and may, may order airstrikes if they're needed.

(BEGIN VIDEOCLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: In recent days we've positioned additional U.S. military assets in the region. Because of our

increased intelligence resources, we're developing more information about potential targets associated with ISIL. In going forward, we will be

prepared to take targeted and precise military action if and when we determine that the situation on the ground requires it.

(END VIDEOCLIP)

NEWTON: Now, despite the President's assurance that Iraq hasn't been abandoned, a humanitarian crisis is unfolding. The U.N. says the number of

people getting out of their homes nearly doubled overnight. Refugees from Mosul, a city now held by ISIS militants, have been streaming into the

refugee camp in Erbil. Now, have a million have been displaced for Iraq's second city with militancy -- with militants attacking the oil refinery at

Baiji.

The price of gas is of course rising as fears of a shortage grow. Long lines as you can see have built up around gas stations in Kurkuk and

elsewhere. As Islamist militants fight with government forces north of Baghdad, Iraq's capital feels like a city under siege. Nic Robertson is

there for us tonight. Nic, you know you've been there for several days already. Has the sentiment on the ground changed? I mean, is there still

that sense of foreboding?

NIC ROBERTSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: There certainly was when we arrived at the weekend. But now we're getting

towards the end of the week, there are a few more cars on the streets. But you're still finding that a lot of young men here who are willing to

volunteer, sign up for the new miltias that are being stood up to join the Iraqi army in the defense of Baghdad and other cities. So, yes, on the one

hand people are feeling a little more at ease that they're not about to be overrun, but they're also feeling that they need to do their part and join

up, and they've been told today if you volunteer for these militias, you'll get paid an army salary and get treated like an Iraqi army -- full-paid

Iraqi army soldier, if you will.

So, yes, I mean, people are concerned, security checkpoints as tough as they've ever been here. We're seeing changes on those checkpoints --

people believed to be more loyal to the government are being put on rather than, you know, soldiers who their concern might be that they would put

down their weapons and run away should ISIS show up on the outskirts of the city.

So, yes, this is still a city. Despite people regaining a little confidence, it's still a city that's not sure what's quite 'round the

corner, Paula.

NEWTON: Yes, and remind everyone you're talking nine to ten million people in urban sprawl not sure of what's going to happen next. Nic, I

know you've been trying to figure out exactly what is going out north of the country. The government has made certain pronouncements about the fact

that it has retaken territory. Do you get any sense from the people you've talked to that there is some kind of momentum there? That they are

fighting back against ISIS?

ROBERTSON: Certainly that's the government's message, and the government really wants their message to come out loud and clear. There

are airstrikes, there are military air operations going on. We heard more aircraft in the sky today, the sort of low throb of, you know, military

transport aircraft over the city -- we haven't heard that before. A couple of army helicopters buzzing around -- haven't heard that before. So the

activity's there, and that's the message the government wants to get across. You know, it's substantiating that and showing us here and other

people in the capital that they really have retaken Tal Afar, they are in control of the oil refinery. That's -- that is not what they've been able

to do so far.

And we're getting messages from eyewitnesses, you know, around Baiji that oil refinery -- the biggest oil refinery in the country -- that ISIS

is still in control of parts of their refinery. It's a big place -- you know, -- 60 kilometer per -- perimeter -- fence around it, four separate

oil refinery, you know, facilities within that perimeter. And it seems that the army has some and the ISIS has other parts. And you hear about

from people in Mosul where they say they're not really seeing a lot of ISIS on the streets. You know, it kind of gives the impression that the

fighters who came into the city have moved on and they're doing battle elsewhere. But where precisely, what are they doing? What are they

planning? Those are the facts that we just can't get to from here, Paula.

NEWTON: Yes, and we learned -- as you heard as I did -- that Barack Obama not sending combat troops in, and while airstrikes remain an option,

he certainly hasn't approved them yet. Nic, thanks so much again for this update. Now, the Iraqi government says it has retaken some territory from

the militants in the north of the country. You just heard Nic explain that there are a lot of conflicting information about that. Now, an army

spokesperson said strikes from the air and on the ground -- as you see here -- they claim killed 50 militants in Tal Afar and destroyed 15 vehicles.

But the fear that ISIS has struck Iraq's people as deeply as its weaponry. Arwa Damon visited a Christian community 90 kilometers from Tal

Afar.

ARWA DAMON, CNN SENIOR INTERNATIONAL CORRESPONDENT: On a dusty street corner in the Christian enclave of Bartilla, Yusef and his friends try to

pretend that things are normal, that ISIS fighters aren't potentially just moments away from slaughtering them. "We all have our bags ready. If

anything happens, we will leave," he says. Mosul, the first city to fall to the terrorist group is right next door. In 2005, there were a series of

attacks against churches in Baghdad. And after that, the young men, the youth here, decided to band together and form their own civilian defense

units. That's been going on pretty much ever since. But now their efforts have really intensified. They don't want us filming their checkpoints or

other measures that they've put into place, especially not with ISIS just a ten-minute drive away.

Most shops are closed. Their owners either fled or don't bother opening. Business is down, power is out. And not everyone can afford

generators. It's a grim existence in a nation that has already suffered so much. Oshaki's (ph) brother and sister were killed in an explosion in

Baghdad in 2008. Her heart, she says sears with the pain of the past and fear of the future. "Here is my son everyday he pulls a 12-hour guard

duty," she tells us. "It's hard, it's very hard very hard. If it stays like this, there won't be an Iraqi left in the country." For most, there

is little to do but wait. Outside the church we meet these women. "It's fine. What are they going to do, kill us?" They try to joke. "I might be

the only girl left here. Everyone will go, but I will stay," 22-year-old Mariana (ph) says. "I won't leave my country." Her mother, Mahastin

remembers the days when they felt they had a future. But the moment there is a glimmer of hope in Iraq, it's stolen. "I remember coming here when I

was this big," Father Benham Lalu proudly points out the new renovations at his church. The granite archways and floor he always wanted to build.

"What are we supposed to do?" he wonders. "This is our land, our church that our ancestors built. This evil can't continue. A day will come when

people will come to their senses."

A hope, a dream in a country hijacked by violence few can understand. Arwa Damon, CNN Bartilla, Iraq.

(END VIDEOCLIP)

NEWTON: And we can hear now from Peter Neumann. He's the director of the International Centre for the Study of Radicalisation and he joins me

now live from London. Peter, I've spoken to you many times about how this kind of radicalization, how this kind of militant insurgency in a country

can be turned around. We have a situation, it's a bit confusing right now. ISIS still looks to be in the advance. What is it going to take on the

ground for the government -- a compromise government at this point -- to be able to turn it around?

PETER NEUMANN, DIRECTOR, INT'L CENTRE FOR THE STUDY OF RADICALISATION: I think it's very important in the first place to stop the advance, so

that's where American military strikes can be useful to stop ISIS from going to Baghdad and capturing oil fields. But then I think it will be

important to let things play out, because once ISIS starts implementing their social programs, telling people not to smoke, not to drink, not to

watch the World Cup, I think gradually people will turn against them. There's no case of an extremist Salafist Jihadist movement like ISIS

holding territory for very long because eventually people turned against them.

NEWTON: Now, in terms of the consequences going forward, we just heard from Barack Obama. Peter, I want you listen to something that you

studied very closely. He's talking now to us about what the potential threat of ISIS is to the rest of the world. Take a listen.

(BEGIN VIDEOCLIP)

OBAMA: We also have an interest in making sure that we don't have a safe haven that continues to grow for ISIL and other extremist Jihadist

groups who could use that as a base of operations for planning and targeting ourselves, our personnel overseas and eventually the homeland.

(END VIDEOCLIP)

NEWTON: Peter, I know you've studied this issue of blowback in the last several months in Syria quite closely and with ISIS now in Iraq. What

do you think the risk of blowback is here if the United States and other countries don't get involved at this juncture?

NEUMANN: I think there's two things that might happen and that are potentially very dangerous. The first thing is that that country that they

are now occupying can't (ph) be used as a safe haven, as President Obama said. That was the lesson from 9/11. Don't ever allow a terrorist

movement to hold territory ever again because they're using it to plan and to operate. The second point is that there are a lot of foreign fighters,

including fighters from Western countries that have gone to Syria and to Iraq, that might return to Western countries at some point and then attack

Western countries -- being experienced, having skills and being ever -- being even better -- terrorists than they were before they went. Those are

the two big threats that need to be mitigated.

NEWTON: Yes, and we've seen how those threats can cause devastation from the streets of London or Madrid and certainly the President trying to

make his case that they will stay involved. Peter, thank you so much for this analysis. We appreciate it.

Now, U.S. markets were flat on Thursday, but the S&P500 edged up to a new record high. Gold futures rose 3 and 1/2 percent to highest level

since April. American Apparel shares shot up after the company fired its CEO and Amazon shares fell one day after the company announced its first

smartphone. Stocks rose across Europe on Thursday after the U.S. Federal Reserve left interest rates unchanged late Wednesday. Germany's DAX ended

above 10,000 -- close to its record high. Rolls Royce shares jumped after the company announced a 1.7 billion share buyback. Alstom shares fell

after GE revised its offer for the company. Now, a company many left for dead saw its stock surge more than 10 percent today. The story behind

Blackberry's comeback -- that's up next.

(COMMERCIAL)

NEWTON: All right. It doesn't sound great, but it is a case of slightly less bad news for Blackberry. Now, the company that once ruled

the smartphone market announced a $23 billion profit for the quarter, thanks to some accounting adjustments. Now, stripping those out, there was

a loss of 11 cents per share which was in fact better than expected. Shares fell 1 percent, not as bad as analysts predicted. And the company

added $400 million to its bank balance, helping ease fears that it was burning through cash at a rapid pace.

Now, the earnings report sent Blackberry shares surging more than 10 percent this session. The chief executive is changing the company's

businesses and focusing more on software. We want to have a look now at the product launches this year that have helped push the stock up 23

percent, and that's well ahead of the competition. I mean, if we look here, Google's essentially flat, Microsoft at 10 percent, Apple 15 percent

-- and there you have it -- at 23 percent. But we want to have a look at another screen here. We've got market share prediction here. If you see

Android, that's at 80 percent, Apple going to almost 15 percent, Windows -- phones that take Windows operation -- 3.5 percent. But then look at this

colossal dive for Blackberry, and that is really what is the scene here.

Pete Pachal is the tech editor at Mashable, he joins me now. Pete, we just had a look at what was going on there for stock prices, which

sometimes don't mean much and also obviously market share which means a lot. Was there a lot to cheer in the Blackberry announcement today that

will say, 'yes, it's going to survive.'

PETE PACHAL, TECH EDITOR, MASHABLE: Well, for the company, yes. I think it's very clear that John Chen has started to at least stem the

bleeding that -- and he has a very clear vision of this company as one that serves mainly enterprise customers and focuses, as you said, on software.

The devices -- that's a pretty big dive as you said.

NEWTON: (LAUGHTER).

PACHAL: The market share is very low right now. I believe these kind -- he said that if they can sustain about ten million handsets a year, they

can -- it's worth for Blackberry to stay in the hardware business. They had about 2.6 million in the quarterly earnings report. So they could --

if they can keep that up, they can do it. That's just sort of barely breaking even. So, we'll see what happens. But I admit (ph) it will be a

very dark day for smartphones the day that Blackberry stops making actual hardware because they have been making it for -- since before smartphones

were smartphones. They were one of the only things that you could get portable e-mail on in the late 90s, so with the day that happens -- I hope

it doesn't happen soon -- that will be very, very strange.

NEWTON: You're telling me I won't have this anymore, I'll have an old one that won't have an operating system attached to it. You know, this is

such a puzzle right now to figure out what's going to happen. We don't even know what's going to happen with the Blackberry software and the

patent which is apparently going to be worth a lot. But you're dealing with a lot of operating systems on these smartphones. Is there going to be

an eventual winner? I mean, we saw Amazon through a lot of skepticism announced their own phone yesterday. In terms of the marketplace and what

it's looking like, is there a clear winner here, and is it Android for instance?

PACHAL: I don't think there is a clear winner right now. Although that pie chart you showed was very green. That said, a lot of those

Android phones are very cheap models that you find in the developing markets. And they don't -- not really used the way we use smartphones with

multiple apps and in-app purchase which is a big revenue driver for developers now. You see a lot more of that activity on IOS, where people

are much more inclined to actually spend money on apps. That's why it's still a very thriving ecosystem with only 20 percent market share.

NEWTON: Yes, because when we looked at market share -- when we brought out that pie chart, it was Android, I mean, that's the way it

looked.

PACHAL: Exactly. And not all of them are being used as smartphones per se. In the coming years -- in the next five to ten years -- I think

we're never -- we're not going to see one particular operating system ever become 100 percent of that pie because we're going to move on to extending

the mobile experience to things like wearables, to car, home automation. This is where the new frontiers are in terms of revenue, in terms of

platforms. So at some point, you know, smartphones are just going to be kind of not as interesting as the other things going on, but we're not

there yet.

NEWTON: Yes, and, Pete, (inaudible) Apple announced today in the fall it's going to come up with its watchable apparently, so --

PACHAL: (CROSS TALK) it's just a rumor.

NEWTON: Well, they're rumors, I should clarify.

PACHAL: I think we're pretty much on a guarantee that Apple will do it, but --

NEWTON: Fall, we'll see the watch, yes.

PACHAL: -- we'll see.

NEWTON: OK.

PACHAL: Yes.

NEWTON: Thank you so much for coming in, I appreciate it.

PACHAL: My pleasure.

NEWTON: Now, U.S. wireless carrier T-Mobile is getting into the music business -- sort of. It has announced a service that lets you stream music

on certain apps for free -- unlimited data. I spoke to the CEO John Legere about music freedom -- what he calls music freedom -- and what else is

changing the mobile market.

(BEGIN VIDEOCLIP)

JOHN LEGERE, CEO, T-MOBILE: If you want to use Spotify, Rhapsody, Slacker, iHeartRadio, Pandora -- you pick. I'm not going into that

business. What I'm going to do is I'm going to let you stream it free. So you pick, and you stream free the way you should. And the reason I am is

my network can handle it. I have more network capacity per customer than anybody else and 70 percent more spectrum per capacity than Verizon. So

that's the challenge. I'm doing things that the other guys either can't or they're too greedy to do, and I actually think it's both. So, I am doing

things as an advocate for you that I think you'll find interesting.

NEWTON: Well we'll see how many people actually end up buying that. It is hard to get people off their plans and off their phones. I want to

talk to you, speaking of phones, I just want to talk to you about the Amazon launch. Do you think that will change the landscape, that device?

LEGERE: I think from a standpoint of a new device coming into the market, that I'm certain will be unlocked and available to multiple users -

- that's always good. In the short term, I'm a little confused because I think was announced was a little different than most people anticipated,

i.e., it's an old contract, subsidized model. It's a very expensive device. You know, it wasn't given to me as a Prime customer -- Prime's

given to new customers that come in and, I don't know, I'm a little underwhelmed, but I'm going to wait and see. I don't think it's going to

revolutionize things, but, hey, if anybody could, Amazon would.

NEWTON: I have to ask you about the proposed merger between your company and Sprint. What do you know going forward? Do you -- would you

put money on it right now on it happening?

LEGERE: Well I think the preface to your question is certainly a rumor that, you know, that I'm not going to comment/speculate on. I would

say that, you know, I as many others have been very consistent that we believe that the competition that the un-carrier is creating is good for

the industry, good for U.S. consumers, and there's multiple ways to give us the scale and the capital that we need to continue that. One of them is

consolidation -- that's an alternative that we will consider going forward, but in the meantime, we're just pushing forward, solving pain points one by

one and, you know, our board will consider the future options.

(END VIDEOCLIP)

NEWTON: Now, if you ever tried to write a music score -- I can assure you I have not -- it is pretty tough. Now anyone can become a composer

thanks to a new app.

(COMMERCIAL)

NEWTON: Now, take a look at this. If you're musically gifted, you may recognize it as the score behind this -- the World Cup anthem featuring

Pitbull and J'Lo. I can assure you I don't read music so I don't recognize it. But now, all we had to do to create this score and make it into this

was to use this -- yes, an absolute simple app. The app did all the rest. Now in this week's "Make, Create, Innovate," Nick Glass explains how this

app can turn anyone into a composer.

(BEGIN VIDEOCLIP)

(VIOLINIST PLAYING)

SVEN AHLBACK, INVENTOR, SCORE CLOUD: I'm Sven Ahlback, I live in Stockholm. I'm a fiddle player. That's how I define myself.

NICK GLASS, CNN INTERNATIONAL CORRESPONDENT: Pug (ph) musician, composer, professor and inventor. Sven Ahlback has a surprising number of

strings to his bow.

AHLBACK: I wanted to know to what degree is music really a universal language.

GLASS: It began with him writing the computer program about the structure of music and how we hear it and that led almost by accident to

discovery in 2002.

AHLBACK: Our product is called Score Cloud. Our approach with this program is to play it and get the notations created from what you play.

GLASS: In other words, you sing, play or hum a tune and out comes an instant score.

AHLBACK: (HUMMING). I'm that kind of guy who gets songs in my head all the time. Once you get them in your head, you feel that this just

might be the next big hit. And then it's almost no limit to how fast it should be notated. (PLAYING PIANO). And I was just improvising, playing

music, not thinking about the notation. For one second I double-clicked on the recording. Suddenly have the notation here. I can now communicate to

people around the world -- it can be read by someone in China who plays the piano as well as my friend next door.

GLASS: Ahlback's company, DoReMIR Music, was launched in 2008. Now a team of ten, it's developing the technology.

AHLBACK: For now we have like a quarter of a million users. If we think about the number of people who define themselves as musicians in some

way -- we're talking about around 500 million people around the world. So I would think that this would be useful actually for at least a big portion

of these 500 million people.

(VIOLINS PLAYING)

GLASS: Like these students at the Royal College of Music in Stockholm. It's really accurate from how we are playing and that's a big

wow I think. It won't necessarily make you a better composer but it should help free up your creative juices.

Female: Yes, it's good. I'm not that fast at writing scores in the computer, but now it doesn't take that time. Now I just sing it and if

it's something that I want to change or switch notes, I can just do it very easily.

AHLBACK: Music is as an important human expression as is writing or text. A lot more people then today are able to compose, to write if they

have interesting musical thoughts and musical ideas. And they should be able to express themselves with the help of our software.

(END VIDEOCLIP)

NEWTON: When we come back, securing Iraq's most lucrative commodity - - the battle for Iraq's largest oil refinery is not over. We'll have more details after the break.

(COMMERCIAL)

NEWTON: Welcome back, I'm Paula Newton. The top headlines this hour. U.S. president Barack Obama says he's ready to send up to 300 military

advisors to Iraq but says there will not be -- they will not be -- in a combat role. He says the U.S. will take targeted and precise military

action if necessary to prevent a Sunni insurgency from spiraling into civil war. As many as 75 scientists working at the U.S. Center for Disease

Control may have been unintentionally exposed to Anthrax bacteria. The agency said this is in -- pardon me -- says it is investigating and

offering treatment. Anthrax is a potentially legal disease although effective vaccines are available.

A humanitarian information service says 60,000 people, many of them children, are fleeing the Pakistani province of North Waziristan near the

border with Afghanistan. The army has launched an attack on what it suspects are anti-government hideouts in the region.

A German cave explorer trapped one kilometer underground for 11 days has now been rescued. Fifty-two-year-old Johann Westhauser has been

brought to the surface after a painstaking rescue operation. He's reported to be conscious but has suffered head injuries.

Now, in the World Cup match between England and Uruguay, Uruguay currently leads 1-nil in the second half before the start of the Games.

And these -- what you're looking at right now -- are very, very live pictures there of people who look to be freezing in Sao Paulo or are they

just nervous? Now we should say that before the game, Sao Paulo police took 14 people into custody for throwing fireworks at football pans -- fans

-- in bars in the city. The nationalities of those involved were not released.

Conflicting reports are emerging bout what's happening at Iraq's largest oil refinery. The police say ISIS controls 60 percent of the Baiji

complex. Although an Iraqi military commander has said government forces have complete control now. Militants lodged a fresh assault early

Thursday. Now, this facility is the key target because it refines much of the country's domestic fuel. My next guest is warning we could be seeing

the end of the greatest period of oil price stability for half a century. Christof Ruehl is the global chief economist for the oil giant BP. I thank

you for coming here on what is a busy day in Iraq and elsewhere. In terms of what is going on in Iraq right now, you say it will affect -- it will

affect volatility -- that we've actually had it quite good over the last few years.

CHRISTOF RUEHL, GLOBAL CHIEF ECONOMIST, BP: No, I said it may affect, I mean, as of now, oil production as you know has not been affected and

most of the fields on the south or in the north, they have not been impacted. Whether that will change we do not know. The refinery as you

mentioned supplies domestic fuel, so that will have no global impact.

But the big global background is important to this. Because what we have indeed seen the last three years is the three years of very high oil

prices for the first time ever -- three years of oil prices above $100, and at the same time, the most -- the least -- volatility for any three-year

period since 1970. And the background of that is of course huge changes on the production side.

You have on the one side massive increases in U.S. tidal/title (ph) production. Last year for the consecutive year a new record in U.S., and

the U.S. was trading oil since 1859 more than 1 million barrels per day. And on the other side, since the last -- for the last three years -- we

have seen sizable supply disruptions. If you count the civil war in Libya and since the beginning of 2011, if you count the sanctions against Iran,

if you count the civil war in Syria, the two Sudans and Yemen, these supply disruptions cumulatively are over three year are three million barrels per

day. That's for sure the highest since the coincidence of the Soviet Union collapse and the Iraqi/Kuwaiti war. So it's massive in history -- just as

massive as the U.S. increase.

The U.S. increase is an interesting side statistic. It's the tenth biggest in history, and will increase. All the other nine came from the

same country -- Saudi Arabia. But six of these lines were built on existing spare production capacities, so the Saudis had cuts and then they

increased. So in terms of organic growth with capacity expansion, that was the first biggest increase in oil production in the history of global oil

markets any place, any time.

And now you wonder why could you have three years of the most stable oil prices ever against this background, and the answer is that ultimately,

by sheer coincidence, these two things cancel each other out. The increase in U.S. oil production the last three years has almost, one-to-one, almost

barrel-by-barrel matched the decrease caused by these supply disruptions. And what that means is very simple -- if you had only had seen these supply

disruptions, oil prices would have gone up, there would've been talk about strategic petroleum reserve for this damage to the global economy and the

rest of that. If you only had seen the tight oil increase in the U.S., there would've been pressure on oil prices, talk about (inaudible) cuts all

the rest of that. Sheer coincidence (inaudible) the balance and that's what I have called an eerie quiet with respect to the stability of this

market and the prices which will come to an end as soon as one of these two sides in the standoff gets the upper hand.

NEWTON: Yes, as you say, an eerie quiet for now. But given the fact that they had been looking at Iraq for a lot of the growth and now that's

looking highly unlikely, we could see more volatility going forward. I thank you for your time today. Thanks for coming in.

RUEHL: Thank you very much.

NEWTON: Now, Argentina is denying reports it may send a delegation to the U.S. next week to hold talks on its debt dispute. The government is

refusing to make a $1.3 billion payment that U.S. courts say it owes to certain bondholders, raising the prospect of a default. Now, on Tuesday,

Argentina's economy minister Axel Kicillof suggested that the country might try to skirt New York law by swapping the existing bonds for ones that will

be subject to Argentinian law.

Daniel Kerner is the head of the Latin American Division for the Eurasia Group, a political risk consultancy. He joins us now from CNN

Washington. I mean, talk about trying to mitigate political risk. By trying to do this bond swap, are they really going to get anywhere which is

where they want to get to, which is going out to those bond markets with credibility that they will stay solvent.

DANIEL KERNER, EURASIA GROUP: No, my sense is no. And paradoxically, Argentina has spent the past nine months trying to rebuild ties with the --

with international financial community by settling its debt with Repsol after they nationalized YPF by reaching an agreement with the Paris Club

over debt that they had defaulted, by paying some place (ph) that they had at the World Bank. And so this really comes at a time when they actually -

- they have actually become sort of the good people in financial markets.

The truth is that this effort at a swap is -- looks -- very difficult to do. Essentially because what the ruling that took place in New York and

now the Supreme Court in the U.S. has essentially sustained says that, one, Argentina has to pay this hold out creditors. But, two, that any financial

participant that actually helps Argentina evade this ruling would be in violation of the court. Meaning that any bank that actually tries to help

Argentina do this swap, would actually be held in contempt of court.

So the sense I think everyone in the market has is that this will be almost impossible to do, and then Argentina is using it trying now to gain

some leverage to see if they can negotiate something with its holdout creditors. Given the fact that they essentially lost everything and will

probably be forced to pay most of what this holdout creditors have won.

NEWTON: OK, Daniel, when we go through the last few decades in Argentina, bar none this is an economy that has an educated workforce that

is absolutely striving to do a little bit better in that economy. This government doesn't seem to be helping anybody out. I mean, at stake here

is its solvency, its credibility. Do you see anything changing right now? Because a lot of people are on the sidelines watching this deal and just

saying, if they can't make it happen -- you know, and especially with some of the rumors of nationalization that have always gone on in Argentina the

last few years -- what is it going to take to make Argentina credible again?

KERNER: You know, I think -- I think that's going to take a really long time because, you know, Argentina have defaulted on its debt in 2001,

restructured aggressively, hasn't really been playing by the rules over the past decade, and now that they have been playing by the rules, again, you

know, they're threatening again to throw everything outside the window. I mean, my sense is that the default in 2001 was very painful. Doing the

swap is very difficult. If you look at the Argentine economy over the past year, essentially it's a story of dwindling central bank reserves, high

pressures on the currency and almost no growth with high inflation. So if they go the default -- the default route again, they'll be most likely in

economic crisis again and what you'll have is then another government come in next year trying to reestablish credibility but with enormous

difficulty.

NEWTON: Well, we'll see how creative the Argentinian government can get in the next two weeks. Thank so much for your insights, appreciate it.

KERNER: Thank you.

NEWTON: Now, the eccentric founder of American Apparel once said, "My biggest weakness is me. Lock me up already." Well, now he's been booted

from his own company. That story when we come back.

(COMMERCIAL)

NEWTON: American Apparel has fired its founder and CEO. Details are few but it is clear Dov Charney is enmeshed in an investigation into

misconduct. Now, Charney started American Apparel in 1998 and was behind its controversial and sex-laden advertising strategies. He survived a

number of sexual harassment lawsuits from employees. Now, board member Allan Mayer, said quote, "The Company has grown much larger than any one

individual and we are confident that its greatest days are still ahead."

Now, American Apparel's stock climbed more than 6 percent this session. But it is still down more than 95 percent since its peak in 2007.

Jason Carroll joins me now. You interviewed him back in 2011.

JASON CARROLL, NATIONAL CORRESPONDENT FOR CNN: Yes.

NEWTON: I mean, it's incredible. You know, he gets fired and stock goes up 6 percent.

CARROLL: Yes, you know, but look let me tell you something -- this is a man who says is he provocative? Yes. Is he unorthodox, you know holding

meetings and running around sometimes in his offices in his underwear? Yes. But he made his point back in 2011. As you know he was facing a

lawsuit. Five of his former employees were claiming that he had sexually harassed them, he denied those allegations then. Just want to listen to

what he had to say back in 2011.

(BEGIN VIDEOCLIP)

DOV CHARNEY, FOUNDER AND FORMER CEO, AMERICAN APPAREL : The way I feel about this situation is, is there's something disengenuine about the

claims. First of all, they're fake. Second of all, these claimants are being coached. Third of all, there's too much money involved in terms of

the amounts of money that they're claiming. And I feel -- I'm prepared to take a polygraph.

(END VIDEOCLIP)

CARROLL: That was then. This time around, it's still unclear exactly why Charney was removed from his position. They would only say that he was

removed for cause. We don't know what that cause was this time around, but we know what the history has been and that has been a history of

allegations of sexual harassment and sexual abuse.

NEWTON: Very quickly, this is a company that had that 'made in America' label.

CARROLL: Right.

NEWTON: Do you think it will continue with that kind of legacy going forward?

CARROLL: Well, look. I mean, you look at what happened last year when you look at the fact that they reported a net loss of 1.6 -- 0 -- 1.63

-- 1. --

NEWTON: You can get there, Carroll.

CARROLL: Over a million dollars of losses last year. So, that's going to be a problem for them. But you speak to most financial analysts

and they will tell you that the brand is still good, but perhaps they expanded too much. We'll have to see.

NEWTON: OK. Thanks for the update, Jason, appreciate it.

CARROLL: You bet.

NEWTON: Now, Jenny Harrison joins us from the CNN International Weather Center, and I believe, unfortunately, we still cannot get away from

some of that very dangerous weather in the United States.

JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: No, we're into what -- day four now, Paula, and unfortunately there's probably another day

if not another day and a half really of more of the same. This what it's been looking like the last few hours in terms of the radar. You can see

one or two yellow boxes popping up for severe thunderstorms. And then here, quite a line of severe thunderstorms working their way through the

Midwest. Now, so far, there have of course been numerous tornados this week. But in actual fact, there have been 20 unreported yesterday, and in

total this week -- 8 -- 90 tornados have been reported. Some strong wind reports, over 400 of those and several hundred damaging hail reports at the

same time. It's all had quite an effect on some of the major airports in the region over the last couple of days. But again right now, these are

the delays that are currently being reported. You can see Chicago, Newark and also Minneapolis and also LaGuardia there with some fairly lengthy

delays.

So, unfortunately, you're probably going to see more of that as we continue through the next couple of days. Very unsettled. We've got this

line of thunderstorms across the Midwest, the Northeast and then elsewhere across much of the South. We have got those afternoon shower and

thunderstorms which could pretty much pop up just about anywhere. And still a very warm day too as we head off into Friday. The warning area not

as large as it was, but still there's a chance again of more tornados, and again, more of that large damaging hail and some pretty strong winds.

Now, there've been reports of the same sort of weather -- not quite in that severity across in Europe -- and again, it's across the south where've

had some pretty strong thunderstorms in place. And we've had -- look at this -- another waterspout reported, this time close to Greece, and also a

tornado was reported in Turkey. And I believe we've got some pictures to show you of that. Not that often, of course, that we have these sort of

events appearing in Europe and certainly touching ground. But also, it's good to see some photography coming out of the region too. So you can see

a very long, thin tornado, no great damage reported. This was just outside of Istanbul, but even so, it does obviously give you a bit of a wakeup call

in terms of the weather that is around from these severe thunderstorms.

As we continue through the next couple of days, more of the same. Widespread scattered showers, heavier across the southeast. Still very

nice across the northwest of Europe. High pressure in control there. But the warnings in place across the southeast -- quite severe, storms likely

again as you can see heading towards the Black Sea as we head Thursday on into Friday.

Again, fairly unsettled picture across the eastern half of Europe, but clear and fine in the northwest, and that's where there's some very nice

temperatures too. There still are and will continue to be for the next couple of days. Twenty-three in London on Friday and 22 in Paris and a

very nice, warm 26 in Rome.

Now, as for the World Cup, can't bear to talk about the match that's currently underway. Paula knows about that. But let's talk about the

other matches that have yet to start this Thursday. This is Natal -- this of course will be taking place 7 o'clock local time, Japan against Greece.

It should be a fine, dry weather pattern for that. We've got a few showers again to the north, but the front that's sliding through is clearing out,

making way for high pressure. So, as I say, one or two showers around coastal areas. So we might actually have some rain on Friday for the

matches, first of all in Recife, 1 o'clock local time. We could have rain for that match. Italy against Costa Rica, a high of 27 Celsius. That's

the temperature for that match.

A little bit later in the day, 4 p.m. from Salvador. Switzerland against France, 26 Celsius. Again, we could have some rain showers with

that match. And then to the later match of the day -- 7 o'clock local time from Curitiba, we have got pretty good, clear conditions against Honduras

there playing Ecuador at 7 p.m. local time. Cool too -- 12 Celsius -- so good temperature to play football. Paula.

NEWTON: Yes, and, Jenny, I'm really glad that you predicted some nice weather for England because it's about to get ugly there if this doesn't

change. Full disclosure -- you and I were messaging about the game, not talking about the weather, but -- good thing the forecast looks good. OK,

Jenny, I'm going to give you the goods now. We're going to tell everybody what's going on. We have a World Cup update. Uruguay -- of course,

Uruguay -- great news for them. They just scored in the 85th minute to go back into the lead 2-1 against England. You know, I am an England

supporter. Alex Thomas who's live in Rio -- why? Because my little boy is an England supporter. After the break we will talk to Alex Thomas and he

will let us know what is going on. You're looking at live pictures right now -- some very tense fans in Brazil.

(COMMERCIAL)

NEWTON: All right, as promised, we do have that World Cup update. Uruguay, as I was saying, has scored in the 85th minute. They are now

leading 2-1 against England. Alex Thomas is here to explain exactly what is going on. Alex, I just told everyone my son is an English supporter. I

don't -- he must be distraught about now, I haven't talked to him. Explain how this happened because I know when they tied it up, it must have been

pandemonium in there.

ALEX THOMAS, CNN SPORTS CORRESPONDENT: Luis Suarez may not understand the phrase 'never bite the hand that feeds you' because the man that plies

his trade in English football is about to put that country on the brink of World Cup elimination. I'm speaking from a rainy Rio de Janeiro, Paula,

and this match is taking place around a seven-hours' drive away in Sao Paulo where the conditions haven't been much better. That should've played

into England's hands, but it hasn't been the case.

As I speak, just seconds remaining, we've got the match on in the corner of my eye. It has been rather tense here as you try and put your

impartiality to one side and enjoy the football --

(CROSS TALK)

THOMAS: -- and take it all in. But it has been a master cause (ph) - -

NEWTON: Yes, no, we're not going there, Alex. I mean, I just have to full disclosure. I mean, congratulations to Uruguay, but, really, what is

going to happen if they can't pull it out in the next few minutes? What's happened to them? Are they not out (inaudible).

THOMAS: As it stands, Uruguay leading 2-1, and if the score stays that way in the last few seconds, that means England -- they're not out of

the World Cup because it depends on the results of the other match in this group between Italy and Costa Rica which takes place tomorrow. Unless

Italy beat Costa Rica, though, England will be out of this World Cup. And the final whistle has just gone as I speak. Uruguay has beaten England 2-1

in Sao Paulo. And it means that Roy Hodgson's men stand on the brink of elimination. Uruguay who lost their opening match surprisingly against the

Costa Ricans, are right back in the hunt for qualification. They'll play Italy -- the 2006 and four-time World Champions in their third and final

group match, England will face Costa Rica, and so England's fate rests in the hands of the Azzurri, the team that beat them in their opening game of

this World Cup. It was a really topsy-turvy game and I'm just trying to stall for time a little bit because I know that we've got some video of the

goals to show you. I'm just waiting to be told when that's ready to show you --

NEWTON: (LAUGHTER).

THOMAS: -- and I can give you a clearer picture of the match. There's some still images, and you can see your Luis Suarez, the Liverpool

striker, playing in England's Premier League got the opening goal. It was a header after Edinson Cavani set him up. Suarez was injured for the first

game. He's been named the Professional Footballers Association Player of the Year in England this season, and the Football Writers Association

Player of the Year --

NEWTON: Oh.

THOMAS: He's been in sensational form and he showed it again here despite that injury. Not only did he score the first goal, Paula, but

later in the second half when rain -- Wayne -- Rooney leveled the scores for England, it was Suarez who cropped up again, beating Gary Cahill to a

loose header from Suarez's Liverpool teammate Steven Gerrard to get the winner. Let's show you the goals now. I've just described them so you can

see them for yourself, and you can see how -. We don't have the video. I thought I heard someone in my ear say that we had the video. But two goals

from Louis Suarez has sealed that victory for Uruguay over England, Paula.

NEWTON: What a deal. And just clarify here -- Wayne Rooney's first goal in the World Cup match -- is that true?

THOMAS: Yes, that's correct. He's been waiting a long time since making his England debut back in 2004 -- a decade ago. He's always seemed

to disappoint despite being one of the few England players that's an international star. He came here with high hopes, and eventually did get -

-

NEWTON: All right.

THOMAS: -- on the score sheet --

NEWTON: OK. I just had to make the best of it. We'll have to leave it there, Alex -- I had to make the best of it there. Congratulations to

Uruguay. Alex, we will continue to update you. Thanks so much. Appreciate it. Now, England fans want to stay away from this app because

it can alert you every time a team scores a goal in the World Cup. Now, forget text messages and tweets. This app only sends you one word -- yes -

- here it is -- 'yo.' Investors say it's worth a million dollars -- not bad for something that was created in just eight hours. Its developable --

developer -- Or Arbel joins me now from San Francisco. Or Arbel. Now, you're telling me eight hours, one word, apparently you've raised $8

million?

OR ARBEL, CREATOR OF YO APP: No, that's a million dollars.

NEWTON: Sorry, $1 million -- apologies. So eight hours, $1 million.

ARBEL: Yes, well, if -- you're looking at it the wrong way. I mean, the million dollars is not about how much time it took to make the app.

The million dollars is about the potential that it has basically to change how you communicate with your friends and families and even things that

interest you on a day-to-day basis.

NEWTON: OK, I'm going to stop you there. Try and explain to me -- because it is at the end just one word, right? All you do is say 'yo.' So

how does it work.

ARBEL: Exactly. Well, I'll tell you how it began and how this app came up, and then you will understand. It began with my partner Mosha

(ph), the founder of Mobley (ph), asked me to do an app that has one big button that when he taps it, it sends a push notification to his assistant.

And then he tells his assistant that whenever she gets the push notifications, he needs her in the office. Because he tells me it's really

annoying for him that every time he's in a meeting, he's with people, and then he needs her in the office, so he needs to call her or he needs to

text her, and then she text him back, and then he has to read the message and he has this annoying red number that he has to remove and it's really

annoying for him. He says I just want to send a push notification --

NEWTON: All right --

ARBEL: -- and she already knows what this means.

NEWTON: -- I'm going to cut it -- I need you to cut to the chase here -- can you do a demo for us? Show us how it all works.

ARBEL: Oh, yes, sure. So instead of just one big button, I thought why not make like a list of big buttons with a bunch of names and I can

type your name --

NEWTON: OK.

ARBEL: -- and then you get a 'yo.'

NEWTON: And did you guys hear that? I just got a 'yo.' And all it says is 'yo,' and that's my alert that whatever --

ARBEL: Yes.

NEWTON: My girlfriend can meet me downstairs, my latte's ready, whatever it is.

ARBEL: Yes, it's really that simple --

NEWTON: Thanks -- OK --

ARBEL: -- it's really easy, you just tap it.

NEWTON: -- I think we just got, then tap we go. Thank you so much for explaining that --

ARBEL: Thank you very much.

NEWTON: And I will correct again one word, $1 million. That is the way it went. Thanks so much. Appreciate your time. Now, in a moment,

transforming the movie industry means looking East.

(COMMERCIAL)

(BEGIN VIDEOCLIP OF MOVIE "TRANSFORMERS, AGE OF EXTINCTION")

Narrator: This is not war. It's human extinction.

Male: Oh my God!

(END VIDEOCLIP)

NEWTON: Well, in case you didn't recognize it as such, that was Hong Kong being blown to bits. Now the harbor city is the setting for the

fourth "Transformers" movie -- "Age of Extinction." The film premiered in Hong Kong on Thursday. Now, it won't debut in New York until next week.

It's the latest sign that Hollywood is looking East to Asia. Jackie Chan's newly-announced "Dragon Blade" film will be one of the most expensive

Chinese language films ever, with a cost of $65 million. Now, when "Ironman 3" opened in China, it broke box office records. The film had

four extra minutes of footage just for the Chinese audience. And the joint venture between Dreamworks and Chinese Studios has announced five new

films. And that is "Quest Means Business" for today. I'm Paula Newton in New York. Thanks for watching.

END