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Quest Means Business
Markets Fall as Oil Slide Continues; Oil Prices Under Pressure; Winners and Losers Emerging from Oil Slide; Falling Oil Price Hurts Russian Economy; Oil Slide Effects on Global Economy for 2015; European Markets Down; Ford Looks to Future at CES; Jordanian Prince Seeks FIFA Presidency
Aired January 06, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: The bells are ringing. The market is well off its low point of the day, had been down more than 200 points. It's still
going to finish with a loss of about 130-odd. The man with the gavel hits it once, twice, three times.
(GAVEL HITS)
QUEST: And trading is over. Thank goodness, some might say. It's Tuesday, it's the 6th of January.
Put it this way: oil proves to be the market's foil. Prices and stock markets, well, they all fall.
Ford chief exec will be on this program live from Las Vegas, where he's unveiled his vision for the future.
And it's a little bit of trouble for Bitcoins. Hackers are staging a virtual break-in.
I'm Richard Quest. We have an hour together, and I mean business.
Good evening. It's a case of the slide will not stop. The price of oil is continuing to fall dramatically, and we are now seeing the shocks
reverberate through stock markets around the world for a second day. Investors are worrying about what this fall means for the global economy.
Join me at the super screens and you'll see what I mean. First of all, how the price has traded. Oil is falling. West Texas Intermediate,
that's the benchmark in the US, that is down 3.7 percent on the day. Brent Crude, which is the general Brent mark -- the general benchmark, I beg your
pardon -- $51.17. That's down roughly about the same amount.
So, interestingly, we're seeing falls in tandem, and WTI is now comfortably under $48. This is how you put it all together when you look
at it. From the high points way back in July, we have successfully come down further and further to where the market is now. As you can see, the
prices, just off by $48 and $51.
Investors are nervous about this and about that, and you're seeing, despite a -- I suppose one would call it a dead cat bounce at the open,
having had a very sharp fall yesterday, the market did try and have a rally at the beginning, but it was absolutely short-lived. As you can see, by
11:00, the market was down. At its low point in the session, just after lunch, it was over 230 points lower.
Oil is the leading culprit for all the volatility that we are seeing on the markets at the moment. The Dow is off 130 points at the close at
17.3.
Now, our QUEST MEANS BUSINESS oil pressure gauge, because we're talking about oil. It is all about oil. This was the high point -- the
recent high point. And the gauge reveals why pressure is dropping away. So, let's see what happens.
First of all, you have the US fracking, the oil -- the US shale revolution. Outputs increased by an average of a million barrels a day in
2014. The Saudis refused to cut production, you'll be well aware of that as well. So, the fracking is one reason why pressure is coming out of the
market.
Then, you've got OPEC. OPEC has absolutely decided it's not going to chase market share. The Saudi's won't cut production. OPEC is in an
absolute mess.
The price falls because ISIS and fundamentalism, which should have pushed prices up, hasn't had the impact that investors had feared. Iraqi
oil exports are at their highest since 1980.
And the oil price falls, the dollar strengthens, the euro is near a nine-year low. You're seeing now how this all feeds into each other. Put
it in together --
(BEEPING)
QUEST: Serious issues now. You have global demand weak, because economies are starting to feel the real pressure.
Now, what does all this mean, of course, for the future of all of this? Let's talk to Alan Valdes about this and put it in perspective.
There's many oil factors involved. Alan, for you, which is the most significant?
ALAN VALDES, CHAIRMAN, DIEGO: You really hit the nail on the head with those three remarks before. But there's one more, and that's energy
efficiency. Cars nowadays get 33, 35 miles to a gallon. So, that's also weighing on the oil price. Oil's great down here for the consumer.
But another factor we haven't mentioned is maybe there really is a global slowdown starting, and not just here in the States, but around the
world. And that, I think, has people nervous, too. At least traders nervous. Not the -- no bottom right now in oil. I mean, it's not going to
go down to zero. I don't think we'll see it down to $20, but you could still could see it come in a little here.
QUEST: Now, we know net -- net, the falling price of oil is good for economies, particularly the oil consuming economies, and that makes up the
most of the world. If we ignore the Exxons and the Texacos, if we ignore the oil stocks on the Dow, why is the market not liking this fall in oil
price?
VALDES: Well, I think the big reason here in the States is because oil -- the industry itself, it's not just the oil, it's the whole industry,
which -- it's huge. It's a huge multi factor here in the United States.
But again, also, it's that global slowdown, and that's going to affect our exports, that's going to affect our earnings coming up in the next
earnings cycle. So, that all weighs on the market. And so, oil down here is good for the consumer, but for business, there's a little nervousness
out there right now.
QUEST: You've now mentioned this slowdown twice, Alan. I know the eurozone is slow, and China is slowing down, but the IMF, even when oil was
down at $60 a barrel, said that this could add as much as 1 percentage point, 0.9 of a percent, to global growth. So, you don't find -- you're
still more worried about slowdown than growth?
VALDES: Yes, at this point, it's gone beyond slowdown. It is really a problem that we're watching. Down -- if oil was down $2 or $3, that's
great. But the way it's going, like I said, we just don't see a bottom.
So, this thing still capitulate a little more. And that is worrisome, again, for the reasons I mentioned. And I look up there right now, we made
a little comeback, but it's still pretty deep here in the red.
QUEST: Right. Now, I want to look at the Dow again, because as we look at the Dow, we've clearly tested -- I'm not a Chartist. I do not -- I
think Chartists is a bit of old hocus-pocus in many ways.
VALDES: Yes.
QUEST: But we have tested levels here, haven't we? We tested 17,000 sort of. And do you see now the risk on the downside, or do we stay where
we are?
VALDES: I think we can stay where we are for a little while. You saw the S&P break below 2,000. That's the one traders watch. The Dow
fluctuates a lot, but the S&P we definitely keep an eye on. That broke below 2,000. That would close a little above 2,000, a good sign.
But it's still a very worrisome market out there, I'll be honest with you. We've got the Greek elections coming up next month.
QUEST: Oi!
VALDES: We've still got problems. So, there's a lot of things we're watching. But oil, of course, like you mentioned, is number one.
QUEST: And we didn't even mention Russia so far. Alan --
VALDES: Yes.
QUEST: -- it merely means we have more scope to talk about these issues in the future. Thank you, sir, for your analysis.
VALDES: Thanks, Richard. Have a great day.
QUEST: Thank you. Now, falling oil prices are creating a lot of winners and losers. Consumers clearly come out ahead. Net-net, cheaper
prices at the pump. There is this boost, of course, for the auto industries. Car makers reporting solid sales. Airlines, well, fuel is a
third of all their expenses, so that's a big win-win.
On the losing side of the equation, you don't need me to tell you, you've got Russia, with its oil industry, Norway, a vast producer of oil,
and OPEC. They are clearly -- if the winners are at the top of the barrel, the losers are well and truly at the bottom.
Oil is now below the level where OPEC makes money. Producers' currencies are falling along with the price. The ruble, well, the ruble
has had so many difficulties. It's down another 4 percent against the dollar.
The ruble and Russia, key in this story. So tonight, from Moscow, our senior international correspondent Matthew Chance looks at this impact of
the falling oil price on the Russian economy.
(BEGIN VIDEOTAPE)
MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, the price of oil remains the single most important factor for Russia's economy.
Sanctions have played a part, of course. But it's the collapse of the global oil price. It's hit the currency, the ruble, hardest of all and, of
course, threatened Russia with its deepest recession since the 1990s.
Russia is one of the world's biggest oil exporters, earning most of its revenue from oil sales. The sinking oil price means that Russia has
been forced to trim its budget. It's now making spending commitments based on a crude oil price of $60 a barrel instead of $100.
But even that is now looking increasingly unrealistic as the crude price tests new lows. At the same time, oil production in Russia has risen
to unprecedented levels. It's now pumping 10.67 million barrels a day, according to official figures in December, adding to the oversupply in the
global market.
One minor positive, though, is that the Russian ruble has been falling at an even greater rate than the price of oil. That means that even though
Russia is selling its oil for fewer dollars, there's no panic, because it's getting more rubles in return.
Matthew Chance, CNN, Moscow.
(END VIDEOTAPE)
QUEST: Put all this -- pull the strands together, make some sense of it. Anthony Chan is managing director and the chief economist at JPMorgan
Chase Private Bank. Good to see you, sir.
ANTHONY CHAN, MANAGING DIRECTOR AND CHIEF ECONOMIST, JPMORGAN CHASE: Glad to be here.
QUEST: Make sense of this. You've got charts you've got diagrams. Make sense of it for us tonight.
CHAN: Very simply, Richard, what we have here is a lot of uncertainty because the volatility in oil prices is spooking people into thinking that
bad things are going to happen.
What I've done is to look at the data going all the way back to 1989. When stock -- when oil prices drop more than 40 percent, it takes a lot of
nervousness, but six months later, on average, the S&P 500 has been up quite a bit. Up in double-digit territory. Up close to 13.5 percent
during expansions.
QUEST: Now, why is that? Is that because production costs are lower because of the oil component in construction, production, whatever, or
consumers have got more money? Why does it have that effect?
CHAN: Because consumers have a lot more money. Believe me. Now, when you look at the S&P 500, about 8.25 percent of the S&P 500 right now
is energy companies, which is another way of saying more than 90 percent are other companies that will benefit --
QUEST: Right.
CHAN: -- from lower oil prices. Seventy percent of the economy of consumers.
QUEST: So get -- let's get rid of the oil companies and the energy companies for a moment, and you're telling me, focus on the rest.
CHAN: Focus on the rest. The other 90 percent should be beneficiaries. Now, granted, that right now analysts have lowered their
earnings estimates for earnings in energy companies by about 30 percent for the next year. Maybe that's even going to come down weaker. But there are
going to be some offsets on the other side.
QUEST: Alan Valdes is worried about global slowdown. We know China's going to slow down. Eurozone remains a basket case for the foreseeable
future. Are you expecting QE from Draghi?
CHAN: I have no doubt that you're going to see quantitative easing when the ECB meets later this month on the 22nd. I have no doubt that
China's going to do a lot more. In fact, overnight, the Chinese announced several acceleration of several trillion renminbis-worth of infrastructure
projects out there.
So, they're going to spend more just like they did in 2008, and they spent close to 8 trillion renminbi in order to stimulate the economy.
They're doing the same thing right now. They've lowered interest rates. I think we're going to see more lowering of interest rates, and even lowering
of reserve requirements.
QUEST: Well, if that happens, both in the eurozone -- let's face it, you can only pump so much more money into the economy before somebody's not
-- they've finally got to do something.
CHAN: Well, guess what else is happening in the eurozone? The value of the euro has come down, which is another way of saying, that's one of
the reasons why the cost of oil has come down, because oil is priced in dollars, and the dollar is getting stronger, especially against important
currencies like the euro.
So, guess what that means? That means that oil prices are coming down lower as the dollar has gotten stronger. People are ignoring that.
QUEST: Except you've got to get those euros and buy dollars if you've got to buy the dollars to pay for the oil.
CHAN: It is, but that's one of the reasons why a weaker euro generates a lower cost of oil when it's priced in dollars.
QUEST: When we pull all this together, can -- because the US, we saw the 5 percent annualized growth. Well, it's clearly not going to be
repeated in the first part of this year. But what is your forecast for US growth in 2015?
CHAN: US economic growth in 2015 is going to be a little north of 3 percent. By the way, in Europe, I look for growth next year to be about 1
percent. This year will probably be 0.7 to 0.8 percent.
Look at the PMI numbers that we got from Europe. For both Germany and France, those numbers were stronger than the consensus. The weaker link
was Italy.
QUEST: But they were still weak.
CHAN: They were still weak, but they are showing that the economy is making progress. And by the way, the ISM, non-manufacturing --
QUEST: Right.
CHAN: -- was a little weaker, but still in expansion territory in the US.
QUEST: I need -- final question to you, sir. Final question. Should we be worried tonight?
CHAN: Tonight, we should not be worried. And in fact, history shows wait a couple of months, and the effects of oil prices will certainly put
smiles on all of our faces. Thank you so much.
QUEST: Smile on our face. We like that. Thank you. Good to have you on. Now, the European stock markets closed lower.
(RINGS BELL)
QUEST: Let's have a look. The major indices were down. The FTSE took the biggest hit. It was down 0.8 percent. It's hardly much of a
movement, not when you think that they were down 2 and 3 percent yesterday.
The French economy minister, Emmanuel Macron, has called on Germany to do more to help revive growth. The minister Macron will be on this program
tomorrow in an exclusive interview.
When we come back, the Ford chief exec obviously has some strong views on the price of oil. But he's also got an entire variety of products that
will use technology well into the future. It's QUEST MEANS BUSINESS, good evening.
(COMMERCIAL BREAK)
QUEST: We've been talking about the winners and losers as oil prices slide. Now, Ford seems to be in both camps. Extra cash in consumers'
products -- pockets, of course, will boost the company's December sales to near ten-year highs. Consumers have more money, they can buy the cars.
But on the other hand, demand has slumped for fuel-efficient vehicles, like the cars made at this Ford assembly plant near Detroit. It's an
extended shutdown because, apparently, of course, it's curbing supply.
And looking ahead, at the Consumer Electronics Show, Ford's chief exec is showcasing its latest innovations in connectivity and semi-autonomous
vehicles. I think -- I think that's a very posh way of saying driverless cars to you and me, "semi-autonomous vehicles."
Anyway, whatever way it is, we're very pleased to have the chief exec of Ford, Mark Fields, who joins me now, live from the show in Las Vegas.
Sir, thank you for joining us. Very kind of you to make time for us tonight.
MARK FIELDS, CEO, FORD: Oh, thanks so much for the time, Richard.
QUEST: Now, just let's get the oil question out of the way first. You have this plant that has been closed. Are you seeing a shirt to gas
guzzlers and away from those fuel-efficient cars? Are we seeing that in the market yet?
FIELDS: Well, I think what we're seeing overall, first, whatever type of vehicles consumers are buying, they are going to want to make sure that
that vehicle gets good fuel economy. So, I think what we are seeing in the marketplace right now with oil coming down, first off, it's good news for
the economy. It's going to put more money in folks' pockets.
I don't think it's going to go out and raise the industry sales numbers appreciably, but what it could do is change a little bit of the
types of vehicles that consumers want. Maybe more CUVs and SUVs and trucks than cars.
But even with that, customers that are purchasing those type of vehicles, they're going to want great fuel economy, and that's why across
our lineup, one of our commitments is to be the best or among the best in fuel economy for our customers.
QUEST: Now, are you -- because you -- if this shift to SUVs and trucks and things, if this does take place, and I'm sure you're right, you
need to be ready. You need to make sure that your supply can keep up with demand. So, at Dearborn, are you all talking amongst yourselves and are
you increasing production of certain vehicles to accommodate this?
FIELDS: Well, the wonderful thing, Richard, about our strategy over the past couple of years is we have a full lineup of vehicles. Cars,
utilities, trucks, small, medium and large. So, whichever way the market goes, we have plant flexibility and working with our suppliers to adjust.
And what we're seeing now, obviously, a little less demand for smaller cars, so we're going to follow our strategy of not overproducing and make
sure we have capacity that meets demand on the car side.
And when we see opportunities on the SUVs and trucks side, we have some flexibility, and we'll use that, depending upon where the market goes.
QUEST: I need to talk to you about CES. The driverless car. You're quoted as you're going to have five -- how many? -- five or so within so
many years. Putting more technology into the car, it's difficult, it's expensive, but is the driverless car coming whether we like it or not?
FIELDS: Well, I think you have to put things into perspective. We're here at CES highlighting our latest innovations. And some of those
innovations are around the semi-autonomous vehicles that we have on the road right now. Vehicles that will help you stay in your lane. Vehicles
that will help you park. Vehicles that will tell you that there's vehicles approaching in your blind spots.
At the same time, we're also talking about our development plans for fully-autonomous vehicles. And our plan for that, very simply, Richard, is
to make sure that when we do come out with a vehicle, whenever that is, we want to make sure it's giving the customer the right experience
And that we make it accessible and affordable to them, unlike, maybe, some of our luxury competitors, who are going after a different market.
QUEST: Now, see, this is very interesting, because you've got to get it right, haven't you? And the question mark becomes, do you want to --
you don't want to follow, and you probably want to lead. But you've got to lead in an intelligent way so you don't bet the ranch or you don't -- Now,
that sounds so obvious, but for you as the chief exec, balancing that, how are you doing it?
FIELDS: Well, very simply, in the case of autonomous vehicles, we don't want to go out and make a marketing claim. We don't want to win a
horse race in terms of the first autonomous vehicle in the marketplace. We want to make sure it's the right one. It gives the customer the right
experience for those customers that want an autonomous type of experience, and do it accessibly and affordably.
So, as we look at our capital and how we spend our capital as a company, we're making sure we're making investments for today, but also for
the future, looking at some key trends going forward.
QUEST: Are you worried about the dollar? The dollar's very high. Now, obviously, you manufacture overseas, therefore, you only -- but that's
going to hit your results when you repatriate, or at least when you report the results. You'll obviously be making allowances for that.
And there are some exports from the US that you send to other countries. So, I know chief execs hate talking about the currency, but
sir, the dollar, is it a concern for you?
FIELDS: Well, overall, currency, it is a factor of our business. And as a CEO, we have to just deal with it. And the currencies are going to --
they're going to be volatile over time. They're going to change. Right now, the dollar is very strong.
We do export. We are the leading ex -- automotive export -- exporter out of the US. We're going to continue to do that, to be able to serve our
customers in various markets.
But very clearly, our approach is to make sure that the market sets exchange rates, and not governments around the world, because we want a
fair playing field. So, we'll focus --
QUEST: Right.
FIELDS: -- on continuing to bring out great products and making sure that we can sell them appropriately across the globe regardless of
currency.
QUEST: Let's -- final question, sir. Let's put economics to one side. You're at CES. This is a bonanza. This is every gadget that you've
ever hoped, thought, or dreamt. Have you seen anything there that's got your blood running and thinking, I've got to have one of those? A drone?
(LAUGHTER)
QUEST: Is there anything that you really thought, that is cool?
FIELDS: Well, I haven't had a chance to walk the show yet.
QUEST: Oh!
FIELDS: I'm going to do that in a little bit. But it's amazing, some of the technology here and the innovation. And that's why we're here,
because we want to showcase our innovation as Ford and make sure we challenge our engineers to put those innovations into products that we have
on the road today and tomorrow, but not have them stop there.
And that's why one of the other messages we're sending at the show today is how we as a company are trying to use innovation to solve some of
the mobility issues around the world. These really societal issues around challenging transportation and congestion issues.
QUEST: And we'll talk more about that. Thank you for taking the time. I'm sure there's plenty of toys, gadgets, and gizmos that are
waiting --
FIELDS: Oh, yes.
QUEST: -- for you to have a go at. If you ask nicely, they'll let you play with them. Thank you, sir, for joining us on QUEST MEANS BUSINESS
tonight.
FIELDS: Thank you, Richard.
QUEST: Mark Fields, the chief executive of Ford.
A prince wants to overthrow the king of world football. The prince is Prince Ali of Jordan. He's announced he wants to unseat FIFA's current
battle-scarred king.
(COMMERCIAL BREAK)
QUEST: Jordan's Prince Ali Bin Al Hussein has now thrown his hat into the ring to be the next chief of football's governing body. Prince Ali is
already a FIFA vice president, and he's aiming to end the rein of the current president, Sepp Blatter.
Patrick Snell is with me from the CNN Center. Core question here: you don't go into this unless you think you can win, or at least you have a
body of support. Is this man a stalking horse, or does he have a real chance?
PATRICK SNELL, CNN SPORTS CORRESPONDENT: I believe it's going to be very, very tough, Richard, to topple the current incumbent, FIFA president
Sepp Blatter. He's the ultimate survivor, if you like. He's been in power since 1998, the year when France hosted the FIFA World Cup.
But Prince Ali wouldn't be staking his reputation. He's a Jordanian prince. He's 39 years of age. He wouldn't be staking and risking his
reputation in the global community, in the worldwide footballing community, Richard, if he didn't feel he had a serious chance of making inroads.
The big question is, does he have support? Now, he says he's been encouraged by those fellow FIFA members who've encouraged him, he says, to
stand, to go for football's top job. He has the support of Europe as well, and the UEFA president, Michel Platini.
But -- this is highly significant, Richard -- Europe only has 53 of the 209 votes available, and I can tell you this, Blatter does enjoy huge
popularity in other parts of the world. This is the man who took the FIFA World Cup to Asia for the very first time back in 2002, and more recently,
to the African continent --
QUEST: OK --
SNELL: -- in 2010 as well, Richard.
QUEST: What about the domino theory that basically says, OK, the moment people start to get a whiff of defeat about Blatter, the moment
people think, hang on, this is over, then pardon the phrase, the rats leave the sinking ship?
SNELL: This is a possible scenario, absolutely. But look, as I said at the top, Sepp Blatter is the ultimate survivor. He enjoys that
popularity. There are those -- look at the FIFA World Cup, Richard. Look what it generates in terms of revenue every four years, $1.5 billion from
TV revenues.
There's a huge pot of money there. That goes periodically, every four years, to benefit footballing programs in emerging nations. It is hugely,
hugely positive in terms of Blatter's legacy that he has that.
And as I say, this is a man that's been pretty much untouchable since 1998. He threw off the then UEFA president, Lennart Johansson, the Swede,
to four years later in 2002, again he was the most powerful man. He was the victor over Issa Hayatou, the CAF president. In 2007, he was
unopposed. And most recently, in 2011, again, he was unopposed --
QUEST: All right --
SNELL: -- after Mohammed bin Hammam pulled out due to corruption allegations.
QUEST: OK.
SNELL: So, this is a tough competitor. He does not want to give up football's top job, Richard, because he feels he still has unfinished
business. And get this -- going into the elections in May, he will be 79 years of age.
QUEST: What do these other countries see in Blatter that the Europeans basically don't? He can't just literally have -- and I don't
when I say "bribe," I don't mean literally bribe. In terms of spreading the FIFA largess to those countries, it can't just be as simple as that.
Or is it?
SNELL: Well, he's vastly experiences. He's a showman. He is a great, great survivor, as I said at the top, and he knows how to play the
political game. He is a talisman, as I say. He has these votes, he has this popularity, and he is not finished. In terms of his agenda, he is not
finished.
But, interestingly, just as a footnote for you, Richard, Michel Platini also saying, also challenging, if you like, Prince Ali saying,
listen, it's still early days. We want to hear more about Prince Ali's very own proposals. What is he going to bring to the table? That's what
we're all waiting to hear right now, Richard.
QUEST: And you'll tell us when you find out, please. Thank you, Patrick. Patrick Snell at the CNN Center.
QUEST MEANS BUSINESS for you at the beginning of the week, a Tuesday. Sticky virtual digits have been busy rifling through fat digital wallets.
It's all about Bitcoin and the busiest European exchange has been pick- pocketed. Bitcoin is telling customers around the world not to worry. Is this Bitcoin redux? QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
RICHARD QUEST, CNN INTERNATIONAL ANCHOR AND REPORTER HOST OF "QUEST MEANS BUSINESS" SHOW: Hello, I'm Richard Quest. There is more "Quest Means
Business" in just a moment. This is CNN and on this network the news always comes first. Turkish police are investigating a deadly bombing in
the main tourist district of Istanbul and they say a woman blew herself up inside a police station, killing one officer and wounding another.
Authorities are working to identify her and determine the motive.
An Israeli military court has sentenced a Palestinian man to life in prison in connection with the kidnapping and murder of three Israeli teenagers.
Hussam Qawasmeh was convicted last week of organizing the attack. His two alleged accomplices were killed in a gun battle with Israeli soldiers. The
teens were abducted near a West Bank settlement in June.
Searchers have found two more bodies for AirAsia flight 8501. The remains of 39 people have now been recovered. Poor weather conditions on Tuesday
kept divers from searching the bottom of the Java Sea. The main section of the plane is still missing. In Washington, the 114th Congress has convened
and the White House has already vowed to block any plans for a new oil pipeline. A measure on the Keystone XL Project will be the first vote of
the new Congress. The White House confirmed that President Obama will veto any bill that approves its construction.
Stock markets in the U.S. suffered a steep loss. The price of oil continues to fall. Brent fell close to the $50 mark. That's just one of
the factors creating volatility. The cost of borrowing from the U.S. government has fallen as investors are looking for safe havens.
Oil is not the only thing that is tumbling in price. Bitcoin has had its share of selling pressure, and you'll see that a year ago it was trading
quite highly. Well, come and look with me over at the Super Screen. We'll see a year ago - over here you'll see Bitcoins up at 8 hundred - it was of
course much higher than that. Today it's roughly $275 a Bitcoin. And that sharp for the ups and downs of Bitcoins all comes as news that Europe's
biggest Bitcoin exchange was hacked yet again. Now this is not clearly - not exactly a confidence boost for investors. Patrick Murck is the
executive director of the Bitcoin Foundation who joins me now from Seattle. Patrick, we're grateful that you're giving us your insight tonight. This
hack - is it going to put the company out of business or is it manageable?
PATRICK MURCK, EXECUTIVE DIRECTOR, BITCOIN FOUNDATION: Well, from all appearances it looks like it's very manageable, and some of their security
best practices dividing up their custodial holdings into what are called hot wallets and cold storage seems to have been effective in mitigating a
lot of the loss and making sure that no customer funds were lost at all.
QUEST: So this is not Mt. Gox all over again? This is not you don't believe going to suddenly explode into something where the story becomes
one of theft and ultimately hacking?
MURCK: So it looks like what happened here and from all appearances now is that the risk was contained mainly because people have learned from past
incidences like Mt. Gox how to better bulwark their cybersecurity against hackers and data thieves and things like that. Bitcoin is like data, just
like selfies or anything else and so these companies are on the frontlines of cybersecurity right now. And some of the best practices they're putting
in place are or seem to be taking affect and mitigating some of these losses.
QUEST: The price of Bitcoin at its peak was $1,240 on the Mt. Gox exchange. It's now down at $275. Hardly a good investment.
MURCK: Well it depends on what time scale you're looking. If you back it out two years, it still looks like a pretty great investment. But of
course the price is just one aspect of this and you can't look at this as a short-term speculative opportunity. The Bitcoin is really a platform for
innovation, and you're still seeing lots of venture capital and energy being invested in building new services and products on top of this
platform. That's where the excitement is right now.
QUEST: So you're saying that it's not an investment tool per se. But do you find it somewhat ironic that the very - the very form of digital
currency that was set up in an anarchic way as against traditional monetary values and monetarism is the victim itself of hackers who are anarchists in
their own right anyway? Or is it just theft?
MURCK: I think it's just theft. Thieves are thieves. They'll steal from anybody they can steal from, whether it's Bitcoin or selfies or credit card
numbers - anywhere there's data or anywhere there's some opportunity to steal from people. You'll find other people who are willing to try and
steal it.
QUEST: So is it fair to say, sir, that when all's said and done, Bitcoin is just like any other bank except your vault is electronic and digital but
eventually somebody with an electronic cosh (ph) and a - you know - the electronic digital equivalent of a sawn-off shotgun gets in through the
front door and makes off with the loot?
MURCK: Wow. The difference of course is that unlike your U.S. dollars that are stored in an online account, with Bitcoin you actually get to
decide how much of it you're trusting other people to store for you. So I can secure my own Bitcoin and I can do it offline in very safe ways. I
have right here what's called a hardware wallet -
QUEST: Oh.
MURCK: -- made by TREZOR -
QUEST: Oh.
MURCK: -- and that allows me to store my bitcoin here on this hardware wallet. And without this in - this - physically connected to a computer,
no one can steal my bitcoin. So you're seeing innovation around security within Bitcoin and the Bitcoin ecosystem that you can't possibly see in the
traditional system.
QUEST: I need to interrupt you. If you've got the Bitcoin wallet on the left hand, you've got the key on the right - what happens if you lose the
key?
MURCK: Well of course there's certainly safe ways to back that up, and this is actually a very consumer-friendly device -
QUEST: Right.
MURCK: -- to walk you through the steps.
QUEST: Thank you, sir. We'll talk more about -
MURCK: So what you're seeing again is - oops, sorry.
QUEST: No, no, no, I apolo - that was just a last-minute thought.
MURCK: Sure.
QUEST: Thank you for joining us, sir. You're always very kind to come and talk about Bitcoin and we appreciate it - the Bitcoin Foundation. Now,
hackers have had their share of headlines lately, you'll know that of course. The U.S. is blaming North Korea for the cyberattack. Now a North
Korean defector says one key location for his country's hacking it continues. It is in China, and CNN's Will Ripley has that part of our
story tonight.
(BEGIN VIDEOCLIP)
WILL RIPLEY, TOKYO-BASED CNN CORRESPONDENT: Shenyang has the neon glow of a typical Chinese city. Beneath the bright lights an unusual site - the
flag of one of the most isolated countries on earth. This is the state- owned Pyongyang Restaurant. The waitresses are here on what's considered a prestigious three-year assignment. They say they're all from the same
university in Pyongyang. Nearby, the Chilbosan Hotel, a joint venture between North Korea and China. The art like everything else pure Pyongyang
propaganda.
This is North Korea's state TV playing right now in our hotel room. Hallways are kept dark just like in North Korea which struggles with
electricity shortages. Shenyang is the biggest Chinese city near North Korea, a place where many from Shenyang come to work. This defector says
they also come here to hack.
KIM HEUNG-KWANG, NORTH KOREAN DEFECTOR, VIA INTERPRETER: It's easy for them to work secretly. It also has great internet infrastructure says Kim
Heung-Kwang. The former Pyongyang computer science professor claims North Korean hackers operated secretly in Shenyang for years. Kim says some of
his own students became cyber warriors for the hacker network known today as Bureau 121. "By day they worked regular jobs," he says. "But the rest
of the time they were acting on orders from Pyongyang. Kim says hackers often work out of the basements of North Korean-owned buildings. He's
found no evidence any hacking activity was occurring at the places we visited, but says locations were kept secret and constantly changing.
"When they enter China," he says, "they come under different titles. For example an office worker, an official with a trade company or even as a
diplomatic staffer.
North Korea has a consulate in Shenyang just minutes from the hotel and restaurant. Representatives for that consulate, the Embassy in Beijing and
government officials reached by e-mail in Pyongyang tells CNN they have no comment on the defector's claims. For its part, China says it opposes any
illegal cyber activity on its territory. In the middle of a bustling Chinese city, a hub for North Koreans and questions about what's really
happening beneath the surface. Will Ripley, CNN Shenyang, China.
(END VIDEOCLIP)
QUEST: From the bright lights of China where they make the products to the Consumer Electronics Show in Las Vegas where they show you the very latest
products that we'll all be buying. We'll be in the drone zone after the break.
(COMMERCIAL BREAK)
QUEST: It is a veritable orgy of technology and it's begun in Las Vegas. It's the International Consumer Electronics Show and it's got everything
you could possibly want from wearable technology to robots and anything and everything in cybersecurity. Attending this orgy is Samuel Burke.
SAMUEL BURKE, BUSINESS CORRESPONDENT: Richard, you and I have both flown drones around. In fact just on this show last night we were flying one
with a 4K camera. It's actually very difficult. It looks easy on television but you nearly have to go to pilot school to fly one. So I
looked for a hands-free drone that will tail you around wherever you go.
(BEGIN VIDEOCLIP)
BURKE: Most people don't want drones following them around, but this is the type of drone that you do want following you around. You just let it
take off and then it uses this wristband to follow you around right, left, up, down and record everything you're doing, even across the Las Vegas
desert. What's the advantage that your drone has over other drones?
EDGARS ROZENTALS, CEO, AIRDOG: The main thing is that you don't need to have any skill to control it. So you have a release, you push a button and
you're ready to go.
BURKE: I've seen drones many times. To get a great shot, you have to have two people. What are some other situations where you could use these type
of drones beside ATV-ing out on your own?
ROZENTALS: Any kind of action sports such as surfing, snowboarding, skateboarding, you name it.
BURKE: Tell me a little bit about the technology - what exactly is happening between that drone and the bracelet?
ROZENTALS: So we have a wide range of sensors inside starting from GPS, axillar (ph) meters, gyroscopes, a magnetometer. We are choosing the
readings from all of these sensors to predict your movement trajectory.
BURKE: This drone is going to set you back $1,300 which is a big chunk of change but not as much as some of the other drones that I tested out. But
keep in mind that doesn't include this camera. So, droning is an expensive sport no matter which way you cut the costs.
(END VIDEOCLIP)
BURKE: Richard, that was one of the most fun experiences I've had at CES and you don't realize just how much work a drone needs, and so you're just
out there and it's following you around.
QUEST: All right, Samuel. Now this is actually fascinating thought - I think you've got to learn how to do these drones properly. Samuel, this
new Walkman that everybody's talking about that's over $1,000. Now I remember buying - you were at school when I bought my first Walkman - and
it wasn't that much money.
BURKE: Richard, I didn't even know what a Walkman was until today.
QUEST: (LAUGHTER).
BURKE: No, I'm just kidding, Richard. I had to pay about $30 for my Walkman, but Sony is rebirthing the Walkman. It's really more like an iPod
with high-quality sound. Sony's marketing it as, you know, you've got HD for a television? Well this is the HD of sound. I've been listening to
some Whitney Houston and I do want to dance with somebody but I don't want to dance with somebody that's going to cost me $1,119 to listen to some
old-school Whitney Houston, Richard. Yes I could hear the difference in the sound without a doubt, but - many almighty - I don't think I can afford
$1,119 for much - much less an overpriced iPod.
QUEST: All right. In a word - I'm going to give you 12/13 hundred dollars. Are you going for the Walkman or the auto drone?
BURKE: Without a doubt, Richard the auto drone and I'm going to be flying it over your studio in New York.
QUEST: No you won't. Thank you very much. Samuel Burke who is at CES. We flew a drone in the studio once before. It nearly got me fired, we
nearly broke all the equipment and the head of studios at CNN was not best pleased. Clinical trials are beginning. It's a serious matter with
potentially huge results. They're looking for the Ebola vaccine and we'll talk to the lead scientist on the project.
(COMMERCIAL BREAK)
QUEST: Clinical trials of a new Ebola vaccine have begun. The first of 72 healthy volunteers have already received the initial dose. Johnson &
Johnson are hoping that large-scale trials may begin as soon as May. The company says as many as two million vaccines could be available later this
year. The Johnson & Johnson chief scientific officer joined me earlier and I asked him how he was balancing the safety protocols necessary to do this
thing without doing any harm. But at the same time there is clearly this very urgent need that the drug has to be made available as soon as
possible. Balance it.
(BEGIN VIDEOCLIP)
PAUL STOFFELS, CHIEF SCIENTIFIC OFFICER, JOHNSON & JOHNSON: We are facing an unprecedented epidemic of a virus with a very high mortality which is at
this moment to a certain extent under control, but we don't know where it will go. It requires a huge effort to where (ph) to keep it under control
at the moment. So we need to go, let's say, at an unprecedented speed. But at the same time, we do very significant numbers of safety testing
before we roll it out and we will do that in the next few months.
QUEST: But is there a contradiction within that statement - an inherent contradiction - that you just have to accept that the gravity of the
situation means that all the safety protocols that one normally would use cannot or should not be followed?
STOFFELS: No, absolutely not. We have to do pre-clinical testing, we have to do clinical testing in extensive numbers of people with federal law (ph)
controls that you know what it's doing in young people, in older people, in children, in pregnant women. A lot of questions need to be answered in the
development. Of course this is - this time it's all in a very accelerated way with the help with the international community. So both the FDA, the
European community but also all the regulators around the world they help us shortening the development process. The discussions with the WHO and
clinical trials happen almost every month, two or three times at the moment to make sure the right progress is made. So on the one hand the same work
needs to be done but it is done in a very accelerated way through the collaboration with all the partners.
(END VIDEOCLIP)
QUEST: The chief scientific officer at Johnson & Johnson on the new vaccine. Sierra Leone continues to be one of the worst-hit countries.
That's where the British nurse Pauline Cafferkey contracted the disease. While her condition has recently stabilized, she remains critically ill in
a London Hospital. Her recovery is very much on the minds of her former co-workers still doing marvelous work in West Africa. ITN's Martin
Geissler has that story.
(BEGIN VIDEOCLIP)
MARTIN GEISSLER, ITN CORRESPONDENT: It is hot, tiring work and it carries a considerable risk. But for the NHS staff who've come here to Sierra
Leone, it's a calling. There are strict, meticulous procedures in place to keep them sterile and safe but their colleague Pauline Cafferkey is in all
their thoughts just now. They know exactly what she's going through because behind this metal gate, they see the symptoms every day. But that
just furthers their determination to beat this virus. Their approach to the job hasn't changed. Just as Pauline Cafferkey did, they all knew the
risks then they volunteered.
ANNA MARTIN, PUBLIC HEALTH NURSE: We take every precaution possible in order not to contract the Ebola and I've got the skills, the experience in
order to be able to provide (inaudible) what we are doing is basic care. And I just - I knew that I had to do it.
GEISSLER: Nothing - none of that has changed?
MARTIN: Not at all.
GEISSLER: From behind their rubber armor, they can still apply a tender touch. But there's heartbreak here every day. Five-month-old Mary (ph)
tested positive for Ebola this afternoon. She's being cared for by a survivor who's immune to the virus. But seven-year-old Solomon (ph) who
lost both parents to the disease was giving the all-clear. By helping to stop the spread the staff believe they're protecting more than just the
people of Sierra Leone.
BILL IRISH, PUBLIC HEALTH WORKER: If we don't treat Ebola here out in Sierra Leone, it is going to spread across Africa into probably to Europe
and to the U.K., and this is the way to protect patients and people in - back home by coming out and helping in trying to treat and restrain the
disease when we can really.
GEISSLER: It's never easy fighting an unseen enemy. Across this country they're doing their best. There are restrictions on movement, roadblocks
and temperature checks looking for early signs of fever. But dozens are still dying every day. Most of the 40 or so British NHS staff in the
Sierra Leone are working here at this treatment center in (McKinney). They bring expertise of course but their very presence is a blessing because the
Ebola virus has killed huge numbers of this country's own doctors and numbers. And the staff saw it claim another life this afternoon. A young
man walked out of an ambulance and into this clinic, then dropped dead on the floor in front of them. The Ebola virus is still hard work here, but
so is the fight to stop it.
(END VIDEOCLIP)
QUEST: ITN's Martin Geissler reporting. And the World Health Organization counts more than 20,000 confirmed or suspected cases of Ebola in West
Africa - 8,000 people have died. "Profitable Moment" next.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." As a general rule, I always think that two things that aren't worth much time talking about are the price of
gold and the price of oil. When you look at them in the marketplace they go up and down and a great deal of noise and fury is made about them. And
when all's said and done, nothing really changes. But I think this is different this time `round at least as it relates to the price of oil.
This dramatic 40 to 50 percent drop in the price is going to have widespread ramifications. And those traders that I speak to are pretty
much as one - the fall is not over yet. The general feeling seems to be the momentum to push the price down is there. And whether or not Brent
finishes at 40 or 45, whether we actually go down to say $30 even -- $25's pushing it a bit far - there's no question in the minds of those in the
market - the price of oil is going down.
But Anthony Chan tonight made a fascinating point when he said if you look historically, strip away the volatility, look out four or five months'
time, and it's obviously a boom for the economies because you and I have more money to spend, there are obviously companies making better profits.
And when you factor it in net/net, this fall in the price of oil is going to be perhaps one of the saviors for the global economy. The price falling
has not finished yet. And that's "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up to in the hour ahead, (RINGS
BELL) I hope it's profitable. Let's get together here tomorrow.
END
