Return to Transcripts main page

Quest Means Business

Apple Rides Out a Wild Quarter in China; Hollywood's Biggest Stars Try to Lift Macau From Its Malaise. Aired 5-6p ET

Aired October 27, 2015 - 17:00   ET

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

[17:00:06]

RICHARD QUEST, HOST: They're clapping on Wall Street, the closing bell rang just about an hour ago. The Dow closed off 41 points for a quarter of one

percent. It was down throughout the session. And, no -- everybody was really waiting for the -- oh. End of the trading day. Which you're going to

hear on Tuesday, October the 27th.

(BEGIN VIDEO CLIP)

QUEST: Tonight, Apple rides out a wild quarter in China. The company's results have been out for the last ten minutes. We will have the analysis

of what they mean and how much they made.

Also tonight, Hollywood's biggest stars try to lift Macau from its malaise. We will be in Macau. And, mwah, sealed with a kiss. A new study examines

the study of getting all touchy feely. I'm Richard Quest, stay exactly where you are, keep your hands to yourself because I mean business.

(END VIDEO CLIP)

(MUSIC PLAYING)

QUEST: Good evening, the world's biggest, most valuable company reported a sharp rise in profits. Which company? Apple. In the last half hour Apple's

released its earnings for the past three months.

(BEGIN VIDEO CLIP)

QUEST: It beat expectations on revenue. So over $50 billion on revenues. Sales of $51.5 billion. Net, profit on the quarter, $11.1 billion. The

shares are up, and the margin was 39.9%. That's 40% between you and me. So, numbers just to put into perspective. IPhone revenue, they sold 48 million

iPhones. Mac revenues, $5.75 million. Extraordinary.

(END VIDEO CLIP)

QUEST: Lance Ulanoff, Mashable's Editor at Large joins me now. This is a behemoth. I mean these numbers, $51 billion in the quarter. Dramatically up

on same-quarter previous year.

LANCE ULANOFF, MASHABLE'S EDITOR AT LARGE: Yes, and driving mostly on the back of the iPhone. I mean they said that there's also the Apple watch that

plays into it and basically record-breaking numbers on the Mac. Which is interesting. But, it's still a big iPhone story, because they don't really

break. For example they don't really break out the Apple watch numbers. So you can't entirely know how many they're selling though they like to put

that in the headline.

The other headline I think that's worth noting here is when you look at what's happening to the iPad.

QUEST: The iPad, I'm just looking at numbers here. IPad sales, just under 10 million. 9.8 million, with revenues of $4.25 billion. Which I noticed is

less than iTunes and ApplePay combined.

ULANOFF: Yes, iPad sales, year over year, seem to be dropping. Or units moved are about 20% down year over year. And the difference between revenue

-- you get 36% jump in revenue on the iPhone, and 20% decline in revenue on the iPad. And this is an important story, because Apple knows the iPad

sales have been slowing down. We've got the iPad Pro, and the Pencil in the wings, and that is - you know is that going to re-energize that part of the

market?

QUEST: We look at China. Let's just deal with China on this at the moment. Now, the China number is fascinating, nearly double on the previous -- 99%.

ULANOFF: 99%

QUEST: On the previous year.

ULANOFF: Right.

QUEST: The previous year, same quarter previous year. But, down on the previous quarter.

ULANOFF: Right. 5% --

QUEST: So Q3 versus Q4, down 5%.

ULANOFF: I honestly think that has a lot to do with the Chinese market. The economy - the economy is just -- is slowed down incredibly. It's

struggling. And so no matter what, you're going to - you know they've got a fever you're catching a cold from that. So that's going to happen. And I'm

sure, you know the 99% year over year is that really they hadn't really fully moved into that market.

QUEST: So if you take those two numbers together, vis-a-vis China, we were looking at Apple as being a barometer bellwether for what's happening in

the greater China economy. I'm wondering whether we can say anything about that. Because Apple's held its own if the only fall is by 5%.

ULANOFF: Yes, they are - I mean, it's not -- it doesn't seem precipitous to me. I think that you can't really ignore what's happening in the economy

there.

(BEGIN VIDEO CLIP)

ULANOFF: But we know that there's tremendous interest in the products, and they obviously are selling things out there. So it's not a calamity, at

least as i see it.

(END VIDEO CLIP)

[17:05:02]

QUEST: Two other companies I want to quickly look at. Alibaba. Alibaba surprisingly good sales. Very much a proxy for China at the moment. Mobile

revenue is up 200%. And twitter. Talk about -- I mean monthly active users less than expected. Only 3 million new. And earnings, forecast but shares

are down sharply. Twitter --

ULANOFF: Yes, the earnings are -- they're making money on their mobile advertising plan but they still, this is the big story. They have to grow

users. They have -- it is the flattest growth line you will ever see --

QUEST: Is twitter in trouble?

ULANOFF: Well, yes. We know twitter's in trouble. But we know they have new leadership. We know now Jack Dorsey is officially the CEO and that was not

true for the whole previous quarter and that was certainly not true for the whole previous year.

You are going to see changes in that company. You're already seeing new technologies move out, you know, moments is theoretically a big deal for

them. But, they have to -- they want to capture people who don't understand twitter and that is an incredibly difficult thing to do. And they're not

yet doing it.

Yes, that is the Apple watch ---

QUEST: And you don't know how many they sold.

ULANOFF: One of the big stories. They say it's going to be in the millions. But they're not telling us how many.

QUEST: Good to see you, sir.

The Dow closed marginally lower. There was a move in shares of Rite Aid. The pharmacy finished 42%.

(BEGIN VIDEO CLIP)

QUEST: I seem to remember buying Rite Aid shares in the 1990s when they nearly went bankrupt. I think I lost my shirt on that particular one.

Reports that Walgreens are preparing a takeover bid.

(END VIDEO CLIP)

QUEST: Staying with some very good corporate news, the Ford motor company managed strong sales in the U.S. Ford is struggling elsewhere in the world

and that meant they missed expectations on earnings.

(BEGIN VIDEO CLIP)

QUEST: The shares were down 5%. I was joined by Bob Shanks, the Chief Financial Officer at Ford, and I asked whether he's worried about market's

outside North America that should by now be showing growth, and instead have got hurdles.

BOB SHANKS, CHIEF FINANCIAL OFFICER - FORD: Well, we're very much focused Richard on the rest of the industry outside of the U.S., outside of North

America. It's actually far larger. China alone is larger than the U.S. industry, so we're very focused on growing there. We've been putting down

investments over the last number of years, in order to participate in that growth. And doing actually quite well in terms of establishing a strong

position in China.

And we expect, and we talked about this in our call earlier today. We expect the fourth quarter in Asia Pacific to likely be a record and that

will be driven on the back of China. So we are making good progress in other parts of the world. We had a 60% reduction in our loss in Europe, and

of course, in South America, which is very tough in terms of the external environment we held our own. We had a very small improvement in the loss

despite much worse conditions than a year ago.

QUEST: But is it Ford's view that China, I mean you mentioned China. But is it - is it the company's view that it -- that the growth continue, or that

there's a hard landing ahead, so you better have your tin helmet on?

SHANKS: Well we can't predict you know economic cycles but we do think the government thus far has been doing a good job of transitioning an economy

that's been very much oriented towards exports and infrastructure to one that's focused more on the consumer and services.

So there's going to be bumps along the way. This year, it looks like growth could come in at around 7% in terms of GDP, and the industry itself, the

automotive industry will be about flat versus last year at 24 million units. But we do think going ahead, as we look at disposable incomes rising

in the tier of three, four, five and six cities we see much more growth ahead for the automotive industry in China.

QUEST: The Volkswagen scandal has shaken the industry. And it has created a view, because it's not the first time a defeat device has been used in

emission testing or in the testing system, but in some shape or form everybody must be at something in some way.

SHANKS: Well I think that's an unfortunate thing to say about the overall industry.

(BEGIN VIDEO CLIP)

SHANKS: I mean, as I can just say for Ford, we take our values and ethics to be the most important thing. I mean that's the foundation of everything

we do. Certainly everything that we do in terms of compliance with the government is done with, you know, sort of a -- we're straight shooters in

terms of that. We're certainly supportive of the effort in Europe to have those tests more reflective of real driving conditions. And we've been

vocal about that.

(END VIDEO CLIP)

SHANKS: So I think that discussion is under way in Europe and we're part of that and we certainly are pleased to see it move in that direction.

QUEST: If we, on this general regulatory issue, not just Volkswagen but whether it's air bags, whatever it might be, I see GM's had another large

recall today, do you believe -- has the industry got this balance right between regulation and the companies that are being regulated?

[17:10:07]

SHANKS: Well, we believe we've got it right. We understand what we have to do. We're frequently in the discussion, and the conversation, with

regulators around the world in terms of, you know, what they want to accomplish, and how we as a company and also as part of a industry, how we

can support that. So, I do think that we've got to continue to progress on both the front of, you know, environmental safety -- environmental safety,

and other regulatory concerns that, you know, general society has. And we want to be part of that solution and we think we have been and will

continue to be in the future.

QUEST: That's the Chief Financial Officer of Ford joining me earlier. The Fed, and a two-day meeting, results are not expected to have any change in

monetary policy. But after the break, you're going to hear from Joseph Stiglitz, a Nobel prize winning economist who says there needs to be a

wholesale revision of the American economy.

(MUSIC PLAYING)

(COMMERCIAL BREAK)

QUEST: To hike or not to hike. That is the question. Ah-ha! The Federal Reserve begins its two-day policy meeting in Washington, and everyone is

asking when will the Fed go for a hike. It will be the first hike rate increase since 2006. So, let's look at the possible blockages on our hike

of the trail of interest rates.

(BEGIN VIDEO CLIP)

QUEST: First of all, you have the issue of jobs. September jobs report was surprisingly weak. 142,000 jobs were added. Previously months, two numbers

were revised down. Then other obstacle on our hike. The Chairwoman, Janet Yellen has cited uncertainty abroad. This is a new area for the Fed to take

into account in monetary policy in quite the same way China, market volatility, all these.

And then you have the issue of inflation. The Fed is concerned about inflation. So, a hike in this particular meeting, in autumn when the leaves

are changing, seems entirely unlikely. That is at this meeting. Nobody is really expecting an October hike. Perhaps, instead, we'll be substituting

our hiking gear for our skiing gear, and a chilly winter hike at the meeting in December.

[17:15:13]

QUEST: Or, there is now a view that maybe, it will be a spring hike next march. I spoke to the Nobel prize winning economy Joseph Stiglitz, I've got

my hiking reading. He's written a new book, rewriting the rules of the American economy. I asked professor Stiglitz if there was disagreement

within the Fed on when to go for a hike.

(END VIDEO CLIP)

JOSEPH STIGLITZ: I think there's a disagreement about where the economy is going and one aspect of economics itself. So the disagreement is how weak

is the economy. I think the economy is relatively weak. You see it in the wage stagnation that has been going on. I take that as a much more

important barometer of weakness in the labor market than the official unemployment number. We all know labor force participation rate is down.

That there's a lot of disguised unemployment. There's hours worked is not - in aggregate is not very good. So we all know the labor market is

relatively weak.

But now here's where the dispute really comes. There are some economists who are of the view that you have to slay this dragon of inflation before

you see the white of the eyes. And others say, that's nonsense. That we are so far from an inflationary situation, that we can read the data in the

next few months, and if we see something going on, we can contain --

QUEST: Where do you stand on that?

STIGLITZ: Oh, I think I'm very strongly of the view that we should wait, that --

QUEST: Even just a quarter point in December, just to make the point that, you know, we're starting our process back to normality?

STIGLITZ: I wish I could believe that we would be reaching normality. But what I really believe (inaudible) are saying, the economy's going to be

weak for a considerable point of time. And you look at the global growth numbers, they say global growth is very weak. And we're part of a global

economy. Whether we like it or not. And those weak global numbers are going to rebound to where the American economy is. And it's showing up in profit

numbers. It's showing up in lots of other areas.

QUEST: Your book, Rewriting the Rules of the American Economy, you don't just want to tinker. You just want -- I mean you want almost a wholesale

revision of the way the American economy does business. Don't you?

STIGLITZ: That's right. This is about making the market economy work like market economies are supposed to. About a third of a century ago we began

rewriting the rules, rewriting the rules in a large number of ways. We stripped away regulations. We lowered tax rates at the top, and the theory

was that that would unleash market forces, so much so, even though there was going to be more inequality, the size of the national pie would be so

much larger that everybody would be better off. We know that is wrong now and so we have to begin from scratch.

QUEST: That's Professor Joseph Stiglitz.

Now for years U.S. companies have begged the government to improve cyber security. Now there's a bill that's expected to pass, and now Silicon

Valley wants Washington to back off. Is it a bill for cyber security? Or cyber surveillance? Quest Means Business.

(MUSIC PLAYING)

(COMMERCIAL BREAK)

(MUSIC PLAYING)

[17:21:19]

(BEGIN VIDEO CLIP)

QUEST: A live picture of the U.S. Senate, and over the next few hours they're going to be considering security or surveillance. The U.S Senate

getting ready to vote on a controversial Cyber security Information Sharing Act.

(END VIDEO CLIP)

QUEST: The supporters say the bill removes barriers, preventing companies from sharing crucial security information. The opponents are saying it's a

threat to user privacy. So the senate will have to consider. Now this is how it works, or it would work.

A hacked company shares samples of whatever malicious code is found with the Department of Homeland Security. Personal information about the hacked

people is removed. The DHS, that's the company involved, the Department of Homeland Security, can then share the data with the FBI, and the NSA, the

National Security Agency.

In theory, the data being removed of personal information. The concern is that personal data may not be wiped off. And if the NSA objects, the DHS

can't wipe any data anyway. The major tech companies have come out against this bill.

Apple writes "the trust of our customers means everything, and to us, and we don't believe security should come at the expense of their privacy."

Joining me now is Mark Jaycox, Legislative Analyst at the Electronic Frontier Foundation which is calling for companies to speak out against the

bill.

I'll say it before you do, sir. I mean, you know, you're not a rampant terrorist who wants to sort of hand over the crown jewels of data. But at

the same time, there is a balancing act, and you believe this bill has got that balancing act wrong. Why?

MARK JAYCOX, LEGASLATIVE ANALYST, ELECTRONIC FRONTIER FOUNDATION: Yes, well, that's exactly right. We all want secure computer systems. We all

want secure databases. What the bill does is miss the mark on trying to solve many of the solutions - many of the problems that we've seen in the

recent hacks. So the bill grants companies broad legal immunity and broad new powers to spy on users, collect personal information, and then send

that to the government.

The very big worry is that there is no affirmative requirements for companies to remove personal information before they send that to the

government. We've been told otherwise. But when you look at the bill, there are procedures laid out but it punts on the issue. That's one of the key

things in this bill.

QUEST: And also there's the question of whether or not you can bypass the Department of Homeland Security and give the information to others in the

first place. But here's really the question. The difficulty, do you, in this day and age of hacking, which is more sophisticated and more

difficult, and on a global scale don't you accept that the sort of privacy levels we have enjoyed simply might not be possible if we're going to get

the hackers and the terrorists?

JAYCOX: Well, I think the current privacy levels are actually, indeed, working. Right now companies collect technical information, they collect

non-personal information, and send that both to the government, as well as to other companies. So, a big issue with the bill is that it is painting

information sharing as this silver bullet, as this cure-all for these government hacks, for these data breaches. But what it does is it allows

companies to share not just the technical information. Right, technical information is the most important information. And it can already be

shared. What it does is it grants companies more powers to collect content.

[17:25:02]

QUEST: And you know, my late father always used to say if you've got nothing to hide, it doesn't matter, you shouldn't be worried about the data

being handed over. He has a point.

JAYCOX: Well, that's a great counter point to the privacy regime. I mean I think a very key aspect of it is that potential data is innocuous data. It

is not just you know intimate private details, its credit card bills right, it is potentially personal twitter messages. So you know it's not

necessarily about something to hide, all right. This is a poor privacy angle, a poor privacy response is to be able to be left alone and be able

to reside in one's house.

QUEST: Excellent. Good idea. Thank you very much, sir. Thank you for joining us from San Francisco tonight.

JAYCOX: No problem, thank you.

QUEST: Thank you. Motorola's President say we shouldn't accept that the screen on our phones should break. After three years of R&D the company

Motorola says it's come up with the first shatterproof phone. Is it shatterproof in all circumstances? Samuel Burke tested the claims.

(BEGIN VIDEO CLIP)

SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: It happens to everybody. Your phone slips out of your hand, hits the ground, you kneel down, and then

that fateful moment where you check to see if your screen is smithereens. Motorola is billing it's droid turbo 2 as the perfect phone for imperfect

people, A.K.A. all of us.

With its five layer shatter shield technology Motorola is "guaranteeing that this screen won't crack or shatter under what it calls everyday use."

CNN is going to put it through the wringer.

Well it's dented but I don't think this counts as everyday use. And it didn't crack or shatter. This phone walked away pretty much unscathed.

Everyday use only managed to scuff up the metal frame, and couldn't crack or shatter the screen. Even all that horse power only left it dented.

(END VIDEO CLIP)

QUEST: Dented. But not broken. When we come back, the U.S. economy and the budget deal. Will there be an increase in the debt ceiling?

(BEGIN VIDEO CLIP)

QUEST: Which would mean that the U.S. can borrow more?

(MUSIC PLAYING)

(COMMERCIAL BREAK)

[17:31:15] QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in a moment when we're going to be live in Macau as a swarm of

Hollywood celebrities try to boost the world's worst performing economy.

That's not something you really want to have to face up to. And look but don't touch - a new study shows us the etiquette of pros and cons of being

hands-free.

Before all of that, this is CNN and on this network the news always comes first.

Iran has been invited to attend talks between world leaders on ending the civil war in Syria. The U.S. Secretary of State John Kerry has convened

the talks. They're due to be held in Friday in Vienna.

However, the Russian Foreign Minister Sergey Lavrov says the countries which have intervened in Syria are struggling to reach common ground.

(BEGIN VIDEOCLIP)

SERGEY LAVROV, RUSSIAN FOREIGN MINISTER, VIA INTERPRETER: We are working in Syria as you know at the request of the Syrian government.

And as before, are aiming for all of our partners, Americans, and countries in the region to agree on one understanding of who represents a terrorist

organization.

Such an understanding does not exist. It does not exist. I can say this honestly inside the coalition that was created by the United States for the

fight against the Islamic State and other terrorist groups.

(END VIDEOCLIP)

QUEST: The United States is considering using direct action on the ground to fight ISIS. The U.S. defense secretary said more U.S. airstrikes could

also target the terror group's oil operations.

Speaking in front of the Senate Armed Services Committee, Ash Carter said ISIS could be targeted more accurately and more often.

(BEGIN VIDEOCLIP)

ASH CARTER, U.S. DEFENSE SECRETARY: And from the skies above we expect to intensify our air campaign, including with additional U.S. and coalition

aircraft to target ISIL with a higher and heavier rate of strikes

This will include more strikes against ISIL high-value targets as our intelligence improves. Also its oil enterprise which is a critical pillar

of ISIL's financial infrastructure.

As I said last Friday, we've already begun to ramp up these deliberate strikes.

(END VIDEOCLIP)

QUEST: Amnesty International is blaming Saudi-led coalition forces for intentionally carrying out five airstrikes on an MSF Hospital in Northern

Yemen.

Riyadh denies the charge, saying it was not operating air raids in the area. Amnesty says the attack may amount to a war crime. There were no

immediate reports of casualties.

China's issued a stern warning for the United States after it says a U.S. Navy warship illegally entered Chinese waters. The ship passed close to a

man-made Chinese island in the South China Sea.

The U.S. says its ship did not breach international law and it intends to make this kind of operation routine.

The funerals have taken place for 13 African school children killed in Monday's earthquake near the border with Pakistan.

Across the region at least 345 people died in the disaster. Nearly 2,000 more are injured.

With a week to go until the United States hits its debt limit, Congress may have done the unthinkable. The Republican leadership has come to a two-

year budget compromise with the White House.

The deal would increase spending and end worries over the debt ceiling until March of 2017.

Some top Republicans are already criticizing it. Manu Ranu is our senior political reporter. He joins us now from Washington.

Well, when we spoke yesterday you sort of very much suggested that this deal was going to be done because it's in everybody's interest. But will

the right wing of the Republican Party let it get done?

[17:35:12] MANU RAJU, CNN SENIOR POLITICAL REPORTER: That is the big question still. Now Republicans are working hard to lock down enough votes

in order to pass this measure as early as tomorrow in the House.

There are new concerns that Republican lawmakers are raising, particularly over how this measure is funded. Now in order to pay for that new

spending, there are cuts to agriculture subsidies and that's really worrying a lot of lawmaker from rural states.

So Republicans are trying to alleviate those concerns in addition to raising the debt ceiling until the March of 2017 which has prompted a lot

of anger from folks on the right who believe that they did not get enough in exchange for that.

So the big question is what will happen over the next 24 hours or so? We don't know the answer to that just quite yet.

QUEST: So where's this extra spending coming from? What's going to get more money?

RAJU: Well, $80 billion is the extra spending in this bill - that's $40 billion that will go to defense programs and $40 billion that will go to

domestic programs over the next two years.

In addition to that, there's another extra (ph) $30 billion that goes to an emergency war spending account. Now this is going to be funded through a

variety of mechanisms, one being that crop insurance program that I was just referring to.

In addition there are cuts to the Social Security Disability benefits program as well. Things like that that will help try to even out the score

so Congress does not end up spending more than it takes in.

So the question is whether or not these concerns will be met. Now I was just speaking to a number of top Republicans who still are very confident

that this could get passed tomorrow.

And the reason why they are pushing so hard is not just next week deadline to raise the debt ceiling but also because John Boehner is on his way out

as the House Speaker.

They're trying to get everything done before the new House Speaker takes his position. That's Paul Ryan who is expected to be elected Thursday for

the job and John Boehner wants to say - he's saying that - he wants to quote, "Clean the barn up." And so that's something that he's trying to do

here in his final days.

QUEST: Colorful phrase from John Boehner, but listen, Manu, Paul Ryan - let I mean - two-two - a twofer question here. Firstly, is he going to get

the job, is it all but a done deal?

And secondly, is he - I've seen a lot written about how he's going to hold his family life and he's still going to, you know, he's going to do the job

in a different way. Is he?

RAJU: Well that's a good question. He is distancing himself from this deal. He has not said yet how he will vote -- I asked him about that this

morning. He criticized the backroom negotiations that produced this deal. He said that he was very critical of it. He's going to change the way he

as actually speaker allow members to give their input before leadership cuts a deal.

But, you know, these things are easier said than done, particularly when you're facing a major deadline and you have reach a big deal with the party

- with leaders from the opposite party. That's why leaders are elected to those positions - to make those tough calls.

So sooner or later Mr. Ryan's going to be confronted with a lot of those same challenges that he had promised to them to change and we'll see if

he's able to keep those promises that he made to his members over the last couple of weeks.

QUEST: Sir, thank you for joining us in the halls of Congress.

RAJU: (Inaudible) thank you.

QUEST: Part of that U.S. budget deal includes selling millions of barrels of oil to raise money for the U.S. government. Oil worth roughly $2 1/2

billion is to be sold from the so-called strategic reserves. The government estimates it paid around $30 a barrel for the oil.

Staying with oil, `oil be seeing you,' BP earnings dropped 40 percent as a result of cheaper oil. That's third-quarter numbers.

BP says it's counting on oil being $60 a barrel in the future and we got more numbers from BP. The cost of Deepwater Horizon oil spill has risen to

the company to $55 billion.

Let's put that $55 billion into some sort of context. That's the revenues for Apple in the third -- or Apple's fourth quarter.

European markets (RINGS BELL) lower across the board. Worst gains pretty much in Germany and Paris. It was a drop in BASF and Novartis shares,

lower oil prices and mixed corporate earnings.

Market news just to bring you -- Walgreens Boots Alliance, the pharmaceutical - the drug store company - has agreed to buy rival Rite Aid

for just over $17 billion. The deal will combine two of the three biggest drugstore chains in the U.S.

The pharmacy industry is under consolidation to keep costs down. Rite Aid shares, they rose 42 percent on rumors of the deal.

When we come back after the break, Macau, the worst-performing economy in the world, with casinos that a top operator says are preposterous for new

rules. So why then is there such optimism? We'll be there in a moment.

(COMMERCIAL BREAK)

[17:42:42] QUEST: A new $3.2 billion casino opened its doors on Tuesday in Macau, and in doing it's smack, bang wallop in the middle of a brutal

downturn for the gambling industry.

The new resort is called Studio City, and matching its Hollywood theme, some of Tinsel Town's top names were there.

You had Leonardo DiCaprio, Robert De Niro and Martin Scorsese attended the red carpet ceremony. They're staring in a new short film promoting the

casino. Our correspondent is Matt Rivers. He got up - I was going to say you either got - you either stayed up very late or you got up very early

because it's quarter to 6 in the morning and you're in Macau.

MATT RIVERS, CNN BEIJING CORRESPONDENT: Good morning to you, Richard, or good afternoon. We didn't unfortunately get to attend that red carpet

premier, but we are up early and this - we can tell you this - casino not even 24 hours old yet, it is joining several other casinos that have either

just opened or will be opened sometime soon here in the Cotai strip in Macau.

That's amidst 18 straight months of slowing growth here and so that brings us to the question facing casino owners - if they build it, will the masses

come?

(BEGIN VIDEOCLIP)

RIVERS: The rattle of the roulette wheel's not quite as loud as it once was here in Asia's very own sin city. High rollers who once spent big on the

VIP tables just aren't filling the seats the way they used to.

Gaming revenues think money from slot machines or baccarat tables are down 36 percent in 2015. And in a place like Macau, as go the casinos so goes

the local economy.

It shrank more than 26 percent in just the last quarter alone. That's good enough to make it the worst performing economy in the world.

A big reason for that - the ongoing anti-corruption campaign in Mainland China. President Xi Jinping has made a big push to curb lavish spending -

money that's helped make gaming revenues in Macau today five times larger than Las Vegas.

But the government wants the resorts to offer more.

LAWRENCE HO, CEO, MELCO CROWN ENTERTAINMENT: We've invested $3.2 billion U.S., 95 percent of the space is for non-gaming.

MALE ANNOUNCER: Studio City Macau!

[17:45:05] RIVERS: Lawrence Ho is the man behind the newest kid on the block, Studio City Macau. It offers rides, shows, even a Ferris wheel. Ho

says that's the way to tap into a growing Chinese middle class but admits there's no long-term future in Macau without gambling.

HO: The truth is gaming is really the financial engine. Without the gaming component, we wouldn't be able to build these fantastic properties.

RIVERS: But backing its pledge to diversify, the government has put strict limits on the number of tables each new casino can have.

Casino magnate Steve Wynn slammed the policy on an earnings call earlier this month. "Preposterous," he fumed. "In my 45 years of experience, I've

never seen anything like this."

His anger came as Wynn's Macau Division reported a revenue decline of nearly 40 percent.

(END VIDEOCLIP)

RIVERS: And despite those falling profits for casinos across the board here, the average worker here in Macau really just isn't feeling that pinch

as of yet. Unemployment here remains below 2 percent and mass layoffs at casinos really just haven't happened.

And so, Richard, at least for now it does appear the casino owners are continuing to bet big on the future here in Macau.

QUEST: So what does it feel like as you go into the casinos? What's the mood? How - I mean, does it feel depressed? Does it feel down? Or is

there still that feeling of one move of the wheel and we'll all be going home with a fortune?

RIVERS: Right, well we went into this casino certainly and this one's brand new, so there's certainly an upbeat feel here. But did manage to pop

into several other casinos here along the strip and it is still very energetic.

The occupancy rates we're told are still very high. There are - the hallways are packed, the lobbies are packed. So it certainly does feel

like business is good. That's anecdotally speaking of course.

The big thing I think is those VIP numbers. You know, are those big spenders going to come back? That remains to be seen and so the mass

market, the average person, has to come and fill that void.

QUEST: Matt Rivers who's live in Macau. Matt, can I put something on 811 and the first four on the roulette wheel? I've always had a bit of good

luck with 811 on the split -

RIVERS: (LAUGHTER).

QUEST: -- the first four on the top, and if you win (RINGS BELL), --

RIVERS: You got it.

QUEST: -- I want the -

RIVERS: I'll see how it works out.

QUEST: -- yes, you will indeed. You're not making off with that money. In a moment, a kiss is just a kiss and sometimes it can be quite awkward.

We're going to debate (DEMONSTRATES AIR KISSING) the whole issue of air kissing and where you can touch complete strangers. But first, "Make,

Create, Innovate."

Female: (LAUGHTER).

(COMMERCIAL BREAK)

[17:50:28] QUEST: Where's legitimate to touch somebody? If you've any important meetings lined up, you'd be aware of the aikas (ph). This is

from researchers at Oxford University and Finland Aalto University, and they're showing us the different places for example where people don't mind

being touched when they're being kissed.

Air kissing is a bit awkward amongst strangers, and as the chart shows, it's where people are comfortable when you're meeting somebody and when

they touch you - ranging from partners on the left who seem to be able to touch you just about anywhere you like - to strangers on the right who can

pretty much touch you nowhere.

And as you can see, most people surveyed are only really happy with a straightforward handshake from someone they don't know.

Now that's not to say that an air kiss has no proper place. After all, it comes naturally to Christine Lagarde as I discovered at the annual meeting

of the IMF. We thought we'd see if world leaders thought it was good enough as diplomatic greetings were equally at ease.

That's Silvio Berlusconi. I don't think I want to see what happened with that picture with Silvio Berlusconi and Vladimir Putin in 2009.

George Bush performs an air kiss with the late Saudi king back in 2008, and there was that every affectionate greeting between Chancellor Merkel

(LAUGHTER) - I hope you're not having dinner at this point - and President Hollande this year.

For a full-on socialist fraternal kiss, you've got to go to Mikhail Gorbachev and Erich Honecker, the former East German leader from 1989.

That study on touching is published in the journal of the Proceedings of the National Science Academy this week. Faye de Muyshondt is the founder

of the Socialsklz :-) group. She joins me now.

I don't know you, we've not met before, do we shake hands?

FAYE DE MUYSHONDT, FOUNDER, SOCIALSKLZ :-): Absolutely.

QUEST: Do we do anything else?

MUYSHONDT: Now, I stuck my hand out because I wanted to - I wanted to put it out there that I was doing a handshake and I think that's really

important.

You set the stage, and when you stick your hand out, you're not going to go wrong. You can't go wrong with a handshake.

QUEST: No, but that's the norm. The handshake is the norm.

MUYSHONDT: Yes.

QUEST: What I need you to tell me is when is it permissible - and we saw the study - when is it permissible to go above the norm?

MUYSHONDT: Well, you need to be looking at the age of the person, you need to be looking at the setting -

QUEST: OK, but -

MUYSHONDT: -- and the location.

QUEST: Right, but I don't know Christine Lagarde that well. I've met her many times -

MUYSHONDT: Yes.

QUEST: I wouldn't say she's a friend but it seemed appropriate since we do know each other in that scenario to do more than just shake her hand.

I mean, you know, we - look at - there we are.

MUYSHONDT: (LAUGHTER). I like the two different kisses too. One was more of the friendlier kiss and then it turned into an air kiss.

QUEST: Yes.

MUYSHONDT: I like that.

QUEST: Well we were both wearing makeup.

MUYSHONDT: Right, that's right.

QUEST: So when do you - when do you kiss?

MUYSHONDT: Well, it's after you've established a connection with someone or if they establish with you that that's what they prefer to do. But

here's what gets really dicey - is that after you kissed her, did you go on and kiss everyone else? It becomes uncomfortable.

So even though -

QUEST: No! I'm not going to kiss Mark Carney, the governor of the Bank of England.

MUYSHONDT: OK, but let's talk about female versus male. So, it becomes very dicey and -

QUEST: I have no problem with, you know, the gender difference. Opposite genders kiss.

MUYSHONDT: OK, in some cases. It depends on the location, it depends on the culture. And I think what's really important to do is for example,

that image of President Bush -- he was giving a kiss. Is that standard in our culture -- in the United States of America? No, but finding out what

the custom is and the culture that you're about to embark upon.

QUEST: Right. So if - so what I obviously - the bold hand. Say we're coming together and I want to give you a kiss, --

MUYSHONDT: Yes.

QUEST: -- but I don't want you to get nervous. I often go like that -

MUYSHONDT: Yes, I like that.

QUEST: -- so that you're quite sure that there's going to be arm's length between us.

MUYSHONDT: Like that. That's a very good move -

QUEST: Right.

MUYSHONDT: -- actually. That's probably the best way to do the kiss.

QUEST: But what if you don't want to be kissed at all? How would you stop me?

MUYSHONDT: Well, if you don't - if you've identified that you're the person that doesn't want to be kissed, you need to initiate a handshake at

all times. So from the walk in, you're going to stick your hand out.

[17:55:05] QUEST: But what if I start going -- .

MUYSHONDT: I'm going to establish that right before I walk in. So I'm going to stick my hand out, and if this is the case, I am going to

absolutely do the kiss.

I'm not going to make you feel uncomfortable. And that's what this is all about is making people feel comfortable when you meet them for the first

time.

QUEST: Thank you very much.

MUYSHONDT: You're welcome, Richard.

QUEST: We went different ways.

MUYSHONDT: That's right.

QUEST: "Profitable Moment" after the break. (RINGS BELL).

(COMMERCIAL BREAK)

QUEST: Tonight's "Profitable Moment." To kiss or not to kiss, that is the question. And if you do touch, where do you touch?

The (real) problem of course is you just don't know what's expected. Yes if you meet your mother, your sister or a close friend or colleague -

you're fine giving them a quick smooch on the cheek.

It's those other difficult situations, somebody you've vaguely met or when you're at a dinner party, you start off with a nice handshake, but when you

say goodbye, that seems a bit formal. So you go in (ONE KISSING SOUND) for the smooch.

And then in America, there's a smooch on one cheek. But Europeans (TWO KISSING SOUNDS) and the Swiss (THREE KISSING SOUNDS).

Before long, it's all one mess and you've got hot, clammy hands and you really wish you'd just stuck to a simple handshake -- nice to see you.

Unfortunately that just won't do these days. Everybody wants a kiss - air or otherwise. And that's "Quest Means Business" for tonight. I'm Richard

Quest in New York.

Whatever you're up to (RINGS BELL) in the hours ahead, (KISSING SOUND) I'll see you tomorrow (KISSING SOUND).

END