Return to Transcripts main page
QUEST MEANS BUSINESS
Yellen's Remarks Push Dow to Record; Dairy Delivery Arrives in Qatar; Kayak Teams Up with Amazon; Formula 1 Teams Gather Ahead of British Grand Prix; Hyperloop Company Stages Landmark Test. Aired 4-5p ET
Aired July 12, 2017 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00] RICHARD QUEST, CNN HOST: Closing bell ringing on Wall Street. Yes, it is just a record, I believe. An all-time record for the Dow Jones
industrials, as the bell is ringing. We'll get the final number as it ticks over. But I've got a good feeling about this gavel. It's going to
be a strong one. One, two, three. Three strong gavels, trading is over. It is Wednesday, July 12th, and it's a record.
Tonight, Janet Yellen helps push stocks to their record highs. It's a case of send in the cows, quite literally. Qatar gets a special dairy delivery.
And you're going to need a bigger boat. Kayak and Amazon are teaming up. The Kayak chief executive is on this program.
I'm Richard Quest live in the world's financial capital, New York, where of course, I mean business.
Good evening. We begin tonight with Janet Yellen's dovish comments which sent the stock market to a record high at least on the Dow Jones
industrials, but not on the NASDAQ or the S&P 500. There are questions swirling around her own future at the Federal Reserve, but that did not
stop investors from going their own merry way.
Now the testimony was released before the market opened. And you can see exactly what happened. When the market opens, the testimony goes straight
up and it never looks back. She gives the testimony. We have a bit of a dip round about 12, 12:30 -- who knows why that was there. We keep the
gains right the way through and yet by about seven or eight points that is a record high for the Dow.
It's all on the back of Janet Yellen's testimony. Now she said the Fed plans to gradually increase interest rates as the economy strengthened.
And the Fed has now hit its jobs target, the target of full employment. So, if we take this as being a case of what we're seeing in the market.
Janet Yellen warning that inflation outlook remains uncertain. That would keep rates low, which caused the bond prices to rise, and of course as
you're well familiar, if the prices rise, the yield goes down, and vice- versa. We see this little tick down in the ten-year bond. Which had been rising on the back of the prospect of high interest rates.
Janet Yellen's term expires in February, and that's raised questions of exactly who will take over. Well not so fast at the moment, according to
Politico. There's a report that Donald Trump may nominate the economic adviser, Gary Cohn to be the new head of the Fed. Janet Yellen says, well,
she realizes she could be leaving.
(BEGIN VIDEO CLIP)
REP. SEAN DUFFY, (R) WISCONSIN: Do you anticipate this could be your last time testifying before this committee?
JANET YELLEN, CHAIR, U.S. FEDERAL RESERVE: My term expires in February. And so --
DUFFY: It's a round-about way of asking you.
YELLEN: -- it may well be.
(END VIDEO CLIP)
QUEST: This may well be.
Now she didn't hedge her comments on that. She said she would obviously be waiting to see, as for the Fed itself, the Republicans want to audit the
Fed, Janet Yellen has warned against what she described as political interference. Let's pull all of this together. Joining me, CNN money's
Christina Alessi, who has been tracking the testimony. The fascinating part about it, I'm not sure she said anything that we haven't heard before.
But everybody took much more notice of it. Why is that?
CRISTINA ALESCI, CNNMONEY CORRESPONDENT: I think the market had an outsized reaction to the actual news in this testimony. There wasn't much
new in what she said. We've heard most of it for a long time. That the Fed is going to go slow and steady. That overall long-term interest rates
are probably going to be lower than what we've seen historically. But she did note this inflation concern. She noted that it's below target which it
has been for most of the recovery. And that's bad news for American workers. But the market here perhaps thinks that you know slow and steady
means that there aren't going to be any surprises in terms of rate hikes. So, at the very least we're not going to have a surprise increase anywhere.
Because the economy is on track. It's just this inflationary number caused some concerns, at least as far as she is --
[16:05:02] QUEST: They're aiming for 2 percent over the medium term. That's the 2 percent inflation target. U.S. inflation is slightly over
that at 1.6, 1.7 percent, depending on whether you take the core or which measure you take. And yet I know the, percentage of expectation on the
rate this year has gone down maybe to 50 percent, another rate rise this year. But there are still people who believe there will be one more.
ALESCI: Yes, of course, there are analysts, and I was just speaking to one who believe there are going to be two perhaps this year. Bottom line is we
have a market right now, and today's moves made me think this even further. It's looking for any excuse to go up. Which is kind of weird. Because I
always thought about it as OK everybody investor wise, believes we're going to get tax reform and that's already priced in.
Today's reaction made me think -- if we get any more formal indication that we get tax reform going forward, perhaps the market will increase even
further. Which is hard to believe, because we're at such record levels to begin with. But it looks like the market is looking for any excuse to go
QUEST: I would agree with you, and I think that if you look at, for example, yesterday where we had that off a cliff. And then immediately
ALESCI: Right, exactly. It just goes to show you, Wall Street is paying a little bit of attention to what's happening politically. But not entirely
trading on that. Even Janet Yellen today warned that uncertainty over Trump's policy agenda is an overhang for her. It goes to show you that
Wall Street kind of looks at the presidency as parents who drop their children off to college and don't want to know anything until it gets
QUEST: Lovely analogy. Good to see you, thank you, Cristina.
Another major story that we're following for you tonight. Top U.S. economists are urging President Trump not to impose steel tariffs on
American allies. The president and his commerce secretary are considering the measures on national security grounds. Now 15 economists, some of the
biggest names in the business say the diplomatic costs of steel tariffs are high with no economic benefits. Who is involved? Two former Fed chairmen,
you've got Ben Bernanke and Alan Greenspan. They both served also as top economic advisers to Republicans and Democrats. And the warning is, that
America has been here before. The Bush administration was forced to withdraw emergency steel tariffs after WTO ruled against them.
You saw in the chart of distinguished economists, Jason Furman there he is in the middle. He served as the chairman of the president's Obama's
Council of Economic Advisers, now teaches at Harvard's Kennedy school. And the distinguished economist joins me now.
If you were assume for the purposes of my question, that the administration are not fools and that they know the economic arguments against tariffs,
but they still believe that there's a real need for them in this case, of steel.
JASON FURMAN, FORMER CHAIRMAN, WHITE HOUSE COUNCIL OF ECONOMIC ADVISORS: I just don't understand it. First of all, this letter was signed by everyone
who has ever been the chairman of the council of economic adviser force any president who is still living, who is not Janet Yellen, who is not in a
position to sign such a thing. So, you have Joe Stiglitz and Glen Hubbard. This is a wide spectrum of people who don't agree on a lot of things, and
all agree on this. The economics is really straightforward. It's bad for consumers, because it raises prices. It's bad for American manufacturing,
because it raises the input costs that they face. And it's bad for all of our exporters, who are going to be retaliated against, as other countries
QUEST: Let me jump in on this. If there is a feeling that there is legitimate unfair steel relationship of dumping of steel from China, of
other countries subsidizing steel, you know the arguments better than I do. The WTO is a laborious, tedious, rarely successful way to rectify this.
Threatening tariffs is.
FURMAN: We have a remedy for dumping and for subsidies, it's the anti- dumping rules. It's the counter veiling duties. We have a ton of those on China already. Which you're right, does misbehave in this area and does
break the rules. That's why our imports from China are less than 5 percent of our steel imports.
[16:10:00] We don't import very much from China. The places we're importing steel from are places like Canada and the European Union. Those
are our friends. They're not doing anything unfair. And I really don't think it's a national security risk that a portion of our steel is coming
from Canada. That's just not one of the things that worries me.
QUEST: Your economic antenna may be sharp. Your political antenna might be somewhat dulled, with respect. In the sense of this plays well to the
FURMAN: It very well might. I'm not giving political advice here. I'm telling you this is bad for our economy. It's bad for our relationship
with our allies. And it is bad for rules-based international system, which the United States has prospered in. Because this is just making a mockery
of those rules. I also think if I had to make a guess on the politics, in some circles, this might be good on the day you announce it. But two or
three years later, we're going to have fewer manufacturing jobs, not more. Because it's a little bit like the Carrier deal. That was a great
announcement. You follow up a couple of months later. It turns out Carrier has laid off people. Jobs in the state are manufacturing jobs in
the state are down.
QUEST: Quick question. Completely unfair. Shamelessly throwing it at you. Should Janet Yellen be re-nominated? And if not, would Gary Cohn
make a good Fed chair?
FURMAN: I would re-nominate her. I think she's done an excellent job and would continue to do so. So that's, I don't even see why we would want to
be thinking about anyone else. It's a strong tradition, presidents of the opposite party reappointing people that predecessors picked. It would be a
shame to break that tradition and make it into a more partisan institution.
QUEST: Jason Furman, good to see you, sir. Really appreciate you taking time, thank you.
FURMAN: Good to see you.
QUEST: Spain's King Felipe has called for the rights of EU nationals to be guaranteed after Brexit. He spoke during his state visit to the United
Kingdom. Now, it's the first time since the 1980s that his father, that a Spanish monarch has visited Britain on a state visit. Obviously, they've
been there on private visits since. It follows the tensions over Gibraltar and the way Gibraltar was added to the negotiating mandate for the European
community or the European Union in the Brexit. Speaking at Parliament on Wednesday or speaking to Parliament on Wednesday, the Spanish King said
citizens have a legitimate right to a stable life.
(BEGIN VIDEO CLIP)
KING FELIPE, SPAIN: Given these circumstances, we must particularly bear in mind the thousands of Britons and Spaniards who live in each of our
nations, who form a sound foundation to our relations.
These citizens have a legitimate expectation of decent and stable living conditions for themselves and for their families. I therefore urge our two
governments to continue working to ensure that the agreement on the U.K. withdrawn from the EU provides sufficient assurance and certainty.
(END VIDEO CLIP)
QUEST: Quentin Peel, an associate fellow at a think tank, Chatham House, joins me from London. Now Quentin, you wouldn't expect her majesty to get
her hands dirty. But his majesty has well and truly delved right in there and got straight to it.
QUENTIN PEEL, ASSOCIATE FELLOW, CHATHAM HOUSE: Well, there are a couple of very sensitive issues here for Spain and for Britain. One is clearly the
issue of respective citizens living in the other one's country. And the other one is of course Gibraltar, which is even more sensitive. And he
didn't shy away from talking about Gibraltar, either. So, he's clearly a more political animal than her majesty, the Queen. Who would really never
touch a subject like that.
QUEST: What is so wrong with the Theresa May proposal that's on the table, for reciprocal rights? Other than the fact that it is not enshrining
protection guaranteed by the European court? Essentially it is saying, if you are here, you can stay under the settled rights. If you can still
acquire settled rights. And it's quid pro quo.
PEEL: Yes, but it's not exactly the same rights that they enjoy now. It is clearly a lesser status to what they enjoy now. And what people like
the European Parliament have been saying, but also many other European governments, is that really, they should not -- they came to Britain, for
example, to work, and do whatever, under a certain rule which gave them effectively the same rights as British citizens.
[16:15:10] Because of the British decision to withdraw, their situation his going to be made more complicated. And I think that's where the argument
QUEST: OK. But I can see how they may wish to alter or to amend in some places. But you would agree with me, that giving the European court
jurisdiction over the U.K. on this matter, post Brexit is a nonstarter?
PEEL: Well, I love the idea that I would agree with you, Richard. I'm sure that we should do so. But equally, you know, this entire process has
been begun by Britain. And they are changing the rules and wish to change the rules. And the truth is that the 27 countries on the other side of the
table are saying look, why should other people be disadvantaged by the rules that you get? We respect the European court of justice. And you
have respected it up to now. Why change your mind?
QUEST: On Gibraltar, this rather last-minute bit that they put into their negotiating mandate that could potentially give Spain a say. Again, the
U.K. is going to find out very difficult. I heard what the king said. But this is going to have an exceptionally tricky bit of negotiation if the
Parliament is not going to balk at the last minute.
PEEL: Yes. I mean look at what's happening. It's a very similar situation in one degree to what's happening in Northern Ireland.
QUEST: Yes, absolutely.
PEEL: Suddenly you've got Gibraltar and Northern Ireland who have actually been -- the situation that has been calm because inside the European Union,
both sides of the board are in the same European Union, so the border is unimportant. Suddenly we've got a situation where because Britain is
withdrawing, Northern Ireland will be outside the European Union and Gibraltar will be outside the European Union. And the border that was
virtually nonexistent is suddenly much more important. And that could mean, hey, we could suddenly see Spain blockading the border again with
Gibraltar which it used to do in the bad old days.
QUEST: Quentin, we will find room for agreement in the end on most matters of which I am sure.
PEEL: I'm sure we will.
QUEST: Good to see you, sir. Thank you.
QUEST: Our nightly conversation on business and economics continues and delighted you're with us tonight. Mark Zuckerberg and Jeff Bezos may not
be picketing in the streets. Their websites are in virtual protest against the U.S. government plan to deregulate the internet. They say it's a fight
for the future and they must win to survive. It's all about something called net neutrality. After the break.
[16:20:15] QUEST: Now do not panic if I say the phrase net neutrality. Well the very phrase is enough to make your eyes glaze over. But bear with
me if you will. The reality is without it, perhaps you wouldn't have binge watching or Netflix or you might not even have home shopping on Amazon.
So, it's the regulation that keeps access to the Internet equal. And that's why you're seeing in many cases on this, this site.
This site has been blocked by your ISP. Well, not yet, but without net neutrality cable companies could censor websites favoring their own
Washington, the Trump administration and many in Washington want to get rid of this concept of net neutrality. Which is why you might be seeing this
protest on your screen so far. It's all part of this virtual day of action from Silicon Valley. Protesting plans that would give internet providers
the ability to choose who, which sites, get faster internet speeds and which don't.
So, you've got things like the bandwidth-dependent companies like YouTube and Netflix, who have been forced to follow long before they gave us "House
of Cards" or "Gangnam Style". Michael Beckerman is the president and chief executive of the Internet Association. He represents Amazon, Facebook,
Google, Netflix. If you accept, you know, why should the net now it's up and running has a relatively mature economic entity, why should it not
offer better prices, better facilities from those who will pay more or have different levels?
MICHAEL BECKERMAN, PRESIDENT AND CEO, INTERNET ASSOCIATION: Yes, thanks I think you teed it up perfectly at the beginning of the segment. If you had
the net neutrality rules go away today, maybe the internet as we know it freezes in time and no new entrants are able to come in. And individual
service procedures are able to decide what Internet you as a customer are getting. Where maybe the AT&T internet is different from the Comcast
Internet. And I don't think that's good for consumers and certainly it's not good for the economy. So, you want to make sure these rules are
maintained so the next generation of companies can compete and can be maintain a vibrant and innovative echo system.
QUEST: Right, but those who have looked at the other side say there's no reason why you should not have a more demand-led, a more economically
viable, if you like, proposition that accord more to reality. That is -- and net neutrality is not that any more.
BECKERMAN: I disagree, I think net neutrality rules are the reality and that certainly that's what consumers are expecting. When you sign up with
your service provider you're paying them for a certain speed and you're paying them for the entire internet. And you don't want your service
provider to decide which sites are going to be available to you as a consumer, particularly because you often don't have choice in changing your
provider. And you want to have competition be a click away, not just a curated cable TV version of the internet.
QUEST: But we do accept that -- we may do it begrudgingly in some cases, that either by mobile on roaming or by sometimes do you get throttled in
your access to the internet. I can see that's for different reasons and different circumstances. But this idea of some sort of some virginity of
equal access to the internet with everybody at the same speed it doesn't really exist at the moment, anyway.
BECKERMAN: I think it does exist at the moment. Where regardless of the size of the company or the resources you have, they're all able to compete
on equal footing. Because the networks are not able to prioritize one versus another.
QUEST: Good to see you, sir. Do you think you'll win the argument?
BECKERMAN: I hope so we're optimistic. I think the American people are on our side and certainly what's best for the economy. We're making our case
to the FCC and we'll take it from there.
QUEST: Thank you very much, good to see you.
BECKERMAN: Thank you.
QUEST: I appreciate it.
Prime day, Amazon's manufactured online shopping holiday is manufacturing enormous results, Amazon says Tuesday was the biggest sales day in its
history. Better than black Friday and cyber Monday combined. So, the most popular item was the echo. The smart speaker that houses Amazon's virtual
assistant, Alexa. With the help of Kayak, Alexa can now be your travel agent, booking hotels on command with your only voice. Let's go over and
meet the chief executive of Kayak. Good to see you, sir.
[16:25:03] STEVE HAFNER, CEO, KAYAK: Good to see you, Richard.
QUEST: This deal -- Steve Hafner is with me. This deal that you've done with Amazon, for Alexa, allows people to use Kayak by saying, I want a
hotel in Boston.
HAFNER: It's a little more complicated than that, but that's the idea, the idea is to marry the conversational aspects of speaking to a human, to the
Kayak backend technology platform. So now you can actually say, Alexa, ask Kayak to book me a hotel room in San Francisco and we can facilitate that
transaction for you with a couple more steps.
QUEST: Is anybody going to do that? Don't people want to see which hotel. I agree if I say book me the Dorchester in London next Tuesday, at you know
the 14th. It will do that. But most people want to see it on the screen at least, don't they?
How much of this is gimmick and how much is going to be actual benefit?
HAFNER: Yes, it's still early days. But the reality at Kayak is our people are passionate about travel, but we're also technologists. So, we
like to jump on AI in the early days and have a view towards where the world's going to be in three to five years. Anywhere a consumer wants to
search for travel, we want to have an answer for them. And Alexa is an example of that. We're on Slack and Facebook Messenger and Google Home and
QUEST: So, you just heard me talking about net neutrality. I assume you're all in favor in net neutrality.
HAFNER: We don't really have a dog and that hump, because we don't play a lot of videos on Kayak. So, we don't consume a lot of content. But it's
interesting for us to watch.
QUEST: Right, interesting to watch. If we talk about the growth of Kayak you're getting some really stiff competition now. Particularly from people
HAFNER: Yes, we're in the internet space and we offer a great service. So, any time you're in a public space like the internet and provide a great
service, and you have a good P&L, you're going to get competition.
QUEST: Right, but you'll be strong in some parts of the world, less strong in other parts of the world. And you know, whenever anybody mentions
google, everybody guess terrified. Because of the sheer power of Google. So, I can see you're not exactly quaking at the thought of it. But how do
you fight back?
HAFNER: We fight back by having a better service. So, if you come to Kayak you're going to see a more complete picture of what's available.
You're going to have more choices and more features than you would if you went to Google. I mean, Google is a great company. I have a tremendous
amount of respect for them --
QUEST: There's a but in there. There's a big but.
HAFNER: Yes, that's people aren't thinking about travel search. They're thinking about self-driving cars and Android operating systems and stuff
like that. We have all of our best engineers working on making travel planning better. And I think we're going to stay steps ahead of them.
QUEST: Right, except this history of sort of -- whether it be Facebook and what they've done with Snap, or whether it's Amazon who seems to be doing
it with everybody including whole foods. And let's face it, you're playing both sides, here aren't you? Because you're getting into bed with Amazon
with Alexa. So, you're playing both sides.
HAFNER: We're in bed with everybody that has consumer engagement.
HAFNER: Well, it's not promiscuous. We have a great travel plan hear at Kayak and we want to make that universally available for whatever the
consumer wants to ask us a travel related question. So that means, yes, we are on Google. We have a good partnership with Google. It means we're on
Apple TV. It means we're on Facebook. It means any platform you want to engage on we want to be there.
QUEST: So, sketch out for me -- because obviously I represent is CNN business traveler. I've done for the last 13 to 14 years. And on this
program, we spend a lot of time talking about travel and the travel of the future. In five years' time, how will I buy and book tickets? Will I
literally say I want to go to London tomorrow night Alexa, book me a ticket?
HAFNER: You're an older gentleman like me, so you probably will do it the same way you're doing it today which is using your assistant or going to a
desktop browser and doing click and point. But for the young generation coming in especially the millennials, they'll do a lot of last-minute
travel. They're going to do a lot of chat-bot and they're going to do a lot of conversational stuff.
QUEST: As an older gentleman like yourself, that you just thankfully admitted to the world. How difficult do you find it to understand all of
your younger staff come up and say, we need to be doing this. Hey, Steve, you're an old fogey, you don't understand this. We need to be doing this.
Does that happen much?
HAFNER: You know, what's great about Kayak and our culture is we hire a lot of young people and we give them complete flexibility and independence
to build something that tailors to their interest. And we put it out in the wild to see if there's consumer engagement. So yes, there's a reason
we have our headquarters in Boston, not in Concord, but right next to MIT. There's a reason why we have our biggest office in Berlin, because that's
where all the young talent is. And those people come to us not with a travel background, but with a make the web better background. Making us a
better background and that's big dividends for us. I didn't think people working to use a smart phone, for example, to look for flights. And boy
was I wrong. Richard, thank you.
QUEST: Really good to have you here. Thank you so much for joining us. Really appreciate it. Come back again, please.
HAFNER: Will do.
QUEST: Lovely. Now coming up as we continue tonight on QUEST MEANS BUSINESS, Qatar isn't wasting any time crying over spilt milk literally.
The goal state may be facing the embargo from the Saudis and the GCC, now the cows are arriving as reinforcements.
[16:30:00] (COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in a moment. I'll be speaking to Formula 1's new managing director, Aa F1 takes
over London's Trafalgar Square. And Hyperloop trains could one day make Formula 1 look tame. The co-founder of Hyperloop joins me in the C-suite.
Before that, this is CNN and on this network, the news always comes first.
U.S. President Donald Trump's pick to become the next FBI director has been facing very tough questions, during his testimony in front of a U.S. senate
committee. The nominee is Christopher Wray, has pledged his independence, saying his commitment would be to the rule of law and the U.S.
Constitution. And in his words to follow the facts wherever they may lead.
The former Brazilian President Lula da Silva has been convicted on corruption charges and sentenced to nine and a half years in prison he
denies taking bribes from a construction company in exchange for government contracts, Lula was a top contender for next year's presidential election.
He's remaining free pending appeal.
A massive iceberg has broken away from western Antarctica according to a U.K. research team. The Larsen sea ice shelf is 5,800 square kilometers,
that is about three times the size of greater London. The researchers have been anticipating the break for some months.
Now when you hear the phrase airlifted cows, you know things are have gone beyond just light and are getting serious. You probably would not imagine
this. Italian firemen rescuing a cow from mountains by helicopter last month. In the case of Qatar, it's less dramatic and far more serious. 165
dairy cows have been airlifted into the country, because of a dairy shortage. The cows arrived on a Qatar Airways plane flight from
Budapest. Qatar imports most of its food and the sanctions imposed by neighbors mean it's hard to find alternatives.
At the same time, U.S. Secretary of State Rex Tillerson continue his efforts to help mediate the dispute. U.S. Secretary of State arrived in
Saudi Arabia on Wednesday.
[16:35:00] There he will meet foreign ministers from the four Arab nations leading the boycott against Qatar. He's already been to Kuwait, he'll be
there tonight and they'll be updates from Saudi and its allies.
Michelle Kosinski is in Washington for us. The secretary of state is, is rolling up his hands, rolling up his sleeves and getting his hands dirty in
this. How worried is the state department that this dispute is not only out of hand, but getting worse?
MICHELLE KOSINSKI, CNN SENIOR DIPLOMATIC CORRESPONDENT: They're definitely worried about it. They see the complexity here. I don't think that they
have any false views at this point. That this is going to be wrapped up. In fact, on this trip that he's on, he's been in the region for a couple of
days. He's been based in Kuwait, which is supposed to be the mediator here. He's been bouncing around talking to everybody. He just extended
his trip another day so he can be back in Qatar tomorrow to tell them what the Saudis have said today. And try to make this work. Right there it
tells you even the trip that they had planned is taking longer than they originally expected.
QUEST: Is this what we used to call shuttle diplomacy or have we not even reached the stage of trying to broker an agreement? We're still at the
talks about talks about talks?
KOSINSKI: I think it's in the stage where they're trying to hammer something out. The biggest problem here is this is a longstanding dispute.
Yes, the U.S. has deep ties with everybody involved. That puts the U.S. in a decent position to try to work this out. But the fact that this has been
going on, and that each side right now is so dug in, it tells you that you know you can sort of see the shadows of what might be an agreement her.
There could be some compromises where the U.S. agrees to be the monitor to make sure these things go into play. But each side is not really feeling
so much pain at this point that it looks like those compromises are going to come any time soon.
QUEST: And related to that very point, Michelle, bearing in mind the administration's laser-like focus on terrorism, and ISIS and what they
would describe as extreme Islamist activity, will the U.S. do you think at some point be forced to take sides?
KOSINSKI: I don't think that they have to split it so easily down the middle. All of these countries are important in the fight against terror.
The U.S. is absolutely against terror financing but there are so many gray areas. The only way to deal with this is through compromise. I think it
was interesting that just yesterday the U.S. signed this memorandum of understanding with Qatar saying we are, we're going to actively fight this
financing. Look what we're going to do. Look how far we've already come. And then you have the quartet, Saudi Arabia, Bahrain, the UAE and Egypt
saying that's not enough. That's not nearly enough. But really the only way is for each side to give a little and clearly, they're not there yet.
But I think the best that the state department can say at this point is what they told us yesterday. That at least all sides are willing to try to
be committed to bring this to a close.
QUEST: Try to be committed to bring this to a close. I think that's the best we can get tonight. Good to see you, Michelle. Thank you very much.
This is extraordinary. The former president of Brazil. Lula da Silva has been found guilty of corruption and money-laundering. Shasta Darlington
joins me from Rio de Janeiro. It's all about a beachside apartment he was supposed to get as a bribe for giving government contracts. But Lula as he
was known was the most popular president in recent history. This is earth- shattering.
SHASTA DARLINGTON, CNN CORRESPONDENT: It really is a stunning downfall. Richard. Not only did he leave office with an approval rating of more than
80 percent, he was lined up to possibly be the next president, he was leading the polls ahead of the 2018 election race. The question is will he
even be allowed to run now? He's been found guilty of graft and money- laundering. Sentencing to nine and a half years in prison.
He is going to be free, awaiting appeal. But if that guilty conviction is upheld. He won't be able to run for office. But on the other hand, it
isn't really a surprise, either, Richard. He's been investigated now for about a year and he's really just the latest big-league politician to be
brought down by this long-running corruption trial. We've seen dozens of politicians and business leaders and it was in one of the driving forces
behind the impeachment of his hand-picked successor, Dilma Rousseff. So stunning, very painful for his followers, but again not exactly a surprise,
[16:40:00] QUEST: All right. But he says of course and his supporters say it was, it's a political witch-hunt that it's designed to prevent him. So,
without besmirching the good judge who found him guilty. From your understanding, was the evidence strong here?
DARLINGTON: Well, I think first to address the witch-hunt accusations, that's becoming harder to sustain. Because this judge Sergio Moro hasn't
just gone after Lula and his Workers Party. In fact, many of the politicians who have been implicated are rivals, they are from the other
major party, the PSDB, Dilma Rousseff's main rival in the last elections. Aecio Neves was accused of receiving bribes. The sitting president, Michel
Temer who accused of maneuvering Dilma Rousseff's downfall is battling his own corruption allegations and trying to avoid a trial at the Supreme
Court. So, in fact, what we're seeing is the entire Brazilian political class is under the microscope. They are not coming out looking very good.
Brazilians are outraged. And really not even sure who will be running in the presidential election. Which party won't be completely stained by this
QUEST: Good to see you. Thank you, Shasta. Another corruption scandal for you to follow in Brazil. Thank you.
As we continue tonight, airline speeds for the price of a bus ticket is a promise for that got a bit more real. On a five second run through.
When we come back this gentleman, the man, the co-founder of Hyperloop is going to tell us how much is real, how much is hype and when will we ever
actually get to try it?
QUEST: The engineers are caught in a Kitty Hawk mode. The first new form of mass transportation perhaps since the Wright brothers brought us the
airplane. The movement was 12:02 a.m. on May 12th, in the desert near Las Vegas. And the Hyperloop 1 finished its first full systems test. That
test now revealed for the first time.
UNIDENTIFIED MALE: Five, four, three, two, one. Fire.
QUEST: A five-second test. Result of three years of work by Shervin Pishevar who is the founder of Hyperloop One. Remind viewers for those who
aren't familiar what is special about the way your vehicle moves through the tunnel?
SHERVIN PISHEVAR, CO-FOUNDER, HYPERLOOP ONE: Absolutely, so what we have to do there is as a team our co-founder Josh Giegel was critical of that in
leading engineering as president, was three things, levitation, inventing our own sky in the tube. So, it's as if you're flying at 200,000 feet.
And the propulsion system which we've invented from scratch.
[16:45:00] QUEST: So, it works. Now you've got to make it to scale and find somebody who will pay for you to build a real full-scale travel mode.
PISHEVAR: Absolutely. It's the first new major form of transportation in 100 years. That's why the Wright brothers have been such an inspiration to
Josh and I and the entire team. Being able to do that test proves that we've built it, that it works. The structure weighs 2 million pounds, the
fourth largest vacuum system in the world.
QUEST: This is tiny compared to what you would have to build, Los Angeles to San Francisco or Vegas to L.A.
PISHEVAR: Right. Our method is to be iterative, to prove that it works to the world. Infrastructure, putting atoms and bits together is very
expensive. You need governments to support you to build. Our goal was to show that this works, that hyperloop is real. And Hyperloop One has done
that 300 people working full-time around the clock to make this happen. In two and a half years to go from idea to this was very hard. And we have
many, many things to do in the future.
QUEST: I'm going to be one of them. I'm not a skeptic or a cynic. When does it become real? When does it become a mode of transportation?
PISHEVAR: Absolutely. We want to build this between city pairs around the world. We would have to have it shooting for an operational hyperloop
somewhere in the world by 2021. We have incredible leadership from Rob Lloyd, our CEO, who is president of CISCO and also Brent Callinikos, the
treasurer of Google. To launch this around the world we are in government studies around hope and hope to be able to announce our first projects in
QUEST: You'll do it here or come on the program after you've announced it. I want to quickly ask you because you have been involved in Silicon Valley
at various levels over many years particularly on the venture capital side. You really know this thing backwards. This latest, this latest soul-
searching about culture. Sexual harassment, denigration of women in Silicon Valley. What's causing it? Why is this an environment that's
turning itself inside out on this subject?
PISHEVAR: I think it is an absolutely critical thing around culture. And cultural needs to evolve. And that's obviously incredibly important. I,
you know, I think that bringing diversity to these companies, is incredibly important from leadership down from engineering up. All of that is
incredibly important. If you look at Hyperloop One and what we've been able to build, it's been a collective effort and we hope that it can be an
example of what can be done with the diversity.
QUEST: Diversity, is that significant for you in this?
QUEST: To have a diverse workforce?
QUEST: Thank you very much. Really glad about what you did.
Now, another form of transportation, we go from hyperloop to Formula One. It's saying it doesn't want to lose the British Grand Prix. As this year's
race approaches. It could be the last at the famous Silverstone track unless they get a new deal. Formula One's managing director joins me live
on QUEST MEANS BUSINESS after the break.
[16:50:00] (COMMERCIAL BREAK)
QUEST: Formula One has taken over London's Trafalgar Square, all ten teams attended the F1 live celebration, after all, it's the British Grand Prix
this weekend. The future of the Silverstone race, while it may not be at Silverstone after 2019, the owners say it's too expensive. It would be a
great shame, it's been there since 1950.
Sean Bratches, managing director of Formula One is in London, he's Formula One's managing director for commercial operations. Lovely to see you Sean,
thank you. I know, I know it's a matter of negotiation and it's a very tricky and delicate moment but it would be a shame if Silverstone bit the
SEAN BRATCHES, MANAGING DIRECTOR COMMERCIAL OPERATIONS, FORMULA ONE: No, we agree and just as it relates to your first supposition. It's been the
British Grand Prix since 1950. It hasn't always been at Silverstone but that's traditionally the home. We've got a three-year deal left, this
weekend, '17, '18 and '19 with Silverstone, and they've elected to exercise an optional extension period.
QUEST: Have we looked at the way in which -- now you've taken over F1 from Bernie Ecclestone and company. Six months in how is it going? What are
you learning? I remember when you took over it was very much a policy of Liberty to find out how the whole thing works, don't make too much changes
until you really understand how this beast operates. What have you learned?
BRATCHES: Well, we were left with an extraordinary opportunity at Formula One. The business was run to a level and taken to a certain level. But
the opportunities are bound to continue to grow it, there's so many fundamental businesses areas that haven't been exploited. We're trying to
evolve this to a 21st-century media platform and media company, and continue to drive the business forward with a kind of a really the thesis
being focusing on fa. And so much what we did today in Trafalgar Square was fan focus. We're trying to put the fan at the middle of every
conversation we have. Activate around that and this was one example of how we're looking at the future and really kind of pivoting this from a Formula
One motor sport company to an entertainment and branding platform and company with Formula One at the center of that.
QUEST: Malaysia has already announced its withdrawal. Singapore is thinking. Are you concerned is probably putting it too high. I'm sure for
every country that pulls out you've got four that want to come in. But you've got to be cognizant of the costs and the way in which cities and
countries will say, is it worth the bill?
BRATCHES: Now I've been in this chair for six months, I probably had over 40 countries principalities, municipalities come into my office seeking to
host a Grand Prix. So, you know we're, we have a little bit of an embarrassment of riches in terms of our options, we have a strategic vision
in terms of where we want to go next, that's principally city centers, in proximity to city centers, street tracks where we can activate large fan
bases, yes, we're losing Malaysia this year, but we're picking up Germany and France, going from 20 Grand Prix this year to 21 next year. The
challenge that we're going to have is not the number that we can grow to per se. But where are we going to go that's going to be best for the
Formula One brand? Where can we activate best around incumbent fans and actually grow our fan base? We feel good about the complexion of the Grand
Prix schedule today and it's always been somewhat dynamic. We're at a relative high in terms of number of Grand Prix that we have today. But we
continue to look for the next generation.
QUEST: You talk about the fact that do you think that this new-found focus, what I see is, you know, I've been to more than my fair share of
races over the years. It's pushing the sport into a more digital age, isn't it? To engage across all levels with fans in different ways that
perhaps it hasn't done so far?
BRATCHES: Well, we inherited an entity that really didn't have a digital strategy. We're probably the only company on the planet that doesn't make
money from digital. We have an extraordinary opportunity there. But you know, focusing on the fan whether it's at the circuit. In the public
areas, in the paddock, in the paddock club or on the grid. We're evolving that entire experience. We're looking at developing content that formula
one fans can consume outside the 20 grand prix weekends, rebuilding our digital platform from the ground up. Looking at there's an abundance of
ways we're looking at engaging fans with new technology.
QUEST: Forgive me. I didn't mean to cut you off. I was going to say and indeed of course here at CNN we have "The Circuit" we're very grateful we
have a strong relationship now in which we're doing considerably more coverage of this with yourselves. Sean, I appreciate it.
BRATCHES: One of the first things I did when I got here is I actually, we took CNN and CNN in Austin and Abu Dhabi is actually going to have a news
desk in the paddock, and your team has been present so we're trying to really market the sport, get the word out. We've got a fantastic asset and
we, the sun shined on Formula One today in Trafalgar Square and we feel good about our future.
QUEST: If you can get the sun to shine in Trafalgar Square, good luck. Thank you very much indeed. We will have a Profitable Moment after the
[17:00:00] QUEST: I'll keep this short and simple, the Dow Jones Industrials at a record, another all-time high, and the market just seems
to want to go higher. And that is quest means business for tonight. I am Richard Quest in New York whatever you're up to in the hours ahead, I hope
it is profitable. I'll see you on Monday.