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Selling Intensifies Amid North Korea Concern; Trump: Maybe My "Fury" Threat Wasn't Tough Enough; Snap Shares Plunge on Earnings Report; Uber's Exodus Grows; Department Stores on Struggle Street;. Aired 4-5p ET

Aired August 10, 2017 - 16:00   ET


[16:00:00] RICHARD QUEST, CNN HOST: Closing Bell ringing on Wall Street. The Dow is off the best part of 200 points, the lowest point of the

session. We've got markets down around the world. But a firm gavel from Allison Transmission. A relief gavel today. It's Thursday. It's the 10th

of August.

North Korea and the fear looms large over the markets. Expected to hear more from President Trump at any moment. But this is how the markets are

just closing at the moment. We'll get down too much more detail over the course of this program. The Nasdaq is the biggest loser of more than 2


Also in this hour, Snap earnings are out in a matter of moments and will look at how Facebook is eating its lunch. And you built them up, and you

knock them down. Lego replaced its chief executive just after eight months.

I am Richard quest, live in the world's financial capital, New York, where it looks like the Dow is off 200, the lowest point of the session. I mean


Good evening. Tonight, the accelerating selling on markets around the world. As North Korea warns its plan to fire rockets toward the American

territory of Guam will be ready in a matter of days. And President Trump has responded, doubling down on his earlier remarks, threatening fire and

fury. He said perhaps those comments were not tough enough. We'll hear more from the U.S. president shortly and you'll hear him in his own were


The Dow plunged back below the 22,000 mark at the open. And it stayed lower for the whole session. That may be the biggest fall off since May.

It accelerated after the Donald Trump spoke. Volatility, the VIX index is up 40 odd percent. Which is now at the highest point in three years. And

gold was up 1 percent. With Swiss franc was up, all the safe havens.

And this is the way the world looks. The selloff isn't limited to the U.S. markets. It began in Asia. Interestingly, the soul KOSPI, where the

locusts, if you like, are much of the issues at the moment with North Korea. The Shanghai composite, the Hong Kong Hang Seng, which is often the

most volatile, saw the worst of the day.

In Europe, it was London with the FTSE. Europe was exacerbated by company results. And in the United States the third straight fall for all three

indices. The first time since April. And the Nasdaq, by the way, was the lowest down. I think if you look at the graph of the Dow Jones, that makes

it absolutely clear we've got the graph. You see clearly unhappiness throughout the session. That's "QUEST EXPRESS" when we're on air. As it

goes into the afternoon this rally. But the largest selling toward the close.

We need to understand what that was about. Ted Weisberg is the president of Seaport securities, joins me now from the New York Stock Exchange. And

Ted, what did happen in that last half hour, 45 minutes that exacerbated and accelerated the losses.

We appear, we couldn't hear you, Ted. You can you hear me, but I can't hear you. So, will come back to you, Ted. The moment we can actually get

your sound.

President Trump's declined to rule out a preemptive strike on North Korea. Perhaps not surprisingly. Speaking to reporters a short time ago. The

U.S. president said his previous talk of fire and fury may not have been tough enough.


DONALD TRUMP, PRESIDENT OF THE UNITED STATES: If North Korea does anything in terms of even thinking about attack of anybody that we love or we

represent or our allies or us, they can be very, very nervous. I'll tell you why. And they should be very nervous. Because things will happen to

them like they never thought possible.


QUEST: Now we go back to Ted can you hear me? And can I hear you?

TED WEISBERG, PRESIDENT, SEAPORT SECURITIES: Well I can hear you. Hopefully you can hear me.

QUEST: Sorry about that, Ted.

[16:05:00] Just tell me in the last 45 minutes. That selling accelerated. Why?

WEISBERG: Well I think it accelerated after President Trump made some additional remarks about North Korea. Clearly, that was the sort of the

canary in the cage yesterday for the selloff. Whether this is just background or rhetoric for a market that was way overboard that hasn't

really seen any kind of major pullback, almost since the election of last November. We'll never know what the reason is, but the reality is that

clearly stocks were for sale yesterday and again today. And closing right on the lows of the day, which in theory does not set us up well for the

opening tomorrow.

QUEST: And that volatility index. The VIX Index, it's often a little bit suspect, the VIX index in terms of measuring. But when you get a rise

yesterday of 20 percent and another rise today of 43 percent, you have to take notice.

WEISBERG: Well you absolutely, and I don't want to get into the weeds too much, Richard, with you. But you know when you get sharp reversals from an

underlying trend, in this case the underlying trend has been positive. So, the reverse would be the negative affect or a big spike in the VIX and a

big selloff in the underlying stocks. It is painful but usually short lived. And so, we're yet to see how this will play out over a period of a

couple of trading days. But certainly, you can't argue with the fact that a selloff was due. We never know what the catalyst is. They don't ring a

bell, unfortunately. And so, we just kind of have to live within it with when it happens.

QUEST: Ted, finally there will be those who will start to say soon enough, buy on the dips. Is this a dip?

WEISBERG: Well, with the benefit of the 20/20 hindsight. We can probably answer that question. But in the past, certainly, for the last six months

any selloff has been a better buying opportunity then a selling opportunity. The problem we all have is so much of the stock trading is

psychological, not necessarily based on fundamentals. And I think in this case, you know, we're just dealing with a market that was pretty much

priced to perfection. The excuse is Korea. Whether it's real or not remains to be seen. Hopefully it isn't. But that was the excuse. So,

people are basically taking some profits, taking some money off the table and the buyers have simply walked away.

QUEST: Ted, see you, sir. Much appreciated. See you in the exchange next week as always.

WEISBERG: My pleasure.

QUEST: President Trump received a briefing from his national security team this afternoon at his golf club in New Jersey. We're expecting to hear

more from the U.S. president in just a moment. Our Senator White House correspondent, Jeff Zeleny, is in Washington at the White House. Jeff,

what on earth, Jeff, the overnight story was, that fire and fury was Donald Trump on his own. Putting out a message that had been sort of agreed, but

not in terms of tone. And then he says today, it wasn't tough enough. Is he freelancing again?

JEFF ZELENY, CNN SENIOR WHITE HOUSE CORRESPONDENT: In fact, Richard, he said three times perhaps those words weren't tough enough. Addressing his

critics head-on, who were criticizing his fire and fury like the world has never seen, as being too harsh. So, I think this is what you're seeing,

the President doubling down and indeed perhaps even more than that today in Bedminster.

This is now the strategy, the message of this administration. This freelancing or not, this is the president giving out his, I would say, the

clearest view yet of what his posture toward North Korea is. Whether you agree with it or disagree with it. So, this is not, I would say

freelancing. I would say this is the president speaking in a language to which we have not heard many presidents before do so.

QUEST: And one can't begrudge him or criticizing him for refusing to answer would he make a preemptive strike. He's quite right in that sense,

isn't he? You don't go and tell what you're going to do before you go and do it?

ZELENY: Sure, you never take anything off the table like that. Even a preemptive strike on North Korea, which all of his military advisers would

say that is not the way to go here. I mean this is not something that that is very likely without be provoked. But he did not take that off the table

of course. But someone did, Richard, ask a question that I thought was interesting. He said the words weren't tough enough. A reporter asked him

there in Bedminster, well, if fire and fury aren't tough enough, what would it be? And he said, will see, we'll see.

QUEST: Let me put one other point to you. Because the president has made a huge issue or point of phrase about how the market has rallied since the

election. Today we're down 200 points. Yesterday was off 80 odd points.

[16:10:00] If this continues, at what point does the President realize he's not only worsening a situation vis-a-vis, North Korea, but he's also

killing the markets gains that he's been Trumpeting?

ZELENY: Good question, Richard. And of course, we did not hear the president or anyone in the White House talking about the market today.

Perhaps not surprisingly. But the hazards of owning the market when it's high, also means you own the market when it's going in the other direction.

So, we will see about that. But look, there's no question where, that these words, that the president used earlier in the week have caused alarm

around the world. The markets seem to be in that group that are reacting as such, Richard.

QUEST: Good to see you, Jeff. Thank you so much. Really appreciate you at the White House. Thank you.

Donald Trump also said he's prepared to get tough with China if Beijing does not bring more pressure on North Korea to drop its nuclear program.


TRUMP: I think China can do a lot more, yes. And I think China will do a lot more. Look, we have trade with China. We lose hundreds of billions of

dollars a year on trade with China. They know how I feel. It's not going to continue like that. But if China helps us, I feel a lot differently for

trade. A lot differently toward trade.


QUEST: Max Baucus is the former U.S. ambassador to China, and says Kim Jong own is very calculating, not irrational. He joins me now from

Bozeman, Montana. Good to see you ambassador as always, thank you. Let's have your first immediate reaction to Donald Trump doubling down on his

fire and fury and say may those words weren't tough enough.

MAX BAUCUS, FORMER U.S. AMBASSADOR TO CHINA: I think the increased bellicosity makes things worse. In effect is still calling Kim Jong-un

names, he's criticizing him, in some degree criticizing China. We've all learn in life that criticizing somebody generally doesn't work very well.

Rather show respect. Listen to the other side and show respect. He has to do much more of that. He's got to show leadership. The world is looking

to the United States for leadership here. No other country can solve the North Korean problem alone. China can't, others can't. We need to provide

the leadership.

And another point here, which I think is critical, that we've got to start thinking about next steps with North Korea. By that I mean the horse is

already out of the barn, maybe not totally, but almost. That is, he's developed nuclear capability, missile capability. We got to start thinking

about how we manage that rather than trying to get him to repudiate it. Because he's not going to get rid of it.

QUEST: I'll come to that a second. Because it is an important point and it may be the way out of this. But just on this question of comment.

Donald Trump says look, no U.S. president has spoken like this before. And that is what is necessary to get over the fact that the U.S. won't be

kicked about. Doesn't he have a point in this sense? That if you look back at Clinton, Bush and Obama, as the president said, all failed where

North Korea's concern.

BAUCUS: All failed, but the problem is much worse now that it was back then. The stakes are much higher now than they were back then. Now that

could argue for a stronger statement, but it also argues for more intelligence, more patients if you will, more leadership. Working on China

with Russia with all the other countries in the region to develop a plan. Private plan and not one where he's calling people names.

QUEST: On this question that you just raised about the fact that the horse is out of the stable and the door has been locked. On this question,

ambassador, do you believe that the time is now right to say, OK, North Korea, you are a nuclear power. You've got a nuclear weapon. You now have

to sit down at the same table that the rest of us sit at with nonnuclear proliferation. And you have to abide by the same treaties. You are part

of the club.

BAUCUS: Something close to that. He does not have full capability, but is getting very close. And he's not going to give it up. But I think it's

worth talking to him with respect and suggesting a compromise here. Maybe some kind of a freeze with inspections. And maybe working later towards

cap. But in life, generally we find that solutions require compromise. It's not an either or it's bipolar. You've got to sit down work with him.

Don't forget too that other countries face this. We face this issue with other countries with, China back in the 60s. We were very worried that

China is going to become nuclear. Well, we've worked with China.

[16:15:00] Pakistan, India, they're nuclear. We've got to manage this and that requires leadership, in not being an apprentice who thinks can fire

people like Mitch McConnell. That's never going to work. You got to be a leader if you're going to be president.

QUEST: Good to see you, sir. Thank you, ambassador. Very kind of you to join us. We needed that input tonight, thank you.

BAUCUS: Thank you.

QUEST: As we continue on QUEST MEANS BUSINESS, it's a case of snap, crackle and drop. Snapchat's parent is plunging after hours. It's

reporting earnings as threats from its competitors loom.


QUEST: Shares of Snapchat's parent, Snap, are down 4 percent after hours as snap gave numbers in terms of its results. Daily active users are up 21

percent year-on-year. And revenue per user was up 109 percent year-on- year. But that is not enough in terms of numbers and in terms of direction and strategy for the company. Snapchat is under threat from its copycats.

It's a case of Evan get your innovation. Because anything can you do, Instagram can do better.


BETTY HUTTON, ACTOR, ANNIE IN "ANNIE GET YOUR GUN": Anything you can do I can do better I can do anything better than you


HUTTON: Yes, I can.

KEEL: No, you can't.

HUTTON: Yes, I can.

KEEL: No, you can't.

HUTTON: Yes, I can. Yes, I can.

KEEL: Anything you can be I can be greater. Sooner or later I'm greater than you

HUTTON: No, you're not

KEEL: Yes, I am

HUTTON: No, you're not.

KEEL: Yes, I am

HUTTON: No, you're not

KEEL: Yes, I am. Yes, I am.


QUEST: And with that duet, well the scene was set in that movie for the climatic shooting contest in "Annie Get Your Gun."

Now let's put the Snapchat with Instagram. If you look at daily use, Instagram is already beating snap. And this copycat strategy between

Instagram and Snap would appear to be working. The opening salvo in this was -- yes, face filters. We can argue which is better, but both have


The crescendo for the musical grew with stories and video diary like features, which enable people to add so much extra material. And then the

grand finale of this Titanic battle, copying Snaps original feature, disappearing messages. One final note, Snap has one thing going for it,

which is the dancing hotdog filter.

Samuel Burke is tracking the numbers for me in London. Samuel, yesterday you gave me various metrics that I should look at. You've already looked

at them. Tell me what they are.

[16:20:00] SAMUEL BURKE, CNN TECH TECHNOLOGY AND BUSINESS CORRESPONDENT: Bottom line disappointing in every category. And that's why we're seeing

the stock gyrate the way it is, now down 6 percent. I think the key number is always daily active users. They have 173, down by about a million

compared to expectations from Wall Street. They're expecting about 174 million.

Earnings-per-share, a loss of $0.16 instead of $0.14. That's what the market was hoping for and revenue of 181 million, versus 186. At the end

of the day it's coming back to what you were just pointing out, is can they compete with Facebook? I'm going to be listening to the call to hear from

Evan Spiegel addresses that. On top of them copying Instagram copying Snapchat. We've heard today, Richard, that Facebook is also copying some

of the video that Snapchat had been planning to do. Kind of short TV shows now. They're making an even bigger push on Facebook. So, we need to hear

Evan Spiegel is taking this threat seriously. Last time on the call a lot of people on the street felt that he was kind of dismissive. So that's

what we're looking for now.

QUEST: You said about the number of subscribers and how many number of users. That we had to look at. They got a lot of people joining, over

this period of the last year. But it's not good enough it's what you're saying.

Not good enough. And it's back into this Twitter problem. A lot of people bought into the stocks thinking they were getting another Facebook and even

through 170 some odd million, 173 million sounds like a lot of people. At these valuations and in comparison, with Facebook and their billion plus

users if you look at it on a daily active basis. It just doesn't compare at all. So, what Snapchat really needs to find is a place where the stock

price can much better reflect the small nature of this social network, Richard.

QUEST: Interesting. And the IPO that probably, some arguably say, should never have taken place. Maybe arguably along with Blue Apron as well.

Samuel, good to see you, sir. Thank you.

Uber's former chief executive has quit the company. I'm not talking about Travis Kalanick, rather Ryan Graves who was briefly the first CEO. He then

became the VP of global operations. We need to talk about this with Michael Nunez. Who is the deputy tech editor at "Mashable" Good to see

you, sir.

MICHAEL NUNEZ, DEPUTY TECH EDITOR, MASHABLE: Good to see you. Thanks for having me.

QUEST: What's happening? Another --

NUNEZ: I think we're all asking that question.

QUEST: Was he pushed? Did he leave? Did he decide it's time to spend more time with my family?

NUNEZ: As far as we understand this is a decision that Ryan made himself. And it's something that's part of a larger trend in Uber right now. A lot

of different executives, you have the CFO, the CMO, probably would say the CEO was sort of forced out. But you have a lot of top level executives

that have been asked to leave after the sexual harassment scandal. Which sort of plagued the company in addition to several other lawsuits around

the world.

QUEST: Is a generally thought that this renegade attempt by Travis to get back in again is over?

NUNEZ: I don't think that that's the common perception. I think that there are still murmurs that Travis Kalanick wants to reclaim his position

as CEO for the company he founded. And there's obvious reasons for him wanted to do that. But I think you're also seeing sort of a cleansing of

the people that were in charge during some very questionable decisions that were made. Both with the sexual harassment scandal and the prevalent

sexism at the company, or alleged sexism at the company.

And also, some of the lawsuits that alleged that Uber was operating illegally in some cities and basically bending the law and had a tool to

skirt the law. And so, you know the people that were overseeing all of the different projects, are no longer at the company.

QUEST: I thought the best story I saw in terms of how Uber drivers are retaliating in some ways is that they go off-line. They go off-line to

force the surge pricing. Therefore, come back online. I mean, it's binding oblivious, but it's brilliant.

NUNEZ: Well, it is. I think it's more said than anything, to be honest. The company is valued at well over $1 billion at this point. And that

valuation was built by contractors. So, you know, the people that are creating the value in Uber are often not taken care of by the company. If

you go a step further, you learn that the employees that are, that are treated relatively well in terms of their finances and benefits actually

have to deal with other issues as well.

QUEST: Let's talk about the more general issue here. Every day you've either had Google or we've had another story in terms of Uber. From your

understanding, how prevalent are these views?

[16:25:00] These sort of sexist views? I mean maybe, maybe I'm not asking you to go as far as to say that women aren't capable of doing the same as

men or --

NUNEZ: I wouldn't say that.

QUEST: No, but I'm not asking you to address that. That is so out of left field. But it's not even worth it. But on just the question of culture,

are they still out of step?

NUNEZ: Uber or do you mean Google?

QUEST: Google, Uber, the tech industry.

NUNEZ: I see. I think there is over representation among certain groups and there's underrepresentation among other groups. This wasn't a problem

with all of the companies were startups and young and they were growing really quickly and adding people. And now we're talking about

multibillion-dollar corporations that have a great level of influence over our everyday lives. Whether it's Facebook, Amazon, Snapchat, Uber,

Twitter, you know, these are things we check in on daily. Whether you want to believe it or not, they are influencing the way we live our lives. And

so, I think now those issues are becoming more obvious I think.

QUEST: Excellent. I mean excellent to hear your views on the subject. Good to see you, sir. Thank you very much indeed, really appreciate it.

NUNEZ: Thanks.

QUEST: America's love affair with the traditional department store continues to wane. It's just part of the tech move that we've been talking

about. As we return, the brand struggling with falling sales and falling shares. QUEST MEANS BUSINESS.


QUEST: Hello, I'm Richard Quest. There's more QUEST means business in just a moment. When one of Kenya's presidential candidates says observers

are missing the point over claims of election hacking. Speak to Europe's top election officer on the line. He'll join us from Nairobi.

And everything is not awesome for Legos chief executive. He lost his job after eight months. As we continue tonight, this is CNN and on this

network the news always comes first.

U.S. President Donald Trump is not ruled out preemptive military strike against North Korea's nuclear and missile programs. The President's

remarks follow Pyongyang's threat to unleash a missile barrage against the U.S. territory of Guam. Mr. Trump also said his comment earlier this week

threatening North Korea with fire and fury may not have been tough enough.

China now says the U.S. Navy warship violated Chinese sovereignty when it entered its territory in the South China Sea. China's foreign minister

said the movement through the Spratly Islands was unauthorized and urged the U.S. to respect China's sovereignty and security interest. As well as

efforts to maintain peace in the South China Sea.

[16:30:00] The former U.S. Secretary of State, John Kerry, says he's confident in the integrity of Tuesday's presidential election in Kenya.

Mr. Kerry is a co-leading dissenter's mission of election observers in Kenya. The opposition Raila Odinga has claimed early results were

compromised by hackers. Final results will be released in roughly a week.

The popstar, Taylor Swift, took the stand in a civil trial today in Denver Colorado. Describing allegedly being groped by a former radio DJ, David

Moeller in 2013. Ms. Swift testified, she knew it was Moeller sticking his hand under her skirt and grabbing her. Moeller is suing Swift saying

his career was ruined by a false allegation and she is counter suing.

In London, the search continues for this jogger who apparently pushed a woman in front of a bus. It's led to an arrest. The suspect is a 50-year-

old man. The victim was walking across a bridge when the incident happened. The bus narrowly missed hitting her. She received minor


The trend continues. American shoppers are shunning department stores. The evidence is in the markets as well as the malls. Macy's, Kohl's and

Nordstrom's stock all suffered to varying degrees over the course of the session. And if you look at the stocks to date, Macy's is down over 40

percent. Kohl's is down 20 percent. Nordstrom's, whose results were just out is off 5.7 percent, and that's because it may end up under new

ownership. Or rather old ownership. There'd been reports that the Nordstrom family may retake the firm and go private.

Clare Sebastian is here. The results though from the companies were not that bad.

CLARE SEBASTIAN, CNNMONEY CORRESPONDENT: Not that bad. You know, Richard, I think that's the key point. They were great with the exception perhaps

of Nordstrom, which was just out. They were the only one where that key metric of same-store comparable sales actually increased. They went up 1.7

percent, which frankly is a number that Macy's and Kohl's would both kill to have. Both of those stores declines. Macy's 2.5 percent. Kohl's down

0.4 percent.

So, you know, the reason why the share prices fell is not just because of the fact that we see this negative trend particularly from the likes of

Macy's, which is something of a bellwether. But also because of the general malaise that we see in the industry. As you say, mall traffic is

declining. Partly because you see big stores like Macy's, closing. But also in general because people shopping habits are changing. E-commerce,

the effective Amazon.

QUEST: But why have they not been able to target that? I mean, Macy' exists. Nordstrom', Kohl' They all exist with the website. So

why have they not -- I was going to say marginally more successful at this.

SEBASTIAN: Well, they're playing catch-up I think to an extent. You know, they are all investing in e-commerce heavily. Kohl's just said on its

earnings call today that they're opening another fulfillment center. Macy's is investing heavily in its e-commerce offering the same as

Nordstrom's. And one of the reasons I expect to tell me why Nordstrom's seems to be doing slightly better, is because they started slightly earlier

when it comes to e-commerce. So, if you can't beat Amazon, you have to join them. Of course, it still doesn't mean you're going to beat them.

QUEST: And if I understand you right, what we will see going forward is just more store closures. You know, that's sort of announcement Macy's is

to close x, Kohl's will close this, Bloomingdale's will -- whatever.

SEBASTIAN: Absolutely. I think they're still too many stores and too many malls. The most conservative estimates out there still estimate that

around 1/4 of America's 1200 malls are set to close. Macy's is about two thirds of the way through closing 100 stores that they announced last year.

They're cutting 10,000 jobs. So, I think as a whole the retail sector is still going strong. We're not seeing a huge dip and how much people spend,

or even the number of jobs in that sector. It's just within the sector that were seeing this kind of restructuring. And as these big legacy

department stores that are bearing the brunt of it.

QUEST: If we take Amazon -- just to go off on a tangent if we may. If we take Amazon -- and I commented before on this program, about how if you've

only got to look at the sort of things that we do on a daily basis, I think I brought something from Amazon last night. It will be delivered today.

And yet people still believe that is an evil -- not evil -- but it is a hindrance to retailing for the longer term.

SEBASTIAN: Amazon the company.


SEBASTIAN: Well, I think the question is the jury is still out, Richard, on how many of these big companies will survive in a world of Amazon. But

you do see, you know, some people even joining them. We saw Nike just last month saying that they were going to sell direct on Amazon. A lot of

brands do that. If they don't feel they can create their own e-commerce offering that's going to compete then one option is to go straight to

Amazon itself. But certainly, their dominance is becoming more and more obvious as the day goes by.

[16:35:00] QUEST: Stay with me. I just want to point out exactly what's happening at the moment. We are waiting President Trump who is due to give

some more comments. Now we've already heard from the U.S. president over the last couple of hours on the question of the threat from North Korea and

the president's comment of fire and fury the likes of which the world has never seen. And today President Trump said, well maybe that wasn't tough


He continued to excoriate and criticize Kim Jong-un of North Korea, and said that he himself would -- and when specifically asked what more he

would do in terms of a preemptive strike, he refused to answer that. And somebody said to him -- a reporter said to him, well Mr. President if fire

and fury isn't tough enough, please tell us what tough would be. To which he said, that he would have to wait and see. Since then the president has

been giving some more comments, which will listen to in just a moment. Put this into the context of the day and you see how the Dow Jones Industrials

fell very sharply. As soon as the president said that it was his comments perhaps were not tough enough. This is the worst market in some three

months. You see that market -- the decline start to accelerate. And we have the Dow off 1 percent. The S&P 500 was off 1.25 percent. And we have

the Nasdaq down 1.5 percent. That is the scenario that we've got at the moment. President Trump has been giving more comments.