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QUEST MEANS BUSINESS
Trump Issues Fresh Warning to North Korea; Kenyatta Declared Victor in Kenyan Election; Snap Shares Price Plumbs New Lows; Google Scraps All- Hands Meeting at Last Minute; Tainted Egg Scandal Hits European Union. Aired 4-5p ET
Aired August 11, 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 on Wall Street just ringing. The market is now closed. A sharp, hefty gavel on a day where
the market was up after a day when it fell out of bed. Trading around the world pretty much over. No major markets open. It's now Friday. It's the
11th of August.
In the last hour, Donald Trump has issued new threats to North Korea. And the stock market takes it in its stride over the medium term. Kenya's
president declares victory in the countries elections. Will be in Nairobi live as his supporters celebrate. And Snap's shares prices are spinning
faster than its famous hot dog. The problem is the share price is spinning all the way down.
I'm Richard Quest live in London. Where I still mean business.
Good evening. There are two major breaking stories to bring to your attention tonight. In the past few minutes, President Trump has issued a
fresh warning to North Korea's leader. Kim Jong-un after his locked and loaded threat that Trump sent this morning.
And in Kenya, finally, we have a result of the country's presidential election. The President, the incumbent won. Although the opposition is
refusing to accept the result. We'll be live in Nairobi and just a moment.
But we do need to start with the events in North Korea and President Trump's latest comments. The President has gone from threatening fire and
fury, to this morning saying that the military plans were in place and the military plans here locked and loaded. Now in a tweet, he said that the
commander-in-chief said the military solutions are fully in place in the event North Korea decides to act unwisely.
Chinese state media issued its own warning to North Korea saying China would stay neutral if North Korea launched missiles. Countries in the
region are protecting themselves militarily. Now in the last hour, I just need you to read this to be absolutely clear as to what the President
actually said. In the last hour, let me find the President's comments. The President has basically said that it's warning North Korea, President
Trump said Kim Jong-un will regret it fast if he issues an overt threat or attacks Guam or any U.S. ally.
We have three sentences from the President, well four if you take it. Firstly, fire and fury. Secondly, maybe it wasn't tough enough. Thirdly,
this morning, locked and loaded. And now, in a statement in speaking in Bedminster he says, President Trump says Kim Jong-un will regret it fast if
he issues an overt threat.
Both Russia and Japan have boosted their air defenses. We'll hear from Japan's ambassador to the United Kingdom in just a moment. Russia has
earns the U.S. to remain calm. The president defended his rhetoric and warned it would regret threats of any attack on Guam.
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We hope that they are going to fully understand the gravity of what I said. And what I said is what I
mean. So hopefully they'll understand, Peter, exactly what I said and the meaning of those words. Those words are very, very easy to understand.
(END VIDEO CLIP)
QUEST: As the threats fly between the U.S. and North Korea, the German Chancellor, Angela Merkel, sad sanctions, not military are the answer.
Moments ago, President Trump said the Chancellor was speaking to the United States, rather she was probably speaking for Germany. However, Mrs.
Merkel warned harsh words will not calm the tensions.
(BEGIN VIDEO CLIP)
ANGELA MERKEL, GERMAN CHANCELLOR: I believe that. I am fully convinced that an escalation of rhetoric will not contribute to a solution of this
conflict. I do not see a military solution to this conflict. Rather, I see enduring work like we saw in the U.N. Security Council with members,
with resolutions in view of the North Korea. And above all, tight cooperation with the countries involved. Especially the U.S. and China,
but also South Korea, of course Japan. Germany will be intensely involved with the potential nonmilitary solutions that we see. But escalation of
rhetoric is the wrong answer.
(END VIDEO CLIP)
[16:05:00] QUEST: With me now is the Japanese ambassador in London. Good to see you ambassador. The position taken now by the Japanese government
as related to North Korea, obviously is extremely serious. And this development of a missile defense system that people are now talking about,
what's the goal here?
KOJI TSURUOKA, JAPANESE AMBASSADOR TO THE U.K.: This is just being responsible for the defense of Japan and the protection of the Japanese
people. We take all means that are necessary to defend ourselves. If there is no need to do that, we don't have to do it.
QUEST: Does your government see any situation whereby the U.S. President's response arguably is making a bad situation worse?
TSURUOKA: The situation has been made seriously worse by the North Korean leader when he launched a series of missiles and proceeding that also
engaged in a nuclear experiment. These are all in serious violation of international commitments that they've made in the past. And also, a
serious violation of the U.N. Security Council resolutions. So, who has violated international agreed obligations? Is the first question that
needs to be addressed and there's no question that it is North Korea that has consistently violated that.
QUEST: This is the first time, ambassador, we've seen a U.S. president or any of the Allied protagonists, actually ratcheted up. Actually, said lock
and loaded, fire and fury, might not might not have been tough enough. This is a new -- when I say the word game I'm not being flippant. But this
is a new game.
TSURUOKA: Once President Trump came in office, you may know very well, that the Japanese Prime Minister had a very powerful discussion with him.
And one of the most important subjects they discussed is North Korea. How we could deal with this threat. The threat is now serious and great and we
can't overlook this threat that is coming. And President Trump said to the Japanese Prime Minister as well as to the public, that all options are on
The elaboration of that is in his words, what he would say. But it is publicly clear that all options are on the table. That has not been said
in the past because we have been trying to resolve these issues peacefully through talks, but then, talks produced nothing. And this is the
experience of the past 20 years.
QUEST: Let us talk if we may briefly about the issue of Brexit. There is a fascinating story that Japan has offered to help the negotiators, the
Brexit negotiators. Because you've just concluded a trade agreement after many years of negotiating with the EU. What are you offering? Are you
offering to help?
TSURUOKA: We have been negotiating with the EU for more than four years. And just last month we have agreed in principle of overcoming most of the
political difficult issues in the negotiation. But that doesn't mean we have completed negotiations. There's much more to be done.
QUEST: You think you can help the Brits.
TSURUOKA: We would be happy to help both the Brits and the EU to conclude and finalize a smooth exit that will benefit all of us. Including the two
of them. Including the world economy. This is the definite intention to help both. We are not standing on either side of it.
QUEST: Ambassador, good to see you, sir.
TSURUOKA: Thank you.
QUEST: The Japanese ambassador.
Moments ago, President Trump said the U.S. would be very successful, very quickly against Korea. He blame past administrations for failing to take
on the issue. CNN's Barbara Starr is at the Pentagon. And Barbara, I fear I have an entire raft of questions for which you will not have -- we will
not have full answers. But listen, let me just repeat the words that you heard the president, if he utters one threat in the form of an overt threat
or if he does anything with respect to Guam or any place that an American territory American ally, he will truly regret it and he will regret it
The President is now backing himself into a corner if Kim does something.
BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well you know, let's pull those words apart for a minute, Richard. What the President is -- if you take
him at his word -- what he is saying is if Kim does something to an American ally, Japan, South Korea, we have mutual defense treaties. I'm
not sure if that's the right legal word, but basically, we have promised to help defend both of those countries from North Korea. That's point number
[16:10:00] If he does something to an American territory, Guam, Guam is America. If North Korea attacks America, any U.S. president would respond.
Respond fast, he says. The military options are designed for a very quick response. So, I think that were looking at is a couple of different things
If there is an overt attack by the North Koreans. The U.S. certainly has every right and would be expected by everyone to respond to that. Perhaps
the deeper question is whether he is poking at Kim and trying to provoke something. Which would be a political statement, not a military statement.
And what do you do if Kim engages in some sort of provocation like firing missiles into the sea that is not a direct threat? That is lots of middle
ground the here.
QUEST: And that's the tricky area, isn't it? Because if Kim just raises the temperature ever so slightly, then we get into very fine debating
points with horrific consequences on is this an overt threat.
STARR: Well, you do. I mean, let's say, we've all seen Kim's rhetoric, right? He's making all of these threats, verbal threats, to turn the U.S.
into a sea of fire, if you will. He's been doing this for years. He's put out propaganda videos showing parts of the America burning down because of
North Korea weapons. That sort of thing. You don't launch a military strike just because somebody says something mean. I'm not sure that would
qualify as a lawful military order for the United States. You have to have a threat and that is why the U.S. intelligence and the U.S. military are
watching North Korea around-the-clock.
What they're looking for is any sign of an intermittent missile launch. Interesting question, I am no lawyer. So, let's say you see a sign of an
intermittent missile launch. Do you engage in a preemptive strike to take it out? The President says he hasn't taken that idea off the table. Or do
you think wait until it launches, until the threat launches and hopefully be able to shoot at North Korea missile down within minutes of launch?
These are very difficult questions.
QUEST: Barbara Starr, thank you at the Pentagon.
Now tonight, our other major story that were following very closely. In Kenya, there's breaking news tonight. The election results have been
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: I therefore wish to declare honorable Uhuru Kenyatta.
(END VIDEO CLIP)
QUEST: So, President Uhuru Kenyatta wins a second five-year term. He was reelected with 54.2 percent of the vote. The challenger, Raila Odinga,
holds 44.7 percent. In the past few moments, Mr. Kenyatta, President Kenyatta has called for calm and urged Kenyans to unite.
(BEGIN VIDEO CLIP)
UHURU KENYATTA, KENYON PRESIDENT: We are not enemies. We are all descendants of one Republic. As with any competition, there shall always
be winners and there shall be losers. But we all belong to one great nation called Kenya. And I extend the hand of friendship. I extend the
hand of cooperation. I extend the hand of partnership. I'm fully aware that this country needs all of us pulling together in order for us to
(END VIDEO CLIP)
QUEST: The opposition has refused to accept the official results. And Farai Sevenzo is in Nairobi Kenya doing sterling work for us. Farai, as
you have indeed all week. All right, you've got to the end of the week and we got the results. But how realistic is this opposition claim that they
won't accept it? Are they just making a bit of huff and puff and a bit of noise? But eventually will full their tents and had off?
FARAI SEVENZO, CNN CORRESPONDENT: Richard, I have to tell you that they left the tallying center at Bomas, Kenya just outside of Nairobi and made
some very emotional and very, very assertive claims. They actually say that it was a charade. That it is a disaster. That they will take no part
in this announcement of the results. And more importantly, they even saying that, they rounded on the observers, on John Kerry, on Marietje
Schaake, on the former president of Ghana and said that these people should have been vetted.
[16:15:00] Because they have given the authority to this election commission to say what they are saying. And more importantly they say that
they don't want to go to court. They've been there before. And which begs the question, what will they do.
QUEST: OK. So, what will they do? We will have to wait and see. But what I'm finding fascinating is this 10-point discrepancy. This 10-point
margin of victory by the president, when we were told -- and obviously you're just reporting what the opinion polls say -- this was a tight race.
This wasn't a tight race, this was a landslide.
SEVENZO: It seems like a landslide now, Richard. We spoke yesterday and you said you can believe the polls these days? But this is where we are.
It's a huge margin. I think it's up to the 9 percent did points at the moment. And while I'm telling you this, we are hearing from our sources in
Kibera, in Mathare, in Kisuma, all Mr. Odinga's strongholds, that there are people out there on the streets. In fact, we are also hearing news of
police bullets to disperse them, from the police. We will yet confirm this for you by tomorrow. But this is a situation at the moment in these
QUEST: Right, Farai, you've just left us with a very sobering thought. That what had been a model or we'd hoped was a model election in Africa in
a strong democracy, tonight. Are you, hearing reports, does it seem as if this could all go wrong?
SEVENZO: I am not to sound alarmist. But we can only report what we're hearing. Kisibu is tense. Mathare, the high-density suburb in Nairobi is
also tense. We are hearing -- our sources -- people who trust me well -- are telling us there are people on the streets and lots of shouting and
phrases like Uhuru must go. So, it's really incumbent on the new president to try to unite this country. In of course, we hope that Mr. Odinga will
kind of give some indication of where he wants this opposition Nasa alliance to go.
QUEST: Good to see you, Farai. Thank you very much and thank you, sir, for all the marvelous work you've done through the course of the week.
Bringing us the importance of what's happening in Kenya.
To the markets. Down .5 percent to 1 percent, 1.5 percent on the Nasdaq yesterday. And today the U.S. market shrugged off the fresh threats
between President Trump and North Korea. Look closely right end of the graph. You'll see the dip that where President Trump made his comment
roughly at that time.
[16:20:08] QUEST: Welcome back to QUEST MEANS BUSINESS. Tonight, coming from London. This is the way the trading day from New York goes. Although
the market is positive for the entire session, just look at the choppiness. Small moments, I'll grant you, small moments but the markets taking a
breath at the end of a tense and dramatic week. This area here is roughly where President Trump makes his latest comments about Kim Jong-un, when he
says he will regret it. The market now having dipped following the comment, holds its own actually comes up and sells off. I suspect selling
off because people don't want to go into the weekend in a long position or at least they want to square it off.
As the Asian and European markets sold off, American investors reverse some losses. And take a look at the week overall. And you see there's the Dow,
which holds its own. The KOSPI stays lower. The FTSE continues to fall. And I think the reason the FTSE continues to fall is because it had seen
the worst of the day from New York. The biggest losers on Friday. It was the worst week of the year for European stocks. The FTSE is off 2.7
percent. Overall, we can roughly say it's a large number. But $1 trillion was wiped from global markets. The traders and economists we've be
speaking to this week are looking beyond the threat from North Korea, though.
(BEGIN VIDEO CLIP)
TED WEISBERG, FOUNDER AND PRESIDENT, SEAPORT SECURITIES: They excuse is Korea, whether it's real or not remains to be seen. Hopefully it isn't.
But that was the excuse.
UNIDENTIFIED MALE: Obviously, we're focusing on price, not what's happening in politics. If you net-net, look at the action from this week.
We made all-time forever highs on Tuesday. Let's remember that and now we're down about 1 percent now across the board for the week. So, it
hasn't been a catastrophic drop in the markets. It's more a psychological shift.
RICHARD CLARIDA, GLOBAL STRATEGIC ADVISOR, PIMCO: It's too soon to tell whether it's just a blip or a trend. But obviously, you know, there is a
lot of uncertainty around the world right now. And I think markets are appreciating that.
(END VIDEO CLIP)
QUEST: Joining me is Bob Iaccino, the founder and chief strategist at Path Trading Partners at the Chicago Mercantile Exchange. So, I'm fascinated --
earlier in the week the President makes a comment and the market falls out of bed. He makes another comment about Kim regretting it. The market
falls. But it pulls itself back up again. So, what's the underlying trend -- not trend. What's the underlying sentiment I suppose is the best word?
BOB IACCINO, FOUNDER AND CHIEF STRATEGIST, PATH TRADING PARTNERS: Well, thanks for having me. There is a couple of things going on here in toward
Friday. If you look back over the last say 15 to 20 Fridays, the moves have not been big at all. There would be absolutely no reason for anybody
who wanted to come in and by dips. And big or small this is a dip and there's been consistent dip buying in this market since 2010.
If you were to buy in a dip a Friday going into a weekend, where the rhetoric continues to grow. And I don't know how it gets much hotter in
terms of rhetoric. Then we're going to fire for missiles and we are locked and loaded. I don't know how it gets much hotter than that. But there's
certainly is no reason to add to a long position or initiate a long position, on a Friday afternoon.
The last little dip you saw in toward the end of the day put us basically at unchanged. I think were up a few cents. Not enough to matter. They
put is basically in unchanged, was exactly that. You saw people, a small batch of people, coming in and covering shorts that they put on after that
comment. And there are no new longs being initiated in this market going into a weekend.
QUEST: And yet -- and this is where, this is where it all gets really tricky. Everyone I speak to says we are looking for that moment where it
is considered to be a buy on the dips. And I'm not suggesting for a moment to any viewer that it's arrived or it's not arrived. But the market wants
to go higher or seems to appear. And these are breathers.
IACCINO: We had really, a really good earnings season. With well over 70 percent beating on both ESP and revenue, 10.1 percent blended earnings
growth as of last Friday. We'll see what the report card looks like later today for the rest of the week. That's a great earning season. Having
said that, one of the keys that I noticed is in the S&P got below the 50- day moving average yesterday and did not close back above it today.
That's not a good sign. It's happened a few times. It happened about four or five times since the middle of the last year and every time it closes
below and does not get back above it the next day, it begets another couple of down days. Here's the key to the North Korea tensions, we have a target
date. North Korea is talking about doing something in the last week or so of August. So, I think you've seen a struggle as the rhetoric gets hotter.
Again, I don't know it gets hotter. You may sort of hobble along trying to get back above that 50-day moving average.
[16:25:00] QUEST: And as you say is this market, is this not the time when you want to be going into a weekend long. Thank you, Bob, we
IACCINO Thanks for having me.
QUEST: Snapchat is dancing hot dog was the star of Thursday's second- quarter earnings call. The chief executive, Evan Spiegel, called it the first augmented reality superstar. And boasted the twirling hotdog has
been viewed more than 1.5 billion times. Can a twirling or swirling hotdog save snap and its investors anytime soon? The shares of snap, it's a fresh
record low on Friday. The companies reported losses of around $450 million. And that's enough to buy, by the way, 100 million real hotdogs.
Snap saw its user growth rise by 7 million. That pales in comparison to Facebook's Instagram, which added 50 million users from last quarter.
Paula La Monica is with us. The twirling or swirling hotdogs is a relatively new phenomenon, even to me. But it's not going to save Snap.
PAUL LA MONICA, CNNMONEY CORRESPONDENT: No. This was obviously not a quarter or a day for Snapchat investors to relish., Richard. And I
apologize for that. But Snapchat is facing the Facebook, Instagram problem. As you point out, it's not hard for Facebook to come out with me-
too products and then just steal away users from Snapchat. And that is something that Snapchat has to figure out. They need to come up with
something that is not going to be just Soares's to replicated by Mark Zuckerberg and his minions at Facebook and Instagram. It's a problem.
QUEST: So, Paul, a moment ago I was looking down, and I'm looking just to see -- so, my snap investment, because as we know, we're all enjoying the
schadenfreude of my misery with Snap.
LA MONICA: My condolences.
QUEST: Yes, but more than that. It's down now 58 percent from where I bought it. Because I bought the day after the IPO at the all-time high of
around $28 a share. What more can I say on that. Talk to viewers, who are not as familiar. What happens in these scenarios where share prices just
keep dwindling down to not quite nothing. But almost into oblivion.
LA MONICA: I think that the problem that people are having with Snapchat right now is that this should be a very good time for the company right
now. You have a market that today and this week, not withstand, was done extremely well. The Nasdaq is red-hot. Companies like Facebook and Apple
and Amazon and Google, they are all doing extraordinarily well right now. Tech stocks are hot but Snapchat is not taking part. Because this market
is different than I would say 2000, the last big tech bubble. They are more discerning and they are looking at earnings. And the lack of those
earnings at Snapchat are a problem and they will be for the foreseeable future. Facebook, remember, was profitable when it went public. The issue
wasn't is Facebook a viable business. It's just can Facebook come up with a mobile strategy. Guess what, it did.
QUEST: Paul La Monica, have a lovely weekend with the family.
LA MONICA: Thank you, Sir.
QUEST: Thank you.
As we continue tonight, the egg scandal in Europe which threatens to get much worse, as millions of eggs are tainted and have to be destroyed.
[16:30:59] QUEST: I'm Richard Quest. There's more Quest Means Business in just a moment. When Google is forced to stop an all-hands meeting after
employee questions are leaked to the press.
And something is rotten in Europe's egg industry. More than a dozen countries having to deal with tainted eggs. But before that this is CNN
and on this network the news always comes first.
President Trump has issued a fresh warning to North Korea's Kim Jong on after his locked and loaded tweet this morning. Now the president says the
North Korea leader will regret it fast in his words. If he issues an overt threat to the US or its allies.
Egyptian authorities are trying to figure out what caused two trains to collide. Killing at least 37 people more than 100 were injured. In the
crash in Alexandria.
The country's prosecutor's dispatch teams to begin an investigation
Well, Uhuru Kenyatta is urging pace after he was declared the winner of the presidential election Kenya. This will be a second term in office. He
defeated Odinga, who refuses to accept the results claiming the vote was hacked.
The European Union is calling an extraordinary meeting to tackle a growing scandal after tainted eggs. The eggs have been found in 15 countries
including Switzerland and Hong Kong. They are tainted with the pesticide. Now, official say it is not a public health emergency, two arrests have
been made, and millions of eggs or egg products have now destroyed and full off the shelves.
CNN Money's Europe editor, hang on, they are tainted with the pesticide but it is not a public health emergency?
NINA DOS SANTOS, CNN MONEY EUROPE EDITOR: they are tainted with the pesticide called Fipronil which it seems Dutch farms, poultry farms have
been spraying some on their laying chickens since back in last year. Perhaps even November, it seems though this was discovered, now Fipronil
should not get into the food chain. It is technically band for this kind of use, that is why we have seen two arrests so far. But in theory it is
only toxic if it builds up in very large quantities in certain internal organs. So, a lot of people are saying here, especially health officials.
That yes, people should be cautious about these products, but they will not build up in significant amounts to do any lasting harm.
Having said that though what we have seen as you quite rightly pointed out, Richard, a lot of eggs, thousands, millions across the European continent
have been destroyed, and also products, remember that products also contain powdered egg products. As seems that a lot of people may have already have
consumed some of the powdered egg products and baked goods and so on and so forth.
QUEST: How did all this come about? I mean how do we find out about?
DOS SANTOS: This is the big furor here across the European Union because you and I know having covered Brussels that there is one thing at the heart
of euro-crats psyche it is protecting agriculture and food safety standards. So, the big question is how exactly does this happen? And
already we are seeing a bit of war of words between a number of EU countries about this. Seems as though there may have been a chicken
manufacturer in the Netherlands in particular that bought this pesticide. Now, a director from the pesticide company in Belgium has been arrested, I
director from a chicken firm in the Netherlands has been arrested as a result of this. And they were spraying these chickens because they had an
outbreak of lice. So, parasites here. But the reality is they should've perhaps told officials how much of this particular spray that they were
using. They should not have been using it.
And then if it's gone through the chickens into the eggs, as I was saying, it might take some time for significant amounts of quantities to build up
from there, but again there are questions whether or not about poultry meat should be tested as well across the EU. The EU is having an emergency
meeting only, Richard, on 26 September. It seems as though Dutch authorities already knew that there was a problem with this chemical
getting into food chain back in November. So, there is a lot of questions here that need to be answered. But they probably won't until those
European officials have come back from holiday in September.
[16:35:00] QUEST: Officials say it is not a public health emergency, I am guessing it is one of the stories where we have to eat a ton of eggs to get
enough of the pesticide. I mean you don't want any of the pesticide in you but I mean I don't know.
DOS SANTOS: That's exactly right, but the big question again is how much of this kind of egg product has been powdered and ended up into baked
goods. In fact, it is countries like the U.K. actually, that are screaming the loudest about this. I believe we can see some of the U.K. headlines
today as you mentioned the tabloids have had a field day here with a kind of gallows humor, because remember the you and I know here in this country
we had a big scandal surrounding salmonella in eggs that cost a big government minister her position about 20 odd years ago.
QUEST: I was going to say you don't remember that.
DOS SANTOS: I do. But I should say that Edwina Curry.
QUEST: Curried eggs.
DOS SANTOS: That is right curried eggs and it cost her position. If we just look at the headlines again from some of these newspapers, even though
the United Kingdom is a country that imports far fewer eggs than any other EU country, 85 percent of our eggs come from the United Kingdom. And we do
not have this pesticide in the food chain, as you can see the daily mail saying things like scrambled to clear these poison eggs off of people's
shelves. And many supermarket chains have been taking products off of their shelves as a result, Richard.
QUEST: Thank you, have a good weekend. Thank you.
As we continue tonight, European shares posted their worst week of the year amid uncertainty over the North Korea crisis, the FTSE lost one percent on
Friday, the DAX closed flat, CAC also lost about 1 percent and that is the reason because they are seeing what is happening in New York.
Ten years ago, this week, there was a very simple press release. A French bank admitted not knowing the true value of one of its U.S. investment
vehicles. This was the starting pistol for a decade of financial misery. BNP Paribas temporarily suspends the calculation of the net asset value of
the following funds -- Parvest Dynamic, BNP Paribas ABS EURIBOR, and BNP Paribas ABS EONIA.
Upon that simple and deadly and dastardly press release, well, followed bankruptcies, bank collapses and central banks that took us into absolutely
uncharted territory with quantitative easing. It all happened 10 years ago this week. It all started.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: Let's look at the situation now, the Dow woke up this morning with a downward tumble after opening down 121 points at this
Two words that you're going to hear a lot of today, subprime mortgages. There is a fear that problems with those housing loans are sparking a
credit crunch and that could impact economic growth and corporate profits. BNP says it is freezing 3 refunds that invested in U.S. subprime mortgages.
Because it was not able to properly value their assets.
GEORGE W. BUSH, FORMER PRESIDENT OF THE UNITED STATES: The American economy is the envy of the world, and we need to keep it that way.
UNIDENTIFIED MALE: Since word got out that Northern Rock Bank had applied for emergency funding from Bank of England, panicky customers like these
have lined up and taken out a reported $4 billion from Britain's fifth- largest mortgage lender.
UNIDENTIFIED MALE: Nothing but fiction this idea this problem can be contained within subprime, whatever that means. It is just not going to be
the case for the balance of the year or even beyond.
QUEST: All right, what does the investor do? Sit on their hands, selling the cash, or selling may go away, it's a bit late for that now, but you
know what I mean.
UNIDENTIFIED MALE: Very difficult question, Richard, obviously we are seeing extreme volatility minute to minute, hour to hour. I think the one
dominant theme that we are seeing in markets is a repricing of risk. So, stay away from those risky investments.
UNIDENTIFIED MALE: Two big British banks both hit hard in the credit crunch.
UNIDENTIFIED FEMALE: Lehman Brothers a company that was too big to fail but did.
QUEST: Good evening, we know of course what happened, we know the financial world has changed now, a year to the day that Lehman Brothers
(END VIDEO CLIP)
[16:40:00] JIM BOULDEN, JOURNALIST: It was really what triggered it.
QUEST: Yes, but here is the chain reaction. Northern Rock happened because BNP Paribas happened, because all of these, there was a sudden lack
of confidence and trust.
BOULDEN: And credit freeze.
QUEST: Credit freeze, nobody was prepared to lend to anybody else. And North Rock relied on that.
BOULDEN: And they relied on it too much, because they were trying to spend, everybody thought this is a game that we can't lose, we have got to
get in. Icelandic banks, Irish banks, U.K. banks all of those collapses were yet to come.
QUEST: Once Lehman Brothers went, then of course it mushrooms, the credit crunch continues and now we are going from a banking crisis to an economic
BOULDEN: And remember, we haven't had the debt crisis yet in the euro zone.
QUEST: But that followed on.
BOULDEN: So, we have the great recession, and we had Icelandic banks collapse, we had the Irish government collapse and their banks collapse,
and then we had the whole thing about European debt. The Greek crisis which we still are talking about to this day hadn't even surfaced, we
weren't even talking about that yet, 10 years ago.
QUEST: I mean we could argue some people say we should have foreseen it, the question of course how much damage did this crisis to do?
BOULDEN: It is extraordinary I think when we think back of all the issues, we talked about how unemployment in places like Spain.
QUEST: Twenty five percent.
BOULDEN: And we saw it in Greece. We can say that Greece was not a recession but a depression, and they are still in that to this day. And
you talk about the U.S., so many people losing their homes, I know that does not sound right today, we are talking about that happening. An entire
class of people absolutely got wiped out.
QUEST: Jim, you and I sat in this room covering this. Some days the Dow fell 1000 points. Some days it went up 500. Did you ever fear that it was
going to get away from regulators or the central banks, and they would lose control?
BOULDEN: I sat in this very room and Sunday nights having to do live shots because we are waiting for a message from the ECB or someone to say
something before the Asian markets opened. Every Friday for several months, every Saturday, every Sunday the bankers were getting together and
trying to make sure when markets reopened on Monday that they had said something to try to get it from going out of control. And a lot of people
I talked to absolutely thought the euro was going to collapse after all of this. And of course, it didn't.
QUEST: Great to have you, sir. Really good to have you, have a good weekend. Thank you
As we continue tonight the controversial memo leaks to the press as a companywide meeting is canceled at the last minute.
[16:45:00] (COMMERCIAL BREAK)
QUEST: Google has announced the new computer science grant for young people from diverse backgrounds. So, diversity within the company remains
a headache. The chief executive Sundar Pichai canceled and all hands town hall meeting on diversity at the last minute on Thursday. He was supposed
to address the widely circulated memo which said Google was a hostile workplace for conservatives. The meeting was canceled after employees'
questions were leaked.
Now, the original goal according to the chief executive had been to answer the question, how do we create a more inclusive environment for all? That
was the goal of the town hall meeting. The clearly, anything that was going to happen was going to be highly controversial. And conservative
Googlers are wondering what is leadership doing when Googlers like me feel invited and accepted. In other words, whether or not they subscribe to the
outrageous views of the man who wrote the manifesto, there are still a lot of people at Google who probably are conservative or maybe right wing and
therefore feel that they have a right, as indeed they do to be included and invited.
And then of course this got leaked, and then everything else gets leaked. The question of the leaks concerned Googlers wants to know, can we get an
update on progress towards identifying leakers? Put all of this together, and you have what can only be described as a Google mess.
Laurie Segall is with me in New York. How does Google extricate itself from this with something approaching humility and indeed dignity?
LAURIE SEGALL, CNN CHIEF TECHNOLOGY CORRESPONDENT: It is interesting because a source inside said this is the biggest PR disaster Google has had
in a while. I think it is difficult because you are saying this tension of free speech, and you saw when these folks came forward in the town hall,
you have Sundar Pichai literally coming back from vacation to have this public town hall. And he could not have the town hall without the question
is immediately leaking to the press to us here at CNN and in general.
Then you have this other problem which is a lot of the stuff that is getting leaked, a lot of Google employees are being harassed. You have
this environment full of political tension, and you know it is a very big issue. I think what Sundar said was he was going to have small meetings
with individuals. He wanted to hear people out, he wanted people to email him. But he wasn't going to do it in a big public forum. Now, the ethos
of Google which is almost what got him into this mess too, is all about free speech. About putting your ideas out there on these internal forums
about challenging each other. So, I think the company has really taken a hit because that this is one of those issues that is just very, very
complicated. Because it wasn't just about gender. And it is about politics as well.
QUEST: All right, but here is the real tricky question, in a sense, Laurie, how many people are not going to open a Google search box because
of this? And therefore, you know, I mean, at the end of the day look, I have got Internet Explorer, I have got all of the different search options
here. But how many people are not going to use Google as a result?
SEGALL: I think that is a good question, I don't think many people are going to take this and say I am not going to use Google. Even look at the
controversy over Uber which is almost to a lesser degree a lot of folks are upset with Uber over a lot of the sexual harassment claims, and a lot of
things going on internally. And if you ask anyone who still has the app, are you still using it? And their answer is generally yes. I don't think
this will impact immediately the business, but one really interesting point I will make is I spoke to the CEO of a billion-dollar company, he did not
want to be named.
And I asked him about this, and what he said to me was, Laurie, companies in Silicon Valley now are like democratic institutions, and they have to
create and protect their own culture. Because that is how they protect their talent, their engineers that make the culture. And he said look what
happened with Uber, they could not afford to keep this guy. They could not afford to keep him on board because he had offended so many people. And
what he said to me, I love this line, he said, talent can vote with their feet. They can walk out the door if they don't like the ethos.
[16:50:00] QUEST: No, Laurie, Laurie, your billionaire has merely discovered what every other major company has no for generations that it is
all about talent and the retention of talent.
SEGALL: Sure, but we are at a point, of course, it's about that, but we are at a point where this could have gone either way. Sundar Pichai was in
a very specific position where he didn't have to fire this engineer, he did not have to do it. But he did make a statement by doing it, and it was a
very politically sensitive one because while these ideas were offensive towards women in many ways, he also made some comments about Google saying
that it was an ideological echo chamber.
And they knew by firing him, by pushing him out the door they will have proven his point to a degree. And he will have his following. He has
become kind of a fixture in the alt right movement as well. I think that now they have opened themselves up to a lot of new problems, and
conservatives within the company are afraid to speak out. And I do think that does say something about this open environment.
QUEST: Good to talk to you, have a lovely weekend. Come back to us next week.
Out with the old and in with the new, Lego is celebrating its 85th birthday. And a young CEO seems to be the company's gift to itself.
QUEST: Lego is celebrating its 85th birthday this week and on that big birthday, the company's chief executive announced he would be leaving after
only eight months on the job. Lego announced that Bali Padda is being replaced by a younger man. A Dane Niels Christiansen, in New York I asked
David Robertson who wrote a book on Lego's innovation, why had the board basically decided to ditch the CEO now?
DAVID ROBERTSON, AUTHOR: The one thing we do know is that Lego had this production shortfall last year. They have eight years of 21 percent
average annual growth from 2007 to 2015, that falls to 6 percent last year. And what I hear from inside the company it is not a demand saying, it is a
supply thing. They could not make enough bricks. And given the business model of Lego which is that they pay a dollar a pound U.S. for ABS plastic,
they sell to us for $50 a pound. Whenever you have unfulfilled orders, that is all profit that is lost.
And so, there is also a new factory in China that is coming online. And that came online at the end of November, and you know, we will find out
soon enough, are they continuing to be supply constrained. And Bali Padda of course was responsible for operations last year. And so maybe there is
something there, but the other explanation could be that, Niels Christiansen has been on the market for eight months. And it could be that
maybe he got some other offer. Right, maybe he came to Lego and said, look, I would love to work for you guys but I have got this other offer on
the table, make up your mind. So, they had to rush this faster than they wanted.
[16:55:00] QUEST: Finally, if we look at Lego, such a phenomenally successful company, do you see this as a blip, both the production problems
and the chief executive being fired and replaced within eight months, just a blip in an otherwise stellar performance?
ROBERTSON: Yes, so far, it's only a blip in otherwise a stellar performance. There are a lot of companies that would be thrilled to have
25 percent gross profit margins on 6 percent growth. But again, Lego before that was 21 percent growth with 34 percent gross profit margin. So,
it is a major step down, now, if that just happens for one year while he a new factory gets up to speed. But we all know that a lot of ships have
crashed on those rocks of trying to get Chinese factories up and going to the level of quality for the rest of their factories around the world. And
so, if there is a blip in China then this may be something that is more than just a temporary hitch in an otherwise stellar performance.
QUEST: Problems of Lego. We will have a Profitable Moment after the break.
QUEST: Tonight's Profitable Moment, 10 years ago the crisis started and became known as the great financial crisis. We know the reasons why we
don't need to back through them all over again. But just to get a bit of a feeling of what it was like sitting here covering it at that time, what we
were told by regulators and bankers again and again is we dread the moment that a consumer puts their cash card into an ATM in the machine says not
That was the financial Armageddon that everyone was fearing. That is what could have brought the entire global financial system crashing down. But
it did not happen because central banks moved in fast. It didn't happen because there was repair work done quickly enough. But let me tell you, it
was closest any of us have covered this or have been involved with this has ever seen that we ever want to get close to a financial disaster.
And that is quest MEANS BUSINESS for tonight, I am Richard Quest in London, whatever you are up to in the hours ahead, I hope it's profitable. Have a
lovely weekend, I'm back in New York on Monday.