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QUEST MEANS BUSINESS
Trump to Announce Decision on Iran Deal Tuesday; Nigerian Army Frees 1,000 Boko Haram Captives; Nigeria`s Buhari to Spend Four Days in U.K. to See Personal Doctor; Hezbollah Supporters Win Lebanon Election; Dozens of Homes Destroyed by Hawaii Volcano; Warren Buffett Says Bitcoin is "Rat Poison"; Investors Remain Optimistic on Blockchain; IBM: Blockchain Can Change the World Like the Internet Did; Nestle Pays $7.2 Billion for Right to Sell Starbucks Coffee; First Lady Melania Trump Unveils Her Platform. Aired 4-5p ET
Aired May 7, 2018 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
STEPHANIE SY, CORRESPONDENT, CNN: There is the closing bell. We are off the highs, but it`s still a positive start to the week on Wall Street. It is
Monday, the 7th of May.
Tonight, oil prices are rising and markets are dipping as the Iran deal decision is now just hours away.
Air France is in a fight for its life, but the French government says it won`t help.
And while Buffet bashes Bitcoin, IBM is backing blockchain. I`ll speak to the Senior Vice President of Big Blue.
I am Stephanie, Sy, this is "Quest Means Business."
Tonight, a double milestone for oil as the Iranian nuclear deal hangs in the balance. President Trump says he will announce whether the US is
staying in the agreement on Tuesday afternoon. Crude prices are highs not seen in four years. A barrel of Brent, the global benchmark now costs more
In the US, oil price spiked above $70 per barrel. There are two major factors driving the price increases. First, the nuclear deal, if it
collapses Iran`s oil exports could collapse along with it. Second, the long-term factor of supply and demand. The OPEC nations and Russia have cut
production even as global demand rises.
We will get to OPEC in a moment, but first, the nuclear deal. The signatories are urging President Trump not to abandon the agreement. The
British foreign secretary took his pitch to the President`s favorite show, "Fox and Friends."
(VIDEO CLIP STARTS)
BORIS JOHNSON, BRITISH FOREIGN SECRETARY: The President has a legitimate point. He set a challenge for the world. We think that what you can do is
be tougher on Iran, address the concerns of the President and not throw the baby out with the bottle, not junk a deal.
Because as I said, plan B does not seem to me to be particularly well developed at this stage.
(VIDEO CLIP ENDS)
SY: All right, let`s remind ourselves what`s in the deal. Iran promises not to develop or acquire nuclear weapons. Here is what it gets in exchange: An
end to the ban on buying passenger airplanes, the removal of sanctions on the Central Bank and oil company, and unfreezing tens of billions of
dollars in revenue.
Iran warns that if the US drops out of the agreement, the whole deal will collapse. The leaders of France and Germany, along with the British Foreign
Secretary came to Washington to try and save it, their companies have billions riding on the deal.
Aircraft from Boeing and Air Bus, cars from Peugeot, Renault and Volkswagen and industrial projects from GE, Finerv (ph) and Quercus.
CNN`s Michelle Kosinski is following all the developments from the State Department. Michelle, first of all, what are you hearing about why
President Trump is making the decision now ahead of the May 12 deadline?
MICHELLE KOSINSKI, CORRESPONDENT, CNN: That will come out of the White House. We don`t know why his timing would be this now, but there`s been so
much out there already. Mainly coming from Europeans that have been trying for months to convince the US to stay in the deal.
They`ve been staying behind the scenes which we have been reporting repeatedly that they do not believe the US will stay in the deal.
So, what we are expecting the President to announce tomorrow is that he is not going to waive sanctions anymore, that those sanctions will go back on.
There are so many questions surrounding this though. We don`t know which sanctions the President will no longer waive. We don`t know what the
timeframe will be for sanctions to go back on.
We don`t know if Iran will stick with its rhetoric of leaving the deal because, you know, essentially, the US will be in violation of the deal if
this is what President Trump does. I mean, Iran may well find itself much better off financially if it sticks to the terms of the deal, with the
Europeans that have been working so hard on this.
Also, you know, we`ve been talking to these people who have been coming here and participating in discussions. We have been talking to people with
knowledge of the discussions among even world leaders who have met with Trump over the last couple of weeks.
And the questions has been, if they can craft some kind of side deal that rides alongside the current Iran nuclear deal that addresses all of the US
concerns, why wouldn`t that be enough for the US? Is it because of the enrichment question that the US wants Iran to have no capability of
enriching uranium ever? Is it because this was an Obama-era deal. It`s hard to really discern why the US side is so hardened against those kinds of
fixes, but it does look like that`s the direction this is going.
SY: You know, it occurs to me, Michelle, as you`re talking about the various leaders including Angela Merkel and Macron from France who in
recent weeks have been trying to get Trump to stay in the deal that now, all of a sudden, in that window for lobbying the President whichever way
you stand is close.
SY: If he has decided he is moving up that decision, there are no other visitors that are going to come in and sway him at this point, I assume.
KOSINKI: Yes, and it has seemed that way ever since Macron`s visit, because remember, he came out of the meeting with Trump announcing these four
pillars of trying to salvage this deal, and other European partners were looking at this and wondering, "What`s this?" You know, "What is he talking
about?" That`s way different than what`s been going on in discussions, which essentially coming off with a kind of buying time to satisfy the
Americans and let`s all come up with a political agreement first and work on these issues.
Everybody agrees there are concerns over the deal, let`s work on that down the road together. But Macron saw this as a last ditch effort. In that
meeting, he saw how hardened Trump was against the current deal, so he tried to come up with this idea for a new negotiation that would be a side
deal, alongside the JCPOA.
By the time Merkel got to talk to Trump, she realized that that, too, didn`t really seem to be working and that it really looks like Trump is
going to want to pull out of this. We just don`t know really what form it will be in and how he pulls out, will that leave any kind of timeframe to
eventually come up with a side deal that would keep kind of the basic framework of the original Iran nuclear deal.
So, there are so many questions surrounding what`s going to happen, but I guess, we`ll soon find out.
SY: Absolutely. Michelle Kosinski, and those details do matter. Thank you so much. The reason the details matter is because things like oil prices
will be affected. Oil prices have in fact spiked as the deal`s deadline approaches.
Joining me now, Antoine Halff, he served as the Chief Oil Analyst at the International Energy Agency, so in many ways, you`re perfect for us to talk
to today about the Iran factor. Let`s start there and then we`ll get into the other factors driving oil prices. If sanctions on Iran and oil exports
snap back, how much would that affect global supplies.
ANTOINE HALFF, SENIOR FELLOW AND DIRECTOR OF THE GLOBAL OIL MARKETS: Well, nobody knows. Nobody knows because it`s very unclear how exactly the
restrictions on the exports will apply, who will be subject to it, who will feel like complying, how this will work out, what would be the baseline on
which potential reduction in supply would be calculated, so there`s a lot of uncertainty.
I think that the fact that the market is spiking in expectation of the announcement, tells us much about the tightness of supply and demand today,
the tight balances that the market has as about the - concern about potential shortfall in the Iranian barrels.
SY: And you know, one of the concerns in supply is voluntary, it`s OPEC. President Trump in fact has blamed the cartel for "artificially" keeping
oil prices "very high." How do all of these pieces fit together?
HALFF: Well, that to me - it sounds like he has been concerned about the potential price impact and he`s trying to blame OPEC for the price impact.
SY: The price impact of pulling out of the Iran deal?
HALFF: Right, and you know, the market speculation about this. Interestingly, we monitor with the company that I am part of, Iranian
production in its satellite imaging and we have seen a big increase in Iranian field activity today, so we might actually see more Iranian barrels
in the market in the next few weeks than this...
SY: Interesting. And that would actually bring prices back down, which is one of my questions, is this a short-term trend and over $70.00 a barrel,
or this is a more long term oil price recovery, which we had been seeing frankly in the last year anyway?
HALFF: Yes, yes. I mean, the number one cause of high prices is low prices. We had low prices for three years, so the result of this has been a huge
increase in consumption. Demand has been very robust, we have seen the strongest demand growth in the last three years that we have seen in the
history of oil and in recent decades, and at the same time, there has been a lack of investment in production and capacity in the OPEC cuts, so this
has really tightened the market.
In the next few years, we are likely to see a shortfall of production because of the lack of investment. Investors also can`t stop that long-term
demand, peak demand, you know, maybe we are moving away from all of these with EV`s - electrical vehicles. So, that`s cutting back, that`s holding
back investment and that could again lead to an increase in prices.
SY: The other thing that conflicts do point out is shale oil and that boom continues in the US, production capacity as I understand continues to
increase. How much of a factor does that weigh into supply?
HALFF: It`s been a remarkable story. The resilience of the shale oil industry during the low price has sufficed the market and production has
been growing very fast. I think the expectation that supply growth from shale will continue the same pace, maybe overstated, the shale industry is
starting to bump against bottlenecks against capacity limits, against infrastructure constraints, so we might see a little bit slower growth
HALFF: ... that sector or at least, we can`t really count on the kind of growth that we have seen. We can`t really be sure that this would
materialize in the next couple of years.
SY: Okay, Antoine Halff, great insights, and we may need to have you back in the coming days as we get the repercussions of transposition on the
deal. Thank you so much.
HALFF: Thank you.
SY: It took just 18 months for oil prices to fall from 110 barrels per barrel to 30. The climb back has been slower and more deliberate is the
result of a coordinated strategy. John Defterios reports
(START VIDEO TAPE)
JOHN DEFTERIOS, CORRESPONDENT, CNN: King Salman of Saudi and Vladimir Putin of Russia wants fierce competitors as the world`s two largest oil exporters
are now partners in the price recovery.
In 2016, their two energy ministers, Khalid Al-Faleh and Alexander Novak hatched a plan to mop up a record oversupply of crude.
Over 20 OPEC and non-OPEC producers have taken an average of 1.8 million barrels a day off the market.
MONICA MALIK, CHIEF ECONOMIST, ABU DHABI: They are working together, the common goal has been central to the strong performance, the strong output
cuts of the unified group.
DEFTERIOS: The unconventional move defied the naysayers who said this diverse coalition would come unglued. Their discipline has paid off. From
early 2016, when oil fell below $30.00 a barrel, the recovery has been impressive. Recently topping $75.00. The rally was sustained despite a bit
rise in US oil production. Shale producers helping pump up 10 million barrels a day last month.
The official line from OPEC headquarters though is that there is no reason to change course.
MOHAMMAD SANUSI BARKINDO, SECRETARY GENERAL, OPEC: I think there is a growing consensus that the pact of OPEC, non-OPEC should continue for the
DEFTERIOS: Founding OPEC member, Iran could be the wild card in all of these. If its nuclear agreement is altered, another million barrels a day
could come off the market pushing prices even higher.
Then there`s what we can call the Trump factor. The US President recently suggested in a tweet that OPEC was artificially driving up oil prices.
Strategists say his intervention may influence US allies here in the Middle East like Saudi Arabia and the UAE, both OPEC members.
The higher crude may be a boom now for US shale producers, but President Trump may have the American consumer in mind.
TIMOTHY FOX, CHIEF ECONOMIST, EMIRATES NBD: In an environment of political uncertainty and midterm elections on the horizon, he can at least afford a
higher bump prices in the United States.
DEFTERIOS: In the meantime, low cost players like the UAE are rolling up more plans for the future with confidence that price stability can be
sustained with OPEC, non-OPEC cooperation. John Defterios, CNN Money, Abu Dhabi.
(END VIDEO TAPE)
SY: US markets begin a new week on a positive note. The Dow closed around 100 points higher adding to the healthy gains we saw last Friday. Energy
stocks were flying high, but pared back those gains after news that the Iran decision will be announced on Tuesday.
Apple also had a seller day pushing it closer to becoming the first trillion dollar company, and in Europe, LNC`s (ph) FTSE was close, British
traders missed out on a broad rally across most markets, so in Paris, Air France closed down 10% after its CEO quit. No CEO, no labor agreement, no
bailout. That crisis at Air France is threatening to ground the fleet for good.
SY: One of Europe`s biggest airlines is in a fight for its life tonight. Air France has no CEO, its workers are in open rebellion and now the French
government says it won`t provide any kind of safety net. Labor strikes resumed Monday forcing the airline to cancel 15% of flights, it`s the 14th
day of strikes this year costing Air France upwards of $400 million.
Shares fell nearly 10% by the close of business Europe, and before he resigned, Jean-Marc Janaillac explained how dire the situation has become.
(START VIDEO CLIP)
JEAN-MARC JANAILLAC, FORMER CEO, AIR FRANCE: (Through a translator). This conflict is unbearable. It weakens the company and prevents it from moving
forward on the project it needs to lead.
Air France is losing customers and the first gains that is obtained through its efforts, the company`s reputation is deteriorating.
(END VIDEO CLIP)
SY: This crisis comes at a time when Air France has been aggressive in trying to make a new name for itself. Last July, it took on its Middle East
rivals by forming a virtual airline alliance with Delta, Virgin Atlantic and China Eastern.
Air France also entered the low cost market last summer to compete with many of its European rivals. It launched June which it said was an airline
targeting millennial fire. But day in, day out, Air France is still plagued by labor disputes. You may remember, an HR executive who had a shirt
ripped off while trying to escape protesters back in 2015.
Simon Calder is in London joining us. He is the travel editor for "The Independent." Simon, thank you so much for being with us. I want to pose
something, could the government`s strong statement saying there won`t be a bailout actually be a tactic to bring negotiations forward between the
unions and the leadership at Air France.
SIMON CALDER, TRAVEL EDITOR, THE INDEPENDENT: Yes, and it was also saying, I must speculate, we are not Italy. You`ll be aware that in neighboring
Italy, Air Italia has kept flying through the decades even though it is pulling the airline, which loses an awful lot of money, and I think the
French government was just putting a marker in when the Economics Minister, Bruno Le Maire said, "We will let Air France go bust." He was really just
saying, "Look, there isn`t a bottomless pit of money and you guys really have to sharpen up."
But of course, the markets didn`t like what happened with the resignation of Jean-Marc Janaillac on Friday. They didn`t like the fact that the reason
he had to go was because he gambled on taking a ballot about the new pay offer and lost that and they also don`t like of course, the spike in oil
prices that you`ve been discussing today.
And so, therefore, everything is looking a bit grim, but someone just got in touch with me, "Help, I am flying from Detroit to Paris in June, should
I cancel my flight and book with someone else." No. I mean, even though the strike is continuing in a couple of hours from now, it will enter its
second day in France, more flights cancelled today - will be cancelled on Tuesday about 20% of them, that`s not good. It`s going to cost the airline
another EU20 million or $25 million.
SY: I mean, how long can it sustain that, Simon, because like you said, fuel costs are not something the airline is going to be able to control and
the French Finance Minister warned that if Air France doesn`t take the necessary efforts to become competitive with major airlines "it will
So, how much is there an existential threat to Air France now?
CALDER: I really cannot see this dominant airline, which of course has a very profitable Dutch partner in the shape of KLM, which isn`t involved in
the dispute and is doing pretty good stuff. But, look at Paris-Charles de Gaulle, by far the biggest hub in continental Europe, better connected than
any other airport in Europe and the French of course have a lot of domination on routes to certain parts of Africa.
So, it`s basically a pretty solid airline. Yes, they do need to shape up, but...
CALDER: ... I am telling you the metric that they will be looking at with some satisfaction in Air France headquarters tonight and that is the
proportion of staff who are going on strike. Now, I have been tracking that over the weeks, and so this is the 15th day of strike action the course of
several months, and it`s down as low as it has been, basically about 15% of pilots, of cabin crew.
Fewer than that in terms of ground staff and I think they - the management will be thinking, "Okay, we are going to get there eventually," but of
course, every day that there is a strike, it means that business travelers or the people who bank on the whole operation can be less and less inclined
to book with Air France because they`ve just got to get there and they don`t want to take part with any uncertainty.
SY: Simon Calder joining us from London with "The Independent." Thank you so much, Simon.
Angry labor unions, opposition from the left at every turn, an unlikely bromance with Donald Trump. It has been quite a first year in office for
French President, Emmanuel Macron. As Melissa Bell explains from Paris, the French President`s honeymoon is well and truly over.
(START VIDEO TAPE)
MELISSA BELL, CORRESPONDENT, CNN: It was to Beethoven`s "Ode to Joy" that Emmanuel Macron completed his march to power. In less than a year, he
founded a new party and seen off the old ones. Now, he won the Presidency and could take his vision to the world stage.
He began with Vladimir Putin receiving him grandly in Versailles, but speaking plainly alongside the Russian President of human rights abuses and
allegations of meddling in foreign elections, including his own.
EMMANUEL MACRON, PRESIDENT OF FRANCE: (Through a translator). Politicians have the responsibility to make decisions to say things and when press
organs spread infamous counter truths, they are no longer journalists. They are organs of influence.
BELL: With Donald Trump, the exchanges would be warmer, but the strategy, the same. The building whether in Paris or in Washington of a solid
relationship, combined with tough talk and plain speaking.
MACRON: I do not share the fascination for new strong powers, the abandonment of freedom and the illusion of nationalism.
BELL: Emmanuel Macron has been determined to represent and forcefully, the world view based on common values and multilateralism that used to be
fashionable in London and in Washington, and domestically, he has been equally determined to liberalize France.
Last autumn, he thwarted off protests to reform France`s Labor Code, among other things giving companies more flexibility to hire and fire.
Now, he is in the middle of a battle with rail unions and despite strikes, protests and popular discontent, he says, he won`t back down.
There are those in France who remain skeptical of the spin, accusing Macron of being more style than substance, and those on the left who worry about
the liberalizing of the economy as the direction in which Emmanuel Macron`s march is taking them. Melissa Bell, CNN, Paris.
(END VIDEO TAPE)
SY: So, a turbulent year has seen Emmanuel Macron`s approval rating plummet, but after an equally turbulent year, in the US, President Trump`s
approval rating barely budged. A new CNN poll released just a few minutes ago shows American`s dissatisfaction with Donald Trump`s is holding steady
at 41%, though when it comes to core issues, views are changing, more Americans feel the country is going in the right direction and much of that
can be put down to the economy. Over half of those polls feel comfortable with the President`s handling of the economy.
Here to put all of these numbers in to perspective, Mark Preston, CNN`s senior political analyst. He joins us live from Washington. Hey, Mark.
So, dig a little deeper into these numbers for us, and what they tell us.
MARK PRESTON, SENIOR POLITICAL ANALYST, CNN: Sure, well a couple of things. Let`s just talk about the greater number right now, 41% approval rating,
holding steady at a time right now with this incredible amount of controversy swirling around President Trump here in the United States as
our global viewers know.
But, as you said, he is starting to get a little bit of traction specifically when it comes to issues. We saw that on the economy. It has
now peaked over 50%, that`s first time in about a year right now where we saw folks having a favorable view of the economy.
We also saw President Trump gain some traction when it comes to foreign trade and also when it comes to the issue of immigration. But the problem
is, is that he was so low on those issues anyway that on foreign trade, only 43% of Americans think that he is doing a good job, and mind you,
that`s an increase from what we saw just last month, and we`ve seen the same thing with immigration as well, but he`s still only at 40%.
What`s really interesting is that Democrats, he`s actually seeing some...
PRESTON: ... support from Democrats when it comes to the issues, not when it comes to his Presidency and this is what is really striking right now is
that 71% of people who support President Trump, these are not the Democrats, actually support him because of his view on the issues, but what
they don`t support him on right now is leadership qualities and that has a lot to do with this tweeting, and his incessant fighting with the media
here in the US.
SY: Well, that`s interesting, Mark because my next question was going to be if he is polling better on certain key issues and the economy is always the
key issue in voters` minds, why does that overall rating stay at 41%?
PRESTON: Well, just to show you how polarized it is here in the United States, right now, President Trump has an 86% approval rating amongst
Republicans. These are the folks that got him elected.
But if you look at where he is with independents now, he is at 38%, so less than four in ten independents here in the United States actually have a
favorable view of him, and then when you go down to Democrats, it`s 9%. So, when you look at the political partisanship that`s occurring here in the
United States, it`s certainly playing out with the President`s approval rating, but we should note, the President has brought a lot of this upon
SY: How does that rating, 41% compare to Trump`s predecessors at this point in their term?
PRESTON: Well, this is where a tie is a win in some ways. Jimmy Carter at this point of his Presidency had the same approval rating at 41%, so when
you look back at past Presidents, certainly, in the present tense, Jimmy Carter is not known to have had a great presidency. We go back to what
happened with the Iran hostage deal. He ended up losing to Ronald Reagan who went on to really reestablish the Republican Party here in the United
States, but if you look at that now, Donald Trump is only at 41%.
Look at Bill Clinton back in 1994, he was 10 points higher, so Donald Trump has become a very polarizing figure, not necessarily about his politics,
but it`s really about his personality.
SY: Yes, I mean, to talk about Jimmy Carter, and Jimmy Carter had an energy crisis on his hand and...
PRESTON: That`s right, there`s a lot going on.
SY: ... of course, Iran. Finally, what is this poll, Mark. Tell us about the Mueller probe. The saga with the adult film star and all of that and
whether that has affected the President or whether he is being forgiving for some of those issues because he has made moves when it comes to things
like tax cuts and taking on China and other countries when it comes to trade?
PRESTON: Could you imagine - let me just say this, could you imagine if we did not have the Mueller probe? If there was no talk about Russia right now
and that Donald Trump was getting all of these things done that Republicans wanted to get done, he would have certainly a higher approval rating than
he is now at 40%.
Now, to note, he still has support of almost every Republican it seems here in the United States, but the Mueller probe certainly is causing a lot of
consternation for him. It`s causing him not to be able to execute his agenda as he would like to see, and for all our folks around the world who
are watching, they can see this and they feel this because of the interaction that they are having with the American government and the fact
that it is not a smooth, we can go through a whole litany of things, but the fact is, Donald Trump has been so unpredictable that it has taken world
leaders off guard, but guess what? They are not alone in that. It has taken all of us off guard.
So, we don`t necessarily know what Donald Trump is going to do, but that itself has hurt his ability to govern here and the Mueller probe is
certainly part of that as well.
SY: Indeed, indeed. Mark Preston, CNN senior political analyst. Good to see you. Thank you, Mark.
PRESTON: Okay, thanks.
SY: After Warren Buffet compared Bitcoin to rat poison, we didn`t think that the criticism could get any worse, then his Vice Chairman, Charlie
Munger spoke up. We will tell you what they said after the break.
[16:30:00] STEPHANIE SY, HOST, QUEST MEANS BUSINESS: Hello, I`m Stephanie Sy, coming up on the next half hour of QUEST MEANS BUSINESS -- from smooth
security to conflict diamonds, I`ll ask the senior vice president of IBM.
The company is embracing the blockchain revolution. And Nestle makes a dainty-size investment to sell Starbucks coffee. First, these are the top
news headlines we`re following for you this hour.
Donald Trump has tweeted that he will announce a decision Tuesday on whether the United States will stay in the Iran nuclear deal. Allies in the
United Kingdom, France and Germany have encouraged Trump to stay in, Iran says if the U.S. drops out, the whole agreement will collapse.
Nigeria`s army says it has rescued more than 1,000 Boko Haram captives in Northeastern Nigeria. Most of the former hostages were women, children and
some young men who were forced to become Boko Haram fighters.
The military says they are receiving treatment at one of its facilities. Meanwhile, in the last few moments, Nigerian President Muhammadu Buhari
says he`ll travel to the United Kingdom Tuesday for a four-day visit to see his doctor.
Mr. Buhari has been battling an undisclosed illness since early 2017 and has spent long periods out of Nigeria receiving treatment in the U.K.
Hezbollah is declaring it`s won a great victory in the Lebanese election.
The Iranian-backed fashion and its allies won a majority of the seats in Lebanon`s first parliament re-election in nine years. Supporters of Saudi-
backed Prime Minister Saad Hariri lost more than a third of their seats. Dozens of homes have been destroyed on the big island of Hawaii as
Kilauea`s volcano eruption shows no sign of abating.
Toxic fumes and lava and seeping through giant cracks in the ground, local authorities are pleading with tourists to avoid the area.
Bitcoin`s rally has fizzled out for now, it sold 6 percent Sunday and another 2 percent Monday after Warren Buffett unloaded a slew of criticism
At his Berkshire Hathaway annual meeting, Buffett compares bitcoin to rat poison and his vice chairman was even less complementary.
(BEGIN VIDEO CLIP)
WARREN BUFFETT, CHAIRMAN & CHIEF EXECUTIVE OFFICER, BERKSHIRE HATHAWAY: It draws in a lot of shallow things, and that sort of a thing we`re trying to
create, various sorts of exchanges or whatever it may be.
It -- you know, it`s something where people who are less-than-stellar character see an opportunity to clip people who are trying to get rich
because their neighbor is getting rich buying this stuff, and neither one of them understands it will come to a bad ending. Charlie?
CHARLES MUNGER, VICE CHAIRMAN, BERKSHIRE HATHAWAY: Well, I like cryptocurrency a lot less than you do.
And so to me, it`s just dementia. And I think the people who are professional traders, they`re going to trading cryptocurrencies, it`s just
disgusting. It`s like somebody else is trading turds and you decide I can`t be left out.
(END VIDEO CLIP)
SY: Experts in cryptocurrency still thinks bitcoin has a future. Nolan Bauerle from CoinDesk told "QUEST EXPRESS" that Warren Buffett`s criticisms
(BEGIN VIDEO CLIP)
[16:35:00] NOLAN BAUERLE, DIRECTOR, COINDESK: What he took issue with and what he took aim at was that, he said bitcoin isn`t producing anything. So
from our perspective and I think from multiple people who understand this, what bitcoin is producing is security.
This is the most secured and reliable financial network in the world today.
(END VIDEO CLIP)
SY: Now, while investors may be skeptical about bitcoin, many are still optimistic about the power of blockchain technology and what the future may
hold. Clare Sebastian explains exactly what blockchain is.
CLARE SEBASTIAN, CNN (voice-over): Imagine you`re in a room with lots of people you don`t know selling large amounts of important information.
Nobody is in charge, somehow you trust everyone.
This room is like a blockchain, blockchain was first invented for bitcoin, a new digital phase with a whole new set of rules. To get started in a
blockchain, you need computer power. Each computer in the blockchain is known as a Note, and here`s where the trust comes in.
When a transaction happens between two users, the request is broadcast at the whole network, the amount and the digital key representing each user.
The other notes on the network verify it and then add it to a shared digital database organized into blocks.
We all have access to the data, nothing can be deleted or changed so no one can cheat. The fact that database is maintained by everyone on the network
means financial transactions can happen without a bank, contract without a lawyer, in theory, even voting without a central election authority.
I don`t know much about the other people in this room, but one thing I do know is we`re volunteers donating our computer power to the blockchain. So
what`s in it for us? Well, you get paid. In the case of bitcoin confirming transactions and creating new blocks involves solving complex mathematical
problem is called mining.
The rewards for doing that is new bitcoins, other blockchains also rewards participating with digital tokens in some cases. Not all blockchains are
the same, some may be huge in public like bitcoin which now needs giant processes to keep it running.
Some may be offline or private. But as the concept takes off --
UNIDENTIFIED FEMALE: It makes our machines the way we work together in the digital space.
SEBASTIAN: Clare Sebastian, CnnMoney, New York.
SY: IBM has set up its own end-to-end blockchain platform and says blockchain can change the world the same way the internet did. In fact, a
lot of folks say that. Joining me now in the C-Suite, Bridget van Kralingen who is the senior vice president for blockchain at IBM.
Bridget, so great to meet you. A lot of people --
BRIDGET VAN KRALINGEN, SENIOR VICE PRESIDENT FOR BLOCKCHAIN, IBM: Nice to be here, Stephanie.
SY: I think still do associate blockchain with cryptocurrencies, but IBM has been offering its own blockchain platform for other users. Can you just
summarize what some of those are.
VAN KRALINGEN: Yes, and so the underlying technology in blockchain is a distributed ledger which is secure, it`s commissioned, it`s scalable, it`s
very fast and so can be used to actually track and trace and verify many types of confections of business processes.
So from that point of view, IBM so that -- and so that the underlying technology is so powerful and we started to work with many clients around
the world. And whiles it`s early days, there are some very exciting ways blockchain is changing companies and people`s lives.
SY: And just --
VAN KRALINGEN: So as an example --
SY: Yes --
VAN KRALINGEN: Yes, examples, there are foods -- so we know the remained ledger scandal we`ve been dealing with recently in New York City working
with Wal-Mart and ten other firms such as Tyson, Nestle and Unilever.
We have put food safety on a blockchain whereby you can recall food in two seconds, this normally takes best case six days to do recall. And 420,000
people a year die of food poisoning.
A second example in terms of the power of blockchain is when we announced last week`s story, six diamond rings -- six types of diamond rings are
being tried on blockchain now, and we can show the complete provenance of the diamond ring from beginning to end to show that it was not made from
Sixty six percent of millennials of people around the world think 3 percent of millennials will pay more when they know the provenance of the items
which they`re actually getting, that`s the kind of --
SY: The only two examples are great because they go to the trust issue which a lot of companies that deal with food safety or something like
diamonds deal with. And blockchain offers that transparency, right?
VAN KRALINGEN: Correct. So when you create a network of members for blockchain, you agree by consensus that the transaction is right. So it`s a
needable and automatically trades trust. Which is why we believe thousands of networks around the world we`re seeing for instance cross-border finance
Fifty percent of small businesses cannot get financing for exports and with the cross-border finance consortium we`re building with banks, we`re able
to meet the need and secure finance in moments rather than months.
[16:40:00] And it`s this kind of impact where instead of cross-checking on each other, businesses and people can actually see simultaneously that a
process is correct and the information is correct.
SY: So much efficient there, and IBM`s blockchain service is considered really the leader in the market when it comes to so-called enterprise
blockchain services. But you are so now.
I wonder how concerned IBM is about Amazon entering the space. AWS is entering the blockchain market with similar offerings. Are there any plans
or just IBM`s offerings in response to Amazon?
VAN KRALINGEN: So we are very enthusiastic about all technology companies and many companies being part of this. Because that helps to scale and
extend the users of technology. Our approach to create a standard, we`ve supported the Linux prelature(ph) so that many companies can be part of it
and that the governance is very open.
That`s the way new technologies scale, people can be involved. What can be interesting, it`s not just about the technology, it`s about the business
model and being able to conveniently coarse the stone of -- participants. So really understanding both the industry and then understanding what
enterprises need to run a technology we think is very differentiating about what IBM does as against other competitors.
SY: I wonder if there are any plans for IBM to go into the cryptocurrency aspects of blockchain. For now, it seems like it isn`t touching that.
VAN KRALINGEN: So we have an approach to blockchain which is around the distributors ledgers and supporting the process of that ledger. Crypto is
really a form of tokens that can be used in any network. And there are some great examples of where we`re working with tokens.
For instance, we`re doing cross-border payments, retail payments and low- traded currency corridors where if you were to send money home or I was to a home in the Pacific Island, it will take weeks on a blockchain, you can
do it in days.
And we`re working that with a number of banks, that`s an example of using tokens. Another fantastic example of using tokens is what everyone is
focused on is also social good. And so we`re working with plastic bank which aims to make -- create plastic into a digital token that can trade in
exchange for goods.
SY: Wow --
VAN KRALINGEN: By 2050, the volume of plastic in the ocean will exceed the volume of fish. And plastic bags aim is to make that tradable currency that
people collect and recycled. And so again, improving inclusion and improving outcomes for the world.
SY: You know, just as an aside, women are in key leadership positions on the blockchain team. At IBM, there`s yourself of course and also the lead
developer is a woman. I wonder if you can just comment, and when you talk about social good and social mission being part of what`s intrinsically the
blockchain model, why is that diversity important for innovation at IBM.
VAN KRALINGEN: So the diversity aspects of blockchain, I think are incredibly powerful and will only continue to grow. And the reason I say
that is, because as well as being a technology that was born for collaboration, open, permission network, improving customer transparency,
the idea of these networks for inclusion is everybody has to be a winner in the network.
And so I think the idea that diverse people in perspective will benefit versus a single dominant force is very interesting about blockchain. I
think it will appeal to many diverse people as it has in IBM.
And also will include groups all over the world, and we are working for instance with Twigger(ph); a microfinance company in Kenya to extend loans
in a blockchain by modeling real-time credit off a mobile phone, which could never be done without a blockchain --
SY: You have thousands of clients --
VAN KRALINGEN: Yes --
SY: Some of them are really big deal, I wonder if you can tell us about any new projects that might be coming up.
VAN KRALINGEN: So we are hoping next week to announce that we would be doing trading of carbon credits in a blockchain, and just over this
weekend, you might have seen the announcements of Mobi which was a -- which is an exploration of whether we could track everything about a vehicle on a
blockchain with BMW with Ford and with GM.
And then just last week, we announced recording insurance contracts on a blockchain, and the fact that again, provenance that you ensure cannot be
stick to the blockchain --
SY: Many can rethink transactions in every field now, it`s incredible.
VAN KRALINGEN: That`s why it`s very early days, Stephanie --
SY: Yes --
VAN KRALINGEN: And there`s of course a lot of hype, but the underlying use of the technology and the ability to put together robust enterprise
technology together with great business models, we think holds potential companies and for all people in the world.
SY: Maybe Warren Buffett will change his mind as her buying IBM again. Bridget van Kralingen; senior vice president for blockchain at IBM, such a
pleasure to have you here with us and --
VAN KRALINGEN: And to be with you, Stephanie.
[16:45:00] SY: Nice to meet you. All right, coming up, a coffee collaboration like no other. Nestle makes a $7 billion bet on Starbucks
coffee, find out what investors thought of the deal next.
SY: They`re calling it a global coffee alliance. A landmark deal between the world`s largest food company and the biggest coffee chain. Nestle is
spending over $7 billion for the right to sell Starbucks products. The news is giving Nestle shares a jolt.
They closed up around above 1.5 percent. David Henkes; Beverage Practice leader at Technomics, he joins me now from Chicago. Dave, thanks so much
for being with us, I also understand you have worked with Nestle in Europe, and I understand Nestle has got a really strong coffee foothold in Europe,
not so much in the U.S., is this a game-changer for the company?
DAVID HENKES, BEVERAGE PRACTICE LEADER, TECHNOMICS: Well, I think it is -- and hello, and nice to be with you. I think when you look at Nestle`s
business, the coffee business, they`re in Espresso and Nescafe business, very strong over in Europe and while they have a presence here, I think the
Starbucks deal really is a win for them, and it really gives them an entree into the $80 billion food coffee market here in the United States.
Now again, they`re already playing here but with a strong power house brand like Starbucks is really -- gives them a huge boost, not only here but also
in Europe as well.
SY: OK, so just from a practical level, does this mean the little Starbucks pods will be able to go into an Espresso machine?
HENKES: That is exactly what it means. I think, you know, the K-cup here is sort of the standard, right? And when you get over in Europe, it`s really
been an Espresso machine. And so this gives Starbucks -- and Starbucks already has the K-cups and now what it gives Nestle is the opportunity to
get into that market and expand into K-cups as well as their own existing pods.
SY: All right, what about Starbucks, what if they get out of this deal besides the infusion of cash?
HENKES: Well, I think when you look at Starbucks, listen, there are $28 billion brand globally, there are about $18 billion here in the States,
really it gives them a couple of things. One, they can focus on their cafe business, their cafe business has been doing great over the last couple of
years, it`s been growing high single digits, low double digits.
So certainly now, senior management can more focus on growing that core part of their business. But I think beyond that it gives them continued
entree into the retail market, right? And so with Nestle`s distribution, with their brand-building capabilities, Starbucks can, you know, really be
enabled to grow in the grocery store, it gives them entree into the European market as well and some of the Asian markets where Nestle is a lot
stronger and where they have strong distribution.
And so I think from Starbucks perspective, it`s a win on multiple levels as well. I think both companies come out ahead in this deal.
[16:50:00] SY: All right, this of course follows another big deal in the coffee world, JAB Holdings acquisition, of you mentioned the K-cup Keurig
Green Mountain, why is coffee so hot right now so to speak?
HENKES: Well, I think when you look at coffee, I mean, JAB certainly has been rolling up coffee with Keurig Green Mountain and just recently with
Panera Bread and Krispy Kreme and Einstein Bagels and all sorts of coffee- related restaurant chains.
So we`re really starting to see two or three, probably four big coffee players emerge, right? You`ve got the Smuckers and Kraft Heinz brands, more
legacy brands and then you`ve got Starbucks which, you know, clearly is on a growth trajectory.
And you`ve got JAB which has put a huge amount of money behind Keurig and behind all of these restaurant brands. And so those four really are going
to duke it out, but I think in the end, JAB and now with, you know, Nescafe and with Nestle buying the Starbucks package business, I think those two
are the ones really fighting it out.
And you know, coffee is something that`s highly penetrated across the globe. It`s probably the number one beverage worldwide, and it`s not only a
breakfast beverage, but it`s you know, it really crosses all day parts, and you know, certainly, those specialty coffees are really growing,
particularly in the restaurants.
So you know, I think coffee is just a beverage that has worldwide appeal and it`s something that we`re seeing a lot of big money players really
pursuing to build portfolios in this area.
SY: Sounds like a safe bet, David Henkes joining us, thank you so much, David, good to meet you.
HENKES: Thanks for having me, I appreciate it.
SY: Well, her poll numbers are the envy of her husband, and now Melania Trump looks forward to use that popularity to further her new agenda. We`ll
tell you about the U.S. first lady`s formal platform next.
SY: There`s more breaking news from the Trump White House today, this time it comes from the first lady. Melania Trump has just announced her formal
platform 16 months into her tenure. A proclamation for the first lady`s new Be Best Program was signed by her husband Donald Trump.
In a Rose Garden speech earlier, Mrs. Trump outlined her mission.
(BEGIN VIDEO CLIP)
MELANIA TRUMP, FIRST LADY: As we all know, social media can be both positively and negatively affect our children. But too often, it`s used in
negative ways. When children learn online positive behaviors early on, social media can be used in productive ways and can affect positive change.
(END VIDEO CLIP)
SY: Cnn Sarah Westwood joins us live from Washington. Hey, Sarah, so we`ve heard Melania talk about cyber bullying before. Any more specifics about
this Be Best Program?
SARAH WESTWOOD, CNN WHITE HOUSE CORRESPONDENT: Well, that`s right, we know that cyber bullying was something Melania Trump wanted to pursue since the
days of the campaign. Now we know that her Be Best campaign will have three prongs to it.
[16:55:00] One, being that online bullying online campaign, the other being fighting opioid abuse among youths and the third being promoting a general
sense of social and emotional wellbeing among children.
This is obviously today the most high profile and significant appearance that Melania Trump has undertaken since her husband took office. She`s been
getting more and more visible though in recent weeks, and her poll numbers reflect that as she`s been more visible, she`s become more popular.
SY: Yes, her poll numbers are higher than her husband`s at this point. That`s not unusual, the first lady has obviously different duties. But a
lot -- and Melania has been a somewhat elusive first lady more so than her predecessors I would say.
Is this a new phase where we can expect to hear from her more?
WESTWOOD: Well, now that her formal platform is more well defined, we may see that she has more and more public events that follow the lines of what
she laid down today. But you`re right that she has been someone who at the start of the administration didn`t even live in Washington, she stayed
behind in New York to allow her son to finish the school year there.
But the late start in the administration has sort of kept her behind the scenes for perhaps a longer period of time. Now, we may expect her though
to be a forward-facing a little bit more and take on more of the duties you would expect of a traditional first lady.
SY: Sarah Westwood joining us from Washington, thank you Sarah.
WESTWOOD: Thank you.
SY: And that is QUEST MEANS BUSINESS, I`m Stephanie Sy in New York, thanks for watching.