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QUEST MEANS BUSINESS
A Common Bond Ties The U.S., Canada And Mexico -- Football; Is This Cartoon Economics And Why Should We Care About Coyote?; AT&T Is Now Going To Complete The Deal For Time Warner; Federal Reserve's Interest Rates Did Go Up By A Quarter Point; Toyota Is Hitching A Lift With Southeast Asia's Biggest Ride Hailing App; North Korea State Media: Trump Agrees To Lift North Korea Sanctions; Saudi-Led Forces Attack Key Rebel-Held Port In Yemen; Italian Minister Cancels French Trip Amid Aquarius Dispute; U.S., Mexico And Canada To Host 2026 World Cup; Julen Lopetegui Fired By Spain's Football Federation; Ben Bernanke Warns Of Wile E. Coyote Economy; Fed Raises Interest Rate For A Second Time In A Year; U.K. Parliament Backs Theresa May Over Brexit Trade; Lloyd of London Seeks Innovation In Insurance Market; Tokyo Tops Lloyd Of London's List Of Most At-Risk Cities; European Stocks Mixed Ahead of Fed Decision; Cubic Corporation Introduces Next Generation Payment Systems For Public Transport; British Theater Looks to Make Mark on Broadway. Aired: 4-5p ET
Aired June 13, 2018 - 16:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN HOST: You're got to hear that man on this program during the course of QUEST MEANS BUSINESS. Those are bells ringing on Wall
Street. The head of Cubic will be on the show. Three solids -- even though the market is down. The day is over on Wednesday, it's June 13th.
Finally, a common bond ties the U.S., Canada and Mexico -- football. This World Cup Coalition spells billions in profit. We will analyze what the
united bid means.
U.S. raising interest rates and a warning that the economy looks like this chap. Is this cartoon economics and why should we care about coyote and
what might happen to this clip.
New Yorkers get a new ticket to ride in the firm taking the troll up out of tickets. You saw the man that we will be talking to during the course of
QUEST MEANS BUSINESS. The CEO of Cubic. I am Richard Quest live in London where of course, I mean business.
Good evening, after months of talks, political wrangling and nice-edge votes, Canada, Mexico and the United States have a deal. The only problem
of course, I am not talking about NAFTA. No, no. Instead, they want a joint bid to host the World Cup in 2026. Football will flow freely across
all three countries just as trade flows freely because of NAFTA, and yet, at the same time, whilst they are celebrating the World Cup bid, a court in
an economic grudge match.
Look at it this way -- thank you -- Donald Trump has called Justin Trudeau very dishonest and weak on trade. Mr. Trump's advisers say the Canadian
Prime Minister stabs the President in the back. There are problems with Mexico and the defensive wall.
Mr. Trump complains of bad hombres -- his Mexican counterpart insists his country will never pay for that wall. And NAFTA itself, no sign of a
breakthrough for either side. It will probably end up going into extra time. These three countries now have to get along for the sake of the
Look, it's years away, but can there be any greater irony that these three countries are locked together in football whilst battling it out over
NAFTA, which may indeed all fall apart.
CNN's Amanda Davies is in Moscow. Paula Newton is in Ottawa. Start with you, Amanda Davies. I mean, they were the strongest bid, it makes the most
sense. It's historic. I heard you earlier talking about the size and scale, but you've got to have a wry smile at this.
AMANDA DAVIES, CNN CORRESPONDENT: Yes, who said sport and politics don't mix, Richard Quest. I mean, it was actually President Vladimir Putin who
addressed FIFA Congress before this vote took place and he praised the football community for not allowing the international politics to get
involved in this World Cup.
I have to say, you have to maybe ask a few questions about that, but this was the united bid that has been the favorite. They were up against the
bid from Morocco, a country that has actually lost four World Cup bidding processes before. They very much led the way in terms of the technical
reports, in terms of the infrastructure that's already in place, the money that will come and be generated in terms of revenue out of this united bid.
But, yes, as you said, it is historic. It will be the biggest ever World Cup held, 48 countries involved instead of the 32 now. What was very
interesting all the way through this process though was the question mark as to despite what was said on paper, what impact would the Trump factor
have in terms of who was going to be voting where in this bid.
And after the united bid had won the vote, the head of U.S. soccer, Carlos Cordeiro agilely spoke to Alex Thomas and said just how important the
support from President Trump had been.
(START VIDEO TAPE)
CARLOS CORDEIRO, PRESIDENT OF THE UNITED STATES SOCCER FEDERATION: Well, look a tournament of this size, you turn out 48 teams, 80 matches, you
know, over a thousand players, millions of fans requires a degree of coordination and cooperation across three governments. It involves -- it
requires a huge amount of work.
And at the end of the day, we are very grateful for the support we got from our administration, just overnight. We got word of a unanimous resolution
that was passed by the Senate, bipartisan. We have something similar from the House a few weeks ago, and yes, terrific cooperation from the White
House, from the President and all his team.
CORDEIRO: And then we wouldn't have been in this position today requiring the guarantees we need to host an event of this magnitude without that
ALEX THOMAS, CNN SPORTS CORRESPONDENT: Should all three host nations get automatic places in that 2026 World Cup in your opinion?
CORDEIRO: Well, as you know, this is a decision that is ultimately made by FIFA. It's their tournament, it's not ours. We are hosts. We think that
in so far as this is very important for the grass roots for all three countries, then yes, all three countries will be given an automatic bid,
but this decision will be taken in time by FIFA.
(END VIDEO TAPE)
QUEST: All right, Paula Newton in Ottawa, somewhat poetic justice?
PAULA NEWTON, CNN CORRESPONDENT: You really -- you think so, I don't know. I think this sport was always going to rise above the politics, and I do
want to point out that all three countries can't even agree on what to call it, whether it is soccer or football.
But, I think, you know from a North American perspective, certainly between Canada and the United States, we have lots of sports that are fully
integrated and Mexico, even loves American football. Whenever the games go down there, they are completely sold out.
I think, look, the leaders, I'd say the reaction today was a bit underwhelming, not many of them really kind of rose to the occasion to show
any of the colors of sport out there to say this is a great thing, and I think that shows the underlying tension politically. But the fact that
they all did get behind this bid, and it's not just things that marketing campaigns, very serious things on the table like security and Richard, also
trying to clear things like visas and immigration and trying to reassure FIFA that they would all work together to expedite those kinds of things.
So, we shall see. I think a lot of people are relieved that the three leaders on the stage right now are unlikely, not impossible, but unlikely
to actually be at the helm of their countries in 2026.
QUEST: Paula, I will say thank you to you. Back to Amanda Davies in Moscow. I should know the answer to this and I don't, and so my apologies
for my ignorance. Where will the final be held?
DAVIES: The final will be held, Richard, right here in Moscow. It is the same venue that the opening game, tomorrow night will be played at Luzhniki
Stadium. I was actually lucky enough to have a little visit to it earlier today. The first time I'd been there since 2008. It looks resplendent.
It's funny though because this is a tournament where all the buildup, all the talk about the readiness, the preparations, the excitement of the World
Cup absolutely not mirrored by the mood around the Russian national team.
They were training ahead of their opening game against Saudi Arabia tomorrow. It is Saturday, they are playing down expectations.
QUEST: All right, no, no. I am sorry, I was wooly with my question. Where will the final in the United World Cup be held? Mexico, United
States or Canada?
DAVIES: Do you know what, Richard, I think you might have the prime seat in the house. It will be in New York. Were you going to be ahead of me in
the queue or am I going to get there ahead of you?
QUEST: It is no competition if you are trying to get ahead of me, I have lost over -- done and dusted.
Let's move on. Dan Flynn is the Chief Executive of U.S. Soccer which is football's governing body in the United States. Dan, congratulations on
winning this. It is a major achievement. Come on, be honest, how difficult was it to keep politics out of this bid, particularly over the
last few months as the NAFTA rhetoric became ever more vicious.
DAN FLYNN, CEO AND SECRETARY GENERAL, U.S. SOCCER: Well, keep in mind, the bid has been going on really for over a year, so the commitments that we
get, not only from the U.S. government, but each of the governments from participants, Mexico and Canada has started a long time ago.
So, I have heard all the conversation leading up to this, but quite frankly, we are very proud. We are very excited that our governments did
make the early commitment and they stayed with it throughout the entire bid and it was -- as Carlos said in his quote, or his interview, he played a
critically important part of our success for our bid.
QUEST: And I realized, you know, you want to stay as far away from politics as possible, but if NAFTA falls apart, if the U.S. withdraws from
NAFTA, we have to be realistic about these battles. This could actually happen, what happens then?
FLYNN: You know, for us, I think that one of the key points that resonated a great deal with the member associations as well as FIFA was the fact that
we were united. So, we are going to leave politics aside. It was not a factor in our discussions with other member associations.
FLYNN: And I think everybody was quite impressed with the level of government guarantees that we got from and received from all three
countries. So, I think we are well poised to move forward and have a very successful 2026 World Cup.
QUEST: Now, it's not the first time of course that there has been World Cup across two countries, but it is the first time across three countries,
albeit very close countries. What do you anticipate? I mean, it's going to be a phenomenal event, no question about it.
It was great in '94 when the U.S. had the World Cup, but what do you anticipate is being the most challenging logistical issue for you?
FLYNN: Well, I think that the -- I think we are actually well prepared for any of the challenges that might come our way, but the footprint of 48
teams, the number of training sites and all that which I think, our bid scored very high on. We have facilities and whatnot throughout our
But I think the logistics for the first time going to 48 teams, the bracketing being a little bit different, I think we will have a little
different feel for the preparation and for the teams themselves, so I think just going from 32 to 48 teams will feel a bit different, I think it's 80
games versus 60 games. The length of time might change a little bit.
So, I think all of that kind of is the driving force to be slightly different. As I said, I think we have a lot of options available to us
within our bid to address the time, the kick times, the travel times and where people will train and teams train relative to their venues where they
will be playing.
QUEST: Dan, good to hear you. Good to see you. Thank you and congratulations, sir. A night for you to celebrate, absolutely.
FLYNN: Thank you very much.
QUEST: This time yesterday, of course, we were talking about AT&T and Time Warner, and the decision of course was a rounding success for AT&T which is
now going to complete the deal for Time Warner.
Well, we told you that it was the start of a process, and now, in the last few moments, Comcast has made it official. It is now bidding $65 billion
for Fox. The assets that Rupert Murdoch is selling of it include the studios and the television network. It is a bid to under -- to basically
to undercut Disney, which has made it own $52 billion bid for the same asset.
Hadas Gold is in Washington. This is what we expected and how does -- Comcast had well telegraphed that it was thinking about doing it. Do you
believe it was the AT&T decision that finally made them go over the edge?
HADAS GOLD, CNN POLITICS, MEDIA AND BUSINESS REPORTER: Almost for sure, and they actually note in this letter to the Murdochs that was just
released moments ago about this $65 billion bid. They say we are also highly confident that our proposed transaction will obtain all necessary
regulatory approvals in a timely manner.
And that they also believe that the transaction is more likely to receive regulatory approval than the Disney transaction. Now, while they don't
specifically refer necessarily to the AT&T ruling, we all knew that this was what they were waiting for, and that if Judge Leon, in yesterday's
court, if he had approved the AT&T-Time Warner ruling as he did, then it was a green light for a lot of these mergers to go through.
I mean, we are used to summers of movie blockbusters, this summer is going to be blockbusters for the companies that usually make those movies because
this is going to start a bidding war.
QUEST: Hadas, I mean, the bidding war is underway. I mean, one assumes Disney now has to come back with another offer if it is going to be
realistic, if they stand a chance of winning this. The Board has to do what is best in the interest of the shareholders whatever Rupert may want.
GOLD: That's true and Comcast is noting in this release up top that their bid is 19 percent higher than the current value of Disney's all-stock
offer. So, they are trying to telegraph here that they have got the better offer, that is worth more money and trying to convince the Murdochs and the
shareholders that this is the best option for the 21st Century Fox now.
QUEST: Quick look at the share prices of AT&T and Time Warner and the like, Time Warner share prices has rallied quite sharply up 1.7 percent.
But AT&T has fallen by six percent.
Now, assuming -- it's an all-share deal, so one compensates the other to some extent, but why would AT&T be down so heavily having won so
GOLD: I mean, Time Warner in the last two years, because this has been a very long time of an approval process has gained value and perhaps, that
has something to do with it, but it is very clear that both companies seem pretty pleased with the outcome of this ruling.
AT&T fully believes that this is what they needed to do and this will be helpful to them. But Time Warner, there was the option that if this ruling
did not come down to their favor, that Time Warner could have walked and possibly gotten a better offer elsewhere, that's clearly --
GOLD: -- not on the table anymore.
QUEST: Hadas, thank you. Good to get an initial and immediate reaction to the Comcast bid, thank you.
As we continue, Toyota is hitching a lift with Southeast Asia's biggest ride hailing app. Surge pricing is in effect for this deal.
And so to the way markets moved today and of course, investors knew and were expecting a rise in interest rates and the Federal Reserve's interest
rates did go up by a quarter point. The rate now stands at 1.75 percent to two percent to take at the upper end of the band at two percent, and more
on that, in the statement and the accompanying document, the Feds said it plans to raise rates twice more before the end of the year.
Now, there have been thoughts that it might only be once more, now it's a bit more than expected. It all shows signs of the Feds confidence in the
economy. Look at the markets and how they reacted though if you look at the Dow and you will see that very sharp fall on the Dow and that sharp
fall comes just about when we get the announcement and then three o'clock, it really goes further down towards the end of the session.
Clare Sebastian is in New York, so the dot plot shows that we are getting probably another rate rise this year? It will be four in total.
CLARE SEBASTIAN, CNN CORRESPONDENT: Yes, absolutely. There is a lot of time when they put out these predictions, Richard, it was three, now it is
four. That doesn't mean they are going to do it, that's just what the members of the Fed Board are saying they think will happen now based on the
It was a very close call though, there was only one dot in it that really shifted the balance there. So, I think you can really learn more into that
than perhaps is necessary, but overall, the big takeaway here was just how much confidence Jerome Powell expressed in the economy. We saw that in the
statement, the shift in the language there. He said, "Economic activity has been rising at a solid rate."
The last time the word was moderate, but one thing, Richard that we are really looking out for, one potential risk to the economy is of course the
dispute that we have been seeing around trade. Have a listen to what Jerome Powell had to say about that.
(START VIDEO CLIP)
JEROME POWELL, CHAIRMAN, FEDERAL RESERVE OF THE UNITED STATES: Concerns about changes in trade policy are rising, I think it is fair to say, and
also, that you're beginning to hear reports of companies holding off on making investments and hiring people. So, right now, we don't see that in
the numbers at all.
(END VIDEO CLIP)
QUEST: And if we look at the step graph again, or the graph, the rate rises. We had that long pause after the first rate rise, which was the
best part of the year, but we very much -- if not on autopilot or at least programmed in, the economy is getting faster and the rate rises are coming
SEBASTIAN: Right, and that is why there was so much scrutiny on this meeting, Richard. We have seen it at such a slow pace for such a long time
now, and people are looking at the economy. They are looking at --
SEBASTIAN: -- generational lows of unemployment. They are looking at GDP picking up. They are looking at the stimulus effect of these tax cuts and
they are thinking, well, I mean, the Fed has to act, otherwise, it risks moving too slow and that's another risk in itself.
So, they were looking at this year. That was another two rates projected. They are looking to the future as well. They are well aware, they think
that the normal rate of interest is going to be well, they think they are going to land eventually and that was where the big focus was today.
I think the take away is that this year, we are going to see four and then it's going to slightly slow down after that as the Fed puts it, they
reached what's called the mutual rate of interest where the economy is kind of sitting happily at a rate where they need to have to put their foot on
the pedal or on the brake.
QUEST: On that note, as you just saw on that graphic, it will be lower than it would have been in previous cycles. All right, Clare Sebastian,
Now, Toyota doesn't want the ride hailing revolution to lead them in the dust. The company is investing a billion dollars in a company called Grab.
You will be well familiar with Grab, after all, it's Southeast Asia's rapidly growing transport app.
Now, though this is the largest investment of its kind, the slew of car makers and transport companies are throwing money in the same direction.
Remember, GM put half a billion dollars in Lyft back in 2016. Volkswagen put $300 million in to Gett. Honda and Hyundai have also backed Grab,
along with Uber, China's ride hailing up DiDi and Japan's SoftBank.
So, ride hailing and self-driving cars in car technology, the car makers are looking way beyond the average ride. Toyota ranks amongst the world's
top 100 advertisers even with its massive budget. It's never had ads like this.
(START VIDEO CLIP)
UNIDENTIFIED FEMALE: In the six short years, we have evolved from a service that lets you book rides and to one that connects multiple areas of
your life. So, you can commute, eat, make deliveries and pay seamlessly through one app.
This is the future of Grab.
(END VIDEO CLIP)
QUEST: Now, one turn of course is the film, "Minority Report," which predicts that one day, we will be surrounded by media advertising. We will
be talking about that in just a moment with our "Business Frontier" series.
And now to talk of course on the question of the Toyota deal and what's been happening there. Lauren Fix joins me from Minneapolis on the issue
and the question of why so many companies -- why are the car companies investing in such a fashion. What is it -- why do they want to tie
themselves in such a way?
LAUREN FIX, THE CAR COACH: Well, think about, how are they going to start getting more customers interested in their product? Well, if you use ride
sharing or something like Grab or DiDi or Uber, you start to ride in these cars and you create a relationship with a brand and they have to invest in
this because they are scared to death that people are going to stop buying cars.
Last year, we had over 17 million sold. This year, the average number is going to be about 16.9 million cars. What are you going to do? How are
you going to replace that income? So, they are trying to invest in ride sharing companies because therefore, they are starting to create when you
do decide to buy a car, you will buy a car that you've ridden in or you have a relationship with.
QUEST: Yes, but what about -- doesn't that go counter to the argument of wanting to be agnostic as to the various players? I mean, if you are in
bed with Lyft, your Uber user or your Uber driver is not going to go to you, so you buy -- I suppose really, bluntly, it comes down to picking
FIX: Right, it is going to come down to picking sides, you're right. You've got to remember manufacturers have to come to it with everything
they can. They are investing tons of money in autonomous driving even though, we as consumers have shown through many studies, including one
through AAA that said we really don't like that technology. We are really not ready for our cars to drive us.
So, we are okay with all of these apps like Grab and DiDi globally, and this is a great opportunity for manufacturers to start getting in front of
anybody whether it is an add on the car, it is an add on the app, it is the car that you've ridden in, riding in. So, these are all things that are
going to start being the only way you can reach people because nobody watches as much television and radio and print than we used to when we were
I know, I know.
QUEST: Yes, yes. Enough of that. Good to see you. Thank you, I appreciate it. Thank you very much indeed.
Now, as I alluded to, the fact that Toyota ranks one the world's top hundred advertisers, even with its massive budget, it's never had an ad
It's the film "Minority Report" which predicts that one day, we will be surrounded by 3D advertising. As part of our "Business Frontier" series,
Samuel Burke shows us that the 3D future is here.
(START VIDEO TAPE)
SAMUEL BURKE, CNN CORRESPONDENT: This is Hypervsn, a startup founded by the company, Kino-mo. They are producing holograms for commercial display.
Founded by two childhood friends from Belarus, the company is grabbing the attention of both consumers and big business.
ART STAVENKA, CO-FOUNDER, KINO-MO: We thought about generating additional sales or increasing footfall to a particular location, while increasing
real time in a certain store. It's all about that. In our case, we are doing that by the never seen before revolutionary 3D holographic visuals.
So the technology is the revolution in outdoor advertising.
BURKE: The imagery seems effortless, though not one might expect. Unlike the holographic projections often seen in films, Hypervsn uses LED lights
on spinning rays to create a 3D suspended image.
STAVENKA: There is a small device, and we can attach to any wall or any surface and then, with the spinning and once it starts spinning, you start
seeing an amazing hologram, but Hypervsn is as much a software product as a hardware product really, so we developed a great platform to manage
thousands of Hypervsn devices in one country.
We have distributors in over 25 countries now and the technology is present in over 70 countries at the moment. As a brand, we work with Samsung, BMW,
Coca-Cola, Red Bull -- any big brand that can come up to your mind.
We are a team of 120 people at the moment and we are growing and growing and growing.
I'd say, it is all about interaction, of making people enjoy their visit into a particular place or a store, so as casinos, shopping malls,
supermarkets, streets of cities, events and many other places, so everywhere you need to display information, everywhere you need to speak to
public, this is where Hypervsn enters the stage.
It won't be just about the process of buying anymore. It's going to be about the experience, and this is why we have interruptive features that we
are thinking of implementing in the Hypervsn are going to be extremely important further on.
We can imagine, say, if you go to a store and if you want to see how a hat looks like on you in 3D, this is something that you cannot do at the moment
and this is something that Hypervsn will allow you to do.
(END VIDEO TAPE)
QUEST: As we continue tonight, it's QUEST MEANS BUSINESS in London, when it comes to the economy, the Federal Reserve Chairman says, everything is
coming up roses. However, one of his predecessors warns, we might be racing towards a really steep cliff.
[16:30:00] QUEST: Hey, I'm Richard Quest, there's a lot more QUEST MEANS BUSINESS in just a moment. You'll hear from Paris and between the U.S.
economy and an episode of roadrunner, a quest of course, a true looney tune analysis maybe.
And in QUEST MEANS "SHOW" BUSINESS, why English theater is making its mark in New York, as we continue, you are watching Cnn, and on this network, the
facts always come first.
North Korea state media says the U.S. president indicated to Kim Jong-un that sanctions against the North would be lifted as the two countries make
progress in their negotiations. The report did not mention denuclearization is a key condition.
Donald Trump has tweeted, there's no longer a nuclear threat from North Korea. A fierce new offensive in the Yemen war could put hundreds of
thousands of lives at risk. Forces backed by the Saudi-led coalition have launched an attack on a key port city held by Houthi rebels that provides
food and other supplies to the entire country.
Yemeni government says it will be a turning point in the conflict. There's feud between Italy and France regarding the Aquarius is prompting the
Italian Finance Minister to cancel his trip to Paris. Italy has denied entry to the 600 migrants aboard the rescue ship, Spain has offered to take
them instead, the Aquarius is headed there now.
The U.S., Mexico and Canada are set to host the World Cup in 2026. It's the first time football's biggest tournament is to be shared by three
nations. The announcement comes after a year of increased political tension between the three NAFTA countries.
Julen Lopetegui has been fired from Spain's national football team less than 24 hours after accepting the role as coach of Real Madrid. Spain's
football federation says it was forced to let him go after being caught off guard by his new position.
Former coach Fernando Hierro will lead the team through the World Cup 2018. In the words of the Fed Chairman Jerome Powell, the U.S. economy is in
great shape. His predecessor Ben Bernanke thinks in 2020, that's only two years away, that well, the U.S. economy could look more like something like
Yes, thank you. Last week, Ben Bernanke warn, it's a Wile E. Coyote fall, it's the logical end of the current road race. Massive corporate tax cuts
and bursts of spending accelerating an economy that's already going full speed ahead.
An alarming forecast from the Fed Chair who's down with the financial crisis. Diane Swonk is with me, as she joins me from Chicago to discuss
this a bit more. So is he right than Bernanke, it was an -- I mean, for a man who's very careful with his words, Diane, he was -- the way he put it,
it could be a roadrunner moment going over the cliff and looking straight down. Do you buy it?
DIANE SWONK, CHIEF ECONOMIST, GRANT THORNTON: Well, I do think it's -- it is an important point to make right now and he's not Fed chairman anymore
so it doesn't move markets the same way it once did, so he can speak his mind a little bit.
I think my own concern is that in fact, we do have a fiscal cliff set up in 2019. When fiscal year 2019 comes to an end which is September 30th, 2019,
if they do not extend the current increases in the Fed's spending and social spending, we will fall off the fiscal cliff and automatically
trigger without anything else happening -- what we call a gross recession.
That's gross so weak that the unemployment rate actually rises in 2020. We could have a recession much sooner if we have full out trade war, that
could happen as soon as 2019. There's a lot of external shocks here that point to two things.
One, overheating on inflation and two, a recession.
QUEST: All right, so we had a rise in interest rate and today, and if we look at the graph showing the rise, although the Fed says it's not on a
pre-determined automatic plot, it does start to look the zener of regularity about the latest ones.
[16:35:00] Where are you now forecasting -- never mind whether we get one more this year or another two next year. Where are you forecasting the end
of a cycle?
SWONK: I actually think we're going to get a recession in late 2019, and we're going to see the Fed react it out with interest straight cuts in
2020. That said, I think it's really important that J. Powell pointed out today, he's going to have a press conference after every meeting in 2019
when the risks of both overheating and recession go up, he's going to give himself more flexibility to not have that pre-set cap, and I think that's
QUEST: How -- when you say recession in the end of 2019, based on the back of what? Because the fiscal stimulus continues. I mean, in the sense of
the lower corporate tax profit rate will still only --
SWONK: Right, actually the 20 -- by 2019, it starts to abate on the tax cuts, but then you fall off a cliff because the federal spending that we
baked into a cake in terms of what our fiscal year budgets are through fiscal year 2019, we voted in increases in federal spending and social
spending but we don't know will be extended in fiscal year 2020 which starts on October 1st, 2019 --
QUEST: Right --
SWONK: So I think that's an --
QUEST: OK --
SWONK: Interesting issue right there.
QUEST: But if that's the case, then and assume -- one assumes the Fed looks obviously at the same data that you're looking at. Then why would
you, knowing that continue with the interest rate rises when you know the economy is likely to slow down or be a potential risk.
Because if you got under the rate rise now, and you've got two or three next year, your baking into the cake slow down.
SWONK: Because right now you have a strong economy, this is the rock and hard place between -- where the Fed is now placed. The economy is
currently accelerating just like Ben Bernanke said. We're accelerating and could be accelerating right off that cliff.
But while it's accelerating, the Fed can only respond to the actual policy he has in place and what's happening now. And what's happening now is the
risk of overheating. It can even respond to a full out trade war because that still not actually confirmed.
It's threatening and we don't want --
QUEST: Right --
SWONK: The tariffs we've already seen and they're showing us in pipeline inflation, but as J. Powell pointed out, it's not showing up in the overall
data yet even though firms are saying they're hesitant to do things, they're still doing things.
The economy has got some momentum of its own right now and it has to do with that first, so it's unfortunately the two-step dance here is really
tough that the Fed has to make, and that is raise rates, respond to the economy now and then deal with bringing the country back --
QUEST: Right --
SWONK: To the party later on.
QUEST: Diane Swonk who is in Chicago, good to see you, thank you. Theresa May's winning streak has continued in the U.K. parliament. In the last
hour, lawmakers rejected the plan that could have made life difficult for her with the Brexit talks.
Paul Hardy is the Brexit director of the law firm DLA Piper. Good to see you, sir, thank you --
PAUL HARDY, BREXIT DIRECTOR IN DLA PIPER'S LITIGATION & REGULATORY GROUP: Thank you very much for your time --
QUEST: Yes, the trade -- never mind what happens with the Brexit bill itself, it's going to work its way through parliament one way or the other.
The longer term trading position of the U.K. with Europe, we still don't have clarity on in any shape or form, do we?
HARDY: We don't, we're waiting for a white paper which we expect to be reduced in the next week or so, but will be produced in July I think.
QUEST: How -- your clients, what are they asking you? What do they want to know and what are you able to tell them?
HARDY: What they want to know is what is their risk to Brexit? What's their exposure? That's the critical thing to understand, and once you know
what your exposure is, what next can you do about it and what can you do about it now?
And clients I think divided into two categories, those that are awaiting, those who have alternatively assess their risk as being very extreme
interacting on it. But all business wants certainty after what's going to be happening.
QUEST: So when you get a situation like we've got to solve over the last 48 hours where you've got amendments on Customs Union --
HARDY: Yes --
QUEST: You've got amendments on forcing the government's hand, and we still don't have a sort of a negotiation on what it will look like other
than a special very ultra close relationship, whatever it might be.
But the Europeans haven't gone for that. So what do you advise them to do?
HARDY: I advise them to act --
QUEST: To what though, what does that mean?
HARDY: Put in place contingency plans and contingency plans can be anything from taking on trusted traders status so that you can go through a
custom's process more quickly.
To -- in more extreme cases, setting up subsidiaries in Europe. So if you're -- if you're selling documentaries, news programs, doing the audio-
visual set to appear on the financial services sector and you rely on EU law to be able to sell your products from the U.K., you might not be able
to enlarge next year.
QUEST: Right, finally, Customs Union doesn't know like it's going to happen. But some form of transition arrangement is being put in place.
Gut feeling or how bad do you think it will be after next year?
[16:40:00] HARDY: Gut feeling is the next six or eight weeks in U.K. and EU politics will determine to know what happened.
QUEST: Yes --
HARDY: By the time October comes, we will have a good idea, at the moment things are not looking good.
HARDY: Yes, things are not looking good at the moment. The U.K. faces all sorts of challenges to getting a unified U.K. Brexit policy together, and
then it has to get that policy accepted by Brussels, Northern Ireland is a very difficult nut to crack and they haven't found a solution yet to do so.
QUEST: Thank you too. Now, tradition and old fashion maybe a little bit dusty. After 300-year history, that kind will do it, Lloyd's of London
wants to avoid. It's looking for a top-tech talent, top-tech talent to open a lab with the aim of finding new innovations to the insurance market.
Sounds about extraordinary for somebody who's old and feisty as Lloyd's of London. Well, luckily, Lloyd's Chief Executive Inga Beale is anything, but
she came in and answered the question whether this is just a gimmick.
INGA BEALE, CHIEF EXECUTIVE OFFICER, LLOYD'S OF LONDON: Absolutely not, dead serious. And I'll just say when the EU referendum came along and
Brexit was distracting us, we had to shelve some of our innovative ideas.
This is us joining back in the growth story for the U.K.
QUEST: Yes, but how are you going to make it work and so it doesn't end up looking like your parents disco dancing. You know, Lloyd is trying to be
hip and having all these new people in the middle of the building.
BEALE: Well, no, it's really serious. I mean, if you look to see what's happening --
QUEST: And are you committed to all the pain that will come with something like this as well.
BEALE: Yes, we are going to create a new sub-culture that's going to be far dynamic and give the customers what they want. Because this has to be
all about changing by behaviors of customers and policy holders.
They want a new type of product, they want a product that reflects immediately what their exposures are, when they've had a claim, they need -
- we need to use data to get more accurate pricing for their products.
So actually, it's got a real customer purpose.
QUEST: The city risk index is also fascinating, isn't it? Because that's looking at risk of a different kind.
BEALE: Yes, Lloyd's, we always do a lot of work in emerging lists, we are always trying to be enabling human progress looking at the latest risks
that are out there, trying to de-risk people. And -- so we analyze the landscape.
We -- the -- we refresh, so we search from three years ago, and what's interesting is how the risk have been changing in the world. So we've got
inter-state conflict on the rise, and that means that the top city that we've identified, we've identified 279 cities, they're the big amount of
GDP at risk from various threats around the world.
Inter-state conflict has put Tokyo or kept Tokyo at the top of the list.
QUEST: Wow --
BEALE: Along with some natural catastrophes that Tokyo is very exposed to. But we've also looked at the rising general man-made risks.
QUEST: If we look at risk at the moment, what is still the number one and most expensive risks? Is it hurricanes and typhoons? Is it earthquakes?
That still dwarfs everything else.
BEALE: No, it doesn't. According to our research and with the urbanization that's going on in the world and the world of concentration of
asset values in cities, it's a crash. It's a financial market crash, it's the biggest threat, $103 billion at risk.
QUEST: Fascinating the thought, the way the risks that we now have to face. The markets in Europe closed before the Fed announced its rate
decision, and stocks ended the day very uncertain.
London FTSE, look at that, no change on the FTSE, but the Dax was up and the other two were lower. Investors are looking at the first day meeting
of the ECB. The Central Bank is deciding when and how to end its stimulus program without scaring the markets as it does so.
After the break, touching in is something every London commuter does. It sounds rather rude, we'll have the chief executive of the company bringing
the technology to New York.
[16:45:00] (COMMERCIAL BREAK)
QUEST: And imagine that many companies can freely boast, the products make life easier for both fighter jet pilots and already commuters like you and
me. That is the case for Cubic which started in 1951 as a one product company.
Now designing everything from air combat training methods for the U.S. and its allies to next generation payment system, the public transport systems
in New York, London and Sydney.
Chief executive Brad Feldmann just rang the closing bell in New York, there you see him with a robust ringing of the bell. And Brad joins me now as we
promised to talk more about the different nature of the products that you are involved in and how they compliment each other and why you find it
works that way rather.
BRADLEY FELDMANN, CHIEF EXECUTIVE OFFICER, CUBIC CORPORATION: Yes, thanks so much for having me on today. Our products use common technologies, we
instrument both payment systems as well as on the battle field.
We move that information using secure communications, we then do computing, whether it's in the cloud or on prem. We then gain insights through
algorithms or modeling in simulation, and we show the answer to our clients with data visualization.
All of that to make their lives easier so that they can make good decisions. In transport --
QUEST: Yes --
FELDMANN: We reduce congestion, in training we increase operational readiness, and in communication, we increase mission effectiveness.
QUEST: So if we take for example the transport system, I got here what has to be maybe the dumbest of all. I have the metro card in New York which of
course is just a straight forward. I also have the oyster card which you'll be well familiar with from the U.K. which of course is again, it's
still a store of value in a card.
But the -- Nevano(ph) is of course, determine New York subway system, so it can accept credit cards like these. Now, how difficult is it when you're
dealing with millions of people systems that millions of people every day are going to use?
FELDMANN: Yes, so the key is to be able to move people along efficiently and to reduce the friction with which one makes a payment. And so you
pointed out sort of opposite ends of the spectrum regarding technology.
And we have this upgrade job in New York and we're going to be bringing the latest technology here over the coming years.
QUEST: And indeed you invented the metro card of course which came along after the subway token. So thank you sir and I've got you to blame for the
metro card, but I'm looking forward to whatever comes next. Good to see you at the Stock Exchange, I appreciate it.
We are approaching finally, the act of the fine arts in tonight's program. Even in the west end, the British Broadway takeover is brewing. It's a
case of QUEST MEANS "SHOW" BUSINESS, we'll be right back.
[16:50:00] (COMMERCIAL BREAK)
QUEST: Look at that, the red carpet is out, QUEST MEANS "SHOW" BUSINESS, here, I'm in London's west end, where the British theater is seen as slowly
taking over Broadway. At last weekend's Tony's, the new "Harry Potter" play took home some of the biggest awards.
And there's now a whole festival in New York devoted to British shows Brits of Broadway.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: The journey of human history is a great escape. A great escape from poverty, from early death, from famine. And we are so
(END VIDEO CLIP)
QUEST: A clip from see the life of humans, one of the plays that's in that festival, and David Byrne is writer and director and joins me now.
Congratulations sir --
DAVID BYRNE, WRITER & DIRECTOR: Thank you so much, nice to be here --
QUEST: Now, what is it about the crossover that allows us to have something like Brits of Broadway where you do get so many Broadway -- west
end productions going to the United States, what is it?
BYRNE: I think there are just a huge hunger in the United States for really great story-telling in theater. And in the U.K., we are really good
at making theater. Our creative industry are one of our biggest exports and we really heavily invest in making really high quality work here in the
Whether it's the smaller of West End of Broadway level all the way up to the national theater which is the world's greatest theater. We're really
good at putting the sort of money and the timing into making really high quality film.
And therefore the Americans, you know, they want to see that --
QUEST: But it translates over there, doesn't it? Wall -- it all translates when it gets there despite the fact that saying what, you know, separated
by common language.
BYRNE: Yes -- no, that's very true. I mean, some of it translates and some of it, you know, gets lost in translation there. FAMA(ph) shows that
has done really well in the U.K. and have gone over to Broadway and not met with the same success that it experienced here in the U.K.
But it's amazing actually working in theaters, how much it translates completely internationally. The shared language does give us a big
advantage in America, but you are running a small studio theater they do London, new dilemma where secret life of humans came from.
In the last few years, we've exported to international theaters in China, in Qatar, all across sort of Asia, also Europe and now quite substantially
QUEST: Is that because we are really good at it or they are not so good at it, and therefore there's -- you see what I'm saying --
BYRNE: Yes --
QUEST: And then there's a hunger for this sort of material and we happen to be or the British happen to be extremely good.
BYRNE: I think it's part of our identity as a nation. You know, we are the nation of Shakespeare or closer(ph), you know, I am -- it's something
that we learn in school, it's something that if you're lucky to have gone to school where there's interest in the performing arts, it's really
QUEST: Is it still considered though -- I mean, it's great to be in the West End, it's great to be in the West End than to be on Broadway. Does it
still have that --
BYRNE: It still have a huge appeal. But personally --
QUEST: Yes --
BYRNE: As a director, I would rather make it work in London, in the U.K. than out in America. I still think we are the culture, you know, we're the
capital of theater for the whole world. I mean, there's nowhere like London to go and see theater.
QUEST: One thing I should see in London at the moment.
BYRNE: One thing you should see in London at the moment --
QUEST: I should be able to get a ticket --
BYRNE: "Mechanic" at the Almeida which is supposed to be excellent and really good, they're fantastic theaters, we're doing really interesting
QUEST: Good to see you sir --
BYRNE: I'm pleased, good to see you as well --
QUEST: Thank you very much indeed --
BYRNE: Thank you very much --
QUEST: We'll continue tonight, busy evening as you can tell, we'll have our profitable moment -- go ahead, you can have a ring at the bell, go on,
yes, ring the bell.
Oh, look at that.
BYRNE: Thank you.
[16:55:00] (COMMERCIAL BREAK)
QUEST: Tonight's profitable moment, Nelson Mandela of course famously said that sports has the ability to change the world, and I think we may have
seen a bit of that tonight because just look at the way in which the United bid for the 2026 World Cup has energized everybody.
Here you have three countries: the United States, Mexico and Canada co-host the 2026 World Cup, one of the largest World Cups ever if not the largest
and it would be across three countries. It would be a logistical nightmare, but they're doing it.
And this at the same time as those same three countries are trading insults, and President Trump has been down rude about Justin Trudeau of
Canada, he has been offensive about the Mexicans and yet, the three countries are going to combine and cooperate and coordinate for the World
And at the same time of course, we've got no idea what's going to happen to NAFTA. Will NAFTA either even be around by the time 2026 comes along?
Certainly not if President Trump seems to be having his way.
That's one of the fascinating things about what we're seeing. Sports and politics don't usually mix, unfortunately, they frequently end up doing so.
And whatever you may think, that's exactly what you're going to see happen with the World Cup.
And that's QUEST MEANS BUSINESS for tonight, I am Richard Quest in London. Whatever you're up to in the hours ahead, I hope it's profitable, I'm back
in New York tomorrow.