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Donald Trump Continues Criticizing The Fed; Power Struggle Drove Down GE's Overall Earnings By Some 30 Percent; Theresa May Putting The Ball Back In Brussels Court; Chairman Of Turkish Airlines Says He Believes In Turkey; Israel Launches Wide Scale Attack Against Hamas; A Source Tells CNN Donald Trump's Former Personal Attorney Michael Cohen Secretly Recorded One Of Their Conversations Two Months Before The Presidential Election; Seventeen Killed in U.S. Duck Boat Tragedy; Novichok Victim Discharged from British Hospital; Honeywell and GE's Fortunes Diverge in Earnings; Nigeria Prepares to Launch New National Airline; Burberry Destroys $37 Million of its Own Stock; JPMorgan Expands Fund for Minorities in Chicago. Aired: 4-5p ET

Aired July 20, 2018 - 16:00   ET


PAULA NEWTON, CORRESPONDENT, CNN: All right, flat on the day, pretty much but the Dow finishes up on the week, but just barely. It's Friday, July

20th. Tonight, Donald Trump has one word for the Fed when it comes to raising interest rates. Really? GE shares sink as the CEO looks for a

power play and from Air Nigeria to Nigeria Air, I'll speak to the man relaunching the country's new national airline. I'm Paula Newton and this

is "Quest Means Business."

Okay, so Donald Trump is not done criticizing the Fed and now he's taking his fight to Central Banks worldwide. The US President says that by

raising rates, the Federal Reserve is putting his work on the US economy at risk and thinks the rest of the world is taking advantage. Now, in an

interview with CNBC, Mr. Trump took aim at two of his largest trading targets, China and the European Union.


DONALD TRUMP, PRESIDENT OF THE UNITED STATES: For years, we've been losing $150 billion with the EU nations, with the European Union and they're

making money easy and their currency is falling and China, their currency is dropping like a rock and our currency is going up and I have to tell

you, it puts us at a disadvantage.

Now, I'm just saying the same thing that I would have said as a private citizen. So, somebody would say, "Oh, maybe you shouldn't say that as the

President." I couldn't care less what they say. Because my views haven't changed. I don't like all of this work that we're putting into the economy

and then I see rates going up.


NEWTON: Okay, he sees rates going up. Guess what? It's time for Economics 101. Here we go. Now, when the economy is doing well, as it is

now, of course, incomes of course as you can see here go up. Guess what? As incomes rise, so does spending and that increase demand of course as we

all know, pushes prices up.

Well, that raises inflation, so to cool the economy and keep inflation in check, remember, that is the job of the Fed, rates also have to go up,

something the President was complaining about. Now, countries that do not keep those rates in check suffer massive inflation. Case and point, bear

with me here, yes, Turkey 18% as you can see there, and Argentina 40%. Yes, cry for Argentina. The Fed -- what it's trying to do always is strike

that balance. It wants to raise interest rates steadily to keep the economy from overheating.

But raising rates too quickly off course, could trigger a recession, and that's the kind of balancing that the Fed is always looking for. Now, who

better to teach us more about Economics 101 than Ken Rogoff. He is Professor of Economics at Harvard University. Thanks so much for being

here. I know you've been watching this very carefully.


NEWTON: Let's start first with the -- I see that little cynical smile, but okay, look, a President can't be expected to say, "I want the Fed to raise

interest rates." That's just not his or her job. Do you see this is damaging, especially now that he has said it twice and apparently, will say

it again.

ROGOFF: Well, first of all, most Presidents feel this way. They don't like it when interest rates go up and they are always stiffing themselves

not to say anything about it. To be fair, so far, Donald Trump has been good to the Federal Reserve. He has made good appointments. He hasn't

been all over them. But you do worry that this is the beginning of something more. I mean, he just -- I remember when he was just mildly

criticizing the Secretary of State Rex Tillerson, the next thing, he is fired. You see this pattern.

I am really worried about what will happen if the economy weakens, particularly around the election. He might say, "Well, I know inflation is

going to go up." I think you explained that well, Paula. But you know what? I'm worried about the economy. Right now, inflations in the future,

so this is a real long term risk to the healthy economy.

NEWTON: When we say long term risk, you made a key point there -- appointments, and they have been solid so far. He has a lot of

appointments to go, on the Board as well as the actual 12-person committee that's in charge of actually raising or lowering those rates for keeping

them where they are. Do you think he can influence this just by the nominees he puts in place?

ROGOFF: He absolutely can. I mean, Congress plays a big role in this, but the Fed is not independent the way the Supreme Court is. It's independent

because we've been treating it as independent, and it's a relatively recent construct. I mean, Richard Nixon in 1972 when he wanted to get reelected,

he was cursing at the Fed Chairman, Arthur Burns. He was pushing him to push up the money. He pushed it up like crazy and Nixon got reelected and

we got the inflation of the '70s.

Don't rule that out. I think it's very early days, but you know with this President, this has been one of my biggest concerns.


ROGOFF: The stock market has been incredibly blase about everything else going on because they say, "Well, he left the Fed alone, as long as the Fed

is doing a job, we're okay." But if he's not doing well, and I wouldn't rule out anything with this President.

NEWTON: And that is key here for two reasons. One is that other Central Banks are watching, right? When he talks about the currency, the American

dollar in relationship to every other currency and other Central Banks, what they will do with their money supply and the markets.

As you said, they have great confidence in Chairman Powell right now. Do you fear that some of that equation, other Central Banks and the Chairman

and his independence will actually spook these markets?

ROGOFF: Not, yet, I mean, but every day brings new surprises. I thought the trade war was just a threat. I didn't think we'd be putting tariffs on

all Chinese imports, which he's talking about now. So, I just don't know. I think as long as the economy is doing well and he doesn't look like he's

falling off the earth in terms of his reelection, he will leave the Fed alone, but all bets are up. Nothing is sarcasing, nothing is safe if he

feels insecure about getting reelected and he feels goosing up the economy using the Fed is going to help get it done, and yes, he has tools to do it.

It could be counterproductive. He could get the Fed mad. They want to prove their independence and they raise rates faster, but they've got to be

careful because their independence is very fragile, not the Supreme Court.

NEWTON: And I keep thinking of that phrase, right? You serve at the pleasure of the President and you made a very key point there about the

fact that it isn't like the Supreme Court. This is not like that at all. Can you remind us again, because you brought up the 1970s, how quickly

inflation can sneak up on people and how it can absolutely demolish an otherwise healthy economy.

ROGOFF: Well, we had inflation something like 13% or 14%, Japan and the United Kingdom were over 20%. It doesn't come really fast actually, but

once it starts creeping up, it's hard to turn it around without really crushing the economy. That's been the Fed's fear. Frankly, if inflation

went to 3% or even 4% for a while, it is not such a big deal, but the problem is, it's hard to rein it back in. So that's why they kind of don't

want to let it to get out of control.

We're not going to get to 20% inflation in a year. That is not going to happen, but if he keeps steadily pushing on the Federal, he undermines its

independence, what you could suddenly see is a long term interest rate, 30- year rates, 10-year rates. They could soar because people say, "Whoa, the lid is off on inflation." When we put our money in something, we want to

know we're getting a big return to make up for inflation. That's where it can really hurt the economy.

NEWTON: And the take away from this as you told us, expect anything at this point from the President when it comes to the economy. We'll go into

the weekend with those thoughts. Thank you very much, appreciate your time.

ROGOFF: My pleasure.

NEWTON: Now, it was a choppy session on Wall Street. Solid earnings from Microsoft pushed up stocks as renewed fairs of a trade war and weak

earnings from GE pushed down the very end of the day and the Dow ended down seven points. I have to say, it was down a lot more there in the

beginning, in the implied open, and then absolutely totally calmed about what could be a trade war.

Donald Trump's comments about the Federal, it did add a certain mix of volatility. Peter Tuchman is a floor broker with Quattro M Securities

earlier on "Quest Express," he told me the President as you've just heard needs to stay out of the Fed's business.


PETER TUCHMAN, FLOOR BROKER, QUATTRO M SECURITIES: The Federal Reserve is not one of those entities that should always stay nonpolitical. And he has

hired a gentleman who we have now seen as incredibly transparent. I think, in my opinion, Mr. Powell is doing a really good job. The market seems to

like it. Where he is talking about a gradual rise in interest rates due to a strong economy, it's often a data driven decision and the economy can

handle a raise in interest rates. My personal belief is that Donald Trump should stay out of the Federal Reserve question because that's not his


As when you ask me questions I don't know ...

NEWTON: From your lips to his ears, what do you -- he really doesn't even listen to his advisers about that.

TUCHMAN: Correct, so I don't know. It's a wild card coming out of Washington as far as that goes. The Federal Reserve should always stay


NEWTON: Okay, that's what they should do. Do you believe they will stay on the sidelines though, and I'm talking about Chairman Powell. Will it

affect his policy at all? Bottom line.

TUCHMAN: It's really hard to know how heavy a hand the President has with the people around him. We've seen that it can drop rather hard. I am

hoping Mr. Powell holds his ground because the market is really responding positively to the new Fed policy.

NEWTON: Right, yes, they like the style. They feel -- it's a safe pair of hands.

TUCHMAN: They like this guy. We like this guy and everything we've heard of him and we've only known him a little while.


TUCHMAN: He's super transparent, really clear and is really smart.


NEWTON: Okay, when Peter and I were talking, one of the market movers was General Electric. We've all heard of about that grand transformation that

it's supposed to be going through, but this ever shrinking conglomerate is still dogged by major problems in its power division. Close your eyes if

you don't want to see this because it's ugly. Profit at GE Power plunged 58% in the second quarter. Orders for gas turbines are running out of


Now those power struggles drove GE's -- drove down GE's overall earnings by some 30%, now however, there's good news. The good news is that many

expected the results to be much worse. I'm not sure how that's good news, but apparently, it is. GE actually managed to grow its revenue and that is

a bit of a milestone. Okay, it may only be a measly 3%, but that was helped by aviation and oil and gas.

And GE is now maintaining its financial outlook for the rest of the years and that is also saying something. So, is this the turnaround that

everyone has been waiting for. Clare Sebastian has been looking into this. Okay, power we know the power situation is dire and GE admits that and yet,

if we're looking for the stock to have bottomed for the company to actually reinvent itself, where are we now?

CLARE SEBASTIAN, CORRESPONDENT, CNN: I think there's some concern around that. I think John Flannery in the conference call today, he called this a

reset year. I think what we're seeing from investors, which -- who sold out on the stocks today, it's down 4.4%. I think this is a realization

that it may -- this reset year may extend beyond 2019. One of the big concerns is yesterday, they (inaudible) from their guidance when it comes

to profits, also when it comes to free cash flow, but it was by far at the lower end of the range. Free cash flow in particular is something that is

worrying investors and power is the biggest part of the business by revenue, so that isn't going away.

That is still going to continue to dog them and the market there is already bad, so it's a big problem.

NEWTON: You know what's funny, Clare, in these stocks normally, once you have this kind of -- we'll call it reset, really, it's so much more than a

reset here. Normally, you will start to see the bottom. You will start to see because you're looking at the guidance for this year what they've


Somebody's waiting for the bottom to fall out here. What do they really feel is the risk? Is it in that power division? Is it the fact that they

don't think they'll be able to grow whether it's the medical division or the airlines division, the way they should be.

SEBASTIAN: I think it's both of those things, honestly. As I said, power is the biggest by revenues, but it's all of it really because what's

they're really grappling with is not so much a bottom, but just a much smaller company going forward. The stock price is one half what it was 12

months ago. It's been a precipitous fall. It didn't affect the Dow today because it's been kicked out of the Dow.

So, I think they're getting used to this idea of a much smaller, entirely different phase for this company and it's hard to predict what's going to

happen particularly when they're faced as I said with such a dire market in power. When you look at the power division, it's hard to tell how much is

GE's fault and how much is simply because of those chips in the market, so they are grappling with a really tough area and their renewable business is

not enough to offset what's going on in power.

NEWTON: In terms of them being hit by something that they weren't expecting, they're maintaining guidance going through to this year. They

obviously had been hoping for so much more though, even in the last two quarters, was there any indication on the call that there was something

unexpected. We've talked many times on the show about that pension liability, which was supposed to be behind them now, right? All accounted


SEBASTIAN: I don't think it was that it was something unexpected. I think John Flannery has taken some very proactive decisions today and I think

this is just the cost of doing that. It's not just the fact that he's shrinking the business. It's not just the fact that -- but returning to

profitability is going to take some time.

But even restructuring and transforming this business in itself costs money. There's cost that they talked about from that. So, I think it's

really all of that taken together. What he did say was just perhaps, some light at the end of the tunnel is that they are getting close to the end of

this $20 billion in divestitures. This kind of stripping and selling this business for parts that has been part of his MO since he's been there,

which is actually has been less than a year.

But I think the market appreciates his proactive stunts, even though they're still doubtful about the future.

NEWTON: He wasn't rewarded for that today. Again, hard to believe, GE a shell -- really a shell of its former self. I guess, we have to thankful

they're not Sears, right, Clare?


NEWTON: It could always be worse.

SEBASTIAN: It could be worse.

NEWTON: It could be Sears. Oh, now GE wasn't the only industrial giant reporting earnings today. Later in the hour, we'll tell you about

Honeywell, completely different story and talk about the rise and fall of that American conglomerate that Clare and I were just talking about.

Now, the man who urged the Tesla CEO to dial it back on Twitter says the world needs to see the real Elon Musk. Clare has been all on top of this.

We've seen the real Elon Musk, haven't we? I think we have. Anyway, tech analyst Gene Munster says the perception is that Musk is thin skinned and

short tempered. Once again, Clare is saying yes.

He told Christine Romans the final straw came when his Twitter insults came to that cave diver in Thailand.



GENE MUNSTER, MANAGING PARTNER, LOUP VENTURES: The way we think about this is this has been something that's been growing. It crossed the line this

week and we heard from Tesla investors that something needs to be said because these investors believe in the Tesla story, believe in Elon Musk

and most importantly, his really captivating mission which is not to build the world's greatest electric cars, but accelerate the world's adoption for

renewable energy.

And the reason why that mission statement is important relative to our letter is that mission statement gets lost in everything that is going on

in his tweets and so, we felt on behalf of investors that it made sense to write this letter.

CHRISTINE ROMANS, ANCHOR, CNN: So a genius with a great vision and a thin skin?

MUNSTER: Yes, that's the unhelpful perception and has been fueled more recently. That's not who Elon Musk is. He is someone who has a way to

motivate people, his workforce beyond anything that I have seen in the two decades that I've been covering tech and I think also, just the quality or

the importance of his mission that we just talked about.

And so yes, the public perception of Elon Musk more recently is he is thin skinned and short tempered but we think it's import that the world sees

what we think is the real Elon Musk and hopefully, we will see some changes over the months to come that he'll be having more measured approach on



NEWTON: Okay, the real Elon Musk, I can't wait. Still to come, the Chairman who took to (inaudible) Turkish Airlines tells us how he is

dealing with political instability at home and stiff competition from the Gulf Three and it's had more re-launches than the space shuttle, Nigeria

ties again at a new national airline. We'll hear from the country's aviation minister as to why this one will succeed.

Okay, Theresa May is putting the ball back in Brussels court. She sure is, over how to sort out the border between Ireland and Northern Ireland after

Brexit. Now, the problem is how to handle customs without bringing back those hard borders which were taken down during the peace process in the

1990s. Now, the British Prime Minister said the EU's plan just won't work.


THERESA MAY, PRIME MINISTER OF UNITED KINGDOM: What I've said to the European Union and we've said this since they've produced their proposed

legal text for the backstop is that the legal text they've produced, the solutions they've produced is not acceptable to us that's why earlier this

year, we proposed an alternative option to that.

We're all committed to ensuring that there is a backstop within the withdrawal agreement, because as I've just said, I believe -- continue to

believe that the best way of dealing with the issue of the border between Northern Ireland and Ireland is a solution which actually means the

backstop isn't necessary because we're able to address this in our overall relationship ...


MAY: ... between the UK and the EU.


NEWTON: Bianca Nobilo is in London, thanks for being here late in London. London, Friday night and you know what? We don't have much to look forward

to on the weekend because I have to say, Bianca that candor with which even the EU has approached this has really stunned me because the issue is this.

There is really no easy solution to this and whatever the solution turns out to be, there are going to be losers, not on one side or the other side,

but likely on both sides, right?

BIANCA NOBILO, CORRESPONDENT, CNN: Right, Paula, and first of all, there's nothing I'd rather do than talk to you on a Friday night, so that we can

deal with. The rest is a lot more complicated. Yes, it's difficult to see how either party will even be moderately happy given the constraints on

this issue.

So, just to translate what Theresa May said there. Essentially, the current backstop as the EU have defined it is the fact that if the UK

crashes out without a deal, then Northern Ireland will remain in the customs union and single market for goods with the rest of the EU, i.e. it

will move away from the United Kingdom and towards the EU economically.

Now, Theresa May's government is propped up by the Democratic Unionist Party that support Northern Ireland's union with the rest of the UK, so

they will never accept his, and also Theresa May is a Tory Prime Minister and the full name for that Party is the Conservative and Unionist Party, so

she can't do anything which looks like its splitting the union in any which way. So, that's why she really dug in today and said, "We can't budge on

this now. The EU, the ball is in your court with this. You need to find a way to meet us in the middle."

NEWTON: But what is that middle? And Bianca, I say this in an environment where, and you've been bringing this up today, I watch with alarm, security

situation in Northern Ireland and feel like everyone works so hard to get the peace agreements there in the first place, what is that risk here if

they don't find that solution?

NOBILO: It is a huge risk, and I think the Prime Minister is trying to leverage that. Essentially, she is saying that while the EU is arguing for

the integrity of the single market, she is trying to argue for the integrity of the Belfast Agreement and the integrity of the union in such a

politically unstable area and Paula, you're right to mention the tensions, in fact, even in the last week or so, there have been six nights of rioting

in London Derry or Derry whatever you call it depending on where you're from, there's also been explosive devices thrown at the leader -- the

former leader of the Sinn Fein Party in Northern Ireland as well.

So, this does show us what reminds us the level of tensions and how little it takes to destabilize the situation. Now, I'm reminded by colleagues who

are from Northern Ireland and Ireland and journalists that of course, that doesn't represent large sways of the population, but still, it just

explains why this issue has to be dealt with so delicately and Paula, as you say, there isn't a solution as yet. The Prime Minister wants a free

trade area for goods and agriculture between the UK and the EU, she says that will solve the problem.

The EU say we can't possibly do that. That would divide our freedoms, so that's where we are at the moment. The impasse continues, but Barnier

sounded a bit more conciliatory today, Paula in the EU. He said that the backstop could be amended. He is very mindful that the Prime Minister's

authority is on a knife edge in Parliament, so he has to be careful how far he pushes it from Brussels.

NEWTON: Which so complicates and already incredibly complicated situation. Bianca, thanks for staying late and working it through with us. We will

continue to follow this every day as we get more news developments. Appreciate it. Thanks.

Now, to the markets. Fears of the escalation in the trade war between the US and China hit stocks of course in London, Paris, and Frankfurt. You can

see it right there, all lower except for Zurich. Auto shares and bank stocks were also affected. Now, the Chairman of Turkish Airlines says he

believes in Turkey, despite the political turmoil there, the airline is facing threats from outside as well in the form of the three major Middle

Eastern carriers. Now, the Chairman sat down with our Richard Quest in London.


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: The other airline are doing this similar sort of thing -- Emirates, Etihad, Qatar and they're just the

three that is sort of in your neighborhood that are all doing six freedom flying in and flying out.

M. ILKER AYCI, CHAIRMAN, TURKISH AIRLINES: Yes, but the thing is, we have a very strong hold market and we have perfect location as well, that is

fitting so much our fleet and we also organized our fleet. We organized our airport, we organized all the resources, everything for the company and

for the future, and in addition to this dedicated staff and also perfect technology also works behind and now, we are -- Istanbul hub is the sixth

most visited country in (inaudible) city in the world right now that is helping us a lot.

QUEST: How have you been affected by any of the political turmoil or any of the political issues that have happened with the Erdogan government.

Obviously, there was the election recently, but there have been differences. There have been issues. There have been terrorist

activities. They do hit you as well.


AYCI: In 2016, we had a crisis management year. 2015 was a record year, 16 crisis management deals. We got over this turmoil by also balancing

everything and we also rearranged the capacity. The arrangement of the capacity was the key because demand and capacity should be always balanced.

If you don't balance it, if you don't optimize also your capacity, your routes planning, if you reorganize your resources as well, you can't be

successful, but it really became successful and got over this political turmoil. Turkey is also one of the -- Turkey has a very strong tourism

sector as well, and Turks, we are the King of Comeback.

So, then in 2017, we became a Euro free court and a comeback year, and after a great year 2017, now, in the first half of 2018, we have another

record year, double digit growth in the passenger side, double digit growth in the cargo side, we're doing great.

QUEST: So, the perception of political instability does not affect you?

AYCI: Well, political situation is always the key and it is always either it helps you or sometimes, it is a challenge, but Turkey, as a dynamic

country right now in transition and a perfect transition right now Turkey has and Turkey's people after referendum and after the last elections,

democratically the process is ongoing and now, the people are supporting the change and the country is changing. It's a dynamic and emerging


That is also one of the strengths of Turkey, I think that the new system will help Turky to go faster in terms of growth and in terms of tourism and

in terms of democratization of the country as well.

QUEST: In difficult economic times, which is what Turkey is facing at the moment, but in difficult economic times, or challenging economic times,

will you be able to have access to the capital necessary for your expansion, for your fleet expansion, for your airports' expansion? For

your renewal, if you like, of business class cabin -- the costly stuff?

AYCI: We do trust first of all Turkish feature and Turkish strength and Turkish people's also entrepreneurship as well, so these are -- the HR of

the country is also one of the strengths of the country as well. We have one of the largest youth generation of Europe. So, then these are all

Turkish potential. So, in terms of the Turkish economy on the right track, and 7.5 GDP growth of the Turkish economy is a great performance. All we

need is the external finance, an FDI to Turkey and I think that Turkish Airlines is benefiting a lot since Turkey is the sixth most visited country

in the world today even in the TripAdvisor as you see that, Istanbul is one of the top destination over Antalya or Izmir.

So, what I can say is, right now, Turkish Airlines, we are finally a solid company, and in terms of capitalization of the company, we made also our

own plans and these are all right now on the right track and we don't have any financial issues or something like that because Turkish airlines also

shareholders, there are very solid shareholders and so, holding Turkish Airlines future as well.


NEWTON: Okay, the American industrial conglomerates reigned supreme in the 1960s and '70s, today though, some are dying while others thrive. The

secrets of success. That's up next.



PAULA NEWTON, HOST, QUEST MEANS BUSINESS: Hello, I'm Paula Newton, coming up in the next half hour of QUEST MEANS BUSINESS. Nigeria's aviation

minister tells me why things will be different this time in relaunching a national airlines.

And millions of dollars have verbally closed, yes, go up in flames except it was the label themselves that was doing the burning. First though,

these are the top news headlines we're following this hour.

Israeli Air Force has launched a wide scale attack against Hamas military targets at Gaza. Now Israel says it's response to its shooting attack on

Israeli soldiers from Palestinian protests at the border fence in which one Israeli soldier was killed.

Palestinian officials say Israeli forces shot and killed four Palestinians. A source tells Cnn, Donald Trump's former personal attorney Michael Cohen

secretly recorded one of their conversations two months before the presidential election. The source says they discussed payments to a former

"Playboy" model who said she had an affair with the president.

The FBI seized the recording from Cohen's office earlier this year. Seventeen people including children were killed after an amphibious tour

boat sank Thursday on a lake near Branson, Missouri, so-called duck boat was swamped by waves and high winds that ripped up suddenly.

Federal investigators are on the scene to try and determine exactly what happened. Other vessels on the water named it safely to shore. Charlie

Rowley; the British man poisoned by the nerve agent Novichok has been released from Salisbury Hospital.

Now, sources tell Cnn that his partner Dawn Sturgess was poisoned by the same agent after mistaking a small bottle of it for a perfume. Sturgess

later died in hospital. OK, so the earnings from Honeywell and GE showed the diverging fortunes of America's great conglomerate.

Now, they dominated the Dow industrials in the 1970s for sure they did. Their products were everywhere. You're talking about everything from

turbines, appliances, fighter jets and thermostats. The Honeywell round was so iconic, yes, this little number is actually in this mesonia(ph).

I've had to give these in hotels in my day, we bought this one this morning at Home Depot, yes, it still exists. Now, we're going to use it to take

the temperature of America's famous industrial brands. Now, first off, Honeywell, business is heating up from the 1950s to the 1980s.

Honeywell moved into computers, heating systems and aerospace, more recently tax cuts, increased military spending and those rising oil prices

have all helped the company's finances. Next step though, we have GE very cold out there.

The empire that once included everything from TV stations to jet engines has absolutely crumbled, it's now trying to offload money-losing businesses

and pay down those massive pension obligations. Next up, the big blue machine, IBM back to warm.

Now the company that revolutionize computers sold most of its hardware business in 2004, like Microsoft its focused on cloud-base services has in

fact paid off. But who can forget this? I can't, finally Sears, yes, it's frost bite for Sears. The empire once included credit cards, internet

services, appliances and of course the great retail brand, most of that is gone now.

Sears has even gotten rid of so many of its stores. Here to tell us why some have succeeded where others have failed. Jim Corridore is the

director of Industrials Equity Research at CFRA, thanks so much for joining us. You know, think about that GE, it meant that one time so much to so

many people, a shadow of its former self.

And yet, in the same breath, we're talking about even companies like Microsoft, that some it's still the definition of conglomerate but it's

doing very well. What is the difference here, is there a lesson to be learned?

JIM CORRIDORE, DIRECTOR OF INDUSTRIALS EQUITY RESEARCH, CFRA: Sure, I mean, there's two reasons to become a conglomerate.

[16:35:00] One is to acquire complementary businesses that makes sense and give you some kind of synergies at cost or RND or purchasing of some kind.

The other is to provide their verifications so that if one sector is doing well, the other sector is not doing as well. GE has chosen to do both

strategies and neither has really worked out for it, it leveled up its balance sheets, it decided to enter the consumer finance business, it

became a systematically important financial institution for a while, and all that led to increased risk for the company, a highly leveraged balance

sheet and they had spent years trying to offload a lot of those assets and still an ongoing process.

NEWTON: It's an ongoing process and Jim, what is the moral of the story though? You know, one time bigger was better and the diversification that

you're talking about helped insulate companies. But now it seems as if companies just are not seeming to be able to focus on any one revenue

stream or anyone profit generator.

But there seems to be no one rule there.

CORRIDORE: That's why it's really important to make sure that the businesses you own make some kind of sense, whether it's either from a

standpoint of shared RNDs, shared sales forces or some -- or provide some kind of needed diversification, that if one sector is doing poorly like the

oil and gas business is for GE.

There's some other sector like healthcare and aviation is doing better. The problem that GE had is that they grew too much, grew too fast and it

doubled down on its strategy to invest industrials oil and gas and power at exactly the wrong time.

NEWTON: But what about Honeywell, why does it seem to have dodged a lot of these similar problems?

CORRIDORE: Well, Honeywell never had a huge consumer finance business, so they never had to -- with the huge balance sheet issues that GE did,

they're also now exposed to oil and gas, they're not in the power business. The fields that they are in, which is related to aerospace and defense

which is related to the home, residential and non-residential construction.

Those are all areas that they're doing relatively well right now. So they are seeing the positive side of diversification without any of the

negatives right now.

NEWTON: The issue here though also seems to be in the kinds of businesses we're talking about. We're talking about the '60s, '70s, the '80s and GE,

even Honeywell in those years. Now, if you look at Microsoft, IBM and even Amazon, has it been a choice they have not adopted to the market

fundamentals the way they should have. But they've been dinosaurs.

CORRIDORE: Yes, when you -- when you acquire a business, that's not the end of the story, you have to continue to maintain that business, you have

to keep your pulse -- your finger on the pulse of what's going on in the world and make sure that, that business remains systematically important to

your business and GE has dropped the ball on a number of that and that's part of the reason for their downfall.

NEWTON: OK, we're going to leave it there, Jim, thanks so much, appreciate it. Now, after the break, Nigeria's new national airline taxes for

takeoff, but is it doomed to repeat the mistakes of its predecessors. I'll speak with Nigeria's aviation minister right after the break.


NEWTON: OK, it's Africa's largest economy and by far its most populous country. But for the past few years, Nigeria has had no national airline.

[16:40:00] Let me say that again, no national airline. Nigerian Airways closed in 2003 after years of mismanagement and large debts.

Air Nigeria closed in 2012 after going through various different owners, Richard Branson even tried and failed to run a Virgin-branded carrier

there. So Air Nigeria is dead, Long Live Nigeria Air, that's the name the government has picked for the new national carrier.

Now, earlier, Nigeria's Aviation Minister told me this time things will be different he promises. I asked him how the new airlines can avoid

repeating those mistakes of the past.


HADI SIRIKA, AVIATION MINISTER, NIGERIA: The West and Central Africa region, transportation by air seems to be the only option. And within the

country of Nigeria, 923,766 kilometers of land mass do need this service of air transportation.

In the past, the sector has been bedeviled by lots of issues, but amongst them, the most prominent is issues of governance, and we intend to look at

that and ensure that it does not hinder the progress of this airline.

NEWTON: And so let's deal with the governance part of this. You know, a lot of Nigerians are still skeptical about this, especially given the fact

that the government will still be involved.

SIRIKA: The tail-end of the '70s to early '80s, government decided to liberalize the sector of air transportation and allowed the private sector

to come in in Nigeria. And we saw the coming of several airlines, most of which were privately owned by individuals who may not necessarily have the

expertise to run airlines.

Some of them may have been owned or run by pilots or engineers. And the fact that you're a pilot and an engineer does not necessarily make you the

best manager of airline. So the capacity of managers of airlines was not at the level that is expected to run on this airline efficiently in most


Quite a few examples are or exceptions to that, but largely, dues to issues of governance and lack of capital made these airlines not to be able to

give the desired service. And as government, we have the social and moral responsibility to provide efficient safest care of air transportation.

And realizing that air transportation is a connector and an enabler of businesses that connects people and trade and markets and also between

nations and other nations. And it capitalizes the economy and then multiply effects of -- it is astronomical.

NEWTON: So is Ethiopian Airlines a part of this or they are modeled for this in any way.

SIRIKA: We will create a hub in Nigeria and we thank God that Nigeria is centrally located in the region and also in the world. We're at the center

of the world, we're in the best situation, and best opportunity to create a hub and we will create a hub. So in that respect, yes, we'll create a hub

and I am sure that the Nigerian hub would do much better than other hubs in the region because we're most centrally located.

Whether Ethiopian Airlines will be a part of it, we're talking to so many airlines including Ethiopian Airlines and we have not concluded on any.


NEWTON: And we're going to pick up this conversation with Zain Asher who is the host of "MARKETPLACE AFRICA". I mean, Zain --

ZAIN ASHER, CNN: I'm a Nigerian myself --

NEWTON: And Nigerian yourself, which is important to note because all I had to do was a very quick check of Nigerians on social media --

ASHER: Yes --

NEWTON: And they were entirely cynical about this, and they have --

ASHER: Yes --

NEWTON: Reason to be, don't they?

ASHER: No, listen, Paula, as a Nigerian myself, I would love to be optimistic. I'm the first person to tell you that I would actually love to

have an airline in my country to be proud of, a national carrier to be proud of. However, you know, you talked about this, you look at the

history and you look at the number of airlines, both private and public that have failed in our country.

There's a cycle of failure. So it's all well and good for the minister to sort of get on stage and announce in front of the media, there's going to

be this massive new airline. But if you don't address some of the underlying issues that have brought us to failure in the first place, it's

all going to end in tears.

NEWTON: And I want to deal with that one issue which he mentioned, he said governance, but it's clear not the corruption, right, well, it's the

problem --

ASHER: OK, yes, it's governance, it's mismanagement, it's poor leadership, it is nepotism, but there's also issues when it comes to the passengers'

experience as well.

Because it's not just about being able to make ends meet, it's also about having the airline being able to thrive. The last time I was in Nigeria,

just last year, I was traveling from Lagos back to America, my flight was delayed three hours because I got to the airport and there was literally no


So the entire airport --

NEWTON: Wow --

ASHER: Was basically peach black and they had to look at my passport, check my passport using flash light, sometimes they do it with the light

from a mobile phone, sometimes flights are delayed because a pilot just don't show up for work on time and there's no consequence.

Sometimes flights are delayed because little relief, there's not enough passengers, so they delay the flight hoping and praying there'll be more

passengers that drop --

NEWTON: Wow --

[16:45:00] ASHER: To the airport, and you know, and sometimes they will combine two different flights going to two different destinations, it's the

same flight and then just drop people off along the way like an Uber.

NEWTON: Oh, my gosh --

ASHER: No, I'm not even joking like an Uber --

NEWTON: I know that you are not, I know --

ASHER: It's not just about the financial aspects of it obviously, the debts, the foreign exchange issue, it's also about infrastructure, it's

also about cultural issues as well. And so Nigerians really have to put their foot down and say listen, we will not accept this type of service in

our airlines any longer.

NEWTON: OK, now one thing that was being talked about is that fact that the government is on the front both here. Now, I asked the aviation

minister, I said where are the private investors because everybody would have more competition.

ASHER: Do you think this has something more to do with political timing and honestly, my gosh, I don't want to be pessimistic, this is my country

and I love my country so much, I don't want to be pessimistic. But people have been saying that, you know, you can't question the timing of all of

this because it's launching in December two months before a national election.

And you look at it and you ask yourself, well, where are the -- who are the -- who are the sort of private investors? Number one, is it going to be --

is it already a registered entity? Does it already have a license to operate?

Where are the offices going to be? Have they started recruitment? There's not even a website, there's not even a website or the main address for this


NEWTON: And they say they're launching in December.

ASHER: Exactly, and that's -- what is that, five months? Five months from now, so I don't know. I don't want to be pessimistic though, I really want

this airline to succeed.

NEWTON: Quickly, before we go, and I know this is totally viewed with a lot of politics as well. But Ethiopian Airlines has had a lot of luck, a

lot of great management and they really are basically challenging what it means to be an African airline especially with some of the hub activity

that they've taken into other Addis Ababa --

ASHER: Yes --

NEWTON: Does that give you hope?

ASHER: Well, when you look at Ethiopia Airlines, it is entirely sort of government-owned, but it's private run, and when I asked people, listen,

well, you know, you mentioned all these issues plaguing Nigeria, but Ethiopian Airlines has done so well, why is that, right?

People just talk about leadership, they talk about leadership, Nigeria unfortunately has a massive problem when it comes to corruption. When it

comes to even small things like anybody who is associated with the government or knows the government minister automatically thinks that they

should be able to fly for free always.

And obviously --

NEWTON: Wow --

ASHER: That's not going to ruin an airline, it's not big enough to ruin an airline, it is not good for business. And so you have to look at Ethiopia

Airlines as a role model just in terms of leadership and management.

NEWTON: Got you, Zain, I know you will be first one at this desk of anchoring or reporting to say, go Nigeria Air --

ASHER: I love my country and I want it to succeed and I really want to emphasize that.

NEWTON: Good, and you'll be here if that happens and here as well and tell them. So coming up, burning Burberry, yes, burning Burberry, you never

catch Zain doing that. The thought of it might bring tears to some fashionistas, but the U.K. fashion house revealed it's destroyed tens of

millions of dollars worth of its own clothes. We'll explain.


NEWTON: Now, earlier on the show, we told you about economics one-on-one, who can forget? But here's another lesson, when demand starts to sink,

guess what? Supplies start to pile up.

[16:50:00] Well, Burberry is going to very extreme lengths to keep its supplies in equilibrium and control their supplies.

In its annual report, the U.K. fashion house revealed it has destroyed $37 million worth of its own stock to guard against counterfeiting. Orsola de

Castro is the founder and Creative Director of advocacy group Fashion Revolution. She joins me now live from London.

OK, clearly, you have a problem with this, you know what the fashion house is going to say. They're going to say we are protecting our brand, we are

protecting our prices, we are protecting our reputation. This has to be done and we're not the only ones.

ORSOLA DE CASTRO, FOUNDER & CREATIVE DIRECTOR, FASHION REVOLUTION: Absolutely, I think it's very important to understand that this is a very

widespread practice that allowed the fashion industry. Doesn't just affect luxury houses, it also affects the high street.

In fact, we have H&M doing something similar quite recently. It is you know, the result for me of years and years of mass production and to a

certain extent an industry that is profoundly inefficient, where burning and destroying clothes is the solution rather than resolving the problem at

source and being more efficient in the production of the clothing themselves.

NEWTON: Are you finding this as a morale problem or as a business problem?

DE CASTRO: Both, I mean, I think the fashion supply chain is very disconnected, and the fact that we can't create a system where materials

and clothing are valuable to the brand that produce them as much as they add to the consumers that buy them is certainly a business problem because

of course, this is a massive waste of material.

But this is also a morale problem because there isn't such a way of disposing of clothing in an equal friendly way. So it is a morale problem

because it affects our environment and this is a morale problem because it is slightly a slap in the face of you know, consumers' hard earned money

that are, you know, used to buy these clothing.

I would like to say, you know, really that Burberry is not unique in this. In fact, they are one of the few brands that have to a certain extent a

creative approach to this problem. Their recent collaboration with Elvis & Kresse in the U.K. up-cycling their leftover leather shows that they are

looking at solutions to this huge problem.

But the reality is that it is a huge problem throughout the supply chain and it -- I don't think it shows any sign of stopping any time soon.

NEWTON: Yes, and it doesn't show so far any creative solutions in that direction as well. We're going to -- it's an issue we'll continue to keep

talking about because I for one was quite naive as to how much material was actually destroyed. Thank you so much, appreciate your time.

Now, fashion entrepreneurs are just some of the people benefitting from a new scheme by JPMorgan Chase. Now, the bank is spending millions of

dollars to support minority entrepreneurs in Detroit, New York City and San Francisco. Now, it's taking its entrepreneur of color fund to Chicago.

Christine Romans has more.


CHRISTINE ROMANS, CNN CORRESPONDENT (voice-over): One order at a time for Vernita Johnson's print and embroidery business has grown to annual sales

of $500,000 and counting.

VERNITA JOHNSON, ENTREPRENEUR: I really didn't even realize I did it. And so, my accountant said, you sold girl.

ROMANS: Johnson started her business out of her bedroom on Chicago's west side nearly 30 years ago. Today, she employs eight full time workers,

provides part-time work to young people in the Summer. She owns this building and this equipment and it's exactly the kind of business the

entrepreneurs of Color Fund wants to support.

The Fund works with local community groups to direct critical financing to minority business owners when bank loans aren't an option.

JOHNSON: When you're small and you're still running in the red, they'll tell you, well, come back next year when you're doing a little bit better

and we're going to look at you again.

ROMANS: And then you say that I could be doing a lot better if you just took the risk.

JOHNSON: If you just take a little risk, it's almost like a make or break here, because you need the equipment, you need the working capital,

sometimes bridging that little gap would be very essential.

ROMANS: That gap would be wider for minorities, only 19 percent of Chicago businesses are owned by people of color. In a city where non-white make up

more than half the population.

After the Fund's successful debut in Detroit, JPMorgan Chase along with the Fifth Third Bank are now moving to Chicago, investing $6.5 million to help

Chicago's south and west side business owners.

UNIDENTIFIED MALE: You have to do a collaboration, it's simply does not work if you know, businesses hitting against government or vice versa.

ROMANS: This theory, work with the community leaders to grow businesses like Vernita's. Small business in those inner city Chicago neighborhood

provide nearly 70 percent of jobs and its existing businesses added one or two jobs each, it could eliminate unemployment in the inner city.

[16:55:00] JAMIE DIMON, CHIEF EXECUTIVE OFFICER, JPMORGAN CHASE: Most people want to do well, they want to do things themselves, sometimes they

need a start-up loan and sometimes they need advice and coaching which I think is really important.

And if you can make that loan and get that person, you can lift up the community.

ROMANS: How do you see local government banks, the people with the capital and the resources. What is their moral imperative to help success?

DIMON: I think all of us in society should have a helping hand. It takes government -- if you have bad government, it's not going to work. But it

takes business, business has the know-how, so if you do it together, it works.

ROMANS: How important is it for you knowing that you're providing a livelihood for other people in your community.

JOHNSON: Sometimes when I look at the guys and I ask them sometimes, it wasn't working, what would you be doing? And some of the guys say, actually

tell me, you know, I don't know because in the area that I live, there's a lot of crime there and sometimes you get in the wrong direction, you do the

wrong thing.

You see, but coming north, it never crosses my mind.


NEWTON: That was an eye-opening report, next week, you can see more of Christine Romans interview with the JPMorgan CEO Jamie Dimon, that will be

on Monday's QUEST MEANS BUSINESS, same time, same place, only right here on CNN.

And if you want to keep up on top of the day's business headlines in just 90 seconds, enjoy our daily briefing podcast which is updated twice a day

before and after the bell rings on Wall Street, and you can just ask Alexa on your Google home device for your CNNMoney flash briefing; and that's

every day of the week it is.

And that is QUEST MEANS BUSINESS, I'm happy to report that Richard Quest will be back in the chair next week, I am Paula Newton, the news continues

right here on CNN.