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QUEST MEANS BUSINESS

. Facebook Says It Is Shutting Down A Network Of Accounts It Believes Are Linked To Russians, Tech Shares Rebound After Losses, The Trump Administration Is Mulling A Tweak Of The Us Tax Code Would Give A Fresh $100 Billion Break To America's Ultra Rich. Aired: 4-5p ET

Aired July 31, 2018 - 16:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: .. by the Dow Jones Industrials of over 100 points, gains on the NASDAQ and the S&P, the rallies of tech

have been arrested, we'll talk about that in a moment. I think they are firm gavels of the Pan Mass Challenge which brings trading to -- a little

colorful way to end Tuesday, July 31st.

Tonight, Facebook versus the fakes. Dozens of pages are taken down for messing with American politics. Apples earnings out within the hour, we'll

have them for you and we're looking for the first trillion dollar market cap company, and have another hundred billion, how rich Americans look at

the new tax cuts on accounts on the capital gains.

I'm Richard Quest, live from the world's financial capital, New York City where of course, I mean business.

Good evening. Tonight, Facebook sounds the alarm. It says it is shutting down a network of accounts it believes are linked to Russians. The

accounts have been reported to the authorities and Facebook says they promoted a range of politically charged content. For instance, one of the

pages promoted an anti-fascist rally in Washington. Thousands of people are said to be interested in attending the event.

This is the most extensive effort to interfere in American politics that Facebook has found and made public ahead of the midterm elections in

November. Speaking earlier on Fox News, the Homeland Security Secretary said, it's a step in the right direction for Facebook.

(BEGIN VIDEO CLIP)

KRISTJEN NIELSEN, HOMELAND SECURITY SECRETARY: I think part of this is a very good news story because it's showing that Facebook has taken this very

seriously, so they should be commended for what they did today. It also shows though that the threat is very real and Americans need to know that.

The Russians or whoever it is in this case, we haven't attributed it, but Russians and other nation states absolutely are attempting to manipulate

us.

(END VIDEO CLIP)

QUEST: Dylan Byers is in Los Angeles, so from what I read, it's not exactly a carbon copy, but there are great similarities between these

accounts, the way they were set up, the way they have been operated and executed and those of the previous election.

DYLAN BYERS, SENIOR MEDIA REPORTER, CNNMONEY: That's right. I see two notable differences, Richard. One is that Facebook is reporting this ahead

of the midterm elections, as opposed to after the midterm elections. Really, so much of the outcry after 2016 was how long it took Facebook to

identify this problem.

Now, after devoting all of these money and all of these manpower towards solving -- not solving this issue, but at least being able to identify this

issue and prevented from happening before the elections, they are showing some capability of doing that.

The second thing is that the people who are creating these fake accounts have become somewhat more sophisticated. The way that they buy, the paper

trail or the digital paper trail that they leave when they buy ads or place Facebook pages or Instagram pages, that's all become a little bit more

complicated, a little bit harder to find and identify. One of the reasons why Facebook isn't publicly saying that there is a Russian link here,

privately acknowledging that they do believe there may be ties to Russian actors.

QUEST: Now, it's fair to say that we're talking here about those fake pages or posts designed to promote discord. But for Facebook, how you

identify those from legitimate people who have illegitimate views, if you like, ordinary people who have repugnant views but who still are what Mark

Zuckerberg was talking about when he hand fistedly talked about the holocaust deniers.

But there will be people who will say, "Well, no, these are legitimate views."

BYERS: The views may be legitimate and there is no question that the people who have created these pages have done a sort of wonderful job of

understanding what tears at the fabric of American society. They are very good at hitting those pressure points where we disagree with each other and

sort of exacerbating that tension, exacerbating the partisan and cultural divides that are preexisting in America and that cannot be blamed on any

outside actors.

Their way of tracking it down is, look, at the end of the day, behind the page, behind an account to some degree, you have to actually be who you

claim to be and if you claim to be a protest organizer in a state like Texas or Maryland or Idaho, and it turns out that the source of that page

is actually coming from Moscow or somewhere else in Russia, that is when Facebook can step up and identify the problem.

QUEST: I mean, if they found these ones -- there's only one -- there's how many they've missed or still waiting to be discovered?

BYERS: Richard, that is absolutely right and at the end of the day, these 32 pages or accounts that they have found are extraordinarily small in

comparison to what lawmakers at least believe is the total sum of the problem.

[16:05:10]

BYERS: And what Facebook says is, "Look, we can't prevent it, but we can do our best to monitor the problem and take care of it as we see it." And

that at the end of the day is a game of whack-a-mole that Facebook is going to have to be playing probably for the rest of time.

QUEST: Dylan Byers, we thank you, Dylan Byers.

BYERS: Thank you.

QUEST: We're waiting for the world's biggest company to release its earnings. I have Shelly Palmer and Clare Sebastian with me in a moment,

you'll be able to digest. You've got a bit of time before we have this, but there's plenty to talk about and we should keep moving. As we have

over here, so this is the earnings that we can expect over the course of the week.

Now, Apple is going to report in just 25 minutes from now. It's due at 4:30, and once we get rid of Apple, we've got the rest of the week and

then, we can see an entire series of companies -- USS, Tesla, and Volkswagen will give us an idea, particularly Tesla, we'll be interested to

see Elon Musk's views after the way he handles his call, and then Thursday, you've got BMW and you've got CBS.

And now this question of CBS of course will be how they're accounting their earnings or reports for what's happened with Les Moonves, who is the Chief

Executive and the President who is still in post even though there are serious sexual harassment allegations being made against him and CBS has

decided to investigate.

The stock was up by the way after being down on the news last week.

As for today's markets, look at that, when you look at the top of the day, we had a slight blip at around 3:30, but the top was somewhere just sort of

after lunch when I think we were about 140 -- 150 up, but by the close, things were looking a lot less cheerful, but even so, not a bad start to

the week.

We've had the best month since January, right, considering it is the end of the July, that's not too bad, and at the stock exchange, if you look at how

the various tech stocks, the FANG stocks performed today because that's so much in vogue at the moment, we've got Facebook, which actually put on the

best part of 1%, Amazon off virtually nothing at all, Apple ahead of its earnings a little bit of weight, Google as you can see.

So, Netflix up three quarters of a percent considering the damage that these stocks have done in recent days, but we turn to Matthew Cheslock of

Virtu Financial who told me that yes, there is a rotation, a shift underway.

(BEGIN VIDEO CLIP)

MATTHEW CHESLOCK, EQUITY TRADER, VIRTU FINANCIAL: We talk about who is investing in this market now, it's the millennials, they want to buy

products that they know, right? And those that are clearly the products that they know, and that's why they have been outperforming for so long,

but now, we're starting to see that rotation in the market. We saw ...

QUEST: Rotation from what to where?

CHESLOCK: We saw the industrials, the financials, energy -- all do much better than technology over the last couple of weeks. We've been waiting

for new leadership, right, and we had news out today. We talked about maybe a breakthrough in the China discussions, the tariff thought -- the

futures rallied incredibly quickly on that news, so this market is fragile in the fact that there is volatility and volatility is associated with

August and midterm election season, and so, expect more of it, but if we have a new leadership group that we can focus on some of the bigger names,

some of the other ones that aren't tech names, we have some kind of buffering in this market.

QUEST: Right.

(END VIDEO CLIP)

QUEST: And that buffer in the market, those are the tech stocks and that rotation can be seen because there aren't particularly strong gains over

here, just about 1% or so, but if you look at the Dow Jones, then you see a much more robust performance because it was Boeing, it's Caterpillar, it's

3M -- it's all the big UT, it's all the big industrials that push that market higher today.

Clare Sebastian is following the markets. Shelly Palmer is looking at the technology side of things. Good to see you both. This rotation, Clare

Sebastian means what?

CLARE SEBASTIAN, CORRESPONDENT, CNN: Well, the good thing is it's a rotation, not a retreat, Richard. This is not a return to the days of

February where we saw people pull out in large scale from the market. I think what the interesting part is that how resilient the Dow have rolled

and the S&P 500 have been throughout their kind of tech -- what people are calling an apocalypse that we've seen in the last few days, but people are

perhaps going to a slightly more boring there, I'd say it's slightly more of the miller stocks, the likes of 3M and Caterpillar, Boeing were up

today. Even GE was up quite a bit.

And now, going back into value rather than growth, but I don't think this is going to be a wholesale shift. I think there's just a repositioning

going on right now.

QUEST: Whey did tech fall out of -- but I mean, the miss of Netflix wasn't that bad. Facebook has been warning for months. I mean, Mark Zuckerberg

short of what -- the old days walking in front of the steam engine with a red flag, he's been warning about that for months.

SHELLY PALMER, CEO, PALMER GROUP: Yes.

QUEST: Why were we all so shocked?

PALMER: Look, markets get spooked for all kinds of reasons and Facebook has always held itself out as a growth organization, a growth company.

They are going to grow. They're going to grow their users, they are going to grow their monthly active users and they didn't -- they made their

revenue numbers, that was great, but all of a sudden, there was a chink in the armor, and I think people were waiting ...

[16:10:16]

PALMER: ... for an opportunity to say, "See," and I am not sure that was a smart thing to do, but that's kind of what it felt like.

QUEST: Right, so it begs the question, who is the child in the room? Is it the investors in the markets and us for sort of expecting and we don't

get a nice lolly with the nice sprinkles on the top, and the flake and whipped cream, then you throw a tantrum.

PALMER: It depends on what you invest it for, right? If you invested to play the movement in the stock, then that's one thing, but if you're going

long on Facebook on its fundamentals, you've got two billion users more or less, it's a robust advertising platform. They are probably the best

mobile video platform for advertiser friendliness. They are making a ton of money at a good margin, Google same-same.

Google is one of the few companies in the world. If the internet gets bigger, Google gets bigger. So, it's like you don't have to worry that

much that no one is going to be searching on Google today, it's like they can't really say that's true.

SEBASTIAN: And there are people out there who are saying that what's going on at the moment just like we saw with the entire market in February, the

corrections that we've seen in tech is actually a good thing because what we saw in the run up after Cambridge Analytica, Facebook and the rest of

these tech stocks in lock step, rocketed back up. Facebook gained about 40% in the months following that and I think what we're seeing now is a

reaction to that reaction as much as it is for the earnings season.

PALMER: Well, look, from my perspective, there's been a tech clash. There is going to be ...

QUEST: Tech clash.

PALMER: Yes, there's been a tech clash and there is going to probably be another one because people are worried about data privacy. They are

worried about cyber security, and we haven't really -- people are talking about Russian hacking and they are talking about tampering.

Facebook made a big announcement today about taking some pages down, but no one has really felt the effects in a tangible way and that shoe has to drop

because between now and the midterms, some way somehow, something is going to happen and we are going to know that wow, this is what they mean when

they say somebody hacked this and then this will correct and then we're going to have to carve our way back. Or everyone is going to go, "No, I

believe in it." There is nothing to correct.

QUEST: Right, but the fascinating part will be whether or not Facebook for want of a stock, whether it claws itself back as fast as it did back after

Cambridge Analytica, because as you said -- I think you said to me earlier on "Quest Express," we're only down at the levels of April, and we're

certainly way above the highs of Cambridge Analytica.

SEBASTIAN: And big picture, Richard, this is the third quarter of a midterm year, which according to some sort of CFO I spoke to today, it's

35% more volatile than any other quarter, so basically, I think more volatility this quarter.

QUEST: Let's look at Samsung results.

PALMER: Sure.

QUEST: And Samsung phones, Shelly ...

PALMER: I don't think Samsung gets credit for the innovation inside, right? A lot of phones are glass. The iPhone is glass, all of these

Galaxies are glass, the HTCs, everybody is making a big glass smartphone.

Samsung is doing a good job with battery life, they're doing a good job with screen brightness and camera. The things people inside really care

about but they don't get credit for it and its very price sensitive because you look at two glass phones and you go, "This look about the same. They

have the same features and this one is half the price or free." I think Samsung has had some headwinds -- serious headwinds in that business and

they are going -- they are fighting back the best way they can. They are an engineering company doing engineering.

QUEST: We need -- we will have Apple in about 15 minutes from now and that's one that we're going to be watching for.

PALMER: You bet.

QUEST: Go and sharpen your pencils to be ready. All gadgets that we've been talking about, they are all set to become more expensive because the

Trump administration's proposed tariffs on $200 billion worth of goods made in China. Now that of course includes the circuit boards and

semiconductors tied to our phones and computers. CNN's Samuel Burke has been looking into that from London.

(BEGIN VIDEO TAPE)

SAMUEL BURKE, BUSINESS AND TECHNOLOGY NEWS CORRESPONDENT, CNN: President Trump's trade war is barreling towards Silicon Valley.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We are demanding fair and reciprocal trade.

BURKE: The latest round of proposed tariffs targets the Chinese hardware fueling the tech sector. Things like semiconductors and electronic

circuits.

JOSH KALLMER, SVP, INFORMATION TECHNOLOPGY COUNCIL: There are certain kinds of machines that you and I never come into contact with but that

underpin a lot of the high tech products that people buy.

BURKE: They are the key components that make smart devices, household appliances and home security systems hum

Every day items like the iPad could be hit. The tablet has a chip from Intel which could be a target. E-scooters have taken office here, now they

face a 25% tariff even your favorite Netflix series could be in the firing line. The streaming companies' videos are played from the Amazon Cloud

server and that equipment comes from China.

Missing from the list, the Apple iPhone. CEO Tim Cook told CNN in June he thought the device was safe.

[16:15:06]

TIM COOK, CEO, APPLE: I don't think that iPhone will get a tariff on it. It is my belief based on what I have been told and what I have see. I just

don't see that.

BURKE: Now, the President says he is ready to tax almost all Chinese imports which would include the iPhone.

TRUMP: They went after our companies and they stole our intellectual property.

BURKE: The administration says the tariffs are meant to pressure China to fall in line, but experts say a levy on the iPhone would be

counterproductive. Even though the device is assembled in China, it's designed and manufactured in the US.

KALLMER: Ninety percent of the tariff falls on value created by Americans. It is -- there is no other way to say it than to say that literally, the

United States is taxing itself.

BURKE: And Apple may have the most to lose if China retaliates with tariffs of its own. Twenty one percent of the company sales are in China,

leaving a clear target on America's most valuable company. Samuel Burke, CNN, London.

(END VIDEO TAPE)

QUEST: And Samuel will be with us later in the program to go over the results from Apple and they will be coming out within the next 15 minutes

or so. As we continue tonight, Donald Trump is planning a new round of tax cuts. Now after the break, our next guest has been in the "Shark Tank" and

the "Dragon's Den," Kevin O'Leary will be with me in the sea suite. How good to see you sir.

KEVIN: Good to see you.

QUEST: We have much that we need to get to grips with.

KEVIN: Thank you, thank you.

QUEST: Please come and join me.

Live from New York and the Trump administration is mulling a tweak of the US Tax Code would give a fresh $100 billion break to America's ultra rich.

It's the adjustment for the Capital Gains for inflation. The Treasury wants to use regulatory powers bypassing Congress, which normally has the

power of the purse. The leading Democrat in the Senate, Chuck Schumer of New York has called the plan outrageous.

(BEGIN VIDEO CLIP)

CHUCK SCHUMER, US SENATOR, NEW YORK, DEMOCRAT: The economy is already running hot on the artificial sweetener of tax cuts and deficit spending.

Another hundred billion in tax cuts for the rich isn't just more gasoline on the fire, it's an incendiary device. At a time when the deficit is out

of control, at a time when wages are flat, at a time when the wealthiest are doing better than ever, to give the top 1% another big advantage is

outrageous.

(END VIDEO CLIP)

QUEST: Joining me now is one of the 1% I suspect, Kevin O'Leary. He is a businessman who has appeared in the reality investment show "Shark Tank"

and "Dragon's Den."

[16:20:12]

QUEST: Is it outrageous to index the capital gains for the purpose of inflation?

KEVIN O'LEARY, CO-FOUNDER O'LEARY FUNDS AND SOFKEY: No, but that's -- this is nothing about giving more money to the rich because the truth about job

creation in America and Chuck Schumer just made reference to how hot the economy is, that benefits every American. Most jobs are created in small

businesses, the kind of businesses I invest in, in places that are not New York or Boston or Los Angeles, like Fargo and Champaign Urbana and

Amarillo, Texas where a man and a woman maybe a family team creates a cupcake company and starts with two employees and now has 26.

When he makes statements like that, he is attacking them because they take risk with money, so to the extent that we can get Americans to create

companies, be successful with them, they create jobs. We're in a phenomenal place now, 4.1% GDP.

QUEST: I guess, you're talking about the real economy, real people making real things, but Chuck Schumer is talking about Wall Street, Chuck Schumer

is talking about Venture Capitalists, people may be even like yourself.

O'LEARY: That's why when I hear that kind of rhetoric, I say, "It's not rich people only. It's entrepreneurs that have to be enticed to risk their

own family's money and these tax codes don't just benefit the rich. Who pays most of the tax? Rich people. That's probably the way it should be.

But when we create tax code like this, we are helping every American start a company and risk their money. That's the whole idea of this.

QUEST: I guess the problem of course is when it seemed to be that social benefits are being cut and when the things are getting much more difficult

for those at the lower end and there's less available welfare, suddenly, it seems a bit egregious.

O'LEARY: I hate the partisan rhetoric that goes on in Washington now because at the end of the day, people like me take our money and invest in

young startup companies. I have got over 30 of them and I see how these ...

QUEST: What's the average investment that you would make? Give us an idea ...

O'LEARY: The smallest might be $50,000.00, the biggest $5 million in that kind of range. And I've got that kind of range, but when I talk to these

young entrepreneurs in their 20s, they are not worried about politicians. They are trying to make payroll next Thursday. They want to be given every

opportunity they can to succeed, and so the rhetoric that we shoot at each other which is becoming noisier and noisier and it doesn't matter where you

stand in politics today, we have never been more divided on all of these issues.

But at the end of the day, what has always been the American dream is that young entrepreneur, that man or woman in their 20s that is saying, "I want

to succeed," we should champion them. Both parties should. We should stop yelling at each other and help those people create jobs.

QUEST: Well, in that scenario of those environments, is it helpful to have these trade tariffs that are in place that could put up the cost of raw

materials to this people whether it be steel or whatever, and certainly, could make it more difficult for them to export and sell abroad?

O'LEARY: You raise a very good point. They could, but so far, they haven't. And here is what most market participants believe about this

administration's policy. First of all, I've come to the point now that I don't listen to the noise anymore. I just focus on the policy. I look at

a Wilbur Ross, I've watched him operate for decades. Very intelligent man in international markets. Kudlow -- the same thing. He is a free trader.

The policy is becoming ammunition. These policies are being leveraged to try and break open markets that have been closed for American companies for

decades.

No administration and look, I am not trying to be supporting or not any politician. I am just saying policy, policy, policy. What I see happening

and why the markets haven't corrected on this is, if we can get the Chinese and the Europeans to open up their markets by squeezing them with tariffs,

the outcomes is so enticing for America, the market is anticipated that will happen in the next two years.

QUEST: That's the core point.

O'LEARY: Yes.

QUEST: The market is anticipating and that is why there has not been that fissure or crack that could spread like glass or throughout ...

O'LEARY: You're a hundred percent correct. They are going to be given a couple of years to prove out their thesis.

QUEST: A couple of years.

O'LEARY: At least, at least. It will take that long but you've already started to see the German saying, how can we make peace on cars. You've

already heard the Europeans say how do we work out commodities. They are starting to trade, at least that's the back story.

QUEST: Right, so, do you see strategy in all of this? I mean, all right, the "New York Times" arguably will have their own view and "The Washington

Post" will have another view and there will be the critics that say that what they are seeing from the White House is not strategy, but scattered

gun and whatever they seen on Fox News in the morning. Let's put that to one side. Do you see strategy in what the President is doing?

[16:25:59]

O'LEARY: I have stopped trying to read the tea leaves on the chaos that comes out of the two-way dialogue that is going on in a very partisan

basis. All I care about now and most investors are like that, show me the policy, show me the outcome. The chaos we had around tax cuts, the only

thing I cared about was the tax code change in January. That changed my investment thesis. More money came back into the US, more money went into

small cap companies. I no longer listen to the rhetoric because it's irrelevant.

QUEST: It's hard, it's hard not to listen to it. It's everywhere.

O'LEARY: Every day, it's chaos, but on the other hand, if I think of good executive management, I think about Mnuchin, I think about Kudlow, I think

about Ross -- they are tasked with implementing this and I am going to give them 24 months to go figure it out.

QUEST: Finally, we obviously have to talk about is markets having done the sort of the bigger picture. I mean, everybody questions obviously what my

last guest, Shelly Palmer calls the tech clash. Does it survive? Does it not? They were overpriced to start with, the forth is clearly now coming

off the top, but where do we go from here is a bit like what day is it?

O'LEARY: When you get -- when you have such extraordinary gains over the last three years in companies like Netflix, in Facebook, in Google, in

Alphabet, in Amazon -- it's not a surprise if you've been a long term market participant like I have to get 20%, 25%, 35% corrections.

In Amazon's history, it's had many corrections north of 20%. The only thing to look at when you have these corrections is, is there something

changed in the business model? And it's hard to see Amazon slowing its growth or any of the international companies like Alibaba or any of them

and so, I've invested globally in all of these growers based on their growth ...

QUEST: And stayed with them.

O'LEARY: And stayed with them. Corrections comes, they go. I buy more. Facebook is a good example. There is no platform in the world like

Facebook for advertisers and yes, there's a lot of concern about privacy, there's a lot of concern about regulation and compliance. The company

announced why they corrected so badly and they're going to spend a lot more money in that, but frankly, that's a competitive advantage.

There are a very few companies that could spend that much to be compliant.

QUEST: Final question, do you still enjoy it? Do you still enjoy the thrill of the opening bell and the closing bell and all that happens in

between?

O'LEARY: More than ever. I love supporting my entrepreneurs. Imagine, every day, my phone rings with the euphoria of success of some company and

the end of the world for another, they are saying, "It's a disaster. We just got kicked out of Walmart." Another calls me and says, "We just got

into Target." That kind of thing is happening every day. The journey of the young entrepreneur supported by an investor like me is what keeps me

young. That's what I say.

QUEST: Great to see you, sir.

O'LEARY: Thank you very much.

QUEST: Thank you very much indeed. And of course, if you need to keep up with the day's business headlines in 90 seconds, talk about technology,

it's a daily big briefing podcast. It is updated twice a day before and after the closing bell. Alexa or Google Home Device, if you just shout

CNNMoney flash briefing, I promise you, money back guaranteed, you'll hear something.

We're moments away from Apple's results. We'll have them when they come out after 4:30 tonight.

[16:30:14]

(COMMERCIAL BREAK)

[16:30:00] RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Hello, I'm Richard Quest, there's more QUEST MEANS BUSINESS in just a moment. And the man who

posted blueprints for a 3D printing gun tells us he should have the right to carry on.

And the Bank of Japan keeps investors on their toes to kick off a massive week of monetary policy. You are watching Cnn, and on this network, the

facts always come first. Facebook says it's shutting down a sophisticated network of accounts it suspects are linked to Russians trying to interfere

in upcoming U.S. elections.

The company briefed Congress and reported the activity to law enforcement. It's the most expensive effort Facebook has found and made public so far.

The trial of a former Trump campaign Chairman Paul Manafort is underway in Virginia.

It's the first real trial to come from the ongoing investigation by the special counsel Robert Mueller. The jury of six men and six women was

sworn in a short while ago, Manafort faces 18 counts of violating tax and banking laws. British lawmakers say international aid groups are failing

to tackle widespread section abuse and harassment carried out by their own workers.

The report by a committee of MPs says its slow response by humanitarian organizations was in their own words "burgeon on complexity". "The

Washington Post" is reporting that North Korea may be working on a new intercontinental ballistic missiles.

The paper says U.S. intelligence agencies believe this satellite image shows potential work on liquid-filled rockets at a factory near Pyongyang.

The forecast doubts on President Trump's claim that North Korea no longer poses a threat.

Mergers -- civil aviation chief is stepping down, following a new report on the vanishing of flight MH-370. The findings indicate the air traffic

controllers in Kuala Lumpur under his watch broke some rules, they were not blamed for the disappearance which remains the cause of which remains a

mystery.

In just a few hours from now, a U.S. defense firm will post online plans that will allow anyone to use a 3D printer and make a plastic gun.

Numerous states are trying to block the downloadable gun because of concerns about safety and traceability. Laurie is with me, Laurie Segall.

So, I mean, you're saying that, that the plans will be up online.

LAURIE SEGALL, CNN SENIOR TECHNOLOGY CORRESPONDENT: Yes, this has been going on since 2013 and the settlement was just reached. And this will

mean, people will have access to download, you know, the blueprints for all different types of assault rifles, you name it.

And I spoke to Cody Wilson earlier, and what he said was that, he said over a thousand people have downloaded this blueprint. We're talking semi-

automatic rifle blueprint. And he said that this isn't about the second amendment, but it's about the first amendment.

This is about free speech and access to information. Take a listen.

(BEGIN VIDEO CLIP)

SEGALL: You have more than 20 states trying to block you from making these --

(CROSSTALK)

CODY WILSON, AMERICAN DEVELOPER & GUN RIGHTS ACTIVIST: Oh, yes --

SEGALL: Available online. So what do you expect to happen?

WILSON: I expect a more win. We've already published the file, so I don't know how they keep giving me this stuff, publishing the files.

SEGALL: President Trump tweeted that he's looking into 3D plastic guns, and he said this doesn't seem to make sense. What's your response to the

president?

WILSON: I don't sell 3D guns, so the president will understand that in time.

SEGALL: Are you worried that the government will reverse its decision?

WILSON: Oh, like I told you, I already uploaded the plans. I mean, that - - you know, it's -- the ship of sale, it's probably getting information now. It's irrevocable, no one can take it back.

SEGALL: The democratization of guns online, giving people the ability to 3D print their own guns, wouldn't make it feasible for felons, minors,

mentally ill to have access to firearms. Are you worried about those repercussions?

[16:35:00] WILSON: No, I don't believe that accessing information is ever tremendously negative or a bad thing. I know that people can use

information for bad things. But this isn't a justification to what? Stop a publisher from speaking?

SEGALL: How would you keep a minor away from 3D-printing a gun when you have the democratization of these plan online that will make it readily

available for folks to do this in a click of a button.

WILSON: I'm sorry, like, I mean, do public libraries perform background checks on people before they rebook, so just doesn't -- which is not how

speech and publication works. So look, it's legal for you to make a gun in this country. It's legal for you to make a gun, all right, I mean, you're

violating the law.

But that doesn't mean that that possibility prevents people from being able to legally share and really access this information. This doesn't work

that way.

SEGALL: Look the case of the 25-year-old man who went on shooting spree in Santa Monica with a home-made AR-15, killing five people. Are you worried

that the implications of democratizing this type of information would lead to similar types of deaths.

WILSON: I guess the question that is like connected to the word meaning to democracy is, is democracy dangerous or not, right? And can the people be

trusted or not?

SEGALL: You're provocateur, you like to push the limits. Do you think felons, minors, mentally ill folks who are able to click and download and

print, do you think they can be trusted and do you think there should be more government oversight over what you're doing?

WILSON: No, I definitely don't think there should be more government oversight. I believe the people can publish this information, I know that

they can legally under the first amendment.

Now, if the question is and more question like was it right? Should we do it? Again, my answer is yes, I believe that I should, I believe in what I'm

doing. When I'm called the provocateur, that somehow takes away like the seriousness of what I do.

Like, I'm only doing it, you know, for starting something -- you know, I believe what I'm doing now.

SEGALL: What does the world look like to you in the next decade with some of the technology that you pushed for?

WILSON: These people have like an internet resource, some type of an encyclopedia scope, it should allow like move up innovation in the space as

well. I know that upsets everyone, Chuck Schumer is out there with a bill today, saying, you know, no gun should only ever be the way they've always

been and we have to prevent them from becoming new.

SEGALL: What's your response to him?

WILSON: It's just a depressing world to live in, there's less hope for -- when things have to be frozen and things have to be managed. And I don't

know, I find it profoundly unromantic.

SEGALL: I think a lot of people will say it's suppressing to live in a world where you think about a lot of people who probably shouldn't have

access to handguns being able to readily have the ability to make them from home.

WILSON: Look, that might depress them, but it excites as far as imagination of many other people. And unfortunately, we have always had

the law on our side.

(END VIDEO CLIP)

QUEST: Does a dreadful sophistry of arrogance about his argument. But the courts are quite clear, for example, you can't -- freedom of speech, there

was -- you can't shout fire in a crowded --

SEGALL: Yes --

QUEST: In a crowded theater.

SEGALL: Right.

QUEST: So I'm not sure whether his argument holds much water.

SEGALL: Well, look, I mean, it's being upheld and he created this argument years ago -- code a speech. And this is -- he's not talking about western

-- he's talking about access to this information. Obviously, it's controversial.

This will have profound --

QUEST: How easy is it to print one of these things up?

SEGALL: It's not difficult, it really isn't difficult, especially 3D printers are being revolutionized. We'll have them in our homes in ten

years. So think -- not something scary.

Think about in college, people could easily 3D -- they could easily print a fake ID, now imagine cautions, being able to, you know, easily 3D print are

going to -- you know, we have to have these conversations and he pushes the limits, this is who he is.

QUEST: Good to see you, thank you --

SEGALL: Thank you --

QUEST: For being with us. Now, Apple shares, they're up more than 2 percent after hours. The earnings came in better-than-expected, revenue

jumped 17 percent over a year ago. Tim Cook says the results are driven by continuing strong sales of iPhones services and wearables.

Sam Burke -- Samuel Burke is with me. You've been with the end of the numbers, what did it tell you?

SAMUEL BURKE, CNN BUSINESS & TECHNOLOGY NEWS CORRESPONDENT: Well, exactly the scenario that you and I talked about on "QUEST EXPRESS", your other

show earlier in the day is playing out here. We always say the most important number is how many iPhones they sold.

That is not the case here, they actually did not sell as many iPhones as expected, Richard, they sold 41.3 million instead of 41.6, but they're

selling them at a higher price than ever. We're expecting that each iPhone would be sold at an average of $699, they're selling at an average of $724,

an iPhone.

That means that Tim Cook's strategy of charging $1,000 for the iPhone 10 that many of us were completely shocked by. Let's be frank, a lot of

people in the media said a $1,000 for a phone, his strategy is working. This is an environment where global smartphone sales are actually down and

Tim Cook has figured out how to eke out a few more pennies -- well, more than a few pennies --

QUEST: Well --

BURKE: Of $300 from each of us.

[16:40:00] QUEST: You know, hang on, he's making more money from existing sales, yes. So he has -- to your point, he has a certain pricing ability,

pricing pressure ability. But he still has to sell the phones and at some point he still has to come up with the next thing.

BURKE: And they did not come up with the next thing. The next big piece of hardware and Apple is a hardware company was the smart-speaker. Amazon

came up with that and they're not a hardware company or they weren't a hardware company.

So in spite of that, the fact that they've not been doing that much innovation, they're still beating on all of these categories here.

QUEST: Is it your feeling, Samuel, that there's something lurking, that they are waiting to announce something. You say that they've not -- they

managed to miss the speakers, well, you know, Microsoft famously missed online in that sense on apps and mobile phones.

Is it your feeling that Apple is working on something -- and they're going to take shockers very late in the future.

BURKE: No, I don't think it's going to shock us at all, I think it's the streaming service that we know they signed on big names like Oprah. They

want to go off against Netflix and Hulu and those folks, they want to create a whole environment where you --

QUEST: Who is going to watch all this stuff? Who is going to watch -- there are not enough --

BURKE: We have to reach --

QUEST: No, go on. So there are not enough viewers and not enough hours in the day that all this extremely expensive content is being created.

BURKE: OK, two points, one we know it took you years to sign up for Netflix, so God knows when you've actually signed up for another streaming

service like Apple Music. And to your point, if you add up all these services together, they're very costly.

The whole appeal of all this is that they cost less than an expensive package, very expensive in the United States where you are. But if you add

up Netflix, Hulu and Apple, you're a 100 percent right, Richard, it will cost more than a cable package, someone is going to have to figure that one

up because we're not paying for all of them.

But you know, I'll be using my parents passwords --

QUEST: I was about -- I was just --

BURKE: Way, Richard.

QUEST: I was just about to say for somebody who has never knowingly paid a subscription because he's still claiming to be under 21 and on his parents

account, Samuel Burke, thank you.

BURKE: Guilty as charged.

QUEST: Thank you, you're sentenced before lunch. When we come back, more news in the end for Japan as BOJ sticks with the stimulus. Its economics -

- no, not 101, economics 201, we're getting technical with bond deals.

(COMMERCIAL BREAK)

[16:45:00] QUEST: Streaming interesting times for Central Banks, we're in the midst of a swell of central bank rate decisions, and that means time

for a professorial question and answer on interest rates. Now, the ECB or the ECB reported last week's.

So the ECB we can put pretty much out of the way. Now, on Wednesday, the Federal Reserve is expected to meet, whether they move on, that is not

really the issue. The overarching trend of course, it is for tightening by the U.S. Central Bank.

Wrangling and (INAUDIBLE) of the tighten, the only question is whether in the Brexit scenario, it there increased the fragility of the already

precarious U.K. economy. So they want to question -- they want to tighten, but they dare not just yet or at least seemingly not.

Now, Bank of Japan today said, we're going to keep our accommodative policy, it's exactly where it's badly are grieved. And in fact, the BOJ

went even further and they actually did -- they actually came out with guidance to the market.

So we have two of the central banks, many of them wanted to push interest rates up because of inflation and growth, hanging up the Bank of Japan

which is seemingly there. The ECB wants to move a little bit higher, but dare not now.

The reason this is all so significant is because if you look at the balance sheets, remember the banks, the central banks have been buying all these

bonds, government bonds and corporate bonds, in some cases and they've been shoving them on their balance sheet which you can do with any of the

central banks because you control the money supply.

However, when you look at the percentage of GDP, well, the United States is roughly 20 percent of GDP according to the latest number. See, but if you

look at the Bank of Japan which starts higher to begin with, now as a percentage of GDP, it's best part of a 100 percent.

Why is all this significant? Because central banks, when they more monetary policy, they affect every one of our lives, and the damage that was done

during quantitative easing has to be repaired. Joining me, Aaron Band, good to see you sir.

AARON BACK, COLUMNIST, WALL STREET JOURNAL: Good to see you.

QUEST: Please, help me understand what we more need to understand about this central bank issue.

BACK: So the Bank of Japan is probably the most aggressive central bank in the world as your chart shows. And they basically said today that they're

going to continue on their target for the ten-year government bond yield in Japan is 0 percent.

And rates are negative when you go shorter term, so --

QUEST: But they had growth earlier, they got one quarter of negative. Inflation is way below target --

BACK: That's correct --

QUEST: But there's growth there.

BACK: So GDP growth since Kuroda, the central bank governor took over in 2013 has averaged -- normal GDP growth has averaged 2 percent which for

Japan is very good. If you look at the last ten years, it was negative 0.4 percent.

QUEST: So normal look, 2 percent, that means real about 1 percent, it's just under 1 percent --

BACK: Yes, a little over 1 percent --

QUEST: Right --

BACK: Yes --

QUEST: Right --

BACK: Yes, so I think the policy is actually working, I mean, we can quiver, but the fact of the matter is the Japanese economy was trading four

decades, and now it's growing again. So my heart is off to Kuroda for --

QUEST: Right, but he has the problem of his balance sheet.

BACK: Yes --

QUEST: But which has to run down, it creates a floor, anger ceiling for other interest rates because he's capping. He's capping his bonds now. So

it creates a ceiling for others to head towards.

BACK: That's exactly -- yes, so, they have capped the ten-year rates --

QUEST: Yes --

BACK: At 0.2 percent, which is very low, in the U.S., it's around 3 percent. And what that means is that rates in the U.S. and Europe can't

move much higher when Japan is all the way here down on the floor.

QUEST: Explain why not?

BACK: Well, because for example, Japanese investors who can't get a decent return in their government bonds are going to buy U.S. bonds instead. So

as soon as U.S. bonds creep up, you see more demand from Japan, in Europe where yields are also extraordinarily low, European investors are going to

come by U.S. bonds, and that holds down this U.S. yields.

QUEST: All the banks -- the ECB is not going to start unwinding for some time to come the Bank of England similarly. But they've all got to unwind

this massive structure that saved us all in 2008, I don't hold it -- those who say it was a bad -- it would be an Armageddon if they hadn't done what

they did.

But they have to unwind it all --

BACK: Yes --

QUEST: The Fed is doing a pretty good job.

BACK: Yes, so the Fed is at the vanguard of winding down quantitative easing, and so far, they've done it without great incident. I mean, people

were worried that once the Fed starts shrinking their balance sheet, it could create chaos in the markets, could cause interest rates to spike. So

far, that hasn't happened.

The secret is they're doing it very slowly --

QUEST: Yes --

BACK: They're not really selling bonds, they're just letting bonds mature and it's creating a very slow runoff. So the Federal Reserve is a pretty

positive example.

[16:50:00] If you're worried about the unwind in Japan, first of all, it's not going to come for years, inflation is still below 1 percent.

QUEST: Quick final question --

BACK: Oh, yes --

QUEST: How much longer can the Japanese Central Bank continue a policy at QE when its balance sheet is a 100 percent of GDP? Eventually, it's going

to overwhelm the system.

BACK: So far, it's been nothing but positive, I don't know what to tell you. People have been doubting Kuroda since he came in, and the fact of

the matter is, he saved the Japanese economy. And the experience of the U.S. is that it is possible to shrink your balance sheet when you want to,

when the economy is strong enough.

So I mean, I understand that, you know, theoretically, it kind of blows people's minds how many bonds they're buying. But at the end of the day,

it's been a good thing.

QUEST: Great to see you sir --

BACK: Thank you --

QUEST: Thank you so much. Social media posts may fade away, they never die. Stars of the "Guardian of the Galaxy" try and save their director

after his old tweet resurface.

(COMMERCIAL BREAK)

QUEST: A series of old tweets have come back to haunt a well-known Hollywood Director James Gunn brought "Disney" Box Office success with the

quirky characters of "Guardians of the Galaxy".

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: A little one inch man saved us.

UNIDENTIFIED MALE: Well, if you got closer, I'm sure you'd be much larger.

UNIDENTIFIED MALE: If it's not I so work, you stupid raccoon.

UNIDENTIFIED MALE: Don't call me a raccoon!

UNIDENTIFIED MALE: I'm sorry, I took it too far and a trash panda.

(END VIDEO CLIP)

QUEST: Now, last week, "Disney" fired Gunn after conservative blogs highlighted offensive tweets that he posted years ago. He referred to

pedophilia and molestation. Now, the stars of the "Guardian of the Galaxy" want him back.

In an open letter of support in which they said they hope Americans can stop weaponizing mob mentality. Frank Pallotta is here, an interesting

one.

FRANK PALLOTTA, CNN ENTERTAINMENT & MEDIA REPORTER: Yes --

QUEST: What do you make of it?

PALLOTTA: Well, what I make of it is that what's really interesting here is that for what might be one of the first times in Hollywood, you're

looking at such a major franchise.

One-point-six million dollars, the "Guardian of the Galaxy", that is two films, you're looking at Marvel Studios which is more than $17 billion.

And James Gunn was the director of "Guardians", more so than any other of the films, he was really a part of the series.

His touches were all over the series. He made it what it was. And as soon as these came out, "Disney" made a decision, a business decision and a

moral decision according to their statement that they've wanted him gone.

[16:55:00] QUEST: Right, but without any opportunity for him to sort of say, very sorry about this, it was a long time ago, I was young and foolish

and I was smoking things I shouldn't have done.

PALLOTTA: I mean, he put that statement out, he after the fact he basically said that he agreed that he understood the situation and that he

was moving on from it.

But it's still very interesting thing to kind of see how these major corporations like "Disney" which had to go through the same type of

situation with Roseanne getting fired for a tweet, now, I'm not saying one equals the other.

But it's very interesting to see how these major corporations are going to deal with social media --

QUEST: Is there a feeling though now that it has gone too far, that it's - - you know, there has to be either a grace period or there has to be a bit more of a tolerance of understanding that something that somebody did 30

odd years ago or whatever.

PALLOTTA: That's really going to be up to the corporations and up to the businesses that are hiring these people. It's everyone's right to hire and

fire whoever they want, however they want. That's how the companies are working.

If I go on Twitter and say they find something of mine from years ago, there isn't anything. But if there was -- I could potentially be up to

lose my job. That is -- that is up to company's discretion.

QUEST: Les Moonves, "Cbs", does he survive?

PALLOTTA: I don't know. Right now, he's here to stay for now, the board basically --

QUEST: If it's true, it will be very -- if the allegations hold water, it will be very difficult.

PALLOTTA: I think what Colbert said last night -- Stephen Colbert on the "Late Show" said it very well. He says that accountability is supposed to

be for everyone, it doesn't matter if it's the head of a network or the head of the free world.

And he's talking about his boss on his boss' network.

QUEST: That takes courage.

PALLOTTA: Right, I think Colbert hit it out of the park last night, talking about it, yes.

QUEST: Good to see you, sir --

PALLOTTA: Good to see you --

(CROSSTALK)

QUEST: We will take our profitable moment after the break.

(COMMERCIAL BREAK)

QUEST: Tonight's profitable moment, we spent a moment or two talking about central banks. They are weird institutions, they're independent with

enormous economic power and frankly the backbone of the economy. And they operate in secluded environment with seemingly dense transparency.

Oh, they tell you what they're doing when nobody really understands. Which is why it's important that you and I talk about whenever we can, whether

it'd be the Bank of Japan, the Bank of England which is going to raise rates probably tomorrow, the Fed which is meeting at the moment, now, you

get the idea.

And that is QUEST MEANS BUSINESS for tonight, I am Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it's profitable.

I'll see you tomorrow.

END