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Donald Trump Throws Fuel On Turkey's Financial Fire As The US President Raises Tariffs Where It Hurts, The Ruble Has Fallen To Its Lowest Point In More Than Two Years, Elon Musk Is Now Preparing To Put His Privatization Plans To The Test, It Was Well Around This Time This Year -- June, July, August, September -- 10 Years Ago That The Entire Financial System, The Global System Was Shaken To Its Core; Saudi Arabia Opens Investigation into an Airstrike that Hit a School Bus in Yemen; Zimbabwe's Opposition Party Challenges Election Results; Violent Storm Forces Evacuation of 1,600 People in Southeastern France; Twenty One Thousand Evacuate as Southern California Fire Rages; Ryanair Cancels 400 Flights as Pilots Strike; Fidelity Offers No-Fee Investing to Stay Competitive; Oscars New Popular Film Awards Prompts Backlash in Hollywood; Spike Lee Weighs in on Trump and the Midterm Elections; Rwanda's Arsenal Deal Raises Questions; Turkey Turmoil Hits Global Markets. Aired: 4-5p ET

Aired August 10, 2018 - 16:00   ET


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: The end of the week. The Dow is down nearly three quarters, as well as the broader market. Also, we had

some difficulties, but trading is now over. There it is, people from Rollins celebrating 50 years in the exchange. Trading is over, it's

Friday, it's August the 10th.

Donald Trump throws fuel on Turkey's financial fire as the US President raises tariffs where it hurts. Pain during peak travel season, Ryanair

strike is now stranding passengers and harnessing the power of the humble penny. I'll speak to the Chief Executive with the hope to convince

millennials to tuck away their spare change. I'm Richard Quest, live from the world's financial capital, New York City, glorious day here in New York

where of course, I mean business.

Tonight, President Trump wades into Turkey's political and economic crisis with new tariffs, which is going to make a bad situation worse. It was an

announcement via tweet of course where the President said, "I have just authorized a doubling of tariffs on steel and aluminum with respect to

Turkey. Our relations with Turkey are not good at this time." The Turkish President said that this amounts to a declaration of economic war.


RECEP TAYYIP ERDOGAN, PRESIDENT OF TURKEY (Through a translator): Dollars and stock will not stop us from getting roads. Do not worry, but I am

saying it again, if you have dollars, euros or gold under your pillow, exchange it for Turkish lira in our banks. This is a national struggle.

This would be the answer by our people against those who wage economic war on us.


QUEST: The United States is Turkey's top destination for steel exports. The new tariffs pushed the Turkish lira to a record low against the dollar

and fears of contagion spread to European and American markets, we'll deal with that aspect in just a moment. First though, to understand what this

effect is, CNN's John Defterios is in London. John, let's take this in a fair clip, and firstly, the relationship was already bad, do we know why

the US President decided today this random Friday in August to make this action?

JOHN DEFTERIOS, EMERGING MARKETS EDITOR, CNN: Well, Richard, one could accuse the US President of kicking both President Erdogan and the lira when

they're down. I mean, it was quite abusive. It was an awful day and an awful week for the Lira, just to remind our viewers. We started with a

record selloff at the beginning of the week, and we finished the same way, a low of 17% at one point.

To your question here, it does deal with an American pastor, Andrew Brunson. They thought they had an agreement to settle this dispute between

them. There's also the case of Turkish banks supporting Iran during the sanctions, it upset President Trump and the State Department and finally,

there's that lingering issue of Fethullah Gulen, the cleric that President Erdogan has wanted to have extradited.

But this issue, Richard has been festering in Turkey long before President Trump got involved. You can take a look at the corrections since the start

of the year. It's a 40% drop for the currency because inflation is up to nearly 16%, but then your bonds up at 20%, Richard and they have a rising

current account deficit. He has not dealt with it and President Trump came in at the last minute because they have not seen any headway. They thought

they had a deal this week and they had a delegation go to Washington and it fell apart.

QUEST: How much worse a situation does this make? The economic crisis or the financial crisis? I mean, obviously, Turkey is a major exporter, I

think number six or seven in to the United States in terms of steel. I would imagine the Turkish steel will now become prohibitively expensive.

What effect is that going to have on the Turkish economy?

DEFTERIOS: Well, Richard, this is an alarm bell that's been ringing as I was saying for a long, long time. There is a big question here about the

concentration of power for President Erdogan. Now, his son in law, who has now been handed both the Treasury and Finance Ministries held a press

conference today and announced a midterm solution to bring down growth to try to bring down inflation. It rang hollow in the financial markets.

This is the reality. President Erdogan was at the Black Sea and made this unusual nationalist appeal telling the Turks to sell gold and sell dollars

as he suggested there in the sound bite, to try to boost the lira, and then he went back to the same thing, banging the drum about the interest rate

lobby- New York, London, Hong Kong, Tokyo -- all working against the Turkish lira.


DEFTERIOS: He has concentrated power in the markets, investors don't believe that he will take the right policy to stabilize inflation, bring

down growth to get a rally in the lira.

QUEST: John Defterios in London tonight. Fear of contagion has been spooking investors. We're already facing a crisis of confidence. If we

take a look at those areas, for example, those banks that have Turkish exposure, you've got the bank there, BBVA, they were down 5%. UniCredit

down 4.7%. BNP Paribas is down some 3%. These investors are worried that Turkey can't pay debt and this ECB concern about bank exposure with those

shares going sharply lower.

And over the markets over all in Europe, you've got Xetra DAX down 2%, Paris down similarly. The FTSE down 1%, so clearly, it's having an effect.

William Jackson is the Chief Emerging Markets Economist at Capital Economics joins me now. Good to see you, sir. Thank you. We're going to

be talking to you on this and other things.


QUEST: So, the question that John Defterios was how serious will this extra tariffs to Turkey -- what sort effect? How much worse will they make

the situation?

JACKSON: Well, I think the sanctions we so imposed earlier or late last week really exacerbated the selloff in the lira that's happened over the

past week, and I think what investors are now thinking about is what happens next? What are the next moves?

We saw President Trump raise the tariffs on Turkey's steel and aluminum exports. That will hurt Turkey's exports sector, but it also sends a

signal that things are getting worse, not better.

QUEST: Within that, we heard President Erdogan just a second or two ago in that sound bite, is President Erdogan now falling victim to that mentality

that absolute leaders sometimes will do, which is "If I say economics is X, then economics is X," even though it might be something completely the

opposite. Is he now fooling himself about his own economics?

JACKSON: That's a good question I think one many investors would like to really know. We've seen some rather strange economic theory come from his

mouth over the past few years, the idea that higher interest rates actually cause higher inflation. This kind of discussion really raises concerns

about for investors because it makes them fear that the Central Bank won't be able to act to actually tackle these high rates of inflation and to

shore up the currency.

And judging by the speeches earlier, it didn't seem that he was trying to calm the situation, it merely added fuel to the selloff in the currency.

QUEST: So if a currency, let's go back to Economics 101, if we may, sir. If a currency continues to fall, that obviously creates a balance of

payment crisis for Turkey, one where they have to fund the external debt, and that really can only be done either by investors pouring in money or

the IMF or similarly coming along with the rest of the what they had planned, for Capital Economics, how's your view on that? How far off are

we from having a rescue plan here?

JACKSON: Well, I think most countries that have ever been in Turkey's situation and at least managed to get out of it have had an IMF plan.

Those that haven't, ones that come to mind -- well, Venezuela is one extreme and things have really become very serious there. There are a few

countries that have had large currency foils like Brazil and Russia a few years ago, who managed to get out without the IMF, but they did have

governments that tightened fiscal policy. They tried to push for reforms and they had very orthodox Central Banks, none of these we're seeing in


QUEST: Stay with us, sir, stay with us. We have more that we need to talk about with you today. Turkey is not the only country talking of economic

war, Russia's prime ministers say new sanctions from the United States could be like economic warfare. The ruble has fallen to its lowest point

in more than two years. Remember, that's the ruble versus the US dollar, so of course you see the number going in the opposite direction.

It's been falling steadily over fears of new US sanctions, which became a reality on Wednesday. Russian stocks are also suffering. The RTS was down

almost 4% in Moscow, which when you see everybody else as you see, put it into a really grim day. Fred Pleitgen is in Moscow for us tonight.

I am now well and truly confused, Fred Pleitgen over exactly how many sanctions, which sanctions, there are sanctions over Crimea, there are

sanction over whatever -- the sanctions now over the Skripals. How many sanctions are there?


FREDERIK PLEITGEN, CORRESPONDENT, CNN: There's an unbelievable amount of sanctions. A lot of them, Richard, target Russian individuals, some of

them target Russian companies. Very few target whole Russian sectors and I think that's one of the things that Dmitry Medvedev, the Russian Prime

Minister was talking about today when he was speaking in Kamchatka way in the east -- the far east of Russia where he was saying, if there are -- and

that's qualifying the statement that he was reading -- if there are sanctions against Russia's banking sector, against the full banking sector,

there's already sanctions against some banks, some of them over American election meddling for instance, but if there are restrictions on financial

transactions, then that is something that they would see as economic warfare.

And they said that the Russians would retaliate, they said in financial terms and in other terms as well. Also, you have Vladimir Putin who called

in his National Security Council today to speak about all of this and Sergey Lavrov who directly complained to the American Secretary of State

Mike Pompeo about these measures as well and called them completely unacceptable.

So, I do feel that the Russians are feeling the heat about this because it's something that is a systemic sanction rather than the individual

sanctions that we have seen over the past two years especially, Richard.

QUEST: And Fred, you can bridge the divide between Washington and Moscow very elegantly, so explain to me, for an administration that is accused in

Washington of -- or a President of being a lover of Russia, in the pocket of Vladimir Putin, a puppet of Russia, I mean, he is taking some of the

strictest and harshest sanctions ever against the country? How do you square those two accusations?

PLEITGEN: Yes. Well, that's what the Trump administration says and then I mean, I could bridge the gap between many countries, but I think right now,

it is very difficult. I mean, one of the things that you have is you do have President Trump who is talking about better relations, but at the same

time, you're absolutely right. The Trump administration has put in place some very tough sanctions.

Now, there are people in Russia who feel that that tough line against Russia is not coming from the President himself, but is actually coming

from American institutions, American agencies like for instance the State Department, but also, first and foremost, at Congress for instance as well,

the Senate and the House of Representatives forcing the President's hand in many ways and if you look at for instance Russian media, you look at also

some of the statements quite frankly, that President Putin has given as well, they believe that it's President Trump who wants better relations,

but that his hands are tied because of the -- well, they are saying it's ill will, but -- so they think that President Trump still wants better

relations, but I think the big question, Richard, right now -- how long is that going to continue? How long are the Russians going to continue to

say, "Look, I think President Trump is going to come through with this. We think he wants better relations." But is he hamstringed at the moment?

It's a very interesting debate that's actually going on in Russia right now, is to what extent do they still believe that President Trump is

actually going to be able to follow through on some of the things, for instance, that he said, in Helsinki, some of the -- not promises that he's

made -- but sort of the goals that he seemed to be laying out as far as the improvement of Russian-US relations are concerned when you see the reality.

QUEST: Fred Pleitgen, thank you for bringing both sides -- Washington and Moscow -- back to William Jackson. How damaging to the Russian economy are

these sanctions -- these current sanctions? And how much more pain can that economy take?

JACKSON: Well, I think the sanctions -- they were really painful were the ones that came in 2014 when after Russia's annexation of Crimea and then

due to the involvement in the conflict in the east of Ukraine. Those new sanctions were just targeting Russian individuals to targeting certain

parts of the financial sector and that meant that many Russian firms and banks can no longer get foreign financing.

But Russia has been living with this for four years now. Its economy actually is quite well placed to cope with some sanctions. Obviously,

there will be some pain from this.

QUEST: Good to see you, sir. Thank you. Have a good weekend on a Friday. Thank you for staying late for us tonight. As we continue tonight, Elon

Musk inches closer to his $420.00 target to take Tesla private. The SEC is looking into the question of exactly how he is going to pay for it. Has he

made a false statement about that? I'll speak to their former Chief of Staff.

And the English Premier League is back. The world's richest football teams made a deal with Rwanda to be their shirt sponsor and we'll explain what

that's all about.


QUEST: Extraordinary week for Tesla just keeps going on. Elon Musk is now preparing to put his privatization plans to the test. The Tesla board is

to meet next week where they'll review the various proposals.

The Chief Executive will most likely be asked to recuse himself from the process. Tesla shares have come back to earth somewhat considerably. Look

at the graph, it really tells -- you've got that where the announcement happened. It's well under $420.00 by the way, which is the number he says,

and then it drifts back again, still above where it was, but it's still where it has been.

There's also a report, a general report that the SEC is now investigating the tweet where Musk says he does have financing at $420.00 per share.

Michael Liftik is our partner at Quinn Emanuel, former Deputy Chief of Staff of the US Securities and Exchange Commission, the SEC. All right,

sir. Let's get to grips with this. The actual tweeting itself probably has not caused or broken any rules or laws, that's my understanding, is

that correct?


2013, the SEC issued guidance that grappled with for the first time whether a company could release information through social media, and in 2013, the

SEC concluded that in fact, you could do that, you just needed to tell people to look at that social media channel before you did so.

So, here with Tesla back in 2013, they issued an announcement that said that of the places that they might release information, Mr. Musk's channel

would be one of them.

QUEST: And fair dues to the market, it was a way of getting the news out to everybody it wants, but the SEC is interested in this question of the

$420.00 and whether there is the financing and said why.

LIFTIK: I think the SEC is going to be looking at two things. They're going to be looking at first, the truth or the falsity of his statement.

And what he said was, funding is secured. It did not leave himself a lot of wiggle room with that. It implies that there is in fact funding that

would be there and to take any private transaction that is one of the biggest questions, and certainly, in a transaction of this size, that would

be one of the most important questions.

QUEST: Is he entitled to the benefit of the doubt where he might say, "Well, look, when I said that tweet, it was secured but then Fred backed

out, Jim said no and Bob went home."

LIFTIK: Right, so that's one of the key things that the SEC's investigators will be looking at is what were the facts on the ground

before he made that statement, so if in fact Fred, Bob and Sue had agreed to provide funding, and then they backed out, then he may have had good

intent at the time and the facts changed. If in fact the funding was not lined up, there may be some tougher questions ...


LIFTIK: ... coming his way.

QUEST: On the wider question, because obviously the SEC will decide one way or the other whether it is or it's not, and if it is, whether any

enforcement action. On a wider question, Elon Musk made some fairly damning comments and his own final -- in his statement the next day about

the quarterly reporting and the way in which short sellers perversely have an interest in companies going against it and how quarterly reporting means

that you're focused on the narrow and the short rather than long term, does he have a point in your view?

LIFTIK: Well, I think certainly we know that the market is driven by quarterly earnings announcements as well as the guidance that companies

choose to give. Now, one way out of this of course is not to provide guidance. I think there's an important distinction to be made between the

quarterly reporting, which simply provides information to investors, and the other things that companies do such as providing estimates.

QUEST: Right, but I guess what I am asking is do you think we put too much emphasis on a quarterly report. We pay lip service to the idea that it's

only a quarter, but the market goes bananas if a company wobbles on a three-monthly basis.

LIFTIK: Right, I think that is a difficulty that public companies face and it certainly creates a lot of opportunities for there to be problems

because companies do feel that pressure to hit that guidance that they've given out there.

QUEST: Good to see you, sir. Thank you very much indeed. Very much appreciated. Thank you.

LIFTIK: Thank you.

QUEST: The European banking stocks was spooked by the Turkish crisis. It was around this year -- it was well around this time this year, August --

June, July, August, September 10 years ago that the entire financial system, the global system was shaken to its core. Those dire weeks in the

autumn of 2008 still live long in the memory of those of us that covered it.


UNIDENTIFIED MALE: Wall Street in meltdown after one big investment bank goes bust and another one is bought out.

UNIDENTIFIED MALE: The feeling here is just one of almost disbelief.

UNIDENTIFIED FEMALE: Hong Kong down, Japan down, London down -- all feeling the effects of Wall Street's worst single day since 9/11.

GEORGE W. BUSH, FORMER PRESIDENT OF THE UNITED STATES: We are in the midst of a serious financial crisis and the Federal government is responding with

decisive action.

UNIDENTIFIED MALE: This is a financial system that is coming apart at the seams. They're trying to hold it together with chewing gum and duct tape,

but it's -- this is big stuff.

UNIDENTIFIED MALE: The American people can remain confident in the soundness, in the resilience of our financial system.

BARACK OBAMA, FORMER PRESIDENT OF THE UNITED STATES: Well, they said they wanted to let the market run free, but instead they it run wild.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: This was a bunch of people primarily on Wall Street and the banking community that tried to take

advantage of a situation and guess what? It didn't work out too well.


QUEST: Adam Tooze is the author of "Crashed: How A Decade Of Financial Crises Changed The World," he joins me now. Good to see you, sir. Thank


ADAM TOOZE, AUTHOR: Thank you for having me on.

QUEST: And how a decade of financial crises -- these are the crises that flowed from what happened in 2008 rather than necessarily the lead up to


TOOZE: Well, I think both. I mean, if you look back to the 1990s, you can already begin to see the outlines of the sort of crisis that we would

suffer in 2008, not then in the 90's at the heart of the system that in Mexico, in Latin America and the emerging markets of Asia, the significance

of '08 is that those kind of financial stresses in the banking system, in international finance suddenly strike the United States and Europe.

QUEST: Right, but then, in the succeeding years, you have the sovereign debt crisis.

TOOZE: Yes, absolutely.

QUEST: Which of course goes rocks the Eurozone to its core.

TOOZE: Yes, and the connecting link between the two are the European banks who are -- as it were, one of the key agents of the financial crisis in the

United States in '08, and then the weak link in Europe after 2010.

QUEST: What crisis has most concerned you since 2008?

TOOZE: I think the unfolding of what we're seeing now in Turkey today that started arguably in Ukraine in 2013, because if you look back to the temper

tantrum of 2013, you have the weak links in the emerging market economies coming under very serious stress.

QUEST: Right, but there was a fairly obvious reason in that case because they were about to lose the possibility of their inward investment there --

their FTI, their bond investment -- to the rising rate in the US. Turkey on the other hand seems hell bent on telling us that the laws of economics

that the rest of us all follow don't apply in Turkey.

TOOZE: That's absolutely the case. The question of course is when you come under that kind of financial stress, how do you respond? And the

states like India for instance which have an effective governance system, tighten up, raise interest rates and stabilize, Ukraine and Turkey are the

opposite cases.


QUEST: I hear again and again from those in the market that people are worried about the amount of leverage, the amount of debt that is out there,

which begs the question to you, sir, did we learn nothing from all of this? From all that happened 10 years ago?

TOOZE: We did on the one hand and on the other hand to get out of '08, the biggest economy of course that's driven by debt since '08 is China. They

launched a gigantic stimulus that carries them through the crisis, they're the only large economy in the world that's growing and then of course the

question is, can you organize -- can you engineer a soft landing? And that is the really large risk hanging over the world's economy today.

QUEST: The soft landing for who?

TOOZE: For China.

QUEST: For China.


QUEST: But the US of course growing 2% to 3% -- we're at 4% on a one quarter basis with low employment, inflation contained at the moment.


QUEST: With the Fed raising rates, are you optimistic on the US economy?

TOOZE: I think in the US case, the interesting thing is the difference between the private sectors, especially households, which did in fact de-

leveraged to a degree and the public sector which is engaged in this extraordinary historically unprecedented burst of deficit at the height of

the cycle.

QUEST: Now, finally, if there is one person who you think deserves the award for saving the financial world in 2008-2009, if you had to give an

award to one central banker, government, politician, private banker who would it be?

TOOZE: It's the obvious pick, it's Ben Bernanke.

QUEST: You think he was.


TOOZE: ... he did stuff with Central Banks no one imagined we could do with Central Banks, both within the United States and in terms of providing

liquidity to the global ...

QUEST: And he's written his thesis, his doctor's thesis was on the Great Depression.

TOOZE: It's a case of learning from history. Somebody actually learning from history.

QUEST: Good to see you, sir.

TOOZE: Thank you for having me on.

QUEST: Thank you so much. Now, if you're watching this program with the CNN Airport Network, and waiting for a Ryanair flight, you may have more

time to watch. Thousands are stranded as pilots are refusing to fly. We'll tell you why and how and when and possibly what might happen next.



QUEST: Hello, I'm Richard Quest, there's more QUEST MEANS BUSINESS in just a moment. When Ryanair pilots who are fed up have gone on strike and thus

stranded passengers right at the height of the European holiday season, first few weeks of August.

The Oscars newest award has tenable reviews in Hollywood, few have a good word to say about it, and as they put it all together, this is Cnn, and on

this network, the facts always come first. Saudi Arabia says it's opening an investigation into an airstrike that hit a school bus in Yemen.

Fifty people died, many of them children under the age of 10. United Nations Security Council has also called for an investigation. Zimbabwe's

main opposition leader says his party has filed a legal challenge against last month's presidential election.

And Nelson Chamisa says there's a good case to show Emmerson Mnangagwa's victory was rigged. The challenge means this Sunday's inauguration

ceremony will now have to be delayed. A violent storm has forced the evacuation of 1,600 people in Southern Eastern France.

The rescue effort was supported by hundreds of firefighters and paramilitary personnel. More helicopters were used to lift people to

safety as the rain has inundated much of central Europe in the recent days. Enormous fire raging out of control in Southern California has now forced

thousands of people to leave their homes.

And there's more hot windy weather expected and that will make conditions worse in the coming hours. This place near Los Angeles is one where

several wildfires are burning in areas across the state. Strikes at Ryanair are crippling the airline across Europe on this peak August travel


Now, there are pilots in five countries refusing to fly, and thus stranded thousands of passengers. And all in all, 15 percent of all Ryanair flights

are affected. The airline has only recognized unions since late last year and have struggled to deal with workers demand ever since.

On the "QUEST EXPRESS", one Irish union told U.S. pilots want to change Ryanair's culture, not their business model.


UNIDENTIFIED MALE: Today is the fifth strike day we've had in the last month. And our issue in Ireland is an issue about how the company

transfers pilots between bases. And actually there's no pay claim attached to it and we think no post attached to it.

So I think while some of the demands of pilots in other countries are about pay, I think our positions shows that the issue here is not really about

challenging the model that Ryanair has. We have said that Ryanair has a specific, almost unique model, business model, we accept that.

But we think that the company has struggled since last December when it declared that it would deal with trade unions, we think it's struggled to

shake off the old culture where it affectedly told workers what was going to happen in terms of trenches to their work practices and so on.

And now with the new situation involving negotiations, they're required to talk to people and try to find common ground, and our experience is they're

really struggling with that contrary as much as anything else.


QUEST: Ryanair says it's not going to give in to what they describe as unreasonable demands from pilots. Speaking for the German Cockpit Union,

said he was frustrated with the lack of progress in the talks.


UNIDENTIFIED MALE: Until now, we've been laid down, we've had -- made in front of us, new contracts as Ryanair wants them. And that's been it.

We've tried to move this forward now for seven months and have not been successful.

We don't have anything in writing that is a compromise and that's the reason behind the strikes. Normally, at this stage, we would have at least

gotten some basic principles in writing and agreed on a way forward. And we're more or less have not made hardly any progress since January.


QUEST: Ian Lee is in Paris for us tonight, good evening Ian, thank you. The strikes taking place, how bad are they for the traveling public? How

are people affected?

IAN LEE, CNN: Well, Richard, if you talk to the tens of thousands of people who are stranded, this is quite bad.

[16:35:00] Though you think this is an airline where at this time of the year, people are going either on vacation, they plan their entire year to

go out and they find out that their flight has been canceled or they're coming back, they have work the next day and they're finding out that they

can't return.

So you hear from these people, this is quite bad because you know, this affects their lives drastically. As far as the general Ryanair public

goes, this is 15 percent. It isn't the largest on swath, this is countries like Germany, Ireland, Belgium and Sweden which are being affected.

Now, we reached out to a number of airports here in France, asking them if they've had any effect by this, and they say that the only thing they've

had is those flights that are corresponding with those countries, those have been affected. But it really hasn't had that much of effect.

But you know --

QUEST: Right --

LEE: When you look at --

QUEST: Right --

LEE: Kind of the -- what is happening here, you have these pilots and the pilots are saying they want better wages and they want better working

conditions comparable to those airlines that -- their competitors. The question is so who are those competitors?

Are we talking Air France, British Airways, Lufthansa or are we talking about these budget airlines like Eurowings, like easyJet, like Norwegian

Air. And Ryanair has come out and said that they pay significantly more than a lot of their competitors.

So you have this impasse, and really what we're seeing with this strike is a shot across the bow. This is the peak season for a lot of people

traveling, and they show what kind of damage they can do if they do have a strike.

QUEST: Ian Lee, who is in Paris, Ian, thank you. An old proverb says tall oaks from little acorns grow. Now, if you've got some of these -- well,

we've all got one of these somewhere, we've all kept the loose change. Now what happens when you actually start to count the whole -- and what about

the way that you might actually be able to take -- you look at the small bits of money that you've got and turn pocket change into real investor



[16:40:00] QUEST: Welcome back. Now, for anyone under the age of say, 40, well, saving for old age and pensions never seems to be that important. It

seems like it's so far in the future, that when you are in your 20s and 30s, who really wants to be bothered with putting money aside for pensions.

It's too easy to put off for tomorrow. What you should be doing today as a result of which millennials are not saving nearly enough. Which is why

this new app coming up with creative ways to get people to invest its Acorns and it does micro investing, basically by linking your credit cards.

So here's some of the expenses I did. It takes up and it rounds up what you spend, it pays -- you pay the merchant and it rounds up and it puts

your difference into -- for example, here's a dime of bill app(ph), $54.17, right. So that would -- but Acorns would then take the remaining 23 cents,

taken out of my account and put it into a savings account. Will show you one more of this.

Here's a bill for 44.55, well, now, we just take the remaining money that would have been from 44.55 up to $45. Let me tell you, now there's no BTF,

there's no beat there, you know, how this goes, this is classic. And after all, as we've always said on this program that every penny counts

particularly the humble penny.

Acorns says it's used those -- are saving roughly $1,000 a year, give or take. Acorns charges $1 a month, studies show 95 percent of millennials

not saving enough, two-thirds of nothing at all. The Acorns CEO Noah Kerner joins me from Los Angeles.

So you're taking a little bit here, a little bit there and pretty soon there'll be some real savings.

NOAH KERNER, CHIEF EXECUTIVE OFFICER, ACORNS: That's right, thanks for having me on the show, I think you did a great job of explaining it. But

basically, the way it works is you set up an Acorns account, you link a bank account, you link your debit and credit cards and we start rounding up

every purchase you make to the nearest dollar.

QUEST: So you --

KERNER: It can go to start --

QUEST: So the credit card and the debit card companies, you have access at any time. Every time you know, you get a notification every time we've

spent some money and New York systems then go and make another charge against us for the difference.

KERNER: That's right, that's right. We pull the money from your bank account. But there's other ways to contribute, regulate your Acorns

account, really effortlessly in the background of life. So it's really easy to set an automated recurring investment of $5 a day for example.

And like you were saying, you know, if you start doing that at 18, 19, 20, 30, whatever, you start doing that, all that small change adds up over time

and sets yourself up for a better life later.

QUEST: The fee seems to be fairly reasonable. And some say they're a little bit on the high side, bearing in mind whether it's a dollar or

whatever, $2 or whatever it is per month, bearing in mind the amount of money being invested is only in the corpus frequently.

KERNER: So our business model is pretty simple, we charge a dollar a month for the core investment account, and that has all the automated investment

features that has grown, which is our financial literacy publication and then has all of our found money part.

We have a program called found money where we partner with 250 brands from Apple to Nike to Airbnb and they invest in your Acorns account as a reward

for shopping. So it's really a whole platform to help you save and invest for a better life later.

It's also $2 a month if you add Acorns later, which is our automated retirement --

QUEST: Of course --

KERNER: Retirement account, and yes.

QUEST: The thing -- idea is I looked at the funds, because you obviously then decide where you're going to put the money. And as I saw it -- and

correct me if I'm wrong, your funds are primarily Vanguard funds. The --

KERNER: Vanguard and BlackRock --

QUEST: Right, Vanguard and BlackRock, two extremely noted and reputable companies. How closely though -- but there's not a lot of information

about other funds. How do we target -- how do you as Acorns target the performance of those funds that you choose that will be for aggressive --

but --

KERNER: So Harry --

QUEST: What benchmarks do you use?

KERNER: So Markowitz was the founder of modern portfolio theory, crafted our portfolios, and they basically optimized returns for minimized risks

and that's the strategy. And we subscribed to a diversified investing, so there are five portfolios from conservative to aggressive, conservative

wait to bonds a little bit, you know, and aggressively to equities.

QUEST: Right, but the fund within each model so to speak, the fund that you've --

KERNER: Yes --

QUEST: Invested in, how frequently do you re-balance, how often do you look at, you know, essentially, if the U.S. main cap fund is not doing very

well, how quickly do you move?

KERNER: It automatically rebalances. And the other great thing about Acorns is because you're investing regularly, your dollar cost-averaging

over time and you're benefiting from -- when there's highs and you're optimizing returns when there's lows.

So it's really set up to invest as efficiently as possible for people over time.

[16:45:00] QUEST: And finally, I mean, it's an extremely good idea, not to say because there's one thing --

KERNER: Thank you --

QUEST: That we are to get people to -- it's an innovative idea as well which is always pleasing to see. What's been the reaction?

KERNER: The reaction has been great, I mean, we almost opened up 4 million investment accounts in the United States, we're adding about a 165,000

accounts a month today. We just launched our Acorns SPEM(ph) product which is the first debit card in checking accounts that saves and invests for


We started pre-orders not long ago and we've done 200,000 pre-orders for that already. So there's a lot of enthusiasm, and most importantly for us,

that means Americans are saving and everyday Americans are saving and investing for a better life later which is fantastic.

QUEST: One final quick question, can you link --

KERNER: Sure --

QUEST: Your credit card from somebody else or does it have to be your credit card.

KERNER: It has to be your credit card.

QUEST: Oh, here we are, this is -- so no one else is going to give any pennies -- well, thank you sir for joining us. The Oscars -- that means

show business. The Oscars new popular film category seems to be extremely unpopular with some of Hollywood's biggest stars.

Dozens of actors and filmmakers are speaking out against the newest Academy Award. And "Parks and Recreation" star Rob Lowe tweeted, "the film

business passed away today with the announcement of the "popular" Film Oscar. It has been in poor health for a number of years, it has survived

by sequels, tent-poles and vertical integration."

I think that's about it with all of us. Late night comedian Andy Richter chimed in, "finally, the Oscars will be given a statue based on popularity

so that those poor mountains of Box Office money won't be lonely anymore."

The shaking comes months after the 2018 ceremony scored the lowest TV ratings went on for hours and hours and hours, and they'll charge just 26

million viewers which is down 20 percent since the previous year.

And joining me as our Cnn entertainment correspondent Chloe Melas, good to see you.


QUEST: So --

MELAS: Nice to see you.

QUEST: The popular entertainment category --

MELAS: So let's talk about it, I mean, Richard, it's clearly a very transparent category. It is to boost ratings, OK? Like you said last year,

the Oscars telecast hitting all-time low with just 26 great -- 5 million viewers --

QUEST: But they haven't defined yet what will be a popular -- for the purposes of this --

MELAS: OK, so they haven't, but a lot of people are saying this quite possibly could mean that "Black Panther" could win an Oscar, right? Because

usually those big blockbuster films, they win the technical categories, but like last year, best picture went to "Shape of Water".

"Shape of Water" last year at the Box Office grossed just $63 million domestically, Richard, that's really nothing compared to these blockbusters

like "Black Panther" that reign supreme --

QUEST: Of course, the argument is "Black Panther" --


QUEST: Now, Spike Lee, we've been talking --

MELAS: Yes --

QUEST: About Spike Lee --

MELAS: OK, well, "Black Klansman" opens in the U.S. today, it's his latest film, Spike Lee and it's about the true story of a man named Ron Stallworth

who infiltrated the KKK as a detective in the Colorado Springs Police force in the '70s.

Well, I got a chance to catch up with Spike Lee and he not only times the film's release to the one year anniversary of Charlottesville, the riot in

Virginia that are this weekend, the anniversary that he is hoping that this film actually impacts the mid-terms and keeps Donald Trump out of the White

House for a second term.


SPIKE LEE, FILM DIRECTOR: I hope that, that people feel like that, they'll be motivated to -- the more register to vote. The mid-terms are coming up,

then this guy in the White House is going to run again and what we're going through is demonstrated -- I think it's fourth -- evidence, what happens

when you don't vote.

We don't take part in the process. We just have to be smarter in who we vote, the people who say they represent us but then, you know, get stabbed

in the back.


QUEST: And Chloe, would any Republican enjoy this movie? Since it's clearly ultimately anti-Trump.

MELAS: OK, obviously it's anti-Trump, at the end, they actually show clips of Trump next to images from Charlottesville from the riots. It will stop

and make you think because it's a true story and it's a true story that not a lot of people know.

And there are a lot of parallels to what is going on today, but Spike Lee's message is very in your face and it's --

QUEST: Right --

MELAS: Very clear and he won't even call Trump by his name, he calls him Agent Orange.

QUEST: Thank you, and finally, when we get the definition of popular --

MELAS: I'll be back --

QUEST: You'll be back and we will go head to head on this --

MELAS: Yes, definitely.

QUEST: Good to see you as always, have a lovely weekend.

MELAS: Thank you.

[16:50:00] QUEST: When we return, a smaller African nation under major sponsorship, here are the world's biggest football teams and it's raising

questions among the countries whose aid money helps to keep the economy moving.


QUEST: Rwanda may rank among Africa's smallest economies, but the country has just landed a major sponsorship from one of the world's biggest

football teams. Arsenal will wear a "Visit Rwanda" logo on its jersey for the next three years.

Which has left many wondering how the small and impoverished nation can afford such a deal. Simon Cullen has our report.


SIMON CULLEN, CNN (voice-over): On the playing fields of Kigali, football is key. In the light afternoon sun, children rush to join in. It's more

than just a game, it's a passion that runs daily. The children proudly spot the jerseys of their favorite European clubs.

It's a loyalty that stretches to the top. Even the country's President Paul Kagame describes himself as a committed fan of his beloved club

Arsenal. A devotion that presents big business opportunities.

UNIDENTIFIED MALE: We noted this partnership of "visit Rwanda" will get a really good global markets and exposure.

CULLEN: In the lead up to the start of the Premier League season, Arsenal announced a three-year tourism partnership with Rwanda, although neither

side is saying just how much the country paid.

UNIDENTIFIED FEMALE: The media has been speculating around 50 pounds, but what I can tell you is that it's not 30 million pounds, it's less than


CULLEN: The deal means that the "visit Rwanda" logo will feature on the players left sleeve this season. Publicity the country hopes that will

eventually be converted into tourism dollars.

UNIDENTIFIED FEMALE: Thirty five million people viewing their shirts every single day and when they have a game, we have over 100 million people


CULLEN (on camera): But the Arsenal sponsorship deal has proven controversial. The club is one of the richest in London, Rwanda on the

other hand is the country where almost the third of its population lives below the poverty line and its government receives millions in foreign aid.

(voice-over): Some lawmakers in the Netherlands and the U.K. countries that both provide financial support to Rwanda are uneasy with the


UNIDENTIFIED MALE: I think when millions of Rwandans are living on less than a pound a day, I think that's fairly obscene. I think the public have

a right to know how (INAUDIBLE) being spent. And the people of Rwanda have a right to know how they're personally spending their money.

[16:55:00] UNIDENTIFIED MALE: First of all, for those other MPs, it's none of their business. I will repeat that, none of their business.

CULLEN: The government says the money for the Arsenal deal comes from tourism revenue, not from foreign aid. By the way, on the ground, there's

support for the sponsorship agreement and excitement that one day it will mean that the Arsenal team visits Rwanda, giving its fans the chance to

meet their football heroes in real life. Simon Cullen, Cnn, London.


QUEST: And before we leave you, a final check of the markets. The Dow is off 196 points at the close, it was the Turkish lira contagion that really

did it in for the markets. The financial shares were very badly affected on both sides of the Atlantic.

And if you want to keep on top of the day's business headlines, 90 seconds, that is our daily briefing podcast updated twice a day before and after the

closing bell. Alexa and your Google home device, they will respond beautifully to CnnMoney flash briefing every weekday.

We'll have our profitable moment after the break.


QUEST: Tonight's profitable moment, just a penny, just a penny! The humble penny you know we've spoken about many times is the backbone of our latest

promotion. And now it's fascinating to see how the humble penny along with its sisters and brothers of nickels and dimes and quarters, it's the future

for millennial investing.

What we told you tonight is about how Acorns is rounding up all your purchases and taking those to one side and investing them in portfolios

that you choose based on your risk capacity. It is ingenious because we do know that youngsters are not -- well, I was young once, and I didn't invest


I mean, who at the age of 25 gets excited about superannuation and pensions. I ask him, you know, the reality is by the time you really need

to know about it and do it, it's probably too late or you have to put too much of a percentage in that side.

And this is really clever. Get people started early with just a little bit here and a little bit there and in true fashion, you want to get used to

say look after the pennies and the pound will take care of themselves. And so it be true.

And that's QUEST MEANS BUSINESS for tonight, I am Richard Quest in New York, what an amazing week we've had together. Whatever you're up to in

the hours ahead, I hope it's profitable. We'll do it again on Monday.