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QUEST MEANS BUSINESS

It Has Been A Confluence Of Investor Factors That Have Spooked Investors This Month; We're Now Learning Horrific New Details About The Death Of The Saudi Journalist, Jamal Khashoggi; GM Is Selling Fewer Cars And Making More Money; Airbus Says Delivery Problems Have Helped Bucket Earnings. Aired: 3-4p ET

Aired October 31, 2018 - 15:00   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: We are in the last hour of trade and well, yesterday it roared up. It's already done the roaring and

it's already up. The market opened higher and it has continued to climb up 419 points. This hour it's up one and three quarters but the NASDAQ is up

two and a half percent. We need to understand why and we need to show you the sort of factors that have been driving the day.

The volatile market, the sprint, it's the awful October and it's almost at an end. Facebook has led the fight back as the FAANGs account their

losses. FAANGs on Halloween, how appropriate. And sell fewer cars and make more money. GE rallies after a big quarter in China, GM, of course,

not GE. GE was all yesterday, now roll GM. Live in the world's financial capital, New York City on Wednesday, October the 31st, Halloween, I'm

Richard Quest. I mean business.

And so very Happy Halloween for investors. We are an hour away - oh, thank you - as if on cue. Ending a very scary October in the markets. Take a

look. Scary it might be, but the market is holding on to these gains. Now, it will be difficult to see how it could have a last hour strong rally

when you're already up best part of 2%, but we'll watch it and we'll follow it closely, you and I together in the hour ahead.

So up very strongly yesterday, down really badly on Monday. It has been a confluence of investor factors that have spooked investors this month. You

know what they are, they're rising rates, they are growing corporate government debts and you've got international factors, the trade war and

Italy's budget crisis and of course the slowing growth in China.

This all means step into my haunted house. The Dow- the Dow is down 4%. The worst performance since January 2016. The S&P, that is down 6%. The

worst since 2011. The first monthly loss since March and the NASDAQ down 9%. The worst since 2009 and if you pardon the pun, maybe there is some

good news coming out of it.

The NASDAQ is out of a correction, so speaking to it at the stock exchange, Ted Weisberg said October was a month where everything came, everything

came to a head.

(BEGIN VIDEO TAPE)

TED WEISBERG, FOUNDER, SEAPORT SECURITIES: Well, I think we got to some kind of inflection point with interest rates and tariffs, quite frankly,

maybe more interest rates than anything else, which came a lot sooner than certainly I suspected because you would think certainly now during earnings

period where the earnings had been relatively good, we have seen a lot of negative volatility yesterday and today and today aside and today is not

over yet.

QUEST: So what triggers it on a daily basis? Because what people who are watching it all says, why does it always go up sharply or down more often

than not, down sharply in the last hour? You're on the floor here, what are you all doing that creates that volatility?

WEISBERG: Well, historically the last hour - actually the last 15 or 20 minutes really sets the markets up for the following trading day and you

get these reversals, but it's the last few minutes of the day that sort of set the tone for the next day.

Now, historically that used to work now with all the algorithms and all the computer trading, I'm not sure that's still ...

QUEST: Right

WEISBERG: ... true ...

(END VIDEO TAPE)

QUEST: Nice, the pumpkins. President Trump says corporate earnings are great and he's crowing about a rise in consumer confidence. Joining me now

is Steven Moore, former economic adviser to the Trump campaign, and a distinguished fellow I'm glad to with - like all distinguished fellows on

this program - of the Heritage Foundation. Let me get rid of this before we go any further.

STEPHEN MOORE, FORMER ECONOMIC ADVISER TO TRUMP CAMPAIGN: Do they have pumpkins in the UK?

QUEST: Of course, they have pumpkins in the UK.

MOORE: They celebrate Halloween?

QUEST: There to, we celebrate Halloween as we do around the world. Look, there's not much to celebrate at the moment because the President said in a

tweet that the market was taking a pause. Do you believe what we're seeing is a pause? I mean, it's clearly under full bear market. No one is

suggesting that, but is there something more going on?

[15:05:00]

MOORE: Well, look, I think there's two things that have caused this bear market for the last three weeks which thankfully the last couple days have

given us back some of that. Number one, I think the interest rate hikes really spooked the markets. I don't think it was that one rate hike, I

think it was the Fed saying, hey, they're going up and up and up and I think that that direction really spooked the markets and the other thing is

I think the trade war has really worried people about, you know, whether we're going to enter a protracted trade war with China. I spoke with some

...

QUEST: But is it helpful? No, I'll rephrase it, it is unhelpful for the President to speculate about more tariffs on trade. I mean, we saw it

earlier in the week, the market literally heard those words and fell off the cliff.

MOORE: Right, right, but he's just telling people - he's telling investors what he's got on his mind. I was sort of surprised that the market had

that big selloff when he announced that he's going to get tougher with China because, look, I've worked with the guy for two and a half years.

That's a surprise that he's going to get tough with China. Weren't people paying attention to what he was saying? I mean, he is very aggressive when

it comes to China. He is not backing down when it comes to China and he's going to continue to tighten the screws on them.

And that's essentially what he said and the markets got spooked by that and I just think, "Gee, you should pay closer attention to what this guy says."

He's not backing down when it comes to China. This could take a while and this is holding back the market.

But I'll tell you this, Richard, and I am not an expert on the stock market, if he gets this deal done with China whether it's six months from

now or a year from now, you think the market's up big today, wait until that deal is announced.

QUEST: What do you make, though of for instance, the constant bashing of the Fed?

MOORE: It's a little uncomfortable.

QUEST: I mean, Stan Fisher who you know, of course, Stan Fisher said on this program that the problem with it is, it does create an undue pressure

for the governors because you're never quite sure what factor it has in their decision making even though it might be subliminal.

MOORE: Well, and by the way, "The Wall Street Journal" said the other day, this might work against Trump to establish their independence; they may do

what the opposite of what he wants, and so he's working against himself, possibly.

My view is, look, he is the Chief Executive of the American economy. He feels very passionately that the Fed is making a mistake here. I don't see

- and by the way, I do believe that the Fed should be independent and I'm an inflation hawk, so I want the Fed to be cautious on the inflation front.

But you've got to admit these rate hikes did - did take that punch bowl away from the party we were having and it might have been premature, right?

I mean, look at the selloff.

QUEST: If you, well, ah, I see - you want to look at the market. You want it both ways. You want to look at the market to justify the position.

MOORE: You got me. You got me there. No, what I'm saying is that, I think that the Fed - look, I don't see inflation out there. You show me

where the inflation is, Richard, you show me the inflation.

QUEST: On the Fed's measure ...

MOORE: Look at commodities. Look at commodities. They are there either level or falling in price and that's the best measure of inflation. I

think the Fed - you know what I think, Richard, I think the Fed is afraid of growth.

QUEST: Oh, come on.

MOORE: They're afraid of growth. They think growth causes inflation.

QUEST: It does.

MOORE: And they are wrong about that.

QUEST: It does.

MOORE: No, it does not. Here it is.

QUEST: Unbridled growth does.

MOORE: If the economy produces more apples, the price of apples falls, it doesn't rise. More production leads to lower prices not higher prices.

QUEST: Until, of course, the imbalances of your apples and supply demand ...

MOORE: Okay. But you know what? We're going to probably see some pressure on wages and that's a good thing. We want wages to rise. We want

middle class workers to do better.

QUEST: So ...

MOORE: ... if we want higher wages ...

QUEST: There's only one problem with having you here, it's such good fun, but thank you very much.

MOORE: What are you going to be for Halloween, my friend?

QUEST: Halloween, when is it? Tonight. I'll be working in the subs of our corporation. Right. Talking of Halloween, back to Halloween - a-ha,

October was the month of the so-called FANG stocks that got defanged. Now these five companies lost nearly $400 billion in value; like killing

vampires, it takes a special set of conditions to hurt the FAANGs -- Facebook, Amazon, Netflix and Google.

Unlike mortal stocks, they haven't been greatly affected by the trade war, so what would defang hurt? What vampire needs to work towards it? Look

inside the FAANG toll kit. First of all, you would need to raise rates. That could take an affect from Jerome Powell, the Fed chair. It could keep

capital the life blood of these tech companies and then you have the momentum - downward market momentum drives a stake through the heart of the

share prices and finally, garlic.

[15:10:01]

QUEST: Garlic repels vampires. High valuations repel FAANG investors. Put it all together and Michael Nunez is the Deputy Tech Editor at

"Mashable" and with me now. We're milking this for all its worth.

MICHAEL NUNEZ IS THE DEPUTY TECH EDITOR AT MASHABLE: I love it.

QUEST: Work with me on it. Work with me. The FAANG stocks. Are we coming to a situation - let's take them today.

NUNEZ: Yes.

QUEST: There was no reason for Amazon to fall 7% yesterday and there's no reason for it to rise 6% to 7% today.

NUNEZ: Right, well, I mean, I think that obviously there's some sort of large market correction happening in order to track tech stocks within this

larger trend happening across the market is a little difficult. I think from the people that I talk to in the financial world, I guess, their

understanding is that these stocks might take a small hit right now, but in the long-term they're still a lot of positive outlook for most of these

companies.

QUEST: But we alluded to this in our program yesterday, is there not a difference now within the FAANGs? I mean, FAANG was a nice idea of tech,

but there's a huge difference between a Facebook and, say, for example, an Amazon which is delivering physical things and running large computers on

behalf of people, not some website.

NUNEZ: Right, I think in most cases, especially for a lot of these companies, these businesses were growing at an astronomical rate over the

course of several - you know, over the course of the last five years let's say and so - so a lot of people followed that growth. There was a huge

addressable market for Netflix, for Amazon and for Facebook and they were growing users and growing customers over that time.

QUEST: So which of these two - let's go through them, let's go through the FAANGs.

NUNEZ: Sure.

QUEST: Which of them are not at risk, but faces the greatest competitive challenge?

NUNEZ: Yes.

QUEST: So Facebook, basically, other social media or simply people just get sick and tired of the whole thing.

NUNEZ: See, I kind of disagree with that. I think that Facebook doesn't have many competitors because of all these companies, Facebook has the most

valuable set of data among consumers and among people that would want to be advertised, too. So, I think ...

QUEST: But advertising is its main source of revenue.

NUNEZ: Currently, yes, but I mean, but I think that a lot of people expect Instagram to introduce shopping, so Facebook will take on Amazon at some

point.

QUEST: Amazon, the leader among all its surveys and it's become of the retailing infrastructure.

NUNEZ: Yes, that's true. So Amazon faces a lot of competition in a lost different places, obviously, because the company has horizontally

integrated more so than a company like Facebook or Google.

QUEST: Apple makes good products and also is now increasing a subscription business, therefore, having a steady source of regular revenue.

NUNEZ: Yes, they're also earning more dollars per device that they are selling, so per iPhone. They just increased the base price of literally

all of their products yesterday at an event in Brooklyn, so the Macbook, the Mac Mini, all of these things cost more money than they used to at the

lowest end models, and so I suspect their business will probably be safe ...

QUEST: Right, we haven't time to do the rest of that. Of all the FAANGs ...

NUNEZ: Yes.

QUEST: Which do you think is most at risk this Halloween?

NUNEZ: The most at risk this Halloween, I guess Apple is the big unknown here. They report tomorrow.

QUEST: Oh, oh. Don't be serious.

NUNEZ: So I think that because they're the great unknown, you know, I would have to - I think that's the most rational answer to that.

QUEST: Rational, good to see you, sir.

NUNEZ: Thanks for having me.

QUEST: Thank you so much for coming on. Thank you. As we continue GM is surprising investors. They're applauding America's biggest automaker. A

look at how China is playing a part in the latest earnings, and before we go, we've got to have one more crash Halloween.

[15:15:00]

QUEST: So to Istanbul where we're now learning horrific new details about the death of the Saudi journalist, Jamal Khashoggi. Istanbul prosecutor

says that Mr. Khashoggi was strangled and then cut up into pieces and the prosecutor added the whole thing was clearly premeditated.

This is as we hear the Britain's former Foreign Secretary Boris Johnson who by the way has publicly condemned the killing went to an all-expenses paid

trip to Saudi Arabia only days before that Khashoggi was killed. The three-day visit was worth nearly $18,000.00 that was paid or the expenses

wre by Saudi Arabia.

Bianca Nobilo is in London now. I mean, obviously, there is no connection in any shape or sense between those two events and certainly Mr. Johnson

knew nothing of what was about to become, but the issue here is the way in which Saudi buys influence from influential people with such arrangements.

BIANCA NOBILO, CORRESPONDENT, CNN: That is the issue because these trips aren't unusual whatsoever and there's a very contentious point in the

British parliament and the nation at large over whether or not Britain should be considering its arms sales to Saudi Arabia.

Last year, it was well over one billion pounds. There's a lot of secretive deals that the public aren't privy to. So this is a really big problem.

As you say, this isn't underhanded. Johnson declared this to the register of member's financial interest, which is what parliamentarians have to do

in case any benefits they receive might influence their political judgment.

But since then, since that three-day trip, Johnson has condemned what's happened to Khashoggi in the chamber and he's also been very vocal about

Saudi Arabia in general saying that Britain can't turn a blind eye to it.

QUEST: Tell me what is the political argument that says, don't buy arms or we shouldn't - the nations shouldn't sell arms to Saudi Arabia at the

moment? What good does anyone think that will do?

NOBILO: That's the Labor Party's position. Now, the leader of the Labor Party in the UK, Jeremy Corbyn famously sides with many pacifist arguments.

He would out rightly say that it's not okay to be selling arms to a country like Saudi Arabia because of the human rights record, because of where that

arms is going at the moment.

Now, bearing in mind that the arms sales from Britain to Saudi Arabia increased by two-thirds over the years 2016 to 2017, that is when the

conflict in Yemen has been hitting more and more headlines globally and the conversation about it in the UK is heating up too, so that's one of their

main points of contention.

QUEST: Right. Turn to Brexit for me, please, change hats. Dominic Raab, the Brexit Secretary says a deal could be done by the end of the month.

NOBILO: He did. So this is a very credible way that he's put this date forward. He wrote it to the Chair of the Committee for Brexit, Hillary

Benn in response to questions they had for him. He said, "Yes, I'll take your questions. It'll be easier for me once we've got a deal. I expect

that to happen by the 21st of November," and he laid out that the main sticking point was still Ireland, but that they had this new proposal to

help un-seek the negotiations which is four pronged. We probably don't have time to go into it now.

QUEST: We don't.

NOBILO: Now that also - I felt that we couldn't. But we also can see other reasons why that date would work. First of all, because it would

allow a summit to happen with the EU around the first of December, which is one of the dates that we know both the EU 27 and Britain can do and also

I've been speaking to sources involved with no deal planning and they told me that after the date of the 21st of November, they'd have to activate a

lot of no-deal spending to make sure that infrastructure ...

[15:20:08]

NOBILO: ... was in place in the event of a no deal next year, so that date is looking quite likely, Richard.

QUEST: Twenty first November, mark it in your calendar and keep us informed on how we're doing if I forget to tell you to do it. Thank you.

NOBILO: Of course.

QUEST: GM is selling fewer cars and making more money. Sounds like a good idea. The shares are up 10%. Extraordinary for a company like that, it's

up almost 20% over the last five days with a strong performance in China. Rebecca Lindland is an executive analyst at Kelly Blue Book. Come on,

mature company like GM selling around the world and the stock is up the best part of 20%, it's just quite remarkable.

REBECCA LINDLAND, EXECUTIVE ANALYST, KELLY BLUE BOOK: It is and I was very cynical this morning when we saw the results because I thought, "Oh, Wall

Street is not going to reward them," so it's nice to see the stock up. I'm not a stock analyst per se, but we certainly watch it carefully to just see

how Wall Street is reacting, so we were very, very pleased.

QUEST: What is it about the numbers that people like about GM? I mean, is this a case of the numbers weren't bad but they weren't barnburner either,

were they?

LINDLAND: Well, they were pretty close to barnburner. I believe the estimates were $1.27 per dividend. I think, they came in at $1.87 ...

QUEST: No, no. I'm talking about the number of cars sold, the way in - I mean, they're making more money by selling fewer cars effectively.

LINDLAND: Well, they are selling literally fewer cars in the traditional sense of cars because they're selling more SUVs and pickup trucks and

that's one of the best things about the company is that they have the right products in the showrooms.

One of the biggest things they just need to get even more people into the showroom or keep the people that are buying cars and transition them into

SUVs and pickup trucks because they make a lot more money selling the larger vehicles. So, from that standpoint the company is very, very well

positioned.

QUEST: Ford and Baidu announced that they were coming together to seek for autonomous vehicles, self-driving cars in China. I am so confused over

which company is in bed with which technology company or internet company on autonomous vehicles?

LINDLAND: Well, it's a little bit like Hollywood where you never really know who's sleeping with whom. So I think that, this is a - we're in a

time in the industry where there's just a lot of disruption, there's a lot of uncertainty and you really want to partner with people that do things

really well that you may not do as well.

And so that's why we're seeing all of these, that's why we're seeing Honda pair up with GM through Cruise. That's why we're seeing these kinds of

alliances because there's billions of dollars on the line and everyone is kind of looking to pair with people that they may be able to gain an

advantage with, so we're certainly seeing some strange bedfellows going on.

QUEST: Thank you so much, Happy Halloween. Airbus says delivery problems have helped bucket earnings. Even still, the stocks soared after it

tripled last year's third quarter performance and that after reporting a $1.1 billion net profit.

Anna Stewart is in London. When you look at the deliveries and you look at the Airbus forecasts, there is some justification for these performances,

for these numbers.

ANNA STEWART, CORRESPONDENT, CNN: Yes, the numbers are very, very strong, Richard, but there has been some concerns about those deliveries and the

CFO and the analysts all states that it was very frustrating particularly with the engine makers which are causing further delays in one of its jets,

the A3-13 Neo. That stands for Rolls Royce last week, which announced that the 27,000 engines are having difficulties getting that ramped up at Rolls

Royce and that is going to impact those deliveries and today, the CFO said that that - they are reducing those deliveries significantly.

But they are hoping to keep up their full year target of deliveries and that's largely because they've had really strong performance with A-350.

QUEST: If you look, though at the management changes, so you've got Tom Enders leaving, you've got Guillaume joining as - he came in as Airbus

Commercial and now he's going to the top job. They've had to restructure further down. Is there a situation whereby stability is on the horizon

even at the CFO has had to be changed?

STEWART: Quite. A lot of change at the top and I think the overall message we're getting from Airbus today is that they're all focused on

making sure they focus on deliveries foremost before anything else, they've got to iron out some of the issues they've had particularly with some of

their manufacturing problems they've had because that's also fed into this problem with deliveries.

But overall, you have said that the demand has been very strong, so even though they're struggling to keep up with it, analysts today are thrilled

with how the outlook is looking, it's not dimming. They've had eight strong years of bumper performing demand really on commercial jets.

[15:25:07]

QUEST: Good to see you. We won't dwell on the A-400M, which is an entirely different story - reek and racked the problems in overruns. Okay,

thank you. We'll have a look at the markets before we take a short break because we are in that last hour of trade and, you know, we started about

419 on the Dow, we're holding around 400 and if I was a betting man, how do I think the day will end? It's too tricky to say. This entire lot could

evaporate before tea time.

Before Venmo, PayPal WeChat, there was a Kenyan company, it was called M- PESA. Countries in Africa are being quick to take up the mobile banking revolution and the vote. Okay, which country is going to lead the economic

performance in Africa? Think about it, is it Nigeria? Is it Ethiopia? Is it South Africa? Is it Kenya? If you have your device ready, we can set

things alight on your vote?

Hello. I'm Richard Quest. We have a lot more "Quest Means Business" to bring you when Bitcoin celebrates its tenth birthday and heads for another

less happy milestone. We'll talk about Bitcoin. And it's the app that took over the entire country, Kenya runs on M-PESA. I'll speak to the man

who helped launched it. This is CNN and here on this network, the facts and the news always come first.

Indonesian investigators are searching for the wreckage of Lion Air flight 610, now say they have detected transponder pings. That could lead to the

discovery of the flight recorders. The black boxes could explain what caused the plane to crash killing all 189 passengers and crew on board.

The US Federal grand jury has indicted the suspect in the Pittsburgh synagogue massacre. Robert Bowers is charged with 44 counts including

religious hate crimes. He is due back in court on Thursday.

[15:30:10]

Bowers is accused of killing 11 people, it is the deadliest attack on Jews ever in the United States.

Two women whose bodies were dumped in the Hudson River in New York were Saudi citizens according to the Saudi Consulate. Now identified them as

sisters Rotana and Tala Farea. Their bodies were found bound with duct tape last week. Tala has been missing since August, they're still

investigating what happened.

Now, in Nairobi, paying with your bills -- with bills on your mobile is easier than frankly anywhere else. Now, I'm not talking about contact list

or any nonsense where you Venmo-ing or PayPaling. I'm talking about where you literally walk into a shop or speak to somebody, they give you their

number, you give them yours and push, it's all done, money transferred.

Kenya has become a world leader in the mobile banking revelation and it's all thanks to the system M-Pesa. It was launched by Vodafone's Safaricom

and only a decade M-Pesa has expanded its money transfer service to almost 30 million customers across ten countries. Now with M-Pesa and with all of

that still going on, we want to know if you think Kenya has the economic edge over its African rivals.

Oh, boy, taking on trust and hope and wind in one hand, go to cnn.com- slash-join, cnn.com-slash-join and you vote for which country you think will be the leading performer in the future in Africa. You'll see the

choices that you have on -- when you go there. It is Nigeria, South Africa, Kenya and Ethiopia. Which of these countries will lead Africa in

the next 20 years? The chance to vote and have your say.

In the past few years, M-Pesa has become so big that investors now use it to buy Kenyan government bonds. I went to the streets of Nairobi to see M-

Pesa's impact for myself.

(BEGIN VIDEOTAPE)

QUEST (voice-over): Long before Apple Pay or Venmo launched in the U.S., years before WeChat and Ally Pay took over China, mobile banking got

started right here in Nairobi.

(on camera): M-Pesa.

(voice-over): M-Pesa was created in 2007. Its service is simple. Money is sent back and forth like a text message. Transfers can be made and

received on even the most basic phones and you don't need a bank account. Do you use this every day?

UNIDENTIFIED FEMALE: Of course, everyday, it's easy.

QUEST: In ten years, it's evolved from a simple money transfer service to a fully fledged financial platform. It offers savings and loans, it even

sells insurance. Do you take M-Pesa?

UNIDENTIFIED FEMALE: Yes, we take M-Pesa.

QUEST: Yes, of course, they do. M-Pesa.

UNIDENTIFIED MALE: M-Pesa, we can accept.

QUEST (on camera): Now, this is the real test. Can I buy newspapers using M-Pesa?

UNIDENTIFIED MALE: Yes.

QUEST: Never mind American Express, Visa or MasterCard, it's M-Pesa.

(voice-over): There are only 2,000 ATMs in Kenya, compare that with 120,000 M-Pesa agents. Places where Kenyans can withdraw or deposit cash

in exchange for virtual M-Pesa currency.

(on camera): Is this the sort of place that I can give money to charge my M-Pesa?

UNIDENTIFIED MALE: Yes --

UNIDENTIFIED FEMALE: Yes --

QUEST: And I do that with you?

UNIDENTIFIED MALE: Yes --

UNIDENTIFIED FEMALE: Yes --

QUEST: And is this the sort of place where I can then come to and get money from M-Pesa?

UNIDENTIFIED MALE: Yes.

UNIDENTIFIED MALE: Yes --

QUEST: Believe it or not, I can do more mobile banking here in Kenya than I can in New York City or London. You're getting the idea, it doesn't

matter what you're buying, mobile banking now is the heart of the payment system in East Africa. You get the idea.

(voice-over): Ninety three percent of the population has access to mobile payments. In fact, transactions processed by platforms like M-Pesa account

for nearly half of Kenya's entire GDP.

(on camera): I've never quite seen a revolution in payment systems like it. Forget PayPal or Venmo, this is going right to the grassroots here.

Everybody takes M-Pesa. That's what you call marketing and mobile banking.

(END VIDEOTAPE)

QUEST: Extraordinary, and you can still see the question by the way, and maybe that affects how you're going to vote on which economy will lead

Africa in the next 20 years.

[15:35:00] Now, Michael Joseph was the Chief Executive of Safaricom when he helped found M-Pesa. He told his employees he wanted a million users in

the first year or they'd be fired.

(BELL RINGING)

The rest is history.

(BEGIN VIDEO CLIP)

MICHAEL JOSEPH, FORMER CHIEF EXECUTIVE, SAFARICOM: The reason for the success in Kenya and particularly in Kenya is because when we started out,

people forget, we spent $10 million in our first year of investing in M- Pesa.

What we spent the number one was the distribution network. You can go anywhere in Kenya within 200 meters, you will find an M-Pesa agent. That

is the secret of success. And when you -- when I send you money or if I don't even send you money, if you sign up to M-Pesa, you want to know --

and in fact, you get money, you can take it out anywhere at any time.

And that's why we built a huge distribution network. So it was a very -- a very confident of people to take their money out.

QUEST: So what's the incidence of people just leaving the money in M-Pesa unless they need a bit of shortcut, but they just leave it in there and use

it as a -- because they -- it's so widely accepted when even the newspaper vendor accepts it. You just -- if you receive money from -- you just leave

it there and spend it.

JOSEPH: Yes, that's what the people do. In the beginning, in the early days you sent money in -- you sent some money and immediately they went and

took it out. Now, the next -- to your previous question, when they start to leave the money in for two or three days, that money sits in a current

account, a trust account which is not owned by Safaricom, it's owned by external trustees.

And that money generates interest overnight interest. In fact, we are the biggest buyer of government bonds at the moment. Seventy percent of the

government bonds in Kenya are M-Pesa trust account funds. That money earns interest. When we started out, we didn't know it would be so successful.

We had no clue.

So we just thought the interest would be just enough to pay the bank fees and all the fees and things like that. But it's gotten so big now that we

started an M-Pesa Foundation to spend this money so we spend it on big charitable projects. And yesterday --

QUEST: So besides the fee --

JOSEPH: Yes --

QUEST: For the transaction --

JOSEPH: Yes --

QUEST: M-Pesa doesn't make money off the float?

JOSEPH: No, it doesn't make -- the float belongs to the M-Pesa -- to the trust company.

QUEST: And you're telling me --

JOSEPH: That's the money that we use to fund charitable projects. We just built an enormous school north of Nairobi to produce the future leaders of

Kenya. We talked about corruption. There's only one way you can solve corruption, and that's to start from the bottom and now we have started the

school. It's an academy. We're taking young people, we're taking four kids from every -- from every county every year and they all come from very

poor backgrounds, but they have some spark of leadership and these are the future leaders of Kenya.

QUEST: Is your ambition to expand M-Pesa elsewhere out of Africa?

JOSEPH: Well, it's my ambition. Whether it can be successful or not. Now, we have taken M-Pesa -- I have taken M-Pesa to Mozambique, to

Tanzania, to Lesotho, to Egypt, to Ghana and to India. We tried to take it into Europe, into Albania and Romania, tried very hard, very difficult to

be successful.

You need to have critical mass for it to be successful because the transaction fees are so low that you need many millions of transactions.

We were not successful to my sadness, we were not successful. India, we tried very hard, and India is a very strange country.

QUEST: But if you look at this country, there was a learning curve or there was a developmental curve that got more and more people involved when

it started, it was just between friends or it was just between families. Getting merchants to sign on was more difficult.

JOSEPH: Yes, but one thing you have in Kenya is if you have a fantastic population that takes to technology so quickly and when the kids started to

use it, it just began to grow.

QUEST: What did you feel like when you saw it grow because you put your neck on the line, you had a hunch and there must have been a moment, there

must have been a moment where you saw -- oh, gosh, this is really taking off.

JOSEPH: OK, so what happened was, when we launched it the business plan said we would have 350,000 customers in our first year. I said to the team

we have to have a million. I just dragged the figure out to the air to a million. They said it's impossible, too difficult. You have to sign up

everybody, you have to change the SIM card, you have to do a KYC, everybody just takes so much different, I said, I don't care.

You get a million or I fire you. And my style of management was that kind of style of management. I'm not a Democrat, OK, I'm a dictator. Anyway

that's what I said and we got 1 million customers in our first year and that was the critical mass. You never had to advertise again because once

you got a million it became viral.

(END VIDEO CLIP)

QUEST: We will discuss and argue about the mode of leadership, but M-Pesa has helped Africa's economy move forward and faster.

[15:40:00] Now, Nigeria and Kenya are pretty much head-to-head over which country you think will lead Africa's growth in the next 20 years.

It's going back and forth. Nigeria is edging out Kenya at the moment. I'm sure the Kenyans won't let that last very long. South Africa is out of the

race as indeed is Ethiopia. Well, like -- it's just lagging far behind. More on this in just a moment. Fintech and a bitcoin, it's the

cryptocurrency's birthday. Happy birthday to you.

(COMMERCIAL BREAK)

QUEST: Oh, there is so much to celebrate if you're out tonight celebrating Halloween. Raise a glass and have a cheer for another big anniversary,

bitcoin is ten. But it might welcome you a good cheer after turbulent few months. The cryptocurrency is undergoing some birthday blues.

It's on track for year-on-year loss, the first since last year's bull market. As someone tracking all of this ten-year-old's tempest tantrums

and tramps, Nolan Bauerle; he's head of Research at CoinDesk, good to see you Nolan.

NOLAN BAUERLE, HEAD OF RESEARCH, COINDESK: Pleasure to be back.

QUEST: Nice to have you. Ten years old, what do you make of it?

BAUERLE: Well --

QUEST: I mean, ten years we're at 6,000 and something, 6,700 --

BAUERLE: Yes --

QUEST: Or something, but none of that volatility, it's eased off slightly.

BAUERLE: Sure it has. And let's put the ten years in context too. It's ten years of conception like everything in bitcoin, there's debate all over

the place. Some people think the actual genesis block, so January 3rd with the "Times" headline that day, chancellor on the brink of second bailout of

major -- of banks was the actual birthday.

Today being the conception day and there's tons of other holidays. There's bitcoin pizza day which is kind of like the Bar Mitzvah when it was all

grown up and we were trading pizzas for bitcoins, so there are a few holidays --

QUEST: Arguably, the Bar Mitzvah for bitcoin, now there's a fault. Arguably, it hasn't grown up because it burnt up to 19,000, 20,000 last

year and it dropped by 70 percent, and we're now down more. And now down six -- so look at that. That's just year-to-date.

What's its future because I don't hear people, I hear lots of people saying blockchain is the future, blockchain and the integrity of blockchain, but I

only hear them saying bitcoin is going to be the heart of it.

BAUERLE: Well, if you just look at the security side of what bitcoin's amassed, forget the price for a second. We're talking about decentralized

networks coordinating through incentives and growing. So this is a network that's grown to these proportions without anybody home. There's no boss,

there's no company, there's no CEO.

[15:45:00] There's no one saying to developers to contribute. There's no one saying -- there's no marketing budget on Twitter, getting people to

talk about it. So here, we've got this phenomenon --

QUEST: Because the people who have been talking about it are in some cases not the ones you really want. They're pure speculators and, look, I got

one of those scam e-mails yesterday telling me about my internet habits or saying if I didn't pay 900 bitcoins -- $900 in bitcoins, you'd be told

about it. I mean, it's got -- it still got a smelly reputation.

BAUERLE: Look, there's -- it's such a different thing that grew out of all this activity. So it's all over the place, of course, it's used for all

these other activities. But the very reasons for which it's good for that, make it good for other things too. So that's what we're still trying to --

we're trying to understand what it can do other than speculation, of course.

That's a part of it. We're now betting on the first time ever a native digital piece of private property. So people are wondering what the value

of that is and you're really buying security because that's what behind it.

QUEST: What do you think the medium term price of bitcoin will be? I mean, has it settled down into a range of say 5 to 8,000?

BAUERLE: I think that would depend on what is being built on top of it. So it went up to 19,000 because you had this first smart contract ever

running that created a multiplicity of coins. All of a sudden, you had way more coins. Bitcoin was behaving as a kind of reserve currency within that

system.

People were going between other coins back to bitcoin into other coins. So that put a lot of buying pressure on it. That was probably artificial

because there were so many coins being created, there was such a frenzy and there was no way to short it.

Healthy that we can short it now, that didn't exist a year ago. There was no way to bet against it, so you had runaway speculation which was a thing

and got a lot of attention, but I think most people that are interested in the technology, interest in the network wanted to see a way to go against

that.

QUEST: How is the community celebrating the tenth anniversary besides arguing among itself over whether this is a benefit --

BAUERLE: Well, it is what it is. These people --

QUEST: Anyway --

BAUERLE: There's a lot of people who thrive off the debate and the arguing and that's a big part of --

QUEST: And what's the name of who started it?

BAUERLE: Satoshi Nakamoto --

QUEST: Yes --

BAUERLE: Yes, well, he's --

QUEST: Oh, great is that, doesn't the January date, was that now?

BAUERLE: So the paper was released today and that's really what everyone's celebrating. So on coindesk.com, we have a whole series written by other

cartographers about how important it was to develop this thing.

QUEST: We should have gotten you a cake.

BAUERLE: Well --

QUEST: I feel remised that we haven't --

BAUERLE: Come back January 3rd and we'll have the cake for that date.

QUEST: Thank you very much indeed.

BAUERLE: Thanks a lot.

QUEST: One more look at the question on which of the countries in Africa you think -- let's close it off. Let's close it down. The answer there --

look, Kenya -- oh, we're not closing it down, oh, no, we're going to keep it going. Kenya, you have another chance. You have another two minutes to

try and beat Nigeria if you can.

Anyway, when we come back after the break, the oracle of Omaha may be changing his investment style, Warren Buffett look at Fintechs after the

break.

[15:50:00] (COMMERCIAL BREAK)

QUEST: Welcome back. Warren Buffett is renowned for making investments in tried and tested consumer staples. Now, the article of Omaha has a new

investment plate and is moving into world of Fintech. Recently invested in two Fintech companies, India's Paytm and Brazil's StoneCo.

Cnn's Ahiza Garcia joins me now from the Nasdaq Entrepreneurial Center. Good to see you, thank you -- in San Francisco. Well, is this -- is this a

bigger change for Warren Buffett as it would seem? The man who only said I would invest in things that I can touch or I use.

AHIZA GARCIA, CNN BUSINESS WRITER: In some ways it definitely is, right? Because he hasn't done a ton of Fintech investment. But in other ways --

it's also important to remember that it wasn't him, it was Berkshire Hathaway and it's Todd Combs who does have experience with technology and

investment -- investing in that area.

But the important thing to remember here is that these are leaders in their respective markets, right? So Paytm is a local leader in India and you've

got StoneCo which is a leader in Brazil. So while Fintech is kind of a new area for Buffett and for Berkshire Hathaway, the fact that they're leaders

in their respective markets does kind of fall in line with his tendency to invest in -- you know, companies in America that have really made a -- made

a major impact in the marketplace.

QUEST: No question it is a -- it is a scene of approval though, isn't it? When the sage of Omaha invests in your company, you are pretty much telling

the world that this is -- on to a good thing.

GARCIA: For sure. I mean, look at Apple, right? They are as of a couple months ago, I believe they were the second largest shareholder in Apple.

And so you know, while he is very selective and has even said he doesn't have, you know, the technological expertise to really dabble in that area.

The fact that they now hold such a large share of Apple is a huge sign for that company and a huge kind of vouch for them, so definitely kind of has

the same weight for Paytm and StoneCo.

QUEST: So these two companies, what do they do? I mean, I'm brandishing around the phrase Fintech as if everybody understands. Well, what do they

actually get up to?

GARCIA: Essentially they're mobile payment processor apps, right, and within their respective markets. Think of Venmo, right, which is peer-to-

peer money lending or PayPal or even Apple Pay. So it's similar to that, right? Money changing hands --

QUEST: So --

GARCIA: Through an app --

QUEST: So tonight on this program, you heard us talking about M-Pesa which is the African one, huge down there, and Venmo and you've heard us discuss

it. Everything I'm hearing suggests that he or she who wins this battle in your area, in your geographical area stands to make a fortune?

GARCIA: For sure. I mean, look at Venmo, right, it's now backed by PayPal, but the fact that it kind of -- PayPal got behind Venmo which was -

- you know, it could have been seen as a competitor and then now they are putting their weight behind that.

And definitely -- I mean, where would we be today if we couldn't exchange money via an app. I know my life would be significantly different.

QUEST: Right, OK, do we end up -- because you're now out in San Francisco and you'll be helping us understand as part of your new duties. As part of

your new duties with Cnn Business out there, what's the goal? What's the goal of our increased output from there?

GARCIA: I think it's a sense that technology and business which used to be kind of desperate fields are now so kind of inextricably linked that it

made so much sense to have a presence out here with the relaunch of Cnn Business, right?

Because technology is such a huge part of every business now, and a lot of the start-ups we've seen have now become major players in the business

world. So I think it's -- it just kind of seems those two desperate entities are now seen together.

QUEST: Cnn Business is probably -- you'll have it, thank you very much. You can expect to be talking to us many more times. So the last few

moments of trade, let's go have a look at the numbers. We might need some Halloween-type noise because we are certainly down, the ghouls have

arrived.

I don't think -- oh, thank you, thank you. As if unsure, quite on cue. The Dow is up more than 200 points, but it is sizably off its highs. We've

given back quite a lot of the gain.

[15:55:00] Obviously, with six minutes to go, I think it would be extraordinarily unlikely that the market would turn negative. That's not

going to happen. A U.S. private payroll rose in October, one of the reasons, but it's trying to finish the month on a high note, and if you

look at what you saw and what we have seen so far, you can see -- well, those who gained today, some particularly strong performers.

You had a Caterpillar, that's obviously on the back of a better economic news and China. Boeing is up again, gave back some of the gains of the

day, it was much better than it was. But look at the losers, all the -- there's no real common thread between a Wal-Mart, the Verizon and Intel and

a McDonald's.

Absolutely, these are the cats at the bottom of the tree. Meanwhile, those at the top, well, I think we just have to say that this is one of those

days where the market decided if the selling had been dramatically overdone -- and when we come back in just a moment, the question that we have been

telling you, asking you, which economy will lead Africa in the years ahead over the next 20 years: Kenya, Nigeria, South Africa or Ethiopia? Our

numbers are off the charts and your answers after the break.

(COMMERCIAL BREAK)

QUEST: All right, tonight's profitable moment, there's the final numbers. Kenya at 41 percent, Nigeria 43, South Africa fell back to 9 and Ethiopia

down at 7. So most of you think that Nigeria will be the country with the strongest economy that will lead Africa over the next 20 years.

Now, yes, I can hear you say, Quest, that's not fair, there's more people in Nigeria, the population is bigger, they more voted, well, it's a bit of

fun at one level, but I think the reason we wanted to bring it to you tonight is because it doesn't allow us to talk about the issues, the four

big economies and others in Africa and how East and West Africa along with South Africa, which will be the big growth area in the future.

And so, that's QUEST MEANS BUSINESS for tonight on this Halloween evening, I am Richard Quest in New York. Whatever you're up to in the hours ahead -

-

(BELL RINGING)

Oh, the bell rings, the bells, the bells are ringing. The day is done, the Dow is up.

END