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Quest Means Business
President Trump Says There is Great Electricity in the Air on the Eve of the High Stakes Midterm Elections; Air Speed Indicator Malfunctioned on Doomed Lion Air Flight; Khashoggi's Sons Issue Emotional Plea for Father's Body; SoftBank Says It will not Sever Financial Ties to Saudi Arabia After the Killing of Khashoggi; Dow Rises in Final Day Before Midterm Elections as Investors Watch Earnings; Thousands of Saudis Call for Amazon Boycott; Amazon Announces Free Shipping for Holiday Shoppers; Amazon Shares Drop as Trump Vows Antitrust Investigation; Founder of World Wide Web Calls for "Contract for the Web"; World Travel Market Opens with Focus on Digital; Indonesia Embraces "Digital Tourism" to Meet 2019 Goals. Aired 3-4p ET
Aired November 05, 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: Look at the Dow, down dipped around about 10:00 in the morning. Goes up throughout the course of the
day, slightly off the best of the day so far, and there is one hour still to trade on Wall Street. I'm Richard Quest. These are the top business -
these are the headlines on CNN.
Iran is the first as the new sanctions come into play. The Trump administration's renewed sanctions on Iran's energy. US elections and the
questions of the midterm, almost upon us, which will go in different directions? And Amazon, is the Trump administration about to try an anti-
trust deal or anti-trust attack on Amazon? Tonight, live from London, this is "Quest Means Business." I'm Richard Quest. Now, let's go.
Good evening. It's the final frantic, dramatic push for votes. Across the United States, candidates and their supporters are making their closing
arguments. President Trump is campaigning right now in Cleveland. It's been a bitter campaign season and the most expensive midterm election in US
history and this is why. The entire House is up for grabs, along with 35 Senate seats and 36 state governorships.
The decisions voters make will affect everything from the Supreme Court to regulation. President Trump's agenda even how and where the electoral
battle lines are drawn. Bill Clinton's strategist famously said, "It's the economy, stupid." But when it comes to economic developments, there's
plenty to campaign on.
So first of all, you've got surging growth, raging trade wars and growing deficits. To voters, the importance of the economy hasn't changed much
since the last midterm elections four years ago. Forty four percent of registered voters polled nationally say the economy is extremely important
to their vote. That's down 12 percentage points in the height of the crisis in 2009-2010. Even President Trump doesn't seem too eager to talk
about the economy.
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: They all say, speak about the economy, speak about the economy. Well, we have the greatest economy
in the history of our country, but sometimes it's not as exciting to talk about the economy, right?
(END VIDEO CLIP)
QUEST: Since John King is tracking the races and the issues as seen from Washington. If there's one man who is absolutely under the hood of the
suffology in this midterm elections, John, it is you. So get out the crystal ball and have a fiddle around try to mix the metaphors beautifully,
what are you seeing in the last 24 hours before?
JOHN KING, CHIEF US CORRESPONDENT, CNN: In the last 24 hours, we're seeing some evidence of a break toward the Democrats. This is very complicated
because for the House of Representatives, the terrain does favor the Democrats. They need to pick up 23 seats in the United States House of
Representatives. They have a clear path, Richard, to at least 25, some Democrats think even 35.
So the Democrats actually have no excuses if they don't take back the House and the late polling numbers suggest things are breaking their way. The
Senate is much more complicated by the Senate races on the ballot this year, many of them were in states President Trump carried big. Many of
them compare - let me put it this way, a lot of these competitive House districts, they're close to the suburbs, they're in suburban areas. That's
where the President is incredibly weak.
The Senate races, bigger states with smaller towns and more rural areas. That's where the President is strong. Democrats look to make gains in the
House. They look to make a lot of gains at the state level, races for governor and state legislature. The Senate, the day before the election,
more of a toss-up where the Republicans are favored to hold their majority, maybe even add a seat or two, but there is some late hope for the
Democrats. They do see some evidence of a possible late break that might let them not only hold their Senate seats, but maybe surprise us. We'll
count them tomorrow.
QUEST: Is it - for everybody I've been talking to, is it possible or likely that the last election repeats itself? And that President Trump,
well of course, it's possible, but is it probable I should really say or at what level of possibility that he actually does much better than expected
and out of nowhere the red wave or little trickle does become much stronger?
KING: I rule out nothing. Based on our 2016 experience and based on our recent American political experience, not just the Trump win in 2016.
Eight years before that, America elected its first African-American President.
[15:05:04]
KING: A lot of people thought that couldn't happen. So, there's no doubt volatility and unpredictability in the climate. I will tell you this
though, Richard, as for a total Republican surprise, meaning the Republicans hold the House, even the President himself doesn't seem to
believe that.
Over the weekend, he conceded the Republicans are likely to lose the House. Just today, he said with zero evidence, this is a farce and a fraud, but
the President said he sees all this evidence already of illegal immigrants illegally voting in the US midterm election. Remember, that's the same
excuse he used for why he said Hillary Clinton won the popular vote in 2016 even though he won the Electoral College.
So the Republicans will suffer some pain tomorrow, all Republicans agree on that. Though you raise a great question about how big, how much do we
trust the polling? Which wasn't perfect in 2016 because the climate is so different when you look at the House and then the Senate.
And to your point about the economy, if this President - if this is a referendum on Trump at the midterm about his achievements, wow, right?
Maybe you don't like the tax cuts, maybe you don't know how the US pays for them in the long run, but the economy is gangbusters, but is it more a
referendum on the Trump tone, about tweets not tax cuts. If it's about tweets and tone, the President is going to have a shellacking tomorrow.
QUEST: Right, so define for me as best one can what would be seen as a disaster for or a verdict of total disaster for the President? And
similarly, one would be saying, actually, he did really well. How will we judge tomorrow's results?
KING: If by any way Republicans hold the House and the Senate, that's a huge victory for the President. No way to sugar coat that for the
Democrats. If the Republicans can somehow hold the House, that means limit the Democrats to picking up 22 or fewer seats, you would have a very narrow
Republican majority, but if you still have a Republican majority come January, this is a victory for the President and his party, if they can
hold the House and the Senate.
Again, the President is going to try to spin this. If he loses the House and wins the Senate, he's going to say his campaigning in the Senate states
in the last days is what saved the Senate. He'll take credit for that.
I'll give you a longer range perspective though, Richard. We focus a lot on Washington, who controls the House? Who controls the Senate? These
races for governor, down ballot races for state legislature are critical across America. That is where Democrats were punished in the Obama years.
First they lost the House in 2010, then they lost the Senate in 2014. Republicans now have 33 governors, 1,000 state legislative seats in the
Obama years switched from Democrat to Republican. Do Democrats tomorrow start the rebuilding effort? If that's the case, then we'll talk a lot
about the next two years of the Trump presidency, but the Democrats need to plant the seeds of a revival because they frankly, they've had a terrible
decade.
QUEST: John, we'll let you go in just a second, but after - talk me through tomorrow night and obviously once you get on air. What should I be
looking for and when?
KING: It's a great question, and we will get, just as we did in 2016, some very early clues. We may not know control of the House until we get to the
West Coast which takes us into the early morning hours. We may not know control of the Senate then if the Democrats are surprising us, we could
come down to Nevada and Arizona in the Western time zones, but polls close early in Kentucky and Ohio. There is a very competitive House district
just outside of Louisville, Kentucky, the sixth congressional district. There is a Republican incumbent, Andy Barr in a Republican district that in
a normal year, he should win.
He is running against a retired Democratic fighter pilot, military experience, shot all her ads with a fighter jet just over her shoulder. If
Amy McGrath is winning in Kentucky's 6th, that tells you the Democrats not only have a path to get to the House majority, maybe bigger than that.
So look at Kentucky first, then you come along the East Coast, there are some seats in New England, New York, Pennsylvania and Virginia. We will
know two scenarios. Are the Democrats doing what they need to do to take back the House or a Republican successfully blocking them and then when we
start to count the votes in the Florida Senate race, then we'll have a sense. Is there any prayer? Any prayer to what would be the biggest shock
the Democrats taking the Senate, we'll start counting the votes. It's going to be a long night. Espresso tomorrow, Richard.
QUEST: You know, I have no idea how you keep all those facts in your head at once. John, we'll be with you tomorrow night. Thank you so much, sir.
We appreciate it. Thank you.
KING: Thank you.
QUEST: John has put it into the big picture of the politics. We need to put it, as we always do, into what's happening in the markets. The day
before the midterms and Wall Street has a stake in the election as investors are waiting, the Dow is nearly at session highs. It's bouncing
around. It would not surprise me, bearing in mind that when it's 55 minutes of trading left, we could see just that hold - unlikely, unlikely
that you're just going to see it evaporate in the next 50 minutes. But, so I wouldn't put too much on that. Holding roughly where I would like to is
what seems most reasonable at this point.
The Dow is near the sessions high as the tech shares are down, and if you look at Apple and Amazon - now, Apple and Amazon are big losers at the
moment. They are on the back of economic news.
[15:10:06]
QUEST: President Trump has unleashed what he calls the strongest ever sanctions on Iran. A move to re-impose all penalties lifted under the 2015
nuclear deal. The target in an investment company with links to Iran's supreme leader. Some 70 financial institutions, if you look at here, there
are seven investment firms, financial institutions, maritime carriers, oil transport -- these are the main targets, if you like, of the attack on the
sanctions.
The US Secretary of State, Mike Pompeo, is warning the companies to continue to trade with Iran will pay a heavy price.
(BEGIN VIDEO CLIP)
MIKE POMPEO, US SECRETARY OF STATE: It should be noted that if a country evades our sanctions regime and secretly continues sanctionable commerce in
the Islamic Republic, the United States will levy severe swift penalties on it, including potential sanctions. I promise you that doing business with
Iran and defying some of our sanctions will ultimately be a much more painful business decision than pulling out of Iran.
(END VIDEO CLIP)
QUEST: Fred Pleitgen is in Tehran, joins me now. So the full weight of sanctions back on, at least from the US and as you're aware, other nations
and companies being forced along. When would we expect to see the first effect in Tehran?
FREDERIK PLEITGEN, SENIOR INTERNATIONAL CORRESPONDENT, CNN: Well, I think some of the effects have already been felt over the past couple of months,
Richard. You already had a first round of sanctions where large companies have already pulled out. But this is arguably the much bigger sanctions
weight that could fall on Iran very quickly.
So far, what we're seeing is that you do see a lot of politicians here who are still very defiant in the face of that. Regular folks who are already
feeling the pinch of it really fear that things could go very, very badly. It could happen in the not too distant future when a lot of countries stop
eyeing Iranian oil. A lot have already stopped doing that.
The interesting thing from Tehran's perspective is they sort of feel, just a little bit, Richard, that Washington might have blinked just slightly
giving some of those sanctions waivers where some of the biggest importers of Iranian oil can actually still do that. Like for instance, China; like
for instance, Japan and India as well.
So the Iranians sort of feeling they might still have a bit of a lifeline with those countries being able to buy that oil, but certainly, if that's
something that stops, they think they're going to take a very, very big hit here and all of the talk of defiance, we speak to regular folks, they are
saying, they are already feeling the pinch and they do think that it could get a lot worse, Richard.
QUEST: Is there any evidence that a return - excuse me - is there any evidence that a return to false sanctions would strengthen any seedling
opposition within Iran against the government?
PLEITGEN: So far it's a very, very important question. So far I don't think that there's any evidence of that whatsoever. One of the things that
you saw earlier this year is that there were some protests here in Iran against the economic situation. We have to keep in mind that it's not only
the sanctions that are strangling Iran's economy. There is a lot of economic mismanagement, there is a lot of corruption, there is price hikes
as well. There is a lot of things that people are unhappy with.
If you look at the situation now that these new sanctions have been put into place that really isn't the case anymore. So the President, Hassan
Rouhani, he was under a lot of fire a couple of months ago for putting the nuclear agreement into play. He was taking a lot of heat from the
hardliners, that's no longer the case either.
It seems that a lot of that anger is now being channeled towards President Trump, towards the US administration, and many people here feel that what's
going on right now in the Islamic public is being induced from the outside, it is being induced from Washington, DC, so it doesn't seem as though, if
it is, the intention of the Trump administration to weaken the government, to weaken the clergy and the military here, so far, it doesn't appear as
though, at least from our perspective that that is currently the case right, Richard.
QUEST: Fred Pleitgen who is in Tehran, thank you. Now Swift, which is the international payment system, is not taking any chances and is cutting its
services from some Iranian banks. Swift is the international standard for verifying money transfers, which is a posh way of saying it provides a
secure network between more than 10,000 financial institutions around the world. If I want to send you money internationally, or more likely,
hopefully, you're sending me money, and then probably, it will go via Swift and our institutions will have a Swift code that will go backwards and
forwards.
Now, this is long before the days of blockchain technology. Some Iranian banks are now unable to talk to Swift after the firm blocked them from its
messaging system. Swift says the decision is regrettable. John Defterios is in Abu Dhabi to put this in perspective. John, the Swift found itself
in an impossible position.
On the one hand, the US is saying, you know, "You do business with Iran and we will penalize you." On the other hand, the Europeans and others say,
"If you give in to external pressure on sanctions, we will penalize you."
[15:15:10]
QUEST: So now what?
JOHN DEFTERIOS, EMERGING MARKETS EDITOR, CNN: Well, Richard, it was not an easy call for Swift because it's based in Belgium right at the heart of the
European Union, but it's an international player and it will target up to 50 banks going forward here that are on the target list from the United
States.
They said it was regrettable as you suggested, but necessary for stability, so that's the argument they are using, but I think, we should remind our
viewers, Richard, this was supposed to be the round of sanctions that targeted oil, not financial institutions. The first round was strong
against Iran, but the second round really targets the financial institutions here.
We have 900 entities, financial banks, insurance companies, the shipping companies and also the airlines. Now, we know Russia, China, Turkey, the
European Union were against the US sanctions, so that how do they work around the US Federal Reserve and US Treasury is a key question.
President Rouhani of Iran said he looks forward to breaking the sanctions. That's very bold as Fred was suggesting here, but it will be hard times for
the Iranians going forward. I was looking at a World Bank report, a month ago, before we saw the full weight of these financial sanctions, and they
were projecting a decline of 4% - a recession of 4% in 2019, inflation of 30%, Richard, and again, this is where it is today. It could come under
further pressure of the Swift banking sanctions that you were talking about.
QUEST: If you look at oil, the movements we've seen in oil in the past few days, there has been quite a sizeable drop in that price on the back of
what?
DEFTERIOS: Well, you know, this is very fascinating to me, because remember, Donald Trump was saying in the summer, we're going to take Iran
down to zero when it comes to exports and this is where the midterm reality settled in. This is a chart looking back just a month, Richard, and when
North Sea Brent hit $86.00 a barrel, Donald Trump hit Twitter and was calling out for more crude.
Saudi Arabia responded. The UAE where I am sitting responded, Kuwait even Russia. We saw that price go from $86.00 a barrel down to $73.00.
But that's not the only factor, Richard. Iran's production has been dropping, but it's not collapsing just yet. Let's take a listen.
(BEGIN VIDEO CLIP)
IMAN NASSERI, MIDDLE EAST MANAGING DIRECTOR, FGE: We drew an expected part of Iran's exports falling to less than a million barrels per day by
first quarter next year and around 700,000 to 800,000 a day by middle of next year. So far, it has come along that path.
(END VIDEO CLIP)
DEFTERIOS: So Richard, we're at 1.5 million barrels a day. Now, the Facts Global Energy is suggesting we get to 700,000 to 800,000 barrels. Let's
bring up, Richard, the eight exemptions that were made here. I was surprised over the fact, the Italian and the Greeks got the exemptions as
members of the European Union, which have been fighting against Donald Trump. China, Turkey and India never were going to go along. So it's
almost like legalizing, Richard the ability for them to continue to import Iranian crude and as Fred said, the big Asian importers are in there as
well.
This by the way, Richard is proof to the fact, you can't replace Iranian crude that easily. They were exporting 2.8 million barrels a day back in
June. Donald Trump admitted he didn't want to see the price go higher right now.
QUEST: John Defterios, thank you. Now, Britain and the European Union are rallying against America's hash new sanctions on Tehran. I'll discuss with
the former British Finance Minister, Lord Norman Lamont after the break.
And Amazon's headlines are coming thick and fast today. Accusations of anti-trust violations in the White House, a Saudi boycott and new clues
around 8Q2.
[15:15:0]
QUEST: The European Union is staunchly opposed to the US sanctions on Iran, saying it will try to protect European companies doing legitimate
business with Tehran. Joining me now to discuss this is Lord Lamont, Chairman of the British Iranian Chamber of Commerce, and of course Prime
Minister's trade envoy to Iran, and Lord Lamont, the situation now is just about you're damned if your company is doing business - you're damned if
you do and you're damned if you don't. It's who you want to be sanctioned by or fall out of favor with the Europeans or the Americans.
LORD NORMAN LAMONT, CHAIRMAN, BRITISH IRANIAN CHAMBER OF COMMERCE: Well, that's got a fair amount of force behind it. There are companies that
trade both with Iran and the US. They will have to choose. Many will choose to trade with America - that is inevitable, but there are other
companies that trade only with Iran or for whom Iran is the more important market.
And the object of European policy is to protect them from the secondary sanctions, the banking sanctions, that even when the nuclear deal was in
force, were inhibiting European companies from trading with Iran, because they feared that the banks, their bank, which might deal with an American
bank, wouldn't finance their trade with Iran. So this is trying to protect the European banking system from American banking, Richard.
QUEST: But the moment a dollar becomes involved ...
LAMONT: Yes.
QUEST: The moment and never mind anything as complicated or as exotic as dollar clearing, then you're into a different ball game, aren't you?
Because then the Treasury and the whole weight of this could be against you.
LAMONT: You know, that's right. Do business with America, have dealings in dollars, employ American personnel, have any American content in your
product. You have got to be very, very careful, obviously.
QUEST: Are you disappointed at the way in which Europe and the UK and other countries, that they've not stood up to the US in this sense.
They've said, "Okay, you go off with your sanctions, you withdraw from the agreement," but they don't seem to protect it.
LAMONT: Well, it's not an easy problem to solve because of the combined effect of trade, the effect of globalization, but the special purpose
vehicle that the EU is working on, that will take time to get going and in the instance, that will essentially be a netting mechanism allowing
companies with debts and obligations to Iran to swap liabilities with each other.
But eventually the SPV is designed or intended to get a banking license and process transactions themselves.
QUEST: But it is allowing an extra territorial aspect to US legislation. I mean, even the right to - or as one reads - exemptions for this country
to trade for oil in this country, I mean, the argument is there because who is the US to tell Japan that it can't buy oil from Iran?
LAMON: Well, I totally agree with you. I think the American policy is unreasonable. I think the United States has an obsessions with Iran that
is not justified by the facts. I think they're obsessed with still with the hostage crisis. They are influenced by Saudi Arabia, and we know when
it comes to which the worst regime, Iran or Saudi Arabia, Western policy is not even handed. It's do with selling armaments to Saudi Arabia, it's to
do a bit with Israel, but I don't think we've got a balance policy from America towards Iran and Saudi Arabia.
[15:25:00]
QUEST: Do you think that policy has become even more unbalanced? I mean, there's always a degree of an imbalance. I mean, there is always a degree
of an imbalance on hypocrisy when putting foreign policy to work with some of these countries. But it seems to have become more egregious is what you
seem to be saying.
LAMONT: Well, I think what's happened here - I mean, frankly, Mr. Trump is not telling the facts when he says Iran is breaking the agreement. Iran is
fully compliant with the agreement and expert opinion from the International Atomic Energy Agency says so. I think the main reason in
Trump's mind, for having these sanctions, is because the nuclear deal was done by Obama. It was done by Obama, and therefore, he is against it.
QUEST: Let's turn very briefly if we may to the issue of Saudi Arabia because you're obviously extremely involved in business. But in terms of
government, you will have been party to Cabinets with negotiations with the Saudis were involved for armaments. Do you think it is time to get back to
business or something approaching business is normal, or do you think that the West should hold armament sales up against the Crown Prince and the
Saudi government?
LAMONT: Well, the West including Britain is so deeply involved in armament sales to Saudi Arabia. I don't see that being reversed, but I think we
ought to aim for more diversified policy in arm sales, and I think above all, we need more balanced approach.
I mean, we've seen how the Saudis have been very economical with the truth when it came to Mr. Khashoggi. Are we going to trust them with everything
to do with the Yemen War that we're told by them.
I think we ought to be a little bit more even handed. I am not saying that Iran is a desirable regime. But I think we ought to be more balanced.
QUEST: But is it time to - is it time to start doing more business back with Saudi Arabia? Back to normal is what I am suggesting after the
Khashoggi ...
LAMONT: I think the West world to insist on getting a proper explanation of what has happened and being sure that the people who are held
responsible for that are the people who really were responsible.
QUEST: Very good to have you, sir. Thank you very much indeed.
LAMONT: Thank you.
QUEST: We didn't even get on to the midterms, that's next time. The US House of Representatives will stay red or it will turn blue, and that will
cause the US markets to turn red or indeed green - it depends on the election, one way or another. It is a good day. We're off the highs of
the day by some - but that is up 170 on the Dow.
[15:30:00]
(COMMERCIAL BREAK)
[15:30:00] RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Hello, I'm Richard Quest, there's a lot more QUEST MEANS BUSINESS in a moment. When you will
hear from Sir Tim Berners-Lee; the father of the world wide web who wants to make the internet a better place.
Amazon is warning potential hosts for its second headquarters. Don't spoil a surprise, as you and I continue tonight, this is Cnn, and on this
network, the facts always come first. President Trump says there is great electricity in the air on the eve of the high stakes midterm elections.
He's headlining three rallies -- key rallies in the states today, stumping for Republican candidates. Democrats hope a blue wave will help them
regain control of at least one house of Congress.
Indonesian diving teams have now identified 27 bodies from the Lion Air flight that crashed last week killing 189 in all. Officials are working
with Boeing to warn all carries but the risk of air speed indicator malfunctions on the 727 MAX 8. The Lion Air jet was found to have that
malfunction during its last four flights.
The sons of the murdered journalist Jamal Khashoggi are issuing an emotional appeal for the return of their father's remains so he may be
buried. The spoke exclusively to Cnn in their first public remarks since their father's murder last month. Khashoggi's eldest son says he has faith
in the Saudi-run investigation into his father's killing.
SoftBank says it will not sever financial ties to Saudi Arabia after the killing of the journalist. Chief Executive Masayoshi Son expressed strong
regret over Khashoggi's death, and says he won't take any new Saudi money until the truth is known.
The U.S. political system, Tuesday is a big day. For investors, it's a week of big events. Political shifts in the U.S. know they will certainly
hit the market. The dollar, FANG stocks and emerging markets all likely to face disruption as a result of events. Now, the Fed will reveal its
interest rates decision on Thursday.
Policymakers have been facing pressure to soften their hawkish views, and all week corporate earnings galore. Some market watchers are concerned
profits have peaked. Ben Phillips is watching it all, the Chief Investment Officer at EventShares. Of the events you are watching at the moment, Ben,
what are you most concerned? What are you watching particularly carefully?
BEN PHILLIPS, CHIEF INVESTMENT OFFICER, EVENTSHARES: Well, so I think everyone is focused on midterms this week, but we're worried about what's
going on after midterms. So regardless of the outcome of midterms, we're looking at Trump's policy towards global trade.
We think how he responds to China after midterms after some of this campaigning we've seen really over the past few weeks, that's our biggest
concern is that global trade breaks down and supply chains are disrupted because of trade policy.
QUEST: But I see where you're coming from, but haven't you neatly jumped the hurdle of the midterms? Because the result tomorrow will factor in, you
know, becomes a sine qua non of all those other events.
PHILLIPS: Well, look, I mean, we're positioning our portfolio adventure as the PLCY portfolio in things that really are going to continue regardless
of the outcome. So financial deregulation, it's out of Congress' hands, it's now in the agency, the Fed, the OCC, the CFPB.
You look at education deregulation, that's in the department of ED's hands. So if we go down the list and see what's actually occurring, it looks like
regardless of the outcome, we're going to have, you know, some policy catalyst that continue. So deregulation, healthcare spending driven by
Obamacare, you know, those sorts of things.
Defense spending, want to stay elevated, our view. So those are the types of things we're watching and those are the type of things we're positioning
our portfolio on.
QUEST: In the event of a gridlock with the house going to the Democrats, does the situation change? Does it get worse for investors or arguably, it
gets a great deal better because if Washington can't do anything, then investors are free and the market is free to make its own direction.
PHILLIPS: Yes, I actually think that's right. I think we'll see some more noise potentially, maybe some more hearings and things like that. I
haven't heard Democrats mention the impeachment word yet again with a split Congress not even worth really taking that off the ground --
[15:35:00] QUEST: Right --
PHILLIPS: Unless there's some really incriminating new evidence that comes out. But so, yes, I think what happens in a split Congress is less and
less is more for the market. There's a whole congressional effect study out there that says when Congress isn't doing anything, markets are happy.
So it's just as soon as we remove this uncertainty of midterms, then we have certainty of what the outcome is within a week depending on California
races obviously if there's some delay there. But so we'll get some clarity here within the next week and see which direction Congress is going.
QUEST: Right, quick-fire questions, Ben. Volatility, more of it in the midterm or less?
PHILLIPS: More in the midterm because of trade.
QUEST: Turning to the question of interest rates. Another one in December, and what after that?
PHILLIPS: It's going to be, again, the trade can really disrupt the growth thesis of the U.S. So I think if the Fed sees slower growth because of the
trade, they might delay their actions and hiking rates further, '19.
QUEST: Diversification and rotation, we've seen it out of tech into defensive, does that continue, is it overdone? When does the tech come
back?
PHILLIPS: I think it continues. Tech really has had all this momentum factor built up into it. Now you're seeing people rotate more
structurally, longer term out of that momentum factor. So what we're seeing is more and more investors doing that, it's really just started.
So if people say, we're at the top of the cycle here, it's going to start - - this rotation continues in our view. So I would be wary of tech and the regulation of tech in big data regulation.
QUEST: Finally, tech and tech. Does tech like Amazon which buys and sells things on Netflix which delivers movies and has subscription basis, and
then there's tech like Facebook, obviously Twitter and Snap, we can sort of leave somewhere in the doldrums down at the bottom. But is there a
difference, as you say, the rotation out of tech?
PHILLIPS: There is, but you know, we think the whole ecosystem is affected. But where we're most cautious is around those social media
names, the ones who have been data aggregators in our view, collecting everyone's consumer data and then using it and selling it. They're the
ones at biggest risk. But China trade, we think hardware and the semi- conductors and really that whole supply chain is so integrated with China that they're at risk too.
So we're broadly avoiding tech other than our 5G telecom exposure in PLCY.
QUEST: Ben, do me a favor, make me a promise, you'll come back and help us understand more in the future.
PHILLIPS: Absolutely, happy any time, thanks Richard.
QUEST: Excellent, new member of the QUEST MEANS BUSINESS family. Help give us the sort of information that we can all use and understand and put
into the wider context. As we continue tonight from London, he created the web in 1989 and now he's trying to keep it on track. We'll hear from the
computer scientist Tim Berners-Lee, and I'm talking tech and question of the day.
I got off the word tech, it's technology. Get your phones ready for a question on technology -- where's my phone, it's here somewhere after the
break. And get ready to head to cnn.com-slash-join.
[15:40:00] (COMMERCIAL BREAK)
QUEST: All right, I assume you have one of these devices, if not, where have you been? Time for you to take your device and go to cnn.com-slash-
join as we -- and join our question of the day. Sir Tim Berners-Lee; now he is the father of the internet, says he trusts the world's biggest tech
companies to take care of your data.
As the man who created the www, he told "Reuters" earlier in the week that some big tech companies could one day have to be broken up. You'll hear
Sir Tim in just a moment. And whiles you think about all of that, is it time for the big tech companies to be broken up?
Are they now the monopolies of yester-year but tomorrow? And I assume by that, we'll let you define big tech, whether we're talking about an Amazon
or whichever sort of Facebook, I'm not sure how you break that one up. Go to cnn.com-slash-join now. Voting is open and you'll see the results
update live on the screen.
I suppose Google is a good example, Alphabet would be another one. Amazon shares while you're voting, Amazon shares are taking a beating today
absolutely, down 2.5 percent or $41, there is the price. It's not off the lows of the week, but it is certainly down.
Investors are being scared off by threats from Donald Trump who is claiming Amazon and other tech giants may have violated anti-trust laws. And the
president says his administration is looking into the claims, but isn't taking action just yet. Now, if that were alone, that would be bad enough
to push down the price, but it is not.
It's not the only thing weighing on the Amazon share price. Remember, cnn.com-slash-join. Now, some customers are also looking to boycott. The
customers in Saudi Arabia are boycotting the company, taking aim at the Jeff Bezos and CEO who also owns the "Washington Post".
It's all over the outrage over how the post has covered the killing of one of its journalists Jamal Khashoggi. The thing has been pointed firmly at
the Saudi leadership. So boycott Amazon is trending on Saudi social media. Meanwhile, the company announced a new incentive to draw in new prime
members on the holiday season.
It's a free-shipping offer. Now, if you're a prime member, you already get free shipping. It's reserved for paid subscribers. Now all U.S. customers
will get it with no minimum purchase -- oh, and one other thing you do get, though, they'll increase the number of things they get free same day
delivery.
So two developments -- if that wasn't enough, an article in the Bezos home post is writing new clues about which city Amazon is going to or may choose
to HQ2. Crystal City, Virginia, has become a frontrunner. The "Post" is claiming citing people close to the process. By the way, Amazon said those
who know don't speak and those who speak don't know, and they've also advised any city who is in the running to best keep stump in case this
suddenly find the knot.
A lot of Amazon news one way or the other. Clare Sebastian puts it all together for us. Clare, taking all of these developments and the fact that
the share price is down some 2.5 percent today. What is the driving factor against that share price?
CLARE SEBASTIAN, CNN CORRESPONDENT: Richard, I think it's a combination of factors, but I think the main one is these regulation comments by Donald
Trump. Clearly, whether or not he intends to act imminently, he is still obsessed with this company. We've seen him through the past few months
talking about, you know, the exploitation of the postal service, the Bezos- Amazon "Washington Post" as he's called it, and he's had this company in his sights.
And this is really the one thing that investors feel could interrupt the growth of this company is some kind of regulation to break it up. So I
think that is what is driving this share. But don't forget, it comes after a brutal month. Amazon has lost about 20 percent of its values since its
peak in September.
So there's jitters with that already. This is just playing into it.
QUEST: If the view and there was something of a view that Amazon was overpriced, that may have been settled by a 20 cent correction. But you
know, at the end of the day, Clare, I don't hear anybody suggesting that Amazon is going to start losing customers or that in some way its business
from Amazon cloud services, Amazon web services through to the toilet paper it will deliver to me in New York.
[15:45:00] That it's in any way waning, it's getting bigger.
SEBASTIAN: Absolutely, this is where we are in retail, the bigger -- are getting bigger. And in particular, Amazon, it's interesting to look at the
free shipping offer that they put out today and the context of that, Richard, because that is one of the reasons why they can do that is because
they have the higher margin part of the business which is AWS, Amazon's web services, the cloud and also the burgeoning advertising business because of
all the data they've got from their core retail business.
They can use those to funnel money into the lower margin --
QUEST: Right --
SEBASTIAN: Retail business, and that is why they can pay for these things --
QUEST: Clare --
SEBASTIAN: Like free shipping.
QUEST: Clare, forgive me for interrupting. I just want to ask you very quickly and briefly, are you surprised the QUEST MEANS BUSINESS viewer,
wise and wary of world, although they are, 71 percent says big tech companies should be broken up, only 29 percent say no. I'm surprised on
that, are you?
SEBASTIAN: I would say a little surprised, you know, these companies are you know, ubiquitous to society. I think the same people who voted the 70
percent who want to break them up are probably also Amazon users and are relishing --
QUEST: Yes --
SEBASTIAN: The lower prices and the free shipping that they're offering. But I think the drumbeat around these companies, Richard, be it Amazon, be
it Facebook, be it Google has got a lot of people worried and they're starting to take a second look here.
QUEST: Clare Sebastian, thank you. The founder of the world wide web Tim Berners-Lee is calling on governments, companies and individuals to back up
contracts for the web. That contract he says would help protect people's rights and freedoms on the internet. Cnn's Laurie Segall asked him if we
can really trust tech companies to build that product in a safe and trustworthy manner.
(BEGIN VIDEO CLIP)
TIM BERNERS-LEE, FOUNDER, WORLD WIDE WEB: I think because of things like the data transfer project in which these four companies said you have the
right --you would be able to physically get your data from one of one others and put it into the other or get -- then I think that for me is
saying, yes, actually they get it as a point and they're prepared to put the work in.
So yes, I think that they will. Yes, I think will have enough people who are building in home devices that talk to me about their excitement. We
have to solid put it, we should ask people to have their own data pods. They've said OK, what would be good would be -- we can -- why don't we
actually put all these data in your data pods?
I think and there's a lot of excitement around that about -- and realizing -- people realizing that if they give you data -- control over on your data
that they're generating value for you. And a lot of companies are finding it so exciting to be able to switch from trying to exploit you, trying to
make you buy something that you didn't want to buy to actually switch back to the core business model of helping the user, generating data for the
user.
LAURIE SEGALL, CNN: Can they do that and still make a profit? I mean, could they do that and not sacrifice their billion-dollar business models?
BERNERS-LEE: You know, all these plugs you can find about how much if you join the big social network and you give them all your data and you get
stuff for free. How much actually is the value date to all those insurance companies themselves. It turns out for example, one blog I
thought -- well, the value to them or if your data is less than you pay for internet connectivity, anyway.
So actually if you subscribed to your social network and your feeds and your data, you could actually replace that funding stream by turning around
and paying for yourself. And it wouldn't be much, so it's actually -- it says maybe it's a myth.
SEGALL: I'm going to give you two ideas of privacy, and you tell me which one you think is right. So one idea is that we just have to re-envision
privacy. Privacy to an extent is dead. Another one is that privacy is a fundamental human right and we have the right to it. So where do you stand
when it comes to the future, this current moment and looking at what it means for us as users in our privacy?
BERNERS-LEE: You don't have to look for other guests, we aren't going to be. I am going to be with the far to see(ph) of human right. I'd be say,
privacy of human rights as all placed in the United Nations have said privacy is a -- those human rights and as you said, that is the right.
Web is a human right -- you know, so for me, it's very important that I have control of my data. That doesn't mean I'm going to afford it, that
doesn't mean that I won't share it with a company which will help me buy the best presents for my family. It means that I'll -- it also -- it means
that I'll be able to share it with my -- the people that I work with, that will -- and so will be able to work more efficiently, I'll have a lot of
total control over who I share what with.
So the idea of control or own your own data is not just about sort of me being my own silo, walking everything away, essentially having the joy of
being able to share it with whoever. Like the joy, if you could know or you take a selfie with somebody, you pass in the streets and they give you
a business card, just you know, they immediately share whatever it is with them immediately just because they're a person, just because they have an
ID.
[15:50:00] That whereas, in fact, you would have to go home and find out which social networks they belong to. So it's partly because -- you know,
control over data -- over your own data as a human right -- that's mine.
(END VIDEO CLIP)
QUEST: Bad news for Google and Facebook by a margin of 2-1. Most of you say big tech companies should be broken up. Now, well, it's come off its -
- the highs of 60s or whatever is -- that could mean separating Facebook from Whatsapp and Instagram while splitting Google Search from its other
bets.
I'd say I'm surprised, I wouldn't have thought together would have -- would go all the way very -- that's where we have it. There is nothing high tech
about the Indonesian xylophone that I got to try out earlier today. The rest of the World Travel Market is getting a lot more digital. We'll hear
from the tourism minister next on how a professional plays that.
(COMMERCIAL BREAK)
QUEST: WTM London, 5th to the 7th November, one of the world's biggest expos for one of the world's largest industries. You need a stout pair of
shoes and a strong constitution if you're attending the World Travel Market which began today at ExCeL in London.
Now, while some offerings are analog, like these Indonesian xylophone -- I don't think it's properly called the xylophone, but you get the idea sort
of how difficult it is. How to run somebody else's song. Most of this year's focus is on digital tourism, that's everything from targeted ads to
digital destinations including a holiday.
Everything -- look at the pictures. Everything is geared not just in taking the picture, but to putting it on mobile and sharing it with
someone. If it doesn't look good on Instagram, it's not worth doing. Indonesia's Tourism Minister told me digital tourism can help him get
millions more visitors.
(BEGIN VIDEO CLIP)
ARIEF YAHYA, TOURISM MINISTER, INDONESIA: We are doing all the promotion using this digital media. For example, we are using the Google, et cetera
for looking, booking, dot com, et cetera. Even in China, we are using Ctrip, et cetera.
Seventy percent of our target allocated for digital media.
[15:55:00] QUEST: Do you -- I see also, you know, the use of the digital, I see the word innovation. But everybody in this building --
YAHYA: Yes --
QUEST: Is saying the same thing.
YAHYA: Yes.
QUEST: So how are you going to do it better than them?
YAHHA: OK, there are two things actually. First is, we have digital destination, it only show you can see it. We have at least five days here,
we are going to develop 100 digital destinations, and the second, how we promote it. We are going to promote our destination using digital media as
I said before.
QUEST: Instagram and things like that?
YAHYA: Everything. Digital -- I mean, this has to be inside a mobile, it has to be nice in camera. You see, that's the first criteria for digital
tourism.
(END VIDEO CLIP)
QUEST: Now, I'll have a lot more from the World Travel Market on Friday's QUEST MEANS BUSINESS where Tourism Ministers from almost every continent.
And we'll take you on a whistle stop tour of the world's tourism as they make their pitch. We will have our profitable moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment, the midterm elections take place tomorrow in the United States, and we can pass the results anywhere as
you'll try and understand who will vote, you know, white women from middle class in northern states or young urban professionals in the Midwest, you
can get it so detailed as you're trying to understand what the voting trends are and it eventually makes no sense.
But we will know tomorrow exactly who voted and how, and then we'll have the problem of how the markets react. If there is an element of gridlock,
further gridlock than we've already got, a greater divide in America if that were possible, what does that mean for the markets?
There is that popular view that says when Washington is gridlocked, the markets do well. We'll find out in the next 24 hours because as the voting
and the results come in, we will be here to make sense of it all for you.
And that is QUEST MEANS BUSINESS for tonight, I am Richard Quest in London. Whatever you're up to in the hours ahead, I hope it is profitable.
(BELL RINGING)
The bell -- Avianca, an airline -- the bell is ringing, the Dow is up, the day is done.
END
