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QUEST MEANS BUSINESS
New Upsurge in Violence at Israel-Gaza Border; Florida Officials Scramble to Recount Votes; New Satellite Images Expose Up to 20 Undeclared Ballistic Missiles Sites in North Korea; Tech-Fears Crunch Market, Dow Falls as Much as 556 Points; At Least 31 Dead as Wildfires Ravage California; PG&E, Edison International Stocks Fall; U.K.'s Prime Minister Theresa May's Brexit Plan Hit the Rocks; Former British Chancellor George Osborne Says a No-Deal Brexit would be "Catastrophic"; SEC Chairman Tells Wall Street Journal Brexit Risks are Understated. Aired 3-4p ET
Aired November 12, 2018 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA NEWTON, CORRESPONDENT, CNN: All right, there's one hour left to trade, and stocks are still deep in the red here on Wall Street. I was
hoping to tell you we'd be off the session lows, but my goodness, we are so close to them. The major markets are on track for their worst session in
nearly three weeks and you guessed it, tech shares are leading those losses.
It's Monday, November 12th, ahead this hour, oil prices had spiked higher earlier but hold on, there is more news here and it all began with this
panel moderated by CNN. You will see that in a moment and why markets moved on that comment.
Now, Brexit negotiations meantime continue to teeter. They are on the edge and the former Chancellor, George Osborne tells us why he is partly to
And Microsoft's President wants to lead a plan to try and combat cyber warfare. Brad Smith is here and he tells us why they are spearheading this
I am Paula Newton and live from New York Stock Exchange, this is "Quest Means Business."
Okay, tonight, investors see risk everywhere they look, but you know, hold on a minute. The volume is pretty low. All is not lost, but certainly
investors are still looking for some kind of direction. Entering the final hour of trade, Apple, Goldman and Boeing are still pushing that market
lower and remember that I said Apple because that is really coming hard into view.
In Europe meantime, yes, there are still those lingering fears over Brexit not to be caught out, Italy as well. A big story here though and has been
for several months is that dollar. It continues to surge higher especially against the pound and the Euro. We want to take a look at what exactly is
moving this market though. We are witnessing a tech route as I was saying, Apple is down heavily and Amazon remains in bear market territory.
PG&E and Edison meantime are down heavily. Investors are worried they will be blamed for those wildfires in California and we will also have an update
for you on those wildfires, so much more on this hour and you don't want to miss it as those fires continue to rage, and of course, SAP is snapping up
Qualtrics. This is a big takeover story especially at this $8 billion deal was completed really just hours. You could say days, before it was set to
actually go public.
Now, it's interesting here. Donald Trump said he is pinning the blame for the volatility squarely on the Democrats. Yes, the Democrats. He tweeted,
"The prospect of Presidential harassment by the Dems is causing the stock market big headaches."
Ben Phillips is here. He is the Chief Investment Officer at EventShares. Okay, just to kind of cut the President some slack because that was a bit
of a - let's say it was a lot of hyperbole in that tweet. The midterms are over though, Ben, why is this market still absolutely spooked?
BEN PHILLIPS, CHIEF INVESTMENT OFFICER, EVENTSHARES: You know, that's a good question, we thought there would be a little bit more positivity post
midterms just given the clarity, but I think people are looking in the markets and looking at trade specifically. Global trade is something we've
talked about. It's now become consensus I think among investors that that's the biggest risk to markets.
These people are looking at global trade, they are looking at interest rates and saying both of these things could derail growth.
NEWTON: When we talk about Apple though in a sense of derailing growth, we can't miss out on the tech route here. People are looking towards more
value stocks, I understand that. Are they really concerned about the kind of revenue growth that we have seen in these tech companies as all but
PHILLIPS: Well, I think we looked last week and we spoke with Richard actually about this when we're talking about tech stocks. They've really
built up a lot of this momentum factor in them and a lot of people were chasing that in the past two years. Now, we're seeing some people rotate
out of that and that's actually causing what we think is some of the weakness in tech.
So tech valuation is still pretty lofty. Apple is probably the one exclusion from that, but most tech shares are still at pretty lofty
NEWTON: I had mentioned it earlier, Ben. I mean, look we have very low volume today. The bond markets in the United States are closed because of
the Memorial Day holiday, is that - it still feels tense. Normally, you would be able to shrug that off. A low volume day kind of a holiday,
that's not what it feels like here today.
PHILLIPS: Well, I think we've got to take a step back and not just look at single day moves, right, I think people got a little spoiled with the
markets just going up and up and up the past two years, other than you know, just last month. That was our first real pause and a real pull back.
We had a one earlier in the year that was really a vol-pocalypse. It was caused by a vol. Now, we're just looking at markets, I think this is a
normal little pull back, light volume doesn't tell you too much, too. You mentioned that, so I think we're going to see how the week plays out. This
is a low volume day, a lot of people are out of the office.
NEWTON: I'm sorry, I'm going to put you on the spot very quickly.
NEWTON: This market have a lot more to follow especially when you start to look at things like the S&P.
PHILLIPS: So when you look at global growth, it still looks pretty good especially US growth, but we are concerned about trade. We are hearing the
first signs of an actually disrupting supply chain in the industrial side. We obviously saw the agriculture earlier this year, but now tech supply
chain - is that coming into question, I think that's what people are saying. They are pricing that in.
NEWTON: Which a lot of people are looking at, looking forward to that G-20 at the end of the month. Ben, thanks so much for being here. Really
PHILLIPS: Thank you. Thanks for having me.
NEWTON: And as those markets continue to fall, we were off those sessions lows, which is a good thing.
NEWTON: Now, I was telling you earlier that those crude prices had spiked more than 1% on Monday, but after a 20% tumble in the last month, they
guess what? Are down again in the last hour. The initial spike had started with this though. The Saudis have suggested that OPEC could cut
output by a million barrels a day and that would be of course to try and bring up that price of oil.
The oil industry's key players are gathering at the Abu Dhabi International Petroleum Conference. The Saudi Energy Minister made those comments during
a panel moderated by our own John Defterios.
(BEGIN VIDEO CLIP)
KHALID AL-FALIH, SAUD ENERGY MINISTER: Consensus amongst all members is that we need to do whatever it takes to balance the markets and if that
means - if that means trimming supply by a million, we will trim it. When we need it to increase a million, we increase to over a million between
June and now and that has achieved the purpose because otherwise, prices would have been way into the three digit territory and that would have been
very, very uncomfortable for us.
(END VIDEO CLIP)
NEWTON: Now, guess who was listening to that? The President was listening to that and he decided he was going to tweet about it. He weighed in
saying, "Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be lower based on supply." Don't forget
that exclamation mark there. The President got his wish and prices are now down for the day. But it doesn't fix the fundamental imbalances on supply
and demand. Our own John Defterios who was there with that news tells us exactly what's going on in the oil market and how it will affect that price
in the weeks to come.
(BEGIN VIDEO TAPE)
JOHN DEFTERIOS, EMERGING MARKETS EDITOR, CNN: Well, they feel squeezed, Paula because they had to respond back in June particularly because
President Trump was suggesting we need more oil on the markets, so they provided an extra 1 million to 1.2 million barrels a day between June and
October, so they are saying enough is enough. They saw the bear market in October. The elections in the United States are now out of the way, so
Saudi Arabia feels like they have more room to maneuver here without getting battered by Donald Trump.
He was back in April leaning on them suggesting they need to do more to balance the market. Donald Trump was very worried about triple digit oil,
$100.00 a barrel, so Saudi Arabia responded in the Jamal Khashoggi situation, and actually made it complicated, so the Kingdom had to stay on
board, along with Russia to make sure the oil market was supplied.
But then it got oversupplied. Now, he is making it very clear we are going to take up to a million barrels a day off the market, when they meet in
Vienna in early December and he's pledged that Saudi Arabia will cut half of that, 500,000 barrels a day.
NEWTON: And the market reacted to that, but perhaps not as dramatically as most people thought it would and the reason, John, is the reason the fact
that the United States -- US supplies and US production quite frankly are just so robust right now?
DEFTERIOS: Well, there's two things, Paula, yes, you are correct. The US production is almost 11.7 million barrels a day, so when OPEC decides to
take oil off the market or Russia does the same, who comes in is the United States. But the other major factor here is Iran. Don't forget, Donald
Trump just a few months ago was saying, "I'm going to knock exports for Iran all the way down to zero by the end of 2018." So Saudi Arabia and
Russia filled that gap anticipating a very tough line from the United States, the US State Department and the US Treasury.
Lo and behold, we get exemptions here. Iran's production in terms of exports, about 1.4 million to 1.5 million barrels a day and that left the
overhang and that's why Saudi Arabia today was very forthright in suggesting we need to act. They see themselves as the regulator in the
global market, almost the Central Bank to the world when it comes to oil and they want to keep stability. The gyrations make it very hard for them
to plan for the future, but the danger in doing so, to your point here, it would show that Russia and Saudi Arabia give up market share and take oil
off the market, it's the United States that's coming right in to fill that vacuum.
NEWTON: Which leads naturally to another question, again, a very pointed question, is OPEC's time limited here?
DEFTERIOS: Well, it's a question that was raised and then heightened last Friday in an article by the "Wall Street Journal" that was suggesting a
think tank which is an oil and gas think tank called Capsar (ph) was running different scenarios if OPEC was not in the market, what would mean
going forward? It's unclear who commissioned it, but I asked that question directly to Khalid Al-Falih today as you saw there and he said, "Look,
there is no consideration by the policy makers themselves ..." referring to himself and the leadership in Saudi Arabia to take any action.
So you have to wonder, was it a message to the Russians or a message to the United States to say, "You don't like the role of OPEC. You often
criticized the role when it comes to Washington, what would it be like? It would be chaos if we weren't serving as the buffer willing to put oil on
the market when you ask us and when oil prices start to come off, we take the oil off." They think they play a key role.
DEFTERIOS: I think it's premature to call OPEC out, but long term, some suggest, Paula, these three major producers -- Saudi Arabia, Russia, the
United States -- do they really need this big apparatus or just deal with the big three players that are out there today?
(END VIDEO TAPE)
NEWTON: And we thank John there who continues to break news on that OPEC story. Now, did you get the memo, it is in fact take over Monday, and I'll
tell you why. German software giant, SAP is paying $8 billion in cash and they can afford it for survey software firm Qualtrics. And that's just
before Qualtrics had planned to make its debut on the market and go for that IPO.
Now, SAP is joining a list of established players snapping up smaller Cloud focused companies this year including IBM and Microsoft. Our Paul La
Monica is following this deal from our headquarters at Midtown and Paul, all you had to do was look at the kind of revenue that people like
Microsoft are building on in that space and think, "Look, this was a good deal." I'm still surprised though that SAP went for it at $8 billion.
PAUL LA MONICA, CORRESPONDENT, CNN: Yes, it's a very rich premium for this company. A very high valuation and it's also interesting that Qualtrics
obviously made the bet that they were days away from going public and there was a lot of talk about this deal being oversubscribed. They could have
done really well as a separate publicly traded company, but they decided to go for the big money now, that $8 billion check from SAP and I think that
is a telling sign in and of itself.
NEWTON: And it is an incredibly healthy industry, although do you think at this point there are problems about the competition in this market,
especially when you see that all of these major tech companies are getting in on the Cloud and just making as much money as they can over it in terms
of you have to be big to actually play in this market, and maybe that's what SAP is thinking.
LA MONICA: Yes, I mean, SAP obviously already is a giant in enterprise software and I think this is a deal that makes them ever more of a great
competitor to the likes of Oracle and Microsoft and Salesforce. Interestingly, when you look at Qualtrics, this is a company that's got 40%
or so revenue growth year over year. It's growing very rapidly, but another company that is similar, SurveyMonkey just went public a few months
ago and after a great debut, the stock quickly fizzled along with the broader market in tech in particular. So maybe they saw the writing on the
wall and said, "Hey, being a public independent small-ish company isn't the best thing at this time possibly."
NEWTON: Yes, and it's interesting Paul because hold on there, the Qualtrics CEO will still be ringing the closing bell here at the Stock
Exchange on Wednesday. He's still kept that invitation and before that, he'll be speaking with me here on "Quest Means Business." Make sure you
tune in for that. I know Paul will be, and we move on from big to in fact bigger.
Japan's Softbank is gearing up for an absolutely massive IPO and there will be a lot of hype around this before it's over. If you're not too familiar
with Softbank, you'll know no doubt recognize some of its investments. Hang on for this. It plans to sell $21 billion worth of stock in its
mobile telecoms unit and that's key. It's just a mobile telecoms unit. To give you an idea of just how big of a deal that is, it would be the world's
largest IPO since Alibaba back in 2014.
Samuel Burke is tracking all of this. You have to explain to me, Samuel, the way they have divided this because by no means is this an IPO for all
SAMUEL BURKE, BUSINESS AND TECHNOLOGY CORRESPONDENT, CNN: A lot of us know Softbank because of its tech investments. In fact, we were just showing
some numbers on the screen there, Paula, which were showing the companies that Softbank, the tech fund has invested and we're talking about $9 plus
billion when it comes to Uber for example.
On the other hand was really the previous- a core part of the company, a mobile telecoms company. That is under some pressure right now. There is
a lot of competition in Japan and in fact, one of their competitors is talking about really slashing mobile plans down by 40% a month, so that
makes a lot of sense in why this IPO right now? Well, if you have the numbers that you're seeing on the screen right now being affected possibly,
tech being affected by this mobile tech sector, that doesn't make much sense, so you're trying to separate the two of them so that you can have
these different companies so investors can take a look at these different markets and decide what they are worth.
Not, a lot of people have really questioned this huge valuation. They are talking about it and it would be the biggest IPO since Alibaba, but can
they really get that much if they are talking about a market that is under a lot of pressure with a lot of competition.
NEWTON: Yes, and it's interesting if this strategy will work. You parse it all out and in the end, the valuation is much higher. Samuel, I have to
ask you, so much of this tech space now is really heavy into geopolitics, Softbank is no stranger to the controversy that's going on with the Saudis.
Is that an example how really in terms of actually dealing with a Saudi government that wants to be part of that tech space in the decades to come
NEWTON: ... everyone is being much more careful right now?
BURKE: Well, we would be remiss not to talk about Saudi when we're talking about Softbank. That huge tech fund that you and I are describing right
now, well half of that money came from Saudi. I've just been at the Web Summit in Lisbon and every tech CEO I was talking to was talking about what
they will do with that money or what company should do with that money.
I talked to Alexis Ohanian, the co-founder of Reddit who is now a tech investor and he said, frankly, a lot of companies may have already spent
that money, may need that money to make payroll, but he said, this that really, it comes down to the co-founders.
(BEGIN VIDEO CLIP)
ALEXIS OHANIAN, CO-FOUNDER, REDDIT: I think it is up to the founders themselves to ultimately decided where they want to be taking the money and
the decision process they should be going through is probably one that ought to be based on values and where they stand.
I don't know anything about the particular decisions that went into those Softbank investments, but I think more and more founders, certainly the new
generation of founders are starting to come to us even at the earliest stages with more of an awareness of the implications of the companies they
are building and the kind of sort of even down to the investors they want to bring on.
(END VIDEO CLIP)
BURKE: Investment with morality, we are also talking to him about what he's learned from his wife, Serena Williams, we'll have more on that on
"Quest Means Business" this week, Paula.
NEWTON: And I'm definitely looking forward to that interesting conversation around that. Samuel, thank you so much. Appreciate it. Now,
when we come back, 100 years after the end of World War I, a call to unity instead of a call to arms. The goal, to end cybercrime. I talked
exclusively to Microsoft's President about it and that's next.
And later in the show, we are live in California to see the aftermath of those wildfires that have now destroyed entire communities.
Microsoft is calling on governments and businesses to try and fight cybercrime together. It's an interesting new project. The tech giant is
urging governments to sign on to a new declaration. It is called, "The Paris Call for Trust and Security in Cyber Space." Now, it's got a big
name and a big ambitious job, to fix what is ailing the internet. Everything from election interference to hate speech, but not everyone is
on board here.
NEWTON: This is what is key. Moscow and Beijing have already taken a pass and Washington may likely do the same. So far saying that it's just not
sure. Now, I talked to Microsoft President Brad Smith in an exclusive interview. I started by asking him, how would this new initiative make the
internet safer for everyone?
(BEGIN VIDEO TAPE)
BRAD SMITH, PRESIDENT, MICROSOFT: We have to start by recognizing the need for stronger rules, rules to protect our elections, rules to protect our
democracies, rules to protect people from indiscriminate attacks against innocent civilians and what we have had had today here in Paris is over 370
different signatories, 51 governments, every member of the European Union, every member of NATO except for Turkey and the United States. Literally,
groups around the world come together to endorse precisely these kinds of protections.
NEWTON: But what is the solution? Because a lot of the things that we're talking about here, things that need to be done, as I said, you have
principal countries saying that actually, "No, we're not going to sign up to this." It's as if cyber warfare as being a new weapon that people want
to hang on to that arsenal.
SMITH: Well, I think that there are concerns about what governments are going to do, those that are the most advanced when it comes to cyber
weapons, but we need multiple steps to come together. Part of this is a call for stronger rules. Part of it is a call for stronger practical
steps, steps not just by governments but also by companies in the tech sector and we're seeing that and that was reflected here today as well.
Ultimately, we are going to need to first, build a consensus in the world's democracies, that's the way things tend to start and then eventually, we'll
have to take those rules and get the rest of the word on board, but you have to start with the like-minded before you can reach the rest of the
NEWTON: Yes, and that's a good point and of course, there is some architecture here and that helps. It helps to have this kind of framework,
I have to ask you though, and we'll get to the issue of democracy and elections in a second, but in terms of the tech companies realizing that
there is a problem, you know, I hear a lot of CEOs voice to me that cyber warfare becomes one of their prime concerns, it's becoming one of their
prime concerns, and yet, on the action side, many people will tell you that what needs to happen is there needs to be built-in another system of
redundancy, a system that is going to be incredibly expensive. Do you see that architecture starting to happen?
SMITH: Well, I do believe we are seeing huge investments across the tech sector and you see that reflected in a number of the companies that are
standing up for this today. Not just Microsoft, but Google and Facebook and Cisco and SAP and so many others.
If you look at the investments that we're making, if you look at the investments that Microsoft is making, we're talking about billions of
dollars a year, so I think we're hardening defenses. We're also trying to make cyber security easier for users to apply, small businesses and
individuals, that is really the first line of defense and it needs to be the first responsibility of us in the tech sector who are focused on it.
NEWTON: And in terms of focusing on it, in terms of the threat itself, what do you think is more of a threat, the state actors or the non-state
SMITH: There will always be more non-state actors than state actors, but it is the state actors that have the most resources. They are the most
sophisticated. We saw that last year in 2017, the two largest attacks by far were nation state attacks. This in effect are military grade
operations, and you know, it's one thing for us to fend off organized crime, it's one thing for us to fend off individual hackers. I think we
made a lot of progress in doing that.
I think we have to worry, we'll always have to worry when you see militaries investing in cyber tools and turning them into weapons.
NEWTON: Yes, and again, the fact that the US, Russia and China haven't signed up to this are showing all signs of being able to that is worrisome.
When it comes to elections, certainly, this has been in the news for several years now and tech companies are starting to really step up. In
terms of actually being able to do enough, some people argue that look, they are only willing to do what keeps regulation at bay, that at the end
of the day, they do not want regulation - government regulation - to interfere with what they are able to do as companies even if they want to
try and keep the electoral system safe.
SMITH: I think there are two things that are really reflected today and they are really both of fundamental importance, and they both involve
pushing ourselves to contemplate steps that we might not have considered before, but we need to do them because of the problem. The first is on the
government side. If you think about what we really rely on in the United States and elsewhere, it is an organization like NATO, so we have 27 of the
29 members who endorse this is a great ...
SMITH: ... importance, and then on the technology side, I think across the tech sector, people have come to recognize that we can't solve these
problems by ourselves. We cannot retain the trust of consumers if we just tell the world that they can leave everything to us and not worry or not
get involved, and so what we are seeing here in Paris is a real multi- stakeholder effort where governments and companies and NGOs work together and I think you're going to see more of this across tech.
(END VIDEO TAPE)
NEWTON: And we will be looking for that. In the meantime here, unfortunately some sad news into CNN. Stan Lee, the Marvel Comics
visionary has died at the age of 95. Now, the cause of death is not yet known. Stephanie Elam looks back at this incredible legacy.
(BEGIN VIDEO TAPE)
STEPHANIE ELAM, CORRESPONDENT, CNN: Spiderman, Iron Man and the X-Men -- they are among the most iconic comic book heroes in history and they simply
would not exist without Stan Lee, the visionary behind Marvel Comics lived a life almost as incredible as the characters he created.
(BEGIN VIDEO CLIP)
STAN LEE, CO-CREATOR OF MARVEL COMICS: I am pretty proud of the fact that some of the stories that I wrote so many years ago are still being read and
hopefully enjoyed by the public and people are making motion pictures based on them and television series.
(END VIDEO CLIP)
ELAM: Spiderman debuted in 1962 and became Lee's most successful comic book creation.
(BEGIN VIDEO CLIP)
LEE: Spiderman is my favorite because he is the most popular and he is known and loved world wide
(END VIDEO CLIP)
ELAM: Lee's spidey senses were tingling. Years later, in 2002, the first Spiderman film was released and was a blockbuster hit.
(BEGIN VIDEO CLIP)
LEE: As a child, I didn't really know anybody who shot webs or crawled on buildings or wore suits of armor and flew or anything like that. I just
imagined them and there they were.
(END VIDEO CLIP)
ELAM: He also imagined Thor, the Incredible Hulk, and the Fantastic Four. They were flawed people with extraordinary powers.
(BEGIN VIDEO CLIP)
LEE: I never had any idea that these characters would last this long. In fact, I and the people I worked with who co-created them with me, the many
talented artists, we just hoped that the books would sell and we'd continue to get our salary and be able to pay our rent. The movies have done so
much for the characters. The movies had given the comic book characters even more prestige.
(END VIDEO CLIP)
ELAM: The native New Yorker was born Stanley Morgan Lieber. He had humble beginnings but his love for comics took him much farther than he ever
dreamed. He also earned a star on the Hollywood Walk of Fame.
(BEGIN VIDEO CLIP)
LEE: In a million years, I never thought that I'd get something like this.
(END VIDEO CLIP)
ELAM: As his creations became larger than life on the big screen, he also kept a feverish pace making appearances at events like ComiCon in San
(BEGIN VIDEO CLIP)
LEE: How are you? Glad to see you.
(END VIDEO CLIP)
ELAM: Though his life seemed charmed, it wasn't without adversity. Lee was married to his wife, Joan, for over 60 years and they had two
daughters. However, his youngest only lived for a few days. In his 80s, Lee was involved in various lawsuits against Marvel and Disney over the
span of seven years. In September 2012, he had surgery for a pacemaker and joked he was trying to become more like his Iron Man character, Tony Stark.
(BEGIN VIDEO CLIP)
LEE: To me, the most important thing in the world is to keep busy and I am happy to say I am lucky enough to still be busy.
(END VIDEO CLIP)
ELAM: The Stan Lee Foundation was also a passion project for Lee, who seemed to believe with great power comes great responsibility.
(BEGIN VIDEO CLIP)
LEE: What we concentrate on is education. Educating children.
UNIDENTIFIED MALE: Stan Lee.
LEE: I never would have dreamed years ago that anything like this would happen.
(END VIDEO CLIP)
ELAM: The King of Comics who was adored worldwide was most proud of his family and his comic heroes. Perhaps, Lee will be remembered as a
legendary innovator with an uncanny ability to capture the imagination.
(BEGIN VIDEO CLIP)
(END VIDEO CLIP)
[15:30:00] PAULA NEWTON, HOST, QUEST MEANS BUSINESS: Hello, I'm Paula Newton, and there's more QUEST MEANS BUSINESS in a moment. When investors
pin some of the blame for California's devastating fires on utility companies, and news outlets in the U.K. is saying Brexit is heading for
catastrophe. The former Chancellor George Osborne tells us why he's partly to blame for the Brexit vote.
Before that though, these are the headlines here on Cnn. Fears of escalation in the Middle East as Israel trades blows with Palestinian
militants. Now, Israel says there have been about 200 rocket launches from Gaza today alone, wounding at least 11 people.
While the Palestinian Health Ministry says three people are dead and four wounded in Israeli strikes on Gaza. A massive recount effort is under way
in Florida as officials race to double-check the votes in that state's incredibly close Senate and governor races. Now, some counties say they
won't be able to complete the recount by Thursday, the deadline for revised vote-counts to be reported by the state.
New satellite images have apparently exposed one of North Korea's undeclared missile sites. Now, a report from a monitoring group says this
base is part of a network of undeclared locations where North Korea may be continuing its missile program in secret.
A sell-off on Wall Street is getting more and more volatile, as you can see there in the last 30 minutes of trade. Now, the Dow is now down as you can
see about 540 points. It touched a session low of 556 points just a few minutes ago. Apple, Goldman Sachs and Boeing are leading the market lower.
Now, a number of people have been killed of course in those devastating wildfires in California, and the death toll has now reached 31. In
Southern California, 13 million people have been affected by the critical fire danger warnings, including Los Angeles Long Beach and Glendale.
Now, this is the devastation meantime in Ventura County, an hour and a quarter's drive from L.A. But the majority of the deaths have happened in
the northern part of the state. Dan Simon joins me now from the Town of Paradise. And Dan, really, we've been watching the kind of devastation
that this town is dealing with.
So much of the town and actually doesn't exist anymore. And Dan, let us know because we keep hearing that this isn't over yet, not by a long shot.
[15:35:00] DAN SIMON, CNN CORRESPONDENT: Oh, hi, Paula. First of all, the destruction is at a level and scale that quite simply we have never
seen before. This is an example of what you see all over Paradise. You can see this neighborhood is entirely leveled. And you're right, the
threat remains. I can tell you, though, that the containment number is gone up and the temperatures are actually OK, but it remains very dry and,
you know, there isn't any rain in the forecast.
So the threat remains. In the meantime, Paula, we're continuing to hear these harrowing stories of people who left town, people who were
frantically trying to evacuate. You have to go back to Thursday morning when this was all going on, and you had everybody just jamming the roads.
Bumper-to-bumper traffic trying to leave town. And part two of those people who were on the road were a mother and daughter, and you can hear
just how terrified they were as the fire was overtaking everything around them. Have a look.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: I thought the windows were going to shatter because it was just so hot. And I mean, everybody is trying to get out as best
they can, but trying not to get in accidents.
UNIDENTIFIED FEMALE: We had the air conditioner on high and it was still hot --
UNIDENTIFIED FEMALE: Circulating --
UNIDENTIFIED FEMALE: And you were praying the car in front of you wouldn't stop. It was -- I'll have nightmares for the rest of my life. This was a
bucket list I never wanted.
(END VIDEO CLIP)
SIMON: Well, this is actually the neighborhood where those two ladies lived. And right now like thousands of others, they are staying at hotels,
and of course you have thousands more at evacuation shelters or staying with friends. And you know, those two people, they don't know what's next.
They don't know if they'll ever return to Paradise. And it will be weeks before residents are allowed back in here. And let's just -- you know,
kind of go through the rubble and see if they can salvage any belongings. It will be quite some time before people will actually be allowed to live
Keep in mind, the infrastructure itself was pretty much destroyed. So that's the situation here on the ground. Of course, you have, you know, a
lot of fatalities, at least 29 people dead and about a 100 or so people missing. So unfortunately, authorities feel that that death toll is going
to keep going on up. Paula, we'll send it back to you --
NEWTON: Yes, and we certainly hope that they do find a lot of those people missing, some of it comes from just trying to find those people. And Dan,
thanks so much for bringing me those stories. I mean, it is incredibly chilling just looking at the pictures and the scenes behind you. Again,
thanks. appreciate it.
Dan Simon there in Paradise, California. Now, as we were talking with Dan there, there are many people here that are showing incredible resiliency,
not just to get out and escape, but they're already wanting to go back to these towns and try rebuilding. This brings us into the business picture
here, it brings it into full focus.
Investors are worried that it will be difficult to rebuild. They are blaming the fires, and they could fall squarely to blame on California's
electricity companies. This is why you're seeing shares of PG&E and Edison International down. Chris Folkman is Senior Director at Risk Management
Solutions, he is in San Francisco.
We have to start by saying this is an incredibly complicated picture, right? It's not just one thing. And yet, let's start with those utilities.
Because people are saying that there's a multitude of factors, unfortunately, a perfect storm. But how did the utilities perhaps
contribute to all of this?
CHRIS FOLKMAN, SENIOR DIRECTOR, RISK MANAGEMENT SOLUTIONS: Yes, well, the preliminary reports around the Camp Fire in Northern Sierra Nevada mountain
range was that, there was a problem with the utility line directly before the fire broke out. But lots of ignitions happen in California every year,
I think what makes this particularly unique is that there were just perfect conditions that aided a fire spread into huge proportions.
The vegetation was extremely dry, the winds were very high. There was low precipitation, there was low moisture, and there was very steep terrain
where the fire broke out. All of these figures sort of combined to create sort of the perfect conditions for a very large fire, and that's what we
saw last Thursday.
NEWTON: And in terms of magnitude and scope, this is going to be California's worst fire event if I'm not mistaken. And you had on your
blog saying that basically it was like a football field was burning up every second in California?
FOLKMAN: Yes, that was the preliminary reports were that the rate of spread were simply unprecedented. That at its peak when the wind was very
high, the fire spread was about the equivalent to a football field every single second. And that's unfortunately probably what contributed to the
devastating fatality count in the Camp Fire.
Last I heard, it was 29 fatalities, very concentrated in a couple of neighborhoods. And I think residents that were trying to flee the area in
cars and on foot mostly became overwhelmed by the fire because it was moving so fast.
[15:40:00] NEWTON: Yes, incredible. Just when you saw the pictures and the harrowing stories of people trying to get out there. I mean, Chris, we
really want to try and say that this should be a once in a century event, and yet California authorities are telling us it's not going to be, why
FOLKMAN: You know, I think as Governor Brown said earlier, this is kind of not the new normal, but the new abnormal. You know, we have a housing
crisis here in California, and we're building a lot of houses which is good, but a lot of those houses are built in very high-risk areas to
If you look between 1990 and 2010, we have 40 percent more residential units in the wildland-urban interface which is the highest risk area in the
United States to wildfire. So the exposure is not going to go anywhere, we have a changing climate, we have hotter temperatures.
We came out of a prolonged drought, we have more extreme weather conditions like high winds, and you know, we had a firefighting philosophy in the
United States for the better part of a century that really focused on aggressive firefighting and fire suppression, and that led to a build-up of
very burnable vegetation.
Now, that changed in the early 2000s when they published a new fire protection plan nationally, but we still have a huge amount of very
burnable vegetation. That is very dry because precipitation levels have been lower. So I think this is a problem that we're going to have to
contend with for some time.
NEWTON: Which is very depressing to hear, Chris. And before I let you go, I mean, we discussed how mother nature is involved in this. But in terms
of what can be done today in California, especially as people start to think about rebuilding.
FOLKMAN: Yes, you know, that's the silver-lining here as I think public awareness and awareness among regulators, among insurers in the financial
community is going to raise. And there are things that can be done to make buildings and residences a lot safer to be able to withstand more wildfire
And I think there's going to be a lot of focus on that, particularly in homeowners insurance around promoting safe construction practices, things
like defensible space around a house, a proper gutter and roof maintenance, making sure that construction materials can withstand as much heat as
There's a lot of ongoing research about this, and now I think there's going to be a renewed focus towards safe construction practices and building more
resilient communities. So if there's -- if there's any silver-lining that can come out of this, I think it's the public awareness in wildfire safety.
NEWTON: Well, we certainly hope so, because the people of California have already suffered so much, and unfortunately, it's not over yet. Chris,
thanks so much, really appreciate it.
FOLKMAN: Thanks for having me.
NEWTON: Now, still to come tonight, under pressure at home and abroad. The British Prime Minister is fighting on multiple fronts to keep her
Brexit plan alive, and she's quickly running out of time. That's next.
[15:45:00] (COMMERCIAL BREAK)
NEWTON: And here we are, also predictable. Brexit negotiations are in fact coming down to the wire. The EU and the U.K. of course are locked in
talks in Brussels right at this hour. Here you see the European Union's Chief Negotiator Michel Barnier earlier today.
These talks are aimed, of course at trying to agree on that elusive Brexit deal. Now, Brussels has set a Wednesday deadline for that to happen. In
London meantime, the British Prime Minister Theresa May is preparing to put details of that deal to the cabinet as early as tomorrow.
Anna Stewart is trying to follow all of this from London. Anna, you know, unfortunately, far too predictable. I fear that even the legendary British
sense of humor is letting everyone down. Because cabinet may or may not have something to look at tomorrow, that they may or may not actually
ANNA STEWART, CNN CORRESPONDENT: Exactly, I mean, in many ways, getting a text, getting a draft withdrawal text that you can actually hold and read
feels like it should be the light at the end of the tunnel. But in many ways, Paula, this is actually kind of the first big hurdle of the Brexit
process because the cabinet needs to agree for it, agree to it.
Then Theresa May can go back and shake hands at the EU, but it then has to go through parliament, it has to be ratified by all 27 other EU member
states. And cabinet is the first hurdle and it might actually be insurmountable if they cannot hit an agreement on this Irish back still,
which haunts us, Paula, week after week after week.
I can see that they're much closer together, the EU wants to ensure that the Northern Ireland remains in the Customs Union potentially, indefinitely
or at least with a clause whereby the U.K. cannot plow it unilaterally. And many U.K. cabinet ministers that will be discussing this tomorrow will
not accept that, so still huge issues there.
NEWTON: Crashing out of Brexit is going to be as dramatic as that sounds, and yet, how firm is this deadline, right? Because technically, you have
until early 2019.
STEWART: Yes, we're 137 days away, that's ages, right? And I have to say, if you do look at Greece and all those sorts of EU summits we had there,
everything goes right down to the wire. However, this is a big legal issue. These bills, these parliamentary acts, this has to be voted on by
And for that to happen, it really needs to be going through the EU by the end of November because there's Christmas coming up, it really needs to be
voted on before then, otherwise the U.K. actually has to start spending huge sums of money on contingency planning that has to begin in earnest.
We can't crash out of the EU without serious planning being put in place. So really, we are coming down to the wire already. And they've got 48
hours really, we're told for the cabinet to reach an agreement or not.
NEWTON: So as I said, it was always predictable, Anna, that we were always going to get here. They may in fact have to cancel Christmas, OK?
Everybody on notice, you may actually have to do that. Anna is going to continue to stay on top of this, you can be sure of this throughout the
next week, appreciate it.
Now, when we return, yes, more Brexit, you need to listen to this, this is about Theresa May's Brexit fudge. Former Chancellor George Osborne makes
his prediction for the U.K. government's next move.
[15:50:00] (COMMERCIAL BREAK)
NEWTON: Now, to some, the odds of a no-deal Brexit have never looked higher. Now, with time running out, Theresa May's Chequers plan has been
thrown into doubt again. The former U.K. Chancellor George Osborne told Richard Quest that crashing out of the EU with no deal would be in his
Osborne oversaw the U.K. economy and the lead-up to the Brexit referendum. Richard asked him whether he felt some personal responsibility for Brexit.
(BEGIN VIDEO CLIP)
GEORGE OSBORNE, FORMER BRITISH CHANCELLOR: Well, I absolutely take responsibility as part of the government -- the recommended referendum and
of course I was part of the campaign that lost, trying to persuade people in this country to stay in the EU. We lost, you know, 48 percent of the
country voted with us, but 52 percent voted to leave.
So I feel a sense of responsibility, I of course, now I've left politics, I edit a newspaper here in London, I feel a responsibility to try and guide
readers of my newspaper and anyone else who is paying attention through the very difficult issues that Britain has to confront.
RICHARD QUEST, CNN: Do you ever wake up in the night and think, good God, I mean, you can -- because you were there, you can think back to those
moments when the decisions, the fights, the arguments in Downing Street or whatever were taking place. You lived next door and David Cameron who was
your neighbor. Do you ever think back -- oh, how did it ever happen?
OSBORNE: Well, I certainly think it wasn't the ideal ending to that government, you know, sadly. And I think personally, the British public
also again respect the decision, made a mistake. And it's a mistake to leave the EU, but we are where we are, and now of course, the big challenge
facing Britain, and you're right it's upended everything here, the politics of it.
Is -- you know, what is the new relationship we're seeking with the European Union? And then there is not a clear view on that.
QUEST: Let's talk about, but perhaps in many ways is some sense is more relevant. The Prime Minister says she's locked it in every which way and
backwards, and her Chequers plan which looks like it's having no hope, but was the only realistic way forward that's allowed Britain to remain to it
some form of single market and Customs Union. I assume you want the closest possible single market to Customs Union.
OSBORNE: Yes, I mean, I think a result that split the nation essentially in half and with a narrow majority in favor of leaving the EU should be
reflected in a long-term arrangement with the EU which is out of the EU, but closely aligned to it.
And that means being in the single market in the Customs Union. I suspect that's kind of where we will end up --
QUEST: But how do we --
OSBORNE: Because --
QUEST: How do we end up -- how do we end up in that situation without having to take the four pillars either officially or unofficially?
OSBORNE: Well --
QUEST: In other words, how do we avoid Norway?
OSBORNE: Yes, well, my view is that if we're not going to reverse the decision to leave, then something like the arrangement Norway has or indeed
the arrangement that Switzerland has. Two proudly independent European countries, but countries that have found a working relationship close to
the EU and their big export markets is the appropriate one for the EU -- U.K.
QUEST: Let's talk about the economy, the U.K. economy. The austerity that you introduced, 2010, 2011, 2012, and largely on the back of needing to
because of high government deficits, huge government spending, deficits that were monstrously large by traditional standards for this country and
an increasing debt to GDP.
Is it now a time to take the foot off the austerity brake and start putting it back on the gas?
[15:55:00] OSBORNE: Austerity is a consequence of the financial crash a decade ago, and the very high deficits, and indeed, we're of course in a
continent where some of our near neighbors like Ireland and over the channel, places like Spain and Portugal have very severe fiscal crisis.
So these were not theoretical threats that Britain was facing. Second, you know, we're not there now. This is ten years later, a lot of the work that
the government I was a part of did to reduce that deficit and make Britain a more competitive and stable economy succeeded.
So, you know, I would not be pursuing the same policies in 2018 that I pursued in 2010 because the circumstances changed. But that wasn't the
plan, you know, was already starting to moderate, if you want, in terms of its fiscal contraction. And ultimately, you know, my successor, who I
worked with for many years, Philip Hammond, and I have a lot of respect and time for.
You know, he faces a different set of decisions, he's facing a country that's voted to leave the EU, he's facing a lot of uncertainty with the
Brexit negotiations and the economic uncertainty that follows from that. By the way, he hasn't got a majority in the British House of Commons so he
can't actually deliver some of the very difficult decisions because he wouldn't get it through parliament.
So you know, he's got to deal with the circumstances he faces. I dealt with the circumstances I faced.
QUEST: Did you fail(ph)?
(END VIDEO CLIP)
NEWTON: And this is a story we will continue to follow this week, a big week for Brexit. Now, trading is about to close here at the Stock
Exchange. Thank Goodness, it has gotten very ugly over the last few minutes. Look at that, very close to session lows there. We'll have the
closing bell in just a minute.
NEWTON: I want to bring you some news we're following very closely here at Cnn. The SEC Chairman says the potential of consequences of Brexit are in
fact understated. Now, that's according to the "Wall Street Journal." The journal says that Jay Clayton of the SEC says that as far as he's
concerned, that the SEC needs to sharpen its focus on corporate disclosures and the associated risks with Brexit.
Unfortunately, that means contagion on Brexit. I told you it was a very bad day here on the Dow. Have a look at that, down better than 2.33
percent, and we take you now to Jake Tapper.