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QUEST MEANS BUSINESS

Another Volatile Day On Wall Street; Oil Prices Are Up After OPEC Struck A Deal To Cut Supply Although The Gains Are Not As Big As They Were Earlier In The Day; The Bail Hearing For The Chief Financial Officer Of Huawei Is Happening Right Now In Vancouver, Canada; European Powerhouses, Each Face A Crossroads Of Their Own Domestic Issues; Sources Tell Cnn Mueller's Team Questioned John Kelly; U.S. Economy Adds 155,000 Jobs in November; Altria Invests $1.8 Billion in Cannabis Firm Cronos; Former Mexican President Vicente Fox Eyes Future of Cannabis Industry; U.S. Employment Rate Unchanged at 3.7 Percent; New Program to Offer Single Moms Basic Income; Dow Ends the Week Down Around 500 Points. Aired 3-4p ET

Aired December 7, 2018 - 15:00   ET

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


ELENI GIOKOS, CNN HOST: Another volatile day on Wall Street. We are in the last hour of trade. The Dow is down over 600 points. Just a putter of

slack in the green and just plummeting as the day went on. It's Friday, December the 7th. Market sell-off confusion among investors as they juggle

trade fears, jobs, geo politics. It's all a mixed bag of problems. An oil deal reached. OPEC agreed to cut output by 1.2 million barrels a day.

We're live at the talks in Vienna, and up in the courts, a bail hearing for the Huawei executive that's rattled markets this week. I am Eleni Giokos,

this is "Quest Means Business."

Hello, a very good evening to you. It's been a volatile end to a very volatile week. The major indices are all down around 2% or more in this

final hour of trading. We saw some green earlier in the day after that U.S. jobs report. Now, the optimism was quickly outweighed by the new

fears on trade.

Hard line China critique as well as presidential adviser Peter Navarro can take some of that blame. He spoke with CNN just before markets turned

negative. Navarro warned if the U.S. and China can't strike a deal in 90 days, the U.S. will move ahead with tariff increases.

(BEGIN VIDEO CLIP)

PETER NAVARRO, U.S. WHITE HOUSE TRADE ADVISER: China is at a point now, at an inflection point. It either has to change itself structurally and come

into the world of free trading nations and be peaceful, or it can continue doing what it's doing. If it's going to continue doing what it's doing, we

have a President who is going to stand up to that for once and the American people should be appreciative of that.

(END VIDEO CLIP)

GIOKOS: Well, some Americans may appreciate it, but investors not so much. So we're going to Alison Kosik now. She is at the Stock Exchange for us

standing by to give us a little bit of insight into all the various dynamics playing havoc on the markets today.

So we had the jobs report, not what people had expected and hoped, and then you've got this renewed fear on how this trade truce versus trade war

scenario is going to play out. What is adding pressure as we head towards the close of trade?

ALISON KOSIK, CORRESPONDENT, CNN: You know what, I think we're going into the weekend where anything could happen. I think that's kind of adding to

the pressure and you make a good point, this is a jobs day. This is a day we got the November jobs report, usually a focal point. But traders are

focusing on anything but.

Especially when you showed very nicely how the White House is putting out these conflicting messages about the unresolved trade situation between the

U.S. and China. You have got White House economic adviser Larry Kudlow sounding optimistic on CNBC about how talks are going with China and then

you've got Peter Navarro warning of these higher tariffs if issues aren't resolved in 90 days.

So all of this confusion, it's really helping to juice the volatility in the markets and increase the anxiety. And you see how the day has

unfolded. It started out flat. The weaker than expected jobs report, you know, it got some thinking that the Fed may decide to slow down its

interest rate hikes next year or maybe not even hike as much as it had initially planned. That kind of thing would be reassuring to investors.

But then came those conflicting headlines and the markets right now, Eleni, are so fragile that every headline that comes out about trade, if it is not

positive, it winds up being very volatile for the markets and you usually wind up seeing this kind of sell-off.

You know, right now, where we stand, all the major indices have wiped out all of their gains for the year. And if you look at a Dow chart, all of

the 30 Dow stocks, all of them, each one of them is in the red -- Eleni.

GIOKOS: Alison, yes, and don't forget we also had that tweet from President Trump earlier in the day saying you know, China trade talks are

going quite well. So talking about these conflicting headlines, what I find fascinating, if you drill into the jobs numbers. I mean, people are

expecting an increase of 200,000 jobs in November. It seems they're viewing 155,000 pretty solid and they just are focusing on that

unemployment rate that is unchanged but it's at historic lows. So are they focusing on the positives there or are they seeing some negative numbers

coming out as well?

KOSIK: I mean, I think the way the market is looking at that jobs report, is it's kind of looking at it as a solid report, only because you look at

that slowdown in the jobs market, it's kind of understood that something like that would happen because the phenomenon that's happening in the labor

market is it's hard to find skilled workers to meet the jobs that are open and that could really be the issue there.

I don't think that - I think the market was actually looking at the jobs report as a positive because of how the Fed would react to it. So if the

Fed does in fact pull back from the number of interest rate hikes or lessen the amount of each hike, I think that would be a big positive for the

market.

[15:05:04]

KOSIK: Meantime, we expect the Fed to go ahead and raise interest rates at its next meeting coming up later this month -- Eleni.

GIOKOS: Thanks so much, Alison. Much appreciated. Have a great weekend.

KOSIK: You, too.

GIOKOS: All right, so oil prices are up after OPEC struck a deal to cut supply although the gains are not as big as they were earlier in the day.

This is how Brent crude and WTI are trading right now. Let's look at those numbers, Brent crude is up over 2%. It was up almost 5% earlier in the

day, and so was WTI crude. And that's shortly after the cartel agreed with its partners that it's going to be cutting supply to try and a little bit

of support to that Brent crude price that has been so volatile over the last few months.

We've got John Defterios covering all the news that maters in Vienna, Austria, where OPEC was meeting. John, yesterday we spoke, we weren't

feeling that optimistic. Today, we finally got a deal, take us through the details.

JOHN DEFTERIOS, EMERGING MARKETS EDITOR, CNN: Well, Eleni, in fact it was two days of nasty, somewhat intense negotiations with a lot of arm twisting

according the sources I've been speaking to, but by the close of business here in Vienna, they have something that looks pretty credible, 1.2 million

barrels a day equates a cut of 2% to 2.5% per producer depending on who that producer is. But let's be realistic, it's 700,000 barrels plus from

Saudi Arabia and Russia.

So I asked the Russian Energy Minister Alexander Novak how did they land on this magic number of 1.2%. Let's take a listen.

(BEGIN VIDEO CLIP)

ALEXANDER NOVAK, RUSSIAN ENERGY MINISTER (Through a translator): First of all, I think that the market was actually expecting us to cut 1 million to

1.2 million barrels per day and making any more aggressive moves than this was not necessary in our view as there are too many uncertainties in the

markets.

We don't want to act now and have to make a completely different decision, 180-degree turn in a few months because the market changes. It may look

like the market has stabilized over the past years, but in fact, I think that there are many more unpredictable factors and uncertainties affecting

it at the moment.

And to name just a few, I mean, trade wars intensify and get lack of clarity as to which direction they move in, the sanction policy of various

countries also being unpredictable and unsystematic.

So overall, I mean, I think we have made a balanced right move.

DEFTERIOS: You have this situation where you have OPEC, non-OPEC cooperation but you have a U.S. President, President Trump, trying to

intervene in the activities and calling for low prices. Is it actually detrimental to the process, or can you shut out the noise from the U.S.

President?

NOVAK (Through a translator): When we make decisions, we, of course, first of all look at the interest of our country, of the Russian Federation and

what is best for our economy and for the market at the same time. So we're looking in the supply and demand balance, hence we are trying to find ways

which in accordance with the agreements - the international agreements we make would help us alleviate the challenges and difficulties which the

market currently sees, be that over supply or under supply or like now, you know, when we have to cut to avoid mounting surplus. So that is why we are

more driven by fundamental factors.

DEFETERIOS: And not the U.S. President.

NOVAK (Through a translator): I've mentioned that before in one of the interviews that our decisions, we try to base our decisions on more

fundamental factors than tweets.

(END VIDEO TAPE)

DEFTERIOS: Alexander Novak, the Minister of Energy, Eleni. You really got the sense now that they're celebrating two years of this OPEC/non-OPEC

agreement, they clearly wanted to stand up to the U.S. President and say they will stay the course despite the noise to keep production higher from

Washington.

GIOKOS: So Iran is really interesting because they were talking about flexibility and exemptions as well. Was that one, one of the big sticking

points and how was that then resolved?

DEFTERIOS: They had to land on a number and they did get to 1.2 million as you suggested. Khalid Al-Falih, Saudi Arabia suggesting last night he

wasn't confident they would get a deal. Then I found out from other sources that a lot of the haggling was over getting Iran to be part of the

agreement even though they're faced with U.S. sanctions. So Iranian sources told me to the bitter end, they were not going to cave in to the

pressure. They even had Brian Hook here, the special representative for the U.S. to Iran putting pressure on the other producers to make sure that

Iran was in.

Here Bijan Zangeneh, is the Minister of oil for Iiran.

(BEGIN VIDEO CLIP)

BIJAN ZANGENEH, IRANIAN OIL MINISTER: I don't know when President Trump and the U.S. administration wants to learn that it is not acceptable for

OPEC to put pressure on this organization publicly. And when Mr. Brian Hook was here, I thought that he wants to submit the request of the United

States to be a member of OPEC.

[15:10:08]

ZANGENEH: But after some discussion, I understood that he's put pressure on OPEC to squeeze Iran. But it seems it has no result.

(END VIDEO CLIP)

DEFTERIOS: Once again, Bijan Zangeneh of Iran and I think this is as close as you can get to a win-win, Eleni, trying to get 25 players between OPEC

and non-OPEC on the same page and they did it, even Khalid Al-Falih of Saudi Arabia said, "Look, even the U.S. energy producers should be happy

because this stabilizes prices for their production which is nearly 12 million barrels a day now." Back to you.

GIOKOS: Yes, coordinated action, right. That's what we need to see and hopefully they comply. Thank you so much for this incredible insight,

John, of the last few days. Appreciate it.

All right, so at any minute, we could learn more about the arrest of a Chinese businesswoman that rattled world markets this week. The bail

hearing for the Chief Financial Officer of Huawei is happening right now in Vancouver, Canada. So far, we know nothing about why Meng Wanzhou was

arrested only that the U.S. wanted her extradited.

CNN's Scott McLean was outside the courthouse just a short time ago.

(BEGIN VIDEO CLIP)

SCOTT MCLEAN, CORRESPONDENT, CNN: The CFO of the world's second largest smartphone maker will be inside of a Canadian courtroom today asking for

her freedom. This is a bail hearing while her extradition process makes its way through the Canadian ports which could be a lengthy process.

The United States has to show the Canadian authorities that she should be standing trial in the United States. It has 60 days to do that and it's

not even clear whether that's been done.

The Canadians have 30 days to make a final decision. This is appealable right up to the Supreme Court of Canada. In the extradition case which has

not yet been scheduled, U.S. authorities or the Canadian judge in this case will have to decide whether this is also a crime in Canada, whatever it is

that she's been accused of, and whether or not the penalty for it is more than one year.

Because of a publication ban, outlets like CNN are not allowed to discuss the charges or the evidence being presented in this case. So "The Wall

Street Journal" reported earlier this year that the United States Justice Department was looking at Huawei and whether or not it had violated

sanctions against Iran. Canada for its part does have its own sanctions against Iran as well.

Now, Canadian Prime Minister Justin Trudeau, he addressed this yesterday. He said that this arrest last weekend at the Vancouver Airport was

completely apolitical though he acknowledged that he did have advanced notice of it. Scott McLean, CNN, Vancouver, Canada.

(END VIDEO TAPE)

GIOKOS: All right, coming up on "Quest Means Business," three leaders, each European powerhouses, each face a crossroads of their own domestic

issues. Find out how they're tackling them next.

[15:15:00]

GIOKOS: Welcome back. So Paris is shutting down its shops and attractions as it braces for the fourth weekend of protests as well as violence. Some

of the capital's most famed sites like the Eiffel Tower, the Louvre and of course, the likes of the Opera House will be closed over the weekend and

just take a look at the most important landmarks that are going to be impacted over the weekend.

Now since the start of the yellow vest movement, the French retail sector has lost more than $1 billion. Last night, France's Deputy Tourism

Minister told me that the government is doing its very best to help retailers stay open.

(BEGIN VIDEO CLIP)

JEAN-BAPTISTE LEMOYNE, FRENCH DEPUTY MINISTER FOR TOURISM: I know some shops and retail sectors of course are affected because people are

preparing Christmas and December is crucial for them. December is a month that is the double from a normal one in terms of business for them. So we

are entering that they can't open on Sundays what is not authorized everywhere in every case usually. But we are doing that, so that they can

have other business during Sundays in order to recover quickly because, of course, retail is important for the country.

(END VIDEO CLIP)

GIOKOS: CNN's Jim Bittermann has more on the preparations for this weekend's protests.

(BEGIN VIDEO TAPE)

JIM BITTERMANN, EUROPEAN CORRESPONDENT, CNN: This time around, French authorities are taking no chances. In Mantes-la-Jolie, a suburb of Paris,

police arrested over 140 demonstrators outside a school amid fears of escalating violence on the streets of the French capital.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: These are not student movements but rather urban violence.

(END VIDEO CLIP)

BITTERMANN: The students, he says, were joined by others intent on causing damage. The small town's police force only had 12 officers on duty and had

a hard time dealing with a mass arrest. It's scenes like this the government is determined to stop.

Every Saturday since November 17th, hundreds of thousands of protesters have taken to the streets across France with increasing ferocity. Four

people have died and over 1,500 have been injured. The so-called yellow vest movement began as a protest against higher fuel taxes but has morphed

into a broader campaign against Emmanuel Macron's government.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE (Through a translator): We're calm, we're pacifists. We are here for the same reasons as everyone else, higher taxes, higher

fuel prices, lower pensions, higher CSG. There's nothing right. And then there's a President who ignores us.

(END VIDEO CLIP)

BITTERMANN: The government announced concessions on the fuel tax hike and other measures, but it hasn't been enough to calm the anger and in the face

of more protests this weekend, the government has vowed to use all means available to prevent violence.

(BEGIN VIDEO CLIP)

CHRISTOPHE CASTANER, FRENCH INTERIOR MINISTER: And I call on reasonable demonstrators, those who do not support violence, to break away from

extremists and not to reconvene in Paris next Saturday.

(END VIDEO CLIP)

BITTERMANN: Paris City officials have removed street furniture over concerns it could be used as projectiles against buildings and police.

Shop keepers have been told to board over their windows to try to weather the expected trouble on the streets.

Tourists, too, are being warned to stay away from Central Paris. Key sites like the Eiffel Tower will remain closed to visitors on Saturday. Events

are being canceled. A dozen museums will be closed as will both Paris operas. The French Retail Federation estimates losses since the protest

began at a billion euros even before Saturday's protests.

(END VIDEO TAPE)

GIOKOS: All right, so from France to here and Great Britain where the Prime Minister is still trying to sell her Brexit deal just had a tough

week, lots of negotiating and even losing key votes in Parliament this week. In the meantime, Vice President Mike Pence has just tweeted, he's

talked with British Foreign Secretary Jeremy Hunt. He spoke of the country's strong partnership and a shared interest in a post Brexit trade

deal.

This is the tweet that he posted a little earlier today. So it's been a cloud of uncertainty that's hanging over Britain as it hurdles towards

Tuesday's Parliament votes on Brexit. It is going to be really important and it's one of the most decisive issues that is called the Brexit

backstop.

[15:20:08]

GIOKOS: Which deals with a difficult question to resolve. What to do about the border between Northern Ireland and the Republic of Ireland.

That's the only land border between the EU as well as the UK.

Now, right now, the EU single market makes it quite easy for people and goods and services to flow across the border, but when Britain leaves the

EU, all of that could fundamentally change. That is where the Brexit backstop basically will be coming in.

It is a fall back plan to ensure that trade doesn't grind to a physical halt or checks or infrastructure along the divide and the draft withdrawal

agreement, the UK would follow current EU custom rules to keep the border open, but the backstop faces a lot of criticism. The biggest complaint,

some MPs are wary of being subject to such levels of EU regulations after the likes of Brexit.

So as Erin McLaughlin reports from Belfast, the proposed solution so far have left many confused about what that future will actually look like.

(BEGIN VIDEO TAPE)

ERIN MCLAUGHLIN, CORRESPONDENT, CNN: Belfast is a city that knows division. And when it comes to Brexit, there are new fissures over Theresa

May's deal. Many say they are more confused than anything else.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: See, like I understood that at the start of the Brexit thing, but now I just don't understand what's happening any more.

So, yes.

UNIDENTIFIED FEMALE: It's difficult.

UNIDENTIFIED MALE: I understand some of it, but not at all, I honestly say and I think the powers that be don't understand that much themselves,

either. So it's better for liquor sales, you know?

MCLAUGHLIN: Isn't that concerning?

UNIDENTIFIED FEMALE: That is concerning, yes.

UNIDENTIFIED MALE: It is. It does - that's the world we live in, isn't it?

UNIDENTIFIED FEMALE: It's concerning. We don't know where we're going. We don't know what the future will hold.

(END VIDEO CLIP)

MCLAUGHLIN: Then there are those with a more definitive view. They say the controversial backstop drafted to for the return of a hard border means

weakening the union between Northern Ireland and Great Britain.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Is it keeping us more in the EU than with Britain?

MCLAUGHLIN: And that bothers you?

UNIDENTIFIED FEMALE: Yes, Because we're British, we're not Irish.

(END VIDEO CLIP)

MCLAUGHLIN: The Democratic Unionist Party feels the same. The DUP holds the keys To Theresa May's minority government and vows to vote down her

deal next week.

(BEGIN VIDEO CLIP)

NIGEL DODDS, DEPUTY LEADER, DEMOCRATIC UNIONIST PARTY: Northern Ireland will treat Great Britain as a third country. How can you possibly stand

here and recommend this deal?

(END VIDEO CLIP)

MCLAUGHLIN: But where the DUP sees a threat, brewer Niall McMullan sees opportunity. If activated, the backstop means Northern Irish businesses

will be able to trade both in the EU and the UK friction free.

(BEGIN VIDEO CLIP)

NIALL MCMULLAN, HERCULES BREWING COMPANY: As I say, we could actually benefit from inward investment, you know, being in this unique situation

where we can play with both markets.

MCLAUGHLIN: So it must be surreal to see arguing against a backstop that you see as a potential opportunity.

MCMULLAN: Yes, it doesn't really make an awful lot of sense to me.

(END VIDEO CLIP)

MCLAUGHLIN: The City of Belfast has known relative peace for the past 20 years. With Brexit, there's new found uncertainty and plenty of confusion.

Erin McLaughlin, CNN, Belfast.

(END VIDEO TAPE)

GIOKOS: Well, so as Theresa May marches on, the power of Germany's Angela Merkel is diminishing. Annegret Kramp-Karrenbauer has been tapped to

replace her as head of the ruling Christian Democratic Union Party. In Hamburg earlier, mrs. Merkel delivered an emotional farewell speech to

members of her party.

(BEGIN VIDEO CLIP)

ANGELA MERKEL, OUTGOING GERMAN CHANCELLOR (Through a translator): And now it's time for a new chapter. Today, at this hour in this moment I'm filled

with one overriding feeling, gratitude. It was a great pleasure. It was an honor, thank you.

(END VIDEO CLIP)

GIOKOS: When Mrs. Merkel steps down, it will be the end of an era for Germany. Angela Merkel has been chancellor since 2005, the first female to

hold that position. If she finishes her fourth term, she will equal Helmut Kohl as the longest serving chancellor. During her tenure, Merkel left an

indelible mark on Europe.

Now, she played a key role in tackling the euro zone debt crisis and the European migrant crisis. Her open door migration policy sparked a fierce

debate and in October of last year, she agreed to limit on Germany's refugee intake.

We have got Fred Pleitgen covering Merkel's career for many years and now joins me. Fred, this is basically going to be an end of an era. I guess

the question is, she has found a successor. Is this going to be a carbon copy of what we've seen coming from Angela Merkel or could we expect change

to occur within the highest ranks in that party?

[15:25:09]

FRED PLEITGEN, SENIOR INTERNATIONAL CORRESPONDENT, CNN: Yes, hi, Eleni. You're absolutely right. I mean, it's certainly is the end of an era and I

remember being a cub reporter in Berlin in the year 2000 when Angela Merkel had just taken over as the head of the Christian Democratic Union and to

see the way that she has evolved and been in power for those 18 years, I do have to say that that is something that certainly transformed a lot of

things in Germany.

So certainly, I think a lot of people tonight are saying "Hats off to Angela Merkel, to all the things she's achieved." But certainly, it is

time at least to a certain extent for a change in Germany. Many people have been saying and many people in her party had been saying as well.

And now you have Annegret Kramp-Karrenbauer, who you know, she is a disciple of Angela Merkel to a certain extent. She was in favor of a lot

of the policies that Angela Merkel put forward, like for instance, taking in those refugees in the year 2015, also allowed the economic policies as

well. However, I would say that on certain issues, she is, I would say a bit more conservative than Angela Merkel.

If you look at the reaction to the refugee situation in Germany now, she does have some harsher methods that she is in favor of like deporting

people who become criminal in Germany quicker than, for instance, the Angela Merkel government had been doing in the past.

Also on some social issues as well, she is a bit more conservative and, for instance, on same sex marriage which still is not fully legalized in

Germany, she is against that.

So in certain respects, she is a bit more conservative than Angela Merkel, but on the whole I would say very much someone that is very similar to

Angela Merkel and certainly, the favored candidate that Angela Merkel had in mind to succeed her as head of the Christian Democratic Union, Eleni.

GIOKOS: Fred, as you say, you've been covering her for so long. It was interesting to see an emotional farewell and I wonder if this means she's

going to be finishing her term. I mean, what are you reading into it? And was it one of the first times you've actually seen this kind of emotion

coming through from Merkel?

PLEITGEN: Yes, well you know what, I would say three weeks ago when she was really in political trouble in Germany, when she lost some regional

elections, I don't think people were sure whether or not she would finish her final term, which she says is going to be her final term.

Right now, with the fact that she said she wasn't going to run again for the head of the party, which obviously, you have someone new since today,

she's gotten herself a little bit of breathing room. Things have quieted down in Germany a little bit. She's not as unpopular in a lot of the polls

as she had been. So does seem to have at least a chance to finish that term.

However, there are a lot of factors that are still in play. We have to keep in mind that the party that is in a coalition with her, the Social

Democrats, have been immensely suffering, have become very unpopular, and they have matured, whether or not they want to continue this coalition, so

there is some uncertainty about whether or not she might finish this final term, but certainly at this point, I would say that she is sitting on that

chair more solidly than maybe she was just a couple of weeks - just a couple of months ago and she certainly does have a chance.

On the whole, German politics isn't necessarily prone to quick and dynamics changes. I think a senior German politician once called German politics

like a tanker. It doesn't move quickly. It doesn't change direction quickly. So don't look to major political changes in Germany. It is

something that could happen, but right now, I think Angela Merkel at this point in time pretty secure in her office, Eleni.

PLEITGEN: Thanks so much, Fred, for that update. Fred Pleitgen there. Now after the break on "Quest Means Business" we continue to track the

selloff in the last hour of trade. AS you can see we started with a little bit of glimmer of hope this morning, and now we're down 560 points. We

were putting the U.S. economy to the test. We've got Dianne Swonk as well as Stephen Moore joining us right after this.

[15:30:00]

(COMMERCIAL BREAK)

ELENI GIOKOS, HOST, QUEST MEANS BUSINESS: Hello, I'm Eleni Giokos, coming up on QUEST MEANS BUSINESS as the U.S. announces job numbers will look at

where the Trump's trade policies are helping or hindering.

And investing in pot, one cannabis company receives a major investment. Before that to the Mueller inquiry, the White House Chief of Staff John

Kelly was interviewed by special counsel Robert Mueller's team.

Three sources with knowledge of that matter tell Cnn Kelly is said to have responded to a narrow set of questions. Sources tell Cnn, he is no longer

on speaking terms with his boss President Trump. We've got Cnn's Kaitlan Collins joining us now to unpack the latest developments.

And Kaitlan, you're looking at news that we could see Kelly resigning, and then we've got sources telling us that he had to answer a narrow set of

questions. How does this complicate matters and do you think the two are related?

KAITLAN COLLINS, CNN WHITE HOUSE CORRESPONDENT: Well, the president likely already knew about this. But sometimes when he does know about things

like this in the past, he doesn't like when they became public.

And likely he doesn't like that it's public now that his chief of staff has sat down with the special counsel, the very special counsel the president

is launching fresh attacks on on Twitter today, saying his administration is preparing a counter report to whatever it is that Robert Mueller and his

team put out as part of their findings.

Now that comes separately from the tension between President Trump and John Kelly which essentially is foretelling this imminent departure for Kelly,

but something about it seems different now, and we're told by people inside the White House that it could come in a matter of days because

things between the president and John Kelly have deteriorated so much that the two men are not even on speaking terms.

Yes, they've been in the same meetings this week in the same room, but the two of them one-on-one are not speaking to each other right now, and that

just goes to show what the state of that relationship is, and just truly how much it has diminished in the last several months.

Now of course, it's going to raise the question what is different this time because it's been such an up-down, back-forth relationship. But we're

told that President Trump is really starting to look forward to next year and what the next two years are going to look like especially with

Democrats taking over the house.

And he's been telling people he wants someone who is politically savvy in that position, someone who can help shape the last two years of his first

term. And he does not think that John Kelly is that person. The problem conflating all of this is that President Trump doesn't like to fire people,

and especially he seems reluctant to fire someone who is a retired four- star Marine General.

The question is how is he going to do that? Because typically, he has Kelly do the firing for him.

GIOKOS: Yes, OK, so Kaitlan, this morning we actually saw President Trump saying that the trade negotiations are going well. But we're also hearing

that he's really surprised at the so-called trade truce which many people are questioning right now are not -- is not actually boosting markets that,

you know, we're seeing the Dow well into the red today.

COLLINS: Yes, on Twitter, we're seeing the president trying to shore up confidence that he did strike --

GIOKOS: Yes --

COLLINS: A successful deal with the Chinese president when they had that dinner and walked away from sitting down with each other for several hours

in Argentina.

[15:35:00] But behind the scenes, the president is questioning his advisors about why the economy and the stock market is -- well, excuse me,

not the economy, why the stock market is doing so poorly and why stocks are sinking. But a lot of it has to do with what the president himself is

saying.

Because when they exited that dinner, President Trump and his administration were saying that essentially, they had struck this great big

deal, and it was going to be big for the United States and a big accomplishment for the president.

But then, the president got on Twitter saying that he was a tariff man, and that if the negotiations with China do not work out, he will impose those

tariffs on China and raise them even higher. So it's the --

GIOKOS: Yes --

COLLINS: President that's the reason for the up-down where the stock market. But even aides inside the West Wing are not confident that, that

90-daytime line they've established is enough time to get the changes they want from China.

GIOKOS: All right, Kaitlan, thanks so much, appreciate it. OK, so the markets pretty much uncertain, we've seen that this entire week. Investors

are awaiting guidance from the Fed on interest rates for direction on the markets. We've got two someone -- we've got two people actually joining us

now to give us a bit of insight into this.

We've got Diane Swonk; chief economist at Grant Thornton and Cnn senior economics analyst Stephen Moore. Thank you very much for joining us.

STEPHEN MOORE, ECONOMIST: Thank you.

GIOKOS: What an incredible week. I mean, we've seen these U.S. job numbers, they were below expectations, but I think people and investors are

kind of trying to look beyond just, you know, the 155,000 jobs that were created in November and kind of focus on unemployment.

And then you've this to and fro, is the Fed going to cut, is it going to increase rates down the line, is it going to hold steady? Steven, let's

start with you, I mean, are you seeing the fundamentals are playing a stronger role than all the kind of panic and uncertainty that is plaguing

investors' minds?

MOORE: Well, look, there's a fundamental disconnect right now between what the economy is doing, which is really well, and the stock market which is

doing really poorly. And I think that's in no small part because of the anticipation of, you know, problems on this trade front.

If Trump can get this done in 90 days and they get a good trade deal with China, the economy is going to go through the roof. But looking at the

fundamentals of the economy, my goodness, I mean, manufacturing is strong, construction is strong, industrial production is strong. Housing is weak

but almost every other signal is pretty strong.

There's going to be a slowdown in the economy in the fourth quarter, but there's nothing -- you know, this idea that there's some kind of a sugar-

high with the U.S. economy, I don't see it. I think we're built for 3 percent to 4 percent growth for the next few years.

GIOKOS: OK, Diane, I know that your prognosis has been that we'll see the Fed starting to cut rates at the end of 2019, and actually this week, we

saw something very interesting happening with those U.S. bond yields where we saw an inversion coming through.

It seems that there's been sort of a sea change in the way that people are viewing the Fed. The Fed is even talking about, you know, halting on

raising rates. What can we start pricing in?

DIANE SWONK, CHIEF ECONOMIST, GRANT THORNTON: Well, I think it's really important we are going to get a December rate hike. The economy is

slowing but it's still going to be strong enough through much of 2019 to justify another two-rate hikes.

And then I do think there's going to be weakness at the end of 2019. I think part of that weakness is due to trade uncertainty, to tariffs, to the

ongoing tariffs. None of the tariffs that had been levied have been rolled back yet even though we got tentative agreements on trade with Mexico and

Canada.

We still have tariffs there. And there are more cracks in the foundation that I see than Steve does, and that's in terms of corporate debt. By the

end of this year, we'll see a doubling of interest rates over the course of the year which is doubling of interest expense, and we have a lot of high-

yield debt out there in the corporate sector that's going to be rolling over next year, and I think that's --

GIOKOS: Yes --

SWONK: A bit of a problem, housing is another canary in a coal mine.

MOORE: You know, can I just say one thing in response to that?

GIOKOS: Yes --

MOORE: You know, you're exactly right, Diane, the corporate debt is problematic. But you know, you mentioned that the Fed rate increase, I

mean, why in the world is the Fed raising rates? It's -- you know, they shouldn't have raised them in my opinion two months ago.

We've got declining commodity prices. The real measure of inflation is what happens with commodities they've been falling, and not just oil, but

copper, corn, wheat, silver. I just -- I think what's happened, the story of the stock market, frankly, is Trump called it right when the Fed came

out with that disastrous rate hike a couple of months ago, ever since then, the Dow has been on a -- on a, you know --

GIOKOS: Yes --

MOORE: A slow burn. And I think that there's no reason for another rate hike, but the Fed has to be getting dollar liquidity into the economy, not

taking it out.

GIOKOS: Diane, I see you shaking your head there, go for it --

SWONK: I actually well do disagree with you. Yes, I appreciate it, Stephen, you know, I mean, we're going to subtly disagree on this. I do

think what the Fed has been doing is correct, even though I do expect the economy to weaken in late 2019.

There's finally the current environment, the current environment is just acknowledging the strength that we've had, and frankly, we don't even have

Fed funds rate is at neutral yet. It's not even a real Fed funds rate, this positive yet, so in that sense we still have a very accommodative

monetary policy.

[15:40:00] And I think, you know, this is -- it's really interesting how people were complaining about the Fed not raising rates fast enough. And

all of a sudden, there's been this 180 that they're complaining they're raising them too quickly.

They are going to slow the pace of rates, they're very cognizant of economic conditions and they are pivoting from seeing tail winds to seeing

some headwinds which Governor Brainard actually made some comments today. And I think what's really important and I feel good about with the Fed is

that they are paying attention to these issues.

The problem is the Fed only has limited amount of tools, and the reality is they can't deal with combative policies like tariffs which are tax hikes

and tax cuts at the same time. Much of this year, we had the tax cuts cushion, the margin squeeze of tariffs, the tax hikes.

As we go into 2019, the stock market is looking at that and saying that's not going to be though, and I'll tell you a lot of my clients are not happy

about it. And for those farmers that are hoping to get bailed out, we've already seen bankruptcies in the farm sector surge to the highest level

since 2010.

GIOKOS: OK, Diane, do you think -- what you just said, is there a sense that we could head into a much slower growth environment if we don't see

these rate cuts? And if -- you know, there's a talk about a possible recession down the line. Is that what you're pricing in if we don't see

the Fed acting as you say?

SWONK: Well --

MOORE: Well --

SWONK: You know, I've got the Fed slowing its pace of rate hikes, and I think that's a good thing. I think the Fed is going to acknowledge the

fact that the U.S. economy is slowing down, but I do think it's a difficult game to play, that they just don't have all the tools necessary

to combat a recession once we get there.

MOORE: Well, in my view --

GIOKOS: OK, Stephen --

MOORE: That is causing the recession. I mean, if we get a recession, it's because the Fed is so tight that look, Diane, what I don't understand is

how you can justify a rate increase when we have decline in commodity price. I mean, it just doesn't make any sense to me. I mean, we've got

deflation --

SWONK: Well, they're turning around right now today. I mean --

MOORE: Yes --

SWONK: The commodity prices are not the only inflation out there, underlying inflation --

MOORE: But they're the best measure, right, I mean commodities are the best measure --

SWONK: No, they're not the best measure. There are only one -- there are only -- no, corn inflation is the best measure, there are only one measure

of inflation, wages are picking up, we are going to see some service sector inflation. I do think inflation we've got a strong dollar which helps to

tamper that. But tariffs are stack inflationary.

So we've got all these cross-currents out there that the Fed is dealing with, they have to respond to the reality and the reality is, we do have

things pushing prices up. Every client I know is going to test the waters on price hikes in January.

GIOKOS: Yes, Diane Swonk, Stephen Moore, thank you very much to both of you for this very dynamic conversation, we'll definitely have to pick it up

once again, have a great weekend.

MOORE: Thank you.

GIOKOS: Right, so after the break --

SWONK: Thank you --

GIOKOS: As they say, where there's smoke, there's investment. The cannabis market is blazing and investors are riding high, even former

Mexican President Vicente Fox, everything money and marijuana right after this.

[15:45:00] (COMMERCIAL BREAK)

GIOKOS: So the market may be down, but stocks in the cannabis company Cronos are surging. After days of speculation, cigarette giant Altria says

it will buy a 45 percent stake in the cannabis company for $1.8 billion. As you can see, Cronos Group up 23 percent today, we've got Paul La Monica

checking this investment from New York for us.

Paul, if you've got -- if you're putting $1.8 billion for a 45 percent stake, you better make sure that the valuation of a company is, you know,

very sound and that you know what you're buying. What are you making of the numbers at the moment?

PAUL LA MONICA, CNN DIGITAL CORRESPONDENT: Yes, I think clearly, Altria is making a bet that when you look at the growth in their particular sector

of the market which would be smoking, it's not really in --

GIOKOS: Yes --

LA MONICA: Tobacco anymore. It's going to be cannabis, there's also a speculation that they might do an investment in the vaping company JUUL.

So that's another possible deal to look out for.

But based on the fact that you also had consolation brands, the beer and wine company that owns Corona making a similar deal in investment in

cannabis growth, I think right now, there is this hope among consumer products companies that are somewhat sluggish growth that they can make a

much bigger profit from the cannabis sector which is only starting to really grow because it's just legal in Canada now.

It's only legal in a handful of states here in the U.S., more recreational standpoint, and Uruguay is the only other nation where you have

recreational cannabis legal as well. So I think the hope is that more markets around the world will eventually legalize cannabis.

GIOKOS: And you know, what's fascinating is, you know, cigarette companies like Altria have been looking to diversify because they know smoking rates

are coming under pressure. Is this the right kind of diversification that they need to be getting into? I mean, and the question is what are they

really buying into when there isn't enough clarity on policy in all these jurisdictions that you're speaking of?

LA MONICA: Yes, it's great question, I think that this deal is a very risky strategy right now. Because it isn't legal from a federal level, and

there are some who would argue that even with Jeff Sessions no longer as the Attorney General of the United States that you may not have full blown

legalization from a federal level until there's a major change in Washington which you know --

GIOKOS: The banks --

LA MONICA: It isn't going to happen until 2020 at the (INAUDIBLE).

GIOKOS: I can't believe we're having this conversation of how things have changed. Thank you so much, Paul La Monica, appreciate it. Now, the

marijuana market is attracting major companies and major political figures. Take former Mexican President Vicente Fox, he recently joined the board of

Caron Life Sciences; a Canadian medical cannabis company with operations in Colombia.

He told Richard Quest, when it comes to cannabis, the United States needs to play catch-up with Canada and Mexico.

(BEGIN VIDEO CLIP)

VICENTE FOX, FORMER PRESIDENT OF MEXICO: Cannabis and marijuana, they're very liberal, so they have announced they will legalize recreational use.

RICHARD QUEST, CNN: This now puts Canada legalizing and potentially or --

FOX: Go on now --

QUEST: Mexico, the United States, individual states, the federal government still says no. And that creates a problem in terms of

companies wanting to do business here and using the U.S. banking system.

FOX: Absolutely yes, lagging behind, not taking advantage of these great opportunities. The money is flowing --

QUEST: What is the opportunity? What everyone keeps doing --

(CROSSTALK)

FOX: It's invested -- it's investments in the returns are 40 percent and higher a year. The future is fantastic and the benefits to the consumer,

to the patient are incredible.

QUEST: You used to be head of Coca-Cola --

FOX: Yes sir --

QUEST: In Latin America.

FOX: Yes, sir.

QUEST: We're seeing at the moment one major tobacco company trying to get involved and take over those markets. The mere thought that the colas of

this world might get involved as well.

FOX: There are already some soft drinks that were on the illegal on the ground market, but Coca-Cola is looking at it, although they are denying.

And Anheuser invested already $4 billion U.S. in this cannabis company which is the largest in Canada. It's incredible what's going on. The

money is going to Canada and United States is losing that great opportunity.

(END VIDEO CLIP)

GIOKOS: All right, we're going to a short break, more QUEST MEANS BUSINESS right after this, stay with us.

[15:50:00] (COMMERCIAL BREAK)

GIOKOS: Right, so returning to U.S. jobs numbers while economists are celebrating a strong jobs market. They are though still struggling to find

a break. This weekend in Jackson, Mississippi, a group of 15 black mothers will receive monthly checks of a $1,000 in a plan to lift them out of

poverty by providing guaranteed income.

Now, the co-founder of Facebook is behind the initiative, called the Magnolia Mother's Trust. If the pilot program succeeds, it will be scaled

up to at least a 1,000 families.

(BEGIN VIDEO CLIP)

AISHA NYANDORO, CHIEF EXECUTIVE OFFICER, SPRINGBOARD TO OPPORTUNITIES: This is exactly correct, so one of the main projects that we're currently

working, one is a guaranteed income pilot really focusing on extremely low income African-American women in the state of Mississippi. It's called the

Magnolia Mother's Trust.

And what this project is doing is, it's restoring dignity and really getting a bad deal of trusting individuals who live in poverty to

understand that they know what it is that they need for themselves and their families. This pile, it is providing a $1,000 a month for 12 months

with no strings attached to these women to actually do what it is they need for themselves and their households without being dictated as to what that

should look like.

GIOKOS: Chris, I know that you've been a big proponent of universal basic income, but you talk about guaranteed income. I don't want to get into the

semantics of it, but I guess a lot of people say, and of course the criticism comes that earth -- work ethic comes under pressure when you give

people money for nothing.

But at the other end of the spectrum, when people are working really hard, long hours and not earning what they should, that brings into question how

you solve this. And we've seen so many countries around the world embarking on a grand system or universal basic income. What do you think

needs to happen in the United States right now to pull people out of poverty?

CHRIS HUGHES, CO-FOUNDER, FACEBOOK: Well, listen, I think we agreed that nobody wants free money, nobody wants a world --

GIOKOS: Yes --

HUGHES: Without work. Every single person that I meet in America wants to work, wants to have a sense of purpose with their families in the

communities. Certainly, the moms I've met that Aisha works with every single day want to not only make some money for themselves but be

productive in their world.

The question is whether or not we're going to actually make work pay. And you're right to mention some of the top-line economic stats, unemployment

is obviously low and stock market until recently has been doing pretty well. But wages haven't really budged.

I mean, if you look at what it was like 30, 40 years ago, median household income pretty much flat. And what's more is particularly black women, they

make cents on the dollar for what white men or even white women make. So we have a fundamental structural problem in the economy that we have to

solve and we should stop acting like we don't know what to do, because we do.

[15:55:00] And the program that Aisha is running is one proof point of it.

GIOKOS: Yes, and I mean, Aisha, at the end of the day, it's a $1,000 to 15 women to start and, of course, I think it's for a year that you're looking

at assisting these mothers. But at the end of the day, if you're going to give people cash in their pockets, it's going to improve their quality of

life.

But the point is that, you want to ensure that it's sustainable, that they can get better jobs down the line. I mean, what is the long-term impact

that you're trying to achieve and that can be achieved? Is there a quantitative thing we can look at down the line?

NYANDORO: Absolutely, so you know, down the line for us, we really are seeing how has this allowed individuals an opportunity to have breathing

room in this moment? How are individuals able to take this cash and make decisions for themselves and their families?

Can we hypothesize what will happen a year from now? No, because it is a research study and that's what we'll be examining. But we are just saying

that, if nothing else at the end of the day, we have doubled the income for these women and their families and we've allowed them an opportunity to

actually plan and breathe and think about what it is that they feel is necessary.

(END VIDEO CLIP)

GIOKOS: All right, time for a quick check of the markets. Let's see how we're doing after quite a volatile day. The Dow ending the week deep in

the red. We're down 540 points at this stage, over 2 percent in the red. Remember, we had the jobs report out earlier today, 155,000 jobs created in

the United States in November.

It was below expectations, but that unemployment rate staying at that key level of 3.7 percent. U.S. trade truce or war with China continuing and,

of course, whether the Fed is going to be hiking or pausing. That's it for QUEST MEANS BUSINESS, I'm Eleni Giokos in London, "THE LEAD" with Jake

Tapper is next.

END