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QUEST MEANS BUSINESS

Trump and White House Working To Set Up Another Summit with Kim Jong Un; Trump Sends Strong Words To Romney About Being A Team Player; Trump Meets With Congress In Situation Room For A "Border Security Briefing; Signs Of A Global Slowdown That Isn't Stopping Investors And The Markets Are Starting The Year With A Mammoth Fight Back Of Sorts; Twenty Years Ago Yesterday, The Euro Was Officially Launched, Spelling The Death Of National Currencies Like The Franc And The Deutschmark; Tesla Is Entering The First Trading Day Of 2019. Aired: 3-4p ET

Aired January 2, 2019 - 15:00   ET

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


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: An hour away from the closing bell on the first trading day of 2019. What a day. Down heavily at 301 at

one stage. Then a bit of green. Now we're off 68. This last hour should be fascinating. You have the Dow and the S&P lower, but you have the

NASDAQ eking out a small gain and the same for FAANG. Put it together and this is what's moving the markets.

It is signs of a global slowdown that isn't stopping investors and the markets are starting the year with a mammoth fight back of sorts. Even so,

Tesla is cutting prices and investors are cutting its stock. Sales figures have missed Wall Street expectations; and 20 years since the euro came to

be, the euro zone economy is still struggling, arguably, it never really got off the ground.

Live from the world's financial capital, New York City, on Wednesday, it is January the 2nd. I'm Richard Quest and I mean business.

And a warm welcome. It's a case of keep calm and carry on as you see stock markets that are all over the place. We are devoting the first part of our

program to this very idea, "Keep calm and carry on." Even if U.S. shares are stumbling higher, banks and tech shares have powered back, sort of, and

the Dow had been down at just 400 points earlier in the day.

We are still 13% or more away from the records we hit last year. Alison Kosik is at the stock exchange and joins me now. All right, so, very short

losses at the beginning. Rallies and down, what was driving the market?

ALISON KOSIK, CORRESPONDENT, CNN: Well, first off, we have to really acknowledge just how volatile the market has been today. Yes, it has been

in a narrow range, but it has been volatile. If you put up that chart showing just how many dips and gains that stocks have made today, it really

is a bit dizzying, what's been the driver?

You know what? Pick your poison. I think what really drove the selloff initially was that news out of China about the manufacturing sector

contracting yet once again. For the second time, a report like that coming out. That really spooking the markets.

As far as what is carrying it now, you know what, we're only seeing modest losses here. One trader walking up to me, Richard and saying, "Look, we

haven't gotten any negative news in the past two hours. This is a good day."

QUEST: But, what is the feeling in the sense, you know, we use that dreadful phrase, the sentiment. Is it a feeling that they want to push the

market higher or are they now just saying, capitulation, we are going to wait and see?

KOSIK: I'm not feeling that capitulation today. I'm feeling yes, that there is this sentiment to sort of try to move the market higher. Listen,

fresh money is coming in. It's struggling to make it through.

And listen, we have seen some gains today for stocks. And I think you're seeing new investors dip their toes in and try to make some money back that

they lost last year.

QUEST: Alison, you and I have a long year ahead. I'm looking forward to it enormously. Alison Kosik at the stock exchange. Keep calm and carry

on. That's what we're determined to do no matter what the market is doing as we start a new year together.

And our first question today on this very subject, cnn.com/join. This is a really tricky one. It's a fascinating one. 2018 was the party that

fizzled and now, investors are trying to light these fireworks again.

(BEGIN VIDEO CLIP)

QUEST: Dow Jones Industrial at a record. NASDAQ at a record. S&P 500 at a record.

UNIDENTIFIED MALE: Companies are already giving out some of the taxing. You'll continue to see benefits through the whole year and you'll see a lot

more benefits next April.

PAULA NEWTON, CORRESPONDENT, CNN: Those jobs numbers, I mean absolutely stellar. And it has to be said, those numbers really deserve an

exclamation point at the end of them.

(END VIDEO CLIP)

QUEST: There is always somebody that wants to keep the party going as long as possible but unfortunately, for the rest of us, it is time to get the

house back in order. And as we clear up, here's how the market stands as a result of last year.

Now, you'll remember, we had 15 record Dows; 19 record S&Ps and 29 record NASDAQs.

[15:05:09]

QUEST: But what today is, day 12 of a shutdown. There's Fed uncertainty. So we clear the board and we start all over again. How many records are we

going to see over the course of this year.

The day so far is down, but we've talked about how it's been up down and roundabout. The S&P is down. The NASDAQ though is still eking out a small

gain. So need to put some context into all of this. Rana will be with us in just a moment. Here we go. So what we're looking at is how the

European bosses fared. Now, there you have the European bosses. They had a bit of a rally going on. Small to say the least, and Paris, hardly

surprising that the CAC quorum was down bearing in mind the political problems. Milan ekes out a small gain, not much, but at least they were

positive.

Go to Asia and you have a very different party poopers galore. Shanghai off sharply. That is on the back of the worries over the China GDP number.

Same in Hong Kong down nearly 3%. That's a sharp loss in the Hong Kong market, and then you've got the Seoul KOSPI and the Australia ASX, but if

you stop, listen very carefully. There is a part of the world where the fireworks were brilliant on New Year's Eve, Copacabana and it's in Brazil,

where the party kicked off late.

Two years of political scandal and now, there is a new captain of the ship. Sworn - the President was sworn in and the new President pledges to fix

corruption, economic mismanagement. So the question that we're asking at cnn.com/join. When it comes to stocks in 2019, the issue is, when it comes

to all of this that you can see -- London, Asia, everywhere -- are you an optimist or a pessimist or a realist? Voting is now open.

As the markets over the course of the year, are you an optimist, a pessimist or a realist? Rana with me. Good to see you. Rana is our CNN's

global analyst. Good to see you.

RANA FOROOHAR, GLOBAL ECONOMIC ANALYST, CNN: Happy New Year, Richard. Lovely to see you.

QUEST: Happy New Year. All right, we'll get to how you would answer the question in just a moment. I got a bit weary as we got to the end of last

year with the prognosticators and negativity.

FOROOHAR: Well, it's a good point. I think, to be fair, I think I was maybe a bit more bearish than I should have been in 2018. I think we are

going to see some stock gains, but I think it is going to be all about volatility. The three big things that we need to worry about are interest

rates, China and whether that triggers a synchronized global slowdown and tech. What is going to happen in tech? Those are the three factors.

QUEST: But you have - China, tech and interest rates. Where in all of that is earnings?

FOROOHAR: Well, earnings I think are going to be pretty good if the - particularly in the U.S. if growth remains solid, like it is now. But the

thing is, the last time we had a big global turndown maybe 20 years ago that really affected the U.S., global growth was not as much of the picture

as it is now.

If you look at China, China has been, the majority of global growth in last year few years. What happens in China matters here.

QUEST: Okay, but the idea of a soft landing in China is still on the horizon versus, well, you're shrugging. You're talking about a hard

landing.

FOROOHAR: I'm talking about a significant slowdown in China that affects the other emerging markets in a way we haven't seen before. If you go back

20 years ago, China could slow and you know, maybe the rest of the world got a cough. I think now, China slows particularly if there's continued

trade skirmishes and the rest of the world is going to get the flu and then, that's going to affect the U.S.

QUEST: And Europe of course is just still mired in the problems of Italy and Brexit and German indecision over who - I mean, she's there for another

couple of years, Chancellor Merkel, but she's a lame duck.

FOROOHAR: Right, and I mean, you're putting your finger on it which is that it's about politics, right? Italy, Brexit, Germany. This is all

about whether or not Europe is going to commit to being a united states of Europe or whether it is going to be a fragmented and the first sign of

trouble, we're going to see another debt crisis.

QUEST: Listen to President Trump on the shutdown a few moments ago.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: The $5.6 billion approved by the House is such a small amount compared to the level of the problem.

When you see that the Democrats want to give away $12 billion extra and giving away $54 billion in foreign aid, so we give to countries, but we

don't give money to our own, which is another thing that I have been complaining about and we're cutting that back. It's very unfair.

(END VIDEO CLIP)

[00:05:07]

FOROOHAR: You know, Richard, it's interesting because this goes to one of the trends I'm watching in 2019 which is de-globalization. We've hadd-

yes, hold on, I see your look. I think we're headed towards a tripolar world. I think the U.S. is going one direction, Europe is going another

and China taking with it some of the emerging markets is going a third.

Tech stocks, you can already see that playing out. You have different forms of regulation in these different markets. We have seen 40 years of

globalization going in one direction. I think we're going to see it going in another direction in the year ahead.

QUEST: What's the danger of this tripolar world?

FOROOHAR: Well, slower growth.

QUEST: But the country is like, say for example, Brazil with its new President; Indonesia, the Middle East, Australia - well, Australia will be

firmly in one particular camp, but for those countries that straddle the different areas, what's the risk?

FOROOHAR: I think the risk is that you get slower growth, you get more partisan politics, right, because when you have everybody sort of in a zero

sum world, a very Hobbesian world, you're going to get people cutting deal - I know, I know - little technical terms there, you're going to get people

cutting deals, you're going to get a spaghetti bowl of trade arrangements, slower growth could be the result.

QUEST: Well, I am just shocked. Actually, I am shocked that you have used the word de-globalization.

FOROOHAR: I have on your show, I know. We're going to talk about this in Davos, I predict.

QUEST: Well, not that particular world. If you were voting, how are you feeling about stocks in 2019? Are you an optimist, a pessimist or a

realist?

FOROOHAR: Mild optimist because I think that the Fed is going to slow interest rate hikes. I suspect that that is going to happen, and I think

that President Trump is going to come out and cut some kind of deal with China. So the short term, optimist.

QUEST: Good to see you.

FOROOHAR: Thank you.

QUEST: We're going to see where that voting looks like. It's short term pessimists with realism coming in. We'll explain that at some point over

the course of the next 364 days.

Twenty years ago yesterday, the euro was officially launched, spelling the death of national currencies like the franc and the deutschmark. It was a

time of high hopes and also pessimism about what the single currency would buy and bring.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: The euro is the single most important thing happening in the world in the next five years. It's more important than any war, any

election because if the euro works, the euro is going to replace the U.S. dollar as the world reserve currency.

UNIDENTIFIED MALE (Through a translator): Countries that are economically worse off will end up paying for it and then before you know it, there will

be another war.

UNIDENTIFIED MALE: Such a project will in fact contribute to the kinds of things that our citizens are looking for -- security, the absence of crime,

the absence of drugs, prosperity, jobs.

UNIDENTIFIED MALE: Strauss-Kahn pushed the button and brought a new and hopefully solid currency into existence on live TV.

DOMINIQUE STRAUSS-KAHN, FORMER FRENCH MINISTER OF THE ECONOMY, FINANCE AND INDUSTRY: It's a kind of symbol. You know, it's the first euro ever done.

UNIDENTIFIED MALE: The sheer size of the currency change is daunting. France alone will stamp out more than eight billion coins and print two and

a half billion euro notes between now and 2002.

(END VIDEO CLIP)

QUEST: Joining me now, Adam Posen who is the President of the Peterson Institute for Financial Economics. He was a former member of the Bank of

England's Monetary Policy Committee. You remember that day very well as I certainly do, the day when they irrevocably linked currencies.

The reality of course is that when they created the euro, they did build a house on shifting sands. Do you now believe the foundations are strong?

ADAM POSEN, PRESIDENT, PETERSON INSTITUTE FOR FINANCIAL ECONOMICS: Richard, I think it's less about shifting sands and more about an

incomplete house. By design, they left it incomplete in all kinds of rooms. They didn't have a kitchen which would have been the bank

supervision. They didn't have a basement, which would have been a furnished basement which would have been the fiscal policy.

And so therefore, the house was standing. You could live in it, but it didn't have all the functions it should have to be a viable living place.

The shifting sands are not so much the issue. If you look at every country, pretty much they have all gotten a popular majority that is in

favor of staying in the euro.

It is the economic gaps of not having a kitchen, not having a finished basement, not having the fiscal and financial things.

QUEST: All right, if they didn't - I mean, I remember interviewing one of the authors of the euro who specifically said, "We knew this when we

created the euro," but the promise was the policy makers would put them in afterwards. Well, they didn't. 2009 happened. Do you now believe all

those extra rooms and those necessities are now in? Is the euro, as a structure, is it safe and secure?

POSEN: It is better than it's been. It was partly as you say, by design that they expected policy makers to do it, but partly, they expected it to

be an automatic process. The countries could converge. The politics would converge.

[15:15:05]

POSEN: It's kind of like the wishful thinking in China that everything would converge. It didn't happen that way. They have made huge progress

in bank supervision and that is really making sure the house doesn't fall down. That's great. They have made no progress on fiscal. They have made

limited progress and capital market integration. They still have got legal issues between countries, not a direct sense, but in the sense of

conformity. So there is real problems. If there's another major downturn, it could be very bad. The problem remains there.

QUEST: And if you look at the Bank of England and it is managing monetary policy ahead of Brexit, the bank has been noticeably pessimistic about the

outlook. Seemingly, even on best case scenario. In this situation, monetary policy in the U.K. on hold?

POSEN: Well, I would say going back to your poll of your viewers that the bank being what's been realistic rather than pessimistic. I mean, they

felt despite the political cost they are paying, they have to be honest. And the honest fact is even a so-called good or soft Brexit is still going

to be a huge trade shock to the U.K. and a lingering source of uncertainty, so they are being realistic. Is it monetary policy at all? I think so. I

think for good reason because they could need to go up or down. They can't say.

QUEST: And if we look at the United States, okay, so two and three - not two rate raises this year. The markets took that very bad. They did that

from the Fed Chair last week or week before last. In your opinion, would you be looking for less than two this year from the Fed?

POSEN: I would certainly put a higher odd on that than I would have up until now. I think the succession of speeches this fall including by Vice

Chair Clarida, by Governor Brainard, as well as statement by Chair Power, they have been pretty clear that there is a real chance of them pausing or

cutting back. I think the market pricing is about right. The average value has got to be well below two hikes next year.

QUEST: And I'll allow you, sir, to join in our question, even though you don't have your phone but we'll allow you a pass on that at cnn.com/join.

If you were answering, would you have gone for optimistic, pessimistic or realistic?

POSEN: Similar to your previous guest, I would say optimistic. Sorry. I think there's going to be some positive surprises. I hope certainly on the

trade front. I think there might even be a positive surprise on the fiscal front in the U.S. These are not good things in and of themselves, but they

will boost markets.

QUEST: Adam, good to see you, sir. Thank you. We look forward to having you help us understand the various machinations on "Quest Means Business"

as we go throughout the year. Thank you, sir. And a Happy New Year.

POSEN: To you, too. Thank you. Happy New Year, Richard.

QUEST: As we start with the week, let's start in European markets, they closed mostly higher. You saw the numbers. They were helped by the

rebounding crude and humping about ways on the U.S. shutdown. In that scenario, it's a miracle they get anything at all, which is why you see

them tweaked, between with Paris, just as the only loser.

2018 was the year Elon Must most won't forget, or rather forget. Now Tesla is entering the first trading day of 2019. There is renewed pressure.

Keep calm, carry on. And later on the show, it's a wobbly start for the year in stocks.

(COMMERCIAL BREAK)

[08:20:00]

QUEST: It is "Quest Means Business" from New York. Tesla shares are now more than seven percent. Deliveries of the Model 3 fell short of

expectations last quarter and Tesla also slashed the price of the car by $2,000.00. Apparently, Tesla got significantly more expensive for

Americans in the New Year, after a government tax credit on electric vehicles began to expire.

Peter Valdes-Dapena is here. Good to see you. Happy New Year, first of all, sir.

PETER VALDES-DAPENA, SENIOR WRITER, CNN MONEY: Thank you. Happy New year.

QUEST: I mean, does it justify a fall of 7% in shares just because it seemed to have fallen short of expectations on deliveries?

VALDES-DAPENA: Well, the miss - I think the miss was quite small from what people were generally expecting. It was in line with Tesla's own

expectations. Their reaction seems to be more into that price cut you were talking about.

But even there, for me, I would think one could have seen that coming. What Tesla would not want to leave its customers in a lurch when that tax

credit expires, so they paid them back part of it by lowering the prices. The cars are quite profitable from what I understand, so they had room to

do that and they did.

QUEST: Last year, the share price fell the best part of 30% to 40% on the back of a variety of scandals, the buyout one was just one of them. But

the bounce back was extraordinary. Almost back to where it was. It was not quite, but almost back to where it - well, well on its way to where it

was. To what do you attribute this ability of Tesla shares to bounce back in face of seemingly some strident criticism?

VALDES-DAPENA: Yes, quite a criticism. They've had certainly problems ramping up production. Today's fall was modest compared to that. I think

people have a picture of Tesla looking to others. And if you look at their valuation, they are up there. Their market valuation is up there with

what? General Motors, Ford - they are up there with some very big automakers.

Personally, I don't see how Tesla gets there from here. I don't see how Tesla can be another General Motors down the road, unless Mary Barra and GM

fail much more spectacularly than anyone ever expects them to.

But that is what investors seem to be buying into, plus, they do have things like the battery business and things like that that are behind the

car business as well.

QUEST: All right, so the three series is out.

VALDES-DAPENA: Yes.

QUEST: And it seems to be selling well.

VALDES-DAPENA: Yes, the Model 3, yes.

QUEST: The Model 3, sorry, the Model 3. He's got his super chargers and he is aiming to put the super chargers right across Europe. We saw that

announcement over the course - he has got a huge investment to make that happen. What is the biggest risk in your mind for Tesla in 2019?

VALDES-DAPENA: The biggest risk in 2019 and 2020 is going to be more competition from established automakers like Jaguar, like Audi. Volkswagen

group across the board in fact. Porsche is coming out with Taycan. They have already said that many of the people who are lining up to buy the

Porsche Taycan are Tesla owners. So that's where the biggest risk is coming from, from established automakers with established brands having

electric competitors in the market.

QUEST: They are lovely cars to drive.

VALDES-DAPENA: They are. They are very, very good cars to drive. But so will the Porsche Taycan be.

QUEST: Sorry?

VALDES-DAPENA: So will that Porsche Taycan electric car. That's going to be a lot of fun to drive as well.

QUEST: Please, throughout the year, you'll be here to help us understand what they are all like.

VALDES-DAPENA: I will.

QUEST: Lovely. Thank you, Peter. Now, despite the big swings of Tesla share price. Tesla itself has generally outperformed the broader market

over the past year. Have a look at this. It becomes quite clear. But the volatility, the volatility. Now, Tesla is down some 3% over the past year.

There you see in orange. Tesla is just down some 3% from its starting point.

Same period over the last year. The Dow which is in the red is down 6%. And the NASDAQ is off 5%. However, the huge swings for the NASDAQ, I mean,

if you talk about stomach churning and your capacity for risk and volatility, well, that's something completely different because volatility

remains at elevated levels. The VIX is just coming off a one year high, up at 38. Now, down at 24.8.

[15:25:08]

QUEST: But we started last year at around about 11. So the level of volatility throughout the course of the year is something that you've

really had to keep your watch on and certainly hold your water and your breath as you've had some stomach churning moments, which gives me a good

point to come to Ed Mallon who joins me now. Good to see, sir. Ed Mallon is the Chief Investment Officer of Pagaya

ED MALLON, CHIEF INVESTMENT OFFICER, PAGAYA: Great to see you, Richard.

QUEST: Nice to see you. Now, you use AI - artificial intelligence to help people manage their investments. First of all explain why AI? And what it

adds to the proceedings.

MALLON: So when we think about what we're doing is what we created was what we call a next generation asset manager, and we're harnessing the

power of AI for one single goal, it's to save pensions.

QUEST: How does AI help it at the end of the day?

MALLON: The way it helps it is, if you think about - if I put you in a darkroom and it was full of obstacles and I asked you to walk to the other

side, you bump and bruise yourself to the other side but you'll probably get there. AI is like giving you night vision goggles that totally

illuminates the rooms so you ou can get a clear path to the other side.

QUEST: Well, yes, but what's it adding to the equation? What information is it adding? What scenarios is it crunching?

MALLON: So when we're looking at it, we're really going down to bottom - individual bottom level analysis on each loan that we're buying. We're

fixed income investors. And so what we are taking into account is historical information about the borrower. Geographically, where they are

located. If you want to think about it, think about if you're putting - looking at a big screen and all of the pixels represent one data point.

What we're doing is we are assembling those points of data, so that we start to get pictures and patterns where it's optimal to invest?

QUEST: And what are you seeing out there? I mean, if you're right, you have got a superior investment tool at your disposal.

MALLON: Absolutely.

QUEST: For the moment, there will be others who will come along on this seat.

MALLON: I hope so because ultimately to our goal of saving pension plans, like the more people that can do this and help these underfunded pension

plans do better, it's better for everyone who has helped serve us.

QUEST: So what are you seeing because pension plans are - many of them are underfunded, most of them in some cases are underfunded? They certainly

don't meet the necessary ratios required by the regulators at the moment. And that was in the good times when markets were roaring ahead. They still

couldn't meet the capital requirements.

MALLON: Yes, and if you think about what has just happened from 2009 - March of 2009 until September, people just made four times their money just

by putting it into the equity markets. It's a lot more difficult. As we are thinking about 2019, you need some tools to better steer you through

the market.

QUEST: How much of this pension underfunding that we have heard about is just technical in the sense of according to regulators, you don't meet the

requirement. But actually, we have got a bunch of money and investments that will be able to pay pensions for years to come. We just don't meet

the numbers.

MALLON: They still need more capital and more returns.

QUEST: Which is where you come in.

MALLON: Right. If they are going to deliver on the obligations that they promised, right? They can continue to meet obligations, but eventually

they are running out of money because they are not meeting the returns that they need.

QUEST: I am - actually, I am almost certainly closer to my pension than you are. Am I going to be working until I am 80?

MALLON: If you love what you are doing --

QUEST: No, you know what I mean? You know, pension returns are --

MALLON: I think when people are dedicated their lives to companies that they work for, that they deserve their retirement and they deserve as it is

promised.

QUEST: But if you had - if you've been stuck with, as you are in the U.S., and now in Europe the 401(k) or the defined contribution system. It is

just - I mean, let's take for example the past quarter, the market is down 18%. Obviously, you should have been transferring to bonds over the past

year or so, five years, but if you haven't, you're in trouble.

MALLON: You're in trouble, but it's not too late, because even though we've had a pretty rough past quarter, there's still time. We still have

made a lot of money over the last few years if you've been invested in the market, so what I'd say is really three things for people. Talk to a

professional. They can help you allocate money.

You're not the financial genius that you thought you were, okay, it was a great market. We could put it into anything.

QUEST: You get a ding on the bell for that one. Thank you. Absolutely.

MALLON: Great - and diversify. If you looked at your top five holdings, like your top five funds and they're all the same thing, you're going to

get stampeded by the crowd. Look at alternatives, so they will zig while the rest of the market zags.

QUEST: Good to see you, sir.

MALLON: I appreciate, Richard.

QUEST: Thank you very much.

MALLON: Thank you.

QUEST: Thank you. As we continue tonight, the U.S. government has been in a partial shutdown for the best part of two weeks. The holiday is over.

Washington is back to work. But Donald Trump is meeting with Democrats at the White House as we speak.

[15:30:00]

QUEST: Putting the fault on U.S. government. More in a moment.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. There is more (inaudible) business in just a moment. When that happens, Donald Trump says he helped the United

States avoid a recession just by picking up the phone. Who did he call and why?

The Chief Executive, the new one, of the world's biggest gold company tells how us commodities will survive this turbulent market as you and I

continue, this is CNN and on this network the facts will always come first.

President Trump says the White House is working to set up another summit with Kim Jong Un in the not to distant future. During a cabinet meeting

Mr. Trump held up a letter sent to him by the North Korean leader. It was the first cabinet meeting since portions of the U.S. government shutdown

because the White House and Congress could not agree to funding over the budget wall. Oh, that's a border wall, I beg your pardon.

Mr. Trump also had strong words for the new U.S. Senator Mitt Romney saying, he hopes the new Republican will be team player, who strongly wrote

an op-ed article that was highly critical of Donald Trump, on Tuesday. He will sit down with a live interview with CNN's Jay Tapper in half an hour

from now.

Six people have died in an accident involving a Danish passenger train. It happened on a bridge between two islands. The authorities confirm that a

truck trailer came off a freight train crossing the bridge. They say it's too early to be sure that's what caused the accident.

The U.S. State Department says Russia is granting consular access to a detained U.S. man. Paul Whelan was arrested last Friday in Moscow and

charged on suspicion of spying. So far there's no word on where he's being held or the exact nature of the allegations. Whelan's family say he's

innocent and was in Moscow for a wedding.

Right now Donald Trump is with leaders of Congress in the Situation Room. The White House is calling it a border security briefing.

[15:35:00]

QUEST: It's the first meeting with Democrats since the U.S. government entered a partial shutdown nearly two weeks ago.

Earlier in the day he claimed he averted recession by single-handily bringing down the price of oil.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: If you look back a few months gasoline was at $83 a barrel. That was going to bad and it was

going to $100 and some people were saying $125, (Rick).

And I made calls, I say, you better let that oil -- that gasoline flow. And they did. And now it's down to $44. And I put out a social media

statement yesterday. I said, do you think it's luck that that happened? It's not luck. It's not luck.

I called up certain people and I said, let that damn oil and gasoline -- you let it flow, the oil. It was going up to $125. If that would have

happened, then you would had a recession, depression like we've had in the past.

(END VIDEO CLIP)

QUEST: Sarah Westwood with me from the White House. Well, what do you make of that? I mean, the president's never backward at coming forward

claiming credit. But he said, let the damn oil and gas flow. What's the White House saying?

SARAH WESTWOOD, CNN CORRESPONDENT: ... up and down that we've seen in the stock market to a glitch, and he said that that will all go away when his

trade deals are resolved in his favor, of course some of those are very far from resolution, like particularly the one with Chine, but President Trump

was quick to just claim victory economically even though we have seen a little bit of rocky markets lately Richard.

QUEST: And now to the meetings taking place. Is it likely -- I mean, we never know with this president, I'll grant you that, but is it likely that

anything substantive comes out from these budget meetings?

WESTWOOD: Well no deal appears to be in the works right now. President Trump said, in that spray off the cabinet meeting, that he would be willing

to maybe consider a little bit less than the $5.6 billion number that we saw in the House past bill, back when the House was controlled by

Republicans, but that he wouldn't take less than $2.5 billion, which as CNN reported, was the last offer that Vice President Mike Pence put on the

table. Democrats didn't seem interested in that, so right now there doesn't seem to be any kind of negotiations going on. Democrats really dug

in against funding the border wall.

QUEST: So, the game has changed if (certain) one wants to think of it like that. The Democrats now have control of the House. How will we, you, me,

those who watch these closely, how will we witness the evidence of this change? When will we first see real effect?

WESTWOOD: Well, pretty quickly, Richard. Tomorrow Democrats have already said they're eager to pass a package of bills that they say could reopen

the government. Six of them will fund the unfunded parts of the government through the next fiscal year and then they want to separate out border

security, the Department of Homeland Security funding from that and fund border security temporarily until February 8, and thus, get the government

reopened and try to get negotiations restarted. But that bill only provides $1.3 billion for border security and President Trump has already

said he won't accept that.

Senator Mitch McConnell, the Republican Majority leader has said, he won't put any bill on the floor that the president doesn't support, so it doesn't

look like those will become law, Richard.

QUEST: And it is worth reminding ourselves, is it not, on day one of this new era, that the Democrats may have the House, but the Republicans still

have the Senate and the White House and the upshot of this is essentially gridlock rather than government.

WESTWOOD: That's right. There's been some talk about some potential bipartisan priorities that could be worked on together, such as lowering

prescription drug prices, such as infrastructure, but all in all, what we're likely to see in the era of divided government is a whole lot of

gridlock, but not a lot getting done and President Trump seems to be preparing himself for the era of divided government. He acknowledged

today, Richard, that the partial government shutdown could go on for a very long time, and it appears right now that it very well may.

QUEST: Sarah, a quick question, we've asked all our guests today, are the optimistic, pessimistic or realistic as they go into 2019? Which would you

vote for for yourself? Optimistic, pessimistic or realistic?

WESTWOOD: I think realistic is the way to go Richard.

QUEST: All right, thank you. And we look forward to you helping us understand the realism of 2019. Good to see you. Thank you.

As we continue, we will get the stock market resolutions. Oh dear, look at that, down 132 points on the Dow. It had been worse, it had been better,

but that's the nature of the day.

[15:40:00]

QUEST: We'll see much more of it this year.

(COMMERCIAL BREAK)

QUEST: And so, we're in the Quest Means Business trading post (ph) in the last few minutes of the first day of trade, a volatile day indeed. We've

already - I just realized - I mean, previous (ph), we got rid of the records for the Dow and for the U.S. markets. But look at Europe. Last

year there was only nine FTSE records, one DAX, and two SMIs.

So, if - we need to just reset Europe as well, get rid of all of that. Get rid of this. We will pretty it all up in the fullness of time. As we are

at the moment, oil a sharp bit higher (ph), and Donald Trump says it will be under (ph) 25 without hitting (ph) the market. So we're up $1.19, West

Texas at - this is under $50.

So, it's supporting that. And the CNN Business fear and greed index is at extreme fear (ph). I'm not sure what that's predicated on. It is red for

the markets. Josh (ph) gave us that. Thank you very much.

All three are down. And it's a challenging environment for us to focus some New Years resolutions, those that should and those that shouldn't

(ph). Paul La Monica is here. And we begin, Paul La Monica, good to see you.

PAUL R. LA MONICA, CNN CORRESPONDENT: Good sir.

QUEST: Happy New Year.

(CROSSTALK)

LA MONICA: Happy New Year as well. Thank you.

QUEST: Good, Mr. La Monica. Our first one is J. Powell. What should his New Years resolution be?

LA MONICA: I think J. Powell's resolution needs to be to stay the course, and not listen to what will probably be continued constant criticism from

President Trump about raising interest rates. J. Powell has to do what is right for the economy, not necessarily the markets. And that may mean

ticking off the guy who appointed him. And we've seen that before.

QUEST: Right. But it - but staying the course, whether that means one or two interest rate hikes this year can't be determined now.

LA MONICA: Right. I think it's too soon to say whether or not the Fed should raise rates two times, three times maybe. Pause for the rest of the

year. I mean, it really is going to depend on the data, not what President Trump says about the economy, and his job performance.

QUEST: Every time I see Chairman Powell I always think, I'm sure he never expected to be Chair of the Fed. But there we are. Elon Musk, his New

Years resolution. What should it be?

[15:45:00]

LA MONICA: I - I think Elon Musk's resolution needs to be to find a way for Tesla to be continuously profitable, and not just have these haphazard,

once in a quarter, you know, profits. Obviously ...

QUEST: But for him personally, to walk (ph), to be more reliable.

LA MONICA: I think he probably, like, maybe, President Trump, should lay off Twitter and social media a little bit, and focus more on the day-to-day

job performance.

QUEST: Netflix Chief Executive Reed Hastings. I mean, this company is a behemoth. It will spend more on productions, some $13 billion on

production. It's immersed, emerged, and some controversies at the moment over various productions. But have we seen the best of it, or not?

LA MONICA: I don't think we've seen the best of Netflix just yet. There are going to be continued concerns about how they will keep that subscriber

growth momentum going. And you do have the controversy you alluded to with the new CFO that they just got from Activision.

The gaming company Activision got rid of him a couple of days ago because of the speculation that he was looking to get a new job, which he obviously

just got with Netflix. But Spencer Neumann is a former Disney executive as well. So, I think it's a good move for - for Netflix.

QUEST: And your New Years resolution?

LA MONICA: My New Years resolution, I guess, is to - maybe I should Tweet a little bit less. I think I, like the President and Elon Musk, sometimes

on Twitter more often than I need to be.

QUEST: Good to see you, sir. Thank you.

LA MONICA: Of course, I'll probably now go Tweet about this appearance.

QUEST: Yes, please do - please do. Thank you very much. As we continue (ph), gold is at its highest level, gold, in six months, helped (ph) by

uncertainty in the equity markets. The gains coincide with a major merger in the gold industry. We've talked about it many of times on this program.

(APPLAUSE)

QUEST: As they rang the opening bell of the New York Stock Exchange, Barrick Gold celebrated its merger with Randgold. Barrick's Chief

Executive, now Randgold's CEO, Mark Bristow explained the rationale to Elena Jarvis (ph).

(BEIGIN VIDEO CLIP)

MARK BRISTOW, BARRICK-RANDGOLD CEO: Randgold, in my previous loss (ph), have 10 of the top - having two of the top 10 world-class assets, and

Barrick has three. So, if you put those together you've got five out of the top ten gold assets in the world.

That naturally makes you a global leader. And - and then, on top of that, we've got two more in the making, both in Nevada. And so, now we spread

our portfolio from Africa across the Americas, down into South America. And we're on - arguably, we have a asset, or a project in every, sort of,

major gold geological province in the world.

ELENA JARVIS, CNN CORRESPONDENT (ph): Which, of course, puts you in a really good position?

BRISTOW: Fantastic.

JARVIS (ph): But what makes a good asset a good asset is being able to mine it effectively, so cost per ounce.

BRISTOW: So - so what ...

JARVIS (ph): That is what you need to focus on. How are you guys faring on that front? Because if you look at the gold price right now, yes, risk

evasion (ph) might be increasing, but you've got a rising interest rate environment which is never good for gold.

BRISTOW: ... so I've always said everyone worries about the gold price.

JARVIS (ph): Yes.

BRISTOW: The real asset is in the quality. The real value - the revenue is embedded in the quality of your gold assets. So, if you have high

grades, if you have a high value per ton than you can manage any gold price. And as you know, Randgold does.

JARVIS (ph): What's the lowest you can go on gold where you'll (INAUDIBLE)?

BRISTOW: Well, we like to believe that you should be able to make a profit at a $1,000 gold price.

JARVIS (ph): How much - what is your cost per ounce at the moment?

BRISTOW: Well below that.

JARVIS (ph): Well below?

BRISTOW: Yes. And the combination is even better. And again, if you look, historically, the combination of Barrick and Randgold, and the new

Barrick, it's - it's all in sustaining cost, or it's cash cost per ounce of gold is the lowest in the industry, certainly against peer group.

JARVIS (ph): So, what is that then?

BRISTOW: So, we're talking about ...

JARVIS (ph): We're going to divulge.

BRISTOW: No.

(LAUGHTER)

JARVIS (ph): Trade secrets here.

(END VIDEO CLIP)

QUEST: All right. While we were talking and listening, the BOVESPA hit a record high in Brazil, and a new president arrives. The BOVESPA goes up

91,012, up three and a half percent.

The new president described as the Trump of the tropics. (INAUDIBLE). A new year, and time for stock making resolutions. After the break, the most

popular promises people make, and the ones we're unlikely to stick to. But this year, no, no, no, we are going to resolve to resolve, because we're

resolute and resolving.

(COMMERCIAL BREAK)

[15:50:00]

QUEST: We've already done New Years resolutions for Chief Executives, now the rest of us. According to a new poll, you see this - the most popular

resolutions are all to do with health.

The only financial promise to make the list is save more, spend less, Elizabeth is with me - the Executive. It's good to see you, Elizabeth.

Spend more, save less come on that's - we never do.

ELIZABETH KORACA, EXECUTIVE COACH AND CAREER STRATEGIST: Well look, if this is the way you're going to do it you want to think about the why

behind spend less, right.

You want to really think about what is the purpose behind it so when I go to buy that designer paid of shows or that new suit or something I really

don't need, think about the pain attached to that.

Oh wow, I don't want to go in to debt. Oh wow, then I won't be able to afford that so you really want to get clear on your why and your purpose

behind the New Years resolution.

QUEST: I want to look good on the beach in the summer therefore - what was that laugh? Well thank you (inaudible). With colleagues like this who

needs - again (ph) there's a snort of (inaudible) from the peanut gallery, right.

And I want to look good on the beach in the summer, what's the - what so I've got to work out more. Now think why? What? Tell me how.

KORACA: Exactly. OK so for me my New Years resolution this year is to eat more healthily. So how am I going to do that? Where is my problem? Where

is my stumbling block? That is raiding the pantry every night. I'm a serial snacker so what did I do? I created a plan.

Get rid of all the junk. Get the healthy food in so I'm not tempted every night by chips and cheetos and cookies. And then I write it down and put

those calendar reminders in there and I also think when I'm out to a restaurant and I think about getting that second piece of whatever it is, I

think about the stomach hanging over the pants.

I don't want that. That's my why, that's my purpose.

QUEST: What happens when it gets to February and in the office and you just don't care?

KORACA: Well that's because then you haven't written it down. You haven't had a clear set of priorities. You haven't written it down. You haven't

made calendar reminders - put it...

QUEST: Hang on. I want beach body. I've written it down now, well.

KORACA: And why do you want beach body?

QUEST: Because it looks good.

KORACA: OK. You want to look good. You want to look good on the beach.

QUEST: I'm sure of it. I'm sure that (ph) we talk about financial things, all right. I want to invest and make money.

KORACA: OK, so how you going to do it? What do you need to do - what do you need to do?

[15:55:00]

QUEST: Sell my snap shares, which I have just regular views now and down about 82 percent over what they are.

Seriously though, what's the purpose of all these New Years resolutions? Do they serve a purpose to somebody not yourself who's extremely ordered

and well structured?

KORACA: They do. It's a goal. It's another goal. It's something that's been bothering you through out the year. Something you haven't been able

to do or get done. So it's just a - think of it as another goal, right.

So then you want to plan it out. What do I need to do if I want to invest more or if I want to get a new job or if I want to ask for a raise? What

do I - for example for a raise what do you want to do? You want to do your research. What are my counterparts in other companies or other departments

making?

QUEST: Promise me you will come back during the course of the year. Many times update us on your snack attacks.

KORACA: Yes.

QUEST: And help us understand the etiquette of the office and our social lives.

KORACA: I sure will.

QUEST: Good to see you, happy New Year as always.

KORACA: Good to see you, Happy New Year.

QUEST: We will have a profitable moment after the break while I go and take it out on one or two colleagues who seem to think it's very assuming.

(COMMERCIAL)

QUEST: Tonight's profitable moment, keep calm and carry on. It was a poster design by the British government in the Second World War. In those

dark days it was never widely used and it was then discovered in 2000 and has now become the watch word if you like.

The poster boy - the poster, poster for those moments when things look grim but you just keep going. Also it is as those nattering nabobs (ph) of

negativity tell us that 2019 is going to be miserable and down. Well it may been be but let's face it it's only January the 2nd and it's way too

soon to be saying just how bad or good things will be.

The message then, in this scenario, is really rather simple. Just keep calm and carry on, which is exactly what you and I will do each time at

this day because we're going to make sure we still are together.

And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it is profitable.

The bell is ringing. The day is done. The DOW is actually positive. We start off on a good note.

UNIDENTIFIED MALE: Everyone in D.C. is talking about Romney taking on Trump. Romney is here for his first national interview at Senate.

END