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QUEST MEANS BUSINESS

Facebook Steps Up Fact-Checking in India; U.S. General: Tens of Thousands of ISIS Fighters Remain; Vatican Hosts Envoys Representing Venezuelan Opposition Leader; Iran Marks 40 Years Since Islamic Revolution; Rouhani: Iran will Continue to Expand Missile Program; Lawyer for National Enquirer's CEO Denies the Tabloid Extorted Jeff Bezos; IBM Computer to Face Debating World Champion; Big Brands Including Badgley Mischka Turn Out for New York Fashion Week; Investors Respond to Trade Talks and Shutdown Fears. Aired 3-4p ET

Aired February 11, 2019 - 15:00   ET

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


JULIA CHATTERLEY, ANCHOR, CNN: Welcome to "Quest Means Business" and the final hour of trade for the first session of the week. This is what we're

looking at right now. The Dow losing earlier gains sitting down some three-tenth of one percent, tough call to say what's driving this.

Remember the Dow up more than 7% year-to-date. So a consolidation day? Hey, we'll take what we can get.

One of the thing that I am watching in particular though, look at the U.S. dollar, up half a percent in this session, but right now sitting at 2019

highs. Cast your mind back to Q3 earnings season, this dollar strength was the big risk for some of these international corporates. I wonder whether

this because a challenge in this quarter again. We're already predicting an earnings season recession. Interesting one to watch. But for now, let

me bring you up to speed with what's driving the session today.

The clock is ticking on a new U.S. shutdown. Now, economists and executives alike fear a recession could follow. There are fresh clues in

the hunt for who leaked those infamous pictures of Jeff Bezos. And don't blame Brexit. The U.K. government has all kinds of explanations for the

slowest growth in years. Live from the world's financial capital, New York City, it's Monday the 11th of February. I'm Julia Chatterley. And this is

"Quest Means Business."

A warm welcome to the show once again tonight, a crucial week for the global economy with deadlines looming large. First, the U.S. government

shutdown just four days away. Today, was a day lawmakers were supposed to announce a deal on funding and border security. Well, that hasn't

happened. Second, a new round of U.S. tariffs on Chinese goods kicks in in 18 days. Negotiators are meeting this week to try and avoid a major

escalation in the trade war. And Brexit, 46 days away now, but businesses are activating contingency plans. This as new numbers quantify the drag on

the U.K. economy. Parliament will debate the options this week.

So a whole host of issues, risks for investors right now. Let's begin with the first. The deadlock over the funding for the U.S. government. Sunlen

Serfaty is on Capitol Hill. Sunlen, earlier on Friday we were thinking maybe a deal would be reached. What went wrong over the weekend?

SUNLEN SERFATY, CONGRESSIONAL CORRESPONDENT, CNN: Well, you're absolutely right, Julia, and that things really took a sharp and sour turn over the

weekend. There was a lot of pessimism and -- excuse me, there was a lot of optimism and hope heading into the weekend that they were inching towards a

deal, but it really took a sharp turn and lawmakers today on Capitol Hill are rally pessimistic, really concerned if they will get a deal at all

before the deadline on Friday.

Now, the negotiators say that first and foremost, there was not an agreement over the basic dollar figure. The money of money that

potentially would be put into a physical barrier of some sort at the border, but here's an additional layer that really emerged and popped up

over the weekend. Some squabbling over the number of detention beds for illegal immigrants here in the country who committed crimes.

Now, Democrats on the committee, they said that they want a reduction in the number of detention beds. They want it to be capped at a certain

number, and a number that Republicans say point blank that is nonnegotiable. That is not going anywhere with them. They want to leave

the numbers as they are. And we certainly heard a lot of that pessimism reflected from lawmakers over the weekend.

Richard Shelby, one of the chief negotiators said he gives it about a 50/50 chance of this succeeding. Now, in the next half an hour, the top four

lawmakers on the Conference Committee, they will be huddling privately up here on Capitol Hill trying to essentially pick up the pieces, see if there

is anything salvageable from this weekend's blowup.

And of course, as you mentioned at the top, the clock is certainly ticking four days to when the government might shutdown on Friday at midnight

Eastern Time and again, no deal on the table. So it will be interesting to see, what, if anything emerges from that meeting, Julia and I think we'll

get an idea of what direction this will all go.

CHATTERLEY: I mean, so much to unpack there. Obviously, both sides are blaming each other, but as you point out, even when we were talking about a

possible solution with a sum of around $2 billion, that's a long way from the $5.2 billion plus that the President has been pushing for, for border

security. At what point does the President turn around here and go, "You know what, I'm not going to risk the politics here of another shutdown and

I'll use emergency funding instead."

SERFATY: Well, that's certainly is the X factor in all of this, Julia. You're right to point out, this wildcard, what President Trump will do. We

know that he has threatened a national emergency if a deal is not done, and certainly, if the lawmakers feel up here on Capitol Hill ...

[15:05:10]

SERFATY: ... that they just can't stomach another shutdown after that longest one that lasted about 35 days last month. So that could be an

avenue they go down. But of now, the feeling is wait and see, wait and see what they can agree on, if anything. And of course, looming large over

this is the fact that President Trump has specifically a direction that he could take this.

CHATTERLEY: Yes, the politics on both sides here is uncomfortable, never mind the impact to the U.S. economy. Sunlen Serfaty, thank you so much for

that update. Now, Mark Zandi says the economy is looking wobbly and that's before a U.S. government shutdown. He is the chief economist at Moody's.

And he is not the only one who is pessimistic here. Vanguard says risks of a recession are 30% to 35% for this year and 40% to 50% next year. The

liberal economist Paul Krugman puts it at 50% or higher. He warns Central Banks don't have much room to maneuver here and what about corporate

executives?

An analysis of their earnings calls this quarter show they're talking about recessions and the global economy more than in previous quarters. Mark

Zandi is the chief economist at Moody's and he joins us now from Westchester, Pennsylvania. Mark, fantastic to have you with us. Vanguard

saying 30% to 35% recession this year. Is that too bearish or do you agree?

MARK ZANDI, CHIEF ECONOMIST, MOODY'S: That's bearish. I'm not quite as pessimistic as that. I mean, obviously the economy is struggling with all

of these geopolitical threats. You did a nice job of listing them off -- the government shutdown, the Brexit, the trade war -- I'll throw one other

in there and that's the Treasury debt limit which we can talk about.

So there are a lot of things to worry about. So risks are high if any one of those things goes off the rails. But odds are better that, you know,

we'll find a reasonably graceful way out and the economy will continue to grow this year.

CHATTERLEY: I have got my head in my hands. You're talking about a possible U.S. government shutdown and debt ceiling debacle at the same

time. Okay, so we had a 35-day U.S. government shutdown. That ended. But the risk, and we're now talking about this three weeks later with a further

U.S. government shutdown. I know it's tough, but can you quantify the damage that we've already seen as a result of the shutdown that's taken

place already?

ZANDI: Yes, a lot of guess work here, but my sense is when all the data is in, we'll find that the shutdown, the last shutdown shaved about a quarter

point off of growth in the first quarter -- GDP growth in the first quarter, so just to put that into context, instead of growing let's say

2.5% in the quarter, we will grow 2.25%.

So small in the grand of scheme of things, but meaningful, measurable and certainly, it means lower profits, lower incomes, less wealth than we would

have otherwise been the case.

I do think if the government shuts down again, the damage - the economic damage will mount much more quickly. Because I do think sentiment

confidence, investor confidence, business confidence and consumer confidence is all pretty fragile, and a shutdown could undermine that and

that would have more of an impact on the economy. So hopefully, we don't go down that path.

CHATTERLEY: Yes, the problem with comparing previous shutdowns is they weren't happening at the same time as trade tensions between the United

States and China, the impact of tariffs of course, too.

I mean, I think one of the most strong views that I got when I was in Davos was from the Cisco CEO and he said, "Look, we can cope with 10% tariffs.

If they go to 25%, which is the risk here, then they are going to have to stop putting the impact on consumers and on other businesses in

particular." What is the risk that we see that in your mind and the impact that we see or do you expect some kind of fudge deal here and that's

prevented?

ZANDI: Yes, I mean, I think when push comes to shove, President Trump will figure out a face-saving arrangement to get out of this. I don't think he

wants to drive the U.S. economy into recession. I don't think he wants to undermine the stock market, I think that's his report card for how well he

is doing.

So if it looks like this is going to get to a place where it does real damage, I am assuming that he'll figure out a way out. Now, having said

that, obviously, big personalities involved here, this can go in lots of different directions and the Cisco CEO is right. It's one thing if tariffs

are 10% which is where they are today. Companies can kind of navigate around that. Eat some of that and lower profitability, but if you raise it

up to 25%, there's no way around that one. They have to change their global supply chains. That will do a lot of damage.

So I don't think we'll go down that path. Again, I think they'll find a reasonably graceful way out of it, but again, you know, big personalities

involved here.

CHATTERLEY: Yes, Paul Krugman said that look, the Central Bank has a round of ammunition here, but I think there's a lot of people, investors included

that believe that actually, the Federal Reserve here is saying, "Hold on a second, we're going to second guess. We're going to stop and see how

things play out." They're underpinning the markets here. Would you agree?

[15:10:07]

ZANDI: Yes, I know, absolutely. I mean, I think the Fed sees all this. They've digested all of these geopolitical threats and just said, "Hey,

maybe while working through these things, and we don't really know how they are going to play out, we'll keep interest rates on hold." And that has

helped support the market.

You pointed out the stock market is up about 7% since the beginning of the year, and that's because of the Fed. So I think the Fed will work to try

to help support things, but at the end of the day, if one of these geopolitical events goes off the rails, if the U.K. actually Brexit, if the

President actually raises tariffs 25%, if we do breach the debt limit, then nothing the Fed does is going to be able to save markets then.

CHATTERLEY: Yes, and that 7% rise that we've seen in the Dow followed the worst December since the Great Recession. So perspective is everything.

Mark Zandi, great to have you with us. Thank you for that.

Right, when we return, Britain's economy is in the doldrums, but the government says don't put all the blame on Brexit. Not surprised by that.

And with India's election just three months away, Facebook is stepping up the fight against misinformation. Can they do enough? We'll discuss.

You're watching "Quest Means Business." We're back in two.

(COMMERCIAL BREAK)

CHATTERLEY: Welcome back to "Quest Means Business." The British government is saying don't blame Brexit as the country's economy grows at

its slowest the pace in six years. As you can see, the latest U.K. growth figures paint a pretty bleak picture, 1.4% growth in 2018, just 0.2% of

that in the final quarter of the year.

The British economy actually contracted in December. Still Britain's Trade Secretary says it is not right to blame all the bad news on Brexit.

(BEGIN VIDEO CLIP)

LIAM FOX, BRITH INTERNATIONAL TRADE SECRETARY: Well, I think that clearly, there are those who believe that Brexit is the only economic factor

applying to the U.K. economy. I think you'll find that the predicted slowdown in a number of European economies is not disconnected from the

slowdown, for example, in China.

(END VIDEO CLIP)

CHATTERLEY: Anna Stewart joins us live now from London. I agree with him, Anna, to some degree here. Of course, there's a lot of other risks, events

potentially coming around the world including China. But there's an own- goal here as far as the U.K. economy is concerned and wherever you look, growth is slowing.

[15:15:07]

ANNA STEWART, REPORTER, CNN: And I'll add to that sentiment from Liam Fox, a nice positive spin from Philip Hammond, the Finance Minister, he tweeted

earlier today saying, "The U.K.'s economy continues to grow and remains fundamentally strong. Growth of 1.4% in 2018 means the U.K. has grown

every year for the past nine years." And he ends it saying, "The U.K. is currently enjoying the longest unbroken quarterly growth streak of any G7

nation." But what he doesn't mention is as you pointed out, there was a decline in GDP last month.

And just last week, the Bank of England said there is one in four chance that the U.K. could fall into recession the second half of the year. Yes,

there are other things at play. China's slowing economy. The impact on demand from that. You've got auto sales down largely due to do with

diesel. But there is so much Brexit in the GDP figures today as well, particularly, if you look at business investment, which declined for a

fourth consecutive quarter, down 1.4%.

We know, Julia, from speaking to business leaders, from looking at all of the surveys, from the likes of the CBI, business investment is down because

of the uncertainty around Brexit.

CHATTERLEY: Yes, but you can use this excuse for the final quarter of the year. Try making that excuse in Q1 again given all the turmoil in the run

up, of course to the Brexit deadline here. Now, there is some good news though, Anna. We've signed a trade agreement with that enormous trading

nation, Switzerland. Talk me through it.

STEWART: Yes, get the balloons out. Switzerland -- yes, a small victory for the U.K. government. We have one trade agreement sorted. Now, this is

with Switzerland, which we currently trade with by the E.U. How many agreements do we have of these? Around 40. That covers around 70

different nations. That is about 12% of our global trade with the world -- 12%, okay?

So we currently have agreements with Switzerland, the Faroe Islands, Chile and Eastern and Southern Africa. Do you know how much that is? That

contributes about 3% of our global trade. Four deals out of 40. We have got some way to go and just less than 50 days. What about Japan? What

about Canada? What about the big, big trading partners?

Anyways, I could rant on and on. But first, Julia, I have been to France. I have hitched a lift with a lorry driver to take a look at trade between

the E.U. and the U.K. and what a no-deal Brexit could mean for borders, what it could mean for all of these businesses, and also, Julia, I got a

bit of a serenade on the way. Take a listen.

(BEGIN VIDEO TAPE)

GORDON TERRY, TRUCK DRIVER: "When the moon hits your eye like a big pizza pie, that's amore."

STEWART (voice over): Gordon Terry has been driving a truck for 25 years, and today he's my chauffeur through France.

TERRY: Even if I say so myself, I'm a fairly good crooner.

STEWART (voice over): He's been on the road for two days hauling car parts made in Italy to a factory in Liverpool, England. With three hours to the

channel crossing at Calais, we have had plenty of time to talk politics.

TERRY: There's only one Brexit.

STEWART (on camera): Which is?

TERRY: No-deal Brexit.

STEWART: No matter what. Even if it means businesses have to close?

TERRY: It will create more industry. It will create more work for the youngsters that they think we're robbing them of.

STEWART: So in your mind, short-term pain, but long-term gain.

TERRY: Long-term gain.

STEWART (voice over): His bosses at Alcaline Haulage don't see it that way.

DAVID ZACCHEO, OPERATIONS MANAGER, ALCALINE HAULAGE: We have spent hundreds of thousands of pounds just for the eventuality of a no-deal

Brexit.

STEWART (voice over): David Zaccheo is Alcaline's Operations Manager. His trucks make 10,000 channel crossings each year, hauling parts to major

carmakers like Jaguar Land Rover.

ZACCHEO: There's a little bit of red there today.

STEWART (voice over): Zaccheo tracks his rigs in real-time, troubleshooting potential delays that could shut off supply.

STEWART (on camera): Wow, this is one truck.

ZACCHEO: This is one truck. So we literally see what's actually happened

STEWART (voice over): Most of the parts hit the assembly line as soon as they reach their destination. It's called just-in-time manufacturing. And

Zaccheo's clients swear by it. Some are stockpiling parts, others shifting production out of the U.K. ahead of the Brexit deadline, worried a no-deal

could grind things to a halt.

STEWART (on camera): What's the worst case scenario? What does that look like?

ZACCHEO: There will be just blockades, vehicles parked up because we don't know what's going on. We're not sure ourselves what is going to happen.

STEWART: We're coming off the Motor Way now. We are approaching the border at Calais, so we can go over to the U.K. Currently, we don't need

to show any customs forms. The U.K. is part of the E.U. Customs Union, part of a single market. This is what could change come March 29th.

STEWART (voice over): U.K. port officials say a customs check could lead to miles of delays on each side of the border. This is how Alcaline is

coping, buying a helicopter to ensure it can deliver parts on deadline.

[15:20:06]

STEWART (voice over): The backlog could hit the Euro tunnel where 1.7 million trucks passed through last year. We go through a security check,

and within minutes we're on our way again. On to a train that will carry our truck under the channel.

Terry rides the separate coach with the other drivers. The shuttle is a marvel of modern engineering and a main artery of the European economy.

Forty minutes later and it's back on the highway. Now on the U.K. side where businesses are hoping for more direction on the road ahead.

(END VIDEO TAPE)

CHATTERLEY: Wow, that's quite fascinating, Anna, for me for two reasons. Gordon, the lorry driver there saying to you he's still pro-Brexit, on the

front lines, but he's still pro-Brexit and again, management saying look at all the money that we've spent for an outcome we're not aware of yet. We

still have to make these preparations for a no-deal exit here.

STEWART: A complete divergence in opinions and this is what you get all over the U.K. depending on where you go. For Gordon, the lorry driver,

it's all about immigration for him. Now, he suffers this from two points of view, he says that you know, people try and take their jobs in the U.K.,

you know, lots of immigrants from Europe, he wants out for that reason. He also finds it frustrating because he has to park his lorry up at Calais and

frequently, immigrants are found inside of it. They broke in and in fact, the lorry that I was seeing just before had several migrants coming out of

it as well. So there's all of these issues at play.

CHATTERLEY: And that's a bummer for the Brexiteers here. They're saying, "Look, if we have some kind of Customs Union arrangement, free movement of

people continues." Just underscoring all the challenges here, Anna. Great job. Thank you for that.

Right, not the only person with problems. Siemens CEO says when it comes to navigating Brexit, the strategy is simple, don't invest on uncertainty.

Joe Kaeser spoke to our John Defterios in Dubai and offered his strategy for Brexit negotiations.

(BEGIN VIDEO CLIP)

JOE KAESER, CEO, SIEMENS: If I had to have a responsibility for the country, I would just try to negotiate my best deal I can potentially stand

for and then I would put it up for a vote and say look, "That's the best I could get and now, is that what you wanted?"

JOHN DEFTERIOS, EMERGING MARKETS EDITOR, CNN: What? A vote within Parliament or vote to the people?

KAESER: To the people.

DEFTERIOS: Straight to the people.

KAESER: I hope they can go to the people because the Parliament doesn't seem to be clear enough about what the people want.

DEFTERIOS: You have better than a dozen plants. Would you put more money into the U.K. in the future now knowing this uncertainty?

KAESER: Nobody puts money onto uncertainty. That is not the way it works.

DEFTERIOS: You could see the slow burn of the U.K. economy, and particularly U.K. investment.

KAESER: It looks like, you know, the U.K. has become an island floating on the Atlantic, where really, nobody knows where to go. And that is the last

thing that you want to do to your people and to investors.

DEFTERIOS: The Siemens-Alstom merger for the rail business was blocked for competition purposes, it seems to a very narrow focus on Europe even

national competition when you have a major Chinese producer manufacturer that goes head to head with Siemens. Do they have to rethink the policy

going forward?

KAESER: Well, that is something I believe the future E.U. leaders need to decide upon. I don't think it's a good idea to block the Chinese from

coming to Europe because I mean, Germany has been going there for, God knows how many years. They made a good living and the whole export goes

from Germany to China, and maybe from the other European countries to China, so what's the big deal now blocking China's companies wanting to

invest in Europe?

I would rather, you know, a lot of them putting prohibitive national laws to protect something which may not be competitive. I would rather bring

competitiveness to the parties and say, "You know what, we are going to go together. This is good for our customers and it's good for Europe because

we are on a level playing field in competition with the best in the industry in the global market."

DEFTERIOS: The deadline on U.S.-China talks up to March 2nd are approaching really quickly. We don't seem to be any closer than we were

even a month ago. Do you find us not going in the direction that markets were hoping for and that we would find common ground? How dangerous is it?

KAESER: If the number one and number two economies in the world create problems for each other, that's not going to be unnoticed to the rest of

the crowd. So definitely, we do see a slowdown. We see it in China. We see it elsewhere.

(END VIDEO TAPE)

CHATTERLEY: The CEO of Siemens there. Right, let's move on. Facebook is ramping up its fight against disinformation in India ahead of the general

elections in May.

[15:25:05]

CHATTERLEY: The company has announced that it is expanding its fact checking network in the country. Ravi Agrawal is the managing editor of

the "Foreign Policy" magazine and former CNN New Delhi Bureau Chief and joins us from Washington.

Ravi, fantastic to have you with us. This is the world's largest democracy and it also happens to be the largest user base in terms of countries for

Facebook as well. Three months out for an election given everything that we know about disinformation, it feels too little too late for me. What

are your views?

RAVI AGRAWAL, MANAGING EDITOR, "FOREIGN POLICY" MAGAZINE: Yes, it really does and for several reasons. I mean, on the one hand, India has about 300

million Facebook users and the thing is, they're not only using Facebook in English, they're using it in many Indian languages, so the recent move by

Facebook to try and fact check what people are posting online, they are extending that to about six languages including English, which still leaves

out a good 20-odd other Indian languages which people could be sharing information on, and some of that information could easily be fake news.

But the big thing that this is missing out is WhatsApp. So the messaging service, WhatsApp, which is owned by Facebook as we know, is really the

main place where most of the fake news can tend to spread in India. And since that's a private messaging service from peer to peer, there's really

no way of checking fake news on that platform.

So even though this is an important step by Facebook, and they are leaning on Indian publishers for help, it really isn't going to be enough. I mean,

for all that fake news has done around the world, the problem that it creates in India is far worse given levels of literacy, not only in terms

of literal literacy, but also in terms of digital literacy and media savviness.

CHATTERLEY: Yes, I can't believe this has not been at least addressed given everything that we know about election interference, fake news, and

disinformation right now. So basically what you're saying is they are going to be fact checking in six plus different languages. They don't get

access to WhatsApp and then the information there then spreads.

Twitter, what about the use of Twitter, too? Because I know the Indians have said that they are going to call Jack Dorsey to testify as well. How

prevalent is that in India as well?

AGRAWAL: Well, Twitter has a much smaller user base than Facebook or WhatsApp globally and that is certainly true for India as well. I mean,

it's an English language only platform and only a certain section of Indians speak English to begin with, and then there's a smaller subsection

that uses Twitter.

So I think Twitter is less worrying in general in terms of its ability to spread fake news in a place like India. The far bigger problem is a

messaging app like WhatsApp or other Indian messaging apps as well that have become prevalent in the last few years.

I mean, the problem is that most Indians are just not sensitized to rumors and fake news in the same way that people maybe in the west and this is

partly because Indians have not evolved with the internet from PCs and dial-up internet connections like people in the west have.

They haven't had that evolution. They are going through a revolution with hundreds of millions of people discovering the internet in a very short

space of time all because of cheap smartphones and cheap data plans.

So you take that giant phenomenon that is taking place in India and you add in the new problem of fake news, and it really is something that could

explode. We have seen this lead to lynching, we've seen it lead to violence between Hindus and Muslims and there are real fears that in this

year's elections, we could see similar outbreaks of violence, all spurred by fake news.

CHATTERLEY: You know, it's interesting when you look at Facebook's results, my argument here is they're not incentivized really to take action

because advertisers are not changing their behavior here. So it doesn't hurt them.

Facebook can monetize users in India far less than they can monetize them in the United States or in the West for example. But if India says, "Look,

we are going to take action against Facebook for disinformation campaigns that spread," do you think that would make a difference to Facebook here

and to change their behavior or plan earlier than three months ahead?

AGRAWAL: Well, it's hard to say what action India really can take. I mean, the internet is just the wild, wild west in that sense where it is

very difficult to regulate players that you have already let in. So you know, India has let in the likes of Facebook. Google is by far and away

the biggest search engine in India. It's very hard to regulate them once they're already in place and have really created the infrastructure of the

virtual world in a place like India.

So in that sense, it is too far too late. But I think what both sides really need to focus on in the months and years ahead is to invest heavily

in digital literacy and to invest heavily in media literacy. Those are things that India needed to do anyway, but I think the onslaught of the

digital era has only sped up that process.

And so, it really is something that is front and center for Indian politicians, for voters as well, but much more needs to be done, Julia.

CHATTERLEY: Yes, it's global, users protect your own data better and get little about fake news. Ravi Agarwal, great to have you, author of the new

book --

AGARWAL: Pleasure --

CHATTERLEY: "India Connected". Right, still to come here on QUEST MEANS BUSINESS, the "National Enquirer" responds to the explosive accusations by

Jeff Bezos and gives new hints about who leaked the explicit pictures of Amazon's CEO.

(COMMERCIAL BREAK)

CHATTERLEY: Hello, I'm Julia Chatterley, coming up in the next half hour of QUEST MEANS BUSINESS, is the Chinese slowdown about to crash New York

Fashion week? I'll be joined by the designers behind the Badgley Mischka, and get your phones ready and go to cnn.com-slash-join.

Our question of the day is all about the Jeff Bezos scandal. First, though, these are the headlines on Cnn this hour. U.S.-backed Kurdish

fighters are staging what may be the final assault on ISIS in eastern Syria.

Cnn has seen fierce fighting in the area, but the top U.S. General in the Middle East warns that even if ISIS loses the last of its territory, there

are still tens of thousands of ISIS fighters scattered elsewhere in Syria and Iraq.

The Vatican is calling for a just and peaceful solution to the political crisis in Venezuela after hosting a delegation representing Venezuela's

self-proclaimed interim leader Juan Guaido. Pope Francis has said the Vatican could help mediate the crisis if both Guaido and President Nicolas

Maduro agree.

The Iranian president is lashing out at the United States on the 40th anniversary of the Islamic Revolution. In front of a huge crowd, Hassan

Rouhani declared that Iran will not let America be victorious and the country will continue to expand its military and missile programs despite

warnings from the U.S.

[15:35:00] An attorney representing David Pecker, the CEO of "American Media" which publishes the "National Enquirer" has denied his client

blackmailed Amazon founder Jeff Bezos. Last month, the tabloid published a story about Bezos' love life, the attorney spoke to "Abc News" on Sunday.

(BEGIN VIDEO CLIP)

ELKAN ABRAMOWITZ, ATTORNEY FOR AMI CEO DAVID PECKER: It absolutely is not extortion and not blackmail. Of what happened was the story was given to

the "National Enquirer" by a reliable source that had given the information to the "National Enquirer" for seven years prior to this story. It was a

source that was well known to both Mr. Bezos and Miss Sanchez.

UNIDENTIFIED MALE: Was it Michael Sanchez?

ABRAMOWITZ: I can't discuss who the source was. Just it's a confidential within "AMI", so I'm not going to answer who the source was. It was

somebody close to both Bezos and Miss Sanchez.

(END VIDEO CLIP)

CHATTERLEY: OK, I want you to get your phones out, don't take pictures, I want you to go to cnn.com-slash-join -- naughty. Tonight, we're asking you

how has your opinion of Jeff Bezos changed since he went public about this scandal? Has your opinion of him got better? Has it got worse? Or perhaps

you simply don't care and it hasn't changed at all.

Go to cnn.com-slash-join to vote and you'll see the results on the bottom of your screen as those votes come in, just looking at it right now.

Interesting, better, it's moving around a bit, but more than half of you at this moment saying your opinion of him has improved.

Brian Stelter is here for the latest, Brian, great to have you with us.

BRIAN STELTER, CNN CHIEF MEDIA CORRESPONDENT: Thanks.

CHATTERLEY: So talk to me through exactly what the lawyer said here. He said no blackmail, no extortion, not guilty.

STELTER: Yes, we're hearing a public version of what's being said in private, now that we know federal prosecutors here in New York are

reviewing this, looking into Bezos' allegations, trying to see if an actual crime was committed. You know, when all of us as non-lawyers look at this,

look at Bezos' blog post, look at the e-mails, it sure looks like blackmail.

It sure seems fishy. However, the legal bar is different than that public opinion bar. And so that's what I think -- that's why I think the

lawyers for Pecker and "National Enquirer" are out there spinning this story saying what happened here is perfectly legal, it might look ugly,

but that's how business works. They are saying the "Enquirer" was just doing journalism.

CHATTERLEY: You know, it's interesting, the way the global attention focused particularly I think in the business community here --

STELTER: Yes --

CHATTERLEY: But also beyond is because the Saudis were brought in.

STELTER: Right --

CHATTERLEY: And that potential political angle was brought in too. We were all fixated on potentially what this could mean. One way to draw

attention to it, I don't see any photos having being released yet. So for now --

STELTER: Right --

CHATTERLEY: Jeff Bezos --

STELTER: The "Enquirer" says it has these photos, and one of the astounding question is how did the magazine obtain these text messages and

apparently explicit photos that Bezos was sending to this woman, Lauren Sanchez? That's an unknown, how those photos were obtained. It's also an

unknown if the "Enquirer" would ever go out and publish them.

But I will think at this point, "National" -- the "National Enquirer" is on its heels, it's on the defensive due to Bezos. And that's why a lot of

people are impressed by what Bezos has done in the past few days. This time last month, Bezos was an alleged cheater, he was someone who had left

his wife of many years, and decided to get divorced and run off with a younger woman.

That was the narrative according to the "National Enquirer". He flipped it completely around by publishing by blog post last week, and frankly now,

it's over to the prosecutor. I don't know if we're going to get an answer in the short term. It might take a little while to find out if the

government believes crimes were committed here.

But certainly for Bezos, who I think was on someway defensive, now he's on offense.

CHATTERLEY: You know, the problem here is that, you know, there are all sorts of political connections. And we've talked about this --

STELTER: Yes, oh, yes --

CHATTERLEY: Between the CEO of "American Media" of course and Donald Trump himself in particular. If you walk this back, you look at "National

Enquirer", you say, you kind of got previous in this kind of behavior. They've been penalized --

STELTER: Yes --

CHATTERLEY: In the past, can they continue to exist in the current form even if no laws have been broken here?

STELTER: I think for "National Enquirer" readers who just want to know about celebrities and want to know about scandals, there's a market for

that. There will always be a market for that, whether it's for the "National Enquirer" or for its rivals.

But this darker sort of operation which was promoting political candidates, attacking other political candidates, seeking foreign government financing,

in this case from the Saudis, that's the piece of this that's been exposed like never before.

For example, we've learned in the past few hours that last year when the "National Enquirer" put out this weird promotional magazine for the Saudi

Crown Prince, that it actually wrote to the Justice Department and asked, do we need to file under the Foreign Agents Registration Act, FARA, now,

the government said, no, you don't need to register under FARA based on the facts you've told us.

[15:40:00] But it goes to show what was going on with "American Media". That they were even thinking they might have to register as a foreign agent

because they were producing what looked like Saudi propaganda. Of course, that magazine has been under a lot of scrutiny now in the past few days

because Bezos brought up the Saudi angle.

There could well be an incredible, crazy geopolitical plot here or this could be more mundane, I don't think we know yet.

CHATTERLEY: Yes, watch this space --

STELTER: Yes --

CHATTERLEY: And she punched out the court of public opinion very important right now. And if you look at the bottom of your screen, 68 percent of you

actually think better of Jeff Bezos as a result of this. That's quite fascinating if he can't push back on potential blackmailers, no one can.

And he --

STELTER: Right --

CHATTERLEY: Made that point in his blog.

STELTER: Yes --

CHATTERLEY: Great, Brian, thank you.

STELTER: Thanks.

CHATTERLEY: The "National Enquirer's" article has put the security and privacy of billionaires in the spotlight. Juliette Kayyem is Cnn's U.S.

national security analyst, she joins us from Cambridge, Massachusetts. Juliette, great to have you with us.

A lot of questions being asked here on whether or not this was ultimately an inside job. The fingers being pointed at the brother of course of

Lauren Sanchez --

JULIETTE KAYYEM, CNN U.S. NATIONAL SECURITY ANALYST: Yes --

CHATTERLEY: Here, what are you thinking?

KAYYEM: So that's always the first and predominant theory. And the reason why is because it's the easiest theory. In other words, how do you get --

how do you get the phone and the pictures from someone like Jeff Bezos? And it would be there's some loose link, whether it's a security person or the

girlfriend or the girlfriend's brother.

People in VIP security have three layers of protection for -- you know, this is the richest of the rich, right? It's the physical, their homes,

their apartments, the cars. It's the personal, you know, them, the wife, the children or the spouse in some cases. And then it's the cyber, right?

Protecting the network.

Someone like Bezos would automatically have what's called the kill-switch. So if he ever lost his phone, if it ever went missing, his people would

know how to shut it down so it was protected. So that's why for a lot of these people in VIP security, they're looking at the insider threat.

The counter to that is of course Bezos' sort of public, you know, sort of you know, acknowledgment of the Saudi -- what he calls the Saudi Arabia

connection which you know, may suggest that he believes and his team believes that there might be -- the Saudis may have been involved with the

hacking.

CHATTERLEY: Tie the possibility then of some kind of foreign agent or foreign conspiracy --

KAYYEM: Yes --

CHATTERLEY: Hacking into his information here with the announcement of the professional that they got that he brought in to say, look, I've written a

blank check here, he's going to investigate and see what he finds.

KAYYEM: Yes, so he brought in his own team, I think two -- a new team, excuse me, to look at the old team. He wants to make sure it's not an

insider threat. So once we figure out -- there's lots of rumors online right now, once we figure out what their assessment is, we'll know a little

bit more.

But I will say a lot of the professionals I've talked to in the last three or four days, security, VIP security professionals, because this is a high-

paying job, it's quite sophisticated. So they thought it was quite odd that Bezos named his new security chief because you often don't want to

name them because you don't want them to be exposed, but also mentioned the Saudi connection.

And the theory, right, the theory, and this is what Bezos seems to be alleging is that "AMI" just served as a repository to protect Trump. The

Saudis also do not like Bezos. They get this information and they hand it to the "National Enquirer" which is more than happy to publish it because

they also are not in love with the "Washington Post" or some of its investigations into Donald Trump or the Khashoggi killing.

It's -- you know, there's a lot of speculation around this. But the tooth fairies of the case insider threat or Saudis, one of them is true. It

could be there's a combination of both. But that's what security officials -- those are the two lanes security officials are looking into.

CHATTERLEY: Yes, the whole spectrum there though. Juliette Kayyem, great to get --

KAYYEM: Yes --

CHATTERLEY: Your insight, thank you for that. Right, when we return, it's man versus machine. An IBM bet computer outwit a world debating champion,

but can it? After this.

[15:45:00] (COMMERCIAL BREAK)

CHATTERLEY: Welcome back to the show. This hour, President Trump is expected to sign a landmark executive order affirming U.S. commitment to

developing artificial intelligence. It coincides with another big milestone for AI, too.

A competition between a former debating world champion and an IBM computer. Earlier, I spoke about the project with Dario Gil, director of IBM

Research. Listen in.

(BEGIN VIDEO CLIP)

DARIO GIL, DIRECTOR, IBM RESEARCH: Here with project debater, the system has to listen for four minutes of continuous speech, right, when the human

debater is presenting arguments. So it needs to listen to those four minutes, get the essence of what's been said and be able to generate a

four-minute answer to that, a rebuttal.

Essentially, being able to write an essay on the fly after what it's listened. So it's really pushing the boundaries to kinds of AI systems

that are more interactive with us and can understand us better. And if they do, we could trust these systems more.

CHATTERLEY: So once you compare and contrast, what change between IBM's Watson on "Jeopardy" and what we're going to see tonight in this debate?

GIL: Well, in the context, what I would say the biggest change of what is happening as it amounts to AI is that many of the previous demonstrations

that we have seen, whether it was "Jeopardy" or chess or Go, in the end, they were in the realm of games, and games have very well-defined set of

rules and there are clear winners and losers.

Whereas in that debate, even though we'll focus sometimes about like who won the debate and so on, that's really not our core focus. The focus is

our ability to drive the mastery of language and to be able to generate persuasive arguments. And if in the end, it enriches us, and we have with

a more sophisticated and a better point of view, for us that's a win.

So it's about building AI that can deal with the complexity of the daily world as opposed to games where, you know, there's a lot of clarity as to

what you have to do to win or lose.

CHATTERLEY: So I have to ask you, who do you think is going to win tonight?

GIL: Well, I'm partial today of course, you know. Our team have been working so hard for so many years, so it will be a wonderful -- you know, I

just want that, that we have a good debate. Both sides I think are going to contribute very powerful arguments.

And in the end, let me put it this way, what we really want is to create systems that are compatible with us, that work with us so that we can make

better decisions. So it's not about outsourcing our decisions to them, but helping us to reason and bring facts better. So if the system does that, I

would think it's a big win for all of us.

(END VIDEO CLIP)

CHATTERLEY: Win or lose, the champion human debater is going to be on "First Move" tomorrow, so I'm looking forward to that. Now, when we

return, one of fashion's biggest events gets under way. Designers are displaying new collections at New York Fashion Week. The founders of

Badgley Mischka will join me in the C-Suite next.

[15:50:00] (COMMERCIAL BREAK)

CHATTERLEY: New York Fashion Week is all about getting ahead of the curve, and if brands performance on Wall Street is any indicator, the shows

just beginning. IVMH's collection was received well by investors, Louis Vuitton says revenue last year was up from the previous year.

Ralph Lauren also finding favor with critics, it reported strong Q3 results last week, and Capri Holdings, the owner of Versace, Jimmy Choo and Michael

Kors beat earnings expectations too. Now, luxury brand Badgley Mischka unveiled its full Winter 2019 collection at New York's Fashion Week. And

the designers Mark Badgley and James Mischka join us now. Guys, welcome to the C-Suite.

MARK BADGLEY, DESIGNER: Thank you.

CHATTERLEY: First thing I think of is Dorothy in "Wizard of Oz" for magic slippers. That's what we like. So you know, I've been looking at what you

presented this year. It's understated glamour for me, lots of tailoring, lots of glitter. Is that what you were going for, leave it more

understated perhaps to fit the mood right now?

BADGLEY: Yes, well, we came up from a Spring collection that was really super feminine, super extravagant. And we felt there's a little more calm

for Fall. We kind of wanted to keep these shapes a little more restrained. We call that controlled drama.

JAMES MISCHKA, DESIGNER: Yes, because it's a little sleeker. She's a little -- in this, there's a sort of laser-focus to a lot of the

silhouettes, cuts closer to the body. At night time, our girls sort of lack a little tailoring, a beautiful sheep coat dress as a gown. Not as a

--

BADGLEY: It's a little more --

CHATTERLEY: It's more protective --

BADGLEY: A little more protective --

MISCHKA: A little more protective and it gives her confidence I think.

CHATTERLEY: Is about the economics? Maybe paired back on the price a little bit here too as well?

BADGLEY: I think it's a combination of all the above, you know. Like James said, our former collections, there could be thousands of layers of

tools and organzas and mousselines --

CHATTERLEY: Flamboyance.

MISCHKA: Yes --

BADGLEY: Flamboyancy. And there's always a place for that, don't get me wrong. But it was fun going slightly the opposite direction and taking her

somewhere else where I think she wants to go.

CHATTERLEY: Speaking of places where you want to go. China, I think is fascinating, particularly for your business. Because at a time when

there's a lot of cautiousness about the Chinese consumer in particular, I believe you've opened 16 stores, the plan is to have 30 by the end of this

year --

MISCHKA: Yes, we're in 14 more this year. It's a huge market for us. China's consumer is really expanding, it's the whole middle class of course

--

CHATTERLEY: Of course.

MISCHKA: Of you know, getting luxury goods now, it's a whole different thing which is you know, just expanding exponentially. And it's area for

huge growth for our brand.

BADGLEY: And you know, we're known for red carpet, but we do day to evening. And even though there's a threat of glamour in everything we do,

our day dresses are still glamorous.

[15:55:00] But you know, she could wear our dresses to the office and you know, to a dinner party, to a cocktail, to an evening event. So it takes

her --

CHATTERLEY: It's a fix --

BADGLEY: A lot of different places.

CHATTERLEY: What about your production though, because you do a lot of that in China right now.

BADGLEY: We do.

CHATTERLEY: Are you shaking up your supply chains in light of the trade tensions right now? Would you look to produce somewhere else.

MISCHKA: We've always looked to produce all around the world. You know, not only in China because it's always been a -- we never want to put all of

our eggs in one basket --

CHATTERLEY: No --

MISCHKA: Although that's a pretty big basket. But we are looking at different places, we're doing Vietnam now, we're producing in Italy when

it makes sense, we're producing in the states when it makes sense. We're definitely spreading it -- spreading it around.

BADGLEY: The lion's share of what we do on our collection business which is the biggest portion of our collection --

CHATTERLEY: Yes --

BADGLEY: Is made in China. But you know, we make things wherever it makes sense in the world. It doesn't matter if it's domestic, Europe, like James

said that the lion's share is made in China. But it really -- the tariff situation kicks in more with accessories presently.

CHATTERLEY: Interesting.

BADGLEY: Especially handbags, that's where we all --

CHATTERLEY: A 25 percent tariffs would be a real problem.

BADGLEY: That's where everyone is feeling the big hiccup is in handbags.

CHATTERLEY: And it's material --

BADGLEY: Yes --

CHATTERLEY: It's the material impact to your business.

BADGLEY: Absolutely.

CHATTERLEY: OK --

MISCHKA: Yes.

CHATTERLEY: But other than that and the concerns, future's bright and sparkly for you guys?

MISCHKA: We just --

BADGLEY: Yes --

CHATTERLEY: Are you looking to sparkling?

BADGLEY: The clothes are bright and sparkly as the future is too, we think.

CHATTERLEY: And the shoes are, too, and we'll watch China, it's a fascinating one. Mark, James, thank you so much, guys.

BADGLEY: Thank you for having us --

CHATTERLEY: Good to see you, thank you. Right, we are just moments away now to the close of play, close of trade on Wall Street, we'll have the

final numbers and the closing bell right after this, stay with us.

(COMMERCIAL BREAK)

CHATTERLEY: Welcome back to the show. We are in the final few moments of trading here on Wall Street. As you can see behind me, the Dow is set to

close lower though. We are off the lows in the final few minutes as you can see. Investors watching for any sign of progress in the trade talks

between the United States and China.

That's going to be an issue the whole week. The dollar also higher for the day despite the looming threat of a government shutdown. A bit of flight

to safety kicking in there. Here's a look at what's going on for the Dow 30 right now. Investors not really making their minds up at this stage.

Boeing, Caterpillar, two of the most sensitive stocks of trade developments moving in opposite directions today as you can see. Focus on the consumers

as well.

(BELL RINGING)

It's going to be important. Inflation, this week to watch too. And there's the closing bell. As you can see, that was QUEST MEANS BUSINESS,

I'm Julia Chatterley here in New York.

END