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QUEST MEANS BUSINESS
Global Stock Are Falling; President Trump Is Risking A Full On Trade War With China With New Tariffs Perhaps On Friday, Baby Sussex Has Arrived Aired: 3-4p ET
Aired May 6, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST, QUEST MEANS BUSINESS: We`re an hour away from the close on Wall Street, 60 minutes, and what a change in the
course of the session. We`re down over 400 at the worst point of today, 462 and change, but the market rallies throughout the afternoon and
specifically since two o`clock this afternoon. Over the last hour or so, and into the last 60 minutes. We`re now down 56.
I don`t think it`s going to go positive. You never know 60 minutes more to go because look at the Dow year-to-date, strong sessions, right the way
through. Whatever little wobbles we are seeing, certainly outpaced by what we`ve had over the year so far.
Throw it all into the pot and this is what we do to understand about today`s business day. The return of the tariff man. Global stock are
falling, President Trump is risking a full on trade war with China with new tariffs perhaps on Friday. Oil is sinking. The bidding war for Anadarko
is intensifying, two underlying trends and forces in the oil markets. Boeing shares are down one and a half percent. Ethiopian Airlines chief
executive tells me he needs more answers from Boeing after the 737 MAX 8 crash.
We`re live in the world`s financial capital, New York City on Monday. It is May the 6th. I Richard Quest. I mean business.
Good evening. The markets opened today after Donald Trump had blindsided them and the Chinese. Markets around the world tumbled after the U.S.
president made a new promise to hike tariffs on China. At the same time, all this happened while a Chinese delegation is right now preparing to make
its way to Washington. Trade talks are due to restart on Wednesday, both sides have been signaling a deal that could be close at hand. It would
seem all bets are off at the moment.
Donald Trump`s threat sent a shiver through global market and you`ll see what how and why. The Dow dropped 450 points at the open. We`re well off
the lows, but the heaviest losers were Nike, Apple, 3M, Caterpillar, Boeing -- although, Boeing had its own issues -- all of those with having exposure
But if you put it into full context, you do see the Dow is up more than 10 percent year-to-date, and it`s been a pretty consistent -- with exception
maybe of a wobble around March. So this has to be put into some form of context.
The Dow itself for today, very interesting this rally that seems to be underway. I am not sure what`s predicated it. I`m not sure why the
markets have shifted direction, having gone into the day thinking is going to be doom and gloom re: China. Now there is some thinking, but we all
just an hour from the close.
Ben Phillips is the Chief Investment Officer at EventShares. He is with me from Los Angeles. So what did happen? When the market opens, very gloomy
after the Donald Trump tweet?
BEN PHILLIPS, CHIEF INVESTMENT OFFICER, EVENTSHARES: Yes, I think people are starting to discount these tweets. They have been I think, for a couple
of years. But when you say, you wake up one morning, and we`ve been making progress with, you know, our China delegation with the Chinese actually
acknowledging some of the issues we`ve had, and now we`re addressing some of these concerns. And so when you come in wake up one day, and the
President saying something opposite of that. I think the markets, you know, just looking through that at this point.
QUEST: Right. But it`s the major nature. What is that -- what`s the fear here, as regards to China?
PHILLIPS: Well, the fear is that these talks really do break down and we go back into this trade escalation. Global trade, if it breaks down, it`s
bad for growth. That`s bad for U.S. stocks. That`s bad for international stocks. It`s bad for China`s economy, too. So if we do see this breakdown
in trade, that is a real risk to market. It`s probably the biggest risk to the markets right now, that and the Fed -- and so if it falls apart yes,
that`s a problem.
QUEST: And we see that. We look at the numbers, the Shanghai Composite was off 5 percent. The Shenzhen was down six. But those markets are much
more heavily influenced. In terms of how you look upon it, in terms of those stocks that are directly impacted by a trade war with China, how
limited or extensive is that?
PHILLIPS: Well, it matters. I think it matters more for just global risk sentiments. So if we see a breakdown here, you`re going to see people just
fleeing stocks and risk assets. So that`s I think the biggest risk to us is that people no longer want to own stocks and want to be in more
defensive assets because the world is not trading with each other anymore and growth is slowing because of that.
[15:05:09] QUEST: Now, the Dow over the course of the last year or sorry, the year-to-date has risen quite sharply. We`ve seen a consistent pressure
upwards for the Dow year-to-date, earnings were part of that story. Economic growth is also part of that story. What do you think drives it?
PHILLIPS: The year-to-date, we`re really thinking that the market has been driven by those two things. It has been driven by the Fed reversing course
and being accommodated -- back to accommodate it. They are tightened there for a few months and that was it.
Now we`re full back on a Fed liquidity spout, pumping more liquidity in this market at the top of the cycle, really. So that`s the biggest thing
we think. And then the second thing is more constructiveness around China, around the trade talks there. And again, if we get something done with
China, and it is real, I think that`s better overall for global growth and just market risk sentiment.
QUEST: You know, you talk about the Fed, isn`t that sort of just a bit ignoring the fact that at some point, they`re going to take more off the
table? I mean, yes, the whole question of patience, no rate rises this year or whatever. But at some point that is going to reverse. And
wouldn`t the market be better off just getting used to that idea?
PHILLIPS: One would think and me -- it is just, I guess a more free market capitalist who would like to think the same that, you know, less
involvement generally from outside entities and let the market do its thing is generally better. That said, that`s not the market we live in. So I
just have to pay attention to the reality that we live in.
QUEST: Where is it going next? I mean, we`re virtually coming to the end of the quarter, the earnings season, you`ve got China as a worry; Fed is
off the table, it would be difficult for the market. I don`t know, you don`t -- none of us do. But it would appear to be difficult for the market
in these conditions to sustain or to continue that sort of momentum for the next four or five months. Maybe I`m wrong.
PHILLIPS: Well, we`ve looked at the past 23, you know, midterm elections, I think going back to the 30s and this is actually pretty common, where you
see a 15 percent or so rally after the midterm elections. And then what you see is the next six months, you really see the market go nowhere.
Again, that`s historical, we always have to discount that with a grain of salt. But that said, you know, markets need a real catalyst to go higher
here. Maybe it`s the China trade deal, but I can`t see anything else other than just growth picking up as being the real catalyst.
QUEST: Good to see you, sir. Thank you. I appreciate it.
PHILLIPS: Thank you.
QUEST: After announcing his new tariff threat, Donald Trump tweeted today, "The United States has been losing for many years $600 to $800 billion a
year on trade. With China, we lose $500 billion. Sorry, we`re not going to be doing that anymore."
If you want it straightforward, fact check it, then let`s just do it. Well, look, first of all, this statement here $600 to $800 billion a year.
That is right. That is exactly the rough trade imbalance on trade for the United States with the rest of the world.
However, the second part of that statement with China, we lose roughly $500 billion. That is incorrect. According to the U.S. government data over
the last 10 years, the trade deficit with China around on average $330 billion. What it is not doing is an offset on services there.
And then you get to something that`s arguably more questionable. Sorry, we`re not going to be doing that anymore. Well, that is simply a question
for the future. Because last year under Donald Trump`s watch, the deficit with China hit an all-time high. It is questionable whether that bit
It brings us to Kaitlan Collins, who is in Washington, Kaitlan, the President -- you know, if there`s one thing anybody who studied President
Trump for several year many years, knows that the trade deficit is something. It`s like a red rag to the bull. I mean, for decades, as long
as I have known about Donald Trump, he has railed against the trade deficit, haven`t we?
KAITLAN COLLINS, CNN WHITE HOUSE CORRESPONDENT: Yes, he has, and he did it throughout his entire presidential campaign. And that`s what makes this
interesting. You`re seeing the President`s frustration with China being aired on his Twitter feed. But it`s important to note the timing of when
all of this is happening.
Now, the Chinese trade delegation is supposed to travel to the United States this week to finalize trade talks ahead of what could be a visit
with the Chinese president, President Xi with President Trump on what is supposed to be in the administration`s eyes, if it works, a historic trade
deal that they`re going to be hammering out.
But now that could be thrown into question with the President`s tweets threatening to impose more tariffs on Chinese goods, because the President
is clearly and the words of his advisers hoping to force some more last minute concessions from the Chinese.
Now, this comes after this trade talks last week when the U.S. delegation went to China. But apparently those talks did not go as expected. They
were not as successful. And now the U.S. delegation is worried that the Chinese are not going to agree to the structural changes that they want to
see in this trade deal, and the President is being told he`ll look weak, if he accepts a deal that doesn`t have any of those structural changes.
[15:10:18] QUEST: Now, that`s really significant because the issue here is not whether you can get a deal. Look, you can always cobble together some
sort of mercantilist deal where they buy more, but the markets will be looking very closely whether or not they do get changes in Chinese law and
we understand that that`s where the problem is.
COLLINS: Yes, and that`s what`s interesting with what you`re seeing with the President`s new threats is the way you`re seeing the stock market react
makes you think that maybe people are not sure if the President is going to follow through on his threats. It`s something that he`s gone back and
forth on throughout his presidency. So that is raising the question here.
And of course, people inside the White House do not think those threats are necessarily helpful for the stages of the debate that they`re in right now.
Republican lawmakers especially do not like the way that the President threatens tariffs, because some of them say he doesn`t understand how that
works that it`s not the Chinese government paying that, it`s the importers that are paying that cost. And that`s either passed on to government, or
excuse me, U.S. consumers, or they eat the cost themselves.
So that`s why they`re wondering how helpful it is that the President is doing this. But now it`s going to lead to the question, does it work? Or
does it backfire on the President? In effect, this trade deal, a trade deal that initially, I should remind the viewers had a deadline of in
March, a deadline that we`ve long past since then, Richard.
QUEST: Kaitlan, thank you. Kaitlan Collins is at the White House talking now on this question of who is affected by these tariffs? What actually
happens? They are impacting the U.S.-China trade relationship. In Q1 of the year, exports from the U.S. to China fell by almost a third. The
reality is when the U.S. raises tariffs, as Kaitlan was saying, it`s not really China that bears the financial burden.
American importers pay the tax, and then they`re passed on to you and me as consumers if you`re in the U.S. or elsewhere as necessary. Rick Helfenbein
is in Miami. He is the President and CEO of the American Apparel and Footwear Association.
Rick, I saw your comments today basically urging the President not to increase or to introduce new tariffs on imports of footwear and apparel.
But how badly are they being tariffed at the moment?
RICK HELFENBEIN, PRESIDENT AND CEO, AMERICAN APPAREL AND FOOTWEAR ASSOCIATION: Prior to all these tariffs, we were 6 percent of all imports
in the United States. But we already paid 51 percent of all tariffs collected, so any more tariffs would be excruciating to our industry, and
we are being affected in this, what we call third tranche of $200 billion at 10 percent.
They hit us in our handbags. They hit us in her backpack. They hit us in leather. They hit us in gloves. They hit us in baseball gloves right in
the middle of the baseball season. I mean, this is pain and if he goes to 25 percent, oh my God. And the worst part for us was the $325 billion that
hasn`t been tariffed has been threatened. And that`s what got our members sort of crazed because we don`t have a place to go. We are highly
dependent on China for trade 41 percent of all apparel, 72 percent of all footwear, 84 percent of all accessories come from China, and we don`t have
a lot of other choices in terms of places to go.
So we really don`t like being a pawn in this chess game. It`s not funny to us. It`s not funny to our members. We`d like to see a deal. We`d like to
see the President be successful. But you know, it hasn`t quite happened.
QUEST: But in that case, it hasn`t quite happened yet. But what are your members currently doing with the 10 percent that is being tariffed? Are
they eating or are they passing it on?
HELFENBEIN: And there`s been -- let`s just put it this way, it has made people unhappy. But we`ve been able to survive 10 percent for a short
period of time, we cannot survive 25 percent and it is being passed on to the consumer modestly at first, stronger later on. Prices will go up,
you`ll see inflation. When prices go up, sales go down; when sales go down, jobs gets lost. That`s the cycle in our industry. That`s what has
QUEST: But this is classic protectionism, of course, but you know, I suppose the administration would say unlike previous tariffs, these are
being done for the specific reason of leveling the playing field at a time of negotiation. So in the words of some thoughts, why don`t you just keep
quiet and let them get on with it, they would say.
[15:15:05] HELFENBEIN: Yes, well, they would like us to keep quiet, but we can`t keep quiet because if it were to go away, suddenly we`d say, "Great.
The President used these tariffs wisely to the extent that everybody came to the negotiating table, and we got a better deal for the United States."
But our question right now is, are we close to a deal? And are we snapping defeat at the jaws of victory? What`s going on here? It was supposed to
be over by Friday, and now they`re talking about raising tariffs by Friday? We cannot deal with that. That is not good.
QUEST: Good to see you. Thank you. As always, it is appreciated. Next time you`re in New York, please, I insist, come and join me here on the set
and we can get to grips with these issues. I appreciate it, sir.
As we continue, after the break Donald Trump`s trade curveball, threatening to hike China tariffs. Warren Buffett says that will be bad news for all
of us, after the break.
QUEST: President Trump surprise all of us by threatening to do more than double tariffs on Chinese goods, he told people ahead of the trade talks
between the U.S. and China. Paul La Monica joins me now. This is strange. I mean, and yet the word is that the Chinese are starting to back track on
potential commitments to change the laws on the foreign ownership.
PAUL LA MONICA, CNN BUSINESS REPORTER: Right, and I think that investors clearly seem to be of the mindset that they think maybe this is another
example of the President kind of tweeting wolf, if you will, and that there still is going to be an amicable deal reached maybe not by Friday as
originally hoped, but at some point. I mean, this rebound off the lows has been stunning. I mean, we were close to going green.
QUEST: Difficult to understand the reason why because I can`t actually see anything that`s changed.
LA MONICA: Nothing has changed. You could argue, though, that the President`s tweets over the weekend may still be just bluster and that
he`ll back off from that. And if that`s the case, then nothing has really changed from where we were on Friday.
QUEST: Except listen to what Warren Buffett said this morning. Listen to what he said because nothing changed except some words from the man who
could make everything change. Have a listen.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: And he`ll probably be here today, big fan of Apple -- Investment Apple. What tells you that Apple won`t be disrupted and the way
that IBM et cetera was? Is there something different?
WARREN BUFFETT, CEO OF BERKSHIRE HATHAWAY: You never can be sure. I think it`s an incredible product and management. I like it very much. And we
own five and a fraction percent of it, and if we don`t do anything, in a few years, we`ll own six percent or more without spending a dime.
[15:20:25] UNIDENTIFIED FEMALE: But will you spend more also on Apple?
BUFFETT: Depends on the price, but we could.
(END VIDEO CLIP)
LA MONICA: Buffett`s thoughts on Apple I think are interesting because Apple along with Boeing and Caterpillar, they were among the Dow stocks
getting hit the worst particularly early this morning on the China fears. Apple has so much exposure to China. I think that has to be something that
the President needs to keep in mind as well that all of this talk of well, we`re going to make China pay.
Well, it is companies like Apple and Boeing and Caterpillar that are actually paying as well as their shareholders. I think he has to keep that
in mind. That might be one of the reasons why investors still think that this is all just bluster, and that Trump is not going to go through with
anything that will harm American consumers and blue chip companies because there are a lot of Apple shareholders out there that might not want to vote
for him 2020 if the stock goes down 50 percent.
QUEST: Berkshire Hathaway makes nothing.
LA MONICA: That`s not true. They own a lot.
QUEST: They`re now a manufacturing company in their own right. They own bits -- they own companies. They have large stakes in companies that do
LA MONICA: Well no, but they own a lot of subsidiaries that are very big, including some manufacturing oriented businesses and a lot of consumer
oriented as well with Dairy Queen, you know, Buffett loves to walk around the exhibit floor eating his Dilly bar.
So I mean, Buffett has a lot of his own operating companies, but I think they have increasingly become known for all the big companies they invest
in, which are like apple, Kraft, Heinz, and now Amazon amazingly enough.
QUEST: What was it like? What`s it like going there?
LA MONICA: It is a bit surreal, because in some respects, it is one area, I think of America, where you don`t really get the sense that people are
aware of this backlash to capitalism that we`re getting right now, with the rise of so many young Democrats in Congress. Everyone there wants to know
what Warren Buffett likes what Charlie Munger likes, they all want the stock picks because they all want to invest, so it`s still capitalism
unfettered, I think.
QUEST: Good food, good harvest, good solid food.
LA MONICA: There`s good solid barbecue in Omaha, Nebraska.
QUEST: Excellent. Good man. Good to see you, sir.
LA MONICA: Thank you, sir.
QUEST: Thank you. Baby Sussex has arrived. The Royal baby is born. Britain`s Duke and Duchess of Sussex announced today the happy news, 5:00
a.m. It was early start and it is a boy. Definitely worth the bell. The picture announcement was placed outside Buckingham Palace over the past few
hours. It says the Queen is delighted. Prince Harry says he and the Duchess are still thinking about names for the baby. And the proud father
did have this to say to reporters.
(BEGIN VIDEO CLIP)
PRINCE HARRY, DUKE OF SUSSEX: Meghan and myself have a baby boy early this morning, a very healthy boy. Mother and baby are doing incredibly well.
It`s been the most amazing experience I could ever possibly imagine.
(END VIDEO CLIP)
QUEST: Max Foster joins us from Windsor, and well overdue, Max, overdue.
MAX FOSTER, CNN INTERNATIONAL ANCHOR: Yes, we had a sense it was overdue and there`s lots of preparations here for the baby announcement then it
suddenly all came in one go. So they announced late morning that the Duchess have been in labor and then we later on very shortly after found
out that they had, you know, that she`s given birth to this boy, very healthy weight.
And Prince Harry there, very elated, obviously, as a new father. It all seems to have gone very smoothly. One thing they`re not telling us is
where she had the baby. Our assumption can only be that she had the baby at home. And it went well.
That interview with Harry there was here in Windsor, we know that they were here in the early hours of this morning. There are paparazzi all around
the state and also at the local hospital as well and they didn`t see anything, but they don`t want to confirm where she had the baby because
they want to keep certain elements of this private -- a private celebration despite all of this global interest.
QUEST: Why? Why? I mean, at the end of the day, Max, the location of where she has the charges, but you know, they wasted no time and making the
announcement that she was in labor. They made the swift announcement, thank God, of the safe birth and we had the whole easel business. They
seem to be wanting to, putting it crudely, have the cake and eat it on the publicity front.
FOSTER: I mean, you`ve got a fair point and certainly there have been commentators in this country saying exactly that. But Harry is so acutely
protective of his private life because of what he grew up with. And there`s a huge amount of goodwill towards him, because of what he went
through as a young child and all the invasions of privacy he suffered along with his mother and his brother.
So there`s a sympathy for it, and then he did sort of go further than we were expecting him to go with that statement, which was all very impromptu.
QUEST: And Max funny, I`m watching pictures of the Duchess in various situations. I mean, as she comes out of hospital, having that -- she`s
meeting -- I can`t think of a Royal who has joined the firm, has taken to it so well, possibly because of her background in Hollywood, obviously.
But she really does know how to work the crowd.
FOSTER: She does, and you know, she`s got acting skills. And certainly, as you know, Richard, they are useful in this role. I think what some of
the photographers will tell you is that she`s always acting, she`s always got this particular face on in front of the cameras, and it helps protect
But she needs to, at some point, give a bit away of herself as well, so people can connect with her more effectively. And that`s one of the things
-- one of the criticisms and why people want an interview from her as well.
It`s interesting, because when you see her in front of the cameras, actually she`s very, very natural when she speaks.
QUEST: Max, thank you. At Windsor tonight. Cool back in Windsor. Thank you. The flight of Aeroflot from Moscow to the Murmansk crash landed over
the weekend. More than half of the board were dead.
Now, it`s not the first plane of this type to crash. President Putin has ordered an investigation. We will discuss exactly what that means and what
perhaps could have been done to reduce the awful toll of people who perished.
QUEST: Hello, I`m Richard Quest. There is more QUEST MEANS BUSINESS in just a moment. The markets all down, but Anadarko Petroleum is up as the
bidding war intensifies. We need to understand exactly what`s happening in there.
And a rag rolling celebration on social media born in the Instagram age, we`ll talk about that as we continue. This is CNN and on this network the
facts always come first.
Michael Cohen is now in prison. Donald Trump`s former attorney began serving a three year prison sentence in New York. Cohen pleaded guilty to
a series of crimes, including making hush money payments on behalf of President Trump in violation of campaign finance laws.
Cohen says he has a lot more to tell and hopes one day, in his words, to share the truth.
We`re learning more about the deployment of a U.S. aircraft carrier strike going to the Middle East. Officials are telling CNN it`s meant to send a
powerful warning to Iran after specific and credible intelligence suggested Iranian forces and proxies were targeting U.S. forces in Syria, Iraq and at
Satellite images obtained by CNN show the smoke trail from Friday`s weapons test in North Korea. An expert says the images suggest the test involved a
short-range ballistic missile. It comes after North Korean state media reported a state drill involving multiple launches.
A U.N. backed report contains a dire warning for the planet. It says about a million species are in danger of becoming extinct and three quarters of
our land has been significantly altered. The report says human activity is to blame.
The Duke and Duchess of Sussex have gone in Instragram to thank well wishers after the birth of their son. Now they`re working on a name and
say they should have that in a couple of days. The first time father, Prince Harry, says he is over the moon.
The Russian President Vladamir Putin has ordered a thorough investigation into the plane crash that killed at least 41 people in Moscow on Sunday.
It was Russian made Sukhoi Superjet 100, an SSJ, that was seen in flames after it landed at Sheremetyevo airport. An investigative committee is
looking into what might have caused it and that includes the aircraft malfunction and the weather. Russia says, both flight recorders have been
delivered and recovered.
The thought of escaping a rapidly burning aircraft is a terrifying prospect. In 1985, 55 people died when a British Airtours jet caught fire
on the runway of Manchester airport.
Now, on takeoff one of the air engines failed as the plane tried to take off, damaging a fuel tank. The pilot aborted the takeoff. Passengers
scrambled on top of each other trying to escape. A lack of space between seats made things worse.
After the disaster, new measures were taken to improve airline safety, which includes revised evacuation rules and fire resistant wall and ceiling
panels. Peter Goelz is the former Managing Director of the NTSB. He`s also Senior Vice President at O`Neill and Associates. He joins me now.
You remember, of course, Manchester on this -- well, the crash and how that changed. As I look at Russia, as I look at this crash yesterday, this --
this was survivable and arguably more should have survived.
PETER GOELZ, SENIOR VICE PRESIDENT OF O`NEILL AND ASSOCIATES: I think that`s right Richard. I mean, there have been a number of advances in
cabin safety, particularly after the 1985 accident, including the toxicity of material in the cabin, 16G seats which keep you firmly rooted when the
plane hits the ground, and increased burn through -- I mean, decreased burn through time, so that the flames don`t penetrate the fuselage. But this
one, it`ll -- they reported that many of the passengers died of affixation. It`ll be interesting to see exactly what the cause of the death for the 41
people that have been -- who died.
QUEST: We`re looking now at the pictures, as you can see on the screen, of the landing. Now, we -- it`s coming in fast. It looks like it`s going to
land on the nose, there`s a very late flare and that late flare with a hard push down creates the bounce. What do you look at when you see that?
GOELZ: Well, I think the plane was obviously heavy, it was fully loaded with fuel. The pilot may not have had enough time to really understand
what that was going to do to his landing speed and to the type of approach he had to make, because when they hit, ordinarily with that kind of bounce
you probably would have gone around. Instead, he put the plane back down on the runway and you can see the fire initiate immediately from that very
heavy tail strike.
QUEST: Lightening is not supposed to bring down a plane, or indeed really to cause problem -- I mean, to cause fundamental problems.
You know, of course, (inaudible), you know because those happened (ph) well. Lars (ph) was texting me last night, that when he was a 777 captain,
his plane got hit by lightning several times, but in this case the plane is supposed to have been hit by lightening and then had to return. What`s
likely to have happened?
GOELZ: Well, I mean, on occasion a heavy lightning strike will, in fact, defect some of the avionics, some of the communications. The recorders
will tell the story on that, and even if it was -- they were slightly affected, it`s still not clear why the pilot felt he had to return right
QUEST: Peter, I just need to ask about Boeing, this latest development on the angle of attack. Sensors, the indicators and they disagree. Boeing
basically says, look, all of this is -- yes, it needed to be repaired, but it wasn`t critical to the safety operation of the aircraft. They`re right
in this aren`t they?
GOELZ: Well, they are. I mean, in both cases, had the pilots been completely familiar with the procedures, they both could have resolved the
problems and the planes might not have crashed, but I think it`s a little bit, on Boeings side, it`s getting a true story out of these guys is like
peeling an onion, isn`t it?
We`ve gotten multiple stories about multiple issues and we still haven`t gotten to the bottom of it.
QUEST: So, it really comes down to trust. If we look at the 737 Max and the way this -- the gestation of this, first of all they tell that it`s
perfectly safe until it`s grounded. Then they tell us, of course, that the MCAS is more powerful than we ever imagined.
Then it becomes clear that pilots have no idea. And then, in Ethiopian`s case, they do the fix, it doesn`t work, so they have to switch the stab
(ph) back on again and that takes the plane down.
GOELZ: Exactly, I mean this -- it`s been an evolving story and I think -- I think Boeing has a real issue with trust, in terms of not just their
customers, but the people who fly the plane. And I think the board of directors and their top executives are going to have to address that and
it`s not going to be easy.
QUEST: Peter, thank you. We`ll continue down that line, because one of those people who is clearly going to have an issue with this question of
trust is the CEO of Ethiopian Airlines.
I spoke to him earlier today to get his response on the latest news. This idea that there was a angle attack of indicated that was an option which,
by the way, they didn`t pay for and then they angle of attack disagree light (ph), which they -- it should have worked, but didn`t.
I asked to Tewolde whether or not he still had confidence in the aircraft maker.
(BEGIN VIDEO CLIP)
TEWOLDE GEBREMARIAM, CEO OF ETHIOPIAN AIRLINES. Well, it`s not a matter of reducing confidence, but it -- but in the last couple of months it`s a lot
of questions are coming to our mind and we have not yet been able to get full answers.
So, for us, as an airline who happened to have this tragic accident, which has killed 157 people, we have a lot of questions without answers even
today, because as clearly indicated in the investigation reporting, in the internal investigation report, his recommendation was to review the entire
flight control system of the airplane, because there are also associated issues that we need to -- that need to be reviewed, because there was a lot
of osculation and unexpected -- and unexpected behavior of the airplane.
QUEST: Are you getting much pressure to counsel the rest of your order of Maxes?
GEBREMARIAM: Well, I would not call it pressure, but we are waiting to complete (ph) our service and we are working with Boeing and the regulators
also, but we`re still expect and we still request that the entire flight management system of the airplane needs to be reviewed. It`s not all about
the MCAS, the MCAS is a software which performed as designed, but the thing is, why the MCAS was required? Why the angle of attack is giving a wrong
or false message and why the airplane is behaving the way it did. So, I think it`s a wide are of investigation and review.
QUEST: Tewolde, you said a moment ago that you were -- what you did have is you had questions that you wanted Boeing to answer. What are those
GEBREMARIAM: Those questions are about the angle of attack, success and the MCAS, the need for the MCAS and the whole situation if it happens in
reality or if it is caused by false message from the angle of attack and putting this together, a big question is now, the entire flight control
system design needs to be reviewed. Make sure that this airplane is safe back to air, because we still have questions.
(END VIDEO CLIP)
QUEST: As we continue, oil prices are recovering after Trump`s tariff threat. And Occidental Petroleum has sweetened it`s offer for Anadarko, to
fend off the rivals Chevron. We need to understand this one a little bit more.
QUEST: Occidental Petroleum has sweetened it`s bid for Anadarko, increasing the cash component of $38 billion. Occidental is in a bidding
war with Chevron over the company and both are fighting for control of the shale assets. Matt Egan joins me now.
This -- you don`t often get, these days, full, all-out battles, why do they all want Anadarko?
MATT EGAN, CNN SENIOR WRITER: So Richard, you`ve got to admit, Occidental has clearly been the aggressor in this bidding war and often the aggressors
are the ones that win here.
And, as you mentioned, it`s all about Anadarko Petroleum, and so the reason why they`re really hot on this company is because, one, it has prime
position in the Permian Basin, that`s the west Texas shale oil field that has catapulted U.S. oil production and it`s also got valuable assets, L&G
assets in Mozambique, it`s got deep water assets in Gulf of Mexico, but I do think so much of it comes back what it owns in the Permian.
And so, oil companies, large and small are really racing to get the best land in Texas so that they can be a big part of this oil boom.
QUEST: But Anadarko is quite a small play in that sense. I mean he has those assets but it`s not a household name.
EGAN: It`s not a household name, which is what makes this so interesting, right. This would be one of the biggest deals, oil and gas deals in
history, and in this case what we`ve had is Occidental.
First they went and they made a hostile takeover offer that actually trumped Chevron`s offer. Then they came in and they said listen, Warren
Buffet is behind our deal, Warren Buffet is giving $10 billion of equity financing and now they`ve made a preemptive deal to sell $8.8 billion of
Anandarko`s assets to Total, that`s an effort to try to ease concerns about Occidental`s balance sheet because this would - this would, you know, incur
a certain amount of debt to get this deal done.
And then they`ve also sweetened their offer. Now Occidental is offering 78 percent cash, instead of - it was - earlier it was 50/50 cash and stock and
a lot of times investors like having more cash because there`s more certainty.
So now we`ll have to see what Chevron does to respond.
QUEST: So where at the moment - what - who does the - which company does the market believe Anandarko is best suited to be with?
EGAN: So best suited to be with would probably be Chevron, because Chevron`s a larger company, it`s got a stronger balance sheet, and it
actually has more overlap in the Permian and LNG.
But the market appears to be betting that actually it`s not going to be Chevron, because we`ve seen Chevron stock move up today as investors are
maybe breathing a sigh of relief that this won`t happen.
And we`ve actually seen Occidental`s stock improve. So I think that the market is betting that Occidental may have enough to get this deal done.
QUEST: Remind (inaudible) I mean it`s always good when we take the moment we have a bit of extra time just to remind and to go through a bit of 101.
Why companies have to be careful, the amount of debt that they take on?
Arguably if you take on the debt, you sell some of the assets to pay it down or you have the extra revenue stream. So why do they need to be
EGAN: You need to be careful because of what happened last fall. Just a few months ago, oil prices crashed into a bare market, and that added a lot
of stress on their finances. Many companies suddenly weren`t making enough money to pay their debt.
And, you know, just three years ago we saw oil prices - U.S. oil prices fell to $26 a barrel, dozens of U.S. oil companies went out of business and
hundreds of thousands of oil workers were laid off.
All of that means that, you know, it`s a boom to bust cycle and it feels like these cycles are getting shorter and shorter. So the last thing you
want to do is take on more debt than you can afford and be caught high and dry when prices undoubtedly crash again.
QUEST: Good to see you, Matt, thank you as always, excellent.
EGAN: Thanks Richard.
QUEST: As we approach the close of trade (ph) let`s have a quick look, the DOW has roared back. Now all right, we`re still on 55 points, but don`t
get too excited, remember we open 450 lower on the back of the Chinese trade threat.
And the Chinese are still now coming to Washington, arguably that is what has pushed the market back up. If we end the day like this and we`ve only
got 12 minutes left, then this will be what we might describe as a result because of the way it was such a grim day.
You have Nike, 3M, Apple, Caterpillar, they are all lower, but not as much as they were. Now in a moment, before the royal easel, we got the royal
Instagram. A look at how Prince Harry and Meghan shared the news of their newborn baby on social media.
Tradition, as is traditional, the royal easel announcing the birth, it was brought to the gates of Buckingham Palace and it bore a message from the
Queen. It says the Queen and her royal family are delighted that (inaudible) Her Royal Highness, the Dutchess of Sussex, was safely
delivered of her son of 5:26, an early riser, today.
Her Royal Highness and her child are both doing well. This is the traditional way, unfortunately by the time we got this, Prince Harry and
his wife Meghan had already shared it all on their joint Instagram account @sussex-royal.
They put all the details there, which begs the question going back to the easel, I mean this poor easel, it`s there, and it shows the royal family is
marrying maternity with tradition, which is exactly what we`re doing with our CNN royal commentator Victoria Arbiter who is here.
All right Victoria, I can feel your bristling at our less than royal easel. But it makes the point.
VICTORIA ARBITER, ROYAL COMMENTATOR, CNN NEWS: It makes the point, and not quite as ostentatious, but it`s a good - it`s a good effort.
QUEST: Look it`s interesting to see how royals are using social media, from historical photos to family news, they`re posting and interacting with
legions of sports.
Look at this, there`s 5.5 million followers for @royalfamily. They saw the queen post for the first time back in March. But (inaudible) Harry and
Meghan have created their own account, they went their own way, and they`ve already got 6.2 million followers.
And I mean the baby announcement has got 2.1 million likes. How does the royal family negotiate this?
ARBITER: Well I think today`s a perfect illustration of how we are marrying this idea of tradition and the modern way of doing things. Before
Meghan married into the royal family, she had a huge following on social media herself.
"The Tig" was her - was her blog, and she promoted that on Instagram. And so obviously they are aware that a huge number of their fans follow them on
Instagram, hence the news.
QUEST: But isn`t there a danger that it just becomes a mouthpiece for official nonsense. You know, the sort of stuff you can find on the
newspapers and in the gossip rags anyway. What value added do you get from their tweets and Instagramination (ph).
ARBITER: I think there`s two points, Richard, first of all speed. You mention a newspaper, well that`s tomorrow. We get that news tomorrow.
This is instantaneous, this is right now.
But more importantly I think why the fans are gravitating is particularly in the last couple of weeks, we`ve seen posts that look like they`ve been
written by Meghan, and so suddenly people feel like she`s accessible, she`s right there.
We - the reason we think it`s her is we`ve seen the use of diapers versus nappies, we`ve seen XOs instead of XXs which is what Brits would
traditionally write. So there are all these little clues that it`s Meghan actually doing some of the posts.
The fans like that, that makes her accessible.
QUEST: How close - I mean the two sides of the family, the Cambridge`s and the Sussex`s, (inaudible) let`s just go straight for it, do they still get
on? What about this war supposedly between Meghan and Kate?
ARBITER: Meghan and Kate, absolutely nothing to that story whatsoever.
QUEST: Oh come on.
ARBITER: No, I think what we`ve seen here there`s been a little of this with the stubborn Windsor brothers. Now there`s been huge speculation what
could this be about, there`s no question there`s something going on, but it`s William and Harry.
QUEST: William and Harry, OK. Royal titles for these - for baby Sussex?
ARBITER: Well if we don`t get an HRH princely (ph) status from the queen, this little boy will be Earl of Dumbarton, Lord first name Mountbatten-
Windsor, Earl of Dumbarton being one of Harry`s subsidiary titles.
QUEST: But it - why that one?
ARBITER: Well that one because he - Harry`s using Duke of Sussex and so Earl of Dumbarton is the next title down, and so that`s the one that this
baby will be known as (inaudible).
QUEST: Earl of Dumbarton, do you think he`s going to become a prince?
ARBITER: I don`t think so, now I`m not a betting person, but in - according to the 1917 letters patent from George the Fifth, this baby`s not
eligible to be a prince. This is no slight, it`s no malice, but the queen does things the way they`ve always been done before.
When in doubt, she sticks to tradition.
QUEST: Very wise, all right, when in doubt, we`ll put this away until we have the next one. Thank you very much indeed. We`ll have a profitable
moment after the break. I`ll put this back in the cupboard until the next time.
ARBITER: OK, sounds good.
QUEST: Tonight`s profitable moment, look at the way the day went. We`re going down about 70 points at the close, but just look at the (inaudible)
offering a 450 and then rise (ph) throughout the course of the day and all because the president said he`s thinking of increasing tariffs on $200
billion worth of Chinese goods and introducing tariffs on another $300 billion also.
We`ve been here before, but what we need to understand is whether this was just an negotiating strategy, parts of a wish to raise the temperature on
the Chinese, who by all accounts are being (inaudible) on some of the core points, not just buying stuff but on things like for example easing up on
the regulations of joint ventures, stopping the requirement of the transfer of technology to the Chinese entity.
These are important points and if - if they - Chinese are reneging or going back on their promises, then Donald Trump is absolutely right to hold his
ground. Chuck Schumer, the leader of the Senate - Democrats of the Senate said exactly the same thing, it is not good enough just to get a deal with
the Chinese, it has to be the right deal.
And yes, if that means turning up the temperature and having a few rocky days at the market, most of us would say go for it. And that is "Quest
Means Business" for tonight. I`m Richard Quest in New York, and have a (ph) (inaudible) after the hours ahead.
I hope it is profitable. The DOW is down, the bell is ringing, the day is done.