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QUEST MEANS BUSINESS
UBS Rogue Trader Kwaku Adoboli Warns Huge Losses Could Happen Again; Sixteen-Year-Old Wins $3 Million as Fortnite World Champion; Italy Holds Funeral for Murdered Italian Police Officer. Aired 3-4p ET
Aired July 29, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ISA SOARES, CNN INTERNATIONAL HOST: It is a mixed start the week on Wall Street. The Dow, the S&P and the NASDAQ are making small moves. Investors
are in a wait and see mode and here's what Wall Street is watching this hour.
Beijing issues a stern warning to Hong Kong protesters. The unrest is putting pressure on business, as well as stocks. Merger mania. Today,
Pfizer announced the tie up with the Epipen maker, Mylan, while takeaway.com sinks its teeth into Just Eat. And it's Christmas in July for
Disney. The studio shattering the box office records. Live from London, I'm Isa Soares in for Richard Quest, it is Monday, July the 29th. And this
is QUEST MEANS BUSINESS.
Good evening to you and a very Happy Monday. Tonight, Wall Street kicks off a busy week as we were saying. The markets retreat from record highs.
We're in the final hour of trading. The stocks, mostly flat as you can see there. The Dow showing modest gains, almost up two tenths of one percent.
That's in particular thanks to Apple, as well as 3M, while Amazon, Facebook and Microsoft pull the NASDAQ into the red.
Well, this week is brimming with potential market movers. All eyes on the Fed, which is expected cut rates on Wednesday for the first time in more
than a decade despite a healthy economy and low unemployment. President Trump says quote, "A small rate cut isn't enough."
U.S. negotiators arrive in China for trade talks, the first since last month's truce, but tensions still linger and expectations remain low.
Then there are plenty of corporate earnings, too, to feast on, including Apple, as well as Beyond Meat. Warnings we heard just weeks ago, if you
remember of an earnings recession have yet to materialize.
Art Hogan is the Chief Market Strategist for National Securities Corporations. He joins me now from New York. Art, good to see you.
Thanks for being on the show. Plenty for us there to get our teeth into. Let's start with the Fed meeting.
I think it's fair to say that the expectation of a quarter point cut -- how upset is the market going to be if they only get that?
ART HOGAN, CHIEF MARKET STRATEGIST, NATIONAL SECURITIES CORPORATIONS: Well, it's interesting. I think it's not so much about the cut which is
pretty well baked into the cake here. It's very much about the guidance. Is this the first of several rate cuts or does the Fed become data
And the Fed has really gone through this evolution of being autopilot hawks at the beginning of the year to being patient and now they're really
determined to take back that December rate hike and they're going to do that with a cut now.
But whatever they say is going to be imperative in terms of the market's expectations because there is still 20 percent of people that think they
should be coming 50 basis points. We think they shouldn't be cutting at all, and the market is locked in on 25 basis points.
So, it's going to be in the messaging. What does this mean going forward? Are we looking at data now or are we actually becoming, you know, more
dovish? This is part of a series of cuts that we're going to see and the market will be looking for that.
SOARES: Okay, so it's a reading between the lines, reading the tea leaves to reel the message, what exactly will they be listening to what the Fed
has to say? Will it be inflation? What would they be looking out for investors here?
HOGAN: Well, the lack of inflation is what's driving this and a global economic slowdown. They are the two things that have really been driving
this, but what we look at is forward guidance while we still have it and forward guidance, at the beginning of the year showed that we're going to
raise rates three times this year. That's gone to the fact that we're probably going to cut rates once this year.
If we have more people slipping into that cut category and the forward guidance shows that there's another cut sometime at the end of this year, I
think the market is going to look at this and say "Okay, we're right, this is what's happening. At the end of the year, we get another 25 basis
points," and this is part of a cycle, it is not a one-off.
SOARES: Let me show our viewers, Art, this tweet from President Trump. He tweeted, "The Fed has made all the wrong moves. A small rate cut is not
enough, but we will win any way." What do you -- what is your view? Can we rule out a half percentage point cut here, Art?
HOGAN: Well, we can't rule out anything. The Fed has made a lot of changes in a short period of time. From the beginning of this year, they
were intending on raising rates; now, they're intending on cutting rates.
The only thing that's changed is they can't really get a grip on why inflation is staying stubbornly low, and they can't get a grip on why the
global economy is moving.
But I think that the President is talking about something that in effect is the monetary policy that that that is now shifting gears and becoming
easier because trade policy is getting more difficult. And I think that's what's happening.
The Fed has a step back and say, for longer U.S. and China are in a trade battle, the more the global economy slows and the more chance there is of
that slowing down the U.S. economies. They want to get out in front of this.
SOARES: At the same time, and correct me if I'm wrong here, Art, a rate card at this moment in the cycle, it could potentially send a signal that
the current economy could be as good as it gets. Do you -- how do you interpret that move? Is that something that's feasible?
[15:05:10] HOGAN: No, I don't think so. I think that what the Fed is looking at and saying, there's pockets of slowdown in China. There's
pockets of slowdown in Europe. You're maybe going through a difficult breakup with the United Kingdom. There may be a hard Brexit. We don't
know any of these things, and I think the Fed wants to say, when we're this close to the zero bound, we want to take aggressive action to prevent a
slowdown in the economy.
So, it's not to say this is the peak of economic growth, but it is also to say, "Hey, two percent GDP growth is probably what we're going to have for
a while now." And I think we saw that with the GDP report that just came out and a revision of the fourth quarter of last year. So, as good as it
gets is what we've had for the last eight years. And that's the economy growing at about two percent.
SOARES: In your view, Art, do these rate cuts make it less urgent to strike a deal with China?
HOGAN: That's a great question. It makes it -- it emboldens the administration to continue the fight longer. So yes, to a certain extent
it does. And you're using you're using monetary policy to help assess trade policy, at least to firm your ground there.
But understand, the other side is doing the same thing. Right? There's plenty of Chinese stimulation coming from their government for their
economy. So, it's not as though we're battling on an uneven playing field here.
But yes, it does involve the administration to stick to their guns as long as the Fed is behind their back, they can continue to fight this fight well
into next year, which is the last thing we need.
SOARES: Great to have you. Thank you very much, Art Hogan there for us in New York.
HOGAN: Thank you.
SOARES: Now, Chinese officials are striking an optimistic turn with regard to trade talks that you heard Art Hogan discussing. They are set to resume
in the coming hours. U.S. and Chinese negotiators are meeting in Shanghai for the first time since a temporary truce was agreed at the G20 last
The top trade adviser to President Trump, Peter Navarro, told CNN's Christiane Amanpour the negotiators should be left to their job. Take a
(BEGIN VIDEO CLIP)
PETER NAVARRO, DIRECTOR OF TRADE AND MANUFACTURING POLICY: My strong preference here is to let these negotiations take place behind closed
doors. And if you want deals reached, there will be full transparency.
The only thing I can tell you, Christiane, is this is not a trade deal in the traditional sense where one country lowers tariffs and the other
country lowers some tariffs.
The problem we have with China is structural. China engages in various forms of economic aggression.
(END VIDEO CLIP)
SOARES: Max Baucus has served as U.S. Ambassador to China. He is also a former U.S. Senator. He joins me now. Max, let me ask you what we just
heard, in fact, from Peter Navarro, who said that trade deal is not so much about trade, as we know, per se, it's more structural. What are your
thoughts on that?
MAX BAUCUS, FORMER U.S. AMBASSADOR TO CHINA: Well, I think he is right, but I don't think we're going to make a lot of headway. Based on my
experience in China, I served over there several years, the Chinese and very tough, they're very visionary. They're not going to change their
culture, they're not going to change their form of economy. And basically, they think it has served them very well. It's got some subsidies, it's got
some technology transfers, got a little bit IP theft. That's where they are.
Now, they will give a little bit on the margins because they want to keep talking. Don't forget, it's the Chinese who invited the United States to
come to Shanghai to meet in a few hours. That's sort of out of the Chinese playbook. Just keep talking, a little bit of time, and then -- but not
give in very much.
SOARES: Okay, so on that strategy then, what is the game plan? What's the long term game plan if we just keep talking, what are you getting, then if
you're not prepared to give anything and not getting anything in return?
BAUCUS: Well, they're going to give a little bit. They're going to buy, as reported, a lot of American products now, soy beans, for example. Maybe
Boeing needs a little help, they may buy another Boeing airplane, for example, but they're not going to address the fundamentals. That's pretty
clear to me.
But they will on the margins, probably enough to give Trump enough to say they got a victory. They're buying our stuff, you know, they're going to
do a little bit on IP, a little bit here and there and declare victory.
The Chinese also are probably waiting a little bit to see what's going to happen to the U.S. elections. They can't trust Trump. They always know
what he is going to do. He changes his mind so much. But you know, sometimes you get what you asked for, and I'm not sure that they'd like the
next administration any better.
They probably would in a sense that it is probably a little bit more predictable, a little more steady, whatever it is, and that's very
important to the Chinese.
SOARES: What would benefit, Max, President Trump here because President Trump said that he believes China may hold out until 2020 election. What
would benefit him more? Just playing -- kicking the can down the road, to continue to put pressure at least -- show to put pressure on China or
actually come out with a deal? What will help him in the election when it comes to 2020?
[15:10:03] BAUCUS: He is a box because the deal that he could probably get would not be sufficient for the hawks and the United States. I mean, he is
not going to get with the hawks are asking for, you know, the Navarro's and the Lighthizer's. He is not going to get that. So he's in a bit of a box.
But if he gets something, ala Trump, he can declare victory, and say, "I got a deal," and he could probably say -- he'll try to say, "I got more
than the previous administration, they didn't gain anything. I got something." Yes, he could play it that way, too.
SOARES: So maybe, we're looking at a small progress.
BAUCUS: Don't forget, too --
SOARES: Go ahead, Ambassador.
BAUCUS: Don't forget too -- you know, he is looking at the market. You know, he does want a deeper rate cut. He wants is economy to be very
strong, and the stock market, how it looks, you know, this time next year is going to be very important to him. So, he is going to have his eye on
that very much as he tries to figure out what to do about trade not only with China, but with Europe and with Japan.
Don't forget, there are a lot of tariffs the U.S. still has in a lot of those countries. You know, it's this is part of the America First
strategy. We're tough, we Americans and so on so forth, and doing all this and that, I think now, a couple of years later, we're starting to realize
that there are certain drawbacks with that, but still that's his main pitch.
Be tough and he is going to talk tough, and he is going to think that's probably going to be enough -- at least he hopes it's going to be enough --
to carry him in 2020.
SOARES: Well, it's a strategy that certainly worked in 2016. Ambassador, just stay with us for just a moment because I want to look at China really,
in particular in Hong Kong because China is standing behind Hong Kong's embattled Chief Executive Carrie Lam as protest reach a new level and
business leaders in the territory warn of economic damage.
In Beijing's first official statement on the protest since they began, described them as a serious challenge. Take a listen.
(BEGIN VIDEO CLIP)
YANG GUANG, SPOKESMAN, HONG KONG AND MACAU AFFAIRS OFFICE (through translator): The recent developments in Hong Kong especially the acts of
violence by a small number of radical activists have seriously undermined Hong Kong's prosperity and stability, seriously challenge the rule of law
and public order of Hong Kong and seriously threatened the life and property security of Hong Kong residents.
They've also touched the bottom line of the principle of one country two systems and can't be tolerated.
(END VIDEO CLIP)
SOARES: While mass demonstrations have been happening for eight weeks, including eight weekends, some of them leading to clashes with police as
you can see there from this weekend, protest is now calling for greater democracy for Hong Kong and say Carrie Lam should resign.
With the uncertainty taking a toll on business, the main share, the Hang Seng today had its biggest one-day drop in more than one month. Look at
that. The President of Hong Kong's American Chamber of Commerce told Julia Chatterley it could drive foreign investors away from the city.
(BEGIN VIDEO CLIP)
TARA JOSEPH, PRESIDENT, AMERICA CHAMBER OF COMMERCE IN HONG KONG: Well, certainly there are backup plans being made as people start to say survey
what could happen in the long term. But to be fair, Hong Kong still is a great environment to operate in.
People don't want to leave here unless they have to, a gateway city to China, connected to Southeast Asia, great connections to the United States
and to Europe.
But the other aspect of it is there are cities across Asia that are becoming increasingly competitive. Singapore is an obvious one, where
multinationals increasingly feel comfortable.
There are other places -- Bangkok or Kuala Lumpur -- that are trying to bring foreign investors in. So, the more Hong Kong loses a sense of
comfort, the more other cities will try to compete for that business.
(END VIDEO CLIP)
SOARES: I want to return to Max Baucus, the former U.S. Ambassador to China. I want to get your thoughts on the clashes, they are violent --
rather violent clashes we've seen in Hong Kong. They've been going for some eight straight weekends. What are your biggest concerns? Where do
you see this ending? And how do you see this ending, Max, in particular?
BAUCUS: Yes, well, I've been in Hong Kong in the last -- or twice in the last eight weeks, and I get both sides, obviously. Some businessmen are a
little concerned that all the protests are going to make it more difficult for the business environment to thrive.
Businessmen always worship at the altar of predictability and certainty. The more they know that their government, they can depend on, the more
likely they're going to do business well.
On the other hand, you know, clearly, whether it's Carrie Lam, or whether it's Xi Jinping, it was a big mistake to propose that extradition
legislative proposal and even though that Xi has backed off and said, "No, no, no, we're not going to do that." The protesters got a little bit of a
taste of democracy.
They got -- it's in their mouth. They want to do more. And Beijing cannot allow that to happen. Beijing cannot allow there to be more democracy in
Hong Kong in order to save that extradition proposal, then that means that the protesters are going to have to think for themselves how far can they
go? How far do they want to go and they're going to be also looking a bit at some of the business concerns that is predictability of business doing
well in Hong Kong.
So, I very much hope that that both sides realize that hey, this is what it is. Hong Kong is going to be transferred to China in 2047 and we're
probably not going to get a lot more freedoms than we currently have. But we've got to just be smart about this, but who knows, the protesters may
think hey, we got something going here and that's going to put Beijing in a huge big box in Beijing I think it's not going to allow more democracy.
[15:15:53] SOARES: Fantastic. Great to have your thoughts and your insight here, Ambassador, Max Baucus, the former U.S. Ambassador to China.
Appreciate you taking the time to speak to us here on QUEST MEANS BUSINESS.
BAUCUS: You bet.
SOARES: Good to see you. Now, I want to switch gears slightly. Now, Mylan and Pfizer putting aside their former rivalry at least for today.
They're aiming to create a new $20 billion a year company. One stock is rallying, and the other not so much. We'll tell you which one after a very
short break. You are watching QUEST MEANS BUSINESS.
SOARES: Welcome to Merger Monday on QUEST MEANS BUSINESS and we want to begin in the pharma sector. Shares in Mylan are soaring, it is working
with its rival Pfizer to form a new company -- see there. Pfizer down three and a half percent in fact, almost three and a half. Mylan -- look
at that up, 13 percent.
The two are spinning off a portfolio of drugs that no longer have patent protection. Pfizer shares are significantly lower. Matt Egan is in New
York for us. Matt, talk us through what is going on with this deal. Is this a David and Goliath tie up?
MATT EGAN, CNN BUSINESS LEAD WRITER: It is a bit of a David and Goliath tie up. You know one of the world's largest drug makers, Pfizer is really
transforming itself right before our eyes.
So late last year, Pfizer reached a deal to get rid of some of its consumer health drugs, including Tums and Advil; and then late last month, Pfizer
actually went out and spent $11 billion to acquire Array BioPharma, which is a cancer treatment company and now it is merging its off-patent business
[15:20:06] EGAN: And so what you're going to see is a combination of Mylan's Epipen treatment with Pfizer's Lipitor and of course Viagra and
some of the other well-known brands that they have.
And so the deal is going to create this off patent generic powerhouse up to $20 billion in annual revenue, it's going to have a presence in more than a
hundred countries around the world. And Pfizer is hoping that this will allow it to focus on trying to go out and find the next blockbuster drug
treatment and spend all that money that it needs to on research and development and get out of this slower growing lower margin business.
Now from a Mylan perspective, we saw the stock price jump up this morning. It's still up double digit percentages right now. Some analysts are
describing it as a bit of a bailout for Milan, because if you look at the long-term short, it's down.
Mylan shares are down about 76 percent coming into today from their all- time highs in April of 2015. It's a really stunning decline, especially when you factor in you know that other drug companies, including Pfizer are
up really tremendously over that span.
And that's because this generic drug business faces a lot of pressure. It's also because Mulan got into a lot of trouble for their controversial
Epipen price hikes, and another big headline that came out of this news is that Mylan CEO Heather Bresch, she is going to retire after this deal
closes. She really is one of the most controversial figures in healthcare, in part because of all those Epipen price hikes. And so that is another
major development here.
SOARES: Yes, and I'm sure -- I'm guessing perhaps that's helping the share price, too. Matt, thank you very much. Now, ordering food delivery could
cost anywhere from $10.00 to $100.00. It depends what you fancy, ordering a food delivery company is more like $6 billion. And that's what
Amsterdam's takeaway.com is offering to merge with London based, Just Eat to keep up with competitors in Europe like Uber Eats and Deliveroo.
Anna Stewart is following all for us. We've seen quite a surge in terms of the share price. Are we looking at maybe potential bidders here?
ANNA STEWART, CNN REPORTER: I think we are. I think a potential counterbid isn't on the offing. But really if you look at the share price,
particularly for Just Eat, well over 20 percent today. I think this is a relief from investors.
This is a stock that has been in the doldrums for months. It actually fell out the FTSE 100 last year. There you go, up 22.7 percent, and you know,
this is largely because although it's a market dominant leader in the U.K., it's having to spend an awful lot of money competing against the likes of
Deliveroo, which recently was bought by Amazon. Uber Eats that recently slashed delivery fees. It's struggling to keep up.
Activist investor shareholder, Cat Rock Capital, let's get it right -- were absolutely thrilled because they've been campaigning for a tie up like this
for months, and finally they're seeing it.
SOARES: From those you've been speaking to in terms of analysts, if it doesn't go this way, who could be the counter bids? Where could they come
from? Uber Eats? Deliveroo? Could they get -- would they want -- would they be interested in this, Anna?
STEWART: Well, I think when you look at Uber Eats or Deliveroo, they already have such a big presence in the U.K. if we're looking at acquiring
Just Eat because it's got a dominant position already.
I suspect there will be problems with regulators. They are already actually having problems with Amazon investing heavily in Deliveroo.
However, I do think, an analyst I've spoken do think that you're likely to see any counter bids from outside of the sector, it is the Big Tech giants,
they are fighting on every front whether it's cars and driverless technology.
SOARES: It's so overcrowded though.
STEWART: It's such a crowded market, but maybe Softbank, you know they are investing heavily in DoorDash. There are plenty of people out there and I
think the future for this could potentially be subscription models.
SOARES: What? Explain.
STEWART: Well --
SOARES: You're wrapping me -- hold on, you can't -- how would that work?
STEWART: Well, think about the fact that you have Amazon and Amazon Prime or Uber.
STEWART: Well, if you could pay them a flat fee, perhaps you could reduce your delivery fee and your driver fee, perhaps -- I suspect these companies
will want to keep you in their ecosystem.
SOARES: Oh, I like that, very clever. Thanks very much. Anna Stewart there.
Now, Ryanair CEO, Michael O'Leary is worried there could be further delays in getting the Boeing 737 MAX flying again. Profit at his airline plunged
last quarter. He is facing a quadruple point impact. The low-cost competition in Europe is heating up.
There is uncertainty over Brexit. You've heard that before. Pilots and cabin crew are threatening to strike. Now, plans to grow with a new Boeing
737 MAX planes are in doubt. O'Leary says Boeing needs to get its [bleep] together with regulators.
Now with airlines saying and 737 crisis is costing the millions, a new report accuses U.S. regulators are failing in their duty to regulate before
the two 737 MAX crashes that killed, if you'll remember, 346 people.
It says after significant lobbying, the U.S. air safety watchdog handed oversight of critical safety systems to Boeing itself. Insiders at the
Federal Aviation Administration told "The New York Times" that senior managers often sided with Boeing, against the advice of their own experts.
[15:25:15] SOARES: Natalie Kitroeff is in New York. She is "The Times" reporter covering this story for Boeing. And Natalie, this is extremely
worrying. Break it down for our international viewers. At what point did the FAA began to lose control or oversight, let's say over Boeing 737 MAX?
NATALIE KITROEFF, ECONOMY REPORTER, "THE NEW YORK TIMES": So this was the combination of a decades long push, that was a lobbied by industry to get
the F.A.A., to get Congress to urge the F.A.A. to hand more and more control to aerospace manufacturers.
The result was a certification of the plane in which the F.A.A. handed as much control to Boeing as possible. And so what occurred was late in the
development of the plane, the F.A.A. allowed Boeing to certify, to approve this software that was on the MAX without much F.A.A. input at all.
SOARES: Okay, let's take a step back. But why was it delegating more of the work and review as well as the oversight of the manufacturers? I mean,
does politics play a part here.
KITROEFF: Well, there was intense lobbying by industry and Congress through its weight behind this shift. But F.A.A. leadership also embraced
this new approach, and the logic there is that the F.A.A. saw itself as smaller than industry, as unable to participate in every aspect of the
The idea behind the shift was to hand more of the mundane tasks over to the manufacturer. But what we saw in the case of the 737 MAX, is that it went
beyond that. And there were critical systems that were handed to Boeing for approval.
SOARES: But they had warning signs very early on. This is from your article here. "Despite their hazy understanding of the system, F.A.A.
officials decided against grounding the 737 MAX. Instead, they published a notice reminding pilots of existing emergency and procedures." This is
after the crash of Lion Air last October, the warning signs were that all along?
KITROEFF: Well, you have F.A.A. engineers during the certification of the MAX raising questions about systems that were unrelated to MCAS, for
example. This rudder, cable control system, F.A.A. engineers wanted Boeing to change the system, Boeing pushed back and managers sided with Boeing.
There's no sign that engineers raised any questions about MCAS to be very clear. But what did occur is management handed the reins over to Boeing
late in the development and then there was little new safety assessments that were shared with the F.A.A.
SOARES: And Natalie, finally, what is the F.A.A. and what is Boeing -- what are they saying off the back of your reporting?
KITROEFF: Well, the FAA and Boeing are staunchly defending the certification process. Both sides have said that rules were followed. And
to be clear, an F.A.A. engineering test pilot did know about the changes late in the game to MCAS.
And so I think what lawmakers are asking right now, what Federal investigators are asking right now is if the rules were followed, is that
enough? And do we need to look at whether the system itself may need some changes?
SOARES: Yes, big questions being asked no doubt in terms of exactly how the regulation and how it's employed, isn't it? The software and/or the
techs that need to be checked. Thanks very much Natalie there for us from -- "New York Times" reporter who covers Boeing.
KITROEFF: Thank you.
SOARES: Now, the man convicted in one of the banking sector's biggest scandal speaks to CNN about what he did, the price he paid and whether it
could happen all again. We have that story for you, next.
[15:30:00] SOARES: Hello, I'm Isa Soares, there's more QUEST MEANS BUSINESS in a moment when Kwaku Adoboli lost more than $2 billion at UBS,
the circle rogue trader warns it could happen again. And the teen who has just won $3 million playing a video game. We look at the big numbers
behind the Fortnite World Cup. Before that, the headlines for you at this hour.
Police say a 6-year-old boy and a 13-year-old girl were killed in Sunday's shooting at a festival in California. A man in his 20s was also killed.
The gunman was shot dead by police. Police say he opened fire with an assault-style weapon that he purchased legally.
It was a solemn day in a town in Italy where a funeral was held for a murdered police officer Mario Cerciello Rega was stabbed repeatedly last
week during a confrontation with two American teenagers he was trying to arrest. One of the teen's told a judge the stabbing was self-defense
because they didn't realize the victim was a police officer.
Russia's opposition leader suggesting he may have been poisoned in police custody. Alexei Navalny blames authorities for a mysterious allergic
reaction that sent him to the hospital. He was detained last Wednesday after calling for pro-democracy demonstrations, and he's now back in jail
according to his attorney.
Welcome back to QUEST MEANS BUSINESS, it is 8:33 in the evening here in London. Now, a trader convicted of defrauding UBS for more than $2 billion
tells CNN it could happen again. Kwaku Adoboli's massive loss shook the London financial sector.
(BEGIN VIDEO CLIP)
RICHARD QUEST, CNN: Police in London have arrested a 31-year-old man on suspicion of fraud after UBS lost $2 billion in what it's called -- calling
unauthorized trading. It's a lot of money, $2 billion. Both the bank and the police are still investigating any possible wrongdoing. The losses are
so great, UBS says it might wipe out the bank's profits in the next quarter.
(END VIDEO CLIP)
SOARES: Now, that was how we covered the story in 2011. According to UBS, the eventual losses from Adoboli's trading came to $2.3 billion. The bank
said no client money was lost, but Adoboli was charged with fraud and just two days later, CEO Oswald Gruebel resigned.
At his trial the following year, Adoboli was found guilty of fraud and sentenced to seven years in prison, released after three and a half years,
he was then deported from the U.K. to Ghana, and he still faces travel restrictions.
CNN's Eleni Giokos spoke with Adoboli, she joins us now from Johannesburg. Eleni, when this happened, he -- I think he was pretty young. He was in
his 20s. Now with years, more perspective --
ELENI GIOKOS, CNN AFRICA CORRESPONDENT: Yes --
SOARES: What did he have to say as to what happened in this case?
[15:35:00] GIOKOS: Yes, you know, it was so interesting, and I have to say this, look, I have done interviews with the wolf of Wall Street, you
know, Jordan Belfort and even Nick Leeson; the guy that brought down Barings Bank, and it was really interesting to speak to Kwaku Adoboli
because he is still pretty traumatized from the deportation to Ghana.
But he also had a sense of responsibility for what occurred all those years ago. But he also said to me that he felt that he was the fault guy, that
he -- that he was the only person who took the fault despite the fact that there were other people involved in those trades that they unaccounted for
that over $2 billion loss.
But no means was he trying to shift responsibility. He felt that, you know, he served his time and of course, he left a lot of lessons. But
what's really interesting Isa here is that this is a man that knows what it's like to trade. High frequency trading, he understands what it's like
to have the pressure of creating maximum profits by taking risk, but of course, sometimes the trades don't work.
And I said, you know, can we draw parallels between what we see in the markets today versus the environment that you're working in back, you know,
pre-crisis levels. And he said, look, markets are sitting at all-time highs, you've got stimulus coming through, and he said to me that he thinks
that the crisis that occurred ten years ago still hasn't fully played out yet. He was also warning about bubbles. But take a listen to what he had
(BEGIN VIDEO CLIP)
KWAKU ADOBOLI, FORMER STOCK TRADER: Well, the reality is that, in low- yielding markets where the Fed is continuing to give stimulus, banks and traders are going to try and deploy that stimulus, and so they will take
risk because they need to generate their profits. So if you layer on top of that, more regulation, what you're actually forcing the traders to do is
to find a way around those regulations, right?
So, it's counter -- it's the two imperatives are contradicting each other, OK?
GIOKOS: Do you feel that you were scapegoated?
ADOBOLI: Look, I was the only person who was held to account for the loss at UBS. But it's well known that there were many people involved in what
happened. So, I've been punished really excessively I think, especially with deportation on top. Now, in order to achieve a deportation, you have
to maintain this narrative that, you know, he's an extra bad person which is, you know, everything is about narratives, right?
GIOKOS: Do you think anything has changed in the world of banking and finance in terms of the risk that they're willing -- these institutions are
willing to take on?
ADOBOLI: Absolutely not. And the reality is that the purpose of the industry hasn't changed. And unless the purpose of the industry moved from
generating profits through extraction of value from processes rather than trying to facilitate growth and the building of communities and societies,
the risk appetite will never change.
It's the purpose that's the problem rather than the risk. So, when your purpose is to generate profits through taking risk and extracting value,
you will always -- you will always get to the same end point, which is that too much risk is being taken because it's a singular goal.
GIOKOS: Looking back now, is there anything you would have done differently?
ADOBOLI: Because we were young -- and you know, how many young men and women are in the industry, 25, 26 today who get asked to do something and
they think, well, if I'm being asked, it must be because it's possible and I've got to find a way to make it work. And when we were 25, 26, 27 years
old, it was, like, well, can-do attitude, we've got to find a way to make this work, right? That's what's being asked of us.
And with the majority I've got now, I would have turned around and gone, you know what? We'll do it but you need to give us more resources so that
we can do it properly.
GIOKOS: Yes --
ADOBOLI: We can do it more safely.
(END VIDEO CLIP)
GIOKOS: And you know what, Isa? I also asked about whether we should see more regulation and whether that could help, and he said -- and so, you
heard what he was saying about the purpose of just being profit-driven. He says, listen, you're going to have more regulations in play, but people are
just going to work actively to find more loopholes and that's going to be the reality.
SOARES: Fascinating interview, Eleni Giokos there for us in Johannesburg. Thanks very much, Eleni, good to see you. Now, when we return, Daimler
wants to revolutionize trucking its plans to combat climate change, and how online shopping fits into everything. We'll bring you that story, next.
[15:40:00] (COMMERCIAL BREAK)
SOARES: Now, online retail sometimes mean slower prices, but some shoppers are starting to worry about the environmental costs like big delivery
trucks that dazzle gasoline and adds to CO2 emissions. But Daimler says electric trucks it is building -- meaning, it can be a sustainable
business. John Defterios has more for you.
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR (voice-over): Daimler is revolutionizing its truck division. On a track at its Stuttgart
headquarters, the Mercedes E-Actros, the woman at the helm believes this is the future.
GESA REIMELT, HEAD OF E-MOBILITY GROUP, DAIMLER TRUCKS: The CO2 emission is really zero, yes. Now, if you look at the energy consumption, if the
energy is green energy, that is charged into the battery, then it's zero as well. So this is huge.
DEFTERIOS: This innovation from the world's biggest truck-maker is made possible by changes under the hood.
REIMELT: Development of electric cars since around about five years, and we see rapid development for the batteries. Until the 2021 launch, every
detail will be perfected in the workshop. What was created in the lab must be tested on the street. Rigterink is ready to do so.
ARNE RIGTERINK, CHIEF EXECUTIVE OFFICER, RIGTERINK LOGISTICS GROUP: From the production to the warehouse to the customer itself, everything you need
is logistics behind that.
DEFTERIOS: Rigterink's company has some 400 vehicles, its driver are on local roads every day, servicing the click, buy and arrive culture of
today's shopper. The German research house Agura(ph) says 38 percent of road emissions in Europe come from heavy duty vehicles, so change is vital.
RIGTERINK: That's part of our philosophy to keep up with new technologies, and as logistics company, we have to think of waste where we can use the
technology to help our nature and our environment.
DEFTERIOS: But we're only at the beginning of the e-truck revolution. Longer distances will require a shift in policy.
REIMELT: If society wants mobility, and if they want it fast, then charging infrastructure is really a topic, it's really a challenge. Here
we all need to contribute, so it would help if governments would invest into infrastructure as well.
DEFTERIOS: John Defterios, CNN, Germany.
[15:45:00] (COMMERCIAL BREAK)
SOARES: Now, this is something to really marvel at. Disney has smashed a record with the highest grossing year for a movie studio ever, and there
are still -- quite a few months -- well, five months in fact to go. Three of its releases this year have made over a billion dollars as
"Avengers: End Game", now the highest-earning movie ever.
Then there's "Captain Marvel" as well as "Aladdin". Two others are close to breaking into a billion-dollar club, it's "Toy Story 4" as well as "Lion
King" which I haven't had a chance to see. And there are more coming attractions in new "Star Wars" film as well as the sequel to "Frozen", both
come out this Fall.
Frank Pallotta is in New York for us. And Frank, this level of dominance is pretty unprecedented. So, it's clear that it's doing something right.
So, what's the secret?
FRANK PALLOTTA, CNN BUSINESS MEDIA REPORTER: Well, the secret is that right now, what people are really going to or what consumers are really
going out to see are, event-type movies. Movies that get you out of your home because at the end of the day, you can just kind of stay home and
watch Netflix or go on social media, you really don't have to go to the movies anymore unless you really have to go to the movies.
So, what Disney has really done is created this big spectacle, these big movies, think of "Avengers: End Game", that's one of the biggest and
broadest comic book movies there is. Think of the "Lion King" with these very photo realistic special effects. They make you feel as if, if you do
not go see it on the opening weekend or at all, you're going to be missing out a cultural event, not a movie, a cultural event.
SOARES: So, fine, really, their strategy is just pay big money for top-of- the-range franchises, they exploit them ruthlessly. Is that roughly it?
PALLOTTA: I mean, that's a part of it, but I also want to kind of contend too as well that anyone can go out and just buy, you know, some of these
companies, I mean, not everyone, but you know what I mean. Like money is not just the only thing. There is a certain level of the Disney brand,
that Disney is just not a studios, it is just not a theme park company, it's not just a media-network company, it's a lifestyle brand.
You know, you kind of wake up in the morning and you eat Mickey Waffles, you go to bed at night watching "Avengers" and you know, maybe Netflix for
now, eventually Disney Plus. So, there's a certain level that they understand their audience very well. They can really buy these companies,
but you have to take it a little bit more than that, and they also have to learn how to really market it to the masses, not just in America, but
SOARES: Let's talk about Disney's rivals, because they're just not competing with other Hollywood studios, they are also competing, streaming
with the likes of Netflix, right? So, talk us through how successful that could be it.
PALLOTTA: Well, it's --
SOARES: That could be for them.
[15:50:00] PALLOTTA: Well, what's going to be really interesting is that right now, as you said that Disney kind of had -- Disney broke the record
with $7.67 billion first year. That was with five months to spare, but in November, is going to be a huge month for the company. It's not only
"Frozen 2", but also Disney Plus will launch in November.
And this is a huge moment for Disney going forward. Think of it this way, they could have this huge, tremendous studio, and if Disney Plus isn't a
big hit right out of the gate, if it isn't kind of circling all of this, the future of the company is a little bit kind of like concerning.
Now, I'm more bullish, obviously, but what I would say is that they are going to be competing less with the Warner Brothers and the Universals of
the world in the coming years potentially, and more with the Netflixs of the world.
SOARES: Well, I can't wait to see if "Frozen 2", I'm sure my son can't either, but although having to deal with the songs afterwards, it'll be
quite painful. Frank Pallotta there for us, thank you very much, Frank, good to see you.
Now, this was a moment when a 16-year-old video game player became a multi- millionaire. I'm not kidding you, watch this.
SOARES: Unprecedented scenes at the first-ever Fortnite World Cup in a packed stadium in New York and with an online audience of more than a
million. Kyle Giersdorf from Pennsylvania beat a hundred other gamers to take the top prize of $3 million, the biggest-ever jackpot in e-sports.
Now, for context for you out there, that's slightly more than Novak Djokovic got for winning Wimbledon, if you remember, after the longest
final match in tournament history. It is a million dollars more than Shane Lowry won at the British Open after four rounds of golf, fighting rain as
well as mud and as well as wind.
It is about six -- I'm not kidding you, six times what the Tour de France winner and the Colombian Egan Bernal got yesterday in Paris after cycling
more than 3,400 kilometers of the multiple mountain ranges. These individuals are sitting down -- we want you to join the conversation.
Get out your phones and go to cnn.com-slash-join. The average age of competitors in the Fortnite World Cup is 16, and the minimum is 13 years of
age. Do you think the minimum should be 13, 16, 18 or should the minimum be eliminated entirely? We want you to cast your vote at cnn.com-slash-
join. You'll see the results at the bottom of your screen there.
And Michael Moore is the president of marketing at Sentinel, the Esports organization behind 'Bugha', that's Kyle Giersdorf's Fornite handle.
Congratulations to you, too.
MICHAEL MOORE, PRESIDENT OF MARKETING, SENTINEL: Oh, thank you --
SOARES: First of all, how is 'Bugha' doing? How is he celebrating?
MOORE: Well, he is there in New York with his -- his whole family is there. They all support him, so it's super awesome to see them, you know,
celebrating the big win together.
SOARES: Let's talk about the business because this is fascinating right around the world. How do you go about recruiting, Michael, recruiting
these young boys? What skills are you looking for?
MOORE: You know, it's a little bit of -- I don't want to give away too much of our trade secrets --
SOARES: I'm not asking you for trade secrets, just roughly the skills. What --
MOORE: Yes --
SOARES: Can I do it? Can anyone do it?
MOORE: Yes, I mean anyone can do it --
SOARES: Were you looking for a particular age?
MOORE: We're just looking for the best. The best of the best at playing games and that can be anyone. You know, we keep seeing these really young
16-year-old guys --
SOARES: Right --
MOORE: Who just like have -- are really talented, and you know, finding them is part of our job and helping them grow them into professionals who
can compete and, you know, take home $3 million prize pools.
SOARES: Which is a quite significant sum. You say they're very talented, do you have to have for example attention, your attention, you have to be
very -- you know, a very good attention span, you have to just understand the gaming world? What exactly -- I mean, my husband loves gaming, and he's
always said to me, I wish someone could pay me. He's just 40 --
MOORE: Oh, yes --
SOARES: I wish someone could pay me to do this --
MOORE: And that's all of our dream, but it's a lot of work that goes into what these guys do. They practice a lot, they spend up to 14 or even 15,
16 hours a day practicing, which is, you know, no joke. It takes a lot of dedication to, you know, to be at the top of their game.
SOARES: At what age -- I mean, we were asking people the minimum age to enter what it should be, the 13, 16 or 18 --
MOORE: Sure --
SOARES: People are voting no as we speak. What age are they considered too old, Michael? At what point do we say -- you say actually, you're not
the right candidate?
[15:55:00] MOORE: I mean, it's hard to say. I don't think there's any like actual hard age limit on the upper end for us, really, the best of the
best is all we're looking for, and if that person happens to be 30, then that's who we would -- you know, who would be the best.
You know, these young guys who have a lot of time to devote to practicing and you know, their hand-eye coordination and everything like that is still
at its peak, and I think -- you know, that's why we see a lot of these young guys really performing at the top of their game, but no, there's
definitely no really hard upper limit.
SOARES: I'm sure you've heard this criticism. The Duke of Sussex has called for Fortnite to be banned, saying the game had created addicts,
basically. What do you say to that criticism?
MOORE: You know, I think it's important to be cognizant of that kind of stuff and make sure we're creating healthy kind of habits in our kids. You
know, I'm a father, and I plan on, you know, taking an active role in making sure my kids, you know, are balancing life and everything, you know,
past-times and things that they enjoy.
So, I don't think it necessarily makes sense to try and, you know, keep kids from engaging in gaming which is, you know, in a lot of ways a social
space, things they do with their friends --
SOARES: Yes --
MOORE: You know, helps them, you know, with a lot of different life skills that I think, you know, in moderation, gaming can really be a positive
SOARES: Very quickly, Michael, do your children play video games and how long for?
MOORE: They're a little too young, they're a little too young right now, but I hope someday to be, you know, playing -- enjoying games with them,
SOARES: You're already training a winner, thank you very much there, Michael Moore. I appreciate you taking the time to speak to us here on CNN
MOORE: Yes, thank you so much.
SOARES: Now, we are approaching the close of trade on Wall Street, we'll have the final numbers and the closing bell, well, right after this. Do
stay right here.
SOARES: There are just a few moments left to trade on Wall Street. You see the Dow is not moving pretty flat, to be honest, the Nasdaq and the S&P
have both given up a little ground after setting records on Friday. Stocks have been really just about flat.
All day as investors wait for the Fed's rate decision later this week as well as developments in the U.S.-China trade talks as well as a slew of
data that we're expecting out of the United States. Now, I want to take you to Europe right here in the U.K.
The British pound, look at, sliding again, touching a two-year low against a dollar down almost 1.5 percent. The new British Foreign Secretary says
the government is stepping up preparations for a no-deal Brexit. And that gives you a sense of -- there it goes of how people --