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Quest Means Business
Facebook Has Good Earnings Report While Twitter Falters; Apple Pay; Dow Rallies; European Markets Higher; Sweden Moves Interest Rates to Zero; Obama on Ebola; Authorities Respond to Ebola; Uganda Accuses West of Creating "Mass Panic"; Two Readings on US Economy
Aired October 28, 2014 - 17:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: A strong performance by the markets, a nice sea of red (sic), the Dow was up more than 1 percent when the market closed an
hour ago. Trading has come to an end across the globe. It is Tuesday, it's October the 29th (sic).
And tonight, there's a real social media melee. Facebook posts profits that beat expectations while Wall Street's turning on Twitter.
Also, Australia slams the door on travelers from three African countries. Uganda says the West is causing panic over Ebola.
And all for naught. The head of Sweden's central bank tells me tonight why he cut rates to zero.
We have a very busy hour together. I'm Richard Quest, I mean business.
Good evening. Tonight, Facebook has made some new friends, while Twitter shares have taken a sharp dive. We had Facebook results within the
last hour after the market closed. And if you join me at the super screen, you'll see exactly now -- after the last round of earnings, Twitter is
finding itself very firmly in Facebook's shadow.
Last night, when you and I were having our nightly conversation, we talked about how Twitter simply wasn't performing. We had Facebook's
number, which were much better. Just have a look and I'll show you.
In terms of active users -- active users, Twitter has shown consistently slow growth. However, when we talk about Facebook's active
users, we see a very sharp rise. And that, of course, is good news.
Facebook, of course, in terms of the other attributes, the revenue front. It says -- now, Facebook topped expectations, whilst Twitter missed
expectations. So, Facebook gets another sharp tick and a green. Twitter missed fourth quarter.
Then you have the share price. And if you look at the stock price for Twitter, well that's what shows you what happened, you've really got to --
that shows you what happened on the earnings.
Now, although Facebook's price was down just a little tad overall, that doesn't really tell you the full story, because year-on-year, Facebook
is up much higher. Twitter is down 31 percent for the year, Facebook is up 48 percent.
So, that's the way you look at it, down 30-odd percent and up 40 percent. It shows you the difference between the two. Our business
correspondent is Samuel Burke. He's with me now. Good evening, Samuel.
SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: Good evening.
QUEST: Good evening. Let's get to grips with this. As I looked at the numbers, which were only out just a short while ago, Facebook is
performing well on all the relevant matrices.
BURKE: Beating expectations for revenue, $3.2 billion as opposed to expectations of $3.12. Earnings per share 43 cents as opposed to
expectations of 40 cents. This company has strong mobile ad revenue, 66 percent of the company is now mobile ad revenue, and that's exactly what
the investors wanted.
QUEST: Right.
BURKE: But the stock is down right now.
QUEST: Well, we'll come to that stock down in a second. The fact -- everybody worried, and even Zuckerberg had said on many occasions that they
had perhaps not -- they were slow at getting their mobile strategy right.
BURKE: Oh -- I think I came on your show and said the app just isn't good enough.
QUEST: Right. And --
BURKE: I'm eating some crow, now.
QUEST: Right. The -- but it proves, now, that they have turned that around.
BURKE: Exactly. They've turned that around, and boy have they done it. And the most interesting part to me is that it's because they're
selling ads for other mobile apps. That's where this robust growth comes from. When you're on Facebook on your phone and you see an ad for another
company's app, that's where they're making their money.
QUEST: So, why -- obviously there's an idiom to buy on the rumor, sell on the news. But why is the market a tinge unhappy tonight.
BURKE: Ooh, I was poring through the numbers and I kept scratching my head and scratching my head until I found this. In a separate filing with
the SEC, we have the WhatsApp numbers. And I talked about eating some crow a few seconds ago. Boy, Richard, I think I'm going to be eating even more
crow.
Because WhatsApp -- remember, they paid originally, they said they were going to pay $19 billion --
(CROSSTALK)
QUEST: Nineteen, twenty --
BURKE: -- it turned out 22. $22 billion.
QUEST: Yes.
BURKE: Well now on these numbers we found out WhatsApp only brought in $10.2 million in revenue last year for a loss of $138 million. That's a
big loss for a company that you paid $22 billion for, Richard.
QUEST: Right, but that assumes -- and I'm going to be devil's advocate here, because I was -- I heavily criticized that deal, and you
argued with me about it.
BURKE: Oh boy, did I.
QUEST: Forget those number, 10 versus 138. If -- if -- WhatsApp is bringing Facebook more traction elsewhere for the company, then that
number's irrelevant.
BURKE: I don't see that it's bringing more traction to Facebook elsewhere. Yes, WhatsApp is growing. There's no evidence that people are
abandoning it. It's still as strong, if not stronger when they bought it. But is it bringing home the bacon? We don't see that. Is it directing
people to other parts of Facebook? No.
(CROSSTALK)
QUEST: Is it creating an echo structure? Is it creating a series of web links between users that they can amortize?
BURKE: Absolutely not. I'm firm and confident in saying that you're not seeing connections as a user between WhatsApp and Facebook, and that's
the only reason that I can see in this filing why the Street is reacting this way.
QUEST: Now, back to Twitter, because this is fascinating. Those of us in the media use Twitter as a news agency, and prime ministers put
statements out on Twitter. But if we look at these Facebook versus Twitter, are we able to say the game has been won and lost yet?
BURKE: Without a doubt. Let's just use the best number that we can. Monthly active users for Facebook --
QUEST: Right.
BURKE: -- they just announced that they're now at --
QUEST: One point --
BURKE: -- 1.35 billion. Twitter, we found out yesterday, 284 billion (sic). I think some investors thought with Twitter they had a second
chance to get in on a social network that could be as big as Facebook.
QUEST: Right.
BURKE: It is not.
QUEST: Finally, Apple Pay?
BURKE: Apple Pay.
QUEST: Apple Pay. It's got some problems with a couple of drug stores in the United States, but Tim Cook is saying it's the big -- it's
now the market leader.
BURKE: Tim Cook says that, and he announced that they have 1 million registered credit cards -- that's not 1 million people. But this is a big
problem. Everybody wants to get into this game, and these two pharmacy chains that pulled out from Apple Pay, you can't use it there anymore -- it
defeats the whole purpose.
They want you to be able to leave your credit card at home and use it everywhere. If you can't use it everywhere, Apple Pay, then you have to
take your credit card with you, Richard.
QUEST: Early days. Early days. Don't touch the bell. Thank you, Samuel Burke. Oh! US stock markets shot up on Tuesday. I showed you the
numbers. Look at that, 187! That's worth a --
(RINGS BELL)
QUEST: It's back over 17,000. Consumer confidence index rose more than expected, it's a seven-year high. And prices for single-family homes
rose at the slowest pace nearly two years. Gold! The price is up as investors speculate about how long the Fed will leave rates near zero. To
Europe and the European markets.
(RINGS BELL)
QUEST: Strong earnings put the indices higher. UBS gained nearly 6 percent. The bank reported earnings that beat expectations. The bank also
said it put aside nearly $2 billion to cover legal expenses related to currency rigging.
Novartis, the drug maker, also saw its shares rose, and it helped offset falling revenues. The markets we'll show you a little later in the
program.
Fears over low inflation in Europe led one leading central bank to take a drastic measure. Sweden's Riksbank cut interest rates to zero on
Tuesday. The Swedish economy is much stronger than its eurozone neighbors. Cutting rates to zero enables the central bank to deal with the strong --
or the currency strength and at the same time other economic factors.
The central bank's deputy governor resigned last year when fellow policymakers ignored his calls for steeper cuts. Stefan Ingves is the
governor of the Riksbank. He joined me before we came on air, and I asked him how relatively small cuts could have the impact.
(BEGIN VIDEOTAPE)
STEFAN INGVES, GOVERNOR, SWEDISH RIKSBANK: What one has to be mindful of is that we have moved the rate down from 0.25 to zero, but before that,
we have gradually lowered the rate for quite some time. So, this is the final step towards zero.
But all-in-all, monetary policy here is very expansionary, because we don't have problems in the financial sector. And that means that if you
look at the rates that people borrow at, the Swedish rates are lower than in most other countries in Europe. So, with that kind of measure, our
monetary policy is presently very, very expansionary, and that should help when it comes to getting inflation up.
QUEST: Into this, why didn't you go for more aggressive policy, basically of bond-buying, QE? Why is it not suitable for Sweden?
INGVES: We don't think that there is presently a need to do that, because we don't have the same issues that many other countries have had
regarding the functioning or the lack of functioning of the financial sector.
And also, if you look at, for example, the growth numbers, the growth numbers are pretty good, and we expect them to get better over the next few
years. So, in that respect, we think staying at zero is the right way to do it.
QUEST: The krona, which of course presents an entirely different set of problems, the -- you clearly would benefit from a further devaluation in
the currency. Now, I realize that your current measure was designed for inflation purposes, not currency purposes. But at some point, will you
need to put in place a currency policy?
INGVES: Not as far as I can judge presently. We have had a floating exchange rate now for many, many years, and it's more than 10 years since
we intervened in the currency market the last time. And the system that we're using presently, that has served us well.
Keeping the policy rate at zero should bring inflation up, given that things are improving, actually, also in the rest of the world, that means
that our exports will go up over time. Unemployment is actually on its way down. All-in-all, this will push prices up.
And as I said earlier, there are no issues in the financial sector. Actually, the one issue that we have, and that's a difficult one, is that
households are borrowing too much, and we have -- we need to deal with that issue. But except for that, there's no lack of supply on credit.
QUEST: So, you wouldn't consider a Switzerland currency flaw that really just says to the market don't go there.
INGVES: As far as I can judge, when it comes to what we have decided presently and when we're looking to the future when we make our
projections, I just think -- I just don't think that that's in the cards.
Zero, that's where we are for now. We'll stay at zero for quite some time to come, given what's going on in the rest of the world, given that
things are improving in many other places, that will help aggregate demand domestically in such a way that prices will start moving up and eventually
we'll get to our inflation target of 2 percent.
(END VIDEOTAPE)
QUEST: I can honestly say there's not many days that those of us of a certain age remember where you'd hear central bankers say, "We will stay at
zero for some to come." It's a sign of how times have changed in the financial world.
As Western nations try to work out how to protect people from Ebola, leaders in Africa say panic measures are counterproductive. You're going
to hear from Uganda and why they think the West is causing panic potentially.
(COMMERCIAL BREAK)
QUEST: President Barack Obama spoke on the telephone earlier today with US workers who are helping to fight against Ebola in West Africa. The
president spoke to the media afterwards, and Mr. Obama reiterated his support for them.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We want to make sure that we understand that they are doing God's work over there, and they're
doing that to keep us safe. And I want to make sure that every policy we put in place is supportive of their efforts. Because if they are
successful, then we're not going to have to worry about Ebola here at home.
(END VIDEO CLIP)
QUEST: Well, France is the latest nation to announce it's stepping up the fight against Ebola in West Africa. Of course, this is where the locus
is, around Guinea. France -- the French Red Cross is to open a 200-bed health center in Guinea and two training centers for health workers, one in
Guinea and one in French Guinea. The moves are part of the commitment, it's worth around $25 million in aid.
Switzerland -- the Swiss regulators have given the go-ahead for a trail of an Ebola vaccine. Now, there are other trials, you'll be will
familiar there, in the United Kingdom, they're in the United States, and there's a trial taking place in Mali.
And all these various trials are being railroaded through as fast as possible. In many cases, obviously, almost with a wink and a nod to any
regulations.
The Australian -- this is the others side of the story tonight -- the Australian government says it has stopped issuing visas to people from
countries affected by Ebola and is to impose a three-week quarantine on Australians coming home from the region. This is exactly the sort of visa
ban and travel restriction that many have criticized when the US was considering it.
And the Australian approach has been widely criticized by international aide groups. The Ugandan government says Western nations are
creating "mass panic" about Ebola. Uganda is not a country affected by Ebola or where it's been diagnosed.
And in fact, it's far from the worst-affected countries. It's quite, as you can see, Uganda is over there, the countries involved are over
there. That is a continent adrift.
Uganda's information minister, Rose Namayanja joins me now on the line. Minister, your words about causing panic, the West causing panic, do
you believe we are already there?
ROSE NAMAYANJA, UGANDAN MINISTER OF INFORMATION (via telephone): I believe we are (inaudible). It's a level of panic to us because for us as
a country, we have had episodes of Ebola before, and it is also wrong to say that whoever is affected by Ebola is going to die.
Yes, we had issues in 2001, and they're set, very set, to prepare in advance, then having our people protected, protective equipment, medical
supplies. And then, the other very simple but effective measures to isolate areas that are affected, identify anyone who has had contact with
the victims, contact those who may be affected, carry out steps, and treat them.
For instance, for us in 2012, we had 173 cases where people were infected, and 69 percent of them survived.
QUEST: Right.
NAMAYANJA: Now, the worst to me is for medics, the medical workers, to be isolated. I head President Obama saying that these people are doing
God's work. They don't need to be stressed. They don't need to be demoralized.
Now, for somebody who has volunteered, for instance, as a country in Uganda long before even the World Health Organization was saying --
declared this as an emergency --
QUEST: Right, but --
NAMAYANJA: -- we already had our medics in Liberia. But we --
QUEST: Let me interrupt you. Minister, if I can just jump in one second, forgive me, Minister. What do you, then, think --
NAMAYANJA: Sure.
QUEST: What do you, then, think of Australia's decision to have this visa ban, which basically is saying to the three countries involved, don't
come here?
NAMAYANJA: I think they should have taken protective measures, like screening at airports and motor vehicles. When you ban, that means leaving
out medics that were in those three countries, cannot even access their country. Or when they come, they have to be quarantined. And that is a
stigma, because it even defeats the instance of protective gear.
You are really seeing even when you have protective gear, you can be affected, or you can be -- it has no meaning. So, to actually believe that
is disappointing that the (inaudible) of certain Western countries would be basing public policy decision --
QUEST: OK.
NAMAYANJA: -- on panic and misinformation rather than science and medical advice.
QUEST: Do you now fear, Minister, finally, do you now fear that other countries -- let's face it, if Australia's done it and the call is already
in the United States to do it, and there will be other countries, perhaps in Europe, that will do it -- is it your serious worry that Africa now --
or at least the affected countries -- gets cut off from the rest of the world?
NAMAYANJA: That's what it means. And we don't want anybody to think that this is actually an African problem. It is a global problem, and it
is a problem that we must all -- handle together. Because if you say this country or the other country who are cutting off that country, and in a
way, it does not only affect travel and movements here and there, but even the economies of these countries.
QUEST: Right. Minister, we will leave it there. Thank you for joining us this evening. I appreciate you giving us time in what is
obviously a very busy agenda for you. Now -- that's the minister talking to me from Uganda.
When we return, there are two views that we need to bring you on the economy, and they're joining us in the C Suite. One is a chief exec who
has his hand on the wheel quite literally, whilst the other has his hand on the Do Not Disturb sign.
(COMMERCIAL BREAK)
QUEST: As we look at the business world tonight, you're going to hear from two chief execs who have their fingers very firmly on the pulse of not
only the US economy, but in many ways, the global economy as well.
And the two companies -- and you'll see why they are such good example -- one runs a leading hotel franchise, which is Choice Hotels, whilst here
in the US, the other is the head of the biggest auto retailer in the United Nation (sic), it's AutoNation.
Now, both companies have just reported rising earnings in the third quarter. But it's more than just the earnings that we need to discuss
tonight, because they are good barometers of the wider economy.
So, first, I spoke to Mike Jackson, who's AutoNation's chief executive. He told me the outlook's good, despite endless safety recalls
that have plagued the US auto industry.
(BEGIN VIDEOTAPE)
MIKE JACKSON, CEO, AUTONATION: This will be a record year for recalls, Richard, 60 million vehicles. Two of them, very serious, the
situation with the ignition switch on the GM products, and now this air bag inflator with the supplier Takata.
Now, the vehicles involved in both cases happen to be very old, anywhere from 8 to 14 years old. So, it's not the original owner, it's not
really the new vehicle market. But I -- these are very disquieting recalls, and the way they came about, no one in our industry can be happy
about.
If I look at this Takata recall, while the individual incidences are rare, when they do occur, they're very serious. It's now caught up with
ten different manufacturers. And we don't have a coherent answer of what to tell our customers. Some manufacturers say it's OK to drive the cars,
and other manufacturers say you have to disconnect the air bag, it's so serious.
And I really think NHTSA, the agency in Washington that is supposed to keep the American consumer safe in driving in their vehicles, has given out
a lot of misinformation. Their answers haven't been compelling. And I think in this circumstance, we need one coherent answer for the American
consumer as what's right to do in this case.
(CROSSTALK)
QUEST: Are you --
JACKSON: We've stopped selling any vehicles we have in stock that need this recall until they're repaired.
QUEST: But are consumers expressing a reservation? Are they asking your sales teams about -- are they asking more often now about safety
issues?
JACKSON: I think this year, yes. I think in most years, people actually -- most recalls are not that serious, not that life-threatening.
QUEST: Right.
JACKSON: But here we've had two life-threatening recalls of a dramatic magnitude occur. It is absolutely a point of conversation in our
service departments and our dealerships across the enterprise today.
QUEST: Right. What do you now find exciting on the market? Not necessarily a particular car or a particular model, but what you're seeing
as a trend, what's exciting you?
JACKSON: The thing that no one expected, Richard, a few years ago that has occurred is that the industry would be able to offer the American
consumers dramatically-improved fuel economy, not with hybrids and electrics, but with the traditional internal-combustion engine.
But by putting high-tech computers in the car to mange the combustion process, we can give our consumers 20 to 25 percent improvement in fuel
efficiency without charging that much more money. Nobody thought that was going to happen, and it has occurred.
In the past, when the American consumer wanted better fuel efficiency, we had to tell them to buy something smaller and go slower. Well, telling
the American consumer to go backwards is never easy and never fun. Americans don't like going backwards. So, they've really embraced this.
Now, we have an irony at the moment with collapsing gasoline prices that the sensitivity around fuel efficiency can go away very quickly. The
American consumer has a very short memory.
(END VIDEOTAPE)
QUEST: Now, even with the American consumer's short memory, falling gasoline prices should translate into more travel. Stephen Joyce is the
chief exec of Choice Hotels. He joined me in the C Suite just before we came on air.
Looking -- you've heard how the car companies perform. Now, the hotels. He gave me his take on the travel business and the challenges he
faces.
(BEGIN VIDEOTAPE)
STEPHEN JOYCE, CEO, CHOICE HOTELS: The biggest issue, which is both the biggest opportunity and the biggest risk, is this distribution
environment that we're facing.
So, the way customers want to book, how they book, where they book, what do they want to see when they book it, and as a result, the customer
is moving rapidly. And I can't hire anybody to work in my business and e- business that has been out of it for six months, because then they're a dinosaur.
So, every month, there are dramatic changes. iPhone just made it. The phones are getting bigger, the iPads are getting smaller. People want
to book in different ways. Mobile -- we're over half mobile now.
QUEST: Right. But you would prefer people to book on your website.
JOYCE: Absolutely.
QUEST: But you can't control that when you've got the aggregaters and you've got the others who are selling your rooms.
JOYCE: But I can give them reasons to book on my website and not have to leave. So, for example --
QUEST: Only if you can offer them the same price.
JOYCE: No, we always offer -- our prices -- the lowest price available to our consumers is always on our site. So, we guarantee that to
the consumer. And there's some confusion out there, but it's beginning to wane off.
The other thing we do -- a lot of people are looking for reviews, independent, credible reviews. So we went ahead and put those on our site,
so customers who actually have stayed in hotel, giving real reviews, good or bad -- 80 percent of them are positive, 20 percent not so positive.
QUEST: So if I write that it was a lousy hotel with appalling service, it will be on the site?
JOYCE: It will be on the site. We might correct your language if it gets inappropriate in some description --
(LAUGHTER)
QUEST: Well, I --
JOYCE: -- but it will be on the site. And our general managers, we have them reacting to that customer, talking to the customer about what we
can do to make it better.
QUEST: The one shift I hear again and again -- and I'm sure you're going to validate it -- is that it's no longer generational when you're
looking at your segmenting. It used to be there was the young, the middle- aged, and the elderly. But it's no longer generational, is it, the way you separate?
JOYCE: There are two major forces that we look at. One is, basically, where do you stand on your income level, your household income,
your security in your job? That defines for us some of the segments.
Then, in addition to that, you do have a major generational shift coming, 17 is the year the millennials cross over. But what we're finding
is millennials are not this monolithic group. And by the way, what millennials want, boomers want, too, for the most part. So, boomers want
more choice, too, they just haven't demanded it up to the way the millennials will.
QUEST: So, how important for you, amongst all the other things, is the good night's sleep?
JOYCE: Well, we're --
QUEST: Because I'm tired of GMs and CEOs rambling on about areas and experiential and generational, when what it really is about is hot water
out of the taps and a good night's sleep.
JOYCE: Yes, so what we've done -- and we are -- we've reinvented sleep, and now we're reinventing comfort. We've put $40 million of our
money to make sure you had a good bed, a good TV, and a good shower. Because that, with a free breakfast, is what makes our customers very
happy.
(END VIDEOTAPE)
QUEST: Two views on the wider economy.
The outgoing president of GDF Suez on the changing landscape of the French energy industry in a moment.
(RINGS BELL)
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in just a moment. This is CNN, and on this network, the news always comes
first. Military (ph) Kurdish forces from Iraq are heading for battle in the city and town of Kobani. A convoy of fighters left Erbil today.
They're closing - crossing - into Turkey and will continue to seriate (ph) to join fellow Kurds fighting ISIS. Reinforcements are expected to arrive
in the next few hours.
President Barack Obama says Liberia is making some progress in its efforts to contain Ebola. The President said the best way to stop the
outbreak is at the source. However, Australia said it will stop issuing visas to anyone wanting to enter Australia from Liberia, Guinea or Sierra
Leone.
Thousands of mourners have lined the streets of the Canadian city of Hamilton today.
(BAGPIPES PLAY)
QUEST: They were paying their respects to the soldier killed by a gunman in Ottawa last week. Michael Zehaf-Bibeau shot Corporal Nathan
Cirillo dead while he was on guard at the National War Memorial. In the past few moments, the United States has raised its security level at
government buildings in Washington and across the country in light of the Canadian attack.
The South Korean News Agency Yonhap says North Korea's leader Kim Jong-un stayed out of sight for more than a month because he had a cyst - a
surgery to remove a cyst off his right ankle. Now, photos of Kim released this month show him using a walking stick. The report also says the
condition could reoccur.
A river of lava is advancing ever closer to homes near a volcano in Hawaii. Local officials say the lava flow is threatening to destroy its
first house in Pahoa. The lava is moving at about 8 to 10 meters per hour. It's already consumed fields, it's buried fences and it's blocked roads.
One of the world's biggest oil companies says it's being squeezed by falling oil prices. BP profits dropped 20 percent in the third quarter.
It also pointed to a drop in income from its share in the Russian state oil producer Rosneft. Come over here and join me at the Super Screens and
you'll see what I mean. Now, look, this is how Brent traded. They've got Brent up at 108, you've got a sharply falling price, and then you have an
escalation in that fall that happens at the beginning of October. Now, if you bear in mind that most of the prognoses and most of the thinking was
that oil would be around - I know a hundred or a hundred or so dollars a barrel. I hope that looks for maybe a little bit more. We're well under
that reference price down in the 80s. Fereidun Fesharaki is the chairman of the energy consultancy FACTS Global Energy, and joins me now from
London.
Let's put this into perspective. The oil companies say they made less money as the price fell. But explain how that is, because if they're
making - if they're charging less and bringing less in, they're also paying less on the other way out when they pay for the supply at the pump - at the
oil well. So, why doesn't it balance out?
FEREIDUN FESHARAKI, CHAIRMAN, FACTS GLOBAL ENERGY: Actually most of them are producers, so they produce the oil at a certain cost. And if they
sell it - the $100 they make it off more money than if they save at $80/$85. So, it is a difference between the cost of production and the
price of the market which is reducing their profitability.
QUEST: Right. Now in that scenario, are we at a price - $83/$85 when it's - I mean, how difficult does it become to continue production
exploration at these levels?
FESHARAKI: Actually for conventional oil production, average costs are less than $20 a barrel, so still you're minting money at $80 or $85.
The problem is unconventional oil like shale liquids in the U.S. or the Canadian oil sands. But the cost of production is the range of $60 to $80
a barrel. So, they are close to the point where there will be some losses of production and restrictive pricing likely to go down further. And that
means that things can become more difficult for the oil companies.
QUEST: Right. Now, where does the logjam break here? Does OPEC blink and cut production, thereby reducing supply? Or - which of course
would prices up - or do we have to wait or do the producers have to wait until oil shale, more expensive Canadian/U.S. prices itself out of the
market?
FESHARAKI: Well, there are two issues here, Richard. One is that OPEC really has meant to be only Saudi Arabia. Saudi Arabia is the swink
(ph) producer. They go up and down to balance the market. And that is one problem. Then other OPEC countries don't participate in the cutbacks to -
QUEST: Right.
FESHARAKI: -- to try to control the market. Second of course is the unconventional producers in the United States and Canada, so the prices go
down, people will learn religion, and they accept to participate in this supply discipline. So both sides - inside of OPEC and outside of OPEC -
the Saudis are not going to carry the burden on their own anymore.
QUEST: Now, sir, let's talk about the Christophe de Margerie whose death was a blow to the French energy industry. Now you knew Mr. de
Margerie. The funeral service was held in Lusford (ph) for us. As you reflect on his contribution and now what happens next for that company, but
particularly about the man himself - with the passage of a few days since the horrendous accident in Moscow. What are your thoughts?
FESHARAKI: Well, he was an iconic character. He had a number of very strong views. He felt that sanctions/politics should not interfere
with production. He felt that long-term we may still end up to be short of oil, so we shouldn't create environment where the production is interfered
with. He didn't think that the sanctions on Russia were the right way to go. He believed that Russia has such huge resources, it should be allowed
to produce. His was a very strong view which are pro-production and pro- market, and he was iconic and a big spokesman for the industry in that regard.
QUEST: Thank you for joining us tonight from London and putting the oil industry into perspective. It's always something we follow very
closely on "Quest Means Business." Now, Christophe de Margerie's death was a blow indeed to the French energy industry which is experiencing numerous
shifts in leadership. CNN's Jim Bittermann is in Paris for us tonight.
(BEGIN VIDEOCLIP)
JIM BITTERMANN, CNN'S SENIOR EUROPEAN CORRESPONDENT BASED IN PARIS: A plane crash in Russia suddenly and dramatically ended the career of the CEO
of French oil giant Total Christophe de Margerie, and just as bluntly, brought home to analysts in France that the leadership of the country's top
energy companies is undergoing striking change.
Just hours before de Margerie died in the fiery plane crash, it was announced that the president of the nuclear power company Areva was
unexpectedly stepping down for health reasons. Less than a week before that, the head of the state electricity company, Electricite de France was
told the government was not renewing his contract. And just last week, GDF SUEZ announced it had picked a successor-in-waiting for the present
president who will retire in 2016.
CHARLES HUFNAGEL, SENIOR EXECUTIVE VP, AREVA: Very special.
BITTERMANN: Four major developments that left industry insiders anxious to sound reassuring.
HUFNAGEL: To talk about the leadership is a little bit too early. We are still in the moment of emotion, so we'll see what's going on. But the
leadership of (inaudible) strategy is strong and our commitment to nuclear and to renewable will remain.
BITTERMANN: But if there will be continuity in the guiding philosophy of the energy companies, the leadership changes drew into focus
the kind of challenges the French companies which have been world leaders in oil, gas, nuclear and electricity the kind of challenges they are now
facing.
OLIVIER MAISONNEUVE, ENERGY ANALYST: Because of the fact that the regulative tariff will end through the period during which we could have
kept the historical tariff land, and it will be a very challenging moment for the former monopolies - EDF and GDF SUEZ.
BITTERMANN: With few natural energy resources of its own, the French government said today that Charles Degall (ph) has nurtured and invested in
and closely regulated its energy supplies. But now with more open markets in Europe, smart (inaudible) and a host of other political and
technological changes, protected markets are a thing of the past. Said GDF SUEZ, the outgoing president acknowledges his replacement will face that
challenge along with declining demand and weak economies in Europe.
GERARD MESTRALLE, CEO GDF SUEZ: We are shifting from the old world of decentralized energy to the new world which is the world of much more
decentralized, much more connected and digitalized and renewable. And we want to be present in North America, Latin America, Middle East stations.
BITTERMANN: So the strategy is to internationalize and to diversify?
MESTRALLE: Yes.
BITTERMANN: That is in fact the strategy that all of the French energy companies are pursuing, companies which are now for the first time
in competition with each other as well as producers from outside the country's borders - something their four new leaders will have at the top
of their agendas. Jim Bittermann, CNN Paris.
(END VIDEOCLIP)
QUEST: Now in a moment, the five BRICS want to create their own development bank. They've been intending to do that for some years.
There's a lot of work yet to be done by Brazil, Russia and the rest. In a moment.
(COMMERCIAL BREAK)
QUEST: Brazilian shares have bounced back after the selloff on Monday. We're talking about the BRICS - let's start with the Brazilian
recovery that will (inaudible) Brazil. The stocks rebounded, the main index finished more than 3 percent higher. It's now made up all the losses
that followed the reelection of President Dilma Rousseff and it comes during uncertain times for the remaining countries in the BRICS. We've had
a lot of news on BRICS over the last 24 hours. For instance, we talk about China - well here we've had a case of standard charter which is warned that
business is getting tougher in China and in India, two more countries that are going through their economic transitions.
Russia's finance minister - well this is fascinating - now admits a massive hole in its finances and he said it's working on an alternative
economic reality, and the reason of course from the graph that we showed you earlier - that fall in prices that we saw. Well, that of course pushes
Russia deep into the red. Staying with BRICS in the wall - South Africa only last week cut its growth forecast. Now all the countries are warning
that they're having difficulties, but they will also be channeling money into a new development bank. It's the BRICS own answer to a regional IMF.
In this week's "Future Finance," Andrew Stevens explains why a BRICS IMF is not such a bad idea.
(BEGIN VIDEOCLIP)
ANDREW STEVENS, ANCHOR AND CORRESPONDENT AND CO-HOST OF "CNN NEWSROOM, LIVE FROM HONG KONG": That the future of wealth is the core of economic
development achieved by letting capitalism loose and supported by a strong financial system with access to international funding - funding to build
the cornerstones of a successful economy.
(BEGIN CLIP)
Male: -- Secretary of State Dean Acheson officiates at the -
(END CLIP)
STEVENS: Since the end of the second world war, the World Bank and the International Monetary Fund have been key in helping channel resources
and support into emerging economies, countries including the so-called BRICS - Brazil, Russia, India, China and South Africa. They are home to
more than 40 percent of the world's population and more than 20 percent of global GDP. And now the BRICS have decided they need their own world bank
IMF-style institution to be known as the New Development Bank or NDB, set to start lending in 2016.
SUBIR GOKARN, DIRECTOR OF RESEARCH, BROOKINGS INDIA: We can drive the agenda, they can decide on the priorities of what kinds of projects need to
be funded. But I think the BRICS Bank is really a departure from the old tradition of development (institutions).
STEVENS: Each of the five BRIC countries will contribute $10 billion to the NDB, and on top of that, there'll be a $100 billion emergency
reserve. That reserve which China will contribute $40 billion to, will be used in case of an economic crisis in one of the member countries. The NDB
could also open the way to financing massive projects to draw the BRICS closer together says emerging markets expert Mark Mobius.
MARK MOBIUS, EXECUTIVE CHAIRMAN, TEMPLETON EMERGING MARKETS GROUP: They have to be daring enough to innovate and try new things. In other
words, finance projects that other banks would not be willing to finance.
STEVENS: One of the biggest worries you have about a new BRICS bank?
MOBIUS: Why, the biggest concern would be that they don't pick the right projects, they don't pick the right partners and they are too
insular. In other words, they just limit their activities to Chines banks, Russian banks, you know, Brazilian banks.
STEVENS: But don't expect this to be a trailblazer for a development banks in other parts of the world, at least not yet.
GOKARN: They're the ones which bought the resources and the investment opportunities, which is what makes this arrangement viable. But
I think BRICS, if it succeeds, certainly provides an opportunity to expand its coverage by bringing more countries into the fold.
STEVENS: Perhaps not a new era, but certainly an experimental first step in the world of development finance.
(END VIDEOCLIP)
QUEST: The future of finance. It costs the global economy nearly half a trillion dollars every year and loss enforcement and - law enforcement -
is scrambling to get ahead. It's the battle to prevent cybercrime, and as we continue our "Dark Web" series, we will explore the deep recesses of the
cybercriminal.
(COMMERCIAL BREAK)
QUEST: Tim Cook says Apple Pay has been a huge hit for the company. The chief exec says more than a million credit cards have been registered
with that service, and that's only in three days. After a series of data breaches at big U.S. retailers, Mr. Cook says consumers want a safe way to
make payments. Well, just how safe in the second part of our "Dark Web" series, Maggie Lake greets the people on the front lines in the fight
against cybercrime.
(BEGIN VIDEOCLIP)
MAGGIE LAKE, BUSINESS ANCHOR AND HOST, "WORLD BUSINESS TODAY" SHOW: It's estimated cybercrime costs the global economy around $400 billion a
year and it's growing in scale and sophistication. Law enforcement is having to do the same. Europol in the Netherlands is spearheading Europe's
fight. They have a new cybercrime center.
ROB WAINWRIGHT, DIRECTOR, EUROPOL: We need to up our game in terms of developing our digital forensic skills for example, and certainly in terms
of our international coordination.
LAKE: In Washington, the U.S. Secret Service helped prevent over a billion dollars in fraud losses from cybercrime last year. What do you
need on the law enforcement side in order to better deal with this?
ED LOWERY, SPECIAL AGENT- IN- CHARGE, U.S. SECRET SERVICE: Hiring and retention and training of law enforcement officers that have the skills
that are necessary to run these individuals down wherever they may be around the world.
LAKE: Are they in it for the financial gain, is it patriotism?
LOWERY: You know, there's been a lot of media reporting towards the patriotism end. The bottom line is the motivation for this is financial.
WAINWRIGHT: Six/since people were making a quick profit and a pretty big one as well actually at the moment, generating unprecedented amounts of
illicit profits online, and doing it pretty easily actually. While it's not the first time of course that certain geopolitical circumstances, you
know, can impede the way in which we can operate against criminal terrorist groups, of course not. So that's a fact of life.
LOWERY: We developed our expertise dealing with the Eastern European/Russian language-speaking cybercriminals. We've, over the course
of what I said - the last decade - it's become very apparent that those individuals are the highest caliber, the most prolific and probably the
most damaging cybercriminals that are out there. They are operating from many places where the U.S. and international law enforcement does not have
the same level of cooperation.
LAKE: One way the law can stay ahead - consistency. One set of laws for everyone who uses the internet.
WAINWRIGHT: At the moment, you know, the legislation which allows us for example to detect these criminals online - it's pretty deficient
actually, and certainly not a line across different jurisdictions.
LAKE: I may have seen too many movies, but do old-fashioned detective skills still work in this world we live in?
LOWERY: Surprisingly enough, yes they do. The - again - you need a very highly-skilled cadre, you still have to be able to develop evidence
that will stand up in a court of law. We have to be sure that the individual that we're going to charge with that crime is absolutely the
individual that committed the crime. To do that, it takes a lot of old- school detective work.
LAKE: Like asking the public for any information that could lead to the arrest of suspected criminals. These are the faces of the FBI's cyber
most wanted. Some old-school elements in a new world of crime fighting. Maggie Lake, CNN New York.
(END VIDEOCLIP)
QUEST: And we'll have of course more on the dark side of the cyber world. A quick look at the markets and we to really update you because
after the last few weeks of turmoil and volatility, as you can see the Dow Jones up 1 percent - a gain of nearly 200 points. And we're back over
17,000 for the Dow Jones, which is not bad as an achievement as we come towards the end of the third quarter reporting season. We'll have a
"Profitable Moment" as our nightly conversation continues.
(COMMERCIAL BREAK)
QUEST: (AUDIO GAP) -- "Profitable Moment." In our program this evening, you really did hear to very strong and very different views on
where we stand economically. First of all, from the United States, you have good sales of automobiles - 16 to 17 million - 17 million. You heard
AutoNation say things were going very well - there was room for growth and more sales.
And on the other side, the governor of the Swedish Central Bank - the Riksbank - which incidentally is the oldest central bank in the world, --
he says he's cutting interest rates and he's going to keep interest at zero - a big zero until 2017. The U.S. will raise rates next year, the U.K.
will do so similarly and yet in Europe in the Eurozone still mired in either slow, sludgy growth or in Sweden's case, being dragged along in
whatever turmoil comes through. Put it all together and you really do now start to understand why the global economy is in such a terrible mess
tonight. Just think - Sweden with zero, America with booming sales of cars. And that's "Quest Means Business" for tonight. I'm Richard Quest in
New York. Whatever you're up to in the hours ahead (RINGS BELL), hope it's profitable. Let's get together tomorrow.
END
