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Quest Means Business
Deutsche Bank Hit With Record Fine; Libor Fixing: How and Why; Deutsche Bank's Fine; US Stocks End Higher; Manufacturing Data Sinks European Stocks; EU to Triple Funds for Search and Rescue for Migrants Crossing Mediterranean; Funeral Services for Migrants in Malta; Life for Migrants in Libya; Make, Create, Innovate: Changing Weather With Lasers
Aired April 23, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:59:55] (NEW YORK STOCK EXCHANGE CLOSING BELL)
POPPY HARLOW, HOST: We are tantalizingly close to some all-time records on Wall Street. It is Thursday the 23rd of April.
Deutsche Bank is slammed with a $2.5 billion fine for rate ragging.
A NASDAQ knock-out. The tech-heavy index jumping to a 15-year record high.
And tickets to the fight of the century are on sale, and if you want them, prepare for a big hit to your wallet.
I'm Poppy Harlow and this is QUEST MEANS BUSINESS.
Good evening and welcome to the program. Tonight, Deutsche Bank is hit with a record fine as it settles some of the most scandalous charges in
financial history. Regulators say the bank did not just rig interest rates around the world, it also lied over and over again, and covered it up.
Deutsche Bank will pay $2.5 billion in a settlement split between regulators here in the United State, also in the UK and Europe. As part of
the deal with the US Justice Department, the bank will not admit any wrongdoing.
British regulators say Deutsche Bank lied about having controls in place to prevent rate rigging, and the bank also destroyed 482 tapes of
phone calls. Regulators say that was done in error. Deutsche Bank took too long to hand over documents which regulators also say could have aided
them in that investigation.
Barclay's was the first bank to pay a fine over rate-rigging allegations. You'll recall that back in 2012. Since then, a series of
other banks have settled similar charges. Deutsche Bank's $2.5 billion penalty is, though, the biggest to date. It is a big drop in an even
bigger bucket.
Think about it in these terms. Deutsche Bank brought in revenue of around $35 billion last year alone. Still, regulators are calling this a
triumph. Clare Sebastian explains why.
(BEGIN VIDEOTAPE)
CLARE SEBASTIAN, CNN PRODUCER (voice-over): The $2.5 billion settlement marks the end of a legal marathon for Deutsche Bank and a
victory for the regulators.
JACOB FRENKEL, FORMER SEC ENFORCEMENT LAWYER: A financial institution cannot be sent to jail. The only penalty that can be imposed is a
financial penalty, and what the governments are trying to do with these large fines is send a powerful deterrent message.
SEBASTIAN: Deutsche Bank has accepted the findings of four separate regulators. The Financial Conduct Authority in the UK, and in the US, the
Department of Justice, the Commodity Futures Trading Commission, and the New State Department of Financial Services.
In a statement, the co-CEOs Juergen Fitschen and Anshu Jain, said "We deeply regret this matter, but are pleased to have resolved it." They
added that no member of the management board was involved in or knew about the traders' misconduct.
SEBASTIAN (on camera): We now know just how widespread that misconduct was at Deutsche Bank. US regulators published e-mails showing
how traders actively colluded to rig inter-bank lending rates. And they even joked about it in the process.
SEBASTIAN (voice-over): In one e-mail, a Deutsche Bank trader writes, "I'm begging you, don't forget me. Please, I am on my knees." In another
exchange, a rate submitter replied to a similar request saying, "OK, we'll try to give you a belated Christmas present."
As part of the settlement, Deutsche Bank has also agreed to fire seven employees and install an independent monitor.
FRENKEL: The imposition of a corporate monitor is central to restoring the confidence at the government level that the company is taking
the proper steps to get it right going forward.
SEBASTIAN: Deutsche Bank says despite litigation costs, it will still be profitable this quarter, and it will work to earn back the trust of its
clients.
Clare Sebastian, CNN, London.
(END VIDEOTAPE)
HARLOW: All right, let's break down exactly what the banks were doing. Libor, you probably know that. But also Eurobor and Tibor, all a
type of lending, basically, in terms of setting rates for lending between banks. They are staffed by the submitters of the bank.
These rates' real importance lies in their use as a benchmark -- the basis for more than $300 trillion of lending. That includes corporate
loans, futures contracts, even your mortgage or your student loan. So, it really trickles down to each and every person. Back at the bank, employees
were trading derivatives, the type of debt based on these rates.
So, you have traders who sometimes had billions of dollars riding on a number set by their own colleague, the submitter. It's no wonder that you
had traders making these kinds of requests: Quote, "Push for 60 or even 58 if you can. Coffee on me." That is just some of what this investigation
unveiled.
Aitan Goelman is a commodity futures trading commissions director of enforcement. He is a big part, along with his colleagues, of bringing this
case against Deutsche Bank ultimately. You guys -- thank you for being here, sir.
[16:05:05] AITAN GOELMAN, DIRECTOR OF ENFORCEMENT, CFTC: Thank you.
HARLOW: Ultimately, you guys are calling this a win. Let me ask you this: this is indeed -- $2.5 billion -- this is indeed the largest fine in
CFTC history. At the same time, you guys came out and said, quote, "Deutsche Bank's culture allowed such egregious and pervasive misconduct to
thrive." Has the culture changed?
GOELMAN: We hope so. I just want to correct one thing for the record. Our fine in this case was $800 million.
HARLOW: Right.
GOELMAN: The $2.5 billion was the total.
(CROSSTALK)
HARLOW: Is the total for you guys, Europe, the UK, in terms of all the regulators.
GOELMAN: Right. And the $800 million, that is the largest fine that CFTC has ever imposed. And it --
HARLOW: Has the culture changed?
GOELMAN: At Deutsche Bank?
HARLOW: Yes.
GOELMAN: I hope so. I mean, the approach that they had to the investigation certainly did change. You've commented on some of the --
let's charitably call them "lapses" early on in the investigation.
In 2010, we asked them to undertake an internal investigation to look at -- this was already becoming public, we already had investigations going
on into other banks, and they really kind of ell down on the job.
And you talked about the tapes that were lost or destroyed. That changed in about the middle of 2011, and Deutsche Bank and the lawyers
representing Deutsche Bank really have cooperated very significantly in the last couple of years.
HARLOW: Is that why you guys didn't demand that they make an admission of guilt? Because a lot of people will look at this, and they
will say this bank can afford this fine, how does this change things going forward if they don't even have to admit one ounce of guilt?
GOELMAN: The -- it's true, in our case, it's on a neither admit nor deny basis. But as part of the overall deal, they took a guilty plea, or
at least a sub of Deutsche Bank took a guilty plea in the criminal case brought by the Department of Justice. So, that did require admissions.
HARLOW: Well, why did you give them that pass in this deal?
GOELMAN: Well, I don't think $800 million and all the commitments that they made to clean up their act is really a pass. But in terms of
admissions, the CFTC is a civil regulator, and when we settle civil lawsuits, and when private parties settle civil lawsuits, they're typically
settled on a neither admit nor deny basis.
We think that our job is to guard market integrity. Our job isn't to make the world safe for plaintiff's lawyers.
HARLOW: So, how have things changed? Because one of the big things pointed out in the settlement here is that the CFTC contests that Deutsche
Bank, quote, "lacked internal controls, procedures, and policies." Has that changed?
GOELMAN: We believe it has. And part of the overall deal, there will be monitors in-house to make sure that it has. Our agreement with Deutsche
Bank requires them to do regular reporting to us. The entire system by which Libor is determined has been overhauled.
They -- Deutsche Bank has made a commitment to reorganize the way that it is involved in rate settings so that submitters are not next to the
people who can actually profit.
HARLOW: Sending messages to their friends down the hall and saying "Set the rate here."
GOELMAN: Sometimes they weren't even down the hall. Sometimes they were in the same room.
HARLOW: Next to each other.
GOELMAN: Yes.
HARLOW: Look, I know that this isn't -- you don't have the ability to criminally prosecute people. Again, this is a civil settlement here. But
the agency has said last fall a real deterrent of market manipulation requires putting people in jail. Is anyone going to go to jail? I know
there's, like, 20-odd people losing their jobs.
GOELMAN: Right. Well, you're right. We don't have authority to charge people criminally. And you're also right that there's no substitute
-- for a general deterrent, there's no substitute for putting actual human beings in actual prison. And that's why we have worked very closely with
the Department of Justice to prosecute individuals.
I don't believe they charged any individuals in this particular indictment, but they have charged and arrested individuals in Libor before.
HARLOW: Right.
(CROSSTALK)
GOELMAN: And so has the FFO.
HARLOW: Do you think we may see the DOJ go against some of the 20-odd people that are going to be fired as a result of this from Deutsche Bank?
Do you think we may see some of that trickle down from this from the department?
GOELMAN: I really can't comment on that.
HARLOW: One final question to you. Bigger picture here -- and I've talked to a lot of folks at the SEC, for example, over the years. When you
look at the job you guys do, it is an incredibly important job to this country and to global financial markets.
A lot of times, folks in your position have told me they cannot keep up with the banks and with the tech companies because those companies are
able to pay a whole lot more than you guys are. Do you still feel like oftentimes you're playing catch-up?
GOELMAN: Yes. In a word, yes.
HARLOW: What can be done about it?
GOELMAN: Well, I think we are kind of perpetually, chronically under- funded. There's technology that we need that private parties have. We are trying very hard to punch above our weight class and do more with less.
[16:10:01] Particularly in the benchmark area, I think that we've been very successful. This is the eighth institution that we brought a
case against on Libor. We also brought a case against five of the world's biggest banks on foreign exchange benchmark manipulation. And we're very
focused on benchmark manipulation, because I think that there's very little that can undermine public confidence --
HARLOW: Yes.
GOELMAN: -- and the integrity of the marketplace --
HARLOW: And set rates that so many people --
GOELMAN: Right.
HARLOW: -- rely on for student loans, for mortgages. I have to let you go. Before I get to my next guest, very quickly here, is any of this
settlement money going to go to the individual consumer, going to help real folks?
GOELMAN: It'll help real folks by reducing our national debt. It goes to the Treasury.
HARLOW: But not directly. Thank you, sir. Appreciate you coming on the program. Joining me now, former SEC chairman Arthur Levitt. He served
as chairman of the SEC between 1993 and 2001, is the longest-serving chairman in the organization's history. Thank you for joining me, sir.
And let's just build off of that, what my last guest just told me from the CFTC, the fact that none of the money from the settlement is going to
go to the average person. Do you think that this constitutes a real change on Wall Street, a real change in culture?
ARTHUR LEVITT, FORMER CHAIRMAN, SEC (via telephone): I don't think this alone represents a real change, but I think the combination of banks
publicize that they were ripping off the vast majority of investors. This isn't just a professional rip-off, this is an individual rip-off. That
notion that that's out there has changed behavior.
Is the work done by the CFTC outstanding? Yes, it is. They got an appropriate fine. I don't think they did have the resources to put anyone
in jail, nor did they have the power for the senior people at Deutsche Bank to admit guilt.
Nevertheless, Deutsche Bank and the other banks that have been guilty of the same violation were held up to public criticism, public challenge.
It's a huge and a costly embarrassment. Can we be assured that it won't happen again? No. But I do think that putting a monitor into Deutsche
Bank is a step in the right direction if he's tough and if he's disciplined.
HARLOW: Arthur, how can we get to place where -- I mean, you just heard Aitan Goelman say it: they cannot compete. They are playing catch-
up because of a lack of resources, and inability, frankly, to recruit the top talent that is going to go work at these banks, that is going to go
largely work at these tech companies for a much higher salary. What can be done to give the enforcement agencies a leg up?
LEVITT: The enforcement agencies will never be able to have the resources held by the wrongdoers. So, I think that's unrealistic. But
what you can do is you can have a Congress that instead of harassing the CFTC and the SEC supports them.
Ideally, the oversight committees of the Congress should see to it that the regulators protect the public interest. But they don't do that.
The oversight committees of the Congress, because of campaign contributions from the business community, harass the regulators, cut their budgets,
object when they bring certain kinds of cases. That's where the disconnect is.
HARLOW: What about this for part of the solution: do you believe that companies that go through something like this, like Deutsche Bank, and
lay off -- a good amount of people as a result got fired, they're having to pay this record $2.5 billion fine.
Should they also be required to house regulators from, say, the SEC, the CFTC, in-house for, say, a few years to keep an eye on things
internally?
LEVITT: I think that a number of those companies, particularly ones which had frauds that dealt with accounting issues, find that they have
people from the Federal Reserve Board or from the accounting profession on premises. I don't think the regulators have the resources to spare to put
them on the premises of all the companies that they bring cases against.
HARLOW: Arthur Levitt, former SEC chairman, the longest-serving in that post. Sir, thank you for your service, and thank you for joining us.
I appreciate it.
Taking a look at markets on Wall Street, stocks closed higher on Thursday, and it has been a record-breaking session. The tech-heavy NASDAQ
broke through its closing high from 15 years ago. The Dow and the S&P 500 ended the day higher as well.
Well, the situation was bleaker in Europe, where stocks ended mostly lower. That was driven largely by disappointing data on manufacturing
activity in the eurozone. Some analysts even warning that businesses are less likely, as well as consumers, to take big risks. They singled out
France in particular, warning of a, quote, "long-term malaise."
[16:14:57] And moments ago, EU leaders announced their plans to address the migrant crisis in the Mediterranean, which has cost thousands
of lives. We'll have the details on what was decided next.
(COMMERCIAL BREAK)
HARLOW: European leaders pledged to triple funding for the search and rescue efforts to try to save migrants crossing the Mediterranean in hopes
of reaching European shores. The Triton Operation's budget has been $3.1 million per month.
A leaked draft of the action plan includes a pledge to double that. The draft was slammed by human rights groups for not doing enough to
address the immediate humanitarian crisis there. Phil Black joins us live in London.
And Phil, you can understand where they're coming from, given the fact that we saw upwards of 800 deaths this weekend alone.
PHIL BLACK, CNN INTERNATIONAL CORRESPONDENT: That is, indeed, Poppy, why it is such an emotional issue. The leaders of the European governments
have a short time ago broken up from a day of consultations and announced their plan going forward.
And as you've touched on there, their goal of saving lives in the Mediterranean, they say, would largely be achieved through its existing
maritime operation known as Triton. But they're going to triple its budget.
And they say that tripling its budget in this way is important because that will expand its resources, its capabilities, and bring it in line with
what was known as Mare Nostrum. Mare Nostrum was its predecessor, an Italian-run search-and-rescue operation specifically designed for search
and rescue across a wide area of the Mediterranean.
That's where there remains a key difference. Even if this operation is expanded, its capabilities vastly improved, it remains, according to its
mandate, a border protection operation. That is, its job is only to patrol to within about 30 nautical miles of the European coast.
Mare Nostrum, the predecessor, had a much more expansive mandate of search and rescue across the Mediterranean. It was broadly seen to be very
successful.
Today, European leaders are saying this is a technical point, it shouldn't make much of a difference in practice because Triton will obey
the laws of the sea and as such will be able to respond to search and rescue needs as they are required, as they find out that boats carrying
refugees or migrants may be getting into trouble.
Another point which we've heard about over the course of the week is this talk of actually finding, capturing, or destroying people-smuggling
vessels. It's being discussed in very broad terms by European leaders.
They've committed to that today, but only in the sense that they're going to go away and do more research to work out just how it can be done
in accordance with internally law and human rights as well, Poppy.
HARLOW: That sounds like the beginning of still a tough fight because a lot of people want to see a lot more immediate action on this front.
Phil Black, thank you very much, joining us from London this evening.
And the first funeral services were held in Malta for the victims of the ship carrying migrants that sunk on Sunday. It was the worst-known
migrant tragedy in the Mediterranean, claiming the lives of more than 800 people. Only 24 bodies have been recovered.
Meantime, patrol boats continue to answer distress calls from the sea. Our senior international correspondent Nick Paton Walsh has been in Libya,
where many of these migrants have been trying to escape from, looking for a better life in Europe. He sent us this report from Tripoli.
(BEGIN VIDEOTAPE)
[16:19:56] NICK PATON WALSH, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): Europe's migrant problems seem small from the Libyan coast.
These rare Libyan navy pictures showing the volume of those they save or stop, and even how this man was pulled to safety directly above his sunken
boat.
Yet, there are also those beyond rescue. Seventy killed in this one episode, bodies often without names or pasts, adding to a toll that's hard
to count properly, many fleeing wars that refuse to stop.
WALSH (on camera): When asked how to solve this almost unsolvable problem, many European politicians have suggested destroying the boats that
smugglers use, but in a coastal country with so many lives dependent upon the sea, where, frankly, would you start?
WALSH (voice-over): Outside Tripoli, 350 migrants are held here for what must seem like forever. A third here Eritrean. All, officials say,
detained trying to cross to Europe. They deny that. They just want to go home.
UNIDENTIFIED MALE: For four months, prison to prison, prison to prison. Now? Now, what I need are if they want to deport people, let them
depart people. If they don't want to deport people, let them leave.
WALSH (on camera): Does your family know where you are?
UNIDENTIFIED MALE: No, no, they don't know, my family, until now.
WALSH: What do they think has happened to you, do you think?
UNIDENTIFIED MALE: Searching that in Libya I died, maybe they think I'm lost. I don't know that.
WALSH (voice-over): Among them, so many pregnant women, we're told, because women choose to cross like that, hoping their child is born in
Europe. This Somali woman's journey to Libya took seven months. Her baby, Sabrine (ph), born just a week after she was arrested trying to cross.
She told us, when she got on the boat, she knew she was in trouble, but had no choice but to go on. The prison head admitted there is no
system in place to send these people home or jail them or let them go.
Life for them, so hellish, they were willing to risk it to flee just instead to see it pass them by here, caught between countries that don't
want them.
Nick Paton Walsh, CNN, Tripoli.
(END VIDEOTAPE)
HARLOW: Incredible reporting from our Nick Paton Walsh, there. We'll be back in a moment.
(COMMERCIAL BREAK)
HARLOW: Predicting the weather perfectly is a near-impossible task, even for the experts. Nick Glass reports on new technology that could
enable us -- honestly -- to actually change the weather.
(BEGIN VIDEOTAPE)
NICK GLASS, CNN INTERNATIONAL CORRESPONDENT (voice-over): The Swiss city of Geneva, famous, among other things, for its wealth of watchmakers
and chocolatiers.
GLASS (on camera): But it's also home to a small pioneering physics lab which is trying to do something extraordinary: using lasers to change
the weather.
(AUDIO GAP)
JEAN-PIERRE WOLF, UNIVERSITY OF GENEVA: -- linked with a laser, and it's also just beautiful to look at.
GLASS: Jean-Pierre Wolf has been experimenting with lasers for over 30 years. The focus of his research: making clouds.
[16:24:58] WOLF: The idea is to modulate the water condensation in the air so that you can create clouds at a certain position where you
wouldn't do it without the lasers.
(AUDIO GAP)
GLASS: Down we go, goggles in hand, to a darkened lab in the basement, home to the cloud chamber.
GLASS (on camera): Well, I'm dying to see it.
WOLF: Let's go, then.
GLASS (voice-over): The laser igniting a reaction. Small ripples of cloud forming before our eyes.
WOLF: So if you were in your bathroom, you have a lot of water vapor, but no drops in the air. But if you look, instead, at the mirror, it's
full of droplets because it needs some surface where the water can stick on. And here, this kind of surface is replaced by the laser --
(AUDIO GAP)
GLASS: And they've proved it can work outside the lab in the skies above Rome in 2013. An invisible beam creating wisps of cloud.
(AUDIO GAP)
GLASS: As far back as the 1950s, we've been trying to manipulate the weather. Cloud-seeding, dropping chemicals from high altitude, has been
the preferred method.
WOLF: Although the efforts are huge and they spray a lot of chemicals, it still not convincing.
GLASS: Cloud control is just one part of Wolf's atmospherics project. He's also trying to tame an unpredictable phenomenon: lightning.
WOLF: The costs due to lighting --
(AUDIO GAP)
WOLF: -- billion a year.
GLASS: In the lab, the lightning pulses between two electrodes, and when you fire the laser, the electrical charge jumps from the air --
(AUDIO GAP)
WOLF: It's like a wire that you could actually scan everywhere, and then you would touch this part of the clouds, and then discharge it against
the ground.
GLASS: And Wolf hopes his lasers could also help with the big one: climate change.
WOLF: We change the size of ice crystals, mimicking the cirrus cloud ten kilometers above our heads which play a very important role in weather
enforcing and climate change so that instead of heating the atmosphere, in a way, they would be cooling the atmosphere. So, we are still working on
that, but there is hope.
(END VIDEOTAPE)
HARLOW: Record highs on Wall Street, but major companies warning there is weakness lurking beneath the surface.
[16:28:08] (COMMERCIAL BREAK)
[16:30:25] HARLOW: Welcome back to the program, I'm Poppy Harlow. Coming up on the next half hour of "Quest Means Business," Sir Martin
Sorrell tells us why he's not exactly optimistic about the upcoming U.K. election.
And if you are not in the 1 percent, you're not getting in -- why the biggest fight of the century will be closed off to you and me.
Before that, this is CNN and on this network the news always comes first. European leaders pledge to triple funding for its search and rescue
efforts to address the migrant crisis since the Triton operation budget has been $3.1 million for a month.
European Council president Donald Tusk said more must be done to prevent migrants from crossing the Mediterranean to begin with.
(BEGIN VIDEOCLIP)
DONALD TUSK, EUROPEAN COUNCIL PRESIDENT: Saving life is not just about rescuing people. At sea it's also about stopping the smugglers and
addressing illegal migration. Let me be clear Europe did not cause this tragedy, but that doesn't mean we can be indifferent.
We are facing a difficult summer and we need to be ready to work.
(END VIDEOCLIP)
HARLOW: U.S. President Barack Obama says he is taking personal responsibility after two innocent hostages of al-Qaeda were killed in a
U.S. drone strike in January. They are Italian citizen Giovanni Lo Porto on the left and American citizen Dr. Warren Weinstein on the right.
Both men were killed during a drone strike right along the Afghan/Pakistan border. President Obama said he offered his sincerest
apologies to their families.
(BEGIN VIDEOCLIP)
BARACK OBAMA, U.S. PRESIDENT: As a husband and as a father, I cannot begin to imagine the anguish that the Weinstein and Lo Porto families are
enduring today.
I realize that there are no words that can ever equal their loss. I know that there is nothing that I could ever say or do to ease the
heartache. And today I simply want to say this - as President and as Commander in Chief, I take full responsibility for all our counterterrorism
operations, including the one that inadvertently took the lives of Warren and Giovanni.
(END VIDEOCLIP)
HARLOW: General David Petraeus will serve two years of probation for disclosing classified information. The former military leader, former head
of the CIA as well was also fined $100,000. It's part of a plea deal that he struck that keeps him out of prison. He had risen, as I said, to become
the head of the CIA but resigned when it was revealed that he'd shared classified information with his biographer and lover Paula Broadwell.
An enormous volcano has erupted in Southern Chile for the second time in 24 hours. Look at those images. It is the first time eruptions have
been seen from the Calbuco for more than 40 years. Nearby towns are on red alert. More than 4,000 people have been forced to flee the area.
And it's finally happened -- after 167 days Loretta Lynch has been confirmed as the next attorney general of the United States. The U.S.
Senate voted to confirm her, as I said, after a long, long wait, months of political gridlock between rival Democrats and Republicans in Washington.
Lynch will make history being the first African-American woman to hold the post. She will focus on everything from counterterrorism to cyber
security.
Taking a look at stocks on Wall Street, shares of General Motors finished the day more than 3 percent lower. The automaker says sales
outside of the U.S. and China fell in the last quarter. GM also set aside more money to pay victims of the ignition switch recall.
Caterpillar forecasts weak sales for the rest of this year, being hurt by the strong dollar. And Pepsi also said its strong dollar - the strong
dollar, rather - was eating into profits and it warned it could be hurt by weakness in Brazil and Russia.
And in just the last few moments, we have gotten earnings from Amazon, Microsoft, Google and Starbucks. Joining me now to talk about them, Paul
La Monica, CNN Money digital correspondent. Overall strong, right?
PAUL LA MONICA, CNN MONEY DIGITAL CORRESPONDENT: Very strong, nice revenue growth from Google and Amazon, Microsoft as well. Starbucks -
record sales. These are all NASDAQ stocks, so with the NASDAQ hitting that all-time new closing high today, it's possible that this could continue
heading into tomorrow.
HARLOW: And these are all companies with - how shall I put it? Very solid products. And by that I mean tangible products. Because when you
compare this to the late 90s and early 2000s and you compare it to sort of the tech bust, a lot of people say could that happen again?
[16:35:07] This is a very different scenario -
LA MONICA: Oh, without (inaudible).
HARLOW: -- even when we're looking at a record for the NASDAQ.
LA MONICA: Definitely. All four companies are real businesses. The only one that you can quibble with its valuation and say it's like a bubble
like 15 years ago is Amazon. It is still insanely overvalued because Jeff Bezos loves to spend money on new projects.
Some of them pan out like Prime, some of them like the Fire Phone, not so much. And that always hurts profits in the short term. I think
investors are pleased that Amazon which has a big Cloud business that it reported its revenues and profits for the first time in this report -
HARLOW: Right.
LA MONICA: Revenues were very strong and they actually reported an operating profit. A lot of people thought they would lose money there.
HARLOW: Sales up 15 percent, shares popping 7 percent for Amazon right after those numbers came out. Where is the risk for an Amazon for
example right now?
LA MONICA: I think Amazon the risk has to be to - one respect, consumer spending - you'd have had -
HARLOW: Yes.
LA MONICA: -- sluggish retail sales throughout the year so far. So that could be something that could hurt Amazon. Then I think you also have
to look at how Amazon has morphed into more of a media company as well. They are really trying to go toe-to-toe with Netflix in streaming video,
new shoes like Transparent that's obviously won a lot of awards and critical praise.
If they don't get that right, that could be a big problem because they're spending a lot of money to try and prove to Wall Street and
mainstream consumers that, yes, we're a place to go for original entertainment also.
HARLOW: What else stood out to you in these numbers?
LA MONICA: I think with, you know, the thing that really stands out is that even though the strong dollar hurts all these companies -
HARLOW: Yes.
LA MONICA: -- because they all have big business overseas. Their businesses are healthy enough to withstand it. Google really shouldn't be
blaming the strong dollar that much because their revenue growth is just phenomenal. They are still the leader in online advertising even with
Facebook really emerging as a significant threat as well.
And I think with Microsoft, they've had a nice transition. They were a business that people were worried about because they're so tied to the
P.C. which is a slow-growth, some would argue dying business. But they are morphing under Satya Nadella and trying to find more mobile and more Cloud
solutions for their customers. And I think it is working so far.
HARLOW: So record - a 15-year record high for the NASDAQ being achieved. What do you make of it, Paul and do you think we see a little
bit of a pull back any sort of correction?
LA MONICA: I still think the whole market does need a correction. This has gone on for way too long.
The last 10 percent pull back was in 2011. It does make you or should make you nervous that stocks have gone higher and every time we have a
little bit of a blip, like a 3 or 4 percent pullback, people act like it's the end of the world and they start buying the dip.
You'll see people you know tweeting BCD - "buy the dip" and that's what people do, but you can't do that forever. I mean you have to have a
healthy correction if we really want the market to go on long-term gains and not have another crash like in '08.
HARLOW: When's it going to come? Who knows. And as Warren Buffett would say, you can never time the markets.
LA MONICA: Exactly. And if you can be in it for 50 years like him -
HARLOW: Yes, right. (LAUGHTER).
LA MONICA: -- obviously that's good.
HARLOW: Just have to have a long horizon. Paul La Monica, thank you very much.
LA MONICA: Thank you.
HARLOW: I appreciate it. Coming up after the break, we're going to talk about this bit of news because after months of resistance and pushback
from government regulators, Comcast walks away from a planned merger with Time Warner Cable. We're talking about a $45 billion potential deal now
not happening.
(COMMERCIAL BREAK)
[16:40:00] HARLOW: New developments this hour on one of the biggest merger deals of the year. A person with knowledge of the proposed deal
telling our Brian Stelter that Comcast is planning to pull away from what was going to be a mega merger with Time Warner Cable.
The proposed deal would have combined the two largest cable companies in the United States. CNN media correspondent and host of "Reliable
Sources" Brian Stelter with me to talk about how this happened, why this happened, why it collapsed - a $45 billion takeover it was about to be.
BRIAN STELTER, SENIOR MEDIA CORRESPONDENT: It was going to be a reshaping of American media, Poppy. It was going to be the number one in
cable and broadband provider in the United States merging with the number two, making a big company even bigger. And put it in a dominant position
to decide how people get internet access, how they watch TV in the future, but now that's going away.
Comcast probably won't confirm this tonight. They'll probably wait until tomorrow but this is moving so quickly they might actually come out
and admit now. It's all happening because yesterday they had very tense meetings in Washington with regulators who essentially said we are going on
one way or another - stop this from happening.
HARLOW: Were the regulators right do you think - looking at it would it have been too much of a consolidation that could have hurt consumers?
STELTER: Comcast is probably going to come out and say this is about a hostile regime in Washington, a hostile climate to business and we've
heard that from other business leaders in the past when other mergers have been scuttled. AT&T and T-Mobile for example.
There is one other big pending deal and that's AT&T and DirecTV.
HARLOW: Right, so whatever became of that?
STELTER: This actually might help that deal because there aren't as many anticompetitive concerns in that deal as there are in this one. The
reason this one's different is it's about internet access. It's about broadband access and these regulators believe that of course is the future.
HARLOW: And in terms of members of Congress, you spoke with Al Franken, congressman from Minnesota who is - been one of the most vocal
people on that.
STELTER: Yes, and one of the few. You know, for a while he's been very lonely. This deal was announced 15 months ago and it was considered
to be inevitable.
As he said to me today, a fait accompli. And in recent months as the reviews have been going on by the government, there started to be some
questions, some criticisms. And Franken was joined by Elizabeth Warren and Bernie Sanders and a few other senators who had concerns.
But even right now, he's been a pretty lone voice in Washington.
HARLOW: That's interesting. All those names you just mentioned -
STELTER: Yes.
HARLOW: -- you know, Bernie Sanders, Elizabeth Warren - these are all real, sort of very dogged when it comes to consumer protection.
STELTER: Right, yes. And very liberal. I mean, we're talking about 94out of 100 senators who have not opposed this deal. Part of the reason
why it's been a surprise to see this collapse in the past few days - now no doubt like I said there were questions for a couple of months this point.
But for the most part, you know, Comcast is viewed as being so powerful in Washington with so much lobbying muscle with connections at the
highest level of the Obama administration.
So to see both the Federal Communications Commission and the Department of Justice express real qualms here and suggest they were
willing to go to court to stop this deal, it's an amazing turn of events for Comcast - a company that's not used to losing.
HARLOW: Sure. What does this mean for the bundling or unbundling of channels and programming? Because I think about that when I look at my
cable bill -
STELTER: Right.
HARLOW: -- and I think, I don't want all these channels. Why is my bill $150 a month?
STELTER: Yes.
HARLOW: Well a lot of it has to do with the fact that they come all together. Does this impact that at all? Would this have impacted that?
STELTER: Comcast argument all along has been we're competing with Apple, we're competing with Google. And to some extent they're right and
that'll remain true. Comcast won't have as much leverage as they wanted in that competition that we're continuing and increasing to see.
One question will be will Comcast go out, try to buy something else? There's speculation out there and it's just speculation. You can imagine
folks on Wall Street talking about it and Netflix talking about a wide variety of other big media companies that might be open to -
HARLOW: Sure.
STELTER: -- open to a bid from Comcast.
HARLOW: Well if they want a Netflix right now they're going to have to pay a -
STELTER: A huge premium.
HARLOW: -- premium.
(CROSS TALK)
STELTER: The idea of consolidation's expected to continue. There will be more consolidation. But in what form? Is the question. And the
future of TV still very much up in the air.
HARLOW: Absolutely. You'll be following all of it for us. We should know Time Warner Cable not a part of Time Warner, our parent company.
Brian Stelter, thank you so much, I appreciate it.
Coming up, advertising mogul Sir Martin Sorrell has come forward with harsh words about the two main parties in the upcoming U.K. election. The
latest polls show a tight race between Conservatives and Labour, and Sorrell said neither is likely to be good for growing British businesses.
His company, the massive WPP reported slower sales the last quarter and a 22 percent drop in new business from the same period last year. Our
Nino dos Santos spoke with him and asked him about prospects for economic growth globally.
(BEGIN VIDEOCLIP)
[16:45:11] SIR MARTIN SORRELL, CEO, WPP: The world economy has probably slowed a bit in the last couple of quarters, but generally we're
seeing the faster growth markets in our case at China, even Russia actually, along with India stronger.
U.K. obviously remains strong, certainly in front of the election. U.S. continues to recover - somewhat bumpy but still recovering pretty
well.
Latin America is the one area where we haven't seen so much growth in the first quarter. Africa and the Middle East strong from a functional
point of view - advertising strong and digital strong.
So all in all, a pretty good picture on the top line, and as you indicated, both were managing our business more effectively and through
growth. But we're getting good, bottom line profitable growth.
NINA DOS SANTOS, NEWS ANCHOR AND CORRESPONDENT BASED IN LONDON FOR CNN INTERNATIONAL: Well what's the big risk here going forward for the rest of
the year?
SORRELL: Well generally I think it's the geopolitical risks are the ones that people focus on. We add things like Grexit as an increasing
possibility in the European context. We have Brexit - I guess a British exit might come if there's a conservative coalition. We have a referendum
and we vote to come out which I don't think is likely, but we'll see what happens.
DOS SANTOS: Let me ask you about a Brexit, how concerned does that make you at the helm of one of the biggest businesses in the U.K.?
SORRELL: Well it make me very concerned because of the patterns of our - it's a reflection of our clients rather than ourselves. The pattern
of trade is very much still with Europe whether we like it or not. It's not gone to the Brits (ph) and next 11 (ph). It's very much focused on
Europe.
So as I look at it, if we do have a referendum, I do think by the time we get to a referendum in `16 or `17 if that's what happens, the Western
European economy will have recovered.
We've seen Germany recover strongly this year and last year. We've seen Spain recover strongly in the same, and to some extent Italy - not
France as yet - but that will come.
And so I think by the time we got to a referendum, that would be the case. Our polling at TNS, one of our companies where we poll not just the
election but this issue continuously, for the first time started to show a majority in favor of those voting or so they were going to vote in favor of
staying in.
DOS SANTOS: Those who do want the U.K. out of the E.U. say that the fast-growing Asian economies and the economy of the Americas are actually
taking more precedent than Europe. Well as you said before because it's going to shrink. Do you buy that argument?
SORRELL: Well, my view is that they're better together and, you know, if you're looking about at a trading block, the E.U. trading block with its
population of 450 million with its GDP of $16 or $17 trillion matches the United States.
Now, the issues that Europe faces and U.S. faces, which are strategic issues - which by the way, don't get covered in the election. We have no
grand strategic plan from any party about what they would do industrially and economically.
I mean, it's just very bitty and fragmented. But the opportunity for Europe as a whole to compete with the U.S., to compete with Asia, to
compete with Latin America, to compete with Africa and the Middle East and to work with them is very considerable.
(END VIDEOCLIP)
HARLOW: Well we have much more coverage of the U.K. election ahead right here on CNN. Tune in this Friday for a groundbreaking debate hosted
by our very own chief international correspondent Christiane Amanpour. She's brought together a panel of senior U.K. politicians ahead of what
could be the closest election in decades.
It all begins this Friday, 7 p.m. in London, 8 p.m. Central European time only right here on CNN. And ahead of that, Christiane will answer
your questions about the key issues and players. Just log on facebook.com/cnni and the time on your screen.
Well it is billed as the biggest boxing face-off ever and it has ticket prices to match. Next.
(COMMERCIAL BREAK)
[17:50:57] HARLOW: Well it is official - tickets are one sale for what could be the biggest fight in boxing history. The so-called Super
Fight between welterweighters Manny Pacquiao and Floyd Mayweather, Jr. is on May 2nd and it is expected to be close - you see the two men facing off
right there.
But in the battle for tickets, the 1 percent are runaway favorites. That's because seats for the big event at the MGM Grand in Las Vegas are
priced between $1,500 and $7,500 apiece. Brokers are already listing four seats for $50,000.
Pacquiao's promoter says the 1 percent will buy tickets because, as he says, they have more money than they know how to spend. Yes, he actually
said that.
"World Sport" anchor Don Riddell joins us now with what is expected to be the biggest payday in sports history. You know, I was a little shocked
at that 1 percent comment, but it's true because - that's - when you look at the secondary market, these ticket prices are going through the roof.
Why do so many people want to be there?
DON RIDDELL, CNN "WORLD SPORT": Yes, I was surprised too by the way. Bob Arum gave me that line and it was completely unsolicited. He just kind
of volunteered it, you know, and said there you go, you know. These rich people spend their money on yachts, paintings or once-in-a-lifetime fight
events.
And that's what this one is. You're talking about two of the biggest names in boxing history. Mayweather is unbeaten, Pacquiao is considered
arguably the best pound-for-pound fighter of his generation.
They should have fought about five years ago. They're finally getting it on now, and everybody wants a piece of the action and the prices are
just going through the roof.
And by the way, Poppy, if you want to watch this fight in any way, shape or form, it's going to cost you money. If you want to watch it at
home, it's going to be $100 pay-per-view. If you want to go to Vegas and can't get into the fight, you're going to have to spend $150 bucks just to
watch it on a big screen in an MGM property.
And then of course if you want to at the fight, $1,500 was the minimum, but those tickets went an hour and a half ago, and on secondary
markets the cheapest you're going to get now is about 7 and a half thousand dollars.
HARLOW: Wow.
RIDDELL: And those prices are going all the way up to $141,000, so, yes.
HARLOW: Here's the -
RIDDELL: One percent for sure.
HARLOW: It's certainly the 1 percent. I won't be there, you won't be there - I don't know anyone who's going to be there. But let me ask you
this, Don. I had read that regardless of the outcome, regardless of who wins, Mayweather is expected to get $120 million, Pacquiao's expected to
get $80 million. It just doesn't seem right.
RIDDELL: Yes, well I think it's actually more than that. They're expected to split at least $300 million between them. I think Mayweather's
going to get $180, Pacquiao $120. Of course if pay-per-view ticket sales go through the roof, they could get even more than that.
And this is for a fight that's going to last 36 minutes max. It might be over in a minute and a half. But you know, this --
HARLOW: But, I just wonder why one would get more than the other, Don.
RIDDELL: Well Mayweather's unbeaten, Pacquiao five years ago I think would've got a more even split. But the fact is that he hasn't been as
good in the last few years. He has lost a couple of fights. It was really Mayweather that, you know, brought a lot more to the table and that's why
he's getting a more favorable split.
But I don't think Pacquiao's really complaining - at least $120 million for one night's work.
HARLOW: (LAUGHTER). I suppose it is all relative I suppose.
RIDDELL: Yes.
HARLOW: Let me ask you this - who are you rooting for?
RIDDELL: That's a really tough on. I mean, I suppose - if I had to root for it, I suppose I'd go with Mayweather. This is a boxer who of
course is unbeaten and he's one of those fighters that does whatever he has to do to win a fight. And it's hard to know really just how good he is
because he keeps whatever he needs up his sleeve, and he doesn't necessarily have to bring all the tools to every fight.
But if anybody is going to surprise him, it will be Pacquiao. This guy is an absolutely huge puncher, a very, very fast puncher and of course
it only takes one punch to win a fight and Pacquiao -
HARLOW: That's true.
RIDDELL: -- might just do that.
HARLOW: One knockout. Don Riddell, thank you so much, --
RIDDELL: All right.
HARLOW: -- appreciate it. So the big fight on May the 2nd. And if there was any doubt about Floyd Mayweather's connection to the 1 percent,
well the boxer tweeted this photo of himself with Warren Buffett last summer -- the billionaire investor.
[16:55:12] The Oracle of Omaha stopped by Mayweather's gym in August as he was training for his fight against another key boxer.
We'll be back with more "Quest Means Business" in just a moment.
(COMMERCIAL BREAK)
HARLOW: Oil prices staging a major rebound. The question is how long is this rally going to last? How sustained is it going to be? Let's take
a look at the numbers here. Brent crude was up 3 percent on Thursday. It's now right around $64 a barrel. Back in January it was heading closer
to the $40-a-barrel mark.
The recent military action in Yemen is one of the reasons behind the latest surge. There's also a slowdown in the United States with oil rigs
shuttering and also production falling. But not everyone is convinced this is going to last.
Speaking earlier this week, the CEO of oil giant Exxon Mobil said prices could stay subdued for years and that U.S. oil companies like his
are going nowhere.
Stocks closed higher on Wall Street on Thursday. It was a record- breaker session. The tech-heavy NASDAQ broke through its closing high from 15 years ago. The Dow and the S&P 500 also ended the day higher. Amazon
shares a big standout - up around 7 percent in after-hours trading after they reported their latest quarterly results following the closing bell on
Wall Street.
The situation was a bit bleaker in Europe where stocks did end the day mostly lower. That was largely driven by disappointing data on
manufacturing within the Eurozone.
And Deutsche Bank shares finished flat in Germany after the company was hit with a $2 and a 1/2 billion -- $2 and a 1/2-billion-dollar fine for
rate rigging. That'll do it - that is "Quest Means Business" for this evening. I'm Poppy Harlow. Thanks so much for joining me. "Amanpour" is
next.
END
