Return to Transcripts main page
Quest Means Business
Stocks Down Again; Oil Prices Plunge Below $30 a Barrel; China Economic Woes; Banks and Corporations Feeling Oil Price Issues
Aired January 15, 2016 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00] MAX FOSTER, CNN HOST: Red Cross rings the closing bell and some stocks might be in need of some urgent care. Today's trading session is
anything to go by. It is Friday the 15th of January.
Tonight, no end in sight, the great selloff 2016 has its worst day yet. Oil prices plunged below $30 a barrel as Iran prepares to turn on the taps.
And, beware the Chinese bear, stocks in Shanghai hits a new miserable milestone.
I'm Max Foster. This is "Quest Means Business."
(MUSIC)
FOSTER: Tonight, fear grips the market, trading has come to a close on a brutal day for U.S. stocks. Two weeks into the year, the volatility on
Wall Street hasn't subsided. It's getting worse actually. The Dow is down nearly 400 points. It is the first time since August indexes hit below
1,600. At one point it was up more than 500 points so it's not as bad as it was.
Friday's selloff begun in China, the Shanghai Composite now in a bear market, that means it's off 20 percent or more from its last peak. The
fear spread to the other Asian markets as well before moving westwards into Europe. Bear concerns about China's economy mixed with fear over the
plummeting price of oil, finally in the U.S. investors headed for the exit ahead of the holiday weekend. U.S. treasury yields fell and gold prices
spiked, and stocks tumbled straight from the open. Miserable day.
Tim Anderson was there to see it all unfold, Managing Director of TGM Investment, he's joining us now from the New York Stock Exchange. Just
describe your day Tim.
TIM ANDERSON, MANAGING DIRECTOR, TGM INVESTMENT: Well, Max, you mentioned the two trigger points are really set -- started the day on a down note,
and that's the Shanghai Composite, trading below 3,000. And oil which had bounced off $30 support level a couple of times earlier in the week,
trading below 30 and holding below 30 for most of the day.
And I think what's really got investors nervous, is that if 30 now becomes resistance for oil on any further rallies. It's just very hard to model
(ph) or to project how much collateral damage might be done for the global economy in an environment of sub-$30 oil.
FOSTER: So, it's guessing game right now about which way things are going in terms of economics?
ANDERSON: That's right, because there's no doubt the economist have been beating on us for year, saying how lower oil prices was the boon for
consumers, and it really hasn't started to show up yet, there might have been a little glimmer of it last week when some of the retail stocks perked
up early in the week even through the market was down. But, there's -- I think that they have underestimated the extent to which job losses and
anything to do with the oil area have reverberated into other job looses in those geographies. And, we're just not sure how deep that might get.
FOSTER: Tim, thank you very indeed, a grim day for you. Thanks for joining Tim.
Our three warning really, fashioning (ph) the markets around the world and Tim was -- touched on them there, the first was China. The Shanghai
Composite is now at a bear market and the fall yuan and the dollar has really spurred volatility. The second is weak economic data for the U.S.,
retail sales dipping in December, manufacturing activity in New York, source supplies fall in January and shares of Citi and Wells Fargo plunged
after the bank results failed to beat expectations.
Now those weak earnings were due impart to the third factor which was oil. Prices are below $30 a barrel and they are likely to go lower if sanctions
on Iran for example are lifted. Both Citi and Wells Fargo won't risk to their energy portfolios. Put those three factors together and you get a
stock rout really, that's reaching around the globe as we can see.
Joining me now, Austan Goolsbee, Service Chairman of the White House Council of Economic Advisors, he's now a professor at the University of
Chicago's Booth School of Business. Mohamed El-Erian is of course is the Chief Economic Advisor of Allianz. Thank you very much indeed for joining
us.
Professor, first of all, within (ph) there from the trading floor, concern that the economist were warning oil prices would be good for the consumer
and that's not turning out to be the case if you look at the impact that everyone's feeling right now.
AUSTAN GOOLSBEE, FORMER CHAIRMAN, U.S. COUNCIL OF ECONOMIC ADVISOR: Well that's not turning out to be the case, but I don't think all economics were
saying that because there were a lot of us saying, that if the oil price is going down because of weakness out in the rest of the world especially in
China, that's a terrible sign for the global economy, and even for the U.S. not a positive sign.
[16:05:14] And I think that's what's going on here. All of these is ultimately coming out of the slowdown in China being worse than what
anybody had anticipated.
FOSTER: Mohamed, in terms of the impact of oil and of China, they'll see link but what is it that's worrying people most here?
MOHAMED EL-ERIAN, CHIEF ECONOMIC ADVISOR, ALLIANZ: I think if you look at the financial markets, they're worried about a third factor, which is the
central banks no longer have their back covered. Central banks are no longer the market's best friend. So in the past, markets have been
comfortable about ignoring weaker fundamentals, because they believe the central bank will continue to support them.
And now that central banks are on divergence path, they are less confidence, so any little hiccup in the real economy, these two outsize
declines in the stock market.
FOSTER: Does this show that the Fed was wrong in raising rates?
(CROSSTALK)
Sorry. Mohamed?
EL-ERIAN: So Austan and I will disagree. I don't think it does because the Fed is responding to domestic indicators including a very strong
employment number, which created 6 million jobs in two years. The Fed has to be careful that it cannot forever decouple the fundamentals from the
financial asset pricing because bad things tend to happen when you artificially elevate financial assets.
GOOLSBEE: And my point of view, it is and was, that the Fed has been wrong year after year, predicting that we were just in the clasp (ph) of growing
in the United States, that we were about to have inflation, and that's why they needed to raise rates. And I don't think there's any chance of
inflation, and I think actually that there's a higher chance that the U.S. were to go into recession in 2016 that it would see inflation get above
what the Fed has been saying was their target.
FOSTER: But this immediate concern, Professor, about oil prices, they're tumbling so fast right now, and I know a couple of guys (ph) have predicted
it could hit $10 a barrel. Where is the floor on that and what sort of impact is all of these going to have, continue to have on the market if
that oil price keeps tumbling?
GOOLSBEE: Well, I mean, it is surprise how much it's falling. For sure you would see in the short run if the price of oil keeps going down. The
amount of oil exploration will come to a dead hold even more than the severe slowdown it's been in.
If as you pointed out in your report, you see a lot of oil from Iran start coming on the market. That could be another factor. And, I think all
those parts of the markets that touch on resource producers, there are many states in the U.S., plus Canada, plus Australia, plus a lot of the emerging
markets who are big resource producers, in an environment in which demand is way down and the price of oil is plunging, which the dollar is going up,
I think they could be in for a very bumpy ride.
FOSTER: Mohamed, if it does get to $10 a barrel in the near future, what sort of impact it will have?
EL-ERIAN: It will have a huge impact. And, it will depend on whether you're a producer or a consumer. Let's understand that where oil prices
are today cannot be justified only the basis of supply and demand. Yes, demand is lower, particularly because of what's happening in China, and yes
supply increased tremendously because of alternative sources of energy.
But let's not forget there was also a surge, and I think major terministic (ph) change which is that, the oil market lost its wing (ph) producer. It
lost OPEC as able to make a decision and the next day the level of decline in order to support pricing. Now we have to wait for market faucet, and
when you make such a dramatic change in the operation of a market, you tend to get what are called volatile volatility, not just volatility but really
volatile, and that's what where we are now. And oil producers better have their seatbelt fastened because this takes months if not years to work
through the system.
GOOLSBEE: I think there's an insight to that...
FOSTER: OK, Mohamed El-Erian and -- yes. I'm sorry...
(CROSSTALK)
GOOLSBEE: ... Mohamed has an insight there. Yes.
FOSTER: OK, Mohamed El-Erian and Austan Goolsbee, thank you both very much indeed for joining us on a very volatile day. There seems no end to the
sliding crude oil prices and Iran is set to make things even worse.
[16:10:06] Our next guest is to advice (ph) Iran's Prime Minister on energy policy. We'll ask him about the country's impending return to the oil
market.
(COMMERCIAL BREAK)
We got some breaking news coming in right now to CNN. The State Broadcast in Burkina Faso is reporting gunfire and detonations in a hotel in the
capital. Securing forces are exchanging fire with fighters outside the Splendid Hotel, it's called, in the capital's business district, and no
details yet available, any casualties following the attack. It's a different area to get communications to right now but we are bringing in
information as we gather.
Now, it's perhaps the single most important factor driving the market at the moment, oil prices have tumbled today to their lowest level in 12
years. Oil prices fell more than 5 percent as markets prepare for more Iranian oil to come to the market. The IEA is expected to rule on lifting
Iran's sanctions too soon. The decision comes sooner for market than previously expected and is affecting things.
It's taken just 18 months for prices to collapse and turn world economics literally in its head. The market as we're talking about, back in June
2014 crude was trading more than $100 a barrel, oil prices spiked as Iran and Libya fell into political turmoil and the Ukraine crisis threaten to
disrupt Russian supplies. Global demand was much stronger then too.
On the same month of the following year the price of oil have plunged to $60, making matters worse, OPEC refuses to cut production after a meeting
in Vienna. Fast forward to today, oil is below the $30 mark, six months on from that Vienna meeting, OPEC members already choose to froze, literally
as some nations are polling from an emergency meetings to take action, and Iran is now about to join the party.
Africa's richest man says the price will continue to fall and could go as low as $20 a barrel. Still, Aliko Dangote told John Defterios that he
plans to keep up investing in oil and in commodities and he explained why he's still cease the opportunity.
(BEGIN VIDEO CLIP)
ALIKO DANGOTE, CEO, DANGOTE GROUP: Obviously some people will shutdown because it will make sense for them to produce. But it will be an
interesting game, you know, to see what's going to happen. But definitely prices will be, you know, affected seriously.
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: You're suggesting on the downs, we could even go as low as $20 in the near-term as a result of this
sort of over...
DANGOTE: Well, we can easily 2025, you know, it could be 2025, but, you know, a couple of countries is not a death sentence. You know it is also
an opportunity. I think Nigeria, this would be a blessing for us, to diversify the economy. I know that it depends, but definitely good things
(inaudible).
DEFTERIOS: But in fact, let's go to the Minister of State, is suggesting potential unrest because of this oil crisis. So, is too heavy of a price
for Nigeria because of what we see today going below $30.
DANGOTE: Well, if oil goes even $20, 25, I think mostly a potential, you know, unrest, because Nigeria's economy is very, very big. Oil will not
really -- we sold oil in 1993, '94 and almost '95 between $8 and $9.
[16:15:10] And, you know, that's the time we build L&G and all these other projects. What we need more in Nigeria is actually management of our
resources.
DEFTERIOS: The lowest level here in quarter century, if you look at the basket of commodities today, are we near that bottom in terms of the
unwinding of that rally we saw for the better part of the decade?
DANGOTE: Well I think you can never know the bottom. If you do know then you'd be the richest person on earth.
DEFTERIOS: But you're the richest man in Africa so you got to have a sense for it.
DANGOTE: Well, you know, in my thinking, things haven't really bottomed down yet. It's going to take a little bit of a push, you know, going
forward. And we still have quite a lot of fat. We have almost $20 billion worth of projects, various ones, you know, and, we're not going to stop,
we'll continue.
DEFTERIOS: That is a great point, you took a $5 billion hit in 2015 to your wealth because of the downturn, what we seen in the Nigerian stock
market. Did you change the mix of your portfolio at all, or eliminate projects because of that?
DANGOTE: The fundamentals of the business is actually very good. So it's not about evaluation, value shares is up and down, you know, I mean you
never know, maybe this time it won't go down, it might go up. You know, but is not a determinant factor of our own investment strategy.
DEFTERIOS: And this sort of pressure that we see today, we're looking at 3.5 percent for 2016. That doesn't alarm you this rate of slowdown?
DANGOTE: I think with the kind of budget that the government has to be, and if they're able to implement it definitely the economy will grow at
about 4.75 to 5 percent. I think we'll defiantly grow more than 3 percent for sure.
(END VIDEO CLIP)
FOSTER: Well corporations and banks are feeling the pain of falling prices. Anglo-Australian mining company BHP Billiton announced say, $7.2
billion hit and will reduce its rig capacity in the U.S. as well
Wells Fargo warned that loans at energy companies could be at risk. Earnings for the fourth quarter were flat.
J.P.Morgan warned on Thursday about possible bad loans to the energy sector, but boosted its reserves in case of default, all very worrying.
CNN Money Correspondent Paul La Monica joins me from New York. We're really getting a sense of the importance of oil in so many different parts
of the global economy.
PAUL LA MONICA, CNN MONEY CORRESPONDENT: Definitely, it's not just a case of the plunging crude prices affecting only the oil and energy companies,
some of those big banks as you mentioned starting to feel some pain as well. I think we need to be careful though, as of right now it looks as if
the loans made to the energy sector by major banks in United States, they pale in comparison to the exposure that these banks had to subprime
mortgage in 2008. So I really doubt that oil in of itself could turn out to be some sort of analogues event to mortgages that led (inaudible) in a
huge crisis.
It bears watching of course but I don't think that is going to be something that sends the entire financial sector into a tailspin.
FOSTER: What advisors is suggesting investors do right now because it's such a complicated victory, you really have to understand international
economics to work out why the markets are reacting in the way that they are.
MONICA: Yeah, the people that I spoke to today and over the past few days, they are urging everyone to really take a step back, take a deep breath,
relax and have a sober, non-emotional if you can outlook for the market for the long-term. One of the financial advisor I spoke to this morning, said
that he had a client who called him, all afraid because that RBS earlier in the week were some from oil bank of Scotland, said sell everything, and his
response was, do you really think that big companies like Apple and G.E. are going to be out of business in five years?
The answer is no, then don't do anything different, if anything, now is a good time to be buying. And, I know it sounds tried, it's hard to really
have that conviction when the market is falling as much as it has, but throughout history, holdbacks like this have been historically very good
opportunities to buy quality stocks, not fluff that is loosing money, that's overvalued but blue chips that are reasonably valued and that are
growing their earnings.
FOSTER: And, obviously business people do understand, want to understand shop being earned (ph), there's some worrying news about Wallmart today.
MONICA: Yeah. Wallmart is a company that we all know from last year has some big problems right now. Sales growth has been sluggish, they have
warned about profits taking a hit this year because they have to spend more money in order to compete with Amazon as well as give many of their workers
a wage hike.
[16:20:06] But the problem now is that, Wallmart is also realizing there are many underperforming stores as well, they're closing 269 around the
globe, many of them in the U.S. Most of those are the smaller stores so I think what's happening with Wallmart is that, the big superstore, that's
still seems to be working but some of the experiments they've had with smaller format, that hasn't really been a success for Wallmart.
FOSTER: The next sort of thing that people are looking at in terms of the market, hopefully some hope in there to bring them back up is earning
season, what are you expecting?
MONICA: Yeah. Earnings is bit of an odd duck if you will. Expectations are so low that perversely we might have companies being able to sort of
ooze over that very low bar, and if we get any pleasant surprises, that might be the catalyst to bring stocks higher. I think what's really going
to be important is, the outlook that companies have for the first quarter in 2016. Max, we all know that the forth quarter was not very good, it's
very likely to prop its bell for the S&P 500 for the second consecutive quarter of so-called earnings recession.
If the outlooks are good and the dollar, you know, has weakened a little bit lately, so that might take some pressure off of your IBM, your G.E.s,
you big multinationals, maybe their outlook will be just a little bit later than the doom and gloom that many on Wall Street currently have.
FOSTER: Fingers crossed, Paul, thank you very much indeed.
MONICA: Thank you Max, have a great day.
FOSTER: Well as the low oil prices take their toll, Venezuela's President is calling it a state of economic emergency. Now, as he prepares to
address the nation, Nicolas Maduro is fighting this political lie, details on that coming up.
(COMMERCIAL BREAK)
Updating that breaking news for you this hour, the state broadcast Burkina Faso is reporting gunfire and detonations in a hotel in Burkina Faso's
capital. Security forces are exchanging fire with fighters outside the Splendid Hotel, in the capital's business district. No details available,
any casualties following the attack. We'll bring you any details as we get them.
And Nicolas Maduro has declared a two-month state of economic emergency in Venezuela. Pressure is running especially high on the Venezuelan
president. He's expected to give his annual State Of The Nation Address any moment now in Caracas.
The country maybe hardest hit by plunging oil prices, it has the largest reserves in the world. And after triple-digit inflation is now facing
economic collapse. Venezuelans voted the opposition party (inaudible) majority in Congress. It has enough power to potentially oust Mr. Maduro
from office.
Shasta Darlington is following this story from Rio de Janeiro in neighboring Brazil. What can he say to the nation to regain that support?
SHASTA DARLINGTON, CNN CORRESPONDENT: Well Max, first he reject (ph) his economic team now he's announced this economic plan, so certainly
Venezuelans will be listening for what he can actually do during this two- month economic emergency because so far we don't have details. And, the problem is, that up until now, both Maduro and the now opposition-
controlled Congress have seen more intense on fighting each other than tackling the economy.
Here we laid it out for you.
(END VIDEO CLIP)
Anyway you look at it the government's power base is being seriously eroded. Back when Hugo Chavez was first elected in 1998, he used the
country's considerable oil reserves and invested them in massive social programs for the country's poorest.
[16:25:10] UNIDENTIFIED MALE: (Speaking foreign language).
DARLINGTON: Well things have changed for his handpicked successor Nicolas Maduro after Chavez died in 2013. Last year alone the price of oil crashed
50 percent, and unfortunately for Venezuela under Chavez, oil went from representing 70 percent of the export basket to 98 percent.
That means the government just doesn't have the money it needs to import even basic goods, there are shortages of everything from milk to toilet
paper.
Maduro also doesn't have the money to funds those very popular social programs. Add to the mix, triple digit inflation and rising crime and
violence and you have a very volatile situation.
The battle has already begun when Venezuela's opposition controlling congress for the first time in nearly 17 years and facing off against the
country's president Nicolas Maduro.
The Democratic Unity Coalition won by a landslide in election last December claiming two-thirds of the seats, a super majority. Setting the tune
portraits of the late Hugo Chavez removed from the national assembly by the opposition even before they got down to work.
Now, the new president of the assembly Henry Ramos Allup has vowed to remove Maduro from office by legal means within the next six months. In
theory it's possible with a super majority congress could initiate a referendum for a recall vote. In practice, things have gotten complicated.
The big question going, what will their priority be? Will they try and work with the government to come up with alternatives to what is arguably
the country's worst economic crisis in over a century, that would have include unpopular measures like a currency devaluation, or will they ramp
up confrontation with Maduro trying to get him out of office before his term ends in 2019?
(END VIDEO CLIP)
Now, we've also heard some new economic data today from the Central Bank confirming what we really been saying all along last year. Venezuela saw
triple-digit inflation in the third quarter. The economy contracted 7.1 percent. This is what Maduro is up against. And again, we haven't had any
details about what he's going to do with the state of an economic emergency, maybe -- there's been some talk about intervening in companies,
limiting access to currency but nothing about the more dramatic and possibly necessary measures, like I was mentioning, the currency
devaluation or raising the price of the heavily subsidized gas at the pumps. Max.
FOSTER: Let's talk about the state control over business, but the government has pretty much run out of money hasn't it? This rapid decline
in the value of its resources, its funds and the trading is down as well because it's all oil-based as well. I mean, how are they going to afford
to run the economy effectively?
DARLINGTON: Well clearly they haven't been Max, and it's not just the economy, you know, as we've been saying, it's also these social programs
that have made the socialist government so popular. When you consider that all -- 96 percent of their foreign income was oil and price has dropped so
dramatically, they're pretty much squared in. Again, there are some things they could do, like currency devaluation, and the price of oil at the pump
is heavily subsidized. What analyst say is they've also got to come up with some way to attract foreign direct investment, that's going to be hard
to do, with Nicolas Maduro at the helm, under, first Hugo Chaves and Nicolas Maduro.
They really, you know, there were -- they took over certain companies, they made it so unprofitable to be in Venezuela and so uninteresting that it's
going to be hard to lure anybody back, that something that in theory the opposition congress could be working on. But they have said their fist
task of the day is going to be passing an amnesty law that would allow many activists who are put in jail out of jail. So again, who's going to tackle
these really difficult problems, Max, we'll see.
FOSTER: OK, Shasta, we'll stay with you as he makes that big speech and see how he'll manage to regain that support if indeed he does.
Now, in New York and on trading flows around the world, oil was just one of the factors driving fear and putting investors towards the exit, details
coming up.
(COMMERCIAL BREAK)
[16:31:52] MAX FOSTER, CNN ANCHOR AND LONDON CORRESPONDENT: Hello, I'm Max Foster. There is more "Quest Means Business" in just a moment. First,
this into CNN and we've got some breaking news for you out of Burkina. The Faso state media there reporting that gunfire and detonations have been
heard and seen at a hotel in the country's capital. Security forces are exchanging fire with fighters outside the Splendid
Hotel in the capital's business district. There are no details yet available about any casualty following the attack but we're chasing things
up for you. Shares on Wall Street have suffered their biggest losses in months as stock markets across the world were hit by a huge selloff.
The Dow closed almost 400 points lower. Fears over the falling price of oil and a slowing Chinese economy are partly responsible - mainly
responsible - for the drop. In France one person has been declared brain dead and five more are in hospital after they took part in clinical tests for a new pain killer.
The French Health Ministry is investigating. More than 100 other people have already been given the drug and suffered no serious reaction.
The chief neurosurgeon in the city of Rennes described the condition that the patient (AUDIO GAP).
(BEGIN VIDEOCLIP)
GILLES EDAN, RENNES CHIEF NEUROSCIENTIST, VIA INTERPRETER: One of them came in a very serious condition, arrived on Sunday. We thought it was a
vascular condition and this patient is the one who very quickly, who became very, very serious which means that today he is in a condition of cerebral
death. And the other patients it became more serious in the start of this week and today we can say that four of the five other patients have neurological
troubles to (inaudible) and one patient has no symptoms.
(END VIDEOCLIP)
FOSTER: Indonesian police have released the name of one of the five terrorists involved in Thursday's deadly attacks in Jakarta. They say his
name is Afif but he was known by an alias which is Sunakim. He already had been convicted on terror-related charges and died during Thursday's attack.
The actor Sean Penn says his interview with Mexican landlord known as "El Chapo" has been a failure. Penn says his "Rolling Stone" article was
designed to start a public conversation about the so-called war on drugs. He told CBS News that readers have missed the point of his interview.
(BEGIN VIDEOCLIP)
SEAN PENN, ACTOR, MET WITH "EL CHAPO" IN MEXICO: Whether you agree with Sean Penn or not, there is a complicity there. And if you are in the moral
right or on the far left, just as many of your children are doing these drugs.
Just as many, and how much time have they spent in the last week since this article come out talking about that? One percent?
UNIDENTIFIED INTERVIEWER: You're saying there's not much dialogue about --
(CROSS TALK)
PENN: My article failed - let me be clear, my article has failed.
(END VIDEOCLIP)
FOSTER: A space walk outside the International Space Station ended early after water got inside an astronaut's helmet.
NASA called off the spacewalk after a small amount of water got inside the helmet of American astronaut Tim Kopra.
Kopra was working alongside Tim Peake, the first British astronaut - official one at least - to walk in space.
[16:35:18] Returning to our top story now, the sharp fall in stocks around the world. For the Dow it's been a week of ups followed by big downs.
The VIX, a key index of volatility spiked 15 percent on Friday alone as investors ran for the safety of government bonds and gold.
Friday's fall is the second biggest single-day point drop since last September when fears over China's economy sent investors around the world
into panic mode. Joining me now is Vicky Pryce, she's the chief economic advisor for the Centre for Economics and Business Research.
What do you make of today? It's so hard for investors to make sense of it. It's really complex now, isn't it?
VICKY PRYCE, CHIEF ECONOMIC ADVISOR, CEBR: Well it is because we've seen the slowdown in China, we've seen of course also (inaudible) in the
currencies. We don't really know whether they're really pushing for the currency to
become weaker or not. They seem to be changing, you know, their minds for like during the week.
An interesting thing for everyone that's looking at it is that there is a sense of panic and there is a sense in China - or at least we feel that
perhaps they're not in control as they appear to have been in the last few years.
And maybe this sort of capitalist experiment has not quite worked the way they want to.
And there is no doubt that they need extra growth because basically they moved to the more demand-led domestic type economy which perhaps it really
likes (ph) so much and export - it's just not working anything like as fast as they would like it to be and therefore they are now reacting and saying,
well we do actually need more exports and we also want to enter - as you know - the sort of SDR mechanisms.
So they are looking at their currency to play a bigger role and they're sort of trying to do too much in one go and as the markets are looking at
the data and saying, well fine, they can't control what's going on and the economy seems to really be slowing down.
So panic basically for everybody else.
FOSTER: And a perfect storm when you consider that Iranian oil is about to hit the market probably and there are various oil stories around the world
which are impacting its price. But really - you can't look for any security because it was always China that would pump extra oil, wasn't it?
PRYCE: Well exactly. I think China has been asking for a huge amount of commodities and of course also oil because it was growing so fast.
And the belief had been that it was all going to be sustained even though the advanced economy's been not bearing (ph) anything like as fast as they
used to and therefore they weren't asking for an awful lot more oil. And they've been becoming very energy efficient. Then of course we've got the U.S. which is now basically self-sufficient in energy, and we've got
Iran which is going to start pumping oil again and exporting it into the rest of the world.
And we've got OPEC which is just not prepared -- which is the Organization of Petroleum Exporting Countries -- not prepared to cut back out.
But so what we're seeing therefore is a sort of perfect storm in this case which is a real drop in oil prices which actually should be rather good for
all of us. But given that everything is going down, if you like, and prices are basically going to be low for some time and consumer prices therefore are
benefitting, one wonders why it is that the U.S. felt - that the Federal Reserve felt - like raising interest rates when it did --
FOSTER: (Inaudible) yes.
PRYCE: -- and I think in retrospect it doesn't make very much sense.
FOSTER: One of the earlier guests was saying in these times you look for the central banks to provide some leadership and some security and they're
not doing that.
PRYCE: No. And what is going on of course is that whereas if you look at what happened to the - in the - crisis - in the financial crisis - when all
the central banking authorities coordinated their approach and lowered interest rates, we suddenly saw the U.S. doing something different,
completely separate to what the U.K.'s doing for example and what is going on in Europe.
And that of course is adding to the pressures on currencies and of course we're looking now what the implication of a stronger dollar might be for
U.S. funds.
FOSTER: OK, Vicky, thank you very much indeed for coming in with your analysis. Chinese stocks officially entering a bear market now as well.
The country's cooling economy and sinking currency once again hitting the Shanghai Composite on Friday.
Just look at the turmoil in the index since September. The Shanghai Composite is off more than 20 percent from its recent high in December.
That's the threshold for a bear market as well. The dramatic volatility we've seen in China's stock markets has taken its
toll on the so-called Mom and Pop investors who go to their local brokerage to make a trade.
Some have lost their life savings over the past few months, and CNN's Matt Rivers spoke to one student struggling to pay for college now that almost
half of her investments have disappeared.
(BEGIN VIDEOCLIP)
MATT RIVERS, CNN CORRESPONDENT: How many 22-year-olds do you know that check stocks before Twitter? Futures before Facebook? In China it happens
more than you'd think.
ANNIE AN, STUDENT, VIA INTERPRETER: When I got into the market, everybody made money. People thought even fools can make a profit.
RIVERS: And Annie An is no fool. She's a hardworking college student paying her own tuition. She worked part-time jobs for years and invested
her savings in the market in June of 2015. [16:40:06] She hoped it would turn a profit. Then the bottom fell out.
AN, VIA INTERPRETER: I was very sad. June was so rough. I needed that money.
RIVERS: Just as she was getting in, Chinese markets crashed. Annie lost nearly half of her $3,200 investment and got out of the market.
China's stock markets are dominated by average people investing small sums. Many trade at brokerages like this one.
Before the 2015 crash, they were encouraged to dive in by influential state media. But after the crash, people watched their investments vanish.
The government stepped in and pumped billions of dollars into the market. Things calmed down temporarily.
In then came 2016 and the ups and the downs continued. Which reminded us of something else distinctly Chinese - ping-pong.
The first trading of the year saw a ton of back and forth until the so- called circuit breaker was tripped. It automatically halted trading on Monday and again on Thursday.
But instead of calming things down, it actually only made the selloffs worse, so volatility continued.
The circuit breakers were scrapped and regulators continued to pump money into the market. It was enough to convince Annie to put some savings back
into the market despite her promise not to. She's lost roughly $500 in two weeks this year.
AN, VIA INTERPRETER: My friends tell me that the market will increase in July, my money might double so I will wait.
RIVERS: Annie also bought a collector's item in 2015 - a large stuffed bear. It could be the most valuable investment she's made thus far in the
midst of a bear market. Matt Rivers, CNN Beijing.
(END VIDEOCLIP)
FOSTER: Well if the global economic picture wasn't already complicated enough, Iran now threatens to throw another spanner in the works.
More cheap oil could be on the way. We'll discuss that next.
(COMMERCIAL BREAK)
FOSTER: The number of oil rigs in the U.S. has fallen to its lowest level in six years. As oil prices falls, rigs have been shutting across the
United States. More than 800 rigs have been closed in the last year alone. The question everyone's asking is where oil prices will go from here. We've heard all sorts of predictions on "Quest Means Business" from top
minds in the industry, starting a week ago, when the Breitling CEO correctly predicted the drop would go below $30 a barrel.
(BEGIN VIDEOCLIP)
CHRIS FAULKNER, CEO, BREITLING ENERGY: I don't think it would go down to a $29, but I think we're going to see next week it bounce around low 30s/high
20s. And that's a big psychological number. When you see a 2 in there, I think people are going to have to take notice.
T. BOONE PICKENS, CHAIRMAN, BP CAPITAL MANAGEMENT: By the end of the year, I promise you you're not going be $30 oil, I can tell you that. It would
be substantially higher than that.
ALAN VALDES, DIRECTOR OF FLOOR TRADING, DME SECURITIES: I think oil is going to keep on, unfortunately, going down and that's going to bring the
market down. I don't see any end of oil - at least probably to the mid- $20s. I don't think it's going to go as low as $10, and I wouldn't be as bearish
as RBS and sell everything, but I'd be careful. I don't think I'd get involved unless it's really something I like and it's definitely on sale.
(END VIDEOCLIP)
FOSTER: Fereidun Fesharaki is a former energy advisor to the Iranian prime minister. He's now the chairman of FACTS Global Energy and joins me via
Skype from Honolulu in Hawaii. Thank you so much for joining us. [16:45:05] When we talk about this Iranian oil coming onto the market, how
much will come onto the market and how quickly?
FEREIDUN FESHARAKI, CHAIRMAN, FACTS GLOBAL ENERGY: I think about 500,000 barrel per day will enter the market within a month, month and a half. The
Iranians have been doing practice runs for some time. They are ready to go. They have presold oil pretty much among the
European, Asian, African buyers. All of the buyers are known, it's all set in motion and so as soon as IAEA says go, they will go.
(CROSS TALK)
FOSTER: Isn't that factored into the market already?
FESHARAKI: Not really - partly it may be factored, but nobody really believes that it's coming until it hits the market.
But for a long time lots of people say, well, it's not going to happen, it's going to be delayed -- some political issue is going to delay it, but
now it's past the point of no return and I think we're going to see it imminently in the market.
FOSTER: And presumably because Iran has been starved of this economic supply line for so long, it's not going to be in the mood for restricting
that oil supply in order to keep prices up.
FESHARAKI: Absolutely right. But, you know, it's not all about money. Iran lost volume, lost money and lost prestige and lost importance in the
oil market. So the Iranians would like to increase the production no matter what the
price is so that they again become a player in the global oil market. They became an irrelevant player because of the U.S. sanctions.
Now they're going to get back their position as the second largest OPEC producer and that's a very important position. Size matters in this kind
of environment.
FOSTER: What are your thoughts then about where the oil price can go after this huge amount of oil hits the market?
FESHARAKI: I think the oil prices are heading towards $25 or so. The Iranian factor would be only one part of it, but the Iranians are going to
put in the 500,000 in the market, not going to bring the additional 500,000 barrels for in the market until they feel the time is right.
So the Iranian situation accelerates an environment which was already taking place - a direction which was already taking place.
So I think we are going towards $25 and this is the worst situation I've seen in the oil market in 40 years.
FOSTER: Mr. Fesharaki, thank you very much indeed. It's a frightening prospect that (AUDIO GAP) bring us your analysis on it.
We're going to move on from oil for a moment, bringing stories about Chipotle shares. They're getting an extra helping of guacamole on Friday.
CNN Money' s Cristina Alesci will explain how the company plans to put its recent health scares behind it and that's after the highlights from "Make,
Create, Innovate."
(COMMERCIAL BREAK)
FOSTER: Now I want to bring you an update on our breaking news this hour. The state broadcaster in Burkino Faso is reporting three individuals
entered the area of the Splendid Hotel in the capital and have exchanged gunfire with security forces late on Friday.
A U.N. spokesman says the hotel is known to be frequented by Westerners and United Nations personnel but it doesn't believe any U.N. staffers are
currently staying at the hotel. A French Embassy spokesman says the embassy is aware of an ongoing operation there now. There are no detail yet available about any
casualties though following the attack. [16:50:09] A drug trial has left one person brain dead and five others in hospital in France. The French Health Ministry calls it a serious accident
and is conducting an investigation. The drug company maintains the trial of the new pain killer was
administered in compliance with all international regulations. Phil Black reports now from London.
(BEGIN VIDEOCLIP)
PHIL BLACK, CNN CORRESPONDENT: "An accident of exceptional gravity," that's how the French health minister describes this drug trial which looks
to have destroyed the lives of a handful of its participants. Around 90 people have taken the drug at the center of the trial but in different doses. Those who've reacted negatively to it were all part of
the same group taking the same dose. They started taking it repeatedly from January the 7th but it only took a few days before one of them developed negative symptoms. He is now
clinically brain dead. Others followed as well, also suffering neurological symptoms. They're all men, aged between 28 and 49. Three of them may suffer permanent
disabilities. This was a phase 1 trial which means it is the first time this drug is being tested on healthy human volunteers.
The purpose of a phase 1 trial after animal testing, is to determine if it is safe for human consumption. The French health minister says the drug is
designed to treat anxiety and motor disorders but she denied very strongly reports in the French media that this is a cannabis-based drug.
MARISOL TOURAINE, FRENCH HEALTH MINISTER, VIA INTERPRETER: This drug does not contain Cannabis nor is it a product or a drug derived from Cannabis.
It acts on natural systems which fight pain, a system called the endocannabinoid system.
But I must stress there is no Cannabis in this drug.
BLACK: So no Cannabis but the bodily system this drug is designed to influence is named after Cannabis because the receptors are the same ones
which interact with compounds in the Cannabis plant. Now the private lab under contract with the French government, Biotrial,
says that all international guidelines were followed through this trial. So does BL which is the Portuguese company developing the drug.
But the French government says that an event like this in a medical is unprecedented and it will work hard to investigate this, find the answers,
and if necessary, determine who was responsible. Phil Black, CNN London.
(END VIDEOCLIP)
FOSTER: Now it's not every day a company promises to shut down all of its 1,900 restaurants and then sees its share price rally.
Chipotle became one of the only stocks out there in the green this Friday when it said it would shutter its doors for several hours next month to
hold a meeting on food safety. The fast food Mexican chain has suffered from outbreaks of E. Coli, Salmonella and Norovirus of late. Shares are down around 40 percent since
October. CNNMoney's Cristina Alesci is in New York with this one. An extraordinary sort movement in the share price, but good news actually for them.
CRISTINA ALESCI, CNNMONEY: Yes, it is totally counterintuitive, and I think what investors are seeing here is really the light at the end of a
very long tunnel for the company. These shares have been battered four months because of the various outbreaks that you just mentioned and they really haven't put too much out
there publicly. So investors are really listening and paying attention to the way the company is responding and seeing it be more public and potentially more
upbeat about its situation, indicating perhaps that government regulators here in the U.S. will actually close the case and announce that the
outbreaks are officially over. That is where investors think Chipotle is headed and that's why we've seen
these moves in the share price. Of course the government hasn't come out to say that just yet but this is all an indication that it's happening.
Also, just a couple of days ago the company executives were very publicly saying look, we are very positive about our ability to withstand this blip.
It's a short-lived thing and we will see the other side of this, we will open more stores.
Again, this is very important to the growth of the company that they continue to open more stores. It's an indication that there is growth
ahead of them and that's really all Wall Street really cares about. The thing that's really been hurting them is the fact that the government hasn't officially closed the case and it's been two months - about two
months - since the last outbreak was reported.
FOSTER: And these are brands that people across know of, right? It's a vast chain across the country.
ALESCI: Yes, as you said, 1,900 stores across the country. This is a crisis that has really struck the core of the way the company operates.
This is a company that really empowered the staff at the store level to cook fresh, right?
[16:55:04] If you think about most fast food chains, what do they do? They get food shipped in pretty much prepared and all the staff has to do at
that point is pop it into a microwave. It's not really cooking at the restaurant level.
Chipotle really prided itself in having a staff that could prepare the food in the freshest possible way.
And that's where they got into a little bit of trouble because they did give so much leeway to the staff to do the cooking at the store level,
perhaps without the right protocol and procedures which they've now put in place, which is why they're shutting down the restaurant to tell the staff
about those additional safety procedures that they're going to be enacting over the next several months.
FOSTER: OK, thank you very much indeed for that. We'll wait to see how that goes and progresses. In a moment, a holy Google hangout. One of the
biggest names in Silicon Valley sits down with Pope Francis at the Vatican.
(COMMERCIAL BREAK)
FOSTER: Here's the first Pope to have ever joined the Google hangout. Now Pope Francis has met with the executive chairman of Alphabet, Google's
parent company. Eric Schmidt attended a short private meeting with the Pope at the Vatican earlier on Friday.
It's not known what they discussed. The Pope has what you might call a nuance relationship with the tech world. In the past he's called the
internet a gift from God, but he's also warned about the isolation that can be created in a society ruled by technology.
That is "Quest Means Business." Thank you for watching. I'm Max Foster. Have a great weekend. You do stay with CNN for the latest news updates,
particularly out of Burkina Faso.
END
