Return to Transcripts main page
Quest Means Business
No End in Sight to Market Volatility; Donald Trump Versus Fox News; Zika Virus Spreading as Airlines Offer Refunds; Security Concerns in Tunisia; Iran Open to U.S. Business; Apple Shares Fall More Than 6 Percent; Challenges and Opportunities for Oil Producers. Aired 4-5p ET
Aired January 27, 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]
(BELL RINGING)
MAGGIE LAKE, CNN HOST: Wall Street slumped to its worst day in a week there's no end in sight to the market volatility. It's Wednesday, January
the 27th.
(MUSIC PLAYING)
(BEGIN VIDEO CLIP)
LAKE: Tonight it's Donald Trump versus Fox News. The Republican front- runner makes America debate again.
Slower and slower, the Fed says growth is falling and sends stock markets sinking.
And the Zika virus spreads, now airlines are offering refunds to passengers.
I'm Maggie Lake. This is QUEST MEANS BUSINESS.
(END VIDEO CLIP)
(MUSIC PLAYING)
LAKE: Good evening. Tonight the richest man running for U.S. President has taken on a media empire and neither side is backing down.
(BEGIN VIDEO CLIP)
LAKE: Donald Trump has amped up his rhetoric against Fox News after pledging to skip the network's Republican debate. It is a big gamble for
Trump, and it comes just days before the first votes are cast in the Presidential race.
The war between two of the most powerful forces for the Republican Party played out on line. A simmering dispute with Fox News anchor Megyn Kelly
came to a full boil. Trump had demanded she not be allowed to moderate Thursday's debate. He sarcastically tweeted I refuse to call her a bimbo.
Fox responded on Tuesday night saying we can't give in to the terrorization of our employees.
(END VIDEO CLIP)
LAKE: Trump escalated the rank attacking all of Fox News and its Chairman Roger Ailes. He called Fox News a disgrace to good broadcasting and
journalist.
Now reports say Trump will only deal with Ailes' boss, the executive chairman of News Corp, you know him well, Rupert Murdoch.
Our Senior media correspondent, Brian Stelter is following the story. And Brian, people are flabbergasted. This is the first time we've seen at this
stage a serious contender refuse to debate. And the language between the two is really coming to a boil.
BRIAN STELTER, CNN SENIOR MEDIA CORRESPONDENT: This is all the media world is talking about. And it's up against a deadline of the debate tomorrow
night. Anything could happen here. I'm not ruling out the possibility of a surprise last-minute appearance by Donald Trump. But he says he is going to
have his own event.
(BEGIN VIDEO CLIP)
STELTER: He is going to counterprogram the debate assuming other networks will air it. It's like Donald Trump is the master of his own reality show,
he's both the producer and the star. And this reality show is happening on twitter and Facebook and instagram and on CNN and Fox News and MSNBC. He is
in some ways calculating this like I don't think we've ever seen a politician calculate it before.
LAKE: Yes, coming from his business perspective. I mean he's saying, I'm in the lead, I don't have to come to the party to negotiate I guess.
(END VIDEO CLIP)
LAKE: But this is a debate. I mean there is a - there is an argument he's getting (inaudible) are you really fit to be President if you're going to
get annoyed because you don't think you are being treated fairly by media empire? I think that we rightly point out, this is less about Megyn Kelly,
who he has a beef with, and really about Donald Trump taking on the establishment. I mean Rupert Murdoch, Roger Ailes, these are king makers
when it comes to politics.
STELTER: Yes, Megyn Kelly is the public face. But this is about a war with all of Fox News. And of course Fox News is a really significant
conservative megaphone in the United States.
(BEGIN VIDEO CLIP)
STELTER: In many ways it up ended media as we know it here when it launched 20 years ago. It created a conservative alternative for viewers. It is the
GOP's favorite news channel. But here's the GOP's front-runner really going at war with the channel. I mean when he said today I'm not going to call
Megyn Kelly a bimbo, we all know what he was doing there, and it was outrageous. I really feel for Kelly in this situation because she's caught
in an almost impossible situation. But hey, she's going to moderate this debate tomorrow night no matter what, whether Trump is there or not.
(END VIDEO CLIP)
LAKE: Yes and as Donald Trump pointed out, maybe there is no such thing as bad publicity. A lot of people know who Megyn Kelly is now as a result of
this. But is this going to hurt Fox News?
I mean the debates serve a purpose, they are a public forum and they're supposed to help us inform who we want to choose from. But let's face it,
especially this season, they've also had big ratings vehicles. Do you think Fox News is going to at the last minute cave and give in to his wishes.
STELTER: Well there is a situation here involving the guarantees advertisers are given. Advertisers are promised a certain level of rating
when they buy an hour on something like a debate. These debates have been aired between 15 or 20 or even 25 million viewers.
The Trump campaign knows this and it's talked openly about how it things advertisers are going to be deeply disappointed when Trump's not on the
stage. That's the kind of business calculation. Again you don't normally hear from a politician, you don't normally hear from a Presidential
candidate. But Trump is using his business knowledge sort of against Fox in this - in this ongoing feud.
At this point though I don't think we're going to see changes from Fox. I don't think we're going to see the advertisers make changes either. There
is a lot of anticipation for this debate, whether Trump's there or not, I think there's a lot of curiosity. But what do the other candidates do?
They've been preparing for weeks to go up against Trump in this final debate before Iowa.
LAKE: Maybe they finally get a word in.
STELTER: Well they're going to have more time, right. Trump's always sucked the oxygen out of every room. Well there's going to be more time
for everybody else now. There could be a real shakeup in this race because Trump's not on the stage. On the other hand he's going to be on other
channels. People are going to be able to watch him instead of the debate, and I'm curious to see how much that cuts into the audience of the debate.
LAKE: And how much once again, even if he's not there, they spend all of that time talking about Donald Trump. It's been so frustrating for some of
the fringe candidates who thought they'd be further along right now. All right, Brian I know you're going to be on it, thank you so much.
Well a late selloff sparked by the Fed ends a day of volatility for U.S. stocks.
(BEGIN VIDEO CLIP)
[16:05:08]
LAKE: Just take a look at the Dow closing more than 220 points lower. Stocks falling on the Fed's announcement to leave rates unchanged. Now
that was widely expected, but there is nervousness over the fact the Fed hasn't signaled fewer rate hikes this year because of concerns over U.S.
and global economies.
From the open, the Dow was already being pulled lower by two blue chip companies with disappointing earnings, Boeing and Apple.
(END VIDEO CLIP)
LAKE: Now recent volatility appears to have put the Fed on the lookout for new risks from abroad. In a statement released a couple of hours ago, the
Fed says "the Committee is closely monitoring global, economic, and financial developments that appears to diminish the chances of a rate hike
at its next meeting in March."
(END VIDEO CLIP)
LAKE Mohamed El-Erian told our Christine Romans that the days when central banks can fix the economy will soon be over.
(BEGIN VIDEO CLIP)
MOHAMED EL-ERIAN, CHIEF ECONOMIC ADVISOR, ALLIANZ: We can no longer rely on central banks. They have done all they can do and a bit more. If we
don't transition in an ordinary fashion we are going to be forced into a place that we really don't want to go not just for this generation but also
the next generation. So the attempt of this book is a wakeup call. The road that we are on now where central banks have taken responsibility and we
have borrowed growth from the future, we've borrowed financial returns from the future, that's going to end. So we better do something about it now.
Otherwise we'll end up in a place that we really don't want to go to.
CHRISTINA ROMANS, CNN CORRESONDENT: What happens this year with the Fed interest rate hikes. Will it be four as many people are saying or more like
two?
EL-ERIAN: I think it's going to be more like two than four and it could be you one or two. I do not think we get four. The global economy is too weak.
And the risk of triggering financial volatility that destabilizes the economy is too high. So I think they will go very slowly. And I think
they're going to get us used to the concept this is a very, very shallow journey. It's going to be full of stop-go. This is not your typical hiking
cycle and it's going to stop, much lower than where it has stopped in the past.
(END VIDEO CLIP)
LAKE: Gillian Tett is U.S. Managing Editor of the Financial Times and she joins us now. Gillian it's a bit worrying when you hear Mohamed lay that
out the central bankers, we have to get used to them not being able to come to the rescue. The cautious - the Fed said something much more cautious
today.
(BEGIN VIDEO CLIP)
GILLIANT TETT, U.S. MANAGING EDITOR, FINANCIAL TIMES: Absolutely. I mean Mohamed is absolutely right. Basically the Fed has used a lot of its
ammunition in the last few years as have the other central banks around the world but they are now at a point where they have not got a lot of bullets
left.
The statement today essentially said we are watching, we're waiting to see what happens. Because we've had some pretty negative signals come out of
the global economy recently and of course we've had these big stock market falls.
(END VIDEO CLIP)
TETT: And the Fed isn't yet ready to concede that actually the economy is so weak, or the outlook is so weak that it's going to sit on its hands.
But it's also not signaling that it's got that much confidence about outlook right now.
LAKE: That's right, and to be fair, I mean if the Fed came out and said they were very worried you can imagine the reaction we'd have. Look at
what happened today just by the fact that they sort of almost didn't want to give us too much information.
TETT: But we're living in kind of Alice in Wonderland economics right now.
(BEGIN VIDEO CLIP)
TETT: Because if the Fed had come out and said actually we are really worried, then maybe the stock markets might have actually rallied because
they would have thought the Fed's going to sit on its hands and not do anything. And maybe, just maybe it might even reverse that rate hike it
made late last year.
(END VIDEO CLIP)
LAKE: Which is what they're betting. A lot of people we talked to in the market believe that the Fed will actually end up lowering rates again.
TETT: Exactly but the problem today was the Fed neither committed itself to trying to sit on its hands or lower rates because things are so bad.
Nor did it say actually don't worry everyone things are pretty good.
It basically said the same thing that many investors are saying which is, we're waiting and watching somewhat nervously.
LAKE: And we just don't know. And that's what we've heard from so many people. The problem isn't that there are risks, it's just that we don't
know what they are, we don't know what to do and it's hard to sort of decide where to put your money in that case, everyone's sitting on cash.
TETT: There are two big uncertainties right now. Firstly people are very much dependent on the outlook on China in terms of assessing what's
happened in the global economy. And the Chinese data and the workings of Chinese systems are as mysterious as the workings of all those sub-prime
securities were back in 2007.
(BEGIN VIDEO CLIP)
TETT: Your ordinary investors just do not understand what's going on.
(END VIDEO CLIP)
TETT: And secondly, the structure of the market has changed in recent years since the financial crisis. It's a very thin market because of
regulatory changes have essentially taken away the banks as that lubricant, the buyer of last resort.
So you'll see prices kind of go haywire right now, they shoot up, they shoot down, a lot of volatility and of course that makes ordinary investors
even more nervous.
LAKE: That's right, we wanted to handcuff the investment banks and take away that risk but then you don't have anyone who's willing to take the
other side of these - in times like this.
TETT: Rule - law of unintended consequences
(CROSS-TALK)
LAKE: As we heard Goldman talking about with us in Davos. It is an interesting time in a worrying month, but we'll get through it. Gillian
Tett, thanks for helping us understand it a little better.
TETT: Thank you.
[16:10:03]
LAKE: Now, still to come on QUEST MEANS BUSINESS. As new cases of the Zika virus are reported in the U.S. and Europe, airlines are starting to
offer refunds.
(BEGIN VIDEO CLIP)
LAKE: We take a look at how it could affect your travel plans.
(MUSIC PLAYING)
(END VIDEO CLIP)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
LAKE: Airlines have begun offering refunds to people who booked flights to the growing list of countries affected by the Zika virus. Extra precautions
are being taken when it comes to pregnant women. They are being warned the virus could cause birth defects.
Let's bring in Samuel Burke with more. And Samuel there's been so much attention on this story, what exactly is happening with the travel
industry?
SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: For the first time we are actually seeing businesses have to change their policy because of this Zika
outbreak. Let's start with the airlines. It's not every single airline. We've been checking throughout the day and have feeling by tomorrow the
list is going to be even longer.
(BEGIN VIDEO CLIP)
BURKE: But the airlines that we know right now, American Airlines, British Airways, United, Lan, which is a Chilean airways - Chilean airline rather,
and Tam airlines, which is a Brazilian airliner. And it's not everywhere across the region, it's only certain airports in certain parts of Latin
America.
(END VIDEO CLIP)
BURKE: Mostly the northern part of South America as well as Mexico and Central America. So it's really the first time that we've seen businesses
on a wide scale having to change what they are doing because of Zika.
(BEGIN VIDEO CLIP)
LAKE: And I know there are so many questions. We have been hearing them from viewers and concerns. Do these changes, the fact that you're going to
be allowed without penalty, do they apply only to pregnant women?
BURKE: That's what it is right now.
(END VIDEO CLIP)
BURKE: Just because you have a fear of going to these regions because of what you are seeing on the television right now, or what you have heard
does mean you can go. Only expectant mothers at this point. And some places are offering refunds.
(BEGIN VIDEO CLIP)
BURKE: Other people are saying that the mothers can come back, if they want, reschedule a trip -- if they are already on the trip they can come
back earlier than they might have anticipated as well as their companions.
So some women are actually having to send in documents to show that they are pregnant and that their partners are travelling with them so that they
can come back.
(END VIDEO CLIP)
LAKE: But this is interesting because health officials are telling us a little bit of a different story. And you know they're not so definitive
that these are the only people at risk. They are really taking a hard look at this. So presumably the industry is going to have to sort of keep in
lock step with what we are hearing from health officials.
BURKE: Yes, there is so much they don't know. But we're hearing time and again is they can't make scientifically that link between the birth defects
and Zika.
(BEGIN VIDEO CLIP)
BURKE: But what they are telling us is that women should take the travel industry up on this offer and they're really afraid of how this Zika virus
might spread.
DR. SEEMA YASMIN, CNN MEDICAL ANALYST: I have spoken to health officials, scientists and doctor who have called what is happening in South and
Central America and the Caribbean a pandemic. And it probably will spread to the U.S. and we might see small outbreaks of local transmission here.
But it's so important that we get the word out now and we educate people.
(END VIDEO CLIP)
BURKE: And Maggie, not just airlines anymore. Just getting word that cruise lines as well, Norwegian and Carnival are saying that women - again
pregnant women can reschedule their trips.
LAKE: All right, good information to know. And we have all of this on our website. So we'll keep everyone up to date. Samuel thank you so much.
Now the Zika virus adds more problems to a travel industry already dealing with security threats across the world.
In the past few days two major tour operators have canceled trips to Tunisia, normally a top destination for European holiday makers.
(BEGIN VIDEO CLIP)
[16:15:02]
LAKE: Security concerns have led to a state of emergency and a nightly curfew in the country. Thomas Cook won't let anyone travel to Tunisia until
the start of November. The company is offering free cancellations or changes. Thomson has also announced similar measures, the company will
offer discounts for people amending their package holidays.
Let's bring in David Scowsill, he is President and CEO of World Travel and Tourism Council and he joins us from Dallas, Texas.
Thank you so much for being with us. How is the industry grappling with this latest threat coming from Zika? We heard Samuel just say they are
starting to make changes. But it seems like this is a quickly evolving story.
DAVID SCOWSILL, PRESIDENT & CEO, WORLD TRAVEL AND TOURISM COUNCIL: Yes, there is a melting pot of information Maggie. If you start with the fact it
is a not really a pandemic yet in the sense it's not like SARS, it's not like Ebola. This is not something that's transmitted from people to people,
this is a mosquito born virus which is very similar to other virus we've seen before like Dengue Fever.
(BEGIN VIDEO CLIP)
SCOWSILL: So if you talk to the World Health Organization, they're advice is very specific. You take normal anti-mosquito prohibition if you like,
so it's doing the spraying you need to do, making sure your flesh isn't exposed. But they're not giving out advice that people should not travel
as a result. That's the key message.
(END VIDEO CLIP)
LAKE: Yes, David what - are we learning anything? I mean you mentioned Ebola there and it's so different, but every time we go through one of
these is the industry learning from that and able to respond more quickly as a result?
SCOWSILL: Yes, we learn very quickly from these incidents. If you just look at Brazil or the Caribbean now, Brazil, there is apparently a link between
this particular virus and encephalitis.
Quarter four in Brazil last year there was something like 4,000 cases of encephalitis. So the medical community are going to have to look at that
very carefully to see whether there is a link. And then if you look at the Caribbean, the U.S. market to the Caribbean, they're about 30 million
people a year that go there.
(BEGIN VIDEO CLIP)
SCOWSILL: Plus all the cruise lines which add another 25 million people. And they are very concerned that the right information gets out. So the key
for us as an industry is you have to communicate very clearly in these situation what is the problem is, what's being done about it and what the
risks are.
(END VIDEO CLIP)
SCOWSILL: So individual travelers can absolutely be across their travel decisions. And as we just heard many of the airlines and cruise lines are
now being absolutely flexible if pregnant women decide they do not want to fly to these locations.
LAKE: Which makes it a lot easier for people who - you know let's face it different have to plan these holidays with quite some lead time.
David what -- another issue that is I know on the minds of everyone in your industry and is much harder to quantify and to anticipate is the threat of
terrorism. What is the industry doing to help figure out the correct response to that?
SCOWSILL: Well I'm in Dallas because the first week of April we have a global summit precisely on this issue. We have a convening government
ministers and the private sector to focus on it.
(BEGIN VIDEO CLIP)
SCOWSILL: If you look at these incidents Maggie, there are two kinds of incidents. There is one like we had in Paris before Christmas, which was
similar to Madrid and London in the past, which is a random attack on people in that city. It wasn't specifically aimed at tourists.
(END VIDEO CLIP)
SCOWSILL: And in those situations, those cities recover to normal very, very quickly. Alternatively, you have attacks specifically on tourism, take
Egypt, take Tunisia, take Turkey, where in those countries the effect is dire, and it's going the take those countries much longer to recover and
get back to normal.
As you have already said, some of the tour operators in Europe have pulled out of Tunisia for a period of time, and the same with Egypt until they are
confident that the governments are on top of the security there and that the governments in the private sector are working to make absolutely sure
those destinations are as secure as possible for the traveling public.
LAKE: And tourism of course such an important source of income, an important key - part of the economy to these locations. It's going to take
the cooperation of both the private sector and the government to get our heads around it.
David, thank you so much for joining us today.
SCOWSILL: You're very welcome.
LAKE: Now one of Kenya's top tourism officials has told me that travel advisories are harmful to countries such as his. Kenya has been the target
of terror groups causing countries like the U.S. to issue warnings. But Kenya's Tourism Cabinet Secretary told me that ensuring security is a
priority.
(BEGIN VIDEO CLIP)
NAJIB BALALA, KENYA TOURISM CAIBNET SECRETARY: Well, we are optimistic and we are already here in London and the next two days and already the
feedback is very positive. Kenya is back. And people are optimistic that if numbers will come back. We have introduced new incentives. One is we have
stopped the visa fees for children.
Second is we have reduced the park entry fees to the national marks to a maximum $60 per person. And then we have given a subsidy to charter planes
coming to Mombasa and (inaudible).
LAKE: It has come to a tough period and I know in the past you have been critical of travel advisories.
(END VIDEO CLIP)
LAKE: What is the best way for governments to try to inform and protect their passengers and their citizens? How should it be handled?
[16:20:09]
BALALA: I think the travel advisory has damaged countries like Kenya. Because then the insurance is out of place. The problem is that you become
double tragedy of victim.
(BEGIN VIDEO CLIP)
BALALA: One is a victim by the terrorists. Second, then it becomes economical. It hurts the economy, creates redundancy in employment and the
vulnerability of unemployed youth to terrorists.
(END VIDEO CLIP)
BALALA: I believe we can be more innovative governments, to protect their nationals. But more important thing is that we should stand in solidarity
with the country that has been attacked.
LAKE: There is this ever-present security threat. We've seen it play out. What more is the industry doing? Hotels, resorts, airlines, in order to try
to change and adapt.
BALALA: We are developing strategies. We are creating a refurbishment fund so that we can refresh and renew our hotels. We can review the beach
destination and make it more vibrant and attractive to tourists.
(BEGIN VIDEO CLIP)
BALALA: We are investing heavily on infrastructure and security. We have increased our security budget to almost $2.3 billion, and additional
equipment and motor vehicle for the police. We recruited 10,000 new policemen just to make sure that the country is safe for Kenyans and for
visitors as well.
But more important thing, infrastructure pertaining to areas where tourists work.
(END VIDEO CLIP)
BALALA: So we are serious this time in creating a new - a new product, a country that is safe as well as we have a plan up to 2030, so we have a 15-
year strategy, which is sustainable for the economy.
LAKE: I know part of your push and portfolio has to been really to expand our understanding of Kenya, to diversify away from being just thought of
for a safari destination or one particular beach resort. What can we expect to see in terms of initiatives in that direction.
BALALA: Well our uniqueness is the combination of beach and safari, and that's the uniqueness. But we have more, we have sports tourism, we have
cultural tourism, we have conference tourism.
(BEGIN VIDEO CLIP)
BALALA: And more important thing, the interaction between the visitors and the people of Kenya. We have a friendly population. And the advantage we
have as a nation, we have a young, educated population.
(END VIDEO CLIP)
BALALA: 70% of our people are below 35. So, yes, we have the innovation to diversify the product and create a facility that the visitor enjoys most.
LAKE: We have numbers just in to CNN. Facebook's earnings have topped analysts' expectations for the last three months of 2015.
(BEGIN VIDEO CLIP)
LAKE: It reported a 14% rise in monthly active users. And more people are signing on using smart phones. The number of mobile users rose 21% over
last year. Most of Facebook's revenue comes from mobile.
(END VIDEO CLIP)
LAKE: Well just days after the sanctions were lifted, Iran is looking for investment from the West.
(BEGIN VIDEO CLIP)
LAKE: The President is drumming up business in Europe in one of his top economic advisors says Tehran is open to cash from America, too.
(MUSIC PLAYING)
(END VIDEO CLIP)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
LAKE: Iran has opened the door to American investment.
[16:25:00]
Speaking exclusively to CNN, a top economic adviser to the Iranian President says the government has no problems with U.S. firms that want to
do business in Iran. We'll hear from him in a moment.
It comes as Hassan Rouhani is drumming up investment in Europe. He arrived in Paris Wednesday where he is expected to meet with the French President
and business leaders.
In Italy, the Iranian President oversaw the signing of contracts reported to be worth around $18 billion.
CNN's Fred Pleitgen spoke exclusive with Hassan Rouhani's top economic advisor. Fred is live for us in Tehran tonight. And Fred, they are
rolling out the red carpet looking for that desperately needed investment.
FRED PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, they certainly are. And they are also saying, as you have noted, Maggie, that the U.S.
companies are also welcome to invest here in Iran. As well of course we do know that the political situation between Iran and the United States
remains quite difficult. But one of the interesting things that they said this week is that they are also seriously looking into direct flights
between the U.S. and Iran. But at this point in time they said they need foreign direct investment. They need it in their manufacturing sector, in
their IT sector, which is a lot bigger than people thing. But of course also in their hydrocarbon sector, and that's one that they really want to
develop despite the current low oil and gas prices. Let's listen in to what Mohammad Bagher Nobakht had to say.
(BEGIN VIDEO CLIP)
MOHAMMAD BAGHER NOBAKHT, IRANIAN PRESIDENTIAL ADVISOR: (As translated) The declining oil price is certainly not what we base our decisions on. And if
the supply of oil is to decline, it should be the countries that increase their production while we were under sanctions that should scale back now.
They should let Iran have its share of the market. I hope and predict for various reasons that the oil price will go back to a realistic level soon.
PLEITGEN: What's your export going to be in five years then? 2 million? 2.5 million barrels? What do you think?
NOBAKHT: (As translated) For the production we are thinking 5 million barrels per day. But of course our production capacity will be more than
that. But for next year our export will be 1.85 million barrels of crude per day as well as 400,000 barrels of gas condensate. So the total of our
export would be 2.25 million barrels a day.
PLEITGEN: We've been speaking to many people here and they are all very hopeful, very optimistic. How fast do you think that they are going to --
the Iranian people, are going to benefit from sanctions relief in terms of investment for businesses, in terms of jobs also for people?
NOBAKHT: (As translated) We can easily create 900,000 to 1 million jobs, especially for the educated young people. This is a realistic figure, not
an optimistic one. With regard to modifying laws to help boost the economy, we have a good track record in the region. Foreigners will surely choose
Iran for investment in this region.
PLEITGEN: Will American companies have the same chances in Iran as European companies?
NOBAKHT: (As translated) We don't have a problem with American companies. They can also invest in the fields where we need investment. Of course we
have the power to choose between different countries. The Europeans and the Americans, who have announced that they would like to come here. Of course
there are many consideration he when choosing investors. But on the whole, there are no limitations for the American companies to invest in Iran.
(END VIDEO CLIP)
PLEITGEN: And Maggie, one of the other things that he also said is that he wants Iranian businesses to benefit from foreign direct investment as well.
They are looking for foreign investors to come here, but also to bring technology transfer for instance so that Iranians here can get a job but
also so that Iranian companies here will get business as well.
It's interesting because just yesterday I was at one of Iran's biggest oil and gas facilities in the south of Iran which actually services the largest
gas field in the world and a lot of that facility was built up during the sanctions. So there certainly is a lot of expertise here in that sector in
many other sectors as well. And what they are looking for now is for technology from the west to further boost their own economy as well,
Maggie.
LAKE: You know, Fred, this whole discussion -- there is a lot of enthusiasm and a lot of optimism when people are talking about it. Iran certainly
looking for the investment. European economies struggling, they are looking for a new market. But you will hear people say, you know hang on a second.
This is a market that's been cut off. There are still problems of corruption, of all the typical thing we see, transparency, rule of law.
Should we temper our expectations a little?
PLEITGEN: Yes, first and foremost because on top of all those things Maggie, you also still have a political situation that really is unclear at
this point in time. We do have the nuclear agreement of course between Iran and the P5+1 countries but it's not clear whether or not that nuclear
agreement will actually hold. There certainly are skeptics out there who say the gains that have been made are not necessarily set in stone. Of
course if either of the sides, or either of the many sides who are involved in this nuclear agreement make some sort of political miscalculation.
[16:30:10] If there is some sort of incident between these two sides, we have to keep in mind there were some incidents recently between the Iranian
Navy and the U.S. Navy in the Persian Gulf. Those are all things that could jeopardize all of this. And the other
thing that we have to keep in mind is at this point in time, this sanctions really is not something that has taken hold yet.
As we've been talking to people about as well. They say so far you can't pay electronically. It's still very difficult to do business here.
So it's unclear how all of that will unfold, but certainly it is the case that people are very, very optimistic and they do believe that there is a
big chance now.
LAKE: Yes, that's fascinating. We heard that in Davos - people want to have toehold there, but they are
sort of moving slowly as they navigate these complicated waters. Fred, great stuff. Thank you so much - Fred from Tehran.
Now, Apple has the most profitable quarter in American history. But that wasn't enough for investors who are not impressed with a disappointing
outlook. We peel back the layer on Apple's slowdown next.
(COMMERCIAL BREAK)
LAKE: Hello, I'm Maggie Lake. Coming up in the next half hour of QUEST MEANS BUSINESS, Apple shares fall more than 6 percent as investors wonder
what Tim Cook's next move will be. And we'll speak to the singer-songwriter who says modern-day musicians may
have never had it more tough. Before that, these are the top news headlines we are following for you this hour.
A late-day selloff sparked by the Fed ended a day of volatility for U.S. stocks. The U.S. Federal Reserve kept rates unchanged as expected.
It acknowledged some risk to the domestic economy coming from low oil prices and a slowing Chinese economy.
Fox News has hit back at Donald Trump for refusing to take part in Thursday's Republican presidential debate. In a statement, Fox said it
couldn't give in to the terrorizing of its employees. Trump has been extremely critical of host Megyn Kelly ever since she hosted the debate last year.
The European Commission has accused Greece of seriously neglecting its border control obligations. In a report, Greece was criticized for failing
to register and take fingerprints of migrants. More than 850,000 crossed into Greece last year.
Demonstrations were held across Norway Wednesday in protest of the government's decision to deport migrants back to Russia.
The U.N.'s Refugee Agency also has expressed concern over Norway's policy. Over 5,000 migrants arrived in Norway through Russia last year.
Brazil's president says Latin America must band together to fight the Zika virus. That call to action comes as new cases are reported outside the
country as far away as Denmark, Switzerland and the U.S. Iran says it is determined to reclaim its share of the global oil market, whatever the price.
[16:35:02] In an exclusive interview, Iran's main economic advisor told CNN's Fred Pleitgen that other members of OPEC should cut output to make
room for Iranian oil exports.
(BEGIN VIDEOCLIP)
MOHAMMAD BAGHER NOBAKHT, IRANIAN PRESIDENTIAL ADVISOR, VIA INTERPRETER: The declining oil price is certainly not what we base our decisions on.
And if the supply of oil is to decline, it should be the countries that increased their productions while we were under sanctions that should
scaled back now. They should let Iran have its share of the market. I hope and predict for various reasons that the oil price will go back to a realistic level soon.
(END VIDEOCLIP)
LAKE: A jury in London has acquitted five out of six former brokers who were accused of plotting to rig the interbank lending rate, or Libor.
They were accused of helping trader Tom Hayes manipulate Libor. The five men were found not guilty of all charges by a jury following a
four-month trial. Apple shares have tumbled a day after their earnings report. The stock
closed more than 6 percent lower, investors taking a deep breath after Apple warned that sales in the current quarter will fall for the first time
in 13 years. That's despite announcing its most profitable quarter in American history. Now, questions are being asked if Apple has reached the end of its era of
unprecedented growth. Let's peel back the layers to see.
First there's China. Apple sales in the country are still growing but not as strongly as in previous years.
CEO Tim Cook warned about what he called "challenging global macroeconomic environment" unlike anything Apple has seen before.
Then there are concerns that the iPhone has hit market saturation. The CEO said he expects iPhone sales this quarter will fall for the very first
time. And the tech giant had long been dogged by criticisms that it's being out- innovated by its rival. Tim Cook also said about 60 percent of iPhone customers haven't yet upgraded to the iPhone 6 or 6S.
Shelly Palmer, host of "Shelly Palmer Digital Living" is here with me now on set. And, Shelly, you know, most profitable quarter in history and
everyone's upset. But is there - is there merit to this argument that the sort of best days,
innovative days for Apple are over?
SHELLY PALMER, HOST, "SHELLY PALMER DIGITAL LIVING": Well assuming that devices matter, then you could argue the market is getting saturated but
phones do get old and break and so there will be a level of phones that are sold forever.
The big question I would ask everyone to consider is what's the story with the data they collect? There were data rich companies and data poor
companies. And Apple is a very data rich company. Everyone's making the assumption that because the margin on the hardware is so great, that if their hardware sales falter even slightly, there's
something in their future that's going to be bad. First of all, I'm not sure that the traditional cell phone or smartphone that we understand is the final form factor of the commercial endpoints for
Apple. They have HomeKit, they are into the auto world, they have HealthKit. At a certain point, Apple's going to have little sensors everywhere and they
know about as much about you as any company in the world. And what they sell with that knowledge will be advertising and other things that you have no idea about. So what's coming for Apple in the future if
you're just thinking hardware, you're too short-sighted. Look, yes, there's going to be a curve on hardware, but that's not the whole story.
LAKE: People have often said one of their strengths is that they are one of the few vertically integrated companies, right?
They did the hardware but they had the operating system, the services - they are so complete like that. And they have one of the most loyal
customer bases out there.
PALMER: Yes, there's an awful lot to consider when you're like foretelling Apple's doom. It's just kind of -
LAKE: Is part of it because there's no faith in Tim Cook? Does that have something to do with it?
PALMER: Oh, I hope not. I hope not. Look, there are concerns about innovation at Apple and what people are missing is that there's
inconspicuous innovation in the form of iteration. When you make something slightly thinner, when you make something with slightly longer battery life, it may not feel to you like it's very
innovative. But people are working hard on the next generation of devices. At a certain point, your clothing is going to have sensors in it, the world
around you will have sensors in it. They will be connected to something. They are most likely going to be
connected to an ecosystem owned by Google, Apple -
LAKE: (LAUGHTER). Exactly!
PALMER: -- Facebook. It's going to be one of the big data rich companies that owns that system and - because they can make that data actionable.
So give Apple a break. If you're thinking 90 days to 90 days and that's how you play the market, then, yes, you're going to look at this and you're
going to make some predictions about, well, Apple's going to, you know, falter here or we're have some stock adjustments.
But if you're going long on Apple, sit back and relax.
LAKE: And by the way, they make $20 billion off of services -
PALMER: You know (rick) (ph).
LAKE: -- a little footnote in the earnings that nobody really paid attention to -
PALMER: You know what they say -- ?
LAKE: -- kudos for our David Goldman for writing it up.
PALMER: -- Yes, you know what they say - rich or poor, it's nice to have money.
LAKE: Yes, exactly. And they've had $200 billion of it which a lot of people think they need to buy something with it.
I want to - you mentioned Facebook though in terms of an ecosystem. We tend to think of Google, Android and Apple iOS sort of battling it out in
the ecosystem. Facebook's in that race too?
[16:40:10] PALMER: Well, they really are. If you look at what Facebook's done in mobile, it's really quite remarkable. You don't need to leave
Facebook, it's actually sort of like the old AOL but you don't notice it. They've got their own browser going, they've got their own video client going. You're inside of Facebook and they are a very data rich company
also. Now, their earnings today were spectacular and everybody's all excited about it, but if you think about the future the way we're - if we put the
same lens on Facebook we're putting on Apple, what you'll see out in the future is here's a data rich company that knows a lot about us, that is
holding us in a very specific box inside of - you could call it a walled garden.
It's an old term but it kind of applies. And their strategy is to be all things you need online. There are people in the world who go on Facebook
using feature phones. They don't believe they're on the internet -
LAKE: (LAUGHTER).
PALMER: -- because they're on Face - but by default --
(CROSS TALK)
LAKE: And they want that walled garden to be so beautiful. One thing that really struck me today, I had an investor on here with - urging Tim Cook to
use that cash to be bold and to buy, you know, into the future and on to that service side that they're becoming.
Mark Zuckerberg - is he the most underestimated CEO? - has been bold, has been making huge purchases. We're talking about virtual reality. He is
sort of in all of these areas, that you talk about.
PALMER: He is. Mark has made some really extraordinary acquisitions. I don't have to tell anybody -- Instagram's pretty smart, Oculus is going to
right now maybe just look like it's not that smart. Trust me, that's a pretty smart acquisition. They've done really well in
the way they've thought about the future. And also the way they've bought unique users and the way that they have grown their business.
There are very few companies if you look out into the digital landscape that have the kind of scale that Facebook, Apple, Google - these are
massive numbers of people. And they've really crossed over from nightclub - which is the way people describe a place you might visit - to utility where you're just going to be
there every day. I think it's pretty obvious Facebook is a utility, Google clearly is. And
Apple is about the most utilitarian company ever and they're getting more so.
LAKE: Are there room for all of them? Are they all going to find their patch and all do well or at some point are we going to see cannibalization
here and sort of turf wars.
PALMER: I don't know that you're going to see the kind of turf wars you would ordinarily expect. These are different strategies.
Apple has a hardware and software ecosystem end to end. Google tends to be based more on search. Their hardware is distributed over other
manufacturers. So while they do have some hardware components, they're mostly a software
company. Facebook is all software all the time. And so there are different approaches. You can throw Amazon in that mix. You can throw all the tier 1 techs into that mix, but how they hold
consumers together and how they deal with the number of uniques (ph), this will consolidate over time.
But I think it's going to consolidate to the larger players. And from my perspective, it's 100 percent about data and making data actionable.
LAKE: Right.
PALMER: If you can turn information into action, then you have a future. The methodology - to say that this is the final form factor of a smartphone
or that this is the final sensor, that's going to be an end point for data is so technologically short-sighted.
But the data's forever.
LAKE: And you know, it's really funny -- all those CEOs are looking so far in the future but they are public companies that are - investors are used
to quarter to quarter so there's a little bit of a culture clash going on between the investing public -
PALMER: More than a little.
LAKE: -- and these CEOs. But so far they've been able to have the day. Shelly, always great to catch up with you. Thank you so much for coming
in.
PALMER: My pleasure, thank you.
LAKE: A lot of food for thought there. Still ahead, they say the greater the challenge, the greater the
opportunity, and that is the mantra of one of the world's top oil bosses. We'll hear from him next.
(COMMERCIAL BREAK)
[16:45:08] LAKE: It's a rare thing these days the down days for the U.S. markets. Oil prices actually rose. This is how Brent crude and Nymex are
doing right now. Prices rose after Russia said it was discussing the idea of cooperating with OPEC.
That could pave the way for a deal to reduce oversupply, the root cause of oil's recent slump.
Now the CEO of Pemex, which is Mexico's state-run oil company, says that while things have been tough for oil producers lately, there is opportunity
out there as well. He told Richard last week in Davos that his company is taking action to weather the volatility.
(BEGIN VIDEOCLIP)
EMILIO LOZOYA AUSTIN, CEO, PEMEX: It has been a rough 12 months. But Pemex has been using these difficult times to restructure and do things
that that the company should have done decades ago. And utilizing the opportunity that the reform process in Mexico gives to
Pemex. And basically, Richard, you will remember that there was an energy reform last year in Mexico that opened up the whole sector, the whole value chain
for the first time in more than 75 years.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR: OK, but you've still got to deal with an oil price that's in the toilet and likely to go down the drain.
AUSTIN: Indeed, but Pemex enjoys one of the most competitive production costs in the industry. So still even at this prices which clearly are
affecting our income, we can still push with a lot of the production projects that we had in our portfolio.
QUEST: And that's a big issue because we saw - you saw - the recent McKinsey report saying $480-odd billion dollars' worth of projects have
been delayed. Have you actually had to take projects off the table?
AUSTIN: We had to certainly reduce our CAPEX and our investment for this year and next year. We had to downsize the company, but everyone is doing
the same. But it's about optimization. It's about focusing on efficiencies in the next couple of years.
(END VIDEOCLIP)
LAKE: We will be back with more QUEST MEANS BUSINESS in just a moment.
(COMMERCIAL BREAK)
LAKE: All this week on CNN, we're looking at the big disruptors in the music industry. Streaming websites have revolutionized the way we listen
to music. But for some artists, it has become far harder to make a living. Tonight
Isa Soares looks at how the technology behind Bitcoins could help change the way musicians are paid.
(BEGIN VIDEOCLIP)
(SINGER SINGING - "Tiny Human")
ISA SOARES, CNN ANCHOR AND CORRESPONDENT: You may not have heard of her, the Grammy Award winner Imogen Heap is revolutionizing the way music is
produced and shared. Her song "Tiny Human" uses blockchain, the first time this technology has been used in the music industry. This is how it works.
Music is placed in a publically centralized server and then each song is invented with a piece of code, meaning that in time anyone purchases or
downloads the track for a crypt or currency, a payment is automatically sent to everyone involved, be it the writer, the producer, the singer as
well as any others. And this is the same open technology behind Bitcoins. A public record of
the transaction is then created. It's an idea that many in the music industry like at Ujo Music are (inaudible)
PHIL BARRY, FOUNDER, UJO MUSIC: I can load my video to YouTube and it'll be watched in 50 countries before breakfast.
[16:50:05] Why can't I just get paid by one person? I don't need - oh let YouTube just pay me, I don't need 50 people in 50 different countries to
come and collect money for me. And that's one of the big advantages of an - of an automated digital blockchain type of system.
SOARES: By monetizing music in this way, musicians like Imogen Heap hope to have more ownership of their music by assuring they are being paid
fairly and quickly for streams and sales of their work as well as simplifying the relationship between musicians and fans.
Now it may sound like music to artists' ears, but retuning the way an enter global industry works may be the greatest barrier to implementing this
technology.
PAUL PACIFICO, CEO, THE FEATURED ARTISTS COALITION: Blockchain opens a really interesting window into where the industry might go to over the next
20, 30 years in the sense that the freedom to operate in any way you want to online, both as a consumer or as a creator and shouldn't be impeded.
I think the pressure to change, the pressure to improve and the pressure to really create a modern industry that's fit for a global digital marketplace
in the 21st century means that the larger corporations will have to move too.
SOARES: That momentum for a simpler industry is growing, with Taylor Swift pulling her music from Spotify over virtually free songs and U2's Bono
calling for greater transparency.
(MUSIC PLAYING)
SOARES: While they may be singing to different tunes, the hope is that together they can strike the right note and force the industry to listen.
Isa Soares, CNN London.
(END VIDEOCLIP)
(MAN PLAYING SLIT DRUM AND SINGING)
LAKE: That is Mike Errico, singer-songwriter and professor of songwriting at NYU and he joins us. Hey, Mike, thanks so much for being with us.
MIKE ERRICO, SINGER-SONGWRITER AND PROFESSOR OF SONGWRITING, NEW YORK UNIVERSITY: Thank you.
LAKE: You wrote an op-ed this week in "The New York Times" talking about the fact that live touring is now such a profitable stream for the
industry. However, the musicians are not necessarily benefitting or being brought
along at that. And I want to read something you said, "From a business standpoint, it's
hard to find a model more unsustainable than one that relies on a single human body. You'd think the industry would protect such an important piece
of its business model, but the opposite is true." How is this not working?
ERRICO: How is this not working is a great - it's a great question. Really what it is, is supply and demand are basically being - havoc is
being wreaked on the industry that way. And the most vulnerable part of that whole chain is what's most affected,
and that's the vulnerable human body. There's only so far one can go. In my initial draft, the title of the piece was "Unprotected Sets."
LAKE: (LAUGHTER).
ERRICO: And that's really what the point is.
LAKE: Yes.
ERRICO: You know, this is an unprotected place for touring artists to go.
LAKE: And you point out people skip -- tour busses skid off the road.
ERRICO: Oh, yes.
LAKE: We know - (inaudible) we've seen people performing with broken legs. I mean, --
ERRICO: Yes.
LAKE: -- this is very, very draining and demanding. Should artists unionize? You bring up this point in the piece.
ERRICO: (LAUGHTER)
LAKE: Why haven't they - is that the answer?
ERRICO: Well that's - it's hilarious that you asked. There is a union but before that, the touring artists don't need to be advised to go on tour in
order to fix the situation. That's where they are. They're on tour right now all the time. What they're basically saying is
tour more. And they just can't - you know, people just can't do that. So should they unionize? They are - there is a union, there are a couple of
unions. One is the AFofM and really they are for lots of different reasons that I mentioned in the piece, there are - they don't have the kind of strength as
something like SAG-AFTRA has.
LAKE: It's just traditionally not there. From your own experience touring and how you've seen an industry change over the years, is it getting harder
to make ends meet? I mean, what has your experience been -
ERRICO: Right.
LAKE: -- watching these changes?
ERRICO: Well to me it's harder to make ends meet if you're doing the same thing you were doing, right? So I've written pieces on why are songs still
three minutes long if Spotify is only paying out at 30 seconds? Why would you be doing the kind of things that the Troubadours were doing
in the medieval times while everyone else is coming up with blockchain and Bitcoin and fantastic new technologies that are going to solve their
problems? We have to solve our problems in a similarly innovative fashion.
LAKE: Everyone's talking about trying to find a solution. What do you thing the role of the consumer is? Should we be paying more as we embrace
digital? Is it the industry that has to give up some of the profits? How do we make
sure that the artists are getting compensated so that they continue to provide us, you know, the art that we love so much?
ERRICO: Well, I mean, that's another problem with supply. There's so much supply - and supply's not going to stop. There's not an art faucet that's
going to be like (MAKES SOUND) and it's going to be done. [16:55:01] That's just never going to happen.
LAKE: Do you feel like it's moving in the right direction so that at least we're talking about the problem?
ERRICO: I do feel like it's moving in the right direction. I do think that something's going to happen that's going to be completely - it's going
to be science fiction to us in five years.
LAKE: And hopefully that will somehow get to the bottom of this because you can see that it is a drain.
All right, Mike, stick with us. We're going to hear more from Mike and the music after this short break.
(COMMERCIAL BREAK)
LAKE: Now, before we say goodbye, some numbers to consider. The average musician get expect to get just six-tenths of a U.S. cent for every song of
theirs that's streamed on Spotify. When it comes to the music industry, many musicians say it feels like the
cards are increasingly stacked against them. So to play us out on QUEST MEANS BUSINESS tonight, once again our musical
guest Mike Errico. Thank you so much for watching, I'm Maggie Lake in New York.
(ERRICO PLAYS MUSIC ON SLIT DRUM AND SINGS)
Someday I'm going to get where I'm going. Someday, somewhere past the blindness of my faith I keep my eyes on the plans I've made. And someday I'll get there.
Someday I'm going to get there. I know when.
END
