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Quest Means Business
Theresa May Suffers Two Big Brexit Defeats; A Source Tells Cnn the Deputy Attorney General Rod Rosenstein is Stepping Down Once the New Attorney General Takes Office; Donald Trump: I Have Absolute Authority to Declare National Emergency; Suspicious Packages Sent to Diplomatic Offices in Australia; Jeff and Mackenzie Bezos, World's Richest Couple, Split; Trump Walks Out on Meeting with Democrats; Apple to Cut iPhone Production By 10 Percent; Harman Unveils New Technologies for Connected Cars; U.K. Food Industry Prepares for Hard Brexit. Aired 3-4p ET
Aired January 09, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: We are in the last hour of trade on Wall Street, very interesting what's happening. Look at the Dow
Jones up 130 points, half a percent. Had been higher earlier in the session. We'll explain this little blip when it went down at a negative
just for about ten minutes or so, down ten points. But the overall gains are there on all three U.S. markets in the last hour.
We start with the Dow up half a percent, NASDAQ similarly -- sorry, the S&P. It's the NASDAQ that's showing the best gains of the day, up some 1%.
Understanding the reasons, well, this is what's moving the markets.
The three days of trade talks are over in Beijing and that's led to four days of gains for the Dow. The tech stocks are hopeful of a breakthrough
in Beijing and they're leading the markets higher. We'll be at CES in Las Vegas and easy does it, according to the latest Federal minutes. The
Central Bank won't be rushing to raise rates.
We're live in the world's financial capital, New York City, on Wednesday. It is the 9th of January. I'm Richard Quest. I mean business.
Good evening. Tonight a global stare down. Events unfolding in Britain, China and the United States will have huge ramifications for the global
economy. How those will unfold is very much for discussion. It is uncertain tonight how and these are the leaders fighting for their
positions.
First of all, Theresa May. She's struggling to keep control of Brexit. And then Xi Jinping, he is pondering his next move in a game of "who blinks
first" with Washington. And then of course President Trump, he is now meeting with top lawmakers in the Situation Room. The policy deadlock
still leaves large parts of his government shut down.
And if you look overall, all three have major decisions to make, not least of which the President, who seems to be the link between them all. Earlier
today, he went to Capitol Hill to meet with members of his own party. Mr. Trump is facing tough negotiations on multiple front. Let's begin with the
trade talks between the U.S. and China.
Christina Alesci is with me to talk about this, so I saw the statements they put out afterwards, very bare bones, wasn't it?
CHRISTINA ALESCI, POLITICS AND BUSINESS CORRESPONDENT, CNN: It was a really thin statement actually.
QUEST: It just said, "We're going back for debriefing and briefings."
ALESCI: Yes, more meetings, right? That's certainly on the horizon. But what is interesting here is the lack of details. The one little specific
that we got out of this is that the Chinese apparently agreed to buy more energy and agricultural products from the U.S., but there's no number
around it and again, and this is what I've been saying all day, is that we have no visibility into the substantive issues.
QUEST: Except, well, the statement talked about the cyber protection, the forced tech transfer.
ALESCI: Yes.
QUEST: Or information transfer.
ALESCI: It talked about that, but didn't say --
QUEST: It did, but it suggests that they're more concerned -- the big criticism of these talks is that the President has been focused purely on
the bilateral trade deficits. That statement suggests that they are getting into these wider, larger, more significant issues.
ALESCI: Right, they are talking about these issues, but the question persists, how do you enforce them? Even if you do get -- even if the U.S.
is successful in getting China to agree, let's say, to take down non-trade barriers -- non-tariff barriers or other forced technology transfer, how do
you enforce the Chinese to live up to their word and to really make good on it?
QUEST: It was the B Team that was negotiating this.
ALESCI: I would say -- they like to call themselves deputies.
QUEST: Yes, deputies.
ALESCI: Yes.
QUEST: B Team sound derogatory. It was the second tier, the deputies.
ALESCI: Right, but I reported that there are plans for the chief Chinese negotiator to come to the U.S. and meet with the principals, which is the
next level. You know, I actually brought this up to several of my sources and I said what's the point of the deputies going over there if they're
just going to come back and restart everything with the principals? And they said, you know what? The last time around, the principals met and
they couldn't get anything done, so maybe give the deputies a try and see what happens.
QUEST: It all relies on one man though, he's got to go along with this. We don't know whether that will happen with Donald Trump.
[15:05:01]
ALESCI: I think that's a great point. But listen, the Chinese face a lot of pressure. I think that the administration does face some pressure, too,
because even though you could argue that tariffs do not have a great impact on the American economy, I think a crisis of confidence would impact the
American economy.
QUEST: We'll leave it there. Thank you, Christina. Thank you.
ALESCI: Thank you.
QUEST: Optimism about those trade talks helped push stocks much higher. The Dow was up 194 points for the best of the day. The longest streak
since October, the Friday, Monday, Tuesday. Still, it is well off the highs. Look at the Dow Jones. I want you to look at this closely. You've
got it from June of last year, you get this run up to October in the middle, then you have a fall, then you have another -- as an attempt, then
down, then it goes up again and then you get the December fall.
This rally -- this rally in January could be the most dangerous if you listen to the former Fed Chair Alan Greenspan.
(BEGIN VIDEO CLIP)
ALAN GREENSPAN, FORMER CHAIRMAN OF THE FEDERAL RESERVE: It would be very surprising to see it sort of stabilizes here and then take off again, but
it's happened in the past. However, at the end of that run, run for cover.
(END VIDEO CLIP)
QUEST: Scott Wren is a senior global equity strategist at the Wells Fargo Investment Institute. Joins me now. So you heard Alan Greenspan then. It
has done what he's said it was unlikely to do. It has rallied, but do we need to worry that this is the rally ahead of the precipice?
SCOTT WREN, SENIOR GLOBAL EQUITY STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE: I would argue against the Chair. I would say that it is not
time to run for cover. As a matter of fact, I think that we want our clients really to be assertive here. We want them holding sectors and
leaning into sectors that are going to benefit from a continuation of the expansion.
So we're clearly going to get some more volatility here. You know, Richard, you mentioned what the charts looked like in December. That was a
nasty tumble and we had a lot of back and forth and a lot of retail investors and investors in general are pretty scared when they see that
type of activity.
But our forward outlook is for good, not great, U.S. growth; good, not great global growth and not much inflation. So stocks look attractive
here.
QUEST: All right, but to follow your point of view, there's -- I guess what the fear is that it goes up another thousand or so, but then that's
the fall of another 30%. But you don't see that?
WREN: Well, no. I mean, there's always obviously another recession out there on the horizon. We think there's a low probability of that into
early 2020 probably. So, you know, first of all, I mean, traders let's face it, traders are running the S&P 500 here and have been really for the
last year and a half or maybe a little longer than that.
There's a lot of resistance just above here at 26, 30, 40 area in the S&P 500. We're not going to get through there on the first time around, unless
we would see some solid agreement with China, for instance or something like that that would drive it through there.
But those negotiations and I know you were talking about it beforehand, we're expecting positives, but we're expecting positives over time. This
stuff -- this is not like negotiating with Mexico and Canada where 70% of your exports go to the U.S. I mean, we have a lot of leverage in those
negotiations.
We have a leverage with China as well, but whether it the E.U. or China, those kind of talks are going to take quite a while, but we do expect
positives.
QUEST: If we look at the Dow 30 today and I just take this as a microcosm of today, those stocks that are doing badly -- Coca-Cola, P&G, Verizon,
Merck, even arguably McDonald's, these are the stocks one would expect to see in a reverse rotation out of the tech and the favorable and into the
cyclicals. I mean, these are the old fashioned ones, aren't they?
WREN: That's right. You know, really, if you look at it from a high in the S&P 500, which was on September 20th to that close on Christmas Eve,
which was down 20% basically, you know, that was all defensives. People were running for cover. So the companies you just mentioned, you know,
they on a relative basis did pretty well.
But since we opened the day after Christmas, you know, this has been a risk-on market, and really the consumer discretionary, financials,
industrials, those have been among the best performers, which we would expect.
QUEST: So, Scott, would your -- let me phrase this. How would your answer differ from that which you'd have given me sort of in mid-December on
sentiment to how you'd say it today? What would be the difference?
WREN: Well, what we're trying to do and let's face it, we broke through every technical support level on the way down. We stopped just ahead of a
gigantic trend line that came from the 2011 lows.
[15:10:09]
WREN: But fundamentally, this is what we've been telling our clients. We believe this expansion is going to continue. We believe that sentiment
clearly is bad. We think the market is way oversold and we've been encouraging virtually every pullback here for our clients to step in and
buy stocks.
Now, that's easier said than done, because as I mentioned earlier, retail investors, they're afraid of the market when they see this kind of
volatility. So we have a tough job, but that's the word. In December, we would have said you need to be buying stocks in here.
QUEST: Good to see you, sir. Thank you. Let's make --
WREN: All right, thanks, Richard.
QUEST: Let's make a deal and we'll talk more often during 2019.
WREN: Let's do, I'd enjoy that. That would be great.
QUEST: We need that sort of input. Thank you, sir.
WREN: Thank you.
QUEST: The war of words continues in Washington. It's day 19 of the shutdown and now, the United States credit rating could be on the line.
AAA or not, as the case maybe. We'll talk about that after the break.
(COMMERCIAL BREAK)
QUEST: Negotiations are under way right now at the White House. Nancy Pelosi and Chuck Schumer are meeting with the President Trump in the
Situation Room. They're trying to find a way to reopen the U.S. government.
Earlier, the President took a trip down Pennsylvania Avenue to Capitol Hill where he was shoring up support from his own party. It was a lunch with
Republicans to keep the shutdown going until he gets funding for a border wall.
Through all of this, Fitch rating agency is warning that if the shutdown drags on, it might lower its AAA rating of the U.S. government as a
borrower. William Foster is here. He is Vice President and senior credit officer at Moody's. Good to see you, sir. Thank you.
WILLIAM FOSTER, VICE PRESIDENT AND SENIOR CREDIT OFFICER AT MOODY'S: Likewise.
QUEST: Thanks for coming in. Good to see you. This issue of the AAA. The U.S. lost it some years -- well, across all AAA major agencies, the
U.S. lost it some years ago. What's the significance of it now?
FOSTER: The 12 AAA rated sovereigns that we rate at Moody's, that's a representation of what's considered the highest rating possible for a
sovereign, which means, you know, when you add up things like economic strength, fiscal strength, institutional strength, et cetera, it's really
the highest rating that you can have and it's the strongest benchmark for credit worthiness for a sovereign.
QUEST: When S&P, I think it was who first dropped the U.S. as AAA, the rest of you didn't follow on that occasion, which was again, similarly a
shutdown ...
[15:15:10]
QUEST: ... and a crisis during the financial crisis. If Fitch was to move and you remain on the outlier, what does that say? Does that mean
anything?
FOSTER: Well, I really can't speak to other agencies' decisions.
QUEST: Right, but I guess -- right, but if they move and S&P moves -- it has moved already, do you not look as if you're a little optimistic?
FOSTER: That's for others to decide, but our decision would be entirely based on our methodology and our assessment of the credit worthiness of the
government. So that's as much as I can really say.
QUEST: Yes, and as you were just saying a moment ago, to your -- you have it currently as AAA stable.
FOSTER: Correct.
QUEST: Stable means?
FOSTER: It means that we don't expect the rating to change in the near future.
QUEST: What is it about what you're seeing in the economics of the U.S. that you like that is -- I'll have to rephrase that, what is it that is
preserving the AAA?
FOSTER: Well, the two strongest credit features for the U.S. really have to do with the sheer size of the economy. At $20 trillion, it's the
largest economy in the world, largest nominal GDP, which to us really is an indicator of the resilience of the economy to shocks and the dynamism and
innovation within the U.S. economy which is a very strong pillar to the credit profile.
The other which the U.S. has and no one else has is the reserve currency of choice of the world, in addition to the largest, deepest, most liquid bond
market in the world. And so that really removes elements of foreign exchange risk or government liquidity risk that you see for other
sovereigns.
What we're most concerned about, if you'd like to hear that, too, is fiscal strength. Over the medium term, we expect the accumulation of deficits for
the U.S. from about 4% of GDP last year to what we expect to be closer to 8% by 2028 to continue to weigh on --
QUEST: That's an annual deficit.
FOSTER: That's an annual deficit --
QUEST: Which is more than twice the master criteria, assuming the U.S. ever wanted to join the European Union, but you know, one of the three
percent criteria. So with deficits accruing at the best part of a trillion dollars a year, even on such a mammoth economy such as the United States,
is this debt level and debt projection sustainable?
FOSTER: It is sustainable. Of course people look at sustainability in different ways, but fundamentally the size of the U.S. economy and the
dynamism that it's able to carry a larger debt burden. And as we said, with a reserve currency of choice, fundamentally it does not have some of
the concerns that others may have about financing with foreign exchange risks, et cetera.
The debt-to-GDP ratio for the U.S. which is an important metric looking at that sustainability is closer to 80% debt-to-GDP and that's a good
comparator with other --
QUEST: Right, but it's not coming down particularly?
FOSTER: No, it's not coming down.
QUEST: And far from it, and you would have expected post 2008-2009 and the big crisis then, when everybody's debt -- you would have thought there
comes a point when you start to get it back down to 60% to 70% again.
FOSTER: Right. Well, the U.S. along with many other advanced economies, that debt ratio has gone up quite a bit, obviously. But you're very right.
There is no plan right now that we see to bring down that debt stock over that time and that's something that we're very focused on in terms of the
deterioration of fiscal strength and the credit profile. We expect that debt-to-GDP ratio to increase to over 100% by 2028.
QUEST: Wow. Good to have you, sir, thank you very much.
FOSTER: Thank you.
QUEST: We appreciate it.
FOSTER: Appreciate it.
QUEST: But AAA stable at the moment?
FOSTER: That's right.
QUEST: Good to see you. Thank you. Now, staying with the government shutdown, furloughs at the SEC have frozen the IPO market in the United
States. Perhaps more worrying that an IPO and the market, the NTSB has put investigations of fatal accidents on hold.
Employees of the FDA are worried about the deadly outbreaks of -- in the food supply and the National Hurricane Center is less prepared for a major
storm or at least less prepared to tell us about it. Jeffrey David Cox is the President of the American Federation of Government Employees. He met
with Nancy Pelosi and Chuck Schumer this morning in Washington and joins me now. Good to see you, sir, thank you.
Before we go forward, I think many of our viewers won't really understand because it's such an unusual concept, this idea of the funding goes away so
you close down the government, those workers who are obliged to go in and just don't get paid?
JEFFREY DAVID COX, PRESIDENT, AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES: Currently, there's 800,000 Federal workers in the U.S. affected by this
government lockout. The President has locked them out of their jobs. About 320,000 of them have been sent home without pay. Another 480,000 are
required to go to work every day, but this week is pay day and they won't get paid.
And if they don't go to work, they face disciplinary, adverse actions. They're required to work without pay.
[15:20:05]
QUEST: Just to be clear, though, and I realize it's cold comfort if you've got a bill to pay, but Congress has already passed legislation that will
restore the back pay once the government reopens.
COX: No, sir. They passed it in the past Congress, but they have not passed it in this current Congress. If you realize just last week, we got
a new Congress in the U.S.
QUEST: Right.
COX: So it was passed in the last Congress. It has not been passed in this Congress. So currently, there is not a guarantee that these folks
will get paid. Currently, they're required to work, not get paid or sent home without their pay. It's one of those things if Mitch McConnell and
the Senate would just allow the senators to vote on the legislation that the House has passed, which was Republican legislation, it could be sent to
the President, open up the government and pay people.
QUEST: Which of all of those that I mentioned, I mean, the NTSB investigating crashes, well, I assume now they'll get back to that when the
thing opens, the FDA looking at food, but this business of TSA and air traffic controllers calling in sick or not showing up, this seems to be a
very serious state of events.
COX: Well, currently -- I mean, yes, people do get sick and during a government shutdown, there's no granting of leave. I mean, every day with
any employer, in particular an employer as large as the Federal government, people do have sicknesses and they have to call in sick, but there's no
granting of sick leave or annual leave. No leave can be granted, so people are just marked that they won't be there.
But currently, air traffic controllers, TSA security officers, they're going to work. They're there doing their job. However, in TSA, it's the
highest government turnover agency. Every week, hundreds of employees leave that agency because they're the lowest paid government workers in our
country.
So they're constantly leaving and going for other jobs. So yes, it's a serious situation that President Trump has created.
QUEST: Jeffrey -- excuse me. Jeffrey, you've seen government shutdowns before. Not just in terms of length, but in terms of animosity, in terms
of disagreement, is this the worst?
COX: This is the worst that I have ever seen. Normally, a President is willing to negotiate with Congress. I was involved in the shutdown in the
mid-90s and the one in 2013. Obviously, the Republicans controlled the Congress, the Senate and the House at that time. There was a Democratic
President, but there was negotiations between the President and the Congress to work to get the government open.
Currently, President Trump is not willing to negotiate with Congress in any way, shape or form and leader McConnell will not bring up the legislation
that the Republicans -- it was Republican legislation. They voted out of the House. Speaker Pelosi put the same ...
QUEST: All right, sir.
COX: ... stuff on the floor for them to vote for again. They voted it. They sent it to the Senate, but Mr. McConnell won't let the Senate vote.
QUEST: We will talk more about it. I hope this doesn't go on much longer. But hopefully, sir, you will help us all understand it if and when it does,
thank you much appreciated.
COX: Thank you so much, sir.
QUEST: Now, let's return to the three issues and the leaders we showed you at the beginning of the hour, each of them facing a dizzyingly high stakes
in short deadlines. Theresa May, it's March 29th when the U.K. is set to leave the E.U. It is also next week when she has to vote on her -- a
meaningful vote on Brexit.
For President Trump, it's in two days' time. Hundreds of thousands of Federal workers will miss paychecks and for President Xi, it's March the
1st when new tariffs are scheduled to kick in.
Get out the iPhone or any phone, Samsung, whatever phone you like frankly and go into cnn.com/join. Our question for today is, who is handling their
negotiation better? Donald Trump with the shutdown, Xi Jinping with the trade talks, Theresa May with brexit? Who is the best negotiator? Vote
now, cnn.com/join.
Barry Nalebuff is the kind of expert business leader turned to, to help us in situations like this. Today, he teaches students at Yale about
negotiations, innovation and game theory. Good to see you, sir. So, there's no question these three leaders have in some senses by their own
actions boxed themselves in to a very, very dangerous negotiation deadline.
BARRY J. NALEBUFF, MILTON STEINBACH PROFESSOR OF MANAGEMENT, YALE SCHOOL OF MANAGEMENT: That's true. I'd say at least for two of them anyway.
[15:25:04]
QUEST: And if you had to say with Theresa May or Donald Trump, how do you view their success at what they've done?
NALEBUFF: Well, I think there's a clear winner in terms of who is the worst negotiator and that's ours. There's line from Bernard Brooke that
you don't have to blow out the other person's candle, let your own shine. That's something that Trump does not seem to understand. He's more of the
Gore Vidal School, which is if it's not enough to succeed, others must fail.
And that aspect, not even zero sum but negative sum is something that is pretty much guaranteed to make for a terrible negotiation.
QUEST: What about Theresa May? She is in an impossible situation, I'll grant you that. She's fighting her own MPs. She is fighting the
opposition. She's got a deadline, a really serious deadline and she's decided to go for broke. Go ahead, sir.
NALEBUFF: I think it's actually a pretty easy situation, which is the forced Brexit is a disaster. If you're going to do it, you want the public
behind you. It's the idea that you wouldn't have a second referendum so that either you don't go that way or if you do, it was, well, that's what
the people want, it strikes me as such an obvious solution to this, that it's only a question to me of how can you not be doing it? That is, the
solution is staring people in the face here.
Q She's decided to put this deadline out. Obviously, there is a real deadline of March the 29th. She has to get this through Parliament. She's
left it until the last possible moment to put the vote to Parliament. Is that a good strategy?
NALEBUFF: It is because I think that essentially, the failure is what will lead to the success. That is to me the obvious answer is you have the
second referendum. The question is what is it going to take for people to accept that? And when they're staring at the void and saying, "Wait a
second, either we don't want to go this way or we don't want to go this way without giving people the chance to say you sent us there." It strikes me
as the obvious answer.
So you have to get to the situation where people are sufficiently desperate that they are actually willing to say we need a second vote.
QUEST: Finally, Professor, you said it right at the start of this, there are only two. I assume the one you're thinking -- you're taking out of
this is Xi Jinping, who you seem to have a respect for his negotiating.
NALEBUFF: Well, also it is not a critical deadline. Yes, we have tariffs that are scheduled to come on, but if there's progress that is being made,
that deadline can be pushed back. So that one is much more artificial than the E.U. deadline, which is determined externally and is not something
that's likely to be changed.
QUEST: If you had to vote on who is handling their negotiations best as our viewers -- our viewers say Xi Jinping wins with 82%, Theresa May at 8%,
and Donald Trump only has 10%.
NALEBUFF: Well, ten seems high for me. You know, I would say that in the end, if Theresa May is able to get a second referendum by taking people to
the brink, then she will have pulled a rabbit out of the hat and it would have been brilliant and we will look back at this and say, "It is amazing."
So the jury is out in terms of where May is. I think the key lesson that I had the opportunity to watch David Stern negotiate with the NBA players and
the owners, and the key lesson there is to understand what the other side wants and actually to give it to them, not because you like them, not
because you want to help them, but because if you give them what they want, you can get what you want.
And what's so startling about the U.S. situation is it's bloody obvious what Trump wants and it's bloody obvious what the Democrats want. That is
you could provide a DACA solution. You could give Trump the wall. And the fact that he rejects solutions that are giving other people what looks like
an obvious answer suggests to me the he actually doesn't want a solution.
He wants to keep this thing as a thorn in the side, as an open, festering wound. And that's something you can't negotiate with. And you can't
negotiate with somebody who says I'll do a deal if and then the deal happens or is presented to you and they say, "No, I've changed my mind."
And so that's -- and that's why Mitch McConnell is in a bind and that's why ultimately, we're paralyzed. Now, it strikes me that one solution is that
Congress says, "Wait a second, we're going to do the two-thirds majority in the House and the Senate," and you do that and Trump can say, "Well, I
wanted the wall, I was asking for it, I was insisting on it and I got beaten up on it."
Because the fact is, if he couldn't get it with a Republican controlled House and Senate, why does he think it's possible to get it now? I mean,
what has changed?
And so much you've got to give something. And the nice nice thing is it's obvious what it is to give, and the question is why is he so unwilling --
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: All right, sir --
NALEBUFF: To do -- I'm sorry?
QUEST: No, that was fine, we're just at the end of our time. I got -- thank you very much indeed for joining us, I appreciate it, thank you.
Coming up, after two big Brexit defeats in 24 hours, Theresa May's options are running out, after the break.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest, there's more QUEST MEANS BUSINESS in just a moment. When the world's richest man is heading for the world's richest
divorce, Jeff Bezos breaks up with his wife. And it's two defeats in 24 hours for Theresa May, parliamentary fight against her Brexit plan pick up
steam.
As we continue tonight, this is Cnn, and on this network, the facts, well, that always come first. The man who appointed the special counsel Robert
Mueller in the Russia investigation in the U.S. is leaving his job. A source tells Cnn the deputy Attorney General Rod Rosenstein is stepping
down once the new Attorney General takes office. That could happen within weeks.
President Trump says he has absolute authority to declare a national emergency to get funding for a border wall, but he says he'll keep trying
to negotiate with lawmakers to end the budget compass has triggered a government shutdown.
Australian investigators are looking into suspicious packages sent to diplomatic officers. It was sent to almost 20 embassies and consulates in
Canberra and Melbourne, including the U.S. and U.K. missions. Authorities say there's no threat to the general public.
Jeff Bezos; the chief executive of Amazon is also the world's richest man and is now getting divorced.
[15:35:00] He and his wife Mackenzie made the announcement in a shared tweet. They said they'll continue their shared lives as friends. They've
been married for 25 years, well before Bezos was even a millionaire. He's currently worth north of $130 billion.
Zac Potter is a divorce attorney who has handled several billion-dollar divorces. He is in West Palm Beach, Florida, and joins me. Now, Zac,
obviously here as you noted to me, made clear, money is not the issue. There's more than enough to go around and as you point out, a billion or so
either way is not going to make any difference to anyone's standard of life.
So what will be the issue here?
ZAC POTTER, DIVORCE ATTORNEY: Yes, that's correct, and thank you for having me, Richard. In cases like this, there are a couple of issues that
are primary concern to the family. The first obviously is reputational. And what I suspect from this tweet is that this case has already been
resolved by the parties' attorneys.
Typically, with a high-profile family like this and with a publicly-traded company, you would only announce something like this to the public once the
deal is already done. So for the two of them, the issues -- they're likely resolved.
QUEST: Right --
POTTER: And with respect to the money, the primary concern is likely what they're going to do with their estate after their death, their charitable
contributions and how their children are going to be taken care of. But between the two of them, it's unlikely to have -- they're unlikely to have
a fight over --
QUEST: Right --
POTTER: Billions of dollars --
QUEST: So --
POTTER: Here or there.
QUEST: The tweet this morning talks about "after a long period of loving exploration and trial separation, we have decided to divorce and share our
shared lives as friends." So it sounds as if the China is not being thrown about, but it does beg the question, how realistic is it when
couples do divorce where serious amounts of money, well, unparalleled amounts of money are involved, but they continue to try and have this idea
of a shared life?
POTTER: It's very realistic. And candidly, when there's this much money involved, a lot of the complications that lead to conflict between the
parties become a whole lot easier. And, you know, it makes little sense under ordinary circumstances, but they have private jets, yachts, whatever
it takes, help.
And so the disputes that can often drive families in ordinary circumstances --
QUEST: Right --
POTTER: Just don't apply in a case like this.
QUEST: The law, I believe, in Washington State is for you split the assets that were accrued during the period of the marriage. In that case, it is -
- well, in that case, it is half and half. But most of the assets here, say $130-odd billion are in Amazon stock.
Now all of a sudden, Amazon shareholders or Amazon company has a very large shareholder -- single shareholder besides Jeff Bezos. Does this make a
difference in a public company?
POTTER: Well, it can make a difference. And you know, we saw this in the Steve Wynn divorce. But in this particular circumstance, we have no idea
what the marital settlement agreement says with respect to how those assets are going to be divided and how they're going to be controlled over time.
In a situation like this, there's almost an infinite number of ways that the deal can be structured in terms of control of the assets. And so we
will only -- it's only likely that we'll know more information about this in the -- well, in the event that the company needs to make a public
announcement or in the event of conflict.
QUEST: Good to see you, sir, thank you very much for giving us some understanding. I appreciate it, thank you. This is QUEST MEANS BUSINESS -
-
POTTER: Thank you for having me.
QUEST: This is QUEST MEANS BUSINESS live from New York, in a moment.
[15:40:00] (COMMERCIAL BREAK)
QUEST: News just in to Cnn on the meeting between President Trump and the Democratic leaders of Congress. President Trump has called it a total
waste of time. That was in a tweet that has just come out. The Senate Minority leader, Chuck Schumer says the President Trump walked out of the
meeting.
Now, this does not bode well. This after Speaker Nancy Pelosi said she would not agree to the wall. So let's just put this in perspective.
There's a meeting between the president and the leaders of Congress, whilst the government is shut down and according to one party, the president walks
out.
Look at the market, let's see if this has affected the market at all in this. The Dow Jones Industrials. Well, it has given back -- I'm not --
I'm not attributing it yet, but we were up 150, and now we just seem to be up about 78. Let's not read too much into it. But there we go.
Apple's struggles came -- in China -- came into sharp focus. Apple is reportedly planning to slash production of the most recent iPhone by a
model by as much as 10 percent. A week ago, the chief executive Tim Cook blamed trade tensions and an economic slowdown in China as he warned the
company's quarterly sales will be lower than expected.
Apple's shares are up 2 percent, as you can see. And the fierce rival Samsung has issued a similar profit warning earlier this week that
reinforces the importance of investing in future technologies like there's on display at this year's CES trade show.
Harman is one of Samsung's software subsidiaries, and it's unveiled a raft of new applications for connecting cars. The chief executive of Harman is
Dinesh Paliwal, well, joins me now from CES. Good to see you, sir. So the area that you are involved with is getting -- and it is already important,
but it is gaining an even greater importance for these tech companies that are starting to feel the pressure.
DINESH PALIWAL, CHIEF EXECUTIVE OFFICER, HARMAN: Richard, can you please come again? I could not get -- one more time, please --
QUEST: Right, let's just see, can you hear me, sir?
PALIWAL: I can hear you well. Thank you.
QUEST: Right, good. So the issue is how Harman now helps in the grand scheme of things for a company like Samsung that is going to feel the
pressure in other areas of the business.
PALIWAL: So, Richard, as you know, Harman is an independent entity of Samsung. And we have very clear responsibility to serve our automotive
industry and we do consumer audio and car audio, professional audio. And we have some great synergies in the areas of mobile and network and
consumer and channels and definitely in technology.
But we are totally accountable for our own development, manufacturing and serving the customers worldwide. We have our own board of directors, so,
therefore, we are very excited here in 30,000 feet surface area and the double space.
We have automotive technologies and we have a lot of cloud competencies and voice-enabled products from head phones to home systems to car systems and
we actually are very busy here.
[15:45:00] QUEST: What is going to be the big fighting ground between all the companies as we move towards autonomous vehicles, as we move towards
the connected IOT? For you, sir, what do you see as being the fighting ground?
PALIWAL: Yes, so I think the three things, Richard, very important, which are commonly shared by automakers and suppliers like Harman. Number one is
personalization. Technology is getting exponentially complex, a lot of sensors, a lot of government-monitoring systems, cognitive load, autonomous
cameras.
So personalization, you cannot allow technology to create monotony. So we need to personalize and we are doing that. Number two, connectivity.
QUEST: Right --
PALIWAL: We are so used to with our iPhone or our Samsung devices, we need that experience, that easy access user interface. And the third, we should
not forget security, cyber security. Very least understood in automotive industry, but we're driving very hard. These three things must happen,
otherwise you don't have connected car, you cannot have autonomous driving.
QUEST: Good to see you, sir, thank you very much. Joining us from CES. After the break tonight, gin, wine and cheese? We're off some menus if
Britain crashes out of the EU without a deal.
(COMMERCIAL BREAK)
QUEST: Seventy nine days, 2 hours, 11 minutes and counting. For the second time in 24 hours, Theresa May has suffered a setback at the hands of
British lawmakers, parliamentarians. They gave Theresa May a tight deadline for action in the event that parliament does not approve her
Brexit deal next week.
If the vote next week fails, the Prime Minister will have just three days to present plan B. She did have 21 days, that's now been slashed to three.
Speaking to lawmakers, the British Prime Minister again told them the options were her deal or no deal.
(BEGIN VIDEO CLIP)
THERESA MAY, PRIME MINISTER, UNITED KINGDOM: The only way to avoid no deal is to vote for the deal. If the right, honorable gentleman -- if the right
honorable gentleman is uncertain about what I am saying, perhaps I can give him a tip, he might like to use a lip reader.
(END VIDEO CLIP)
[15:50:00] That of course is a reference to -- or which of course was in parliament a few weeks ago. As the hard Brexit looms, there are fears
Britain's favorite foods and drinks might be harder to find. For instance, join me in the grocery section -- oh!
Well, how about a bit of this gin? Now, remember, the principal flavoring in gin comes mostly from Mediterranean countries, and then you've got
nearly all the wine consumed in Britain is imported, just over half of it from EU countries as well.
And less -- we've also got a bit of Olive oil and still under threat, produce like cheese. Olive oil, all of which would have difficulties
getting into the U.K. They would arrive, but only after going through Customs and all the procedures. Are the Brits about to lose out.
Cnn's Anna Stewart has visited one of the many firms that says there's still no clarity about the future.
(BEGIN VIDEOTAPE)
ANNA STEWART, CNN REPORTER (voice-over): The U.K. government said it was a hard Brexit test-run. A chance for trucks to practice biding their time
backed up at the border. But British businesses, the theme confirmed a no- deal nightmare.
UMESH PARMAR, JOINT MANAGING DIRECTOR, TILDA: The goods will only trickle in to Europe.
STEWART: Goods like this Basmati rice milled by a company called Tilda. Last year, Tilda generated $150 million in revenue, processing up to 250
tons of rice a day at its factory on the edge of London.
PARMAR: No-deal Brexit looks like we have to outsource 20 percent of our production, so we'll have to produce that in Europe and sell in Europe.
STEWART: What does that mean for the facility here. Are you going to lose staff?
PARMAR: Well, potentially, yes. Because we have to shrink our operation over here.
STEWART: It's not just border delays, if there's a no-deal Brexit, the company could face a roughly $200 tariff on each ton of rice it sends to
the continent.
PARMAR: We want free market access into Europe for our goods.
STEWART: Time to sit up to get a closer glimpse of the milling process. The rice gets cleaned and then screened. Any bag that goes against the
grain is rejected.
PARMAR: Well, this is -- he has brown rice, cargo rice that comes in.
STEWART: Tilda brings in rice from India and that's a problem.
(on camera): A lot of the food that U.K. sends to the EU actually has its origins elsewhere, whether it's corn from the United States, wheat from
Canada or rice from India. Now, even if the U.K. manages to negotiate a free trade agreement with the EU, a company like Tilda is unlikely to
benefit.
Based on the EU's rules of origin, this rice wouldn't be considered British enough and would face steep tariffs.
(voice-over): The food sector is calling it a hidden hard Brexit.
ALEXANDER WAUGH, DIRECTOR GENERAL, UK FLOUR MILLERS: Exports in the arable sectors as a whole are valued around 800 million, 900 million pounds a year
to the European Union. And in the event that those trades don't happen, there's going to be an impact on jobs.
STEWART: To this being a U.K. staple since the 1970s, it started out family run and many of the employees count their service in decades.
UNIDENTIFIED MALE: Very good --
STEWART: It's Umesh Parmar's job to seek the face of an anxious workforce as the clock ticks down towards Brexit day.
PARMAR: The biggest issue is the uncertainty which still stands today.
STEWART: Do you feel a sense of urgency?
PARMAR: Yes, absolutely, emergency, we need to know what's going to happen to us.
STEWART: Anna Stewart, Cnn, London.
(END VIDEOTAPE)
QUEST: Tom Newton Dunn is the political editor of "The Sun" newspaper, joins me now from London. Seventy nine days to go, Tom. It would seem
from three and a half thousand miles away, as if Theresa May is losing control -- well, lost control in one sense, but the parliament is gaining
the power, for example, with all these amendments saying you shall do this, you shall not do that.
TOM NEWTON DUNN, POLITICAL EDITOR, THE SUN: Well, Richard, despite having the Atlantic Ocean between us, I think that's a very acute summary of
what's happened today. Enormous drama in the House of Commons really still playing out now.
Because despite all the shouting and two and a half years of negotiating, not just with the EU, but also with our cabinet and her party, Theresa May
is still failing to get this deal passed through the House of Commons.
Today, a seismic event really when the speaker of the House of Commons John Bercow agreed to a backed-bench rebel Tory MP amendment pushed by some pro-
remain Tory MPs to effectively see control of what happens next if her deal --
QUEST: Right --
DUNN: Is finally shot down once and for all next Tuesday to the House of Commons, and then parliament takes over.
[15:55:00] QUEST: So what does happen? I mean, if everybody expects next week she'll lose the vote, then you've got this three-day time limit. What
are the options? It seems to me either Norway's solution or something, extend article 50, which could be done but would be difficult, or revoke
it. What's your -- what's your gut-feeling what happens next?
DUNN: I think those are the basic colors. But if you go across the rainbow, there's a whole lot of different shades. From you know, some sort
of revision of her deal that maybe is a little bit softer, perhaps a little bit more of a Customs Union element to it which I think would obviously
irritate a lot of Tory MPs.
Then to the middle ground area which is the Norway option, the EEA, which the Norway --
QUEST: Right --
DUNN: Liechtenstein, a few other countries currently exist in, then you have a far softer option of a full blown --
QUEST: Right --
DUNN: Customs Union and single market membership, and then you go all the way to the extreme other end which is a second referendum. Now, what will
happen on Friday or perhaps it's been Monday, the three days after is, Theresa May will put her proposal forward.
I suspect it will be yes, another delay, she'll probably try and extend the article 50 process which will delay Brexit date by maybe another three
months to ask for some more concessions in the EU. But parliament, and this is what's crucial, will then also at the same time be able to come
back with their own ideas, their own suggestions at the same time --
QUEST: Right --
DUNN: And there will be an almighty vote fest. So all the things will get up to a vote, and really it'll be the winner, will be the last man left
standing. Whichever option of this multifarious myriad rainbow can gather a simple majority, will be the one that wins. It will be a very long and
interesting day.
QUEST: And John, I'll be in London next week, let's arrange to meet up and talk about this more. It should be good.
DUNN: You're on.
QUEST: Good, excellent. We'll get some expert opinion on what comes next. We will have a profitable moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment. It is sad that a marriage has failed. That of Jeff Bezos and his wife, Mackenzie. But when I was a law student,
I was always taught the hardest part in any divorce is you can't get -- pot-out of a pine pot. In other words, you can't get two houses out of
one.
Well, here of course, money is not the object, there's plenty of it. Which just goes to prove the old adage, money doesn't buy happiness, but it does
buy a very pleasant sort of misery.
As they go forward, it will be interesting to see exactly how they have this shared life in their divorce. And that is QUEST MEANS BUSINESS for
tonight, I am Richard Quest in New York.
(BELL RINGING)
Whatever you're up to in the hours ahead, I hope it is profitable. The bell is ringing, the Dow has held on to the gains, the bell is ringing, the
day is done.
END
END
