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Quest Means Business
S&P 500, NASDAQ At Record Highs On Hopes Of China Stimulus; Diamond Princess Cruise Passengers Disembark After Quarantine; China Expels Three Wall Street Journal Journalists Over Opinion Piece. Aired 3-4p ET
Aired February 19, 2020 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:13]
AISHA HASNIE, CNN INTERNATIONAL HOST: All right, and it's all about the green today. In fact, the NASDAQ and the S&P 500 are hovering around record
highs. The Dow has been around triple digits all morning telling a different story that we saw yesterday because fears about the coronavirus
have been waning.
A rally in tech stocks pushes the NASDAQ and the S&P 500 to old time highs. That's despite new coronavirus warnings from the Fed and the IMF.
And billionaire Mike Bloomberg prepares for first ever presidential debate after he pledged, he would put his $60 billion business empire up for sale
if he wins.
And Virgin Galactic shares enter the stratosphere as traders make big bets on the future of space travel.
Coming to you live from the world's financial capital here in New York. I'm Zain Asher in for my colleague, Richard Quest, and this is QUEST MEANS
BUSINESS.
Good evening everyone. I'm Zain Asher. Tonight, cautious optimism on Wall Street boosts. U.S. stocks to record highs, looking at the major indices,
let's take a look here. All three right now are in the green.
The S&P 500 and the NASDAQ are scoring records. Tech, as you can see there with the NASDAQ is leading the way.
Coronavirus and how it could disrupt global supply chains continues to be the dominant worry despite all the green you see on your screen. Stocks are
rallying because the Chinese are actually expected to unveil new, more aggressive measures to support the economy through the outbreak.
Despite the market gains, the IMF is warning that coronavirus is "our most pressing uncertainty." Managing Director Kristalina Georgieva writes, "It
is a stark reminder of how fragile recovery could be threatened by unforeseen events."
Matt Egan is joining us live now. He is senior business writer at CNN. So when do you think about just what the market's reaction has been to the
coronavirus. It's been a bit haphazard, I would say somewhat unpredictable.
There are some days where the market sort of takes the coronavirus fears in its stride. Today is a day like that. And there are other days where it
really absorbs a lot of the fear and you see red across the screen.
Today was a different story. Walk us through it.
MATT EGAN, CNN BUSINESS SENIOR WRITER: Well, the fact that the market is at all-time highs right now shows that this really is like the Teflon stock
market.
None of this bad news is really sticking. I mean, we have the coronavirus doing real damage to China's economy, the number two economy in the entire
world. Apple issued that sales warning earlier this week. Adidas says that business activity in China is down 85 percent, and yet the Dow is hovering
near 30,000, the NASDAQ up another one percent.
It's up 10 percent so far this year. It's really incredible. I think there are two things at play. Clearly, investors are betting that the coronavirus
storm will pass and when it does, the economy and corporate profits are going to rebound.
We have to see if that plays out, but that's what the markets are betting.
The other one, of course, is easy money. All of this easy money from the Federal Reserve and global central banks have really, really supported
stock prices and risk assets of all kinds.
Some of the analysts I've talked to have said that the easy money from the Fed is kind of acting like a safety net by supporting stocks.
It feels looking at all like the green on the screen, it feels like more of a trampoline though.
ASHER: I like that. So we did actually get Fed Minutes as well just a few moments ago. They were looking at -- we've got Fed Minutes from the policy
meeting, January 27th and 28th. What do they say about -- I mean, obviously a lot has changed since then. What did they say about coronavirus fears,
especially disruptions from the Chinese economy and how that would affect the U.S. economy?
EGAN: Well, the Fed is acknowledging that this is a problem. The Minutes that was just released earlier this afternoon, they said that the
coronavirus has "emerged as a new risk to global growth." And they say that participants have agreed that it warrants close watching.
So the Fed is going to monitor this. They're going to look to see what other companies besides Apple and Adidas come out with profit warnings and
how this impacts overall growth.
It's interesting that the market is betting that the Fed is not done cutting and that is what is also driving the market. The Fed cut rates
three times last year and there's an 84 percent chance that the Fed cuts again, before the end of this year.
Neel Kashkari, the President of the Minneapolis Fed, he was out today. He said he thinks the Fed is going to do nothing for three to six months. But
he said after that he thinks the next move will be down.
ASHER: Matt Egan, live for us there. Thank you so much.
In Yokohama, Japan as the remaining passengers who tested negative for coronavirus begin disembarking from the Diamond Princess, the cruise lines
President has been speaking exclusively to CNN.
Jan Swartz says her heart breaks for the passengers forced to endure the quarantine on board. The ship had the largest concentration of coronavirus
outside of China.
Experts are questioning the effectiveness of the quarantine.
Matt Rivers asked if it worked.
[15:05:14]
(BEGIN VIDEO CLIP)
JAN SWARTZ, GROUP PRESIDENT, PRINCESS CRUISES: What I can say is today, as our guests disembarked, they had tested negative for coronavirus. They had
a health check right before they got off. They had a thermal screening.
And the Japanese Ministry of Health issued them a certificate saying that they had tested negative for coronavirus.
So I would just defer those types of questions to the Japanese Ministry of Health who have been in charge.
MATT RIVERS, CNN INTERNATIONAL CORRESPONDENT: On a human level though, you can understand the concerns if you put yourself in the shoes of those
passengers, you can understand why some people may feel that way or they might feel uncomfortable.
SWARTZ: I think on a human level, right, this is an unprecedented situation. I mean nobody going on vacation thinks that they're going to be
notified in the last days that they've got an extension of 14 days and they're not going to be allowed to leave their cabin.
So our heart breaks for everybody who experienced the situation.
(END VIDEO CLIP)
ASHER: In the last two weeks of quarantine on the Diamond Princess, the number of cases tied to the ship surged from just 10 to 624. It sparked a
crisis inside the cruise industry.
Carnival Corporation has borne the brunt of the fallout. Shares the Princess Cruise's parent company are down more than 15 percent in the past
month.
The Westerdam ship operated by Holland America, but also owned by Carnival was carrying more than a 2,300 people. It was denied entry into countries
around the South China Sea before it finally docked in Cambodia last week.
More than a thousand people are still on board. One of the disembarked passengers tested positive for the virus on her way home.
James Hardiman is the Managing Director of Leisure and Travel Equity Research at Wedbush Security. He joins us live now from Cleveland, Ohio.
Thank you so much for being with us. So just walk us through what you think A, the short term impact is going to be on the cruise industry and what the
longer term impact will be and if there is a difference?
JAMES HARDIMAN, MANAGING DIRECTOR OF LEISURE AND TRAVEL EQUITY RESEARCH, WEDBUSH SECURITY: Well, there's certainly a difference. I think short
term, I mean, we're really still working through the initial assessment, the initial quantification of what these companies think is going to be the
earnings impact.
Carnival won't report for another month or so. Royal reported two weeks ago and the region report is tomorrow and even since Royal reported, very
recently, they've significantly increased the earnings fallout estimate.
I think that's evidence that this is very much a developing story. It's very much fluid math that we're dealing with.
Long story short, I think if you were to look at published estimates right now, they're all going to need to come down. I think most investors get
that at this point.
Long term is a lot more difficult of a question. These stocks, if you look at Carnival, Royal and Norwegian, they're down anywhere from 15 to 20
percent. I feel comfortable in saying that you're not looking at that magnitude of a permanent impairment to these companies earnings power.
And so I do think it's a -- you know, for those willing to take on a little bit of risk, now might be a good time to get involved, but between here and
there, it's going to be a rollercoaster ride.
I don't think anybody knows what's going to happen tomorrow. What's going to happen next week, what's going to happen next month? Obviously, the
concern would be that this would have a lasting impact on the psyches of potential cruise passengers.
I don't think we're necessarily there yet, but that would be the concern.
So how does the industry signal to investors that actually they do have things under control?
HARDIMAN: Well, I think they need to be careful to show confidence in the broader opportunity for the industry and for their respective companies,
but not signal anything that they can't back up.
I don't think they necessarily have this under control and I think any communication otherwise would potentially get them in trouble.
Again, using Royal Caribbean as an example, again, they are the only ones that have actually reported earnings since the fallout of coronavirus. They
were in the unenviable position where they needed to give full year 2020 guidance really not knowing where this was headed.
And so what they ultimately did is said, you know this is what we were going to make before the coronavirus fallout. This is what our current
estimate is for the fallout which was at the time 25 cents, it's since been up to at least 65 cents.
But they didn't make any assertion that that was the end of it. That that was the extent of the impact of the fallout because, you know, ultimately
they don't know.
[15:10:14]
ASHER: So based on Royal Caribbean and their earnings, I mean and also based on the average price per cabin. What does a company like Carnival
Cruises, which owns Princess Diamond actually stand to lose here?
HARDIMAN: Yes, it depends on A, how long these you know, ship bans or you know how long ships aren't able to go in and out of China. Number one.
And then number two, how far reaching the impacts are. Initially everybody I think was doing the math around ships in and out of China, and you know,
our math was that in rough terms, you were looking at maybe $3 million to $4 million of lost revenue per ship.
But then that quickly evolved to impacting broader Asia, which I think is where we are today. It's not just Chinese ships, it is ships you know,
obviously going in and out of Japan and Singapore and other countries.
And then the bigger picture concern would be that it's now impacting Western consumers, and I think that the magnitude of that is probably
limited. But I think, you know, if you were to ask your friends, right, the people that you've talk to, if they're in any way hesitant to go on a
cruise, or even an airplane or a train, I think that a significant amount of them at this point would say yes.
The good news is, I think Western consumers over the years have been shown to be exceedingly resilient, as we exit major events, and there's plenty to
look back on for this industry.
But as we sit here in the middle of it, I think it's safe to say that that bookings are being impacted.
ASHER: All right. Thank you so much. Appreciate you joining us.
HARDIMAN: Thanks for having me.
ASHER: Three journalists from "The Wall Street Journal" have been given five days to leave China.
Beijing revoked their press credentials over an opinion piece titled, "China is the Real Sick Man of Asia," which the government says is racist.
It represents the most dramatic Chinese crackdown on Western journalists in decades. There is so much more to the story than meets the eye.
Senior media correspondent Brian Stelter is joining us.
So, Brian, I mean, this raises all sorts of questions about freedom of speech, about China's desperation in terms of controlling the narrative
when it comes to the coronavirus, however -- however, just putting that aside, you think about that headline, "China is the Real Sick Man of Asia."
They say that is racist.
BRIAN STELTER, CNN CHIEF MEDIA CORRESPONDENT: Yes, it has racist connotations.
ASHER: Don't they have a point here?
STELTER: They do. It has racist connotations. It has ugly historical connotations for China in particular, and I think "The Wall Street
Journal," which is known for being a conservative, a rightwing editorial page and the opinion section in the United States, the editors may have
been trying to be provocative.
But you do wonder about the lack of diversity at media outlet like that. Now, having said that, the opinion division of the journal and the news
division are completely separate. And this has all the appearances of the news division being punished for the opinion division's sins and that's
troubling from a journalistic standpoint.
And that's basically the argument that Dow Jones, which owns the journal is making. They are saying, we regret that this headline has offended people
in China. We regret that. But the news division needs to be able to engage freely in China and cover the news.
ASHER: What has the relationship been like between China and Western media ever since not just the coronavirus outbreak, but just going all the way
back to the Hong Kong protests?
I mean, there has been so much tension between the two, no?
STELTER: Yes, there has been tension. Look, if you go back decades, we haven't seen multiple expulsions like this of international correspondents
since 1989, since the Tiananmen Square Massacre.
In the decades since, there has been a sense of openness within China with some exceptions where journalists are able to travel and interview
citizens, et cetera. There's not nearly as much freedom as there should be, but there is a lot of that freedom.
But we've seen, as you mentioned, with Hong Kong, there have been some scattered examples of visas being turned down of people only being given
short term visas instead of long term visas to be working as a journalist.
So there have been these signs of friction, and this expulsion, this is a dramatic escalation to have three journalists from one news outlet kicked
out all at the same time. We've not seen that happen since Tiananmen.
ASHER: And what's been the difference particularly under Xi Jinping's leadership?
STELTER: I think it is -- in the same way that we talk often times on this program and others about China as a rising power, they are finding more and
more ways to exercise that power.
And certainly press freedom groups are saying today this is a troubling example of using that power to show you know, essentially weakness, like
don't allow these journalists to do their work. That's really a sign of weakness even though China is presenting it as a show of strength.
This also comes only a few hours after the U.S. State Department announced the Chinese state-owned news outlets in the United States will be treated
as foreign missions.
[15:15:10]
STELTER: Meaning basically CCTV, other news outlets with bureaus in the U.S. are going to be treated as embassies or consulates. That's a dramatic
move by the United States. So we might be seeing a tit-for-tat here.
ASHER: All right, Brian Stelter live for us there. Thank you so much.
Michael Bloomberg is just hours away from his first debate in the U.S. presidential race. His poll numbers are rising fast and his rivals are on
the attack.
And shares of Virgin Galactic are taking off. We will explain what's driving the stocks sky high. Next.
(COMMERCIAL BREAK)
ASHER: All right, welcome back, everybody. We are just hours away from Mike Bloomberg's first debate on stage with his Democratic rivals. The
stakes are sky high for all the presidential candidates where the Nevada caucus is just three days away.
But billionaire Mike Bloomberg is likely to face the harshest spotlight. CNN's Cristina Alesci has been following it all.
So he is quite placed the harshest spotlight, Cristina, for a number of reasons, not least of all, is the fact that he's a billionaire within a
party that has moved progressively to the left. What is tonight going to be like for him?
CRISTINA ALESCI, CNN BUSINESS POLITICS AND BUSINESS CORRESPONDENT: Well, I think he is going to face fire on a number of fronts. To your point,
they're all going to try and you know, paint him as the billionaire who is perhaps out of touch, who skipped the first four contests and now is
strolling into this race, you know, hiding for the most part up until now behind all of these ads without facing any direct fire from his
competitors.
That all changes tonight. But of course, what they're going to say is, he is, you know, he is out of touch with where the party is right now, to your
point, that the party has moved left. That they want somebody who has a connection to the people, who kind of understands where they come from, not
to mention, stop and frisk and his comments about redlining.
And even today, we saw Joe Biden go after him for attempting in his advertising to align himself with President Obama. And then Biden came out
with an ad basically showing the number of time times that Bloomberg criticized Obama and his policies.
So it has been an all-day kind of preview of what we're going to see going forward.
ASHER: Obviously, Donald Trump and Michael Bloomberg are both billionaire businessmen, but Michael Bloomberg is painting himself to be in a way the
anti-Trump -- the anti-Trump from a billionaire perspective.
Trump had his sons take care of his businesses after he became President. Michael Bloomberg, on the other hand is saying, listen, you know, I'm going
to divest. I'm going to sell.
Obviously, when you're dealing with a $60 billion company that is a very tall order. It does not happen overnight.
ALESCI: It's not going to be easy, for sure. And right now, it is creating a lot of issues because not only does he have a financial information
company, but a large part of his business, at least from the exterior for those of us on the outside, they know it for the news part of the business.
And that's creating a scenario where right now the reporters in the newsroom are confused about how they should be covering --
ASHER: You worked for Bloomberg.
ALESCI: Yes, exactly.
ASHER: So just -- yes, give us a sense of what that is like in the Bloomberg newsrooms knowing that the person who owns the company might
actually end up becoming -- possibly -- we don't know, President of the United States. Huge, huge, huge dilemma for the reporters in that room.
ALESCI: Yes. Huge dilemma. And I can tell you that the Bloomberg reporters are like any other reporters at any other newsroom. They're aggressive,
they want to uncover the truth, and they feel to a certain extent in this environment that they have their hands tied behind their backs, because
there was an edict from the top that they weren't going to do any investigations.
So, you know, the question always becomes in these situations, what's a news story? What's an investigation? Where do you draw the line?
ASHER: I am sure they hate it.
ALESCI: It's very complicated. Yes.
ASHER: I am sure reporters hate it.
ALESCI: They hate it and so do the editors and everyone else. They're very confused. And this is something you know if Bloomberg continues, and we're
going to have to see what happens with Super Tuesday, but if he ends up you know, continuing the momentum, they're going to have to address that.
ASHER: Of course, no doubt. All right. Cristina Alesci live for us there. Thank you so much.
Bloomberg LP is a company that is built around one key product.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Welcome to the Bloomberg, the total investment management tool, which lets you perform a vast array of analytical
functions at the touch of a key.
(END VIDEO CLIP)
ASHER: Nearly 40 years after launching Bloomberg LP, Bloomberg LP now has an army of journalists and a TV channel, but its success and Michael
Bloomberg's fortunes still revolves around the iconic terminal.
Let's look inside -- 325,000 people pay tens of thousands of dollars each year for a subscription. It's a must have for traders who need a vast array
of data at their fingertips.
And a lot of subscriptions means, of course, a lot of revenue for Bloomberg LP, an estimated $10 billion every single year and Bloomberg owns 88
percent of it all.
It has made him a very rich man and very conflicted certainly if he were to become President.
An adviser to the Bloomberg campaign tells CNN that Michael Bloomberg will sell it all if he becomes President.
(BEGIN VIDEO CLIP)
TIM O'BRIEN, SENIOR ADVISER, BLOOMBERG CAMPAIGN: Mike will release his tax returns. Mike Bloomberg will also sell Bloomberg LP. There will be no
confusion about any of his financial holdings.
Blurring the line between public service and personal profiteering. We will be 180 degrees away from where Donald Trump is on these issues, because
Donald Trump is a walking financial conflict of interest.
(END VIDEO CLIP)
ASHER: Joining me now, Tim Naftali is CNN's presidential historian and a former Director of the Nixon Presidential Library. Tim, thank you so much
for being with us.
TIM NAFTALI, CNN PRESIDENTIAL HISTORIAN:* My pleasure.
ASHER: So here's the thing, Donald Trump didn't divest. He didn't sell. In the court of public opinion when it comes to how the public and the average
voter on the street perceives you. Does Bloomberg even need to do this?
NAFTALI: Well, the question of course is, Donald Trump is not popular. He has an intense following, but he still hasn't cracked 50 percent.
So the question you need to ask ourselves is how do Americans want to see their Presidents in the future? Donald Trump is an exception.
Presidents before Donald Trump divested, sold, put, gave, created trusts, so there'll be no conflict or no apparent conflict of interest.
Donald Trump tested the waters, decided that his base didn't care and said, I'm not going to do that. But going forward, does that become the new
normal? And that's the great debate about all kinds of aspects of the Trump administration.
So I would say it this way. Should Donald Trump be defeated, are the American people saying you know what, we want to go back to the old rules?
Not necessarily the old ways.
ASHER: I don't know. I don't know.
NAFTALI: I don't know either. But I'd say that Mike Bloomberg, if he wanted to be Trumpian wouldn't have to divest. But I suspect one of the
arguments and we can see it from his ads already, one of the arguments he is saying is, I'm not Trump. We don't need Trump. I'm going to be
different. And he's, in fact talking about the way Presidents used to be.
So it would be bad for his brand for not to divest.
[15:25:09]
ASHER: Okay, so I want to talk about how Michael Bloomberg has changed the landscape of this race, and also what -- I guess, what sort of pressure he
is under tonight because, yes, he owns a media company.
But does that really mean that he knows and understands what it means to perform on television at a time of, you know, a lot of public pressure, the
entire country is watching you.
I mean, this is it. I mean, he could either surge or it's over after tonight.
NAFTALI: So if you see a smile on my face, it's not -- it is because those of us who study history and watch politics love uncertainty. That's the
analysts in me. The citizenry does not like that.
I can't say we are going to find out. We're going to see how he does on a debate stage. We're going to see how he does on Super Tuesday where he
swooped. He just came in like an eagle, and will he get all of these votes that he didn't fight for the way that Warren and Buttigieg and Sanders did
in Iowa? And in New Hampshire? We just don't know.
Here is -- there are a number of question marks about democracy in the 21st Century. One of them is what prompts people to vote? Do you go to vote
because you enjoy the show? Do you go to vote because you're thinking about your family's -- the realities of your family life?
We don't know. We were surprised in 2016 and turnout is going to determine 2020. Mike Bloomberg, I think is basically betting that there's a new
social media era, and that you can come in without doing retail politics, without shaking lots of hands and become President.
ASHER: You can buy your way.
NAFTALI: Well, money is always --
ASHER: $400 million gets one to the debate stage.
NAFTALI: Okay, here's the thing. Yes, money. He -- it's his money.
ASHER: And he spent so much money supporting other candidates within the Democratic field who don't want to speak out against him.
NAFTALI: Well, okay. I think that every voter will have to make up her or his mind about the character of the next President. And they've got to
decide if it matters how people made their money. They've got to ask themselves, how they assess the judgment of that person and the direction
that person wishes to take the country.
So they are going to decide. Now, there's no question that Mike Bloomberg has changed the nature of the game, because he can Bigfoot it. He doesn't
have to go and raise money.
Donald Trump didn't want to spend a lot of his money, but he had money. And Donald Trump had 22 million viewers, people who remembered his show, so he
had his own set of advantages.
The question, you know, I think about is because somebody like Jimmy Carter, I'm not saying necessarily his persona or his politics, but
somebody out of nowhere, could someone like that become President?
Now we still have some candidates in the race. Pete Buttigieg for example. His candidacy is not over and the story hasn't been told.
So it's not clear, okay, that a media mogul necessarily has all he needs to become President or at least nominated.
ASHER: Jimmy Carter party became President because of what happened before him. We have to leave it there. I am being yelled at in my ear. Tim
Naftali, thank you so much.
NAFTALI: Thank you.
ASHER: E.U. leaders trying to keep Big Tech in check by calling for the dominant firms to share their data. That story next.
[15:30:00]
(COMMERCIAL BREAK)
ZAIN ASHER, CNN INTERNATIONAL HOST: Hello, everyone, I'm Zain Asher. There's more QUEST MEANS BUSINESS in a moment, when we'll look at Boeing's
ongoing troubles for the 737 Max and how the company is reacting to new issues with its fuel tanks. And Christmas may be 10 months away but one
Chinese toymaker tells us that the coronavirus could impact its supply of holiday toys. Before that though, these are the headlines we're following
for you at this hour.
About 800 people who tested negative for the coronavirus was finally able to leave the Diamond Princess cruise ship after Japan lifted a two-week
quarantine. It could take several days for everyone on board to disembark. More than 600 passengers have contracted the virus. The largest
concentration outside Mainland China.
The top Pentagon policy official who warned against withholding military aid to Ukraine is now out of a job. John Rood wrote in his resignation
letter that he is stepping down at the U.S. President's request. This comes days after President Trump fired two key impeachment witnesses involved in
the controversy of aid to Ukraine.
And we now have a timeline for when Britain's Duke and Duchess of Sussex will begin stepping back as senior members of the Royal Family. A
spokesperson for the couple says Prince Harry Meghan will close their Buckingham Palace office and begin a 12-month transition period on March
31st. Meantime, a source says the use of the word royal in regards to the couple's branding is being reviewed.
The E.U. has unveiled a new plan aimed at breaking down the monopoly power of big foreign tech. Officials say they want the dominant companies to open
up their troves of data to smaller rivals in hopes it will create a level playing field. It comes after Facebook CEO, Mark Zuckerberg, and alphabet
CEO Sundar Pichai did their best to get ahead of the game-changing announcement. Both men have been in Brussels trying to appeal to E.U.
leaders.
Jules Polonetsky is the CEO of the Future of Privacy Forum. He was the Chief Privacy Officer at AOL for a time, as well. He joins us live now.
Jules, thank you so much for being with us. So, the goal of the E.U. here is really some kind of regulatory framework that governs the use of data.
Just walk us through it.
JULES POLONETSKY, CEO, FUTURE OF PRIVACY FORUM: Well, the E.U. recognizes that over the last decade or so, the big national champions on consumer
data have been Google, Facebook, all the others. They see A.I. now as the opportunity to catch up, the next big thing that could really make a
difference to economies and to the -- to the world. And they don't want to be caught behind the game. The strategy seems to be, put rules in place
because if A.I. is not properly regulated, we could have discrimination, we could have, you know, A.I. running amok, all of the problems and the fears.
And so, the hope is that by having a world of trusted A.I., the E.U. will set forward a path. But I think it's important to note that the President
of the commission, when she came into office just a little while ago, promised that she'd regulate A.I. within 100 days.
[15:35:09]
That clearly proved to be a pretty big challenge. And so, what we're seeing now is a white paper that takes a little bit more time, sets out some
rules, and in a lot of ways, talks about shared values. You know, everybody wants to make sure that A.I. does, you know, good things for the world, and
doesn't end up being discriminatory. So, I think there's a lot to like here.
ASHER: Right. So, when you think about areas like health care, like policing, like transportation, just what are the risks and what are the
vulnerabilities when it comes to flaws in A.I.?
POLONETSKY: Well, one important point that the strategy makes is it says there's really high-risk A.I., the kind that we really ought to go very
slow if it's used for policing, if it's going to decide whether somebody gets out on probation, for transportation, you know, areas where we can't
take a chance that just because it seems to be accurate and working, that it isn't actually doing something very risky, making unfair decisions,
where we really need to understand it and have humans assessing it. And so, it says, for those areas, let's go slow. Let's have clear rules. And then
the A.I. areas where perhaps it's lower risk, right? Maybe I'm marketing, does it make a difference that I send one offer versus another offer? Or,
you know, I'm deciding which entertainment option to offer you next. Maybe you'll like this movie because you saw that movie. And that can go a little
bit more quickly.
Where it could be a problem, though, is they do propose that in some high- risk areas, you might need to pre-check or pre-approve your technology with perhaps government agencies. Now, if we're looking to compete, and we want
the European market moving as quickly as the U.S. as other areas as China, slowing down and pre approving really could be a barrier for some of those
start-ups. So, they're really going to have to figure out how, when they get around to legislating, which they do promise that by the end of the
year, they will do, they're able to balance sort of being trusted, and setting good rules without slowing down and overregulating.
ASHER: All right. Jules Polonetsky, thank you so much.
POLONETSKY: Sure.
ASHER: Another blow for Boeing; the American plane maker discovering debris in several 737 max fuel tanks. The company telling employees that this is
absolutely unacceptable. This, as Boeing is hoping to get the jet approved to fly again by the middle of this year. Clare Sebastian joins us live now.
So, Clare, what does this tell us about quality control issues at Boeing?
CLARE SEBASTIAN, CNN INTERNATIONAL CORRESPONDENT: Well, it tells us there are issues. Now, Boeing has faced problems in the -- in the past with
what's called FOD, the sort of debris -- foreign object debris that you can find in planes, sort of gets ensnared in planes as part of the
manufacturing process. Now, they have tackled this in the past. They say that they are now conducting a robust investigation there. They're updating
their processes within their manufacturers to tackle this. And crucially, they are going to inspect every single one of the 737 Max planes that they
have in storage, and that is a lot by virtue of this grounding.
And the fact that Boeing continued to produce these planes throughout the last year without delivering them. They have about 400 planes that are
parked up in parking lots, various other locations around the U.S. and they're going to have to inspect all of them. That will be a painstaking
process. But they do say, though, that this does not change their timeline for getting the Max back in the air. They still say the ungrounding will
begin in the middle of 2020.
ASHER: The term debris will no doubt cause alarm for anybody reading or hearing the story. But just walk us through how dangerous is this type of
debris that's, you know, generated during the production process? How dangerous is it or would it be for the flying public?
SEBASTIAN: I mean, it can be very dangerous. It is an issue that, you know, all plane makers not just Boeing face. They all factor it in to how they
regulate their assembly lines that, you know, I'm told there are signs up in the Renton Washington factory where the Max is produced that warns
employees to be aware of this. It can be -- it can be all kinds of things. It can be metal shavings, it can be tools, it can be sort of rags that are
left lying around, but it can interfere with the wiring of the plane, the engine, it can cause short circuiting, it could fry --
ASHER: My gosh, I'm already terrified of flying. And I --
SEBASTIAN: See, you want to be really --
(CROSSTALK)
ASHER: I wish I wasn't doing the story. Oh, my goodness. OK, I'm going to try and listen. Sorry, go ahead.
SEBASTIAN: But it can be really dangerous and, you know, the -- it's banned by the FAA that they have to now ,you know, not only clear out the stuff
they found, but they have to make sure there's not a systemic issue in the -- in the manufacturing process. That's why they're conducting this
internal review now.
ASHER: Clare Sebastian. I must thank you so much.
(LAUGHTER)
ASHER: Don't laugh at me. The coronavirus is disrupting manufacturing in China. One toymaker says it might not have as many of its popular dolls
this holiday season, and that's next.
(COMMERCIAL BREAK)
[15:40:00]
(COMMERCIAL BREAK)
ASHER: Call To Earth, a call to action for the planet. This is CNN's commitment to engage our global audience in making a difference to protect
the planet's future. As part of this commitment, we're introducing you to people and projects inspiring us all to answer the call. While in Davos
last month, Richard Quest caught up with Topher White, a Rolex associate laureate, who created one solution to the challenges of climate change, and
the extinction of endangered species by using old cell phones. He developed an alert system to detect illegal logging and poaching. Topher hopes this
technology will help protect the world's rainforests.
(BEGIN VIDEOTAPE)
TOPHER WHITE, ASSOCIATE LAUREATE, ROLEX: Technology is an important part of helping fight climate change, helping to protect forests. And there's
people around the world, if you give them the right tools, they will actually protect their own forests.
So, I'm Topher White from Rainforest Connection based in California. Growing up, I've always loved animals, you know, but I wanted to see them
in the wild. Went out to Indonesia to volunteer for two weeks. This given reserved where they rehabilitate these Gibbons who have been in captivity
and released them into the wild. But they were spending almost half their budget trying to protect this one area from illegal logging, a small area.
And wandering through the woods one day with the founder, I stumbled upon somebody who's cutting a tree down, and thought that was kind of too bad
that they couldn't really know what's happening in their forest.
There was no electricity, no roads, no running water, none of that stuff, but there were cell phone service. And so, I figured I could use these old
telephones to listen to the forest and try and find out where the chainsaws were. We have these cell phones in a box with a microphone sticking out and
some solar panels. And we can hear, you know, sounds that are happening up to a mile away, which is a huge area to cover the forest and the low
sounds, the sounds of chainsaws, the sounds of vehicles, that actually travels better through the forest.
Well, the phones actually listened for everything. They listen to everything in the forest, and they send it over the cell phone network up
to the cloud, up to our servers. And once it's up there, we use artificial intelligence even now to pick out anything but we're listening mostly for
danger. So, chainsaws, logging trucks, gunshots, motorcycles, vehicles, humans talking, things like that things that don't belong in the forest.
And once you hear those things, you can react to it.
Each phone we put up can hear things up to a mile away. That's the entire square mile of forest. Protecting over 2,500 square kilometers of forest,
which is almost two-thirds of a million tons of CO2 that have been avoided in terms of deforestation through our partners. It's possibly the best and
cheapest way to fight climate change today, protecting forests. These people on the ground will do it if you just give them the right tools and
the encouragement.
[15:45:11]
RICHARD QUEST, CNN INTERNATIONAL HOST: Once this sound has been heard, who's supposed to do what?
WHITE: There you go. That's the most important part, right?
QUEST: Well, of course.
WHITE: Technology on its own doesn't really make much a difference. So, we have to build these partnerships with local groups. So, like tribes, NGOs,
governments, local communities, who commit to actually showing up and stopping these stuff. We're going to all these places where enforcing
protection. And for us, that's an important part of what we do.
So, we have this whole like, you know, cycle of reaction where an alert comes in and they react. Every one of these Rangers, these like indigenous
warriors out there with bows and arrows. They're actually a more impact of fighting climate change than like a dozen engineers in Tesla. They don't
know it. Attention is what the difference is, the tension is what is the difference between a place being destroyed and places actually striving for
generations to come.
(END VIDEOTAPE)
ASHER: We'll continue showcasing inspirational stories like this as part of the new initiative at CNN. And let us know what you're doing to answer the
call with the #calltoearth. You're watching CNN.
(COMMERCIAL BREAK)
ASHER: Pick up any toy often you'll find the "Made in China" on the label. Iconic prop toys like Lego, Beanie Babies make at least some products in
China. Hasbro, which makes Play-Doh manufactured 67 percent of its goods in the country last year. Now, as the coronavirus disrupts manufacturing, one
company has issued a warning. Maker of the popular LOL Surprise Dolls said the slowdown may disrupt its supply this holiday season. Kristie Lu Stout
has more.
(BEGIN VIDEOTAPE)
KRISTIE LU STOUT, CNN INTERNATIONAL CORRESPONDENT: Big eyes, crazy hair, and those layers and layers of packaging. For whatever reason, LOL Surprise
is one of the most-coveted toys on the planet. But they could be harder to find this holiday season.
ISAAC LARIAN, CEO, MGA ENTERTAINMENT: There's going to be a major shortage of LOL come this holidays worldwide because of the coronavirus epidemic
that we have right now.
STOUT: The coronavirus outbreak has sparked a health crisis and an economic mess. As it exposes major vulnerabilities in the global supply chain for
all the sectors that reached deep into China.
[15:50:07]
UNIDENTIFIED FEMALE: Numerous companies, Apple another one, of course, impacted here.
QUEST: (INAUDIBLE) warning that the coronavirus outbreak --
SEBASTIAN: Hyundai, the South Korean carmaker says as you said, that they are suspending production.
STOUT: Retailers are also feeling the impact, anticipating a supply slowdown. Amazon is stockpiling certain made in China products. In a
statement, Amazon says, "Out of an abundance of caution, we are working with suppliers to secure additional inventory to ensure we maintain our
selection for customers.
LOL Surprise Dolls are designed by MGA Entertainment in California and made in China. The CEO says, before the outbreak, they produced a million
dollars a day. Now, they were at a standstill, as China struggles to get back to work.
LARIAN: What people don't understand is that even if the factories open, they are not able to get all the workers back. And then, to make matters
worse, what happens is that factory does need raw material.
STOUT: For multinational firms, this is not the first time their Asian supply chains have been tested. In 2011, the tsunami and nuclear disaster
in Japan hit the high tech supply chain, pushing back the launch of new devices. Later that year, devastating floods in Thailand rattled both the
tech and auto industries as production stalled.
But the current crisis in China is different, given the unprecedented measures in place to stop the virus and the world's reliance on China as a
manufacturing machine, China accounts for more than 80 percent of all global toy production. So, could the outbreak prompt a rethink about China
as the factory of the world?
LARIAN: People were already thinking about their supply chains as a result of the trade war between the U.S. and China. And we're thinking about not
being dependent so much on just one country. But the impact of this is much bigger than the U.S.-China trade war. And if this goes on for a long time,
then companies will have to think about relocating their supply chain.
I don't think, frankly, any company is going to be able to replace China. China is the factory of the world. We have to accept it. We have to face
it. They're great at what they do. They -- the quality, the discipline, the infrastructure, the workforce that they have. It's going to be years before
somebody else can replicate.
STOUT: In the long run, the maker of LOL Surprise toys is hopeful for the future, but this year, he's bracing for a lackluster Christmas, a Christmas
without enough of his toys under the tree.
LARIAN: It really makes me sad because, for us, the happiness, smile of children is magical, is so important.
STOUT: Smiles that may be harder to capture after the coronavirus. Kristie Lu Stout, CNN Hong Kong.
(END VIDEOTAPE)
ASHER: Virgin Galactic shares are skyrocketing, as the company moves closer to launching a commercial space service. Shares are up more than 19 percent
on Wednesday. Virgin Galactic stock has surged more than 200 percent this year, blowing past other top performers such as Tesla, and Sprint. Paul La
Monica joins us live now. What do you make of this rapid, rapid rise, 200 percent in the past year?
PAUL LA MONICA, CNN BUSINESS DIGITAL CORRESPONDENT: Yes, it is pretty stunning. And you could argue that this might be a bubble in the making, as
I joked on Twitter, like if you scream bubble in space, does anyone here it? But that's a story for another day. I think, really, what's happening
here, Zain, is that Virgin Galactic went public through this merger with a blank check company, and it allowed them to go public without the scrutiny
that's usually attached to companies when they IPO through a more traditional way.
And to be fair, there's a lot of excitement about space travel and space tourism. It's a reason why Tesla announced a recent partnership to do
something similar, as well. But the stock is now up, as you pointed out, 200 percent just this year, more than 50 percent, I think, or so in the
past week is a bit insane when you consider that this is a company that's probably not going to make money anytime soon, because the cost of
obviously, launching rockets into space is prohibitively expensive.
ASHER: So, the fundamentals don't justify it?
LA MONICA: At least not yet. I think that investors are of the mindset that at some point down the road, if you have well-heeled rich tourists that
want to go into air -- go into space and orbit the Earth, that this is something where a business model might make sense. You have to pay a lot
obviously upfront to get your rockets launched. But once you do so and have a sustainable group of customers paying extremely high fees to do this
space tourism, then maybe it's a viable business down the road, but there's going to be competition. We pointed out that SpaceX, you could see some
maybe from Blue Origin, as well, and that's backed by Amazon's Jeff Bezos.
[15:55:06]
So, obviously, a lot of competition here, but Richard Branson has the leg up, at least in the public market, because he's public right now, and Blue
Origin and SpaceX aren't.
ASHER: So, is -- I mean, is this stock just send -- your opinion and experience, is this stock overbought? And obviously that means, if it is,
that means that short sellers in a way in the wings, looking at it -- looking at it as a, you know, potential target.
LA MONICA: Yes, you would have to think that short sellers will be circling around this company, particularly when they finally report their first
earnings, following this merger into a blank check company that create the public entity in the first place. But again, I think that to be fair,
investors are obviously taking the long-term view. You're not going to buy a company like this because you expect their next quarter to be good
because their next quarter, they're going to lose money, and they're going to do that the next quarter after that, and that, and that. Because no one
is expecting money to be made in 2020 or 2021, probably.
ASHER: Paul La Monica (INAUDIBLE) thank you. There were just moments left the trade on Wall Street. We'll have the final numbers and the closing bell
right after this.
(COMMERCIAL BREAK)
ASHER: There are just moments left to trade on Wall Street here about a minute and a half. The S&P 500 and the NASDAQ are on track to close at
record highs. The Dow is still up not at a record high, though. Tech shares are the best of the day. Investors are betting on new stimulus from the
Chinese government. Investors had also been watching for the new minutes from the Federal Reserve. They show policymakers believe rates will stay
steady this year.
Let's take a look quickly at the Dow components. Apple is near the top of the pack after suffering losses on Tuesday, and that was because Apple had
warned the coronavirus outbreak was hurting its supply chain. Boeing is up half a percent, even though the plane maker is reporting a new problem with
the 737 Max. Boeing says the employees actually found debris in the fuel tanks of several jets that have been sitting in the storage. Stocks hit
fresh record highs in Europe today, as well. Italian stack -- stocks rose their best levels in over a decade amid hopes for banking sector
consolidation. And that is QUEST MEANS BUSINESS, I'm Zain Asher in New York. The news continues right here on CNN.
END
