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Quest Means Business
Goldman Sachs Is Warning Investors Not To Get Complacent About The Coronavirus Outbreak; Maersk Cancels 50 Trips To Asia Amid Coronavirus; Morgan Stanley Buying ETrade For $13 Billion; Bernie Sanders, Elizabeth Warren Rake in Donations After Attacks on Michael Bloomberg; Bergdorf Goodman President on Creating "Digital Experience"; Victoria's Secret Valued at $1 Billion in Deal to Go Private. Aired 3-4p ET
Aired February 20, 2020 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:21]
ZAIN ASHER, CNN INTERNATIONAL HOST: Well, would you look at that. The Dow has been pretty much suffering all day, triple digit losses on the Dow ever
since around 11:30 this morning.
Goldman Sachs is saying that this could be just the beginning.
Those are the markets, and these are the reasons why.
A correction on the cards. Goldman Sachs is warning investors not to get complacent about the coronavirus outbreak.
And a mega merger. Wall Street to Main Street, Morgan Stanley snaps up ETrade for $13 billion.
And Bloomberg takes a beating. Rivals attack his wealth and track record as a businessman in his first Democratic debate.
Coming to you live from the world's financial capital in New York City, it is Thursday, February 20th. I'm Zain Asher, in for my colleague, Richard
Quest, and this is QUEST MEANS BUSINESS.
All right tonight, volatility on the Wall Street. The Dow falling 300 points in a matter of just minutes just after 11:00 a.m. Analysts are
describing it as an air pocket with no single factor to blame. I'm not quite sure in terms of what the reasons why we are at this hour, the Dow as
you can see there, still down triple digits, down about 160 points or so.
Tech shares right now are seeing the biggest losses. The NASDAQ is down the most out of all three major indices.
Goldman Sachs is warning that a drop like this could be just the tip of the iceberg. It says that a slide of 10 percent or more is looking more and
more likely and investors are to exposed to the impact of the coronavirus.
Clare Sebastian is joining us live now. So Clare, is the worst still to come here?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Well, that's what Goldman says. The theory is that what comes up must eventually come down. They say
that the markets might be under estimating the scale of the coronavirus impact, partly because of the comparisons with what happened in 2003 with
SARS.
They say, those are no longer relevant. The Chinese economy is significantly bigger. It's a significantly bigger contributor to the world
economy.
I want to read you a quote from the report itself, which really brings this home. They say, "The Chinese economy is six times bigger now than it was
then." As our economist also pointed out, "Chinese tourism accounts now for 0.4 percent of global GDP and the number of missing work days in China will
be roughly equivalent to the entire U.S. workforce, taking an unplanned break for two months."
ASHER: That is sobering.
SEBASTIAN: Right. It isn't necessarily relevant to compare to SARS back in 2003. China is much bigger now. Companies are much more exposed.
We saw Apple warning earlier in the week. I think that was a really sobering moment for analysts, and the stock markets today, I think sort of
started to have a moment of reality around lunchtime.
ASHER: But some might argue that just given what the stock market has been through over the past 10 years, this is quite an old bull market that we're
experiencing. The market is more resilient than people imagine.
SEBASTIAN: I think that the economy is resilient and in the U.S., the economy is still growing. We're seeing you know, solid employment, things
like that. Inflation is low, which is a bit of --
ASHER: The U.S. consumer is strong.
SEBASTIAN: The consumer is strong. So the market is to some extent reflecting the economy. But the weak point here is that it's been propped
up by all of this cheap money.
The Fed cut rates as an insurance policy last year three times. The expectation among markets is that that might now happen again, and inflated
expectations because of this coronavirus.
They think that the Fed might come and cut and I think that's part of the reason why we saw that fall today is that Richard Clarida, the Vice Chair
of the FOMC went on television and said, actually, you know, he thinks economists don't really feel that there should be rate cuts and sort of
pouring cold water on that expectation.
But overall, the Fed is really at the heart of some of these gains and why Goldman Sachs says the market is vulnerable.
ASHER: It is so interesting because we're seeing two different stories play out here. On the one hand, you're seeing stocks climb. Obviously,
they're down today, but generally stocks have been doing well.
We were talking about record highs in the S&P 500 and the NASDAQ just yesterday. And then at the same time, you're seeing gold and the bond
market tell a completely different story.
SEBASTIAN: Yes. They're buying gold. They're piling into bonds, and they're buying stocks at the same time.
ASHER: This does not make any sense. This is not what we were taught in school.
SEBASTIAN: This is not something you -- right, this is not something you generally see. I mean, analysts have said to me, look, it just depends on
what you believe.
Do you believe the equity market that this is going to be a V-shaped recovery and eventually sort of the effects will disappear and we will be
back where we were originally? Or do you believe the bond market that expectations for growth slowing are still there. Inflation expectations are
really low.
It's possible that sort of both things are coexisting in this strange moment where the economy is still strong, but possibly it's going to be
less strong in the future.
And there are as the Fed calls it, you know, significant risks to the downside including coronavirus.
ASHER: So it's interesting. So if Goldman Sachs is right, if there is going to be this correction and it's going to catch -- everybody is going
to be caught swimming naked as they say. What then happens with the Fed? How do they change course?
[15:05:09]
SEBASTIAN: Well, they have said that there has to be something that is a material impact that will mean a material change their outlook for them to
do anything.
Right now, they are sticking to the script. The policy is where it should be. Rates -- they are not sort of forecasting any imminent rate cuts, but I
think if you do start to see a broader sort of ripple effect from the coronavirus, if it starts to hit U.S. companies even harder than it already
has, we don't know yet.
Companies don't know. No one knows how long this is going to last. That then might mean that the Fed move to a rate cut.
Currently, the market expectations are for a rate cut, sort of around June or July this year. Most people think by the end of the year there will have
been one, but I think the Fed for their part thinks that they need more evidence to do that.
ASHER: Clare Sebastian live for us there. Thank you so much.
The coronavirus is causing a very week start for the world's largest shipping company, Maersk. It says that it expects production in China will
ramp up in the next few weeks.
Speaking earlier, its CEO told our Julia Chatterley the disruption it's feeling right now.
(BEGIN VIDEO CLIP)
SOREN SKOU, CEO, MAERSK: This year, we have canceled more than 50 sailings more than we would otherwise have done because of the coronavirus.
So the impact right now is quite substantial. We have around 30 percent of our business is really related to China, so it's significant.
But what will be really important is what happens in the coming weeks.
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, FIRST MOVE: What percentage of the total shipping volume then is those 50 cancellations? Can you just give
us a sense of, of how material that is?
SKOU: It's the 20th of February today, and I think it's really impossible to tell how this will play out. You know, we're still relatively close to
Chinese New Year. We would have expected seasonal weakness to begin with.
So I think we need to get, you know, two to three weeks further down the road before we can really quantify the impact of the coronavirus on global
shipping volumes.
(END VIDEO CLIP)
ASHER: All right, still to come here. ETrade slogan is don't get mad. Get ETrade.
Morgan Stanley is doing just that. It's a $13 billion bet on customers, like for example, you and me.
And the European Union passes the budget. It is missing what was once one of the biggest financial contributors. That's next.
(COMMERCIAL BREAK)
[15:10:06]
ASHER: Welcome back. It is a mega merger of Wall Street and Main Street. Morgan Stanley is buying the online brokerage company ETrade for $13
billion.
It combines two very, very different companies; very, very different businesses. ETrade, has for example 5.2 million clients with $360 billion
in assets.
Morgan Stanley is pretty much just the opposite, with a lot fewer clients, three million, but far, far more money.
The deal gives Morgan Stanley access to a massive customer base and relieves pressure on ETrade, which has been getting squeezed by upstart
investment apps like Robinhood and a zero commission trading.
Shares of ETrade are up more than 20 percent. Morgan Stanley shares are down. Let's bring in Paul La Monica who has been following this story. I
think this is really interesting because what you're really seeing here is a merger between Wall Street and Main Street.
Before we get to, you know, the disruption in the landscape when it comes to trading, just walk us through what this deal means. What's in the deal?
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, what's very interesting here, Zain, this is an all-stock deal. So Morgan Stanley doing $13 billion to buy
ETrade, and they're pretty much just subsuming, what we now know as ETrade into Morgan Stanley.
And it doesn't seem like they're going to be making a lot of major changes because the CEO of ETrade will continue to run the business under Morgan
Stanley and as you pointed out with that graphic.
The key thing here is that ETrade, you have younger customers that may not have as much in the way of assets as Morgan Stanley's more affluent Wealth
Management clients.
But you have more active traders and they are younger so that obviously gives the company some more room to grow with clients that may be just
starting out, but that will need more sophisticated financial services products as they get older.
ASHER: So overall, though, how has the trading business been disrupted?
You and I were talking a second ago about apps like Robinhood, what has that done to the landscape?
LA MONICA: Yes Robinhood clearly has disrupted the entire industry because you could argue that they're the reason that just about every company went
to a zero commission model last year.
We saw it with Schwab. We saw with TD Ameritrade, ETrade, Fidelity, all of them going that route. And the pressure that was created now on these
companies, well, they lost a big chunk of revenue from commissions that forced these companies to consider what they need to do to stay
competitive.
And that's why Schwab agreed to merge with TD Ameritrade. They bought them for $26 billion. You know have ETrade selling out. There was a lot of
speculation that the deal was going to happen that either Morgan Stanley or maybe Goldman Sachs will be the buyer, it turns out it's going to be Morgan
Stanley.
And there have been other moves that companies have made. Robinhood and Fidelity, both offering fractional trading as well. So you know, if you
want to buy a share of Amazon, you don't have the thousand dollars plus that Amazon trades at, you go buy a small piece of it. And I think that's
something that's attractive to younger investors as well.
ASHER: But regulators still need to say this is okay.
LA MONICA: Yes, regulators will have to greenlight the deal. It seems that given that Schwab and TD Ameritrade are likely to get approved that this
deal will probably get approved as well.
I'd be very surprised if there is a regulatory hurdle that winds up killing the deal, but obviously, you never know. And of course, that could be
something that investors will have to just keep an eye on in the coming months.
But the company is hoping that by the fourth quarter, both shareholders and all the requisite regulators -- say that five times fast -- will approve
this deal.
So by the end of 2020, we might have Morgan Stanley and ETrade as just one company.
ASHER: So how much more of a competitive advantage though, do these two companies have by joining forces?
LA MONICA: I think it is very significant for ETrade because there were questions about can they survive in a world where Robinhood is gaining
steam. Schwab is buying TD Ameritrade. Goldman Sachs, they have Marcus -- just everyone really seems to recognize that Main Street investors, not
always just the super affluent investors that these companies used to cater to exclusively, is the way of the future.
So I think ETrade, it's a good move for them and now with Morgan Stanley, it's hopefully something that James Gorman can show investors om his
company that they're able to diversify, and it's going to be not just the Blue Bloods on Wall Street, but you know, the average investors who may
only have a little bit of money to put into the stock market.
ASHER: And the future of ETrade has been uncertain since basically November. People haven't been sure what's going to happen to it, since that
merger between Charles Schwab and TD Ameritrade.
LA MONICA: Yes, there were questions about what ETrade could do, how they could survive, going it alone. And their last quarterly report really
showed the pressure that they were facing.
Revenues plunged. Earnings weren't as awful as some had feared, but the commission revenue just completely dried up as a result of going to zero
commissions and that was obviously going to be a big problem going forward. How do you replace that lost revenue?
[15:15:09]
ASHER: Paul La Monica live for us there. Thank you so much.
E.U. leaders are meeting in Brussels this week to set the blocs budget for the next seven years. Before Brexit, the U.K. was the second biggest
financial contributor to the E.U., its absence could put the E.U. in a $70 billion hole over this next period.
The remaining countries are scrambling to make up the difference. They formed two key alliances. On the one hand is the Frugal Four. Those are the
richer countries that want a smaller budget, focused on funding for technology and climate change.
On the other side, you have the Friends of Cohesion. Those are perhaps the poorer countries that are against budget cuts because they are more reliant
on E.U. funding.
Speaking earlier, Sweden's Prime Minister says his country doesn't want to pay more to plug the Brexit budget gap. Take a listen.
(BEGIN VIDEO CLIP)
STEFAN LOFVEN, SWEDISH PRIME MINISTER: It is very clear that the member states are far apart from one another. The President of the European
Council that led for the proposal that is far from enough, because we are fine with being net payers, of course.
It's a simple solidarity. It is an important solidarity, but we cannot accept a dramatic increase of our fees. So that is out of the question.
(END VIDEO CLIP)
ASHER: Jeffrey Sachs is an Economics Professor and directs the Center for Sustainable Development at Columbia University. Mr. Sachs, thank you so
much for being with us.
JEFFREY SACHS, ECONOMICS PROFESSOR, COLUMBIA UNIVERSITY: Pleasure.
ASHER: So how are they going to make up for this massive budget gap that they have? This shortfall that they have in terms of funding?
SACHS: Well, it's not so massive relative to the size of the E.U. economy and they really are arguing about fractions of one percent of the European
Union-wide gross national product to add it up across the 27 countries.
They'll find a way, but they are going to bicker for quite a while, because there really are different visions of the European Union.
The minimalist vision, keep it small. It's basically about the internal market or a bigger vision, which is that Europe needs to stand on its own,
to have a foreign policy to really have a geopolitical presence much greater than it does right now that would require a bigger budget.
Europe has also put on the table a massive and very important proposal for a European Green Deal to face the climate change crisis. That requires
funding.
But some of the countries as you heard the Frugal Four, a number of countries are saying they don't want to pay for it, but they're all behind
the policy. Well, that's an inconsistency.
ASHER: So then between these two very different visions on moving the E.U. forward, Friends of Cohesion, Frugal Four, which one ends up winning?
SACHS: I hope that over time, the European Union budget becomes bigger. The E.U. becomes stronger geopolitically, I think that's good for the whole
world and certainly needed for Europe and certainly needed to fund the ambitions that this new European Commission headed by President von Der
Leyen and has put forward.
So I'm hoping for a strong Europe because I think a strong Europe is good for the whole world, but a strong Europe needs an adequate budget behind
it.
ASHER: So then it is the simple option and the most obvious option, just to find ways to raise money through taxes.
SACHS: Well, the budget is raised partly through a variety of taxes and partly through contributions by the individual member states.
ASHER: They are raising it to make up for that shortfall.
SACHS: That is one way forward or lower rebates to some of the countries given now, the contributions come in, then there's a partial rebate back
and there are many ways technically that the adjustment can be made.
The big question is, how much do they want to spend is the overall pie and how do they allocate it?
ASHER: Also just financially, in terms of what European countries continue to fight over. There is the sense that, you know, there are some countries
that end up contributing the most, and other countries that contribute the least, but gain the most? How do you square that?
SACHS: Well, Europe has an inequality within Europe of some relatively rich countries, some relatively lagging countries. Remember, there were the
new accession countries after the fall of communism in the end of the Soviet Union.
So the Central and Eastern European countries have a lower per capita income. They're saying, we need help still to catch up. We need help to
decarbonize our economies. You want to have a European Green Deal, okay, we have an adjustment problem.
To my mind, fair enough. The rich countries are saying well, you have to do this and that, but we don't want to pay anymore.
I don't think that's wise for Europe as a whole which does need its cohesion, so Europe can face challenges like its neighborhood which is not
so stable, like the challenges geopolitically of the U.S. and China and Europe in between these two geopolitical giants.
[15:20:14]
SACHS: And so Europe needs to be able to fund itself to operate effectively, and given that there are divisions or inequalities or gaps
between the relatively high income and lower income countries of Europe, it's natural that there should be some transfers within Europe.
ASHER: One lesson that I imagine that is going to be taken away from all of this is that nobody, of course, wants to deal with more budget
shortfalls, i.e. any other Brexit happening anytime soon.
So that means that they're going to have to figure out a way to quell or try to ease some of the anti-European or anti-E.U. sentiment that is coming
out of certain countries.
SACHS: It is a paradox and a great stress because there is a lot of anti- E.U. sentiment on the right in many of the countries, the populist right. And that makes the government's reluctance to ask for more contributions to
Brussels.
But without those contributions, the E.U. can't provide the services that justify and help give support for the European Union. So they do have to
have a clear vision and then move forward based on that vision and pay for it.
This isn't easy for any government in the world these days, but it's very difficult when there are 27 individual governments negotiating.
But Europe does have a way of muddling through. Probably they're not going to resolve it at this summit. It could go on for months, it could go into
the summertime, but I believe that they will find a resolution and it will be I think, with some increased budget as some of the more cohesionists are
calling for.
ASHER: All right. Jeffrey Sachs live for us there. Thank you so much. And you are actually going to be joining us a little bit later on in the show
to talk about last night's Democratic debate.
SACHS: Indeed.
ASHER: And also, we've got another billionaire running for President. There's so much to discuss there. Thank you so much. Appreciate that.
All right. Sergio Ermotti will leave the Switzerland in June. He will be replaced by surprise outsider pick, Ralph Hamers in November.
Hamers is the current chief executive of Dutch bank, ING. He has limited experience with UBS's core businesses, wealth management and investment
banking. He does however, have a record of pushing digital banking.
This month, UBS's main Swiss rival, Credit Suisse also announced its CEO is resigning over two spying scandals.
Ermotti has spent close to a decade at UBS. He is credited with leading the bank through a post financial crisis, restructuring and repositioning it as
a global wealth manager. Shares have risen 28 percent since Ermotti started the job.
He says UBS is in great shape now, and it's the right time to move on.
In the meantime, airlines are facing heavy losses from the coronavirus. IATA said today, the outbreak could cause global carriers nearly $30
billion in lost revenue. That's more than four times what the SARS outbreak cost airlines back in 2003.
Alexandre de Juniac is the Director General and CEO of IATA. He joins us live now. Mr. de Juniac, thank you so much for being with us.
Just walk us through -- how hard is that to really calculate what the impact is going to be? Given that there is so much uncertainty.
ALEXANDRE DE JUNIAC, DIRECTOR GENERAL AND CEO, IATA: It's our first estimate that we have released today. They are based on the -- what we have
seen in the traffic, particularly in China and in Asian region.
First of all, it's based on the experience we have had from previous outbreaks of the SARS, MERS, H1N1 and so we have estimated that the impact
for the Asia-Pacific airlines would be in revenues minus $27.8 billion. And there is an additional $1.5 billion for the other airline based outside
Asia Pacific.
ASHER: Can you really look at that SARS though as an accurate indicator of what's going to happen this time around just given that the world is a
vastly different place in 2003 compared to today?
DE JUNIAC: Of course, we have either -- we have tried to learn from SARS and to integrate the changes. In the SARS issue, what was interesting was
that it was more limited, and at that time, the impact of the Chinese economy was much smaller.
Now, the Chinese economy because it's a major economy, because it is the main manufacturing area in the world because of the size of its export and
import, and so we have included that in our calculations to be able to give you these figures.
But I have again to say that's our first estimate of the impact of the crisis, but we think they are reasonably --
[15:25:18]
ASHER: Reliable. So, how long can airlines continue the status quo? Continue with all of these flights being canceled before they actually have
to start laying off employees?
DE JUNIAC: You know, it depends on the airlines because for the airlines outside Asia-Pacific, the impact is significantly small.
ASHER: Of course.
DE JUNIAC: So, normally, they have to take measures. A part of the reduction in revenues is also compensated by the reduction in oil price
that has been also significant.
So for the outside the Asia-Pacific region, normally, the impact in terms of restructuring should be very, very limited. For the Asian airlines, it
is another story. It's much more impactful.
ASHER: Right.
DE JUNIAC: But the interesting point is that some local governments have started to help the industry by reducing costs.
Today, the Singaporean government decided, you know, to inject some money by reducing costs on the airlines that were suffering from the coronavirus.
So this is a very interesting and very positive movement. And we strongly encourage the other governments, particularly in the Asia-Pacific region to
do the same.
ASHER: And you mentioned though that and the lowering of fuel prices also helping as well. But in terms of -- and I understand there is a difference
between the airlines that operate largely in the Asia-Pacific region versus outside of that.
However, how much of a role do Chinese tourists play in overall revenue for airlines? I mean, that's a significant part of this, too.
DE JUNIAC: It's also integrated in the figures I gave you. The impact of the enormous reduction in Chinese travel, it's massive, but it has been
integrated both in the figures of the Asia-Pacific airlines and the other airlines as well.
And it has also an impact on the overall tourist industry: The hotels, the entertainment, parks -- and we are seeing some Asian governments who are
trying also to help this industry -- these industries -- by pumping some money inside which I think is very helpful for them.
ASHER: A lot of people -- a lot of economists are talking about sort of the V-shaped recovery that we saw during the SARS epidemic, which is where
everything sort of fell apart and there was a sharp decline initially followed by a sharp recovery.
Do you anticipate that this time around?
DE JUNIAC: Yes.
ASHER: It's impossible to predict, though.
DE JUNIAC: It's difficult to predict, but you know, we do not see why it shouldn't have the same -- for the same level and the same profile.
You know, when the outbreak will be at its peak, so normally, the traffic will get down to the bottom. Normally it should come back to normal and
then the traffic increases again.
Just in China, the fact that the government will have to allow people to come back home after the New Year --
ASHER: That alone, right.
DE JUNIAC: That alone will probably trigger a lot of passenger demand.
ASHER: All right, Alexandre de Juniac, thank you so much. Appreciate that.
DE JUNIAC: Thank you very much.
ASHER: Controversial political consultant, Roger Stone has just been sentenced to prison. Now questions arising, whether his longtime friend,
President Trump, is going to be issuing a pardon. That story, next.
(COMMERCIAL BREAK)
[15:30:00]
ASHER: Hello everyone, I'm Zain Asher. There's more QUEST MEANS BUSINESS in a moment when we look at how Mike Bloomberg's debate performance last night
is galvanizing his Democratic rivals.
And I'll speak to the president of Bergdorf Goodman about how a brick and mortar retailer competes in an online marketplace. Before that though,
here's the headlines for you at this hour.
Roger Stone, a longtime confidant of U.S. President Donald Trump has been sentenced to 14 months in prison. He also received two years' probation and
must pay a $20,000 fine. Stone was convicted last year of lying to Congress and threatening witness in charges standing from the Mueller probe.
We are learning new details about Wednesday's mass shooting in Germany. The gunman opened fire at two shisha bar near Frankfurt killing nine people.
Chancellor Angela Merkel says it appears he acted out of right being extremist racist motives.
Prosecutors say nine of the victims had immigrant backgrounds. The suspected gunman was found dead in his home near his mother's body.
Iran and South Korea are now reporting their first deaths from the coronavirus. Schools and universities in Iran's home province are shut. And
(INAUDIBLE) South Korea's fourth largest city is telling people to stay indoors.
Meantime, two patients infected onboard a cruise ship in Japan have died.
In London, police say terrorism is not suspected in an attack at a mosque. The aftermath was caught on video. Police say a prayer leader was stabbed
in front of about a hundred worshippers. The victim was in his 70s is expected to survive. A 29-year-old man has been arrested on suspicion of
attempted murder.
President Trump is speaking after his longtime friend and ally Roger Stone was sentenced to more than three years in prison. Many are wondering
whether Mr. Trump might pardon Stone. Here's what he had to say a few moments ago at an event in Las Vegas.
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Very good chance of exoneration in my opinion. I have known and you people understand it
probably better than anybody in the room, I have known Roger Stone and his wife who's really a terrific woman for a long time, and Roger is definitely
a character. Everybody sort of knows Roger. Everybody knows him. And most people like him. Some people probably don't but I do and I always have.
(END VIDEO CLIP)
ASHER: We'll have more on that a little bit later on the show.
All right, the fundraising dollars are right now streaming into the campaigns for both Bernie Sanders and Elizabeth Warren. They've each raised
more than $2.5 million after putting capitalism on trial Wednesday night at the Democratic debate.
Warren and Sanders delivered feisty performances attacking billionaire Mike Bloomberg over his immense wealth, track record as a businessman, and his
legacy as the former mayor of New York.
[15:35:04]
Bloomberg says the real winner of the debate was Donald Trump. Donald Trump just tweeted that he agrees.
Abby Phillip is in Washington for us.
So, Abby, everybody I think agrees that it wasn't exactly just putting this diplomatically, it wasn't exactly Bloomberg's best possible performance.
The question is, how much does it change his position in the race going forward?
ABBY PHILLIP, CNN POLITICAL CORRESPONDENT: Well, Zain, even the Bloomberg campaign is acknowledging today that he really was not prepared for what he
experienced on that debate stage in Las Vegas last night.
He was really at the center of attacks from virtually every single candidate on that stage, first and foremost from Elizabeth Warren who from
the very beginning of the -- of the debate basically likened Bloomberg to President Trump, bringing up comments that Bloomberg has allegedly said
about women, calling them according to Warren a horse faced lesbian, and that really set the tone for the rest of the debate from there on.
And Bloomberg knew that he would get some criticism, not only for some reporting that CNN and other outlets have done about the culture at his --
at his companies that some women alleged sexual harassment and discrimination in the workplace, but also his record as mayor and his
defense of the police tactic of stop and frisk.
But all of that seemed to catch him flat footed. There was however, a moment where Bloomberg was defending his wealth against attacks from Bernie
Sanders and others, and he went again after Bernie Sanders for owning three homes. That was one of the few times that you saw Sanders a little bit on
the defense.
But at the end of the day, that exchange even seemed to be not necessarily the greatest one for Bloomberg. He was talking about how wealthy he is and
how releasing his tax returns would take some time because he doesn't use turbo tax. I think a lot of people saw that exchange and some say that
would not necessarily resonate with average Americans who probably do use turbo tax because they are not billionaires.
So, you know, Zain, at the end of the day, this was the opening for Michael Bloomberg who has spent more than $400 million of his own money to get into
the race in a big way. He's been in the double digits in a lot of polls both nationally and in a lot of states.
But now comes the point where the American people get to see how he fairs under fire. And his campaign is acknowledging he's got a lot of work to do
between now and the next debate which is a week from Tuesday in South Carolina.
ASHER: So, who has the most to gain from Bloomberg's stumble last night, Abby?
PHILLIP: Well, there are a lot of candidates who really need Bloomberg to stumble. And actually frankly, they are the moderate candidates, candidates
like Pete Buttigieg and Amy Klobuchar.
But one of the reasons that you saw Elizabeth Warren doing a lot of that work on the debate stage is because she is at a crossroads at her campaign.
She needs to really show some fight and show the ability to -- that she can persist in this campaign.
And so, last night was not necessarily for Warren about the fact that Bloomberg is in her lane, she is more in the progressive lane anyway. But
rather, she needed to show the public that she had some fight in her. That for Warren was an electability argument. So it was a really important
moment for her last night.
And for Bernie Sanders, you know, Bloomberg has been trying to say for the last couple of days that this is a Sanders, Bloomberg debate.
Well, I think for Bernie Sanders, he's feeling good after last night because in many ways, Bloomberg failed to land many of the blows that he
had been signaling that he would land on Bernie Sanders.
And Sanders kind of came away from this debate largely unscathed. He is the clear frontrunner right now in the Democratic primary, and I -- and I think
the fact that so many of the other candidates were focused on Bloomberg means that Bernie Sanders had a very good night.
ASHER: All right, Abby Phillip live for us there. Thank you so much.
Michael Bloomberg, the world's 12th richest man, was left to issue defense of capitalism on the debate stage. His foil was Bernie Sanders is self-
described Democratic socialist who doesn't believe billionaires like Michael Bloomberg should even exist. Take a listen.
(BEGIN VIDEO CLIP)
MICHAEL BLOOMBERG (D), PRESIDENTIAL CANDIDATE: I can't speak for all billionaires. All I know is I've been very lucky, made a lot of money, and
I'm giving it all away.
SEN. BERNIE SANDERS (D-VT), PRESIDENTIAL CANDIDATE: You know what, Mr. Bloomberg? It wasn't you who made all that money, maybe your workers played
some role in that as well. And it is important that those workers are able to share the benefits also.
We are living in many ways in a socialist society right now. Problem is, as Doctor Martin Luther King reminded us we have socialism for the very rich,
rugged individualism for the poor.
BLOOMBERG: I can't think of a ways that would make it easier for Donald Trump to get reelected than listening to this conversation. This is
ridiculous.
We're not going to throw out capitalism. We tried that. Other countries tried that. It was called communism and it just didn't work.
(END VIDEO CLIP)
ASHER: So much to discuss here. Jeffrey Sachs is with me again. So there's rich and then there's Michael Bloomberg rich. Given the landscape of
Democratic Party, just given, you know, how it's moved quite a significant amount to the left; is being that rich a huge liability in this race?
[15:40:12]
JEFFREY SACHS, PROFESSOR OF ECONOMICS, COLUMBIA UNIVERSITY: I don't think Bloomberg's going to get it for the reason --
ASHER: Plain and simple.
SACHS: -- for the reason that even throwing a billion dollars at this isn't going to dissuade people who are watching this, that oh, that's not very
presidential. And I think Bloomberg had an absolutely terrible night. And he has lots of liabilities as a candidate in the Democratic Party and
generally.
Right now, many people feel the American political system is in the hands of the super rich. And they wanted to be in the hands of the democracy, of
people.
And so I think that that is actually what a lot of people are looking for and why Bernie Sanders is the frontrunner and why Michael Bloomberg really
didn't have good answers last night.
ASHER: The thing is that, to be fair, and like I've talked on this program a lot about his record when it comes to African-Americans, the stop and
frisk policy, etcetera, etcetera.
Now, to be fair though, he has done a lot for the Democratic Party financially. He has spent over $100 million trying to help female Democrats
get elected. I mean, he has single handedly boosted the party, especially during the midterms. Doesn't that count for something?
SACHS: Well, it shows how much money plays a role in the American system. Our election cycles now, this one could be a $10 billion or even more
election cycle, the 2020 cycle.
But most Americans say we want to have the one person, one vote, not one dollar, one vote. And so, the fact that someone with more than $60 billion
gives money away and gets support, that's a problem, not just a good thing. That really is a big part of the problem.
In our system today in the United States it is the big bucks, the big campaign contributions completely unleashed by the Supreme Court which was
a shocking series of decisions.
Say, spend what you want, keep it secret, spend everything. We turned into a kind of plutocracy in this country. Money speaks, that's what Bloomberg's
counting on.
But I think people watching this are saying we don't exactly want just a contest of billionaires, we want the American people to be represented.
ASHER: They don't want a contest of billionaires, but what they do want is somebody who can defeat Donald Trump.
Now, people might look at Michael Bloomberg -- I mean obviously, his performance wasn't great yesterday, but people might look at Michael
Bloomberg as somebody who possibly can do that. Has that change after yesterday?
SACHS: Well, I don't think the performance gave much confidence of that. He barely could stand in the -- in the debate effectively. But I think what
the opinion survey show is that many of the candidates right now are ahead of Donald Trump, the claims that Bloomberg keeps making that Bernie Sanders
couldn't do it is shown to be false by opinion survey after opinion survey after opinion survey saying that Sanders is in the lead.
So, I don't think that Donald Trump is in any way invincible in this campaign. He's got negative ratings, significantly larger than his positive
ratings, and it's going to probably be a close election, but a number of candidates have the chance to beat him, that's for sure. And it doesn't
have to be a billionaire that does it.
ASHER: Right, Jeffrey Sachs, live for us there. Thank you so much. And we'll have much more news after this break.
(COMMERCIAL BREAK)
[15:46:15]
ASHER: For more than a century, the department store Bergdorf Goodman has catered to luxury lovers in New York City. I sat down with its president,
Darcy Penick to talk about bringing an established brick and mortar brand into the digital age.
(BEGIN VIDEO CLIP)
DARCY PENICK, PRESIDENT, BERGDORF GOODMAN: For me there was a tremendous opportunity in looking at the Bergdorf's business to really ensure that we
were creating a channel list vision for the brand.
So by that I mean, it's this combination of saying we have an incredible iconic store that is a destination in the city, arguably kind of the
remaining luxury destination in the city.
And then this opportunity to ensure that the digital experience, so our website, introducing an app experience was able to actually reflect the
brand in a native way but consistent with the way that we are express ourselves in the store.
So by that, I mean, you know, people talk about Bergdorf's windows quite frequently, it's an escapist experience, it's inspirational, it's story
telling.
And so, we were not translating that historically to the web experience. And so over the last few months, we've launched entirely a new experience,
our first app that is really beginning to ensure that across our physical and digital experiences, we're finding ways to really story tell across the
board.
And then to me, the other largest asset that sort of remains in our organization is our selling team. And so, the selling that we do is not
just transactional, it's not just ringing the register, it's building relationships and styling customers to make them feel good and have these
experiences.
ASHER: So the thing is that when you are focused heavily on the online experience, for example, that obviously is going to draw in younger
clientele. How do you do that? How do you focus on the younger sort of future generation clientele of Bergdorf Goodman that it needs to modernize
and survive without alienating your traditional customers?
PENICK: So I am less focused on age and demographics. I'm far more focused on psychographics.
So, by that I mean, this is about serving a customer that loves luxury. And I think one of the things that I've observed is that oftentimes, people are
focused on trying to be all things to everyone.
And I'm comfortable saying our goal is to be the destination for luxury and with that, at serving any customer that wants to be part of that, that has
the shared taste for life that wants to be --
ASHER: Regardless of age.
PENICK: It's not about age, it's actually about a love of a luxury experience.
ASHER: And what needs to change in retail and elsewhere when it comes to various industries in terms of having more people like you, more women,
younger people running these large organizations?
PENICK: So, women in leadership I think is a really interesting topic, I think it's one that's near and dear to me. But in reality there's a friend
has recently brought up a topic to me that has stuck with me a lot, and it's this idea of the need for women to help other women in that process.
And so, there has not a great play book for women at C-level roles that exist out there today. And so I think the more that we can say how can I
help, is something that a friend of ours actually has shared that phrase with me in a way that's been really compelling to me. The need to really
say how do we help other leaders and how do we just offer up that help as a place to start.
I also think that it's in an aspect of leading by example. So I had a couple of really incredible mentors in my career who have been women paving
the way for that. And I think some of my favorite aspects of their leadership have been the ideas of drawing on what are sort of considered
typically female characteristics that I think are becoming more and more important today.
So, thinking about grace and wisdom and empathy as powerful leadership qualities I think is where the industry is going today, where leadership is
going today and something that I think can harness a lot of strength women in that process.
(END VIDEO CLIP)
[15:50:01]
ASHER: Darcy Penick there. All right, when we come back, Victoria's Secret is out of angels. The troubled lingerie brand now going private after years
of scrutiny from being out of touch.
(COMMERCIAL BREAK)
ASHER: Welcome back. Victoria's Secret is going private. Equity firms Sycamore Partners is buying a 55 percent stake in the troubled lingerie
brand. Shares of Victoria's Secrets' parent company L Brands are under pressure on the deal that values the brand at $1 billion.
When the transaction closes, Leslie Wexner will also step down as chairman and CEO of L Brands. It comes as the brand has been struggling for years to
adapt to consumer demand and inclusive messaging. Alison Kosik joins us live now. What do we know?
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: You know, this is a powerful brand which -- you know, really dominated the lingerie space. I don't know.
Did you ever buy lingerie at Victoria's Secret?
ASHER: I'm not going to say.
KOSIK: I did, in fact, I do but maybe I'm the old school. But you know, a lot of other women apparently aren't buying it. But this used to -- is this
store that really dominated the space and now it's kind of really diminished because L Brands is -- which owns the Victoria's Secret is
selling -- is selling 55 percent to Sycamore Partners. L Brands is going to go ahead and keep 45 percent of it. So that's a minority stake. But you
know, it's going to be spun off into a fully private company.
Now, it's being sold for just 300 -- I'm sorry, $525 million. That's kind of a discount here when you think about what analyst had expected
Victoria's Secret could have gotten for the full company.
For a full company, I saw estimates anywhere from three billion to 3.5 billion for the full company. So one analyst saying this price is lower
than a full scale of sale. And so you've got -- you've got this massive debt load that Victoria's Secret is carrying, it shows just how desperate L
Brands was to off load this company.
And this -- then the sale price really signifies how desperate and how much of a decline this brand has been in, despite the fact that Victoria's
Secret still has hundreds of stores and despite havening -- having weakening sales, it pulled in roughly $7 billion, let me check my -- yes,
$7 billion in revenue last year.
So, it seems people are still buying the products. It seems there are other issues with Victoria's Secret.
ASHER: So what are those other issues because when I was growing up, this brand was all the rage. So what went wrong for the company?
[15:55:03]
KOSIK: It was all the rage. I think that it kind of maybe got too complacent in the way it sold its merchandise. It kind of glamorized and
sexualized lingerie.
You know, it's known for its push up bras and the Victoria's Secret Fashion Show that came on every fall where you'd see the diamond encrusted bronze -
-
ASHER: And also, a normal women do not look like that. Sorry.
KOSIK: And then there you hit on -- hit it right there on the head because that is what the problem is there. I think what you're seeing now is women
are looking for more authenticity, they're looking for --
ASHER: I can't relate to that. Do you know what I mean?
KOSIK: I can't either. As much as I did buy my bras at Victoria's Secret, I can't relate to that. And that's the problem because then you also -- so
you throw in the fact that the times are changing, the Me Too movement. Women don't want to see all the sexualized lingerie. They want to buy stuff
that looks more authentic and fits their bodies and is comfortable, more comfortable than a -- let say, a corset.
So, they want -- they want to buy lingerie that really defines them. And I think that had a lot to do with Victoria's Secret down fall and that comes
down to just marketing. Because someone into the corporate headquarters there didn't stop and think, look, the times are changing, we have to
change with it.
ASHER: You got to evolve and adapt.
KOSIK: Absolutely.
ASHER: There's no other way.
KOSIK: And this company didn't. Because ironically, you look at the competitors, ThirdLove, True & Co., Rihanna's got a company, they sell
pretty much the same kind of merchandise.
ASHER: Right, Alison Kosik live for us there. Thank you. It's very personal discussion there.
All right, there are moments left to trade on Wall Street. We'll have the final numbers and the closing bell right after this.
(COMMERCIAL BREAK)
ASHER: All right, there are just about 90 seconds left to trade on Wall Street. Let's take a look and see here. The Dow has been falling back ever
so slowly from that sudden 300 point loss we saw around 11:00 a.m. this morning. The feeling is that there could be many, many more days like this
as the market really struggles to contain the impacts from the coronavirus. Companies are suddenly feeling the pinch.
Goldman Sachs actually just issued a warning saying that a drop like this could actually be the tip of the iceberg, saying that the slide of 10
percent or more is looking much more probable and that investors are far too exposed from the impact of the coronavirus.
As we come to the end of the session, let's do a quick check of the boarder markets. Tech shares are the biggest losers of the day. And that does it
for QUEST MEANS BUSINESS. I'm Zain Asher. You are of course watching CNN. The news continues.
[15:59:58]
END
