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Quest Means Business
US Economy Adds 187K Jobs In July; Source: Ukraine Behind Drone Attack On Russian Ship; Russian Opposition Leader's Jail Term Extended; Military Warns Of Retaliation If ECOWAS Intervenes; New Victim Identified In Gilgo Beach Murders; U.S. Presidential Candidate Chris Christie Visits Ukraine. Aired 3-4p ET
Aired August 04, 2023 - 15:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOS: Now, the observant amongst you will realize that this is not the beach. That our Summer Friday, I'm actually in
Well, the weather was not agreeing. It's raining down in Asprey Park, I think it is a bit miserable to be out in the rain at the beach. So we're in
the studio, Asprey Park is next week.
The markets, there is an hour to trade. We were up for most of the session and now, we've gone down. I think it's just the last-hour nerves, last
couple of hours nerves on the back of the jobs numbers, get to all of that, in a moment.
The main events: The pace of hiring is slowing in the US. They are deciding the Fed's medicine is working. Tonight, we have the Nobel laureate, Paul
Krugman to analyze and discuss.
Amazon shares up almost 10 percent on strong growth in both retail and cloud computing, and the third rail of corporate travel, should companies
get to keep the frequent flyer miles that we accrue, and when should you use your miles?
Live from New York Friday, August 4th, no Summer Friday per se, but I'm still Richard Quest and in the studio, I still mean business.
We start today with the slowing US job market, and the latest possible sign of the inevitable soft landing. The economy added 187,000 jobs in July, the
second lowest number since December of a couple of years ago, but it is roughly in line with the amount in June, and slightly more than the pre-
pandemic average. The unemployment rate ticked down just a notch to 3.5 percent.
Initially, markets very much liked the news, but that rally has now faded. Matt Egan is with me. We'll be talking to Paul Krugman in just a moment to
get the details on all of this. Before we actually do go into some of this, I just want to show you the numbers and how the numbers have moved, Matt,
if you bear with me.
Look at the numbers of the jobs so far in the Telestrator and you'll see that we have this blip here. We have a blip here, but overall we have a
downward trend of jobs, and that downward trend suggests Fed medicine is working. Do you agree?
MATT EGAN, CNN REPORTER: Absolutely, Richard. It also suggests that the soft landing that many people thought was basically impossible, it might
just be happening. I mean, that's kind of what the chart looks like, right? We didn't want to see payroll growth crashing, because that would signal a
recession. We wanted to see a gradual slowing back to something that's more sustainable, and it does feel like we're moving in that direction.
The unemployment rate ticking lower to 3.5 percent at a time when many economists had been warning of an increase in the unemployment rate to
recessionary levels. We're not seeing anything like that -- Richard.
QUEST: Okay, this is the conundrum which I'll certainly be asking Paul Krugman in a second. Do we need to see -- if you're going to get rates down
to two percent, do we need to see lower job creation and higher unemployment?
EGAN: Well, I think that's the trillion dollar question. I don't know that anyone, not even the Federal Reserve really knows the answer, but what
we have seen is inflation move considerably down from those peaks of over nine percent last year, back towards the two percent level.
And the trend is certainly going in the right direction at a time when payroll growth is still very healthy. The question is, how do they get that
last percentage point, right? How do they go from three percent all the way down to that two percent goal and whether or not they end up doing too much
in the quest to get there.
QUEST: Okay, now look at the markets, all three, the triple stack. We've got the Dow, which is now off a third of a point, the S&P and the NASDAQ,
but what is interesting is they're all lower, but if you look at the way the big board moved during the course of the session, you can see the Dow
itself was higher during the session and has now gone lower.
So the Dow is now down a third of a percent. What happened?
EGAN: Hey, Richard, I don't know if there was anything in particular that can explain that dip into the red. I mean a 0.3 percent loss for the
Dow is not really anything to be concerned about. I think the initial reaction here pre-market was pretty positive, and that made sense, because
this does look like the Goldilocks report that people had been hoping for.
Maybe people just kind of taking some chips off the table going into the weekend, but overall, it seems like there is a lot to be happy about with
this jobs report.
QUEST: Matt Egan, have a good weekend, sir, on the back of a good jobs report.
Now, since rates started rising in March of last year, the labor market has cooled slowly and steadily. I'm going to show you again how the jobs
numbers, just over 400,000 jobs were added as of March back there, 2022. And another 190,000 added barely last month. In between, the Fed has
increased rates 11 times and the unemployment rate has remained virtually - - I mean, the unemployment rate remained virtually the same, or it has come down slightly.
The headline inflation number has fallen to three percent, and now, Morgan is the latest bank to reverse its prediction for a recession, and it is
this trend that I was talking about that is very much giving the idea that you can have a soft landing without having a sizable uptick in
unemployment, or indeed, having to see a cutback in job growth.
Paul Krugman is the Nobel laureate and a columnist for "The New York Times." So I ask you, Paul, good to see you, first of all, and thank you
for taking the time.
I ask you, do we need to see higher unemployment and lower job creation, if the Fed is going to make it to two percent?
PAUL KRUGMAN, ECONOMIST AND COLUMNIST, "THE NEW YORK TIMES": Well, of course, the answer is, nobody really knows, but the experience of the past
year has been really encouraging. I mean, inflation, even if you try to extract some kind of underlying inflation measure, it is down from
something like five to six percent a year ago to something like three percent now, and all of that has happened without any rise in unemployment.
So whatever, you know, all the stories about how we were going to need a kind of 1980s style Paul Volcker crunch with years and years of high
unemployment don't seem right. Now, it's possible that the last mile, the last percentage point will be harder -- much, much harder; essentially,
infinitely harder because we haven't made any progress at all for the disinflation so far.
But so far, everything says that it's actually really, it's not that hard to get inflation back to normal.
QUEST: Right, a Goldilocks scenario. I read your article earlier in the week, which I think amply and whilst chastising potentially, you argue that
President Biden might have done a bit more than was necessary with his stimulus, you do say, it would be too much to argue that Biden economic
policy was pure Goldilocks, but overall, it's starting to look as if Biden got it more or less right and I'm guessing, too, or got it mostly right,
after all, and I'm guessing you would put today's numbers as very clear evidence of that.
KRUGMAN: Oh, yes, today's report, I mean, there was a -- if you wanted to obsess, you could say the wage growth number looked a little bit high, but
that's been a very noisy number and all of us who follow these things have gotten burned repeatedly by over interpreting monthly changes there. So, it
is not even -- it's not disastrous.
And the job, the job growth number is right in the slot that you want to be seeing at this point. You want to see it slowing because we can't add jobs
faster than the population is growing indefinitely, but we don't want to see it falling off a cliff either, and so this is right where we want to
QUEST: In this scenario, does the Fed -- I mean, to some extent, it is an academic question, whether there is one more rate rise or two more. It
is not really terribly significant in the great grand scheme of things, but how long the Fed keeps these rates up, along with the other central banks
like the BoE. That is significant, don't you think?
KRUGMAN: Yes, and there is -- I'm actually not a big monetary dove here. I'm a very -- I'm a soft landing guy, but I think that there is at least a
reasonable argument that says that what the Fed guys call our star, that the interest rate is consistent with full employment, but not -- but price
stability has gone up, that we've had a variety of things including Biden administration policies that have basically increased investment demand.
And so we may need to have for a substantial period, interest rates considerably higher than they were pre-pandemic.
QUEST: Has the underlying economics changed or is it merely a question of the facts? What I'm alluding to is, in the 1980s, Greenspan, or 90s, he
always talked about whether or not the change is a result of the internet and whether the existing models, but this ability to grow at a time of high
inflation that's now coming down, this scenario without unemployment, has the underlying economics changed?
KRUGMAN: I don't think that the way the economy works has changed all that much, although it's always changing. It's just that this was a very
different kind of inflation, from the kind of inflation that we had to deal with in the 70s. This was -- I've been calling it the discombobulation.
This was inflation that had a lot to do with the disruptions associated with the pandemic.
Yes, we called it transitory; it turned out that transitory meant years of discombobulation, not months, but it really was a very unusual, the closest
parallel with the kind of disruptions of the late 1940s. So that we were, you know, turning back to a peacetime economy. So it's not so much that the
economy is different, it is that this inflation was a very different phenomenon.
QUEST: On the politics of it, it's going to be very hard for the Democrat president, though, for Joe Biden. It is almost like he's being
blamed for the damage. But if the latest polls are to be read correctly, he's getting no credit, yet, I'll give you the yet for the better economy.
KRUGMAN: Well, you know, it's all kind of mysterious. I mean, there are many surveys now that say that, if you ask people, how are you doing? They
say, great. And you say, how is the economy doing? And they say terrible.
Lots of people think that, you know, bad things are happening to someone else, people they don't actually know, but it's really bad out there
somehow. Maybe that changes in response to reality, maybe there's just been some fundamental shift in the psychology here.
But it's also not clear what people say about the economy is going to matter as much as people imagined for their voting intentions.
QUEST: I noted in all your articles and your tweets of the last few days, you've been very restrained from using a phrase that if I had been
you, I would have delightfully said, I told you so. At the moment, you're being proven right.
KRUGMAN: Well, I mean, I was clearly wrong, you know, there was a good year-and-a-half when inflation was way higher than I imagined was going to
happen. So I'm not going to start doing a victory dance over the fact that, you know, way behind schedule, it is starting to look kind of like the
story, I imagined.
I think we all need quite a lot of humility here. If you find any economist who says that they've gotten it right all along, then you know not to trust
Paul, I will always trust you. Thank you, sir. I'm very grateful for your time tonight. Have a lovely weekend. Thank you.
KRUGMAN: Thank you.
QUEST: Ukraine has attacked a key Russian Black Sea port. First sign it is prepared to go after the ways in which Moscow is funding its invasion
for its own grain exports.
QUEST: Ukraine is now going after Russia's ability to export oil and grain on the Black Sea. We've obtained this video, which appears to show a
sea drone approaching a Russian warship. The latest in damage made near the Port of Novorossiysk.
Social media video showed the vessel listing heavily. It is now being towed to shore. Russia claims, it intercepted a sea drone attack on the naval
base there. The port handles two percent of the world's oil supply and also exports grain.
Nick Paton Walsh is in Zaporizhzhia in Ukraine. Good evening, sir.
Well, now, this is very interesting because Ukraine is upping the ante in all of this, and really, pardon the pun, it is going into some very, very
NICK PATON WALSH, CNN SENIOR INTERNATIONAL CORRESPONDENT: Look, it is certainly showing the Kremlin that things that possibly Moscow felt were
just utterly impregnable are now utterly vulnerable. And this half metric ton bomb went all the way across the Black Sea to get to Novorossiysk and
that is in itself somewhat extraordinary that Ukraine has managed to harness the ingenuity of a hundreds of miles automated journey for a device
Startling development, one Russian military analyst called it a quantum leap in the conflict in terms of what it shows Ukraine can do and what
Russia must do in response.
Here is what we know.
WALSH (voice over): The footage is grainy and dark, then the target comes into view. Russia's Olenegorski Gornjak amphibious assault ship, and
unmanned attack drone approaches its target, 450 kilograms of TNT detonates, and the feed cuts out. Russia claim to repelled this attack, but
the video tells a different story.
Ukraine's counteroffensive has in recent weeks reached further and further behind the frontlines, forcing the Russian military to spread its sea and
air defenses. Hundreds of miles from Ukrainian controlled territory, this was meant to be a safe anchorage, no longer.
It used to be safe here says one prominent military blogger, but Kyiv's arm has grown longer. The rear no longer exists, he says.
ANDRIY YUSOV, UKRAINIAN DEFENSE INTELLIGENCE (through translator): The fact that such unfortunate incidents occur one after another will certainly be
something for them to talk about today. For the political leadership of the Russia fascist regime, this is of course, a serious slap in the face.
WALSH (voice over): All the same, Russia maintains the image of being in control. It says Defense minister, Sergei Shoigu visited troops in occupied
(SERGEI SHOIGU and UNIDENTIFIED MALES speaking in foreign language.)
WALSH (voice over): The map they both point to so much worse for Moscow than ever imagined when they invaded nearly 18 months ago.
WALSH (on camera): So really, a startling development here, Richard. You've got to remember, too, the context of this, we have had the Kremlin attacked
by drones, possibly Ukraine. We've had Moscow's expensive suburbs attacked by drones, probably Ukraine. We've seen the glass towers of Moscow City
district hit, we've seen the Kerch Bridge between the Crimea and the Russian mainland also hit by a drone, almost certainly Ukraine as well.
In fact, really, they've openly claimed that too, and so Ukraine now increasingly vocal about its ability to hit Russia exactly where Russia
would have felt was impossible, just a matter of weeks ago, frankly, and that is a significant development, perhaps a bid to put positive headlines
there for Ukraine's military efforts while they are certainly having a tougher time in the south in their counteroffensive than they would have
possibly liked, but this is a significant psychological blow to Moscow, to the Kremlin and a real blow too, to the Russian military, a hundred
personnel on that boat, one Russian blogger saying an entire compartment was flooded -- Richard.
QUEST: So what's interesting, I was listening to one military expert reminding us that so much of Russia's military innovation and true military
prowess and genius, if you will, came from when it was the Soviet Union. Ukraine, a lot of the research work was done in Ukraine. A lot of the
expertise was in Ukraine in the old days, and therefore we shouldn't be surprised at Ukraine's ability to come up with these different original,
unique ways of attacking back.
WALSH: I mean, kind of, but a lot of that Soviet expertise has now died out or is on its pensions. What in fact, we're seeing here in Ukraine is a
younger generation of IT savvy people who make their money in computers, in drones and coding, and essentially have transferred those skills to things
like this, extraordinary modern ingenuity. And there is an element of transparency and competition about how Ukraine does this.
People looking to get financing, to prove their project is the best. The Russian system quite the opposite. Money seems to disappear. Defense
officials have extraordinary lavish vacations and possessions, and really what appears to be going to the frontline is often rubbish, poor rations,
poor alloys in their tanks, a real sense of the Russian system now creaking under its own lack of self-inspection, its own lack of transparency, and
kind of the opposite happening in Ukraine, where they appear to be very capable of finding very low tech at times or perhaps low budget, high tech
ingenious solutions to enormous problems.
Like how would you deliver half a metric ton of explosives to a Russian amphibious assault vessel on the other side of the Black Sea? They found a
way and it probably didn't cost them that much -- Richard.
QUEST: Quick question, Nick, completely off subject and sort of, and where you are, Zaporizhzhia tonight, you'll tell me the correct
pronunciation. What's it like? I mean, it looks busy. It looks, I won't say normal. What's it like where you are behind you at the moment, Friday
WALSH: Yes, look, it is close to curfew here. Less people on the streets, but in a normal day here. This is a busy thriving summer city. Yes, you
occasionally hear a bang and people often shrug and carry on. I think that's the interesting thing about life in Ukraine now nearly 18 months
into the war.
Daily life is kind of very resiliently carrying on regardless of the constant possibility that an Iranian-made drone might be fired by Russia at
you at any particular given moment. It leaves some to criticize, saying, well, the country is just carrying on as if there is no war. Others might
say actually, that's a psychological win because Ukraine is not carrying in a bomb shelter all the time, and getting on with its economy, getting on
with its life and trying to keep what's left of life here afloat.
But it is interesting, you know, we're not like we were at the start of this war, always dealing with people underground during bombardments. It is
quite lively, and you'll see the lights go off here and a few hours completely. This place goes into blackout, weary of what could come next.
But yes, life is still going on.
QUEST: Well, before that blackout, it's 10:30 at night where you are, have a drink on me, buy your crew a drink and enjoy Friday evening, if you
Thank you, sir. Very grateful.
WALSH: I'll send you the bill. Thank you. Cheers. All right, thanks.
QUEST: That I've got no doubt. No doubt. Thank you, sir.
Don't lose the will to resist is the message from the Russian opposition leader, Alexey Navalny, after court added 19 years to his jail sentence. He
was sentenced on extremist charges and he and his supporters, they are aimed at keeping them out of politics and amount to in his words, a life
sentence. A reminder, he is already serving 11-and-a-half years on other charges, which he also says are bogus.
CNN's Nic Robertson is reporting.
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR (voice over): Entering a courtroom that looks as flimsy as the legal case against him, Alexey
Navalny and his legal team line up to hear his almost predictable sentencing, 19 years.
(UNIDENTIFIED MALE speaking in foreign language.)
ROBERTSON (voice over): The judge's words, utterly unintelligible in the press room next door, convicting Putin's harshest and most persistent
critic of creating extremist communities, charges Navalny denies. He was neither bowed nor cowed, he even shared a joke with his lawyer.
After sentencing, using his Telegram channel to tell his supporters, 19 years in a special regime colony, the number doesn't matter. The verdict is
not for me, it's for you. They want to frighten you.
They want to frighten you.
Not for the first time is Navalny being made an object lesson of the cost of challenging Putin. Poisoned and almost killed with a deadly nerve agent,
novichok almost three years ago, and attack he blames on Putin, which the Kremlin denies.
He barely survived, recovered in Germany, then returned to Moscow six months later, despite the certainty of what awaited him.
He was arrested, charged with fraud and other offenses he says are a bogus and is currently serving nine years. In jail, he says, he has been denied
sleep, kept in isolation, intentionally made sick and almost completely cut off from his family and lawyers.
Putin's brutality has taken its toll. Navalny has lost weight.
DARA NAVALNAYA, ALEXEY NAVALNY'S DAUGHTER: There are no calls, no visits, no human conditions. He is allowed to write 35 minutes per day with a pen
and paper. He's allowed to have two books. These actions are clearly an open strategy to destroy my father's physical health and maybe mental, too.
There is absolutely no way the colony will take these drastic measures without having a nudge from the Moscow government.
ROBERTSON (voice over): Putin, it appears intends to silence not just Navalny's supporters, but the man himself. The new sentence expected to be
served in one of Russia's harshest and remote penal colonies will cut him off from the outside world.
It is a price he said, at his trial, he would be willing to pay. It is a test of wills. Putin has the upper hand for now. Navalny appears to be
betting his life that that will change.
QUEST: Nic Robertson reporting.
Niger's ousted president has warned of the impact of the military coup in that country and what it will have on the region where Russian mercenaries
have gained a foothold.
Writing in "The Washington Post," the elected President Mohamed Bazoum says the entire Sahel region could fall to Russian influence via the Wagner
Group, while he says, he is still being held hostage. Leaders of the West African bloc, ECOWAS have given the military one week to release and
reinstate him. Here's how the coup's leader responded.
(BEGIN VIDEO CLIP)
AMADOU ABRAMANE, NIGER MILITARY SPOKESMAN (through translator): ECOWAS being impersonal, any aggression or attempted aggression against the state
of Niger will be met with an immediate and unannounced response by Niger's Defense and Security Forces on one of its members, with the exception of
(END VIDEO CLIP)
QUEST: David McKenzie is in Joburg tonight. Okay, David, look, this is really actually getting rather simple; in a sense that all the Western and
then eventually, the US will join in, has now cut off aid or even electricity. Basically, it is isolating the country, but if the coup is
allowed to stand, then it speaks volumes for the ineffectualness of say ECOWAS, or any form of ability to have democracy in Africa?
DAVID MCKENZIE, CNN INTERNATIONAL CORRESPONDENT: Well, certainly in that band of Africa across the Sahel that might be true, Richard, and you saw
officials from ECOWAS on Thursday saying, well, we didn't do it for Mali, we didn't do it for Burkina Faso, where those countries fell to military
So basically, now it's the time to step in and make an effort to return this country to democratic rule. The problem is, while the stakes are
simple, they are very high and the solution is potentially complex.
If those coup leaders, and you heard the spokesperson there, indicating they would fight back, don't step down or aren't negotiated out of power by
the special envoys from ECOWAS, the regional bloc, then particularly the Nigerian president, which leads that regional bloc right now is promising
to send troops in, and then you can have a very dangerous situation because multiple countries will be sending in troops that will potentially be
fighting against other countries that used to be part of ECOWAS.
So this all could go bad pretty quickly. If there isn't a negotiated solution -- Richard.
QUEST: Okay, but putting that -- I mean, a negotiated solution is the preferred one, but if President Bazoum is not reinstated, tell me what that
means, for if you will, the future of any form of -- and I'm not talking about the major countries in that sense in Africa. which are more
established in the democratic traditions, but what does that mean if Bazoum -- if this coup succeeds?
MCKENZIE: I think it's a very, very serious situation because if you think of the geography of the Sahel, stretching from the east all the way to the
west, there's the band of coups that have happened in the last few years, Richard, which have shown that those governments are fragile, that they are
ripe for military takeover. Niger would be the last domino to fall within the Sahel region.
There is also a very large military presence, they have both the French and the Americans. If it becomes a protracted coup with the military
leadership, those American soldiers will have to stop cooperating likely have to leave the country. And then you think of the final countries to the
west of Niger, if you think of an African map, which would be countries western South like Nigeria, like Benin, like Senegal, the Gulf of Guinea
countries, which already faced threats from extremist groups.
And while Wagner and the Russians have claimed that they've been successful in helping countries in taking on extremism, they haven't been and even if
Russia moves in through Wagner in Tunisia, it could mean that those insecurities will stretch out of the Sahel and onto the coastal states of
QUEST: David McKenzie, thank you, sir. Very grateful. Take a look at the Dow 30 tonight and you'll see that the largest -- the biggest loss, which
is just under the banner at the bottom there, the biggest loss, there you have it. It is Apple down 4.3 percent. I'll explain why Apple is in the
doldrums after. QUEST MEANS BUSINESS.
QUEST: I'm Richard Quest. More QUEST MEANS BUSINESS as we look at the diverging fortunes of two tech giants, Apple and Amazon. And a sensitive
topic for people like you and me. Frequent travelers.
Who gets the air miles when you fly for work? Employee or the employer should get them and who might get them in the future. That's the big
question. This is CNN. We'll answer it after we've given you the news because the news always comes first. To U.S. Navy soldier -- sailors, I beg
your pardon, have been arrested in separate incidents, both accused of showing military secrets with Chinese intelligence officers.
One is facing espionage charges while the other is accused of accepting bribes for the information he handed over. A Chinese Embassy spokesperson
has denied in the U.S. has denied knowledge of the case.
New York State officials have identified the seventh woman whose remains were found on a beach in Long Island. 34-year-old Karen Vergata disappeared
on Valentine's Day in 1996. She is one of 11 people who have been found on Gilgo Beach east of New York City. A suspect has been arrested. No charges
have yet been filed.
Andrew Tate has been released from house arrest to remain here after winning a court appeal. The controversial influencer and his brother
Tristan will instead face judicial control measures for 60 days said a spokesperson. The Tate brothers and two associates remain under criminal
investigation for human trafficking and rape charges.
U.S. Republican presidential candidate Chris Christie has made a surprise visit to Ukraine. The former New Jersey governor met President Zelenskyy in
a show of supporting the war against Russia after former Vice President Mike Pence, Governor Christie is the second Republican presidential
candidate to visit Kyiv.
U.S. star gymnast Simone Biles is back. The seventh time Olympic medalist is due to compete in Saturdays at the U.S. Classic in Illinois. After 2020
games in Tokyo, she withdrew from key events to prioritize her mental health. The 26-year-old is the most decorated gymnasts in U.S. history.
OK. So, Amazon has had a very strong earnings season when the stock is now up some 10 percent. The shares have risen more than 60 percent since the
start of the year. Amazon's announced growing sales across its business citing strong demand for its products, web services, prime, you name it.
The other side is apple. Apple's down four percent. Slowing revenues, iPhone sales are lower than last year. Its services business was on a
bright spot, which in record revenue. But how much can you make from selling music? Dan Niles is the founder and portfolio manager of the Satori
Fund with me now from Seattle right now out of it all. Let's deal with Amazon first. To some extent, I always think the issue with Amazon.
I mean, at the end of the day, yes, it's a tech company. But at the end of the day, it's a store, it's a shop, and we are still going to buy things.
And if they sell them cheaper, and they offer a better deal than Amazon will succeed.
DAN NILES, FOUNDER AND PORTFOLIO MANAGER, SATORI FUND: You're absolutely right. And that's what you saw on Prime Day, Richard, where over Prime Day
itself, they sold 375 million units. And a year ago, they sold 300 million. And so that's up 25 percent year over year, and they talked about the fact
that consumers are looking for bargains that trading down as the economy gets tougher.
And so, you're absolutely right. They should pick up share in a tougher economic climate.
QUEST: OK. But this -- I mean, traditionally, the idea has been they lose a lot of money or they potentially lose money on the retail side, but it's
AWS that makes the money. And I looking at the numbers, I saw AWS performed well. Is that still the case in a sense? Is it still a cloud services
company that happens to also have a packaging business as well?
NILES: No, absolutely not. And if you look at some of our posts from earlier in the week, our reason for getting bullish on the company actually
was not because of AWS, it was despite AWS because if you think about a very big picture, they put a big logistics network into place during COVID
because that's the only place you could get your goods. You couldn't go to the supermarket and the store.
Unfortunately, when we all got unlocked and we're able to travel again, that -- the revenues fell off very dramatically. And so, you have this huge
logistics base without enough revenues going through it. Now the revenues are starting to ramp up and so the leverage on that business, the profits
are really starting to grow. That should go on for several more quarters. That's why you should own the stock.
QUEST: So, Apple, now I'm aware, you know, don't necessarily bet against Apple, those who have have lost out. But iPhone sales are down. Ipad sales
down even more. Yes, read from services pitches up.
Is Apple -- is it -- it's not existential obviously but does it got a real problem to answer?
NILES: It had a real problem for a while. But the thing is this market has been going up. And so, people sort of mistake, oh, the stocks going up. So
the fundamentals must be fine. And they're not. You look at the March quarter when they reported, the June quarter numbers came down. Then when
they reported the June quarter, just yesterday, the September numbers came down. But, you know, everybody has an iPhone, they weren't comfortable with
And the problem is, this is all from the multiple going up. So now the stock trades at 31 times for no revenue growth this year. And to put that
into perspective, the S&P is seeing about four percent revenue growth this year, but is trading at about 21 times. So, you've got a lot of risk in
Apple because you now have three down quarters in a row year over year of revenues, they guide into a fourth, you haven't seen four down quarters
year over year and over 20 years.
And remember, this company was not growing before COVID. In fiscal 19, their revenues were down a couple of percent year over a year, and COVID
really helped them out. And now you're on the other side of that with a very high multiple stock with no growth. And that's why we're -- it's a
short in big technology basket we have. On the other side, we happen to own, Amazon's our biggest position on the long side.
And so, you know, that -- that's working out very well. But don't forget with the iPhone launch coming up early September, the stock tends to go up.
So it may get a short reprieve at some point.
QUEST: I was about to say careful of that short. You never know. More than one person has been caught on the wrong side of that particular short.
Thank you, sir. I'm very grateful. Thank you. Have a good weekend.
And so, to the answer to the Beatles question, will you still love me? Will you still need me
when I'm sixty-four? Well, the answer is when you're 64, absolutely. Barbie is 64. Barbie is everywhere. And now the film is on track to pass a billion
dollars at the box office. Not bad for a 64-year-old.
(BEGIN VIDEO CLIP)
(END VIDEO CLIP)
QUEST: I'm Just Ken, a song from Barbie. The soundtrack currently number two on the Billboard charts and the movie is on track this weekend to earn
more than a billion at the box office.
It's distributed by Warner Brothers. Of course, owned by our parent company, Warner Brothers Discovery. There's a Barbie for everyone. So --
well, when I asked to find one for us, here it is. Travel Barbie. Now she's got a suitcase, which I'm sure it is, within regulatory size for carry on.
A neck pillow, even an eye mask for the long-haul flights. And all this seems to be appropriate and in the right place.
Allison Morrow joins me from New York to talk about this Barbie mania. The thing about Barbie, she's 64. I mean, it is this phenomenal ability for a
movie to find a new generation. And in one fell swoop give Barbie another lease on life.
ALLISON MORROW, CNN BUSINESS SENIOR WRITER: Yes. It's a massive success. And I think it's a testament to what happens when you have kind of three
parts to the secret sauce that's already put it almost to a billion dollars. It's got a nostalgia play. Everyone remembers playing with
Barbies. It's got smart marketing, and it's got good content. You know, smart marketing can get you a great opening weekend.
But we're about to enter the third weekend of Barbie in theaters and it's already over 800 billion and probably going to hit one billion this
weekend. So hard to argue with the numbers.
QUEST: One I find of that is, you know, content, content, content, because over the years I must have done at least four stories in my career. Well, I
was only three when Barbie was created. But I must have done at least three stories about Barbie. Barbie Over, Barbie Back, Barbie Up, Barbie Down,
Barbie Ubiquitous, Barbie Forever. And here we are still talking Barbie.
MORROW: Yes. I think it's a testament to the endurance of the brand. I mean, Mattel took a big risk by not only making this movie and going into
production with it, but also kind of being a character in the movie. I don't know if you've seen it, but they take some shots at themselves and
have a good laugh at themselves about the very silly iterations of Barbie we've seen over the years.
But I think it's -- I think it's working for them because Barbie ever since it first came out in the 50s has been evolving. And I think what keeps it
going is that Barbie has always sort of been a reflection of what girls or young people want to see in themselves and fantasize about their futures.
So, you know, I think this is just the latest iteration of that evolution.
QUEST: Good to see you. I'm grateful. Have a lovely weekend. Thank you. Frequent fliers love airmiles. And now when it comes to business trips,
there's the possibility and there's an argument that the model should go to the employer, not the employee. It's not a new argument but I'll talk to
one man making that argument next. QUEST MEANS BUSINESS.
QUEST: So, business travel hasn't yet recovered. As we're seeing from a slew of earnings from airlines. They all say that business travel hasn't
fully recovered from the pandemic. For example, JetBlue says corporate bookings are up some 20 percent. Alaska, they're 25 percent lower. And
Southwest is cutting back and B.A. says it doesn't expect its business bookings to be back until 2026. 2025, 2026.
So, businesses are looking for ways to save, reduce emissions and costs. The (INAUDIBLE) says airline miles from business trouble should go to the
company not the employee. A heresy, Mike Harris. He is the founder of Cribstone Strategic Macro. He's with me from London. Besides the logistical
nightmare, yes, you could have a separate account where it has to go into or you're going to be forced to use the miles that you've earned for
business travel. Let's put logistics down to the side. Morally, morally, sir, what's your argument?
MIKE HARRIS, FOUNDER AND ANALYST, CRIBSTONE STRATEGIC MACRO: Well, so I think it's less morals, because if it was morals, it would be about the
planet, it's obviously better. But this is not about flight shaming. This is actually about automation and productivity. Before COVID, we didn't
really have a good alternative for the face-to-face meeting. And every element of corporate -- the corporate world that finds automation needs to
leverage it to improve productivity.
So, this is about making sure that now unnecessary face-to-face meetings do not happen. Companies need to find the equilibrium because before it was
really all face to face.
HARRIS: And now they need to find that equilibrium and the companies that do are going to win and unfortunately frequent flyer miles throw an
economic wrench in the equation because they actually motivate more travel than otherwise would happen.
QUEST: Now most companies have a rule, we certainly have it a WBED that basically says firstly, A, no ticket should be bought if it's more
expensive for the purpose of frequent flyer miles, B, no travel should be undertaken just for the purpose, and you have to stick within certain
airlines. Of course, there are million and one ways round those rules. Aren't there?
HARRIS: Sure. But even if it's not more expensive, it's not about cost for the company. This is about keeping the employee in their most productive
seat. When you travel, you give up a half a day. It's not just hours, it's a half a day, sometimes it's a day of your -- of your work time and your
personal time. So, I don't care if actually there -- you're not paying more, and the employee gets the frequent flyer miles. It's not about cost.
It's making sure the employee isn't in the back of their mind making the decision because the frequent flyer miles are there for them. It's a
benefit. It's an untaxed, effectively payment for them that they can -- they can leverage. And the airlines -- no. The -- no, no. Listen, the, you
know, the painful responses we've gotten to this, everyone feels hard done by this argument. They think it's absurd that people are entitled to this.
I mean, before COVID for years and years, this was a reasonable employee perk and benefit. And it would be suicidal for companies to take it away
because employees would feel that they need to go elsewhere where they're not appreciated and not trusted for their travel. But economics 101. This
is a law of economics. You pay into and incentivize for something. It happens more than it should.
And so, we can't believe our employees are actually not rational economic actors.
QUEST: One of the questions because as an economist, sir, one of the questions, when should you use your miles? Assuming I've got a few miles
and I do have one or two. I do the old equation and I'm sure you do as well, you know, a mile on United's worth five, half percent a mile and this
is what (INAUDIBLE) when do you use it? Are you a user of miles or a hoarder of miles?
HARRIS: No. Well, I'm personally a user mile and I think basically one they're not an inflation hedge because the airlines can change the policy
whenever they want to. But also, we're in an environment where airline pricing is very, very high. So, if you can get access to the trip that you
want, personally, I would -- I would cash into miles. That's what I'm doing. But, you know, I want to be in a world where basically the miles
earned or the miles earned based upon personal travel.
And the corporate is making it very comfortable for people to travel. Giving them upgraded room, giving them access to a lounge that don't pay
him to travel because that is -- that is negatively impacting productivity. It's obviously (INAUDIBLE)
QUEST: Right. So, in that scenario, would you -- are you in favor of no one getting the miles? Are you in favor of the company getting the miles? Are
you in favor? What -- of me getting them out and having to use them, how do you remove that incentive?
HARRIS: Well, it's going to be tough, because basically someone needs to step up and start this process and being the first could be ugly. So, the
easiest way to force this is for the government to say we're going to tax it.
HARRIS: That creates so -- that creates so much complication that everyone will just stop using them, right? Because who's going to want to have to
deal with that? But the answer -- my answer to you, Richard, is companies should go, big companies should lead with this. And they should go to the
big airlines and say, give us the best price you can without the airlines, give us -- let's say lounge access for all our employees that fly.
And they use those savings because they clearly get a savings on that and use those savings to give the employee a higher meal allowance for a better
hotel. It's not about making travel more challenging. It's lousy, but there's definitely a solution here if they want to do it. Part of the
problem is the Richard is biggest (INAUDIBLE) are the CEOs and the CFOs of the companies themselves.
QUEST: Sir, I just -- to quote Voltaire, I disagree violently with everything you say. But I fight to the death for your right to say on QUEST
HARRIS: Thank you.
QUEST: Grateful to have you with us on the program. Yes. I can tell you what the profitable moments going to be about in just a moment. QUEST MEANS
QUEST: Tonight's profitable moment. You show me a frequent flyer who denies having ever taken a trip or done a routing or brought forward the date for
elite purposes of earning elite status who says I've never done it and I'll show you somebody who has problems with the truth. I freely admit that in
the past, yes, I have maybe once or maybe even twice, brought forward a trip or done some form of travel or done something that was with the
secondary purpose of frequent flyer earnings.
But the answer is not, I don't believe to -- it's prevent employees from getting it. It's that little perk you get for your life on the road for
your butt in the seat for those hours spent away from the family. Now the answer is proper auditing within the company, questioning the employee,
looking at the routes taken and ultimately making it clear if you do this, you're out of a job. That's far better than some nonsense big overarching
And that's just his business for tonight. I'm Richard Quest in New York, going to London tonight using frequent fliers. Vials I've earned. Yes.
Whatever you're up to in weekend ahead, I hope it's profitable. I'll be back with you in New York on Monday.