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QUEST MEANS BUSINESS
China Aims to Increase Investments in Africa; Kenyans Worry About a Chinese Debt Trap; A New Study Shows Flexible Working will Boost Economy; President Trump Arrives in Pittsburgh After Jewish Synagogue Massacre. Aired 3-4p ET
Aired October 30, 2018 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: We are an hour away from the closing bell, and the market has suddenly become very interesting. In the
last few moments, a massive rally under way that took the Dow to its highest point for the day so far.
In this last hour, will those gains be maintained? A look at the triple stack shows you the Dow is amongst the best of the day. Tech stocks are
still up, but not as much. If you need to understand why and what, this is what's driving the day. Just a penny? GE cuts its dividend and the share
price dropped by up to 10%. Everything but the phone. Apple is unveiling a new range of hardware. We'll have the details. And from a trade war to
a chip war. New skirmish emerges between the US and China.
Live in the world's financial capital, New York City, on Tuesday, October the 30th. I'm Richard Quest. I mean business.
Good evening. We start tonight with GE -- General Electric and the shares are falling sharply as the company reports a wave of bad news. Now GE is
no stranger to trouble, but we've decided to show you exactly what they've been up to. You're familiar with the phrase "Everything but the kitchen
sink." It means you throw everything out, but the kitchen sink. When it comes to earnings, though, kitchen sinking means throwing into the kitchen
sink everything that's nasty and miserable.
And so GE in the kitchen sink had the new CEO has on his hands a real mess. First of all, there is the dividend. Now, it's been cut from 12 cents to
one. That is a drop of 90-odd percent. It's already cut in half from last year. and the experience suggests that GE is doing it to hoard cash. They
may be short. The second dirty dish to go into the sink is the power division.
Now, the power division's being split into two. That's right, wash it up. And GE has written off down $22 billion. That is the traditional meaning
of kitchen sinking. Writing off, getting rid. but there is a commemorative plate to go into the sink from the SEC., which is probing GE's accounting
practices.
The problem of course is the sink may have so much in already, but how much more is waiting to go into the GE before everything gets thrown down? So
let's talk about that. Matt Egan is with me. I'm going to take all of that stuff that might still be around with me. Matt, the GE kitchen sink
water, why did they do it now? What are they up to?
MATT EGAN, LEAD WRITER, CNN: Well, it's interesting. I think that GE shareholders will recall that this is hardly the first one of these kitchen
sink quarters that they've had. Now, one of the disappointments here is that people knew they were going to cut the dividend. People were
expecting a power write down, but there was also the hope a new CEO, Larry Culp, who's very well respected, was going to come in and reset the
expectations lower. But he didn't do that.
In fact, there are no expectations given for the fourth quarter or for 2019, and that's because he simply doesn't know yet how bad things are.
QUEST: But nor would he because he's just come in. He came from outside the company. He's got no idea. He's only just discovering where the
photocopier and the toilets are, let alone where the skeletons are buried deep in the accounts.
EGAN: Well, those skeletons, where he's really got to watch out, are in GE Power. As you mentioned, there's a $22 billion write down. That division
has been hit really hard by the rise of renewable energy, the shift away from coal and natural gas. They doubled down on fossil fuels at precisely
the worst time with that Alstom deal in 2015.
The other skeleton of course is in GE Capital. They have ...
QUEST: That's gone though.
EGAN: It's not. It's not gone. And in fact, they still have major problems there. The Justice Department is still investigating WMC, the
subprime mortgage division that is now defunct, still there, and they took massive losses on insurance. And during the conference call today, the CEO
actually suggested that they could have more losses ahead on insurance.
QUEST: So let's put the other side to some extent -- I've been doing some travels lately quite a lot and one of the things I've been discovering
during my travels is GE makes things. It makes engines. It makes power stations. There is a dichotomy between these two.
[15:05:00]
QUEST: We're talking about how awful it is, but the products are world beating and world class.
EGAN: That's right, but some of those product are actually going to be going away. They have the GE light bulb division. They've been trying for
quite a while to get rid of that. They haven't been able to. They're planning to -- they've already sold the transportation business that makes
the locomotives and they are planning to get rid of the Baker Hughes stake and then health care which makes MRI machines. So, it's nothing to do with
necessarily the products that they make.
QUEST: No, but the perception of the company can be when you've got people beating it up on a daily basis, the perception is "Oh, GE is in trouble."
Well, their engines are powering aircraft -- it powered the aircraft that I came back from Kenya on.
EGAN: Right, well the aviation division is in fact the bright spot. I mean, their orders for equipment were up over 80% in the last quarter. The
sales were up strongly, but here's the thing, some people are worried that the aviation boom might be slowing down and you have to look at the broader
economy.
I mean, if GE looks like this right now in an economic boom and in a bull market, what is it going to look like in the next downturn?
QUEST: Good to see you, sir. There you have the market. Thank you very much. Matt Egan. GE stock initially rose. It's off 10%. It's the worst
percentage loss in ten years and it's the last point since the crisis -- the view is that the analysts' fear, the dividend cut may not be enough.
Paying dividends is a sign of strength. it's a steady income that attracts investors.
Now, all companies in the Dow 30 pay. If you look there, you have the top ten in percentage terms. Companies who pay dividends are much sought after
in times of trouble. Art Hogan is chief strategist at B. Riley FBR.
To pay a dividend, I mean, let's face it, it's a bit out of fashion these days. The dividend play as it used to be known, the tech companies decided
dividends were for the stupid, they were better if we kept -- the money should be kept on the books.
ART HOGAN, CHIEF STRATEGIST, B. RILEY FBR: Yes, Richard, I think that's a very interesting point. So when we look back over the last five years and
think about what's happened in terms of dividend investing versus tech and growth investing, you certainly hit it on the head.
Technology companies were constantly reinvesting in themselves and using their free cash flow to reinvest themselves and stay on current trend.
Whereas, well-established mature companies that have free cash flow were paying dividends. The problem with dividend investing over the last three
years and certainly coming into this year has been it's become a very crowded trade.
So when you think about some of the groups that are consistent historic dividend payers like the consumer staples, they just get very expensive
when they're crowded. So a group that usually trades at 14 or 15 times, grows earnings at 7% or 8%.
Now trading at 20 times and paying dividends that oftentimes are less than 3%, so I think it's dangerous to think about that as a defensive play.
QUEST: Okay, so who relies on the dividend? I mean, obviously pension funds invest heavily. It's a form of -- what? It's an important form of
income. But where does the dividend play become relevant?
HOGAN: For a lot of people that are retired, that have seen a very low interest rate environment over the last eight years, dividend stocks have
been the next place to finance. So it's been that sort of chase for yield that we've seen over the last three to five years with very low interest
rates. There really wasn't any place to find it.
And at the beginning, that was probably a great idea. So you'd get into REITs and utilities and consumer staples and telecoms, all historic good
dividend payers. The problem is the more people that pile into that trade, the more expensive these sectors get and the higher the multiple, you can
lose that dividend yield pretty quickly in capital appreciation.
QUEST: Is that really as relevant as it used to be? I'm thinking of the old retiree argument. Well, at these prices, you ain't going to get many
shares and if the dividend is only 20 cents on the share, you get about 20 bucks on a good year, if you're lucky.
HOGAN: That's exactly correct. You don't want to see high multiples and you don't want to see lower and lower dividend yields. That's where it
gets dangerous. And Richard, it's the exact people who were talking about that shouldn't be in that dangerous trade.
So our advice has been since the beginning of this year to avoid the dividend earnings of bond surrogates, try to stay away from the group. The
more expensive they get, the lower those yields go, the more dangerous the group gets.
QUEST: Good to see you, sir. Thank you. I needed you to help make sense of the dividend. We'll watch it closely.
Markets are in the final hour of trading. The Dow -- well, take a look at it, the S&P is no longer in their correction area. It's off its 10% lows
from its recent peak. And if you take a look at 1% or so. So we're getting back slightly. We're going to watch it very closely. It's all one
of those things -- the last hour has taken on certainly a new importance in recent days.
And a look at the tech-heavy stocks coming on Monday's heavy selling. Before Facebook's results which are out after the close. So far, it's been
another seesaw day on Wall Street for the FANGs. They are -- now, you see Facebook is up to 1.5%. But we have results, so whether that's buy on and
sell on the news. Amazon continues to get hit hardest as indeed does Netflix.
There is a strong view in the market that both of those stocks, the selling has now been over done or at least the correction. I was noticing that
Netflix is off nearly 30% from its recent high.
[15:10:10]
QUEST: Amazon 24%. So these are serious losses for major stocks. A new report says phone users are choosing to hold on to their smart phones for
longer before upgrading. It's not a surprise that Apple's big event in New York City had little to do with smart phones, if at all. The chief
executive, Tim Cook took to the stage town to unveil a raft of new Apple hardware including a brand new Macbook Air billed as the greenest Mac ever
and there was also an updated iPad Pro.
Samantha Kelly from CNN business was at the event in Brooklyn and joins me now. Good to see you.
SAMANTHA KELLY, EDITOR, CNN BUSINESS: Hi, how are you?
QUEST: All right, so no phones. This Macbook Air and a Mini Mac.
KELLY: Right.
QUEST: What else?
KELLY: Today was all about not the smart phone. So today, Tim Cook on stage said that the iPad Pro, which was sort of the flagship main highlight
of the event, is the most popular computer in the world and that's a really interesting choice of words that he said, "computer." And that's sort of
what we're seeing today in the announcements that the tablet, the computer, there was a Mini Mac, which is more of the desktop.
So remember, you used to have the big clunky desktop that would sit under your desk, now it's small and tiny and you can hook it up to an exterior
monitor. But now, a lot of these devices borrow from each other.
So the new iPad Pro has face ID, just like the iPad, and some of the graphics from the Mac are now available on the iPad, so there's a lot of
blurring of the lines.
QUEST: One of the things I heard was that they're raising the price of all and thereby raising the floor. So the entry price for Apple products goes
up and to some extent, they're almost, I wouldn't say -- they're almost utility-like in that they are creating a steady stream of earnings.
KELLY: Yes, I mean, the iPad Pro is $150.00 more than the last version. The new Macbook Air, $200.00 more. Even the Apple Pencil is $30 more. So
it's really interesting to see whether or not consumers are actually going to pay more. We saw this with the iPhone line as well. So Apple's
definitely raising the bar. You might say why? And you can look at the specs as a point for that. too.
QUEST: And Tim Cook himself? I mean, 11 years -- no, took over in 2011, I believe, so it's coming up to sort of seven, eight years in the job. Is
the feeling now that he is obviously, it's his company, he's making a mark.
KELLY: Yes, I mean, definitely. And I think we're seeing -- you know, a lot of the products in recent years have been relatively incremental. But
we're all kind of getting to that next step. Apple is still a leader in the space, and certainly he is the leader leading the company. So we're
definitely looking toward Apple for all the innovations.
QUEST: Thank you.
KELLY: Thank you.
QUEST: So next, we're in Europe, the markets, BP profits helped push up the FTSE in London, those are really small gains. Now, Lufthansa missed
third quarter profit estimates and anyway, the German market have more than enough on its mind as it considered life after Angela Merkel. Zurich was
up the rest of the day.
The bargaining chips in America's trade war with China are getting literal and would a Democrat victory in the House of Representatives next week tank
the markets?
[15:15:00]
QUEST: Exactly a week to go until the US midterm elections and President Trump says markets are taking a little pause when he wants to describe
what's happening over the last few days and a vote for the Democrats, the President says would ensure that markets dropped. The latest CNN poll
predicts a democrat win for the House with a 17-seat majority.
However, the Republicans are likely to retain control of the Senate and indeed consolidate that control with a four-seat majority, likely to win an
extra seat in next week's election. How will a Democrat-controlled House impact the markets?
Well, they could dial back Donald Trump's planned tax cuts or indeed not extend them to individuals. So tax cuts and the future of them crucial.
And some analysts say that could lead to a shift in economic policy and business sentiment.
Paul La Monica is here to tell us what he's discovered when we look at markets and midterm elections.
PAUL LA MONICA, CORRESPONDENT, CNN: Yes, typically with the markets in midterm elections, if you have the status quo, particularly when you have
one party in power in the White House, another party in power in Congress, that's usually treated as great news. It's gridlock.
Washington can't mess things up as Wall Street would cynically put it. Here's where things get different this time. The worry is that, as you
pointed out, if the Democrats do take control of the House, even if they're not able to roll back the tax cuts, as Trump would probably veto that, you
likely would have any chances of future tax cuts getting killed.
QUEST: Right, but the markets, if we look at the way the markets have progressed and traded, now, look, this is since the election. There was
one nasty little hiccup somewhere around about November of last year. Then they recover, and now we get this. Now, are these corrections politically
driven on the back of, say, for example, the trade war?
LA MONICA: I think the current correction you could argue is about concerns about the trade war. The correction back in February, I think was
a worry that the Fed was going to have to raise rates more aggressively, inflation was starting to pick up. Those numbers started to dial back.
The big concern, I think now, Richard, that people are going to have regarding the markets after the election is what will happen if you wind up
having a Democratic-controlled House that doesn't want to do anything? Because most people, remember, before Trump was elected never thought
Hillary Clinton was going to win. The bet was even if Trump wins, we get infrastructure spending and that will be good for the markets. We may not
even get that now in the second term or the end of this first term.
QUEST: A moment, Guru La Monica, are we not overlooking the fact 19,109 in December of '16 to 25,000 today? So the President is right when he talks
about how the market has performed. Is he right when he says it's on a pause?
LA MONICA: It clearly looks like it is a pause and he must hope that obviously, the markets will continue to go higher after the midterms
because if not, it does make chances for him in 2020 look a little less encouraging. But the big question is going to be what happens to corporate
earnings if you don't get an extension of tax reform, if you don't get any significant plans for infrastructure spending.
QUEST: Let me push you on this.
LA MONICA: Yes.
QUEST: When the president says, and he's making a political point, and I'm not asking you to make anything of the kind, but when he says if Democrats
win, the market will fall.
LA MONICA: I think that's a politically expedient quote. I think the rest of his tweet went on to talk about comparing the Democrats to Venezuela.
Last I checked, Nicolas Maduro is not eligible to run for Congress in any of the United States, but putting that aside, I don't think the market
would fall apart if Democrats gained control of the House.
QUEST: Good to see you, sir.
LA MONICA: Thank you.
QUEST: Thank you very much indeed. Now, reports of police raids on offices, talk of hidden hardware full of vital intelligence and a battle
for global dominance. There's a trade restrictions on computer chips, that have never sounded so sexy. It's a part of the drama and a backdrop to a
story that Clare Sebastian is here to explain.
[15:20:08]
QUEST: When we look at what's been happening, the issue of why and how the US believes they're being targeted.
CLARE SEBASTIAN, CORRESPONDENT, CNN: Right. So this is an interesting one because obviously the news we have today is that the Commerce Department
has slapped these restrictions on this Chinese semiconductor company called Fujian Jinhua, but this isn't taking place in a vacuum. So the
restrictions are they can't now -- so basically cuts off their supply chains to US companies, US companies don't want to sell products to them,
they have to get a special license to do that.
We saw the same thing with ZTE which we saw brought the company practically to its knees and the ban was eventually lifted, but this is a company,
Fujian Jinhua that has been on the radar of the Trump administration and the Commerce Department because they are locked in a bitter litigation with
an American company called Micron over intellectual property laws.
QUEST: What are they alleged to be doing?
SEBASTIAN: So in terms of what the Commerce Department has said today, they are a threat to US national security because, and I quote, "They
threaten the long-term economic viability of US suppliers, of potential US military ..."
QUEST: So they're not -- are they suggesting that they're stealing stuff or that they're mere -- I mean, when I read that, it sounds like merely
them being in business is what's angering the US.
SEBASTIAN: Right, so these two things are not connected on paper as it were. So the Commerce Department has today slapped these restrictions for
concerns about national security. There's a separate case where a US company called Micron Technologies has sued this company saying that they
have stolen their intellectual property. They go into great detail. It's classic espionage. They recruited people and told them to bring secrets
with them.
QUEST: Let's put that to one side. Let's put Micron to one side. Let's stick with the US one. The US is basically saying, if I understand you
correctly, that this company is a threat to national security merely by doing that which it's doing, by being in business.
SEBASTIAN: Right. Exactly. I mean, I think this gets to the heart of the contentious relationship that we see now between the US and China. It's
not just the theft of intellectual property that worries the US and the Trump administration. It's the core reason behind why they would want to
do that, which is China's pursuit of dominance in high-tech industries, things like semiconductors.
This is why we see so much concern around this trade war. This is one of the reasons why the Trump administration is pushing for China to pull back
on some of its subsidies for these high-tech industries. They are piling billions of dollars into these companies like Fujian Jinhua which is
actually owned by the regional province there. This is really the core of the issue that we see here, and obviously given the timing, the fact that
we're about a month away now from that key meeting between Trump and Xi in the sidelines of the G20. This really ratchets up the pressure. We've
seen no movement really to the positive on this trade war.
QUEST: Let's talk about that trade war. wWhere do we stand in terms of escalation? Forgive me. I've got a bit lost in it. We had the first bit,
then we had the second bit, then we had the third bit coming in, but there were still some threatened bits out there.
SEBASTIAN: Yes. So we have $250 billion in tariffs on the US side for intellectual property violation on the base of it. China has retaliated
with about $110 billion on their side. Don't forget, they have a lot less that they can tariff, but the Trump administration is still hanging more
over their head. They say they will put another $257 billion which amounts to the entire amount of Chinese products that comes into the US if things
don't go well, and of course we have that step up that's coming at the end of the year on the current $200 billion from 10% to 25%. So there are
still levers that they can pull if the talks don't go well.
QUEST: Is there any evidence that it's working from the Trump point of view? Is there any evidence that with the Chinese economy being in great
difficulty, that actually the squeeze is on? Maybe not in the same sense or as effective as it was in Iran, but that the squeeze is on, China is
feeling the pain and will eventually come to brook?
SEBASTIAN: This is the argument of the Trump administration ...
QUEST: Any evidence?
SEBASTIAN: ... is making. I think the problem with tariffs is they take a long time to hit. The Chinese economy was slowing anyway. They've got
all kinds of problems with debt and leverage and their currency falling which isn't necessarily related only to this trade war. But I think they
are vulnerable.
QUEST: Good to see you. Now, China has poured billions of dollars into projects in Africa, yet money comes with its own share of consequences.
Get your device ready to join us in the voting on the topic. cnn.com/join is the website to visit. And it's a fascinating one. It is the
relationship between African countries. We'll do that after the break.
[15:25:00]
QUEST: Hello. I'm Richard Quest. There's more "Quest Means Business" in just a moment. When the man who runs Kenya's ports and railways tells me
the country has nothing fear from China's great and giant investments, and I'll ask the Britain's Minister of Loneliness why she wants postmen and
women to deliver more than just the mail. As we continue. This is CNN and on this network the facts always come first.
President Trump and the First Lady Melania Trump are heading into Pittsburgh, where they'll pay respects to victims of the worst massacre of
Jews in American history. Air Force one is expected to touch down moments from now. We'll bring you the pictures of course and we'll bring you the
details as indeed, when we see them.
Meanwhile, the mourners are burying three of the 11 people who were killed in the synagogue shooting over the weekend. And the President is
ratcheting up his anti-immigrant rhetoric a week before the midterm elections.
Mr. Trump is warning of what he calls an invasion of Central American migrants. Now he's vowing to put an end to birthright citizenship, of
babies born on US soil to parents who aren't citizens. The step would immediately be challenged in court as being against the Constitution.
At least nine people are dead in Italy after strong winds and heavy rain battered the country. Venice is dealing with its worst flooding in a
decade and the wild weather has force officials to close schools across the country and issue warnings against non-essential travel.
One of America's most notorious mobsters has been killed in prison; 89- year-old Whitey Bulger was serving a life sentence for a long list of crimes and his role in 11 murders. He was arrested in 2011 after 16 years
as a fugitive. There's no word yet on how he was killed.
In Germany, a former nurse has admitted murdering a hundred patients. Nils Hogel offered the confession on the first day of his trial. Prosecutors
say he gave patients drug overdoses, then tried to revive them to show off his nursing skills.
All this week, we are taking you to Kenya, Nairobi -- a city and a country at a crossroads in terms of its massive investment potential.
[15:30:10]
Tonight, we're talking about China's role in Africa and we want your opinion. Get it? Yes, there we go. Now, go to cnn.com-slash-join, we're
about to open up our question of the day.
And I have little doubt this is going to be controversial. With more than 10,000 firms on the continent, China has become Africa's biggest business
partner. China has been funding some of Africa's most ambitious, expensive infrastructure projects. Railways, airports, dams, roads, projects, the
list goes on and on.
The Chinese are continuing to invest more even as we speak. China is now Kenya's largest creditor, holding around 70 percent of the total bilateral
debt. Only Angola and Ethiopia owe Beijing more. And the worry of course, how it can all be paid back. It seems Kenyans are growing wary over
China's actual intentions.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: More Kenyans believe that China constitutes the biggest threat to the country's economic and political development than United
States of America, according to the latest survey.
UNIDENTIFIED FEMALE: And China has defended its ongoing projects in Africa in an attempt to dismiss the notion that it is trapping African countries
with huge debts through mega infrastructure projects.
UNIDENTIFIED MALE: The problem is when the deal is too good, I think you need to think again.
UNIDENTIFIED MALE: The consequence of failure today is really big. And to assume that the Chinese are going to be kind and generous because of China-
Africa relations is incredibly silly.
UNIDENTIFIED FEMALE: It takes two to tango. I think we've been bashing China a lot and there are issues there we shall talk about. But at the end
of the day, it's about us and Kenya and the kind of agreements that we sign and how we conduct our business.
UNIDENTIFIED MALE: That China knows what it wants from Africa. Does Africa know what it wants from China? My answer is politically yes, but
economically no.
UNIDENTIFIED MALE: Well, I don't see them as truly a trapper. They're not truly a trapper. I don't think --
UNIDENTIFIED MALE: Because now the devil is in the details. And the details is not what we're not told as a country, right?
UNIDENTIFIED MALE: So these things stings, let's forget about it, let's talk about politics.
(END VIDEO CLIP)
QUEST: This is all about politics. Our question for you today on cnn.com- slash-join -- should Kenya be cautious about taking giant investments from China? You've heard the critics say it's dangerous and you've heard
President Kenyatta on this program say that he's happy to partner with any foreign country.
Cnn.com-slash-join, the voting is now under way. Look at that, 84 percent of you, 84 percent of you so far say Kenya should be wary of investments
from China. I sat down with the Managing Director of Kenya Ports Authority, who told me the country stands to gain more from China's
billion-dollar investments.
(BEGIN VIDEO CLIP)
DANIEL MANDUKU, ACTING MANAGING DIRECTOR, KENYA PORTS AUTHORITY: I think you have to look at it in terms of the reason for investment and
infrastructure. Infrastructure is an enabler. And it plays the role of catalyst in economic development. Don't forget that investment in
infrastructure also does not have any risks because even in cases of economic downturn, there's significant level of resilience.
But also remember that with the railway in place, our economy grows by geometric progression.
QUEST: Are you agnostic as to where you get your funding from?
MANDUKU: I think it's a question of looking at the best deal in the market. Who gives you good money at very low interest rates, combination
of loan concession, grant, and with good grace periods.
QUEST: And do you sometimes wonder what they want back in return besides interest? I mean, the Chinese is -- you know, the old saying, "he who pays
the piper calls the tune." Do you -- and it's the same with the Americans as well in different circumstances. I'm not suggesting one versus the
other, but it's a tricky position, isn't it?
MANDUKU: I don't think so. I think it's a question of give and take. As a country, we have -- we stand to gain more. Don't forget that these
investments are going to last a century or two, well beyond most of us. And the importance of these investments today cannot be easily estimated in
the future. And so I think given the circumstance we're in, I think it's the best option.
QUEST: How concerned are you by the latest trade protectionism obviously on the back of, you know, some of the Trump administration tariffs? I mean,
after the great recession we saw the first decline in world trade for many years and decades. Now, we're starting to have a slowdown in world trade.
How worried are you?
MANDUKU: As Kenya and Africa, we're not very worried because we're an emerging economy.
[15:35:00] And emerging economies have got unique exports basically based on agriculture and basic trade. And that gives us a chance. As the war
continues between the big nations, China and the U.S., Africa has a chance to make their own niche in exports by creating regional blocks.
In this mine they have this African community and also the common market for Eastern and Southern Africa, COMESA. So we can concentrate as small
countries come together and create our niches so that we can have direct markets where we don't have any barriers with the big economies.
(END VIDEO CLIP)
QUEST: Interesting, the views of the president and the port authority -- well, look at that. Now, in all the time we've been doing these join
questions, I don't think we've had one quite as clear-cut. Eighty two percent of you are saying that Kenya should be wary of investments from
China and the rest -- it is quite clear cut, the vast majority warning of - - warning. Tele-working is the future of work and it's gaining investors interest.
In just a moment, we'll talk to -- exactly the future of future working.
(COMMERCIAL BREAK)
QUEST: And so to the future of working. And this is very similar to what we could. It's called co-working. Different businesses sharing the same
workspace. Over here it might be a party organizer. Here, it's a cake deliveries. Here it's something to do with technology and the like. Who
knows?
All you know is that each day we turn up and we all work in our own individual places and say hello. It is helping the rapid expansion of
companies like we work and Regus. Flexible working is said to benefit you and your world life -- work-life balance as it is. But what about the
wider economic benefits?
Now, Regus has just completed a first of its kind of that sort of study on the socio-economic impact of flexible working. The results are due to be
released on Wednesday. And Darin Harris is with me; he is the CEO. Good to see you, sir.
DARIN HARRIS, CHIEF EXECUTIVE OFFICER, REGUS NORTH AMERICA: Thank you.
QUEST: What is -- I realize the results are still to be released. What are they saying?
[15:40:00] HARRIS: So basically, the study is the first of its kind. It's a socio-economic study that gives really three key benefits. And that
is personal benefits to the workplace, economic benefits and environmental benefits.
QUEST: What are they?
HARRIS: So in the U.S., by 2030, 13 percent of the U.S. population will be working in a flexible work space --
QUEST: What does that mean?
HARRIS: It's like 4.5 trillion people --
QUEST: No --
HARRIS: Commuting or --
QUEST: Flexible workspace, I mean, not having your own desk?
HARRIS: Oh, they can have their own desk, they can have their own office or they can just have a space that they share over time with other people
where they want to come in and work when they want to work or where they want to work.
QUEST: Why this is -- why is this revolution different before? I mean, serviced offices --
HARRIS: Right --
QUEST: You'll be familiar with --
HARRIS: Absolutely --
QUEST: And for many years. There's nothing new. The idea that if you wanted offices in a particular town, you rented an office and you rented
secretarial services.
HARRIS: Absolutely, nothing new about this. So what is new is that the demand from people in the workspace, they want to be flexible, they want to
have work closer to home or not be at home. They want the connectivity with each other.
And so we find that, it's a need that companies now are looking forward to retain talent and attract talent.
QUEST: I mean, I suppose you would say that, you're in the business of providing the accommodations that people are using --
HARRIS: Absolutely --
QUEST: In that sense. So you know, which is driving which? I understand that new technology-type arrangements, media and those sorts of things want
this thing. But are you seeing industrial uses of this?
HARRIS: Absolutely. You're seeing it from small startup companies all the way to large multinationals of every business sector entering this
workspace.
QUEST: And what do you provide? You provide the space, the coffee machine, the desk?
HARRIS: Meeting rooms, space, a desk, an office. We can even provide the furniture if they like. Services beyond that, whether it's coffee like you
said or other ancillary products.
QUEST: But that's so interesting, the fact that it has been around before, what has led to it being to take off in this way? I mean, why are companies
preferring to do what you're -- if I need an office --
HARRIS: Oh, true --
QUEST: I'm going to need an office for a year, why not take a rent at least an office?
HARRIS: Right, so companies have a business impact. And the impact is they lower cost for them, it's about 50 percent -- they need 50 percent
less space because they're not wasting space. They have the ability to flex, go up and down basically, if they expand or contract their business.
Or now to attract and retain people, people don't want to move, or they don't want to move far from their home, but they still want to maintain
connectivity with other people. And so that's the benefit to companies. Is it helps them to attract talent, it helps talent remain near their
customers if they would like or suppliers being near them.
So there's a lot of benefits and most of them end up being economic.
QUEST: And you're a competitor of course, where you work --
HARRIS: Sure --
QUEST: The valuations that we see on that particular company are extraordinary. The potential valuations --
HARRIS: Absolutely --
QUEST: They're on there, are you surprised?
HARRIS: Well, if you look at the study, what I love about the study is it shows how much demand there is. This is a 4.5 billion or trillion --
QUEST: Yes --
HARRIS: Opportunity of the next -- by 2030.
QUEST: So what --
HARRIS: So going there, what you find is it's attracting capital.
QUEST: Right, but --
HARRIS: Right?
QUEST: What differentiates you from your competitors?
HARRIS: So what differentiates us. We have five different brands. And so what you're finding is each brand is segmented now to meet the needs of how
the way the customer wants to work. So for example, spaces, it's a creative environment, one that is for entrepreneurs and one that is
designed to connect people.
Regus is more about productivity. We have number 18 that's a membership club that's more like a lifestyle brand where people have amenities --
QUEST: Oh, dear --
HARRIS: Absolutely --
QUEST: But you know you're in trouble when you're talking about lifestyle brands.
HARRIS: And then we have the opposite spectrum, a luxury brand in signature where people want the finest building in the city, the most
prestigious address --
QUEST: That's not --
(CROSSTALK)
HARRIS: And then value. The value concept.
QUEST: No --
HARRIS: Where you access your office with an app.
QUEST: No, I think the QUEST MEANS BUSINESS, we'll take -- we'll take the other one --
HARRIS: Right --
QUEST: With the coffee machine.
HARRIS: Absolutely.
QUEST: The coffee machine and the nice biscuits at 3:00, and so --
HARRIS: And we can provide those, thank you.
QUEST: Digestives, please, thank you. We'll take a break after -- and then as we continue, look at the markets, we're in that last hour of trade,
and you know how dodgy it can be. Well, today it looks like it's dodgy in a different way.
[15:45:00] (COMMERCIAL BREAK)
QUEST: Now, throughout the hour, we've been watching and waiting. Donald Trump has now arrived in Pittsburgh. He's visiting the city following
Saturday's massacre at a synagogue in which 11 worshippers were killed.
And Stephen Collinson joins me from Washington. We are awaiting pictures of the president getting off the plane, but he has now arrived. So Stephen
Collinson, the significance of this visit, bearing in mind many civic and political leaders locally are not going to see him, have refused.
STEPHEN COLLINSON, CNN WHITE HOUSE REPORTER: That's right. This is very unusual presidential visit, and we have very little idea of exactly what
the president is going to see, who he's going to visit, and if he will make remarks. Usually, in the wake of these national tragedies, you have a
president who shows up and leads a moment of national healing.
That isn't going to take place today. One of the reasons is because as you say, Richard, civic and local leaders have said they want to concentrate on
the funerals of the victims of this mass shooting, many of which are taking place today.
So in some ways a lot of people are questioning why the president has decided that he must rush up to Pittsburgh right away and perhaps not wait
a few days.
QUEST: We're now seeing the pictures of Air Force One at the Pittsburgh Airport. But let's be clear here, Steve, he can't win. If he doesn't go,
he will be accused of ignoring those who are suffering and in grief. If he does go, the criticism you've just given, that you know, it's all a show
and circus. I mean, what's the man supposed to do here?
COLLINSON: That's right. And especially given the huge controversy that's raging right now in the United States about the extent to which the
president's own rhetoric is giving comfort to extreme white nationalists and extremists in U.S. society.
One thing we are learning, however, from sources in the White House is that the president has a very packed schedule of 11 rallies over the next six
days running into the midterm elections and he didn't want to disrupt that schedule.
Now, he could have canceled a rally and gone to Pittsburgh or he could have gone to Pittsburgh, say, on Thursday when local officials want to meet him.
But that would have run the risk of perhaps making his campaigning for the midterm elections look in bad taste.
So in some senses for the president at least the only window where he could go to Pittsburgh was today and not disrupt his campaign schedule. And that
of course is going to raise all sorts of new questions about whether he's doing the right thing here.
QUEST: The tricky part is, I mean, all this politics amid such sadness. Not only of course -- I mean, you've got the raw anger from the bombs that
were sent or the pipe bombs that were sent that didn't thankfully go off, including to our organization, several of them.
And then you've got the Pittsburgh. But we haven't seen a reaction from the president that suggests any difference from previously.
COLLINSON: No, and I think the question that has to be asked is how the White House and the president can draw this line between saying, as many
other people have said, well, clearly you can't blame the president himself, he didn't force either the person who allegedly sent these mail
bombs or the shooter in Pittsburgh to carry out their actions.
[15:50:00] The White House is saying there is no link at all between the kind of fear-filled rhetoric the president has been spreading in the run-up
to the midterm elections in a very harsh closing argument. And they're saying that this has not tipped people over the edge and there's no blame
for the president.
And anyway, that Democrats behave like a mob. I think that's a very difficult case when you look at the facts of all these issues --
QUEST: Well --
COLLINSON: Especially with the mail bomb, for example, because the alleged bomber, the person that allegedly sent these bombs was a vehement Donald
Trump supporter --
QUEST: But hang on -- but hang on a second. It seems -- let's put the other side of the argument here. There have been mass killings and
shootings in the United States for decades, many of which have had political overtones, and they -- you know, from both left and right.
Nobody in previous times suggested that presidents had incited or could have incited. Looking at the evidence of these two -- I mean, I understand
that the alleged bomber had Donald Trump on his van. And if you look at the writings on Gab of this chap, they were incendiary. But isn't it a
stretch too far to say that they were encouraged by the president?
COLLINSON: I don't think people are saying they were encouraged by the president. I think what they're saying is that some of the president's
rhetoric, for example, on the caravan of migrants, which is currently in Mexico and has become a huge issue on conservative media, that has given
some people encouragement to believe that his rhetoric is sending them signals or is perhaps sympathetic with their extreme goals.
So, I don't think you can make the line, you know, that directly. And you're right, of course, there's been much violence in U.S. society in the
past. I think the difference here is that we have never seen in living memory at least a closing campaign argument that is so extreme and is so
calculated to tear at the nation's divisions as we've seen from Donald Trump in the run-up to the midterm elections.
I think that is the difference and it's why a lot of people are making these linkages and suggesting that the president needs to tone down his
rhetoric, in the recognition that there is a tiny minority of people who might see this, what some people would describe as hate talk as a spur for
extreme actions.
QUEST: The -- this is awful that we're having to talk about this on the day that people are being laid two rest after -- in such a fashion. We're
seeing now the door and the stairs to Air Force One. I assume you can see these pictures as well, Stephen.
So as we wait for the president, talk me through what you expect him to do over the next few hours.
COLLINSON: Well, the president himself has said that he wants to visit several of the police officers that were injured in Saturday's attack.
There's some suggestion that he will go to the hospital where some of the victims are being treated. But the White House has basically given no
indication of exactly who he will meet.
It seems like this has come together very quickly and that you know, as you know, a presidential trip has a vast entourage, incredible planning around
it, and it's very unusual that you don't get some details. We don't actually expect -- and this is another unusual aspect of this visit, the
president to be met at the floor of Air -- at the foot of the stairs there of Air Force One by any local officials.
So that just lets -- that sort of stresses really how his trip has not been at the behest of the civic and local officials in Pittsburgh. You would
normally expect to see them there. And one of them to ride in the presidential motorcade with the president --
QUEST: So let's talk about that. The mayor of Philadelphia said he's not meeting him, and other dignitaries have said they're not meeting. Here we
go -- let's just pause -- there we go. The president and the first lady are coming out.
I'm noticing immediately the somber tones of what the first lady is wearing. Dark skirt or dark dress along with a much more muted coat on the
nature of the occasion. Nobody there at the bottom of the stairs seemingly to meet.
Certainly not the local dignitaries one would have expected as Stephen Collinson was alluding to, other than the normal military personnel that
would greet the president. And the goal here I suspect is to move and get on as fast as possible, Stephen Collinson.
[15:55:00] As you look at these pictures, now we see a much better example of who and how the president is being greeted. As you look at this, these
pictures, straight into the car, why are these leaders not there to greet him? The mayor of Pittsburgh talked about attending funerals instead or was
this a case of it being put together so quickly that they simply couldn't get there in the right place at the right time?
COLLINSON: There were a number of Pittsburgh officials who said they didn't get enough detail from the White House about exactly why the
president was coming and when he was coming, and only got confirmation of the fact during the White House briefing on Monday when Sarah Sanders was
talking about this.
But as you say, the mayor and other officials say that they are attending a number of funerals that are taking place and they would have actually
welcomed the president coming later in the week when they perhaps have more time for him, when it might be more appropriate and he could see more
people.
But that adds to this question of why exactly the president is coming now in the knowledge that he has this packed campaign schedule in the next few
days.
QUEST: Stephen, you'll watch the events in the hours ahead as we continue, thank you, sir. We have a profitable moment with an update of the market
as we head to the close, and it will be after this break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment, going to leave you with a look at the markets. And as you can see, the Dow is now enjoying its best percentage
point gain, or best percentage gain in some two weeks from October the 16th. The Dow has roared up in the last hour of trade.
It's really fascinating how it goes down very sharply in the last hour and it likewise goes up. We're now showing a gain of one and three-quarters,
430 points on the Dow Jones Industrials. Similar gains on the S&P and the Nasdaq. And a quick look at the triple stack -- sorry, the Dow 30.
Red -- just a smidgen of it at the bottom, otherwise, it's green across the board. And that is QUEST MEANS BUSINESS for tonight, I am Richard Quest in
New York. Whatever you're up to in the hours ahead, I hope it is profitable. The day is done.
END
