Gold on the Rise; How China Slowdown Affects South America; America Elections Examined. Aired 6-5p ET - Part 2



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QUEST: -- is the "Quest Means Business" guru.

LA MONICA: That's very kind.

QUEST: Make sense of it all for me.

LA MONICA: It is difficult to make sense of this chaos right now. Obviously when you see the Chinese stock markets open and then close within a half hour, that is very, very nerve rattling. And that explains, I think, why investors were on a - basically a shoot first and ask questions later type of mentality -


LA MONICA: -- they're just selling first.

QUEST: I want to go through this at fast speed so that we can cover a lot of ground. The decision on the circuit breakers - bad decision that put them there in the first place or just bad - poor - execution?

LA MONICA: I think poor execution. There were circuit breakers in the U.S. and other markets that seemed to work. I'm - I don't know why China didn't mimic some of these other circuit breakers that do a good job.

QUEST: They've got bigger bands, 19, 20 bigger bands. OK, so China devaluation of the currency. They're trained to make it Mohammad Delarian (ph) said on this program, more reflective of market conditions. But a cack-handed way of doing it.

LA MONICA: Exactly. They really look more as if they're still manipulating the currency even though they are saying that it's just market forces. And obviously any time the yuan goes down even further, you're going to get those concerns about a possible currency war.

QUEST: We are about to start the earnings season here in the United States. There were suggestions this could be a recession in the earnings season - two quarters back to back of lower earnings reports.

LA MONICA: It looks like that's going to be the case. It is going to be very difficult for companies to report profit increases in the wake of all the volatility that obviously didn't just start when the calendar hit January 1st. We had this leading into the (AUDIO GAP) at the end of last year as well. And the dollar strengthening hurts a lot of (inaudible).

QUEST: All right, but if the - let's just go straight to good old- fashioned economics 101. If the results aren't there on the P.E. ratio basis, which is already looking elevated, --

LA MONICA: Yes, definitely a bit stretched.

QUEST: -- I can't remember what the average P.E. is now on the S&P, but I mean, I'm sure somebody'll tweet me and tell me. But the only thing, if the earnings aren't there, then the price must come down.

[16:40:08] LA MONICA: It has to happen at some point, and obviously that I think is taking place already. When you look at Apple, Apple has been just crushed because no one believes that iPhone demand is as strong as it once was. If that's the case, it will be impossible for Apple to report results that live up to Wall Street's considerable hype.

QUEST: Finally, Walmart - bucked the trend.

LA MONICA: Walmart's been up all week, it really is astonishing.

QUEST: What's happening?

LA MONICA: People I spoke to said that no fundamental changes have taken place for the better -

QUEST: Come on there, Paul, --

LA MONICA: -- for Walmart.

QUEST: -- I mean look, 2.3 -

LA MONICA: No, it's up about - it's up about 6 percent this week when the Dow's down 5 percent. The reason is that Walmart, as you mentioned earlier, definitely people will probably be more prone to shop there in times of global stress, economic concerns but also the stock was down almost 30 percent last hear. Almost every major traditional retailer plunged because of Amazon fears. They're not the only retailer bouncing back this week. Macy's is up, the Gap is up, --

QUEST: And well they lost (inaudible) yesterday.


LA MONICA: -- (inaudible), Macy's lost (inaudible) closing shares but investors seemed to be bargain hunting for retailers because, guess what, Amazon's not going to kill them all.

QUEST: Our guru.

LA MONICA: Thank you.

QUEST: Thank you, sir. Paul La Monica making sense of it all as he always does on "Quest Means Business." (RINGS BELL). Emerging markets were hit particularly hard by the China slowdown. The Brazilian stocks closed more than 2 percent off, already down more than 5 percent this week. Shasta Darlington is in Rio de Janeiro. It may be summer there, but there are these very nasty clouds. Look, Shasta, these, I mean, Brazil, to some extent Argentina, certainly Chile, Peru - these are the emerging markets that won't be able to withstand a China slowdown.

SHASTA DARLINGTON, CNN CORRESPONDENT: That's right, Richard. I mean, we're seeing these huge problems in Brazil for many months now and it really started with the slowdown in China. China is Brazil's biggest export market. So they're not going to be immune to the problem there. You mentioned what happened in stocks. The currency here was trading at 4.05 at the end of the day. It really seems like just yesterday it was two to one. So this is -- the currency has just been completely eroded and yet I think we should also point out that if China isn't Brazil's only problem, they really created a lot of their own problems with the massive corruption scandal here that's brought down a string of top business leaders and politicians. But these two things combined - a recession largely on the back of a slowdown of commodity sales to China and all of these missteps in politics and economy - have led to calls for the impeachment of the president. So completely unknown when you're looking forward as an investor. Do you want to put your money in Brazil? The answer tends to be no. There's just too much uncertainty here.

QUEST: Shasta -

DARLINGTON: And we're seeing it, we're expecting more bad numbers just moving forward, Richard.

QUEST: Right, OK but Brazil clearly is in the deepest doo-doo in the sense of political, business and in economic crisis, but let's take Argentina with its new government, with its new economic policies and crucially of course doing this at a time when emerging markets are under threat.

DARLINGTON: Argentina has an uphill climb ahead but I think they're also coming from such a low spot, they've been isolated from global markets for long, and with the new President Macri coming in and promising to really implement all of these market-friendly policies, it's looking interesting to companies. I think a lot of investors are looking at Argentina that haven't looked at it for a long time. So even though they of course are also big in commodities, they rely on China - because of their relative isolation, the prospect of opening up the new government that is more market friendly makes Argentina in many ways more interesting than Brazil which there's just no light at the end of the tunnel here, Richard.

QUEST: Right. Shasta Darlington in Rio. I mean, it looks very pleasant on a summer's evening in Rio, but I take your point that there's no economic light at the end of the tunnel. Shasta, good to see you. Now regular viewers of "Quest Means Business" - and I hope you are and if you're not why not? - were well familiar with my love affair with the Blackberry. I won't be parted from it. Well when we come back, the chief executive of Blackberry tells us are they going to survive and what's going to be next.


[16:46:10] QUEST: Blackberry's chief executive insists the company will be profitable in 2016 even as the shares in the company fell more than 8 percent during the course of the session. Blackberry announced plans to build software that will eventually drive self-driving cars - autonomous vehicles as is the posh way and the politically correct way to describe them. Now, the vehicles are made by some of the biggest rivals like Apple and Google. John Chen told Maggie Lake demand for this type of technology is strong.


JOHN CHEN, CEO, BLACKBERRY: We want to make very sure that we stay cross platform and opened and this is why it works with the Apple CarPlay, it works at a Google automotive initiative, it works at the Ford SDL, and so we're adopting all the standard interfaces. Again, you know, the layer of this code and the product that we provide, everybody needs. Whether you're a car manufacturer or even a tier 1 like Harmon (ph) or Danso (ph) that help put the dashboard together or, you know, the Google or the Apple of the world. They all need the resources I'm providing. So we're not really competing but we really our position in the - in a new world here.

MAGGIE LAKE, CNN INTERNATIONAL BUSINESS ANCHOR AND CORRESPONDENT: So talk to me about what your goal is for 2016 when you're there. Before we - when we've talked personally - you've had to explain to people that no, we're still in business. What's the conversation like now? What's the goal for 2016?

CHEN: Very good. Conversations is much better. The people are now starting to believe that we're here, we're to stay. Company had make positive cash flow for the last six quarters. I think it's since we met - I think that maybe we met about a year ago or less than that. So we've been continue making - generating - cash from operation. We've also been investing. We bought five different companies, the biggest of which was Good Technology which happened to be the biggest acquisition the company had made in history. So you could see that we're not only generating cash and make ourselves really, really strong balance sheets and viable financially, we are also investing heavily into the future. So the customer loves it and because of the acquisition we also have newer or repeat customers or a customer who have left us and came back. So, you know, the conversation a lot healthier, a lot easier for myself running around the world doing it and for my team. So, I mean, I'm hopeful. I do note - I will say one thing - Blackberry's definitely safe now as a company. I don't have any problem with that financially, balance sheet-wise, income statement-wise. Now it's up to us to execute the growth and that's what you will hopefully see on 2016 our two major milestones. One is the growth - the continued growth - of our software business and a car will be part of that, messaging is also part of that. And then, you know, in store a lot more growth engine around for future. And the second thing is we're going to turn profitable sometime in 2016 and I hope that once we turn profitable, we'll stay there and we'll never look back. So those are the two milestones that I'm working toward for the next four months.


QUEST: John Chen of Blackberry saying that Blackberry is safe. One billion dollars - that's how much investment money Donald Trump says he'll withhold from the U.S. First, a highlight from Make, Create, Innovate.


[16:51:14] QUEST: Donald Trump is threatening to withhold more than $1 billion from the United Kingdom if he's banned from the country. His organization Idea (ph) marked the money for improvements to golf resorts. He now says it would cancel the investment if there's any attempt to prevent Trump from traveling. More than 500,000 Britons signed a petition calling on the U.K. government to keep him after the Republican candidate called for a temporary ban on Muslims entering the United States last month. That petition will be debated by lawmakers later this month. I have to say, the debate is by no means binding on the government and certainly it's my understanding that it's not. The Trump organization said in a statement "Westminster will create a dangerous precedent and send a terrible message." Let's join now Jeff Zeleny who is our senior Washington correspondent with the Trump campaign in Burlington, Vermont. The U.K. billion row is a sideshow. What is he going to be telling us - or what is he going to be telling the people in Vermont tonight?

JEFF ZELENY, CNN SENIOR WASHINGTON CORRESPONDENT: Richard, there are a lot of sideshows with this campaign as you've seen. Certainly it's drawn attention here in the United States and across the world. But here in the U.S. in Vermont, his - Donald Trump is more focused on his sort of new fight with Ted Cruz. Ted Cruz, that freshman senator from Texas, a tea party darling, is really coming on strong in some respects. So Donald Trump all of a sudden is questioning Ted Cruz's citizenship. He was born in Canada but his mother was a U.S. citizen. Suddenly Donald Trump is saying that, you know, Ted Cruz may not be eligible to be president. So he said that in an interview yesterday with our own Wolf Blitzer. We'll see if he says it again here tonight to a crowd of his own supporters.

QUEST: The - does Donald Trump have any sort of no-go areas where he won't attack, do you think?

ZELENY: (LAUGHTER). If he does, we haven't seen them yet I guess. I mean, it's difficult to sort of answer no, a negative, but so far everything seems pretty much fair game. He's also, you know, on one hand he is drawing distinctions with Ted Cruz, raising questions about his citizenship at the same time as he is pointing out all of these scandals from the, you know, from days gone by from the Clinton administration, saying those are fair game. So, certainly he is keeping a lot of issues up in the air. And quite frankly, Richard, his supporters love it. They love it he's taking on the establishment on both sides and he's shaking things up here. So, so far I have not seen many things that're off limits, at least in the mind of Trump or his campaign.

QUEST: Now, I know you may have to dash off, Jeff, so feel free to dash off if you need to or don't answer my last question. The one question as I travel the world is people keep asking me is the realistic possibility of Donald Trump getting the nomination.

ZELENY: Well Richard, it certainly is - looks like much more of a possibility than anyone ever would have imagined - than even Mr. Trump likely would have imagined. He has kept his lead for months and months and months. But now the hard part begins. The voting is, you know, scheduled to begin in just about four weeks' time here so he's in a stronger position than absolutely anyone else but, you know, it is difficult to predict here.


ZELENY: A lot of the Republican establishment still believes he will not be the nominee. But, boy, I can tell you there's no exit ramp here, you know, for him to sort of fall off. He has so much support. So at this point, it's just as likely to be him as anyone else, perhaps more likely to be him more than anyone else. But the voting has yet to begin here so we'll just have to stay tuned and follow this exciting, chaotic race, Richard.

QUEST: Jeff, thank you and thank you to the men who didn't pull the plug just in time for us to say - to hear you all the way through. [16:55:02] Now, in just a few hours from now, CNN will have a look at guns in America and it'll be with President Barack Obama. Anderson Cooper hosts a live and exclusive town hall event with the U.S. president. It's in three hours from now - that's 1 a.m. on Friday in London and it will be replayed on Friday evening at 7. So you get two chances to see it. Now, some news just in to you - my boss is staying. Jeff Bewkes - well my big boss - well, the one who's way up there. That Jeff Bewkes has - the announcement from Time Warner, parent company of this network, announced it's agreed with the chairman and CEO Bewkes to extend the term of his employment agreement another three years through 2020. I'm not saying a word (RINGS BELL).


QUEST: Tonight's "Profitable Moment." It's easy to dismiss what's happening in China and the spillover effects to the rest of the world and, to be fair, it is way too soon to say that this is a bear market or it's something deep and fundamental for the global economy. But the reality is that China faces such extraordinary problems and there is such a level of disorganization and economic cooperation/coordination that one must be worried. And that is what is now transmitting itself around the world. And to those of you who say it's a bear market, not yet. And that's "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, (RINGS BELL) I hope it's profitable or at least try to be profitable tomorrow and I'll see you tomorrow.


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