BUSINESS-01
Bid for Yahoo; U.S. Stocks Rally on Energy and Tech Shares; Apple CEO Goes
on Tour of China; China Leads the Way with Drones; Trump: Brexit Would Not
Hurt UK-US Trade; Clinton: Bill Clinton to Help Revitalize Economy; US
Officials: Venezuela Faces Imminent Crisis; Goldman Sachs Raises Oil Price
Outlook; Premier League Victory Party for Leicester; Security Boss: Bomb
Scare was My Fault; New Atlanta Arena to Take Public Funds; Juarez
Struggles to Fix Its Violent Image; Massive Global Scam Shut Down in the
US. - Part 1>
Riddell; Nick Valencia, Melanie Hicken, Blake Ellis>
Vice Pres., Americas Society and Council of the Americas; Todd Colvin,
Senior Vice President, Ambrosino Brothers; Arthur Blank, CEO, AMB Group;
Michael Perry, DJI Strategic Partnerships>
Buffett used to stay away from tech stocks. Berkshire may fund a bid for
Yahoo. DJI in China is one of the world's biggest drone developer. In
five years it can explode to close to $27 billion industry. Donald Trump
says Brexit would not put Britain in a disadvantage in terms of trade
negotiations. Hillary Clinton says Bill will be involved in revitalizing
the economy, but will not be in her cabinet. U.S. officials say Venezuela
faces an imminent crisis. President Maduro says he will take over the
companies who have stopped. Goldman Sachs' report says there is going to
be a short term increase in the price of oil. Long term, Goldman Sachs
sees prices plateauing. The boss of a security firm hired by Manchester
United stadium says he made an honest mistake is leaving the realistic pipe
bomb device in the stadium after a training session. Manchester United
says it will cost them an estimated $5.5 million for the mistake. The
NFL's Atlanta Falcons is building a new stadium with public funds. It is
patterned after the Pantheon in Rome and the critics are lined up. The
city of Juarez, Mexico, is worried about another wave of violence with El
Chapo in the local penitentiary. El Chapo brought violence to the streets
from 2009 - 2012 and his presence brings nightmares to many. The U.S. has
shut down the largest international scam in history. Maria Duval still
operates around the world and remains elusive as ever.>
Violence; Finance; Stock Markets; Oil; China; Warren Buffet; Technology;
Venezuela; Goldman Sachs; Sports; Hillary Clinton>
[16:00:00] PAULA NEWTON, CNN ANCHOR: Well, that rally kind of came out of nowhere. The DOW up sharply as trading now comes to a close on Wall Street. The last time I looked up about 177 points. It seems that the stories that we're about to cover here in the next few minutes are what's driving the market and that's Apple and oil. Speaking of Apple, it got that Buffet bump. The oracle of Omaha reveals the company's stake, from a state of emergency toward a state of collapse. Venezuela's president threatens to seize factories and one of the biggest cons in history is being shut down by the U.S. government. I'm Paula Newton and this is QUEST MEANS BUSINESS.
Tonight, Apple gets the Buffett bump. Warren Buffett's, Berkshire Hathaway has revealed the first investment in Apple. It paid more than a billion dollars for the stock. The news triggered a rally that returned Apple to its position as the most valuable company in the world. Now Wall Street has beat up on Apple so far this year, though. Take a look here. Its stock down 11% and dipped to a 52-week low last week. But remember, the oracle of Omaha's advice -- be fearful when others are greedy. And greedy when others are fearful. Berkshire bought Apple as an average price of $109 a share and well below the all-time high of about $133. Until a recent investment in IBM Buffett avoided the tech sector. Berkshire's biggest holdings in companies like Kraft, Heinz, Coca-Cola and American Express. And Buffett taking the opposite view of fellow investor Carl Icahn whose firm recently sold its stake in Apple over concerns of competition in China and there are certainly some startling concerns there. Gene Munster is managing director at Piper Jaffray. He joins us now from Minneapolis. In terms of Warren Buffett and the company taking a bite of Apple here, why and why now?
GENE MUNSTER, MANAGING DIRECTOR, PIPER JAFFRAY: I think it's symbolic of what investors have been thinking about Apple for past six months and reason is that this is a different story. It's not the high growth story. And typically Warren Buffett doesn't invest, as you mentioned, in kind of high growth, more speculative tech names. I think he probably sees that this is just a fabric of how we engage in the internet is with the mobile devices and feels that given the valuation, and given the new growth profile then it more better fits his investment style.
NEWTON: And yet, there's so many people betting against Apple right now. And you know one of the problems happens to be a lot of cash that they have on the books, $150 billion and counting. What are they doing with that cash? There's so many people, you know who they are, betting against Apple right now. Why would his company get in when they have been reluctant to go near this sphere right now?
MUNSTER: Well, I think the reason is that they've got an established business. The renewal rates with the iPhone are exceptionally high. Kind of 90% plus and he probably went back and looked at that. Was able to build some sort of a cash flow model that shows that they even though the growth isn't what it has been they can add some more in the order of $20 billion to $30 billion a year in cash to the balance sheet. And I think that looking at it from that perspective gives him some time for Apple to figure out kind of what their next big moves are longer term. We are starting to see them dabble with some investments last week outside of areas they typically have, and he probably even though he wasn't aware of that when he made his investment is probably encouraged by some of this.
NEWTON: You know, some of the looming problems for Apple include China. It is definitely the biggest market in the world upcoming for Apple, and yet, it seems that the Chinese government still battles what they're going to be doing. It's been shutting down some of the businesses there. You know, when you look at that scenario, could that not throw off Apple completely here?
MUNSTER: It could. If China right now is called about 15% of their total business. Its historically has been the fastest growing segment of their business and it's just been a rough road for Apple in the last six months. And you see Tim Cook in China right now probably trying to build some interest not only with the public, but starting to work with hardware and the manufacturing side and also the carriers to try to drum up more support. And so, this is going to be a big x-factor in the story, how China plays out. Most analysts like myself aren't expecting a rebound any time soon and so I think that's properly reflected in the street estimates.
[16:05:00] NEWTON: yes, which leads more to a mystery as to why Berkshire Hathaway is in now. You know, he hasn't commented on it yet. Do you think the cash on the books has a lot to do with it though right now, and the fact that he perhaps is an activist investor can give them a little bit of a boost to say, look, something's got to be done with the cash on the books?
MUNSTER: I think so. And I think that, you know, if you back out the cash which is one way that some investors look at valuation, the stock is one of the cheapest tech stocks with one of the best growth opportunities over the next few years. And so I'm sure he's looking at that. There's been a subtle change in terms of what invest like Warren Buffett are looking for in terms of what Apple can do with all that cash. Over the past couple of years, it's buybacks and dividends and Apple's been aggressive at that. But going forward there might be a slight shift where investors may want Apple to buy different things and invest more like a venture capitalist to try to build some of the road work for the next decade. So I think you may see Warren Buffett kind of weigh in on those conversations.
NEWTON: It is interesting that he wants a piece of the action here and it's something that we'll continue to follow. Thanks so much for your perspective. And we will now be telling you more about Berkshire Hathaway and its place in the market. We learned Monday that Berkshire could get involved in a takeover bid for the core assets of Yahoo. Now it's quite a tech turn around for Buffett whose desk looked like this as recently as 2012 when he gave CNN's Poppy Harlow a tour of his office. She noticed the preference for pen and paper.
(BEGIN VIDEO CLIP)
POPPY HARLOW, CNN CORRESPONDENT (voice-over): No fancy flat screen TV. Just an old tube.
WARREN BUFFET, BERKSHIRE HATHAWAY: No. No computer.
HARLOW (voice-over): That means no e-mail. Perhaps a secret to Buffett's success.
(END VIDEO CLIP)
NEWTON: Incredible when you take a look at that office. Paul La Monica joins me now. Paul, when you look at this kind of a move, is it a very complicated move now into Yahoo? He has commented on that and said it has a lot to do with this perhaps as a financial play. Please explain.
PAUL LA MONICA, CNN CORRESPONDENT: Yeah. I think that there's a big difference here between what Berkshire Hathaway just announced, actually investing in Apple, buying a big position in that company, and then possibly helping Dan Gilbert from Quicken Loans finance a possible takeover of Yahoo. I think, you know, Buffett does recognize that there is value in the Yahoo brand name. It is important to remember that Berkshire Hathaway for the first time streamed its annual meeting live via Yahoo Finance a few weeks ago and there must be some familiarity factor there with the company. But, you know, Berkshire has been more aggressive in the past couple of years partnering with the big hedge fund 3G on some deals, as well. Kraft, Heinz. I think this just shows the continued evolution of Warren Buffett and his investment strategy.
NEWTON: Yes, and that's a really insightful point, because at first you might scratch your head and say they're not like the investments of prior. But as you said, he's adapting, isn't he? Because this is a tough market. And if you play Yahoo, right you could really see a lot of value from that.
LA MONICA: Yeah. I think that there are some people who feel that Yahoo Has been maybe overly beaten up, that is criticism of Marissa Mayer may be just a tad overdone and unfair. That there are, obviously, still value in some of the brands. Did Yahoo overpay for Tumblr? Yes, undoubtedly. But now you have a company that potentially its core business could still be a formidable competitor to a Google and a Facebook if they have the right things done and the right management team in place. So it's going to be interesting to see how that shakes out. I still think Verizon because of their ownership of AOL is the most likely winner of Yahoo and can't underestimate Buffett obviously.
NEWTON: Yeah, that's going to be one of the headliners to go in the next few months. See were that company lands. Now in the meantime I just said at the top of the show, the DOW, S&P 500 and NASDAQ all soared about 1% this session. Look at the numbers, Paul, from the DOW. We know that Apple and obviously oil stocks on that oil rally had something to do with it. You know, I looked at the Home Depot results today and made my eyes water. When's going on? We had been trying to know that, look, this wasn't going to be a good earnings season and many cases that's come to fruition but, you know, I kind of feel like there's fear and loathing still out there about this market even as it continues to climb.
LA MONICA: Yeah. Definitely. I think there are investors who are concerned, particularly with regards to retail. We had several retailers report lousy results last week and that is concerning because the U.S. economy is driven by consumer spending. We all know that. Without consumer spending a lot, it's going to be difficult to imagine how the economy can power ahead over the next few months and without that you're not going to have strong earnings growth either. The Apple news today definitely coming out of the blue and helped lift the stock market and oil as you mentioned, Paula, with Goldman lifting the price target, albeit a couple of bucks higher and maybe only for the near term. that also brings a little bit more confidence about the stock market going forward, because oil had been beaten so much over the past year and an and a half.
[16:10:00] It's finally nice to see some good news about where oil prices are going. Even though the bad news is may hurt consumers who have gotten used to low gas prices.
NEWTON: the oil story has definitely been a bit counter intuitive and we'll continue to watch that price. We will talk about it later on the show. Paul, thanks so much for hashing some of this out with us, appreciate it.
LA MONICA: Thank you.
NEWTON: As we told you before, we were talking about Apple and China. Now with slowing sales, cyber security concerns and unfriendly regulatory climate. China is presenting a challenge for Apple. CEO Tim Cook is currently in Beijing on a goodwill tour of sorts. Cook has predicted that China will one day surpass the U.S. as the company's top market. Last week Apple invested a billion in China's version of Uber. This morning, he tweeted that he tried out the service for himself. Now, all this week we'll be looking at the growing tech scene in China. Chinese businesses very much leading the field when it comes to drones. Andrew Stevens sent us this report from China's Silicon Valley Chensin.
(BEGIN VIDEOTAPE)
ANDREW STEVENS, CNN MONEY ASIA PACIFIC EDITOR: In the world of tech innovation, China, many would argue, is a follower. But there's one field where it is undeniably a leader, drones. We've come to the home of the world's biggest commercial drone developer. DJI to find out what's the next big thing in an industry where literally the sky is the limit.
(voice-over): They're futuristic flagship store in Chensin is a monument to just how far and how fast drones are developing. In December 2012, the company launched its breakthrough Phantom 1 drone without a camera. Just 3 1/2 years and 3 models later, the phantom 4 drone can produce this. High definition video, live streamed on to your smartphone or tablet from a distance of up to 5 kilometers. And users will tell you, it's simple to operate. DJI leads the pack with an estimated 70% of the world's commercial drone market currently worth just over $3 billion. Within five years, that could explode to $27 billion. Say market experts.
MICHAEL PERRY, DJI STRATEGIC PARTNERSHIPS: We're very excited about the future. And think we'll continue our monumental growth.
STEVENS (voice-over): Michael Perry heads up strategic partnerships for DJI.
(on camera): Michael, ten years' time, what do you think that drone's going to look like?
PERRY: Well, I think there's a wide variety of possibilities and the form will follow the function. It depends on how people start incorporating it into their daily lives. But overall, we hope to see units that are lighter, smaller, easier for people to use.
STEVENS (voice-over): Quantum leaps in drone technology may now be a thing of the past. Camera and navigation systems will continue to improve although already some of the industrial drones can fly to within centimeters of their target. Battery life is being extended and sensors are already being built in so drones automatically dodge objects both on the ground and in the air. The real breakthroughs now are what the technology will be used for.
PERRY: One of the most exciting ones for us recently was we saw a team of whale researchers use our systems to fly over whale pods and collect their snot so that they can do advanced analytics to determine their health.
STEVENS (voice-over): Those researchers' the Ocean Alliance call it the "snot bot," a drone that gathers mucus from a blowing whale. And just one out of the box application. DJI has developed a model that can accurately spray crops in difficult to reach areas. It's also talking to Europe's biggest emergency response network about how to use drones in search and rescue, firefighting and surveillance. The options, say Perry, are limitless.
PERRY: We've put the technology out there. And what's been really exciting is the creativity and the innovation that people bring to their platforms. There are a million different use cases.
STEVENS (voice-over): DJI, their challenge is to continue making drones easier to use so that the next generation can be captured all over again by the wonder of flight. Andrew Stevens, CNN, Chensin, China.
(END VIDEOTAPE)
NEWTON: Now there's much more on China's tech revolution on our website. CNNmoney.com/Chinatech, for more about Apple's big investment in Didi Chuxing.
Now, Donald Trump says the Brexit vote is a decision for the people of Britain, but he disagrees with President Obama on what it would mean for trade talks with the UK.
[16:15:00] (COMMERCIAL BREAK)
NEWTON: Donald Trump says a Brexit would not put Britain at a disadvantage in terms of trade negotiations with the United States. President Obama previously said if Britain votes to leave the EU it would go to the back of the queue in negotiating future trade deals. Now in an interview of ITV Trump said he'd treat Britain much differently.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: You become president, and we have come out of European union, what would your view be about where Britain should sit in priority terms with trade deals with the United States?
DONALD TRUMP, U.S. REPUBLICAN PRESIDENTIAL CANDIDATE: I don't think they'll be hurt at all. They have to make their own deal. Britain's been a great ally.
UNIDENTIFIED MALE: Back of the queue? Front of the queue?
TRUMP: Britain's been such an ally that they went into things that they shouldn't have gone into. Like as an example going into Iraq. Okay? With me, they'll always be treated fantastically well.
UNIDENTIFIED MALE: Would we be in front of the queue with a Donald Trump administration?
TRUMP: well, I don't want to say front or anything else. I mean, I'm going to treat everybody fairly. But wouldn't make a difference to me whether they were in the EU or not.
UNIDENTIFIED MALE: We wouldn't be back of the queue and trade?
TRUMP: You would certainly not be back of the queue. That I can tell you.
(END VIDEO CLIP)
NEWTON: David Gergen has advised a number of U.S. presidents, from Richard Nixon to Bill Clinton. He joins me now from Cambridge, Massachusetts. David, OK, I'm scratching my head over this one and I'll tell you why. Look. Regardless of whether or not Donald Trump said that just to be contrarian to what President Obama said, and let's face the facts, President Obama kind of took a little bit of license with that. Back of the queue is probably not entirely accurate. Trump has said again and again trade is not exactly a priority of his. He wants to dismantle trade agreements, not put more together.
DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Well, that's right. But he also thinks, you know, he has certain nations and singled out, particularly Mexico and China, as essentially cutting deals with us to the disadvantage of Americans. But he's not opposed all trade agreements or all trade relationships. Clearly, you know, he wants to maintain a strong relationship with Great Britain. What I find interesting is in the old days, you know, American politicians, president, a candidate, wouldn't wander into the middle of essentially a vote that was being taken in Britain or any other European country. and now both of our -- both president Obama and now candidate Trump are wading right into the middle of that. Fur is flying. David Cameron is ticked off at Trump. I imagine the former mayor of London is cheering him on.
NEWTON: That's interesting, right? Those politicians weighing in on Brexit and the election campaign. You have David Cameron refusing to apologize for essentially calling Donald Trump stupid in terms of his comments being stupid and the --
GERGEN: Absolutely. You got the mayor of London, new mayor of London, going after Trump. They've been a number of people around the world who, in fact, have made very disparaging comments about him. Don't want him in certain places in Latin America. You have had a big debate in the parliament of Britain, whether he'd be welcomed there. It's a bizarre world, which has never seen these kind of conversations.
NEWTON: David, just for -- you know, you have been really involved lot of these negotiations with allies and people that are probably difficult allies. Is any of this going to matter depending on who they elect in the White House anyway?
[16:20:00] GERGEN: Think it matters some in tone, yes. But on the substance, I don't think it makes that much difference. The nation's interests don't change just because the prime minister or president may change. The national interests are still very aligned with each other in terms of Great Britain and United States. I don't care who's at number 10 or the White House, they'll try to get along well together. What it does mean is the atmospherics do matter. When you want a favor from somebody, you want to lean on them for something, if you really don't have a good friendship, it's hard.
That's no better example than the relationship of president Obama and Prime Minister Netanyahu of Israel. You know, they have a poisonous relationship. They've never liked each other. One thinks the other's a bully. That's what Obama thinks of Netanyahu. Netanyahu thinks Obama is too weak. And it really has slowed down. We're sort of at a point where nothing's going to happen on the U.S. -- Israeli Palestinian negotiations until the next president comes along. In part because of this poisonous relationship. So it does matter. I think it matters more on the margins. On the questions about when you lean on people for things. It does not matter when it comes to fundamentals.
NEWTON: I hear you. Trying to get tough things done there. To the Democratic campaign. Hillary Clinton saying, look, my husband Bill could very well be the economic czar. She said he knows how to deal with these kinds of things. You advised Bill Clinton politically and in a substantial way. Do you think it was a good idea, eastbound though she seems to have backed off now, saying, he's not can have a position in cabinet?
GERGEN: I think she sort of got carried away little bit. She's pretty careful to avoid this whole notion of two for the price of one and electing both. She really wants to win this on her own. I think what she was trying to do is remind people that Clinton years were good years economically. Lots of jobs created and strikingly in the Clinton years the group of people in the country who had the highest rate of income growth were people at the bottom quadrant. And of course that's not happened much in the last 30 years. So she wants to remind people.
A lot of people who are voting this time around were not around. They weren't adults in the Clinton years and they don't remember the good times and one of her important, you know, goals is to convince people that the Clinton years in fact were very positive in contrast to this. And she'll bring that back. I think she went too far saying my husband will revitalize the economy. Frankly, this's what the president is supposed to do.
NEWTON: yes, and he's not running for office. She's saying he won't have a cabinet position. So you do kind of wonder if she is elected --
GERGEN: Yeah. You know, they'll both be in there. She'll have them by her side no matter what. I think everybody expects that. What I don't think is most people would imagine he would not have some sort of -- you wouldn't carve up the oval office and give him the economy. That's not going to happen. Where I do think she may use him more as an emissary to a variety of foreign countries and not sure the secretary of state is going to be the happiest person around working with Hillary if Bill, in fact, is various countries. There will be interesting things to work out.
NEWTON: A long way to go before we get there as we continue to fight on in this campaign.
GERGEN: Absolutely.
NEWTON: David Gergen, we'll talk to you again. Appreciate it.
U.S. intelligence officials meantime say they think Venezuela is at risk of an imminent and serious crisis. Now they are warning that it could even trigger a revolt as severe shortages of food and power stoke unrest. Opponents of President Nicholas Maduro, were out on the streets of Caracas on the weekend. On Friday, Mr. Maduro, extended a state of emergency for 60 more days. He also threatened that factories that have stopped production would be taken away from their owners.
(BEGIN VIDEO CLIP)
NICOLAS MADURO, VENEZUELAN PRESIDENT (through translator): Comrades, I am ready to hand over communal power the factories that some conservative's big weeks in this country stopped. And if the factory is a factory hands over to the people. But we're going to do it.
(END VIDEO CLIP)
NEWTON: Now, it's important to remind people that one of the reasons the factories are closed is because the owners of the factories say, they do not have any of the materials they need to keep the factories going. Eric Farnsworth is vice president of the Americas Society and Council of the Americas.
ERIC FARNSWORTH, VICE PRES., AMERICAS SOCIETY AND COUNCIL OF THE AMERICAS: You know, a lot of people, we heard the headlines in Venezuela week after week and the people in Venezuela themselves suffering through a lot of the economic affects here. Do you see an end game at this point? When I say end game, any insight that the government of Venezuela understands how serious this is and is willing to change tact in order to resolve some issues?
[16:25:00] I think there are a lot of potential end games, but probably not many of them end in a good way. Part of the problem, in fact the main problem, is that the government instead of changing its direction is actually doubling down on the course of action that it's already implemented now for 17 years if you go back to when President Chavez first elected. It's a direction of the economy that systematically destroyed the productive capacity of the state. It's certainly oil and energy is a part of that, but expropriating private sector companies, vilifying private sector leaders, throwing opposition leaders in jail, now you're looking at inflation that some estimates would have as high as 700%. Basic goods unavailable. Lines, people standing in line for hours to get basic goods if they're even available. This is a country in crisis and doesn't seem the government has any willingness or desire to change course. So the endgame is in a positive one.
NEWTON: And yet what they've been willing to do is pay their debt. I mean, some people thought they would be in default by the end of the year. They are saying they won't be. And they look on track be able to pay that debt. I mean, what kind of effect does that have that in order to conserve the foreign reserves that means they have to import less and import almost everything they need in that country. I mean, what do you think their end game is there? Because clearly, they have a program that they want to stick to, and that means they're going to meet the international financial obligations.
FARNSWORTH: I think the immediate end game is to play for time. And the reason why is because according to the constitution the opposition can put in to place a recall referendum that if done by the end of this calendar year or early next year, will be force the president to step down and new elections would be called. If he can resist until after the deadline, which is early next year then, in fact, even if a recall is put in place it would -- the vice president would step in and take over and fill out the rest of the term. So, the immediate plan is to play for time. That's not sustainable over the long term. But what they have been doing in order to try to make sure that they can pay those debts, is, for example, renegotiate loans with China.
They have had a little bit of breathing space, because the price of oil, which is really their only commodity export at this point, has ticked up recently and it may be going up a little bit further. So there's a little bit of breathing space there, but fundamentally these are unsustainable issues. And the question is how much pain can the population of Venezuela take before they say, enough, and go to street and really try to force change from a different perspective?
NEWTON: Many people have been asking that question and week after week things continue to get much worse there. We'll continue to check in with you on this issue. Appreciate your time.
FARNSWORTH: Thanks very much.
NEWTON: Venezuela might be getting relief soon in the form of oil prices. Goldman Sachs those prices could hit $50 per barrel toward the end of the year. Now the U.S. banks forecasts have previously quite bearish on oil. Goldman said production outages in Nigeria and Canada would support higher prices. We've also seen production sputtering, as we said, in Venezuela. Brent crude touched a six-month high on Monday. Todd Colvin, of the commodity trading firm for Ambrosino Brothers, joins me now from the Chicago Mercantile Exchange. I mean, is this a short lived rally? It seems to be an open question at this point in time. Or have we hit the floor, the price floor, on oil and it's only up from here?
