BUSINESS-01
Trump Over Taxes; Lagarde: Respect Women and One Another; Lagarde:
Everything is Better with Growth; Dow Rises as Investors Digest Bitter U.S.
Debate; Samsung Stops Producing "Exploding" Phones; Hungarian Newspaper
Abruptly Closes; Contact Theorists Awarded Nobel Economics Prize; Tecate
"Beer Wall" Ad Combats Debate Rhetoric. Aired 4-5p ET - Part 2>
Economic Adviser, Allianz; Gabor Horvath, Editor, Nepszabadsag; Per
Stromberg, Chairman, Nobel Prize in Economics Scientists; Bengt Holmstrom,
2016 Nobel Economics Prize Winner; Felix Palau, Vice President, Tecate>
at least remove themselves as far away as possible. From the man who is
regarded as toxic for the rest of the Republican party slated. Warren
Buffett has responded saying he paid close to $2 million in federal income
taxes last year. He said Mr. Trump knows more about taxes than any other
human. One of the world's most influential women, Christine Lagarde, says
she has no interest in anyone with does not respect the dignity of women.
Christine Lagarde says everything is better with growth. Secretary Clinton
economic indicators showing that she won last night's debate. Samsung
after their flagship smart phone started exploding in people's pockets and
on airplanes, it can get worse. The replacement Galaxy Note 7 are
reportedly also catching fire. Hungary's largest opposition newspaper has
closed down quite spectacularly over the weekend. Ever since the global
financial crisis, executive pay has been the subject of much public debate.
Now it's also a subject tackled by this year's Nobel Prize winners in
economics. Tecate is a Mexican beer. It's owned by Heineken, and it's
released a commercial that spoofs the ugly rhetoric and promises to bring
people together.>
Alcohol; Taxes; Stock Markets; Technology; Electronics; Women>
Samuel Burke is following the events from London. Do we know definitively that the replacement phones are exploding?
SAMUEL BURKE, CNN MONEY CORRESPONDENT: We have reports and Samsung is no longer pushing back on them. I think that is key here, Richard. We have been reporting on this for almost two months now. Back on August 19th, the phone was launched and people said it was the best smart phone ever made.
Little did they know that just a few days later August 24, we would be already seeing reports on social media and that has been key here. Without social media we would never have been able to piece that together of the phones catching on fire.
September 2nd that recall is announced. They say it is just a problem with one of the batteries. They have two different battery makers. Not a problem with the phone. Just one of the battery makers, really. There is a big period there between the second and the 21, Richard, they finally start this recall, but just in certain countries.
But immediately then we start to see problems with replacement phones and in other countries. By October 5th we have this evacuation of a Southwest Airlines flight in the United States, thankfully it wasn't in the air. And by the 10th, today we have now what they are saying is a temporary halt of production of the Note 7. I have never seen a product fly so high and then go so low.
[16:35:10] QUEST: For Samsung, I'm reading various analyst estimates that say it could cost billions. They have other phones in their armory, and they have many other products as well, but this is catastrophic, would you say?
BURKE: This is absolutely disastrous for Samsung. This the biggest smartphone maker in the world. A company which had been struggling, they get a phone that gets these great reviews and suddenly it looks like they're on their come back and what I'm hearing from analysts, Richard, is they're telling me, what are they going to do if this really is a problem with the second -- the replacement phone, the second iteration of the phone? It can't launch a third one they tell me. How do you re-launch a product for a third time that's it for the Samsung 7, many of them assume.
And then they have to roll out the Samsung 8 but you can't roll out a phone overnight, certainly not a new model, a new name. So there is going to be a gap that puts at a serious disadvantage to the iPhone 7 that seems to be going very well for Apple and now Google just announcing their line of Pixel phones. So it is hard to see where the Note 7 goes from here if it even survives.
QUEST: And is there any schadenfreude -- I'm just looking at Apple's share price today, it was up nearly 1.75 percent, Apple again of nearly 2. How would they be responding or what are they saying? Or they just keeping schtum?
BURKE: They're just keeping quiet and riding high at this point. Knowing that this has hit Samsung. I think the real problem here, Richard, and I am still scratching my head, how is it that this is only a halt in production? They have not recalled the replacement device that is having problems all over the world, Richard. The carriers, ATT, T-Mobile are saying you can bring it back to us, we are not selling it anymore. So the carriers are taking the lead while Samsung seemingly tries to evaluate this floundering situation.
QUEST: Samuel Burke in London, watch this closely, please, thank you.
Now to Hungary where the country's largest opposition newspaper has closed down quite spectacularly over the weekend. Now normally we wouldn't necessarily be covering just a newspaper closure in a relatively small country in central Europe, but in this case it's very different. Two thousand demonstrators gathered outside parliament to protest against what's happened. They believe that the left-wing papers demise is entirely politically motivated, and stems from the right-wing Prime Minister, Viktor Orban.
The paper's owners say the closure is temporary and the paper has been losing money and readers, and is the result of years of poor financial losses in a poor business model. It is more than a story about the newspaper going broke or going out of business. It goes to the heart of the issues and Hungary at the moment. Joining me now is Gabor Horvath, he's the editor of the recently closed paper. Sir, I would try to mention the name of the paper, except I would fail spectacularly. So please tell me what the name of the paper is.
GABOR HORVATH, EDITOR, NEPSZABADSAG: Yes, the name of the paper Nepszabadsag. And let me tell that it's an honor to be on one of my favorite shows at CNN.
QUEST: We're delighted to have you, sir. So the question simply this, do you believe that this closure is entirely politically motivated because this newspaper was a threat or a thorn in the side of the government?
HORVATH: Yes, sir, yes. That's our strong belief. Probably the company's owner is being under pressure from the government to do something about it. During the last few weeks, we came up with a few scoops. One of them the chairman of the National Bank hiring his long-time lover for triple salaries. She happens to be a yoga teacher. Everybody wonders why the National Bank of Hungary needs a yoga teacher in a high paying job. And this other one was a cabinet minister flying on a helicopter to the countryside wedding with his family and then trying to lie about this. So we came up with a few stories which were very unpleasant, but I guess, the main problem of the prime minister was losing the referendum on migrants.
QUEST: He says he won it. He says --
HORVATH: I watch your show, Mr. Quest, I know.
QUEST: He says he won the referendum because even though it didn't get to 50 percent, most of those who voted were in favor.
HORVATH: I know. I saw our foreign minister. I saw the government spokesman on your show before.
[16:40:01] Of course they tried to put up a brave face, but as a matter of fact they lost. And probably they got very upset about this.
QUEST: How serious is losing this newspaper -- whose name I won't attempt to butcher -- how serious is losing this newspaper to the freedom of the press in Hungary? Bearing in mind there are plenty of websites that one can go to.
HORVATH: Just imagine the United States of America, when not only NPR, PBS, and C-Span being owned by the government -- I know they're not -- but also NBC, CBS, and ABC belonging to them, and CNN, and Fox News also. Then just try to imagine that the "New York Times" shuts down all of a sudden. That is the effect. As a matter of fact, Hungary very much needs an opposition newspaper. A free independent voice, and they've been trying to do that for six years.
QUEST: Even if it is losing money. This paper was losing money and losing readership.
HORVATH: Yes, as all the newspapers, not only in Hungary, but all over Europe and North America, too. Yes, we know that. It did not lose that much money. As a matter of fact, as much as we know, we don't know too much because we're employees and we don't see the books. But we would be losing about, let's say, less than a million euros a year. For a company with a revenue of 80 million euros, it should not be that much. Actually they came up with glorious reports about their revenues and profits. So probably they could have found a solution to this program.
QUEST: Sir, we're very grateful to you coming on tonight. We look forward to talking to you again about the situation in Hungary in the future. We appreciate it, good to see you sir, tonight from Budapest.
HORVATH: Thank you very much.
QUEST: Coming up next from Hungary to the Nobel Prize for economics. And it couldn't be more topical. It's about executive pay. I've been talking to one of the winners of the prize. And you'll hear it in a moment. We'll talk about contracts. Will hear about it and we'll talk about contracts.
(COMMERCIAL BREAK)
QUEST: Ever since the global financial crisis, executive pay has been the subject of much public debate. Now it's also a subject tackled by this year's Nobel Prize winners in economics. It is the work of Britain's Oliver Hart and Finland's, Bengt Holmstrom. It addresses a host of questions from how best to reward executives and as to whether schools and prisons should be privately owned. I asked the chairman of the Nobel economics committee to tell me by contract theory, as it's known, is so important.
(BEGIN VIDEO CLIP)
[16:45:00] PER STROMBERG, CHAIRMAN, NOBEL PRIZE IN ECONOMICS SCIENTISTS: Whenever we have an economic transaction, or so many economic transactions we have are really contracts, you know? When we work for a job we have employment contract that tells us what you're being paid and what you do. When we take out insurance, it's a contract between us and the insurance company, and so forth. Even if you think about little institutions in society, you can think about those as contracts. The constitution is a contract between the citizens and the state. This is just very, very fundamental theory to understand lots of different phenomenon in society.
(END VIDEO CLIP)
QUEST: A panel of judges said the winners have laid an intellectual foundation for policies in areas such as bankruptcy and legislation. Now, one of the winners, Bengt Holmstrom, explained that not only was he delighted to have the recognition after working for decades. He was doubly thrilled to be sharing this honor with his good friend Oliver Hart.
(BEGIN VIDEOTAPE)
BENGT HOLMSTROM, 2016 NOBEL ECONOMICS PRIZE WINNER: I could not be happier, I got two prizes today. One for myself and the fact that Oliver got a prize. It was a new area when I started in the 70s, 80s it was a discipline field, and I would say that I contributed in various ways to develop that field and develop above all, perhaps, what the right questions are.
QUEST: We were talking to the president of the committee, the Noble committee, and he was telling us that your work has very practical applications across a wide range of the economy. And that was one of the reasons, or partly, or whatever, that they were most impressed with the real life application of your work. That must be very rewarding.
HOLMSTROM: Yes, I got into these problems as an assistant CFO of a big company in Finland. I did not start off as an academic.
QUEST: And so now you have the Noble, and now you are recognized in that respect. How do you celebrate?
HOLMSTROM: That I don't know yet. It's too close to say. But I'm going to celebrate with my wife tonight. We are going out for dinner.
(END VIDEOTAPE)
QUEST: I guess if you can't take your wife or your husband out for dinner when you just won the Nobel Prize, when can you.
Christine Lagarde's comments about butter, growth in the future of economic growth is what we're talking about. Why Christine Lagarde is shouting at countries. It's at our newsletter. It arrives as the closing bell rings, but before Asia trade gets underway. CNNMoney.com/quest where you can subscribe. And incidentally there is a link, a hyperlink, whatever you want to call it, where you can click on it if you want to email me directly. And I promise you it goes directly to my Blackberry, which is that one. We can keep in touch. I still have this for the time being, until they take it away.
As the campaign rhetoric goes down into the gutter, the debate ratings follow even lower. One beer company is trying to bring people together around the election. The vice president of Tecate will join me next. QUEST MEANS BUSINESS.
[16:50:00] (COMMERCIAL BREAK)
QUEST: Now we thought initially that there would be absolutely huge, but the ratings from the first presidential debate showed America's interest in the election. The second faceoff, they actually showed America's revulsion. Viewership dropped by 20 percent on Sunday night as the race between Hillary Clinton and Donald Trump has grown nastier and more divisive. At exactly the moment when you thought it might have gone the other way. Tecate is a Mexican beer. It's owned by Heineken, and it's released a commercial that spoofs the ugly rhetoric and promises to bring people together.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE, TECATE BEER COMMERCIAL (voice-over): The time has come for a wall. A tremendous wall. The best wall. The Tecate beer wall.
(END VIDEO CLIP)
The Tecate beer wall. Joining me in the C-suite, is the vice president of Tecate, good to see you, sir.
FELIX PALAU, VICE PRESIDENT, TECATE: Great to meet you, thank you.
QUEST: It takes a certain courage to decide to make a commercial about something as politically toxic as the issue of the wall, doesn't it?
PALAU: No, this is a big and bold idea for sure. But we really saw a big opportunity to insert ourselves in a conversation that is current and that is relevant to many of us. And being a Mexican beer, the idea of a wall is close to us. We wanted to tell a story with a lighthearted approach of how Tecate, in this case, being a beer can bring people together of two bordering towns over a Tecate beer wall.
QUEST: But are you mocking Trump's plan of building a wall?
PALAU: We're playing on this conversation and we strategically --
QUEST: Oh, no, no, no. You can't have it both ways. You can't talk make an advert about something that is politically sensitive, and when people pointed out, try and say no, that is not us. Oh, no, no, we have no intention of that. We were just having a bit of fun.
PALAU: You look at the spot. I mean, it's lighthearted, it's fun. We just want to make a twist of a story. We know that beer brings people together. That's the role that beer plays in society. It brings us together. It opens conversations about all things happening. In this case, Tecate is a protagonist of this story, and we strategically developed this conversation or this spot to trigger this conversation in a healthy way. And the results so far have been very positive.
QUEST: Tell me about the results.
PALAU: I think we have difficult metrics. First of all, we wanted to increase our awareness as much as possible. So we reached as many consumers as possible with this spot. We reached more than 27 million consumers through the national media. But also I think very important, we created a very healthy conversation through social media.
QUEST: A conversation about what?
PALAU: About this topic that can be poignant. But at the end of the day when you look at the sentiment, 89 percent of the conversations are positive. So in a way consumers understand the nuance. They in a way appreciate the tone and humor. And they get the message.
QUEST: When you say 87 percent are positive, positive in the sense of let's all love each other and let's not have walls that divide ourselves. So are those 87 percent anti-Trump wall?
PALAU: Across all the different ideologies whether you are conservative or liberal. Our strategy was to reach as many people as possible. We don't have any ideology or any affiliation. This is the perfect timing for us. This is the super bowl of our efforts. Because we are an emerging brand. This was a perfect opportunity.
PALAU: You are an emerging brand with very deep pockets from Heineken. Who had to convince somebody at Heineken -- let's face it, the corporate suits at the top, that shy away from their own shadows, who had to convince them that this was not going to be a career killer?
PALAU: Again, we were very careful about the message. Strategically on brand and I would say neutral from a political standpoint. So, yes, it went through all the different approvals of the company. The first time that we saw this story we really felt that it was really going to trigger a very healthy conversation. The facts are there. The results are there. It's not me talking its consumers talking.
QUEST: Good to see you, sir. I suspect my colleagues here will never forgive you. Because here we are in a studio talking about beer, and I don't see any beer, let alone walls --
[16:55:00] PALAU: You know what, sir? Our biggest, I would say, objective of all is that no matter who wins, that he celebrates with a Tecate.
QUEST: Get the advert in. We sell advertising time. We'll get you the bill on the way out. Good to see you.
PALAU: thank you so much for having me. It's a pleasure.
QUEST: Will have a Profitable Moment after the break. He didn't bring any beer.
(COMMERCIAL BREAK)
QUEST: Tonight's Profitable Moment. Christine Lagarde told us last week, everything is better with butter. It was a comment that her grandmother used to say it. But she interpreted it as meaning everything is better with growth. And on this program tonight you heard Mohamed El-Erian basically say, that's absolutely right. Things are better with growth, and growth simply doesn't exist at the moment.
But what we learned at the IMF over the weekend is that monetary policy, central banks are just about done. Interest rates are negative in many countries. There's some QE is nowhere near as effective as it was in 2008, 2009. Now it's really up to fiscal policy and our old friend structural reform. The problem with structural reform is that it's very difficult to do. Everybody talks a good talk. View actually get on with it. And that's why the current situation is so serious. It's not catastrophic or calamitous, but it will certainly get worse if growth doesn't pick up, and everybody feels there taking part. And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in New York, whatever you're up in the hours ahead, I hope it's profitable. I'm off for the rest of the week. I'll see you.
END
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