BUSINESS-01
Pro Quo" Over Clinton Email; Obama: Trump's Claims of Rigged Election
"Unprecedented"; Corporate earnings Help Rush U.S. Stocks Higher; Yahoo
Beats Wall Street Earnings Estimates Since Revealing Breach. Aired 4-5p
ET - Part 2>
Ben Wedeman>
Kohn, Columnist, The Daily Beast; Russ Gerber, CEO, Gerber Kawasaki Wealth
Management; Ken Rogoff, Professor of Economics,
Harvard University; Ryan Lintelman, Entertainment Curator, Smithsonian>
of a rigged election. Documents released on Monday suggest that a top
official at the State Department by the name of Patrick Kennedy, tried to
persuade the FBI to declassified an email was from Clinton's private
server. Strong corporate earnings are fueling a mini rally on Wall Street,
and we've seen better than expected numbers from Netflix and Goldman Sachs.
President Obama says he is confident ISIS will be defeated in Mosul. The
battle to retake the city from the terrorist group is now into its second
day. Yahoo is trading 1.5 percent higher after hours. The third quarter
results beat Wall Street expectations, but the future of Yahoo remains
murky. It appears Europe's trade deal with Canada will not be getting
approval, at least not today. EU ministers failed to come to an agreement
a week before it was set to be signed during an EU/Canadian summit. Nearly
80 years after Judy Garland danced up the yellow brick road, her ruby red
slippers have fallen into some repair. And now the Smithsonian is making
an appeal to save the world's most famous pair of shoes.>
Internet; Telecommunications; Media; Technology; Lifestyle;>
QUEST: Finally, Ben, as I'm looking at where you are in Irbil tonight, I was thinking this last night when we spoke to you. I mean, the lights are on in Irbil, the traffic is moving, and you know it must feel surreal that you're not that far from this hell hole of fighting. But as much as it can, life seems to be going on in Irbil.
WEDEMAN: Yes, we're a good 75 kilometers to the east of Mosul and this is a city that seems to be going on life as usual. I'm on the balcony of a suite in a five-star hotel. The electricity is on 24 hours a day. Keep in mind, however, that Iraqis have gone through an awful lot in the last few decades and they do cherish normal life to the extent that is possible. So yes, here and here in Irbil, restaurants are full, there's traffic late into the night, but it's not far away where it is the exact opposite, Richard.
QUEST: Again, Ben, thank you so much. You've brought the reality of the situation on both sides to us and we're grateful. Thank you. Ben Wedeman joining us from Irbil.
Yahoo's results came out. Will be back to our business agenda. Look, profits were up. There is no word on the Verizon deal, but we do need to understand parlous fate of Yahoo, after the break.
[16:35:00] (COMMERCIAL BREAK)
QUEST: I guess the beleaguered shareholders of Yahoo will take whatever good news they can, and Yahoo is trading 1.5 percent higher after hours. The third quarter results beat Wall Street expectations. The future of Yahoo remains murky.
I'm going to put this into context for you. Let's just imagine Yahoo's search history, which is riddled and shows the wronged turns and the missed opportunities. So if you look at Yahoo and the most recent search of course, is the data breach. One of the largest data breaches in history. Some 500 million user accounts stolen in 2014 that you can read about. Now the data breach puts Yahoo's Verizon deal into 4.8 billion into some doubt. Verizon can renegotiate or pull out. The Verizon general council has said there is a reasonable basis to assume the deal will be affected. But it is worth mentioning, there is not really a word about that in today's results.
And to put it into context, whatever Yahoo may be suffering now, just remember back in 2008, do a quick search on that and you will see it comes up with the Microsoft deal. Microsoft offered nearly $45 billion, $45 billion in 2008. That is nearly ten times the current Verizon deal. And then Yahoo said the offer was substantially undervalued the company.
Let's put this into perspective. Russ Gerber joins me now from Los Angeles. He's the president and chief executive of Gerber Kawasaki Wealth Management. Has long called for Yahoo to be broken up and sold off. Good to see you Russ. So these results are -- one can't say they're encouraging, you know they're better than expected. But we're not being given any more details about the hack or how it affects the Verizon deal. What can you tell us?
RUSS GERBER, CEO, GERBER KAWASAKI WEALTH MANAGEMENT: I think there is a concerted effort to not have this be a big deal. Because Marissa Mayer is trying to get this thing sold and get out of there with her $100 million payout without a disaster. And the ship is so broken here at Yahoo, so they goosed earnings up as well as they can. They're down playing the issues they have to try to maximize the potential of getting this deal done as soon as possible.
QUEST: Right, but for somebody like yourself, who has long sought a breakup of Yahoo on behalf of other investors. I mean, at least she's selling it off. Which is exactly what people like you wanted her to do in the first place.
GERBER: That's correct. And she is. The problem is that she's done it from a position of weakness versus a position of strength may be a few years back. And basically every attempt she's made to add shareholder value has actually decreased shareholder value. I think that company would have better served selling maybe a year or two ago.
QUEST: Right, but that a case, Ross, I'm not being difficult here, but that's a case of should of, could have, would have, and you didn't. So now you are where you stand. Do you believe that Verizon will progress with the deal? Or do you think they have a strong case either for abandoning it or going back and ask were something off the price?
GERBER: No, I mean, Verizon is going to finish this deal and it would be hard for them to say that the data breach has materially affected the value of Yahoo. Because quite frankly, the value of Yahoo is pretty immaterial. So I think the real issue is, what can they salvage from this deal that will really benefit Tim Armstrong and the AOL team at Verizon.
[16:40:00] And I think that there's some value there. I just kind of feel like it's diminishing quickly.
QUEST: Where does Yahoo sit in the Verizon firmament? I mean, with all of the other things that it's got, whether it's Huff Post, all of the other bits of Verizon, the content rich -- everybody wants content. Where does Yahoo sit, do you think?
GERBER: I think that that's the exact strategy they're trying to employ at Verizon, which is a pivot away from basically cell phone service, which is a very mature business. To services, video and ad content and generation. They're very, very focused on the video ad business and delivering the ads to their 100 million or so subscribers or whatever they have. So I think this is a good move for them, it's just a lot of pieces that have to eventually come together and I don't know if they're that good at doing this.
QUEST: One point though, we've trashed Yahoo to some extent, but if you actually look at the numbers, whether it be for Yahoo Finance, Yahoo News. Yahoo is consistently in the top three to five, sometimes like in Yahoo Finance, the number one visited site. So is not as if it's a basket case. It may be corporately or financially a basket case, but it's content is not.
GERBER: Yes, I agree with you. And I do think the two most valuable areas are sports and of course finance. But the recent changes to the finance site I actually really don't like. And so it's not just about having the properties that are so visited today. Our people going to visit them in five years or three years from now and are they going to stay relevant in rapidly changing technology landscape. And that's what I'm worried about with them.
QUEST: We're very grateful, sir, that you came in this afternoon and this evening to help us understand it, thank you.
GERBER: My pleasure.
QUEST: Commodity stocks helped European markets pushed higher. Take a look at the numbers and you will understand what I mean. The best of the day was in Germany where -- well actually it was in Paris, Germany and Paris -- was 1.32 and 1.22. It helps, Richard, if you read all of the numbers before you make a comment. And the FTSE eked out three quarters of a percentage point gain.
It appears Europe's trade deal with Canada will not be getting approval, at least not today. EU ministers failed to come to an agreement a week before it was set to be signed during an EU/Canadian summit. The protests are against the deal that have been held in the past week in Paris. Now last week Belgium was unable to get its approval after one of the Belgian regions Vilonia, voted against it. The EU Trade Commissioner says, failure to make this deal happen could have wide reaching ramifications.
(BEGIN VIDEO CLIP)
CECILIA MALMSTROM, EU TRADE COMMISSIONER: If we can't sign with Canada, of course the rest of the world will ask themselves is Europe a reliable partner? So we will have consequences for our trade policy.
(END VIDEO CLIP)
QUEST: After meeting with the Italian Prime Minister, Matteo Renzi, in Washington, Barack Obama said, these kind of trade deals and other measures to boost growth are important to Europe's overall well-being.
(BEGIN VIDEO CLIP)
BARACK OBAMA, U.S. PRESIDENT: My hope will be that the debate broadens as Europe moves forward around how to grow more quickly, put more people back to work, see incomes rise, create a greater momentum and optimism. Because I do believe that there is a connection between stagnation and some of the less constructive populist impulses that have been rising up.
(END VIDEO CLIP)
QUEST: Now from Cambridge, Massachusetts, where joined from Harvard, Professor Ken Rogoff. Ken, how good to see you sir, nice to have you, thank you.
So the Canadian EU deal, the Belgians looked like they were about to scupper that particular deal in some shape or form. If they do cobble it together as many suspect they will, the under lying antitrade trend continues, doesn't it?
KEN ROGOFF, PROFESSOR OF ECONOMICS, HARVARD UNIVERSITY: It absolutely does, I think president Obama hit the nail on the head with why deals like this are needed now. If you don't have them, there is a lot of backsliding. There is huge anti-trade, anti-immigration, very populist impulses. And if you don't have something like this creating a barrier to putting up more protectionism, you will get it.
[16:45:00] QUEST: But if you have protests in Paris, and you have the government base which I saying we're worried about the protections in a certain deal with Canada, you see the elites may be ahead of the populous?
ROGOFF: It is never easy to get trade deals through. They're usually knife edge. And if you put them up to a vote it's very tough. We're talking about Canada EU, I think the U.S., the EU in this environment it will be harder given the campaign we have seen for president.
QUEST: Donald Trump is making huge scores in his debates about the extent of the U.S. trade deficit, $7-800,000 billion. He talks about it frequently. Is that a number that is of concern bearing in mind the dollar is very strong and the U.S. having no difficulty financing its current count?
ROGOFF: No, I don't think in itself, The U.S. deficits are a huge concern, I think the fact is the rest of the world is desperate to hold U.S. assets, considered relatively safe, and they lend the United States the money at phenomenally low interest rates. Yes, of course it is a concern that the quality of job growth has been weak and demand from overseas is not as strong as it is.
I've got to tell you, we put up a wall of trade with China and it might make the trade deficit look better, but it will drive prices up massively.
QUEST: And while we're talking on the big issues of trade, The U.S. Trade Representative Michael Froman speaking in Europe just this week, you may have seen what he said about how it is impossible for the U.S. to negotiate with the U.K. on a post-Brexit trade agreement, because no one knows that U.K. EU deal will look like. So how worried are you that the Brexit overhang on trade is just -- it just continues to pull down all of the various trade negotiations?
ROGOFF: I don't know that so much as that when the U.K. did this, the Brexiteers said don't worry, we'll get a good deal on all these trade negotiations. But I have got to tell now is a very bad time to be doing trade negotiations, the populism is very strong. The leadership against it is not strong. I would be very concerned about what the U.K. is going to get.
I think the bigger problem for the U.S. is simply that even though a Europe-U.S. deal in some sense is very minor compared to the deal with Asia, because they're very similar economies, versus Asia which is a very different one. It is just toxic, the environment right now after Trump, after Sanders, very successfully campaigned against trade. And secretary Clinton has been just hanging on for dear life defending her early positions which were pro-globalization.
QUEST: Thank you, good to see you, sir.
Nearly 80 years after Judy Garland danced up the yellow brick road, her ruby red slippers have fallen into some repair. And now the Smithsonian is making an appeal to save the world's most famous pair of shoes. We'll go over the rainbow after you enjoy some "MAKE, CREATE, INNOVATE".
[16:50:00] (COMMERCIAL BREAK)
QUEST: Just tap your heels together three times, and think to yourself "there is no place like home".
The most famous shoes in the world. The ruby red slippers from the "Wizard of Oz". Maybe not these, but the ones in the Smithsonian are in need of saving. Oh my, oh my, lions and tigers and bears. The Smithsonian says they need $300,000 to repair a pair of shoes. Why are they so important? 77 years ago, Dorothy had to fend off that wicked witch of the west to keep her slippers.
(BEGIN VIDEO CLIP)
WICKED WITCH OF THE WEST, WIZARD OF OZ: The ruby slippers what have you done with them? Give them back to me or I'll --
GOOD WITCH OF THE NORTH, WIZARD OF OZ: It's too late, there they are, and there they'll stay.
WICKED WITCH OF THE WEST: Give me back my slippers, I'm the only one that knows how to use them, they're of no use to you, give them back to me. Give them back.
GOOD WITCH OF THE NORTH: Keep tight inside of them, their magic must be very powerful, or she would not want them so badly.
(END VIDEO CLIP)
QUEST: Oh, powerful magic, now the Smithsonian says its crowdfunding to make sure the slippers are preserved for generations to come. So far the campaign is surging down the yellow brick road towards its goal. A Kickstarter appeal raised $75,000 in just a few hours. Ryan Lintelman is the Smithsonian's entertainment curator, he joins me now from Washington. Sir, why Kickstarter for the red slippers?
RYAN LINTELMAN, ENTERTAINMENT CURATOR, SMITHSONIAN: These shoes, like you said, are the only pair owned by the American people. So what we want today do with the Kickstarter campaign was give the American people a chance to contribute to the restoration of the shoes and the conservation and display of these shoes that matter to so many people. It's a great platform.
QUEST: But the Smithsonian is not -- I know you're strapped for cash on the big projects, but you're not hard up for $300,000 to repair some slippers. So how much of this is really also about involvement? You want people to be involved?
LINTELMAN: That is exactly it. A lot of the money will go to this, it's very complicated process to conserve and build a new case for the shoes, but it is a great opportunity to get people to contribute to something that really matters to them. So many people have great memories of the "Wizard of Oz" with friends and family at the holidays, and the magic of Hollywood as represented with these shows. So we want to give the people an opportunity to have some ownership of that.
QUEST: I've got to ask you. What are you doing with $300,000? I mean -- this is -- I have a feeling I will learn more about preservation of shoes than I wish to, however, why do you need $300,000 to build a case to hold a pair of shoes?
LINTELMAN: Museum conversation is very complicated process. You need highly trained experts who can analyze the material types. And really figure out what the best way to care for these is. This is a very early type of plastic used to make the sequins. It is a very complicated thing to be able to analyze. It has never been attempted on this scale and we want to give those people the tools they need to be able to figure what is going to keep the ruby slippers on display for years to come.
Because we want everybody to be able to see them. The case they will go into in our new exhibition in 2018 is also going to be state of the art. Totally sealed, and anoxic so that all of the light and humidity and temperature changes that hurt the slippers over time will be mitigated and so we'll stop that deterioration and save them.
QUEST: And finally, the Smithsonian relies on private donations and a lot of corporate money, I assume maybe some corporate money, a shoe manufacturer or something might come in and decide to have the ruby red slippers sponsored by.
LINTELMAN: So far we wanted this to be a people centered campaign. That is why we picked Kickstarter and we hope everyone will go there and make a contribution there. As small as a dollar or up to the higher levels where you get some of the great rewards that we are offering. We really want it to just be something for the American people.
[16:55:00] QUEST: Well, I am sure there will be others who will join as well. The red slippers one of the most sought after artifacts at the Smithsonian, thank you for joining us.
We will have a Profitable Moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's Profitable Moment. Even for an economic nerd like me, getting excited by trade agreements is pretty difficult. However, the failure or potential collapse of the Canadian EU CETA deal, the Comprehensive Economic Trade Agreement is the most far reaching and ever negotiated by the EU with another body is serious stuff.
And all because there are protests in Paris and the Wallonia region in Belgian is up in arms about it. If they can't get CETA through, and I think they will, they will cobble together some deal, it merely reinforces the view that the populous uprising that we're hearing on things like the Transpacific and the of course, TTIP. European Transatlantic Trade Partnership.
Getting these trade deals through is becoming almost impossible. And that doesn't seem likely to change any time soon. Only a fool, it seems, actually goes in favor of a trade agreement if they want to get reelected. That is QUEST MEANS BUSINESS for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, do I hope it is profitable. I'll see you tomorrow.
END
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