Netanyahu Suspends Migrant Deal; Trump-Putin Discussed Meeting at White House; U.S. Markets Tumble on Trade and Tech Fears; Trump Renews Attack on Amazon as Shares Plunge.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: It's been a very ugly day for the start of the new week, and the start of the new quarter. The market was up by about 700 points, a slight rally later in the day has pushed things around and that's what you want to bring trade into an end. A solid gavel. It is over and when we show you the numbers you'll be grateful on Monday, it's the 2nd of April. It's welcome to Q2. Brutal markets and a brutal way to start a new quarter. More for you as the share drop after Elon Musk makes a wedge and talks about bankruptcy. And it's Mark Zuckerberg versus Tim Cook in a Silicon Valley showdown. I am Richard Quest live tonight as always from the world's financial capital, New York City where it knows -- where I mean business. Good evening, it is a new quarter for Walls Street, but there are definitely old fears on tech and trade and it was an extremely ugly day on the market. All the major US indices are now officially what would be described as a correction, in other words, they have dropped by more than 10% and the final number is pretty unpleasant. Broad selling across the boards. If I take you to the trading post, we can get a little bit more detail on exactly what is necessary and what should count. These records by the way all seem a long time ago. All three down, so please, red, I think is the color of the day. Not, I think, I know it is. You have the Dow off 459 and it closed at some 2%. It was about 3% at one point during the day, so a bit of a rally. Two and a quarter percent for the SMP and the NASDAQ. That would have been well over 3% earlier. In other words, all 11 sectors were down on the SMP over the course of the day. If you look at FANG and this is the institutional FANG -- Facebook -- alphabet, and Apple, Netflix and Google, then you've got Facebook now 20% off from its peak, Amazon fell sharply after that little Trump tweet, President Trump tweet and accuses Amazon of abusing the postal system and killing retailers. CNN's Clare Sebastian is at the New York Stock Exchange. She joins me now. Clare, the market as we are looking at these numbers, and the CNN Fear and Greed Index remains in extreme fear, but the market at one point, the Dow was often having 700 points, so a marginal rally, but still a very unsettled day.</s>CLARE SEBASTIAN, CORRESPONDENT, CNN: Very unsettled, Richard and you certainly get a sense of it down here. Volume picked up over $600 million ahead of the close, that's around double what it was at lunch time. But what we are seeing really here is a confluence of factors. We've got the trade laws, we've got the issues surrounding tech in the Presidential tweet. He put manufacturing numbers that came in a little below what was expected, along with reports there of worries from companies about those tariffs and the impacts that it is having on their business. So, I think this is the start of the second quarter. I don't think we're seeing any of the volatilities that we saw in the first quarter dissipate.</s>QUEST: It's the -- we'll talk about this with the next guest, but put into perspective it's the various catalysts for what takes place and the severity and extremity of the move that seems to be unsettling.</s>SEBASTIAN: Yes, so they don't need much at the moment, Richard. The fundamental that you know, it feels stronger. The earnings have been pretty strong and those really are the things that underlie the market. But it is these triggers that we have seen recently, be it chaos in Washington, be it talk of a trade war. That talk of a trade war really is something that can have the power to roil these markets. So, I think, as you say, triggers is the thing, but volatility is something that is playing around with the market at the moment.</s>QUEST: Are they talking about buy on the dips?</s>SEBASTIAN: Today, I don't think that was the case. Obviously, we came off the lows of the (inaudible) in the Dow is now about 750 or so points at its worth and we have come off that, which is something of a change, Richard throughout February and March where we really saw where the selling taking place in the last hour of trading. So, perhaps, we are in a slightly different, slightly more measured approach to the selling at the moment. There wasn't a technical level on the SMP 500 that was breached today which did spark some of that selling in the afternoon. But as of buy on the dip, I think, tomorrow will be a big teller on that. It was about the Spotify IPO coming out tomorrow. What a time to be listing a tech company?</s>QUEST: Clare Sebastian at the Stock Exchange. Thank you. Volatility is the key of the day. You saw that with the VIX which was at 10% to 12%. Joining me now, Ross Gerber, the Venture Money Manager; leads Gerber, Kawasaki which has more than half a billion dollars in assets under management joins me from the West Coast. Very difficult to know what to make of a day like today. When you, you know, look, Ross, we saw the presidential tweet on Amazon. You've seen the trade and the China retaliation, are these the reasons that the market is deciding to sell off?</s>ROSS GERBER, VENTURE MONEY MANAGER: Absolutely, I mean, when you have such an...</s>GERBER: ...unstable President who constantly is meddling with the status quo in a negative way, it's very hard to build confidence to make term investment on the future of America and that's making investors pause and say, "Hey, despite everything looking amazing in the business environment here in the United States and globally, maybe something we can't even quantify can happen with the sky. And I think that is a legitimate risk.</s>QUEST: So, where is the money going? Once it comes? I mean, is it staying in cash money markets and the like? It doesn't look at the moment like there is a rotation in to bonds?</s>GERBER: Well, we've seen a little bit of a bid on bonds, but everybody is scared of higher rates and we're definitely creating an inflationary environment in the United States based off of our immigration and trade policies as well as government spending and the need to borrow more. So, bonds aren't necessarily the safe haven they used to play and so, I think cash is piling up and that's what's happening at my firm. The number one position we actually have is cash at my firm because as we actually like these opportunities to get in to our favorite names during corrections like we are seeing now. But it's been a long run up and you know, I have to say, this is just more volatile than people are used to in the last two years, but this is pretty normal actually.</s>QUEST: I mean, this is the new normal, and it is predicated on the back of algorithmic trading and then the forms of movement, but look, you know, when this latest down leg began say a week ago, 10 days ago. Then I would have thought to myself including this, do I take profits off the table? Do I -- you know, money that I have banked already, do I -- so money I have made, should I just keep? Well, I didn't and others won't have and I guess now, I have got to write this out.</s>GERBER: Right, and you know, I always say you want to be positioned for the correction before the correction, not after and we tend to build portfolios around the concept of stress test of what happens if and so, we were prepared for this type of downturn, it doesn't make it any more fun. But as long term investors and somebody who has been doing this my whole like, you're always going to be somewhat invested in the stock market even during the worst of times and I have to remind people that when you feel the worst about the stock market, it's usually actually a good time to invest. So, it's very, very hard to market time, so you build a good portfolio. You stick with great names and you'll make it through.</s>QUEST: And Ross, I come back to your first answer. You know, and I take what you have just said and you see it through or you stick through it, but there is this -- I mean, we're making a political comment here, but there is this mercurial element which cannot be predicted which is the next tweet in the President of the United States. You know, there used to be rule in constitution law that governments don't target individuals or governments don't target individual companies. It's always been a contract tenet of common law as well. This President is doing both.</s>GERBER: Well, you know, honestly, I have turned off his tweets and I do everything to avoid any information I am getting because it is constantly changing and constantly wrong in a lot of cases where they will do one thing and then reverse it the next thing. So, you know, the political risk is huge and I am not trying to minimize it, but the stock market is ultimately about money and making money and corporations are making a ton of money, they have so much opportunity to use this money right now. So, it makes us bullish on business as much as we are bearish on government, so the real issue that you are bringing up is how much can the government really screw a business especially a government that is supposed to be helping business?</s>QUEST: I love that, Ross. Stay with me. Bullish on business if we are bearish on government. Stay with me because we are going to talk more about Tesla after just briefed on the subject. Elon Musk's efforts, to shrug off Tesla's words, aren't helping the share price. Join me at the screens and you'll see what I mean. All right, the Tesla share price, the stock is down nearly 6% today and 20% so far this year. You can see how the stock literally fell off a cliff over the course of the day. And the reasons can be quite simply seen. First of all, Model 3 sales are likely to miss expectations because the ramp up in production has not been possible. And Elon Musk's April fool joke about the company's health fell flat. He was poking in front of his critics and he tweeted a picture of himself slumped against a car with a sign saying, "Bankrupt." Now, Tesla is also in trouble with the NTSB, the company who has blogged about a fatal crash involving the Tesla which was in auto pilot mode at the time of the crash. The NTSB then happy about the release of the information. The crash is still under investigation. So, Ross Gerber...</s>QUEST: ... you were an early investor in Tesla, you see these problems of sales on Model 3, safety with the NTSB, are you concerned? I mean, I guess everybody is sort of writing off Tesla. Is it time to write off Tesla?</s>GERBER: Well, absolutely not and we're not concerned actually. You know, what we are concerned about is Elon's media presence has actually become detrimental to the company because I get where he is coming from, but as I have personally learned myself, you know, Twitter is a dangerous place, so you know, I get his joke, but unfortunately, you know, not everybody has a great sense of humor. That being said, Tesla is the safest car on the road. Okay, let's be real. If you fall asleep on auto pilot at 75 miles per hour and the thing is beeping for seconds after seconds, and you don't touch the wheel, I mean, you know, we can talk about this all day. The second thing -- but the fact is that Tesla is one of the safest cars on the road and autonomous driving is here, it's a very early technology and there's a lot of bumps on the road, but this is going to make the world a lot safer place to drive, automobile desks are a huge amount desk especially people under (inaudible)...</s>GERBER: And so we are very bullish on the technology and the company despite it being a high risk investment.</s>QUEST: Ross, good to see you. Please come back again from the West Coast.</s>GERBER: Thank you for having me.</s>QUEST: Love to have you on the program. Thank you very much to you. Now, as we continue tonight in "Quest Means Business," stop the migrants or lose the trades, so really, straightforward choice being offered by President Trump as he threatens to stop NAFTA if Mexico doesn't act. All right, China has made good on its tariff threats against the United States as we have been throughout this trade dispute, battle, war, we're tracking it in our trade war room. So, let's talk about what China has done. It's imposed tariffs on three billion dollars' worth of goods against the United States, so it has done it for pork, it has done it for fruit and it has done it for steel pipes, $3 billion worth of exports from the US. It is in direct response for the aluminum tariffs that the US imposed and of course, those of steel which were also imposed against China. Now, there has been no response yet to a possible second round of tariffs that would target Chinese aerospace and tech. Now if they were tariffed in some shape or form, that would be goods worth around $50 billion. And at the same time, you have NAFTA which is very much on the agenda as Donald Trump is threatening to stop NAFTA over the question of the war and some incendiary tweets over the last 24 hours where he has been talking about sending things across. The President has complained Mexico makes a fortune from the trade pact. In a tweet, he calls on Mexico to use that fortune to stop drugs and migrants passing from Mexico into the United States, migrants like these Central Americans seen in Southern Mexico who are heading towards the US border right now. As Trump said, it is up to Mexico to use its powers which is a much stronger than U.S. laws, and stop them. CNN is on both sides of the border with this, Boris Sanchez is at the White House, Leyla Santiago is in Mexico City. Boris, stand by, I want to get to Leyla first. The reaction in Mexico which has a presidential election coming up in July to the incendiary suggestions that Mexico could do more to stop the drug traffickers and the opioids, but isn't?</s>LEYLA SANTIAGO: Well, listen, a lot of people and the candidates are certainly talking about President Trump and using that as a sort of platform saying hey, listen, I will be the one who stands up to President Trump. One in particular, the front runner which is Amlo, Andres Manuel Lopez Obrador just yesterday said we will not be a pinata to any foreign government and said we will respect the U.S. but we demand that same respect. Now, I do want to know that I have checked in today with the Mexico President's office, the foreign ministry, just checked in with the economic minister and none of them are making comments in response to this morning's tweets from the President, now -- the President of the United States. But yesterday when President Trump tweeted about Mexico, the foreign minister did make it a point from Mexico to tweet back and say hey, listen, we are working with the U.S., that is just a fact, we are trying to solve these same problems but never has Mexico said that they believe the wall is the right way to do it or a threat like this.</s>QUEST: Boris, has he managed to start construction of the wall yet even though plans -- we have seen prototypes. From the White House's point of view, what purpose does it serve to offend the Mexicans at the time of a presidential election that could be highly disadvantageous in the long run?</s>BORIS SANCHEZ: Frankly Richard, I don't know that the White House is considering whether or not they are offending the Mexican leadership. Frankly, if you look back at what President Trump said on day one of his campaign, they are not sending us our best, they are sending drugs, their rapists, et cetera, et cetera, throughout the campaign trail and even in his time in the White House in conversations that he has had, not only with the Mexican leader but even allies to the United States, close allies and Malcolm Turnbull of Australia, et cetera, et cetera. President Trump has a certain way of speaking, a certain way of carrying himself, he believes that the United States has been taken advantage of by other countries, that is one firm ideological perspective, one of the few that he has held for years and so this instinct of his to try to challenge Mexico, to threaten to end the North American Free Trade Agreement if Mexico doesn't help him build the wall or at least does more to prevent immigration to the United States, I'm not exactly sure that it's a calculation on his part in trying to affect Mexican politics.</s>QUEST: All right, to both of you, start with you, Leyla, the reality of abandoning, discarding, getting rid of whatever you want to say, NAFTA, is Mexico realistically facing up to the possibility? And then Boris, when Leyla is finished speaking, your question would be, you know, is it likely they will do it? Bearing in mind the damage that will happen? To you, Leyla, first.</s>SANTIAGO: Well, I think most Mexican government officials will tell you anything is possible, that is what they have learned from President Donald Trump, but they also have said that they are willing to back out if their demand or if their compromises are not something that the U.S. is willing to do. They have several things that they have said, they said, look, this is not about the wall, this is not in Mexico's interest, I'm out. So I think right now, you know, these negotiations started in August, President Trump could back out, he would require six months worth of notification, that hasn't happened yet. And so I think everyone is just sort of on a wait and see but really, I mean we have been at this since August on this wait and see. It seems like they were making some progress and coming to those compromises but what will happen now is sort of like well, let's see what the next week is about.</s>SANTIAGO: Yes, I think Leyla is right, you can kind of expect the unexpected when it comes to President Trump, I can tell you though that I have spoken to a number of Republicans specifically one key Republican operative with close connections to the White House who firmly believes that these NAFTA discussions are going to continue on ad nauseam, endlessly, because the Presidents isn't really going to get a deal that he is looking for and frankly, it serves him as a point drives his America First base. Potentially what we could see if there is some kind of deal would be similar to what we saw recently with South Korea where there was a reworking and a trade policy that was largely symbolic but not something necessarily that totally changes the way that the United States trades with Canada and Mexico. To add one more point, we saw the President say that he was going to enact a steel and aluminum tariff across the board for all countries and then he took a couple of steps back days later in offering you know, exceptions for certain allies. We may potentially see that kind of movement backward on NAFTA as well, it's a threat that the President has made many, many times, one that he has yet to really follow up on, Richard.</s>QUEST: Boris is in Washington, Leyla is in Mexico City, both sides of the position. Colleagues, thank you very much indeed. Now our next guest says it will take more than a wall to fix the situation on the Mexican border, the issue is what needs to be fixed. Howard Buffett is Chairman and Chief Executive of the Howard Buffett. Good to see you.</s>HOWARD BUFFETT: How are you, sir? Nice to see you.</s>QUEST: Good to see you. Thank you for joining. And you are a former businessman and a law enforcement officer, and of course the son of Warren Buffet, now you have been a sheriff and a volunteer deputy and you see a connection between America's border issue and the drug epidemic. Our 50 State Border Crisis, How The American Border Fuels The Drug Epidemic. Who is at fault></s>BUFFETT: Well, I don't think -- I mean you could say everybody is at fault or nobody is at fault, I mean it's very hard to see someone specifically at fault but at the end of the day, we haven't secured our border and we have 90 plus percent of the drugs that are getting used in this country -- illegal drugs coming across the Mexican U.S. border.</s>QUEST: Yes, but you say we haven't secured the border, and you know, arguably, it takes two to tango and both sides can work towards securing our border.</s>BUFFETT: Absolutely, Mexico has -- and if we don't have Mexico as a trusting serious partner in this effort, we cannot secure our border.</s>QUEST: So does a wall -- I know you must get sick and tired about the wall, I mean you surely agree that a wall is not the answer as I said in my introduction, a wall is not the answer?</s>BUFFETT: No, it's not.</s>QUEST: It's part of -- but what is the answer then?</s>BUFFETT: Well, it's -- that what I write about...</s>QUEST: Right.</s>BUFFETT: But I mean basically, the answer is that we need probably more of everything that we are doing but it is important to go back to your point which is without Mexico, we can't succeed at this?</s>QUEST: So the tweets like today's tweets, I mean, you know, I don't want to take into heavy politics but one has to because these -- the tweets today poison the well of diplomacy that would enable cooperation on board.</s>BUFFETT: You can't expect people to respond well when you call them names.</s>QUEST: Okay, that was good. You put that much better than I do, sir -- much better.</s>BUFFETT: Well, and that does hurt us, I mean the border patrol will tell you their most valuable asset at the end of the day is the intelligence and the cooperation they get from Mexico, and they get that but it makes it a lot harder when you know, you have all this rhetoric going on at the top and they already have a tough job, Mexico, Mexico has more violence a day than -- I mean it was ranked second not too long ago, it was the second most violent country in the world, and there are cartels down there that when we look at what's -- we see things on TV from Syria or Yemen and we think it's terrible, it's going on everyday in Mexico, that is our neighbor. And eventually that becomes across our border and into our country and threatens our rule of law.</s>QUEST: On this question of the drug crisis, you know, we are a business program, we can put it in business terms, it's supply and demand and this is as the narco program were -- you know, the narco program make it, they would arguably say hang on a second, you are not exactly doing a very good job, United States...</s>BUFFETT: We're not.</s>QUEST: Dealing with the demand side of the equation.</s>BUFFETT: Yes, we're not, I mean we have our problems as well. There is one way to stem demand and that is to cut supply, and you know that as well..</s>QUEST: No, not necessary.</s>BUFFETT: It's happened before in the United States.</s>QUEST: It has but that just raises the price.</s>BUFFETT: No, not if you really cut supply, it depends on what you are talking about. You know, we had that happen in World War 2 and they couldn't bring in heroin into this country. We went from 200 and some thousand addicts down to like 10,000, I mean if you truly cut supply, but I'm not advocating that that is the only solution, I mean I deal with people on my job as sheriff all the time they need help so you can't just simply push it off on something else.</s>QUEST: Final question, in your job as sheriff, the tragedy of the immigration crisis, whatever one may think that you are having to deal now with human beings threatened with deportation and potentially nowhere to go back to anyway and the breakup of families. As a law enforcement officer, how can you deal with that?</s>BUFFETT: Well, typically, as a sheriff, we don't deal with that very directly, we honestly don't, I mean where I have experience with that is the hundreds of millions of dollars that we spend over the last decade or two through our philanthropic efforts and I can tell you it's heartbreaking. It was heartbreaking.</s>QUEST: Does law enforcement in its totality, is involved and has to bear witness to what is taking place?</s>BUFFETT: Well, that is where some of the confusion comes. I mean some of the confusion is that local law enforcement can enforce immigration rules and laws and we can't so where we see it, as we see it in our jail, we see it on the street when we arrest people but it's very disconnected from the actual immigration debate.</s>QUEST: Right. Thank you for coming in and talking about it.</s>BUFFETT: You bet.</s>QUEST: Thank you.</s>BUFFETT: Thank you very much, I appreciate it.</s>QUEST: Good to see you, sir. Thank you.</s>BUFFETT: Yes, thank you.</s>QUEST: As we continue tonight, Spotify is holding its closely watched IPO tomorrow, now unlike most tech and unlike most IPOs the executives won't be ringing the opening bell or popping champagne corks, it's a very strange way that they have done this IPO, we'd explain after the break.