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Quest Means Business
Stock Markets on Both Sides of Atlantic at Record Highs for Year; 'Cash for Clunkers' Shuts Down
Aired August 24, 2009 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR: Stock markets on both sides of the Atlantic reach record highs for the year. The "Cash for Clunkers" program comes to a swift close. It's a boiling hot summer's day in New York.
I'm Richard Quest, all this week in the Big Apple, I mean business.
Good evening. What a day for global stock markets. A warm welcome to QUEST MEANS BUSINESS, coming to you from Federal Hall on Wall Street, just outside the New York Stock Exchange. As we start the next leg of "NY-Lon- Kong (ph)."
Last week we were in Hong Kong, looking at how the recession has taken its toll there, and the spirit of optimism. This week, we're in New York gauging the effects. And already we're seeing a strong rally on Wall Street. A 10-month high across-the-board.
London's FTSE hit its highest level so far this year. What does the rally mean for material recovery? It's all very well to see stock markets going up so sharply, what does it tell us about profitability of companies involved?
And most crucially of all, is there a complete disconnect between what we're seeing on global stock markets and what we're seeing in the real economy. These are some of the questions we are going to be answering this week as we have our "Road to Recovery," "NY-Lon-Kong" from New York.
Let's begin, first of all, by going inside the New York Stock Exchange. Stephanie Elam is watching over the markets for us this afternoon.
Stephanie, it's a rally. It may not be that strong, but it's there nonetheless.
STEPHANIE ELAM, CNN FINANCIAL CORRESPONDENT: Yes, it has been, Richard. You know, I mean, it pulled back a bit in the last hour or so from our gains. We actually did see some red today. And right now the markets are mixed.
But overall, we've got a day where there is not a lot of economic activity, but we've got a week that's going to be full of it. So we kind of see this pattern lately where you'll see things start moving in one direction, and then any little bit of information that comes out about the economy, be it good or bad, you'll see the markets react to it very quickly.
And what we saw from Friday was Ben Bernanke's comments saying that -- the Fed chief saying that the markets look like they're starting to get better. The overall economy, I should say, is starting to look healthier.
When he said that, we had a rally here that led to a rally in Asia, and sort of trickled its way around the world. That's after four days of gains, we don't know if we'll be able to pull it out today, but clearly people are looking for something to react to, and that's what has been moving the markets.
The question is, will that be able to stick around for as long as -- without going back and creating a letter "W," that's our question.
QUEST: A mile wide, an inch thick, volumes are low, it's the middle of August, or am I just being miserable, Stephanie?
ELAM: No, you're not. Well, you may be being miserable. But you are sitting outside in the sun. It is a little bit of a true situation here. Volume is really light. So that makes things really move around quickly. People are not here. This is traditionally the slowest time of the year. This is kind of one of those months, and we see that.
So it will be more interesting to see what happens once we get into the rest of the quarter here, but right now we are seeing the fact that people are encouraged by any little bit that comes out.
In fact, the S&P 500 is up more than 50 percent from its 12-year low, which was hit on March 9th. The Dow is up 45 percent. So some people would say that that is moving too fast and we may see a correction here.
QUEST: Stephanie Elam at the New York Stock Exchange, a long way (INAUDIBLE), but just over the corner physically. Stephanie, many thanks indeed.
I must be the only lunatic standing on a hot August day in a thick wool suit, one of the suits that I had made in New York. I promise you, people are starting to look at me like I might have lost my mind.
Talking about these markets, you might wonder why their investors have lost their minds. In Europe, stock markets are now at their highest levels since the turmoil of last year. Friday's encouraging words from Ben Bernanke, along with other economic reports.
Let's show you the numbers. The FTSE was up nearly 1 percent. Royal Bank of Scotland was a strong gainer, Barclays, Lloyd's. In Paris, the CAC at 1 percent. Steelmakers, our old friend Arcelor-Mittal. The Xetra DAX with Deutsche Bank up 3 percent, but Volkswagen, well, poor old VW, with its merger with Porsche, and all of those (INAUDIBLE) down nearly 2 percent.
A quick run around the Asia bourses where optimism beat the recession: Mumbai up 2.5, even though -- apparently the monsoon rains were responsible for the revival. Hong Kong, Nikkei, Seoul, and Sydney all showing rather good gains.
We need to put perspective on all of this, it seems somewhat irrational, the markets should be doing so well at the time of still great uncertainty. Stephen Pope is chief global market strategist at Cantor Fitzgerald.
Stephen, I'm in the heat of New York, you're in the kitchen of London, why are markets so optimistic?
STEPHEN POPE, CANTOR : Well, certainly you mentioned about the potential bank comments coming from Jackson Hole, Bernanke saying the economies are picking up, we also saw Jean-Claude Trichet, head of the European Central Bank, indicating that the accommodative stance on rates is here to stay for quite some time.
So not until deep in 2010 will you see the rates being moved to the slightly side higher side. And then you look at some of the economic numbers coming through. Today, for example, in the Eurozone, industrial orders expected at plus 1.8, up at around 3.1 percent.
So that matched up with some of the purchasing managers figures last week, means that it's going pretty good in Germany and France.
QUEST: But the reality, of course, and I'm aware that my boss thinks that I'm a constant gringe (ph), wanting to talk caution when the bull market seems to be already under way. The reality is there is a disconnect between the numbers and the markets.
Now it cannot just be swept away simply by saying "markets are a leading indicator."
POPE: Well, I think you have to make that point, first of all, because normally it's between six to nine months that any sort of financial index is going to start moving ahead of the real economy.
However, we are in a phase where Western companies, whether its European or North American, have been through a calamitic (ph) situation. They've had to make severe job cuts, really sort of streamline the whole operation.
But it's because they have done that viciously and aggressively that we saw that in quarter two, more companies, on both sides of the Atlantic, were coming out with better-than-expected earnings.
And they are in a really good shape. So any improvement they have on their revenue, through quarter three and four, whether it's coming from consumers or fitting in the demand from government stimulus programs, that revenue is going to go straight through to bottom line.
These equity markets are showing you that they expect better earnings going into the back end of this year. It's not running too far ahead. There is still money that has to come into the markets, money that has not done work at all for the whole year.
QUEST: If we put this "NY-Lon-Kong" into perspective and draw finally the strands together, Stephen, do you still feel that the era of globalization, the era of markets all marching in tandem, still exists? We've seen optimism in Asia. We're starting to see some in the United States. It can't be that far away off in Europe.
POPE: No. I think you certainly are beginning to find that the pickup in confidence is beginning to start moving in a degree of tandem, or shall we say trio, given we are talking about three economic zones there.
However, what I would say is that you're finding that the emerging powerhouses of China, and now India post their election, is beginning to take up some of the slack. And they will be slowly replacing tired, overspent Western consumers.
Sure, they don't compensate for the lack of the American consumer at the current time. That is still some years off. But generally speaking, there is a consumption appetite building in these new territories. And that is where the heavyweight companies who can sell on a global stage will generate their good revenue, and hence their good earnings.
QUEST: Stephen Pope, many thanks indeed. Stephen Pope joining me from London. We thank you, as always, for coming and talking such good common sense.
Now if you want to know really what is going on in terms of the New York stock market, if you want to get a feel for the market, well, you really have to go inside to the building on Wall Street. There I found Teddy Weisberg, president Seaport Securities. He spent 40 years on the floor doing deals of the exchange.
Is the recovery sustainable?
(BEGIN VIDEOTAPE)
TEDDY WEISBERG, PRESIDENT, SEAPORT SECURITIES: Wall Street is filled with cliches. You know, if it wasn't -- we live in a world of cliches. But the one thing we know is that markets love to climb walls of worry. And there is plenty to worry about still. I mean, you can make a better case for stocks going down than you can for them going up.
But the good thing is, there is nothing rational about stock markets.
QUEST: The fascinating thing is that whilst you and I are making cases for the stock market going down, it has gone up a couple of hundred points.
WEISBERG: Well, it has gone -- yes, more than a couple of hundred points. Pretty dramatic. And even this weekend, the financial press was filled with stories that basically were negative. You know, the market has gone too far. It's not sustainable, so forth and so on.
And yet here we are on a Monday. We're up 65 points, having been up very strong on Friday.
QUEST: You'll be familiar with the idea that what we're seeing is potentially, and I use word, 1929-1930. Look at the face! Look at the face!
(LAUGHTER)
QUEST: 1929-1930 all over again. The strong rally which presages a very deep fall.
WEISBERG: Well, you know -- and this is what makes it so difficult and so frustrating, because you look at a market like we're having now, and people tend to draw parallels with history. And people who ignore history are destined to relive history, as we all know.
But the fact is, it's never quite the same. It really never is the same. And as I just said, you can make a better case probably for the stock market going down than going up. But the fact is at the moment, the tape doesn't lie.
And the tape obviously sees something out there that it likes and obviously that's probably an improving economy, which will negate what the bears are saying.
QUEST: Do you like what you're seeing? Because at the end of the day, never mind the numbers, it's all about what is happening the gut.
WEISBERG: Well, in the gut, I think that all of us that invest or trade have just lived through what I would refer to affectionately as a near-death experience. And it was only four months ago, you know, it wasn't four years ago or five years ago, it was March when we were looking at a market that was trading in the low 600s that looked like it was going to go a lot lower.
And I think most people are still scared to death and are basically sitting on the sidelines.
QUEST: October, people are still talking again, how many times have you heard an October surprise? How many times have you heard that?
WEISBERG: Well, every year since October of '87, because clearly that was a big surprise.
QUEST: So we had October '87, we had October '89, I mean, is it going to be a 20th anniversary?
WEISBERG: I suspect -- well, you know, you just don't know. The market has a funny way of fooling everybody. Truly there is nothing rational about the stock market. And so therefore sometimes it's a mistake to try to connect the dots with too straight a line.
(END VIDEOTAPE)
QUEST: Teddy Weisberg joining me -- or me joining Teddy Weisberg, I should be more accurate, on the floor of the New York Stock Exchange. And later in the program we'll be hearing from Teddy about whether the floor really still serves a purpose in this day and age, or is it just one big television set for the likes of me.
You're up to date with what is happening in the markets, strong sessions. We're now getting a nice cool breeze coming off from the Hudson and from the Bay. Becky Anderson is at the CNN news desk in London.
Good evening to you, Becky.
BECKY ANDERSON, CNN INTERNATIONAL ANCHOR: Good evening to you, Richard. Thank you for that. Your news headlines at this hour.
Round the clock efforts helping firefighters contain massive wildfires in Greece. For the fourth day, a fleet of aircraft resumed water drops as flames licked the northern outskirts of Athens. About 20,000 residents have been evacuated from the capital's suburbs. It's the worst destruction seen in Greece since a rash of blazes killed more than 60 people two years ago.
Well, the Scottish justice secretary, Kenny MacAskill, defended his decision to release the Lockerbie bomber on compassionate grounds at an emergency session of the Scottish parliament earlier today. MacAskill has faced a torrent of criticism on both sides of the Atlantic for freeing the only man convicted in the 1988 Pan Am bombing that killed 270 people.
The CIA, the FBI, and now the HIG. U.S. officials say President Barack Obama has approved the creation of a special unit to question terror suspects. The High-Value Detainee Interrogation Group will be overseen by the National Security Council. It comes just before the CIA releases a new report that details the use of unauthorized interrogation methods in the Bush era.
The former Cuban leader, Fidel Castro, appeared on Cuban television on Sunday for the first time in over a year. The 83-year-old looked healthier than ever, certainly than he has been in previous pictures. State TV says the footage was shot Saturday as Castro greeted and joked with a group of Venezuelan students.
And for the time being this hour, those are your headlines. Back to you, Richard, in what seems to be a fabulous day in New York.
QUEST: It is. It's one of those stunning days, clear skies, humidity is high, but it will be -- we'll leave it Guillermo to tell everybody about the rest of the week. It will be a lot later. Becky, we'll see you in about 15 minutes from now.
If you have a clunker, you only have a few more hours to cash it in and get some real money for your new car. The "Cash for Clunkers" program comes to an end early in the United States. Was it any good? Or was it simply a large waste of money?
QUEST MEANS BUSINESS, we're on Wall Street, and we're back in a moment.
(COMMERCIAL BREAK)
QUEST: Sign that could. This is a little sign on Wall Street, it's pretty much the only place where you can ever get a half-decent picture. And I'll show you later in the program the precarious position that we are on just outside Federal Hall.
"Cash for Clunkers," you'll be well familiar, it is the program where the U.S. government gave up to $4,500 for people to trade in old cars and buy new fuel-efficient vehicles. It has still got some way to go. The money hasn't quite run out, but the program comes to an end tonight.
Kate Bolduan explains from Maryland.
(BEGIN VIDEOTAPE)
KATE BOLDUAN, CNN CORRESPONDENT (voice-over): With a fast-approaching deadline, customers flocked to car dealerships over the weekend, looking, hoping to be one of the last to drive home a deal.
UNIDENTIFIED MALE: I came here and there was so many people here.
BOLDUAN: David Baroso (ph) is trading in his van with more than 150,000 miles on it for a new Toyota...
UNIDENTIFIED MALE: Say thank you.
BOLDUAN: ... thanks to a $3,500 "Cash for Clunkers" rebate.
UNIDENTIFIED MALE: For me, basically, more motivation, you know? And, of course, a new car always is good.
BOLDUAN: As of Thursday, the Transportation Department reported more than 450,000 clunker deals nationwide, worth nearly two-thirds of the $3 billion set aside for the program. But dealers say the paperwork and the payback is a major concern.
(on camera): So, 15 to 20 documents like this for every deal.
UNIDENTIFIED FEMALE: Absolutely. Right.
BOLDUAN (voice-over): Tammy Darvish is the vice president of DARCARS auto chain in greater Washington. She has people working around the clock to meet the deadline. They've made 1,400 clunker deals so far, fronting as much as $4,500 for each rebate. To date, they've only been reimbursed for nine.
TAMMY DARVISH, VICE PRESIDENT, DARCARS AUTOMOTIVE GROUP: I mean, you know, especially coming out of the times that we've just come out of, and then to have this kind of cash flow hanging out there, it's very unnerving. And it's hard to sleep at night knowing that you have, you know, $6 million outstanding.
BOLDUAN: The National Automobile Dealers Association is urging the government to give them an additional week to process all of the deals they expect in these twilight hours. Transportation Secretary Ray LaHood assures the money is on the way.
RAY LAHOOD, U.S. TRANSPORTATION SECRETARY: They're going to get their money. We have the money to provide to them.
BOLDUAN: As for customers like Sarah Nesbitt, she's rushing to cash in on a deal she just couldn't pass up.
SARAH NESBITT, CUSTOMER: From this, with all its dings and dents and scratches and dog hair and all that, into one of those.
BOLDUAN (on camera): So, what are people buying? Well, this dealer says nearly 80 percent of all their clunker customers are buying foreign brands, and about 80 percent of what people are turning in are domestic vehicles.
Kate Bolduan, CNN, Silver Spring, Maryland.
(END VIDEOTAPE)
QUEST: Now the "Cash for Clunkers" program has been a rip-roaring success, so much so that some dealers stopped accepting it a few hours ago because they feared there wasn't going to be enough federal money, as you were just hearing in that report.
Andy Graff is the sales director at Galpin Motors, a Ford dealership. Andy joins me now live from Los Angeles.
Andy, are you still taking "Cash for Clunkers"?
ANDY GRAFF, SALES DIRECTOR, GALPIN FORD: Yes, we are, actually. You can see the activity around the showroom. It's a lot of customers here today trying to get in the last minute.
QUEST: I know you've heard -- I know you've heard this argument before, Andy, but isn't the real worry that all you've done is telescope sales from later in the month earlier on, when, frankly, you could probably shoot a cannonball around your dealership tomorrow to find any customers?
GRAFF: Well, actually, I would tell you that applies to some customers. There are a few who said, I'm coming in early to take advantage of the program. But there is actually many other customers who have told me, specifically said, I came in only to take advantage of this program, I would not have purchased a vehicle otherwise.
And I do think there were a few customers that have -- are waiting right now, saying, I don't want to get involved in any of this madness, so I'm just going to wait, give it a week, when things calm down, I'll come in, I'll buy a car, because they're not eligible for the "Cash for Clunker" program.
QUEST: Andy, have you actually received any reimbursement yet from the federal government? I know you put paperwork in. I know you're expecting to get money back. But have you actually got the money back yet?
GRAFF: At this point we have nearly a thousand claims and we have not been paid on one of them. We have got plenty of rejects, but no payment.
QUEST: So you've had rejections. You've had to resubmit. Do you fear that of those thousand that you've put in, which is tens of thousands of dollars, you might end up eating the cost of it yourselves?
GRAFF: Well, there is certainly that fear. In fact, I just want to correct you, it's closer to millions of dollars that we're waiting on right now. And unfortunately, we're fearful that some of the claims may be rejected and there is no real process in which to rebut why they rejected it.
So, in fact, I've been on hold right now for well over an hour waiting for somebody to discuss one particular deal with them.
QUEST: Andy, if you had to sum up whether you think "Cash for Clunkers" was a good idea, and I don't just mean for the purchases, but let's talk about for the purchaser, for the dealer, for the government, for the economy, would you say it was worthwhile?
GRAFF: Actually, I would. And there is one thing I just to comment on that a lot of times people don't see. They see the new car sale, but what's good for the economy is what is called units in operation.
As we sell new cars, customers will actually improve their cars. They will pay for accessories, they will bring those cars in for service. And that will continue to stimulate additional sales. So you've got to sell cars to get those cars our there and generate additional sales in the future.
QUEST: Andy, I've got one final request for you, please, come back and talk to us in a month or two's time. We really do want to know just how much you actually did get repaid by the federal government. We thank you, Andy Graff, joining me.
GRAFF: Oh, absolutely.
QUEST: Andy is there in Los Angeles. Now when we come back -- QUEST MEANS BUSINESS live from outside the New York Stock Exchange here in New York. When we return, the credit crunch has caused all of us to tighten our belts. What about the rich, the celebrities? Are they tightening their belts or is it still spend, spend, spend?
We're in New York in a moment.
(COMMERCIAL BREAK)
QUEST: Welcome back, QUEST MEANS BUSINESS just outside the New York Stock Exchange. Look at this, sunglasses and Italian ties, Jason (ph) is here.
I've always believed the best ties are the cheapest ones that hold their knot the best. But this is a bargain, $6 each?
UNIDENTIFIED MALE: Four for $20.
QUEST: Four for $20.
UNIDENTIFIED MALE: Four for $20.
QUEST: Give me five for $20.
UNIDENTIFIED MALE: Five, well, that depends, you know, I've got to see.
QUEST: And -- all right. Four for.
UNIDENTIFIED MALE: . the cash.
(CROSSTALK)
QUEST: Here's the cash. Here's the $20. It's my own $20 bill. I want four.
(CROSSTALK)
QUEST: All right. I want four ties that I can wear for the rest of this week on television, which will look -- four, the best four? While I choose the best four ties at merely $20 for all four, celebrities, rich people, those who have really got money, they're also cutting back. Here in New York, Maggie Lake has been finding out.
Now which ties?
(BEGIN VIDEOTAPE)
MAGGIE LAKE, CNN CORRESPONDENT (voice-over): The New York City skyline remains as radiant as ever during this long painful recession. It's the city's star power that's dimming, according to Village Voice night life columnist Michael Musto.
MICHAEL MUSTO, COLUMNIST, VILLAGE VOICE: Celebrities are in a crunch like everyone else right now. And the A-listers are trying to save money.
LAKE: Or at least that's what some of them want us to believe.
MUSTO: Celebrities are all about image. And so even if they still have tons of money, and most of them do, let's face it, they have to act like it's a new them for the recession. They can't be flaunting their bling as much. I'm pretty sure Paris Hilton will become a social work soon, or we'll get a press release that she has become a social worker.
Because right now there is not a whole lot of relevance to the Paris Hiltons.
LAKE: The Hollywood set may be toning it down, but New York Post gossip page editor Richard Johnson says the rich are still spending big.
RICHARD JOHNSON, GOSSIP PAGE EDITOR, NEW YORK POST: I get reports from San Tropez, and believe me, the restaurants there on the beach in San Tropez are filled with Americans. So I think that sometimes they are going abroad to spend their money.
I sort of expect when I'm driving around in the Hamptons to see the hedges are no longer being trimmed and the lawns aren't being mowed and the pool is filled with algae. But I don't see it so much. I think the people will keep up those appearances. That will be the last thing that will go.
LAKE: The uber rich may be keeping up appearances, but the city that served as their playground is feeling the strain.
MUSTO: Even a year ago, there were three or four events a night. Now if you're lucky, there is one. I think we'll snap back, but right now things are bad in New York. I mean, the clubs you see, filled with Wall Street brokers who have money to throw around, now they're staying home and trying to find pennies under the mattress.
It's rough. And there are hot restaurants that used to thrive and you couldn't get a table, the good news now, you can get a table, OK? Do you want one? Probably not. But you can get one.
LAKE: Celebrity watchers can't wait until the velvet ropes return and New York City bounces back.
MUSTO: Hopefully next year.
(END VIDEOTAPE)
QUEST: Maggie Lake joins me now. Should we feel -- well, I suppose sympathy is the wrong word for those rich people who have got more money than they out to do with.
LAKE: Right, right. You're right. Nice to see you in New York, Richard, by the way. We never get to be in person together.
No, you're right. For the average person, we don't feel sympathetic to those who have millions and maybe lost a couple of million. But for the first time the rich are getting poorer. And there is a big debate on the real effects of the economy. Some people are worried about what that means for charitable organizations.
And for the middle and lower class, those are the people who believe that, you know, rising tide lifts all boats. And then there are other people who say, hey, maybe the fact that the rich are getting a little poorer will take away that income disparity that has really sort of skewed the economy and it has not really been good.
So there is a real economic effect to all of this.
QUEST: You say that. And I'm not expecting sympathy for these people, but what effect does it have to the wider strata when the rich don't get bigger -- get richer? It -- I mean, the idea of trickle-down economics suddenly goes out the window.
LAKE: Ah, well, this is if you believe in -- this is where the debate divides. If you believe in trickle-down economics, then you're worried, because these rich people buy a lot of things. And we service them. They go to the restaurants. They keep that sort of sub-economy going, that we all work for the service economy.
Other people say, that's ridiculous, that's not true, and maybe some of that wealth will come back to the middle and lower classes.
QUEST: But, Maggie, when we talk about rich, define it for me.
LAKE: Well, we're talking uber rich, you know?
QUEST: Uber rich.
LAKE: Uber rich.
QUEST: Are we.
LAKE: We're not talking about people who do.
(CROSSTALK)
QUEST: Are we talking about people who work down here? Or are we talking.
LAKE: Exactly. Well, the people who -- no, actually, we're not talking about the people who work down here. We're talking about the people who work for the people. They trade. They do the (INAUDIBLE).
We're talking about the people who had -- there was an -- as someone highlighted on Friday in The Times, McAfee, the man who invented antivirus, $100 million he was worth. Now he's only worth $4 million. I mean, that's the kind of people you're talking about, that have tens of millions, billions, you know, Bill Gates, Warren Buffett.
I mean, we're talking about the 1 percent, 2 percent of the world. Most people took a big hit with the simultaneous real estate and stock market collapse, hedge fund managers.
You know, Richard. You move in those circles, I'm sure.
QUEST: Oh yes!
(LAUGHTER)
QUEST: Didn't take long before that came up. Maggie, many thanks -- would you like to be in that uber rich category?
LAKE: I don't think so, actually. I'm quite happy with where I am -- a bit richer, actually.
QUEST: A bit richer, yes.
LAKE: Yes, a bit richer I'd like, but not uber rich.
QUEST: And I think that's how we all feel. It would be nice to be just a little bit richer.
When we came back Jay McInerney, the author, will be with us to talk about whether or not that uber rich has lifestyles changed in New York.
QUEST MEANS BUSINESS, we're live, it's very hot.
LAKE: It is.
(COMMERCIAL BREAK)
QUEST: Good evening to you. QUEST MEANS BUSINESS. This is CNN. I'm Richard Quest tonight, live from outside the New York Stock Exchange on Wall Street in New York. We are looking around the world at the "Road to Recovery," trying to discover how life has been in the major financial capitals of Hong Kong, New York, and London, "NY-Lon-Kong," or as we're calling it, "Hong-NY-Lon," and what happened one year after the Bear Stearns/Lehman Brothers debacle.
My next guest is Jay McInerney, the author, one of the most respected chronicalists of New York City and life in this city.
Your latest work, a collection of stories called "How It Ended," which has just been published.
Jay, you have -- you've witnessed everything from the good days of the greed is good of the '80s, the dot-coms of the '90s and into the turn of the century.
How would you say life has changed, is different, today?
JAY MCINERNEY, AUTHOR, "THE GOOD LIFE": Well, you know, last -- last fall if you'd asked me this question, I would have had a slightly different, more dramatic answer. There was a -- there was a real sense of panic and -- and -- and crisis in October and November into the -- you know, into the new year.
You know, I -- I think, for the moment, there's a sense that, you know, this, too, shall pass.
But I think the worst is far from over.
QUEST: But how much of the -- how much collateral in terms of the way the people live their lives -- and I'm not talking about physical, perhaps, I'm talking about the damage -- people don't spend as much, it's not right to be ostentatious, you don't get that big house in the Hamptons?
MCINERNEY: Well, it -- it's true that there's -- there's been a lot less spending. There's been a real change, you know, I think for many people here. Volatility, even for those who weren't severely affected, there -- there's been a sudden sense that -- that ostentatious consumption is no longer fashionable.
QUEST: Now, is that just because they don't want to be seen to be ostentatious or have they had a change in heart on morality and ethics?
There's a big difference there.
MCINERNEY: Well, I think, as is usually the case here in New York, it's a -- you have to look at appearances first. You know, we -- we survived -- we somehow survived 9/11 and, you know, we -- we thought that we would all become better people and, you know, go to -- go to medical school or -- or join the priesthood. And, in fact, you know, very few of us -- very few of us changed our lives that dramatically.
But it's partly a question of appearances, as I say. You know, and Gucci and Pravda, they now -- they're now stocking non-logoed shopping bags because people don't want to be seen -- even if they are spending this kind of money -- spending it.
And there -- there is a sense that the kind of consumption that really characterized the last seven or eight years is -- is unfashionable, at least.
QUEST: You've just come out on the (INAUDIBLE) Southampton, which for our viewers who may not be familiar, is an extremely fashionable place to be in the summer.
And are people still commuting -- husbands or wives commute at the weekend, leaving the other one there with the children?
MCINERNEY: Yes, well, it's been the worst -- I just talked to a real estate agent the other day and it has been the worst season in terms of, you know, rentals are down. There's very few sales taking place.
On the other hand, it's still the sort of place where a friend of mine is looking for a house in the Southampton estate section and he's having trouble in the $10 million to $12 million range. You know, they -- I think that, you know, the distressed sales tended to happen last fall and now, the people who own the $20 million homes can hang on.
QUEST: So if you were inviting -- let's move back a bit, because we've got to -- if you're -- if you're inviting someone out to dinner in the city, let's say I'm inviting you out to dinner.
What is acceptable for me to take you to?
Clearly, maybe Wendy's, McDonald's, Burger King, you might raise an eyebrow. But if it's the Mandarin Oriental and an expensive $500 a plate, you might raise an eyebrow there, as well.
MCINERNEY: Well, I -- I think there's been a real change of -- of habits. And I think it's -- even for those people who still have expense accounts or who still have large bank accounts, there's a sense that it's much better to go to a casual (INAUDIBLE), you know, jeans and polo shirt place and order a $50 bottle of wine instead of going to La Bernardin and ordering the $500 bottle of wine.
Now, all of these -- I have a lot of friends in the restaurant business. And they -- they all say business is really down. And...
QUEST: But coming back...
MCINERNEY: And where it's great...
QUEST: But coming back.
MCINERNEY: Well, we hope. We hope, yes.
QUEST: (INAUDIBLE).
MCINERNEY: I think this is more of a pause than it is a crash in the -- in the history of -- in the history of New York. It's -- but the only - - you know, the great thing is that there -- there ac -- it is a moment of reflection. You know, and New York is a -- is not a very reflective place. And it's a place that, you know, with a -- you know, amnesia is practically the -- the -- you know, the religion of the city. And, you know, we certainly forgot the lessons of 9/11 quickly enough.
So -- but I think at this moment, people are reflecting on -- on what's important in life and where they want to go.
QUEST: David, thank you very much, indeed, for joining us.
You can now go back to the Hamptons and enjoy yourself.
MCINERNEY: Thank you.
QUEST: (INAUDIBLE).
Thank you very much.
Now, the markets are up in Europe and they were up in the United States. I'll update you with those numbers when we come back.
I'll also take you into the Stock Exchange to discuss with Freddie (ph) whether or not that -- whether or not the floor of the Stock Exchange is simply passe -- is it a relic of another era?
QUEST MEANS BUSINESS.
We're live in New York.
(COMMERCIAL BREAK)
QUEST: Welcome back to QUEST MEANS BUSINESS.
We're live in New York.
And this time we have the Biz Clinic for you.
The green shoots of recovery -- Ben Bernanke says that we are bouncing on the bottom and that things are set for a recovery. And so far, stock markets seem to be agreeing with him, with their very strong performance.
One man who's not quite sure is Stephen Roach. The economist is extremely influential. He is shooting down ideas of the green shoots. Stephen has always been something of a bear when it comes to looking at the bullish side of life.
But is he right?
In the Biz Clinic, he's discussing whether or not actually green shoots have been shot.
(BEGIN VIDEO CLIP)
STEPHEN ROACH, CHAIRMAN, MORGAN STANLEY ASIA: Markets are up. And, you know, when the markets are up, memories get short. They sort of forget about the crisis and the recession that put you into this mess in the first place. You forget about the mistakes that were made.
Number one, the financial crisis is far from over. There are going to continue to be an awful lot of write-downs of troubled assets that will impair the ability of financial intermediaries to provide the credit that the global economy needs.
Number two, this is the most synchronous downturn the world has ever gone through.
Thirdly, on the demand side, the big driver over the last 10 years has been the American consumer. And the American consumer is dead in the water right now.
So when I add it all up, I -- I see a very anemic, unusually weak recovery in the global economy over the next two to three years.
When markets go up, investors want to then concoct a theory that explains how the rallies in the markets are being supported by the underlying momentum in the economy. So the green shoots theory is just that -- it's -- it's sort of a fiction (INAUDIBLE) liquidity-driven markets. And if you want to call those green shoots or blue shoots or yellow shoots, you know, pick your color.
There are a lot of people focusing on -- on housing as being the key to the U.S. recovery. I think that's overblown. But -- and the damage has been done. And -- and if we can stabilize the housing market, that doesn't mean we're going to have a miraculous recovery. It just means we'll stop the bleeding on the asset side of consumer balance sheets.
Are we going to get another consumer other than the overly indebted, savings short American consumer?
If -- if the world is still counting on the American consumer to deliver the demand for exports made in Asia, then we've got a problem.
Secondly, you've got to look very carefully at the debt levels, both private, in the case of the United States, and now, increasingly, public, given the massive stimulus programs that have been enacted all over the world. And we -- we need better balance in the mix of global savings. The U.S. has to save again and excess savers in Asia have to start consuming.
And -- and until we see that, I -- I'm going to be very cautious about the prognostic -- prognosis for the global economy.
(END VIDEO CLIP)
QUEST: That is Stephen Roach, chairman of Morgan Stanley Asia, with some interesting thoughts about what the strength of the recovery is likely to be.
Biz Clinic is where you can ask for a question to be addressed. The e-mail address is CNN.com/bizclinic, where you can see the reports and, of course, take part in the debate and submit your own thoughts and questions on what is happening.
It is a big debate, of course, at the moment -- the strength of its recovery and, of course, it's sustainability.
Now, the news headlines demand our attention.
Brooke Anderson is, I suspect, nice and cool in the air conditioning of the CNN News Desk in London.
BECKY ANDERSON, CNN CORRESPONDENT: That's right.
And attach out for my e-mail, because I have a couple of questions I want answered. So they will be going to the Biz Clinic.
Thank you, Richard.
These are the news headlines.
Firefighters in Greece are making some progress in a battle to control wildfires outside Athens. Other nations are sending in help. Italy and France have sent four water drop airplanes. Two thousand military personnel, firefighters and volunteers have been working around the clock for four days straight. Officials are investigating the cause of the original fire, which broke out northeast of the capital late on Friday.
(INAUDIBLE) reprieve for a Malaysian woman sentenced to caning for drinking a beer in public. Her punishment has been postponed until after Ramadan, the Muslim holiday month. The 32-year-old mother of two was arrested in a raid in a hotel lounge two years ago. She was convicted by a Sharia court and will be the first woman caned for the violation.
One of Afghanistan's top election officials says there are only a few dozen complaints of election fraud that could have had an effect on polling results if proven. (INAUDIBLE) President Hamid Karzai and the main challenges, Abdullah Abdullah, have accused each other of being behind vote rigging and ballot box stuffing. The electoral commission says partial presidential results will be announced on Tuesday.
Well, the state-run China daily newspaper says trials could start this week for more than 200 people formally arrested in last month's deadly rioting between Uyghurs and ethnic Han Chinese. The charges range from vandalism to murder. At least 200 people were killed in several days of clashes in the nun provinces and the provincial capital of Urumqi.
And those are the headlines -- Richard, back to you in New York.
QUEST: Well, thank you for that, Brooke Anderson, at the CNN News Desk, bringing you up to date.
The British government has denied that there was any commercial links in their decision to release the Lockerbie bomber, Abdul Baset Ali al- Megrahi. Even so, here in the United States, there are some now calling for a boycott of Scottish products, including, of course, famous scotch whiskey, amongst other things.
If there were to be such a boycott, how damaging is it going to be for Scotland and its industry?
CNN's Jim Boulden found out.
(BEGIN VIDEOTAPE)
JIM BOULDEN, CNN CORRESPONDENT (voice-over): An outrageous miscarriage of justice -- that's what those behind calls to boycott Scotland called last week's release of the convicted Lockerbie bomber. Stop buying scotch whiskey, some tweeters say. Others are calling for Americans to cancel plans to travel to Scotland to play golf or to find their family trees.
Three hundred and forty thousand Americans visited last year, responsible for a fifth of the money spent by non-U.K. visitors. These pleas to Americans are not falling on deaf ears.
CAMPBELL EVANS, SCOTCH WHISKEY ASSOCIATION: I mean the worst we've encountered so far is that any campaign to boycott Scottish whiskey doesn't seem to be having much momentum and the activity is pretty much limited to the Internet.
BOULDEN: According to the Scotch Whiskey Association, the U.S. is its number one export market. Last year, it shipped more than $600 million worth there. While any hit in the market would not be welcomed, Scotland in total shipped around $5 billion worth of the stuff last year. Scotch makes up a full quarter of all British exports of food and drink.
This shop in London caters to those wanting the finest whiskeys, from Scotland, but also Ireland and the United States. I asked whiskey expert Philip Shorten, what a connoisseur would buy if they chose to boycott a Scottish single malt.
PHILIP SHORTEN, WINE MANAGER, MILROY'S OF SOHO: Well, we deal with a lot of consumers from around the world here and it's the type of person that buys and drinks Irish whisky is typically different than the person that buys, you know, scotch whiskey, is difficult -- is different from the person that buys and drinks bourbon or rye whiskey from the U.S.
BOULDEN: Some Americans have tried symbolic boycotts in the past, from once dumping British tea in the days before the American Revolution to renaming French fries to "freedom fries" on the Congressional menu in the run-up to the 2003 invasion of Iraq.
The anti-French feeling then worried the British makers of French's mustard so much, it issued a statement to say the mustard was named after its American creator.
But when it comes to a full boycott of Scottish products or those made by Scots, one Tweeter claims beyond whiskey, Americans would have to include innovations like penicillin, the telephone and the television.
Jim Boulden, CNN, London.
(END VIDEO TAPE)
QUEST: And we'll follow that story very closely if and when any boycott is actually instituted.
It is a corker of a day. I don't take off my jacket because, frankly, it's so hot and well, it's not for -- it wouldn't be wise, not until we're off air.
But Guillermo is at the World Weather Center.
You can give me the nuts and bolts of exactly how hot and humid it is and am I expecting rain for the rest of the week in New York?
GUILLERMO ARDUINO, CNN METEOROLOGIST: Not at all. I think that you are not going to see any rain at all. It's going to be sunny. It's going to be warmer. It's 27 right now, Richard. But it's pretty good.
I mean, how often do we see like an entire week of sunny skies in New York?
It's great for you. You can do a show from out there. So it's going to remain like that.
You see the rain is out in the open ocean, not in New York. We're not going to see rain. Perhaps we'll see some on the weekend, but maybe not even on the weekend. And we see two weeks of nice conditions. It's going to cool down toward Thursday, I think.
Elsewhere, things are fine. Remember that we had Hurricane Bill, right?
I'll tell you what it is right now and who is going to be affected next. All over the States, across the United States, things are looking OK. Some thunder in Denver. Apart from that, things appear to be fine.
So this is Bill, you know, remnants of it, after it went through Newfoundland here. And now it's moving toward Europe. And it always happens like that. So in a couple of days or three days, toward Thursday, we'll see it affecting indirectly Scotland, Northern Ireland and also Scandinavia. It's not going to be that bad, but it will be -- you know, it will be there.
Also, another story we're following closely is the fires very near downtown Athens. Actually, here, if you see, the winds come from the northeast, so this is the direction. So the smoke is going toward downtown Athens. The situation is desperate. The winds have subsided a little bit, but they are promising to come back.
You see how close they are here to the center, to the downtown area. This is all densely populated. And the fires -- thousands of them -- are over there. More coming up, of course.
At the International Desk, you see how close it is. And, actually, we have some things to -- to discuss about it and how the winds affect these areas and what about the temperatures. It's not that hot right now in Athens, but we're expecting 29 degrees later for tomorrow.
Tuesday, 24 in Kiev; 26 in Paris. It's warming up a little bit OK. The south continues to be very warm, indeed -- 29 in Madrid. Thank you if you're watching CNN from London. It's 24, the forecast for tomorrow.
But at the same time, we see -- well, we anticipate some storms there into parts of London, the low countries and into France, central parts, where we have the heat, especially here in France. Parts of Italy are going to be affected by this, too. So here and there.
But look at these storms over there in Northern France -- quite severe at times. So we're looking at that. And if we see -- if we find something, we're going to bring it to you.
OK, stay with us.
Richard is in New York. We have him all week over there. He'll be back after the break.
(COMMERCIAL BREAK)
QUEST: Usain Bolt, of course, struck again. Three gold medals, two world records -- the fastest in the world, quite extraordinary. But it's not just on the track, of course, that records can be broken. When it comes to sponsorship deals, it's his footwear that is now raising eyebrows of other record-breaking attempts.
Frederik Pleitgen reports from Germany.
(BEGIN VIDEOTAPE)
FREDERICK PLEITGEN, CNN CORRESPONDENT (voice-over): It's a one man show -- fans lined up for hours at this Puma flagship store to meet the fastest man in the world -- Bolt mania in Berlin.
BOLT, WORLDS FASTEST MAN: I think it's just hard work and dedication. I'm really dedicated to -- to being a champion. I want to be a legend, so I have to work really hard if I want to be a champion. So I'm just doing that and that's it.
PLEITGEN: How about this for legendary?
Berlin dedicated an original piece of the infamous Berlin Wall to Bolt, to be displayed in his homeland, Jamaica.
BOLT: You know, definitely it -- it's an honor. I got my -- my face painted all over it (ph). I'm going to put it in my house if I can get it there. It is -- I'm looking -- I'm looking forward to that. It was an honor they gave me a piece of the Wall.
PLEITGEN: Many are trying to grab a piece of the pie. There's the Jamaican Tourism Board and Puma's Jamaica Collection is flying off the shelves.
Usain Bolt's big success means big money for his sponsor, Puma. You have the Usain Bolt hoodie, a whole Jamaica collection, including t-shirts, the Usain Bolt shoes, which are sold out in almost every store.
JOCHEN ZEITZ, CEO, PUMA: He is not just an athlete, he is just an -- an amazing personality, which I think for the first time gives an opportunity to -- to promote an athlete beyond his sport. You know, he's about family. He's about the Jamaican lifestyle. And that's something that we are also trying to incorporate into our calculations.
PLEITGEN: Puma believes Bolt's advertising value goes into the hundreds of millions. Even Bolt's dad says he's never seen so many people sport Jamaica's colors outside Jamaica.
WELLESLEY BOLT, 'S FATHER: That surprised me. Everybody is watching Jamaica now.
PLEITGEN: But Puma may want to watch out. Headhunters are prowling their star athlete -- even at this Puma event.
Listen.
UNIDENTIFIED MALE: A million dollar contract for you. I will make a million dollar contract (INAUDIBLE) contracts for a German company (INAUDIBLE).
PLEITGEN: Bolt seemed less than interested, but for a man who can mobilize the masses like this, other offers are sure to follow.
BOLT: Yes, yes. This is a good one.
PLEITGEN: Frederik Pleitgen, CNN, Berlin.
(END VIDEO TAPE)
QUEST: One of the most notable signs -- one of the most famous pics, of course, of the New York Stock Exchange, is its trading floor, where (INAUDIBLE) is to make a market and keep ordinary markets. It's a hallmark of New York that other markets simply don't have.
But how relevant is that trading floor in this day and age, when more than 85 percent of the deals are now done electronically by phones, not with a presence on the floor?
I went back to find out.
Teddy was my guide.
How relevant is today's NYSE trading floor?
(BEGIN VIDEOTAPE)
TEDDY WEISBERG, PRESIDENT, SEAPORT SECURITIES: The biggest change was the change from fractions to decimals, because when you -- with that change, I think other -- even the electronics, which is quite dramatic. But when you change the pricing mechanism of how stocks are priced, that basically really changed the landscape about how stocks trade.
And the profit margins in trading stocks, both for the trading floor and for the upstairs dealers just went -- just shrunk.
QUEST: Is -- and I'm going to ask this question and I'll probably have to run as fast, because I'm about to ask a heresy -- but, you know, the elephant in the living room...
WEISBERG: OK.
QUEST: ...is the trading floor a (INAUDIBLE)?
Is it dead?
WEISBERG: I'm going to answer that with an observation. I've been here 40 years. It's -- it's until -- it's probably slower now than I've ever seen it in the 40 years. And it gets back to the pricing fractions to decimals. But for 38 of the 40 years that I've been here, I keep hearing from very smart people like you that the trading floor is dead. I mean I saw the end of fixed commissions, May -- May '75. That looked like the end of the trading floor. Automation certainly looked like the end of the trading floor.
As long as our customers want us to be here at the firm -- Seaport is the firm -- we're going to stay here to represent them. Clearly, there are fewer people as a result of all the automation.
But is the floor dead?
I guess -- hopefully I can get another 40 years out of that. I don't know. I'm going to try.
(END VIDEO TAPE)
QUEST: And tonight's Profitable Moment -- I first reported from outside this building back in 1987. It was just after Black Monday, when the market dropped more than 20 percent. I was back in 1989, after another stomach-churning roller coaster crash.
Twenty years on, everyone wonders what will happen after the great recession is over?
It's hard not to believe that there's a new bull market taking shape. You can't argue with success. And even though this rally is a mile wide, is it just an inch thick?
At the same time, everybody and their brother warns us the recovery is insipid and fragile.
Can it survive through autumn of worry?
Teddy on the floor of the Exchange reminds us that those who ignore the perils of history are destined to repeat it, whether it's 1929, 1989, '99 or 2009, there's always a nine somewhere in the worry. I guess none of us will be happy until November the 1st.
And that's QUEST MEANS BUSINESS for tonight outside the New York Stock Exchange.
Hala Gorani at the International Desk is next.
Whatever you're up to in the hours ahead, I hope it's profitable.
I'll see you tomorrow in New York.
END
