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Quest Means Business
India's GDP Robust Despite Global Meltdown; Rookie Day Trader Gets Education; Marvel Comics Sold for $4 Billion; U.S. Economy Outlook
Aired August 31, 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 ANCHOR: A superhero super deal, marvel comics get sold for $4 billion. I'm Richard quest. NYLonKong continues. Tonight, I'm in London where I mean business.
QUEST: Good Evening! From Wall Street Europe global stock market. Since I'm shopping, I am concerned that they have gone too far and too fast, and today, leading the global sum, it was China. Nearly a year young from the height of a financial crisis. We continue to bring you the show from the streets of the world financial capital, New York, Hong Kong, NYHong, and that that's -- of course London. The wrong way around perhaps but NYLonKong continues. We need to update you urgently with what's happening with u.s. stocks as sliding.
(BEGIN VIDEO TAPE)
QUEST (voice-over): It follows a brutal sell-off in china. This is the way the Dow Jones Industrial average opted nearly 90 points, just about 1 percent, but crucially under 9500, and as you know, we look at the support levels with. We will cut on what's happening in New York in a moment or two. In China, the Shanghai composite tumbled more than 6-1/2 percent. It fell to a 3-men slow. It was bank clending worries, and of course, officially, China has now into fair market numbers. Since the beginning of August of 21 percent, China shared trading slugging large consults from global market the drop. Then shock waves moving on Japan. Investors are cautious. The exit polls reveal the landslide victory of the democratic party of Japan. The Nikkei was off just about 40 percent (ph), but of course in Hong Kong where optimism as we have discovered had been stronger. There are losses of nearly 2 percent.
(END VIDEO TAPE)
QUEST: So, bring you the cross of the side of the world. The Chinese losses and how they took their DOW on Europe.
(BEGIN VIDEO TAPE)
QUEST (voice-over): The results are fallen in all prices. It pushed down energy stocks, total, royal Dutch shell, financials under pressure. The French market was 100 percent. Xetra DAX was off just nearly 1 percent, and there is no number there in the U.K., of course, where it is the oldest bank holiday.
(END VIDEO TAPE)
QUEST: There is much to talk about with our 1st guest and guest this evening, Laura Tyson, an academic adviser to president Obama. Laura Tyson joins me now, and Laura Tyson, the crucial question remains, we hear again and again the probability of the recovery, but do you believe the recovery itself is in doubt?
LAURA TYSON, COUNCIL OF ECONOMIC ADVISOR: I think what -- the only thing one can say at this point is that the recovery is likely to be slow and gradual and there is likely to remain for considerable period of time uncertainty because there's a lot of doubt and side risks. The doubt in side risks in a situation where you're growing slowly out of a great recession. It means that there's always a possibility that policy maker has to keep in mind that the economy slow down again, and I think that's really the right way to answer that question.
QUEST: Now that's a delicate way of saying that if policy makers do not get this so-called exit strategy right, then we are looking at a double-dip recession, perhaps mid to late 2010 or early 2011?
TYSON: Well, I think policy makers - let's us start with the good news here which is I think policy makers both in the u.s. and really around the world should be applauded for what they have managed to accomplish so far. The world was stumbling into essentially what looked exactly like the great depression, and through very active monetarian physical policies around the world including places like china and Europe and the u.s., we have managed to basically hold off the great depression number 2 and bring growth back. Now, policy makers will have a very complicated problem of exit strategies because they are going to have to try to assess constantly is the regular -- private economy strong enough that the policies can be gradually pulled back. There's a lot of policy support right now.
QUEST: Right.
TYSON: Propping up to world economy.
QUEST: But the confidence question which will seeing in terms of consumer confidence numbers, lei indicators suggesting that the turnaround -- that the confidence is always like self-propelling. It is reason by stock market which creates more confidence which then rises the stock market a bit more. Now, it is a bubble that can be pricked at the first for winter.
TYSON: Well, the thing is -- I would say that look, we had a collapse of confidence and a collapse of trust, very dramatically following the collapse of Leman brothers last fall, and the restoration of some confidence and some trust and we see that clearly in the capital markets where private money has come back into financial institutions after rushing out the door. Those are all signs of a very positive development, and I think that a gradual improvement in confidence. Last part of the indicators that policy makers are going to have to look at, how does confidence behave? I don't think it is a bubble. I think it's a restoration of some degree of normalcy.
QUEST: So, what do you hope we are going to see both the G20 finance ministers come to weekend and of course the G20 summit of 3rd in a year. I mean, is this summit just going to be dolting eyes, crossing, and well let's all stop ourselves on the back or will let the real work to be done?
TYSON: Well, I think the remains real work to be done. I think number one, there has been very aggressive gentle layout for greater coordination in financial regulation around the world. There has been a gentle laid out and there has not been much action yet; that's a very big task, and I think the finance ministers and the head of state thing that we commit to coordination is very important. I think it's very important for the head to stay -- to underscore their commitment to long-term trade liberalization to the wto to making sure there isn't protectionism as we move out of this great recession, and I think finally there should be a statement, I think there will be a statement that policy makers around the world will continue to provide support until such time as they judge the private economy is strong enough that they can reduce that support backwards, and I think that's a very important set of messages, not to mention by the way, the possibility of talking about the need for this additional allocation on special withdrawing rights to be made available to handle some of the problems of the emerging market countries that we haven't talk about.
QUAEST: Oh no! A favor we won't be able on this occasion talking about emerging markets. Laura, many thanks indeed for joining us and talked about it.
TYSON: Thank you too.
QUEST: You and I will discuss this. I hope you'll come back in the future to talk on quest means business.
TYSON: Oh, it's a pleasure.
QUEST: Thank you very much. Now, (inaudible) with the market. It's been a grim day one way or another so we need to turn our attention to the news headlines. Fionnuala Sweeney is at the CNN news. Good evening.
FIONNUALA SWEENEY, CNN CORRESPONDENT: Hello Richard. Dalai Lama has his visit to Taiwan as the humanitarian man without the political agenda.
(BEGIN VIDEO TAPE)
SWEENEY (voice-over): The Tibetan spiritual leader is meeting and praying with survivors of typhoon Morakot, but some of his remarks could rank china. While visiting a devastation village, the Dalai Lama said that Taiwan should have closed links with Mainland China but should also enjoy democracy. (INAUDIBLE) had an exclusive interview with the spiritual leader
DALAI LAMA, TIBETAN SPIRITUAL LEADER: As soon as I received the invitation, I know that there are some complications maybe but it is nicer to know your responsibility to come and to see show my face to those people while passing for different period.
(END VIDEO TAPE)
SWEENEY: Beijing has said it resolute opposes the Taiwan visit. The head of U.S trips in Afghanistan has delivered his long awaited review of strategy in that country.
(BEGIN VIDEO TAPE)
SWEENEY: General Stanley McCrystal (ph) has the situation as serious but success remains achievable. He says it will require a revise strategy along with commitment unresolved. Meanwhile, complaints of election fraud have surged. Afghanistan election commission says president Hamid Karzai is still in the lead ahead of his top two rivals, but the number of complaints went up to nearly 2500 series and that's to effect the outcome. A raging wild fire in California has doubled in size and now threatens 10,000 ton. Officials say the fire is only 5 percent contained, fueled by dry air and protected by the terrain surrounding the Los Angeles national forest. The fire is edging close to television and radio transmission tunnels as well as fire and communication equipment. Turkey's foreign minister has been shackling between Iraq and Syria trying to make friends between the neighbors. He was invited on Monday. Syria and Iraq through their ambassadors earlier this month after 2 suicide truck bombs in Baghdad killed 100 people. Iraq accused 2 people living in Syria of involvement. And there's the headlines for now. Richard back to you.
QUEST: Well, thank you for that Fionnuala Sweeney. We will be with you again in about 15 or 20 minutes. Now, if you are a playing geeks like me and being up its absolute delight, they are going back with some forwards in London (INAUDIBLE) and watch them all day. When we return in just a moment, we will turn our attention back to the market. What did cause the Chinese stock market to brutally sell-off in such an unpleasant faster? Quest means business, we're live in London.
(COMMERCIAL BREAK)
RICHARD QUEST, CNN INT. ANCHOR, QUEST MEANS BUSINESS: QUEST MEANS BUSINESS, now Hong Kong coverage continues.
Let's look at emerging markets where there were fresh signs that the pace of economic growth is gaining momentum in India. Figures out on Monday showed GDP rose by 6.1 percent, in the second (sic) quarter. Yes, that's right. I said 6.1 percent.
As Malika Kapur reports from Mumbai, the bad monsoon weather could see celebrations dry up somewhat.
(BEGIN VIDEOTAPE)
MALIKA KAPUR, CNN INT. FINANCIAL CORRESPONDENT (On camera): India's economy grew at a rate of 6.1 percent in the first quarter of this financial year. Those numbers considered pretty good over here in India because the general expectation was for the number to come in at 6 percent, so it is a little bit better than expected.
Sure it is a lot lower than the same period last year. That's when India recorded growth of 7.8 percent. But when you look at the global picture, you see the global recession, you see growth in the West, in countries like the U.S. and the U.K., where growth is still negative, a growth rate of 6.1 percent in India is pretty good. And that's the general consensus over here.
Of course we've had some other issues to deal with here in India. The drought, for example, but the drought has perhaps shaved off just a couple of points of India's growth. It really hasn't had too much of an impact on these figures, A, because we're still experiencing the monsoon season, the lack of rainfall, so we will really only know the full impact of the drought later on in the year. Plus, agriculture now accounts for just about 17 to 18 percent of India's GDP. So the impact will probably be muted.
For now, though, a figure of 6.1 percent, the stock market took it in its stride, didn't really react very much to it. And there is a general sense of relief and optimism here that the Indian economy is still growing and is in the process of bouncing back.
Malika Kapur, CNN, Mumbai.
(END VIDEOTAPE)
QUEST: As we were talking earlier, our lead story, China has investors had a shock, which of course reverberated elsewhere, when the Shanghai composite fell 6.7 percent. That is a startling number. The benchmark finished at 2,667. It's at a three-month closing low, overall it was a 21 percent drop for the month of August. The plunge seems to have been triggered by worries about the Chinese banking system and the tightening up of lending. To help shed light on this drop let's talk to Linda Yueh, a fellow of economics at Oxford University.
And we don know that the Shanghai market is extremely volatile on a good day.
LINDA YUEH, ECONOMICS FELLOW, HARVARD UNIVERSITY: Yes.
QUEST: Up 6, down 7, up 4, down 3. But this was exceptional.
YEWS: This was exceptional. In the span of just a few weeks we've gone from a bear - to a bear market, actually, from a bull market. This volatility is unusual even for the Chinese market. But the Chinese market has always been volatile. It can easily be driven by sentiment and rumor and that's what we're seeing today.
QUEST: But the difference in the Chinese market is its been the sentiment and rumor appertains to what the central government is going to do.
YUEH: Very much so. So what's unusual about this market is that two-thirds of the shares are non-tradable, held by the state. So what the state does matters. And even more importantly 80 percent of Chinese growth this year is being driven by government spending. So what the government intends to do drives other corporate earnings as well.
QUEST: So let's strip out all the rumor and the gossip. What do we actually know about what China's government intentions are in relation to bank lending and feeding more money into the economy?
YUEH: What we know is that they are going to tighten bank lending because they are very worried. They have unleashed the equivalent of a third of GDP in fiscal spending and loose monetary policy, you know, releasing credit through the state owned system. They are worried about inflation. They have told the banks, you've got to increase your capital requirements. It's rumored, because it's a state-owned banking system. And that's what it causing a lot of this panic.
QUEST: You see, doesn't this show exactly the fallacy of China as an investment market? You have something as serious as supposedly the central bank or the government telling banks to increase liquidity or to increase capital requirements, but we don't know.
YUEH: Oh, absolutely.
QUEST: And we can't even see the transactions within the market that you would normally be able to read the runes from?
YUEH: Yes, no, absolutely. I mean, I think, we tend to read a lot into the Chinese stock market, especially now, because it supposed to be harbinger of Chinese growth. But it actually underpins how opaque the Chinese market actually is. So, when worldwide markets follow China, I think we have to wary of just how unusual this market actually is.
QUEST: The downside of all of this is what we saw today. In the sense of, China falls, the other Asian, Southeast Asian markets fall with them. That, then, takes its turn elsewhere in the world. And are we really that reliant on China at the moment?
YUEH: Well, I think this is part of the fallacy. We are not that reliant on China. To a large extend Chinese growth will only benefit Chinese state-owned companies and commodity exporters and people who sell energy to China. So, certain countries, like -
QUEST: Commodities, we saw, again, taking the slide off. Because China is slowing down. In all of this, it seems like the U.S. market - I mean, we're always told the U.S. is the most important, in terms of the consumer demand, but it seems like China has now started to supplant that?
YUEH: Oh, I think Chinese consumers are more important than American consumers this year.
QUEST: Ah?
YUEH: Because in a recession, it is only the Chinese consumer which is buying, retail sales are up.
QUEST: But they can't replace one for the other?
YUEH: Oh, absolutely not. The Chinese consumer, on average, has an income of only $3,000, U.S. dollars. It is $45,000, for the Americans.
QUEST: Right. So that's a fascinating moment that we have. Thank you Linda Yueh for coming. Nice to see. Come again and talk about this. Thank you very much.
YUEH: Pleasure.
QUEST: When we come back in just a moment, the recent weakness in China's markets to Disney's new superpowers. The House of Mouse joining forces with the makers of Spiderman and Captain America. It's a multi- million dollar partnership.
Also, the markets madness, Adrian Finnegan, he will be with me. He's trying to be a day trader. Well, actually, he's a rookie trader. In a moment.
(COMMERCIAL BREAK)
QUEST: What a glorious night. That's Canary Wharf that you have just been looking at and that's over in the far part of the city of London. The new part, if you like of the financial district, built on the old docklands area. Over there, of course, is the main hub of the British, the U.K., financial system; and the single most important financial markets in Europe. Although, let's not get into that, just at the moment.
If you are wanting to make some money faster than a speeding bull market, more powerful than a low-risk investment, you need to become a rookie trader. Now, this of course is taking the markets over there and seeing if you can actually make money. Undaunted by a lack of trading expertise our very own Adrian Finighan bravely leapt into the London market. Adrian needed to see if he has what it takes.
(BEGIN VIDEOTAPE)
ADRIAN FINIGHAN, CNN INT'L. CORRESPONDENT (voice over): Traders, notorious characters molded by the sharp end of the world's financial markets.
Wheeler-dealers consumed by making money. Buy, sell, and turn a profit, any which way you can.
DAVID BUIK, BGC PARTNERS: If money is not one of your goals, you are wasting time in this.
FINIGHAN: Bonuses come thick and fast for those who can smell a deal and keep a cool head.
I'm on a crash course with the experts in the city of London.
UNIDENTIFIED MALE: You need to preserve your capital at the start.
FINEGHAN: An apprenticeship so I can trade online, anytime, anywhere. This is my journey as a rookie trader.
The trading floor is, of course, and unforgiving place and I have no desire to join its rowdy ranks. But online technology means that I don't have to.
(On camera): I want to play the market on my terms. To make a bit of money on the side from the comfort of my own computer.
(Voice over): The pages are full of companies advertising their services to individuals like me. They provide software and online access to the global markets in real time, basically, a trading platform. Trading alone though is a daunting prospect. Even for a business journalist. Before I even dream of profit, I need to go back to the classroom.
(On camera): Well, here I am. No going back now. Quite nervous actually. I feel like the new boy at school.
RYAN O'DOHERTY, CMC MARKETS: Adrian, hi. I'm Ryan.
FINEGHAN: Ryan, please to meet you. I'm your rookie trader.
O'DOHERTY: Ha, ha, rookie trader. You a bit nervous? No problem.
FINEGHAN: I am nervous. Yes, actually.
O'DOHERTY: Let's bring you through, and I'll try to get you trained up.
FINEGHAN: You're going to teach me, yes?
O'DOHERTY: I am absolutely.
FINEGHAN: Teach me how to make money, Ryan.
O'DOHERTY: I'll try my best. OK, come through.
FINEGHAN: Thanks.
(Voice over): Three companies invited me through their doors to learn the basics.
O'DOHERTY: We have an eight-modular course. That goes through the different elements of trading in financial markets.
FINEGHAN: At CMC Markets Ryan O'Doherty introduces me to the concept of trading CFDs, contracts for difference. One of the many trading instruments used by professional investors to hedge their bets.
O'DOHERTY: First we're going to go through the benefits of trading CFDs, or contracts for difference. We're going to talk about risk management and how to manage your money properly and then talk about the actual trading platforms. You have a range of products of around about 5,000 products that you can trade in around 35 markets in the world.
FINIGHAN (On camera): Wow. So, I can more or less trade anything.
O'DOHERTY: You can. Almost, yes.
FINIGHAN (voice over): Further south, in Canary Wharf, BGC Partners broker deals by matching buyers and sellers. David Buik is something of a guru when it comes to all matters, trading.
DAVID BUIK, BGC PARTNERS: We don't like the markets being quiet. We like volatility. We also like our clients to make money, because if our clients don't make money they go into their shell and they don't deal.
So, it's very important that the market, for want of a better expression, bobs around like a cork in the bath, because you catch the highs and the lows and you can catch the highs and lows several times in a working day (ph).
FINIGHAN (on camera): My quest for knowledge continues, here we are at another company and they're going to teach me about another financial instrument, spread betting, and in particular, currencies, foreign exchange. This is going to be interesting.
(Voice over): My third David Jones, chief market strategist at IG Index, one of the oldest electronic trading platforms.
DAVID JONES, ID INDEX: If we look at something like pound against the dollar, for example, at the moment it is trading right around $1.64, so a pound is worth at $1.64. But earlier this year we saw it as low as a $1.35. So, it bounced back something like 20 percent in the space of two or three months. Which is a fantastically big move for a currency. And many people are drawn, particularly, when we have sort of fairly quiet stock markets. They're drawn to markets such as currencies because you have the volatility. Hand in hand with the potential for additional profit is, of course, the increased risk factor.
FINIGHAN: The offices of these companies will be my training ground. I don't necessarily endorse any of them. But they're hospitality is vital to my success.
UNIDENTIFIED MALE: Let's talk about the trading platform?
UNIDENTIFIED MALE: There's the U.S. dollar.
UNIDENTIFIED MALE: Trading same day (ph).
UNIDENTIFIED MALE: Knowledge is power, really.
UNIDENTIFIED MALE: A fantastic move.
UNIDENTIFIED MALE: Focus on product.
UNIDENTIFIED MALE: You need to preserve your capital at the start.
FINIGHAN: People who trade, live and breath money. They literally feel it as the markets ebb and flow. If I hope to stand any chance of beating the system I have to tap into this mindset. But first I have to fill my head with a vast amount of knowledge and fast. My apprenticeship has begun.
(END VIDEOTAPE)
QUEST: We all do stories all the time, that we have to do, and some we actually love to.
But, Adrian, you really wanted to do this story.
FINIGHAN: Yes.
QUEST: Why?
FINIGHAN: Because I wanted to pit my wits against the boys that are supposed to be responsible for the financial mess that we're in. See whether I could have done any better than they could. To find out about their world, the world that has created this financial meltdown that we suffered in the last year. And I just wanted to get - I don't know, I'm a financial journalist and we work everyday with the markets, with the financial world, but I know very little about the nuts and bolts, how it actually works on a day-to-day basis.
QUEST: Do they actually have a different psyche? I've always believed that whether they were selling fruit and veg in a market.
FINIGHAN: Yes.
QUEST: Or stock and shares on the stock exchange, or derivatives, there is a trader mentality.
FINIGHAN: Absolutely, there is. You've got to be able to face risk and not worry about, on a daily basis, and not get stressed about it. The kind of - we're talking about amounts of money that you and I would - I mean, we'd have nervous breakdowns, I'm sure if we were to apply ourselves. And they take risks with enormous amounts of money. So, yes, there is a certain mentality.
QUEST: So, what have they got?
FINIGHAN: What?
QUEST: So what have they got, because they obviously -they don't worship money.
FINIGHAN: No.
QUEST: But they obviously have a healthy respect for money.
FINIGHAN: Yes.
QUEST: Is it all about the accumulation of wealth? Is it the art of the deal? Is the chase of the bull?
FINIGHAN: I think it is -the art of the deal is having a nose for a deal as well. I mean, you know, you've got the boys in the city earning an absolute fortune, you got the barrow (ph) working on the market. They've got the same thing.
QUEST: Did they cause this crisis? Was it the traders? Was it the MNA people? Was it the banking crisis? Who - was it the regulators? Who causes this crisis?
FINIGHAN: You are asking a question that I can't possibly answer. I don't think it was the traders. I don't think that anyone takes unnecessary risks. They take risks, but they don't take dangerous risks with the amounts of money that they play with on a daily basis.
QUEST: As we go through the week with your "Rookie Trader"?
FINIGHAN: You are going to see my learning the ropes, completely.
QUEST: Yes?
FINIGHAN: Being given all the tools that I need to trade on the same basis that they are. Obviously not with the same amounts of money.
QUEST: Did you actually make a trade?
FINIGHAN: I did, yes. I did. And I'm not going to tell you whether I made money or not. You'll have to find out throughout the course of the week, but I'll come back with -on Friday, when you have seen the whole series, and then you can give me a hard time, if you want.
QUEST: If you've got your shirt on your back, then we know you did well. Adrian, many thanks to you. We'll see you Friday.
If you want to catch up with team behind "Quest Means Business" then you really do need to look at our Facebook page. And our Facebook page, well, as you can see on the screen, I'd like to say it is an ardent work of journalism. But it's not. It's rumor, it's gossip, it's scurrilous chit- chat. And there's even a bit of me. Oh, lordy!
There's lots of pictures. The sort of things you really do need to know about how we make this program on a daily basis. It is absolutely not verifiable and there is no truth in most of what we write.
Coming up in just a moment, the Walt Disney Company is weaving some new assets into its web, Spiderman and X-Men, they are joining the House of Mouse. Will that be -who is going to read to whom?
(COMMERCIAL BREAK)
QUEST: You can see that the seasons are starting to change. It just half past 7 in London and already dusk is well and truly underway. Good evening, I'm Richard Quest. QUEST MEANS BUSINES, this is CNN.
A bit of light reading -- put down "The Wall Street Journal".
How about "Spider Man," "The Incredible Hulk," "Captain America" and "Astonishing X-Men" -- the sort of magazines that are now on their way to Disney. The entertainment giant has swooped in on Marvel. It's a $4 billion deal. It's the sort of deal that has been moving the market.
Susan Lisovicz is at the New York Stock Exchange -- and, Susan, I'm not sure whether you're the sort of reader of this sort of literature, but certainly on balance statements, this has been moving matters.
SUSAN LISOVICZ, CNN CORRESPONDENT: Yes. I mean, actually, Richard, I didn't hear the sole -- the first part of your question, so -- I can tell you that the markets are moving. They're moving down. You know, it's been a terrific month of August. The three major averages each up at least 2.5 percent.
You know, the -- the standard refrain here is that Wall Street's taking its cue from Asia. But I would have to say, closer to home, we're looking at the New York Mercantile Exchange -- oil and other commodities are down substantially. Crude is down $3 and that's, once again, stocks and commodities moving in town.
And so we've got a pronounced sell-off on the final -- the final day of August. But what a great month it's been -- Richard.
QUEST: I can see -- I think you're --you're on the floor of the Exchange. And...
LISOVICZ: (INAUDIBLE).
QUEST: ...the talk and, if you like, the -- the -- the scuttlebutt, the gossip and those words that you can actually repeat on a family network, what do they actually say they believe is the undercurrent of the market at the moment?
LISOVICZ: I think we're -- we're at a tricky -- tricky stage here. And, you know, we did get one economic report today that might actually be a good example for -- for the mood of the market right now. And that was for business activity in the Midwest.
OK, it came at this level of 50. All right, it doesn't mean anything to most of us. But what -- that level is right on the line between contraction and expansion.
And I think what's been happening for the last few months has been the fence -- like, OK, things aren't as bad or things are getting better. And I think the bar is going to be set higher now.
And one of the -- one of the common themes, Richard, is that we -- like sort of a line from "Jerry Maguire," "show me the money" from sales -- from sales. Corporate America has been massaging the bottom line by cutting costs every way they can -- cutting inventories, slashing benefits, reducing the head counts.
Now, we want to see top line growth. We want to see revenue growth. We want to see real signs that the U.S. economy is growing. The bar sets higher. We're going into September. Then comes October. Those are tough months for the bulls -- Richard.
QUEST: Now, we were -- what I was asking you when I first came to you was all about this Disney and Marvel Comics deal -- $4 billion.
Do you think -- I mean do we believe that this is just a one-up deal that made sense because of the companies involved, it's not general M&A?
LISOVICZ: Well, you know, it's still $4 billion. And that's a lot of money and that's the biggest media deal of the year.
Now, is it the perfect fit?
Yes, for a company that can really leverage these brands. I mean this is a company that has amusement parks as well as a studio. It has merchandise that it sells in stores. So -- and then, of course, Marvel has been putting a lot of its characters on the big screen. It makes a lot of sense.
But I would say it's not a -- it's not the only deal of the day. We have a big deal in the energy sector today with Baker, Hughes and BJ Services. And I think the two of them combined says, you know, things are maybe improving a little bit. Generally, deal making is considered a positive sign.
So I think that, you know, if you want me to go into a litany of terrible puns about how "Spider Man" has been snagged in the web of Disney, I will. But somehow, I suspect that you don't want me to -- Richard.
QUEST: I'm just horrified that you tried to compare a deal of "Captain America," "The X-Men" and "Spider Man" with some tedious deals in the energy sector.
It's time to say good-bye to Susan Lisovicz, who's clearly not a lover of this sort of stuff.
Poppy Harlow, who's in New York and watching over "Captain America" and "The Incredible Hulk," you're much more on this page, aren't you?
POPPY HARLOW, ANCHOR, CNNMONEY.COM: Sure. Call me a comic -- a comic book girl, if you will, Richard. I am a fan of "Iron Man" and "X-Men" and "Spider Man." So this is a huge deal. Disney is buying Marvel Entertainment for $4 billion. Some people are calling that a pretty high price tag. It's a cash and stock offering. It values Marvel at a 29 percent premium to its closing price on Friday.
And this will give Disney 5,000 Marvel characters, some which we know about and some which we don't even know about, but that they own the rights to. We're talking about "Iron Man," "X-Men," "The Hulk," "The Fantastic Four."
And, Richard, this is so interesting because it comes four -- really, almost four years after Disney bought Pixar, which led to a huge success for Disney with the cars franchise, "Wall-E".
And the CEO, Bob Iger, we spoke with him this morning. He told me he thinks and he hopes that this tie-up with Marvel will be as successful as Disney's tie-up with Pixar, when Bob Iger took the top seat at Disney.
Take a listen.
(BEGIN VIDEO CLIP)
BOB IGER, CEO, WALT DISNEY: I think, from a strategic perspective, because what we're all about is taking great content or making great content and distributing it to people all over the world on, these days, just about any platform imaginable. And this treasure trove of over 5,000 characters and the richness of their stories offers Disney exactly what we love to do the best and what we do the best.
(END VIDEO CLIP)
HARLOW: And what he didn't say there, Richard, but I'm sure what he meant is what they make a lot of money off of, and that is reaching across multiple platforms. You're talking about licensing; the video games; the theme parks, both here in the U.S. and abroad; the online properties.
Look at the success that Disney has had with "The Jonas Brothers" and "Hannah Montana" and Cars. This is something that reaches from grandkids that demand the movies and the toys and the games from their grandparents that have to buy them. So this is broad-reaching.
And I think, you know, investors love it for Marvel. Disney's stock is down about 3 percent on it, but it's a very interesting tie-up. It seems to make sense at the -- at the forefront -- Richard.
QUEST: It's not about comics, is it?
I mean you -- you alluded to it. But I mean let's -- let's get straight to the jugular here. Let's cut -- cut to the quick, as you might say. It is not about this printed dinosaur of -- of paper?
HARLOW: No. No, you're exactly right. I mean this is about, even so much more than the blockbusters. I asked Bob Iger today, I said, listen, is this about focusing on blockbusters like "Iron Man?"
It's not, really. It's about taking fantastic images and fantastic characters that people not only in the United States, but around the world love, like an "Iron Man," for example, and multiplying it in so many ways that are so profitable for Disney, beyond the movie, beyond the comic book. We're talking about products and theme parts and all of that.
And it's interesting to see that this is Disney adding on to its global push abroad, which you've seen them do more and more of.
Take a listen to how Bob Iger talked about that on a global scale.
(BEGIN VIDEO CLIP)
IGER: Well, there's definitely global appeal to these characters and stories, as we've seen with Disney. And that's one of the attractive elements of Marvel to us. I can recall -- not that long ago, as a matter of fact -- being in -- in China and seeing some kids with "Spider Man" t- shirts, for instance.
And so as we look at Marvel, you know, we see, in many respects, another Disney.
(END VIDEO CLIP)
HARLOW: We'll see if that is the case. But I mean if the past is any indicator of the future, Richard, Disney had a hugely successful tie-up with Pixar. They've been eyeing Marvel for a while. If this passes all the regulatory authorities, this could be huge for Disney -- Richard.
QUEST: Poppy Harlow, we thank you for that.
Poppy Harlow joining us from New York.
The news headlines -- I promised you another look at what's happening in the world of news.
Fionnuala Sweeney is at the CNN News Desk.
FIONNUALA SWEENEY, CNN CORRESPONDENT: Richard, news just coming into CNN, Turkey's foreign minister says that Turkey and Armenia have agreed on a plan to establish diplomatic relations. The statement says each country will discuss protocols on diplomatic and bilateral relations over the next six weeks then sign them and present them for ratification. Relations between the countries have long been strained. But in the last year, things have improved, with Turkey's president visiting Armenia.
Now, an update on the air disaster which happened last June. Investigators say they need more resources to search for the flight data recorders from Air France Flight 447. They say they still don't know what caused the crash. Flight 447 was flying from Rio de Janeiro to Paris when it crashed, killing all 228 people on board.
American leaders -- rather, African leaders are gathering in Libya for a summit to discuss the continent's trouble spots. Libyan leader Moammar Gadhafi says much of Africa's violence is due to foreign meddling. He singled out Israel, saying it's to blame for stoking conflicts there. The meeting coincides with celebrations to mark 40 years of Moammar Gadhafi's rule.
A mandate for change -- leaders of the Democratic Party of Japan have begun the task of forming a new government. The centre left party faces a laundry list of problems, including the task of lifting the country from its worst recession since World War II. Unemployment is at an historic high. Japan's once formidable ruling Liberal Democratic Party, the LDP, was handed a crushing defeat by voters.
The streets of London's Notting Hill erupted in a fiesta of color and sounds because it is annual carnival time. More than 200,000 people got a chance to eat, drink and be merry at the annual event. Dancers paraded through the streets Sunday and Monday to the sounds of pulsating music. The celebration of Caribbean culture has become one of Europe's biggest street parties.
And that is the news for now -- Richard, back to you.
QUEST: We thank you, Fionnuala Sweeney, at the CNN News Desk with the Notting Hill carnival.
When we come back in a moment, we're going to open up the doors of The Biz Clinic. The trillions of dollars in deficits -- paying it back will be the hard part. There are deficits all the way to the moon. We'll be back in just one moment.
(COMMERCIAL BREAK)
QUEST: $9 trillion is a mind-boggling number. It's likely to impact every man, woman and child in the United States for a very, very long time to come.
As we open up the doors of The Biz Clinic, Colleen McEdwards explains why this is so crucial and why it has to be dealt with.
(BEGIN VIDEOTAPE)
COLLEEN MCEDWARDS, CNN INTERNATIONAL CORRESPONDENT (voice-over): You're probably tired of hearing all the big numbers batted about in this financial crisis -- hundreds of thousands of jobs lost each month, millions in Wall Street bonuses, billions in bankruptcy figures and company bailouts -- so many numbers, it can make your head spin.
And now we've heard the White House say it expects the 10 year budget deficit to climb to $9 trillion. That's about $2 trillion more than it estimated just a few months ago.
The White House blames the recession for driving up government spending.
Big numbers and a big issue.
PETER MORICI, UNIVERSITY OF MARYLAND: For the average person, that deficit is their responsibility. We're -- we owe more and more of that money to foreigners and we're going to have to pay interest on that money.
MCEDWARDS (on camera): Here is $10 million. Now that is a really big number. But if I spent $10 million every single hour, hour after hour, day after day, it would take me more than 100 years to spend $9 trillion.
Here's another way of looking at it. If I were to stack dollar billions one on top of the other, just like I'm doing right here, my little pile here would go all the way to the moon -- 384,000 kilometers. And then I could keep going all the way back to Earth and then go halfway back again before I got to $9 trillion.
(voice-over): While the numbers are tough to grasp, economists say there is a real impact to be felt.
MORICI: For Americans, it's going to mean less Social Security. We're going to have to work later. We're probably going to get fewer health care benefits. It's going to cost more to send our children to state universities. It's got to give some place.
MCEDWARDS: If you want to break down that $9 trillion deficit for the average American, divide $9 trillion -- again, that's 12 zeros -- by the roughly 300 million people living in this country. That means $30,000 of debt for each American -- every man, woman and child.
And you thought paying off that monthly credit card bill was tough.
Colleen McEdwards, CNN, Atlanta.
(END VIDEO TAPE)
QUEST: And that is the moon that Colleen was talking about. And that, of course, just think going there and back several times to pay off the deficit. That's the real moon, by the way, not the one in the studio.
For expert advice in uncertain financial times, join us on QUEST MEANS BUSINESS. We have The Biz Clinic every week. The blogs are on our Web site. It's at CNN.com/bizclinic. And you can post your views there.
Rarely can there have been a moment when it is more important for me to know what the weather is going to be like over the rest of the week. Forget the naked self-interest in all of this, but Guillermo, I'm standing outside in London.
GUILLERMO ARDUINO, CNN METEOROLOGIST: Yes.
QUEST: We had brilliant weather in New York, brilliant weather in Hong Kong. I am seriously concerned that this gorgeous weather is going to last all week in London.
ARDUINO: Well, what I can tell you is that it's been extremely nice. We see some storms in the midlands. I have behind me, also, the forecast. And you see that it's typical London weather -- it comes and goes. So we are going to see sometimes, we hope, actually, that the rain is going to fall at night and not during the day or overnight, so you can do your show freely.
But you will see an increase in clouds now. I'm going to give you the long-term forecast in a minute, but I think that for now, we're going to be fine.
There is high pressure in central parts of Europe and that's keeping things nice. It's a little bit breezy in Copenhagen and then to the south it remains pretty nice. Actually, east is where we have problems. Also, in the Pyrenees we're going to encounter some rough weather conditions here again, not that bad, but we will see Moldova, Romania, Bulgaria and into Greece some bad weather.
The midlands all the way to southern parts of Scotland is where the bad weather is going to remain.
So, precipitation wise, in the next two days, we will see significant accumulations in England. So it stays up there. You see there's a pocket of high pressure to the south. We will see some rain showers in France and into certain -- down in parts of Germany, but not in London.
Temperature wise, we're going up a little bit. It's 25, the forecast for tomorrow in London; 29 in Paris. It remains 31, indeed, in the south. But the east, we see a change. And now after the storms, we will see a change in temperatures and they will go down.
In terms of airport activity, we are anticipating some problems into the Paris area, as I said before. London, breezy conditions because of the proximity of that front that we have in the area. Dublin with the same thing. Copenhagen with a breeze.
But it's not significantly bad. You know, we will see a little bit farther south, conditions remain pretty nice.
Where the problems continue in the United States, especially in California. I anticipated last week that the driver of the news weather wise was going to be that. On top of that, we have to add the proximity of a hurricane into the Baja, California Peninsula. Her name is Jimenez. And, as you see, it promises to make landfall in Baja, California soon. Of course, this is a very desert like terrain so we may see the problems with flood and all that, because the soil can't absorb the water.
I'll keep you updated throughout the night and the days to come in the state. Apart from that and apart from the serious problem of the fires, no airport delays.
And, also, remember that cyclone that we had into Japan?
Well, it brought rain and it's moving very quickly. We're going to take a quick look at it again. And it's half of -- of Honshu is under clouds and Hakahasa (ph), the same thing. And then the system will rapidly continue to move away so we don't anticipate big problems in the immediate forecast.
Central Argentina very warm conditions; the same in Chile, even though it's winter time still, it feels like summer at times. But the tents are going down in the Rio de la Plata very soon.
And coastal parts of Madagascar, especially to the east, is where we are going to see more of the precipitation. On the other side of the channel here, we'll see no rain at all into Mozambique. So conditions are going to be OK. But Madagascar is the with rain.
We'll see you on the other side of the break.
Richard is in London this week.
Stay tuned.
(COMMERCIAL BREAK)
QUEST: Well, you don't need me to remind you, that building on the right of your screen is the Gherkin. The one on the left is the old NatWest Tower. It's given it some other fancy name now. It is all part of the city of London. If I position myself, I end up with them both on either side and not popping out of my head.
Let's take the markets that are open and doing business. The Dow Jones Industrials in New York, the Dow is currently off just about 68 or 69 points. 9500 has been and gone. We're up 3/4 of a percentage.
You can see it in the red at the top of the screen.
That pretty much shows you there was never any encouragement on the session. It was largely on the back of what took place in Shanghai, where the market fell more than 6 percent.
One thing I have, of course, learned as we've been covering NYLONKONG (ph), where you rest your head at night is big business. Many hotel managers are having some restless nights themselves. They are struggling with the recession.
Filling a hotel is not that difficult. All you have to do is lower the rate. The problem is if you lower the rate, it's known as destroying the yield -- you never get it back except over a period of time.
I've been looking at how some of London's hotels are walking that fine line between cutting costs and keeping everyone happy.
(BEGIN VIDEOTAPE)
QUEST (voice-over): It's a buffering and balancing act to hold onto regular customers and to keep all flagship addresses afloat. And that's the challenge The Four Seasons faces.
KATIE TAYLOR, COO, FOUR SEASONS HOTELS: What you really have to focus on is the kind of expenses that don't have any impact on the guests' experience -- what goes on in the back of the house, are there ways, through technology or just in time inventory, or differing -- different purchasing process, to try to make sure that the business is as efficient and as -- as well managed as possible. There's lots to things you can do in how the business runs in ways that are actually invisible to -- to the guest experience.
QUEST: Maybe a few items here and there may go unnoticed. They can't hide the fact The Four Seasons in London is closed for refurbishment.
TAYLOR: Business demand levels in London are down. Major renovations displace a huge amount of (INAUDIBLE). So those -- those dollars, those big displacement dollars in a very busy hotel have, ironically, been saved by doing the renovation at this particular moment in time.
QUEST: Rehabbing during a downturn may be an opportune moment. Entering a new market could be risky. Firmdale has six London boutique hotels, such as The Haymarket Hotel, and will be opening its first property in New York at the end of September.
TIM KEMP, FOUNDER, FIRMDALE HOTELS: Hotels are very capital intensive. And after you've got a plan -- and we started planning New York three years ago. And we were told by the best financial brains that there was no recession and it was boom time.
So, really, once you're on the road, you're on the road. You can't change courses.
We expect to do fine.
QUEST: Tim Kemp deals with the finances. His wife Kit handles the interior designs.
KIT KEMP, FOUNDER, FIRMDALE HOTELS: If you can make your guests look around them and be interested in what is around and they're either doing one of three things -- they're working, resting or playing. So if you can appeal to all three of those particular senses, you -- you're going to be OK.
T. KEMP: In the month of July, all our hotels in the U.K. performed above 90 percent occupancy with extremely good room rates. Looking back in -- into time, when we did our budgets in November, we just simply wouldn't have believed that's possible.
QUEST: Hotels cannot afford to bask in the most profitable season of the year; although compared to New York and Hong Kong, hotels in London have been the least affected. Occupancy rates are down 10 percent; in Hong Kong, by 17 percent; and in New York, the hardest hit, occupancy rates are down by almost a third.
So the months ahead will be crucial to determine whether the industry will be on a leafy road to recovery or in for another winter of discontent.
(END VIDEO TAPE)
QUEST: So tonight's Profitable Moment -- short, brief and to the point. We have been in Hong Kong and seen what some might regard as a bubble starting to form. There has been -- we've been in New York, where others might see the first optimistic green shoots of spring recovery. It's not a train coming toward us when there's light at the end of the tunnel.
Can we say the same over the course of this week of what we're going to discover here in the city of London?
This was one of the places most affected. It's one of the places that still has many of the toxic assets buried deep in the bowels of those buildings. The British economy has fared worse. It seems to be slower recovering and the mountain of debt is probably larger, percentage wise, than most other European Union countries.
Will we, by the end of the week, find the road to recovery has arrived in Britain?
That's QUEST MEANS BUSINESS for the start of this week.
I'm Richard Quest live from London.
Hala is at the International Desk in a moment.
Whatever you're up to in the hours ahead, I hope it's profitable.
I'll see you tomorrow.
END
