Return to Transcripts main page
Quest Means Business
Heads of Skype, Burberry Talk Biz Outlook; Making Money on Toilets in Nairobi;
Aired September 02, 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: Hitting the brakes. Investors fear the stock markets are getting ahead of themselves. Life after eBay, the chief exec of Skype on this program tonight to talk about the telephonic future. And a big month for Burberry, the chief executive of that company on Britain's most famous fashion house.
I'm Richard Quest, "NY-Lon-Kong" continues in the rain in London. I mean business.
Good evening. Would you believe it, three weeks on the road and I finally get back to my home city, and it would be here that the heavens have opened. September showers perhaps appropriately for the stock market.
After a big run-up, stocks tumbling into the month. The bears say that the rise in share prices outpaced economic recovery, and now it's time to have a bit of a shower of a correction.
If that is correct, how big will it be? And will it bring the house down while we're trading? A look at the Dow Jones Industrials perhaps shows a little bit of something of what I'm talking about.
As you see on your screen, the Dow is just up 1.4 -- not percent, 1.4 points. That's virtually unchanged. Now after the gains that we've seen in recent months that we should be seeing such a small rise is indicative of the mood.
We're seeing fresh signs that the global economic squeeze is beginning to ease in different parts of the world. In Europe and Australia, consumers are coming out of their shells. They're spending their way out of the downturn.
The latest numbers, please, show they are by no means back to normal. The economy of the Eurozone still shrinking. The rate of decline has slowed right down. So still going downhill, but just by 0.1 percent in the second quarter.
France and Germany leading the process of stabilization. Their economies are actually growing again. Things are getting worse for workers in the region. In Spain nearly 85,000 people joined the queue for jobless benefits in the second quarter. Four million people are out of work in Spain. It's the worst-hit labor market in Europe.
Moving on, Australia, who has the Southern Cross of the flag, is one country that has avoided a recession of its own, its economy is gathering pace more quickly than expected. GDP expanded 0.6, yes, between April and June. Australia has pumped billions of government dollars into the economy, and that is being critical as the treasurer, Wayne Swan, explained.
(BEGIN VIDEO CLIP)
WAYNE SWAN, AUSTRALIAN TREASURER: We bring stimulus out now would pull the rug out from under the recovery, undermine confidence, threaten small business and treaties that are relying on the stimulus to employ Australians.
(END VIDEO CLIP)
QUEST: Investors in Europe weren't much impressed by any of the members or any of the comments, just look at those, the indices were all down, not as much as you might have expected, but it is the third day in a row of losses and banks took the most off the markets. Lloyd's, RBS, were some of the worst performers.
BP jumped more than 4 percent. BP said it made a giant oil find in the Gulf of Mexico. In Paris, the CAC-40, Total helped lessen -- lighten the losses. And in Frankfurt, Volkswagen shares, dear old Volkswagen, what has been going on there? They've halved in value since the news of the merger deal with Porsche, gained some ground, though only 3 percent.
At the end of this week, some of the world's most powerful policy- makers will be in London. They'll debate the next chapter in the global financial crisis. They are the Finmans (ph) and Cent Banks (ph) from the G-20. They will be clearing the way for the main event of a G-20 in three weeks' time in Pittsburgh.
On Friday, I'll be speaking to the finance ministers of Egypt, South Korea, and India. And look out for more (INAUDIBLE) speaking on this program throughout the week.
This gentleman has just done a deal that is of particular interest. Josh Silverman is the chief executive of Skype. Now to remind you, Skype, which is the Internet phone service, is changing hands. EBay is selling 65 percent to a consortium of investment groups. The price tag: $2 billion.
Josh, we spoke to eBay yesterday, who discussed why Skype did not strategically fit with their company. So what do you gain as a company by being on your own?
JOSH SILVERMAN, CEO, SKYPE: What we gain is focus. First, I want to say eBay has been a terrific owner, really focused with us on building value in the company. But it's true that there were no real synergies with the core eBay business.
So what eBay gets is the ability to focus on its core marketplace and payments business, we get the ability to focus exclusively on communications, exclusively with the set of investors who are world class, and who are totally committed to helping us build the world's greatest communications company.
QUEST: Are you profitable?
SILVERMAN: We're highly profitable. We did $170 million in revenue last quarter, and it was our 10th consecutive quarter of profitability, and profit margins have grown every quarter.
QUEST: And yet you're basically giving the product away. Skype-to- Skype calls, whether video or voice, are free. Look at that smile.
SILVERMAN: Isn't it amazing? What a great world we live in.
QUEST: So are you really making money by people, you know, to some extent, buying the little bits and bobs -- is it really -- surely you should be charging for the calls, not as much as the telcos, and you'll be uber profitable.
SILVERMAN: We're pretty happy with our profits as they are. But let me explain the way Skype works. Anyone can download Skype for free and make calls or high-quality video calls to anyone else.
So we give away a product for free that doesn't cost us a penny. In exchange for that, a lot of new people come to join us. In fact, over 300,000 people per day are coming and signing up for Skype.
Some of those choose to buy our paid products. We sell, for example, very low-cost calling all around the world at a phenomenal value. And from that we gain about, last quarter, $170 million in revenue.
QUEST: You're not necessarily unless -- as a businessman, you're not an altruist, although you may have philanthropic goals to keep the world in touch, would you like to be -- if you could, go on, I'm going to give you a chance. You can sign just here. Would you like to be able to charge for Skype-to-Skype calls?
SILVERMAN: We're very happy with Skype-to-Skype calls being free. It's a phenomenal investment in our community that drives great value for us.
QUEST: So where -- now you say goodbye to eBay.
SILVERMAN: Yes.
QUEST: As some have suggested, it wasn't the most strategically advantageous deal for anyone involved in that. I think perhaps there is a certain truth in that. But now you leave eBay behind, where are you going to increase your profitability?
SILVERMAN: So first we're seeing tremendous growth. In fact, growth has really reaccelerated in the last 18 months. Last quarter we grew revenue 45 percent year-over-year on a currency-adjusted basis.
But the future for us is even brighter. Video is a major focus for us, other big focuses for us are mobile. So Skype is now one of the most popular applications available on the iPhone. And we're seeing tremendous increases of people downloading Skype on their mobile phones.
And the other area of great growth for us is business. Many of your audience members are businessmen, and we're seeing huge amounts -- businessmen and -women, and we're seeing huge amounts of growth in the enterprise where actually they're asking for a paid supported version of Skype.
QUEST: I've got to put it to you, though, it won't be long, we know that there are -- there is MSN, there are other people doing VOIP, voiceover Internet protocol, and they'll be following with -- you're smiling again, I'm getting worried.
And they -- it can't be long before people will be moving in to try and eat your lunch.
SILVERMAN: We've faced competition since the day we were launched. Here we are at only six years old and we have over 400 million users. We are over 8 percent of the world's international calling volume. We have a great community.
And we think that comes from the fact that we have background (AUDIO GAP), and we've put huge focus on quality.
QUEST: So how do you prevent from becoming complacent? Because nothing (AUDIO GAP) company -- that the world is replete with people who invented something, because complacent, and suddenly wondered why they were a dinosaur.
SILVERMAN: That's right. And so it's incredibly important for us to keep focusing on having the best product quality, and having an independent shareholder group, some of the world's best investors who just spent $2.75 billion.
QUEST: It's a lot of money.
SILVERMAN: It's a great value.
QUEST: Were you surprised they spent that much money on you?
SILVERMAN: I think eBay shareholders did well for it. But I think we're going to demonstrate phenomenal growth in the future as well. I'm very happy that eBay chose to keep 35 percent of the company. And I think that shows great confidence, because we think we're going to deliver great value for them.
QUEST: All right. We thank you for that.
SILVERMAN: Thank you, Richard.
QUEST: I do need to -- in the absolute interest of avoiding conflict of interest, I do need to point out two things. First of all, this show does have a Skype name where you can get a hold of us, QuestMeansBusiness is our Skype name.
And again, in the absolute avoidance of confusion or conflict, I am actually a user of Skype. So let's be clear, we all know where we stand, now we've finished that particular interview.
I'll tell you where I'm standing at the moment. I'm standing dreading that it's going to suddenly downpour on me from a very large height. The sky is heavy.
(AUDIO GAP)
QUEST: Here are headlines with Fionnuala Sweeney.
FIONNUALA SWEENEY, CNN INTERNATIONAL CORRESPONDENT: Richard, we begin with the war in Afghanistan. The nation's deputy spy chief has been killed in a suspected Taliban suicide attack. Abdullah Laghmani was one of 23 people who died when an explosion tore through a crowd, leaving mosque east of Kabul on Wednesday. Dozens were wounded.
Laghmani's agency says (AUDIO GAP) grow similar to the U.S. agencies, the CIA and the FBI (AUDIO GAP).
Indonesia is feeling the pain of a powerful earthquake that struck about 10 hours ago, the country's health ministry says 34 people are dead with dozens more still missing. Officials fear the death toll will rise in part because of landslides triggered by the quake.
The epicenter was underwater about 190 kilometers southeast of Jakarta.
Dramatic images from the U.S. state of California where cooler temperatures are helping firefighters contain dangerous flames. Officials say conditions are slightly better, but Mount Wilson, home to a famous observatory, and antennae for virtually every TV station in Los Angeles remains at some risk.
One blaze, the so-called Station Fire, has killed two firefighters and forced thousands of people to evacuate.
Hurricane Jimena has lost a little of its punch. But it is still bearing down on Mexico's Baja peninsula with about 160-kilometer-an-hour winds. Forecasters say the storm was expected to weaken further as it makes its way across a sparsely populated area.
(AUDIO GAP)
QUEST: .. the wind is getting up, which means I could end up having to hold onto this for the foreseeable future. If you see it flying across London, you know we've got our sums wrong.
In just a moment, amid all of the worries that the weak economy will choke off consumer spending, at least one luxury brand has a patent for success. The woman in charge of Burberry.
(COMMERCIAL BREAK)
QUEST: It's a seriously fashionable to be holding shares of Burberry right now. The value of the British company with its trademark tartan has almost tripled in less than a year as investors piled in.
Burberry is capitalizing on its success later this month, it will be at the London Fashion Week. It's going to show its collection for the first time on home soil. Why are we pleased tonight to have Burberry, because as we have looked at "NY-Lon-Kong," or in our case, "NY-Kong-Lon," well, Burberry is a company that is in all three markets.
Jim Boulden now on the strategy behind the Burberry success.
(BEGIN VIDEOTAPE)
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): Luxury brand Burberry has spent the past three years trying to refreshen its image, while the 153-year-old British brand has kept the distinct check pattern, and of course, the trench coats, it's expanding in many ways, more accessories and products for men, more clothing for children, and more stores to go along with a higher profile with the help of a new model.
(AUDIO GAP)
BOULDEN: In May, Burberrys lit up the New York skyline with its new American headquarters on Madison Avenue. Two new stores will open there in October. In fact, the company is opening more than a dozen new stores this year, from Toronto to Dubai to Singapore to Beijing, right in the teeth of a recession.
In March, CEO Angela Ahrendts said: "A recession was a great time to expand."
ANGELA AHRENDTS, CEO, BURBERRY: I think the thing that people forget in a recession is sometimes it's when the best deals are made, so I mean, it's amazing in certain countries, the real estate that's being offered to the brand.
BOULDEN: By opening new stores, Burberry has been able to report an increase in sales and market share, while at the same time, sale of Burberry items inside big department stores has suffered this year.
Jim Boulden, CNN, London.
(END VIDEOTAPE)
QUEST: And the chief executive, Angela Ahrendts, joins me now here outside.
First of all, I do need to apologize. I mean, dragging you out in the most appalling weather.
AHRENDTS: Honestly, this is Burberry weather.
QUEST: But when we look at "NY-Lon-Kong," New York, London, Hong Kong, and the three markets, extremely important markets for you, how are they performing for you? Are you seeing some weaknesses between them all?
AHRENDTS: I will tell you that London has been off the charts. I mean, currency has been on our side, it's now very reasonable to shop in London for European tourists as well as international tourism. So you -- London has been the strongest it has absolutely been in years.
And Hong Kong and New York have been more -- have absolutely held their own.
QUEST: They have. Now that's interesting, isn't it? Because I'd have thought that in the recession that we've seen, the luxury market.
(AUDIO GAP)
AHRENDTS: . you know, and especially at a time (AUDIO GAP) Burberry went into this storm, which is getting worse.
QUEST: It's extraordinary.
AHRENDTS: But Burberry went into this storm with some great momentum. So honestly, I think you go back to the basics at a time like this and you just stay real close to all parts of the business.
QUEST: It's -- as the CEO, you have turned this thing around. And the Burberry check was traditionally -- and not exactly -- how would describe it when you took it over? It needed a bit of something on it, didn't it? A bit of pepper, a bit of style, a bit of panache, bringing it up to date.
AHRENDTS: Mm-hmm, absolutely.
QUEST: Is that fair?
AHRENDTS: Absolutely. We've had a tremendous amount of innovation in the check. And you know, it has been around for 153 years, it is -- we call it the iconic branding platform for the company. It is the 11th most recognized icon in the world today according to Interbrand.
QUEST: So when you travel around and you see knock-offs, you see, I won't counterfeit, but you see people trying to get as close as they can to the Burberry check without actually having the Burberry check, does your blood boil?
AHRENDTS: It does. But it also tells me how we have to keep moving forward fast. We've got to continue to innovate because then it's so glaringly obvious that those are knock-offs.
QUEST: Do you.
(AUDIO GAP)
QUEST: . wind and rain that we are inflicting, I do apologize.
AHRENDTS: Well, it's OK. Just both should be wearing trench coats, that's all.
QUEST: I left mine at home, it was so warm. What's next, do you think, overall, what do you hope to do next?
AHRENDTS: You know, we're actually really excited. We launched about six, eight months ago that we were re-launching our men's wear business, which is just.
QUEST: Hang on, hang on. I'm not sure I like the way.
(AUDIO GAP)
AHRENDTS: No, you look wonderful.
QUEST: But.
AHRENDTS: Re-launching our men's wear business which hadn't grown for a few years, so thrilled about that. And we also just jumped into the children's wear business. You know, our -- 65 percent of our business is apparel.
QUEST: Right.
AHRENDTS: Children's is a natural for us, doing "mini-me" versions of great trench coats and -- so we're thrilled and we're focusing on the digital world, and e-commerce is one of the largest growing channels that we have right now, so.
QUEST: It's called, quit while you're ahead, the wind is getting up, I'm going to say thank you very much. Angela, very kind of you for coming in.
AHRENDTS: Thank you very much.
QUEST: I promise next time we'll be somewhere nice and warm.
In just a moment, we turn our attention to doing business in Kenya. QUEST MEANS BUSINESS, we meet the man whose market will probably never dry up. That in just a moment if I'm not blown away by then.
(COMMERCIAL BREAK)
QUEST: Welcome back. We've been bringing you regular bulletins on business in Africa. But this week, as we look at "Africa Inc.," a sector we don't often like to talk about. If you live in a part of the world with poor sanitation, a lack of toilets is a serious issue. David McKenzie meets a Kenyan entrepreneur who is rising to the challenge. He is turning for a profit from the privatized privy.
(BEGIN VIDEOTAPE)
DAVID MCKENZIE, CNN INTERNATIONAL CORRESPONDENT (voice-over): Visit a slum in Nairobi with David Kuria, and you'll see that he is a man on a mission.
DAVID KURIA, OWNER, ECOTACT: It's about one-and-a-half.
(AUDIO GAP)
KURIA: . this portion is for many just in (INAUDIBLE) now. And the other portion is for (INAUDIBLE). And after 40, 50 years of independence, this is really poor performance.
MCKENZIE: As a businessman, he obsesses about a rather unusual product, public toilets. And rather than spending his time in the boardroom, he is working on bathrooms to fulfill his customers' needs.
(on camera): Are you confident it's going to be ready?
KURIA: Oh yes, yes, yes.
MCKENZIE (voice-over): His company Ecotact's chief aim is to provide cheap sanitation services to the poor. And with this facility in a Nairobi slum called Mathare, they hope to do just that.
They've dubbed this "a toilet to them all."
KURIA: Make this final purchase in (INAUDIBLE).
MCKENZIE: It's just hours away from opening, and the final lick of paint is still being applied, the final tiles placed. And the community is accessing them.
In downtown Nairobi, this toilet is booming, servicing thousands a day. They pay a couple of Kenyan shillings to spend a penny.
The toilets are so popular because the alternative is so unattractive.
KURIA: And what we saw that about 10 years, the few public toilets that existed were in very poor shape. (AUDIO GAP). And they were all most points (INAUDIBLE) and drug trafficking. So it was very insecure.
So with that background, for us, we needed some sort of social transformation for people to gain the confidence that, yes, you can have a public toilet which is clean, which is safe.
Yes, you can go in and come out the same way.
MCKENZIE: Where local governments fail, socially-responsible businesses can succeed by working with municipalities.
PATRICK OBATH, KENYA PRIVATE SECTOR ALLIANCE: The private sector is basically, we're here to make business, we're here to make a profit, we're here to make things work, with a certain amount of corporate social responsibility.
And because of that, we're ready to look at something that the government sees as a service, we're able to look at that and say, fine, you can provide a service, but at the same time, make it worthwhile for somebody to put some money in.
MCKENZIE: That doesn't explain why the toilets are so popular. For that, you need to know something about shoes.
Business shoes take a beating in the streets of Nairobi. So businessmen like to give them a shine. This thriving business is attached to the toilet, along with a convenience store. The micro-businesses help finance the toilet operations and ensure that health standards stay high.
So Kenyans get pretty excited about their toilets.
(on camera): And are you surprised that so many people write comments?
KURIA: I would say, yes, especially someone would any time to take two or three minutes to comment on a toilet and really some are writing quite a lot of details, yes? I mean, this is quite exciting. "Proud to be a Kenyan." "Great job."
MCKENZIE: The need in Kenya is massive, with nearly half the population without proper access to clean water and regular cholera outbreaks. Having a proper toilet facility can make a big difference.
That is why the toilet mall is drumming up support to expand into poorer areas like Mathare slum. Over a dozen toilets have been finished and many more are planned.
This project was completed in the nick of time. And while local politicians will take the credit, a private enterprise has taken over delivery of a vital public service that under the government had slowed to a drip.
David McKenzie, CNN, Nairobi, Kenya.
(END VIDEOTAPE)
QUEST: Of all the reports that we have ever done on "Africa Inc.," I think that has to be one of the most poignant and most important. The private privies in Africa.
In just a moment, we continue QUEST MEANS BUSINESS, assuming the tent hasn't blown away. Back-to-school for students the world over. One man has got a very lot to learn in a short space of time. Adrian Finighan is on his crash course. He is trying to become a stock market trader. He is a "Rookie Trader" to be sure, in a moment.
(COMMERCIAL BREAK)
QUEST: And the evening commute well and truly under way in Britain. The trains going into the station, a good evening to you. I'm Richard Quest, QUEST MEANS BUSINESS on a blustery, extraordinarily unpleasant September evening here in London. "NY-Lon-Kong," and I can tell you the "Lon" bit we're getting the worst weather.
Not to worry, going back to school, it is September, and in next week, of course, the youngsters, the little ones, the little tykes will be off back to school, while it can be stressful however old you are, whether you're 5, 35 or 45.
Just ask Adrian Finighan, he is learning the ropes in the cutthroat world of finance. It's day three of his weeklong (AUDIO GAP) learning how (INAUDIBLE) on one side, when it comes to making money, he needs his best decision-making.
(BEGIN VIDEOTAPE)
ADRIAN FINIGHAN, CNN INTERNATIONAL CORRESPONDENT (voice-over): Traders, characters molded by the sharp end of the world's financial markets. Wheeler-dealers consumed by the ebb and flow of 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're wasting time in this environment.
FINIGHAN: I'm on a crash course with the experts in the City of London.
UNIDENTIFIED MALE: You need to preserve your capital.
FINIGHAN: An apprenticeship so I can trade online, anytime, anywhere. This is my journey as a "Rookie Trader."
UNIDENTIFIED MALE: Welcome back, Adrian. I think today we're going to step up the training a little bit. I think we're going to talk a little bit about these risk-reward strategies.
FINIGHAN: My education continues. I'm not well on the way to understanding the mechanics of trading through an online platform.
UNIDENTIFIED MALE: The deposit requirement part of the dealing ticket, this tells you how much money will be tied up on your account when you place this trade.
FINIGHAN (on camera): This might sound strange, but my next lesson isn't about making money, it's about how best to lose it.
BUIK: You should never, ever had any kind of a trading mentality unless you can afford to take a loss.
FINIGHAN (voice-over): Fact and fiction, myth and revelation, walk into any bookshop, and the shelves are packed with titles inspired by trading. Among the tales of rogue traders and lavish lifestyles, there are plenty of books aimed at the likes of me, with modest aspirations of learning to trade online.
(on camera): Now by the end of my trading journey, the man I want to emulate wrote this book.
Robbie, here were are in your trading room, beautiful view.
ROBBIE BURNS, AUTHOR, "THE NAKED TRADER": We wouldn't really call it a room, would we? It's kind of like a trade -- it's a mobile trading desk, which I can move around depending on what view I want to see at the time.
FINIGHAN: Yes. And it's fantastic, out over the River Thames, and this is it. This is what you do for a living.
BURNS: Anyone can do it, Adrian, even you.
FINIGHAN: Even me?
BURNS: Even you. Yes, you know, even a CNN news reader.
FINIGHAN (voice-over): Robbie escaped the corporate rat race in 2001 and set out to conquer the markets from the comfort of his own home.
BURNS: There's something really (INAUDIBLE) running around chatting with each other and putting their hands in the air, which is just fine. But I think you (INAUDIBLE) very quickly. Trading, for me, is just passing -- passing the time, having a good time.
FINIGHAN: As the naked trader, Robbie publishes all his trades on his Web site -- transparent testament to the success of his philosophy.
BURNS: You've got to be Mr. Spock, is the main thing.
FINIGHAN: Right.
BURNS: The Vulcan. Everybody knows Mr. Spock -- cool, calm, collected, not emotional. If you're Mr. Spock, you will make money in the stock market.
FINIGHAN (on camera): If your winning one minute...
BURNS: Yes...
FINIGHAN: ...and then -- then it starts to go down...
BURNS: Yes.
FINIGHAN: ...but the tendency is oh, I -- you know, I've got to do something to stop it.
BURNS: I think that's what most people do is (INAUDIBLE) going down and it goes down and suddenly they're lost. Particularly with men, as well, the ego then takes over. Perhaps I've made a mistake.
FINIGHAN: Yes.
BURNS: If that one loses, I'm going to buy some more at that price. And then I'll break even if it just goes up a bit. And, of course, what happens is it (INAUDIBLE). It's much better just to get rid of a losing share and -- and move on.
FINIGHAN (voice-over): Robbie has a talent backed up by methodical research. But the crux of his success is this idea of Mr. Spock's. It's a rather clinical approach, in stark contrast to the image of the fiery trader living off his gut instincts. And yet, despite the stereotype, I'm starting to hear the same advice wherever I go.
At CMC Markets, the equivalent of Mr. Spock is Ashraf Laidi, an expert in technical analysis.
ASHRAF LAIDI, CMC MARKETS: You don't, you know, you don't have an emotional relationship with a price, with a stock, with a currency. You have that with human beings, you know.
FINIGHAN (on camera): Yes.
LAIDI: You know, therefore, you're -- you have to be able to separate yourself from losing trades. If you have spent hours and days in studying something and it -- and it has convinced you to buy it and it has fallen 5 percent, you have to be able to get your ego out. And not only that, maybe you should use that as an opportunity to learn from what you did wrong.
FINIGHAN (voice-over): I now have a grip on the psychology.
BURNS: I think we're going to talk firstly about risk-reward. I think...
FINIGHAN: At the various companies that have been teaching me, it's time to put my new sense of discipline into practice.
UNIDENTIFIED MALE: The most important thing in trading is to be aware of the risks.
UNIDENTIFIED MALE: I mean risk in moderation is very important.
UNIDENTIFIED MALE: Because we're looking at a potential risk (INAUDIBLE) ratio of two to one.
UNIDENTIFIED MALE: You have a level where you say well, OK, if I'm wrong and the market gets to there, I'm going to get out and live to trade another day.
UNIDENTIFIED MALE: Adrian Finighan, welcome to the Holy Grail of risk management.
UNIDENTIFIED MALE: So how much are you willing to risk on each trade?
FINIGHAN: I don't know, 50 pounds I suppose.
UNIDENTIFIED MALE: Fifty -- 50 pounds?
FINIGHAN: Yes.
UNIDENTIFIED MALE: That's a good starting point.
FINIGHAN (voice-over): It boils down to pretty simple mathematics -- you make sure that on any given trade the amount you can win is greater than the potential loss.
UNIDENTIFIED MALE: We're now live and executed into the market. But remember, we need to make sure we're protecting it, OK. On any trader, I always encourage to make sure we put on a stop loss.
FINIGHAN: Should the market go against you on a trade, stop losses automatically close your position at a certain price to limit your loss.
(AUDIO GAP)
FINIGHAN: So there it is. Traders are making money by managing risk and absorbing the inevitable losses.
Back on the river, Robbie Burns, the naked trader, learned this lesson long ago.
BURNS: My strategies, when I take a loss, it's got to be smaller. So I take the loss quickly. And what I'm looking for is to make two or three grand on each share and I lose, at most, a grand on a share. Mathematically, it makes sense. You cash in more losers and still win overall.
FINIGHAN (on camera): But to some extent, is -- is making mistakes like that all part of the learning process?
BURNS: Definitely. In fact, I think people who start off making mistakes are more likely to make money than people who start off winning.
FINIGHAN: Right.
BURNS: You know when you feel smug, clever when you're making money in the market, it will come and bite you.
FINIGHAN: You know, meeting Robbie and learning about risk management has made me quietly confident that I can do this. I'm under no allusions, though, about how hard it's going to be when it comes to putting in my own money.
(END VIDEO TAPE)
QUEST: Adrian Finighan, who is our rookie trader. And we'll see how he progresses -- does he ever actually make any money before the end of the week?
Some corporate news. The world's biggest drug maker has agreed to pay a record sum in fines for illegal marketing of a host of medicines. It's Pfizer, the U.S. giant, the maker of Viagra. And it will pay two countries a billion dollars after being deemed a repeat offender in promoting the use of its drug for conditions that were not approved that it can treat. It will be plead guilty to a criminal charge relating to a market of Bextra, the painkiller that's now been pulled from the shelves.
And one other piece of company news you will want to know tonight, BP says it's made a giant new oil find in the waters of the Gulf of Mexico. It could hold a billion barrels. It's Europe's second largest oil company, BP. The well was built to more than 10,000 meters -- greater than the height of Mount Everest. I think that might be what you call an ultra deep water site. No doubt, somebody will correct me if I'm wrong.
The news headlines -- Fionnuala Sweeney, good evening, at the CNN News Desk.
FIONNUALA SWEENEY, CNN CORRESPONDENT: Hello, Richard.
Some news just coming into us.
The British foreign secretary, David Miliband, has just announced that a body that may be that of a Briton taken hostage in Iraq two years ago has been handed over to the Iraqi authorities. There are no more -- further details on that just at the moment. But a body that may be that of a Briton taken hostage in Iraq two years ago has been handed over to the Iraqi authorities.
A report from Chinese state media says at least 18 people are dead after a truck explosion. According to the state-run Chinese agency, a vehicle carrying chemicals blew up in the eastern Shandong Province. The blast was (INAUDIBLE) at least 10 other people. A Reuters report says the chemicals were being unloaded at the time of the explosion.
The relatives of the man known as the Lockerbie bomber are saying he's been taken to the intensive care unit over hospital. But Libyan officials deny that, saying Abdul Baset Ali al-Megrahi has been in a hospital for the last four days, but he's not in an intensive care unit. Officials say al- Megrahi's medical condition has worsened since he was released from a Scottish prison less than two weeks ago.
Cars on fire, tear gas -- all reportedly part of fierce fighting in the streets of Brazil between police and residents of a Sao Paolo slum. Officials say clashes started after a teenaged girl was killed by a stray bullet. Eyewitnesses say that police fired it while shooting at alleged car thieves. Authorities are investigating.
The U.N. secretary-general, Ban Ki-moon, got a firsthand look at effects of climate change when he traveled to an area just 1,200 kilometers from the North Pole and took a walk from the polar ice in Norway and was alarmed at the rapid rate of the melting ice. Ban (INAUDIBLE) this to act ahead of the key climate change summit in Copenhagen in December.
And those are the headlines -- Richard, back to you.
QUEST: Fionnuala, we thank you for that.
Fionnuala Sweeney at the CNN News Desk.
Now to Bernie Madoff, who's serving 150 years in a U.S. prison. The very name Madoff is synonymous with fraud on a massive scale and now the U.S. Securities and Exchange Commission, the SEC, has released details about the investigations into the multi-billion dollar Ponzi scheme that put him behind bars.
CNN's Allan Chernoff in New York joins me -- Allan, from all of my reading is they seem to be suggesting that -- that the SEC were just incompetent in the way they investigated all these previous allegations.
ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Yes, absolutely, Richard. This is the SEC's inspector general, an independent inspector general who, after the scandal broke, took a look at the Securities and Exchange Commission's investigations of Bernard Madoff over the past two decades. And he has concluded in his report over here that, indeed, the SEC was essentially incompetent.
The report, in fact, does say that a thorough and competent investigation or examination was never performed. The report also says at no time did the SEC ever verify Madoff's trading through an independent third party and, in fact, never contradicted a Ponzi scheme investigation.
And, indeed, of course, that's exactly what Bernard Madoff was engaged in.
The SEC also, according to this report, was not unduly influenced by the Madoff family. And, as you know, there also had been an SEC official who had a romantic relationship with Bernard Madoff's niece. He ended up marrying her. But the inspector general says that did not influence the SEC investigations.
As you say, it was purely incompetence here, according to the -- the inspector general's report -- Richard.
QUEST: Breathtaking, Allan. Breathtaking in the sense that the SEC likes to think of itself as the gold standard, if you like, of investigations and what you seem to be outlining is a catalog of missed opportunity, missed chances and mistakes.
CHERNOFF: Richard, indeed, that is a good summation of how the current SEC chair describes the situation. Mary Shapiro, who took office after the -- the scandal broke, did say, indeed: "The agency missed numerous opportunities to discover fraud."
And then she said the failure to continue to regret. The SEC has made quite -- quite a change since then, but this is a black eye that probably will never, never be forgotten -- Richard.
QUEST: All right.
Allan Chernoff, who joins us from New York. We'll talk more about this one. There's clearly a lot to be learned from that.
Allan Chernoff.
Now, you -- one of the beauties of our Facebook page is that you get the chance to see QUEST MEANS BUSINESS and the staff behind it and how we actually make the program.
Who would have ever thought that QUEST MEANS BUSINESS actually involves this sort of behavior -- holding the actual -- holding the tent to make sure that things don't go wrong?
We have to go this way to get a bit better view of exactly how much and how dangerous things are.
Good evening.
UNIDENTIFIED MALE: Good evening.
QUEST: The rain is getting up.
UNIDENTIFIED MALE: It's a bit -- yes. It's a bit much.
QUEST: A bit much. Great much now. But we'll keep going, if you don't mind. Just another -- just another 15 minutes before you can let go.
Earlier in the hour, we were talking about the return of the consumer to the high street. Spending is making a come back from Australia to Europe.
When we are back in a moment, music to the ears of this next guest, in a moment.
(COMMERCIAL BREAK)
QUEST: NYLONKONG (ph) coverage on QUEST MEANS BUSINESS.
I'm Richard Quest in (INAUDIBLE).
They've been jettying (ph) credit cards in favor of the debit card. More than half of all payments are made using the plastic equivalent of hard cash. That plastic equivalent is set to grow. But it is the shift from credit to debit that's one of the most startling phenomenon.
CNN's Money's Poppy Harlow spoke to Joseph Saunders, the chief executive from Visa. She wanted to know how the climate looked and how ready we were to get rid of -- to part with dollars and cents.
(BEGIN VIDEO CLIP)
JOSEPH SAUNDERS, CEO, VISA: Consumers are not spending as much as they were in 2008 and, frankly, not as much as they were in some periods prior to that.
Having said that, the number of transactions has been growing and it's mostly been growing on -- on debit cards. That growth is -- is a matter of choice, possibly, over credit cards. But in addition to that, it's that there are many different places that take debit cards (AUDIO GAP) than there used to be.
As it relates to the economy in general, I would -- I would -- I would have to say that things are moving along at a -- at a reasonably steady pace.
The good news, if you can call it good news, is that things haven't gotten worse. On the other hand, there's nothing to indicate that they are going to get substantially better in the -- in the near future.
(END VIDEO CLIP)
QUEST: And you can see much more on that story on our Web site, CNNMoney.com for the latest in business and in finance.
To look at the conditions here in London tonight, it may be September. The rain is absolutely pouring down on the ground. It is just one vast swath of -- of wet weather -- Guillermo, I'm not blaming you...
GUILLERMO ARDUINO, CNN METEOROLOGIST: I know.
QUEST: ...but I am, actually. And you -- you're right, I mean we had brilliant weather in Hong Kong.
ARDUINO: Yes.
QUEST: Gorgeous weather in New York.
September arrives, what have I got to look forward to?
ARDUINO: Well, you had a nice Monday and Tuesday in London, I must say. Now, Richard, I told my supervising person, Cindy Nelson, I ran there and I said if it is not raining there, probably Richard will not be able to finish the show at the terrace. Because I saw this behind me.
It's pouring. It is awful. And it's going to get worse.
You see these red dots there?
Those are going to get to London at any time.
And you know what?
The European Union has a Web site where they post all the European members' advisories weather wise. And London southeast has a warning of severe weather for today and for tomorrow. So, unfortunately, we'll see that.
Look at the extended forecast, three days. We may see the same thing. It's very difficult to predict in London, because it changes so quickly. But we are going to see the same in the next days. You may be lucky. You may do a show tomorrow from there.
I'll talk about London in a second a little bit more.
Let me tell you about Jimena, this hurricane that actually made landfall in the eastern Magdalena area last night. (INAUDIBLE) the system has weakened, but we're looking at it very closely because it's in the area.
Now, I must say, it's connected to a long-term with the fires in California. It seems that now, with the new path, because of the interaction with the peninsula, it's going to move westwards and that is good, because it's not going to bring winds into California at all. We were concerned about that, because no rain was in the forecast.
It's going to damage the environment a lot in here, but the situation gradually is going to get better.
Also, we see a tropical storm that may dissipate or not. The National Hurricane Center is not sure yet. But we have the official track, actually, all the way to three days from now, north of the Greater Antilles and affecting the Lesser Antilles.
Now, look at what's going on here. We have one, two, three -- three areas of bad weather -- the South China Sea, the Philippine Sea, the Pacific Ocean -- that have the chance of developing tropical weather wise. So it's going to be very busy.
Now look at Britain. Now, covered -- practically, England and the midlands and Wales covered in rain right now in the radar. It's going to be a tough night weather wise. Then conditions are going to get a little bit better. And we get the secondary part of the -- of the low where, with a band that is going to bring the rain. So there is no change, unfortunately. Severe weather all over Europe into Germany, into Italy, parts of France, the Alpine region and, needless to say, Ireland and the British Isles.
All right, sorry about the grim news, but we have much more for you after the break. Stay tuned.
(COMMERCIAL BREAK)
QUEST: The chief exec of NYSE Euronext is cautioning that U.S. investors might have got a bit too carried away too fast with the prospects for recovery this year.
Duncan Niederauer told CNN some of the share price gains were immature. He's still optimistic, though.
(BEGIN VIDEO CLIP)
DUNCAN L. NIEDERAUER, CEO, NYSE EURONEXT: I think the market went up too soon -- too much too soon -- a little too quickly earlier in the year. But it's really held onto those gains all summer. There is always that nervousness as we come into September and October, because that's what the history books tell us.
But the market did absorb a lot of issuance during the summer. Volatility has been muted. Volume has been a little lower in August, as you'd expect. And I started -- I was starting to feel that it was a leading indicator of what my view is for the broader economy in '10, which I think is going to improve.
It still remains to be seen what September and October hold. But I think if earnings hang in there, I'm not going to read too much into yesterday's activity. I think we're still in a pretty good place.
(END VIDEO CLIP)
QUEST: In just over an hour's time, he will be ringing the closing bell remotely from Atlanta, Georgia. It's the sort of thing they did with the opening bell from Davos. He may have his bell. Of course, as we'll hear in a moment in the Profitable Moment, I have mine every single moment of the day.
Now, it's about this -- I'm about to say something that in today's climate is most unfashionable. Some banks have a heart.
Jim Boulden has been finding out about the wealthy bankers trying to help out one of the country's poorest regions.
(BEGIN VIDEOTAPE)
JIM BOULDEN, CNN CORRESPONDENT (voice-over): Few Western financial centers butt up against the city's poor. In London, much of the area around the two financial centers has housed the poor and immigrants for centuries. So in the shadow of London's bank towers sits many a tower block filled with social housing.
(on camera): This part of London is known as Tower Hamlets and it includes those bank towers. Still, campaigners say nearly a quarter of the young people who live here don't have the skills to work in those towers.
(voice-over): Ten years ago, bankers who started to move into the re- gentrified parts of Tower Hamlets created City Gateway to try to bridge this gap. The charity's aim is to give the young people here the skills and confidence to apply for jobs in the financial districts.
Today, banks like Barclay's give more than just money.
DARREN WOLF, CITY GATEWAY: They provide tutors for us on our courses. They provide our young people with opportunities to walk around their offices and to look at what work looks like in an office environment. And they provide us with workplace meets for our apprentices to go on for up to three months.
BOULDEN: Seventeen-year-old Salima came to City Gate this day to look for an entry level administration job. She grew up right alongside East London's expanding financial landscape.
SALIMA KAHTUN, STUDENT: When I was young, I was, you know, I think, yes, I would love to work in a place like that, because it's -- you can tell (INAUDIBLE) and good money and stuff.
BOULDEN: But some people here, of course, say the banks could do more.
SUZY STRIDE, CITY GATEWAY: Young people get at our youth camp and they've been affected by, you know, Barclay's or one of the big corporates coming down and funding a football tournament. And they would say, oh, they are helping. They are doing their bit. There is some -- you know, there is a bit of connection there.
But essentially, I would say there's too much of a gap still. There's too much of a -- a wall.
BOULDEN: The mixture of a global financial center with so many deprived people has many challenges. Campaigners say one is that for every two jobs on offer here, only one person from the area applies.
But now, with the banks starting to hire again, if more people here had the skills, the world in those bank towers would not feel so distant.
Jim Boulden, CNN, London.
(END VIDEO TAPE)
QUEST: Whoever's idea it was to do the program from outside in September should be taken out and removed. Oh, that was me.
And tonight's Profitable Moment.
The traditional view is that September is a bad month for the stock market. New research sent to me today from Steven Pope (ph), who was on our show last night, dispels that as a myth.
Market falls during the month do usually outweigh gains when taken over a 12 month period. There is little to be concerned about, because the market has fallen sharply in the tenth month, it rebounds briskly by the end of the year. So far so good.
It seems to be the prevailing view that the market does recover and any losses that we see in September are well made up before we really notice it.
Now, I don't know whether I believe all this. The problem is that these days, there's an argument for just about every possibility and every outcome. I think we have to go back to basics. Consumer confidence can only take us so far. We have to look at economic numbers. And, at the moment, they tell different stories to the market.
Look at Australia today. Look at what we saw in the European Union and compare and contrast with what we've seen in the U.K. and in the U.S.
Things are getting better. It's slow and that's what September is likely to be about.
And that is QUEST MEANS BUSINESS for this mid-week wet version.
I'm Richard Quest.
Hala Gorani is next at the International Desk.
Whatever you're up to in the hours ahead, I do hope it's profitable.
Keep wet.
END
