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QUEST MEANS BUSINESS

Strong Sign Interest Rates Will Rise; Rupert Murdoch's Takeover of BSkyB

Aired March 3, 2011 - 14:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: When the ECB says strong vigilance is needed, it is a strong sign interest rates will rise.

What will be with BSkyB, will be. Rupert Murdoch's takeover moves ever closer.

And tonight, a driving lesson with a difference, Formula One's Heikki Kovalainen shows me how to handle a race car when it is in the snow.

I'm Richard Quest. I mean business.

Good evening.

The phrase tonight is "strong vigilance". Two words which means that an interest rate rise could be just weeks away across the Euro Zone. Europe's central banker is grappling with an oil price shock as unrest in the Middle East fans the flame of inflation. And it is prompting Jean- Claude Trichet to issue the code word for eminent action. If you didn't get it the first time around, he practically spelled it out at the press conference.

(BEGIN VIDEO CLIP)

JEAN-CLAUDE TRICHET, PRESIDENT, EUROPEAN CENTRAL BANK: The interest rate decision today was unanimous. I would also say that we are mentioning that we are in a posture of strong vigilance. And my understanding of the position of the governing council in line with such assessments that we did in the past is that an increase of interest rates in the next meeting is possible.

(END VIDEO CLIP)

QUEST: Jean-Claude Trichet, and that is practically spelling out the phrase, "strong vigilance". When investors heard that they bundled into the market and bought the euro, which rose sharply in the expectation that it will go up. And it this is why those two words are exciting so much speculation. Almost every time Jean-Claude Trichet has used that phrase, rates have gone up within a month. The key rate remained on hold today. But if from March '06 right through to June '07, it was always a case of the phrase "strong vigilance" being used, which then led to a rate rise.

Trichet is blaming fast rising oil prices for the danger of pushing inflation too high. It is already above the ECB's reference range. Events in Libya are pushing Brent crude far beyond $100 a barrel. Every sector of industry, from aviation to manufacturing to consumers will be affected at these sorts of levels, even though it was off just a tad today, the pressure is there and the risks are ever greater.

Trichet said when we have a shock, and we have a shock, our responsibility is to prevent a second round of inflex (ph). Yesterday's EU inflation numbers sent alarm bells ringing. Prices are raising at an annual rate of 2.4 percent.

Even Ben Bernanke of course, over in the U.S., has been warning about the relationship between the oil price rise and this very high risk of inflation.

(BEGIN VIDEO CLIP)

BEN BERNANKE, CHAIRMAN, U.S. FEDERAL RESERVE BOARD: The most likely outcome is that the recent rise in commodity prices will lead to, at most, a temporary and relatively modest increase in U.S. consumer price inflation. And outlook consistent with the projections of both FOMC participants and most private forecasters. That said, sustained rises in the prices of oil or other commodities would represent a threat both to economic growth and to overall price stability. Particularly if they were to cause inflation expectations to become less well anchored.

(END VIDEO CLIP)

QUEST: Ben Bernanke.

Now, we have talked on shows on both sides of the Atlantic, the worry is there about oil prices and inflation. But for the ECB head, the president, Jean-Claude Trichet, to use the phrase "strong vigilance" is really interesting. I've brought back our old friend the traffic light. Because it always was said, in the rate rising last cycle, that Trichet used a traffic light signal. For example, if he just said that they were "monitoring events closely", that merely said that the rate rise was likely at some point in the future. If he said that they were "monitoring things very closely", that said that a rate rise was pretty much on the way in two month's time. But if he used the phrase, "strong vigilance", as that graph showed, it meant hold onto your horses, the rate rise was around the corner.

Earlier I spoke to Valentijn Van Nieuwenhuijzen, the chief economists at ING Investment Management. And I began by asking him was he surprised that the "strong vigilance" phrase had been used?

(BEGIN VIDEOTAPE)

VALENTIJN VAN NIEUWENHUIJZEN, ING INVESTMENT MANAGEMENT: Yes, we were absolutely surprised by that. I mean, this is-we had some indications that they would be more aggressive and signaling, you know, more vigilance tone, but that they would actually use the code word for, you know, basically announcing a rate hike next month. That is really a big surprise for us.

QUEST: So, bearing in mind that central bankers don't like to take the markets by surprise, you have-let's be clear about this. You have interpreted this, that rates go up next month, all thing being equal?

VAN NIEUWENHUIJZEN: Absolutely. I mean, not only did they give a code word, which has, you know, in the past really been very reliable in sort of indicating a rate hike, but also in Q&A afterwards, you know, Trichet went as far as saying, yes, indeed, this might very well mean that we will hike rates. Of course, he didn't pre-commit, but for us this has really increased the probability a lot and our best case is that they will hike in April.

QUEST: If it is so much of a done deal, why would he not just do it now?

VAN NIEUWENHUIJZEN: Well, I think there, he wants to be a little bit predictable, at least. I mean, if he would have done it now, there would be really, really limited signaling for the ECB's reputation to be sort of, you know, somewhat readable. So, I think the wants to pre-announce it in a little bit, although, he is more aggressive than he was in the past, when it took a lot longer for them to pre-announce such a policy change.

QUEST: Explain to our viewers, explain, and help us understand. Why do they feel the need to telegraph their intentions?

VAN NIEUWENHUIJZEN: Well, it is a fine balance. Sometimes they want to surprise markets to some extent. Sort of to take away all of the surprises that markets can anticipate. They need to have something of an element of surprise to them. \

QUEST: If we look at the markets, you see how they reacted. The euro gained. The best gains it has seen since-for some weeks. The bonds, well, we have seen bonds sell off and yields have started to rise.

VAN NIEUWENHUIJZEN: Yes.

QUEST: All this is entirely predictable in an interest rising cycle, isn't it? But what has been unpredictable for you about this?

VAN NIEUWENHUIJZEN: I think what was a little bit unpredictable is actually the good reception in equity markets. You could say that, you know, this could be the start of a more broader tightening cycle in developed markets. And an acceleration also for tightening and emerging markets. And never the less, generally it has been received quite well in risky assets and most notably in equity markets with, you know, with a few exceptions, for instance positive evolution after the announcements.

(END VIDEOTAPE)

QUEST: And, indeed, exactly that happened, as the traders prepared to put their hands in their pockets, during the session, the threat of the interest rate rise hanging over them. It didn't stop the European market ending the day higher. There is plenty to be cheerful about. Rosier than usual jobs numbers from the U.S., a pull back in oil prices, and healthy earnings reports out that lifted the mood. The ANB Inbev (ph) Company and Adacco (ph), the recruitment company both had numbers. But look at the good gains in London, at 1.5 percent.

Markets got the boost in the U.S. There was a rare piece of good news on the latest job numbers. Alison Kosik is in New York, at the New York Stock Exchange.

Rates, as you know, were the big talking point on this side of the Atlantic, but you have jobs on your mind.

ALISON KOSIK, CNN FINANCIAL CORRESPONDENT: Yes, jobs, is really what is driving this rally today, Richard. You know, it looks like stocks may wind up posting their best day in three months. You know, this report shows that weekly claims fell to 368,000. It is the lowest level that we have seen since 2008. It is really the best sign yet that the job market is improving. And this is really building the anticipation for the government's big jobs report that comes out Friday.

Richard, right now we are expecting a gain of about 200,000 jobs in February. And a slight tick up in the unemployment rate, Richard.

QUEST: The retail sales numbers, we've had consumer confidence earlier in the week. You have got these numbers today. A clear, perhaps, sign that the good ship is turning around, or not?

KOSIK: It is, in some ways. But then, you know, you throw into the mix the rising prices of commodities, like, you know, cotton, wheat and iron, and oil, you know. And we're seeing that that is beginning to be passed on to consumers. And that, of course, could really throw a wrench in the recovery. It is already affecting consumer spending. You know, it really doesn't come as a big shock to the people that I talked to on a daily basis here on Wall Street. You know they have been worrying about rising prices since the Fed began its latest round of quantitative easing at the end of the last year. And traders believe, actually, that QE is going to be helping to keep-it has been helping to keep the floor from falling out from under the market.

Now, we've been talking about, you know, how this Mideast unrest, and the rising oil prices for weeks. And essentially the Dow hasn't gone anywhere. But today it definitely is. But still, you know, you still have those concerns in the back of your mind, about these rising commodity prices that really could throw a wrench in the economic recovery, Richard.

QUEST: Alison Kosik. We are up 195 or so, on the Dow. Don't touch any buttons, don't do any damage.

KOSIK: Yes, we are.

QUEST: And we might actually end the day with a good gain, or if you are long. Many thanks indeed.

Now in just a moment I'll be speaking to the head of Standard Bank, Africa's largest lender. It had earnings today and a statement about refining its strategy. Why does a company, a bank, need to refine its strategy? It suggests that something might have gone wrong with the previous strategy. We'll find out.

(DESK BELL CHIMES)

(COMMERCIAL BREAK)

QUEST: Africa's largest lender announced it is tweaking its strategy. Jo'burg-based Standard Bank says it will continue to focus on cost cutting after reporting headline earnings of 1.5 million. It was down 4 percent on the previous year.

It was the bank's third straight fall in annual profits. Times have been hard, though, for banks. Standard says it will no longer be looking for at market outside of Africa, after aggressively expanding into BRICs before and during the financial crisis.

Back to the knitting, back to home, back to the African market. Let's talk about Standard's earnings and that change in strategy, the chief executive, Jacko Maree, joins us now from Johannesburg.

Mr. Maree, why do you want to change the strategy? It is-if you change strategy that usually suggests there was something wrong with the previous one.

JACKO MAREE, CHIEF EXECUTIVE, STANDARD BANK: No, Richard, the way you summarize it isn't quite correct. We very much are interested in connecting the BRICs to Africa and to each other. But we said we no long aspire to have domestic businesses in these countries, but cross border businesses, doing the big deals on mining and infrastructure, for sure. We just have done a huge deal between China and Brazil in the area of electricity transmission. So, that is bang on strategy, but running a commercial bank in Brazil would not be on strategy for us.

QUEST: Now that is fascinating, isn't it? Because that is cherry picking the most lucrative business, isn't it? The big global M&A commerce, commodity business, but it is not lumbering yourself with the costs in-country?

MAREE: That really is the issue for us. You know, we are a relatively small bank on the global scene. So we have to really look after our capital and liquidity well. I think everyone understands with the changes that have happened in bank regulation, increased capital requirements, increased liquidity requirements. You really have to be very selective as a wholesale bank, as to what you can do. And for us it has to be bang on strategy. So therefore, we are trying to avoid holding up large infrastructures, in countries and perhaps form partnerships with small teams of investment bankers on the ground rather than a big infrastructure of a commercial bank.

QUEST: You see that, that takes us to the heart of the difficulty that you face, doesn't it? Your bigger than a niche player, but you are playing in the territory that someone like the HSBCs, the RBSes, the Citigroups, come in and you risk getting nut crackered.

MAREE: Absolutely. And that is why we have to play to our core strength. Why do people want to deal with us, typically, it is because we are the biggest bank on the African continent. And there we can compete head-to-head. You know, HSBC was looking to come into Africa, withdrew finally. And we compete effectively with Standard Chartered, Barclays, Citi, on the Continent. And then we can find the deals with our partnership with ICBC, and so on. We are very strongly positioned on China/Africa business. And so, we do have to try and cherry pick, but box (ph) where we can effectively.

QUEST: The African Continent, offers opportunity. It offers risk at the same time. A the moment, Northern Africa is offering instability.

MAREE: Correct. Fortunately for us, we say we are the biggest bank in Africa, but we are at the moment, in terms of commercial banks on the ground, only in Sub-Saharan Africa. So we are in Nigeria, and Ghana, and places like that. But we are not in North Africa, so apart from the indirect effects of what is going on in North Africa, that wouldn't affect us at the moment. \

QUEST: And, finally, let's just talk about bank bonuses. I really-it doesn't matter whether you are a big bank, a little bank, a middle bank or a niche bank. Standard Bank is just as much affected by this argument about bank bonuses. Are you going to take a big bonus yourself this year?

MAREE: I announced today-well, it is not my decision, obviously, it is the remuneration committee decision, but given the fact that we have had three years of earnings decline, I received no bonus last year. I'm not receiving a bonus this year. And I will not be receiving a salary increase, and nor will the head of the South African business. So, I think we can firmly say we are in line with shareholders.

QUEST: And do you believe, as you look at that whole bank bonus issue, and the whole question of that, it will die down, or is it just about to be stoked up again?

MAREE: No, I think of this as an evolution, undoubtedly, you know bank pay is-you know bankers' pay has been too high. A bank like Standard hasn't had nearly the same excesses, I think, because we are based in the developing country, and the emerging markets. But of course, we hire people in London and New York, and have to pay up to attract and keep them. So it is a challenge. But I think the pendulum is swinging in the right direction. Hopefully it doesn't swing too far. We need to keep our good people. But undoubtedly the pay issue did get completely out of control.

QUEST: Jacko, many thanks, indeed for joining us from Johannesburg tonight. Much appreciated, and good to see you tonight down in Johannesburg. Thank you very much.

A good day for the banks. And an excellent day for the Dow Jones, if you look at the numbers as they are coming up at the moment, up now, 207 at 12,273, a gain of 1.7 percent.

It is lucrative, it is glamorous and it is hard work, too. When we return after a moment, being a Formula One driver is about more than just sipping champagne on the podium. What does it take? I'll have a go at it myself.

(DESK BELL CHIMES)

(COMMERCIAL BREAK)

QUEST: Today it was supposed to be the first day of testing for the Bahrain Grand Prix, as you know, and I do, the political unrest in Bahrain saw the season opening race was postponed. Instead, testing begins for the Australian Grand Prix, in just three weeks from now. And preparations are well underway.

Drivers have been preparing in Barcelona, during unscheduled downtimes they are rearing to go. Now this driver is no exception. He is Heikki Kovalainen, and he's starting his second year with Lotus Racing, the team sponsored by this network. For him, the hard work begins right now. So, he believes he can one day be an F1 champion. I took a ride with him when I was in Helsinki earlier this year.

And Heikki, showed me just how intense his "World At Work" really is.

(BEGIN VIDEOTAPE)

HEIKKI KOVALAINEN, F1 DRIVER, TEAM LOTUS RACING: This is where you see the ice.

QUEST: You not losing control of this, at all, are you?

You need to be able to control a slide. If you loose control of the car, normally the back end of the car is sliding. So you need to be able to correct that. And also be able to stop the car and predict the braking differences. You know, if there is an animal on the road, we have a lot of moose and reindeer that cause accidents. It is the basic stuff that we require in Finland to actually be able to-go around, in a car.

KOVALAINEN: There is a moose.

QUEST: You have got to be joking. You-

(LAUGHTER)

KOVALAINEN: It doesn't matter if it is a road car, it is a rally car, if it is a Formula One car, when the engine goes on I feel that all the senses, they suddenly switch on. That is when I feel like, OK, now, it is what I like. It is like playing a musical instrument. You know, you can't think about it too much. It needs to happen naturally. (UNINTELLIGIBLE) Otherwise it is game over, if you don't have that.

It is winning, the winning is the fashion, you know, to become a champion, to be the best of these all very good teams and divers. It is something that really motivates me.

I never felt fear when I race, myself. But after my last accident, at the end of last season, in the Race of Champions, when I knocked myself out, for a second, I was really a passenger. I didn't really know where we were and what was going on.

I remember, for the first time I had a thought that, why am I doing this? But that very, very quickly went away. As soon as my brain started to work again, and I realized what I had done, and what went wrong. And we are all OK, everything is fine. That thought came back again.

QUEST: Now on this occasion we had better make sure that we are both properly strapped in.

KOVALAINEN: I'll tell you one thing, uh, when we get moving here, first gear, second gear, and then after that you don't need to touch the gears.

I can sense when the guy who is driving the car, or the person who is driving the car, I can sense when the car is out of control. And it makes me-it makes me little bit nervous. I prefer (UNINTELLIGIBLE) always.

QUEST: See there we are, exactly what I shouldn't do.

KOVALAINEN: Yes, exactly. All the (UNINTELLIGIBLE) went on the power.

QUEST: I don't want to have to pick up the cones.

KOVALAINEN: It's OK.

QUEST: I'm not picking up the cones.

KOVALAINEN: I don't mean to be arrogant, saying to some one, can I drive, you know if we drive in a car. It is not that I think you're a terrible driver, I can drive. But I just feel, generally in my life, when I am in control I feel comfortable. And I need to drive (UNINTELLIGIBLE).

QUEST: The moose!

KOVALAINEN: Ahead of us.

QUEST: The moose is ahead of us. I'm not going to go through? Yes.

(voice over): Are you good enough to be F1 champion?

KOVALAINEN: Absolutely, 100 percent. No doubt in my mind.

(END VIDEOTAPE)

QUEST: That is what you call determination. Are you good enough to be F1 champion. Absolutely, 100 percent; no equivocation there, Heikki Kovalainen, of course, from the team. And CNN s one of the sponsors of that team.

Pinning his hopes on pay TV, Rupert Murdoch has cleared a major hurdle in his bid for BSkyB.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS. This is CNN. And on this network the news always comes first.

(NEWSBREAK)

The media tycoon Rupert Murdoch is a step closer tonight to acquiring BSkyB, the British satellite broadcasting giant. But in order to go ahead and get the go ahead from the government, Mr. Murdoch has had to agree to spin off SKY News, the channel which competes with CNN in some markets.

Shares in BSkyB gained nearly 3 percent in London. And investors think Mr. Murdoch wants BSkyB badly. And that means he is prepared to pay more to get it. The independent investors and board of directors have demanded a pound more than Murdoch was originally prepared to pay.

CNN's Jim Boulden reports on just why Murdoch is so keen to expand his empire.

(BEGIN VIDEOTAPE)

JIM BOULDEN, CNN CORRESPONDENT (voice-over): There are always strong opinions when Rupert Murdoch and his News Corp media empire makes a deal.

ALEX WILLS, CAMPAIGN DIRECTOR, AVAAZ: We think Rupert Murdoch already has much too much power over the media, much too much media control. This allows him to influence elections, influence politics and pursue political agendas when we think are totally against the public interest.

BOULDEN: Murdoch has long denied any such claims, but his News Corp is expected to mount another offer to take full control of U.K. satellite broadcaster, BSkyB, where, by the way, Murdoch's son, James, is the non- executive chairman. It already owns 39 percent. A full take over is far from complete, but likely.

SIMON HOLMES, S.J. BERWIN: There are details to be looked at. There are issues to be worked through. And there is going to be a consultation process in which there will be considerable input and vociferous opposition. But my sense is that the tide is moving now in -- in favor of News Corp.

UNIDENTIFIED MALE: News Corp could end up paying 10 pounds a share, bear in mind that...

BOULDEN: Sky News spent Wednesday telling viewers that the British government will allow a take over only if News Corp spins off the 24 hour Sky News channel.

Andrew Neil was the first chairman of Sky TV and also the editor at Murdoch's "Sunday Times" for 11 years.

ANDREW NEIL, FOUNDING CHAIRMAN, SKY TV: He can now put this massive company onto his balance sheet. At the moment, all he gets is dividends. He can put this onto his balance sheet. He -- he gets direct control of this enormous cash flow.

Why wouldn't you do it, even if you have to pay over the odds. And Rupert Murdoch is famous for paying over the odds.

BOULDEN: And media analysts say the result of the Sky channels fit into a much bigger pay TV strategy for News Corp.

CLAIRE ENDERS, ENDERS ANALYSIS: The plan is that it will be, as it were, the foundation of this global pay TV business, encompassing all the operations that are currently part owned and owned by News Corp, including Sky Deutschland and Sky Italia.

BOULDEN: Pay TV would then become the biggest single entity within News Corp, to go along with the Twentieth Century Fox film studios and TV channels in the U.S., including Fox News. Then, there are the Star TV channels in India, plus, of course, the newspapers, which Murdoch has acquired over the past 60 years, in Australia, the U.K. and the United States.

RUPERT MURDOCH, NEWS CORP: Our ambitions are very big.

BOULDEN: Rupert Murdoch turns 80 next week and is clearly not slowing down.

Jim Boulden, CNN, London.

(END VIDEO TAPE)

QUEST: Now, we all know the economic crisis changed the world as we know it.

One author is calling it the zero-sum world.

The age of win-win is over, he says. What's good for you isn't always good for your neighbor.

And that means rivalry is back -- global rivalry is back on a grand scale. Making sure countries get along may be extremely difficult.

The author of "Zero-Sum World" is Gideon Rachman of "The Financial Times".

And he joins me now.

Good evening to you.

GIDEON RACHMAN, CHIEF FOREIGN AFFAIRS COLUMNIST, "FINANCIAL TIMES": Good evening, Richard.

QUEST: A controversial view, because with total globalization and the rising tide lifts all boats and the Doha Round will take us all to the shore of prosperity.

RACHMAN: Well, you may have noticed, they're having a bit of trouble completing the Doha Round. And I think that's because although the rhetoric of leaders very much still is that globalization is a win-win for everybody, I think if you look at the way they're behaving, I think the U.S. is increasingly anxious about the rise of China, both economically and politically.

I think within the European Union, you can see it -- actually, it's no longer really seen as a win-win for all the companies in the EU. There is any kind of zero sum logic taking hold.

QUEST: OK. If that is the case, what's the down side to it?

If we're -- if -- if the rose-colored spectacles come from our eyes, is there a down side?

RACHMAN: Yes, I think there is. Because, I mean, I think that in the period when everybody was comfortable with globalization, I mean all the major powers, that it helped them to get along better. I mean the U.S. was willing to accommodate a rising China.

I think you now see rising tensions between the major powers and within the EU.

QUEST: But politics is heavily involved here.

RACHMAN: Yes.

QUEST: Now, you've got Obama, who is actually strengthening his position to a mar -- to a minor extent, in the U.S. You've got Cameron. You've got the ECB. You've got Asia, the Japanese prime minister.

So where does politics fit into that?

RACHMAN: Well, I mean I think that the major zero-sum problems are political, actually. I think they're still clinging onto this idea that although, obvious, you know, the E.U. and the U.S. have recovered much slower than Asia, that they're -- they're still trying to preserve a globalized world.

But politically, I think if you look at any global problem, from global warming, global economic imbalances, whatever, they're really struggling to find solutions, because, increasingly, one country's loss is seen as another's gain.

QUEST: Right. But that might be the case, but it doesn't stop them from espousing the rhetoric of win-win.

RACHMAN: Absolutely. Because I think that they know that it becomes very dangerous if -- if Obama actually turns up and -- Obama, before he went to China, actually said, this isn't a zero-sum world, we welcome the rise of China. And he couldn't really say anything else. What he meant to say, you know, we -- we're going to try and block you, whatever their private thoughts, they have to stick publicly to the rhetoric of win-win.

QUEST: OK. So far so good.

But if -- if, are you suggesting in your book, we move toward this zero-sum world, how much of that is just as a -- we -- it was always there?

And how much of it is just as a result of the financial crisis exposing -- you know, what's the old phrase, when the tide goes out, you see who's...

RACHMAN: Who's swimming naked.

QUEST: -- swimming naked.

RACHMAN: Well, I think, look, these relationships always had elements of cooperation and rivalry in them. But to take -- again, take America and China. It's not entirely negative or entirely positive. But I think post- the crash, suddenly America feels weaker economically, politically and therefore, they're much more conscious of the negative aspects of the rise of Asia and of China in particular.

QUEST: That's nothing they can do about it, though. Get over it.

RACHMAN: Well, yes. I don't think there is much they can do about it. I mean they could go protectionist. And you saw just before Christmas, Congress flirting with protectionism But they can't quite bring themselves to do it, because the consequences would be really dangerous.

QUEST: You and I must just spend a second or two talking about today's event. Jean-Claude Trichet returned the word "strong vigilance" to -- to describe monetary policy in the Eurozone or future monetary policy.

How bad are things?

RACHMAN: Well, I find this whole central banker thing about speaking in code rather strange. I don't know why he doesn't just say, yes, we're thinking about raising interest rates, rather than saying strong vigilance and then everybody is meant to take the hint.

But look, they're in a dilemma because there are inflationary pressures. But a lot of those rising commodity prices, it's not like the economies are doing so well they're overheating and they have to raise interest rates to cool them down.

Actually, although Britain and the Eurozone -- and Germany, obviously -- are doing well, large parts are in deep trouble. So you've got these problems of not having a coordinated policy for a very different Eurozone situations and also the fact that this is inflationary pressure caused by higher oil prices and commodity prices, not a boom.

QUEST: Gideon, when you have an endorsement on your book from Niall Ferguson, who says that no one else can make the subject live and breathe the way you can.

Thank you for coming in and talking to us.

RACHMAN: Thank you.

QUEST: Many thanks, indeed.

Now, when we come back in a moment, here's a question for you -- what do Beyonce, Nelly Furtado and Mariah Carey all have in common?

Well, you don't get this on every business program in the world. Well, they've all performed for the Gadhafis and they're keeping the money. We'll ask the question, whether they should.

QUEST MEANS BUSINESS.

(COMMERCIAL BREAK)

QUEST: Now, you may well have spotted tonight's deliberate mistake, when I said just a moment ago about Beyonce, Nelly Furtado and Mariah Carey -- what do they all have in common?

They didn't keep the money, of course, after realizing it had been received from the Gadhafi family.

We already know that some have. But this now famous video is said to show Beyonce entertaining Gadhafi's family in St. Bart's two years ago. She's been getting some bad press, along with Furtado, Usher and Mariah Carey, for reportedly collecting seven figure checks for performances. Furtado says she's donating her money to charity.

And now Beyonce's people have issued a statement saying all monies paid to Beyonce for her performance at a private party at Nikki Beach in St. Bart's on New Year's Eve, 2009, were donated to the earthquake relief efforts in Haiti more than a year ago.

Those artists may have felt giving the money away was the right thing to do.

But did they have to do it?

Buck Williams is the president of Progressive Global Agency, which represents bands such as REM.

And Buck joins me from Nashville, Tennessee, at the moment.

Good evening to you.

Good afternoon in Nashville.

BUCK WILLIAMS, PRESIDENT, PROGRESSIVE GLOBAL AGENCY: Good afternoon.

QUEST: I suppose if you find out that the money has come from the Gadhafis, what should you do?

WILLIAMS: Well, I'll -- obviously, the first thing you do is you make your artists aware of -- of what they're getting into. You know, so often, these offers come in and they -- they are the -- the actual party giver is unknown. They come through a third party. And it could be a Saudi prince. I mean it could be anyone. And they have them in an island, you know, as these were done, St. Bart's, and you really don't know.

But as soon as you find out, you should let your audience know. And, of course, it becomes their decision.

QUEST: Yes, but you say that, that's -- you know, that's, up to a point, they have the final decision. But they turn around to you and say, oh, yes, Buck, you're the agent and what would you do?

What do you think I should do?

WILLIAMS: Well, I would have declined in the first place. I would decline the offer in the first place.

QUEST: Right. So the -- it's a -- it's a growing problem, isn't it, because with the sheer amount of -- I mean artists are now looking for different venues and avenues to make up wealth and to make a -- to make money. So there are only a certain number of people who've got that sort of money in the world. And some of them are less than desirable.

WILLIAMS: Well, that's absolutely true, but not most of them were directly responsible for the bringing of the PanAm flight down and -- and all these other atrocities that are happening, particularly right now in the streets of Libya. You know, and, of course, there are a lot of artists who could care less, as well. They are totally apolitical and -- and greed sets in. And -- and they have their overhead. They spend more than they're making -- though they do make tens of millions or hundreds of millions.

So, you know, it becomes an individual thing. Myself, the artists I represent, who I know very, very well, would say absolutely want nothing to do with it. And...

QUEST: Right, but then...

WILLIAMS: -- a lot of them...

QUEST: -- but then we start to move the -- the bar -- the barriers, don't we?

I mean I'll give you an example. You start to move from, say, outright dictators who may be wanted at the crim -- at the international court in the Hague. But then you move maybe to non-democratic leaders. And then not far from that, you're with Russian oligarchs who've got more money than they know what to do with.

For you, sir, what's the litmus test of where you draw the line?

WILLIAMS: Well, you've got to -- look, for me, it would be a -- from a humanitarian standpoint, what good or what bad have these people really done?

And -- and -- and, also, for each artist, remember, we're just an extension of the artist. And each artist can be very different. One artist can say, you know, I don't care. I need it and I want to take it. And the other would say absolutely don't even bring it to me. I don't want to even hear about it.

QUEST: Right...

WILLIAMS: But me, my personal opinion is, is if -- if -- if it's dodgy, don't do it.

QUEST: Finally, into quickly ask you, the protection of the artist's name -- and we've had a good example last week and this week with John Galliano, of course, in -- in France.

WILLIAMS: Yes.

QUEST: How close do you have to be to ensure that your artists maintain their good name by not associating or being linked with somebody who -- who's not?

WILLIAMS: Well, ultimately, these artists -- the -- I would say the greater percentage of the time, these offers do come through us as agents. Sometimes they go directly to managers and the agent is out of the picture. Myself, I'm an agent and a manager, depending on which act it is.

But I think the agent is pretty much ultimately responsible for getting and letting the artist know what's going on.

QUEST: Right. Buck, many thanks, indeed.

A pleasure to talk to you.

Nashville, Tennessee, one of my -- one of my favorite cities. I went to university there. It was many years ago, I hasten to add, many years ago.

Now, it's just a week after the Oscars.

Poppy Harlow has managed to grab hold of Hollywood legend, Peter Gruber.

He's helped shape the entertainment industry over the past three decades, producing "The Kids Are All Right," which got four nominations, including one for best picture.

Poppy is in New York and joins me now -- good evening.

POPPY HARLOW, CNN BUSINESS CORRESPONDENT: Good evening, Richard.

Yes, this was a very interesting conversation with a man, as you said,, who is literally just a Hollywood legend. He is full of energy. Of course, they had the Oscar not for "The Kids Are All Right." But he also has produced hits like "Batman," "Rain Man," "The Color Purple."

And we sat down with him to talk not only about sort of what the recession, Richard, has done to the film industry, but also the importance of emotion and story-telling, and not necessarily money, in making blockbusters hits. You always focus on the money behind the movies, but he says there's a lot more.

We talk about that.

And then we get into the relationship between Google and Hollywood.

Take a listen.

(BEGIN VIDEOTAPE)

PETER GUBER, CEO, MANDALAY ENTERTAINMENT: No one says let's go down to the AMC Theater, I heard a film came in on budget. I mean you'd arrest them. And, you know, so the idea is the -- the idea is it's not the money that's on the screen or on the television show, it's the story -- good old- fashioned words on the page is the architecture. And that's the story -- that's the way life works, so it should be the way films work.

And the idea is that diversity forces people to be creative. You know, the story of everybody that's been successful has overcome things.

HARLOW: It's interesting look at the relationship between Hollywood and, say, Google, right, this tech giant. Yes, I think you have an interesting take when it comes to Google. You said you can't fight Google. It is a state of play.

So looking at YouTube and the arguments over piracy and -- and what role YouTube does or doesn't play in that, has Hollywood, Peter, figured out how to work with Google?

Has Google figured out how to work with Hollywood?

GUBER: I -- not completely, because I think, really, what you have is you have one business that's digital zeros and ones and you have one business that's oohs and ahs. And, you know, the -- those are two businesses and they have got to fit together, because when you really think about it, when you really stop and think about it, the idea is that unless, at the end of the day, you render oohs and ahs to your story, to your audience, to your -- to whoever they are, it's vacant. It's empty.

So I think what's happening is you look at the Oscars, for example, and see that they really haven't figured out social media as a way to market films. They really haven't figured it out yet. They really haven't found the way to tap into that niches -- all those niches and bring them together and turn them into transactions. They haven't done that effectively yet. But they will. Remember, this is just the beginning of the beginning. It's not the end. It's not the end of the beginning, it's the beginning of the beginning. And the change is going to come ever faster.

But at the end of the day, a good old-fashioned story, words on the page, are always what moves the heart.

(END VIDEO TAPE)

HARLOW: Really refreshing, Richard, to -- to hear someone who's a legend like him who -- who is worth tens of millions of dollars, who could pour as much money into movies as he wants, saying it all comes down to telling a good story. He calls it the emotional transportation business. He said for any businessman or woman, whatever you're trying to sell, if you don't do it with passion, if you don't have a good story behind it, you're going to fail.

And he even owns now an NBA team, the Golden State Warriors in California, here in the U.S., and -- and he said even sports, even that industry is all about the story you tell, the entire experience you sell and not just the product or the money behind it -- Richard.

QUEST: OK, Poppy, let me play devil's advocate with you here. I mean, is that

Such a revolutionary idea?

I mean hasn't it always been the case that if there's nothing underneath, if there's nothing holding the building up, it will fall down?

HARLOW: I -- I think, absolutely. But I think that what he's saying here is that that has, many times, been lost in Hollywood. He gave an example of the Oscars, how much money, how much effort is poured into the Oscars. The ratings were down this year because, he says, they haven't learned how to communicate, send the message, get it out through social media, that -- that's one thing...

QUEST: Oh, bah.

HARLOW: But when you look...

QUEST: I -- I'm not sure I -- I'm not sure I agree with you that that's why the ratings were down. There's a lot of other reasons out there, Poppy, that you know about, why the ratings. There weren't as many blockbusters. There weren't as many films...

HARLOW: Right.

QUEST: -- this year that have made such a huge splash...

HARLOW: Right.

QUEST: -- as in previous years. People weren't as -- listen, you and I could talk about this for hours.

HARLOW: Well, we certainly could, Richard.

But anyways, an interesting points he made. I'll let him know that you don't agree on all of them. But I think getting to the root of storytelling here in any -- any single business is, it's certainly an interesting one. And many more blockbusters ahead, hopefully -- Richard.

QUEST: Poppy Harlow, quite rightly putting me in my place in New York.

Many thanks, indeed.

It's nice to see you, Poppy.

Right. It was good while it lasted, but nothing in life is free. An Australian ATM spat out free money.

How long did it take before someone noticed?

(COMMERCIAL BREAK)

QUEST: The New York market is showing an extremely strong performance, now up 201 points. It's on the back of lower jobless claims or unemployment benefit claims numbers in the United States -- 12268. And that's one of the best sessions -- best gains that have been seen for roughly about -- oh, about three -- three or four months.

One thing I do want to bring to your attention, now, if you've ever sat down on a plane...

(COUGHS)

QUEST: -- and the next passenger next to you has coughed, sneezed or wheezed, well, he's got something you may be worried about. All those people piled into a small space would make any germophobe or non-germophobe worried and nervous.

That's a great article...

(COUGHS)

QUEST: -- that you need to read online. I've posted it for you, Facebook.com/CNN/quest. This article shows you the best way to -- to actually ward off the nasties that you see on board aircraft. And I don't mean the fellow passengers, I mean the germs. Facebook.com/CNN/quest.

Now, New Zealanders are bracing for another blast from Mother Nature, this time stormy weather.

Meteorologist Pedram is at the CNN World Weather Center and he's following that tale for us tonight.

PEDRAM JAVAHERI, CNN METEOROLOGIST: Yes, Richard.

The story out there is that mild temperatures right now on Friday morning, certainly nothing to complain about when you get up and get out and about. A sunny sky. It's about 19 degrees out there. And the winds, they've calmed down a little bit.

But changes in the forecast, we do have a storm system offshore that's really going to ramp up the winds and also bring in very heavy winds across that area for the next couple of days. And, of course, just some of the photographs out there showing you the aftermath, some of the cars nearby a building, when one third of the city's buildings now have been decimated there because of the shocking associated with this quake. And the researchers are out and about. The community is, right now, trying to find out why this happened, as far as the buildings not being able to withstand, say, a 6.3 or even perhaps a little greater than that in some areas.

But if you take a look at the weather system that we're talking about and here comes the feature -- the associated cold front, a low pressure center that's going to begin to move on through. And widespread showers certainly possible from Saturday afternoon on into Sunday morning, as the storm begins to push on in.

And behind this, temperatures some five to eight degrees cooler. And you've got to keep in mind, we've been about 25, 26 degrees, certainly warm temperatures. Now, we're going to be talking about 17, 18 degrees behind the storm system. And it looks to stay that way here for, say, Monday on into Tuesday, as the storm system moves out on across that part of the world.

Now, over Europe, take a look at the these readings -- very much cold temperatures tonight. London sitting at two, not bad. And Glasgow, we'll take that, at about eight degrees. And farther east, from Berlin out toward Warsaw, ranging from three to minus three degrees.

Generally clear skies, so a lot of what we call radiational cooling, where the little daytime heating that we see does escape into the upper atmosphere since the sun has now set. And if you take a look, travel delays are going to be minimal, a little breezy, perhaps a little bumpy on a flight around Paris on Friday afternoon.

But besides that, hot temperatures, enjoy it. Nine about -- about nine or so and sunny skies in Paris; Madrid also staying on the cooler side there, at around nine degrees.

But the majority of the activity associated with this feature right here across the Mediterranean.

This storm system that parked in place the last couple of days brought in very heavy rainfall, very strong winds across portions of Trieste in Italy, near the Adriatic there, where we had one of those down sloping bora wind events that cause a lot of injuries. A lot of trees down there. But, really, that's the only feature to speak of across much of Europe.

And that will bring us some showers as it begins to rain out over the next 24 to 48 hours.

But generally, Richard, for much of the areas within Central and Northern Europe, we're looking at sunny skies all weekend and temperatures getting ever so close to spring like conditions out there -- Richard.

QUEST: All right, many thanks, Pedram, at the World Weather Center.

More than a few people in Sydney in Australia are walking around tonight with extra money right now. It's morning there and they're probably spending it on a short black or a long white or whatever they call the coffees.

It's compliments of a computer glitch at an ATM machine. Several throughout the city suddenly began dispensing a king's ransom in cash on Tuesday, leading some customers to believe they'd struck it rich.

Reporter Damian Ryan describes the scene.

(BEGIN VIDEOTAPE)

DAMIAN RYAN, NINE NEWS CORRESPONDENT:

UNIDENTIFIED MALE: (voice-over): The technical glitch had some customers believing they'd hit the jackpot after 40 ATMs in Sydney shelling out more money than people had in their accounts.

UNIDENTIFIED MALE: The young (INAUDIBLE) customer was showing and I just put the card in and it was just spitting out lots of $500.

UNIDENTIFIED MALE: Actually, I was just at a shopping centre. And there was a line up of 20 more people. And each one of them, one took out $2,500, another one took out $1,000.

RYAN: And word spread quickly.

UNIDENTIFIED MALE: Oh, I heard about Commonwealth Bank, they're giving out free money. I hear that's very good.

RYAN: But warning -- money is never free. And this morning, the fraud squad stepped in.

SUPERINTENDENT COL DYSON, FRAUD SQUAD: We want to stress that if people keep money dispensed by these ATMs they're not entitled to know they know they're not entitled to it, they may well be committing a serious criminal offense.

RYAN: For other customers, it was a rude shock -- withdrawing money and then discovering their accounts had been emptied.

The Commonwealth scrambled to stop the flood of money by shutting down its entire ATM network. Online banking has also been disrupted. And that led to big cues at branches.

UNIDENTIFIED MALE: It's a big problem. We can't get any money out.

UNIDENTIFIED MALE: And they've got -- I would have liked to have used their bank, but they shut theirs down.

RYAN: Today's meltdown is being blamed on maintenance work carried out last night. It's the second major glitch for the Comm Bank in three months.

CHARLIE BROWN, I.T. EDITOR, TODAY: Well, as these big companies are pushing us more and more toward technology gateways such as Internet banking and ATM machines, when this kind of thing happens, it causes more and more concern to customers.

RYAN: Damian Ryan, Nine News.

(END VIDEO TAPE)

QUEST: And when we come back in a moment, A Profitable Moment on what would you do -- what's the right thing to do?

(LAUGHTER)

(COMMERCIAL BREAK)

QUEST: Tonight's Profitable Moment.

When the ATM starts spitting out free money, as we just heard in that report from Australia, the question becomes, do you take it and run or do you honestly hand it back?

Oh, the police may warn about the fact that you're committing an offense and it's a fraud, but let's be honest, you and me. It's only the two of us. We all think about it and probably like to believe we would do the right thing. We like to think we'd hand the money back.

But I ask you the question, is it wrong to take the money?

Now, my judgment is clouded but the fact banks lose little time in taking my money. Oh, whether it's higher mortgages before bank rates have gone up, they're already putting rates up; higher charges for the slightest little bits and bobs; higher everything. The banks are constantly trying to cut their costs at our expense.

It may not be morally right to take the money, but if it happens to me on the way home, perhaps it will make me feel a great deal better. In fact, I like the answer from one bank owner, who said, when his machine went mad handing out free cash, "If the people using the ATM see it as a bit of fun, so be it."

And that's QUEST MEANS BUSINESS for tonight.

I'm Richard Quest in London.

Whatever you're up to in the hours ahead, I do hope it's profitable.

"PIERS MORGAN TONIGHT" is next after the headlines.

END