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QUEST MEANS BUSINESS
U.S. Stocks Officially Enter Bear Territory; Interview With Sweden's Finance Minister
Aired October 4, 2011 - 14:00 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: They're battling the bears. The markets and Bernanke, they are down beat.
A new crop of Apple iPhones; CEO Tim Cook revealing all, shortly.
And never argue with a pub landlady. The Premier League fails to bar this one from showing matches.
I'm Richard Quest. I mean business.
Officially we have entered bear territory. The S&P 500 is down and U.S. stocks continuing to sell off amid worries of Europe's worsening debt situation. Investors are on the edge over Greece's abilities to meet its debt obligations. Those are the U.S. markets showing quite clearly the Dow is off just 1 percent. The Nasdaq is up a tad, the S&P as well. They are all worried about a possible default on Greece and what it means for the global banking system. Fed Chairman Ben Bernanke has offered a grim assessment but pledged to take further action as necessary.
So, while Greece is up in the air, the markets are down in the dumps. European shares have tanked once again. And it all happened, which perhaps ironically, or perhaps in spite-or despite Europe's finance ministers, who are trying to sort things out and arguably going back to the drawing board. In the library you will see what I mean.
Well, it is a moment of silence, in mourning, for another salami slicing day. The Xetra DAX off 3 percent. The London FTSE down 2.8. You don't need me to have to-look, only Zurich weathered the storm, and that was still off 1 percent. It is the second day of losses this week. Well, it is only Tuesday. So there are still another three to go.
The Greek situation very much influx. European finance ministers, first the Euro group meeting then an ECOFIN meeting in Luxembourg. And to just proving how unstable it is. There has been a hint of a re-jigging of the July 21 summit agreement. Juncker has said technical revisions could be in the works. The last thing the banks needed, hardly surprising, if there is more uncertainty about Greece. Barclays off 7 percent. Agricole down 6.5. Paribas down 5 percent. Lloyds off as well.
And one of the real worries coming out of the ECOFIN meeting is whether PSI, private sector involvement, in other words, whether the banks, will have to take bigger haircuts when it comes to Greece. Dexia gives a good example of just what can happen. The French Belgium bank down 22.5 percent. It was off 33.1 percent. It is all about worries of Greek exposure. France and Belgium both committed to doing what necessary to keep Dexia in business. It shows you again, this Tuesday how uncertain things are.
Markets are showing their displeasure with policymakers. I asked Sweden's Finance Minister Anders Borg, when it comes to ECOFIN and the meeting, has anything happened of use?
(BEGIN VIDEO CLIP)
ANDERS BORG, FINANCE MINISTER, SWEDEN: Well, I think there are some strong efforts from the Euro area countries to make progress, both on the firewall, and also on the backstops on the banking side. So, the effort there is very clear. To my mind it has been a disappointment that we have seen such bad numbers coming out of Greece. It looks like the program is off track when I look at it.
QUEST: Let's call a spade a shovel, as they say, where I come from in Northern England. There is going to have to be restructuring or a default, or whatever we want to call it. And the sooner you and your fellow ministers grasp that nettle, the better. That is what the market is saying.
BORG: Well, but then you also must have very clear backstops for the banks and the firewalls so this doesn't bring contagion to other countries. So to my mind there has to be some order to a comprehension solution here. But it is quite obvious that the discussion on Greece is still a major factor in the market. And I haven't heard anything today that makes me convinced that there is a logic to the debt sustainability. And that basically means that the program is on track.
QUEST: And therefore, I am extrapolating here, but clearly nothing that has happened today suggest that the Eurozone, or the ECOFIN, or the European Union is actually ahead of the curve yet on this crisis.
BORG: Well, I mean, the politicians have been behind the curve for sometime. I now feel that there is a sense of urgency. That the efforts are reinforced. We are seeing parliamentary decisions taken in many countries. And when that process is clear to my mind it is quite obvious that further progress has to be made. And but now I have the feeling that some extra effort is actually put into this.
QUEST: The market doesn't agree.
BORG: We are still behind the curve.
QUEST: I know-right, right.
BORG: No, we are still behind the curve, but we are moving.
QUEST: Right, but the market, it must be down another 3.5 percent. I mean salami slicing of equity values, this is pricing a recession into Europe.
BORG: Yes, but I mean, it can be solved. If we now have a progress for what where-at least we can see some further measures when it comes to limiting the uncertainty to Greece. And some further measures on recapitalization of banks. Eventually I think these could be calmed down. But you are quite right that we need to be traveling at a high speed if we are going to move from behind the curve, to ahead of the curve.
QUEST: I'm choosing my words respectfully to you and your fellow ministers, but when we look at it from outside these Europe group meetings, ECOFIN and the like, we do sometimes wonder, are you all living in the real world? Are you seeing things that the rest of us are not? Everybody else is talking double dip, Greece default, banking collapse, or banking issues. And yet, all we get are statements saying that things will be done.
BORG: Well, at the same time I think we should realize that these are a huge amount of taxpayer money that are at stake here. And I think it is very clear that we have to get it right. Also, it is not only a matter of speed. But I am agreeing that we need to really pick up some pace here to get ahead of the curve.
QUEST: Tonight, what would you say to any investor, any doctor, lawyer, businessman, woman, in Europe, who sees their portfolio going down 3 percent, 4 percent, on the DAX or whatever. And says, when are they going to actually sort this out?
BORG: Well, I can understand the feeling that or the sense of urgency that they have. And I think we have to therefore to be very clear that further measures are needed, not only in Greece, but also in countries with high deficits. Because contagion cannot only be there dealt with by firewall, but also from serious fiscal work. But then, again, there has to be a sense of European solutions that actually reduces the level of uncertainty. And obviously that is pretty urgent.
QUEST: Anders Borg, of Sweden, the finance minister speaking to me earlier. Obviously, it is not just doctors, lawyers and businessmen and women who invest in the market. Journalist, television presenters, just about everybody that perhaps that is watching now, that is with us tonight, has a little bit of an interest in the market. So, in this scenario it is deeply disturbing when you see 2, 3, 4 percent, lopped off each day. I spoke to Elsa Lignos, the senior strategist at RBC Capital Markets. What were the markets hoping to see to put things right?
ELSA LIGNOS, SENOR STRATEGIST, RBC CAPITAL MARKETS: I don't think anything is going make things better overnight, but there is quite a bit that can happen to stop things getting worse. On the one hand we are waiting to see what policymakers will do. The ECB meet on Thursday. We are waiting for them to announce more liquidity. Longer term liquidity. That would do its job. That would got some way towards helping. On the other hand we are waiting to see what the fiscal policy makers are going to announce.
LIGNOS: So we are waiting to see what the Euro group will do. What the European Finance ministers will do. And that, perhaps, is the most critical for the resolution of this situation.
QUEST: Elsa, isn't this the truth of the subject? All roads lead back to leadership and somebody giving the impression, whether accurate of not, that they are driving the bus. And that what we are getting at the moment, is that after every ECOFIN, or Euro group, or any form of meeting, we just get a cacophony of voices.
LIGNOS: Well, that is unfortunately the truth about policymaking and the Eurozone. You have got 17 Eurozone members and everyone has their say. And I don't think that is going to change anytime soon. But they have proved themselves before to be able to make decisions under pressure. And I think the markets are hoping they'll be able to do that again.
QUEST: You talk about the banks and the funding problems. Are there now reports in London and in the international money markets that banks simply are either finding it difficult, or having to pay too much? Or in some cases, simply can't get overnight funding and having to go to the central banks?
LIGNOS: Well, there are some isolated cases. We can see that from the ECB's data. There is one bank, for example, that needs dollar liquidity week after week, from the ECB, it seems. But these measures aren't permanent. Banks can access markets again, if we get the correct response from policymakers. So we do need some kind of long-term solution for the Eurozone crisis. And that, unfortunately, requires leadership, like you said.
QUEST: Finally, the phrase you will know well. It is salami slicing, where you just get this cuts again and again. And that is what we are seeing at the moment, isn't it? 2.5 percent on one day, 1.5 percent off the market on the next, 3 percent the next day. This salami slicing of equity values is corrosive.
LIGNOS: That is true. But at the same time we do have up days. It is not a one-way street. It is just very volatile. And I think that is what is hurting people the most. It is the uncertainty and the volatility, which is catching people out. But long-term investors should not be panicking. Panicking doesn't help anybody. Just need to take a strong and good hard look at their investment and make sure that they are happy with the risk that they are taking.
(END VIDEO CLIP)
QUEST: When she said strong hard look, I was sure she was going to say strong drink. Certainly the way in which the markets are trading at the moment, off another 2 or 3 percent on the main European bourses.
Now, Apple is showing off its latest gadgets in California. There will be a new, faster iPhone we are told. And we will tell you the details in a moment.
QUEST: So far this evening we have heard from the policy makers. We have heard from the strategists. But in these uncertain times the question that we are asking is that where do you invest the money when stock markets are on a roller coaster. The appetite for risk is evaporating in these uncertain times. So look at some of the key indicators and we can factor it together.
First of all, you've got the dollar. Well, safe haven, the dollar is holding up considerably stronger against the euro. It has been gaining over the past couple of months. Ignore today's little blip-ette. By and large, not withstanding all of the political problems in the U.S., the dollar remains the value. Brent-now, Brent is over $100 a barrel. It is down just a 0.31 percent today. Worries about economic growth taking the shine off the oil price; but substantially it is still way up on where it was say, 2008 and '09.
Gold is, of course, also coming off its tops; $1,900 was the top. But at $1,611. And the view still seems to be with gold, that they risk is that it will rise higher, has it as a safe haven. So, asset allocation in all of this area.
I spoke to HSBC's global head of asset allocation, Fredrik Nerbrand, who has just brought out their latest recommendations. With gold down, stocks down, and everything going downhill. The markets are pricing in a recession, I suggest.
FREDRIK NERBRAND, GLOBAL HEAD OF ASSET ALLOCATIONS, HSBC: It might be premature to call it the second recession, but nevertheless is that if you think the same as I do, you follow the same news as I do. Everyone is aware about the same type of problems. Ultimately, that becomes a self- fulfilling prophecy at some point.
And it is what the economists would call a feedback loop, in terms of the fact that we all think the same. And the impact on financial markets, in our view, is that you need to be focusing today on stable cash flows, on stable investments, rather than trying to optimize future returns. It is about capital preservation than anything else.
QUEST: Capital preservation. Now I knew that gold was about to go down, recently. By the obvious reason that I decided to add some gold in my portfolio, and the moment, of course, you know, you chase the market it is over.
What is the correct-or the wise asset allocation now, for capital preservation?
NERBRAND: Well, in our portfolios we have quite a lot of gold. We actually have 12 percent in our tactical asset allocation with, towards the yellow metal. But I guess you should tell me next you are looking to buy or sell. Because that is going to be contrary indicator more than anything else.
No, but seriously, what we are looking at is an environment where everything is correlated and actually gold is relatively uncorrelated, in a very correlated world. And that, we think, is going to drive gold investments. Where else, out of equities I see you saying, but into what? Do I just put it under the mattress?
NERBRAND: Well, I guess you should have some equities, because the world is not quite as gloomy as you would first believe if you would just look at Western macro-economics. Because of the fact that the world is also increasingly global, there is ample place to make money.
In our view, in terms of how we structure the portfolios from an overall perspective is that out of the equity positions that we have, so we have today about 22 percent in equities, half of that goes into high dividend yielding stable companies that are giving you a yield. And half of that is going into the emerging world, is where we see growth. Because some of aspect there is still growth out there in the world, but it might not be in the same places that you have seen in the past.
QUEST: And what asset allocation changes have you made?
NERBRAND: We are still looking at a world which is slowing, we are looking at world where there is ample opportunity in the future to add to risk. But at this point we are cutting risk in general. So we are cutting equities where we are allocating slightly more into, uh, into gold. We are cutting our allocation into commodities and we are increasing slightly into gold. And our fund-we are funding that through some cash, some very elevated cash positions that we had going into this bear market.
QUEST: All right. Now, assuming you have decided asset allocation, investments is all little bit-why bother investing if it is all going down hill? Instead-(DESK BELL CHIMES)-you might want to go an actually buy something. Consumerism at its best.
Well, the iPhone is the big talking point at the moment. In Cupertino, in California, Apple is announcing its latest iPhone. The iPhone 4S, it is called. Not an iPhone 5. The CEO has been-well, that is not Tim Cook, but they are now, that is what is happening at the moment there. He's going the variety of things-but we-we'll get to it, the detail.
But first of all, Rupert Goodwins is with me, editor of Tech Web site, ZDNet.
RUPERT GOODWINS, EDITOR, ZDNET: Hello.
QUEST: All right. You now know you have heard what-just a quick bite at this.
QUEST: Tell me.
GOODWINS: It looks just like the old phone, better camera, faster chips. Voice commands.
QUEST: All right. Hang on. So it looks like the old phone.
GOODWINS: Nope. Same size we believe.
QUEST: Same size. Same weight?
GOODWINS: Haven't said that yet.
QUEST: Right. Faster, faster?
GOODWINS: Faster chips. Faster instant access. They say they have fixed the problem with the antennae that cursed the iPhone 5.
GOODWINS: Better camera. There is HD video. And it has voice commands, and that is pretty much it.
QUEST: Voice commands?
GOODWINS: Yes, you can ask it what the weather is and it says, it's raining.
QUEST: Call, Mum.
GOODWINS: Yes, that sort of thing. Set an alarm for 6:00 o'clock.
QUEST: Are you excited by what they have announced, in terms of the iPhone 4, what is it?
GOODWINS: iPhone 4S.
QUEST: S for speed?
GOODWINS: Well, lots of people wonder what the S stands for online, but I won't repeat what they say. It's not the iPhone 5. It is not what people were expecting.
QUEST: It is not the 5, we'll talk more about that. Not the iPhone 5 he says-it is not the iPhone 5. If it is not that, what is it? We'll talk more about that later.
A storm brewing for beer makers, when we come back after the moment, cost increase is putting a squeeze on profits. A boss' tough decision, passing on the pain to the consumer.
(DESK BELL CHIMES)
QUEST: It is a boss' hardest decision. When costs rise how long should you hold off before increasing your prices? It is a problem playing very much on the mind of our "Boss," the beer maker, Steve Hindy at Brooklyn Brewery. Steve has seen wheat prices soar over the past 18 months. Just look the way they have gone up from this low point, all the way up there to 2010 and '11. And remember, Steve has to buy two years back, or at least 18 months back. So, he is paying this increased prices. How does he have to plan to brew, account for the prices, and make the decision, when it is time to pass on the price rise? It is the tough choice for tonight's "Boss".
UNIDENTIFIED MALE (voice over): Previously on "The Boss":
STEVE HINDY, FOUNDER, CEO, BROOKLYN BREWERY: Good, thanks.
UNIDENTIFIED FEMALE: Thank you.
UNIDENTIFIED MALE: Bottling success. Steve Hindy combines public service with profitability.
HINDY: It has enabled us to get a lot of attention for the company. Yes, we are doing good, but it is also good marketing for Brooklyn Brewery.
UNIDENTIFIED MALE: It is crunch time at Brooklyn Brewery. And for its CEO Steve Hindy, big decisions have to be made.
HINDY: So this is barley malt, from Germany. Well, this has gone up like 30 percent next year. This is malted wheat, also from Germany. And this has gone up even steeper than the barley.
UNIDENTIFIED MALE: This is what he faces. Rising prices for the key ingredients that make Brooklyn Brewery's beers.
HINDY: I mean, this is really the meat of the beer. You know, the barley. Beer is about balancing the sweetness of the barley with the bitterness and aroma of the hops.
UNIDENTIFIED MALE: Steve always knew the price of barley and hops would rise, but not at this alarming speed. Back in April rising costs were already front and center on Steve's mind, telling Richard Quest that he was considering raising prices across his line of beers.
HINDY: Either we absorb it or we raise the price. And right now have to predict there are going to be price increases.
QUEST (on camera): As `The Boss"?
QUEST: You are going to have to make that decision, aren't you?
QUEST: When are you going to make it?
HINDY: Probably as late as possible.
UNIDENTIFIED MALE: Now, the time for decision making has arrived.
HINDY: What does it look like for next year, with the grain increases?
UNIDENTIFIED MALE: Our supplier has been telling us that they are kind of predicting a pretty ugly year for price increases. And it is coming true.
UNIDENTIFIED MALE: Steve knows he has to lift prices to protect margins. But raise them too much and it may impact sales. Too little and he won't make a profit. So to help Steve make this decision, he is meeting with two of Brooklyn Brewery's managers.
UNIDENTIFIED MALE: When you add all these things together, guys, we are looking at roughly a $3 million hit to our bottom line.
UNIDENTIFIED MALE: Because of increased costs.
HINDY: That is like what, 8 percent of our revenue?
UNIDENTIFIED MALE: Yeah.
UNIDENTIFIED MALE: It is a good chunk. So, you know what I'm thinking about-
HINDY: So we're looking at a price increase?
UNIDENTIFIED MALE: Yeah, we're looking pretty good at. I mean, I think we are going to need to go up 5, 6, maybe even 7 percent, on our prices, to cover this. Just to break even on the increased costs.
HINDY: We don't have to be specific, but-
UNIDENTIFIED MALE: Steve is concerned that raising prices may crimp the thirst for his boutique beers.
HINDY: We don't want to kill the sales. What we're up 30 percent.
UNIDENTIFIED MALE: We are facing up to 32 percent right now, so I think that is roughly where we are going to end up. And I'd hate to see that go to 5 next year, because we went too far in our pricing.
UNIDENTIFIED MALE: It is a fine balancing act. A decision that only "The Boss" can make.
HINDY: If we can increase our price by a dollar a case across all brands, we would be able to meet the $3 millions in extra costs we are going to have next year.
UNIDENTIFIED MALE: For Steve Hindy this decision comes at a crucial time for the brewery. It is in the midst of a massive expansion plan, which has cost millions of dollars. So loosing customers now just isn't an option.
HINDY: We have never spent this much money on an expansion and faced this challenge at the same time. So it is a tricky moment for us. The increase is going to affect January 1. We'll know by spring whether it is really hit our sales momentum.
UNIDENTIFIED MALE: Next week on "The Boss": Evaluating your success and your failures. We are in Macao with Francis Lui. And up scaling your business, Sara Curran tells us how she manages productivity during a crucial move.
SARAH CURRAN, CEO, MY-WARDROBE.COM: We have (UNINTELLIGIBLE). We had to first of all move the staff over, and then we had to move all the product over.
UNIDENTIFIED MALE: That's next week on "The Boss".
QUEST: The real-live world of running a company. And we spoke to Steve Hindy today. He told me he has actually had to start raising prices now. He couldn't wait until the first of next year.
In California, they are all a flutter about the Apple iPhone 4S. It is a bit of a mouthful. We'll explain what it means for the phone and for the brand, after the break.
QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN. And on this network, the news always comes first.
Witnesses are describing today's truck bombing in Somalia as the worst carnage they've seen in two decades of chaos there. The blast killed dozens of people in the capital, Mogadishu, including students registering for an education program. The Al Shabab Islamic militant group has claimed responsibility.
Frustrated that more answers haven't been found, Meredith Kercher's family say the acquittal in her murder case sends them back to square one. But they say they'll accept the Italian jury's decision to overturn the conviction of Amanda Knox and Raffaele Sollecito. Miss. Knox is currently on her way back to the United States.
A group of Syrian military deserters calling themselves the Free Syria Army, is asking for an international no-fly zone. The mission would not be to protect civilians, as in Libya, but to allow the opposition to set up a base of operations so its force can start taking control of the country from the al-Assad regime.
Archbishop Desmond Tutu has lashed out at his government, calling it a worse regime than apartheid. He's angry that South Africa failed to approve the Dalai Lama's visa request, causing him to cancel his trip, planned for this week. The Dalai Lama was invented to speak Desmond Tutu's 80th birthday celebrations. Critics say South Africa is scared of annoying China.
Apple's next generation iPhone has ripened and now is ready to go. A few months ago, well, Apple's chief exec, Tim Cook, unveiled the Apple iPhone for at -- these are live pictures coming in just a moment from Cupertino. Look, it says eight -- all this talk time, lots of briefing about this new iPhone 4S.
It looks like the last iPhone. But I'm told inside, it's been turbo charged -- faster processer, faster browsing speeds. The camera has also been upgraded.
Investors seem unimpressed. They had expected, perhaps, a revamped model. Apple's shares now down almost 2.5 percent. They had been up around 1.5 percent before the press event.
It's been more than four years since Apple introduced the first iPhone, raising the bar by mixing facility and style. Now, this is when it was launched in 2007. Steve Jobs introduced it by much fanfare. And when he did so, everyone wondered, could Apple actually do it?
OK, if you join me over at the super screen, you will see exactly not only 2007 seems a long time ago, but we can show you how the phone has grown up as it's evolved from small child to big adult, as some would say.
First of all, say hello to the iPhone. That was 2007 or when it first came out, thereafter, and everybody said this was Apple's big -- big gamble -- $500, two megapixel camera with no flash.
Move on the 3G version, a lower starting price of $200, twice as fast and GPS.
That wasn't enough. We move up. We're growing up. S is for speed. It comes along in 2009, twice as fast again and an enormous amount of storage.
So in these few years from the launch of '09, we have got three versions.
Then we come to the iPhone 4, slimmed down, very cool, except, of course, that it had this antenna problem somewhere around about the bumper, which made it difficult to see.
But finally, the new model unveiled today. It's known as the iPhone 4S. And as we con -- we'll talk now with -- joining us to talk more about this is Rupert Goodman, editor of tech Web site, ZDNet.
OK, are you excited?
RUPERT GOODWINS, EDITOR, ZDNET: Not as excited as I'd like to be, no. It's faster, but then people don't really care if their phones are too slow.
When was the last time anyone complained their phone is too slow?
It's got faster Internet access, but that requires the networks to work. A better camera, which is also very nice, but it's a revamp. It looks exactly the same. People who buy Apples to have the latest model so they can flash it around aren't going to want this, because it looks just the same as the old one.
QUEST: But hang on...
QUEST: Well, no, no, no, no, no. Go on. I'm not going to let you get away with all of this.
QUEST: The 3G and the 2 and the first one...
QUEST: They didn't look radically different. The 4 did.
GOODWINS: Yes. Well, they looked a bit different and that was close enough.
But how many want to go from 3G to 3GS?
Probably not as many, if it looked like the 4 then. So that -- that will be an impact.
And it's not what people were expecting. They wanted something that looked different. The specs are probably what people were expecting.
People thought the 4S was going to be a cut price one to go for the Smartphone market, where the Android is making inroads. And that hasn't happened.
So it's a strange mixture of what people thought the 4 and -- the 4S was going to be and what they thought the 5 was going to be.
QUEST: All right, if you look at the market share and the -- that takes place, we've seen Apple got -- increase its market share over the last 12 months to something like 18 percent or so, globally...
QUEST: -- of it. But we've seen, Android, of course, is the big winner, as against, for example, all the other players.
Does this do -- does the 4S do anything for Apple?
GOODWINS: It keeps it in the game. It can -- it's got lots of figures that look good. It's probably not going to keep it ahead of the game for very much longer, because they pretty much expect to get on the very high end Androids, as well.
QUEST: All right, look at that graphic. There you see Androids moved ahead, Symbian is still quite high, although it's going out of the way...
QUEST: -- well, but we know what they're coming next with, Windows, whatever.
So you think this actually helps Apple?
GOODWINS: It helps Apple. It keeps them going. It's another upgrade path. But it's not the sort of great leap forward that you'd like to see if they're going to say we're now so much better than Android, the same way that we used to be two years ago.
QUEST: We'll talk more about this. You're not impressed, but...
GOODWINS: It's not enough.
QUEST: No. Not enough. All right, excellent.
Many thanks, indeed.
All right, now, for the first time, nice enough. For the first time, though, Apple has made it into the top ten most valuable brands in the world.
According to Interbrand's annual report, Apple's brand value has risen 58 percent year-on-year, more than $33 billion. It puts it in eighth place. The dollar value is based on factors like performance and brand strength.
The top five, if you look at the top five brands, General Electric takes number five spot, with a brand post of $43 billion.
Google is number four. That's a nice range -- GE, old industrial, Google, new tech stock -- tech stocks.
Another one, Microsoft comes in at $59 billion, a tech company. It's been at number three for four years -- three years running.
IBM, its value has been rated at $70 billion.
Who's Number One?
Come on, have a guess. Come on, you can do better than that. Number One, Coca-Cola. Its brand is thought to be worth nearly $72 billion and it's held the top spot every year for the past decade, since Interbrand started its ranking.
Jez Frampton, the Interbrand chief exec, joins me from the New York Stock Exchange.
OK, so tell me, is next year the year that IBM or a Google or an Apple trounces Coca-Cola?
JEZ FRAMPTON, GLOBAL CEO, INTERBRAND: Well, you know what, Richard, it could help. But you're going to have to wait until then to find out. Certainly, they're getting a lot closer to each other. And I think it would be fair to say, it's quite an interesting battle between a consumer giant and a business to business giant.
QUEST: What is it about Coca-Cola that keeps it in that position besides, you know, it is everywhere?
FRAMPTON: I think, you know, first and foremost, they have a fantastic understanding of their customer and a very, very clear understanding of what their brand is about and what they stand for. And then they execute brilliantly across every different medium, through into their product and their packaging. You know, they really do set a gold standard in how to build brand and how to -- how to market products around the world.
That's why they're so difficult to catch up with.
QUEST: Are you surprised that Apple is only just start making an appearance, and, indeed -- and yet it is such a brand that everybody knows and has heard of, but it's not reflected fully in your numbers yet?
FRAMPTON: I think that if you look at it over the last three or four years, it has really significantly bounced up the table. From our perspective, the thing that's really making them zoom up now is to do with the fact that they are changing our lives and the way that we live our lives. The -- the whole environment they've created within their products and services is creating a significant Barrier to anyone else entering their market...
QUEST: But -- but...
FRAMPTON: And they really have -- they've got us by the hearts and by the minds.
QUEST: All right, they've got you by the hearts and the minds. Have they also got you by that other part of the anatomy that we don't say on a friendly family-oriented program?
FRAMPTON: Possibly. I mean, obviously, what they're doing is they are creating an environment that we don't want to go away from. So, yes, to a degree, they're trying to create reasons why we wouldn't want to leave.
FRAMPTON: We now have our music, our photographs, our connections to our friends, all of these things matter a lot.
QUEST: Jez, last year, I seem to remember when we spoke, QUEST MEANS BUSINESS, as a brand, didn't seem to feature in your list.
QUEST: You may recall, you -- you said I'm disappointed in...
FRAMPTON: I wondered when this was going to come up with you.
QUEST: Yes, well, you were disappointed.
Where are we?
FRAMPTON: I think, as you said to you last year, you know, you have to continue to bang the drum, to acquire that audience around the world and make sure that you're monetizing it, Richard.
QUEST: That -- I think that's a polite way of saying, ask for a pay rise.
All right, many thanks, indeed, Jez.
Jez, good to see you, at the stock exchange.
There is one factor, of course -- this is one thing about the iPhone that we didn't quite show you earlier, that, of course, the new iPhone perhaps will not solve. This is my producer's iPhone. And, as you can see, it has a broken screen.
Right, it was the biggest matchup of the English Premier League season. A pub team may have walked away with the spoils. We'll explain.
This lady was pulling pints, but she didn't pull her punches when it came to the Premier League.
QUEST: Let me sum up the way the day has gone on the iPhone. A CNN producer says no iPhone 5. So Dan Simon, who was at iPhone 4S unveiling, is with me at Cupertino, California -- Dan, are you disappointed with it as an iPhone 4 or 5, not an iPhone -- listen, I've got to be careful here, before I say something I don't mean?
DAN SIMON, CNN CORRESPONDENT: Well, look, I think people who were expecting a fundamental upgrade, you know, walk away disappointed. I think people were expecting an iPhone 5. Instead, they get an jiff. These are incremental improvements, if you will. It's going to be a lot faster. It's got a better camera. It's got this thing called Siri, which is a personal assistant. I have to say, that was a very impressive feature. In other words, you can talk to the phone and it will give you directions and things of that nature.
But -- but a fundamental upgrade we did not see. And I think that's one of the reasons why we're seeing the Apple stock price take a dive, down about 11 points when I -- when I just checked a few minutes ago.
And so I think, you know, Apple, going into this, you know, they always seem to have high expectations for themselves. The public demands high expectations. They've always seemed to deliver. This time, they may have come up a little short. But -- but we'll know for certain when the phone goes on sale in a few weeks and we'll see what the public response is like -- Richard.
QUEST: Indeed, we will.
Dan Simon with the jiff, which is a mouthful, but we appreciate it.
Now, if you join me over at the super screen, a pub landlady from Southern England may just have single-handedly changed the way Europe watches football, as you can see on the super screen.
On the one side, well, it was Landlady Karen Murphy, who was basically taken to court for using a Greek satellite service to show football in her pub. It was cheaper than the British broadcasting version that she could buy in the UK.
On the other side of this battle, the English Premier League. They complained. They said it was unfair, it was against their copyright, it was against -- well, you get the idea.
And they took it all the way up to the European Court of Justice.
So what did they decide?
Well, the court ruled that, actually, she was right. It was an infringement and that, actually, it was an infringement on the provision of service and, therefore, the fans would be able to watch it. You could get your foreign thingamajig and watch it in another country. But giving it a little something to -- if it relates to the copyright of the anthem for the Premier League or it relates to anything of importance of the graphics, then that couldn't be shown.
It all seems like a bit of a mess.
So, how does the landlady now feel since she sort of got a victory?
(BEGIN VIDEO CLIP)
KAREN MURPHY, PUB OWNER: I believed in what I was doing. I just don't understand how a monopoly, which is a private company, can dictate. They think they're above the law and they can dictate what I do. I should be able to go out, as with any other commodity and buy -- and choose to buy from wherever I like.
Why should they dictate where I buy from at what price?
It's just not right. That's why I fought it.
(END VIDEO CLIP)
QUEST: Karen Murphy, "It's just not right."
PEDRO PINTO, CNN "WORLD SPORT" ANCHOR: What's a thingamajig?
QUEST: It's a highly technical thing.
PINTO: Is that a decoder?
QUEST: It's a decoder. It's a code -- that you know (INAUDIBLE), a thingamajig.
So have you got any questions for me or am I just supposed to react to what she said?
QUEST: Well, no, no, no. No, plenty of questions.
QUEST: Who looses out on this, actually?
I mean will the Premier League feel badly done to by this ruling?
PINTO: I really don't think they're too worried about it right now. And from the reaction that we've seen from Sky that's the official broadcaster of the Premier League, they're not too concerned.
What happens here, Richard, is that -- that the European revenue of the Premier League is around 10 percent of the total. If that goes down to 9 percent because of people who, all of a sudden aren't going to go with Sky, they're going to get a box from Albanian or Greece or Malta, wherever it's coming from, I don't think it's really going to impact the big picture.
And the fan at home...
PINTO: -- will they get a service from a foreign box and then not understand anything that's going on on television, anyway, just to -- to save two or three pounds a month?
Because she's a pub. She's got higher fees. As an individual at home, your fees are -- are smaller.
So are you really going to go out of your way to ship in a box from a random country to then get...
QUEST: All right...
PINTO: -- get games a few pence cheaper?
QUEST: But there's -- there's this odd thing that apparently the Premier League don't own the copyright of the games themselves.
PINTO: Do you really want to get into the copyrights?
QUEST: No, no I didn't really want to, because it could be a thingamajig that we both (INAUDIBLE) been outside.
QUEST: They don't own the copyright of the games, do they?
PINTO: This is the situation. The...
QUEST: All right. Go ahead.
QUEST: I've got the bell ready here.
PINTO: For what?
Are you going to cut me off?
QUEST: Just to...
QUEST: -- just to -- go on.
PINTO: All right. Anyone can show the games on a foreign decoder through a satellite signal. But all the graphics that belong to the Premier League, the music and everything that goes along with that, that can't be shown on a foreign decoder.
So what's going to happen now is this ruling by the European Court of Justice is going to go to the high court in London. They're going to have the final say. If they go along with this, I really don't know where this leaves Karen Murphy and the other pub owners because...
QUEST: She'll just keep switching it on and off.
PINTO: Exactly. As soon as the graphics come on, sorry, guys, you can't want this anymore, switching back over. Yes, it -- it's -- it's a little bit confusing. But it does mean that the fans have more power. And may -- maybe in the future, when the Sky -- when other -- other sports sell their rights to European territories, they have to make just one blanket price, they can't say well, we're going to charge...
PINTO: -- Greece 10 pounds, we're going to charge Portugal 15, whatever it may be.
QUEST: Do you have a thingamajig?
PINTO: I don't.
QUEST: You don't?
PINTO: No, I have the legal one.
QUEST: Do you have a thing of -- you have a legal (INAUDIBLE)?
PINTO: Well, I have a legal cable box.
PINTO: There's the ring.
QUEST: There's the ring.
PINTO: For some apparent reason.
QUEST: Many thanks.
QUEST: When he speaks, investors take notice -- the oracle of Omaha has some fresh views on the situation on both sides of the Atlantic.
Warren Buffett with us after the break.
QUEST MEANS BUSINESS.
Good evening to you.
QUEST: The sage of Omaha, Warren Buffett, has been in an optimistic mood lately. He has been speaking to CNNMoney's Poppy Harlow, where she joins us from down points south of Los Angeles on the way to San Diego.
I'm not sure the connection between Warren Buffett, that point and San Diego, but Poppy Harlow has been speaking to Warren Buffett and that's certainly worth hearing about.
POPPY HARLOW, CNN BUSINESS CORRESPONDENT: Richard, it is always interesting to hear from Warren Buffett. And he speaks annually at the Fortune Most Power Women's Conference here, just south of Los Angeles. That's where we got an opportunity to sit down for an extensive interview with the Oracle of Omaha.
Of course, the first thing I want to talk to him about was the situation in Europe. He has said for the past few weeks that the situation in Europe is not bad enough to lead to a big impact here in the United States. He has insisted that the United States has not fallen -- is not falling into a second recession.
I talked to him about the situation in Europe right now, particularly the massive selloff where we're seeing the steep declines in U.S. bank stocks as a result.
I asked him, also, is that because investors cannot short the European banks, so they're letting it play out here in the U.S.?
Take a listen to part of our conversation.
HARLOW: When you look at Europe right now, many feel as though it's a perilous situation. You've said that Europe has not brought the U.S. economy down yet. It hasn't.
How bad does it have to get where it truly impacts us?
WARREN BUFFET, CHAIRMAN, BERKSHIRE HATHAWAY: Well, if their -- if their situation gets somewhat chaotic over there, if -- if -- if there's contagion...
HARLOW: It's not -- it's not now?
BUFFETT: Well, it's pretty close. It's -- the -- when you have the bonds of major countries payable in the same currency yield and 300 plus basis points more than Germany, that -- that's something that was not contemplated, believe me, when the euro was established and it's not something sustainable at all. So they have to come up with a different answer and they have to come up with it soon. And it has to be pretty darned decisive.
And the problem, of course, is you have 17 people -- or 17 countries and -- and it's hard to have Europe speaking with one voice or acting with one, you know, one -- one strong action.
HARLOW: We're feeling it here in the United States. Today, banks are selling off steeply. You've got steep declines from Bank of America to Morgan Stanley.
Is this because investors can't shore up the European banks?
Is this something else?
Is this selloff in financials, is it justified?
Does it make sense to you?
BUFFETT: Well, I think it -- I think -- well, it doesn't really make sense. I mean I -- I'm not -- if I were to have a choice of buying or selling certain banks in the United States today, I'd be buying.
I think people are very worried about the banking situation in Europe. And Europe is such a -- I mean it's a huge part of the -- of the world. And there are -- there is a lot of interconnectedness between banks, although probably less than a year ago.
So it's natural when you're -- when you have fears about the financial world to particularly concentrated on -- on banks and investment banks.
(END VIDEO TAPE)
HARLOW: Richard, I want to point out a few other bits of news that he made.
He said that he's still 100 percent support President Barack Obama over any other candidate. But he also said -- I asked him a number of times about the American Jobs Act, is that the right way to really create jobs in this country?
And he said it is stimulus. That is what it is. It may create some jobs, lead to some growth. But he said the bottom line is that until we have a housing recovery in this country, you will not see sustainable mass jobs created. And the only way that a housing recovery is going to happen is with time.
HARLOW: The housing bubble not only blew up the housing industry...
QUEST: Thank you.
HARLOW: -- but it blew up the entire economy. He said he -- he doesn't even have a housing solution -- Richard.
QUEST: Poppy Harlow in California for us tonight.
When we come back, a Profitable Moment.
QUEST: Instead of a Profitable Moment, let's take a look at some of the initial reviews of the iPhone 4S.
TechRadar says regarding a revamp rather than an entirely new model: "It's not surprising Apple has chosen to go down this route. After all, this is exactly what it did with the iPhone 3GS, a retread of the phenomenally successful."
That's from TechRadar.
"The Telegraph" notes investor disappointment. And "The Telegraph" says: "Despite Apple's protestations that it's revolutionary, it looks like the markets were hoping for an iPhone 5."
In other words, everyone is not at all impressed.
And that's QUEST MEANS BUSINESS for tonight.
I'm Richard Quest in London.
Whatever you're up to in the hours ahead, I hope it's profitable.
The news continues.
This is CNN.