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QUEST MEANS BUSINESS

Global Stock Market: Bulls Rush in to 2012; Iowa Presidential Caucuses Offer Plenty of Drama

Aired January 3, 2012 - 14:00   ET

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


RICHARD QUEST, CNN INTERNATIONAL ANCHOR: Best FTSE forward; from the DAX to the Dow, don't look down.

Putting the best candidate forward. Voters in Iowa caucus away.

And putting its case forward. BP tells Halliburton, pay the lot.

I'm Richard Quest. A new year, and I definitely mean business.

Start as you mean to go on. Good evening. The old saying from the stock traders' almanac, is as goes January, so goes the rest of the year. Well, we may only be at the beginning of January, but if these numbers are anything to go by, a gain of 1.5 percent, 12,500; 193 on the Dow. It is a very happy new year indeed. The first readings of the January barometer has good things in store in New York.

And also, if we have a look, you can see what happened in Europe. An extremely impressive performance, particularly in the FTSE, in the London market, where as see not only did things start optimistically. When New York kicked in, the day continued and grew rather nicely, too. A similar sort of trend, pretty much for all the markets. Again, it was very much the introduction of New York, that gave the boost to the markets. Labor numbers were good in Germany. Some good employment numbers, a falling unemployment, jobless rate is at 6.8 percent, which is a 20-year low.

The only one that is a bit miserable was the CAC currant in Paris and as you can see, well that did get a boost from New York, but not really much to talk about.

With the Dow up now 206 points, Alison Kosik is in New York.

Well, the bon ami of the new year has arrived early, what's caused it.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: You know we got a couple of good reports here the U.S., one on construction spending, the other on manufacturing. They came better than expected, abroad some good reports as well. That kind of set stocks off, running, the bulls were running right from the opening bell. And you are seeing these gains sort of feed off each other.

And it could have been a little bit of what you talked about, Richard. You know this January effect, you know the January barometer, it has been correct, well, more than 85 percent of the time since 1950. Not so much in recent year, but then again, you think it really hasn't been that normal in recent years.

You know the market rallied in 2009, 2010, despite January losses. Last year the S&P gained more than 2 percent in January, but then finished flat. It is anyone's guess, but if the rest of January is anything like today, we could be in business, Richard.

QUEST: Now, you are talking about the January effect, which is for, as so goes the whole month of January. I'm just taking one day's numbers. When you look at one day's numbers it is not nearly as accurate, is it, for the year?

KOSIK: No. Obviously, it is not. This is one day and what you may see are just, you know, investors who are rested and ready to put their money into the market. There is no bad news hanging over the market today. It is good economic reports, overall. So, yes, we have investors ready to sort of ring in the new year with a bang, Richard.

QUEST: All right. I'll be talking more about the January effect, and the first day of the year, in "Profitable Moment", right at the end of the program.

Alison, many thanks.

There is one bit of fly in the ointment. Look at these oil price making sharp gains because of the growing tensions between Iran and the United States. This is the way the price has gone and we start the year with the price over at $110, at $110 at the moment, .61 a barrel. It is a gain of about 2 to 3 percent. So that is one slightly depressing point on what has otherwise been a optimistic day, the worries about what has been happening with Iran and the Strait of Hormuz.

Let's talk about the way the day traded. Holger Schmieding is with me, chief economist at Barenberg Bank.

Are you a January effect man? Do you believe in the January effect?

HOLGER SCHMIEDING, CHEF ECONOMIST, I don't really believe in the January effect, but I do believe this is a year which could net-net be fairly good for stock markets. Expectations at the end of 2011 were suitably subdued so that it doesn't take much to spring a positive surprise.

QUEST: No, but if we take, for example, the Germany mark, which was down 15 percent last year, I mean it would have to be a fairly devastating 2012, to have a repetition of that sort of magnitude. It could happen?

SCHMIEDING: Well, it is not impossible but it is unlikely. Actually just staying where the German market was at the end of last year, would be a bad performance. We have the euro crisis weighing on core Europe, it that doesn't explode then core Europe will trade up eventually.

QUEST: But you are not more optimistic than just about every economist that was quoted over the weekend press and in the new year forecasts. Most people expected, well not most, but there is a sizable body of opinion that says that Europe will be a very difficult year and will not show many gains. And, the Eurozone will not survive in its current form.

SCHMIEDING: First of all, for the euro economy this is going to be a very difficult year. Definitely, very start into the year, but equity markets look forward. Equity markets will at some time, over the coming months start to play the fading of the euro crisis. And as for the euro crisis there are two way, either it gets completely wrong, or it gets better, and it will get better more likely.

QUEST: Now, that bit, it will get better more likely. The optimism you express, on the euro crisis, is based on what, because experience would show that every time they had a chance to get it right, in 2011, they managed to fail, the Euro politicians.

SCHMIEDING: But they also managed to keep at least most of it, so far actually all of it together. The experience is that if they really have to, the Eurozone policymakers rise to the challenge. They will probably have to do more in 2012. But the consequences of failure, would be so devastating that peering into the abyss, will make them do the right thing.

QUEST: Right. So, you come back to this idea that, in extremist, the right thing will be done, but we may have to get to the patient almost being carted out the of the operating theater.

SCHMIEDING: We may have to get there, but thereafter, the patient will survive and if we are lucky the crisis in between won't be to bad. And markets will eventually start looking forward to the end of it, rather than just to the next step of it.

QUEST: So, when we have a day like today, are you prepared to join me on the bandwagon, of optimism and say, as so goes the first day of the year, the year will go?

SCHMIEDING: By the end of the year that will very likely be true, but it is not going to be correct for every month of it. We'll end higher, much more likely than not.

QUEST: I found them. I was looking for this. Our traffic lights, for you gauge of New Year optimism. Red, recession; amber, steady a she goes; green, good year ahead. Which one do you want?

SCHMIEDING: Well, actually we would have to take all of them.

QUEST: Ah!

SCHMIEDING: The thing is if your time horizon is six months the end of the year, it will be green.

QUEST: Right.

SCHMIEDING: If you are just into the first few months then for the economy it will, of course, be red. But markets look forward. Markets are already in amber. Markets will end the year on green.

QUEST: I'm exhausted and we've only just started.

SCHMIEDING: That is a lot of clicking.

QUEST: Yes.

SCHMIEDING: Lot of clicking.

QUEST: Good to have you with us. Many thanks, indeed.

We'll talk politics next, it is going to be a very busy year. All eyes are on Iowa. U.S. Republicans are headed to the caucuses. Wolf Blitzer joins me-(DESK BELL CHIMES)-after the break.

(COMMERCIAL BREAK)

The first vote in the U.S. presidential election will be cast today. Don't get too excited, it is only Republicans versus Republicans. It is the Iowa caucuses, 1,500 kilometers from Washington, D.C. Iowa, right in the middle of the country, one of the breadbasket states, Illinois, Nebraska, all around it, Wisconsin. It becomes the epicenter of U.S. politics. As Chris Welch now reports, for the candidates this is one of the most important moments in the campaign.

(BEGIN VIDEOTAPE)

CHRIS WELCH, CNN CORRESPONDENT (voice over): The Republican candidates are up and at'em early in Iowa, campaigning in the final hours before tonight's caucuses. Mitt Romney is riding a wave of confidence with his front-runner status.

MITT ROMNEY, (R) PRESIDENTIAL CANDIDATE: We're going to win this thing will all of our passion and strength and do everything we can to get this campaign on the right track.

WELCH: Romney, and Ron Paul, are both trying to shake a last minute surge by Rick Santorum.

RON PAUL, (R) PRESIDENTIAL CANDIDATE: He's very liberal. And he-

UNIDENTIFIED FEMALE: Rick Santorum's liberal?

PAUL: I mean, have you looked at his record?

RICK SANTORUM, (R) PRESIDENTIAL CANDIDATE: All the other candidates just talk about what they're going to do. Well, my response to that is, that if I had their record I'd just talk about what I was going to do, too. But I'm actually proud of my record.

WELCH: After admitting his chances of a win, are slim, New Gingrich seems to have gotten a late boost of campaign confidence.

NEWT GINGRICH, (R) PRESIDENTIAL CANDIDATE: There is 41 percent, who are undecided. It is very possible to win.

WELCH: Two other candidates are also banking on an upset. Despite running at the back of the pack, Rick Perry and Michelle Bachmann are not giving up at a shot at victory in Iowa.

MICHELLE BACHMANN, (R) PRESIDENTIAL CANDIDATE: And I think that we are going to see a real surprise at the polls tonight.

WELCH: Noticeably absent from the crowd is Jon Huntsman. He's not competing in Iowa. Choosing instead to focus on next weeks primary in New Hampshire.

(END VIDEOTAPE)

QUEST: Now let's talk more about the impact of the Iowa caucuses and discuss exactly what it all means. Wolf Blitzer joins me now from CNN Center.

Good evening, to you Wolf. The fascinating part about the Iowa caucuses, is that everybody says how unimportant they are and then we spend such a huge amount of time saying how important they are. Wolf-

Just shows you, I ask a difficult question to Wolf, or rather the key question and suddenly-he can't hear me. We'll come back to Wolf Blitzer in the CNN Center in just a moment.

The impact of the Iowa caucuses on the state's economy are really quite significant. The last time around spending by candidates reached nearly $16 million, Democrats spent $10 million, compared to the Republicans' just $6 million.

So, let's go back to Wolf Blitzer, and put this into perspective.

Wolf, if you can hear me, hopefully we've managed to pay the electricity bill, we spend a lot of time saying the Iowa caucuses are not representative, but at the end of the day, they are still extremely significant?

WOLF BLITZER, CNN ANCHOR, THE SITUATION ROOM: Very significant, Richard, because it tends to whittle down all the candidates, two or three or four, might emerge out of Iowa, and there could be six, seven, eight or nine. I remember four years ago on the Democratic side, there were six candidates who were running in the Iowa caucuses; three of them, there were three tickets out of Iowan, Barack Obama, who won the Iowa caucuses, Hillary Clinton and John Edwards.

But if you remember the lower tier, the lower third, they all did really poorly in Iowa. Bill Richardson, Chris Dodd and the current vice president of the United States, Joe Biden. They did really badly in Iowa, didn't go on. So it does have a tendency to whittle down. We'll see what happens tonight.

There are six candidates running tonight. John Huntsman, the former U.S. ambassador to China; he's not running in Iowa. He's spending all of his time in New Hampshire, which has its primary next Tuesday. So, we'll see of these six, who drops out, who stays in.

QUEST: And has it been a good season in Iowa? As a veteran of these political campaigns, well has it been one of those that is a bellwether, that set agendas, that did lead the direction of debate, do you think?

BLITZER: It has been a fabulous season from the journalists' perspective, because we have had so many roller coaster ups and downs. There were some candidates who were surging and then collapsed. Others who seemingly out of no where, like Rick Santorum, right now; he was no where, and then all of a sudden he is surging right now. Ron Paul is doing well. Mitt Romney, he really wasn't counting on Iowa.

QUEST: Right.

BLITZER: He is counting more on New Hampshire, but he's doing well. But, you know what? It was only about three or four weeks ago that the front runner was Mitt Romney. A few weeks before that it was Herman Cain. A few weeks before that it was Rick Perry.

QUEST: Right.

BLITZER: And remember in August, the winner of the Iowa straw poll, among the Republicans, was Michelle Bachmann. She was doing great. So we have seen a real, a real roller coaster kind of season so from our narrow perspective of journalists it has been a fabulous ride.

QUEST: Right, so that leads to the question, to what do you attribute this roller coaster, sea-sawing of the candidates. Where no single candidate can get purchase, and hold on to it. And you get these dramatic- it was the sort of swings that we are used to seeing in the volatility of the stock market, why are we seeing it in the political arena?

BLITZER: Because there are so many Republicans who don't want to vote for Mitt Romney. They don't like Mitt Romney for a variety of reasons. He has his base, about 25 percent or so, but the remaining 75 percent is divided. So there was an anti-Romney, a non-Mitt Romney candidate who was going up, going down. And once that candidate did really well, then the media and the opposition would focus in and find flaws. And all of a sudden they would collapse.

In the case of Newt Gingrich, the former speaker of the House of Representatives, he was doing great, but they targeted him. The attack ads, from those who support Mitt Romney, from those who support Ron Paul, for example. And all of a sudden he went from 35 percent down to 10 or 15 percent.

QUEST: Right.

BLITZER: The negative advertising on television, in Iowa, and I was there last week, it is non-stop. It is intense. Newt Gingrich tried to take the high road and stay above it and not respond. It was a huge blunder, because he has paid a huge political price as a result of seemingly try to just be positive as opposed to responding. Now he's responding, but it might be too late. Today he said that Mitt Romney is a liar.

QUEST: Do we see the American people, do you think, as we go into-as we start this process, a split, 50/50 overall, as they were say, for example, in the Bush/Gore election and in subsequent elections where we have basically seen a divided country?

BLITZER: I would say it is divided, but I would do it a little bit differently. I would say there is about a third of the American electorate that is hardcore Democratic, about a third that is hardcore Republican, maybe a little bit less. But there is another third that is fiercely independent and could go either way. They are moderates. They are moderate Republicans. They are moderate Democrats.

And whoever captures that independent third wave will win this election come November 6. There is still a long time go and in politics, not only a month, but a week sometimes can be a lifetime. And this U.S. election system is drawn out over almost-longer than a year, for all practical purposes. So there is still plenty of time, we don't know what's going to happen.

But I will say this, Richard, it is going to be ugly. Because if you see these negative commercials, these ads that have been running in Iowa, and I saw them last week. They were brutal in going after, for example, Newt Gingrich. Just wait until the Republicans settle on a candidate, we know the Democratic candidate is going to be Barack Obama. The attack ads, the unlimited spending that is going go on, this is going to be a very, very nasty political season here in the United States.

QUEST: Which-I mean, you say that-I can hear some journalist rubbing their hands with glee. And the more principled ones throwing their hands up in horror at what might be about to come upon the electorate.

Wolf, good to have you on the program. Thank you for giving us time. Always lovely to see you.

Wolf Blitzer from the CNN Center. And please, remember, CNN's live coverage of the Iowa caucuses, in just a few hour's time, midnight London, 1:00 a.m. in Central Europe. We'll show you the meetings, the results, and of course, the analysis. The sort of analysis that only comes from the world's news leader, with the best political team on television.

Coming up after the break, starting small, making a monumental difference. One woman has taken her artist's eye and put it to good use, the "World @ Work" next.

(COMMERCIAL BREAK)

QUEST: Now, tonight we take you into "World @ Work" that defies perception. This is a job where life becomes art. And where the pupil is the product; where the best work of all goes unnoticed. We're going to meet Christie Erickson, who lifts the veil on her life as an ocularist. What is an ocularist? Well, watch, making prosthetic eyes.

(BEGIN VIDEOTAPE)

CHRISTIE ERICKSON, OCULARIST (voice over): For someone not to notice the reality of it is my favorite part. It is a challenge, but I do enjoy a challenge.

I'm Christie Erickson. I'm an ocularist.

The path that got me here is part of who I am. I got involved as a parent. My son lost his eye when he was three years old. I remember thinking that, oh, my gosh, devastated. You know? And I could just picture this, having to pull an eye out of a drawer.

It is a joy of my work, to be able to reconstruct and have the rest of the world not view my artwork. I've always been attracted to eyes and people's-and their eyes, and they do tell a story. Everything is very unique. Every color is unique. Every expression is unique. Very much so. Everything is done very individually, very custom made, hands on, every step hands on.

The process can be completed in about three days. And as many hours. Not only the process completed at that time, it is very hands on, with the patient involved and the patient present. It is probably a matter of maybe, 25, 30 hours of work. Some hands on, some lab work, some processing.

I plan to do this forever and ever, and ever. I am just-I'm very passionate about what I do. I am dedicated to do the best everyday. Comes from heart, it comes from my experience of knowing hurt and trauma myself, and wanting to turn it around into something better.

I'm Christie Erickson, I'm an ocularist.

(END VIDEOTAPE)

QUEST: Fascinating, the love of the "World @ Work".

Now, from a delicate touch to a blunt and bruising battle. It is all about who should pay for the disaster in the Gulf of Mexico. BP's intending to clean it all up. And now it is telling Halliburton, you're going to pay the full bill, in a moment.

(COMMERCIAL BREAK)

(NEWSBREAK)

QUEST: The U.S. Republican presidential candidates are facing their first major test on Tuesday evening, as they take part in the Iowa caucuses. There have been lots of ups and downs leading up to the vote, poll numbers rising and falling for different candidates. Mitt Romney remains the frontrunner, albeit by a narrow margin.

BP is going after Halliburton, the company that was in charge of cementing the doomed Macondo well in the Gulf of Mexico. BP says Halliburton should pay all the costs and damages associated with the disaster. the explosion in April, 2010, killed 11 people and released more than four million barrels of oil into the Gulf. That much you will remember. It's cost the company more than $20 billion so far, not including the loss on its share price, fallen by a third since the spill. BP is now worth four pounds 71 pence a share.

BP has not yet put a figure on its claim.

Jim Boulden joins me now in the studio -- Jim, we know that BP has always said, you know, to Halliburton, oyez, cough up some of the money. But this is all to do with the court case.

JIM BOULDEN, CNN CORRESPONDENT: Yes. And the point you said there, some of the money, I mean the way it was going, I thought that BP was going to get a little bit of money from each other -- of the players in this and then it would have to spend the bulk of the money.

But from the court filing yesterday in New Orleans, which actually repeats a court filing from April of last year, they've been saying all along that they think that Halliburton has been grossly negligent, and, therefore, Halliburton should pay all of BP's costs once BP pays up everything.

QUEST: Right, because there's no doubt that BP, under the law, is liable...

BOULDEN: Yes.

QUEST: -- as the owner of the -- the lease on the well.

BOULDEN: Yes. This is -- it's getting kind of technical, but the court case is going to start in February...

QUEST: Yes.

BOULDEN: -- to find out who is liable, whether it's BP and Halliburton. There are hundreds and hundreds of cases that have been brought together, hundreds of lawyers, all getting together. It starts around February 27th. And then the process, as we know, to find out who is liable for all this.

But inside of all that, the two companies are suing each other.

QUEST: Right. Now, there's all -- we -- I -- I can't remember the names of the companies, but several companies have already stumped up.

BOULDEN: Yes.

QUEST: Several hundred millions...

BOULDEN: Yes. Anadarko...

QUEST: Right?

BOULDEN: Anadarko and Mitsui and Cameron, who was the maker of the blowout preventer, has given $250 million. So...

QUEST: I think they have more than...

BOULDEN: -- (INAUDIBLE)...

QUEST: -- more than that.

BOULDEN: A flash in the pan.

QUEST: Yes.

BOULDEN: BP, obviously, has some...

QUEST: I never understood why the maker of the blowout preventer didn't end up having to pay more, since it was the failure of the blowout preventer. But that's another matter...

BOULDEN: Yes, it is.

QUEST: -- (INAUDIBLE).

BOULDEN: Well, that's why the courts will be deciding all this. And that's why there are 493 lawyers involved in this case at last count, because, obviously, there is so much money involved here.

QUEST: But the two biggies haven't settled.

BOULDEN: No. Yes.

QUEST: Transocean...

BOULDEN: Yes.

QUEST: -- and Halliburton.

BOULDEN: Right.

QUEST: They are going along the way...

BOULDEN: Yes.

QUEST: -- in court.

BOULDEN: The whole way. And I don't see anything that's going to change that. And so they're getting quite nasty. Each other, they're accusing each other of fraud, they're accusing each other, some of them, of -- of destroying evidence. I mean it's getting to that level, where these companies are going after each other in the courts in New Orleans because we're talking about, as we said, BP, something close to $40 billion to clean it all up.

QUEST: BP's latest numbers are showing that, actually, the problem may not cost that much...

BOULDEN: Yes.

QUEST: -- isn't it?

BOULDEN: Yes.

QUEST: BP is now sort of revising -- they're not revising downwards...

BOULDEN: No.

QUEST: -- but -- but they don't think that they're going to use up the whole $40 billion in the trust fund.

BOULDEN: Well, they haven't used the trust fund, which is $20 billion of that. And they've only used a fraction of that, to be honest with you.

QUEST: Right.

BOULDEN: A part of that. So...

QUEST: I want to...

BOULDEN: -- it may not get to that level.

QUEST: Let's just pause for one second, Jim, because BP is on a public relations campaign.

BOULDEN: Yes.

QUEST: Let's look at this commercial from BP as to how they're trying to get their act -- their image across.

(RINGING BELL)

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I'm glad to report our beaches and waters are open for everyone to enjoy. And the economy is showing progress, with many areas on the Gulf Coast having their best tourism seasons in years. I was born here. I'm still here and so is BP. We're committed to the Gulf.

(END VIDEO CLIP)

BOULDEN: And BP making the point on their press releases and on -- on this that record tourism in 2011 in the Gulf Region and that the fish there that are pulled out of the Gulf of Mexico are the most tested fish in the world. And they're trying to make the point that it's a very safe and clean place to go.

QUEST: It's not the first time BP has run those adverts, but they are determined to get that message across, aren't they?

BOULDEN: Yes.

QUEST: A big court case.

How many lawyers?

(LAUGHTER)

BOULDEN: Sorry, 340 lawyers, 90...

QUEST: Three hundred forty?

BOULDEN: Yes. I think I said 340 lawyers, 90 different law firms...

QUEST: Yes.

BOULDEN: And that's the filings in the court, 230,000 lawyer hours. Now if you think of what the average lawyer in America makes...

QUEST: Please come back to us tomorrow with a rough cost, with a rough cost...

BOULDEN: I couldn't do it today.

QUEST: You couldn't do it today. Tomorrow.

(LAUGHTER)

QUEST: Jim Boulden, we thank you.

When we come back in a moment, choking on its own success -- it's India's economy. It's growing steadily, providing something nasty in the air, in a moment.

Sorry, Jim.

(COMMERCIAL BREAK)

QUEST: The Latin American merger of TAM and LAN one stage closer. Brazilian shareholders at TAM have agreed to the deal, LAN buying TAM. Now, of course, it's got -- it's already received regulatory approval, so the deal will go ahead and they'll still have to decide which alliance they will be a member of. TAM part of Star, LAN part of oneworld.

But it will create one of the most valuable airline groupings in the world.

Let's stay with airlines, because whether it's LAN, TAM or any other airline that flies to Europe, they will be paying, as of this month, money to fly to Europe. And airlines are ramping up their opposition to the European Union's carbon trading scheme. Now, some are warning it could impact prices. The Abu Dhabi-based Etihad has called the scheme counter- productive. Lufthansa has confirmed it will have to pass on the extra costs for emissions trading and carbon emissions to passengers.

Jim Boulden, who's had a busy day, looks at the history of the scheme and why it's causing such a hair -- a headache.

(BEGIN VIDEOTAPE)

BOULDEN (voice-over): Carbon trading takes off in Europe. Starting this week, Europe's 7 -year-old emissions trading system, or ETS, now includes air transport. Up until now, it's been exempt.

European airlines aren't happy about this. And to the great annoyance of airlines based outside Europe, any flight to and from the continent will also be subject to the emissions system. And this is key -- the entire flight is subject to the new EU rules, not just for the length of the flight in European skies.

British Airways' parent, IAG, for one, estimates this will cost its airlines more than $100 million in 2012.

UNIDENTIFIED MALE: You know, but surely, we've discovered there are too many allowances.

BOULDEN: Under a carbon trading system, companies have to hold carbon credits to emit greenhouse gasses. The European Union was first in setting up a large pan-regional and legally binding trading system similar to a stock exchange, where companies buy and sell carbon credits based on the amount of carbon they emit. The ultimate goal is to push industries toward greener technology.

BOAZ MOSELLE, FTI CONSULTING: The level of ambition that the EU has in terms of emissions reduction, is very, very big. By 2050, they want to have reduced reductions by 80 -- emissions by 85 percent. So if you want to do that kind of very, very ambitious reduction, you've got to include everything, really. And the aviation sector is a relatively important part.

BOULDEN: Supporters say it's high time that airlines, which account for around 3 percent of global carbon emissions, pay to pollute. Europe says it's waited long enough for a global agreement on airline carbon taxes. None has been forthcoming.

JAKE SCHMIDT, NATURAL RESOURCES DEFENSE COUNCIL: We've learned with this program and with lots of environmental programs that the complaints from industry are always large right when the program is about to go into effect. They always claim that it's going to cost them exorbitant amounts of money but then when the program actually comes into effect, that they find that it both saves them money and spurs the kinds of technology innovation that is necessary for competing in the 21st century.

BOULDEN: Critics of this expansion to the skies, including the U.S. State Department, say this amounts to an unfair tax on companies based outside the EU. European airlines now fear retaliation from countries outside the EU to which they fly. There have been several court cases instigated to try and stop the inclusion of airlines and the extra cost to buy carbon credits will likely be passed on to the price of a ticket, possibly as much as $16 each way, which adds up if you consider all the other additional fees passed on to the passengers.

Jim Boulden, CNN, London.

(END VIDEO TAPE)

QUEST: The problem, of course, is carbon emissions. And, indeed, in some cases, in some places, it is the very air quality that's raised serious issues.

In India, for example, in the capital, New Delhi, the air quality is worse than ever. And this is despite government efforts to combat pollution.

New Delhi is one of a handful of cities on the top of the world's most polluted list, which includes Cairo and Mexico City. New Delhi recently pulled ahead of Beijing.

Our correspondent there takes a look at why every day in New Delhi is a bad air day.

(BEGIN VIDEOTAPE)

SARA SIDNER, CNN CORRESPONDENT (voice-over): India's capital appears to be losing the battle against pollution. After a few years of beating back bad air quality, this vibrant city is now one of the most polluted capitals in the world. You can see it and, worse, feel it.

To student, Himanshu Baria, the emphatic but simple demand by the technician to take a deep breath and exhale is exhausting. Baria rides his bike to college every day. His asthma attacks come more often in the increasingly polluted air.

HIMANSHU BARIA, STUDENT: This is really a lot of pollution. I feel a bit less. You can feel the lack of air.

SIDNER: Doctors say bad air quality is adding to the number of respiratory diseases and lines at emergency rooms.

S.K. CHHABRA, VALLABHBHAI PALEL CHEST INSTITUTE: Now, frankly, it's a major public health issue now.

SIDNER: India's government fought hard in the late '90s and early 2000s to clear the air in the capital. It pushed power plants to the outskirts of the city, mandated its fleet of public buses and the ever popular rickshaws to use compressed natural gas instituted of diesel and built a fast and efficient metro.

At first, the air quality changed for the better.

SARATH GUTTIKUNDA, URBANEMISSIONS: Even though we did some measures almost 10 years ago, after that, nothing happened. Like everything was in the upturn, so all the gains that we had in the late '90s and early 2000s completely wiped out.

SIDNER: Why?

Most people cite these items -- more than 1,000 new cars are registered in Delhi every day. In the winter, the poor and cold burn anything they can.

(on camera): But research group UrbanEmissions says their data shows of the major pollutants in the air, road dust is actually the most prevalent, followed by vehicular emissions, emissions from power plants and brick (INAUDIBLE), eleven though the last two industries have been pushed outside of the city.

(voice-over): The government says it recognizes pollution has increased. In an effort to combat the problem it's expanding the metro and vowing to better enforce laws already in place. But environmentalists warn if no new measures are taken, living, working and visiting this colorful developing city may actually take your breath away for all the wrong reasons.

Sara Sidner, CNN, New Delhi.

(END VIDEO TAPE)

QUEST: In a moment, on your marks, get set and vote -- it's the first poll in the 2012 presidential election. It's in Iowa tonight. The whole political circus brings a lot more, as well, in a moment.

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QUEST: Now, as we told you earlier in the program, the first votes in the presidential election are to be cast today. This isn't just a tradition in Iowa, it's the law where the state says Iowa must hold its caucus at least eight days before any other state.

Across hundreds of churches and gymnasiums and in school halls, more than 100,000 Iowans will turn out. They will enjoy the privilege. In some cases, it's even a nice little earner.

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ROBERT JOHN FORD, DIRECTOR, "CAUCUS! THE MUSICAL": It basically gives audiences an insight to the presidential election process and the caucus process here in Iowa, especially the week before. It -- it gets kind of crazy around here. You -- you can't help but run into the media or the politicians somewhere at some point.

GREG EDWARDS, DES MOINES VISITORS BUREAU: You've got journalists. You've got campaign staff. You've got followers of the campaigns, supporters of the campaign. You know, there are so many different areas that money can go. It's not all just going into just hotels and restaurants. You know, they're paying rent in office buildings, t-shirt shops or printing shops and things like that, all small, family-owned private businesses. And they're all benefiting from this, no doubt.

UNIDENTIFIED MALE: Rock out with your caucus out.

UNIDENTIFIED MALE: It's traditionally very, very slow for hotels. So to have a sold out hotel between Christmas and New Year's is huge.

BARBARA ESLICK, DIRECTOR OF SALES, RENAISSANCE HOTEL: We've been taking reservations off and on for about four years now. Actually, we came completely sold out about a year ago.

UNIDENTIFIED FEMALE: It probably quadruples my income in a month.

UNIDENTIFIED MALE: In 2008, Scarlett Johansson couldn't get a table at a restaurant because they were full.

UNIDENTIFIED MALE: We have the top tuna every four years the sort of showcase whatever is going on in the state, because we know that the national press will be here. And so that's a great opportunity economically to -- to sell Iowa.

UNIDENTIFIED MALE: Who are all these people?

I've never seen any of them before in my life.

EDWARDS: Well, four years ago, we quantified a $25 million impact just on greater Des Moines. It generally represents about a quarter of the state's overall impact. We estimate $100 million on the state of Iowa.

Four years ago was definitely a larger impact. I think we're -- we'll see some lesser numbers this time around, but still pretty strong.

UNIDENTIFIED FEMALE: It's considerably slower and a little quieter than it was in 2008.

UNIDENTIFIED MALE: This year, it hasn't been as big, just because I think the staffs are smaller than they were in 2008.

UNIDENTIFIED MALE: There's definitely a difference. When you have both parties trying to select a candidate.

UNIDENTIFIED MALE: I think it's fun for Iowans to see people talking about Iowa on the national news.

UNIDENTIFIED FEMALE: We're very thankful that they're spending their money here.

EDWARDS: We tend to just sit around and cry on January 4th. And -- and say please come back in four years and please let us be the first state again.

(music)

Now, the election season is on the minds of Americans and people around the world behind the Tweets, as, indeed, we bring you Top Tweets.

First up is the chief executive, Steve Forbes.

Steve has Tweeted: "Almost half of all Iowans and New Hampshire voters are still willing to change their support to another candidate. With the Iowa caucus hours away, anything can happen."

He may say that, but I'll bet it doesn't.

A new Tweeter, new to the Tweetosphere, Robert -- Robert. Rupert Murdoch -- my apologies. He Tweets, saying: "While Obama feeling courageous, why not follow his first class education policy? The U.S. absolute biggest crisis, no read, no write, no jobs." and finally, one Tweet not on the elections from Nouri al-Roubini. Dear Nouri al-Roubini, returning to the financial crisis: "Greece in free-fall moving from recession to depression."

And, indeed, today I just saw that the Greek government is selling four of the Airbus A340s that the national airline owns. So they're hoping to bring in some coffers.

Whether you or not agree, it's our Tweeting, it's @richardquest is where we can follow each other and have our debate.

Now, in the last 20, 40 minutes or so, the U.S. Federal Reserve has just released the minutes of its last meeting. It always comes out a couple of weeks after the meeting itself.

And as expected, it's given an overhaul -- it's planning to give an overhaul in the way it communicates its policy to the public.

The Fed is going to give the market -- and that's you and me and investors and households and businesses -- a new idea of where interest rates are headed.

Four times a year, as part of their summary of economic projections, the SCP, not only will it do employment, economic growth and inflation, it will give monetary policy.

Here to discuss how important the announcement is, I'm joined by Lincoln Ellis, chief investment officer with Strategic Financial Group, who joins me from the CME.

All right, so the Fed is like -- like the vestal virgin teasing us right to the end. It is lifting the veil and telling us where it thinks interest rates is going to go in the future.

Do you think this will help?

LINCOLN ELLIS, STRATEGIC FINANCIAL GROUP: Richard, good to be with you.

Well, it's not clear that this will help. In fact, the markets and market participants have done quite a good job of sort of anticipating where rates are going to be going based on their every four week or every six week meetings.

What will be interesting is to see the relationship between the total aggregate of information as you laid out, what will be in these steps, and how you get a sense of the -- the Federal Reserve Committee is thinking about their relationship and its effect on potential interest rate moves. That will be the interesting change of events...

QUEST: All right.

ELLIS: -- and -- yes, go ahead.

QUEST: Well, as I read the report and -- and the Fed minutes, you know, it talks about how households and business can make judgments on investment decisions and, I assume, whether they're going to pay the gas bill as a result of this.

I mean anyone who has read the Fed minutes or the Summary of Economic Projections, I'm not sure they're going to be much the wiser from having a raft of individual projections on the Fed funds rate.

ELLIS: Yes, no, I think that that's probably right. I think what they're trying to get it is to have both market participants as well as those who are making those kinds of household decisions, have a more aggregated data set.

One of the arguments about the way that markets have been reacting or do react to market information is that the frequency with which we get these readings actually is more a custom or akin to noise rather than anything that's substantial that would devalue -- denote a trend.

And what I think the Fed is hoping to do is to help individuals and again, market participants...

QUEST: Right.

ELLIS: -- aggregate data in a useful way, in a more useful way.

QUEST: I was reading about the video conference call that they had on November the 28th, when they set up the dollar swap lines. It's fascinating, the important date. They set up those dollar swap lines and they admit here the important demonstration to show central banks working together to support the global financial system.

But they remind us that nothing they've done so far actually improves the situation.

Is that your understanding?

ELLIS: Yes, I think that is the understanding. You have to remember, when you get into a credit crunch or credit type of situation, where a counter party risk is the game -- the name of the game, and it really is a -- a sense of confidence in viewing confidence in the system and what they did on the 28th, in the pursuant weeks, during the middle or the height of that European credit crunch, waiting for the ECB to move, was to do what they could to allow dollars into the European central banking system.

QUEST: Right.

ELLIS: So I think they probably did the right thing there. And, yes, the reading of these minutes, which is normally a bit of a snoozer, certainly around the conference calls, it's a bit of an interesting chapter and drama.

QUEST: I never thought we would discuss the Fed minutes as being dramatic, but there we are.

Lincoln, we do live in very interesting times.

Many thanks, indeed.

Joining us from the CME, it is Lincoln Ellis.

Right. Wind and lots of it -- and I don't mean the hot air coming from me.

Karen Maginnis is at the World Weather Center.

KAREN MAGINNIS, ATS METEOROLOGIST: Yes, we do have quite a few severe weather reports as far as wind is concerned. And they have been fierce. Now, they are diminishing a little bit. That is not to say they're going to be light. In fact, there's yet another round of some windy weather conditions we're expecting just about 24 hours from now.

But take a look at these fierce reports of wind in Edinboro, 164 kilometers per hour; Glasgow, 146.

And as I mentioned, it's not over yet. Yes, we see them weakening slightly, but then going into Wednesday, Wednesday evening, we all start to see those winds pick up once again between 60 and maybe 80 kilometers per hour.

So not an easy forecast and very unsettled over the next 24 to 48 hours. And as you can expect, some of the international airports are going to be impacted, already have been. We've reported delays in the previous 24 hours. There will be delays as we go into the middle of the work week, with Amsterdam and Glasgow looking at some fairly significant delays, maybe an hour to two hours possible. Certainly check with your airline before you head out toward the airport.

But even those roadways are going to be not just slick, but very wind- buffeted.

From Brussels to Frankfurt, Munich and Berlin, expect those delays primarily to the gusty winds and you'll see reduced visibility, as well.

This picture coming out of Scotland, where trees were reported down and the roadways were snagged. There has been a report of a landslide. This affecting one of the bridges in Scotland that has snared traffic there, as well.

Right now, the wind in Dublin gusting up to 67 kilometers per hour. And in Plymouth, we are looking at 50 kilometer per hour winds, London just about 22.

The past 24 hours, rounds of rainfall from Scotland into Belfast and into Dublin. It'll be windy and cold and you can expect the winds to increase, as I've mentioned, once again. And the risk for severe wind gusts going into Wednesday -- Richard.

QUEST: Ouch. Ouch, ouch, and double ouch again.

Karen, many thanks.

The Profitable Moment is next.

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QUEST: Tonight's Profitable Moment.

A sea of green on the European bourses. As the saying goes, so goes January and so goes the rest of the year. The first full trading day saw good gains -- 2 percent in London, 1 percent in Frankfurt and so on, even in Paris.

The old wives' tale in the history book says a good omen ahead.

But wait a minute. We've been here before. The first trading day of '11 saw gains and we don't need to tell you how it ended that particular year.

What matters are the fundamentals, economic and corporate truths that tell us where we are headed. In other words, by all means rejoice and cheer, but one swallow doth not a summer make.

It's going to be tough to make money in 2012.

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.

This is CNN.

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