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QUEST MEANS BUSINESS

Warnings for Europe; OECD Says Europe Needs Policy Shift; Europe's Core Weakening; European Markets Dip; Economists Looking for Sustained Growth, not Short-Term Gains; US Markets Slightly Up; Israel Bans Use of Underweight Models; JetBlue Flight Diverted; Euro Down Against Dollar; The Millennials Trying to Get Ahead

Aired March 27, 2012 - 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: A warning, indeed. Europe is stalling, says the OECD.

Tonight, Friends relaunch. One social network's brave move back into the market.

And odds on a euro collapse. Why the UK treasury is off to the bookies.

I'm Richard Quest. Tonight, as always, I mean business.

Good evening. Europe today received a wakeup call from the rest of the world. Global economic leaders are united in their belief that Europe's crisis still needs urgent attention. The only thing to fix it is what's been missing all along: according to the leaders, hard, decisive action.

It was an extraordinary day in which leading economic policymakers all rounded in some shape or form on Europe and what's taking place. Join me in the library and I will show you some of the measures and comments.

First of all, the OECD and the Secretary-General, Angel Gurria. He said Europe is stalling and with the new OECD report, economic and fiscal imbalances are too large. In other words, Europe needs to do more to grow. Growth must be the number one priority.

And in an extraordinary attack again, Gurria said that the firewall, even at the current elevated levels, is still not enough.

(BEGIN VIDEO CLIP)

ANGEL GURRIA, SECRETARY-GENERAL, OECD: The mother of all firewalls should be in place, strong enough, broad enough, deep enough, tall enough, all sorts of -- just big -- to ensure that it does not need to be used, actually, that people know that it's there and there, therefore, will not even attempt to speculate or try to see if it's strong enough.

(END VIDEO CLIP)

QUEST: Policymaker number one. Policymaker number two, Tim Geithner, US Treasury Secretary, says Europe cannot rely solely on the IMF. Europe has the ability, he says, to solve the problems itself, and it must show a strong European response to stand on its own two feet.

(BEGIN VIDEO CLIP)

TIMOTHY GEITHNER, US TREASURY SECRETARY: Our judgment is for Europe to be effective in solving this crisis, they've got to demonstrate to the world -- they're a rich continent, they have the ability and the means to solve this -- they have to demonstrate that they're prepared to take on -- continue to take on the larger share of the burden of solving this problem. The IMF can help, can supplement that, but can't substitute for a strong European response.

(END VIDEO CLIP)

QUEST: Strong European response. Policymaker number three, the governor of the Bank of England's Mervyn King. He says -- and may I remind that the UK is outside the eurozone, not part of the EFSF or the ESM or, indeed, the treaty on fiscal compact. Governor King says it still feels like a crisis to him.

The governor spoke in front of the House of Lords. He said it's a long time before we're through the crisis, and the banks, worryingly, are still under pressure to deleverage.

So, these are the warnings from leading policymakers during the course of today. I put more of this to Pier Carlo Padoan, the chief economist at the OECD. This was clearly the moment that Europe -- not should, not might -- but needed to take action.

(BEGIN VIDEOTAPE)

PIER CARLO PADOAN, CHIEF ECONOMIST, OECD: It will. Which means mostly structural policies to liberate competition and improve the flexibility of labor markets. But also, in those countries that have fiscal space, some fiscal consolidation, which could be tempered down to allow for adjustment.

QUEST: All right, then. Which countries -- which main countries could take their foot off the gas of austerity, if you like, where they have room for growth and could actually make improvements on that growth.

PADOAN: Well, certainly I can tell you that there's no space in program countries or sensitive countries. In the rest of the countries -- you can easily understand which ones -- there's room for automatic stabilizers to operate, and even some room for discretionary expansion given what we see in the next three or four quarters coming up. That is to say, negative growth in most of the euro area countries.

QUEST: If we talk about the firewall, Germany has signed up to at least temporarily merging the EFSF with the ESM. When you put it all together, that makes a firewall of nearly 780 billion euros. Is that enough money?

PADOAN: Well, when people ask me about the number of the size of the firewall, my favorite answer is it has to be so big that you don't need it. So, I don't have a precise number. Maybe what we have now is not enough.

QUEST: OK, so more money's needed. Where's it going to come from? Is it from the European governments, from the IMF? Everybody agrees it should be bigger, but nobody wants to pay. And yet, somebody has to foot the bill.

PADOAN: Well, there is a possible deal out there, which involves more resources to the IMF, which of course would be for the whole world and not just for Europe. But that would be an important deal also in terms of boosting confidence.

If the Europeans are willing to put more money in the IMF and in their own firewall system, then non-European members would put more money in the IMF. So, overall, the amount of resources would be approaching that size which I mentioned earlier, so big that you don't actually need it.

QUEST: Isn't it a bit depressing that after all we've been through, with the Greek debacle, the second bailout, we thought it was all over. And now, once again, we very much seem to be looking right into the abyss.

PADOAN: Well, we have been moving away from the abyss, which was there only a few months ago, but we are still in a very delicate zone, which requires much more confidence, much more growth, and much more convincing collective action to boost confidence in markets.

Spreads have been going down. Now, they're going up again because markets are fearing that there's not enough political resolve. So, we go back to the policy agenda. We're still very much in a policy-driven environment.

QUEST: And that, sir, is exactly the point. There is still a lack of policy, a lack of leadership, a lack of direction, even after all that we've been through.

PADOAN: Well, yes. This has been, in a way, the drama of the euro area crisis for a couple of years now, and it is time to get rid of that attitude. Let's make a jump forward, a leap forward, in a number of areas, including the firewall size. Let's be very convincing about structural policies and growth-oriented policies. Let's do it once with one strategy, and markets will react positively.

(END VIDEOTAPE)

QUEST: It's the chief economist of the OECD. Action cannot come soon enough. The eurozone's economic bedrock, the core, is growing weaker, and confidence is slowly ebbing away. Run the deck and you'll see what I mean.

Netherlands' GDP -- now, you may wonder why we're so concerned with the Netherlands' GDP, which is down just six tenths of a percentage point. It was a slight revision upwards, but that's about all. It was a tough year of contraction.

Now, CitiGroup says that Netherlands is no longer a core eurozone nation. By core, we are really talking about a fiscally sound country that's implementing austerity and also unlikely to need any form of external financing in an emergency.

Fitch, on its eurozone snapshot, talks about systemic problems and shrinking credibility and says seven countries has earned a single A or below, and that compares to Greece, Greece alone, in 2008. A worrying, systemic issue.

As for Germany, the surveys there show that confidence is dropping. The survey sees a fall in April, and that, of course, is a worrying issue if you bear in mind what is happening in the German economy.

Finally, the stock markets, and the European markets have shown weakness, down half a percent. XETRA DAX -- I question whether the XETRA DAX did end in exactly that position. I'll check that one out for you. No, apparently it is right, I'm being told. It was zero across the board on percentage points.

The Paris was down nearly one percent, so the best gains of the day, clearly, which weren't losses, on the XETRA DAX.

Put all this together and work out exactly what is happening in the markets. Joining me now, Tobias Blattner, the European economist at Daiwa Capital. Well, hang on.

OECD says growth is stalling. Netherlands, according to CitiGroup, out of the core. Geithner says it's up to Europe to do a response. What is happening?

TOBIAS BLATTNER, EUROPEAN ECONOMIST, DAIWA CAPITAL: Well, I think right now, we are basically back to the point where investors can really look at the fundamental problems of the countries.

Because we had these very, very good start to the year, in which liquidity found its way into the markets. It brought investors back to the market. It was crucial in order to change the sentiment in the market.

But at the same time, now we can see -- I think last week was a stark reminder that there's no time yet for complacency, and there's still a lot of work to do in the different countries.

QUEST: What do they -- what do people like you, economists, what do you want to see happen?

BLATTNER: Well, we want basically to see that this is not now a very short moment in which markets are going up again, but we want to have that sustained. And if we want to have it sustained, then we want to see liberalization of labor markets in Italy and in Spain, because these are really the core problems of poor growth in these countries.

QUEST: So, their long-term or medium-term solutions to some very immediate problems. Are you worried about he current situation?

BLATTNER: Well, we certainly must be, because there are a lot of problems that cannot be solved by just providing cheap loans to the banks. But we must make sure that the briefing space that these loans from the ECB have given, they must be used, now.

QUEST: Talking of the countries that have taken action, Ireland has announced a date of the referendum. It's to be in late May. An Irish referendum of no doesn't have the effect that it did in Lisbon or in previous treaties, does it? It can be basically ignored if Ireland chooses to shoot itself in the foot?

BLATTNER: Well, I think it would still be a key date in the agenda of investors for two reasons. I think for reason number one, it still shows whether the German-inspired fiscal compact will actually find some kind of acceptance also in the electorates of other countries.

Reason number two is, it's very, very important for the future of Ireland, because only a country that has ratified the fiscal compact can actually apply for credit to the new ESM. So, if Ireland would not be able to go back to the market at the end of its program, it might not be able to apply for a new credit, and that, obviously, will decide over the future of Ireland.

QUEST: But in terms of scuppering the fiscal compact, it can't do that anymore?

BLATTNER: No, it can't do that, no. For as long as 12 countries -- euro area countries --

QUEST: Which will happen before the -- probably before the end of this interview.

(LAUGHTER)

BLATTNER: Maybe not as fast, but hopefully it will certainly happen, I think. Twelve countries, then, it is enough. But obviously, I think it's still a very bad signal for the euro area if one euro area country will not sign up to the trumpet.

QUEST: Let me ask you what I asked the chief economist of the OECD: don't you find it depressing that three years into this European crisis, we are still talking about an inability to lead and make changes?

BLATTNER: Oh, certainly it is, I think. But simply, I think, we have to face the reality that this is a very, very slow process in which many parties are involved, and this is unfortunately the outcome of that. And there's a lot of domestic political games that obviously will decide over the future of Europe.

QUEST: All right, leave it there. Tobias, thank you.

BLATTNER: Thank you very much.

QUEST: Now, Europe -- the European markets, you saw how they traded: all were down except for Frankfurt, which was on a frolic of its own.

(RINGS BELL)

QUEST: The US markets are open and doing business. Ooh -- I don't know why I made so much noise and rang the bell. Up a mere 1.75 points, and even that looks a little big dodgy. So, we'll leave it, the US markets.

When we come back in a moment, Israel. It's telling underweight models they're not welcome on the catwalk. And Kate, Claudia, or Naomi, if you don't make that weigh-in, it means you. QUEST MEANS BUSINESS, good evening.

(COMMERCIAL BREAK)

QUEST: Thin in Israel is no longer chic. The Israeli government's banning underweight models from appearing on catwalks and in commercials. Now, models will have to produce a medical certificate to prove they are healthy. And even then, those who are deemed too thin will not be able to work. CNN's Matthew Chance in Tel Aviv.

(BEGIN VIDEOTAPE)

MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): At Israel's Fashion Week, a parade of models in all their skinniness. Critics say this waif-like image glamorizes extreme thinness, encouraging eating disorders, and Israel has become the first country to formally legislate against it.

ADI BARKAN, FASHION PHOTOGRAPHER: Something happened in the last 20 years. Always the model was skinny. But not too skinny. And I found that the difference between skinny, thin, and too thin, it's a big -- it's the difference between life and death.

CHANCE: At his studio in Tel Aviv, Adi Barkan is the fashion photographer behind Israel's groundbreaking new law. It bans underweight models from catwalks and commercials using body mass index, the way of estimating healthy weight, to decide who can model and who can't. Anyone with a BMI less than 18.5 is out.

BARKAN: Even if they're a supermodel, nobody can get into the Israel market if they are less than 18.5. It doesn't matter if it's Kate Moss or Claudia Schiffer or Naomi Campbell. If you're less than 18.5, you are not here.

CHANCE: Other countries, like Spain and Australia, have set minimum weight limits for certain fashion shows in the past, but Israel's law goes much further. The fashion industry's obsession with being super skinny is an increasingly global public health concern.

CHANCE (on camera): This new Israeli law may be a step in the right direction, perhaps a way of shocking the international glamor industry into making important changes. But critics say limiting the types of bodies permitted to model may also backfire. Instead of celebrating bodies of all shapes and sizes, they say, it simply rejects extreme thinness.

CHANCE (voice-over): But Adi Barkan knows the dangers that extreme thinness can pose. In his arms is Hila Elmalich, a former Israeli model dying of anorexia. He found her on the floor of her apartment five years ago, too weak to stand. She'd been desperate to keep her weight down and passed away after having a heart attack, he says, in his arms.

BARKAN: So, people die. Just because some schmuck told her, lose five figure. That's all. We didn't know how much power we have. We can kill people, and we can save people.

CHANCE: And that's what Barkan says he hopes Israel's new law can achieve, slashing eating disorders among models and those trying to emulate them, saving a few lives in the name of fashion.

Matthew Chance, CNN, Tel Aviv.

(END VIDEOTAPE)

QUEST: Now, before we take a short break, one bit of news to bring you. It's reported that JetBlue, the US airline in the United States, flying from New York to Las Vegas has been a flight that's been diverted to Texas because of the captain's medical emergency. When we know the nature of that medical emergency, we'll bring it to you.

Coming up next, Millennials take center stage.

(BEGIN VIDEO CLIP)

MICHAEL BURBACH, ASPIRING ACTOR: What he wants, and he's not going to stop at anything to get it.

UNIDENTIFIED MALE: Give it your best shot.

(END VIDEO CLIP)

QUEST: They want to play the lead in the theater or in business, and they get the chance in a moment, and the spotlight.

A quick look at our foreign exchange movements. Concerns about debt contagion weighed on the euro, which closed off a fifth of one percent against the dollar. Sterling barely changed, cable is at 1.5966. The yen, down around a tenth of one percent against the dollar.

(COMMERCIAL BREAK)

QUEST: Millennials are not accustomed to disappointment. They look for feedback, they want guidance more than any other generation before them. And they expect to succeed and do so quickly.

In today's episode, David Lloyd struggles against language barriers to get his message across in Santiago in Chile. In New York, Michael Burbach takes center stage. He's trying to get an audition, he's trying to become the leading man. They are, of course, The Millennials.

(BEGIN VIDEOTAPE)

UNIDENTIFIED CORRESPONDENT (voice-over): Previously on the program: in Santiago, Chile, 27-year-old David Lloyd admitted failure is not an option.

DAVID LLOYD, MANAGING DIRECTOR, INTERN LATIN AMERICA: I've got no interest in having -- do nothing, being lazy, achieving nothing would be very disappointing.

UNIDENTIFIED CORRESPONDENT: And in New York, following your dream, Michael Burbach told us, belief is everything.

BURBACH: If you need it and want it badly enough, then you can do it. That's the craziest thing. Because sometimes it seems like an impossible dream, but it's not.

UNIDENTIFIED CORRESPONDENT: Michael's shot at the bright lights cannot begin without a dramatic final test.

UNIDENTIFIED MALE: Read them with feeling.

BURBACH: OK.

UNIDENTIFIED MALE: In other words, just don't go "blah blah blah blah blah blah blah."

BURBACH: Oh, you want us to act?

UNIDENTIFIED CORRESPONDENT: Today, he's joining his classmates at Marymount Manhattan College for their first rehearsal of Shakespeare's "A Midsummer Night's Dream," the play which Michael will perform in April just before his graduation.

UNIDENTIFIED FEMALE AS HERMIA, "A MIDSUMMER NIGHT'S DREAM": I will yield my virgin patent up unto his lordship.

UNIDENTIFIED CORRESPONDENT: His performance here is crucial. It's the culmination of years of hard work.

BURBACH AS DEMETRIUS, "A MIDSUMMER NIGHT'S DREAM": Relent, sweet Hermia, and Lysander, yield thy crazed title to my certain right.

UNIDENTIFIED MALE: Good.

UNIDENTIFIED CORRESPONDENT: His last bow before facing the cutthroat world of Broadway.

BURBACH AS DEMETRIUS: Do you marry him?

UNIDENTIFIED MALE: No, I think you've got to make the joke bigger.

UNIDENTIFIED CORRESPONDENT: Playing Demetrius, one of the lovers in this famous romantic farce, is Michael's chance to prove he can cut it as a leading man.

BURBACH: In high school, I always wanted to be the romantic lead, always. I always wanted to be center stage, singing the romantic song or doing the romantic scene, and I was always sort of the weird character, the weird supporting friend, or the drunk.

BURBACH AS DEMETRIUS: Slayeth me. Thou told'st me they were stolen into this wood, and here I am!

UNIDENTIFIED CORRESPONDENT: In an ironic twist, it seems Michael will fit right in as Demetrius.

BURBACH: He's very passionate, and he really wants what he wants, and he's not going to stop at anything to get it.

UNIDENTIFIED MALE: Give it your best shot.

BURBACH AS DEMETRIUS: I love thee not, therefore pursue me not.

UNIDENTIFIED CORRESPONDENT: For this Millennial, hitting the right notes is key.

BURBACH AS DEMETRIUS: Hermia? The one I'll slay, the other slayeth me.

UNIDENTIFIED CORRESPONDENT: And today it seems, he's done just that.

JOHN BASIL, MARYMOUNT MANHATTAN COLLEGE: He's always prepared, and he's always willing. And sometimes, I just wonder with all that's going on with these people, I wonder where that drive comes from.

BURBACH: As an actor, people are going to tell me no millions of times. I'm going to be told no over and over and over again probably. But that's not going to stop me. I have a dream that I'm passionate about and I put so much work into it, and I'll find a way. I'll find a way to work in the theater and make my dreams come true.

UNIDENTIFIED CORRESPONDENT: In Santiago, Chile, David Lloyd is also looking to create a lasting impression.

LLOYD: We think we've been seen in TMI.

UNIDENTIFIED CORRESPONDENT: Today, he's taking part in a networking event with like-minded entrepreneurs.

(LLOYD SPEAKING SPANISH)

UNIDENTIFIED CORRESPONDENT: His aim here tonight is simple: to market his business and himself.

LLOYD: It's also just a fantastic kind of arena to share ideas, share problems, and a lot of the same problems that the other kind of start-ups are experiencing and solving. We can save ourselves a lot of problems in the long run by just learning from them what they did.

UNIDENTIFIED CORRESPONDENT: As the event picks up steam and as the music gets louder, David enters into a discussion in Spanish on a new project he has in the works.

LLOYD (through translator): It's called "Flirt," like a flirt in English.

UNIDENTIFIED CORRESPONDENT: Soon, he's faced with the harsh reality - -

UNIDENTIFIED MALE (through translator): So one says, "Are you interested?" And the other, "Are you interested?" If both say yes --

LLOYD (through translator): No, no. That's not it.

UNIDENTIFIED CORRESPONDENT: His business concept is getting lost in translation.

LLOYD (through translator): That's the point. There's a risk that someone is rejected. Do you understand?

UNIDENTIFIED MALE (through translator): And?

LLOYD (through translator): What?

UNIDENTIFIED MALE (through translator): And?

UNIDENTIFIED CORRESPONDENT: Not wanting to lose out, he quickly switches to English.

LLOYD: I'll speak in English, I guess. It's like this. So, there's a girl, there's a guy. You're in this bar, right? You see many people

If their English and Spanish is exactly the same level, I would probably prefer to speak in English, because while I'm always trying to improve my own Spanish, and there's always room for improvement, at the end of the day, the most important thing is that you minimize the kind of potential misunderstandings between the two people.

UNIDENTIFIED CORRESPONDENT: Despite the language barrier, it seems David's night here has ended well. He's made a new contact.

LLOYD: OK, I'll give you my cell. LatinAmerica.com, exactly. And phone number like this.

UNIDENTIFIED CORRESPONDENT: Still, this Millennial isn't blind to the challenges that lie ahead for his business and for him.

LLOYD: I find sometimes if I feel nervous in a business meeting in Spanish, then I can forget words that otherwise that I would know immediately. So, there is a whole other dimension, but once again, it's a challenge which you kind of want to surpass.

UNIDENTIFIED CORRESPONDENT: Next week on The Millennials, Michael takes an important step in his push to become a Broadway star. Will head shots help him get ahead?

And from Santiago to London, David comes home to look for a new addition to his team.

(END VIDEOTAPE)

QUEST: So, now it's time for you to tell us what you think of our Millennials. David's moved to Chile. His attempts with Spanish, are they inspirational at setting up a business? And how would you have handled the question of when you can't get your message through and you don't want to appear to be a failure and you don't -- ? You get the idea.

And Michael. So, there he is, giving it all for "A Midsummer Night's Dream." The issue, has he got what it takes to make it on Broadway? Tweet us your thoughts. It's @RichardQuest, and the hash tag is #cnnmills. Hash tag #cnnmills. And our Millennials have been blogging for us at cnn.com/themillennials. That is all still to come.

Now, when we come back in a moment, it works 99.9 percent of the time. It's the 0.1 percent --

(RINGS BELL)

QUEST: -- that everyone's talking about. Why a technical fault at the BATS stock exchange could not have happened at a worse time, in a moment.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest.

More QUEST MEANS BUSINESS in a moment.

This is CNN. And on this network, the news that always comes first.

Syria's government has agreed to accept a peace plan put forward by Kofi Annan, the envoy for the United Nations and the Arab League. Annan's spokesperson says it's a crucial first step but that implementation is the key. Kofi Annan is in China to rally support for the six point plan. The U.N. said more than 9,000 people have been killed in the uprising.

The bullet holes pockmark the walls and furniture inside the apartment where French commandoes shot the serial killer, Mohamed Merah, dead. Now, an Arab TV network says it has recovered video Merah purportedly recorded as he killed seven people. But Al Jazeera says it will not air the video and, anyway, France's president says France will jam any satellite channels that try to do so.

U.S. presidential candidate, Mitt Romney, has just responded to criticism from the Russian president, Dmitry Medvedev, after Romney claimed Russia was America's number one geopolitical foe. President Medvedev says Romney needs to listen to reason when talking about Russia. Mr. Romney is standing by his claim and says that growing authoritarianism in Russia is part of the problem.

World leaders have called for a greater cooperation to fight the threat of nuclear terrorism. The nuclear summit in South Korea was largely overshadowed by North Korea's plans to launch a satellite next month. Pyongyang says that launch will go forward despite warnings from Barack Obama and other world leaders, who say it is really a long range missile test in disguise.

And Pope Benedict XVI has arrived in Havana on the last leg of his visit to Latin America. He started his Cuba trip in Santiago, where he held a mass. He visit the Shrine of the Virgin of Charity, the country's patron saint. He's set to hold a mass in Havana, too, in Revolution Plaza, on Wednesday.

The board of the BATS Stock Exchange is expected to hold an emergency meeting today, following its catastrophic attempt to go public. The company says its trading platform, which is the third largest in the world, has worked more than 99.9 percent of the time over the past three years -- 99.9 percent of the time. That means that on Friday, when the blunder went wrong, it was the other .1 percent that went horribly wrong.

With that introduction, if its own stock trading platform caused a major software error, the knock-on event -- effects -- sent ripples way into the market. And the biggest casualty is BATS, which now says its offering is on hold for the foreseeable future.

This is not the first time, of course, that these things, IPOs, have gone spectacularly wrong. In 2006, Vonage had a Web site go horribly wrong. It's the -- the Web site glitch prevented many from buying the stock.

Then there was Wilt Chamberlain, where the IPO was rescinded after it had begun trading and investors saw the deal as mispriced. Current trades were actually canceled.

Spectrum, in 1991, had an IPO canceled amid heavy short selling very early on in the session.

And Eagle, in 1983, that's a long way back, much more sad news and sad reasons. The chief executive was killed in a car crash and said the IPO was canceled.

So there are plenty of examples where IPOs have gone, well and truly down. Perhaps none in so spectacular fashion, when it's your own IPO on your own platform.

Larry Tabb is the founder and chief exec of capital markets research firm, the TABB Group.

Larry is with me from New York.

Look, I don't want to make mischief and mayhem at somebody else's misery, but it is a spectacular failure.

LARRY TABB, FOUNDER AND CEO, TABB GROUP: Oh, it's a tremendous mess, you know. Their one day to shine in the -- in the light, the one day that -- that they're supposed to be on the top of their game is the one freak time that their platform goes down. It's just really not good timing at all.

QUEST: The company says 99.9 percent it works, .01 percent it doesn't. This was the .01 percent.

As human beings, we can say, well, these things happen, we understand. As men and women in the financial community, should we accept this?

TABB: Well, actually, things aren't going to be perfect all the time. And I think the way that the equity markets are built, with multiple redundant exchanges, typically, the failover works pretty seamlessly. If one platform is down, trading naturally shifts over to another platform. So if BATS goes down, it goes to NASDAQ or New York or Archipelago. We have 13 exchanges. We have plenty of exchanges to trade on. You know, the challenge here was just the IPO. It was just a complete disaster. And -- and that didn't really recover.

So you had Apple had a bad tick in batch.

QUEST: Right.

TABB: BATS printed it. The circuit breaker shut the stock off. Five minutes later, the stock was trading as normal. Now, they canceled the trade. Everything worked well.

The challenge was just their IPO software just...

QUEST: We knew...

TABB: -- didn't work at all.

QUEST: We know the regulators are looking into this, and there's no suggestion it's anything like the flash crash of high frequency trading. But as an expert on high frequency trading, Larry, you -- you need to just tell us, do we believe that the high frequency menace that many perceived has, to some extent, be -- gone away?

Or have we just got used to the idea of these very fast super computers executing tens, if not hundreds of thousands of trades, and moving markets?

TABB: I think, you know, they come -- I wouldn't say it's gone away. I don't think it will ever go away. Machines are -- are cheaper, faster. You know, nowadays, in the U.S. markets, sometimes we're dealing with upwards of six and-a-half million pieces of -- of data moving through the system per second. There's just no way a human being can process information that quickly.

So the regulators may slow it down. They might put roadblocks in the way. But computers will continue to do trading and -- and increasingly across asset classes, futures, options...

QUEST: OK.

TABB: -- European equities, fixed incomes...

QUEST: All right. All right. But continue -- computers may continue to do trading and we've -- and that's been happening as long as I've been covering the financial markets. And every 15, 20 years or so. There's a nasty hiccup.

But it means that the ordinary investor, the -- the man and woman on the Clapham omnibus feels left out, don't they?

TABB: I -- I think that, to a certain extent, I think that's more the media saying it than individuals. If you look what happens, it -- most stocks, for an individual investor buying 100, 200, 500 shares, that's never been a better market. You know, you -- execution is cheap. Permission is cheap. You get filled very quickly, generally within a penny, at most, of the order.

Where it's been a little bit more problematic is -- is the institutions. When you try to buy 100,000 shares, a million shares, it gets a lot more difficult, especially if you want to buy a large position in an -- a liquid stock.

But for the average, you know, mom and pop buying a couple of hundred shares, 500 shares, even 1,000 shares, it's the best market you could ever imagine for the -- for -- for individuals.

You know, for institutions, as...

QUEST: Right.

TABB: -- who actually invest a lot of individuals' money, it -- it gets harder there.

QUEST: Larry, we thank you for joining us and for making sense of the BATS story and high frequency trading.

Larry Tabb joining us from New York.

In a moment, the social networking site, Friends Reunited, relaunching itself. The new look distinctly old school. It's going well beyond the dusty old classrooms.

(COMMERCIAL BREAK)

QUEST: Today, one of the world's very first social networks is reborn and both feet are unashamedly in the past. This time, it's aiming to go beyond the old school tie and help you recall iconic moments of our times.

Friends Reunited -- but as you can see, it is by no means alone. It has a little history of its own.

It was a social networking pioneer when it launched in 2000. In five years, it had added 15 million members. It was sold for around $200 million. As its youthful rivals' popularity, Facebook, all the others, came along, Friends Reunited, well, it sort of fell apart and sold to the Internet company, Brightsolid, in 2009, $40 million.

So now, Friends Reunited comes back for a second bite at the cherry, celebrating the past.

Brightsolid's chief executive, Chris van der Kuyl, joins me now.

What on Earth are you going to do with this albatross?

CHRIS VAN DER KUYL, CEO, BRIGHTSOLID: Well, Friends Reunited isn't just old school anymore, it's every blast from your past. You know, we are celebrating the favorite times in your life. And you can find absolutely anything you want on Friends Reunited related to, you know, nostalgia trips down memory lane. We've got over 350,000 amazing images that launch over 10 million memos that you can search. And you can keep them all for free in your own keep safe forever. You know, that's part of the...

QUEST: Hang on.

VAN DER KUYL: -- part of the whole thing.

QUEST: So you've got -- you basically have built a library from the past?

VAN DER KUYL: We -- we've built an amazing place to share and store those memories. You know -- you know, everyone loves to reminisce, loves to look at things that were past...

QUEST: For old codgers like me. For old codgers like me who have got nothing better to do than say things used to be better?

VAN DER KUYL: I would never call you an old codger, but certainly you'll -- you'll absolutely love it. You know, if it's -- if it's not just about schools anymore, it might be sweet Sheilahs (ph), it might be concerts, we've been to sporting events, every memory. It's a British phenomenon and it's back (INAUDIBLE)...

QUEST: This is very shrewd, isn't it, because at the end of the day, the market for nostalgia and for there was a better golden time is huge?

VAN DER KUYL: The nostalgia marketplace is always very, very popular. You see some amazingly successful brands using it. And we think we can give those brands and our customers and our members an amazing way to share that nostalgia.

QUEST: OK, so you're going to do that. And your advocate -- your model -- your business model is an advertising model.

When do you hope to make money out of this?

You've paid $40 million for this and others, but when do you hope to make money out of it?

VAN DER KUYL: Well, Bright -- Brightsolid is as -- as a business, is all about being the home of the world's memories. So we -- we're very big in genealogy. We're -- we're one of the biggest companies in the world within genealogy. And some of the business that we bought when we bought Friends allowed us to expand into that market. So we already make money. And that's a good thing.

We're now moving ahead with Friends and it's all about giving people what they want, where they want, when they want and allowing them to share in all these memories for good.

And through that, we'll have a great relationship with them. That will be good for advertisers and good for -- good for the customers, as well.

QUEST: Well, I'm sure it will be. But I've got to repeat that question.

I mean feel free to say you don't know, but when will you make money out of Friends Reunited or the -- as it's called?

VAN DER KUYL: Friends Reunited, I -- has always been revenue generating. We have over 20 million men -- members right now. So -- so we make money from -- from advertising today.

Clearly, we've invested a huge amount of time and money in building -- you know, in building the site itself. I -- I'm -- I'm -- you know, time - - time will tell.

QUEST: Right. Time will tell.

Finally, you know, you've got these -- hats off to you, you've found a niche. You've found a niche. You're not taking Facebook on on its own treaty. MySpace is now for music and for -- for the artists in the world and who knows what all the others do.

So there's not a lot of room for a lot of you, is there?

You've got to find your niche and you think you've found it.

VAN DER KUYL: I think keeping focus is the key for success on the Internet. And we have focused on memories, you know, and some place where you can share and own those memories. You're going to find amazing things when you go back to Friends Reunited.

So we encourage everyone to go there and see some amazing (INAUDIBLE)...

QUEST: Oh, hang on -- hang on.

(RINGS BELL)

QUEST: Time -- time for the -- once you start doing a commercial, it's time for the bell.

(LAUGHTER)

QUEST: For an old codger like me.

Thank you very much for coming in.

VAN DER KUYL: Thank you.

Thank you very much.

QUEST: (INAUDIBLE).

When we come back in just a moment, when the U.S. -- sorry, when the U.K. treasury advisers said that they were getting tips from the local bookie, well, William Hill, the book shop, said it was not surprised. We'll tell you that extraordinary story of economic forecasting in a moment.

(COMMERCIAL BREAK)

QUEST: When the independent treasury expert, Stephen Nickell, admitted to British MPs that he used a local betting shop to help make financial predictions at the Office of Budget Responsibility. Yes, he admitted betting shops.

They were shocked. Professor Nickell said William Hill's tips were very useful and not just for small forecasts, big ones, too, like whether the euro is likely to fail.

So this is where William Hill is standing on some key areas.

Look at these questions.

Will the Eurozone split by the end of 2012?

No, it's one to five. And yes, 10 to three. In other words, you put five on, you get one back; three on, you get 10 back. So that's the way those looks at -- on that.

Will Greece leave the Eurozone?

Some say seven to two are the odds on favorite there. No, six to one. So more people now are saying, on this one, that Greece will not leave the Eurozone. The odds are that Greece will not leave the Eurozone.

Will the U.K. reenter recession, the double dip?

Yes, four to seven is the odds; no, five to four. In other words, that is the way it goes forward.

As you can see, these are extremely controversial, but at very profitable bettings. And since the OBR's Nickells said he also quoted them, they got a new impetus.

William Hill said it is not at all shocked that top U.K. advisers are using it for economic forecasting tips.

Earlier, I spoke to the book maker's media relations director, Graham Sharpe, who told me well, frankly, the only thing he's surprised about is that they admitted it.

(BEGIN VIDEO CLIP)

GRAHAM SHARPE, MEDIA RELATIONS DIRECTOR: Well, on a scale of one to 10, I think I was more surprised, up to a nine, that somebody would actually admit it rather than that they did that, because I think it makes sense for them to do that, because we can't afford to get that sort of thing wrong, because if we do, it's very expensive for us.

So he should know that's a good place to look.

QUEST: Before we talk about where your numbers are, where go you get the information from that's -- I mean to you have secret sources?

SHARPE: Well, they're secret as far as the outside world is concerned, not -- not secret as far as I'm concerned. Obviously, we -- we have to cover a very wide range of subject matter from finance, politics, right through to reality TV and sports, to the Olympics, etc.

So we need somebody with a bit of knowledge about a lot of things. And we have some who are pretty well -- well informed when it comes to matters of this nature. And if they're not well informed, then they're soon ex-employees.

QUEST: I was about to say, you must discover fairly quickly, because it -- you have to pay out.

SHARPE: Yes. I mean initially, when you put up some odds, it represents our opinion.

QUEST: Really?

SHARPE: Obviously, then, to a certain extent, it's influenced by the way the money goes and where the money goes, because it would be a foolish book maker that would ignore a stream of money coming in one direction without amending the market.

QUEST: So what do we see at the moment?

Let's take it in terms of Greece leaving the euro.

SHARPE: Yes, well, it's -- it's interesting here that when Stephen Nickell was making his point about looking at our prices, he said that he'd seen it was -- we thought it was 40 percent -- a 40 percent chance that Greece would leave the euro before the end of the year.

Well, that may be -- that must have been a little while ago, because we now think it's about an 80 percent chance that they'll stay in the euro until the end of the year. And we expressed that in terms of odds of one to six. That means if you stake six euros, drachma, francs, whatever it may be...

QUEST: What...

SHARPE: -- you would win one.

QUEST: Plus your stake?

SHARPE: Plus your stake, right.

QUEST: So one to six is a -- it means you pretty much think it's -- it's not going to happen?

SHARPE: We are pretty confident -- no, one to six means we're pretty confident that the event will happen.

QUEST: Yes.

SHARPE: So we're pretty confident that the -- the Greeks will still be in the euro by the end of the year, yes.

QUEST: That's was (INAUDIBLE).

And in terms of the euro collapsing completely, all over but all the shouting, switch the lights upon the way out?

SHARPE: Well, that -- we think the chances of that happening are slightly over three to one, a 100 to 30 chance. That means that if you put 30 on, you would get back 100 profit plus your 30.

So we think that's pretty unlikely, but not impossible.

QUEST: And what other economic ones have you been looking at in closely?

SHARPE: Well, economically, I must admit, when I first heard this story, I thought maybe the price had been confused with Greece winning the Eurozone song contest or something -- something of that nature. At the moment, we -- we've got other prices on a lot of political ranges like the -- the French presidential election, where we don't expect Nicolas Sarkozy to win, which could...

QUEST: You don't?

SHARPE: -- in turn, effect, obviously, the financial situation and the -- the U.S. presidential situation when we do expect Barack Obama to win again.

QUEST: Finally, a lot of money is bet on a lot of events.

Are serious sums of money bet on these political and economic events?

SHARPE: Well, very much so. We -- we can take six figure sums on -- on these sort of events. And we often do. So, yes, serious money is involved.

QUEST: And you were -- and you are now -- you now have the stamp of approval?

SHARPE: It's about time, too. It's 40 years today that I joined this company. So it's about time I was able to put something right above my head that said, seal of approval, he knows what he's doing.

(END VIDEO TAPE)

QUEST: There we are.

So now you hear. And, of course, one of the biggest betting areas is when it comes to the weather. And if you're ever wondering what's happening to the weather, William Hill has the answer to that. They're offering a two to one odds -- two to one that this year is going to be the warmest on record in Britain.

So, hop down from money if you believe that to be the case.

Jenny Harrison is at the World Weather -- Weather Center this evening -- good evening, Jenny.

JENNY HARRISON, ATS METEOROLOGIST: Do you know what you just said said then?

You said if you want to know what the weather is doing, check with William Hill.

QUEST: Well, I...

(CROSSTALK)

QUEST: -- I didn't quite mean -- I didn't mean today.

(LAUGHTER)

QUEST: I meant over the summer. And...

HARRISON: I know, but that wasn't really actually what you said, is it?

I mean, really, it's like just so bottom watching me.

Listen, listen, I don't need -- are you a man who likes to sweat?

I don't think you are, really, are you?

So the odds are for a 38 degree Celsius temperature, 100 degrees Fahrenheit, in the Olympics, 12 to one. Pretty good odds there, 12 -- yes, the 12?

QUEST: Twelve to one, that's not -- no, that's not good odds. That's dreadful odds.

HARRISON: No, it's not, is it?

Twelve -- no, 12 to one.

QUEST: All right.

HARRISON: That means you pay a pound and get 12 back, doesn't it?

Doesn't it?

QUEST: No, carry on. Carry on.

HARRISON: Have I got it wrong?

Oh.

QUEST: Yes, no, you've got it right. You got it right.

HARRISON: Oh, I've got it right?

Ooh, I like those words from you.

Eight to one, a temperature of 38 Celsius recorded any time in the U.K. during this year.

Now, the thing is, Richard, it's like you said, where does it get this information from?

And it's not based on nothing, let me tell you that.

Look at this. Here we are, just up until March the 25th is where this information comes from. Already, from Scotland, temperatures up, they're warmer than usual, 1.4 degrees Celsius. In the south, .6. Across into Ireland, one degree Celsius.

These were the temperatures that actually came in this Tuesday. Twenty-one in Edinboro. The average is nine. Twenty in Belfast. The average is 10.

Now, the last -- the seven warmest years across the U.K. have been in the last decade. The last seven warmest years have been in the last 10 years. August, 2003, which is, of course, when the Olympics are, July- August, August 2003 was the highest recorded temperature ever, 38.5 Celsius in Faversham in Kent. So it's quite possible we could have that temperature in August this year.

2006 was the warmest year on record and 2011, so just last year, was the second warmest year on record in the UK.

So with all of that information now at your fingertips, do what you will with those -- those odds at William Hill.

But look, this is why we've got warm weather at that moment. We've got these clear skies. High pressure in control across the west. The jet stream is far to the north, so it's keeping the very warm weather in place. Cold air to the east. We've got some snow in the forecast, as well. But for the next few days, it will stay sunny and fine, certainly in London and also in Paris -- Richard.

QUEST: We thank you for that.

Sunny fine. I'll take that any day.

There's a Profitable Moment after the break.

(COMMERCIAL BREAK)

QUEST: Tonight's Profitable Moment.

You would think that the time for talking was over in Europe. And the fact it's facing a dire crisis should be news to no one, least of all policymakers in charge of fixing this perilous situation.

You would be forgiven if tonight's warning from the OECD that Europe is once again in a dangerous position has left you open-mouthed. I have long since passed the moment of incredulity. It's astonishing -- three years after the crisis began and more warnings the firewall is still not big enough, structural changes are being ignored, policies are still lagging behind.

It shouldn't be up to the rest of the world, people like Tim Geithner, to kick Europe into action. And there should be no excuse for inaction that's essentially left countries to fight for themselves.

For instance, today, the Netherlands is now no longer considered a core country. A two tier Europe, I tell you tonight. It's no longer a concept, it's a stark reality.

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.

END