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QUEST MEANS BUSINESS

IMF Impressed with Ukraine, Gazprom Not; US View on Ukraine; European Sanctions; US-EU Trade Meetings; Standoff in Crimea; US Jobs Report Beats Expectations; Rocky Week on Wall Street; Dow Closes Flat; US Economy; Man Denies Being Bitcoin Inventor; Newsweek Back in Print

Aired March 7, 2014 - 16:00   ET

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


(NEW YORK STOCK EXCHANGE CLOSING BELL)

RICHARD QUEST, HOST: International Women's Day, the women are closing the New York Stock Exchange. Hit the hammer as the S&P hits an all-time high, another one. No records on the Dow, although the Dow is higher and the closing bell. It is Friday, it is the 7th of March.

Tonight on the program, the IMF says it's impressed and offers to help Ukraine's economy. The situation's highly volatile. Armed men seize a military base in Crimea. Also tonight for you --

(BEGIN VIDEO CLIP)

DORIAN NAKAMOTO, ALLEGED BITCOIN INVENTOR: I have nothing to do with Bitcoin.

(END VIDEO CLIP)

QUEST: So says the man outed as Bitcoin's founder, and he says you've got the wrong man. So, who is he and why do we think he's part of the Bitcoin foundation?

I'm Richard Quest. It may be Friday, but of course, I mean business.

Good evening. We start, of course, with matters in Ukraine. The International Monetary Fund is impressed with Ukraine's new government, but Gazprom isn't. Today, the Russian gas provider warned it could turn off the tap to Ukraine and says Kiev hasn't paid its bills for February. As a result, Gazprom is now saying it won't deliver the gas for free.

The aspect of Gazprom and the gas is now turning into a major issue in this crisis. The company's chief exec says if the interim leaders can't pay the debts, then there's a risk of returning to the situation beginning of 2009.

Alexey Miller is referring there to the last time Gazprom cut off the supply to Ukraine for nearly two weeks. Now then, it was in the middle of winter. Now, spring is just around the corner, but it's still extremely significant.

The IMF says it stands ready to help the people of Ukraine, meaning economic assistance could soon be on the way. Remember, when we're talking about IMF assistance, you're looking at balance of payments and macro economic as opposed to the investment funds that may be coming from, say, the Europeans or the EBRD.

The Fund has a team in Kiev. It says it's impressed by the new leadership, the interim government's economic plan.

Let's get the view from the US and the EU. David Cohen is the undersecretary of treasury for terrorism and financial intelligence. He joins me from Washington.

In just a moment, Commissioner Karel de Gucht heads the EU's trade agency. He also serves as the chief negotiator on the Transatlantic Trade and Investment Partnership, the TTIP. He's in Atlanta. Commissioner, we'll be with you in just a moment to talk about that.

Let's start with you first, David Cohen. The sanctions issue that is being put forward now, the measures being taken by the United States, how soon and how dramatic will they be?

DAVID COHEN, US UNDERSECRETARY FOR TERRORISM AND FINANCIAL INTELLIGENCE: Well, just yesterday, Richard, the president announced a new sanctions program, as well as the fact that the State Department was implementing some visa bans on individuals who are involved in the threat to Ukraine's sovereignty and its territorial integrity.

The sanctions program allows us at Treasury to impose economic sanctions on anyone who threatens the democracy institutions in Ukraine, constitutes a threat to peace, stability --

QUEST: Right.

COHEN: -- sovereignty in Ukraine. And we are in the process of collecting the evidence, responding to the situation on the ground, and preparing ourselves to implement sanctions on individuals and entities that are involved in that sort of conduct.

QUEST: Right, but your point is well-taken there, but these measures will only work, would you agree, Mr. Undersecretary, if you actually do them, enforce them, and find somebody to go after?

COHEN: Well, these measures will work in two important ways. One is the fact that we have this sanctions program in effect, and we've been very clear about our willingness to impose sanctions in this program and in other sanctions programs. I think the world well knows, including the people in that region, that we have very effective sanctions programs that we're not afraid to use.

So, it will work in part by setting the conditions for imposing sanctions. And then, when we take action against specific individuals, specific entities, it will really hurt them badly. It will cut them off from the US, and our partners around the world will also, we expect, take action that will have a similar impact.

QUEST: The United States faces, to some extent -- I hesitate to overstate it, but -- a credibility issue here in that many people suggest much of Putin's measures or Putin's actions in Ukraine wouldn't have happened if the administration hadn't been more steadfast to begin with.

That's a political argument for another day for other people. But from your point of view, sir, the importance is that you are -- you are not only threatening to act, but that you're seen to act, and you actually mean what you say. Would you agree?

COHEN: Well, I would agree with your last question --

QUEST: Right.

(LAUGHTER)

COHEN: I would not agree with your statement at all.

QUEST: Understood. Understood.

COHEN: But we are poised to act. What the sanctions program that the president announced yesterday allows us to do is have a flexible tool that is responsive to the situation on the ground.

We are ready to act, and as the situation develops, we will use this tool, as well as the other tools that we have available to us, to impose costs, as the president said, on those who were responsible for threatening the integrity and the sovereignty of Ukraine.

QUEST: And if we look at the IMF's role in all of this and the ability, now, for the US Treasury to, in some ways -- you've got to sort of look at the IMF quota for Ukraine to start with to be able to get enough -- sufficient lending into Ukraine.

COHEN: Right.

QUEST: And that's one of the things that this is an opportunity for you to do on IMF quotas.

COHEN: Yes, it's important, Richard, that the -- to understand that the US approach, here, to the crisis in the Ukraine is multifaceted. And one of the things that we're also involved in is providing assistance to the Ukrainian government.

We're doing that through bilateral assistance, including a billion- dollar loan guarantee. And also through trying to support the IMF. As you noted, the IMF is there, impressed with the Ukrainian government, looking to assist the Ukrainian government.

For us to be in a good position to continue to have a leadership in the IMF and for the IMF to be well-positioned to support the Ukrainian government, it's very important that Congress pass legislation that allows the US to continue to play its role in the IMF.

QUEST: Right. Mr. Undersecretary, thank you for joining us. Very much appreciate you putting the US position so forthrightly. Thank you, sir, for joining us and have a good weekend.

COHEN: My pleasure.

QUEST: Now, Commissioner Karel de Gucht joins me from the CNN Center in Atlanta. The European side of this. We know to a large extent, 27, 28 members, it's much more difficult to get that cohesive, immediate reaction. The council of the leaders yesterday did come up with plans. So, where does the European strategy for the imposition of sanctions move forward on this?

KAREL DE GUCHT, EU TRADE COMMISSIONER: Well, first of all, the European Council, which is -- which are the heads of state and governments of the 28 members states, yesterday have decided that they would take progressive action if Putin doesn't de-escalate the situation very, very soon.

But what is, to my mind, at least as important is that we have also decided to sign the association agreement. That's why all these protests on Maidan began three moths ago, because their president, Yanukovych, refused to sign the association agreements. So, we are going to sign immediately, as soon as possible, the political part of the association agreement.

And the second part, which is by large the most important one, that's about 90 to 95 percent, I think, of the association agreement is a deep and comprehensive free trade agreement that I have been negotiating with the Ukrainian government.

We are going to put into place immediately the tariff cuts so the benefits that Ukraine can get from this agreement by unilateral regulation, which means that the European Union itself is going to take that decision to do it without a present -- how would I say? -- a counter move by --

QUEST: Right.

DE GUCHT: -- the Ukrainian government, which means that we are giving them unilaterally these benefits. And that's, I think, a very important move.

QUEST: So, from the Europeans' point of view, it's absolutely crucial, as the undersecretary was saying, for a multifaceted approach.

You've got to provide almost immediate aid so the country doesn't go bust. You've got to have the trade guarantees or the trade -- open trade for the future, and you've got to be -- you've got to sort of repair the damage of what's gone so far. How much more can Europe do to help Ukraine?

DE GUCHT: Well, we have decided that we would have a support program, financial support program, of at least 11 billion euros, starting with approximately the same effort that the United States is doing, $1.5 billion, but --

QUEST: Right.

DE GUCHT: -- getting to 11 billion euros over time. So, this is a very important support program that we have put into place.

But let me repeat it: I think that the most important of all is that we show very clearly to the Russian leadership that we are going to continue with our association agreement and that we are going to put unilaterally into place the trade benefits that they could have from that agreement.

QUEST: Let's talk about your trip to the United States. You're in our headquarters city of Atlanta. Now, the talks -- the trade and partnership talks with the United States moving into the next gear. Where are we with this EU-US free trade agreement? How -- I assume you're well and truly in the deep weeds of negotiations now?

DE GUCHT: Well, we have already had three hours of negotiation, and we will have a new one next month -- no, next week, excuse me -- in Brussels. And I did the political stock-taking with my counterpart, Mike Froman, a couple of weeks ago in Washington.

Yes, we are now really going into the matter of facts and trying to reach agreements on tariff cuts, on services, on public procurement, and on regulation. Now, this is an enormously complicated deal, and we want to do it in as short a period of time as possible.

And when you look at what is happening worldwide, then I think it's very important that we strengthen this bond between the United States and Europe, that we give it a very sound foundational support for the generations to come so that we can continue to play a leading role in the world.

Because we lead on the basis of values, here, not on the basis of force. And that we can do this at this very moment in time seems to me to be of the utmost importance.

QUEST: Commissioner, thank you, sir, for joining us. I much appreciate it. Have a good weekend, and thank you for putting the point of view. And no doubt, we'll speak more -- certainly, I know you and I will speak more on the Transatlantic Trade Partnership as this deal comes together. We appreciate for that.

Now, to actually the further details of what's happening in Ukraine at the moment. A military spokesman tells CNN a group of Russia-aligned Cossacks used a truck to smash the gates of a Ukrainian command post near Sevastopol.

A spokesman says now some Ukrainian officers have barricaded themselves inside the facility others are trying to negotiate with the so- called self-defense group. The latest, now. Matthew Chance, who's in Simferopol in the Crimean peninsula. This is another of these very serious moments, Matthew. Flashpoints where matters can get out of hand very rapidly.

MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, it certainly seems to be, Richard. And there's a lot of concern about whether this is a one-off incident or whether it's the start of a wider process to evict the large numbers of Ukrainian soldiers that are still holed up in their various military bases around the Crimean peninsula.

At least a dozen of those bases surrounded by pro-Russian forces. So far, there hasn't been any violence. The pro-Russian forces appear to be just waiting it out, although there have been reports in the past week or so of ultimatums being issued to the Ukrainian officers and soldiers inside those military bases along the lines of surrender or face a storm.

And so again, there seems to be some concern that this may be one of those storms, and that this may be the start of a process to evict all of those Ukrainian troops. Although for the moment, we just don't have enough details about the situation at this location close to the port city of Sevastopol a short distance from here.

QUEST: Matthew Chance near Sevastopol, joining us a moment.

Now, US jobs numbers are heading in the right direction. Bad weather has failed to slow down the US recovery. We'll have that story after the break.

(COMMERCIAL BREAK)

QUEST: The US economy added 175,000 jobs in February. That was more than expected, 135,000, 145,000 was the number the market had thought might happen. And if you look over the last gains, you really will see how they've been climbing since the sharp slowdown in December.

Look. I want to you to look at these particularly, because if you average over the course of the last year, I can tell you the number's roughly 189,000, 190,000 jobs. We got this blip here, and everybody was quite sure that that was about the weather.

And there had been serious fears that this would also be about the weather, but it didn't turn out that way. The number was better than expected. And on a variety of matrices, whether it's number of hours worked, amount of hourly earnings, the under-employed, it all seems -- it has several sectors, including construction, education, professional services, all seemed to move higher.

So, the US labor secretary put this into perspective on what these numbers meant.

(BEGIN VIDEO CLIP)

THOMAS PEREZ, US LABOR SECRETARY: I think that businesses are bullish about the future. When I go around the country, and I spend a lot of time on the road, what I hear from the business community is that we're bullish about the future, we want to add jobs, and what we need to work with you, Tom Perez, on is making sure that we have the skilled workforce to expand.

And so, when I see growth in professional business services, I'm not surprised, because you're -- that's part of the ramp up. And so, I'm very -- I'm heartened to see that.

(END VIDEO CLIP)

QUEST: Now, where all this factored on Wall Street? Well, you can take these numbers and maybe today's gains on Wall Street have largely been driven by these better numbers, but the Dow was basically flat. The S&P may have eked out a small gain.

What, of course, moved the markets for most of the week was, frankly, Ukraine. And if you look at he way the Dow traded during the course of the week, there you have a sharp fall at the beginning -- well, not hugely sharp, but you do have a sharp fall.

You have this dramatic rise on Tuesday, when it looked like a diplomatic solution was going to be forthcoming. And incidentally, that is the highest gain of the year so far, that single gain.

We bounce around Wednesday and Thursday, a good -- another good gain there. And then, of course, bouncing around on Friday. All of which puts it into perspective as just how volatile these markets are. And at the same time, how much they're looking for certainty and direction.

Alison Kosik is at the New York Stock Exchange and joins me now. This chart really does, more than anything else, Alison, just show the enormous difficulty of any investor in this scenario.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Oh, you said it. Stocks were just all over the place this week, as you said. Monday it was the Dow having one of its biggest losses of the year. Tuesday, the Dow having its biggest gain of the year.

Just look at the S&P 500. Just this year, Richard, the S&P 500 has hit record highs five times. And guess what? Three of those happened this week during this crisis between Ukraine and Russia. Can you make sense of that? I don't know.

All right. So, we got this decent jobs report today, despite the bad weather, playing a very small very role in it. It kept investors in the game, ending the Dow on the positive side. Once again, the S&P 500 ending at a record level, Richard.

QUEST: Alison, have a great weekend. Thank you.

KOSIK: You, too

QUEST: I want to move very swiftly on, because the question that Alison asked, can we make sense of a market that has hit three record highs in the same week as we've had what one person described as the worst geopolitical crisis of this century? John Silvia is the chief economist at Wells Fargo. John, you make sense of that question.

(LAUGHTER)

JOHN SILVIA, CHIEF ECONOMIST, WELLS FARGO: Lots of different pieces of information going in different directions. Clearly, the political situation was up and down, somewhat negative one day, somewhat positive the next.

From an economics point of view, I would say that the number today was reassuring that the US economy looks like it's improving. It's going to be adding more jobs going forward. I think the overall growth pace of the US economy will be much better in the second half of this year than the first half, so I'm encouraged by the job numbers.

QUEST: Encouraged by the job numbers, but this market is volatile, and I -- don't worry, I'm not going to ask you to sort of predict a market. Let's face it, the sheer volatility that we saw this week --

SILVIA: Yes.

QUEST: -- bearing in mind Ukraine, it tells us something about the fragility of investors' nerves, doesn't it?

SILVIA: Oh, absolutely. It tells you that the market investor is very uncertain about the politics as well as the economics, and as you get new information, it immediately gets incorporated into the marketplace.

But now, the market is on edge. How strong is this recovery? What is the position of Russia in the Crimea right now? How does this work with respect to the European trade? Natural gas energy coming into Europe? Obviously, a lot of information up and down, very uncertain period.

QUEST: There seems to be a suggestion that if you strip out these quirky oddball months or numbers and whether, the US is probably growing at roughly 2.4 to 2.5 percent on an underlying trend growth basis. Would you accept that?

SILVIA: I would accept that. I think when you look at consumer spending, business investment spending, a little bit in terms of trade, it looks like that underlying fundamental economy is still growing at 2, 2.5 percent, which is very good.

And as the government sector sort of neutralizes itself as the year moves along, we should see 2.5 to 3 percent growth for the second half of this year.

QUEST: And as long -- since we have a second or two longer -- as long as tapering continues, everybody's now taking that in its stride, because it would take an enormous dislocation or disruption now for the Fed to change their plan to reduce tapering by $10 billion a month.

SILVIA: Oh, quite right, Richard. I think the Fed is really -- sort of clued in the market to what its intentions are. I think the markets adjusted to that. To get it off that path would take some significant, significant changes. So, I think right now, tapering is a sort of a done deal.

We'll probably finished by October, and after that, I think the Fed will be neutral for a while. Don't expect for the fed to be raising rates before the second half of 2015 at the earliest.

QUEST: John, before I let you go, would you ever buy a bitcoin?

SILVIA: No.

QUEST: Right.

SILVIA: I really would not. I don't -- I just -- no.

QUEST: Right.

SILVIA: It's not my style.

QUEST: That's fine. That's fine.

SILVIA: Thanks, Richard.

QUEST: The only reason I ask you is because of our next story. Have a lovely weekend, John. Good -- and thank you for putting this economic situation into perspective. The reason I was asking John about that is because when we come back --

SILVIA: Thank you, Richard.

QUEST: -- after the break -- thank you, sir -- the chase is on to find the creator of bitcoin. A magazine alleges it's this man. A blaze of publicity followed. It's all wrong, says Mr. Nakamoto. You'll hear more after the break.

(LAUGHTER)

(COMMERCIAL BREAK)

QUEST: You've got the wrong man!

(RINGS BELL)

QUEST: So says the man who's been accused of being the father of bitcoin. The digital currency's founder has always been somewhat of a mystery. This elderly Japanese man has been outed by Newsweek. He's living in Los Angeles.

Now, before embarking on a car chase with a pack of journalists, he denied the Newsweek allegation and said, "It's not me."

(BEGIN VIDEO CLIP)

NAKAMOTO: I have nothing to do with bitcoin. I never worked for the company, I don't know any people there, I never had a contract there or anything like that. And I don't even -- I wasn't even aware of the product.

(END VIDEO CLIP)

QUEST: So, let us now look at the bank of evidence in the bitcoin vault that suggests that that gentleman is the actual founder, that Japanese-American did found bitcoin.

Firstly, his new -- his name. Let's have a look. The first bitcoin suggests the following on evidence. The Newsweek article says Dorian Satoshi Nakamoto's name and background checks offer a potential match. So, you've got the name. They searched all the names they could find, and then they came up and they found this gentleman on the West Coat and they said it was a perfect match.

Then, there's the quote itself. When Newsweek asked about the bitcoin project, Nakamoto reportedly gave the actual response that said, "I'm no longer involved in that, and I cannot discuss it." The question is, what was the "that," and what was the "it"?

Those words, it's believed, the bitcoin founder mixes up his various phrases. The use of these words, it's believed bitcoin founder mixes up the British and the American spellings. According to Newsweek, Dorian Nakamoto's wife confirmed he has the same habit.

And then, of course, you have the last one, which of course goes back to this question of the mixing up of spellings, the British, the American, and the way in which it's all been put together. So, our business correspondent Samuel Burke joins me now.

SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: Hello.

QUEST: Is he or isn't he the founder of bitcoin?

BURKE: Neither you nor I know that for sure, but what it does appear is that no other journalist or investigation -- here is the 14-page investigation that this journalist carried out for months -- has found somebody who better fits the profile than --

(CROSSTALK)

QUEST: But that's just by elimination!

(RINGS BELL)

BURKE: Exactly. No one else has been able to eliminate anybody else to bring them to this path. And in fact, this journalist, she still believes that it is him. That's what she told me earlier. And she spoke to our Kate -- our colleague, Kate Bolduan, and told her this.

(BEGIN VIDEO CLIP)

LEAH MCGRATH GOODMAN, SENIOR WRITER, NEWSWEEK: The reason we think it's him is we went through -- I don't know how many leads, and the process of this research isn't about proving who someone might me, it's about eliminating possibilities.

So, for every person you say why might it not be them? And with this man, we could never find how it might not be him. We kept finding reasons why it could be him.

And then all the way down to the day I went to his home, all the dots connected and all the details fit the time frames. His background, his work expertise, the way he wrote, and all of the descriptions of him about how people found him and his personality, his political leanings, his worldview.

And it's really in the detail that it comes alive. But that being said, you are looking of the reason to not think it's someone.

(END VIDEO CLIP)

QUEST: Why is it significant?

BURKE: Because there's so much mystery behind bitcoin. I've even spoken to experts who've invested a lot of their money in this digital currency, and even they don't understand it 100 percent. So, to find the man who is the mastermind behind it would help unlock some of the mystery. It would be like finding the Alan Greenspan for the American dollar.

QUEST: Quick final question.

BURKE: Yes?

QUEST: Do you believe it's the man?

BURKE: I don't think there's a better candidate that I've seen so far.

QUEST: Oh!

BURKE: Very careful in my words. I learned from you.

QUEST: Waffle-a-rama! Waffle-a-rue!

(RINGS BELL)

QUEST: Well, the bitcoin story has put Newsweek back on the map. It's also back on the newsstands with this rather striking cover. A decision to resume print production was made by its new owners, IBT Media.

This was the last edition by the previous owners IAC. They threw in the towel at the end of 2012 after 80 years of Newsweek on the presses. And whichever way you look at it, the decision to return back to print, thank goodness. Nothing like a bit of old newsprint on the fingers. But the decision to do that, and with such a scoop, certainly must be applauded.

After the break, as tensions mount over the situation in Crimea, Vladimir Putin says he has reason to smile, and I'll tell you why after the break.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. There is more "Quest Means Business" in just a moment. This is CNN and on this network the news always comes first. For a second day a group of unarmed military observers from the Organization for Security and Cooperation in Europe - the OSCE - was blocked from entering Ukraine's Crimean Peninsula. The 43-member delegation was initially turned away from a checkpoint on Thursday. Masked armed troops prevented the delegation from passing a checkpoint.

There's been a better-than-expected news report on the jobs market in the United States - 175,000 jobs were added last month, an improvement from January. Even so, the U.S. unemployment rate rose as more Americans started looking for work.

The trial of Oscar Pistorius is adjourned for the weekend. The defense will continue questioning on Monday. A security guard was amongst the first on the scene of the fatal shooting. The prosecution has called only nine witnesses after more than a 100 on its list. An ex-girlfriend of Pistorius testified he often slept with a pistol by his bed.

The Russian president Vladimir Putin attended the opening ceremonies of the Sochi Paralympic games after speaking with Ukraine's Paralympic Committee. The committee wants him to ensure peace in Ukraine for the duration of the games. There had been talk of a boycott by the Ukrainian team but the athletes will and are competing.

As the crisis in Crimea continues, leaders in Kiev and Moscow are vying for influence over the region. After Crimea's Parliament announced a referendum on joining the Russian Federation. In Russia, Vladimir Putin scoffed at the possibility of dialogue with Kiev. Its spokesperson said the notion of talks with Ukraine mediated by the West in their words - "makes us smile." Russia's Parliament and these people rallying in Moscow are backing the lawmakers in Crimea who want to be part of Russia.

The view from Ukraine is very different as you might expect. In Kiev, officials have a clear message for Moscow's Crimea referendum. They say it is illegitimate. The interim prime minister Arseniy Yatsenyuk is demanding Russia pulls out its troops and opens up a dialogue.

(BEGIN VIDEOCLIP)

ARSENIY YATSENYUK, UKRAINIAN PRIME MINISTER: I would like to reiterate as we urge (ph) the Russian president to pull back forces, not to support separatists and terrorists and to start real talk with the new Ukrainian government and to accept it.

(END VIDEOCLIP)

QUEST: A mission of observers from the OSCE have been stopped from entering Crimea. The 43 members are unarmed. CNN's Matthew Chance was with them when they tried to enter the region.

(BEGIN VIDEOCLIP)

MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT BASED IN LONDON: Right over here at this checkpoint near the Crimean Peninsula, I can tell you the monitors there from the OSCE -- the Organization for Security and Cooperation in Europe -- they've just been turned back again from this checkpoint after trying to negotiate with those pro-Russian gunmen over there who are stopping this mission of the OSCE from entering Crimea -- tried to negotiate with them to let them through, at least a proportion of them through. That's not been permitted, and of course that's caused a great deal of anger amongst the crowds. But they're obviously extremely angry that this mission has not been permitted through and the mission members themselves very frustrated as well. But, again, it's underlining that situation that exists in Crimea that it's the pro- Russian government. They are armed with (inaudible) assault rifles, their faces covered that are in essentially operational control certainly of this checkpoint, and they're not permitting these international monitors as I say to go through.

(END VIDEOCLIP)

QUEST: To keep up to date with the developing situation, there is cnn.com/Ukraine which will have the very latest details. When we come back, it's 25 times the strength of steel, and scientists say it can be used to help our bodies self-heal. A new development in the use of spider's silk, in a moment.

(COMMERCIAL BREAK)

QUEST: To some people they are e stuff of nightmares. Not to scientists in the U.K. Spiders could be at the forefront of a medical revolution. They've created an implant for mending injured knee joints using silk, and hope they can go on to treat a range of other ailments too. For tonight's "Make, Create Innovate," Nick Glass has been to Oxford and England to see for himself.

(BEGIN VIDEOCLIP)

NICK GLASS, CNN INTERNATIONAL CORRESPONDENT: A lot of us don't like them very much -- arachnophobia it's called -- fear of spiders. Yet spider's silk is both beautiful and extraordinarily strong. Only now are scientists learning how to use it to mimic nature for our medical benefit.

DR. NICK SKAER, ORTHOX: So we've invented an implant called FibroFix which goes in people's knees. It's made out of silk and it gives them the function of their knee back, but it also encourages the regeneration of cartilage tissue.

GLASS: After joining a group studying spider silk at Oxford University in the U.K., Dr. Nick Skaer soon realized their potential.

SKAER: Spider silk is 25 times as tough as high (inaudible) steel, and it manufactures that at room temperature -- room pressure -- out of protein. And that makes it one of nature's finest bioengineers.

GLASS: Despite these extraordinary properties, spiders only produce tiny amounts of silk. The challenge was to find a way to produce high- quality volumes of the stuff. So he turned to a different insect.

SKAER: The silk factories are silkworm, and they've been farmed for more than 5,000 years. Each one of these can produce a couple of grams of silk -- a thousand times more than a spider can.

GLASS: But as silkworm is only a fifth as strong as spider silk, Skaer had to find a way to strengthen the fiber.

SKAER: The eureka moment was understanding that we could take silkworm silk and break it down into the individual silk molecules, build it back into structures that hatch at the properties of spider silk.

GLASS: So there it was. The silkworm productivity combined with spider silk strength. FibroFix was born.

SKAER: So, what we turn our liquid into is one of these. This is an implant which is designed to go into the knee to repair the cartilage when it's damaged.

GLASS: A key aspect of any implant is durability.

SKAER: I'm going to hang this five kilo weight off the bottom of it. We could probably put another five kilos on the bottom of this and it wouldn't deflect but the pins would break. It's probably at least ten times stronger than the options that are out there at the moment certainly.

GLASS: According to a recent study from Sweden, knee replacement surgery costs the U.S. health market an estimated $13 billion a year. The same study predicts a 600 percent increase in the need for this kind of surgery by 2030. With Skaer's product entering clinical trials now, this could help those knees self-heal and remove the need for a replacement. Skaer is hopeful his technology could be used to fix other parts of the body -- shoulder an hip joints, the spine and even the heart, all using animal silk technology.

SKAER: Insects were my passion. I used to turn over rocks and look under rocks and find bugs. Of all of the insect world, spiders were about my least favorite.

GLASS: Some of us will always be terrified by spiders, but Dr. Nick Skaer has forged a career by unlocking the secrets of their spinning. How do you look at spiders now?

SKAER: I don't so much see the eight legs crawling around and the sharp pair of fangs. I see something that can spin me a remarkable material, and that's very exciting as a scientist.

(END VIDEOCLIP)

QUEST: That is truly fascinating. Nick Glass reporting on the spider's web. If you think office politics are bad where you work, at least it's not as public as what's going on at the bond giant PIMCO. Now, you both -- know these two gentlemen -- Bill Gross and Mohamed El-Erian. The co-founder, Bill Gross says he has evidence that the departing chief exec, Mohamed El-Erian, was the source behind an article in the "Wall Street Journal" about tensions in the company. In an interview with Reuters, Mr. Gross said -- they're his words -- "I'm so sick of Mohamed trying to undermine me." When the news agency challenged Gross to produce evidence, Gross reportedly said Reuters was on El-Erian's side, adding, "Great, he's got you too wrapped around his charming right finger." Reuters says Gross has indicated he had been monitoring El-Erian's calls. A PIMCO spokesman said Gross denies saying the firm ever listened in on Mr. El-Erian's phone calls or that he wrote any previous media articles. Now you'll be aware of course, Mr. El-Erian is about to take a part-time position as the cheek -- chief economic advisor to Allianz. Whichever way you cut this cake, it's particularly unpleasant.

On Sunday -- happy birthday to you. The bull market is five years old, and with a bull market of five years old, some investors are certainly enjoying many happy returns. Get it? Many happy returns -- oh well I thought it was quite funny. Let's get back you (ph) to the winter of 2008, when during a vicious bear market I made a gamble.

(BEGIN VIDEOCLIP)

QUEST: In the interest of getting us close as possible to the real business world, I've been conducting something of an experiment. Last week we told you about Barclays' share price which fell dramatically -- it's down almost 75 percent since its all-time high. Well, we decided it was really time to put it to the test, so on Thursday, I bought a 1,000 shares in Barclays' bank. I paid a good price -- 63 pence per share -- that's around 85 cents.

(END VIDEOCLIP)

QUEST: Barclays shares are now 248 pence each, giving us a return of some 300 percent. They were higher before the banking crisis and LIBOR and everything like that. But we have kept hold -- or I have kept hold -- of those Barclays shares and we're not going to get rid of them just yet. Here's what whitle -- whitle? Here's what Wall Street did over the same period, and we have the cake to celebrate. Enjoy it while you can because some people believe the bull market may not have much lot (ph) to go. So, the Dow is up 150 percent, the Nasdaq is up 240 percent, the S&P 500 has gained nearly 200 percent. In this bull market from 2009 to now. On the job's front in the United States, the job losses rate was 8.7 percent for unemployment, now it's down to 2 percent -- which points at 6.7 and it's falling. In the U.K. as well, not so much in the European Union. Look at GDP growth. This is the frightening number -- get right in there. That's the frightening number. In 2008, GDP was off 8.3 percent. And the latest numbers suggest a gain of 2.4 percent last year and we can expect maybe up to 3 percent this year for the United States. The Fed has just poured money in -- QE was originally $600 billion, QE3 is just -- is now -- 65 billion a month, going down by $10 billion a month. And interestingly -- interestingly of course -- the Fed in this period has managed to swell its balance sheet to several trillion. But there are always those risks -- the Ukraine, Russia, the Middle East -- lots of tensions which could in the end potentially blow out those candles on the birthday cake. For the moment though, it goes 'round nicely -- one, two, three, four, five.

Jenny Harrison is at the World Weather Center for us this evening.

JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: (LAUGHTER). I'm glad there weren't 500 candles on that cake, we'd have been here a while, while you count them all out.

(LAUGHTER)

HARRISON: Anyway, I'm going to -- I'm going to just stick with that birthday theme. I'm going to come back to it actually. But let me crack on -

QUEST: Right.

HARRISON: -- and tell you exactly what's going on in Europe because a very nice weekend ahead for most of the continent. We've seen quite heavy rain of course across central Med, the southeast and also the U.K., but in fact as we go through the weekend, systems -- both systems really coming in the north -- are staying well to the north of the U.K. The system with the rain is pushing across it towards Turkey and the Black Sea, and easing off and then look at this high pressure, quiet weather and very mild weather. Now, when I say mild, I mean temperatures well above the above the average. This was today, this Friday. Madrid 19, the average is 16, London get to 17, the average is ten, Paris just a degree colder at 16. The snow drops out -- this of course you can see is in Germany. Really it does finally feel as if spring has actually sprung. The children playing here on the beach in the Netherlands having a fabulous time, and as I say, there is more of that to come. So for Saturday, look at these temperatures -- 17 in Paris, should overtake London at 15, we've got 12 in Berlin, and generally things are looking pretty nice and pretty quiet for the weekend.

Now you might remember on Wednesday, I was talking to you about the amount of snow that they've had up in Scotland. Well, look at this -- Aviemore is this this most amazing depth from the lower levels -- 130 centimeters. Not so good Saturday and Sunday weather-wise but plenty of snow and most of (inaudible) are open too, so head up to the slopes in Scotland if you can, or if you want some glorious sunshine with some very, very good snow, some excellent conditions here. Zermatt in Switzerland -- sunny skies. Temperatures just sort of hovering around freezing and no snow in the forecast, but even so, plenty there and some very nice sunshine to go with it.

Now, let me just get back to what I said a moment ago -- there is the New York skyline. What are these called? Fireworks. They're already of course beginning to go off, and my goodness. It's because of this -- oh, yes. "Another year older, another year wiser, this -- his demeanor even bolder, but still spending like a miser..." Yes, it's true.

"Too many candles for the cake" -

QUEST: Oh!

HARRISON: -- oh come back to me. -- "Too many candles for the cake, instead a gathering reminiscent of wake. Happy birthday my old friend, amazing after all these years you've not sent me 'round the bend." So, yes, I say again. Happy birthday, Richard, for Sunday. And you know why I've got the bull here, don't you? Because he apparently is going to be 25 on Sunday -- much younger than you -- but 25 on Sunday and you'll be a little bit older.

QUEST: You have -- thank you, Ms. Harrison.

(LAUGHTER)

QUEST: How very gracious of you not to reveal the number. Careful, - -

HARRISON: No.

QUEST: -- that bull's behind you and looks like it's getting -- yes, going to do you a nasty injury.

HARRISON: OK.

(CROSS TALK)

QUEST: Jenny Harrison -- thank you very much. Mom, we have a birthday cake -- well, of sorts here in the studio. Many thanks, Jenny Harrison at the World Weather Center. We will be back in just a moment.

(COMMERCIAL BREAK)

QUEST: Hillary Clinton, Malala Yousafzai, even Dora the Explorer -- some of the names that have come together to mark International Women's Day which will take place on Saturday. In anticipation, the United Nations has been hosting a special event today led by Mrs. Clinton. The occasion celebrates the achievements of and recognizes the struggles of women around the world. Also in attendance was the head of the U.N. Women -- Phumzile Mlambo-Ngcuka -- I apologize.

PHUMZILE MLAMBO-NGCUKA, EXECUTIVE DIRECTOR, U.N. WOMEN: Thanks, it's OK.

QUEST: I need to ask you -- the relevance of a women's day today.

MLAMBO-NGCUKA: I was hosting the event at the United Nations on behalf of the United Nations and Mrs. Clinton was our guest.

QUEST: But why do we still need a women's day do you think?

MLAMBO-NGCUKA: Because, as we speak today, more women who are poor, who are unemployed. The Fed said for instance, if things continue as they are, girls in Sub-Saharan Africa will only attend primary education in 2068, that's why. The Fed said -- and I know of women who die having children. It's -

QUEST: But what does a women's day do? I mean, look, I'm -- first of all, I'm very aware -- you know, you've got a man sitting here talking about women's day -- I'm aware, but what do they do?

MLAMBO-NGCUKA: It celebrates the work that has been done, because clearly there is progress that has been made. But it reminds us about how much needs -- still needs -- to be done. Because, as you know, the Fed says even though girls -- more girls -- go to school, there're much more girls that are not in school.

QUEST: The sort of work that Malala did -- the sort of concentration that she was able to bring to the issue, and people like Hillary Clinton, but particularly Malala -- that has a hugely beneficial effect for your -

MLAMBO-NGCUKA: Absolutely, absolutely. And we're supported because it's important that young women like actually going to stand up for their generation. But we are now recruiting men to play an integral -- and this is what I was launching today at the United Nations.

QUEST: So tell me, what would you like me to do?

MLAMBO-NGCUKA: I would like you to stand up and change your tone and speak about the need for women to be supported so that more girls go to school, more women get senior jobs and less women work at the bottom of the pyramid. Because in that way, there are more women who are able to take money into the home, and through that, poverty is alleviated. There's overwhelming evidence that when women have better economic prospects, the family is better.

QUEST: I don't doubt for a moment the economic imperative of what you're suggesting. I question whether or not having a women's day adds value to that cause.

MLAMBO-NGCUKA: It's actually -- you know what? What we are changing about women's day is that women must not get together to talk to themselves.

QUEST: That's the point.

MLAMBO-NGCUKA: Yes. That is why today we're launching a campaign that is called "He for She," where we are reaching out to men who'd otherwise not sit and contemplate about the impact of excluding women in the economy to sit together and talk about that. (Inaudible) things that we have to focus on. We call it the SHE Imperative. S for that -- for security and safety on women because women are being beaten up, human rights of women who are violated and economic empowerment and leadership of women.

QUEST: So, I'll tell you -- tell me what I need to do, I'll come along and do it -- how about that?

MLAMBO-NGCUKA: The voice -- you're in the media, you've got a voice.

QUEST: Good to see you and thank you for coming in, I appreciate it. We will have a "Profitable Moment" after the break. This is "Quest Means Business," good evening.

(COMMERCIAL BREAK)

QUEST: Tonight's "Profitable Moment." It's not every year you get to celebrate your birthday with a momentous day as well. I'll be 52 -- just in case you wanted to know -- on Sunday. The bull market will be five years old. I guess one only hopes both of us last a great deal longer. And that's "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, (RINGS BELL) I hope it's profitable. Come back, I'll see you on Monday.

END