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Quantitative Easing Ends; Stocks Dip After Fed Announcement; The Science of QE; Private US Rocket Explodes; UK Air Passenger Duty Turns 20; Heathrow Looks to Expand

Aired October 29, 2014 - 17:00   ET



RICHARD QUEST, HOST: The closing bell rang, the Dow went a bit pear- shaped in the afternoon, it was a busy day on Wall Street. There is much to talk about on tonight's program. It is Wednesday, it's October the


Think of it as QE RIP. The Fed has brought an end to six years of massive stimulus.

Sanofi sacks the boss. The boardroom battle at one of France's biggest companies.

And down to Earth, quite literally, with a bang. First came the crash, now the rocket maker's share price is also falling.

I'm Richard Quest. Our nightly conversation, and I mean business.

Good evening. It's the anniversary -- the 85th anniversary of the Wall Street crash, and an appropriate moment, because that started the

Great Depression and now, today, the Federal Reserve is ending the stimulus that's kept US stock markets singing over the past five or six years.

It's almost a move six years in the making. In the darkest days of the recession, the Fed began buying mortgage-backed securities. It took on

debts from agencies like Fannie Mae and Freddie Mac.


QUEST: Two years later, it launched a new bond-buying program, QE2, $900 billion.


QUEST: Then there was Operation Twist, designed to lower long-term bond yields. And finally --


QUEST: -- in 2012, a new bond-buying program, securities from the private sector. It was QE3, $85 billion a month. And that, of course, led

to tapering. And now, over the last ten months, the tapering has come to an end. Tapering has finished.

Look at how the Dow Jones -- today it ended just off 31 points. But here is when we got the announcement that tapering was actually over. It

was also about the economic statement. We'll deal with that in a moment. It fell throughout the course of the session and then just closed off 31,

because the Fed may be singling -- signaling it may rise rates sooner than expected if inflation picks up.

Now, look at what's happened as the Fed has been doing all that bond- buying. The Fed's money has sent stocks on an absolute tear. Back in 09, this was the low point, and then we had around 6500.

But the way the market has continued to rise through QE1, then QE2 -- that's QE2, we have a bit of a pause here -- and then you get this massive

QE3 with pretty much a one-way arrow. The only bit of turbulence was when the question of the tapering tantrum came along.

Whichever way you look at it, the quantitative easing, the Fed's printing, creating money, has been a pretty much one-way bet for stocks.

Now that might be coming to an end. Joining me to talk about this is Ben Willis. Good to see you, sir.

BEN WILLIS, PRINCETON SECURITIES GROUP: Good to see you, too, Richard.

QUEST: The trader with the Princeton Securities Group. Lots to get through. First of all, the fact that QE was coming to an end was not a

surprise. No one really expected it to continue, except one member of the Fed's governors.

WILLIS: Well, nobody wants the punch bowl to get taken away, so there's somebody calling to leave the lights on, but the Fed had made the

decision that it was time to take the punch bowl away. But they're going to let the music play a little bit longer while we continue to talk about

leaving interest rates considerably low, at least for a considerable period of time.

QUEST: We're going to be talking do Diane Swonk in just a moment in Chicago on what the Fed statement said, but from the trader's point of

view, how did you interpret this?

WILLIS: The fact that they left the terminology in place, "for a considerable period of time," was probably the most important aspect of the

conversation. The rest of it is -- you need to -- the world needs to understand that interest rates are going to go higher, but what continue to

look at the Federal Reserve for is an indication of when that's going to happen. The odds --

QUEST: Did you see anything today that changes your view?

WILLIS: There was a slight indication that it may be earlier in 2015 than some had anticipated. There's a whole marketplace that is built on

anticipation on what time, whether it's going to be in March or June or September of 2015. The odds had dwindled greatly for the early -- as the

Fed made their announcement, that changed a little bit, and some of that money started to bet on a little earlier.

QUEST: Right. Now, from a trader's point of view --


QUEST: -- never mind the macro economic point of view.

WILLIS: Right.

QUEST: Diane will deal with that in a second. But from a trader's point of view, does it make a jot of difference, as Hillary Clinton

famously said, what difference does it make whether the rates go up in June versus August versus May? We're talking about months. We know it's


WILLIS: That is exactly my position as a trader. The problem is for the investors throughout the world that have -- as you showed that chart,

got on board the Federal -- the FOMC train. You never fight the Fed. By not fighting the Fed, you went along on the game. They continued to buy

bonds. They own 50 percent of some of the issuants that were --

QUEST: The Fed?

WILLIS: The Fed owns 50 percent of the issuants of the United States government. If you did that in any other business, you'd be put in jail.

QUEST: Right. But now they've got to get rid of them over the next few years, as well as raising interest rates. And that's where your

dislocation in the market comes true.

WILLIS: Absolutely. As interest rates rise, there will be a fear and a reallocation model for those people that are long-term investors. It

will create a buying opportunity in equities and it will create an opportunity lost if you have not sold your bonds at this point.

QUEST: Now, one very quick question before we just move on.


QUEST: Did you ever think you would see not just quantitative easing in your career --


WILLIS: I know exactly --

QUEST: -- but as much quantitative easing, the experiment that he talked about?

WILLIS: Absolutely not. I was absolutely blown away. And you went back on the chart where it became an opportunity of a lifetime to buy

United States money center banks at $2, $1 a share. I never thought I would see, no less the United States government, but a Republican, sitting

Republican, socialize American industry.

QUEST: And on that note, we're going to leave it. Good to see you, sir.

WILLIS: Pleasure.

QUEST: We're talking about quantitative easing, but it's been a complicated science, QE, right from the very beginning. An art or a

science? Well, I learned for myself back in 2009, QE and the trickle-down effect has always been the key.


QUEST: There are many ways to think about quantitative easing, but he principle always remains the same: how to get money flowing through the

economy from the top to the bottom. When interest rates are at zero and there's nowhere else to go, how do the central banks get things moving?

Think of it this way: you have the banks, then you have business, and you have consumes. Everyone's got a bit of money, but no one wants to move

it around, spend and lend, lend and spend. So, I am the central bank. I can do one thing that you can't. I can do one thing that nobody else can.

I can print money.


QUEST: Lots of it. Money here, money there, money everywhere. I have the power to take this money and yes, pump it into the economy, from

the banks, to business, to consumers. It works like this.

What's fascinating is the amount of money it takes. The banks are full, the businesses have them, but consumers have yet to see the benefit.

And so, I keep pouring. More and more and more --


QUEST: -- right the way down the economic tree, and eventually gets down to the consumer. That is quantitative easing in a glass.


QUEST: And it is experiments like that, about what QE has been all about. Ben Bernanke admitted in 2012, the Fed didn't have much evidence to

go on. It was learning by doing. So, what has the flame of stimulus produced? Well, as Ben Willis was saying, the gurgling --


QUEST: -- bubbling up of the stock market back to pre-crisis levels and beyond. GDP growth bubbling but not so evenly, 4 percent in Q2 after a

2 percent drop earlier in the year. Inflation well under the boil, under the 2 percent level, that's what the Fed's aiming for, and it's so far


But jobs -- it rose, having come from down here higher, all the way down. Unexpected job numbers, unemployment now below the crucial level.

Other measures, like workforce participation, all remain weak, but the economy, the experiment, the grand experiment, continues.

Diane Swonk is at Mesirow Financial's chief economist. She joins me now in Chicago. Good to see you, Diane. Lovely as always. I looked at

the Fed statement. They are much more bullish than before. They talk about solid job growth, employment gains.

DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: They actually did upgrade their statement on the US economy, and I think it was really

interesting, the absolute omission of all the fears that the markets have been through in recent weeks. And that is fears of deflation in Europe,

fears of a strong dollar and the effect that will have on lowering inflation in the US.

They sort of took the downdraft in inflation that we've seen, which got a lot -- turned a lot of heads when it got fed through on the cost of

living increases on Social Security, on disability benefits being at only 1.7 percent for this fiscal year. That was considered really low.

QUEST: Right.

SWONK: All of that, they looked through it and they said -- it was an absolute conscious omission by the Fed's part. I think this was the Fed

communicating sort of counteracting fear. The Fed has become very cognizant of the fact that they don't want a self-fulfilling prophecy.

And I think they decided not to acknowledge the low inflation as a risk, instead look through it and say, listen, we like lower oil prices.

We're a net oil importer still. That's good. So they look through that. But the omission was actually a communications gamble --

QUEST: All right.

SWONK: -- that it would be reassuring to financial markets.

QUEST: But by talking about the positives, the job data -- look, it's so beautifully balanced this statement, in the sense that --


QUEST: -- they talked about the job gains, well that suggests rates coming -- going up sooner rather than later. They then throw in the lower

energy prices. Well, that suggests we can keep rates down for a longer period of time. They've balanced it rather elegantly.

SWONK: They did. And I think the other thing in there, as you saw it, Chair Yellen's imprint is as they were balancing it, they got -- they

sidelined the hawks in terms of descent.

And of course, the dove came out and said -- the dove who happens to represent how a lot of people who are joining the voting ranks of the Fed

feel about the economy next year. So, I think the dissent is important because he's representing many views that we're going to see reflected in

the voting statement -- the way the votes go in 2015 when they decide on rates.

But I think it's really important that Chair Yellen got in there that issue, too, that when we do get liftoff, we're going to raise rates back to

what anyone would consider normal, even when we get done with meeting our mandate, getting inflation up to 2 percent, getting what we think is full


Because we want the economy to catch up, and we also don't want to make the mistake every other central bank has made, and that is raising

rates too fast, too rapidly, too soon.

QUEST: Now, join me in the chemistry set, if you will be as kind --


QUEST: -- as I go --

SWONK: I feel like I'm in a Harry Potter episode or something.

QUEST: Ah, well, maybe.


QUEST: Well, let's face it, the wizard is now going -- so, back to my condiment, which I can see here. So, we've got --

SWONK: Here we go.


QUEST: -- we've got the stocks bubbling beautifully. We've got the GDP, inflation down, jobs under control. In my chemistry set, which now

should I be most concerned about? Stocks, GDP, inflation, or jobs?

SWONK: Inflation. I think the low inflation rate is something to be concerned about, and the omission of the Fed today was fairly startling and

I think calculated. But I do think low inflation is what we need to worry about.

Many that are going to be voting on the Fed next year have talked about catch-up, overshooting on inflation to allow the economy to catch up.

We need wage acceleration to get inflation, and we want to see wage acceleration, and we want to reflate the economy a little bit, because

we're a little bit -- the porridge is too cold right now.

QUEST: Too cold. Well, that's a subject and a graphic for another day. Final thought, I'm going to ask you --


QUEST: -- what I asked Ben. Any of us who've covered economics, and you, who of course, have been deeply involved in it your professional life,

we never thought we'd see QE, and we certainly didn't think --


QUEST: -- we'd see 1, 2, and 3, and over six years.

SWONK: It really is stunning. But remember, these last six years, it was a worse financial crisis than the Great Depression. It was depressing,

but it wasn't the Great Depression. And I think that really is important.

Of course, a lot of people really don't know and have a context for what it was like during the Great Depression, but it was stunning. The

kind of ravages -- this is not good, but it prevented that from recurring.

QUEST: Lovely to talk to you as always. Thank you for joining us tonight in the chemistry suite. Thank you very much.

Now, it was a catastrophic failure. It was six seconds after launch. The pictures are stunning as the pyrotechnics -- thank God no one was hurt.

Investors are scrambling to work out what this means.


QUEST: Shares in Orbital Sciences plunged, literally. That's the company that made the unmanned rocket that exploded on Tuesday. It was a

spectacular -- spectacular accident. The rocket launched from Virginia's eastern shore. Just watch.




UNIDENTIFIED MALE: Oh, God! (Expletive deleted) God! (Expletive deleted)!


UNIDENTIFIED MALE: It's going to be loud!


UNIDENTIFIED MALE: It's going to be loud!


UNIDENTIFIED MALE: Oh (expletive deleted) my (expletive deleted).

UNIDENTIFIED MALE: Holy (expletive deleted)! Oh, my God!




QUEST: No one was hurt in the explosion. The fuel used to lift the rocket was a combination of liquid oxygen and kerosene, and that explains

the fireball. The authorities basically are now saying -- NASA basically says it's just going to let it burn out for the time being because there's

nothing else they can do.

As for the science behind it, the engine used in the ill-fated rocket, the engine itself dates back some 40 years. It was made by a Ukrainian

company that was later bought by Aerojet Rocketdyne. It was refurbished, it was sold to Orbital Sciences, the NASA contractor -- 40 years old.

Now, Marco Caceres from the aerospace consultancy Teal says the engine might initially -- this engine might initially have been bought for as

little as $1 million each from the Russian space program before refurbishment. A spokesman wouldn't comment on that other than to say,

frankly, it's proprietary information. This rocket with that old engine that blew up.

Joining me is our space and aviation analyst Miles O'Brien. We have a lot to get through here, Miles.


QUEST: What happened?

O'BRIEN: Well, it -- first of all, we don't know for certain. There's a lot of forensic work that needs to be done. In this case, of

course, we don't have to worry about black boxes, because there's instant telemetry going back to Mission Control, and they'll be able to figure out

what failed pretty quickly if they don't know already.

Looking at the video, I think you and I saw the same thing, it kind of lurched to a stop. It appeared some things started falling out of the

bottom, and then the rocket plume changed color. All signs leading toward a problem with the rocket engine. Which as you pointed out, is a Soviet

relic. Refurbished --

QUEST: Right.

O'BRIEN: -- but does, in fact, go back to the days of the moon race.

QUEST: People are making a lot of points this morning that getting to the space station and these launches are being done by private companies,

Orbital Scientists, SpaceX and the like. But to be fair to the private sector, they have done quite a few launches most successfully. So, they're

not like it's two tin cans, a piece of string, and an old bit of old kerosene.

O'BRIEN: No, no. It's been -- it's actually been to this point so far a great success. It's early to say, of course, we're trying to figure

all this out.

Let's not forget, Richard, that when NASA was doing its old way of issuing contracts, which is to say they were right there watching every

screw being turned and making sure everything was done absolutely to spec, sort of right there on the factory floor, versus just buying the car

afterwards, when they were doing that, we lost two Shuttle crews, 14 brave men and women, and we also lost three people in the Apollo 1 fire.

So, it's dangerous business regardless, and NASA is trying to open up low Earth orbit to a proper commercial enterprise, and that's a reasonable

thing to do at this stage of the space business.

QUEST: Now, so, when they now have to launch to the space station and other missions, similar missions, Orbital obviously is out of the game for

the foreseeable. It's going to take them a while to find out what happened, rebuild the facility. But there's still SpaceX and there are

still other people. And you can always go back to the Russians.

O'BRIEN: Well, all roads seem to lead to the Russians, Richard. The SpaceX rocket is built lock, stock, and barrel in the US by Elon Musk's

SpaceX corporation.

When you look, though, at, for example, the United Launch Alliance, which is a partnership between Boeing and Lockheed Martin, the engine,

which lofts its Atlas rocket, which lifted off today carrying a GPS satellite, is an RD-180. Guess who makes that? The Russians.

So, there is a dearth of engine options that are built by the US right now, and that's a big-time policy issue that needs to be addressed, because

if the Russians, as they made noises after the whole Crimea-Ukraine flare- up, made noises about not selling those engines to the US for national security launches. So there is a national security issue here.

QUEST: And thank you, Miles. If anyone comes up to you offering to sell you a rocket, one used rocket, you might keep your wallet in your

pocket. Thank you, sir.

O'BRIEN: I think I shall.

QUEST: Miles O'Brien, making sense of it all for us tonight.

He was one of France's most powerful chief executives -- "was" is the operative word. He got the boot. The board at Sanofi say they just

couldn't work with this boss. We will be live in Paris to find out why.



QUEST: British Airways is wishing a very unhappy 20th birthday to Air Passenger Duty. It's one of the airline sector's least popular taxes.

APD, as it's called. It was introduced in 1994. Then, it was about $16, about 10 pounds. Now, APD is the highest aviation tax in the world, $110

and $156 for long-haul flights. It varies depending if you're in economy, if you're in business class, or first.

The increase is 870 percent over the 20 years. The head of IAG, which owns British Airways, says APD -- that's Willie Walsh. "APD has snowballed

out of control and become a tax that works against people. This tax helps no one in today's economic environment." Willie Walsh says, "We must call

on APD's time has come."

APD is one of the big problems for London Heathrow, amongst many others that the airport is facing. More passengers seems not to be one of

the issues at the moment. The chief exec of London's Heathrow says he is going to campaign against APD so Britain can keep up with France and


Heathrow has raised its growth forecast for passenger numbers. I asked John Holland-Kaye, well, the big issue at Heathrow is not really APD,

it's not even more passengers. It's that new third runway. Is it any closer?


JOHN HOLLAND-KAYE, CEO, HEATHROW AIRPORT: We're seeing more support coming out for expansion at Heathrow. We've seen employers groups, such as

the CBI, come out in support of a hub airport, i.e. Heathrow. We've seen regional chambers of commerce up and down the country, 23 of them came out

last week in support of expansion at Heathrow. We've seen Unite the Union do the same.

And actually, over the summer, we've seen good polling which shows that more local people support the expansion of Heathrow than oppose it.

That's something that you wouldn't have expected to see.

But also MPs support expansion at Heathrow, 58 percent of MPs back Heathrow. Only 13 percent back Gatwick. That shows that Heathrow is not

only the right economic answer for the UK, it's politically deliverable.

QUEST: It's -- you say it's politically deliverable, clearly nothing happens before the next UK election, which takes place next year. How

quickly, realistically, would you expect a new or returning government to make a decision on a third runway?

HOLLAND-KAYE: Well, we expect the Davis Commission to report a couple of months after the elections, so mid-summer. We'd expect a quick decision

after that, so maybe late summer, early autumn.

And the encouraging thing is that in the party conferences that took place recently, both Labour and the Conservatives, were backing a quick and

bold decision. Both of them want to see the right economic choice for the UK.

And that, again, shows that Heathrow is politically deliverable. They're prepared to make tough decisions to make sure that Britain remains

right in the heart of the global economy.

QUEST: What's your Plan B?

HOLLAND-KAYE: Well, we are working on Plan A. And actually, Plan B is what we've been doing for the last ten years, continuing to eke out a

little bit of growth here and there. But all the while, we're seeing our competitors, Britain's competitors, France and Germany, moving ahead.

If you look at the growth they have achieved at their hub airports over the last 12 months, they're twice the rate that we're achieving here

at Heathrow.

Now, we're still the biggest international hub airport in the world. We still have slightly more long-haul destinations than any other airport

in the world. But we are being overtaken by our competitors, and that's something that no politician can afford to let happen. We need to fight

for our place in the world economy. Britain can be the winner if we expand Heathrow.

QUEST: We're talking about on the anniversary of APD, the passenger duty, which came in some 20-odd years ago. Who knew it was that long ago?

The rate of increase now makes APD a serious deterrent to flying from UK airports. Is there any hope that APD goes?

HOLLAND-KAYE: I think it's unlikely that APD will go altogether. We will certainly campaign for APD to come down. We need to remain

competitive against the French the and the Germans.

And it'll be interesting to see what happens with regional APD if the government devolves some of the tax raising to parts of the UK. I think

then it'll be unsustainable to have high APD across the rest of the UK.


QUEST: The chief exec of Heathrow Airport. QUEST MEANS BUSINESS has more as we continue our nightly conversation. Good evening.



QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in just a moment. This is CNN, and on this network, the news always comes


President Barack Obama today met with some of the health care workers who have returned from West Africa. He thanked them for their work

combating Ebola. The President said authorities had to make sure they don't do anything to discourage medics from going to the region to help.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I want America to understand - the truth is that until we stop this outbreak in West Africa,

we may continue to see individual cases in America in the weeks and months ahead. Because that's the nature of today's world. We can't hermetically

seal ourselves off.


QUEST: The U.S. Federal Reserve is ending quantitative easing after six years. The Fed says it's confident the U.S. economic recovery will

continue despite volatility in the markets. It also reiterates its plan to maintain its benchmark interest rate near zero.


DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL : -- but I think it's really important that Chair Yellen got in there that issue too that when we

do get lift off, we're not going to raise rates back to what anyone would consider normal, even when we get done with sort of meeting our mandate -

getting inflation up to 2 percent, getting what we think is full employment. Because we want the economy to catch up, and we also don't

want to make the mistake every other central bank has made, and that is raising rates too fast, too rapidly, too soon.


QUEST: A group of Syrian rebels has arrived in Kobani to help defend the border town against ISIS. About 150 Iraqi Peshmerga fighters as you

can see here in the picture are also on their way to Kobani to reinforce the defenders.

A mudslide in central Sri Lanka has buried homes and killed at least eight people. Media is reporting and certain government ministers are

saying more than 100 people may be dead. Up to 500 people are also missing.

Shares in the drug maker Sanofi, which is France's second largest public company, they took a strong beating. The board sacked the chief

exec. It said Chris Viehbacher didn't communicate enough with colleagues and wasn't good enough at putting strategy into practice. The stock had

fallen 11 percent on Tuesday after bad earnings. Putting it into perspective, Christian Mallard, international diplomatic consultant on the

phone from Paris. Now, Christian -


QUEST: Good evening, good evening. The question is was he really fired because he wasn't a good CEO or was he fired because he wasn't French

and French enough?

MALLARD: Well, definitely he has been the victim of a war between two men - himself and what they call the chairman of the Council of the Board

of Management of Sonafi, Serge Weinberg. I think the - it dates back - the whole thing started getting deteriorating last September the 4th when it

was proven definitely when Viehbacher wrote a letter to the members of the administration saying that he disagreed officially on the method on the way

of working of Serge Weinberg, the chairman -

QUEST: Right.

MALLARD: -- of the council. And Serge Weinberg has been at war, definitely, with Mr. Viehbacher since Viehbacher moved to Boston, because

Weinberg was definitely fearing that Sanofi would be anchored more and more in the United States in Massachusetts in Boston. So, it was definitely a

war between the two men, and when you read the communique announcing the hacking of Mr. Viehbacher, the terms used are very funny - they talk about

a lack of fidelity management and the lack of confidence and collaboration with the board of management incarnated by -


MALLARD: -- Mr. Weinberg.

QUEST: With that in mind, the way - the way - he put it all together. I mean, he tried to take - and he succeeded) - Sanofi into the big league.

He shied away from the big mega merger, but he made Sanofi a big player. Is there now a fear that Sanofi becomes parochial again?

MALLARD: Yes, definitely there is this fear all the more so has - as you know, Richard - ten percent of the income of Sanofi comes from the

product concerning Diavent (ph), and the last few days, they have been losing billions or fewer on that. They have been losing by a margin of 50

percent of the benefits they used to have. So it's a real problem for Sanofi right now on this key division with the medicine called Lantus and

they are fighting on that and all the more so as - also I would add that on his side, on his own without any consultation, Mr. Viehbacher sold 200 old

products - medicines - that nobody was aware of for a cost of 6.3 billion euro. So it seems definitely there is a lack of coherence (ph),

conciliation, worth (ph) working -

QUEST: All right.

MALLARD: -- inside Sanofi right now.

QUEST: Now we'll follow the man or the woman who gets the job in the future. Thank you, Christian, for joining us tonight from Paris.

MALLARD: Thank you, Richard.

QUEST: Good evening to you. Now, in just a second, Peter Stordalen - - or Petter Stordalen -- has put nearly all of his art collection - well he hasn't put them under the bed and they're not in storage. Where else would

you put your art collection? You put them into your own hotels in Oslo, and we'll show you them.


QUEST: This week's "Business Traveller" update, and we go to Oslo where we're going to meet a man who has put his own art collection at the

center of his very profitable hospitality business. The man involved is Petter Stordalen, and he's the chief executive of Nordic Choice Hotels. As

I found out at the Thief Hotel, there's no line between the comfort of a five-star hotel -- which he considers crucial for his flagship property --

but at the same time, you've got to have the cultural experience of a museum.


QUEST: What's important to you in this room?

PETTER STORDALEN, OWNER, NORDIC CHOICE HOTELS: Most of all that it's unique. Art here is Sir Peter Blake. This is the famous Sonja Henie, and

there you have Uh Huh, and you see it's a place where you just want to sit down in the sofa looking at the beautiful view of Oslo, or watch CNN on the

TV, and if you have to do some work, it's beautiful to sit here.

QUEST: But hang on, hang on, hang on, hang on - whose work - these are yours, correct?


QUEST: These are yours. Why did you want to put them on the - doesn't move, does it?

STORDALEN: Laughter.

QUEST: What's the point?

STORDALEN: Because this was something Sir Peter Blake made just for us, just for the Thief, and it's about the region (ph) heroes, the rich

history and that's why we have given you some of the history.

QUEST: How much of your collection is in display, and how much is still sort of - do you still have?

STORDALEN: Today 90 percent of all the - my - collection is in our hotels. That's everything from photos, paintings, sculptures, everything.

QUEST: And you're still collecting?

STORDALEN: I'm - I don't feel I'm an art collector, but I want the art to be -

QUEST: Sorry, sorry, sorry - say that again. You don't feel you're an art collector?



STORDALEN: But that - but that still gives you as a guest a unique experience.


STORDALEN: We do everything from super budget, I mean super-super budget until the Thief is more like a five-star hotel. We do spa hotel,

conference hotels, so we are more or less the jack of all trade hotel in the industry in Scandinavia.

QUEST: And then you have the Thief. More like a hobby than a business.

STORDALEN: And then the Thief. Which is more like a hobby, a dream, an ambition that once in my life, I get a chance to do something unique at

this location.

QUEST: Why do it in a hotel? You could've just built an art gallery or put your wing on another museum. Why did you want to do it in a hotel?

STORDALEN: I wanted to have art which it could easily be provocative. I mean, let's say we have something here where we have small young girls,

three sisters taking this decision - it's a video installation - this decision for life. Should I wear the hijab or not?

QUEST: But why in a hotel?

STORDALEN: Why not? It's like a museum, it's like you are coming here and you can remember the art, you will remember the people - not like

an ordinary hotel. We have the best beds, sofas, everything, but I want you to remember different things. Unique experience. Being different.

QUEST: So, which is it? Are you a frustrated art curator - you're certainly a collector -- are you a frustrated art curator or are you a


STORDALEN: I wouldn't call me a hotelier. I --

QUEST: (inaudible) a hotelier - with 170-odd hotels -

STORDALEN: -- don't -

QUEST: -- sir, you are a hotelier.

STORDALEN: I'm more a businessman.

QUEST: So your concept is what?

STORDALEN: That's based on something my father did teach me 40 years ago, and it's called the strawberry philosophy. That'll teach you one

thing - sell your strawberries because that's the only strawberries you can sell. And I took the philosophy with me because that's about make the most

out of what you have.

QUEST: Do you harbor grandiose ambitions secretly for a hotel in Paris?

STORDALEN: Not at all.

QUEST: London?


QUEST: New York?


QUEST: Do you want to expand?

STORDALEN: Yes, but I - Scandinavia is my market. The next step to be - to be -- Nordic to go to Finland, and then we are started up in the

Baltics. But I'd rather be a big fish in a small pond than a small fish in a big pond.


QUEST: Ah, all right. (PLAYING THE OPERATION GAME). Now, it's been part of so many childhoods for so many years - 50 years in fact. It's the

game of Operation. It turns you into an amateur surgeon. I rather think the holes are getting a bit bigger than as I remember them as a child.

It's not quite as difficult - well maybe it is -- (BUZZER). You gently remove the body parts one at a time, you don't touch the sides, the buzzer

sounds, the patient's nose lights up and you lose.

The inventor is a man named John Spinello. Now, he was paid just $500 for the idea. Hasbro now owns the game. As for Mr. Spinello, he needs an

operation of his own. It will cost $25,000. John Spinello's friends have started a crowd raising campaign to help him out. Tim Walsh is leading the

charge. He joins us now from Sarasota in Florida. Good to see you sir. Before we talk about how much you'd -


QUEST: -- raised, I have some news to bring to you that we have only just heard in the last few moments. And now, Spinello - Mr. Spinello, your

friend - said he'd planned to auction off his prototype of the game, correct?

WALSH: That is correct.

QUEST: Right. A short time ago, Hasbro sent me this statement. "Today we informed Mr. Spinello that Hasbro plans to purchase the prototype

with the hope that the funds will help defray his medical costs. We plan to display it at Hasbro's global headquarters to one of the contributions."

What do you make of that, sir?

WALSH: That's awesome. That's awesome. That's his prize possession, that prototype, so that's great.

QUEST: So not only does Mr. Spinello get the money for the operation - I mean, I would imagine Hasbro's not going to be mean about the cash at

this point - and if they are, they'll have me to deal with. But I would imagine-the game goes on display. How important is this game to Mr.


WALSH: Well, it's the game that got him into the toy industry in 1964, and although he only made $500, as you say, he is so proud of the

fact that it's touched so many lives. So, it means a lot to him because that is the prototype.

QUEST: Over the years, has he been bitter about the $500? I mean, you're shaking your head, but I can just feel him - you must be - it's, you

know. We've all had this thought of `if only I'd invented Monopoly or Operation or whatever. But he got $500 bucks.

WALSH: He's disappointed, --


WALSH: -- but that is the thing that I tell everyone that's amazing is that he is not bitter. He's - of course he wishes he could've gotten a

royalty, but he chooses to celebrate the game. He collects everything that has the Operation logo on it - from boxer shorts to shower curtains to

neckties, and when he meets people that say, `I loved that game when I was a kid' -

QUEST: Right.

WALSH: -- that brings him a lot of joy.

QUEST: You - without Hasbro's contribution, you were well on the way to raising the money necessary, and I suspect within short order, you would

have raised it. It's a testament to the messages you must have been receiving about him, to him, must've been very heartwarming in a moment of

great distress for him.

WALSH: Absolutely. We just today in fact - we got an anonymous message from a nurse, and she said, `This is from an Operation fan who got

into nursing because of this game,' and she gave us a $1,000 for the campaign --

QUEST: Well, you're going to get more money -

WALSH: -- because people have gotten into the -

QUEST: You're going to get more money from Hasbro. All I can say is please give him our very best wishes for his operation as and when, and

reassure him I will not be anywhere near the operating table. Now let me have a look -


QUEST: Thank you, sir.

WALSH: I will let him know that, Richard. Thank you.

QUEST: If I do here - help -- (BUZZER). When we come back, fighting crime in "The Dark Web." We're going to be inside the world's most

prolific credit card hacker ever caught. It's our special series "Dark Web" - next.


QUEST: A computer network that's used by President Barack Obama's top advisors has been hacked. Two officials have said it looks as though the

hackers were from Russia, and they hinted the hackers may have been backed by the government, though they can't be sure about that crucial fact. The

hack was apparently severe enough to shut down the White House staffer's computers last week. Hacking left, right and center. Kevin Mandia is the

chief operating officer of FireEye. His company published a report this week. He said the greater cybersecurity threat lies in state-sponsored

hacking from countries like Russia. A group they called APT 28. Before this latest news from the White House and the breach there, he told me how

groups like this distinguish themselves.


KEVIN MANDIA, CHIEF OPERATING OFFICER, FIREEYE: We're responding to a group where there's a lot of differences. One, we don't see any non-

military, non-security, non-government targeting - that's surprising. So, whoever's doing this doesn't appear to be stealing intellectual property,

doesn't appear to be stealing credit card data. So they're in some other purpose. If you look at what they're doing, and we outline it in great

detail in our report, the way they're breaking in gives us a good amount of purview into who they're targeting. And so we kind of know they're not

after the retailers, they're not doing drive-by shootings to hack you if you're vulnerable. They're selecting who they're going to compromise, and

just looking at those targets, it is government-based targeting. It's been going on for over seven years. That's an ongoing campaign, a well-funded


QUEST: It's an ongoing, well-funded company, but what - how do they do it? I mean, do they, you know, I - look - believe me I'm no expert in

this at all.


QUEST: Do they just literally attack all the defense companies' computer systems and you can just spot attack, attack, attack, and you've

then got to follow it back up the yellow brick road?

MANDIA: Well, there's a lot of different ways to pierce anonymity on the investigation. In this case, speaking of APT 28, the designation that

we gave this group, is every time we respond to a breach, or we have the purview of malware, what we do is we look at the trace evidence and the

characteristics of that breach and we put it into our intelligence buckets. With APT group 28, how they break in is with spearfishing. They will send

members of your organization an e-mail, but the e-mail has what we call a lure - the lure is a document that's armed with custom malware that APT

group 28 has been using - at least since 2007, because we have over 140 derivatives of the malware going back to 2007.

QUEST: These Russian hacks, are they a menace, a mere nuisance or a serious real threat to security?

MANDIA: I think right now we've known they've been going on, and they can happen - I think the general public has recognized that can happen and

I think you have to keep an eye on the geopolitical situation between our country and Russia to know at what level they become more than a nuisance.


QUEST: Now tonight, our "Dark Web" series brings us on the other side of the story. We're going to go to the hackers side to Vladislav

Horohorin. He was indicted in the United States in 2009. It was part of a two - a multimillion dollar credit card hack. He was arrested in France

the following year, eventually extradited to the U.S. He is now in prison. Samuel Burke managed to contact him and got his insight into the hopes and

motivations of the world's great hacks.


SAMUEL BURKE, BUSINESS CORRESPONDENT: This was the online persona of Vladislav Horohorin, one of the most prolific credit card hackers ever

apprehended. His nickname was `BadB,' and he used cartoons like this to promote his products - stolen credit card data. The U.S. Justice

Department says he helped steal more than $9 million from an Atlanta-based credit card processor. I contacted Mr. Horohorin in prison and received

this e-mail. I asked him if he had acted out of patriotism for his native land. In response he told me quote, "He had never been a big patriot of

something including Russia." But being there gave him the opportunities and resources he needed and "Crucially," he said, "it provided him with

more freedom and less boundaries there."

With a little more than two years left to serve, freedom is clearly on his mind. At an office on New York's Madison Avenue, I met with the

attorney who defended BadB, Arkady Bukh.

ARKADY BUKH, CRIMINAL DEFENSE ATTORNEY: The conviction was for attack on American Banks. The damage was a 200 thousand credit card numbers.

BURKE: Born in what was then the Soviet Union, he has defended some very high-profile Russian hacking cases brought to court in the U.S.

BUKH: They understand that United States and West is the enemy and this is not - and this is not a crime - at least moral crime. So far as

it's the enemy.

BURKE: So do they see them self as some time type of soldier in a way?

BUKH: Absolutely, absolutely.

BURKE: He says Mr. Horohorin fits the bill of a typical Russian hacker.

BUKH: First of all, educated. We're talking about at least the actual (inaudible) moderately (ph) often. They're not from the poor

families that hack. I mean, to have access to high speed internet, you have to be at least from middle class.

BURKE: And I'm just curious - you're Russian American. What do you make of this kind of Russia versus United States cybercrime that's going

on? Does it make you sad?

BUKH: Well, this is the reality, and I mean, some call it continuation of Cold War.

BURKE: Interestingly, the inmate is more optimistic than the attorney. At the end of his e-mail, he says when he gets out of jail, he

has some brilliant ideas and the resources to implement them. He emphasizes they will be legal this time. Samuel Burke, CNN New York.


QUEST: The fascinating story inside the mind of those who hack. We'll have a "Profitable Moment" after the break.


QUEST: Tonight's "Profitable Moment." As expected, tapering came to an end - QE is over and we enter a new perhaps more fascinating period.

Think about it, the Fed now has to not only decide when to raise interest rates, probably in middle to late next year, but also at some point, it's

got to get rid of that huge number of bonds on its books without scaring the horses and overturning the market. Be under no doubt QE may be over,

but for the Federal Reserve in Washington and for the U.S. economy overall, a very new, tricky, -- some say dangerous situation has begun. And that is

"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. Let's get together tomorrow.