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Quest Means Business
Greece's Financials Get A Glowing Review From IMF, EU Commission, and ECB; Russian Bans Grain Exports Due To Devastating Wildfires; Unilever's Problems; Wall Street is Hiring
Aired August 05, 2010 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INT'L. ANCHOR, QUEST MEANS BUSINESS: So the verdict is in and Greece makes the grade.
What price our daily bread? Russian bans grain exports due to devastating wildfires.
And tonight, on this program, Unilever's chief exec tells me the key to success, emerging markets.
It will all emerge over the next hour, because I'm Richard Quest and I mean business.
Good evening.
Impressive, remarkable, and ambitious: Tonight, has got a glowing review from the International Monetary Fund, the European Commission, and the European Central Bank. The officials of the so-called creditor representatives have cheered what they call vigorous efforts to put the Greece financial house in order. The reward will be nearly $12 billion more in financial support.
But the optimism comes with a word of warning. The road ahead is still long. Tonight Greece's finance minister in a press conference said it was a positive outcome. The next tranche of loan is safe. The first cycle has come to a close. The challenges ahead, there are no new measures. But there is a program that the Greek government will continue to strive for positive growth. That was the reaction from Athens. But officials from the creditor reps, ECB, EU, IMF, they spent a fortnight going through the Greek books at a time when many bureaucrats would, of course, been on a long vacation in the Greek islands.
Join me over in the library and you'll see exactly what we're talking about. The finances, the IMF and EU says that the economy this year will contract by around 4 percent, bear in mind Germany and the EU will grow by 2 to 3 percent. In 2011, they still expect a contraction from the austerity measures of around 2 to 2.5 percent. So Greece is going to be mired in recession for the foreseeable future. Also, they warn that there are worries and problems about overspending in some parts of the economy.
But as a result of this first interim report, they will get a $12 billion payment which will be made in September. It will allow Greece to refinance debt and continue to pay bills without having to go to the markets, the credit markets which are shut out for the Greek finances, at the moment. In total, $110 billion euros has been put on the table for the Greek economy. And the deficit target remains 8.1 percent GDP in 2010.
Just remember, though, the IMF and creditor reps said there were three areas that they were concerned about. Firstly, increased spending by a state governments, like hospitals and other authorities. Secondly, they were worried about structural issues. They said the Greek government had made a good start on pensions, and opening up the economy. Bu they worried that they wouldn't be able to fight back against the entrenched professional organizations and the protectionism within the Greek economy.
So, a short time ago I spoke to a senior IMF official about this. Poul Thomsen is the IMF's mission chief for Greece. Clearly, I asked, was this a case, a classic case, of doing well, but could do better?
(BEGIN VIDEO CLIP)
POUL THOMSEN, GREEK MISSION CHIEF, IMF: No, I think they have done as much as can reasonably be expected. As a matter of fact, the important area the program is ahead of schedule, right now. But the program has always shown there are pressure points and we need to deal with pressure points going forward.
QUEST: The pressure points that you identify in the statement really come down to budgetary issues that some of the local authorities and the hospital authorities are overspending, picking up the slack. And also structural reform, worries that the government may not be able to withstand the opposition.
THOMSEN: They really need to redouble efforts, to regain control at lower levels of government. Importantly, they expected to have problems there and therefore they over-performed at the state level. So the program overall is on track. Of course, difficult reforms still lie ahead and they will be fiercely contested by vested interests, but certainly what we have seen the last couple of weeks is that the government is determined to press ahead when it encounters such resistance.
QUEST: Obviously, as a result of this you will be recommending the next tranche of debt. But longer term, Greece still has to handle and deal with the rescheduling of the big vast amount of debt it has.
THOMSEN: I don't think that debt is the issue. I do think that the real issue is competiveness and growth, reforms to restore growth. It is not debt. There are many European countries with relatively high debt. The issue is growth. And I'm confident that if they really determinedly implement this program, spreads (ph) will come down, and they will regain access to markets and they will be able, you know, to gradually issue longer paper. Debt is not the issue, Richard.
QUEST: This statement from the representatives talks about this breathing space, as a result of the standby and the EU funds. Now, time will rapidly run out to make the necessary adjustments, if the momentum isn't maintained.
THOMSEN: Well, that is the point. As long as momentum is maintained, I think this is a sound strategy. Remember, we took them out of the market for two years. You follow these kinds of programs. This is quite extraordinary. Take them out of market for two years, because we know that the government, the past government did not have a good track record. We give them time to establish this track record. And with the kind of implementation we have seen in the past couple of months, now I am confident that they will establish a track record. I'm not trying to say that all the difficult things are behind us. Most of the difficult times are things that are ahead of us. But now with this kind of determined implementation, I think that they will convince markets that they are serious about fundamental change.
QUEST: A 4.5 percent contraction in GDP this year, a potential 2.5 percent in 2011, from my recent visit to Athens, the worry I heard about is social unrest.
THOMSEN: There is a considerable understanding that these reforms are necessary. The challenge is to make it socially fair. The challenge is this is not new, wage earners, pensioners, have certainly done theirs, with the way the pension cuts are up front. Now it is a question of having a more equal distribution of the tax burden. Equally important, to remove all these barriers behind which lawyers, accountants and pharmacies, are extracting high rents an imposing big, big, big costs on the economy.
(END VIDEOTAPE)
QUEST: That is Poul Thomsen of the IMF, one of the creditor representatives, our other big story tonight. And two major central banks today left interest rates unchanged, keeping them at historically low levels. The Bank of England kept its bank rate at 0.5 percent. Meanwhile the European Central Bank kept its lending rate, its holding benchmark rate at 1 percent.
The ECB, of course, also still offering unlimited amounts of money, but on a much shorter time scale. Both banks said that they would not, or saw no need to do anymore of non-traditional methods of monetary stimulus, in other words, quantitative easing.
Jean-Claude Trichet of the ECB, found the Euro Zone's recent economics surprisingly strong and he's cautious about Q3.
(BEGIN VIDEO CLIP)
JEAN CLAUDE TRICHET, PRESIDENT, EUROPEAN CENTRAL BANK: We are considering that we are in an environment of uncertainty. We are considering that we should not be complacent in any respect. Of course, we had good indications whether (UNINTELLIGIBLE) that are served better. And we, as I said, we considered that both would, I would say, the second quarter, and probably the third quarter, are likely to be probably better than had been anticipated and had been expected, if I may.
But we would certainly not consider that we have to declare victory, that we are now in a mode of active growth. It remains uncertain. It remains uneven, as I said, on behalf of the governing council. And we in a situation where, it is clear that probably the second semester will be much less buoyant than the second quarter, which we expect to be particularly flattering.
(END VIDEO CLIP)
QUEST: Jean-Claude Trichet, the president of the ECB. Both results, we imply we are always listening to what they said, but the outward (ph) decisions were well factored into the markets. So, neither Trichet, nor the news on Greece really offset jitters in the euro bourses, where the U.S. weekly job numbers came in worse than expected. And that is pretty much what took the shine, 2 up, 2 down, very small moves, or overall moves. And as I'm-you're going to be tired of hearing me say this. It is August, so we need to make sure that one market session does not a summer make.
(DESK BELL CHIMES)
Into the markets in New York, to make the point even clearer. Hardly going to get excited down 24 points, but when we talk to Felicia Taylor later in the program, you will get an understanding of those jobs numbers and why it is significant.
OK. The banner week for banks continues. Barclays opened its books and joined the club of banks making bumper profits.
And a price surge after a major announcement from the Russian prime minister. It is all about wheat, a devastating crop and a record high on the exchanges, in a moment.
(COMMERCIAL BREAK)
QUEST: Russian Prime Minister Vladimir Putin has put grain exports on ice and in doing so, really disrupted the markets. He made the announcement after a drought and fires devastated crops throughout the country. The export ban will take effect from August 15 to December 1. And it will effect wheat, corn, barley, rye and flour. Put this in perspective, Russia is the world's third largest wheat exporter. This is Mr. Putin's announcement earlier today.
(BEGIN VIDEO CLIP)
VLADIMIR PUTIN, PRIME MINISTER, RUSSIA (through translator): Due to abnormally high temperatures and drought I consider it feasible to impose a temporary ban on exports from Russian of grain and other farm products derived from Russian grain.
(END VIDEO CLIP)
QUEST: Supply was tight to start with. The decision by Mr. Putin sent the prices of futures soaring to a 23-month high, as you can see. Wheat futures on the CBOT, the Chicago Board of Trade, rose to $7.85, a bushel. Now, keep in mind that is still a long way short of the 13.34 a bushel that we saw in 2007. But the momentum is clearly rising. And there is concern of course, that that 7 and change will just be a staging post, if there isn't some form of increased supply.
To understand the Russian decision I turned to our Senior International Correspondent Matthew Chance in Moscow. I needed to know what effect the ban on wheat might have outside Russia.
(BEGIN VIDEOTAPE)
MATTHEW CHANCE, CNN SR. INT'L. CORRESPONDENT: I think what Vladimir Putin is most concerned about, of course, is the domestic impact of this terrible drought that has seen these wheat crops diminish by 26 percent, more than a quarter on last year's harvest. He's worried to death this is going to mean that there are going to be higher bread prices, higher food inflation in Russia.
And of course, it is the domestic market that Vladimir Putin, as the prime minister of Russia, is most concerned about. He's not at all concerned about what this is going to do to global grain prices. And of course, we have already seen that those prices have risen to a 23 month high, as this news of the block on exports from Russia, which is the world's third biggest wheat exporter, was announced, Richard.
QUEST: What are-to use that dreadful phrase-ordinary people saying about this. I'd say see the price of staples, of bread, for example in Moscow, is an extremely important commodity. What are they saying?
CHANCE: This is one of the reasons why Vladimir Putin has made this move, to prevent the kind of criticism that would come if bread prices would rise in the way that they are going to rise, in other countries dependant on Russian grain imports. And what Vladimir Putin is trying to do is cut off any domestic criticism. They are very sensitive in the Kremlin and in Vladimir Putin's office, as the prime minister, to what people say about them.
And there has already been a whole load of criticism around the country that the authorities didn't do enough to prevent the wildfires from sweeping across vast areas of Western and Central Russia. And they have tried to crack down on that. And so the authorities are trying to make sure there is a very limited amount of domestic criticism against them.
QUEST: The crop is in the ground, it is being harvested, it is going to be a dead of a crop, as you were just telling us. So, there is not much more that can be done in harvest, or summer harvest 2010. How significant then is it for the second harvest and into next year?
CHANCE: I think the big concern now is what will happen to this year's grain harvest, as you rightly pointed out, the harvest already in. It is already 26 percent down. Nothing can be done about it. But it is the quality of the soil right now. I was speaking to some farmers in the Veronage (ph) area, which is one of the areas that has been most severely affected by not just the fires, but the drought as well. It is a very agricultural area. They are expressing their concerns that the soil is so dry now. It is like sand. It is not fertile anymore. This is black fertile soil that should be really, being got ready now to be planted again for the winter crops. So, what we may see is a knock on effect now. Not just on this crop, on the next crop as well.
(END VIDEOTAPE)
QUEST: Matthew Chance joining me from Moscow.
There is a lot more on QUEST MEANS BUSINESS. Despite a big hike in profits investors off loaded Barclays shares. What does that mean for my stake in Barclays? Canny viewers will remember I bought some Barclays at the bottom of the market. Where are we now?
(COMMERCIAL BREAK)
QUEST: Barclays has joined the list of banks reporting strong numbers this week. The banks saw a 29 percent hike in first half profits, to $3.9 billion. That is a sizable amount of money. For a bank that didn't take any government loans, or bailouts, during the crisis. Barclays is also setting aside less money to cover bad loans. And that made for a big drop in investment banking revenue for the second quarter. You give some you take some, the loans versus the investment banking.
BarCap's Q2 was down 15 percent. The numbers weren't pleasing to investors. Shares in Barclays closed down more than 4 percent. The president of Barclays, and head of BarCap, Bob Diamond was asked about bank lending. For many people the issue now is that the banks are simply not lending enough.
(BEGIN VIDEO CLIP)
BOB DIAMOND, PRESIDENT, BARCLAYS, PLC: Our numbers are very, very clear. And the full year 2009 we did 35 billion pounds of lending to consumers and to businesses. In the first half of this year it was 25 billion pounds. Now, that was flattered by a 7 billion pounds in lending from Standard Bank, which was an acquisition during the first half of the year. But by any measure that is strong performance. Our approval ratings across the sector, consumers and businesses are running between 80 and 90 percent.
We recognize the responsibility we have for lending in the domestic market in the U.K., and the other markets that we operate in around the world.
(END VIDEO CLIP)
QUEST: Bob Diamond of BarCap. Staying with Barclay share price, I have always said I couldn't sell water in the desert. But even I can spot a real bargain when is necessary. And my Barclays shares, you'll remember, when we launched QUEST MEANS BUSINESS, I bought Barclays shares right the way down there. I paid 60 pence a share. Now, since then, of course, I could have got-I bought 1,000 shares. I could have got out here. I probably should have got out here. But I didn't. So I've seen the best to come and go, and my-even at this current price of change, my current 600 pounds investment, is worth 3,240 pounds.
And perhaps, just perhaps, when it comes down to sell them, we'll have a competition about what I should spend the money on.
Other corporate news that really made the day. Shares in Randgold Resources slumped on Thursday. It was another company that had results but the market didn't like what it saw. The West African focused gold miner says production this year may fall short of its original target. But profits did shoot up 52 percent. That was the higher gold price. Once again, give and take.
I spoke to the chief exec, Mark Bristow, and I asked him, when you look at the numbers it is clear, some areas of his company need attention.
(BEGIN VIDEO CLIP)
MARK BRISTOW, CEO, RANDGOLD RESOURCES: A good and bad quarter, in many instances, we've suffered from some (UNINTELLIGIBLE) problems in the expansion in Lulow (ph), but at the same time our new mine, which is going to make some significant-a significant contribution to our year end results, is about to come on stream.
QUEST: The totality remains the same, at a time when gold prices themselves-I mean, that softness that we saw just a couple of weeks ago, seems to have evaporated over the last say 48 to 72 hours.
BRISTOW: Richard, you know, these short-term-you know, you can't play this market in the short term. You'll get very confused. There are some long-term issues here that we are going to deal with. Both-you know, mining is a long-term business and so is fixing economies.
QUEST: In the past your problems in mining, they've been technological, in some cases, getting the stuff out of the ground, getting the equipment, equipment breakdowns. Are you now comfortable that you are over those sort of hiccups?
BRISTOW: No, I don't think so, Richard. We certainly are on top of them. I don't believe we over them, and I'm not sure you ever get over them trying to run these big industrial complexes, and in very remote sites with, you know, challenging infrastructure, etc cetera. But certainly we are on top of this one, in the form of the Lulow (ph) project, and we expect to deliver against our remedial actions, so to speak, over the next two quarters. And then, of course, I'm sure we'll have another one to deal with in the near future.
QUEST: So, when do you hope to be able to raise the guidance on total production?
BRISTOW: Oh, Richard, not hope, we plan, significant improvement in production in 2011, as we bring in a new mine. And as we deal with the expansion project at Lulow (ph) and then behind that we have got Gonkoto (ph), which is going to augment the Lulow (ph) production. And then we have just brought forward our Congolese gold project by six months.
QUEST: Right.
BRISTOW: So that will continue to add to that growth going out four years.
QUEST: Briefly, let's finish on interest rates. Because the Bank of England and the ECB both leaving interest rates at historic lows today. I suspect you rub your hands with glee at the prospect that that only stokes a certain element of future inflation, which of course, is good for gold.
BRISTOW: Absolutely. I think, you know, I think right now if you leave it to the politicians they are very good at driving the gold price up.
(END VIDEOTAPE)
QUEST: The ever diplomatic Mark Bristow of-joining me earlier today.
Now, shares in Rio Tinto closed up half a percent in London. The other mining company, the global giant reported a record first half. Profits more than tripled to $5.85 billion. It was boosted by strong demand from China and high commodity prices. A stellar performance if you consider a year ago Rio was struggling with massive debts from its purchases of Alcan, as well as dealing with the financial crisis.
OK, look, there are companies and there are companies that make things that, frankly, is quite extraordinary. In the world of corporate giants, Unilever had results today. They claim 160 million times a day somebody, somewhere, chooses a product in their shopping trolley. We'll be talking to the chief executive in just a moment.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. QUEST MEANS BUSINESS, this is CNN. And on this network the news always comes first.
(NEWSBREAK)
QUEST: She assumed they were from Charles Taylor. Campbell testified today at Taylor's war crimes trial at the Hague. The former Liberian president is accused of using illegally mined diamonds to fuel and fund civil wars in neighboring Sierra Leone. Prosecutors want to prove that Taylor possessed so-called blood diamonds.
Kenya's president says a process of national renewal has begun after provisional results in yesterday's referendum have been reported. They indicate that Kenyans have approved a new constitution by a 2-1 majority. Official results expected soon, but opponents are already conceding defeat. One even said that every Kenyan is a winner.
Fourteen naturalized American citizens are now facing terror charges in connection with a Somali militant group. The U.S. is accusing them of providing money, personnel and services to Al Shabab, which the U.S. considers a terrorist organization. At least two of the suspects have now been arrested.
A week after devastating monsoon rains and aid is now finally reaching some of the flood-ravaged regions in Pakistan. Humanitarian groups began delivering supplies to victims who have been cut off for days. The United Nations has sent a special envoy to help with relief efforts. At least 1,500 people are believed to have been killed. More than three million more have been affected by the floods.
The consumer group's giant, Unilever, is warning of a rocky road ahead. Now, chances are if you and I rifled through our cupboards, we'd fine one or two of their products. For instance, this is out of their washing powders, a bit of a shower gel and deodorant, Lipton's tea, A Matter of Protection deodorant, North casseroles, and, of course, Magnum ice creams. I'm not advertising Unilever products. I'm showing you this because this is just a fraction of what this company produces. It is ubiquitous. It is just about everywhere.
Now, look at the product names themselves. Unilever's Dew One up 14 percent in the first quarter, $1.4 billion. The surge came with a warning -- the rest of the year faces rising pressure from competitors and higher commodity costs. Unilever itself accepts that it has to do a better job of promoting these to -- these tony brands.
I spoke to the chief exec, Paul Polman.
I put it to him, the headline number is impressive, but their mature markets are slowing down.
(BEGIN VIDEOTAPE)
PAUL POLMAN, CEO, UNILEVER: Well, we've seen that. The market in the U.S. is slightly down and the market in Europe is flat. So you're totally right. And that puts a brake on the growth that we get from these markets.
We've responded to that by stepping up our innovations and spending behind those innovations. And we're not afraid to introduce even new brands in these markets. And that obviously gives us a little bit of growth. And that's where you see the small, modest share growth in those markets.
QUEST: What are consumers telling you, though, about what they are feeling in their economy?
Because looking at a company like yours, it's a perfect way that we can understand the real economy.
POLMAN: Well, consumers are probably thinking twice a little bit of spending their money and their value, but they are still looking for where do I get the best deal?
QUEST: So what's your gut feeling telling you what's happening at the moment in the world and in the economy?
POLMAN: I still see a polarizing world. You see a continuing struggle in the emerging markets -- in the developing markets, no doubt about it. I have always said the last time we met, that we're in for a long and slow recovery. The amount of deleveraging that needs to be done is enormous. Don't deny that -- slow growing markets, driven by unemployment and consumer confidence not moving up.
But then, on the other hand, you see the emerging markets, where we have 55 percent of our business continuing to motor ahead -- Indonesia, Vietnam, Brazil, India, China. And there, obviously, we're benefiting from our strong positions.
QUEST: Every chief executive tells me now about the beauty of the emerging markets.
POLMAN: Right.
QUEST: But what I'm keen to hear about is what you can do in the developing markets, in the EU, in the U.S., where we're seeing this sclerotic or slow growth?
POLMAN: Yes, well, what you have seen for Unilever, specifically, in Europe, we've had several years of decline in our business. If you now look at the last six months, Richard, we're going up about 2 percent in Europe. So I believe that you can grow in Europe, provided you innovate at the right value equations and provide it to the consumer, there's no reason why you cannot grow.
So I think that we will see, hopefully, moving forward, a slow but steady growth coming out of these regions, driven by innovation and, obviously, ruthless cost control.
QUEST: That's a fascinating -- I love the way you say ruthless cost control.
POLMAN: That's right. Absolutely. Absolutely.
QUEST: Is that where your -- your beady eyes firmly...
POLMAN: Oh, no, as a -- and Europe is absolutely a must. We cannot live in economies that don't grow and expect salary increases every year or higher costs, because consumers are not able to pay for that.
QUEST: Are you worried about the austerity measures now being introduced around the world?
POLMAN: We -- not around the world, in the -- in the developed markets. You have to be careful. They will definitely take time to see the economies growing again, that money is taken out of somewhere. But you see, we have one advantage. Where we see the biggest change was in big ticket items. You might decide not to buy your flat screen TV, postpone the purchase of your car for a year and we have seen that. You save 1,000 euros, 2,000 euros. On our products, you only spend five or 10 euros. So you're freeing up a lot of money and -- and that gives a lot of opportunity for us.
I'm personally not too worried about it.
QUEST: Finally, what's the average spend on your product?
POLMAN: It depends on what country. It depends by country.
QUEST: All right...
POLMAN: But if you take the U.K., if you are a loyal customer of ours, 300 to 500 pounds a year.
(END VIDEO TAPE)
QUEST: He'll be lucky getting that much money out of my pocket. I wait for things to be on sale. A good bargain is always worth having.
Still to come, a high powered headhunter tells all on the eve of the big jobs report. Your prospects of getting hired on Wall Street.
QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
QUEST: The New York Stock Exchange demands our attention. Stocks are losing ground. But do not get too upset or excited.
Felicia Taylor, I hope you're not going to try and convince me that a loss of 25 to 30 points is something I need to get in -- suffer indigestion over.
FELICIA TAYLOR, CNN CORRESPONDENT: Not today, anyway. Pretty much everybody is waiting for the monthly job number that will come out tomorrow, before anybody makes any real commitment to the marketplace. The jobless claims have hovered at about 450,000 all year. We all know hiring trends are slow. The labor market is really moving very quickly. Unfortunately, it's not even improving.
This week, though, we saw a lot of conflicting reports. Today, we saw the weekly claims rose to 19,000. That was a large expectations were for a drop of 2,000. So that was a -- a big surprise for Wall Street.
There should have been more reaction in the stock market, but there isn't. They're kind of holding tight. It's only fueled anxiety that tomorrow, we could get an even bigger surprise to the down side.
And all this week, we've talked about this already. We've heard from the private sector. ADP showing that jobs grew for the sixth straight month in July, adding about 42,000. The July number could be distorted. A number of reasons for that.
We've got shutdowns of auto plants. It's not a time when companies hire, naturally. It's the middle of the summer. It will also be skewed by temporary workers. They were hired for the 2010 Census. They are now out of work. But keep in mind, those were always temporary jobs. You can't really consider that as a real job.
QUEST: We -- look, when we see the number tomorrow, should we concentrate...
TAYLOR: Yes?
QUEST: -- on the headline number of unemployed, which is often a distorted figure because of people falling in and out of the workforce, or the number of jobs created versus lost?
TAYLOR: You should concentrate on the number of jobs created. That is very significant. And the biggest problem that the administration has been facing recently is whether or not a number -- those jobs have been created. You're taking a look at the big number tomorrow, which takes into account government and private sector jobs. We're hoping to see -- the expectation is a creation of about 80,000 in the private sector. That's great news.
If we get that kind of a number, you're likely to see a spike in the - - in the stock market. You've got to remember, more than eight-and-a-half million people are collecting benefits. In July, that's just about the same number of people who lost their jobs during the height of the recession in '08 and '09. The lack of job growth is the major issue here.
So when -- if we see that in the government sector and the private sector tomorrow...
QUEST: Right.
TAYLOR: -- it will be a good thing. But keep in mind, all along the market has been looking for the positive. Traders want to drink the Kool- Aid of a great recovery. The proof will be in the numbers tomorrow.
QUEST: And just while we're -- we've got a second or two in hand so we can explore this off agenda slightly, there's a large number of people in the U.S. that have fallen out of the unemployment -- the global totality, the 8.99 percent unemployment number. They're no longer eligible for benefits.
TAYLOR: Well, send me the question again.
QUEST: Well, the -- my -- my question is that when we see the total number of people unemployed, we can sometimes -- it can sometimes...
TAYLOR: Right.
QUEST: -- be distorted because people are not eligible for benefits or they're no longer claiming benefits or they've simply stopped looking for jobs.
TAYLOR: That's absolutely true. I mean there's a lot of distortions around this number. But nevertheless, that doesn't mean that Wall Street isn't going to use it as -- as a the same kind of impact around the marketplace and whether or not they trade on it. You're absolutely right, there's many different distortions around the number, some of which I already went through...
QUEST: Right.
TAYLOR: You're right. There's a lot of people that are no longer even looking for jobs because they're older, they're -- the benefits have also been extended for 99 weeks in some states, as opposed to the 26 that we had been seeing. I mean there's a lot of reasons why it's not exactly as it seems from the -- from the -- from the surface.
But the point is, is the market wants to accentuate the positive. It wants to believe that we are recovering. As I said earlier in the week, there's one trader out there, he still believes it's a house of cards and not as positive as one would hope.
QUEST: I listened carefully to what you said, but I was fixated on your broach.
Is it a bee?
TAYLOR: I did it just for you.
QUEST: It's on the other side.
TAYLOR: It is. Oh, there it is. It's over there.
QUEST: Is it a bee or is it a plain or is it a...
TAYLOR: Thank you.
QUEST: -- (INAUDIBLE)?
TAYLOR: He flies around. It's a bee, can't you tell?
QUEST: Well, no. All right, fair enough. Fair enough. It's pointing in the right direction, pointing up. That's the wishful, hopeful that you've got...
TAYLOR: Up...
QUEST: Yes.
TAYLOR: -- that's the way we want to go.
QUEST: But...
TAYLOR: But not in the red.
QUEST: I mean I was going to say, that's the Madeline Albright school of broaches, whichever way the bee is pointing.
OK, many thanks, Felicia Taylor.
I'm going to quit while I am ahead. And I'm not that far ahead today.
One hard hit sector of the economy is adding to its payrolls again. It is Wall Street. Yes, I know you may find that hard to believe, but Maggie Lake talked to a high powered corporate headhunter who says financial talent is once again in high demand.
(BEGIN VIDEOTAPE)
MAGGIE LAKE, CNN CORRESPONDENT (voice-over): Richard Stein has been placing executives in high powered finance jobs for more than 25 years. He's seen boom years and bust for his industry. He says 2010 is definitely one of the good years.
RICHARD STEIN, PRESIDENT, GLOBAL SAGE: Well, we're seeing a lot of rapid growth since the second quarter. This is traditionally a quiet time for Wall Street. But we've never been busier. We've been contacted by the CEOs of a number of Wall Street firms that are hiring in a number of areas.
LAKE: After shedding more than 25,000 jobs during the worst of the recession, Wall Street firms added 2,000 workers to the payrolls between February and June. Stein says global giants like Goldman Sachs, Credit Suisse and Deutsche Bank are all beefing up staff in New York, as are smaller, boutique firms like investment bank, Centerview Partners.
BLAIR EFFRON, CO-FOUNDER, CENTERVIEW PARTNERS: We're hiring. Others are hiring, as well. And as much as anything, that is a reflection of the mood improving in the financial community, slowly but certainly steadily.
LAKE: The hot jobs in demand include private banking and asset management, also, risk compliance as necessitated by the recently passed financial reform bill.
But despite this hiring up tick, experts say there is little job security, even at the senior level. And the mood on Wall Street, while bullish, is far from buoyant.
STEIN: There isn't the kind of irrational exuberance in terms of hiring 12 people and writing blank checks. There's a lot more due diligence in the process. And I think with Washington and corporate governance and the regulations, there's also a growing emphasis on actually doing it right this time.
LAKE (on camera): Are they just sort of getting back to basics, to try to make up the -- the extreme cuts we saw?
Or do you have a sense that this is actually sort of building for the future and there's momentum here?
STEIN: I think it's a bit of both. I think it depends upon the institution. A lot of the U.S. domestic institutions, investment banks, are in catch-up mode.
LAKE: If they're out and they're hiring, do you think that bodes well for the broader economy or is this just you think it's a big pocket and we can't make that correlation anymore?
STEIN: I do think that Wall Street is a preparader (ph) of things to come. The leaders of Wall Street -- the CEOs of Wall Street are bullish on this country. Their investments in their businesses, I think, bode well for Main Street.
LAKE (voice-over): Every job placement here, Stein believes, is a sign of hope in the economy as a whole.
Maggie Lake, CNN, New York.
(END VIDEO TAPE)
QUEST: You may be noticing a pattern emerging this week. It would be hard not to. Barnstorming bank results. Barclay's, TopGen (ph), Lloyd's, beating the market expectations. It makes us wonder if the good times are really back on the way to the financial industry.
And if it's so, what about the rest of us?
Jim Boulden has been to London's financial district.
He met 2,000 bankers. And, yes, they were ready to party.
(BEGIN VIDEOTAPE)
JIM BOULDEN, CNN CORRESPONDENT: Well, with Britain's banks reporting better than expected profits this week, maybe the mood is changing here in London's financial district. Maybe people are feeling a bit more confident. In fact, there's a big party going on in the center of London where people will certainly be talking again about bank bonuses and talking about the mood and feel.
So we thought we'd come here and see just how people are feeling here in London's financial district.
MARTIN DEESON, EDITOR, SQUARE MILE MAGAZINE: We do these parties to give something back to our readers. The bankers have had a tough couple of years, like everyone has, and they've been even more unpopular than journalists for the last couple of years. And we want to make them feel good about themselves.
I think everyone knows that things have changed. I think it will be a long time before we go back to the old days and the boom time massive bonuses, buying two Porches, that kind of thing.
BOULDEN: You look like you're really enjoying that?
PETER TAYLOR, MANAGEMENT CONSULTANT: I was.
BOULDEN: Something you need after a hard day?
TAYLOR: Of course. Absolutely.
BOULDEN: Do you work in the city?
TAYLOR: I work sometimes in the city. It's frustrating sitting in front of a computer.
BOULDEN: And how would you describe things right now?
TAYLOR: I think we're still being a bit optimistic.
BOULDEN: Too optimistic?
TAYLOR: A little bit.
BOULDEN: Do the people here have a right to celebrate?
I think you know what I mean.
Do they have a right to say we make a lot of money, we're doing well for the economy or we going to do well for the economy again and we have a right come out and have a few drinks and have a good time?
MIKE BAGHDADY, TRAININGTRADERS.COM: Absolutely. Always -- it's always a good time to come out for a couple of drinks. The economy is jumping back.
UNIDENTIFIED MALE: Most folks keep a low profile, but also, a lot of people understand that we work very hard, but this new tax is coming into play that takes 50 percent away of our bonuses and our pay. It's just very hard. It's a high stress level. There's a high burnout level in the city and I don't see any reason why people who stick with it shouldn't be well rewarded.
BOULDEN: Did you have friends that might have lost their job and have you seen them coming back and getting jobs again?
JULIA COAKLEY, LARK INSURANCE: I did. I -- I think there's -- I think if you have a certain set of qualifications, that in certain fields, I think you're OK. The only difference is if you've got a company like Lehman Brothers, you've got a huge number of people at the same time looking for the same position.
But I do have a friend who was in that position and he found something quite quickly, albeit initially on a year's contract. But I think he's fine. He's fine now.
BOULDEN: I think two words sum up the mood in there -- cautious optimism.
Jim Boulden, CNN, London.
(END VIDEO TAPE)
QUEST: It may be a cautious optimism, but Jim will still be working back here tomorrow.
Now, when it comes to buying property in Hong Kong, it might surprise you to learn you don't get much for your money. There is a pioneering homeowner who's thought outside of the box and he's living in it. And we'll show you how he does it, in a moment.
(COMMERCIAL BREAK)
QUEST: In Hong Kong, property is at a premium and prices just keep going up. While a perfect home is beyond the grasp of most people there, some are refusing to feel the squeeze. Instead, they're squeezing the space.
Anjali Rao explains how they're doing it.
(BEGIN VIDEOTAPE)
ANJALI RAO, CNN CORRESPONDENT (voice-over): Hong Kong is among the most densely populated places on earth. With seven million people sharing just 1,100 square kilometers of land. As you can imagine, demand for space is enormous. Even the dimensions of the windowsills are included in the size of properties. Sure, there are ways to make less look like more, by, say, placing a mirror here and there. But Hong Kong architect Gary Chan has gone one better.
(on camera): So this is 300 and...
GARY CHANG, DESIGNER: Yes, 50, 60 square feet.
RAO: Square feet.
CHANG: Absolutely.
RAO: That's about 32 square meters, something like that.
CHANG: Yes.
RAO: And it turns into how many rooms?
CHANG: Mathematically, it's quite endless. But roughly, it's at least 20.
RAO (voice-over): Twenty rooms in that tiny space?
How is that possible, you may ask?
CHANG: It involves me moving from one room to the other. In this home, the space changes for me. The idea is when you close...
RAO (on camera): Yes?
CHANG: -- things up here, OK, it touches one of the walls (INAUDIBLE) the TV, the wall (INAUDIBLE) roof, as well.
RAO: Behold, the kitchen.
CHANG: And the funny part is the kitchen is a (INAUDIBLE) because it's more bigger. And this is the (INAUDIBLE) mini bar.
RAO: I see that. Not so many.
(voice-over): Nothing goes to waste here. A few more wall shifts reveal the master bedroom, the office, a laundry area, a scarfing (ph) bathroom, guest accommodations and more. There's even a mini movie theater.
Out of the box thinking for one who's upbringing was traditionally Chinese. Gary grew up in the very same apartment over 30 years ago, sharing it with his mother and father, three sisters and a tenant.
(on camera): Oh my god.
Did you not get on each other's nerves?
CHANG: Yes, but I -- I have always said this is like we have to learn the art of living close to each other. And one thing is I remember is we speak quietly.
RAO (voice-over): This city isn't alone in suffering the close quarters quandary.
CHANG: I would try to argue it's now global.
RAO (on camera): Right. Yes.
CHANG: Yes, I see (INAUDIBLE) bring my home, you know, everywhere from the outer London and the upper (INAUDIBLE) people always come in and they say, oh, my home is similar.
RAO (voice-over): Hong Kong's biggest little home even works as a party pad. Gary once entertained 20 friends here. He admits that when guests wanted to have private phone conversations, well, they had to do it in the shower. But it seems a small price to pay for all that space.
Anjali Rao, CNN, Hong Kong.
(END VIDEO TAPE)
QUEST: That's what you call ingenuity. And Hong Kong can be a challenge if you don't like the heat and humid weather.
Guillermo Adruino is at the CNN World Weather Center.
I personally quite like it when I get off the plane at...
GUILLERMO ARDUINO, CNN METEOROLOGIST: Oh, you do?
QUEST: -- well, yes, there's a real feeling of it hits you in the face.
ARDUINO: Oh, well, I like it inside the airport, not outside. It's been raining like crazy and we're going to see some more rain. Now, I was looking at the satellite picture. Hong Kong, of course, is in here. You see how much rain is going through. I was concerned.
I stopped and I said, OK, are we getting a lot of rain here?
So we're looking into this because we have some days of rain in the forecast here, especially the southern parts of China. Remember we had the terrible flood. It's 2:53 in the morning in Hong Kong as we speak.
Well, we are going to see some thunder in Hong Kong. So, also, many areas of Asia are under a lot of rain. Needless to say, Pakistan and India, where the monsoon, of course. You know, that's the main story in the weather units in here.
I'll talk about Russia, too.
But the southern parts of Vietnam, we see a lot of rain, as well.
Now, Australia -- five -- almost five in the morning in Sydney. Like seven in the morning in New Zealand. And 3:03 in the morning in Perth. You see we saw last week a lot of snow and we're going to see some more snow now, especially here in the Alpine -- the Alps, the Australian Alps here. It's winter that is going on in the Southern Hemisphere. So Friday is going to see some snow.
It is, right now, seven degrees in Sydney. Again, it's almost five in the morning. Eight in Wellington, the capital of New Zealand; and eight in Perth, three in the morning there.
OK, look at Russia.
Can you believe that we're going to see, again, close to 40 degree marks in Russia, in Moscow, especially?
We are way above average, almost a month with the terrible fires and record breaking temperatures. You see Ukraine, also close to 40 degrees. You see the contours here, very hot. London, 21 degrees in the forecast. And we see some cooling trends, but you know what, Richard?
I think the weekend is not going to be nice. But Sunday and Monday will be much better.
QUEST: Oh, hey, hey, I don't care. I'm going on assignment tomorrow to Cairo, where I suspect...
ARDUINO: Oh.
QUEST: -- temperature is a little bit warmer, Guillermo.
ARDUINO: Yes, like you like them. You'll get it.
QUEST: (INAUDIBLE).
All right, Guillermo, many thanks, indeed.
ARDUINO: Thank you.
QUEST: Guillermo at the World Weather Center.
And interest rates will be much on my mind in a Profitable Moment, after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's Profitable Moment.
Both the Bank of England and the ECB left interest rates on hold at historically low levels. There are members of both of these who would like to see rates rising now.
Well, at first, I thought are they mad?
Surely the recovery is so fragile, that rates need to stay this low. If you look at the average bank rate in Britain, it's around 5 percent. Historically, that's where rates have been.
For the ECB, rates have been around 3 percent. Rates, as they stand today, are unrealistically and, some say, dangerously low. Borrowers are taking out loans on rates that won't last. They will feel the pain when rates go up.
And finally, if economic growth does start to pick up, these rates will be hiked away fast.
So, my argument to you tonight, isn't it better, perhaps, to have a tiny rate right now getting back to normal rather than the risks we'll be running in the future?
And that's QUEST MEANS BUSINESS.
I'm Richard Quest.
Whatever you're up to in the hours ahead, I hope it's profitable.
"WORLD ONE" starts now.
END
