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Quest Means Business
Regulators Block AT&T Merger With T-Mobile; Tax Break Standoff; Interview with Glenn Hubbard; Star Wars Online; World's Oldest Stockbroker
Aired December 20, 2011 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR: Get ready. Some seasonal cheer is here. Some markets are swinging sharply-higher. Reach out and touch someone, so long as it is not T-Mobile. AT&T abandon's its bid.
And tonight, we meet Irving Kahn, he's a 106, and an investor manager, still giving youngsters a run for their money.
I'm Richard Quest. I mean business.
Good evening.
It is the week before Christmas, a time when normally things are quiet; investors shunning the markets and most people heading off for an early break. Not so this week. It seems everybody has a bit of buying on the brain. Markets are up very sharply. The Dow Jones industrials in New York, as you can see in the screen, it is up more than 300 points.
The question of whether it is a Santa Clause rally, is a question for Felicia Taylor. Who joins me now from New York.
When I just last looked a second ago, 306, or change, on the Dow. You're smiling Felicia.
FELECIA TAYLOR, CNN BUSINESS CORRESPONDENT: Ho, ho, ho. Technically this is not actually considered a Santa Clause rally. That happens in the last five days of the year and the first two days of January. But nevertheless, we are seeing some very attractive gains. I'm afraid to say, though, that a lot of the traders have already left for the holidays, for this week. So a lot of this can be attributed to computerized trading. Obviously, they don't go on holiday.
So what this is-it can be attributed to, is number one, we got some good news on the U.S. economic front with regards to housing starts. They are up more than 9 percent. So that is clearly a good indication. But frankly, the housing market has been so beaten down, that that really doesn't make that much of a difference. We are going to get more numbers up toward the end of the week in terms of existing home sales. We'll see if there is actually a trend to be perceived.
But what people are really focusing on, still, is the European market and what is happening in the Eurozone. We had a decent Spanish bond auction, we have had good news out of Germany in terms of business confidence. And that is what matters more right now, to traders, even here in the U.S. despite those economic numbers.
So, it is not really a Santa Clause rally yet, but you know, hey, what's wrong with 300-point gains?
QUEST: 300 to the good is better than 300 to the loss, if you are long in the market, at this point of the year.
TAYLOR: You bet.
QUEST: OK, so what we are really seeing Felicia, is the tone of volatility, which has been the markets signature throughout the year. It has kept with us right to the end.
TAYLOR: Yes, there is no question about it. You have got to remember the volume on the market place, it is still very low in terms of, you know, historical numbers. So that is what is adding to the volatility. And again, it is those computerized trading that is taking place again. Those things go into affect when things-when certain numbers hit a level.
That just automatically kicks in, and those things aren't going to change anytime soon. So it is not necessarily individual traders, because a lot of, you know, hedge fund guys, mutual fund guys. They are already out of the market place. They have done their trading for the end of the year. They have taken their profits.
QUEST: All right. Felicia, one quick question. Are you working all week?
TAYLOR: I am.
QUEST: Fine, so.
TAYLOR: Why do you want to know?
QUEST: Because, I'm not mistaken, on Christmas Eve, actually not- maybe on the Friday, we'll get us a rendition of-or next week-of "Wait `Til The Sun Shines, Nelly." Which is the song they always sing at the stock exchange, at the festive season.
(LAUGHTER)
And I'm looking forward to Felicia leading us in some communal singing.
(LAUGHTER)
Felicia, thank you.
TAYLOR: Oh, you do not want me to sing.
QUEST: You're right. That's why she's gone.
TAYLOR: But if you insist.
QUEST: No, no, please. Not next week.
All right. Here in Europe, in the last hour or so, Herman Van Rumpuy has confirmed the president of the European Council. That there will be a summit in Brussels on January the 30th, 2012. For the first time, at least the first time I can remember, this has also been accompanied by an announcement from President Van Rumpuy. And we are going to show you the announcement. It is a video press release on the European Council's Web site. Have a look.
(BEGIN VIDEO CLIP)
HERMAN VAN RUMPUY, PRESIDENT, EUROPEAN COUNCIL: Welcome to the meeting room of the European Council of Heads of State or Government. This room is empty now. But it is very busy during our meetings. And last time our discussions lasted even throughout the night. Our next summit is already scheduled for 30th of January. I am preparing this meeting intensively.
It will be focused on jobs. And there is a big challenge in a context where zero growth is expected in most of our economies. In some of them there will even be a recession. We must take strong action on employment. Bringing financial stability to the Eurozone remains absolutely key for our future. We have taken many decisions this year to overcome the sovereign debt crisis.
(END VIDEO CLIP)
QUEST: SO, it will be jobs and it will be a review of the reinforced architecture of the Euro summit. That is what they will be discussing at the end of January, as you heard there.
And an interesting admission, nothing new, and perhaps he hasn't said before, from President Van Rumpuy, that growth in the Eurozone will be just about zero. And in some cases it will continue in recession.
You might not have known that looking at the markets today. It was a strong performance. The best gains came in Germany, the Xetra DAX. And I think what you are seeing here, is the Xetra DAX probably got its best climb, once it saw New York kick into trading.
That is this sort of period. And that is where we really did notice. I think we'll probably test that if you look for say, for example, in Paris, you will see the similar sort of trend. And yet, once again, 2:00- 3:00 o'clock in the afternoon is where you see a very robust performance.
London finished up more than 1 percent higher. Similarly, New York kicks in, London goes. Zurich was in for around 0.75 of a percentage point. Perhaps not the best performer of the day. All of this, despite the fact that Fitch now saying they outlook is negative for four French banks, including Soc Gen. The best performance, as I said, was in Frankfurt. The DAX up more than 3 percent.
Moving along now, to the ethos study which, of course, showed in Germany. The Ifo study gave a much more robust performance on German economic growth. The yields on three-month-on three month Spanish bonds, fell to 1.735-that is just three-month money-to about 1.75 percent. Last month the rate was more than 5 percent.
This reason, along with the Ifo study, along with what was happening, that is why you saw these sort of numbers in the market.
So, when we come back in a moment, the deal is off. AT&T has given up on T-Mobile. It was a marriage that turned sour before it even started.
(COMMERCIAL BREAK)
QUEST: AT&T has finally given up on its merger with T-Mobile, as widely expected. AT&T is the second largest mobile phone carrier in the U.S. and it launched its bid for T-Mobile, which is the fourth biggest, back in March. The deal, for $39 billion, is off. Regulators consistently opposed it on grounds of competition. AT&T says customers will be worse off now.
The company itself will take a hit. It is paying $3 billion cancelation fee. T-Mobile's future is no less certain. According to "The Journal", "The Wall Street Journal", the chief exec of its American arm tells staff the company now has a chance to write its own future, which is one way of looking at it.
We have all been there. You know? You get together. Promises so great. The look of love between the two. And now breaking up is hard to do. Jim Boulden takes us through this messy split.
BOULDEN: There is going to be a lot of puns in this, so be warned. We are going to talk about why they didn't go down the aisle. You know this is, of course, a tragic love story for the ages. A pair of star- crossed cell phone operators, who couldn't even work out a marriage to last as long as Kim Kardashian's.
Well, the engagement was announced the happy couple were in a match made in heaven. AT&T was the powerful groom, T-Mobile, the blushing bride. AT&T wasn't looking for love it was looking for spectrum. In other words the network space to send data to all the smart phones and tablets in the U.S.
Now, T-Mobile has that space. And it wanted to get hitched on paper this was the perfect marriage of convenience. Well, why do things get messy? Well, like any big-name wedding these days there was a pre-nup involved. If it ended in tears T-Mobile wouldn't get to keep the ring. Instead it would get $3 billion from AT&T and a $1 billion worth of spectrum, from AT&T as well. So AT&T now has less than it had before they even agreed to have this engagement.
So, before the vows had been agreed the happy future-the happy couple got together to try and map it out. But there was one problem. Just as when the went to the alter, the question was asked, if anybody knows any lawful reason why these two should not wed, speak now or forever hold your piece.
QUEST: I object! I object!
BOULDEN: Yes, I'm sure you do.
QUEST: I object!
BOULDEN: Just like the regulators.
QUEST: Just before this deal is solemnized, or whatever the word is- I can never say that word.
BOULDEN: Solemnized, no? Well, look, what happened? Regulators never wanted this to happen. You have No. 2 and No. 4, coming together would make No. 1. And then AT&T T-Mobile, together with Verizon, would have 75 percent of the U.S. market.
QUEST: Right?
BOULDEN: No regulator, in any country, was going to go for that.
QUEST: So, you had all these together. These two were getting together.
BOULDEN: Uh-huh.
QUEST: But what do the regulators want? What was the fundamental objection to all of this?
BOULDEN: Well, the idea was, going from four to three, was the biggest worry. But, of course, it wasn't just the voice of the regulators. If T-Mobile and AT&T were the bride and groom, the regulators said, well, no we didn't like this deal from the start; the FCC, the Federal Communications Commission; the U.S. Justice Department, they all had reasons why they just did not want these two to come together. They said, higher prices, and less choice for customers. Massive job cuts, right before an election. Potentially coming from both the company's job cuts.
QUEST: OK, so we end up with a situation in the U.S.?
BOULDEN: Yes.
QUEST: AT&T continues on its own. I can never remember, cellular, or AT&T-it is AT&T itself a merger.
BOULDEN: Oh, yes.
QUEST: Verizon continues, T-Mobile continues, and all the rest of them, along with Sprint.
BOULDEN: You can't see these two getting together, of course, because that would be No. 1 and 4 coming together.
QUEST: That would be even worse?
BOULDEN: Yes. The thing is we all talk about 4G and this is what next G is going to all be about, in 2012. Verizon has started to roll out the next generation. They are talking about live streaming of films onto your mobile device. Not just down loading it, but live streaming. That kind of technology, that kind of money, to do that investment is huge.
That is why AT&T, said T-Mobile could get together and actually give customers more choice. Because the idea of both of them having to build up this network, to them, it is just too expensive.
QUEST: Jim, I'd never thought of you as the old romantic.
(LAUGHTER)
QUEST: Many thanks.
BOULDEN: Yes.
QUEST: Time for a year of reflection. The Brooklyn Brewery boss, Steve Hindy, is thinking abut the future. So, when we continue, with "The Boss", who takes over the Brooklyn Brewery, on "The Boss".
(COMMERCIAL BREAK)
QUEST: When you are "The Boss", your desire to win goes much further than just the boardroom. When Francis Lui goes to watch Formula One, there is only one car he wants to win, the one with his company's name written all over it.
In New York, for Steve Hindy, when it is time to win, it is time to take stock. And in this time, a time to party, too.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE (voice over): Previously on "The Boss": The chairman knows best. Francis Lui tells us why speaking up has brought him success.
FRANCIS LUI, VICE CHAIRMAN, GALAXY ENTERTAINMENT GROUP: I think I do know what local customers would like to have, and this is why sometimes I am not afraid to be outspoken to my staff, to tell them what I want.
UNIDENTIFIED MALE: And in New York, a Brooklyn dolce vita, Steve Hindy expands his empire with a bet on Italian beer.
STEVE HINDY, CEO, BROOKLYN BREWERY: We've done several collaborations with European breweries. But we came up with the idea here of an actual joint venture.
UNIDENTIFIED MALE: In New York City, Brooklyn Brewery President Steve Hindy is greeting employees and their families at his company's holiday party.
HINDY: Good to see you, Tom.
UNIDENTIFIED MALE: The choice of foods at this year-end event, mouthwatering. And the beer of choice? What else? Brooklyn Beer, fresh from the barrel. As the part gains steam Steve looks back at the strong growth achieved this year.
HINDY: The projection was 20 percent. And the outside goal, meaning like the shoot the moon goal, was 32 percent. And we are going to beat that by a percent, or two.
UNIDENTIFIED MALE: 2011 has been an eventful year for this boss, with a major expansion at the company plant.
HINDY: This is a total thrill. This is a total turn on to be expanding your brewery and to be catching up with demand that is out there.
UNIDENTIFIED MALE: A year of new product roll outs.
HINDY: 15 percent of our sales are export now, and it is growing every year.
UNIDENTIFIED MALE: And in the fall, a key decision to raise prices.
HINDY: If we can increase our price, by a $1 a case, across all brands, we'd be able to meet the $3 million in extra costs we're going to have next year.
UNIDENTIFIED MALE: As the Brooklyn Brewery bids farewell to 2011-
HINDY: Hey, Justin. You we doing?
UNIDENTIFIED MALE: Steve is looking ahead to the next few years, where he will cut his commitments to the company he co-founded back in 1987.
HINDY: Within, I think, three or four years, I'm not going to be there every day. I'll be available to these guys, you know, 24/7. And I'll probably be involved in association work. And I'll be involved in the industry. But, you know, I'm very confident I can step a way from this and it is going to continue to grow.
The man he has chosen to take over the reigns, General Manager Eric Ottaway, and his brother, sales V.P. Robin Ottaway, who have been through the company for 16 years.
For Steve, they are natural leaders, who have the brewery's interest at heart.
ERIC OTTAWAY, GENERAL MANAGER, BROOKLYN BREWERY: A week doesn't go by that somebody knocking on the door, offering to buy us, invest in us, etc cetera, we really have not interest. We are happy with our growth rate.
UNIDENTIFIED MALE: Well, it's a hell of a year.
UNIDENTIFIED MALE: Steve choice of successor is a prime example of his manage philosophy.
HINDY: If you are going to grow a company, you have to bring in good people. And you've got to let them lead. You have give up the reigns of power and let other people realize their dreams.
UNIDENTIFIED MALE: The engines are revving. The drivers are focused. And the crowds are in high spirits. This is Macao's 58th Grand Prix. And here to see the action up close is Francis Lui, chairman of Galaxy Entertainment Group.
UNIDENTIFIED MALE: See that crowd over there? That's you team?
FRANCIS LUI, CHAIRMAN, GALAXY ENTERTAINMENT GROUP: Our Grand Prix is one of the three major international car events in Macao, every year. And it is represent Macau. And we want also to be so safe at this event, because this is where we feel we are diversified, we area also a thought tank, a different form for entertainment in Macao, not just gaming.
(CROWD CHEERS)
UNIDENTIFIED MALE: Francis is here just for the thrill. He's thrown some serious cash at this event, sponsoring two of the (UNINTELLIGIBLE) drivers.
LUI: I'm so happy that we have cooperated with you guys, representing us.
UNIDENTIFIED MALE: Francis has never been one to settle for second best. And so to help him say in poll position, he has partnered with double RR, a British racing team that is well positioned on the F3 leader board.
LUI: Are you confident?
UNIDENTIFIED MALE: I think the Double R is a great racing team. They always bring good quality drivers. And this is why we want to continue with that. The winners are winning, the Macao, which is a bid deal fro us.
UNIDENTIFIED MALE: For Francis this is just more than entertainment. With his company logo on display, this is business. And here he is determined to take the checkered flag.
LUI: Our partnership is not going to be working successfully, this is a win-loss, situation. We always talk about how we have a win-win situation. With a little bit of luck we will be winning again.
UNIDENTIFIED MALE: Next week, in our last, ever episode of "The Boss".
QUEST: Sarah, the micromanager.
(LAUGHTER)
UNIDENTIFIED MALE: Richard Quest speaks to all our bosses, past and present, about the challenges of 2011, and what the new year has in store for them. That's next week, on "The Boss".
(END VIDEOTAPE)
QUEST: That is something you really don't want to miss, as we look back at the Boss and we get their thoughts, the 53, 54, 55, weeks that we have been following our bosses around the world.
Where a CEO, an economist, and an entertainer have all made it into today's "Tweets From The Top". Steve Case, of course, is the former AOL chief exec. Steve has Tweeted: Is America at a digital turning point? Americans love online technology but at cost to personal and professional lives. That is a very sober thought, for those of us who are perhaps addicted to Blackberries, iPad's, and other forms of digital paraphernalia
The economist, Jeffrey Sachs, who incidentally was on this program only last week. Jeffrey has tweeted today, "Shocking data from the census bureau. One in two Americans is now low-income." He says, "It is the disappearance of the middle class."
Finally, the wonderful British entertain Stephen Fry has Tweeted. "I think out of all the Christmas cards I have received, I have managed to recognize the signature of one. Why do people send cards and scrawl."
I'm afraid, Mr. Fry, I am guilty.
For someone with a little more Christmas cheer, you can follow me @RichardQuest. That is the Twitter name, @RichardQuest. And I might even tweet online one of my awful signatures.
But the thing that has come through thick and fast, during the course of the year, there are no shortage of people, in the world, you are simply rich. And the question is, where to the rich people live. Apparently, it is in Singapore.
A recent report shows the number of millionaires there has almost tripled in the last year. Now it has the highest concentration of millionaire households in the world.
Liz Neisloss reports on Singapore's big earners.
(BEGIN VIDEOTAPE)
LIZ NEISLOSS, CNN INTERNATIONAL CORRESPONDENT: It is a millionaires party in Singapore. So whether they are watching price fashion on the runway, or taking a test joy ride on this runway. Here the gathering is about enjoying luxury.
But it is also about the connections. And the business cards are always close at hand. Where is all this money coming from? A lot of Singaporeans made big sums from their country's hot real estate market, now their neighboring countries are also a good place for them to make money.
BRIAN LIM, PUBLISHER, MILLIONAIRE ASIA: The booming economies of India and China, and Singapore, being a close proximity to all these countries, will be seen as a natural springboard to get into all those markets.
NEISLOSS: Singaporeans Angela Lu and Rayne Ho found their fortune in multi-level marketing of anti-aging products in China, Malaysia and Indonesia.
RAYNE HO, NU SKIN: Everybody is waiting a part to claim, integrity, right honors, and transparent government. So, in a way, it is (UNINTELLIGIBLE). We come from Singapore, they tend to believe in us and trust us better.
NEISLOSS: The safe haven of Singapore is also a magnet for millionaires and their capital from other parts of the world. For a roughly 2 million U.S. dollar investment in a business or an approved fund, the government gives permanent resident status.
LIM: Many of the surrounding countries, they are also parking their funds here in Singapore. So you find, actually, when you count the millionaires in Singapore, it is not just Singaporeans, but those who are from neighboring countries all around the world, who park their assets here in this tiny little island.
NEISLOSS: Like Malaysians, Soon Chye, who explains how a millionaire works.
(On camera): So you are carrying three phones. Now what do you do with all these phones?
SOON CHYE, MALAYSIAN MILLIONAIRE: OK, all my phones, I can be now here. I can be in the office. I can be in a yard, or in a club, or on the beach. I work and answer all calls. (UNINTELLIGIBLE) Christmas Day, Chinese New Year Day. I do answer calls.
NEISLOSS: This is rare playtime for hotel tycoon Ted Fang. He and his brothers have the Days Inn Hotel franchise in China.
TED FANG, FRONTIER GROUP: So, you can have a very good-looking hotel, but it doesn't have to cost very, very much.
NEISLOSS: Fang thinks the business can grow from the current 40 hotels to a potential 2,000.
FANG: There is a big space in the mid-markets, between 3,000 and 4,000. That is where we think we can do very well, and we have the people. And we have a huge market site. This potentially is the largest mid-market in the world. And it is growing at a very rapid pace.
NEISLOSS: In Singapore millionaires may put work first. But the new crop also knows how to spend.
UNIDENTIFIED MALE: Look at how she dresses.
UNIDENTIFIED FEMALE: We work hard to enjoy life, right? Yes, that is my attitude.
UNIDENTIFIED MALE: And in the years ahead, growing numbers are expected to take off.
Lis Neisloss, CNN, Singapore. ]
(END VIDEOTAPE)
QUEST: There was a nasty moment there when that woman tried to get in that plane in those heels. Whew! The (UNINTELLIGIBLE) ought to be wrong.
They all agree they want it. They can't agree on how long for, or how are they going to pay for it? The standoff over U.S. tax cuts, and that is next.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest.
More QUEST MEANS BUSINESS in a moment.
This is CNN. And on this network, the news always comes first.
To Pyongyang in North Korea, where Kim Jung Un bowed before the body of his father, known as the Dear Leader, Kim Jong-il. The state media described it as a solemn ceremony expressing deep condolences with the bitterest grief. He was accompanied by senior government and military officials.
One of Iraq's vice presidents, a Sunni, is facing an arrest warrant. But Tariq al-Hashemi denies the searing allegations against him. He's accused of organizing a death squad to target government and military officials. Al-Hashemi told reporters today the charges are politically motivated.
It's a tense atmosphere in Cairo's Tahrir Square, where thousands of people are out demonstrating after a woman's march and more clashes earlier in the day. Anger runs high at the Egypt's security forces' heavy-handed response to the protests over the past five days. Fifteen people, at least, have died in violence since Friday.
Piers Morgan says he doesn't believe phone hacking happened while he was a British tabloid newspaper editor. Morgan told a British inquiry into media ethics that he had no reason to believe it was happening at his papers. The inquiry was prompted by public fury over the hacking of voice- mail belonging to a murdered 13-year-old girl by the now closed "News of the World" tabloid.
U.S. lawmakers are locked in a stand-off over tax breaks. And today, Republican Congressional members are trying to block a Senate proposal to extend the cut in payroll taxes by two months, due to expire at the end of December.
Members ago, President Obama warned Republicans not to play poker with the U.S. economy.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The clock is ticking. Time is running out. And if the House Republicans refuse to vote for the Senate bill, or even allow it to come up for a vote, taxes will go up in 11 days.
I saw today that one of the House Republicans referred to what they're doing as, quote, "high stakes poker." He's right about the stakes, but this is not poker. This is not a game. This shouldn't be politics as usual. Right now, the recovery is fragile, but it is moving in the right direction. Our failure to do this could have affects not just on families, but on the economy as a whole.
(END VIDEO CLIP)
QUEST: The Republican House speaker, John Boehner, has just spoken on the cut.
(BEGIN VIDEO CLIP)
REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: Now it's up to the president to show real leadership. He said that he won't leave town for the holidays until this bill is done. The next step is clear. I think President Obama needs to call on Senate Democrats to go back into session, move to go to a conference and to sit down and resolve this bill as quickly as possible.
(END VIDEO CLIP)
QUEST: Kate Bolduan joins us now live from Washington -- Kate, we certainly don't want to enmesh ourselves in the minutia of a...
KATE BOLDUAN, CNN CORRESPONDENT: No.
QUEST: -- of the payroll tax cuts, as I suspect very few people do, unless they're getting a benefit from it.
However, what I need to know from you is the politics of all of this.
Who is getting the blame at the moment for it not happening?
BOLDUAN: Both sides, as will be no surprise to you, Richard, is trying to blame the other. And they're all -- and they are twist -- spinning this situation to their favor.
Polls are showing, though if -- if this tax cut would lapse, polls are showing that Republicans, that Americans would put more blame on Republicans than Democrats.
But both sides are spinning it to blame the other. Republicans say there are still, you know, a handful of days left before this tax cut would expire, why are the Senate Democrats not in town, sitting down to try to negotiate a deal to extend this payroll tax cut for a year?
Senate Democrats, though, say Republicans are playing politics here. The Senate, this past weekend, passed a bipartisan compromise, with a lot of Republican support, to extend it for two months in order to let negotiations continue after maybe cooler heads prevail.
So both sides pointing the finger at each other.
But I'll tell you, I don't think anyone expected the brinksmanship to get to this point. And it really ratcheted up just this afternoon when -- when the president came to speak at the podium and, of course, House Speaker John Boehner said -- clearly is showing that he is not ready to budge from his position -- Richard.
QUEST: Kate, thank you for not taking us into the minutiae of the...
BOLDUAN: Next time, maybe.
QUEST: Oh, yes. That's a Christmas present that we can look forward to.
BOLDUAN: Exactly.
QUEST: Kate Bolduan, who joins me from Washington.
One person who is well and truly in the minutiae of tax cuts and payroll tax cuts is Glenn Hubbard, the chief economic adviser to the presidential candidate, Mitt Romney. He says the U.S. needs something more permanent than a tax cut extension.
And Glenn Hubbard joins me now from New York's Columbia University.
You'll forgive me if, again, we don't get into the -- into the weeds of the details of this.
GLENN HUBBARD, ECONOMIC ADVISER TO MITT ROMNEY: I promise.
QUEST: Yes, thank you.
But on the bigger picture, the bigger picture, look, we'll come to the politics of your man in a minute.
What is it you fundamentally think the U.S. economy needs that it hasn't had so far?
HUBBARD: Well, first, we have to understand the problem. There are real structural issues with the U.S. economy of needing to pivot much more toward investment and encouraging exports than we have in the past.
Underneath of all of that, we need policies that would put people back to work. And the first step is stop doing harm, stop creating policy uncertainty.
The political theater now in Washington is really a reflection of two fundamentally different visions of government and we're unfortunately seeing that play out in real time.
QUEST: Now, you see, that's the point, isn't it, because nobody would suggest that these aren't men and women of conviction who have a fundamental difference of opinion of how this should be settled.
But we can't go through until next November with this sort of paralysis -- or can we?
HUBBARD: No, exactly. Well, sadly, we might. But I don't think we can if we really want the economy to do well. And the right answer is to clarify the long-term, make improvements in the country's fiscal future by addressing long-term government spending problems. That would free up room to move in the short-term.
Republicans may have things they want to do. The president may have things he wants to do. But you need to do that step. Right now, we have no presidential leadership and this is simply mired.
QUEST: All right. But at the same time, let's take your -- the Republican Party, who came out of the budget battle perhaps more bruised because of their refusal to even countenance increases in taxes or -- or fees.
Was that a mistake, when just about everybody, to a person, seems to say, you can't do it all on spending cuts alone?
HUBBARD: Well, I think it's a two part argument, Richard. First, the main problem really is spending. If you look at the forecasts of future deficits, they're principally driven by -- by growth in government spending.
QUEST: (INAUDIBLE).
HUBBARD: In any real negotiation, of course both sides have to give.
And the question is, can you have higher revenue without higher marginal tax rates?
And the answer to that question is, yes, you can.
QUEST: Well, well, most -- some people would say no, you can't and the evidence is that you do have to have higher income taxes and nobody has successfully proven, in a workable way, any other way.
HUBBARD: Well, let me give you a clear counter example. The Bowles- Simpson Plan, which was bipartisan, appointed by the Democratic president of the United States, came out with a plan that raised revenue and lowered marginal tax rates. Marginal tax rates aren't the same as the average tax rates, my one little minutiae comment. We can raise revenue without raising rates.
QUEST: OK, assuming this goes forward -- and we're now seeing this -- this bitterness -- you are the economic adviser to one of the candidates. And your candidate, at the moment, is not leading.
Can he do it in time, do you think?
And if not, is he -- are you going to have to address his economic policy?
HUBBARD: Well, I think Governor Romney has had a very clear economic policy from the beginning, with a couple of points. One, this has to be about growth and he has a plan for encouraging economic growth and bringing back jobs.
The second is to reduce the size of government in the long-term. And he has a very clear plan there. I think those are the right ideas whoever the candidate is.
QUEST: Right. But -- but at the moment, that is not the idea that is floating the boat.
So are you going to go back to the drawing board or at least even tinker with Governor Romney's plan that might give him a boost, say, over - - over Newt Gingrich or whoever else might be the leader du jour?
HUBBARD: I think Governor Romney has exactly the right economic plan. It's one that is his and one he believes in. I don't see him tinkering with it because of the polls.
QUEST: And you, sir, when you look at the economy, finally and briefly, the U.S. has shown remarkable growth and resilience in the last three months.
Do you expect that to continue?
And, if so, what's the biggest threat to it, Europe?
HUBBARD: I do think Europe is a clear threat. The other threat to growth is simply to policy uncertainty in the US. But the bottom line is the underlying health of the private sector is actually quite good, if we can get rid of that policy uncertainty here and across the Atlantic.
QUEST: Glenn Hubbard, thank you for giving me a Christmas present and not getting us involved in the minutiae...
HUBBARD: A pleasure.
QUEST: -- in the minutiae of the -- but we'll -- I promise you, one day you and I will sit on this program and discuss the payroll tax. It just won't be today.
HUBBARD: Great.
QUEST: Many thanks.
Many thanks, indeed, for joining us.
HUBBARD: Yes.
QUEST: It's a plot -- it's a story we'll follow closely.
It's very important to people living in the United States and for the rest of us, we can leave it on the back burner.
A force to be reckoned with -- the Star Wars universe is now online. It's a $100 million game and you are in the middle of it.
(COMMERCIAL BREAK)
QUEST: Well, we started, of course, in this program with a love marriage a long, long time ago. And now a long, long time ago in a galaxy far, far away...
(VIDEO CLIP FROM GAME)
QUEST: I can get a piece of the action.
Today, Electronic Arts opened up the Star Trek universe to gamers across the world. This is a video game, Star Wars: The Old Republic. It isn't your typical sit in front of the TV shoot 'em up. You have to work with other online players to win battles. It's -- it's taken the Jedi world into the social network.
How much did it cost to create?
One hundred million dollars at least, making it one of the most expensive videogames ever made. Its creators aren't relying on the usual sales routes to make that back. If you want to keep on using it, it costs around $15 a month to do this.
Greg Zeschuk is of BioWare, the Electronic Arts' label that's releasing the game.
And Greg joins me via hologram.
Hologram, I'm...
GREG ZESCHUK, CO-FOUNDER, BIOWARE: Hello.
How are you?
QUEST: Hologram on the cheap. We didn't pay the full money.
(LAUGHTER)
QUEST: Greg, I can see you. Look,
Are you going to tell me, how much did this actually cost to develop Star Wars: The Old Republic?
ZESCHUK: You know, unfortunately, I'm not going to tell you that, but I can tell you it's worth every penny we paid for it and made it for. It is a remarkable game that will bring any Star Wars fan into the most incredible universe they have ever seen.
QUEST: Go on, let -- can you -- can you suggest it was -- was it more than $100 million?
(LAUGHTER)
ZESCHUK: No, I can't -- I can't. I've been, you know, the reality is, we don't talk about that. But, you know, like I said, you can just play it yourself and see. You'll see it's just utterly incredible, incredibly decent, rich, realized. There's so much in there, it's absolutely incredible.
QUEST: It has 200,000 voice phrases. It's designed to -- to give maximum, I suppose, enjoyment. But it does -- its financial success for you as a company does hinge on this subscription model that, frankly, the jury is out on whether that is a long-term viable model.
ZESCHUK: Well, I think, you know, the reality is we deliver something in this game -- and, to be fair, the subscription model is a proven four games that bring, you know, the top quality premier entertainment. And this is what this game is. I mean, obviously, Star Wars, one of the biggest licenses in the world, you know, working with our partners at Lucas Arts and Lucas Film. And we just create, like, you know, you can literally live in this universe. It's so detailed, so deep.
And, you know, it's -- it's something that we've actually -- we -- we're very confident. We have released it. We have had hundreds and hundreds of thousands of people testing it and playing it, actually. Launch day is today, but we've actually been open for a head start for a week. And the people are playing so much, it's just -- the servers are filling up. It's just actually, it started off with incredible moment.
QUEST: Right. How many people have -- I'm not asking you how much it costs, but I am, sort of, in a roundabout way.
How many people do you need to make this thing -- this -- this whole thing profitable or sustainable, do you think?
ZESCHUK: Well, yes, so what -- we're -- where we say, you know, we've been on record as just saying like, obviously, we had a half a million subscribers. We're actually in a good position. We've got a good business. Anything over a million subscribers, we've got a wonderful business.
And it's entirely feasible. You know, we had -- we announced that we had over 725,000 tested just one -- one weekend, actually, before we launched a couple of weeks ago. So we're well within the zone of this being a wonderful business.
QUEST: OK, now I'm not a -- I'm not a video gamer and, in that sense. So for somebody who does subscribe, how do you keep this thing interesting and active?
You can all -- and so that you keep wanting to play it over many months and thus continue to pay the $15 or whatever it is per month to yourself.
ZESCHUK: Well, sure. That -- there's actually a couple of different ways. One is the actual amount of content in this game is astonishing, as you said. There's 260,000 lines of dialogue in multiple languages, in English, French and German. So we're talking about a global product. There's 16 novels worth of story. I mean it is immensely deep. And that's just what we start with when we launch.
The other thing you do is you have to maintain a really high quality service, so very high quality availability. But then, also, additional content. We actually continue to build the game. Like we're not done -- we -- we're still building the game today and we're delivering new content to players. So they're paying for not only the great service we provide, the great game we built them already, but the future of what we're building.
QUEST: All right, now just bear with me a second, because I -- my back -- my last question to you really does concern the Star Wars franchise. It's a $20 billion franchise of which, say, $5 billion to $6 billion came from the -- the movie itself. $4.4 was movie takings.
But if we look, you've got, obviously, the Old Republic. You've got the Toys of Yoda, you have got the Bedspreads and the Pillows, you have got the compact, the complete saga, you've got the LEGO, you've got the -- the -- the thingamajigs, the name I've forgotten. The lights over -- the lights.
(LAUGHTER)
QUEST: It's not lights over.
What can I say?
You've got all these things, so is this video game the next incarnation that adds billions to it?
That's what I see. I'm trying to see where it fits into the Star Wars phenomenon.
ZESCHUK: Well, that's a great question. I mean what -- what it really does is it actually allows people who love Star Wars and even just videogames in general to experience Star Wars like they've never seen it. You literally take the role of your favorite Star Wars characters. It happens 3,000 years before the movie, so it's not the actual gods (ph), but it's the time where there's all kinds of Scythe (ph) and Jedi and you literally choose what you're going to be, I'm going to be a Jedi knight or a Scythe (ph) warrior. And you go through their personal story. You interact with hundreds of other players at the same time. You join battles together. You fight your enemies. And you just keep enjoying and enjoying the story. It's something -- it's literally a never-ending exposure and deep involvement with the Star Wars franchise and it's something that we think is incredibly compelling.
QUEST: Greg, good of you to join us tonight via fiber, via satellite, via hologram.
Good to have you.
Have a good, safe holiday period.
Very interesting, funny enough, when you look at this. I can hear some of you saying he couldn't remember what one of those things was called.
Now, what was happening on Wall Street 80 years ago this week?
One man knows.
Why?
Because he was there. He's Irving Carr. Next, you will meet a 106 - year-old stockbroker who started work before the Great Depression and he's still trading, in a moment.
(COMMERCIAL BREAK)
QUEST: When Irving Khan started trading on Wall Street, it was 1928. The Dow Jones stood at 240 and it had just been expanded to calculate the stock of 30 companies, of which only one is still part of the Dow 30. Yes, you know, of course, it's General Electric. A loaf of bread cost you $0.09 and the average rent in New York, $12 a month.
Irv is now 106. He went through the Great Depression, both world wars, a market crash, and, most recently, the Great Recession.
Poppy Harlow caught up with the world's oldest stockbroker.
(BEGIN VIDEOTAPE)
(BEGIN VIDEOTAPE)
HARLOW: Wall Street 80 years ago.
You know who was there?
Irving Kahn.
(on camera): When were you born?
IRVING KAHN, TRADER: December 19, 1905.
HARLOW (voice-over): He rang the opening bell at the New York Stock Exchange on his 100th birthday. That was six years ago.
(on camera): How has Wall Street changed during your life?
KAHN: Well, when I got to the Street in '28-'29, it was much more a rich man's game. Not that I was rich, but I mean it was designed for banks or insurance companies or railroads or public utilities. It's no longer a rich man's business. It's a business for everybody.
HARLOW: Do you still watch the stock market very closely every day?
KAHN: Well, I have the Bloomberg, which is right here. I don't watch it because I'm not a trader.
HARLOW: You're a value investor.
KAHN: Right. And I stick to the 20 odd stocks that I hold.
HARLOW: Who is your idol, Irving?
IRV HAHN: Ben Graham.
HARLOW: Ben Graham. That's Warren Buffett's idol, too.
IRV HAHN: And a lot of other people that wish they could do what he did.
TOM KAHN, SON OF IRVING KAHN: He works every day.
HARLOW: What do you think is to thank for your father's longevity?
TOM KAHN: I would say that the fact that he has an office to go to and a job and responsibilities is extremely important.
HARLOW: Do you think that you will live to be as old as your father has so far?
TOM KAHN: Well, let me ask...
HARLOW: And do you want to?
(LAUGHTER)
HARLOW: You didn't always have Bloomberg terminals, right?
IRV HAHN: No. I was very lucky, being born in 1905. I was just in time for a lot of the new technologies -- radio, television.
HARLOW: Do you have a cell phone now?
IRV HAHN: Yes, I do. I don't use it much, except to remind myself what my number is.
(LAUGHTER)
HARLOW: I see.
(voice-over): But Irv doesn't think technology necessarily makes things earlier, when he looks at the gadgets his grandson Andrew uses.
IRV HAHN: He also has to know how to work his whatchamacallit, the Berry and the iBook.
You have to interrupt me, otherwise I talk too much.
(END VIDEO TAPE)
QUEST: Absolutely fascinating to anyone who thinks that the drop -- stock markets are about a quick buck and moving on.
(RINGS BELL)
QUEST: Irv will be delighted by today's markets. The Dow Jones Industrials are up more than 320 points. I'm sure he will be seeing some gains in his portfolio today of his 20 that he follows closely.
When we come back, a Profitable Moment.
(COMMERCIAL BREAK)
QUEST: Tonight's Profitable Moment.
When Irving Kahn turned up his first day at work at the New York Stock Exchange, I wonder if he had any idea what he was getting himself into 83 years ago. And we showed you tonight how he has adapted since and continues to work every day.
We all send him congratulations, because none of us can claim that much experience.
I am no spring chicken myself, as some of you are only too wont to remind me. Yes, I remember Black Monday back in 1987. I was a junior financial journalist. It took us all by surprise. But the lessons I learned that day have stayed with me forever.
Some of the millennial types working with us now weren't out of school uniform when that happened. In fact, they were barely born.
And they are now scratching their heads at the wild swings that we're seeing.
Quite frankly, I love the millennials that work on this program, the twenty-somethings that are going to take over the world. They think they've seen it all.
But as Irv showed us tonight, you can never underestimate the wisdom of an old head.
And that is QUEST MEANS BUSINESS for tonight.
I'm Richard Quest in London.
Thank you for your time and attention.
And with the Dow at over 300 points up, it proves even in this Christmas week, it's going to be a busy week for us all, because whatever you're up to in the hours ahead, I hope it's profitable.
The news continues because this is CNN.
END
