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Quest Means Business
US Fiscal Cliff Talks; Wall Street Reaction; Disney, JC Penney Disappoint; Europe Indices Mixed; Iberia Job Cuts; Diageo Pays $2 Billion for Control of United Spirits; Wall Street and the Fiscal Cliff; Dollar Up; Eye on Namibia: Booming Beer Business
Aired November 09, 2012 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: He has the pen, he's ready to sign, but he won't accept no action on the fiscal cliff.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I'm open to compromise. I'm open to new ideas. I'm committed to solving our fiscal challenges.
(END VIDEO CLIP)
QUEST: The New York Stock Exchange big board up just 6 points. They are nonplussed by what the president may have said.
I'm Richard Quest, live tonight at the New York Stock Exchange where, clearly, I mean business.
Good evening, and a warm welcome to the New York Stock Exchange. Where else would you expect us to be after the sort of couple of weeks we have seen. American Quest on the road, Hurricane Sandy in the northeast, and an election in the United States.
With falls on the stock market, there was only one place we could be, at the heart of the big board, the New York Stock Exchange. And we're here on the day that President Obama threw down the gauntlet, inviting leaders of Congress, union, and business to the White House next week. He said it is time to sort out the fiscal cliff.
(BEGIN VIDEO CLIP)
OBAMA: We can't just cut our way to prosperity. If we're serious about reducing the deficit, we have to combine spending cuts with revenue, and that means asking the wealthiest Americans to pay a little more in taxes.
I want to be clear. I'm not wedded to every detail of my plan. I'm open to compromise. I'm open to new ideas. I'm committed to solving our fiscal challenges. But I refuse to accept any approach that isn't balanced.
I'm not going to ask students and seniors and middle class families to pay down the entire deficit while people like me making over $250,000 aren't asked to pay a dime more taxes.
(END VIDEO CLIP)
QUEST: Ali Velshi. Ali Velshi is at CNN New York, joins me now. Ali, he says he's open to compromise.
ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Right.
QUEST: Do you spot where the grand bargain comes --
VELSHI: Yes.
QUEST: -- or is it a mini bargain?
VELSHI: Well, I think there's something interesting. Up until now, President Obama says everybody gets the -- gets to get the Bush tax cuts extended except those earning more than $250,000 a year. Their top tax rate was going to go from 35 percent to 39 percent.
I think there might be some wiggle room as to what it goes up to. He has said he will not accept a deal that doesn't include an increase on taxes in the wealthy, but he didn't say it's got to go to 39 percent. So, that might be some wiggle room.
I'll tell you where the problem is, Richard. John Boehner, his nemesis in the House of Representatives said they'll accept higher tax revenues but not higher tax rates. So, that's where they're going to butt heads.
QUEST: All right. Ali, we'll put Mr. Boehner to one side for a second.
VELSHI: Yes.
QUEST: What about this meeting at the White House next week? Is it going to -- is it worth everybody getting together --
VELSHI: Yes.
QUEST: -- at this point when there's a lame duck Congress?
VELSHI: Yes, absolutely. And there's a point of disagreement there, because the Republicans say we'll deal with this in the new Congress, the president says we'll deal with it in this Congress. So, the president's going to bring them together, and I think we'll see if there's some light.
You'll know as soon as that meeting is over from the press conferences whether or not there's something that these two sides have in common. They've been sent a message by the American people, who don't seem to be all that interesting in not seeing a tax increase for the very wealthy. So, at this point, that's the biggest sticking point.
QUEST: All right.
VELSHI: There's a lot they have to deal with, but we want to see if there's any compromise on that. So, we'll watch that very closely, Richard.
QUEST: Ali Velshi at CNN New York joining us with that instant analysis on what the president had to say.
John Boehner the leader of the House, the Speaker of the House, speaking earlier today. He has said he is open to compromise provided tax rates don't go up.
(BEGIN VIDEO CLIP)
REP. JOHN BOEHNER (R), SPEAKER OF THE HOUSE: The problem with raising tax rates on the wealthiest Americans is that more than half of them are small business owners. We know from Ernst & Young, 700,000 jobs would be destroyed.
We also know that it would slow down our economy. As I said on Wednesday, this is an opportunity for the president to lead. This is his moment to engage the Congress and work towards a solution that can pass both chambers.
(END VIDEO CLIP)
QUEST: All right, that's John Boehner. We've heard from the president, we've heard from John Boehner and the House. The New York market at the moment, if you look up here, you can just see in the numbers, the Dow Jones is just off some 4 points, give or take. It's bouncing around the zero level.
They have let me out to play here at the Exchange, which means I need to try and find -- she's here somewhere. They tell me she's -- ah, there she is.
ALISON KOSIK, CNN CORRESPONDENT: Hi, there, Richard!
QUEST: Ah!
KOSIK: Richard, so good to see you. Good to see you, darling.
QUEST: Alison Kosik. The market --
(CROSSTALK)
KOSIK: I brought you something.
QUEST: Yes?
KOSIK: Because you're such a smarty, here's some Smarties --
QUEST: Oh!
KOSIK: Welcome to New York!
QUEST: Look at this!
KOSIK: Isn't that nice?
QUEST: Some candy to make sure we have a sweet program.
KOSIK: Yes.
QUEST: Alison Kosik, why is the market down just one point when the president has spoken, John Boehner has spoken, there's a meeting at the White House in a week or so?
KOSIK: Because they couldn't be any farther apart. Look, when the president started talking, the Dow as up 60 points. You saw it slowly trickle down, and now the Dow is in the red. So, Wall Street not happy about what the president said. And look --
QUEST: What do they want?
KOSIK: Well, look. When Speaker Boehner said, "You're not going to raise taxes on the wealthy. Instead, let's play with the tax rates here in the US. Let's play with the tax policy, and let's go ahead and work with entitlements.
So, that's how he wants to fix the fiscal cliff. President Obama saying something very different. So, what Wall Street sees is this huge divide. How are you going to close that? That's why you're seeing this up.
QUEST: So, if you're right, and I don't doubt it for a moment, we're lucky we're only off 3 points and not 300 points.
KOSIK: True. But I think -- you know what I think? This is -- a scene where investors are kind of out of breath.
QUEST: Right.
KOSIK: Over the past couple sessions, the Dow's lost over 430 points in two sessions. I think Wall Street is screaming, "You've got to fix the fiscal cliff!" I think they're taking a breather today.
QUEST: The Dow over the course of the week, if we take a look while you take me to where you need me to go --
KOSIK: Yes.
QUEST: The Dow over the course of the week, you can see the movement. It's been an extremely rocky and choppy week.
KOSIK: It has been a rocky, choppy week. Take Disney for instance. Disney having a rough day of it, what? Disney down over -- almost 6 percent. Earnings -- we've been talking about the election so much, the focus hasn't been on third quarter earnings. They haven't been that stellar. Wall -- it's back to basics here on Wall Street. Earnings aren't there.
QUEST: So, we've got Disney, which is off some 6 percent, down nearly $3 a share.
KOSIK: Right.
QUEST: On earnings. What else?
KOSIK: OK, JC Penney. JC Penney also having a rough time of it.
QUEST: Oh! This is one of the largest department stores in the United States.
KOSIK: JC Penney having a rough time of it. The CEO saying it's a retailer that's sort of caught between two worlds, the old and the new, and investors are saying it's not working very well. Shares are down here, as well, down 6 percent. JC Penney's trying to reinvent itself with someone new at the helm, someone who actually came from Apple. It's not doing very well.
QUEST: All right. So, to wrap -- to wrap this all up together, fundamentally what we have at the moment is poor earnings, an election result, a fiscal cliff, a European sovereign debt crisis, and all of this coming together.
KOSIK: Exactly, and it's giving very little reason for any conviction buy here in the market. If you see any buys, they're quickly going to sells, because of such uncertainty, especially with this fiscal cliff. A lot of companies here in the US, they're holding off hiring because they don't know what the tax situation's going to be like next year. That's a huge part of the fiscal cliff.
QUEST: I have to say, times have changed hugely. In 1987, when I first came to the Stock Exchange to cover here, you weren't even allowed on the floor if you weren't a member or a specialist or a trader. Now, we bring cameras onto the floor.
KOSIK: And now you can do whatever you like. The whole Exchange -- you know, you should turn around and show everybody watching. All the traders are watching you right now. They're fascinated by Richard. To your right, to your right. They're all just -- see, yes. They're all watching, believe me.
(LAUGHTER)
KOSIK: They were trying to sound like Richard a few seconds ago.
QUEST: All right.
KOSIK: He's an -- he's entertaining for this Exchange welcome.
QUEST: Good to see you, Alison. Nice to be on your doorstep for a change. Thank you very much.
KOSIK: My pleasure.
QUEST: Alison Kosik with the Exchange, the Dow Jones is off some 8 points at the moment.
When we come back, we will talk booze, spirits, and deals. The chief executive of Diageo. It's QUEST MEANS BUSINESS. We're live tonight from the New York Stock Exchange. Good evening.
(COMMERCIAL BREAK)
QUEST: Now, the stocks on Wall Street may be betwixt and between, down 4, up 4. They're literally bouncing around the zero. And what's interesting about that is, it really is very rare that you see the market to be quite so uncertain just at that moment, which tells anybody who's looked at this for a while, nobody wants to take a position at the end of the week on such dodgy times.
As over here in Europe, it was very much a mixed picture. Take a look at the numbers in Europe. The major indices in London and Frankfurt fell. They were dragged lower by banking shares.
In Paris, the CAC gained around half a percent, despite a near six percent fall in Credit Agricole. In Zurich, the SMI was practically unchanged. It's the only one of these indices not to show a loss for the week as a whole.
Here's one to bear in mind: AIG, that's the airline group, international, IAG -- International Airlines Group -- that gained more than 1.5 percent on the London FTSE. Now, the reason IAG gained was because the company announced a massive restructuring of its Iberia subsidiary, 4,500 jobs are to go, 20 -- the capacity of planes is to be reduced by 20 percent, they're cutting huge numbers.
The chief executive of Iberia says the company's losing money in every market and it will have to take even more radical action if unions don't back the restructuring plan, which includes job losses, getting rid of planes, closing unsustainable routes, and a reminder, the CEO saying that it is losing in every one of its business divisions.
The parent company, IAG, of course, is led by Willie Walsh, who is the former chief executive of British Airways, who made similar major restructurings at BA.
Diageo shares are closing higher after it clinched a deal to take a controlling stake in India's United Spirits. It's an important deal for Diageo. It's the world's biggest spirits maker, paid just over -- I'm looking at the notes -- $2 billion for the top spirit maker.
The chief executive of Diageo, Paul Walsh, told Max Foster that together, these new assets with this company will form a powerful organization.
(BEGIN VIDEOTAPE)
PAUL WALSH, CEO, DIAGEO: India is a very exciting, dynamic market. If you look at the future for India, good GDP growth, a huge emerging middle class that will continue to grow very attractively, and familiarity with spirits and scotch, particularly. You put all that together, this deal gives us the number one position in a very important market.
MAX FOSTER, CNN CORRESPONDENT: Give us a sense of the size of the whiskey market in India, because I think a lot of our viewers will be quite surprised.
WALSH: Well, to put this into context, although the price point for some of the brands that are sold through United Spirits are lower than our global average, in number of bottles sold, this will actually double the sized of Diageo.
And the whiskey market, which includes Indian-made whiskey, is 400 million cases. It's very, very big.
FOSTER: There have been increased activity throughout your industry, really. Companies buying into those emerging markets. Is that because there is no growth in the west, or it's just that there's such extraordinary growth in the emerging markets?
WALSH: There is growth in the developed world. The US is growing very attractively. And even in Europe, there are parts of Europe that are growing nicely. But certainly the super growth, if you like, comes from these new high-growth markets.
I hesitate to call them emerging because they're very sophisticated, and you have an emerging middle class that has familiarity with our brands and the aspiration to consume them and, increasingly, the fiscal wherewithal to access our brands.
FOSTER: You also took over a Turkish company, didn't you? Mey Icki, and an Ethiopian brewer, as well. Why this emphasis on taking companies over? Why are you driving towards scale at this level?
WALSH: Well, we have been on this journey for a number of years, so it's not new. But you're absolutely right. We have been successful in the last few years in bringing onboard acquisitions that not only give us very good local brands to complement our global brands, but it also gives us a fantastic distribution footprint. So, we have an already-made route to market, and that's what's important.
(END VIDEOTAPE)
QUEST: That's the chief executive of Diageo on the deal that they announced, tying off the United Spirits of India.
Here at the New York Stock Exchange, everyone watched the president, or at least listened to the president, as they have listened to the events on the fiscal cliff. Art Cashin is with me. Good afternoon, sir, good to see you.
ART CASHIN, TRADER, UBS: Good to see you.
QUEST: And thank you for talking to us in a busy week, busy day. Always good to have you on the program. Thank you.
CASHIN: Well, I appreciate that.
QUEST: Sir, what did you make of what you've heard today? Boehner's spoken, the president's spoken, and the market is just up 10 points having been down 6. We're literally bouncing along like a ball.
CASHIN: Yes it is. And what happened was as Boehner spoke, the market traded nervously, in fact, gave a few points up. Some trepidation, was he being conciliatory enough? Then, the TV pundits came on and assured everyone that he was being conciliatory.
QUEST: But then the president spoke.
CASHIN: Well, then the market, the Dow rallied about 70 points.
QUEST: Right.
CASHIN: And the president came out, and you have to look at the nuances. He didn't come out to speak to reporters, he came out to speak to a room filled with supporters, who cheered him wildly when he was introduced. So, that said to the markets, "I've just been elected and you're going to ask people to do my bidding." So, that didn't look very conciliatory.
They hesitated again waiting on the pundits, and then they gave up all the 70 points, and we went to minus 20. Then, as you just said, we're bouncing along, unchanged..
QUEST: So, what is it that the market wants? We know the fiscal cliff. We know the risks involved. We know there's going to be a summit next week. What do you want?
CASHIN: We want the summit to work. We want people not to posture. If one of them had gone so far as to say "this is an absolute line in the sand," we'd be down 200 points, as you and I are talking. The market is very nervous about this.
QUEST: What are you nervous about, though? Do you seriously believe -- that the -- there is a real risk of the US going over the cliff?
CASHIN: Yes, I do. Yes, I do, because even with Boehner's best of intentions, the question is, can he sell the package to his members in the House? And I stood here when they voted on the TARP plan the first time, and I watched them, to everyone's amazement, vote it down, and watched the Dow melt 800 points while they were voting it down. So, that's what the nervous is.
QUEST: So, to anybody globally watching that says, hang on, don't the politicians and doesn't everybody in the US realize they're playing with fire? Everybody is making the right noises, but nobody's doing any action. Is that the gist of it?
CASHIN: That's unfortunately it, and history is replete with that. Unfortunately, you may well recall that World War I started because everybody believed no one would be foolish enough to go into it, and yet they marched one step at a time saying the other guy will give up first. And that's what's happening, potentially, in Washington, DC.
QUEST: And so, a cheerful note on which to finish this?
CASHIN: Yes. It's Friday and the weekend's about to begin.
QUEST: We can't go wrong with that.
CASHIN: Right.
QUEST: Friday and the weekend is about to begin. Now -- thank you very much, Art.
CASHIN: Right.
QUEST: Good to see you. OK. Our tonight's Currency Conundrum. In 2007, the US mint began releasing a series of presidential dollar coins. Four coins will be issued every year until all the US presidents have been featured. Why will Barack Obama not appear on a coin.
Is it because A, he asked not to? B, because he's the current president? Or C, because he's still alive? The answer in the program.
Now to the currencies that are trading 20 after here. The dollar's on the rise. This is a two-month high against the euro. It's put on half a percent against the pound, holding steady against the yen. Those are the rates -- ding! -- this is the break.
(COMMERCIAL BREAK)
QUEST: QUEST MEANS BUSINESS live tonight from the New York Stock Exchange. Now, all this week we have been keeping an Eye on Namibia, taking a close look at the country's economy and the industries upon which it relies. It's located in the southwestern part of Africa. Namibia is home to the world's oldest desert.
In CNN's Eye On series, we've looked at the country's diamond mining industry, we've explored how Namibia is trying to protect its fish stocks and make the industry a source of work for its fact pool of unemployed. We've also seen how black farmers are faring as they look to their own piece of land in the post-apartheid country.
In today's Namibia and today's report, we spoke earlier about Diageo, let's continue that drinks theme, as we look at the country's booming beer business.
(BEGIN VIDEOTAPE)
ROBYN CURNOW, CNN INTERNATIONAL CORRESPONDENT (voice-over): Fine malted barley imported from Europe, mixed with the purest water from deep underneath the African desert, combined in a high-tech process to create some of Namibia's finest beers, brewed by Africans to an old German recipe.
Homateni Kapewangolo works for Namibia brewery and ensures it meets the strict guidelines of the centuries-old purity law called Reinheitsgebot.
HOMATENI KAPEWANGOLO, QUALITY CONTROL MANAGER: We brew only with raw materials. We don't have any additives, so we basically consider or uses malted barley, hops, and water. So, there are no additives or anything like that in our product.
CURNOW: Listed on the Namibian stock exchange and partly owned by global drinks giants Diageo and Heineken, Namibia brewery sells Windhoek Lager and Tafel Lager, which have become familiar brands in southern Africa.
WESSIE VAN DER WESTHUIZEN, MANAGING DIRECTOR, NAMIBIA BREWERIES LTD.: If you look at the Namibian market, for instance, you track our last financial year, we managed to sell just over one million hectare liters of beer within the Namibian market.
Now, for a country with 2.2 million people, that is quite a lot. If I compare that to South Africa, where there is a population of about 55 million people, we've managed just below one million hectare liters.
CURNOW: So, there may be business opportunities over the horizon, but Namibia's beverage industry may just be selling too much at home.
CURNOW (on camera): Here in the poorer parts of Namibia, there's concern that alcoholism rates are just too high, and with youth unemployment estimated to be around 70 percent, according to some government statistics, there's also worry that poverty and a lack of opportunity are fueling a growing drinking problem.
CURNOW (voice-over): This vocational training school takes in high school dropouts, teaches youngsters like Sophia to be bricklayers, plumbers, electricians. Life skills training is also part of the deal.
WEBSTER SIMASIKU, TRAINER: You are very important people in your society.
CURNOW: And trainer Webster Simasiku says that includes alcohol awareness.
SIMASIKU: Here, they don't use alcohol, they abuse alcohol. Because once they wake up in the morning, they just go to the road and start fetching one by one the bottle, and at the end of the day, you forgot that you can go and look for employment.
CURNOW: The government's began a campaign against underage drinking, and also clamping down on shebeens, illegal roadside bars. There's talk of higher taxes on alcohol and banning some advertising.
Namibia Brewery is also involved in campaigns to deter underage drinking, with the slogan, "Too young is too young."
But commercially, it's looking to expand into new markets, in places like Zambia and Uganda, where you can order a cold Windhoek Lager.
Robyn Curnow, CNN, Windhoek, Namibia.
(END VIDEOTAPE)
QUEST: And you can find more details by looking at cnn.com/eyeon, where you can find details of our Eye On series.
When we come back, more from the New York Stock Exchange as we digest what President Obama said and what it means for the market. QUEST MEANS BUSINESS, live from the Stock Exchange.
(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. Fionnuala Sweeney is at the CNN Center.
FIONNUALA SWEENEY, CNN ANCHOR: Hi there, Richard. The US president has addressed the country's looming debt crisis in his first public comments since winning reelection. Barack Obama invited party, business, and labor leaders to the White House on Friday to come up with a plan to avoid a fiscal catastrophe. He also called for the extension of tax cuts for the middle class.
Iran has acknowledged an incident involving an American surveillance drone similar to this one. The country's defense minister says Iranian fighter jets took, quote, "decisive action" after the drone entered their air space. The Pentagon says it was fired up on in international air space.
New video out of Syria purports to show a room full of government troops captured by Syrian rebels. These pictures are said to have been taken in Ras Al Ain. The border town has been the scene of fierce clashes since the opposition launched an offensive there on Thursday.
The incoming Archbishop of Canterbury supports women bishops, but not same-sex marriage. The Right Reverend Justin Welby is a former oil industry executive, and he's only been bishop for a year. He'll be taking over for Rowan Williams as leader of the world Anglicans.
Britain's biggest bank stands accused of providing offshore accounts for alleged drug dealers and drug runners. The UK tax authority is studying the details of 4,000 account holders. It's pledged to cracked down on tax cheats if it finds any evidence of wrongdoing. The claims were reported in a British newspaper.
And those are your headlines. Now, back to QUEST MEANS BUSINESS, live from the New York Stock Exchange.
QUEST: Good evening tonight from the New York Stock Exchange. This is the only place you really want to be at the end of what has been an extremely difficult week in markets, in electoral politics and, perhaps, for the global economy.
In just a moment I'll be talking to our old friend, Teddy Weisberg. It's about exactly what the events of the week mean.
First, though, President Obama has been speaking. He's calling an emergency summit or whatever you will at the White House, business leaders, union leaders, political leaders from both sides of the aisle will be there. And the goal will try to be to put together some mini-bridge or large bridge for a fiscal cliff fallback. This is what the president said a short while ago.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Now the American people understand that we're going to have differences and disagreements in the months to come. They get that.
But on Tuesday, they said loud and clear that they won't tolerate dysfunction; they won't tolerate politicians who view compromise as a dirty word, not when so many Americans are still out of work, not when so families and small business owners are still struggling to pay the bills.
What the American people are looking for is cooperation. They're looking for consensus. They're looking for common sense. Most of all, they want action.
(END VIDEO CLIP)
QUEST: They want action, says the president.
Teddy's with me.
First of all, good to see you and thank you for always talking to us. I think the last time you and I spoke, you were -- you were in your apartment, during the hurricane.
TEDDY WEISBERG, PRESIDENT, SEAPORT SECURITIES: I think so. I think so.
QUEST: What did you make of what you heard from the president?
WEISBERG: Well, I mean, it's tough not to be a little cynical, but I didn't see anything different and I really didn't hear anything different. I think there was a sense of a conciliatory tone, but I think when you cut through it, it seemed like it was the same old rhetoric to me, you know, they want to raise taxes on the rich and they want to save, you know, the tax cuts on the middle class and they -- and we want to work together but no plan, nothing concrete, only a sort of little fig leaf --
QUEST: But what does the market want, in that regard?
WEISBERG: Oh, well --
QUEST: What does it -- what do the people actually want to happen?
WEISBERG: Well, I can tell you what they don't want to happen. What they don't want is more of what we'd had for the last four years. And --
QUEST: Which is what?
WEISBERG: Which is just gridlock and this -- and this political dysfunction where the markets become hostage to the politicians.
QUEST: But does the -- but surely, here, you accept that there's right and wrong on both sides. It's not as if one side's got it all there, going their way, is it?
WEISBERG: Well, no, listen, I -- and I agree with you. And let's just hope that there is an environment for a conciliatory tone to get something done.
QUEST: Do you get the feeling that the markets -- not just the equities, but the bond market, the global markets are running out of patience on questions, the long-term questions of the U.S. deficit?
WEISBERG: Oh, yes, I mean, absolutely because the fear is, the real fear -- and this is what -- unfortunately because there has not been a change in politics in the White House, the real fear is that we will see what we will see going forward is exactly what we've seen for the last three years, which is this gridlock and nothing gets done.
Now historically that's sort of been good for the markets. But in the current environment, it is not good for the markets.
QUEST: Why?
Because bond yields are at record lows. So the U.S. government can continue funding and financing that deficit.
WEISBERG: That's right. But it basically -- in the bigger -- in the bigger grand plan, it's just kicking the can down the road without any resolution and I thin --
QUEST: Are you prepared to pay more taxes? Do you think most Americans are prepared to pay -- because if we take the example of Europe, it doesn't matter what has happened, ultimately to close budget deficits, you have to raise taxes.
WEISBERG: Well, you know, there's two schools of thought on that, Richard. You know, there are the -- it's Reagan economics, where you lower taxes, where you lower taxes and you stimulate business, and that increases revenue. So this is the argument. This is the chicken-and-egg argument, which somehow we have to get away from.
Hopefully, we will. But if we don't, we're going to have some problems.
QUEST: All right. The dollar is currently up 48 points. And we've sort of traded up and down, and we're basically bouncing around.
When does the market finally lose patience? And did we get a whiff of that earlier in the week when we're off 300 points?
WEISBERG: I think -- I think your only message is the fear is that we're going to have more of the same. The hope -- the hope is that they'll be some kind of compromise here, because we need -- whether we raise taxes or don't raise taxes; we need a resolution to this issue before the end of this year.
QUEST: Good to see you and thank you for always talking with us on QUEST MEANS BUSINESS. It's always a treat and a pleasure to have you on the program.
When we come back, we will find out how one hotel company has dealt with the very serious business in the aftermath of Hurricane superstorm Sandy. QUEST MEANS BUSINESS live from New York. Good evening.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
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(BEGIN VIDEO CLIP)
QUEST (voice-over): Time for the answer to today's "Currency Conundrum," why wasn't Barack Obama featured in a series of presidential coins? The answer is because he's still alive. The answer is C, the U.S. Mint has decided that coins will feature only those presidents who are deceased.
(END VIDEO CLIP)
QUEST: President Obama will visit New York next week to see the damage caused by superstorm Sandy. He will see it for himself. The aftermath of the storm is very much still being felt, as you can see, from the pictures.
(BEGIN VIDEO CLIP)
QUEST (voice-over): For the first time ever, well, this -- I beg your pardon. For the first time in more than 30 years, the city's drivers are facing fuel rationing. It's an attempt to cut down lines at gas stations, which are as long as eight hours due to fuel shortages.
Just last week, the bustling trading floor, the heart of the world's financial capital, was deserted. Superstorm Sandy led to the first weather-related closure -- double weather-related closure -- in 27 years.
InterContinental Hotels Group says 60 of its hotels were affected and afflicted by the superstorm. Seventeen were forced to close. IHG is the world's biggest hotel group by the number of rooms. The earnings reports warned that the economic environment remains extremely challenging. Kirk Kinsell is president for the Americas for IHG. Kirk joins me now.
Let's start first of all; we'll get to big results in a moment, but let's start with the region, the Caribbean, the hotels that were affected. Are -- how far are you to getting everything back to normal?
KIRK KINSELL, AMERICAS PRESIDENT, INTERCONTINENTAL HOTELS GROUP: Well, Richard, the good news is as we have just two hotels that are closed right now. But as you know, our hotels are first to shelter in a storm.
And we're able to serve in our communities and take care of a number of not only the traveling public, but certainly the local neighborhood in terms of their ability to have a safe place to stay. So we're pleased to be really back in business.
QUEST: You're back in business, and when we look at the business, there were -- I mean, if we take out the exceptional items, what we see is a business that is finding it very challenging. So I'm wondering, what is it that IHG now needs to do to solidify and grow?
KINSELL: Well, we're continuing to do what we've done for the last 10 years, and that's a strategy that's built upon preferred brands, delivered by really talented people and having great world-class delivery systems, all built on a platform of responsible business.
And continuing to look at how we can delever the balance sheet in terms of asset-light strategy and return capital to shareholders so that they can continue to have trust and confidence in IHG as we go forward.
QUEST: So when you say asset-light, and you're looking to sell certain properties, does this continue your strategy, which IHG was pretty much the first hotel group to move towards, which is basically no more bricks-and-mortars but management and long-term contracts?
KINSELL: No, that's right. We went for an asset-light strategy back in 2002, as we became a stand-alone hotel company. And that's seen in the sell-down of a number of hotels, hundreds of hotels. We're down to less than 10 now.
What that does is it allows us to take that -- those proceeds and put it to work. Some of that is to return back to shareholders; we've now returned over $9 million -- excuse me -- $9 billion to shareholders. And that's two-thirds of what the economic value created over that period of time.
QUEST: Good to talk to you. We have to keep it brief today, because it is a very busy day, as you can imagine, both politically and in the markets.
Kirk joining me from CNN New York.
One bit of news to bring to your attention, at a White House briefing, it has been announced that the U.S. Treasury Secretary, Timothy Geithner, will stay on until the New Year to help with the fiscal cliff negotiations. It had been widely thought that he's ready to leave and go, and move back to New York for personal reasons.
Jenny Harrison is at the World Weather Center.
Jenny, I took a train because of a nor'easter, and I'm -- don't you laugh, young woman.
And I'm delighted to say -- and I'm delighted to say it's beautiful weather in New York today.
JENNY HARRISON, CNN METEOROLOGIST: Oh, good, yes, I know that. I was actually wondering about your train trip. We'll talk about that another time. But so you're right. The weather conditions of course have been improving over the last few hours.
Let me show you the satellite, the radar, all of this. You can see that the winds also have really begun to ease back as this system continues to push away from all areas of land and just a little bit of light rain and snow up there, the far northeast, but a much improved picture.
And as you say, Richard, the sun has come out. It's feeling a lot better, and it will only get better over the next few days. So Saturday, Sunday, Monday, temperatures actually reaching eventually a little bit above the average, 16 degrees, 17 degrees and remember, this is under sunny skies. So in fact, it'll feel warmer than this. It should do in the sunshine.
And the overnight temperatures actually getting above the average as well. And look at this 13 degrees Celsius on Monday morning. And that's the general sort of theme across the whole of the northeast. So some good news, but particularly for the residents everywhere, really, without any power and dealing with all of that.
Now that's not to say there is no more snow or rain in the forecast. There really is, but it's out across the West, sweeping pretty rapidly across towards the Central Plains and look at that line of thunderstorms that are developing as we go through the weekend. But the snow will certainly accumulate.
The northern Plains, we could pick up about another 25 centimeters of snow. You can see that cold air in line with that, 25 in Dallas on Saturday and 21 in Atlanta.
As for Europe, a rather unsettled picture again. We've got this next system which has been pushing into the northwest in the last few hours. High pressure just sort of clinging on, but being pushed a little bit further east as that nice and mild with it. And then once these systems go through, could see some heavy rain across the central Med, some snow to the mountains.
It will actually feel quite a bit cooler. You can see there's some temperature trend over the next couple of days, but that's just showing temperatures a little bit below average, but some good sunshine with some good temperatures across the southeast, Richard. Enjoy your weekend in the sunshine in New York.
QUEST: Thank you, Jenny Harrison at the World Weather Center.
Times, they may be a-changin'. When I first reported from here in 1987, they wouldn't even let us on the floor of the Exchange, let alone with a camera and be able to see what is going on. But some things seem to be not changing. For instance, the fiscal cliff, the budget deficit problems and the sovereign debt crisis in Europe.
There are serious issues afoot, which need to be addressed. The president referred to them. Unfortunately, as long as there is no spirit of compromise, then we will continue to watch the markets to see when they finally give up patience on the politicians, because only then may there be real change.
And that is QMB for tonight, live from the New York Stock Exchange. I'm Richard Quest. Whatever you're up to in the hours ahead, I hope it's profitable. I'll see you next week.
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ROBYN CURNOW, CNN HOST: You're watching MARKETPLACE AFRICA. I'm Robyn Curnow. Now in this market, amongst other things, people are selling loose, single cigarettes to passersby. Tobacco is big business in Africa.
There are more than a million tobacco farmers. And so countries like Malawi, it's their largest source of income. But the industry could be under threat because of a new set of proposals that aim to restrict tobacco growing. Errol Barnett has this story from Malawi.
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ERROL BARNETT, CNN CORRESPONDENT (voice-over): Ben Sambira (ph) is one of Malawi's tobacco farmers. His family's been working this land for generations.
BEN SAMBIRA (PH), TOBACCO FARMER: They are the seedlings for (inaudible) tobacco. They are about ready to be transplanted into the field. These seedlings are enough for 14 acres.
BARNETT (voice-over): He says that to stop growing this crop would be devastating for him and his community.
SAMBIRA (PH): I've been growing tobacco since 1970, so there is the (inaudible) this business and I went to school, leaving my children, leaving my brothers, sisters, went to school because of growing tobacco.
(Inaudible) growing tobacco be like killing me and my whole family.
BARNETT (voice-over): But Ben Sambira (ph) and other farmers throughout Africa are worried about proposals in the International Framework Conversation on Tobacco Control. The World Health Organization says it's designed to help governments deal with an expected decline in demand for tobacco, proposals that will be discussed next work at a meeting in South Korea.
Some welcome the move.
YUSSUF SALOOJEE (PH), NATIONAL COUNCIL AGAINST SMOKING: The point of the WHO convention is to say how do help farmers. This is provision is forward-looking.
They're saying as fewer and fewer people smoke, the demands of tobacco (inaudible) will reduce and we will need to then provide farmers with an alternative way of earning a livelihood. The treaty does not wish to harm farmers. In fact, the treaty wants agriculture in Africa to prosper.
BARNETT (voice-over): But the body representing an estimated 30 million tobacco growers sees the move by the WHO as part of a wider anti- smoking campaign aimed at cutting tobacco production.
FRANCOIS VAN DER MERWE (PH), INTERNATIONAL TOBACCO GROWERS' ASSOCIATION: Tobacco is an easy scapegoat. It's an industry where they can go in and regulate and tax and try and show the world that they're doing good. And we do not accept that and we will keep on doing what we believe is right to do.
It's a legal product with harmful effects, so government should rather focus their attention on educating people, rather than going and try and demonize the industry, drive extreme regulation and drive extreme taxation. And now even right down to the most vulnerable in the value chain, which are the farmers, the soft underbelly of the sector.
BARNETT (voice-over): In this tobacco processing factory in Malawi's capital, Lilongwe, you see mixed messages about smoking. But there's no disputing the importance of the tobacco industry to the country's economy.
OSCAR PHIRI (PH), ALLIANCE ONCE TOBACCO: We are one of the biggest employers here in Malawi; in this hall alone we have about 424 people.
BARNETT (voice-over): In the stifling heat and choking air, these workers are destemming the dry tobacco plants to order, ready for export.
PHIRI (PH): The tobacco after we pack it, we ship it to all international cigarette contractors, mainly in Europe and the -- in the U.S.
GRAHAM KUNIMBA: Malawi is dependent on tobacco. Just to give you an example, 60 percent of our foreign earnings come from tobacco. So if they are to ban tobacco, definitely they are killing the livelihood, not only of tobacco-growing Malawi, but in the entire economy of Malawi as a country.
BARNETT (voice-over): This reliance on one export makes Malawi vulnerable, particularly when production is down. The World Bank says this year Malawi's tobacco production decreased by more than 75 percent compared to last year.
BARNETT: Isn't it your responsibility as the minister of agriculture to develop and find an alternative for these tobacco farmers?
PETER MWANZA, AGRICULTURE MINISTER OF MALAWI: My government is ready when the problem diversified away from tobacco. But this is not something you can do overnight.
BARNETT: What is Malawi's position on these tobacco restrictions and controls that the WHO is considering?
MWANZA: Tobacco is very culture (ph). And therefore our view is that the FCTC protocol particularly, article 17 and 18, are rather unfair to Malawi and to other growing tobacco in countries. I think the best we could have done is to (inaudible) farmers and also put up measures that would help for them to diversify away from tobacco.
We are not opposed to (inaudible) protected from tobacco. But you see, if people went to the (inaudible), they would die even faster than smoking, because people would starve and they would no have -- would have no income.
TERRIE: I'm Terrie --
BARNETT (voice-over): The global anti-smoking lobby has spent millions of dollars on public health videos like this one. They say tobacco growing only compounds Malawi's economic and social ills.
UNIDENTIFIED MALE: Malawi has been growing tobacco for over 100 years and yet it is one of the poorest countries in the world. Tobacco farming in Africa and in particular in Malawi is in crisis. It perpetuates poverty, harms the environment, harms workers and is based on unfair labor practices. Child labor is rife on the tobacco farms in Malawi.
BARNETT (voice-over): The industry acknowledges child labor is used in the tobacco sector, but says it's a problem being addressed.
DR. BRUCE MUNTHALI, CEO, TOBACCO CENTRAL COMMISSION: (Inaudible) tobacco. Child labor (inaudible) commodities, mining, other commodities you can think of. So the industry we are taking some politic (ph) measure to address some of the concerns that are related to child labor.
SAMBIRA (PH): The whole of this four acres will be green with the tobacco crop. When with a planting like this four acres, we do transplant seed for about maybe two days. But each day we plant about 50 before.
BARNETT (voice-over): (Inaudible) Sambira (ph) says he never uses children in his fields. He relies on workers from nearby villages and from Mozambique. He knows tobacco offers him and his country an uncertain future, but for now, he sees no alternative and doesn't believe that WHO is truly offering one.
SAMBIRA (PH): This is a good business. Not (inaudible) in Malawi.
BARNETT (voice-over): Errol Barnett, CNN, Lilongwe, Malawi.
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CURNOW: With Malawi's economy potentially in crisis, how does the country diversify? Find out after the break.
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CURNOW: One way Malawi aims to diversify its economy away from tobacco is to bolster its tourism and wildlife industry. Now Malawi traditionally lost tourists to its neighbors, Tanzania and Zambia, because it hasn't had those big five animals. That's until now.
African Parks, a company that aims to bring business solutions to conservation, has teamed up with a safari company to bring lions into Malawi. (Inaudible) our "Face Time" interview this week, here's Ton de Rooy (ph). He's a managing director of Robin Pope Safaris.
BARNETT: Well, it's a great plan to bring the big five back here. I know recently you're reintroduced leopards and lions to specific locations here.
But how difficult is that?
TON DE ROOY (PH), ROBIN POPE SAFARIS: It's a complicated operation. It starts with finding the animals, in a nutshell, it's finding them, quarantining them, getting all the paperworks (sic) in place, which takes months at a time and then flying them across here and then introducing them into the reserve.
BARNETT: So where are the tourists that your business relies on? Where are they coming from?
DE ROOY (PH): Well, Malawi's tourism used to come in the old days from South Africa, which was a good market for Malawi, which had to do with the independence, what they did in South Africa, with apartheid. And Malawi was one of the only countries they could still go.
Now we see more and more people coming from U.K., U.S.A., Germany. Those are for us the most important markets.
BARNETT: Since the financial crisis of 2008, are you seeing numbers rebound now from those areas?
DE ROOY (PH): I guess what we -- when I look at my numbers, they're on the increase.
What's difficult for us to see is how has the impact been, because the numbers have been growing and the park is not as established. So when I compare the product to our Zambian product, which is more established, I see that there was certainly mostly good impact on the global crisis and slowly those numbers are going back up again.
BARNETT: Obviously, it's a challenge. But how is it working with the local policies and government here compared to other countries in the region? I know that you also work in Zambia, a country just to the west of where we are. So how are the local policies either helping or hindering your efforts?
DE ROOY (PH): As a large operator, the Zambian product is more sophisticated. It's been longer there. I mean, South Luangwa in Zambia is a well-known park in Africa. It's a well-known park in Europe. And that's where Malawi is behind Zambia in that way, that it's trying to get there.
Again, diversity in Zambia is also more sophisticated. They have less of a problem than Malawi has, as I said. Zambia has the same amount of people, but seven times the amount of space.
BARNETT: How long do you think it will take to get Malawi to a place where you're happy as far as having the big five and having the tourism draw the country needs?
DE ROOY (PH): We're very happy with the big five. Malawi is getting more and more on the map. There's more operators coming in which Malawi needs. Government is, to some extent, on our side and trying to push it from their angle, and they've got, of course, bigger problems than just tourism. So we are happy. But it can always be better.
I mean, on average, in the world, 5 percent of revenue -- 5 percent of GDP is from tourism. Malawi's below 2.5. So there's a lot of potential which Malawi needs to grasp to get rid of the forage (ph) problem, have more employment. So there's a lot of potential benefits. So from that angle, I'm not happy. But operating here, I'm very happy.
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CURNOW: That's it for this week's show. We'll be back again next week, same time, same place. In the meantime, go online. We're at CNN.com/MarketplaceAfrica. Thanks for watching.
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