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Quest Means Business
Global Slowdown; Deal for Greece; Row Between French Government and ArcelorMittal Escalates; London Mayor's "Sans-Culottes" Slur; European Markets Up; Current Bank of England Governor "Completely Confident" in Successor; Independence of Bank of England Questioned; Dollar Up, Euro Sliding; The Millennials: Good-bye; Hobbit Hype in New Zealand
Aired November 27, 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: Get on with it. The OECD secretary-general tells me economic risks are everywhere.
Into the furnace. ArcelorMittal's chief executive meets President Hollande and his company's accused of blackmail and threat.
And debt insured. Better safe than sorry says the chief exec of Lloyd's of London.
I'm Richard Quest. We have an hour together, and I mean business.
Good evening. The momentum has gone and the global economy is weakening. So says the OECD in its latest economic outlook. Recovery has given away to relapse. Forecasts have been slashed and the OECD is now warning a major contraction cannot be ruled out, especially when you consider the fiscal cliff and Europe's debt problems. Join me at the CNN super screen.
Hesitant and uneven. That's the definition of the recovery that the OECD is seeing as a whole. The 2013 number has been cut back. If you just take a look at it, this year is 1.4, next year will be 1.4, and growth doesn't pick up again until 2014, when it gets to 2.3 percent.
But within this, the United States, look at the growth rate there. It's 2.2 this year, 2 next, and 2.8 the year after. Slow growth that will have limited effects on US unemployment.
As for the eurozone, spin the globe. Recession this year, recession next year just about, and even in two years' time, just small growth. The unemployment projection has been raised. It's expected to hit -- you'd better be sitting comfortably here, because it's an uncomfortable number -- 11.9 percent. 11.9 percent.
The eurozone is witnessing fragmentation pressures and could be -- pressure that means fragmentation could be in danger.
The emerging market, there's a lot of numbers there, but really what I want you to focus on is just the nature of those numbers. Fours. Threes and fours. Eights. Fives and sevens. That really shows you the huge difference that there is between it all.
Factor it all together and you see a world that is growing slowly and in some danger. Angel Gurria is the OECD's secretary-general. He told me that leaders need to take notice of the numbers and get their act together.
(BEGIN VIDEOTAPE)
ANGEL GURRIA, SECRETARY-GENERAL, OECD: It's a wake-up call and saying, not only for the next two years, but for the next five and ten years, it is going to be sclerotic, it is going to be mediocre, it is going to be undesirable, so let's do something about it, OK?
Let's get those measures, those structural measures in place so that we can improve the outlook so that we can have a better story and we have a better narrative, better positions going forward.
QUEST: They finally took the decisions on Greece, decisions that you knew they were always going to have to take, which is to cut the debt burden. The only question is what took them so long?
GURRIA: Well, this has not been for the last few months. We've been pushing for this for the last three years. Then eventually, it happened for the first time last year. That was not enough. And of course, now because of lower growth overall, you're having Greece struggle.
But what is more important is you took an integral view. You're asking efforts from the Greeks, yes, but you're giving them a little bit more time in order to get their goals, and you're giving lower interest rates, longer periods to repay the public debt, and you have decided to go and buy back the private debt at a big discount.
(CROSSTALK)
QUEST: Right. It's time --
GURRIA: And you're also giving them --
QUEST: -- I'm just going to --
GURRIA: -- back the profits from the central bank.
QUEST: I'm just pausing you there because if they're dealing with Greece, it's time to deal with Spain.
GURRIA: No way. Absolutely nothing to do. These are two different things. Spain has done its homework. Spain has much -- half -- half the debt of Greece, OK? In terms of GDP. And Spain had five years of surpluses in their budgets before the crisis struck.
So, what Spain needs is unequivocal message from the Europeans and the IMF to the market saying if Spain decides to request support, because they've done their homework, because they're performing, and because they are a viable economy, then they will be supported, and that request will be enough to detonate the ECB to go and buy their bonds in secondary market if need be.
I'm betting that just the announcement that the bazooka is ready, that it's loaded and ready to fire if need be will make it unnecessary for the bazooka to be fired.
QUEST: How kind of you to talk about the bazooka, because I'm going to tell you there's a nuclear weapon waiting to explode in Washington: the fiscal cliff. If they don't deal with that and the longer-term deficit, Secretary-General, that -- never mind fiddling around with a short-term deal, a long-term deal on the deficit.
GURRIA: Absolutely. And the question is, if you can avoid going over the fiscal cliff, then why should you? The road maps are very clear. There's a very competent team there with Tim Geithner and Jack Lew and you have an experienced, competent team with a political -- with savvy, who are going to be facing the music there. And I think they should get it.
Now, the other thing is I'm just looking at the politics being very cynical. I think no party is going to want to be responsible for having put the United States in a second recession.
QUEST: Final question: what would you say to those people in the United States that say, "Nah, go over the fiscal cliff, that'll teach everybody, only after we've gone over the fiscal cliff will we get real, long-term, structural deficit reform, take the cliff, jump"?
GURRIA: Well, I think that is absolutely nonsensical. I think that's cutting your nose to spite your face and nobody in their right mind should do that.
(END VIDEOTAPE)
QUEST: Now, "nobody in their right minds," says Angel Gurria, would go over the fiscal cliff.
After 12 hours of talks in Brussels, a deal has been done on Greece's debt bailout burden, which will help to finance Greece for the foreseeable future and bring the debt burden down. Jim Boulden is with me now.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Yes, Richard. Well, this deal takes Greece a step closer to billions of dollars of bailout cash. It also reduces Greek debt by more than $50 billion in some creative ways.
Now, of course, these protracted negotiations were all about drawing a line under the Greek debt crisis. So, let's look at these lines. What's the top line?
Well, lower in the interest rate on bilateral loans and extend the payback time for Greece. Also, allow Greece a bit more time to buy back some of its debt. The idea here is cutting Greek debt to help the economy.
What were the red lines? Well, these talks went into the -- well into the night. Why? Well, sustainability. That was the IMF red line. Any deal had to show that Greece would eventually become sustainable.
No more cuts? Well, of course, that's what the Greeks wanted, that's what the Greek government and, of course, the Greek people. Enough is enough with the austerity, we don't want any more.
No debt write-offs. That, of course, was Germany, Germany's saying no official haircuts for now.
Well, what's the bottom line? The bottom line is, $56 billion for Greece to pay its bills and inject cash into its banks starting in December. That loan goes, and then there'll be three more, a total four injections, three more in 2013.
Safe for now? Well, that means the eurozone is safe for now, it looks like, until at least the German election next September. That's really what Germany wanted to make sure happened, Richard.
QUEST: Is the bottom line in a word, this is over and done with for Greece for the time being?
BOULDEN: For the time being, but I'll tell you, Barclay's put out a report and says, "With very few details released, we are unimpressed with the measures put forward so far." They want to see more about debt sustainability, what -- how that would be addressed.
A lot of people say it isn't over over, but it does give them time. It's not just kicking the can down the road, I don't think, Richard. I think they've made some serious decisions. It doesn't mean we won't have to revisit it sometime in the future.
QUEST: Jim Boulden with the Greek debt crisis. Jim, we thank you.
Sparks are flying in Paris. There's a row. It's a particularly nasty row between the French government and ArcelorMittal. It's at melting point, and we'll tell you why President Hollande is threatening nationalization in a moment.
(RINGS BELL)
(COMMERCIAL BREAK)
QUEST: President Francois Hollande is not backing down in France's extraordinary row with ArcelorMittal. The French president is threatening to seize control of one of the steel company's factories a day after a cabinet colleague said the company wasn't wanted in France.
The French industry minister, who's here on the right, said the government could nationalize one of ArcelorMittal's plants over plans to close two blast furnaces there. Now, the argument, of course, is the promises made by Mittal when the factories -- when the two companies Arcelor and Mittal were put together.
The president says he will discuss that possibility in a face-to-face meeting with the chief that began this afternoon. More than 2,000 people work at the plant at the center of this row. Jim Bittermann is in Paris for us tonight. We've a lot -- you've got a statement there. They've been meeting. Do we know, have they -- well, you tell me, Jim. What's happened in Paris tonight?
JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT: We've got a statement, but it doesn't mean a whole lot here, Richard. Basically, it came out just minutes ago basically saying the president reaffirmed his commitment to ensure the sustainability of employment on the site and he asked that discussions continue between the government and the company until the end of the time agreed to find a potential buyer. The end of that time, by the way, is Saturday.
Basically, what's happening is here -- here is this: that Mittal has this plant in the eastern side of France. Part of it's profitable and part of it's not. It had two blast furnaces are not profitable and they'd like to shut it down, they'd like to get rid of about a third of the employees, the 2,000 employees at that plant.
They want to hang on to the profitable part because that supplies steel to the car industry in Germany, and --
QUEST: Right.
BITTERMANN: -- that's one of the things that makes it profitable. The government says, well, we want the whole thing to sell. We're going to try to find a buyer. In fact, we've found two buyers for this plant, and Mittal says no, that's no good. You're not going to be able to sell the whole plant. So, that's where things stand going into this meeting this afternoon, Richard.
QUEST: And of course, it all goes back to the promises that were made about what plants would be kept when the company was formed. But listen, how realistic is Hollande's threat of nationalizing the plant if Mittal doesn't go along with the government's proposals?
BITTERMANN: Well, I think it's fairly realistic. But the threat that Mittal has in the back of his pocket is that the other 20,000 jobs in France that relate to ArcelorMittal, and he in fact has made that threat. He said if he loses this plant, if it's nationalized, then the whole -- the 20,000 jobs in the rest of France may be in jeopardy as well.
So, he's basically what the government says, he's blackmailing the government into trying to get rid of this plant.
QUEST: Jim, reform, restructuring, change in the economy -- is this a case, a touchstone case, for Hollande in dealing with the French economy, or is it a flash in a pan and one on its own?
BITTERMANN: Well, I think there's a -- we could look at it both ways. Basically, the fact is that Mr. Mittal is not particularly well-liked here for a number of reasons, but the socialist government of Mr. Hollande has basically been very critical over the last six months that they've been in office about Mittal.
But on the other hand, at this particular moment, it really is a very sensitive time. We just in unemployment figures today, Richard, and the unemployment rate is up to 10.6 percent, up by 1.5 percent over the last statistic.
So, as a consequence, any threat to end jobs is something the government's very sensitive about, and they could be cutting off their nose to spit their face here if in fact they challenge Mr. Mittal and he does bow out on his promise -- or at least put in jeopardy the rest of the jobs that are in France as far as the steel industry's concerned.
QUEST: Jim Bittermann in glorious Paris for us tonight.
Now, the mayor of London, Boris Johnson, is never one to pass up a PR victory at the expense of the French. Schadenfreude it might be, from the German. But Boris Johnson's in India promoting British business. He compared the Hollande regime to radical French revolutionaries and said if ArcelorMittal isn't wanted in France, it's welcome in the UK.
(BEGIN VIDEO CLIP)
BORIS JOHNSON, MAYOR OF LONDON: I see the "sans-culottes" appear to have captured the government of Paris, and a French minister has been so eccentric as to call for a massive investor to depart from France. I have no hesitation or embarrassment in saying to everyone here, "Venez a Londres, mes amis." Come to London. Come to the -- come to the business capital of the world.
(END VIDEO CLIP)
(COUGHING)
QUEST: You've got to admire the man. "Opportunist" is not the word.
European stocks reacted cautiously on that Greek debt deal that Jim was on about. The banking sector recovered from Monday's drubbing. Excuse me. In London, RBS shared finished up 3.5 percent. Barclay's added nearly 1.5. In Luxemburg, shares of ArcelorMittal ended flat on that standoff with the French government.
Mervyn King, Sir Mervyn, says the Bank of England will be in good hands when Mark Carney takes over as governor in the middle of next year. He was appointed yesterday, that much you know. Join me over in the library and you will see.
The existing governor welcomed the newcomer. He will succeed on the 1st of July next year. The Canadian will be the first bank -- the first foreign bank governor for the British Bank of England. I think I've got that that the way around. King is confident that Carney will continue the good work that he believes he's done.
(BEGIN VIDEO CLIP)
MERVYN KING, GOVERNOR, BANK OF ENGLAND: I think anyone who holds down a job like mine wants very much on the day when they leave to hand the bank on to someone whom they know will carry on the good work.
And I'm completely confident that with Mark Carney, you have someone with whom the bank is in very good hands as, indeed, is the role of governor, which I'm sure he will carry out with very great distinction.
(END VIDEO CLIP)
QUEST: There was a hint of a challenge ahead for Carney when the governor was questioned over the bank's economic forecasts. Now, Mervyn King admitted he should have revised figures earlier and he said there is - - and this is the crucial part -- there is "little prospect" for rapid recovery in the next two years.
Perhaps that's not new, but it is a reaffirmation of the very slow growth and the low interest environment that will pertain the United Kingdom for the foreseeable future.
As for the claims of the central bank's independence, the governor expressed regret that claims had been compromised. MPs are concerned that the government profited -- profited -- from the quantitative easing policy. The government transferred nearly $60 billion of surplus funds. King insisted the MPC is independent. The Labour MPs are not convinced.
(BEGIN VIDEO CLIP)
GEORGE MUDIE, BRITISH MEMBER OF PARLIAMENT, LABOUR PARTY: You on one or two policy outlook is independent as a Chelsea manager. The chancellor's just wandered in, taken 37 billion, spent it in your view, and you've just accepted it.
KING: A few Chelsea managers have managed the last ten years, Mr. Mudie.
(LAUGHTER)
(END VIDEO CLIP)
QUEST: Sir Mervyn King. Currency Conundrum for you. Let's stick with the Canadians. The Canadian and the Australian dollar are being added to the IMF list of official reserve currencies. How many reserve currencies are there already? The answer: 3, 5, or 8?
And a bonus point if you can name all of them. We'll give the answer later in the show, 3, 5, or 8 reserve currencies? And we'll need to clarify, it does not include the two new ones.
The dollar's up thanks to the rising consumer confidence and the single currency is sliding on concerns about Greek debt. Those are the rates --
(RINGS BELL)
QUEST: -- this is the break.
(COMMERCIAL BREAK)
QUEST: Amid the gloom of the US fiscal cliff, record youth unemployment, miserable economic forecasts, there's one group of people that remain upbeat. They are the Millennials. More than three-quarters of them describe themselves as very happy, according to a study from Viacom.
And every week on this program, we've followed our own group of young businessmen and women. Tonight, for our Millennials, it's time to say good-bye.
(BEGIN VIDEOTAPE)
UNIDENTIFIED CORRESPONDENT (voice-over): For almost a year, we've followed our Millennials in their ambitious quest to the top. In the process, they've showed us why they have the upper hand, why losing is not an option, and how they'll shape the future workforce. This is their Millennial way.
From the day our cameras started rolling back in February this year --
JOE BRAIDWOOD, CHIEF MARKETING OFFICER, SWIFTKEY: Just wanted to keep you in the loop on that one.
UNIDENTIFIED CORRESPONDENT: -- our Millennials oozed confidence and self-assuredness.
BRAIDWOOD: I think it's really silly for people to think that they can't achieve things just because someone tells them that they can't. There's nothing worse than the feeling that you can't do something without trying.
UNIDENTIFIED CORRESPONDENT: From Broadway in New York all the way to the Plaza de Armas in Santiago, Chile, our Millennials showed us that their ambition came from within, from their dreams.
MICHAEL BURBACH, ASPIRING ACTOR: If you need it and you want it badly enough, you can do it. That's the craziest thing. Because sometimes it seems like an impossible dream, but it's not.
UNIDENTIFIED CORRESPONDENT: This year, we've witnessed these impossible dreams become a reality. In Colombia, David Lloyd won the prize for Talent and Innovation of Latin America, recognizing him as one of the best entrepreneurs in the region.
ANNOUNCER (through translator): The prize goes to Intern Latin America.
(APPLAUSE)
UNIDENTIFIED CORRESPONDENT: In London, Joe Braidwood was pleasantly surprised as his company beat the likes of Google Wallet to take home the prize of Most Innovative Mobile App.
ANNOUNCER: The winner is SwiftKey.
(CROWD CHEERS)
BRAIDWOOD: That was awesome!
UNIDENTIFIED CORRESPONDENT: And Michael drew the curtain on his studies.
BURBACH: If you want it, then you have to go and get it, and you have to keep knocking on doors until someone listens to you. You definitely have to take the initiative and make it -- and pave your own way, really.
UNIDENTIFIED CORRESPONDENT: To take on the acting world with jobs alongside some of his favorite actors.
But a childhood filled with trophies and adulation has done little to prepare them for the cold realities of work.
BRAIDWOOD: I have been struggling to deal with all my e-mail to make sure that I'm addressing absolutely everything in my to-do list.
UNIDENTIFIED CORRESPONDENT: The days and nights of loneliness.
DAVID LLOYD, MANAGING DIRECTOR, INTERN LATIN AMERICA: It's a constant balance -- balancing out personal life and professional life. It's not easy, but if you're very efficient, very disciplined, then obviously you can do it, and one probably makes the other better, to be honest.
UNIDENTIFIED CORRESPONDENT: And the emotional scars that overworking and burnout can leave you with.
MILISUTHANDO BONGELA, FASHION BLOGGER: I just felt inundated with helplessness. I just didn't know what to do for myself, I didn't know how I was going to stop. Which, of course, is very shortsighted because there was a solution, but at that time, I was very stressed. I was crying a lot, and I slept a lot.
UNIDENTIFIED CORRESPONDENT: Millennials, however, must rise above it.
BONGELA: Fortunately, I'm surrounded by sensible people who told me to stop, and I eventually had to stop everything: switch my phone off, get onto some medication, go away for a little bit and be by myself and come back and restrategize.
UNIDENTIFIED CORRESPONDENT: In no time, they're planning their ascent because they thrive in competition.
BRAIDWOOD: I think everyone sometimes feels slightly stressed that they're going to be outperformed by others, but I think that that is a really, really important feature of what it is to drive yourself and what it is to stay committed and focused on achieving things.
UNIDENTIFIED CORRESPONDENT: If there's one thing our Millennials have taught us, it's that confidence can take you places, even if success is not assured.
LLOYD: There are no prizes for being a shrinking violet. There are no prizes for not giving everything. There are no prizes for not throwing your hat in the ring. And maybe it doesn't come off, and if it doesn't come off, it's better to be a glorious failure than never to have tried.
(END VIDEOTAPE)
QUEST: Isa Soares was our series producers for The Millennials, which we've enjoyed bringing to you over the last few months.
Coming up after the break, optimism takes a back seat. Natural disasters have the potential to destroy growth, and some countries are failing to prepare.
(RINGS BELL)
QUEST: QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
RICHARD QUEST, CNN HOST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in a moment. This is CNN and, on this network, it is the news which will always comes first.
(BEGIN VIDEO CLIP)
QUEST (voice-over): Egypt's Muslim Brotherhood is dismissing the massive protest in Tahrir Square. The group's Twitter page calls the rally "underwhelming," and says the low turnout indicates "a lack of support," in their words. Protesters want the president to repeal his decree that says the courts cannot throw out his decisions.
The body of the late Palestinian leader Yasser Arafat has been exhumed and later reburied after forensic experts have taken samples from his remains. They're now examining those samples for traces of poisoning.
Thousands of dairy farmers have blocked access to the European parliament building with their tractors. It's a protest over low milk prices. The farmers spread tons of milk at the building, lit a fire in the street in Brussels. The E.U. is currently debating its common agricultural policy in its budget.
The Eurozone and the IMF are stepping in to rescue Greece as it teeters on the edge of another default. They've agreed to give Greece a series of payments totaling about $57 billion in a variety of ways. The move should keep the country afloat and in the Eurozone.
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(END VIDEO CLIP)
QUEST: Some of the world's most dynamic economies, the fastest growing, the most influential for growth may be risking their long-term future because they're not protected from the costs of catastrophes.
The insurer, Lloyd's of London, says 17 countries -- 17 -- are either underinsured against natural disasters or poorly insured. And this new report shows where the risks are based.
If you join me at the CNN superscreen, so the problem is this: if a country is not properly insured, inevitably means the government or the state bears the cost if people don't have their own insurance.
So, for example, the better insured countries -- obviously most of the developed countries: the United States, Canada, Australia, parts of the European Union, the U.K. -- are all described as better insured. And by that, of course, it means they have a rating of 8; they're well insured if there's a natural disaster, a natural disaster the bill will fall on the private sector, not the government.
Moderately insured, you've got Russia; you've got other parts of the E.U., parts of Latin and Central -- Latin America, Japan and Scandinavia.
However, the underinsured, these -- those are red. If we take the others out, you can see the underinsured quite clearly there. And when you look at the underinsured, you really do start to see countries like Bangladesh with a rating of 2.6. This is described as the most underinsured nation, the -2.6. And the effect of underinsurance, again, means quite simply the state has to pick up the cost.
Now recent disasters in the United States and the U.K. show the scale of the problem.
(BEGIN VIDEO CLIP)
QUEST (voice-over): The governor of New York, Andrew Cuomo, says the total damage -- the total damage of all of this, from the superstorm Sandy, will cost his state $42 billion.
In the U.K., heavy flooding this week alone has put 200,000 homeowners maybe without cover. Insurers in the U.K. government have deals (ph) about to expire. The British prime minister says he'll take tough approach in talks with the insurers.
So the importance of insurance. I spoke to the chief exec of Lloyd's of London, Richard Ward, and I asked him, those countries that are going without insurance, why and what was the cost?
(BEGIN VIDEO CLIP)
RICHARD WARD, CEO, LLOYD'S OF LONDON: That's correct. And it's not just the poorest. It's some of these countries, they're showing phenomenal economic growth at the moment, such as China, that also have significant exposure to natural catastrophes.
What we're saying to those countries is there's a gap between your economic growth and the insurance spend to manage your exposure to natural catastrophes.
Let me give you an example. China, Szechuan earthquake 2008, damage from that earthquake was $125 billion worth of damage. The insurance industry picked up less than $400 million of that. So that means the government effectively picked up $125 billion.
QUEST: OK. Why are people so underinsured? Is it financial -- they haven't got the money? Is it cultural -- they don't really understand the purpose or benefit of insurance? Or is it something else?
WARD: It's probably a combination of many factors, but when I look at the faster growing economies, what I'll say there is that the growth is outstripping their insurance spend. And as you see greater industrialization, urbanization, growth in the middle classes, you will then start to see insurance spend coming in.
QUEST: But why do you think insurance spend isn't keeping up with growth?
WARD: It's a lag. And I think you'll catch up with growth over time. So if you look at the world's largest economy, the U.S., insurance penetration is very large in the U.S. So the natural catastrophes they're exposed to that we're now seeing through superstorm Sandy, they have reasonable insurance cover in place.
The (inaudible) been built up over tens of years, decades, centuries, even. I mean, we go back to 1906 in the U.S.
QUEST: Some would say, well, this is all very self-serving of Lloyd's. Of course they would -- of course they would warn Hong Kong, Saudi Arabia, China, Turkey and India to buy more insurance. They'll make more money out of it. They're right. It is a bit self-serving.
(LAUGHTER)
WARD: You could argue that. But the reality is there are two ways you can manage risk. Either the government picks up the tab and therefore effectively the taxpayer picks it up, or you syndicate the risk across the insurance market. We would argue it's more effective syndicating that risk across the insurance markets, rather than the government and therefore the taxpayer picking up the tab.
QUEST: Let's quickly look at Sandy, probably amongst the most expensive besides Katrina in the United States in terms of hurricanes and storms because of its position.
Will it make a dent in Lloyd's profits this year?
WARD: It will make a dent in Lloyd's profits. Yes, it's an earnings event, but it's absolutely not a capital event. And let's just keep it in perspective. Katrina was the big hurricane; that was 2005 and that was about a $75 billion insurance claim.
You then move to Hurricane Andrew; that was probably about $25 billion.
You move to Hurricane Ike; that was about $20 billion to $21 billion.
Superstorm Sandy is probably in the Ike territory, the best estimates out there at the moment for insured losses, not economic, insured losses is between $15 billion and $25 billion. Of course Lloyd's is going to pick up a proportion of that, as we always do. We're a major catastrophe writer in the U.S. But it will be an earnings event, no more.
(END VIDEO CLIP)
QUEST: I've learned a new phrase there, which I think I can use in my daily life: an earnings event, not a capital event. In other words, I'll pay it out of me back pocket rather than dipping into me savings.
When we come back in a moment, U.S. consumer confidence is climbing. The cliff looms ahead. And that could all spoil the good mood -- in a moment.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
(BEGIN VIDEO CLIP)
QUEST (voice-over): The answer to today's "Currency Conundrum," how many official global reserve currencies are there? The answer, B. Yes, there are five, the dollar, the pound, the euro, the Swiss franc and the Japanese yen. A pat on the back if you got them all.
The IMF now says it will recognize the Australia and Canadian dollars as reserve currencies in the future. The significance of reserve currencies are that may come to use as balances in your trade accounts and, of course, they can be used as reserve currencies with the IMF.
(END VIDEO CLIP)
QUEST: U.S. consumer confidence is at its highest level in more than 41/2 years. Maggie Lake is in New York, joins me now.
Should we be surprised?
MAGGIE LAKE, CNN CORRESPONDENT: Well, if you've been paying attention to the headlines, you might think it's a bit weaker with all this sort of doom and gloom about the fiscal cliff. But listen, two big things, the stable jobs market and recovery in housing really helping you feel that sentiment. And that, in turn, is leading to a pretty strong holiday sales season. And that matters.
Remember, two-thirds of the U.S. economy is consumer spending. Take a look at the latest stats we have from Cyber Monday.
(BEGIN VIDEO CLIP)
LAKE (voice-over): Yes, it's made up; it doesn't matter. People went out and spent anyway, Richard. Of course, that would not be the stats we're talking about; Dubai. I'm sure we'll get the right one up sooner or later.
(END VIDEO CLIP)
LAKE: But on Cyber Monday, online sales up 30 percent. That's almost double the rate of growth in 2011, 18 percent of those purchases made on smartphones or some sort of tablet. And overall, mobile based sales, as they call them, made up 13 percent of overall sales. Now that may sound small but that's something like a 96 percent increase.
So good news for consumers, walking around with those devices, they can demand the best price. That is helping. But it's going to cut into retail margins. So you want to watch if you have investments that have exposure to retail stocks. They might get hit as they really have to discount to the very lowest level. The overall amount spent in dollar terms is down.
But interestingly, Richard, there are a couple of standouts that don't have to seem to discount at all. You're going to guess Apple, because we talk about that all the time. But check this out: Uggs. I don't know if you're familiar with this, but it's a footwear brand. A lot of people thought it was a passing fad.
(CROSSTALK)
QUEST: Where do you think I've been, Ms. Lake? Of course I'm familiar.
(LAUGHTER)
LAKE: Well, I mean, just showed the pink furry ones, Richard. I'm sure you're not walking around in that. But --
(CROSSTALK)
LAKE: -- they have been targeting guys just like you, slippers, kids; Tom Brady is in a commercial that they've been running; Justin Bieber posted himself wearing them. Second-most searched product over the weekend, first on Black Friday, second on Cyber Monday.
Between the Kindle and the iPad, it's extraordinary. And they're like $200. So some products have pricing power (inaudible) almost everything else is on a fire sale.
QUEST: They're not making a good set of brogues yet. Once we get that, then maybe I'll try them.
Listen, Maggie, forget the consumer confidence numbers, forget the market. I'm not even sure what I'm about to ask you to do is fully legal, all right? Get your wallet, go out and you and I can have an investment in a Powerball ticket.
The Powerball multistate lottery is $500 million tomorrow night. I know you must have perhaps bought one. If not, I think you and I need to come to an arrangement over a Powerball ticket.
LAKE: The problem is, Richard, I already have the winning ticket. I'm confident. But I will happily go out and get another one that you and I could share the proceeds of. You'll have to take me on my word for that, but I'll go pick one up tonight and we'll see what our luck is.
It's absolutely lottery fever here, I have to tell you. Everyone is dreaming about what they're going to do with those millions, myself included.
QUEST: Five hundred million. If you take into account some $327 million, because obviously there's a discount in value for future earnings, since you've got it all in one go. Maggie Lake, who's -- you heard it. We've got an agreement here. That's a deal.
Maggie, many thanks -- probably have to go to prison. I'm not sure that it's totally against the law.
Maggie Lake is in New York at the moment.
But I'm going to hedge me bets.
Jenny Harrison is at the CNN World Weather Center. Jenny, I've got a nice little deal for you tonight. There's a little lottery; I don't know whether if Georgia's in it, but if it is, are you interested in an arrangement?
JENNY HARRISON, CNN METEOROLOGIST: You know what, we've got an office pool going on, Richard, for that $500 million. So I've already put my $2 in for that. So, sorry, mate, you're out of luck. Sorry. Look, (inaudible).
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QUEST: (Inaudible) weather.
HARRISON: (Inaudible).
QUEST: Serious stuff.
HARRISON: Yes, it is serious stuff, and my goodness, what good you could do with some of that money, too, and of course I'm really talking about the flooding across the U.K., Wales, parts of England. The last few hours we've still got quite a bit of rain showers. In fact, that rain is going to turn increasingly wintry over the next couple of days as the cold air comes in from the north.
But I want to show you in particular where there has been some very serious flooding. Rivers have burst their banks at St. Assef (ph). And then you can see here, up into Riflan (ph) in North Wales, hundreds of people have been evacuated from their homes. And unfortunately, the situation really isn't getting any better any time soon.
Eventually what happens, there are two rivers that come through here. But the (inaudible) actually eventually comes out, just into Rhuddia (ph) as you can see then, and drains into the Irish Sea. Now in terms of the flood warnings and watches that are in place, I mean, it is just extensive, right the way up into North Yorkshire, down into parts of Devon and Cornwall.
Right now, there's 189 flood alerts, 170 flood warnings and there are now two severe flood warnings and that is because of the state of the rivers. I can show you (inaudible) river and -- oh, we're going to show you the video instead.
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HARRISON (voice-over): Let's have a look. This is actually Tewkesbury in England. And you can just see. This is actually not one of those dissimilar shots. This has happened before, in particular the abbey is just on this little area of land that is just above usually the area that gets flooded. But it is so widespread. We've got some other images to show you as well, outside of Tewkesbury.
This is just a picture as I say across much of Britain, across England and Wales, where the flooding has been so very bad. So the concern now is not that the rain is continuing to come down, although there will be quite a bit, it's for the level of the actual rivers.
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HARRISON: So come back to me and I can show you this one particular river, which runs through (inaudible). The current level is already at the highest recorded ever mark, and it could go up and beyond that as well. So that, as I say, is the concern.
But this is what has been happening day after day after day, beginning Tuesday last week. So for a week now, it's just been system after system after system, very heavy amounts of rain. And of course just continuing to really impact pretty much the same areas, the southwest, much of Wales and also central England.
And just the last 72 hours, again, Capel Curig in Wales, 104 millimeters on top of what they've already had; Keswick up here in the lake (ph) district, 74 millimeters; Liscombe in Devon,66 millimeters of rain. And you can begin to see the direction now coming from the north, because that low is actually drifting and pulling away.
But it also means that cold air, of course, we've got plenty of snow across central Europe, along the line of the Alps. It's going to feel a lot colder as well. So be prepared for the next, which is all that snow and that very, very cold air. And my goodness, will it accumulate across much of the Alps. And you can see southern areas of France into Germany, Richard.
QUEST: Jenny Harrison at the World Weather Center, we thank you for that and thank you for nothing when it comes to the Powerball. I'll be back after the break.
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QUEST: Hobbit hype has taken over New Zealand in the run up and lead up to the world premiere tonight. Images from the film are plastered over everything, from office buildings to the jet that delivered Peter Jackson. "The Hobbit" films have received millions of (inaudible) dollars in tax breaks from New Zealand. The government even tweeted its labor laws to keep the production there.
Today Peter Jackson suggested that might not be enough. This report from Daniel Faitaua at New Zealand One's news network.
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DANIEL FAITAUA, TVNZ ONE NEWS CORRESPONDENT (voice-over): "The Hobbit" movie came very close to not being filmed here as Warner Brothers sent scouts to locations in the U.K.
SIR PETER JACKSON, DIRECTOR: They literally had "The Hobbit" script broken down into each scene. And in each scene, there were pictures of the Scottish Highlands and forests in England.
FAITAUA (voice-over): Back in 2010, the government responded to that threat. It hammered out a deal with Warner Brothers Studio executives and agreed to make controversial changes to the labor laws and has given it $67 million in tax breaks. Sir Peter says the incentives are a reality.
JACKSON: You've got to be aware of what other parts of the world, you know, other American states are offering (inaudible) tax incentives. You've got to be aware of the exchange rate. And you just have to (inaudible) you want to be in the game, you've got to be in the game.
FAITAUA (voice-over): Prime Minister John Key is not making any promises for future projects.
JOHN KEY, NEW ZEALAND PRIME MINISTER: They need to (inaudible). I mean, that's the nature of this industry. We are looking at some (inaudible) changes made here around television. (Inaudible) various parts that we've moved beyond we were at in terms of (inaudible).
FAITAUA (voice-over): Labor questioned the government's deal with Warner Brothers and is now facing criticism for taking part in the premiere's celebrations tomorrow.
DAVID SHEARER, NZ LABOR LEADER: There are still a lot of people employed in New Zealand in the making of this film. It's a premiere. It's a great achievement.
FAITAUA: Prime Minister John Key is also defending the tourism marketing campaign leveraging off "The Hobbit," saying it's an investment that's paid off.
KEVIN BOWLER, CHIEF EXECUTIVE, TOURISM NEW ZEALAND: If we were able to achieve another 100,000 to 200,000 visitors, which would be similar to what was achieved with "Lord of the Rings," over the next two or three years, that would be a fabulous result.
FAITAUA (voice-over): As millions see the spotlight put on Wellington once again, millions have been spent to making it happen -- Daniel Faitaua, ONE News.
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QUEST: Now obviously in fullness of transparency, "The Hobbit" movie is being made by Warner Brothers. Warner Brothers is part of TimeWarner, which is the parent company of this network. A "Profitable Moment (inaudible).
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QUEST: Tonight's "Profitable Moment": in Paris, one of the world's richest men sat down with one of the most powerful. President Francois Hollande had summoned Lakshmi Mittal, the head of one of the world's biggest steel firms to explain why his factories may well be nationalized. It's an extraordinary argument, and it could not come at a more crucial time in the Hollande presidency.
The shine of the inauguration worn off, old problems rearing up again, the rating agencies and the economists say France is still too uncompetitive, too protectionist, too hostile to business. Everyone's watching this row closely, trying to work out if the Socialist government is showing its true revolutionary colors. There's no sign of a Jacobean uprising yet.
The statement says talks will continue. When the dust finally settles, we'll see whether Mr. Hollande is the true man of steel.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest. Whatever you're up to in the hours ahead, I hope it's profitable. News is next.
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QUEST (voice-over): The headlines: Egypt's Muslim Brotherhood is dismissing protests in Tahrir Square. These are live pictures from the square. The group's Twitter page calls the rally "underwhelming," and says the low turnout indicates "a lack of support." in their words.
Protesters say the president is behaving like a dictator and demanding he repeal his decree that says courts cannot throw out his decisions.
The body of the late Palestinian leader Yasser Arafat has been exhumed and reburied after forensic experts took samples from his remains. They're examining them for traces of poison. Mr. Arafat died in 2004 and the cause of his death has never been fully explained.
Thousands of dairy farmers staged this protest over low milk prices. They got the demonstration in Brussels, blocked access to European parliament building and spread liters of milk on it, complaining prices do not cover the cost of production. The E.U. is currently debating its common agricultural policy.
The Eurozone and the IMF are stepping in to rescue Greece again. It's teetering on the edge of default. There's an agreement for a series of payments totaling about $57 billion. The move should keep the country afloat and in the Eurozone.
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QUEST: You are up to date with the latest news headlines. Now to New York and "AMANPOUR".
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