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Quest Means Business
OECD Calls for Action on Tax; Currency Peace Pledge; Dangers of Currency Wars; European Markets Up; Barclays Overhaul; US State of the Union Address; Dollar Down; Stranded Cruise Ship
Aired February 12, 2013 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
NINA DOS SANTOS, HOST: Time to pay up. Tonight, the head of the OECD calls on big businesses to play fair on taxes.
Cuts and shutdowns at Barclays as the British bank begins its wholesale transformation.
And 3,000 passengers, no power, and days from land. It's a Carnival cruise ship calamity.
Hello, I'm Nina Dos Santos, and this is QUEST MEANS BUSINESS.
Good evening. The OECD says that multinational corporations must be made to pay fair and pay their fair share of corporate tax. And it also says that they shouldn't leave citizens and small businesses to bear the burden.
Loopholes in the systems mean that some big firms pay as little as 5 percent corporate tax, while smaller firms here are paying up to 30 percent, according to the OCED. It says that such strategies, though they may actually be legal, do hurt investment and growth as well as unemployment.
The OECD is drafting an action plan to help governments try and close these gaps in the global taxation system. Angel Gurria is the head of the Organization for Economic Cooperation and Development, otherwise known as the OECD, and he joins us now live from Paris.
Good to see you, as always, Angel Gurria. You're taking quite a stand on tax here, and it has been a huge issue, particularly here in the UK over the last few months. How confident are you that all these countries and companies are going to be embracing the kind of things that you're putting on the table here?
ANGEL GURRIA, SECRETARY-GENERAL, OECD: This is a request by the G20 countries of last November in Mexico, and we're going to present it to the finance ministers, which mandated this to be done.
If they approve it, by next June, we will have an action plan based on the document that we are going to present them in two days in Moscow. And then, we're going to go and present this to the leaders in September to move ahead.
This is not about enterprise bashing, this is not about governments against companies. This is to protect both the governments and the companies, the governments so that they can have a fair share of the taxes, and the companies from being taxed twice or three times by different countries because they're trying to act, let's say, politically correct, OK?
So, it's better to do it in an organized way rather than unravel in a disorderly way when everybody's going to be trying to get ahead of each other.
DOS SANTOS: So, effectively, what we've got here is, we're paying the price for years and years of not harmonizing the tax regime across a number of these countries so that, as we were saying before, companies like Starbucks may have their intellectual property in one place, they can book sales in one country, but actually decide to book those sales in another country where, obviously, the tax regime is more favorable. You'd like to see that eradicated, presumably?
GURRIA: Nina, the -- we've been fighting the problem of tax evasion and tax havens and all that and bank secrecy, but that was easy to deal with because you were on the right side of things, simply by saying enforce the law.
The problem that you have now as you very appropriately put it is that we have created a system where today it is legal to shift the profits around to the lowest taxation jurisdiction, and actually the effort that we're putting on is called base erosion and profit shifting.
What we want to do is modify that, and this requires not just enforcement or policing, this requires major changes in the laws of all the countries, and no country can do it on its own. It requires a massive cooperative effort. This is why this -- the only chance of this to succeed is to do it in the context of the G20.
DOS SANTOS: Well, talking about unilateralism and multilateralism and profit shifting, currencies are also a huge part of that equation for companies that decided to book their profits in one place in the world or another. And of course, apropos this subject, today we've got the G7 warning on currency wars. How concerned are you about the prospect of a currency war here?
GURRIA: I think this question of currency wars was coined by the minister of finance of Brazil a few years ago. I think we're out of that.
This question came about again, the discussion, because of the Japanese decision, which is in the context of fighting deflation and getting back on growth, which is, again, something which would benefit everybody in the world because Japan is a locomotive that has been stalling for some time.
It's very, very important to get Japan back. I think the discussion in the G7 really represents the complexity of the issues. And the other thing is that Europe clearly has a big productivity problem, a competitiveness problem, that it has to address.
It's not just a question because one currency or another currency is dealt with in a particular way. The problems of Europe are still there: productivity, competitiveness, they really have to be addressed, and that has to be with innovation, it has to do with education, it has to do with competition policies --
DOS SANTOS: Let's just --
GURRIA: -- has to do with tax policies, it has to do with a number of issues, which are structural in nature, and which have to be the next generation of reforms in Europe once you get out of the short-term crisis- related decisions.
DOS SANTOS: But it's not just Europe, it's not just Japan. The issue, really, at hand here is that, I suppose, if your goods and services are being priced out of the market because they're becoming too expensive because of your currency, and you need to stimulate your economy, why not?
They only problem is is that if everybody devalues their currency, then you have a big problem, economically speaking, on a global level.
GURRIA: First of all, you're absolutely right. But the other thing is, there is -- there's such a thing as saying, OK, legitimate self-defense.
You are successful. Everybody wants your currency. They use it as a haven. They go and buy the currency, your currency appreciates by 8, 10, 15 percent in a few weeks, and you lose the competitiveness that you have gained over years of efforts.
And of course, there you have defend yourself and say OK, how do we best manage these flows so that they do not affect my competitiveness?
The other question is, when you are trying to -- to manipulate the markets or the currencies in order to produce, artificially, a competitiveness that you have not gained, now, that's another matter, here.
The problem is at where do you draw the line and where do you have an absolute number that is appropriate for the dollar, euro, or for the euro yen or the sterling or whatever. That is not easy to determine.
In the end, the question is, let the markets take their course, and only there will we see what the proper values of the currencies over a period of time. But there is a question of some countries, because they're considered a good investment, a good bet, especially a number of emerging economies these days --
DOS SANTOS: Yes. Like Brazil.
GURRIA: -- the yen, of course, having been one of them -- where they have to take, in some cases, some decisions, in order to defend yourself from the inflows, which are, in a way, a success story.
DOS SANTOS: Angel Gurria, as always, thank you so much for joining us here on QUEST MEANS BUSINESS. It's great to have you on this show.
Well, seven of the world's most powerful industrial nations say that they won't, indeed, wage a currency war in order to try and kickstart growth. This is something that I was just debating with Angel Gurria of the OECD.
G7 finance ministers and central bankers were responding to concerns that some nations already engage in what's been dubbed "competitive devaluation." We're talking about deliberately weakening their currencies here to try and make their exports cheaper on the open market.
Now, in a statement ahead of the weekend talks that are going to be taking place in Moscow, the G7 had this to say. "We will not target exchange rates. We are agreed that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability."
If the G7's goal was to smooth over the volatile currency fluctuations, I'm afraid to say, it has backfired spectacularly of late. Take a look at this, for instance. This is what Angel Gurria was referring to in point.
The Japanese yen, this is how it traded against the US dollar just on Tuesday's session. As you can see, it surged against the US dollar. That was after Reuters, quoting an unnamed G7 official, said that the statement that was issued by the G7 was actually highly aimed at Tokyo and signaled concerns about the yen's recent movements.
Do remember that the yen had been appreciating all the way through the eurozone crisis. That had been putting pressure on Japanese exporters, and the Japanese Central Bank has since countered by printing more money to try and depress the value of the yen. What you're seeing there is a chart of the yen against the US dollar.
Now, devaluing a currency can boost a country's competitiveness and the attractiveness of its exports, as we were just saying before, but if every country does actually do the same thing, what you have is the dangerous topic of a currency war.
Let me show you exactly how this works and what's been happening on this front of late. Japan's prime minister, as you can see here, denies deliberately weakening the yen, although, as I was saying before, the dramatic stimulus measures that have been put in place have been having that effect.
And what they've done is try to counter the fact that Japanese goods and services were just getting very, very expensive because everybody's plowing their money into Japan as a safe haven last year.
And then, the eurozone has also reacted and waded into this war. The French president, Francois Hollande, said today that "We should ensure that currencies are not used as instruments for competitiveness gaps that are not real out there."
And just last week, he actually called for foreign exchange rate policies to be put into place, saying that the euro shouldn't be allowed to fluctuate, according to the whim and mood of the markets.
Now, Luxemburg's own prime minister has also waded into this debate. Jean- Claude Junker, the former head of the euro group, no less, has said that while there is not an optimal range for the currency -- the single currency, we're talking about here -- he did say, quote, "We should have an eye on the behavior of our direct competitors."
And then, if we take at Switzerland -- take a look at Switzerland, the ultimate safe haven, which has seen the Swiss franc really appreciate over the last three years of the eurozone crisis, Switzerland actually openly intervened in its own currency markets around about the middle point of last year.
It set a floor of one franc 20 centimes against the euro, and the head of Switzerland's central bank recently -- just as recently as Tuesday, in fact -- affirmed that the franc remains an overvalued currency and confirmed that the floor will stay in place, even if, obviously, it's costing them an awful lot of money to keep that going.
Let's have a look at how all this is playing out on the markets as well in today's session. As you should be able to see here, we've seen a third session of gains to the markets in London, Paris, and Zurich.
Financial shares among the best performers there. Deutsche Boerse are up around about 2.3 percent on the day. Also, Societe Generale over there in France, that went up 3.5 percent. UBS up 2.7 percent, so the banks very much the beneficiary of the kind of trend on the markets.
And speaking of banks, here in the United Kingdom, Barclays' new CEO has managed to outlay a long-awaited plan to repair this bank's battered reputation. Antony Jenkins says the process will take literally years, but he does insist that he's undaunted.
What he plans to do here is close the bank's controversial tax-planning unit. The once lucrative business has been described as facilitating industrial-scale tax avoidance. The average bonus at Barclays would also be shrinking by around about 17 percent from last year's figures. Jenkins, for his part, has actually waived his payout altogether.
He also plans to cut 3,700 jobs here at the company. This is in an effort to reduce costs of around about $2.5 billion. Almost half of the jobs will actually be lost from Barclays' investment banking arm.
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ANTONY JENKINS, CEO, BARCLAYS: Very few jobs will go in the UK. As part of the strategic review, we've conducted -- we've looked at all of our businesses, 75 percent of -- 75 of them across Barclays, and there are two major areas that are affected.
One is our retail banking businesses in Western Europe, and the other is our investment banking activities in Asia. And those are the areas where the job cuts that we've announced to day will be affected.
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DOS SANTOS: Investors seemed pretty pleased with this plan. If you take a look at how Barclays fared in today's session, it was actually the best performer on the FTSE 100, as you can see, closing the day up more than 8.5 percent, at a price of 327 pence.
In full, the announcement came as Barclays released its annual results as well, and we should mention that this bank saw to a net loss of $1.6 billion. Jim Boulden is here in our London studio to run through the specifics.
So, Jim, this is a major departure from what Barclays was this time last year when, of course, we had Diamond Bob running the show. It was more of an investment bank, really, than a High Street bank, many international viewers might have thought.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: And I think investors loved it during the good times, didn't they? They loved Bob Diamond and his investment bank, and this area that, as you called it, the tax-avoidance unit, which did very well during the times.
But Antony Jenkins was brought in to make changes, and boy, this -- this is really important. If people think, oh, we hear from banks all the time, yes. Quarterly statements. This is a fundamental change of how Barclays says it's going to work going forward.
He said things like, "ethics above earnings." They've come up with a new slogan, "the go-to bank." And he wants it to be a bank that Mom and Pop, you and me, would use, feeling that they are an ethical bank going forward.
DOS SANTOS: But a High Street bank isn't necessarily profitable --
BOULDEN: No.
DOS SANTOS: -- for this main reason: if you put your cash in as a deposit, you don't necessarily take your loans and mortgages out with that company. So, they don't make money doing High Street operations in the same way as they used to be able to use that deposit money to trade in the markets.
BOULDEN: And that's why this is a different Barclays Bank then the one that Bob Diamond created. One analyst said that they're shredding Bob Diamond's legacy. Getting rid of the investment banking side, becoming a smaller bank, getting rid of employees, and shrinking its base.
And then, obviously, I would say, becoming a less-profitable bank over time. But he's hoping that that also means you're not paying billions in fines over times.
Part of the reason for this loss, and we should mention it, is increasing the amount of money going into some of the payouts they have to make in the UK because of past misdeeds. Remember Libor, of course, last year. Wasn't as much money as UBS, but still, the reputation of the bank was hurt.
So, his theory, anyway, and what he has to try to tell thousands of employees to do going forward, is that we can make money by being a smaller, more ethical bank, and that people will come back and use us for small business loans, for mortgages, and for savings.
DOS SANTOS: Yes, and we haven't even addressed the fact that it's not even government-owned. But we don't have time.
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DOS SANTOS: Thank you very much for that. Jim Boulden, I'm afraid to say, there in London studio.
Straight ahead here on QUEST MEANS BUSINESS, in just a few hours' time, President Barack Obama will be making his State of the Union address. With some big-ticket issues on the table, we'll take a look at what he's likely to say and what he should do.
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DOS SANTOS: The state of the US economy and jobs are expected to be at the heart of tonight's State of the Union address. There are reports that President Barack Obama will also mention progress on a trade deal between the EU and the United States. These two regions already enjoy the largest bilateral trade relationship anywhere in the world.
Let's take a look at the status quo when it comes to trade between these two regions, and as you can see on the chart here, what we see is that the United States is the largest European trading partner for this region.
Interesting to note, though, I want to point out that China's only a whisker behind and catching up fast. It's also worth mentioning that the EU and the US economies combined account for no less than half of the world's total GDP and for nearly a third of the world's total trade flow.
So, any new deal would of course have huge and profound implications, not just in these kind of regions around the world, but everywhere else as well.
I'm joined now by our White House correspondent, Dan Lothian, who's going to be running us through the specifics of what the president may or may not say. Dan, what's he likely to address? Presumably jobs and the economy very high up in this speech.
DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: That's right, and Republicans have been critical of the president, saying that he's now pivoting back to jobs, because they say this is something that he just has not been effective in addressing over the last four years because the unemployment rate remains around 8 percent.
But nonetheless, the president will be pushing very hard, focusing on jobs and job creation, specifically looking to find ways to create relief for middle class Americans. We're told that he will be laying out some proposals focusing on investments in manufacturing, infrastructure, education, and also clean energy.
And this will not be a speech where the president is aggressively going after the GOP, but rather a way of laying out his vision for the next four years, focused primarily on domestic issues. But the president will, we are told, touch on the latest from North Korea, these tests over there. The president will touch on that during his address tonight.
In addition, the president expected to talk about how this time next year, about half of the US troops in Afghanistan will be back home. That number, 34,000, right now, 66,000 troops on the ground in Afghanistan, so the president will be touching on that as well.
So, a little bit of foreign policy, but the big focus in the president's address tonight will be on jobs and the US economy. Nina?
DOS SANTOS: OK, Dan Lothian in Washington. Thanks ever so much for that, our White House correspondent standing by, obviously, looking at all the minutia of what the president is likely to say.
Well, Barack Obama makes his State of the Union address on Tuesday night in the US, but that's pretty early on Wednesday for much of the rest of the world. In fact, if you're tuning in from London, it airs at 1:00 AM here London time, 5:00 AM in Abu Dhabi, and a little bit of a more pleasant time in Hong Kong, that's 9:00 in the morning.
Following the address, of course, CNN will also show you the Republican response, which will be delivered by the senator -- Florida senator Marco Rubio. That's Wednesday morning, right here on CNN.
Time now for a Currency Conundrum for you out there. According to the latest figures, the number of counterfeit euro coins were removed from circulation last year went up by 17 percent. So, what's the chance of running into one of those fake coins? Well, is it A, 1 in 50,000, could it be B, 1 in 100,000, or C, 1 in a million? We'll tell you the answer later on in the show.
Given the fact that the currency war has been dominating the agenda this week, in the economic front, the dollar is actually down against the euro and the Japanese yen. When it comes to the British pound, those two currencies are currently trading flat.
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DOS SANTOS: Welcome back. A cruise ship left drifting after a fire is being dragged back to safety. More than 3,000 passengers onboard the Carnival Triumph face uncomfortable conditions as they head back towards an Alabama port, now. John Zarrella is in Merida, Mexico, and he's been following the trials and tribulations of these poor passengers onboard.
John, this sounds terrible. They don't necessarily have toilet conditions, they don't have showers, some of them are sleeping on the decks. What's the latest?
JOHN ZARRELLA, CNN CORRESPONDENT: Yes, that's exactly right, Nina. We've had reports from the ship from a couple of passengers on the ship saying that they're getting cereal, they're getting fruit, they're getting some very limited -- limited -- hot meals.
A couple of other cruise ships pulled up next to the Carnival Triumph yesterday and dropped off some more supplies, some more food, and some more Carnival personnel to help with all the guests.
But many of them, up to 70 percent, one of the passengers told us, of the passengers are sleeping on the deck. They brought their mattresses up to the deck because it's just so hot down, particularly in those lower decks with the inside cabins. And also, the smell of sewage, they say, is just horrible.
And we've talked to one of the members -- one of the passengers on the cruise who told us about what they were going through.
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ANN BARLOW, ABOARD THE CARNIVAL TRIUMPH (via telephone): The smells are -- I can't even describe them. Our room is flooded. There's sewage -- raw sewage -- pretty bad. When you walk in the hallways, you have to cover your face. We don't have any masks for breathing. It's disgusting. It's the worst thing ever. We're sleeping on mattresses, our room is so horrible.
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ZARRELLA: Now, Ann Barlow also told us, though, that the crew was doing a very good job, that at least at the time, she was pleased with how Carnival's crew on the ship was handling it.
Now, Carnival themselves tell us that there are some elevators that are operating, they've got some axillary power, that there are -- people are able to take showers -- albeit they're cold showers, there's no hot water on the ship -- and that they do have some -- not all, but some -- of the toilets working in the public areas and in some of the staterooms.
So, needless to say, it is a mess on that ship. It is being towed in, as you mentioned, to Mobile, Alabama. Expected to get there, Carnival says, sometime on Thursday, although the United States Coast Guard told us a little while ago that they thought it might get in there late, late tomorrow night.
One of the US Coast Guard cutters is actually escorting the Triumph as it is being towed into Mobile, Alabama. Nina?
DOS SANTOS: We won't mention the horrible irony about all of this happening during Carnival week, and of course, it's a Carnival ship, but Carnival's been having a really rough time and the cruise industry in general, we had an incident that claimed the lives of five crew members off a ship in the Canary Islands earlier this week, Costa Concordia last year. Why is cruising still so popular, John?
ZARRELLA: It certainly is one of -- it is the largest cruise line in the world and has many, many subsidiary companies. As you mentioned, the Costa Concordia, one of the subsidiary companies, to Carnival.
But cruising -- and Carnival's fleet is bigger than a lot of navies in the world, that's how many ships they have. But cruising is popular because it's so all-inclusive. Everything is paid for. You pay one price and you get your meals free, you get sodas and things free. You've got to pay for alcohol, and of course, your gambling on the ship.
But because it's all-inclusive, they're a very good bargain. A lot of people love to do cruises and do many, many cruises a year.
Now, Carnival is saying that for these people -- so everybody knows out there -- they're, of course, reimbursing all of these people for the cost of this cruise and they credited them for any of the shipboard purchases they made except for the losses in the casino.
And they're offering these people cruises later, another cruise, free of charge, equal to the value of what they spent on this one. But quite frankly, it's probably going to be a while before a lot of these people decide they want to get back on any cruise ship. Nina?
DOS SANTOS: Sounds like they need a really big holiday after all of that debacle, doesn't it? John Zarrella in Mexico, thanks so much for that there.
Well, straight ahead here on QUEST MEANS BUSINESS, Tim Cook faces some tough questions, but the CEO of Apple is in a bullish mood, and he says the best is yet to come.
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DOS SANTOS: Hello and welcome back, I'm Nina dos Santos. These are the headlines here on CNN.
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DOS SANTOS (voice-over): Japanese prime minister Shinzo Abe is calling North Korea's latest nuclear test a grave threat that can't be tolerated. Tokyo deployed military jets in response to the test, which North Korea says is its third. Pyongyang says that the test was more powerful than previous tests, which took place in 2006 and in 2009.
The French national assembly has passed a bill allowing same-sex couples to marry and adopt children. Now the measure will go to the Senate. It's a key election pledge of the Socialist president, Francois Hollande, but it's still a highly controversial issue. The opponents plan to march next month.
A Vatican spokesman says that Pope Benedict's resignation was purely a spiritual decision and had nothing to do with any specific medical issue. We're told the pope will keep a regular schedule until he leaves office at the end of the month. The Vatican spokesman says cardinals will choose Benedict's successor, should be arriving in Rome by early March.
The U.S. Coast Guard official says a stricken Carnival cruise ship could arrive at a Mobile, Alabama, port as soon as Wednesday. It was on the third day of the four-day cruise across the Gulf of Mexico when a fire broke out on board, knocking out the ship's propulsion system. Passengers say that they've seen raw sewage sloshing in the hallways.
An Italian magazine is set to publish beach holiday photos of the pregnant Duchess of Cambridge. Key (ph) says that the photographs show the duchess in a bikini that reveals her baby bump. The spokesman for the palace says the royal family is disappointed at the breach of privacy.
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DOS SANTOS: Apple's CEO, Tim Cook, who will attend President Barack Obama's State of the Union address had to address some concerns of his own company earlier today. He was in a bullish mood, though, at the Goldman Sachs Technology and Internet Conference, which took place in San Francisco.
The question was how did this happen, though? Apple's stock, as you can see behind me, has lost nearly a third of its value over the course of the last five months alone. Its own forecasts show that slowing demand for its products is especially going to be a key issue going forward and we're talking in particular about the iPhone, which has been a huge hit worldwide.
Maggie Lake is in New York, listening to what Tim Cook has been saying so far. So what's he had to say, Maggie? Presumably he's been under huge pressure to address things like David Einhorn's proposals that they give more money back to shareholders.
MAGGIE LAKE, CNN CORRESPONDENT: Exactly, Nina. And given that, given that stock price, and their own forecasts, you would have thought you would have seen a very nervous Tim Cook. Not the case. He was very relaxed, very upbeat, addressing investors, saying, listen; he was unapologetic, defending their business.
Listen, we have a lot of money, yes. We intend to use it wisely. We are not against giving it back to shareholders. We are not against large acquisitions, including big ones, if they get over the bar, if they fit the bill. So far they haven't. He -- yes, the iPhone, there's some worry about that. He talked a lot about the success of the tablet.
As you can imagine, they would with iPads and their dominance, particularly on Einhorn's proposal with the preferred stock, issue some sort of perpetual preferred stock. He called it creative and said the board would consider it thoroughly.
But in terms of the lawsuit Einhorn's pursuing, he called it a silly sideshow, a distraction and a waste of shareholder money and said, frankly, we should all just donate that to a worthy cause. So he's a bit biting on that front. But otherwise, very upbeat Tim Cook, Nina.
DOS SANTOS: What did he have to say on the products front? Because of course, as we're just showing our viewers before the stock has been plunging, even Apple's own predictions say that they can't get away with selling quite so many iPhones at such a high margin forever.
LAKE: Yes, that's right. He didn't give away any details on the product pipeline. As you imagine that they wouldn't under these kind of circumstances, but they did say that they're conscious of that lower price point part of the market, which would allude to the fact that perhaps they are going to come out with a cheaper iPhone; that's been on the rumor mill.
They emphasize the importance of emerging markets like China and Brazil. Again, it would point to the fact they are looking at that, again talking about the success of the tablet. And interestingly, no details on the TV, Nina. That's the other thing people really holding out for.
But one analyst afterwards, after listening, said listen, they need that cash hoard ph). They need to hold onto all the money they can because if they're going to do TV, it's not going to be about the device and the hardware. It's going to be about content deals. And they cost a lot of money. So that may be why they're being so conservative with that cash hoard (ph).
DOS SANTOS: Well, one of the other companies that's facing a similar predicament, although it's a completely different end of the product cycle, is Dell, isn't it? They've got activist shareholders saying that they should be doing one thing with their money, the technology market is moving wildly away from where they are today.
LAKE: Yes. That's right. And this is really the theme in the world of tech, Nina, the shareholders stacking up against CEOs.
And today, a new development on Dell, we've been following this ,remember that firm from Memphis, Tennessee, we talked about yesterday, Southeastern Asset Management has come out vocally against the deal that Michael Dell and Silver Lake have on the table, to take Dell private, saying it's not high enough.
Well, today, another major shareholder is joining that and saying they, too, opposed it. T. Rowe Price, who owns 4.4 percent of Dell shares say they are also against it, in a brief statement to us at CNN, they say that the CIO, Chairman Bryan Rogers (ph), says, "We believe the proposed buyout does not reflect the value of Dell." They'd like to see it higher as well.
The thing that's significant about this perhaps is this is not an activist shareholder or a sort of arbitrage group. This is a pretty traditional mutual fund group. So that may be a worrying sign for Michael Dell, if we start to see more of these kind as well.
So we're going to have to watch this closely. But it seems the opposition is mounting, watch and see whether they come back and counter. Yesterday, when we were reporting on this, they indicated they were not going to come in with a higher bid. But we shall see, Nina.
DOS SANTOS: OK, great stuff, Maggie Lake bringing us all the latest there from the technology world in particular on Apple and also Dell in New York. Thanks for that.
Coming up next, the smartphone James Bond would be proud of. It's called the Vertu, with a scratch-proof screen and a case five times tougher than most of its rivals. And when it comes to the price, well, you'll have to stay tuned to find out exactly how much these go for. But I'll just say I do hope you're sitting down.
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DOS SANTOS (voice-over): Time now for the answer to today's "Currency Conundrum," earlier in the show we asked you what the chances were of getting a fake euro coin when you got handed your change, and the answer is actually one in 100,000.
You'd be fairly unlucky to find one, because they're actually 16 billion genuine euro coins out there in circulation. But as you can see, there are one in 100,000 is your chance of ever encountering one that is counterfeit.
Well, speaking of cash to spare, if you've got $10,000 change, well, the ultimate smartphone could be yours. The Vertu TI claims to have a scratch- proof design. And believe it or not, a concierge available at just the touch of a button.
And as a sign of separation from its former parent company, Nokia, Vertu chose an Android operating system rather than Windows, which is what Nokia uses these days. Earlier today, Vertu's chief executive, Perry Oosting, explained that decision to me and more.
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PERRY OOSTING, CEO, VERTU: We live in a world where there's open operating systems that are quite open to use. And I think Android is a typical example, is where Android is just delivering great software. And then it's up to the developers like us to develop a user interface and not touching the source card. And it's very open and available. It's very democratic.
So in that respect, we didn't have any default in terms of going for the bigger corporation than a stand-alone business, very different than in the car industry.
DOS SANTOS: But what about your customers? How -- are they going to be buying that and thinking, well, if 2-3 years down the line, the operating system shift are spent all this money on this phone, they don't have a big technological backup like Nokia. So if something goes wrong?
OOSTING: Well, the backup is not because of Nokia or Vertu, whatever the backup is, if you want a story of data, if that's the backup where you (inaudible), you have cloud services that sometimes are even independent from what kind of operating system it is.
And then there's also the upgradability going forward that gives you that security element. So I don't see there's any risk in that, because that's not different than any other operating platform.
DOS SANTOS: I must ask you, there's only around about 320,000 people out there who have one of these coveted luxury phones. Obviously, it's never going to be your mass market product. But then again, if you juxtapose that with the way how the average person buys a mobile phone, they only keep it for about two years or so.
Run me through the logic of buying one of these.
OOSTING: Well, the logic is, first of all, if you are interested in something which is different, unique, that's one element. In terms of that is not widespread.
If you are interested in durable materials versus disposable materials and have an element like you buy other luxury categories, which is more the touch and the feel and the sensory experience, we think we believe we offer something unique and different in that respect.
And I believe it's also delivering you services that, besides the normal usage of a smartphone and the browsing element, you get additional services, which is, for example, the concierge or the encryption voice calls that we deliver and the certainty on the package and in the server (ph) proposition. I think we could be quite a unique choice.
Then are we for everybody? Absolutely not. That's never our drive. We're not after market share. We're not after high quantities. We want to deliver an authentic, made in Hampshire, made by one person, a unique proposition that is a true sensory experience in terms of the experience of the device.
It is not only the materials. That is also the human touch through the concierge, and it's also about the durability combined with high-tech technology.
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DOS SANTOS: Well, if bling is your thing, gold might be a more traditional purchase out there, because people in India bought more than $50 billion worth of this precious metal last year. As Mallika Kapur now reports, some are worried, though, that that's taking the shine of India's economy.
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MALLIKA KAPUR, CNN CORRESPONDENT (voice-over): Twenty-four-year-old Alfiya Bhombhal is preparing for her wedding.
ALFIYA BHOMBHAL, CUSTOMER: (Inaudible) what is the goal of the (inaudible).
KAPUR (voice-over): She says a bride won't look the part without it.
Indians are gluttons for gold, and gift it at weddings, births and festivals. Many people also use it to hedge against India's high inflation and consider it a safer bet than the stock market. Plus, it's a lot easier for the Indian public, most of which doesn't even have access to a bank to buy a piece of gold than it is to invest in a financial instrument.
KAPUR: This is Mumbai's famous jewelry market. And all these little stores here sell gold. Remember, India doesn't produce any gold domestically and has to import all of it. The cost for that: $56 billion last year.
KAPUR (voice-over): That's one of the main reasons India's fiscal deficit ballooned last year. It put the rupee under pressure, slowed growth and left the finance minister concerned.
P. CHIDAMBARAM, INDIAN FINANCE MINISTER: I may add that we may be left with no choice but to make it a little more expensive to import gold.
KAPUR (voice-over): He then raised the import tax on gold for the third time in a year, this time hiking it from 4 percent to 6 percent. Industry insiders say that's likely to cause an increase in illegal smuggling into India, but they also don't think legal imports will come down. And even if gold ends up being a little bit more expensive, they say consumers will still want it.
MOHIT KAMBOJ, BOMBAY BULLION ASSOCIATION: Gold is the commodity which has paid you 10 times in properties; also the recession is there. Stocks also, the index, you can see from last couple of years. But nobody has got much return of -- on their investment besides gold.
KAPUR (voice-over): It's been good for the retailer. But according to this economist, money spent on gold is a drag on the economy. According to estimates, Indians put away about 20,000 tons of gold in jewelry, coins and bars.
SHUBHADA RAO, YES BANK: Because the savings have gone into gold so much more, the financial savings have begun to deplete.
And those have caused reasons for structural liquidity in the banking system getting lower, because nobody's now preferring as many people to deposit their money in banks rather than, you know, utilize that money in buying and investing in gold, which is a non-productive asset.
KAPUR (voice-over): But try telling that to Indian consumers like Alfiya, who's trying on another piece of jewelry. She says buying gold is a tradition in India, one that few are willing to give up -- Mallika Kapur, CNN, Mumbai.
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DOS SANTOS: Let's take a look at how the weather is looking these days, because there's been some pretty chilly weather right across the European continent of late. Let's go over to Jenny Harrison, who's standing by at the CNN Weather Center for us this evening.
Jenny, what have you got?
JENNY HARRISON, CNN METEOROLOGIST: Yes, not many places have managed to escape that cold air, Nina, even places you don't generally see snow. We have seen some unexplained in just a moment. But you can see, again, a very unsettled picture and lot of this cloud bringing, of course, the rain, but also that snow, particularly heavy across the line of the Alps.
And then not a huge amount of movement in terms of this storm system moving out of the region. So we can expect to see more rain, more snow. You can see some rain pushing to the far northwest. And again, across Germany and down the line of the Alps, more snow in the last few hours.
But this is what I mean about snow in places where you don't see it quite as often as others. It is Carnival time in Venice, in Italy. And you can see that, sure enough, the streets are wet, but the snow is coming down as well. Now the Carnival lasts until the 17th of February. But guess what? Aqua alta also happening at the same time.
And look at St. Mark's Square, all those chairs out there for the Carnival -- frankly, no one's sitting in them because not only is the -- as you can see, all that water, but also snow on the top. So as I say it's aqua alta, so we know about the high tide. This time around, 143 centimeters is the actual depth of that water, makes it the 15th highest tide ever recorded.
Back in November, on the 11th of November, it actually got to 149, which made it the sixth highest. But as we know, it's when the high tide's combined with heavy amounts of rain in land and very strong winds, of course. That's a fairly clear as well, pushing it into the lagoons, so very intense area of low pressure.
But just look at this, bitterly cold water of course, given this time of year, but then you mix this ice and the snow with it and just very unpleasant indeed. Away from the water, it looks glorious, all this snow, beautiful city, beautifully lit up there at nighttime. But this is a system, the same system bringing the snow.
And look at this, 60 centimeters of new snow into Vojsko in just the last 24 hours, a very deep snowdrift there of 145 centimeters, the system moving away to the east, but still more snow across the north. Another system pushing into the northwest. Now the leading edge has been cold, so we'll see some fairly widespread snow. Then it'll get a bit milder.
And so that is when we'll see the rain. But look at the winds. The gusts have been causing, problems, too, 104 kph, one of the highest gusts recorded. And also it is that time of year, a very busy day this Tuesday. It is Shrove Tuesday. The scene in Washington in the U.S., doing these pancake races.
And the same here in London. This is the annual Parliamentary Pancake Race. And it's been going for 16 years now. Politicians versus journalists, and unfortunately, guess what? The politicians beat the journalists, Nina. But never mind. There's that milder air pushing in to the northwest. But in the meantime, a very unsettled picture. Back to you.
DOS SANTOS: Ah, the politicians beating the journalists, but the journalists might them to a scoop or two, (inaudible). Jenny Harrison, thanks ever so much for bringing us the latest there on that.
Now you may remember the ditty, "Tea for Two," and two for tea. After the break, Richard gives Dr. Sanjay Gupta a crash course in the beloved British ritual.
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DOS SANTOS: Hello and welcome back. Well, you may know that our very own Richard Quest is particularly partial to a refreshing drop of tea. And when CNN's chief medical correspondent, Dr. Sanjay Gupta, came to London for a visit recently, Richard took it upon himself to take the good doctor out for a taste of Britain's most popular drink. And what I have to say is I think he probably enjoyed it.
Take a listen. Cheers.
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RICHARD QUEST, CNN HOST: We have this wonderful phrase. We don't even have a scone yet. Ah! That's the phrase. Ah! A nice cup of tea. And when you say that phrase, "a nice cup of tea," you are connoting more than just drink.
DR. SANJAY GUPTA, CHIEF MEDICAL CORRESPONDENT: A nice cup of tea, yes.
QUEST: You'll often hear people say, ooh, I could murder a nice cup of tea. The important thing to remember about afternoon tea is that it's not just about the sandwiches or the tea or the scones. It's about the occasion.
And the newest analogy I've been keeping was it's like brunch. If I invite you to brunch, we both know that we're going to have eggs and something. And we're going to have a muffin and we're going to have -- but that's not really what it's about, is it?
It's about that moment, that sense of occasion. So when I say -- when somebody says shall we go to afternoon tea, you're bringing in an event, a moment. Tell me, more tea?
GUPTA: Yes, please. What the heck, yes.
QUEST: More tea, Dr. Gupta?
GUPTA: So is it the taste you like, the invigoration?
QUEST: Yes.
GUPTA: Are there ones that you consider more healthy?
QUEST: No idea whether they're healthy.
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QUEST: (Inaudible) all confused.
You've got --
GUPTA: Do you ever think about in that sense, though, because some teas are supposed to be higher in antioxidants? Is this something that you think about or.?
QUEST: Not in the slightest. I find -- I find a herb tea or a chamomile in the evening, a ginger maybe in the mid-morning to be a bit of a boost.
GUPTA: Oh, well, that's interesting. And then a chamomile at night?
QUEST: Yes, yes. But I do find that -- I find that rose-flavored, lemoned hip ginger nonsense.
GUPTA: So this is the cream? Do you care how much cream you put on?
QUEST: Well, I'm sure you do. My cholesterol. But I don't.
GUPTA: Notice how well my skin is cut there, by the way.
QUEST: You're not committing surgery now. You're making afternoon tea.
GUPTA: Just pointing it out.
And is that too -- is that an adequate amount of cream there?
QUEST: No! (Inaudible) bit more.
(LAUGHTER)
GUPTA: All right. Just for you, Richard.
QUEST: Enjoy yourself.
GUPTA: Are there absolute no-nos when it comes to (inaudible)? Is there anything that is completely -- violates the rules?
QUEST: I wouldn't go for coffee. You really do -- should go for tea. And I think the only rule I would say is you've got to enjoy it. And you've got to remember what you're about. You're about -- I needed that nice cup of tea.
GUPTA: You didn't put any sugar in your tea, no lumps.
Just because I'm sitting here or.?
QUEST: No. I gave up sugar a few years ago.
GUPTA: You did?
QUEST: I did.
GUPTA: In the move -- for health reasons.
QUEST: For health. I just found I was eating -- drinking too much of it. And I was having, you know, two or three lumps here and a lump there and a lump there and a (inaudible) there and maybe -- and before long, I was --
GUPTA: Everywhere.
QUEST: I was a lump everywhere, there a lump, there a lump, everywhere a lump-lump.
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DOS SANTOS: Great stuff. There you go. Two for tea, and tea for two.
We'll have a full update of the stock markets after this short break as QUEST MEANS BUSINESS continues. Do stay with us.
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DOS SANTOS: Hello and welcome back to the show. Let's take another look at the U.S. markets as investors get ready to hear the U.S. president, Barack Obama, make his first State of the Union address in his new term as you can see the big board over there and the Dow is trading up around about 61 points or about just half of 1 percent.
Do remember that the U.S. president is likely to say something perhaps even announcing a new E.U.-U.S. trade deal that progress is being made on that front, announcing that remember that they enjoy the largest trading relationship anywhere in the world. And trade between the two countries accounts for no less than half of GDP worldwide.
CNN has just learned, in fact, that Mr. Obama will be making his speech soon, and it'll last a little over an hour during which time he's also likely to address the issue of North Korea as well.
Here in Europe, rising banking shares helped some of the major indices, as you can see, to close in the green as well today, around about up around about 1 percent, if you take a look at the FTSE 100, and that was buoyed in particular by Barclays, the British bank. It was by far the best performer on that FTSE 100 index, gaining more than 8.5 percent in today's session.
Mind you, it did announce a major departure and radical u-turn in the business, also announcing that 3,700 jobs will be going.
And on that note, it's time to say goodbye. That's it for this edition of QUEST MEANS BUSINESS. I'm Nina dos Santos. I'll be back with a check on the news headlines next.
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DOS SANTOS (voice-over): These are the headlines on CNN this hour.
The Japanese prime minister Shinzo Abe is calling North Korea's latest nuclear test, quote, "a grave threat that can't be tolerated. " Tokyo deployed military jets in response to the test, which is North Korea's third so far. Pyongyang says the test was more powerful than previous ones, which took place in 2006 and in 2009.
The French national assembly has passed a bill allowing same-sex couples to marry and adopt children. Now the measure has to go to the Senate there. It was a key election pledge of the Socialist president, Francois Hollande, but it's still a highly controversial issue in the country, and opponents plan to march next month.
A Vatican spokesman says that Pope Benedict's resignation was purely a spiritual decision and had nothing to do with any specific medical issue. We're told the pope will keep a regular schedule until he leaves office at the end of the month.
An Italian magazine is set to publish beach holiday photos showing the pregnant Duchess of Cambridge. Key (ph) says that the photographs such as they show show the duchess in a bikini that reveals her baby bump. The spokesman for the palace says that the royal family is disappointed at the breach of privacy.
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DOS SANTOS: That's a look at some of the stories that we're watching for you here on CNN. "AMANPOUR" is next.
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