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Quest Means Business
Oil Prices Ease; Andrew Young on U.S.-African Trade;
Aired August 26, 2009 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR: Oil prices are easing, shares are adrift. In France, unemployment is rising. I'm Richard Quest, I'm in New York. And here, I mean business.
And a very good afternoon to you and a warm welcome to the New York Mercantile Exchange, where we are here to talk about commodities, particularly the price of oil. Later on in this program, as we put full perspective into what is happening in the financial world, I spend some time in the pits.
And I assure you, spending time in the pits, even with me own name badge, is not for the faint-hearted.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: One who has a weak stomach does not do very well in this environment. You've got to be a little bit tough, if not, you're not going to last.
(END VIDEO CLIP)
QUEST: OK. Let us talk, first of all, about the main news in the business world of the day. French unemployment has risen, but it is still seemingly under control. It is certainly not yet reaching the heights that perhaps have been seen elsewhere within the European Union and in the United States.
The French finance minister has said that the French government is doing all that it can to keep those unemployment numbers under control. How much more can be done? Our senior international correspondent Jim Bittermann joins me now live from Paris.
Good evening, Jim.
JIM BITTERMANN, CNN INTERNATIONAL SENIOR CORRESPONDENT: Good evening, Richard. In fact, there is something in these numbers for everybody. The fact is that if you go back to what I was standing on, this balcony about a month ago, I told you that unemployment had unexpectedly gone down.
That, in fact, there were 19,000 more -- fewer people looking for jobs last month than this month. Now with a figure that came out today, there are -- the figures show that in fact the unemployment rate is going up. That there are 10,000 more people seeking jobs this month than last month.
So kind of a mixed bag. In any case, the French finance minister, Christine Lagarde, says that overall things are going to get worse before they get better. That it will be still another few quarters before, in fact, the unemployment rate really starts to change -- Richard.
QUEST: But with unemployment at those sort of numbers, the deficit levels, of course, for the French, with its automatic stabilizers in terms of unemployment benefits and other social benefits, that also has a related effect, doesn't it, Jim, on, for example, deficit spending for the French government?
BITTERMANN: Well, there is a lot of deficit spending going on. In fact, they're just about to float a big capitalization program they're talking about in a month or two. So yes, there is a lot of deficit spending. And there is a lot of unemployment programs that, in fact, are causing a lot of this deficit spending.
So I think you're going to see a lot more deficit spending to help out that unemployment picture.
QUEST: Jim, finally, is there the unease? Obviously the French unions are never one to be backwards at coming forward, but in terms of the response of the Sarkozy government, do they believe that more should be done, can be done, and more importantly, must be done if the French with their normally bilious ways don't take to the streets?
We've lost Jim Bittermann there in Paris. But not to worry, if we get him back, we will come to you. Let's look at the European stock markets and how they traded during the course of the mid-week session.
An element of August exhaustion tinged with a lack of general economic numbers saw European markets slipping gently into the red. Traders were ready to take the odd profit, after all, the gains have been very good after four straight days of gains. In spite of signs of rising business confidence in Germany (ph), the mining and energy sectors lost (AUDIO GAP) in London.
In Paris, Alcatel-Lucent and Suez Environnement, each gained more than 11 percent, one on speculation on a takeover bid from China, the other on profits. It has helped lighten the load on CAC-40 prices. Now of course, that's the way the markets have been trading.
One of the largest market participants in terms of advertising is WPP, the global advertising company. Sir Martin Sorrell is widely quoted as saying he now believes that there could be a double recession. And that one would take place in 2011. That will be predicated, of course, on the back of a reduction in government spending.
Adrian Finighan spoke to Sir Martin Sorrell to get an idea of what that recession would look like overall.
(BEGIN VIDEOTAPE)
SIR MARTIN SORRELL, FOUNDER & CEO, WPP GROUP: We do see some signs of stabilization, we saw that little bit in July. We think the second half will be significantly better than the first half. But there is still a lot of hard work to do. And we still make provisions for severance (ph) in the second half.
ADRIAN FINIGHAN, CNN INTERNATIONAL CORRESPONDENT: Where do you see the economy right now? And are we through the worst of it?
SORRELL: I don't think these are U's or V's or even W's. I think these are L's, and maybe an Italic L, because I think there will be some recovery because we are cycling easier comparatives.
I think where the rubber really hits the road is sort of 2001 or something like that, maybe back end of 2010, because governments then are faced with the dilemma about what they do with these deficits.
(END VIDEOTAPE)
QUEST: OK. We'll hear more from Sir Martin Sorrell later in the program, especially, of course, on the question of the advertising industry.
Around me you can see the financial news that is coming in just about from every section and every sector of the world. There is more data on these walls than you can shake a stick at. But when you want to turn to the news agenda, we got back to London, and at the CNN news desk, Becky Anderson.
BECKY ANDERSON, CNN INTERNATIONAL ANCHOR: Good stuff. Thank you, Richard.
Tributes are flowing from around the world following the death of U.S. Senator Edward Kennedy. The last surviving brother of the influential Kennedy clan passed away Tuesday after a long struggle with brain cancer. Known as the "Lion of the U.S. Senate," Kennedy fought for a number of liberal causes, from equal rights to universal health care. He was 77 years old.
British Prime Minister Gordon praised Kennedy's commitments to children's education and health care reform. He called him a "senator of senators," and said, quote, "Senator Edward Kennedy will be mourned not just in America, but on every continent."
Well, German Chancellor Angela Merkel expresses her condolences in a letter sent to President Obama. She writes: "For decades Edward Kennedy was a towering figure in U.S. politics. His battle for justice and equality was defined by persistence and resoluteness. In Senator Kennedy, both Germany and Europe have lost a great and dear friend."
Frederik Pleitgen reports, that's a feeling shared by many Germans.
(BEGIN VIDEOTAPE)
FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT: I'm Fred Pleitgen in Berlin, where the death of Senator Edward Kennedy is big news. The Germans have always been admirers of the Kennedy family. What you see behind me is the building where then-President John F. Kennedy held his famous "Ich bin ein Berliner" speech where he condemned the building the Berlin Wall.
It's something Germans have not forgotten and which still reflects on their emotions about the Kennedy family.
(END VIDEOTAPE)
ANDERSON: Well, Ted Kennedy had a special attachment to Ireland, where his legacy has had a lasting impact. The great-grandson of Irish immigrants was a vocal opponent of the British military deployment in Northern Ireland in the 1970s. But later he helped broker a peace agreement. There his efforts won him an honorary British knighthood.
Former Irish Prime Minister Bertie Ahern remembers him fondly.
(BEGIN VIDEO CLIP)
BERTIE AHERN, FORMER IRISH PRIME MINISTER: In the early years, the British didn't like them, but we loved them because he was saying what we didn't have the strength to be able to get in to America. But I think he remained -- and Tony Blair and I, you know, were great friends with him.
I remember the night that we completed the Good Friday agreement. I arrived back from Belfast to Dublin, and the first phone call I got was from Ted Kennedy.
(END VIDEO CLIP)
ANDERSON: Well, Edward Kennedy spent most of his life in public service. And now his nation is paying its respects. At the president's mansion, a tribute, Barack Obama ordered U.S. flags at all federal buildings to be flown at half-staff.
Kennedy will be buried along with other American heroes at Arlington National Cemetery; a grassy plot of land has been reserved for him there, just steps from the graves of his brothers Robert and President John Fitzgerald Kennedy. The senator's family is still preparing final funeral arrangements.
And those are the headlines for you. Back to you, Richard, in that other financial capital, New York.
QUEST: Absolutely, Becky. Many thanks. We'll be back with you in about 15 minutes more for CNN news.
There is only one problem, as I look around all of these numbers, which number is the important one? How to find out actually what I should be looking for. When we come back, I'll tell you how the New York markets are trading. What's the Dow Jones doing, in just a moment.
QUEST MEANS BUSINESS, we're at the New York Mercantile Exchange, live.
(COMMERCIAL BREAK)
QUEST: Welcome back. QUEST MEANS BUSINESS, we are live tonight at the New York Mercantile Exchange in the heart of New York. We're going to be talking about the way commodities are trading, particularly oil, the crucial commodity, which has such economic importance.
Let me update you where oil is. Somebody -- I won't pretend to even have had any knowledge of this, if I look up at the NYMEX Globex summary, I can tell you that oil -- crude oil currently trading at $71.33 a barrel, down $72. Heating oil at some other price, which I can never work out if it's pence or dollars, I suspect it's (AUDIO GAP).
And a variety of other stats, but the key one is $71.29 for oil, which tells me that it is off just a fraction on the day. We'll get analysis on that later in the program. Felicia Taylor is at the New York Stock Exchange.
If oil is off, how are stocks looking today?
FELICIA TAYLOR, CNN FINANCIAL CORRESPONDENT: Well, Richard, U.S. stocks have been back and forth all day today. We (AUDIO GAP) now trading to the upside, and actually trying to hold on to what was seen.
(15-SECOND AUDIO GAP)
TAYLOR: . clear sign of optimism in the housing market after a report on Tuesday also showed that U.S. home prices posted their first quarterly increase in three years.
Also today, we've had new orders for big ticket durable goods. We saw them jump nearly 5 percent in July. That too was much better than expected, and the biggest increase in about two years.
The rise, though, is largely due to a spike in orders for commercial aircraft. Both reports, though, lending support to the theory that we might actually begin to see a modest recovery. The question, of course, remains, does it have legs? And can it actually last?
As for the markets, the Dow right now, as I said, has been seesawing back and forth. It's just fractionally into the positive territory, but the Nasdaq.
(15-SECOND AUDIO GAP)
QUEST: . Felicia, when something happens over here, they tend to react over there. And it is all to do with economic growth.
TAYLOR: Absolutely right. So here is one of the numbers that we got today. A surprise from the American Petroleum Institute, which reported an unexpected 4 million barrel rise in inventories.
Analysts had been looking for a drop of a million. Last week on the opposite side, we did see a decline of 8 million barrels. That indicates that demand was picking up. And that was enough for the price of oil to once again test the $75 level on Monday, which we haven't seen since last October.
That would have indicated that there was a greater demand for oil and therefore it was things like, you know, trucks traveling across the country, people using more gas and oil, et cetera. So that would have indicated that the economy was really beginning to ramp up.
So when we see the stockpiles increase, it's just the opposite. So this rise in supply coupled with the strengthening dollar now paints a different picture. As you said, the price of crude is now down below $72 a barrel.
Analysts are expecting that the price of crude will fall below $70. Now the reason is because it has met resistance twice at this year's high of $75. Another factor has to do with the calendar, literally. The Labor Day holiday falls a week later than normal, and motorist group AAA forecasts that 13 percent fewer people will be traveling during the long holiday weekend.
Labor Day is typically the last big weekend of summer in the United States. But it's so late this year that many of the school kids will already have returned to school. The price of gas is also expected to be down about a dollar from last year to near $2.60 a gallon.
So when we've got this rise in supplies, that's not a good thing for the stock market necessarily, because it means that there isn't actually business taking place -- Richard.
QUEST: And sometimes I wonder, Felicia, whether we can all have too many numbers for our own good, because I can tell -- Felicia Taylor, many thanks, at the stock exchange.
I can tell you from what I've often seen here at the NYMEX, it's often more trading by grunt feeling of the gut rather than what they may be seeing up on these boards. Although you do eventually get to work out what number is what.
You've heard of Little Italy, Little Chinatown, Little Korea. Here in New York, Little Senegal? Well, when we come back, "Africa Inc." looks at important trade links between Africa and New York.
QUEST MEANS BUSINESS, we're in New York this week. Good evening.
(COMMERCIAL BREAK)
QUEST: Welcome back. QUEST MEANS BUSINESS, and it is "Africa Inc.," and of course, oils and minerals are amongst the biggest components of trade between the United States and Africa. That much you don't need me to make clear.
Last year the value of trade, I want to read this clearly so we get it absolutely right, came to more than $150 billion, according to the Commerce Department. Now this year, the value of exports from Africa has dropped by more than 50 percent.
As our correspondent Richard Roth here in New York now reports, when the odd drop in exports feeds through on both sides of the world, effects are clearly being felt.
(BEGIN VIDEOTAPE)
ATIM OTON, STORE OWNER: But I don't think it's going to go across, all right? But it might be able to if you do it diagonally.
RICHARD ROTH, CNN SENIOR U.N. CORRESPONDENT (voice-over): Store owner Atim Oton plays a small role in U.S.-African trade, but both her stores in Brooklyn and in Nigeria offer a Main Street view of the slump in U.S.- African trade.
OTON: I think that everybody is talking about recession.
UNIDENTIFIED FEMALE: This is out of Nigeria, but it's using (INAUDIBLE).
ROTH: The Nigeria businesswoman has noticed higher quality imports are not being snapped up anymore.
OTON: We used to sell particular products at a price point of $40, primarily a lot of jewelry. We went down to about a $25 price point average in terms of our sales.
WAYNE KILTZ, OWNER, AFRICA IMPORTS: I'm not a good drummer.
ROTH: But Wayne Kiltz has been drumming up business for the past 10 years as one of the largest suppliers of African goods to U.S. retailers. His company, Africa Imports, does about $3 million a year in catalogue and Web sales.
KITLZ: This is one of the most popular items that we sell, is this mud cloth fabric. Each piece of mud cloth is individually hand-made. They are all about the size. This is the size of a lapa (ph), or a wrap skirt, is what it would be used for.
ROTH: His business grew 5 percent last year, much slower than the triple-digit growth of previous years.
KILTZ: Because of the products that we sell, I don't think we're as affected as much as maybe, I don't know, auto industry or home improvements or something like that. We have less expensive items that people still want to have.
UNIDENTIFIED FEMALE: The price for the kuba (ph) cloth is $100.
ROTH: Still, the economy has taken a toll on some of his clients.
KILTZ: It has hurt some people. We've -- there have been stores that have gone out of business. There has been people who have stopped doing this.
ROTH: New York's famed Harlem community, home to many African immigrants, has been hit hard. Harlem Business Organization say 35 percent of the community's small businesses have closed in the last year, including many stores.
And in the area of Harlem known as Little Senegal, concern for the health of African trade goes beyond the cash register.
KILTZ: Every time that we sell a piece of mud cloth, there is someone in Africa that gets to work for two to three weeks. Not a lot of money by our standards, but it supports somebody for a long time in Africa.
ROTH: Wayne Kiltz buys some of his goods from this man, Mookie Camara, originally from Gambia. Mookie is the middle man. He has been buying and selling for over a decade, mostly importing black soap, cocoa, and butter. He puts the go in "go-between."
MOOKIE CAMARA, WHOLESALER: I travel all over the United States. Yesterday I went to Baltimore, I supplied some black soap and some shea butter. So tonight I'm going to Detroit, Michigan, and supply 18,000 pounds, a guy needs, shea butter.
KILTZ: Oh, OK, just dashikis. How much are the dashikis?
ROTH: And Mookie is hustling to ride out this downturn.
CAMARA: Back in the day, business was very good, the economy was very good, everybody was happy, any little things you bring, you sell it right away. But nowadays, you have to know where to go to survive. If you don't know, you can't survive.
UNIDENTIFIED MALE: And you're surviving?
CAMARA: I'm surviving, thank God.
UNIDENTIFIED FEMALE: Things move across the borders, and they use whatever they can use.
ROTH: These days, all players in the U.S.-African trade game could use some more customers.
Richard Roth, CNN, New York.
(END VIDEOTAPE)
QUEST: Now, joining me now, Andrew Young is co-chairman of GoodWorks International, a firm that is dedicated to creating and developing business in Africa and the Caribbean. The firm represents the governments of Tanzania and Rwanda, it also represents Chevron, GE, and Motorola in Nigeria. GoodWorks does not represent the Nigerian government.
Ambassador Young is a former U.S. ambassador to the United Nations, and a former mayor of the city of Atlanta. And we are very pleased that Ambassador Young joins me now on the line.
Ambassador, the trade links between the United States and Africa that in -- some say, it really comes down to this old argument of "trade, not aid." But at which point do you shift from one to the other?
ANDREW YOUNG, CO-CHAIRMAN, GOODWORKS INTERNATIONAL: Oh, I think it's always -- it's always going to be a "both and." We're interested in trade, though, because trade is sustainable. And what we've been trying to do is, frankly, replicate what we did here in Atlanta.
We built Atlanta largely through tourism and conventions. We didn't have a big manufacturing sector. We had no raw materials. But we had a great airport. And we had nice people. And we built some good hotels. And around that, we built an economy that attracted during the '80s when I was mayor, $70 billion worth of foreign direct investment and 1,100 firms moved to Atlanta.
QUEST: Right.
YOUNG: Now we practice what we call "public purpose capitalism." And we say we're not looking for aid, we're looking for investors.
QUEST: But.
YOUNG: But to get investors, you have to take the red tape and turn it into a red carpet.
QUEST: And let's -- let's.
YOUNG: And make people welcome.
QUEST: Let me just -- let me just come in onto that, Ambassador. That question of public purpose capitalism works very nicely provided you haven't got a group of people who are trying to, if you like, oppose the very idea of market economics within the continent, or within the structures.
YOUNG: Well, very few people are opposing market economics in the continent right now. In fact, I almost don't know anybody. South Africa has a wonderful market economy, Tanzania, Rwanda, Nigeria.
Algeria, even, was a former kind of French socialist state, they're advocating market economy.
QUEST: So what do we -- so what do we -- what do we, if you like -- I use "we" in the wider sense of the Western countries. What do the Western countries have to do that is more than is being done at the moment? Because it seems to me that that is the crux of the trade question.
Because the -- for example, the Doha Round is well and truly bogged down on all of these issues.
YOUNG: Well, but what we have to do is decide we're going to do business with Africa. Africa is a marketplace that is terribly underserved. Coca-Cola probably sells more Coca-Cola in Nigeria than they do in New York.
I figure if you can sell Coca-Cola, you ought to be able to sell anything. Delta Air Lines recently started flying between Atlanta and Lagos, Atlanta and Ghana, two flights a day to South Africa. But those are the busiest flights in the Delta system. They're the most profitable.
QUEST: Do you.
YOUNG: . flights in the Delta system.
QUEST: Do you still believe, obviously, that until that the carrot and stick approach is still the best way forward on questions of transparency, on questions of corruption, and on questions of good governance, is it carrot and stick that is best?
YOUNG: No, it isn't. It's really getting over our hypocrisy and doing what is required as good businessmen. We don't pay bribes. We don't discuss bribes. We don't give kickbacks. We say you can make more money honestly, and a growing economy, than you can steal in a dying economy.
Corruption kills your economy. It kills economic growth. But there is -- the people who are trying to -- see, corruption takes two things. And usually it's somebody trying to do business too quick with somebody they don't know. And they think they can pay under the table and get the job done.
QUEST: Right.
YOUNG: But Coca-Cola has been in Africa for 50 years.
QUEST: Ambassador.
YOUNG: The -- yes.
QUEST: The one thing I'll say about you, Ambassador, when it comes to promoting your town of Atlanta and your town -- and your hometown industries, whether it be Coca-Cola, Delta, or indeed our own CNN, headquartered in Atlanta, you do a very -- a very, very admirable job. And I'm wondering.
YOUNG: Because we do a good job.
QUEST: And I'm wondering, finally, Ambassador, is that what the continent needs? Briefly, does it need more, if you like, spokesmen that it put it forward at the tables of government and business?
YOUNG: Well, it does. The Chinese go in to Africa and they go to stay. They take their time. They have a long view. Coca-Cola, Delta Air Lines, the companies that I know about, have gone in and those who have made a long-term investment and have decided that that is part of their economic and business future, not only last, but they do well and they make money.
QUEST: Yes, right.
YOUNG: The African stock markets, for the most part, are out- performing American, European, or Asian stock markets. But we don't look at that business potential.
QUEST: Ambassador, before we let you go, and we thank you for giving us your time, today, of course, is a solemn day in the United States, the death of Senator Edward Kennedy, a man I'm sure you worked with over many years in a variety of different forms of government, the issues -- the liberal issues, the social health care issues that he put forward.
You must have some reflections, indeed, on what America has lost today.
YOUNG: Well, I'll tell you, I don't think we've lost it. I think that the Kennedy spirit, just as we did not lose civil rights when his brother died, we did -- will not lose health care because he is no longer with us.
In fact, his spirit will infuse that health care debate and we'll realize, this is something that he started talking about in the early '70s. And we still haven't achieved it. But what we have to do is have a health care system that is prepared to deal with a global economy.
And in order to do that, we do have to have a mixed bag. We have to have government options, and we have private options.
QUEST: Thank you. And there we will leave it. Ambassador Andrew Young, thank you very much for coming in, joining us on "Africa Inc."
This is QUEST MEANS BUSINESS. We are coming to you tonight from the New York Mercantile Exchange, part of our coverage "NY-Lon-Kong." And I'll be back in just a moment.
(COMMERCIAL BREAK)
RICHARD QUEST, HOST: Welcome back to QUEST MEANS -- welcome back to QUEST MEANS BUSINESS, coming to you from the New York Mercantile Exchange, part of our NYLONKONG coverage.
My voice is sounding just a little bit hoarse. I assure you, I've only been on this floor for the last hour or so.
Just over there in the pit, they are coming to the end of the trading day -- basically trading oil futures. They have been shouting and screaming for more than five hours at each other. I assure you, that pit - - in fact, any of these pits, it ain't for the feint-hearted.
(BEGIN VIDEOTAPE)
QUEST: If you're going to be a trader, you've got to start early, 10 to 8:00 in the morning. Well, not that early. I suspect he's been up for hours reading the papers, trying to read into what the markets are likely to do.
RAY CARBONE, PARAMOUNT OPTIONS: Hey, good morning.
QUEST: Good morning.
CARBONE: Good morning.
QUEST: Good morning.
How are you?
CARBONE: Very well.
QUEST: I bet you've already been up and read the papers.
CARBONE: I've already read them all.
QUEST: Really?
CARBONE: Sure. I read "The Times," the "F.T." And "The Wall Street Journal".
QUEST: Well, way to go.
What are you going to be really watching for today?
CARBONE: I'm going to watch the Dow Jones. I'm going to watch the S&P. I'm certainly going to watch the dollar/euro ratio because that has a great influence on the oil prices.
QUEST: What you're doing is very much concerned with what's happening overseas?
CARBONE: Absolutely, because oil, unlike natural gas, which is a domestic market and carries no risk premium, oil carries great risk. It is a global commodity that people can put on a ship and send anywhere where the price is right.
QUEST: What time have you got to be in there?
CARBONE: 9:00.
QUEST: Before we go inside the New York Mercantile Exchange, Ray Carbone gives me a quick lesson on what to look for.
CARBONE: You have to focus in on the financial flows -- again, the dollar, the global equity markets and kind of ride that wave. And if you've been able to do that, you've done very well in the last five months, six months.
QUEST: We're going to trade.
And I'm going to have to do this sort of funny business.
So in just over 16, 17 minutes time from now, when it opens, what will you be looking for?
CARBONE: Today, I'm going to concentrate on just putting out information. We're going to listen to what the pit is talking about and what structures are out here. We put them out to customers and market them and try to get response and orders.
QUEST: None of this has got anything to do, seemingly, with the real world. And yet -- and yet, it's got everything to do with the real world.
CARBONE: That's well put. I can't dispute that. It is...
QUEST: These people...
CARBONE: ...it's a niche like any other business is, except this has repercussions for the real world.
All right, we're ready to rock here. And we go into the ring.
QUEST: But why are they making so much noise?
Is it because...
CARBONE: I have got to make my voice louder than yours to get my information back to my pit.
Wait, Roy, Roy, what's the bid?
QUEST: How do you know who the other person (INAUDIBLE)?
CARBONE: We can understand each other. I made this market a 30 bid at 40.
A 150 bid at 300.
Because we all know the same hand language.
QUEST: Right.
CARBONE: So I can communicate with someone across -- everything I've just said to you, I can do it with my hands. This is an Occ (ph) through March 65-90 fence against 76 1/2.
QUEST: Do you need nerves of absolute steel to go into that pit?
CARBONE: One who has a weak stomach does not do very well in this environment. You -- you've got to be a little bit tough. If not, you're not going to last.
Jerry, let me have the card with the APO, please.
QUEST: Do you ever get tired of it?
CARBONE: Certainly. It's like anything else, you get tired of it. You go through lulls. That's when you know you need some time off.
QUEST: It may seem extreme, but upon such shouting rests the global economy.
This may be (INAUDIBLE).
CARBONE: I have to sleep. I'm trading my own capital. I cannot wake up. If some geopolitical terrorist incident happened and oil is trading at $200, I don't want to find that out being short the market.
You bought 48s?
I'm sorry.
QUEST: We've only been going 44 minutes and I'm exhausted.
CARBONE: It is an exhausting business. It's physical and it's mental all at once in a very confined space.
(END VIDEO TAPE)
QUEST: All right. And the day is now over. Ray is with me.
And the day -- first of all, how was today?
CARBONE: Today was a volatile day. Stats came out. The market was lower. It came back up a little bit. Plenty of action today.
QUEST: All right, what are they all doing now, because sitting around seemingly -- well, you tell me.
CARBONE: People are looking at their positions. They're going over their P&L, all contained in their tablets. They're finding out how the day went for themselves.
QUEST: How did your day go?
Come on.
CARBONE: Lots of business...
QUEST: Lots of business.
CARBONE: I've been yelling. Lots of screaming. Lots of doing.
QUEST: So tell me, I never did quite understand what was this all about. I never quite got the gist of it.
CARBONE: Each month has a hand signal. The 10s are up here, the ones and the fives are down here.
QUEST: So give me an example.
CARBONE: (INAUDIBLE).
QUEST: Come on, give me an example.
CARBONE: If I were to buy 25, I'd buy 25.
QUEST: Twenty-five?
CARBONE: Correct.
QUEST: And I got...
CARBONE: If you're going to sell them, you go 25.
QUEST: And when I go like that over there, somebody will sort of (INAUDIBLE).
CARBONE: You're going to have a position in the crude oil market.
QUEST: Good day?
CARBONE: A nice day.
QUEST: Did you make money?
Did you make money, a yes or a no will do?
CARBONE: Flat.
QUEST: He can't say yes or no.
Did you make money?
CARBONE: Yes or no, can't do it. I never talk about money. All the best.
QUEST: He does it all again tomorrow. This is what the pit looks like at the end of the day. This is one place, I have to tell you, where, frankly, you really don't worry about cleaning up at the end of the shift.
Becky Anderson is at the CNN News Desk to bring you up to date.
BECKY ANDERSON, CNN CORRESPONDENT: Yes. Stick to the anchoring, Richard.
It looks -- it's a lot easier, I can tell you.
Thank you for that.
Headlines for you at this point.
Iraq's political and religious landscape has changed significantly with the death of Abdul Aziz al-Hakim. The influential Shiite cleric with ties to both the U.S. and Iran. Al-Hakim passed away on Wednesday in Tehran, where he was being treated for lung cancer. He was 59 years old.
Well, clashes between South African police and soldiers escalated Wednesday. The soldiers were protesting low wages with a march on government buildings in Pretoria. Police fired rubber bullets to break up the crowd.
Well, with 17 percent of the vote counted, incumbent Hamid Karzai is leading challenger Abdullah Abdullah in Afghanistan's presidential race. Official results aren't expected until September and a runoff will be called if no candidate wins more than 50 percent of the vote.
And talk about painting the town red, it's the Tomatina Festival in Bunol in Spain. Forty thousand people turning out for the annual food fight. They tossed about 100,000 kilos of ripe tomatoes, all in good dirty fun. Participants were advised to wear diving goggles and old clothes. They can also toss away.
And those are the headlines -- and, Richard, maybe, yes, that would be quite good attire for the New York Mercantile Exchange, wouldn't it?
Hey (INAUDIBLE).
QUEST: I'll tell you, Becky, you know, you and I have covered these markets for many a year. But, frankly, when you actually get down into the pit and you actually realize that -- I mean it's quite a -- it's quite brutal stuff.
ANDERSON: Yes. Very. Absolutely. I mean, I -- I could see from that great report. I'm very jealous. I've always, always wanted to get onto the floor and actually get involved.
Good stuff.
Thanks.
QUEST: And, of course, make some money, but with you and me and our skills at investing, well, we'll leave that one there.
All right, Becky Anderson...
ANDERSON: Yes, exactly.
QUEST: ...at the CNN News Desk.
Hey, sir, sorry to bother you.
UNIDENTIFIED MALE: Yes?
QUEST: What were you trading today?
Anything interesting?
UNIDENTIFIED MALE: Gold.
QUEST: You were trading gold?
UNIDENTIFIED MALE: Yes.
QUEST: Gold.
How was the day in gold?
UNIDENTIFIED MALE: Expiration (ph) today, so it was pretty much a (INAUDIBLE)...
QUEST: When we (INAUDIBLE) up there somewhere is the number of (INAUDIBLE) gold.
UNIDENTIFIED MALE: Actually, it's selling at $944 today.
QUEST: $944 -- $944...
UNIDENTIFIED MALE: $944.07.
QUEST: Was that up or down?
UNIDENTIFIED MALE: That's...
QUEST: Are you bullish on gold or not?
Or do you still believe this whole inflation nonsense?
UNIDENTIFIED MALE: I believe (AUDIO GAP).
QUEST: He's bullish -- bullish on gold. (AUDIO GAP) at the Exchange.
When we come back, forget -- forget gold, we'll be talking about beer.
QUEST MEANS BUSINESS. We're at the Exchange, in a minute.
(COMMERCIAL BREAK)
QUEST: It doesn't seem to matter, wherever you look in this room -- hello -- people are sitting here having a break at the end of what has been an extremely long and brutal session, because every day seems to be long and brutal in these particular markets. Probably ready for a drink by the time the end of the day. All you can have on the floor of the Exchange itself is, as you may be able to see, a glass or a bottle or so of water.
When it comes to something stronger, how about a glass of Heineken?
The brewer has announced profits -- (INAUDIBLE) top profit up 20 percent. That's certainly given a sparkle to the company.
At a time of recession, are people drinking more of the premium stuff?
Do they trade (AUDIO GAP)?
JEAN-FRANCOIS VAN BOXMEER, CEO, HEINEKEN NV: We have seen some strong growth still in -- in Africa, by and large, all over the African continent; also, in some parts of Asia. On the other hand, we have been taking some price to maintain our margins on the top line and the rest of the growth has been driven by forceful action on the cost cutting across our organization.
BOULDEN: How tough has it been for this market in a recession?
Some people say people can drink more in a recession.
What have you found?
VAN BOXMEER: Well, I think that is a false idea. I wish it would be true, but it is not. I think beer is not immune to recessions, clearly. It depends from market to market. In mature markets, you clearly see people doing two things -- going less frequently out so the on trade (ph) sectors is -- is affected. And you see, also, phenomenons of down trading. These are the two negative phenomenon that you have.
BOULDEN: Now, down trading, you try to stay at a more premium side of things, don't you?
So what do you do about -- what do you do with price now?
VAN BOXMEER: Well, traditionally, we have been always cued to the higher end of the market. And we see no reason to change our -- our policy and our strategy. The crisis will not last forever. And so we will, in these difficult moments and years, we will continue to invest in our top notch brands, whether that is Heineken, which is the largest international brand around the world there, or in every country, the top brands we have in -- the local brands that we operate in every country.
BOULDEN: In the U.S. though?
VAN BOXMEER: And in the U.S. we are more prone to down trading. Heineken is a very large brand. It's available everywhere in the U.S. The consumers which choose our brand have to pay a significant premium. And in a recession like this, these are the categories of product -- the premium products -- which suffer, I would say, the most.
BOULDEN: You've given a cautious outlook for the second half of this year, not a surprise, really.
But is this going to be another half year of more cutting costs, more rationalization?
Or is this going to be a time, because of the recession, that you say those investments might start coming through and we might start seeing, maybe, an increase in some beer drinking?
VAN BOXMEER: No, we -- we have to be cautious here. It's only in the second half, and certainly in the fourth quarter, where we'll see where the whole recession will land for our industry. So it's a bit early days to say. I don't want to sound pessimistic, but we have to be cautious.
BOULDEN: Like many other drink companies, you're deeply involved in sports -- marketing, the Heineken Cup in rugby. A lot of people thought maybe in a recession, you'd be scaling back on these things.
VAN BOXMEER: I think the -- the bonding that you have watching a sport and supporting a team, there is where a beer brand is at home and where we think that Heineken fits the best. So we are absolutely determined, in a recession, to continue to give our support.
(END VIDEO TAPE)
QUEST: And that, of course, a refreshing, perhaps, drink at the end of an extremely long day, something I would suspect -- over in the oil pit over there, I have absolutely no idea why all of a sudden you get a bit of cheering, you get a bit of noise. Sometimes you see post-market.
Who knows whatever it is?
Anyway, let's bring you up to date with the market that is open, even though the NYMEX has now closed for the day. The market that's open is the Dow Jones Industrials. And it -- the Dow Jones is up 12 points. A very quiet session at this point of the year, of course, as we are in August, waiting for the GDP numbers coming out later in the week on the United States. And that is likely to be a mover of the market.
Before we catch up with the weather forecast, because it is still stunning in New York -- Guillermo has done a good job there. Let me just show you a little bit and give you some statistics around and about this particular room where we are. Some numbers. There are 98 LCD displays on the new trading floor; 683 is the number of occupants on the trading floor; and are you ready for this -- 22,331 square footage of integrated trading floor.
And when we say integrated, what does that mean?
It means you not only have big LCDs like this that look like you're trying to launch the space shuttle -- it's good to be careful. There's lots of steps. You could go over them. There are phones that are caller loaded (ph).
Who knows what that all means?
And I've been strictly advised and warned do not touch any buttons because QUEST MEANS BUSINESS might buy an oil tanker or two -- or perhaps even a couple of bars of gold bullion.
Guillermo is at the World Weather Center.
What it won't tell me, this machine, is what it's going to be like in New York tomorrow.
You're going to do that for me.
GUILLERMO ARDUINO, CNN METEOROLOGIST: Oh, Richard, you know, it's gorgeous outside and we have very nice conditions. But we have an unexpected guest now for the weekend. I was going on air in the Asia shows last night promoting your show from the outside there in New York, beautiful. Of course, Friday will be fine. But now we have a tropical cyclone -- a tropical storm, Danny, it is. And it's moving close, according to what we gather right now, close to the Northeastern Coast.
So Saturday and Sunday -- Saturday is going to be clear in New York. Sunday, it's going to be rainy, probably. We're talking about a 60 percent chance. So it's not going to be as gorgeous as I promoted before, unfortunately.
So I must say, though, the next two days are going to be fine. New York is looking OK. But come the weekend, you know, I have to take my words back, unfortunately. We were doing so well. I was so happy. So all of this may change, especially in the Eastern Seaboard, you know, Washington, D.C. we're going to see some winds and into North Carolina -- Charlotte, North Carolina, big airports over there all the way up, Baltimore, all the New York airports, Philadelphia, are going to be impacted indirectly by winds.
Well, it seems that Bill is finally coming to bring more problems into Scotland, Northern Ireland and Scandinavia. But the stormy weather that we have in the forecast for tomorrow actually shifting a little bit to the south right now, into Southern France, where it's been extremely warm; in Northern Italy; all the way into Poland, as well.
Nevertheless, the windy conditions prevail in London; in Dublin, as well. We may see some impact there (INAUDIBLE), but it's not going to be significant, significant. You're going to see some winds. And London is posting 24 degrees for tomorrow. Paris still quite warm, 29; Madrid, 35. That's pretty warm, indeed. And Kiev in Ukraine, 28 degrees.
So gradually we're transitioning, especially in the north, into cooler conditions. The south remains very warm. Nothing in the way of problems at airports weather-wise. You see all the way to Barcelona, Milano, Rome, Madrid looking fine.
And Iraq, Iran, Jordan and Syria remain quiet. We have cloudiness, but just a little bit. Nothing else.
Stay with us.
Richard will be back after the break.
(COMMERCIAL BREAK)
QUEST: We're back to the NYMEX.
QUEST MEANS BUSINESS coming to you live tonight from New York, NILONKONG (ph), as we have been over the past 10 days.
Look at this, it is so tempting -- a flashing red light. Somebody trying to telephone in. Oh, I was just about to make a trade. I'll have to wait until next week.
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Earlier in the program, we heard (AUDIO GAP) Martin Sorrell of WPP. Somatin (ph) believes that we might see another recession at the back end of 2011. His own company saw a falloff, not surprisingly, because of the falling advertising revenues and in the industry.
We asked him about Microsoft and Yahoo! It may be the big talking point in the market, but what is it likely to mean for the future?
(BEGIN VIDEO CLIP)
MARTIN SORRELL, CEO, WPP: Oh, we're -- we're very positive about that because Google dominates the market, one provider -- almost a monopoly provider. We don't think it's healthy and we say that because our clients are saying that.
I mean, what is -- some of our competitors -- one in particular took the position when Google was -- was trying to get together with Yahoo! that that was good for the market.
That couldn't have been good for the market. It couldn't have been good for prices in the longer-term.
We think having a better number two, which Microsoft and Yahoo! together will be, will be better for the market, will improve the process of (INAUDIBLE) which I think has done quite well, the sort of data that we ourselves, in our -- in our symphony company (ph), generate on the -- the market share of being post -- well, post its launch, which one of our interests is JWT (INAUDIBLE). And I think post the time when Yahoo! will continue to strengthen. That brings better balance into the search marketplace. And it's got to be good for our clients in terms of choice and ultimately in terms of price.
UNIDENTIFIED MALE: You're a very successful businessman, very, very experienced.
(CROSSTALK)
UNIDENTIFIED MALE: You've been doing it a long time...
SORRELL: Yes.
UNIDENTIFIED MALE: -- and you...
SORRELL: I've certainly been doing it a long time.
UNIDENTIFIED MALE: (INAUDIBLE) and you're pretty good at what -- at what you do and very well respected.
But what -- what has the last 12 months taught you, do you think?
Do you think we've learned anything in the last 12 months?
SORRELL: Well, I mean, you're -- you know, you -- you always learn that, you know, things can't carry on as they -- as they went on before, that life is -- is -- is cyclical and you have to take the good with the bad. And the big test is always in the tougher times.
I don't find these times fun, as some people call them. Fun -- I don't think laying off people -- you know, we reduced our head count by about 6 percent by the end of July from where it was on December 31st. We increased it by 4 percent the previous year.
But -- but I don't think that that is fun. It's very demanding. It's very taxing. You know, one would like to come in and present sets of numbers that -- that showed profits up by 50 percent.
But -- but I think what it teaches you is that -- that everything is cyclical.
UNIDENTIFIED MALE: You say that times like these certainly aren't fun.
But I mean, do you still relish the challenge (INAUDIBLE)?
SORRELL: Well, I think intellectually, I mean, if you look at the challenges that digital brings, it's really interesting. You know, what happened, you know, with London -- the London paper closes. Rupert Murdoch is talking quite rightly or actually acting on -- on charging for -- on live content, which I think you have to do. We've been saying that in our annual report for years.
UNIDENTIFIED MALE: But do you think the way...
(CROSSTALK)
UNIDENTIFIED MALE: I mean why would people start to pay...
SORRELL: Well...
UNIDENTIFIED MALE: -- because they've got...
(CROSSTALK)
SORRELL: That's my point. And the point is in order to make the -- the -- the operation viable, you're going to have to. You -- you have no choice, in my view, all right. They say what you have to do is you have to find the content that you, Adrian and I, are prepared to pay for. And one of the issues is younger people have grown up in an environment where paying for content is not something that they're attuned to.
It's very difficult to take consumers from zero cost to a cost. It's much easier to take them from -- from a significant cost to less of a cost or even -- even nothing.
But the problem was we started with a zero cost model and that's what the V.C.'s (ph) funded these operations on, to build traffic. We then found out it was very -- it was easy -- not easy. You could get traffic, but how you monetize that traffic in any significant way was very difficult.
UNIDENTIFIED MALE: And one final question. I mean you -- you have so much -- for such a busy place and you have so much energy and I mean just...
SORRELL: There's nothing else to do.
UNIDENTIFIED MALE: Do you ever have...
(LAUGHTER)
UNIDENTIFIED MALE: Do you ever feel -- do you ever see yourself slowing down?
Do you ever see yourself (INAUDIBLE)...
SORRELL: No, I think that's (INAUDIBLE) isn't it?
I mean that's -- you know, that's -- that's an asset and a liability. And, no. I mean, WPP is very much part of my life. As I've said many times before, there is the man who can come to giving (INAUDIBLE) I mean to starting a company. And it's very difficult to see yourself doing anything else.
So, no, but I -- you know, I'm here 24/7. It's -- it's Bill Shankford's (ph) famous quote, you know, if it was not a matter of life and death, it's more important. Well, WPP is not a matter of life and death. It's much more important than that.
(END VIDEO TAPE)
QUEST: Sir Martin Sorrell talking to us from WPP.
And finally tonight's Profitable Market. When this market is open, it is active, noisy and one of the most exciting places to be in the financial world. It is also one of the most important places to be.
Sometimes standing here, it's hard to believe events on the other side of the world, in the Middle East, in economics, actually affect the numbers that are traded and vice versa -- what happens in these pits affects the world out there.
But when it comes to the oil markets in particular, the relationship between economics, growth and markets is very tight, indeed. Above $90 a barrel and it will stifle what nascent recovery there is underway. Below $60, OPEC starts complaining. And, of course, the oil companies simply say it's not profitable for them to explore and produce those new ultra deep rewards.
No -- (AUDIO GAP).
END
