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Quest Means Business
U.S. GDP Shrinks 1%; Diageo CEO Warns of Challenging Year Ahead;
Aired August 27, 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: U.S. GDP shrinks by 1 percent. Is this the first green shoots of recovery? If so, when will we start seeing lush economic growth? From the West Side of Manhattan, I'm Richard Quest, I mean business.
Good evening from New York where news in the United States says that the U.S. economy may actually have turned and soon be growing faster than originally thought. Second quarter GDP and a second time we've seen the number, showed that GDP shrank by just 1 percent.
It was a much better performance than the first quarter of the year. And it was better than economists had expected. The 1 percent decline in Q2 GDP is the broadest measure of the nation's economic activity. It's most crucially in-line with prior estimate released figures last month.
This chart shows the annual rate of growth or decline since 2007. The 1 percent Q2 is much better than had been originally thought. The question, of course, is why? Is it just stimulus cash that is basically propping up the American economy.
Peter Morici, always good to have you with us on the line to put some perspective. The number is interesting, but is it the savior you had hoped for?
PETER MORICI, UNIVERSITY OF MARYLAND: Well, it's better than we were expecting. And it likely indicates that we're going to be growing in the third quarter. Inventory rebuild, housing will positively contribute to growth for the first time. The export sector, through the balance of the year, yes.
You know, the stimulus money really hasn't been spent yet. We had some tax savings for consumers, but they largely saved that. However, the government spending really isn't out there. It just takes time to move money through the bureaucracy. That's going to hit in the fourth quarter/first quarter of next year.
So most economists expecting to see growth scale up. You know, third quarter, 1 percent, fourth quarter, 2 percent, first quarter next year, 3 percent, that sort of thing. So the economy will have a nice, steady takeoff.
It's not going to be the big V jump that Wall Street would like, but it's going to be good enough to give those stocks a further lift. I expect the S&P to close, oh, around 1130 to 1150. The Dow Jones -- excuse me, 1130 to 1150. The Dow Jones around 10,500.
QUEST: Peter, the underlying question, bearing in mind all of that is, how much of what we are seeing is organic, and how much is stimulus, even if it does take -- stay until the fourth quarter to get the better part of the V-shaped recovery or at least the other part of the U-shape?
MORICI: It is not organic enough, that is the basic problem. The United States has to shift. It has to develop a new source of demand other than just consumers spending recklessly, which means we have to balance our trade accounts.
You know, Larry Summers talks a lot about an export-led recovery, but we don't hear the administration expressing how that will be engineered. Now the dollar is dropping against the euro and other foreign currencies, but not the Chinese yuan.
So we expect to do better in European markets, but what does that do to European growth? The real key to the puzzle is opening the Chinese market, and also reducing American oil consumption so we're just spending less money on gasoline, which is imported, and more money on domestic goods.
That is the key.
QUEST: But you still do not seem to be -- again and again, Peter, you still do not seem to be optimistic that things are satisfactorily turning around. And whilst you perhaps are being a little bit down in the mouth on these matters, investors are making billions in the stock market -- Peter.
MORICI: They have. And I called this rally, on the Kudlow show over on a rival network, if you'll excuse me, the night they released the stress test results, I said we were going to take off because come the end of June, the market would smell the recovery and march on it.
Well, it did it around July 7th. You know, the markets should be happy, 2.5 percent growth, American companies have so scaled down their costs, they can make a lot of money that way.
And they also make a lot of money abroad in Asia. You know, General Motors makes two-thirds of its cars abroad. We may have a new "Government Motors," but it's actually going to be a "Foreign Motors," it's going to be a company -- we're going to be like the Dutch.
We're going to make our money roving the world.
QUEST: Well, I should ignore the fact that you've been promiscuous and actually been flirting with other networks. We shall put that to one side and come back on the question.
MORICI: OK.
QUEST: . of the federal deficit. When you look, Peter, at those numbers that we saw this week suggesting federal deficits in the tens of trillions in the years ahead, is this not just putting to the future a problem which is best addressed sooner?
MORICI: Well, there are basic changes we finally have to make in the United States. Americans were -- live a long time. You know, it's not uncommon today to live to be 85 or 90. You can't quit working at 60 or 65 and ever have enough savings to do that. And Americans don't save anyway.
So we're going to have to look at things like the retirement age, when Medicare and Medicaid kick in, and things like that so that we can streamline what we pay ourselves through the government so we can afford it.
And the other thing is we're going to have to look very carefully at health care in a manner this administration has not done. You know, we spend almost 20 percent of GDP on health care by next year or the year after. And you guys are spending about 12.
We have to find a way to lower our costs while we cover everybody so we can afford this enterprise.
QUEST: All right. Peter Morici, we thank you, as always, for joining us. Peter Morici, from the University of Maryland. And we'll -- before we go, to Susan Lisovicz. I need to just -- I just realized, I haven't actually told you where I am.
Just let's pause for one quick second. This is what they call The High Line. It's a new park on the West Side of Manhattan. Over the course of the next hour, I will tell you more about The High Line, why it's significant, and rather appropriately, why we are here today. That's still to come in the program.
Next, catch up with the markets and how they reacted to that GDP number. Susan Lisovicz is on the floor of the New York Stock Exchange. They got a better number, perhaps, than they had expected, so they must be please, surely.
SUSAN LISOVICZ, CNN FINANCIAL CORRESPONDENT: Well, Richard, you were standing on an elevated track line. I mean, that is what The High Line Park is. I've been there. It's very beautiful. I am looking at an elevated Dow, if you will.
The Dow Jones Industrials could close higher for the eighth consecutive session. If you look a little deeper, and I know you always do, Richard, you'll see that the blue chips, the index of 30 stocks, is supported to a great degree by Boeing.
Boeing, with its Dreamliner, its troubled 787, says it will have the first flight of this troubled aircraft by the end of the year. Delivery will be next year. And no matter the fact that it's delayed a couple of years, AIG -- or excuse me, Boeing shares are up 8 percent.
AIG, by the way, is also doing very well. But the NASDAQ and the S&P 500 under a little bit of pressure -- Richard.
QUEST: Susan, the problem with being elevated is that eventually things have to come down to earth. I may be up in the air, you're down on the floor. Is there a feeling, though, that we're heading more in my direction or yours?
LISOVICZ: I'm afraid your direction, Richard. And don't be so smug when I answer you, one of the reasons is that first of all, we're near the end of August, this is peak vacation season, volume is as thin as a souffle.
The fact is, we're approaching September is the worst month of all for the three major averages. And there is some worry here, because, oh yes, OK, things are getting better. Well, we're going to need to see some growth. Will we actually see consumers spend if they're not getting a first-time home-buying credit?
Will they buy a car or a big-ticket item if they're not getting the government to kick in an extra $4,500? These are concerns. Sure, the jobless numbers, they are trending down. But they are still awfully high. And that's a problem if you need consumers to kick in for real economic growth -- Richard.
QUEST: All right. We'll leave it there. Susan Lisovicz on the floor of the New York Stock Exchange, we thank you for that.
Let me update with the European market closes and how things were on the bourses. They were lower for the second straight successive session -- well, obviously it's successive sessions, because it was -- I just told you that bit.
The U.S. GDP and the weekly jobless claims didn't inject much optimism. One was better, one was in-line. There was more -- mounting trouble in the U.S. banking system that really caused concern. This is the report from the FDIC that said it's bailing out many more banks.
Shares in Diageo, Johnny Walker whisky, were down over 4 percent. The chief exec warned of challenging years ahead. We'll hear from the chief exec in a moment.
Commodity prices among the weakest performers. Oil dipped on Wednesday. Banks moved the market with the French bank Credit Agricole gaining 3 percent. It beat expectations.
So you've got a nice broad overview -- pretty much a similar sort of overview that we get here in New York, a glorious day, more on that in a moment. Fionnuala Sweeney, though, to bring us up to date with the serious stuff at the CNN news desk.
FIONNUALA SWEENEY, CNN INTERNATIONAL ANCHOR: Thanks, indeed, Richard.
Sri Lanka's high commissioner to the U.K. is dismissing new video that purportedly shows troops committing atrocities against suspected Tamil Tigers. The video was obtained by the group Journalists for Democracy in Sri Lanka.
And among other scenes, it shows a naked, blindfolded man being pushed, kicked, and apparently shot. But the envoy says it is disinformation and there is, quote, "no way Sri Lankan soldiers were involved." CNN could not independently verify the videos authenticity.
In Turkey, railway officials have shut down a line between Ankara and Istanbul, following a deadly crash. Turkish state railways say four people were killed when a passenger train collided with a road construction machine. Several cars derailed on impact, at least 17 people were injured.
A motorcade carrying the body of U.S. Senator Ted Kennedy is on its way to Boston, Massachusetts. The Kennedy family just held a private Mass in Hyannis Port. The senator's body will lie in repose at the JFK Library in Boston ahead of Saturday's funeral.
Beijing is slamming a proposed visit to Taiwan by the Dalai Lama. Taiwan's president approved an invitation for the Nobel Laureate to pray for victims of Typhoon Morakot. A spokesman for the exiled Tibetan spiritual leader says the trip is completely unpolitical. But China says the Dalai Lama is involved in Tibetan separatism.
And those are the headlines. Back to you, Richard, in New York.
QUEST: We thank you for that. Here I am on The High Line, the new park here in Manhattan. This is where the freight trains used to come from the north side of the city, come right the way down to the Lower Manhattan.
And this, of course, the last train -- they started in the 1930s. The last train ran in the 1980s. It was derelict until this year. And then when we come back, we'll show you more of this park.
QUEST MEANS BUSINESS in just a moment from New York.
(COMMERCIAL BREAK)
QUEST: The issue of bank profits and bank bonuses won't go away. A new tax could be the solution to curb excessive bonuses being suggested in the U.K. The chairman of the Financial Services Authority, the main regulator, Lord Adair Turner, is suggesting some form of windfall tax.
Speaking to Prospect magazine, he said: "If you to stop excessive pay in a swollen financial sector, you have to reduce the size of that sector or apply special taxes to pre-remuneration profits."
He added that some of the (INAUDIBLE) activity was "socially useless," and it has "swollen beyond its useful size."
The chief executive of the British Bankers Association, Angela Knight, needless to say, did not necessarily see things in quite the same light.
(BEGIN VIDEO CLIP)
ANGELA KNIGHT, CEO, BRITISH BANKERS ASSOCIATION: If you've got -- and we have here, one very good -- and I do say that, very good, world class industry, we do have to regulate it right. We do have to sort out excesses where excesses have taken place.
But if we say we don't want it anymore, you lose jobs, you lose tax, you actually lose the benefits of a very strong sector.
(END VIDEO CLIP)
QUEST: Now with people like President Sarkozy of France also suggesting some sort of tax on banks to take back extra and excess remuneration, the issue will be discussed at the G-20, which is to be held in Pittsburgh in September.
On the economic front, bad news from Japan where the jobless rate climbed to 5.5 percent in figures that are expected to be out on Friday. That's what is expected to show. It's a level that has not been seen since 2003.
And whilst a jobless rate of 5 percent would be a bonus in countries like the United States or the European Union, in Japan terms, it's nothing short of catastrophic. As Morgan Neill reports from Tokyo.
(BEGIN VIDEOTAPE)
MORGAN NEILL, CNN INTERNATIONAL CORRESPONDENT (voice-over): For Kaoru Yosano, the campaign for Tokyo's first district could hardly have started worse. After speaking for less than five minutes in the midday heat, the Liberal Democrat's 70-year-old finance minister nearly collapsed. A spokesman said the candidate briefly felt faint but soon recovered.
But the image was not one any candidate wants to project.
In contrast, his Democratic Party rival Banri Kaieda, looked sharp and energetic at his rally that evening.
(on camera): The opening of the two campaigns could hardly have been more different. The LDP's was a tightly managed affair with the press kept at a distance as well as the public. But the Democrats candidate has gone through the crowd shaking every hand. He has taken time to answer just about every question the press can throw at him before making his way out.
(voice-over): The dividing lines in this race in central Tokyo are much like those in the overall election. Yosano, a political heavyweight in the ruling LDP, is selling one thing above all else, experience.
"When I compare the two," says housewife Sumye Ogura (ph), "the words of Yosano, the experienced politician, sound more trustworthy and convincing."
His opponent Kaieda says it's time for a change. For the large and active block of elderly people in the district, pensions and the overall social safety net are priorities. Both candidates say they want to help those in need, but Kaieda says his plan goes further.
"We must redesign the social security system," he says, "Yosano thinks we should tweak the current system. I say we must change it drastically."
Some analysts say not much separates the two parties' platforms. In part that's because the Democrats, leading in the polls, must walk a fine line between promising change and trying not scare away undecided voters.
The LDP, meantime, is just trying to hold on.
Morgan Neill, CNN, Tokyo.
(END VIDEOTAPE)
QUEST: Now for more than 20 years this area was just derelict. The weeds had grown up. It was just one big wild garden. When they renovated it at a cost of $86 million, they decided that's the way it was, that's the way it was going to stay.
So you have this wild garden. They've still got the original train tracks right along here that you can see.
Now when come back, recognize this chap? This is Thomas, he is one of our "Job Questers." We've been following his ordeal in getting a job. And we'll hear from him and how that ordeal is going in just a moment.
QUEST MEANS BUSINESS, we're live in Manhattan.
(COMMERCIAL BREAK)
QUEST: Now earlier this summer, we had been showing you our "Job Quest" where we had been following people around the world as they seek to find employment. There was Didya (ph) in Dubai. There was, of course, Jason (ph) in Atlanta. Jenny (ph) is in Hong Kong. And of course, Thomas -- Thomas Hein is in New York.
We'll talk to Thomas in just a second. But let's remind ourselves of Thomas's "Job Quest."
(BEGIN VIDEOTAPE)
THOMAS HEIN, "JOB QUESTER": Since I was a kid I've just had this dream, you know, walking down the street, you know, crowded New York streets with the skyscrapers, briefcase in hand, going to work. And that dream just never went away.
At the moment, I'm looking mostly into jobs in marketing. I mean, obviously that's why I studied and (INAUDIBLE) maybe with international business, because I think that's really interesting.
I love studying abroad. I love, you know, kind of getting to travel and see what else is out there, you know, what international consumers are interested in, what they best respond to. But I'm also, you know, not opposed to standing and trying to learn, you know, go into new things.
Living in New York, it's so stressful and there is always so much going on, so much around you and you're always around people and you just feel gross, you've got the city all over you. You know, so, you've just got to really like -- like I said, you've got to be really motivated and just push yourself.
It's just like, sit down, focus, send out those cover letters, make sure that that resume is perfect and hope for the best.
Originally I just told myself if I don't have a job here, if I can't find anything here by, you know, August or so, then I would back home. But I really don't want to move back home. I feel like I just -- it's a step back for me.
(END VIDEOTAPE)
QUEST: Thomas is with me now.
Thomas, your search for a job, do you think you've actually managed to find a fulltime job yet or shall we write you off "Job Quest" yet?
HEIN: I wouldn't -- I wouldn't write me off just yet. I'm still looking, I'm still applying, you know, trying to send out applications every week. No, no fulltime job just yet.
QUEST: Where are you actually based at the moment and what is your current situation?
HEIN: Currently I'm finishing up my internship at L'Oreal. It ends in about two weeks. And after that, I'll be working five days a week at a clothing store downtown in SoHo.
QUEST: I think the key question is, are you now taking a job to pay bills, or are you working towards your career?
HEIN: Definitely to pay bills. I mean, that's very important here in the city. I mean, I'm self-sufficient, graduated college, and it's very important to do all of that, but.
QUEST: Just remind our viewers, what sort of debt are you carrying at the moment from school?
HEIN: Student loans, those are a lot of fun. And.
QUEST: What size? Give us an idea.
HEIN: You want to see the size?
QUEST: Are we thousands, tens of thousands?
HEIN: Oh, definitely tens of thousands. NYU is a pretty pricey university.
QUEST: Right. Just so that our viewers understand, you know, that it's not $2.50. We're talking about more than $20,000.
HEIN: No. We're talking about a lot more than $20,000, yes.
QUEST: Really?
HEIN: Yes.
(LAUGHTER)
QUEST: So we've got -- so you're paying bills, but are you working towards your career?
HEIN: I definitely -- I think that everything I do, whether it's working in a clothing store, or working in marketing internships, doing modeling jobs, I think it's all kind of adding up to putting the tools in my tool belt for a career in the future.
I mean, working at a clothing store, I'm getting experience in high fashion. I get to work Fashion Week in two weeks, and that will be really awesome. I get to meet a lot of good contacts and stuff.
And you never know where my career could go, if it could into marketing for fashion. So it could definitely be relevant.
QUEST: Let's talk more generally now about the job market and what you've been finding as you've been applying. What are your friends telling you? What are they finding?
HEIN: A lot of internships, a lot of my friends are just trying to find an internship at this point, because a lot of.
QUEST: Unpaid?
HEIN: Yes.
And if they haven't found that, they're working -- you know, clothing stores, restaurants, at this point, any job is kind of a good job. I mean, yes, you need -- everyone needs to make that money and.
QUEST: But how many people that you know of are reevaluating their whole career structure and actually deciding, you know, I'm not going to be able to do what I thought I was going to be able to do?
HEIN: I think a lot of people are doing that. I mean, I have friends who graduated from theater and, you know, they're looking for any sort of job in sales or, you know, whatever they can do.
I mean, look at me, for example, I never would have thought that I'd be working in any sort of fashion. I didn't really know too much about high fashion until I started working for Philip (ph) (INAUDIBLE) down in SoHo.
And I mean, I think that it's definitely an opportunity to kind of like look outside the box and be like, these opportunities are available and what could happen from those?
QUEST: When I've been watching your -- when I've been watching your reports that we've been watching, and we have continued following you, the one question I've wanted to ask, as we look at this, is when you went to NYU and took on all of that debt, you never for a moment imagined it was going to be so difficult.
HEIN: I never would have thought that this would be my situation. You know, after graduating, what was it, three months ago, I never thought that I would still be searching for a job.
I thought I did everything right by, you know, going to the really good schools, doing all of the good internships, making a lot of good contacts, and just working really hard in everything that I did, you know, joining.
(CROSSTALK)
QUEST: Do you feel the system has failed you?
HEIN: I don't want to blame the system. I mean, I understand that it's like a huge worldwide economy, but I don't want to like think, well, you know, if -- it's just a rough -- I mean, it's a rough time and I mean, I'm not going to let that, you know, stop me from still pursuing and working hard and just not -- I'm not going to give up.
I'm not going to just be like, ah, it's a crappy economy, I'll just, you know, work at a clothing store until I can find something better.
QUEST: Thomas, we will follow you more and your "Job Quest." And we wish you luck. Come let us know what is happening.
When we come back, you might need a strong drink. We'll have some food. The economy and hospitality is not doing very well in the U.S. But we'll be back in a moment.
This is QUEST MEANS BUSINESS. We're live in Manhattan.
(COMMERCIAL BREAK)
QUEST: It's a quiet afternoon in Manhattan. That is 14th Street that you're looking at down in the meat-packing district on the West Side of Manhattan. And a warm welcome back. This QUEST MEANS BUSINESS, coming to you live from New York all this week, part of our coverage of "NY-Lon- Kong," New York, Hong Kong, and London, and how the economies of these great three financial centers are moving forward one year after the recession began.
Today we are coming from The High Line, which is the park in the West Side -- it's a new park. I'll have more trivia for you about that in just a moment too.
For the moment though, let us concern ourselves with the idea of food and drink, two hospitality industries that have been battered by recession. The British-based drinks-maker Diageo seems to be weathering the storm.
It said an annual profit of $2.6 billion, that was up some 7 percent on last year. Profits forecast, though, has been cut for the total year. Paul Walsh, the chief executive, spoke to Adrian Finighan about what is next.
(BEGIN VIDEOTAPE)
PAUL WALSH, CEO, DIAGEO: I think these numbers demonstrate the resilience of the business. This has been a very challenging year. You've had the impact of the global slowdown. For us that manifested in de-stock in certain markets, and also a slowdown in consumer demand.
But I think our brands have weathered it well. And, of course, we generated $1.2 billion worth of free cash-flow. I think the virtue of Diageo is the fact that we have such diverse category positions and diverse geographies.
So when we have a problem over here, we can usually mitigate that with other opportunities.
ADRIAN FINIGHAN, CNN INTERNATIONAL CORRESPONDENT: So it's true what they say about a drinks company being able to make money even in a recession.
WALSH: Well, we are not recession-proof. But we are, as I said, and these numbers demonstrate, quite resilient.
FINIGHAN: De-stocking has worked against you in the last year. But the exchange rate has been in your favor.
WALSH: Yes. And that's why you're seeing, you know, very strong numbers in reporting terms, both in sales, profit, and earnings per share. We've definitely benefited from a stronger dollar.
FINIGHAN: So what is your view of where we are right now economically and what is the outlook for the future?
WALSH: I think for us, we see the economic situation as having stabilized. However, having said that, it varies market by market. And therefore I think the rate of recovery will be uneven based on different geographies. But as I said, I think the situation has stabilized.
(END VIDEOTAPE)
QUEST: OK. Now, you've had your drink from Diageo. You need your food. In Manhattan at the moment, restaurants are closing probably faster than they are opening. But chef Bouluo Daniel here is actually more optimistic than most in terms of opening restaurants.
You have how many restaurants in the city?
Daniel Bouluo, chef, restaurant owner: I have five restaurants in the city and actually I just opened a new one, DBGB, which is the menu of DBGB here...
QUEST: All right...
BOULUO: ...downtown on the Bowery and Houston.
QUEST: All right. Now, we understand that it takes how long to plan a restaurant?
BOULUO: It takes about a year-and-a-half of between finding the location...
QUEST: Fine...
BOULUO: ...finding the deal, designing, building.
QUEST: Chef, let me ask you very simply, do you regret opening a restaurant, because, frankly, nobody in their right minds would open a restaurant in this economy?
BOULUO: I have on regrets. I think I...
(SPEAKING IN A FOREIGN LANGUAGE)
BOULUO: I had that idea of making a very casual, very affordable restaurant -- 24 different beers on tap, 14 different sausages, three different burgers. You want...
QUEST: Well, what do you call affordable?
And what do you call affordable?
BOULUO: Affordable is here at DBGB's...
QUEST: Yes?
Yes, yes, we've got the effort.
What do you call affordable?
BOULUO: You -- you can eat there for $35 at lunch and maybe $45 at dinner -- around, $40, $45. It depends all on what you drink and what you eat.
QUEST: When people come to your restaurants, are you finding that they are actually cutting back, they are demanding things...
BOULUO: No.
QUEST: ...that they are demanding from you...
BOULUO: No.
QUEST: ...better value?
BOULUO: Actually, I think enough -- I mean I have the menu of Daniel here.
QUEST: Now, Daniel is a very well known restaurant and an extremely expensive restaurant.
BOULUO: It's not extremely expensive, actually. You get so much value for the price. And, actually, I mean it's a prix fixe, let's say. Here, we have a prix fixe at $145, but we have also the prix fixe normally is $105.
For $105, you get pampering for three-and-a-half hours of pampering for $105...
QUEST: Hang on...
BOULUO: ...it's...
QUEST: $145?
BOULUO: $105 plus, of course, you're going to drink, you're going to -- you're going to...
QUEST: What's the average check?
BOULUO: The average check, I would say, is between $170, $160 to $170 and $200.
QUEST: Per head?
BOULUO: Yes. But that's -- I'm telling you, the restaurant has never been so busy, because I think people really perceive today, I'm going to go out, I'm going to spend a little bit of money to make myself happy, I want to make sure there is value, there is perfect service, perfect food, perfect ambiance.
QUEST: Now, let me ask you, because I understand, of course, this is New York and people are going to be prepared to spend money and they're prepared. But you, as the chef and as the owner, you must have had to rethink some of the things on your menu that you would have had before but maybe not now. You must have added a couple of cheaper elements...
BOULUO: I just -- actually, you know, I did one thing last December celebrating the 10 year anniversary. So we opened in '98 Daniel on 65th Street and Park.
QUEST: Right.
BOULUO: So I said, OK, then our menu is $105 for four course -- three course, but all the accoutrements before and after. I will offer, for $98, a three course menu with the one pairing (ph) for people who want to come at 5:30.
QUEST: Right.
BOULUO: So that menu is the biggest bargain in town...
QUEST: But so you...
BOULUO: ...for a four star restaurant.
QUEST: So you have had to rethink, to some extent (INAUDIBLE)...
BOULUO: I felt I wanted to...
QUEST: ...the recession?
BOULUO: I wanted to make sure that I was making an effort in this recession. But I was not going to dilute the brand or the quality of our offering...
QUEST: Right.
BOULUO: ...for the sake of shutting down, as well.
QUEST: And what are your -- I think I know -- probably know the answer to this.
Are you starting to see a return to people spending money and prepared to go out?
Because the mid-priced restaurants are going out of business?
BOULUO: I know. That's a problem. You see, there was a lot of, also, people who were very opportunistic about the restaurant business, where they weren't really professional, they weren't really carrying about the food or the service and all that. And I think those restaurants suffer the most.
When you are very trendy, as well, it's very dangerous.
Now, I believe and I am very optimistic about people really reassess their value and they say well, you know, we may spend a little bit less here and there, but food, dining, sharing with someone a moment in a restaurant, it's very important for a New Yorker.
QUEST: Chef, I'm...
(CROSSTALK)
QUEST: ...I'm told it's quite difficult to get a table in your restaurants (INAUDIBLE). You know, I mentioned...
BOULUO: It's not that difficult, actually...
QUEST: If I mention your name, could you...
BOULUO: No, actually, when you have...
QUEST: No?
BOULUO: ...when you have a little bit of a recession or a crisis, that's the best time to go out and book a table because it's easier.
QUEST: All right.
BOULUO: It's not difficult.
QUEST: Chef, I'll mention your name.
BOULUO: Thank you.
QUEST: And I'll...
BOULUO: Thank you.
See you soon.
QUEST: We hope so. All right, $140 odd per head with $175 with one - - Fionnuala, if you were -- if you were in New York at the moment, Fionnuala, I'd take you for dinner tonight, but unfortunately you're not, so well, what can I say?
FIONNUALA SWEENEY, CNN CORRESPONDENT: You can say I'll take you when I'm back in London.
QUEST: The news headlines, please.
SWEENEY: All right.
A call for stiffer sanctions against Iran. In a meeting in Berlin, the German chancellor, Angela Merkel, and the Israeli prime minister, Benjamin Netanyahu, agreed more action may be needed for Tehran to stop its nuclear program. Iran faces a September deadline to take up an offer for talks before facing additional sanctions, possibly against its energy and financial sectors.
In the U.S., the search for a girl missing for 18 years ends in California. Police say Jaycee Degard is alive and in good health. She disappeared in 1991 at the age of 11 while on her way to take the bus in Lake Tahoe. Police confirm a man and a woman have been arrested in connection with the case.
A funeral procession begins in Iran, as Iraq prepares for the burial of Shiite leader, Abdul Aziz al-Hakim. He died on Wednesday in Tehran, where he was receiving treatment for lung cancer. His body is due to arrive in Iraq on Friday. The Tour of Mourning will stop in several cities in Iraq's Shiite heartland before al-Hakim's burial in Najaf.
A mea culpa from Microsoft. The giant software company says it's sorry that it digitally changed the face of a man -- the race of a man, rather, known -- shown in an online advertisement. In the original promotional photos that appeared in most papers, notice a black man in the middle. His head is cropped for a photo of a white man in the Polish version of the ad, but the color of his hands was unchanged. The company called it a marketing mistake, says it corrected the image and is reviewing how it happened.
When you're feeling a little low on cash, many of you (INAUDIBLE) and hold a yard sale. And that's what an entire state is doing in the United States. It's called The Great Garage Sale and everyone is invited to the Tuesday event. But for non-Californians, some items are going up for bid on the Internet. You still have, for example, a few hours to get this used SUV -- high miles but it has a little added value because it's autographed by the Governator, Arnold Schwarzenegger himself. He signed the sun shades of most of the vehicles up for auction. And try the stacks like this stack of death (ph) -- $5 apiece. That's quite a bargain.
Those are the headlines -- Richard, back to you in the Big Apple.
QUEST: Fine. And as they say in New York, take a rain check on that dinner, Fionnuala, when I come back, or something like that.
Now, when we come back in a moment, imagine you're down to your last $20.
What would you spend it on?
Would it be a meal?
Maybe you would pay the electricity?
You could put it toward your rent. Our next guest says no, forget all of that. Cynthia Rowley, the talent show judge and the designer, says spend it on makeup.
Is she mad?
In a moment.
(COMMERCIAL BREAK)
QUEST: And welcome back.
It's QUEST MEANS BUSINESS, NILONKONG (ph). We are in the New York part of the -- the two week or three week extravaganza, which was -- and we are on the High Line Park on the West Side of Manhattan.
You're down to your last $20.
What are you going to spend it on -- food, water, electricity?
Maggie Lake is -- and, once again, you're far more appropriately attired than myself in another hot wool suit in Manhattan.
MAGGIE LAKE, CNN CORRESPONDENT: It's interesting you say that, Richard. We're going to get back to that a little bit later on.
But you're right, you know, you've got to look good. You know that and so the designers that a lot of them call this downtown part of Manhattan their home.
So we went to visit one of them, Cynthia Rowley.
She's an American designer who's got a store not far from here, on Bleecker Street. We wanted to ask her what she thought of the consumer -- the state of the consumer.
Are they back there in the stores?
(BEGIN VIDEOTAPE)
CYNTHIA ROWLEY, FASHION DESIGNER: People are splurging on things that make them feel good but that they know is a good value. So a lot of accessories -- handbags, for sure. For me, I can't resist shoes. Anything that changes the way you look and makes you feel better and happy and excited, I think, is worth the money.
LAKE: And people...
ROWLEY: You know, it's worse (INAUDIBLE)...
LAKE: And you're saying that people will still spend on that?
ROWLEY: Yes. I mean, I actually just heard Adam Winter (ph) say that if you only have $20 to spend, buy a lipstick, which I think is such a great quote, because, really, that -- that feeling that a -- a new color of lipstick makes you feel great is really true.
LAKE: Transformative.
What about the tone?
Is it -- is it more sort of sober, more work clothes, darker?
Or is it -- is it the opposite?
Is -- are you still sort of doing light and happy and fun?
ROWLEY: I think it's not so sober. I think it's surprisingly things that are a little bit more frivolous, things that maybe have a little bit of shine or, you know, it's a -- I feel I can go back to the basics of being a woman, where it's like you just can't resist something that's so beautiful.
The most important thing this season is leather.
LAKE: Really?
ROWLEY: And it's expensive.
LAKE: Right.
ROWLEY: But it lasts.
LAKE: But it lasts.
ROWLEY: And it's -- and it's something that you'll buy now and you'll -- I promise you, you'll wear it every day.
LAKE: You talked about having more stores and sort of brick and mortar stores, as well.
Have -- have you been moving more in that direction?
And that kind of defies, for me, some of the -- some of the reports out there about, you know, the -- the American consumer being flat on their back.
ROWLEY: We are opening more stores, but they're small. This is the best time to negotiate terms. And so leases are better.
I think that it's interesting that in this recession, it's also a great opportunity for entrepreneurial companies to really go out there and do things that maybe they haven't had the opportunity to do in the past. And now, I think, you know, anything is possible.
(END VIDEO TAPE)
LAKE: Now, I thought -- I thought that was really interesting, that last point, Richard, that this is an opportunity for those companies that have been careful with their money, that have capital, they're actually expanding their lines. And she's even buying advertising for the first time, because she said the deals are so good, she just can't pass it up.
QUEST: Which is what I'm hearing again and again -- deals are good. There's money to be made. But the reality is you've got to be careful and you've got to be careful where you're expanding.
LAKE: That's right. And she is across a lot of different sectors. She's conscious of also keeping a foot in the price point. She's got an inexpensive baby line coming up. And, interestingly, Richard, she's got a men's line coming up, as well.
And with you in mind, we asked her about that.
Have a listen.
(BEGIN VIDEO CLIP)
LAKE: Lastly, we -- I have to ask this one for Richard Quest. He's in town this week. He's a big suit man.
ROWLEY: Yes.
LAKE: He's been wearing a suit in...
ROWLEY: Right. I always see him in a suit.
LAKE: ...in the boiling New York summer, a wool suit. And so I -- you're doing menswear, as well.
What -- what's hot for menswear?
What should this fashion forward TV personality be thinking about?
ROWLEY: Oh, I don't know if Richard -- Rich -- I could see Richard wear -- sporting one of my men's jackets, maybe. I mean my -- my menswear is kind of casual. It's kind of fun and a little bit...
LAKE: We let him off every once in a while.
ROWLEY: Yes. I could -- I could see him maybe with a jacket with jeans or something.
(END VIDEO TAPE)
QUEST: It ain't going to happen, jacket and jeans. No way.
(LAUGHTER)
QUEST: I know -- I know television presenters who once they go lower than the top it's down to the bottom. It's -- they sort of -- no.
LAKE: No?
It's not going to happen?
But I like that she -- she pegged you for the dark suit kind of man. I asked her about bright colors. Except for the lovely tie that you got...
QUEST: And she...
LAKE: ...the bargain ties from earlier this week, she agrees dark colors are the way to go.
QUEST: All right.
Maggie Lake, we thank you for coming down here on the High Line. This is marvelous.
LAKE: It's wonderful.
QUEST: What a wonderful -- a wonderful way to spend the afternoon.
Now, there has been a lot of people that have made this program possible. It's taken a lot of effort, as you can see, just to get this program on the air. The people who have made it possible are moving around faster than you can imagine to get out of the way.
But if you want to see the candid pictures of them, then the only place to see these pictures of people like producers is on our Facebook page.
You just search on Facebook, QUEST MEANS BUSINESS, and you can join us and find out they got it.
Why was Matt carrying that phone line that?
And what was Brian doing with those sunglasses?
We'll explain on Facebook.
Now, we get -- now to the weather forecast. Another delightful day. It's a bit cooler. I think I can do your job for you today -- Guillermo.
We have overcast skies, slightly low temperature, humidity slightly weaker, but it is the weather forecast.
GUILLERMO ARDUINO, CNN METEOROLOGIST: I think that last night you got some rain. And that's what changed the wind direction. It was much nicer. Again, I have to tell you, Richard, we have the presence of that system in the Atlantic that is going to destabilize the atmosphere by the weekend. So you are going to be fine.
But here you see the radar. Conditions are OK. I'm looking at the specific forecast. We have probably Saturday we're going to see the rain. And that -- that's going to be associated with Danny, this tropical storm promising to become a hurricane. I'll show you the latest in a second.
Now, rain in Georgia. We got a fair share of rain last night, as well. Here in Chicago, we see some rain moving in. And this system is going to bring the clouds and it is bringing the clouds to you.
A look at Danny. Danny may become a hurricane. And this is going to push clouds, you know, it's going to actually bring some rain showers into London, into New York City and also the rain and the winds and everything.
That is sort of the system that we would need on the other side of the country, where we have the problematic issue of the fires. And look at the very dry conditions and the record heat. Santa Ana, 38 degrees; Laguna Beach, 33; San Diego Center a heat wave, as well. The winds are coming from the desert right now.
I think that's going to be the driver -- the story that is going to drive our coverage for the next days until we get some change in the weather pattern.
Now, apart from that, the rain into New York, maybe Friday night we see some moving in. And then on Saturday, we get the rain, but you will be long gone.
Denver with partly cloudy skies. San Fran with some windy conditions.
Dublin, Amsterdam, you know, these sections of Europe are going to get the unstable weather. And it remains warm in the south. Look at Madrid, 36; 33 in Bucharest; London 20.
So it's going to be breezy. It's not going to be as bad as in Scotland, as you see here in the north and in Scandinavia. But the heat continues in the south.
A look at the next 48 hours, the same pattern -- the same thing. You're going to see clouds moving into London and that's about it. The winds also shifting into Copenhagen; then Frankfurt with some rain showers.
Elsewhere, dry. Nothing -- there's nothing in the way of delays. The time over here to go to the south of Europe.
See you on the other side of the break.
Richard is in New York this week.
(COMMERCIAL BREAK)
QUEST: Enjoying the wonderful delights of a hot summer's August day on a High Line, New York's newest park, which was the old railway tracks where the freight trains used to come along -- $86 million it cost to put all this up. The freight trains used to come from up there and they used to head down there. They were running from the 1930s to the 1980s. Then it was a vast wasteland, as you might think.
But now, of course, it's the new place for people to have a bit of recreation.
Talking about recreation, Boeing has announced the Dreamliner 787 plane will probably make its first flight toward the end of this year, Q4 of '09. The plane is two years -- more than two years late. If it does make its first flight later this year, then, of course, it will manage to deliver to A&A by some time during 2010, the back end, maybe third or fourth quarter.
It's costing Boeing hundreds of millions -- if not billions of dollars to actually put this right.
OK, tourism is one of the most important industries in New York. Forty-seven million people, between overseas and domestic tourists, will come to this city.
Why and are they still going to come during the recession?
Richard Roth (INAUDIBLE) and Richard Roth now joins me to talk about this.
RICHARD ROTH, CNN SENIOR UNITED NATIONS CORRESPONDENT: Welcome, Richard.
QUEST: Thank you.
ROTH: You know, tourism is a big part of the economic engine of this city. It supports 300,000 jobs. But there has been an impact. And to get an idea of how bad, I sampled the New York tourism experience.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: Welcome to New York City.
ROTH (voice-over): New York needs tourists -- especially in a global financial crunch.
GEORGE FERTITTA, CEO, NYC & COMPANY: The importance of tourism to the City of New York is just astronomical.
ROTH: The city, though, is not cracking in its boots. Tourism is down 5 percent, but that's much less than other major U.S. cities.
(on camera): Where are you guys from?
UNIDENTIFIED CHILD: England.
ROTH: England.
(voice-over): I can't duck this assignment -- a seat on the New York City Duck's Land and Water Tour.
UNIDENTIFIED MALE: One Times Square, where the ball drops on New Year's Eve. They actually put the ball up just before Mother's Day this year. We're going to take a left on 42nd Street. It's one of New York City's best kept secrets. OK, people, that's the shot of the Empire State Building you want.
ROTH: The Duck Boat Company reports business is up 40 percent over last year, even with the rough sea around.
DAVID CHIEN, NYC DUCKS AND COMPANY: Richard, everyone is I the same boat and I think we're no exception. But we are poised to stay above water, just like everyone else.
UNIDENTIFIED MALE: Three, two, one.
ROTH (on camera): I'm glad I wore a suit for this, I've just been drenched here on New York City's Duck Boat, as the tourism industry hopes to stay dry in the summer of '09.
UNIDENTIFIED FEMALE: I didn't get wet much. It was fun.
UNIDENTIFIED MALE: OK, Germany. Camera.
UNIDENTIFIED MALE: We have always wanted to come here and financial crisis or not. So we make holidays in New York, so.
UNIDENTIFIED MALE: OK, you can just make out the Statue of Liberty to the left of Goldman Sachs.
ROTH (voice-over): On your right, a grounded high flyer -- the Concorde.
UNIDENTIFIED MALE: There you go.
ROTH: Nothing like a child at the wheel to help settle passengers and consumers down.
UNIDENTIFIED MALE: This country needs to stop spending -- spending money they don't have -- spending money that they have.
UNIDENTIFIED FEMALE: That was a good answer. I think that was Bernanke that -- with that duck call.
ROTH: This quacker meant war.
UNIDENTIFIED CHILD: I'm going to throw you in the water.
UNIDENTIFIED FEMALE: No, you be nice.
(END VIDEO TAPE)
ROTH: And the tour guide on that boat said tips had fallen off from the tourists last year, but he thinks they're coming back. But he still describes the economic atmosphere on that boat and elsewhere cautious -- Richard.
QUEST: Richard Roth, many thanks.
And thank you for the wet wacky do for us on (INAUDIBLE).
ROTH: You're very welcome.
QUEST: We thank you.
All right. Richard Roth there.
Join me over on this side of the High Line. People enjoying the day. Well, I'm going to enjoy the last few moments with a Profitable Moment.
The best economic barometers are usually those that are right in front of your very eyes. Last night, I turned down a free meal. I was at dinner with an architect friend of myself. He told me of a horrible week that he had had -- a week in which four major projects had been canceled. Now, he says, he cut back his staff hours. In short, he's hunkered down for the recession.
Last night, he was still looking stressed, but this time for a different reason -- the phones were starting to ring again. The Upper East Siders who put off their pet projects were now doing renovations -- pampering themselves with real estate projects.
My friend offered to pay for dinner. I declined, because, as we saw today with GDP numbers, the economy in the United States is still shrinking -- it's just not shrinking quite as much.
This is no time to be turning down the opportunity for a free dinner. This is no time to be getting ready to start spending again. As you can see here on the High Line, New York's economy is slowly but surely coming back. The economy of the United States is slowly but surely coming back, but it still has a long way to go.
Whether it's friends offering you free dinners or people offering you to start doing renovation projects, now is not the time to let down your guard.
And that is QUEST MEANS BUSINESS for this Thursday. I'm Richard Quest on the High Line.
Hala Gorani is next.
Wherever your profits may take you, I hope it's profitable.
I'll see you tomorrow.
END
