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Quest Means Business

Germany's Chancellor Bans Naked Short Selling; Interview With Muhammad Yunus

Aired May 19, 2010 - 14:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

MAX FOSTER, GUEST HOST, QUEST MEANS BUSINESS: Germany going it alone. Germany angers its EU neighbors as it lashes out at speculators, at the center of the disputed naked short selling. We'll explain what it is, what it does and why it rattled the markets.

Meanwhile, in the U.S. the Senate is voting on its own bank clamp down.

I'm Max Foster in for Richard Quest. This is QUEST MEANS BUSINESS.

Good evening.

Well, Germany is waging a lone war on speculators it seems, warning that the European Union's very survival is at stake. Chancellor Angela Merkel says the euro is in danger. And if the euro fails, she says, Europe fails. That' why later on Tuesday Germany banned traders from a form of speculation against bonds issue by Euro Zone governments. It is a practice known as naked short selling and we'll break down exactly what that means in just a moment.

First, though, let's take a look at how traders are taking all of this news. Let's first of all look at the euro. It has actually been bouncing off a four-year low. And it has been rising by nearly 2 percent or 2 cents, really, against the dollar. After a dramatic slump late on Tuesday after this news of the ban, which we'll go to in a moment. It is just over $1.21.

Now investors are now speculating that the European Central Bank will intervene in the debt crisis. And the beaten down euro looks undervalued to some.

Let's have a look at the stock markets then. European markets the ban on naked short selling sparked fresh fears, really, about the European debt crisis. To traders it looks like a bit of a desperate move and that is why we have so much negativity today. Almost every stock trading, on each of these indices actually lost ground. The mining sector, incidentally, we hit hard as metal prices fall, as fears of a slump of a demand there.

Let's have a look at the banking stocks, then, because some of the worst performers in the region were the banks. Germany banned speculative short-selling of 10 German financial stocks. So, Deutsche Bank still sharply down. BNP Paribas lead to losses in Paris, and Union Credit (ph) leads losses in Milan. Now, the LIBOR rate here in London, that is the rate at which banks lend to each other, three-month dollar LIBOR is now at ) 0.4775 percent. We are mentioning that because it is the highest level in more than nine months. And it is a sign, really, of stress in the markets.

Now Germany acted without the support or approval or even prior knowledge of its European partners, on the story that we're talking about. And the French finance minister Christine Lagarde complained that she wasn't consulted. Diana Magnay joins me live from Berlin.

Diana, is the chancellor upsetting her neighbors?

DIANA MAGNAY, CNN INT'L. CORRESPONDENT: Hi, Max. Well, it appears so. Christine Lagarde, as you said, said she was annoyed not to have been consulted and that she wouldn't actually implement this ban naked short selling in France because the market for it is very small.

And let's just talk quickly about what it is. It basically means that you buy or you sell a financial security hoping that you can buy it later at a lower price, when you actually don't even have, or have borrowed it in the first place. And I know you'll talk about it a bit more later on.

But the reason Germany is doing this is because as you say, it wants to stop this rampant speculation against the euro. And so further around Europe, other voices, complaining that a unilateral action, Michel Barnier, who is actually the EU's chief financial regulator, also said that this would have been better coordinated on a European level. And, in fact, the German chancellor has said that this ban will only be implemented until Europe agrees its own policy, its own regulatory policy on this kind of speculation. In fact, these three will be meeting tomorrow, with the German finance minister here in Berlin, where there is an international conference on market regulation. And of course it will be a topic that will be aired there, Max.

FOSTER: And Diana how much of this is about economics, and how much about politics?

MAGNAY: Well, it is very important, politically, for the German chancellor to try and get this-this speculation stopped, because she has to get the German part of the $1 trillion EU rescue plan through the parliament on Friday. And she has always couched this kind of rescue plan and this kind of bail out in terms of the stability of the euro. And today was no exception. Let's just listen to what she said.

(BEGIN VIDEO CLIP)

ANGELA MERKEL, CHANCELLOR OF GERMANY (through translator): That is our historic task. If the euro fails, then Europe fails. But if we are able to anticipate this danger, then the euro and Europe will be stronger than ever before.

(END VIDEO CLIP)

MAGNAY: It is extremely unpopular, first of all the Greek bailout, secondly this EU rescue plan, Max. And that is why the chancellor has to couch it in those terms, that really this is the stability of the entire Euro Zone that we are talking about, Max.

FOSTER: Diana, thank you so much.

Well, naked short selling isn't as transparent as it sounds.

(LAUGHTER)

Like that we did that joke?

JIM BOULDEN, CNN INT'L. CORRESPONDENT: Yeah.

FOSTER: Jim, just explain to us. I mean, let's get back to basics on this.

BOULDEN: Yes.

FOSTER: Because we have to talk about short selling first, don't we? Then we can talk about naked short selling. So, give us an example.

BOULDEN: Let's have a good example. I'm going to short sell, Time Warner, our parent company.

FOSTER: Did you tell the bosses about this?

(LAUGHTER)

BOULDEN: So, let's see where Time Warner shares were a couple of hours ago. So, there is Time Warner shares at $3.45 cents. I'm going to say that these shares are going to fall, whether it is the next minute, the next hour, next couple of days. So, I'm going to borrow Time Warner shares from a broker. I'm going to sell them somewhere around this price, and I'm going to hope they fall, and fall enough that when I buy them back, at a lower price. And then, give them back, I have a profit in there.

FOSTER: There is the gap there somewhere?

BOULDEN: Yes.

FOSTER: OK, so what is the difference-if we understand that?

BOULDEN: Yeah.

(LAUGHTER)

FOSTER: It was very well explained.

How do we then understand naked short selling?

BOULDEN: If you get this, this is very simple. I will speculate against the Time Warner shares, while never owning or borrowing, the Time Warner shares, in the time that I'm speculating. Eventually I have to get them, because I have to sell them back. But the idea here is that people are trading in these speculative markets without actually having any underlying asset there. This-and we're talking specifically about stocks, so the idea is it is considered to be naked because I don't have that asset. I don't have any value in what we're doing. It is just that I have somebody who is willing to play with me in that market.

FOSTER: That is really hard to understand, because we're not trading anything? What are trading exactly?

BOULDEN: Well, we still have to go with the price that is happening in the market. So, it is just that I can speculate on this, this share, or in other ways a bond, or in other ways, a currency. But in different ways, don't want to confuse it. But I am speculative on that without actually having that underlying value. And of course, that is what is worrying people, is that when you do this and the acceleration in the trades and you are in there. You are betting on losing. Now there is nothing wrong with that. You have to have somebody win, somebody had to loose. That is what a stock market is all about.

FOSTER: They are very risky for an investor to get involved in?

BOULDEN: Yes, because if that price goes higher, as we are going to look at in a minute, then I loose money. But hopefully if I do this enough and I've done it, you know, thousands and thousands and thousands of trades, with a computer, then I'll make money at the end.

FOSTER: Let's go to our company stock then, again. There it was, about an hour ago, just over $30. We are going to find out the latest figure that we have on this now. It's up! Jim, you are out of pocket.

BOULDEN: I am-I am-

FOSTER: That means you could be-you haven't made any money. Have you lost money?

BOULDEN: Well, I have lost money, because I've got to actually give it back to the borrower-and I've paid a brokerage fee.

FOSTER: OK. And in essence, we have got a very complex financial product here. How do the markets defend it, because Angela Merkel clearly doesn't like it. A lot of people watching are saying well, it doesn't really make sense to them.

BOULDEN: Yes, well the SEC in the U.S. doesn't like it either. The naked part of it is actually frowned upon in lots of places. The thing is I don't think anybody would actually defend the naked side of it. The worry or the fear is that they will go after short sellers themselves, which is a very legitimate part of the market. I think that is what you are going to hear people say. And it adds to the malaise, it adds to the idea that the politicians are attacking the markets, attacking the banks, regulating this, regulating that. And it just makes people think maybe it is not a good time to be in the market.

FOSTER: OK, Jim. Still good news, the company stock is up.

BOULDEN: Yes, actually.

(LAUGHTER)

FOSTER: Cheers, Jim.

Now, Germany says it hopes that other Euro Zone nations will join it in putting restrictions on naked short selling. Our market watcher David Buik told me it will never happen though.

(BEGIN VIDEO CLIP)

DAVID BUIK, BGC PARTNERS: We should have learned the lesson from 18 months ago. Short selling has its place in financial society but it is nothing like as damaging as Chancellor Merkel thinks it is. Nor is it particularly effective. Cast you mind back to the 18 of September, 2008, when Treasury Secretary Hank Paulson, threw Lehman Brothers to the wolves. And you will recall that a short selling ban was implemented into the United States, Europe, and the U.K. And during the time of that ban, which I think was about three weeks, never have financial stocks fallen so fast and so hard. Because you can say what you like about things, its sentiment that wins the day all the time. Short selling has some influence, but against sentiment it is a spear carrier.

FOSTER: But it has influence in the sense that it does actually speed up movements, doesn't it? You accept that?

BUIK: Yes, from time to time. But it is nothing like as dangerous as the German chancellor would have us believe.

FOSTER: But it does rush decisions through political systems when perhaps they should be more considered?

BUIK: Well, this is why I find this one of the most intemperate and astonishingly bad piece of public relations, from an international political standpoint I can ever remember. Because to try and do something that is as sensitive as that, with a framework of 24 odd countries, without prior consultation, which is the way it looks, is insanity personified.

FOSTER: But it is not going to work anyway, is it? Because you can't ban short selling one country by virtue of the way it works, the way markets work. They work across national borders anyway.

BUIK: Yes, but worse than that Max, it sends out the wrong message. What it-it gives everybody the opinion this isn't going to work. What is Chancellor Merkel hiding? What is wrong with the European Union? Well, we know what is wrong with the European Union and we don't need the situation exacerbated.

FOSTER: OK.

BUIK: Now today, the bond markets in Germany and the Unite Kingdom has rallied, because there are strong bonds compared to the rest of Europe. So, she can say to us, job done. And also the euro is one big figure stronger. But the fact remains that it has fallen very hard and people are just stepping back from the breech. But just look at the cost of sentiment, and also in terms of endeavor, and also in terms of confidence. Absolutely trash but all European markets losing the best part of 2 percent today.

FOSTER: She was right though to ban naked short selling, though, wasn't she? There is no place in the market for that, because it is completely made up.

BUIK: Doesn't matter, it's a view. If the view is wrong you pay for it-heavily. So naked short selling to the degree of from any kind of other setting, where you can borrow stock from the other side, makes no difference really.

FOSTER: But isn't it madness? Surely a market-you kneed to be buying and selling something. You shouldn't just be throwing money at each other.

BUIK: Markets are a view. It's a positive view or a negative view and that is why we have a market. And that is why we have a market. People have diametrically opposed opinions. Never, should that ever, ever, be changed. If people get it wrong they will pay for it. IF they are right it just shows that the markets got it sentiment correct.

FOSTER: So the point is they are not the only ones paying for it, are they? Because if the euro is falling on the back of these naked short sells, then everyone is suffering.

BUIK: Well, could I not put it to you in the nicest possible way? Over the period of the past two months have you ever seen a less coordinated effort by a bunch of European leaders and finance ministers, to come to a common cause, and failing to do so, in your entire life? Because I haven't.

FOSTER: So is this the markets versus the European political establishment?

BUIK: Absolutely. They are not singing from the same hymn sheet. Or if they are, they are taking an uncannily long time to get there. Markets don't like that. They want to know exactly how many beans make four.

(END VIDEOTAPE)

FOSTER: Fighting talk from David Buik there.

Now, as Germany carries the fight to financial speculators across the Atlantic today it is a big day for Wall Street reform. The U.S. Senate will be discussing how to shake up regulations. When we come back we'll be live in New York with the very latest on that.

(COMMERCIAL BREAK)

FOSTER: At the U.S. Senate a vote is due to take place this hour that could pave the way for sweeping reform of the financial sector there. Stephanie Elam joins us now from New York.

Stephanie, is this a big deal?

STEPHANIE ELAM, CNN FINANCIAL CORRESPONDENT: Well, it is going to be one of those things we are going to have to wait and see. It is not going to come into affect right away, Max. This legislation has been up for debate and amendment for a month now. Today's vote will determine if the bill will pass on Friday.

Now, at the heart of the bill is a new consumer protection agency that will have the power to write new rules on credit cards and mortgages. It will also create an alarm system which is basically a group of people who are responsible for noticing when a big bank is failing before it triggers a crisis.

Now, as far as a market reaction here? Wall Street has been waiting for reforms to come down the pike for a long time now. So today's vote probably won't make any changes official just yet. So traders therefore probably not paying much attention this vote today.

Investors are much more troubled by what is going on there in Germany. The ban of the so-called naked short selling that you were just talking about with Jim. That is what is weighing on the markets today. But we are off of our lows. And some on Wall Street are welcoming some of the reforms that are being proposed by the SEC. The SEC proposed new trading rules that would prevent another flash crash from happening. That is one thing that people have been saying needed to be changed, Max.

FOSTER: How do you achieve that? What sort of rules are they talking about?

ELAM: Yes, well, they are talking about circuit breakers. The SEC is going to put so-called circuit breakers on individual stocks. Similar to what we have already seen for the overall marketplace here. And here how it will work. Trading will pause on any individual stock that moves at least 10 percent in either direction, in a five minute period. This will prevent a stock from trading at say, $40 one minute, and then at a penny the next minute. The pause basically gives the market a chance to slow itself down, regroup itself, and then establish a fair price in an orderly fashion for the stock.

Now, the SEC says 30 stocks on the S&P 500 index would have been subject to these rules had they been in place on May 6th, the day of the flash crash. And the circuit breakers will go into affect following a public comment period and SCE approval, then they will undergo a six-month trial period. After that, the SEC will decide whether or not they are going to make them a permanent thing.

But the COO of the New York Stock Exchange call the new rules a good step toward restoring faith in the market. Because so many people are concerned, Max, that we are going to have another flash crash, or that it could damage the confidence of just average investors. And if that happens that will dampen the world recovery. So that is why so many people are keeping their eyes on New York.

FOSTER: Everyone is fired up about everything, aren't they, in the financial center. Just briefly, is there a sense that, you know, Europe is doing one set of financial regulations, America is doing another. It is a global industry. Shouldn't they coordinate or work together in some way?

ELAM: I think that has been part of the issue that we've seen since this recession started, which was December of '07. We have seen that a lot of people around the world, like there needs to be more of a cohesive discussion, around the globe, about how these markets work together. Because a lot of people are investing in American companies, who are not American, and visa versa, and to European companies. So, therefore, there needs to be more of an idea of how everyone is doing this. So, it can be the same sort of system. Now, it is probably going to be a little different, but hopefully there will be a clearer page there.

FOSTER: OK, Stephanie, thank you so much for joining us from New York, then. Let's get a sense really of what the markets are doing there right now. How much they have been upset by what is going on Europe and those other factors that Stephanie was stalking about. It is down .8 percent. It is 5 points of the moment, we will stick with that, though, and at the end of the show we'll bring you an update.

Now thanks to the credit crunch some people are still finding conventional loans hard to come by. But a different type of lending is booming now. As Maggie Lake now discovered, also in New York.

(BEGIN VIDEOTAPE)

MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: Cutting through the red tape. Nobel peace prize winner Muhammad Yunus marks the latest stage of his life's work in micro finance. In the middle of a credit freeze Yunus' foundation is lending money to aspiring entrepreneurs in Manhattan.

UNIDENTIFIED FEMALE: Well, I think it is a very good opportunity for us people, you know, from low income. So, it is-I'm really thankful for that.

UNIDENTIFIED FEMALE: They gave me for my first loan, $1,500. That helped me a lot to make my business grow more faster.

LAKE: You began this micro finance movement in Bangladesh. But now you are here in the U.S. I'm interested, what are the differences or challenges doing it here?

MUHAMMAD YUNUS, FOUNDER, GRAMEEN BANK: Well, everybody said that it is so different it will not work. That I never believed. People are people whether you live in Bangladesh or you live in the United States. The need is the same. Banks don't open the door for you. So, you that kind of money. You cannot find that money. So, in that context there are lots of similarities.

LAKE: It is especially striking to me that you are expanding Grameen, the micro financing here at a time when all the banks that are here are pulling back on credit. What is working for you that is not working the larger more traditional banking centers? Where do you think they are going wrong?

YUNUS: Well, first of all they are going wrong in that they reject a vast number of people. I think that is wrong. Banking should be for everybody. It shouldn't just for privileged people. You used to argue, the conventional bank used to argue that poor are not credit worthy. They cannot say it now, because globally we have shown, through micro credit, that they are very much credit worthy. Even when the big banks were collapsing, micro credit was flourishing. We had no problem, no impact on them.

LAKE: So why does the micro finance have a 99 percent rate, there must be something different that you are doing, other than just opening your doors to people.

YUNUS: One thing I would say that very close relationship between the lender and the borrower. That relationship disappeared in a conventional bank. You lend the money to borrower, you know her or you came to know here. And you give the loan. And then you sell the document to somebody else. The person who is now owning it doesn't know this person anymore. And this has been sold, and sold, many times, with nothing to do with the person who still owes the money.

So, the relationship has disappeared completely. So we have to go back to the original concept of banking. They stole that relationship. I think that is a very important element that we have to com back to.

LAKE: What do you think the biggest misconception is about borrowers? Especially individuals or entrepreneurs, or people who are starting out, that get rejected by the traditional banking. What is the biggest misconception about them?

YUNUS: Suspicion, distrust, starts with a very negative attitude. You are wrong, you have to prove you are right. Unless you have done that, I am not going to do business with you. And this is the reverse in our system, in the coming bank system. We take everybody in trust.

We don't even ask questions about what you have been doing in the past, because we are not interested in the past of the person. We are interested in the future of the person. We want to build a future. Many people had an opportunity to peak into the beautiful gift they have. Because society never allowed them to do that. We are trying to see if we can do that, unleash that energy.

LAKE: Cynics might say that is naive. What would you say to that?

YUNUS: Well, cynics have not done the work. We do the work. So if you are naive, naivety works.

(END VIDEOTAPE)

FOSTER: Well, said. Now it is the death of the desk top apparently. (UNINTELLIGIBLE) shouldn't the forecast of two men who should know. Up next we'll hear from the joint heads of software maker SAP, to find out how they see the future.

(COMMERCIAL BREAK)

FOSTER: Well, 101 days ago a new regime took over at the software giant SAP. Not one new chief, but two, acting as joint CEOs. Bill McDermott and Jim Hagman Snab came in at a rough time for the company. Profit and sales were down, the previous boss hadn't lasted long in the job. Earlier I spoke to both of them, side by side. Asked them, how they were changing things.

(BEGIN VIDEOTAPE)

BILL McDERMOTT, CEO, SAP: Well, we have made several announcements so far. One, of course, was the intent to acquire Cybase (ph), the number mobile infrastructure software company in the world, which gives us SAP. The number one position in business software, business applications, and now mobility. We think that is beautiful, because CEOs want to connect the boardroom to the shop floor and nothing moves applications onto the hand held, what we call the new desktop better than Cybase.

FOSTER: You say the new desktop, does that means the desktop is dying and you are moving everything toward mobile technology?

MCDERMOTT: Yes, if you look at emerging economies, emerging fast- moving markets like China, they have skipped past the PC. Three out of four business workers in China, went right to the mobile. So, as you look into the future, clearly the mobile will be the new desktop, SAP's power is moving business software, business applications, to the new desktop, which is the mobile device, to empower workers all over the world to move faster and get more things done for their companies.

FOSTER: You are both at the top, the helm of the company. How is it going to people in charge from two different continents?

Two souls, two hearts, two heads, are better than one. So Jim and I are completely aligned it has been a high trust relationship for many years now. And we like to think we are doing pretty well.

FOSTER: Another advantage-I mentioned you both from different continents. Mr. Snab we are hearing some frightening signals coming about European economies right now, which I'm sure you are focused on and you have been looking at, but chancellor Merkel, today, saying the euro is in danger no less. Very stark warnings from her.

As a global enterprise, you must be really worried about that. What if the euro does disappear or die?

JIM HAGMAN SNAB, CEO, SAP: Well, actually when you look at our business today, we are very, very global. And that gives us a lot of benefits and also takes out some of the risks on currencies and uncertainties in markets. We have, however, also a pretty strong belief that the Euro Zone is a solid Zone. We see growth coming from the main countries in Europe. And yes there are some uncertainties in the markets, we continue to be optimistic. We are, of course, cautious but optimistic. And we try and benefit from the fact that we reach globally, we help companies around the world and with that, get a good mix in our portfolio.

FOSTER: Mr. McDermott, it is the global economy is actually in a bit of a state right now, So, I'll guess you are focusing on the developing world like many other mobile companies, right?

MCDERMOTT: Yes, well, if you look at our mature markets around the world right now. They are all growing. And in fact, Europe is growing very near double digit in software and related services. North America the same, and Asia Pacific moving very quickly. What Jim and in the first quarter that we are really encouraged by is the BRIC, Brazil, Russia, India and China. I actually doubled on a year over year basis and we see that trend continuing.

There are also fast moving markets like Turkey and Columbia, so as we manage our portfolio of industries, market segments and geographies. Jim is absolutely right, this is a portfolio approach, and when you have a global reach like SAP, it puts you in a pole position to focus where you must, to get the job done.

(END VIDEOTAPE)

FOSTER: Joint heads of SAP, there.

Now Google has been sticking it nose in where it shouldn't. And now, Germany and Italy say the Web giant needs to be investigated. We'll you live to Cuba's own back yard, to drop in on their conference, in San Francisco.

(COMMERCIAL BREAK)

FOSTER: Welcome back.

I'm Max Foster in London.

More Kremlin in just a moment.

But first, we'll get a check of the headlines this hour.

Now, Bangkok is under its first curfew in 18 years after months of political crisis finally came to a head in a burst of violence. Troops stormed a protest encampment today, smashing through barricades of bamboo and razor wire. The assault killed at least five people and forced protest leaders to surrender. More Red Shirts dispersed, but some went on a rampage, setting fire to buildings, including Thailand's stock exchange.

US President Barack Obama and his Mexican counterpart discussed immigration reform today. Both President Felipe Calderon and Mr. Obama have denounced Arizona's harsh new immigration law. It makes it a crime to enter the state illegally. The U.S. and Mexican governments are now focusing on beefing up border security.

As oil continues to spill from BP's ruptured well in the Gulf of Mexico, the U.S. and Cuba are working together on ways to respond. The problem is the slick could drift toward the Florida Keys and the northern shores of Cuba. The issue may be new, but communication isn't. U.S. and Cuban Coast Guard officials are in regular contact, discussing a variety of maritime issues.

Pakistan is pulling the plug on Facebook, at least temporarily. The government ordered the social networking site to shut down after Islamic activists won a court order blocking access until May the 31st. They're furious over a Facebook page called Everybody Draw Mohammed Day. It encourages you users to post depictions of the prophet. Thousands of students rallied in Karachi today in support of the ban.

Now, Germany and Italy say they're both starting investigations into Google for violating privacy laws. The Web search giant admitted on Friday it had mistakenly gathered personal data over unsecured wi-fi networks and it compiled its Street -- as it compiled its Street View mapping service.

Our Jon Fortt is at Google Conference in San Francisco and he joins me now.

This sounds pretty frightening.

I mean why are they gathering personal information from wi-fi networks, Jon?

JON FORTT, SENIOR WRITER, "FORTUNE": Well, Max, Google's got no really good explanation. When they talked about the Street View program, they were talking about driving around the streets of the world, much like the one that I'm standing in front of right now, taking pictures of places in order to put in maps and be a great service for people online. What they were also doing, yet they didn't talk about, as promised, was getting a sense of where the wi-fi networks are -- places where people could connect and taking sort of a sense of that.

What they were also doing that they said that they didn't realize was snooping in on the data communications that people were having. This is like driving a van around the streets snooping in on people's phone conversations.

And for Google, which already has a lot of privacy concerns being raised with governments around the world, this is the sort of thing that they don't want to happen, particularly because Google makes its money off of advertising -- having free services, free content out there and making money off of advertising, collecting personal information. And that business is really based on trust. If they don't have the trust of users, if they don't have the trust of governments, there's a real chance that their growth could be arrested and then shareholders end up feeling that.

FOSTER: OK, Jon, I'm sure this wasn't the -- the main topic on the agenda before all of this sort of blew up.

So what else have they been talking about?

Anything interesting?

FORTT: Well, here at Google I.O. They're not talking about that at all, really. Their real audience is developers, customers, not so much governments and their audience that they're really trying to sell. They're here talking to developers, particularly about the Open Web. Google's entire business is based on the idea that the more people they can get participating in Google's sites and using government technologies, the more money Google makes from the advertising.

And here they're talking about video, they're talking about html 5, which is particularly important, as they seek to bring up new ways to compete, presidential with Apple, on mobile and with media. Html 5 is a different kind of development framework that allows them to do that.

They were talking about how video can help them with that. They were also talking about having a new sort of aps store that works on the Web to contrast with Apple's Ap Store and iTunes that has done so well. They're going to come out with an ap store that will work with their Chrome Web browser, also with their Chrome O.S. That should allow Web developers to sell their games, sell their applications in a similar sort of what to what they've been able to do with Apple.

And, finally, they've been talking correctly to developers are being able to build Web-based applications for businesses -- for even big enterprises that allow them to compete with folks like Microsoft in the traditional client server world.

FOSTER: Good stuff.

Jon, thank you very much, indeed, for joining us from San Francisco and that Google conference.

Now, the -- the Russian billionaire who's now the owner of a top American basketball team. His first picture is with the media. We'll be live on the court.

(COMMERCIAL BREAK)

FOSTER: A billionaire is setting -- or settling in tonight as the majority owner of the New Jersey Nets of the NBA. He's only the second owner of a professional American sports team to be from outside the United States.

And Mikhail Prokhorov joins an elite band of Russian tycoons who do -- who've invested in Western sports, as well.

Now, Prokhorov is 45 years old and he's actually two meters tall, we understand, which is taller than most of the Nets players. He is Russia's second wealthiest man, worth an estimated $13 billion plus.

His financial empire includes an investment fund group, as well as Russia's largest gold producer and a stake in the world's biggest aluminum producer. So that's where he's got his money.

Now, Roman Abramovich is the owner of the Chelsea Football Club, the English football team, which has just won the double. That is the English FA Cup and the Premier League. Now, Abramovich bought Chelsea in 2003 and went on a spending spree, bringing in some of the biggest names in football. The second richest man in "The Times" rich list, worth $11.4 billion. Unbelievable. The 51st richest man in the world, according to "Forbes".

And Alexei Osmonov (ph). He's Arsenault's second largest shareholder. He's from Uzbekistan but based in Russia and owns 26 percent of the club -- still adding to his shareholdings. So he may well end up owning it, as some people speculate.

Now, Richard Roth joins us from New York.

He has more on this incredible story.

I don't know how it's being taken there -- Richard.

RICHARD ROTH, CNN SENIOR UNITED NATIONS CORRESPONDENT: Well, I attended, Max, his unveiling, you might say, his official first press conference ever at the Four Seasons Hotel in midtown Manhattan. Prokhorov very affable, totally prepared for what could have been many tough questions from his New York media audience. But he handled everything quite well. You've mentioned his extensive business background. He noted that he has a large passion for the game of basketball. He becomes the first foreign owner here of a sports franchise.

He said, at the beginning, he, in effect, opened up with a bit of a charm offensive as he sat down at the dais before the media.

(BEGIN VIDEO CLIP)

MIKHAIL PROKHOROV, NEW OWNER OF NEW JERSEY NETS and welcome. And for me, it's a great pleasure to be here as the new owner of the Nets, of the team with the best record in the whole NBA.

(LAUGHTER)

PROKHOROV: Was I -- was I misinformed -- misinformed?

But, really, I am looking forward to a great season. And there is only one way to stop.

(END VIDEO CLIP)

ROTH: The joke that he was making is that his new team, the New Jersey Nets, are the worth team in the NBA. So he was sitting down and saying he's now the owner of the best franchise.

These Nets were pretty bad last year and played before practically an empty house in New Jersey, just over the river from Manhattan. And Prokhorov had breakfast with New York City Mayor Michael Bloomberg today. He said he was going to encourage him to be a Nets fan.

There is another team in New York which is almost equally bad, the New York Knicks. He is talking, Max, about building a global brand. In two years, the team moves to the borough of Brooklyn in New York. As he described it, a very rich ethnic, diverse community -- millions of people there. He said you can be a Nets fan whether you're in Brooklyn or whether you're living in Europe. So he's got big ideas and he consistently said he's got a secret plan, wouldn't reveal it. At one point when someone asked for more details, he said if I tell you, I will kill you.

It was more of a direct threat we don't always hear from these owners. But I think he was joking -- Max, back to you.

FOSTER: We hope so, don't we, Richard?

Thank you very much, indeed.

An interesting development there in U.S. sports.

Now, back to European sports, world sports, London sports. Meet the mascots of London's 2012 Olympic Games. They're called Wenlock and Mandeville. They've just been unveiled and there they are. Rather obscure, I think you'll agree. But we'll get used to them I'm sure. The designs have been kept under wraps until now. They're based on two -- two drops of steel from the Olympic flame, as we understand it. Make your own mind up. Some of -- some of the Web sites in the U.K. being rather rude about them already, but I'm not here to make judgments -- Guillermo, you can make your own about this.

GUILLERMO ARDUINO, CNN METEOROLOGIST: Yes, I like it, though. I like it. Let's be fun with that.

FOSTER: You like it?

ARDUINO: Yes. Yes.

FOSTER: OK, let's be positive...

(CROSSTALK)

ARDUINO: Do you want some more positive news that I have for you?

FOSTER: Yes, please.

ARDUINO: Guess what?

Guess it.

FOSTER: Something to do with the ash cloud, I'm thinking.

ARDUINO: Absolutely. I want to start with good news. The jet stream is out there. Winds, the high velocity, high level winds that we follow all the time is pushing the ash to the north, which means that Europe is going to be OK tomorrow. So even much better than what we have seen lately.

This is Wednesday. You see some -- a little bit of it here over West and Central Europe. And then we're going to see, the next day, nothing, because it's moving all the way to the north. It's the jet that is pushing all that ash to the north.

So relax. Thursday is going to be an easy day. If you're flying tomorrow, you're fine, all right?

And remember us, CNN. We gave you the good news.

OK, you see that not much is going on in the Northern Hemisphere. Actually, Britain, France, Spain, Portugal looking fine.

The problem is in the east. You know, you'll see some clouds and that's about it. We saw floods in Poland.

Do you know they closed down, for the time being, the Auschwitz- Birkenau Memorial because of the floods in Poland?

Also, the bad weather in the Czech Republic and in Slovakia will continue. And in Greece, I think, here to the south, we'll see some severe storms, as well.

So this is a summary for you, Max and I -- you take it away. Clear a mile to the west. Some scattered showers continue in the east -- back to you.

FOSTER: Good stuff.

ARDUINO: Thank you.

FOSTER: Guillermo, thank you much -- so much.

ARDUINO: Thanks.

It's good to see you.

FOSTER: Particularly for the positive news.

ARDUINO: It is.

FOSTER: That is QUEST MEANS BUSINESS.

I'm Max Foster in London.

"MARKETPLACE AFRICA" is next.

END