Return to Transcripts main page
Quest Means Business
US Jobs Recovery; Outlook for US; US Stocks Flat; Major European Indices End Week Higher; Switzerland's Oldest Bank Fined; Google's Clean Sheet; US Dollar Up Against Pound, Down Against Euro; How Marshall Amps Deliver Iconic Rock and Roll Sound
Aired January 04, 2013 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: It's a Goldilocks report. The latest US jobs numbers calm investor nerves around the world.
Halted by a higher power. A crisis of faith in the Vatican renders cash cards useless.
And turn it up. The loud legacy of Jim Marshall.
It may be Friday, I'm still Richard Quest and, of course, I mean business.
Good evening. Slow and steady and just about keeping pace. The US jobs recovery is doing little more than meeting expectations as the US Federal Reserve looks to the labor market for cues to end quantitative easing and stimulus.
(RINGS BELL)
QUEST: 155,000 jobs were added in December, and that was exactly in line with estimates. We always think that this is the best way to show you how it is. Look at it. You've got the big job numbers in the middle of last year, then it tails off and there were worries, and now we have 150,000 in December.
The unemployment rate remains unchanged at 7.8 percent. That's -- we'll go to that in a minute, but the 7 -- the 7.8 percent is a long way off the 6.5 percent needed for the Fed to consider raising interest rates, according to their new definition.
Maggie Lake is in New York. Good afternoon and good evening to you. And -- it's hard to get excited by a -- by a jobs report that's neither hot nor cold.
MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: Yes -- no, Richard, you're right. This is not where we need to be, it's the same story we see every month.
I'll tell you, though, based on the -- some of the commentary coming out from people in the market, it looks like they were maybe a little bit worried that all of the fiscal cliff nonsense really spooked employers and that maybe that number was going to be weaker.
So, against that backdrop, you're seeing a little bit of relief in the markets. But clearly, this isn't going to do anything to really kickstart the US economy.
But since it's Friday, Richard, and I'm feeling optimistic, let's point out the positives, because there are a couple. If you take a look at where the jobs were added, we have the usual suspects, we see tends to be a pillar of strength: health care, food services. That sort of -- the restaurant, bar, fast food, if you will.
But construction and manufacturing both gained. The thing that's important about those two sectors is they tend to be higher-paying areas, right? They're the sort of middle class, that core group that really filters into the economy. Economists like to see that. That has been a source of strain. It continued in December, it's not gangbusters --
(CROSSTALK)
QUEST: All right, Maggie --
LAKE: -- it's not super strong, but it is back --
QUEST: Maggie --
LAKE: -- and especially construction, that's something that was missing all along. So, that is a positive. The problem is, Richard, you're still seeing that weakness on the government side of the ledger, and there's no sign of that getting any better, given the fact that Washington's focused on spending cuts.
QUEST: All right. Maggie, the whole question of Hurricane Sandy, we know what effect it had on jobs, saw that in previous months. But there's a real -- political broyges underway now, isn't there?
LAKE: Oh, absolutely. A real political backlash given that the Republicans in the House did not take up the bill on Sandy aid. It caused a lot of furor. Today, actually, they're trying to make amends for that. They did pass the first of what's going to be two bills, freeing up about 9.7. It's mostly going to be related to flood insurance.
They're due to vote on the second, the much larger part of that bill, about $50 billion, January 15th --
QUEST: All right.
LAKE: And the reason that's so critical in terms of the economy, Richard, of course, is that's going to fund that rebuilding that's expected and again, filter down into a lot of construction jobs. Again, those are good jobs to see growing and should be a support for the Northeast here, even as we grapple with a reduction on the government level.
So, as long as they go through, we should continue to see some support coming through from construction.
QUEST: Maggie Lake in New York for us this evening. Have a good weekend, Maggie. See you next week -- well, actually, part of the program next week will be coming from New York. I'll be in the Big Apple. Next Thursday and Friday's programs coming live from New York.
At some point, the job creation machine is going to have to start accelerating. Anthony Chan says it might be the second half of the year before it happens. He's the chief economist of private wealth at JPMorgan in New York. I asked him what it would take to get jobs really going.
(BEGIN VIDEOTAPE)
ANTHONY CHAN, CHIEF ECONOMIST, JPMORGAN PRIVATE WEALTH MANAGEMENT: Well, I think that when you start to see economic growth accelerating, you're going to see employment growth accelerating.
We look for economic growth to be a little bit softer in the first half of the year, obviously due to the fiscal cliff effects. Even with the resolution, you're going to get some negative headwinds coming in the beginning of the year.
But as the year progresses and we move into the second half, we're going to see employment growth, perhaps, accelerating. And at that point, you're going to see the unemployment rate making more progress to the downside.
One thing to keep in mind, there are some really good results if you look under the hood. We saw, of course, manufacturing activity coming in a little bit stronger on the employment side, and that should not have been a real surprise, because the manufacturing surveys were signaling it.
And of course, with some of the rebuilding and construction, you saw construction employment doing a lot better, and I think that that's going to carry on through 2013.
QUEST: Were you surprised by the minutes at the Fed yesterday, which clearly showed a minority or a growing minority questioning the duration of the latest QE?
CHAN: I think when you look at the FOMC minutes, what you saw there was really a little bit of an optimism on the part of FOMC policymakers, because after all, no one should assume that quantitative easing would go on forever.
And if the FOMC decides to start to take some of it off the table, it really should be good news, because it's telling us that the economy's improving.
But keep in mind, there are many, many more employment reports, and there are many, many more FOMC meetings between now and the end of the year, so by no stretch of the imagination should we take the comments out of the December FOMC minutes as being definitive and, in fact, signaling that something will, in fact, happen at the end of December.
But -- and this employment report really tells us that --
QUEST: Right.
CHAN: -- despite what you read in the FOMC minutes, the Fed is not going to be in a rush to do anything hasty -- in a hasty fashion.
QUEST: The elephant in the room: the debt ceiling negotiations or debacle that we're about to face. Are you worried that both a combination of the debt ceiling, the reckon -- the appropriations continuing resolution, all these things are going to create a lot of volatility in Q1.
CHAN: Well, there's no question that when the -- when volatility picks up, it picks up for a reason, and uncertainty is certainly the chief catalyst of that. And right now, as we go into February and March, all those elephants in the room are going to, in fact, play an important role.
But just like we were able to avert the fiscal cliff, I am confident that some sort of a resolution. Now, will it cause more negative headwinds to growth? Of course. In a negotiation, chances are there'll be some cutbacks, perhaps on the spending front.
But keep in mind that I never underestimate the ability of Congress to be creative, and if they decide to make cutbacks in later years, it doesn't have as much of an impact on 2013 economic activity, and therefore, may not have as much of a negative impact on growth or employment growth this year.
(END VIDEOTAPE)
QUEST: That's the way economists view the numbers.
(RINGS BELL)
QUEST: This is the way the markets are looking at it. The Dow Jones Industrials up just a 30-odd points, quarter of a percent, 13,419. It's been a bit of a topsy-turvey week, a very strong gain, and then we had that fall, and now we're back up a bit. It shows the -- it shows the nerves in the market as we face the end of the fiscal cliff and now the debt ceiling -- issues, I should put it -- put it easily.
Over in Europe, stocks ended the week on a high note. Good gains, look at that. Milan was up 3.8 percent, a roaring success. The Market Purchasing Index hit a nine-month high in December, though it's still showing declines somewhat at a slow rate.
Germany's services sector grew for the first time in five months, and that's the way the Xetra DAX moved. Well, we could have showed you that a bit more, but there we are. It's up a quarter of one percent.
Now, join me at the supe -- the CNN super screen. Wegelin. It was Switzerland's oldest bank, and it has been wiped out, sunk by a fine from regulators in a country -- here's the best bit -- it's been sunk by regulators in a country that didn't even exist when the bank was started.
Wegelin and Co. has paid -- agreed to pay a $57.8 million fine to US authorities, and it says it will cease to operate as a bank once the fine has been paid. So much for that.
But the bank says the guilty plea is -- in New York court is because the bank -- it basically pleaded guilty -- that it has helped US clients hide $1.2 billion from the IRS. This is classic tax evasion that the bank was involved with.
Now, we know from other banks, other Swiss banks that have paid or at least come to accommodations, in the case of Wegelin, it has been very much the end of the bank itself.
As for the bank, it was set up in 1741, initially known as Caspar Zyli. It was named after this chap, who is nephew of one of the original founders. So far, so good, but here's the point: when Wegelin started trading in 1741, the world was a very different place. First of all, Britain had the best or was just starting to get an empire. And dear old George II was on the throne.
The New World was under colonial rule and, frankly, 1776 was still a long way off, the war -- the Revolutionary War, so Britain still had the New World.
And an unskilled worker in London could expect to earn nine shillings a week. Nine shillings -- now, if I remember, you used to write shillings like that, I seem to remember. That's around $93 in today's money. All that in 1741, the time when they started, and they are no more.
Coming up next, a clean bill of health for Google search business. We'll look at why it's come out of two-year anti-trust investigation and everything seems to be, well, rather good.
(COMMERCIAL BREAK)
QUEST: Google shares are gaining nearly 2 percent in New York the day after the company emerged mostly unscathed from a two-year anti-trust investigation. The US Federal Trade Commission says Google's search business does not violate competition laws.
Its primary goal has always been to improve user experiences. Rivals had complained the company was getting an unfair advantage by prioritizing its own pages in searches. David Balto is a former policy director at the FTC and told me Google's transparency led it to be given a clean bill of health.
(BEGIN VIDEOTAPE)
DAVID BALTO, FORMER FTC POLICY DIRECTOR: I think what they did was convey to Washington decision-makers and really provide substantively why - - how search worked, how they had the best interest of consumers in mind.
And then they worked in a very proactive fashion with the regulators, gave them millions and millions and millions of pages of documents, gave them access to the highest Google officials to explain how search worked and explain why consumers weren't harmed.
And ultimately, what the FTC concluded -- and this is very unusual -- they concluded not only that they should close the investigation, but they took the extra step of making it clear that on the basis of their investigation, Google acted with the intent and had the effect of promoting consumer welfare, of making sure that consumers benefited from search.
QUEST: Of all US government departments that deal with the minutia of really complicated stuff, the FTC is probably way up there along with the FAA and other highly-technical organizations. So, if -- if the critics now say, "Ick, the FTC had the wool pulled over their eyes, the FTC were bamboozled into this, Google managed to pull a fast one," what would you say?
BALTO: I'd say they're absolutely wrong. Look there were like 20 lawyers, sophisticated FTC lawyers, who worked on this case. They hired a top-notch outside litigator from a private firm to help them out.
These are the top -- the best attorneys at both competition and consumer protection issues. Remember, this wasn't just a competition case, this was also a consumer protection investigation, and at the end of the day, they gave the -- they gave Google a clean bill of health.
And one important difference here, Richard, you should keep in mind is that if these people -- if the Google critics have a problem, they can go to federal court. They can file their own anti-trust or consumer protection case and put their money where their mouth is.
QUEST: You know a private anti-trust action is nowhere near as powerful as an FTC-DOJ action.
BALTO: Well, sometimes that's true, but I was just involved in a case where the private plaintiffs got over $7 billion from Visa and MasterCard. So, the private right of action in the United States is a very powerful tool.
And again, Microsoft and other firms that may object to Google's conduct, they have plenty of lawyers they've hired for this Washington battle. If they think this is a good case, they can go to court and bring it.
(END VIDEOTAPE)
QUEST: Time now for today's Currency Conundrum. Cash points and debit and credit card terminals in the Vatican City in Rome are out of action. The question is, why? Has there been a major software glitch? Computer hacking? Or concerns about money-laundering controls? The answer later in the program.
Now, the rates today. The US dollar gains around a tenth of a percent against sterling. It's down around a quarter of a percent against the euro. Those are the rates --
(RINGS BELL)
QUEST: -- this is the break.
(COMMERCIAL BREAK)
QUEST: Bigger and louder.
(BEGIN AUDIO CLIP)
(ROCK GUITAR RIFF)
(END AUDIO CLIP)
QUEST: That was the mission of Jim Marshall, the founder of the UK- based Marshall Amplification. Loud speakers, more noise. His amps were the engine behind a generation of rock gods, from Jimi Hendrix to the Who. Jim Marshall died in 2012, the same year his company turned 50.
Now, the amps, the Marshall amps, how many of you have done a bit of air guitar imagining a Marshall amp behind you? The amps are still manufactured in the UK. They have the same unique sound, iconic look, and this is how all these amps come together.
(BEGIN VIDEOTAPE)
(ROCK GUITAR RIFF)
JONATHAN ELLERY, MANAGING DIRECTOR, MARSHALL AMPLIFICATION: The guitar and the amplifier are fixed, if it's a truly good amplifier, then they work together with the artist. It's three individuals becoming one.
The way that a valve, when it's really driven, it actually gives you a rounded sound rather than the clipped sound you get from a transistor, and it's that rounded sound from an over-driven valve is what gives Marshall the sound that it uses today.
(ROCK GUITAR RIFF)
PHIL WELLS, TECHNICAL SPECIALIST, MARSHALL AMPLIFICATION: About 70 percent of the components are loaded by machinery, auto-insertion machines. After that, it would then go off to the ladies, who will then fit the 30 percent that are left by hand.
(ROCK GUITAR RIFF)
WELLS: You have a complete circuit board. This is a new one-watt already to go, all been tested, all working. You got the chassis, they've had the front and back panels fitted. As you can see now, they're fitting the circuit boards.
(GUITAR NOTES)
WELLS: Quality is probably something that's paramount, as far as we're concerned. It's something that we've always been famous for. There's no machinery involved at all with this particular unit. We do it that way because it's the way we do it. It's the way we've always done it, and we won't change.
(ROCK GUITAR MUSIC)
ELLERY: Slash's collaboration is crucial. He's one of the main artists we've worked with just recently, Slash. We did a limited-edition amplifier for him last year. He's at the top of his game at the moment, a very-well respected guitarist. AC-DC use it, ZZ Top use Marshall equipment. You name any rock band, and they've had a piece or a lot of pieces of Marshall in their lineup.
WELLS: It's a great feeling to see an amp -- another amplifier roll off the production line, as it were, and then you don't know, in a month's time, you may well see that in television. You can actually turn around to somebody, "Oi, I helped build that." It's just a good feeling.
(ROCK GUITAR MUSIC)
ELLERY: One of the most famous endorsers at the very beginning was James Marshall Hendrix. The name that -- because they had the same name, and James Marshall Hendrix said he wanted to come and meet Jim Marshall, the man who had the same name.
And Jim was a very humble man, and he loved music and he loved working in the music industry, and he wanted to give the customer what they wanted.
(ROCK GUITAR MUSIC)
(END VIDEOTAPE)
QUEST: By jingo, that's a noisy way to start your weekend, a Marshall amp. Now, when we come back, it's the races and scandal that rocked the world of football. The victim says it's time for the game's authorities to act. CNN's exclusive interview with Kevin-Prince Boateng is coming up next, along with Pedro Pinto and his analysis.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in just a moment. This is CNN, and on this network, the news always comes first.
A small contingent of US troops is getting ready for a possible role in the Syrian civil war. The 27 who arrived in Turkey on Thursday are part of a NATO contingent that will man Patriot missile batteries near the Syrian border. Germany and the Netherlands will also contribute Patriot missile teams.
Venezuela's information minister says Hugo Chavez, president, is battling a severe lung infection that caused respiratory failure. Mr. Chavez has been in a Cuban hospital for three weeks following cancer surgery. His health setbacks come one week before his scheduled inauguration.
In Assam in India, these women attacked a politician accused of raping a mother of two. A tide of anger has swept the country since last month when a group of men raped repeatedly a student on a bus in New Delhi. The student later died of massive internal injuries. The suspects are now facing murder and other charges.
A young Pakistani activist who survived an attack by Taliban gunmen has left hospital in England. Doctors at Queen Elizabeth Hospital in Birmingham say Malala Yousufzai is making excellent progress in her recovery, but she must return to the hospital in a month for reconstructive surgery.
The AC Milan footballer who led his team off the pitch after racial abuse from fans says the football authorities aren't doing enough to fight racism. Kevin-Prince Boateng has spoken exclusively to CNN's Pedro Pinto.
And Pedro's with me now.
We will talk about the commercial aspects for a moment. This is an extraordinary story.
PEDRO PINTO, CNN CORRESPONDENT: It is, and it's the first time ever that a team has abandoned the field of play, causing a match to stop because one of their players -- or, in this case, quite a few of their players -- were being racially abused. It happened in the outskirts of Milan.
AC Milan were playing against a lower division team, Pro Patria, and a section of their fans starting to shout monkey chants at Kevin-Prince Boateng, at Urby Emanuelson, a couple of other black players on Milan's team.
And Boateng decided he'd had enough. He was convinced, or tried to be convinced to stay on. But he decided that he wasn't going to put up with it anymore and I asked him exactly why he decided to take that stand in an exclusive interview a little earlier. Let's listen to that.
(BEGIN VIDEO CLIP)
KEVIN-PRINCE BOATENG, AC MILAN FOOTBALLER: They should not tolerate it. If there is a little thing of racism they, they should be out. They should be banned forever from the stadium -- forever. They should not even enter the stadium anymore. Never again. That's the first thing what you can do.
PINTO: Would you support criminal action as well, against supporters?
BOATENG: Yes, of course. If they are racist I would even put them -- get them to court. They have the videos, they have everybody, get them selected and bring them to court if it don't get better. Like there are so many things you can do. But to do like we didn't see it or we didn't hear it, that's the worst.
And I just think we have to open our eyes, open our ears, listen to everything, hear everything, see everything and react on that.
PINTO: So you don't think the football authorities are doing enough to fight racism?
BOATENG: If it still happens, I think it is not enough what they do. But it's like -- it's not that I woke up in the morning and said, today in the game, I am going to do a signal to the world, no. But it happened, so I did what I had to do, what I felt to do. But I like this, I want to open their eyes and say to people, look this is still here. It is still existing.
PINTO: Would you ever consider quitting football if this kind of abuse didn't stop?
BOATENG: No, this -- I would not go this far. Like I would not go this far. But because this are like some very stupid people and they are still there, I will give them my attention, because I will -- I will try to kick them out. But I love the game so much that I would never quit football because of some stupid people.
(END VIDEO CLIP)
QUEST: Pedro, the football authorities -- Graham Turner (ph) says, you know, it's not for the players to decide when to walk off the pitch. So clearly, they're setting themselves up on one side. If the -- if the authorities are not doing sufficiently -- sufficient, is it the corporate sponsors, is there a commercial aspect to this?
PINTO: Look, we're talking about the brand of football, which is worth tens of billions of dollars around the world. And we have seen in the past that the only way that certain clubs and certain organizations start taking certain problems seriously is when a lot of the sponsors that are in investing these dollars in the sport say it's enough.
What I'm thinking here is what it's going to take for UEFA or FIFA to release a statement responding directly to an incident like this, because we contacted both footballer organizations and we just got from FIFA a standards statement on their stand against racism in the first place.
I think this is a wonderful opportunity for them to come out and support a player for defending himself. I think this --
(CROSSTALK)
QUEST: And you think they're not?
PINTO: I think a lot of the times they haven't realized what the right strategy is. I don't think -- they spent money and they spent time on some campaigns which, let's face it, some of them have helped. But I don't think their overall start to combating racism and to incidents like this have been studied enough.
I mean, it got to the point, Richard, recently, where Michel Platini, the president of UEFA, has asked his own organizing body, UEFA, to have a look at a penalty that was handed out to the Serbian Football Federation for abuse toward England's black players during (inaudible) 21 game because he himself wasn't satisfied with what his disciplinary body was doing.
So we need to see more of this and we need to see the leadership. We need to see Platini to (ph) do this more. We need to see Blatter (ph) to do this more. So --
QUEST: What about -- ?
PINTO: -- the players feel supported.
QUEST: And on the -- there have been occasions -- I'm thinking -- I think it was Standard Chartered once that did -- (inaudible) the tables were turned in the opposite direction, but companies have basically said, you deal with this or we'll pull the bucks.
PINTO: Standard Chartered released a statement when the whole saga with Luis Suarez and Patrice Evra, what was occurring in the Premier League and they did not agree with the fact that Liverpool were dealing with the situation the right way.
So they expressed their disappointment at that. And we all know that when the threat of money being pulled, the plug being pulled from a financial aspect, really, makes clubs and organizations want to take a stand.
I'm wondering if the likes of, you know, Adidas, Sony, Gazprom, MasterCard, these companies invest a lot of money on a process like the Champions League. Milan play in the Champions League and Kevin-Prince Boateng told me he would walk off again if it happens, even if it is in the biggest stage possible. So --
QUEST: Right. Do you think, though, that in his actions -- and this is what the debate is about. Has his actions given the taunt as a weapon with which to attack him?
PINTO: No, I don't --
QUEST: Nobody walks on the pitch but out comes the starting -- out comes the noise again?
PINTO: Look, fans go to football stadium to watch football. If that is taken away from them, they will react. And that's what we saw here. Finally, a stand was taken and fans weren't allowed to continue to watch the spectacle which they paid for.
So I don't think that's the tool that fans will see, oh, I can bother them, I can -- no. No one wants the match to be called off. So I think this is a perfect deterrent.
QUEST: (Inaudible). Many thanks for that.
PINTO: Yes. Thank you.
QUEST: Good to see you. (Inaudible).
PINTO: You, too. You, too.
QUEST: Thank you.
In a moment, we clambered up the fiscal cliff. We hit our head on the debt ceiling and Congress also caught in a cliche.
(MUSIC PLAYING)
PATRICK MURPHY (D), FLA. CONGRESS-ELECT: Kick the can down the road.
UNIDENTIFIED FEMALE: That's just kicking the can down the road.
UNIDENTIFIED MALE: Kicking that can.
UNIDENTIFIED MALE: Kicking the can.
QUEST (voice-over): Never mind kicking the can; kick the cliche: a metaphor for a crisis. It's QUEST MEANS BUSINESS. Good evening.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
(BEGIN VIDEO CLIP)
QUEST (voice-over): The answer to today's "Currency Conundrum," why are cash machines credit and debit terminals not working in the Vatican City?
The answer: C, an anti-laundering move. Italy's central bank has blocked the -- Italy's central bank has blocked the use of cards within the Vatican City state because of concerns over the Vatican's financial transparency and its failure to comply with its national money laundering rules.
If you don't have cash and you want to visit the Sistine Chapel or you want to buy something while you're there, you're out of luck.
(END VIDEO CLIP)
QUEST: It's been nearly a year since chairman of the Fed, Ben Bernanke, introduced us to the phrase, "fiscal cliff." Since then pundits and politicians have come up with all sorts of metaphors and analogies to explain the financial landscape. I am as guilty as most right here on this program.
Well, Christine Romans now reports and -- you make your own judgment.
(BEGIN VIDEO CLIP)
CHRISTINE ROMANS, CNN ANCHOR (voice-over): Just like the yodeler in that cliffhanger's game on "The Price is Right," we did fall off a cliff -- a metaphor cliff.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Fiscal cliff.
UNIDENTIFIED MALE: The fiscal cliff.
UNIDENTIFIED MALE: Over the cliff.
UNIDENTIFIED MALE: The so-called fiscal cliff.
ROMANS (voice-over): Or maybe not.
(MUSIC PLAYING, "THE SOUND OF MUSIC")
ROMANS (voice-over): Cue Julie Andrews in "The Sound of Music."
DANA BASH, SR. U.S. CONGRESSIONAL CORRESPONDENT: It is more of a slope.
QUEST: It's not a cliff. It's a slope.
UNIDENTIFIED MALE: It's really kind of a slope.
ROMANS (voice-over): Hill, cliff, slope, be honest. It felt more like this.
REP. DENNIS KUCINICH (D), OHIO: This place is starting to have the feel of the movie "Groundhogs (sic_ Day."
BILL MURRAY, "PHIL": This is pitiful.
ROMANS (voice-over): At least the movie made you laugh. This was more like "The Hurt Locker."
JOHN AVLON, CNN CORRESPONDENT: Congress set this time bomb, now they're scrambling to defuse it.
ROMANS (voice-over): In the end, the cliff, slope, bomb, Groundhog Day, call it what you will, it became a bill and a new metaphor.
PATRICK MURPHY (D), FLA. CONGRESS-ELECT: Kick the can down the road.
UNIDENTIFIED FEMALE: That's just kicking the can down the road.
UNIDENTIFIED MALE: Kicking that can.
UNIDENTIFIED MALE: Kicking the can.
UNIDENTIFIED FEMALE: We are done with kicking this can down the road. We grabbed that can, and that can is called spending cuts --
ROMANS (voice-over): But hey, we're not blameless.
ROMANS: That's Congressional malpractice.
ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Economic storm of our own making.
JOHN BERMAN, CNN ANCHOR: We are in detox from our fiscal cliff addiction.
(CROSSTALK)
ROMANS (voice-over): But the masters reside in the halls of Congress.
UNIDENTIFIED MALE: Like a bull in a china closet.
UNIDENTIFIED MALE: You're like sales people who tell their customer they can have a $30,000 car.
UNIDENTIFIED MALE: We should look at those who have lit the candle.
UNIDENTIFIED MALE: Like an airplane, did we climb over it? No.
ROMANS (voice-over): So now, can we please put the metaphors out to pasture?
UNIDENTIFIED MALE: We soon face the Valentine Day cliff, and perhaps, the April Fool's Day cliff.
UNIDENTIFIED FEMALE: What the president was saying was, I'm not going to play chicken with the debt limit.
ROMANS (voice-over): I guess not -- Christine Romans, CNN, New York.
(END VIDEO CLIP)
QUEST: And the beautiful part about that story is there isn't one person on this network -- or, indeed, any other network -- who has broadcast about the cliff -- pardon the cliche. I just realized I'm going -- that comes to this table with clean hands.
Jenny Harrison is at the World Weather Center this evening for us.
Good evening.
JENNY HARRISON, CNN METEOROLOGIST: Hello to you, Richard. I'm going to talk fog actually, not fog across central and western Europe. We've got that high pressure although there has been some of that. But in fact, across the southeast, Turkey in particular.
Now the last few hours (inaudible) picture again across central and eastern Europe. You can see some slightly clearer skies across France, the southwest of Portugal and Spain there. And that's because of that high pressure. But we have a front which is actually working its way across this region. It's going to really bring those temperatures down.
We've got some pictures to show you because before this front comes through, we have the fog. So in fact, in the morning hours on Friday, it really did cause a few transport problems, more than a few. The boss was actually closed to a transit shipping for a while. You can see why. Look at that. You could -- you literally cannot see beyond the end of your fishing rod.
So that has been the situation but as this front comes through, it will bring with it some pretty strong winds. So with those winds will come weather conditions like this. And I can show you, as I say, that if we have a look in Istanbul, maybe a bit of a sleet, sort of snow, rain mix on Sunday, then turning more likely to snow.
But Ankara, you're going to see some snow really fall the next couple of days. And temperatures in both cases, particularly in Istanbul, getting way below the average by Monday, about 7 degrees below. And the overnight temperatures about 4 degree the below the average. So this system, there's a low pressure system which is in the region.
It'll sweep across the Black Sea. It'll bring with it all the moisture, that cold air means that it will likely turn to snow. So some fairly widespread snow, some pretty notable accumulations. But you can see out across the west of Europe, we have got pretty good clear skies, quite a bit of cloud across the northwest, but at least it's dry.
Germany, I'm afraid, not; you continue to see the rain, heavy spells at times. And of course turning to snow through the higher elevations. And then the U.K. for a change. We've got some dry conditions there. But as I say, the cloud will continue. Temperatures will stay above the average. More snow across northern and eastern Europe.
And this is certainly where the cold air is in place. You can see it here. So the blue, of course, is below the average. The purple, way below the average. Green, average temperatures is warmer, shading showing you where indeed the temperatures will be above the average. So for example, London, still staying in double figures and very mild in the overnight hours.
Send the story in Paris, (inaudible) Monday and then the temperature dips quite a bit lower. But you can see the rain's still coming in. We've got high pressure, but it's just allowing some of these fronts to just skirt the northwest of the U.K., the snow continuing to accumulate, central and eastern areas. And there it is across in Turkey. Some travel delays to be prepared for.
QUEST: All right.
HARRISON: I know it's the weekend, but even so, we've got the snow in Sofia, fog in Glasgow, the same in Paris and then I think we've also got a few problems in Zurich as well, Richard. Not a bad weekend ahead, but a bit of a --
(CROSSTALK)
QUEST: Thank you.
Jenny Harrison, have a lovely weekend yourself.
HARRISON: You, too.
QUEST: And that is QUEST MEANS BUSINESS for tonight. I'm Richard Quest in London. Thank you for joining us this week (inaudible) without you. Whatever you're up to in the hours ahead, I do hope it's profitable. I'll see you next week.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
ROBYN CURNOW, CNN HOST: You're watching MARKETPLACE AFRICA. In London, people are arriving for sightseeing and last-minute present buying. But a recent survey says that Nigerians are flocking to London in unprecedented numbers. And retailers are starting to capitalize on this trend.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: Oxford Street, the central London shopping mecca is in the middle of its busiest time of the year. The pre-Christmas rush and post-Christmas sales are when the big money comes to town. But it's not just domestic spend that's keeping the tills ringing.
London's high-end stores are, of course, no strangers to overseas visits. But there is a new growth customer base contending for the top spend spot. And it is a surprising one. China, of course, maintains its position at the top of the lake, followed by the Middle East. But Nigeria comes number three in top international spend here in London, surpassing even Russia and the United States.
(Inaudible) your customer base?
UNIDENTIFIED FEMALE: Africa is getting -- growing from strength to strength, particularly in the last 12-18 months. We've seen Nigeria come through incredibly strongly. So it is a very broad base. So we're still very much (inaudible) Chinese base, a strong Middle East, Russia is there, the BRICs nations, as you imagine. But Nigeria seems to be coming through very strongly at the moment as well.
UNIDENTIFIED FEMALE: So you're seeing that and you're responding (inaudible)?
UNIDENTIFIED FEMALE: Absolutely.
UNIDENTIFIED FEMALE: (Inaudible) actually (inaudible).
UNIDENTIFIED FEMALE: No, absolutely. I know more recently we're starting to introduce a lot more niche brands. We've worked in collaboration with some very popular Nigerian brands. So today you'll see literally a very new installation that's come into the store with jewelry and fashion brands that very much epitomize the direction of fashion in Africa and particularly Nigeria.
UNIDENTIFIED FEMALE: So if I went to Lagos, I could get this made.
UNIDENTIFIED FEMALE: (Inaudible) is the director of Lagos-based style house files. It's her company's installation that is helping to salvage this team further engage with their target audience.
UNIDENTIFIED FEMALE: So you were an incredibly loyal (inaudible) customer. And then you decided to take it one step further. Tell us about that.
UNIDENTIFIED FEMALE: (Inaudible) essentially a style house files (inaudible) development agency. We have a platform called Lagos fashion and design week. And it was essential for us to seek new and more interesting ways of giving our designers a platform, giving them a voice outside of Nigeria obviously and we realize that definitely Nigeria is an emerging market.
So we realize at Selvages (ph) we probably rank about 4th to 5th largest vendors. So we approached Selvages (ph) and thought why not have a sort of cross-collaboration of some -- of some point?
We know that, yes, for us, at Lagos fashion and design week, you'll give our designers a platform, an opportunity for their pieces to be -- Selvages (ph), that's a dream come true. And for Selvages (ph), on the other hand, (inaudible) sort of been (inaudible) Nigerian customers, and not just Nigerian customers, Africans in general, more to the brand.
UNIDENTIFIED FEMALE: And at a time when many western designers are sending African inspired fashions down their runways, Acarelli's (ph) hope is that it won't just be African customers filing their way to the end downy (ph) installation.
UNIDENTIFIED FEMALE: (Inaudible) 'fess up. What kind of damage would you wreak in a day at Selvages (ph)? An average day?
UNIDENTIFIED FEMALE: The average Nigerian woman who does a lot of spending (inaudible) sort of like their gold, their VIP card, Selvages (ph), there are tons and tons of (inaudible). You're talking double digits.
It's probably going to get increased because, you know, right now there's a whole (inaudible) in the market beyond just crude oil or, you know, oil and gas, you know, there are areas that are booming even more from your telecommunications, agriculture, you know, retail. So there's more spending power, more capacity and people are spending it here.
But that's not to say that, you know, a reality's not our reality. We still have tons of people (inaudible) below the $2, you know, $2 a day mark. But at the same time we know that the middle class is increased and that earning power and the earning capacity is increasing.
And then they're spending on more things than just, you know, the baby's food (inaudible) clothing. They're spending it , they're getting on a plane and they're coming to London to buy things they cannot (inaudible) find in Nigeria.
(END VIDEO CLIP)
CURNOW: Nima Elbagir there, enjoying a little bit of retail therapy in London. Not just fashions that are flying off the shelves, but also alcohol. After the break, we speak to a major drink company about African growing taste for hard liquor.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
CURNOW: Smirnoff, Guinness, Johnnie Walker. Now these are all alcoholic drinks made by Diageo, the beverage manufacturer. While sales have been down across Europe, but there has been considerable growth in emerging markets, particularly in some parts of Africa. Well, David McKenzie recently caught up with Mark Taylor, who's a commercial director for Africa for Diageo.
(BEGIN VIDEO CLIP)
DAVID MCKENZIE, CNN CORRESPONDENT: It seems like Africa's been really good to your company. Just describe that a little bit, because the phenomenal growth rates out of a continent that's in the past people saw as a backwater for premium brands.
MARK TAYLOR, COMMERCIAL DIRECTOR, DIAGEO: Yes, no, I think it's a great question. I think you have to remind yourself that Diageo, in its various iterations, has been doing business in Africa now for, what, over 100 years.
You know, we operate in 40 countries. We're 12 percent of our global revenue for Diageo comes from Africa, growing at around about 15 percent, compound annual growth for years. So it's a huge part of our business. It's not as if it's a new business for us, you know. People talk about Africa being a developing market.
Some of our markets, they've already developed, you know, like Nigeria is a massive market for us; Kenya is a massive market for us. And we have some of the smaller markets which have started to come on stream in terms of Angola. I think the fortune as well in that we have a very, very vibrant spirits category. But that is underpinned by an incredibly strong economic base in our beer category.
MCKENZIE: You know, beer is -- as you say, beer's underpinned in terms of volume, of sales. But it's very surprising to see -- to me, at least -- the premium spirits doing so well in Africa. Is it just South African Nigeria, or are you seeing growth all over?
TAYLOR: No, we see growth everywhere. You know, we have a very simple strategy, which is to grow beer fast and grow spirits faster. So if you look at our performance last year, we got 11 percent growth out of our beer portfolio. We got 20 percent growth out of our spirits portfolio. And when you go into the individual brands, you know, we (inaudible) four big international (inaudible) brands.
And Johnnie Walker portfolio, Baileys, Gilbey's Gin and Smirnoff Vodka. And we saw a tremendous growth out of those brands. Good example would be Johnnie Walker last year. In Africa, as a total market, Johnnie Walker grew by 38 percent.
MCKENZIE: And then you're comparing that to other emerging markets in Europe? Is Africa the standard (inaudible)?
TAYLOR: I mean yes. I mean Europe is -- for some markets, Europe is in decline as far as scotch is concerned. Some markets, it's kind of petering along in terms of flat. And in U.S., it's absolutely growing.
But a lot of the growth globally that we're seeing from scotch is coming from the big developing markets, like Latin America, like Asia and like Africa. But 38 percent growth on Johnnie Walker is pretty much globally leading for that portfolio.
MCKENZIE: You've been at Diageo for some time, more than a decade (inaudible). If someone had said to you, your key market would be Africa in terms of growth, when you started, what would you have said (inaudible)?
TAYLOR: I'd have been surprised, is the honest answer. You know, I've had the pleasure of working in Africa now for around about two years. Prior to that, I've worked in the U.S., Canada and the U.K.
And when I first was approached to come and work in Africa, I probably had all the cliches around Africa within me. And as I got more and more into the market, I spent 50 percent of my time here, I just see opportunity wherever I go. I also see a continent that's massively changing.
MCKENZIE: But, you know, in terms of just the numbers, Africa really gave -- has given you a boost in the last few years. (Inaudible).
TAYLOR: Yes, absolutely. It's been one of our key growth markets. As I say, our annual compound growth has been around about 15 percent. And we've seen greater growth come out of our spirits portfolio than we are from our beer portfolio. And that's deliberate.
You know, we have -- we spent -- we spent about 150 million pounds on A&P, so advertising and promotions, the last year in Africa in totality. And we have a greater share of A&P going towards spirits than we do towards beer.
MCKENZIE: Several other sort of premium and actually good companies haven't necessarily pushed into Africa, even recently. I mean, certainly worked there as long as your company has been. Do you believe they're missing out?
TAYLOR: I think that Africa has a lot of barriers. I think there's a lot of cliches to the barriers around, you know the perception of our doing business in Africa in the past, around is my investment safe, what is the compliance environment like, et cetera, et cetera.
I think the fact that we operate mostly as local businesses within Africa and the fact that we've been operating, as I say, in some markets over 100 years, really helps us as far as confidence is concerned. We hold ourselves to the same if not higher international standards. But I think we have the experience and the relationships that allows us to do business.
MCKENZIE: Understanding of the continent is important.
TAYLOR: Yes, yes, absolutely. Understanding the continent, being in the continent for the longer term as well, having agendas that are all about working with local government, with local businesses, with local producers, et cetera, et cetera, makes good business sense. But also makes good social responsibility sense and gives you, I think, a strong platform in which to play in those markets.
MCKENZIE: Yes, obviously, as a company, put an enormous amount of tax revenue into government. But where do you feel you can improve on physically getting individuals involved who are employed by the company?
TAYLOR: Yes, no, absolutely. We have a very deliberate policy. We employ across Africa around about 71/2 8,000 people. We have a very, very specific corporate agenda around sourcing local materials, especially when the manufacturing project (inaudible) manufacturing process, I should say, (inaudible) making beer, buy source from Africa, et cetera, et cetera.
That makes good business sense at the social level. It also makes good business sense as far as hedging your currency risk is concerned. So we have specific objective around sourcing of local materials for those (inaudible) agendas.
If you then said, OK, how much employment does that create, if you went into the amount of farmers that are producing for us, the amount of distributors that have livelihoods through our brands, the amount of bars that exist because of our brands, et cetera, the economic impact of the Diageo portfolio in Africa is significant, is very, very significant.
(END VIDEO CLIP)
CURNOW: That was Mark Taylor from Diageo. And I'm Robyn Curnow in Johannesburg. Thanks so much for watching. Remember, you can find all of our interviews and stories online at CNN.com/MarketplaceAfrica. See you again next weekend.
(MUSIC PLAYING)
END
