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Quest Means Business
Tapering Begins; Dow Surges; Beyond the Taper; Taper Rally; Ford Profit Warning; Indian-US Diplomacy Row; Exclusive Interview: Carolyn Everson on Facebook and Offline Data
Aired December 18, 2013 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: Ah! The closing bell rings, US stocks swing sharply higher, the Fed has begun tapering. What a day it has been as the gavel gets hit --
(RINGS BELL)
QUEST: Oh! It's Wednesday, it's the 18th of December.
Tonight, we're all about tapering time. The Fed slows down the stimulus just a smidgeon.
Ford falls a little bit more. It falls foul of investors and warns about profits at risk.
And also tonight, taking the company by the tail. Which do you prefer for the new American Airlines? The employees get to vote, we will explain.
I'm Richard Quest, live at the CNN Center, where of course I mean business.
Good evening. What a day! Well, the suspense is over. The Federal Reserve is to start tapering in January. The key line in the Fed statement, it said quite clearly, "In light of the cumulative progress towards maximum employment and the improved conditions in the labor market, conditions the committee decided to modestly reduce the pace of its asset purchases."
So, tapering is to begin. Since September 2012, the Fed's been buying $85 billion worth of US securities and mortgage-backed securities. Now, from January, just watch the speedometer, it goes down just a smidgeon by $10 billion to $75 billion a month. It will break down in $35 billion and $40 billion of US treasuries and make $75 billion.
It's symbolic but it is happening, and this is what everybody had been waiting for. We had debated whether it was going to be January or March of next year, but clearly, the Fed's announcement, followed by Chairman Ben Bernanke's news conference, which was his last before he steps down at the end of January. And Bernanke said tapering -- according to the data at least -- tapering is here to stay.
(BEGIN VIDEO CLIP)
BEN BERNANKE, CHAIRMAN, US FEDERAL RESERVE: If the economies slows for some reason or we are disappointed in the outcomes, we could skip a meeting or two. On the other side, if things really pick up, then of course we could go a bit faster. But my expectation is for similar moderate steps going forward throughout most of 2014.
(END VIDEO CLIP)
QUEST: Now, the Fed has invigorated the markets. Come over to me over at the board and you'll see just what these numbers look like. This is a record. The Dow surged up 293 points. That's a gain of nearly more than 1.75 percent.
But it's the way the day had progressed. For most of the session, we really were just bobbing up and down about, 30, 40 points. Then as we get to this period here, just before the announcement, it goes down.
It comes back up again -- and you can't see it on this graph, but take my word for it. I'm going to right in here. Just there, after we get the announcement, the market goes down, and I suspect that's because nobody really was able to work out just how much, what had -- it was literally just a minute or two at exactly 2:00.
And then the rally began and it was slow to begin and then broad-based, and it continued right up to a record, the Dow standing at 16,168. The S&P 500, the broader market, also closing at all-time high.
And this is about much more than just the Fed taking the foot off the gas. This statement contains several other crucial parts of information. For instance, the Fed adjusted its forward guidance. Rates are to stay low well past the time when unemployment goes below 6.5 percent. Now, that's interest rates. That's, of course, the Fed funds rate.
Inflation still well below the 2 percent target. We had economic projections that were released. Unemployment is expected to fall faster next year. Fewer board members now expect tightening on rates that will take place next year.
Joining us now from Washington is Joseph Gagnon. He's the senior fellow at the Peterson Institute for International Economics and has worked at the Federal Reserve Board and at the US Treasury.
Sir, thank you for joining us. We knew it was coming. It's happened now, and it's still -- even though we knew it was on its way, it's still significant.
JOSEPH GAGNON, SENIOR FELLOW, PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS: Yes, absolutely. It seems like a case of sell on the room rather than buy on the news, in this case. But I wonder if the language about keeping the rates lower long after the unemployment rate goes below 6.5 might actually have been the more important piece of news today that might have encouraged markets to be so positive.
QUEST: This idea that even though stimulus may go next year, what really matters is when interest rates go up, because that -- the tightening part of the policy, isn't it?
GAGNON: Yes, I think so, I think so. Because the taper, although it's a bit earlier than expected, it looks like it will be going slower than expected. And so it probably doesn't have much news for the market, because we'll still be having QE through the end of the year next year just about.
But the fact that they were willing to say that they would hold short-term rates at zero well beyond unemployment reaching 6.5 percent to me was the real news.
QUEST: And yet, at the same time, there is this inflation question -- I mean issue. I'm looking at the projections. Now, they all believe that inflation will remain low for the foreseeable future, in the 1 to 2 percent range.
And everything the Fed basically says today about that unemployment well past the time that the unemployment rate declines, is very much contingent on them being right on the inflation question.
GAGNON: Yes, it is. And I think there's a huge uncertainty in both directions because inflation's been lower than they had expected, but there is a lot of concern that it could go up higher in the future, and they have to be on guard against both possibilities.
QUEST: Looking at the GDP forecast that we got from the FOMC members, very slightly down, it's almost unalterable, it's almost unaltered. But the unemployment number, again, that did fall.
There you've got the GDP number slightly lower, but you've also got the unemployment number. Which of all the data that you heard and the forecast that we've seen and the projections that we've been given do you find the most interesting?
GAGNON: Well, I would say it's the data that's come out recently that they didn't talk about today, but spending data in the US economy and employment data, monthly employment reports and stuff, have been stronger lately, and in particular, showing the strength through the government shutdown and despite the big sequester cuts is what I think has got people feeling rather bullish.
QUEST: Good to talk to you, sir. Thank you for joining us and putting this into perspective. Now, as we've talked about the taper rally, well, the stock surge was quite impressive. Maribel Aber is at the New York Stock Exchange.
We've just been talking there, not only do we have this taper, we do have that wording in the last paragraph of the statement, which does say "the committee anticipate the funds will last well past the time of 6.5 percent." What was the market focusing on?
MARIBEL ABER, CNN BUSINESS CORRESPONDENT: Hi, Richard. It was focusing on all of that, and as you said a little bit earlier there, we saw that tick down a little bit right at 2:00. Took some time to vet that through. And then all the sudden, you saw this gradual rise.
I think the markets in general were really happy to have the decision finally behind us. And as you said, not putting on the brakes, per se, just easing the foot off the gas, right? The markets seemed to like this gentle ease if you will. The Dow was surging shortly after the taper announcement came down.
You talked earlier about these records that we set today, the Dow set a record close, the S&P set a record close. That $10 billion pullback was in the range that Wall Street expected, so not so dramatic that it's spooking investors.
But now, I think, they're looking past this taper headline. They're focusing on the message that this decision telegraphs about the economy. The Fed is confident --
QUEST: Right.
ABER: -- it can start to stand on its own. Richard?
QUEST: Maribel, thank you for that. I day that will -- I think all of us who work in this business, all of us who sort of cover business news and economic news will certainly remember.
It was also the day when shares in Ford -- now that has been a stellar performer, bearing in mind the US economy and its recovery and the recession -- shares in the Ford Motor Company plummeted after the company issued a profit warning. The stock fell more than 6 percent in New York.
Ford now expects to earn between $7 billion and $8 billion next year, down from $8.5 billion in 2013. Bosses are blaming tough economic conditions in Europe and South America.
When we need to understand these market movements, Paul La Monica's the man we turn to from CNN Money. He joins me now from New York. We've known that Ford has had some difficulties, but it has always been the darling of the motor industry because it didn't take US government cash and it did seem to be performing so well. What's gone wrong?
PAUL LA MONICA, CNN MONEY ASSISTANT MANAGING EDITOR: Yes, exactly. As you point out, Ford did not go bankrupt. GM and Chrysler did. I think what's happening here is that GM and Chrysler are emboldened now because they've cleaned up their balance sheets, they've gotten their act together, they're making cars that people like to drive.
And Ford specifically said that tough competition in North America, the US specifically, is a problem. I'm not so sure it's that the economy is weak in the US as much as it is just that the Big Three is -- they're all back.
QUEST: In this environment, then, do we just take today's warning as a hiccup? Or we've known Ford -- Ford of all of the companies has really been very aggressive in restructuring its European assets. It's always had the idea of a third, a third, a third. A third US, a third Europe, a third Asia. Do see anything in this that changes that strategy?
LA MONICA: I doubt it. The only thing that could potentially change that strategy is the eventual changing of the guard at Ford, and in some respects, that's the bigger story, the Alan Mulally, will he stay, will he not rumor hasn't died down, even though many people within the Ford organization have been adamant to say that he's going to be there through the end of 2014.
But you still hear all the chatter. Maybe he's the top candidate to replace Steve Ballmer at Microsoft. So if Mulally's gone, I think anything's up for -- up in the air in terms of new strategy.
QUEST: Yes. Now, that's the big one, isn't it? They say he will be CEO right the way through 2014, or he'll stay to the end of his contract, I forget the exact -- you could probably remind me the exact phraseology. It's clever wording, isn't it, that leaves a little bit of a window of interpretation --
LA MONICA: Yes, it definitely seems that way.
QUEST: -- of when he might go?
LA MONICA: I really doubt that -- the only thing that's going to stop the chatter about Mulally going to Microsoft is Microsoft announcing a new CEO whose name is not Alan Mulally.
(LAUGHTER)
QUEST: Good point. A busy day. You've got to admit, you don't see Ford down 6 percent ever day. You don't see tapering every day. Good to see you, Paul --
(CROSSTALK)
LA MONICA: Yes, no tapering love for the Big Three, unfortunately. Tessla down, too.
QUEST: No, I -- well, yes, but -- and also, and yet at the same time, the US government selling -- managing to get rid of its GM stock. So all three are, as you rightly point out, now fit for purpose and fit to fight. That's basically it, isn't it?
LA MONICA: Definitely. And keep in mind, too, that even with the Ford sell- off today, the stock is up about 20 percent year-to-date. That has lagged GM.
GM's had an amazing year, and a lot of people feel that they're on the right track with a new CEO, Mary Barra coming in, and she's a product person, so I think a lot of people are excited about GM in a way that they hadn't been in a long time.
QUEST: Paul La Monica, thank you for joining us.
LA MONICA: Thank you.
QUEST: What -- no wonder we enjoy this business so much when you've got so many great stories all happening at once, a firmament in our very midst.
The arrest of an Indian diplomat in New York has sparked an international row. US Secretary of State John Kerry says he empathizes with India. Did he actually apologize, and if he -- whatever he said, why did he say it? We'll talk about it after the break. QUEST MEANS BUSINESS.
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(COMMERCIAL BREAK)
QUEST: The US secretary of state, John Kerry, has been drawn into the diplomatic row, not surprisingly, between India and the United States. Secretary Kerry expressed regret over the arrest of India's deputy consul, who's been held on suspicion of visa fraud last week.
Devyani Khobragade was strip-searched after being accused of underpaying her New York maid. Before we talk more about this, let's get the background from Pamela Brown.
(BEGIN VIDEOTAPE)
(BEGIN VIDEOTAPE)
PAMELA BROWN, CNN US NATIONAL CORRESPONDENT (voice-over): Watch as police remove the concrete security barriers in front of the US embassy in New Delhi. Newspapers in India reporting the government is behind the anti-US protest. Why? Retaliation sparked by an arrest of this Indian diplomat in New York City, Devyani Khobragade.
According to this criminal complaint, Khobragade, a deputy consul general, severely underpaid her babysitter, only paying her $3.31 an hour, far less than minimum wage. The complaint also alleges the diplomat worked her babysitter far more than the 40 hours per week, allegedly without overtime pay, and then lied about all of this on visa documents, a violation of US law.
UTTAM KHOBRAGADE, DEVIYANI KHOBRAGADE'S FATHER: My daughter has not done anything wrong. She had nothing to do with this visa process.
BROWN: State Department diplomatic security arrested Khobragade last Thursday after she dropped her daughter off at school. She was later strip- searched and put in a holding cell with other defendants. Her lawyer says she pleaded not guilty.
DANIEL ARSHACK, DEVIYNAI KHOBRAGADE'S ATTORNEY: I have every expectation that she will be completely vindicated.
BROWN: Her arrest sparked outrage among Indian officials, some calling her treatment barbaric, one even calling for the partners of gay US diplomats in India to be arrested. The country recently banned gay sex.
YASHWANT SINHA, FORMER INDIAN FOREIGN MINISTER: What the government of India can do immediately is to cancel those visas, arrest all these companions, put them behind bars.
BROWN: Indian officials also snubbed US delegates visiting India, one tweeting, "Refused to meet the visiting USA delegation in solidarity with our nation."
KAMAL NATH, INDIAN ARLIAMENTARY AFFAIRS MINISTER: More steps should be taken against the United States until they give an unconditional apology.
BROWN: US Marshal Service officials stand by their strip-search procedures, saying they treated the diplomat the same way they treat everyone else.
MARIE HARF, DEPUTY SPOKESPERSON, US STATE DEPARTMENT: Thus far, all indications are that appropriate procedures were followed. But nonetheless, we understand this is a very sensitive issue, and we're continuing to review exactly what transpired.
(END VIDEOTAPE)
QUEST: All right, let's talk about this with our World Affairs Reporter, Elise Labott, who's in Washington. We need to get to the bottom of this. I've -- I don't know why, but one day I did sit down and read the US State Department's handbook on diplomatic immunity and how they're supposed to treat people.
Now, if she'd been a full diplomatic agent, there was no question of handcuffing her or anything like that, whatever she'd have done. But she's not a diplomatic agent, is she? She has consular immunity. And now the issue is, did Kerry apologize or not?
ELISE LABOTT, CNN WORLD AFFAIRS REPORTER: OK. Well, she has this consular immunity, Richard, and that means that she can't be arrested for anything that she's doing as part of her official duties. So, these crimes that she's been accused of and actually pled guilty to in a Manhattan federal court, by the way, are outside the scope of her duties.
I think what -- Secretary Kerry was apologizing for a few things. He was apologizing for the treatment that she received. I think even though proper procedures were followed, I think that there's an understanding that A, she could have been afforded a little bit more courtesy and respect given her status in New York as an Indian diplomat.
And B, this cultural sensitivity in India, where woman who are screened or patted down or anything like that are kind of brought to a private room. It's very -- the cultural sensitivity is very high there.
And I think he's also apologizing for the fact that this is getting out of hand, that now India is taking all these actions against the United States, and that this is really affecting relations, because --
(CROSSTALK)
QUEST: But there's a very -- all right. But -- I'm going to jump in here because --
LABOTT: Yes.
QUEST: -- this is the difficulty, though.
LABOTT: Yes.
QUEST: You've got New York authorities saying we did nothing wrong. You've got Kerry basically saying, well, they may not have done anything wrong, but I'm still very sorry that they did nothing wrong. And you -- at what point does India decide to bury the hatchet in this, or does it decide to keep throttling forward?
LABOTT: OK. Well, technically, the marshals didn't do anything wrong, but diplomatic security guards made the arrest. And then they handed her over to the marshals. And the diplomatic security services could have said, listen, treat her with kid gloves. Give her a little bit of respect and leeway. They didn't do that, and I think that's one thing that there's an understand of that.
And I think that -- the Indians here, it's kind of unclear. On one hand, they're protesting the treatment of the diplomat and the manner in which this was carried out, but the whole idea that she doesn't have immunity from this crime in the first place. And that's one of the little dirty little secrets here in Washington is about how diplomats treat their domestic help. There have been a lot of cases, even particularly in India this year of diplomats that are treating --
QUEST: Right.
LABOTT: -- their servants poorly. And so I think that both sides need to take it down a notch, and I think that's what Secretary Kerry is trying to do.
QUEST: In a word, in a sentence, you've studied diplomacy and diplomatic relations for years. Does this story go away fast?
LABOTT: No. I think it -- I think that the moves that the Indians have taken have been a bit excessive, and you saw in Deb Feyerick's (sic) piece that they're calling for more action. And so, I think that that call might have helped, but I think that the tensions are going to remain, especially if this diplomat is prosecuted in US courts.
QUEST: Elise Labott in Washington putting it into perspective for us. Thank you, Elise.
Now, Facebook knows what its users do on its site, and now they know what they do when it's off it. An executive speaks exclusively to CNN on the Facebook data dilemma and -- it's straight after in a moment.
(COMMERCIAL BREAK)
QUEST: For the first time, a Facebook executive has spoken on camera about how Facebook is using your offline data to market ads to you online. Samuel Burke sat down with Facebook's vice president of global marketing for an exclusive interview. Samuel joins me now live from New York.
Now, let's be clear about this. We know that they rampantly manage to take our online searches and when you're on Facebook, but this is when you're offline. This is when you're not on the Facebook site, is that right?
SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: That's correct. I think, Richard, we've all had that "oh wow" moment when we realize they really are tracking us. When you search for something on website and then you go to another website and see an ad there for what you were searching for.
This is -- that's really nothing compared to what they're able to find out about you offline, and then give ads to you online.
(BEGIN VIDEOTAPE)
FRED ASTAIRE AS SD KLUGER, NARRATOR, "SANTA CLAUS IS COMING TO TOWN": Santa can still look into his magic snowball and see just what you're up to.
BURKE (voice-over): Just like Santa Claus in the classic cartoon --
ASTAIR (singing): He sees you when you're sleeping, he knows when you're awake --
BURKE: Big tech companies not only know what their users are up to online, increasingly they know what they're doing offline. Facebook is partnering with data collection firms that gather information from those customer loyalty cards used in many brick and mortar stores.
Facebook's vice president of global marketing says the data is then used to create customized ads and deals to its more than 1 billion customers.
CAROLYN EVERSON, VICE PRESIDENT OF GLOBAL MARKETING, FACEBOOK: I'll give you a very real example. Let's say that I am a heavy snack user and I buy snacks. And we now have the ability through about 50 percent of purchase card data in the United States to tell a snack manufacturer that here are the consumers that have purchased snacks and allow that marketer to target them with a very specific ad.
BURKE (on camera): How can Facebook guarantee that all this data is anonymous?
EVERSON: We have the data from, let's say, the grocery store, which is really purchase card data. We have that bucket of data. We have the Facebook data. Those two never shall meet in terms of us sharing specific Facebook information or them sharing very specific purchase information.
So they would turn Samuel into a code that would never be identifiable as Samuel, you would be a set of characters.
BURKE (voice-over): That procedure is called hashing, and despite this advance in securing information, privacy advocates are worried about tech companies collecting so much information.
MARC ROTENBERG, EXECUTIVE DIRECTOR, PRIVACY INFORMATION CENTER: We do believe that hashing and more generally de-identification, which is a technique for anonymizing, that is to remove the actual information of the user, is a good privacy too, and we favor it.
But we think it also has to be tested independently, and we can't rely on Facebook's representations about whether they're doing a good enough job.
BURKE: Facebook says their business depends on keeping users' data secure, and they believe they'll prefer seeing ads and coupons customized to their tastes and habits.
EVERSON: We firmly believe that the more relevant and useful the advertising can be, that it's in service of the consumer.
BURKE: Maybe more importantly for Facebook, the people paying their bills, the advertisers, see this customization as the Holy Grail.
EVERSON: We want to be able to offer a marketer the opportunity to know precisely who they want to target to drive very specific business results, and that's incredibly valuable for them.
BURKE: Now, Facebook's users will have to decide whether this type of data sharing is naughty or nice.
ASTAIRE (singing): He's gonna find out who's naughty or nice --
(END VIDEOTAPE)
QUEST: Samuel, I have only one sentence: how dare they?
BURKE: Well, you may not like this, Richard, but the fact of the matter is, this data was already being collected about you before. Anytime you go into a grocery store and use your loyalty --
(CROSSTALK)
QUEST: Yes! Who gives the -- hang on, hang on. Who gives the grocery store permission to give the information to Facebook, whether hash tags or hashed or whatever?
BURKE: Well, inadvertently, I suppose it's you, because you're using those credit and loyalty cards, but it's the information -- the data companies that have collected that information, that own that information about you and me who are now sharing it with Facebook.
QUEST: And I'm guessing -- I've been told it's the last question, so you're going to have to answer this very briefly -- I'm guessing that there is a way to get out of this, but by jingo, you'd need a degree in computer science to get through the privacy rules to opt out.
BURKE: Or only use cash, Richard. Don't use a loyalty card, and don't use a credit card, then you might be able to --
(CROSSSTALK)
QUEST: Oh, please, Samuel!
BURKE: -- get around it.
QUEST: Oh, please, Samuel! Oh, please, Samuel! Thank you. Excellent reporting. Samuel -- Samuel Burke, who's never knowingly put his hand in his pocket. Many thanks, indeed, Samuel, for joining us there. We'll have more on the Fed tapering in just a moment. I'm really annoyed about that, my data being just willy-nilly handed about. After the break.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. This is CNN, and on this network, the news always comes first.
Around 500 people have been killed and hundreds more people have been wounded in violence in South Sudan. The UN fears the fighting is being fueled by ethnic tensions. The government says it's politically motivated. So far, between 15,000 and 20,000 people have fled the fighting, taking refuge at the Untied Nations bases.
The US Federal Reserve is to begin easing the stimulus measures next month. Tapering is to start. Reducing its monthly bond purchases by $10 billion to $75 billion a month. The Fed says the economy is growing at a moderate pace and stocks on Wall Street surged to new records after the announcement.
Security experts say the NSA should end the systematic collection of phone records. The panel recommended reforming surveillance activities at the spy agency. The suggestions include greater transparency, more oversight, and greater self-restraint.
Police in New York say they were following standard procedures when they strip-searched an Indian diplomat after her arrest on visa fraud charges. India has taken steps in retaliation, which includes removing the concrete security barriers outside the US embassy in New Delhi. US Secretary of State John Kerry has expressed his regret over the situation.
The Turkish prime minister has denounced a corruption crackdown on his allies as a dirty operation. Tayyip Erdogan says enemies are trying to smear his administration as the country heads towards elections. Fifty-two people, including three ministers' sons and businessmen close to the prime minister, were detained on Tuesday.
So, tapering is to begin in January as Ben Bernanke prepares to leave his post as the Fed chairman at the end of next month. He already admits he does not fully understand why the U.S. recovery has been so sluggish. In his press conference a few hours ago, he defended the handling of U.S. monetary policy.
(BEGIN VIDEOCLIP)
BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE: We had been disappointed in the pace of growth, and we don't fully understand why. Some of it may just be a slower pace of underlying potential, at least temporarily. Productivity has been disappointing. It may be there's been some bad luck - for example, the effects of the European crisis and the like. But compared to other advanced industrial countries - Europe, U.K., Japan - compared to other countries, advanced industrial countries recovering from financial crises, the U.S. recovery has actually been better than most.
(END VIDEOCLIP)
QUEST: Ben Bernanke. Now, Bob Parker is the senior advisor at Credit Suisse. When I joined - when he joined me earlier in London, I asked him what he made of the Fed's decision. The tapering starts in January.
(BEGIN VIDEOCLIP)
BOB PARKER, SENIOR ADVISOR, CREDIT SUISSE: Two important points. The first point is that you know the risk of them announcing tapering in December - that risk had certainly increased in recent weeks and it increased first of all because in contrast to September and October we had the agreement, albeit it a small agreement, between the Democrats and the Republicans on a fiscal policy. So, you know, that threat to the economy - that threat of sequestration - has been removed. And that was a concern for the Federal Reserve earlier in the year.
And I think the second consideration, and probably the more important one, is that recent data - whether you look at industrial production, whether you look at today's housing figures, whether you look at recent data on consumption -- everything shows that in the last month the U.S. economy, after a temporary weak period in September -
QUEST: Right.
PARKER: -- and early October, is now accelerating. And it's - you know - it's I think intelligent to forecast U.S. growth next year at close to 3 percent. And, you know, that growth upgrade takes away the case for quantitative easing.
QUEST: Looking now at the statement and reading what they say, it's almost as if this was a trigger they have been waiting and wanting to pull, and this gave them the reason to do it today.
PARKER: That is certainly true, but I think one part to emphasize, Richard, is that they are moving very slowly, and you know let's be very clear. If monetary policy in the United States was exceptionally easy with $85 billion of quantitative easing per month, by moving to $75 billion -- and my forecast is the average for quantitative easing will be $70 billion per month for the first quarter -- they've gone from being exceptionally easy to slightly less easy. But you can't describe this as a monetary tightening. We've still got with $75 billion a month a high volume of quantitative easing.
QUEST: But what they say is the committee will likely reduce the pace of assets in further measured steps, and we go back to when Bernanke first talked about this in June of this year. Now he said - then he talked about it all being over and done with by the end of 2014 - so I'm guessing if you - if we extrapolate - they started later, therefore they'll finish later. It's likely they'll still be QE into 15 probably.
PARKER: I think that's probably right, and you know, although circumstances may change. My central case forecast would be QE averaging $70 billion in the first quarter, by midyear 2014 I'm assuming that we will be down to perhaps $40 to $50 billion per month, and that by the end of 2014 we'll still have QE, but obviously it's going to be much smaller -- it may only be $10 to $20 billion a month. And the whole program will probably end in the first quarter of 2015. It's going to be a very slow, unwinding process, underpinning this good growth outlet for the U.S. economy.
(END VIDEOCLIP)
QUEST: Bob Parker of Credit Suisse talking to me earlier about the Fed and many of the other central banks have all pinned their forward guidance on unemployment. And the Bank of England will probably raise interest rates sooner rather than later, and that reason is because unemployment in the U.K. is falling faster than expected. The jobless rate declines at 7.4 percent in the third quarter - the lowest since April 2009 - and it approaches the 7 percent level which Mark Carney, the governor, has said could trigger - could, not would, could - trigger a rise in rates.
The pound sterling - that, well it jumped on the jobless numbers. I want you to look and see how the pound has performed. This chart shows its performance in recent - in recent months. We get to a low down here of just under 147 or so, but then you come to a very sharp rise to where we are now - just shy of 163 on stable -- on the cable rate. And as you see this gain here - no wonder the Bank of England is already now warning that this sort of appreciation - bearing in mind an economy like the U.K.'s which is so export-led, even though leading export partners like the E.U. are in some economic troubles -- that could have a bad effect on the strength of the U.K.'s recovery. Or at least it's one of the factors that we're (aware/wary). But as you know, there's not a lot you can do about currencies if that's the trend that the market wants to move in.
The pound itself, however, the actual physical pound - well that is getting much more robust. No more in - from 2016 will there be old notes, instead, polymer is going to be the substance by which they make the bank notes from Threadneedlestreet. Jim Boulden reports.
(BEGIN VIDEOCLIP)
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Paying with plastic used to mean using a credit card. In a handful of countries like Australia, New Zealand, Canada and Vietnam, it also means using a bank note made of polymer instead of cotton paper. Now the Bank of England will start to switch to polymer notes as well after consulting the public. The bank says 87 percent approved the plastic money over cotton paper.
MIKE CARNEY, GOVERNOR, BANK OF ENGLAND: We think it is significant. They bring a lot of benefits. They're more secure so they protect us against counterfeiting much better than the existing notes, better technologies.
BOULDEN: From 2016 five-pound notes will be printed on polymer, ten-pound notes will follow, making Britain the largest economy with plastic notes. But it's assuring all the queen will remain on the front of all notes. So, what are the reasons for the switch? Well, polymer notes can last a lot longer in circulation, and bank notes are getting evermore safety features to try to thwart counterfeiting, including these windows in the polymer.
UNIDENTIFIED MALE: Hard to get into.
BOULDEN: As the CEO of the bank note printing company De La Rue told me recently during an exclusive behind-the-scenes look at the company's design studios, a crucial part of the switchover is getting the public behind it.
TIM COBBOLD, CEO, DE LA RUE: I think you should expect many central banks to look at all the available technologies, both from a durability and a security point of view. And as polymer becomes more common and more accepted within the industry, I think you can expect all central banks to at least be considering it.
BOULDEN: The Bank of England says polymer notes will last more than twice as long in circulation which would cut costs and promises the new notes will stay cleaner. They can even survive a washing machine, and importantly, still fold nicely into any wallet. Jim Boulden, CNN London.
(END VIDEOCLIP)
QUEST: Ah, but as I discovered once on a trip to Australia, yes, they can withstand the washing machine, they can stand - withstand - a trip into the ocean, but they can be ripped if you bite them. If you just try and tear them it won't work, but if you bite them - don't ask me why we decided to do an experiment biting Austrian dollar bills, but anyway, that's a story for another day.
European markets advanced on Wednesday. Investors were awaiting the outcome of the Fed's meeting. Look at the numbers and make your own judgment. The best of the day is Xetra DAX which gained 1 percent. The Paris CAC (Inaudible) was also up. The goal, for bank lenders - leaders - agreeing to landmark banking union in Brussels tomorrow. They goal is to prevent banks from crippling national economies. We've had the single supervisory mechanism, now we need the single resolution mechanism, and that's got to be agreed and signed off on.
It's not just about the banks - European officials are also going after some of Spain's top football clubs. The Commission's investigating if local governments in Spain have given unfair advantage to some football clubs through tax breaks. Our correspondent in Madrid is Al Goodman.
(BEGIN VIDEOTAPE)
AL GOODMAN, CNN'S MADRID BUREAU CHIEF: It's a three-part investigation by the European Commission into some of Spain's and the world's best-known football clubs like Real Madrid and FC Barcelona. "Professional football clubs should finance their running costs and investments with sound financial management rather than at the expense of the taxpayer," said European Commission Vice President Joaquin Almunia.
First, Brussels will look into possible tax advantages for Real Madrid, FC Barcelona and two clubs in Northern Spain - Athletic Bilbao and Osasuna in Pamplona. These four clubs are not private companies - they were given an exemption from converting to that status. Instead, they're run by their season ticket holders like shareholders who elect the club's president. Brussels says that legal status gives them a lower tax rate than other clubs.
Next, Brussels will look into a reported land transfer between the City of Madrid and Real Madrid to see if there was inappropriate state aid. The land swap involved Real Madrid's old training grounds near its home, Bernabeu Stadium, which became the site of four office and hotel skyscrapers. The new training grounds were moved out near the airport. The Commission says the land swap was based on a piece of land being revalued to nearly 23 million Euros, up from just 600 Euros in 1998. Finally, Brussels will look into more than 100 million Euros in state- backed loans to three clubs in the Valencia region. Spain's foreign minister says all of these operations were in accord with Spanish law, and he expects the investigation to be closed after European officials get more information. The clubs are either professing innocence or not commenting.
Al Goodman, CNN Madrid.
(END VIDEOTAPE)
QUEST: When we come back in just a second, greater freedom for gadgets from takeoff to landing - it's already been in the United States, now one of Europe's top carriers is to relax the rules for the first time. We'll have the story after the break.
(COMMERCIAL BREAK)
QUEST: This week's "Business Traveller" update. Delta Airlines - you heard from the chief executive yesterday on this program - Delta has announced today it will continue to ban voice calls onboard its flights, regardless of what the official regulations may be. In a statement, Delta says on the question of flight communications, it feels passengers' voice calls in the cabin are in their words (RING) "disruptive." It applies to cellular calls and internet-based voice calls.
Now, Delta says no because of course you'll remember the rules have changed in terms of gadgets which you can use, and British Airways is to become the first European carrier that will allow customers to use small handheld electronic devices during taxiing, takeoff and landing - iPads, Kindles and the like. From tomorrow BA passengers can use their phones, tablets and e- readers in the flight-safe mode from the time they board to the time they disembark The European airlines are now catching up after the U.S. relaxed the rules earlier this year.
How about this one - look at this. Which of these two do you prefer? Now that of course is the old American Airlines logo. That over there is the new American Airlines log. But there's been a great dispute over which is better - the new or the old. Now employees of the merged company are to be allowed to vote on whether to go with the new or back to the old. It's an interesting question because some people hate the new and some people love the old and vice-versa. On January the 2nd the result will be announced as to which the employees prefer. It's not the first time of course this has happened.
Margaret Thatcher famously showed her displeasure when British Airways replaced - look at that - she took her handkerchief and - can we run that again, please? Because it's so good. Bearing in mind that these were the ethnic tailfins that British Airways had introduced. And if we could show that video again - I'm not sure whether we can - but if we could, you would definitely - Margaret Thatcher, there she goes - out comes the handkerchief. She's shown the logo, she's shown the tailfin. "Dreadful" she said and in one fell swoop, she destroyed millions of dollars' worth of branding.
JENNY HARRISON, CNN INTERNATIONAL METEOROLOGIST: Wow.
QUEST: And now American Airlines is asking their people which do they prefer - the old or the new.
HARRISON: I know which one I like.
QUEST: Which one do you -- don't answer that, no.
HARRISON: I'm not going to answer, I'm not going to answer.
QUEST: You were going to.
HARRISON: I won't, I won't, I won't. I won't.
QUEST: You're not going to?
HARRISON: I won't.
QUEST: We wouldn't (inaudible).
HARRISON: No. I wouldn't dream of it.
(LAUGHTER)
QUEST: Have you been at the cooking sherry before Christmas?
(LAUGHTER)
HARRISON: No, you didn't bring me any over. No, all this talk of planes - they could be (inaudible) delays across in Europe into the U.K. Very, very strong winds, has been for the last couple of days. Huge wind gusts. I want to show you some of the numbers. They are shocking. You wouldn't want to be flying with these sort of winds, Richard.
Let me show you. This is the satellite. You can see all this action again across the northwest. Just going to zoom in and actually show you the U.K. and Ireland in particular and also northern France. This is where the really high wind gusts have been reported. Rain has been coming in as well, very heavy amounts which is going to accumulate obviously in the next couple of days. But look at these wind gusts. This what I mean. Plymouth in the U.K. which is (inaudible) 137 kilometers an hour, Castlederg there in northern Ireland 120, Quessant in France, 116, Valencia as well 111 kilometers an hour. These are some really strong winds, so over 80 miles an hour, these winds.
These are some of the current wind gusts that have been coming down a little bit, but once one system clears out of the way - like this one - there is unfortunately another one literally just waiting in the wings. I was saying yesterday, as we continue over the next few days - the next week actually, right up to Christmas day - it is going to be case of the same. This is the forecast showing you the winds, and look at some of these numbers --- in fact they seem to sit still so I think some of the data is missing there. But we could actually see some wind gusts again over 100 kilometers an hour. And of course, coming in with it, very heavy amounts of rain. So be prepared for obviously delays at the airports, but also very dangerous conditions on the road, particularly with winds that strong.
And this is the rain accumulating some portions there of Wales and Ireland. We could be seeing as much as five centimeters of rain. This is what's going to be happening over the next few days. System after system coming through bringing more of the same. Some pretty severe thunderstorms in there and amounts of rain. Current temperatures on the upside are fairly mild out in the west. This is the rain coming in, snow to those higher accumulations as well, and as for temperatures - well, you can see a little bit cooler as we head into Thursday - mostly single digits of course below freezing across central and eastern areas. Richard.
QUEST: You're right, I certainly would not like to be landing in that.
HARRISON: You wouldn't.
QUEST: Wouldn't want to be on a plane that's landing in those situations. Jenny, thank you very much. You can go back to the cooking show.
HARRISON: (LAUGHTER). I'm going to do something. Look at those logos again. Look at the logos on the planes again.
QUEST: The logos, the logos. Well, certainly. Right. When we come back after the moment, the big screen to the big board - AMC's Entertainment went public today. A conversation with Gerry Lopez on what it is we want when we go to the movies beside a good movie and a good yarn.
(COMMERCIAL BREAK)
QUEST: It's show time for AMC Entertainment, the parent company of AMC Theatres, went public on the NYSE today on the big board. The chief executive Gerry Lopez rang the opening bell. AMC shares closed today up 5 percent - that's a nice pop on an IPO at $18.90. I asked him what AMC gains by being on the market.
(BEGIN VIDEO CLIP)
GERRY LOPEZ, PRESIDENT AND CEO OF AMC ENTERTAINMENT: The key piece that we gain by coming public is access to the U.S. equity capital markets. Our parent company Wonder -- Dalian Wanda Group out of Beijing is on a path to globalize its businesses. As they do so, it's a good idea to gain access to the different capital markets across the globe. Taking us public is one of the many things - one of the many ideas - that they have, one of the many initiatives that they're executing (against) as they look to continue to grow, and grow not only in their home country but across the globe.
QUEST: But of course once you're in the market, and the reason for my question is, once you're in the market, you are so much more susceptible to the whim of the market -- to the reporting of it to shareholders. And many CEOs do find being in the market to be much more of a strain than as a private company where you're given much more leeway.
LOPEZ: Well, you know everybody has a point of view on that, Richard, but for us we were already a public filer. We - although not trading our equity publicly - we have had public debt throughout our entire period as a private company. So to us, we were already kind of public. We had to file every quarter, we had to deal with the debt holders, which you know, it's a different group than the equity holders, but it's not that really different. The scrutiny, the compliance, the rules that you live by are really not that dramatically different, so for us, gaining access to the markets was really frankly more important - the flexibility that it brings is something that we wanted. So, sure, there's, you know, some burdens that come with being a public company, but to us those were not a blocker, and we are quite prepared to live within you know within those rules. That's not a big deal for us.
QUEST: What do you foresee as you compete against the Netflix at home and all of the options at home and you're providing good business - technologically, do you see anything on the horizon?
LOPEZ: The reality, Richard, is that - is that the consumer that enjoys Netflix and the consumer that enjoys a movie on an iPad at home on the go is also the consumer that enjoys the movie in a theater. People who love movies love movies. And they love movies at home, they love movies in our theaters, they love movies in an airplane, they love movies everywhere they go. That consumer, that core customer, is the same across all of the many different -
QUEST: Really?
LOPEZ: -- forms. And you can enjoy - oh, absolutely. The best DVD customer at any of the retailers in the DVD world are also our best customers in our theaters. The truth is that as people want to have an evening out, as young people want to date other young people, as, frankly, some of the parents may want to get away from some of the young people on a Saturday evening, we like our chances as to where the business is going. If we continue to provide people with a great story and a good environment in which to enjoy that story, I think - I think this business which many have predicted is dead many years, you know for many times, will still be around.
(END VIDEO CLIP)
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." So, tapering will begin in January. It's a historic day, of that that there's no doubt, but we do need to keep it into proportion. By no means is the Fed slowing down its purchase of bonds. It's just very gently, very easily easing up on the gas. Because, let's face it, it's still buying $75 billion a month and that's a great deal of money.
And that's "Quest Means Business" for tonight. I'm Richard Quest at the CNN Center. Whatever you're up to in the hours ahead, I hope it's profitable.
(BELL RINGS).
QUEST: I'll see you back in New York tomorrow.
END
