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Quest Means Business
US Economy Shrinks; US Markets Up; European Markets Flat; MH370 Search Zone Ruled Out; Clippers Controversy; World Cup Countdown
Aired May 29, 2014 - 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: The bells are ringing, there's a moment of celebration. The S&P 500 is at a record tonight, another record. Hit the hammer, sir, hit the hammer! Oh, dear. I think we've seen more enthusiastic hammering before now. But it is, in any event, Thursday. It's May the 29th.
Tonight, the world's biggest economy just got a teensy, weensy, eensy, beensy bit smaller. For the first time in years, the US is in reverse. Should we be worried? You'll find out tonight on the program.
Also, after months of searching for MH370, investigators admit they'd been looking in the wrong place.
And it's a case of just what the doctor ordered. Apple's purchase of Beats measures the pulse of the record industry.
I'm Richard Quest, tonight in London, where of course, I mean business.
Good evening. Tonight, the world's biggest economy is in reverse for the first time in three years. Consumers are shopping less, businesses are holding back on new investments, inventories were down, local governments are cutting spending, and this was the result.
(RINGS BELL)
QUEST: The US economy shrank at an annual rate of 1 percent in the first quarter. And after, of course, since Q2 of 11, when it had shown such good growth. It spoiled last year's record of strong growth.
Now, months ago, economists have been predicting growth of around 1 percent for the first three months of the year. That's what it would have looked like on the econo-dial. The QMB econo-dial. And when the first official reading came out last month, it showed a meager 0.1 percent expansion.
Now, the picture's even worse. Find reverse, and there it is. The second official reading shows a decline for the first time since early 2011. The number will be revised twice more before we get a final number.
Now, White House says don't worry. The chairman of the president's Council of Economic Advisors wrote, "A range of more up-to-date data from March and April provide a more accurate and timely picture of where the economy is today and show that it continues to recover."
Diane Swonk is the chief economist at Mesirow Financial. She joins me now from Chicago. Diane, in a nutshell, we can be blunt. We've known each other a year or two, you and me. Should we be at all concerned by this number, or do we put it as a frolic of winter?
DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: Well, it wasn't just winter alone. We had the decline of 1 percent, mostly inventories. The good news is, we get to catch up from that.
That means we've seeded growth and are already seeing catch-up in the month of March, April, and I think May we're seeing it as well, with the most recent jobless figures were very good last week. So, that's good.
On the other side of it, though, I think we're going to get to 4 percent in the second quarter, but if you average that, that's only 1.5 percent growth. That's half -- less than half the pace of growth we saw in the second half of 2013.
So you're again feeling one of these lulls in the US economy, which is not where we want to be at this stage of the game.
QUEST: Right, but Diane, as we look at the graph of the numbers, and we see this, it's quite a very sharp reversal, isn't it, though, to go from Q4 --
SWONK: Absolutely.
QUEST: -- where we were plus 2 to minus. Now, we can find it -- you can finesse the figures, but why would inventories fall back?
SWONK: Well, a lot of it was actually due to the weather. Even though we weren't spending very much and we weren't out, we were literally migrating here and hibernating, we were inside of our houses and wouldn't go out to the malls, wouldn't go out and buy any cars.
We also weren't producing. A lot of production was disrupted. And so because of that, even the already low production schedules that were scheduled for this first quarter were taken down even further.
QUEST: All right.
SWONK: And over 1.6 percent of this was just inventories alone. And that's good news, because we had an overhang of inventory, so now, that gives us a little bit of room to ramp back up in the second quarter.
QUEST: Of course, this does mean that Chair Yellen, Chairwoman Yellen, the whole FOMC, they are not going to take any risks. Because if this number proves to be prophetic rather than just a blip, they certainly don't want to be doing any form of tightening in any shape or form.
SWONK: No. And actually, right now, of course, rates have continued to fall since they've done the tightening, because of course the Treasury is issuing fewer treasury bonds. We have a deficit that's narrowing in the United States at the same time we've had some of the flight to safety of Mr. Putin and all of his hubris in the other side of -- in Europe, and things like that, in the Ukraine right now.
QUEST: Right.
SWONK: So, I think what you're seeing is that interest rates are still very low. The Fed can continue tapering at their measured $10 billion on each side pace, but not anything aggressive. They're -- this is steady as she goes. They're not going to raise rates anytime soon, either. I don't think they're going to raise rates until a little over a year from now, in June of 2015.
QUEST: Which is interesting, because what we are now seeing -- and it is a conundrum, isn't it? -- that we're getting a rising market. And if you look at bond prices as well, you normally, of course, do not see them moving in the same synchronicity that we're getting at the moment --
(CROSSTALK)
SWONK: They're moving in tandem, yes.
QUEST: They're moving in tandem, and they shouldn't be. So why?
SWONK: Yes, I think that's part of the residual of what I said earlier is that we do have -- most people haven't really taken into account how many fewer -- how much less supply treasury bonds there are out there, and I think that's a very important fact --
QUEST: Right.
SWONK: -- in the market. Also, the flight to safety. And I do think you do have to start to wonder when you see the kinds of premiums places like Portugal, getting a little over a percent, versus the US and paying for their sovereign debt. We've got fiscal problems here, but they still look worse in Portugal than they are here. So, I've got to wonder about that as well.
QUEST: I need you to stay with me, and I need you to listen carefully, as I'm sure you always do, but listen carefully, there, while I was just -- I give a bit of information. The UK is looking for growth in the underbelly of the economy. The Office of National Statistics said today it will include prostitution and illegal drugs in the formula that it uses to calculate GDP.
Now, other illegal activities, like smuggling, are already counted. The changes could add $17 billion to UK GDP numbers, roughly the same size as the agriculture industry. It's being driven by new regulations at EU level. Italy announced similar plans last week. The government there hoped the changes will help it hit its deficit targets.
Diane, it's a rum business when prostitution and illegal drug dealing are included in the official stats. But there is a certain perverse logic, if you really want to know how an economy's performing.
SWONK: It's part of the economy. I remember years ago, there used to be statistics for the Soviet Union, and they had two different economies, and they would quote statistics about what the official government statistics were on growth, and then what the gray market was -- they called it gray, they never called it the black market, they called it the gray market. And it was larger than their actual economy.
So, these things can have a big influence, and if you're not taxing them, maybe you want to tax them, and it would change your results on your deficits, right?
(LAUGHTER)
QUEST: Excellent. Diane Swonk, thank you very much for joining us, much appreciated.
Now, investors in the US, they shrugged off the ICDGP numbers and looked ahead to a summer rebound. The numbers!
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QUEST: The Dow, the NASDAQ, and the S&P were up. The Dow, besides a very slight blip just after 10:00 in the morning, it's at almost -- in fact, I do believe it is at the highest point of the day for the Dow. The S&P hit a record.
Apple shares are up after the Beats deal was announced. BlackBerry shares also claimed 6 percent. The chief exec said the company has 80 percent chance of coming back -- 80 percent chance, what about the other 20 percent?
The European stocks were mainly flat, two up, two down, very little movement. In fact, the Xetra DAX didn't move at all, it's two down, one nowhere, and one a little bit up. Let's not waste a moment more talking about that.
Possible new ECB stimulus to be announced next week. The world's largest hedge fund manager, Man Group, is up 5 percent after a report that it's in talks to buy Numeric Holdings.
Now, when we come back in a moment, the authorities say they can find no trace of Flight MH370 in the area where they'd detected the pings last month. It's leading to a rethink of the whole search. We'll talk about it after the break.
(COMMERCIAL BREAK)
QUEST: It was a startling announcement: officials in charge of the hunt for MH370 say the missing aircraft's final resting place is not in the main suspected zone off the coast of Australia, the region which has been the focal point of the investigation since early April.
Now, in April, having followed the Inmarsat data and the various arcs, the pings were thought to be from the flight's black boxes, and four of them were heard by the towed ping locator on the back of Ocean Shield.
Now, after weeks if not months of searching, nothing has been found, which ergo leads to the conclusion the pings were not from the black boxes. CNN's Will Ripley reports on what happens next.
(BEGIN VIDEOTAPE)
WILL RIPPLEY, CNN CORRESPONDENT: Yet another blow for the families of Flight 370. After weeks of searching this area off the coast of western Australia, the Blue Fin 21 has turned up nothing.
And now, one US Navy official is telling CNN, those possible pings detected in that area, the pings that have pretty much shaped the underwater search so far? Well, that Navy official saying those pings likely did not come from an airplane's black box.
The US Navy stepping back a bit from those comments, saying they're speculative and premature. However, even the Australian government now acknowledging that this area that has been the focus of the underwater search is not the final resting place of the missing plane.
So, what happens next? Well, in the next two months or so, private contractors are going to be brought into this area, and they're going to bring in new technology that can map out the ocean floor and scan and search for possible wreckage from a plane.
This is going to be a huge undertaking that could take months, a year, or even longer. It's going to cost millions of dollars, and they're going to be searching an area that's 23,000 square miles, 60,000 square kilometers, roughly the size of West Virginia, a huge area, where the water is more than 3.5 miles deep at some points.
All of this technology, all of this effort, to bring closure for the families of the 239 people on the plane, closure they still don't have almost three months in.
Will Ripley, CNN, Tokyo.
(END VIDEOTAPE)
QUEST: David Soucie is a former FAA security inspector. He is CNN's safety analyst. He joins me now from Denver. Well, I thought it was the pings, I thought they'd got it right. It all -- the sums all added up, David. But clearly, it wasn't. And now the question is, what next?
DAVID SOUCIE, CNN SAFETY ANALYST: Well, I like it, Richard, that we're looking forward, now. Looking back and what happened, what didn't happen doesn't really mean a hill of beans right now.
What means something to me is looking forward. What are they doing to put the wheels back on the cart and move forward? And I think they're doing the right thing.
You have to start with a map. When the ocean's that deep, you have to start with a map so that the other equipment that you put down there knows where it's going before it's put into the water. And that's, I think, some of the difficulty they had with the Blue Fin 21, was that it really didn't know where it was going, it was kind of searching and grasping through the dark. And they had some issues with it.
QUEST: Right, but even before they get to the stage of the right instrument for the job, they've got to define where they want to search. Now, we're back, really, to the Inmarsat handshakes, particularly number seven. How far was this search area, looking at the map there, how far was it, really, from the true point of handshake seven?
SOUCIE: It really -- I think that they were close, to be honest with you. But it does go back to the tools, Richard, because that Blue Fin only had a limited amount of capability to search, and they were confident -- evidently, they were confident that they would be able to find it in a very finite area.
Now, that's not going to happen. They've definitely got the Inmarsat data is still putting them in the basic regional area, the same area within several miles. But what they're talking now about is 23,000 miles. That's a much bigger area than anywhere near around those pings.
So you have to question, did they find something new in the Inmarsat data that they didn't have before, or is there some new piece of information? Because now they're looking at a far larger area than they were before.
QUEST: Right. As I read the Australian press release back in the beginning of May, they're looking -- they are going to define a new search area, which could be up to 60,000 kilometers. Then they're going to put it out to contract.
We are -- you've always believed that this is going to be the long haul, not the short sprint. But now when you've got the Australians saying 12 months, even that could be regarded as optimistic.
SOUCIE: Yes, it sure could, Richard, especially because they're going to start with the mapping first, and that mapping is not of a high enough resolution to find the aircraft, necessarily. Because it's going to have to get the maps, just the general altitudes and where the terrain goes.
So, it's -- there's no hope of finding it, in my estimation and from talking with the sonar experts, there's no hope of really finding the aircraft with this first part of the second phase.
QUEST: Finally, I've got to ask you, is there any advantage to going over the blame game for why they thought these were the pings? I personally believe there's not. I think they did the best job that they could with the evidence they had at the moment they had it, and time was against them to hear those pings. But I'm wondering if I'm missing something, David.
SOUCIE: Well, I'll tell you, Richard, after 17 years of doing accident investigations, especially from the FAA's perspective, remember, we're not looking for just the proximate cause, the thing that caused something to go wrong. Similarly, in the accident investigation, there are things that could have been done better, certainly, and there's nothing to be gained there.
What is to be gained is if there's a systemic failure of some kind. If there's some system thing that the International Civil Aviation Organization could put in as a standard that would help countries in the future to say, these were problems that we had doing a good investigation. These are problems that we had with the families and dealing with the families
And I spoke with the president, President Aliu, of ICAO just last week, and he does already have a family assistance program that he's recommending as a standard for every country, which is a great step forward. I really admire him for getting right on that, getting that out there, and doing it.
QUEST: David, good to see you, thank you, sir. One brief programming note --
SOUCIE: Thank you, Richard.
QUEST: -- to bring to your attention. On Monday, the program, QUEST MEANS BUSINESS, we're going to be in Doha in Qatar, where the -- we'll be at the IATA, the International Airline Transport Association. IATA, I always get that one wrong. But it is the main body, of course, of the airlines, the representative body of aviation and airlines.
We'll be at the annual general meeting of IATA, and we'll be hearing from CEOs and obviously the -- what happened and the lessons to be learned from MH370 will be very much on the agenda.
Coming up next, the exiled basketball team owner Donald Sterling is about to become an even wealthier man. Just how can you be so wrong and still walk out having filled your boots? QUEST MEANS BUSINESS, back in a moment.
(RINGS BELL)
(COMMERCIAL BREAK)
QUEST: Donald Sterling is looking at a huge payday as he begins the process of selling the Los Angeles Clippers, whichever way you parse it. At least five bidders are preparing offers, and some are up to $2 billion plus, according to one source at CNN.
Sterling's been banned from the NBA for life for making racist remarks last month. CNN's Rosa Flores joins us now from New York. Rosa, when we look at these numbers, first of all, let's just clear up one issue. Is he selling or isn't he?
Because his wife is supposed to be having the authority to negotiate, but at the same time, we've got this very long document in which appears to be a defense. So which is it?
ROSA FLORES, CNN CORRESPONDENT: There are a lot of very interesting pieces, and moving pieces, if we will, Richard, to this story. But let me start with this. So, there are five bidders who are out there willing to pay some mega bucks for the Clippers. We're talking offers to the tune of $2 billion.
And then you said it right. Shelly Sterling is saying let's sell, sell, sell now. Let's close this deal. Well, so, who are these five bidders, right? Well, those names are a secret for now. However, take a look at your screen, because of course we've done some digging, and these are the names of people, groups, entities, who have expressed interest in the Clippers.
Now, here's the interesting thing. Look at those two first names. Now, these are not in any particular order, however those first two names, former Microsoft CEO Steve Ballmer and former NBA All Star Grant Hill. According to sources -- CNN sources, they tell us that Shelly Sterling met with those two individuals this past weekend.
Now, meantime, while all of this is happening, Donald Sterling and his attorney writing a 26-page letter to the NBA in response to the charges from the NBA. And I'm going to read you a quote, because this really sums up what this letter is about.
He says, "In reality, Mr. Sterling is being banned for life, fined $2.5 million, and stripped of his ownership for a purely private conversation with his lover that he did not know was being recorded, that he never intended would see the light of day."
Now, he makes a couple of very interesting points that I want to talk to you about. First of all --
QUEST: Well --
FLORES: -- that the NBA morals clause doesn't regulate private speech. So, what he's saying there, Richard, is OK, he's having a private conversation in his living room, he's expecting privacy. Number two, that the NBA rules limit fines to only $1 million. He asks why is he being fined $2.5 billion.
But the one that I think you are going to find most interesting, Richard, is this one. "The forced sale of the Clippers causes an egregious tax hit to this family." So he's thinking, OK, if it sells for about $1.5 billion, let's say, $500 million tax hit. Now, I don't know that viewers would feel sorry for him, because that is a lot of money, but --
QUEST: Well, it's because of the capital gains increase, isn't it?
FLORES: Correct.
QUEST: From when he bought it for a handful of millions of bucks and --
FLORES: For about $12 million.
QUEST: For 30-odd years ago, and now it's worth -- so, it's the profit over the capital gain that we're talking about there. But here's -- the issue really comes down to, look, I'm no defender of Donald Sterling's views, so I'm going to be devil's advocate here to a certain extent.
But Rosa, he has a point. These were private views, repugnant though they may be, that were said to his lover with an expectation of intimacy and confidentiality.
FLORES: You're absolutely right. And that is his point, his main point in this 26-page document. He says look, yes, I understand that what I said was stupid, I should not have said it. However, in America, what America stands for, which includes the right to privacy, it was in my living room, and I have an expectation of privacy in my living room.
And then he adds, so this is an illegal conversation, so if this conversation is illegally recorded, how can you use it against me in these charges that they're saying? So, he's saying everything that the NBA --
QUEST: Right.
FLORES: -- is basing their decisions on is something that was recorded illegally, is his point.
QUEST: Interesting things. The moment you know who's bought it or bidding, come back with some more. Many thanks, indeed.
FLORES: Certainly.
QUEST: Now, in Brazil, FIFA's general secretary, Jerome Valcke, says at least one stadium isn't ready for the World Cup. He tweeted, "Just completed visit at Arena das Dunas. Race against the clock. Still lots to be done for #WorldCup fans and media." There are, of course, just two weeks left.
The World Cup trophy has begun its tour of Brazil. The national side is training for whatever fans are hoping will be a victory in the tournament. And 90 kilometers away, very different preparations are being made in the favelas of Rio.
Our correspondent, Shasta Darlington, who has spent the last few years really covering this story upside down, inside out, backside and front side, and now she explores this other side of Brazil.
(RINGS BELL)
(BEGIN VIDEOTAPE)
(DANCE MUSIC)
SHASTA DARLINGTON, CNN INTERNATIONAL CORRESPONDENT (voice-over): Vibrating hips, children dancing in flip-flops, and the occasional assault rifle. Just another funk party in the lawless favelas on the outskirts of Rio de Janeiro. By day, even more brazen.
DARLINGTON (on camera): They're selling drugs right here behind me on the corner in the middle of the community in broad daylight while life really goes on around them. They're selling to housewives and workers and teenagers, while kids walk home from school.
DARLINGTON (voice-over): The local dealers agree to talk to us while they carry on with business. Marijuana, an inhalant containing ether, hashish, cocaine, and for just $2, crack.
"This is the famous powder for 20 reals," he says, closing a deal. While buyers snort coke and lookouts stand guard, children play in the streets. Jorge says he's been dealing for five years. "I was born in the middle of trafficking," he says. "My childhood was trafficking, my adolescence was trafficking. I didn't see any other alternative."
For decades, favelas were virtually abandoned by the state, teeming shanty towns without sewage systems or schools and hospitals. Neglected by police, warring drug gangs proliferated.
"If I told you I wasn't afraid of dying, it would be a lie," he says. "If I told you I avoided it, it would also be a lie. I wouldn't be here trafficking if that were true."
In 2008, Rio launched a pacification program to secure the city ahead of this year's World Cup and the 2016 Olympic Games. Police, backed by the army, have seized control of dozens of favelas, expelling drug gangs, most of them near the beach and tourist hot spots.
But hundreds more haven't been touched at all. We found Wagner, a former trafficker, at a drug rehab shelter. "My community lives in a constant war zone," he says. "We make the headlines every day." He says he won't go home until the police occupy his slum as well.
The pacification campaign does have its critics, who say more schools and more job opportunities need to follow the tough-knuckle tactics, especially if they want to convince people in favelas like this one that police won't just pack up and leave once the big sporting events are over.
Shasta Darlington, CNN, Rio de Janeiro.
(END VIDEOTAPE)
QUEST: Fascinating story, bearing in mind that the World Cup is just a couple of weeks away. Coming up in a moment, it's the search result that Google is not proud about. We'll explain in a moment.
(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. At least 14 people have been killed after a Ukrainian military helicopter was shot down near the embattled city of Slavyansk. Pro-Russian separatists have claimed responsibility for the attack as the situation in Ukraine seems to becoming increasingly violent.
Abdel Fattah el-Sisi is poised to become Egypt's next president in a landslide victory. Exit polls suggest the former military chief has won around 95 percent of the vote. Human Rights Watch is calling the election unfair, citing unrests - citing arrests - of thousands of political dissidents in the last ten months.
Pakistan's prime minister wants a report by tonight on the brutal killing of a pregnant woman outside the high court in Lahore. Police say Farzana Parveen was stoned to death by relatives on Tuesday after she refused to participate in an arranged marriage. Australian authorities have conceded the missing Malaysian jetliner is not where they have focused their search efforts. Officials concentrated on an area after they detected what sounded like the pings from the plane's black box locators. Now they say those noises could've been produced by the search ships themselves.
For the first time in three years, the U.S. economy shrank. GDP fell by 1 percent - that's an annualized rate in the first quarter. A contraction was expected but it's larger than many had - economists had - anticipated. However, fret ye not, the economy's expected to bounce back in the spring.
Apple shares ended the day almost 2 percent higher following the confirmation it is to buy Beats, the headphone maker and the music streaming service. The price tag, $3 billion, is a lot of money to the largest acquisition in Apple's history and it put the market up by nearly 2 percent for the shares. As the ink was drying on the deal, Apple's chief exec Tim Cook tweeted this picture with the senior VP Eddy Q and the Beats' founders Dr. Dre and Jimmy Iovine. Now, the Recording Industry Association of America is the trade organization that support the music industry. You may know them as the one who certify your favorite albums as gold and platinum. The chief exec Cary Sherman joins me now live from CNN Washington. Mr. Sherman, this is an interesting deal because it's an enormous amount of money, it shows lest there was any doubt that the recording industry is in good fettle, but what's really justifying it do you think?
CARY SHERMAN, CHAIRMAN AND CEO, RECORDING INDUSTRY ASSOCIATION OF AMERICA: Well it's demonstration that the market is moving very much towards access models - streaming models, subscription models -- and that is an area where Apple needed to play a better game than it's been playing so far. But it also demonstrates that music is really at the center of Apple's heart and ecosystem. The iPod was the first music product that put Apple back on the Mac -
QUEST: Right.
SHERMAN: -- on the map - in a big way - and they want to continue to really offer music as part of their service.
QUEST: It begs the question though why Apple having - didn't firstly recognize it themselves and secondly do a better fist (ph) of launching their own streaming services. Every time they've tried to do something similar, it is always -- it's been half-hearted at best and it's never got much traction. But they actually had the downloading game, set and match with iTunes. So, where did they lose the plot?
SHERMAN: Well, consume behavior is continuing to evolve online, and the download market is beginning to decline as more apps and other videos and so on are taking up more time and attention on mobile phones. So, you needed to look for new ways to offer music to consumers. Apple had already offered iRadio. It was a step in the right direction, but subscription has taken a huge jump in the past year. More people are subscribing to services on a monthly basis where they can get instant access any time they want to any song they want, and in order to play in that market, Apple would've had to start scratch, launching a service -
QUEST: Right.
SHERMAN: -- whereas Beats just came together with really a first-class service with first-class entrepreneurs running it, and for that reason, it made sense for Apple to combine with Beats.
QUEST: You raise a very interesting point that consumers are now prepared to subscribe and to pay, and do you believe that - my generation which was around when the internet came about got everything for free and rebelled at the idea - you know, the Napster generation if you like. Do you think that that has changed? The new generation is expecting to pay for things?
SHERMAN: Well, I think we have a way to go before the new generation is expecting to pay for things, but certainly it's moving in that direction. The fact that people are willing to subscribe to a service is really an important development. We thought that subscription services would take off years ago when you could get access to any song in the world for $10 a month. Who wouldn't want that? But the fact is it's taken a long time, but it's beginning to happen as cultural habits change and people begin to understand that if they want the content that they love, they're going to need to help pay for it.
QUEST: A very unfair question, sir, a very unfair question - is this a good deal for Apple at this price?
SHERMAN: I have no way of valuing a deal like that - none whatsoever, but they're getting some remarkable people, they're getting a service that has already launched, so they know what they're buying and they get to put the Apple brand on something that could make a big difference in the marketplace. The fact that so many tech companies are beginning to look for music services as part of their offerings - Amazon is rumored to be looking for subscription service, YouTube is beginning to launch a subscription service, you already have Spotify and Rdio and on and on. This is good news for the music industry because music has never been consumed more -
QUEST: Right
SHERMAN: -- than it is right now.
QUEST: Sir, thank you for joining us, putting it in perspective. I much appreciate it.
SHERMAN: My pleasure. Thank you.
QUEST: Google has lifted a shroud of secrecy and released diversity figures for its workforce. The data probably won't surprise you. The vast majority of Google employees around the world are men - 70 percent of them. Thirty percent are women, and the discrepancy grows even wider if you look solely at the company's leadership positions (RINGS BELL).
The search results for ethnicity amongst U.S. employees - 61 percent white, 30 percent Asian, 3 percent Hispanic and 2 percent black. Now, to put that into context, within the workforce you're looking at - certainly in terms of the black workforce - a number that is more like 14 to 16 percent. So, dramatically, underrepresented for African-Americans but overrepresented in some ways in terms of Asian employees. Now, many tech companies face growing pressures to release this type of data. Google says it will hope the disclosure sparks dialogue as it works to increase diversity. Gunjan Sinha is executive chairman of MetricStream. He joins me now from Boston. Good to see you, thank you. It's a difficult one this, isn't it? Because you want - you want - to have the numbers so you can see where improvement needs to be made, but you're at the same time got to be careful that you don't end up with a quota system.
GUNJAN SINHA, EXECUTIVE CHAIRMAN, METRICSTREAM: Sure. Yes.
QUEST: What do you think you learned from these statistics from Google?
SINHA: So, you know, first and foremost I'm very pleased to see some key metrics and statistics come out of Google. That's a great trend for the industry to be able to come out and look at diversity in true sense of metrics and say 'where do we stand today?' not just in one company but how do we look at every company that is there - out there? So to the extent that we can create transparency, that's going to drive better governance and better culture where we can have greater proportion of workforce in a more diverse sense. And to me, diversity is about creating performance and it's not about just social good. It is the right thing to do, it is a thing to do to drive performance -
QUEST: It's - well
SINHA: And that's what I think Google has embarked on here.
QUEST: But how -
SINHA: Go ahead.
QUEST: -- do you execute it? Because when you see these numbers and you see - and Google, I mean, hats off to Google for releasing it. Why are minorities so underrepresented with the exception of the Asian community? Why are they so underrepresented in Silicon Valley do you think?
SINHA: Yes, and I think that goes back to some of these figures and stats need to come on the forefront and the other thing is we need to set the tone at the top, right, it needs to start at the top. We got to look at underrepresentation right at the levels of - at the board of directors, at the CEO, at the executive leadership teams, and I think what is going on right now is companies are beginning to look at it and say how do we tap onto the talent pool across the entire diversity -
QUEST: OK.
SINHA: -- rather than on narrow segment. Yes. Go ahead.
QUEST: But you're an executive chairman, so when you say it has to start at the top, you are at the top, sir.
SINHA: Yes.
QUEST: So how can you in the companies that you run and in the people that you speak - give us some practical guidance as to what you do.
SINHA: No, for - yes, but let me give you an example, right. At my own company we have Shellye Archambeau who's our - my - partner and CEO. She's an African-American woman, you know, and, you know, she's a very capable CEO, she serves on the board of SVLG - Silicon Valley Leadership Group. She's now, you know, appointed to the board of directors of Horizon. We need role models, we need executives, board members at the top making a statement of what I call tone from the top to say that diversity is important, and that needs to permeate through the entire corporation. So the first order of business is we need to see some stats and metrics and that's what Google has done today, so I really applaud them for what they have done, but we need to see commitment coming from venture capitalists, private equity, you know, guidance people at the board levels and executives taking real action to drive diversity. And as I said, this is to drive performance. This is not just a social good thing.
QUEST: And it all starts at -
SINHA: Go ahead.
QUEST: -- and we've had the top - a top chap - talking to us tonight. Gunjan Sinha, executive chairman of MetricStream. Now, when we come back after the break, Argentina is finally taking steps to pay down its debts. We'll break down the deal in a moment.
(COMMERCIAL BREAK)
QUEST: Argentina has finally reached a deal with its creditors. It's more than a decade after it defaulted on its debts. When Argentina defaulted it was the largest debt default in the world - since of course being beaten by others. The country's agreed to pay the Paris Club of Creditor Nations around $9.7 billion over the next five years. It's a crucial step towards getting Argentina back into the international debt markets. Our senior Latin American affairs editor, Rafael Romo joins me now from the CNN Center. Rafael, before we get into the nitty-gritty of it, Argentina was ordered by a court in the U.S., last year I believe, to repay money or it was - how does this fit in? Is this the same debt or is one to Paris Club, the other was to London Club of Private Debt?
RAFAEL ROMO, SENIOR LATIN AMERICAN AFFAIRS EDITOR OF CNN WORLDWIDE: It is a separate part of the debt, but in any case, Richard, it is a very important day for Argentina. And this deal that we're talking about - the Paris Club - is seen as a victory by the government - they're for two very important reasons. Number one, it allows the South American country to get rid of $9.7 billion in foreign debt in five years which will clear the way, as you can imagine, for lower borrowing costs. And number two, -- and Richard this is more of a political reason than a financial reason - Argentine officials were able to negotiate the deal without, without the involvement of the International Monetary Fund.
Now, President Cristina Fernandez de Kirchner has sharply criticized the IMF on multiple occasions. This morning her chief of staff pointed out that the agreement was reached because only Argentina and the Paris Club - a group of 19 industrialized nations - were involved. Let's take a listen.
(BEGIN VIDEOCLIP)
JORGE CAPITANICH, ARGENTINE CABINET CHIEF, VIA TRANSLATOR: This negotiation process has been grueling and difficult, but something very important is the fact that it's the first negotiation where the International Monetary Fund has not actively participated and has not been a part of the conditions set during negotiations. This is very important.
(END VIDEOCLIP)
ROMO: The Paris Club usually favors IMF involvement when it comes to agreements like these. Argentina has not really had access to capital markets since it defaulted on its $100 billion debt during the 2001 and 2002 financial crisis. Now, Richard, Economy Minister Axel Kicillof highlighted the fact that prior to the agreement, Argentina was paying 7 percent interest on its foreign debt which will now go down than less than 4 percent. Richard.
QUEST: We thank you for that, Rafael Romo, joining us this evening to put that into perspective. Now, the weather forecast. Jenny Harrison is at the World Weather Center where - I'm not at the World Weather Center, but I believe that masses are getting hot under the collar in places.
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: Well, indeed, Richard. Yes, very hot. I mean, I know what you're like with hot weather, but let me tell you, you would struggle with some of these temperatures. I'm going to start you out in Asia. Of course it's early morning hours getting on towards 5 a.m. in Beijing, and the temperatures on Thursday - look at this - a record certainly for this time of year. The last time it got to 4 - over 40 degrees Celsius - in Beijing was actually in 2010 in July. So, 41 was the high, the average is 28. You can see the - even in Shanghai - a high of 33 and the average is 25. These are the current temperatures. And even now at this time of the day, perhaps in another hour the temperatures might go down another degree or two. But they're still well above the minimum temperature for the day. So, 21 in Beijing, 23 in Shanghai, 29 Celsius there in Hong Kong.
So people of course staying as cool as they can, and guess what? The remedy is just the same as when it's raining - you need an umbrella. Something just to really cover yourself from the heat as it is actually blazing down upon you. But the high pressure's still in place across north and eastern areas of Asia. Still very hot, very dry. And then to the south, we've got this trailing front, so unfortunately we could see some more heavy rain just on the end of that system and it could cause some more localized flooding.
These are the temperatures for the next few days. So, finally, by about Sunday, it will be feeling a whole lot better in Beijing - 31 - so still above the average. Hong Kong, not a great deal of change there, temperatures in the low 30s. And then for the next few days in Shanghai, but Sunday actually a little bit below the average. But it should feel pretty good Saturday and Sunday with those temperatures in the mid to low 20s.
Now, if it's really heat you're talking about, then just look at these temperatures - Sibi in Pakistan 50 degrees Celsius this Thursday, the average is 42. By the way, 50 Celsius - that's 122 degrees Fahrenheit. And this heat wave across Pakistan and India really is about to stay for the next few days. So, again, temperatures well up there in the high 40s getting on towards 50 Celsius. You can see Nurpur, Pakistan in the mid- 40s, the low 40s eventually into New Delhi. And of course, remember these temperatures - that is the temperature for the shade, not for the sun, so it will be even hotter out there when you haven't got any shade.
Now, it has been pretty warm across central and eastern Europe - not so in the last couple of days. We've seen that dramatic temperature drop from Tuesday to Wednesday. Thursday even cooler - look at Minsk. It was 27 on Tuesday, 10 Celsius this Thursday. So, really feeling pretty chilly. We've got a lot of cloud around, quite a few showers. This area in the southeast brings some fairly heavy rain, so we need to keep an eye on that because of course we've had the flooding across the southeast. The rain for the most part where it's heavy is going to be further to the south. The temperatures are still warm across eastern Europe but not as hot as they were. And pretty nice in Moscow for the -
QUEST: Right.
HARRISON: -- next few days, temperatures there in the mid-20s and also some very heavy rain as well in the past 24 hours, but, as I say, to the north of the area that was flooded. So, Richard, that's the word of warning is the southeast - very heavy rain and elsewhere in Europe. Not a bad picture, not as harsh as it was.
QUEST: I've just been looking - as I was saying earlier, Jenny, the program's coming from Qatar on Monday --
HARRISON: Ah.
QUEST: -- and you're in Doha at the IARTA (ph). I've just been looking. It's going to be 112 on Monday.
HARRISON: Yes. I know, I mean, you like it hot, but that, yet it's the little bit hot, isn't it? I mean now it's just getting a bit absurd. Yes.
QUEST: Oh.
(CROSS TALK)
QUEST: -- return before I've even got -
HARRISON: I know, but listen, take your umbrella and use your umbrella to keep you in the shade. You see, that's what sensible people do. I mean, you know, whether or not you do -
QUEST: Thank you. Jenny Harrison - yes, yes, yes, yes. When we come back after the break, you're heard of the metrosexual and the yuppie, if you've been around long enough and old enough. Now it's the yummies who are dressing to impress. Who are the yummies? In a moment.
(COMMERCIAL BREAK)
QUEST: Tonight we talked about gender diversity in the program. Well, it's not only something big companies such as Google are looking to achieve. The world of luxury fashion wear men have long been the minority unless they're wearing constructs (ph) or decent suits for a change is also seeing a change. Remember the metrosexual? Now there's the successor. It's the young urban male - something tells me I don't qualify. HSBC is calling 'him' in a recent report the yummy. The yummies are being seen as the great white hope for the luxury brands, the new big spenders. Samuel Burke who's more yummy than most, reports it's a matter of right concept, wrong word.
(BEGIN VIDEOCLIP)
RAJ MAHAL, COMEDIAN: I think that - I hate that term yummy. I prefer the old name for a young urban professional that drives around in a Porsche - a douche bag.
(AUDIENCE LAUGHTER)
SAMUEL BURKE, BUSINESS CORRESPONDENT: This is one of those rare occasions where comedy and economics collide.
MAHAL: Like this guy right here, this girl doesn't look like a yummy. This guy - I think a yummy looks like a guy that weighs 400 pounds.
BURKE: Raj Mahal is a former Wall Street trader-turned comedian. He hates the term yummy, but if the designer watch fits -
MAHAL: I'd probably put on an SPF15 moisturizer every morning. I go to the gym three or four times a week, and half the time actually work out. I buy nice hair product, I press my shirts, I like to spend money on myself because I think I've earned it.
BRUCE PASK, MEN'S FASHION DIRECTOR, BERDORF GOODMAN: This is our shoe library and we've devoted a section to sneakers and, you know, it's become a huge part of young man's and certainly every man's wardrobe - the designer sneaker. We've got like Givenchy and Valentino.
BURKE: Here, at Bergdorf Goodman, one of New York's most exclusive department stores, they're tailoring their collections to include young urban men. What statement does this shoe make for the yummy?
PASK: I'm confident and I've got my own personal style, and I'm not going to adhere to rules.
BURKE: And the rules of how young men shop are changing.
PASK: I think the one thing I've noticed of late is that a lot of younger men are coming in in groups. They're assessing their purchases kind of collectively, they know what they want, they're clear about it and they go directly to the racks that are appealing to them and they're utterly informed shoppers.
BURKE: Today's yummy isn't only bombarded by fashion blogs, Twitpics and Instagram, he is socially conditioned to share while he shops. Don't I just run the risk of looking arrogant if I post this on my Instagram account?
PASK: I think it's a really approachable piece and I think they would think like, 'Wow that's really cool, where can I go to get it'?
BURKE: The yummy is part of today's economic reality. The growth in men's luxury is starting to show up in the measurement. In fact, men now account for 40 percent of sales in the luxury sector and growth in men's wear just edged out women's wear last year, notching up just under 5 percent.
WENDY LIEBMANN, CEO, WSL STRATEGIC RETAIL: You know what the retail environment is in the U.S. At the moment it's a struggle, it's hard. So you need to find targeted or niche shoppers who've got money to spend who are feeling optimistic and who are willing to spend it. There aren't many of those.
BURKE: Well, what are some tell-tale signs of a yummy walking down the street? How can we spot them?
LIEBMANN: Shoes are often the tell-tale sign because, you know, they might be in just denim, you know, jeans or whatever and a tee-shirt. If they spent a little time on their shoes, you know they're paying attention.
PASK: Why don't you try this with your gray suit? That would change your day.
BURKE: And with every shift in habit, comes a shift in attitudes.
MAHAL: I don't think there's that - any taboo at all. Like the place actually where I get my haircut, they offer free manicures while I'm getting my hair cut and beard.
BURKE: So now it's up to the brands to keep this very tough crowd interested.
Male: Raj Mahal everyone!
(AUDIENCE APPLAUSE)
BURKE: Samuel Burke, CNN New York.
(END VIDEOCLIP)
QUEST: A "Profitable Moment" in a moment.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." It was always going to be difficult to locate the wreckage and the lost remains of MH370. Just the sheer part of the ocean with its four pinger locations meant it was a challenge. But I was one of those that did believe that those pings were from the black box's locater beacons. We now know that not to be the case. Some will say, 'Well, we told you so.' I choose to say this is evidence of just how difficult this search is. That serious senior people - scientists, businesses - looked at this. Acoustic experts looked at it and came up with the wrong solution. And far from the gloat that may be 'they should have known better,' we should be simply saying it's an achievement that they're able to go so far and understand so much. That's the nature of the difficulty they face. And that's "Quest Means Business" for tonight. I'm Richard Quest in London. Whatever you're up to in the hours ahead, (RINGS BELL) I hope it's profitable.
(END QUEST SHOW)
END
