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U.K. Q3 GDP Shrinks 0.4 Percent; Spain's Jobless Number Eases Slightly; U.S. Cuts Exec Pay on Taxpayer-Owned Companies

Aired October 23, 2009 - 14:00:00   ET


MAX FOSTER, CNN INTERNATIONAL ANCHOR: Sinking deeper into recession, Britain unexpectedly limps on for its longest slump in 50 years.

Payback time fury as the White House takes an eye to wage packets.

And taking the wheel, can the new boss at Formula One steer the sport out of trouble.

I'm Max Foster, in for Richard Quest, and this is QUEST MEANS BUSINESS.

Good evening to you. The odd one out, with economic strength returning across much of Western Europe, the recession here in Britain is dragging on. Tonight, we examine the health of the U.K. economy, why it's still in the dumps and underperforming against its European neighbors.

Well, a collective gasp echoed around Britain today. This was the news few expected: GDP shrank by 0.4 percent in the third quarter, its sixth consecutive quarterly decline. An island economy now in more ways than one. As European manufacturing climbs, we'll look at why Britain lags behind its European neighbors. And less pain in Spain, a jobless rate stick (ph), but is still the highest in Europe.

Now Britain's GDP bombshell set the pound into a steep slide. Sterling is currently losing nearly 2 percent against the U.S. dollar. That's after hitting a six-week high on Thursday as investors anticipated the GDP news would be very different. Jim Boulden looks at how economists are reacting to those dashed hopes.


JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): The question seemed to be how much did the British economy grow in the third quarter? Not if the economy grew. Instead, economists were caught off- guard when the preliminary data showed the U.K. economy contracted by 0.4 percent in the third quarter, according to the Office of National Statistics.

But some economists are skeptical, saying the number could be revised upwards.

NICK BATE, BANK OF AMERICA MERRILL LYNCH: The ONS's number do imply a renewed weakening in the economy in August and September, which that is hard to reconcile with other sort of indicators with the general backdrop of improving confidence in the U.K., improvements in financial markets as well.

BOULDEN: Still, the number means the U.K. economy has contracted for six straight quarters, the longest recession the country has faced for decades. Construction and the service sector all down.

CHRIS GILES, ECONOMIES EDITOR, FT: Hotels and restaurants had a very bad third quarter. So did construction and so did the output of the North Sea, the oil and gas industries. And those areas might well have had a bad time, but there is lots of things in the data ultimately that you have to worry about, because they don't seem to accord with what other information we've had about the economy in the third quarter.

BOULDEN: For instance, house prices have started to rise. London's property market is showing strength, some retailers have reported profits this year. And at 7.9 percent, U.K. unemployment is far below that of places like Spain and the United States.

GILES: Unemployment has essentially stopped rising and has been performing -- the unemployment data has been performing much better than we had been expecting. This is what makes this data so odd and so difficult to understand.

BOULDEN: The experts that got the number wrong this time around are still confident Q4 will show growth, allowing the U.K. to join the list of countries out of recession, even if it now will be an even longer and slower recovery in the U.K.

(on camera): Some economists are actually quietly relieved that the GDP figures did not show growth this time around. They're concerned that consumers would see the numbers and go back to unsustainable spending, or the Bank of England and the government would prematurely cut stimulus measures.

Jim Boulden, CNN, London.


FOSTER: Well, it's a question many people were asking at the height of the crisis a year ago, who could have seen this coming? And it seems little has changed. I asked Gilles Moec, senior economist at Deutsche Bank, why this recession continues to outwit the experts.


GILLES MOEC, SENIOR ECONOMIST, DEUTSCHE BANK: All of the soft data that we had were pointing to also some improvement, actually, in GDP, positive reading for GDP. We had fairly strong TMI survey, which is usually quite (INAUDIBLE) to predict GDP. We had fairly strong retail sales, so it was going in the right direction.

So yes, it comes as a surprise. I think that no one was really expecting a negative figure today.

FOSTER: Is this a temporary problem, or does this show that the U.K.'s problems are far more entrenched than any other European country?

MOEC: At this stage, it's a bit hard to know, because there is not much detail, actually, around the roll (ph) figure for Q3. But normally, yes, the U.K. is in a worse situation than a lot of other European countries simply because it's an issue of private debt in the U.K. rather than anything else.

We've had quite a steep increase in household debt over the last 10 years. These kind of things tend to take quite a long time to be absorbed. So actually at the beginning of the recession, most observers were betting on a later recovery for the U.K. compared with the rest of Europe.

FOSTER: And I guess the implication of this is that whilst the politicians had hoped the figures would be better this time 'round, they're not. So therefore they may be looking to the Bank of England to intervene continuously in the markets. They weren't meant to be easing up on that quantitative easing, but they're not going to now, are they?

MOEC: It's true that, for instance, the governor of the Bank of England, Mervyn King, argued in favor of more exceptional action and he was actually outvoted by the NPC recently. But of course, what has just happened is negative figure for Q3 plays in his hand, adds strength to the idea that the U.K. needs some extra -- a combination of some extra action, not just from fiscal policy, but from more unorthodox military policy movement.

FOSTER: OK. And meanwhile, we've got France and Germany doing incredibly well. They seem to be flying off in terms of economic news at the moment. Where are they going right where Britain is going wrong?

MOEC: It's true that there is quite a difference between France and Germany on the one hand and the U.K. and other countries in Europe on the other. And it's actually strange to some extent because France and Germany have to deal with a steep appreciation of their currency, whereas the U.K. is normally benefiting from a depreciation of its currency.

I guess that what is happening in the -- in France in Germany is simply that they didn't have any major structural problem before the recession started, private debt was clearly managed -- manageable in France and Germany, households did not take too much debt. The corporate sector did not take too much debt.

So it -- to some extent it's logical that these countries can really reap the benefits of some kind of virtue before the recession and extricate themselves from recession ahead of the others, actually. And we've had positive growth in France and Germany as early as the second quarter. The latest figures play in favor -- are very strong -- are quite strong GDP growth in the third and possibly in the fourth quarter.

But again, they didn't have any structural issue before it all started. It's a reason for them to be reasonably optimistic for at least the second half of this year and for the beginning of next one.


FOSTER: Gilles Moec, senior economist Deutsche Bank, speaking to me a little earlier on.

Well, let's take a look at where this data puts Britain compared to other leading economies in more detail then. And on Thursday, China announced 8.9 percent growth in the third quarter. Beijing has used a $585 billion stimulus plan and more than $1 trillion in bank lending this year to drive the nation's recovery.

In the U.S., GDP decreased 0.7 percent for the second quarter, and that's less than anticipated. The U.S. unemployment rate rose to 9.8 percent last month.

Germany surprised many analysts when its GDP grew by a third of percent in the second quarter. Another surprise is September jobless rate fell to 8.2 percent and German government officials are expected to forecast better than 1 percent growth for 2010.

Japan's economy expanded at a 3.7 percent pace whilst the jobless rate fell to 5.5 percent in the second quarter. The Bank of Japan reported just last week that the country's economy has started to pick up.

On Wall Street, U.S. stocks, meanwhile, are on track to end the week on a down note. Taking a look at where the Dow is trading right now, we've got a sell-off on our hands. The Dow is currently down at well over 1 percent, as you can see, under the 10,000 mark -- point mark.

(INAUDIBLE) earnings from some corporate of America -- some of corporate America's top names, including Microsoft and, are helping those stocks move a bit higher though. They're not helping the market move overall, as you can see, a drop in oil prices is hurting shares of the major oil companies, one factor there.

Investors here in London are shrugging off the news that the U.S. -- or the U.K. is still in recession is likely to mean interest rates stay low for some time to come. Banking and mining shares helped lift the FTSE by 0.7 of 1 percent, but all of the region's other major indices finished Friday's session in the red, dragged down by drug-makers and a slide in oil stocks.

Better news over in Asia though. Stock markets there ended the week on a high. Korean automakers Kia and Hyundai led the gains on the Kospi, whilst banks and insurers jumped higher in Hong Kong.

Now let's get you up to date with the news headlines. Fionnuala joins us now from the newsroom here in London

Hi, Fionnuala.


We begin with new developments over Iran's nuclear ambitions. The International Atomic Energy Agency now says Iran wants to respond next week to a U.N.-brokered draft agreement to ease concerns over its nuclear activities. The deadline was accepted for today, but the draft did call for low enriched uranium, produced in Iran to be sent abroad for enrichment and then returned. The U.S., Russia, and France have signed on to the proposal.

Militants stage multiple attacks Pakistan today. In the first one a suicide bomber rode up to a checkpoint outside a key air force facility northwest of Islamabad, seven people were killed. Hours later a car bomb exploded outside a banquet hall in Peshawar, wounding 15. Also Friday, a bus drove over a land mine in the Mohmand Tribal Region, killing at last 17 people.

The FBI is now helping with the investigation into a massive fire near the Puerto Rican capital. An agent says authorities are examining suspicious graffiti found in a San Juan tunnel that includes the words "boom," "fire," and "RIP." Firefighters say it will take a few days to control the inferno. It was sparked by an explosion at a fuel storage complex.

U.S. aviation authorities are investigating what caused a Northwest Airlines plane to fly past its intended airport by more than 240 kilometers. The pilots have been suspended while investigators examine cockpit recordings. The pilots say they were distracted by a heated discussion, but authorities say they're looking into all possibilities, including whether the pilot fell asleep. The flight eventually reached its destination, the Minneapolis-St. Paul International Airport.

Well, that story is getting loads of hits online at, and you can find out more on just what happened. Tune in to "WORLD ONE" at 8:30 p.m. London time, 9:30 p.m. in Central Europe. In the meantime, Max, back to you.

FOSTER: Fionnuala, thank you very much.

Now things aren't getting any better for job-seekers in Spain. New quarterly numbers show the country still has by far the worst jobless rate in Europe. Still predictions of another steep rise in unemployment didn't come true. Al Goodman brings us Friday's report card.


AL GOODMAN, CNN MADRID BUREAU CHIEF: Finally some relief for Spain's unemployment crisis. The number of jobless declined slightly by 14,000 in the third quarter, the government says. That's the first time in two years there has been a quarterly decline.

But the unemployment rate is still 17.9 percent, the highest in the European Union, with 4.1 million people out of work here. The line was a bit shorter Friday at this unemployment office just outside of Madrid. But this Romanian immigrant is not optimistic. He lost a construction job last year. Now he has been laid off from his latest job at a department store.

BENJAMIN BRICIU, UNEMPLOYED CONSTRUCTION WORKER (through translator): I'm worried, I have a wife and two kids to support.

GOODMAN: Analysts say two sectors created jobs in the third quarter, Spain's huge summer tourism industry, which nonetheless had a bad year, and the government's public works plan that provided temporary jobs, such as fixing streets and sidewalks, to 400,000 people nationwide.

But construction, once a mainstay of the economy, has not recovered. And there are hundreds of thousands of new homes either unsold or not even finished.

More than a million households in Spain now have all of their adults out of a job. And the International Monetary Fund predicts Spain will be one of the last major economies to get out of the recession.

Al Goodman, CNN, Madrid.


FOSTER: We're wrapping up the Q-25 with inflation QMB-style. Microsoft and American Express will get our final two balloons. Find out if they're red or if they're green.

And major deflation for some of America's top businessmen and -women, as the White House demands their pay be slashed. We'll tell you why some say cutting back is bad for business.


FOSTER: It's the last day of the Q-25 for this earnings season. The Q-25 is our attempt to help you make sense of earnings season. We're assigning green or red balloons to 25 leading companies. If QMB teams likes an earnings report, we give it a green balloon, weak reports get a red balloon.

As you can see, red and green are running neck-and-neck. Reds have a razor-thin edge. Today we assign our last two balloons: Microsoft and American Express. Let's bring in Susan Lisovicz now in New York.

Susan, there is a great responsibility on your shoulders right now, because there are 11 greens, and there are 12 reds.


FOSTER: You could define the outcome here. I think you will. In this bucket, we have two colored balloons. Tell us, first of all, about American Express.

SUSAN LISOVICZ, CNN FINANCIAL CORRESPONDENT: As long as it's not a silver balloon, we are tired of that in the U.S. That floating silver balloon out in the western United States.

I'm going to tell you about American Express because it's an important company -- financial company, as to the spending of corporate America as well as affluent customer. American Express saw, as so many companies have, declines on both revenue and in its bottom line, profit. But it was better than expected in both areas.

Furthermore, CEO Ken Chenault says that billings have stabilized. And this is really what you want to hear now, because we have a very high unemployment picture in the United States, as you know, Max, a 26-year high. And executives are saying that they are seeing improvements in credit quality of card members, which may be sort of financial jargon for people just simply paying their bills.

American Express shares are off today by about 5 percent. It's close to its 52-week high. And I will give American Express a green balloon.

FOSTER: Susan, you have. It is neck-and-neck, 12 of each. So the decider is Microsoft. And this is going to decide the overall result for the whole earnings season. So this is it, go for it.

LISOVICZ: This is it. And this is the 800-pound gorilla in operating systems throughout the world, as you know, Max. And I think that Microsoft may be the beneficiary of just great timing. As you know, on Thursday Microsoft released Windows 7. There have been a lot of folks out there who have been trying it out for the past year.

So what we saw with the third quarter, the last quarter with Microsoft, also a decline in profit, an 18 percent drop in profit. Still better than expected. I mean, it's not as if these companies aren't making money. It's making a whole lot of money, $3.5 million net income for Microsoft. Third consecutive quarter of falling revenue.

But again, better than expected, and great optimism about Windows 7 over the next year for Microsoft's bottom line, and for that matter, for the PC industry. It will be the beneficiary of that. So in fact that's an easy one. Microsoft shares are up 5 percent at a 52-week high. It gets a green balloon.

FOSTER: You've done it. Susan, you tipped the balance. It's very close, isn't it? There is one more -- this is the final result of the Q-25 for this earnings season, and it's -- you know, it's almost neck-and-neck, but actually the balance is tipped in favor of the greens.

What do you make of that? Is that the general mood or is that just what we make of it?

LISOVICZ: Well, you know, I mean, if you looked at what the market is doing today, you would not take it as general optimism. But we've had so many rallies going into the earnings season and -- well, seven months worth basically. And I think that, you know, the general picture is, unless there is some sort of shock to the global financial system, things will get better, albeit slowly.

American Express repaid its TARP money in June. It seems that the financial industry is slowly but surely stabilizing. Those companies are actually making money. In the tech arena, Microsoft's introduction of Windows 7 is something that a lot of folks have been waiting for a long time, not only consumers, but corporate customers as well.

I saw a statistic the other day, Max, that said -- by IDC, that said there should be an additional $41 billion between now and the end of next year, just in products, services, that will revolve. New products and services that will revolve around Windows 7.

So that is a good thing for the tech industry, and for an economy that really could use a boost right now.

FOSTER: Very well, Susan Lisovicz, thank you so much for that. The greens have it. That's the final decisive answer. Thank you so much, indeed.

More optimism coming your way, the latest reading on the U.S. housing market looks very good on the surface until one reads into the fine print though. Existing home sales spiked by almost 10 percent in September compared to the same period last year. And sales of existing homes are now at their highest level in two years.

But even as demand strengthens, home prices keep falling year-over- year. Economists also point out that first-time home-buyers helped lead the advance. They're taking advantage of a tax credit that expires later this month. The fear is that sales may drop once that tax break ends.

Also in the U.S., debate is raging over major salary caps soon to be imposed at troubled firms. Many say pay cuts are long overdue, others say they will hurt companies trying to get back on their feet. Well, Poppy Harlow is live in New York.

And, Poppy, this was bound to be a divisive issue. Bring us up to date on it, though.

POPPY HARLOW, CNNMONEY.COM: Yes. Well, you know, this is something, Max, that the Obama administration has been talking about for a year now, since really the collapse of Lehman Brothers, the unraveling of Wall Street. But finally putting those words into actions.

Late on Thursday coming out with those restrictions on compensation for seven firms, including major banks and major automakers that have $350 million in total in terms of U.S. bailout money. Of course, as we talked about, this is applying to 25 employees at the top of each of those firms.

But when you look at this, the question really comes up, should the government -- should the U.S. government, in a capitalist society, get involved and regulate pay at American businesses? And that's what CNN's Jessica Yellin asked the pay czar, Kenneth Feinberg, in an interview this week.

And here's how he answered that question.


KENNETH FEINBERG, U.S. SPECIAL MASTER FOR COMPENSATION: It's not a good idea for the United States government to start micromanaging compensation practices at American businesses. But that's not this case. These are, under the statutes, seven specific companies that are in effect owned by the taxpayers of the United States.

And that's a much different situation.


HARLOW: It's a very different situation, Max. It's an unprecedented situation for the United States. They haven't been in a predicament like this before. Essentially what he's saying, the businesses would not be standing if it weren't for taxpayer money propping them up.

That said, here is what these seven companies face. Take a look here at what we're going to show you on the screen, because it's dramatic pay cuts when you look at overall compensation, when you look at AIG, the pay there down more than 57 percent. For General Motors, about 25 percent lower for total compensation. At Bank of America, more than 65 percent in terms of pay cuts for those top execs. And down about 70 percent at struggling bank Citigroup.

Those are going to take effect -- all of this will go into effect starting in November. So finally putting those words into action. Interesting reaction from both Wall Street and Main Street on this one -- Max.

FOSTER: But, Poppy, these things are never clear-cut, are they? Especially when politicians get involved in these things. I presume there are some exceptions to the rules.

HARLOW: Now there are certainly exceptions to this one. There are, I mean, when this document came out from Treasury on Thursday, on the first page there, there was a line that said there would be exceptions where necessary to retain top talent and try to protect taxpayer interests.

The thinking here is if you keep people that know the business fundamentally, that the firm believes is what can rebuild the firm so it can become profitable again, whether you're talking about the automakers or the banks, then they can repay the TARP money. That's the argument. When you look at AIG, the embattled insurer, what the pay czar said there was it was his hardest case. What to do with pay at AIG?

And actually, what they've decided to do is allow three top AIG executives to keep their bonuses. One of them being the CEO, who is going to get paid more than $10 million. It's a question a lot of Americans have as to why. And we asked the pay czar, here is what he said on the question of AIG compensation.


FEINBERG: What these three AIG officials are entitled to is a prior valid contract entered into long before the law was passed or I arrived. And the fact of the matter is that I met with the AIG officials, and there is clearly an understanding that these contracts are valid.

However, since those contracts are valid, I did take those dollars into account in setting compensation for 2009 and going forward into 2010.


HARLOW: And I think the long-term question here is, what will this mean for the pay structure going forward on Wall Street and for corporate America? You can see more of that interview. Some interesting responses from the pay czar, it's right there on -- Max.

FOSTER: Good stuff. We'll have a look. Poppy, thank you very much, indeed.

Now after recent scandal, financial crisis, and a biter fought election campaign, a new man takes the wheel at Formula One. But will he get motorsport back on track? We'll look at how the new guy stacks up.


FOSTER: (INAUDIBLE) case of old wine in a new bottle. South Korea's young drinkers are developing a fresh appetite for a 700-year-old brew. That's part of our "Eye on South Korea" series. Kyung Lah finds out why this tipple has become the toast of the town.


KYUNG LAH, CNN INTERNATIONAL CORRESPONDENT (voice-over): Nothing has changed at this factory in three generations. The way they steam the grain, or how Ban-kyo Yoon (ph) helps the yeast rise, the same way his father and his father before him made Korea's oldest liquor, called makgeolli .

"If you use a modern machine," Ban says, "this is easy." But he refuses, moving every box of yeast every two hours by hand, feeling the temperatures so it's exact.

"This temperature, this is it," he says. "It's the only way to make makgeolli delicious." Then in these giant clay pots, the makgeolli brews, tasted at every stage.

Japanese imperialists once restricted domestic drinks like makgeolli. It was kept alive by brewers secretly making the milky liquor, and the old ways survived.

(on camera): Makgeolli is known as the farmer's drink. Poor people, because it's made of rice, used to drink it to fill their stomachs.

But in 2009, what is old is hip again, makgeolli got a makeover in Korea's trendiest bars.

(voice-over): Nothing old about the drink here at this makgeolli bar in a chic Seoul neighborhood.

"It's trendy," says this makgeolli fan. This bar serves it up with tapas, stirred up by chief chef Kim Hak Soo.

"Before, Koreans could only drink makgeolli at dirty markets or shabby restaurants," says Kim. "I believe the drink deserves better." So Kim updates the drink, cuts up melon, and whips up makgeolli cocktails, wildly popular to a new generation of Koreans, reintroducing history and rewriting the future of something nearly lost in Korea's past.

Kyung Lah, CNN, Seoul.


FOSTER: On-air, online, we've even got more stories for you on our "Eye on South Korea" series and our coverage. Go to our Web site. Go to and follow the links there.

Now mixed message from the stock markets at the end of a very turbulent week. We'll be getting to the bottom of those.

Plus, a message of confidence from the new man at Formula One, but could be a rocky road ahead for him.


FOSTER: Welcome back.

I'm Max Foster in London and this is QUEST MEANS BUSINESS here on CNN.

Now, motor sport is hoping today marks the beginning of a change in fortunes. Controversial Formula 1 President Max Mosley is out and ex- Ferrari boss, Jean Todt, takes the wheel as one of the -- one of the -- as one of the world's most lucrative sports battles a very deep downturn.

Jim Bittermann looks at a tough road ahead for the new man on the track.



UNIDENTIFIED MALE: The new president wasted no time in promising to heal the rifts in the International Automobile Federation after a bitter election campaign that saw him pitted against one of his rival rally drivers from the years past, Ari Vatanen. Todt, a former team leader at Ferrari, promised that he would build a similarly strong team to lead the motor racing organization, which takes in Formula 1 racing, but also includes rally and touring park competitions, as well as other aspects of four wheel motor sport.

But especially on the Formula 1 side, there have been problems and scandals of late, including last year's race in Singapore in which driver Nelson Piquet, Jr. admitted to deliberately crashing his car in order to put his teammate into the winner's circle.

I asked Todt how he planned to clean up the image of Formula 1 and the FIA.


JEAN TODT, ELECTED FIA PRESIDENT: You know, probably the success in my career has always been to find the right people at the right place and to build a very strong team. So that's what I want to do, build a very strong team with people who know what they are talking about. And then, if you have some controversy, I want to have one independent disciplinary panel. And then, once the program will have been discussed through this disciplinary panel, the sport world council members, the president of the FIA will be able already to have some input and be able to make the final decision.


BITTERMANN (voice-over): Todt's rival for the job, Vatanen, expressed doubt after the election that Todt would be able to change things, especially since he's vowed to keep in place the leadership team of his controversial predecessor, Max Mosley.

But Todt has won racing events himself, including the 24 hour Le Mans in 1992 and '93, says he can put the racing organization back on track.

I asked him about one of the big challenges, the impact of the world economic crisis, which has forced several teams to drop out of the competition because of alack of money.


TODT: I like harmony. And if we -- we can get another element from the parting (INAUDIBLE), I'm very happy with it. So at the moment, I understand that (INAUDIBLE) Commission should have different discussions between FIA, commissioner right holders, teams who are now under the roof of the FOTA (ph). Everybody is quite happy about this coming over there. Already a big step has been done, you know, which is very -- which is very healthy. But the level of cost which was in Formula 1 until very recently was, for me, not acceptable in the world where we are living now.


BITTERMANN: Todt says he's happy that the mass -- the election campaign is over and he will take the weekend off before starting to work on Monday to get to know his new organization and the way it works.

Jim Bittermann, CNN, Paris.


FOSTER: Well, let's get you a recap of all the action from the stock markets this Friday then.

Let's take a look at the big board, first of all -- sinking, as you can see. Well below the 10000 mark. Microsoft doing pretty well today after shareholders got a boost of Wall Street estimates there, but industrial companies and also the energy sector doing pretty badly. Everything else pretty much sinking over on Wall Street today.

Here in Europe, the FTSE 100 rose by almost .7 of a percent. U.K. investors shrugged off news of the country's being still in recession.

But the DAX in Frankfurt and the Paris CAC 40 ended a turbulent week in the minus column.

Over in Asia, green arrows across-the-board. The Hang Seng added 1.7 percent in Hong Kong, whilst automakers lifted the KOSDAQ in Seoul.

We've been seeing a mixed picture across stock markets in Latin America right now. The major indices in both Brazil and Mexico are approaching the weekend in negative territory. But the IPSA in Chile is soaring, up more than 5 percent.

While some countries struggle through the economic slowdown, Brazil is moving ahead. It was one of the first countries to emerge from recession. People are investing again, many online.

As Shasta Darlington now explains, that give young professionals time to make money whilst enjoying life.


SHASTA DARLINGTON, CNN CORRESPONDENT (voice-over): Paolo Porthino and his friends share a passion for music and money.


DARLINGTON: Every week, they get together for a jam session and more sober talk about the Brazilian stock market.

PAOLO PORTHINO, BRAZIL NATIONAL INSTITUTE OF INVESTORS: You can make a -- a huge amount of money in 15, 20 years by investing a small amount of money each month.

DARLINGTON: Porthino heads the National Institute of Investors, doling out advice for individuals trading on the Internet.

Pedro Wood, a dentist, listens.

PEDRO WOOD, INVESTOR: It is for my retirement. I -- I think about 30 years.

DARLINGTON: For Young, a musician, it's all about security.

"It allows me to live, not like a millionaire," he says, "but without worrying that I have to get up and kill myself working like a dog."

Like the rest of the world, markets here were hit hard by the global financial crisis. But Brazil was one of the first countries to pull out of recession. With corporate earnings on the rise again, so are stocks -- up almost 80 percent this year. Those results, combined with falling interest rates, have lured record numbers to Brazilian stocks. According to the BOVESPA Stock Exchange, the number of individual investors has more than doubled since 2006, to half a million.

(on camera): Most of the online traders we talked to don't expect to become overnight millionaires, but it does give them the financial security to choose a more relaxed lifestyle here in Rio. For years, the only option for young professionals was moving to Brazil's chaotic financial hub, Sao Paolo.

(voice-over): At the investment firm, Future Generation, in downtown Rio, a good 80 percent of clients are middle or working class. The minimum investment is $50.

NUNO CRUZ, INVESTMENT ADVISOR: (through translator): Ten years ago, this kind of investor wasn't even contemplated by the banks. It was too much work, too much cost.

DARLINGTON: And there's room for growth. Only a quarter of 1 percent of Brazil's population of almost 200 million invest in stocks.


DARLINGTON: Music to the ears of those who got in early and are staying for the long haul.


DARLINGTON: Shasta Darlington, CNN, Rio de Janeiro.


FOSTER: Pretty good weather there.

What's it like for the rest of the world?

We'll find out next.


FOSTER: Well, it's already cold and wet and dark outside here in London. And now Guillermo is going to tell us we've got a storm on the way.

GUILLERMO ARDUINO, CNN METEOROLOGIST: Unlike in Rio de Janeiro. I want to -- or Sao Paolo. I want to be Sasha...

FOSTER: Beautiful, wasn't it?

ARDUINO: ...Shasta Darlington. Come on. I want to...


ARDUINO: I want to go over there. And now -- and I always get stuck here in the middle of nowhere.

OK. Let me show you what's going on. You are in better shape than Italy and the Balkan Peninsula, so we're going to see, this weekend, bad storms there. We'll see thunder. We'll see flooding, probably; wind storms and some tornadoes. So I'm talking about this section, this coast of Italy, the Adriatic Coast and also Croatia, Bosnia-Herzegovina down into Albania and Greece.

So that gradually is going to move into Turkey, as well, later on. So we will see 100 millimeters or so of precipitation.

They are in bad shape. We that, at the end of the forecast period, things are going to start getting a little bit better.

And Turkey, get ready, because you will get some fair share of rain over there.

Cyprus appears to be OK for now, but they're going to see an increase in clouds.

Now, let's see where the severe storms are going to be. Tonight into tomorrow morning, especially -- the darker the color, the more significant the severe weather is going to be. So you see it over there, but it gets all the way up into Lombardi and Piamonte, as well.

Sorry, my -- my earpiece is not working very well.

So, now on the other side, we see here the low pressure center is rising. And originally I thought, well, it's an indication that we're going to see cold conditions moving into England. No, I don't think so. It's not going to be that bad. The low temperature of the day is going to be around 10 -- 10 degrees, 11 degrees, 9 degrees or so. Ireland, also, the same thing. And on Sunday, we'll see an improvement in London.

So, Max, I don't want to hear any complaints at all, because among all the cities of Europe, you're not in bad shape for Sunday and Monday. So conditions are not that bad.

Saturday is going to be rainy, you see, and especially in the north.

Now, let's see some other problems that we'll be dealing with, some windy conditions in London, in Heathrow; also, Amsterdam and Dublin, we'll see some delays, probably, because of weather. And Rome, of course, with that bad weather, we already see the bad weather over there. And Vienna with some rainy conditions.

So the winds will prevail in the north. Here you have the low that actually goes across Scotland in the south, a little bit windy, still.

France in better shape. That's true, too -- 19 the high for Paris for tomorrow; 23 in Madrid; 17 in London.

So you see, Max, not bad at all.

Now, when it comes to severe weather, the Philippines comes to -- comes to your mind, because of all the drama that we saw with the cyclones, now, Taipei is getting the winds, because the system is steering away from the Philippines thanks to this high pressure center. And it's going to bring the rain, especially into Ishiga, Kajimi (ph) and Okinawa -- Max, that's the forecast.

More coming up.

FOSTER: Guillermo, thank you so much for that.

ARDUINO: Thank you.

FOSTER: It's good news for some people in some parts of the world.

And that is it for QUEST MEANS BUSINESS.

I'm Max Foster in London.


Stay tuned for that.