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QUEST MEANS BUSINESS
Dubai Debt Crisis
Aired November 30, 2009 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ADRIAN FINIGHAN, HOST: Investors run for the exits as the government gives Dubai World the cold shoulder.
An economic revival -- India powers ahead.
And banking on big business -- why South Africa has more than the World Cup on its mind.
Hello, I'm Adrian Finighan in for Richard Quest.
This is QUEST MEANS BUSINESS.
A dark cloud continues to engulf Dubai World this Monday. And investors there are taking note. They're heading to the exits on fears that Dubai World will be left out in the cold.
Tonight on QUEST MEANS BUSINESS, we ask what next for the state- controlled company?
Well, a Dubai government official says lenders should be prepared to pick up the tab for some of Dubai World's debt. The head of Dubai's department of finance says creditors ought to take some of the responsibility for making the loans in the first place.
(BEGIN VIDEO CLIP, COURTESY DUBAI TV)
ABDULRAHMAN AL SALEH, DIRECTOR GENERAL, DUBAI DEPARTMENT OF FINANCE: The government is the shareholder of Dubai World but the company was set up that it will -- it was on a commercial basis and not guaranteed by the government, considering the diversity of the businesses it was doing, the risk involved, so it was decided from the inception at the time of the establishment -- not now, at the time of establishing -- that it's a commercial entity not guaranteed by the government.
So lenders and contractors, they have been dealing with Dubai World on that basis, that they consider the liability of the business, the projects involved and they provide finance on that basis, not on the basis of government guarantee.
(END VIDEO TAPE)
FINIGHAN: And, not surprisingly, those comments have done nothing to soothe tattered nerves on stock markets around the world. Take a look at this. In the region itself, there was an avalanche in the markets. It was their first chance to react to Wednesday's news on Dubai.
Dubai DFM Index, it was down 7.3 percent. That's its biggest fall in a year. The Abu Dhabi ADX Index was down 8.3 percent. That's its worst ever drop. Egypt's market was down 7.8 percent. Many other markets -- Saudi Arabia, Qatar, Kuwait, Oman and Bahrain, thank goodness they're closed for Eid.
Stocks in Dubai World have plunged, down 15 percent. That's the maximum drop allowed on the stock market. The National Bank of Abu Dhabi down 9.7 percent. It's got $335 million worth of exposure to -- to Dubai World Group.
AMR Properties, the UAE's biggest developer, it was down 9.9 percent.
And European markets all slid today more than 1 percent. Surprisingly, they managed to shrug off those falls in the Middle East. It was worries about oil stocks, and in particular, banks and their exposure to Dubai World that broke down stocks in Europe.
Now, CNN's Jim Boulden is monitoring the sandstorm currently engulfing the world's markets. He reports now on what went wrong with Dubai, Inc.
JIM BOULDEN, CNN CORRESPONDENT (voice-over): On the streets of Dubai Monday morning, things may have appeared routine, but far from it on the region's stock markets. Open for the first time since a request for a moratorium on some of the commercial debt of Dubai World.
(on camera): The view here over the weekend was that last week's falls on world stock markets was an over reaction. But that didn't stop steep falls happening here on Monday, when Dubai's main index fell more than 7 percent and Abu Dhabi's was down more than 8 percent.
(voice-over): And then this reminder to world markets from the Dubai government about the debt.
AL SALEH: Considering the diversity of the business that they're building, the risk involved. So it was decided from the inception at the time of establishment -- not now, at the time of establishing -- that it's a commercial entity not guaranteed by the government. So lenders and contractors, they have been dealing with Dubai World on that basis.
BOULDEN: Dubai doesn't have much oil. That's why it diversified into property and tourism. The city-state, with its palm-shaped islands, also boasts the world's tallest building, the world's largest mall, even one of the world's largest indoor ski slopes.
Whether it's Dubai World or DP World or Dubai Ports or its troubled property development arm, known as Nakheel, financiers just call it Dubai Inc., a series of industries and international investments all tied to Dubai's ruling family, much of it built on loans from dozens of international banks.
But while oil prices rose, property investments in Dubai, like many parts of the world, fell hard during the economic slump.
RYAN MAHONEY, MANAGING DIRECTOR, BETTER HOMES: It was launched at the -- at the very top of the market.
BOULDEN: Ryan Mahoney says this debt shock has come just as Dubai's real estate market was stabilizing.
MAHONEY: Setting aside the -- the real economic impacts of all of this, including the -- the damage to sort of confidence is -- has already been done. And hopefully -- you know, what -- what we hope is that there will be some, you know, clear action in terms of what -- what will be done to -- to restructure Dubai World's debt.
BOULDEN: Nakheel means palms in Arabic. But far from providing financial shade for Dubai, the debt of the property arm has left the entire region exposed. So, analysts say, the Gulf is now facing its own version of too big to fail.
(END VIDEO TAPE)
FINIGHAN: And Jim Boulden joins us now live from Abu Dhabi -- Jim, what are we to make of those comments from the -- from the government official in -- in Dubai, saying that investors should be prepared to pick up some of the tab here, as far as Dubai World is concerned?
BOULDEN: You know, the analysts are mixed on this, Adrian. Some are saying they're pretty surprised by this announcement, if you will. But others are saying this is an obvious statement because they have been saying all along that Dubai World is a commercial arm. And people were investing in this and loans were being given by lenders, especially banks in the U.K., to this commercial arm. And it went out and bought properties. Not only did it develop here in the Emirates, but it also bought properties around the world. It owns part of Cirque du Soleil. It owns half of the MGM Mirage in Las Vegas. It has the QE2 ocean liner.
And so the thing is that there's a lot of these assets out there that they invested in. Some people are saying they invested in too much, of course. And, of course, then the markets went against them.
The question now, Adrian, is will they have to sell any of these assets?
And that's what a lot of people were talking about here today.
FINIGHAN: Yes, which of the assets would they sell, Jim?
And will there be a market for them -- other buyers out there, given the current economic situation globally?
BOULDEN: Well, of course, it's always about price, isn't it?
I'm sure at the right price, there would definitely be buyers out there. But if they sell these things at a distress sale, as you -- as it were, like many of their properties here in the Emirates, are -- obviously, they've fallen 40, 50, 60 percent. Some people are trying to sell them if they can. There may not be many buyers. So it really does depend on whether they can get a loan from the -- from the Abu Dhabi government or from the central bank, if they have to restructure the debt, or, more specifically, could DP World itself -- could Dubai World itself be sliced out and could that go into default?
That's an interesting question people are asking. I'm not sure it could happen that way.
But from the comments we heard from the government today making it very clear investors invested in this arm and that arm is specifically the one that's in trouble.
FINIGHAN: All right, Jim.
Many thanks, indeed.
CNN's Jim Boulden reporting live there from Abu Dhabi.
Let's get an expert opinion now from John Defterios, host of CNN's "MARKETPLACE MIDDLE EAST," who's with me in the studio -- John, I'll ask you the same question I -- I put to Jim a second ago.
That -- that comment we had from the Dubai government official about investors picking up the tab, I mean it wasn't very helpful, was it, as far as market reaction was concerned?
JOHN DEFTERIOS, HOST, "MARKETPLACE MIDDLE EAST": Well, I like to call it -- I'm just working on a blog on it -- in fact, call it "mine the gap." You had the UAE central bank over the weekend trying to cool or calm the markets by saying we'll provide the liquidity to depositors and to both foreign and domestic banks there in case that liquidity was needed -- those to avoid this run on depositors trying to get their money out of the banks for a lack of confidence.
That was very successful. And then 24 hours later, you hear from the department of finance of Dubai basically saying this is a commercial entity and any lender that puts money forward shouldn't expect it to be bailed out.
But that was not the signal being sent over the weekend. And that's why -- I mean I spike to one London banker today who's going this is not a way to rebuild confidence. This is not positive. We were not expecting it.
FINIGHAN: So locally, what -- what's the view of -- of Dubai World's debt?
DEFTERIOS: Oh, this is very interesting. I saw your stock picks for the -- for the Dubai markets today. And you saw the downturn of Dubai World. But there was another one you listed there, which is Emaar, which was down nearly 10 percent. There's been quite a healthy debate there within Dubai, when we talk about $80 billion of debt, Adrian, for Dubai overall, that nearly $60 billion of that is with Dubai World.
And I think some of the other members of the business community are starting to get concerned -- why is it that Dubai World was allowed to run up this huge debt and not restructure its books?
And, in fact, over the last month-and-a-half, we've been speaking to some of the major players on "MARKETPLACE MIDDLE EAST." And one of those is the chairmen of Emaar, Mohamed Alabbar. He's very well known, a very tight-knit circle within Dubai.
And he was pointing out himself the level of Dubai's government debt vis-a-vis Dubai World's debt and why Dubai World needs to deal with that.
Let's take an excerpt of that interview.
(BEGIN VIDEO CLIP)
MOHAMED ALABBAR, CHAIRMAN, EMAAR: If you were to look at the government of Dubai's debt history, $9 billion only. And that's only for the utilities and there is a good return on the utilities locally. The other debt, people transpire it (ph) as a government debt, but it's not a government debt. It's not there for any government purposes. Debt to companies in business that are owned by the government.
DEFTERIOS: But most of that debt is with Dubai World, as you know, and Nakheel. That seems to be disproportionate.
Does a major cleaning up need to take place?
ALABBAR: I think restructuring in the oil businesses is a must. We cannot do business the way we used to do. So I -- I have restructured my business and I'm sure the DP World are restructuring these -- their business the way more serious businesses are restructuring its business. So the answer is yes.
(END VIDEO CLIP)
DEFTERIOS: So that was one of the major business leaders in Dubai himself saying that Dubai World needed to deal with that debt issue. That was back in October, October 7th. So they were basically pointing in this direction, that something needed to be done to clean up the assets of Dubai World.
FINIGHAN: All right, Dubai World is -- is going to need assistance in some shape or form. The Dubai government has said not from us.
Is there going to be some sort of federal government role, do you think?
DEFTERIOS: Well, this is the big test for the UAE as it evolves over time. It has the Federal National Council, which is similar to the parliament here. It doesn't have real powers just yet. I spoke to people who are in Abu Dhabi, or tried to. And the answer was basically it's not our issue, you have to deal with the federal government.
The UAE's central bank stepped in.
But what's going to be the entity going forward?
It is going to be a stability board that represents the UAE to deal with this sort of challenge going forward?
That's not answered just yet, Adrian. When does the crown prince, perhaps, of Abu Dhabi sit down with -- with the leader of -- of Dubai here and say we need to work this out with the federal statement we're going to put forward.
Who's going to be the lead authority?
It is going to be the central bank or another entity?
FINIGHAN: So -- so how do they get out of this mess?
As we were -- were discussing with Jim, they've got some pretty big assets which they could sell off.
DEFTERIOS: OK, I know this is a very delicate subject, but let's put it out. Its corporate assets. Dubai has been a very key investor in the world in the last 10 years. Some of those corporate assets include the London Stock Exchange; EADS, the big aerospace group, of course; Standard Charter Bank it has a stake in. It has a stake in some other banks in the U.K. and in Europe, like Deutsche Bank. It has a stake in Sony, as well.
And then Jim talked about some of the leisure assets that they have right now, too. Let's go through a few of those. You have Kerzner International, we have been is the owner of the Atlantis, the QE2 Jim talked about, Madame Tussauds through Merlin Entertainment, Cirque du Soleil, Barney's of New York, MGM Mirage.
OK, so these are phenomenal assets. Some of those are liquid equities. So if they needed to raise the money, they could do so. And, in fact, if you talk to bankers outside of Dubai or Abu Dhabi, they say well why is it they're not going to -- to get some of the assets off the books so they can raise the money to service the debt?
And that's a question that's being raised. It's going to be a question that -- it's going to be raised going forward, as well, no doubt about it.
FINIGHAN: John, many thanks.
You'll be with us throughout the week as this story develops. And no doubt wrapping it all on "MARKETPLACE MIDDLE EAST," which you can see on Friday at 19:45 hours GMT right here on CNN.
Well, we showed you what was happening in Europe today. All the markets down about 1 percent.
Let's see what's happening on Wall Street, as everybody gets back to work after the -- the Thanksgiving holiday. And, as you can see, the Dow Jones now is down about 12 points.
We'll be going live to New York to get more on what's going on on Wall Street a little later in the show.
And now, as if all of that wasn't enough to make your head spin, let's get you up to date with what else is making news around the world.
Fionnuala Sweeney joins us live in the London newsroom.
FIONNUALA SWEENEY, CNN CORRESPONDENT: Adrian, the British Foreign Office says Iran has detained the British crew of a racing yacht traveling from Bahrain to Dubai. The five were detained on November 25th and are believed to be safe and unharmed. The Foreign Office says their boat may have strayed inadvertently into Iranian waters. The British ambassador to Iran is working to resolve the situation.
An 89-year-old retired auto worker is on trial in Germany, accused of helping to send thousands of Jews to their deaths during World War II. A lawyer for John Demjanjuk says his client was a prisoner of war and he claims the Nazis forced his client to exterminate Jews at the Sobibor death camp.
Iran's president has deferred a news conference until Tuesday, one day after announcing plans to build 10 new uranium enrichment facilities. The U.S. ambassador to the U.N. says the move is unacceptable and will further isolate Iran from the world. Analysts say the new plants could take years to construct and stock with nuclear centrifuges.
Well, the Somali pirates have hijacked another oil tanker. The Greek- owned ship heading from Saudi Arabia to the U.S. was seized off East Africa. Twenty-eight crew were on board. This year, pirates have captured more than 50 ships near Somalia and they're currently holding 12. They were proven to be worth millions in ransom.
The White House says the U.S. president is in the process of reviewing his new strategy for Afghanistan with several world leaders. Barack Obama has already looped in top U.S. diplomatic and military officials. Tomorrow, he will inform the rest of the world what's in store. The top commander in Afghanistan has called for 40,000 extra troops.
Those are the headlines.
I'll have more on all those stories on "WORLD ONE" at 8:30 p.m. London time.
In the meantime, Adrian, back to you in the studio.
FINIGHAN: Fionnuala, many thanks.
Still ahead here on QUEST MEANS BUSINESS, India's economic growth is putting Western economies in the shade. India is shining. We'll tell you what's been the boom, when we come back.
FINIGHAN: Now, new figures out today show that India's economy is growing at the fastest pace in one-and-a-half years. Take a look at this. From July to September, India's economy grew almost 8 percent. Now, that's compared to 6.1 percent in the previous quarter. And those figures -- I mean, let's face it, for example, here in Britain, we can only dream about.
The economy was given a helping hand by government stimulus measures. India's central bank has pumped in more than $100 billion. It also kept interest rates low and cut taxes. The total stimulus could be as much as 12 percent of GDP. And remember, India's economy is worth some $1.2 trillion.
So perhaps no surprise, then, that the main stock market, the
BSE Sensex, closed higher today and ended two thirds -- 1 2/3 of a percent higher. Figures always get me.
Earlier, I spoke to CNN's Mallika Kapur.
And I asked her is she thought the stimulus measures have paid off big time.
MALLIKA KAPUR, CNN INTERNATIONAL CORRESPONDENT: It certainly did, because the figures today were truly stunning -- way, way above expectations. GDP figures came in at 7.9 percent. The expectation, Adrian, was for figures to come in at 6.1 percent. So you can see the massive difference there, which really took everyone by surprise today.
The reason the figures were so high is because we have seen a huge increase in domestic demand. We've seen a very strong performance in mining and in the facilities here in India, in the construction sector, as well. And the reason for that is those stimulus measures that you just talked about. The government, last year, to spur growth in the country, introduced a host of economic measures through a stimulus package. It also cut interest rates and that does seem to be paying off.
The big surprise, though, is the agricultural sector. Remember back in July this year, we were waiting for the monsoons, which never really arrived in India. And because of the poor rainfall, we saw a drought in many parts of the country. We saw crop failure, which did have an impact on the economy. So analysts were expecting to see the agricultural sector come in in negative territory.
But we did see growth even there -- growth of 0.9 percent. So it's not as growth, but growth all right (ph). And overall, very good neighbors -- 7.9 percent. Very good for India, and, indeed, really impressive when you put it in a global context. And you see many countries, especially in Western Europe, showing very little growth, then you have India with 7.9 percent.
So a very good performance overall -- Adrian.
FINIGHAN: Absolutely. The stock market -- there was a pretty positive reaction there. But it was, given the stunning figures, as -- as you described them, Malika, a fairly muted reaction on -- on the stock market today.
Why was that?
KAPUR: Yes, a fairly muted reaction because, as one analyst said, that, you know, the GDP figures, it's like looking in the rearview mirror. It looks back at what's already happened. So it's not usually a driver of what's going to happen going ahead.
The stock market, though, as you said, we did see some gains today. But that was really after the serious losses we saw on Friday, which, in turn, was because of what's happening in the UAE.
So the stock market here definitely more concerned about developments in the Middle East than about GDP.
Remember the UAE and India have a very strong and a very close connection. We have millions of people from India working in the Gulf region, about four-and-a-half to five million people.
In Dubai alone, the estimate is for about a million to a million-and- a-half workers in Dubai.
And they sent back $9 billion in money back to India last year. If you take that away, that actually accounts for 0.7 percent, just under 1 percent of GDP. So there is a very close connection financially between India and the Gulf. And that's what the stock market is keeping an eye on -- Adrian.
FINIGHAN: All right. So, as we said, the stimulus measures have paid off big time to the Indian government.
But with stunning figures like -- like those today with that surprise GDP number, there must now be concerns about inflation.
KAPUR: There are concerns about inflation, absolutely. And the big focus -- the big question right now turns into what is the government going to do next, now that we have these great figures?
And, of course, people are wondering -- the first question is what's going to happen to those stimulus measures?
Is the government going to do away with them?
And again, the focus now turns onto monetary policy. We saw the government loosen interest rates last year and now people are expecting the government to tighten interest rates as early as in January.
So, yes, inflation was a big concern and therefore, what is the government going to do about it is the big question right now.
(END VIDEO TAPE)
FINIGHAN: CNN's Mallika Kapur speaking earlier from Mumbai.
Now, you've heard of euro trash, but what about euro thrash?
We'll look at why the mighty dollar is being humbled by its European cousin. Giving us some insight, the author of the biggest selling financial book in history.
We'll be right back.
FINIGHAN: Regular viewers will be more than aware that the U.S. dollar is in the doldrums. We've been telling you for quite a while. But don't take my word for it, I mean just take a look at the this graph. It tells the tale of the euro surge versus the greenback, tracking its performance for the last six months.
Now, today the dollar fell against the euro again. As some of the worries following the fallout from Dubai's debt crisis are starting to fade, the greenback has been used as a safe haven in times of voluntarily.
Well, one man who's here to shine a light on the dollar's demise is Howard Ruff. He's saying pull your money out of any investment based on the greenback. He's been saying that for a while. And he's the author of "How to Prosper in the Age of Obamanomics."
Howard, it's -- it's great to have you on QUEST MEANS BUSINESS.
Thanks for being with us.
I know you've got laryngitis at the moment, so that this will be a bit -- you'll be a bit -- a little croaky here.
But tell us, it's not just you that's ailing, the dollar is ailing, too.
What ails the dollar and why does it matter?
HOWARD RUFF, AUTHOR, "HOW TO PROSPER IN THE AGE OF OBAMANOMICS": What ails the dollar is what's ailed currencies essentially we invented the printing press. We just made too much of it. We've just diluted its value. And the -- what the Obama administration is doing is creating dollars by the trillions. And that dilutes the value of the dollar. And in every instance where the governments have done that throughout history, they have created monetary inflation, which has created price inflation.
And so it...
RUFF: There are two ways to measure what the dollar is doing. One is what it's doing against other currencies. And two, what it's doing to the purchasing power of the average American with dollars in his pocket. And my job is to be a -- it's to tell people what to do. My government wouldn't listen to me if I told them what to do anyway. So I -- I ignore that.
FINIGHAN: OK. So you're advising people to get out of any asset that relies upon the strength of -- of the dollar. And the Obama administration says that its policy is for a -- a stronger dollar, but it's doing nothing about it. I mean what -- what -- where does this -- this -- this disparity come in?
RUFF: Well, do you think it's possible that somebody lied to us?
FINIGHAN: I mean yes, I mean -- I mean possibly it is.
Who do you blame, then, for the -- for the dollar's demise?
And is it the Obama administration or was the dollar's demise already underway before the Obama administration came to power?
RUFF: Well, it was already on the way. But the Obama administration is making it many times worse than it might have been.
FINIGHAN: So the book that you've got, "How to Survive in the Era of Obamanomics," why do people need such a guide?
RUFF: Well, because that traditionally, investments aren't going to work. Now, I -- I'm really writing for mavericks, people who leave the herd, who get away from Wall Street tells them how to do and what traditional financial advisers tell them how to do, which are going to be losers. For example, you -- you're going to be a loser if you buy U.S. Treasury bonds because interest rates are going to rise with inflation. And when interest rates go up, bond prices go down. The same thing is true of anything with a fixed return.
So I have a -- on my Web site, rufftimes.com, I've done that -- we recently did an analysis of how we've done with the -- of the many (INAUDIBLE) that I have on -- in every -- every newsletter, a copy of "The Ruff Times," my letter. And we found that we're up 96 or 86.9 percent since the first of the year with that portfolio, with that menu.
And so it's working very well and it's working by ignoring what the average person will do. And I think the average person -- that what the average person is going to do is going to be toxic.
FINIGHAN: Howard, it's great to talk to you.
I really appreciate you coming on the show, in spite of your -- your laryngitis.
Many thanks, indeed.
That's the legendary Howard Ruff here on QUEST MEANS BUSINESS.
Now, shops in the U.S. splashed some green on black on Friday.
But are they logging onto Cyber Monday?
After the break, we'll take a look at one of the biggest online shopping days of the year and what it says about just how merry this holiday season will be.
FINIGHAN: Welcome back.
Live from CNN London, this is QUEST MEANS BUSINESS.
In for Richard Quest, I'm Adrian Finighan.
Now, a little earlier, we showed you the impact that those comments from the Dubai government official had had on the European markets, which all fell by about 1 percent or thereabouts today. Those comments not rattling, it seems, the U.S. markets in quite the same way. This is what's happening on the Dow Jones at the moment. It's down by about 8 points.
It's also, today, one of the biggest online shopping days of the year.
Let's get a closer look at what's happening on Wall Street now.
Alison Kosik joins us live from the New York stock -- Stock Exchange - - hey, Alison.
ALISON KOSIK, CNN CORRESPONDENT: Hi, Adrian.
You know, it's really been a -- a day where we've seen stocks go up and we've seen stocks go down, really not finding much direction, really a choppy trading day on this first day back from a long holiday weekend.
It's a much different, much more measured reaction to the lingering fears out of Dubai. And that's because it looks like U.S. banks have less exposure to Dubai World's debt than banks in other countries -- and other countries.
Now, there's also not much reaction to a report that we got on economic activity in the Midwestern U.S. states, showing that activity expanded faster than expected in November.
Also, the Obama administration announced new rules to pressure banks to help struggling homeowners. Under the plan, the Treasury Department may fine mortgage companies that aren't doing enough to make permanent loan modifications.
Now, here's something possibly adding to some volatility in the market today. It's the last day of the month of November and it's worth noting that despite the big drop on Friday and some pressure on stocks today, the Dow is actually on track to finish the month with about a 6 percent gain -- Adrian.
FINIGHAN: Alison, it's also Cyber Monday, as we said, one of the -- the biggest online shopping days of the year. That's going to give us some indication of just how merry the forthcoming holiday season is going to be, right?
KOSIK: It is. And, you know, right now, retailers do have some encouraging news from the Thanksgiving weekend. The National Retail Federation says that 195 million Americans spent their money shopping in stores and online between Thursday and Sunday. That's a 13 percent rise over last year.
But, you know, they're not spending as much. Shoppers spent an average of about $343 each. That's down from last year. There are also signs that shoppers are more bargain conscious this year. More than 30 percent of the people who hit the retail stores on Black Friday last week were there by 5:00 a.m. They set their alarm clocks on a holiday weekend to take advantage of discounts.
Still, online shopping seems very healthy so far this holiday season. Internet research firm comScore reported an 11 percent jump in online sales on Thursday and Friday. And retailers are really hoping that that trend continues on this Cyber Monday, which is the online world's version of Black Friday.
Most really sites will have special Cyber Monday deals that include one day sales and free shipping. Lots of deals out there, Adrian. And a lot of people shopping online.
FINIGHAN: Yes, I'm not so sure I'd set my alarm for 5:00 a.m. Though, to take advantage of them.
KOSIK: Me either.
FINIGHAN: Alison, many thanks.
Alison Kosik at the...
FINIGHAN: ...at the New York Stock Exchange.
Well, let's take a closer look now at the U.S. retail sector.
Our Maggie Lake has been among those treading the aisles.
She joins us now live with a look at what we can expect this holiday season.
Lucky old you, then, being paid to go shopping on a work day.
MAGGIE LAKE, CNN CORRESPONDENT: It's tough work, Adrian, but someone has to do it. But I'm with you, no way was I waking up at 5:00 in the morning for -- for Black Friday, to get out there and fight the crowds. But I did a little bit of shopping in stores over the weekend. And we are out here today at Columbus Circle in the mall. And you heard the numbers from Alison. But -- but we can attest, looking around, there are an awful lot of people milling about, good foot traffic in the store, people looking around.
But -- and the same thing I saw over the weekend, people in the stores, well, they're not exactly running up to the cash register with their arms full of goods. And we had a retail analyst meet us here and walk around a little bit earlier today. And she says that's pretty much what we can expect from this holiday season.
(BEGIN VIDEO CLIP)
WENDY LIEBMANN, WSL STRATEGIC RETAIL: You know, I think the "we didn't expect that" is the fact that this is going to be one of those Christmases where both retailers and consumers have sort of come to a recognition that nobody can get themselves in a huge amount of debt by January. And I think that's the big ah-ha, that American shoppers and retailers have actually been logical, sensible, not over stated this year. That's going to be one big thing.
LIEBMANN: Yes. I think absolutely (INAUDIBLE), much more like we see in other countries, they're now normal -- you know, we'll buy anything that's left standing.
(END VIDEO CLIP)
LAKE: So, a little bit more pragmatic. They're definitely looking for those bargains. Alison mentioned the door busters -- people are very, very price conscious and they're holding out until those retailers meet them with the kind of deep discounting.
So we're seeing the sales already, but you can expect it to get a little bit more aggressive as we get toward the actual Christmas day. And, of course, you know what that means, a little bit more of an impact on the bottom line for retailers.
FINIGHAN: Yes, absolutely. What I'd give to go shopping in a mall like that there. It seems reasonably quiet. But then American malls are always cool compared to -- to the British ones, which are heaving at the moment. You go out to Oxford Street just around the corner from where we are, Maggie, I mean the Christmas shoppers are out in force. It's -- it's not a pleasant experience, or at least I -- I don't think so. So much for a recession.
Just how are retailers feeling, though, optimistic?
As you said, they -- they'll get a little more aggressive before Christmas, I suppose. That -- that depends on how well their sales hold up right now, immediately after Thanksgiving.
LAKE: That's right. But the bottom line, though, Adrian, is that they're encouraged. You know, a lot of people had sort of (INAUDIBLE) that you had consumer debt, never coming back. And that's not the case. People are being price conscious, but they are -- are out here shopping.
And the woman I spoke to you just saw said, you know, it -- it's actually a sign of optimism that things are still tough. And, clearly, those who are looking for work are in a very difficult position. But for the 90 percent of the country that is employed, you know, they're feeling maybe a little bit more positive about the future, just enough to tiptoe out and stick their toe in the water.
They're not running up the charge card, but they are willing to come out in a way that they certainly weren't last year.
FINIGHAN: All right, I'm just saying, what's that -- that sign over your -- your left shoulder there in the -- in the shop window?
Is that a 50 -- it's not a 50 percent -- I can't read it from here. It's all blurred from where I am, but...
LAKE: Oh, yes.
FINIGHAN: Are there sale signs up already?
LAKE: Yes, 50 percent off. And -- and they're starting early. You know, they don't have a lot of inventory. They're trying to get the word out that if you want the deals, you've got to come early. Of course they always say that. And we do believe people are going to hold out until the last minute. There's always those running around on Christmas Eve looking for the last minute deals.
If there's something very specific you want, they're saying don't wait. But otherwise, if -- if you can hold out beforehand and you're a little bit flexible, well, you'll probably benefit -- Adrian.
FINIGHAN: Yes, I'm one of those poor souls running around on Christmas Eve usually...
LAKE: I thought maybe.
FINIGHAN: I always leave it until the last minute.
Maggie, great to talk to you, as always.
Many thanks, Maggie Lake, shopping in Columbus Circle.
Now, buy low and sell high is the mantra repeated by traders all over the world, but how do you know where or when to invest?
Answers in this week's Biz Clinic, coming right up.
Stay with us on CNN.
FINIGHAN: Now, the continuing uncertainty over Dubai is enough to rattle the nerves of the most steely investor. Plenty of traders sold out this session and it's led to those big stock market falls that we've seen here in Europe and in the Middle East. Only time will tell how rational that reaction was.
Now, in this week's Biz Clinic, Andrew Stevens asks when it's worth listening to your heart and when it's wiser to take a more hard-headed approach.
ANDREW STEVENS, CNN CORRESPONDENT (voice-over): It's a simple concept -- buy low and sell high. But it's a difficult mission to accomplish.
Because we're human and the experts say when it comes to money, we let our emotions get the best of us. Experts in the field of behavioral finance study how we go about making investment decisions.
PHILLIPA HUCKLE, BEHAVIORAL FINANCE EXPERT: There are two main parts of the brain that make decisions and they're very separate from each other.
STEVENS: They point out there's the analytical way of thinking -- calm, rational, methodical; and then the instinctive way -- the snap judgments based on excitement or fear, the fight or flight.
HUCKLE: Most instincts that you have on these things will be wrong.
STEVENS: The proof?
Phillipa Huckle points to the markets, in blue; versus the vics (ph), the voluntarily or so-called fear index, shown in orange. Over the past 15 years, when fear goes up, the markets tend to go down.
So what do you need to keep in mind before deciding to buy or sell?
HUCKLE: As a good investor, you would be always trying to shift your decision-making process from the instinctive back to the analytical, where it belongs. But, of course you've got this instinctive system running all the time.
STEVENS: The key, some say, is to take a deep breath and try to override your instincts or press the pause button. And experts say to focus on spreading your investments across asset classes, whether it's stocks, bonds, gold or property and rebalancing those positions instead of simply being all in or all out. It's no big surprise who serves as a prime example when it comes to thinking long-term and keeping fear or greed out of the investing equation.
HUCKLE: I mean Warren Buffett is -- is, for sure, the best investor in the world. And the reason for that is that he has such a powerful understanding of the way that his emotions affect him. And it's -- it's a well known fact that Warren Buffett will not look at stock markets on a daily basis, because it -- it affects his long-term analytical strategic viewpoint on things.
So he tries to remove himself from, essentially, the noise.
STEVENS: So, be rational. But no matter how much you think it over...
HUCKLE: The world is ever changing and investments don't go in a straight line. You have to learn to understand and cope with the feelings that you have as markets are moving in order to keep making those rational decisions.
STEVENS: Still, there is, of course, no such thing as a sure bet.
Andrew Stevens, CNN, Hong Kong.
(END VIDEO TAPE)
FINIGHAN: If only life had a pause button.
Why that, wouldn't it be great just to be able to pause for a moment?
Jenny Harrison is at the World Weather Center.
She joins us now -- Jenny, of all my friends, you're the only one who's going to be interested in this story, which I've told to several people today and their eyes glazed over.
JENNY HARRISON, CNN METEOROLOGIST: Yes.
FINIGHAN: I took the dog for a walk this morning, it rained. I got very wet. It was raining before I left the house. I got soaked.
HARRISON: Well, (INAUDIBLE).
FINIGHAN: Halfway around my -- halfway around my walk...
FINIGHAN: It stopped raining. And the temperature went bump.
FINIGHAN: It dropped about three or four degrees. It was...
FINIGHAN: ...it went from about seven or eight degrees down to three degrees. It was purely cold, especially being so wet.
FINIGHAN: There you go. I told you she'd be interested.
HARRISON: I -- no, I am. I am. A front is going through, clearer fresh air, and the temperatures are going to go down, as well, over the next few days. But, actually, talk about a sure bet -- Andrew Stevens said there's no such thing -- I think there is when it comes to weather.
At some point, you're going to get some rain, aren't you, somewhere?
We've got plenty of it here in the southeast of the U.S. I'll come into that in just a moment.
But this is what we're talking about out in Europe, first of all.
Now, you see all this mess across Central Europe?
I'll come onto that in just a moment and explain to you the impact it's having in particular on Venice right now. And then you can see out toward the west, we've got these (INAUDIBLE) that have happened in the last few hours. And that is why, indeed, Adrian felt the temperature dip down.
Now, you can see very clearly on this the radar. You can see the circulation around that area of low pressure as it actually headed away from the southeast of the U.K. and across the Channel. Now, of course, it is really impacting the northern sections of France.
But as we go through this week, especially for the next couple of days, there's a big trough moving eastwards. And it's going to take the rain with it and it's going to make things feel not only, of course, wet, but also very cool, as well.
Now, you'll notice the area of the Jetstream, but also the winds. When you've got low pressure, of course, the winds are in an anti-clockwise direction. So that what's been happening is the winds are funneling up the Adriatic and that means they're funneling up toward Venice. So, not a good situation there at all. They've got the aqua ultra, which is the high water there -- an unusually high tide. So far, we've had reports just on Monday of 131 centimeters of water.
Now, this is, obviously, a few things combined. It's the high tide also combined with the rain coming in and then literally some storm surge coming up the Adriatic because of the strength of the winds and also of the -- the -- just the frequency of the winds, as well.
So all these things -- these three things combined means that we've got these warnings in place. And about 140 percent -- that is considered a particularly severe situation in Venice. And as much as 90 percent of the city could be underwater. Right now, it's estimated about 70 percent of the city is underwater because of this particularly -- situation and a bit of -- these particularly high tides.
As you can see in the next couple of days, there is more rain, especially for the next 24 hours. Then it clears out of it. And that's supposed to head toward the southeast. And in the meanwhile, the next system, of course, heading in toward the northwest.
Now, when it comes to delays at the airports, we've got some snow in the picture, as well, in Munich as we go through the morning hours on Tuesday. And then the winds are going to be pretty brisk, certainly, across the northwest again, over the next 48 hours. And you can see that those delays are continuing and some areas of Europe will also see some low clouds. But the wind not helping anywhere there at all.
But look at the temperatures for Tuesday. Seven degrees your high in London; eight in Paris. Colder, of course, across the line of the Alps. Plenty of snow in place there. And just nine Celsius in Madrid.
Now, in the United States, we've got all this (INAUDIBLE) streaming in across the southeast and (INAUDIBLE). Some very persistent rain, some thunderstorms in the mix, as well. But it's really when we get toward the end of the week, you'll notice all of this activity coming out of the Gulf. This is going to bring some very heavy amounts of rain, certainly by about Wednesday, toward the end of the week. And that, of course, is when we could see some thunderstorms.
What we haven't seen so much for this year, of course, is hurricanes.
The slowest season since 1997. And, in fact, given the number of years I've been here doing this job now -- we were talking about it earlier and literally for the decade it is -- this is the quietist season we've seen. Just nine named storms this year. It's the first year since 2006 that we have not had a single hurricane make landfall. We've had two tropical storms make landfall and they're, of course, in the Gulf Coast.
So it has been an unusually quiet year.
Now we need to take a short break here on QUEST MEANS BUSINESS.
Mr. Adrian Finighan -- he's back with you as soon as we return.
So you stay with us.
FINIGHAN: Funny, with Jenny talking about the cold weather over the alps just a -- a few minutes ago, people's minds naturally tend toward the forthcoming skiing season here in the -- the Northern Hemisphere winter. Of course, not many people are thinking ahead to the summer here in the Northern Hemisphere, which, of course, would be winter in the Southern Hemisphere.
But the stage is being set for South Africa's World Cup 2010. And on Friday of this week, we'll find out who is playing who and in which stadium. Of course, the World Cup is not only the world's biggest football event, it's also a big business. The total of it's likely to generate over 150,000 jobs for South Africa. More than a dozen companies have signed on with FIFA to sponsor the event, paying different amounts for different sponsorship levels.
And CNN's Robyn Curnow has been taking a closer look at just two of those companies.
ROBYN CURNOW, CNN CORRESPONDENT (voice-over): Sponsors pay millions of dollars for their companies to be associated with the World Cup, so much money, in fact, some brands like Adidas are reluctant to say just how much FIFA charges them to be part of the football magic.
HERBERT HAINER, CEO, ADIDAS: Oh, we have a long contract with the FIFA, as you might know.
CURNOW (on camera): You're not going to give me a number?
HAINER: No, of course I will not give you a number. But we definitely use this World Cup, as we have done in 2006, as a platform to showcase to the world that we are the clear number one in football, that Adidas is the football brand, that football is our DNA.
CURNOW (voice-over): Adidas says it's had a long relationship with FIFA. But the South African company, First National Bank, is new to the World Cup commercial family. They are one of the national sponsors for next year's tournament in South Africa.
MICHAEL JORDAAN, CEO, FIRST NATIONAL BANK: I think it's by now well known that we paid more than $50 million for the four year period leading up to the sponsorship. And as the expert marketers will tell you, that only buys you the rights to be associated. You then have to spend more money telling people that you are associated with it. And the rule of thumb there is somewhere between one and two times as much as you pay for the sponsorship is what you need to spend to activate it.
So it's a lot of money, but we would not hesitate to do it again.
CURNOW: These sponsors say there is a direct commercial value in linking up with the world's biggest football tournament.
HAINER: Of course we cannot really count how many shirts we have sold during the World Cup 2006 in Germany...
CURNOW (on camera): How many was it?
HAINER: It was over three million replica jerseys from all the teams which were competing. And our brand name, it was 1.5 million just alone from the German team. We sold over -- or nearly 50 million balls with their team guys' design, which was the special design for the World Cup 2006. So this is a tangible asset.
CURNOW (voice-over): Many tangible assets, too, for First National Bank.
JORDAAN: Now, we are a banker to FIFA. You have visitors who want to exchange the foreign exchange. We have business opportunities in South Africa that are developing from hospitality industries to airports being redeveloped. And in all of those, banking requirements need to be met and we want to be the first choice.
CURNOW: But the South Africans have also placed huge value on the intangible benefits of the World Cup such as building national unity. This television advertisement is just one of many on local screens that paints next year's World Cup as a positive experience for the country's racially and culturally devise population.
JORDAAN: But brands are also about emotive appeal. And as this country draws together emotionally, we want to be part of that.
CURNOW: And that's something he says you can't put a price on.
Robyn Curnow, CNN, Johannesburg, South Africa.
(END VIDEO TAPE)
FINIGHAN: Fantastic. It's going to be a great World Cup. Don't miss coverage of the draw on Friday. CNN's Pedro Pinto is in South Africa for the draw.
When we come back on QUEST MEANS BUSINESS, an update on the market numbers from the U.S., Europe and the Middle East.
Stay with us on CNN.
FINIGHAN: The renewed worries about the strength of the holiday shopping season weighed on stocks on Wall Street. Stocks fell modestly Monday, as retailers slid. Investors there also still wondering about the possibility that a debt default by Dubai could touch off a new round of lending problems. The Dow Jones down 12 points.
It's not bothering investors on Wall Street nearly as much as here in Europe, where all the major markets ended the day in the red. Banks and energy stocks coming off worst, with Lloyds Banking Group and Royal Bank of Scotland both down about 4.5 percent. In London and Frankfurt, auto stocks were amongst the worst hit. V.W.'s shares off by nearly 5 percent. And in Paris, Credit Agricole shed nearly 2 percent. Zurich, it was financial stocks helping to drag the SMI down.
Here's what happened in the Middle East. Stock markets in the United Arab Emirates taking a severe beating. It was, of course, the first chance that traders have had in the region to react to the debt crisis in Dubai. The Dubai FM Index dropping 7.3 percent, the biggest slump since October 2008. Abu Dhabi's main index tumbled 8.3 percent, the worst ever drop.
Many other markets in the region, thankfully, I suppose, remain closed for Eid.
And that will do it for Monday's edition of QUEST MEANS BUSINESS.
I'm Adrian Finighan in London in for Richard all this week.
As the man himself would say if he were here, whatever you're up to in the hours ahead, I do hope it's profitable.
Christiane Amanpour is next after the headlines from the I Desk.
See you tomorrow.