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Examining the Financial News Stories from 2009

Aired December 30, 2009 - 14:00:00   ET


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Body scanners laid bare. Tonight we look at the security of the future. What does it look like?

Japan Airlines hits a storm of speculation. The rumor mill sends shares sharply lower.

And will 2010 be the year of the dragon? China's economy gets ready to overtake Japan in the world ranking.

I'm Richard Quest. The year is not over yet, because I mean business.

Good evening. If you are traveling on an aircraft between Amsterdam's Schiphol and the United States, now you will undergo a full body scan. Some new regulations have been introduced. We will go into the details of them in just a second.

And on this program tonight, we will also talk to the head of the largest manufacturer of detection equipment. And that includes the so- called full body scanners.

First, though, let's put some perspective on what the new regulations from Amsterdam are all about. Amsterdam already has 15 of these so-called full body, or millimeter wave, scanners. Three of them, which you will hear in my report, at the moment are unmanned. The others are being converted. The idea of this machine, of course, is that it gives you a full body scan. You see actually what the person is like under their clothes. It will detect -now, Amsterdam, until now has only used the metal detectors for passengers going through and going overseas.

Now, they say, they will use the full body scanner for everybody going to the United States. But first of all, if we take a look these body scanners can pretty much see everything. They see all sorts of bits that perhaps some people would consider to be issues of privacy. Even so, the Netherlands government decided this is the way forward.


GUUSJE TER HORST, DUTCH INTERIOR MINISTER (through translator): All aspects of security are investigated in detail, but the detection gates only detect metal, which is why we carry out samples and do body searches. And this system, of course, is not water-tight. Which is why, meanwhile, we have decided to start using body scanners on flights to the States.


QUEST: Now, the scanner controversy, as of course, you have just heard from the interior minister, basically does pit the safety versus the privacy argument overall. Not only Amsterdam, other airports, like Manchester in the U.K., are also trying these new scanners. But particularly en route to the United States.

So, we are at a turning point in air security. That delicate balance between passenger safety and personal privacy is changing. And I know, you as leisure and business travelers are keen to know more about this new check, which means more inconvenience.


QUEST (voice over): Slow and steady, the pace passengers face from check in to plane. With only one piece of hand luggage now allowed passengers bound for the U.S. undergo lengthy searches at security, which include a final pat down before boarding.

UNIDENTIFIED FEMALE: What can I tell you? What can I tell you? I cannot change my ticket. I have to try and go, try to be safe.

QUEST: Airlines also have the discretion to enforce a rule that requires passengers to remain seated one hour before landing with nothing in their laps.

SIMON CALDER, TRAVEL EDITOR, "THE INDEPENDENT": What we will see, I think, is initially these rules applied only to trans-Atlantic flights. They could gradually be expanded, but we are also going to see faster moves towards the complete body scanner. That enables security staff to look at the whole person to see if they have by any chance any kinds of explosive devices, either strapped to their body or -and this is what really worries the security professionals -concealed within their body.

QUEST: And Schiphol Airport is first out of the gate to move from voluntary to mandatory full body screenings for trans-Atlantic flights, with its 15 millimeter wave scanners. Schiphol currently has three automated scanners, requiring no manned operators. The remaining 12 will switch from manned to fully automated operations within the next three weeks, thus helping to solve the privacy question.

Like it or not, this is the future. But there is more. Nemesvsco, based in Israel, has developed a new profiling device, using voice analysis, essentially, a lie detector. The company's founder, Emir Lieberman, believes terrorist intentions can be detected with a few simple questions, requiring yes or no answers.

UNIDENTIFIED MALE: What our system can provide is the additional layer that looks inside your soul, so to say. Looks for the intention to cause harm. So, think about it from their perspective. I am now, in the queue, going for a mission. I am very nervous. I am very paranoiac, I have this extreme emotional state that I want to succeed and I fear. I fear detection. It is a very unique state of mind.

QUEST: For now, everyone is going through longer additional checks.

UNIDENTIFIED MALE: Think about that guy, he was like with the leg. How could you prevent that? Ex-rays or? What do you want, everyone having a shower before going onto the plane? That's crazy.

UNIDENTIFIED FEMALE: I like, honestly, it is all a thing about chance. I guess every little thing reassures you, psychologically, but it is really all about chance.

QUEST: And it is to avoid leaving things to chance that things are changing.


QUEST: Stephen Phipson is the president of Smiths Detection, a security technology company, the largest in the world, I believe.

Your company makes these, amongst many other machines, makes these body scanners?

STEHEPEN PHIPSON, PRESIDENT, SMITHS DETECTION: We make body scanners, X-ray machines, explosive detection systems, the whole range of different security equipment, which are used in airports and border security around the world.

QUEST: So, let's clarify first of all. What do you believe a body scanner, a millimeter wave body scanner, would this have detected the substances on Abdulmutallab's person.

PHIPSON: Well, as of right now we are not familiar with all the details of actually what happened, there. What I can tell you, though, is that these systems are able to detect anything that is being carried underneath the clothing that shouldn't be there. So, in that respect you can find any kind of threat or any kind of other item that is being carried on the body.

QUEST: And if it was sew into the clothing, that would be extraneous to the body but part of the clothing.

PHIPSON: Absolutely. You would still see something on the image that the operator would recognize that should not be there.

QUEST: So, we also heard, and we are going to take this slowly, that the airports in Europe say that they can't introduce these scanners without European Commission permission. The European Commission has told CNN, and told me, that this is not true, they can, individual countries can introduce these scanners. What is your understanding of the situation?

PHIPSON: I think both statements are largely true. What happens, of course, in Europe is that individual countries are responsible for their national security, and if they so choose to, under a trail scheme, they are able to introduce different technologies. But the key here is to have a consistent level of government regulation across the whole of the European Union, and to do that the commission needs to regulate.

QUEST: So, I'm still not -I hate to push it, but I'm not quite sure I -who is right? Can these scanners -because tonight, the Netherlands has introduced them for U.S. flights. I assume they have had TSA approval for that. So, it sounds as if all these airports could have been buying your scanners and others and putting them on the airports?

PHIPSON: They can do if the local government regulates for them to do that on a temporary basis. But we are looking to the commission, as usual, to have a consistent approach across the whole of the commission.

QUEST: Is a temporary basis, a bit like how long is a piece of string?

PHIPSON: It is sort of a year to 18 months, as a trail basis for putting the equipment in place. So, we have done that before, in the U.K., for example, with different types of systems. But again, it is no good having a great piece of technology in one country if in another country in Europe you are not adopting the same processes.

QUEST: So, your phone must have been ringing off the hook. Yours, and your competitors, in terms of people wanting to buy these machines?

PHIPSON: They are certainly looking at how they can add layers of security the airports and they are looking to us to provide some guidance as to what is available. Absolutely.

QUEST: You are being coy, here.

PHIPSON: Yes, it is certainly a busy time for us, put it that way.

QUEST: Have you sold many of them?

PHIPSON: We haven't sold too many of the new generation systems yet, they are in trials and in tests, in various government labs. It takes a while for governments to regulate these systems, but then once they are proven we actually deploy them.

QUEST: Is it realistic - and a couple more questions and we're going to go, time is not really an object tonight, because we want to get to grips with this.

Is it realistic for airports around the world to go to a full body pat for all passengers?

PHIPSON: A full body pat? Not really. It would slow down immensely the through put, through the checkpoints. You need layers of technology to be able to provide that through put, and make it much easier for passengers to transit, much easier than doing a full physical search.

QUEST: And would you imagine that you are talking about a metal detector, then a body scan, and then something else, or is it all in one?

PHIPSON: We are getting to the point where they are becoming integrated together.

QUEST: But at the moment they're not?

PHIPSON: At the moment they are not, absolutely.

QUEST: And when we talk, are we talking about metal detectors, body scanners and so called puffers, which blow air?

PHIPSON: Or some sort of explosive trace detection system?


PHIPSON: Absolutely, we are. In fact, we do use them on a sample basis. You would have been swabbed as you went through a checkpoint occasionally with a trace detection system, which is a very sensitive device for finding explosives. So they will probably increase the frequency of the swabbing passengers as they go through the check point, we expect.

QUEST: Were you surprised at the event that took place in Detroit? Or is - I mean, from my understanding of the situation, it is the unspoken of the industry, you all know it could happen, and now basically, the truth that dare not speak its name has come out.

PHIPSON: We are always saddened when we see an event like this. And what actually encourages us to do is think about a more cohesive approach to security, adding more layers, whilst at the same time making the passenger experience and the through put one that we can all live with.

QUEST: Come back again for us, and help us all understand these things more. Many thanks indeed for joining us.

PHIPSON: Thank you very much.

QUEST: Thanks for joining us.

So, now you know the authoritative version on what has all happened with the Europeans and the body scanners.

The news headlines and Fionnuala Sweeney is with us from the CNN News Desk.


QUEST: Reports, tonight, Japan Airlines is staring bankruptcy in the face while it tries to draw up a flight plan for the future. The rivals, of course, are watching carefully. We'll have the details in just a moment. QUEST MEANS BUSINESS, good evening.


QUEST: European markets, they snapped their six-day winning streak. All the major indices ended the session down, trading was thin, the holiday season is just about upon us. And banks and miners showed the biggest loses, energy stocks also slipped. We're not going to give too much credence to the markets, though, in these very small trading days.

Another quiet day on Wall Street. Alison Kosik is in New York.

Alison, good afternoon to you. We know things are quiet. I'm wondering there was a security disturbance in Midtown Manhattan today. And I'm wondering if all that had a bit of an affect on what was going on. Bring us up to date.

ALISON KOSIK, CNN FINANCIAL CORRESPONDENT: Richard, it is quiet, but that incident that you are talking about, that happened in Times Square, didn't even - I didn't even see a blip as far as the Nasdaq goes, or the NYSE. The Nasdaq is actually where that van was parked in front of, but it wound up being absolutely nothing. Everything wound up being OK, and we didn't see a blip happen with the markets.

You know, in watching the markets right now, we're seeing light trading volume. You know we are coming to the end of the year right now and everybody is on vacation. So not a lot of people buying into the markets. Right now the Dow industrials is down about 10 points, the Nasdaq off about 4.

One thing that investors are doing , though, they have already closed their books and they are looking ahead to the New Year. We are watching however, the U.S. dollar is rising, and that is driving down commodity prices. After this session we have just one more trading day of the year and the decade, Richard. And while the decade has been the worst ever for stocks, 2009 has really been a good year overall.

QUEST: Whoa!

KOSIK: The S&P 500, obviously, the broadest index, it has jumped 25 percent.

QUEST: Whoa!

KOSIK: And the U.S. economy, it continues to recover.

QUEST: Hang on. Hang on.

KOSIK: Richard.

QUEST: Not letting you get away that one. The U.S. -- yes, the market has done -

KOSIK: Why not? Why not?

QUEST: Well. The U.S. market has done well, in 2009, but only from the appallingly low levels that we started with.

KOSIK: Granted, granted. And sure, you know, investors, they are still concerned about unemployment, consumer spending. They are worried about where interest rates are going to go next year, Richard. But you know, overall the market has really recovered. I mean, if you think about it. Go look at your portfolio if you have invested in U.S. stocks. I mean, you know, a year ago, we were much lower, we are much higher now. Historically, obviously we are not doing as well, but we have got a kind of look at this as glass half full, don't you think, Richard?

QUEST: You know, you have just chosen the phrase, half full, or half empty, and I'll talk about that at the end of our program tonight, in my "Profitable Moment". And we didn't even plan it that way.

Alison, have a happy New Year. Alison, in New York.

A crisis of confidence hit shares of in Japan Airlines this session. Shares plunged 26 percent to a record low on speculation that the airline is going to file for bankruptcy. Now, it recaps a dreadful 12 months for stockholders. If you look at how the shares have tumbled. This is, I mean, you don't need to be a rocket scientist or a great investor to know about the sharp drop at the end of Wednesday's markets.

Here we have the first rumors of what is happening with JAL, very sharp fall off. And it continues further down. And I think what you are seeing here is, to some extent, the death throes, if you like, as people wonder whether or not this is going to be a resuscitation airline, or whether it is going to be out of business.

Back in January one share would have cost you $2.31, now it is worth only $0.73, a drop of more than 68 percent.

Asia's largest airline, by revenue, is looking for its fourth government bailout since 2001. The loss maker airline has been struggling under massive debt. To save money it has retired employees, it succeeded in them taking benefit cuts, but it is going more. Two of the biggest airlines in the U.S., Delta and American, are watching closely from the sidelines. Both are anxious to do a tie-up with JAL to gain access to its extensive networks.

Now, remember, JAL is already in bed, through One World, with American. So Delta is trying to do a stealing operation to cut in. So, basically, both of them have put up, roughly, $1 billion up on the table, along with other things. And JAL says it will make a decision on whether it is going to stay with American and One World, or move across to Delta and Sky Team, by January of next year.

Despite Japan Airline's troubles, a new report from IATA is another sign of what is happening in the global economy. Passenger demand has actually picked up by 2.1 percent in November. That is an interesting development. It is a trend that is accentuated by a sharp fall at the end of 2008. Passenger demand is higher and you have got to put it into perspective, very low base through which it was coming up. But even so, this is the sort of indication that you are going to be looking for, that suggests a recovery and a resurgence. And perhaps we can ignore the fact that actually demand is 6 percent below the peak of earlier in the year.

Significant differences between the regions, for example, Asia Pacific is strongly up. Latin America, Middle East, saw the highest demand of 16.5 percent. But if you look at North America, it still showing pulls (ph) of around 3 percent. Unemployment, definitely is affecting those markets.

I think this statistic is perhaps the most interesting of that lot. Freight demand is up by 9.5 percent. It is doing extremely better than expected, but still 10 percent below the peak in 2008.

So, from air travel to the Internet: We live in an age where speed counts. Now stock markets trading is getting a boost. I'll have more of that in a moment.


QUEST: As you can see, it has been choppy year for stocks in Mainland China. There is just one day of trading left for the Shanghai composite index for 2009. The index has risen a massive 73 percent since January. And there is a major rally stretching right the way up until August. Beyond that, stocks are still mainly on the up, but at a slower pace, but if you think -just look at that. That has been impressive days. What a sensational first part of the year, which of course is now slightly - it is starting to look a bit like the mountains of the Alps, but that is the way the Shanghai composite traded during the year.

Now, CNN's Charles Hodson sat down with Linda Yueh, the fellow of Economics at Oxford University, and asked her if the markets are in for another such exciting ride?


LINDA YUEH, OXFORD UNIVERSITY: I think the Chinese stock market is going reflect the fact that its companies do have strong growth potential. But it is growth potential which could be driven by, either easy money, from the government, or tempered by the fact that we know there is weak consumption in its main markets. And that is both the Chinese market and also overseas market.

So to the extent that the stock market is going to follow the fortunes of Chinese companies, and Chinese are going to follow the fortunes of China and global growth in 2010, I think we are in for a volatile year.

CHARLES HODSON, CNN INT'L. CORRESPONDENT: Now, a year ago, there were worries about the political structures in China. The strain they would come under as the economy slowed down. Now that the economy is growing again, do you think that those political structures could perhaps come under different strains, or do you expect them possibly even to evolve politically.

YUEH: I have some hope China's going to evolve politically in 2010. And the reason is because all of this attention this year, on why China shouldn't grow just by export, has turned the government's attention to the domestic economy.

What is happening with its consumer? What is happening with its firms? How can they support domestic investment by private companies, more consumption for rural households as well as urban ones. And that does lead to an examination as to why it is these sectors haven't been consuming or investing as much. So, I think to that extent, this crisis has shown China it can be just like the United States. It can be one of the biggest traders in the world and still be driven primarily by domestic demand, if it can look after its components of domestic demand, so domestic firms and households.

Now, where China, I think, escaped a bullet this year is that unemployment was a problem with the collapse of exports, primarily in the rural sectors. These are migrant workers. But what it did instead, was China substituted the crop and exports with government spending. And they spent it on things like roads and infrastructure, exactly the kind of low- skilled jobs that can absorb migrant workers laid off from low-skilled jobs in factories, producing for exports.

So that sense they escaped any instability because these migrant workers, the 20 million or so thought to have lost their jobs in 2009, actually found work making public works. So, I think in that sense China has come through 2009 on a relatively sound footing. And to many, this was a pretty good combination of policies, it seems.


QUEST: China's property market is growing fast and some fear it is becoming a bubble, which could easily burst. In Tianjin John Vause found developers with huge ambitions and a massive project to match.


JOHN VAUSE, CNN INT'L. CORRESPONDENT (voice over): The sales pitch promises a residential development like no other. It is called The World, luxury villas, homes and apartments, all divided into five continents and linked together by small replicas of iconic bridges. The world's biggest indoor ski ramp, the biggest water park in Asia, even a seven-star hotel.

That is the seven-star hotel there, Shuru (ph), in charge of marketing tells me, it will have full water views in every room even the restrooms. It will be the most comfortable hotel in the world.

The entire project will take five years to build on almost 2,000 acres on the outskirts of Tianjin. A second tier city, three hour's drive south of Beijing. Total cost around $4billion U.S. funded mostly by one of China's biggest state-owned banks. Construction is well underway on phase one, called North America.

(On camera): Villas like these started selling back in March for around $300, 000 U.S., the developer says now, less than a year later they have doubled in price. But that is nothing compared to the luxury high-end properties they are trying to sell.

(voice over): This house, made of glass, and still on the drawing board, and it could be yours for close to $60 million U.S.

(On camera): So, an indoor ski slope, seven-star hotel, luxury villas, if it all sounds like you have heard it before, that's because you have.

(voice over): Think Dubai, with its seven-star hotel, indoor sky ramp, massive developments, and more recently, a real estate bubble, which burst.

That is what economists are predicting for all of China's property market as well. A massive government stimulus package and more than $1 trillion in bank loans, have fueled a boom in house prices this year.

XU XIAONIAN, CHINA EUROPE INT'L. BUS. SCHOOL: The nature of our landing, not so different from (UNINTELLIGIBLE), the nature, OK? Not so different, OK? In such a short period of time you granted so many loans, did you do your homework?

VAUSE (voice over): The developers of The World insist they have no shortage of buyers and almost all of them are Chinese.

"Before we started we did very detailed planning and analysis," she says, "We are certain our project will develop very quickly."

But more and more economists say China is facing a double-dip next year and warn the bigger the boom, the bigger the bust. John Vause, CNN, Tianjin.


QUEST: And when I return, in just a moment, the year for the London stock exchange.


QUEST: Welcome back. I'm Richard Quest. QUEST MEANS BUSINESS. This is CNN.

Despite a recession in the U.K., companies listed on the London Stock Exchange raised a record amount from investors this year. They did so through a variety of vehicles, whether it was placements or IPOs, whether it was even just straightforward issuance of corporate debt.

But the beneficiaries can be seen, if you look at the story of the London Stock Exchange.

The London Stock Exchange says IPOs and issues raised $132 billion. That's 16 percent more than last year.

Now, don't forget, some of those were pretty big ones, like the banks, when they went to the market. HSBC went to the market, Lloyds went to the market in some substantial I.O. (ph) rights issues -- deeply discounted, but rights issues, nonetheless.

But the exchange itself, that's also been on a bit of a buying spree from smaller rivals. It bought a 60 percent stake in the trading platform Turquoise. Now -- or Tur-koys (ph). Some say Tur-koys (ph), Tur-kwaz (ph). You guess what I'm talking about. It's the color of what it is.

The point about it is, Turquoise has only got a very small percentage -- only 5 percent of U.K. market share -- and has been loss-making. So, the LSE is buying up the rivals to try and maintain its own market share.

It will merge Turquoise with its own dark pool venture Baikal (ph). This is very interesting, because dark pools allow anonymous trading. This is perhaps the future that we're going to see more of in 2010 and beyond.

When it comes to stock market transactions, it's the speed that counts. And across Europe, ultra-fast trading platforms are giving the traditional exchanges a run for their money. You want a price-perfect precision trading arrangement.

Jim Boulden now looks at the runaway success of light-speed trading.


JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT, LONDON (voice-over): You may not be familiar with the term high-frequency trading. But buying and selling shares in milliseconds is now coming out of the shadows.

Big banks and hedge funds have invested millions of dollars in ultra- high-speed computer trading platforms, each with a sophisticated mathematical formula to spot trends and move faster than traditional investors.

There's a whole host of new electronic trading platforms, each trying to be faster than the others.

JEREMY GRANT, THE FINANCIAL TIMES: What makes this so interesting, I think that at no time in the history of markets have we had such a step change in the ability of people to trade because of technology. The technological development has been like a hockey stick. It's just spiked up.

BOULDEN: This is the London trading floor of a two-and-a-half-year- old stock trading platform known as Chi-X. It's a small office with fewer than 40 employees. Chi-X has quickly eaten into the business of the incumbent stock exchanges.

MARK HOWARTH, CEO, CHI-X EUROPE: And we're trading around 12, 13, 14 percent of the entire European market, and around 22, 23 percent of the London market.

BOULDEN: So, how was Chi-X able to get nearly a quarter of the trades in London?

When it launched, its fees were a fraction of what the London Stock Exchange charged.

Chi-X, and other new entrants with names like Turquoise and Burgundy, have a fraction of the employees, and use the theory behind high-speed trading to full effect, making small amounts of money on each trade, which is executed nearly at the speed of light -- much faster than what older stock market platforms can do.

But there is no room to rest.

HOWARTH: Unless some very bright chaps at MIT come up with faster than light, you know, we're going to reach those constraints, I think, probably in the next 15 to 18 months, at which point speed of operations, speed of transactions starts to become a common service, becomes a commodity provision. And that part of the debate will die down over that time.

BOULDEN: But other parts of the debate are just heating up. The U.S. Congress and the Securities and Exchange Commission are asking if high- frequency trading creates an unfair advantage over slower moving investors.

Brussels will also soon begin a review of its two-year-old directive that opened Europe to high-frequency trading. There is concern about the use of so-called "dark pools," where large blocks of stocks are traded privately.

RALPH SILVA, SILVA RESEARCH NETWORK: If you're trying to hide something, then that's not the appropriate method for using dark pools. It was never designed to hide something. It was designed to do big transactions.

Now people are using it, so that you can't determine who's buying and selling. And that's where the regulators get a little worried, because they want to know who's buying and selling.

BOULDEN: So, the rules around high-frequency trading are likely to change, as is the marketplace, as well.

The London Stock Exchange announced just before Christmas it will create a pan-European trading platform with Turquoise. Better late than never, in a trading world where speed counts for everything.

Jim Boulden, CNN, London.


QUEST: For most of us, it would take a lottery win to be able to afford a new, swanky apartment after a grueling recession. That's exactly that these people in Japan are hoping for. We'll give you three million reasons why they're standing in that line in a moment.


QUEST: Japan's lottery ticket holders are hoping to end the year on a financial high after braving a deep recession. Eager players are waiting for a New Year's Eve draw that could give them a major fortune.

In just a moment, we'll have a report from Kyung Lah, but here I have the lottery ticket of my producer for a draw last week that she hasn't discovered whether she's won anything yet. I'll let her know after this report from Kyung Lah in Tokyo.


KYUNG LAH, CNN CORRESPONDENT, TOKYO (voice-over): Dream a little dream -- or $3 million, that is. That's the jackpot for Japan's year-end lottery, drawing a line of wishful winners up and around the block, and another block, hoping their year ends in a blowout of cash. Wishes go from the whimsical...


LAH: ... "how about spending the money to find boyfriends?" says this player -- to the more pragmatic wish.


LAH: "I need to repay loans," says Masayuki Asamizu, who acknowledges he's been hit hard by the downturn in the world's second-largest economy.

The latest threat to Japan's economic recovery -- deflation. Consumers are unwilling to spend money, so prices are falling. The highest levels of Japan's government are struggling with how to kick-start the consumer to spend.

But the lottery appears recession- and deflation-proof. Consumers are spending and spending, dreaming about a big pay-out. It comes with little cost -- just about the price of a coffee.

LAH (on camera): After you stand in this very long line and purchase your ticket, the chance that you'll actually win is about one out of 10 million. That's about the same chance that you'll get hit on the head by a coin tossed out of an airplane.

But the people playing say that doesn't really matter. This is a welcome distraction out of all the bad news of the economy lately.


LAH (voice-over): "It's fun," says Yoshiaki Yoshimura (ph), who bought $150 worth of tickets for his grandson. "It's nice to have a dream, even for a little while," he says. "Reality is tough."

And that brief escape, even if your chances are beyond a long shot, is priceless.

Kyung Lah, CNN, Tokyo.


QUEST: So, did Gayle (ph) win the lotto millions?

Put it this way. She'll be at work after the New Year.

Time for the weather forecast. Guillermo is at the World Weather Center. Good evening.

GUILLERMO ARDUINO, CNN METEOROLOGIST: Good evening. Coincidentally, I bought my first lottery ticket this week.


ARDUINO: Yes. First one in my life. Can you believe that?

QUEST: All right. So, when is the draw for that lottery?

ARDUINO: Actually, it was a couple of days ago, for Christmas, I think.

QUEST: So, this is a -- hang on. No, no, no, no. This is a polite way of saying that you, too, will be at work after the New Year.

ARDUINO: Yes. But I lost. Not even one number, Richard, not even one. I am such a loser. But I'm going to keep trying. I might keep trying. And if I win, I'll share it with you guys. OK?

QUEST: Hey, you heard that first here.

The weather forecast, please...


QUEST: ... because I'm not seeing where we're going to make progress.

ARDUINO: OK, because I need my salary.



QUEST: Now, we're getting into the bonus season on Wall Street and in the City of London. It will be a season unlike any other. With a pay czar on Wall Street and a bonus tax in Britain, payouts are likely to disappoint -- at least for this year.

Banks and bankers have taken a battering. Jim Boulden asked how our group analyst, Ralph Silva, to explain why.


SILVA: The banking industry this year didn't realize that they were in the political game. And quite frankly, if they were in a political game, they were playing a very poor game. Bonuses have been an issue.

The reality is that the banks that have -- like HSBC and Barclays -- really haven't played their cards right. They've taken too much. And the banks that haven't had -- the RBSes and the Lloyds -- simply have been taking so much from society and haven't really given anything back. So, it hasn't been a great year for the brands, the banking brands.

BOULDEN: A lot of people think they haven't paid their dues in what happened in 2007, 2008. Is that what you're saying they don't get? They think, OK, we're making profits again, now, for the second half of 2009.

And isn't that what we should want banks to do, to do well? But now we're saying we don't want them to do too well. It must be confusing for the bankers.

SILVA: Society actually believes that the banking industry is the one that brought this recession on. And quite frankly, they're right. It has been. So, they want somebody to pay for that.

What they've been looking for for the past year is somebody to blame. The reality is, is everyone is to blame. But the bankers seem to be where the focus is -- and their bonus payments.

Frankly speaking, the bonus payments are really almost a commission. So, yes, they are going to get a lot of these commissions. But they think the commissions are simply too high.

BOULDEN: And one of the issues within the G-20 is, could there be a semi-global banking restructuring deal that would include bonuses, pay, profits, what have you? That seems unlikely to me.

SILVA: It started off -- the year started off very strong discussions about global regulations. And we had the G-20. We had the G-8. We had a variety of different institutions coming out and saying, we want to do this.

Towards the end of the year, however, we saw that kind of die down. Why? Because although we have one big banking system globally, we have many countries with many different cultures. And all the banks kind of evolved slightly different in each one of the countries.

To have one set of regulations that applies to the whole world is an enormous undertaking. I don't expect it to happen any time soon.

BOULDEN: The other side of the coin is, as we said earlier, the banks did pretty well in the second half of 2009, especially the banks that did not take any government, massive government handouts.

What changed in 2009? M&A comes to mind, firstly (ph).

SILVA: Well, there's three things that have changed towards the middle of 2009 onwards. And the first thing was retail banking came back. Customers basically were getting more products -- more mortgages, more loans, things of that nature.

The second thing that came back was the trading environments. They were making money on trading. Now, not all banks were making money on trading, but the banks that weren't associated with the governments were making money on trading.

And lastly -- and this is the big one -- investment banking came back in the mid to the end of 2009. And that's the big one. That's where all the bonuses come in. That's where the real money comes in.

Those are the three areas of banking that have to come back. And all the banks that did not have government intervention, in fact, got all that business back. And that's why it was a very good end of the year.

BOULDEN: And some of these banks that did get government loans and government bailouts seem to be paying the money back quicker than anyone had expected.

Is that because, in some ways, 2009 became more of a normal banking year?

SILVA: Well, normal in one way, but in the other way, not really, because we found, though, two things had happened with government intervention.

The first thing was, is that they were going to dictate salaries and compensation plans. So, that's obvious. They wanted to get out of that.

But the second one was less obvious, but far more important. Customers, especially corporate and business customers, chose not to do business with banks that were associated with governments.

A couple of reasons. They didn't want their books to be opened up to the government. And secondly, they didn't know the future.

So, we saw all the corporate business migrate to banks -- like HSBC, like Barclays, like BNP Paribas -- the organizations that didn't have that association. And that's where the real profits came in. RBS, Lloyds didn't do so well.

BOULDEN: Now, let's look at the U.S., as well. I mean, obviously, an amazing amount of government intervention over the last few years. But Bank of America I think is one that is paying money back a bit early.

Did the U.S. banks come back quicker than maybe expected?

SILVA: I think they did, but for a very different reason, because over 100 banks actually went bankrupt. And I think that that's what America needed. It needed far fewer banks. There was just a huge over- supply of financial services products in the U.S.

So, as the industry -- if you look at the industry today, it's far healthier than it was a couple of years ago.

Unfortunately, however, most of the good business has gone to the large banks, the diversified banks. So we're seeing much less business in the small, the regional banks. They're almost going away. So we're going to have very few banks in the U.S. with a tremendous amount of power.


QUEST: Ralph Silva talking to Jim Boulden.

Now, Hollywood A-listers are sprinkling their celebrity status in some of the world's most prestigious stages. Each star comes with a hefty price tag. We wanted to know how theaters can afford it.

Katie Walmsley put them under the spotlight.


KATIE WALMSLEY, CNN CORRESPONDENT, NEW YORK (voice-over): Broadway's current cast lists look more like the lineup for the Oscars, as legions of Hollywood stars are migrating east to the Great White Way.

UNIDENTIFIED MALE: First mouth (ph) to be last swallowed.

WALMSLEY: Editor-in-chief of, Paul Wontorek, is not surprised.

WALMSLEY (on camera): Now, we do have so many A-list Hollywood celebrities on Broadway at the moment. What's bringing them in?

PAUL WONTOREK, EDITOR-IN-CHIEF, BROADWAY.COM: And more are coming. We have Scarlett Johansson and Liev Schreiber coming in "A View from the Bridge."

I do think that a lot of Hollywood actors are seeing the respect that they can get on Broadway, and how it can maybe transform a career and show another side of their talent. I think it kind of reminds them of why they got into acting in the first place.

CATHERINE ZETA-JONES, ACTOR: The greasepaint and the dust of the theater, it's just wonderful. Just to be on stage and to have that immediacy, and to be able to play. It's going to be different every night. It's where it all started. And it's just a fascinating, wonderful, wonderful, wonderful experience.

WALMSLEY (voice-over): But in this tough economy, how can Broadway afford Hollywood big-hitters?

WONTOREK: Hollywood stars can make a pretty penny. You know, a lot of times they have deals where they're getting a cut of the box office. So, if a Hugh Jackman show makes a million dollars in a week, he's definitely seeing a share of that in his paycheck.

ZETA-JONES: Right now, you know, given not just the economic climate, there's a missing link in movie-making, what is being (ph) (UNINTELLIGIBLE), what is going to be, you know, actually financed to be put on celluloid.

I think the theater has taken that role.

WALMSLEY: Indeed, according to the Broadway League, shows featuring stars and big ticket musicals are currently the main profit-makers. So, shows with A-listers are more likely to see a return on their investment.

WONTOREK: This past year, a lot of the shows that critics said were important pieces of theater didn't sell very many tickets. And if you look at Hamlet with Jude Law, or "A Steady Rain," Hugh Jackman and Daniel Craig, two shows that got OK reviews, and then they were sold-out hits.

People are a lot more selective now how they're going to spend their money. So, maybe shows without stars or shows that are more experimental, not a proven brand, might be having a harder time getting people in.

WALMSLEY: But who bears the real cost of stars on Broadway? With premium tickets for some shows priced at nearly $400, it may be you.

WALMSLEY (on camera): We're seeing record high ticket prices. Why are people still going? How can people still afford to see the shows?

WONTOREK: I think there are always going to be a certain segment of the population that can afford $250 tickets to see a Broadway show. There are always discount tickets. There's a wide price range. There are always ways to see a great Broadway show.

WALMSLEY (voice-over): Katie Walmsley, CNN, New York.


QUEST: Four hundred dollars for a ticket. Four hundred dollars for a ticket.

Anyway, the debate and the discussions that we have on this program, and the behind the scenes, I'm giving you a new commitment that, in 2010, we'll be showing you more of what takes place behind the scenes on QUEST MEANS BUSINESS. You'll see it through our Facebook page, which can be found at QUEST MEANS BUSINESS. That's -- just search QUEST MEANS BUSINESS.

There are a couple of rogue sites, a couple of imposters out there, those who want to get in our way. But you'll soon be able to spot the original one.

Join up. Have a discussion, have a debate. And who knows? Who knows, maybe (ph) even (ph) have a nice conversation.

When we come back in just a moment, I will have the last "Profitable Moment" of the year.


QUEST: Finally, tonight's "Profitable Moment." And this is the last QUEST MEANS BUSINESS of the year. I won't be with you live tomorrow night on New Year's Eve.

So, attempting to try and define the year -- and, of course, this year, to define the decade -- it's hard not to resist.

Should I focus on the fact that the major equity markets are actually lower than they were at the end of 1999, and the miserable predictions of rising unemployment and sluggish growth in 2010? Or should I celebrate my Barclays shares that have made more than 300 percent this year alone, and possibly more ahead?

It's an issue we've had to grapple with all year, as we've striven to bring you the best business program on television.

Is the glass half full or half empty? It's a subject we'll put at the top of our agenda in the year ahead.

It's a privilege to be with you in 2009. And I hope we've made the world of finance a bit more interesting -- yes, understandable and downright fun. And we will do it all again next year.

And that is QUEST MEANS BUSINESS. I'm Richard Quest in London. Whatever you're up to in the year ahead, I do hope it's profitable.