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QUEST MEANS BUSINESS
Wall Street Stocks Up; iPad Hype
Aired April 5, 2010 - 15:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: A bit of encouragement goes a long way. Wall Street stocks are up, 11,000, who knows when?
The waiting is over for U.S. Apple fans. Does the iPad live up to the hype?
And the lifeblood of London; so how do you modernize The Tube. I go underground as our new series, "Future Cities" takes to the air.
We're pre-empting "AMANPOUR" tonight to bring you a shorter, but just as special edition of QUEST MEANS BUSINESS. I'm Richard Quest, and yes, I mean business.
And a good evening to you, slightly later than usual, but we still have all the business news to bring to your attention. Investors in the United States came back from a long Easter weekend, and never mind the weather, there was spring in their economic step. The Dow Jones has been climbing throughout the day and within striking distance of 11,000.
(DESK BELL CHIMES)
That is well worth it. It had actually been higher a short while ago, just within a striking point of that number. It has given back a bit of the gains. It is the first trading day since Friday's big employment report where payrolls grew by 162,000 in March. Not only did those payrolls grew by the biggest gain in some three years. The significant part of that was, of course, a lot of it came from the private sector, having thought it was all going to be to do with the census collectors, actually the private sector employment was robust.
Some fresh reports on the U.S. economy have added to today's optimism, Felicia Taylor is at the New York Stock Exchange.
Well, we need to-we need to understand why we're off to such a roaring start of the week?
FELICIA TAYLOR, CNN FINANCIAL CORRESPONDENT: Well, Richard, it really has been just an ever so slow crawl back to that Dow 11,000. We almost got there. We were within about 12 points today. We are quite shy of that right now. And when we hit the mark it will be the first time since last September that we'll have seen that. So, Wall Street, as you said, like the jobs report we had a lot of growth in the private sector, which is what we've needed. And it wasn't just from the census count. But it was a mixed report.
You have to remember, we also saw more than 6.5 billion people that have been without jobs for at least six months or more. So it was kind of a mixed reading on that. Today, though, we got a unexpected rise on pending sales of existing homes. That is suggest that the tax credits for homebuyers are still helping sales. We also got another report that showed that the U.S. service sector grew for the second straight month. So, not only are we just seeing some growth in manufacturing but also the service sector which is significant, Richard.
QUEST: I have never been a huge fan of the idea of these so-called psychologically important number, but 11,000-and we're now just what, 35 or so, 40 points away from it-is considered to be key. When it gets there, as indeed it will, 12,000 by the end of the year? Peter Morici sent me a note today saying exactly that point.
TAYLOR: Yes. Well, I happened to agree with you. The benchmark carries a lot less symbolic weight than what was Dow 10,000. It is significant, though, because it may actually entice retail investors back into the market. What is important here, is the timing of all of this. As you well remember, investors have been incredibly nervous about the market, expecting another freefall like the one we saw in late 2008. Instead it has been this steady climb upward, getting back to those levels of September '08.
The point, though, is that this has been a very short turn around for a crawl back. Many people were afraid it was going take years to get back to 11,000. The problem, of course, though is that this rally about momentum. Analysts have said that the bull isn't really about growth in this. Traders are buying into the belief that a deep recession is followed by a strong recovery. And historically that is true. The fundamentals are not there so that trip to 11,000 could be very short lived.
QUEST: All right. Felicia, before you go, how many people do you know have bored you to tears talking about the iPad and that they picked one up in New York this weekend?
TAYLOR: I, for one, did not. I've got to tell you something though, the lines were around the block.
TAYLOR: The truth is, though, the iPad, there is still a lot of inventory. They didn't completely sell out. They are still in the stores.
QUEST: Oh! Oh, good.
TAYLOR: And for my money the jury is out.
QUEST: Oh, good so there is still time for you to nip and get one. Felicia Taylor-
TAYLOR: Oh, plenty.
QUEST: Just don't send me the bill. Many thanks, Felicia Taylor, in New York.
Now, on the whole stock markets have been looking healthier, whether we look in London, which is at 18-months high. Or across the Euro bourses. Paul Donovan, the deputy head of global economics at UBS is not so optimistic. He believes risk lie ahead in the United States and I needed to know where.
PAUL DONOVAN, DEPUTY HEAD OF GLOBAL ECONOMICS, UBS: There are a number of risks in the United States. The risk, which is diminishing is of a further downturn from the consumer. I think consumers in the States are, if not wildly optimistic, at least providing a fairly solid support to growth.
There is a risk of a downturn if the banking system had another convulsion, or if unemployment causes more concerns. But there, I think, you know, that risk is diminishing. Bigger risks lie ahead, though, the first is trade protectionism is back, that is very disruptive for an economy, particularly a globalized economy like the United States.
The second risk is fiscal policy. The U.S. is showing very few signs of coming up with a coherent plan for fiscal policy over the medium term. That ultimately is going to worry financial markets. And finally, I think the fact that the United States is experiencing lower trend rates of growth over the next few years, is a challenge markets have yet to seriously face up to.
QUEST: If we turn to across the Atlantic, and we look at the U.K., we had a recent budget in the U.K., which didn't tell us very much about anything, except there is going to be an election sooner rather than later. But nobody seems to be that concerned. Certainly the market isn't pricing in that much of a concern on U.K. government debt at the moment. Don't you find that a bit puzzling?
DONOVAN: Well, no. I mean, I think there are a couple of things which are working for the U.K.'s advantage. First and foremost, of course, the chance of default in the U.K. is zero. The Bank of England knows how to turn on its photocopiers, it can print the money if required; which is a situation, of course, which no Euro Zone country finds itself in.
Secondly, the U.K. started this crisis with one of the lowest debt levels in the OECD. Luxembourg was slightly lower, but that is about it. And a result it has got quite a lot of leeway in the short-term to allow its debt level to go up. And third, the U.K. generally doesn't like government debt-and really doesn't like government debt. The U.K. actually has a fairly good track record of bringing debt/GDP down. We go back to 1950, U.K. debt/GDP, 240 percent of GDP. By 1970, without particularly high inflation, without particularly strong growth that debt GDP level was down to about 50 percent.
To Asia, is Asia still the only game in town when it comes to growth, to strong economic growth? And by that I then put equity growth as well.
DONOVAN: Well, certainly as far as economic growth is concerned, yes, Asia is, I think, still powering ahead. It has got reasonable domestic demand, and as the global economy is going out of the abyss and into some kind of recovery, obviously that does something on the export sector. So, Asia-if we can exclude Japan from that-is doing fine in terms of economic growth. Equity markets, of course, have anticipated this. There is a lot of good news in the equity markets. We need to be cautious about how wildly optimistic we get about the Asian equity position, I think.
QUEST: If we have been, Paul, a global, spin the globe `round, since we have enjoyed Donovan's tour of the world, are you-at this time, are you more or less optimistic. Obviously, more optimistic from a very low point where we were a couple of years ago, but as the way policy makers are handling the recovery, not the crisis?
DONOVAN: Am I more or less optimistic? I think the answer is yes. I'm more and less optimistic. I'm more optimistic in the near term. The policymakers are, generally speaking, doing the right thing. Even Mr. Trichet has been doing the right thing. And that is saying something. So, we have generally an appropriate policy response. My concern is that policy makers are perhaps going down the wrong route in some aspects, the massive reregulation of the financial system, the moves toward trade protectionism. And absolutely, critically, the increasing protectionism we're seeing in capital flows, this is going to damage long-term growth prospects at a fairly critical juncture for the global economy. So, near term, yes, I'm more optimistic. Policymakers have done what they're supposed to. Long-term, though, I think we're in a structural downturn for global growth.
QUEST: Paul Donovan, always worth listening to, on his analysis. Of what's happening in the global economy.
When we come back in just a moment, the iPad, is it overpriced? Is it a toy or is this gadget the future of computing? Maggie Lake has one in her hands. And Maggie Lake has got the verdict.
MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: That's right. We've been talking to the people who sat in line all weekend to get their hands on this machine. And I have to tell you we were a little surprised about what they had to say. We'll give you the full reviews after the break.
QUEST: Shares of Apple are trading close to their all-time high on Monday's Wall Street. The company says it sold 300,000 iPads on Saturday when they went on sale in the U.S. Investors seem to believe Apple has another hit on its hands. But it is not going to be the sort of hit where it is obvious from day one.
Maggie Lake is in New York.
Maggie, all right, first of all, I insist on transparency in all of this. Transparency, are you a Mac or a PC user, normally?
LAKE: I knew you were going to ask this Richard. I used to be a PC person, but I have been migrating.
LAKE: I have been migrating and slowly been won over by Apple's offerings.
QUEST: Right so we need to-so that is a prism, pardon the pun, to which we now hear. All right. Tell us about this machine.
LAKE: Yes, so 300,000 the first weekend. Listen, that is certainly on the high end if not over a lot of the expectations that were out there. Remember there was a lot of skepticism we were hearing, when we were doing preview pieces to the release of this. So, it came out.
Not only that, this is the other impressive thing. And we'll just show it to you again, because you don't have it over there. It is a thing of beauty, I have to say. And we have the CNN MONEY web site, up here now. And it does a lot of cool interactive things.
So, 300,000 sold, but 1 million apps downloaded already; 250,000 e- books. And as you said, we're just getting going. Not that many sort of organizations actually had access to the test model. So, these are the early days. Pretty impressive.
The thing that really surprised me is that it is getting a lot of good, really good reviews from the sort of tech community. Again, I mentioned there was a lot of skepticism. In fact, one guy was saying on Twitter, "Yes, I bought an iPad. It is the most significant consumer computing device since the 1984 McIntosh.
OK, maybe he is an Applehead, too. But we wanted to sort of talk to the average folks who had to shell out the money for this, to see what they thought. Have a listen.
(BEGIN VIDEO CLIP)
KYLE VANHEMERT, GIZMODO.COM: It is really a different experience to sort of interact with the Internet and read the news with your fingers. You know, you can hold it up close to your face. You are not hunched over like you are with you laptop, but you can sort of lean back in your chair. And it is a much more leisurely experience. And it is a whole different way of computing.
MATT POLEVOY, PRODUCER, CNNMONEY.COM: I'm definitely super excited about it. You know, it certainly has, really, an amazing wow factor. But I'm kind of concerned about where it is exactly going to fit into my digital life. You know, it is not as portable as the iPhone is, which is great on the go. And when I'm at home it is not nearly as powerful as my desktop computer. So, it's sort of-you know, I'm trying to find the niche for it.
(END VIDEO CLIP)
LAKE: Did Kyle talk about leaning back and reading it, yes. Richard, yeah, we did get you a skeptic, though, because there are a little bit of mixed reviews and some questions. What about you? You going to buy one?
QUEST: I'll be in New York next week and I'm still debating that very issue at the moment. Maggie Lake we are out of time. We could talk more about this. We will talk more about this. Maggie Lake is in New York.
All right. Now, in all the hype let's not forget Apple's marketing team. The company makes sure there are fanfare around each product launch. They are impossible to miss and where ever you get conspicuous success others will want to hitch a ride. As Jim Boulden now reports from the heart of London's shopping district.
JIM BOULDEN, CNN INT'L. CORRESPONDENT: Every time Apple launches one of its iconic products, consumers scramble inside the Regent Street store, in Central London.
Outside on that same street, retailers are scrambling to secure space on the so-called Mile of Style. From Piccadilly Circus to Oxford Street, touted as the world's first purpose built shopping street when it was laid out in the early 1800s.
David Shaw was instrumental in getting Apple to open its first flagship store in Europe here. Others quickly followed with their first European outposts, such as Banana Republic, and Anthropologie.
DAVID SHAW, THE CROWN ESTATE: I was in New York meeting with retailers who wanted to come to Regent Street, and we-change happens on the streets and when the next change comes we have got people ready to move in to place.
BOULDEN: Regents Street wasn't so glamorous, even 10 years ago. Beyond Hamley's Toy Store, nothing really stood out. Not anymore.
(On camera): Gone are many of the chain stores, the airline travel offices and the tatty tourists shops, and in have come a number of one-offs for Britain, like, this Ferrari store.
(voice over): The tourists have taken note.
UNIDENTIFIED MALE: We came to shop, yeah? We're from South Africa.
UNIDENTIFIED MALE: There are less big fashion shops that you find in every shopping street. So that is what we like. And there are a few shops that we don't have in Belgium.
We've just been to Anthropologie which was really cool. We don't have anything like that in Australia.
BOULDEN: Next time you are here look beyond the merchandise. This furniture store still has the old organ from its days as local cinema. But the buildings, many rebuilt in the 1920s, have gone through major interior renovations. The World's first National Geographic flagship store, opened here. Store manager, Ian McCavish, used to work around the corner.
IAN MCCAVISH, MANAGER, NATIONAL GEOGRAPHIC STORE: I used to work on Oxford Street where the old stores, what comes with old stores is leaky pipes, drainage problems, infestation problems. And then coming here you have a fantastic facade from the 1800s, and then an up-to-date, from the 2000s interior.
BOULDEN: The stores and the modern offices above are the crown jewel in the Crown Estate's portfolio.
UNIDENTIFIED MALE: The properties are own by the reigning monarch, which is Queen Elizabeth, but the profits go to the taxpayer.
BOULDEN: When it comes to London shopping, the rich head to nearby Mayfair. Others go to Oxford Street for the big department stores and fast food. Regents Street is rediscovering a niche in between. Jim Boulden, CNN, London.
QUEST: This is a work of art. It is certainly one of the most famous diagrams in the world. It is, of course, the London Tube map. And I have to admit, everyday, I get The Tube to and from work. Along the Baker Lui Line, that's the brown one. I never realized how much work goes into keeping this running smoothly. In a moment, I go Underground, and spend time with the night workers renovating The Tube.
It is part of our look into today's "Future Cities". QUEST MEANS BUSINESS, good evening.
QUEST: According to the United Nations half of the people in the world live in cities. So, the future of how we live has a lot to do with how we manage those cities' development.
Here at QUEST MEANS BUSINESS we consider this to be part of our coverage, so we're launching "Future Cities". It's our new series about the business of sustainable living. You'll hear from engineers, from architects, from planners and from scientists. It is all about what cities could, and what cities should look like.
So, tonight where better to start right here in London with a story that affects millions of people just like me; those who the London Underground, nicknamed The Tube. After dark, 1,000 workers go deep underground to work all night to keep London moving. If there was ever an example of how a future city looks, the London Underground is one such case. I joined them on the nightshift.
QUEST (voice over): The sprawling city that is London; 600 square miles. And everyday 3 million Londoners go underground to The Tube, to get to and from work. I use it, too. Like most others I grumble about it. The closures, the delays, but now the company transport for London is carrying out the most extensive renovation of our Tube for more than seven decades. They want to make this network of tunnels, started in the Victorian era, fit for the 21st century.
It is a massive program of renewal, and it happens at night, when the tube has closed down. The city workers have long since left, and our shift can begin. I got a glimpse of this nocturnal world, this most secret piece of civil engineering.
(On camera): The intensity of the look on people's faces. They know they've got a limited amount of time and everybody is just going for it. We've only been down here a half an hour and the drilling is well and truly underway.
(voice over): A single team will work on four meters of track per night.
UNIDENTIFIED MALE: We've taken all the wooden (UNINTELLIGIBLE) because the manager (ph) said they were no good.
QUEST (On camera): Are you replacing the rail or it is just the sleeve (ph)
UNIDENTIFIED MALE: The rail needs to be changed as well, that's new rail. So all the rails are changed, we put a new design into the tracks to make sure the trains run a lot smoother, and get the longevity out of the tracks. Without it, there won't be no future for The Tube.
QUEST (voice over): In total 650 kilometers of track will be replaced across the network. It will cost in excess of $22 billion over the next 8 years.
(On camera): Transport for London is concerned that commuters don't really understand the work that is taking place every night. So, they have created these posters across The Tube network.
When you hear commuters complaining does it annoy you?
UNIDENTIFIED MALE: People will moan no matter what in life, that's London for you, you know? If we could take them all down hand by hand and show them exactly what we do over night time, then they'll have a bit more sympathy towards what we do. And what we are doing is we're building the system for them. We spend thousands and thousands of hours down here every year, with hardly any interruptions to traffic.
QUEST (voice over): Think of these tunnels as the arteries, through which the economic lifeblood of London pulsates, every day.
They have become clogged, they're worn, tired and old. Now, think of those men and women up there as the surgeons and doctors cutting away, renewing, taking out the old, putting in the new.
Tell me what happens now, because time is getting tight.
UNIDENTIFIED MALE: Well, I mean, at the moment the track would be lowered now, they are getting themselves ready to start pouring concrete. We are on schedule for the train to pass through.
QUEST: And at what time will you start to tell people to leave?
UNIDENTIFIED MALE: We have to be out of the station by half-past 4:00.
QUEST: You going to make it?
UNIDENTIFIED MALE: Easy.
QUEST (voice over): It's pretty hard to believe that within an hour and a half all this will be cleared away, and trains will be running on the track again.
UNIDENTIFIED MALE: Perfect, it's all perfect. It is all good.
QUEST: High up above, London will soon be waking up, just as we are heading home to bed. The night crew that's worked underground, overnight is finished for tonight at least. Sometimes a transport system is so ingrained into the fabric of the city, it just isn't possible to rebuild it and start again from scratch. The Tube keeps London moving only with constant care and attention, usually after dark. It is something I'll think about next time I'm going from A to B.
QUEST: Waste energy, the purpose of a plant being built right now, outside London.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: There is a lot of hope in the concept of waste to energy, or waste to new materials, because we have solutions that will allow us derive a lot of energy from what we consider today, as waste. And all the parts of society stand to win in the future from this kind of solution.
(END VIDEO CLIP)
QUEST: Our "Future Cities" will be visiting cities around the world. We might be coming to yours.
And that is QUEST MEANS BUSINESS for tonight. I'm Richard Quest in London. Whatever you are up to in the hours ahead, I hope it is profitable. "WORLD ONE" is after the break.