Return to Transcripts main page
QUEST MEANS BUSINESS
Spain Pays A Fat Premium To Keep Its Debts In Control; U.S. Senate Debates Bush-Era Tax Cuts; Settling the Spill; Retraining America's Jobless; Sartorial Stir
Aired December 16, 2010 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, CNN INT'L. ANCHOR, QUEST MEANS BUSINESS: Spain pays a fat premium to keep its debts in control. We'll have the latest from Madrid for you.
A taxing deal? Obama's controversial tax compromise faces its biggest challenge yet.
And no sexiness in the city: As UBS lays down the law on how to dress.
I'm Max Foster in for Richard Quest. This is QUEST MEANS BUSINESS.
Hello to you.
The financial future of the Euro Zone is on the table. European heads of government are getting together to weave a bigger safety net for countries that get into deep water with debt. Spain is the latest country to wade into the money market and it is paying an uncomfortably high price to stay afloat. In a bond auction on Thursday Spain raised a total of $3.2 billion. That was less than its maximum target and it came at a very heavy cost. On a 10-year bond Spain paid around 5.5 percent for 15 year debt. Spain is paying around 6 percent. Germany gets half that rate on its borrowings.
I asked our Madrid Bureau Chief Al Goodman what Spain expected from the auction.
AL GOODMAN, CNN MADRID BUREAU CHIEF: Nearly 6 percent average interest is what the Spanish government had to offer this day in order to get investors for its 15-year bonds. They are paying 5.95 percent, the Spanish government will pay them on an average interest; that is the highest rate in about a decade. And that is up from 4.54 percent, when these same 15-year bonds were issued just two months ago.
Now the other part of the sale, that was the smaller part of this $3.2 billion bond sale. The larger part was 10-year bonds. But the interest rates were also up there. The Spanish government had to do in order to get buyers; 5.44 percent is what they'll pay on average interest on the 10-year bond. And that is up from 4.6 percent just last month. It means that the Moody advisory, a day earlier, just before this sale warning that it might have to downgrade Spain, apparently pushed up the prices that the Spanish government had to pay. It also comes at the worst possible time for Spain, trying to cut its budget deficit. Now it is going to have to pay more on those bond interests, Max.
FOSTER: And what is also worrying is they didn't actually sell all the bonds they intended to sell.
GOODMAN: Well they say that they were well within the range. They were trying for 2 to 3 billion euros. And they go 2.4 billion euros about $3 billion U.S. So they say that went pretty well. That they were oversubscribed on both the 10- and 15-year bond; 2.5 oversubscribed on the 15-year and 1.7 oversubscribed on the 10-year. The problem is, as Moody's is laying out, they are worried, Moody's is worried and others are worried what Spain is going to have to raise next year in 2011. And they are saying it could be 170 billion euros for the national government.
Now today they have sold 2.4 billion euros worth. They have to raise 170 billion next year. How are they going to get that? Well they are going to partially privatize the national lottery, the airport operator, that will bring in 15 billion of the 170 billion, according to Moody's. And in addition to the national government the regional governments are going to need 30 billion euros and the banks are going to need 90 billion euros. So what Moody's is saying is where is Spain going to get all this money next year, that they are going to need, to keep doing business, Max.
FOSTER: As we stand now, Al, Spain is selling enough bonds to keep up with its debts, right?
GOODMAN: It is doing that and it is talking about, today, that there was interest, unofficially, something on the order of 60 to 70 percent of the buyers this day were from outside of Spain, we are told. So that was seen as a good sign here in Madrid. That there is interest, but of course there is interest if you pay a high enough interest rate, Max.
FOSTER: Well, that was Al speaking to me earlier. Let's get into what those numbers mean for Spain a bit more, and indeed, for Europe. And for that we need Jim. And of course, glass of the finest Sangria.
It suits you, Jim.
JIM BOULDEN, CNN FINANCIAL CORRESPONDENT: You know, it is about the half empty, half full scenario, I think, Max. Because at first glance these numbers don't look so good for Spain, half empty. The government is suddenly finding it very expensive to borrow. As we said earlier, that yield on the 15-year bond is 31 percent higher than October. Imagine, your mortgage suddenly jumping by a third. That is what Spain is going through, right, at this problem.
The problem for Spain would be a problem for everyone in the Euro Zone, in and out. Because Spain of course, is Europe's fourth largest economy. And in GDP terms it is bigger than Greece, Ireland, and Portugal combined. So think of this like a firewall protecting the European mainframe. Spain needs to be able to stop the spread of problems in the bond markets. If it were to need a bailout the European project, itself, would look bankrupt.
That is half empty. Half full, well, it was oversubscribed, this bond. Both bonds sold by Spain today. And it is likely that hedge funds- hedge funds were scooping up this bond, because, some say, it could be the highest they could see if Spain gets its house in order, Max.
FOSTER: OK, Jim. Thank you very much indeed for that.
Well, Bob Parker, is a senior advisor at Credit Suisse Asset Management. I put it to him, that in terms of price today's auction just wasn't what the Spanish wanted.
(BEGIN VIDEO CLIP)
BOB PARKER, SENIOR ADVISOR, CREDIT SUISSE ASSET MANAGEMENT: Well, what you've seen over the last few days is pressure, again, on the Euro Zone government bond markets. And recently, obviously, the pressure has been focusing on Spain. Because of the announcement by Moody's that although Spain would keep its double A credit rating it was on negative credit watch. So as a result you have seen further selling of Spanish bonds. You've seen the spread on the yield between Spanish bonds and German bonds widen quite significantly.
And you know, this auction, I think, has crystallized that negative sentiment to Spain and to the Euro Zone sovereign debt market as a whole.
FOSTER: So when Spanish bonds are yielding something like 5.5, 5.9 percent that is manageable, I guess, in terms of repaying the debt. But at what point does it become difficult?
PARKER: Well, it becomes very difficult in the case of countries like Ireland and Greece. And Greek debt is now trading on a yield well above 11 percent. Irish debt is trading close to 9 percent. There is no precise answer to your question, but if we get into a zone, let's say, where Spanish debt is yielding somewhere between 7 and 8 percent, that becomes problematic.
I would also add that for the Euro Zone, Spain is very important, because it is the fourth largest economy. And whereas, you know, Greece, Ireland, Portugal, are the very small component of the Euro Zone GDP. You can't make that statement about Spain. So Spain is the one that really worries the EU and the European Central Bank.
FOSTER: You don't always get that impression. You get the impression that they think Spain is a sound economy and it is going to be fine.
PARKER: Well, Spain was a sound economy, but there are a number of structural problems with the Spanish economy. Clearly there was a major real estate bubble. That burst, as was the case in Ireland. Who financed that real estate bubble? And it was mainly the Spanish regional savings banks. And the Bank of Spain is actually being very aggressive in reorganizing that savings bank system. I think actually that reorganization will be successful.
Two other problems in Spain worth mentioning is its lack of competitiveness, relative to Germany. And on the work we do we estimate that Spain is about 40 percent uncompetitive, relative to, and albeit, very competitive Germany. And then the fundamental problem of unemployment needs to be addressed. And Spanish unemployment, today, is 19.8 percent. So you know, that is-
FOSTER: You can see why people aren't buying the bonds, basically.
PARKER: Well, people are worried that the credit rating may get downgraded further. They are worried about the refinancing of Spanish debt when it comes due in 2011 and 2012.
FOSTER: So when European leaders meet, what can they do to reassure the markets and get them to start buying bonds again? Because there is not enough in the bailout fund, is there, to cover Spain on top of the other countries.
PARKER: There is just enough to cover Spain. There is certainly not enough to cover Spain and Italy.
FOSTER: Spain and Portugal? OK.
PARKER: But there is just enough to cover Spain, Portugal, Ireland, and Greece. And one assumes that the IMF funds would be forthcoming as well. I think one actually ought to make a number of positive statements about Spain, however. One shouldn't be too negative, because the Spanish government have actually taken very strong action in potentially cutting their budget deficit. They have announced an accelerated privatization program. And there are cuts in taxation and cuts in wage costs and increases in taxation. So quite strong action is being taken the problem is it hasn't yet convinced the markets that that action is sufficient.
FOSTER: Bob Parker, there.
Well, stocks had a fairly indifferent day in Europe. Most of the main markets ended the day little changed from the open. Shares of BP helped to drag the FTSE 100 over the red line. The oil giant lost more than 1 percent after the U.S. government launched a lawsuit against the company. In Frankfurt Deutsche Boursa (ph) was the stand up performer and CAC (ph) therefore, gained 2.7 percent in Paris.
It looks like Spanish traders might as well have stayed at home. The IBEX hardly moved an inch, in fact Spanish banks took a hit today. But those losses were neatly offset by gains in other sectors, like energy.
Which is how we will be live at the European Union Summit where heads of government are working out how to deal with the countries that need financial help. We are getting reports from Reuters at this point that a deal has been reached, of some sort. We are going to get those details for you from our CNN correspondent there.
Next we are heading to Washington. We'll tell you why President Obama's tax compromise is not having an easy time in the House of representatives, even though the Senate passed it easily.
FOSTER: President Obama's tax compromise is facing its toughest challenge yet, today. The U.S. House of Representatives, in Washington, is set to start debating the bill, but House Democrats aren't happy.
If some version is not signed into law by the end of the year, all Americans will face a tax rise come January. And federal benefits from any unemployed people would also be cut off. So it is a big deal. The bill easily cleared the U.S. Senate yesterday. It looks like it will be a much tougher seller, though, in the House. Some lawmakers there see it as a compromise too far. The bill means that democrats would get what they want, an extension of federal unemployment benefits, in return, Bush-era tax cuts for even the wealthiest Americans would be renewed.
Without congressional action, those cuts, those tax cuts will expire at the end of the year. Now House Democrats have warned that they may change the bill, especially the part that lowers the estate tax. Now if the house does pass a modified version, it would go back to the Senate for approval, but Senate Republicans have warned against any changes.
Brianna Keilar joins us now live, from Washington.
What is the latest you are hearing from there Brianna?
BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Max, just here in the last hour, this bill hit a major stumbling block in the House of Representatives. Democrats were just trying to bring it to the floor, in a preliminary vote, and in what was kind of an unexpected move, they had to pull it from the floor when it became obvious that they weren't sure if they were going to be able to pass this measure.
Here was the moment when it happened. This is a Democrat, reading this.
(BEGIN VIDEO CLIP)
REP. JAMES MCGOVERN, (D): We have people, we have children who go to sleep at night hungry. In the richest country in the world, we should be ashamed of ourselves. We can do better than add to the deficit by giving more tax cuts to the wealthy.
Mr. Speaker, with that I withdraw the resolution.
UNIDENTIFIED MALE: Resolution is withdrawn.
(END VIDEO CLIP)
KEILAR: Now we are hearing form a House democratic source that the plan is still to have a vote on this tax cut today. But this is the extension of these Bush-era tax cuts. This is a very big deal. This would extend these tax write rates for all Americans, which are said to have expire at the end of the year. It would extend unemployment benefits for millions of Americans. And you can just see how serious the situation it would be if these things were allowed to expire.
But this is President Obama's problem with his own party. Liberal Democrats are very upset with, as you mentioned, Max, this estate tax provision. It would exempt inheritances of up to $5 million from being taxed at all. And then above 5 million it would be taxed at a rate that a lot of liberal Democrats just consider to be too little. They say this is a give away to the rich.
And on the flipside you have Republicans saying no, this allows people who have small businesses who are maybe passing them down in the family to pass them down. And for them to retain their value and still be lucrative. But this is very up in the air and we are just two weeks away, really, from the deadline here.
FOSTER: Yes, Brianna, we are just looking at those live images there, from the House. We are going to bring the vote, of course, as soon as it comes in to CNN.
But if it does go back to the Senate, gets approved, who is the winner here?
KEILAR: What do you mean, it if it changes-if the changes to this bill are approved?
FOSTER: If the bill sort of goes back to the Senate, the Senate is happy, it is a compromise on all sides, isn't it? No one has really won, it is just a way of getting this through before January?
KEILAR: No, that is exactly right. I mean, the problem is if it is not going to go through. And there is no one saying at this point, I mean, Democrats and Republicans are saying we need to get this through. Because if these tax cuts are not extended, everyone is going to loose here. Almost all Americans will see their taxes go up. And you would have millions of Americans losing their unemployment benefits. You can just imagine how politically catastrophic it would be for Congress not to push this through.
FOSTER: OK, thank you so much for joining us from Washington, Brianna, great stuff.
Now, let's find out how Wall Street is fairing ahead of the vote. It is, of course, watching this and Felicia Taylor joins us live from New York.
A lot of people, economists, looking at all of this and saying it makes no economic sense, but the politics is outweighing the economics at the moment. But how is that being interpreted where you are?
FELICIA TAYLOR, CNN FINANCIAL CORRESPONDENT: Well, the truth is the markets have pretty much already priced this in and they did so weeks ago. And for them, frankly, the traders her at the New York Stock Exchange, there is zilch in terms of reaction. Totally unmoved by the events happening in Washington.
Stocks are picking up a little bit of steam later in the day. Right now we're up just about 38 points that is actually off the highs of the session, so far. We have a decent number on unemployment claims. They were down 3,000, but obviously that is not enough to really make a difference in what is still a jobless recovery.
Intraday, that was interesting news. The Dow did break through 11,500. Naturally that is a key psychological level. We are below that now, by about 5 points. The problem here is that we have flirted with that number before, not been able to trade above it for long and once again today we're seeing the same thing. We are also close to a key level on the S&P and that is at 1248. We are below again, that level, again today. So once again, not able to stay and break through it. If the market can, though, breakthrough those levels we are going to have an even stronger Santa Clause rally than we have already got. The markets are up about 2 to 4 percent this month. So, we're not doing so bad. Tech stocks are leading the game. A couple financials there, Bank of America, in particular, Max.
FOSTER: I know that FedEx, there was some news on FedEx today. It is often seen as a barometer, isn't it, of the U.S. economy? Because if the economy is doing well, FedEx does well. So what did you make of what we heard from them today?
TAYLOR: This is a really interesting story. At first glance it was very disappointing. And the reaction of the stock market over night and the futures were to punish the stock. FedEx reported a solid rise, though, in both third quarter sales and earnings. But it actually missed the mark in terms of expectations. But here is the rub on the story. Sales were up 12 percent, income fell 18 percent. OK, so there is the big number, income fell 18 percent. But that is because-listen to this-the company is paying its employees more money. They increased the number of full-time employees by 5 percent. And also reinstated programs that had been eliminated during the recession. So, naturally investors changed their minds, once they sort of read through the tea leaves a little bit.
FedEx shares right now are up, well, 1.75 percent, so far. The big missing factor is obviously the month of December. So that is the other critical aspect of this. It is going to make all the difference for the company. They raised the full-year guidance, because naturally December is the major month when it comes to shipping products and shipping presents, because of the holiday season. And again, on Monday, it had its busiest day in the company's history; 60 million packages were shipped on Monday.
So the only reason that income actually fell is because it is being gentler and kinder to its own employees and investing money back into its company, not only hiring people, giving them bonuses and paying them on a more regular-on a kinder basis. The company is doing fine and it is rewarding its workers. That is the story for FedEx, which I think is amazing.
FOSTER: It is worth reading the details sometimes, isn't it, Felicia. Thank you very much indeed.
Now rewriting Europe's main rule book. Next we'll tell you why European leaders maybe tinkering with the Lisbon Treaty.
FOSTER: As Belgium, Spain and Greece are flashing yellow cards for possible downgrades we are hearing a report that Europe will make small changes to the Lisbon Treaty to ease the debt crisis. European leaders are meeting in Brussels for two days of crisis talks and a tweak to the Lisbon Treaty could help created a permanent legally air-tight rescue fund for the Euro Zone.
Fred Pleitgen joins us now from Berlin.
What do you understand as to what has been agreed, Fred?
FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT: Well, certainly as you said, in order to create this permanent fund they have to change the Lisbon Treaty somewhat. Now the important thing about this, as you know, it took a very long time for the Lisbon Treaty to be ratified anyway, and it was quite controversial at the time. So they want as few changes to it as possible. However, the leaders of all the European countries that use the euro, they have for a long time agreed that they need a permanent mechanism to deal with countries that are in trouble or in danger of defaulting.
Right now, Max, as you know, there is only a temporary fund, worth about 750 billion euros. So they want to create something more permanent there. And earlier today, Jerzy Buzek, who is the head of Europe's parliament, he went out and he said that it is absolutely essential to create such a fund. Let's listen in to what he had to say.
(BEGIN VIDEO CLIP)
JERZY BUZEK, PRESIDENT, EU PARLIAMENT: The stability of the euro is the key issue to all 27 member states. And a key issue for our citizens, because citizens don't want to see the value of their money shrink. To avoid that, we have to enhance and strengthen its stability, euro stability. Permanent European stability mechanism can be the answer.
(END VIDEO CLIP)
PLEITGEN: So, Max, what he is trying to say is that essentially this is about making clear to everyone that the nations that use the euro are not going to let the euro go away, or not going to let the euro fall. Now, the big question that has been around this European summit, is when would such a crisis mechanism actually come into effect? And the Germans are quite clear on this. They say they want this to be a matter of last resort. They say only if the current is in fundamental danger of losing its stability, only then, would such a mechanism come into effect, Max.
FOSTER: I guess, we'll have to wait and see how the markets react to see whether or not it makes life easier for countries like Spain, in terms of raising debt and Greece, of course, Ireland. But in terms of this sort of fund, I thought Angela Merkel and Sarkozy had said they don't want to put anymore money into a fund. Or am I just getting things confused here?
PLEITGEN: What they have said is they don't want to give anymore money to the temporary fund, which is already in existence, right now. Of course, what we have to note is that right now we have this temporary fund, which as I said, is worth about 750 billion euros. Part of that comes from EU, the other part of it comes, of course, the international monetary fund.
The Germans and the French said they don't want to put any more money into that fund. However, this new mechanism is something that might have to be propped up even more. Certainly that is something that the Belgium Prime Minister said, before the EU Summit. He said we have to make it absolutely clear that our pockets are deep and that we are willing to shoulder and crisis that comes. Now one of the big concerns that the Germans have is that they believe that if they make it too easy for countries that are debt ridden to get a hold of this money. They will believe it will impede on their desire to be more financially responsible with their money. You are talking about Greece. You are talking of course, about stain, and Portugal. So those are all things that weighed very, very, on all of this. And tomorrow we will, obviously, see what they are going to come up with.
This is going to be a very, very important EU summit. You can literally sense, by the responses that you are getting, How important this could be to the financial stability of the Euro Zone. And also, of course, as you said, when the markets open tomorrow morning, we'll see how they react to all of this, Max.
FOSTER: OK, for your sake, I hope the snow calms down a bit. Fred, thank you very much indeed.
We are going to keep across that story for you, Reuters reporting that some sort of agreement has been reached for a permanent bailout fund.
Now, first the oil leaks, now the Wikileaks, if bad news always comes in threes, then what is on the horizon for BP, with a lawsuit looming, to end a trouble 2010. We'll look at BP's future, in just a moment.
FOSTER: Welcome back. I'm Max Foster. You are watching QUEST MEANS BUSINESS. And these are the headlines.
FOSTER: Ivory Coast shot and killed at least nine unarmed protesters during demonstrations over that nation's disputed presidential election. Supporters of President Lauren Gbagbo and his election rival, Alassane Ouattara, exchanged gunshots for several hours outside Ouattara's hotel and the state TV station. The two men both claim that they won last month's presidential election.
And just around 19 minutes ago, WikiLeaks founder Julian Assange walked out of a London courtroom hours after a judge cast aside Sweden's objections and granted him bail. He thanked supporters and the media and said he intends to clear his name. He'll stay at a friend's mansion under tight restrictions until a court hears Sweden's request to extradite him for questioning in a sexual assault case.
Now, it's been a rocky 24 hours for BP. New documents from WikiLeaks and published in Britain's "Guardian" newspaper say the company narrowly avoided a catastrophe in Aberr -- Azerbaijan after a massive gas leak in 2008. And during last night's show, we brought you news of the lawsuit from the U.S. government over one they didn't avoid, which is the Gulf of Mexico oil spill.
Now, shares of BP were down in London today by around 1.3 percent on that news. This graph shows how BP's shares have done since the start of the oil spill saga. They're down more than 28 percent in value from their peak in April, April the 20th, when the spill actually started.
Now, things could get worse for BP, a lot worse, if that lawsuit goes against them, of course. If the courts find BP to be grossly negligent, it could face fines of up to $4,300 per barrel of oil spilled. Given that 4.9 million barrels leaked into the Gulf, that would mean a possible fine of more than $21 billion.
BP has already put aside around $20 billion to deal with what it calls legitimate claims, but last night, the company warned that the total cost of the spill could be as high as $40 billion.
Back in May, the investment firm, Oppenheimer & Company told investors to buy BP's stock, saying the upside potential outweighed the possible down side.
But is that still the case?
Their managing director and senior analyst, Fadel Gheit, joins me now from New York.
Thank you so much for joining us.
What's your view on BP after what we heard from Washington yesterday?
FADEL GHEIT, MANAGING DIRECTOR, OPPENHEIMER & COMPANY: Well, we have not really heard anything new. We -- that was expected. BP, as you mentioned before, took a $40 billion write-off. The outside potential in this write-off could be another $20 billion. These are large numbers. But it's already reflected -- most of these charges are already reflected in the -- the stock, in our view.
It remains to be seen what kind of additional penalties the fur -- the U.S. government will impose on BP. So far, BP spent $60 billion on the cleanup costs and gave about $4 billion in compensation. They're still incurring about $15 million a day in cleanup costs. So this, unfortunately, is going to stay with them for probably most of next year.
So they will spend another $3 billion or $4 billion, maybe even more, toward the cleanup costs.
So after that, nobody really knows what kind of settlement is going to come, what kind of penalties BP will have to pay. But most important than that, if BP is found negligent, then they will be responsible for 100 percent of the liability. If not, they're only responsible for 65 percent of the liability. And that is a very big difference.
FOSTER: And there are figures, I guess, but it's all pretty speculative, isn't it, because we just don't know where the lawsuits will go, we don't know how many lawsuits there will be and the figures could be astronomical.
But, of course, this is a company with huge amounts of resources and cash. So it can handle a pretty large amount of fines, can't it?
Have you got any idea of how far it could go?
GHEIT: Well, let's put it this way. BP, before the Macondo accident, market value was about $180 billion, $190 billion. The liquidation value of BP is more than $300 billion. So a $60 billion outside liability, assuming no other party will participate in this liability, that is only 20 percent of BP market value. It's a large amount of money, but obviously BP is a very large company, too.
FOSTER: And also, everyone is focusing, of course, on what the Justice Department is saying, but a lot of analysts are also pointing out that, actually, the U.S. authorities cleared these operations, you know, gave them the clearance to carry on. So there's liability on that side, as well. So they can't put the full onus on the companies involved, perhaps.
GHEIT: Correct. There is plenty of blame to go around. They already -- companies were named in the lawsuit. The hearings will start in 2012. Litigation can take years, if not decades. Exxon Valdez lasted 20 plus years. And the final settlement was less than 5 percent of the -- to the liabilities.
I'm not sure that BP will have the same luck, but I am not at all looking for liabilities beyond the $60 billion, which, in my view, is an exaggerated number.
But it is what it is.
FOSTER: OK, Fadel Gheit, thank you very much, indeed, for joining us from Oppenheimer.
Appreciate your time.
Now, the job market in the U.S. is still in need of a boost. But if your career needs a reboot, then why not retrain?
We'll meet the Wall Street banker who went from finance to fashion, in just a moment.
FOSTER: First time jobless claims fell slightly in the U.S. this week, but unemployment remains stubbornly high in the U.S. and in Europe and in many other developed economies. If you're looking for a job, maybe it's time to try something completely different, though.
Poppy Harlow has been looking at the options for retraining.
You're not going anywhere, are you -- Poppy?
You've got me worried.
POPPY HARLOW, ANCHOR, CNNMONEY.COM: No, no, certainly not, Max. But, you know, in this country, we may have had a slight improvement this week in jobless claims. Still, though, over 15 million Americans unemployed, many more underemployed in this country.
Salop are turning to retraining programs. In fact, the federal government has poured billions upon billions of taxpayer dollars into these job retraining programs.
So what we wanted to find out is are they working and is this the right way to spend taxpayer money?
We spent a day with a former banker who got government money to become a jeweler, of all things.
Take a look.
HARLOW: (voice-over): David Aleprin is a long way from Wall Street.
DAVID ALPERIN, JEWELRY DESIGNER: It was a major transition in my life. I lost my job, went back to school and started this new business.
HARLOW: After Citigroup laid him off in 2009, David reassessed and completely switched gears.
ALPERIN: I started talking to my sister, who had done this program for jewelry design. And I realized that this was something I was always interested in.
COLLEEN GARDNER, NEW YORK STATE LABOR COMMISSIONER: I think job retraining is critical. We're seeing that employers want people with higher levels of skill.
HARLOW: About $4 billion has been appropriated for the Workforce Investment Act -- the biggest federal job retraining program.
But is retraining the answer for America's unemployment crisis?
A 2008 study released by the Labor Department questioned conventional wisdom.
KEN TROSKE, CO-AUTHOR, WORKFORCE INVESTMENT ACT STUDY: The impact for the typical worker, it did not seem as if the benefits were particularly large.
GARDNER: I absolutely disagree with that. We see time and time again people who have additional training, they are able to go into jobs.
HARLOW: But critics say the challenge is predicting those jobs.
TROSKE: The problem is nobody really -- you know, I've been a labor economist for -- for over 15 years and I don't do a very good job of predicting what the next hot new job is.
I don't think we should get rid of the job training programs. I think we need to work on improving them so that they -- they're better targeted.
ALPERIN: These are my jewelry cases.
HARLOW: And red tape almost sabotaged David's quest for a new career. Because he was laid off from the financial industry in New York, he qualified for a national emergency grant for job retraining.
GARDNER: This was helping people who lived on Main Street but worked on Wall Street.
HARLOW: But going to school for jewelry design?
Well, that raised some eyebrows at the Labor Department.
ALPERIN: They said that's not really what we'd classify as an in demand occupation.
HARLOW: (on camera): Or the job of the future?
ALPERIN: Yes. And that -- that was the part that kind of frustrated me. I said here I am trying to do something of interest and follow a passion.
HARLOW: So you almost didn't get the money?
HARLOW: (voice-over): But in the end, he did -- $10,000 for tuition and expenses. And less than two years later, he sells the jewelry he designs and a friend's clothing line at his Brooklyn boutique.
ALPERIN: This is my 14 carat gold bezel ring (ph).
HARLOW: (on camera): Two years ago, you were a banker.
HARLOW: And -- and now you're running your own boutique, trying to make it, trying to turn a profit.
Are you happier now?
ALPERIN: I am. I am. I work harder now.
(END VIDEO TAPE)
HARLOW: And, Max, no surprise he works harder. He's the only person that runs that shop. If he even wants to go out to lunch, he has to put a sign on the door that he -- he can't be there.
But what's very interesting is that money -- federal money for these programs has gone down even though the demand has gone up. The demand from 2007 to 2009 for those federal job retraining programs has increased 150 percent. Of course, that's because of the recession. But, also, the bottom line here and what we saw in that story is that job retraining works some of the time but not necessarily if it's not a targeted mission.
And in this case, the subject you saw, David, almost didn't get the money because they didn't consider his position a, quote, unquote, "job of the future" -- Max.
FOSTER: OK, Poppy, thank you very much, indeed.
The jobs market really being affected by this economic crisis, as some are calling it now.
Also in the United States, federal authorities have announced the arrest of five people associated with technology firms. They're being charged as part of a sweeping insider trading probe on charges that they sold company secrets to so-called expert network firms with ties to hedge funds. Those people come from -- from Advanced Micro Devices, Flextronics and Taiwan Semiconductor. Another manager from Dell Computer pleaded guilty to insider trading charges last week. The fifth person arrested was from a California networking firm called Primary Global Research.
An FBI official said, quote, "The information trafficked by the four consultants went way beyond permissible market research. It was insider information."
Among the secrets the U.S. alleges was sold, information about Apple products still in development.
Now, if you thought that the weather was getting better in Europe, think again, because Guillermo has some disappointing news for travelers and those who are visiting Europe; those who live here, too -- Guillermo. GUILLERMO ARDUINO, CNN METEOROLOGIST: I mean, I am always put on the spot.
Now, look at the motion here.
You see the motion, how it's coming down from the north, the Northern Hemisphere, cold weather?
This is the next two days, right?
It's going to get cold. It's going to get snowy. And those who live in London, like Max, dusts? In two days, a snowy weekend.
Now, let's talk about those people who are at airports and who, you know, are going to be evaluating the situation and thinking what's going to happen with me?
Am I going to be able to travel as I planned or not?
Hmmm, I don't know, because we're going to see, also, temperatures, especially in the east, going down. But look, this new wave of cold air coming from the north. And look at the -- the time there and the date. So you see how it's coming down there along with this very cold Arctic air mass that is coming from the south, the one that you are seeing right now, bringing icy conditions. Temperatures going down. We're going to see sea effect snow again.
I was in Paris until yesterday. It was getting cold. But now there is a new system that is coming into that area, France, into the alps, into Germany, Britain, Belgium, especially. I was looking at the European Union alert. Belgium has a red alert, because you're going to see a lot of snow. We are going to see a lot snow in the next two days in Belgium.
Look also here in the Alpine area of France, where we see some snow. The -- the Carpathian Mountains here, too, with snow. Athens, 11. I haven't seen this in ages. So it's cooling down. The high for Berlin, minus four; London, zero; Paris, one on Friday and getting worse, because, look at this -- we may see some snow on Saturday, as I was showing you before. Then the clouds go away. High pressure takes over and all the water or warm air we have left is going to dissipate and go away.
So it's going to be a really tough one -- tough at the airports -- Paris, London, Amsterdam, Berlin, Dublin, Brussels, all these airports, in addition to those living in these cities -- Max.
FOSTER: I wish I had never asked.
Guillermo, thank you.
FOSTER: Now, up next, it's the style that's driving Switzerland wild -- the dress code for UBS staff has been turning heads in the business world.
Stay with us.
We have a couple of very special models coming up for you.
FOSTER: Now the dress code -- the dress code given to UBS employees at their Swiss retail branches has raised a few eyebrows in the business world, to say the least. The 43-page code lays out some dos and don'ts for what staff should wear to work. And now other businessmen and women are weighing in.
We asked Bob Parker, Credit Suisse, what he made of Star Coats (ph).
(BEGIN VIDEO CLIP)
BOB PARKER, SENIOR ANALYST, CREDIT SUISSE ASSET MANAGEMENT: I think it is very important to dress well when you have a client meeting and, you know, when you are, for example, speaking at a conference or if you come on CNN. You know, if you're working in a non-client facing role, frankly, I think, you know, reasonable casual dress is absolutely appropriate. You don't have to wear a suit and a tie.
I think, you know, not personally, I actually have a degree of cynicism about dress codes. I think that common sense, frankly, should prevail.
(END VIDEO CLIP)
FOSTER: That's Bob's view.
Sarah Curran knows a thing or two about fashion.
She is the CEO of My-Wardrobe.com and she is one of the chief execs we are following in our series, The Boss.
Our digital producer, Samuel Burke, got her opinion.
(BEGIN VIDEO CLIP)
SARAH CURRAN, CEO, MY-WARDROBE.COM: I think, you know, every sector of business has got almost a uniform and you dress according to the area. (INAUDIBLE) my wardrobe obviously is a function. So (INAUDIBLE) information about that. And so everyone is dressed sort of (INAUDIBLE) how I dress.
But I think, in some ways, it's a way of controlling the grand image out there, whether, you know, (INAUDIBLE) sectors have come out in the direction (INAUDIBLE) just to get away from the previous images that they - - that all the perception out there of -- toward (INAUDIBLE). It's -- you know, it's -- it's been interesting. I can see why -- why it's kind of causing much debate.
So, in some ways, you know, (INAUDIBLE) if you're representing a brand, you know, the brand has a right, therefore, to -- to sort of have an -- an influence in how dress.
UNIDENTIFIED MALE: And you're the boss, so have you ever told your employees how to dress?
CURRAN: Luckily, I've never had to.
(END VIDEO CLIP)
FOSTER: Well, we're experts on the subject on this program, because we have our own sort of style guru, really. It's the only way he can be described. And he's Jim Boulden, of course.
And he joins us now and he -- he's joined by his very glamorous assistant.
JIM BOULDEN, CNN CORRESPONDENT: Well, of course, this is Christen (ph), one of our senior planning producers. And I'm going to tell you exactly why the two of us would have failed this UBS test.
Well, first of all, they say that ma -- that males should have nails no longer than 1.5 milliliters -- millimeters. Of course I have failed that terribly. Also, your suits -- a suit, mind you, should be gray, black or blue. I didn't know I was going to be doing this today and I decided not to wear a suit. So I failed that one miserably.
And most importantly, if you stay down here for a minute, you're supposed to have black knee socks. I am currently wearing socks with Snoopy on them. And they're saying these socks, at UBS, because if you sit down, they don't want your -- any of your flesh to ever show.
Now, let's move over to women, Max, for a second.
Now, they say women should wear black stockings or tights. They must wear scarves at all times, with an authorized knot.
BOULDEN: You don't see a scarf here. And skirts must reach the middle of the knee with a five centimeter tolerance.
Well, Christen is not wearing a skirt today to work.
CHRISTEN: Yes. Failed on that.
BOULDEN: And, of course, very importantly, you should put on your makeup and perfume after you shower, not at lunchtime.
Is this how you looked when you got out of the shower this morning?
CHRISTEN: No, not exactly.
BOULDEN: No. And you shouldn't have any trendy eyewear, of course.
Now, do you think, real quick, that the way you dress influences the way you work?
CHRISTEN: No, I don't think so. And, you know, a bit of a funny tidbit. I recently booked someone in my pajamas rather than knocking on the embassy door. And that didn't stop me from getting that senior diplomat. So it is doable. Nothing stops me from getting my job done. You know that.
FOSTER: Those that know Christen know she's a rule breaker (ph).
FOSTER: Chris makes no -- if there was a dress code, she would break it.
FOSTER: She'd be in a suit if they were told to wear trousers.
CHRISTEN: Yes. And as always, be hiding behind the (INAUDIBLE) phone nowadays.
FOSTER: Thank you both.
FOSTER: I mean you're an inspiration fashion-wise.
CHRISTEN: Thank you.
FOSTER: UBS says sticking to the code will give its staff in Switzerland a more polished appearance.
But how much difference can a dress code really make to your business image?
Now, Richard Hillgrove is director of Hillgrove PR.
He's an expert on P.R. and image.
All -- it's all part of the same thing, isn't it, basically?
RICHARD HILLGROVE, DIRECTOR, HILLGROVE PR: It is nowadays. I think - - I think we have to start from the beginning. It's actually a 44-page guide. I think you said it was a 43-page guide. But coming from a wealth management specialist bank, you would expect your front line staff -- because I think it's only the -- the 2,000 front line staff that have been singled out for this sort of complete nip and tuck, in terms of their wardrobe.
HILLGROVE: And I think it's absolutely justifiable. That's what banking has always been about. And they're just fine-tuning it.
Now, what would give, of course...
FOSTER: But you've made
FOSTER: -- because banking has always been about that.
so why are they putting it down on paper?
HILLGROVE: I think they're taking it to the next level. I mean as a P.R. and an image consultant, I -- it does, to me, seem like -- it does smack a little bit of a P.R. stunt. I mean this is a bank that (INAUDIBLE)...
FOSTER: Yes, well, we checked this out, though. And it just -- they just insist it's not.
HILLGROVE: Well -- well, of course they would. But a 37 million pound bailout in 2008 and all of a sudden they come back with precision. They want the best from their staff. They've got the world talking. They're number two on Twitter globally. I think this...
FOSTER: But doesn't it make them look pedantic?
HILLGROVE: It's all right for a bank to look pedantic, because the image of a bank should be pedantic. People expect that from people...
HILLGROVE: -- who manage their funds. They don't want people who are...
HILLGROVE: -- who have not got an (INAUDIBLE) to do so. And I think that's the vital point. That's the P.R. message. But in terms of the message that banking sends out, you can't do -- you can never do enough, in terms of the way people look.
HILLGROVE: And it is heading toward uniform, but UBS is talking about funding this experiment, if you like, the pilot program. They're not saying they won't provide some cost toward the staff for filling these objectives.
FOSTER: OK. And it depends entirely on the industry, doesn't it?
Because if you're in the music industry and you turn up in a pinstripe suit, unless that's in fashion at that time, you're going to look a bit silly. So you need to be trendy if you're in the music industry.
HILLGROVE: That's -- I totally agree. And every genre of personality, if you like, particularly in business personalities, there's so many genres of business personality. Richard Branson has a more laissez faire...
FOSTER: He doesn't wear a tie.
HILLGROVE: -- not reckless. He doesn't wear a tie.
HILLGROVE: He's laid back.
FOSTER: He jogs.
HILLGROVE: He invokes the brand. Now, banking is at the other end of the spectrum and they have to fulfill and be consistent with the stereotype, the archetype that's been created.
And I'm all for UBS fine-tuning it...
HILLGROVE: -- and making a noise about it.
FOSTER: So what's the advice for someone going to a company and deciding what the dress code should be if they haven't got one written down, if they're not going to UBS?
If there isn't one written down, how would you work it out?
Just copy the chief exec?
HILLGROVE: Oh, you're not going to get it completely right. And I think that's why they're trying to find a point of difference in the market. They're saying UBS, with a little bit of an image disaster a couple of years ago, is coming back all guns blazing. And they are getting it right or not all right, they're making sure it's almost a military operation, as far as people's image is concerned. They're not leaving any stone unturned.
And I think that sends out the right message to the market, if anything else. I'm not -- I don't -- I'm not sure they care so much about what the staff think about it. It's more the public at large and with Internet banking, everything is going back toward how you can interface with people through bricks and mortar. And they're making sure front line staff, people who have people contact, look a certain way and deliver a certain image.
FOSTER: Richard Hillgrove, thank you very much for joining us on the program.
HILLGROVE: Thank you.
FOSTER: We've had a rather large response, to say the least, to this story on our Facebook page.
And first, Isabelle Singh says: "Usually, dress code is not written on a board. It's mostly what we call culture in a company. That means that we belong, more or less, to the same one."
But Mola Bola Clement disagreed and said in response: "Dress codes are written on the board in some companies, because here in Nigeria, the way you dress is the way that you're addressed."
And finally, Adam Barlow had a few words on this one: "Some people need to be told how to dress."
We have some great behind the scenes show videos on our Facebook page. So do come and meet the team at Facebook.com/cnnquest and get an idea of how the team here dresses and make your judgments, as well.
Twenty-five years of a CNN icon are coming to an end, meanwhile. We are counting down to Larry King's final live show. It's on Friday. It's come around very quickly. It will be a star-studded event. Night owls in Europe can see it live from Los Angeles at 3:00 in the morning CBT or the more sleep-friendly time of 10:00 in the morning in London, 11:00 in Paris and in France.
And tonight on CONNECT THE WORLD, as well, we'll hear from viewers around the world as they reflect on Larry's 25 years here at CNN. That's just about an hour from now, as we celebrate CNN's Larry King.
We'll check the European and U.S. markets on QUEST MEANS BUSINESS, meanwhile, after this short break.
FOSTER: We just want to have a look at the big board as we go to the end of the show. It's actually up very slightly. Everyone watching the House of Representatives, especially on that bill -- that tax cutting bill in the United States and also some interesting results from FedEx. They looked bad but they actually were quite good, if you look at the detail. But that's the -- a rather flat picture in New York right now.
Stocks had a very indifferent day in Europe, as well. Most of the main markets ended the day with little change from the open. Shares of BP helped to drag the FTSE 100 over the red line. The oil giant lost more than 1 percent after the U.S. government launched a lawsuit against the company and other companies.
In Frankfurt, Deutsche Bourse was the standup performer. And Carrefour (ph) did about 2.7 percent in Paris.
The euro is treading water against the dollar this hour, as European leaders meet to talk about a contingency plan in case more bailouts look likely. Right now, it's very slightly down on the day, at $1.32.
That is QUEST MEANS BUSINESS.
I'm Max Foster in London.
Thank you for watching.
"WORLD ONE" starts right now.