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QUEST MEANS BUSINESS

Interview With Stephen Chu; Russia Opens Oil Pipeline to China

Aired January 3, 2011 - 14:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


MAX FOSTER, GUEST ANCHOR, QUEST MEANS BUSINESS: In a moment an interview with the man in charge of shaping U.S. energy policy, Stephen Chu.

Goldman invests in Facebook, valuing the site at $50 billion.

And a new year, a new currency, Estonia's finance minister tells us he set a good example.

I'm Max Foster in for Richard Quest. This is QUEST MEANS BUSINESS.

Hello to you.

Well, Stephen Chu is the U.S. Energy secretary, a big job for the biggest economy in the world. He was hired to help President Obama to deliver on promises to reduce America dependence on foreign oil. His brief also includes investing in clean energy, adjusting the climate crisis, and creating millions of new jobs. He won the Nobel prize for physics in 1997. And I asked him whether he shares the view that oil prices will continue to rise.

(BEGIN VIDEOTAPE)

STEPHEN CHU, U.S. ENERGY SECRETARY: I share the view that oil prices in the long term and mid term will continue to rise. It is hard to predict what is going to happen in the short term. But certainly as the world comes out of this terrible recession and demand goes up that will drive the prices up.

FOSTER: And what does that mean in terms of where we get our energy in future?

CHU: Well, this is a conundrum that we know is coming. If you look at the growing demand for oil consumption in the world, particularly in developing countries, you look at where the multinationals are now getting their oil. They are going to offshore, deeper offshore arctic regions. Where the lifting costs of the oil are becoming more expensive, I think the prudent prediction would be to expect over the mid- and long-term oil prices will rise. Having recognized that, once you do whatever one can in order to say, how to use the oil as efficiently as possible, and how do you moderate the consumption of oil? That in itself would actually moderate the prices.

FOSTER: And you want to then, move away from oil and the dependency on oil, don't you? So, when we talk about alternatives what is America considering as the best alternative?

CHU: What we're doing is we're investing in a number of things. First big investment in the Department of Energy in new technologies that will help electrify personal vehicle transportation, cars, automobiles, better batteries, better systems. We're also investing in biofuel technology. Something that you can use not only specific plants designed for energy production but bio-wastes, these are agricultural residues that are burned or go into landfills or whatever. These things could be used for making substitutes for liquid fuels that come from petroleum. So there are a number of things-and finally efficiency, that there will be an ever upward march towards better efficiency, lighter weighting of vehicles, more miles per gallon. Those things are all what is needed in order to be come less dependent on oil.

FOSTER: President Obama is very keen on renewables, isn't he? And he wants to really push that as an alternative, but he's having to compromise because Republicans don't just want renewables as part of the future plan on energy. So are you having to compromise and use coal and look towards nuclear as part of your renewable strategy, even though it is not renewable anymore?

CHU: Well, I think what happens, one does recognize that it is going to take awhile to transition away from traditional use of fossil fuels. And that is going to take decades, but you cold push the adoption and the technology of renewables to make them much more cost competitive. We are hoping, for example, in a daily (ph) program we are looking at how you can reduce the cost of photovoltaics by a factor of four, to the point where it would actually be cheaper than fossil fuel. And so as you push the renewables, as you push the transmission distribution and energy storage systems, they can automatically begin to take the place of our dependency on fossil fuels.

FOSTER: But are you going to allow nuclear and clean coal, as it were, to be part of this future energy policy, where you wouldn't have done before the midterms?

CHU: No, that is-we were pushing clean coal before the midterm, recognizing that coal is a major fossil fuel resource around the world; that you need to develop the technologies in order to use it more efficiently. Nuclear, we always felt was part of the energy mix for this century. It is carbon free and if one could build a new generation of plants and make it cost effective, I think this is part of the solution.

So, we were pushing both of those things since the beginning of the administration, quite frankly.

FOSTER: Do you feel under a lot of pressure because the country that comes up with the best, most efficient, energy in future are going to be the biggest economies in future, aren't they? It might not be America, if you don't come up with the technology.

CHU: Uh, yes, that is possible. I think I will agree with your premise, that the countries that develop the most efficient uses of energy, the countries that develop the cleaner sources of energy will be dominant players, economic players. Now having said that I think the United States has the right innovation machine to be the leader in these clean forms of energy and to help the world transition to a sustainable use of energy. So you know, there is no disagreement that going to clean energy is something that is at the heart and center of future prosperity of any country. And I think the United States should be the major player in this.

(END VIDEOTAPE)

FOSTER: The U.S. Energy secretary speaking to me just a few minutes ago.

Well, the global energy landscape is shifting. As we begin 2011, Russia, the world's top oil producer has opened a new giant pipeline to China, as crude prices head back to where they were before the financial crisis. It puts Moscow in a key strategic position. Our Matthew Chance reports from Western Russia.

(BEGIN VIDEOTAPE)

MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice over): From this computerized control room the world's biggest energy exporter closely monitors its flow of oil. A simple click of a mouse could plunge Western Europe, dependent on Russian fuel, into an energy crisis. Outside the pipeline that is the major conduit of Russian power is called the Druzhba, or Friendship Pipeline, and CNN was granted rare access to this strategic, closely guarded asset.

(On camera): How much of a source of money and power is this pipeline for Russia? (repeats question in Russian)

YURI SINITSA, MANAGER, PUMPING STATION (through translator): Druzhba is like any pipeline, it is like a blood artery, which allows to fill up nation's budget through exporting hydrocarbons to other countries. This allows to implement social programs, develop economy, so it is very important.

CHANCE (voice over): When it was built, back in the 1960s, the Druzhba was an engineering showpiece, celebrated on Soviet television. Connecting the vast oil fields of Siberia with the Kremlin's European friends, it also locked Russia and the West into a commercial bear hug. Even today, Russia depends on European markets for its oil sales, as much as Europe depends on Russia for its oil.

(On camera): So this is it, the Druzhba Pipeline, for decades a lucrative source of money and power for the Kremlin. Along its great length, Russia's vast oil exports are transported to those traditional customers. Those customers have always been in one direction, to the West in Europe. But now, Russia is, for the first time, turning its attention to the fast emerging markets of the East, as well.

(voice over): Amid much fanfare, and after years of delays, the new ESPO Pipeline from Eastern Siberia to the Pacific Ocean is finally open, delivering Russian oil to energy hungry China, overturning decades of Russian dependence on European markets. Analysts say it is a huge strategic shift.

LIAM HALLIGAN, CHIEF ECONOMIST, PROSPERITY CAPITAL: Now Russia's oil infrastructure is pointing East, and its gas infrastructure will be soon, as well as West, Russia can play one side off against the other. Russia can command a better price. Russia can expand its hydrocarbon exports.

CHANCE: At its peak, analyst say the new ESPO pipeline will be able to deliver a third of all Russian oil exports, helping quench China's growing energy thirst. But the impact on Europe could be profound, making its longstanding reliance on Russian oil less certain than in the past. Matthew Chance, CNN, in Western Russia.

(END VIDEOTAPE)

FOSTER: Well, the positive momentum behind stocks continues into the new year. So it is it time to shift back into equities, or will 2011 be another bumpy ride?

Bob Parker, Credit Suisse, will join us with his expert analysis, in a couple of moments.

(COMMERCIAL BREAK)

FOSTER: Well, the Dow Jones has begun the new year in style with a triple-digit gain. Let's go to Alison Kosik at the New York Stock Exchange for more on this.

What a start to the year, Alison.

ALISON KOSIK, CNN FINANCIAL CORRESPONDENT: Hi, Max. You're right. Stocks are getting a nice running start to 2011. And you know a strong finish to 2010 is really bringing out the bulls on this first trading day of the new year. And you know, general optimism that has been carried over from last year, is really a big part of this rally, as well as a couple of good readings on the economy that we got earlier today. Reports on construction and manufacturing, they came out earlier. Both showed a slight improvement.

And we're going to be getting more data, throughout the week as well. We're going to get December sales numbers from automakers, and individual retailers, as well as monthly jobs-the monthly jobs report, from the government, on Friday, Max.

FOSTER: OK, Alison, thank you very much indeed.

Well, as the U.S.-well, as in the U.S., stocks here in Europe kicked off the first trading day of the year with a broad based rally. That positive factory and housing data from the U.S. helped optimism over global growth. And they were going to all the main markets as well, except the U.K., which was close. Porsche was the biggest winner. The stock surged 15 percent after a judge in the U.S. dismissed a $2 billion law suit against the sports carmaker.

So a strong start to the year for many stocks, but where do we go from here? Bob Parker, senior advisor at Credit Suisse. He joins me now with his outlook for 2011.

Many people were wrong about last year. It was better than expected, wasn't it? What do we expect from this year?

BOB PARKER, SENIOR ADVISOR, CREDIT SUISSE CAPITAL MANAGEMENT: Well, I think almost by default equities will outperform, at least, for the first six to seven months of the year. When I say by default, other asset classes actually don't look very attractive. Where you have the U.S. recovering, where the risk of deflation is going away, it is very difficult to see outperformance in bond markets.

And one feature of 2010 was actually investors putting too much money into bond markets. We've had a big rally in corporate bonds, and I think that rally probably now fades. If we look at other asset classes, such as commodity markets, we've seen very strong gains last year. And to some extent commodity markets, I don't think they're going to reverse, but certainly the price gains are starting to look over extended. So, as a result I think you are going to see a flow of capital, certainly for the first half of the year, into equity markets which logically will out perform.

FOSTER: And if I'm reading that right, you are saying people-or investors-are getting more risky?

PARKER: I think with interest rates staying low, at least until the second half of the year, and then we may see interest rates, particularly lead by the Federal Reserve, they may slowly start to rise. But certainly with bond markets unattractive, money markets unattractive, commodities over extended, that I think is going to drive investors into taking more positions into equities. Now, you could argue that equities actually are not as risky as they have been in the past, given their relationship with other asset classes.

FOSTER: OK, so take us through the regions. In Europe, what equity markets are the most interesting? What would you be investing in, or advising?

PARKER: Well last year we saw major outperformance by Germany and by Scandinavia, notably Sweden. And also strong gains in Central Europe, like Poland. Given that the stressed economies in Europe, such as Portugal, Ireland, and Greece, I think we'll go through at least another one to two years of economic pain. I think that outperformance lead by Germany and Scandinavia will continue.

FOSTER: And in the Asia Pacific region? I guess it is the emerging markets there, is it?

PARKER: Well, I think actually one feature of next year will probably be some improvement in the Chinese market, which was a big laggard last year. And if you actually look last year and the outperformance by India, relative to China, a great trade last year was to be long India, short China. I think that will reverse. Investors, both domestic and international are actually underweight China. I think you will see capital start to move into China.

FOSTER: All right. In the Americas, the American economy is still very hard to judge, isn't it? But broadly across Americas where are you looking to?

PARKER: I think two points to make. The first point to make is that with easing monetary and fiscal policy in the States we are clearly seeing signs of economic recovery. I think it is reasonable to forecast 3 percent growth in the states for 2011. And I think that will, assisted by very strong corporate earnings growth, underpin the S&P and we'll see quite major gains, at least in the early months of 2011.

I think the other economy to look at is Brazil. Rather like China, the Brazilian equity markets was a big under performer over the last 12 months. And I think that investors will move into what is now a cheap market, relative to other Latin American markets, like Chili, Peru, Colombia, which are now looking very expensive.

FOSTER: And there is this huge pot of cash swirling around the world economy, isn't there, looking for a home? Because there is money coming from the Western economies, which wants to be invested in high potential areas, and I guess, these economies, these emerging economies like Brazil, you just mentioned, is where that money is going. Are you concerned there maybe another bubble, though, as caused by this?

PARKER: I think the answer is, eventually. I would not worry about an emerging markets bubble in 2011. Clearly we are going to see pockets. You know, some areas of the Chinese real estate market show classic bubble characteristics. And the Chinese government are trying to address that. But more generally, emerging markets are not in what one would describe as a bubble today.

Now we might have a different discussion in 2012 or 2013. But I think we certainly don't need to worry about that yet. I think another major beneficiary from growth in emerging markets is going to be American, European, and Japanese companies, which have a very high part of their revenue and profitability driven by emerging markets. So those large cap American, European and Japanese companies I think will significantly outperform, because of their exposure to the growth areas of the world.

FOSTER: Bob, thank you very much indeed. For joining us on the program.

PARKER: Thank you.

FOSTER: Now it is largely unregulated and largely unplanned. Next on QUEST MEANS BUSINESS our series, "Future Cities" focuses on the urban sprawl of Mexico City, and the vibrant spontaneous community of Neza (ph).

(COMMERCIAL BREAK)

FOSTER: This is the urban sprawl of Mexico City, as it grows new areas are springing up and spreading outwards unplanned and unregulated. In this week's "Future Cities" installment, Richard finds out that the disorganized nature of urban sprawl isn't necessarily a bad thing.

(BEGIN VIDEOTAPE)

RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS (voice over): As far as the eye can see, house after house after house. Mexico City, the world's second biggest city is home to more than 20 million people, and one of the greatest examples of urban sprawl.

JOSE CASTILLO, ARCHITECT, URBAN PLANNER: We are standing in the rooftops of Sudat Mesa, a community of 1.5 million people, where this has been built one home at a time. Maybe this is the future of urban planning.

ASTRID PUENTES, INTER-AMERICAN ASST. FOR ENV. DEFENSE: One of the problems of the city, and it is one of the megalopolis in the world, is that it spread without any planning. And it literally spread to every single place that the city could.

QUEST: The United Nations says urban sprawl is the symptom of a divided, dysfunctional city.

Jose Castillo is an urban planner. There are lessons, he believes, to be taken from the existing streets and communities.

CASTILLO: In Mexico City 60 percent of the city has grown through some mechanism of informal planning. And what is quite compelling is to see that some of these peripheries, and even places of the central city, have transformed themselves into real cores of urbanity.

QUEST: This is Neza (ph), it used to be one of the biggest slums in the city. Fifty years on it is still sprawls across the landscape. But it is also a thriving urban center. It is a prime example of unplanned, unregulated, unmanaged growth. And also, of how some sprawling areas can become successful neighborhoods.

CASTILLO: Maybe the one relevant aspect of a place like Neza, is to learn from what happens to a city in the absence of planning. What happens when lack of regulation can produce this kind of vitality. Maybe what we need to do is not try to improve Neza, but find what Neza can tell us to the way we make and produce cities.

QUEST: One of the major problems associated with sprawl, is the pressure on infrastructure.

PUENTES: it is impossible to move without a car, because a lot of the places in the city do not have public transportation access. If you live there and you have to work downtown, for example, it is literally a nightmare.

QUEST: The challenge of delivering water, electricity, and telephone lines, to a seemingly endless boundary is not easy. Here in Neza, drinking water has to arrive in trucks.

MARTHA DELGADO, MEXICO CITY, ENVIRONMENT SECRETARY: If you think that Mexico City is indeed a megalopolis, with 20 million inhabitants, that consumes 35 cubic meters of water per day, per second, and we have four million of cars. And we generate 13,000 of waste per day. This means that we have to manage a lot of troubles and this is a complicated city to live in.

MAYOR MARCELO EBRARD, MEXICO CITY: You can figure out, like this, you have 20 percent of our top population as a country, in 1 percent of our national territory. So it is amazing. So it is an experiment, human (ph) experiment.

QUEST: The authorities are experimenting with the idea of building up instead of out.

EBRARD: Why until now, why not know before 20 years, or 30 years. Forget because it is an earthquake city. So you have the earthquake of '85, so there are a lot of resistances for our psychology as a city. Build a lot of high, tallest, buildings in the city.

HUMBERTO CHAVEZ, URBI: This building-well, the building it to used to exist here, was badly damaged in the 1985 earthquake.

QUEST: URBI is one of the biggest house builders in Mexico. It is working with the city government to re-densify the downtown area. This patch of land used to house nine families. Now 17 families will live here.

While the pressure for housing is huge, because according to the latest census there has been a dramatic growth in the city. But that generates a lot of problems. The cost of land has risen five-fold in the last 10 years. It is a play of the cost of land per unit. It is a matter of maximum density.

MICHEL ROJKIND, ARCHITECT: We are just about to start our first high rise here in Mexico City. OF course it is great that we do a 52-story building, but what happens, the streets are not getting wider?! There is no more infrastructure underneath to bring more water, there is a lot of things that need to be tied together with densification. It is not only about, OK, let's go high. What is going to happen with all the traffic?

(BEEP, BEEP, BEEP)

ROJKIND: People getting in and out, of course, it is going to be crazy.

QUEST: Jose Castillo supports the re-densification project, but he also sees the reality of life on the edges of this mega city.

CASTILLO: Sprawl with all of its negative qualities can suddenly turn into city. In a way, the beauty of Neza (ph), or the real promise of Neza (ph) lies in the way the citizens and the physical structure have transformed what used to be sprawling periphery, into a vital and very alive sense of community.

QUEST: The vibrant community of Neza has thrived. People here have come a long, way, from the original slums. Perhaps the key to future growth is learning from the successes of areas like this.

(END VIDEOTAPE)

FOSTER: Meanwhile on the streets of Estonia, shopping will never be quite the same again as the country adopts the euro. For some the euro maybe why debt crisis and division not Estonia's finance minister, though. He thinks it is going to be a glittering success.

(COMMERCIAL BREAK)

FOSTER: Welcome back. I'm Max Foster. You are watching QUEST MEANS BUSINESS. And these are the latest news headlines.

(NEWSBREAK)

FOSTER: Pakistan's prime minister is scrambling to shore up his government's shaky group on power. The ruling coalition was dealt a big blow over the weekend when the country's second largest party pulled out and joined the opposition. Pakistan's president has pledged his full support against efforts to destabilize the government.

Officials in the U.S. state of Arkansas are hoping a test will what caused 5,000 birds to fall dead from the skies on New Year's Eve. Most of the birds fell to earth in an area covering less than 3 square kilometers. Weather and fireworks are considered possible of the mass die-off. A result of the test should come out this week.

Estonians are getting used to a crisp new currency today. The euro is now the country's official coin and note, and the country sort of a bit a frosty welcome from the market it seems. The euro is falling against the dollar. At the moment, persistent worries about the euros and debt crisis, of course, linger.

That's the factor that, but generally, they wasn't that much excitement about Estonia joining in. I think Estonia won't be adding to those economic worries there because its debt level is very low. It just joins the euro. It is the 17th member and more than 330 million Europeans now carry euro notes.

So despite the crisis, it's growing and it's dominant. The stimulus budget deficit is below 3 percent, or 3 percent target at least within the euro zone and the 2011 target 1.6 percent for Estonia. It's the poorest economy in the euro zone though. The economy shrank 14 percent in 2009 and there are many who predict Estonia's economy will grow though by 3.5 percent in 2011 partly helped probably by joining the euro.

Now Jurgen Ligi, Estonia's finance minister, he spoke with me earlier from whether there had been any problems this country switches over to the new notes and coins?

(BEGIN VIDEOTAPE)

JURGEN LIGI, ESTONIAN FINANCE MINISTER (via telephone): Really no big problems. No IT problem so far. No bigger complaints by consumers and everybody so committed and patient that we can't blame them.

FOSTER: OK, in terms of the public response, I know there was a poll, wasn't there, by Estonian Institute of Economic Research in December saying that only 25 percent of people supported the euro. Do you think they've been encouraged by the successful launch?

LIGI: No, actually this poll was a very emotional one that I don't remember the exact question, but it was sort of, do you want to leave kroon or something. But usual (ph) polls show a little bit more than 50 percent support euro, and some 30 percent is against.

There are, of course, reasons why some people do not know or are against (inaudible) of course, do not want to leave euro. The bad news from euro zone is one reason, and of course, the inflation rate has gone up during autumn because of fuel and food prices on international markets. So you can't control them, but people emotionally blame euro here.

FOSTER: I'm speaking to you from the U.K., where there's a lot people who are hugely relieved that the U.K. never actually went into the euro because of all the problems you've been describing within the zone and all of those terrible fiscal problems some of the countries have had. Why on earth would Estonia enter the euro when it's in such a precarious state?

LIGI: Well, we could not possibly (inaudible) to break these things like this, common European idea to support each other and to have a -- we've got a lot of help from Europe. Now it's -- we are ready to give back. Common currency has helped a lot Great Britain as well. It has been the stabilizing factor for countries outside euro, as well as taking the real situation, still Estonia has 1.3 million people only. Such a small country can't afford independent active (ph) monetary policy.

FOSTER: You got a very healthy economy, really, compared with a lot of the other Euro zone countries, and that's been largely credited to the government, which has been carrying out an austerity drive even before entering the euro. But do you have any sense from other finance ministers about how Estonia will be treated if it does get into some financial problems because, you know, the Euro zone doesn't want any extra pressure coming from smaller countries, does it?

LIGI: Well, of course, to discuss internal problems internationally is uncomfortable, but Europe has to be a more coordinated policy. Otherwise, we get more debt crisis in more countries. In general, euro has proved to be a very stable currency with low inflation as well. But the problems in certain countries can't be avoided in the future if we do not coordinate the fiscal policy, and it's what Europe is doing at the moment. And I am happy about it, that we have learned (ph) an experience to bring to Europe and to share.

(END VIDEOTAPE)

FOSTER: Well, up next, a new friend from Facebook. We'll tell you why the "New York Times" has a cash injection from Wall Street puts the company's value at $50 billion.

(COMMERCIAL BREAK) FOSTER: Facebook may now be worth a staggering $50 billion. The "New York Times" reports that Golden Sachs and the Russian investment group have some $500 million into the company. Sighting people involved in the transaction. The report says the deal values Facebook then at $50 billion.

That takes Facebook into a whole new league. It makes it worth more than CNN's parent company Time Warner, which has a market cap of $35.9 billion. It also makes it bigger than eBay. It's market cap is $36.5 billion and Facebook is by no means the biggest tech company. Apple holds that title. It's worth around $300 billion.

So you can see what we're talking about here. Well, Evelyn Rusli is one of the authors of that "New York Times" article. She joins us live from CNN New York.

Thank you so much, sir, for joining us with this. When you'd expect for all of these to be made public then?

EVELYN RUSLI, NEW YORK TIMES: Well, I imagine it should be made public probably in the next few weeks. There was some talk today that Mark Zuckerberg is planning to send out e-mail companywide to tell them about this latest investment.

But, you know, we're going to see how this shapes up because Goldman Sachs also have the option to perhaps raise $1.5 billion through its own investors and a special investment vehicle. Now what that would mean was that be that their own private investors, their wealth clients would be able to get in on Facebook stock.

So for Goldman, this is a great strategic play because not only do they also have the possibility of becoming at the front of the line for when Facebook eventually IPOs, which made it believe to be in 2012. But they also have this great branding of having these assets and be able to track new investors potentially.

FOSTER: And so much as self-fulfilling prophecy for Goldman Sachs because they often make the right bet on some of getting early investments in. I think you write back to four in that day, isn't it? And they're getting it right. So you'll see a very strategic decision for Goldman there.

RUSLI: Yes, it is a very strategic decision and you know, right now Facebook may only have roughly $2 billion or so in annual revenues, but a lot of experts say that because of the way its growing. The fact that it has 600 million or so users worldwide that - actually - very interesting value proposition in the sense that you're buying in to the future of the web.

The idea that social would become increasingly important and that potentially maybe Facebook at some point could help dictate the way commerce is on the web. You know, for example, you know, the fact that when you go to Facebook, there are a lot of people who were recommending products online and such.

And now the belief is that at some point down the road maybe in two or three years, Facebook will become more important in making those transactions happened. So you know, even though their revenues are relatively low to the huge evaluation today. There are a lot of potential in the startup.

FOSTER: They're taking a big risk currently Goldman, but you know, they're in the business all I guess, but in terms of Facebook. It isn't a big risk. They get huge chunk of money, which they can now invest. Have you got any sense of how they're going to use the money?

RUSLI: Yes, well, of course, this isn't Facebook's first go around in terms of raising huge amounts of capital, and DSC (ph), one of the investors in this round, have previously hundreds of millions of dollars. And so Facebook now has this massive war chest, and the expectation is they're going to go abroad. They're going to be able to consolidate their power in abroad, in Asia and other parts. Mark Zuckerberg as we know recently visited China. And on top of that, you know, they're trying to get the best talent, the best engineers in Silicon Valley. They're competing with the likes of Google.

So we should expect them to offer some lucrative compensation packages to be able to get some star talent on top of that. You know, what they're doing is, we know where the best when it comes to social networking right now. Let's try to consolidate that power over the next few years to become even bigger. I mean, $600 million is just a very beginning for Facebook.

FOSTER: But a slight sense of deja vu, perhaps the Internet bubble when all these companies were getting stakes and we were valuing those companies based on those stakes, based on what we're expecting them to produce, not on what they're producing now. Any concerns about that?

RUSLI: Well, there is some concern about that. I mean, with certain kind of - certain companies, I guess from the Valley, but there does seems to be a real birth or maturation of these social media companies that are starting to sprint and take off.

Now beyond Facebook, you know, GroupOn recently got a $6 billion bid from Google. Some people said that was really high. It's only a two year old company, two, three year old company, but at the same time, they were making roughly -- they are on track to make roughly a billion or so in revenues this year.

So -- and of course, as I mentioned, your Facebook isn't exactly, you know, one-year-old company. They do have $2 billion in revenues. So they're roughly on track for that, for at least for 2010. So these companies are making money in a sense and on top of that, there is a lot of potential with something like Facebook because even though maybe the cash is flooding in right now. There are a lot of opportunities to monetize that base. Like I said, they have 600 million people around the world using the site and so that's very valuable for investors. And no one even comes to close to matching that at this point.

FOSTER: Evelyn Rusli, thank you very much today for joining us in the "New York Times." Appreciate your time.

We're going to check in the weather for you now. Guillermo is at the Weather Center standing by. Hi, Guillermo.

GUILLERMO ARDUINO: Hey, Max. You know, I was checking out. It seems that we have may have the chance of some light snow in London for tonight and we see here some evidence in the radar. There are some white clouds, but overall, the situation, of course, nothing to compared to 2010 at the end of the year.

We still see some bad weather in northern parts in Scotland and Northern Island, and things that - the long term forecast for Europe is changing now for the better. Now, all those watching CNN International from the eastern parts of Europe, will have to wait for a little bit.

So look at the temps for tomorrow Tuesday. For the high in London, maybe some sunny intervals there and minus 7 in Stockholm. Airport wise, no problems and no delays weather induced at any airport. Perhaps Vienna may see some problems with some foggy conditions in the evening. That's about it.

And this is what I would still give you. I want to give you the trend now. You see there is a little bit of a change now into Wednesday. The cold air is shrinking. That area of cold air in Europe is shrinking especially in the west, but it is being emphasized into Russia, Belarus and Ukraine.

Of course, if you're watching from Sophia right now, you're saying, tell me about it. I have snow. What are you talking about because you're in the east so things are going to wait for a little bit. But see, this is through tomorrow. With that low pressure sent there in Greece that was bringing some bad weather. It's going to clear over there and it's going to move into Russia right now.

The area continues to be dominated by below normal temps all across Europe, but see the pattern into late this week, OK, late this week. We see some moderating effect especially into France, London perhaps and the Alpine region. (inaudible) and Sophia if you're watching also are going to see a change by the end of the week.

It's not going to be sunny like let's go to the beach kind of weather, but it's going to much better. Throughout the night, I'm going to be covering the situation in Australia. We have the long term forecast for the months to come. You know, the city of Rockhampton is covered in water. We have seen these numbers. When the average is 100 mm in many cities where we're seeing now like five times that figure.

What is the forecast for the next three months? We think that we're going to see some more rain because of La Nina that is influencing the area. So I'll give you a detailed forecast on "World One" coming up in 15 minutes. Max -

FOSTER: Guillermo, thank you so much. Now there is a mounting economic cause of a huge flood hitting northeast Australia as well as the human death toll, which has reached nine since the water started rising one month ago.

Amnest (ph) and McCory (ph) Group say that could lead to a worldwide shortage of steel. That's because the region underwater provides the large share of the worldwide production of coking coal, which is needed for making steel. McCory says the spot price could hit $300 a ton compared to $246 at the moment, but because of the way contracts worth in this market - - prices are fixed into March -- which means the real impact might not be felt until April. Now with an area larger than Germany and France combined underwater, billions of dollars of exports have been affected and as Brooke Corte, a business journalist with "Sky News Australia" says, it could wipe as much as half of 1 percent of GDP.

BROOKE CORTE, SKY NEWS AUSTRALIA: This is a huge story for all Australians, but from an economic perspective that key issue of the coal industry and how it's been affected is the big one that we're following at the moment.

Roads are underwater. Railways have been affected. There had been ports, export port closures up to a week in some areas. So there's been billions of dollars of coal exports being halted and affected by this rain and by this flooding.

In fact, Queensland produces two thirds of the world's coking coal. So this is, of course, the key export for us and it's already has seen implications for the global coking coal process. They've risen as a result. Also thermal coal prices have been affected as well.

You mentioned the force major of some of the major companies on a daily basis. We're getting updates from companies whether it's been BHP or Rio Tinto, also Anglo American and many, many others saying that they're not able to meet their obligations, their legal obligations under their contract because of this flooding. That's the force majeure that you mentioned.

Also one of our key exports and we're a key producer of sugar here in Australia. Global supplies now are looking a lot tighter because of this. Apparently, not only has the old crop being affected by the rain, but the final harvesting of that old crop. But of course, the planting of the new crop is very difficult in these conditions as well.

You mentioned Andrew Fraser, the Queensland treasurer. He said that maybe one billion dollars could be the ultimate cost. I've heard comments this morning from experts saying we won't know the cost of these for up to two years. And one key economist for us here in Australia, his name is Shaine Oliver (ph) from AMP.

He says he's estimating about a half of percent of GDP could be wiped off in our figures this year because of this flooding. He says it's huge, and a disaster of biblical proportions is probably the best way to encapsulate things at the moment. I think it's about 850,000 square kilometers currently under water.

FOSTER: Now, an age-old business model is making a comeback. We'll introduce you to a group of New Yorkers who have joined forces to trim that (inaudible).

(COMMERCIAL BREAK)

FOSTER: Now, the first successful cooperative was setup more than 150 years ago. Faced by soaring prices, a group of English workers decided to pull their resources to buy goods more cheaply. Fast forward it today and as Richard Roth reports the co-op is fast becoming a shopping alternative that could gain popularity.

(BEGIN VIDEOTAPE)

RICHARD ROTH, CNN CORRESPONDENT (voice-over): Jill Jarvis does a shift of heavy lifting at this Brooklyn grocery.

JILL JARVIS, FOOD CO-OP MEMBER: I kind of like it. I sit around reading books all the time so it's really nice to get out and get some exercise lifting vegetables.

ROTH: Jarvis and nearly 16,000 other member of the Park Slope Food Cooperative are owners. They each work three hours a month stocking shelves, packaging food and running the cash register to save on labor cost. They don't collect a paycheck, but their pay off is fresh organic food at discounted prices. Important especially when food prices are on the rise.

UNIDENTIFIED MALE: It's really the best place around here to get - get descent food at an incredible price. A no brainer for me.

ROTH: And the benefits of a co-op go beyond the discounts.

LAURA HYMSON, FOOD CO-OP MEMBER: I think it's a pretty good place to be. I get to talk to people as they're coming through and see some new foods that I don't normally checkout when I'm in the store.

ROTH: But you also have to be committed buying a share in the enterprise and giving your time.

MIKE COSABOOM, FOOD CO-OP MEMBER: I joined in '92, but then I got suspended for many years and I came back about two or three years ago.

When I was grad school, I - you know, had trouble managing my time back then.

ROTH: Joe Holtz founded the co-op nearly 40 years ago. He says success brings its own problems and the co-op is trying to limit the number of members.

UNIDENTIFIED MALE: The popularity of the idea of joining the coop is out shipping our ability to deal with that many people. If we didn't do this, I believe we'd be heading very much to 17,000 now.

ROTH: Another New York co-op accommodates those who don't have the time to work. Paid employees are used, but the prices are still enticing.

UNIDENTIFIED FEMALE: The vegetables are always very fresh and they have good sales and you get a member's discount.

ROTH: The co-op recently expanded into a building three times its former space.

BARRY SMITH, FLATBUSH FOOD CO-OP FOUNDER: It's a new wave of this happening right now across the country. There's going to be hundreds if not thousands of new start-ups at least trying to get off the ground.

ROTH: At this monthly meeting, citywide start-ups come together to share and learn from one another.

DAVID MARANGIO, BAY RIDGE FOOD CO-OP MEMBER: We started talking about it when a supermarket closed in our community and we thought that the best thing for us to do is to get together and try to come up with the solution that we wanted to see.

ROTH: As co-ops grow, more people will be enjoying the fruits of their own labor. Richard Roth, CNN, New York.

(END VIDEOTAPE)

FOSTER: Now, with an unemployment rate of 9.8 percent and jobs outlook in the U.S. is looking bleak indeed, but a growing number of economists believed 2011 maybe what everyone's hoping for and that's more jobs.

Poppy Harlow, CNNMoney.com joins me live from New York. There will be a lot of people hoping for - to at least to keep that jobs wouldn't they, Poppy?

POPPY HARLOW, CNNMONEY.COM: Millions and millions of people sort of on the edge of their chairs hoping to keep their jobs this year. Millions more hoping to get a job this year, you know, 2010 was really the year of recovery.

The stock market in the United States did exceptionally well. Companies across the board posted record profits, but the job market did not get any better. But what's expected in 2011, Max, is 2.5 to 3 million new jobs that would be triple the amount of hiring we saw on 2010.

We have gotten some good indicators recently. Last week what we saw is the number of Americans filing for those first time unemployment benefits. That fell below the 400,000 mark for the first time in more than two years. That was a good indicator.

Also a good indicator, job openings rose 17 percent in the U.S. from June until October that's the latest data available, but I think the over arching problem here is you still have more than 15 million Americans that are unemployed. Millions of them have been out of work for six months, a year even longer.

And even Fed Chief Ben Bernanke said that it's going to take years, four or five years to get American unemployment to decline back to a more normal level of about 5 percent. Now you talk to other economists and what they are predicting is that unemployment in this country will stay at least at or about 9 percent for quite a while.

Listen to one, he's the chief economist for Standard and Poor's.

(BEGIN VIDEO CLIP)

SAM STOVALL, STANDARD AND POOR'S EQUITY RESEARCH: Basically, you could call it a half speed recovery. Our feeling is that we'll continue with that half speed rate mainly because unemployment is likely to stay above 9 percent through the middle of 2012.

(END VIDEO CLIP)

HARLOW: Think about that above 9 percent unemployment, which is double normal employment in this country through the middle of 2012. Now what we get this Friday, Max, will be the December jobs report. That number is very important. What's expected is that the unemployment rate will stay at 9.7 percent.

That said, this economy is expected to add about 935,000 jobs, but one of the biggest road blocks to significant hiring in America is the fact that companies have learned how to operate in a much more lean fashion with many workers and yet just as efficiently as they did before. And the big question is will they hire ever again at three recession levels, Max.

FOSTER: So have you got any advice to people that are looking for a job in the sense of what sectors, what types of companies maybe hiring first?

HARLOW: I wish there was a silver bullet. There's not, but there's certainly are some sectors doing better than others. The economist we talked say education and healthcare. Those are those two key areas of hiring. They were in 2010. They are going to be again in 2011.

Manufacturing, that is expected to pick up this year, which is not something we saw in this country in 2010. A career builder, which follow all of this said. What's they're expecting to see is a lot of hiring in sales, in information technology, also in customer service, in engineering and again, in health care.

Health care is that big driver in the government, which, of course, we have a new health care system in this country. The government is projecting 50 percent growth in terms of home care. People working at home and also 22 percent growth in nurses in this country by 2018 so health care, certainly a huge industry, a huge job creator going into 2011. Max - -

FOSTER: For sure. Poppy, thank you very indeed for joining us with that. A storming start of the year for Wall Street. We'll have the market numbers for you after the break.

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FOSTER: We need to check in on the markets. This has been a storming day for Wall Street today. As you see, up more than one percent currently. The Dow at 116 points, up 116 points. A pretty fantastic day.

(Inaudible) prediction for the year for many economists. We spoke to Bob Parker earlier who said he expects a lot from the U.S. economy this year and some positive equity news. That is QUEST MEANS BUSINESS now for the first year of the New Year.

I'm Max Foster in London. "WORLD ONE" starts now.

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