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QUEST MEANS BUSINESS
Rajaratnam Guilty On All Counts
Aired May 11, 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, HOST, QUEST MEANS BUSINESS: Hello to you.
Guilty as charged. Raj Rajaratnam, the head of the Galleon Group hedge fund has been found guilty on all counts, in the biggest insider trading trail in decades. The New York jury convicted Raj Rajaratnam on 14 counts of securities fraud and conspiracy. The Galleon boss found to illegally used private information to make $60 million on trades.
He now faces up to 20 years in prison. But his attorney says there will be an appeal. His trail became the true Wall Street media circus with some of the biggest names in the financial world getting involved. Company chiefs like Lloyd Blankfein of Goldman Sachs were called to the stand. And inside information regarding Wall Street's biggest firms was heard in court, thanks to Raj Rajaratnam's wiretapped phone conversations.
Maggie Lake has been following this trial since the very beginning. She is outside the federal courthouse in Manhattan, right now.
And of most interest, it seems, were these wiretap phones calls. Fascinating stuff, wasn't it?
MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: Absolutely. And it really proved critical in this case, Max. And no doubt about it, this is a very big victory for the government, and in an area where they have not had a lot of success in the past getting convictions on insider trading. It took the jury two weeks. During that time they did review those wiretap conversations of Raj Rajaratnam talking to various people within corporations and contacts out on Wall Street, some of those very same people who have pled guilty already in this wide-ranging crackdown on insider trading.
But Raj Rajaratnam, by far the biggest fish so far that they have netted. Raj Rajaratnam was let out on bail. The prosecutors were trying to make sure he didn't. They say he's a flight risk. The judge said yes, but he has to wear an ankle bracelet. He appeared outside the courtroom with his defense lawyer who has already said they will absolutely appeal this case. The prosecution left the courthouse today all smiles, but not saying very much. Interestingly they chose not to hold a press conference.
But Preet Bharara, the U.S. attorney leading this charge did release this statement saying, quote, "The message today is clear. There are rules and there are laws, and they apply to everyone, no matter who you are or how much money you have."
Of course, Raj Rajaratnam's net worth said somewhere around $2 billion. Once a very high flyer on Wall Street now faces the prospect of a lot of time behind bars, Max.
FOSTER: So, we mentioned the possibility of an appeal. What does happen next, Maggie?
LAKE: That's right. They will start that process, absolutely. And it is going to be interesting to watch-one to watch from a legal perspective, Max. Because of these wiretap conversations and the use of them. They are widely used in cases involving organized crime, drug trafficking. It is the first time they've been used in this type of white collar crime. So that is certain to come up.
While that happens, meanwhile, Raj Rajaratnam out on bail as they said, wearing an ankle bracelet. He will return to court on July 29 for sentencing. That is when the judge is going to determine how long he has to stay in jail. You know, there is a guideline that he can follow, but it is not clear yet, it is possible that Raj Rajaratnam could spend the rest of his life in jail, depending on what the judge decides. It will be a very important piece of this trial, Max.
FOSTER: Many people looking at this, saying there is this dark side to Wall Street, but do you think things have changed since all of this came to light?
LAKE: It is an interesting-absolutely they have changed, but it is an interesting question. Do convictions prevent greed? A lot of people would say, no. You are still going to get people out there. But you know, when it comes to insider trading, this is going to cause a lot of people a lot of hedge funds, people in the community to take a very close look at how they run their business. And they are going to have to make sure that they are on the right side of the law in terms of people they are talking to, expert networks. This wasn't a very great area. It is important to point out, Max. This is black and white. You know, you knew this was insider trading listening to the conversations. It wasn't really veering into that area of expert networks that we thought it was going to. But I still think people are going to take a close look at that, and knowing now the government has this powerful tool to use in terms of wiretaps. They are really going to have to pay attention, Max.
FOSTER: Maggie, thank you very much indeed for joining us outside the courthouse there.
Now, next on QUEST MEANS BUSINESS, are roller currencies and harmful decisions. Media mogul Steve Forbes will tell us why he thinks the U.S. government is mishandling the economic recovery.
FOSTER: Rising oil prices have sent the U.S. trade deficit deeper into the red. The U.S. Commerce Department says the gap between imports and exports widened by $2.8 billion, in March to $48.2 billion. That is more than economists were expecting.
Petroleum imports, including crude oil, jumped 18 percent. Non- petroleum imports rose by just under 3 percent. So, you can see where a lot of this is coming from.
We-if we took oil out of the equation, we would actually have seen the U.S. trade gap narrow in March. A weaker dollar helped exports grow to record that month. Quantitative easing is one factor contributing to the dollar's lower value. And business publishing mogul Steve Forbes told me earlier that the policy of QE is stalling not driving America's economic recovery.
STEVE FORBES, CHAIRMAN, FORBES MEDIA: I think it contributed to the slowness of the recovery. Normally, in the U.S. when you have a sharp downturn you get a quick up turn. And the question becomes can you sustain it? And this time we did not get that quick upturn. Like an automobile, we're moving, 35, 40 miles an hour. But we should be going 70, 75 miles an hour. Cheapening the dollar does not work. We should have learned that from the 1970s. On the tax side, the uncertainty there; the massive regulations, I mean, 3 million words of regulations just coming from the so-called financial reform bill.
FOSTER: You won't want a set tax, don't you?
FORBES: I would love a flat tax. But I think that tax simplification is going to be a major issue next year in the U.S. We got a preview of it in December with the president's deficit commission. Even the Democrats sign on to the idea of simplification. Not as simple as I would like it, but I think that is going to-we're moving in the right direction. Our tax code, with all the rules and regulations, almost 10 million words. Even the IRS, our Internal Revenue Service, doesn't know what is in the bloody thing.
FOSTER: Keeping them busy, though.
I want to ask you about what you were talking about there, about cheapening the dollar. Actually it is helping the U.S. economy right now, isn't it, arguably? We have had some new trade gap figures heading towards $40 billion. That will be a lot higher if the dollar was more expensive.
FORBES: Well, the idea you can print your way to wealth by changing arbitrarily the terms of trade, we should have learned from the tariff era, that things don't stay the same. In the early `30s we put on massive tariffs and all it did was get retaliation and destroyed the trading system. When you cheapen your money you may get a surge of exports, maybe, but your imports are going to go up in price, i.e., oil. And you are going to get more wage pressures and other pressures inside your own domestic economy. If printing money was the way to wealth Zimbabwe and Argentina would own the world today, it does not long term. Stability does work.
FOSTER: I presume, though, now that we are getting this really strong sense from U.S. authorities that this monetary easing is going away. You are pleased that they are going to start looking at some structural reforms, which is what you are really talking about, isn't it?
FORBES: I hope they do. But while the Fed is not doing QE2-which should have just remained the name of a ship, not a binge of printing money-they are still going use, they have a portfolio with a lot of mortgages that throws off a lot of cash. They are going to use that cash to buy more Treasury securities. So, while they say they are not going to have quantitative easing, number three, it is behind the scenes.
FOSTER: It is there, in a sense.
FORBES: It is there in effect, yes.
FOSTER: So, what harm is that going to have? Because you know, it will just compound the problem that you think is there already?
FORBES: It is going to just hurt the recovery because it puts a premium on speculation and currencies and commodities. It hurts what you might call traditional investments and makes world trading a lot more difficult when the chief currency is like a roller coaster.
FOSTER: But you are saying it is weakening the recovery. It is also weakening a sharp recession, isn't it? It is dampening what would be a much sharper recession. So there is a benefit to that?
FORBES: No. Again, the normal thing is for an economy in a free market to expend. If it is not expanding something is standing in the way. When you cheapen the money, it is like minutes in an hour. Let's say you floated the hour, 60 minutes in an hour one day, 30 the next, 85 the next. You would soon have to have hedges to (UNINTELLIGIBLE) just to figure out how many hours you were working. Very, very inconvenient, very, very disruptive. Same thing when you don't know what the value of your currency is going to be. It certainly skews our interest rates. If they-if President Obama had come in and gotten rid of this thing, mark to market- which eventually Congress did, that was a good thing-and did nothing, the economy would be much stronger today. There would be a lot less uncertainty about what the rules of the game are, what is the dollar going to be worth? Very disruptive.
FOSTER: Well, we'll be hearing more from Steve Forbes later in the show. Stay with us to hear how he is pushing his media business deeper into Europe and publishing in the digital age.
Plus, we'll be hearing from Warren Buffet on his take on the steady but slow growth in the U.S. economy.
Now we're going to have a look at the Big Board, now. Because it is looking pretty negative actually at the moment. Concern around the world about inflation, will that bring interest rates up. We'll have more on that with John Defterios in just a moment.
The Dow, 1.2 percent currently. Commodity related shares falling. Disney was the biggest percentage loser on the Dow today. Down more than 5 percent after profits missed forecasts.
Stocks in Europe had a pretty mixed session earlier. Mining and oil shares down as commodity prices have been falling. The FTSE down, the DAX down, but actually, the CAC up slightly. Anglo-American was down 2.1 percent in London. BP down 1.76 percent. Mary Hennessy over there, Louis Vuitton helped lift Paris. The CAC 40, that was one of the reasons there. And it is Bulgari jewelry division swung to a Q1 profit as Chinese sales surged. That is the story in France. Slightly bucking the trend.
Runaway price rises around the world are concerning investors more generally today, though. In China new figures show inflation at more than 5 percent. That is well ahead of Beijing's target. And that is mainly due to rising food prices.
In Germany, the pressure is more from rising fuel prices; 2.4 percent is mild by some countries standards, but it is Germany's highest since October 2008.
And in the U.K., the bank of England says it expects inflation to remain ahead of its 2 percent target, throughout this year, and next. And that it could reach 5 percent within the year.
CNN's John Defterios joins us now.
Let's first of all talk about the U.K. and those concerns about inflation and growth. This is unexpected to everyone, isn't it? At this stage?
JOHN DEFTERIOS, CNN FINANCIAL CORRESPONDENT: Yes, in fact, Max, they have a target of 2 percent, which many people forget. They were hoping to keep this capped at 4 percent. So, let's take a look at what I call Britain's cloudy outlook.
They are saying inflation is going to be at 5 percent right now. And that GDP instead of it being 2 percent for the year, coming back down to 1.7 percent, which is pretty meager.
What we are seeing, Max, is that $132 billion in budget cuts are starting to bite and starting to erode consumer confidence. And that this target of 2 percent is going to be thrown out the door. But there was a signal, going forward, if we had raised rates earlier this could be the end, as we see the market reaction in New York this evening, of easy money. Perhaps the rates in the U.K. have to go up in July because of the inflation rate of 5 percent is well above the target they were looking for.
FOSTER: So the assumption being that rates will increase, but how fast?
DEFTERIOS: Well, we have seen now, with interest rates at a 0.5 percent, the market is kind of banking in on rates of another 0.5 of a percent, by the end of 2011. We heard from Mervyn King right after he put out that report this morning. Let's take a look at what he's saying and we can talk about the analysis afterwards.
(BEGIN VIDEO CLIP)
MERVYN KING, GOVERNOR, BANK OF ENGLAND: When inflation fell to 4 percent in March, it remains uncomfortably high and well above the 2 percent target. And there is a good chance that if utility prices rise further, later in the year, inflation will reach 5 percent. Before falling back through 2012, and into 2013.
DEFTERIOS: So, after he said those signals to 2012, 2013, the British bond market sold off, because we thought that interest rates would be coming up as early as July, with perhaps a second increase by the end of the year. And as we are finding out right now, it is not just a U.K. problem a U.S. problem, we are seeing the same challenges in Europe, as well.
FOSTER: Yes, Germany, in particular.
DEFTERIOS: Yes, Germany, with the rate as 2.7 percent, as you noted coming into the interview with me, the highest since October 2008. It looks like Jean-Claude Trichet has been vindicated with that rate increase in April, by going up 0.25 point then. But when he came out in May and said he didn't give clear indications that the next interest rate increase was going to come by the month of July. It is a delicate balancing act because when the euro fell, then we saw that sell off in commodities. So, maybe he wanted to take the pressure off of commodities, but it is a very delicate game, right now, as we come to the end of the cycle of very, very cheap. The market is very jittery.
FOSTER: It was accused of jumping the gun, wasn't he, Trichet. He's looking pretty good on it now, isn't he?
John, thank you very much indeed.
Now tough times ahead for the world's biggest motor company, Toyota executives admit there is uncertainty in the future, as the company recovers from the Japanese earthquake, and the tsunami.
FOSTER: Now it calls itself the world's local bank, but HSBC's new strategy-actually, strategy plans that we have been hearing about today, are becoming less about dealing with customers, and more about dealing with commerce. It has been an interesting day for the banking sector, largely off the back of HSBC. This is a complete strategic overhaul from HSBC, as we heard today. It wants to move away from the classic retail banking sector and focus more on commercial and investment banking. It is also getting out of countries that have proven to be unprofitable, like Russia. Focusing on countries with faster growing economies, like Turkey and Mexico.
Now, HSBC also made some other announcements. Big cost-cutting measures potentially worth up to $3.5 billion. Its credit card operations in the U.S. have been placed under review. And the reason for this is HSBC is currently falling short of the targets it actually set itself. It wants between 12 and 15 percent return on its investments. Right now it is only at 9.5 percent. It also wants to increase efficiency its cost cutting income ratio currently stands at over 55 percent and HSBC wants to bring that down to between 48 and 52 percent. Let's hear from the CEO Stuart Gulliver.
(BEGIN VIDEO CLIP)
STUART GULLIVER, CEO, HSBC HOLDINGS: It is therefore important that we continue to have a substantial network because the way you actually take advantage of this is through global banking markets and commercial banking, OK? And actually to be crystal clear, to be the leading international bank is a goal, it is not a marketing strap line, it is not a piece of jargon, it is a goal. It is also a realistic ambition and it forces us to take a sharper focus on what we are actually doing.
(END VIDEO CLIP)
FOSTER: So what do all these changes do to one of the world's biggest banks? Well, Ralph Silver is a banking analyst and president of the Silver Research Network.
Thank you so much for joining us, Ralph. What did you make about HSBC today?
RALPH SILVER, PRESIDENT, SILVER RESEARCH NETWORK: Generally I've been pretty critical of the banking industry, but I've got to say HSBC has always stood out as that type of organization that wants to be a little bit ahead of the curve. What we are seeing now is they are trying to avoid fixing the roof on a rainy day. It is sunny now. They are doing pretty well. Not as well as last quarter, but they are doing pretty well, and now is the time to make the changes. Why? Banking will become less profitable. It is clearly-it will become less profitable. So they want to make sure that they are in the areas that will make the most money. And that is exactly what they are trying to do, move into the areas where they are going to be the most profitable.
FOSTER: But they are moving away from retail banking?
SILVER: They are, because retail banking is going to be far more expensive in the future. In fact we are expecting profitability in retail banking to go down 15, maybe even 20 percent in places like the U.S.
FOSTER: Why is that?
SILVER: It is just more regulation, more rules, more checks and balances that you have to do for your customers that, quite frankly, five years ago, you didn't have to do. Basically, you walked in and if you could chew gum and sign your name you get a mortgage. Now they have to do all these checks and balances. It is much more expensive to do banking on the retail level. But it is still fairly inexpensive to do banking on the investment banking level. So we should move our resources there.
FOSTER: Banking started in the High Street, though, didn't it?
SILVER: That's right.
FOSTER: So what is a modern bank?
SILVER: That's a really good question because it used to be helping people live their lives and helping businesses run their businesses. But now it seems to be more about managing people's investments. And managing people's future from an investment perspective. If you want to do basic banking you can go to your car dealers, you can go to your groceries stores now. You can go to your electronic stores, and they will give you loans when you need them. The banking industry has to move away from that, because that is not where they are going to make money.
FOSTER: What do you think this would mean then for the customer who is got a currency account at a High Street bank?
SILVER: Well, quite frankly, HSBC might give up some of these banks, or some of these branches, but they are not going to fire anybody. There may be 50,000 few employees in HSBC in a couple of years, but those employees will be working for another bank. There is lots of organizations that want to get into retail banking. Just the very large ones, like HSBC, don't need to be in retail banking. So the banks will still be there. There will be serviced but they will be serviced by other people.
FOSTER: They are going to be taking risks, though, aren't they? Because the investment side is so much more risky?
SILVER: Well, that would generally be true but for HSBC it is not really true. Remember, HSBC has 100 million customers. They have 300,000 employees and they operate in 87 countries. Yes, one or two countries might do poorly, but they can always offset that. And that is why they did so well, over the last economic crisis. Their future is diversification and they are not changing that. They are just moving into more regions to make sure they have even more diversification.
FOSTER: As you say, they have always been ahead of the curve. Can we see what is happening at HSBC as something that is going to be reflected in the rest of the banking sector then?
SILVER: Clearly, whenever HSBC speaks the rest of the banks absolutely have to listen. And the global banks, like the JP Morgans of the world they will absolutely be looking into this. And I guarantee you they will be following the same type of practices. They might go into different countries, but they will expand globally into emerging markets, just like HSBC has done.
FOSTER: Ralph, thank you very much, as ever, for joining us.
The world's largest automaker says the continued uncertainty about the impact of the Japanese earthquake and tsunami will prevent it from setting new production and sales targets. Toyota Motor took $1.3 billion worth of hit after the quake. Kyung Lah filed this report.
KYUNG LAH, CNN INTERNATIONAL CORRESPONDENT: Two months after the tsunami you can see that recovery, reconstruction, is achingly slow. It has been very costly, not just for the hart-hit communities, but for the economy at large and some of Japan's automakers. Toyota Motor Company today announced its year fiscal earnings. And in an extraordinary move decided not to report an earnings forecast for the upcoming fiscal year. This is a very rare move. Something we don't see very often from Toyota.
Toyota saying they simply cannot predict the impact of all of this. What this has done in this region is taken out houses. It has caused all this devastation. But for Toyota is has disrupted production. Toyota's parts suppliers have been damaged. It has disrupted the supply chain, so it plunged production and the ability to sell more vehicles.
As we look back at what Toyota did earn over the last fiscal year, it wasn't such a bad year. Toyota announcing that the net income was approximately $5 billion U.S., operating income did slightly fall about $1.5 billion because of the earthquake.
But again, Toyota saying that they simply don't know what the year ahead is going to look like; Toyota did announce some slightly good news as far as when production will start to improve. Saying it will start to come back in stages beginning in June. That is a little earlier than expected. But all of this is expected to be very costly. It is going to cost a lot for this economy. Ratings agency Standard & Poor's saying that all of this could end up costing the equivalent of about $562 billion U.S. Kyung Lah, CNN, Ishinomaki (ph), Japan.
FOSTER: Coming up, after QUEST MEANS BUSINESS tonight, politics, love, kids, and confirmation that she dated rapper 50 Cent. And exclusive for you. It is frank talk from a funny lady who is a late night staple on U.S. television. Up close, up personal with comedienne Chelsea Handler, on "PIERS MORGAN TONIGHT", 30 minutes from now on CNN.
FOSTER: Welcome back. I'm Max Foster. These are the headlines.
FOSTER: Let's take you to the U.S. markets because there are some interesting things going on. Let's first of all show you the Dow. It is down more than 1 percent and that is largely due to inflationary concerns around the world, in U.K., China, and the U.S. But also we have oil prices falling quite sharply. Down $5 in New York and that is because we heard earlier that U.S. inventories, U.S. supplies, are actually greater than expected. But it does show that with the sharpness of these movements that the markets are very jittery right now.
We've already heard Steve Forbes thoughts on the U.S. economy.
I also had a chance to ask him about Europe, though. Forbes Media obviously thinks it's a good bet. It's launching a new division in Europe.
Earlier, Steve Forbes told me why.
(BEGIN VIDEO TAPE)
STEVE FORBES, CHAIRMAN, FORBES MEDIA: What we're doing is having a European edition, going to 20,000, what we call C level, I.e. Chief executive officers, chief information officers, executives making things happen in 11 countries. It will be centered, obviously, from London. And so much of the -- not only business, but content, is emanating from Europe. And so it just seemed a natural to beef up our presence here, both with the print and online.
FOSTER: You say that, the European economies are in a bit of a state there, as I'm sure that you've been reporting in the magazine.
FORBES: Yes, we have.
FOSTER: But you're looking at the long-term, obviously. So you're seeing Europe, still, as a very strong base of the media industry.
FORBES: A strong base for a media industry, also in the financial world, despite the financial crisis. And we believe that Central and Eastern Europe, when this thing settles out in two to three years, will once again be surging ahead. That's one reason why we went into Poland several years ago. We think that there are great prospects there. And the pressure of Central and Eastern Europe doing well, I think, will lead to major structural changes in Western Europe.
FOSTER: So there's good stories to tell, but, also a strong readership for the magazine?
FOSTER: I want to ask you about the media industry, because you see I think you've described the Internet as a tornado which hit the -- hit your industry, our industry first. It's true, isn't it.
But you're coming out of it now and what have you learned?
FORBES: What you learn sounds very simple, but I think it's a very basic thing to remind yourself of, is that you have to tell yourself, what is your purpose in business. And if you focus on what your purpose is, what your mission is, then you don't get quite so hung up on the tools needed to achieve that mission.
So for decades, we did things a certain way. Now, with the Web, not only are you able to reach broader audiences, but the way you create content, the way you market what you're offering has profoundly changed. And there was no playbook, obvious, for this. You had to learn as you go.
And I think one of the things we wisely did years ago when we started our Forbes.com was we separated it from print. We put it in a different building. Different staff reported to me and to my brother, not the usual chain of command, because the human nature being what it is, is if you're dominating in print, you're going to twist it for the purposes of print.
So we wanted this baby to be able to grow into a strong adolescent.
Then two years ago, we went in the opposite direction and merged them together -- very, very difficult, but we -- we've done it.
FOSTER: It's interesting, though, isn't it, because you're still 100 percent reliant on advertising, whereas some of your competitors have put up paywalls.
I'm thinking of certain magazines purely based on paywall, really, aren't they?
Aren't you ever going to go that way?
FORBES: Well, you never say never. And maybe for certain pieces of content, we will, certain newsletters we run online you pay for. But -- and I think what you're going to see is numerous ways -- let 100 flowers bloom -- and hybrids of something that works for one entity may not work for another.
And even if the paywall works, I don't think it's going to ever match the revenues you get on the advertising side.
So if you get it right on the marketing side, then you can look at a paywall. But even in the days of -- the glory days of print, most of our revenue came, at least in the U.S., on the advertising side on the magazine business, not from the paid circulation.
FOSTER: Do you think some of the newspapers are heading to a fall -- heading for a fall because they're setting up paywalls?
FORBES: We'll see. Something like "The Wall Street Journal" in the U.S., it -- it can work. They tend to do a hybrid. Other newspapers...
FOSTER: What about "The Times" in the U.K., for example, (INAUDIBLE)?
FORBES: A very different thing. We'll see how that works. Each one is going to have to find their own way to do it. And, again, what works for one is not necessarily going to work for another. You're going to have to be very agile in this thing and adjust to changing times and circumstances.
(END VIDEO TAPE)
FOSTER: Well, he's managed that over the years, hasn't he?
Steve Forbes speaking to me earlier on.
On the program later tonight, a look at a -- a company that's breaking the mold with innovative business ideas themselves. In this case, it's a bold move to help save the planet. One of America's greenest businessman talks to us about changing the way carpet is made.
FOSTER: It may surprise you that used carpet is said to last thousands of years in a landfill before disintegrating. But one businessman has gone against the grain to push for a greener, more environmentally friendly way to make carpet.
Ray Anderson has been named a hero of the environment by "Time" magazine.
But he says his quest to save the planet is far from over.
RAY ANDERSON, INTERFACE FOUNDER AND CHAIRMAN: Breaking the mold is good. It's not about brand issues (INAUDIBLE). We started the company in 1973 to produce a new kind of carpet for a new marketplace. It turns out that the carpentile (ph) has many advantages, especially in that office of the future. No longer did you have walls to carry the wiring the way we traditionally did. But you had the wiring in the floor and you needed immediate access to that wiring.
That's where we gained our initial success. But over time, we made the very deliberate decision, we have to diversify our marketplace. And the way we did this was going after different segments of the market -- schools, hospitals, gymnasiums, retail stores. And over time, we had a very broad product offering and a very board marketplace.
We began to hear requests in the summer of 1995 -- what's your company doing for the environment?
And we had no answers. So we -- we said, you know, we have to give answers.
The industrial system as it operates today is a cancer over the earth. We created a plan, taking nothing from the earth, if not naturally and rapidly renewable by the earth, and doing no harm to the biosphere. It was totally radical.
Nylon in a landfill, they tell me it will last 20,000 years. So you want to rescue that material from the landfill and put it immediately back into use replacing some virgin petroleum product. And that's what we're doing.
UNIDENTIFIED MALE: Today, if we're going to a job site and it's got old carpet on it, we'll take that carpet off the floor and we'll shave the faience (ph) and create what we call crum (ph) to create a post-consumer recycled back and we'll send the faience to our yarn producers and they'll recycle that back into their -- their process.
ANDERSON: Our costs are down, not up. Waste elimination alone has saved nearly $400 million over the years. Our profits are up. Our stock is up since we embarked on this journey. So we -- we just hope other companies are looking and we -- and they are. I hear it all the time, that others are -- are seeing what we're doing and being inspired by it. It's more than just our success. It's the success of an idea whose time has come. And we can create the example and other companies follow it and we'll get a multiplication effect. And we will have done something that makes our existence here truly worthwhile.
(END VIDEO TAPE)
FOSTER: Anderson says Interface has adapted what it's calling a "mission zero policy." That's the company's pledge not to leave any footprints on the environment by 2020.
Now, we're just going to have a very quick look at the -- the Dow, because it's down quite sharply today. Now, there's been quite a big sell- off in commodities, but particularly oil, down more than $5 in New York today because inventories were pretty high, but also concerns about inflation around the world.
But look at the -- the Dow. It's down more than 1 percent. Watching that for you.
We're also watching the weather for you.
Meteorologist Pedram Javaheri is at the Weather Center for us.
What have you got -- Pedram?
PEDRAM JAVAHERI, CNN METEOROLOGIST: Hey, Max.
We're going to be covering what's been happening across Europe. And, you know, fairly mild conditions for the past several weeks. We talked about what was happening across the United Kingdom for much of the month of April, where we led up to the royal wedding, where the conditions have been well above average.
And, you know, we're paying a price for this right now, as the mild and dry conditions. And you can see, we do have a storm system well to the north, but generally speaking, scattered clouds and very warm temperatures.
From Germany, recording very warm readings today, approaching the upper 20s.
And you put all this together, the past 30, 35 days, some extreme severe droughts across parts of Northern and Central Europe. And, again, this is what happens when you get nice, mild conditions. And we came off a very cold wintry time of the year there across parts of Europe in, say, December and January. And take a look, extreme drought in portions of Germany working your way on into Poland, the Czech Republic, on into Austria, having extreme drought, as well.
And some of these temperatures recording very warm readings for this time of year. The average temperature in Bendorf about 16, 17 degrees this time of year. Some are coming in close to 30 degrees. It was 27 in Berlin today. That's 81 degrees Fahrenheit, when the average temperature is about 17 or so degrees for this time of year. And, again, in Poland, temperatures in the upper 20s. Even Stockholm reporting temperatures well into the 20s. And that pattern gradually going to begin to break down.
We're looking at some mild temperatures across Berlin. But Stockholm cools off to 19. Kiev should be at around 22 degrees, as the warmer air mass begins to get a little displaced there to the east.
And as far as travel difficulty, you're not going to find too much. Yes, a little bumpy, perhaps, around Amsterdam and Dublin, a few showers in your forecast there on Thursday. And the same thing in the evening hours for Frankfurt on into Munich. But the temperature it's going to stay above average and that pattern going to continue for at least another day.
All right, how about the United States?
We know what's been happening. The Mississippi River, one of the most widely traveled river systems in the world there, has an estimated $10 billion plus in revenues that are transported and imported through this river system here in the United States. And the record snow pack that we saw in the northern tier of the United States, coupled with the heavy rainfall that we saw, all of this together, of course, the water has now shifted all the way south. The river levels some of the highest in 50 plus years for some and some approaching the 100 year flood levels there.
And, again, the forecast right now looks troublesome for areas around Greenville out toward Vicksburg and eventually on into New Orleans, where flood levels there, the expected crest nearly six meters. Flood stage, 5.18 meters.
Now, here in New Orleans, the actual levees get up to about six meters. So this gets up just to .6 meters below where the water could actually spill over some of those levees. So it's going to get very, very tricky, Max, over the next few weeks as the water finally works its way across to some of the higher populated regions of the Southern United States -- Max.
FOSTER: OK, Pedram, thank you for that.
A quick update on our breaking news for you. An earthquake has rocked Southeastern Spain. Spanish media reports say at least four people are dead. Damage is reported in the town of Lorca. These are the images we just had in. You are looking at new video from that area.
The U.S. Geological Survey says the 5.3 magnitude quake hit roughly 350 kilometers southeast of Madrid. Widespread damage, as you can see. And operation underway to -- to rescue people. We're still trying to work out what the damage is and where people are who are dealing with this.
But as you can see, it's only certain buildings affected. It's not the whole town. We'll wait to see more pictures as they come in.
Now, power lunches don't come much more powerful -- Warren Buffet is offering a very special date, although you might raise your eyebrows when you see the check arrive.
FOSTER: Now if you can't get financial advice from "Forbes," there aren't many better fountains of knowledge than Warren Buffet. People will do anything to get a piece of the Oracle of Omaha, even just to have lunch with him.
Every year, he auctions off a power lunch for charity. Bidding will be held next month, starting at $25,000.
Fortunately, Poppy Harlow didn't need to stump up cash to sit down with him. And a little later on, we're going to be speaking to her live.
But here's a conversation she had before.
WARREN BUFFET, CEO, BERKSHIRE HATHAWAY: The recovery is -- is -- I wouldn't call it fragile. I would call it steady and slow. But residential construction is -- is the big laggard. And resular -- residential construction goes far beyond the actual jobs involved in construction. It affects our Shaw Carpet. It affects the furniture market. It affects all kinds of things.
So -- so when we get back up to a million units of housing starts, I think you will see a lot more people employed far beyond construction workers. And that will come. I don't know exactly when that will come.
But in between, we have been making steady but relatively slow progress now for a year-and-a-half.
HARLOW: What's that big risk, though?
BUFFET: You know, I don't -- I don't see a big risk. I mean, you know, there -- you know, maybe -- you know, maybe -- maybe there will be an asteroid or a comet or something or...
HARLOW: Not oil?
BUFFET: But -- but -- no. I mean we have those problems. We always have problems, but we always solve them. And this country goes forward. So I -- I -- I do not see a big -- big risks in the economy. I -- I see more growth. And at some point, I see residential construction coming back.
HARLOW: We're heading into the elections again. And once again, issue number one is the economy. You've given Ben Bernanke an A grade in the past. You've been a big supporter of President Obama.
I'm wondering how you think the government and the administration right now are doing handling this economy.
BUFFET: Well, I think, overall, quite well. I mean I -- and I -- and it goes back to the last three or four months of the Bush administration. I think that what they did in September and October of 2008 was crucial. I give them great credit for that. I never voted for them.
But the -- but overall, I think they've done a decent job and -- and I think -- but I think by far the most important factor is just the dynamism of communism. I don't -- I don't think that fiscal and monetary policy are 80 percent of the solution or 70 percent of the solution or anything like that.
HARLOW: But we don't need more stimulus by the Fed, by the government, let capitalism work?
BUFFET: Well, we have enormous stimulus going on on a fiscal basis. We are spending 25 percent of GDP and raising 15 percent. That's huge stimulus. It may not be called that, but that's what it is.
Monetary policy has had its foot to the floor. So we are not going to get much more from those two elements. But we are going to get something - - and I see it every day -- from that actual dynamism of capitalism.
(END VIDEO TAPE)
HARLOW: And, you know, I think that's always such an interesting point, when you think about what's going to fix this economy, really get it back on its feet. Buffett is -- is straying away from saying the U.S. government can do that at this point. He's a little less enthusiastic, really, about the government than past times that I've spoken with him.
He says what it comes down to is entrepreneurship and -- and the dynamism of capitalism, when you look at the situation.
FOSTER: Anyway, Poppy, we want to really hear about his show biz career, as well, because I know he's going into a rather well known TV show.
Tell us about that.
HARLOW: A well known TV show, especially for your audience there in the U.K. and -- and across Europe, and really around the globe. We're talking about the hit show, "The Office," which has been a huge success, of course, here in the United States, as well.
Warren Buffet will have a cameo appearance in "The Office" in the next episode. And I was at Berkshire Hathaway's annual meeting about a week ago, Max, and got a sneak preview of that. He will be playing one of the many people interviewing to be the manager there in "The Office," Steve Carrell's position.
It's not just going to be Buffett. Buffett is one of them. Also, Will Farrell, Jim Carey and Ricky Gervais, of course, the star and the creator of the original "Office."
But it will have some video we might be able to play for you to show you that this is not exactly Warren Buffet's first time as -- as an actor. He actually played Axl Rose, Max, in a Geico commercial. We'll try to get that video up for you. But Warren Buffet always has a lot of fun with these things. And, again, you should look out for him in "The Office" -- there he is, Axl Rose. I think Warren looks great as a brunette, don't you?
FOSTER: This is getting too strange.
We're going to go to more sober subjects, I hope, Poppy. This is actually sort of a breaking business news, financial news story, as well, which you need to keep on top of.
Stay there. I want to get your thoughts on this. The price of oil plummeting today. NYMEX crude is showing a drop of around 5 percent. It's down around $5 on yesterday's settling price. It's now trading at below $100 a barrel. Brent crude is down around 4 percent, to just under $113 a barrel.
The sell-off intensified after a report by the U.S. Department of Energy showed an unexpected rise in gasoline supplies.
Oil's dip is hitting energy stocks on the Dow. Right now, Exxon Mobil and Chevy are each down by more than 2 percent. Walt -- Walt Disney, by the way, is the Dow's biggest loser, down by almost 6 percent after profits missed forecasts, Poppy.
But what we're seeing here is those commodities stocks dragging the whole Dow down.
It's so sensitive right now, isn't it?
HARLOW: Absolutely. But I think the market, Max, was -- was preparing for this and -- and was honestly ready for this. We have seen such a run-up in commodities, whether you're looking at gold, silver oil, over the past few months with, as -- as commodity traders tell me, no real justification for those prices.
And let's focus on oil prices specifically, falling nearly $6 on the day, a big decline. But at the same time, over $100 a barrel, oil traders tell me, was not justified when you look at crude supplies here in the United States -- and gasoline supply, it was -- it was not a concern. We actually have an over supply, some argue, of -- of oil and gas in this country right now. That was not the concern.
You wonder if this is a less of a focus, of course, on the Middle East, tension in the Middle East. We haven't heard as much about that in recent weeks and if that's what's driving things down.
But the supply issue is not the concern. And I think that report that we just got this afternoon saying -- really showing people how much supply we do have is driving those prices down significantly. But as I look at the market here, just about an hour and a bit before we close here in the United States, you can see it is those energy stocks that are really weighing on the equity market, as well.
But interesting, this is the first time we've seen crude prices below $100 in quite a while -- Max.
FOSTER: And you talked about some global factors there. There's general concern, isn't there, as well, about general inflation around the world and interest rates going up, right?
That's another broader factor.
HARLOW: Absolutely. Absolutely, that -- that's a huge concern right now. And it's interesting, last time we heard Fed Chairman Ben Bernanke speak about a week and-a-half ago in that big press conference that he held. He said, once again, to the -- to the American people and, really, to the world, we are not concerned about inflation and the long-term impact on the recovery.
At the same time, when you look at energy prices, when you look at food prices, even the inflation report out of China that we got late last night, what -- what that was showing us, as well, is that inflation is, indeed, still a big concern. It may be down slightly in China from where we were before, looking at food and energy prices, but it's still a huge concern and it's weighing on what -- it's certainly weighing on everyone here in the United States and globally, Max.
But a very interesting move for this market late this afternoon. Interesting to see where we do see crude close. And it's clearly having a big, big impact on the market.
FOSTER: Poppy, thank you very much, indeed, for that analysis.
Well, this will affect pensions, of course. And the fastest growing part of the population in the industrialized world is people 50 and older. Add to that the fact that in 2011, the -- the baby boomer generation turns 65.
So what can they expect in their retirement?
CNN's Deborah Feyerick shows us some high tech solutions to help boomers age gracefully and get some firsthand experience, as well, of what it feels like to get old.
DEBORAH FEYERICK, CNN CORRESPONDENT: (voice-over): Welcome to the Age Lab at the Massachusetts Institute of Technology in Boston.
(on camera): I'm getting older.
(voice-over): If you want to know what it's like to grow old, this is the place to come.
(on camera): So this is what it feels like to be 75 on a good day.
Here we are at the store.
(voice-over): Joe Coughlin runs the lab -- a valuable outpost for designers and businesses figuring out ways to cater to aging baby boomers.
JOE COUGHLIN, DIRECTOR, MIT AGE LAB: We have found that product placement for the things that you most want and the most healthy are quite often those that are the hardest to reach.
FEYERICK: Researchers here are figuring out everything from easier shopping...
(on camera): Can I do a little exercise program here?
(voice-over): -- to fun ways to stay active.
(on camera): Even for 10 minutes, it makes you very fatigued.
COUGHLIN: Well, if the baby boomers are going to leave a legacy, it's about expecting more and they're going to try their best to age cool.
FEYERICK: OK. Or age less.
COUGHLIN: Or age less, yes.
FEYERICK: OK. (voice-over): That includes the kind of homes baby boomers will choose to live in, reconfiguring spaces.
COUGHLIN: Here at the counter cutting vegetables now is going to make you far more fatigued than if you had a counter that you could sit at.
COUGHLIN: And so we're really designing the house to live in for a lifetime.
FEYERICK: And using electronic strips to keep track of medicine and help others keep track of you.
COUGHLIN: And it says that you put your pills back without taking them.
FEYERICK (on camera): I did. I'm just like going to stand next to him.
COUGHLIN: We're using that type of technology that was used for the astronauts for your mom in your kitchen, because if you think about it, space is an extreme environment, but your kitchen is an extreme environment as you age. FEYERICK (voice-over): In America alone, there are some 77 million baby boomers were born between 1946 and 1964. Seventy percent live in rural areas, where cars are a lifeline.
COUGHLIN: Are there things that we can do with a car to compensate for maybe reduced flexibility in the neck, blind spot detection, warning systems?
FEYERICK (on camera): So are you, on some levels, trying to turn back time?
COUGHLIN: In some levels, no, we're trying to make the best use of the time we have.
Do we work longer?
Do we come up with new forms of play? How do we stay in our homes, not just independent, but connected, as well?
FEYERICK (voice-over): Even if that connection is a robot with the same weight and feel as a baby and oddly soothing.
As for me, I'm not ready to get old.
(on camera): I feel 17 again.
(voice-over): Refusing to age without a fight.
Deborah Feyerick, CNN, Boston, Massachusetts.
FOSTER: Time is on her side.
Stocks, though, are suffering in New York, as we were speaking earlier. Stocks in Europe had a mixed session earlier on.
Let's have a look at those numbers.
Mining and oil shares down, as commodity prices fall. And that has escalated as we go into the U.S. session. Anglo American down 2.1 percent. BP down 1.76 percent.
You can see there in France, how shares were actually up. But Moeig (ph) Hennessy Louis Vuitton helped lift that Paris CAC. Shares were up 2.3 percent. Its Bulgari Jewelry division swinging -- swung into a Q1 profit, as China sales surged, though luxury doing quite well.
Let's just go back to the Dow, if we can. We need to keep on top of that, just over 1 percent down, dragged down by commodities.
Oil, NYMEX down $5 today.
We'll keep across that for you.
But for now, that is QUEST MEANS BUSINESS.
I'm Max Foster in London.
"PIERS MORGAN TONIGHT" is just ahead, after a check of the headlines with Hala.