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Taking Stock of Market Shock; Odds of a Double-Dip

Aired August 19, 2011 - 14:00   ET


RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS: Tonight, we're taking stock of the short, sharp market shock.

We're taking stock of double dip. Some say, yes, some say, no.

And taking stock of your air miles. Plan now to be elite.

I'm Richard Quest. I mean business.

Good evening.

It's dead calm on the Dow at this hour. Even with deep rumblings of uncertainty threatening global markets. Another stormy day-(DESK BELL CHIMES)-for stocks. And you can see, and I'm going to take you over to the big board. Because this is fascinating. We're down 59 points at the moment, 10,930. So we are under the 11,000. Not rocket science, that.

But look at the way the day has progressed today. Let's go right in and show you. We opened 100 points down. It followed losses of more than 400 yesterday. And the day pretty much, the yellow line-sorry, the red line shows this, but it doesn't really give us the detail. Throughout the course of the day, the market was nosing its way up, just a couple of points here and a couple of points there. There had been periods, it is only in the last, I would say, half hour or so, that we've now got this consistent, and rather deep, and perhaps some disturbing lows.

Let's go straight to Felicia Taylor in New York.

After we have just looked at the markets, how the others have traded. This is the year to date, and the year to date, as we have been going so far. The Nikkei, since January 1, down 14.7 percent. The London FTSE is, since January 1, year to date, down 13.6. The German DAX, which is, I think, showing 18.9 percent, as the year to date, but actually because mid- year there was a sharp upswing, it is probably nearly 24 percent down from its highs of 2011.

And the Big Board-interesting, interesting-the Dow is only down just 5 percent, year to date, about 15 percent from the high of the year, back in April. But 5 percent for the Dow, for the year to date.

Felicia now, in New York, to put some perspective onto all of this.

The market, today, I-listen, I'll be honest, I think it is just exhausted.


FELICIA TAYLOR, CNN BUSINESS CORRESPONDENT: You know what that is probably part way true. I mean, there is no question about it. You were talking about the Dow being down only 5 percent. The Nasdaq is down 10 percent. The S&P is down 9 percent. But you are right, to be perfectly honest I'm encouraged by today's market. Because we aren't really seeing a steep sell off. We have no idea, we have two more hours to go. And possibly there could be. People don't really want to hold their positions going into the weekend.

But this is not a concerted sell off across the board. People are still sort of dipping back into the marketplace, looking for those bargains, obviously prices are much cheaper than where they have been before, but you know, the gold bugs are still out there. Gold is at a record high at $1,852. We saw it cross $1,881 at one point, Richard.

QUEST: All right. Now, in this maelstrom of market misery, we've heard from Bill Gross of PIMCO, that he believes that highly probably, or very likely, or inevitable-there is a variety of words-but the gist of it is that he thinks a recession is just about now baked into the market at these sort-this sort of level of disruption. You're chap, that you have been talking to, does not, and your chap votes. Tell us more.

TAYLOR: Indeed, I had the chance to talk with the Federal Reserve president in Dallas, Richard Fisher. And on the one hand he is encouraged by the fact that he does not believe that we are going to see another recession. He does believe that there is going to be growth, albeit slow. But on the other hand, he is quite pessimistic about the leadership in Washington. Have a listen.


RICHARD FISHER, PRESIDENT, DALLAS FEDERAL RESERVE BANK: I believe, we at the Federal Reserve, the central bank of the United States, have made money inexpensive, obviously, as rates are near zero. And also widely available, so we have gas in the tank, what the problem is that no one is stepping on the gas pedal and engaging the transmission to move our economy forward-at the speed we would like to move forward. We are still moving forward. We have the greatest capital plan in the world, and the most efficient economy in the world. But it needs to engage.

And the whole debt ceiling negotiations, which I considered to be a comic opera, gave pause to business leaders, to consumers, to everybody. We were told by our president, by our Congress, by our Senate, the sky is falling. And when you get that kind of message from your leadership it doesn't matter if you are a Democrat or a Republican, or whatever you are, you wan to pull back and just wait and see what the outcome is going to be. So, I don't believe the answer is monetary policy.

By saying that we were going to lock in rates at the lowest end of the yield curve-what are known as federal funds rates, that is the inter-bank lending rate-which we make at zero, or near zero, out to 2013, my belief, this is my personal belief is that we further disincentive businesses. Because now they can say, well, wait, why don't I just hold back longer, I know money is going to be cheap. I don't have to move now.

TAYLOR: Wall Street clearly agrees with you. I mean, this comic opera that you referred to has been of deep concern to Wall Street. And we've seen extraordinary market volatility in the last couple of weeks. What does Wall Street need to hear to start to calm down the markets and reinforce the fact that things are going to be OK?

FISHER: You know, again, I used to be in this business. I have to be very careful about commenting on it. I made my living managing money. This is a fear-induced type of sell off. I would like investors to think about how much progress we have made, particularly here in the United States. Now, our markets have not sold off as aggressively as the European markets, as you know. There are off in the mid-20s, year to date. And we are seeing a flight to the U.S. Treasury. And we see that in Treasury rates. Our business plan is ultra efficient. What it needs to do now is just move forward at a faster speed. I personally don't see negative growth. I see positive growth, but I have said forever, it is a slow slog coming out of this recession.

TAYLOR: What about inflation, though? I mean, the numbers that we saw yesterday were really somewhat alarming when it came to an increase in the jobs number. Housing was dismal. Consumer inflation started to pick up. Are you worried at all about that inflation number?

FISHER: I'm a genetic worrier. It is in my DNA. That is why I'm paid the bigger pay that I'm paid. I mean, that is what central bankers do, is they worry for a living. But our own trimmed mean analysis, we do- as Texans, of course, we do everything differently. We analyze inflation differently. Look at 170 items that people actually buy, from my favorite subject, beer, to hair cuts and shoe repairs as well as all the other things that are in the personal consumption expenditure basket. And we see a-we expected to have a pick up mainly because of gasoline and apparel prices. We also expected to see that come down. The last rate running over the 12 months has been somewhat subdued.

That doesn't mean I'm not worried about things. I'm especially worried, by the way, because savers are not earning very much and they are earning a negative real interest rate right now because inflation is eroding their earnings. These are people that play by the rules. Save their money as they are supposed to and are now getting very little. It dampens their consumer power. It frightens businesses a little bit further.

I don't think the risk here, and I hope I'm wrong, but-and remember I'm a hawk in the aviary of central bankers. I don't think the risk here is runaway inflation. I think the risk here is stagnation that derives from government's inability to provide confidence to the American people.


TAYLOR: So what is stagnation? Stagnation means that there is going to be growth less that 2 to 3 percent. And that is the ideal level that they want to see. I mean, Mr. Fisher is being very clear about what he thinks with regards to what is happening in Washington. And that there has got to be some more clarity and it has to happen sooner than November, when this super committee is supposed to issue their guidance.

QUEST: All right. He doesn't talk politics in a party political sense, very briefly, but in that interview he is laying the blame for the stagnation very firmly at their door.

TAYLOR: Oh, there is no question about it. And he has been on this for some time now. And he does not believe that there needs to be any further monetary stimulus.

QUEST: Right.

TAYLOR: He doesn't think we are going to see it. He doesn't believe in a QE3, at all. So he doesn't think that is the responsibility of the Federal Reserve at this point to do anything. Watch for comments from Ben Bernanke on August 26. That is when they meet at Jackson Hole. And last year, that is he gave hints about QE2.


TAYLOR: I don't think that is going to happen this time. But watch for his words and what he says about where we are in the economy now and if he gives any hints about reducing rates further.

QUEST: I remember that speech well. That is where we got the first indication.

Felicia, very good to see you. Have a lovely weekend. Have a rest. You must be as exhausted as the markets.

Alison is in New York. Alison, unfortunately is not going to have any rest just for a few more hours yet.

Alison, I said to Felicia that I thought the market was pretty much exhausted from what we have had happen over the last few days, few hours.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: I think you are spot on about that, Richard. You are seeing exhaustion. You know compared to what we saw yesterday, what we saw last week, it is pretty darn calm here today. The Dow down 106 points.

You know it has been moving quite a bit. There has been quite a bit of volatility all day. But nothing like we have seen lately. You know this is a headline-a news headline driven market. Not many news headlines out today to really steer the trading day. No economic reports either. That kind of adding to the bit of volatility that we are seeing.

Funny thing with the Dow, right now, it would be much higher if it weren't for Hewlett-Packard. You know, Hewlett Packard announced the radical restructuring. It is the world's biggest computer maker. It is spinning off its computer business. It is killing its tablet. Its shares are tumbling 20 percent. It is really a big drag on the Dow right now, Richard.

QUEST: Alison, thank you very much. Have a good weekend, and a bit of a rest, too.

KOSIK: Thanks, Richard. You, too.

QUEST: If you can, if it is not too busy.

When we come back after this short break, from the scene of the crime we bring you the forensic analysis. I'm about to turn detective to find out what is behind this weeks assault on global confidence. We present the evidence in a moment.


QUEST: It is easy to tell you about the damage done to the global stocks of this week. It is often less easy to understand the reasons why this crime has been committed. Now, in August 2011, we should experiencing these kinds of brutal scenes. Sirens can go and we can show you the maps and the descriptions of what has been happening.

Let us turn detective and analyze why things are as they are. First of all, you have the actual crime itself in 2008. The reality is, the enormity, and I mean the literal meaning of enormity. The graveness of what took place in 2008, 2009, was so deep and so severe that we literally are still cleaning up the blood and gore from the carpet.

But then you have the politicians, seemingly, out of policies. And if they aren't out of policies, they can't agree. The witnesses are fighting amongst themselves. You have got the global reach of what is taking place. The fear, for example, why did the KOSPI, in South Korea, fall 6 percent? You know the answer to that. You don't need to be a detective. It is because the U.S. will buy their manufactured consumer goods and computer chips, their semiconductors.

And finally, Roosevelt may have said, we have nothing to fear, but fear itself. As always the tail wags the dog. And the tail of fear is wagging the dog of the economy. There is no doubt in this environment it is a sniffing hound that is clearly leading to what is taking place.

Bob Lenzner is the contributing editor at "Forbes" magazine and joins me now from CNN New York.

Sir, we have the crime, we have the-


QUEST: Go on?

LENZNER: You were spot on about this. I think you have to go back and realize that we never-what we did in 2008 was used about $3 to $4 trillion to save Wall Street so that the world would not end. And some $10s of billions to stabilize Detroit, and pretty much everybody else had to fend for themselves. So, the economy did not really come back, but the stock market came back. The stock market came back about 80 percent.

So, if I'm somebody who has gotten their household wealth back up 80 percent, if I held on through the terrible times, I'm still scared when I hear there is going there is going to be a recession. And I see what is happening in Europe. And I see what is happening around the rest of the world. I'm going to try to preserve some of those gains that I got back from thinking I was going to loose it all in 2008.

QUEST: But you'd agree with me, Bob, that-I mean, the reaction this week, and indeed, over the last couple of weeks, is disproportionate to the news that we have got. We have debt crisis before. We have had countries going bankrupt before. So why do you think these incidents are tumbling the markets so dramatically?

LENZNER: I'm going to give you-I'm going to tell you a small anecdote. See what you think of this. When the president was speaking the other day, when the market-the big day when the market went down the most, when he took-got on camera, the Dow was down 400 points. When he got off camera, 12 minutes later, the Dow was down 525 points. And during that little talk he said America has always been a AAA nation and we'll always be a AAA nation, which was a sort of empty rhetoric. Nothing he said stopped the deluge in the market. So that is sort of symbolic of that people just have confidence in the political class. And there is a lot of reasons why they shouldn't.

QUEST: OK, right.

LENZNER: And there are a lot of reasons why they shouldn't, to be perfectly honest.

QUEST: Right. So you end up with Bill Gross of PIMCO, who was on CNN earlier today, he basically saying a recession is inevitable. And then you have Richard Fisher who is blaming the political gridlock, but doesn't see a recession. To people watching, they wonder you know, cleaning up and sifting the evidence, and making sense of this, on weeks like this is just about beyond the wit of individual, human comprehension.

LENZNER: Right. Well, I think individuals, listen, Richard, neither you nor I know for sure just whether there is going to be a recession or not. But this morning JP Morgan came out and said the growth of the U.S. economy in the first half of 2012, will be 0.5 of 1 percent. So, there are projections all over the map. Nobody can agree on exactly what is going on. And that is a real problem. People don't have confidence. The tremendous volatility and the sharp moves in the market are scaring-if I was Aunt Sadie, I would be scared. And I'm scared myself. And I've been covering this stuff for 40 years. So, you know, run for cover.

QUEST: Right.

LENZNER: That is what people are doing. Run to safety. And by the way, gold is going up, running like it is, right now, it is beginning to go into its bubble projectile.

QUEST: All right.

LENZNER: We'll see what happens when we loose all of it.

QUEST: That is a problem we'll have to wait for-that's a crime we'll have to investigate on another day. Bob, many thanks for joining us. Have a good weekend if you can. Many thanks.

Now, at least you have a better understanding of exactly why the events, seemingly, are having a disproportionate effect.

Everyone likes a bit of something for free, especially when it comes to travel. Next, there is one thing we can still do. Maybe those frequent flyer miles? They are not that devalued yet. When we come back.


QUEST: Taking stock, this time on air miles. As the summer jets by and the autumn approaches on the horizon, so you need to take stock about something you can get for free. While you were making the trips, anyway, you were getting the miles. But now running out top up your airline loyalty points, and your elite flying club status, absolutely essential this time of year.

Now, for instance, tomorrow, I happen to be, purely coincidentally, I happen to be going to Chicago. Right? I'll be back next week, part of the week to do the program. So, my roundtrip to Chicago, will give me, if you add on the base miles, there are no fare miles because it is discounted, business class, the elite miles for being gold, I will get roughly, for that one round trip 15,000 frequent flyer miles. Which takes me well on the way, well on the way to getting a free ticket. But if you wan to re- qualify for your gold, platinum, or any form of elite, you have got to start planning now. Brian Kelly is known as The Points Guy, and on his blog he has been dispelling some of the myths about frequent flyer rewards. Brian is with me from New York.

I'm right. You are coming into September now, the serious travel, if we are going to make it to the top. Is it still worth collecting those frequent flyer miles that I'm going to get tomorrow?

BRIAN KELLY, THE POINTS GUY, BLOGGER: It is absolutely worth it. Frequent flyer miles are absolutely valuable. You know, whether you want free travel or you want an upgrade. You know, even these days you can use your miles for hotels and cars. So, if you value money, you should be collecting frequent flyer miles.

QUEST: Let's go through some of the myths. Firstly, that we can't use miles. We can never get dates. It is just not possible.

KELLY: Yes, using miles can be tricky. I think that is one of the reasons why my blog has been very popular. For example, most of the time when you go to an airline Web site they are not showing you 100 percent of availability of what is out there. So once you arm yourself with the knowledge you can definitely find out, you know, the ins and outs of finding out all of the award availability that is out there. A leap status is also extremely important. You know, while we may look for the best price of each flight. You should take into account the value that elite status will give you. The customer service benefits alone are huge. You know, when flight is cancelled due to weather, if you are an elite passenger, you are going to get accommodated before everyone else.

QUEST: One of the biggest events is due to take place in the next month. And that is the new United Airlines, United Continental; which, Jeff Smisek, the chief exec, said on this program, and he told us, they have more combined members than people living in France. Now when you start to put that into context, you start to see that these frequent flyers programs are quite important.

KELLY: They are very important. Yes, the airline frequent flyer programs make the airlines millions and millions of dollars. These aren't just free tickets that the airlines are giving away, you know, to be nice. They are actually make a lot of money off of these programs. United and Continental actually just launched brand new credit cards with Chase Bank, in the U.S., of which I'm sure was a very lucrative deal for the airlines.

QUEST: Right.

KELLY: So, they are making a lot of money off the miles.

QUEST: So what would your tip be? Come on, because I know every viewer who, like myself, is slightly obsessional about these miles. And yes, I have admitted that I have taken routes that have taken me through other airports, and frequent-to actually build-and, I'm sure, you have done the same, right? Don't you look like that.


QUEST: I'm sure you-have you ever done a mileage run, just for the purpose?

KELLY: Yes, last December I flew from New York to Dublin, but I flew New York, Pittsburgh, Atlanta, New York, Dublin and back, just to make sure I got my Delta Diamond status.

QUEST: And everybody-I know at home, people are going, God, how did he do it?

Listen, finally, what is the number one tip, the number one tip as we come to September and you want to reach elite status by the end of the year?

KELLY: I think the first thing is you need to have a plan. You need to chart out, so how much have you flown, this year. And understand that there are two types of miles. There is the redeemable miles that you can use for air travel. And then there is also a separate clock-no, a counter, of elite miles. So figure out how many elite miles you have on your preferred airline right now. And chart out how much extra flying you have from now until December 31. If it is achievable, you know, it may make sense to throw in an extra flight to hit that next elite status, because that status usually is good until February of 2013, if you make it this year.

QUEST: Right.

KELLY: So, you have a long time to use those benefits.

QUEST: Brian, many thanks, indeed. We'll have you on again, talk more about this as the year goes on. Thank you, Brian, joining me there, The Points Guy.

And any frequent flyer, I just know you know how many miles you have got to get to elite status. I know how many I've got to get to elite status, if we are going to recreate, get there for the end of the year.

The Big Board, which is another sort of mileage which is absolutely in the red. Well, we are 119 points lower, 10,971. That is a loss of 1 percent, so far on the Dow. We are in dangerous territory with an hour and a half to go before the close of play. We'll watch it closely in the next few moments.

No room for maneuver, in a moment we speak to one expert who says European banks will struggle to raise enough to cover losses from the sovereign debt crisis.


QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.

This is CNN. And on this network, the news always comes first.

Officials in Tripoli say a NATO air strike has destroyed the home of Libya's intelligence chief. A short distance away, fierce battles are raging over Zawiya, a crucial city on the main supply route. Rebels say they control 80 percent of the city, including its oil refinery.

Israel has launched multiple air strikes against targets in Gaza on Thursday. Two people were killed, including a member of the militant group Israel is blaming for attacks on Thursday that killed six Israeli civilians, as well as a soldier and a policeman. Six Israelis were wounded today when rocket fire from Gaza hit the port city of Ashdod.

No apparent letup in Syria's violent crackdown despite increased pressure from Western nations. Activists say security forces shot at protesters after Friday's prayers. At least 22 people have been killed. Deaths were reportedly in Damascus and Homs and across Daraa to the south.

Spain is the latest European country to declare how it plans to tighten its purse strings with a raft of measures, which included halving the tax paid when buying newly built homes, which is a temporary measure, a tax cut, reductions in corporate tax credits and an increase in early tax collections for some firms. So that obviously is a massive tax raising revenue.

Savings in health costs by using more generic drugs.

Speaking at a news conference, Spain's finance minister spoke of the cuts, but refused to get out a crystal ball.


ELENA SALGADO, SPANISH FINANCE MINISTER: (through translator) I'm not in a position to predict what is going to happen in the stock markets in the coming weeks.

What I can do is to examine when the biggest turbulences have happened, has it been because of the lack of decision-making, the lack of news, a lack of trust or tax that should have been paid and redacted over - - or on the transactions in the last days. There seems to be something behind this call for some of the financial institutions throughout all or most of the European markets and we're looking into it.


QUEST: Now, the minister may not want to put her neck on the block, but one man who had some of the answers on European banks is Sean Egan, one of the founders of the credit ratings agency, Egan-Jones, who joins me live from CNN New York.

Sean Egan, the -- the worries about European banks have swirled all week, from the supposed regional bank needing 500 million credit to the warning from a Swiss official of a seizure in the interbank market.

What do you believe is happening?

SEAN EGAN, CO-FOUNDER, EGAN-JONES RATINGS: I believe that the concern is growing in the market about whether or not the banks will have the wherewithal to absorb the losses from the sovereign periphery countries and their related banks.

Basically, the concern is that a number of the European banks don't have the ability to absorb the losses. And as a result, some of the money market funds are pulling back funding and other investors are pulling back funding. You're seeing that concern reflected in share price...

QUEST: All right.

EGAN: -- of the various European banks.

QUEST: Now, taking -- the numbers I've seen -- and if you, let's just take Greece, for example, yes, we know there are some French and some German banks that are heavily indebted. But the numbers I've seen don't suggest that to be an un -- it would be a nasty blow, but not a death threat to the bank after they have recapitalized toward Basle III.

EGAN: Well, Greece is just the tip of the iceberg, actually. If you look at the latest proposal for providing funding to Greece, the debt holders are going to take a haircut of in the area of 50 percent. And there's some question whether or not, in the next round, the haircut won't be greater than that. That's just for the -- the government of Greece, the Republic of Greece. You also have to worry about exposures to the Greek banks...

QUEST: All right...

EGAN: And then you carry it forward to Portugal and certainly...


EGAN: -- Ireland and some of the other countries.

QUEST: One of the really awful parts of 2008 was not the -- the banking crisis per se, but it was when Lehman collapsed and the interbank market, the money markets, overnight cash, seized up.

Is there a real risk of that happening again, do you think?

EGAN: If it's not handled properly, there clearly is the risk. Hopefully, we've learned from the Lehman crisis and it makes little sense to have an uncontrolled bankruptcy. There's little doubt that more capital is needed to absorb the losses. And certainly the European politicians have been focusing on this. It's a little bit more difficult to coordinate things in Europe because you have two -- you have a number of -- of countries, as opposed to the U.S., where you had one country.

However, we've had the experience of history and hopefully regulators are going to learn from that.

QUEST: Mr. Egan, I know you'll forgive me if I say your -- your perhaps thought that this could happen -- one hopes that it doesn't come true. It's rarely that I say that, but I hope he's wrong. But we'll certainly be watching what you have to say and having you come back.

Many thanks, indeed.

Sean Egan joining me from New York.

EGAN: Thank you.

QUEST: When we come back, hanging up the boots -- sports fans are set for a disappointment this weekend as Spanish footballers go on strike. A discussion of what it's all about and how it might last -- how long it might last.


QUEST: OK, a row over wages has kicked up a crisis in Spanish football. The start of the season has been delayed because of a strike, the first in 27 years.

What do they want?

They cried, the strikers -- well, they want their money. They want funds to protect unpaid wages. The players say more than 200 of them are going without and they're owed about $72 million. Six teams have filed for bankruptcy. And I'm guessing -- and we'll talk more about it with Pedro in a second -- but I am guessing it's not the superstars that are necessarily the worst off in all of this. It's probably the poor kickers at the bottom.

Anyway, a spokesman for the Football Association says 22 clubs have either gone bankrupt or are in receivership. The clubs have been negotiating in good faith.

So, there's lots of disappointed sports fans this weekend.

What's being done to get things back on track -- Pedro?

PEDRO PINTO, CNN CORRESPONDENT: You want me to break this down for you, don't you?

QUEST: I do. It's odd. It's odd.


QUEST: These are overpaid footballers.

PINTO: It's odd if you think of only Barcelona and Real Madrid. Real Madrid. And there have been talks going on for the last week of the Association of Spanish Footballers and -- and the league. And everybody was expecting, at the last minute, for there to be a deal and let's play football and this is what it's all about, because that's always what has happened. And as you reported, that it hasn't happened since 1984, a strike in Spain.

But it didn't. And it -- it's very clear that the main reason is about how they split the profits. And it all comes down to television revenue.

QUEST: Are they spoiled rich footballers arguing over the -- the circuses of enjoyment from the game or are there some people in serious hardship who are being hard done by?

PINTO: It's Option B, I would say. You have a lot of footballers -- and you showed some numbers over there. There's around 200 footballers who are out a combined $72 million. And these are players, many of them, that haven't been paid in a year. They haven't had the chance, many of them, to pay their bills.

Let me just break this down for you quickly because...

QUEST: Please. Yes, go.

PINTO: -- there are numbers here that are very important. We're talking about Real Madrid and Barcelona, for example. They share 50 percent of the whole revenue of the whole league. So 20 clubs. Each one should have 5 percent, correct?

The way it works is clubs negotiate their TV deals independently from the league...


PINTO: -- so Real Madrid and Barcelona, everybody wants to -- wants to watch them pay -- play. They get $600 million euros.

A lot of the smaller clubs get between six and 10 million euros. So right there, you see the discrepancy.

The -- the -- Cristiano Ronaldo, the Lionel Messi (ph), the Ikar Casillas, they're fine. They're making a lot of money. But this is the solidarity...


PINTO: -- that they're showing with the other players, who, some of them, can't afford to pay their bills.

QUEST: And that's the key, isn't it?

If the Real Madrids and the Barcelona players, if they strike and that strike holds, then the others stand a chance of winning it?

PINTO: Some of the players have said, hey, we'll go the whole season without playing, just to make sure...

QUEST: Is that right?

PINTO: No, it's not, because they can't do this. They need, still, the income from their salaries and they need to pay...

QUEST: Right.

PINTO: -- to -- to get their money.

One -- one final thing I wanted -- I wanted to mention is that the players want a new collective bargaining agreement with two key clauses.

The first one is that their salaries are protected. And the second is that there's a fund in case the clubs can't afford to pay the -- the wages, that the federation and the league has a fund that can pay them. And they want to be allowed to break their contracts if they're not paid for three straight months.

QUEST: All right.

PINTO: So that's what the players want.

QUEST: Pedro Pinto, thank you very much.


QUEST: Many thanks, indeed.

OK, off to Chicago tomorrow.

And the weather forecast there, please -- (INAUDIBLE) it's all about me today.

Guillermo is at the World Weather Center.



ARDUINO: -- and it's going to be great.

When are you flying out?

QUEST: Well, since you've -- tomorrow morning, 7:00 on the early flight.

ARDUINO: Well, you have like a 50 percent chance of thunderstorms when you arrive and then the weather is going to be gorgeous. We're talking about some mere -- a slim chance of thunderstorms. And if you stay until Wednesday or Thursday or Friday, next week, great. It's like 28 degrees during the day and 15, 16 degrees at night and in the morning. It can't be even -- any better than that.

For our viewers who are going to Chicago and they may have the chance to see Richard walking on Magnificent Mile some time on Monday or Sunday, it's going to be fine. So come to the States. It is cooling down overall, except for the southern sections, in Texas.

And, you know what?

We had some severe storms in Canada. I'll tell you about that in a second.

We have no problems at airports into Saturday. If you're flying this weekend, fine.

The heat in Texas, remember, here in Oklahoma, then, of course, in the desert, it's going to get hot. And then at night, you're going to notice a change -- a change. It's going to be much nicer all over, especially into the coast over here, the southeast. And it's now hot, of course. Thirty- two in Atlanta, 19 -- 29 in New York. But then in the morning and at night it gets better.

It's 30 in Chicago as we speak right now.

Boy, look at these storms that erupted in Calgary. And actually, they caused almost four centimeters of hail in -- in the area. So look at the clouds and this is thanks to an iReporter, quite ominous. Of course, you know, you don't want to fly through something like that.

But that was in Canada, Richard.

And coming up later, I'm going to be talking about Central America, because a system has formed. Its name is Harvey.

Have a nice trip and have a nice weekend.

QUEST: Thank you very much, Guillermo.

See you next week.

Many thanks.


We've talked so much this week about double dip. I want to show you a double dip of a different kind. There we are. This is a real double dip. It is a double dip which is a busy, throaty dip with a swizzle stick. We liked these double dips so much, we bought them all for the team. Let's face it, the team all needed to enjoy a double dip.

And that is QUEST MEANS BUSINESS for tonight.

I'm Richard Quest in London.

Thank you for making time and joining us over the course of the week. It wouldn't be the same if you weren't there.

Whatever you're up to in the hours ahead, as always, I do hope it's profitable.

Come back to us next week.




I'm Robyn Curnow here in Johannesburg.

Now copper was one of the first metals used by mankind. These days, it's an essential element in many goods and services.

But copper theft is becoming a real problem here in South Africa. Industries are disrupted, so much so that businesses are calling copper theft economic terrorism.


CURNOW (voice-over): In the darkness, sparks fly on a Johannesburg road as a thief, caught on a security camera, steals copper cables from a street light. Along another road in another part of South Africa, a municipal police unit nicknamed "The Copperhead" inspects the latest damage where copper thieves have struck again.

YUL COLEMAN, PRINCIPAL INSPECTOR, CAPE TOWN POLICE: This is now a (INAUDIBLE) trains. As you can see here, the copper cable is already stolen. The tools that they are using basically to chop up this, they can even -- evenly use an ax or a hacksaw or they will even use a piece of stone.

CURNOW: The casings are stripped and the raw copper sold as scrap metal, often to illegal drop shops that operate day and night in poor neighborhoods. A handful of copper like this being burned openly on the side of the road is worth about $4 or more, earning South Africa's poor some easy cash.

UNIDENTIFIED MALE: You know how much it's against the law to burn cable.

CURNOW: These police, unable to prove that the copper is stolen from their Cape Town municipality, cannot arrest the men. Authorities say the illegal trade in copper is crippling South Africa's ability to provide basic services.

Brand new high speed train tracks, electricity pylons, street lights, telephone lines, water meters -- South Africa's infrastructure is hacked up, ransacked and stolen everyday, says one of the security officers for Eskom, the national power utility.

LEON VAN DEN BERG, ESKOM: As far as Eskom is concerned, it is huge. If we look at the number of incidents, we're looking at annually about five -- 2,500 incidents. And if we look at losses, we're looking in the vicinity of about $5.5 million American.

CURNOW: Petty thieves and international syndicates are behind the thefts, say "The Copperhead." But they and other police are overwhelmed by the scale of it. So the state-owned telephone, electricity and transport companies, as well as city municipalities, are hiring private investigators to deal with the problem.

(on camera): So you guys are using quite a lot of high technology stuff to try and combat copper thieves. Just show us some of your video here. You've got this amazing helicopter, infrared.

It's quite serious stuff, isn't it?

ROY ROBERTSON, MANAGING DIRECTOR, COMBINED PRIVATE INVESTIGATIONS: That's right. And it operates basically every night. Obviously, trying to -- to (INAUDIBLE) the syndicates or -- or pick up the syndicates as quickly as we possibly can. And then they toss the ground forces to -- to apprehend the suspects.

CURNOW: So how many suspects have you apprehended, have you caught, in the last month?

ROBERTSON: Well, during my record, 90 copper thieves. And I think that's quite outstanding. We, on average, arrest about 70 copper thieves per month.

CURNOW (voice-over): Rudimentary hantles (ph) like these are often used to steal copper -- copper that often ends up in the international market, says Robertson.

ROBERTSON: Well, there's a big demand for copper all over the world, not only in South Africa, all over the world. So a lot of people are making money out of it. And the scavengers are making money at it. The families are making money at it. The overseas marketer are making it. Everybody is making money out of it.

UNIDENTIFIED MALE: As you can see there, the fence was even taken off.

CURNOW: It's estimated that copper theft costs the South African economy around a billion dollars a year in material losses and replacements.


CURNOW: And then there's the ripple effect on the daily lives of South Africans, of broken telephone lines, inoperable train services, lost productivity and electricity blackouts. Many say the price of stolen copper is far too high.


CURNOW: Now, although the problem is widespread, let's take a look at how Eskom is affected. South Africa's national electricity utility says that they have 370,000 kilometers of overhead power lines at risk. However, things have improved with increasing policing and vigilance. These days, they say, they only lose about $7 million worth of materials compared to $15 million 10 years ago.

Up next, as criminals seek out copper, many telecom companies are eyeing fiber optics. How these new networks can change the way Africans do business.


CURNOW: Africans are used to frequent power cuts, but as more and more businesses come onto the continent, they're looking for more reliable ways to stay connected. So telecom companies are looking, of course, to fiber optics.

Well, our guest on FaceTime this week is Jabulani Dhliwayo.

He works for Corning Optical Fiber.

And he chatted with our Isha Sesay.


JABULANI DHLIWAYO, MARKET DEVELOPMENT MANAGER, CORNING OPTICAL FIBER: Prior to 2002, Africa relied on satellite networks to transmit data from one city to another and from one country to another and from the continent to other parts of the world. And the problem with satellite is there's not enough capacity on satellite.

And, secondly, where they were doing that, some of these chords (ph) or data that is being transmitted would be routed through Europe or North America. And so the cost was very, very high. And most of the tariffs were actually going to operators overseas.

So in 2002, there was a submarine cable that was commissioned and it actually tied South Africa and a number of West African countries.

But the problem with that cable was that it was very, very expensive.

ISHA SESAY, CNN INTERNATIONAL CORRESPONDENT: Is it actually accurate in saying that it cost more to speak to someone on the continent, sometimes within the same region, than to phone someone overseas?

DHLIWAYO: So at times, it was actually much cheaper to phone overseas than to call somebody within the continent.

SESAY: Which is incredible.

DHLIWAYO: It's -- it's horrible. Actually, there's a time that when my mother wanted to speak to a relative in another country in Africa, I tried to do a three way for them. So I'd call one, called the other and they talked like that. That was cheaper.

SESAY: Talk to me about what is unique about your product and what you do.

DHLIWAYO: We're the largest supplier of fiber optics in the world. And we are a global company. So we have the experience to help operators of dirge (ph) networks. And we have many, many different types of optical fiber for different applications.

So we are talking about submarine cables to Africa. Most of the submarine cables are actually using quality fiber in them.

SESAY: OK, so talk to me about fiber optics and the difference that makes. Talk to me about why it -- it's such a good move for Africa.

DHLIWAYO: So fiber optic cable carries a lot of data, a lot of capacity. You can look at a hair of fiber optics, which is as small as the human hair. It can carry 10 million spontaneous phone calls. Compare that with copper. A pair (ph) of cooper will take only six simultaneous phone calls. So it's really about capacity.

At the end of the day, it will be much cheaper to transmit through fiber optics than it is through any other medium.

SESAY: How widespread is that?

Give me a sense of the take-up of fiber optic technologies, fiber optic systems in Africa.

DHLIWAYO: So if you are in Maputo, Mozambique, you are in luck, because you are close to the capacity, to the loading point. If you're in Cape Town, South Africa, you're OK. You could be in Freetown, you're close. But the problem is if you're in Zimbabwe, Zambia, Central African Republic, then you are very, very far away from the capacity that we are talking about.

So there is a need to actually build metrics to connect the loading points to -- in -- in the communities so they can have access to -- to that capacity.

SESAY: And where are we in -- in that process?

DHLIWAYO: So we have gone a long way. In the past 10 years, we have seen a total of 600,000 cable -- kilometers -- that have been de -- deployed in Africa. And in Africa, that's a -- a very big achievement. But it's not enough. We have a very, very long way to go to get enough -- enough fiber in the ground.

SESAY: In terms of the expansion of mobile phone technology, which is -- is important for the continent, how does that marry up with fiber technology, because the two are related?

DHLIWAYO: Yes, they are related, because when you make calls, you text on the mobile phone, you send them an e-mail on the mobile phone, all this service -- all this traffic is sent through a central office. And from the central office, it is routed to where it has to go. It might be to another city. It might be to another country. Or it might have to go overseas.

And you need a high capacity medium to transmit those services. This is where fiber comes in.

SESAY: You know, people will be sitting there at home and they'll say well, I -- I hear what he's saying, it's great technology, but what difference is it going to make to me at home?

DHLIWAYO: It is -- it is going to make a big difference. Even people in rural areas. I come from rural Zimbabwe. I go there and I -- I see a lot of poor families there. I don't know a single one that does not have a mobile phone. People want to communicate with others, their relatives in the city.

So it does work for everybody.


CURNOW: Jabulani Dhliwayo there of Corning Optical Fiber.

Now here's what's making business news in Africa this week.



Power Plan

Tanzania plans to spent $742 million on an emergency power project.

The East African country is seeking loans from China to help fund the package, which is aimed at ending ongoing energy shortages.

Land Offer

Mozambique offers Brazilian farmers six million hectares of land to grow soy, corn and cotton.

The country will issue low priced 50-year leases in exchange for the opportunity to learn Brazil's successful planting techniques.

CURNOW: Do go to our Web site, Links to my blog as well as my Twitter page are up there.

But for me, Robyn Curnow, here in Johannesburg, see you again next week.