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QUEST MEANS BUSINESS

Spain's Sick Economy; Older Unemployed Losing Faith in Spain; Spain Unemployment Worst in Eurozone; Spain's Situation Calls Austerity Into Question; European Markets Gain Despite Spain's Woes; US Growth Slows; US Economy and Wall Street; Dollar Slumps; Ford's Profits Fall But CEO Optimistic for Future; Q25; Q25 Final Scores: Positives Edge Out Negatives

Aired April 27, 2012 - 14:00   ET

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


MAX FOSTER, HOST: Crippling unemployment and a credit rating cut. Spain sinks deeper into crisis.

US growth weakens as spending cuts bite.

And the duchess factor. One year on, Catherine sets the right economic trend.

I'm Max Foster, and this is QUEST MEANS BUSINESS.

Hello to you. One in four workers on the scrap heap and a debt grade cut closer to junk. For Spain, the bad news just keeps on piling up. The government says unemployment is at an 18-year high with more than 5.5 million people out of work. The jobless rate now stands at 24.4 percent, and more than half of workers under 25 are unemployed.

The second slap in the face came from Standard and Poor's, which cut Spain's credit rating by two notches. S&P says Spanish debt could mount up as the economy shrinks.

This week, the Bank of Spain revealed that the country's back in recession following two quarters of economic decline. Spain's finance minister says the government is working towards a return to growth next year.

(BEGIN VIDEO CLIP)

LUIS DE GUINDOS, SPANISH FINANCE MINISTER (through translator): We have reduced every deal or considered our deficit. This shows that our economy's competitive, unlike some of the other economies in Europe, and therefore it means that the Spanish economy can grow in the future. And so --

(END VIDEO CLIP)

FOSTER: Well, with youth unemployment at 52 percent in Spain, it's clearly the younger generation that's being hit hardest. Still, as Al Goodman now reports, for older people who no longer have a job, the situation can be even worse.

(BEGIN VIDEOTAPE)

AL GOODMAN, CNN MADRID BUREAU CHIEF (voice-over): These hands used to work in construction. Now, they sell tissues.

JOSE ANTONIO MELGAR, UNEMPLOYED CONSTRUCTION WORKER: Buenos dias.

GOODMAN: Jose Antonio Melgar was laid off four years ago when Spain's construction boom started to go bust. His unemployment benefits have run out. And this corner of Madrid provides his only income.

MELGAR (through translator): Sometimes, I have to leave here because I'm depressed. My spirits are so low. And when that happens, I get angry very easily.

GOODMAN: Yet he keeps coming back every weekday. Hundreds of cars pass, everyone rushing to work or school. Most drivers give nothing. But those who do offer money can get something back. Not just tissues, but a piece of his mind.

MELGAR (through translator): What screws me is my age, man. I'm 53. Experience doesn't count. You need to be young.

GOODMAN: Yet he's still working for work. His sign pleads for a job even as he's become a fixture at this corner.

ANTONIO CANAS, COMPUTER SCIENCES TEACHER (through translator): He's been here a long time. I think he's a normal guy without work, and that's why I give to him.

GOODMAN: This man also recognized Melgar and gave money this day. Then, he got out of his car to talk more about Spain's economic crisis.

QUICO VIDAL, BRAND CONSULTANT: More and more of us see ourselves in him. He could be us. He's not a foreigner, he's not someone from somewhere else. He's from here, working class becoming the new poor.

GOODMAN (on camera): This intersection where Melgar asks for money is very close to the office of the Spanish prime minister, over there. But he says the economic policies of the current prime minister, a conservative, and the former prime minister, a socialist, have done nothing to help him get a job.

GOODMAN (voice-over): He's slightly more optimistic about the conservative prime minister, even though Spain just officially slipped back into recession. The crisis also worries these municipal employees, who feel lucky to still have work.

ANTONIO GARCIA, MUNICIPAL WORKER (through translator): The crisis is just going to get worse, and if we lose our jobs, we could end up like this man.

MELGAR (through translator): I am an optimist. I don't think this will last. It cannot be like the place of Egypt. I'm not throwing in the towel.

GOODMAN: He says he collects hundreds of dollars a month right here, enough to pay a modest rent and his meals, keeping the crisis at bay, for now.

Al Goodman, CNN, Madrid.

(END VIDEOTAPE)

FOSTER: Well, if we look at the figures, Spain's unemployment level is the worst in the eurozone. Have a look at this, 24.4 percent and only really comparable to Greece, but a much bigger problem because Spain is a much bigger economy.

Over a billion -- a trillion dollars' worth of GDP, there, in Spain. And there you are, $215 billion for Greece. Germany, obviously, the largest economy. But it's in this striation that Spain is a much bigger story for Europe than Greece.

Valentijn van Nieuwenhuijzen is the chief economist at ING Investment management. Thank you for joining us. The figures today weren't a shock, but you're getting into serious territory when you see Spain getting into this sort of trouble.

VALENTIJN VAN NIEUWENHUIJZEN, CHIEF ECONOMIST, ING INVESTMENT MANAGEMENT: Absolutely. That's why markets worry so much over Spain and Italy, because these economies are so big.

These debt piles are so huge that it's very difficult for the rest of the eurozone to sort of support and get them out of their mess, because the financing of that is so costly. And of course, politically, also, very difficult to justify.

FOSTER: There's very little positive to say about Spain right now. You do wonder how on Earth a government can handle an economy with that sort of unemployment and those sort of debt levels.

VAN NIEUWENHUIJZEN: Absolutely. I think what you see now is that this whole austerity agenda, which is focusing so much on front-loaded austerity, is killing these economies too much, whereby achieving the fiscal targets almost becomes impossible, and thereby you can question whether this is really the strategy that they should take.

And actually, S&P itself is questioning that also, today but also -- or yesterday, but also earlier in January when they downgraded other European nations.

FOSTER: Let's have a look at the market reaction today. Spain's pain wasn't being reflected, really, in the stock market numbers today. We'll talk about it in the moment. The IBEX actually sold -- made solid gains as Friday's banking and construction stocks actually soared.

These other indices ended the week just around where they started it. Banks were some of the block's top gainers, Barclays up 4.7, the Credit Agricole up 4.5 percent. Is it a case that everything's so bad in Spain, any new news doesn't really shock anyone?

VAN NIEUWENHUIJZEN: Well, it's interesting to see that sometimes there isn't any news, really, surrounding Spain, let's say last month. And then, all of a sudden, the theme gets back into the markets and they get really concerned and talking about the Spanish housing market, as if we didn't know that it was a problem in there.

And now, we have some data, and there is another feeling in the markets, they feel that it's almost the global data probably give some positive news, think about the US housing numbers. And then the markets tend to become more positive, because they're pricing already so much misery for Spain.

FOSTER: Let's talk about next week. You've got the French and the Greek elections. How important is that to economists?

VAN NIEUWENHUIJZEN: Well, I think it is important to the extent only that it really influences financial market sentiment.

And with respect to the French elections, what you can say is that, of course, this is widely anticipated to be a Hollande win. It's for months now pretty clear that he's leading Sarkozy, so in that respect, I wouldn't say it's a huge new shock to the market if he would actually win.

And then the big question is just how much of his story has been rhetoric rather than what he's actually going to do once in office.

FOSTER: OK, we'll see what happens. Thanks, Valentijn, thank you very much, indeed, for joining us.

Economic growth is faltering in the United States, but stock markets are still holding onto their gains. We'll take you to Wall Street next.

(COMMERCIAL BREAK)

FOSTER: Austerity's hampering economic growth in America just as it is in Europe. US GDP grew by 2.2 percent in the first three months of this year. That compares to 3 percent growth in the last quarter of 2011.

We were expecting a slowdown because of the cuts to government spending in areas like defense, but analysts were hoping for more like 2.5 percent. What makes this number even worse, though, is that a growth at this kind of level is considered too tame to inspire the job creation that the US, the government in particular, so badly needs.

US stocks are still set to finish up on the week, however, with just a couple of hours of trading to go. Felicia is at the New York Stock Exchange. Though, it couldn't have been that bad. People aren't losing money at least.

FELICIA TAYLOR, CNN INTERNATIONAL CORRESPONDENT: Well, look. This is a much more contracted number than we were expecting. I mean, 2.2 percent growth rate isn't exactly a lot. And yes, the market is trending higher, but it's really because expectations of traders of what the Federal Reserve might do.

And I'm joined, now, by Ken Polcari of ICAP. And it's interesting, because the markets are almost goading the Federal Reserve to do something.

KENNY POLCARI, MANAGING DIRECTOR, ICAP CORPORATES: And that's exactly what they have been doing. We noticed how it's been, right? Yesterday, two days ago, we were up 110 points, and really the face of negative macro data that came up across the board.

Earnings were mixed. They keep saying that these earnings -- that 75 percent of the earnings have beaten the estimates. Yes, you're right, but the estimates have been really low, right? The bar's been lowered. So, if the companies can't jump over the bar, then we have a real problem.

So, you take that all into account, and the market is absolutely doing that, especially today, with a GDP number of 2.2, certainly not horrendous, but it's not necessarily where we have to be at all, below the expectation. Therefore, the market's saying, "Come on, Ben, let's go. Back the truck up and bring the stimulus."

TAYLOR: One thing that was interesting, though, is that consumer spending was higher in this GDP report, but that's misleading, isn't it?

POLCARI: It's very misleading, because look -- on the other side, look at what's happening to consumer saving, it's actually down, right? So, what does that tell you? That people are taking money out of their savings account to try and continue to live this lifestyle. It's going to turn around, it's going to bite them all in the backside.

TAYLOR: Next week, of course, we've got the all-important jobs report. What does the market need to see in terms of job creation to really feel like things are going in the right direction?

POLCARI: Listen, it's -- at the very least, we're supposed to do 200 just to maintain even, right? So, the number's got to be north of 200.

Now, that being said, look at what the data's been. The initial jobless claims have gone up. For the last couple weeks, they've gone up, and so it's a conflicted message we're getting about jobs. It's going to be very interesting how they play that number next week.

And so, it's -- one way or the other, it's got to be north of 200 to at least give anyone the sense that it's real. Anything less than 200 is going to cause another problem.

TAYLOR: So, if traders and investors are looking for QE3, some kind a stimulus, how soon do you think we might actually hear from the Federal Reserve that that -- that truck is being backed up?

POLCARI: Well, in my sense, you're going to have to hear from it pretty soon because, as we move -- move into the summer and we move closer to the US elections, it cannot be that the Fed is acting politically motivated. And so, it's an independent group. They're not associated.

But if you get to be July and August and all of a sudden they start backing the truck up and throwing money, people are going to stand up and scream that it's politically motivated. And so, if they're going to say something, my guess is they're going to have to say it in the next four weeks or so.

Either they're going to extend the current program, or they're going to initiate a brand new program, but they're going to have to do it sooner rather than later.

TAYLOR: Thanks, Kenny. Ken Polcari from ICAP. And you know, Max, this is somewhat of a fragile rally. Anything could derail it, especially with what the concerns are in Spain, and the UK now falling back into recession. So the eurozone is still a headline for the US markets, as well. Max?

FOSTER: And when economists talk about growth and business leaders talk about growth in the economy, I think really they're talking about the Fed stepping in, because fiscal policy is pretty tied up right now.

TAYLOR: Well, when it comes to growth, certainly. What we are seeing is it's not anemic, but certainly less than expected numbers. So, the floor is expecting -- traders are expecting that the Federal Reserve is going to be able to step in and add that stimulus, which would hopefully end up helping the growth numbers down the road.

But we haven't really seen that so far. Growth has been -- 3 percent is OK, but 2.2 percent is definitely not OK.

FOSTER: Felicia, thank you. As ever, thank you very much for joining us from the New York Stock Exchange.

Well, a Currency Conundrum for you now. It's rare that you see anyone using $100 bills these days, let alone $1,000 bills. What was the highest denomination note ever printed in the US do you think? Was it A, $100,000, B, $10,000, or C, $1,000.

Whilst you're mulling over that, let's take a look at the foreign exchange moves today. The greenback slumping again against the pound and the euro. One pound buys $1.61. A day of highs and lows for the yen, too, as the Bank of Japan increased its bond-buying program. The yen is currently up three quarters of a percent against the dollar.

(COMMERCIAL BREAK)

FOSTER: Well, if you want to find out how differently the American and European economies are performing, look no further than Ford. The car maker made $1.4 billion in the first quarter, down 45 percent on last year despite record profits in North America. The weak spot was Europe.

Ali Velshi spoke to Ford CEO Alan Mulally just a short while earlier. He asked whether the cuts Ford made at the height of the recession have affected the bottom line.

(BEGIN VIDEOTAPE)

ALAN MULALLY, CEO, FORD MOTOR COMPANY: And what has happened is the market this year has come back about a quarter, maybe two quarters faster than what we had anticipated, so we're going to be a little short for the next few months.

But as we bring our capacity back on, by the third and the fourth quarter, we will have our vehicles in the volumes that people really do want.

ALI VELSHI, CNN CORRESPONDENT: You've got what might be the opposite problem in Europe, where you've not lost market share. Sales were down in Europe, but sales overall were down.

But you can't idle and close factories in Europe largely because of labor laws. So, I guess I'm interested in how long you think this European problem is going to go on for and whether that's going to start to bleed into your bottom line from the cars you're selling here in the United States?

MULALLY: Well, respect to the market itself, we see it stabilizing on the GDP relatively flat, but looking like it's stabilizing. For the industry, we still see a very robust market, around 14 million units.

Now, in Ford's case, Ali, one of the neat things that we have done over the last few years is that six out of the last eight years, we have been profitable because of the One Ford plan of matching production to the real demand and then taking the next necessary actions to deliver the vehicles profitably.

So, clearly, the slowdown is a little bit more aggressive than we've seen in the past, but as we pointed out in the first quarter, we have taken very decisive action to reduce our cost structure and we're going to also be bringing in more new vehicles, One Ford vehicles, in that second half of the year, which will help us on the revenue side, also.

So, it's a tough situation, but we're taking decisive action, just like we did in North America earlier.

VELSHI: And as we look at GDP growth around the world, let's take a look at Asia. At Ford, you group it into Asia-Pacific-Africa. You've lost a little market share there in places that are the fastest-growing economies in the world, though they're slowing down a bit.

MULALLY: Well, I think that's a really important point, because in some of the -- of the markets, just like China, these -- it's a little bit slower, but also, I think, going to be a lot more sustainable.

And of course, in Ford's case, we have made a tremendous commitment to the consumers in Asia-Pacific. We are right now bringing online eight new factories, and over the next few years, we're going to be introducing 50 new vehicles and power trains based on our One Ford strategy, which we can do very efficiently and very quickly.

So, we're very, very pleased with the progress in Asia-Pacific. The customers love the Ford brand, they know all about Henry Ford and Ford and, of course, they're going to be able to get the vehicles they want, whether it's a car, utility, or a truck, from the Ford Motor Company.

(END VIDEOTAPE)

FOSTER: Well, these numbers were a major disappointment on Wall Street, of course, and we're going to plug that straight into our Q25, it's our guide to understanding the earning season.

And on the final day, the reds and the greens are almost neck and neck. Maggie Lake is in New York to help us out on this one. We've talked about Ford a bit, there. We've heard from the chief executive. But still, a talking point in terms of the Q25.

MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: Yes, it was, Max. This one was two out five -- net two out of five of our criteria, so it was up for debate.

Normally when you see that, you sort of want to lean to giving it a red, and there are certainly reasons to be concerned, as Ali just went over with Alan Mulally about that international weakness, especially when you're talking about China. That's going to be the most important car market in the world.

However, their North American sales were really strong, the strongest since 2000, and Alan Mulally has a lot of respect, people think he can get the job done. So, when you factor that management into the equation, I think we're going to give it a grudging green. But we should watch that space.

FOSTER: OK, grudging green. In it goes, there. Amazon. The stock did well, but that surprised some people.

LAKE: Yes, it had a big reaction, actually. I love this Amazon story, because it's kind of complicated. And investors have been frustrated by this company for a long time. They spend a lot of money, something like $4 billion, building those new warehouses, investing back in the company. It's a little frustrating for investors.

But within the quarter itself, you started to see that pay dividends. Their media business, media revenues, were really good. I think up 17 percent revenue for media, if I look at my notes. Digital content, all those Kindles they've been selling, investing in. They're selling a lot of digital content over that.

And the other thing about Amazon, Max, is they have a huge Cloud service. They really benefit for that move to Cloud computing. It's not something we talk about or think about when we hear Amazon.

So, when you factor those things in, that's where the growth is going, and they're positioning themselves for the future, so I think you've got to give this one a green, even though they only met three out of our five criteria.

FOSTER: In it goes, Maggie, a green it is. Starbucks is an interesting one, because it's become a barometer, really, of the global economy? So, I guess it depends where it operates.

LAKE: Yes, Starbucks kind of felt a little bit like Ford to me. They definitely had some weak spots. This is a company -- we've seen this scene throughout this earning season, hit by weakness in Europe. They missed their same store estimates, which bothered some people.

But again, the North American business looking really good. They're going gangbusters in China, which counts a lot, as we know, for the future. And again, back to management.

Howard Schultz came in when they were -- struggling in North America, really turned that around. He knows how to get it done, and he says he's going to make it happen in Europe. So, Starbucks, 3 out of 5, again, up for debate, but I think they get a green.

FOSTER: OK. Another green, there. Green's doing well, Maggie, today, unlike yesterday. Very quickly, on Chevron, it's an automatic red, but just explain that one to us.

LAKE: Yes, this is another oil company that can't get it done when oil prices are high. The problem is natural gas prices are really low, production down. That's been hurting all the energy companies, oil companies this time around, Chevron no exception.

FOSTER: OK. Procter and Gamble, as well. Feeling positive about that one? Because it wasn't great, was it?

LAKE: No, it wasn't great. And the thing I don't like about Procter and Gamble is it's not just the global economy, those weak patches in the global economy. This is a P&G problem. They're losing market share to their rivals, 55 percent of their categories lost market share. That is not good. They get a red.

FOSTER: OK, a red. We have got a red. But we're running out of red, so -- very cleverly, Dave, who's holding the camera, has turned it red for us. And it does fit, I'm glad to say, but not brilliantly.

OK. In terms of WPP, we're just going to hear from Martin Sorrell, because we spoke to him earlier on today, he's always a great talker, isn't he? But we'll discuss that after we've heard from him, Maggie.

(BEGIN VIDEO CLIP)

MARTIN SORRELL, CEO, WPP: We're a little bit against the trend in the advertising vision. I think the explanation of that is that clients are investing in brands even in slow-growth markets. In fast-growth markets, it's capacity in band. In slow-growth market, it's just brand to maintain market share.

So, that old argument that you should invest in brands even in tough times seems to be getting some traction.

(END VIDEO CLIP)

FOSTER: And Maggie, I know that you gave this a three out of three, so are you get red or green?

LAKE: Yes, no. This one's a green, Max. And it's interesting, advertising companies usually hurt when the economy's struggling and weak. They bucked the trend. They're, again, investing where it counts, diversifying away from Europe, and also moving digitally which, as we know, a lot of that advertising going online.

FOSTER: OK, so the green goes in and the greens actually pit the reds to the post. It's close, though, Maggie, at the end of the week. So, would you say that's balanced --

LAKE: Yes.

FOSTER: -- or do you think, actually, the greens should have won.

LAKE: Yes, no -- I think that's probably pretty accurate, Max. And one thing that's been deceiving, you're hearing a lot about the fact that 75 percent of companies are beating estimates. That's just because estimates were really low going into this period.

But when you actually look at this quarter versus the fourth quarter of last year and the quarter before that, the earnings trend is going down.

So the fact that we have the reds almost keeping up to pace with the green, I think it's a pretty accurate reflection that not only is the economy hitting a lot of speed bumps now, but people are worried about the future. They're feeling very uncertain about what lies ahead for the months to come.

FOSTER: And it doesn't really tell us that the -- private sector is going to drive the growth going forward. They're just sort of paddling through this crisis.

LAKE: And I think one of the things that's happening is, even though we saw a sector struggling and sort of consumer struggling, corporate profits were doing really well because as Europe and the US struggled, Asia was booming, emerging markets were booming, and they really rode that strength, and that helped them a lot.

Now, we are seeing China cool, as well as Europe and the US remain weak. So, that's a real problem, and again, that's another reason why we're seeing those reds bump up again.

FOSTER: OK, Maggie Lake, thank you very much, indeed, for bringing us the Q25 this week, as ever.

Nokia's 14-year reign is over. Samsung is the new mobile king. Next, we'll look at how it raced to pole position as the world top phone seller.

(COMMERCIAL BREAK)

FOSTER: Welcome back, I'm Max Foster. These are the headlines.

New jobless figures out of Spain show unemployment at an 18-year high of just over 24 percent. The country has also officially slipped back into recession and, in more bad news, Standards and Poor's has downgraded Spain's credit rating.

The Syrian government says a suicide bomber detonated an explosives belt outside a mosque in Damascus on Friday, killing at least nine people. Syrian media reports at least 26 other people were wounded. The government and the opposition are blaming each other for hundreds of killings since the cease-fire supposedly went into effect two weeks ago.

At least four bombs exploded in one of Ukraine's largest cities, injuring more than two dozen people. The blasts came within minutes of each other. Still not clear who set off the explosions or why. Ukraine is preparing to co-host the Euro 2012 football tournament in just a few weeks.

The man at the center of a security scare in London is in police custody. He's been -- he'd been threatening the staff at a local business, and authorities set up a 300-meter cordon to protect the public. They say he came out after talking with police negotiators.

Barclays received a stinging rebuke from its own shareholders today when nearly a third of them refused to back the bank's executive pay package. Many investors were angry when it emerged CEO, Bob Diamond, would receive $29 million in salary and bonus benefits.

(MUSIC PLAYING)

FOSTER: After 40 years at the top spot, Nokia has lost its place as the world's biggest phone maker. Samsung's global market share rose to more than 25 percent in the first quarter, according to market research supply company iSuppli.

Now Nokia's slice slipped to 221/2 percent . This is quite a turnaround, just four years ago its market share was three times bigger than Samsung's, and since then, Nokia has been fading fast.

And Apple comes in third place with a market share of 91/2 percent, and that's not, considering it only makes high-end smartphones, so it's only in the market -- part of the market that those two are in and has no budget handsets. Our resident gadget lover, Jim, joins me now. (Inaudible) gadget lover, and it's quite hard to get him off his gadgets. But --

(CROSSTALK)

FOSTER: -- distract him.

JIM BOULDEN, CNN CORRESPONDENT: -- of one of our fellow employees, who has a Samsung.

FOSTER: Yes.

BOULDEN: -- and it's good to be able to check these out. You know, we did Samsung in February at the Barcelona Mobile Phone World Congress, and they're so big now, as you can see from those numbers. Everybody was going there to see the Galaxy, to see the Tao (ph), to see the hybrid phones. They are the ones that everybody is talking about.

I'm not talking, you know, outside of Apple of course, because they're Android. So when you talk about Android, this is what's so key. They've gone with Google Android, and they've now taken over from HTC and Motorola to be the biggest handset maker of Android as well.

And next week in London, they're going to have a global launch of yet another phone to add to what is becoming a dominant Samsung Android atmosphere.

FOSTER: And if we talk about smartphones, who's winning that battle, Apple or Samsung?

BOULDEN: Well, you look at the numbers and you can see that the Samsung had 441/2 million smartphones in the first quarter. So that's 34 percent of their phones are smartphones. Apple only make smartphones, so it's 100 percent of their phones.

But for Samsung, it's about migrating people from their lower-end phones to the smart ones, doing it much better, we can see, than Nokia has done. Some of this is also a Nokia story, because Nokia has done so badly.

FOSTER: They've lost market share whilst Samsung's been gaining.

BOULDEN: Yes, and because they did the low end phones for long and then the switchover. Sony Ericsson has not been able to do well. Motorola is fading. LG hasn't done that well, HTC is OK. But Samsung has become very popular with the young, and this is always where you want to be if you can be, is to have people be out --

(CROSSTALK)

FOSTER: -- one, then.

BOULDEN: Oh, I have my iPhone and my BlackBerry. (Inaudible) talk about BlackBerry here.

FOSTER: (Inaudible). In terms of Nokia, has it gone wrong? Because it wasn't keeping up with smartphones, is that where it went wrong?

BOULDEN: Yes, it did. And also they are now migrating over to Windows platform. Now this could work for Nokia, this could work for Microsoft. It's a very small market for them at the moment, but they've put themselves into the Microsoft camp, moving away from their own software.

Samsung has put themselves into the Android camp a long time ago, and that's what's become very, very popular. But also what's really important about Samsung is that it's such a huge company, much, much bigger now than Sony ever is, much, much bigger than Apple as well.

And so it has all the other things to fall back on, you know, electronics, chemicals. It's such a huge conglomerate, that the phones and things we talk about, that the amount of appliance they sell, where they are in their engineering firms, it's just become such a big company, now the worry with that, of course is that's we would have said about Sony 20 years ago.

Sony had all these great materials and everything. It had movies, had music and all that, and Sony now is cutting jobs and trying to reinvigorate itself. So Samsung has become dominant in so many areas.

FOSTER: Which is more remarkable that it can be so focused in this one area, and this has been a very long-term strategy for Samsung, hasn't it? They wanted to dominate this market and they have now, so it's an amazing corporate success story, long-term strategy.

BOULDEN: Two weeks ago I went to buy a digital TV and I looked at Sonys, I looked at Samsung -- full disclosure, I bought a Samsung TV for the digital switchover here in the U.K. They are doing so well with their flat screens, moving into 3-D, the big beautiful 50-60 inch TVs that they're selling.

And so Samsung has done a lot of -- and this is what someone said, very important about them, and I want to get this in -- they have taken a long-term approach, many, many years ago, to be dominant in TVs.

They did it over 20 years. They have very, very long-term strategy. They've got the money and the power to do it with the 100 -- 344,000 employees they have. They're able to do this with long-term strategy and not quarter by quarter.

FOSTER: Which we'll be thinking long-term about (inaudible).

Jim, thank you very much indeed.

Next, the duchess with the golden touch. We look at why Kate Middleton, as she used to be known, and her wardrobe can be the ultimate advertising boost for the fashion industry.

(MUSIC PLAYING)

(COMMERCIAL BREAK)

(MUSIC PLAYING)

FOSTER: Earlier we asked you our "Currency Conundrum," which of these denominations was the highest ever printed by the U.S. Treasury, $1,000, $10,000 or $100,000? And the answer is: $100,000. That was issued back in 1934 by the U.S. Treasury, and was only used for transactions between federal reserve banks, not for the general public, rightly so. (Inaudible) pretty distraught if you lost that note on the street.

And now one year on and still going strong, the Duke and Duchess of Cambridge will celebrate their first wedding anniversary this weekend. It was with this kiss one year ago on Sunday that sealed Catherine's status and put their family in the spotlight yet again. Since then, she has become a fashion icon. Nina dos Santos looks at why the Duchess' style is right on the money.

(BEGIN VIDEO CLIP)

NINA DOS SANTOS, CNN CORRESPONDENT: Her Royal Highness the Duchess of Cambridge, has become so much of a trendsetter that she seems to have given the U.K. retail sector something of a hefty boost. Some estimates put the copy Kate or Duchess effect to be worth more than $1.6 billion.

Now take you through some of the latest kits in the last two years that she's worn, starting out with that famous blue dress by Ether. Kate decided to wear that when she announced her engagement to Prince William. Soon it had sold out globally within hours and budget copies were flying off the shelves within days.

We also saw this number being a big hit. It's (inaudible) dress made by the British High Street chain Reese. She decided to wear that when she was photographed officially by the celebrity snapper, Mario Faustino (ph) for the official shots of her engagement. She also decided to wear it a second time following her marriage on an official trip to Canada, showing that she's not just smart, she's also thrifty as well.

And then we saw her footwear causing quite a bit of commotion as well, not just the clothes on her back, it seems, for the making a stir these days. She's a big fan of this brand of shoes, L.K. Bennett, and these new stilettos were particular hit.

This company has reported a 17 percent rise in its gross profit, thanks to sales of shoes and also handbags. We asked Tony Dimasso, the president of L.K. Bennett in America, what this means to the company.

TONY DIMASSO, PRESIDENT, L.K. BENNETT AMERICA: We are excited and flattered every time the Duchess of Cambridge wears our clothing and our shoes. She has brought brand awareness for our customers in the U.S. We're new to the United States, and, yes, because the American press is infatuated with our every move, her wearing our clothes and our shoes has brought a lot of attention to the brand.

DOS SANTOS: Now the Duchess of Cambridge is also a big fan of couture as well as High Street chains. This week she wore this number made by Amanda Wakeley. It's a dress that retails at around about $750. She had that outfit accessorized by a pair of high-heeled black Jimmy Choo shoes. Amanda Wakeley now explains what makes Kate's style unique, but also popular at the same time.

AMANDA WAKELEY, DESIGNER: I would describe her style as neat, youthful and occasion-appropriate. I think she really has the potential of becoming a modern-day Jackie O.

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FOSTER: Quite a thing to say, but if you want to find out more about the newest member of the royal family, I'll be hosting a documentary next Friday, May the 4th, the royals' Kate, Duchess of Cambridge, right here on CNN. And one person sure to be tuning in is Kate's biggest fan, Jenny Harrison.

Are you a fan because of her or her fashion?

JENNY HARRISON, CNN METEOROLOGIST: Well, all of it, actually, Max, because you're so savvy, I mean, on her wedding day, can you believe it was a year ago? She looks great, doesn't she? And she just seems lovely. She's going to be the most photographed woman in the world, I'm sure. So, yes, very shortly. Right. Weekend weather, you've disappeared ever so quickly there, Mr. Foster.

I will get to it and of course despite all this very inclement weather over the last few days of really heavy rain across the U.K., she still managed to look lovely when she was carrying out all her official engagements. But look at all this (inaudible) that's been streaming in again. The winds have died down. That is some good news.

It's still a little bit gusty, as you can see here, through the Baltic Sea, where you find coastal areas. But the rain really hasn't particularly died away. We're still seeing some fairly persistent rain showers as you can see, some thunderstorms in there as well. And not much letup (inaudible) across Wales. Look at that rain in the last 12 hours.

Now the last seven days have seen some particularly high totals to some areas, particularly across the U.K. The strong winds of a couple days ago, the really impacting northern Spain, western areas of France, and the rain was particularly heavy across the U.K., so (inaudible) 17 millimeters there in Sunnybridge (ph), and that, of course, in many cases, we've seen nearly the total average for April in just the last few days.

But this is the next system which will be heading up from the south. This means a very wet, unsettled weekend, but not just that, once again, very strong winds, and again, the rain is going to be particularly heavy. You can see there on the wind forecast model how that system literally pushes up from the south and again, just sits and spins in the (Inaudible).

So once again, some similar areas will really feel the brunt of those storms. So some warnings in place across western Europe for that, and then also across the southeast, pushing into Turkey. Could see some storms there, possibly with some large hail.

Now it's very warm across central and southeastern Europe, temperatures are above the average, well above in some cases, a little bit below across the far northwest, but then gradually you can see in the next 48 hours (inaudible) pushing in from the west, things beginning to moderate. But look at there -- you're looking at the weather for the next few days, 26 on Saturday.

The average is 15, so obviously 11 degrees above average, very, very mild, this weather in the overnight hours. Warsaw just sunny skies, temperatures in the mid-20s, a good 10 degrees above average and look at Kiev, by Monday, 29, the average is 16. Now on Saturday, the delays will start to kick in, I'm afraid, because of that rain and in particular those strong winds.

But in fact Sunday's probably the day when we'll see those winds at their strongest. There is a system coming in and of course, still some snow in (inaudible) after the high elevations across northern Spain. And then temperatures on Saturday, we've got 26 as well in Vienna, 26 in Rome and then 13 Celsius in Madrid.

Now remember, this time last year, it was that deadly outbreak of tornadoes across the central plains of the United States, over 300 people died and look at the number of tornadoes that actually occurred, 122. Now the last few hours, we've had a company of reportings of tornadoes, quite a bit of hail damage across the south. And then we have seen some rain, mostly to the north in the last 12 hours.

There was a warning of severe thunderstorms for a short while, but there will be more warnings as we continue into Saturday across the central plains. You can see that storm system clearing out, so a better day later on Saturday, and then (inaudible) about Sunday, we're going to see some more thunderstorms pushing in across Oklahoma. Temperatures warm in the South, 30 Celsius in Dallas and Atlanta, Max.

FOSTER: OK. Jenny, thank you very much indeed. Have a great weekend. We'll get a look at the stocks before we go, slightly up, despite those disappointing GDP figures, the hopes really now for growth are targeted toward some Fed action. You can see the market is only up by 0.3 percent.

That is QUEST MEANS BUSINESS. Thank you very much. (Inaudible) for watching. I'm Max Foster in London. MARKETPLACE AFRICA is next.

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ROBYN CURNOW, CNN HOST: Millions of people like to start the day with a cup of tea, and many have discovered the health benefits of a cup of rooibos or redbush tea. This week on MARKETPLACE AFRICA, we're going to look at the global trade in rooibos tea. It's a plant that's only grown here in South Africa. And this multimillion dollar business is trying to protect both its unique heritage and its name.

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CURNOW (voice-over): At this cafe in Cape Town, making a cup of rooibos has become a fine art. Great care is taken to measure just the right amount of tea. The leaves aren't allowed to swirl for too long. And when the time is just right, the customer gets to take a sip.

Rooibos used to be a specialist tea for only some taste buds. But it's being drunk in cafes like this across the world, as global demand for these unique tea leaves grows. Martin Berg is a rooibos farmer. He also runs Rooibos Limited, the largest rooibos tea processing factory. From here, the rooibos is exported around the world.

MARTIN BERG, MANAGING DIRECTOR, ROOIBOS LTD: Germany really was the start of the big export boom, but since then, Holland, U.K., USA, Japan, all the first world countries, rooibos has grown in their -- grown in popularity.

CURNOW (voice-over): This popularity has created an industry worth around $23 billion, 15,000 tons of rooibos are harvested every year, and at least half of that is then exported to the increasingly health-conscious consumer.

Willem Engelbrecht's family have been farming rooibos for four generations. He believes that the popularity of rooibos has grown because of the plant's health benefits, documented in several studies, including its anti-oxidant properties.

WILLEM ENGELBRECHT, ROOIBOS FARMER: It's also got a soothing effect, and that is what we need for our everyday high-speed lifestyles. The Japanese did a lot of research early in the 1990s. Once that research became public and also South African research, people all over the world started to drink the product, not only for its very exceptional taste, but also for its wonderful health attributes.

CURNOW (voice-over): Rooibos, an Afrikaans word that means "red bush," only grows in one small part of South Africa. And when it's time to harvest, the industry becomes a major employer. But with increasing export demands, the pressure is on to deliver.

The workers are paid per kilogram, so they're anxious to keep cutting down and piling up the rooibos, hardly ever stopping to escape what remains of the intense summer sun.

Once the plants are cut down into small pieces, they are laid out to dry. The intense sunlight in the semi-desert in the western capes slowly turns the rooibos into a deep red (inaudible).

After it's been processed and sterilized, the tea is ready for the consumer. This trade has become so lucrative that the rooibos industry is now trying to protect its unique brand name. A lengthy lawsuit with a U.S. company, which tried to use the rooibos name, went the way of the South Africans. But farmers, like Willem Engelbrecht, believe more should be done.

ENGELBRECHT: It is not currently (inaudible) Africa to protect the word rooibos as a geographical imitator or G.I., similar to what exists in France, where the French government makes sure that champagne can also be used -- can only be used by the wine producers in the Champagne region of France.

I think it is the responsibility of government to make sure that legislation come in place, because we need to protect our cultural assets.

CURNOW (voice-over): But while the industry waits for government reforms, plans are already in place to expand further and into new markets, like India and China.

So laboratory tests are underway to develop new products to broaden the tea's appeal.

ENGELBRECHT: This room we're in now is for new product development, where rooibos used to be only fermented rooibos and it was only drunk as a hot tea. We now have a vast array of different rooibos products, from the traditional unflavored tea to all the flavored tea, cappuccinos made from rooibos, cosmetics, rooibos used in cooking.

CURNOW (voice-over): Back in Cape Town, customers are already enjoying some of these new products. There's a whole new menu of fruit- flavored rooibos teas, rooibos cappuccinos and even espressos. But despite this extensive range, perfectly perfected traditional cup of rooibos remains the firm favorite.

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CURNOW: Right. From Africa's unique blend of tea to one of the continent's most lucrative commodities, gold, after the speak we speak to the CEO of one of the big gold mining companies about the gold price in uncertain financial times.

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CURNOW: It was here in Johannesburg in the late 1880s that gold was discovered. South Africa used to be the top producer of gold in the world. It no longer has the number one position, but it does have some of the deepest gold mines in the world.

But accessing the commodity is becoming increasingly expensive. This week's "Face Time" interview is with Mark Cutifani. He's the CEO of Anglo Gold Ashanti, one of the biggest gold miners on the continent.

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CURNOW: (Inaudible) gold price, where do you think it's going to go?

MARK CUTIFANI, CEO, ANGLO GOLD ASHANTI: Look, I think on basics, it should be trading around $1,650 and how I get to that is on costs, it costs about $1,250 to produce an ounce of gold, $400 margin gives the industry about its weighted average cost of capital.

So on fundamentals, I think that's about the right number. And if you add the financial crisis, whether it's the U.S., whether it's the Eurozone or whether it's anywhere else, it could do anything, up to $2,500.

CURNOW: How has the Eurozone crisis affected gold? Has it?

CUTIFANI: I think it has. I think it's created uncertainty across the global financial system. So as a consequence, I think we've seen people continue to invest in gold as historic value (inaudible) securities.

CURNOW: It's just becoming increasingly more expensive, isn't it, just to mine gold?

CUTIFANI: Yes.

CURNOW: Well, does it become a point where it just becomes too expensive?

CUTIFANI: Every year we're mining about 40-60 million meters deeper, which adds about 3-5 percent. Grades are declining, new developments are occurring long way from infrastructure, exploration costs are all up. So the industry's experiencing cost inflation of around 12-15 percent a year. That's the pressure we're under. And for us to maintain margin, we have to see gold increase at the same rate.

CURNOW: It just sounds too complicated sometimes. I mean, a higher risk, deeper mines, different, more dangerous, remote places to go, you still have to go there. You still have to do it.

CUTIFANI: Well, absolutely. You have to go where the gold is. Many people say what differentiates miners from any other industry. It's (inaudible) our ability to understand and manage risk, because the risks we take on are very unique, and there's not -- there's no way of producing chocolate, every deposit's different, every political environment's different.

So we have to be pretty flexible and think about risk and manage risk very carefully.

CURNOW: And South Africa's (inaudible) as, you know, has been built on the gold mining industry. I mean, (inaudible) South Africa particularly?

CUTIFANI: Well, I think South Africa is a much tougher proposition. We're mining the deepest mines in the world, irrespective of commodities, the gold mines here in South Africa are the deepest in the world, the most technically complex.

So we're putting a lot of money into research and development and innovating new ideas, because there's lots of gold, but it's very deep, beyond 4,000 meters. So we have to think out of the box, and really we have to change mining methods that have been there for 100 years to be successful from a safety perspective and from an operations perspective, and that's what we're working on today.

CURNOW: How does political risk (inaudible) uncertainty? I know the South Africans just said, no, we don't have a policy, we're not planning on any policy of nationalization? But still, lingering doubts, is there or aren't they?

(Inaudible) trust it?

CUTIFANI: Well, I think that lingering doubt is a concern. I think, having been here for 41/2 years, I believe the government. I don't believe that there's any thought or any rational thought of nationalization. I don't think there has been. I've been saying that for two years, literally. But it does create doubt in the mind of shareholders.

And the one thing I would say about the mining industry, the mining industry is about real estate. You have to go where the gold is and you have to mine where the gold is. And if there's any perceived threat to your tenure or your ownership of that real estate, then you really do undermine the share value and the value for pensioners and everybody else who's invested in our companies or in the industry.

So land tenure, licensing, transparency of the processes are all critical issues, and I believe the government's addressing. But we still have to keep getting better to make sure that that confidence is there.

CURNOW: But it's -- South Africans have to manage this smart, don't they?

CUTIFANI: Well, I don't think many countries have managed it terribly well. I think the one thing I've learned about being in South Africa, the political debate is vocal. It's robust and in many cases people outside of South Africa don't understand or are somewhat confused by the debate.

One thing I do say about South Africa is we're very internally focused, and I don't think either businesses are terribly good at nor politicians, in particular, are very good at understanding the impact of their comments, external to South Africa and that's what's hurting us.

CURNOW: The issue around royalties and tax and just government, particularly here in Africa, seem to be coming more emboldened, perhaps, when it comes to negotiating what they think is a better deal for themselves and for their people.

How do you view that? And do you think (inaudible) a sign of (inaudible)?

CUTIFANI: Well, I'm actually much more encouraged and I actually think it's a very good sign for Africa. The leadership of African nations are thinking about the people and how they secure the right deal for the people in terms of developing the countries.

So it's the right debate. I think we as business leaders have to be mature and grow with those leaders and work out solutions that work for the communities and work for business.

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CURNOW: Remember, we're online at CNN.com/MARKETPLACE AFRICA. They're linked to our Twitter and Facebook pages. But for me, Robyn Curnow, thanks for watching. See you again next week.

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