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QUEST MEANS BUSINESS
CitiGroup CEO Quits; Pandit's Years at CitiGroup; Earnings Boost US Stocks; Spain Bailout Hopes; European Stocks Up; Europe Versus US; Australia's Economy; South African Mining Ultimatum; Euro Gaining; Pot Culture
Aired October 16, 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: A shock exit CitiGroup chief executive Vikram Pandit resigns.
Round two. President Obama says he'll come back stronger in his debate rematch with Mitt Romney.
And the battle to break Rupert Murdoch's hold over his media empire. We hear from the chairman of a shareholder group.
I'm Max Foster. This is QUEST MEANS BUSINESS.
Hello to you. Well, it's a shakeup that's taken Wall Street by surprise. The CEO of Citigroup has quit with immediate effect. Vikram Pandit says now is the right time for someone else to take the helm.
He's been CEO since late 2007, and his replacement is Michael Corbat, who's been with the bank for 29 years. He's been head of Europe, Africa, and the Middle East at Citi since the start of this year.
CitiGroup's president and chief operating officer John Havens is also stepping down, and all of this comes just a day after some well-received earnings figures from Citi. So, it's taken some by surprise. But Maggie, not everyone.
MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: Well, a lot of people, though, Max. It is hard to keep something like this under wraps on Wall Street when you're talking about such a big player like CitiGroup.
So, there was an awful lot of shock around the trading floors and throughout the country, really, in financial circles this morning. A lot of people scratching their head, a lot of speculation about whether this was a clash, differences over strategy with the board.
Neither side is saying too much about it right now. You'll remember back in -- there's been a bit of controversy. Sources tell CNN that there has been tensions between Pandit and the board. You'll remember earlier this year, as well, Vikram Pandit had a pay package, his compensation package, voted down by shareholders, a rebuke from shareholders. So, there's been a little bit of controversy there.
Whatever the reason, though, one of the universal responses on the part of investors was really that this was not handled well. It was disorderly, coming just one day after their public earnings call, and it was a pretty good earnings report, as well.
No mention of it at all at the call, and some of them are saying publicly this is representative of what they consider to be some corporate governance issues at Citi.
So, those are all sort of themes that are going to play out over the next couple of days as we are sure to get a little bit more information about what happened behind the scenes.
Two fundamentals that really -- we want to underscore, here, when it comes to Citi, because ultimately that's what matters to the balance sheets, and one is that stock price.
Listen, CitiGroup survived the financial crisis, and it's important to remember that it almost didn't. It's on more stable footing, but this stock has really lagged. It's still down some 90 percent from its highs, investors frustrated that that hasn't moved and is lagging its peers somewhat.
And there's another question with banking, Max, and there's this sort of existential question of what are banks really supposed to do? What are they supposed to be? Should they go back more -- to the more traditional banking -- lending, M&A, advising, investment advising roles?
Or do you want to try to redirect and once again go after that riskier business, some of that riskier investment banking business, which brought in those huge returns earlier this decade? So, there's a lot o controversy there, as well, playing out here, perhaps behind the scenes in Pandit's decision to leave, Max.
FOSTER: Yes, and Corbat, it'll be down to him where he decides to send the company. How are investors looking at him? A good decision?
LAKE: I think cautiously optimistic, a cautious positive is what one money manager said to me. Listen, of course, that frustration, if they can bring in new blood, even if Pandit wasn't to blame for all the woes and they can sort of jump start this and really build on some of that momentum that has been coming through -- the last couple of quarters have definitely looked better -- then it's a positive and they're happy for it.
Some people say he's recently coming off of heading that Europe-Middle East- Africa division, international business is sweet spot for Citi. It's one of their core strengths, so that's good.
But other people in conversation saying listen, Citi's still a big, complicated business. They've got a lot of those assets still on the books they're trying to work down. Does this guy know where all the skeletons are buried in case there is a problem or a flare up.
And we've seen, it can happen to the best of them. Look what JPMorgan went through this year. Does he know where all the bodies are in order to deal with that level of a crisis? Little bit of a question mark on that, perhaps.
FOSTER: OK, Maggie, thank you very much, indeed. Well, Vikram Pandit saw CitiGroup's share price fall 90 percent during his time as CEO at CitiGroup. The slide started around this time five years ago, when Citi reported a quarterly loss of $6.5 billion.
Pandit came in a couple of months later in December with a portfolio stuffed with sub prime and Citi lost another $18 billion in his first quarter in charge.
Now, despite Pandit restructuring, CitiGroup needed to take around $45 billion from the US government in October and November, 2008. It received one of the largest handouts from TARP, that's the government's emergency bailout fund.
Tax payers? Well, they did get their money back, plus $12 billion for good measure in 2010. Of all the major banks on Wall Street still in existence, CitiGroup's shares have performed the worst since that crisis. And shareholders recently voted. They voted down Pandit's $15 million pay package.
Despite all of that, CitiGroup's shares are up almost 40 percent this year. Up again today. Alison Kosik at the New York Stock Exchange. Though, I guess they see the replacement as good news, as Maggie was saying?
ALISON KOSIK, CNN CORRESPONDENT: Yes. Apparently, they do. You saw the stock start lower this morning, and now that the shakeup has sort of been processed by investors, you're seeing shares come back with shares up more than 1 percent at this point.
But there is a lot of questioning about the timing of this. As Maggie said, just yesterday, Citi reported very good third quarter profit and revenue, beating estimates. Though Citi's CFO did admit that the bank was late to join in on the recent refinancing boom because it wasn't staffed up in the area.
So, some are speculating that the mist on this rebound in mortgage lending could have been what finally may have pushed the board to make its decision.
One other indicator that Pandit could have been on his way out, the fact that his pay package that you mentioned didn't go through. You often see these outlandish packages pushed through with other companies all the time. So, the fact that Pandit's wasn't pushed through wasn't a great sign of shareholder confidence.
As far as the broader market, you're seeing the Dow up 117 points. Strong corporate earnings are -- what's really moving stocks higher. Goldman Sachs posted both profit and revenue that easily beat expectations. Gold man also raised its dividend to 50 cents a share from 46 cents. We are watching Goldman's shares actually turn lower, about little less than a half a percent lower.
Johnson & Johnson also reported today. Both profit and revenue topping forecasts, even though earnings were down from a year ago. Johnson & Johnson shares are up about 1 percent. And Coca-Cola reported earnings per share that were in line with expectations, but revenue came in slightly lower than anticipated. Coca-Cola shares are down about 1 percent.
But overall, Max, expectations are pretty low for the third quarter, so at this point, investors are feeling pretty good about today's reports. Also, what's helping to boost the market of course, optimism over Spain, that it may ask for a bailout. Max?
FOSTER: OK, thank you very much, indeed, Alison.
Next, bailout hopes for Spain are growing. We'll look at why. That's giving European stock markets a lift, as well.
And Milli moves on. It's time to say good-bye to one of our original Millennials.
FOSTER: Stocks in Spain surged this Tuesday as investors grew more confident that a full bailout request is just around the corner. The IBEX gained nearly 3.5 percent, by far the best performer in Europe. It was fueled by a report in the "Financial Times" citing anonymous government sources saying that Spain is prepared to ask for help to get the European Central Bank to start buying its bonds.
Europe's other major indices also closed higher this Tuesday. Banking shares were at the top of the pile, but as you can see, all the main indices up 1 or 2 percent. Lloyd's up 6 percent, Credit Agricole up 5 percent, Deutsche Bank up 5 percent, UPS 3 percent up.
And Nokia shares gained nearly 9 percent in Helsinki. A UBS analyst's note today said Nokia is stabilizing and its drop-off in customers may have bottomed out. Jerry Evans -- Garry Evans, even -- is the global head of equity strategy for HSBC. He's here with us, now. Thanks for joining us.
GARRY EVANS, GLOBAL HEAD OF EQUITY STRATEGY, HSBC: Hi.
FOSTER: We do a lot of coverage of the economics here, but investors watching the programs can be confused. Yesterday, for example, we had an economist saying US is looking very, very strong, Europe is looking weak. But from an investor's point of view, looking for somewhere to put their money, you've got, actually, the upside down view right now.
EVANS: Economists are not necessarily what drives the stock markets. The stock markets behave sometimes in rather perverse ways. So, I look at Europe versus the US, and a couple of things you can say.
First of all, the US is a little on the expensive side, now. We're talking about a price-to-earnings ratio of maybe 13. Europe's more like 11. In some measures, Europe's actually maybe -- or US is maybe now 60 percent more expensive than Europe is.
The other thing is, it's often about not whether things are good and bad, but whether they're better or worse than people expected. And if you take the next year's economic growth forecast for the US, people think the US is going to grow about 2.5 percent, they think the eurozone is going to grow at zero.
So, where's the up and down risk? To me, there's a chance the US doesn't do quite as well as that, and Europe might do a little bit better. So, Europe from that point of view, I think -- and also, people are very under invested in Europe. They've stayed out of that market for a while. And we saw with Spain going up very sharply today, who owns Spanish shares? So, it only takes a little bit of an improvement for markets to do very well.
FOSTER: So, the bailout in Spain, from an investor's point of view, would be an opportunity, you'd say?
EVANS: One of the things I -- when I look at stock markets, the key issue is quantitative easing by central banks. So, the Fed has done lots of it. We're on QE -- I think it's 3 now. The ECB's been very reluctant, but in September they announced that they would do it if someone like Spain applied for a financing package.
So, that's absolutely key. If Spain -- and we think they will apply before the end of October -- if they come out and say, "We want a package of money from the European Commission, but we'll accept some conditions for that," on the basis of that, the ECB then comes in and says, "We will buy up as many Spanish bonds as are necessary to bring the yield on Spanish bonds down."
FOSTER: But why would that reflect on the IBEX, for example?
EVANS: So, that means they're putting a lot of money in the economy. It means that the tale, the worst-possible scenario, Spain has now been excluded and the ECB's supporting it as much as possible, so --
FOSTER: This takes away uncertainty.
EVANS: Exactly. It's taking away that uncertainty. But also, it's putting money literally into the market. If you own Spanish bonds and they're currently yielding you 5.5 percent and they suddenly go down to 4, well you say, "Actually, bonds don't look so attractive anymore. I'd better go and buy some stocks."
FOSTER: And they look cheap?
EVANS: And they look very cheap.
FOSTER: The fiscal cliff in the US is the big uncertainty looming in America, so even if the economy is doing well at the end of the year, you're not confident that it will continue.
EVANS: No. So, whoever wins the election, we're going to face this issue that from the first of January there are automatic spending cuts that will come in. There's also the Bush-era tax cuts, which expire. So, those two together, unless something changes, will take about 5 percent off GDP next year.
Now, I don't think anyone thinks it's going to be quite that bad, but politics in the US has gotten so dysfunctional, after the election, there's a period when you have this lame duck Congress, the old Congress comes back. Can they make those tough decisions? They'll probably try and push it off a bit.
So, I see there's a lot of noise, a lot of debate, something that markets really don't like very much.
FOSTER: So, more certainty in Europe, that's the strange thing, even though it's things looking bad.
EVANS: Europe still has its issues.
EVANS: Plenty of things still to argue about. Will Spain get this package? How does the European Stability Mechanism work? Will we have centralized bank regulations?
FOSTER: But we're getting there.
EVANS: We're solving some of the problems, yes.
FOSTER: OK, Garry Evans from HSBC, thank you very much, indeed.
EVANS: Thank you.
FOSTER: Australia's energy and resource minister says the commodity boom there is over. In a Reuters interview, Martin Ferguson said companies must now look at cutting costs and scaling back capacity to make a profit. The mining sector contributes 8 percent of Australia's gross domestic product.
In a recent IMF meeting in Tokyo, the country's treasurer, Wayne Swan, spoke to Andrew Stevens about the impact of cooling commodity prices.
WAYNE SWAN, AUSTRALIAN TREASURER: I'm very confident about our position in relation to all of the drivers of the Australian economy. If you look at mining as a percentage of GDP, roughly about 8 percent. When it comes to employment, only 2 percent.
But if you throw in some of those sectors associated with the construction boom that's going on at the moment, transport and construction and so on, you might get up to 15 percent.
The truth is, the Australian economy is a very big economy. Mining is a very important part of it, but we have a very strong economy, we have a very strong services sector. Even in manufacturing, certainly there are areas there where we do very well. So, we're a much broader economy than purely mining.
Mining's part of the story. But when you look at Australia's prospects for the future and you look to Asia and you look at the expansion of the middle classes in Asia, not just in China, but across Asia more broadly, there's going to be demand not just for energy, but also for agriculture and a whole host of services that Australia is well-positioned to supply.
ANDREW STEVENS, CNN INTERNATIONAL CORRESPONDENT: Mining as a whole contributes about 15 percent of GDP. China, which is obviously one of Australia's biggest customers for resources, the economy there is slowing down, 10 percent two years ago to 7.5 percent now. How big an impact is that having?
SWAN: Well, certainly we've seen commodity prices come off, and that will have an impact on our national income, and it will have an impact on revenues, particularly budget revenues. It'll affect company profitability, there's no doubt about that.
But if you look at commodity prices overall, we had 150-year highs. And whilst commodity prices have come off, and they've come off more than we thought, if you say look at the current iron ore price, it's still six times what it was only a decade ago.
So, there's going to be ups and downs in the commodity markets, and they will have an impact upon revenue and profitability of companies, but mining is --
STEVENS: There is --
SWAN: -- but no, but mining is still going to be a very important part of the Australian story. Mining investment, for example, is still increasing.
STEVENS: Are you concerned about the strength -- the relative strength of the Australian dollar?
SWAN: Well, there's no doubt that that's putting substantial stress and strain on a number of our trade-exposed sectors. For example, our tourism industry, which is still growing, even in the face of the higher dollar, particular with Chinese tourism into Australia.
It certainly puts a lot of pressure on our manufacturing sectors. It puts a lot of pressure on sectors across the economy. And in the face of that, what we have to do as a country is just be as productive as we can.
STEVENS: When you look at the strength of the dollar, fundamentally, does it make sense?
SWAN: Well, I think a stronger Aussie dollar makes sense when you consider that our economy was the 15th largest, it's now the 12th largest. We've had 21 consecutive years of economic growth.
If you look across Asia, prior to the global financial crisis, investors who were going to invest in Asia didn't necessarily come to Australia. After the global financial crisis, anyone who's investing in Asia and the region is now investing in Australia, and far wider.
Australia, if you like, as a consequence of how we performed during the global financial crisis, has been brought to the attention of a lot of investors around the world. And I think the strength of our dollar reflects that very deep interest in our economy and in our society.
FOSTER: Well, a South African, company, Goldfields, has issued an ultimatum to thousands of striking workers. The gold producer says 15,000 workers who refuse to return to its plants by Thursday will be dismissed.
Goldfields says the strike has cost the company more than $100 million in revenue, and miners are refusing to return to work until their pay demands are met.
A Currency Conundrum for you now. In the 1950s, which -- in which country was there a museum which sold radioactive coins as souvenirs? Was it in A the UK, B Russia, or C the US? We'll have the answer for you later in the show.
The euro is gaining sharply against the dollar this Tuesday. Optimism over a full bailout for Spain has sent it up around two thirds of a percent. Right now, a euro will buy around $1.30 and a half. Sterling is gaining a quarter of one percent against the dollar. The yen is falling slightly.
FOSTER: The Italian economy is shrinking, but one sector is growing: marijuana cultivation is booming. As Ben Wedeman reports, during these times of austerity and cuts, more and more people are exploiting a legal loophole and growing grass.
BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): The leaves are dry, most of the plants have been removed, but the pungent aroma of marijuana still lingers in the air.
Italian finance police discovered this underground plantation in August, deep in a tunnel built during the era of Mussolini, directly under the main vault of the Italian Central Bank. They say it was an industrial- scale enterprise employing dozens of workers.
DAVIDE CARDIA, LIEUTENANT COLONEL, GUARDIA DI FINANZA: Maybe 50, maybe 30. It was a -- an unusual organization, and it's difficult now to say how many people. For sure, we have a chemical engineer, a hydraulic engineer.
WEDEMAN: The authorities report a steady expansion in domestic pot growth.
WEDEMAN (on camera): In these tough economic times, marijuana cultivation has become a growth industry in Italy. More than a million dollars were invested in this operation alone.
WEDEMAN (voice-over): Police estimate that if left undisturbed, annual profits here would be more than 20 times the original investment. The cultivation of marijuana in Italy is illegal, but by a strange legal loophole, the sale of seeds is not. And seed sellers who declined to appear on camera told us sales are booming.
And there's another somewhat ironic reason for the upsurge in do-it- yourself pot cultivation, says this consumer of home-grown grass, who ask we neither name him or show is face.
"Even though they smoke, many young people live within the law," he tells me. "They work and pay their taxes and observe the rules, but have a problem that the money they spend on grass goes to organized crime."
Rita Benardirni, a member of parliament representing the Italian radical party, is campaigning to legalize marijuana. To make her point, she grows some on her balcony.
Her concern is not just with the money going to criminal networks. "There's no control on what they're selling," she says. "For example, much of the marijuana is coming form Albania and other countries in the east and is contaminated with chemicals. People aren't smoking just marijuana, but also other dangerous substances."
The Italian police are ramping up their campaign against local production, using high-technology to track down growers big and small. They're using planes equipped with sensors that can spot marijuana by the light its leaves reflect.
"A plant," explains pilot Gianfranco Origlio, "even if small, in theory could be spotted."
The grass may be greener this side of the border, but for now, it's still illegal.
Ben Wedeman, CNN, Rome.
FOSTER: Coming up, debate day in the United States. The presidential candidates prepare to face off once again. It's round two in Romney versus Obama.
FOSTER: Welcome back, I'm Max Foster. This is CNN, and on this network, the news always comes first, as Richard would say.
The US presidential candidates face off later in their second debate. This one is town hall-style, where the candidates take questions directly from voters. Both Republican Mitt Romney and President Barack Obama need to put in strong performances.
Radovan Karadzic has begun his defense against war crimes charges at the Hague. In an opening statement, the former Bosnian-Serb leader portrayed himself as a mild, tolerant man who went to war reluctantly. Karadzic is accused of committing genocide during the Balkan Wars.
In a surprise move, the CEO of CitiGroup has resigned with immediate effect. Vikram Pandit had been the bank's CEO since December 2007. He'll be replaced by Michael Corbat. CitiGroup's president and chief operating officer, John Havens, has also announced his resignation.
The US says it is disappointed that Britain will not extradite computer hacker Gary McKinnon to face charges, saying he's too ill. McKinnon has confessed to breaking into computers at NASA and the Pentagon. He faced 60 years in jail if convicted. He suffers from a form of Autism called Asperger Syndrome.
John Dalli, the European Commissioner for Health, has resigned after an investigation by the EU's anti-fraud office. A businessman claiming to know Dalli had approached a Swedish tobacco firm asking for money in exchange for a possible shift in the EU's tobacco policy. After the company complained, an inquiry found he had been aware of those offers. He rejects the findings, but has resigned with immediate effect.
FOSTER: Well, in just a few hours' time, U.S. President Barack Obama and his challenger, Mitt Romney, will take part in a second presidential debate. CNN's own Candy Crowley will be moderating.
Dana Bash is outside the debate hall in Hempstead, New York.
Well, the economy is a big subject, or it has been in terms of the deficit and taxes. But I guess if the voters have questions around the economy, it's going to be about jobs. And they haven't been too clear about that, candidates so far, have they?
DANA BASH, CNN CONTRIBUTOR: They haven't. That's a really good point. And what is most fascinating about this debate is that it is going to come -- these questions are going to come from the people who are affected most and the people who matter most politically because all of these voters will -- are telling us that they are undecided voters. They're -- they have not made up their minds.
And it is our own Candy Crowley moderating, who will choose which questions are asked. She is probably, at this hour, going through all of the -- about 80-some questions that the people who are going to be in the audience brought in this morning. And she is choosing probably about a dozen or so that will be asked of the candidates.
And as you can imagine, she's trying to go through and maybe give a taste of many of the key issues that are on the forefront of Americans' minds this election year.
FOSTER: She'll do brilliantly.
We're all convinced of that. But in terms of --
BASH: Of course.
FOSTER: -- the two candidates, last time Romney, it was -- it was judged by commentators -- did a bit better than Obama. Do you think Obama's going to have a different strategy this time? He's not going to let as many things go as was the interpretation?
BASH: Well, we know that he had a very different strategy to prepare for tonight's debate. Instead of doing it under duress, which he made clear the last time around that he said debate prep was a drag, he didn't say that this time. And at least we don't think so because we didn't actually see him in public.
He didn't do sightseeing as he did when they were in Denver; he didn't do campaign events. He really was holed up at a resort in Williamsburg, Virginia -- Virginia, a swing state -- for three days, working with his team to try to do better this time around.
And look, you know, the people who are close to the president, Democratic sources, they say he is -- he's a politician, so maybe this goes without saying, he is a competitive person. And he doesn't want to have the same kind of performance that he did last time. So it really is hard to imagine that he is not going to be more aggressive.
But there is a fine line because it's not just the two of them, Mitt Romney and Barack Obama, on the stage. It is President Obama also dealing with these voters. So could be aggressive but also have to sort of balance that with being also polite and engaging with the people who are asking the questions, because that is really one of the X factors in the town hall that you cannot underestimate.
FOSTER: OK, Dana, thank you very much indeed for that.
Now it's a clear day in New York ahead of tonight's debate. But the months ahead may be unseasonably stormy for Wall Street, with some major disturbances on the horizon. Maggie Lake has your economic weather forecast.
(BEGIN VIDEO CLIP)
MAGGIE LAKE, CNN CORRESPONDENT: Let's start with housing. Whether you're talking about prices or sales, things have been looking up. But this is really significant. Foreclosures at a five-year low: this is a really pained (ph) part of the economy, improvement there, really helping the consumer feel a lot better.
And we've seen that come through in the latest numbers. Consumer sentiment, the latest survey showed it's at its highest level, confidence at its highest level since the recession.
The other thing really helping out, the consumers, is the job market, especially on the local community level. Look at this sector in particular, the hiring of teachers, the people we send our kids to go to school with.
State and local level, national level, across the board, hiring of teachers for the first time in four years. If we take a look at weekly jobless claims, in the latest week, we saw claims down near a five-year low. So it's to reinforce that picture of a better jobs picture.
Last, let's look at manufacturing. That sector you can see a little bit of cloud starting to come into the forecast there. It is back in growth mode. It is expanding. But historically it's at a pretty low level. For all that good news, there are some major clouds on the horizon. And they're happening outside the borders of the U.S.
Let's start with China and let's call this storm the soft landing storm, a lot of people very concerned about slowing Chinese growth. And for the U.S., it matters for those multinationals who counted on China being the engine of growth for the world's economy. We've got an important GDP number coming out there.
The other big storm system internationally threatening the U.S. is, of course, coming from Europe. And this has been a system that's been stalled for years. A lot of U.S. companies, again, concerned about that. It is a major export market for U.S. goods.
When it comes to Europe or China, there's not much either presidential candidate can do to control those events. But the next president will not be able to avoid the storm hanging over Washington, D.C. If you take a look at our map, those clouds and lightning strikes represent the fiscal cliff.
If the next president and Congress cannot reach a deal on the budget, you will see automatic spending cuts and higher taxes kick in. Analysts warn that could throw the U.S. economy back to the dark days of recession. I'm Maggie Lake in New York with your U.S. economic forecast.
(END VIDEO CLIP)
FOSTER: Conditions are a little sunnier where Richard is at the moment, all this week he's traveling by train across the United States. Gauging the mood ahead of the presidential election, well, America -- where are we?
Yes, there we are -- gauging the mood for the presidential election, an "American Quest" is taking him from Chicago -- here he is at Union Station -- to the swing state of Iowa, Mitt Romney's leading in the polls there.
From there, he's headed to Granby in Colorado and on to Provo, Utah, where he dined handsomely on orange cheesecake Dreamsicle, we're told, the picture to demonstrate as evidence. He also sent us this update.
(BEGIN VIDEO CLIP)
QUEST: The Y stands for young, Brigham Young University, better known as the Mormon college or Mormon school. It was from here that Mitt Romney graduated. And I've come here to find out what the students think about the Romney-Obama battle.
So I'm in Utah on my American quest, where, yes, I mean business.
(END VIDEO CLIP)
FOSTER: Well, tomorrow, Richard will be heading over to California, arriving in San Francisco by the end of the week. Quite a journey. And you can follow his progress on Twitter. His handle: @RichardQuest and you can also read his latest blog at CNN.com/international.
Now next the News Corp annual general meeting gets underway in Los Angeles. And we talk to a campaigning shareholder about succession planning.
(BEGIN VIDEO CLIP)
FOSTER (voice-over): Time for the answer to the "Currency Conundrum," earlier we asked you where in the 1950s you could pick up radioactive souvenir coins. The answer is C, the United States. The American (inaudible) atomic energy at Oak Ridge, Tennessee, would blast visitors' 10-cent pieces in neutron radiation, then give them back in a souvenir holder.
Here's one of the coins for sale on eBay, in fact. The museum had to stop irradiating dimes in the '60s when the composition of 10-cent coins changed from silver to nickel. The process (inaudible).
(END VIDEO CLIP)
FOSTER: And now News Corp shareholders want to split Rupert Murdoch's dual roles of chairman and CEO. The company's annual meeting is wrapping up at FOX Studios in Los Angeles. Ian Greenwood is there. He's the chairman of one of the groups behind the move. I spoke to him just before he addressed the meeting and asked him what his message to shareholders would be.
(BEGIN VIDEO CLIP)
IAN GREENWOOD, CHAIRMAN, LAPFF: We have a strong view that the chairman and chief executive should be filled by different people, the different roles in the company. That's a view we've expressed to the company prior to the current hacking situation.
It's a long-held view; it's a view which we've had mature dialogue with the company over the last few years, with particular the senior non- execs, Rob Din (ph), Robert Eddington (ph) and Beit Din (ph). And that will be my message.
I think there's been, to some extent, an over-politicization and over- personalization of the issues. That's not what we're about. We're about long-term (inaudible) governments and future proof in the company against changes in personnel and business strategies.
FOSTER: Murdoch himself said this recently, "Shareholders with complaints should taken profits and sell."
He's got a point, hasn't he? When you bought into this company, you were buying into Rupert Murdoch, weren't you?
GREENWOOD: The problem with that is that if you divested yourself, there's a large pension fund. If you divested yourself of every company where there were issues, you'd be unduly concentrated. It's odd (ph) interest is long term, very, very broad investors to try and improve the corporate governance (ph) of the -- of all sectors in which we invest.
And therefore we don't believe in disinvesting in what is fundamentally a sound company. We're not saying it isn't sound. All we're saying is that you can make it better and you can future-proof it.
FOSTER: What about the broader views? What about the broader board's views? They've said this in September, but the proposal would deprive the board of the valuable flexibility to exercise its business judgment in selecting the individual best suited to serve as chairman in the future. So they're looking beyond Rupert Murdoch and saying actually the current system is best to appoint after him.
GREENWOOD: Well, my view is that the very fact of having a chairman would -- should be done sooner rather than later, because that person could then oversee the appropriate appointment of a chief executive when it comes the time.
And the board's job is to hold the -- hold the executives to account and to ensure that they get their outright (inaudible) and their right business plan. The chief executive's job, in my view, has always been to have the appropriate business plan, to provide the appropriate leadership for the company (inaudible) and have the right vision for the company on an ongoing basis.
We're not saying, by the way, that we should -- that we want a revolution. We're saying that we want an evolution.
FOSTER: The voting shares are out of your hands. The family's got them; a Saudi prince has got them. You haven't got them. You're not going to get this passed. That's the reality of the situation. So a brutally honest question is what's the point?
GREENWOOD: The point is that we believe that the company will, in the end, recognize that they need to move towards a corporate government structure, which satisfies those of us that are, yes, minority investors, but nevertheless, we are investors. And we have obligation to keep that money as upper in for our beneficiaries to the best of our ability.
I believe over time that they will adopt a view. I do understand the defensiveness in the current circumstances with all of that's gone on in terms of the hacking scandal and that sort of thing. And I think that's unfortunate, because we're not attacking Mr. Murdoch or anybody else personally.
My view is if there are issues that are to be dealt with in regulatory or criminal behaviors, then the appropriate criminal and regulatory body should deal with it. That's not our purpose in bringing this resolution.
Our purpose is to say we need a situation where we've got a chairman, we've got a chief executive that do different jobs, they're complementary jobs and we think that the company will benefit from that.
(END VIDEO CLIP)
FOSTER: There you go. We'll await the result and bring that to you, of course, The "Financial Times" says Rebekah Brooks, meanwhile, former chief executive of Rupert Murdoch's News International got quite a sendoff when she resigned in July last year.
It says she got a package totaling just over $11 million in cash, pension payments, use of a chauffeur-driven car and even an allowance for legal fees. Brooks is awaiting trial on charges of phone hacking and trying to obstruct a police investigation of what went on at the "News of the World", the tabloid paper that was closed last year.
Let's bring you the European weather now, in particular. This is getting stormy, Jenny, I'm told.
JENNY HARRISON, CNN METEOROLOGIST: It's been very stormy, Max. It's had some terrible storms across the central Mediterranean, particular in the last few hours. Let me start by showing you the satellite, because you can see, it's in a very unsettled picture. It's certainly unsettled throughout the weekend as we start this week a very similar sort of story.
It will begin to improve across the southeast, but (inaudible) the last few hours, all of this very active cloudburst down there. And bringing with it some very strong wind gusts for a start, 130 kph over there in Corsica.
And then in Croatia, 100 millimeters of rain came down in 24 hours and there was even a tornado reported in Greece. Now I think you've got some pictures to show you of the damage, some video of the damage that was done in Rome.
And you can see there, (inaudible) about the winds being strong and (inaudible) big wind gust that was reported in Corsica. But of course, the winds are very strong within these thunderstorms and they passed across the Mediterranean.
Now at the same time, in Italy, but a little bit away from Rome, this is Venice. It's the aqua alta. That, of course, is the high tide and what we tend to see a few times throughout the year. This is the first high tide of the first aqua alta of the season is we have very heavy rain combined with the high tide.
And then we get flooding and it's very common, really, in Venice itself because of course, sitting there on the lagoons. So that is what's been going on there. People seem to be enjoying that. In the meantime, across the northwest of Europe, more rain across much of the U.K., heavy at times on your notice.
Look at that, the first fleece snow of the season across Scotland. More rain, of course, continuing in that system across much of western Europe as well. And this is the pattern as we go through the next couple of days, more of the same across the north, very heavy rain at times, and then across the south, the southeast in particular, high pressure beginning to build in.
So eventually it is drying out. So better weather to recover from those storms across the central Med. But the thunderstorms still could pack a bit of a punch. So there are some warnings in place Tuesday and Wednesday across the southeast for, again, the potential for some pretty damaging strong winds.
And then across in the northwest of Europe, the U.K. in particular, very heavy rain is coming in in the next area of low pressure as well as that some very blustery conditions. So you can see in the wind forecast for the next 48 hours, no real easing from there, staying pretty cool across the north.
But you can see that high pressure building in nicely across more central and southern areas. You see the color going from the cool to the warmer. So it is improving. There it is, clearer skies as well, but no real change across the north and the northwest.
We've got snow accumulating, even a little bit accumulating across the highlands of Scotland and temperatures a little bit lower, just 8 Celsius in Glasgow on Wednesday. Meanwhile, in Rome, warming up to what should be a very pleasant 22. Time for a short break now here on QMB. Max is back with you in just a while. So (inaudible).
FOSTER: Over the last some months, we've seen our Millennials come and go, blogger slash designer slash retailer Mili Bongela was one of the original gang. What we've seen from Mili is almost certainly just the very beginning of a much bigger story. But for now, it's time to close the chapter and to say goodbye.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE (voice-over): From the day our cameras started rolling back in February of this year, Mili has proven to be the ultimate Millennial. Young, ambitious, competent and outspoken, Richard Quest caught up with her in London and found that this Millennial is happy just living life on her own terms.
QUEST: As we've watched you over the month, one's become aware of frenetic activity. The word unguided missile could be used. The strategy, but it seems to be unstrategic. Is that fair?
MILISUTHANDO BONGELA, FASHION BLOGGER: I think that's a fair description. There is no, you know, big plan. There is no modus operandi where I'm saying there's a huge strategy that I'm following. I do make a lot of mistakes, but for me, the end result, what I would like to achieve out of all of what I do is peace of mind.
QUEST: Oh, come on.
BONGELA: Yes. I'm not giving it up, but the end result is peace of mind.
QUEST: No. I'm not letting you get away with that.
QUEST: I'm not letting -- you do everything possible to avoid peace of mind, Mili.
BONGELA: I need to make money. But at the end of the day, I do actually have a lot of time, where I do sit and reflect about the things that I do. I'm trying to go against the grain that we've been taught, that may parents and everybody else is going, and yes, there are no parts that have been set and so, you know, there isn't a legacy that I'm following. I am making my own way as I go along.
In October last year, I had done so much and, you know, was not taking care of myself, was just working, working, working. The shop assistants called and said that the kettle at the shop is broken. Can I please bring a kettle? And I just lost it.
QUEST: Let's talk about burnout. How did it feel?
BONGELA: I was -- I felt very helpless and completely overwhelmed by everything and people wanting things from me, me doing things because they were expected and being able to stop, not being able to say no, not being able to say give me a break, I want to breathe; I want to sleep. And it felt like I was in a very dark hole and I couldn't get out of it.
QUEST: Burnout but also feeling that you've just got to keep going though, isn't it?
BONGELA: Yes, unfortunately, I'm surrounded by, you know, sensible people who told me to stop. And I literally had to stop everything, switch my phone off, get onto some medication, go away for a little bit and be by myself and come back and restrategize.
I do feel like I'm -- I can achieve anything, but I don't have to achieving everything. I don't -- it's not on my shoulders. I don't have - - I don't have to have the most lucrative company. I don't have to have the biggest house or the biggest car. Or I don't have to have a lot. I don't want it all. I just want enough. That's all.
QUEST: I'd like to look into your crystal ball 10 years down the road and paint for me -- you'll no longer be Millennial by then even five years, even in a couple of years, you'll no longer be. But I'll give you five to 10 years. Look into your crystal ball and tell me what is it, what would you like to see Mili Inc. look like?
BONGELA: Hopefully being able to do so well that my partner and I will be able to hopefully sell it to somebody who can run it and do all the operations and I will move on to other things in life. I'd really like to get into the food industry. In 10 years' time, I see a nice eatery.
QUEST: There's the unguided missile.
QUEST: About to launch off in another direction.
BONGELA: Why not, though?
QUEST: No reason why not.
BONGELA: If I've made my money in --
QUEST: Would you like to be rich?
And that's not a value judgment. That's a straightforward, would you like to be rich?
BONGELA: Well, the word "rich" is quite objective. I would like to be rich in my mind and in my heart. But obviously I would like to have cash in the hand for the things that I would like to do. I do not believe that money makes you happy at all. In fact, when you have a lot of it, you're stressed so much to maintain it that when you lose it, you know, you kind of -- you're -- you lose your mind.
QUEST: OK. So if I've got a check in my pocket for an amount of money that would mean you would never have to work again -- let's say you sold me (inaudible) you'd never have to work again, what would you do the day after? Start something else?
BONGELA: Yes, because I'm not motivated by money. I'm motivated by (inaudible).
UNIDENTIFIED MALE: Next week, on "The Millennials," no time for an adventure. Michael Burbank (ph) tells us why his career takes center stage.
FOSTER: (Inaudible) the top story now, the CEO of Citigroup Vikram Pandit has stepped down from his post and from the board. Pandit has been with Citi since 2007.
He will be replaced by Michael Corbat, who's been serving as the CEO of Citi's Europe and Middle Eastern-Africa division. He's holding a conference call later today to discuss the future of the company. So we'll get a better idea of what he's got planned.
Yahoo! CEO meanwhile, Marissa Mayer, has poached a new deputy from her former employer, Google.
Henrique de Castro will start in January as Yahoo's COO. He's currently a vice president of Google. When he joins Yahoo!, the executive will get a base salary of a mere $600,000, but with the compensation package worth a mighty $58 million.
Since becoming CEO in July, Mayer has also hired a new CFO and head of marketing to revamp the ailing web companies. So it's coming together for her.
Europe's other major industries or indices also closed higher this Tuesday, all up 1 percent and Paris up more than 2 percent. Nokia shares gained nearly 9 percent in Helsinki. UBS analysts noted today, said Nokia is stabilizing and its drop-off in customers may have bottomed out. So a turnaround. U.S. markets were up 100 points meanwhile.
That's QUEST MEANS BUSINESS. I'm Max Foster in London. Thank you so much for watching. The news headlines are next.
(BEGIN VIDEO CLIP)
FOSTER (voice-over): The U.S. presidential candidates face off later in their second debate. This one in town hall style, where the candidates take questions directly from voters. (Inaudible) Republican Mitt Romney and President Barack Obama need to deliver strong performances.
(Inaudible) has begun his defense against war crimes charges at The Hague. In an opening statement, the former (inaudible) Serb leader portrayed himself as a mild, tolerant man who went to war reluctantly. (Inaudible) is accused of committing genocide during the Balkan Wars.
In a surprise move, the CEO of Citigroup has resigned with immediate effect. Vikram Pandit has been the bank's CEO since December 2007. He'll be replaced by Michael Corbat. Citigroup's president and chief operating officer, John Havens, has also resigned or announced his resignation.
The U.S. says it is disappointed that Britain will not extradite computer hacker Gary McKinnon to face charges, saying he's too ill. McKinnon has confessed to breaking into computers at NASA and the Pentagon. He faced 60 years in prison if convicted. He suffers from a form of autism called Asperger syndrome.
The police chief in Pakistan's Swat Valley says the government behind an attack on a teen activist will be caught soon. Malala Yousafzai was shot last week. She's now being treated at a hospital in Birmingham in England. Doctors say they're pleased with her progress.
And that's a look at some of the stories we're watching for you here on CNN. "AMANPOUR" is next.