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QUEST MEANS BUSINESS

Japanese Markets Tumble; Next for Nikkei; European Markets Rebound; Wall Street Muscle; Market Volatility; EU-China Trade Row; Expensive Taste; Hermes on Tour; Dollar Up; Europe, UK Patent System; Patently Speaking

Aired May 27, 2013 - 14:00   ET

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


NINA DOS SANTOS, HOST: Hello, welcome. You're watching QUEST MEANS BUSINESS. A knock to the Nikkei. It's another volatile day in Japan.

Tariff troubles: China tries to stop the EU from slapping on huge duties on its solar panels.

And also, the International Monetary Fund warns Arab Spring countries to reform or else, it says, they could face further instability.

Hello, I'm Nina Dos Santos, and this is QUEST MEANS BUSINESS.

Good evening. Japanese stock markets are taking a gut-wrenching dive as volatility continues to grip these markets. Well, this session saw the Nikkei fall by more than 3 percent alone. Companies like Toyota and Sony, which rely on exports, dragged the market lower.

The reason? Well, it was of course another strong yen, which makes Japanese exports just ever so much more expensive. All of this follows a steep 7.3 percent drop on Thursday and a small gain on Friday. Just goes to illustrate how volatile things have been in Japan.

Well, at least one Japanese official is trying to put on a brave face these days. Here's the chief cabinet secretary, Yoshihide Suga.

(BEGIN VIDEO CLIP)

YOSHIHIDE SUGA, JAPANESE CHIEF CABINET SECREATARY (through translator): There were weeks where the Nikkei rose 1,000 yen in a week, so I think we've entered a correction phase. But our economy is certainly on the path to a recovery, so I think it's important that we look at this calmly.

(END VIDEO CLIP)

DOS SANTOS: So, that's the Japanese cabinet secretary speaking after everything that's gone on.

Well, investors have been anything but calm. Let's have a look at exactly how things have panned out. Well, the Nikkei 225 has actually risen by 36 percent since the beginning of this very year, as you can see. Investors have now begun to question the effectiveness of the prime minister Shinzo Abe's aggressive plan to reflate the economy.

Let's have a look at what happened on Thursday in particular, as you can see here. We had that plunge with the Nikkei 225 falling 7.3 percent, as I mentioned before. First, investors were spooked by weak factory data coming from China, and then more worryingly, the yield on the Japanese ten- year bond managed to spike to its highest in a year.

That in turn led to a swift response from the central bank governor, and he says that Japan can tolerate higher interest rates, but he still warned that the government has to do more to try and slim down the country's huge and mounting debts that now stand at around about 286 percent of GDP and counting.

So, European stocks enjoyed a more orderly session in today's markets. The DAX and the CAC, as you can see there, each rising nearly 1 percent on their own part. The SME over in Zurich finished just about a fraction lower.

And I also want to mention Club Med, because this stock listed on the CAC 40 over there in France climbed 22 percent in the Parisian session today. Its top shareholders are seeking to take over the company in a deal that could be worth more than $700 million.

Overall, though, trading volumes are quite a bit lighter than usual. That's because it is a bank holiday here in London, that means that the London Stock Exchange is closed today. And Wall Street is shut in observance of Memorial Day as well.

Well, the run-up in stocks this year has been mostly fueled by central bank stimulus, and that's been making equities more attractive than any other asset class. On Wall Street, the Dow and the S&P 500 seem to have been going from strength to strength every day. As Maggie Lake now reports, it's the type of move that traders have become accustomed to.

(BEGIN VIDEOTAPE)

MAGGIE LAKE, CNN INTERNATIONAL BUSINESS CORRESPONDENT (voice-over): Call it the Iron Man rally.

(NEW YORK STOCK EXCHANGE OPENING BELL RINGS)

LAKE: Just like the superhero who visited Wall Street, stocks this year have so far defied gravity.

MARK NEWTON, GREYWOLF PARTNERS: All of a sudden now, everybody is bullish on stocks, and they're getting more and more bullish.

LAKE: Wall Street made history early March when the Dow hit its first record high since 2007. Then in May, it crossed 15,000 for the first time every. The S&P also joined the party, and the tech-heavy NASDAQ earned its bragging rights, hitting a 12-year high.

For the bulls, the argument for stocks is compelling as long as the Fed keeps pumping billions into the economy.

TED WEISBERG, SEAPORT SECURITIES: It's almost as if the Fed is leading us by the hand into the stock market, into riskier assets.

LAKE: The housing market has also gotten a boost, and spending, particularly for cars, is holding up. This bull market may have staying power. In a survey by financial magazine "Baron's," money managers say the Dow could reach 16,000 soon.

Despite the positives, this is a rally that, in the immortal words of Rodney Dangerfield --

RODNEY DANGERFIELD, COMEDIAN: No respect! I don't get no respect at all!

LAKE: -- still has trouble getting respect, especially from traders sitting on the sidelines.

MICHAEL GURKA, SPECTRUM ASSET MANAGEMENT: The reason people don't like it is because they think it is a perceived bubble.

Bears say a rally fueled by Fed stimulus cannot be taken seriously. Corporate prophets are also a concern.

RANA FOROOHAR, "TIME" MAGAZINE: It's not like companies are out there selling a lot more, inventing great new things. We're not seeing a real boom of any kind right now.

LAKE: Meantime, the US jobs market remains sluggish, gridlock reigns in Washington, and Europe is mired in recession. Even world-famous investors say what happens next is anyone's guest.

WARREN BUFFETT, CEO, BERKSHIRE HATHAWAY: We don't know what the stock market ever is going to do. If you think you know it, you're kidding yourself.

LAKE: Volatility has returned to the markets, but the bulls still hope Iron Man's super powers will prevail.

Maggie Lake, CNN, New York.

(END VIDEOTAPE)

DOS SANTOS: The bulls versus the bears, we're back there again. Last time we talked about this was a few years ago. Let's talk about that market volatility and ask what's next in terms of the moves for stocks. Joining us now is CNN's contributing editor, Todd Benjamin, who's in our London studio with me.

So, bulls versus the bears. Anybody watching a piece like that from Maggie Lake and watching these shows here on CNN will be very familiar with the fact that we've had a huge market rally and very few economic fundamentals to back that up. Why is sentiment going in one direction, and yet the markets just seem to be rolling ahead?

TODD BENJAMIN, CNN CONTRIBUTING EDITOR: Well, I think you really have to sort of divide it up. I think actually the sentiment we've seen in the US is more justified because, as Maggie pointed out, you are seeing improvement in the housing market. Unemployment is still problematic, but at least it's moving in the right direction.

Now, that's in sharp contrast to Europe, which is completely mired in recession and I think will be for a very, very long time. And then you have Japan, which had very good growth in the first quarter, 3.5 percent, although there are question marks about that moving forward.

So, if I had to divide the three, I would say that the US is the most justified rally we've seen. But again, you have to remember that this is a liquidity rally, and therefore, as long as the Fed keeps monetary policy easy, and as soon as it hints it's not, like it did last week, you see the market fall apart. As long as they keep monetary policy easy, then I think the smart money favors going with momentum.

DOS SANTOS: The smart money seems to be staying -- going from the central banks to banks that are investing in the stock market. It's not really hitting Main Street.

BENJAMIN: Well, the retail investor may be behind, all right? But it doesn't matter. It's still moving the market. And as long as it moves the market, then that's going to grab the headlines, and that's going to reinforce sentiment to be bullish.

DOS SANTOS: Let's talk about Japan, you mentioned before. So, we have Shinzo Abe and his new brand of economic theory dubbed Abenomics, which is basically stimulate the Japanese economy as much as you can to get it out of 20 years of torpor. We already seem to be seeing that unraveling, though, if you look at the plunge that the Nikkei has seen over the last few days.

BENJAMIN: Well, I don't know if I agree with you totally, all right? And you're very smart, but I don't know if I agree with you totally, and the reason for this is, let's put this in perspective.

As you pointed out when you introduced the Nikkei's fall, that it's been up 36 percent this year. The broader market, the Topix, is up 34 percent this year. That's with the huge fall we saw last Thursday and the further fall we saw today.

Now, some of this is profit-taking. There are certainly worries, I think, anytime the yen gets stronger. I don't think the BOJ is communicating its policy that well, and I think there are question marks over yes, we want 2 percent inflation, but we want to keep yields low.

So, when you put that all together, as well as question marks among BOJ members themselves in terms of whether or not they can really get inflation higher, I think that confuses the market at times, and that's a good way to take profits, especially when the yen strengthens because they're so export-dependent.

DOS SANTOS: Well, that's the other thing, isn't it? The yen is strengthening, not because of anything that's going on in Japan, it's because people don't know where else to put their money during times of uncertainty.

BENJAMIN: Yes, and that's something --

DOS SANTOS: How do you fight that?

BENJAMIN: Yes, and I think that's a very tough thing for the BOJ to fight, because if there is perceived risk somewhere else and they're looking for a safe haven, they find the yen a very good place to put it, and that's something they can't control.

DOS SANTOS: OK, CNN's contributing editor Todd Benjamin in our London studio giving us some insight. Thanks ever so much for your time there.

Up next, earning more and also spending more as well. China's luxury market is taking off, but a brewing trade war threatens to make it a little bit harder for Europe to meet the demand. We'll be back with more after this.

(COMMERCIAL BREAK)

DOS SANTOS: The EU and Chinese officials are meeting to try and diffuse a growing trade dispute. The European Commission is considering slapping on hefty tariffs on imports of Chinese solar panels.

And on Sunday, the German chancellor Angela Merkel said that she would do what she could to try and stop this happening. She said that she was playing host to the Chinese premier, Li Keqiang, in his first -- sorry, playing host, that is, to his first visit to German. Mr. Li said that the planned tariffs would harm both jobs in China as well as industry in Europe.

The EU trade chief, Karel De Gucht, said he's going to try to negotiate a solution with China before the provisional deadline, which will fall as of next week.

Germany has pretty good reason to help China felt those planned import duties. The country is China's biggest European trading partner. And as CNN's David McKenzie now reports, Mrs. Merkel sees an opportunity in meeting China's growing taste for luxury goods.

(BEGIN VIDEOTAPE)

DAVID MCKENZIE, CNN INTERNATIONAL CORRESPONDENT (voice-over): A luxury convention in Tangshan, from jade to Jaguars. But the question is - -

MCKENZIE (on camera): What is luxury in China? Joining the golf club? Maybe a red Ferrari or Lamborghini? A super car like this will be out of most people's price range.

MCKENZIE (voice-over): But consider this: China could soon have more billionaires than anywhere else on the planet.

MCKENZIE (on camera): They're calling it the Bling Dynasty. Is it all about showing off?

HONG HUANG, CULTURAL COMMENTATOR: It is, because China has found a new religion for our 21st century living, which is we worship money.

MCKENZIE: So, when I think luxury, I don't think Caravans.

MCKENZIE (voice-over): "Chinese are not familiar with the concept right now," he says. "But when they get to know it, it will change the way they live completely. So, luxury can mean camping -- with flat screen TVs and Burberry blankets.

HONG: There's a little bit of binging going on, in terms of material goods, and there's a little bit of starry-eyed and bushy-tailed about all things luxury, aristocratic.

MCKENZIE (on camera): It's hard to miss the luxury pitch here in Tangshan, and it's third-tier cities like this that are the new frontier of the luxury market.

MCKENZIE (voice-over): And the number of millionaires in China is growing rapidly, as entrepreneurs take their companies public. There are around 1.5 million millionaire households in China. That's why luxury is taking off.

"Our clients are the people of Tangshan," says Dong Zhi-an. "There are a large number of new rich whose lives have been changed dramatically. They used to drive cars. Now, they want choppers." China's new elite likes to spend to be seen spending.

David McKenzie, CNN, Tangshan.

(END VIDEOTAPE)

DOS SANTOS: The French luxury goods firm Hermes is currently on a world tour showcasing the skill of its craftspeople. First stop, naturally, was Beijing, and it's currently at London's Saatchi Gallery, where I found the managing director of Hermes UK, Bertrand Michaud, hard at work.

(BEGIN VIDEOTAPE)

BERTRAND MICHAUD, MANAGING DIRECTOR, HERMES UK: I think the pleasure to share is bigger than the willingness of hiding. So, we decided to open our doors and to show exactly who we are and what we do.

Hermes started as a saddle-maker in 1837, and we are using the same techniques 280 years later to make our bags. It's a good opportunity for us and Festival Limited to show what we are doing and why it takes so much time.

DOS SANTOS: How important would you say the fact that Hermes is made in France or, even better perhaps, made in Paris? How key is that to Hermes's brand?

MICHAUD: It's very important, because we have different locations. For example, the silk is in Lyon. And why is it in Lyon? Because by tradition, it's the best place in the world to print the silk. And in France, we have this long tradition of know-how, especially in leather craftsmanship.

DOS SANTOS: Would you say that during these times of uncertainty, people are really looking for something that's got a certain amount of tradition and heritage, something that's made in France, for instance?

MICHAUD: People want authenticity, and knowing that you buy something that is going to last as a good companion is a nice way of living. It's our ideal more than buying under impulsion. And I think that in the difficult in which we are living now, people are -- want to be more secure. They want to make sure that what they have will last and not disappear.

DOS SANTOS: You spent time managing some of Hermes's operations in key areas like, for instance, the Asia-Pacific region. How key are those export markets abroad?

MICHAUD: It's very important that we try to keep it balanced between the United States, France, Europe, Japan, and Asia-Pacific. But the growing in those markets is very strong. I was in charge of Asia-Pacific about four years ago.

We organized the same exhibitions in Singapore. And in three days, we had 22,000 visitors in the exhibition. So, there is a real appetite and a very -- willingness to learn and to appreciate craftsmanship.

Craftsmanship, quality, and creativity. It's the balance between those three elements which makes us unique. And I think France still has a lot of appeal of the joie de vivre and quality and dreams and maybe a romanticism as well.

(END VIDEOTAPE)

DOS SANTOS: It's time now for the answer -- for the question that you've been waiting for, it is tonight's Currency Conundrum. Estonia joined the euro back in 2011. The question tonight is, what was the name of its previous currency? Was it A, the kroon? B, the crown? Or C, the krone. I'll have the answer for you later on in the program.

Well, speaking of currencies, the dollar is currently up against the British pound, it's flat against the euro and also against the Japanese yen. We'll be back straight after this.

(COMMERCIAL BREAK)

DOS SANTOS: Welcome back. Well, these diagrams and documents on either side of me are patents. Now, patents are the legal protectors of ideas. Today, the European Patent Office received about 700 of these such applications.

At a time when the system is undergoing, of course, major reform these days, the idea is to try and encourage innovation. As Richard Quest now reports, the light bulb moment behind some of these ideas is only the beginning of quite a bit of hard work.

(BEGIN VIDEOTAPE)

TREVOR BAYLIS, INVENTOR: I'm sitting there, literally with my pipe, and I'm watching tele. And I suddenly have this idea.

MANDY HABERMAN, INVENTOR: We were at a friend's house for tea, and the toddler ran across this cream-colored shag pile carpet carrying a cup full of Ribena and left a trail of pink stains.

RICHARD QUEST, CNN INTERNATIONAL (voice-over): The year was 1990, and on opposite sides of London, two inventors were at work.

BAYLIS: You see a lot of radio in you, isn't it? There you go.

QUEST: Trevor Baylis designed the windup radio to help combat the AIDS epidemic in Africa, getting lifesaving information to hard-to-reach areas.

BAYLIS: I got hold of a hand brace into which I put a DC motor. And then I hitched that to the back of a cheap transistor radio. And when I turned the handle, I got the first bark of sound.

QUEST: While Baylis was putting the finishing touches to his prototype, Mandy Haberman had finalized her own design for a non-spill child's cup. She called it the Anywayup Cup.

HABERMAN: The valve was molded in. It was integral to the spout and it was downwardly domed.

BAYLIS: There's the spring there.

QUEST: After the design, the patent was the next logical step, and getting the right patent means getting the right advice. The patent attorney Ilya Kazi handles around 500 cases each year.

ILYA KAZI, PATENT ATTORNEY: So, this updated data is very good.

QUEST: Today's client has patented a product that measures female fertility. He already has two families of patents, and he has now updated the product sufficiently that he needs a third.

KAZI: Because we've got already clinically effective results, but this is going to give us what -- it's almost one step beyond the gold standard.

QUEST: There's a problem: a challenge to one of the patents.

KAZI: It's not really a serious threat. They've made up some arguments. But I think that's not going to fly.

QUEST (on camera): Do little companies stand a chance against the big boys?

KAZI: Yes, they do. I'm not going to say that a small company can fight an all-out war against a major company in litigation because they're just going to run out of resource. But in reality, a large company has a lot more to lose.

QUEST (voice-over): Mandy Haberman is proof of this.

HABERMAN: Eighteen months in and the first infringement occurred.

QUEST: Tommee Tippee, a giant in the baby product market, counter- sued, arguing her patent was invalid. So, Mandy took a huge gamble and went to court.

HABERMAN: The patent system, it's very scary, but the patent system does work, and thank goodness, we won. And they had to withdraw their product.

Tommee Tippee told CNN they wish Mandy continued success.

BAYLIS: Well, I was foolish enough to trust the people I was with.

QUEST: Trevor Baylis formed a company to make and distribute his radio. Baylis says the professionals with which he joined forces let him down.

BAYLIS: They brought their own team in, and I was worked out of the program. They were in Africa, I was here. I didn't know what they were doing, and I was left out of the equation.

QUEST: The company, now called Freeplay, says there was no unfair treatment. The company told us it paid Baylis royalties for the patent up to the year 2000. "Technology moved on, and the spring-based clockwork radio became outdated," Freeplay told us in a statement. So, they switched to a different technology, which the company says was not covered by Baylis's patent.

QUEST (on camera): Here you have two ideas, two products, and two very different outcomes.

BAYLIS: Well, I've still got a mortgage. I think the important thing is, you can't take it with you.

HABERMAN: The success of the Anywayup Cup has completely changed my life. It's made millions.

(END VIDEOTAPE)

DOS SANTOS: Well, next year, Europe is planning to launch its own unitary patent. The UK is also planning super-fast patents, this to encourage innovation. With almost 258,000 patents received just last year, Richard asked the president of the European Patent Office, Benoit Batistelli, how many actually made the final cut. Take a listen.

(BEGIN VIDEOTAPE)

BENOIT BATISTELLI, PRESIDENT, EUROPEAN PATENT OFFICE: Only 25 percent.

QUEST: Wow.

BATISTELLI: Because -- because we are very selective and very rigorous in the examination of an application. Because we think that a patent must be a high-quality patent, and it means legally secure. So, if you are given this title of property, you must be sure that it's worth something.

QUEST: You said something very interesting to me earlier. You said that the patent office, the EPO, represents society.

BATISTELLI: Yes. In the sense that once again we must come back to the basis. A patent is an exception to the principle of free trade and free industry, free competition. So, this exception must be justified by the technical progress that it represents. And our job is to limit this exception exactly at the content of the progress which is made.

QUEST: But you also consider it crucially important for the EPO to be involved in promoting innovation in Europe.

BATISTELLI: Yes, of course, because we -- I don't think it is useful to patent for the sake of patenting.

QUEST: People do, though, don't they?

BATISTELLI: No, I don't think so. I think you do that because you consider this an investment which is worthwhile. And I think patent facilitates innovation in both ways. First, it gives protection to your investment in research and development. If you are not sure that you'll be the only one to exploit your -- what you have found, you are not incited to invest.

And the second thing which is also very important is the fact that we publish the patent application. We call that technical information dissemination. And this is to help new inventors to start from this invention and to find other ones, to find it -- to improve it.

QUEST: So, of all the patents in many years that you've seen, which is the one you really like?

BATISTELLI: I'm thinking of an inventor called Roland Moreno. He was a Frenchman. And in the 80s, he invented the chips which is used in smart cards. So, from this invention, now everybody is using smart cards for inventing, for many purposes.

QUEST: Are the best patents simple? Are the best inventions simple?

BATISTELLI: I think their principles are simple. But I think that as always, the best ideas, it's most difficult to find the simple ones.

(END VIDEOTAPE)

DOS SANTOS: Ah, wise words of wisdom there from Benoit Batistelli, who is the head of the European Patent Office.

Still to come here tonight on QUEST MEANS BUSINESS, we'll talk about where the stock market is going next with two of the smartest minds in the business. Now, one of them has been right so far, at least.

(COMMERCIAL BREAK)

DOS SANTOS: Hello and welcome back, I'm Nina Dos Santos, these are the headlines on CNN this hour.

At least 51 people have been killed in Iraq after a series of car bombs exploded in the capital, Baghdad. More than 160 other people were injured in the attacks that targeted mostly Shia neighborhoods. The number of deadly attacks is increasing, sparking new fears of renewed sectarian violence across the country.

The deadline is growing ever closer for European Union ministers meeting in Brussels to make a decision on whether to allow arms to be sent to rebels in Syria. Britain and France want to ease the arms embargo that's due to lapse at the end of this very week. Austria is leading a group of at least five member states opposed to sending weapons to those rebels.

Germany's national rail provider, Deutsche Bahn, is planning to use drones to catch vandals who deface its trains. Graffiti costs this company about $10 million every single year. The drones, which hovered about 150 meters in the air, will be used to capture infrared pictures to gather evidence with those cameras.

In Britain, a 50-year-old man has been arrested in connection with the brutal killing of a soldier in London last week. He's being detained on suspicion of conspiracy to murder. It brings the total number of arrests as a result of the Woolwich attack to ten. Four people are still in custody, including two suspects who remain in hospital.

And finally, 13 people have gone on trial in Algiers, accused of kidnapping children. It's alleged that they sold an unknown number of children for adoption in France. The case arose four years ago after a young woman denied -- after a woman, excuse me, died in an illegal abortion clinic in Algiers in Algeria.

(MUSIC PLAYING)

(END VIDEO CLIP)

DOS SANTOS: Going back to business news, this year we've seen a rally pretty much across the board for U.S. stocks. But if we break things down to individual sectors, as you can see over the past three months, all sorts of sectors, including for instance, finance and also health care as well as retail and transportation here have been rising about the 10 percent mark.

And on the Dow -- and if we look at the stocks that have been moving, in particular, some of the big winners this year include, as you can see here, the computer maker Hewlett-Packard. Take a look at that one. It's up 69-70 percent since just the start of January.

The Walt Disney Company over here is also up by about half that amount, 31-32 percent, helped by some pretty strong earnings for that company in particular.

And Boeing has also added nearly 33 percent, as you can see here, despite the kind of troubles that it suffered with its latest Dreamliner jet.

And finally, the retailer Home Depot is up by more than 27 percent, just goes to show even if retail is difficult sector to crack, well, Home Depot's still appreciating by nearly a third so far this year.

Maggie Lake spoke to two well-known market watchers to find out what they think about the market's trend and where it's going. Jim Rogers is, of course, a long-time bear and the author of "Street Smarts."

And Jeremy Siegel is a professor at Wharton Business School, which (inaudible) espouses a completely different point of view. He's a noted bull. And he's actually tipped the Dow to climb to 18,000 sometime next year. Take a listen to what they had to say.

(BEGIN VIDEO CLIP)

MAGGIE LAKE, CNN CORRESPONDENT: Mr. Siegel, we're going to start with you. You've been very bullish about U.S. stocks. Do you think the rally can continue? And if so, what's going to drive it?

JEREMY SIEGEL, PROFESSOR OF FINANCE, UNIVERSITY OF PENNSYLVANIA: Yes. Most certainly this can continue and for several reasons.

First of all, I think earnings are going to be good this year -- not great, but good. But that's not going to be the primary driver of the bull market. The primary driver of the bull market is what we call expansion of multiples; in other words, the price-earnings ratio, which is a fundamental yardstick for judging values.

I think it is going to push higher. And the reason for that is that my historical research shows that when interest rates are as low as they are now, you generally have much higher valuations of stocks than you have today.

LAKE: When I hear low interest rate environment, I hear the Federal Reserve pumping money in.

Jim, what's your perspective and do you think the rally can continue?

And especially if it's Fed driven?

JIM ROGERS, AUTHOR: Well, Jeremy's been right so far. (Inaudible) right so far but, Jeremy, I would have to disagree. This is because of money printing. This is not because some intellectual exercise. This is the Federal Reserve and the central bank in Japan and the central bank in England and the central bank in Europe printing staggering amounts of money.

This is unprecedented. Never in world history has ever central bank, major central bank printed money at the same time and desperately tried to debase their currency. This is madness. Yes, yes ,yes; people are getting the money and are having a good time. If you gave me a trillion dollars, Jeremy, I'd show you a good time. But this is not good for the world.

LAKE: And, Jeremy, what happens if the Fed starts to take away the punch bowl?

SIEGEL: You know, it's my belief -- and I know this is not what the market thinks. The markets thinks this bull market is because of QE, quantitative easing. It's my feeling that it is driven by fundamentals. I mean, we have good earnings; we have dividend yields that are above interest rates. This is the first time this has happened in 60 or 70 years.

And there's $11 trillion that are sitting in bank accounts and money funds, earning a big fat zero. And those people are saying, hi, I want to get some return out of my money. And I agree. I mean, the Federal Reserve if -- there's no return in the fixed income. And I think that's what's going to drive them into the stock market.

ROGERS: But, Jeremy, this is all artificial. Suppose sanity resumes someday? Suppose people say we cannot have zero interest rates, we cannot have gigantic deficits, we cannot have gigantic debt? Suppose somebody says to Mr. Bernanke, you've got to stop this?

SIEGEL: Well, we are going to have an increase in interest rates. I absolutely agree with you. But there's still going to be very low by historical standards. I mean, inflation is very low; we have the aging in the populations. We have pension funds going into bonds. These interest rates are not going to rise to what we remember in the '70s and early '80s.

And in that sort of environment, stocks can certainly go much higher than they are right now.

ROGERS: Jeremy, when you say there's no inflation, that's because your butler does your shopping. The rest of us who go shopping, we know that prices are going up. Have you been to a restaurant recently? You're a professor. You probably go to restaurants all the time. Have you bought insurance? Have you bought health care? Have you bought anything recently? You know that prices are up.

LAKE: Let me jump in here. Do you have issue with the Federal Reserve policy? Or do you think that the U.S. economy is fundamentally unsound?

ROGERS: No, it's -- I'm talking about the Federal Reserve policy. Madness at the Federal Reserve where they're printing staggering amounts of money; they're putting huge amounts of debt on their balance sheet. They've more than quadrupled their own balance sheet in five or six years. This is unprecedented in world history.

Yes, money's going into stock markets. But I'm just very worried about how it's going to end and when it ends. And I know it's going to end badly, not just for us but for the world.

(END VIDEO CLIP)

DOS SANTOS: Excellent stuff. We'll hear more from Siegel and Rogers later on in this very show. They'll tell us where they think that investors can make money in the months to come. I'm sure you'll want to stay tuned for that.

(Inaudible) be back after the break with an interview of Estonia's president. You won't want to miss that, either. (Inaudible).

(MUSIC PLAYING)

(COMMERCIAL BREAK)

(MUSIC PLAYING)

(BEGIN VIDEO CLIP)

DOS SANTOS (voice-over): Time now for our answer to tonight's "Currency Conundrum" for you. Earlier in the show, I asked you what currency Estonia used before adopting the euro in 2011, and the answer is the kroon, as you can see there. It's A, though currently 51 million euros worth of Estonia kroons out there that haven't yet been exchanged so far.

So if you're in Estonia, take a look down the back of the sofa, because your time (inaudible) is running out.

Well, (inaudible) behind Skype was born in what was once a small corner of the Soviet Union, the Baltic state of Estonia. After gaining independence in country strength and I.T. in particular led this nation to be branded E-stonia. Get it? And now this country's also hoping to bring more computer firms inside its own borders.

This is the pet project of the president, Toomas Hendrik Ilves, since he was once the country's U.S. ambassador. He told me that it's currently work in progress, but he's optimistic that E-stonia is the future for this country.

(BEGIN VIDEO CLIP)

TOOMAS HENDRIK ILVES, PRESIDENT, ESTONIA: Unfortunately, within the European Union, there -- the degree of e-commerce is minuscule compare to, say, the United States or within large countries such as the U.K., where there are significant and where e-commerce is -- plays a significant role.

DOS SANTOS: Why would you say that is the case, though? What's the reason for that?

ILVES: Because the complicated rules on, say, VAT with 27 in a month, 28 E.U. members makes trans-border e-commerce difficult, time-consuming, expensive and that's why I argue that the digital market must be -- I mean, a single market must include the digital market.

Otherwise, we will not reap the benefits that we see from in the U.S. economy, which is doing where a significant portion of GDP comes from, the Internet -- from Internet commerce. So that's -- so if you ask about our strength, it's much more has to do with innovative products.

Skype was born in Estonia. We have -- we have probably more startup per capita than anyone else in Europe. But at least if you look at, say, whether it was last year or two years ago, the CCAP, which is a competition, the best startups -- the best 30 startups, well, seven of them were Estonian. Now that statistically is not possible.

It's not possible for a country this small to take up basically a quarter of all of the -- I mean, to be among the 30 best startups in Europe.

(CROSSTALK)

DOS SANTOS: You've often talked about the issue of cyber-security and how that is one of the big, big topics that doesn't get anywhere near as much coverage as it probably should deserve.

Do you think that people are investing enough in this yet, if not, what can they do?

ILVES: Today, virtually all our critical infrastructure -- they all are run over the Internet and so you can, in fact, shut anything down if you get into a system. And so on the one hand, far greater vulnerability with our infrastructure and, at the same time, I would say -- I mean, it's sort of the focus of attacks on getting into systems, not shutting down your website, but getting in and manipulating, so --

DOS SANTOS: How concerned is the president of an E.U. country are you when you see headlines like China is behind huge cyber-attacks in the United States? From a political point of view?

ILVES: Well, again, I mean, from our point of view, I know that Skype, which is -- Skype's research and development headquarters are in Estonia. That's where it came from and while the business and all, everything else has been bought by Microsoft, the research continues to be done in my country. And they are constantly, constantly being bombarded with attacks.

And of course, you never know where it's coming from, but when I talk to our people, they say, well, it's -- we assume that many countries are interested -- and companies as well, probably, are interested in acquiring our latest designs or new products.

So all of us are affected.

(END VIDEO CLIP)

DOS SANTOS: Well, the wet and cold conditions continue across parts of Western Europe, I'm afraid to say. Our meteorologist Jennifer Delgado is standing by with all the good news and largely the bad news, from what it sounds.

Jennifer at the International Weather Center, how's it looking?

JENNIFER DELGADO, AMS METEOROLOGIST: Ah, you know, it is definitely looking cool as well as rainy across parts of Western Europe. I guess the good news at least you're not dealing with the sweltering heat. You're getting a nice ease into the summer months.

Now as we're showing you on the radar, yes, we're dealing with rain out there, spreading into the very western part of France. You can see through western parts of England, that's where we going to see the shower activities as we go through the evening. And this is going to be the pattern as we go through Tuesday. So get used to this. This is going to be sticking around.

This cold air is just dipping all the way down towards the south. And along with it we are going to see some of that rain as well, spilling into areas as far like Spain as well as into the very northern part of Italy. As we move across the northeast, for areas like Estonia, Latvia, Lithuania, we are going to continue to see showers and thunderstorms as we go into the early part of the week.

Now of course the rain out there, moving in on the radar that you just saw coming into the northwestern part of Europe, well, of course, that's going to have an effect on the French Open. And for Tuesday, we're expecting showers out there, winds 10-20 kph with temperatures roughly 14- 11 degrees. And speaking of Paris, those temperatures are rather cool for this time of the year.

We'll show you the forecast as we go through the next couple days. We are still running about 5-8 degrees below average in Paris, but much worse in London, where Tuesday we're only expecting a high of 13 degrees. We start to get closer to normal as we move into the end of the week and for areas like Madrid, temperatures running just a couple degrees below average.

Showers and thunderstorms, once again in the forecast for parts of the U.S. You can see we still have a watch box in place for parts of the Upper Plains as we go through today as well as tomorrow. And really even through Thursday we do have a chance for more severe weather to pop up. You can see another box just riping up right now in parts of the Dakotas.

Now what we're going to see is the potential really for some strong winds; we can't rule out the chance of an isolated tornado because we do have a moderate risk across parts of Kansas as well as Nebraska and in addition to that some large hail. But the weather has been absolutely crazy across parts of the U.S. In fact, I'm going to prove it to you. Let's go to some video coming in to us.

(BEGIN VIDEO CLIP)

DELGADO (voice-over): Nina, this is snow video. And, no, I didn't pull the wrong video. This isn't from last year. This is after 35 mm of snowfall came down in Vermont yesterday. And you can see this is good news for the ski slopes. You want to know what that is, a little more than a foot of snow. This is one of the latest snowfalls, especially measurable snowfalls for Vermont on the record books.

Isn't that incredible?

DOS SANTOS (voice-over): Certainly is. I've got to say, there's only one word for that, isn't there, Jennifer, and the weather forecast you've given me here in Europe and it is brr.

(LAUGHTER)

(CROSSTALK)

DELGADO: And you know what? You thought it was cool there, but nothing like Vermont right now, right?

DOS SANTOS: Well, I certainly chose the right color, didn't I, to wear?

Jennifer Delgado, as always, thanks ever so much for joining us and bringing us up to date with all of that.

Well, coming up next here on QUEST MEANS BUSINESS, the young discontented people of the Middle East who toppled their leaders are still waiting for real change to occur. When we come back, politics and job prospects after the Arab Spring in this region.

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DOS SANTOS: Welcome back. (Inaudible) heard today key stock markets are currently near their highest levels so far this year -- or not just this year; in a few years, I should say.

London's FTSE 100, for example, is up nearly 13 percent so far in 2013. Let's return, though, to Maggie Lake's interview with Jeremy Siegel from the Wharton School of Business as well as the veteran increase and author Jim Rogers.

(BEGIN VIDEO CLIP)

LAKE: There is a big debate on between growth stimulus and austerity. Which is the best policy near term to right some of these economies? Where do you come down on that?

ROGERS: Well, in Japan, the government said we will print unlimited amounts of money, unlimited. That's their word. And the Japanese currency has collapsed nearly 30 percent --

(CROSSTALK)

ROGERS: Yes, it's starting to grow now, but at the expense of your currency collapsing 30 percent in six months? This is going to cause serious dislocations all over the world; the Koreans are already going nuts. The Chinese, the Germans, everybody's saying, wait, what do we do next?

LAKE: And you have to take into consideration the citizens who live in these countries, not just the investors who are on the front of this.

Jeremy, Bernanke, the U.S. leading the stimulus charge, but Japan now on board; Europe taking a different tack.

What do you think is the right path?

SIEGEL: Well, first of all, let me say that even with the depreciation of the yen, the yen has been the strongest currency since World War II. That shows you how much it has appreciated. And they have had deflation over the last 5-10 years. So I think this is worth a shot for the Japanese.

I think their long-term problems are structural; I don't think monetary policy can solve a lot of long-term problems. But I think as a short term, this could be a stimulus and might change some of their policies going forward.

It's our long-term deficit which is the big problem. The entitlements going forward in 2020, '30, '40, when all the baby boomers reach retirement age. Right now, I don't think there's a deficit problem in the U.S. that needs any radical fixing.

ROGERS: And I have exactly the opposite -- America's the largest debtor nation in the history of the world, Jeremy, in world history no one has ever been this deeply in debt. And the debts are going through the roof. This is not going to end in a good time. This is going to be a disaster, not for our kids, for us, for you and me.

LAKE: Last question to both of you, given that outlook, where should investors put their money globally? What's the most attractive place right now?

ROGERS: Well, I'm looking for investment, believe it or not, in Russia. The Russian stock market, the Russian bond market, the Russian ruble because everything else is up. And it's a disaster. Everybody hates Russia. I've hated Russia for 46 years. I was (inaudible) Russian (inaudible) for 46 years until recently.

(CROSSTALK)

LAKE: (Inaudible) to change, always the contrary.

Jeremy, last one to you: globally, what do you like?

SIEGEL: I think global stocks are cheap, too, even Europe, which is still a basket case, being 11-12 times earnings, emerging markets 15 times earnings. History has shown that those are long-term buys. And by the way, the dividend yield in stocks, they pay more dividends outside the United States, the firms, and even emerging markets than we do in the U.S.

So there are some very, very good dividend plays abroad. And I think those are going to continue to rise.

LAKE: Professor Jeremy Siegel, Jim Rogers, thank you both so much for such a great conversation.

(END VIDEO CLIP)

DOS SANTOS: There you go; it's the bulls versus the bears all over again.

The International Monetary Fund, though, is calling for economic reform, especially across the Middle East and North Africa. The IMF's director for this region around the world, Massoud Ahmed, says that governments are trying to spend their way towards economic recovery and have been doing so aggressively since the Arab Spring of 2011.

Well, he says that the trend must change because increasing government debt is only keeping investors away. Remember that this is a region used to attract billions of dollars' worth of foreign direct investment; no longer, it seems.

Well, the IMF says that Egypt and Jordan in particular are spending too much money on food and energy subsidies and in doing so it says that they're pushing their budget deficits higher and higher and they're being forced to dip into their foreign cash reserves. Egypt used to have pretty big foreign cash reserves; no longer, again, it seems, since the Arab Spring. And it's got a big problem with that.

Also unemployment is still a problem and has been since the political revolt, particularly among young people. And that's leaving many people unhappy and threatening more social unrest from here on.

And going back to Egypt, it has almost $5 billion worth of loans on the table from the IMF, but the offer hinges on this country actually adopting austerity measures, which the president, Mohammed Morsi, has so far failed to do.

Well, the U.S. Secretary of State John Kerry has also weighed into this debate, urging Mr. Morsi to adopt economic reforms at a fast pace or risk missing out on further aid and investment from Washington.

So let's take a closer look at some of the key countries in this region, starting out with, for instance, Egypt.

(BEGIN VIDEO CLIP)

REZA SAYAH, CNN CORRESPONDENT: I'm Reza Sayah in Cairo. Egypt's 2011 revolution came with the promise of more jobs for millions of young, unemployed Egyptians. A little more than two years later, not only has post-revolution Egypt not delivered on the promise, the numbers show things are getting worse.

The unemployment rate here right now is roughly 13 percent, an all- time high, dating back to 1993, when the government started keeping track. Compare that to the unemployment rate back in 2010, the year before the revolution, when 9 percent of Egypt's workforce was unemployed.

And here's maybe the most staggering number, 77 percent of Egypt's unemployed are between the ages of 15 and 29, and most are educated. Eighty percent have high school degrees; a third have college degrees, but they still can't find work.

(END VIDEO CLIP)

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ARWA DAMON, CNN CORRESPONDENT: I'm Arwa Damon in Benghazi, Libya. Last year, the government here put unemployment countrywide at around 26 percent, though unofficial estimates are higher. It's especially a problem when it comes to the country's youth. It is critical that the Libyan government provide the many armed men from the days of the revolution with jobs.

That will help with stability. But creating those job opportunities requires a certain measure of stability to begin with, especially when it comes to foreign investment. And many companies are now reluctant to come and invest in Libya, especially here in Benghazi, given the ongoing instability.

(END VIDEO CLIP)

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MOHAMMED JAMJOOM, CNN CORRESPONDENT: I'm Mohammed Jamjoom in Beirut. Concern about the economy here in Lebanon is really growing. And the primary reason for that is the brutal civil war in neighboring Syria.

The spillover of violence into Lebanon has meant that the economy here has really suffered a sharp downturn since the beginning of the conflict in Syria over two years ago. It's not just trade that's been affected; it's also tourism. So many countries in the region have warned their citizens against travel to Lebanon.

So tourism here has really slowed to a trickle of people. Beyond that, though, the primary reason that the economy here isn't developing is because of a youth unemployment rate which is currently estimated at 19 percent. The economy just isn't growing fast enough to create the number of jobs needed.

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(COMMERCIAL BREAK)

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DOS SANTOS: Hello and welcome back. Time now for tonight's "Tweets from the Top," the European Commission President Jose Manuel Barroso has been tweeting today, "We back the current momentum for a peace conference on Syria. A political settlement is the best possible solution," he's been saying.

Well, Barroso actually discussed this matter with U.N. officials this morning. And speaking of the European Commission, Richard Branson here has been tweeting, "It's a great pity that the European Commission is planning to impose heavy duties on solar panel imports from China." We told you about that brewing debate earlier on in the show.

And then moving along towards the emerging markets, the Kenyan president, Uhuru Kenyatta uploaded this particular picture along with his tweet, with the Brazilian president, Dilma Rousseff there.

He says he's at the A.U. headquarters -- that's African Union headquarters building in Addis Ababa, Ethiopia. The Brazilian president announced her country's going to be canceling $900 million worth of debt in 12 African countries. The gesture is part of Brazil's strategy to improve its ties with Africa.

And on that note, it's time to say goodbye. Thanks for watching QUEST MEANS BUSINESS. I'm Nina dos Santos in London. I'll be back in a second's time with a roundup of your news headlines.

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DOS SANTOS (voice-over): At least 51 people have been killed in Iraq after a series of car bombs exploded in the capital, Baghdad. More than 160 other people were injured in the attack that targeted a mostly Shia neighborhood.

The deadline is growing ever closer for European Union ministers meeting in Brussels to make a decision on whether to allow arms to be sent to rebels in Syria. Britain and France want to ease the arms embargo that's due to lapse at the end of this very week.

Germany's national rail provider Deutsche Bahn is planning to use drones to catch vandals who defaced its trains. The graffiti costs about $11 million every single year.

(END VIDEO CLIP)

DOS SANTOS: That's a look at the top stories we're watching on CNN. Here's "AMANPOUR."

END