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Fiat Chrysler Merger Deal; U.S. Stock Markets; NYC's New Mayor; Hologram Technology

Aired January 2, 2014 - 16:00:00   ET


RICHARD QUEST, CNN HOST: The first trading day of the new year, the Salvation Army, ringing the closing bell. The market itself out with a bang but in with a whimper. Hit the gavel, it is Thursday, January the 2nd. Stocks fell on the first day of trade in the year. And it was driven by passion and profit. Fiat's shares rose sharply.

Also snapping on the heels of Snapchat, hackers make their point.

And from slot machine to squat machine, it pays to get physical on Moscow's subway.


QUEST: I'm Richard Quest. I mean business.

Good evening. The new year had barely begun when news came that one of America's biggest automakers, one of the big three, would soon be completely owned by the Italian firm, Fiat, which says it has reached an agreement to gain full control of Chrysler.

Shares in the Italian carmaker soared in today's trade at more than 16 percent in Milan. The deal is a major victory for Fiat's management, ending a bitter dispute with the United Auto Workers union. It agreed to pay more than $3.6 billion to buy the 41 percent stake it doesn't already own. And it also means a proposed IPO of Chrysler stock has been called off.

It was a big tipping point: when would Chrysler succumb to Fiat? Or would the battle with the United Auto Workers continue? Well, for both companies, Fiat and Chrysler, what happens now is a major overhaul.

The once mighty Fiat is struggling in the European market. There are slumping sales and falling profits, and that's made Fiat increasingly dependent on Chrysler's earnings to keep it in the black.

Fiat will also relaunch its Alfa Romeo brand and it will return it to the United States in the spring. It's a move that's been repeatedly delayed but it is seen as a way of reestablishing and putting together, reviving, if you like, Fiat's fortunes in America.

And then finally, you've got Europe; you've got the United States. But put into a global context, and you really do have some very daunting challenges. The merged group will become the world's seventh largest group, going against General Motors, Toyota and Volkswagen.

Let's talk to Michael Robinet, managing director of IHS Automotive Consulting, who joins me from Detroit.

Michael, it's not a surprise that Fiat finally got control of Chrysler. And there's a lot of sense that it makes. But it's an achievement for Sergio Marchionne nonetheless.

MICHAEL ROBINET, MANAGING DIRECTOR, IHS AUTOMOTIVE CONSULTING: Oh, it's not a surprise whatsoever. It's been a fait accompli for some time. It's just -- it was one of the things where it's just a matter of when, not if.

And it is an achievement. Now Sergio and the rest of the management team can focus on the business as they continue to take it global, especially Indonesia.

QUEST: Right. And you heard the challenges that I've outlined. I mean, does it make sense, Fiat and Chrysler, now as one, but where is their growth going to be?

ROBINET: Well, their growth is in their current markets. But there's no doubt that Asia definitely has a target. You've got manufacturers like General Motors and Volkswagen and Toyota that you mentioned earlier. They've done extremely well in Asia, especially emerging Asia. China, India and the Asian countries, those are the countries that Fiat and Chrysler have to continue to penetrate.

QUEST: A lot of noise has been made here in the domestic United States about Fiat, Chrysler, one of the big three now being foreign-owned.

But of course it was foreign owned once before by Daimler.

ROBINET: It was foreign-owned once before and actually, frankly, it's been foreign-controlled for a couple of years now. So this is really more icing on the cake and allows the Fiat-Chrysler management to really move forward and not from an operational perspective, move the company forward, but definitely certainly from a financial perspective.

QUEST: Now Fiat has -- let's look at the Fiat side of this equation. Fiat has serious problems in Europe, a vast overcapacity in automotive production. We know Ford has already taken huge losses there; General Motors has cut back.

Can Fiat continue at this sort of level?

ROBINET: Well, and they've got plans to continue to rationalize capacity, whether it be in Italy or some of their other locations.

Fiat's not the only one. You mentioned Ford, (INAUDIBLE) with General Motors, PSA and Renault are all -- they're all in the same basket. It's just a premium Germans actually that have managed to do quite well in the European market.

QUEST: So what needs to happen?

ROBINET: Well, we certainly -- bringing the company global. If you look at Fiat, where they were before, Fiat was a southern European and South American company, at least from an automotive production perspective. They had no exposure to Asia; they had no exposure to North America.

Now with Chrysler, they have exposure in North America and a brand that they can take global in the form of Jeep. So they've got more tools in their toolbox to broaden their horizon of Fiat and Chrysler and expand the scale. And that's going to be critical.

QUEST: Final -- I need you to pull the strands together for me, Martin (sic). You have Chrysler going into bankruptcy, 2009. You then have Fiat, pulling out 60-odd percent 2011.

Would you say Fiat has played this one well?

ROBINET: Oh, I think there's no doubt that Fiat, you know, for -- I wouldn't say very little money, but certainly for -- given the amount of investment and the exposure that Chrysler has in North America market and the brand power, it's a tremendous value that they have now.

QUEST: Martin (sic), good to talk to you. Thank you for joining us -- sorry, Michael -- I do beg your pardon. Michael, thank you for joining us from Detroit. I much appreciate it today.

Now the trading day has finished and Zain Asher's at the New York Stock Exchange.

Oh, dear. We seem -- (INAUDIBLE).



QUEST: What went wrong today? Give us a number. Down 135.

As I look at the graph, it was never up.

ASHER: I know, I know. I checked with it (INAUDIBLE) I think today was a surprise, even for traders, Richard. What they were expecting was that all that money we've been seeing in cash on the sidelines, they expect it to go to work, to pour into equity on the first day back.

But instead a couple of things happened.

First of all, analysts do not expect we're going to see the same bull run that we got last year. So immediately traders first day back, what do they do? They lock in some of those gains.

Second of all, you know, we saw money pour into other areas, like gold, for example. Gold did take a beating last year. It fell by the most in 30 years. So it could -- gold could actually be a buying opportunity for traders.

But in terms of the year ahead, traders say 2014 will not be for the faint of heart. Expect to see some volatility, possibly even expect a market correction. And it's long overdue. They do expect a gain of about 5-10 percent this year, but bottom line is, proceed with caution, Richard.

QUEST: Right. Well, on that cheerful note, Happy New Year to you, too.

ASHER: Happy New Year to --

QUEST: Thank you very much. What do you do for an encore? Many thanks indeed.

Zain joining us now. Most European markets finished the day weaker. Shares in France and Germany led the region lower.

The CAC 40 in Paris was off 1.6, quite a sharp loss there. It was a similar situation in Frankfurt in the DAX, London's FTSE, end of the day, nearly half a percent weaker.

So you're getting an idea of the mood. And if you look at the Xetra DAX, it's 9,400. It's just holding that level.

When we come back after the break, a new mayor in the city of New York. And I promise you, he's already got one of his first challenges on his doorstep. This is QUEST MEANS BUSINESS in New York.




QUEST: Now you're looking at live pictures in New York. That, of course, is Columbus Circle, just outside the TimeWarner Center here. That's out towards Central Park as the city gets ready and is waiting for a snowstorm.

Now the job of making sure that everything keeps moving and that the city manages to stay open has fallen to a new mayor; 24 hours into his term and Mayor Bill de Blasio is now taking on a political storm and he's also got an oncoming winter storm because the number one concern of course is not only how to keep the city moving in these crises, but for de Blasio, keeping his election promise: tackling the rich-poor divide that has landed New York with the poverty rate of more than 20 percent.


BILL DE BLASIO, MAYOR OF NEW YORK: We are called to put an end to economic and social inequalities that threaten to unravel the city we love.


DE BLASIO: And so today, we commit to a new progressive direction in New York. And that same progressive impulse has written our city's history. It's in our DNA.


QUEST: That change, of course, is going to be huge. And the question will be whether a liberal agenda like de Blasio's is workable in a city like New York and what part of his manifesto will succeed.

The mayor says cities around the globe are paying attention to what he's about to do here.


DE BLASIO: To tackle a challenge this daunting, we need a dramatic new approach: rebuilding our communities from the bottom up, from the neighborhoods up. And just like before, the world will watch us as we succeed.


QUEST: The world will watch as New York tries, one might say. De Blasio will be taking on issues that affect many great cities. He wants to raise taxes on the rich. He says he will.

In London, of course, the wealth gap is a major issue. But Mayor Boris Johnson wrote earlier this year that the super-rich deserve thanks because their spending benefits the economy and they do not deserve to be vilified.

London believes, of course, you enhance the rich and everything else will rise.

Also on de Blasio's agenda, affordable housing. Paris is struggling with that. The city's deputy major recently said he's concerned Paris could turn into a Venice-style city, devoid of inhabitants because of tourism, legal rentals to tourists often high above market rates are pushing out local people.

And then of course environment issues are a priority for Bill de Blasio. Beijing will no doubt be watching to see how the new mayor takes this on and how the city responds. China's capital is struggling with crippling smog. It's long been a symbol of environmental cost associated with economic growth.

So whether it's Beijing or Paris or London, cities around the world are watching New York to see how this experiment gets underway.

Hank Sheinkopf is president of the Sheinkopf Communications and he's been a political media consultant, joins me now.

Good to see you.


QUEST: You've got to admit, it's an experiment and everybody's watching to see what happens.

SHEINKOPF: Everybody watches whatever happens in New York and something that happens here is immediately international news.

The question is, what can a mayor really do about the income gap? It's a very serious issue. Under Mike Bloomberg, we had 40,000 buildings constructed in New York City, most of them with -- by union members. And most of those union members today, by the way, are black, Latin and women. So you can do things about finding jobs that are real, that provide real incomes for people. But the affordable housing question is really a very serious one.

QUEST: But it is rare perhaps that one sees such a dramatic holdfast (ph) in political direction that we saw yesterday. I mean, the mayor, the former mayor, Bloomberg, sat there stony-faced, according to -- not smiling, according to "The New York Times."

But New York is now going in a different direction.

SHEINKOPF: Well, New York is going in a different direction, according to what the mayor is saying now. Whether New York gets that way is quite another issue. And New York City is a ward of the state. The state controls a lot of what goes on here.

And this is a very unusual set of circumstances. The Parisians love Paris; but the French protect it. The government itself.

In New York, New York is governed largely by laws enacted by the state. And so getting a tax passed that will provide pre-K for all children, pre- kindergarten for all children in New York City is not something you can do so quickly.

QUEST: Right. But he's entitled to get that, isn't he, because he stood on that. He's been elected. Albany could not turn 'round -- they may not like it, but he can honestly say as few politicians can, I said I would do it and that's what I was elected to do.

SHEINKOPF: This is a man who will try to do everything he said he would do to try to make life better for those who don't have and to try to make those who have pay for it, there is no question about that.

QUEST: But that -- even in the United States, other cities, whether it be Los Angeles or Chicago -- let's not worry about Detroit; they've got even greater problems -- Miami, they are all looking to see has this experiment got legs?

SHEINKOPF: It's a very radical approach and if it works in New York, they'll try it everyplace else. Why? Because all those cities need money and all those cities have income gaps.

QUEST: And what's the cornerstone of this policy? Because offering preschool and post-school care and offering all these (INAUDIBLE) better environment, everybody says they want to do it.

What, to you, is the cornerstone of what he's doing?

SHEINKOPF: The cornerstone of what he's doing is to get the jobs that are unfilled filled. The New York City we have -- we're rapidly becoming a very significant high-tech community, thanks to Mike Bloomberg; 40 percent of those high-tech jobs go unfilled because we don't have people who are educated sufficiently to fill those jobs at every level.

If we can do some of that, then he will have accomplished something extraordinary.

QUEST: But I'm old enough to remember the Dinkins administration.


QUEST: Now here you had a mayor who arrived with a -- I get it; a different type of agenda -- a different agenda.


QUEST: And failed -- I mean, that's just maybe putting it too strongly. But he --

SHEINKOPF: He had some successes, safe streets, safe cities, Dinkins started it, rebuilding Times Square was a Dinkins initiative. So he can take that away from -- the difference here is that Mike Bloomberg leaves Bill de Blasio a city that is in much better shape than it was 12 years ago when Mike Bloomberg took office. Of that there is no question.

QUEST: Finally, you've got to ask, he's got his biggest challenge immediately, the snow. If the city grinds to a halt tonight.

SHEINKOPF: You can have great ideas but if you can't manage the things that New Yorkers expect, the ideas don't matter. And that challenge will be proven today. Can he manage the snowstorm? Can he keep crime down? Can he make the streets free of potholes? Can he clean up the garbage overall? Those are the things that New Yorkers want to see and they'll worry about the rest of it all later.

QUEST: Hank, good to see you.

SHEINKOPF: Thank you for having me in.

QUEST: Thank you for joining us. Many thanks.

Now Bill de Blasio's first problem, this snowstorm, moving towards the city.

Jenny Harrison's at the World Weather Center.

Jenny, we'll get a full bulletin from you later. But let's have an update on what we can expect in New York.

JENNY HARRISON, CNN METEOROLOGIST: Well, your first question there, Richard, I can answer hopefully, because I've actually got 1,600 garbage trucks already fitted in New York City with snowplows on the front. So that should be a good start for the snow that is expected.

This is where it is coming from. You can see that massive dark cloud there. That is an area of low pressure sitting off the coast. When we talk about a nor'easter, I'm going to explain to you exactly what a nor'easter is.

But already you can see the snow's been coming down, 18 cms for Detroit in Michigan, Chicago, Illinois, 12 cms down there in Indianapolis.

Now the temperatures as well, it's a lot about the cold air. This is why we have this nor'easter setup. Look at these temperatures. This is Thursday morning, -39 degrees Celsius up there in Thunder Bay, Ontario, the average is -18. Winnipeg, -34, the average is -21. So it is bitterly cold.

This is the setup or the anatomy, if you like, of a nor'easter. So we have high pressure, which is very dominant across land areas, in this case the U.S. and Canada, and then an area of low pressure. And these develop usually in the Gulf of Mexico. And then they follow the Gulf Stream, so very, very mild, moist air is being picked up, water-laden clouds up there. And it's got to come down somewhere.

Because of its bitterly cold air, which is on land, this is what produces the snow and we call it the nor'easter. But the winds are also bitterly each other, coming in from the northeast and that is why it gets its name nor'easter.

So the two combined is very, very moisture-laden warm air, the bitterly cold air coming down from the Arctic. And we have this very heavy amount of snow along with these strong winds coming in from the northeast.

And so because of that, we see some bitter conditions as well. There's forecasts for Long Island, Cape Cod. But it does move out of the picture pretty quickly. So the worst time is going to be Thursday night into the early hours of Friday morning, certainly for New York City.

And then all of these warnings and watches, the red areas are those under blizzard advisories.

In fact, Boston expecting a huge amount of snow. Two days ago they made the decision they were going to cancel all schools on Friday. We should be seeing 22 cms in Boston, 29 in Portland in Maine, 46 cms in Halifax, Nova Scotia. The temperatures are going to stay very, very much on the low side.

Talking about flights, well, have a look at this. This is Flight Explorer. There would normally be many more planes across this region of the Northeast, the blue, by the way, is the moisture, the rain and the snow. You can see there the Great Lakes to give you some idea as to where we're looking at.

Of course there are still plenty of planes up there but over 1,700 have been canceled and unlikely to perhaps see even more cancellations as we head into Friday. The storm moves that quickly and then finally we have a breather behind. But it's going to be a very unpleasant and very dangerous few hours ahead, Richard.

QUEST: And I shall be out covering it after QUEST MEANS BUSINESS tonight. I shall be popping on some snowshoes and -- well, you'll see in the hours ahead.

HARRISON: I will look forward to that.

QUEST: There will be no building of snowmen, not in this bitter cold.

HARRISON: Oh, see, that's what I wanted. I've already asked Fred Pleitgen. He's on the case for the snowman. I want to see a good snowman by tomorrow from all of you out there.

QUEST: Jenny Harrison at the World Weather Center, you'll have Europe's weather for us later in the program.

Coming up, the latest technology , no pop star or fashion house can be without, we find out more about cutting edge hologram machines that seemingly bring the dead back to life.




QUEST: Now it has famously brought the American rapper, Tupac, and screen legend Richard Burton back to life. It's in hologram form and now the Musion EyeLiner 3D projector is being used in fashion, pop videos and advertising around the world. As we take our look at "Make, Create, Innovate," Nick Glass found out more.



NICK GLASS, CNN CORRESPONDENT: She looks absolutely real, but I know she isn't. And she's a hologram. I'm here to explore where this technology's going. Who else can they resurrect? What else can they create in 3D?

UWE MAASS, INVENTOR, MUSION EYELINER: My name is Uwe Maass and I'm the inventor of the Musion EyeLiner (INAUDIBLE) foil-based system.

GLASS (voice-over): Uwe Maass is a German-born inventor living in Dubai. He made his first hologram projector in 1992.

MAASS: I'm an electronic engineer, but I was always fascinated of optics. I built the first 3-dimensional polarized laser system a long time ago.

GLASS (voice-over): Maass' invention is a twist on a Victorian theatrical trick called Pepper's ghost. It involves an actor below the stage with lighting being reflected upward by mirrors to a sheet of glass, giving the appearance of a ghostly apparition on stage.

In Victorian times, they used glass. With the EyeLiner, it's a special foil.

MAASS: Pepper's ghost system is a relatively simple system but not big enough for a proper stage. So I was just thinking, what can we use to enlarge the Pepper's ghost system? And the result was a special polymer foil.

GLASS (voice-over): An image is projected from the ceiling to a screen on the ground before the stage. This is bounced up against the foil, which is crucially at a 45-degree angle. The image appears a further 45 degrees beyond the foil, and in the right lighting, looks as real as can be.

MAASS: If somebody sees Musion for the first time, it has the same impact than in the past when people saw for the first time a cinematic movie.


GLASS (voice-over): Maass founded a company, Musion, to market his invention. So could they make me into a hologram?


GLASS (voice-over): Even I can now become a hologram.

I am a hologram. (INAUDIBLE).

I'm a hologram.

Are you sure about that?

Yes, you silly old real person.


GLASS (voice-over): The EyeLiner has been used particularly creatively by the music industry, by stars like and Madonna, who appear dancing with the animated pop group, Gorillaz, at the Grammys in 2006.

Most famously, it was used to bring American rapper Tupac Shakur back to life at the Coachella Festival in 2012.

Maass still remembers that moment when he realized his invention was rather more than just smoke and mirrors.

MAASS: I filed in a patent application using foil for a (INAUDIBLE) system. And two weeks later I got phone calls, what they wanted to buy the patent. And I didn't want to sell it and I didn't sell it. So here we are.

GLASS: So simple to make and yet so effective. A new poised to be added to the entertainment industries to play with.

Couldn't have put it better myself.


QUEST: Absolutely riveting, fascinating story from Nick Glass as part of "Make, Create, Innovate."

When we come back, let's go onto another side of technology, it's the latest social media craze to fall afoul of hackers, nefarious deeds indeed. The photo sharing app Snapchat is in the doghouse after (INAUDIBLE) millions of users' personal details (INAUDIBLE).




QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. This is CNN and, on this network, the news always comes first.


QUEST (voice-over): At least four people are dead and 70 more wounded after a powerful car bomb exploded in Lebanon. It happened in a southern Beirut neighborhood that's said to be a Hezbollah stronghold. Only days ago, a car bomb killed a Lebanese politician who was an outspoken critic of Hezbollah.

Rebels in South Sudan are still battling government troops, even as delegations from both sides were arriving in Ethiopia for direct talks on ending more than two weeks of hostilities. A South Sudanese army spokesman says troops are trying to halt rebel forces from advancing on the capital, Juba. The peace talks are expected to begin on Friday in Addis Ababa.

The U.S. Secretary of State John Kerry says reaching a Middle East peace deal is not mission impossible. He's arrived in Israel, held in meetings with the prime minister, Benjamin Netanyahu. Next he heads for the West Bank for talks with the Palestinian Authority president, Mahmoud Abbas.

Doctors say the former Israeli prime minister, Ariel Sharon, is experiencing organ failure. The hospital spokesman says the 85-year old continues to be listed in critical condition. Mr. Sharon suffered a major stroke in 2006 and has been in a coma since then.

Fifty-two passengers who were stranded on the research ship in the Antarctic are now safely on board in Australian ice breaker. A Chinese helicopter had to airlift them from the ship which has been stuck in ice for ten days. The passengers are expected to arrive in Australia in around two weeks.

Hackers have posted the personal details of 4.6 million Snapchat users (RINGS BELL), forcing the app to go temporarily offline. They broke through security measures to highlight how vulnerable the social media is to cyber attacks. Snapchat has grown in popularity. It has a - well, you know this - it has a novel approach to picture and video sharing - everything uploaded completely disappears in up to ten seconds. Now, on the Snapchat - on the app - user names and phone numbers were leaked online. It triggered a major headache because of course the U.S.-backed firm said the hackers stopped short of posting four mobile numbers, blurring two digits to make sure they could not be exploited. In other words, they're gone.

In a statement, the anonymous group said their motivation was to change Snapchat's app to make the exploitation easier. But of course what actually happened was something quite different. They admitted recent changes had made it easier to strike. So, let's pull all this together - how serious is this? The security meltdown is the latest attempt by so- called white hat hackers who target websites to show their weakness. And then disappear.

Just last week white hat group Gibson Security revealed a flaw in the system. Let's talk about this with Shelly Palmer. What are you doing, Mr. Palmer?

SHELLY PALMER, AUTHOR, "DIGITAL WISDOM": Taking a Snapchat of you.

QUEST: Is it gone already?

PALMER: It's gone, of course.


QUEST: So look. As I understand this, this group Gibson Security warned Snapchat that their - that it's unsafe or that there is a loophole, an exploited loophole -


QUEST: Snapchat makes some changes, but not enough, and now this next group (steal) the numbers - is that the gist of it?

PALMER: Welcome to the information age. There's no version of the world where this is not going to happen all of the time, and at a certain point it's not going to be news anymore.

QUEST: Who's at fault here?

PALMER: Everyone's at fault.

QUEST: Ah, come on.

PALMER: No, it's very simple - Snapchat for being arrogant, Gibson Security for thinking - for being arrogant, everybody saying there's security flaws all over the place. Look, what we have in our world right now are new villages with new kinds of gates and walls around them and new cities with new kinds of fences and moats, and people are breaking through them -

QUEST: Right.

PALMER: -- because they can.

QUEST: Right, but when somebody like Gibson does tell you that there is a hole in your net - in your fence, you do expect somebody to do something about it.

PALMER: And I believe that they did what they thought was the best they could to solve that issue, and truthfully, everybody should take - this is a teaching moment. It really is. For everyone who goes online, for everyone who puts their servers in a cloud, for everybody who decides that I'm not going to have server racks or a server-farm on my premises, but I'm going to move my stuff to a municipal-style environment where now we have electrical grids, we don't have like electrical generators on our house except for emergencies, so we're going to have computing grids. These are vulnerable installations and you can't ever be as secure as some of these larger installations can be. And even they are fighting a fight everyday that's a real arms race.

QUEST: So, are you - do you - I'm choosing my words carefully here -


QUEST: -- because hackers of course are in many cases are committing illegal act.


QUEST: And therefore it's not a laudable goal to commit an illegal act. But, do you laud the hackers in this case because they basically pointed something out without doing any damage?

PALMER: This reminds me of when I was a kid - the guy who sold the printer that printed your checks - that made the check unforgeable - would come in with a forged check to your business and say, `Look, I've forged a check to your account. Anyone could do this but if you buy my special thing-a-ma- jiggy that makes the check unhackable' -

QUEST: Right, right.

PALMER: -- `you know, then you're going to be safe.' So, there is a white hat version of this, Richard, there really is and it's - whether it's laudable or not, it's a way to get new business. It's a great biz-dev methodology, but in practice, it shows that we are in a flawed world and it's going to stay that way.

QUEST: So, Alicia Keys.


QUEST: Now, we mustn't - we mustn't mock the afflicted - Blackberry here - - but she was the creative director of Blackberry for all - for less than a year.

PALMER: Right. You want to talk Blackberry - is that (inaudible)?

QUEST: I mean, no, I mean, now apparently Blackberry says she's no longer the creative director.

PALMER: Yes. Well, let's just say R.I.P. Blackberry. I know you use one, I know you love it - what do you love about it? Like you have to just - tell the world, Richard, what is it you love about your Blackberry? Come on, now, you can tell us, there's only a few million people watching. Come on.

QUEST: The reliability.

PALMER: Oh, what's reliable about it?

QUEST: The reliability as an e-mail client -


QUEST: There is none better.

PALMER: Wow. Is that true? Do you really think that's true?

QUEST: When I travel the world - when I travel the world, I switch this thing on --

PALMER: -- and it works.

QUEST: -- and it - it just works.

PALMER: So, all those people with iPhones or Android devices, their e-mail doesn't work?

QUEST: No, no - come on -

PALMER: Stop it. What is it about the Blackberry that you think actually matters? Blackberry, stick a fork in it, they are done. There's nothing they can do to come back. The problem is that, yes, it's got flawless e- mail and texting, but so does every other device, and the other devices, like this little Samsung Gallaxy S4, also has a pretty nice size screen and allows me -

QUEST: We're not going to agree.

PALMER: -- emotionally satisfying web browsing.

QUEST: Look -

PALMER: Can you browse the web on your Blackberry in an emotionally- satisfying way? Are you satisfied with it, Richard? You can tell us.

QUEST: Shelly, have a happy new year.

PALMER: Happy New Year to you too. Look, you know --

QUEST: Look, you only have one device. I carry two devices.


PALMER: I know, which makes you a man of many devices.

QUEST: But you need two devices because how can you refer to an e-mail when you're on the phone?

PALMER: Well, that's very simple, you just simply call up the e-mail client that multi-tasks. Richard, it's the 21st century - it's 2014. You know what? Meet me at CES next week.


PALMER: Meet me at CES, I will show you the new gear.

QUEST: It's barely the first week of the year and my blood pressure's already up.

PALMER: I hear you.

QUEST: Thank you.

PALMER: All right.


QUEST: Shelly Palmer. Latvia's great currency swap. (Inaudible) - look what he's done to me. Latvia's got a new currency. We'll tell you about it after the break.



QUEST: It's a new year and with it comes new opportunities and new challenges. By all accounts 2014 looks to be a year of growth although it will be slow growth. I spoke to Bob Parker, the senior advisor of Credit Suisse and I asked him how he saw the road ahead.


BOB PARKER, SENIOR ADVISOR, CREDIT SUISSE: Well, when you say slow growth, Richard, I'd actually qualify that in a number of ways. I think the first qualification would be, don't be surprised as we go into the second quarter and the third quarter of 2014, the U.S. growth surprises to the upside. And we could easily have, you know, two quarters of annualized growth, you know, close to 3 percent or even higher. I think that the second qualification is let's emphasize that the Eurozone is now decisively out of crisis. And I think you know one theme for this year is with the exception of a limited number perhaps of emerging countries - the risk of sovereign default, the risk of sovereign crisis is now very low. And you know, that risk has lived with us for at least the last five or six years. So I think we're out of that - out of that problem. I think the third qualification is let's recognize also the Japanese growth is going to be very erratic.

QUEST: All of which leaves us pretty much accepting that we probably won't see the sort of equity gains that we saw last year, and scrabbling around looking for a strategy as to what we should do.

PARKER: Well, I think the first point to make is that if one looks at equities versus other asset classes, most other asset classes, whether it be money markets, whether it be bond markets, whether it be commodity markets, no other asset classes remain unattractive. And you know I would want to for example see much higher yields on the U.S. treasury bonds to want to go back into the U.S. treasury market, and that comment would apply, you know, to most government bond markets still. Equity markets - yes, I think you're right. I think we are going to see positive returns, but those returns are going to be much more modest than we saw in 2013. And you know if one wants to make a forecast on what will be the return on the S&P in 2014, you know, somewhere less than 10 percent is the most likely scenario. And I think we have to (inaudible) apply equally to global equitors.

QUEST: I'm going to jump in there because if you're right on that, and let's say it comes in somewhere between 8 and - I'll give you the benefit of the doubt - 14 percent, to anyone who looks for 20/25 percent or who believes the good years are behind, this is going to feel like a very poor investment environment.

PARKER: Well, I think it is going to be much more difficult, and you know, for those people who are -- who are expecting 20 percent-plus returns in 2014, I think they will be very disappointed, because those returns are not going to be there.

QUEST: Yes. Were you celebrating Latvia's arrival into the Euro?

PARKER: Well, I think it's fair to say that Latvia probably will be the last country to enter the Euro - you know - for many years to come. And you know I think the observation is that generally it is low-risk for small countries to be bolted onto the Euro, and I think there are powerful economics - there were very strong political considerations in Latvia joining the Euro. Having said that, obviously, you know, we've had some accidents -

QUEST: Right.

PARKER: -- with small countries in the Euro, and if one looks at 2013, you know, the best example of an accident of course is what happened in Cyprus.


QUEST: Now, Bob Parker talking about Cyprus and Latvia there. As we were talking, Latvians are getting more familiar with their new Euro bank notes and coins after the country became the 18th member of the Eurozone. The government hopes adopting the Euro will boost economic growth. Some citizens fear it will lead to a spike in inflation. Isa Soares reports.


ISA SOARES, REPORTER AT CNN INTERNATIONAL: As fireworks lit up the skies heralding a new year, cash points across Latvia began shooting out Euros instead of lats. Among the first to withdraw a crisp ten Euro note was the country's prime minister.

VALDIS DOMBROVSKIS, LATVIA PRIME MINISTER: I believe it's also a big opportunity for Latvia's economic development becoming a member of the world's second biggest currency. It's a big opportunity for raising welfare in Latvia.

SOARES: Joining the club hasn't been easy though. The country's economy shrank by some 20 percent at the height of its economic crisis. On top of that, it has pushed through a wrenching austerity program. But the hard grind it seems has paid off. The economy has rebounded. It grew 4.5 percent in the third quarter of last year and unemployment has fallen -- an example, some argue, that austerity can work.

JOSE MANUEL BARROSO, PRESIDENT OF THE EUROPEAN COMMISSION: Thanks to these efforts undertaken in the aftermath of a deep economic crisis, Latvia entered the Euro (area) stronger than ever. In 2013, Latvia's GDP is forecast to expand by 4 percent, the highest growth rate in European Union. And this growth is expected to continue in 2014.

SOARES: While, the political elite in Brussels herald the new members, those at home have adopted seven currencies in 100 years fear losing sovereignty. They're worried about new, tougher responsibility to meet E.U. targets and price increases.

Male, VIA TRANSLATOR: In all other countries who switched before us, prices rose. Most likely they will rise here as well. That is bad.

Female, VIA TRANSLATOR: Nice, good-looking money. But unfortunately I still don't understand much.

SOARES: Well it seems she's not alone. According to the latest polls 50 percent of Latvians are against adopting the Euro. This despite promises of new jobs, of foreign investment and economic growth.

ANDRIS VILKS, LATVIAN FINANCE MINISTER: (Inaudible) and I see Latvia would be able to get (service) other neighboring countries to be the fastest growing region in the Europe.

SOARES: This new beginning moves Latvia closer to the West and further away from the shadows of Russia, hoping that their new club will bring it more stability, predictability and prosperity. Isa Soares, CNN London.


QUEST: Now, across the border in Russia, the city of Moscow has found a new way to get people moving. The Metro has got an unconventional new payment option in honor of the Olympics. We'll show you how you get a free ride.


QUEST: Now that's a map or part of a map of the Moscow subway. If you want to get from A to B on that subway map on the Metro system, a ticket sets you back roughly 91 U.S. cents. Compare that to a couple of bucks in New York and more than four pounds for a full-priced ticket in London. If you're not in too much of a rush, there is a way that you can claim a free ride in Moscow - for no money at all.

Russia is stoking the Olympics spirit ahead of the winter games, and Phil Black takes a look at a PR stunts that burns calories instead of a hole in your wallet.


PHIL BLACK, MOSCOW-BASED NEWS CORRESPONDENT FOR CNN INTERNATIONAL: Beneath the freezing streets of Moscow is the city's underground train system - the Metro. It was the source of great pride to the Soviet Union. Some of its stations and platforms are spectacular. This is a recent attempt to build national pride with the Metro.

These people are buying tickets with the winter Olympics coming to the Russian city of Sochi next February. The government wants people to get excited and get moving. Instead of accepting 30 rubles for a ride at $1, this machine allows people to pay with 30 squats. We saw lots of enthusiasm, some big age differences and interesting techniques. Sometimes there was even a lineup. The numbers were still pretty small. There was only one squatting machine in the whole Metro system which moves as many as 9 million people a day. The regular ticket booths were getting a lot more traffic, so I asked this woman, "Why are you lazy?" Apparently that's a rude question in Russia. She denied it and accepted the challenge.


BLACK: I held her handbag, she squeezed out a confident 30. Apparently you can't call other people lazy without having a go yourself. OK, it is a bitterly cold Moscow day. What could possibly go wrong? A very popular one I've noticed has been, here we go, the superman - it's not counting. Is also the squatting chicken, I've seen that a bit - that's popular. The dancing (inaudible). Pretty easy, or so I thought. Fifty-nine, 60. You're sure, as the man said, one more time. Annoyingly, he was right.

Female: It did 29.

BLACK: No, it said -

Female: (Inaudible) that's why you need to do it all over again.

BLACK: Everyone else seemed to be much happier with the experience. They told us they'd like to see more of the machines and think it's a great way to build Olympic spirit. Phil Black, CNN Moscow.


QUEST: You could hear (LAUGHTER) - you could feel bits twinging that shouldn't twinge.


QUEST: Jenny Harrison at the World - well look, come on - look.



HARRISON: See, I can do it. I love Phil Black's face at the end of that, Richard. He was very put out, wasn't he, that the machine hadn't calculated what he thought was his 30 squat (inaudible).

QUEST: It's given my lumbago a twinge, I can tell you that (inaudible).


QUEST: All right.

HARRISON: Well, yes, well.

QUEST: We've done New York, what about the rest of the world other than Europe?

HARRISON: Yes, well you know I need to talk about Europe actually, Richard, as well in particular the U.K. because for the last, what, three weeks now we've had this series of areas of low pressure come across to Europe from the Atlantic, and in every single case, they have really just made a beeline for the U.K.

So, again, we're looking at well a very wet and very windy weather conditions. Now you can see a lot of cloud across western Europe in general. The rain of course has been coming in and because it's fairly mild - it is mostly rain just snow to those higher elevations - but the next system is coming in, the rain is increasing and so are the winds. In fact, some gusts right now that have been reported - look at this - 74 kilometers an hour there in Cork, and the winds only set to get stronger. And this is it - this is the culprit, this area of low pressure which just sort of moved that towards the north.

And meanwhile, another system heads across into western areas of Europe. But when it comes to the warnings that are in place across the U.K., because of the flooding, I just want to show you this from the U.K. Environment Agency. It is just staggering again because of course there's so much rain expected to come in with the next storm system, and because the ground is so very, very saturated, the flood warnings - the severe flood warnings - is actually up to 17, the flood warnings in (inaudible) 183 and flood alerts, over 200. So, just a huge amount and mostly across the southwest and areas in the west and the midlands that really are under threat from these rising waters in the hours to come.

So, that is the concern, and as I say, the winds are certainly on the increase. And in fact at times as we go into Friday, we could well have some winds again in excess of 100 kilometers an hour. So, not a good scenario. There comes the rain, hence all of those flood watches and warnings. And by the way, the 17 that are for severe flood warnings, that is what they say from the Environment Agency - severe flooding is expected and it's a danger to life. So that is why these things are taken so seriously.

Now the delays will also start to kick in, unfortunately, in the morning hours because of those winds - so Brussels, London in the afternoon you've got some of those delays beginning to kick in, and, again, here at Glasgow, Amsterdam, Dublin. So you get the general idea. And you can see again where those strong winds are again. So, it's across the same region - the northwest, and even Paris, which is further to the south. Some potential delays there as well kicking in.

So there's the next system with the rain, and you can see as well, further out in the Atlantic, it looks there's another system really just sort of waiting in the wings. Mostly here across central and eastern Europe, and in fact, when Phil Black was below ground doing his squats, he could've done them up-ground because the temperatures -- doesn't show it here - but temperatures actually above freezing for Moscow, again, 7 in Vienna your high temperature and actually a fairly mild 12 in Paris. Richard, we've not said it yet to each other, but very Happy New Year to you from me.

QUEST: Thank you for that, Jenny Harrison, forgive me - I'm back at the desk now. You saw that, Jenny?

HARRISON: Actually I'm just wondering why that prevents you from wishing me a Happy New Year, but OK.

QUEST: It doesn't - it doesn't. I was about to play with an aero plane which is why I -

HARRISON: Oh, you're playing.

QUEST: But Happy New Year to you, Ms. Harrison.

HARRISON: Thank you very much.

QUEST: Keep warm. All right now, what I was going to talk about. Last week or two weeks ago, we told you all about the vote to whether or not American Airlines would keep its new livery on the back of its plane. Some 60 - 50/60,000 employees were given a vote on this. Now, 60,000 of them voted with 50 percent - 30,000 of them - just 52 percent have agree - have voted to keep the new look. They like the new flag livery on the American Airlines fleet. That's - take a look at - you'll see there's the old and there's the new. The old is on the right of the screen, the new is on the left. The carrier announced the news on Twitter saying `our people voted, we will retain our flag tail fin. Now we continue painting our fleet.' So, I'll have a "Profitable Moment" after the break.


QUEST: Tonight's "Profitable Moment." The cliches about New York are pretty legendary - whether it's the rudeness, the raucousness or simply the arrogance of a city where the very song says, "New York, New York, so good they named it twice." But let there be no doubt, this city - New York - is now about to involve itself in an experiment.

Having taken a sharp political turn to the left with the new mayor Bill de Blasio. Overall, the rest of the world - the major cities - London, Paris, Berlin, Moscow - everybody will be watching to see what happens here with the new policy to reduce social inequality. Higher taxes on the rich and an entire infrastructure that's designed to bring more people of all incomes back into the city. Will it work? That is the experiment. It's begun today.

And that's "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, (RINGS BELL) I hope it's profitable. I'll see you tomorrow.