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QUEST MEANS BUSINESS
Google Buys Nest; The House That Google Built; US Markets Rally; European Markets Up; Earnings Season Begins; French President Speaks; State of France; World Cup Price Cap; Libyan Oil Crisis
Aired January 14, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: Meet me in the markets, where we have a cheerful Tuesday. It follows a miserable Monday on the markets. The closing bell is ringing on Wall Street. Hit it! Several times, Tuesday, January the 14th.
Tonight, the House that Google built. How the tech giant is taking over your home and the privacy questions it raises.
Privacy of a different kind. Private is private. The French president sidesteps a scandal.
And we cut to the Chase. JPMorgan's legal issues and what it meant for the bottom line.
I'm Richard Quest. I mean business.
Good evening. It has changed the way we live online, and now, Google apparently wants to change the way we live in our own homes. Tonight, Google's acquisition of Nest. Nest is the maker of smart household appliances. It's poised to revolutionize domestic life as we know it.
We told you about the Nest takeover. It broke while we were on air last night. But the full ramifications and discussion and debate is only now becoming clear. The Nest chief exec, Tony Fadell, calls it the conscious home, a place where every facet of our life is connected and the information is analyzed and stored online. I spoke to him last November. He said he wants his technology in every single room.
(BEGIN VIDEO CLIP)
TONY FADELL, FOUNDER AND CEO, NEST: Our goal is to take these unloved products in the home, reinvent them with new technologies, make them connected so they're safer, more energy-efficient, so you actually know that you're being protected, that you know you're saving energy.
QUEST: I love this phrase, "unloved objects in the home."
FADELL: And there are many.
QUEST: What are they? What have we -- so we've got the thermostat, we've got the smoke alarm or smoke detectors, CO2 detector. What about -- what else is unloved?
FADELL: Trade secrets. You'll see in just a few years as we create those products.
QUEST: Clock radios?
FADELL: Clock radios, a lot of people, they still don't --
FADELL: -- set themselves.
FADELL: Kettles, toasters, they still burn the toast. You need a Nest Protect because the toaster will still burn your toast. Why should that be?
QUEST: So, are you going to make a toaster?
QUEST: Are you going to tell me any product that you're working on?
FADELL: Yes, a Nest Protect and a Nest thermostat.
(END VIDEO CLIP)
QUEST: Right. What he didn't tell me, of course, was that Nest would soon be sold to Google and this would give Google an in-road right into the heart of our homes. The deal means Google could be in parts of your home that it's never been to before, and the firm will have access to data from every nook and cranny. Now --
QUEST: -- allow me to show you around the house that Google built.
QUEST: Come on in, in the library. Now, Google in the library has access to all of Nest products, the smart thermostat, the smoke alarms that we heard about. In fact, Google now knows when you're at home, how many people are there, and how much power you're using, and if something goes wrong.
FEMALE ALARM VOICE: Heads up. There's smoke in the dining room.
QUEST: Smoke in the dining room in the Google House? Then we better head immediately to the living room. And in the living room, we find a Google integrated TV, Chromecast, which will offer online streaming of movies and videos. Google knows viewing habits, favorite TV shows. Google knows what we are watching.
Never anything decent on television these days. On to the kitchen, and here, Google has filed patents so that Google Glass can control appliances in my kitchen. It could set the temperature in the fridge, provide recipes, give reminders on recipes, and also take me on my grocery shopping.
If you think it's the living room and the kitchen, you will get no escape when you go out to the garage.
QUEST: The garage, where even here, Google is now involved. It has, of course, the driverless car. That car uses video cameras, radio sensors, to move around. In short, Google knows when you're leaving, where you're going, probably who's with you and why you're going there in the first place.
So, Marc Rotenberg is the executive director of the Electronic Privacy Information Center. Joins me now from Washington, DC. Sir, we have visited the Google House as we envisage it. The information that Google will be gaining. You're worried.
MARC ROTENBERG, EXECUTIVE DIRECTOR, ELECTRONIC PRIVACY INFORMATION CENTER: Well, I think that's a real concern. This is the internet's largest company. They collect a great deal of information about what we do online. And now, they're planning to collect a great deal of information about what we do in the home.
The technology is cool, the innovation is great, but the critical policy question, the question I think consumers need to think about is should this one company know so much about us?
QUEST: But you can't help it. If this is the product you want, and whether it's search, if you want Google Glass, if you want the Nest sophisticated thermostat, the price that comes with it is giving information. Are you paranoid?
ROTENBERG: No, I'm not, Richard. In fact, I want to break down what you just said a moment ago, because we view it differently. I mean, Glass is interesting. And Nest is a good product. I bought one recently. I'm now about to return it.
But the problem, of course, is the company that's providing it is integrating all the data across the services. And I think that's what consumers and regulators are going to look at more closely. Is it necessary to have one company gathering all of this data?
QUEST: Right. But -- well, Google says it will have firewalls to protect the information. Nest said it will ensure that personal data is not transmitted to Google in the sort of fear that you express.
ROTENBERG: Well, this is not about fear. This is about recent experience. We had this same debate with Google a couple years ago when they were telling users don't worry if you have an e-mail service like Gmail, we'll protect that data, and you have access to YouTube videos, we'll protect that data.
And guess what? They decided to merge all the data. They changed the privacy policies on internet users, and that's what people object to. And I think that's the concern here, even though they're saying they're going to keep the Nest data separate, based on the experience we had with Gmail and Google Plus and YouTube, I anticipate they're going to try to put the data together.
QUEST: So, let me just get to the nub of this. Assume you're right, they're going to put all the data together so that they can basically sell you adverts and they can align the products that they offer to you to their clients. What's so wrong with that?
ROTENBERG: I think that's just one company knowing too much about us. Too much about what we do in our homes, too much about what we do online. I think we should have the benefits of new technology. I don't think it's about being fearful or worried. But we've got to put some privacy safeguards in place.
There's going to be a lot more of this. We're moving into the era that's been described as the internet of things. And you are going to see more devices connected to the internet. That can work. That can work great. But I think we need some privacy protections to go along with it.
QUEST: And experience tells us, doesn't it, sir, that the only organization that can instill and enforce those privacy restrictions is the force of government and law?
ROTENBERG: Well, I think we do need law, and I think we do need government enforcement. That's not to say that government itself doesn't create some privacy problems. We work on those issues as well.
ROTENBERG: But I think when we're looking at some of the private sector activities, we need to update our laws and make sure our privacy will be protected.
QUEST: Marc, good to see you. Thank you very much for joining us --
ROTENBERG: Nice to see you.
QUEST: -- in the House that Google built. Thankfully, for the moment, there does seem to be one part of the house where Google doesn't know what's going on. Let's leave it.
QUEST: Woof. My word. At least not for now. So, thank you for joining us in the House that Google Built.
QUEST: And now, to the house where money is made, the New York Stock Exchange. Having been down yesterday heavily, up sharply today. Alison Kosik's counting the bucks.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Hi, Richard. I do have one question for you. Do you have somebody who goes out and actually buys those props for you?
QUEST: You had --
KOSIK: For that beautiful segment.
QUEST: You had better believe it. All day, somebody is out shopping.
KOSIK: I love it. I loved it. It was very entertaining. All right, let's talk stocks for a minute.
KOSIK: It looked like the Dow gained back almost everything it lost today. It was all about calming nerves. And investors, they've been nervous, not just about the hiring slump in December, but whether earnings would be strong enough to justify the lofty stock prices that we're seeing.
So today kicked off the big financials reporting for the fourth quarter. JPMorgan and Wells Fargo helped allay those fears, both companies topping those earnings estimates. Even JPMorgan topping estimates after having to pay a billion dollars in legal fees.
Also, retail sales for December coming in a bit better than expected, that helping to push the Dow up to -- up 115 points today, Richard.
QUEST: Alison Kosik in the house where money is made. We thank you for that.
QUEST: European shares edged higher on Tuesday. They were buoyed by gains in major pharmaceutical stocks. They got a boost of a rebound in US equities after retail sales rose above forecast. Look at that. One down. Funny enough, the Zurich SMI was down, but it was the SMI that was best of the session on the first day of the week.
We talked about privacy as it might be in yours and my home. Well, it's been an uncomfortable day for France's President Hollande. He's been trying to shift attention away from the problems in his private life and answer those in the economy. We are live in Paris after the break. QUEST MEANS BUSINESS, good evening.
QUEST: Now, the French president faces a delicate balancing act. Francois Hollande wanted to talk about his plans to revive his country's struggling economy, and instead, he faced questions about his personal life. This was the first time the president has spoken to the media since a French gossip magazine published allegations of an affair with an actress.
The president spoke for 40 minutes on the economy. Were journalists were given the floor, he was immediately asked about his private life.
(BEGIN VIDEO CLIP)
FRANCOIS HOLLANDE, PRESIDENT OF FRANCE (through translator): Everybody in their personal lives can go through hardship. That is our case. These are painful moments, but I have one principle: that private affairs are dealt with in private with respective intimacy of each other. Therefore, this is not the place nor the time to do this.
(END VIDEO CLIP)
QUEST: Well, that's the French president. Now, of course, on this program, we'll a business program, so we won't dwell too long on the tittle-tattle of the potential affair, at least not for the moment.
President Hollande began his news conference insisting France needed bold measures to kick start economic growth and outlined two major steps. The first is to cut business tax and red tape, a big turnaround for a man who imposed a 75 percent tax on high earners.
The second was to reduce public spending, restating a commitment to slash billions of dollars from the budget over the next four years.
(BEGIN VIDEO CLIP)
HOLLANDE (through translator): What do we still need to do between 2015 and 2017? We need to undertake at least 50 billion more. That is a lot. In fact, nothing like this has been ever been done before. It is the equivalent if we put things into perspective to 4 percent of the entire public expenditure, only 4 percent.
(END VIDEO CLIP)
QUEST: So, let's put this into perspective. France has been lagging behind its European neighbors, particularly Germany. And when you look at these numbers over at the super screen, you'll see exactly what I'm talking about.
Compare with France with Germany. Now, French GDP in 2013 expected to finish at about 0.2 percent of growth, two tenths of one percent of growth. Look at Germany at 0.5 percent, so that's -- or more than twice as fast growth.
Unemployment, another barometer. Look at France: 10.8. Germany -- that's the level of unemployment, twice as high as Germany's at 5.2.
And the PMI, the Purchasing Managers Index, which tells us about the manufacturing activity, is the economy contracting, what do people expect is going to happen in the future, it again shows a lagging: 47 shows a contraction, 54 for Germany shows a growth.
The two anchors of the European community, the eurozone, are at very different points in the economic spectrum. Let's go to Paris for the latest. Christian Malard is an international diplomatic consultant and joins me now. Cold night for you, Christian, but we start -- look, we don't --
CHRISTIAN MALARD, INTERNATIONAL DIPLOMATIC CONSULTANT: Good evening, Richard.
QUEST: Good evening, sir. We don't want tittle-tattle, but did he admit he was having an affair with the actress or not?
MALARD: In certain way, yes, because he never denied this affair. He said there was a breach in his private life, which he reiterated today. But listen, we are used to that in France. Let me remind you one thing, Richard: dating back to Mitterand -- Francois Mitterand's time.
One day he was having lunch with the journalists, and one woman, one colleague of ours asked him the question and said, "Mr. President, we have rumors according to which you have one mistress and one hidden child."
And the president answered, "Yes. So, what?" So, in a certain way, you have Hollande, whose big guy to follow is Francois Mitterand who is telling you without admitting it officially --
MALARD: -- yes, he has a love affair with this actress, but at the same time, he does not -- he wants to treat that in a very private way.
QUEST: Is he --
MALARD: As he says --
QUEST: Is he -- OK, but Christian --
MALARD: -- what I have been shocked by --
QUEST: Christian, is he entitled in this day and age to treat in that way? Mitterand was a different era.
MALARD: Sure. Well, Mitterand definitely was far more presidential than Francois Hollande is. And Francois Hollande would like to be compared to Mitterand, but it is not the case.
But let me put it this way: Hollande is really in the same kind of situation that Mitterand has been in, but today, most of the press, of our colleagues, were a bit shocked when somebody asked about Valerie Trierweiler, his "friend" at the Elysee Palace. "How is she? She has been hospitalized since last Friday. Can you tell us, how is she?"
And he said, "She is resting." I stop talking now. He was very cold --
MALARD: -- in his way. No feeling about that. And I think people were a bit shocked by that.
QUEST: We have just seen -- finally, we've just seen the numbers, Germany versus France. Ultimately, the president is not going to be judged on what he does in the bedroom, he's going to be judged on what he does in the cabinet.
And on that point -- I can't believe I've just said that on television, but you get what I'm saying. And on that score, the French economy is in a very poor state.
MALARD: You are right. Very poor shape. It's the truth. Now, as you said, 84 percent of the French don't care about the private life of the president, they want to get more jobs, they want their companies to create jobs.
And we found out today we have a new man, Richard. We have a new man, a new president. He's a Social Democrat. Is he Tony Blair-like? We don't know. He didn't want to say. Is he former chancellor Gerhard Schroeder- like? He did not want to say. But he's a Social Democrat.
MALARD: But the question is tonight here, why did he wait so long to understand that to help companies create jobs, you have to lower taxes?
MALARD: My God, he has been in power for 18 months. To come to this, it has been a little bit long.
QUEST: Christian Malard, how good to have you on our program tonight. When we need to know what's happening in France, you're the man.
MALARD: Thank you.
QUEST: Thank you for joining us tonight. A cold night in Paris, stay warm. Christian Malard joining us.
Now, one update I must give you, last night I told you about how a Brazilian airline was capping its prices for the World Cup and the need for that. Now, with just five months to go, a second carrier has vowed to put limits on its domestic fairs.
Azul Airlines and Avianca Brazil both say they will not charge more than 999 real -- that's about $423 -- for any internal ticket, fending off accusations that they're ripping off fans with price gouging ahead of the Olympics (sic).
Coming up next, we speak to the man holding billions of dollars of Libyan oil hostage. Ibrahim Jadran after the break. It's QUEST MEANS BUSINESS, good evening.
QUEST: A militia leaders who is holding billions of dollars of oil in three Libyan ports says he's not a warlord. In an exclusive interview with CNN, Ibrahim Jadran said it's not his intention to hold his country's oil industry hostage.
Protesters have been blockading three of Libya's largest eastern oil terminals since the summer. The barricade has pushed up prices and cut much-needed oil revenue. Libyan prime minister Ali Zeidan says he still hopes for a peaceful solution.
Christiane Amanpour's been speaking to all concerned, joins me now. This is extraordinary. What's it all -- what's at the root of it?
CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT: Well, I think what's at the root of it is obviously, the central government is really weak in Libya. They haven't been able to really have a unified system. This has now been going on since March of 2011.
And we're in a state where even the country's lifeline which, as you know, of course, is the oil, is being held hostage, although Ibrahim Jadran vigorously denied he was holding anything hostage. Told me he wanted to simply redistribute Libya's oil wealth to the people. I chatted with him earlier today.
IBRAHIM JADRAN, LIBYAN MILITIA LEADER (through translator): First of all, I'd like to emphasize that the government is not able to defend itself. We give them three years to rebuild the institutions, but they will not be able to do that or to secure the average citizen.
This is a government whose prime minister was kidnapped. How could it secure oil? Start the offensive of anything? This is a government of corruption and a government that's accused of all types of corruption.
AMANPOUR: Meantime, the oil revenue has been plummeting. Your country is losing billions of dollars in oil revenue, and you cannot get this oil out because other countries, other companies won't do business with you. And so far, you haven't managed to export this oil.
The Libyan navy, the Libyan government, such as it stands, has already fired warning shots to get one of the oil tankers that was coming towards your port to move and to not dock and to not take on any oil.
JADRAN (through translator): First of all, there is no Libyan navy because the Libyan navy and the Libyan army are not capable of defending themselves. The incident that you just mentioned, we don't have any information about that.
AMANPOUR: Can you try to be specific on who is funding you and where you are getting your money from?
JADRAN (through translator): Until now, we don't have any finance coming except from businessmen who believe in our cause. For the last four or five months -- five months, actually -- our soldiers have not been paid their salaries, but because they believe in their cause, they are still committed to it. And that's why they are taking and persevering.
QUEST: He portrays every bit a Western businessman, suit and look and moderation. Does he have support?
AMANPOUR: Well, it's really interesting. People aren't quite sure. They do believe that he's gaining support, and he's very big in the eastern part of Libya, where they are controlling. But what he tells us is that he has 23,000 people under arms, a militia of 23,000 strong.
Almost nobody that I've talked to believes that, but he insisted that this is true even though, he said, they come from the sons of all the tribes who -- even though he can't pay them, as you heard.
QUEST: But it's fascinating. He's got his hand on the throat of the economy by this action.
AMANPOUR: Well, that --
QUEST: And the way he's managed to do this. That's fascinating.
AMANPOUR: It is fascinating. They have managed to do it. The Libyan prime minister told me a while back, and he reiterated, that anybody who tries to do business with these "thugs," as the government calls them, will have their boats sunk. They've really made very serious threats, the government, for international companies not to do it.
But as you see, this man wants to reach out to the international community, wants --
QUEST: But what for?
AMANPOUR: To make business. And therefore, he said, to really redistribute wealth around the country. He accuses the Libyan government of being corrupt and having squandered the oil wealth, having financed the kind of terrorism and militants who are right now tearing the country around.
Obviously, the government disagrees. The government has issued arrest warrants. But just look at the way he looks. Suit and tie --
QUEST: Absolutely. OK.
AMANPOUR: Shed his military fatigues, because he wants to be taken seriously as a politician.
QUEST: From our point of view -- on your program, you're dealing with big geopolitical issues. We put it in dollars and cents.
AMANPOUR: Which is the biggest geopolitical issue.
QUEST: Absolutely, in many ways. So -- every businessman I speak to always says they're looking at opportunities.
QUEST: Whether it's Iraq, or Libya, or Iran, now, of course, with the changes. But they're still not there yet.
AMANPOUR: Well, they're not, certainly with Libya, particularly in this regard, because the government, the elected government -- remember, the West actually liberated the country, and now this elected government says don't you international community do any business with these people because this is a rogue operation.
By the way, you should examine business opportunities for your own. Norman Lamont and former foreign secretary Jack Straw just came back, hoping for Britain to do some business in a post-sanction Iran.
QUEST: I feel that you and I need to go on a joint trip there.
QUEST: We need --
QUEST: Christiane, good to see you. Thank you for joining us tonight.
Coming up after the break, JPMorgan's been grappling with a very big legal bill. We'll talk about how that affected its results in the last quarter. It's QUEST MEANS BUSINESS.
QUEST: Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in just a moment. This is CNN, and on this network, the news always comes first.
Violence has broken out on the first day of voting in Egypt's constitutional referendum. Nine people died in what the head of the emergency unit is calling "criminal circumstances." It's the country's third constitution in as many years. If approved, it would ban religious political parties and give more power to the military police and the judiciary.
At least 17 people have died in a car bomb attack in northeastern Nigeria. The bomb exploded near a post office in the city of Maiduguri, the birthplace of the militant group Boko Haram, who officials suspect are behind the attack. There were no immediate claims of responsibility.
The former interim prime minister of Iraq is weighing in on the recent surge of violence in his country. Ayad Allawi says the current prime minister, Nouri al-Maliki, is not helping to diffuse the situation. He told CNN that while it's up to the US to support al-Maliki, he believes the support should be conditional.
A second day of anti-government demonstrations in Thailand drew far fewer people than the first, but their demand for the prime minister, Yingluck Shinawatra, to step down hasn't waned. The prime minister has tweeted she will not resign.
Southwest Airlines has confirmed that a third employee was in the cockpit of the jet that landed at the wrong airport on Sunday. The company dispatcher was in the jump seat as the plane landed. No one was injured in the mishap. Investigators are trying to find out what went wrong.
There's the number -- $5.3 billion. It's the amount that J.P. Morgan made in the fourth quarter -- $5.3 billion. And that's after 100 and -- 1.3, a $1.30 a share. And that's after they paid out another $1.1 billion in legal costs and fines for various misdoings and misdeeds. The chief executive Jamie Dimon says the bank has left some significant legal issues behind. But it hasn't been a cheap process, putting all that behind.
So let's go through exactly how much expense -- funds paid in the past few months. Well, first of all as you can see, you've got the London Whale. That put $1.2 billion on the table. Then you've got the really big banana -- $13 billion which will get the 15.2 for risky mortgage sales to federal and state agencies. And then there was the risky mortgages to investors -- they paid another $4.5 billion in fines, damages and restitution -- $20 billion. And now of course $2.5 billion to Bernie Madoff's victims. All in all $22.6 billion. Now that doesn't leave a huge amount of money. It's put aside $26 million for legal fees and legal costs. So it's nearly spent just about all that money -- that wall, that tower of money of $22.6.
But let me ask you, what else could you do with $22.6 billion? I tell you what you could do. With all that money you could build and equip 53 hospitals on average costs. That's one for every state in the United States plus a few extra to spare. That's built on the cost of the Stamford Hospital in Connecticut which we took as being the barometer. Fifty-three hospitals or legal fees for your misdeeds of the past.
Another bank that reported today -- Wells Fargo reported a 10 percent rise in fourth quarter profits to $5.6 billion, and that's despite a slowdown in its key mortgage financing business -- $5.6 -- up 10 percent. So, if the latest figures are anything to go by, five years after the crisis, the banks are once again raking in the cash. There's another side to this story, and that, of inequality. It's something that's been touched on by President Obama last month.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: A dangerous and growing inequality and lack of upward mobility that has jeopardized middle class America's basic bargain that if you work hard, you have a chance to get ahead. I believe this is the defining challenge of our time.
QUEST: Defining challenge of our time -- of all countries, not just the United States. The issue is set to feature heavily in Mr. Obama's State of the Union address later this month. My next guest says neither party in Congress have the will or the strength to tackle the issue of inequality. Robert Reich is the former labor secretary under Bill Clinton, also with a new documentary "Inequality for All" in which he'll also star. We'll see him in just a moment. First though, we need to show you an excerpt from that documentary.
ROBERT REICH, PROFESSOR OF PUBLIC POLICY, UNIVERSITY OF CALIFORNIA AT BERKELEY: Today we're going to try to explain the mystery of why inequality has been widening. Remember the economy is growing all of this time. The economy -- the economy continues to grow. Look here is gross domestic product growth from 1929 to 2011. The economy overall has done extremely well and productivity keeps on increasing. We are producing more and more and more and more value. That's a big, big success story. But here is the problem, here's the puzzle because if you look at the average hourly earnings of production workers, the average hourly earning continued to rise until the late 1970s and then something happened -- flattening wages. Look at the gap.
QUEST: Robert Reich joins me now live from Berkeley in California to talk about the issue of inequality. Professor, you and I have been talking and interview -- I've been interviewing you -- for a good few years, probably more than either of us would like to remember. But the question of -- always is -- why do you think this inequality gap has suddenly exploded?
REICH: Richard, the major reason that it's exploded -- at least here in the United States -- is that all of the coping mechanisms that the American middle class have -- has -- used for the last 30 years to avoid facing the reality of stagnant and declining wages have been exhausted. I mean, the first coping mechanism was women moving into paid work. The second coping mechanism in the 1980s and 1990s -
REICH: -- was a lot of extra hours and then finally going deeper and deeper into debt.
REICH: You can't do any of those anymore.
QUEST: No, no but , but their coping mechanisms -- that doesn't address -- please address for me -- the reason of why this inequality was created in the first place and why wages have not kept up. Because if it's just straightforward law of supply and demand, as a free marketeer, you wouldn't argue with that.
REICH: Well actually you might want to argue with it but actually there are three factors. One, Richard, has to do with globalization. The fact of the matter is that beginning in the 60s and 1970s -- and it affected all nations -- satellite communication technologies, cargo ships, container ships -
REICH: -- enabled the production process to be parceled out 'round the globe -- wherever things could be done more cheaply, most cheaply. And secondly, you have technological progress -- technological change --
REICH: -- a lot of labor-replacing technologies. But the third and most important factor is public policies that either did or did not address these structural changes. In some countries, they adopted policies, you know, labor market policies, labor adjustment policies, --
REICH: -- tax policies, all sorts of things that actually responded to all of these changes, but the United States went in the opposite direction -- privatization, deregulation -
QUEST: OK, but, but -
REICH: -- lowering taxes on the wealthy -
QUEST: -- but then there's an argument for saying that the prosperity that this country has enjoyed -- the $5.3 billion that you might have heard me talking about that JPMorgan Chase has made, the Wells Fargo up ten percent. They are the engines of growth in a sense of the new economy in this country.
REICH: Well, that's one of the problems, because they are financial markets -- they're not actually creating goods and services, they're simply moving money from one set of pockets to another set of pockets. That financial entrepreneurialism is not building the economy, in fact you can look at the United States economy -
REICH: -- and say, well the stock market is doing wonderfully well, it's a huge success. But if you look at median household income, you'd see that, adjusted for inflation, it's heading downward. It's four and a half percent below what was at the start of recovery.
QUEST: So what would you like to see? Give me two concrete policies that you believe, Professor, would redress the inequality balance.
REICH: Well, one is to get big money out of politics. Because it's very, very hard to do much of anything as long as it's dominated -- American politics -- is dominated by the same big money that is now dominating the economy. The second has to do with education, job training, life-long learning. There is no way that the typical American can become more productive in this global economy without a better system of education and we simply have failed dramatically.
QUEST: When you pull the strands together like that and you bear in mind the febrile and poisoned, toxic environment in Washington, one's left feeling -
REICH: Febrile and toxic -- those are adjectives that describe it exactly, Richard.
QUEST: -- right but -
REICH: You must be spending a lot of time in Washington, yes.
QUEST: Probably more than one should, but it doesn't bode well for the future of economic growth for that inequality gap in the future.
REICH: And no, it doesn't. I think we're heading toward a turning point or some sort of a switch point. I -- you know, in this country we have had over the last hundred years three times when inequality's got out of control, and instead of moving toward socialism, communism, fascism, doing something like that, we are very practical, very pragmatic. We reform the system, we save capitalism from its own excesses, we did it in the Progressive Era, we did it again in the 1930s, we did it to a large extent in the 1960s and we will do it again. I can't tell you when that tipping point is going to happen. I hope it happens very soon.
QUEST: Professor, thank you for joining us from Berkeley tonight. Much appreciate you giving us time tonight.
REICH: Thanks, Richard.
QUEST: Robert Reich joining me. Still to come on "Quest Means Business," Time Warner Cable shuts the door on Charter's merger offer. The cable operator isn't giving up without a fight. This is "Quest Means Business."
QUEST: Ah, welcome back to the "Quest Means Business" living room, where Google is not the only company trying to worm its way into our homes. Cable operators are battling it out to provide TV service all across the world. Now, here in the United States, a company called Charter is preparing to go directly to Time Warner Cable's shareholders after its merger offer was flatly rejected. Charter's offered $132.50 a share -- that's about $83 in cash. Speaking to the "Financial Times," Time Warner Cable chief exec said, "Our house wasn't for sale, somebody knocked on our door and made a low-ball proposal. It's obvious that what they're trying to do is buy a premium asset at a bargain-basement price."
In an open letter, Charter's chief exec wrote, "Time Warner Cable has "unrealistic price expectations" and "ignores widespread shareholder endorsement of a deal." Time Warner's indicated a deal could be possible at around $160 a share. Trading of the shares closed nearly 3 percent up. One thing to note in all of this, Time Warner Cable used to be part of Time Warner, it's no longer -- Time Warner spun it off, but Time Warner of course is the parent company of this network.
Now, moving on to the weather forecast now. Jenny Harrison, we go from the living room to the weather room. A conservatory. Yes, I think the greenhouse in the conservatory is where we find Jenny Harrison tonight.
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: Well, I tell you what, a greenhouse is a good word for, Richard, (inaudible) talking about the heat in Australia because, my goodness, that is somewhere you would not want to be -- not with these temperatures. Now, of course, it began really last Friday in Perth out across Western Australia. Look at these temperatures -- Saturday and Sunday, 43 Celsius, the average is 31. But look at this in particular. The overnight low on Saturday only got down to 29.7, so that was the warmest night ever recorded for Perth. And more records have been broken since then. On Tuesday, in Keith in south Australia, 47 Celsius the high, the average is 30 and nowhere -- not at any time is Keith -- actually achieved that sort of temperature before, so it gives you a good idea. Melbourne as well 43 degrees Celsius, the average is 26. And of course this is of particular concern at the moment because of the Australian Open that is taking place, all those tennis players really suffering with this intense heat.
This is the heat wave which has been put together -- the heat wave graphic put together -- by the Australian Bureau of Meteorology. This is something new they're piloting this for the first time. So, they're not just looking to warn people that it's going to be warm and high temperatures, but they're really looking at sort of the longer term effect and really forecasting as you can see here -- Wednesday through Friday for this entire region to be aware that the heat is reaching those dangerous levels.
There is a break in sight, but unfortunately, not for the next few days. The high shifts eastwards, the heat is still coming from the interior, so very dry and very hot as well. And all of these temperatures well above the average. Look at this in Melbourne -- 42 Thursday and Friday, and they're pretty good clear, sunny skies, but it is Saturday -- that is a key day because eventually we are going to have a little bit of a front sweep through. That will reduce the temperatures and hopefully in Melbourne on Saturday, temperatures actually in the low 20s Celsius.
There is some rain in the forecast too. That is generally to the north as you can see. But it is actually working its way southwards. Again, this is the front that's been coming through that has really helped with the temperatures in Perth and eventually that will have an impact into the southeast. Now not high temperatures but low temperatures in Europe -- the blue really indicating where the cold air is pushing in over the next couple of days. We're seeing some sleet and snow into Ireland and also Scotland, and at the same time, not just the line of the Alps but also you can see elsewhere through Germany and on into Poland. So, showers but snow at the northern end of that system. Still breezy and unsettled across the west but the wind's nowhere like they were, and the rain, unfortunately though, is still pretty heavy.
This is the snow accumulating on the line of the Alps in the next 48 hours. And you can see eventually all these areas such as Moscow may be 17 centimeters of snow and of course that is because so far there's a real deficit of snow across much of Europe. Moscow, the temperatures are well below average by Friday. Kiev also getting back down to the average and the same for the most part in Berlin, although by Friday it does tend to spike up to about 6 degrees. So, unsettled rain to the west -- that cold air turning that rain into snow and then temperatures on Wednesday quite mild in London at 11, 15 in Rome and feeling much better -- more like winter in Vienna with a high of 6.
QUEST: Goodness grief, I mean from the high 40s in Australia -
HARRISON: Oh yes.
QUEST: -- to the -10 in -
QUEST: -- in (Inaudible). Jenny Harrison at the World Weather Center. Thank you for that --
QUEST: -- for updating you on that of course. Now, and (Raceco) is at Royal Ascot. The Queen's race course may note that the event has a more international feel this year. It's an unprecedented move when the Queen has given permission to the ruling Al Thani family of Qatar to become her first commercial partners at the races. CNN's Jim Boulden reports on the branding initiative that's expected to raise millions.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: It's an empty Ascot Racecourse in mid-January, but change is coming. During the week in June when Ascot becomes Royal Ascot, the Queen and the other 70,000 or so daily ticketholders may notice something different. There will be commercial branding of one of Qatar's holding companies, Qipco, during the royal races -- a first.
NICK SMITH, ASCOT RACECOURSE, LTD.: We had a very successful sponsorship program in the past, but it's been based on race sponsorship, and the royal (inaudible) always been excluded from that. So we just feel that the time is right for us to maximize the commercial value, if you like, of Royal Ascot, which is very, very special.
BOULDEN: How special? Well, it's had horseracing backed by the British royal family since 1711.
NICK LUCK, CHANNEL 4 RACING COMMENTATOR: Ascot's the royal racecourse set up by Queen Anne, and ever since, every reigning monarch has treasured the racecourse and really cherished it and made it and cemented it as the heart of British racing.
BOULDEN: That tradition, complete with eye-catching hats worn by patrons perhaps held Ascot back when it came to looking for more modern forms of sponsorship. And that has meant up to now prize money falling behind.
SMITH: It's a competitive world, you know, we want to make sure that we can going forward work hard on prize money so they can (inaudible) it globally, plus we want to improve our facilities.
BOULDEN: Here at Ascot, they are promising their sponsors will have subtle signs and references and more top-tier brands will be announced soon beyond Qipco. But unlike branding deals in American sports, it's not about to say 'Barclay's Ascot' or the 'British Airways Queen Anne Stakes.' Still, these investments from the Middle East sponsors have been very welcomed.
LUCK: The Qatari interest in British racing has been a huge boost to racing's internal finances over the last two or three years and continues to grow.
BOULDEN: And you may be wondering did the Queen agree to all of this.
SMITH: Everything that happens in Ascot is discussed with Buckingham Palace.
BOULDEN: So rest assured Royal Ascot will remain as royal as ever, and the Queen is unlikely to notice much difference when she's in her box. Unless of course one of her horses wins that increase to purse. Jim Boulden, CNN Ascot, England.
QUEST: And we will be back with "Quest Means Business" in just a moment.
QUEST: South Korea's finance minister has warned the country should stay alert for risks including further tapering from the U.S. Federal Reserve. It comes as the president prepares to give a speech at the World Economic Forum in Davos next week where of course we'll be reporting from. Now, the president expected to showcase a new creative economy. CNN's Paula Hancocks asked the president how creative thinking can help.
PARK GEUN-HYE, VIA TRANSLATOR: One can say the previous existing economy placed a great deal of emphases on extracting minerals from the ground whereas nowadays in the era of the creative economy, the focus is on tapping into the creative potential of the human mind. With regard to a weak yen as well as exchange rate fluctuations, the fundamental solution to these challenges would be to emerge from a case where we are too exposed to those changes. In order to do so, we seek to promote development of our economy that ensures balance between domestic demand and exports.
PAULA HANCOCKS, INTERNATIONAL CORRESPONDENT FOR CNN INTERNATIONAL, BASED IN SEOUL, SOUTH KOREA: Is this shift away from the manufacturing sets which South Korea is obviously very well known for. Is it a way of trying to lessen the significance of power that large conglomerates like Samsung and (Jinde) have which of course was one of your election pledges?
GEUN-HYE, VIA TRANSLATOR: Korea's forte lies in the manufacturing sector and the creative economy is not about reducing the permanence of the manufacturing sector per se. Rather, companies like Samsung are cognizant of the need for incessant self-innovation and renewal. They must constantly innovate their existing products and promote the convergence of their products as well and create added value and enhance competitive edge.
HANCOCKS: Now, Madam President, you are the first female president in South Korea, and as far as I can tell, the last time that Korea was reigned by a woman was Queen Jinseong in the ninth century. Now, this is a very male-dominated society and many smart, well-educated women are struggling against a very entrenched glass ceiling. How can you ensure there is equality rather than simply being a symbol of equality?
GEUN-HYE, VIA TRANSLATOR: Whether being the political circles or other fields, we seek a society where women can actually live out their potential, can build up their careers. We provide social system that provides assistance in that regard, and I believe that's what is important. It's important we prevent woman from suffering the pain of having their careers interrupted in this regard. We seek to provide tailored assistance that cater to the different states of their life cycle. For instance, when they seek employment, when they find employment, when they give birth to a child and when they raise their children.
HANCOCKS: Now, women here are clearly ready for equality. Are South Korean men ready for it?
GEUN-HYE, VIA TRANSLATOR: This is a time when we see fathers, especially young fathers, that would more than willingly play their part in raising children and who are so willing to help their wives. In fact, we find many young fathers who would find great reward, pleasure enjoying raising their children.
QUEST: The president of South Korea. One stock we need to look up briefly. Shares of Tesla Motors soared, up nearly 16 percent. The automaker reports were 25 percent increase in sales of its Model S Sedan in Q4, and on tomorrow's "Quest Means Business," you'll hear from Tesla's chief exec, the very famous Elon Musk on tomorrow night's program. I'll have a "Profitable Moment" from the house that Google built. (RINGS BELL)
QUEST: Whenever we talk about the issues of privacy and keeping things private, maybe this is what it's all about. Tonight's "Profitable Moment." That's the sight from the top of the roof here at our building in New York -- Midtown Manhattan. Just look at all the buildings, the lights, the people and everybody in some shape or form trying to protect their own information. And what we've learned of course with Google's purchase of Nest and of course with the Target and Neiman Marcus is that privacy comes at a price. Whether it's cyber security or new regulations, we have to decide as a society what it is we are prepared to give up and to whom. And that of course is something maybe we don't all agree upon.
And that is "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, (RINGS BELL) hope it's profitable. And I'll see you tomorrow.