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QUEST MEANS BUSINESS
Interview with IMF's Dominique Strauss-Kahn; Susan Boyle Releases Album
Aired November 23, 2009 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: Don't stop now -- the IMF chief tells me tonight countries must not pull the plug on stimulus. Prepare to power down.
Risk and reward -- Britain's top financial regulator tells me global banking crises are inevitable.
And singing for survival -- Susan Boyle has a new record with her "Dream" album.
A busy hour ahead.
I'm Richard Quest.
I mean business.
We will be talking to Dominique Strauss-Kahn. And we'll also hear from Lord Adair Turner on the knotty issues affecting global regulation, as the banking crisis comes to an end and we move to round two.
But the markets, they demand our attention right at the beginning of this program. Up 119 points -- the Dow Jones 10436, a gain of 1.15 percent. You need to know that number. It's largely because of a better than expected housing report in the United States. There was also dollar action. The weak dollar and a surge in commodity prices. We'll talk more about that later. But at least you're briefed on what you need to know.
The global economy still needs to be propped up. The view of Dominique Strauss-Kahn, the managing director of the IMF. He says it's just too early to being a general withdrawal of economic stimulus measures.
He was speaking at the annual CBI, the Confederation of British Industry, a conference in London.
Mr. Straus-Kahn said the global economy is still vulnerable to shocks.
Afterwards, I put it to him that at some point, fragility will have solidified.
Why are we not there yet?
DOMINIQUE STRAUSS-KAHN, MANAGING DIRECTOR, IMF: I think the main reason why we can't say we are there yet is that we know that unemployment is going to rise in the coming months. So it's very difficult to say the crisis is over when you know that unemployment is going to be -- to increase.
Now, as soon as it will be - I won't say obvious, but clear enough that we are going to reach the peak in unemployment, then it will be time to say OK, the recovery is strong enough, we can go back to take care about other problems, namely fiscal sustainability. But it is not time now.
QUEST: Asking you when that time will be, I suspect, is like asking you how long is a piece of string. It will vary from country to country.
But what I don't understand is why are people so insistent on talking about exit strategies now?
STRAUSS-KAHN: Because, certainly it's useful for markets to know that the countries -- the governments have in mind in different countries that they will have to unwind what they have done. So they're worried about what's going to happen after. And the sooner they have information, the better it is.
QUEST: The countries don't have exit strategies in mind at the moment, do they?
They're still -- if they're not exactly putting out fires, they are, at the very least, still cleaning the rubble.
STRAUSS-KAHN: I won't say that. Most governments have asked the IMF and they're working themselves on the design of their own exit strategy, even as they know they will have to implement it only in six months time or eight months or so.
So I think it's -- it's the right thing to do to try to design and communicate about the exit strategy, knowing that it's not the time to implement it. Of course, in terms of communication, it's very difficult, because we say to people at the same time, things are improving, but we're not going to exit now. So it's something which is not easy to understand for the regular citizen.
QUEST: As the managing director, are you pushing countries more towards fiscal stability in the sense of cutting deficits and starting to move back to sustainability or do you still think it's time -- more -- there needs to be a lot more done in terms of stimulus?
STRAUSS-KAHN: Today -- today, the second is true. Today, the need for maintaining the stimulus is certainly the most important thing. And the biggest -- the biggest risk we may face, which is, in my view, the only risk of a double dip and going back in -- in the recession, would be that we withdrew from -- the different stimulus will take place too early.
QUEST: But that risk of a double dip is becoming ever more real in the early part of 2010, by which time you will not only have seen some fiscal stimulus work its way through the system, but many countries are starting to redress the fiscal imbalances.
STRAUSS-KAHN: I don't think the -- the traditional -- the experience we have and the lag between growth resuming and the peak in unemployment is something which looks like eight to 10 to 12 months, depending on the country. So it means that something around the end of the first semester, in most advanced economies, will be the right time to see where the economy really stands. And probably in most advanced economies it will be clear that the recovery is strong enough to begin to unwind what has been put in place to face the crisis.
QUEST: Which countries are you particularly concerned about at the moment?
STRAUSS-KAHN: All of them. I mean, you know, things are going better, obviously, in the Asian economies, in emerging economies. They recover fast. The U.S. and European countries are lagging behind. So that's the countries I'm focused on.
QUEST: That was Dominique Strauss-Kahn, managing director of the IMF.
These are the euro bourses. You don't see a day like this all the time. Paris up sharply; as, indeed, was Frankfurt and London.
Tra -- traders were driven into the market by the prospect of lower interest rates. If we take a look at the London, it was banks that were much the highest gainers. RBS, which, of course, is nationalized Royal Bank of Scotland, up 5 percent on reports that they are being potentially more successful at offloading their billions of dollars worth of toxic assets.
Mining shares -- as we saw the price of commodities rise, which I'll tell you in just a second, we also saw mining shares up higher. Rio Tinto up 3 percent and Cadbury's in play with Kraft and now Hershey, looking ever more likely to come in. Cadbury's shares up 1.6 percent.
The Frankfurt DAX, which saw BASF, the chemicals giant, up 4 percent. The banks were stronger. Siemens also gained 3.7 percent.
The reason was, of course, the prospect of lower interest rates for the foreseeable future was postulated by a Fed official in the United States, who said interest rates would remain relatively low -- well, would stay at their low levels until well into 2010.
Paris CAC -- currant, a possible merger with Societe Generale and Dexia saw that stock up 4 percent. Renault gained 3 percent. And the hotel group Hakor (ph) was up 3.5 percent. Apparently it made through a bit of a split and -- and move around.
Anyway, you see a very interesting day. But one factor that was very important in the market was what happened to the price of gold. And when we talk about gold, we need to see that it actually reached another record high. It was over $1,070 an ounce at one point in the session. The weaker dollar pushing up the price of the currency. It made the bullion more attractive.
You've got to remember that investors are worried, if there is a recovery faster because of low interest rates, then inflation becomes the real risk. And if you look at what's happened to gold, you start to see it.
This -- from earlier this year, this very sharp trajectory on the price of gold, yes, it has been affected by -- to some extent, by IMF gold sales and -- to India and to Mauritius. Several of the central banks have expressed interest. But that's what we're seeing with gold at the moment, with record highs for the year.
Now, as you see, a busy day in the markets.
And the news headlines, Fionnuala Sweeney has also had a busy day at the CNN News Desk.
FIONNUALA SWEENEY, CNN CORRESPONDENT: Hello, Richard.
Philippine Army officials say at least 21 people have been killed in politically related violence in the south. The victims were among a group of dozens of people, mainly women and journalists abducted by gunmen. Local reports say the murder victims include the wife of a candidate for governor in the Muslim autonomous region of Mindanao.
Brazil's president says engaging and not isolating Iran is the way to push peace and stability in the Middle East. Luiz Inacio Luis da Silva made the comments just hours before he met Iranian president, Mahmoud Ahmadinejad. The two leaders have signed a series of agreements. Mr. Ahmadinejad will also visit Bolivia and Venezuela in his tour to boost political and economic ties with those nations.
It's been three years since the Israeli soldier, Gilad Shalit, was seized by Hamas militants. Now it's possible that a deal mediated by Germany and Egypt could set him free, along with a number of detained Palestinians. Hamas representatives are discussing the terms in Cairo, while Shalit's family is following the situation with Israeli government officials.
The world is getting warmer. The U.N.'s weather agency says greenhouse gases in the Earth's atmosphere reached record highs in 2008. The report by the World Meteorological Agency comes ahead of the climate conference in Denmark next month. The European Union today urged the U.S. and China to set targets for cutting greenhouse gas emissions.
And those are the headlines -- Richard, back to you in the studio.
QUEST: Fionnuala Sweeney back (INAUDIBLE) -- back to you later in the evening with (INAUDIBLE).
Coming up, the man on a crusade to rid the financial world of London of its flagrant excesses. We'll talk to Lord Adair Turner. He's chairman of the U.K.'s Financial Services Authority -- in a moment.
QUEST: The chairman of the U.K. Financial Services Authority says that the regulator needs more power if we are to prevent further failures in the banking system.
Lord Adair Turner's goal is a financial system that serves the needs of the real economy.
Lord Turner famously described much of the City of London's activities as "socially useless."
I caught up with him as he addressed business leaders at the CBI Conference in London.
ADAIR TURNER, CHAIRMAN, FSA: Well, I think what we've been through is a period of many years -- several decades in which, in this -- in which the existing financial system developed in a particular direction and it appeared to make sense. A lot of people said it had reduced risk. It became very specific. It was focused on particular forms of finance, high levels of trading activity.
And, to our surprise, not many people saw it coming -- I did not see it coming -- it has gone through an enormous crisis.
But after that crisis, we really do have to go back to basics and to understand what was wrong with it in a fundamental fashion.
QUEST: As we come out of the crisis, there is the feeling that the industry itself, whist paying lip service to the necessary changes, is -- will ultimately draw lines in the sand and prepare to fight back at every opportunity.
TURNER: I think the more thoughtful people in the financial services industry, and, in particular, banking, because it's in banking that the biggest changes have to occur, realizes that we do need a new approach.
Now, having said that, there are many good bankers out there who have been, throughout this crisis and before, providing good service to their core customers, companies and householders.
But I think the thoughtful ones understand that there has to be a change.
There is bound to be an element of pushback from people who have made large amounts of money out of the existing system and who simply don't like people coming along and saying hang on, is this actually to the benefit of the whole economy?
But the more thoughtful people, I find, are well aware of the need for change, both because it's needed in itself and because they understand, if they're thoughtful, how annoyed the public are at what has happened.
QUEST: How aware are you that you carry a burden in the get it right or get it on the wrong side of -- of the line and you put in jeopardy one of Britain's most important industries, the City of London and the financial services?
If you get regulation that becomes a tad too strict, people will up and go.
TURNER: Well, it's certainly something that we need to know is possible, both from a fact that if that is unnecessary, we don't want it to happen. We don't want to undermine the competitiveness of London. If that is a risky financial activity, we don't want it to be going on anywhere in the world.
So we do have to get it right. I think the point to make is, first of all, there are large elements of the city which ain't bust and don't need fixing it, which came through this crisis perfectly well. Let's take wholesale insurance, the Lloyds market. No problems in that market. It's done a good job. It's not threatened by new regulations. We're not going to change it. It isn't bust, don't fix it.
So the city, I think, should be confident. I am absolutely certain that in 10 or 15 years time, the city will still be an important part -- a very important part of London and the U.K.'s economy. I think you can say that while still believing that some of what went on was unnecessary and believing that it's probably sensible for us not to put all of our eggs in one basket.
QUEST: Which brings me to my last question, is it inevitable that we are destined to have these sort of crises, bearing in mind the risky nature of the business and the risk -- and the whole concept of risk and reward?
We're going -- it may not be as bad, but we're inevitable -- it's -- we're destined to repeat?
TURNER: I think the good -- through good regulation, we can reduce the probability, the frequency and the severity of financial crisis. And that's what we've got to do and that's what we are doing and -- and we'll succeed in.
Does that mean that there will never be a banking and financial crisis again?
No. I don't think anybody believes that. But we've got to make it a smaller crisis in another 50 year's time, not the same again in 15 years' time.
(END VIDEO TAPE)
QUEST: Lord Adair Turner speaking to me earlier in the program.
Now let's hear from some of the hundreds of business leaders who were listening to Lord Turner at the conference in London. After all, they're the ones who make the tough decisions about hiring and firing.
CNN's Jim Boulden was with them.
JIM BOULDEN, CNN CORRESPONDENT: This is the most important annual conference for the Confederation of British Industry in years. It comes as the British economy is likely just out of recession and it's also the last one before a general election.
So I've come to gauge the mood of British business, to find out what people here think of the economy and the road ahead.
UNIDENTIFIED MALE: (INAUDIBLE) somewhat is quite interesting. It's sort of a downbeat Gordon Brown there.
UNIDENTIFIED MALE: We've had what I might call a one off shock to the whole global economy.
UNIDENTIFIED MALE: And the optimism and the spirit (INAUDIBLE).
BOULDEN: Is he likely to be the next leader of...
UNIDENTIFIED MALE: One would think so, wouldn't we?
UNIDENTIFIED MALE: We're certainly seeing the green shoots. We're certainly seeing greater margins. We work with a consultancy business. And certainly demand is improving almost as we speak. So one would hope it will go to next year, things are going to strengthen.
BOULDEN: How are things in your side of the business?
UNIDENTIFIED MALE: Well, my company actually depends, to quite a great extent, on -- on government contracts, business we're providing educational services. So I guess, looking to the next couple or years, with considerable interest, you know, on the one hand that -- with the public sector cuts, we're likely to have to, you know, produce economies for the people that contract with us, but equally, I think opportunities for the private sector to deliver more public services, because we can do things in terms of getting down price and so on that -- that local government and local authorities can't do here in the U.K.
UNIDENTIFIED MALE: The private sector has gone through a terrible recession and now we have a huge budget deficit here in the U.K. and everywhere in the world. They're going to start looking at cutting public sector. So you might actually have your own recession in 2010 if you're looking at government budgets.
Indeed, you know, but a company like mine is actually planning for that, because we are looking at new ways of delivering public services that -- so that we can do that on a restricted budget.
STEPHANIE ELSY, GROUP DIRECTOR, SERCO GROUP: Our business is in the support services sector. And so far, we've been relatively well insulated from the impact of the -- the global recession.
BOULDEN: A lot of people here told me today they're hiring.
Would you say your field is -- is it static or are you looking for more people, if you didn't make a lot of cuts, does that mean you're not doing a lot of hiring, as well?
ELSY: Well, we -- we are doing a lot of hiring in lots of parts of our business. Like everybody, you know, we go through periods of rationalization and restructuring, which we do on an ongoing process to try and make ourselves more efficient. But we're actually improving in many parts of the world.
BOULDEN: I'm hearing a lot of optimism in the room from most of the people I've spoken to. You're not one of them.
How bad has it been for manufacturing, especially in the West Midlands in England?
PETER WALL, CHAIRMAN, W.G. EATON: Well, I think, unfortunately, the -- the -- the upturn, so-called, and particularly the sort of spin that is associated with the stock markets bouncing and the banks being recovered, etc. Has not come through to the manufacturing sector.
ANGELA MORTIMER, DIRECTOR, ANGELA MORTIMER GROUP: What we're seeing is the introduction to the new, smaller companies, people breaking away and starting up new companies and some of the strength in the economy has been coming from there, which hasn't been too (INAUDIBLE).
BOULDEN: That's one of the things that comes out of a recession that people don't talk about a lot, is that a lot of people strike out on their own and they actually create companies out of the ashes. And that actually is how you get a lot more jobs.
MORTIMER: And that's exactly right. Normally, you have the (INAUDIBLE) talking, so they're just all about (INAUDIBLE), particularly among (INAUDIBLE).
(END VIDEO TAPE)
QUEST: Jim Boulden reporting there on the CBI conference.
A solid start, Wall Street -- you've only seen what happened in the euro bourses. Gains of more than 2 percent for the euro bourses.
In New York at the moment, up 1 percent.
Why should it -- well, what was the effect of these housing numbers, in just a moment.
QUEST: OK. We told you that New York was gaining more than 1 percent. The Dow Jones up over 100 points.
Look at that. There we are. Even before you can say it, up 113.
What's the reason behind it?
We need to be in New York at the New York Stock Exchange to find out.
And for that, it is Susan Lisovicz at the Stock Exchange.
I alluded earlier in this broadcast to the fact that -- I don't know why I'm being so long-winded tonight.
Housing sales were...
QUEST: ...were up quite sharply this -- a 10 year high or something.
Is it really the reason why it went up that much?
SUSAN LISOVICZ, CNN CORRESPONDENT: No. It just -- it just gave the bulls a little bit more room to run, Richard. The fact is 30 minutes before that report came out, the opening bell rang and we had a sharply higher rally. We had, you know, a couple of things. One is that we're coming off of three days of losses. We had the nice rally overseas, suggesting that things across the pond are getting better.
We had the dollar getting beat up. And so you know what that means. You -- a flight into commodities. Gold hitting a new all time high.
Oh, and we had a survey that was released today from an economist group that said the bottom of the job losses will occur in the first quarter of the new year and then after that, you will start to see job growth, albeit slow.
So this is just sort of icing on the cake. And, actually, we're off - - off our highs of the session right now and pretty much where we were before that report came out, Richard.
QUEST: Going to -- an interesting week this week, because it's Thanksgiving, if I'm not mistaken and the shopping season. So, of course, it will be a shortened week for Lisovicz.
QUEST: Well, it is. But the shopping -- the main shopping for Christmas kicks off, although you and I have thought that it's -- it's already underway.
Is anybody expecting it to be a particularly good season?
LISOVICZ: No. No, not really. And -- and what -- what retailers need to do -- and they're certainly learned it coming off -- if they survived last year's holiday season, is that you have to keep your inventories very tight, very controlled. You have to -- you have to price aggressively, because if you're not, your arch competitors are. No question about it.
I mean, Wal-Mart started putting, you know, the best-selling toys and the most popular toys on sale months ago. You know, other retailers are bringing layaway, something that, you know, began during the depths of the Depression and something that really had lost favor during the boom years.
So it's a very tough time for retailers. And once again, only the strongest will survive. We'll probably have some fallout in the new year as a result.
QUEST: Well, one can always rely on Susan Lisovicz in New York to be the harbinger of cheer in the festive holiday season.
LISOVICZ: I am doing my part and I will be shopping over the weekend, Richard. And if you keep it up, I might have to cross you off the list.
QUEST: Instead, she's just crossing her arms.
Susan Lisovicz, with the Dow up 115 points.
We thank you for that.
In just a moment, when we return, we continue discussions with the chief economist -- the managing director of IMF. This time, we're going to be talking about the Chinese currency and the yuan and the view that China, at some point, does have to allow the yuan to appreciate. Dominique Strauss-Kahn says the waiting may soon be over.
(BEGIN VIDEO CLIP)
STRAUSS-KAHN: I do believe that we're going to see, in the coming -- in moving forward, the yuan will be appreciated. And will -- the yuan will be, as (INAUDIBLE) all other Asian currency.
(END VIDEO CLIP)
QUEST: And we'll have that interview in just a moment.
Now, also ahead, Susan Boyle's debut album was released today and it's already set a record.
QUEST: It's the most preordered CD in the history of Amazon. We're talking about Susan Boyle.
Has she been dividing opinion in the newsroom all day?
We want to know what you think of the reality TV contestant who became an overnight singing sensation. Atrichardquest is Twitter address.
Is the Boyle just about bust?
QUEST: Good evening.
I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN.
Beijing is under mounting pressure to let its currency, the yuan, rise against the U.S. dollar. The two have been effectively pegged since 2008. So far, China has refused to budge, despite complaints that the arrangement creates global imbalances.
Last week's visit by President Obama failed to convince the Chinese to allow their currency to appreciate.
In the second part of my interview with the IMF head, Dominique Strauss-Kahn, I asked what more could be done to convince the Chinese to let yuan go up.
STRAUSS-KAHN: I think the Chinese will move when they will understand that it's in their own interests to move, not only that it's in the interests of the global economy. And I think that (INAUDIBLE) to explain to the Chinese, which clearly you understand things, that with the new plan they have implemented, namely having a more domestic growth led -- domestic led growth model -- and export-led growth model they've had in the past, it's consistent to have this revaluation of their currency.
So it goes together. It's -- it's part of the plan.
QUEST: OK, but they've heard it from President Obama. They've heard it from yourself. They've heard it from every financial commentator in the world and lots of prime ministers and presidents and Southeast Asian economists and it still hasn't happened.
STRAUSS-KAHN: Yes, because you shouldn't argue only in telling them that it's in the interests of the global economy, do it for us. You have to explain to them that it's in the interests of you. And until now, they hadn't chosen to shift their model to a more domestic-led growth model. Now, it's consistent with this model to do it.
So, it's not going to happen overnight. These kind of -- of things take time. But I do believe that we're going to see, in the coming -- in looking forward, the yuan will be appreciated and will -- the yuan will be, as you rightly said, all other Asian currencies.
QUEST: If we do not see that, what is the down side to that?
STRAUSS-KAHN: Well, if we do not see that, then there's a big risk of those imbalances creating distortion and a kind of, you know, a disruptive solution, which, again, will be bad for the Chinese themselves. That's why they have, also, interests in taking care about the global economy. When you become a bigger partner than in the past, you have more at stake.
(END VIDEO TAPE)
QUEST: And that, of course, was Dominique Strauss-Khan, the managing director of the IMF.
The Indian prime minister, Manmohan Singh will be talking about currencies this week when he visits the United States. Prime Minister Singh has been talking about the dollar to our Fareed Zakaria. And he says we shouldn't write off the U.S. currency -- not just yet.
MANMOHAN SINGH, PRIME MINISTER OF INDIA: Well, there is a temporary setback, there's a temporary questioning about the relevance of the American model. But I've these things much before. I think way back in the late '60s, a very famous economist at Yale, Professor Robert Triffin, wrote that very famous book, "Gold and the Dollar Crisis," and saying the days of the dollar as the reserve currency of the world are over, that the United States should take -- take a lead to move to a more neutral dissolve asset.
But things change. And the United States recovered from a difficult economic situation. It has shown remarkable capacity to bounce back -- the entrepreneurial spirit, which is a hallmark of the American enterprise system. I have no doubt that these things are not permanent, irreversible shifts, but that the American economy has the capacity to bounce back to its normal growth point.
FAREED ZAKARIA, HOST, "FAREED ZAKARIA GPS: So the Russian government and the Chinese government, in various ways, have been suggesting or hinting that they might prefer a world without the dollar as the reserve currency.
You do not share that view?
SINGH: No, no. The power to create money is an index of power of patience. And as far as I can see right now, there is no substitute for the dollar.
(END VIDEO TAPE)
QUEST: And, indeed, Manmohan Singh's views are widely shared in the market.
The prime minister of India talking to Fareed Zakaria.
When it comes to investing, you might be a gutsy, go for the glory risk taker, or, indeed, you might play it safe -- you stash your guns (ph) in the mattress, that sort of saver. There's a simple test that can help you decide which you are. Our Biz Clinic, after the break.
QUEST: Investing in uncertain times -- it requires nerves of steel -- a question of just how much risk can you stomach. It is the core issue that goes to the very heart of all of our investing strategies.
We want to make the big bucks, but do we have the nerves of steel necessary to see it through?
For this week's Biz Clinic, Morgan Neill took a series of tests. His goal -- to determine his own financial stress.
MORGAN NEILL, CNN HAVANA BUREAU CHIEF: As an investor, when you look for your options, what do you see?
All different levels of risk. You've got stocks, bonds, commodities, real estate. The choices can be bewildering.
So how do you know what's right for you?
One way is by taking what's called a risk tolerance questionnaire. Now, these are short tests given out by banks, asset managers, universities and even some consumer Web sites. And what they try to do is gauge how comfortable you are with taking risks as a way toward setting your goals.
Are you a gambler looking for quick returns?
Are you a new parent trying to put your kids through school 15 years from now?
(voice-over): To get an idea of what's involved, I'm taking three tests to see what they tell me about my financial personality and, more importantly, where I should be putting my money.
(on camera): So what kind of questions do these tests ask?
Well, generally, they're fairly straightforward, like this one -- "what is your most important investment goal?"
Well, in my case, it's to protect my assets against losses, really, above anything else.
Then there are a series of statements that you can disagree or agree with. For example, "I want a guaranteed income from my investments, even if I have to accept a lower rate of return."
Well, I completely disagree with that one. I'm not as interested in having that guaranteed income.
Then from there, we move on. There's another -- "I cannot afford to lose my assets even if it means lowering the chances of a good return."
Well, I absolutely agree with that one. I do not want to lose my assets. It's all about saving and building over time for me.
And then finally, "I want to be sure that I can sell all or parts of my portfolio quickly if I have a need for liquidity."
And that's something I neither agree nor disagree. Liquidity not a huge priority for me.
(voice-over): But just who do these tests serve?
We spoke to one analyst who said in addition to helping clients figure out how to allocate their assets, they also protect investment advisers from litigation in case their advice doesn't turn out well.
UNIDENTIFIED MALE: The potential investor or client has got to (INAUDIBLE) the box. And he's got to (INAUDIBLE) every single box imaginable so that there is no come back and no recourse to any investment advice that may be given that could conceivably go wrong. And that's where I think fund managers and wealth managers have got to cover themselves.
NEILL: (on camera): Well, the results of the three tests are in. So let's take a look at just what kind of investor I am.
They're all pretty consistent, really. All of them had me somewhere between a balanced and an aggressive investor.
(voice-over): What does that mean?
A mix, I'm told, of moderate risk items, index funds and large cap stocks, with higher risk investments like emerging market funds and international mutual funds. Individual banks and investment houses can certainly tailor your results much more specifically. But not a bad start, really, toward getting a sense of your financial personality.
Morgan Neill, CNN, London.
(END VIDEO TAPE)
QUEST: Now, that we know how to gauge how much of a daredevil you might be, let's get a reading on investors, in general, as we head toward the year end.
Now is the time to make those decisions.
Maggie Lake is in New York.
The strategists consistently tell us to have a balanced portfolio. Hah.
MAGGIE LAKE, CNN CORRESPONDENT: Yes, that's right, easier said than done. They also tell us to think long-term, but I tell you, when you're sitting here looking at these markets, it's so hard to know what to do, because there's a lot of confusion or strange things going on.
You're looking at gold hitting record highs, the dollar and the U.S. stock market linked in a way that they've never seemed to be before.
And one headline that caught my eye this morning, Richard, when I came in, 3-Month Treasury Bills -- very, very short-term U.S. government money. The yields on that negative for the first time since the credit markets were frozen last year.
It seems odd considering the fact that we're supposed to be on a path to recovery.
So I talked to a market strategist down at the CME in Chicago and asked him what we should make of it all.
He had very interesting things to say.
Have a listen.
(BEGIN VIDEO CLIP)
PETER YASTROW, MARKET STRATEGIST, YASTROW ORIGER: Yes, I liken it to a safety deposit box. People would pay money to a bank to keep their valuables safe. And that's kind of how the -- the rate -- the negative rate should be viewed for consumers and -- and non-market participants.
But to think about it, why would someone be willing to take a zero rate and why are they so quick to accept that?
I think you have to understand that there are more ominous things happening out there. And the fact that people are willing to take a zero rate, whether it's year end or not, indicates that the credit markets are not operating smoothly and there is not a healthy demand for credit. And that is why we're in this situation that's basically unprecedented in our lifetimes.
(END VIDEO CLIP)
LAKE: Credit markets not operating smoothly. I don't know about you, Richard, but that makes me very nervous.
Now, obviously, things have backed off a little bit as the stock market had rallied. But I have to tell you, I talked to another analyst who I know is not nearly as bearish. He actually does think the U.S. economy is slowly going to improve. But he agrees, short-term, this all feels fake. And he's worried about something sort of blowing up in the near term.
So, a lot of people saying these markets don't really reflect fundamentals; instead, they reflect a lot of sort of speculation.
QUEST: Maggie, you and I -- I'm going to go out on a limb here. Maggie, you and I have beaten this horse that the recovery is not real, that the market is going to crash, that things are going to go to hell in a hand basket -- you and I have beaten this horse until it's dead. In the time that we've been talking about it, other people have made serious money.
LAKE: You're absolutely right, Richard. And I said that. We were talking about that today, that it doesn't matter necessarily how you feel or how worried you are. If you were in the market until now, you're making money, but it's short-term. You have to remember that.
The other thing is, the reason I brought up that other -- that other money manager I was talking to is you're right, we are worrying about some of the short-term things that don't look like they're operating normally. But there are people who, longer-term, if you take a long-term perspective, do believe that things are getting better and that corporate profits are going to improve.
It's the short-term you have to worry about. That doesn't mean you take yourself out of the action, it just means that you don't blindly buy into the fact that the Dow is rallying, therefore, recovery must be right around the corner. You have to be smarter. You have to be a stock picker. That's all we're saying.
QUEST: All right. And the only caveat to what Maggie and I have said is that nothing that we say should be taken as being advice to buy anything.
QUEST: I mean would you buy a -- would you buy a used care from yourself?
LAKE: No, absolutely. Hey, if I could pick that kind of stuff, Richard, I wouldn't be doing this job, and neither would you.
QUEST: And I'd still have a shirt on me back.
Maggie Lake in New York.
We thank you.
All right, one part of forecasting that can be just as difficult, perhaps even more than stock picking, but it's got a lot more science to it, is the weather forecast. That's a tortured way of getting to Guillermo at the World Weather Center.
GUILLERMO ARDUINO, CNN METEOROLOGIST: And especially when it gets -- when it comes to Great Britain, it is the most difficult today you can imagine.
Now, we are lucky that, as time goes by, we get better and better models that are calculus -- the computers come up with -- and with forecasts. And they are actually very accurate.
So, I'm going to tell you what's going to happen with Great Britain. We are going to see the return of the rain. In one hour or so, in Cornwall here, we will start seeing the rain with a new system that is arriving.
But, in fact, we're more concerned about the north.
So what's going to happen in those areas that were flooded?
Well, we are going to get -- once again, we are going to get rain again. We're talking about like 100 millimeters or so.
Now, this is where I become a little bit uncomfortable, because last week, before this, it was forecast that we were going to see 100 millimeters and we saw much more. But certainly we have to trust that -- what the models are suggesting right now. The winds are coming back. You're going to have a nightmare at airports in Northern Europe. The rain is coming back in the area of 100 millimeters.
Take London, for example. It's not going to be bad because the problem is in the north again. So we'll see partly cloudy skies probably Wednesday and Thursday, and tomorrow mostly cloudy skies, because that front is going to go and go away and affect northern fronts, as well, the Netherlands, Northern Germany, from Schleswig-Holstein all the way into Pontevedra in Northern parts of Spain, we have alerts of intense winds.
And that's what's going to happen with these low pressure centers.
Not much going on in the south, as you see. But Germany, the Netherlands, Belgium, Luxembourg, Northern France, Great Britain overall, Ireland and Northern Spain, Scandinavia, Denmark here, Sweden and Norway with intense winds.
I told you it was going to be a nightmare, right?
Look at the charts behind me. Windy conditions all over throughout the day and throughout the night, from London's Heathrow to Brussels.
Some other cities for you. Look at Frankfurt, the same thing; Copenhagen; Zurich. This is a change, because we were not seeing wind in the Alpine region. We are going to see that. You see how it dips down into here and brings all the unstable weather into those areas, too.
Look at this low, how it's now traveling into Scandinavia. That's where the bad weather is going to be.
Look at how this front is all loaded with a lot of precipitation and clouds. That is going to make it into Great Britain. We hope that it's not going to be as bad as what we saw before. Temperature wise, we see a change overall. Not here in terms of the double digits. They are still hanging out there. But you have the wind. So it doesn't feel, actually, that comfortable.
And in the south, Spain saying good-bye to the 20s. Athens very soon saying good-bye to the 20s, as well. We see a gradual change. So get ready for that.
But the good news -- and I end with this -- Madrid, no problems; Rome, Milano, no problems at all; Germany, as I told you, all the way up into Neibul (ph) in the northern parts of the country. If you are watching from Germany, you know what I'm talking about. They're very next to Denmark is where the will -- the wind will prevail.
Stay with us.
Richard will be back after this break.
QUEST: Welcome back.
Well, (INAUDIBLE) has made its first CD from the "Britain Got Talent" runner-up, Susan Boyle. It came out today. It's already set a record. "I Dreamed A Dream" is the most preordered CD in the history of Amazon.
CNN's Ayesha Durgahee takes a look behind the hype.
AYESHA DURGAHEE, CNN CORRESPONDENT (voice-over): She sang and surprised us all.
UNIDENTIFIED FEMALE: Susan Boyle.
DURGAHEE: The Scottish woman who volunteers at her local church appeared to be a mouse (ph) on the stage on reality show, "Britain's Got Talent" before unleashing her mighty vocals.
DURGAHEE: Now, this unlikely singing sensation is back for a second act with a debut album.
(on camera): In music stores across London, a huge fuss isn't being made of Susan Boyle's debut album. There are no big stands or posters of her, apart from a few copies of her album in the new releases section. So far in this store, 80 copies have been sold. But if you go online, it's a completely different story.
(voice-over): Boyle's album has generated more preorder CD sales globally on Amazon than any other artist in the entire history of the online music store. The number of sales confirms that since winning over the judges and receiving international attention both on television and online, people want to listen to Susan Boyle.
(BEGIN VIDEO CLIP FROM TALKBACKTHAMES/COTV, CO-PRODUCED FOR ITV 1)
SUSAN BOYLE: Why should I change?
(END VIDEO CLIP)
DURGAHEE: After ultimately losing "Britain's Got Talent" and coping with the stress of her sudden fame, Susan Boyle has bounced back, apparent on "The X Factor" singing one of the songs from her debut album.
DURGAHEE: Now center stage once again and ready to win over new fans.
Ayesha Durgahee, CNN, London.
(END VIDEO TAPE)
QUEST: Even the Rolling Stones seem to have taken note of the Boyle phenomenon. As you heard, a cover their 1971 song, "Wild Horses," is the first single off her album. Today, The Stones reissued the song on a major download site, no doubt intending to capitalize on its renewed popular -- popularity.
Somehow, I never thought that Mick Jagger and Susan Boyle would go together in the same story.
All right, the Tweets. I asked earlier in the day atrichardquest whether or not you felt that Susan Boyle had burst.
Here's some of your -- your answers.
J.G. Onoyle -- O'Neill (ph): "A bounty of Boyles, a Boyle blitz, subo (ph) superstar."
Desbi 2008 (ph): "She has the talent, she has the energy and I'm sure her album will do well. That's my two cents."
Now for the alliteration which we never got to, to an e-mail that came to firstname.lastname@example.org from Guy Slocomb (ph): "Talent is not enough. Like all talented people, her future will depend on how effectively she's managed and how she copes personally with success."
And one more, if I can manage to get to me -- the right screen. All this -- oh, here we go.
Laura the expat -- we can always rely on Laura for the alliteration that we seek at most: "Boyle's ballads bring a bag full of brilliance to battle the brainless babes who bark out musical baloney. Bravo Ms. Boyle."
The epic film, "Titanic," holds the record for the highest grossing movie of all time. It pulled in more than $600 million. Even I had to read that number again to make sure it was right.
The film's director, James Cameron, is now putting the final touches to his new blockbuster, "Avatar," which he has been four years in the making.
Jason Carroll has our report.
JASON CARROLL, CNN CORRESPONDENT: (voice-over): He made millions terminating mankind...
(BEGIN VIDEO CLIP, COURTESY ORION PICTURES)
ARNOLD SCHWARZENEGGER, ACTOR: Hasta la vista baby.
(END VIDEO CLIP)
CARROLL: -- battling aliens. And when critics thought he couldn't top himself...
(BEGIN VIDEO CLIP FROM "TITANIC," COURTESY PARAMOUNT PICTURES)
UNIDENTIFIED MALE: Iceberg right ahead.
(END VIDEO CLIP)
CARROLL: James Cameron sunk the Titanic, making the highest grossing film of all time, winning 11 Academy Awards.
JAMES CAMERON, DIRECTOR, "AVATAR": I'm the king of the world!
CARROLL: Cameron has a thing for worlds. This time it's Avatar's world.
CAMERON: We challenged ourselves on this film to go beyond what we collectively knew.
(BEGIN VIDEO CLIP FROM "AVATAR," COURTESY TWENTIETH CENTURY FOX)
UNIDENTIFIED FEMALE: Things fly.
UNIDENTIFIED MALE: Fly?
(END VIDEO CLIP)
CARROLL: This is Cameron's imaginary planet, Pandora, inhabited by luminescent creatures and blue-hued indigenous aliens. Humans can't survive on Pandora. Special technology allows them to live through avatars, which look like the planet's giant blue natives. (BEGIN VIDEO CLIP FROM "AVATAR," COURTESY TWENTIETH CENTURY FOX)
UNIDENTIFIED MALE: This is your avatar, M.J.
(END VIDEO CLIP)
CARROLL: Cameron calls it a classic adventure with a love story -- due in theaters December 18th and still unfinished.
This is an actual sound effects editing session. Opinions here are encouraged, but it's clear who the boss is.
UNIDENTIFIED MALE: It was great.
CAMERON: When you direct your movie, you can do it any way you like.
UNIDENTIFIED MALE: No, I don't want to do that.
CARROLL: Cameron knows "Avatar" is under intense scrutiny. Costing $237 million and counting, it could be the most expensive movie ever made.
(on camera): A lot of money spent on "Avatar," lot of pressure.
Are you feeling the pressure?
CAMERON: Sure. I mean, you always do on a film. I think pressure is good for film makers.
CARROLL: Cameron showed me where much of the money is being spent -- visual effects.
CAMERON: There's like 3,000 visual effects. And the way we did it.
CARROLL: What, 3,000 visual effects?
CAMERON: Yes. Pretty much every shot in the film is a visual effect.
CARROLL: Good God.
CARROLL: That's a lot.
CAMERON: That's what the studio said too, good God.
CARROLL (voice-over): Cameron actually updated technology, allowing him to mix 3-D, computer animation and live action to bring actors like Zoe Saldana to life.
CAMERON: So the trick was to get everything that she had done into her -- her character.
CARROLL: Fans can't wait, but some critics already saying Cameron's avatars look more like giant smurfs.
(on camera): Does it make you nervous?
CARROLL: what does it do?
CAMERON: Actually, honestly, a bit of relief. I think if everybody was embracing the film before the fact, you know, the film could never live up to that expectation.
(BEGIN VIDEO CLIP FROM "AVATAR," COURTESY TWENTIETH CENTURY FOX)
UNIDENTIFIED MALE: You're not in Kansas anymore.
(END VIDEO CLIP)
CAMERON: I think the film -- the film stands, you know, stands for itself. And as -- and we're going to get our fair day in court.
(END VIDEO TAPE)
QUEST: Fascinating. And it's one thing of which I know for a fact, none of you will necessarily agree with each other if we were to ask your opinion, however tough.
OK, the markets are open in New York. It's one of those days where we do need to keep you informed because there -- there is a bit of a rally going on, up 123, 1.2 percent.
When we come back in just a moment, I will have in here a Profitable Moment.
Is that what you say to that?
QUEST: Finally, tonight's Profitable Moment.
On this show, you've heard two distinguished leaders in the field of economics tonight. Dominique Strauss-Kahn warned that now is not the time to pull back on country's stimulus packages. Countries need to have plans ready for when things do pick up. He reminded us that there is an eight month gap between when growth returns to most countries and when you get to the top of the unemployment curve. Only after that does unemployment start falling. And that's when stimulus packages need to be withdrawn.
Also, Britain's top regulator told me his goal is to ensure that future banking crises don't become global calamities.
These are the voices of the men who have the nasty task of rebuilding the global economy -- , piece by piece, bank by bank. Shocked by what happened, bitten by experience, they are the people we've entrusted to put things right. And since banking and financial crises are inevitable, Lord Turner summed it up -- we have to ensure smaller crises in 50 years time, rather than the same again 15 years from now.
And so say all of us.
And that's QUEST MEANS BUSINESS for tonight.
I'm Richard Quest in London.
Whatever you're up to in the hours ahead, I hope it's profitable.
Christiane is next, after the headlines from the I Desk.