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QUEST MEANS BUSINESS
Victims of Haiti Earthquake Await Help; Snapshot of Earnings Season
Aired January 18, 2010 - 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, QUEST MEANS BUSINESS: Tonight, victims in Haiti wait for help. We're going to dissect the logistics of aid.
Markets and mergers, they were the talk of the town and the market.
And a new year, and the balloons are back. We have a snapshot on the earnings season. It is the Q25.
I'm Richard Quest. The start of a busy week, where I mean business.
Almost a week now since the earthquake in Haiti struck and some international aid is beginning to get through. U.S. officials say several thousand troops have now arrived on the island and thousands more are on their way. The effort is being hampered by bottlenecks within the transport system. The sheer scale of what is needed means it will take time to reach all the victims.
The military says Port-au-Prince airport is operating at maximum capacity 24 hours a day, however, medical aid organization, Doctors Without Borders said its plane couldn't land, a cargo aircraft, couldn't land on Sunday. The plane, which was carrying an inflatable hospital, had to divert to the Dominican Republic. It is traveling the rest of the way by road. That will delay its arrival by one more day. A second plane sent by the same organization landed on Sunday.
Haiti is, of course, in urgent need of police and troops, according to the U.N. Secretary-General Ban Ki-Moon, who says he now wants 1,500 more U.N. police and another 2,000 troops to be on the ground.
(BEGIN VIDEO CLIP)
BAN KI-MOON, SECRETARY-GENERAL, UNITED NATIONS: From my conversations with people on the street yesterday I heard a clear message from them. They said we need the United Nations. We need jobs, we need food, and water. Help has been arriving. More is coming. But for those who have lost everything, I know that aid cannot come soon enough.
(END VIDEO CLIP)
The aid issue is now the talk of the hour. Where is the aid and why is it taking so long to get there? Or was this an inevitability in an area that has been devastated? Jonathan Mann, now live from Port-au-Prince.
Jonathan, we are trying to dissect what it is that has gone wrong, if anything, in the aid operation?
JONATHAN MANN, CNN INT'L. ANCHOR: Well, you know, Richard, some people are saying aid is beginning to trickle in but you'd have to measure that trickle in the tons, in the hundreds of tons. What you are seeing is the inevitably slow start up to an immeasurably large operation. This is of a scale that obviously no one expected before the earthquake, and I'm not sure anyone has ever really mounted.
Already today, and this is day six, the World Food Program, of the United Nations says it plans to distribute 200 tons of food, 95,000 meals, at eight different locations in the city. That is scaled up from what it was yesterday, more than it was the day before, and less than the World Food Program says it will be giving out tomorrow. But there is still an awful lot of aid sitting at the airport, an enormous frustration.
But this here is what happens. The aid can be flown in, and even that was a bit of a problem, but the aid gets down in planes, at the airport, and then where does it go? To move food aid, out of the airport, to the people who need it, you need vehicles, the vehicles need fuel, the vehicles need security, they need drivers, and then the whole operation needs staff to make it happen. That, in essence, is why food in Haiti doesn't turn into full bellies in the streets of Port-au-Prince.
Where we are people are still saying they haven't seen any sign of aid. They haven't seen any sign that the government or the international aid organizations are looking out for them. And the truth is they probably haven't. We are near the ruins of the presidential palace, in the center of the city. That aid is spread out throughout the city of between 2 and 3 million people, and so much of it is still waiting for infrastructure. Waiting for people, waiting for gasoline and trucks, out at the airport, Richard.
QUEST: OK, let's get into that issue, Jonathan. Because the question, and bearing in mind to some extent we are talking on a business program. But the question is, is it reasonable five or six days into a disaster of this scale, that only now that level of logistic support could realistically have been put in place? The critics who say otherwise, are they simply being unrealistic?
MANN: You know, the critics may know a whole lot more about this than I do. I am struck by two things. The scale of this disaster, 250,000 people, by the government's estimate, who are homeless, and who as a result, obviously, are not carrying their kitchens or their cabinets around with them. A quarter of a million people who need the government's help for sure. Think of all the people in homes who know, six days after the earthquake have run out of food because there are no stores, there are no banks open.
Some commerce is starting, but think of the enormous need. It could be that in some, in some universe, smarter people could have been ready to feed 300,000, or 400,000, or 500,000 in one of the world's poorest countries. But this country already imports, on a good day, before the earthquake, half of all the food it needs. That entire daily consumption of food has been cut off, because the imports are cut off. Add to all that, the people who needed food who didn't need it before, it is a disaster. It is a disaster of enormous proportion. Maybe smarter people could be doing this better. There are a lot of smart, hardworking and expert people who are doing the best they can from all over the world.
If my wife or child was out there under the rubble, or if I was out there, without food or water for six days, I would be demanding answers. But from the looks of it, I can't imagine people doing dramatically better than they are doing now. This is just beyond anyone's scale to imagine or organize. And they are, after all, getting this organized; 95,000 people, through the World Food Program, will be fed today, Richard.
QUEST: Jonathan Mann, joining us from Port-au-Prince. And we continue that thought with Rigoberto Giron, who joins me from the CNN Center.
Rigoberto is head of emergency response at CARE International, one of the charities working right now, in Haiti.
And Rigoberto, the issue that we are trying to get to grips with, the people are saying the aid isn't getting there. The aid is slow. But there an inevitability in scale and size, particularly in an area where there is simply devastation. That it was always going to take a week to 10 days to get the operation up to size and scale?
RIGOBERTO GIRON, DIR., EMERGENCY RESPONSE, CARE INT'L.: Yes, what we need to understand is the scale of the emergency in Haiti is one that happened in a very highly populated city. It is a city that was originally designed for 40,000, 50,000 people and now houses over 2 million. And the construction practices and all of that infrastructure, poor infrastructure, that it has does hinder an effective emergency response.
At the time being, what you are going to see is an emphasis on getting the pipeline full. The airport being restored to operations, the port, hopefully at some point. And obviously creating a logistical hub out of the Dominican Republic.
QUEST: But so to -not putting words in your mouth, but if I understand you correctly, you are saying you are not surprised that it is, you know, five days on, and only now is that aid pipeline filling up.
GIRON: In terms of what we can expect, I think that what you are seeing is what the international community strives to do. Set up logistical operations in the very early on, you have a city that has been devastated and needs to be cleaned up. So, yes, I think we have seen this before in other situations. It reminds me of the Asian tsunami in 2004. And because of the contained nature of Port-au-Prince, this is what I would expect to see for a few more days.
QUEST: Now, one of the people from the World Food Program, WFP, is quoted as saying the confusion in the early stages of an emergency operation is normal. Now, it may be distressing, and it may -you know, God forbid, cause further loss of life. But short of taking further risks, what more can you do?
GIRON: Well, for the time being, obviously, what we want is to provide immediate life saving assistance to those in need. Food, water, shelter are the main needs at the moment. However, we also need to make sure that psycho-social issues are addressed. Those are often overlooked. There is a significant amount of trauma in the capital city.
And also, vulnerable groups, like women and girls, pregnant and lactating women, in particular, need to be taken care of. And that is something that CARE, as an agency, is looking after.
QUEST: And finally, at what point, what point do you believe sizable and systemic aid that will make a difference will arrive and the pipeline be complete?
GIRON: I would expect that happening within the next few days. For instance, CARE is bringing in a plane load of relief supplies. We already have our logistical hub set up in Port-au-Prince. Staff that were outside of Port-au-Prince are coming back. Not only CARE but other agencies are also ramping up their efforts. So, I would see a significant amount of relief flowing out in the next few days.
QUEST: Rigoberto, many thanks, indeed for joining us. From CARE, at the CNN Center.
A story that we are following for you, from Haiti. We are getting details of looting and violence breaking out in parts of the country. CNN's Anderson Cooper is on the line with the latest.
Anderson, when we talk about looting or when you report this, what is actually taking place? What is being taken and for what purpose?
ANDERSON COOPER, CNN CORRESPONDENT: Well, this isn't starving people, you know, trying to grab for food. This is in downtown Port-au-Prince, very close to the National Cathedral, in an area of shops where there are supplies and there are food stocks. And this happened to be a store filled with candles.
Hundreds of people descended, on this, they have broken in through the roof. And they were basically stealing boxes of candles and they were selling them right there to women. A number of young men had gotten control of the rooftop, gotten control of the flow of goods in and out of this store. And they essentially were setting up a business. It quickly turned violent. It quickly turned very aggressive, as a number of people tried to maintain control.
There was an American businessman there. A man by the name of Tony Bennett, who owns two stores. He is a young man who, he had a Glock in waist. He had two Haitian police officers with him. They would occasionally fire into the air via their automatic weapons. But the crowd would pay very little attention, they would disperse for a few moments. And then they would quickly run back and just start stealing again.
You know, this is not - a lot of folks in Port-au-Prince do not approve of this. And just a few blocks away, people were saying to me, as I was running toward the scene. You know, this isn't right. This is not hungry people looking for food. This is young, you know, taking advantage of a situation and stealing what they can.
It turned violent as more young men began to appear and the strong battled the weak. Someone would take out a burlap sack filled with goods and then a number of young men, four to five, would descend on that person trying to steal their goods from them. They started arming themselves with pieces of two-by-fours.
I just heard more shooting now, in the distance, more Haitian police officers firing into the air, trying to control the crowd. But again, the crowd runs away for a short time, and then they come right back. These young men, I saw screwdrivers. I saw men with large knives. They started to hit one another. I saw people being hit with two-by-fours. I saw a young man being whipped by another young man with a belt.
Then, finally, it got to the point where somebody on top of the store began throwing rocks from the top of the store, pieces of rubble down into the crowd. A young boy, I'm estimating about 10 or 11 years old, was hit in the head. He collapsed on the ground and was incoherent, as blood was pouring from his head. I was able to actually run in and get him and bring him out, because no one else was doing anything. Everybody was running away and not paying attention to this little boy.
QUEST: Anderson Cooper. And, Anderson, while you were giving us commentary on the events we were indeed looking at the pictures of that criminality at the candle warehouse. Anderson Cooper, joining me live from Port-au-Prince.
Where, indeed, we can hear the gunshots being into the air.
CNN's coverage will, of course, be complete and full in less than an hour. Christiane Amanpour will be talking live to the U.N. Secretary- General Ban Ki-Moon. It is his first interview since he traveled to Haiti over the weekend.
"WORLD ONE" at 20:30 London time, 21:30 Europe. Fionnuala will look at the families still hoping to get word that loved ones survived, via our web site, CNN.com/haitimissing. Becky Anderson on "CONNECT THE WORLD" looks at why aid is still not getting to the people who it most. And with that our coverage continues with "BACK STORY", journalists as doctors. Our very own Sanjay Gupta talks about meeting the demands of two professions amid a tragedy.
So, the news headlines, or other news headlines that you need to be aware of, we are grateful Jim Clancy is with us now, from the CNN Center.
QUEST: QUEST MEANS BUSINESS, in a moment, the markets. Now, one factor that was missing form last year's big share price rally, I hesitate to call it mega-merger, mega-mania, but something odd is going on, in a moment.
QUEST: The cold weather of Britain is still sort of resting on my chest.
Europe's main stock markets ended the day higher, taking a look at the numbers. Perhaps they don't tell the full story. Because the gains that you saw, roughly .75 of a percentage point for the two majors, the FTSE and DAX, with the CAC, but the reason -the reason, was of course we were seeing perhaps, potentially, quite a bit of M&A activity. At least people talking about M&A activity in the market.
Now, in just a moment, this gentleman, David Simpson, the global head of M&A at KPMG, is going to be telling me exactly how significant it all is, and whether it is going to be a major shift in 2010.
But first, we need to put some perspective on the deals that are out there at the moment, and the ones that we are seeing. For instance, join me over here, in the library, where we can talk about Cadbury's. Now, just at 24 hours before Kraft has to put up or put out, in other words, are they going to improve their offer at just about 8 pounds, but some top shareholders say they won't accept Cadbury's - they won't go for the Kraft offer unless it hits 9 pounds a share, that would put it at 20 billion, for Cadbury's. Cadbury share were up 1.7 percent. The deadline for Kraft to do something, under the take over rules, is tomorrow. That is Tuesday night.
This is an interesting one. All day, International Power and GDF Suez, the French company. The power company were in talks or in rumors of talks, and talks about talks, about talks. You know how this thing plays out. Was there a deal? In fact, IP was one of the biggest movers in the market. However, late in the day, the word came out the talks are off. That is the opposite side of buy on the rumor, sell on the news.
And there are other deals out there as well. Oracle and Sun with a $7-billion deal. Now, Oracle and Sun, that is bogged down amongst European regulars.
Overall, more M&A is expected in 2010. Join me over in the lounge, if you like.
One professional observer of the corporate scene reckons M&A is set for a rebound in 2010. The accountants at KPMG say a deal is growing. Last year analysts over-estimated corporate earnings by something like 20 percent. Now, that over-estimation took its toll, of course, on valuations. KPMG now says investors are taking a more realistic view.
If that realism is indeed borne out, then debt levels drop, deals become far more likely to be done. And according to Bloomberg, while mergers and acquisitions dropped 37 percent last year, to $1.75 trillion, that is less than half the record $4 trillion.
You get the idea. We have last year, we have the scenario this year, and now we need to know where we go from here.
David, we're up to date. David Simpson, is global head of M&A at KPMG.
DAVID SIMPSON, GLOBAL DIR., M&A KPMG: Richard.
QUEST: It is all now about realistic valuations?
SIMPSON: It is about realistic valuations, and it is about confidence, because confidence drives markets. We can see forward priced earnings ratios for 2010, higher than they were for 2009, a year ago. So corporate are seeing confidence coming back into the market. And you have summarized it extremely well for us.
Second thing we can see is that debt, as a percentage of earnings, is coming down for corporates. That is capacity. Take confidence and capacity and we see growth in M&A.
QUEST: The deals that are being done, though, or hoping to be done, they are very selective at the moment. They have got to have that synergistic ability, haven't they?
SIMPSON: They absolutely have. The big difference now, from two years ago, you recall the last merger boom. The last merger boom was lead by private equity, cheap money, private equity funds. This time around there is much less debt, so corporates have got to be very, very careful as to where they spend their money, and when they spend their money, and you will see a number of the deals being muted, talking about cash and shares, as well as just cash.
QUEST: So, when they -but are they doing it at all on debt? I mean, are they doing it to ramp up the debt, sell off bits and parts, or bond issuance?
SIMPSON: They are being a little bit more cautious than they used to be. But they are now seeing -
QUEST: So, they want money in the bank or they are using their own paper?
SIMPSON: They really want to have some money in the bank and they want to do the deals.
QUEST: Why then should we not believe that we're off to the races? In the sense of, what prevents if from getting out of control this time?
SIMPSON: There is still a big issue on debt. Even though debt as a multiple of earnings is forecast to drop, the banks aren't really lending yet.
QUEST: So where are they getting the money from?
SIMPSON: They are getting it from the bond markets and they are getting it from their existing bank lines, to the extent that that is available.
QUEST: And we saw bond issuance late last year, starting to hit some very impressive levels once again.
SIMPSON: We absolutely have. And we can also see the stock market beginning to open with the IPO perspective boom. So there is an opportunity for companies to sell a few more shares.
QUEST: I'm getting worried. Should I be getting worried, or is this really so early in the year? I mean, are we light at the end of the tunnel?
SIMPSON: We are not off to the races yet.
SIMPSON: But what we are seeing is, is we are seeing a bit of a move. We'll know we're off to the races when somebody who looks at the company being sold immediately thinks, that could be a bargain. Instead of thinking, as he does at the moment, I wonder why that company is being sold? Is it distressed?
QUEST: The deals that we talked about over on our board over there. And you've got Cadbury's, I mean, you know, it is unlikely to go at its current price, at the moment, isn't it? It is going to go for whatever. They are going to pretty much have to put up.
You have IT that was talking, they were talking big today, but that went no where fast. And you've the Oracle deal.
SIMPSON: So what we are seeing is we are seeing a lot more talk in the markets. We are still seeing caution, even though it is cautious optimism that we are seeing. And it is interesting that you raise the technology sector, because that is a sector, that is a sector, which has got much less debt than many other sectors. It has seen a lot of activity, in terms of technical progress. And we see a lot of companies at the bottom end of the technical sector who need some money to develop.
QUEST: Many thanks, indeed. Come back again during the year. Help us to understand it all. Many thanks, indeed.
SIMPSON: Thank you.
QUEST: We are talking about debt.
Appropriately enough. Some equally emotive (ph) subjects in just a moment. Rising taxes, job loses and a lingering recession. I'm describing London, or some people's view of it, anyway. We'll hear from someone who takes a more cheerful view of the city. It might just turn out all right after all.
QUEST: The threat of thousands of financial workers going overseas, has one of course been talking about in London, especially as bank bonus levies will start to bite. One man who represents the City of London is the lord mayor. He is the ambassador of London's financial district and, indeed, for the financial industry based in Britain.
Now, don't get confused. There is also the mayor of London, who is a completely separate post and a political post. The lord mayor is ceremonial, but he's also extremely important for the financial industry.
Jim Boulden met the current lord mayor, Nicholas Anstee and asked him how a general election in Britain will keep the heat on bankers and bonuses.
NICHOLAS ANSTEE, LORD MAYOR, CITY OF LONDON: What we are going to have to deal with between now and the election in terms of what our politicians are saying is perhaps a threat, perhaps rhetoric, perhaps reality. But we won't find out `til we get to beyond the election period.
As to how the city is behaving. The city is buoyant. And I don't mean buoyant just because of what is happening in the bonus area. I don't think there is euphoria in relation to the bonus issue. I think they are confident. I think there is a desire to stay in London. I think they can see that the markets are beginning to recover. They maybe fragile, but there is a certainly more optimistic mood today than there was this date last year.
JIM BOULDEN, CNN INT'L. CORRESPONDENT: You mention bonuses, you mention optimism, and whether people are moved. This threat seems to be hanging out there that some of the banks, some of the U.S. banks will expand, maybe some hedge funds won't move here. So you see no evidence that banks have already started to leave, or that they are not expanding in London?
ANSTEE: No, indeed, I think the number of individuals who are looking to move out of London was rather overplayed last week. What I have heard is not so much anecdotal evidence, but information that I actually believe in, which suggests a few number, a much lesser number of people have requested transfers to different locations. But those are people. They are not institutions. And I do wholly subscribe to the notion that the institutions that are here today will stay. Why? Because of the cluster effect; they want to be part of the City of London, the largest financial cluster that does exist on this planet.
We want to take the leadership in this -in an area of the development of the financial services industry over the next 10 years, as it inevitably will move more east, towards India and China, we still want to -as I have, a vision, or developing a vision for 2020 and what financial services industries should be, in London, in that year.
BOULDEN: You mention the bonuses, and some ways, you are sort of the face of the financial center here in London. Do you find it hard to sort of justify this bonus culture and what has been going on?
ANSTEE: Well, let's deal with the bonus issue first. First of all, I will not get involved, at all, in commenting on bonuses, other than when it impacts on the competitiveness of London. It is for the banks and the managers of those banks to make the decisions as to the levels of bonuses for their people.
In terms of bonuses as a concept, I don't have a problem with bonuses as a concept, as one way of driving and incentivizing individuals. So bonuses, per se, are not wrong. As a -- as a pontum (ph), I'm not going to get involved in that debate.
I'm interested on how the bonus attitude impacts on our government and how they behave to the banks that do pay bonuses and how that impacts, ultimately, on those banks' attitudes to staying and basing themselves in London.
BOULDEN: Ironically, if the banks pay this one-off tax on bonuses, then the government could say, look, it works, no one left, we're going to do it again.
ANSTEE: Well, look, they -- they work, but not in the way that they anticipated it would work, that what they didn't want to do is -- is for the banks to pay the tax. They wanted to change the culture. The reality is the banks have or are going to be paying the taxes following the announcements of the various bonus pools over the next few weeks.
So we will have situation where the government will have recovered not 500 million pounds, but more like five billion pounds, with capital receipt. It is not akin to the Obama levy, which has been announced over the last 72 hours. It was going to be one-off -- the backs (ph) of an understanding was going to be a one-off. But I have absolutely no doubt that all governments -- and there is going to be a meeting with G7 ministers in London next week, which I heard announced by Paul -- Paul Myners earlier today, that they are going to be looking at this particular issue. So they're acting not unilaterally, but collectively.
(END VIDEO TAPE)
QUEST: Good evening.
I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN.
And here, we like to do something a little special every time it's the quarterly earnings season. You know it well enough. We call it the Q25. It's our own barometer of how companies are weathering the storm in uncertain economic times.
Now, the principal is very simple. Our team -- both in London and New York -- will pore over a company's results and then we take a vote and then we decide does it deserve a green or a red balloon for a positive result?
Red, of course, is a disappointment.
We'll be doing it this week and we're going to try and get all 25 in this week, because next week, we are in Davos in Switzerland. And, frankly, the thought of dragging all this up a Swiss mountain has turned me rather cold.
So we're going to check on all 25, because this is a good week, frankly, a really good week -- I'll put my balloons down for the moment -- a really good week to discuss this.
Today is a public holiday. It's Martin Luther King Day in the United States. So the best way to begin the Q25 is to look back at one or two of the big results from last week.
On Thursday, for example, Intel was the world's largest chip maker. It notched up more than $2 billion in net income, easily beating market estimates. Revenues of 10.6 also beat estimates. Those revenues, incidentally, were really what got people's attention. Intel also had positive things to say about its forward position.
Investors were not in a celebratory mood. The stock dropped more than 3 percent. That, again, I think that's going to be a case of buy on the rumor and sell on the news.
But that's Intel, as our first Q25.
JP Morgan, that you and I talked about on Friday, the bank posted $3.3 billion in profits. Now, remember, an easy to beat forecast. For all of 2009, the profit was just about $12 billion -- more than double that seen in 2008.
Its retail division was weak, and that was both on consumer loans and credit cards, reflecting trends and weaknesses in the segment.
So, those are the raw numbers. Now, let's break out the balloons. And for that, let's -- Maggie Lake in New York.
I think I'm going to put me notes down for a second.
All right, shall we start with Intel, because I suspect Intel is going to be the easier one for us to decide a red or a green balloon.
MAGGIE LAKE, CNN CORRESPONDENT: Yes, hard -- hard to take issue with Intel, Richard. They had a great looking report -- record profits, really strong guidance. Notably, they said things were looking good in the consumer sector with their business, which was positive.
But as you mentioned, investors sold off a little bit. It got caught up in a sell-off with the brooder market. And it does go to show that the bar is really high this time. So even when you beat expectations, people really have built up a lot going into this.
But Intel, without a doubt, a green. I think it just got swept up in a bad market week.
QUEST: The truth is -- I mean, and we don't need to spend too much time on it, though, because as I read Intel's results, it had a great quarter. It had good forward looking. I think we can dispense quickly and simply say Intel gets a green.
Do we agree?
LAKE: Yes. Yes.
QUEST: JPMorgan Chase -- here, I have to tell you, we had a very interesting debate -- Maggie, which -- I'm going to get both of it.
Which side were you on for JPMorgan Chase and why?
LAKE: I was -- I was for a green, Richard. Even though there were problem spots, I think that the underlying -- analysts digging deep in the report said the underlying credit trends were improving. And that's been such a core problem for banks. In other words, they have less bad loans. Things are looking better and they've already socked away a whole lot of cash...
LAKE: ...to take care of that. So as it improves, it's going to...
LAKE: ...they're not going to have to do that as much. And that's going to boost their earnings going forward.
QUEST: Yes, but Jamie Diamond says it's cautious, disappointing. He even says the return on capital is disappointing -- Maggie, that's a red.
LAKE: No, he -- he says things are -- he's cautious -- a weak labor market, housing. We already know that.
And as people rightly pointed out here, what CEO of a Wall Street investment bank is going to get up and say, hey, things are looking good, we're doing really well, profits are good and they're going to continue to be good?
It is not the political environment to say that when everybody wants to throw fees and taxes on them...
QUEST: All right...
LAKE: So they're keeping their cards closed, saying it's really tough out there, don't be too hard on us. I would discount that guy.
QUEST: You need to know and you need to be wary of this woman, because when we came to vote, those -- the majority of reds she single- handedly, it turns out would...
QUEST: It's true.
Which is it, Maggie, a red or a green?
LAKE: It's going to be a green. It's going to be a green. Revenues were up, profits were up. You've got to give it a green.
QUEST: Maggie Lake in New York.
Q25 throughout the course of the week. We're going to be there.
Many thanks, indeed.
Two green balloons to start the week off. We'll have some fun with this before the week is finished.
If earnings season is giving you sleepless nights, take a look at the some Wall Street's emerging competitors -- the BRICs. We visit The Biz Clinic, in a moment.
QUEST: The Biz Clinic is open and doing business. Over the past year, stock markets in the BRIC countries -- and that is, of course, Brazil, Russia, India and China -- they've outperformed shares in the developed nations.
So in The Biz Clinic, Andrew Stevens asked asset manager Mark Mobius for his outlook for the potential of Brazil, Russia, India and China -- the BRICs.
MARK MOBIUS, TEMPLETON ASSET MANAGEMENT: I've been telling everybody be ready for a correction. And that correction could be 15, 20, 25 percent. And we've already seen that in some markets. Like Dubai has had a big correction -- over 20 percent. China-Asia last year had a correction of over 20 percent. So be ready for that.
And, yes, in the short-term, with the U.S. market at such a low point, we could see our performance. But over a longer time frame, emerging markets definitely have the momentum.
ANDREW STEVENS, CNN CORRESPONDENT: What about the bubbles that we keep reading about, particularly we see them across the border in China in property?
We're starting to see them in the stock markets
MOBIUS: I don't see any bubbles at this stage of the game, because there are too many doubts. It's -- you have a bubble when everyone is moving in the same direction and everybody is thinking the same way, that property prices will never go down. And -- and you're not seeing that now. You know, people realize that property prices do go down and they've been hurt last year.
STEVENS: So you're saying the bubble fears, then, are over done?
MOBIUS: I think so. Yes.
STEVENS: When you look at the emerging market universe, Mark, what do you like specifically in 2010?
MOBIUS: We like commodities, commodity companies -- companies that produce iron ore, that produce nickel, that produce any of these major commodities. We like oil, which, of course, is a commodity. So that's one area.
The other area is anything to do with consumers. The emerging market consumers are getting wealthier. They are just beginning to learn about consumer finance. They are beginning to learn about credit cards. This will create a boom in consumption going forward.
We are finding more opportunities now in Russia, in India, in China, to a lesser extent in Brazil, because the real has already come up quite a lot.
And in our frontier area, we're finding opportunities in Vietnam, in Nigeria, in Kazakhstan and Ukraine.
STEVENS: One of the biggest issues, surely, for someone like yourself, is going to be transparency -- actually getting behind the -- the hot air of the companies or countries that talk about themselves.
How easy is it to do that, in -- in somewhere like Russia, for example, where transparency is an issue?
MOBIUS: Transparency in Russia is no worse than in other parts of the world. I mean, we know what's happening with the oligarchs. It's pretty open in Russia. We know who owns what. They explained what's happening to their companies, in terms of earnings and balance sheets and so forth and so on.
So it's very, very transparent when you consider where we've come from. Now, of course, there are secret deals, but that happens everywhere in the world. There's political influence -- again, everywhere in the world you have that. But transparency is not a major, major problem.
STEVENS: If you're looking at the BRIC countries -- and a lot of focus is still on the BRIC countries -- Brazil, Russia, India, China -- are they still a buy, all of them?
MOBIUS: They are, yes, because they will continue to outperform because of the momentum you have and, also, they're not very expensive when you compare them with other countries around the world.
STEVENS: Mark, what advice would you give to an average investor as far as wanting to play the emerging markets?
I mean how much of their portfolio -- their investment portfolio -- should they be looking at?
MOBIUS: Well, from an equity viewpoint -- let's assume they have a certain amount that they want to put into equities, which should be a -- a major part of their portfolio. At least 20 percent should be in emerging markets, because that is the size of emerging markets in terms of the market capitalization globally.
If they're willing to be patient and to go in on a dollar cost averaging basis, then it should be substantially more than 20 percent, because emerging markets are growing faster.
(END VIDEO TAPE)
QUEST: That's The Biz Clinic.
Now, here's an interesting tale for you. One of Britain's biggest department stores has introduced a divorce gift list. It's a service for people, not companies, who want to celebrate their newfound freedom, who need a bit of help getting a new single home. After all, if you get divorced, you might have to start again. So in a moment, we'll tell you more about it.
But on our Twitter line and our e-mail line, we would like to know what would you like as a divorce gift, if you could find anywhere?
And it's firstname.lastname@example.org and it is @richardquest, which is the Twitter address, @richardquest.
What would you particularly like on your divorce list, if you could have anything that you like?
I promise you, some of the answers I'm already getting are not broadcastable on a family network.
The snow has gone, the flooding has arrived and Guillermo is at the World Weather Center. There's no connection between all those events, I'm sure.
GUILLERMO ARDUINO, CNN METEOROLOGIST: Well, more or less. What we have is the temperatures are rebounding. And you see, because of this high pressure center, remember last week, when we were showing that satellite picture of the U.K. all covered in snow?
That snow is going to go somewhere. So what happened now is we are getting the -- the floods in many sections or the potential for floods. So we are concerned.
On top of that, we get more rain. Now, it's not going to be, you know, that bad when you see how bad the snow was -- the snow events were a couple of weeks ago. But now we're going to see more snow in the Romania/Bulgaria section. And temperatures are continuing to be very cold, especially in the eastern sections of Eastern Europe.
Well, let's see what's going on in Britain specifically. I think, Richard, that tonight. You're going to see fog in many parts, and especially here toward the south. Some frost to the north and into the Midlands, as well. I have been looking at the mild conditions and the moist air in place over Britain. So that's going to promise some mild conditions for the time being.
And the (INAUDIBLE) is going to go to Paris and Brussels, as well. I said -- I said, again, that the snow is in the east, anywhere from Berlin down into Romania and Poland. So that's where we see a contrast in terms of weather and temperatures, as well.
We may see some delays in Berlin there, because of the snow. We have, actually, some reports of snow continuing in Munich, into the south in Zurich and in Vienna. Vienna is reporting rain now. Sarajevo is reporting some snow. But the west mild -- seven degrees in London; 13 in Madrid. Last week, this was like minus -- minus five and now we're talking about 13. And then on the other side, minus nine in Kiev. So it continues to be very cold in these areas.
Now, the storms arrived and will continue in the Middle East here, from Egypt all the way into Israel and into Jordan and Iraq, as well, especially the northern parts -- and Syria. You see this low is going to promise a lot of precipitation. We saw in one day what we usually see in a year.
And now the other story that I want to report on -- and you will hear a lot, you will see a lot of stuff coming from there, is the western parts of the United States. It is system after system dumping a lot of rain and snow in here. And we have landslides. We have more snow in the forecast and delays at Los Angeles. So if you're coming here, San Fran, the same thing. You may see some delays there because of the persistent rain.
Temperature-wise, this is pretty much the makeup of the conditions in here. Notice that the South is so much better. It's so pleasant now in Atlanta, with sunshine. And New York at three degrees.
And before, you know, remember Winnipeg at minus 21?
We do remember. Now it's just minus five.
Richard will be back after the break.
QUEST: Welcome back.
The start of the new year. Evidence is showing -- here's an interesting thing -- that although the economy is getting better, that has an interesting effect on the rate of divorce. Apparently, when things are grim, people don't get divorced. They can't afford to.
But now things are getting better. Growth is actually boosting divorce rates. The report shows that people have waited not only for some improvement in the economic climate, but after Christmas.
I wonder whether it's got something to do with who gets to keep the Christmas tree and the like?
Take a look at the U.K. divorce rate. Per thousand marriages, 11.9 percent. And so 11.9 marriages per thousand end in divorce in the U.K., according to the -- the latest.
The U.S. publishes the numbers a little bit differently. But substantially, they are the two countries -- the U.K. and the U.S. -- with the highest rate of divorce.
So factoring these two in together and you start to see that after Christmas, with a recovery, things are getting worse.
This is fascinating. If you decided that marriage is for you, the cost of getting married, according to "Wedding" magazine, costs more than $33 -- that's the average cost -- $33,000 -- $33,000. But move it along and bingo, ha, ha, ha -- and it's not a laughing matter. We mustn't laugh. The average U.K. divorce costs $45,000. There is a huge discrepancy, of course. One is an event, the other is a major splitting up of assets.
As I was telling you before the break, one store in London is now offering a service in which it calls a divorce list. It includes everything that a new single might need in order to start a new life.
Morgan Neill went to see what was on offer.
MORGAN NEILL, CNN HAVANA BUREAU CHIEF (voice-over): What to get that friend who had it all but is now losing half of it. U.K. department store Debenhams is here to help, with its just launched divorce gift list service.
RUTH ATRIDGE, DEBENHAMS: Someone is getting divorced and moving out of their marital home, there may be lots of things they don't have. And, you know, not everybody has two toasters, two kettles, two irons. There's something that they're going to need.
NEILL: Friends and family simply choose from a list of gifts pre- selected with the store's help.
The launch date was anything but random. Debenhams chose January because it's the busiest month for divorce.
(on camera): Inevitably, there will be those who will be offended by the idea. Divorce, after all, is generally not something you want to celebrate. But the store says they're not leading people to separate, they're just helping them to deal with the consequences.
(voice-over): And they're not the first. Newly divorced couples can now look forward to cards, cakes and even parties.
Richard Dodd of the British Retail Consortium says it's no surprise retailers are getting creative in this difficult economic climate.
RICHARD DODD, BRITISH RETAIL CONSORTIUM: It's about focusing on what your customers need and want. And, of course, looking for new opportunities, looking for niches or new demands -- new services that you can offer that other people haven't thought of.
NEILL: How receptive friends and family will be to another wish list after getting through your wedding list, that's another question.
Morgan Neill, CNN, London.
(END VIDEO TAPE)
QUEST: So @richardquest, I asked you what would be on your divorce list. And Malabagavar (ph) said: "Another husband, bigger and better."
There's absolutely no understanding or explaining the QUEST MEANS BUSINESS viewer.
And some other people -- Spedtalk (ph) decides: "Can't decide if a divorce list is avaricious or simply pathetic."
Laura the Expert says: "It ranks up there with the mistress hampers in Hong Kong."
And Lord Dufay (ph) says: "I would like a key for my handcuffs and a bottle of the finest cognac."
We have some very strange viewers for QUEST MEANS BUSINESS.
The Quest Profitable Moment in a moment.
QUEST: Tonight's Profitable Moment.
Good to see corporate life getting back to normal -- well, something approaching that. Today, the markets were all of a dither. It was merger talks. Stocks like International Power rose on rumors and then fell on truth. Kraft has until tomorrow to put up or put out, since its offer is unlikely to succeed at its current price. It's not at the top end only. One corporate lawyer in London told me privately he was almost as busy as in the good days. Those equity funds, the venture capitalists, debt, looking for a good bargain.
None of which means we should ignore the reality of sluggish growth, but when markets start to sizzle, it's well worth noticing.
And that's QUEST MEANS BUSINESS.
I'm Richard Quest.
Whatever you're up to in the hours ahead, I hope it's profitable.
Christiane is after the headlines.