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U.S. Real Estate Market in a Slump; Advertising Business

Aired August 24, 2010 - 14:00:00   ET


RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS: A stop sign on the road to recovery. Home Sweet Home isn't selling in the United States. It's another story in the in the advertising world. Tonight WPP Chief Exec tells me profits are up-driven in the US.

And holiday. What holiday? In this day and age is there such as thing as getting away from it all. I'm Richard Quest. We have an hour together even on a holiday. I mean business.

Good evening. Today US home sales numbers were released and they showed a startling plummet. It's a reminder that the US economy is by no means as safe as houses. The markets in the United States were sharply lower. The foreclosures and limited jobs growth has been depressing the markets and now it's off as you can tell.

Well the 114 points down 1 percent. Ten thousand and fifty-nine. In fact, arguably 10,000 is looking a little doggy at the moment with this level of losses. Now these numbers are despite government measures.

The potential to recovery appears to be in trouble. Tonight on this program we're going to ask what it means for the US recovery.

The property market look set for a second major slowdown. Real-estate agents are reporting the quietest month in 15 years. Sales of existing homes down more than 27 percent in July. That was doubled the job - the economist had been expecting.

Homes are changing hands at a yearly rate of just 3.8 million. The lowest level since 1995. It gets worse. There's a glut of homes on the market and it all points to the dreaded double dip in house prices. Julia Coronado is the Senior US Economist at BNP Paribas. Julia joins me now. Julia what - can we write this number off as a one of or are there some serious underlying treads that we need to be aware?


JULIA CORONADO, SENIOR U.S. ECONOMIST, BNP PARIBAS: (INAUDIBLE) ...since the recover began. We've gotten some picking up owing to the tax credit then we fall back after the tax credit expires. And really we just haven't seen any momentum developing at all despite record low mortgage rates.

QUEST: So but 25 percent. When everyone is expecting 12, I mean this can't pardon the phrase "be brushed under the carpet."

CORONADO: Oh it definitely cannot be brushed under the carpet. And I certainly wouldn't suggest that we do so. I think the economic data has been developing a very worrisome dynamic. It's not just housing, it was the jobless claims numbers, the manufacturing sector is running out of steam, as the inventory and there's a lot of things they're suggesting weakness ahead.

And so I think policy makers in particular the fed should be taking this very seriously.

QUEST: If we look at the question of confidence, because every time we get a number like industrial production or jobless claims like last week or now existing home sales that takes a bout on confidence.

And Julia it's not long before the self-defeating spiral really kicks in.

CORONADO: (INAUDIBLE)...that risks rights now it's a very delicate situation. I think that what we're going to - one thing were looking very carefully toward is Chairman Bernanke speech Friday morning at Jackson Hall. The Annual Jackson Hall conference.

I expect him to outline something fairly - fairly bold, that they will take aggressive action to exactly as you say shock confidence. Seen a signal very strongly that the fed is not going to stand by and let us just evolve into a deflationary dynamic.

QUEST: But if I believe this morning's Wall Street article.


QUEST: Which you may have, we'll have seen, a lot of noise being made about this, this very, very good piece of research. They seem to have spoken to everybody who's in the FOMC.


QUEST: I had suggest that regardless of the nine one vote the reality is that the FOMC is split on the question of what to do next?

CORONADO: I don't think that really matters though. I mean I think that what really matters is what Chairman Bernanke thinks. I think he's what we say in that article is that Chairman Bernanke is beginning to exercise more forceful leadership. He didn't have to in the past.

QUEST: Right.

CORONADO: Because he could forge a consensus, but if there is disagreement guess who's going to get his way? It will be Chairman Bernanke. So I think listening to him very carefully will be key.

And the second point I like to make is if you look at how the data has evolved since that meeting. We've gotten nothing but bad news. So I think to the degree that some people were a little bit uncomfortable in the way that article described it.

That there were some that were maybe not ready but could be convinced. I think some of those are going to be convinced by now.

QUEST: Alright final question. Everybody gets the same question these days. Double-dip yes or no?

CORONADO: I think we're about even Steven on the chances of that right now.



QUEST: Well Julia, at least you moved away from no, yes. Thank you very much alright. Many thanks Julia. Lovely to see you though. Julia joining me from BNP Paribas. The markets in Europe took a very sharp turn for the worse.

The numbers in the US stoking fears of that double D. The news hit shares and companies in the house building sector. The cement maker (INAUDIBLE) up more than 4 percent in Paris. Heidelberg Cement five in Frankfurt.

In London bad day for mines. Mines set price - metal prices dropped. (INAUDIBLE) Resources down more than 7.5 percent. (INAUDIBLE) Government has bought plans in the state of (INAUDIBLE).

If you are in adverting you might think things would be grim. Well at least perhaps maybe it'll be a bit of spin. You can hear it from the head of one the agency the biggest in the world. (INAUDIBLE) sorry. We'll be back in a minute.


QUEST: The world's biggest ad firm says the US economy is making a remarkable comeback. WPP says America's recovery is not so much a U-shape as a V-shape. And it has not seen a region make such speedy recovery in around a quarter of a century.

A note to caution, the (INAUDIBLE) at ones uncertainty is the poison in the system. It says the world is not facing a double-dip but a slow growth slide. WPP's first half net profits up 39 percent on the same period.

It wasn't enough for investor though. Typical of the markets, shares were down 3.95 percent at the close. So Martin Sorrell is the Chief Executive of WPP.


QUEST: And you were - you were surprised at that the US performed as well as it did within the results?

SORRELL: Yes, I mean - it was again - if we were having this conversation six months ago I wouldn't have forecast it or we wouldn't have forecasted it. And there was another thing we wouldn't have forecast, that's the recovery in traditional media.

I think because of surplus inventory last year prices fell, clients were attracted to as they started to think of expansion in 2010 as supposed to cost cutting in 2009. And the US, when I say it's surprising its surprising in the context of first 25 years.

But when you think about the fiscal stimulus that was put in place, is that surprising? I mean we need more fiscal stimulus as a result of what we're seeing today and the last few days, but we'll see how that plays out.

QUEST: Are you more encouraged by what you see happening in mature markets like Europe and the United States as a result of the numbers you've seen in your business?

SORRELL: Yes, but I'm not, I'm not encouraged in the long-term. Because I think in the long-term the world is moving at different speeds and it's - you can't fight it. So, the bricks and next 11 Brazil, Russia and China and what Goldman calls the next 11 countries like Vietnam and Pakistan and Turkey and Columbia or Mexico.

These are the countries where geographically the future lies because of population of population concentration. And then in terms of functional expansion, digital will out - continue to outpace traditional media.

QUEST: But you said in your - or in your - in the statement from your results that CEOs were still talking about a culture of uncertainty.

SORRELL: Very much so. I mean I think we said, and this was way before Bernanke said about there's a considerable amount uncertainty a few weeks ago. We said that the Allen (ph) Company Conference, that the poison in the system was uncertainty.

QUEST: But that's not going away is it?

SORRELL: No. But - see what you got, you got eight, nine, 10 percent unemployment. You got crisis affecting companies whether it be Toyota withdrawals, the Prudential, the bid going down, Goldman Sachs. Whatever it happens to be, these are - Hewlett Packard.

These are putting pressure on boards in CEOs to be extremely conservative. They lower expectations. They outperform expectations. Look at the results they're doing.

QUEST: Look at what you're doing.

SORRELL: No. I think we - well I don't get any choice because people like you ring me up all the time and say what happen in July? What happen in June? So we give them monthly updates. So we're very much like a food retailer in that since.

So we perform pretty much in line with expectations because that's - were continuing updating the market on what we're doing monthly. But I think the point is that they try and keep assumptions and analyst estimates conservative and they try and outperform.

And there's an in built conservatism in the system. The reason for that is that layman weekend is September 13, 2008 is seared in the consciousness of CEOs. When Jeff (INAUDIBLE) said the world is reset or where there's a new normal? I think things did change in relation to people managing expectations.

QUEST: How difficult is it for you now running WPP in all the various different parts of the world on balancing the mature markets with the emerging ones?

SORRELL: Well that's a good point, because we - last year it was terribly (INAUDIBLE). We had to reduce our headcount by about 12 percent. This year we started to rehire and that reflects in India, in China, in Brazil, in Russia expansion.

And also, reflects the fact that in Western Europe - you know if you look at our results, we put out severance payments in. You'll see that we still are restructuring in Western Europe sort of 18 months after the severe part of the recession.

QUEST: Last question, same question here as to Julia in New York. Double D? Are you ...

SORRELL: Double D worldwide you're talking about?

QUEST: I'll take a double D US, double D (INAUDIBLE)? Do you see double D anywhere?

SORRELL: I do not see double-dip worldwide. I think what you're going to see is a policy response as usual to the fears that are being expressed on QUEST MEANS BUSINESS or by the lady from BNP or whatever it is. That is now 50-50 you tell me.

QUEST: Fifty-Fifty. Where are you?

SORRELL: I would still say no double-dip.

QUEST: No double-dip.

SORRELL: Slow growth slung.

QUEST: You will be with us later on with (INAUDIBLE) on the question of holiday.

SORRELL: As long as you keep your blackberry on.

QUEST: As long as I keep my blackberry on. Martin many thanks indeed.

SORRELL: Thanks very much.

QUEST: Many thanks. Now all on this week on the program QUEST MEANS BUSINESS are making your holidays are business. And in today's show were asking should you work on your holiday? And there's still time for you to get some response in. You'll hear Sir Martin's response later in the program.

You'll hear what best practices QUEST@CNN.COM and as always it's the twitter @richardquest or Facebook. In a moment mortgages billion dollars market its getting bigger. The mobile phone apps, we're going to meet one young 20-year-old entrepreneur who says he'll be a millionaire in six months.


QUEST: Competition in the app store world is about to get hotter. Microsoft says the tools needed to make apps with new line of Windows mobile will be available next month. Now those tools will allow the developers to make the apps, which was an extremely lucrative market.

The research company Garner (ph) says consumers will spend more $6 billion on apps this year. No I genuinely did say six with a B. Six billion. If you come and join me in the library you'll see what I mean.

Looks you don't need me to tell you Apple pioneered the App Store. It's got about 200,000 apps at the moment. In June, Steve Jobs said Apple had paid out more than a billion dollars to app developers.

They develop them, but you could only get, whether it's an IPhone, I Touch and I this and I that. I see you. You can only get that through the Apple Store, the App Store.

The Android market has more than 80,000 apps available. Obviously, it's a couple of years behind Apple. So it's not surprising that they're a bit behind. But you'll know from what you and I talked about on this program.

Android phones are now the biggest selling phones in the United States by some measure. So there's will increase. Finally rivals, Blackberry, Palm all the others they all have those App Stores, App Catalogs, app this or app that.

Now, the importance of this. Yesterday we met a man whose part-time hobby was making IPhone Apps and it made him enough money to make a mortgage. Today, we're going to meet a man, a 20-year-old developer who has said he will probably be a millionaire in the next six months to a year.

Nikita Lutsenko is Chief Executive of the Ukraine base LightRoom Company. His company makes these three Apps, GoCal for Google Calendar, GoTalk and GoDots. He makes these if you Google online.

He spotted a niche. He made Google available on the various IPhone Apps. Nikita joins me in the studio and I asked him what got him started in the App business?


NIKITA LUTSENKO, CEO, LIGHTROOM: It is interesting for me and I create the company the US company that I was working for in Ukraine. It was elephant (ph) hatt (INAUDIBLE) software and I decided to make Apps for IPhone for getting some money.

QUEST: How successful has it been?

LUTSENKO: It is really successful. We are selling approximately 150 copies of our Apps today.

QUEST: Of the money that comes in, how much do you get and how much do you have to give to Apple?

LUTSENKO: We get 70 percent and actually we are not even getting the money right after purchases. We're getting money each month, once a month for every one of seven regions.

QUEST: So you get seven payments?

LUTSENKO: Seven payments and that is 70 percent of all sales.

QUEST: So the moment anybody buys an App...

LUTSENKO: We are not (INAUDIBLE) the money.

QUEST...Apple takes 30 percent straight-away?


QUEST: Do you think that's fair?

LUTSENKO: I think to manage all that App store and to handle it, it takes 30 percent.

QUEST: All the Apps that you have created have been successful as you say? They are all in the top categories correct?


QUEST: And how difficult is it to be in the top category? Did you have to get a lot of noise? Did you have to get people talking about your Apps?

LUTSENKO: You have to release updates. And we are releasing updates for every of our Apps once in three weeks. So every App gets an update in three weeks.

QUEST: How long does it take Apple to deal with new Apps, updates, all these other issues?

LUTSENKO: The time is usually the same. It fluctuates from one day, from one hour to a month. It was a month half a year ago and right now it's a week, approximately a week.

QUEST: And you - can you put pressure on Apple to tell you when it's going to come out or do they just say when we're ready?

LUTSENKO: When we're ready.

QUEST: Pretty annoying?

LUTSENKO: All emails that were sent to the App Review Team of Apple we're like we are getting the reply - the same reply each time. We don't know, where and will be reviewed.

QUEST: Nothing you can do about that?

LUTSENKO: No. Its only Apple rules and Apple are the monopoly of that and managing all of that.

QUEST: Would you like a different channel to be able to get to the consumer besides just the App Store?

LUTSENKO: Yes of course. Of course because we are not - we don't want to give the 30 percent to Apple and we want to sell our Apps more.

QUEST: You are 20 and you are already doing extremely well. You've made quite a lot of money I would imagine from these Apps?


QUEST: Will you be a millionaire before long?

LUTSENKO: I think I will be a millionaire in half a year or two years.

QUEST: What's your principle goal in terms of the design and the look of the App?

LUTSENKO: Useful. Usefulness. The productivity of the App. The people can manipulate all the buttons, all the stuff in there.

QUEST: At the end of the day, the functionality of the App and particularly in your area which is in productivity is in business Apps. Isn't it the functionality that's the most important?

LUTSENKO: The functionality is important but all the people that love Apple love design. They're buying Apple because of the great design. I'm buying Apple because of the great design and functionality. But they don't need only the functionality, they need the best design.


QUEST: You need the design and you also need functionality and he'll be a millionaire within six months he says. Nikita joining me from (INAUDIBLE). I'm wondering Patricia Wu, with the market being as it stand more than 100 points 10,000 looking doggy quite a few people maybe the opposite of being a millionaire within six months.


PATRICIA WU, CNN CORRESPONDENT: Absolutely Richard. You know the market need some positive data that's what it needs. The existing home sales report that came out earlier today really spooked the market.

The Dow dipped below 10,000 briefly as you said. Right now it is still triple digit losses. But that existing home sales number was down 27 percent Richard, that's a 15 year low. And it was much worse than expected. And the biggest monthly drop ever.

So why the big drop? Well, some of the analyst say with the expiration of the federal tax credit, that that brought out those first- time home buyers in droves (ph). They were all trying to get there contracts close before that tax credit expired on April 30.

Also, there's uncertainty in the job market Richard. If you don't think that you're going to keep your job it's likely that you're not out there house hunting - Richard.

QUEST: The other question of course is with a 27 percent drop in existing home sales and jobless claims numbers high and industrial (INAUDIBLE) there is clearly a feeling now what is next? How much more maybe lurking under the water?

WU: Exactly. It's that uncertainty that keeps you know the sell-off going today. But you know, if there is a bright spot I still can't find many traders on the floor that think a double-dip is going to happen. They think that it's going to feel pretty bad for a while but they do not think that we're going to fall back into a double-dip recession.

However, housing prices a different story. Many believe that housing prices are going to continue to fall. One economist warns that a double- dip in housing prices could be just around the corner. Also, that housing crises could drip another 15 percent - Richard.

QUEST: Good Lord! Alright many thanks indeed.

WU: Sure.


QUEST: Fifteen percent. Well, that'll certainly take the shine off things. Sinking US home sales has just (INAUDIBLE) a pot on in America's road to recovery. The numbers are an appetizing, but of course there's still room for some optimism perhaps, especially if you're on a holiday. In a moment.


QUEST: Hello I'm Richard Quest, QUEST MEANS BUSINESS. This is CNN and here the news always comes first. Chinese state media is reporting 49 people have been recused after a passenger jet went off the runway and burst into flames in North East China.

The accident happens in Yinchuan City while the plan was landing after a short domestic flight. Ninety people was said to be on board, no word yet on possible fatalities. China state television says 49 people were hospitalized three are in serious condition.

The US is condemning the suicide bombing of a hotel in Mogadishu in Somalia as particularly outraging (ph). At least 33 men and people including six members of Parliament were killed when two mean in military uniforms rushed the building and blew up the explosives.

The Al Qaeda linked group Al Shaaab has claimed credit for the attack. Al Shabaab has tried to dislodge the entry of American government. The Philippine National Police say Monday's tour bus hostage crisis in Manila was botched by authorities.

A statement for the assault teams (INAUDIBLE) ability skills equipment and planning inadequate. Eight tourists from Hong Kong died when negotiations broke down and the former police officer who held them at gunpoint started shooting. Hong Kong Chief Executive Donald Tang (ph) called it a serious blow to the Hong Kong people.

Pakistan's President says it's going to take years for his country to recovery from the torrential floods. Millions of people are homeless and hundreds of thousands are suffering now contagious illnesses. Officials say the death toll is between 1500 and 1600. Aid workers believe the number will rise considerably as the water recedes and more bodies come to the (INAUDIBLE).

India says no to (INAUDIBLE) Resources. The government in India has rejected a proposal by the London based company to mine (INAUDIBLE) in the Eastern Indian State of (INAUDIBLE). As our business correspondent Mallika Kapur now explains. It's an old-fashion dispute simply between a multi- national corporation and local residents.


MALLIKA KAPUR, CNN CORRESPONDENT: These are the Neanberry (ph) Hills in Eastern India and these are the people who live here. Around 8000 of them members of two primitive tribes. They depend on the land and its dense forest for food and water and consider the hills sacred.

It's this land that that (INAUDIBLE) wants to mine for (INAUDIBLE). The company has been trying to get permission to do that for five years, but its plans have been fiercely been opposed by human rights activist who say it will endanger the local tribe.

Some investors still have withdrawn support. The Church of England sold off its shares in the company earlier this year. Now India's environment industry has handed down a final decision. It will not allow (INAUDIBLE) to mine here. There is no emotion, no politics, no prejudice.

I have taken the decision in purely legal approach said the environment minister. His decision comes two weeks after a report commission by the ministry found that allowing (INAUDIBLE) to mine in this area will deprive tribes of their right and cause serious ecological and environmental damage.

(INAUDIBLE) could not be reached for comment about the decision. In a controversial battle between a private company and the people of the land India's government has decided to side with the people.

Mallika Kapur, CNN, Mumbai.


QUEST: Now, we don't do holidays here on QUEST MEANS BUSINESS, so instead, we're gate crashing yours. Our week long holiday special continues -- finding out of a summer getaway is a no work zone or whether we do have to take work with us.


QUEST: To work or not to work -- that is the question.

Is it better to rest by the pool or BlackBerry with one of these by the beach?

How much would these become part of your holiday?

All this week, your holidays have become my business. Last week, we looked -- last night we looked at how much leave different countries offer.

Tonight, the work we do on vacation -- the recession has made us terrified of losing our jobs. We're frightened not to be seen to be working hard. Americans know their worker bees. Trading is now more and more global. It's harder to switch off. Bosses and clients expect us to be available at their beck and call.

Take the British, for example. Now, the Britain employees, they already work some of the longest hours in Europe. And more than a quarter simply can't switch off the BlackBerry or laptop. Twenty-nine percent -- 28 percent say they're compelled to work with e-mails at least a couple of times a day on holiday. One in 10 Brits admits to needing a daily e-mail fix while on leave.

And as for the French, a whopping 87 percent check work e-mails when they're supposed to be sightseeing or dining.

Now, is this just hot air?

No, we've put it to the test here in London with people who are supposed to be on vacation enjoying themselves but most seem to be married to the boss, even if they don't like to admit it.


UNIDENTIFIED MALE: But I think we shouldn't be reading it. We should -- when -- when you are on vacation, you are on vacation. It should be a total shutoff. Take your mind off work and enjoy your holiday.

UNIDENTIFIED MALE: But now you're retired, but when you were working did you read your e-mails on vacation?

UNIDENTIFIED MALE: Ah, yes, yes, yes. That's what you do.


UNIDENTIFIED MALE: But you just said you shouldn't.

UNIDENTIFIED MALE: Yes, you shouldn't, but you worry about your work.

UNIDENTIFIED FEMALE: Work you mean almost -- no. No.


UNIDENTIFIED FEMALE: Unless there's an emergency.

UNIDENTIFIED MALE: I read the small (INAUDIBLE) my e-mail because I need -- I'm working in computers and I'm responsible of the computer service and I must (INAUDIBLE).

UNIDENTIFIED MALE: Is it OK to read your work e-mail when you're on vacation, though?

UNIDENTIFIED FEMALE: Yes, I think so. Yes.

UNIDENTIFIED FEMALE: No, you don't think so?




UNIDENTIFIED FEMALE: No. Because vacation is supposed to be when you're relaxing, you know, like sunbathing and swimming.

UNIDENTIFIED FEMALE: Well, we can't sunbathe and swim in London, can we?



QUEST: Now, the chief executives we've had on this show have told me that one thing -- don't expect to let go. They believe staying in contact and staying connected to the office is more relaxing than being out of touch.


JOHN CHEN, CEO, SYBASE: Yes, I think the world is now 7-24. And the world is global. I don't really believe that people could take the vacation in the -- in the classical sense. And I even know there's a lot of our German colleagues right now that's on vacation and their holiday, but they're still working. You know, they are responding to some of our e- mails. So I -- I would say that -- that especially as a -- as an IT company, we needed to learn to adapt to that new reality.



BILL MCDERMOTT, CEO, SAP: Hey, I'll tell you what I do. I wake up in the morning on iPad reading the newspapers. I have my new BlackBerry Torch, which I think an awful lot of. And I'll transact with John and my other colleagues at SAP. And, of course, I'll take calls in between on the iPhone. So this is a -- a very data driven, a very connected world that we live in. And to drive productivity, I believe you have to be connected. And I do not believe an enjoyable vacation anymore is having a list of to- dos build up so high that by the time you get back, you wish you didn't take the vacation in the first place.

So stay connected, be disciplined, carve out some time in your day to do your business and then go back to enjoy your family and enjoy your holiday. Do both.



DITLEV ENGEL, CEO, VESTAS: Yes, I think it's -- I think, to be frank, it's still a prevailing to be so much together with the family. But the world keeps moving on and so there are a few telephone conferences and some e-mails that need to be responded to and so forth and so on. But frankly, it's OK.


QUEST: Are these chief executives heartless?

Don't they want us to enjoy ourselves?

Earlier before, and I put the question to Sir Martin Sorrell, who you saw on the program talking about his company's results. Let me put it like this, Sir Martin's company did very well and this might be why.


SORRELL: Our business might be slightly different for two reasons. Firstly, a macro reason and secondly, a personal reason. The macro reason is that -- that clients don't wait for you to come back on a holiday if they have an opportunity, a problem, a crisis. It doesn't get a neat chance.

The other thing that people forget is that while we go on holiday in the summer, other people in the world don't. They continue to work. And it's a rather parochial view to say that you should go -- you should stop when you go on holiday when others has to wait. And that's one thing. The -- the personal part of it is, you know, I started WPP for good or ill, 25 years ago. It's part of me. It's very personal. And therefore, I think founders are slightly different in this respect. To my mind, it's not a -- it's not a job. It's not work. It -- it's fun.

So I -- I'm interested in it. And that's what I think some people -- some people understand that point. Some people don't understand the point.

So I -- you know, I get my -- I -- I believe there's no such thing as stress. It's just you're not having fun.

QUEST: What do you expect your executives to do?

SORRELL: Well, I'd like -- as they well know, I'd like to keep in touch with them, too. It probably, you know, it drives my family crazy. It probably drives their family crazy. But I like to keep in touch. And I don't think it's so much of an effort.

The other thing that always amuses me is that when you come back and you -- you come back to this mountain -- if you've kept out of touch, you come back to this mountain of e-mail -- in the old days, it used to be letters -- and -- and you feel completely stressed out, you know, as though you need another holiday when you come back within about two or three hours.


QUEST: Martin Sorrell, who I'm sure his bark is worse than his bit. But we're enjoying a bit of a nice break. Forget the special relationship. We're looking at that uneasy relationship the world over -- the twinge of guilt that salary workers feel when they go on holiday.

Is it healthy to be glued to work when you're supposed to be letting go in a fortnight's break?

Angus Struthers is with me, senior director of's TripAdviser.

Well, what the research shows is that even if we don't believe we should, we still do, don't we?

ANGUS STRUTHERS, TRIPADVISER: We absolutely do. As the results show, nearly two thirds of Brits are checking their e-mails whilst they're on holiday. I think the temptation is there. Most people are taking their Smartphones on holiday, therefore, if the dilemma is do I actually keep up with the -- with my work e-mails so that when I do get back from holiday, I'm a bit more prepared, or do I actually completely cut off?

I think what you need to do is just be disciplined about it and you either completely switch off and decide that's it, I'm going to enjoy my holiday -- my well earned holiday -- or you actually have a bit of a daily fix to be a bit more prepared.

QUEST: You can't -- then you -- you say -- how often?

STRUTHERS: On a daily basis.

QUEST: Come on, how often on that daily basis?

STRUTHERS: I probably look at them twice -- twice a day because I find it -- it's -- it's -- I get more comfort from knowing that there aren't any emergencies happening at work and therefore I can relax -- relax on my holiday.

QUEST: OK. Now then -- and what is best practice, though?

I mean if one of the people -- your senior director. So, actually, that means you've got people working for you.


QUEST: What do you do -- what do you expect them to do?

STRUTHERS: Hopefully, I've hired people that are able to run the show when I'm not there and...

QUEST: No, but I mean in terms of when they're on holiday, when they go away, what do you expect your -- your...

STRUTHERS: I expect them to completely switch off. And I -- and I think that that is the right way to do. But there is no...

QUEST: hang on

STRUTHERS: -- but there's no such...

QUEST: Hang on Do as I...

STRUTHERS: There is no such...

QUEST: -- do as I do, don't do as I say. Or do as I say because I do.

STRUTHERS: There's an interesting stat which you didn't show on the surveys, which the question was asked, do you actually lie to the people you're on holiday with about whether or not you're checking your e-mails?

And 5 percent of Brits actually admit to lying. They're saying they're not checking any e-mails whilst they're on work when really they are taking a sneak.

QUEST: But how important is it, do you think, within an internal politics of a company to be seen to be engaged even when you are on vacation?

That's a crucial aspect, isn't it?

STRUTHERS: It is. But -- but I think, at the same time, you need to respect the -- the desires of -- of the people that work in the company. Some people are going to find it more relaxing to check their e-mails whereas others want to completely switch off. You should respect what they want to do. But at the same time, I would want to encourage my staff to -- to completely switch off when they're on holiday.

QUEST: It's a dilemma.

STRUTHERS: But the reality is you know that they are going to be checking their e-mails.

And do you mind that they're checking their e-mails?

Part of you is thinking, actually, you know, good on them for -- for checking that all is right at the -- at the office.

QUEST: Can you imagine a situation where your boss calls you and you say I'm on holiday?

STRUTHERS: I think that that would be a very difficult conversation to have. The -- the reality is, if my boss calls me while I'm on holiday, I'm going to take that call and -- and take that call and deal with it.

QUEST: Let's just briefly talk now about where people are going on holiday and -- and the trends that we've seen. On this program tonight, you've heard us talk about the possibility of double dip, the questions of unusual uncertainty, which feeds into people wanting to be seen to be working, doesn't it?

Are we seeing people still putting a priority on a holiday?

STRUTHERS: Absolutely. I think even in times of recession, people are wanting to take that break. Where that break is might change. You find that there has been an increase in people staying within the U.K. for their holidays and just adapting their -- their travel project. But we haven't seen a decrease in the actual number of holidays overall.

QUEST: Well, I -- I assume this is obviously holiday garb for you. I mean, you know, thankfully, you still have to keep in the standard.

Many thanks for joining us on the beach.

We would have had real sand, but when we suggested it to the management that we get real sand in the studio, they made -- they made a fuss about that.

Many thanks.

Stay there for a second.

I'm going to tell you about some interesting e -- Twitter atrichardquest. Because the thing about a deck chair is it's very difficult to do anything in it once you're actually in the deck chair, as you might witness before we're finished.

Naral Abdul Aziz (ph): "The truth is with B.B., BlackBerrys, iPhones, iPads, we're actually connected all the time we're online. We exchange info. We communicate 24-7."

Eliza Filapalooli (ph): "Didn't you hear about those devoting -- didn't you hear that those devoting more than two hours a day in personal time will be penalized joke?"

Grayson (ph) says: "The BlackBerry has an off switch. Who knew?"

And Woodson Hall (ph). This is a -- this is the -- the trend that I think we've heard: "Personally, I prefer to stay in tune with the office when I'm away. I don't like nasty surprises when I get back."

Now, it's anything but holiday weather in London today. In just a moment, we are off to the CNN Weather Center to find out if things will get better wherever you are, in a moment.


QUEST: Hang onto your flip-flops when you hear about the alternative approach that one Silicon Valley company takes toward vacations. Netflix calls it a non-policy on holidays. The streaming video/DVD by mail service lets its staff take as much vacation as they want whenever they want.

Hang on. Hang on. A road to chaos. The company spokesman, Steve Swasey, joins me now live from California.

Steve, you're clearly not barking mad, so you must have some rules about what people can do with vacations.


Well, Richard, Netflix likes to think that we changed the way Americans -- and soon Canadians -- watch movies. And we did that through a great culture of innovation and creativity. And one of the things Netflix believes that rules and regulations and processes are really innovation killers. So what we try to have is as few rules and regulations and...

QUEST: All right...

SWASEY: -- policies as we need.

QUEST: So what does that mean in practice?

It's nice to say the P.R. speech, but in terms of what it means for employees, do you not give them a limit for vacation?

Do you not say they do not have to work?

What does it mean?

SWASEY: You know, first, I have to say, this is kind of interesting because this vacation issue has come -- become kind of a media cause celebre. But to Netflix, it's no big deal, because we really get energized at Netflix, as employees, about creating new ways for people to watch movies. And it's really big in the United States and soon going to Canada.

To answer your question specifically, nobody accounts for vacation time at Netflix. You take what you need, you take what you want and when you want. The two caveats are, one, your manager has to be aware and, two, your work has to get done. So if you are in a collaborative team and you have a big deadline to meet and you meet it and you can take some time off and filter the work among your employees, your -- your coworkers, great, take some time.

You know, Netflix has about 600 salaried employees that this non- policy really does apply to. And we've found that over the several years we've been running this non-policy, we've never had any problem with it.

QUEST: Right...

SWASEY: People take two or three weeks at a time, people take no time for two years and then take six or seven weeks in one stretch. There's no regulation around it.

QUEST: This -- you know, Steve, this sounds very similar to the restaurants that don't have prices on the menus and you pay what you think you're going to get. And people always pay more. And it seems to me that people don't abuse these systems.

But you do admit there's the potential for abuse?

SWASEY: Well, if there is the potential for abuse, somebody will do it and they probably won't be a Netflix employee for long. What we like to have at Netflix, again, an innovative company that really changed the way Americans watch movies. What we like to have is an -- a mantra that we have is freedom and responsibility. Netflix employees are given enormous freedom and with that comes enormous responsibility. Or, the flip side, you have enormous responsibility, you said have some freedoms.

And so we don't encumber Netflix employees with a lot of policies and a lot of regulations. We do expect them to be on their A game every day, be innovative, be creative. And this is the way the company has reached 15 million subscribers in 10 short years. We've got movies and TV shows going instantly to you in the U.S. and soon in Canada...

QUEST: Right.

SWASEY: -- over all three of the game consoles, Blu-ray disc players, you name it.

QUEST: So, I mean it's interesting, finally, it is interesting, isn't it, because it does run counter culture to everything that most blue chip U.S. corps have to have a rule book the size of the telephone book. They are parsimonious -- two weeks if you've been there for 10 years. Steve, are you going to lead by example?

How many weeks off have you had so far this year and how many do you expect to have this year?

SWASEY: You know, Richard, if I knew, I would tell you, but I really don't, because we don't keep track. I know that some days I -- I work from home quite a bit. In fact, this studio you see is in my home office. Right now, after this, I could go out to lunch with my wife if I wanted to, but I've got some other work to do.

The point is we give people enormous freedom and with that comes enormous responsibility.

I get my work done. The Netflix employees get theirs done. I probably have taken a couple of weeks, but I don't account for it because I love what I do. And if it's talking to you in London or talking to some other reporter around the world, I'll do that even when I'm on vacation, because it doesn't bother me. I don't let work get in the way of my time off and I don't let my time off get in the way of work. But I manage them both equally.

QUEST: Steve, many thanks, indeed.

I'm not sure we ever did find out how much leave you take. Perhaps we'll do that on a future occasion.

Many thanks.

Steve joining me from California.

Now, ooh, there's never enough work to be done when you're in the garden of relaxation. It seems if you can't let go of the technology -- and for that we are grateful -- here are some of the holiday snaps you have been sending us.

Now, this is Marcus Hoffman (ph), who sent us a picture of him in front of Big Ben. Well, that's Marcus, that's Big Ben. You managed to get that bit right.

He says he visits London often thanks to cheap airline tickets.

The classic photo of the beach was sent to us tonight from Stuart Clark (ph) from Dubai. He says he does the dad thing wherever he is.

What does the dad thing mean?

It means he takes the pictures and he's never actually in them.

If you are a golf addict and living golf, Richard Deniele (ph) on the links with his son, Matthew. It's Richard's 17th time on the paradise island of Mauritius.

One of our viewers means business on vacation. She sent us this iReport from a cruise ship coming back to Miami. Her family came from Vancouver, Canada to Mexico for a week on the water in the Caribbean.

Now, today I read an interesting article about BlackBerry use on holiday. It's all about moderation, apparently. The executive trying to get on top of knowing about just what's happening.

I've posted that article. It's from the F.T.

It's on my Twitter page at

Take your time. Have a look at it. See what you think. Sign up. Join me on board and read that article.

Now, Guillermo Arduino is at the CNN World Weather Center -- Guillermo, you had better have something nice to offer me.

GUILLERMO ARDUINO, CNN METEOROLOGIST: Yes, if you're a -- if you're going to hang out until Friday there, you'll get it. But tomorrow, it's going to rain. And it's going to rain a lot, because now it's clear, in general. But this is the system that is going to come to England here. It's going to bring rain for Wednesday -- for -- for -- today is Wednesday, right?

Yes. Thursday, then, we will see -- no, today is Tuesday. Wednesday and Thursday and then we will see good weather on Friday and Saturday.

Now, apart from that, Germany, I think, is where we will see the winds, the bad weather, this low in Scandinavia, too. You see how here, this is sort of deceptive because it's in the last 12 hours. So it's getting better in Britain. But then we see this, how the system is coming into England again.

Temperature wise, 20 for London. So it's a little bit cool. That's the high, 36 in Madrid. That's warm. And the east, compare Bucharest, 34, and Kiev at 24. So we see a difference there.

The south of France looking fine. If you are vacationing there, you know it. Also, the Balearics, Italy, East-Central, Southwest Med, the Aegean Sea, the Ionian Sea, great.

So I said the clouds on the increase for tomorrow. With the rain, we may see delays at London Heathrow. Amsterdam and Dublin with some rain. Copenhagen still posting for tomorrow some windy conditions. And Berlin with winds, but it appears to be OK. In Spain, fine.

Now let's go to the Pacific a little bit. We saw some rain in Puerto Angel, Port Angel in English, 200 millimeters. This is, indeed, a tropical system. So you see it here. But it's not going to make landfall. It is going to continue its way parallel to the coast and going away, gradually, from the coast. And that's what happens all the time in the Pacific, that's why we don't talk about these systems much in the coastal parts of Mexico, unless they are too close to com -- for comfort.

A hundred and two kilometers per hour, gusting a little bit stronger. And, also, Richard, I chose this hurricane -- Hurricane Danielle -- because it's getting close to Bermuda in the long-term forecast. But it is going to be far enough, not to make landfall, not to bring significantly bad weather. But it will bring some surf and also some winds and clouds. So all those Brits vacationing there, any -- any holiday makers, for that moment, in the area, also look at that.

We see some more rain in the northern parts of China. We see some more rain in the coastal parts of China. And we saw a cyclone here making landfall in the northern parts of Vietnam. So that will continue. But this has helped the southern parts of China, because it was keeping the stationary boundary here in the northern parts. So now, as it weakens because of interaction with the land, it's going to allow the system to go south.

So if you are in Chunking (ph) or in Hong Kong, in Macaw, you may see an increase in clouds. If you are in Shanghai, you will see the rain. Needless to say, it continues to rain in the Korean Peninsula -- Richard, back to you.

QUEST: And you talked to me about wet weather in Britain. But, you know, I'm British. My son braleigh (ph) can easily turn...

ARDUINO: Very colorful...

QUEST: -- to something more suitable for the weather over here.

Guillermo, many thanks, indeed.

Serious stuff to remind you, the Dow Jones Industrials are down 95 points. They've rallied back up a bit. It's because of those existing home sales numbers, which crashed more than 25 percent. The Dow is at 10078.6. That's the scenario in New York.

When I come back with you in just a moment, there'll be a Profitable Moment on vacation.


QUEST: Tonight's Profitable Moment.

There are no rights and wrongs. There are no guidelines. There are no rules. Each of us has to decide for ourselves how much work we will do when on vacation. Everyone has an opinion. Holidays are for us to relax and recharge.

Can you do that and be busy BlackBerrying?

Can you actually enjoy your holiday when you're worried about the mobile phone calls to and from the office?

Can we also cut ourselves off for two weeks?

It's not realistic anymore. Let's be honest about it.

For me, the real nuisance is the mobile phone. I'm always accidentally ringing people who are away on leave. I then have the nasty moment to decide whether to continue the call or just say, have a nice time, sorry, brnnnn.

Isn't is possible to design a mobile phone with a message system telling you the person is on leave and then giving you an option to push a button if you really want the call to go through?

It would preserve the holiday. It would keep us in contact and ensure peace and quiet until the boss pushes the button.

And that's QUEST MEANS BUSINESS for tonight.

I'm Richard Quest working in London.

Whatever you're up to in the hours ahead, I hope it's profitable.

"WORLD ONE" starts now.