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QUEST MEANS BUSINESS
Fed Continues Tapering; Turmoil in Turkey; Emerging Market Hotspots; Emerging Markets Sell-Off; US Investors Rattled; Obama on the Road; US Economy; Poor Education Wastes Billions; Facebook Results; US Snow Storm
Aired January 29, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA NEWTON, HOST: Do not adjust your set. That is still the close of Wall Street today as the Super Bowl hoopla continues in this city, Wall Street not in on the party. Triggered by an emerging market sell-off, the Dow ends down. It's Wednesday, the 29th of January.
Tapering. Despite the turmoil, the Fed has a plan, and my gosh, it's sticking to it.
Elsewhere, central banks act to try and stem the falls. Turkey and South Africa raise rates.
Plus, Ukraine's bailout is now on hold. Russia says the new government must be formed first.
I'm Paula Newton. This is QUEST MEANS BUSINESS.
Well, it seems to always lead back to the Fed. The US central bank, as expected, has announced a further cut in stimulus. I want to underscore those words: "as expected." And yet, the Fed said as it had telegraphed for weeks that its monthly bond purchases would be tapered by another $10 billion, that brings it now to $65 billion.
Signs are the US economy is continuing to improve. What Wall Street, though, calls tapering is contributing to pressure on emerging markets. Now, in the past 24 hours, Turkey and South Africa tightened monetary policy in an effort to prop up their plunging currencies.
Now, the interest rate hikes were drastic. Really, these were jaw- dropping and unexpected, and the moves, yet, appear to be in vain. The lira and the rand are sliding again as the Fed presses on with its slow wind-down of its stimulus program.
Turkey's central bank raised its benchmark one-week repo rate to 10 percent from 4.5 percent, a much larger increase than anyone had expected. Now, the decision has been, as you can imagine, politically controversial.
Prime Minister Erdogan's government is embroiled in a corruption scandal that has truly spooked investors there. The lira fell as much as 2.5 percent before settling in at about 2.25 to the dollar.
Now, the rand is also extending its slide for the year after the reserve bank raised its key rate to 5.5 percent from 5 percent. Like Turkey and South Africa, India unexpectedly increased rates Tuesday. The rupee is now, though, also heading lower.
Let's bring in Andrew Finkel, who is with us here from Istanbul. So much to parse, here, but Turkey was at the epicenter of this sell-off, and really, it seemed to audibly accentuate a lot of nervousness about many, many markets.
In dealing with Turkey, investors have clearly lost confidence in the government there. Can you really say anything else when you look at how investors reacted to that dramatic interest rate rise?
ANDREW FINKEL, AUTHOR: Well, at first, they gave it a sign of approval. The central bank had this emergency meeting, they announced this increase in interest rates at midnight, nearly 24 hours ago.
At first glance, it looked like this was a substantial hike in interest rates, people thought finally the central bank is coming to its own, it's got rid of this political pressure to keep interest rates down. And it gave it a very strong nod of approval.
But by morning, I think people began to realize that Turkey's problems weren't going away. Of course, a lot of people rushed -- a lot of people who were short on dollars, rushed to buy dollars at the cheaper rate.
So, that again put pressure on the lira, and of course, by close of trading, the lira was again in a fairly fragile position, not as bad as it had been the day before, but certainly extremely vulnerable, Paula.
NEWTON: But for the central bank to make such a dramatic move, and then for the prime minister to come out and basically say this was sabotage on the part of the enemies of Turkey. Andrew, you've written extensively about this, and saying that the government at times hides behind what you call bluster and conspiracy theories instead of looking at the cold, hard economic facts.
On the streets there, do people see this move as a way forward for Turkey, or are they really afraid of the consequences at this point?
FINKEL: Well, I think, of course, everyone is afraid of high interest rates. It's going to mean much lower growth. Growth was already slowing down. Obviously, people know that there's going to be a hard year ahead.
Is higher interest rates worse than a currency devaluing all the time? Probably not, but of course, we now may have -- we're edging into stagflation, it hasn't occurred yet.
But of course, as you say, the government is really trying to bluster its way not so much out of economic difficulties, but out of this corruption scandal which you mentioned. The government about two weeks ago, three weeks ago, was caught pretty much with its hand in the till.
It's in the middle of December, it was this huge corruption scandal, erupted in Turkey. And the government has more or less tried to cover it up ever since. It hasn't had a clear inquiry, an investigation. It's more or less taken the prosecutors and policemen off the job. It just really wants the thing to go away.
But it's not going to go away. And as long as the corruption scandal rumbles, then they're going to compound the emerging market difficulties with this political situation of their own, Paula.
NEWTON: And despite all that political background noise, it grew at a fairly healthy rate last year in 2013. Do you think Turkey, its economy and the people there, have the resilience to see this forward in the next 12 months? As you say, they're going to be a difficult 12 months.
FINKEL: Well, we've -- Turkey has lived through very hard times before. It's lived through crises far worse than the current one in 2001. People have a fair amount of confidence in the future. They know when the economy turns around that there's a resilience and a bounce.
Turks want to get out there, they want to consume, they want to produce. They want to engage with the world. So, there is a sort of bedrock of positive sentiment, but I think at the moment, the economy's taking a terrible battering, and people -- it's sort of heads down for the time being, and I don't think anyone can realistically expect the situation to improve in the immediate future.
NEWTON: Yes, which is not good news when you think about the potential for contagion to other emerging markets. Andrew, thank you for your perspective this evening.
Now, the sell-off has hit emerging markets, as we've said, worldwide. We want to take a look at which countries have already been forced to take action and those running out of time to decide.
Now action taken: Argentina, currency controls. In India, an unexpected rise in interest rates. Turkey, larger than expected interest rate rise. It more than doubled. South Africa, a surprise rate rise. It was modest, but still a big surprise.
Now, countries and currencies that still remain under pressure. Rate decisions are due next month in the Philippines, in Indonesia, in Russia, and very crucially, in Brazil. South Africa's central bank, meantime, that governor, Gill Marcus, has outlined the problems facing all emerging economies.
Besides sharply depreciating currencies, they're suffering from capital outflows, as we just heard from Turkey, slowing growth, rising inflation, and deteriorating confidence.
To get more insight on what looks like a pretty grim picture here, we turn to Nariman Behravesh. He's the chief economist at IHS. Thanks so much for joining us.
I will put you on the spot a bit. I think some people, especially when the emerging markets started to stumble this way, expected this kind of pullback, expected that investors would have this flight to safety. What I want to know from you is, is this more systemic? Do you believe there's more risk in the system that we need to be taking a hard look at?
NARIMAN BEHRAVESH, CHIEF ECONOMIST, IHS GLOBAL INSIGHT: The answer is probably not. We don't think this is a repeat of what happened 97, 98 when we had that huge crisis in the emerging world. If you look at some countries, China, it's got its problems, but it's not going to be vulnerable to this kind of a situation.
South Korea's another one, Taiwan. Mexico. Really, these countries are sort of a little apart from this. Even Russia, to some extent, although it has its issues.
So, it's a handful of countries, I would say, and you listed most of them. They've got financial fragility, they've got political issues. Many of them have elections coming up this year. So, it is the Brazils, Indias, Indonesias, South Africa, Turkey, and a few -- Thailand, a few others like that. So, I don't think it's systemic.
NEWTON: I'm glad to hear you say that, but I still can't help but think that you might have butterflies in your stomach today if you are a central banker, not just an investor. What has changed since the financial crisis in terms of the global financial system and our ability to really weather the kind of shocks that we are seeing from emerging markets and elsewhere?
BEHRAVESH: Well, I think there are a variety of things. One is more sort of long-term, and that is we've seen a huge deceleration of growth in the emerging world, mostly because they enjoyed the ride in the decade of the 2000s, but really didn't do much to reform their economies to make them more flexible, more productive, more competitive. So, you've got that as a backdrop.
And then separately, you've got, of course, the fact that this huge credit boom that was going on, both before and after the financial crisis, is coming to an end with the Fed tapering. And so all of a sudden, I think a lot of investors are waking up to this fact and saying well wait a minute. Why are we pouring money into these countries when their situation is going to get worse?
Where you were talking earlier about stagflation, a lot of these countries have got stagflation. So, they're just not looking as though they're very good investments anymore.
PAUL: And you know, what a day for Ben Bernanke's last day. Certainly the $10 billion tapering. They say tapering is not tightening. OK. They decided to go through with it, really not a surprise there.
But if it really was momentous to say that we were really back in the deep woods here of this financial system, what do you have to say for really the way the Fed handled today and where it will handle things going forward now that Ms. Yellen is at the helm?
BEHRAVESH: Well, a couple of things. One is, certainly while they're worried about the emerging market situation, they're more -- in the end, they're more focused on the US.
And a lot of the data recently has sort of confirmed that growth is gradually accelerating in the US, so I think that's what they're focused on. Even though there are some weak spots, mostly it's looking pretty decent for the US and looks like growth is accelerating.
But one way to look at what the Fed's doing, and we use an automotive analogy. The Fed's gradually taking its foot off the accelerator. It hasn't put its foot on the brake yet and probably won't until 2015. So it's a very gradual process.
And I think they feel that rather than try to do it in fits and starts, let -- they want to stay the course, especially given that the economy is doing fairly well.
Now, of course, if things get worse, if we get another bad employment number or we really have a bad situation in emerging markets, I think they may take a pause. It's possible.
NEWTON: OK. Nerves of steel we will all need, and I'm going to hold you to the quote that it's probably not systemic. Great, good to hear it. Thanks so much for joining us. We'll hear from you again. Appreciate it.
BEHRAVESH: Thank you.
NEWTON: Now, we have to take a look at what the markets have been doing today. They haven't been doing anything pretty. Alison Kosik has been there all day. You know, Alison, they did come up -- they really are close to their lows from where the day began. Taper or no taper, it was pretty much expected. And yet, the market's still taking a deep dive today.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Exactly. No surprises from the Fed, Paula, but that didn't keep the volatility at bay. Triple-digit losses, accelerated, in fact, after the Fed statement that really didn't have anything new.
One trader put it this way, saying at this point, the market's really looking for a correction. The point of that is so -- the thinking is so maybe the market will come back bigger and stronger by the end of the year, if the market corrects now.
Also, the market got down today because of fourth quarter earnings. Boeing's shares were done, Yahoo!, AT&T, those companies reporting either weak earnings or a downbeat outlook.
Normally, you look at the Fed, it potentially is a calming force. Not happening today. So I guess the way you look at it, if last year was the year of the rally, 2014, Paula, may be the year of uncertainty. Paula?
NEWTON: Yes, and we should all sober up.
NEWTON: Alison Kosik, thanks so much. Appreciate your time today.
Now, the US president says he wants the government to work for ordinary people. Today, he's been on the road meeting some of them. We'll bring you more, up next.
NEWTON: The US president is keeping the focus on improving the economy. After the State of the Union address Tuesday, Barack Obama is on the road promoting his plan to tackle income inequality. First stop on his tour was to a Costco. Now, that is basically a grocery discount store here in the United States. This one was in Maryland, where he said he is determined to help ordinary people.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I'm choosing this to be a year of action.
OBAMA: Because too many Americans are working harder than ever just to get by, much less get ahead. The scars of the recession are real. The middle class has been taking it on the chin since before the recession.
The economy's been growing for four years now. Corporate profits, stock prices have all soared, but the wages and incomes of ordinary people haven't gone up in over a decade.
(END VIDEO CLIP)
NEWTON: We're now joined by John King from Washington. John, I know you were at this all night last night in terms of trying to parse what this could possibly mean to the ordinary people, apparently, we were just talking about.
But it just so strikes me, John, that here's a guy who probably could have led dolphins into the desert five years ago in terms of all the hope invested in them, and now we've got a guy going it alone on so many levels.
In terms of reaction yesterday, it didn't even seem that there were that many Democrats all that basically happy about what he said in the speech and about all these executive orders now going into motion.
JOHN KING, CNN CHIEF US CORRESPONDENT: That's an excellent way to put it. The most liberal part of the Democratic party, the president's party, is happy he's talking about these issues.
Happy, the liberal wing of the party, happy he's issuing executive orders to, say, raise the minimum wage on if the federal government awards a contract, the person getting the contract has to pay about $3 an hour more once the president's order takes effect for workers.
But can he get the US Congress to do some of the other things he wants to do to help the economy, like immigration reform? Maybe. Like big tax reform? Most likely not. And you make an excellent point about the reason why: his political standing, Paula, has deteriorated so much.
This is a mid-term election year. The president's not up for reelection, obviously, but most of the US Congress is. The entire House and 36 seats in the United States Senate. The biggest indicator in American politics of how the election will turn out is the president's approval rating. Right now, about 43 percent of Americans approve of the job he is doing.
And part of the dysfunction of the American political system right now is Republicans know if not much happens in Washington this year, even if they're partners to that dysfunction, the president will get blamed and his party will suffer in November. So, don't be optimistic about big compromises in Washington.
NEWTON: And yet, no big compromises. Your perspective, and you've been at this for such a long time in terms of looking at a speech like that and the things that he wants to get out of it over the next 12 months, what has any hope of working?
A lot of the rhetoric we've heard from him on the road today in terms of getting to what the middle class needs, what has hope, there, John, if he's to turn this around?
KING: In terms of -- look, if you look at the statistics, the president's dead right. There are people of different philosophies, different economic approaches who would debate the solution to it, debate the reasons, but if you look at the gap between the rich and poor in the United States, the numbers are quite stunning. So the president is dead right to address the issue.
The problem is, there's not a great political consensus in a very divided Washington about whether it's the government's job or how much of the government's job to try to address that.
So, the president can do some things that will help ordinary Americans. If you're somebody who works on a federal contract, maybe a janitorial service, maybe a catering service, and you're at the low end of the rages, if you raise the minimum wage, not only do the lowest wages go up, the people just above them go up. So, that will help somewhat. The president can have an impact there.
But on the big, sweeping structural issues, the drags on the US economy that -- so you get the rising tide, if you will, that lifts all boats. Tax reform not going to happen in this election year, at least not in any big dramatic way. Entitlement reform, big spending, structural reforms to the budget, not going to happen in an election year.
If there's one glimmer of hope, Paula, it could be on immigration reform, an issue the US politicians have talked about for a decade or more now. It was a huge priority for President George W. Bush, a Republican. He couldn't get it done. President Obama has promised every year to try to get it done.
Republicans see it in their self interest, both because their corporate backers want this and because of their problems politically with Latino voters to do something, but they don't want to do everything the president wants. They might give legal status to the illegal immigrants in the United States. The president wants to give them full citizenship.
So, the big question could be a month or two from now, does the president accept that compromise, not quite what he wants, legal status, not a full path to citizenship, or would he veto such a legislation and take the political issue into the next campaign? That could be a question the president faces in just a few weeks to a month or two.
NEWTON: Yes, and in this day and age in Washington, tough to really decide what to put your money on there, what he would do.
NEWTON: Thanks, John. Appreciate your time.
KING: Thank you.
NEWTON: CNN's Jake Tapper will have an exclusive interview with President Obama this Friday. It will be the president's first interview since the State of the Union address. That's at 11:00 AM GMT, Friday on CNN.
Now, governments across the world are wasting almost -- get this -- $130 billion per year on what they believe should be effective education. That's according to a UNESCO report out just today.
The study found that 250 million children worldwide are failing to learn basic, very basic skills in terms of reading and math. In poor countries, one in four young people were unable to even read a sentence.
Pauline Rose is the director of the UNESCO study, the Education for All Global Monitoring Report. She joins me now via Skype from Addis Ababa. Pauline, thanks so much for joining us.
It was a bit depressing, unfortunately, to read your report. But what struck me was that in emerging countries like this, in developing countries, they're having the same problem that we're having in developed countries.
It is difficult to find a model of education that is foolproof, that works, that even if you throw money at it, is going to make sure that kids are getting the skills they need. Is that what you saw from this report, or did you see something far more entrenched?
PAULINE ROSE, DIRECTOR, EDUCATION FOR ALL GLOBAL MONITORING REPORT, UNESCO: It's certainly a problem of quality of education around the world. It is a global problem. But actually, it's far more entrenched in countries that are the poorer countries around the world, in countries like Ethiopia, where I am, where we've launched the report today.
In sub-Saharan Africa, account for about 80 million of those 250 million children who can't read or write. And about 40 percent of young people can't even read a sentence in this continent. So, of course, there are massive problems in the US, in rich countries, but they pale into insignificance when we think of these poorer countries.
That's not to say that there aren't glimmers of hope, in fact. Ethiopia, the reason why we were launching the report here in Ethiopia is because the government is really committed to improving education, and there have been great strides, great strides in getting more children into school in particular.
NEWTON: Great strides, but even in Ethiopia, and I've been there to some of those rural schools, a lot of the money at times seems misplaced. What do you think is the key going forward? I notice that the report underscored the training of teachers as being crucial.
ROSE: Yes, one of the big things is that there's just not enough teachers, and the teachers that are there don't have the right sort of training. So, there's a deficit of about 1.6 million teachers, and again, around 60 percent of the teachers that are missing are here in sub-Saharan Africa.
But it's not just about getting more teachers, it's about getting more teachers into the rural schools, into some of those schools that you've seen in Ethiopia, and I've also seen. Because the conditions are so bad that teachers just don't want to go there.
We were actually hearing from teachers today about what would help support them in going there, which isn't just more money, but it's also about making sure the infrastructure in rural areas helps to support them, to support their families. That there are health clinics there, that there are schools there for their own children and so on.
So, there's a vast amount of development that needs to be done, that needs to connect up education with other sectors, too, to help teachers to actually be able to make sure children are also learning wherever they're living.
NEWTON: And again, very interesting that the same solutions we look for here -- better, more qualified teachers -- is the same as what we're looking for in the developing world. Pauline Rose, thanks so much for being with it. Appreciate it.
Now, some numbers just in to the QUEST desk here: Facebook results. Earnings per share were 31 cents. That is much better than expected. Analysts were looking for 27 cents. That means shares already in the after trade up 5 percent.
This is a stock which we'll continue to watch closely. A lot of people said the shine would be off of Facebook, it just wasn't the place to go for young people anymore, and yet, I'm sure when you take a closer look at these numbers, those mobile revenues continue to go up for Facebook. We'll keep you updated on that.
Coming up on QUEST MEANS BUSINESS, huge disruption on the roads as freezing temperatures play havoc with the southeastern United States. Not even CNN in Atlanta is immune. That's right, we'll get there right after the break.
NEWTON: At least five people have died in extraordinary winter weather in the southeast of the United States. The deaths happened in Alabama, where 23 other people were injured in weather-related incidents.
In Atlanta, Georgia, wow, has there been a lot of traffic chaos, with people stuck in cars for hours. And when I say hours, I mean 18 and 20 hours. Many abandoning those cars to walk miles home in freezing conditions.
We've never seen anything like this in Atlanta, and joining us from the heart of it is our own Michael Holmes. Michael, I don't even know where to go with this. Yesterday, here in the east, we were not making fun of you guys, not at all.
And when I heard about some of the heartbreaking stories about people trying to get to their kids on the other side of town, their kids being stranded in schools, it sounded like utter chaos.
MICHAEL HOLMES, CNN INTERNATIONAL CORRESPONDENT: Yes, and it absolutely was, Paula. I mean, my own son, it took five and a half hours to go four miles to get him home from school, and they ended up with 30 kids in the school staying overnight. That's the type of chaos it was. I'll show you the road, I don't know if you can see --
NEWTON: I can.
HOLMES: -- ahead of us as we're driving along. This is I-20. Yes, this is one of the major freeways in Atlanta, runs east-west just south of the city. And you can see here, there's -- they still haven't plowed this, by the way, and salted it. There's one sort of central area where people are able to cruise on.
There you go, there's a car off to the right-hand side that slid off the road, and they're trying to get it out now. And that's the problem now that we are seeing here is that you have these cars all off to the side of the road that have been abandoned, basically, because people spent those 12, 15 hours in the car.
And we spoke to a woman about an hour ago who had stayed there from mid afternoon until 5:00 AM, got up, got out of the car, left it on the freeway, and went home. And we got her when she was coming back to pick it up. That's the sort of chaos that we have seen.
Here on I-20, now, there's a few places around the freeway system where there are still some pretty good traffic jams. We were in one a couple of hours ago. But this is what you're seeing now is the roads are generally clear. But even this major freeway yet to be fully de-iced, if you like.
NEWTON: Really, incredible pictures. I'm so happy that you're bringing us this close to the action there. I pray that there's a lot more salt to be had and some warm food and that Atlanta has learned some lessons from all this. Michael Holmes from inside a car on the I-95 (sic), thanks so much. Appreciate it.
We will be back right after this break.
NEWTON: Welcome back, I'm Paula Newton, and here's a check of the main news headlines this hour.
New violence is being reported in the Central African Republic city of Bangui. First a gunfire and explosions were heard and Reuters reports French peacekeepers had to disarm an angry mob that was apparently involved in a tit-for-tat sectarian attack.
(Inaudible) Al-Jazeera journalists detained in Egypt are being referred to the country's criminal court to face trial, that's according to Egyptian state media which says they're accused of broadcasting false information and rumors about the nation's political unrest.
Authorities in the U.S. state of Georgia are urging people to stay off the roads so crews can clear the ice and snow. Expressways have been jammed in some places for more than 24 hours now. The weather is still causing problems across much of the Southeastern U.S. In Alabama at least five people have died in traffic accidents.
The Federal Reserve will reduce its bond-buying program by another $10 billion to $65 billion. The decision was unanimous and the move widely expected. The Fed made no mention of the ongoing turmoil in the emerging markets.
The parliament in Ukraine has not voted to adopt an amnesty law for protesters. Now the government says building -- government buildings -- and streets must be clear for that to take effect. So that means those protesters have to get out of the way if they want that amnesty. Also, the future of Ukraine's financial lifeline from Russia could depend on the makeup of Ukraine's next government. President Putin says Russia will hold on to what remains of a proposed $15 billion bailout, and I should say, the balance of it still remains until Ukraine replaces the country's prime minister who resigned yesterday. Mr. Putin also says other countries should not get involved. After talks with German chancellor Angela Merkel, the Kremlin released a statement saying, "Outside interference in Ukraine's affairs is unacceptable." Diana Magnay has more from Kiev.
DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT BASED IN BERLIN: There's a bitter chill, but Kiev's Independence Square is quiet, the real turmoil going on inside the Parliament. As deputies struggle to reach agreement on a possible amnesty for protesters arrested during weeks of demonstration. Vladimir Oleynik from President Yanukovych's Party of Regions left the session long enough to meet us. He helped draft the infamous anti-protest laws which severely restricted the rights to free assembly and peaceful protest. They were widely seen as the trigger for last week's violence.
OLEYNIK: My own opinion, he tells me, is that sooner or later we'll get back to these laws and pass them, but in a more peaceful time. Still yesterday, I made the decision to vote on canceling them because I think there's no decision that we shouldn't make in order to find understanding and bring peace to Ukraine.
MAGNAY: Behind him, a rival protest action to that on the main square, just far fewer people. These ones bussed in from Ukraine's traditionally pro-government east. This is a pro-government's demonstration just above the Parliament. We've been trying to go into the park to talk to these people but they don't let us in. They won't give us a coordinator. Now if you can see, they don't really want to be filmed. But there are other far-more powerful players at work behind the scenes who are equally disinterested in speaking with the media.
MALE POLITICAL ANALYST WITH REUTERS: Members of Parliament are not totally are not totally subordinated to Mr. President because they are united in subgroups, subordinate to all oligarchs, and that's why President asking for support -- asking for support to deal with protesters. But oligarchs have decided that if they (inaudible) start strong attack against protesters, economics will crash down and all oligarchs will lose their assets.
MAGNAY: Oligarchs like Rinat Akhmetov, the richest of them all, worth $15.4 billion. Last Saturday he issued a statement on the website of his business conglomerate SMC saying, "Business cannot keep silent when people are killed" and that "the only solution is to move from street riots and attempts to curb them to constructive negotiations and results. That same day, the president offered a package of concessions to the opposition after weeks of refusing to budge, though he offered no explanation for the change of heart. (Akmentoff) has declined our request for an interview, Petro Poroshenko, worth $1.6 billion, agreed to talk. He's the owner of a chocolate empire, a former economy minister and firm supporter of the protest movement.
PETRO POROSHENKO, BUSINESSMAN AND MP: Now Ukraine is united. They are -- all the people are together. This is not a civil conflict between one part of the country and with another -- no, this is the whole civil -- whole society -- are fighting against the tiny group of government protected by the riot police.
MAGNAY: The president clearly still has some supporters, even if he's finding it harder to keep the backing of the oligarchs. Diana Magnay, CNN Kiev.
NEWTON: Now, the Russian ruble is continuing its slide, following a sharp sell-off earlier this week. There are hopes that the Winter Olympics in Sochi may help bring some much-needed cash and confidence. As Ivan Watson reports, not all those who live nearby are feeling the benefits.
IVAN WATSON CNN'S SENIOR INTERNATIONAL CORRESPONDENT BASED IN ISTANBUL, TURKEY: In the shadow of a brand new Olympic stadium workers put the final touches on tidy new streets and sidewalks in the run up to the Winter Olympics. This is a model neighborhood of sorts, built to resettle some Russians who had to give up their homes and move here to make way for Sochi's new Olympic Park.
Female, TRANSLATED BY WATSON: The Olympic torch is going to burn where I used to live, says a local woman who introduces herself as Grandmother (Rema). I'm very happy with my new house, she says.
WATSON: All of the Russians around Sochi share Grandma (Rema)'s Olympic spirit. We drove 25 minutes from the Olympic Park up a winding road that runs parallel to a brand new multi-billion dollar highway and high speed train line. And it's along this route in the village of Akhshtyr where some residents claim the Olympics destroyed their way of life. Alexander Koropov used to make a living selling fruit from his orchards -- kiwis that are not rotting on the vine he says due to pollution from nearby Olympic construction sites. The new Olympic train was built 20 yards from this man's farm.
ALEXANDER KOROPOV, FARMER, TRANSLATED BY IVAN WATSON: Every ten minutes he says a high-speed rail train wizzes by his house, which is very close to where we're standing right now at his farm, and it drives him crazy.
WATSON: The little government medical clinic in Akhshtyr stands abandoned while the community recreation center is an empty shell. Several locals told me they're angry that the government spent billions of dollars on Olympic transport while promises to provide centralized plumbing and heating went unfulfilled. And then there's the environmental question.. (Mike Samna) says this was a beautiful place before the Olympics. You can't imagine how many trees were destroyed here to build this.
The new train and highway were built up the length of the Mzymta River. This river is one of the major drinking water supplies for the city of Sochi which has a population of more than 300,000 people, and locals fear that the enormous construction here is polluting that vital water supply. Nearly three years ago, Russian authorities signed a pledge with the United Nation environmental program to restore the river basin. But that's done little to satisfy some Russians here who claim the Sochi Olympics have simply passed them by. Ivan Watson, CNN Akhshtyr, Russia.
NEWTON: Coming up, that personal touch in a global hotel empire. The head of Intercontinental Hotel Group talks trust and tough demands from guests.
NEWTON: Time for today's "Business Traveller" update. As Intercontinental Hotels announces plans to expand in West Vaango, India, it says the key is not to have a uniform approach to hotels, but to make sure they reflect the surrounding culture and environment. Now, the chain operates nine brands including Intercontinental, like this one in Paris. It also runs Holiday Inns, like this one in Halifax, Nova Scotia, Canada -- not too far from where I used to live -- and the Crown Plaza chains, like this one in Birmingham, England. Now, the head of IHG has been telling Richard Quest why tailored things -- tailoring things -- to the needs of customers has been his priority. He spoke to Richard Solomons in Davos.
RICHARD SOLOMONS, CEO, INTERCONTINENTAL HOTELS: A lot of guests really want to be you know sort of globally coherent brands and understand what it stands for. They want it to be relevant locally but they also want personalization which clearly is not an easy thing to do. The other real insight that came out was the big element of trust that's now important in a more uncertain world -- who are you going to trust, which brands are you going to trust and why are you going to trust them?
QUEST: This concept of trust is a double-edged sword, because if you've got it, you will benefit, if you haven't, you're out of luck. And once it's gone, it's very difficult to get back.
SOLOMONS: Well I think you're right on that -- that's what brands are all about, isn't it? It's a promise -- it's a promise that people are prepared to pay for and people have to trust that promise. So after grappling globally coherent or globally consistent, people understand what the brand stands for. So if you take one of biggest brands -- Holiday Inn -- which has been through a big refresh program. We've actually thrown out of our system well over 1,000 hotels and added over 1,500 new ones in the course of the last eight or nine years. So, we've really moved that brand forward, and we can actually have a proposition for it based on a physical product and the service experience that is consistent.
QUEST: I can hear the viewer saying, 'he would say that, wouldn't he?' He's the chief exec of the company. Lip service.
SOLOMONS: By being clear what the brand stands for -- define it clearly which is something we do with each of our brands -- and then deliver it consistently. The hotel brand is actually an experience brand, much more than it is a physical product. So, we take the Holiday Inn -- (inaudible) talking about -- we retrained every single member of the operation teams in those hotels -- to deliver a service that was relevant to the guest.
QUEST: You say the trend survey said that people want personalization -
QUEST: It's the one thing you can't do once you get to scale, because if you promise me that you're going to give me a personalized 'you know Richard Quest likes X' and you fail to deliver -- you really have got it not just partly wrong but totally wrong?
SOLOMONS: That's only one aspect to personalization though. That can be difficult. I think when we go on to very regular guests, one can do it. And we -- don't forget that a lot of this is enabled by systems and technology, which is one -- no question one -- of the key drivers of a brand experience. But there's other aspects to personalization in the sense of I want to be able to use the services the way I want to use them. I want to use them on demand, I want to have a concierge who understands a bit about me and help me get something a little better out of the experience. It's not necessarily Richard Quest likes Jelly Babies and that's the condiment he's going to have in his room. It can be much more than that.
QUEST: But if you knew that Richard Quest likes green seedless grapes in his room --?
SOLOMONS: Much tougher. Much tougher, but we'd certainly try very hard to do that for you.
NEWTON: Well I could see Richard giving those executives a hard time. Anyway, another executive key to put the customer first, so he says, is the president and CEO of Hilton Worldwide, Christopher Nassetta.
CHRISTOPHER NASSETTA, CEO, HILTON WORLDWIDE: I think in today's world, customers -- what customers really want is the choice and control, OK? So, yes, you know that sometimes can be interpreted as sort of a something that's more personalized or customized, but I think today -- it's choice. They want to be able to make the choices that they want to make and they want to control how they interact. Thus, when you look at the iPhone and all these other wonderful new technologies, and you think about what makes them so special? It's not the wiz-bang, it's got a great app and you know it's fun to play with, you know, as a game. It's that it makes people's lives easier, simpler, it gives them more control in terms of how they interact with the world. So, what you out to look for from us, OK, across off our brands in the system -- because we're spending a lot of time on it -- is obviously great service and, you know, customization within the brands which we think we do very well. But you ought to be looking for advancements and innovations in the technological area that give our customers a lot more choice and control over their experience with us from the time they think about taking a trip, to the, you know, to the - - when they're done taking the trip and they're giving us feedback in every step of the process.
QUEST: What are the great challenges you face? Is an American company acting as an international company that has to act as a local company so that individual -- in individual countries -- you're perceived not to be an American behemoth who's come overseas?
QUEST: It's not unique to you, this, but it is very important in the hospitality industry now, isn't it?
NASSETTA: What's unique to us is we have been out you know playing in the international arena longer than anybody, and if you think about the Hilton brand in many markets around the world, it is synonymous with the hotel. I mean, we were in most of the major markets around the world 50 years ago.
QUEST: In those occasions, you were an American brand that was offering an American style of product in -
NASSETTA: We --
QUEST: -- a foreign country.
NASSETTA: -- we were, but over time, as the industry has evolved and as we've adapted, we have very much become a local brand in the major markets around the world that we play in. And the key to that which we've done for e long time and I think right now we're doing a better job than we've ever done, is taking our brands and making sure that we localize them. So, if you walk around the Hilton Garden in Davos. If you walk around the Hilton Garden in Davos, you will notice striking differences in many -- in many areas than you would if you walked into one in midtown New York. If you walked into a Hampton in India, it has been localized. It's, you know, we have done a huge amount in all of the major markets around the world of research to know what exactly the customer wants.
Now the DNA of these brands -- you know you're in a Hilton Garden and not because the sign is there -- it's some common DNA. Obviously they're global brands, same with Hampton, but those are adapted to the local -- to the needs of the customers in the local jurisdictions. And we absolutely obsess over that with each of our brands in each of the geographic regions around the world.
NEWTON: Yes, what people in Atlanta wouldn't give to be a warm hotel room of any description at this point. Pedram Javaheri joins us from the Weather Center in Atlanta. First, take a bow -- you made it to work -- excellent, congratulations.
PEDRAM JAVAHERI, METEOROLOGIST: Absolutely.
NEWTON: And you're in a much better position than our colleague Michael Holmes who's still on the road there, and will be for quite some hours to come. I don't like what I see behind you, I really don't like it. Can you explain?
JAVAHERI: Yes. You know what you're seeing here is what has transpired in the past 24 hours. The good news with it, Paula, it is finally beginning to move out of the region, out of the state of Georgia into portions -- really off the coast of the Carolinas and beginning to minimize the impact that we've seen. But quite a mess. And really when you're talking about 6 centimeters -- that is the smallest amount of snow causing this much disruption across any major city in the world. But last time we had this much snow across the southern U.S. in the city of Atlanta, back in 2011, you see how much ice accumulated in the cities of Charleston, also in portions of Virginia on the order of 14 centimeters came down.
But absolutely incredible photographs coming in courtesy of our eye reporters showing the scenes before the sun was to set. And you've got to keep in mind it's not the 6 centimeters that caused the problems, it is more about this 1 or 2 centimeters of ice that accumulated on the roads where we had some folks stuck on the highways in excess of 12 hours where temperatures dropped to -10 degrees across this portion of the country. And children, of course, stranded in school busses. We know hundreds of children slept in schools in the overnight hours.
Well, the governor is sending military Humvees out to hand out food and water across portions of the greater Atlanta area. And really what transpired here is we're talking about a city exceeding six million people in population and then kids and also school -- and also businesses -- being fully operable into the morning hours and once you get in, to say -- 12, 1 and 2 in the afternoon on Tuesday -- everyone decides, how, not going to be a good afternoon, let's send everyone home early. And then we had hundreds of thousands of people at one point really trapped across much of the highways surrounding the portions of Georgia and the city of Atlanta. And of course we know travel impacts not only localized through Atlanta, but also much of the region as well, while up across the upper Midwest, travel delays and cancellations exceeding 600 when you put together the arrivals and the departures -- 3,000 cancellations in total.
But the good news with all of this, a very rapid warming trend, and we're talking about doubling your temperature and some in the next couple of days across this portion of the world. Getting up to 13 degrees -- actually getting up above average for this time of year across Atlanta up to (inaudible) for both Friday and Saturday. In New York City, also sees their temperatures warm up to well above average. So, everything going to melt rather quickly and the problems should begin to improve in the next coming 24 or so hours. But (inaudible) with the scenes coming across out of portions of Europe there where we know temperatures in Poland probably have dropped down to -10 in Warsaw, over 40 centimeters of snow down on the ground across parts of southern Europe and travel delays there not as bad as the southern U.S.
NEWTON: Well, they are used to winter of course, and, hey, --
JAVAHERI: -- Yes.
NEWTON: -- I was in Poland in the fall, they had a warm fall -- they know what to do with this kind of stuff.
NEWTON: Thank you so much and I'm glad to hear things will improve over the next few days in Atlanta. Appreciate it. Thank you.
JAVAHERI: You bet.
NEWTON: Still to come on "Quest Means Business," We'll take a look at where it's all going wrong for the gaming company once loved by teens and adults alike -- Nintendo. Stay with us.
NEWTON: Nintendo saw net profits fall to just under $100 million in the nine months to the end of last year. Now the gaming firm is struggling with weak sales of its Wi-U console. Some executives may face pay cuts. Vladimir Duthiers looks at how a much-loved company lost its way.
VLADIMIR DUTHIERS, INTERNATIONAL CORRESPONDENT FOR CNN BASED IN LAGOS, NIGERIA: When I was about 12 years old, Nintendo launched the game that blew the minds of every kid in America and around the world including me -- Donkey Kong. This came was (inaudible) on any given weekend and even on some school days, you'd find kids playing this game. Several years later they launched the hugely-successful Mario Brothers. Subsequently, even after the company had been written off by gamers and analysts, they were able to reinvent themselves with the 2006 launch of the Wii gaming console. But since then, Nintendo has been bruised and battered by the competition, including Sony's PlayStation and Microsoft Xbox 360. At the Super Potato Retro Gaming Center, fans of the classic Nintendo games can spend hours playing their old favorites. Keita Furuyama remembers what it was like owning an early Nintendo console.
KEITA FURUYAMA, GAMER, TRANSLATED BY DUTHIERS: When I first bought a Nintendo, he says, I was the envy of my friends. They all wanted to come over to my house to play.
DUTHIERS: Since the launch of its Wii U in November 2012, Nintendo has sold more than 3 and 1/2 million units worldwide. It originally said it expected to sell 9 million consoles in fiscal year 2013. But last week, they revised that forecast to 2.8 million. Many gamers say the Wii U can't compete with the graphics and titles offered by the competition.
FURUYAMA, TRANSLATED BY DUTHIERS: I just find Sony more attractive as a gaming platform, Furuyama says. Even when you play a game that's available on both consoles, the Sony version is more fun than Nintendo.
DUTHIERS: Masaru Sugiyama, a gaming analyst for Goldman Sachs which has cut their 12-month target price by 8 percent and downgraded the stock (inaudible), agrees.
MASARU SUGIYAMA, GOLDMAN SACHS: I notice the people who are buying PlayStation 4s and Xbox 1s are really dedicated hard-core gamers who are willing to spend larger amounts of money to gaming. However, people who conventionally play the Nintendo games -- the Wii games -- were (inaudible) or casual gamers.
DUTHIERS: But it appears the company's share of the market is shrinking, even making it more affordable hasn't helped.
SUGIYAMA: When you price that $100 below the competition, they also - - the hardware specifications -- were below PlayStation 4s and Xbox 1s. So I think those populations also went for PS4, Xbox 1. So Wii U was left with not many people to buy.
DUTHIERS: he news is not all grim. Nintendo reportedly has 62 billion yen in cash. That's over $600,000 million. And sales of its handheld 3DS remain strong. Analysts say profits could also be boosted by developing mobile software and selling games online. Looking at that P/E ratio right now, do you think that the stock is fairly valued and what are you expectations over the next 12 to 18 months?
SUGIYAMA: Our 12-month target price is 11,000 yen, and this is based on a rather optimistic scenario. This is a company with a very big balance sheet -- cash -- and also a great content. So at some point, there's definitely a point where the value in Nintendo stock should be appreciated, but not at this moment.
DUTHIERS: Nintendo looking to knock out the competition like they did back in the early days. Vladimir Duthiers, CNN Tokyo.
NEWTON: Time now for one final check of the U.S. markets. Stock sold off after the Federal Reserve announced it will reduce monthly bond purchases by another $10 billion to $65 billion this month. The Dow dropped more than 1 percent on that news. We also got in some Facebook earnings this hour -- better than expected 31 cents a share -- analysts were looking for 27 cents. As you can imagine, that means the shares are up and (inaudible). I'm Paula Newton, I'll see you right here tomorrow.