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QUEST MEANS BUSINESS
Weak US Jobs Report; Roller Coaster US Markets; Ford Unveils S-MAX; Dollar Down; Olympics 2020; Pros and Cons to Hosting Games; Summer Weather in Cities Bidding for 2020 Games; European Weather Outlook
Aired September 6, 2013 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
FELICIA TAYLOR, HOST: More US job seekers abandon hope as hundreds of thousands are out of the workforce.
Also tonight, we've got Ford regaining its focus. CEO Alan Mulally tells us it can ride the European recovery.
And a high fashion furor. Kenneth Cole starts a social media row over Syria.
I'm Felicia Taylor, and this is QUEST MEANS BUSINESS.
Good afternoon from New York, I'm Felicia Taylor. US stock markets are rising despite a bitterly disappointing jobs report. Investors think the numbers might be poor enough to actually stop the Fed choking off the supply of cheap cash for now.
The US economy added just 169,000 jobs in the month of August, and that number was well below expectations of more like 185,000. The Department of Labor also reported that far fewer jobs were added in June and July than previously thought. Altogether, the numbers are down by 74,000 jobs.
The US unemployment rate fell to 7.3 percent. That's the lowest that it's been since the start of 2009. But the decrease was for all of the wrong reasons. More than 300,000 people dropped out of the workforce.
This was always going to be a jobs report with big implications. Remember, the Fed has said it won't begin scaling back its stimulus measures until the labor market actually improves. Now, if these numbers had been better, it might have been seen as a green light to begin that tapering process. Until this morning, it looked likely that the squeeze would begin as early as this month. Now, not so sure.
Let's bring in Diane Swonk, chief economist of Mesirow Financial, and she joins us now from Chicago. Diane, you have said all throughout the day that it's now sort of a coin flip as to what the Federal Reserve is going to do. Certainly this doesn't meet the criteria of any kind of a trend.
SWONK: Well, this is what the problem is is that we revised our backward look at history twice now. Two months in a row, we revised down, and at this stage in the recovery, what we'd like to be seeing is that we're capturing more jobs as we get more economic information as the economy is gaining momentum.
And actually, what this told us is that we went through a summer lull -- really, a six-month lull. And I think that's important to understand. I do think we'll have a little reacceleration in the fourth quarter. The important word there is "little."
I think for the Federal Reserve, the key issue is, how do they deal with this. It's going to be a very heated debate, and it is a coin flip. I think they'll probably end up erring on tapering to stake out their ground on tapering, but it's tapering light, putting the toe in the water and really defining what gradual means.
Tapering is still stimulating the US economy, just not as aggressively. It's like moving from a 1 percent cut in the Fed funds rate in the old days to a half or a quarter percent cut in the Fed funds as the economy kind of stabilizes.
This is going to be a tough meeting for the Federal Reserve, but it's really important to know that by laying out a road map, they can lay out some continuity for whoever's next on the Federal Reserve. A lot of different seats are going to be changing around in the month of January and February on the Federal Reserve, voting committee of the Federal Reserve, the FOMC.
And if they set in course today a road map for how policy is going to go going forward, that institutional momentum is really important, so even doves may have some meaning to go ahead and go with the tapering even though they don't like where the economy is going to be able to lay out that road map.
TAYLOR: Wow, you've given me so many things to ask you questions about --
TAYLOR: I'm going to begin with --
SWONK: I'm sorry.
TAYLOR: No, I'm serious, it's wonderful, it was such a great answer, it was all comprehensive. But one of the things that I'm really curious about is -- because we've been going back and forth as to what it really means to sort of dip your toe in the water.
If that's what they're going to do, if they do some kind of a pullback, what's it going to look like specifically? People are talking about somewhere between $5 billion and $10 billion being pulled out of the marketplace. Does that about sound right to you?
SWONK: Yes, exactly. That's a very small decline, $5 billion to $10 billion, and I think it would be in treasuries rather than mortgage-backed. I think what they're looking for is to support the mortgage market.
And if they do less than expected and only do part of it on one part of the equation, the treasury market, they may get a bit of a rally, lower rates in the treasury market, and they'd really like to narrow that spread. Because the mortgage market's been hit pretty hard, much harder than even treasuries, and they'd like to narrow the spread so mortgage rates come in a little bit.
They also -- they are very concerned about how much rates have backed up. They don't like how rapidly they've backed up.
On the other side of it, there is a big debate, how effective is this easing going to -- has this easing been? I think it has been effective, and I think, actually, the effectiveness is underscored by how scared the market is by them even just slowing down a little bit rather than stopping entirely.
And so, I think this is all part of a communications program by the Fed. They need to clarify, clarify, clarify. As you absolutely, rightly underscored, the 7.3 percent was for all the wrong reasons. It wasn't one step closer to an end in monetary easing.
This economy -- today's report shows this economy still needs the backing of the Fed to move forward and it will continue to get it, and that's what the Fed's going to clarify, is that when it talks about unemployment, it wants to see unemployment go down for the right reasons, not the wrong reasons.
TAYLOR: Diane, I really hope you're right and the Federal Reserve will clarify things, because they've been --
TAYLOR: -- a little vague lately. Clarify would be terrific --
SWONK: It's been tough with us --
TAYLOR: -- and all of us would be grateful for that.
SWONK: TMI. TMI, yes.
SWONK: It's kind of like going to your favorite restaurant and seeing the back room, wherever the food is made.
SWONK: Sometimes you don't want to know --
TAYLOR: You may not want to know.
SWONK: -- what goes in there, right? You just want the food --
SWONK: -- served on a plate.
TAYLOR: Just a -- we have just a few seconds left. Because one of the other options, of course, is that they may do nothing at this meeting in a couple of weeks, and it is just a couple of weeks away. Could they call for an October press conference and make a different kind of a stance then? Is that on the options table?
SWONK: It certainly is. The Fed can do anything it wants. And so, that is absolutely on the table. So is the fact that I think we're going to get a dissent, either way. If we go ahead with tapering, I think we will see a dissent from some of the doves to represent that, at least one dissent.
On the other side -- which will give the markets mixed messages, of course. On the other side of it, if we don't taper, you're going to see -- you could see a dissent on the other side. So, I think there is -- there is some tension as we move into this meeting.
But the important thing is they have some time to explain it. But if they don't get to explain it this meeting, they'll explain it in October, they can do whatever they want. They can call a press conference whenever they want. They can move between meetings. Remember, the Federal Reserve has that power.
I think it is important, though, for everyone to take the bigger picture. When all is said and done, Charlie Evans -- and this is really -- he's been supporting this with the Chicago Fed -- said today he thought that the QE3, which is the current buying program, would end up being $1.25 trillion by the time we're done.
That's double what they did in 2010, 2011. So, this is no small feat of what they're still trying to accomplish here.
TAYLOR: It's a very big number. Diane Swonk of Mesirow Financial, laying out for us perfectly what's been going on in this jobs market and hopefully what the Federal Reserve will be doing a little bit down the road. Thank you.
The rally on Wall Street is not looking particularly strong, however. Zain Asher is live for us at the New York Stock Exchange. Zain, it's an interesting way how the markets are interpreting this number, because for their perspective, not pulling out at this point would be a very good thing, in terms of stimulus.
ZAIN ASHER, CNN BUSINESS CORRESPONDENT: Hi, Felicia. Yes, absolutely. But the stocks have really been on a roller coaster ride today. It's been quite interesting to watch. Initially, 8:30 AM Eastern Time, when we got the August jobs report, we saw stocks jump.
And then after that, the Dow sort of fell more than 100 points after Vladimir Putin's comments about Syria at the G-20. And then, President Obama sort of tried to step in to ease worries, and then stocks picked up after that.
So, the market has so many things it's thinking about right now. It's thinking about Syria, it's thinking about what the Fed's going to do, it's thinking about the state of the economy and also jobs as well. So, it really does have a lot of pots on the stove right now.
But back to jobs, just looking now, the Dow is up -- let's see -- 62 points. So, people are -- they sort of seem to be happy that September 18th may not be -- this is what traders are telling me -- may not be the day, in terms of stimulus. They don't think that the economy is strong enough to be taken off crutches right now. They think the economy is still limping.
But listen, in terms of jobs, you have a headline number that fell short of expectations, the unemployment rate might be 7.3 percent, but as you know, it's because people are dropping out of the labor force.
And when I went downstairs and talked to traders, a lot of them were saying, are we wasting our money on QE? Is QE running out of steam? You see a lot of low-wage jobs being added, jobs that don't have the insurance mandates, so part-time jobs as well.
And also, by the way, of course it is -- we are in the midst of a Jewish holiday, so the markets are volatile because there is less participation. But definitely, there is some volatility, because the markets do have one eye on jobs, and then also one eye on what's happening in Syria as well. Felicia?
TAYLOR: And certainly we can attribute the holiday to lower volume. Zain Asher at the New York Stock Exchange, thank you for that.
Still to come, the future is here. Ford CEO Alan Mulally tells CNN how new technology will impact drivers.
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ALAN MULALLY, CEO, FORD MOTOR COMPANY: Our point of view is the driver always needs to be in control and be the center of the driving experience, and we're enhancing their ability to be even a better driver.
(END VIDEO CLIP)
TAYLOR: Ford CEO Alan Mulally says the automaker wants to make drivers even better drivers. Ford unveiled the new S-MAX concept on Friday, offering motorists a tantalizing glimpse of the next generation S- MAX due in 2015.
The concept car is filled with all kinds of smart technology, many of which could make it into the showroom. Ford chose to launch the S-MAX at the IFA Consumer Electronics Show in Berlin, and Alan Mulally told Jim Boulden Ford has always been a technology company.
MULALLY: One of the neat things about today at IFA is that we are sharing all of the technology that we're incorporating in our new vehicles to improve not only quality and fuel efficiency, but also safety, with a special emphasis on the connectivity of the car to be seamlessly connected to the internet.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: When you say connected, what is that going to help -- how is that going to help the driver? It's not just about if there's an accident that they can contact you or they can get help that way?
MULALLY: Well, exactly. Because clearly the automobile is going to be -- one of the devices that's on the internet, information is going to continue to be ubiquitous. And so what we're doing is providing all the power of that knowledge and that information to enhance the driver's situational awareness, but also allow the driver to be even a better driver.
With voice commands, your hands are on your wheel, your eyes are on the road, and you're managing your vehicle and you're managing your life.
BOULDEN: And obviously, that technology's here already, so how much can you put in in each reincarnation of the car? How much could we get now and what do you think will be going in the car in the next few years?
MULALLY: Well, I think that one of the thing's that's really neat is the announcement today is not only will we have voice-activation and synch, but we're also going to have app-link now, where you, with your voice, can now activate and access all your applications off your smartphone.
I think longer term, you're going to see more and more active safety features that allow the driver to have even more situational awareness and the ability to respond to that even more safely.
BOULDEN: When you say situational awareness, give us some concrete examples.
MULALLY: Well, some really specific examples, in fact, is where are you going, prediction availability, heads-up displays, showing you what's coming at you, what the situational awareness is with other vehicles around you. So you just know a lot more about what the status of the vehicle is, but also predictively where are you going in the future.
BOULDEN: Of course, you're standing in Berlin and Europe has not been very kind to automakers the last few years, hasn't been kind to the American automakers, either. How would you describe 2013 for Ford, and will things recover in 2014, or is that just too early?
MULALLY: Well, 2013 has been really a very good year for Ford. Worldwide, all our operations are continuing to improve based on the strength of our complete family of best-in-class vehicles.
With respect to your question about Europe, clearly it's a tough economic situation, but we're seeing signs that the automobile industry itself is stabilizing. And of course, on Ford's case, we're actually accelerating the introduction of a lot more new Ford vehicles.
So, as the economy starts to come back and the industry recovers, we're going to be here with the vehicles that people really do want and they value.
BOULDEN: And you see 2013 as a -- maybe the end of the crisis in Europe, or are you still very cautious when you think of the economy, when you think of the euro, when you think of the exchange rates, et cetera?
MULALLY: Well, I think all of us are cautiously optimistic, because it looks like we've kind of bottomed out on the industry side. Another kind of neat thing for Europe is the average age of the vehicles has continued to climb. So, with the new vehicles, the consumers can actually economically obsolete their older vehicles. So, it's another reason to consider Ford in your future.
BOULDEN: And that technology that you're putting in the cars, of course, you hope that gets people to say it's time to trade up? It's time to sell the old clunker?
MULALLY: Well, absolutely. And I think we have taken a point of view that what the customers really want and value is ever-improving quality, fuel efficiency, safety, really smart design, like synch and my app-link now. You add all those together, and that is an economic decision that's very, very beneficial to replace an older vehicle.
BOULDEN: And finally, I must ask you this. Do you really think that people want to see their car parking itself, that they don't want to have power over that? We see that technology out there. Do you really think people want that and will be safety -- happy to use it, I should say?
MULALLY: Well, the response has been terrific. And of course, our strategy is to augment the driver and make the driver even a better driver. So just like -- things like parallel parking assist is a real plus to the drivers, and they really appreciate that capability.
But to your point, our point of view is the driver always needs to be in control and be the center of the driving experience, and we're enhancing their ability to be even a better driver.
TAYLOR: Call me old-fashioned, I still like to park the car myself.
TAYLOR: Now I've got a Currency Conundrum. For the first time, the Chinese yuan is now one of the world's top ten most-traded currencies. The question is, what is the other new entry in the top ten? Is it A, the Hong Kong dollar? B, the Russian ruble? Or C, the Mexican peso?
And on the currency markets, the dollar is down against the pound, the euro, and the yen. We'll be right back.
TAYLOR: On Saturday, we're going to find out which city will host the 2020 Olympics. Tokyo, Madrid, and Istanbul are all bidding for the Games. The International Olympic Committee will make its choice in Buenos Aires tomorrow, and none of the candidates is without its problems.
Currently, Tokyo is the bookmakers' favorite, but Japan's economy is being governed by the prime minister's experimental Abenomics. And officials are still dealing with the aftermath of the disaster at the Fukushima nuclear power planet.
Madrid is grappling with Spain's record unemployment and brutal government austerity measures. The organizers of the Spanish bid are facing their problems head on, however, saying the Olympics would help revitalize the Spanish economy.
Istanbul, the final city in the running, is caught up in the capital crunch which is affecting the emerging markets. It was also the scene of violent anti-government protests earlier this year. As Turkey shares a border with Syria, there are also concerns about those regional tensions.
I'm joined now from California by Andrew Rose, professor of economic analysis and policy at the University of California at Berkeley. Mr. Rose, tell us, is it really a boon to a local economy for the city that does end up hosting or winning the bid to host the Olympics?
ANDREW ROSE, PROFESSOR OF ECONOMIC ANALYSIS AND POLICY, UNIVERSITY OF CALIFORNIA BERKELEY: It's probably a good thing for about three weeks and a bad thing for the six years before and the ten years afterwards. So, there's a very short-term benefit, but it's very short term.
TAYLOR: So, what is the incentive for the many cities that do bid for this, because obviously, it's expensive to engineer a bid that's going to be attractive enough to win the Olympics to come to your host city. And then, of course, as you're pointing out, it takes years to actually build the centers that need to be built.
ROSE: I actually don't think that they have the right incentives. It's not very difficult to find a consultant or two to write a report that says the costs of putting the Olympics on are small and the benefits are going to be high.
But the reality is, it's almost never in the interest of a city to put them on. The costs turn out to be far higher, the disruption is high. And most city residents just do not appreciate it.
TAYLOR: So, not even the local residents want the Olympics to necessarily come, so really, what are the tangible benefits of this?
ROSE: I think there are very few tangible benefits. The IOC always says that this can act as a catalyst, so if you need a new airport or some new roads or motorways, you can organize development of major projects. And that's always a good thing.
But as far as an economist is concerned, if you need a new airport, you need a new airport anyway. You shouldn't build new facilities simply because of the Olympics. They're almost never used afterwards and they're extremely costly.
TAYLOR: There is some data that points to the fact that trade is some -- does get some sort of benefit, but evidently, irrelevant as to whether or not you're an Olympic host city. Those that are in the running seem to benefit as well. How does that work?
ROSE: That's right. The deal is the following: when a country really wants to enter the world stage and signal both to the rest of the world and to its domestic constituents that it's going to be a serious player in the international community, then a good idea is to make a bid for a mega event, like the Olympics or, for that matter, for the World Cup.
But actually hosting it is not particularly important. The idea is, you have to make a credible bid to say we really entered the world stage and we're going to behave well. And that sort of strategy worked very well, for instance, for Tokyo when it first hosted the Olympics back in the 60s. Or for Rome when Italy was coming back after the end of the second world war.
But these days, for rich countries like Japan or Spain, it really makes very little sense. The only one that really works out well is Istanbul, because Turkey is sort of on the verge, it's an emerging market, it could be about to make the leap into developed country status. Istanbul is the only one where it makes economic sense.
TAYLOR: And we will find out in about 24 hours what the answer's going to be to that question. Perhaps it will be Istanbul. Andrew Rose from UC Berkeley, thank you.
Nevertheless, weather play an important role for whoever does win -- or whichever city wins. Jenny Harrison is at the CNN International Weather Center. Give us a glimpse of what one of the host cities might have in terms of the weather picture.
JENNY HARRISON, CNN METEOROLOGIST: Well, they're not this dissimilar, actually, Felicia. I can start by showing you, first of all, that Madrid - - let's start with that. As I say, July and August, typically as well those two months don't differ hugely in any of these cities.
So for July, you can see -- and August -- in Madrid, 31 Celsius the high, the low is 18. In fact, the low temperature, that is fairly significant, possibly. Now the rainfall, certainly, is in Madrid, 15 millimeters in July, 10 millimeters in August. And that works out at about three rainy days for each month in Madrid.
Then we move across into Istanbul, and what you notice here, again, is the temperatures don't vary hugely, 28 and 29, 19 and 19 for the low. And then the rainfall, a little bit more, not a huge amount, and that works out to about four rainy days.
Now, the thing to say about Madrid and Istanbul is that those two months for both of those cities are considered moderate when it comes to the humidity. So, how it's actually going to feel, sticky and unpleasant, not too bad.
Then we head across to Tokyo. Now, the temperatures, again, not hugely different, but the low temperature, so the overnight temperature, is actually quite a bit higher. So, 23 and 25 in August, so that will feel quite a bit different.
But look at the rainfall, because that really is significant. In July, 154 millimeters, and in August, 168. But in fact, there are less rainy days in August, but heavier rainfall, and then ten rainy days in July.
So, what we actually has is moderate humidity in July and high humidity in August, so that really would make it feel a little less pleasant, certainly, for the athletes participating in August. But really, when it comes to the temperature and the weather, not hugely different, just the amount of rain and the number of rainy days, certainly, in Tokyo.
Now, let's have a look at Europe and what's going on. You can see a nice big clear area across central regions, high pressure in control there. Rain pushing into the west and rain across the east. Some rather heavy thunderstorms across areas of the UK, Paris, into France, and also the low countries.
Look at the temperatures, look how they've dropped rapidly in the last 24 hours. London 29 to 17. Paris 33 to 22. A drop in Brussels as well. It'll stay cooler for the next few days as well, Felicia. Summer hasn't really gone, but it certainly is feeling a little bit different over the next few days, certainly.
TAYLOR: Jenny, I have to tell you, there's been a bit of a cold front in this part of the world as well. I found it very welcome to sleep with the window open and there was a nice cool breeze, so --
HARRISON: I have to --
TAYLOR: -- I'm not complaining.
HARRISON: No, me too. I'm looking forward to October here in the southeast. That is my favorite month of all. I like the cooler weather --
TAYLOR: Me, too.
HARRISON: -- I have to say.
TAYLOR: I love the autumn. OK. At least we agree on that one, too.
All right, moving on. The G-20 summit has wrapped up in St. Petersburg. After all the talking, division over Syria are as -- divisions, I should say -- over Syria are as deep as ever. We're going to have an update and the latest news headlines when we come back.
TAYLOR: Welcome back, I'm Felicia Taylor, and these are the news headlines. The G-20 summit has wrapped up without consensus on Syria despite a passionate plea for military action from the US president. Russia and China still strenuously oppose intervening in the conflict. President Obama says he'll present his case for military intervention to the American people on Tuesday.
Russian president Vladimir Putin reiterated his stance that a military strike against the Syrian regime without UN approval would be illegal. Mr. Putin said leaders at the G-20 meeting were split 50-50 on the prospect of using force and warned rebels may have launched the attacks to push the world to intervene.
Australian voters head to the polls just hours from now to decide which party will lead their government next. If the polls hold true, Tony Abbott's Liberal National Coalition is headed for certain victory. That would end six years of Labour rule. The economy has been a key issue in the campaign.
(END VIDEO CLIP)
TAYLOR: Vladimir Putin says the Syrian crisis is affecting the world economy. And G20 leaders spoke about the issue for a long time Thursday night. There was no agreement, however, on military action. U.S. President Barack Obama argues the world cannot, in his words, "stand idly by in the face of a chemical attack." Brianna Keilar reports.
BRIANNA KEILAR, CNN CORRESPONDENT: President Obama downplayed the possibility of this turning into a long, drawn-out, unilateral war between the U.S. and Syria if the U.S. takes military action and then Syria uses chemical weapons yet again, saying that would mobilize the international community and create a broader response.
Now, as Congress considers a resolution that would authorize a strike, there is a big question that remains about whether President Obama will go ahead even if both chambers of Congress, the House and the Senate, don't OK it.
(on camera): On the resolution to authorize the use of force, one of the big challenges right now isn't just Republicans, but it's from some of your loyal Democrats. It seems that the more they hear from classified briefings that the less likely they are to support you.
If the full Congress doesn't pass this, will you go ahead with the strike?
And also, Senator Susan Collins, one of the few Republicans who breaks with her party to give you support at times, she says, what if we execute this strike and then Assad decides to use chemical weapons again?
Do we strike again?
And many Democrats are asking that as well.
How do you answer her question?
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Well, first of all, in terms of the votes and the process in Congress, I knew this was going to be a heavy lift. I said that on Saturday when I said we're going to take it to Congress.
You know, our polling operations are pretty good. I tend to have a pretty good sense of what current popular opinion is.
And for the American people who have been through over a decade of war now with enormous sacrifice of blood and treasure, any hint of further military entanglements in the Middle East are going to be viewed with suspicion and that suspicion will probably be even stronger in my party than in the Republican Party, you know, since a lot of the people who supported me remember that I opposed the war in Iraq.
So, I understand skepticism. I think it is very important for, therefore, for us to work through systematically making the case to every senator and every member of Congress. And that's what we're doing.
But for the American people at least, the concern really has to do with understanding that what we're describing here would be limited and proportionate and designed to address this problem of chemical weapons use and upholding a norm that helps keep all of us safe.
And that is going to be the case that I try to make, not just to Congress, but to the American people over the coming days. OK?
KEILAR: (Inaudible) congressional support (inaudible) the Senate (inaudible) and the House does not (inaudible). Would you go ahead with the strike?
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: You know, Brianna, I think it would be a mistake for me to jump the gun and speculate, because right now I'm working to get as much support as possible out of Congress.
KEILAR (on camera): President Obama says he'll address the American people from the White House on Tuesday. And he has a long way to go in convincing Congress and their constituents that this is the right move. A recent NBC News poll shows that four out of five Americans believe that he should not act if there is not congressional approval for this -- Brianna Keilar, CNN, St. Petersburg, Russia.
TAYLOR: And as U.S. President Obama makes his case for a military strike on Syria, one American fashion designer draws criticism for using the crisis to promote his brand -- when we come back.
(BEGIN VIDEO CLIP)
TAYLOR (voice-over): A little while ago I asked you which currency joined the top 10 traded currencies alongside the Chinese yuan this year. The answer is C, the Mexican peso.
(END VIDEO CLIP)
TAYLOR: This summer has been a hot season for home prices in Britain. In the three months leading to August, prices were up nearly 5.5 percent from the same time last year. August marks the seventh straight month of growth. That's according to new numbers from Halifax.
Jim Boulden checked out the last apartment in inner London which is on the market for less than six figures.
JIM BOULDEN, CNN CORRESPONDENT: Here in Brixton in South London, this tiny studio apartment or flat is said to be the last one for sale anywhere in London for under 100,000 pounds. That's about $150,000.
So we asked the real estate agent to show us around to see what we'd get for such little money in London.
BOULDEN (voice-over): Built in 1934 --
LISA MACKENZIE, REGIONAL SALES DIRECTOR, KFH: If you'd like to come into the flat, I will show you 'round.
BOULDEN (voice-over): This flat has no bedroom.
MACKENZIE: And you have lots of storage here. And with imagination, you could use this as a kind of sleeping area. So you can try and keep your sleeping and your living areas separate.
BOULDEN (voice-over): The rundown flat is officially on the market for 99,500 pounds, said to be likely the last flat near Central London to be on sale for less than six figures. Brixton itself is an, well, shall we say, eclectic area south of the river.
Still, it's only a few tube stops from Central London, making the price all the more desirable.
MACKENZIE: Very large bathroom here that obviously needs ripping out completely.
BOULDEN (voice-over): Agent Lisa Mackenzie and her colleagues have been doing a lot of this lately. On one recent Saturday, the studio had 50 viewings.
MACKENZIE: It's a bit smelly in here as well.
BOULDEN (voice-over): And 22 offers came of that.
MACKENZIE: So the appliances and everything here will go and (inaudible) the furniture and that will go. But whoever will buy it will perhaps take out the sink, take out this. Obviously the boiler, I would imagine, is probably going to need to (inaudible) as well.
BOULDEN (voice-over): The agent says some $50,000 may be needed for renovations. That may still be worth it to some would-be buyers.
After all, the average price for a 1-bedroom in Central London is more than $1.5 million. Back to the Brixton flat, there is one other thing to know: because of an oddity in British real estate law --
MACKENZIE: It's got a very short lease. And so you wouldn't be able to get a mortgage on the flat.
BOULDEN (voice-over): So $200,000 to buy a fixer-up, cash buyers only, please. In this case, price trumps location -- Jim Boulden, CNN, London.
TAYLOR: And from real estate, we're going to turn to fashion, where one American designer named Kenneth Cole is once again taking criticism for trying to hijack political events to sell footwear. As U.S. President Barack Obama presses his case for military action in Syria, Cole tweeted, "Boots on the ground or not, let's not forget about sandals, pumps and loafers -- #Footwear."
It comes two years after Cole apologized for this tweet promoting his fashion line during the Egyptian uprising.
"Millions are in uproar in #Cir. Rumor is they heard our new spring collection is now available online at http;://bit.ly/KCairo - KC."
This time the designer hasn't deleted the tweet or apologized. In a new video statement, Kenneth Cole says he's only trying to encourage dialogue.
(BEGIN VIDEO CLIP)
KENNETH COLE, AMERICAN FASHION DESIGNER: I've always used my platform to provoke dialogue in issues, including HIV/AIDS, war and homelessness. I'm well aware of the risks that come with this approach, and if this encourages further awareness and discussion about critical issues, then all the better.
(END VIDEO CLIP)
TAYLOR: Scott Galloway teaches brand strategy and digital marketing at New York University's Stern School of Business, and he joins me now from New York.
Scott, is this really about encouraging dialogue? Or just a brilliant marketing strategy?
SCOTT GALLOWAY, CLINICAL PROFESSOR OF MARKETING, NYU STERN SCHOOL OF BUSINESS: I think it's more the latter than the former. The fact that we're here right now is probably evidence that this is a victory for Kenneth Cole. Whether or not this is offensive or across the line is a topic of debate. But to a certain extent, this is a victory that has caused attention and Kenneth Cole is now a big part of today's media lineup. And I think at the end of the day, I think that's a victory for him and the brand.
TAYLOR: OK. So a lot of the response, though, has been fairly negative. I mean, not everybody thinks that this is such a great idea.
Does that hurt sales in any way?
Or when people go to a shop, do they forget about this sort of incident and buy what they want to anyway?
GALLOWAY: I think the bark you get in terms of the reaction in social media, in the broader media scope itself, is a lot louder than the bite. I think consumers are often -- their actions don't match their indignance sometimes. And we saw that when there was controversy over manufacturing in Southeast Asia with Nike and some of the things we've heard out of Apple's manufacturing facilities.
At the end of the day, consumers go for the best product at the best price that's captured in a halo of a great brand. And part of the challenge is just being part of the selection set. And I think when Kenneth Cole makes these provocative statements, I think it's on brand. It draws attention to him. I think they are provocative and also I think they're authentic. I think this is who he is. I think he is -- he's comfortable making these types of statements.
So I would argue at the end of the day, this works for Kenneth Cole and the negative reaction will not translate to a decline in sales or anything measurable.
TAYLOR: All right. But ultimately, should designers, anybody in business who's developing a brand and certainly anybody in business is doing just that, should they really be using social media as a platform?
GALLOWAY: Yes, I think so. I think this is another tool in the arsenal to get awareness, create associations around the brand. You've seen Tory Burch, Burberry, a variety of brands do a fantastic job, even some of the smaller brands; Oscar de la Renta does a fantastic job on Twitter.
To try and cut through the clutter and find a less expensive way to build those all-important associations, so, yes, absolutely, social media has become a proven part of the media mix. Some brands do it better than others. But it's a powerful tool when used well.
What will be interesting is if there's any academic research over the course of the next few years around some of these more provocative or controversial tweets. If anyone can attribute them to a decline or an increase in sales. But again, I just think it's -- at the end of the day, as Umberto Eco, the Italian author and philosopher said, "Western society loves people for being famous, not necessarily what they're famous for."
TAYLOR: On that literary note, we will leave it.
Scott Galloway from NYU, thank you for your opinion.
And finally, we have a programming note for our viewers. QUEST MEANS BUSINESS is taking a week off next week. And, no, it's not about taking a holiday. It's in preparation for a big move. Beginning Monday, September the 16th, QUEST MEANS BUSINESS will be coming to you just two hours later at 9:00 pm in London, 10:00 in Berlin and midnight in Abu Dhabi. And Richard will be hosting the show live from New York. That's QUEST MEANS BUSINESS.
For now, I'm Felicia Taylor in New York. MARKETPLACE AFRICA continues on CNN.
ERROL BARNETT, CNN CORRESPONDENT: Welcome, everyone, to MARKETPLACE AFRICA, overlooking Monrovia, Liberia. I'm Errol Barnett in for Robyn Curnow.
Now this West African nation is celebrating 10 years of peace since it was ripped apart by civil war. That political stability has allowed for the redevelopment of essential infrastructure here. But it is far from complete.
And while government revenues are expanding, thanks in large part to the mining sector, those in the hospitality industry are trying to foster their own growth.
AMIN MODAD, CEO, BELLA CASA HOTEL: And this is our new suave (ph) restaurant. Now we serve in both continental and Liberian cuisines.
And over here, we have our lounge that will be serving cocktail for the European and traditional Liberian cocktail drinks as an annex to the restaurant. Hopefully, I should be open in (inaudible) within two months (ph).
BARNETT (voice-over): Like many others, Amin Modad left Liberia in the late 1990s, during the country's civil war, seeking refuge in the United States. When he returned in 2005, he quickly recognized an area where he could put the business skills he gained in the U.S. to use.
MODAD: It was evident there was a need to develop the hospitality sector in Liberia. At that time there were many interests in Liberian investment interests. We saw an influx of investors, influx of NGOs. But yet, still, Liberia didn't have the capacity to cater to them.
BARNETT (voice-over): The civil war destroyed much of the country and hotels in the capital, Monrovia, weren't excluded.
The skeletons of two of the country's biggest hotels still stand and serve as a grim reminder of the impact the war had on the country.
Before the war, like (inaudible) a couple of very good hotels. We had two major hotels, which were the Ducor InterContinental (ph) and the Hotel Africa. In fact, the Ducor InterContinental (ph) was the first for what we know, the first five -- one of the first five-stars hotels in Africa.
BARNETT (voice-over): With only a few full-service hotels operating in the country, the hospitality sector seemed like a ripe area for investment. So he decided to convert his parents' six-room house in Monrovia into a boutique hotel.
MODAD: So what you see here is the old building. It began with the first two floors because it was old, we were going to add one more floor.
BARNETT (voice-over): Still, there are many challenges to face the entrepreneurials betting on an upward trend in the hospitality industry.
AXEL M. ADDY, LIBERIAN MINISTER OF COMMERCE AND INDUSTRY: There are some challenges. We have a ways to go. I mean, there are no strong institution that are training people in hospitality. And so you match that with the energy costs, it makes it a difficult enterprise to venture in.
BARNETT (voice-over): Liberia's main source of power, its hydroelectric dam, was also destroyed during the war, leaving the power situation very unreliable. So any business that depends on constant electricity must rely on generators, which can be expensive.
MODAD: Well, for example, it costs me close to $10,000-$11,000 a month just to provide electricity for such a small establishment.
ADDY: Right now, if an investor wants to build a resort here, they have to build the entire infrastructure.
BARNETT: What do we have here?
J.J. VODAK, GM, RLJ KENDEJA RESORT AND VILLAS: Here on this side, just like on the other side of the resort, are the two areas where the guest rooms are.
BARNETT (voice-over): J.J. Vodak is the general manager of the RLJ Kendeja Resort and Villas, just outside Monrovia. His boss is multimillionaire developer and founder of the U.S. cable network Black Entertainment Television Bob Johnson, who took the challenge of building an entire infrastructure when he decided to create Liberia's largest resort.
Vodak is optimistic about the progress he sees in Liberia's development.
BARNETT: Do you feel as if Liberia, Monrovia, this industry in the country, is turning a corner?
VODAK: It certainly is. Hopefully we will -- right now we still have mostly business people, investors and NGOs and so on, that are staying in the resort and visiting Monrovia. But hopefully, I mean, we will see and really -- a real tourism industry flourish. And that's the (inaudible) part in our industry, when real tourists are coming to a place like Liberia.
BARNETT (voice-over): The minister of commerce and industry agrees. There is reason to be optimistic.
ADDY: This country is a gift. It's a tourist attracting waiting to happen. You know, you go to some parts of this country, and I'm just blown away.
MODAD: I would like to encourage Liberian investment into the sector. But to have that, the government needs to provide an incentive to Liberian enterprises, like bring entrepreneurs who are willing to take such risks, the risk in hospitality sector is far more than many other sectors that we find.
BARNETT (voice-over): Despite the risk, Modad is continuing to expand his now 35-room hotel and is in the process of building another one in the Liberian city of Buchanan. Like other entrepreneurs here, he foresees that the investments he's making now will pay off down the road.
BARNETT: Coming up next from MARKETPLACE AFRICA, from Liberia, we talk in-depth with the new general manager of the country's largest resort about his changing clientele.
BARNETT: Welcome back, everyone, to MARKETPLACE AFRICA in Liberia's capital.
Now we've been looking into the budding hospitality industry here, which is mostly made up of small hotels. But when J.J. Vodak was flown in last year to become the general manager of the largest resort in this country, he didn't know what to expect. I recently sat down with him to see if he's gained his footing in a country trying to get back on its feet.
BARNETT: In what way are things in the hospitality industry changing in Liberia?
VODAK: In particular, to this resort, when I first came here nine months ago, the customers, the clients were a lot of NGOs, diplomats and essentially investors, missionaries that would come and visit Liberia for different purposes.
I've seen the market change a little bit -- quite a bit, actually -- we see more and more businesspeople, whether it be the mining industry, investors, potential investors servicing the mining industry that are coming across in the country, who are staying for a short stay or even some extended periods.
So that changes quite a bit. It's part of the big construction. And we've seen it clearly in this hotel on the clientele that is coming to visit them.
BARNETT: Talk to me about some of the biggest challenges. I mean, this hotel, in essence, is self-sustained, self-containing?
VODAK: Exactly. Yes. We have our own water plant, our own sewage plant, our own generators and so on, because the electricity grid only gets into the next suburb, into Sinkor. Hopefully one day, the electricity will come over here. So basically fully independent in anything that we are doing, electricity-wise, water-wise. We have our own water well that is 100 feet below. And it goes into our own filtration system and so on. The water -- it's actually excellent water; you can almost drink it because it's filtered by the grounds. So, yes, that is a challenge because it's something that requires a perpetual maintenance. We are close to the ocean and because we're close to the ocean with the salt, the erosion and so on, I mean, there is a lot of maintenance and that is required. I mean --
BARNETT: Maintenance? Like what, for example?
VODAK: I'll give you an example. The door keys (inaudible) door keys in all our rooms and in the other hotel, those batteries will last months. We have to change it over here every month. We have to fully -- completely take it apart and clean it and change the batteries because we're by the waterfront. And that takes a lot of toll on those things. And it's just an example. You can imagine larger pieces of equipment, like the generators.
BARNETT: Talk to me about staff, because at a resort, there's more of an emphasis on hospitality and allowing guests to having extended stays to be comfortable.
Have you been able to find a local workforce, skilled enough to take those jobs?
VODAK: Yes, we did. And we have about 200 employees. That's including the security staff and plus subcontractors that are doing some of the grounds and so on. The beautiful part is that with the (inaudible) staff that we hired, we, over the last year, we have started promoting into junior management position, actually more than journeymen in position. We even start to promoting people that started with the company at an entry level and that are moving into management position, which is natural growth, I mean, which -- that for the purpose of opening a resort somewhere. But starting with the staff at -- without the base was not really hospitality trained, trained to work in the hospitality industry and they now have moved to the next level or even further than the next level. I mean, that is an amazing accomplishment.
BARNETT: Now you've worked in the hotel industry for decades, not just in Africa, in other countries, but you've also worked in the Middle East and in the Americas as well.
How does Liberia today compare to other places you've been, Kinshasa for example?
VODAK: Well, it's certainly a growing market. I mean, the potential for growing is there, particular situation here is much stabler, is stabler already for quite some time. Unfortunately, that's not the case in some other places. And that's what hoteliers are looking for or investors are looking for, not just hoteliers, also the investors that are staying in the hotel before they decide to travel to a destination. In that sense, yes, political situation, the stability of the political situation plays an enormous role in that because it allows people to come here and feel comfortable. OK, we're going to spend X amount of millions of dollars in this country. But you know, it's not going to go down south. It basically will continue to stabilize. So there is a potential return on investment.
BARNETT: And that's all for this week's show from Liberia. Remember, you can always check the program's website and connect with the show team on social media. I'm Errol Barnett in Monrovia, Liberia. We'll see you next time.