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Quest Means Business
Election Activities; Yellen Testimony to Congress; Nestle Ends Deal with IAAF; Discussion of European Banks; Burger King to State Selling Hotdogs. Aired 4-5p ET
Aired February 10, 2016 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BELL RINGING)
[16:00:00]
RICHARD QUEST, HOST: The bell is ringing on another day as trading comes to a close on Wall Street, where economics were very much on the agenda as the
markets digested the latest news from the Fed. All's over for Wednesday, February the 10th.
(BEGIN VIDEO CLIP)
QUEST: The risks are looming for the U.S. economy. Janet Yellen says the Fed will stay the course, for now. The IAAF suffers a new injury. Nestle
pulls its money over allegations of doping and corruption. And Burger King wants to become the hot dog king as the fast-food giants' tries where
others have failed.
(END VIDEO CLIP)
QUEST: I'm Richard Quest tonight live in Abu Dhabi, where of course I mean business.
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QUEST: Good evening. We will get to the economic news from the Fed in one moment. But in the last hour or two, the Republican field in the race for
the White House has become that ever bit more smaller.
In the last hour, Carly Fiorina said she's pulling out of the running for the U.S. Presidency.
(BEGIN VIDEO CLIP)
QUEST: Carly Fiorina is the former H.P. Chief Executive. And she used the official rubric saying she is suspending her campaign. She was the only
woman in the Republican field and placed second to last in Tuesday's primary in New Hampshire. Our own political man is Jonathan Mann, and he's
with me with the details.
(END VIDEO CLIP)
QUEST: Not a surprise, perhaps, that she's gone after the poor performance. But she is the only woman on the Republican side.
JONATHAN MANN, CNN ANCHOR, "POLITICAL MANN": You are right about both of those things. You know, she is a former CEO, he can weed read numbers. She
came in seventh in Iowa. She came in seventh in New Hampshire. And ultimately it's about coming in first.
(BEGIN VIDEO CLIP)
MANN: You know, from the very outset, Carly Fiorina was feisty, she was articulate. She was a very strong debater. And people were impressed when
they saw her on television. But her primary credential as you mentioned was CEO of Hewlett Packard. Which is a strange credential because her time
there was wildly regarded as disastrous. She was responsible or blamed we should say for 30,000 layoffs and ultimately she herself was fired.
So in a crowded field of competitors each one of them trying to find a way to distinguish themselves, it wasn't clear what in fact Carly Fiorina had
to sell. And as it turns out, nobody was buying.
(END VIDEO CLIP)
QUEST: And by leaving the race now, does she still hold the possibility of being a Vice Presidential nominee for one of the other candidates who gets
to the nomination?
MANN: She absolutely does. As you mentioned she was the only woman in the race, and voters liked her.
(BEGIN VIDEO CLIP)
MANN: But there is a complex calculation about who you are going to choose as Vice President. Carly Fiorina doesn't really deliver I think a big
demographic, and she doesn't deliver a particular state. You think about John Kasich, the former governor of Ohio who also was a centrist candidate
with government experience and he delivers a crucial segment of the voters. Ohio.
So, we probably haven't heard the last of Carly Fiorina but once again she goes out with something like 4% support. She is not a big boost for whoever
wins the nomination. And of its Donald Trump, he hardly needs her to prove he is bona fide as a business leader. I think she is out of the picture
essentially, Richard, and she is not the last one.
(END VIDEO CLIP)
QUEST: Chris Christie, the Governor of New Jersey has returned to his home state for a pause and to take a deep breath, as he put it.
(BEGIN VIDEO CLIP)
QUEST: And the rumors are out there about what that means. What do we know, Jonathan?
MANN: We know exactly what you said, which is once again he has not been doing well. He hasn't won anything, he hasn't come close. And so when you
are a single digit candidate the writing is on the wall. You have got nowhere to go. And eventually the money runs out.
He's also got another job; he's supposed to be the Governor of New Jersey. What happened to him has happened to others. Essentially, there is Donald
Trump and there is everybody else. And you can look at this as well as the cliche of the season would suggest candidates competing in various lanes.
And Chris Christie was in the moderate lane with Jeb Bush, with John Kasich, there was just no space for all of those candidates. And there is
no space for half a dozen candidates to all be competing against Donald Trump. They are all going to start sooner or later wondering what they are
doing in the race and if they've run out of money they are going to wonder it faster.
(END VIDEO CLIP)
QUEST: Finally, this political rubric that they all use, of success spending their campaigns instead of sort of saying the campaign is over.
There is a certain legal nicety having to do with money I believe.
[16:05:00]
MANN: Well there may be. Because the campaign finance laws in the United States are incredibly complicated. They are governed about when they can
raise money, when they can spend money. You are probably more of an expert in that than I am.
But Carly Fiorina for example, in her last campaign left enormous debts. When you run and when you work up debts, you've got to find the money
somewhere. When you close down the campaign that's different from suspending it, but I'm going to leave the financial niceties to experts
like yourself.
QUEST: If I am the financial expertise, then lord help the rest of us. Jonathan Mann thank you very much indeed for joining us at the CNN Center.
Janet Yellen says the Fed is still on track for further rate rises, even as fear is gripping the stock market. The Fed chair visited Capitol Hill on
Wednesday telling lawmakers there are indeed risks on the horizon.
(BEGIN VIDEO CLIP)
QUEST: Amongst them of course the hard landing in China or turmoil in emerging markets. She said the Fed wasn't complacent about the impact they
could have on the U.S.
(BEGIN VIDEO CLIP)
JANET YELLEN, CHIEF U.S. FEDERAL RESERVE: Financial conditions in the United States have recently become less supportive of growth, with declines
and broad measures of equity prices, higher borrowing rates for risky borrowers and a further appreciation of the dollar. These developments, if
they prove persistent, could weigh on the outlook for economic activity in the labor market.
(END VIDEO CLIP)
QUEST: All at the same time, Janet Yellen said that the U.S. could probably ride out the bumps and that the Fed would likely stick to its course of
gradual rate hikes. That would depend though on the evolving signals coming from the economy in the months ahead.
(BEGIN VIDEO CLIP)
QUEST: Seven more FOMC meetings this year are to take place. The original thinking following the December meeting was that there would be four -- up
to four rate rises. Now the consensus seems to be around the idea there may be no further rise inside 2016.
Randall Kroszner is Professor of Economics at the University Of Chicago Booth School Of Business, former Fed Governor and joins me now from
Washington.
(END VIDEO CLIP)
QUEST: Randall, now, I read the statement from the chair. She sort of tantalizingly tells us that there are these international issues which
could affect U.S. growth but she sticks to her guns?
RANDALL KROSZNER, PROFESSOR OF ECONOMIC, UNIVERSITY OF CHICAGO BOOTH SCHOOL: So I think she wanted to leave all options open. I think it's
unlikely in practice that the Fed is really even going to seriously consider any rate increases before the second half of the year.
(BEGIN VIDEO CLIP)
KROSZNER: But she didn't want to exclude anything because she's also managing the members of the Fair Open Market Committee, the FOMC, some of
whom want to move quicker so she didn't want to take it off the table although I think that's highly unlikely.
QUEST: The economics of the situation has become amongst the most complex we have ever seen.
(END VIDEO CLIP)
QUEST: Simply because the Fed now takes into account geopolitical, international, markets, and at the same time of course has the worry of
exactly what's happening in the U.S.
KROSZNER: For sure, this is an extremely complex problem. Both because the world has become much more integrated and there are more channels where
financial fragility somewhere can affect the U.S. But also this is a real loo unusual time period. Most central banks around the world are cutting
rates and even have negative rates. Think about how odd that is that people, instead of getting paid, are paying to buy someone's debt. That's
so unusual. And I think that makes it really a very, very difficult time to accurately forecast what's coming.
QUEST: Right. Right. Now, on that very point, as a former or a current -- as a central banker who has had to make these decisions and whose sat at
the table, just tell me how different is the environment that they are all in, with not only one or two, but quite a few negative interest rates, with
the possibility of more negative rates still to come? How unusual, difficult, unique, whatever you like, is this for central bankers at the
moment?
KROSZNER: It's unique. This has never happened before, where there are so many central banks, major central banks around the world that have negative
rates. I'm not even sure that there ever had been negative rates before, maybe one or two very short periods where that had happened.
So we're not quite sure of the economic situation in general. We're not quite sure what the consequences of negative rates are although there was a
lot of discussion of that at the testimony today. Janet Yellen said that she didn't think that was likely to happen but she certainly didn't take it
off the table for the U.S.
(BEGIN VIDEO CLIP)
KROSZNER: So we could potentially get there too if the country turns south.
[16:10:05]
QUEST: Randall, I just want to finally -- I'm reading a lot of economic data and commentary about the yield curve between, say, the three month and
the ten-year U.S. bonds bills suggesting that the flattening of the curve, the narrowing of the gap in the interest rate presages at least hard
economic times ahead and the potential for a recession.
(END VIDEO CLIP)
QUEST: Do you subscribe to that theory at the moment?
KROSZNER: Well, there are certainly some circumstances in which that happens. If the short rate is really brought up very high by the Fed and so
- and people are not sure there is going to be a lot of demand for borrowing, that can flatten the curve.
I think what's happens now is the short rate is low, the long rate is coming down, both because people are not so sure about how much borrowing
demand there's going to be. But also inflation expectations have come down a lot. So they're thinking gosh there is just not going to be a lot of
inflation, I don't need much compensation for that. It might even be zero or slightly - or potentially negative and so that brings down the long
rate. And that certainly means that this could be a very dicey time.
QUEST: Randall Kroszner, dicey times and we'll need you to hold the dice and help us understand exactly where we are going. Thank you for taking the
time to talk to us tonight.
KROSZNER: Thank you.
QUEST: We were talking there on the Fed of course. Now the mandate of the Federal Reserve, there are two distinct components to it, and the two of
them keep the economy's vital signs healthy and stable.
On the one hand there is maintaining price stability, better known as inflation. Now, most central banks around the world have a price stability
component. But the Fed is different. It also has a full employment. It's known as the other half of the dual mandate and they have to stimulate
growth for full employment.
Realistically there is potentially a duty that's unspoken but is believed and that is discouraging volatility in the market. And they've been
exceptionally volatile since the Fed raised interest rates in December for the first time in nearly a decade.
2016, just look at the Dow triple digit swings.
(BEGIN VIDEO CLIP)
QUEST: The green are the days it was up by triple digits. The red, the days it was down by triple digits. Look at January. There are only four days
when it doesn't move in a triple digit direction. And if we look at February, bearing in mind what, we're the 10th of February now, again
you've just got three days overall where the market hasn't moved triple digits. Some of the other drivers that have been shocking the economy's
vital signs, plunging oil prices as well.
Janet Yellen said China's slow down and the Yuan decline are major culprits of market volatility. Then you've got the weakness in the emerging markets
further aggravated by china and fewer raw materials being sold.
Throw all this into the pot and you've got lackluster corporate earnings and you start to see why people are so worried at the moment. Take a look
at the Dow Jones industrials, which did - it wasn't a particularly raucous session for the Dow today, just down 99 points. I say just down 99. But the
market had been up throughout the session. And we could almost call this a triple digit move on the same day.
(END VIDEO CLIP)
QUEST: Ted Weisberg is the founder and President of Seaport Securities. Ted is at the New York Stock Exchange. What is it you like now for the -- I
shall use the term advisedly for the men of a certain age to be seeing these triple digit moves the likes of which, Ted, you and I have not seen
before?
TED WEISBERG, FOUNDER AND PRESIDENT, SEAPORT SECURITIES: Well, the reality s you know, we've been living with this for the last six or seven years. It
has become a little more acute of late, since the buys has been on the downside.
(BEGIN VIDEO CLIP)
WEISBERG: And anybody that understands the stock market knows that stocks always go down faster than they go up. But you know we do have the
volatility on both sides of the equation. A lot of it is caused by changes in how stocks trade, which were implemented seven or eight years ago, which
is an entirely different topic. But the reality is - and if you listened to your previous guest you can absolutely understand why the market is on soft
sand, has no real footing. Because the only things markets cannot deal with are unknowns.
(END VIDEO CLIP)
WEISBERG: And central bankers around the world, including our own Fed with all their double-talk and all their Fed speak basically created more
questions than they do answers, lack of direction, a lot of verbiage, but no real direction, no game plan. And as the world flounders the market has
finally caught up.
(BEGIN VIDEO CLIP)
[16:15:05]
QUEST: And then of course we have the economic fundamentals underneath this. And, Ted, you know, the U.S. will still grow by 2, 2 1/2 percent, it
is thought. That might be the - that might be the best that you are going the get. But it's still not good enough for you?
WEISBERG: Well, it's the cleanest shirt in pile of dirty laundry, isn't it? I mean it's 2 1/2 percent.
(END VIDEO CLIP)
WEISBERG: The fact is, at the end of the day, stock markets are driven by corporate earnings.
(BEGIN VIDEO CLIP)
WEISBERG: There are a lot of reasons why the earnings are beginning to roll over. We saw this a year ago. A lot of it is dollar related. But I mean
there's a lot of noise out there. It's not any one thing. But that sound we hear is the sound of growth coming out of the balloon -- the growth balloon
everywhere. You know negative interest rates in Japan. Negative interest rates in Europe. I mean, your previous guest, you know, laid it all out
quite well. But at the end, you know, it's confusing because you know you take a little of this and a little of that. But the end result is that
there is this huge disconnect. You have the U.S. moving in one direction and you have what seems like the rest of the world moving in another
direction. Somebody clearly is right here. And somebody is wrong. And for me, the bottom line, having done this for almost 50 years is the stock
market. The stock market never ever lies.
(END VIDEO CLIP)
WEISBERG: And the stock market's telling us things are not so good out there and we're going to probably see a lower stock market.
QUEST: The stock market never lies. And neither do you and we're grateful that you brought the 50 years of experience to our program tonight so we
can get that bit of insight. Thank you, sir, for joining us. Wish you a pleasant evening.
As we continue our nightly conversation on business and economics, international athletics has lost one of its biggest sponsors.
(BEGIN VIDEO CLIP)
QUEST: Nestle has become the latest brand to distance itself from the sport's governing body. It's "Quest Means Business."
(COMMERCIAL BREAK)
QUEST: Nestle is ending a sponsorship deal with the World Athletics Governing body they say it's because of doping and corruption allegations
which they believe have tarnished the sport and by them of course their reputation.
(BEGIN VIDEO CLIP)
QUEST: Now Nestle is axing its financial involvement with the kids program at the IAAF, International Association of Athletics Federations. Referring
to the recent scandal Nestle said, I'm quoting now, "we believe this could negatively impact our reputation and image and will therefore terminate our
agreement with the IAAF."
Just last month the World's Anti-Doping Agency said corruption was embedded at the federation. It's a huge blow for the association and its President
Lord Sebastian Coe. They're already struggling to hold onto sponsors.
Branding and Social Media Consultant, Peter Shankman joins me from New York.
(END VIDEO CLIP)
QUEST: Peter - When I look Peter -- when I see how much scandal surrounded FIFA and the sponsors stayed on and have continued to stay on through thick
and thin, why do you think Nestle has decided to bail relatively soon?
[16:20:05]
PETER SHANKMAN, BRANDING AND SOCIAL MEDIA CONSULTANT: I don't see this obviously as a problem. Nestle is not bailing because there is doping
allegations. You know Nestle bailing because there is doping allegations is the equivalent of saving global warming by removing one car. You know this
is not something they are doing -- they are doing this as a financial play and they are using the excuse of doping allegations as a way to get out of
their contract.
They are leaving the kids program. Not the main program. They are leaving the kids program. And let's face it. This is Nestle; this is a company that
doesn't have the most stellar track record on human rights or any kind of violations or ethics to begin with.
(BEGIN VIDEO CLIP)
SHANKMAN: This is a company whose CEO said that water isn't a human right. I'm pretty sure you need water to you know mix the stuff that you dope
with. So it's a - they're doing this as a financial play and they're just using the excuse of oh, we don't want to be associated with this. I don't
like it.
(END VIDEO CLIP)
QUEST: Right, now of course, they are getting a lot of - they are getting a lot of flak if you like on twitter and social media for the very point that
you're saying; that they do seem to be visiting the since of the parents on the children by of course stopping a kids program.
SHANKMAN: Exactly.
QUEST: Rather than the main one which of course they are not necessarily involved in. But here's a point then. Nestle seemed to want to be
weathering this storm when many companies wouldn't.
SHANKMAN: Right, so what that tells is me is that they're leaving the kids program because there is no financial bang for the buck. Right, if you are
investing as a sponsorship in any sort of brand whether it's FIFA, whether it's soccer, football, baseball, you are doing it to get the reward of
people seeing your brand, of getting eyeballs, of generating buzz and eventually increasing sales.
So I guarantee you that the bean counters at Nestle saw this, they said this is not making us money, this is the thing we would most likely cut to
save a few bucks because it's not helping us, let's figure out a way to do it. They gave it to the marketing and PR people. The Marketing and PR
people said oh yes, we'll just say that you know, we don't want to be associated with doping except for the fact they already are. And this
doesn't - this doesn't kill anything, this doesn't take them away from that in the slightest.
QUEST: OK, right, but if we again, if we come back to FIFA, you do have a situation where companies have wanted to stay associated because of the
popularity of football. They've wanted to stay with FIFA despite everything.
SHANKMAN: Yes, because the popularity of that sport, and the popularity of FIFA in many ways trumped the concept of ethics or the concept of good
versus bad.
(BEGIN VIDEO CLIP)
SHANKMAN: There was eyeballs, there was money there. That's my - that's the whole point, is that they're not seeing that in the IAAF and so they're
saying well, let's call it that we're doing this for the betterment of society by not wanting to be involved with ethical violations. But there -
for them it's a way for them to save money because they are not getting the return on investment they wanted.
(END VIDEO CLIP)
QUEST: Good to have you on the program, sir. Thank you very much indeed.
SHANKMAN: Thank you sir.
QUEST: We will talk more about this in the future.
Now 2016 has been a tough year for European banks so far. Tuesday's session was a rare chance for them to claw back some ground.
(BEGIN VIDEO CLIP)
QUEST: The issue is why banks like Deutsche and the other German banks are being beaten up when the companies themselves say they are rock solid.
(COMMERCIAL BREAK)
QUEST: European shares bounced back from a two year low in the Wednesday trading session that has just closed.
(BEGIN VIDEO CLIP)
[16:25:05]
QUEST: The bank shares led the recovery and investors are now betting that their heavy losses for the sector earlier this week has been overdone. Look
at the way the (inaudible) close the best gains were in the Xetra Dax, and the CAC. A report said that Germany's Deutsche Bank was considering buying
back billions of dollars of its own debt at these lower levels.
(END VIDEO CLIP)
QUEST: Shares of Deutsche won back some ground, more than some actually that they had lost in the previous sessions.
(BEGIN VIDEO CLIP)
QUEST: They were up by more than 10% on Tuesday. The chief executive of Deutsche had rejected reports and rumors that the bank was in any sort of
trouble. And he used the phrase that the bank, and I quote, "is rock solid."
(END VIDEO CLIP)
QUEST: The concerns lingered on that the banks are going to suffer if the global economy is in for a down turn. The Euro stocks bank index which
tracks the major banks has sunk to three year lows this week. Bill Rhodes is with us this evening, the President and Chief Executive of William R.
Rhodes Global Advisors, he joins me from New York.
Bill, I need to understand, even if there are hard economic items, it doesn't justify the way in which the banks have been beaten up in the
market. Or does it?
WILLIAM RHODES, PRESIDENT AND CHIEF EXECUTIVE, WILLIAM R. RHODES GLOBAL ADVISORS: I think what's going on, Richard, and first of all, it's always
great to be on with you, even if it's remotely here. But I think what's going on is there's a lot of lack of confidence in the marketplace today
with all the volatility that we've seen over the last six months vis-a-vis raising interest rates reach and search for yield and the banks are feeling
that.
And there are real question marks particularly about the European banks, about their capital, about their liquidity and how fast they have been
writing off their problem loans from the great recession. As you remember in the United States in 2009, tough stress tested were put in by the
regulators here and the U.S. banks were forced to write down bad loans, increase capital, increase liquidity ratios, which put them in fairly
strong position. You didn't really have this in Europe until the European Central Bank started doing this stress test the October 2014.
So I think there is a real time lag here. And I think this is one of the reasons you are getting all of this pressure on the European banks. Plus
you know we are in a very deflationary economy. You see Mario Draghi talks about that all the time.
QUEST: But, Bill, is there -- from what you are hearing in the market, is there a genuine feeling that this is just market froth and speculation? Or
that a bank could go bust?
RHODES: Well, that's always a possibility, but i don't think you have to worry about the Deutsche Bank. That is the bank in Germany. And the finance
minister, who is the strongest finance minister in Europe, made a comment yesterday that he has absolute confidence.
And you know John (Pran), who has taken over the bank and has a restructuring plan going, very competent banker. He help clean up problems
at UBS several years earlier, feels that he has a wherewithal.
Now they may have to raise additional capital. They have already announced they are going to be selling probably in the marketplace in the next few
months post bank which they bought in 2008 when they were expanding. So he is going to have to find ways to raise capital. Post Bank is one. He may
sell off additional assets. He may be forced to go to the capital markets. But I think he will do what it takes to rectify the situation. But it
probably won't be overnight.
QUEST: All right. Bill, we've heard on this program -- we've heard from the stock market floor, we've heard from Randall Kroszner, who is a former fed
governor. Now you are a seasoned banker as we're ever likely to get on "Quest Means Business," sir. So with that sort of great respect in mind
give me a gut feeling. Do you believe that we are on the precipice of something nasty?
RHODES: Well, I said in the Financial Times article which I sent to you in October that we could be getting into a worldwide recession. It's not
clear. The emerging markets, with the exception of a few countries like India are already there. Look at Brazil. You know, look at the situation in
South Africa, Turkey, places like that. Plus, you've had - you've had a -- a route in commodities. Not just oil and gas, but also in minerals, iron,
ore, copper. Tremendous volatility and exchange rates. A slowing down in China. We don't know how much the slowing down is going to be. But
certainly it's going to be affecting the markets. And so if you take all of that together, I think it shows we've got some real problems and the stock
market is reflecting that. And I think also these problems -
[16:30:00] WILLIAM R. RHODES, AUTHOR, "BANKER TO THE WORLD": -- certainly it's going to be affecting the market.
And so if you take all of that together, --
QUEST: Right.
RHODES: -- I think it shows we've got some real problems and the stock market is reflecting that and I think also these problems with the lack of
confidence for the downside side in some of the major banks of the world.
QUEST: All right. Bill Rhodes. Bill, we do appreciate it. Thank you, sir. We need your expertise to guide us through these troubled times and
we appreciate you coming in. Thank you, sir.
RHODES: Stay well. It's always good to be on with you, Richard.
QUEST: As we continue, -- thank you. As we continue tonight, Twitter - the earnings are in and the market is down some 14 percent with lower users
of the social media site. Samuel Burke will break down those numbers after the break. (RINGS BELL).
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest in Abu Dhabi tonight. There's more "Quest Means Business" in just a moment when Twitter is all aflutter with its
earnings report and the stakes have never been higher and the share price is falling sharply. We'll tell you how far.
And Burger King is relishing the opportunity of becoming the biggest seller of hotdogs in the United States.
But before all of that, or before any of it, this is CNN and on this network the news always comes first.
New Hampshire has narrowed the Republican presidential field. Carly Fiorina, the former Hewlett-Packard chief executive has ended her campaign
after coming in seventh in the New Hampshire primaries. Chris Christie is also widely expected to give up his campaign later today. Donald Trump has moved his campaign to South Carolina where he's set to make his first public appearance since winning a clear victory in the New
Hampshire primary. Mr. Trump has led the polls in South Carolina for months. The Republican primary there is in ten days' time.
Tuesday was also a momentous night for Bernie Sanders as you'll be aware. The 74-year-old independent won the New Hampshire Democratic primary with
the biggest margin in a contested New Hampshire primary since Kennedy in 1960.
To Taiwan where prosecutors are questioning a developer over the collapse of the 17-story tower during a powerful earthquake.
He and two former executives of his company are under arrest, facing charges of professional negligence resulting in death.
At least 40 people were killed in the quake. More than 100 are still believed to be trapped in the ruins.
Laurent Fabius is stepping down as France's foreign minister. Now he's a former prime minister and he served as foreign minister for nearly four
years. [16:35:05] And the reason that he's being as the head of the country's constitutional council. The move is expected to be part of a government
reshuffle by President Francois Hollande. So, Twitter has reported its numbers, and what better way to show you than
a few emojis. Revenue beat expectations - that much was clear. Earnings per share also beat expectations by 4 cents a share. But here's
the bit that you need to know - user growth. Monthly active users declined in the fourth quarter and that was a huge disappointment.
CNN's Samuel burke joins me now at the Super Screen. But the market, Samuel - I'm just looking now - 13/14 percent down on Twitter shares which
are already lower. Is that just because of this user number?
SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: It's all about the user number, Richard. This is as bad as it gets for a social network.
No surprise that Twitter which once traded above $70 is down at $13 now because what they were always looking for was user growth.
They could monetize later, they could get profit later, lots of people bought Twitter thinking that they would get a Facebook which now has nearly
1.6 billion users - with a "b". They have WhatsApp with a billion users, Gmail has a billion users. Everybody's looking for platforms with a billion users, and here Twitter
can't even maintain 320 million users. Decline -- this is the worst type of news that a social network can
experience, Richard.
QUEST: Samuel, just pause there. I've got some breaking news that I need to bring you, that the New Jersey governor Chris Christie has suspended his
campaign for the Republican presidential nomination after a disappointing finish in New Hampshire, a source is now telling CNN.
So it does appear that Christie is dropping out as had been widely thought throughout the course of the day. He returned to New Jersey after New
Hampshire saying he was going to take a deep breath. That deep breath has become a large sigh. He realized his campaign's going
nowhere. So two major candidates or potentially big - two big names, Christie and
Fiorina, are both out of the Republican nomination process. Back to you, Samuel. You do not get off lightly there, Samuel, so listen. If Twitter doesn't have any b's of billions behind it, the only question
one asks is it has cash, it's going to burn through it, but does it survive?
Well, Jack Dorsey must be the other person, not just Chris Christie taking a big breath, Richard, because they need something more. And a lot of the
people who you thought might buy Twitter - someone like Google. Well, all the analysts I talked to say, listen, Google gets the information they need for Twitter at a fraction of the price, so it may not be a good
buy for them. If Google's not buying then who would? It is very hard to see a clear path for Jack Dorsey and for Twitter at this point.
Their big problem, Richard - they've got people like you and me talking about it in the media but the rest of the world just hasn't caught on to
Twitter and how it works.
QUEST: You see, now that's really it in a nutshell. Twitter has become the de facto - AP - Associated Press for breaking news. I mean, somebody
dies and everybody puts out a tweet saying how marvelous the person was. A prime minister wants to make an announcement and they do it by Twitter.
But that, Samuel, I suggest to you does not a social media network create.
BURKE: Celebrities love it, news people love it, politicians, athletes, but that doesn't create the eyeballs.
At the end of the day what all these social networks want are the massive amount of eyeballs that the other bigger platforms like WhatsApp, like
Facebook have. And if you can't have those, even if you're good at monetizing what you have, if you don't have the eyeballs, you're not going to be able to get it
past there. They haven't been able to develop the platform to make it as dynamic as Facebook, to make the ads interactive into Facebook, ads to draw in people
to actually sit, stay and use it. Remember, they do get a lot of people to come and check it out, but they don't say stay. It is just not simple enough.
Twitter is not another Facebook. That's clear in the revenue, that's clear in the charts that we see here, but nowhere is it more clear than the user
growth or lack thereof.
[16:40:08] QUEST: Samuel, thank you. Samuel Burke who is in New York for us tonight.
It's a case of being quieter and greener and IAG which is one of the world's biggest airline groups. It owns British Airways, Aer Lingus,
Iberia and Vueling. IAG has now become the first to sign up to a global commitment to limit
carbon emissions. In the U.S. on Monday, 22 other countries agreed to the world's first emissions standard for commercial aircraft under ICAO, that's the national
U.N. body. It's a big issue for the aviation industry. Commercial jets, well they say
it's about 2 percent of the total emissions from transportation worldwide, 11 percent of carbon emissions from transportation worldwide.
The U.N. Aviation Agency expects the number of passengers on flights to double by the year 2030, and that's the incentive for the White House to
say the new standards are expected to slash emissions by more than 650 million tons between 20 and 40.
The equivalent to removing 140 million cars from the road for a year. Willie Walsh is the chief executive of International Airlines Group that owns BA, Iberia, Aer Lingus and Vueling and he told me IAG's gone beyond
the targets set by ICAO.
(BEGIN VIDEOCLIP)
WILLIE WALSH, CEO, INTERNATIONAL AIRLINES GROUP - IAG: Well, Richard, I think we have to demonstrate that we are committed to improving our
environmental performance. I think this step by ICAO is a small but I think very important step
towards reaching agreements at the assembly meeting in Montreal later on this year in September/October.
But we don't stand by waiting for others to take action. We have set ourselves some challenging targets to demonstrate that we are committed to
improving our individual performance within IAG.
QUEST: What will you actually be doing though? Because my experience of all of the environmental and emissions issues is that it really has to come
down to taking hard decisions and changing, if you like, the way you fly the planes, the sort of fuels you use, the scheduling of the airline.
So what are you actually going to do?
WALSH: Well you put it very well, Richard. There are a number of measures we can take. We can improve the operating performance of our existing
aircrafts. We're modifying some of the existing aircraft in our fleets to make them more fuel efficient, more carbon efficient. We're investing significant
sums of money in new aircraft that's had significantly improved environmental performance.
And that's a multi-billion dollar annual program that will continue over the years to come.
So we're buying more efficient aircraft to replace the aircraft in our fleet and we're working with partners and suppliers to ensure that they can
play their parts. So certain air traffic control providers where we look to see if we can shorten the distances that we fly our aircraft. And anything we can do to
shorten distance or to take weight out of aircrafts means we're burning less fuel. If you burn less fuel you produce less CO2.
QUEST: The Europeans of course - the E.U. came up with the carbon trading - the emissions trading - system and put aviation at least temporarily
until the others objected into it. You are against such a system, aren't you? You don't believe that an emissions trading hierarchy is the right way forward.
WALSH: No, I actually believe it's the right approach. I just think that the E.U. made a mistake in trying to impose their views and their answer on
the rest of the world. I argued strongly that what the E.U. should do is to apply an emissions trading scheme for intra-E.U. flying and to demonstrate that an emissions
trading scheme is actually a valid way of addressing part of the problem. Because what we recognize in the industry is we can take certain measures to improve our performance, but that won't be enough to achieve the very
challenging targets we have set ourselves which is a 50 percent reduction in our net emissions by 2050.
So we recognize that we're going to have to provide money to incentivize other industries to improve their performance.
And that's how an emissions trading scheme works. It gives you a financial incentive to improve your performance but it also makes funds available to
others to improve their performance. We do see it as part of the solution but we think the E.U. was a bit heavy handed in the way it went about implementing its scheme.
QUEST: And if you look at the business at the moment, and you see - I mean - you're being - you're benefitting from a low oil price, you're being
clobbered because so much of your business is transatlantic and the dollar is high, but you're benefitting from the fact that there's probably more
Americans coming eastbound. I mean, at the same time there's a global slowdown. Willie, I guess I'm asking you just how tricky and difficult is it out there at the moment for
you?
[16:45:03] WALSH: It's certainly challenging and there are lots of moving parts, but you know, the lower oil price does give us a bit of a tenwent
(ph). Interestingly, the strong dollar hasn't really resulted in more U.S.
visitors to the U.K. and Europe. We think that's going to come. And the good news is the strong dollar hasn't discouraged Europeans and
people in the U.K. traveling to the U.S. So, you know, there are a lot of moving parts. You know this industry
well, Richard, it's extremely challenging and this is just another one of the many challenges that we have faced and will, I'm sure, face in the
future.
(END VIDEOCLIP)
QUEST: Willie Walsh, the chief executive of IAG on the challenges in aviation.
Now news to CNN, or just in to CNN - Amazon stock has climbed in after hours after the company announced a new $5 billion -- $5 billion share -
repurchase program. And Tesla has just reported its lasted results. It revealed a fourth
quarter loss, but the shares are rising strongly and that's driven by an upbeat guidance for the year ahead.
And you'll remember of course Tesla's stock has been down sharply - down more than 25 percent in the year so far as a result of what seemed to have
been problems at the company. The lifeline that's keeping Ukraine afloat could be pulled away. The IMF has told leaders in Kiev that'll be the consequence if they don't clean up
their act. The Ukraine crisis next.
(COMMERCIAL BREAK)
QUEST: Breaking news at CNN, and allow me to recap for you - Chris Christie, the governor of New Jersey, has become the latest in the Republic
candidates for the nomination for president of the party to suspend his campaign and basically quit the race.
It was a disappointing finish in New Hampshire and a source close to the campaign has now confirmed to CNN that he is suspending and giving up his
race. Christie made the announcement (on the cor) with his campaign. He had staked great hopes in doing better in New Hampshire.
And you'll remember in the last debate had a fierce, searing battle with Marco Rubio, the senator from Florida which seems to have been a scorched
earth policy for both candidates. Rubio finished down in New Hampshire and Christie also finished sharply
lower than he had hoped, recognizing that Chris Christie has suspended his campaign and is now out of the race.
Also of course today Carly Fiorina, the former CEO of HP, Hewlett Packard, she also suspended her campaign, recognizing the inevitability that the
votes just weren't there. The candidates have gone. Ukraine is once again staring into the abyss as the International Monetary Fund says its $17.5 billion bailout fund will collapse unless the country
gets serious about stamping out corruption. The Fund's managing director Christine Lagarde said, "Without any doubt and without invigorate governance reforms and to fight corruption, it is hard
to see how the IMF-supported program can continue." [16:50:05] It's hard - it's the IMF's harshest warning yet to Ukraine's
leaders. CNN's Claire Sebastian has the story.
(BEGIN VIDEOCLIP)
CLAIRE SEBASTIAN, CNN PRODUCER: The aftermath of a deadly bus explosion in Eastern Ukraine Wednesday. The country's ongoing civil war a violent
backdrop for another crisis that's threatening its future.
ANDY HUNDER, HEAD OF THE AMERICAN CHAMBER OF COMMERCE IN KIEV: The two wars the Ukraine now is facing is the war on the Eastern front but also a
bigger war is also facing us - the war on corruption, that corruption that's eating away at the cancer at the economy.
And, you know, Kiev can do much more quicker tangible results to show that it's fighting the war on corruption.
SEBASTIAN: The war on corruption matters to Andy Hunder. His job as head of the American Chamber of Commerce in Kiev is to advocate for a better
business environment in Ukraine. Just like the IMF, he believes Kiev is not doing enough and it's
splintering an already fractured government.
AIVARAS ABROMAVICIUS, FORMER UKRAINIAN ECONOMY MINISTER: It's a crisis of trust, it's a crisis of basically our values.
SEBASTIAN: A key reformer of the economy minister resigning last week, he said his efforts to push through economic reforms were being stifled by
corruption.
ABROMAVICIUS: We are in a pretty difficult situation yet I believed a week ago and I still believe now that we are either two steps away from a
breakthrough or two steps away from a breakdown.
SEBASTIAN: Ukraine can't afford not to tackle corruption. In December, Kiev defaulted on a $3 billion loan from Russia. Moscow has now threatened
legal action. The World Bank estimated Ukraine's economy shrank by 12 percent in 2015 and the currency has fallen around 8 percent against the dollar this year
alone.
HUNDER: In 2016 we feel that we've hit rock bottom. We're at rock bottom now, so we're forecasting at least 1/1.5 percent GDP growth in 2016 and
this could be a rebound.
SEBASTIAN: For a government where brawls in parliament have become commonplace, any rebound will require unity.
The next steps, a rumored cabinet reshuffle and a possible no-confidence vote later this month. Claire Sebastian, CNN.
(END VIDEOCLIP)
QUEST: Now, as we continue tonight, more from Make, Create, Innovate. This is "Quest Means Business."
(COMMERCIAL BREAK)
QUEST: Burger King wants to become the hotdog king, and for the first time in its 62-year history, it's putting hotdogs on the menu in U.S. outlets.
CNN Money correspondent Cristina Alesci in New York with more. Having - why? Why, Cristina? I mean, what is the attraction to Burger King to
suddenly start selling hotdogs?
CRISTINA ALESCI, CNNMONEY CORRESPONDENT: Well, this is all about money, right? They want to drive top-line growth and they see hotdogs as the way
to do it. And it's somewhat logical, right. How hard is it to throw a hotdog on a grill right next to a burger. It doesn't take any rejiggering in the
kitchen or anything like that. But there is risk involved here, Richard. If you think about it, they have to be careful that customers don't trade down - instead of buying let's say
a burger for $4 or $5, they'll opt for the $2option when it comes to hotdogs.
Now, Burger King says it has studied this issue very carefully in the test markets that it has been in for the past year and said people are adding on
hotdogs, not swapping them out for the higher-ticket items. [16:55:12] But obviously, you know, that's in several test markets. They're going to have to see how this rolls out.
QUEST: Right.
ALESCI: Generally, franchisees aren't really happy when you add extra items to the menu because it makes their lives more difficult.
QUEST: We have another place for us to go on our first date. Never mind -
ALESCI: (LAUGHTER).
QUEST: -- Chipotle. We're having hotdogs - hotdogs at Burger King.
ALESCI: You're not getting - you're not getting out of taking me to the Four Seasons. I'm holding you to that.
QUEST: Four Seasons, Schmeasons. Cristina Alesci -
ALESCI: (LAUGHTER).
QUEST: We'll have a "Profitable Moment" after the break. (RINGS BELL).
(COMMERCIAL BREAK)
QUEST: Allow me to recount the major news of the U.S. presidential election tonight. Two of the B candidates, Chris Christie, the governor of
New Jersey has suspended his campaign, recognizing the futility of continuing any further.
Stephen Collinson is in D.C. Stephen, briefly - not a surprise but a bombshell nonetheless.
STEPHEN COLLINSON, SENIOR ENTERPRISE REPORTER: That's right, Richard. Chris Christie needed a very good showing in the New Hampshire primary.
He trailed in sixth. He really gave himself no option really to carry on. He wouldn't have been able to raise money, he didn't qualify for the next
Republican presidential debates on Saturday night. So I think really Chris Christie had no option.
I think he'll be remembered in this race as the man that really -
QUEST: Right.
COLLINSON: -- tried to take down Marco Rubio. In the last debate in the end it turned into a bit of a murder-suicide mission I think for Chris
Christie -
QUEST: All right.
COLLINSON: -- and he's out of the race.
QUEST: Thank you, Stephen. That's "Quest Means Business" tonight. I'm Richard Quest in Abu Dhabi. We'll have more in the hours ahead. (RINGS
BELL).
END
