<Show: QUEST MEANS BUSINESS>
<Date: January 15, 2013>
<Head: Facebook Unveils New Graph Search; Facebook's Public Timeline;
Analysis of Facebook Search Decision; German Growth Slows; European
Markets; Euro Down, Yen Up; Goldman Sachs Decides No UK Bonus Delay - Part 2>
<Sect: News; International>
<Byline: Nina Dos Santos, Maggie Lake, Frederik Pleitgen, Feklicia Taylor>
<Guest: Victor Basta, Peter Bofinger, Brooks Newmark, Dan Simon>
<High: Facebook CEO Mark Zuckerberg unveiled a new Facebook graph search
function, which he calls a new pillar of the social networking site. A
look at the timeline of Facebook's public stock trading since its IPO last
May. Germany has finally succumbed to the sluggishness that's been
gripping the rest of the eurozone, with preliminary figures showing that
Europe's biggest economy actually grew by just 0.7 percent in 2012.
Goldman Sachs backs off its decision to delay bonuses to some UK employees
so they could take advantage of a new lower tax rate starting this April.>
<Spec: Advertising; Asia; Banking; Business; Consumers; Economy;
Electronics; Europe; Financial Services; Government; Internet; Media;
Policies; Stock Markets; Taxes; Technology; Telecommunications; Trade;
U.S. President Barack Obama and the vice president, Joe Biden, will propose a ban on assault weapons on Wednesday. The package of gun control proposals will also address the issue of high-capacity magazine and this design to strengthen federal background checks, too.
The move comes a month after 27 people were killed in a school shooting in Connecticut.
And Facebook has announced a new search feature to help you sort through all of your people, places and pictures on the social network. It's called Graph Search and it's aimed at bringing new users, new content and also more friends as well. Facebook shares fell following the announcement, though.
(END VIDEO CLIP)
DOS SANTOS: Well, let's delve a little bit deeper into that new feature of Facebook announced just in the last hour or so. Let's get the latest from Dan Simon, who joins us now from the social network's headquarters in Menlo Park, California.
And I might tell our viewers that he spent the best part of the last 30 minutes or more inside that press conference.
So, Dan, what was the atmosphere like and what would this mean for Facebook?
DAN SIMON, CNN CORRESPONDENT: Well, you know you had a lot of people from the press inside, you know, listening to Mark Zuckerberg. People were generally excited to hear what he had to say. And this is a pretty big development for Facebook.
They announced this thing called Graph Search. This is a way for you to ask certain questions and to get certain results based upon your quote- unquote "social grab" within the Facebook universe. So you can ask things like photos of my friends in Paris or favorite restaurants that my friends like in San Francisco.
Those kinds of questions and before you couldn't really get those kinds of results within Facebook. So this is a new thing for Facebook where you can actually ask very pointed questions and get -- and get specific answers, Nina.
DOS SANTOS: And this leverages a lot of their information, Dan, in a way that many people hadn't expected them to do. It takes them down a completely different alley that says embarking on competing with the likes of Google instead of investing in mobile. Is that a good thing or a bad thing?
SIMON: Well, I think there is a lot of potential in this type of business or this new business that they're going into. For instance, when it comes to advertising, I think this could be huge. So if you were to ask, you know, photos of my friends in Las Vegas, well, boom. Then right on the right-hand side of the screen, you might see advertisers for hotels or airlines, that kind of thing.
At this point, they haven't announced a business strategy around the Graph Search. But you can tell clearly that's what the future is going to hold. They did not announce a mobile product surrounding Graph Search. That's going to come later. At this point, you're only going to be able to do it on a desktop computer, Nina.
DOS SANTOS: Interesting stuff. Obviously we'll see, the proof of the pudding is in the execution, isn't it? Dan Simon, thanks very much for joining us there outside Menlo Park, California, which is, of course, Facebook's headquarters.
Well, the United States may lose its triple-A rating with another ratings agency even if it does manage to raise the debt ceiling. Fitch Ratings says that it'll downgrade the U.S. unless Congress manages to come up with a medium-term plan to bring down the deficit.
And I asked Fitch Ratings' managing director, (inaudible) David Riley if he regretted not cutting the rating for the U.S. earlier alongside Standard and Poor's back in 2011.
(BEGIN VIDEO CLIP)
DAVID RILEY, MANAGING DIRECTOR, FITCH: No, we don't, because it's important that we get our analysis right. And it's not something that we would do lightly, to cut any sovereign rating, in particular the rating of what is essentially the world's benchmark issuer of fixed income securities.
And you know, we did view the August 2011 debt ceiling episode as essentially a sort of one-off, that this wasn't typical to go right up to the wire, to potentially threaten to -- or risk a potential payment on the Treasury securities.
So we thought it was right to wait for the outcome of the presidential and the congressional elections and that a new administration, a new Congress would better put in place a plan to address the fiscal challenges.
DOS SANTOS: So let's talk about the debt ceiling as a complex issue. Should the United States really have a debt ceiling after all, because some people, even the head of the Federal Reserve, Ben Bernanke, have hinted that, really, without one, that would be the best option.
RILEY: Well, the debt ceiling as a means of enforcing fiscal discipline clearly doesn't work. I mean, and essentially, what's happening is that the tax and spending decisions that have been made by Congress, those decisions have created a gap.
There's a shortfall between what's been taken in tax and what's been spent on a whole range of programs. (Inaudible) been filled with debt. And that's what's driving the increase in the debt, not increases in the debt ceiling.
DOS SANTOS: So if we take a look at the United States as total debt to GDP, it's still not the highest in the world for a big major economy. You take a look at Japan and Japan's 236 percent of GDP; the United States is 107 percent of GDP. Is it really that indebted?
RILEY: It is by triple-A standards. It's the most indebted of the triple-A rated sovereigns. In fact, our typical triple-A government would have a debt-to-GDP ratio of around 50 percent. Now can the United States sustain, you know, 100-plus percent debt-to-GDP ratio, 120 percent, 130 percent? Yes, it can.
There's a lot of sort of particular features about the U.S. Not the least there is reserve currency status of the -- of the dollar. But that's not, in our opinion, consistent with the U.S. retaining its triple-A rating.
DOS SANTOS: Well, the reserve currency status is exactly what I wanted to come to, because obviously if the United States just goes ahead and prints more dollars, people are still buying those Treasuries. It's the ultimate safe haven. So it doesn't matter, really, whether you cut its triple-A rating or not.
RILEY: Well, if we were to cut the triple-A rating, we would still be saying that the federal government, the U.S. Treasury securities are still very safe assets from a credit point of view.
But the idea that you don't have to take difficult decisions on tax and spending that you can keep on running up debt and don't worry, we'll just keep on printing money to finance that, well, history has told us that ultimately that does end in tears. That's not a sustainable economic policy and certainly not one we'd expect from triple-A or any highly related sovereign government.
(END VIDEO CLIP)
DOS SANTOS: Well, investors seem pretty cautious while we wait for most of the big names to report their earnings on Wall Street. A lot of them will be reporting those earnings with the issue of the debt ceiling and the unfinished business rounding the fiscal cliff also in the back of their minds as well.
JPMorgan and also Goldman Sachs are set to report on Wednesday. They will certainly set the bar for Wall Street in terms of big banks.
But in light of that, as you can see, the Dow Jones industrial average rather flat at the moment, up -- down only six points as you can see about 4/100 of 1 percent at a level of 13 and 501 at the moment, investors also looking to the financial sector for earnings growth, even though the manufacturing sector seems to be doing slightly better some might say than the financial sector stateside.
Let's bring in Felicia Taylor in New York, who can talk us through a latest set of banking earnings and the action that we're expecting.
Felicia, great to see you. Is it going to be a good week for Wall Street in terms of banks, do you think?
FELICIA TAYLOR, CNN CORRESPONDENT: I don't know. The banks were able to pull it off last year, obviously, outperforming the broader market. And this week we're going to get a better idea of the last quarter. As you said, we've got Goldman Sachs, Bank of America, JPMorgan, Citigroup and Morgan Stanley all set to report. You know, those are the big six.
But investors aren't so sure about 2013. So what they're really worried about is revenue growth, low interest rates, reduced lending, not to mention the slew of scandals that you and I have been talking about now over the last few months that could have affected somewhat the bottom line. That's not the big issue, though.
Wells Fargo did kick things off for the financial sector, reporting fairly strong earnings. But the stock got hit on worries about a slowdown in mortgage refinancing. So the big concern is will they issue any cautious guidance for the year? That's the problem. Moving forward, what do things like for the banks? (Inaudible).
Banks have been it the bright spot in what is obviously a slow growing economy. Financials are expected to report growth of about 10 percent compared to overall earnings growth of about 3 percent. So, yes, they're going to do fine. How well and how long it can be sustained is the question.
Large cap banks rallied between 25 percent and 50 percent last year. It's going to be pretty tough to keep up with that pace. There was an uptick in lending and profits got a boost by funds that were released and had been used for loan loss provisions. So that's a good thing. But you know, the question is now where are we going to have growth with interest rates as low as they're expected to be?
DOS SANTOS: Yes, that's a good point. Felicia Taylor from New York, thanks so much. Setting the tone there for the financial earnings season for the really big names on Wall Street that'll be released tomorrow.
Now his master's voice is in (inaudible) we should say, but (inaudible) fat lady hasn't sung yet. We'll take a look at the perils and the situations in the U.K.'s oldest record store is facing next. Do stay with us.
(BEGIN VIDEO CLIP)
DOS SANTOS (voice-over): Time now for the answer to today's "Currency Conundrum." Earlier on the show, we asked you how many deutsche marks the German central bank estimate are currently still in circulation out there. Well, the answer to this is C, around about $8 billion. That's right, $8 billion worth of deutsche marks.
The Bundesbank says that people mostly find them tucked away when they move house or when an elderly relative dies. And you can still exchange them, remember, for euros once you get them (inaudible).
(END VIDEO CLIP)
DOS SANTOS: Well, potential buyers are circling the U.K. music store chain HMV a day after this company (inaudible) administration. The "Financial Times" says that Hilco -- this is the owner of HMV Canada -- has shown an interest in some of the firm's stores. As Isa Soares now reports, the 18 High Street company has been so far unable, it seems, to adapt to the trends of the 21st century.
(BEGIN VIDEO CLIP)
ISA SOARES, CNN CORRESPONDENT (voice-over): For more than 90 years, HMV or His Master's Voice, as it was known, commanded a strong position on the High Street and loyalty from its customers. Now it has fallen victim to changing consumer habits.
SOARES: It all began here on London's Oxford Street with the first store opening back in 1921. Now HMV flourished for many, many years. But it failed to keep up with the digital times, sticking instead to (inaudible) business model. And that may have cost its place on the High Street.
NEIL SAUNDERS, RETAIL ANALYST: HMV's biggest mistake is when the original trend of online started to emerge, it didn't react. It thought it wasn't a problem. It thought it still was sufficient to pull things (inaudible).
SOARES (voice-over): For consumers outside its store in Oxford Street, this is a sad time. But just like the High Street bookshop, HMV's decline seems almost inevitable.
ACE, MUSICIAN: For me, the MP3 just ruined the whole music industry. You know, it was physical copies anymore. I'll miss HMV, because I had put my CDs in there before. And also I liked to go in there and buy physical copies. So to me, it is a tragedy that it's gone.
SOARES (voice-over): The reality (inaudible) business on life support. Last year, HMV accounted for 22 percent of music and video sales. But more than 73 percent of music and film are downloaded or bought online. And even though HMV has an online offering it simply couldn't compete with the bigger players.
UNIDENTIFIED MALE: I suppose everything is easier when you have an iPod and a computer and it syncs everything and then it's just a lot more convenient.
SOARES (voice-over): HMV's struggles underline the gloom on the High Street. Last year alone, 32 retail chains went into administration here in the U.K. Facing intense competition from online retailers, digital downloads and supermarkets.
UNIDENTIFIED MALE: There are a group of products like books, like music, like film which are easily digitized. And that means that more people will buy those products digitally because it saves space, it often costs less and it's much more convenient for them to do that.
And unfortunately, if you're exposed to one of those sectors, you really have the tide set against you in terms of generating profitable growth over the next 10 or so years.
SOARES (voice-over): It may not be the day the music died, but some fear it may be sympathetic of the demise of the High Street -- Isa Soares, CNN, London.
(END VIDEO CLIP)
DOS SANTOS: Well, even a company that helped to hasten HMV's demise is hitting a few hurdles of its own these days. Take a look at this.
Apple shares are currently down by more than 3 percent in New York trading right now, and it looks as though this stock as you can see there is set to close below $500 for the first time in nearly a year. (Inaudible) actually cut their earnings forecast for this company just today, warning the profit margins, particularly on the iPhone products, are currently unsustainably high.
All of this also comes a day after reports of weaker than expected demand for the iPhone 5, the latest model issued by Apple.
Well, shares in the company are falling around about 20 percent in just the past six months alone. But, of course, keep a close eye on earnings which are due out next Wednesday.
Let's have a look at how the weather forecast is shaping up at the moment. Jenny Harrison is standing by to tell us all at the CNN International Weather Center.
Hi there, Jenny. What you got for us?
JENNY HARRISON, CNN METEOROLOGIST: Hey, Nina, I've got some very cold weather across Europe and, of course, plenty of snow. Let's start out with satellite because it's a very unsettled picture, as you can see, just about everywhere seeing some sort of cloud. We've got some rain in there; we've got some very heavy amounts of snow.
And let's start with the northwest, shall we. The last few hours, look at this, first of all, Marham in Norfolk in the U.K., 8 centimeters then across into Suffolk 8 centimeters. Nottingham in the East Midlands, 4 centimeters of snow. And some pictures to show you as well, because of course it's all very well, the snow coming down but my goodness it causes problems.
So Gainesboro (ph) up in the North Yorkshire, the very, very brave cyclist that has to be said. And then of course the cars doing their best. This is again North Yorkshire, Pickering (ph) up there. You can really see the snow. It's really sticking to the ground. And then across into France, Lyons, again, plenty of snow here. It really is widespread across much of Europe.
And in fact, in the Netherlands, here's a bit of a different picture for you because of social media over 1,000 people actually registered for this massive snowball fight that you can see there. But the temperature's keeping the snow well on the ground.
This is what the wind (inaudible) feels like -10 in Berlin right now, -2 across in Birmingham, -14 in Karlstad (ph) and still some snow flurries along the east coast of the U.K. And snow pushing into the west. We've got some pictures actually (inaudible) show you some of that snow in Scotland because you saw those still images. But it really has led to huge traffic snarlups.
Of course, the accidents as well in the very, very icy conditions. (Inaudible) temperatures staying so below freezing. So everybody's doing what they can to clear the snow. And then across in the Netherlands, some more pictures to show you, not quite so many vehicles around.
Of course, this is Amsterdam, it's all about walking, isn't it, and also about using your bicycle. But again, the snow is sticking to the ground there, even to the boats, the barges there, you can see along the canals.
But as what's going to happen next, well, the snow's going to continue to come down, but not as much as we've seen across western Europe, maybe just another 4 centimeters, though, having said that across into Brussels.
But the really heavy snow just have a look at this, 68 centimeters in Zagreb. That's actually a record for January and Ogulin 76 centimeters, strong winds as well, about 115 kph. Still more snow across this region but in particularly northern Italy and of course along the line of the Alps some very heavy snow, maybe 25 centimeters over the next 48 hours.
So it's going to stay very wintry. We're going to see more of this snow, this system working its way across the south. It'll be rain really across the Med but of course that cold air will stay in place and it means that temperatures will be below average over the next few days. Again you can see that Berlin's doing well below freezing. And then, as I say, widespread snow.
So be prepared as well, Nina, of course for lots of disruption when it comes to traveling and just take care, because it is so very icy and cold.
DOS SANTOS: It is decided chilly out there, I might say. Jenny Harrison, thanks so much for that.
And speaking of people who are facing a bit of a cold front these days, his reputation is at rock bottom; his legacy is in tatters. There's nowhere else for Lance Armstrong to go these days except perhaps (inaudible) televised confession. We'll have all the details of his interview with Oprah up next.
DOS SANTOS: If true, the reports suggest that Lance Armstrong has finally come clean because in an interview with Oprah Winfrey, the now disgraced cyclist is said to have finally admitted to using steroids. The talk show host told CBS "This Morning" that the conversation took a surprising turn.
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OPRAH WINFREY, TV STAR: I would say he did not come clean in the manner that I expected. It was surprising to me. I would say that for myself, my team, all of us in the room, we were mesmerized and riveted by some of his answers.
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DOS SANTOS: Fascinating stuff. Let's get a little bit more now from Don Riddell, who's over at the CNN Center.
Don, this has been going on for so long, finally, I supposed, we may have the confession.
DON RIDDELL, CNN CORRESPONDENT: Well, we may do. I mean, it's interesting ,apparently Oprah Winfrey and Lance Armstrong had an agreement, Nina, which was that the details of that interview would remain confidential until it was actually broadcast on Thursday night.
But by the time she'd stepped off the plane from Austin back home to Chicago, the details of that interview had been revealed in which he did apparently make a confession. So Oprah Winfrey isn't denying it. But she's not actually saying what he did or did not confess to.
That sound bite we heard from her there, I think it doesn't really tell the full story of what she has said so far. I think when she was -- when she spoke on "CBS This Morning," she said that she went in very prepared for this interview. She went in with over 100 questions. She said she got to ask most of them, and she was very satisfied by the answers.
She said she'd gone in prepared to dig, pull and reference because she really thought he would be kind of quite hard to pin down. But she said he was so forthcoming that, in the end, she just really let him talk by the sounds of it. And it sounds like what he had to say really was quite revealing.
Now the original plan was that this was going to be an interview that was going to be broadcast on Thursday night. It was going to be an hour and a half. But she said they talked for so long that it lasted 21/2 hours.
It was so good they didn't want to drop any of it out, that it's now going to actually be aired across two nights on Thursday and Friday and sports fans all over the world are going to better hear finally what Lance Armstrong has to say.
DOS SANTOS: Yes. I suppose the only question is will the confession come at the start or the end? Don Riddell, thanks so much for that, bringing us the latest there from CNN Atlanta.
Well, QUEST MEANS BUSINESS will be back in a moment's time. We'll take a look at how Facebook uses a reacting to the company (inaudible).
DOS SANTOS: Hello and welcome back. Well, Facebook shares are currently falling in today's session. They're around about down about 3 percent on the Nasdaq at the last time we looked as you can see there at a price of $30.05 apiece.
They were up nearly 1 percent before the social network actually unveiled its new Graph Search feature a little earlier today. So that's how investors are reacting to this piece of news. Let's have a look at the response in the world of social media itself.
(Inaudible) Pete Cashmore is seeing an opportunity for romance here. He writes, "Facebook search just made dating easier or perhaps creepier?"
Then Zero Hedge also asked this, "So does Facebook search," he says, "sort stalkers by weight?"
And Depressed Darth Vader says that Graph Search, which is the new feature that Facebook has announced, doesn't quite hit the hot spot for him. As you can see here, "I'd be much more excited about Facebook's Graph Search if it could help me find the droids I'm looking for," he says.
Well, investors seem to be pretty cautious while we wait for a whole host of big reports coming out of Wall Street as Felicia Taylor was just telling us before. We've already had Wells Fargo setting the tone for banks across Wall Street, but the really big names, finally speaking in terms of investment banks, will of course be Goldman Sachs, JPMorgan as well, those two companies set to release their earnings tomorrow.
So on Wednesday, in light of all of that investors are going to be looking to the financial sector for earnings growth going forward. But as you can see, the Dow Jones industrial average is still not that much further off the flat line from the last time we had a look. It's up around about 9 points. It was down around about 6 points half an hour ago. And it is up only about 1/700 of 1 percent at 13,517.
On that note, it's time to say goodbye. Thanks for watching QUEST MEANS BUSINESS. I'm Nina dos Santos. "AMANPOUR" is next after a quick check on the headlines.
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DOS SANTOS (voice-over): Welcome back. This is the main news we're following for you here on CNN this hour.
French airstrikes have kicked behind Islamist rebel lines in Mali. France now has some 800 troops to back an offensive against Islamic insurgents in that country. Now West African nations say that they're also sending troops on the way as well. The U.S. State Department says that no decisions have been made as yet on whether they'll contribute any soldiers.
Thousands of people staged an anti-corruption rally in Pakistan's capital, Islamabad. The country's Supreme Court has ordered the arrest of the prime minister and a number of others, alleging that they received illegal payments for projects. Pakistan's benchmark stock index fell by 500 points in response.
U.S. President Barack Obama and Vice President Joe Biden will propose a ban on assault weapons on Wednesday. It's a part of a package of gun control proposals which also will address the issue of high-capacity magazines and strengthen federal background checks.
And finally, as we've been telling you before, Facebook has announced a new search feature that will help you sort through all the people, places on your social network. It's called Graph Search and it's aimed at bringing users new content and also crucially more friends.
That's a look at the main stories we're following for you on CNN. "AMANPOUR" is next.
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