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Quest Means Business
Fed Gives Bubble Warning; Tech Sector Sell-Off; State of US Economy; Moscow Train Derailment; BRICS to Launch Bank; Juncker Next European Commission President; UK Versus EU; European Markets Down
Aired July 15, 2014 - 16:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
PAULA NEWTON, HOST: And the bell closes as torrential downpours come down in New York. Thunder, lightning, and that was nothing compared to the
storm of controversy that Janet Yellen created today. It's Tuesday, the 15th of July.
Bubble trouble. The Fed warns of stretched valuations.
Train horror in Moscow. At least 20 were killed when this metro derailed.
And FIFA is criticized for not taking head injuries seriously.
I'm Paula Newton and this is QUEST MEANS BUSINESS.
Good evening. And I was just hinting at, strong words from the US Federal Reserve today. Social media and biotech stocks may be greatly overvalued.
The message comes from the Fed's latest monetary policy report to Congress. It says, "Valuation metrics in some sectors do appear substantially
stretched, particularly those for smaller firms in the social media and biotechnology industries."
Now, it's all a bit reminiscent of Alan Greenspan's comments before the dot-com bubble. I'm sure many of you remember the former Fed chief cited
so-called "irrational exuberance" in the market in 1996. But guess what happened: US stocks continued to surge until the tech bubble burst in the
year 2000.
Now, NASDAQ and tech stocks, as you can imagine, fell after Yellen's comments, but I want you to take a look at this board here. Now, while we
have, certainly, companies like Twitter down one and a bit more percent, they hung on, why?
It was the smaller companies, Yelp down about 3 percent here. And also looking at Tesla, down more than 3 percent, and that was the target, there,
in terms of what Janet Yellen apparently was trying to get at.
For more, though, now, we go to Alison Kosik, who's at the New York Stock Exchange. Really hard to follow the trade today. We came out of the gates
really strong, another intra-day record on the Dow.
Yellen came up, things went down, not in any kind of serious way. So much discussion today. How is everyone parsing it?
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: It's very much as you said, we did see stocks come out of the gate strong. As soon as Janet Yellen began
speaking on Capitol Hill, you saw stocks kind of hit the pause button.
But interestingly enough, what rattled the market, Paula, had less to do with what she said and more to do with what was said in a written report by
the Fed that was submitted to the committee in addition to her own testimony. Because in that report was that warning from the Fed of this
bubble in social media and biotech stocks, saying that they're overvalued.
Now, as far as Wall Street saw this, it wasn't a huge shocker. You weren't telling them something they didn't necessarily already know, but as we saw
throughout the day, it did cause this knee-jerk selling.
Investors were surprised that the Fed would actually focus on some of these so-called momentum stocks. And we did see shares like Amgen fall about 2
percent, Facebook fall about 1 percent. But then, as the day went on, things settled, especially since the Fed didn't sound overly worried about
the stock market. Paula?
NEWTON: And in terms of those earnings, still, they keep steaming along, and that certainly boosted Wall Street.
KOSIK: Right. It didn't hurt that Goldman Sachs and JPMorgan had really strong earnings today. There was some weakness in JP's investments income.
That was disconcerting for some investors.
But overall, those strong earnings continue. We're going to see the big names come out this week, and we're going to see if stocks can hold their
own as we hear from some more of these big names for the second quarter.
NEWTON: Yes, no summer doldrums to talk about here, Alison. Thanks so much.
KOSIK: None.
NEWTON: Appreciate the update.
KOSIK: Yes.
NEWTON: Now, Fed chair Janet Yellen told Congress the recovery is a work in progress and still needs Fed stimulus. Take a listen.
(BEGIN VIDEO CLIP)
JANET YELLEN, CHAIR, US FEDERAL RESERVE: The economic outlook is very uncertain. I hope we're on a solid course of recovery and that it will
continue and not encounter some serious setback.
I wouldn't take it off the table forever as a tool the Federal Reserve might need to someday in some circumstances use again, but my hope is we're
on a path of recovery and monetary policy will over time normalize.
(END VIDEO CLIP)
NEWTON: Ken Rogoff is professor of economics and public policy at Harvard University, and he was also the former chief economist at the IMF. He
joins me now from Cambridge. Dying to know your reaction to Janet Yellen today. She surprised many. Many thought it would just be a snore. It was
a lot more than that.
KEN ROGOFF, PROFESSOR OF ECONOMICS AND PUBLIC POLICY, HARVARD UNIVERSITY: I really think it's sort of a footnote that the Fed complained about social
media stocks and biotechnology stocks. Look, the stock market's really high, they had to say something. And by and large, they said it's high,
but it's within normal bounds.
She basically accomplished her mission, which was to reassure people that she's not planning to raise interest rates anytime soon, without being very
specific about it. And she -- I think she was really in command in trying to deliver that message.
NEWTON: So, you think she had full control of trying to get her message across, which was what? Interest rates will likely go up in 2015, but
we're keeping our eye on the job market, and what else?
ROGOFF: Yes. You're the Fed chairman, and the last thing you want to do is roil the markets, make them think, oh my gosh, they're going to raise
interest rates way sooner. Janet Yellen's panicked about inflation, or that she'd going to do something crazy in the other direction.
And she projected -- she clearly has a bias. She cares about unemployment. She used the word that the Fed aims for "maximum employment." She was very
firm on that. She was asked about inflation, said yes, it's up, but I'm -- she expressed not being that worried about it.
She was asked about -- are you worried about bubbles, and she said, well, I don't want to take it off the table -- you played that tape -- but I'm not
going to do anything about it soon.
So, she kept her options open, she didn't commit herself, and the same time, I think definitely followed through this very dovish presence that
she's brought and that she aimed to do, and I think she accomplished it very effectively.
NEWTON: Ken, if you can do a macro economic reset for us. You saw the eurozone crisis coming, you saw the US housing crisis coming. What worries
you today?
ROGOFF: Well, frankly, I think the United States is healing and Europe is healing, and I'd be a little more worried about other parts of the world,
like China, which is stable at the moment, but they've been growing really fast, they're at a different point in the cycle, they're more vulnerable.
I agree with Chairwoman Yellen that the issue right now is still healing employment. Inflation could happen, but it's really very far from being
not anchored.
So the big pictures is that we need to continue to heal, to grow, and that's the front and center issue. If there's a big risk, I think it's
outside the United States. Famous last words, of course.
(LAUGHTER)
NEWTON: I was going to say, I'm writing that down, Ken says we have nothing to worry about, it's all going -- steady as she goes.
(LAUGHTER)
ROGOFF: Yes.
NEWTON: Again, you brought up China, we've got GDP figures out for that country, actually just in a few hours. You've written, certainly, about
the potential there. China affects global economy so much more than it used to. Real risk factors that we need to look out for there in China?
ROGOFF: Well, basically, an analogy is look at a team like the Miami Heat basketball team, they won 28 games in a row the year before last, it
doesn't mean they're going to win 28 games in a row again.
And China's had three decades that have been fantastic, and everybody thinks, well, the next three decades will be fantastic. Chances are, they
won't be. Chances are, there'll be a slowdown at some point. And like all these things, people aren't really prepared for it. So, I think that's
where the vulnerability is.
On the other hand, they have a lot of command and control there. They have a lot of power. But over the long run, they can't make something grow
where it's not organic growth.
So yes, absolutely China's a concern, but the data's so bad, it's really hard to know what's going on. I'm not sure I see an immediate super-high
risk, but I'm more worried about that than I am about a renewed financial crisis right now in the United States.
NEWTON: OK. Well, Ken, you seem like a man who sleeps well at night, and that's going to help me sleep tonight. Sounds very good.
(LAUGHTER)
NEWTON: Appreciate your time. We'll check in with you again. Appreciate it.
After the break, a deadly train derailment in the middle of Moscow's morning rush hour. We get the details next.
(COMMERCIAL BREAK)
NEWTON: A train derailment in Moscow has claimed the lives of 20 people and injured 160 more, according to state media. Now, three metro cars came
off the tracks and crashed in a tunnel during rush hour Tuesday morning. The cause of the crash is still unknown. Russian transportation officials
say they have ruled out terrorism. Phil Black has the story from Moscow.
(BEGIN VIDEOTAPE)
PHIL BLACK, CNN INTERNATIONAL CORRESPONDENT (voice-over): There can be little surprise lives were lost here. The train didn't just slip off the
tracks. These pictures show some of the carriages jackknifed 90 degrees and wedged sideways in the narrow tunnel.
Other carriages, still hurtling forward, slammed into them. The result: this tangled structure, metal crushing metal, and whoever was inside. Most
of the bodies had to be cut free.
In the moments after the crash, more than a thousand people fled to the surface. The walking wounded, and many who had to be carried. Of the 160
injured in the derailment, most needed treatment in hospital, dozens of those for critical injuries. The death toll could still rise further.
Moscow and the world has seen similar images after terror attacks on its metro system in 2004 and 2010 by Islamists from the North Caucasus region
of the Russian Federation. But this spokesman for Russia's top investigative body said a terror attack is the only theory already
excluded. The investigation is focusing on a technical failure, and officials here say someone will be held criminally responsible.
BLACK (on camera): Moscow authorities say it will take at least a couple of days to get that wreckage cleared, the clear the line, and have this
metro line operating again. The Moscow Metro is a vital backbone to the public transport system of the city, moving as many as 10 million
passengers a day.
Phil Black, CNN, Moscow.
(END VIDEOTAPE)
NEWTON: Europe's parliament has chosen its next leader. Jean-Claude Juncker got the top job from a short list of, yes, exactly one. After the
break on QUEST MEANS BUSINESS, we ask if this man can get the EU back on its feet.
(COMMERCIAL BREAK)
NEWTON: There's new competition for the World Bank and the IMF tonight. The BRIC economies -- Brazil, Russia, India, China, and South Africa -- are
setting up their own development bank. Now, the countries want to make it easier for developing nations to gain access to financial support. It also
aims to provide an alternative to current Western-backed options.
Now, leaders signed the deal just hours ago at the BRICS summit in Brazil. Shasta Darlington is in Sao Paulo with the details. She has been following
this summit, and clearly the development of this thinking all along.
This is really supposed to be a counterweight, a counterbalance to the IMF and the World Bank, but the point is clear, right? They're not happy with
the way these places operate. They've created their own system.
SHASTA DARLINGTON, CNN INTERNATIONAL CORRESPONDENT: Exactly, Paula, and it's really interesting, if you take a look at it. The BRICS, what do they
have in common? They're not from the same region, they aren't a trade bloc. This is this term coined more than a decade ago, and they've somehow
stuck together, even though their economies are cooling. And they're trying to show the world that there's another way of doing it.
Now, in this bank, it'll initially have $100 billion capital, and each of the countries has -- they've put in an equal amount of money, and they have
an equal say in the decision-making. Apparently, there was a bit of disagreement over where it would be headquartered. In the end, they
announced it will be in Shanghai, and India will have the first presidency.
So, there may have been a little squabbling behind doors, but the idea is that this somehow is a different model, that they're going to be -- the
countries involved will have an equal say and that it really will be involved in infrastructure financing.
They also announced, of course, that they're creating a $100 billion reserve fund, which could be used in emergencies, a currency crisis, for
example. And they also said that these -- this financing isn't exclusively for the member countries. Other countries, especially emerging economies,
of course, can also seek financing from these institutions.
But it is interesting that we've gone from this just a term, if you will, BRICS, to some concrete financial institutions. And interestingly also,
the leaders of BRICS will be meeting with presidents from across South America and Latin America tomorrow, obviously to try and get them onboard
and see how far this can go, Paula.
NEWTON: And in terms of this being a counterweight, a parallel economic system, as you will, the trade between these countries is so low, and then
at the same time, you have this huge economy, China, that dominates the BRICS here.
Any sense that they're going to try and change that, that they're actually going to try and do more trade with each other and really work at the same
purpose all along in these economies?
DARLINGTON: I guess other than China, of course, this is the opportunity. I think each time they hold these BRICS summits, the idea is that they also
have bilateral meetings with presidents and leaders from the countries in the region, and this is an opportunity to try and build those relations, to
try and build the trade.
And of course, they have now these -- or they will have -- they've launched them, but they're still setting them up -- they will have more
opportunities to get financing to really get involved in joint projects and in trade.
But it is hard to tell at this point how much of it is rhetoric, because these are countries that have shared at least one thing in common, and
that's that sort of anti-Western rhetoric, and how much will really be practical. While they are being created, they won't actually be
functioning for quite a while yet, Paula.
NEWTON: Yes, and we'll see how that goes. Certainly Argentina, I'm sure, with its debt problems, might be taking a close eye on what's going on
right now. Shasta, thanks so much for the update, appreciate it.
Now, one of Britain's worst nightmares may be coming true in Strasbourg today. Jean-Claude Juncker was confirmed as the next European Commission
president.
Now, from the 1st of November, Junker, who was prime minister of Luxembourg for almost two decades, he will become the most powerful person in the EU.
Now, he received broad support from Parliament, but that didn't stop the euro-skeptic heckles.
(BEGIN VIDEO CLIP)
JEAN-CLAUDE JUNCKER, PRESIDENT-ELECT OF THE EUROPEAN COMMISSION (through translator): The single currency does not divide Europe. The single
currency protects Europe. Protects Europe. Protects Europe.
(APPLAUSE AND BOOING)
(END VIDEOTAPE)
NEWTON: Now, despite the jeering in the background, Juncker fought back, saying he's proud to have already made some enemies on the far right.
(BEGIN VIDEO CLIP)
JUNCKER (through translator): I thank Ms. Le Pen for not voting for me. I do not want to have the support of those who reject, who hate, who exclude.
Thank you, Madame, for not voting for me.
(APPLAUSE)
(END VIDEO CLIP)
NEWTON: Apparently some action there at the EU. We're not used to that kind of commotion there. Now, Jean-Claude Juncker wants to revive Europe's
economy with a three-year, $400 million program. He's promising to re- industrialize the EU and put its 25 million unemployed back to work.
Now, his measures include a minimum wage across Europe, improved economic governance in the eurozone, and he says the single currency should unite
the bloc, not divide it. He's also opposing what he calls the "winds of the age." That was an apparent dig at privatization and restrictions on
state aid.
Now, some of Jean-Claude Juncker's policies are at odds with what Britain wants, that's to say the least. Now, for example, his support for
migration. Viviane Reding is the EU Justice Commissioner. She supported his appointment. I asked her what the new president will do to fix what
some say is a broken Europe.
(BEGIN VIDEOTAPE)
VIVIANE REDING, VICE-PRESIDENT OF THE EUROPEAN COMMISSION: Those who say Europe is broken are a very small minority. Fortunately, I must say,
because I'm one of those who thinks that Europe is not broken at all. Europe is the strongest economy in the world, and it has the intention to
stay like this.
Europe has, of course, to do many reforms, as all parts of the world have to do. But what Europe has, it has a European parliament which is capable
to take decisions, capable to have majorities and to have clear majorities to help the government to go ahead with the reforms. That is what is going
to happen in the next coming month.
NEWTON: What do you think will be the president's stand towards Britain, who may actually usher in a referendum? You're on the record of saying
that, quote, "the British people are not well-informed enough to actually hold a referendum on the issue." What will he do to try and compromise
with Britain on these issues?
REDING: Well, a British referendum is a British affair. This has nothing to do with the European Union, so it is for the British government to
inform its people well enough so that the people can have an informed decision on whatever it is.
Democracy functions in such a way that it is the government who is asking for a referendum, presenting a referendum, and the people of Britain who
are going to decide. It is not the other Europeans. It is a British story to be solved by Britain alone.
NEWTON: I don't think anyone in Britain would disagree with you on that. On the other hand, it's as if Europe is saying take us or leave us,
Britain. We're not going to do anything to try and make it more accommodating for you in Brussels.
REDING: Well, Great Britain has signed the treaties and freely accepted to be part of the family and to play by the family rules. Now all of a
sudden, this signing of the treaties seems not to be convenient anymore. Well, then, Britain has to take its own decision.
But the treaties are for 28 nations who have all signed them, ratified them, and who are advancing in the direction they are democratically
deciding to go.
NEWTON: David Cameron was on the record very loudly saying this is not the man to lead Europe. What do you think is Britain's future within Europe at
this point?
Well, Great Britain has always wanted a Europe which is a sole internal market because it has a lot of advantages from this market. It exports and
imports 50 percent of its goods to the European market, so it is really depending on this market.
Great Britain has also signed to all the other elements, which go with a democracy, like the free movement of citizens, not only the free movement
of capital and of goods. And now it wants to take out one of those freedoms. I do not believe that any of the other nations wants to go to
this way. So, Britain has to find its own way with Europe or without Europe, that's a British decision.
(END VIDEOTAPE)
NEWTON: Very blunt words from Viviane Reding there, and listening to all of it is one of Britain's leading euro-skeptic figures, John Redwood. He's
a conservative lawmaker, and he joins me now from Westminster.
You've heard all of that before from her and others. Given everything that's gone on today, where do you believe Britain sits vis-a-vis its
relationship with Europe right now?
JOHN REDWOOD, BRITISH CONSERVATIVE MP: Well, the United Kingdom, particularly the conservative party and our current prime minister, feel
very strongly that this relationship doesn't work in our interests, and in a way, it doesn't work in the interests of the other member states of the
union either. They wish to go ahead with a full political union, the United Kingdom never wanted to do that.
So, we're saying to them, we're very happy to negotiate with you to see if there is a way of accommodating the British interests. If, like the
commissioner you interviewed, they have absolutely no wish to accommodate our views, then the British people will vote to leave.
NEWTON: You've said all along that this so-called minimalist relationship with Europe just doesn't work, that you could see in the next few years
Europe leaving -- I mean, Britain leaving the EU. But does that really work for the British economy? Has the British economy not developed quite
well under this partnership?
REDWOOD: Oh, I think it would work fine if we were out of the currency arrangements. And as the German finance minister's made very clear, were
Britain to vote to leave, Germany would want a free trade agreement with Britain. Of course she would, because the continental countries sell us an
awful lot more than we sell them.
There are anyway, I'm pleased to say, big international agreements and an international code over trading, which would mean that the European
countries couldn't suddenly impose a whole set of tariffs or obstacles in the way of trade with the United Kingdom, which would be self-defeating for
them.
So yes, of course, there would be an accommodation over trade. None of us euro-skeptics want to damage or impede the trade. But what we would quite
like is to be free to trade with other countries around the world not in the European Union with rules that we've made up rather than having rules
and restrictions forced upon us by Brussels.
NEWTON: The picture you paint, of course, is that Britain doesn't get any advantage from being a member of Europe. That is not true. Is it? I
mean, many people --
(CROSS TALK)
REDWOOD: Well, I think --
NEWTON: -- would say you get a lot from being in Europe.
REDWOOD: Well, I don't agree. I'm British. I and many of my fellow members of the British nation feel we have a very bad deal from the
European Union at the moment.
And as we have different aims -- Britain doesn't want to be part of the single currency, it doesn't want to be part of the common government -- the
honest thing to do is to explain that again to our continental colleagues and sort out a relationship which makes sense for both sides.
I think if you take the overall balance of the package at the moment, it's clearly not in the United Kingdom's interests, and that's why were we to
only be offered what we've got at the moment, I and many people like me would vote to leave.
But I think more than that, it's not in the interests of the other European countries, which is why I think they will come around and start
negotiating. Because it's not much fun for them always having the United Kingdom saying no to everything that they want to do.
And surely there can be a relationship where they can go ahead with their political union and Britain can have a relationship based on trade and
friendship, which would suit us much better.
NEWTON: OK, but we're getting to the heart of the issue here. Is this just a bargaining position, meaning if you don't compromise with us, we're
just going to leave, so you'd better sit at the table, and you will be able to strong-arm a better position for Britain within Europe?
REDWOOD: Well, I don't look at it like that. As the commissioner rightly said, this is going to be a democratic decision by the British people. I
think the commissioner was quite wrong to suggest the British people don't understand it or are unable to make up their minds on this. I think a lot
of my fellow citizens have very strong, well-informed views on this.
We are offering the European Union the opportunity to sit down and discuss with us a way that the British problem can be dealt with, and we would do
that in good faith. But it's not a threat to say that if we don't have a satisfactory relationship on the table, the British people will vote to
leave. It's just a statement of fact.
Once we trust the people, the European Union and the British government have to accept that the British people might decide to leave. Because we
are very proud to be an independent democratic country that pioneered parliamentary democracy.
We feel too much of that democracy has been put at risk or has been overwritten by the common government emerging on the continent, which is
very bureaucratic and not democratically accountable in the same way.
NEWTON: Yes, and I think the problem for the EU right now is it seems that other people in the Union are beginning to feel like Britain. Thank you so
much for joining us this evening from Westminster. Appreciate your time.
Now, most European markets fell today. Investors were put off by poor economic data out of Germany, and shares in BES fell in Portugal, and
concerns that a company linked to the troubled bank might miss a debt payment. Now, the PSI 20 closed down more than 1 percent.
Coming up on QUEST MEANS BUSINESS, some action after the bell for Yahoo! We'll find out if results chime with investors.
(COMMERCIAL BREAK)
(MUSIC PLAYING)
PAULA NEWTON, CNN HOST (voice-over): Welcome back. I'm Paula Newton and these are the top news headlines we're following this hour.
Israel is reporting its first fatality in the conflict with Gaza militants after a cease-fire proposal collapsed. Rescue services say a
mortar shell hit the Arras border crossing, killing an Israeli volunteer who was delivering food to soldiers. Now Hamas is claiming responsibility.
Israel says Hamas never stopped firing rockets during an attempted cease-fire. Israel unilaterally stopped airstrikes on Gaza but resumed
them after six hours.
Investigators in Moscow are trying to find out what caused a deadly train derailment in the Russian capital. At least 20 people were killed
when three train cars crashed, scores more were injured. Officials have ruled out terrorism as a possible cause.
Media reports say at least 89 people are dead after a car bombing in a crowded market in Eastern Afghanistan. The U.N. is calling the assault a
suicide attack and says it's the single deadliest strike in the country this year. The Taliban has denied any involvement.
Libya's government says shelling at Tripoli airport has destroyed 90 percent of the airplanes there. It may request international troops to
stop rival militias fighting for control over the facility. The U.N. has temporarily pulled its staff out of the Libyan capital.
Huge crowds have welcomed Germany's World Cup winning team back home after Sunday's final in Brazil, up to a million people were estimated to
have gathered in the capital as the team traveled to the Brandenburg Gate on an open-top Mercedes truck.
(MUSIC PLAYING)
NEWTON: Now this just in to CNN. Google announced it has appointed Alan Mulally as its -- to its board of directors. Now Mulally is the
former CEO of Ford. In a statement just released to the markets, he said, quote, "I am honored to serve on the board of a global iconic company that
is dedicated to enhancing our lives."
And that piece of news from Google on the heels of Yahoo! results that have just come in after the bell. Investors were expecting an Alibaba
windfall. That's not exactly what happened here.
Samuel Burke, get us up to speed.
SAMUEL BURKE, CNN CORRESPONDENT: All right. I'm going to let Marissa Mayer, the CEO of Yahoo!, do my job as the reporter. She summed this up in
one line. In this statement, we are not satisfied with Q2 results, she said. I believe we can and will do better moving forward.
Now I'll summarize it, very simply, Web traffic down 3 percent, ad revenue, which is a key indicator, down 7 percent, Paula. And total
revenue also down. So very bad news. But the stock is actually up a little bit in afterhours trading. And that's because Yahoo! says they're
not going to sell as much Alibaba stock as they once had said and they thought they had to sell before.
And they said at least half of the proceeds from Alibaba are going to go to shareholders, which, of course, shareholders like.
NEWTON: Which is why the stock price is up. We should say Alibaba going public and it could be one of the largest ever. That's a big deal.
Down 7 percent for ad revenue? I mean, this is quite bad results.
Samuel, what fundamentally is wrong with Yahoo! that she can't fix?
BURKE: Well, the fundamental problem is Yahoo! is a search company. And when is the last time you went here? Do you even recognize this page
anymore, Paula? This is the Yahoo! front page. And how many people go there? Most people, the vast majority of people do their search through
Yahoo! And that's the problem. This company doesn't have something fundamental to it right now. They have a few parts that do all right.
Email, for example, that still does very well for them. They have a lot of users. People to go Yahoo! to check their email. They have the
mobile apps, where people go and check email. And that's still doing well.
Their news site is doing well. But fundamentally what does this company stand for? We still don't know and search is not working out for
them.
NEWTON: Search isn't working out with them. There is also that crucial component that you always tell me about, which is mobile. Is that
a silver lining for them at all?
BURKE: Unfortunately, it's not. Revenue is not looking good for them in any category, including in mobile revenue. And that's what people were
waiting for. Here's one of Yahoo!'s apps for mobile phones. This is the email one, even though they have continued email use, mobile revenue for
them is just not that good.
So we have to see Marissa Mayer's saying I think we can and will do better. She's been in office since July 2012, the CEO of Yahoo!, so we
have to see them deliver. I'm also want to look through this notes more to see what they plan to do with this money that they are going to get for
Alibaba, and that's what investors are going to be looking at as well.
NEWTON: Yes, so two years, eight quarters, not much has changed there at Yahoo!, although I know they keep trying new things that you're keeping
up to speed on this for us. And I appreciate it.
And we'll continue to see what the analysts think of the stock tomorrow.
Thanks, Samuel. Appreciate you coming in.
Coming up on QUEST MEANS BUSINESS, it's one step, very small step, at Farnborough, one giant leap for the U.K. space industry. We'll have the
details of Britain's big aerospace plans. That's up next.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
NEWTON: Now we just told you about Alan Mulally joining Google's board of directors. Today Google also says you should be able to use the
Internet without fear and announced some so-called Project Zero. It's a new task force that will try to tackle cyber crime by improving software
security.
Now in this week's "Future Finance," I.T. expert Guy Bunker tells us that companies may be most vulnerable where they least expect it.
(BEGIN VIDEOTAPE)
(MUSIC PLAYING)
GUY BUNKER, I.T. EXPERT (voice-over): Cyber attacks are here to stay. But I'm sure I don't need to remind you of this. They have always
been around. Unfortunately, there's no silver bullet to stop the attacks and their impact on financial institutions, business and people. And as
the security industry gets smarter to prevent them, the cyber attackers get more sophisticated in carrying them out.
It's a catch-22 situation with no end in sight.
Willie Sutton, the notorious bank robber, was asked, "Why do you rob banks?"
"Because that's where the money is."
The same is true today. Why do cyber attackers go after information? Because that's where the money is. It's no longer just about credit cards
and bank details. It's about any information that can be monetized. Product designs and even service contracts all have a value to someone.
Today it's not external hackers. Those are the primary attack vector. The first route into an organization is through people, the weakest link;
the internal threat is greater than the external. You need to protect against the enemy within.
In the U.K. in 2013, 86 percent of organizations experienced some form of data security instant; 58 percent of threats came from within the
extended enterprise. That's employees, ex-employees, contract staff and trusted partners.
We found that 72 percent of respondents are struggling to keep up with the change in security landscape. There are some simple questions to ask
with not-so-simple answers: what is your critical information? Where is it? And who has access?
It is most likely to be your secret source, your intellectual property that is most important. After all, that's what your business is founded
on. So it could be product designs or the bid cost of a contract that you hope to win. These have a value to you and also to the cyber attacker.
The way we do business is changing more rapidly than ever before. Cloud computing, bring your own device, Web-based collaboration,
legislation from industry and governments. The goal at the CEO or the CIO needs to be to balance all of these different aspects with a prime
directive of keeping the critical information and therefore customers safe.
The speed of change shows no sign of abating. Remember, there is no pause button.
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NEWTON: Now United Kingdom wants one of its airports to boldly go where no British airport has gone before: outer space. Now it plans to
open a spaceport by 2018. The country wants to bolster its commercial space industry and to become Europe's space tourism leader.
Jim Boulden has the details from the Farnborough Air Show.
(BEGIN VIDEOTAPE)
JIM BOULDEN, CNN CORRESPONDENT (voice-over): Britain is crammed full of crowded airports. Now the government wants one more with an extremely
long runway, able to handle aircraft flying to and from suborbital space. It has now shortlisted eight potential sites for a spaceport to be up and
running by 2018.
BOULDEN: Here at the Farnborough Air Show, it's usually more about commercial aircraft and fighter jets. But the British government used this
show to announce a massive increase in its space industry, something the government says is already worth more than $18 billion to the economy.
ROBERT GOODWILL, BRITISH TRANSPORT MINISTER: We have a clear ambition for the U.K. to capture 10 percent of a global space market likely to be
worth around 400 billion pounds by 2030.
BOULDEN (voice-over): Britain's business secretary told me this is a logical step for the country.
VINCE CABLE, BRITISH BUSINESS SECRETARY: The idea of having a spaceport where craft can land, take off, be maintained is part of our
ambition for the industry. Think that by 2030 we can have 100,000 people working in that industry. And it's got tremendous potential.
BOULDEN (voice-over): The U.S. state of New Mexico teamed up with Virgin founder Richard Branson back in 2005 to build a spaceport.
In May, Virgin Galactic got clearance from the U.S. Federal Aviation Administration to use airspace for routine space flights, a step closer to
commercial and leisure flights. Sweden is building a spaceport as well, which could be used by Virgin Galactic. Now another European country
enters the spaceport race.
JEAN-JACQUES DORDAIN, DIRECTOR GENERAL, EUROPEAN SPACE AGENCY: I visited the U.K. industry pavilion and I must say that I have heard much
more about economy than about space, which is a demonstration that we are now in the economic dimension.
BOULDEN (voice-over): Spaceports also handle commercial rocket launches, a proven business model. And while Britain and other countries
build spaceports for reusable commercial spacecraft, they're flying into the unknown, perhaps, as there is yet to be even the first passenger flight
-- Jim Boulden, CNN, Farnborough, England.
(END VIDEOTAPE)
NEWTON: It would be nice if those would make weather delays a thing of the past. Tom Sater is at the CNN International Weather Center.
I'm sure you're going to tell me that that is absolutely not possible.
(CROSSTALK)
TOM SATER, AMS METEOROLOGIST: No, unfortunately, Paula, it's not.
We have a story to tell you about in the Philippines, where all flights just about are canceled. Schools are closed, government offices,
businesses all shut down in fear of a typhoon that has made landfall now and continues to be very strong as it moves right across north central
areas of the Philippines, southern Luzon. They have been evacuating in Legazpi and that's just north of Tacloban. Remember Haiyan made landfall
back in November.
It's not near as strong as Haiyan, but it is a little bit stronger than we even expected. This is rainfall from down in Mindanao, the extreme
south.
So here's mainland China. Well, come on off and you can see where the system has made landfall. It moved in at 5:00 pm local time and this is
Legazpi, about 200,000 live there. The concern is now it's going to move right over Manila and the heavy amounts of rain have already devastated the
landslides with this and of course we're still looking at winds that are going to be in excess of 150 kph. I mean, look at the winds now at 200.
This system expected to move in as a strong category 2 type hurricane but it's a typhoon, obviously; that kind of equivalent strength, rapidly
intensified to the equivalent of a strong category 3. That is a big difference. We had a little bit of a waterway area and so it had the warm
water to feed on and move right to this area.
Every region that you see here in red are typhoon strength winds. We're talking 28 million people are affected by this and that's just from
the winds. That doesn't even count for the heavy amounts of rain.
This is Manila. Here's the eye. You can kind of see this. We'll get another loop in here. Here is the eye right now. Now it's 4:44 in the
morning. So once the sun rises, our fear is that there could be a little bit more destruction than we previously expected. We knew maybe a 2-meter
storm surge. We knew heavy amounts of rain and the risk for flash flooding and of course mudslides.
But already with over 250 millimeters, another 250 could fall. Manila sits in a bowl. It's below sea level. So this is just going to really
just kind of -- everything's going to funnel into Manila. And if we get some of this wet up into this region, we're looking at big concerns not to
mention we're looking at winds at possibly 100-150 kph.
One more look at this, Paula, this is the concern, that once it passes by Manila, it's the wraparound winds that I think are going to create a
storm surge, especially for the poverty level residents that live in the Manila Bay. So this is a concern we're watching very closely in the next
six hours. Back to you.
NEWTON: Yes, Tom, they seem to get hammered every time. We'll keep our fingers crossed that it's not as bad as it looks right now. That does
look pretty terrible.
Thanks, Tom; appreciate your time.
Now more corporate news into CNN here. As we told you, it's not been summer doldrums around here at all. IBM and Apple have announced some type
of a joint venture that they describe as combining IBM's big data and analytics with of course Apple's products. And they are saying that they
are going to develop 100 industry specific enterprise solution with those kinds of made to order apps that everyone is looking for.
A lot of them will have business applications. But this is a very interesting merger between certainly two of those big tech companies, Apple
and IBM, saying they're doing something they have never done before, especially for business use.
Now a billionaire investor, a music superstar and the lucky American teenager who got that money shot. Sixteen-year-old Tom White of Nebraska
managed to get a little sneaky picture of himself beside two men, Warren Buffett and Paul McCartney, already an unlikely pairing. And it started
with an alert on social media and you guessed it. It ended up with a snap seen around the world.
Our Jeanne Moos brings us the story.
(BEGIN VIDEOTAPE)
JEANNE MOOS, CNN CORRESPONDENT (voice-over): It may not be Ellen at the Oscars or the pope or the president. Technically it's not even a
selfie.
UNIDENTIFIED MALE: Tom was like, hey, take a picture of me. Take a picture of me.
MOOS (voice-over): But there's something about this photo of Omaha teenager, Tom White, giving the thumbs-up in front of Paul McCartney and
Warren Buffett on a bench that made it go massively viral.
TOM WHITE, OMAHA TEENAGER: It's probably the biggest thing that's ever happened to me and probably all of us.
MOOS (voice-over): All of us being Tom and his three buddies.
Paul McCartney was in Omaha on tour. Warren Buffett lives there. After dinner, the famous posse headed for an ice cream parlor and the word
went out.
"Paul McCartney was walking around Dundee. I repeat, Sir Paul McCartney is in Omaha."
Jacob Murray saw an Instagram post and called his friends.
JACOB MURRAY, OMAHA TEENAGER: We went over there pretty fast.
WHITE: By the time we got there, the Instagram post was like seven minutes old.
DREW TVRDY, TOM'S FRIEND: We didn't speed; no, not at all.
(LAUGHTER)
TVRDY: No. Definitely no speeding.
MOOS (voice-over): Drew Tvrdy brought along his guitar, hoping to get it autographed. Luke Kesters (ph) clutched an "Abbey Road" cover. Neither
got Paul's signature, though Paul told Drew to keep up with the guitar playing.
This woman got a kiss from him for her 24th birthday.
And Tom got the now-famous photo.
MOOS: You know my favorite thing about that picture? Paul and Warren Buffett look like they're sitting on a bench, waiting for a bus.
WHITE: It does kind of seem like an odd couple, telling jokes that they thought it was wax figures that I took it with.
MOOS (voice-over): Tom says of course he knew who both men were.
MOOS: Who was a bigger thrill to see?
UNIDENTIFIED MALE: Definitely Warren Buffett.
UNIDENTIFIED MALE: I think, yes, Warren Buffett.
MOOS (voice-over): Just kidding.
UNIDENTIFIED MALE: Paul's definitely the answer.
MOOS (voice-over): And guess who retweeted the photo? Sir Paul himself saying, "Just hanging out with friends."
(MUSIC PLAYING)
MOOS (voice-over): But can't a guy just eat his ice cream without being put under the microscope, like some kind of Beatle?
(MUSIC PLAYING)
MOOS (voice-over): Jeanne Moos, CNN, New York.
(END VIDEO CLIP)
NEWTON: Love that story.
Now after a World Cup full of blood, sweat and, yes, a few tears, FIFA is taking heat over their treatment of players with concussions. Them and
the issue with our Dr. Sanjay Gupta.
(COMMERCIAL BREAK)
NEWTON: FIFA's secretary general is defending the organization's concussion policy. Drone Algar (ph) argues there were fewer injuries in
this year's World Cup than in the last one. Now earlier the World Players Union called for football's concussion rules to be changed.
In the tournament's final match, German midfielder Christoph Kramer had to be led off the field. That was after the team's trainers let him
play on for another 15 minutes after knocking his head. Now later the footballer admitted not remembering anything about the entire first half.
Earlier I spoke with CNN's chief medical correspondent, Sanjay Gupta, and asked him why very strict concussion protocols are so important in
sports.
(BEGIN VIDEOTAPE)
DR. SANJAY GUPTA, CHIEF MEDICAL CORRESPONDENT: Well, look, this is something that is a cross-section across several different sports as you
know. And we've been reporting on this for some time.
I think what is so important is recognizing, first of all, the diagnosis of concussion, as things stand now, isn't an exact science.
There isn't an imaging test or a blood test or something specifically that's going to say for sure that a concussion has happened or not.
So what you find is most people err on the side of safety; pulling the patient out of the -- pulling the player out of the game, potential
patient, and making sure they are examined and if there's any signs of concussion not letting them go back in.
But let me tell you why that's so important to your question and that is that a concussion is a brain injury. So the brain has been injured.
It's a little bit swollen; it's a little bit inflamed, a little bit angry. It would likely heal.
What the worst-case scenario is, if there's another brain injury on top of that first one and then it can -- you can run into a potentially
deadly problem. You get catastrophic brain swelling. And that's exactly why these protocols are so stringent.
NEWTON: And in terms of those protocols, there is a suggestion that even at the level of the World Cup that it wasn't the team doctors or the
team coaches that should have been making decisions about this. I mean, in terms of your coverage of this, how important is it that someone impartial
is attending to this diagnosis?
GUPTA: Well, in the National Football League, some of those protocols have been put in place just over the last year. So it's something that has
been recognized as being important and it's just now being done.
So all of what we're talking about is pretty new, Paula.
What I will say is it's a very subjective thing. In my day, a coach or a doctor because of their -- if they're employed by the team, are they
going to have a stronger allegiance to the team? And be more willing to let somebody who is sort of on the fence get back in the game? Whereas
somebody who's independent and is only concerned about the welfare of the player, might they behave differently?
The NFL has basically said, look, we need to have these independent people in place because we think that's a real issue. And I think you
could make the same argument about any level of athletics, especially at this level.
NEWTON: Which is a good point, and we should say that they're in it for the players as well. Sometimes they know how much the player wants to
stay in the game and maybe being so close to them really clouds their judgment.
You know, Sanjay, so many of us have our kids on these soccer fields. We know about the risks in football or hockey. A lot of people aren't used
to thinking about soccer being at risk, such high risk for concussion.
GUPTA: Yes, and it's really interesting; there are a couple of observations that we really made with regard to soccer. You have certain
sports which are going to put you at higher risk of concussion and soccer is one of them. About almost one out of every 100 players is going to have
some concussion at some point during the season.
Now it's not as high as some other sports. But it's real. What I think is interesting is we certainly got to recognize concussions more and
recognize that it's a brain injury and pull those players out until the brain is fully healed.
But what is also very important are what are known as these subconcussive injuries. But not the ones that people are going to pay
attention to; the players on the ground and getting medical attention, but over time, these subconcussive blows to the head add up. That's one thing
we've learned scientifically over the last several years. They add up.
Every time you head a ball, for example, it's about 20G of force to the brain. And they add up.
And what you find is that if your kid is playing soccer, a lot of young people are playing soccer, it's often during practices, when you're
doing drills or you're just heading the ball over and over and over again where you start to get the most significant potential consequence to the
brain.
So could you decrease the number of header that a player does? Can you ensure that you're trying to minimize the risk as much as possible?
(END VIDEOTAPE)
NEWTON: The German people may have celebrated their country's World Cup in over an ale and the traditional meal, frankfurters, mettwurst (ph)
and bratwurst. It turns out, though, they may be paying too much for those sausages. We'll explain right after the break.
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(COMMERCIAL BREAK)
NEWTON: Sausages, of course, are one of Germany's most famous exports, apparently along now with World Cups. And now it's emerged that
some sausage makers have been ripping off retailers and consumers for years.
I want you to take a look at this. Anti-trust officials have started investigating price fixing after they were tipped off. They've now slapped
21 companies with fines totaling $460 million. Now they range from small- scale producers to household giants like Switzerland's Nestle.
Now the producers agreed to force retailers to pay higher prices for salami, frankfurters, bratwurst, ham -- I'm getting hungry just going
through this. Now German meat products make up a big slice of Europe's biggest economy.
Get this: the industry employs about 60,000 people and generates revenue of about 16 billion euros, $22 billion. That is an incredible
slice of a sausage right there, a sausage cartel, who knew.
That's QUEST MEANS BUSINESS. I'm Paula Newton in New York. "THE SITUATION ROOM" with Wolf Blitzer live from Jerusalem starts right now.
(MUSIC PLAYING)
END
