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Quest Means Business
French Workers, Students, Truckers Continue Violent Strikes Leaving General Public Without Petrol; Britain's Cyber Strategy: The Threat To Businesses And Personal Security Are Assessed; Security Questions for Facebook; Brazil's Richest Man; Gold's Appeal
Aired October 18, 2010 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, CNN INT'L. ANCHOR, QUEST MEANS BUSINESS: We won't be choked. The French government calls a crisis meeting as fuel pumps run dry there.
Britain's cyber strategy: The threat to businesses and personal security are assessed.
And Citigroup gives banks a boost, but how will it fair in the Q25? It's back to help you make sense of the earnings season.
I'm Max Foster, in for Richard Quest. And this is QUEST MEANS BUSINESS.
Hello to you.
A crisis task force is meeting in France tonight as the country is held in the grip of a strike, from the oil refineries and the roads and the schoolrooms, and the streets, a million or more are protesting over pension reforms. And the disruption is about to enter a second week.
This is what motorists face at thousands of petrol stations across the country as pumps run dry. It is not just cars, half the flights due out from Orly Airport on Tuesday have been canceled. Other shortages are partly due to truck drivers who are staging go-slow protests on some major highways. They are stopping fuel from getting through.
And production has stopped at all of Frances 12 refineries, workers formed a human chain to stop anyone from getting in. Students set cars on fire and clashed with police. Officers fired teargas at the protestors. Jim Bittermann is following events across France. He joins us now from Paris with an update from there.
Hi, Jim.
JIM BITTERMANN, CNN SR. INT'L. CORRESPONDENT: Hi, Max. In fact, you pretty well summarized the situation this evening. Basically, I guess the one that has got the government the most worried is the fuel supply problems across the country. We heard just a short while ago that in fact it is not so much as a fuel supply as fuel distribution that is the problem.
There are-there is a sufficient quantity of oil and gasoline and other products for automobilist, that are in the terminals and in the depots across the country, but the problem is getting it from those terminals to the service stations. And in many cases they are being blocked by truckers who are on strike, who have joined this protest against the reform bill. Here is what a couple of the motorists we talked to earlier today had to say about the situation.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: And I really need to feed my car, and I can't because everybody is going to the fuel station.
UNIDENTIFIED MALE: It's very difficult to find a station with gasoline. I made perhaps 10 stations before finding one station with gasoline.
UNIDENTIFIED FEMALE (through translator): I think it is completely logical to strike. Everyone has the right to do it. But when it means blocking a whole population of workers, it's not great.
(END VIDEO CLIP)
BITTERMANN: And I think what that woman, there at the end expressed is the kind of thing that the government is gambling on. That sooner or later the French general public will come to terms with the strike and say, well, no it is not the government that is the problem, that has been causing the problem here, but rather the unions. And it hasn't happened yet, though, because in fact, right now, according to the latest public opinion polls, people would like to see the government renegotiate that pension reform bill, Max.
FOSTER: It is a country, of course, built on revolution, Jim. How likely is it that the government will respond to this, if it continues to get worse and there is gridlock across the country?
BITTERMANN: That is really the question, Max, is how bad is it going to get? And how many other unions will join? To what extent the students will be out there. We've seen these situations in the past, here, where there have been face offs and large social movements that have seized the country. 1995 is one that comes to mind. And the government was forced to back down because there was so much social unrest. Whether it will get to that point, the government is obviously gambling it is not going to get to that point.
Also, they are trying to get this pension reform bill through the upper house of the parliament, to the senate, by Wednesday. Hoping, I think, that in fact, that will take some of the steam out of this social action that we have been seeing. And that is not entirely clear either. Even after it has been cast, perhaps, there may still be some disputes in the streets.
So, we'll have to just see how this plays out. Tomorrow is a big strike day here. A number of other strikers will be joining those strikers that are already on. There will be demonstrations across the country. And then Wednesday is the vote. So we'll be watching this very closely over the next two days and the government will be, too, Max.
FOSTER: Big day also for Britain.
Thanks, Jim, for that.
Because Britain's austerity drive kicks into high gear this week. Making bearish announcements on Wednesday as well, as the government gets ready to reveal just how it will slash nearly $130 billion from its budget.
But two days from the big spending review, one area may be preparing for windfall. Would you believe? And that area is cyber security.
There are reports that cyber security will get a big boost suggesting that $800 million will go into the development of cyber defenses. That is because national security strategy has named cyber attacks as one of its top four priorities, so, MI5, MI6, GCHQ (ph). They are all expected to escape the worst of these because that threat from cyber security. Cyber threat is so bad.
The head of GCHQ said last week that government networks received 20,000 malicious e-mails per months. It is their job to monitor these things; 1,000 of those are deliberate attacks. It is believed that hackers can now target objects of national interest. Things like power stations and the national grid, much of which is in the private sector.
Now, the defense strategy is shifting it seems. Off the back of all of this. They are adapting to these new changes. They are going to have more mobile units, it's reported, intelligence gathering. There will be fewer tanks and jet tankers. Overall cuts of about 8 percent of the defense budget are expected, but that is less than the 10 to 20 percent that was originally mooted. Now Sir Malcolm Rifkind is chairman of the Intelligence and Security Committee, here in the U.K. It is a body that oversees Britain's security agency. He's also a former defense minister, former foreign minister, as well. I asked him how worried he is about the threat of cyber attacks.
(BEGIN VIDEOTAPE)
MALCOLM RIFKIND, CHMN., U.K. INTELLIGENCE & SECURITY CMTE.: There is increasing evidence that the technological capability exists, and could severely disrupt, if in the wrong hands, some of the vital parts of the national infrastructure of the United Kingdom, or America, France, Germany, other countries.
FOSTER: Is there sort of confirmed intelligence that suggests a cyber attack is more likely than another type of attack.
RIFKIND: Well, we know already it has been spelled out by the person who is in charge of our government communications headquarters who deals with these matters. He has said publically there have been, already, a substantial number of attacks on public sector institutions in the United Kingdom. And we know that has happened in other countries.
There was also some very, very important evidence of what is now possible. What is called the Stuxnet worm, which is a form of software, which we know now, because it has been acknowledged, has penetrated Iran's nuclear power station capability and disrupted some of the mechanisms. Now that we may welcome if it helps stop Iran going the nuclear route, but if that technology exists, then of course we must be alert to the fact that at some stage that kind of technology can be used against us. And, therefore, it is quite a high priority.
FOSTER: Have you got a sense from other countries that they are very concerned about this as well?
RIFKIND: Oh, it's not just a British problem. I mean, in the United States, for example, it has already been highlighted. I recall a conversation some months ago, I had with a senior intelligence person, in the Washington, when he said, what the United States is most concerned about is that because of cyber attack, that it could be the next Pearl Harbor, for the United States.
(CROSS TALK)
FOSTER: It is an extraordinary thing to say, isn't it?
RIFKIND: Well, it was a conversation-a remark in conversation. But it nevertheless emphasized that this is an increasing priority in the U.S. as well as in Western Europe.
FOSTER: And the other priority, in Europe, for example, U.K. particularly this week, looking at cutting government spending by a huge amount. Surely, the spending on the defense budget is as vulnerable as any other part of government spending. And this is not an area where the government is going to put more money.
RIFKIND: You've got two equations to this. First of all, any country, whether it is Britain or the United States, anywhere, in order to have an effective defense capability and the strategic position that can counteract terrorism, you have to have a successful economy, otherwise you can't afford the infrastructure required. So, because our deficit at the moment is in a very sorry state it is right for the government to be making major cuts in spending. The ministry of defense cannot avoid being involved in that process.
What appears to be emerging, we will see the final figures in the next couple of days, but what appears to be emerging is the ministry of defense will take a hit, but a lesser hit than most other government departments. But most important in terms of the conversation we have just been having about cyber threat, it is indeed possible, it is being reported, that there may be a very substantial increase in the resources being made available to help deal with cyber threat.
FOSTER: Which illustrates how concerned the government is about it.
RIFKIND: Yes, indeed, it does. And, of course, in any major exercise of this kind national security, the national interest, must be at the very forefront, even if you are under economic pressure. You don't have across the board, exactly the same cut in spending, regardless of the implications for your national security. You have to sometimes increase spending even if overall very big reductions are being made. That is part of the hard choices that governments have to make.
FOSTER: You'll be aware of concerns in America that cut backs in European spending on defense will leave them in a difficult position. They don't want the European governments to think that the Americans will step in, when there have been European cuts. How much political pressure do you think the Brits are under not to cut defense spending?
RIFKIND: Oh, if I may say so as, I'm not a member of the government.
FOSTER: Good insight (ph).
RIFKIND: So I can say what I'm about to remark. I shall imagine that when Hillary Clinton expressed concern about potential cuts in European defense expenditure, my guess is the British ministry of defense was very pleased to hear her say that. Because it helps-
FOSTER: It seems like the prime minister responded, as well.
(CROSS TALK)
RIFKIND: Well, I do think he had to respond. In the sense that I think he was already there. Prime minister has all made it clear right from the very beginning that he has no interest, nor has William Haig, any interest, as our foreign secretary, in seeing the shrinkage of the United Kingdom's international role. So, although there has been, for a long time been understandable concern in the United States about European levels of defense expenditure, the political and factual reality is that the United Kingdom and France have a level of defense spending, which while it might be less than the United States, is far higher than the rest of Europe. That is going to remain true even after all the cutting (ph) decisions have been implemented.
(END VIDEOTAPE)
FOSTER: Malcolm Rifkind speaking to me earlier.
Well, still ahead the return of the exclusive earnings season index we call the Q25. First up, banking giant Citigroup; will Citi pass our tough new Q25 test? The answer after the break.
(COMMERCIAL BREAK)
FOSTER: Well, look what they have roped me into this time. It is a business show and we're going to explain why. Earnings season is in full swing in the United States, of course. And this week more than 100 companies in the S&P 500 will report results.
That means it is the time, once again, for our exclusive quarterly earnings index. We call it the Q25, the index that helps you make sense of the earnings season. And earnings trends, with the help of balloons. Of course, this time they're going up, instead of down. Every quarter we pick 25 global firms representing a wide variety of business. And we decide whether the results merit a green balloon, or a red balloon. And this earning season, which things are a bit differently, because we are raising the bar to make it harder for companies to get passing grades as earnings tends overall have improved. We are calling it our tough love edition of the Q25.
Here are those very tough criteria. To get a green balloon a company must meet four out of five criteria. Those criteria, revenue growth of 5 percent a more, year-upon-year. A profit growth of 10 percent or more year-on-year; 5 percent quarter-over-quarter profit growth. And positive comments about the future, also a factor here, and signs that the company is expanding and hiring.
Well, today we begin with two companies. Citigroup, the third largest U.S. financial institution. The U.S. government still owns more than 10 percent of the company. We are also going to look at the European electronics giant Phillips, because both reported profits Monday. And they give a different sense of the picture for us, the economic picture.
Let's bring in Maggie Lake from New York to help hand out our first two balloons.
Maggie, remember these firms must meet our criteria, mustn't they? But there is a get out here, isn't there? What's that?
MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: That's right. Yes, there is a mercy round if one of us feels like saving a company that looks like it is going to get a red, and gets a green instead, Max. And it should be said, you are a brave man to stand there with the balloons. I'm glad it is you, and not me.
(LAUGHTER)
FOSTER: All right. We'll see what Richard makes of it when he does it later on in the week.
(LAUGHTER)
FOSTER: I just want to ask you, first of all, about Citi, as I get these balloons out of the way, because actually, you know from what I read today they've had a pretty good day. Are you up or down on them?
LAKE: Yeah, yeah, the stock is up over 4 percent and it is sort of, in some ways, leading the U.S. market here. And that first headline we all saw certainly does pass. They had year-over-year revenue growth. That was up very nicely, it swung from a big loss to a profit.
But once we started to dig a little deeper, I'm sorry to say, that was the only criteria that they managed to satisfy. If you look down the list, the rest of them, they didn't sort of pass the test. The revenue growth was down. That is something people are watching closely with financials. Quarter-on-quarter was down. They weren't particularly positive about the future. They are not doing any hiring.
So you know, when you look at the details in this, Max, I'm afraid Citi gets a red, despite the action we're seeing in the stock today.
FOSTER: Ah, it is tough this year, Maggie.
LAKE: It is.
FOSTER: I'm going to put them both there.
OK, we're going to talk about Phillips. This is really interesting, isn't it, because it has a different perspective? It takes in the consumer point of view very much. So that is going to be interesting in terms of this criteria as well. You can be tough on Phillips, you can also be generous. So how have you assessed it?
LAKE: Yes, this one is definitely a little bit of a closer call, Max. And they did quite well when it came to the earnings, and the revenue. They did-they passed the test on three of our criteria, all the number criteria, if you will; with profits, both year-over-year, and quarterly, revenue up. But where they failed and remember, you have got to get four.
When you were looking at all those indicators of the future, were they positive about the future? Did they up their guidance? No, they didn't. In fact they were very cautious. It seems they just don't really have a handle on that consumer. And there is some concerns in the healthcare area as well, with some of their medical supplies, when it comes to the health care plan in the U.S.
Hiring, R&D expansion, it is just not there yet. They don't have any certainty. So, in this new environment, in the past, this may have been a green. But in this edition, this time, I'm afraid this is a red as well.
FOSTER: Red as well. You wore the wrong jacket today, Maggie.
LAKE: I know, I did. I did. We'll have to see if this is the start of a trend. Not a great start out of the gate, it must be said, Max.
(LAUGHTER)
FOSTER: There we are, two reds then. And our kit (ph) works with a small amount of balloons. We'll see what Richard manages to do when he's got 25, or whatever. Thanks very much, Maggie. We are going to be back with you later on.
But these results from Citigroup are turning into a strong day for its stock price in the U.S., as Maggie was saying, Alison Kosik is tracking the numbers from the New York Stock Exchange. And she joins us now live.
What are traders are traders saying about banking stocks then today, Alison?
ALISON KOSIK, CNN FINANCIAL CORRESPONDENT: Yes, well, what is interesting, Max, is that you are right. You know, shares of Citi are doing really well. They are up almost 5 percent at this point. But traders are pretty critical about what the earnings report said. They are calling Citigroup's earnings smoke and mirrors. They are calling it creative accounting. Something similar, they say, they saw with JP Morgan Chase, as well.
Now, Citi, as you heard, beat estimates with a profit of more than $2 billion thanks to a drop in the amount of money that the bank set aside for losses on bad loans. But you know, from the trader's point of view, Max, because the money is not going to the rainy day fund and is being put in the asset column, these traders are calling it creative accounting, so, Citi can show better profit.
Traders are telling me that Citi's core business is down, equity trading is down, even though Citi shares are up today. Think about it. Citi shares are really stuck below the $5-mark. It is where they have been, Max, since early 2009. Think of it. It was trading above $40 a share before the crisis hit. So traders say, you know, they are concerned about this company. Because, you know, Citi is not really not showing much growth in their forecasts as well, Max.
FOSTER: OK, Alison, thank you very much. Back with you later in the week.
Now the skies over sunny California have been tinged with health harming smog for years. Richard has been finding out how industrial growth can also be green though.
(BEGIN VIDEOTAPE)
RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS (voice over): On "Future Cities", after the break, I'm in Los Angeles learning how the port is cleaning up its act and improving the environmental effect of the big ships.
(COMMERCIAL BREAK)
FOSTER: Now, sun, sea, sand, and shipping. There is more to California and the California coast than beaches, surfing and beautiful people. Together Los Angeles and Long Beach make the world's fifth largest port, generating vital jobs and income for the region. Prosperity used to come at a high price, but not anymore, as Richard reports in "Future Cities".
(BEGIN VIDEOTAPE)
QUEST (voice over): This is an industrial side to Los Angeles that few outsiders would recognize. The ports of Los Angeles and Long Beach side by side, on the Californian coastline. Lynchpins of the city's economy.
GERALDINE KNATZ, EXECUTIVE DIR., PORT OF LOS ANGELES: The Port of Los Angeles is the largest container port in the United States, combined with our neighbor the Port of Long Beach, about 45 percent of all the containerized goods coming into the United States come through this port complex.
We say, basically, one in eight people in Southern California are someway related to the port, in terms of their job, or employment.
QUEST: At the larger Port of Los Angeles they handle more than $200 billion of cargo each year. And 90 percent of it, of course, comes across the Pacific from the Far East.
(On camera): These ships arriving from Asia, are carrying a vast array of consumer goods, from furniture to clothing to electronic goods. And their arrival has an environmental impact, which the ports are now having to address.
MELISSA LIN PERRELLA, NATURAL RESOURCES DEFENSE COUNCIL: What a lot of people don't realize is that port operations are extremely dirty. The port-serving trucks, the locomotive, the ships that visit the port on a daily basis, create vast amounts of pollution. Here the Ports of L.A. and Long Beach produce more smog forming pollution than all 6 million cars in the Los Angeles region. And our local air quality agency has told us that communities near the ports suffer cancer risk that is 60 percent higher than the cancer risk experienced by other sin the Los Angeles region.
KNATZ: have been working on environmental programs since the `70s here at the Port of Los Angeles. But more recently, in the late 1990s, when all of sudden scientists discovered that there was a link between health issues and diesel particulates, the exhaust from internal combustion engines that use diesel fuel, like trucks. That really changed the playing field for us because we were dealing with an impact on human health.
QUEST: In the firing line of local communities, and the environmental lobby, litigation put a hold on the port's plans to expand its business.
KNATZ: We got to a point where for seven years we were not able to approve a new development project. In a big port like the Port of Los Angeles we can't take a seven-year break on investing in our infrastructure.
QUEST: For the City of Los Angeles, the only way to grow its port was to green its port.
MAYOR ANTONIO VILLARAIGOSA, LOS ANGELES: When I became Mayor in 2005, I said, hold it, this is the engine of the Southern California economy. Of course, we have to grow our port. But I also agreed that we have to implement technologies that will improve the air quality and the environmental risks and hazards that come with operating the port. So we put together a clean air action plan that was very aggressive. A five-year plan that I believe is the template for clean air efforts at ports around the world.
QUEST: Evidence of a change is all over the port. There is shore- side electrical power for ships unloading their cargo. Using their engines, they would ordinarily put a ton of pollution into the air each day.
A new hybrid tug boat patrols the harbor. And there has been major investment in renewable energy.
KNATZ: We're investing big in solar power in our port. You know, it's a right climate to do that. We have committed to creating 10 megawatts of power. And what we did is we put panels on our cruise terminal. We are going to put panels everything that is flat in this port.
QUEST: In the water itself, these sea lions have a much cleaner environment than their predecessors.
KATHRYN CURTIS, ENVIRONMENTAL SUP., PORT OF LOS ANGELES: There is anecdotal evidence from the 1940s that recreational vessels would actually traverse into the inner harbor with the express purpose of getting their hulls cleaned. That the water was so toxic at that time, that it basically killed all the barnacles and the marine life on the hulls of the ships. And now, it is dramatically improved. We have been monitoring dissolved oxygen in the harbor since the 1960s, that has shown a dramatic improvement, even in the back harbor area.
QUEST: Some of the port's most aggressive measures have been aimed at the 10,000 registered trucks that roll in and out of the port, and then across the country.
KEVIN MAGGAY, AIR QUALITY SUP., PORT OF LOS ANGELES: If you came to the port a couple of years ago, it would have been easy to find trucks that are 20, 30 years old. But through the Clean Truck Program, the port instituted a progressive ban of older trucks. And that progressive ban of older trucks has resulted in a reduction of 70 percent of all truck emissions with in the port.
QUEST: In the last couple of years, three major terminal expansion projects have been approved. It is testimony to the philosophy of green growth.
PERRELLA There is no question that local environmental groups want air quality to improve faster at the port, however, there is also no question that the port has really been a pioneer in sustainability. And it is the type of program that ports across the country, and around the world, should be looking at.
QUEST (On camera): The fact is the economies of California, and the United States, need the Ports of Los Angeles and Long Beach. They play a vital role in the economy. So now in the future, it is up to both these ports to prove that they can still grow and live in harmony with the places where they are based.
(END VIDEOTAPE)
FOSTER: Now, Facebook's added extras are adding extra trouble. Why the site's apps are at the center of new security allegations. And what Facebook can do to keep its giant network under control.
(COMMERCIAL BREAK)
FOSTER: Welcome back to you.
I'm Max Foster.
You're watching QUEST MEANS BUSINESS.
Let's take this opportunity to check the news headlines.
New intelligence about the world's most wanted man -- a senior NATO official says Osama bin Laden is not hiding in caves in Pakistan. It's now believed he and his deputy are living comfortably in houses in the country's northwest. The official says they're being protected by locals and members of Pakistani intelligence services. Pakistan denies harboring members of al Qaeda.
Disaster officials in the Philippines are confirming two deaths, as Typhoon Megi batters Northern Luzon. The strongest winds from the eye of the storm have passed, but the threats of landslides and flash floods remain since the storm could dump 300 millimeters of rain. Now, forecasters expect the storm and locally, as Typhoon Juan, to regain strength over the South China Sea.
Iraqi Prime Minister Nouri al-Maliki, desperate to keep his job, has been meeting with Iranian allies in Tehran. The controversial visit is part of his push to form a ruling coalition after nearly eight months of political limbo. Former Iraqi prime minister, Ayad Allawi, who leads a secular bloc, accused Iran of trying to destabilize the region.
Pope Benedict to Catholic priests who sexually abused children disfigured their ministry and caused the church's -- the church profound shame and regret. It was one of the strongest statements yet from the pope on the abuse scandal, but critics aren't satisfied. A spokeswoman for a victims' survivor group said the statement minimized and mischaracterized the crisis. Thousands of people have alleged abuse across Western Europe and the United States now.
Now, Facebook's 500 million users have another reason tonight to doubt the Web site's security. The social networking site is coming under secur -- under scrutiny after a "Wall Street Journal" report found some of the site's apps were revealing data about users.
Let's take a -- a closer look at how this works, then.
Well, apps are mainly operated by outside companies. But they do have access to Facebook user I.D.s, crucially. And that's a number assigned to each Facebook user. And "The Wall Street Journal" reviewed several apps, all of which were passing on user I.D.s to Internet tracking, advertising companies, for example. Some were using them to build up online profiles of people. And Facebook explicitly bans passing on user I.D.s.
Now, most of these apps are free, so this is one way the developer is making money. They basically sell on the information, which is so useful to marketing companies.
The three most popular apps. Among them are Farmville. This is just one of them. They are all highlighted in this report. Farmville, Texas Holdem Poker, Frontierville. They've got millions and millions of people signed up to them. Their information is going out there into the ether.
Facebook's response then, well, plans to introduce new systems are in place, they're saying, to dramatically limit the searching of user I.D.s. Facebook issued warnings to app developers on Monday not to disclose user information but says no evidence of any personal information was being misused has been found or any of that information been collected, actually. And Facebook says that media coverage of security breaches like this is a bit exaggerated.
But we're going to get more on this and where it takes Facebook from here with Dan Zarella.
He's a self-proclaimed social media scientist who -- who looks at social media marketing from a -- a scientific perspective.
He's joining me live from Boston.
Thank you very much, indeed.
I would just like to get your perspective from someone within the industry, as it were. This isn't a surprise to you, even though many people are shocked, I guess.
DAN ZARELLA, SOCIAL MEDIA EXPERT: No, it -- it's not really a surprise. I mean if you look at what "The Wall Street Journal" was reporting -- and you're right, they were reporting a bit dramatically about this -- mostly they were talking about Facebook I.D. numbers, which is an unidentifiable -- it's just a number that's assigned to you based on when you joined Facebook. And so, you know, applications have had access to this data for quite a while.
I think what "The Journal" has uncovered or what they have found is that some of those applications were using the Facebook I.D. numbers, which, again, is just an anonymous number -- they were providing that information to third parties, which is against Facebook's terms of service.
FOSTER: And what is that information used for?
ZARELLA: Well, one example that was actually cited in "The Wall Street Journal" example was Rapleaf, which is a company that sort of de- anonymizes social network identities, meaning they collect data from a bunch of different providers, namely, you know, applications like there are from other social networks. And then they tie those profiles together. So once you have a Facebook I.D. number, if you have a large database like what Rapleaf has, you can then potentially tie that to a -- a person's name, maybe their e-mail address, maybe their profiles in other social networks.
FOSTER: Are people being a bit naive here, do you think, to be a bit harsh in that they're getting something for free, they think, but nothing is for free in this world. These services, which many people enjoy, are only available because the information is being sold. That's where the money is coming from.
ZARELLA: Absolutely. I'm not sure that I would use the word naive, but I definitely think that, as you said, that people are getting services like Facebook for free and what's making them profitable is advertising. And, in fact, as a -- as a marketing speaker, which I speak to conferences and some people who are marketing and advertising, one of the biggest reasons I recommend Facebook advertising is because of the wealth of information available about users.
And, in fact, you know, advertising isn't going away. And with some lim -- limitations, the more data these networks give to advertisers about the users, the better targeted and the more valuable and the more useful the advertisements can be.
FOSTER: So whatever the economics here, the problem for Facebook is that they've given the impression to their users that they can choose their privacy settings. And when someone sets the highest privacy setting, they don't expect it to be reused.
So how does Facebook get out of this one?
ZARELLA: So I think they've been working on this one for a little while. They have made some improvements to their -- their privacy settings page. It is pretty complex, still. I think beyond what Facebook is doing, there's just a feature of the Internet called a refer URL, which means when you go from one page to another on the Web, the address of the previous page, of the first page, is transmitted to the second page. And because Facebook URLs contain that Facebook I.D., that URL -- that information is passed on to whatever page you're visiting from Facebook.
So that's really not necessarily a feature of Facebook. That's a feature of the Web. And you can, in most major browsers, there's a fairly obscure setting. You can go and you can turn off refers.
But for the most part, I think that's one of the ways in which this data can be leaked that's not in Facebook's control.
FOSTER: There's going to be some sort of clampdown though, isn't there?
What about the future of these apps?
Are they going to have to start charging if someone wants to play on Farmville?
Is there another way they can make money from it?
ZARELLA: Yes. I mean I -- I think that without breaking the rules and without providing the, you know, the restricted data to third party advertisers, they can still make money selling advertising. In fact, Farmville, which is made by Zynga, which is one of the largest Facebook application developers, was not terminated, was not suspended, didn't have their account suspended by Facebook for engaging in any of these practices, like one of the other ones, I believe it was called Lal Aps (ph), actually did get suspend for a little while because they were incorrectly using some of this data.
FOSTER: OK, Dan Zarella in Boston.
Thank you very much, indeed for your insight on that one.
ZARELLA: Thank you.
FOSTER: It's complicated, but important story today. It's everywhere on social media, as you can understand.
Now, Dan writes a blog analyzing social media marketing effectiveness. He did a fascinating piece, actually, looking at whether more people click on verbs or adjectives online. To find out, visit our Facebook page, where we've posted his findings, at Facebook.com/cnnquest.
Now, some believe the price of gold will continue on its record breaking run, while others are convinced the bubble is about to burst. When we return, a look at one of the world's most desired commodities and where the experts see it heading.
(COMMERCIAL BREAK)
FOSTER: Brazil's richest man says his country represents a gigantic opportunity and he's putting his money where his mouth is with a -- with a personal fortune of $27 billion. Eike Batista is currently the eighth richest man on the planet -- richest person on the planet even. He -- he made his money from mining, real estate and ship building. But most of his wealth comes from OGX, the oil and gas exploration company he founded just three years ago.
Batista sat down with our Shasta Darlington in Rio de Janeiro and they talked about the growing number of business opportunities that Brazil has to offer.
(BEGIN VIDEOTAPE)
SHASTA DARLINGTON, CNN CORRESPONDENT: What is your recipe for success?
How much is risk?
How much is luck?
How much is expertise?
And how much is location?
EIKE BATISTA, BRAZIL'S RICHEST MAN: Well, let's start with location. Location, yes, Brazil, because Brazil, you know, for the last 20 years, Brazil was very much involved in financial engineering, like -- like America. I think America is paying a big price for these excesses, you know, extra leveraging or excesses -- excessive leveraging.
Brazil has done a little bit the same, with one difference. We have done our TARP in '97. So we have a -- we went through a complete bank reform, you know. So and since then, you know, we have -- we've been having fiscal discipline, you know, trade surpluses. And now, after the second term of President Lula, we are 16 years into this really -- we have consolidated this process.
People have not invested in -- in the infrastructure, which is what we do in -- in efficient power generation, logistics like ports that we're building.
So, as I said, Brazil is a gigantic opportunity to arbitrage inefficiencies. Brazil's largest story if offshore and it's a trillion dollar story. So because of one -- one big monopoly having had control over this since 50 years ago, we de facto broke the Petrobras monopoly in 2007, when we stepped up. And the big surprise is, is that it's so rich because it -- it was really untapped.
DARLINGTON: Now tell me a little bit about this latest project. This morning, we went to visit the super port. It's under construction, an industrial complex. This is also a story about Brazil's relationship with China. And tell me a bit about this.
BATISTA: It's actually a mega logistic complex to allow companies finally to come to Brazil, manufacture things here. The Chinese connection may be linked to -- to -- to path (ph) commodities, right, to -- to lots of oil. Brazil will continue to export iron ore, ethanol...
DARLINGTON: Right.
BATISTA: Yes. And -- and for which we have designed the port to receive the largest ships in the world, you know, 400,000 ton China Nexus (ph).
DARLINGTON: Probably one of the biggest opportunities going forward is -- is the consumption in Brazil. That's the market you're looking at.
BATISTA: People want to participate in China because of a gigantic consumer market. People like -- like India because of the gigantic consumer market in India. The same story goes for Brazil, with one difference for Americans, is that we're very much like America, you know? Look at us. I mean I -- I -- people think I -- I'm a gringo in Brazil.
(LAUGHTER)
BATISTA: Here, you know, projects can -- can give you 15, 20 percent returns unleveraged. So this is the real world. And the gigantic pent up demand, because people need still to buy their first home, their first car, their first television.
DARLINGTON: Well, I've read that you're fairly superstitious.
Could you talk to me about that?
BATISTA: I use a lot the number 63, because it was the number that I used in my race horse and -- and I won the Brazilian championship, the American championship and the world championship with the 63 number. So most of my contracts, even though there's a larger number, at the end, there's 63, even if it's 63 cents. It doesn't matter.
DARLINGTON: Where is Eike Batista putting his money?
I want to put my money there, too.
What -- what's your -- what's your advice to investors?
Where should they put their money?
BATISTA: Brazil. I -- I have a -- I -- I'm betting full on Brazil for the next 10, 20 years.
(END VIDEO TAPE)
FOSTER: We'll let's take a look at Latin America's richest men, then, having spoken to him. Carlos Slim is number one on the Forbes list, and not just in Latin America, but the entire world, in fact. He made his $53 billion fortune largely in telecommunications.
Eike Batista, you just heard from there, is number two, with more than $27 billion.
Not bad, is it?
Brazilian Jorge Paulo Lemann is third among Latin America's richest men, with more than $11 billion. He is one of the largest shareholders -- shareholders of Anheuser-Busch InBev, the world's biggest brewer.
And Mexico's Ricardo Salinas Pliego is fourth, with more than $10 billion. His family owns Grupo Elektra, one of Mexico's largest electronics retailers. He also launched TV Azteca, the second largest producer of Spanish language television in the world, which is a growing business.
Meanwhile, we have our own South American at the Weather Center, but he's looking to the Philippines, I gather?
GUILLERMO ARDUINO, CNN METEOROLOGIST: Yes. We have a -- a big typhoon in here. And it's emerging from Luzon. But don't think that because the cyclone is leaving Luzon and the northern parts of the Philippines that the story is over for the Philippines, because, actually, is it going to pump very high waves into this coast over here. And it is, even though we did not have a landfall in Manila, that's a very densely populated area of Luzon.
You know we're getting the rain and we're getting the waves into this section. Where the second went through is not so densely populated. But now, we are seeing those effects, too.
So watch out and stay tuned, because the news is not going to be very good coming from the Philippines. We're sure about that.
The cyclone, while it was interacting with the land, there was weakening. Now, as it jumps into the waters of the South China Sea, it's going to remerge, reinvigorate and take general aim at Hainan and Vietnam.
You know what the problem is there?
That we have seen so much rain in that region that it's over saturated and we may see many problems.
On top of that -- this is where I was telling you before, you see the moisture coming into the are of Manila, where we have millions of people.
So when we talk about mountains, we say, yes, the likelihood of landslides, right?
Yes. But it has a positive aspect. When it interacts with rugged terrain it weakens the system.
Now, it delays or it -- it makes it move slower. And when it does so, it dumps a lot of rain over the same areas, so it can have a devastating effect on the mountains.
In essence, you know what, anything that happens with a cyclone is not good. We're going to see really, really bad news coming from there -- Max, do you know if Richard is in Rio right now or in Sao Paolo...
FOSTER: I don't know.
ARDUINO: I think he's in...
FOSTER: Do we know?
ARDUINO: No, he's in Brazil, right?
I think he's in Brazil. He -- he told me on Friday.
FOSTER: I'm just -- Brazil. Yes. He's in Brazil.
ARDUINO: Yes. Well, today, you know, when I see Rio de Janeiro and Sao Paolo, it's raining a little bit. But the week is looking very promising. So if Richard is watching -- I doubt it -- it's going to be nice. And also look at the temps, 22 for Rio. It's going to be fantastic. So that's pretty nice.
We're gradually moving into a warmer season there in South American, while here, in the Northern Hemisphere, in Europe and in North America, we are transitioning into cold weather. And that is what's going to happen to you, because, Max, tomorrow it's going to be chilly. We will see, probably, two degrees at night -- and tonight, too. And so we'll get an influx of cold conditions. It's going to be rainy. And then after that rain event, it's going to be better -- or you will see sunshine, but it's going to be cold -- back to you.
FOSTER: Yes, it had been bright, but very cold. There was a frost. But I think Richard made the right decision for his trip.
ARDUINO: For the first time.
(LAUGHTER)
FOSTER: OK. He'll be back tomorrow.
Thank you very much, Guillermo.
ARDUINO: Thanks.
FOSTER: We'll be back after a very short break.
(COMMERCIAL BREAK)
FOSTER: Now, the price of gold has bounced back from losses seen earlier in the day. It's currently trading at around $17 below the record high that we saw on Thursday last week.
Now, the precious metal moved higher after the dollar slipped back and Wall Street posted gains higher on the prospect of more Fed easing.
Now, in a quest to examine gold's appeal, both past and present, CNN's Felicia Taylor visited the new Tutankhamun exhibition in New York and she's also come back with a bit of a horse (ph) -- Felicia.
(LAUGHTER)
FELICIA TAYLOR, CNN CORRESPONDENT: Indeed, I have. I'm going to keep it for after the -- the story. But the truth is we've seen such a precipitous and rapid rise in gold that we wanted to find out exactly what it is about this precious metal that keeps its allure through literally thousands of years.
(BEGIN VIDEOTAPE)
FELICIA TAYLOR, CNN CORRESPONDENT (voice-over): For thousands of years, gold has been the object of adornment, crafted into sacred objects, the currency of choice and the metal of pharaohs and kings.
DAVID SILVERMAN, CURATOR, TUTANKHAMUN: THE GOLDEN AGE: Well, it is fairly rare. There's just a limited amount of it. So something being rare makes it more valuable. And then, like other very rare material, the -- the gold really doesn't change.
TAYLOR: The early Egyptians were the richest gold producing civilization of the ancient world. The young King Tutankhamun, known as the golden boy, was buried with shiny relics, surrounded by elements that would make him immortal.
SILVERMAN: All of the gods were also timeless. And they, therefore, assumed that the gods had skin and bones made of immutable metal, that is, gold.
TAYLOR: Mr. T, a 1980s icon, is the new face of Gold Promise, a Web site looking to purchase gold -- a man who has been a lover of gold for decades and self-professes to have 45 pounds of the shiny metal.
"MR. T.": See, because I'm a spiritual person, I understand that my gold, my wealth, everything I'm about is only good on this side of the grave. See, King Tutankhamun didn't know that when they buried this stuff with him, that -- that they didn't realize the possession is no good on the other side of the grave.
TAYLOR (on camera): The affluent, in times of economic trouble, often turn to gold as an investment, whether it's gold bars, gold coins or gold stocks, whatever it may be. And for centuries, world currencies -- any paper currency was actually backed by gold, like the dollar. It represented a real amount of gold.
But then in 1971, the dollar suffered from inflation and the gold standard, as it was called, was just done away with.
(voice-over): The weaker dollar now is, in part, fueling the run-up in gold, reaching record breaking levels. The price of gold has soared well over 100 percent since its low in 2005 and about 29 percent in just the last year.
JOE BATTIPAGLIA, STIFEL NICOLAUS: Countries are looking to diversify away from dollar-centric assets. And gold is a very good way to get that diversification.
TAYLOR: Gold is called a safe haven investment. But last month, financier George Soros, who has made a fortune in international currency trading, warned gold was in the ultimate bubble and the run could not last forever.
One technical analyst says gold won't represent a true bubble until it reaches $5,200 an ounce.
How soon?
No one knows. But the precious metal has always stood the test of time, market fluctuations or not.
(END VIDEO TAPE)
TAYLOR: You know what is interesting, the demand for gold has risen so high for even banks like JPMorgan Chase, they've reopened their gold vaults. That's something that hasn't been seen in about 20 years.
And I should also point out, if gold continues to rise at the current rate that it has been going, that's for the last couple of years, it would reach $5,200 by the year 2018. That's, again, if it goes at the current rate.
Now, we talked to a company called Gold Buyers. That's all they do is buy gold. And this is a kilo of gold. It is extraordinarily heavy. This alone is worth about $45,000 -- Max.
FOSTER: You can sort of see the appeal, can't you, Felicia, if you -- your investments are (INAUDIBLE)...
TAYLOR: Well, just kind of...
FOSTER: Exactly. You're obviously enjoying holding it.
But it's solid. It's real. It's something we can all identify with. It's glowing. You have two of them. You're loaded.
TAYLOR: I know it.
FOSTER: We're never going to see you again.
(LAUGHTER)
FOSTER: But you can see the appeal, because this is something that people can understand in this world of complex finance.
TAYLOR: And it doesn't change. I mean literally, the gold itself doesn't change. It doesn't tarnish, it doesn't color, it doesn't change its -- its weight. It is constant. And that's the beautiful thing about gold. And that's why it keeps its value for the centuries it has.
FOSTER: And do those lumps of gold come with our own security?
Are there people hidden around?
TAYLOR: Oh, there's a very large man waiting outside just in case I decided to run away with it.
FOSTER: Jump out the window.
OK, thanks very much, Felicia.
As we mentioned earlier, Richard has been on assignment in Brazil. To follow his travel Tweets from airplanes to hotels, do log onto Twitter.com/richardquest.
Also, do tune in on Wednesday, which will be when we'll be focusing on Britain's austerity drive. Both Richard and I will be in Westminster, the political district of London, all day. Chancellor George Osborne will unveil his cuts, worth 87 -- no, 83 billion pounds over the next four years -- well over $100 billion on Wednesday to all but wipe out by 2015 a budget deficit running close to 11 percent of the national output.
Richard and I will be in Westminster throughout the day and we'll bring you a special edition of QUEST MEANS BUSINESS, as well. It's a big test of how Western governments are going to deal with this debt crisis they all face.
We'll be right back with a recap of the stock market news this day.
(COMMERCIAL BREAK)
FOSTER: Now bank stocks lifted Europe's main markets higher this session thanks to pleasing results from Citigroup that we were talking about a littler earlier on with Maggie. Now, investors are -- are looking forward to a week of results from America's big lenders.
All the indices ended the day higher. Frankfurt's DAX is at its highest point now in more than two years, would you believe?
And in London, Lloyd's Banking Group was one of the top performers off the back of all of that. Deutsche Bank, Stock Gem (ph), Credit Avacol (ph), Credit Suisse -- they were all doing well today and the gains outweighed their loses in the mining sector that we had.
Here's what the big board is doing currently. It is up by .6 percent, 2/3 of 1 percent. So some positive news there from the banking sector helping things, as well.
Just before we go, time to show you a sneak peak of an interview with the president of Chile, Sebastian Pinera. He is counting -- on tour of Europe and he's sharing a little of that euphoria that followed the rescue of 33 men from the San Jose Mine.
He's been talking with Becky about the moment the first miner was brought to the surface.
(BEGIN VIDEO CLIP)
SEBASTIAN PINERA, CHILEAN PRESIDENT: It was Florencio Avalos, the first man to come out of the mine. I -- I really -- I will never forget that moment. It was so, so overwhelming. It was so impressive when he came out and -- and we shared a hug with him.
(END VIDEO TAPE)
FOSTER: Sebastian Pinera. Hear more from him in about an hour.
That's it from FOSTER MEANS BUSINESS.
"WORLD ONE" starts right now.
END
