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First Move with Julia Chatterley
Investors Caught In The Crossfire As The U.S. And China Chaff On Trade; Facebook's Messenger App Admits They Were Vulnerable To Hackers; Saudi Aramco Says Two Facilities Came Under Fire. Aired: 9-10a ET
Aired May 14, 2019 - 09:00 ET
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JULIA CHATTERLEY, CNN INTERNATIONAL HOST, FIRST MOVE: Live from the New York Stock Exchange, I'm Julia Chatterley. This is FIRST MOVE and here's
your need to know.
Counting the cost: Investors caught in the crossfire as the U.S. and China chaff on trade. WhatsApp-ened to encryption? Facebook's Messenger app
admits they were vulnerable to hackers. And a drone attack, Saudi Aramco says two facilities came under fire. It's only Tuesday. But let's make a
move.
Welcome to FIRST MOVE this Tuesday. Now, don't look now, but after the worst day for the financial markets here in the United States, as far as
stocks are concerned, at least, we are looking at a bit of a bounce here, some consolidation for U.S. futures.
Let me give you a look at what we're seeing right now. Now I am the last person to eagerly cite some perceived soothing words coming from President
Trump last night when he said we'll have a better picture of where these trade talk stand in three to four weeks. But if we're clutching at some
straws here, then this could be a sparse one.
Right now, as I mentioned the futures are in the green, but it is worth taking stock, I think of some of the moves that we saw in yesterday's
trading session. The Dow, the S&P falling some 2.4 percent; the NASDAQ, though, the tech heavy index, the worst performer, tumbling at 3.4 percent.
Bad enough in aggregates and in isolation, but within these indexes, some really significant losses.
Apple tumbling some 6 percent; once again, in bear market territory. I'm saying it's down some 20 percent from most recent highs. Remember the
optimism that we heard from Apple. Tim Cook, of course, saying that the approaching U.S.-China trade deal was helping sentiment.
One of the reasons I think that investors were holding on to, hopes that we were going to see a deal sometime in the near distant future. Not so after
the last week, of course. The chips certainly down for some of the chip stocks as well. Take a look at the Philadelphia Semiconductor Index that
fell some four and a half percent, too, outpacing the losses for the rest of the market.
Intel, Micron, of course, very much caught in the crossfire Monday, more broadly, a classic right to safety day. U.S. Treasuries, the safe haven
currencies all gained yields on the 10-year Treasury falling to some six- week lows and a repeat of the chatter that perhaps China is the largest foreign holder of U.S. Treasuries could ultimately use its very own trump
card here and dump some of those bonds things.
Yes, I'll believe that when I see it. Let's begin the drivers because Clare Sebastian joins us now. Clare, fantastic to have you back. Not just
some dramatic under performance in the tech stocks, but some of those domestic focused stocks, too, really coming under pressure in the last few
sessions.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, absolutely, Julia, if you think this trade war is going to be a problem for those blue chips, the
multinationals, it's going to be an even bigger problem for some of those smaller more U.S. focused stocks.
I want to pull up the Russell 2000. That's an index of smaller cap stocks. That fed much worse than the S&P 500. Yesterday down some 3.2 percent. I
know these are companies that will really struggle to swallow the cost of these tariffs themselves and they will equally struggle to shift production
to places outside of China. This is something that they are going to face much more than the big companies.
But look, still a resilient economy. There was a small business survey from April out today that showed a four-month high. The question is, how
long will that last amid this uncertainty? And we are expecting, as you say, a bit of a bounce this morning. But it's not going to make a dent in
the losses that we've seen over the last six trading sessions since President Trump first tweeted that he was going to raise that tariff,
right.
I want to bring up some of those more trade sensitive stocks that we've been talking about, the losses that they've seen over the last six sessions
are significant. Apple down some 12 percent, Boeing 10 percent. You talked about the chip makers, Intel down more than the rest, 13.5 percent.
You can see that it has caused some damage, the uncertainty and the escalation of the past six sessions.
CHATTERLEY: Yes, it's such a great point, Clare that you make as well. I mean, I was being a little bit facetious there about how closely we're
watching the President's tweets here. But you do get the sense that if he tweets something more positive, "I'm still very good friends with Xi," that
does have an impact on sentiment right now, because people are really clutching at the hope that a trade deal can be reached here because the
spillover effects are so huge.
What do we make of the rumors that perhaps China could use one leverage point here and dump some Treasuries? And, of course, there's going to be
an impact on their own holdings and their own portfolio of the ones that they still hold.
SEBASTIAN: Yes, this is the so-called nuclear option, Julia, and this came from a tweet yesterday from the editor-in-chief of the "Global Times," a
Chinese-English language and Chinese language newspaper.
[09:05:16] SEBASTIAN: He said yesterday that many Chinese scholars he said are discussing the possibility of dumping U.S. Treasuries and how to do it
specifically. That raised the specter again, as you say, of this nuclear option, but I think the market certainly doesn't appear to be pricing that
in at the moment.
Treasury yields fell yesterday as people, you know, sought safer assets. And then many people think this would actually be China shooting themselves
in the foot. Of course, if you're going to look for a place to park around a trillion dollars, there is no safer at the moment than U.S. Treasuries,
especially as U.S. growth continues to outpace the rest of the world.
CHATTERLEY: Yes, emphasis on the line "how to do it." Good luck with that, it would take several years, perhaps more. Clare Sebastian, thank
you so much for that. And again, great to have you back.
All right, let's move on to our second driver. More trouble for Facebook. This time, it's WhatsApp and potential vulnerabilities. Hackers were able
to inject phones with Israeli made spyware allowing them to access users' information. Hadas Gold is in Jerusalem for us.
Hadas, give us more details on this story, because the details here is something out of a movie, but it's real.
HADAS GOLD, CNN BUSINESS REPORTER: Julia, it is real and it is stunning, and not only for how these are this hack seemingly is being able to being
able to be perpetrated just through a single voice call made over WhatsApp, but also because WhatsApp has become known as the safest place to
communicate because it's supposed to have end-to-end encryption.
Now WhatsApp which is owned by Facebook said that they discovered this vulnerability both on its own and through the help of a human rights lawyer
who believes was targeted by this attempt and went to some researchers at the University of Toronto and they determined that it was likely connected
to NSO, which is that Israeli cyber company that you were talking about who created a platform called Pegasus, which has been used by governments
around the world allegedly to help them spy on human rights activists and on journalists in places like Saudi Arabia and Mexico.
Now, WhatsApp did not name NSO themselves, but CNN has spoken with a source familiar with the matter who did say that it was likely the NSO-made
software. And WhatsApp says in a statement, "We believe a select number of users were targeted through this vulnerability by an advanced cyber actor.
The attack has all the hallmarks of a private company that works with governments to deliver spyware that reportedly takes over the functions of
mobile phone operating systems."
Now, NSO has said, and as they said before in the past, that they just create the software that they then give to governments, and they tell the
governments it should only be used to fight terrorism and to fight crime.
NSO said in a statement, "Under no circumstances would NSO be involved in the operating or identifying a targets of its technology, which is solely
greeted by intelligence and law enforcement agencies."
Now, WhatsApp says that as soon as they discovered this vulnerability, they worked around the clock to fix it. Now, they're encouraging all WhatsApp
users to update the app. They said the update was released on Monday, and they said that update should fix that vulnerability -- Julia.
CHATTERLEY: I have to say, I've done it already, but this is fascinating for so many reasons. I mean, if we go back to this secretive Israeli
company, this software is so potent that the government regulates who they can give it to, who they can ultimately sell it to.
So what do we think happened here? And more specifically, who was targeted? Who do we think was targeted with this spyware?
GOLD: So Julia, all we know is that there was a human rights lawyer who was allegedly targeted with the spyware. We don't know by which country,
but what we do know is that the markings of this software seems to be linked to NSO which as we've said, has sold its technology to governments
like Saudi Arabia, like Mexico, and it's been in the news before for that software allegedly being used to target people that most of us wouldn't
consider terrorist or criminals, people like journalists or human rights activists.
And actually what you're saying about how this is something that's regulated by the government here in Israel, in fact, Amnesty International
just today said that they have filed a petition in the Tel Aviv District Court, asking Israel to strip NSO of its export license, because they say
this software violates human rights.
We'll see how that petition plays out. But clearly, this is something that's worrying for a lot of WhatsApp users and is obviously worrying for
WhatsApp and Facebook because it is hurting their reputation as the most secure platform on which to have conversations or to call people.
CHATTERLEY: Yes, I just wonder how much of a problem this is for Facebook and of course, for WhatsApp or on a really high government level. Big
questions being asked about who got access to this and how? Hadas Gold, great job. Thank you for that.
All right, let's move on now and over in Europe Bayer shares are down some 2 percent. They were ordered to pay more than $2 billion to a couple with
cancer. They blamed long-term exposure to the weed killer Roundup. Anna Stewart joins us now. Anna, it just gets more and more painful and more
and more complicated for Bayer as a result of an inherited problem, of course, from that Monsanto purchase. What more do we know about this
latest issue?
[09:10:27] ANNA STEWART, CNN REPORTER: This is the third verdict that has gone against Bayer in all of these cases, and it's the third time that they
have come out and said they will, of course appeal it.
And as usual, in a statement today, they continue to cite all the reports that they say supports the fact that glyphosate, which is the key
ingredient in Roundup is safe. They say that it's unlikely to cause cancer, according to the U.S. Environmental Protection Agency, also other
health regulators.
Unfortunately, that does go against reports from the World Health Organization, which actually has said that that ingredient is likely to
cause probable -- is likely a probable carcinogen. I think is how they put it.
So here we have today, the jury awarding $2 billion or a little more to a couple and that's likely to get reduced. But the big problem for the
investors here is that there's another more than 13,000 lawsuits in the U.S. waiting in the wings on this -- Julia.
CHATTERLEY: Yes, I mean, that's the eye opening figure here. And you and I have talked about this horrible for the individuals and the people
involved. But if you're multiplying $2 billion by 13,400 cases that are still open, you can kind of understand why Bayer's shareholders here are
basically in revolt and looking at this deal and going, "What on earth happened here?" And investors, of course, selling the stock.
STEWART: And we saw that huge backlash at the AGM a couple of weeks ago, when, you know, a majority of shareholders actually decided they would not
endorse the Board's actions from the last year. That was really one of a kind sort of moment really, and there are concerns here that activist
shareholders may get involved as well. They may try and split up the business in the months to come.
Bayer a really has to reassure their investors at this stage, they are trying, but with each case that goes against them, it's getting harder and
harder.
And it's interesting, you know, because they set aside costs for the legal costs and things. They haven't set any money aside for compensation costs.
And while that's goes to the fact that they're very confident that they will have all these cases overturned on appeal, I think with each one that
goes against them, investors are more and more concerned that they haven't put any aside yet for those damages.
CHATTERLEY: Yes, straight to the heart of it. Anna Stewart, thank you so much.
All right. Let me bring you up to speed now with some of the other stories that we're following around the world. Authorities say a police officer
was killed and a large number of pro-democracy protesters were injured in violence in the Sudanese capital on Monday. The ruling transitional
Military Council blames Monday's violence on group seeking to undermine, quote, "the goals of the revolution."
U.S. Secretary of State, Mike Pompeo was in Russia as we speak. He is holding talks with Foreign Minister Sergey Lavrov in the city of Sochi.
Pompeo's visit comes amid escalating tension between Washington and Moscow over Iran and Venezuela. But he kicked off the talks on an optimistic
note.
(BEGIN VIDEO CLIP)
MIKE POMPEO, U.S. SECRETARY OF STATE: I'm here today because President Trump is committed to improving this relationship. As I think you said, we
have differences. We -- each country will protect its own interests, look out for its own interests of its people. But it's not definitely we're
adversaries on every issue, and I hope that we can find places where we have a set of overlapping interests.
(END VIDEO CLIP)
CHATTERLEY: Secretary Pompeo will meet with President Putin later today.
Saudi Arabia says two pumping stations at state-owned company, Aramco have been attacked by armed drones. Saudi's Energy Minister says the drones
caused minor damage to one of the pumps, but it has seen oil prices lifting further in this session.
John Defterios joins us now. John, what more do we know about these events?
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Well, it's very interesting because we've had two days and two very different attacks,
Julia, against facilities owned and operated by rivals of Iran, of course, and this is why it's raised eyebrows in the market.
As you suggested, the target was a couple of pumping stations. Let's bring that map back up again. There's both eight and nine. They did hit pumping
station number eight. And as a precaution, Saudi Aramco has told me, they did shut down the pipeline.
And in the last two minutes, I just got a text message suggesting that they have now reopened it, but there was a fire. They said it did not impact
production or refining.
Now, this pipeline goes from the very lucrative fields of the eastern province of Saudi Arabia all the way across the country, to Yanbu on the
Red Sea, where they have a very large joint venture with the Chinese state operator there producing about 400,000 barrels a day.
It almost seems like a signal to the outside world again, like the Fujairah Port in the UAE and the tankers that were hit outside the UAE territorial
waters that nothing is out of reach right now. And I think that's why the market spiked up.
[09:15:10] DEFTERIOS: We're right near the high for the day, but we spiked up one and a half percent to take us above $71.00 a barrel. It's come off
those highs, as one strategist was suggesting to me, we don't see this damaging anybody's production, but it does send a very strong message again
-- Julia.
CHATTERLEY: John, it is quite interesting, isn't it? As you said, two events in two days, totally headline grabbing, and yet no real damage or
impact and the social media certainly wild with conspiracy stories about whether this is sabotage or perhaps self-sabotage, given the tensions in
the region right now?
DEFTERIOS: Yes, you raise a key question. And in fact, over the last hour, they are working the phones talking to different sources. One senior
energy strategist who wants to not be named here was saying this is actually perfectly well-orchestrated or very coincidental, and we're
scratching our heads trying to figure out what's going on.
So let's just go with the facts of what people are suggesting right now. The Saudi Energy Minister who was put up to speak yesterday, again, called
this an attack sabotage, again at play at their most precious facilities.
But the Ambassador to the UN from Iran told CNN a couple of hours ago that they're not in the business of doing any sabotage. The Foreign Minister of
Iran was suggesting they need an investigation and they blame the U.S. for escalating tensions in the region right now as they build up the military
presence in the Gulf, and this is why it is so worrying going forward.
Ironically, this pipeline by Saudi Arabia and the pumping stations that were attacked, built during the Iran-Iraq War to avoid the Strait of
Hormuz. And we saw the attacks there yesterday. This will go through the Red Sea on the other side. And again, the message is quite clear. And
these days, the 21st Century, nothing is out of reach for anybody who wants to create some havoc.
CHATTERLEY: Absolutely and sparks flying here. We have just got to be very cautious not to see a fire lit perhaps given the diplomatic tensions.
John Defterios, thank you so much for bringing us that story. And we'll talk in more detail about it later on in the show, too.
All right, moving on. Rubbish collection with a difference. I love this story. Plastic waste has been found at the deepest point of the ocean
floor. The American explorer Victor Vescovo made the discovery during a dive of nearly 11,000 meters to the bottom of the Pacific Ocean.
He was breaking what his team says is the record for the deepest ever manned sea dive and they are doing some rubbish collection while at it.
Good man.
All right, we're going to take a quick break here on FIRST MOVE, but still to come from high tech to some legal highs. Why Yahoo's former boss is
betting big on cannabis? We've got the details. Stay with us, you're with CNN.
(COMMERCIAL BREAK)
[09:20:52] CHATTERLEY: Welcome back to FIRST MOVE live on the floor at the New York Stock Exchange and I'm pleased to say we are seeing a bit more
green on the boards, pre-market compared to what we've seen for the last few sessions of the worst day, in fact, yesterday since January the third.
We've got tech futures indicating higher by some three quarters of one percent.
Apple also expected to bounce on the open. Remember that fell some 6 percent yesterday. So in no way right now clawing back the losses that
we've seen since Monday of last week. And those game-changing tweets, of course, on May the fifth. We are down around four to four and a half
percent across the board since Monday of last week.
Also this week, we are going to be watching the retail sector, too. Walmart and Macy's are set report Q1 earnings. Investors wanting details
on how they think they're going to be able to absorb the impact of higher tariffs here. The car makers are also in focus as well. So a whole host
of further details set to come this week.
Let's talk now about to the economy in these markets. Mark Zandi, chief economist at Moody's Analytics joins me now. Great to have you with us.
MARK ZANDI, CHIEF ECONOMIST, MOODY'S ANALYTICS: It's good to be with you.
CHATTERLEY: Now on April the second, you said a global recession is quote "highly likely" if we don't see a trade deal here within months. Are we
back to having those kind of conversations, do you think or do you think we're just in a continuation of the same kind of game playing over a trade
deal?
ZANDI: Well, I think it is game playing.
CHATTERLEY: Do you?
ZANDI: I do. I think it's brinkmanship. I think it looks like the economy is going to really suffer. Stock market down a few days like
yesterday. I think the President will figure out a way to come to some kind of arrangement with China.
But having said that, you know, the President is the President, he does things that no one anticipates. And so if he actually follows through and
escalates the war, then yes, recession becomes very likely.
CHATTERLEY: So what we've said, and what we said last week was actually the President is looking at record highs in the stock market. He takes
confidence and he cited that even this week, that 3.2 percent growth figure that we saw for the first quarter, he actually thinks that he is in a
pretty strong position here in order to push this and be really firm and going for a much firmer trade deal than perhaps investors were expecting,
in particular. You argue actually, that the growth isn't as strong as it looks. Walk me through why.
ZANDI: Yes, I mean -- you know, he thinks we are in 3 percent growth roll. We've got that 3.2 percent GDP number. That really was a fluke. It was a
bunch of technical factors that juiced things up. The underlying growth rate of the economy is 2 percent, which is exactly where we were, you know,
throughout this economic expanse, so nothing has changed.
You know, the economy is strong, no doubt, 3.6 percent unemployment rate. He is in a good bargaining position. But so are the Chinese. I mean, the
Chinese have used different kinds of stimulus to support their economy. It's growing well, also. And I think he is overestimating how much
leverage he has here over the Chinese. The Chinese are going to be tough in the negotiations.
CHATTERLEY: So are you saying actually that as far as you're concerned, the Chinese were in a very different place today than they were even four -
- three or four months ago, just because of the stimulus that they pumped into the economy?
ZANDI: Yes, you know, their economy was struggling a few months ago.
CHATTERLEY: Absolutely.
ZANDI: They juiced things up. They cut reserve for firemen. They cut taxes, their infrastructure program. Their economy is a lot stronger. And
they're doing this because they know they're in negotiations with President Trump.
So you know, they're going right at each other. I'm not sure who has the upper hand here. I think this is hurting everybody. At the end of the
day, he has got to figure a way out of this.
CHATTERLEY: Okay. You said, actually, we're tracking more like a 2 percent growth rate rather than the 3.2 percent that we saw. I mean the
President this week cited the trade war and said, "Look, actually, that's fueling the growth that we're seeing." And you could argue he's right, in
a way, because we did see a huge inventory build as companies, arguably were looking ahead to the imposition of tariffs and perhaps higher tariffs
and stockpiling goods.
ZANDI: That's a bizarre argument, isn't it?
CHATTERLEY: Well?
ZANDI: I mean, okay, so I stockpile and then once the war is over, then I don't stockpile and the growth goes right back down to 2 percent. You
know, is this sustainably stronger because of the trade war? The answer is absolutely not. In fact, it's just the opposite. This is hurting the
economy.
Look, businesses can navigate around a 10 percent tariff, right? They can eat some of it in their margin. They can pass a little bit of the cost to
the customer. They can source some of it. But 25 percent they can't. That changes their economic model, your business model. They've got to
make a big decision about investment.
[09:25:10] ZANDI: They're going to -- and they're not going to do anything until they have clarity around this war. So they're going to sit on their
hands. If they choose to on their hands, this economy is going to slow and he's going to see it.
CHATTERLEY: And for a company, just take the pain in the short term and hope that those things are unwound again versus pushing it through to the
consumer and denting your business that way, too. I mean, it's a double whammy.
ZANDI: Yes, I mean, 10 percent, you can kind of do it. It's not too much. I mean, you can manage. Twenty five percent is a big change, and they
can't manage that. So that's going to be a big hit to them.
CHATTERLEY: You know, if we're talking about tracking to 2020, because that's one of the other big considerations, particularly on the U.S. side,
one has to fight an election in 2020. President Xi doesn't. If you took a snapshot today of the growth environment, the economy in the United States,
and the labor, the strength in the labor market are they reasons for Trump to be able to win 2020?
ZANDI: Well, I think if the election were held today, he would have a pretty good chance of winning the election because the economy, you know,
the 3.6 percent unemployment is a 50 year-low.
CHATTERLEY: Yes.
ZANDI: And it's very low in the key swing states. Like I'm from Pennsylvania, and unemployment rate in Pennsylvania hit 3.9, which is the
lowest it has ever been.
So he has got the economy at his back at the moment. But a lot of things change. It can change between now and Election Day, you know, 18 months
from now, and one of the things that could change it is this trade war.
CHATTERLEY: Yes, and we know this is a consideration. Mark, always great to have you on the show.
ZANDI: Thank you.
CHATTERLEY: Mark Zandi, chief economist there at Moody's Analytics.
All right, we are going to count down now to the market open this Tuesday. We are looking as I mentioned at a more positive start to the session, but
hey, we're not going to make any bets on where we end this session. Of course, we will walk you through what we've seen in tech stocks in
particular. And we're also going to be talking cannabis investment, too. So don't move a muscle. You're with FIRST MOVE. Stay with us. The market
opens is next.
(COMMERCIAL BREAK)
[09:30:00] CHATTERLEY: Welcome back to FIRST MOVE. I'm Julia Chatterley live from the New York Stock Exchange, and that was the opening bell this
morning. Some smiling faces and the excitement and a higher open for stocks as expected after yesterday's trade related selloff.
We've also had President Trump tweeting today. He said, "When the time is right, we'll make a deal with China." He also urge a Fed rate cut to beat
China on trade. He may get that rate cut, but for reasons that he wasn't hoping for, I think -- but we do see growth weaken as a result of this, but
as you can see right now, six tenths of a percent higher for the NASDAQ that suffered most in yesterday's trading session.
A quick look at what we're seeing in the bond markets right now. We've got to the U.S. 10-year trading at just above that 2.40 level there after
dipping below there in Monday's trading session. It's still near a six- week low.
We did see the 10-year and the three-month part of the yield curve inverting. Remember that? A signal traditionally of economic weakness
ahead, but we know there's a lot of technicals going on in the bond market and demand of course to pushing those yields lower.
All right, let me walk you through some of the global movers that we're watching. Uber -- the ride hailing app is still around 17 percent below
that $45.00 IPO price where it launched, of course, on Monday. But right now it is up some two and three quarters of a percent. Shares had another
11 percent in Monday's session. That was just the second trading day.
The company facing a lot of investor skepticism about whether it will become profitable anytime soon. No promises of course from the company
itself.
Facebook also in focus, higher by five tenths of one percent. The social network is headed towards an agreement with the U.S. government over its
privacy policies making it subject to 20 years of oversight. The deal would resolve an investigation into whether the company violated a similar
consent pack from 2011.
Apple, a touch higher right now. It fell more than 5 percent, Monday after the Trump administration outlined plans to impose 25 percent tariffs on
$300 billion worth of Chinese goods. It is well and truly caught in the crossfire, this one. However, President Trump sounded optimistic late
Monday saying he has a feeling the China trade deal will be quote, "very successful."
All right, let's talk through some of the more details -- greater detail -- on that tech selloff. Samuel Burke joins me now. Samuel, let's talk Apple
specifically right now because there were two things yesterday. Fine, they are caught in the crossfire as far as future growth opportunities in China
is concerned. But there was also an antitrust ruling as well that that had an impact. So talk us through both things.
SAMUEL BURKE, CNN BUSINESS TECHNOLOGY CORRESPONDENT: As the trade war goes, so goes Apple and when the trade war is going up, so is Apple. When
it is going down, there goes Apple as well. And keep in mind that Apple has largely been kept safe from the trade war, because Tim Cook was able to
go in and negotiate with Donald Trump according to many reports and keep USB devices -- any device that plugs in via USB -- safe from the trade war,
and some worry that that may not always be there, if indeed, at some point, Trump has to tariff - put tariffs on all goods coming from China.
And then when we flip to the other side of the Apple coin, you have a move from the Supreme Court, which would put Apple right in the firing line for
an antimonopoly suit. Basically, much like we've seen here in Europe, a lot of people in United States are saying it's not fair that Apple is the
App Store. There are no other app stores available for Apple.
And so they're both setting the prices in the sense that if Apple raises prices than any other app using the App Store, like Spotify then has to
raise their prices. But at the same time, their competitors, no.
This Supreme Court case only made it so that the path is clear to do that. Apple is saying, "You can't sue us. We're just an intermediary between the
apps and the people." The Supreme Court said, "Not so fast." So this will play out over the next few years. But it's really looking like high tide
is finally coming in for Apple in both the U.S. and Europe.
CHATTERLEY: High tide -- I like it. Now, I want to circle back. Because one of the things we were talking about yesterday on the show was the fact
that actually China was pretty restrained in its response to the United States' imposition of higher tariffs and that they could crack down on
companies investing in China.
Well, the reverse is true. Talk me through what's going on with the dating app, Grindr. Because this is a really interesting one for me here, too.
BURKE: This is a fascinating story in case your audience doesn't know Grindr. This is a very popular app with gay men and this is an app that
was sold to China some months ago. Now, the sale has been complete.
But now the U.S. Treasury has come in and said we're worried about sensitive data about gay men could be used against them if this company is
storing this information and it even has information such as HIV status, which is often shared on these types of apps that they would have this
information, storing it on Chinese servers may make it so that the Chinese government could come in and get this -- this is all suspicion by the way,
this isn't based on any evidence that we've seen, or these companies might have to turn over this type of data.
[09:35:21] BURKE: So the U.S. Treasury is saying, "We want you to sell Grindr back to an American company." And this Chinese company has made an
agreement to do that by June of 2020. And in the meantime, agreed not to hand over any data.
Of course, we have no way of knowing how that would be enforced. But it is incredible to see how the U.S. much in the way they've gone against Huawei
is now doing something similar with a Chinese company and just as you pointed out, there is a lot of restraint being showed on the Chinese side
as we don't see reciprocal actions on these types of fronts yet.
CHATTERLEY: High Tide for inward investment into the United States and China, too, if I had to guess. Samuel Burke, thank you so much for that.
All right, China, of course and the U.S. are bound together and cannot afford to turn their backs on each other, so says Eric Schmidt, the former
chairman of Alphabet and former CEO of Google, of course.
I spoke to him this week, and asked whether the two nations can coexist even work together at the forefront of technology. Listen in.
(BEGIN VIDEO CLIP)
ERIC SCHMIDT, FORMER CEO, GOOGLE: We need to coexist because the outcome of a total split of return or a return to a Cold War would be horrific for
everybody. These economies are completely interlinked.
So we need to find ways to hold our principles and yet continue to collaborate. Any mechanism that we can do, which involves sharing the good
parts of the technology, while making sure that it's not misused are what we should be doing.
(END VIDEO CLIP)
CHATTERLEY: And we will bring you the rest of that interview tomorrow. And we'll be digging into Schmidt's new book, "Trillion Dollar Coach: The
leadership Handbook of Silicon Valley's Bill Campbell." It's a brilliant book.
All right, the trade war is raging back and forth with tech bosses caught squarely in the middle. Let's bring one in now. Carol Bartz is former CEO
of Yahoo, and chair of cannabis company, Caliva and joins us now. Great to have you with us.
CAROL BARTZ, FOMER CEO OF YAHOO: Thank you.
CHATTERLEY: So Eric Schmidt there was just saying, look, we've got no choice, you know, we have to work together, we have to collaborate with
China. What's your view, because technology is clearly at the heart of the battle going on right now between the United States and China over trade?
BARTZ: We've tried to collaborate for many years around intellectual property, which was stolen by droves in China. We've all -- I think, as
tech companies known that there was a certain time when it would get harder and harder, when they wanted to be in an industry we were in. So sure, we
have to work harder. But I don't hold on as much hope as Eric does.
CHATTERLEY: Do you think that what the President is doing right now in trying to crack down and trying to protect the intellectual property, the
innovation that's being created in the United States has to be done? And actually, the timing is imperative?
BARTZ: Oh, it absolutely has to be done. It should have been done presidents ago. Now, just how to do it? I'm not a political expert, but I
at least applaud them bringing up the topic, everybody else just said, "Well, you know, it'll get better." It never got better.
CHATTERLEY: So even if you're a company like Apple, for example, and you have a huge growth opportunity in China, you have to accept this. This has
to be done. It kind of balancing the two things, it's tough.
BARTZ: Everybody, when they first enter China has a huge growth opportunity, until China decides that they really want to have that market.
They want to sell their own cell phones into China, their own various software products and hardware products, and then they slowly take over.
So I don't think it should be a big surprise anybody as to how tariffs play a role that's for economists.
CHATTERLEY: Yes, but eyes wide open when you go into China and try to sell --
BARTZ: Totally wide open. If you think that you're going to be in there forever growing forever and take the top spot, you're deluding yourself.
CHATTERLEY: Now some investors perhaps were deluding themselves over the hopeful valuation of Uber, of course that IPO'ed on Friday, and have had a
bit of a rude awakening. Do you think that that's an idiosyncratic thing, the challenges with one particular company, or do you think there's
something more systemic going on with these unicorns now coming to market?
There was so much optimism and hype about potential valuations, and now, perhaps some of the hype in these areas is coming out?
BARTZ: Well, it's a new experience for the market for those of us in Silicon Valley to watch these companies get so large before going public.
That just wasn't the case.
And so therefore, a lot of drama can ensue, and therefore these valuations do get pretty high. There's mad money following it. And then, you know,
you have a few character problems like Uber did and it's not that big a surprise that it wasn't the multi, you know --
CHATTERLEY: Yes, another reality check.
BARTZ: Exactly. I don't know that it's done anything but say, perhaps there's an intern between being a multi-unicorn or whatever they're calling
them and just when we normally used to go public, but I wouldn't call Uber out as the beginning of a new problem.
[09:40:29] CHATTERLEY: No, so don't know. I call it an Uber-con. Let's talk about Caliva because you're now pushing into cannabis. Huge
investment. You're very excited. Tell me how you doing this strategically because you're being very selective, I think in where the investments are
being made, and how.
BARTZ: Well, I got interested in cannabis because of bad knees and so while of course, the biggest part of cannabis is still what we call the fun
for you. There's an emerging part wellness and health which helps pain, anxiety, sleep. I mean, I used to take 12 Advil a day, I don't take any
now. I used I was hooked on Ambien, I don't take any now.
And so when I discovered these products, I said I've got a I've got to find a company. And luckily, I was invited to Caliva and found -- you know,
they've got PhD scientists running, they're growing. They've got PhD chemists running their labs. These are full blown technical companies in a
brand new market, well, not brand new, it's 12,000 years old, but --
CHATTERLEY: Yes.
BARTZ: But certainly. Exactly. I don't know why we stopped along the way, but in a market that is very controversial, but yet very important.
CHATTERLEY: Is legalization at the Federal level important here or are there still huge opportunities for investors, for individual investors to
get involved here irrespective of Federal level legalization, which may or may not come in at some point in the future?
BARTZ: Well, Federal level like you say will just make things easier in banking and mailing and that sort of thing. But California is the largest
cannabis market in the world, it's 38 percent of the market. It's already been proven that people are finding -- are using it responsibly and is
making a difference. So Federal legislation would help us a lot, but we can charge ahead without it.
CHATTERLEY: Yes, charging ahead without it. Carol, we're going to get you back on to talk Caliva specifically because this is a huge growth area, and
I know our viewers are very interested. But we are going to wrap up there. Carol Bartz, fantastic to have you with us.
BARTZ: Thank you.
CHATTERLEY: All right, some news now just into CNN. We're hearing about a 7.5 magnitude earthquake striking one of the smaller islands of Papua New
Guinea. That is according to the US Geographical Survey. Officials say it struck at a depth of 11.5 kilometers. We will bring you more updates as we
get them. But for now, we'll be right back.
(COMMERCIAL BREAK)
[09:46:10] CHATTERLEY: Welcome back to FIRST MOVE. Oil prices rising after Saudi Arabia said drones loaded with explosives attacked two oil
pumping stations at state-owned accompany, Saudi Aramco. Both Brent and WTI are up as you can see in this session, around some one percent.
Saudi's Energy Minister is calling the latest incident a quote, "act of terrorism" targeting the world's oil supply. It comes after Saudi Arabia
reported Monday that two of its oil tankers were damaged in a sabotage attack off the coast of the UAE.
All right, let's talk this through with Jan Stuart. He is global energy economist at Cornerstone Macro, and he joins us now. Fantastic to have you
on the show.
JAN STUART, GLOBAL ENERGY ECONOMIST, CORNERSTONE MACRO: Good morning.
CHATTERLEY: What do you make of this?
STUART: Never boring.
CHATTERLEY: No.
STUART: It is honestly never boring. It is making the market clearly more volatile. It stands against the backdrop of intensifying worries around
global trade for that demands overall, and this market is saying until something actually happens, actually disappears in the market, until that
time, it's a percent here or a percent there.
CHATTERLEY: I mean, it's funny, isn't it? We've been through a period now where we've seen waivers that we're applied to eight countries to allow
them to export Iranian oil removed by the United States. There was some confusion over whether or whether or not that would happen given past
experience. That's now kicked. There is also speculation that perhaps this isn't sabotage and that there's perhaps other people involved here and
I'll be cautious what I say.
STUART: It's creating a catastrophe and --
CHATTERLEY: Tension sparks.
STUART: True. No, but what sort of facts, right? Yesterday attacks on four commercial vessels at the debunking Port of Fujairah which
significantly is outside of the Strait of Hormuz. Today, they were claimed by the Hooties in Yemen.
CHATTERLEY: Rebels, yes.
STUART: Then today, these pump station attacks, not just a pipeline, the two pump stations, Station 8 and Station 9 with a fire. The pump stations
are a little bit more difficult to fix and repair than just a pipe. Right? So what this thing is, my humble opinion is a warning. It's a warning.
It said, we can reach you. Don't push us too hard. This is going to cost you, too. These are warning signals, and the market doesn't know really
how to treat that, but warning signals are better off heeding them.
CHATTERLEY: What are you advising in that case, if it is a warning signal? And as you say, I mean, we've seen oil up some one to two percent, but as
you point out, the other big story here is the ongoing inability, it seems right now of the U.S. and China to reach some kind of trade deal and that
has global growth implications.
So arguably, you would see oil prices coming down in that regard. You said, these are two counter forces here.
STUART: So what we are advising is narrowly on the oil market, be prepared for more volatility. Be prepared for prices to slowly grind higher,
seasonal reasons, the demand worries about trade and deteriorating efficiency of the global economy. That would have an effect on 4Q 2020.
Gives it time to compound, right?
In the meantime, most economies are ironically beginning to do better -- Germany, Japan, China -- the U.S. is on wonderful tier, right. So for now,
demand is just fine. Supply is not. And that is slowly pushing prices up.
The big picture is like when these pieces go talk and not walk down this road ...
CHATTERLEY: Not escalate.
STUART: ... to really know where this is going.
CHATTERLEY: Good luck with that. What about Venezuela here, too, because this is another flashpoint potentially?
STUART: Venezuela falls into the category of policy error, right? Why push that hard for someone who clearly cannot muster enough support
domestically from within the military to actually get into power? Why push that? The only good thing about Venezuela situation is that America is
doing nothing on its own. It is this in concert with a great many countries and they're doing everything very methodically.
[09:50:18] STUART: The policy area really is only why trigger those oil sanctions that quickly? Why push Guaido that quickly? Why bank on him on
getting the trucks across the bridge or getting enough with military support to turn sides? There are policy areas there.
CHATTERLEY: The wild card here, perhaps there are two of them. One is the President's ability to literally tweet and tell the Saudis to increase oil
supply when he gets concerned that the oil price is high. But it's true. I mean, you're laughing, but it's true.
All the fact that, you know, the United States has become such a dominant player in the energy markets with its own production here.
STUART: We knew that, right. We knew when we heard years ago, the first people in Washington uttered the phrase "energy dominance." What on earth
is wrong with you? Right? So let's crush everything. That's great, really. And then you think that you can just tweet and the Saudis will
just listen? I don't think so. This is little more complicated than yourself.
CHATTERLEY: I'd say it's a lot more complicated. The bottom line is more volatility and that's what you're -- that's the message you're giving, Jan.
Fantastic to have on. Jan Stuart there from Cornerstone Macro.
STUART: Thank you.
CHATTERLEY: Thank you. Up next on FIRST MOVE, when a risky asset becomes a safe haven. We look at why investors are hedging their bets perhaps on
Bitcoin and Beyond Meat. That's after the break. Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. Disney has taken full control of us only streaming service Hulu, with its 28 million customers. Co-owner
Comcast has agreed to sell its 33 percent stake to Disney in five years' time. Under the terms the deal, Disney takes over Comcast's voting rights
though immediately.
Now, amid all the market volatility, it's unsurprising perhaps that investors have been looking to move money into safer havens. What may be
surprising though is just what those safe havens and I use the term pretty loosely. Paula La Monica joins us now with all the details. Bitcoin,
Paul, walk me through this.
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, it is a bit surprising, Julia that when you looked at what was plunging yesterday, the entire market the
things that were rising, it was Bitcoin along with classic safe havens like utilities, REITs and gold.
I think that there are a couple of reasons why Bitcoin might be getting a bounce. I mean, keep in mind that Bitcoin has surged this year. You know,
now, it's above 8,000. You know, I've talked to people who suggested that, you know, you're seeing more institutional interest. There's talk that
Fidelity may launch Bitcoin trading and that is something for institutional investors that would be a very positive sign to have this validation from
one of the world's largest asset managers. I think that's one reason that's driving Bitcoin higher.
[09:55:08] LA MONICA: But it's strange how the tide has turned so quickly. Bitcoin plunged at the end of last year when the broader market was in
turmoil. And now it's been viewed as a safe haven, even though a lot of the fundamentals around Bitcoin haven't really changed all that much since
December.
CHATTERLEY: And that's the point. I think we have to show a longer term chart there as well, because that year-to-date looks really pretty, but a
bit longer, and it looks a little bit more exciting perhaps.
LA MONICA: Yes, 8,000 is nice, but not for the people who got caught buying around 20,000 in December 2017.
CHATTERLEY: And therein lies the key. Longer term perspective required. Paula La Monica, thank you so much for joining us this morning.
All right, let me give you a look once again at the broader markets and what we're seeing. Remember a publishing session yesterday, a bit of a
bounce back. Some four tenths of one percent high, but we have lost a bit of ground in the last 10 to 15 minutes. So watch the markets and we will
do that for you.
We're back in a couple of hours' time on "The Express," but for now, that's it for the show. I'm Julia Chatterley. You've been watching FIRST MOVE.
Time to go make yours.
(COMMERCIAL BREAK)
[10:00:00]
END
