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First Move with Julia Chatterley
China Threatening To Withhold Minerals Essential To The U.S. Tech Sector; A Former Purdue Pharma Exec Giving A Stark Warning About The Drug, OxyContin; Amazon Releases A Delete Function For Voice Recordings For Alexa; Governor Asa Hutchinson (R-AR) Talks About Arkansas Being Open for Business. Aired: 9-10a ET
Aired May 29, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, FIRST MOVE: Live from the New York Stock Exchange, I'm Julia Chatterley. This is FIRST MOVE and here's
your need to know. A rare Earth's battle. China threatening to withhold minerals essential to the U.S. tech sector. The next Pablo Escobar. A
former Purdue Pharma exec giving a stark warning about the drug, OxyContin and Alexa's amnesia. Amazon releases a delete function for voice
recordings. It's Wednesday, let's make a move.
Welcome once again to FIRST MOVE and I can tell you, it is another day in the trade war trenches for us, First Movers. Take a look at what we're
seeing in terms of the global market action.
Right now, U.S. futures, a weaker global stocks, as you can see in the red after Tuesday's late day selloff in the United States. We did see stocks
closing here in the U.S. at session lows, the blue chips bore the brunt with the Dow falling almost one percent, stocks fell. Of course, bond
prices rose. That flight to quality yields.
On the U.S. 10-year bond dropping into a 19-month low and are down once again in this session. Today, expect to hear those renewed questions, the
debate about the inverted yield curve where we see shorter term interest rates higher for the longer term rates. Is that sending a recessionary
signal about the U.S. economy?
Well, I can tell you Morgan Stanley thinks perhaps it does. It is placing the U.S. economy on recession watch saying the economic outlook is quote
"deteriorating" and U.S. profits are increasingly at risk, just echoing concerns even by the European Central Bank that U.S. stocks might be
overvalued here.
You know, it's a concern that we've been raising on FIRST MOVE, I think repeatedly over the past few weeks. Also U.S. investors appear to be
increasingly getting with the picture here, too. New numbers showing investors sinking cash into money market funds. Again, going into bonds
and cash instruments.
This is the largest clip in a year, almost $100 billion, in fact, over the past four weeks. There is though, a ray of sunshine, and I do want to
bring you that, too.
The U.S. Treasury once again saying that China isn't or at least refusing to label China as a currency manipulator here. But again, watch that seven
level in dollar-yuan because if that breaks, I think all bets are off here. The big worry, of course remains the threat that I mentioned that just
moments ago, that Chinese threat to limit exports of rare earth minerals. Why do we care?
Well, you can ask the question. They are critical to production of consumer electronics and military equipment in particular here in the
United States. So watch Apple and some of the defense names like Boeing, like Lockheed Martin in the session today.
The Chinese media have said that Beijing is ready to play the rare earths card here. The official "People's Daily," of course, the mouthpiece you
could argue for the Chinese government put it this way, "Don't say we didn't warn you."
That's why we're going to kick off the drivers. Let's get to it. Paul La Monica joins us live. Paul, great to have you with us. This clearly
spooked investors overnight. I think and the statistic here, from the idea of weaponizing these rare earth minerals or metals are quite alarming
because China supplies what? Eighty percent of the imports to the United States.
PAUL LA MONICA, CNN BUSINESS REPORTER: Exactly. These are minerals, Julia, that are notoriously difficult to mine, not necessarily hard to
find. So that's really where the rare part comes into play, and a lot of them are coming from China.
So I think, you know, many investors may have to take a break from their stock charts to bust out their old periodic table of elements and look at
things like Cerium and others that are -- Europium -- all of these weird exotic minerals that are very important and crucial parts of automobiles,
defense systems, phones and other electronics. So there could be a big ripple effect on U.S. manufacturers if China were to restrict imports of
some of these minerals, or the U.S. would have to try and find other places to mine them and that might be a little difficult to do.
CHATTERLEY: Yes, it's just not something that you can substitute, at least in the short to medium term, which is one of the questions and it just
adds, I think, to the nervousness that we saw, Paul.
I mentioned yesterday, what we saw in the session in the pullback further of bond yields globally, but also here in the United States. I mean, we're
now looking at approaching pricing two rate cuts from the Federal Reserve. Are we getting a bit ahead of ourselves here as investors or are these
concerns valid because again, different messages from the equity markets versus the bond markets here?
[09:05:11] LA MONICA: Yes, here's the troubling thing as I see it, Julia. I think that investors aren't ahead of themselves to be worried about a
possible slowdown in the U.S. economy as the effects of stimulus fade.
The problem, though, is that the job market is still pretty healthy and we are starting to see some small signs of inflation creep in as well. So at
the same time that bond yields are falling, you know, wages have been rising, you could have this potentially stagflation sort of environment,
which would really be difficult because then the Feds hands are tied, what do they do? Do they cut rates to satisfy the stock market and probably
President Trump in order to juice the economy again? Because there are concerns about slowing growth?
Or do they have to worry more about wage pressures and inflation and potentially have raise rates? I think probably that's the reason why maybe
it's premature to think that the Fed is going to do anything. They may sit tight until we get the pendulum swinging more dramatically in one
direction, either global recession fears or inflation fears, and then they'll act accordingly, depending on which one seems to be the more
dominant economic theme.
CHATTERLEY: Yes, you raise such a great point and we're going to discuss this later on in the show. But I think for now, sit on your hands as far
as the Federal Reserve is concerned, and just watch the data incredibly closely. Paul La Monica, thank you so much for that.
Sticking with the theme here, too, for our second driver using the strength of an entire nation to come after a private company. What am I talking
about? Well, this was the words of Huawei's chief legal officer as the company files a lawsuit against the actions of the United States.
Sherisse Pham is in Shenzhen. Sherisse, great to have you with us. It is a private company, but the United States is arguing that Huawei is
effectively the eyes and the ears of the Chinese Communist Party here and that's the challenge. What good does this lawsuit do? Is it really
symbolic only?
SHERISSE PHAM, CNN BUSINESS REPORTER: It is mostly symbolic and greetings from a windy balcony here in Shenzhen. And maybe these are the winds of
change that are coming for the trade war, we will have to see.
But Huawei, really on the defense today here in Shenzhen, Julia, really on the -- like some heated rhetoric and some fiery language coming from the
executives today calling the United States a bully, which is of course language that echoes the Ministry of Foreign Affairs.
So making it look a little bit like the company is in lockstep with Beijing, but also moving forward with this lawsuit that they filed in March
against the National Defense Authorization Act, which essentially bars Federal agencies from doing business with Huawei.
But of course, that lawsuit was filed before this Commerce Department, export ban on the company and that is the much bigger elephant in the room.
So Huawei was hitting back against that, calling that illegal actions from the United States and saying, "Look, if you are going to hurt us and damage
us, it will also hurt you as well."
"It will not only hurt the 170 countries where we operate and our three billion customers, it will also possibly hurt U.S. customers," because of
course rural carriers use Huawei equipment in their networks and having to strip Huawei from those networks and use more expensive equipment will
result probably in higher bills for Americans.
So we are looking forward then I guess, to the next things that are going to come out of this company -- Julia, yes, sorry. I'm so sorry. It's a
little bit windy here.
CHATTERLEY: No, no, you are making some great points. I was just going to say I feel like it's a question of timing here because President Trump has
already suggested that Huawei could see some kind of carve out as a result of a broader trade deal here. The question is, how long does that trade
deal take versus how long Huawei can exist without being able to source U.S. components and products and the damage that then does on the business
more broadly?
How long can they go, do you think without seeing the business materially impacted as a result of these restrictions? Because I think the message
from Huawei right now is pretty confused.
PHAM: Well, Huawei is saying that they have been preparing for this for a long time for years, they said, and they've been stockpiling supplies and
diversifying their supply chain in the event that this would happen.
Analysts are a little bit divided on how long they have. I have seen ranges from three months to one year to keep the production lines going and
to continue rolling out their 5G equipment and their smartphones.
But of course, that was before I think people started combing through the fine prints of this Commerce Department export ban because you can't
replace software on a dime.
So this export ban includes software from Google and it also includes software from American companies that provide updates to the 5G base
stations that Huawei is selling to customers as part of these 5G contracts around the world. So this will be crippling not only for Huawei, they
don't have a long time to last. Most analysts are saying a long term ban would be crippling for the company, but it would also be crippling for the
global rollout likely of 5G.
[09:10:18] CHATTERLEY: Yes, the winds of change blowing swiftly, Sherisse. I hope you're hanging on there. Get inside. And thank you so much for
joining us on the show. As always, Sherisse Pham there.
All right, another challenged company. Now to the oil giant, Exxon Mobil bracing for a challenging annual meeting today. Activist investors want
more action from the company to tackle things like climate change. Matt Egan has been following this story for us.
I do believe that these guys versus the Europeans have always had -- I thought, easier ride as far as climate change, as far as shifting their
businesses to a more environmentally friendly products as far as energy is concerned. What are we expecting to hear from investors and shareholders
today, Matt?
MATT EGAN, CNN BUSINESS LEAD WRITER: So we're expecting another battle between big oil and climate activists. But as you're alluding to, unlike
in Europe, U.S. oil companies, they're not really giving much ground here.
In fact, Exxon won a big victory long before today's annual shareholder meeting in Dallas. Exxon successfully persuaded the SEC to block a
shareholder resolution that would have called on the company to disclose greenhouse gas emissions targets in line with the Paris Climate Accord.
Now, Exxon opposed that measure, even though you know, we actually saw BP's Board support the same or very similar proposal. Ninety nine percent of BP
shareholders voted in favor of it, and Royal Dutch Shell, they adopted an even more aggressive measure.
Now, these shareholder proposals are being put forth by a group called the Climate Action 100. It's a coalition of institutional investors with
almost $10 trillion in assets. Now, these shareholders at Exxon are now supporting a separate proposal that would call for Exxon to separate the
CEO and Chairman titles at the next CEO transition.
Now Exxon, of course opposes this move. They say that their board has enough independent directors already, and that they are doing enough on
climate risk.
Chevron is also holding an annual shareholder meeting today, and it also opposes a similar proposal that would call for the company to separate the
CEO and Chairman titles and also calls for the creation of a Board level committee on climate risk.
Now, you know, I think, Julia, all of this shows this really stark divide between Europe and the United States. European oil majors, they've been
much more open to engaging with shareholders on climate risk. They're also more open to diversifying their business models away from fossil fuels a
bit and pushing into fossil fuels and wind and even electric car charging. Exxon and Chevron haven't done that.
So Julia, I think no matter how these votes land today, it's clear that this battle is nowhere near over.
CHATTERLEY: Yes, and I just think renewables in the end offer lower shareholder return. So it's about being a profit maximizer. I wonder
whether it's a legacy issue, going back to the BP oil spill and the sensitivities that exists around some of the European names. It's a
fascinating one. Matt Egan, thank you so much for that.
All right, we are going to move on to the next driver and a stunning warning about a powerful pain killing opioid, OxyContin. Purdue Pharma's
former President has warned that he risked being seen as, "The Pablo Escobar of the new millennium," I quote. Jean Casarez joins us now from
Norman, Oklahoma.
Jean, thank you for joining us on the show again. I know you're watching a separate court case that's going on right now in Oklahoma. But the biggest
story here and the challenge with the opioid crisis here remains a very pivotal one.
Just explain where this warning came from relating to the former President of Purdue Pharma.
JEAN CASAREZ, CNN CORRESPONDENT: Right. You know, there are so many cases in this country that are opioid cases. And we are here in Norman,
Oklahoma, because it's the first one to actually go to trial, which in a civil case is really very rare because normally they do settle.
That deposition that you just talked about where it was Mr. Sackler, a 74- year-old physician that undertook a deposition, where he said that a former friend of his had said to him, "You know what? You're the Escobar of the
industry." That is for a case out of Ohio, many states have merged together along with tribal nations.
So that is for that case, it has nothing to do with Johnson & Johnson, but saying that this trial, Purdue Pharma settled in March for $270 million, so
they're no longer a part of this case. But in the reality, they are a part of this case, because I can't tell you how many times the state of Oklahoma
focused on them yesterday in relation to Johnson & Johnson.
[09:15:12] CASAREZ: Because Johnson and Johnson procured the raw narcotic ingredients and sold them to major pharmaceuticals to make their own opioid
prescription medication.
And so they're saying that Johnson & Johnson was behind the curtain, and the others were in front of the curtain, but they collaborated together,
they marketed it together. And they were in a sense as one.
I want you to listen to a little bit of that opening statement yesterday, from the state of Oklahoma.
(BEGIN VIDEO CLIP)
BRED BECKWORTH, ATTORNEY FOR OKLAHOMA ATTORNEY GENERAL'S OFFICE: There's a very simple truth with opiates. If you over supply, people will die.
The reason we have an opioid crisis is that simple.
(END VIDEO CLIP)
CASAREZ: Now, Johnson & Johnson and Jansen is really focused on limiting this trial to the two medications that they produced and sold right here in
Oklahoma, because they brought out yesterday that at the University of Oklahoma's Health Sciences Center, that never has anyone been admitted for
addiction taking their drugs or more or less died from their drugs.
The state of Oklahoma says you can't limit it to just their medications. This was a big picture. They sold those products to all the other
companies, and therefore it is the big picture, not the small picture and Johnson & Johnson created that public nuisance right here also in the state
of Oklahoma.
CHATTERLEY: Yes, Jean, you make some great points about the importance of the supply chain here and the linkages, but also the fact that it's this
one, the first one that goes to trial. The key that unlocks and has implications for all the other trials to come. We'll see. Jean Casarez
there. Thank you so much for bringing us up-to-date with that story.
All right, let's move on and let me bring you up to speed with some of the other news headlines that we are watching around the world.
Almost 40 million Americans remain under threat from extreme weather in the coming hours a day after a tornado destroyed dozens of homes in the state
of Kansas. Severe weather has been battering the U.S. heartland for 13 days now.
The man many see as the front runner to be Britain's next Prime Minister has been ordered to appear in court. Boris Johnson is accused of lying to
the public in the run up to the Brexit referendum back in 2016 specifically, by claiming E.U. membership cost the U.K. quote "350 million
pounds per week."
The figure was emblazoned on a bus Johnson used during the campaign. The former Mayor of London is a leading contender to replace Theresa May as
Prime Minister when she steps down next month. His legal team calls the accusations a political stunt.
Over to Israel now and Prime Minister Benjamin Netanyahu Party has agreed to merge with a smaller center right party. The move boosts their voter
base. This has Prime Minister Netanyahu less than a day to form a new coalition. Missing the deadline could lead to fresh elections being
called.
All right, we're going to take a quick break here on FIRST MOVE. But still to come, up in the air. When will the 737 MAX be able to fly again?
Boeing CEO speaks. But does he provide any answers?
And Alexa, lose your memory. Amazon smart speaker gets a case of amnesia in a bid to improve privacy.
We will have all the details next. Stay with CNN.
(COMMERCIAL BREAK)
[09:21:47] CHATTERLEY: Welcome back to the floor of the New York Stock Exchange and FIRST MOVE where I am joined by Kristina Hooper. She is chief
global market strategist at Invesco. Great to have you with us.
KRISTINA HOOPER, CHIEF GLOBAL MARKET STRATEGIST, INVESCO: Great to be here.
CHATTERLEY: Tell me what you're thinking of what we're seeing here. I mean, bond yields coming down globally, but particularly here in the United
States and a bit of stock maintenance, too. What are we seeing here?
HOOPER: Well, what are we seeing is concerns about global growth, really, that have been driven by the realization that this U.S.-China trade war is
getting worse and worse.
CHATTERLEY: I mean, you said it when you were last on with me, you said look, you don't really believe a trade deal here is going to happen without
much fight. If the President is pushing for it, then it is going to take time to reach a deal here.
HOOPER: And actually, I think we're at the point now where I have diminished expectations that we will see any kind of deal unless the U.S.
is willing to capitulate and take very minor concessions around the narrowing of a trade deficit from China. So expect this to be more
acrimonious going forward.
CHATTERLEY: What's the likelihood that he does? Because we know this President watches the stock market very closely. He watches the data very
closely, too. Is that what it's going to take for him to go, "Okay, we just need to reach a deal here," do you think?
HOOPER: I think ultimately, it's going to be a political calculation. Which is going to be better for reelection in 2020? Because actually a
U.S.-China trade more polls very well, although it hurts the economy. And so I think that will ultimately be the determination.
CHATTERLEY: What's in the price here? I mean, we're now what? Five percent off the recent highs for the S&P 500. I mean, bond markets are
telling us that there's a recession warning, I think, flashing here. What do you think is in the price as far as expectations of some kind of a
future trade deal? Is the more downside to come here at the stocks?
HOOPER: I think there's certainly more downside to come, and it can always be aggravated by program trading. It's very hard to actually price in
exactly what a trade war means for economic growth, but we know that the longer it lasts, the longer we have trade policy uncertainty, economic
policy uncertainty, business investment declines. And so that can have an impact for a while.
But again, it's very hard to quantify, so usually we see an overreaction, and then something of a correction over time. We are not yet to the
overreaction phase. But maybe that will happen today.
CHATTERLEY: What about the overreaction phase in the bond market? Because we're starting to look at pricing, a second rate cut now from the Federal
Reserve in 2019. I know you said one cutback is a possibility. What do we think when the market starts to price in two rate cuts?
HOOPER: Well, certainly the bond market is, I think, a more accurate gauge of fear than the VIX and so it is showing accurately the fear in the
market. And of course, also suggests that we could see two rate hikes. I think we are likely to see -- yes, sorry, two cuts.
CHATTERLEY: Just to be clear.
HOOPER: That was a Freudian slip. So we're definitely likely to see one rate cut just based on the breakdown in the U.S.-Sino trade relationship.
But certainly, too, it is possible if we see a deterioration in the economic data, we're starting to see that because even in the U.S., the
PMIs have been disappointing.
The ISM Manufacturing Index, the New Order Sub Index actually, the last reading was very disappointing. So we want to follow that closely.
Certainly, there's reason for concern. I also do believe though that we're likely to get reassuring language from the Fed.
[09:25:10] HOOPER: Richard Clarida speaks tomorrow and he could provide some reassurances. Keep in mind the FOM Siemen had stumped, but that
meeting occurred before this breakdown.
CHATTERLEY: I mean, we spoke to Eric Rosengren of the Boston Fed last week. And he said, "Look, you know, this is one of the big risks out
there, and we're watching it very, very closely."
You mentioned something that was very fascinating to me. You said, it's a better reflection. The bond market is a better reflection of the fear. Is
it a better reflection of the fundamentals, though? And to your point about the PMIs? What do you think here?
And the other point to make, I think, as well, I mean, we were talking about this earlier on in the show, tariffs are inflationary? What's the
risk if the Fed wants to cut rates, thinks it needs to, but as we see the price impact of tariffs coming in, the inflation numbers aren't allowing
them to do so?
HOOPER: Well, I think the Fed is not as worried about inflation. It thinks that we're in a relatively low inflation environment. And in fact,
so much so that they're talking about raising inflation targets as well. I don't think that's going to be an immediate concern.
I think much more the immediate concern is, what kind of negative impact will trade wars have on economic growth? And so from that perspective, the
bond market is pricing in fear and certainly, to a certain extent, fundamentals. I think it's also pricing in maybe not the worst case
scenario, but a worst case scenario than the more optimistic stock market.
CHATTERLEY: Yes, and we'll see how long that continues. Kristina, always a pleasure to have you on the show. Thank you. Kristina Hooper there, the
chief global market strategist at Invesco. You heard it there, some cautiousness clearly in what we're seeing from U.S. futures as we get to
countdown to the market open this morning.
Plenty more to come, including a look at what the CEO of Boeing is saying, too. Stay with us. More to come on FIRST MOVE.
(COMMERCIAL BREAK)
[09:30:02] CHATTERLEY: Welcome back to FIRST MOVE live from the Stock Exchange. That was the opening bell in Wednesday's session and we were
expecting stocks to come under pressure here in the United States once again, continuation of Tuesday's late day slide of course, and that's
exactly what we're getting -- a lot of concerning headlines as we've been discussing throughout the show.
The big fear that China will perhaps retaliate with a ban on rare earth exports, that hitting consumer electronic products here in the United
States. The message from Beijing state media saying, "Don't say we didn't warn you."
Also, a warning from Morgan Stanley, too, concerned about the risk of a recession here in the United States, too. All of these things feeding in
more broadly to what we're seeing in the market. Some flight to safety in bond markets, pressure on the energy markets, too. A weak day for oil as
you can see both Brent and WTI off some two percent.
WTI in fact is off more than 8 percent this month with a number of those in the market saying that we may have seen the highs for 2019 as far as oil
prices are concerned.
All right, let's bring it back to the stock markets now and the global movers that we're watching in the session.
Kraft Heinz under pressure again. The shares closed down more than 6 percent in the session on Tuesday hitting a fresh record low. It appears
the company got caught in a downdraft of shares of JM Smucker, Kellogg and Campbell Soups also falling and made a decline in demand for packaged food
goods, down to further 0.8 of a percent in the session this morning.
Apple also in focus, Citi slashing its share price target for Apple to $205.00 based on concerns about iPhone sales in China amid the broader
trade war. The shares have now fallen more than 11 percent. This month, Apple is on track to post its worst month of the year. So far down a
further one percent in the session so far.
Dick's Sporting Goods, bucking the broader trend, Q1 earnings and revenues beating expectations. They reported a net income of $57.5 million. The
company also key, raised its four-year outlook with the same store sales flat for the quarter, but it still beat estimates of a 1.3 percent decline,
up some 3 percent in the session. So actually significantly outperforming the broader equity markets here in the U.S.
All right, let's hone in on Boeing because I mentioned that before the market open. The CEO has been talking about the potential return of the
Max 737 jets to the skies. Clare Sebastian was in the room listening.
Clare, what did he have to say? Any signs of a potential timeline here to get them back up there?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: No, Julia. No exact timeline although he did say they are working with the FAA on an hourly and daily
basis to get this done. No clear timeline though, as I said, but some other interesting nugget. He talked about some of the difficult questions
that Boeing has been facing about the 737 MAX.
He talked about the certification process by the FAA that's come under a lot of scrutiny that's why they delegated some of the authority to Boeing's
own engineers. He said he has a lot of confidence in that process. But he is working with the FAA as they review it and he has set up an internal
Board within Boeing to review that as well.
And he did say that some of those learning opportunities might trickle down to other planes, like the 777X, which is their wide body jet that is set
for service in 2020.
He also did talk about working with customers of the 737 MAX who have been disrupted by the grounding of that fleet and he said, in terms of
compensation, cash might be part of the solution. So that was an interesting nugget.
But long term today, what I found really interesting is he is still bullish on this plane. He says that he doesn't see any change long term to the
demand and the production for the 737 MAX. So he was -- you know, he was clearly trying to restore confidence in this plane, but ultimately, he is
confident long term that it will still be a driving force for customers.
CHATTERLEY: I think he has to say that though. This is such a pivotal part of their order book, of the story, even at this stage with the
concerns of regulators, of pilots, even customers here. I don't really think he's got a choice, Clare?
SEBASTIAN: Absolutely not. I mean, it was a constant refrain, Julia, throughout this speech, which was almost an hour long, I'd say about 75
percent of it dedicated to the 737 MAX.
He said repeatedly when asked about the company's finances, about guidance going forward that that they are laser focused at the moment in getting the
737 back up and running and doing so safely.
He talked in detail as well that how that's going to work. They've obviously got this fleet grounded. They are having to store the planes.
He said every plane that returns to the sky is going to be its own individual event based on tail number. They have teams deployed with every
plane, but obviously there are confidence issues.
[09:35:10] SEBASTIAN: We don't know how the global regulators are going to deal with this, whether they're going to require more training, which could
push out the timeline of its return to the skies even further.
CHATTERLEY: Yes, I'll give you one guess. Clare Sebastian, great job. Thank you so much for following that for us.
All right, so I want to move on now to the big FinTech Deal of the Week, of course, that's between the Global Payments firm and Total System Services.
Now, this is the third time we've seen a tight consolidation in this sector, so far this year. But this wasn't a panic move. I spoke to the
CEO, Jack Sloan yesterday, and he said, "Look, these two companies have been talking for a long while now. And there's all sorts of complementary
aspects to this deal."
What's fascinating to me, though, is how he pointed out the differences in technology in this space between Asia, between Europe and what we've got
even here in the United States. And that lies at the heart of where the growth opportunities are. Listen in.
(BEGIN VIDEOTAPE)
JEFF SLOAN, CEO, GLOBAL PAYMENTS: The more ways you can pay for things we like to say, you can pay anywhere you like anytime of the day on any device
and that's good news for us. And that's really the way to think about our business.
CHATTERLEY: You talk about 60 percent of the business being tech-enabled, what does that mean in practice?
SLOAN: it means we're really selling a technology solution. So we're selling software to the merchant where we are partnering with a software
company to sell payments to the merchant. And the opposite of that is really relationship based and that means we're getting a warm referral from
a bank, for example, but it's not based on a technology sale. It's based on a relationship sale.
And that business for us today is about 60 percent of the company, it is technology-enabled. We think we can take that to 75 percent or 80 percent
of the company over the next few years. We're always going to have a very good relationship base because this is a people based business, every
technology company is.
But I think technology is going to continue to grow faster than the rest with a massive acceptance.
CHATTERLEY: Is that where the growth opportunity is ultimately? I mean, you've described facial recognition technology over in Asia and whether or
not that comes to the United States, but you're doing other things in Europe as well.
I mean, even as a Londoner, I know that you're involved in the technology even just to get into the subway stations there. There's all sorts of
advanced technology that we have even in Europe that isn't used in the United States. Is that an opportunity here for you, too?
SLOAN: You're absolutely right. So you're finally seeing contactless here in the United States, after many years of it leading in Europe with the
tube and also, by the way, in Asia Pacific. So we have the tube and Global Payments in the U.K. and we have many transit systems around the world, and
you're finally seeing that come here.
I think the reason for that is most of our payment systems in the United States are very efficient already. So most of these solutions are looking
to solve a problem. But if it's really not broken, it's very hard for these solutions to get penetration into an existing base.
Another way to think about how we grow is exposure to faster growth markets. So we've gone into most recently, Mexico in a partnership with
HSBC, went to Austria and continental Europe with Ulster Bank a number of years ago. That's the other way we grow our business.
CHATTERLEY: Is there enough space, given the consolidation that we're seeing for all of the big players now that have been created to grow to
make headway? Or is this a fierce battle that will end up with even further consolidation, do you think?
SLOAN: Well, it's always a dog fight every day and a scale business consolidation is a natural element of a scale business. But I'd say if you
back up -- it's at $1.9 trillion -- our business is the number I saw today from McKinsey. So there's plenty of room, I think, for everyone to grow.
And largely who we're all taking share from is cash and check. The way you think about our business is the same source tailwind that we have going
into any given year is 200 to 300 basis points, because there's less cash and check, and there's more electronic payments, and then add that to GDP
and you should be growing at a pretty good rate.
So I think there's plenty of avenues of growth. What I like about where we are is that we're distinctive in our distribution and we're selling unique
technologies and that's the way to think about it.
CHATTERLEY: And that's what's unique to your business, in particular versus all the others that actually you've enhanced that with this deal.
SLOAN: Yes, so the key thing on this transaction is that we're a pure play. So unlike some of our competitors and the more recent deals, they're
also selling mortgages, they are also selling bank accounts. Those may be very fine businesses, but we're a pure play and we're only selling
payments.
The reason that's important is in every business, when you go to make a capital decision for budgeting every year, something has got to give, you
can only fund a certain number of things. Ours is all funding payments.
We don't have to worry about GM funding a mortgage business it can fund payments this year. So I think having critical mass at scale and payments,
therefore is a really important bet.
CHATTERLEY: Do you think that makes you less exposed to business cycles, in particular, the fact that you're a pure play? I think people will
always spend money, even if they're incrementally in each transaction spending less.
SLOAN: So 40 percent of our revenue we think today is pretty economically resilient. And by that, I mean we have every Burger King in the United
States, every Tim Hortons in Canada, we have a lot of gas stations in the United States, but it's not based on the price of gas. It's just based on
buying gas.
CHATTERLEY: It is transactions.
SLOAN: It's transactions. It's like spend a few cents per gallon, that kind of thing. We have 40,000 K through 12 schools with 30 Universities in
the United States using our software.
So as a result, we think we're pretty resilient because as long as your child is going to a K through 12 school, as long as your son or daughter is
going to a university, as long as you're getting food at Burger King and one would argue, in a bad economic environment, you're more likely to go to
quick service restaurants than not. In those environments, I know things will be fine for our business.
(END VIDEOTAPE)
[09:40:19] CHATTERLEY: It's a fascinating industry and a fascinating sector. Wait and watch for further consolidation to come, I think.
All right, we're going to take a quick break here on the FIRST MOVE. Plenty more to come. Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Just in to CNN, the man in charge of the Russian investigation and the man, of course, who stayed silent about this investigation so far
is about to make a statement.
Special Counsel Robert Mueller will speak at 11:00 a.m. Eastern Time today. It will be on the investigation into Russian interference into the 2016
presidential election, and CNN will of course, bring that to you as it begins. That at 11:00 a.m. Eastern, a statement finally from Bob Mueller,
of course at the heart and the head of the Russian investigation in to interference in the 2016 election.
All right. Let's move on. The U.S. state of Arkansas is open for business. That's the message from the Governor, Asa Hutchinson. It's a
pivotal time for the state which has seen exports of agricultural products to China damaged by the ongoing tariff war.
I sat down with the Governor to discuss what the state is doing to diversify and to attract global investors.
(BEGIN VIDEO CLIP)
ASA HUTCHINSON, (R-AR), GOVERNOR: Well, we're in New York to talk about the exciting things happening in Arkansas in terms of foreign direct
investment, in terms of company expansions. In terms of what our legislature just finished, we lowered taxes both corporate taxes,
individually income taxes. We raised teacher pay.
So we accomplished so much and we're taking advantage of that opportunity to showcase what we've done and hopefully attract more investment in
Arkansas creating over 90,000 jobs. It's a great opportunity and a great business climate.
[09:50:10] CHATTERLEY: And just to make the point, you run a balanced budget. So you are actually finding the money from other areas? It's not
just about extra spending?
HUTCHINSON: Oh, absolutely not. That's something that's mandated under our Constitution is. In Arkansas, we balance the budget and we've actually
started creating a surplus, so we can put some of that in savings, create a long term reserve fund.
The economy might not stay strong forever, so we want to make sure we manage it carefully, and that's an attraction in and of itself to business
because they don't want to be in an unstable environment, you know, where the state goes into deficit spending, and there's pension fund issues.
So we make sure we manage it carefully. In Arkansas, it's stable, it's consistent, and it can be relied upon.
CHATTERLEY: And you're achieving success. I mean, even just in the last two months, you've attracted millions of dollars' worth of investment.
Talk me through this and where is this money coming from?
HUTCHINSON: Well, we just had a series of announcements. Part of it is our Aerial Defense Industry that's expanding in South Arkansas from Aerojet
Rocketdyne and other companies. And then you've also got to Czech Republic Company, CZ, that's investing in Arkansas, building a manufacturing
facility for the first time that they have in North America. They are going to be right there in Arkansas.
So all of these combined, really shows growth expansions and we hope it catches on.
(END VIDEO CLIP)
CHATTERLEY: What you can't escape is that agriculture is Arkansas largest industry sector. It adds around $16 billion to the state's economy each
year. Soybeans are their largest crop and prices, of course, have fallen to their lowest levels in a decade.
Before the trade war hit, 60 percent of the state's soybeans was shipped to China. As a result, the Governor argues it is vital for his state to have
open access to trade with that nation.
(BEGIN VIDEO CLIP)
HUTCHINSON: First of all, we export 90 percent of our soybean crop goes out of the country, 60 percent of that goes to China. But there's also the
lost opportunity that we are a great rice producer, 50 percent of all the rice in the United States comes from Arkansas. We were looking at China as
the new export market, obviously, that subsides as a possibility in the midst of the trade war.
And then you've got the decline of the soybean prices. China is looking to other countries like Brazil to make their soybean purchases. And so it's
hurt us In Arkansas. We understand what the President is doing and we believe we need to have a better trading relationship with China.
But the end result needs to be first of all, low tariffs, zero tariffs, hopefully, open markets, and secondly, enforcement mechanisms. And that is
tough on the Chinese because they don't like transparency and transparency is a necessary part of enforcement.
And so I understand where the President is going. We hope the end result is low tariffs and better enforcement capability.
CHATTERLEY: Do you trust the President to find that balance? Because as you point out, it's quite delicate.
HUTCHINSON: It is, but you have to go on his track record, first of all, and the new NAFTA agreement is a success story. It needed to be done.
Former Presidents hasn't been able to do that. He did it.
I want Congress -- Senate to ratify that which is critically important. And so if we can have the end result of a successful agreement like that,
then hats off to the President.
And so we're patient, but we do hope that we can draw these negotiations to China to a conclusion soon, and in a way that gives better transparency,
better enforcement, but open markets.
(END VIDEO CLIP)
CHATTERLEY: Five Chinese companies have previously made commitments to invest in the states; however, amid the ongoing trade tensions, I asked the
Governor if he is worried that the uncertainty will make them reluctant to follow through or invest in the future.
(BEGIN VIDEO CLIP)
HUTCHINSON: Investors, whether individual companies or countries have to invest based upon stability and certainty in the future. Right now. We
have uncertainty in the global markets. That's not good for anyone. And so we have to create that new environment.
From an Arkansas standpoint, I've been to China three times. We've recruited five companies. We had zero companies when I became governor,
now we have five companies that have either invested or looking to invest in Arkansas and that is reassuring manufacturing.
That's bringing manufacturing back from China to United States. This is a good thing, but the uncertainty has put some of those on pause, has delayed
some of them, but you know, and so everybody is looking at, let's end this global tension and let's get back to the business that we're good at. And
we will welcome those kind of foreign investments to a state like Arkansas.
CHATTERLEY: Interesting you say that. That's actually how we are going to wrap up the interview, because we do have a huge Asian audience in
particular, but a global audience, too. So the message right now from your state and from the Governor here is, "We're open for business. Come and
look at what we're doing here because it's a business friendly environment."
[09:50:38] HUTCHINSON: Absolutely. We build those relationships, we develop policy that's friendly to business, and we recognize that we've got
a manufacturing talent in Arkansas that is needed and that helps them to grow their business right in our state.
CHATTERLEY: Come and look up.
HUTCHINSON: Thank you.
CHATTERLEY: Fantastic. Thank you so much, Governor.
(END VIDEO CLIP)
CHATTERLEY: All right, so we're going to take a quick break, but up next forget, Alexa. Well, the information anyway. Amazon introducing new
privacy options. All the details, next.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE and a look at today's "Boardroom Brief." Qualcomm has asked a U.S. Federal judge to put her antitrust
decision on hold while it prepares to appeal. The firm is accused of squeezing out rivals in the smartphone chip market.
Qualcomm argues that any business changes it would have to make in order to comply with the ruling would be too difficult to undo should it win that
appeal.
The world's biggest steelmaker, ArcelorMittal has announced it will cut yet more of its European production. It blamed weak demand and high levels of
imports. Its shares falling, as you can see in Amsterdam.
Now forget it, Alexa. Amazon has introduced new privacy options for its voice-controlled assistant that will allow users to delete their latest
commands. Anna Stewart has more.
Anna, great to have you with us. What do we mean by latest commands? How forgetful is Alexa?
ANNA STEWART, CNN REPORTER: At this stage, as of today, Alexa can be forgetful for the last 24 hours on command by saying, "Alexa, delete
everything I said today," which frankly would be great for real life, put in mass situations. And in two weeks' time you say, "Alexa, delete what I
just said," and it will just go for that last command.
Now clearly, this is a great move by Amazon to try and assuage concerns about privacy. There have been so many reports and worries about Alexa.
Now this is new, but you could always actually opt out of Amazon using your data, using the Privacy Settings. You can also delete some of those
recordings using those settings as well. But this does make it easier.
And there have been a lot of concerns. Recently, we found out that not only does Amazon collect the recordings that you use with Alexa, the
conversations you have at home, but also there is a group of employees who do listen to certain clips from what you're asking at home, to help, I
would stress with Alexa's voice recognition.
But listen, who wants to have their personal conversations not only recorded to, but listened to by absolute strangers?
CHATTERLEY: Yes, but they do have people don't they? They've admitted they've got people that listen into some of these recordings to try and
improve Alexa's handling of the commands it gets. So what happens to those people? Do they simply not get access? And if you don't do this every
day, recordings are still made and kept?
STEWART: Well, you have to wonder whether this idea that they're going to make it easier for people to have their commands deleted, will people
really take it up? Is it more of an exercise in getting consumers happier with the product so they invite Alexa back home? Will they really use it?
I suspect they'll still have plenty of data to use, and they do need that data. It's incredibly valuable. But I just wonder whether this is enough
for consumers across the board with Google and Facebook. There are huge concerns all over about how our data is used. You can learn so much about
what someone likes to eat, what they like to wear, what music they like to listen to.
It can be manipulated not just by these companies that we may begin to trust. But of course, if they get hacked by bad actors, by rogue
governments, could it be -- could your data be manipulated against you so that you buy products that you don't need? Or of course, work on your
political bias? So lots of big concerns out there. I'm not sure if this will be enough, but it's definitely an interesting development.
[09:55:22] CHATTERLEY: Yes, I think my amnesia is more superior to Alexa's, quite frankly, and I forget to tell it to forget. Anna Stewart,
thank you so much for that.
All right, a reminder of the news that we heard this hour. Special Counsel Robert Mueller will speak at 11:00 a.m. Eastern Time this morning. He is
the man in charge of the Russian investigation of course and for two years until today, has never spoken about the investigation, or of course, the
Attorney General's handling of the conclusion. So one hour from now, we will hear finally from Bob Mueller.
All right, a quick look, as we wrap up the show here of what we're seeing. Pressure on stock markets once again. Pressure on bond yields as well.
Some real nervousness out there and in the markets right now. We will continue to watch those trade headlines.
But for now, you've been watching FIRST MOVE, time to go make yours. Keep on watching.
(COMMERCIAL BREAK)
[10:00:00]
END
