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First Move with Julia Chatterley
A Second Day Of Flight Cancellations Amid The Airport Protests In Hong Kong; Growth Forecasts In Singapore Slashed As Trade Tensions Bite; Argentine Investors Prepare For Another Session Of Volatility As The Political Shock Waves Continue. Aired 9-10a ET
Aired August 13, 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 is
your need to know.
Hong Kong chaos: A second day of flight cancellations amid the airport protests. Singapore slowdown: Growth forecasts there slashed as trade
tensions bite. And an Argentine ambush. Investors prepare for another session of volatility as the political shock waves continue.
It's Tuesday. Let's make a move.
Welcome to FIRST MOVE once again. Great to have you with us. I'm calling it now the August of angst for investors right now. Wherever you look, it
seems we've got protests, we've got escalating political risk -- when you combine that with summer markets, less investors, the result is volatility
and that's exactly what we're seeing.
Let me give you a look at what we're seeing right now for U.S. markets. Premarket, we are tilted to the downside once again, that after losses in
yesterday's session, too. The Dow falling some one and a half percent. The S&P and the NASDAQ, the tech stocks falling some 1.2 percent. Once
again, stock markets really feel like they're watching the bond market action hear. The message -- higher bond prices, therefore lower yields
means weaker growth ahead, and that's the fear.
We continue to look at safe havens, too. Gold, the Japanese yen, bonds. The question is, at what point here perhaps do stocks look oversold and
bonds look overbought? Hey, perhaps it's an early question, but then, this is FIRST MOVE.
Right now, we've got the 10-year bond yields ticking a bit higher. We're sitting at 1.65 percent. Longer term bond yields though under real
pressure. We're approaching all-time lows in that 30-year. Similar story in Europe, too. Bond yields lower, stocks lower as well. Germany -- look
at the German stock market. The underperformer here. Investor confidence there, hitting an eight-year low, not a good sign of course as we await
those growth numbers from Germany tomorrow.
What about Asia? Chinese stocks fell overnight, but again, the underperformer here, the Hang Seng falling more than two percent today, now
fully wiping out year-to-date gains. Investors I think just grappling trying to gauge the economic and the political implications of the ongoing
protests in Hong Kong. And that is where we're going to kick off the drivers, so let's get to it.
A fifth straight day a protest at the international airport, flights suspended, too, for a second day. The Hong Kong Chief Executive, Carrie
Lam saying the city is quote "on the brink of no return." Paula Hancocks is at the airport for us.
Paula, talk as through what we're seeing. I heard you earlier on CNN talking about an individual, a suspected infiltrator of the protests, a
member of the police force. What's going on right now? Because clearly, everybody is very, very nervous.
PAULA HANCOCKS, CNN INTERNATIONAL CORRESPONDENT: Well, Julia, that individual, as far as we can tell, we can just see off to the distance is
still effectively being held by protesters. There's a trial by protest going on at this point this.
This really does show though the frustrations and the anger that the protesters here are feeling against police and against the undercover
police that they say have been working amongst the protesters. So they believe they have found one of these undercover police. We have no way of
knowing whether or not he is.
But just the very fact that for well over an hour now, they have been holding him amongst dozens of protesters. They've been questioning him.
It really does show that that this is one of the things that does concern these protesters.
Yes, they are here for a fifth day at Hong Kong International Airport, because of the Extradition Bill to China. They want that to be cancelled.
They have a number of demands.
But this is also about showing anger against the police about what many protesters here believe is excessive violence that has been used by the
police in particular on Sunday.
So this is really why we're seeing quite so many people in here. Thousands of people here at the airport, the numbers don't appear to be thinning out
too much, maybe a little bit, but certainly we are seeing the anger directed specifically towards police -- Julia.
CHATTERLEY: Absolutely, Paula. And to your point, the protesters have been saying now for many days that they want an investigation into apparent
police brutality in handling protesters. They also want the Extradition Bill, the place where this originally started to be formally withdrawn and
taken off the table. Again, journalists last night asking Carrie Lam to do that, and she refused once again.
What did protesters think here? Are they going to wait for that? Do they want to just sit here and continue and try and hope that the Executive here
backs down?
[09:05:12] HANCOCKS: Well, Julia, with no concessions coming from Chief Executive Carrie Lam and she said today in that press conference, she was
quite resolute, she was defending the police action saying that it was necessary to try and keep the peace in Hong Kong.
Without any kind of concession from the Hong Kong government, it's very difficult to see where the off ramp is when it comes to these protests.
They are not losing steam. The momentum is continuing, if not building.
The very fact that this is the fifth day at the Hong Kong International Airport, it is the second day as well that they've actually managed to
cause severe disruption. They have actually managed to work to cancel flights coming out of here.
We are still seeing, though you can probably see behind me the board with a lot of red "canceled" on it. Some of those departures have been canceled.
There are a lot of protesters, of course, but also some very confused passengers wandering around with their luggage trying to figure out if they
are going to be able to fly out of here tonight, and the overwhelming answer is no, because we've been told by the Hong Kong authorities here at
the airport that there is no more check-in. That that has been suspended.
But the fact is the momentum is still here. The protesters do not believe that they have what they set out to get and they are even more angry now
because they believe that the police is using more force and what they see as excessive force against the non-protesters -- Julia.
CHATTERLEY: Yes. To your point, where's the off ramp here? It's tough to see. Paula Hancocks, thank you so much for that and we'll be back over to
Hong Kong to get the latest there in the show.
Now, let's move on. Recession risks in Singapore. The city state slashing its growth forecasts for 2019. John Defterios joins us now. John, an
incredibly weak second quarter for Singapore. But it doesn't get more bellwether than this. Two largest trade partners -- the United States and
China -- they are well and truly caught in the crossfire here of a far bigger trade war.
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: And as you suggest, Julia, Singapore is a great global barometer because it's so export
dependent. And basically, the crystal ball in the near future in a word is "cloudy."
Let's bring up the actual numbers. This is the worst growth in a decade going back to the financial crisis. The latest quarter with a contraction
of 3.3 percent, and equally alarming, the forecast for all of 2019 was ratcheted down by the government of Singapore by one and a half percent.
We're looking at zero to one percent for the entire year, a technical recession is on the cards, according to a number of different global
economists who cover Singapore because of a contraction in the third quarter as well.
And the Ministry of Trade very interestingly, was not shy about the reasons behind the selloff that we've seen in the financial markets today and the
outlook going forward.
Regionally, they suggested that the disruption we see in Hong Kong right now can spill over to the rest of the region. Ironic, because it's the
number one competitor, as you know, of Singapore as a trade hub, and as the financial services hub; and number two, something that's overlooked very
often is this simmering dispute between Korea and Japan, which has hit supply chains throughout the region.
And as you suggested, the big elephant in the room is the U.S. and China -- number one and number two global economies. And they even mentioned the
Brexit concerns saying this could spill into the third quarter because we don't have a resolution on the actual hard exit into the European Union by
the U.K.
So if you look down the pipeline, Julia, plenty to worry about and most of that is coming from Asia, with Donald Trump hammering away at China with
the tariffs.
CHATTERLEY: Yes, it's interesting. I mean, to your point electronics at the heart of this as well, and we know the supply chains here for Singapore
is so critical. The currency, the Singapore dollar relative to the U.S. dollar, also sitting at two-year lows, and that's part of a bigger story
here as well.
We've seen China's currency weakening, more broadly, you try and see some currency, which is making your exports cheaper and offsetting that, but
when lots of Central Banks in the region are cutting, lots of currencies are weakening, you just don't get the bang for the buck here that you'd
hope for.
DEFTERIOS: Well, your phrase about the August angst that you talked about at the top of your program today, I think is apropos here because you have
to raise the question, what is the response by the Central Banks not only in Asia, but globally.
We've seen in the last week New Zealand, India and Thailand cutting interest rates. We don't see an emergency meeting coming from the Central
Bank of Singapore. That's slated for October, but they're expected to ease and over the last week, in the annual address to the nation when Prime
Minister Lee of Singapore said that they're ready to provide stimulus going forward. You know that the U.S. Federal Reserve has cut interest rates as
well.
[09:10:04] DEFTERIOS: One thing that stood out for me is the Bank of America recent survey at the highest level since 2011, we have a third of
fund managers suggesting the risk of global recession is at the highest level since 2011.
So it is starting to look rather dark, and the worst thing about all of this Julia, the three main items that I listed there, my first answer; Hong
Kong, the dispute between South Korea and Japan; and U.S.-China -- no one is blinking right now.
So a resolution perhaps is not in the pipeline on why we see the downgrades here coming from Singapore today.
CHATTERLEY: It is such a great point, John. The U.S.-China trade spat is not the only one, and it's clearly having regional implications, too, never
mind anything else. John Defterios, thank you so much for that.
All right, we're going to move on to Latin America now and fears of another Argentinian default. The Argentinean peso and the stock market plummeting
yesterday, it follows the Argentine President's shock defeat in Sunday's primary elections. Clare Sebastian joins us now. Clare, obviously we're
waiting for the market to open up around 10:00 a.m. Eastern Time and poised for what action we see there.
But just talk us through the price action yesterday, and why -- what has got investors so jittery as a result of what we saw at the weekend?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Julia. It was really a collective freak out. We saw precipitous falls in stocks, in bonds, in the
currency. Everyone extremely worried after seeing the result of that primary election, which really is a kind of poll ahead of the election,
which happens at the end of October.
The incumbent, Mauricio Macri, who is seen as very business friendly. He is the one who negotiated the loan, the bailout with the IMF. He has been
implementing austerity measures. He got just 32 percent of the vote compared to the opposition leader, Alberto Fernandez, who got 47 percent of
the vote; much more than expected and really a rejection it seemed by the people of those austerity measures from Mauricio Macri that have led to a
precipitous rise in poverty and inflation in Argentina.
So everyone is extremely worried now that this raises the likelihood that Macri will not get reelection, and then it raises the likelihood that
Argentina will default on its debt. If you look at the bond market, the price action there suggests that people don't believe that Argentina will
be able to pay off its debts and Julia, this is not over. We've got a couple of months now of uncertainty ahead of that vote. So I think much
more volatility still to come.
CHATTERLEY: Yes, it's quite fascinating, isn't it? To your point, even if President Macri doesn't win the next election and there's big question
marks over what economic policy follows, when you're talking about a huge plummet in your currency that reduces your purchasing power, you've already
got 50 percent inflation; never mind 10 percent unemployment, the economic costs here, a huge in addition to austerity measures, as a result of an IMF
program, it's kind of eye watering for the economy here.
SEBASTIAN: Yes. And I think, you know, we have to talk about the impact on people here. These austerity measures have led to a growth in poverty,
the peso lost about half of its value last year against the dollar and other fifth of its value was shaved off yesterday. That is going to
increase inflation. The central bank rate is at 74 percent, Julia.
If inflation keeps rising, they are going to have to tighten monetary policy even further. That will increase the pressure on the population.
And I think this raises serious questions about whether this IMF bailout is even working.
The IMF, one of its stated aims it says was to protect societies most vulnerable. I think looking at the economic situation in Argentina, you
can seriously question whether or not that has actually worked.
CHATTERLEY: I'm glad you raised that. So I didn't have to. I couldn't agree more. Have we not learned lessons? Those are certainly the
questions asked. Clare Sebastian, thank you so much for that.
All right. Let's bring you up to speed now with some of the other stories that we're following around the world. One woman has died and another was
wounded in a stabbing rampage in Sydney, Australia.
The 21-year-old suspect filmed running through the street with a knife in his blood stained hands. Witnesses were able to hold him down until police
arrived and arrested him. Officials say the suspect has no apparent link to any terrorism organization.
More details are emerging around the apparent suicide of Jeffrey Epstein who died in prison while being held on sex trafficking challenges. U.S.
Attorney General William Barr said serious irregularities were found at the New York facility where Epstein was held. Employees say the incident
highlights inadequate funding and staff shortages in the Federal Bureau of Prisons.
The Trump administration has unveiled new regulations that could cut legal immigration to the United States. The new rules say applicants can be
turned down for a visa or green card if they have limited education or if they're receiving government benefits.
Critics are saying it's an attempt to turn away low-income immigrants and people of color. Joe Johns joins us now. Joe, great to have you with us.
So just describe who exactly could be impacted by this because my understanding is it doesn't include asylum seekers. It doesn't include
refugees at this stage, but it does include people that are taking handouts from the state.
[09:15:10] JOE JOHNS, CNN SENIOR WASHINGTON CORRESPONDENT: Right. There are a lot of exceptions to this rule, and you mentioned a couple of
important ones, so-called asylees, people who are getting the government's assistance because they are refugees. But there are many people that this
rule does apply to. It's known as the Public Charge Rule. It has been around a long time, the idea since the 1800s, really picked up speed around
1996. But it's always been very limited in its application until now, a vast expansion by President Trump and his views on immigration.
The rule is actually some 837 pages long. You can read the whole thing on cnn.com. But the bottom line on it is that if you come to the United
States from another country with intent to stay after October 15th of this year, and you need public assistance, you may not then be entitled to a
green card. You may not be entitled to stay in the United States as a permanent resident.
Of course, the critics here in the United States are saying this is just one more application of President Trump's attempts to crack down on the
immigration policies of the United States as we know them. And there are some concerns that even though this rule does not apply to people who were
in the United States, before that date, certainly of October 15th, there's a lot of fear that there could be a chilling effect, and that people might
not seek the benefits, they need.
The bottom line, a lot of people come to the United States, with nothing more than the clothes on their back for one reason or another with the
hopes of building a life here. And of course, apparently, the government is not going to help.
CHATTERLEY: You know, John, I can see both sides of this debate. I really can. I mean, the United States has a burgeoning deficit, you could make
the argument that it simply can't afford to give decent medical cover benefits to Americans who were born here, never mind anybody else? What's
the net financial impact? Because there are those that would say, look, these are people coming into the United States that the United States
needs, if they do enter the workforce, and they do jobs that ordinary Americans don't want to do. Can we gauge that at this stage?
JOHNS: I think you make a very important point. And throughout this immigration debate, there's been a real question about how much people who
are illegally in the country actually contribute to the economy in terms of the taxes they pay, for example.
Because so many people don't want to get flagged by the Internal Revenue Service, so even if they are illegal in the United States, they still pay
income taxes, and they pay sales taxes, and so on. So there's a question as to the value of some of these individuals who might be excluded.
And the other half of it, I think that is very important, when you talk about immigration, is just because somebody comes here and for a brief
period needs some help, it doesn't mean that they're going to need help always. A lot of these Americans become very productive members of
society, but they do need to get on their feet -- Julia.
CHATTERLEY: Yes. Fascinating. This conversation, no doubt will continue. Joe Johns, thank you so much for joining us. All right. We're going to
take a quick break here on the FIRST MOVE, but coming up. Grounded: Hong Kong stocks slide as protesters shut down the international airport. We'll
take a look at the fallout of the businesses in the Hong Kong economy.
And the long awaited makeup after the breakup. More than 10 years after going their separate ways, Viacom and CBS are said to be close to a deal.
But what does this mean for the industry? We'll discuss. Stay with us. You're with FIRST MOVE.
(COMMERCIAL BREAK)
[09:17:02] CHATTERLEY: Welcome back to FIRST MOVE where we are looking at a lower open once again for U.S. stock markets. The major averages are now
on track for their third day of losses, in fact, even as the 10-year bond yields steady a little bit here.
We've also had some inflation numbers from the United States. Consumer prices rising 0.3 percent in July. Core inflation rising 2.2 percent year-
over-year. That's a six-month high. So one eye from the Federal Reserve on that, but slow growth remains the concern.
As John mentioned earlier, a new Bank of America survey of Global Fund Managers suggest recession risk at an eight-year high. One third of
investors surveyed see a global recession over the next 12 months.
Let's get some context here. Jeff Kleintop is Senior Vice President and Chief Investment Strategist at Charles Schwab. Jeff, always a pleasure to
have you on the show. Is that recession risk concern among investors to high in your mind for the United States?
JEFFREY KLEINTOP, SENIOR VICE PRESIDENT AND CHIEF INVESTMENT STRATEGIST, CHARLES SCHWAB: No, I don't think so. I think when we look at indicators,
like the leading indicators from the OECD, or what we're hearing, even from CFOs who are now the majority of CFOs in the U.S. believe there will be a
recession in the next year, and they're pulling back on capital spending.
I think as we look at things like the yield curve and other cyclical indicators, they're all stating that we're probably seeing the highest risk
of recession in many years.
Right now. It's concentrated in the manufacturing space. The consumers still look pretty good, and the service sector looks okay. The concern is
now with all these other developments around the world that that begins to spill over and weigh on the consumer and the service sector and pull them
down into the recession already being experienced by manufacturers.
CHATTERLEY: You know, counter to that would be, but the Federal Reserve is cutting rates. How valuable our rate cuts here? How are financial
conditions? Because you kind of need to have tighter financial conditions to loosen them, for the Fed rate cuts to work here. Is that a valid point?
KLEINTOP: That is exactly right. This is -- this is not really the battle we're fighting. I mean, the Fed really has one superpower, and that is to
loosen financial conditions. And often, it is those financial conditions that are tightening late in an economic cycle that are weighing on economic
growth.
As interest rates rise, it becomes more difficult to borrow. That is not the problem we're having right now in the U.S., it is certainly not the
problem they're having in Germany where interest rates have never been lower, yet their economy is on the threshold of a recession.
So it's not an interest rate or financial conditions issue, it is about trade policy. It's about again, this manufacturing slowdown tied to autos
and many other factors. I think those are the issues we need to address and there are more political ones, the ones that can be directly addressed
by the Fed.
CHATTERLEY: Yes, I mean, this is a tough, challenging environment for investors, whichever way you look at it, whether it's political risk,
whether it is economic risk right now. What happens if we see some kind of trade agreement?
There is all the pent up demand, the slowed business investment that the real concern for the manufacturing sector here suddenly go away, and then
you've got a real kicker to the U.S. economy and others because a lot of the issues that have held them on pause as far as investment is concerned,
go away.
[09:25:13] KLEINTOP: That may be the case that we do see a fresh round of business investment, if we see some of these major trade concerns begin to
fade. But gosh, that just doesn't seem likely maybe ahead of the 2020 elections. It is probably the least likely now that it's been anytime in
the last couple of years.
So certainly, that breakthrough would help maybe give us another year of economic growth and market performance. I maybe would liken it to 1998
when there seemed to be major problems around the world late in an economic cycle that were alleviated due to a number of things. And we did get
another year of growth or so. So that could kind of give us that last burst of growth before we experience the downturn.
But I'd note that already, we're seeing a rise in inflation pressures that are classic in a late cycle environment. Businesses are already seeing
their profit margins squeezed your higher labor costs, at the same time revenues are headed down. So, I think that additional boost might be
limited in its duration.
CHATTERLEY: You've always said and you've said to me many times, look outside, diversify away from the United States. Look at Europe. What do
you make of what's going on in Italy right now? Because for most foreign investors, they just look at Europe, they go Brexit, they go political risk
in Italy and go, "yuck." What's your message?
KLEINTOP: Right. It looks like it's breaking apart. But you know, right now, it's interesting. So that the League Party in Italy, which is now the
major focus of concern, do they -- are they very anti-euro? And would they consider a more abrupt break with the rest of the Eurozone?
But the truth is, they're polling at a 39 percent level of support versus the Euro, which is 71 percent support within Italy, and overall at the
highest level of support within all of the Eurozone. So it doesn't appear the Eurozone is set to break apart anytime soon.
CHATTERLEY: Great point.
KLEINTOP: And I think that's an important consideration as valuations are very low there, and maybe an attractive opportunity.
CHATTERLEY: I have to wrap. Great work. Thank you so much, Jeff. We'll get you back very soon. More to come. The market opens next.
(COMMERCIAL BREAK)
[09:30:10] CHATTERLEY: Welcome back to FIRST MOVE this Tuesday and the opening bell here at the New York Stock Exchange. We are softer, seeing
losses at the open here for the U.S. markets despite the smiling faces that you saw there. It's always nice to see that even if we're seeing a bit of
broader pressure here. It follows Monday's one and a half percent pullback in the Dow.
Investors also eyeing slightly hotter than expected read here on consumer prices. Core CPI score coming in at six-month highs as Jeff Kleintop was
just mentioning that, something that the Federal Reserve needs to keep in mind hereto.
It's not just about the majors as we were discussing on the show yesterday. Small cap stocks here in the United States have also been hit pretty hard.
The Russell 2000 remains in correction territory, down some 14 percent below recent highs. Much worse than the S&P 500 performance. Remember,
we're just some five percent -- 5.5 percent away from record highs in the larger cap stocks.
What about the U.S. dollar? Well, the U.S. dollar is also higher again versus the Chinese yuan. The PBOC guiding the currency lower once again
today. A little bit stronger though than anticipated? Remember, a slow descent continues here for the currency over in China and what about in
Asia as well?
The Hang Seng falling more than two percent now and is in negative territory, down some 2.2 percent, I believe for 2019. A real burden, the
protest of course, the economic costs yet to be quantified.
What about our global movers? Let me walk you through some of these. Yum Brands, the owner of Taco Bell, Pizza Hut, KFC have named David Gibbs as
their next CEO. Gibbs currently is COO and he will take over at the end of the year.
Tencent Music also in focus. The quarterly revenue missing estimates on slower than expected monthly average revenue growth per user. Right now,
under some pressure in the session. JD.com in focus. The Chinese e- commerce company posting better than expected quarterly revenues and forecasts, strong third quarter sales.
We are also keeping an eye on Boeing in the session today as well. Sales numbers for the embattled plane maker will be out around 10:00 a.m.
Eastern. The 737 MAX has been grounded since March, of course, following two fatal crashes.
All right, we're also on media merger watch as well. The reunion of CBS and Viacom could be announced in the coming hours. That's according to
someone involved in the deal. Hadas Gold is standing by on this story. 2006, I believe was the official separation and what a battle it has been
since then, and the landscape has changed dramatically. Talk to me about the structure of this deal and what the tie-up means for both of these
players.
HADAS GOLD, CNN BUSINESS REPORTER: Julia, it's pretty ironic considering that they used to be one company in 2006, and they were actually split up
because the theory was that maybe Viacom would do better without CBS, bringing it down when actually when you look at the results, CBS has done
so much better.
This is the third attempt to bring these two companies back together, and it seems like the third time might be the charm. As you noted, a senior
executive involved has told CNN that the announcement could be coming sometime today, maybe later today. We're all just waiting.
But it seems as though the details of this deal have been reported out by so many different places, and what we're seeing is an all-stock merger
values. It Viacom at a bit of a discount. But what the main thing here is bringing these two companies together is like we've seen in so many of
these other media mergers is just how they can compete on this new scale we have with the Amazon's and the Netflix's and the Disney's all getting into
the streaming world trying to bring these companies back together, bring the content libraries all back together.
Because between CBS and Viacom, there's an interesting array, everything from Comedy Central, and BET on the Viacom side, including Paramount
Studios, and at CBS side, you have that news, sports, and you can see right there on the screen, what these sort of two companies coming together would
all be.
But what's interesting, Julia, is that even combined, this combined, CBS- Viacom combining would still be pretty small up against some of these bigger giants that they're dealing with. So the big question is, what will
they do next? This is not the last step in this merger. There is talk that they will then be trying to acquire some other smaller companies or
possibly even trying to sell themselves to an even bigger company.
CHATTERLEY: Yes, it was quite fascinating. When this was originally talked about, retying up again, it was who would then buy them? But
there's been so much M&A in the sector, it's like no one actually would want to buy them. They now have to be the buyer. Who might they buy?
That's the question. What are the assets available?
GOLD: Yes, so Julia, right, that's like who would buy them now? Because think about it. If let's say an Apple wanted to buy one of these
companies, why wouldn't they have done it already? Why would having this merged company make them any more attractive? So that's why the thinking
is, they might be trying to acquire a smaller company.
There's talk of something, for example, like Discovery Scripts, which is smaller than the combined CBS-Viacom, and some of their properties might
align well with some of the CBS-Viacom properties when you think about things like home improvement shows or nature shows or something. That is
the thinking right now. That's the direction they're going to try to go, but again, it's a really difficult landscape out there when you're going up
against some of these tech companies that are valued at what? A trillion dollars and even the combined CBS-Viacom company would be maybe valued
around $35 billion. That's a big gulf between the two.
CHATTERLEY: Yes, it's such a great point. I mean, I looked at the headline on Vox website, and they said, "Add "NCIS" and "The Daily Show"
and billions, not bad, and you get a company that's still not big enough to compete with the Netflix, the Apple's and the Disney's of the world." And
what we know right now as well is that the streaming rules are on, quite frankly, all of these making huge strides so we could add others to really
shake up and change the way that consumers digest content.
It's pivotal, it's also going to be quite complex, I think, for these guys to come up with their own version of this to compete, even if they bolt on
other acquisitions. Am I making sense here, Hadas? What do you think?
GOLD: No, you're definitely making sense. And listen, sure, in the short term, this merge of CBS-Viacom will give them some leverage in sort of
carrier negotiations, but that's old fashioned now. I mean, there's a huge new landscape out here and there is a question of what will 15 years from
now look like for a merge of CBS and Viacom.
And I do think that's why the chance of them being gobbled up by another bigger company, I think that is still out there. Even if they end up in
the next five years or so acquiring Discovery Scripts or something like that, I can totally see an Apple wanting to buy up CBS.
CHATTERLEY: Yes, fascinating. Hadas Gold. Great to have you with us. Thank you so much for that.
All right. Coming up on the show, an exodus from Argentina. Investors selling out bonds, stocks and the currency. We look ahead at the start of
Tuesday's session in Buenos Aires, more volatility to come. Stay with us. We're back in two.
(COMMERCIAL BREAK)
[09:40:26] CHATTERLEY: Welcome back to FIRST MOVE. Argentina stock market opens in around 20 minutes from now. The day after the heaviest one day
share price route most people have ever lived through. The Merval Index losing a shocking 39 percent on Monday, after a primary election that
hugely increased the chances of President Macri's government will be ousted in October.
Joining me is Hans Humes, Chairman and CEO of Greylock Capital. He has also served as the Co-Chair of the Global Committee of Argentina
Bondholders. Great to have you with us.
HANS HUMES, CHAIRMAN AND CEO, GREYLOCK CAPITAL: Thanks for having me.
CHATTERLEY: Let's talk about the price action first, and then we'll go into the explanation of what do you think of what's going on. That's
extreme volatility by anyone's measure.
HUMES: Oh, absolutely. I mean, on the stock side, that was the second largest one-day loss in history in any equity market. But on the bond side
where we play, we saw a good sort of 20 percent gap down in prices, and it was followed up by a further sort of 10 percent fall today.
So the feeling is that most emerging market investors, both on the equity, or the debt side have been invested; and probably overly invested in
Argentina, so the technicals have been fierce with this primary result.
CHATTERLEY: You know, it's interesting, in light of what's going on in the rest of the world and we talked about this a lot, $15 trillion worth of
negative yields. You look at a nice high interest earning bond with a country that, hey, it's had its problems, but it's got an IMF program right
now and you think, okay, you know, it's tough, but they're going to make it happen. And then you have a political shocker like this weekend. Why did
this makes such a difference?
HUMES: Well, Alberto Fernandez was the Chief of Staff of Nestor Kirchner, and then Cristina Fernandez de Kirchner, he ran with Cristina de Kirchner
as his VP candidate, and everybody in the markets remember the hostility towards the free markets that those two administrations had.
So after sort of at least the friendly rhetoric of the Macri administration, to get the sense that you're going to have the same kind of
anti-market, anti-free market policies coming back in really shocked people. And most people thought that would be close. Nobody predicted
that it'd be a 15 percent gap.
CHATTERLEY: And this was a primary, but to understand, my understanding is it was mandatory. So you really got a sense, a sort of referendum on the
current policies of Macri, a 15-percentage point lead for the alternative, and suddenly everybody is going, this is a gap, quite frankly, that
President Macri cannot close between now and the presidential elections in October.
HUMES: Yes. Macri came out yesterday to say that he was going to have a much better result the next go around. But there is a big question. This
is -- that's an unusual system. We've got the first primary where you have to get over a certain threshold, sort of like the Democratic debates to go
into the runoff election on October. And then if it's too close, you'll get the runoff between the two first candidates.
But in this case, a 15 percent gap, it really begs the question whether Macri can pick up enough votes from others to close it, but we'll have to
see.
CHATTERLEY: I mean, there's so much going on here as well. We've got 10 percent unemployment rate; 50 percent plus inflation right now, an IMF
program that's creating further pressure on the real economy and obviously, the sensitivities of being a country that's had so many IMF bailouts in the
past and this sort of association with an IMF package for the people here.
HUMES: Right.
CHATTERLEY: It was very difficult for Macri to make this choice and to decide to do this. He clearly got investors on board, international
investors buying into the currencies, buying into the bond, buying into the stock market, and now it's all falling apart?
HUMES: Yes, and some would argue that he used the market access as a substitute for the actual reforms that the country needed.
CHATTERLEY: Right.
HUMES: But it's true. The anti-IMF rhetoric, that Nestor Kirchner in particular employed in his first administration that carries through and
the wholehearted embrace of the IMF, you know, $56 billion program creates a real negative issue for Macri, not least of which that the austerity is
not going to allow him to spend the way that he would like to, to win an election.
But there's -- you know, Macri is fighting some serious headwinds. He came in promising to fix all the problems and clearly, he hasn't. He has had
some bad luck, but a lot of the damage has been self-inflicted.
CHATTERLEY: So the alternative here is Alberto Fernandez backed by something that we've seen in the past, which is Cristina Kirchner,
obviously but, I mean, the scandals that surrounded her, the corruption cries. Are people are willing to go back to, perhaps that in a puppet
leader perhaps in Alberto Fernandez?
[09:45:19] HUMES: You know, I don't think he will be a puppet leader. It's funny --
CHATTERLEY: So this is important.
HUMES: I engaged with him a bit when I was the Co-Chair of the Creditor Committee, and I mean, he is not a traditionally educated economist by any
means, but he is pragmatic. And I think that there's some latitude that both have learned from the mistakes they made.
Obviously, Cristina is going to be whispering in his ear, and you do have some of the issues that you hear rumors that Kicillof coming in to run the
economy, Guillermo Nielsen may come back, neither of whom will get a round of applause from many investors.
CHATTERLEY: Those are not market friendly.
HUMES: But, you know, the expectations are so low now. There's a ton of room after two days of the results, there's a lot of room for some positive
surprises. Having said that, Alberto Fernandez, the first thing he says is "I'm not going to default, the market sells off." That's not a great sign.
CHATTERLEY: What's the risk that we go down a route that we've seen in recent history? Greater capital controls, another debt default with a new
government that goes, "You know what? Actually, we can't abide by this IMF program." And, you know, history repeats itself plenty of times in
Argentina and we do have a default.
HUMES: I mentioned it yesterday. But if you refer -- if you take a look at the hundred year bond that they issued, and you go back to the actuarial
tables, what they tell you is that a hundred year bond will restructure eight times. If they restructure again, it will be the third in the last
20 years.
So really, the market and I think the world has some PTSD. There's a lot of the posttraumatic stress that's gone on with Argentina. It used to be
that we get buffeted by this every 15 years. And now it's every two or three years. So it's not surprising the market is flinching the way it is.
CHATTERLEY: And the real economy gets battered and ordinary Argentines get -- Argentinians get battered as well. Not a buying opportunity yet then?
HUMES: No, when you see a market move like this, I thought --
CHATTERLEY: Stay away.
HUMES: No, I frankly, think it's about you know -- if you don't mind trading, it's not a bad time to stick in a bid. But it's a big question
whether it's time to buy for a long term hold. I think the market will bounce.
I mean, again, you can't get more of that -- have a worst sentiment than you have right now. So it won't be that difficult to get some kind of
retracement in the markets. But it's really unclear what the long term opportunities are.
CHATTERLEY: We'll see when the market opens up. Hans Humes, fantastic to chat with you both in the short term and the longer term here.
All right, let's move on. I'll give you a look at today's "Boardroom Brief." "The Financial Times" says U.S. National Security adviser, John
Bolton believes the new British Prime Minister will take another look at Britain's position on China's Huawei.
Before Boris Johnson took office, the U.K. disregarded U.S. advice when it allowed the Chinese firm to build some parts of its 5G telecom
infrastructure. Washington says Huawei may be working to help the Chinese states spy on Western nations.
Verizon Media is telling Tumblr to web service company, Automatic. Verizon had originally inherited the social media platform in 2017 as part of its
acquisition of Yahoo, which bought Tumblr for more than a billion dollars just six years ago.
All right, let's move on. It's been a summer of extreme temperatures around the world. Heat waves across the continent of Europe, extreme
flooding in India and parts of China enduring the worst rain in almost 60 years.
Now while scientists and governments are trying to figure out how to address climate change, architects in Malaysia are adapting their designs
warming environments. John Defterios reports.
(BEGIN VIDEOTAPE)
DEFTERIOS: On this edition of "The Global Energy Challenge," I'm in Malaysia to meet the architects building a better future.
DEFTERIOS (voice over): At Kuala Lumpur's center, one million residents; on the periphery seven million others. Worldwide, more than a third of all
energy is consumed by buildings and construction, an often overlooked fact.
(BEGIN VIDEO CLIP)
TAN LOKE MUN, ARCHITECT: We were so busy Malaysia building the nation that it never hit us that we needed to also look after the environment. 2009
when we launched Green Building Index. It was the year when everyone realized there was another way to look at things and we also helped in the
bottom line, your cost of operation went totally down.
(END VIDEO CLIP)
DEFTERIOS (voice over): Old Energy elevated this, city future success may be more grounded.
From the shadow of the Petronas Towers, a bamboo structure by award winning architect Eleena Jamil. We meet at this month's Festival of Architecture.
(BEGIN VIDEO CLIP)
[09:50:10] ELEENA JAMIL, ARCHITECT: We are slowly moving towards making natural sustainable materials like bamboo to become a standard building
material to be used in buildings, in housing, in tall buildings, in skyscrapers.
Responding to the climate is very, very important in a hot and humid climate like Malaysia, and you see that in the architectural education.
You see students designing sensitive buildings which respond to the climate, which makes a connection with the local culture and local
lifestyle.
MUN: The new generation might save the world. I really hope that the new generation, they'll do the right thing. We hope just like us, they will
have green common goal as an architectural style, but green is not style; green is the right thing to do.
(END VIDEO CLIP)
DEFTERIOS (on camera): More FIRST MOVE, next.
(END VIDEOTAPE)
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE where I want to give you a quick look at what we're seeing for U.S. markets at this moment. Well and truly
turned.
Take a look at that. The Dow, up some 1.4 percent. The NASDAQ, the tech heavy sector up some 1.8 percent. Why? Well, I can tell you that we've
had an announcement from the U.S. Treasury regarding those tariffs, the 10 percent tariffs on the additional $3 billion worth of goods that were set
to hit come September 1st.
Well, the U.S. Treasury has announced that certain products are going to be removed from that tariff list based on health and safety aspects, but also
the consumer related products. And now we're talking cell phones, laptop computers, video game consoles, certain toys, and footwear and clothing.
Those tariffs will be delayed to December 15th. So that gives plenty more time perhaps for negotiations and the U.S. government here deciding to
protect the U.S. consumer. Remember, the underpinning of the U.S. economy at least until December 15th.
Investors liking what they're hearing there, and as a result, stock markets have turned. Makes sense. Real sensitivity right now to the broader trade
concerns. A delay though for consumer-facing products on tariffed goods until December 1st.
All right, I want to take you back now to Hong Kong and the protest at the international airport there. We were discussing it earlier on in the show.
Paula Hancocks joins us once again. Paula, what's your sense? Are people deciding to wrap up for the evening? Clearly, it is pretty late there or
are they are bedding down for the evening?
HANCOCKS: Well, Julia, at this point, it doesn't appear to have lost any of its momentum. There are still, I would say thousands of protesters here
at the international airport. You've also got protesters now trying to cover some of the security cameras, too. Massive cheers from everybody
else, so it really doesn't feel like it is calming down in any sense.
[09:55:06] HANCOCKS: But as I've said earlier, most of the flights have been canceled. We see on the board behind me that there's an awful lot of
red there and there are still some passengers milling around in the terminal looking a bit confused and not quite sure where exactly they're
supposed to go. But certainly, it's not expected that there will be many if any flights coming out of here anytime soon.
So certainly this isn't the second day. It is going to have an impact on the airport. It is going to have an impact on Hong Kong's Cathay Pacific
inevitably. We heard from the Hong Kong Transportation Chief saying that it's very easy to lose a reputation, it's much harder to try and build one
back up.
So really trying to appeal to the protesters not to continue this because of course, the longer it goes, the more damage it could do financially.
CHATTERLEY: Yes, just look at those pictures as well behind you. Certainly, plenty of people there and as you pointed out, no intention of
leaving right now. Paula Hancocks. Thank you so much for joining us and obviously plenty more coverage from Hong Kong are coming up later in the
programming. For now though, you've been watching FIRST MOVE, time to go make yours.
(COMMERCIAL BREAK)
[10:00:00]
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