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First Move with Julia Chatterley
President Trump Attacks The Federal Reserve Arguing Rates Should Be Lower; The Hong Kong Stock Exchange Makes A $39 Billion Bid For The LSC; Apple Slices Prices On iPhones And Streaming. Aired 9-10a ET
Aired September 11, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:19]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Live from the New York Stock Exchange, I'm Julia Chatterley. This is FIRST MOVE and here is your need
to know.
Boneheads: President Trump attacks the Federal Reserve arguing rates should be lower. Exchange Trades: The Hong Kong Stock Exchange makes a $39
billion bid for the LSC, and Apple slices prices, relatively -- relatively cheaper iPhones, and certainly cheaper streaming. It's Wednesday, it's
also September the 11th. And we remember, let's make a move.
Welcome to FIRST MOVE once again. Glad to have you with us, as always. As I mentioned there, it is September the 11th. And we will be observing a
minute of silence here at the New York Stock Exchange to remember those who lost their lives and those that were impacted 18 years ago with members of
the Emergency Services, as well, as you can probably see behind me, are going to be ringing the opening bell this morning, too, and we will bring
that to you live as always.
For now, though, let me give you a look at what we're seeing for the U.S. markets -- premarket this morning. We are a little bit higher, but we are
well and truly, as we've been saying all week, in wait-and-see mode right now.
An easy thing to do, perhaps we could argue here with major stock markets, sitting just one and a half percent away from record highs, though those
figures belie underlying shifts going on within the sectors and we'll discuss that later on in the show, but lots of risk events coming up in the
coming days.
The European Central Bank, of course, tomorrow potentially announcing a return to bond buying though Goldman Sachs warning overnight that fresh
stimulus might not be forthcoming, given the divisions in the ECB leadership right now. So that will keep investors guessing.
I'll tell you what though, one man who isn't second guessing the need for more stimulus is President Trump. He has been tweeting this morning. Let
me show you what he said, "The Federal Reserve should get our interest rates down to zero or less and we should then start to refinance on debt.
Interest costs could be brought way down."
He continues, "The USA should always be paying the lowest rate. No inflation. It's only the naivete of Jay Powell and the Federal Reserve
that doesn't allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of quote
'boneheads.'"
Naivete -- look, I've got it there. Now, some might say, that trade tariffs are also boneheaded hereto, some might say. Well, I can tell you
there is good news on that front. Let's get to the drivers because there is a temporary reprieve -- Beijing waiving fresh tariffs on 16 types of
U.S. products.
Christine, Romans joins us no this. Wow, Christine lots to discuss, including the fact I can't get my words out of my mouth this morning.
First of its kind, though, in this case.
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: Yes.
CHATTERLEY: Tariffs have already been applied. They're going to be waived going forward for a year. This feels like a huge step from China. Is it
an olive branch ahead of fresh talks? Or is this acknowledgement that tariffs are hurting the domestic economy or perhaps both here?
ROMANS: I think, a little bit of both. But the latter is a big driver here. I mean, you're talking about cancer treatment drugs, and you're
talking about the kinds of products you use to feed livestock, and in the production of their own agriculture industry.
So it looks to me like they're trying to make sure that really important parts of their economy aren't going to be hurt. And the social, frankly,
social stability in their country is going to be hurt by the higher prices, their cancer patient and farmers. That's, you know, pretty basic here.
So we've got two big rounds here, one list it's a total -- just you can waive these categories. It's everything from shrimp, shrimp seedlings,
fish meal for feed, lubricating oil and the like. The second list, these are also exemptions -- whey, mold release agent, base stock for lubricating
oil. Some of these you are going to be able to get a refund on if they've already paid these tariffs. Others, there's just a reprieve going forward.
CHATTERLEY: Yes, absolutely. And I didn't know that neither pork nor soybeans, of course --
ROMANS: Yes.
CHATTERLEY: Critical --
ROMANS: Politically sensitive -- not on that list.
CHATTERLEY: Yes. Yes, absolutely. I do want to talk about what President Trump said though, neither of us will ever condone the name calling or the
criticizing or the interference with the Federal Reserve here. But he does make an interesting point about utilizing low rates here.
Refinancing, borrowing longer term, when you can. Now this is an argument I've made about Europe. The governments in Europe should use the room that
they have here perhaps to borrow, to provide fiscal support to their economies, while rates are low, what do we think of this?
[09:05:11]
ROMANS: This is a sort of a new attack on the Fed, I think, that is pretty interesting. A couple of days ago, Stephen Moore, of course, you remember
who is somebody who the President wanted to put on the Fed, and that eventually was scuttled.
He is somebody who an op-ed piece in "The Wall Street Journal" with this very idea. He even use the term "once in a lifetime" to restructure,
refinance American debt.
The President makes it very simplistic here, like it's a home loan that can be, you know, that can be remortgaged, and it doesn't really exactly work
like that. There's some concern among bond market experts, for example, that while yes, you could maybe issues of new debt and very longer terms
and low rates, that might be a good idea for the U.S. to keep its borrowing costs lower going into the future.
What kind of signal you're sending to international investors, if you're promising negative rates and talking about restructuring all the debt that
we've already got out there? These are contractual obligations, legal, contractual obligations. It's not as easy as just one home loan.
But you're right, the point of the very low interest rates does give America kind of an interesting moment in time here and a lot of people have
said this is the time actually to be borrowing at very long terms for infrastructure build, for example, that will be the kinds of thing to add
to your debt pile for not necessarily maybe new tax cuts as we've already done.
CHATTERLEY: Yes, it's such an interesting question, quite whether the President needs to call up Steve Mnuchin, of course, and the Treasury who
issues debt versus the Federal Reserve.
ROMANS: It's not the Fed, right. And that's not the Fed's job. That's the Treasury, right.
CHATTERLEY: Yes, yes. Yes. Christine Romans. Thank you so much for that. All right. Let's move on because we've got some the potential deal
making going on.
Hong Kong Exchange is making a bid for the London Stock Exchange. We're talking a $39 billion tie up when you include the debt. The LSE stock up
from five and a half percent in the session today. Clare Sebastian joins me now.
This is an interesting one, Clare. I make this a 23 percent premium for LSE shareholders trying to entice them away from that whopping refinitive
offer that they made just a few weeks ago. What do we think of this?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Julia, it's interesting, because it does seem to be presenting a binary choice between one deal or
the other.
The Hong Kong Exchange is saying in that statement that essentially the deal would be contingent on dropping that $27 billion bed for a refinitive.
Now, the stock price up as you see five percent this morning. It was up a little bit more.
So clearly, shareholders do see this as a potential positive, but it's also up, the LSE stock has still about 20 percent since before that refinitive
deal was announced. It's hard to see at this moment, which one shareholders are going to see as the most lucrative going forward.
The LSE though for its part says it's still committed to that refinitive bid, and it describes the bid from the Hong Kong Exchange as quote,
"unsolicited preliminary and highly conditional." And it would of course, be a completely different direction for the company were they drop the bed
for a refinitive that would have created a market data giant to rival Bloomberg, a combination of Hong Kong Exchange and LSE would be more of a
giant in terms of market infrastructure to rival the likes of intercontinental exchanges in the U.S.
So you know, a couple of competing forces really here, but as I say, highly conditional preliminary and unsolicited is how the LSE is describing this
this morning.
CHATTERLEY: But that is exactly the point. These are two completely different directions and a number of people already coming out and sort of
scratching their heads and going, "What would be the financial benefits here?"
But let's talk about some of the complications. What about the regulators here? We're talking about, in the end, a special administrative region of
China. Is this effective, and will the regulator's look at this as a Chinese exchange buying a very strategically important exchange over in
Europe? Are they going to be willing to sign off on that?
SEBASTIAN: Yes, it does seem like the politics is going to be a very important part of this going forward, Julia. We heard Andrea Leadsom, the
U.K. Business Secretary on TV this morning saying that although she hadn't really looked at it yet, they would be thinking about the security
implications of this like.
Look, this is a Hong Kong exchange that has been tightening its ties to China in recent years through stock connect programs and all of that, plus
we have the backdrop in Hong Kong, the unrest that's been going on there fueled or rooted mostly in fears of rising Chinese influence in that
region.
So that will certainly inform the decision making around this going forward, and of course, we have to mention Brexit. It's possible that the
weakening pound has made the LSE more attractive as a takeover target, but we have a situation here, Julia, where these two exchanges could merge.
Two exchanges from some cities that because of local turmoil of both contemplating whether or not their status as a financial center is under
threat. So very interesting timing here for this deal.
CHATTERLEY: Yes, better together. Clare Sebastian, thank you so much for that update there. Now, regulators are keeping busy all over the world.
Amazon, reportedly under investigation. U.S. antitrust regulators interviewing smaller Amazon sellers. The big question, it seems they're
asking is Amazon using its market power to hurt competition here?
[09:10:14]
CHATTERLEY: Matt Egan joins us on this story. This is an interesting one, what they're being asked here is, what proportion of their revenues are
done with Amazon versus other players here like an eBay or a Walmart, all they to leveraged here to Amazon in terms of their percentage of revenues?
It's an important question.
MATT EGAN, CNN BUSINESS LEAD WRITER: Julia, clearly, the crackdown on big tech is intensifying here. Bloomberg is reporting that the FTC is
interviewing small business owners that use the Amazon Marketplace to see whether or not the tech giant is using its enormous size and influence to
unfairly take advantage of competition.
And what's interesting is that this report suggests that the FTC has really started a sweeping and very serious probe of Amazon, and they're basing
that on the fact that the FTC is devoting some serious manpower to these inquiry, and they're also asking really long questions.
I mean, these interviews have been going on apparently, for something like 90 minutes. Now, we should stress that we haven't confirmed this news
ourselves, we've reached out to Amazon and to the FTC, haven't heard back yet.
But you know, we saw earlier this morning, Amazon shares were dipping premarket on this news. Because you know, it really is just another
reminder of the serious antitrust scrutiny that Washington regulators are putting on big tech, which is a really big deal, because big tech is really
the heart of the bull market.
Just earlier this week, we learned that 50 U.S. Attorneys General, they had announced this sweeping investigation into Google, Facebook, as well as
facing scrutiny from eight states and the District of Columbia. And that's on top of Federal scrutiny.
The FTC is investigating Facebook. The Justice Department is looking at Google. There's a House Committee that is also looking at big tech. So I
think that what is really important here is that, you know, even if this doesn't result in some sort of a breakup of any of these companies, you
know, there are costs here.
I mean, there's obviously legal fees, there's distraction costs for the management, as well. And it really acts as kind of a cloud over the sector
that we should expect will weigh on those lofty multiples for these companies. So Julia, clearly this issue is not going away anytime soon.
CHATTERLEY: Yes, it's interesting. And I will make the point that Amazon argue all the way through that, look, they are just four percent of the
U.S. retail market, even if you total what they are in terms of e-commerce sales in the United States, which is just shy of 40 percent.
The question is does that defense hold when you're going down to the granular level in trying to understand how much and how much dependency
there is on individual sellers on the Amazon platform. It's going to be fascinating to watch. Matt Egan, thank you so much for that.
All right, let's move on. Apple investors seemingly unmoved by the latest announcements, 11 is the magic number. But premarket gains show a lot less
than that. We will bear in mind about 35 percent in the past 12 months. Apple banking on fresh models to reverse a year of sunken sales.
Seth Fiegerman joins us now on this story. Seth, they delivered exactly what we were expecting, and that's the problem here. We're looking for new
innovation and we didn't get it. What did you make of the announcement yesterday?
SETH FIEGERMAN, CNN BUSINESS TECH EDITOR: It's certainly true. There was no radical redesign here, there was no breakthrough feature. The real
breakthrough here, it was an aggressive pricing strategy, which is not nothing.
You know, after a year of being criticized and raising concerns on the market that they were reducing their customer base effectively, because
people were taking longer to upgrade, and we're getting scared by four figure price tags, they did introduce a baseline model in this new line up
that's $50 cheaper than they had offered last year at you know, some $700.00 price tag.
And we saw this repeat throughout the event. They offered a cheaper iWatch than we've ever seen. They offered -- excuse me -- Apple Watch. They
offer a cheaper TV subscription service and people were expecting at $4.99.
It seems as though Apple understands they have to play ball at the lower end of the market here in order to broaden their customer base. But that's
coming instead of them putting through a breakthrough feature that would naturally attract new users.
CHATTERLEY: Yes, I agree with you, an aggressive pricing strategy going on here, perhaps acknowledgment that the price rises that they've put through
in the past year and with the iPhone X in particular, just aren't sustainable in this kind of market with softening sales here.
What do we make of the price of Apple Plus, of the streaming? It is half the price, even under of the likes of Netflix and Disney here, but you
know, I look at the relative content that they provide. And that's dwarfed by anything Disney and Netflix can provide, so value or not value? What do
we think, Seth?
FIEGERMAN: You know one analyst I saw yesterday described it a showstopper and I do think that's right. Now, it's going to still depend on how much
you care to watch Jennifer Aniston in a morning news show.
That said I do think that Apple is willing to be aggressive here and put billions of dollars, which they're rumored to be doing towards premium
original content, knowing that it can be a loss leader for them, and they can afford to charge less for this than a company like Netflix where that's
their entire business. They are a threat in this marketplace.
[09:15:29]
CHATTERLEY: I can tell you that morning news shows are the most thrilling thing on television. Obviously, you would want to sign up, obviously.
Seth, thank you so much for that. Seth Fiegerman there.
FIEGERMAN: Thank you.
CHATTERLEY: All right. Let me bring you up to speed with some of the other stories that we're following around the world. Scotland's highest
Court of Appeals has ruled that the Prime Minister's suspension of British Parliament is unlawful.
Parliament has been prorogued or shut down for a total of five weeks and will return on October 14th. The government says it is disappointed by the
legal decision that will appeal to the U.K. Supreme Court.
The body of Zimbabwe's former President Robert Mugabe is expected to arrive back in his home country soon for burial. Earlier on Wednesday, a police
motorcade in Singapore escorted the vehicle carrying his casket to the airport. Mugabe died on Friday last week after spending months in a
Singapore hospital.
Another top U.S. official has been booted out of the Trump administration. President Trump says he fired the National Security adviser, John Bolton.
Bolton says he is the one who offered to resign. The two men often clashed on foreign policy including over countries like North Korea and Iran.
All right, we're going to take a quick break here on FIRST MOVE, but still to come, the car industry at a crossroads. China climate demonstrations,
and Brexit loom over the Frankfurt Auto Show. We are live in Germany with an update.
And save as you shop. In our latest edition of "Crypto Crazy," we speak to the CEO of Lolli about an easy way to get a piece of the Bitcoin action.
Stay with us. We're back in two.
(COMMERCIAL BREAK)
[09:20:20]
CHATTERLEY: We've just been observing a one-minute silence to remember those who lost their lives and were impacted or involved in the September
11 attacks, 18 years ago, today.
Joining us now, Art Hogan. He is the Managing Director and Chief Market Strategist at National Securities Corp. Art, always a pleasure to have you
on.
ART HOGAN, MANAGING DIRECTOR AND CHIEF MARKET STRATEGIST, NATIONAL SECURITIES CORP.: Thank you. Thanks for having me.
CHATTERLEY: It's important that we remember this, for most people, whether they were here or watching around the world, it was a moment they will
never forget.
HOGAN: Absolutely, it's hard to believe it was 18 years ago. I've worked in the World Trade Center, and you know, every time this date rolls around,
it just feels like it was 10 minutes ago, so yes, it's always important to remember all of the good friends and the co-workers that we lost, and
particularly, all the folks that had to rush into the fire and help save lives, and they continue to do so as their job every day.
CHATTERLEY: I know and we remember them, too. So it's a great point, and they'll be ringing the opening bell as well today. Grief, lots of hugs
today.
HOGAN: Yes, indeed, Julia.
CHATTERLEY: All right. Let's talk about markets. What do you think of what's going on? I made the point on the show where one and a half percent
of record highs in aggregate for these majors, but beneath the surface, the shift has going on.
HOGAN: It's unbelievable. It's such a good way to put it. When you think about that. The indexes has been very, very stable. And yet yesterday is
a perfect example, S&P 500 virtually unchanged, a hundred stocks were up two percent, a hundred stocks were down two percent.
So what you're seeing is all of the very loved names for almost all of 2019 getting sold, profit taking the momentum and defensive. And all of those
unloved, the unwashed masses are getting sponsorship for the first time this year.
Hard to know how long that lasts. We've seen this happen about three times in the last two years. It's usually a trend that stops abruptly, but it
started abruptly.
CHATTERLEY: It's a temporary. It's been a temporary phenomenon when we've seen it.
HOGAN: Right.
CHATTERLEY: And what we're talking about is people selling out of some of the technology stocks getting back into things like energy and financials,
tie it to interest rates for me, because I feel like we've turned blue in the face talking about lower and lower and lower yields bags the things
like banks, concerns about recession risk, and then, we've also seen in the last two weeks or so is starting to see rates sort of coming off the lows
again.
HOGAN: Yes.
CHATTERLEY: It's all tied.
HOGAN: That's a really good point. I think that when you think about interest rates, the yield on that 10-year in August got very low, probably
oversold, and I think that overshoot, bouncing back has sent a signal that, "Hey, perhaps the worst is not going to happen in the near time."
So basically, an advance of about 22 basis points from 1.47 to 1.69, as of yesterday, and that's a pretty significant move, and it didn't yield on a
10-year. So that sends a signal to investors, like "Hey, maybe we don't have to be in that safety, momentum and the safety of defensives. Maybe we
can look at the stuff in the middle that hasn't had any sponsorship this year." And I think that's what's going on right now.
CHATTERLEY: You know, it's interesting, I think we can tie it to a presidential tweet, basically saying that the trade talks are back on. A
phantom phone call that we never really confirmed.
HOGAN: Yes, that's right.
CHATTERLEY: At that point, I saw some comments from you, and it was so important. You said you don't really care whether the phone call happened
or it didn't. The point is the President is trying to facilitate trade talks progress, and that was sort of the message to the investors, too.
HOGAN: That's exactly right. I don't care if he makes this up. He wants to have trade talks. And I think that's what we are getting done.
CHATTERLEY: Such a great point.
HOGAN: Right? And it really -- but it's also important to remember, we're only one tweet away from triumph or tragedy on trade at any point in time.
I think right now we're leaning in the direction of both sides wanting to get something done. We saw more of that today.
CHATTERLEY: Yes.
HOGAN: There may be a mini deal over the next couple of weeks, working into a larger deal. But I don't think this is an administration that wants
to carry this fight into the election cycle and that's coming upon us really quickly.
CHATTERLEY: And in the interim, Central Banks are providing support. We're expecting to get some announcements from the European Central Bank
this week, which investors are waiting for. And then of course, the Federal Reserve, this week.
HOGAN: Yes. Mario Draghi has got a tough one here. So he has only eight days left or so, and I mean, a couple of weeks left of his eight-year
tenure. And what's interesting is, does he really trying to swing for the fences as his last central policy move? Or is he going to do the usual
Mario Draghi, "Hey, you know what? We'll do whatever it takes, but not today."
And my guess is, it is going to be more disappointing that it is because he has really backed himself in a corner on this one. In July 25th, he said,
we're going to be doing a lot. But he has done this before. He said, "Well, we're already doing a lot, but not just yet." And then we passes
this along to his predecessors.
CHATTERLEY: The next -- yes, the next --
HOGAN: Yes. There you go.
CHATTERLEY: Yes, Christine Legarde.
HOGAN: Yes, indeed.
[09:25:34]
CHATTERLEY: Good luck with that. Do you think he perhaps announced this bond buying because he says, "Look, we will start at some point in the
future."
HOGAN: Right.
CHATTERLEY: Because that's kind of the midway point between the two? More stimulus is coming, just not yet.
HOGAN: Just not yet, and that feels like very Mario Draghi-ish, right? It's like, yes, we're definitely here. We're going to do whatever it takes
-- next week. And I think that's exactly --
But I think the markets have gotten ahead of it. There's also an expectation both in the magnitude of quantitative easing that's announced
and the magnitude of how negative they go on their rates.
CHATTERLEY: Yes, in the absence perhaps of leadership from politicians hereto. Very quickly. Fed, quarter point cut next week given. Do they do
more?
HOGAN: They want to do more, I don't think they should do the quarter point, but that they're kind of they are in that place where that's exactly
where they go.
There's too much going on for them to do nothing, but there's too many people out there maybe that don't want them to do 50 basis points for them
to make the most. So we're talking 25 basis points now.
CHATTERLEY: Yes. Now, you're committed.
HOGAN: Yes, that's it.
CHATTERLEY: Get on with it.
HOGAN: Exactly.
CHATTERLEY: Next. Art Hogan, great to have you with us.
HOGAN: Thank you so much.
CHATTERLEY: As always. Art Hogan, the Managing Director and Chief Market Strategist at National Securities Corp. there. We are counting down to the
market open this Wednesday. Plenty more to come here on the show, including our latest "Crypto Crazy" segment, too. So stick around. We'll
be back after this with the market open.
(COMMERCIAL BREAK)
[09:30:00]
CHATTERLEY: Welcome back to FIRST MOVE. That was the opening bell this Wednesday. Officials from the New York Police and Fire Departments here in
New York ringing the opening bell in honor of the fallen heroes of September the 11th.
As we begin, a somber day of trading here at the New York Stock Exchange. We've got mostly higher open for stocks. The Dow on track for its sixth
straight winning session. China also helping the mood, as we were discussing earlier on in the show, lifting tariffs on some U.S. goods for
the first time in fact since the trade war. So an unprecedented step. A signal? Perhaps ahead of fresh talks next month.
Bond yields, as we were discussing with Art Hogan, also in focus. The 10- year breaking above 1.7 percent here. We also had the wholesale inflation numbers out for the United States today, core inflation rising a hotter
than expected 0.4 percent last month, but still below the Fed's two percent year-over-year target. No problem there if the Federal Reserve wants to
find an excuse not to cut rates. It wasn't in those numbers.
All right. Let me give you a look at the global movers. The London Stock Exchange trading up six percent right now after Hong Kong Exchanges made a
$39 billion bid. The merger is aimed to quote "redefine global capital markets." Tough choices here for the London Stock Exchange.
GE also in focus. The company giving up majority control of the oil services firm, Baker Hughes. GE will raise nearly $3 billion as a result,
but it's likely to cost $7 billion in accounting charges.
Apple also in focus here trading higher as investors trying to unpick the fruits of its new products. The tech giant says they are relying on its
new iPhone 11. The smartphone sales continue to slow. Now, there's no question that Apple launches are a big deal. There's always buzz, too,
around a new iPhone back in 2007 though. Remember that? The original iPhone launch, I have to say, it did feel way more exciting. Listen in.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: He's been out here for two days. She has been out here for three days, and these two over here, they've been out here for
four days and counting.
UNIDENTIFIED MALE: Touch screen.
UNIDENTIFIED FEMALE: The touch screen is cool.
UNIDENTIFIED MALE: Yes, it's cool.
UNIDENTIFIED FEMALE: What about the entertainment stuff because I hear --
UNIDENTIFIED MALE: Like, iPod, yes, you could listen to music, you can watch YouTube, that's cool.
UNIDENTIFIED FEMALE: Some people say only a loser would sit and wait in line. What do you say to them?
UNIDENTIFIED MALE: I say to them, "Go to hell or come sit here with the rest of us."
UNIDENTIFIED MALE (voice over): For all the hype, analysts stress Apple is a long way from becoming a smartphone seller.
IAN FOGG, ANALYST: It will take Apple a while for this to be a mass volume product. Apple have sold millions of iPods. Nokia have sold hundreds of
millions of mobile phones.
UNIDENTIFIED MALE (voice over): But it's the buzz surrounding the iPod that gives Apple so much hope that customers will be willing to upgrade
their music players and ditch their old phone.
(END VIDEO CLIP)
CHATTERLEY: We remember those days done. Dan Ives, analyst at WedBush Securities joins us now. This is clearly not the same excitement when we
see a new iPhone launch. I mean, there were people there queuing for three or four days. What did you make of this latest announcement though because
this is Apple getting aggressive on pricing -- relatively aggressive.
DAN IVES, ANALYST, WEDBUSH SECURITIES: This is cooked in Cupertino, taken off the gloves and aggressively going after Netflix, Disney and other
streaming players. $4. 99 was a massive aggressive price. In our opinion, it was a game changer for them to really go after share. We think 100
million consumers in the next three to four years is now with the goalpost.
CHATTERLEY: That's interesting. So iPhone prices aside, you're going straight in for the streaming $4.99 for Apple Plus. You know, I get it. I
know it's cheap relative to Netflix and Amazon Prime, they are video offerings, too. But then I look at the content library of Amazon, of
Disney, of Netflix and I go Apple may have the financial firepower, but it doesn't have the content. Really?
IVES: That's a good question. That's the missing piece of the puzzle and maybe this is just the first step toward ultimately what I think is going
to be a larger acquisition of a studio for Apple. So I view from a content perspective, they're aggressively stepping up content, or again, it go to
$6 billion to $7 billion a year.
But I do believe a larger studio, a Sony and MGM could be potentially in the mix as they go forward.
CHATTERLEY: And so pricing here of $4.99 is smart because you go, "What? What's $5.00? Add it in." And they basically continue to build the
ecosystem here.
IVES: And it's the install base. That's the golden jewel, 900 million active iPhones. That's what the cooks in Cupertino are going after.
CHATTERLEY: Tell me about the message is from the pricing now on iPhone 11 on some of the repricing, lower as well by $250.00 on some of the older
models and they're not that old. You know? We are only you talking 2017 iPhone models? What's the message that Apple is sending here and is this
this the way to try and build out, recapture market share in places like China?
[09:35:23]
IVES: Significant move by Apple. I think now is really the headline. It's them cutting prices, showing that they do a bit pricing hubris last
year with the XR, swung and miss. It's going after China's 60 to 70 million iPhones in a window of an upgrade opportunity. That was an
aggressive move, and it shows a change of tune in Cupertino.
CHATTERLEY: You know, I've seen some analysts coming out and saying, "Look, they already still have to pay a premium -- Chinese consumers -- if
they want to buy the iPhone." Even with these price drops, you're talking between 10 percent and 12 percent on the iPhone 11, up to 23 percent on the
Pro in the Pro Max for iPhone 11 is enough, it's is enough of a cut.
IVES: But it's a premium phone. Is Blue Yard going to cut their prices $200.00 a bag? So it just comes down to what they're doing on iPhone.
It's a premium pricing, but this price cut does signal what they needed to do. And that's why China, given what you're seeing there, competition-
wise, this was an important move. And I continue the overall -- a step in the right direction for Apple in terms of yesterday.
CHATTERLEY: Particularly given the upgrade cycle and you keep talking about this. There's so many iPhone users out there that are getting into
that window where they could potentially upgrade. They're being induced to do so.
IVES: A third off that install base in a window of an upgrade opportunity. That's why you buy the stock here.
CHATTERLEY: Ha-ha-ha. So talk me through it because I was just saying just a few moments ago that actually the stocks barely budged as a result
of this announcement. What are the investors seeing? Or is it just the case that we've made what? Forty percent gains over the last 12 months?
IVES: Yes. It's a digestion process. I think for the next step, they need to prove that you you'll see the managed cycle that's going to
increase rather than decreases, ensure that services they come on with price, that's going to be the one-two punch to see a stock with new highs.
Also the tariffs. It's a $20.00 to $25.00 overhang on the stock as Apple continues to be the poster child of the U.S.-China trade war.
CHATTERLEY: And this is key. You said, you were one of the first analysts to come out and actually quantify what you thought the impact would be of
the additional tariffs and we've seen a few of them suspended, some of them will kick in in December. You were like, "Look, this is going to have a
material impact." And that is still overhanging Apple.
IVES: Tariffs happen on December 15th.
CHATTERLEY: Yes.
IVES: It could potentially cut EPS about four to five percent. That's why right now, if tariffs ease $20.00 to $25.00, it will be overhang in the
stock.
CHATTERLEY: So you're willing to gamble and say, "Look, hang on in there, there's still value in the stock, even if that potentially kicks in in
December."
IVES: Some of the parts and services $400 billion to $450 billion in upgrade cycle in my opinion, we're still pounding the table in Apple.
CHATTERLEY: Don't panic. Amazon, the news this morning that reportedly the FTC is talking to individual sellers trying to understand if Amazon is
abusing their marketplace.
We keep coming back to this and I've lost count of the number of investigations now that are going on for all of these big players. Do we
need to be worried today? Or is this again years before we see action?
IVES: I think it's more of a political grandstanding going on. Barks worse than bite. I've seen it with Microsoft. I think, ultimately, it
results in fines rather than business model tweaks where buyers are in any weakness here and I continue to think here, it's fines not any sort of
business model changes. That's what the Street cares about.
CHATTERLEY: No one is being broken up.
IVES: No.
CHATTERLEY: Nice. There are regulators and politicians in D.C. right now screaming. Great to have you on.
IVES: No, thank you.
CHATTERLEY: Dan Ives of WedBush Securities there. All right, we're going to take a quick break here on FIRST MOVE. But coming up, full speed ahead
to the Frankfurt Auto Show. We will take a look at what's putting the brakes on the auto industry. Stay with CNN.
(COMMERCIAL BREAK)
[09:42:00]
CHATTERLEY: Welcome back to the FIRST MOVE. The Frankfurt Auto Show kicked off in glamorous style. We've already seen the first electric
Porsche, a hybrid Lamborghini and a brand new logo for Volkswagen, but one of the shiny new cars certainly take the spotlight as the threats lurking
in the shadows that may also steal the show.
Anna Stewart is in Frankfurt, who better to send to a glamorous location, our intrepid reporter. Anna, talk us through it. It sounds like a tough
gig.
ANNA STEWART, CNN REPORTER: Yes, I mean, lots of shine and sparkle. You'll see the new Porsche Tycan all-electric vehicle behind me. But
you're right, you pop open the hood in this sector, and you see all sorts of problems. Lots and lots of headwinds. German car production in
decline. And this contributes five percent of German GDP. So it's a really big problem.
Now, from all the gloomy reports we've had this week from German economists, it looks like Germany is already in recession. So going
through those headwinds. U.S.-China trade war, CO2 emissions regulations. Those are getting much, much tougher for the automakers to reach.
And then, of course, Brexit and that is really the heaven that looms very large at the moment, potentially, of course, at the end of next month if
the Prime Minister of the U.K. gets his own way. Possibly a no deal.
And speaking to the Head of the German Automakers Association, they say that they are really worried about this. A no-deal Brexit will be
absolutely dire. It's already having a hit on car production and exports. So I asked, what is he doing? Is he lobbying the German government? Is he
trying to get a softer stance on Irish backstop? Here is what he said.
(BEGIN VIDEO CLIP)
BERNHARD MATTES, PRESIDENT, GERMAN ASSOCIATION OF THE AUTOMOTIVE INDUSTRY: We have a clear position and we have made this very clear to the Chancellor
and the whole government here in Germany. Clearly, we do want to have a Brexit, the orderly Brexit based on a deal with good framework for our
trade and for business on one hand.
On the other hand, we need to have the 27 remain as a market and unified because at the end, if we invite others to also leave the E.U., that will
be even worse for us.
(END VIDEO CLIP)
STEWART: He says that all the German carmakers are as ready as they can be for a potential hard Brexit and that actually echo comments we heard from
the Chancellor, Angela Merkel this morning speaking to Parliament and she says they're going to do everything they can to reach a deal with the U.K.,
right up to the very last minute, but they are ready for a disorderly Brexit -- Julia.
CHATTERLEY: Yes, it's just painful. I remember we spoke to the Aston Martin CEO recently. And he said, look for them, actually, Brexit has
already happened. They've seen the detrimental effect. They've had to make changes. They've had to stockpile. It's a nightmare for these guys.
Interesting, though, to your point as well about what we're seeing in terms of the German economy itself. What are these guys saying about demand in
the German economy and the outlook here? Because to your point to, there are fears that actually, the economy there is already in recession.
STEWART: Yes, and it's interesting, because if you look at the auto sector, it is in decline globally. You know, last year was the first year
of global car sales actually declining since 2009. So this isn't just a German issue, but of course, it contributes so much the German economy.
[09:45:09]
STEWART: So it has heightened fears here. I think a lot of the car makers at the moment are most concerned with how much money they're putting into
electric investments, how much they're going to settle on. You just look at this Porsche. How many people will actually buy? This is the problem.
First of this year, 90 percent of car sales all around the world was still combustion engines, people aren't buying electric. And car makers say it's
the government's fault. The infrastructure isn't there. They've got these regulations they're trying to meet. They're investing billions. But if
the infrastructure isn't there, customers simply will not buy them.
CHATTERLEY: Yes, it's such a great point, investing for a future that's uncertain at a time when actually you probably need to be drawing your
horns in. Anna Stewart, great, great story. Thank you so much for that.
All right. We're going to take a quick break, but coming up, a crypto pioneer, who is making it as easy as ABC to get into Bitcoin. Meet the 30-
year-old CEO of an exciting startup called, Lolli.
(BEGIN VIDEO CLIP)
ALEX ADELMAN, CEO, LOLLI: We've never been so connected, as we have with Bitcoin, like the internet connected us all socially. And then Bitcoin
came in and connected us all through commerce.
(END VIDEO CLIP)
(COMMERCIAL BREAK)
TEXT: Crypto Crazy.
CHATTERLEY: If you've wanted to get into cryptocurrencies or Bitcoin for example, with minimal effort, I want to share one way of building some
crypto savings with very little investment. Lolli -- it's like a shopper's loyalty rewards plan.
It lives as a browser extension and kicks in when you use a partner store. You pay for goods in dollars and get rewards back in Bitcoin. It's only
available in the United States for now, but Lolli's co-founder, Alex Adelman told me it's an easy introduction for crypto newbies.
(BEGIN VIDEOTAPE)
ADELMAN: The interesting thing about Lolli is that it turns every one, anyone who shops which is everybody into an investor in this scarce asset.
So there's only 21 million Bitcoin and there will only ever be 21 million Bitcoin.
And a lot of people, I would say less than one percent of the world would consider themselves an investor. What Lolli does is it takes a shopper and
it gives them the ability to get into Bitcoin without having to invest in it.
So if a consumer was to go on an exchange to buy Bitcoin, it would take a week, maybe more to go sign up, invest their hard-earned money, and then
actually accumulate Bitcoin.
What we do is we take every single purchase that you make, and we let you earn Bitcoin when you make those purchases.
CHATTERLEY: For me, the key here is accessibility. Suddenly to someone who reads about Bitcoin or cryptocurrency, hears about it, but just things
I have no idea what's going on there. It perhaps starts to get them comfortable with the idea of owning a cryptocurrency like Bitcoin and
getting comfortable with maybe transferring it to dollars, maybe spending it if the retailer accepts Bitcoin, is that right? That's what you were
trying to achieve here.
[09:50:03]
ADELMAN: Yes. So, Lolli makes it extremely easy and Lolli makes Bitcoin accessible to everybody.
CHATTERLEY: Are you making money doing what you're doing right now?
ADELMAN: Yes. So our business model is very simple, and we make money from day one. And we make money when our user makes money. And so
everyone is mutually benefiting in this business model.
So the merchants, when our users shop at our different merchant sites, the merchants pay us in U.S. dollars, and then we send that in Bitcoin to their
Lolli wallet. So we take a portion of that. The merchants are paying us.
So one thing I like to think about is what everyone is optimizing for in exchange it is optimizing for you transferring Bitcoin to potentially other
cryptocurrencies. We're optimizing to just share Bitcoin with everybody, and so everybody wins. It's a flywheel effect.
The consumer wins because they're earning Bitcoin, the merchant wins, because they are getting new customers that maybe would have shopped
elsewhere. And then we win, because we're, you know, the middleware, that's like sharing Bitcoin with everybody and helping the merchants earn.
CHATTERLEY: How many of the people that are doing this, are already comfortable with cryptocurrency versus people that are just learning new
and then go on to accept perhaps more cryptocurrency as they continue to shop?
ADELMAN: So that's a great question, because a lot of what we're doing is we're trying to introduce new people into Bitcoin.
CHATTERLEY: Yes.
ADELMAN: And into this space. So when we first started, it was a lot of Bitcoin maximalist, people who already had Bitcoin that wanted more. And
it was almost entirely that.
CHATTERLEY: Yes.
ADELMAN: As we've continued to grow, we found that those people can finally share an application with their friends and their family for them
to earn Bitcoin. So what we found is we're nearing 50 percent of our users are now new to Bitcoin, which is really, really exciting.
CHATTERLEY: Wow. So it is an on ramp, basically, to cryptocurrency use.
ADELMAN: Yes. And we're just getting started, so everyone can get in really, really early. We launched a year ago, and so we just started. We
have almost a thousand merchant partners, and we have tens of thousands of users that are earning Bitcoin every day on their everyday purchases.
(END VIDEOTAPE)
CHATTERLEY: Yes, one of the consistent push backs I hear is that Bitcoin, like other cryptocurrencies has been used for various nefarious activities,
which has tarnished the brand to some degree. I asked Alex, whether there a specter of regulation is needed and necessary to keep the crypto craze
under control and give it credibility.
(BEGIN VIDEO CLIP)
ADELMAN: Regulators can work with it. And I think that regulation will come.
CHATTERLEY: Yes.
ADELMAN: To make sure that people use it responsibly. And I want to be held accountable for being a company that uses it responsibly. I don't --
I just don't think that it needs -- Bitcoin itself does not need regulation. It just is.
Everyone in the entire world can see the source code, can see what it was - - how it was created, and so everyone can agree that it has value and that it is this like cryptographically secure like asset that everyone can own.
Regulators can actually look at it and say, "Okay, I can either work with it or I can work against it." And the regulators that work against it, I
think will be penalized, whereas the ones that work with it, it will increase economic activity. It will connect the entire world through
commerce, and that is what makes it so powerful.
CHATTERLEY: What does the future look like for Lolli? Talk to me about your plans? Expansion plans? What you're working on right now.
ADELMAN: So we've just started work on a mobile app, and that mobile app is going to let everybody earn so easily and on daily purchases. Right
now, you can earn on all online purchases with about a thousand merchants all across the U.S.
CHATTERLEY: Yes.
ADELMAN: Part of our expansion is going into mobile. And so you can have that that web wallet and your mobile wallet, and you can earn on daily
purchases going and getting your coffee all the way to your flight for work or your office supplies whatever -- we want every single purchase to drive
attention to Bitcoin and for you to be able to earn on everything similar two points.
CHATTERLEY: Is anyone else doing this?
ADELMAN: Not as well as us. We're the first and I'm biased, but I think we're the best.
CHATTERLEY: You're pretty sure that you can continue to grow and not be challenged by any upcoming competitors?
ADELMAN: Well, I think our team -- so I started this with my old co- founder. We've been working together, his name is Matt Senter. We've been working together for about eight years now, and we reassembled our old
team.
Our old team was acquired by eBay. It's the biggest cashback company in the U.S. and so we know the space I think better than most people and you
know, we stay humble. We understand that competitors can come out. Incumbents can come in.
CHATTERLEY: Amazon? MasterCard? I think these kind of people have an incentive to do something like this, too. Would they be a threat or you
think you've got better technology and a better head start?
ADELMAN: I think we have a really good head start. Incumbents can come in. I think the more people that come in, the better because the tide
rises all ships.
CHATTERLEY: Yes.
ADELMAN: And because we're the first, I think we've created a really solid community and brand around Lolli that I think we will rise with them. I
personally -- like I'm talking with MasterCard, I'm talking with Visa. I'm talking with Amazon. We want to work with all of these partners because it
makes Lolli stronger.
[09:55:08]
CHATTERLEY: Are you open to being bought?
ADELMAN: Not right now. Yes, I mean, I want to be here, IPO and I want to ring the bell with you.
CHATTERLEY: Really?
ADELMAN: Yes.
CHATTERLEY: Really?
ADELMAN: Let's do it.
(END VIDEO CLIP)
CHATTERLEY: All right, the Lolli CEO there. Now we do have President Trump at the Pentagon this morning for a Memorial for September the 11th.
Speaking right now, he is being introduced by the Pentagon Secretary Mark Esper. We've also got the Joint Chiefs Chairman Joseph Dunford there, an
observance ceremony at the Pentagon Memorial, and we are of course 18 years after the Defense Building was attacked by terrorists on September the
11th.
We're going to see a name reading, plus remarks and a wreath laying ceremony. In fact, President Trump just being introduced as you can see
him shaking hands there with the Pentagon Secretary. Let's listen in to what he has to say.
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Thank you very much, Secretary Esper. Today, our nation honors and mourns the nearly 3,000
lives that were stolen from us on September 11, 2001. On these grounds, 184 people were murdered when al Qaeda terrorists overtook American
Airlines Flight 77 and crashed it into the Pentagon.
For every American to live through that day, the September 11th attack is seared into our soul. It was a day filled with shock, horror, sorrow, and
righteous fury.
I vividly remember when I first heard the news. I was sitting at home watching a major business television show early that morning. Jack Welch,
the legendary head of General Electric was about to be interviewed, when all of a sudden, they cut away.
At first, there were different reports. It was a boiler fire. But I knew that boilers aren't at the top of a building. It was a kitchen explosion
in Windows on the World. Nobody really knew what happened. There was great confusion.
I was looking out of a window from a building at Midtown Manhattan directly at the World Trade Center. When I saw a second plane, at a tremendous
speed go into the second tower. It was then that I realized the world was going to change.
I was no longer going to be and it could never ever be that innocent place that I felt that it was. Soon after I went down to Ground Zero with men
who worked for me to try to help in any little way that we could. We were not alone.
So many others were scattered around, trying to do the same. They were all trying to help. But for the families who join us, this is your anniversary
of personal and permanent loss.
It is the day that has replayed in your memory a thousand times over, the last kiss, the last phone call, the last time hearing those precious words,
"I love you." Then the attack.
The anguish of knowing your family member had boarded one of these flights or was working in the World Trade Center or serving right here at the
Pentagon.
You waited, you prayed, you answered that most dreaded call, and your life changed forever.
To each of you, the First Lady and I are united with you in grief. We come here in the knowledge that we cannot erase the pain or reverse the evil of
that dark and wretched day.
But we offer you all that we have -- our unwavering loyalty, our undying devotion, and our eternal pledge that your loved ones will never, ever be
forgotten.
Eighteen years ago, the terrorists struck this citadel of power and American strength. But the enemy soon learned that they could not weaken
the spirit of our people.
In times of distress, the heart of the American Patriot only grows stronger and more today determined. Even in the midst of the attack, the world
witnessed the awesome power of American defiance.
[10:00:10]
END
