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First Move with Julia Chatterley
Fed Chair Jay Powell Cuts Rates And Leaves Room For More To Come; Trump Administration Overrides California's Strict Car Emissions Policy; Iran's Foreign Minister Issues A Warning To Saudi Arabia And The U.S. Over Future Military Action. Aired 9-10a ET
Aired September 19, 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: Live from the New York Stock Exchange, I'm Julia Chatterley. This is FIRST MOVE and here is you need to
know. Keep calm and cut along as Fed Chair Jay Powell cuts rates and leaves room for more to come. California Dreaming: The Trump
administration overrides the state's strict car emissions policy. An All- Out War: Iran's Foreign Minister issues a warning to Saudi Arabia and the U.S. over future military action. It's Thursday. Let's make a move.
A warm welcome once again to FIRST MOVE and a jam packed show. I tell you, speaking of moves, first came the Federal Reserve's move and then a global
central bank bonanza. More words, less action, perhaps on the whole and I'll walk you through that in just a second.
But first, take a look at features right now. We're pretty flat to a touch higher, a tenth of a percentage. As you can see, it follows a volatile
session yesterday, though, net-net, majors ending at the session unchanged.
I think Jay Powell has to be happy with that. Views of course on what to do next are clearly split, but Powell stressed that the Fed will do more if
it needs to, and I think the markets are seeing that right now -- it's a glass half full. Now maybe someone filled President Trump's glass a little
hereto. He blasted the Fed, Thursday saying they had failed and they lacked guts.
But he said on TV today that Powell's job is safe. Good news, because today's job actually is more about plumbing than central banking for Jay
Powell.
The Fed injecting a further $75 billion into the financial system today to keep bank-to-bank lending rates down. Jay Powell said yesterday that a
further fix like perhaps bond buying might be needed. It's like a game of whack-a-mole here.
Let's move on swiftly. European markets are higher right now. We've had the Bank of England holding rates steady and Norway, well and truly
swimming against the tide here. They hiked rates today for the fourth time in a year. The Governor said he wants normal, he wants a normal policy
rate. What on Earth is normal in this day and age? What a luxury if he can find it.
Meanwhile, over in Japan, Governor Kuroda was asked whether the Central Bank will provide more support. He said, quote, "We are eager to act given
heightening global risks." The question here is, how? And what else do they do here?
I'll tell you what, in the meantime, Hong Kong not hanging around -- lowering rates once again in the face of those protests. I told you it was
a bank bonanza.
Let's get to the drivers because we're going to talk about the Fed. Clare Sebastian joins us once again on this story. I think it's Powell the
plumber to Powell the peacemaker here given the divides on the governing council here, Clare, but he did leave the door open to future cuts. And I
think that was what investors at least wanted to hear here.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Julia. I think the artful dodger is another phrase that people are using to denote Powell
today. He certainly made it clear that the Fed would do whatever it takes that they would look at the economy and keep watching the data, and if that
prompted them to cut more, they would do that.
He said the same about the efforts they've been taking to stabilize the overnight lending market, injecting cash into the financial system, he
said. While he didn't announce any kind of permanent facility to support that or any immediate rises to the Fed's balance sheet. He said they would
continue to support that facility as and when it was needed.
But look, this is a man, this is a Fed Chair who has been very vocal on the power of forward guidance to actually serve as a tool in monetary policy.
He didn't really use that so much today or yesterday when he gave that press conference. He was very kind of non-committal. He said this is all
about the data. This is all about going meeting to meeting.
And this really is probably part of the strategy. He is dealing with a lot of variables here. A trade war, the potential for a hard Brexit. His
strategy is not to move the market too far in one direction or the other, not to commit too far in one direction or the other to avoid disappointment
and potentially wild swings in the market if one of those variables comes into play.
So this, you know, was a complex moment for him, and of course, juggling as well those dissenters on the committee complicates that task even further
of justifying and explaining why he is making the moves that he is.
CHATTERLEY: Yes, three words. Less is more, as far as the inflammation is concerned. He was of course asked about the prospect of cutting rates
below zero. This idea of negative rates that we see in many countries around the world and something that President Trump has also suggested, the
Federal Reserve should be using here, just listen in to what he had to say on this point.
(BEGIN VIDEO CLIP)
JEROME POWELL, U.S. FEDERAL RESERVE CHAIRMAN: I think if we were to find ourselves at some future date, again at the effect of lower bound, again,
that's something we're expecting. Then I think we would look at using large scale asset purchases and forward guidance.
I do not think we'd be looking at using negative rates. I just don't think those will be at the top of our list.
(END VIDEO CLIP)
[09:05:19]
CHATTERLEY: Uh-uh to negative rates here, but Clare, it does underscore an important point that they have other options, unlike other countries around
the world.
SEBASTIAN: Right. I think that's interesting. We're hearing a lot of concerns around at the moment, Julia that the Fed, you know is doing these
insurance cuts that it might be weakening its capacity to act if the U.S. does enter a recession.
I think this debate around negative interest rates just reinforces the fact that the Fed does still have room -- 1.75 to two percent is not at zero.
We know that Central Banks in Europe, Denmark, Sweden, and Japan are already below zero. So the Fed, you know, is at an enviable position in
some ways compared to them, and I think you know, it's also worth noting that the efficacy of negative rates as a tool for monetary policy isn't
always guaranteed.
It can, for example, hurt banks' profits by, you know, forcing them to pay to park money at the Federal Reserve. So clearly, Jerome Powell making it
clear that he would rather use the other tools first. The likes of quantitative easing, and indeed forward guidance to ease further if rates
do get zero.
CHATTERLEY: Yes, it's such a great point here. And I think the other thing to emphasize, I mean, we knew he had a delicate balancing act to find
here.
It was the idea that he managed to incorporate the recent data that we've seen that has seen a bit of a pickup here for the domestic economy, but
just emphasizing the sheer degree of uncertainty everywhere else in the world. And that's the balancing act that they've got to find here. Trade,
of course, being one of the big risks.
SEBASTIAN: Yes, absolutely. You know, the balancing act, not just because of the very mixed data that we're facing at the moment, but because of that
trade uncertainty and he has to create the appearance of not doing what the President wants, of not bowing to political brushes.
He was forced to answer questions on that again. But of course factoring in the trade war and cutting rates without using rates as a way to
encourage the administration to continue the trade war. There are cynics and in fact, invite serious economists out there who've suggested that
President Trump is perpetuating this trade war as a way of pushing the Fed into cutting rates.
So that kind of feedback loop is something that Jerome Powell is also dealing with. It is a hugely complicated situation, not only, Julia, in
terms of setting monetary policy, but also in communicating why he is setting it and I think, you know, we saw that in play yesterday.
CHATTERLEY: Yes, managing this certainly takes guts. Clare Sebastian, thank you so much. Despite what the President says.
Okay, moving on. The Chinese tech giant, Huawei launching an Android smartphone right now and it has chosen the heart of Europe as the place to
do it.
Germany hosting the launch of the Mate 30 and unlike Huawei's earlier handsets for the international market, this one will not have Google
services preinstalled. Sherisse Pham joins us now on this story. Interesting location to choose, Sherisse, obviously given the importance of
the international market.
But how excited are international customers going to be if it has the operating system from Android, but doesn't have access to the apps here?
SHERISSE PHAM, CNN BUSINESS REPORTER: As far as we know, it will not have access to the apps. Google Services will not come preinstalled on this
very big flagship phone coming from Huawei.
This is a phone that the last year's version sold for upwards of $800.00, all the way up to more than $1,000.00 for a more professional version of
the phone. So analysts are all saying across the board that it's got great hardware.
I was watching the launch event just before coming into this chair and I can tell you, there are lots of cameras. There are lots of bells and
whistles on this phone, lighter battery and longer battery life, four cameras on the back. Kind of one-upping iPhone there. The iPhone 11 that
just came with three cameras on the back. But analysts are saying without Google services, this phone will be really hard to sell in international
markets and Julia, you kind of address that, right?
At the top of this launch saying, you know, this has been quite a challenging year for Huawei, a little bit of an understatement there. A
couple of the details we got from the launch so far, which is still happening as we speak, is that Huawei is going to launch the Mate X fold,
their foldable smartphone, something that's supposed to rival Samsung's foldable phone next month, but only in the China market, and that is a
really interesting clue because there has been chatter and some reports that this Mate 30 series, this latest flagship phone from Huawei will not
sell in key international markets -- Julia.
CHATTERLEY: Yes. And I mean, a lot of people were saying this was going to be a key challenger to the iPhone 11 here. Four cameras, not three, to
your point as well. But yes, the difficulty without these apps. Sherisse Pham in Hong Kong. Thank you so much for the update there.
All right. Let's move on to our next driver. California's right to impose vehicle emission standards is being officially overturned today by the U.S.
Federal government.
[09:10:07]
CHATTERLEY: It says automakers can't meet the tough standards imposed by President Obama to combat climate change. Tom Foreman is in D.C. and joins
us on the story. Tom, interesting one here and already being challenged by California, but it kind of had a domino effect here in that automakers'
then created cars with standards that would comply with this for other states and other states also followed suit. So it's about far more than
California here surely.
TOM FOREMAN, CNN CORRESPONDENT: Absolutely. This is not something that these states, about 40 percent of the driving public represented in these
various states have agreed to this sort of thing. They're saying that's fine with them. The automakers' have signed on to doing this.
But now the Trump administration is saying emphatically, no, this cannot happen. There can be only one Federal standard. It has to be the Trump
standard which is less stringent in terms of emissions than the California standard.
But listen to what the Transportation Secretary says as they've announced this roll back on what California is doing.
(BEGIN VIDEO CLIP)
ELAINE CHAO, U.S. TRANSPORTATION SECRETARY: No state has the authority to opt out of the nation's rules, and no state has the right to impose its
policies on everybody else and our whole country. To do otherwise harms consumers and damages the American economy.
(END VIDEO CLIP)
FOREMAN: Now, the White House is arguing, the administration is saying that basically the California standards are unreachable and that they're
going to put this huge burden on the auto industry and everyone else, and they're saying that by rolling it back, you will actually produce more cars
at a cheaper cost. People will buy more of them and that will lower emissions overall.
But I must say, you have to understand politically in this country, for a Republican administration to do this is absolutely just 180 degrees
opposite of what Republicans have argued for years.
Republicans here for years have said, states should be able to make their own choices about where they're going forward. The Federal government
should not be this onerous hand reaching in saying it has to be our way. They've said that many times over Democratic proposals that tried to have
won national standard for all sorts of things. And yet now, here is a Republican administration saying no, no, it's unthinkable that this would
happen.
This fight is absolutely going to the courts, and we'll see what the courts have to say about it.
CHATTERLEY: Yes, automakers and consumers aside, the lawyers here are rubbing their hands together. Well, we will watch this space. Tom
Foreman. Thank you so much for that.
FOREMAN: You're welcome, Julia.
CHATTERLEY: All right. Let me bring you up to speed now with some of the other stories making headlines around the world. Iranian Foreign Minister
Javad Zarif has told CNN that there could be quote, "all-out war" if the U.S. or Saudi Arabia launches strikes against it.
Those two countries are accusing Iran of being behind attacks on Saudi oil facilities last weekend. Zarif spoke exclusively to CNN's Nick Paton
Walsh.
(BEGIN VIDEO CLIP)
NICK PATON WALSH, CNN SENIOR INTERNATIONAL CORRESPONDENT: What would be the consequences of a Saudi military strike on Iran now?
MOHAMMAD JAVAD ZARIF, IRANIAN FOREIGN MINISTER: An all-out war. An all- out war.
PATON WALSH: You make a very serious statement, Minister. A very serious statement there, sir.
ZARIF: Well, I make a very serious statement about defending our country. I'm making a very serious statement that we don't want war. We don't want
to engage in a military confrontation. We believe that a military confrontation based on deception is awful, it will have a lot of
casualties.
But we won't blink to defend our territory.
PATON WALSH: Put yourself in Saudi Arabia's shoes. If there was an attack on Iranian sovereign territory with cruise missiles launched from Saudi
Arabia. What would Iran's response be?
ZARIF: Well, they are making that up. Why do they want to make that up that it was from Iranian territory? The Yemenis have announced
responsibility for that. They have provided information about that. They have answered all the Saudi disinformation campaign about the fact that
they launched this attack against Saudi Arabia in self-defense.
Now they want to pin the blame on Iran in order to achieve something and that is why I'm saying this is agitation for war. Because it's based on
lies. It is based on deception. But you lie and deceive men, it serves your interest. It doesn't even serve their interest.
(END VIDEO CLIP)
CHATTERLEY: You'll see more of this exclusive interview with the Iranian Foreign Minister in the next hour. John Defterios joins us now though, on
this story. John, I'm just watching what's going on in oil prices today and we've had an incredibly volatile week.
The truth here is when we have a problem for Saudi Arabia that impacts oil in that country, it has global ramifications. Does a solution here
ultimately, if you talk to the Saudis here have to be an international solution here because it's clearly going to be a hot topic at the UN next
week?
[09:15:11]
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Well, it's a fantastic point, Julia, because you'd have to be numb not to feel what's
been going on here in Saudi Arabia at every presentation, for example, the Ministry of Defense, it was mentioned, Abdulaziz bin Salman, the Minister
of Energy said at the press conference last night, and then we even had Mohammad bin Salman, the Crown Prince says putting out transcripts of his
calls with the President of South Korea and the Prime Minister of Japan saying it is a global response that's needed here, and why it is needed at
this stage.
Now, even the French Foreign Minister was suggesting that it couldn't have been the Houthis doing an attack of that scale because the sophistication
was way too high, and they're following the tracking that Saudi Arabia is presenting to them.
So you could see a case here, a win for Saudi Arabia and I'm not taking out a response into that conversation here and attack back on Iran. But a win
would be not just maritime security, and there's a coalition already formed with the United States and the U.K., maybe the French joining that.
But to get the protection of the facilities in Dhahran, because the mother lode was hit, they knocked down 250 missiles or drone attacks over the last
couple of years. But you can imagine that stretching all the way to the west right here in Jeddah, and going north to the Yanbu Port, which has a
big refinery there on the Red Sea.
If they could get that narrative, the political support, and also the physical support going into the United Nations General Assembly, they would
think that is a victory, because if you think about it, Julia, a year ago, Donald Trump was suggesting, why should we defend Saudi Arabia? We have
our energy independence with this shale production, and total combined production of almost 13 million barrels a day.
CHATTERLEY: That's such a great point actually, in effect, uniting them all in tackling this problem. John, the other obvious thing here to point
out as well and we talked a little bit about this yesterday was in the meantime, President Trump saying he is going to step up sanctions against
Iran. What capacity here has the United States got to further step up sanctions? And what is that going to mean for Iran ultimately on an
economic basis?
DEFTERIOS: Well, not a lot, Julia, because they had been taking a squeeze and you can see it on any measurement for Iran. But I think this market in
oil, and because of the narrative there on the Iranian sanctions could rally on rhetoric alone, right?
From Javad Zarif, Mike Pompeo is saying this is an act of war by the Iranians. Donald Trump leaving the option here open to say that we could
have a very strong response, so that's putting up the pressure and you look at the volatility over the last week alone. We're in a $10.00 to $11.00
range. That says a lot and we were lulled into thinking that Aramco could get up to nearly 10 million barrels a day production by the end of
September, and it's all solved.
But the spare capacity in the world is about 2 million barrels and we saw reports in "The Wall Street Journal" suggesting that Saudi Arabia may be
taking oil in from Iraq. So in the last hour, I talked to sources here in Saudi Arabia, they're saying I wouldn't rule it out because they need
different blends and they need the extra security as they start to build up.
So you can see it is a tight market, Julia and on pins and needles, particularly when you apply more sanctions to Iran.
CHATTERLEY: Yes, pins and needles. John Defterios, thank you so much for the update there.
All right, U.K. Supreme Court wrapping up the case brought against Prime Minister Boris Johnson. Opponents of Mr. Johnson are arguing that he
unlawfully suspended Parliament in the run up to Brexit. The last legal arguments will be heard today and a ruling could come as early as this
evening, so we'll watch for that.
All right, we're going to take a break here on FIRST MOVE, but still to come, Mark Zuckerberg leaving Silicon Valley for Capitol Hill in a bid to
make a few more friends for Facebook. Stay with us, plenty more to come.
(COMMERCIAL BREAK)
[09:21:56]
CHATTERLEY: Welcome back to FIRST MOVE. Take a look at futures right now for the U.S. majors. We have strengthened a little bit following a pretty
much unchanged session despite the volatility yesterday following the Feds' move to cut rates and at least leave open the door to more cuts should they
be required.
Let's talk this through. Joining us now, Binky Chadha, he is the Chief Global Strategist at Deutsche Bank. Thank you. Fantastic to have you on
the show.
BINKY CHADHA, CHIEF GLOBAL STRATEGIST, DEUTSCHE BANK: Pleasure to be here.
CHATTERLEY: What do you make of the Fed yesterday?
CHADHA: I would argue they're essentially sitting, you know, on the fence. If growth slows, they will cut some more. If growth doesn't slow, they
won't. Our view is a little different. Our view is very clear. Growth is slowing. Growth is going to continue to slow and so they will cut as
growth slows and they will continue to cut for a little while longer after the growth bottoms out.
CHATTERLEY: So you're far more worried than Jay Powell at least was letting on yesterday. How close to recession are we? Because I know
you're one of those who think we're far closer perhaps than people realize.
CHADHA: Sure. You know, there's two or three very simple points to make. I mean, if you look at the manufacturing sector in the U.S., and you look
at the ISMs, I mean, you know, we've been slowing from a peak back in September of last year. And it's a leap of faith to think that, you know,
something that's going down to like this is suddenly going to stop here tomorrow and then start maybe to even, you know, going up, number one.
Number two, people say that, you know, they are sort of mixed signals and you look at the bounce in services. But I mean, if you do actually look at
services, you look at the ISMs, I mean, they've essentially been coming down in a saw-tooth manner. So the last two bumps did not sustain.
I would argue, you know, the U.S. economy is slowing broadly. It is slowing unambiguously. And I would argue that the U.S. economy is
dangerously close to sort of tipping over into a recession. What I would argue is, we are very, very close to what has historically been a stall
speed for the U.S.
If you look at the labor market, for example, payrolls growth, you know, is running the six-month change at an annual rates, running at about 1.3
percent. That is, number one, the slowest pace that we've had in 10 years at any point in this recovery, going straight down.
CHADHA: It's bound to slow when the labor market gets so tight. And I guess back to your point about manufacturing, it's still only what?
Fifteen to twenty percent of the U.S. economy. Are you saying actually, that you're worried about the consumer, too, despite things like retail
sales, because of what you're saying about the jobs market?
CHADHA: So a consumption growth is always going to be over, you know, some period of time, tightly related, basically, the labor income growth, and
the biggest component of that is jobs growth.
CHATTERLEY: Right.
CHADHA: Now, just one additional point that I would make is parallels growth in the U.S., you know, has slowed from two and a half percent in the
middle of last year down to 1.3 percent. The services sector is much bigger than the manufacturing sector as you just said.
CHATTERLEY: Yes.
CHADHA: And most that slowing has actually come from the services sector, not the manufacturing sector because it is much bigger. We are running at
1.3 percent. And I would argue that the stall speed or tipping point is around one percent.
[09:25:14]
CHADHA: If you look at private payrolls growth historically going all the way back in the 1960s, whenever we've gone through one percent, we've ended
up in a full recession.
CHATTERLEY: What does this mean for stock markets? Because you're also arguing that there's a gap here, a gap between the fundamentals that you're
talking about here and where stock markets are. If you're right on the fundamentals here, what kind of pull back are you talking for stock markets
potentially here?
CHADHA: So you know, the things that I would point out are number one, the U.S. stock market is about 15 percent expansive to where growth is
currently.
CHATTERLEY: Fifteen percent.
CHADHA: That's right, I would put -- where we should be on the basis of, you know, the ISMs and the like at 2,600 not at 3,000. Now, I do have a
target for 3,250, and most people are confused by that.
CHATTERLEY: I am, too.
CHADHA: What I would argue is that because the U.S. -- because the US economy is slowing, and it's slowing pretty severely, I would argue, you
know, we will get a relent on trade policy, and so my constructive view or V-turn in the stock market is predicated on getting a credible trade deal
that would be very positive and 3,250 then will look to conservative.
CHATTERLEY: Very quickly, how long are you going to leave it before you change that call, if we don't get a deal?
CHADHA: I mean, it's a call. We're very close to the end of the month. So I will accept, you know, whatever on my face.
CHATTERLEY: We have to wrap it there. Binky Chadha, the Chief Global Strategist at Deutsche Bank. Thank you so much. We will get you back to
discuss.
CHADHA: My pleasure.
CHATTERLEY: The market opens next. Stay with us.
(COMMERCIAL BREAK)
[09:30:00]
CHATTERLEY: Welcome back to FIRST MOVE here for a very excitable opening bell. Ping Identity ringing the opening bell this morning. We did have a
touch higher start for the market this morning, following the volatility yesterday. We are calling him Powell the appeaser, at least pleasing
investors for now with that further insurance rate cut yesterday, and the door opened at least to further cuts if they are required in the future.
Though you have to say, you do feel the bar is higher here for action given a dissent on the governing council, also injecting another $75 billion as
we mentioned earlier into the banking system today, too. Powell the plumber, in this case, the third straight day of emergency moves following
the spike in bank to bank lending rates earlier this week.
Also U.S.-China trained negotiators getting back to work in Washington today. High level talks of course next month. Reports say the Chinese
officials could even travel to the Midwest this week to meet with farmers. More agriculture buying ahead. Watch this space.
All right, let me take you through the global movers hereto. AT&T in focus. A "Wall Street Journal" reports that the wireless carrier is
considering the sale of direct TV. The satellite TV business losing subscribers as customers shift to streaming.
An activist investor recently pushed for the sale of direct TV. AT&T, of course, the parent company of CNN and that report again in "The Wall Street
Journal."
US Steel lower in the session. The company lowering its guidance for its second half of this year, citing lack of demand and falling U.S. steel
prices. It said it will continue to idle two of its blast furnaces and reiterated plans to cut 2,500 jobs in Europe.
And finally, Alibaba the Chinese e-commerce company celebrating five years since it listed here on the New York Stock Exchange, a $25 billion IPO if
you remember, the largest in history, still the largest. The stock has more than doubled from its IPO price of $68.00. The market cap today, a
cool $465 billion.
All right, joining us now, I'm happy to say, Andrew Left, founder at Citron Research, and prominent activist short seller. Getting my tongue twisted
today. Great to have you with us.
ANDREW LEFT, FOUNDER, CITRON RESEARCH: Good morning.
CHATTERLEY: Now, a year ago, you said Alibaba looks like a good buy here. I have to say it's gone nowhere fast in the last year and it's become a
sort of victim, I think of the trade war.
LEFT: Well, either is --
CHATTERLEY: Aha.
LEFT: If you go 52 weeks, it's right on par with Amazon. It's definitely a victim of the trade war. I think the investors are not -- they're not
rushing to buy any Chinese stocks right now. So there's so many of them. You know, we could make a list of all the stocks from JD.com -- there's so
many of them. So it's not an outlier. It's just what's happening right now, a victim of the trade war.
CHATTERLEY: I should correct myself, a victim of the perception of the trade war versus actually trade impacted.
LEFT: Very fair. A hundred percent.
CHATTERLEY: Yes. Okay. So relative basis, then Amazon versus Alibaba, if we have to make the comparison. Very different beasts, very different
animals, but --
LEFT: I like -- going forward, if you're looking for a year or five years, I think Alibaba. They still dominate the server market, not as much
competition in China, as Amazon is facing in the U.S. with the data center business and e-commerce, the runway they have going forward in China, it's
a lot greater.
Amazon is great. We all know it's great, and it's fully penetrated. No doubt they'll still grow. But if you look at the overall economy in China,
and the growth of the middle class there, Alibaba is a beneficiary.
CHATTERLEY: Do we need to worry about a trade deal or not a trade deal or an escalation here? Because there are all sorts of risks here, perhaps the
United States cuts China off completely as far as technology is concerned, for example?
LEFT: Well, everything is based on perception. Right?
CHATTERLEY: Yes.
LEFT: So as you were saying, you know, we've had a perception of a trade war. So going forward, I think, yes, it is a concern. Absolutely. Until
the China-U.S. thing completely gets ironed out, it seems as if all of these Chinese stocks are just all stuck in the mud right now.
But if that's the case, maybe they'll start looking at the possibility of relisting these stocks in Hong Kong or in China. And if that's the case,
they go up.
CHATTERLEY: Really?
LEFT: I think so.
CHATTERLEY: But that will basically mean they do an alternative in Hong Kong, right now, it is a bit hairy. But --
LEFT: I mean, there's no reason to be -- how crazy is the concept? Imagine if Amazon was only traded in China and not in the US. So you can
only imagine the nationalism factor of wanting to bring Alibaba back home. And that would open it up to investors in China as well.
CHATTERLEY: How high is that risk, do you think?
LEFT: I mean, it would be a good -- it is a risk. It would be a good thing if you can trade your shares of Amazon -- I'm sorry for Alibaba right
now for Chinese Alibaba, it would probably have much higher multiples.
The reason why it wasn't done five years ago, and the IPO was done here is there were restrictions in China on what can go public, they have to be
profitable. So this is like a breeding ground for stocks.
But I think if we have evolved past that right now, the Chinese people should have the opportunity to buy Alibaba and then the multiple would
expand.
[09:35:04]
CHATTERLEY: Are you exposed? Are you long Alibaba or --
LEFT: I was and I admit, I got a little bored out of it. You know, it just seemed like okay, I'm not going to forecast the government. I own
some JD on a smaller position.
CHATTERLEY: I do you think you're a much happier person -- much happier person, at least on television when you're buying things as opposed to
short selling. There is a lot of criticism there.
Now, I'm being tough today. On April 5th, you said Lyft is an amateur short, shorting disruptor companies that dominated mega trends simply
because they lose money. It's your way to go broke.
LEFT: It is. I am amazed. I'll tell you something. I own Uber and I'll tell you when I'm wrong. I own Uber and I own Lyft. I own them both. I'm
down in both of them. Actually, I own them privately also and I own them on the public markets. For some reason, the market gives runway to some
companies and not runway to these ride-sharing companies. They are really -- you know, they're really unloved despite the fact that Lyft and Uber
operate a duopoly in what is no doubt a megatrend.
I mean, I have four children. I have two of them that are driving age, and none of them drive. They both take Uber and Lyft everywhere. Uber Eats
Uber. If you look at alternative delivery systems for Amazon, that last mile, they're both Uber and Lyft. But people want the profitability right
now.
CHATTERLEY: It's like that you have to show a viable business model. I guess that's the thing.
LEFT: I could show you 20 businesses listed on the NASDAQ, 30 businesses that have not shown profitability, but have shown top line growth.
CHATTERLEY: So this comes to my point now, are perceptions changing? Are we having a sort of realization of the valuations that companies are being
given in the private markets relative to the valuations that they're being given in the public markets?
WeWork, another one where we're suddenly going, hang on a second. One minute, we were talking about an IPO worth $46 billion or $47 billion, and
now we're talking about maybe $18 billion to $20 billion.
LEFT: WeWork -- as a short seller, I was just hoping everyone was going to forget about WeWork and let it go public, so I can short it. I am quite
upset about all the publicity it has taken. It's like, uh, okay. It's not what you're looking at with Uber or Lyft. These are not disruptive
megatrend companies. It's a reputable business model. It's office space. It's what it is. It's didn't even own the offices.
So it's a complete opposite of what I look at as with an Uber and Lyft. But I think with the CEO, a little -- this completely brought attention to
it, and I'll be surprised if it gets public.
CHATTERLEY: Okay. Okay, I'm going to try again with this question, though Softbank, another company, Vision Fund 2. It's now putting a lot of money
in it seems itself, it's also talking about potentially bringing its workers in. This is a massive technology investor. And I guess my
question at this moment, given the sensitivity to loss-making companies, at least, as I see it, again, we're going, are the valuations in the private
market is at a whack with the public?
LEFT: I mean, with all respect to Masa, he works -- Softbank has that hundred year vision. I don't think there's one investor out here that
wants to invest on a hundred-year vision besides him.
So when it goes to a public marketplace, it doesn't hold. They have a slew of bad investments. You can look at Compass. You can just keep going on
and on of things that have money invested by Softbank that they will never take out to the public markets.
That being said, they made a fair amount of money in other stocks. But I don't think that halo effect of Softbank by no means should translate it
to, oh, we're going to be able to take it public.
CHATTERLEY: Interesting. So do you disagree with me then that there's a mismatch between the valuations in private markets right now and the
valuations that public investors that are willing to give to these companies?
LEFT: Of course, also private markets, you don't get the same amount of scrutiny. You don't have short sellers. You don't have people in -- it's
a private transaction, and you only need one buyer. It's like selling a piece of real estate, you need one buyer.
So if you find one buyer to come in and say, oh, we'll put X amount in at X valuation, and Softbank has been that one big buyer over the years and you
take them out, the crazy part, what would happen is, what happens if Fidelity and all the major funds have to lower the way they mark their
private investments? And if they lower -- then they have to start lowering their exposure in the public marketplace. So there could be a longer tail
to this.
CHATTERLEY: It's that coming?
LEFT: I wish I knew. I mean, it could be I mean. I'm sitting on $20 billion in private investments, and then all of a sudden, I realize, oh my
god, I have to mark these to $13 billion or $14 billion, and how I want to completely lower my exposure. So it's kind of like the tail that wags the
dog.
CHATTERLEY: Yes, I mean, Softbank has got deep pockets, but other perhaps --
LEFT: I mean, Fidelity is deeper.
CHATTERLEY: Interesting. We're going to come back to this conversation, I think. I just think with everything else that's going on in the world
right now, maybe there's a reality check going on, but you don't feel it. You think these are specific issues.
LEFT: Yes, there are specific issues. There's still some wonderful companies doing some wonderful things and real disruption in this world.
But I think profitability has to be involved at some time, but I've been saying this for years. So I think investors still with rates the way they
are right now will still pay for their top line growth.
CHATTERLEY: Interesting, Andrew Left, always a pleasure to have you on the show. Andrew Left, founder of Citron Research and prominent activist short
seller and buyer as well.
[09:40:07]
CHATTERLEY: All right, we're going to take a quick break, but coming up after this. Soaring pork prices are a big problem in China. What is the
government going to do about it? Well, we'll see what they're doing right now. Stay with us. We're back in two.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. China moving to stabilize its port prices by auctioning stocks in its national reserves. The country is
in the midst of a swine fever crisis that's wiped out around a third of its pigs.
China's pork market is the largest in the world. The pig population has fallen by 100 million just in the last year and as prices soar, $452
million has been handed out in food subsidies to low-income families. In the government auction, each bidder can buy up to 300 tons of pork.
David Culver joins us now from Beijing. David, great to have you with us. I saw some data that suggested pork prices has risen as much as 46 percent
over the last year. I mean, that's a huge price increase. What impact is this release of reserves actually going to have on the price? Will it
help?
DAVID CULVER, CNN CORRESPONDENT: Julia, it's incredible to think, 46 percent. But when you actually have even seen numbers go higher than that
in some places, 70 percent, nearly 90 percent increase. So it depends on where you're looking. But certainly, it's being felt here.
And we really have to grasp what pork means to China, and you have to look at the numbers to see that. As far as consumption is concerned, let's get
the 2018 numbers. They consumed 55 million metric tons here in China. Put that in perspective, that's more than the U.S. and Europe combined. In
fact, it's nearly double what the U.S. and Europe consumed last year.
So we wanted to know, to your point, how is it being felt here? Not only in major cities like Beijing, but also in smaller towns. Here's what we
found.
(BEGIN VIDEOTAPE)
CULVER (voice over): Inside Beijing's Home Plate restaurant, American barbecue is king. Their specialty pork ribs.
(BEGIN VIDEO CLIP)
CULVER (on camera): How long will this take?
BILL CHEN, GENERAL MANAGER: It will take six to eight hours to smoke.
(END VIDEO CLIP)
CULVER (voice over): General Manager Bill Chen touring us through the kitchen. He says China's growing pork crisis has had him paying about 20
percent more for the meat. He is about to print new menus to help ease the burden.
(BEGIN VIDEO CLIP)
CULVER (on camera): Are you worried by raising the prices that you might push customers away?
CHEN: I'm a little bit worried about that, yes.
(END VIDEO CLIP)
CULVER (voice over): The Chinese pork market, the world's largest has been ravaged by an outbreak of African swine fever. Demand is strong as ever,
setting prices up nearly 90 percent in some places.
It's a reality felt in small towns, too. Despite the chill in the air, this inner Mongolian market bustling midweek. Among the raw offerings,
pork. Butchers are eager to make a sale.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE (through translator): Compared to previous years, business is worse.
CULVER (on camera): The locals whom we've spoken within this small town market tell us they have noticed the price of pork going up, but their
consumption has stayed the same. They're willing to pay more.
UNIDENTIFIED MALE (through translator): I need to eat pork. It's a big part of our life.
(END VIDEO CLIP)
CULVER (voice over): Chinese people consume more pork than the U.S. and Europe combined. It is also the biggest supplier of pork, which explains
why the swine fever outbreak is so devastating.
Since late last year, a third of China's pigs, more than a hundred million have been wiped out. To help replenish the supply, China has suggested
they will ease tariffs on U.S. pork imports in the midst of the trade war. They're also trying to regulate the domestic market from within.
(BEGIN VIDEO CLIP)
CULVER (on camera): The Chinese government has just released some 10,000 metric tons of pork. Is that going to help you guys at all?
CHEN: I think it will be good for the common people and the restaurants like us.
(END VIDEO CLIP)
CULVER (voice over); But Bill is hesitant about the long-term impacts.
(BEGIN VIDEO CLIP)
CHEN: The trade war between the two countries, the politics, I don't know.
(END VIDEO CLIP)
CULVER (voice over): For now, Home Plate keeps dishing up, bringing American customers a taste of home and serving local Chinese their staple
meat with a Texas twist and a soaring price tag.
(END VIDEOTAPE)
CULVER: How much of an impact has he seen with these rising prices, Julia, in the past few weeks? He said he has seen about a 20 percent increase.
That's what he is paying. I asked him, so what in turn are you going to do with the menu prices, he is going to raise them about 10 percent. He
doesn't want to put the entire burden and push off all his customer base. But that's the reality not only some of these restaurants are dealing with,
but as you saw there, in the smaller towns, some of the consumers.
But they say they're going to be paying it. They're willing to put up with it for now. They're hoping this release from the Central Reserve will ease
things a bit especially, Julia when you consider what's coming at the first of next month. October 1st is National Day here. It is a major holiday.
It celebrates 70 years since the founding of Communist China and it's going to be about a week long of celebrations, folks getting together with their
families, they're going to be having meals. What's going to be on the table? You can bet pork.
CHATTERLEY: Yes, absolutely. I mean, I'm just looking at the numbers here. We have a major math problem here. I mean, we're talking, as you
said, 55 million tons. They've only released 10,000 from the strategic reserves here. I mean, it's nothing. It's peanuts compared to what's
actually required here.
So I guess two questions. One, do we even have a sense of what they've got in the strategic reserves here for pork? Because even with a command
economy, if you don't have the reserves, you can't help here and two, they simply have got to get the swine fever under control, haven't they? Are
they making any progress there?
CULVER: It is frustrating when it comes to your second question as far as getting swine fever under control because there's no vaccination for this.
So their solution as of now has been simply to essentially decimate more than a hundred million pigs all together.
And it seems like a lot of the farmers aren't nearly as willing to replenish those stocks right away. So in turn, they're having to import
from the U.S., from Brazil and from other countries.
And as far as what they haven't the Central Reserve, China hasn't released those figures. The Commerce Ministry is not putting that out there. But
one of the other things that I find interesting here is the timing of this with the trade war, Julia, and you've got recently the Chinese government
suggesting that they will ease some of the tariffs on pork and soybeans.
Well, that's not only a goodwill gesture towards the U.S. and these negotiations, it's also something that they desperately need, so it
benefits them, too.
CHATTERLEY: Yes, such a great point, David. Desperate measures here. Is pork the path to some kind of trade deal? David Culver in Beijing there.
Thank you so much for that report.
All right. Coming up here on FIRST MOVE. Mr. Zuckerberg goes to Washington, again. Why the Facebook founder is meeting U.S. senators? We
are live from D.C. with the latest. Stay with us.
[09:52:10]
CHATTERLEY: Welcome back to FIRST MOVE with a look at today's "Boardroom Brief." Three former tech co-executives have been cleared of negligence
over the Fukushima nuclear disaster.
The case against the former Tokyo Electric Power Company executives is the only criminal case to arise from the 2011 meltdown, the worst nuclear
disaster in fact, since Chernobyl.
And what might have been. Disney's Chief Executive, Bob Iger believes his firm could have merged with Apple if Steve Jobs was still alive. The
revelation comes in Iger's upcoming autobiography. He writes that he had a close relationship with Jobs who died in 2011 from cancer. Disney and
Apple are set to launch rival streaming services in November. Yes, I'm still not ruling it out.
All right, let's move on. Facebook founder, Mark Zuckerberg meeting with U.S. senators today. The company telling CNN that they will be talking
about future regulation of the internet. For more, let's talk to Brian Fung.
Brian, I have to say, I think self-regulation will be the words that Mark Zuckerberg is using, perhaps not the senators. What can we expect today?
BRIAN FUNG, CNN TECHNOLOGY REPORTER: Well, Facebook isn't releasing very many more details about these meetings. But we do know that Mark
Zuckerberg had dinner last night with a number of senators, including Senator Mark Warner and Senator Richard Blumenthal, both very powerful
Democratic senators to talk about things like election security, data privacy and competition issues.
Meanwhile, Mark Zuckerberg is planning to have meetings today with a number of senators as well with Senator Maria Cantwell, who has been working on
Federal privacy legislation, as well as House Intelligence Chairman, Adam Schiff.
Now there may be others, we are trying to figure out who Mark Zuckerberg may be meeting with and what the topics will be. But it seems like a lot
of the issues surrounding this have to do with how Facebook could be regulated in the future as it grapples with issues like data and security
and privacy.
CHATTERLEY: Yes, Brian, you raise such a great point there. Never mind, quite frankly, about future regulation, what about election security into
2020? This is such an important subject. And as far as I can see, even with the talks that we've seen between Congress or congressional members,
and these big tech giants, we're simply not ready to stem the risk of interference here. Would you agree?
FUNG: Right, well, experts say you know, the, the potential for misinformation and deep fakes is greater than ever, and you have a lot of,
you know, companies like Facebook trying to figure out how they're going to, you know, beat back some of this misinformation and malicious content.
Facebook has set up a Civil Rights Task Force to try and suss out some of this stuff before it really has an impact. But I think you know, a lot of
lawmakers will say that's not quite enough and it'll be interesting to see what kinds of policies they try to come up with to, you know, put in place.
[09:55:13]
CHATTERLEY: Yes, talk is important, but we'd like let's talk and more action, perhaps. Brian Fung, thank you so much for bringing us that update
there and we'll watch those talks and any announcements potentially later on from D.C.
All right, so let me give you a look at what we're seeing as far as the U.S. majors are concerned this morning. We are holding in positive
territory four tenths of a percent higher from the NASDAQ, following of course, that rate cut decision from the Federal Reserve. Dissent of course
on the governing council over what to do next, and indeed the rate cut that we got there, but Jay Powell reiterating, they will do more if required at
this stage.
A quick look at oil markets as well. It's been a volatile week ever since the Saudi attacks, of course, this weekend. Right now we're adding as you
can see one and a half percent higher there for Brent, 1.2 percent for WTI Crude in the United States.
All right, more to come in a couple of hours with "The Express," but for now, that's it for the show. You've been watching FIRST MOVE. Time to go
make yours.
(COMMERCIAL BREAK)
[10:00:00]
END
