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First Move with Julia Chatterley
Michael Bloomberg, The Billionaire, Prepares To Enter The Presidential Race; Disney Roars As Shares Soar In The Premarket After Blockbuster Earnings; Mind The Gap: As The CEO Leaves And Old Navy Is Spun Off, Is The Retailer Coming Apart At The Seams? Aired 9-10a ET
Aired November 08, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:18]
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Live from the New York Stock Exchange, I'm Alison Kosik. I'm in for Julia Chatterley. Here is what you
need to know.
Bloomberg's bid. The billionaire prepares to enter the presidential race.
Disney roars. Shares soar in the premarket after blockbuster earnings.
And Mind the Gap. As the CEO leaves and Old Navy is spun off, is the retailer coming apart at the seams? It's Friday. This is FIRST MOVE.
Welcome to FIRST MOVE. Great to have you with us. We made it to Friday. Let's begin with a check of the markets.
Futures at the moment are pointing to a flat to lower open for U.S. stocks as investors await more clarity on U.S.-China trade negotiations.
The Dow and the S&P closing it record highs on Thursday after China said negotiators have agreed to cut tariffs as part of a trade deal. But there
are conflicting reports over whether the White House is willing to cut right now.
Hopes for a trade deal have been pushing bond yields higher, U.S. 10-year yields, they took their biggest jump since late 2016 on Thursday, and are
currently approaching two percent. That's a big change from just a few months ago when yields were plunging on fears that the U.S. was headed for
a recession.
We are going to have more on all of that and all the markets later in the show. But first, let's get to our drivers.
As the U.S. race to the White House heats up, it looks like billionaire Michael Bloomberg will throw his hat into the ring. It's expected he'll
file paperwork for Alabama's Democratic presidential primary that he could file this week. Cristina Alesci joins us now with more.
Good to have you, Cristina. You know, correct me if I'm wrong here, is this a surprise? Because wasn't it just in March that Michael Bloomberg
said he wasn't running? What changed here?
CRISTINA ALESCI, CNN BUSINESS POLITICS AND BUSINESS CORRESPONDENT: That's what I reported in March, Alison, and it's not surprising that Michael
Bloomberg wants to be President. What is surprising to your point is that he is jumping back in after saying that he was leaning against doing this
and he is jumping in so late at this juncture.
Look, at the end of the day, Michael Bloomberg sees an opening because of Biden struggling in the polls and Warren's rise. So he sees an area for a
centrist Democrat, appealing to specifically moderate Democrats in the suburbs and that is the person that he is going after.
He has some significant challenges. Resources isn't one of them because he has -- he is worth about $52 billion and he is willing to spend a
tremendous amount of money.
But you know, there is a challenge around polling in the very last national poll that we got. He was clocking two percent. That is not a very
promising number.
That said, sources close to him tell me that they, you know, plan to spend if he does move forward with this, plan to spend time and money making sure
that he has a tremendous amount of name recognition.
Sources close to him are also telling me look, when Buttigieg started out, he was pretty low on the polls, too and look and see what the progress has
been made -- looking at the progress that he has made over the last couple of months.
So when you look at all of that information, you know, Bloomberg is the data guy. He made his fortune off of financial data, but he is kind of
ignoring the polling data that's out there, really thinking that there is an opening politically going with his gut here.
That said, a final decision has not been made. We really have to see what happens next. The next state that has a deadline for filing and get on the
ballot is New Hampshire next week. So I'll be watching to see if Bloomberg files there.
KOSIK: What's the reaction Cristina, from the White House? From President Trump? Because many are saying, look, this could really shake things up
for him that, you know, Michael Bloomberg could really -- could really be a contender.
ALESCI: Yes, we haven't heard too much from the White House. Bottom line right now, the Bloomberg potential run would shake things up on the
Democratic side, and I think the Democratic candidates are the ones who are paying most attention to this right now especially Joe Biden.
And then we've seen Elizabeth Warren and Bernie Sanders, kind of weigh in on the question of whether or not we need another billionaire entering the
race, whether our elections can be bought.
And they raised the question about whether or not Bloomberg is the right candidate to address the growing problem of income inequality that's really
central to their platforms.
[09:05:10]
ALESCI: So I think for the time being, Bloomberg, yes, does presents a unique risk to Donald Trump. But in the near term, he presents a greater
risk to the other Democrats running in the field and making it essentially way more complicated for Joe Biden at this point.
KOSIK: Yes, many saying that he poses a greater risk for Joe Biden, opening the way for Elizabeth Warren, something that Wall Street will not
to be too favorable about.
All right, Cristina Alesci, thanks so much for joining us.
ALESCI: Of course.
KOSIK: Disney Magic is casting a spell on investors. Shares are roaring in the premarket after Disney reported better than expected earnings helped
in part by its remake of "The Lion King." Frank Pallotta has the details on all of this.
Frank, I want to get to "The Lion King" at the end, I want to get your opinion. But first, let's talk business. We've got just days to go before
the streaming service lifts off. You think there's no risk here, but there's a risk here for Disney Plus. There's a risk here for CEO Bob Iger,
isn't there?
FRANK PALLOTTA, CNN BUSINESS MEDIA WRITER: Yes, there is. I mean, if you think back, this company was founded in 1923. So over the last 96 years,
it's made its money off of theme park rides, TV shows, movies, Mickey Mouse plush dolls, or Buzz Lightyear action figures, whatever you want to buy.
Now it's going into a whole new segment with streaming. This is a completely new area. Now can Disney succeed? Yes, it is prime to succeed.
Disney Plus is a low price at $6.99 and a treasure trove of deep content from their vault from Marvel to Mickey Mouse to Star Wars.
But what's important here is also this is a huge risk not just for Disney, the company, but for Bob Iger, the leader of the company himself. He is
going to be stepping down, at least he says he's going to in 2021 and this might be the last great undertaking and possibly the biggest bet he takes
on the way out.
KOSIK: Walk me through, Frank, why it's a big deal that Amazon and Disney partnered up?
PALLOTTA: What's most interesting here is that we've been talking about the streaming war, and if you don't know what the streaming wars are,
that's all these different companies, both tech giants and legacy companies, legacy media companies coming together from Netflix, to Apple,
to Disney, to NBC Universal to CNN's parent company, Warner Media all battling it out.
Amazon is one of those companies and they're kind of are showing that they can be a partner with another competitor to help both grow. Last night,
Bob Iger was on CNBC and he was talking to Julia Boorstin and she said to him, so it's kind of like you guys are frenemies. And he said, yes, that's
one way to put it.
So you looks like even in streaming wars, there can be some friendships between competitors.
KOSIK: Okay, take out your crystal ball here. What do you see is the future of Disney with Disney Plus?
PALLOTTA: I think Disney is going to really be able to dominate this field, but they're going to have to find out what happens to their big
moneymakers going forward and what I mean by that is studio entertainment, aka their movies and media networks aka linear television, because the
bigger that streaming gets, the more questions and possibly the more cannibalization of those big, big decade long moneymakers is going to a
core.
So we're going to have to see where Disney goes from here. I think they can be successful. But it could be a bumpy road for what Disney was to
what Disney will have to become.
KOSIK: But Wall Street seems to be pretty happy with Disney.
PALLOTTA: A hundred percent. I mean, as you said, six percent this morning, five percent and after hours last night, I think Disney is a real
bullish case for Wall Street comparatively to say a competitor like Netflix, obviously the king of streaming who has had some bumpy roads these
last couple months with subscribers.
Their U.S. subscribers have kind of leveled out and they have some challenges internationally. But Disney is trying to really kick this off
four days from now with Disney Plus. You've got to remember, in 2017, they announced that they were going to pull all of their content from Netflix,
thus starting the streaming wars as we know it today, so we're going to really see where it's going to go from there.
KOSIK: Very quick. Did you like the original "Lion King" or the latest one?
PALLOTTA: I like the original "Lion King."
KOSIK: Me too.
PALLOTTA: But I am not so against the new "Lion King." It's beautiful to look at, but I'm an animation guy, hand drawn all day.
KOSIK: I am with you. Frank Pallotta, thanks so much. All right, first Facebook, now, Google the social media giant is in the firing line over
political ads as its rivals changed the practices to try to stay ahead of the storm.
Donie O' Sullivan is joining me live now. It's great to have you on because there's so much going on with Google, with Facebook with their, you
know their common practices. What is Google doing specifically? What changes is it making to calm its critics?
DONIE O'SULLIVAN, CNN BUSINESS REPORTER: Alison, Google, which of course owns YouTube has done a remarkable job at staying under the radar here.
We've heard over the past months so many people complain about Facebook's ad policy where they allow politicians to run false ads.
We've heard from Congress, from Democratic presidential candidates, from commentators in the media. YouTube and Google essentially has the same
policy. They are allowing candidates -- they allowed the Trump campaign to run a false ad about Joe Biden.
[09:10:12]
O'SULLIVAN: Now "The Wall Street Journal" reports that internally at Google, even though the company has said nothing publicly, there is some
discussions that they might change some of their policies. What they might change? We have no idea.
But it is quite interesting to see you know, you think the three major titans in Silicon Valley -- Google which owns YouTube; Facebook and
Twitter. Facebook have remained, you know, committed to their policy of saying we don't believe we should be fact checking politicians.
Twitter said last week, Jack Dorsey announced you know what we're getting out of this game entirely. We're not allowing any politician to run ads on
our platform from mid-November, and Google has stayed so far silent.
KOSIK: Are there any changes that Facebook could make to calm its critics, even though the company appears committed to its most controversial policy
in this area? Of course, what you just said allowing politicians to run false ads.
O'SULLIVAN: That's right, Allison. So we heard from a source yesterday that Facebook is considering making some changes to its policies, but not
through its main controversial policy, which is fact checking.
So what they are thinking of doing is creating -- making it clear that posts when they're an ad, that it's clear that it is actually an ad,
perhaps providing more information on who paid for the ad, and also, perhaps most importantly, potentially restricting how ads can be targeted
on the platform. That's the real value of Facebook in terms of you know why it's a multibillion dollar company.
You can really specifically target ads at specific groups of people, in this case voters. There's been concern -- some concern raised including
internally at Facebook that that could be a problem of sending, you know, one specific set of messages to one group of voters and a different to the
other, so if they did decide to cut down back in the micro targeting that would be a significant action.
KOSIK: Okay, Donie O'Sullivan, thanks so much for your analysis. And these are the stories making headlines around the world.
On Saturday, Germany marks 30 years since the fall of the Berlin Wall. It was the most visible symbol of the Iron Curtain between Western and Eastern
Europe. It was built by the German Democratic Republic starting in 1961.
More than 1,000 firefighters are trying to contain brush fires across the Australian state of New South Wales. The local fire service calling it an
unprecedented situation. Close to 100 fires and more than half of them out of control. Officials are saying lives are at risk and people living in
the area should get out if they still can.
Acting White House Chief of Staff, Mick Mulvaney will not be testifying before impeachment investigators this morning adding to the list of White
House officials who have defied subpoenas for testimony. Nevertheless, House Democrats, they continue to plow ahead with all signs indicating
President Trump could be impeached as soon as next month.
Suzanne Malveaux joins me live now. The timetable is certainly becoming of the essence, isn't it?
SUZANNE MALVEAUX, CNN U.S. CORRESPONDENT: Well, they are very confident that they can move this along rather quickly, actually, I mean, next week
here marks some dramatically different phase of the investigation that is with public testimony of various witnesses, but they believe that they
don't have to call a lot of people to make the case that they have a tight coherent story here outlining what they believe is quid pro quo for the
President holding up the aid in return for political favors.
It is interesting, however, Mick Mulvaney, what he would have provided to House Democrats, so they're downplaying it a little bit here. He is the
one who famously said just last month at a press conference that it happens all the time when someone had asked him about quid pro quo and he said, get
over it.
He then did denied those comments that he made just an hour later. But what they would have liked to have asked him is was he ordered by the
President to delay this aid? Or was this something that he had done on his own?
There are some Republican lawmakers who are floating this idea, this theory, if you will, that the President really wasn't the one directing
this, that he has distanced from some of the other players involved regarding Ambassador Sondland, his Chief of Staff Mulvaney and his attorney
Rudy Giuliani and what they were doing regarding Ukraine.
It is not something that people are really buying here on Capitol Hill. For the most part we've been hearing from Democrats who say, well, all you
have to do is just take a look at the transcript of a phone call with President Trump and the Ukrainian President, which he directs them to talk
to Rudy as in Rudy Giuliani, that he did, in fact, play a central role in this -- Alison.
KOSIK: All right, Suzanne Malveaux live for us from Capitol Hill with all of the latest on the impeachment investigation. Thanks so much.
Coming up on first move, Gap's stock is down and the CEO is out. We have the latest details.
[09:15:10]
KOSIK: And later, billionaires may be under fire on the Democratic campaign trail. But a new report shows the mega rich are boosting
business. All of that later in the program.
(COMMERCIAL BREAK)
KOSIK: Welcome back to FIRST MOVE. We are live at the New York Stock Exchange where it's still looking like a mostly flat open for U.S. stocks.
The Dow and the S&P finishing at all-time highs in Thursday's session and all the major averages are set to finish the week with gains.
That said investors are clearly hoping for more clarity on trade over the next few days. There are conflicting reports over whether the White House
is on board with cutting tariffs as part of the ongoing U.S.-China negotiations.
Another big trade deadline is on tap for next week. President Trump must decide by Wednesday, whether it's a slap tariffs on European auto imports.
Meantime Gap's stock is plunging in premarket trading. The retailer announcing its longtime CEO is stepping down before the spinoff of its
budget line, Old Navy.
Clare Sebastian is on this one, who joins me live. Good morning, Clare. So what happened here because Art Peck was expected to stay on through the
spinoff of Old Navy, what happened here?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Well, Alison, I think it's interesting to note that at the same time as announcing his departure, the
company has also issued a profit warning for the third quarter and reduced their guidance for the full year. They now say they expect comparable
sales which are in stores that are already open for a year, they expect those to be down four percent versus flat in the same period last year.
And particularly interesting to note that they expect a decline of four percent in Old Navy stores. They were up four percent in the same period
last year. So I think people are looking at this. He was, as you say, supposed to stay on through the spinoff which is supposed to happen next
year and questioning whether this might be the company reevaluating its options here.
[09:20:09]
SEBASTIAN: The spinoff, the thesis behind that was that Old Navy is the strongest part of the company. It's showing consistent sales growth under
Art Peck where the other part, the other brands have faltered. But is that still happening? If you look at the numbers from this quarter, I think
there is some doubt around that.
KOSIK: Is the thinking at Gap that maybe they can get back on their feet with a new leader because they've clearly fallen so behind?
SEBASTIAN: Well, I think the thinking is probably that they haven't got back on their feet under this current leader. If you look at the share
price since he took over in February of 2015, it has more than halved in value.
Art Peck was supposed to be the man who was going to bring Gap into the digital age, but it has continued to falter and part of that is because of
its presence in malls that continues to be one of the biggest mall tenants in the U.S. Part of that is because it hasn't been able to appeal to a
younger customer. It hasn't been able to bring its e-commerce offerings up against the competition.
And I think really they're looking at bringing in a new person who can really bring this turnaround to bed. But as of now, they don't have a
permanent CEO. Robert Fischer, who is the son of the founder is a non- Executive Chairman on the Board, he is going to step in actually for the second time. He has done this before in 2007.
So right now, we have a bit of a leadership vacuum at Gap and I think that's one of the reasons why you see the share price down today.
KOSIK: Yes, I think that's not all that Gap is lacking, unfortunately, not just its leadership. All right, Clare Sebastian, thanks so much.
And the Gap and other major retailers begin reporting third quarter earnings later this month. Earnings season has been mixed so far, but
investors hope profits will strengthen if the U.S. and China reach a trade deal.
Tom Porcelli joins me now live -- joins me here with his take on the economy and the markets. He is the Chief U.S. Economist at RBC Capital
Markets. He walked here in the cold and to talk about the markets with me.
TOM PORCELLI, CHIEF U.S. ECONOMIST AT RBC CAPITAL MARKETS: It's a little cold, I am not going to lie.
KOSIK: So we are watching the markets kind of come off this euphoria with this sort of Phase 1 with U.S.-China trade deal. And the reasons here are
not so clear, though. But we have seen the market really rally on this. Is it setting itself up for failure? Because nothing -- the details really
aren't out.
PORCELLI: Yes. So I would say it this way, I think, a fair sort of blanket statement, which I'm sort of loathed to do generally, but I think
it's fair to say, if you know, this thing crumbled, you know, if all of a sudden Phase 1 got kicked down the road to some other point, sort of call
it early next year. I think, the market would act very harshly to that news.
But we don't get any sense that we're going down that path. You even had Peter Navarro, who's one of the bigger trade hawks within the
administration come out today and say, yes, you know, it looks like we can basically exclude the December 15th tariffs assuming a deal is signed.
So for even him to say that I think that, it seems like we are moving in the right direction.
KOSIK: Do you think at this point, the market is depending on the Fed's monetary juice rather than the fundamentals of the economy as the paths to
gains?
PORCELLI: Yes.
KOSIK: What's your opinion on that?
PORCELLI: I love this question. So I think that it's -- what's happened in the market over the course of the last year, maybe a little bit more
than that at this point, it is entirely a function of trade policy. This was never a monetary policy problem or like there was nothing that the Fed
could have done in terms of cutting rates that would have sort of restarted CapEx or, you know, capital expenditures spending.
So, no, this is not a monetary policy problem. The Fed cut rates 75 basis points, and I promise you that that is not going to show up in any material
way from an economic perspective. What will show up is if you can remove trade from the table, if you can get some positive resolution, I think that
allows for a positive sentiment to kick in and because that has been the problem. It's an entirely a function of poor sentiment that has been sort
of driving sort of the CapEx space in particular.
KOSIK: Okay, so let's just say for arguments sake that a trade deal does happen, whether it's a mini deal or a big deal. What is the catalyst for
Wall Street?
PORCELLI: So and again, that's a good question. So I think that if you think about sort of how the year is going to unfold, the coming year, the
coming year is very easy to make the case that you're going to have a really rock solid economic backdrop.
Consumer remains in really good shape. If you can get trade off the table to get CapEx to kick in, you can actually have another economic sector that
is actually able to provide a little bit of juice from an economic perspective.
So I think what people are going to want to really start to focus on is, you know, sort of the consumer fundamentals, how good or weak are they and
we, of course, think that they've remained really sound and I think that will be enough to have another good year in 2020 from whether it's from an
economic perspective or from a markets perspective.
KOSIK: Then why the disconnect in earnings? I mean, we're in another earnings -- we're at earnings recession, literally, and another earnings
contraction is expected ...
PORCELLI: Yes.
KOSIK: ... in the next season. So why this disconnect, as we see the markets move to record highs?
PORCELLI: So I don't think earnings are actually all that bad. Actually earnings have actually been performing a little bit better I think than
what you would have suggested there.
[09:25:06]
PORCELLI: So I think what we'll have to keep in mind is there have been pockets of weakness. There's no question about that, you know, anything
tied to sort of the trade space. Manufacturing is a great example of a sector that has been performing pretty poorly, but generally speaking,
earnings is a bit okay on balance.
KOSIK: The borrower is separately low.
PORCELLI: Without question.
KOSIK: Let's talk about bond yields very quickly, they're moving higher, 10-year yields, they're flat today, but they did hit a three-month high on
Thursday. It's a big change for a few months ago.
PORCELLI: Yes.
KOSIK: What is the bond market telling us?
PORCELLI: So it's been very interesting, the lift that we've seen from the bond market perspective. I think the bond market -- in yields. I think
the bond market was very fearful of this trade war going down a really bad path, an even worse path than what we've already seen.
So now I think what the bond market is effectively saying is, it looks like there is some resolution at our doorstep and so that has allowed yields to
lift.
I think yields can continue to drift higher. You can easily get north of two percent over the coming several weeks, and I think even stay there
again, as long as we can get some resolution from a trade perspective.
KOSIK: You're very positive, but we can't --
PORCELLI: Yes.
KOSIK: We can't just ignore that we have -- we had some downbeat data. Manufacturing, ISM.
PORCELLI: Yes.
KOSIK: The jobs numbers are expected to move -- to worsen. Is that something we just sort of turn our backs to?
PORCELLI: No, no, not at all. In fact, I think -- in fact, if we keep straight in front of what we'd actually realized is that data is actually
not that bad.
Yes, ISM has actually been falling pretty poorly, but what's interesting is, this is obviously a measure of sentiment. And if you look at other
regional sentiment manufacturing indicators, they didn't perform nearly as poorly as ISM.
I mean, so there's a schism between ISM and the regional data, which are actually holding up a little better. Job data are actually performing
incredibly well. I think, in fact, much better than expectation. So you're looking at 150,000 to 175,000 jobs over the balance of last year.
So that's enough to continue and propel consumption.
KOSIK: All right, Tom Porcelli, thanks so much for your analysis. And thanks to you, and we'll be back right after the opening bell.
(COMMERCIAL BREAK)
KOSIK: And welcome back to FIRST MOVE. I'm Alison Kosik. We are live from the New York Stock Exchange and that was the opening bell. As
expected, we have got a flat to lower open for U.S. shares as we wrap up the first full week of trading for November.
That's remained close to record levels, though as traders awake parody on the U.S.-China trade negotiations and trade concerns could soon trigger
fresh stimulus. In Japan, Prime Minister Shinzo Abe is asking his Cabinet to draw up a fresh stimulus bill that includes funds for major
infrastructure projects. It would be that country's first stimulus measure in three years.
Time now for look at the Global Movers. Shares of the Gap are falling in early trading. As we just mentioned, the retailing giant's CEO is stepping
down after almost four years at the helm. The company continues to suffer from slowing sales. It's issuing a third quarter sales warning and cutting
its guidance for the rest of the year.
Shares of Zillow are moving higher on online real estate -- the online real estate platform is reporting better than expected third quarter revenues.
Sales soared more than 100 percent during the period. Zillow says its so- called home flipping business is doing especially well.
Shares of Alibaba are advancing. Reports say it will launch its long awaited Hong Kong share offering later this month.
Disney shares are higher, too. The entertainment giant is reporting stronger than expected earnings and revenues. The results come just days
before the launch of a new streaming service Disney Plus. One cause for concern here, weakening results at Hong Kong Disneyland. Attendance has
been hurt by the ongoing pro-democracy protest there.
Okay, let's dig a little deeper into those Disney numbers. In the three months that ended in September, parks and movie studios delivered strong
operating profits. There was a small dip in the media division though. The cost of launching Disney Plus took the operating losses to $740
million, although that was less than analysts had expected.
Nate Fischer is the Chief Investment Strategist at Strategic Wealth Partners and his company owns Disney shares. So glad to have you with us.
NATE FISCHER, CHIEF INVESTMENT STRATEGIST, STRATEGIC WEALTH PARTNERS: Good morning.
KOSIK: Good morning. So we saw Disney's profits jump, but so did its expenses. I understand that you've got to spend money to make money but at
what point does that spread become worrisome for the company and for investors?
FISCHER: I don't think it's really worrisome right now. Everything is happening on Disney Plus launch, as you mentioned next week, and then
they're going to launch two weeks out in Australia, New Zealand, and then come March of 2020, the rollout in Europe.
So as you mentioned, you have to spend the money up front to get the platform up and running. At the end of the day, content is king and Disney
has 70 years of content that they're ready to put on this platform and see if the investors or the user appetite is there to watch the programming.
KOSIK: Oh, no doubt, it's the content that's going to draw those members in. I agree with you there. But we did listen to CEO, Bob Iger focus a
lot on Hulu on the conference call as part of Disney's overall strategy to kind of pounce on Netflix. What has to -- what has to be done here to
succeed you know, to kind of succeed or to win those members away from Netflix and really, really make a difference here.
FISCHER: So I think the three-prong approach that Disney is going to be using with the bundling at $13.00 price point with Hulu, ESPN Plus, and now
Disney Plus is very competitive with Disney's offering which is $13.00 for their basic subscription, right?
So you're not only playing into this the sports enthusiasts with ESPN Plus, you're playing into the family, the adult and the child content with Disney
Plus, and then in Hulu, you're getting the aggregator which essentially if you go up to the basic and TV, you get live TV and you're getting, you
know, other content from other networks as well that's going to aggregate on there. So that is a very compelling proposition for anybody looking to
cut the cord.
KOSIK: All right, so from Hulu to Marvel, the companies that Disney is over. The pressure really is on these other companies to create content
that's going to bring in new members, that's going to draw on these new members. You know, talking about productions like movies and series and
shows and bring these shows and movies straight to streaming.
[09:35:04]
KOSIK: What do you see content-wise from these companies and the pressures that are on them? Talk to me about that.
FISCHER: So obviously, Netflix has a lot of headwinds from a cash burn perspective to generate content to essentially acquire the talent to create
the content. This is Disney's wheelhouse, right? They own studios. They have a deep talent bench of creative people. And they're really good at
making content across different genres.
So for a deep pocketed competitor like Disney, there's a lot of advantages on their side to continue to roll out new content originals, movies, and
push that through their streaming platform. So all eyes will be on how they execute the streaming platform and the stock potentially will rerate
higher if there's positive data points about subscriptions, getting on the Disney Plus platform.
Right now, management is looking at anywhere from 60 million to 90 million subscriptions over the next three years, and that's probably conservative
given the fact that they have a partnership with Disney, which should allow them or not Disney -- Verizon -- to allow them to enter 20 million U.S.
households in the next 12 months.
So there's definitely a lot of people just looking to see that data points at Disney Plus. I don't think anybody is worried about content from their
standpoint. That puts, as you mentioned, a lot of pressure on other people trying to generate content to compete.
KOSIK: Okay, Hong Kong's political crisis is certainly impacting Disney specifically at Disneyland there, but not just last quarter with
operational -- with operating income falling, but predictions for that income drop to actually accelerate in the coming quarters. What do you
think Disney can do to mitigate this impact?
FISCHER: So the Hong Kong thing is one very offing. It's still not as meaningful as Disney World and Disneyland in the U.S. The parks are doing
fine. Attendance is strong, they are raising ticket prices, but the on the call, management mentioned there might be a little bit deferral from
visitation as they ramp up the next exhibit of the Star Wars phase, and that's going to happen over the next couple of months.
So people probably wait, and once all -- both exhibits are open, then the floodgates probably open. So I'm not worried about the Hong Kong in
particular. It sounded like Paris was doing well, so the parks in general are fine in my view.
KOSIK: Okay, Nathan Fischer of Strategic Wealth Partners, so great talking with you today.
FISCHER: Thank you.
KOSIK: All right. Up next, an e-cigarette crackdown in China. There are calls for a public vaping ban even though the industry is worth billions
and growing fast.
(COMMERCIAL BREAK)
[09:40:40]
KOSIK: Health officials say the number of vaping related deaths in the U.S. has risen to 39 with two more reported in the past week. The
government is scrambling to clamp down on the industry and is trying to take flavored e-cigarettes off the market, but China is going a step
further.
Beijing is calling for a ban on vaping in public and has already prohibited the selling and advertising of e-cigarettes online. David Culver joins me
live now from Beijing. Good morning.
DAVID CULVER, CNN CORRESPONDENT: Hey there, Alison. Good morning to you. This can't be understated. I mean, this is a multibillion dollar industry
here -- e-cigarettes. To fully understand the impact though, we needed to head south to Shenzhen. That's the city that dominates e-cigarette making
here in China and really provide much of the global supply.
It's there we were able to get a feel for how these growing health concerns are impacting and really hurting business. But it's there we also got
their take on government regulations and that may surprise you.
(BEGIN VIDEOTAPE)
CULVER (voice over): In a city often called the Silicon Valley of China, Shenzhen is now widely viewed as a global hub for e-cigarette makers, an
industry that in recent years has grown rapidly with few boundaries, but that is changing.
(BEGIN VIDEO CLIP)
YUAN TAO, CHEMIST: Okay, for example this -- this is one sample from the customer.
(END VIDEO CLIP)
CULVER (voice over): Inside this sleek high-tech laboratory, chemists are testing the oils and materials used in e-cigarettes, determining the level
of nicotine advertised versus what's really in the product. Local manufacturers send their e-cigarettes to this private lab to be dissected.
(BEGIN VIDEO CLIP)
CULVER (on camera): Have you had to tell some of the companies before your product is not meeting the standards right now and you need to change it?
TAO: Sure.
(END VIDEO CLIP)
CULVER (voice over): The business is called Shenzhen BLESS Electronic Technology. They tell us they have contracts with more than two dozen
Chinese e-cigarette makers. Product Manager Wang Shengfu who sees their role as enhancing the standards of the e-cigarettes coming out of China.
(BEGIN VIDEO CLIP)
WANG SHENGFU, PRODUCT MANAGER, BLESS TECHNOLOGY (through translator): There are some small factories with poor production standards in this
industry. They also hope to make money from this huge market. But our company is always sticking to guarantee the safety and health of our
products.
(END VIDEO CLIP)
CULVER (voice over): China is home to the world's leading manufacturers of e-cigarettes. Tyson a prominent financial publication says in 2018,m
Chinese vaping related sales reached $4.8 billion adding that 85 percent of the vaping products end up as exports most to the U.S. or at least they
did.
In September, amid growing health concerns over the impact of vaping, Trump administration officials said they plan to strip all flavored e-cigarettes
from the market, hoping it will help curb vaping particularly among young people.
China going further. Last week, Beijing urged a halt to e-cigarette sales on e-commerce websites and prohibited e-cigarette ads from going online.
The move is impacting the estimated 1,000 vaping related businesses here in Shenzhen.
(BEGIN VIDEO CLIP)
CULVER (on camera): Are you still confident, Mark, that what you're making here is safe and healthy?
MARK LEE: Yes, we are safe.
(END VIDEO CLIP)
CULVER (voice over): Mark Lee showed us his factory. It was clean, orderly and appeared to be focused on quality control. Lee's team testing
each e-cigarette before allowing them to leave the plant. While he stands by his product, he hopes U.S. health officials' studies will confirm that
his products are safe. His business depends on it.
CULVER (on camera); To give you an idea just how significant the U.S. market is to factories like this one here in China, when vaping concerns
hit the headlines in September, their sales plummeted some 70 percent. They went from 300 employees down to just 40.
CULVER (voice over): He widely advocates for Chinese government intervention, hoping it will weed out harmful products that he says are
keeping the rest a bad name, and he supports BLESS' efforts to create an industry standard in China. For its part, BLESS says they're taking a
leading role in creating regulations.
(BEGIN VIDEO CLIP)
SHENGFU (through translator): We have participated in drafting the standard and we believe the government will issue the national standard
soon.
(END VIDEO CLIP)
[09:45:07]
CULVER (voice over): The absence of any e-cigarette national standard in China has not stopped them from enjoying the products they've tested. Wang
confident the smoke will clear and the industry will thrive once again.
(END VIDEOTAPE)
CULVER: Shortly after we interviewed Mark Lee, that one manufacturer Alison, he messaged me to say that he had these grand plans for a second
facility. He has now scrapped those plans because business simply is not strong enough.
A lot of the manufacturers here in China are now turning away from the U.S. market because that seems to be no longer viable and they're turning to
hopefully market in their minds domestically. We'll see how that goes. Regulations, meantime here could come out any day now.
KOSIK: Exactly. Federal regulations are expected here on electronic cigarette flavors within days. So we are seeing the beginnings of a
crackdown. David Culver, thanks so much for that great reporting.
Saturday marks 30 years since the fall of the Berlin Wall and for decades, it stood as the most visible symbol of the Iron Curtain between Western and
Eastern Europe. Many people died trying to escape from communist East Germany.
CNN's Frederik Pleitgen met up with one man who made it across.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: A line of demarcation on the Cold War lies in Berlin.
FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice over): For 28 years the Berlin Wall symbolized the struggle between capitalism and
communism and the cruel division between the people of East and West Berlin.
(BEGIN VIDEO CLIP)
RONALD REAGAN, FORMER PRESIDENT OF THE UNITED STATES OF AMERICA: Mr. Gorbachev, tear down this wall.
(END VIDEO CLIP)
PLEITGEN (on camera): So here at CNN we actually own our own CNN Trabant. This was the epitome of communist East German automotive engineering. And
for the anniversary of the fall of the Berlin Wall, what we're going to do is we're going to take this car and take a drive back into history. That
is if I fit into the car. Because it's small, and I'm big. Ready to go.
PLEITGEN (voice over): The remnants of the wall are a tourist attraction nowadays, but this deadly barrier with border guards, observation towers
and barbed wire struck fear into the Berliners it divided.
PLEITGEN (on camera): I stop and pick up Peter Bieber who grew up in East Germany despising the communist regime and the wall it needed to keep
people from fleeing into the West.
PETER BIEBER, ESCAPED EAST GERMANY: You look and saw the wall. And you know it's the end.
PLEITGEN: Yes.
BIEBER: It's the end of the world. You can't go where you want.
PLEITGEN (voice over): As a young man, Peter Bieber attempted to flee East Germany several times until he finally succeeded in 1972. He then helped
others get out as well, until he was betrayed and arrested by East Germany's secret police, the Stasi, and spent five years in jail there.
BIEBER: It was a little --
PLEITGEN: Psychological terror. Yes.
BIEBER: I sit in a little room, not so light. And one month, two months, nobody came and said anything.
PLEITGEN (voice over): The West German government eventually paid East Germany to release Peter Bieber, but many others who tried to get away paid
with their lives -- more than 100 of them in Berlin.
In 1989, East Germans had had enough, after a wave of mass protests, the regime opened the wall leading to mass celebrations as people from all over
the world joined in to literally tear down the wall.
BIEBER: I think about the freedom, that's for me the highest point --
PLEITGEN (on camera): The highest good that people can have is freedom.
PLEITGEN (voice over): Thirty years later, a united Berlin is thriving, having shed the shackles of communism and dismantled the wall many thought
could never be breached.
Fred Pleitgen, CNN, Berlin.
(END VIDEOTAPE)
KOSIK: Coming up on FIRST MOVE, a blip for billionaires as their wealth takes the dip. We'll tell you why you shouldn't feel too bad for them
after this break
(COMMERCIAL BREAK)
[09:51:28]
KOSIK: Welcome back. I'm Alison Kosik and love them or loathe them, you can't turn on the news lately without bumping into a billionaire. We just
found out one of America's richest Michael Bloomberg is preparing a run to oust fellow billionaire Donald Trump.
While some Democrats on the campaign trail are promising to tax the billionaire class pay for social programs. There's a new report out
looking at how they fare in business. A UBS study says companies headed by billionaires perform better on the stock market.
For more on this, John Mathews joins me right here live. He is the head of Ultra High Net Worth Americas at UBS Global Wealth Management. And as I
was saying, talking about billionaires one of my favorite subjects, you know, a girl can dream, right?
JOHN MATHEWS JOINS, HEAD OF ULTRA HIGH NET WORTH AMERICAS, UBS GLOBAL WEALTH MANAGEMENT: Absolutely.
KOSIK: Give me a quick and dirty about the billionaire report, some of the highlights that stand out for you.
MATHEWS: Yes, Alison thanks. And by with this, this report is written about billionaires but it's not really written for billionaires. This is
for all of us to learn what incredible wealth creators have done over time, and so we can really learn from billionaires.
First of all, the billionaire actually wealth and number of billionaires declined in 2018, after a five-year incredible trajectory, so actually a
decline and everywhere in the world except for the United States. So once again, the U.S. economy proved to be incredibly resilient. We added wealth
and another 33 additional billionaires in the Americas just in 2018.
KOSIK: Okay, well, those are amazing statistics. So let me jump to politics very quickly. Michael Bloomberg looks like he is going to jump
into the presidential race, is he -- would you think that he would be seen as more of a villain or a savior for the Democrats?
MATHEWS: Well, as far as -- you know, I don't really comment on politics. You know, we have clients that -- half our clients are probably on one side
and the other half on the other side. But what I can say is when you look at this wealth creation through billionaires, they've done it through both
parties, right?
It's been like a 30-year wave, both Democrats and Republicans, so I don't think it really matters who is at the top in terms of wealth creation of
billionaires.
KOSIK: And you talked to me about this during the break that most billionaires actually are self-made that they didn't just come from money.
So knowing that, how do you feel maybe some of your clients feel about Elizabeth Warren kind of beating up on billionaires? How fair is that?
I mean, look, they are living the American dream, the very thing that Americans want to live and she is stomping all over that.
MATHEWS: Yes, once again, we care about our clients and we try not to get in those conversations, but If you look at some of the not only the wealth
creation, the trickle-down that billionaires have, the report last year showed that they employ over 29 million people around the world. So
there's a trickle down in wealth, job creation. But most importantly, philanthropy.
Two hundred four of billionaire families have already signed on to the Giving Pledge, which means they've signed on to give away half of their net
worth over time to philanthropy. So there's some good -- I can't speak for all of them, but there's a lot of good out there as well.
KOSIK: And average investors can make some money if they just look at what billionaires are doing, especially in the stock market. Explain what we
found.
MATHEWS: The billionaire effect, we went back -- over the last five years, we've discovered the billionaire run and founded companies seem to be
performing better. So we went back over a 15-year time period, and it's almost a double the return from public markets measured against the MCI All
Cap World Index, 17.8 percent to 9.1 percent, almost a double.
So then we dug down deeper and said what are the characteristics and why? Three really quick ones, they are incredible risk takers. They will take
risk. They're all in. They are determined to win. They will search the world for opportunity. So globalization has been really good for
billionaires and finally they are very long term focused.
[09:55:09]
MATHEWS: I had dinner with a billionaire client of ours just last week and I said, tell me the secret of your success. And he said, I don't measure
our success in quarters. I measure our success in a hundred years, so long term focus.
KOSIK: Is this a lesson to U.S. investors to follow where billionaires go, where they invest their money?
MATHEWS: I think it could be. I mean, I think, listen, it's a good path to see how wealth is being created over a long period of time. The average
billionaire is 67 years old. So these aren't people that wake up one morning and they invent something.
KOSIK: It doesn't happen overnight, folks.
MATHEWS: Yes, it's a long term thing.
KOSIK: All right. John Mathews, it's been fabulous talking with you about one of my favorite topics -- billionaires.
MATHEWS: Nice to see you, Alison. Okay.
KOSIK: All right. And that's it for the show. I'm Alison Kosik and you've been watching FIRST MOVE. "CNN NEWSROOM," that's up after the
break. Have a great weekend, everybody.
(COMMERCIAL BREAK)
END
