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First Move with Julia Chatterley
Silver Lake Buys A Stake In Manchester City Owner, CFG Giving It A Record Valuation; HP Earnings Beat Expectations, But Is It Enough To Withstand The Threat From Xerox?; Papa John's Founder Orders 40 Pizzas In 30 Days. Aired 9-10a ET
Aired November 27, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:14]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Live from the New York Stock Exchange, I'm Julia Chatterley. This is FIRST MOVE and here's your need to
know.
When silver turns gold. Silver Lake buys a stake in Man City owner, CFG giving it a record valuation.
Going hostile. HP earnings beat, but is it enough to withstand the threat from Xerox?
And Papa don't preach. Papa John's founder orders 40 pizzas in 30 days. Perhaps, it is time to preach. It is Wednesday. Let's make a move.
Welcome once again to the show. Happy Wednesday and it is pre-turkey day pre-Thanksgiving here in the United States. But I have to say, just
looking at the markets right now here in the United States, the bulls have been feasting early.
We closed at a record high yesterday and judging by the futures at this moment, it looks like we're going to open and add to that this morning,
too.
In fact, we've had record closes in five of the last eight sessions here. We can thank the T word and no, I don't mean turkey -- trade talks. No
eye-rolling.
Let me just walk you through this, please. President Trump says the deal is in quote the "final throes" in a good way, I believe.
Last night, he said he'd been holding up a trade deal in order to get better terms. He doesn't want an even deal here.
Meanwhile, I have to say the data on both sides continues to argue for some kind of resolution here. We found out today that Chinese industrial
profits fell some 10 percent in October. That's their steepest drop in months.
Chinese consumers also looking stretched here, too. Fresh numbers showing households debt at record levels, too. What about here in the United
States? Well, U.S. GDP growth numbers surprising to the upside today. A revised 2.1 percent for the third quarter, stronger than the 1.9 percent
preliminary reading that we'd already had.
Durable goods orders also coming in stronger than expected. That said, growth is expected to get worse from here. The Atlanta Federal Reserve
says GDP is trending at under half a percent for the fourth quarter of this year. So some significant softening between the third and fourth quarters.
Elsewhere though, take a look at what we're seeing in terms of price action. European stocks, mostly higher today and sitting right now at
four-year highs.
Asian markets also finishing the session in the green as well. The Nikkei close to a one-year high as well. What about for Hong Kong though?
Alibaba shares rising an additional three percent following their record breaking debut yesterday. So we're looking at almost a 10 percent rise now
over the past two days.
Now speaking of records, I've already mentioned it. We've got a big one in the sporting world and we really do kick off with the drivers today.
Private equity firms, Silver Lake buying a 10 percent stake in a football group, this is the owner of Manchester City Football Club and they own a
number of them around the world. Matt Egan has all the details. The key here, Matt is the valuation that this seems to give CFG $4.8 billion. So
one of the biggest sporting franchises in the world here. Talk us through the details.
MATT EGAN, CNN BUSINESS SENIOR WRITER: Julia, this is no doubt a hat trick for Man City and its owner, CFG. First, as you mentioned, the valuation
getting done at a record $4.8 billion. Secondly, they're getting $500 million cash injection here from Silver Lake. They can use that money to
finance their global expansion.
They already own clubs in the United States, in Australia, and Japan and China, and they might just buy more. And the other thing is the fact that
this investment is coming from a well-respected Silicon Valley private equity firm means that they can really hold this up as a validation of
their overall strategy.
So it really is a win on all three fronts for this deal right here. You know, and at first glance, I don't think, you know, a football club really
would fit into a portfolio for a tech PE firm, but because you know, Silver Lake is really known for investing in Dell. It was an early investor in
Skype as well. And it also owns shares in Alibaba.
But in recent years, Silver Lake has actually expanded into sports and entertainment. It now owns a stake in the mixed martial arts group, UFC;
it also owns shares of Madison Square Garden Company, which is the owner of the New York Knicks and the New York Rangers and so this is kind of a
logical extension of that.
This is really just the latest example of a monster price tag put on a sports franchise.
Just two months ago, the Alibaba co-founder Joseph Tsai, he went out and he took full control of the NBA's Brooklyn Nets at a valuation of nearly $2.4
billion. That was a record for a U.S. sports franchise.
I think it's just another reminder of how these sports teams are really more than trophy assets now in an era of cord cutting, and streaming wars.
There is just so much demand to get eyeballs on these sports teams. And so you're getting -- you're seeing just amazing TV contracts, and that really
is the Holy Grail for cable companies and for tech firms now -- Julia.
[09:05:44]
CHATTERLEY: Yes, you make such a great point. The diversification potential that this provides for a private equity firm like Silver Lake,
but to your point as well, the franchise growth that we're seeing and the interest in sports in particular and the opportunities going forward I
think is a great point.
The breakdown of ownership though, if this specifically for CFG is interesting to me. If you look at it, they've got -- what? A 12 percent
stake of its own via Chinese consortium, Sheikh Mansour 77 percent here. So just talk to us a bit about that too, because that is a growth
opportunity, a geographical growth opportunity here is also interesting, I think as well.
EGAN: Yes, no, you're right. They have this global footprint both in their investor base now, which now includes a California private equity
firm, and also where they have their clubs around the world. So I think that that is also, you know, another important part here.
What's intriguing is kind of what are they going to do with this money now that they have another $500 million to spend? And some of it actually
might be spent here in New York. "The Financial Times" reported that they could be looking to try to put some of this money towards paying for a new
stadium for their New York football franchise, so that would be interesting as well.
I think it's just -- it shows that there's just this boom in sports valuations right now and Silver Lake wants to take a part of that. And for
a long time now, it seems like it's been a really good investment, particularly when we have interest rates as low as they are. We've got all
these investors figuring why not borrow some money and why not put it to use in in buying another sports franchise.
CHATTERLEY: Hurray. More soccer here in the United States as well or football, we like we found that. Matt Egan, thank you so much for that.
All right, let's move on to our next driver. Hewlett Packard or HP earnings beating Wall Street's expectations. The PC maker though
continuing to try and fend off the hostile takeover bid from Xerox, its competitor.
Clare Sebastian joins us on this story. You know, I say they beat expectations here, Clare, but I look at the minor, the tiny rise that we
saw in revenues, and I kind of feel like they need to do more here to justify fending off or saying look, we're not interested in any kind of
offer from Xerox potentially when we're talking about a $33 billion bid. What do we think?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Right. Yes, Julia. I mean, they're not exactly printing money -- if you see what I did there. Revenue
accelerated a little bit up 0.3 percent year-on-year, which you know was enough for shareholders today at least, the stock, it looks like it'll rise
when it opens shortly.
But yes, their argument for shooting down Xerox now several times publicly and then in pretty strong terms is that they are strong enough to go at it
alone. They have a turnaround plan. They don't need Xerox.
They have said they're willing to look at a potential combination, but they are hinting that they would rather be the acquirer, and a key number from
this earnings report, Julia, which further weakens their argument here is that their printing business was down six percent year-on-year.
This matters because this is about a third of revenues, but it's about two- thirds of earnings. And this is why analysts are looking at this and saying a combination might make sense.
Both Xerox and HP are heavily, you know, into the printing area which continues to decline in the age of smartphones and the Cloud, so that again
weakens their argument.
CHATTERLEY: I just realized what you did there with the printing of the cash. That was a nice moment. Delayed onset humor in my case, but I was
laughing quietly behind the scenes there.
To your point exactly, I mean, we've seen $4 billion added to the value of both of these companies. Carl Icahn, of course, activist investor owns
both, so he is winning either way here.
But markets clearly like this. I just wonder whether given that Xerox has to borrow heavily in order to buy HP here. HP could borrow a load of money
and put a hostile bid in for Xerox in reverse. Just throwing me out there, Clare. What do we think about one?
SEBASTIAN: Yes, I think if you look at the letters that HP has sent to Xerox, they are clear that they -- you know, certainly haven't discounted
the idea of a potential combination, but look, they are a much bigger company. Their market cap is about three times the size of Xerox. Their
revenue is more like six times on an annual basis and they have made it clear that they don't want to open their books until they can do some due
diligence on Xerox.
[09:10:04]
SEBASTIAN: They have publicly undermined Xerox's turnaround plan and said that their business is lacking strategy and focus. And it's clear that
they are looking at this more in the sense of whether or not they want to be the acquirer rather than the target.
Having said that, Julia, on the earnings call last night, they were pretty clear that they see their stock as undervalued on an individual basis, that
they are very confident in their turnaround plan. They are talking about returning cash to shareholders.
So maybe they're actually thinking they'd rather go at it alone. They don't need Xerox at all.
CHATTERLEY: Yes, investors going, show me the money. Clare Sebastian, thank you very much for that.
All right. Let's move on. "The New York Times" reporting that President Trump was aware of the whistleblower's complaint when he finally released
military aid to Ukraine.
This, as newly released transcript show the former official who first signed off on the freeze deemed the request so unusual. He feared it could
violate Federal law.
All of this as a second House committee prepares to hold public impeachment hearings next week. Kristen Holmes joins us now on this story.
Kristen, explain why this is important because it does seem to bring a whole new meaning to the term quid pro quo here, given the timing, not only
of the freeze on the aid to Ukraine, but also who knew what when?
KRISTEN HOLMES, CNN U.S. CORRESPONDENT: Absolutely, Julia. So we want to break this down. I'm going to start even before he learned about the
whistleblower complaint, because we've learned a lot about this general timeline over the last couple of days.
One big revelation being that that aid was actually held up the same day that President Trump President Zelensky phone call happened. Now, we're
not sure if that's a coincidence or what, but it certainly seems notable.
Now, moving forward to this "New York Times" report, as you mentioned, they say that President Trump was made aware of the whistleblower complaint at
the end of August. Pardon me.
Why is that so important? Well, it really casts a shadow on everything that happened afterwards. One of the things, especially being that Gordon
Sondland phone call. Remember? The Ambassador to the European Union said he called up President Trump and said, what exactly do you want with
Ukraine? And President Trump said, no quid pro quo. There's not a quid pro quo.
Well, this would be really relevant and very important if he had known already that someone had come forward and said that there was in fact, a
quid pro quo on this phone call. So that could give a reasoning to why he was so adamant about that, when he had been in fact asking for this dirt or
this information on the Bidens.
Then you see, John Bolton resigning; also a huge issue here, and then following that, the release of the aid. So this is raising a lot of
questions as to whether or not that aid was only released because President Trump knew that people were looking into this.
So all of this is really framing what exactly happened from the time of that July 25th phone call up until now. It changes exactly what President
Trump's reaction or how President Trump's reaction is viewed now in a different sphere.
CHATTERLEY: You know, it's quite fascinating, and one of the other things that the President seemed to suggest yesterday was that Rudy Giuliani, his
private attorney, wasn't acting on his behalf in Ukraine.
I mean, if we take a step back here for a second, is he perhaps suggesting that Rudy Giuliani was going rogue or he was acting on behalf of the United
States? And one of the questions that was being asked I think on social media yesterday was, does that thing reduce or remove the attorney-client
privilege for future hearings here?
Did President Trump just throw Rudy Giuliani under a proverbial bus here, do we think?
HOLMES: Well, Julia, that is the big question. I saw a lot of memes last night about President -- I mean about Giuliani going underneath the bus
there in that comment and this is the first time President Trump has really said anything like that.
But more importantly, over and over again, Rudy Giuliani, the President's personal attorney, has said that he was doing this at the behest of
President Trump. That will completely change the entire dynamic. What exactly it looks like? Why Rudy Giuliani was there in the first place,
talking to people if he wasn't working at behest of President Trump?
So we have not heard from Giuliani. I think that is the most important thing to keep your eyes on. How is he going to react? We know of course,
over the past couple of weeks, many people have asked Giuliani over and over again, are you going to be thrown under the bus? And he has the same
joke where he says, well, if it happens, which it won't, I have insurance.
Now his lawyer say that he is joking around, but who knows right now, if Rudy Giuliani does in fact have some sort of insurance or information on
President Trump?
I think the big thing to watch though is how he responds to these remarks by President Trump because it has been clear from the beginning, he has
repeatedly said that this was something that President Trump wanted him to do and now President Trump clearly taking a step back.
[09:15:02]
CHATTERLEY: One thing we know about Rudy Giuliani, he is not normally shy in coming forward with his views. Kristen Holmes, great to have you with
us. Thank you so much for that.
All right. Let me bring you up to speed now with some of the other stories that are making headlines around the world.
If you're traveling into or from the United States, be prepared for major disruptions. Major storm systems could impact millions of travelers as the
Thanksgiving Holiday gets started.
Blizzard warnings are in effect in the West with hundreds of flight cancellations already in Denver. Snow and powerful winds are hitting the
Midwest and moving east.
Police in Germany say they believe four people were involved in stealing precious artifacts from a Dresden museum on Monday. That's after they
reviewed surveillance video of the scenes.
Authorities also say they have received more than 200 possible leads via the police website.
All right, we're going to take a quick break here on FIRST MOVE, but coming up, brace yourself for the crypto wars. Leading economist Ken Rogoff
enters the digital currency debates.
And getting in gear. I speak to one of Ford's leading engineers on new technology as the literal tug of war continues with Tesla. That's coming
up. Stay with CNN.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE live from the New York Stock Exchange this Wednesday. We're looking at fresh records for the NASDAQ and
for the S&P when we open up this morning.
There's a look at the futures right now. Call it perhaps a turkey trot to fresh highs today as we await new trade headlines and digest some stronger
than expected GDP data -- growth data -- here in the United States for the third quarter.
Before the bell today, farm machinery maker, Deere though warning that 2020 results will come in weaker than expected as the agricultural sector
grapples with those trade uncertainties. Deere shares are a set to fall more than four percent as you can see at the open up for the farming
equipment maker.
[09:20:04]
CHATTERLEY: All right, let's talk about what we should expect in 2020. Joining me now is that Krishna Memani. He is Vice Chairman of Investments
at Invesco. Great to have you with us.
KRISHNA MEMANI, VICE CHAIRMAN OF INVESTMENTS, INVESCO: Thank you. Thanks for having me.
CHATTERLEY: I loved your notes -- your look ahead, because it was in reverse. It is what we are absolutely not expecting in 2020.
MEMANI: Well, so you know, you have to get your research read somehow. So this is one little trick you have to --
CHATTERLEY: So, pure exercise.
MEMANI: Yes, exactly. But the bottom line is, 2020 is probably going to be one of the -- at least, the first half of one of the lowest volatility
years that we have seen in a while for three reasons. One, the Federal Reserve has basically set it up very nicely. Not only are they not going
to be tightening policy, they're expanding their balance sheet. And that is the case on a global basis.
And second, the global economy is reaccelerating. It may not get to a very high level, but it's kind of coming off of a trough, which probably ends up
being in the fourth quarter of this year.
And thirdly, we will have a trade deal. You know, call it whatever you want, Phase 1, put a kind of a lipstick on a pig, but at the end of the
day, it's not getting worse. That's all we need for a very good low volatility environment for 2020.
CHATTERLEY: Lipstick on a pig. So it's not going to be very comprehensive, but we never expected that anyway.
MEMANI: Exactly. And the impact of the trade deal on the real economy is really going to be very modest. What we need is for the sentiment to calm
down, CapEx to get going. There is enough momentum in the global economy for that to be the case. We just don't need anything thrown in the middle
of it.
CHATTERLEY: So it's sticking with the not going to see theme. So we're not going to see a U.S. recession in 2020. We can rule that out.
MEMANI: Oh, absolutely. I think U.S. recession with the Fed pivoting and the reacceleration that is unfolding, you know, the consumption part of the
economy is doing quite well to begin with. Any slowdown there is going to be temporary and now you see a revival of manufacturing. So the likelihood
of a recession is very low in my book.
CHATTERLEY: What about not seeing a materially weaker U.S. dollar? Because this is something that has come out in the earnings.
MEMANI: Sure, sure.
CHATTERLEY: And it matters all around the world for emerging market investment, whatever we're talking about.
MEMANI: So I think that is really one of the kind of the most critical thing for 2020. You know, normally in this sort of an environment where
the Fed is an easing mode and you have reacceleration response, you would expect the dollar to weaken.
But this time around the reacceleration is very modest, and the growth differential as a result is very modest. Rate differential in favor of
U.S. is still quite substantial.
So that combination basically ensures that if we see any weakening, it is going to be very modest. All we -- but for the markets to do better, all
we need is for the dollar not to strengthen and that is not going to be the case.
CHATTERLEY: Okay. So that's the important part of this. And I made the point that it matters not just to the United States, but for elsewhere in
the world. What about if we compare developed market growth to emerging market growth? I guess the two countries I'm thinking of here, India and
China.
MEMANI: Well, so I think that is -- if there is going to be a revival of growth to a really good level at some point, those would be the two
economies that will be driving. Unfortunately, in 2020, that is not going to be the case.
So the developed market actually, so the U.S. and Europe probably gets close to a potential of, let's say, one and a half percent. The emerging
markets, on the other hand, where the potential is probably north of four and a half percent, probably stays close to the four and change.
So I think the shortfall in emerging markets is something that is going to be with us in 2020.
CHATTERLEY: Are we or are we not going to see greater stimulus from China because to your point, it's not just about the Federal Reserve. We've got
60 percent plus of the Central Banks around the world here stimulating, which is also creating a sort of cushioning effect here. China?
MEMANI: Well, so I think China has the fiscal capacity to stimulate its economy. But it is letting its economy slow down. And what that tells me
is they are far more focused on the transition of the economy, rather than keeping the growth rate north of six percent.
So I'm really not, you know, they're stimulating just to make sure the growth rate remains good enough, but not accelerating. I think that's what
they'll do, but no significant additional stimulus. I don't think it is coming.
CHATTERLEY: One of the other big features, I think of 2019 was the focus that we saw on interest rates, on the pullback in interest rates, the
inversion of the yield curve, as we talked about it here, particularly in the United States. What about rates? What are we not going to see?
MEMANI: Well, so what we are not going to see is a lot of volatility in rates for two reasons.
CHATTERLEY: Okay.
MEMANI: One, the Fed is not going to be cutting rates because the economy is stabilizing. Equally importantly, actually, perhaps from a price
standpoint, more important is the fact that even when you see the acceleration, that's as prices go up, the Fed is not going to tighten.
They have broadcast that.
[09:25:06]
MEMANI: So I think that combination basically anchors the front end of the market, and with the growth being relatively modest, the long end of the
market gets -- the volatility there is going to be very low as well, so --
CHATTERLEY: And you can translate that around the world as well, if we are seeing Central Banks easing that anchors this sort of shorter term rates,
but if rate isn't strong enough, really, you don't see longer term rates rise either.
MEMANI: Yes, I think there used to be a lot of difference between individual economies. Now, we are all the same. And there, we are acting
alike.
CHATTERLEY: Synchronized stability. I saw that term. What do we think of this term?
MEMANI: No, I think we are coming up with all sorts of things over the last -- you know, it was synchronized whatever last time. I think
synchronized stability kind of catches it perfectly.
CHATTERLEY: Yes, I would agree. What about fresh highs then for the markets? Because we keep talking about record highs here, particularly in
the United States. How much upside based on what you were just saying there is available then in 2020?
MEMANI: So if you are at record highs, and even if you go two points, it's a new record.
CHATTERLEY: It's another record high.
MEMANI: Another record high. So I think it's silly to talk about that. But at the same time, I think it's fair to say that growth is not going to
be turbocharged and policies not being -- you know, they're not cutting rates anymore. So that combination ensures we are talking about, you know,
mid to high single digit type returns out of the developed markets and maybe slightly better out of emerging markets.
It's not going to be one of the best years or anything of that sort. But it is going to be a decent year off of a really good year.
CHATTERLEY: I think we take that, quite frankly with some little turbulence.
MEMANI: Oh, absolutely. Absolutely.
CHATTERLEY: Krishna Memani, great to have you with us. The Vice Chairman of Investments at Invesco. The market open is next. You're with FIRST
MOVE. Stay with us. We're back after this.
(COMMERCIAL BREAK)
[09:30:00]
CHATTERLEY: Welcome back to FIRST MOVE and that was the opening bell this Wednesday morning. You can see executives from the Empire State Realty
Trust ringing the opening bell this morning, celebrating the opening of the Empire State Building Observatory Experience and just like that, building
investors, hoping stocks can make fresh highs on this day before Thanksgiving. We're already at record levels, as we were just discussing
there for the S&P and the NASDAQ.
We're inching higher this morning. Remember the shortened trading week as well will take some liquidity out of the markets. We have brand new data
this morning though showing the U.S. economy growing. It is stronger than expected 2.1 percent annual rate in the third quarter. Business investment
slowing less than initially reported.
And we saw durable goods orders rising more than half a percent last month due to increased defense related orders. Investors were in fact expecting
a more than one percent drop. It's all about the fourth quarter though now where further weakness is expected.
What about our Global Movers this morning. As was mentioned, Deere already, Deere shares lower. The farm machinery giant reporting better
than expected profits, but it was all about the guidance -- the 2020 guidance was cut as farmers grapple with continue to trade uncertainty.
Right now, down some 4.6 percent.
Dell also down four percent. The company said Q3 profits were beating expectations, but revenues actually fell short. It says Q4 sales will
suffer from a shortage of chips from its main supplier, Intel.
All right, shares of another tech giant now, HP. Those are higher by some one and a half percent. Results beating expectations as we discussed
earlier on in the show. Also, the company raising guidance as well. The company also fighting that hostile takeover bid from Xerox as well. Right
now hired by 1.6 percent.
Disney right now relatively unchanged. Reports say its new streaming service has added more than one million subscribers per day on average
since it launched, so one million subscribers per day. Not bad if you can get it.
All right, let's move on. On Monday's show, we had the co-founder of Libra argue why Facebook's feature payment system, Calibra, and the digital
currency, Libra, of course will help bring greater inclusivity to regions of the world that remain unbanked. Here is a reminder.
(BEGIN VIDEO CLIP)
CHRISTIAN CATALINI, CO-FOUNDER, LIBRA: Libra is really optimized for that cross border experience. So transactions where already today you're
incurring fees and there's like many intermediaries throughout the value chain. They all charge their own spreads.
And so when you look at the at the end result, consumers and users are really excluded because of cost.
(END VIDEO CLIP)
CHATTERLEY: There are those who look at this situation and Facebook's potential as a threat to regional Central Banks and their ability to
operate monetary policy. However, my next guest says we need to focus more overseas, that the risks lie beyond the reach of U.S. regulators in China,
for example.
Ken Rogoff is former Chief Economist at the IMF and Professor of Economics at Harvard University, and he joins me from Cambridge, Massachusetts. Sir,
fantastic to have you on the show.
KEN ROGOFF, FORMER CHIEF ECONOMIST, IMF: Thank you.
CHATTERLEY: You wrote a fascinating op-ed about this and I just want to take a quote from it to begin, you say, "The real challenge for the United
States isn't Facebook's proposed, Libra, it is government backed digital currencies like the one planned by China." Why? Why in your mind is this
the real threat here?
ROGOFF: Well, if it's a currency like Libra or even Bitcoin, the rich countries have the ability to regulate where you can use it. Can you spend
it in stores? Can you cash in at banks? And by controlling that lever, they can really control it.
If there's no final usage, except buying a hitman or drugs, its liquidity. Its value is very limited.
But a state-sponsored digital currency, say by China, which seems very likely next year, China is probably not going to have a crypto secretive
currency, but more a retail digital version of the one it has.
Initially, it'll be aimed at domestic consumers, but it has global ambitions. The difference in the case of China is there is -- if China
says you can spend it here, it's the world's largest economy, that's that final demand that can make it work.
The advanced countries can still regulate it, and say, well, you can't use it here. But there are lots of parts of the world where China and the
United States disagree over policy starting with all of the countries the U.S. has financial sanctions on and I think indeed there's going to be a
global market for China's currency.
[09:35:06]
CHATTERLEY: You know, it's interesting I was in Singapore 10 days ago and I actually did a panel that had the head of digital and blockchain for the
People's Bank of China, the Chinese Central Bank, and he reiterated this is purely for domestic use. That is their only focus, and this is actually
something to do with trying to reduce the dominance of WeChat Pay and Alipay because they're afraid that if something went wrong with one of
those players, they could have a systemic problem. You're laughing, you don't believe it?
ROGOFF: Oh, I do. I mean, that's certainly the initial push. As I said, it's initially going to be directed domestically, and exactly for the
reasons you say that they have their versions of Amazon and Facebook issuing digital currencies that are immensely popular in China. China is
way ahead of the United States, way ahead of Europe.
But over time, there's no reason -- it is digital -- that it can't be used in North Korea, Iran, Russia. And I think over time, absolutely, it is
China's ambition to challenge the dollar for global dominance at least among a set of countries and perhaps in the world's underground markets.
CHATTERLEY: You know, one way that I asked perhaps this could be facilitated on a global scale is by the One Belt One Road, using a digital
renminbi to transact with African nations, for example, with Brazil, do you think that's perhaps the best way that China could get global use? And we
don't have to go down sort of negative uses of this, perhaps it could facilitate cheaper payments with destinations like those that I've just
mentioned? What do you think of that?
ROGOFF: Well, that's a very good point. I mean, I think there's reason that so far, a lot of China's loans to those countries are actually in
dollars. And even where they have some payments in renminbi, the dollar is still dominant because at the end of the day, both sides trust that more.
But I think you're absolutely right. That's a starting point for you know, legal transactions with this currency. Again, you have to be able to use
it somewhere. That's really the key to making a currency work.
But if China continues to grow, it's already by some measures the world's largest economy that provides the sync. Again, the U.S. and Europe can
block it out within their borders, but they can't control its use abroad.
CHATTERLEY: You know, it is interesting that we're even having this discussion. When I talk to traditional economists and analysts, they're so
skeptical about any part of this, quite frankly, at this moment.
Why are you talking about this and what do you want to see regulators do? Do we need to see the Federal Reserve coming up with its own Fed coin as
has perhaps been mooted and dismissed by certain quarters? Is this what the U.S. needs to do?
ROGOFF: Well, there are two separate issues. One, private currencies like Libra, and I think I am very skeptical about their long run value simply
because if the government can't observe the transactions the way it can observe credit cards and debit cards, it's going to regulate it.
And if it can observe them, it's not at all obvious there will be much of a market, but state-sponsored currencies are another matter. I think people
haven't really gotten their heads wrapped around how fast that's coming.
Absolutely. The Bank of England is looking at it. The Bank of Canada is looking at it. The Federal Reserve, they're on top right now. They don't
want to rock the boat. They're not going to do something to shake up the system that's already working for them. But yes, we will eventually have a
Fed coin, too.
CHATTERLEY: How long are we talking here? And to your point, you raise a great one. To a traditional investor in these days, they'd say, a
centralized, a government owned digital coin or digital asset here is the last thing we want. It's the exact opposite of why Bitcoin, for example,
was created here. They wanted something that gets away from government control. How long does it take before we see a government backed coin be
it in China or elsewhere, do you think?
ROGOFF: Well, I think next year in China, we're probably going to see it on a large scale. But you know, these people who, you know, have a
libertarian view, and they don't want the government to, you know, be able to tax them and see all their transactions, I agree with that at a small
scale, but when you can do you know, $100 million and the government can't see it, governments have to clamp down on that.
And if you look at the history of currency, the private sector, always invents stuff, but the government comes along and clamps down.
[09:40:03]
CHATTERLEY: Can you envisage a future where a digital coin of some sort challenges the dominance of the U.S. dollar?
ROGOFF: Well, I mean, it would be from China. But again, the governments are going to be the winners. The private sector is not, at best, something
like Libra can compete with MasterCard, and Visa and American Express and Western Union among the private payment mechanisms. But they have to have
some kind of centralized reporting.
The government cannot allow things that they can't observe. But that's where China comes in because China can say, well, we observe it. We don't
really care if you do. If you don't like what we're doing in Iran, too bad. They already say that.
So I think that's where the real future battle lies between different governments with different views.
CHATTERLEY: Yes. It is going to be fascinating to watch. Thank you so much for writing about this. It is fascinating. Ken Rogoff, former Chief
Economist at the IMF and Professor of Economics at Harvard University.
ROGOFF: Thank you.
CHATTERLEY: We will continue this discussion, sir. All right. Global auto sales are set for about a bad year. We'll be talking about how
carmakers are working to attract more and different buyers. That's next.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE with a look at today's "Boardroom Brief." The Federal Aviation Administration, the FAA has pushed back on
pressure from Boeing to approve its new 737 MAX jets.
The aircraft has been grounded for several months now following two deadly crashes, but in a letter to Boeing, the FAA says it will determine when the
737 MAX is safe to return to the skies and not Boeing.
Until then Boeing is scrambling to find space to store the finished planes.
Global auto sales could be on track for a four percent drop this year. That's according to Fitch, the biggest percentage decline since 2008.
Demand from China is down 11 percent so far this year.
[09:45:11]
CHATTERLEY: And as the auto industry struggles around the world, many car makers are introducing new technology and bigger screens to lure customers.
Ford is just one of them.
The company has unveiled a 15 and a half inch touchscreen display that will be in all-electric Mustang Mach-E SUVs. Ford has debuted to the new
generation of SYNC system, the SYNC 4. Joining us now, Ford Chief Engineer for SYNC Technology, Gary Jablonski. Gary, fantastic to have you with us.
I'm very excited about this. You called the SYNC 4 system a cellphone on wheels effectively. Is this Ford basically saying that we are planning for
a driverless future where you can be distracted, you can do work in your car?
GARY JABLONSKI, CHIEF ENGINEER FOR SYNC TECHNOLOGY, FORD: Yes, I don't know that we are looking for a driverless future just quite yet. Our SYNC
technologies have really always been designed around, trying to make the experience of driving the vehicle easy and hassle free for our customers.
So SYNC 4 is probably our largest advancement in connected vehicle technology since we introduced the SYNC technology originally 10 years ago
with Alan Mulally and Bill Gates.
The big advancement here is, we know that customers' expectations in their vehicles are really based on their experiences with cellphones, and so we
really wanted to close that gap and provide that great connected experience in the vehicle. That's what SYNC 4 delivers for us.
It's going to give customers the navigation experience they expect with fresh maps and traffic that's fed from the Cloud. It's going to give them
a digital assistance that actually understands natural language when they speak to it and for entertainment. We know that you know, people like to
consume music by streaming from Cloud services and so on, again, a connected SYNC 4 product like we're delivering is going to be able to
deliver that entertainment experience as well.
CHATTERLEY: And it learns, too, if you regularly call home or call your mother on the drive home from work, it will ask you if you want to dial
your mother, is that right?
JABLONSKI: Right. One of the fantastic advancements that our user experience designers have been able to achieve is just a little bit of
learning as you drive the vehicle and, you know, examples like you cited, if every morning on the drive to work, you listen to a particular radio
station to get traffic, a button will pop up right on the front surface, just to give you a shortcut right to that function.
Or if you call mom on the way home from work every day, there will be a button right on the first surface of the screen that gives you just a quick
shortcut to get to that function and they are small little things, but when you add them all together, we think it's going to make the experience of
driving with SYNC 4 really enjoyable and easy.
CHATTERLEY: How did you decide to use a screen that was 15.5 inches? If I look at the Model S from Tesla, that's 17. I think Byton over in China has
decided to go for a 48-inch display in a car that's coming next year. The whole dashboard is going to be a screen. What did you decide? What made
you decide to that 15.5 inches was right? And is there some justification for the fear that perhaps as a driver, you get distracted? At a certain
point, it can become a distraction?
JABLONSKI: Well, you know, we started with kind of this assumption that, you know, we didn't know anyone that ever bought a smaller TV. So clearly
there's a trend for larger displays.
And for our user experience team, it really created a palette that let them to do some really unique things that we think are actually going to make
driving a little more hassle free.
We know that we're in a multitasking culture. We're really doing one thing at a time and so with the large screens that enables us to maybe show a
couple pieces of information, maybe you're navigating in your Mach-E and monitoring, you know, distance to a charging station. But you also want to
pay attention, maybe to a podcast.
And so, on a smaller screen, you might be flipping between screens in order to do all of that. But on some of these large screen systems, we can
actually show you all of that information at once.
CHATTERLEY: Now, as a chief engineer at Ford, I have to get your opinion of some of the debate that has been going on, particularly on social media
with regards to Tesla's new Cyber Truck and Ford's pickup as well, and the suggestion that there needs to be a rematch over the tug of war that we are
seeing on social media. As a chief engineer for Ford, can I get you to weigh in on this, please?
JABLONSKI: Well, I'll tell you. I personally love a good social media debate. But here at Ford, we're super focused on our F-150 customers.
They've made us the bestselling truck for 42 years in a row and we're super excited to kind of continue that heritage with a hybrid F-150 next year and
an upcoming all electric F-150. So we think the future is really bright for the F-150.
[09:50:07]
CHATTERLEY: Yes, it sounds like you're not afraid at this moment. Gary, great to have you with us. Thank you so much for that. Gary Jablonski
there from Ford.
All right. After the break, the founder of Papa John's pizza takes a bite out of the company he founded and explains why the treats he concocted now
leaves him with a pretty sour taste in the mouth. That's coming up. Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. The founder and former CEO of Papa John's Pizza has gone cold on the product he used to sell. John
Schnatter who started the firm back in 1984 became embroiled in a row about NFL players protests and eventually resigned.
Now in an interview with a Kentucky TV station. He said he believes that company is being mismanaged, and he towed at the quality of the pizzas. He
tells WDRB, "I've had over 40 pizzas in the last 30 days." Yes. "And it's not the same pizza. It just doesn't taste as good. This is all a fast
farce."
Paul La Monica joins us now. Paul, 40 pieces in the last 30 days.
PAUL LA MONICA, CNN BUSINESS REPORTER: Carbo loading, Julia. Carbo loading.
CHATTERLEY: Wow. Yes, you have to do some serious gym workouts to offset that. So I mean that astonishing revelation aside -- if we can, what do we
think of what he was saying here? A change in pizza recipe? Mismanagement of the company?
LA MONICA: Yes. Let's be honest here. Schnatter obviously has a bit of an axe to grind being forced out of the company that still bears his name
and he has been lately putting his money where his mouth is, so to speak as well because he sold a lot of Papa John's shares in recent months. He is
still a major shareholder, but he's got just under three million shares of the company, about a nine percent stake. He at one point had about nine
and a half million shares. So he's clearly dissatisfied.
As for whether or not Papa John's Pizza doesn't taste as good as much, you know, as it used to, let's just say I live in Brooklyn and have a one to
one vowel to consonant ratio in my last name, so I don't really like chain pizza to begin with. So --
CHATTERLEY: So you're not a lover of this, but have you ever eaten 40 pizzas in 30 days?
LA MONICA: No, I've had it, but Domino's, Papa John's, Pizza Hut -- not my thing when I can get good old fashioned good pizza in Brooklyn from a local
business.
CHATTERLEY: I completely understand that. He did say though, stay tuned. The day of reckoning will come and the record will be set straight. So
some interesting warnings here for Papa John, but yes -- investors not so worried.
LA MONICA: I don't know, I mean, to be honest, the stock has really had a nice turnaround recently in his absence. Star Board value activist
investors come in. They've replaced Schnatter and the person who took over for him with a CEO who used to be the President of Arby's, which has been
one of the hotter fast food chains because of their quirky, "We have the meats" campaign.
[09:55:17]
LA MONICA: So I think Papa John's might be on the right track without John.
CHATTERLEY: Yes, I was about to say, he may have a beef but it looks like no one else will. Paul La Monica, thank you so much for that.
LA MONICA: Thank you.
CHATTERLEY: All right. Let's move on, and finally New York's latest arrival has been sent packing by authorities. Roxo the robot is a six-
wheeled contraption which delivers FedEx packages.
When it was seen trundling along a New York City street, Roxo was told to cease and desist.
Mayor Bill de Blasio tweeted, "Never gets a robot to do a New Yorker's job." He also said they might clog up the already busy streets. FedEx
figured that one out. Yes, no to robots. Not right now at least in New York.
All right, let me give you a quick look of what we're seeing for market at this moment. We are higher in a truncated week, but that's it for the
show. I'm Julia Chatterley. You've been watching FIRST MOVE. Time to go make yours. Have a great Wednesday.
(COMMERCIAL BREAK)
[10:00:00]
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