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First Move with Julia Chatterley
Production Suspended As Boeing's MAX 737 Jet Crisis Escalates; Amazon Restricting Sellers From Using FedEx Citing Performance Issues; Twitter Receives Praise For Banning Political Ads. Aired 9-10a ET
Aired December 17, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:21]
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.
Production suspended. Boeing's MAX 737 jet crisis escalates.
Subprime delivery? Amazon restricting sellers from using FedEx citing performance issues.
And tweeting up a storm - potentially. We're joined by the Twitter CFO live on FIRST MOVE. It's Tuesday. Let's make a move.
Welcome back to FIRST MOVE. It's a joy to be back. We may not be in storm free white Christmas here in New York, but I'll tell you what, investors
will settle for a green one - Boeing.
Take a look at what we're seeing for the futures right now. Boeing, as I mentioned dragging on the Dow. I'll explain why shortly. But U.S. stocks
do begin the session at fresh record highs and that's the key here.
In the meantime, I should point out as well stocks rising for the last four days as the blizzard of recent uncertainties that they've been dealing with
have steadily cleared, I think. We have a Phase 1 trade deal between the U.S. and China.
Brexit in January now feels all but certain and Mexico's concerns about the NAFTA Mark 2 deal, the USMCA have apparently been calmed, too.
But hey, I'll tell you what? There's reasons for other forms of optimism. The Federal Reserve Bank of New York's Index of Factory Sentiment hitting a
five-month high on Monday, then add to that the Atlanta Fed predicting a two percent growth rate this quarter, too. That's a huge jump from earlier
estimates. So the fundamental seemingly kicking in here.
Then what about Asia? We have strong Chinese consumer spending and industrial output numbers this week, too. Perhaps maybe early days, but
indicating the economy there could be steadying, too.
The Shanghai Composite rallying some 1.2 percent, similar gains in Hong Kong, too. So a pretty positive start to the week.
What about Europe as well? Well, stop taking a breather right now. But again, they hit record highs on Monday as well. The first record for the
stocks Europe 600 in four years.
We've had plenty of Santa Claus rally predictions on FIRST MOVE over the past month or so, and so far in December, Santa it seems has delivered, the
S&P 500 up around 1.5 percent.
So the clouds may be clearing for global investors, but for Boeing, the clouds remain and that's where we're going to kick off the drivers. Let's
get to it.
Boeing says it will halt production of the 737 MAX jets, the jets, of course, have been grounded since March following two fatal crashes. The
company is still awaiting the recertification of the plane, and Richard Quest joins us on this story.
Richard, great to have you with us. They threatened a production halt, but this does feel like a pretty drastic step here. Just talk us through the
implications.
RICHARD QUEST, CNN BUSINESS EDITOR-AT-LARGE: The short term implications are of course, that they will be destroying the supply chain or at least
halting the supply chain, which could lead to some very serious economic problems.
You've got about 15,000 to 18,000 employees in the Puget Sound who work on the 737, so they were not out of a job. They will be redeployed elsewhere
within Boeing as Boeing has to prepare to get nearly 800 planes back in the air.
You've got 378 that they've delivered; 400 that they've manufactured since the grounding, all of which will have to be individually inspected.
Julia, I think that's one large part of it. The other one, of course are the suppliers, the supply chain, and how this is going to affect companies
large and small, who are basically now going to be told don't bother delivering to us for the time being.
CHATTERLEY: Yes. Trust. Such a huge issue here. I wonder whether it ever comes back, at least with this name. Richard Quest, great to have you
with us. Thank you for that.
All right, let's move on to our next driver. To the U.K. now where Sterling has been under a bit of pressure today, down almost one percent
versus the U.S. dollar.
The U.K. Prime Minister Boris Johnson, planning to block an extension of the Brexit transition period beyond December 2020. Here's what he said in
his first Cabinet meeting since reelection.
(BEGIN VIDEO CLIP)
BORIS JOHNSON, BRITISH PRIME MINISTER: It was quite extraordinary. It was a seismic election, but we need to repay their trust and work 24 hours a
day, work flat out to deliver.
And of course, the first hundred days were very busy -- 140 days or whatever it was -- you may remember, it was a very frenetic time. But you
ain't seen nothing yet, folks.
(END VIDEO CLIP)
[09:05:08]
CHATTERLEY: Hadas Gold joins us now. Very Prime Minister, Boris Johnson, I have to say, but he said this all the way along -- he is not going to
extend beyond December 2020. He also said he wasn't going to rule out going back to World Trade Organization rules. Something tells me he is
preparing to engage firmly with the E.U. here next year.
HADAS GOLD, CNN BUSINESS REPORTER: Negotiating tactics at play here, both domestically and with the European Union, but when you're looking at
businesses, they see another cliff's edge.
So despite the thumping win last week that Boris Johnson and his Conservatives had, despite that surge that we saw on Friday with the pound,
the pound has now gone back down to pretty much where it was right before the election at about what we just saw a moment ago, about $1.31 or $1.32.
So it kind of leveled out, wiped out the gain that it might have had before.
And shares in U.K. focused companies are also sliding. The FTSE 250 is down just over one percent. The Royal Bank of Scotland is actually down by
four percent, and we also just got some manufacturing output numbers from the Confederation of British Industry, which says that manufacturers
suffered their worst output in the past few months. It's their biggest fall since 2009. And all of this still has to do with Brexit.
Because of that cliff edge, investors are still worrying about what's going to happen on December 2020. There's not going to be a transition if we're
going to fall onto WTO standards.
But it's interesting because the Confederation of Business Industry that's putting out some of these stark numbers is throwing its weight behind Boris
Johnson's plan, saying they will do whatever they can to help him. It's a slight kind of shift in tone from them, which I'm finding very interesting.
But it just goes to show that despite this big election win, despite all the, you know, the good news we might have seen on Friday in the markets,
businesses are still very worried and they're being advised by firms like DLA Piper to keep their no deal plans still warm and ready to go.
CHATTERLEY: Yes, you have to think the E.U. now has to take a step back and think about this strategically. If they've given up a close
relationship with the U.K. here, what can they come up with to achieve without risking a no-deal exit at the end of December 2020? It feels like
negotiating tactics to me. Hadas Gold. Thank you so much for that.
All right, let's move on to our next driver. The Amazon-FedEx feud escalating. Amazon is barring third-party sellers, from shipping Prime
items with FedEx ground delivery. FedEx stock down some one percent premarket.
Clare Sebastian joins us on this story. Clare, they said that this was due to performance declines and that the ban will last until these methods
improve. I wonder.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, there's a lot going on here, Julia. According to this e-mail that was apparently sent to sellers
and seen by "The Wall Street Journal" Amazon's version of the story, they did say is that this is a temporary ban that will last until the delivery
performance of these ship methods improve.
So on the surface, yes, this is a performance issue. Amazon clearly very sensitive of about the speed of shipment. This is a company that's already
taken a $1.5 billion penalty for shipping costs in this quarter alone to try and get holiday deliveries out to customers at the fastest rate
possible.
They are spending $35 billion on shipping this year. They're expanding one-day delivery to all Prime members on millions of products. So it's a
huge deal for Amazon.
But of course the backstory is that they have been reducing their partnerships with FedEx. FedEx announced in June, just two months after
Amazon said it was rolling out one-day shipping that it would end the contract to provide express shipment on its planes for Amazon. And in
August, a ground shipping contract was also allowed to expire.
So FedEx now grappling with what was once a big customer in Amazon, now a big competitor, so that is sort of the backstory behind all of this.
CHATTERLEY: Yes, and I think that perhaps, it is an indication of what we're seeing in the share price here. I mean, you have to just get a sense
of what we're talking about here in terms of lost business and the reaction that you see in the share price. Investors already know this is a
challenge.
I guess the big risk here is, is that if customers ship to Amazon, they then don't go back even if Amazon says, well, you know, you can if you want
to.
SEBASTIAN: Right. As I said, Amazon now saying this is temporary. FedEx is playing this down saying that it will affect any small number of
shippers but, look, 58 percent of Amazon sales are from third-party sellers, a lot of them do have the option to use FedEx and this only
affects them that are using FedEx for Prime in particular, just FedEx Ground.
So they can still use FedEx Express for their Prime deliveries, and they can still use FedEx Ground for non-Prime delivery. So it is a very
specific ban. So for the moment, I think, Julia, we're going to have to wait and see how this plays out.
FedEx in the past have said that Amazon represented only 1.3 percent of their revenues in 2018, so they consistently bear this down. But I think
the bigger picture is how much of a competitor does Amazon continue to be for them in the logistics space?
CHATTERLEY: Vast. Clare Sebastian, thank you so much for bringing us up to speed with that story.
All right. Let me bring you up to speed with some of the others that we are tracking around the world.
Coming soon on Capitol Hill, the U.S. Congress will begin the final step leading to a vote on impeaching President Trump.
[09:10:09]
CHATTERLEY: A House Committee will set the rules for the debate surrounding the third impeachment vote in U.S. history. The vote is
expected to be held on Wednesday.
A special court in Pakistan sentencing former President, Pervez Musharraf to death in his absence. It found he committed treason during his
presidency by unlawfully imposing emergency rule. Musharraf has been living in Dubai since 2016 and has the right to appeal the ruling.
To India now, police and protesters clashed as people again took to the streets of New Delhi due to a controversial citizenship law. Prime
Minister Narendra Modi is trying to calm the protests saying the law will not affect Indian citizens of any religion.
It makes it easier for immigrants from neighboring countries to acquire citizenship and less than Muslim.
Right now, thousands of transportation workers are on the streets of Paris, again. It's the 13th day of strikes. Workers are demonstrating against
proposed changes to pensions. Police are trying to prevent any more clashes by banning groups identifying as the yellow vests and forbidding
gatherings around famous Paris landmarks and government buildings.
We will continue to follow the story for you right here on CNN.
All right, we're going to take a quick break here on FIRST MOVE, but coming up, BlackRock's 2020 vision. The financial giant sees recession fears
easing next year, but Central Banks perhaps won't be so friendly.
And the U.S. elections? Well, they are a wild card. We'll discuss.
And it was a challenging year for President Trump's social media of choice, Twitter. Will ad fears ease in 2020? The CFO of Twitter joins us, coming
up on the show. Stay with us. We'll back after this.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE live from the New York Stock Exchange.
I'll give you a quick look at what we're seeing for U.S. stock market. Futures perhaps is going to see a little bit of a pullback at the open
today from record highs.
[09:15:10]
CHATTERLEY: Investors have pretty much got everything on their holiday wish list this December from trade deals to greater Brexit certainty. The
question is where does that lead us?
Well, tech stocks have been the big winners. The NASDAQ up nearly 33 percent so far this year with chip stocks up 56 percent. Of course, we're
excluding the damaged brought in December of last year, but hey, what a year it's been.
Now a new survey from BlackRock sees a quote, "Favorable market backdrop the next year with recession fears easing further." They do warn that the
dovish pivot that we've seen from Central Banks is pretty much behind us and it believes inflationary pressures could rise, too.
Let's talk through this. Mike Pyle joins me. He is Global Chief Investment Strategist at BlackRock. Great to have you with us.
MIKE PYLE, GLOBAL CHIEF INVESTMENT STRATEGIST, BLACKROCK: Thank you.
CHATTERLEY: Two crucial themes: Protectionism as you call it, the trade tensions first and foremost there; and then of course, what? Two-thirds of
Central Banks around the world stimulating, not going to be so easy for us to have that support next year perhaps.
PYLE: That's exactly right. 2019 was really the story of those two things. 2020 with those forces moving to the kind of back of the burner
means that growth is going to have to come a little more front and center.
I think we do see something of a pick up next year. There's a lot of that embedded stimulus from the Central Bank easing, still working its way
through the system that should edge growth globally, as well as the United States somewhat stronger next year.
CHATTERLEY: So the fundamentals then kick in because to point that that made there as well, and it's from your report, recession risk fear is also
going to ease, so you may not get more support or much more support from Central Banks, but hopefully, they've done enough.
PYLE: That's exactly right. You know, I think with the Central Banks having done their job in 2019 that does mean that the recession risks that
were so front and center, August-September, we see as receding to the background, but exactly your point, 2019 was a year of multiple expansion
on the back of Central Banks.
2020 is going to have to be a little bit more of a year around growth and that top line expansion for stocks to perform, we think it will happen.
CHATTERLEY: You know, we can talk in aggregate, and then we'll drill down into the details. But a lot of people will be looking at this and saying,
look, we've had equities around the world, particularly here in the United States dramatically outperform.
We've got trillions of dollars' worth of bonds trading with negative yields. You pay governments in order to lend them money, which is quite
astonishing. Are valuations relatively too high to support even if we do see greater growth coming through here in the fundamental solidify. Where
are we just relative to history on the valuation basis? You have a great chart to show this, too. What do we think here?
PYLE: Yes. So I think the important point is, if you just look at something like a PE multiple, it's going to show equity markets being
somewhat stretched relative to history.
CHATTERLEY: Right.
PYLE: But the important thing is that, PE multiples don't take into account the much different interest rate environment that we're in today
versus history. And if you look at something like the equity risk premium today versus history, it looks much more reasonable reflecting the fact
that interest rates are structurally lower.
And so in our eyes, equities, both in the U.S. and globally look kind of in the broad range of reasonable or fair.
CHATTERLEY: Just to explain what you're saying there, you're saying that actually, if interest rates were a lot higher, the future value of money
and earnings potential for these companies is reduced?
PYLE: Exactly.
CHATTERLEY: Because they're so low today, actually, you can look at this and value future earnings differently.
PYLE: That's exactly right. I mean, if you think about sort of just basic equity valuation, the future cash flow is discounted by interest rates and
those lower interest rates mean that the value of those -- tomorrow cash flows today is greater.
CHATTERLEY: So who benefits most, if we're talking about a relieving of some of the trade tensions? I know you like Japanese stocks. Where else
do you see potential here as we head into 2020?
PYLE: I think that's part of the story of 2020 is where we see not just growth firming a bit, but where we see growth farming in terms of sectors
and that I think is -- you know, 2019 is a year where manufacturing, global trade, CapEx was really beaten down.
And the place that has a bit more room to firm are exactly those parts of the global economy. That means things like Japanese equities, emerging
market equities, what have you in particular, because, again, those valuations especially had been especially beaten down, and that gives them
more upside when we expect to see this bounce back.
CHATTERLEY: I mean, surely that's very reliant on what we see from China as well and the stabilization in Chinese growth because however excited we
want to get about manufacturing recovery, if China is not recovering, or at least stabilizing, we've got a problem.
PYLE: Yes. And I think that's why the case that we're making for some of these cyclical assets is real but also, you know, not kind of all in; it's
somewhat muted. We see China stabilizing. We see them doing enough and with the trade tensions relaxing, them getting some benefit there, too, but
it's not going to be 2011, 2012, 2015, 2016 when they really pushed a lot of stimulus in and caused this big impulse globally.
CHATTERLEY: What about bonds? I mean, I'll go back to it. You've got $17 trillion now worth of bonds globally trading with negative yields. What
are you saying to investors about bonds and investing in bonds?
[09:20:13]
PYLE: Well, it's a somewhat easier story for U.S. based investors.
CHATTERLEY: Yes, it is.
PYLE: For European and Japanese clients, that's a really challenging picture. And as we saw in 2019, the type of cushion that you want your
bond allocations to provide, you are still there a little bit, but it's going to be increasingly difficult to get that stabilization from bonds in
those parts of the world.
In the U.S., we're still in a somewhat better position. We saw it just as recently as this past summer that when there was this geopolitical shock,
when there were these recession worries, U.S. bonds really rallied in pushing portfolios. We still see that as being a part of the future.
But you know, outside of the U.S. is a much more challenge picture.
CHATTERLEY: What's the biggest risk for investors in 2020?
PYLE: I'd say, too, on the shorter term, you know, though we've gotten some good news on trade, we've also seen how uncertain that can be. That
can unwind. That can cause a set of growth worries that we don't right now anticipate and put us right back where we were last summer.
I'd say longer term, you know, we see the possibility of a somewhat different inflation regime as a real, real worry, not so much because it's
super high probability, but because if it were to happen --
CHATTERLEY: I felt we were going to for years for that quite frankly.
PYLE: If it does happen, it's one of those things that really impacts portfolios, because you can't rely on that stock bond diversification. And
right now, it's pretty cheap to get some protection from chips and other sources of resilience, and that's a place where we think investors might be
sensible to turn a little bit.
CHATTERLEY: Make sure you've got some diversification and some money invested there.
PYLE: Exactly.
CHATTERLEY: Fantastic to have you with us. Thank you so much for that. Mike Pyle there. Global Chief Investment Strategist at BlackRock. Have a
great holiday season. Thank you.
All right. We're going to take a quick break now, but coming up, the owners of OxyContin maker, Purdue Pharma withdrew billions of dollars from
the company even as the opioid epidemic escalated. We've got all the details after this.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. The family -- the Sackler family -- behind Purdue Pharma withdrew billions of dollars as the opioid crisis
escalated. They pulled out the sum of $10.7 billion between 2008 and 2018 according to court documents.
Jean Casarez joins us on this story. Jean, great to have you with us. The importance I think of the money that was withdrawn was that it was eight
times the size of the prior decade, and it came out and they settled in 2007 with the Justice Department, so they had a sense perhaps of what was
coming. Talk us through the details on this and what we make of it.
JEAN CASAREZ, CNN CORRESPONDENT: That's exactly right, Julia, because the issue is, as you compare it with what they had taken up before and it was
between 2008 and 2018. They took out $10 billion from Purdue Pharma.
And then what they did with it, they said although the records cannot precisely say this is what was done, that they paid half of it in taxes and
half they re-invested into some of their international businesses.
Now, this all came about because we are in the middle of the Purdue Pharma bankruptcy at this point, and it was Purdue Pharma that came forward. I
was in the courtroom when it happened and they said, Your Honor, we want to be as transparent as possible and we want to have an internal audit done
for our years in business, so we can show the creditors exactly where the money went, exactly what we did and that is how this came out, which is
fascinating.
[09:25:24]
CASAREZ: Now, the fact is, this was during the time when people were very public that they had opioid addictions. People were dying. Families were
broken apart.
We do have a statement that we want to read from the Attorney General of New York because there are several states that are really contesting right
now the proposed settlement by Purdue Pharma. The Attorney General says, "The fact that the Sackler family removed more than $10 billion dollars
when Purdue's OxyContin was directly causing countless of addictions, hundreds of thousands of deaths and tearing apart millions of families is
further reason that we must see detailed financial record showing how much the Sacklers profited from the nation's deadly opioid epidemic."
But the Sacklers have a different take on this. They say that, "These distribution numbers were known at the time the proposed settlement was
agreed to by the dozen of Attorney General's and thousands of local governments." And they are saying that it was smart business to do what
they did, paying their taxes, and that they are the ones that came forth with this.
And here's the problem, Julia, the longer that this bankruptcy proceeding is protracted and litigated and more and more issues come about, the less
money there is going to be for the communities and the states in this country in the United States and that's the division right there because
the sooner you do this, the more moneys the people will get, the people that have suffered and have those addictions.
CHATTERLEY: I couldn't have said it better, and to your point as well, they could have invested it elsewhere. And I'm sure they'll try and say
that. Jean, great to have you with it. Thank you so much for bringing that story.
CASAREZ: Yes, thank you, Julia.
CHATTERLEY: The market opens next. Stay with FIRST MOVE.
(COMMERCIAL BREAK)
[09:30:00]
CHATTERLEY: Welcome back to FIRST MOVE. I am Julia Chatterley live from the New York Stock Exchange. That was the opening bell this morning.
Caterpillar, as you can see celebrating 90 years being listed on the New York Stock Exchange.
Let's take a look what we're seeing for stocks. As expected, a pretty flat start for stock markets this Tuesday. Investors taking a bit of a center
pause after our recent record run. Boeing of course, we've talked about it already, remains a big drag on the Dow this session, extending its losses
after Monday's four percent drop on word that it would suspend production of the 737 MAX jet next month.
Economists believe that U.S. growth actually could take a bit of a hit in Q1 as a results of that. As you can see, another one and a half percent
early on in the session.
All right, let's move on. As 2019 draws to a close, Twitter will look back at another busy year. Its stock had been rising for the most part of the
year before a disappointing set of numbers in October. The company continues to attract new users, but advertising sales were a challenge.
Now speaking of advertising, Twitter received widespread praise for banning political ads from its platform in stark contrast to the policies of the
likes of Facebook and other social media platforms. More tests like this will come next year with the U.S. presidential election. So there's plenty
to discuss.
And I'm excited to say, Ned Segal, the Chief Financial Officer of Twitter joins us now from San Francisco. Ned, fantastic to have you with us.
NED SEGAL, CHIEF FINANCIAL OFFICER, TWITTER: Thanks for having me, Julia.
CHATTERLEY: I want to start big picture here -- great to have you, too. I want to start big picture to understand -- to understand what you are as a
social media platform, and who your user is because I think this cuts to the heart of your utility and the function you provide. Talk me through
that. And if you, as a company clear on that now?
SEGAL: Sure, well, our purpose is to serve the public conversation, and what that means is helping people all around the world find out about the
topics and events that they care about most.
It could be the Rugby World Cup in Japan, or Brexit, or the Prime Minister election in the U.K., or the presidential election that you mentioned in
the United States that comes up next year. These are all topics and events where people want to find out what's happening in the world and what people
are talking about and we help them do that.
We organize the information much better than we have in the past. That's allowed us to grow our monetizable daily active usage by 17 percent in the
last quarter.
CHATTERLEY: I think the streamlining of the sheer quantity of information and the changes that we've seen on Twitter has been a crucial thing. But I
also think, for advertisers understanding what you provide, a great example that I saw "Joker," the movie and the engagement that you saw around the
trailer.
Talk me through that because I think that provides a good comparison again with other platforms and other forms of advertising here.
SEGAL: Well, the "Joker" is a great example of a company launching a new product or service and Twitter is a great place to do that. We talk about
two primary reasons that advertisers come to Twitter that really differentiate us: Launching new products and services and connecting with
what's happening.
When the "Joker" trailer came out in August, Warner Brothers put it on a bunch of different platforms. It was seen twice as many times in the first
hour on Twitter as anywhere else because this is a place where people come to find out what's happening. It's where they come to engage, to form and
help form opinions about new products and services.
We were thrilled we were able to deliver that, but whether it's a movie or a chicken sandwich or a new phone, Twitter is a great place to connect with
customers and help them understand your product or service.
We're also a great place to connect with what's happening. The Super Bowl is my favorite example, where in the United States, you saw 30 of the 38
advertisers who were on TV during the game, also advertising on Twitter at the same time.
CHATTERLEY: Wow. Simply because it's direct access to consumer, it's very simple, I think to use as well, in this regard, and I guess you can
multitask. What was of the one of the reasons, you think why you are getting so much engagement during the Super Bowl?
SEGAL: Well, we can be really complimentary to other things. So if you're watching a game, if you're digesting a political event, you can be on
Twitter, learning more and discussing that topic or event while you're watching it play out on a screen.
And so if you're an advertiser during the Super Bowl, you want to amplify your message that people might be hearing during the game in the other
place that people might be at the same time. So we end up being a great service for that. It also helps us bring great content to the platform.
Because whether you're a sports league, or you're a news broadcaster, you know that you're going Twitter to find your customers a place where they
might be when they're not on your product or service to help bring them back to it.
[09:35:05]
CHATTERLEY: Let's talk about political ads. A bold call from Twitter to say, look, we're not going to have them, we're not going to be paid to do
them. What kind of response did you get? And financially, do you think it risks hurting you? And was that the right call to make regardless of the
financials here?
SEGAL: Well, Jack's call on political advertising was a principled call that really wasn't about financials. The good news is when you look at
2018 as a reference point, in the U.S. midterm elections, political advertising was about $3 million.
So that gives you some sense for a size in a previous period that, of course, may be smaller than a presidential election, but it gives you some
sense on a $3 billion advertising business, what we're talking about.
But we make these decisions from a principled perspective recognizing that if we do the right thing for the people who use the service, for the
advertisers who use the service, for all of our stakeholders, it'll all play out better in the long term.
We want voice around political topics and events to be earned and not bought, and when we make that really clear, it ends up being a proud day
for everybody at the company and for all of our stakeholders when we're able to apply our principles to our business.
CHATTERLEY: 2020 elections in the United States, there are fears around foreign interference. We saw that with the 2016 election, it's been
proven. Is Twitter safe for users? Have you made it safe?
SEGAL: Well, we're always working hard to make sure that people can trust the information that they see, and that they can feel safe being a part of
the service. And when you're able to juxtapose one event from another four years apart, we think you'll see an incredible change in terms of both how
the information is organized so people can find what they're looking for, but also removing spammy and suspicious behavior.
Having candidate labels, having live content around the election. In the U.K. election that just happened, we had live video, we had prompts to tell
people where to go to vote. We had -- the outcomes of the election, they're now really a commodity, you can find them anywhere, but the
discussion and allowing people to be part of the discussion, allowing them to see all sides of a discussion, not just the one with which they might
agree, that's something that's really differentiating to Twitter.
Remember, it's an election every day on Twitter somewhere in the world, and so we've had a lot of opportunity to improve since the last presidential
election in the United States in 2016.
CHATTERLEY: You know, I mentioned the challenges that you had with the earnings numbers and the disappointment there that investors displayed.
What do investors need to understand about what you're offering now?
I feel like they look at the valuation and they say, look that doesn't match the revenues, they you look at the number of users and perhaps they
don't understand the kind of level of engagement that you're getting and how the relationship with advertisers works. What do investors need to
understand about what Twitter represents here and how you're going to monetize the product going forward?
SEGAL: Well, our goal is to get the whole world to use our service. Everybody cares about topics and events and if we can organize the
incredible content that's on Twitter, increasingly in a more compelling way for people around the topics and events they care about most, they will
come to Twitter and more frequently, they'll find what they're looking for. They'll tell other people about it.
We've found real success around that in the last few quarters, where our monetizable DAU growth has accelerated for each of the last few quarters.
And we've broken out of this range that we were in for the last couple quarters.
So if we can continue to grow the base of people who use the service, we're confident will be able to deliver strong and relevant advertising to those
people and the outcomes for all of our stakeholders, including the shareholders will be great.
When we look at the third quarter where we did have some challenges, which we really feel were in our control, it validates our strategy. We had
really strong performance in terms of monetizable daily active usage, but we also demonstrated that the work we're doing on the revenue products is
really critical. We need our ad server to be more performant, and we need our ad formats to be more performant as well.
CHATTERLEY: And I look forward to continuing the conversation. Ned Segal there, the CFO of Twitter. Great to have you on the show. Thank you for
that.
SEGAL: Thanks, Julia.
CHATTERLEY: Thank you. All right. We're going to take a break here on FIRST MOVE. But coming up, my interview with the CEO of money transfer
giant, MoneyGram. His take on going digital and the company's partnership with Ripple, next.
(COMMERCIAL BREAK)
[09:41:28]
CHATTERLEY: Welcome back to the show. MoneyGram is one of the largest money transfer companies in the world known for its local presence.
The rise of digital tech means it's also in a period of transition. Next stop, the digital platform -- the key to staying relevant in the cross
border payment industry. I spoke to Chairman and CEO, Alex Holmes and asked him to explain what MoneyGram does and how it is tackling broader
digitization. Listen in.
(BEGIN VIDEOTAPE)
ALEX HOLMES, CHAIRMAN AND CEO, MONEYGRAM INTERNATIONAL: The core remittance space, so migrants -- there's hundreds of millions of migrants,
you know moving to other countries to find opportunities, send money back home to support their friends and families and improve the lives of those
in the countries that they came from.
We traditionally have operated globally, you know, through what we would call an agency network, so 350,000 locations in 200 countries around the
world. But recently, in the last several years, we've been going through what we call a digital transformation, really trying to modernize our
company and keep up with all the changes in technology and all the things that are happening, you know, at the forefront of digital and
communications and telecom and mobile and all the other exciting things.
CHATTERLEY: That is exactly the question I was going to ask you in an increasingly digitized world, what proportion now of your overall
transactions are done in some form by digital versus in-store or in the local presence that you've talked about? What's the split right now?
HOLMES: Right now, so you know, the World Bank is probably the foremost leader you know, in measuring, the percent of the industry that has moved
digital.
And so today they'd say, roughly speaking, about 60 percent of all transfers around the world are done still through cash. In our business,
we're catching up quickly, in the last quarter, we just surpassed 20 percent of our global transactions are now done digitally.
So we've improved our capabilities quite considerably, really in the last 18 to 24 months and just past 60 countries where we have digital
capabilities enabled. So we're very excited about that.
We're leading that with a lot of online direct consumer platforms, a brand new app that we rolled out, new technologies for us like Transaction
Notifications, a really exciting, revamped and enhanced loyalty program that's really driving a lot of attraction and really, in many ways, which
is really interesting, Julia, a completely new customer demographic for us.
About 85 percent of all of our customers that transact digitally were never in the walk-in space before. So you actually see kind of an evolving
market, which is great for us because it's additive to both, you know the walk-in business, but also additive to the growth of our company.
(END VIDEOTAPE)
[09:45:10]
CHATTERLEY: MoneyGram stock is up almost 20 percent year-to-date, although that partial recovery comes after a steep decline in the previous couple of
years.
This year, the digital payment platform, Ripple has invested $50 million in the company. MoneyGram struck up the partnership in June to make the most
of Ripple's digital currency, XRP.
Cross border transfers can be notoriously tough. So I got right to the point with MoneyGram's CEO. Why Ripple? Listen in.
(BEGIN VIDEO CLIP)
HOLMES: Most people probably really don't understand about money and the movement of money is that it is incredibly complicated to move money across
border.
One of the things that we talked about quite a bit internally is that you know, money doesn't actually move, right? Data moves. And so it's a
really cumbersome process to run what we call the net settlement engine to enable the cash to be available in all of those markets for settling into
bank accounts who are actually paying out cash to consumers.
And so we have a lot of what we call liquidity and working capital positioned all around the world, 122 different currencies, you know, many
different bank accounts and associated pieces that really help us to facilitate the flow, so we can actually move money instantly, right,
without actually moving money.
So what's interesting about Ripple and what's happening in the blockchain and crypto space, is for the first time, there's a technology available
that has the potential to truly transform that capability and actually, you know, move money with data, which to me is just, you know, kind of magical
in a lot of ways, because that's really what the future is all about.
How do you instantly transfer funds? How do you instantly sort of transform the business without all of this, you know, as, as Brad would say
at Ripple with all this trap liquidity, you know, around the world? And so that's what's exciting about Ripple. That's what's exciting about their
technology platforms and all the change that they're trying to drive and the innovation they're trying to drive.
CHATTERLEY: You carry Ripple because you think, they, right now have the best platform to do this most efficiently.
HOLMES: I think they not only have the best platform to do it efficiently, but they also have the vision that I think encapsulates what we're trying
to do as well. Right? How do you drive down costs? How do you improve throughput? How do you drive efficiency and provide a better service not
only for our customers, but also for the future and potential customers that are coming?
And so you know, I think Ripple and it's -- you know, cryptocurrency, XRP is really innovative in that sense. They've driven well over 300 partners
around the world, some of those are banks, some of those are other remittance providers, like MoneyGram.
And so there's just sort of an infinite possibility as you build out, you know, that network and the associated touch points, through that channel
and through that capability.
CHATTERLEY: Is it bringing prices down? You've said it's quicker to use their technology and their platform, settlement is quicker. But is it also
bringing costs down? Are you able to pass that cost reduction on to customers, too, as a result of, of using Ripple's platform and XRP? The
digital currency to do this?
HOLMES: Yes, no, that's a great question. So there's a lot of things driving costs and price in a market. And so, if you think about generally
speaking, it should be very, very quick. It should be very inexpensive to move money cross border, but the truth is, it is not today, and that is
largely because of the cost of foreign exchange, it is the cost of banking services. It's the speed at which you can actually move money and make
these things happen.
And so companies like MoneyGram have innovated for years to try to drive the best solution possible. But you know, as I was saying earlier, to have
liquidity parked in all of these markets around the world for the purposes of instant settlement actually takes a lot of working capital, it takes a
lot of cash and it takes a lot of forward thinking to preposition money out there.
If you also think about currencies never really being stable, currencies are always quite volatile, and so the fluctuations and that is moving all
the time. You know, if a customer wants to send $300.00 from the U.S. to Mexico, we're giving them a rate. We're locking in that rate. But the
price at which we have to buy Mexican pesos for purposes of settlement in Mexico, you know, that could be at a totally different price point by the
time we get to actually prepositioning that currency.
So if you're able to take that $300.00 that that consumer wants to send and actually settle it instantly, real-time and give the same rate to MoneyGram
that you're giving to the customer, it is actually a very, very interesting opportunity to streamline and take costs out and yes, those costs then can
be passed back to customers or you know, as a public company they can also be, you know, driven to help improve margin and actually profitability for
the company as well for shareholders.
[09:50:05]
HOLMES: So, you know, it's kind of a win-win combination and it's also enabling, you know, this instant speed of money which is amazing.
CHATTERLEY: Now, I ask FIRST MOVE viewers what their most popular questions were or questions for you were and one that kept coming up was,
do you own the digital currency XRP? Or does Money Gram? So I'm asking you, do you own any of that?
HOLMES: I personally do not own any XRP and MoneyGram itself, again, because of sort of new regulation and reporting requirements, you know, any
XRP that we receive, we tend to sell about as real-time as possible.
You know, there's a lot of changing regulation and accounting rules around cryptocurrency and the assets associated with it. So no, we do not hold
for any period of time any crypto assets in our books.
(END VIDEO CLIP)
CHATTERLEY: MoneyGram was also done deals with Visa, Visa Direct to make payments straight to debit cards, it's all about the need for speed.
I asked Alex if he plans to take the U.S. based service cross border, too?
(BEGIN VIDEO CLIP)
HOLMES: Well, absolutely. I mean, I think one of the challenges, you know, for us has been how do you compete with a free service? And that's
really complicated.
So you know, we've done everything we can to reduce cost, reduce friction and improve our U.S. domestic product. We used to be one of the largest
players in what we call the U.S. domestic business, which was really cash to cash payments across the United States. That market has declined quite
substantially. Our market share has dissipated with the rise of Venmo and Zelle as we've lost market share to these digital players.
And so for us to be able to push back and get that market share back is great and the adoption of Visa Direct in the U.S., the ability to push
money from an account to an account is an absolutely needed service. And so we are actually competing now and actually doing quite well. So we're
very excited about that.
And again, it's hard to compete with free, but we're doing the best we can on that. And I think our service through our app and that capability with
Visa is giving consumers a connection and a capability that they've been wanting.
CHATTERLEY: What is the potential entry of Facebook into the e-payment space mean to you? To go back over to your point about cross border
potential? 2.4 billion monthly active users?
HOLMES: Yes, no, absolutely. I think what Facebook is trying to do is absolutely exciting. I think that anybody who knows what's been happening
in Silicon Valley and you know, sort of in the evolution of tech recognizes exactly what you said.
The enormous amount of users, 2.4 billion or whatever that number is, is just astronomical to even sort of contemplate and think about and so
certainly, you know, their aspirations of pushing into financial services really can't be denied.
(END VIDEO CLIP)
CHATTERLEY: The MoneyGram CEO there. More of that conversation coming up on social media. For now, we're back after this. Stay with us.
(COMMERCIAL BREAK)
[09:55:14]
CHATTERLEY: Welcome back to FIRST MOVE with a look and today's "Boardroom Brief." Shares in Unilever down more than six percent after the consumer
goods giant lowered its sales guidance for 2020. The company blaming a slowdown in Southeast Asia and weak sales in North America.
SpaceX has successfully launched a satellite from Florida. Its aim is to provide Internet coverage to poorly served Pacific Island nations. The
satellite belongs to a Singapore-based startup which says there are around a million people in Asia-Pacific region willing to pay to get Internet
access for the first time -- all about owning the skies.
And Mariah Carey's career hitting another high note as the singer celebrates her holiday classic, "All I want for Christmas is You" reaching
the U.S. number one for the first Time. It was originally released back in 1994. It's completing a long journey therefore to the top spot. I refrain
from singing.
That's it for the show. I'm Julia Chatterley. You can listen to our podcast on cnn.com/podcast. Thank you for watching.
(COMMERCIAL BREAK)
[10:00:00]
END
