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First Move with Julia Chatterley
JPMorgan Earnings Delight, While Wells Fargo's Profits Dive; Amazon Fighting Microsoft Over A Potential $10 Billion Military Contract; Retailing Robots Coming To A Supermarket Near You. Aired 9-10a ET
Aired January 14, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:02]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: I'm Julia Chatterley. This is FIRST MOVE and here's your need to know.
Banking big feats and blunders: JPMorgan earnings delight, while Wells Fargo's profits dive.
Return of the Jedi: Amazon fighting Microsoft over a potential $10 billion military contract.
And retailing robots coming to a supermarket near you.
It's Tuesday. Let's make a move.
A warm welcome once again to FIRST MOVE and a jam packed show for you today including the fact that we've kicked off earnings season. Wall Street right
now consolidating, I have to say, after a record setting session on Monday, the S&P and the NASDAQ both hitting all-time highs.
Today, we're watching banks, specifically JPMorgan actually is the current outperformer. A huge earnings beat versus earnings estimates. All of the
details on that to come, but it was pretty broad base, I can tell you, and the resurgence of trading income, too.
We've also got a currency market olive branch from the U.S. heading into the U.S.-China trade deal signing ceremony tomorrow of course, but you know
stocks may be taking a pause here, but we have come a long way fast and I keep reiterating this.
You'll remember last Tuesday, investors and therefore markets too, were grappling with the possibility of potential war in the Middle East yet
since last Tuesday's close, the NASDAQ and the S&P have risen one and a half percent plus. Japan's Nikkei over in Asia and the German DAX are up
almost two percent In fact, the Nikkei powered ahead today following the long weekend, too.
The bottom line is that the rally in stocks that we're seeing right now is a global story and very much in line with that, the safe haven assets
continue to retrace some of those recent gains we saw, too.
The Japanese yen now sitting at an eight-month low versus the U.S. dollar. Gold has retraced another half of one percent. This rotation, I have to say
may continue, too, judging by the big earnings out from the banks this morning suggesting, at least as far as the U.S. is concerned, there's a
reason to be optimistic about the economic outlook. And that's where we start the drivers. Let's get to it.
The three major U.S. banks kick starting earnings season this morning. JP Morgan's profits jumping more than 20 percent in the fourth quarter. Citi
also beat expectations, but it was some bad news from Wells Fargo, profits at that bank dropping over 50 percent compared to the same quarter of last
year.
Paul La Monica joins us with all the details. Paul, it is a lot to wade through, but just start by talking through JPMorgan's -- well, it looks
like a record year for these guys, and it's pretty broad based in terms of the performance, too.
PAUL LA MONICA, CNN BUSINESS REPORTER: Exactly, Julia. You had strong demand for consumer loans, auto loans and credit cards that helped fuel
some of the gains. But also, businesses are more confident and are taking out more loans as well. They are selling stock. They're selling bonds and
underwriting fees helped lift JPMorgan's results and trading revenue was also a bright spot for them and Citi.
And I think this all reflects, as Jamie Dimon said, both in the press release and in a call with reporters, I think a lot of U.S. businesses are
more confident now because that Phase 1 trade deal that the U.S. and China signed leading to more confidence.
CHATTERLEY: Yes, if you take that trade uncertainty out of it, then the hope is that the performance pick up or the consolidation at least
continues.
Now, is that the sound of kitchen sinking, I hear if I look over at Wells Fargo with a new CEO in charge? I mean, yes, there are challenges for all
of these banks in terms of low interest rates, legal costs for Wells Fargo, but I can't help but look at these results and think there's something more
to it as well.
LA MONICA: Yes, you have a new CEO at Wells Fargo, so they very well could be setting the bar extremely low in order to beat estimates down the road.
Today, that's no solace for Wells Fargo investors. The stock is down on these results that missed forecast and the new CEO admitted that they have
to regain consumers trust and the CFO said that expenses are too high and the bank has to become more efficient.
CHATTERLEY: Yes, absolutely. And very quickly, Paul, on this. I just want to mention, a report done by the New York Fed talking about the cyber risk
for some of these banks and how crippling it could be for the system.
I just want to mention this because I do wonder whether some of these CEOs on the earnings calls today are going to be asked about the preparations
they've made, particularly in light of their conversations about Iranian cyber risk in the last few days and week or so.
LA MONICA: Yes, it's a great question. No one asked that specifically during the media call with JPMorgan Chase, but I do think that when you
look at that New York Fed report and it talks about how the big five banks, they could hoard cash and liquidity, if there is a significant cyberattack
that disrupts the financial systems, and that could obviously lead to a major bottleneck and ripple effect for other banks.
[09:05:22]
LA MONICA: And, you know, the New York Fed estimating that, you know, nearly 40 percent of banks could be impacted by this, and it sounds in some
respects, very similar to concerns about what happened in 2008.
We all thought subprime loan damage was contained until it wasn't. There was all that counterparty risk and contagion. I think that cybersecurity is
now becoming one of the biggest threats and concerns for banks in the financial system writ large.
CHATTERLEY: Absolutely. And to your point, they've targeted the banks in the United States in the past as well. Paul La Monica, thank you so much
for that.
Now, to China now or at least D.C., a 10-member Chinese delegation has arrived in Washington for Wednesday's Phase 1 trade deal signing ceremony
as we were just mentioning, and on cue, the U.S. Treasury has removed China from its list of currency manipulators just as the Chinese yuan hits a
five-month high against the U.S. dollar.
Christine Roman's joins me now. Christine, timing, as they say is everything in this regard. But we've been pretty much in the dark about the
details, the contours of this trade deal, this Phase 1 trade deal, and according to some of the speculation, it may be a little bit more
comprehensive than perhaps some speculation suggested. What do we think on this?
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: We won't really see the text probably until this thing is signed. It's going through
the translation process, and we're told by the U.S. Trade Representative's Office and the Treasury Secretary, everything is copacetic here. They're
just going through the translation process, but it'll be signed before we really get our teeth into it.
What people around it and what media reports are saying is you've got some big purchases from the Chinese of not just farm products, but other things,
too -- automobiles and other kind of manufacturing goods in the United States and services as well.
U.S. drops tariffs, and then they're starting to see the beginnings of China make some promises about tweaking its forced technology transfer
practices that has been a big, big problem for American companies.
Dropping the currency manipulator label, that's remarkable and it's a real olive branch from the President because he has for months said that it was
a no brainer that they were currency manipulators.
Five months ago, they -- officially, the Treasury Department, officially labeled China a currency manipulator -- say it 10 times fast -- but this is
what Stephen Mnuchin, the Treasury Secretary is saying now, they have made commitments, enforceable commitments. That word is super important to
refrain from competitive devaluation while promoting transparency and accountability.
You know, it wasn't very long ago that the President of the United States said there is no way he would sign a small deal or a piece of a deal, that
he wanted the whole kit and caboodle to fix an unfair trade deal -- trade situation with China. Now, it is an election year, you will see him
rebranding this small deal, and maybe it's small, a little bit bigger than just really skinny and he is going to rebrand that as a promise kept. I
think you'll see that this week.
CHATTERLEY: Slightly less skinny than initially thought at this stage. I completely agree with you on the enforcement word, whether we're talking
about currency manipulation or not, given that the IMF said that their currency was fair, of course, fairly valued, but enforcement on this entire
deal are going to be key, Christine, but hopefully it boosts the U.S. economy because this U.S. administration couldn't half use it if we look at
the budget deficit numbers that we got, a 12 percent rise in the fiscal -- first few months of 2020. Wowzers is the only word I can use.
ROMANS: You know, Julia, here is the thing. This is another big number in the Trump economy, right? And it's not the kind of number that Trump
promised he would do. It's not a big jobs number, a big economy number, you usually see budget deficits swelling in bad times as tax receipts go down
and the government spending big to try to rescue the economy.
For the year, the budget deficit of the country topped a trillion dollars. We knew that would happen within the first three months of this new fiscal
year, up 12 percent. Healthcare costs are going higher. Defense spending is going up, and those big tax cuts mean the money coming in for big companies
is down and so that's what a budget deficit looks like.
You know, I'm reminded of JPMorgan Chase, the CEO Jamie Dimon likes to say that when you fix the roof when it's not raining, when the sun is shining,
well, the sun is shining and we are not fixing the roof. Instead, we're spending money we don't have and that is something the President promised
he wouldn't do.
In fact, he criticized President Obama when they were deficit spending in the middle of a recession. He said, "America's debt is greater than our GDP
time for new thinking." Donald J. Trump apparently has the same old thinking as the President he criticized.
CHATTERLEY: Yes. New President, same old thinking perhaps. We shall see. Yes, spend less or grow more and by grow, I mean grow your GDP, your
economy.
ROMANS: More than two percent. Two percent is not going to cut it.
[09:10:07]
CHATTERLEY: Yes, it's not good enough. Yes. Christine Romans, thank you so much for that.
ROMANS: You're welcome.
CHATTERLEY: All right, next driver, Amazon heading to court to file an injunction against Microsoft's $10 billion U.S. military contract.
Amazon was widely believed to be the front runner to snag the Cloud computing contract called the Joint Enterprise Defense Infrastructure or
JEDI, believing it was edged out though due to the ongoing feud between CEO, Jeff Bezos and President Trump. Brian Fung is in Washington for us on
this story.
I have to say, I expected this to come before now to be honest, Brian, Amazon thought they had it in the bag ultimately, and they clearly think
this decision was political. It was against Jeff Bezos and of course, his ownership of "The Washington Post." What more do we know here?
BRIAN FUNG, CNN TECHNOLOGY REPORTER: Well, Amazon essentially wants a do over of the contract award process for this $10 billion contract. As you
may remember, this contract is all about providing Cloud computing storage to the Pentagon, as well as technologies such as artificial intelligence to
help the military analyze data that it gets from out in the field.
It's also looking at, you know, that this issue is also all about how Amazon, as you said, has had a lot of tensions with the President. In its
complaint protesting the award to Microsoft, it sort of highlighted a number of issues that had showed how President Trump has viewed this issue
through the lens of a personal and political nature, saying, you know, President Trump has tweeted all about Jeff Bezos.
He has called out Jeff Bezos and Amazon for example, you know paying below market rates to the Post Office for shipping Amazon packages to consumers.
Trump has gone after Amazon for issues, including this JEDI contract where it's been reported that the President told then Secretary of Defense James
Mattis to "screw Amazon" out of this contract.
And Amazon sort of includes all of these different elements in its protest of the JEDI contract and it's now asking for a court to intervene here and
essentially, reverse the decision that the Pentagon made and try again with a new process.
CHATTERLEY: Yes, it's going to be quite interesting to see. I mean, there's another player here, of course, and that's Microsoft, too, thought
they've won this contract.
The CEO, Satya Nadella has talked about this having a halo effect around the business here. A huge blow ultimately, if this decision then goes
against them. Huge implications for both companies here.
FUNG: Absolutely. Microsoft has made a big bet on Cloud computing and artificial intelligence and services as part of its business model here and
for Microsoft, this JEDI contract with the Pentagon is a major, major deal and could put it on the road to a lot more business moving forward.
So you know, this is something that is going to be really key for Microsoft. It's not commenting on the specifics of the protest yet. It's
expected to file on January 24th its response calling for the complaint to be dismissed. That same day, Amazon is also expected to file its request
for a preliminary injunction, excuse me, and so we'll be watching very closely as this court proceeding unfolds.
CHATTERLEY: Yes, absolutely. Brian Fung, great to have you with us. Thank you for that.
I'm just watching Microsoft premarket actually barely budging. If they really thought that this contract was going to shift anywhere, we would see
an instant reaction, so to your point, very important, too. Brian Fung. Thank you so much for that. Look at that, zero reaction.
All right, let me bring you up to speed now is some of the other stories making headlines around the world. Democratic presidential hopeful, Senator
Bernie Sanders has denied telling his rival, Elizabeth Warren, that a woman could not win the election.
Warren say Sanders made the statement in 2018 in a 2018 meeting about her candidacy. The two are due to come face-to-face in a final debate ahead of
the Iowa caucuses in just a few hours' time.
Ryan Nobles joins me. Wow. So Elizabeth Warren saying one thing, Bernie Sanders denying it ultimately. Are the gloves going to be off tonight in
this debate? Never mind this story, but beyond.
RYAN NOBLES, CNN WASHINGTON CORRESPONDENT: Yes, Julia, I do think that this is going to come up in the debate tonight. But I wonder just how much
both Sanders and Warren really want to engage on this topic. I know it's the last thing that the Bernie Sanders campaign wants to be talking about.
And judging by the statement that Elizabeth Warren put out late last night where she said basically that yes, in her opinion in that conversation,
Bernie Sanders did give her the impression that he didn't think a woman could win in 2020, but that she didn't want to talk about it anymore.
Now, this has definitely become a he-said-she-said. There were only two people in the room during that private conversation. It was Bernie Sanders
and Elizabeth Warren. They obviously have a difference of opinion as to what exactly they talked about.
[09:15:08]
NOBLES: I think you're going to get to see both of them attempt to clarify their perspective on this. But this is basically already baked into the
cake. You know, your impression of this is basically going to be based on who you trust more, Sanders or Warren.
To your point, though, Julia, I do think you're going to see Sanders at least pivot a little bit, and try and make this conversation more about Joe
Biden and his role in this race.
Sanders and Biden have been itching for a fight for the last couple of days leading up to this debate here tonight, particularly as it relates to the
situation in Iran. Sanders wants to make the former Vice President's vote to support the Iraq War, a central point of contention here on this debate
stage tonight.
Julia, I do think kind of the overarching theme here is that we're getting very close to votes actually being cast here, and you could see all of
these campaigns stepping up their efforts to draw distinctions between one another that's really at the core of this flap between Bernie Sanders and
Elizabeth Warren. We'll have to see tonight how it actually all plays out - - Julia.
CHATTERLEY: Yes. I mean, it's tough to get further clarification on this when one of them saying it happened and one of them saying it never
happened, quite frankly.
To your point, do you think Joe Biden with his experience, particularly as far as geopolitics is concerned amid the Iranian situation and the handling
of the Iranian situation, do you think he can capitalize tonight?
NOBLES: Yes, I do think that, you know, you're going to see differing opinions on this, right? And I do think that the Biden team as much as
Sanders believes that this is an area where they could potentially score points.
I think the Biden camp is definitely welcome to this conversation. They believe that Joe Biden's lengthy foreign policy experience, not only his
portfolio as Vice President, but his time spent in the United States Senate, specifically dealing with foreign policy issues are one of the big
reasons that he should be Commander-in-Chief.
So even though Bernie Sanders is going to criticize that vote to support the war in Iraq, Joe Biden is going to ask Democratic voters to look at the
totality of his record, the fact that he has met with many of these foreign leaders. He has traveled to these parts of the world. He understands these
conflicts on a very granular level. And that's why he deserves to be President of the United States.
It's going to be an interesting conversation for sure, because both sides have a very specific opinion as to how this should all play out and they're
going to make their pitch to Democratic voters tonight.
CHATTERLEY: Yes, well and truly policy driven, which is what we need. Ryan Nobles, great to have you with us. Thank you so much for that.
As we were mentioning there, tonight, six of the remaining 12 Democrats will take to the stage for the final debate before the Iowa caucuses. The
debate is hosted by CNN and the Des Moines Register. You can watch all the action here on CNN on Tuesday night at nine New York time, Wednesday
morning at 10 in Hong Kong.
Meanwhile, Iran says several people have been arrested over the downing of the Ukrainian passenger plane shortly after takeoff on Wednesday last week.
The authorities did not provide details on the how many had been arrested or what their role in the incident was. All 176 people on board were killed
in the crash.
British Queen Elizabeth has agreed to a "period of transition" for the Duke and Duchess of Sussex. More details of a more independent future for the
couple are being worked out. The Queen says she expects a final decision on their roles to be reached in the coming days.
All right, we're going to take a break here on FIRST MOVE, but when we return, a rare intervention by the U.S. Attorney General as Apple comes
under pressure once again, this time to unlock the phones belonging to a mass shooter.
Walmart, meanwhile, stocking up on robots and denies that human workers will be left on the shelf. Stay with us. We're back after this.
(COMMERCIAL BREAK)
[09:21:58]
CHATTERLEY: Welcome back to FIRST MOVE. U.S. stocks still on target for a pretty soft open here. The S&P and the NASDAQ set to pullback from record
highs, but minor, minor. We will call that unchanged amid some diverse, let's call it that -- results from the major banks. More than that in just
a moment.
But if you remember yesterday, we talked with Bank of America about the rise of sustainable investing. Well, as if on cue today, investment giant,
BlackRock has announced a major new commitment to ESG investing, putting sustainability at the center of its investment strategy that includes
doubling the numbers of its environmentally friendly funds. And remember, we talked about the passive inflows into ESG yesterday, too. This is going
to be a conversation we have more and more.
Meanwhile, JPMorgan and Citigroup report better than expected quarterly results driven by strong fixed income and trading revenue. Wells Fargo,
meanwhile, saw profits drop more than 50 percent after a surge in cost, stemming from a series of scandals -- legal costs, I'm talking about.
Susan Schmidt joins us now. She is the head of U.S. Equities at Aviva Investors. Susan, fantastic to have you with us. I just want to get your
take on financials more broadly. I know you don't look at them -- these stocks -- individually.
But if we look at some of the key takeaways, whether it's managing the low rate environment, their expectations for the U.S. economy here, in line
with the performance we've already seen from financials over the last 12 months, is there more room for upside in financials in the United States
here in 2020?
SUSAN SCHMIDT, HEAD OF U.S. EQUITIES, AVIVA INVESTORS: I certainly think there is, and we're just starting to get earnings now on the fourth
quarter, but I think we're seeing some resiliency and a reminder to investors that there are other areas besides a net interest margin for
these banks to make money, and I think that's what's important.
Net interest income overall is increasing. Scale is showing to be very important, and I think these banks are showing that the underlying economy
remains healthy. We are seeing loan growth and I think there are a lot of positives here.
CHATTERLEY: You know, there are those that say a lot of the financial performance -- and I mentioned it there -- is due to buybacks, the sheer
scale of buybacks that we got in 2019. If a client said that to you, would you say, okay, that's just part of the deal here as far as these stocks are
concerned? There is more room for upside or is that a concern?
SCHMIDT: No, not a concern. The buybacks I think are a function of the better capital controls that we've put on these banks. Remember that
they've come through this recovery -- in the beginning of the recovery with great restrictions put on them.
They've been really careful about the balance sheet, and the buyback show that they've had excess capital and the regulators are comfortable with
them, buying back the shares and reducing those capital levels because they feel comfortable with the credit structure of the assets at the bank.
I think it's a positive. I think it's a normal development for these stocks as they move into different vehicles. These are different businesses than
they were before our downturn, and I think they're showing to be well run enterprises.
CHATTERLEY: Such an interesting point. What about for the technology sector here? We've seen a real bump of performance particularly for some of
the FAANG stocks at the beginning of 2020. Tech leadership such an important theme in 2019.
[09:25:10]
CHATTERLEY: Do you expect that to continue in 2020?
SCHMIDT: Tech leadership has been an important theme and it's really interesting to see the sentiment of the market reflected in tech, it seems
to be the most volatile as it goes up, it goes down. It really impacts people's decisions on whether they want to have a risk on or risk off
exposure.
I think tech does have more room to go. We're certainly positive there. I think people are looking for disruptors where the productivity gains can
come from, and tech companies are showing an ability to continue to have sales gains.
It's not the end of semis, there's plenty of room left to go. And I think we're seeing that in the market response to it, waking up to it. There is a
sustainability to these businesses that perhaps we didn't appreciate before.
CHATTERLEY: I know you're positive overall on U.S. stocks in 2020. We're going into earnings season, forward guidance in particular, I know you
think is going to be critically important here once again, what might trip investors up? What might surprise us in this earnings season?
SCHMIDT: I think investors are going to be keenly aware of commentary from management. This time around, management should have a better handle on the
impacts and repercussions from the trade agreement. I think any commentary around that is going to be important.
If managements are still hesitant to talk about cost structure and impacts, I think the investors are going to back off as a result. Certainly, any
change on this Phase 1 trade deal, which has provided such optimism and a tailwind for the market, any setback there would be a negative for the
market.
Earnings overall, I think are going to come in better than expected and I think the optimism for the future will continue. Obviously, anything there
that's a strong negative or a set of managements that's really pessimistic about the future is going to trip the market up.
CHATTERLEY: Susan Schmidt, great to have you with us. An optimistic way to go into the market open this morning and that's what follows. We're back
after this.
[09:30:09]
CHATTERLEY: Welcome back to FIRST MOVE live from the New York Stock Exchange and Equitable ringing the opening bell this morning.
We're up and running here on Wall Street. We've got a mostly unchanged start to the trading day, a bit of consolidation we're calling it after a
week of solid gains. Earning season getting into full swing as well.
Fundamentals well entry back in focus, but I have to say, no alarm bells on U.S. inflation. December's core consumer prices coming in slightly weaker
than expected. Wow. A lot of excitement here at this stock exchange. I can tell you, I wonder if that gin up stocks here.
Let me give you a look at some of our Global Movers. Well, no ginning up required for Delta Airlines here. The U.S. carrier reported better than
expected results citing strong consumer demand, another positive economic indicator for the U.S. economy it seems.
What about for the major banks as we've been discussing on the show. Citigroup and JPMorgan are higher after their market friendly results.
Remember JPMorgan CEO, Jamie Dimon said the U.S. consumer remains a strong point, too, and cited a degree of lessening of course, of the uncertainty
on trade, too.
Wells Fargo, meanwhile, lower after missing their earnings expectations, profits falling by over half compared to the same quarter of last year.
Right now down some 3.3 percent.
To Apple now and the Apple in focus after the U.S. government made a request that Apple unlock two iPhones belonging to this man. He was a Saudi
airman who opened fire at a U.S. Naval Base last month killing three before he himself was killed.
The high profile request was made by the Attorney General Bill Barr escalating the ongoing battle over privacy and security. Apple says it
already handed over all the evidence it has.
Evan Perez joins us now. Evan, great to have you with us. The Attorney General said quite frankly, they didn't go far enough. Apple, of course
said, look, we did what we could here in creating a backdoor that helps bad guys, as well as good guys. You could argue they have a point. Tell us
more.
EVAN PEREZ, CNN SENIOR U.S. JUSTICE CORRESPONDENT: Well, that's right, Julia. This has been a battle obviously, that has been going on for some
years now and this one really crystallizes the issue between certainly the tension between the national security needs of the country which is to try
to figure out what happened in this terrorist attack and to try to prevent anything else from happening.
And of course, the privacy needs and Apple says it's trying to protect the privacy of its customers by building this encryption system that it says it
even cannot really get into, and so that's where this is now headed.
The Attorney General made clear yesterday that he believes that Apple has not provided assistance that is substantive enough to help this
investigation. Keep in mind that Apple says that they've turned over gigabytes of information to the investigators who are looking into this
case.
And in this case, it is two iPhones, one of which the shooter actually put down and shot a bullet into. The F.B.I. has been able to reconstruct the
phone and get it to a place where what they need now is for Apple to unlock it.
Apple says that they cannot do that. The technology they have, the encryption technology they have is built in such a way that not even Apple
can get into it.
Now, we know that there was a previous case like this, Julia, where there was a terrorist attack in San Bernardino a few years ago in California, and
there was a similar fight. The Justice Department ended up suing Apple to try to force it to get into these phones. And in that case, they ended up
withdrawing the lawsuit because in the end, the Justice Department and the F.B.I. was able to find an Israeli company that was able to get into this
phone.
So we'll see whether the F.B.I. can find a private sector, a third party company to try to break into these phones. I think that is likely the
solution rather than Apple giving in to these demands from the Justice Department.
CHATTERLEY: Yes, Apple puts their reputation at stake on privacy here. Very, very cautious about setting some kind of precedent here. Fantastic to
have you with us, Evan, thank you so much for that.
PEREZ: Thank you.
CHATTERLEY: All right. We're going to take a quick break here on FIRST MOVE, but coming up, Impossible Foods's new pork leaves out everything,
including the pig. Details on what the new plant-based alternative actually brings, next.
(COMMERCIAL BREAK)
[09:37:46]
CHATTERLEY: Welcome back to the show. Impossible Foods is making a move into plant-based pork, having made its name with its beefless burger, the
company debuted Impossible Pork at the Consumer Electronics Show in Las Vegas.
Joining us for is David Lee. He is the CFO of Impossible Foods. David, fantastic to have you with us. You made a real splash, I think at CES last
week. Can you just give us some clarity on when your porkless pork will be available in stores, and precisely where?
DAVID LEE, CFO, IMPOSSIBLE FOODS: Absolutely, you know, we're very excited about Impossible Pork. Pork could be the most ubiquitous animal protein
consumed globally.
For now, we've released news about a great version of Impossible Pork, the Impossible Sausage, which will be featured by one of our customers, Burger
King, as croissanwich. It is going to be at about 139 locations to start by the end of January in five different regions across the United States.
CHATTERLEY: When are you going to go beyond the United States because you know, when I look at the statistics here, I look at Asia, I look at the
demand particularly for pork, meat-based products, and the opportunity that presents, 40 percent of the world's meat is consumed in Asia, too.
Talk to me about how your positioning to target the Asian consumer, including the Chinese consumer here as well.
LEE: Absolutely, you're right. Our mission is global at Impossible Foods and with Asia being such an important market for the meat market, we want
to ensure the meat eaters there enjoy Impossible Pork, too.
In fact, I just tried an Impossible Pork shumai that was great. We actually have a vibrant business in Singapore, Macau and Hong Kong. That business
has grown multiples over the last six to 12 months.
We were just in Shanghai serving 25,000 servings of Impossible Pork under the auspices of a great local chef, which really proves that our products
are not just relevant as a great burger in the U.S., but anything the meat eater can imagine that great pork that has no guilt can provide them
globally.
But we are not yet announcing more specifics about new markets. Stay tuned. It is an important part of the mission in business at Impossible.
[09:40:04]
CHATTERLEY: Do you think you can remain independent operating in China or is the local presence ultimately going to be key because there's already
competition in plant-based products in China? What are your expectations?
LEE: It's a great question. You know, we have seen such demand globally for Impossible Pork, but also Impossible Burger which you mentioned debuted
just last year, at our first showing at the Consumer Electronics Show.
We are open to partnering with anyone, as long as it achieves our mission. You know, 95 percent of our hardcore consumers call themselves meat eaters,
which means this multi-trillion dollar global market requires that we leverage every strategic option and that can be different market by market.
So we are in the midst of determining, what is the right set of partners for each of the markets we hope to enter soon, globally?
CHATTERLEY: Now exactly on that point, there was some confusion created about your relationship with McDonalds. You've mentioned that you're
working with Burger King and your products are going to be available there. Are you currently in talks with McDonalds?
LEE: You know, it's interesting. Our point of view is to protect the confidentiality of our large customers. So we only release information that
our customers are happy for us to really release.
I can confirm the following that we hope and believe that meat eaters will determine the future of the planet. And that means that wherever meat is
served is where eventually we want to be.
But we're also pragmatic, you know, with the incredible demand we've seen for our debut of new products, we know that we have to continue to rapidly
expand our capacity which we're in the midst of, to ensure we serve our customers well.
I'll take that as a not right now, but who knows what the future holds. One of the big issues and you've mentioned it -- I know, I'm moving on -- with
the guilt-free. You know, one of the big criticisms and perhaps is most often coming from the meat industry itself because they sense competition
is that your product is still processed? It's not a clean food.
And actually, if you compare particularly your beef burger alternative product, it actually has more salt than meat, traditional beef burgers,
what's your response to that fact or fiction?
LEE: That is absolute fiction. The Impossible Burger and Impossible Pork is no more complicated than a piece of bread or a fermented serving of
yogurt.
If you look at Impossible Pork, we have all the protein you want, and two and a half times the iron, but we have 40 percent less calories, 60 percent
less total fat.
In many ways it's very simple. An animal, it consumes plants and in a complicated processed way determines its future as meat with folks
processing it. We just skip that whole complicated process called the animal and go straight to the plants. Arguably a much more simple,
sustainable, and I believe one day, far better tasting way for meat eaters like me and you to enjoy craveable meat.
CHATTERLEY: Makes sense to me. David, very quickly, your CEO said no plans to go public right now. Just talk me through the logic of staying private
here and are you profitable right now as a company?
LEE: Well, Impossible Foods has had the benefit of raising over $750 million from large investors who participate not just in private
investments, but public ones.
So our investors expect us to operate at the highest level of rigor, and as I've said before, you know, our mission demands every strategic option,
including the option one day to choose to make the decision to be public.
But for now, we have not made that decision. We're not announcing an IPO or any public vet. I think our logic is to align long term investors who want
superior returns with the mission and business model we offer and so far, that's proved to be a very successful fit for our investors in Impossible
Foods.
CHATTERLEY: Fantastic, David. Great to have you with us. David Lee, the CFO of Impossible Foods there. I look forward to continuing the
conversation.
LEE: Thank you.
CHATTERLEY: Now that wasn't my only favorite story coming out to CES. The other one, of course was flying cars, and I mentioned it yesterday. Now as
Hyundai announced its partnership with Uber for a flying taxi service. The South Korean automaker unveiled its electric aircraft concept, too.
I spoke with the head of Hyundai's Urban Mobility Division. Listen in.
(BEGIN VIDEOTAPE)
JAIWON SHIN, HEAD OF UAM DIVISION, HYUNDAI: We're announcing our first vehicle concept. It's named SA1. It is a codename, but it has eight rotors,
four tilt rotors and four lift rotors, which means that for rotors can tilt up and down, depending on the flight mode and it can carry four passengers
with a pilot.
[09:45:10]
SHIN: And it is really designed for inner city travel, but also, it could serve rural residents as well. So we're super excited as a company well-
known for making cars, automobiles, we're entering into a very new business, but we are very confident that we can make this new era of
aviation a reality and possibility for everyone.
CHATTERLEY: You know, there will be a lot of people that look at this and say, hang on a second, why is this ultimately better than a helicopter? Can
you explain and answer that. Why is this superior to a helicopter?
SHIN: The difference between helicopter -- conventional helicopters and this kind of design is mainly the level of noise and also be able to
distribute the rotors, multiple rotors, because we can put electric motors -- individual electric motors to each propeller, unlike the helicopter,
where you have to have a big engine to rotate the main rotor.
So, the benefit of this kind of design of a UAM is you reduce the noise level quite a bit so you can actually operate in the city and also it
increases the safety because you have multiple rotors. If one fails, the others can take the load.
So, safety is increased, the noise is down and that's why we believe we can actually operate this in the city.
(END VIDEOTAPE)
CHATTERLEY: So, interesting. Flying cars will be piloted initially, but over time, they are expected to become fully autonomous. So, we also talked
about Uber's plan to launch air taxis in just three years' time.
(BEGIN VIDEO CLIP)
SHIN: This vehicle will be designed to have a pilot initially because we believe passengers will feel much more comfortable to have a pilot, but
ultimately, we believe this kind of operation needs to be fully autonomous.
So, we will put a lot more systems with smart systems, I should say, compared to the conventional helicopters. So the pilot's role we envision
will be changing. So rather than actually flying the helicopter with this kind of vehicle, the pilot will be more of in the management role and then
when emergency happens, the pilot will engage to make sure that the vehicle lands safely.
But I think it is important to note that the fully autonomous operation is coming. It may take some time and I don't want to forecast or predict when
that could be, but the idea is trying to make these vehicles to be operated fully autonomous, and the role of pilots will be changed as well.
CHATTERLEY: I also wanted to talk to you about the deal with Uber here to support them in their plans for air taxis. They say they'll have air taxis
in the skies by 2023. Is that too ambitious or do you agree 2023, we will have flying taxis?
SHIN: I think it depends on the degree of scale. If we are talking about some fixed routes like two spots in the city centers to the airport as an
example, so these are fixed routes. And if you think about operating maybe few vehicles, you know, a day, I think that type of operation could happen
as early as 2023 as Uber is expecting.
And there are a number of -- as you probably know, there are a number of companies working on developing this type of vehicles. So the regulations
need to come together, and a lot of things need to come together, of course, but very limited and in a safe mode, I think the limited scale of
operation could happen sometime in 2023 or maybe 2025, around that time.
(END VIDEO CLIP)
CHATTERLEY: I volunteer for a test drive. All right, we're going to take a quick break here on FIRST MOVE, but after this, the robots are coming to
retail. Take a look at this. That's coming up after the break.
(COMMERCIAL BREAK)
[09:50:09]
CHATTERLEY: Welcome back to FIRST MOVE. Retails Big Show, the world's largest gathering for the retail industry is currently underway here in New
York.
Clare Sebastian is live at the Javits Convention Center with a shelf scanning autonomous robot. Clare, always a pleasure to have you with us.
Not the most dynamic robot. I was getting very excited there. But tell us what this does and how it's going to revolutionize retail.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Right. Yes, Julia, this is sort of a new phase that we're in. We're all -- we've all got used to
robots in fulfillment centers doing sort of behind the scenes things. But this is a robot that is designed to be in a store with people. It makes
that noise. I don't know if you can hear it, so that people know to sort of get out of the way.
It's very tall and flimsy, it can sort of roam the aisles of supermarkets with people. Now this is from a company called Badger Technologies. They
have already deployed floor cleaning robots, a bit different from this model, but in about 500 retail stores and supermarkets across the U.S. and
this is a new product that does shelf scanning.
So basically what it will do is it will look at shelves like this here in the cereal aisle, it'll check for whether something is out of stock, it'll
check for price discrepancies, all the kinds of things that retail as of the moment are really struggling to do, very menial tasks that take human
beings a long, long time.
This is the world we live in, Julia, where brick and mortar stores really have to be absolutely perfect. There is no room for error if they're going
to keep up with the rise of online retail.
CHATTERLEY: I mean, I'm just imagining myself with a supermarket trolley that are banging into this or getting stuck around this quite frankly, but
I think we should make a joke about this.
When we talk about autonomous vehicle technology, there's always a fear that it's going to mean less retailing jobs and it is a critical part of
not just the United States economy, but far more broad than this. Is this a worker replacement tool ultimately, Clare, or does it just make workers
more efficient?
SEBASTIAN: Well, companies behind this will tell you that it is not a worker replacement. That this is simply about improving operations that
retailers, frankly, in such a low margin business don't have the money to hire extra people. They need to improve their operations without that.
And Walmart has just made an announcement this week that they are expanding shelf scanning robots to another 650 stores. They already have them in 350.
They say they are designed to be an assistant to employees. But it is clear that some retail workers will be worried about this.
This is a business of course where job losses have happened. We've seen a lot of store closures over the last year. So it is perhaps a concern to
retail workers. But the company certainly behind this robot say that they are designed to improve things not to replace people.
CHATTERLEY: And it's just one of the elements of the story here in what has been a pretty challenging time. I know you've been looking at the
winners and losers, the perfect opportunity while you're there to do so, talk us through that.
SEBASTIAN: Yes, so last year, we really saw sort of a split emerge. We saw this in 2017 when people started talking about the retail apocalypse, but
last year we saw really big differences in the performances among retailers.
[09:55:06]
SEBASTIAN: If you look at the worst performing of the year, they were really the department stores: Macy's, Kohl's, Nordstrom -- they really,
really suffered. Americans do seem to be sort of rejecting the whole concept of department stores, and these companies have really struggled to
update their technology and keep up with the times.
But on the flip side, the winners of companies like Walmart and Target in particular, the stocks there, up 94 percent, almost doubled over the course
of 2019.
This is a company that has really invested in e-commerce. They're doing buy online, pick up in-store, one-day shipping. They've managed to do
fulfillment and delivery in a way that has turned out to be actually profitable.
So we'll have to see whether this trend continues in 2020 -- Julia.
CHATTERLEY: Yes, I mean, that's incredible. I was just trying to do the math there. Almost 140 percentage points between the peak winner there and
the worst loser. Really important for retail investors at this moment.
Clare, fantastic job. Have a fun day. It sounds like it's going to be a lot of fun there.
All right, let me give you a quick look as we wrap up the show here of what we're seeing for the markets right now. Consolidation. I've been calling it
that, but we are seeing a bit of a pullback here for the NASDAQ down some four tenths of one percent.
We'll be back in a couple of hours with "The Express." But for now, you've been watching FIRST MOVE. Time to go make yours.
(COMMERCIAL BREAK)
[10:00:00]
END
