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First Move with Julia Chatterley
Talks Of A $500 Billion Bailout To Break D.C.'s Deadlock; Regeneron Teams Up With Roche To Boost Production; Danish Shipping Company, Maersk, Raises 2020 Outlook. Aired 9-10a ET
Aired August 19, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:06]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Live from New York, I am Julia Chatterley, this is FIRST MOVE and here is your need-to-know.
Skinny stimulus. Talks of a $500 billion bailout to break D.C.'s deadlock.
Antibody alliance. Regeneron teams up with Roche to boost production.
Calmer waters. We will speak to the CEO of shipping giant, Maersk and --
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: You guys want to go camping.
UNIDENTIFIED CHILDREN: Yes.
UNIDENTIFIED MALE: Okay. We'll do a campfire. Go, go, go. Let's go. Here, Liam. You want to roast s'mores.
UNIDENTIFIED CHILD: Yes.
(END VIDEO CLIP)
CHATTERLEY: With the magic mounting, we will ask one of its biggest stars, if TikTok's time is up.
It's Wednesday. Let's make a move.
Welcome, once again, to FIRST MOVE. As always, great to be with you. Today's show, I can tell you is all about records and reality checks.
There's no better time therefore to chat to famed short seller, Jim Chanos, as stocks begin the session at all-time highs.
Yes, after weeks of failed attempts, the S&P 500 hit a record close Tuesday. The NASDAQ also hitting fresh records, too. Although, those
milestones may be short lived, futures have softened in the past hour, so we shall see what happens when we open up.
But that said, we're talking about the fastest rebound from a bear market on record. The S&P soaring some 54 percent from the lows hit just five
months ago. It's been driven ultimately by massive amounts of Central Bank and government spending all around the world.
If you held onto your nerve and bought the dip, you are having a great year as a result. But the global story is a very different picture.
Japan and German stocks still down some 12 percent year-to-date. Chinese stocks are down 40 percent from their most recent record levels, and down a
further one percent in fact, too, overnight, a reaction, perhaps, to comments from President Trump that he scuttled trade talks with China over
the weekend, raising all sorts of questions about his commitment to the Phase 1 Trade Deal as we head towards the election.
The trouble in Asia doesn't end there either. The new numbers showing Japanese exports falling 19 percent last month, the 20th month of declines
in fact.
Exports to China meanwhile rose, but this number just continues to point out the challenges export-driven countries still face amid the ongoing
pandemic.
For now, the path forward depends heavily on four Vs, they are the virus, the vaccines, November's U.S. presidential vote and the volume of
additional cash support we see from here. Cheating a little bit on the last one, we may have a breakthrough on that. Let's get to the drivers and find
out.
Republicans and Democrats are hinting at a pared down Coronavirus Relief Bill to break the deadlock on the stimulus. Republicans have drafted a
scaled back plan and House Speaker Nancy Pelosi says Democrats are willing to take a smaller deal to get an agreement passed.
Christine Romans joins us on this this. Christine, well, something is better than nothing, the problem is the thorniest issues here are perhaps
the most vital ones when we're talking about support for individual states and for individual consumers.
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: Absolutely. I mean, look, when you talk about retail earnings this week, we have seen
that the first round of stimulus was fantastic for consumer spending.
People in their pandemic hunkered-down mode spent a lot of money and a lot of money online, money that they got from the government in those stimulus
checks and unemployment benefits.
Now, the next phase here in terms of a crisis for joblessness comes from state workers. These states have huge holes in their budgets that must be
filled. Many states, by law, they have to balance their books every year. They can't just run big deficits or print money to get their way out of it
like the U.S. government can, and so they're going to need help or there are going to be layoffs of firefighters, of teachers, of streets and
sanitation workers.
These kinds of workers who are going to feel the pain immediately and potentially hold back the recovery.
So I think that in the economic numbers we've seen for the quarter, it's very clear here that there's a real fire burning for Congress to keep the
support up, because the economy is not back to normal.
CHATTERLEY: And that's the big dichotomy here as we watch again in aggregate. We will be careful. Stocks hitting record highs.
We know the underlying fundamentals here are in desperate need of ongoing support and that's why more and more people, despite what we're seeing in
stock markets are saying actually, we're worried about a second pullback, a double-dip recession here, particularly if we don't see the support
forthcoming.
ROMANS: Yes, I mean, you've heard from the administration in particular that they expect a ferocious V recovery and even the President will say
we're in it.
But it doesn't look that way at all when you realize that right now, all the supports for the recovery we've seen so far have been pulled back.
They're not there anymore.
[09:05:06]
ROMANS: Small business loans are not there anymore. The extra jobless benefits are not there anymore. The White House has promised half the
amount of the extra jobless support, but it's not in people's paychecks quite yet here.
So there's really an urgency right now that the longer they wait and the more cautious they are, the worse it is for the recovery overall.
So in a way, some of the recent economic numbers maybe are giving them pause, but they shouldn't, in fact, they should be confirming to
policymakers that the stimulus worked, the Fed support worked, and now we have to wait for a vaccine and get our hands around the virus and we'll
need support until then.
CHATTERLEY: Yes, no room for complacency here. Christine Romans, thank you so much for that.
Joe Biden has officially become the Democratic Party's nominee for President.
(BEGIN VIDEO CLIP)
JOE BIDEN (D), PRESUMPTIVE DEMOCRATIC PRESIDENTIAL NOMINEE: Well, thank you very, very much, from the bottom of my heart. Thank you all. It means the
world to me and my family and I'll see you on Thursday.
Thank you, thank you, and thank you.
(END VIDEO CLIP)
CHATTERLEY: The nomination came on the second night of the Democratic National Convention. His wife, Jill Biden, a longtime educator closed out
the virtual event from an empty classroom.
(BEGIN VIDEO CLIP)
JILL BIDEN, WIFE OF U.S. DEMOCRATIC PRESUMPTIVE NOMINEE: Across this country, educators, parents, first responders, Americans of all walks of
life are putting their shoulders back, fighting for each other. We haven't given up.
We just need leadership worthy of our nation, worthy of you.
(END VIDEO CLIP)
CHATTERLEY: That's a heartfelt moment. John Harwood is live in Washington for us. John, are there standout moments for you last night?
JOHN HARWOOD, CNN CORRESPONDENT: I think the standout moment, Julia, was when Jill Biden in that speech said, how do you heal a broken nation? The
same way that Joe Biden and I healed a broken family.
Joe Biden, of course, lost his wife and young daughter in a car accident shortly after he was elected to the Senate. He later married Jill Biden.
They had another child together.
They have, obviously, a strong relationship, which was highlighted by her remarks. But she cast it as a recovery from the traumas of the Trump years
and that built on Michelle Obama's indictment of President Trump the previous night.
This was more in the positive sense associating Joe Biden's empathy, his personal warmth, his concern for others into a tonic for the country, and I
think that's the thing that stuck with me the most.
CHATTERLEY: You know, whenever we talk about business or politics, we talk about the idea of burying the bad news. I can't help but feel like those
that are lightning rods for the Republicans, the likes of Alexandria Ocasio-Cortez were pretty much buried last night amid a broader sense and
feel that the Democratic Party was trying to present this united front.
She got what -- 90 second last night. I'm not surprised, but it did raise eyebrows, I think.
HARWOOD: Right, and they deployed her to -- or she deployed herself to be a nominating speaker for Bernie Sanders, which fit, because she was the most
prominent supporter of Bernie Sanders among young Democratic activists.
I do think that the party's message in the convention so far is, we have got a tent as large as it needs to be to pull the country together.
So in addition to the young leaders, 17 of them who comprised the stitched- together keynote address at the opening of the show last night, you had senior figures that are familiar, especially to older Americans, and that's
a key voting constituency this fall, people like Colin Powell attesting to Joe Biden's character, his concern for America's alliances and its role in
the world.
All those things are designed to reassure, as well as while the Democratic Party is trying not as aggressively so far, but they certainly will in the
fall campaign, to keep younger activists engaged and fired up.
Michelle Obama served some of that purpose, Barack Obama will serve it tonight as well.
CHATTERLEY: And what about Kamala Harris, vice presidential nominee here as well? What do we get from here tonight?
HARWOOD: Well, this is in a very significant way her broadest introduction to the American public, and she represents the face of the Democratic
future. Women are the key constituency of the Democratic Party, people of color are the key constituency for the Democratic Party.
Kamala Harris is not someone who is on the far left edge of the party, though Republicans will try to paint her that way. She is a more pragmatic
figure that I think you could say is in the mainstream of today's Democratic Party.
[09:10:10]
HARWOOD: To the left of Joe Biden, perhaps, and Joe Biden is the ultimate long-run centrist, but she is someone who fits because she is in the
mainstream of what the Democratic Party is today.
And in that way, she is going to be a bridge from Joe Biden to the Democratic future.
CHATTERLEY: Yes, it's going to be fascinating to watch. John Harwood, great to have you with us. Thank you so much for that there.
HARWOOD: You bet.
CHATTERLEY: All right, a new CNN poll finds around half of Americans would try to get vaccinated against coronavirus if one became available and at
low cost.
Elizabeth Cohen has all the details on this. Elizabeth, the standout here clearly is that that's simply not enough if you want to see some form of
herd immunity and that's assuming the vaccine is a hundred percent effective, which is a highly unlikely fact in any case.
ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: Julia, you have it exactly right. What you need in order to get the kind of immunity that we
are trying to achieve is a very effective vaccine, combined with many people taking it.
We don't know how effective the vaccine will work, but this poll numbers tell us a lot of people in the United States, it looks like as of now,
they're going to say no, which is really problematic.
Let's take a look at what this latest CNN poll shows. We polled people between August 12th and 15th, asking them the question, would you try to
get a coronavirus vaccine if it existed? And 56 percent said yes, but 40 percent said no.
If you have a vaccine, it's sort of like having a party and nobody shows up. If 40 percent of Americans don't take it, it's going to be very hard to
reach the immunity levels that we need.
Now, let's take a look over time. This is even worse, actually. In May we asked the same question, would you get a coronavirus vaccine, and 66
percent said yes. Now only 56 percent are saying yes.
So we're headed in the wrong direction. More people, just over these past few months, 10-percentage point dive in the number of people who would say
yes to a coronavirus vaccine.
And Julia, you and I have talked about this before on your show, which is that the anti-vaccine folks have been hard at work, really hard at work. Go
on Facebook, you will bombarded with it. All the messages about why you shouldn't get a coronavirus vaccine, most of it complete nonsense.
However, the pro-vaccine groups have been very slow to start campaigns. There's very little out there. The government has not yet started its
campaign and one does have to ask, what are you waiting for? Take a look at these numbers -- Julia.
CHATTERLEY: Yes. Absolutely. I mean, I read an article from Brookings in the last 24 hours that said if you want people to take the vaccine in this
country, you're going to have to pay them to do it, which is interesting as well.
Speaking of parties, let's talk about cocktails and I'm speaking specifically about antibody cocktails here. A deal between Roche and
Regeneron. What do we know about this?
COHEN: So, Regeneron is one of the major manufacturers of an antibody medicine. So these are medicines that almost in a way kind of work like
vaccines in helping you create an immune response to the coronavirus.
They're being tested out both as a treatment and as a preventive medicine.
And what the news today is that Roche and Regeneron -- Roche, of course, a pharmaceutical giant and Regeneron, the folks who actually make the
medicine -- are going to team up to get the manufacturing up and going.
So, you know, I don't know if it's a coincidence or not, but it's certainly good news to hear this given that we've seen the reluctance of Americans to
take a vaccine, maybe they would feel better about taking a drug -- Julia.
CHATTERLEY: Yes, it's funny, isn't it? A treatment, perhaps, rather than taking a vaccine given the uncertainty and the prejudice in this country
against taking them.
COHEN: Right.
CHATTERLEY: Work to be done here to convince people. Elizabeth Cohen, thank you so much for that.
All right, let me bring you up to speed with some of the other stories making headlines around the world.
A statewide emergency has been declared in California as more than two dozen wildfires burn. Thirty seven thousand customers are now without power
and millions of people across the Western United States have been told to take precautions against a record-breaking heat wave.
The military leaders behind the suspected coup in Mali are pledging to hold new elections within a "reasonable time," quote. They addressed the West
African nation earlier and announced a border closure along with a nightly curfew.
Mali's President dissolved the Parliament and resigned on Tuesday after weeks of destabilizing protests.
E.U. leaders are holding emergency talks by video on the crisis in Belarus. The European Parliament President says there is every reason to fear
escalating repression, calling on Europe to support the demands of protesters for new elections and help end a crackdown on dissent.
All right, we're going to take a break here on FIRST MOVE. But still to come, a crisis tested Maersk lifts its outlook for 2020. I speak to the CEO
of the world's biggest shipping country.
And TikTok careers on the line, viral video star, Zach King joins us to discuss the challenges of creating content as geopolitical storm clouds
gather.
That's all coming up. Stay with us. We're back after this.
(COMMERCIAL BREAK)
[09:18:05]
CHATTERLEY: Welcome back to FIRST MOVE live from New York, where the bulls are taking a breather after finally propelling the S&P 500 to record highs
on Tuesday.
Futures, as you can see, trading mostly flat. Tech just dipping into the red here. As usual, big name tech stocks playing a big role in pushing the
S&P to the records.
As we discussed frequently, Amazon rallied some four percent. Tesla is cruising three percent higher. Both companies also sitting at record highs.
Apple rose almost one percent yesterday, too. It is very close to hitting a milestone of its own. The first $2 trillion market cap stock in Wall Street
history.
Apple's current valuation right now at $1.98 trillion, just to give you the exact figure.
Lots of support, but let's not forget the skepticism hereto. A recent survey by the American Association of Individual Investors says just 23
percent of market participants believe that the S&P 500 can move higher for the rest of the year.
Well, our next guest believes the current market is setting up to be one of the greatest shorting opportunities of all time. He is a man who reportedly
made millions betting against the disgraced German Fintech giant, Wirecard and says we're entering a golden age of fraud and that man is no other than
Jim Chanos, the Founder and President of Kynikos Associates, and he joins us now.
Jim, fabulous to have you on the show. Good morning.
JIM CHANOS, FOUNDER AND PRESIDENT, KYNIKOS ASSOCIATES: Hi, Julia. Good morning. Thank you for having me on.
CHATTERLEY: If we're talking about one of the greatest shorting opportunities of all time, it's going to take one heck of a reality check
here. What gives us that?
CHANOS: Well, what we see is in the top couple of deciles of the market and it reminds us a lot -- for those of us that are gray bears of the late
'90s, when there was -- the vast number of stocks were reasonably priced, if not sometimes cheap, but that which the market loved went to ever-
increasing valuations and that's what we're now seeing, starting in the fourth quarter of last year as retail began to pour into the market,
despite your citing of the AAII survey.
Really, we're seeing people chase stories, chase concepts, and, you know, the financial markets generally exist to allocate capital to those
businesses that can best return on that capital.
[09:20:28]
CHANOS: But every once in a while, the market sort of flips that around and begins to create companies to satisfy the market. And that's the phase of
the market we think we're in now, where you're seeing things like SPACs and companies soar on stock split announcements.
A few months ago, we had a little craze in bankruptcy stocks, companies that were literally worthless. And all of that behavior is worrisome to us.
CHATTERLEY: Ruchir Sharma of Morgan Stanley Investment Management told us recently on the show that 20 percent of S&P 500 companies or listed
companies are zombies, which they're simply being kept afloat by all the money, the stimulus, the support sloshing around.
Is that an opportunity for someone like you as a short seller or is that a huge burden, because bankrupt, failing companies simply don't go out of
business?
CHANOS: Yes, it's one of the reasons why I think that we continue to see this sort of deflationary trend, in that you don't see companies that
shouldn't be in business go out of business.
They stick around and they cut prices and then you have the other deflationary trend from the other coast, if you will, with the gig economy
companies like Uber and Lyft and others that just don't care about running billions of dollars of losses. That's their business model.
So they keep pressure on prices and wages, and so it's all sort of a vicious circle, and it's, I think, one of the unintended consequences of
just really, really easy money and very, very low rates that I think people aren't appreciating, or at least our policymakers aren't appreciating. It
is just how deflationary those policies can be in an attempt to prop up the economy.
CHATTERLEY: Yes, and suppressing innovation at the same time, too. Let's talk Wirecard, because I heard you made a lot of money on this one.
CHANOS: Well, my clients made a lot of money on it.
CHATTERLEY: Both of you.
CHANOS: But not me. It was a big position for us in the spring and since last year, and it's quite a saga. I mean, for those of you who don't know,
it was a German payments processing company that was one of the darlings placed in the DAX 30 and the signs were everywhere that it was a fraud, and
yet the German regularities not only looked the other way, but sort of went out of their way to look the other way it appears.
And now, you have one of the executives as a fugitive from justice. It's a mess. But what was so incredible was that the signs were all there if you
were looking. It was hiding in plain sight.
CHATTERLEY: Yes, it was hiding in plain sight. The regulators investigated the press. They investigated short sellers. The auditors kept signing off
on the accounts. I mean, the golden age of fraud here, Jim, these are the layers of protection that are supposed to protect.
You're incredibly intelligent. You do your analysis, but for ordinary investors, they simply lose money on these things.
CHANOS: Exactly. As you say, the gatekeepers or the people who are charged to sort of prevent this, and we always like to say that the regulators are
financial archeologists, and journalists and short sellers are financial detectives.
And in this case, it was exactly right. I mean, it was the FT with amazing reporting, as well as other organizations and then the short sellers who,
BaFin, which the German regulators actually went after, who kept blowing the whistle and nobody listened.
And that's why I sort of said that I think we're in the golden age of fraud right now, Julia, is that some of the institutions that are there to
protect investors seem to be actively encouraging a lot of this behavior and it's frightening.
I teach a course on the history of financial market fraud, and this wave that I think we've seen and we're going to continue to see, I think is
going to put all the rest to shame.
CHATTERLEY: What are you teaching about Tesla, Jim? Because you win some and you lose some, and this trade, I know, has been incredibly painful.
CHANOS: It's been painful, yes.
CHATTERLEY: When do you pull the plug on this one?
CHANOS: Two thing.
CHATTERLEY: I've seen your analysis, by the way. I know it's very comprehensive and that story has not played out yet, but this must be a
really painful trade.
CHANOS: Well, it's simple. It is very painful. It reminds us of our America Online trade of the late '90s where we were short AOL and not to bring up a
sore subject to anyone at your organization, but we shorted America Online because we thought there was accounting fraud, which turned out to be the
case.
[09:25:07]
CHANOS: And yet the stock went up eight-fold on us and then Time-Warner found out the hard way what they had bought.
Tesla, a very simple observation just on Tesla and I think it goes to the fact of what I talked about at the beginning, about retail investors
putting just ever-increasing valuations on concept stocks.
Tesla has 0.5 percent of the global auto share market and they lose money selling cars, $55,000.00 cars on average. All the money they've made when
they've reported profits have come from selling tax credits.
This is an unprofitable automaker with less than one percent of the global auto market and it probably gets more press and ink than all the others
combined as you know.
And so, this has become a concept stock and it's become a canvas upon which investors, you know, paint their hopes and dreams. And these kinds of
things, if you go back, again, to 1999-2000, we saw a number of these types of stocks, JDSU, Qualcomm, a variety of them just go parabolic, and as
people put ever-higher and higher valuations on what they thought were the new economy companies, only to find out that they were exactly governed by
the same laws of supply and demand as other companies.
And I think at the end of the day, Tesla is an auto company and it is not some sort of -- I know that sigh -- but I do think they make cars, and
everything else is the company painting a picture of some futuristic set of businesses that are pretty mundane like making batteries, and so ...
CHATTERLEY: I was going to say, that's what the bulls will be saying when they are watching this interview, shaking their head and going, that's the
big mistake you're making, calling them a car company rather than a technology company.
CHANOS: I know. You could buy --
CHATTERLEY: At what price do you pull the plug?
CHANOS: What's that?
CHATTERLEY: At what price do you pull the plug and go, okay, this is too painful?
CHANOS: We've re-cast the position. We've re-cast the position. Obviously, we've got to risk manage it, but we're still short and we bought puts to
limit the upside and it's a smaller position, because it has to be; on the short side, you're losers. For the time being anyway, get bigger, so you
have to risk manage. Any professional knows that.
But again, it's one position of many of ours. It's one of our favorites, but it is one position of many, just as Wirecard was.
CHATTERLEY: As you look around the world, what worries you most, at least in the short-term? I think one of the things that stands out to me is the
working from home phenomenon. Maybe it's because I'm in New York, but I see a lot of commercial real estate that is seemingly empty.
CHANOS: Yes.
CHATTERLEY: Do you see risks in this, Jim?
CHANOS: So the commercial real estate is something, I think, that not enough people are paying attention to. And one of the reasons is that the
banking system is not sending out warning signs as it did in previous cycles, and one of the reasons for that is in the CARES Act.
That gap accounting in effect was suspended for banks, for loans that have gone into what they now call a deferral. So prior to that, if someone
stopped you, stopped paying the bank interest, it would go into nonperforming and nonaccrual.
And now if the loan is deemed impaired by COVID, banks can continue earning interest on those loans that aren't paying them interest.
So, for example, there's one New York bank that is very heavily aggressively in commercial real estate in New York City, and over 20
percent of their loans were in deferral as of June 30.
In the old days, we would have said a bank with 20 percent nonperformers is headed for the rocks, and this bank trades at a premium to book value and,
in fact, reported earnings that would have been less than half of what they reported had they been not accruing the loans that actually are not paying
them interest.
CHATTERLEY: Just the bank, Jim.
CHANOS: Well, I'm not going to name the bank, but your viewers can do -- it's a very aggressive New York City midsized bank.
But there's a lot of banks like this that have 15 percent or 20 percent of their loan book currently is on so-called deferral and so far, the market
hasn't gotten worried about it.
But if you look at some of the big New York landlords, like Vornado or SL Green or some of the others, you'll see that the rents are dropping at over
20 percent a year and the cash flow is dropping as much as 30 percent year- over-year, and that's just getting started, I suspect.
Whatever you might think about work from home, I think the need for additional office space is probably nil in a lot of cities and the question
will just be, how much absorption?
[09:30:01]
CHANOS: I would also point out that right now, urban vacancies are at 14 percent in offices in the U.S. That's a number that normally we see at the
peak, not at the beginning of a cycle.
And then one more point, we looked at some FDIC data recently and most banks, with the exception of the very largest, I should add, the giant
banks do not have this risk, but a lot of mid-sized banks are at all-time record exposure to commercial real estate, higher than before the GFC and
higher before the last commercial bust in the late '80s.
CHATTERLEY: Wow.
CHANOS: So there are some worrisome signs out there.
CHATTERLEY: Okay, I've stolen all my time. I'm going to get you back soon, please, to talk China. And I know you're a friend of Joe Biden, too, so we
want your wisdom on that as well.
But for now, I have to thank you because I have to get to the market open. Jim, it's always a pleasure to hear from you and get your wisdom.
CHANOS: Anytime, Julia.
CHATTERLEY: Jim Chanos, the Founder and President of Kynikos Associates. Sir, stay safe and speak to you soon.
CHANOS: Okay.
CHATTERLEY: All right, up next, shipping giant, Maersk says it expects to come out of the pandemic stronger. The CEO joins us and we've got the
market open. Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. U.S. stocks are up and running this Wednesday.
We're beginning the session a little changed after yesterday's milestone record high for the S&P. Tech pulling back from record highs.
Retail chain Target, one of the bright spots today. It's rallying more than seven percent after reporting its strongest quarterly sales growth on
record. More details on those Target results, but I can tell you online sales, wow, breaking records here.
The S&P is tending to pull back after hitting records, too in the past few years, so a bit of a pullback here. Some consolidation, let's call it that.
Not out of the ordinary.
It's also important to note that stocks have risen to records on light summertime volume and it may take until early September to get a good read
on the real strength of this market, and that is a very important point.
All right, shares in Danish shipping company, Maersk, are up over four percent, too. The company raising its outlook for 2020 above the level that
was given back in January.
Maersk says the pandemic hit demand in the second quarter, but that lower fuel prices and high shipping rates compensated for the drop.
[09:35:21]
CHATTERLEY: And joining us now is Soren Skou, he is the CEO of Maersk. Sir, fantastic to have you on the show, as always. The big news this morning,
that reinstated guidance and actually better than what we were seeing. What gives you that confidence?
SOREN SKOU, CEO, MAERSK: Well, we've of course had a very negative effect from the pandemic in terms of lower volumes in the second quarter, 16
percent in our ocean business, 14 percent net down in our turmoil spot.
Relatively good pricing and a fantastic job on all the costs that we control, and then we also, of course, benefitted from a lower fuel price.
All of those factors combined meant that we could report in operating earnings that we are up by 25 percent and a net result that was almost
triple of what it was in the same quarter last year.
CHATTERLEY: Yes, I mean, I was looking at some of the numbers here, the operating cost management here was astonishing, a 16 percent drop, I
believe, in the quarter here. What assumptions are you making, though, when you look at that forecast?
Are we assuming that we don't go into a sort of material second wave style lockdown environment?
SKOU: Yes, well, first of all, we of course are making the assumption that the actual development in volumes will not drive our results to the same
extent that we probably would have thought in previous years.
I mean, the fact that we were able to deliver better earnings on 16 percent lower volumes in Q2 says something about -- that we are doing something
right with our own network.
But the main underlying assumption for the second half is still that we do not believe that we will see a global lockdown in the same way as we saw in
the second quarter.
We believe, of course that there will be flare-ups and second waves in a number of places, but that they would be dealt with at a local or regional
level as we're seeing now in Europe and Asia, in North America and elsewhere.
CHATTERLEY: I remember you saying to me vividly when we spoke last time that China is 30 percent of your business whether we are looking at
warehousing, logistics and terminals.
So, I'm always fascinated to hear from you what you're seeing there.
SKOU: We are seeing good business in China. Now, of course, it's a long time since China came out of the pandemic. The interregional trade in Asia
is doing fine, as is actually the Pacific trade, and I think that's probably one of the most interesting stories right now.
We, today in August, have more capacity deployed on the Pacific trades, moving goods from Asia and China into the U.S. as the imports into the U.S.
are up year-on-year in June and July.
So it's quite an astonishing development after the lockdown, the U.S. consumer came back very strongly.
CHATTERLEY: Yes, I mean, that fits with certainly some of the retail data as well that we've been seeing in recent days as well.
Another thing that I think is critical to get your insight on here is supply chains. If there's one thing we've learned during this pandemic,
it's about how resilient or lacking resiliency supply chains are for companies.
And you can buy in bulk from a certain source, but that makes you very vulnerable in this kind of crisis that we've been through. How are clients
changing and are they changing in light of what we've seen and been through?
SKOU: There's no doubt that many of our customers, will, once they are out of the pandemic, will sit down and take a look at their supply chains to
see what worked, what didn't work.
I think it's a fact that our network kept operating throughout the pandemic, the ships were sailing, the ports were open, and the warehouses
were operating and so on. So getting goods transported from one end of the world to the other was never an issue for supply chains.
The problems that customers experienced were that in many cases they had single source vendors, so if they bought a hundred percent of a component
with one supplier and that supplier was based in Wuhan, you had a problem.
Another issue many customers faced was that over many years, the buffer inventories had slowly but surely been down as they relied more on more on
just in time, and then when the supply chain breaks, then obviously you have a big problem.
We believe our customers will be thinking more about inventory. They will certainly want to make sure they do not rely on single source situations.
We also believe that they will demand more visibility from us in terms of we are a good sign in the supply chain and we're sure that they will demand
more ability to affect outcomes while in transit.
[09:40:08]
SKOU: We don't think that supply chains globally are going to change very much. There was already a trend of moving certain kinds of manufacturing
out of China, but into Southeast Asian countries that we believe will accelerate.
But bringing everything home and consolidating in one location is also not a very good strategy if that location gets hit.
CHATTERLEY: Yes, it's all about diversification, quite frankly. And your point about visibility is also a really important one and I know you're
working with IBM on digital ways to provide that visibility. But we'll get you back to talk about that and I will save that for next time.
Sir, fantastic to have you on the show, as always. The CEO of Maersk there.
SKOU: Thank you, Julia.
CHATTERLEY: Thank you. All right, still to come on FIRST MOVE --
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Is that what we are going for today?
UNIDENTIFIED FEMALE: I would really love this style.
UNIDENTIFIED MALE: Oh yes, love the hair.
UNIDENTIFIED FEMALE: Oh, my gosh.
UNIDENTIFIED MALE: I love it. It's great.
(END VIDEO CLIP)
CHATTERLEY: The king of magic and social media, Zach King, the third most followed TikTok star in the world, joins us next.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: You guys want to go camping.
UNIDENTIFIED CHILDREN: Yes.
UNIDENTIFIED MALE: Okay. We'll do a campfire. Go, go, go. Let's go. Here, Liam. You want to roast s'mores.
UNIDENTIFIED CHILD: Yes.
(END VIDEO CLIP)
CHATTERLEY: That was Zach King and his children and a piece of his trademark, magic and clever editing. Let's be clear. That has propelled him
to stardom on several social media platforms.
Most recently, he's become a hit on TikTok where he quickly amassed more than 47 million fans, making him the third most followed creator in the
world.
His most popular TikTok's have been viewed more than two billion times. Zach is no stranger to other platforms, too. He started off on YouTube and
Twitter's now defunct, Vine. He has also cast a spell on some big companies, too, leading to collaborations with Disney, Hasbro, Nike, Coca-
Cola and more.
And thanks to the magic of television, Zach is with us now.
Zach, fantastic to have you with us. I feel that you're somebody who can definitely say they love their day job. You make some really --
ZACH KING, FILMMAKER AND SOCIAL MEDIA STAR: I absolutely --
CHATTERLEY: Fun videos.
KING: It's not a job, it's just -- I get to show up and work with an amazing team and production crew for what I get to make every day, which is
magic videos.
CHATTERLEY: Yes, they are. They are magical and you do have two very cute children.
KING: Thank you.
CHATTERLEY: Tell me, is there anything special, really, about TikTok as a platform in terms of the technology it provides? What's your view?
KING: Yes, so there's a couple of things. The magic behind TikTok to me is the algorithm and how they've leveled the playing field for so many
different people.
A lot of people who wouldn't call themselves creators when they log onto the app, you know, one of the most popular things they want to talk to,
kids who are in middle school or High School. A lot of them will say they want to be YouTubers and that kind of has transcended into becoming kind of
TikTokers where they know it's a little bit more accessible.
And you have 80-year-old grandmas or you have an eight-year-old kid go on there with their family and make a TikTok and has the chance of going
viral.
So what I like about it is it has encouraged a lot of people to actually create and kind of become, going from the consumer of the content on the
feed to actually thinking, oh, I think I can try this, whether it is -- you know, it might start out as a dance move. It might actually jump into one
of the other many cool hobbies that they showcase on the app and different communities.
So I love that it's getting people up and creating every day.
CHATTERLEY: So TikTok should definitely hire you to do their PR. The big question is, is it replicable? Could someone else do this in light of the
challenges that TikTok here in the United States, but around the world, too, now faces?
KING: Yes and no. I mean, in the long run, sure, there will be many people who can copy a similar algorithm and I think TikTok has even disclosed
what's in their algorithm so that people can have access to that in the future.
And so, sure, the algorithm can be replicated, but I don't think you can replicate the exact culture. You know, you see Instagram Reels launching a
very similar format around the world right now to compete directly with the TikTok feature and I think it's great that Instagram is trying to copy that
and make that, you know, for me where that's one of my other big followings, that could be a neat feature for me to grow again on Instagram.
But for TikTok, you can't fully copy that community. You know, it has taken a life form of its own. There's a lot of different creators on there that
are taking chances in ways that they wouldn't.
On Instagram, you kind of have your set way that you create and that just naturally happens on platforms over the years. Even Vine had that where it
kind of becomes just a comedy skit page and it finds its rhythm there.
But for TikTok, it's been changing, finding itself for a while. It started with a lot of dance trends and music heavy stuff, and now it's kind of
really diversified, and if they go long form here, I think this is a chance and open up a partner for it -- there is a chance for it to really take a
next season of its life.
So I'm excited what the TikTok team could do.
CHATTERLEY: Wow. You've made this into a business. You've made this into a business opportunity and I know, because I've seen what you've said in the
past that actually, some part of going from just doing this for fun to getting revenue from it to then making it into a career and a business is
diversification.
What if TikTok wasn't around? Because it's a viable risk. Would your business be damaged and would there be creators on the platform that have a
revenue stream that suddenly lose it?
KING: Yes, for me, in the short-term it would hurt just a little bit. But it is about diversification. That's what I always tell new creators who are
just starting in or reaching out for advice, even other platforms, it's not just diversifying on Instagram or Twitter or Snapchat or Vine, because all
platforms are going through the thing.
But you actually don't have a direct connection there. You know, look at Facebook years ago, eight years ago when we started creating content there,
you had access to a hundred percent of the audience and it was great until the pay wall hit and even brands obviously had to start paying to access
the audience.
But, now, you really only get access to one percent or two percent of your audience when you hit post -- without paying.
So ultimately, you've got to start e-mail lists, there are services for text now. There's a lot of ways you can directly connect and your viewers
can become your customers and have a tight relationship with you, so that's what I'm always trying to cultivate for myself as a creator.
CHATTERLEY: Is it less cool or less usable to people if a Microsoft owns it or an Oracle owns it? Zach, would it make a difference to you? Do you think
it would make a difference to TikTok users and content creators?
KING: I can't speak for everybody, but for me, it doesn't make it less cool at all. I think, at this point, the community at TikTok would be excited
whoever owns it if it helps prevent it from a ban, because the livelihood of so many creators is beginning to flourish on TikTok and that's what I'll
be most sad about if it does get banned when you have your mid-size creators, your low tier creators who are just starting.
Maybe they couldn't quite make it on YouTube or another platform in the past, but TikTok has become that place for them to really get some
momentum.
And to have that shut down, especially when TikTok is just rolling out their new creator fund, which apparently is supposed to be paying out up to
a billion dollars in three years, which is pretty substantial. It is not enough to keep all the creators long-term, but it's enough to begin, and so
that's an exciting first step.
But it will be that mid to low tier creator that will really be hurting if they're not, you know, diversifying. Because it's harder at that level.
It's easier when you have 45 million you can translate to other platforms and pivot.
But the smaller channels, those are the ones that will suffer the most.
[09:51:03]
CHATTERLEY: You may have one or two more. That "Harry Potter" video was just phenomenal, Zack. I was distracted listening to you and trying to
watch the video at the same time. Thank you for coming on.
KING: It is wonderful. Absolutely.
CHATTERLEY: We'll keep in touch and we will see where this goes. Zach King, great to have you with us. Thank you.
KING: Thank you.
CHATTERLEY: All right, coming up, retail boom continuing for some. Target and Lowe's reporting earnings and they were strong. We'll discuss next.
(COMMERCIAL BREAK)
CHATTERLEY: Breaking news into CNN. The European Union says it does not recognize the results of the recent election in Belarus and will shortly
impose sanctions on those who were involved in electoral fraud.
The European Commission is calling for new elections and says it will re- route 53 million euros earmarked for Belarus away from the government and towards civil society.
We will continue to keep you abreast of any further developments, and of course, the news of those sanctions when we get them.
All right, let's take a final look at the markets here and the main U.S. indices, mixed -- it's a mixed picture. We are higher though for the Dow,
as you can see, but the NASDAQ under a bit of pressure.
The S&P 500 once again on target for another record close. We've also had some strong retail earnings today, too, which is helping out.
Shares of Target and Lowe's are trading higher after both reporting surging sales. Clare Sebastian is with us now. Clare, focus on Target first. Target
well and truly hitting the bull's-eye here. Wow.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, pretty extraordinary numbers, Julia. I think it is worth pointing out for a company that size
where they have the best part of 2,000 stores in the U.S. to deliver 24 percent comparable sales, that same-store sales. That is extraordinary.
Add to that the numbers for digital, which were up some 195 percent. Digital sales almost tripling compared to a year ago. Bear in mind, Target
has been really strong for the past couple of years. Their share price doubled nearly last year.
So this is sort of a good quarter on top of another good quarter of the previous year. So extraordinary to see, Julia. I think the question, both
for Target and for Lowe's that we also saw deliver a strong quarter today is how sustainable is this? They're saying that they're sort of seeing the
numbers moderating a bit as we go through the summer. Will that come down even further as we see the waning of stimulus and uncertainty perhaps
around back to school.
[09:55:23]
SEBASTIAN: Target, I will say, pretty confident. They say that they've made $5 billion in market share gains in the first half of the year, added 10
million digital customers. Lowe's a little more cautious. They then say that the second half of the year is slower for home improvement in general,
but they're investing heavily in e-commerce and that they say is paying dividends.
CHATTERLEY: Yes, I picked up on that, too. The CEO of Target making the point that yes, the stimulus checks have helped, but even as the stimulus
warned, we've continued to see strong growth and that was what took the shine off the retailers from yesterday, some concern about the lack of
stimulus.
So phenomenal results. The question is, can they continue? Clare Sebastian, thank you so much for that report there.
All right, that's it for the show. Thank you for watching FIRST MOVE. Great to be with you. We'll see you same time, same place tomorrow. Stay safe.
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[10:00:00]
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