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First Move with Julia Chatterley
A Deal to Raise the Debt Ceiling Imminent, but is Temporary; President Xi and President Biden Agree to Talks; Russia Offers to Ease the Energy Crisis in Europe. Aired 9-10a ET
Aired October 07, 2021 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:07]
JULIA CHATTERLEY, CNN BUSINESS ANCHOR, FIRST MOVE: Live from New York, I'm Julia Chatterley. This is FIRST MOVE and here is your need-to-know.
Debt diversion. A deal to raise the ceiling imminent, but it is temporary.
Chinese chatter. President Xi and Biden agree to talks.
And Putin's power play. Russia offers to ease the energy crisis in Europe.
It's Thursday. Let's make a move.
Welcome once again to today's FIRST MOVE. Lots to discuss including a D-day delay. Congress set to keep a debt default at bay. Plus, U.S. jobs data on
the way. Will Friday's report accelerate the Federal Reserve's taper day? And Putin holding sway. Russia says Europe's energy shortages could be made
per se, but it will cost. We'll discuss.
U.S. stocks stage a mighty rebound on Wednesday as energy prices ease and the debt ceiling debate took a more positive turn. We are adding, as you
can see to those gains at premarket following the brighter tone across Europe and Asia. The Hang Seng rallying over three percent as you can see,
too, in what feels like part tactical retreat, part can kick.
Senate Republicans are offering a short term debt limit extension deal until December to give Democrats more time to work on a longer term deal.
Let's hope Christmas in D.C. isn't cancelled or delayed yet again this year, just wake me up when it's over, please.
The Nobel Peace Prize actually is set to be announced tomorrow. How about a Nobel Cease Prize for whoever can broker a permanent end to these debt
ceiling dramas? Yes, I said it. Tinder from hot air in Washington, it maps a little bit in New York, too, I acknowledge it. To cooler prices for oil
and natural gas, the latter falling from 10-year highs Wednesday, after President Putin said Gazprom maybe can accelerate supplies. The United
States also mentioning perhaps tapping emergency oil reserves, too. You see, there are options.
The energy shortage is far from licked, at least the debt ceiling can might be kicked. And that's where we begin today's drivers with John Howard.
John, talk us through how this might work.
JOHN HARWOOD, CNN WHITE HOUSE CORRESPONDENT: Well, it is a kick of the can down the road, but it's a very welcome one for the American economy, the
global economy, the country more generally. We were getting close to a crisis point where, of course, the Democrats and Republicans were facing
off. Mitch McConnell was trying to exact a large political price from Democrats for raising the debt ceiling, even though he knew that failing to
do so would tank the economy.
And in the end, because he worried that Democrats might set aside the filibuster in order to deal with this; that seemed like a bigger threat to
him, so he backed off. It appears that it hasn't been -- the deal hasn't been accepted, yet. They are still haggling over the wording of it. But it
looks as if the debt limit will be raised sufficiently to get us into December, then they'll have to work a longer term resolution of the issue.
There is still a question about what the mechanism for that will be. Does it have to be, as Mitch McConnell is offering in the reconciliation
process, that special budget procedure that Democrats are using? Democrats are saying no, we're going to do it independently of that.
And it does appear that given the fact that McConnell backed off at the last minute, at this moment, that he is likely to do the same thing at the
end, and they will get a longer term resolution. It is the kind of thing that in the past had been the subject of a harmless fight between the two
parties, but increasingly in recent years, Republicans have escalated the stakes of these encounters.
In 2011, the House Republicans refused to raise the debt limit, and we actually had a downgrade, as you recall, Julia, of U.S. debt for the first
time in history. We've avoided that this time.
CHATTERLEY: Yes. And two of the rating agencies actually, in the last few days coming out and saying, look, we do think this crisis will be averted.
I want to eye-roll when this comes around every year, but to your point, John, I think it's a great one, actually, the stakes are coming and
becoming higher and higher.
And actually, the economic crisis that could be created by this should be paramount, but we talk about the political crisis, too. And actually, I
looked at the stats in the latest Quinnipiac poll and speaking of political crisis for the Democrats here avoiding a further issue here, pivotal -- his
approval ratings are slumping.
HARWOOD: Joe Biden has taken on water in the last couple of months, that Quinnipiac poll that showed him at 38 percent, that's an outlier in the CNN
Average of Polls. He's a little bit higher at 45. But he had been consistently above 50 percent as you know, Julia, all year, very steady
until you had two things occur at the same time. One, is the delta variant reflected a resurgence of the pandemic, and one of the reasons that people
had judged Joe Biden favorably since he took office was the progress he had made with vaccinations and with tamping down the pandemic, that seemed to
go into reverse, that took the most significant toll on his popularity.
[09:05:31]
HARWOOD: And then you had the Afghanistan withdrawal, whether you agree with it or not, the images were very bad and troubling to the American
people, and that also was a negative on his approval rating.
The biggest thing that the Biden demonstration can do now, they are concerned about it, of course, is one, get control of the pandemic and you
see a more aggressive approach by the President to vaccine requirements. He is going to be speaking about that today in Illinois, and we are seeing
cases and hospitalizations and deaths now going down.
And the second thing is to enact this economic agenda. That's what will make a difference he believes substantively for the American economy now
and in the future, but also the American people will see him as succeeding on a top priority that's important to them. That may begin the uptick back
up in his approval ratings. At least, that's what the Biden administration hopes.
CHATTERLEY: Yes. Delta, the economy, and his economic agenda, Afghanistan and the border wall. Immigration -- it is a perfect storm. John, we will
see. Thank you so much for your wisdom, as always.
HARWOOD: You bet.
CHATTERLEY: Also in Washington, the White House says President Biden and his Chinese counterpart, Xi Jinping have agreed to meet virtually before
the end of the year. This comes as Beijing escalates its military pressure on Taiwan by sending a record number of warplanes into Taiwan's air defense
zone.
Selina Wang joins us with the details. Selina, this is the highest level meeting actually since the Alaska Summit back in March, when I think
everyone ended up publicly berating and lecturing everyone else. So, it seems the tone here was warmer.
SELINA WANG, CNN CORRESPONDENT: Exactly, Julia, and we can certainly say that U.S.-China tensions are still running high, but what we are seeing
here is a partial thawing of tensions, and at least we're seeing both sides willing to hear each other out.
And this decision on principle to agree to have Biden and Xi meet virtually before the end of the year was a result of this extended six-hour meeting
between U.S. National Security adviser, Jake Sullivan and China's top diplomat Yang Jiechi and as you say, both sides had a positive review of
this. They said it was candid, wide ranging, and direct.
The tone was professional and respectful. A far cry from that March meeting we had discussed in Alaska, when they were trading barbs in front of TV
cameras. There were accusations of condescension and grandstanding. But now, this talk was private. They were able to have a more honest back and
forth discussion, we hear, on areas of both cooperation and disagreement, which is a long list that includes Hong Kong, the South China Sea,
Xinjiang, China's human rights record, as well as, of course, Taiwan.
But what's important about these lines of communication being open is that it avoids any accidental conflict and as the U.S. side says, quote,
"Responsibly manage competition." And this meeting comes, of course, as the U.S. has been sending sharp warnings to Beijing over a record number of
warplanes sent through Taiwan's Air Identification Defense Zone.
Take a listen to what U.S. Secretary of State Tony Blinken had to say.
(BEGIN VIDEO CLIP)
ANTONY BLINKEN, U.S. SECRETARY OF STATE: The activity is destabilizing. It risks miscalculation, and it has the potential to undermine regional peace
and stability. So, we strongly urge Beijing to cease its military, diplomatic and economic pressure, and coercion directed to Taiwan.
(END VIDEO CLIP)
WANG: Chinese military activity around Taiwan is not a sign of an imminent threat of war according to analysts, but it is Beijing flexing its military
muscle and power to not just Taiwan, but to the world. It is showing Taiwan's friends that it is not going to back down in the face of their
support.
That display was also a show of patriotic strength. The warplanes coincided with China's national day that was celebrated on October 1st. And so Julia,
the big question here is now that we have this line of communication open, this somewhat thawing of tensions, how is that discussion going to lead to
actual action when you have got so many increasing areas of disagreement?
CHATTERLEY: You're so right, but at least at this stage, talk is better than nothing and we hope for action. Selina Wang, thank you so much for
that.
I've got this. Natural gas prices falling after President Vladimir Putin said Russia could pump more, and the Deputy Prime Minister says approving
the Nord Stream 2 pipeline is key to easing Europe's energy crisis. Anna Stewart is following the story.
But who does have this, quite frankly? I mean, Putin has so much leverage - - OPEC+, of course, in terms of oil prices. The Nord Stream 2 pipeline -- he is waiting for the Germans to approve. Never want to miss a moment is
Vladimir Putin, and he certainly didn't miss this one.
ANNA STEWART, CNN REPORTER: Exactly. I mean, Russia holds all the cards, particularly when we look at Europe and energy. I mean, Europe imports 90
percent of its gas, nearly three quarters of that comes from Russia. Russia is the biggest supplier of its oil. So yes, Russia holds the cards here.
And Russia has repeatedly denied that it has been withholding gas from the European markets in order to keep those prices high to support this
pipeline. But it is interesting that Putin suddenly has said that they could supply more gas to Europe, not that they would, but they could, and
the Deputy Prime Minister within the same meeting makes the argument that if Nord Stream 2 was satisfied very quickly, well, that would stabilize gas
prices.
Very, very interesting, particularly as President Putin used this opportunity to also really blame Europe for not having longer term
contracts in terms of gas with Russia. This is something that have reduced in recent years, and saying that they are relying too much on the spot
market, and given how reliant the E.U. is on Russia. I think perhaps, he's right.
CHATTERLEY: Yes, very interesting point. You know, it's not often, I have to say that I agree with Vladimir Putin. But with regards to some of the
comments that he's made in recent weeks, I have to say, I agree with him.
And I want to get your conversation though, your viewpoint on this, too. And it ties to a conversation I had with the Dow CEO yesterday. I mean,
Vladimir Putin said, some people are speculating on climate change issues, some people are underestimating some things, some are starting to cut back
investments in the extractive industries. There needs to be a smooth transition, and he does have a point, we can't go from A to C in terms of
greatest sustainability without having a path and policymakers here are so important in smoothing that transition.
Anna, what do you make of what he said here?
STEWART: Listen, I don't think I'm going to give you a different viewpoint, to be honest. I think you, me, and President Putin are all on
the same page here. We are in a transition to renewable energy, everyone wants to see that. But the fact of the matter is that the world's demand in
terms of energy cannot be met at this stage by 100 percent renewables.
And yet, the pressure from policymakers and also, I think, crucially from shareholders is to move away from hydrocarbons, and that means lots of
energies have simply cut back on their investment there. They've cut back on infrastructure around the world, particularly in terms of government
infrastructure, gas storage facilities, and so on.
And therefore, when you have these multiple shocks to supply and demand, when we look at the fact that, you know, there was a very long winter. It
depleted reserves of gas around Europe, and then you had weak, weak weather in terms of solar and wind over the summer, and you've got demand roaring
back into action post lockdowns, there simply isn't enough energy security here, really, within this transition.
And the E.U. is meeting next week. We're going to hear a lot more about the Commission's strategy, longer term strategy in terms of energy. But I think
we're going to hear more and more about investment in renewables, not of course, looking at hydrocarbons.
And a really interesting nugget of information I got from an analyst at Eurasia is that very quietly on the side, apparently, Germany and France
are firing backup their coal plants, plants that had been made mothballed and I really think that says it all.
And this winter, we'll see whether consumers who feel the pinch from these gas prices start to question the strategy from governments in their push
for new renewables.
CHATTERLEY: Yes, I mean, what Vladimir Putin is saying that we know there's plenty of vested interests there because the transition for
renewables is clearly relatively bad for Russia. However, he has a point and I think you made it well, Anna Stewart.
STEWART: He has a plan.
CHATTERLEY: He does. We don't disagree. Anna Stewart, thank you.
All right. Let me bring you up to speed now with some of the other stories that are making headlines around the world.
The World Health Organization is recommending the widespread use of the world's first malaria vaccine for children in Sub-Saharan Africa and other
regions. It is being called a historic move. The World Health Organization says the vaccine was developed in Africa by African scientists.
CNN's David McKenzie joins us now from Johannesburg. David, I can't say how pivotal this would be and is quite frankly. I mean, this is the worst
pandemic the world has ever faced. Talk us through what more we know on this and how important it is.
DAVID MCKENZIE, CNN INTERNATIONAL CORRESPONDENT: Well, certainly it's been a disease, a parasitic disease that has affected people across the world
for centuries, particularly here in Sub-Saharan Africa. And still, on this continent, young children, those under five more than a quarter million die
from malaria, this parasitic disease every single year, despite the many, many decades of attempts to try and end the scourge.
But this parasite that is carried by the anopheles female mosquito has really just worked around all of these attempts. Now, there is this vaccine
that's been approved for wide use. It's being tested in pilot programs in Ghana, Kenya, and Malawi to many hundreds of thousands of children and
shown to be safe and effective.
[09:15:17]
MCKENZIE: Now, how effective it is? Well, that's slightly complicated. Around 30 percent efficacy, Julia, in terms of stopping severe disease in
young children, but when that is combined on a seasonal basis with prophylactics and insecticide treated bed nets, that moves up to around 70
percent.
So because it's safe, because it saves lives, possibly tens of thousands of lives a year according to the W.H.O., this long-awaited vaccine has been
approved and will be rolled out further -- Julia.
CHATTERLEY: And David, very quickly, because we've all talked about the logistical issues of mRNA based vaccines and the deep, cold temperatures
that they have to be transported and stored in, how easy is it going to be to transport this, particularly to rural areas?
MCKENZIE: Well, I think one of the issues here is that these vaccines have to be given out three in over a space of a few months with young children,
and then a bit later after 18 months. But what they found in these large pilot programs is because many of these countries, though, these are rural
and poor areas, because they have routine immunizations for diphtheria, tuberculosis, polio, they can then put in this other dose of the malaria
vaccine, and everyone is used to this, and there are systems in place for this. So I don't think that's the major issue.
Again, an issue will be cost. GlaxoSmithKline, the major producer of this has said they are willing to do this at under five percent over cost. They
need funding for that, and the next step will be for GAVI and others, the Vaccine Alliance to see whether they are willing also to put money to this
initiative, because it can and should have very massive impact.
And just on a personal level, you know, for any of us who have traveled through these regions and seen the impact on families and children of
malaria, the listlessness, the sickness, the repeated infection, and often the death, this is really good news.
This particular vaccine was first developed in the 80s. It's taken that long to get to this point, but we're here now -- Julia.
CHATTERLEY: Here we are. David McKenzie in Johannesburg, thank you so much for that.
All right, coming up here on FIRST MOVE -- inflation, the Federal Reserve, and supply chains, we will tackle all the issues and the risks with Mohamed
El-Erian in just a few moments time, and later in the show, fighting plastic pollution and making cleaning products kinder. One company shows us
how both can be done at the same cost.
Stay with us, it's all coming up.
(COMMERCIAL BREAK)
[09:20:25]
CHATTERLEY: Welcome back to FIRST MOVE. Wall Street may have a feeling that a deal on the debt ceiling is narrowing. All the major averages are
set to rally for a second day as Republicans offer a short term deal to raise the borrowing limit until December, far from an ideal solution of
course, but at least it lessens the odds of a last minute political miscalculation with very painful consequences perhaps for markets and most
importantly, the U.S. economy and beyond.
The Dow and the S&P are now higher for the week with a lot riding on Friday's all important U.S. jobs report. We're expecting around half a
million jobs to have been created, net a substantial jump from the week read in August. A good report could give the Federal Reserve the last piece
of evidence it needs to begin cutting its stimulus next month.
Markets fear the Fed is already behind the inflationary curve as energy prices soar to multi-year highs. Fed officials still believe higher prices
won't last once supply issues and port bottlenecks subside, but major retailers like Walmart don't have the luxury of waiting. They've begun
chartering their own ships that can bypass congested terminals, retailers hoping to avoid product shortages and empty shelves ahead of the holiday
season.
Mohamed El-Erian, adviser to both Allianz and Gramercy Funds Management joins us now. Mohamed, always great to have you on the show. I have to say
there is growing disquiet, I think that perhaps that inflation and higher prices not looking quite as temporary, as policymakers keep telling us. How
concerned are you?
MOHAMED EL-ERIAN, ADVISER, ALLIANZ AND GRAMERCY FUNDS MANAGEMENT: I am concerned, and I've been concerned for a while. This is not to say there
aren't transitory factors, meaning they are temporary and quickly reversible, but there also are longer term issues that are going to last
into next year. And as you just pointed out, Julia, people are already changing behaviors.
The minute you talk about behavioral changes, it tells you that these are not transitory inflation trends. And the next one, unfortunately, is going
to be more companies feeling confident that they can pass on the higher cost into higher prices.
CHATTERLEY: Yes, changed behavior starts to look far more sticky than temporary. Is it too early to be discussing -- I'll say the word --
stagflation? We're talking a lower growth environment with higher prices.
EL-ERIAN: It's not too early to discuss it as what they call it tail risk, relatively low probability, high impact. Is it too early to talk about it
as a baseline? As something that has a more than 60 or 70 percent probability of happening? Yes.
There is no reason why we should trip into a stagflation. There are stagflationary wins, but if our policymakers respond quickly enough, they
will die down.
CHATTERLEY: You say the deciding factor is going to be policy, policy decisions, global economic policy decisions, actually, in the coming weeks.
Is that fiscal? Monetary? Or both? Be specific about the real risks here.
EL-ERIAN: Happy to be specific. We need three policy responses. Number one, a defect. They need to ease the foot off the pedal to the metal
monetary policy approach. They are putting in way too much liquidity. It is causing a liquidity overhang. It also is causing asset prices to
disconnect.
Look at housing as a perfect example. Do we really need the Fed to buy $40 million -- $40 billion worth of mortgages every month, when a lot of
Americans are being priced out of the housing market? The answer is no. But they keep on doing it. So number one is the Fed easing its foot, not
slamming the brakes, easing its foot off the accelerator.
Number two, pro-growth initiatives. I think what the Biden administration is proposing in terms of physical and human infrastructure is really
important. And number three is something that's hardly ever discussed, more prudential supervision of the non-banks to make sure that we don't get a
market accident.
If you do all three, you have an orderly path that avoids both persistent inflation and the stock side of stagflation.
CHATTERLEY: I mean, they're staggered in terms of when they take place, and we've got all sorts of decisions to your point about spending -- be it
significant spending or whopping size spending. We've obviously got the Federal Reserve to make a decision.
How does the market react? Will the market react positively to a Federal Reserve that turns around and says look okay, the time is nigh. In fact,
the time perhaps has been nigh for a while, and now, we take action. How soon do they respond? Because I think that has to be the first thing.
[09:25:14]
EL-ERIAN: So I don't think we're looking at the taper tantrum of 2013, or even the sort of instability we saw in 2018, and that is because even when
they taper, they will be continuing to inject liquidity into the system.
Most people expect, for example, that the balance sheet of the Fed is going to keep on going up for a while and may well exceed $9 trillion. So, they
are still putting in liquidity, they're just putting in less of it.'
So there will be some uncertainty in the marketplace, but I do not think it will be dramatic. But the longer they wait, the higher the probability that
they not just have to ease off the accelerator, but slam on the brakes, and that's why I've been calling for them to taper for the last six months.
CHATTERLEY: I mean, one of the uncertainties, and I do feel a little bit for Jay Powell and the Federal Reserve here is the political dysfunction
that we've been watching in D.C., and while most of us I think, would take a step back and say we do this every single year, and we have this dramatic
debate about the debt ceiling, a ceiling of chaos of the Congress's own creation, quite frankly. It has been one of the risks in addition to higher
energy prices, in addition to supply chain issues.
So you can perhaps understand that they sort of fear creating a greater problem than people are already dealing with, that the real economy is
already dealing with for all the challenges.
EL-ERIAN: So that is the view, but Julia, if I may, I completely disagree with you.
CHATTERLEY: It's wrong. Yes, please.
EL-ERIAN: First of all, because they are not benefiting the economy, they are benefiting asset holds. And they are creating asset inflation, which is
actually harming the base of the economy and creating a higher risk of financial instability. That's number one.
Number two, they can't do anything about supply constraints. So, continuing to pump in liquidity is not going to help the ships move across the oceans.
It is not going to re-establish all sorts of supply chains. I think we've gotten to the point where most economists agree there are very few economic
benefits of this pedal to the metal approach, and the costs and risks are mounting every single day.
CHATTERLEY: Does the Fed get that, Mohamed? Is Jay Powell listening?
EL-ERIAN: They are afraid of a repeat of 2013 or 2018. You know, the image I have in my mind -- and it is a good thing that we called it a tantrum is
that you are continuously feeding sweets candy to the marketplace. And of course, you've gotten the marketplace conditioned to expect lots and lots
of sweets on a regular basis.
So of course, if you're going to take some away, there's going to be some short term reaction and they're afraid of that short term reaction, so they
will have the tantrum. But every parent knows that the answer to a potential tantrum by your kid is not giving them more sweets. That's not
the right approach. You just make things worse for later on.
CHATTERLEY: And it's better than rotten teeth and your teeth all falling out as well if you keep doing it, which I think --
EL-ERIAN: That's it. That's it. Well, I should add that. That's one -- I will add that from now on.
CHATTERLEY: I will give that to you. For investors, Mohamed, how should they invest based on the risks that the likelihood of the Federal Reserve
reacting -- and to your point, and I think it's a great one, we are beyond the point now where there's been so much liquidity sloshing around that the
risks are deeply mismatched in certain asset classes as well in too many asset classes.
EL-ERIAN: Yes, I always had the image of a surfer. You're on a wave, you're enjoying the liquidity wave. But just keep an eye on the shore,
because we're getting closer to it. So from a tactical perspective, it makes sense to continue to buy the dips, but I want to stress that's a
tactical view. You've got to be incredibly agile, because we have a lot of uncertainties ahead of us, and that's not yet priced in by a marketplace
that has been conditioned simply to follow the Fed.
So tactically, liquidity is going to continue to be important, more long term. Just make sure that you get off that wave before it breaks.
CHATTERLEY: Yes, kneel on that surfboard. Don't stand on it, strap yourself in.
EL-ERIAN: That's right.
CHATTERLEY: Mohamed, great to chat with you as always. Thank you so much. Mohamed El-Erian there, advisor to Allianz and Gramercy Funds Management.
We will speak soon. Thank you.
The market opens next. Stay with us.
(COMMERCIAL BREAK)
[09:33:00]
CHATTERLEY: Welcome back to FIRST MOVE. U.S. stocks are gaining ground at the open, the second day of gains in fact on Wall Street on hopes for a
short term, at least, debt ceiling increase until December. Markets have been relatively concerned with short term yield spiking on fears that the
U.S. could default on its debt for the very first time.
In the meantime, another uncertainty, the energy markets, can the Russian bear wrestle with the energy bulls? Call it a Gazprom gusher. Crude and
natural gas prices are lower as Moscow pledges to do more to help boost gas supply. But U.S. oil still up 56 percent this year. Natural gas prices, up
123 percent.
Facebook meanwhile moving higher for a third straight session and gaining back a lot of the five percent losses it suffered on Monday. That said,
lots of questions over how increased regulatory scrutiny might pressure future growth. Reports say the company is delaying the rollout of some new
products as it battles whistleblower allegations that its business model weakens democracy and harms users.
Meanwhile, Facebook is facing more potential problems as whistleblower Frances Haugen is expected to meet with a congressional panel investigating
the January 6 riots at the U.S. Capitol as soon as today.
The former Facebook employee could provide insight into how the social media giant was possibly used to facilitate violence. It also comes after
she talked about how Facebook's Instagram affects children's minds, as Clare Sebastian reports.
(BEGIN VIDEOTAPE)
FRANCES HAUGEN, FORMER FACEBOOK PRODUCT MANAGER: It's just like cigarettes. Teenagers don't have good self-regulation.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT (voice over): Whistleblower, Frances Haugen says she saw how Instagram's algorithm can lead the teenage
brain down a negative spiral.
HAUGEN: They say explicitly, "I feel bad when I use Instagram and yet I can't stop."
SEBASTIAN (voice over): Experts say they've been seeing this for years.
DR. PAUL WEIGLE, ADOLESCENT AND CHILD PSYCHIATRIST: You could hit something really exciting or you could connect with someone in a really
positive way that feels great. These things don't happen often, but they could happen at any moment.
And this is not unlike a gambler who is playing a slot machine and just plays it over and over, because you never know when that next pull is going
to hit a jackpot.
[09:35:18]
SEBASTIAN (voice over): Studies have shown the part of the brain that controls decision making and judgment is still developing in teenagers.
UNIDENTIFIED FEMALE: I want to understand the science of teens' emotional life.
SEBASTIAN (voice over): Doctor and filmmaker, Delaney Ruston says that can make it harder for them to stop doing something, even if it's upsetting,
DELANEY RUSTON, DOCTOR AND FILMMAKER: They will have micro emotions that are positive, like get attention, and micro motions that are negative, ooh,
I feel jealous of that person. The real concern that we have as a society is the teen brain is primed to more likely get absorbed by that negative
feeling.
SEBASTIAN (on camera): It's not just the type of content that can affect the teenage brain, it is the amount of time spent just sitting and
scrolling.
WEIGLE: Remember that adolescence is a time when the brain is not finished developing. Right? And it's not actually growing, it's actually shrinking,
but it's becoming more efficient.
SEBASTIAN (voice over): Dr. Paul Weigle says if social media starts to displace other activities, that could leave a permanent mark.
WEIGLE: If a young person isn't engaging in certain activities sufficiently, whether they be for example, social activities or developing
a musical talent or reading, these parts of the brain tend to wither and are destroyed so that they can never really be regained.
HAUGEN: They say, just take your kids' phone away, and the reality is, those issues are a lot more complicated than that.
SEBASTIAN (voice over): Quitting social media in a digital world is not always realistic. Experts say, there is a middle ground.
WEIGLE: I think that social media companies could very realistically put safeguards in place that encourage people to take breaks from social media.
RUSTON: Teens tell me over and over that they feel better when they have significant bouts of time off social media.
SEBASTIAN (voice over): Clare Sebastian, CNN, New York.
(END VIDEOTAPE)
CHATTERLEY: Coming up after the break, time to clean up our act, making household cleaners without the chemicals and the landfill -- oh, there is a
firm for that, it's called Cleancult, and investors are finding it hard to resist. They join us next.
(COMMERCIAL BREAK)
[09:40:06]
CHATTERLEY: Welcome back to FIRST MOVE, and to an awful scene. The durability of plastic waste is depressingly obvious. About 370 million tons
of plastic was churned out of factories last year, according to STATISTICA, and one estimate suggests that only nine percent of plastic bottles are
actually recycled.
Well, a company is trying to reverse that trend with a range of cleaning products in recyclable and refillable containers. Cleancult says its
ingredients are kinder to humans, and their shipping model is more sustainable, too.
Here to discuss, Ryan Lupberger, he is CEO of Cleancult, and he joins us now.
Ryan, welcome to the show. Okay, explain --
RYAN LUPBERGER, CEO, CLEANCULT: Thank you for having me.
CHATTERLEY: Good to have you here. Explain Cleancult and what makes you unique?
LUPBERGER: Yes, I started Cleancult because I looked at the back of my bottle of laundry detergent 2015-2016, I didn't see any ingredients listed.
Right? I'm from Boulder, Colorado, always been really natural.
I did all this research, right? And there is very limited regulation in the U.S. for what goes into our cleaning products. Then (AUDIO GAP) that the
green ones you see in the market are covered in plastic, right, and more and more plastic packaging on store shelves.
So finally, I said, there has to be a better way. And that's what -- where Cleancult came.
So we are the only company in the world that can actually put soap in a milk carton and we use natural ingredients you can actually understand and
pronounce, formulas that are hyper-effective and a system that cuts out over 95 percent of plastic waste.
CHATTERLEY: Okay, so there is so much in there that I want to deep dive in to, but how difficult just first of all, is it to put cleaning products in
the equivalent of a milk carton? I have an image of dishwasher with the wrong powder in there, and the thing foaming out.
LUPBERGER: Yes, yes, so it sounds easy. It's really not.
CHATTERLEY: Yes.
LUPBERGER: We started and we could go to any water, milk, right, orange juice manufacturer in the world, and you can't, because once you run a non-
food product on a food machine, that machine cannot be used again in food, right? It's totally cross-contaminated. So we literally had to build our
own machines from scratch.
So, we jokingly, at our team call it the dark years, but 2016, 2017, and 2018, we leaked almost two million pounds of soap on our floor because we
couldn't get it right, so our piston filled foam, the soap, our cartons exploded, the side seals leaked. And then when you think of it being on a
shelf for a year, too, right, CVS, for example, you have to just get it really perfect.
So it took us quite a while to get it.
CHATTERLEY: The dog years, but the floors were incredibly clean. That's the consolation. Okay, so when we're talking about sort of clean products,
and we're talking about the cleaning products, I think the first thing -- and we can talk about cost afterwards -- but does it smell clean? Does it
do the job right? Because I think everybody would like to be more environmentally friendly, but at the same time, it's got to smell clean,
it's got to feel clean.
Have you achieved that?
LUPBERGER: Yes, so when we started this, we actually originally wanted to start with the formulations, right? So truly clean formulations. Then we
went to packaging, right? And then we actually went to use for the consumer.
Because our whole thesis is we can't ask people to change behavior, right? (AUDIO GAP) introduce a way that you could clean with hand soap, dish soap,
all purpose cleaner, laundry detergent, and not sacrifice anything, right?
So instead of a plastic bottle, you just refill it in our forever glass bottles that are really beautiful. Formulas are equally as effective as the
leading conventionals, and they are at price parity, right? So we've really tried to create a way -- we call it the everyday environmentalist, right?
How do we change behavior, but without actually changing ourselves is really our goal here.
CHATTERLEY: The key in there for me was price parity, because I think we all again, care about sustainability, whether it's the products that we're
using, whether it's how they're shipped, and the sustainability of that, which I know you tackle as well. But perhaps sustainability becomes a
luxury if it costs more.
Are you saying that all of the things that you're doing does not make it more expensive than just something where you look at the back of the
product, and you can't tell what's in it?
LUPBERGER: So, I think when we started absolutely, it was incredibly expensive, right? It's really challenging to move to a zero waste model,
right, and I think a lot of retailers are starting to see that consumers are starting to see it. But we're getting really close.
So what is so great about our model is instead of storing an empty plastic bottle, right, so imagine a bottle of laundry detergent, we actually can
store 26 times the amount of cartons, right, because they store flat. So it ends up actually saving us a lot of costs in the warehouse and the
manufacturing floor.
So with those costs passed through, even with (AUDIO GAP) ingredient cost, we get close to parity. So really our goal is to be at parity with the
market next to Mrs. Meyers' method of seven generations and offer a better packaging solution in the very same positioning.
[09:50:04]
CHATTERLEY: And a great deal of sustainability along with it. Okay, talk to me about where you're available because I know you can buy these
products on Amazon, you obviously have your own website. You also mentioned a couple of retail stores already. How does that break down? Where is the
bulk of your selling at this moment, at least taking place?
LUPBERGER: Yes, we started online like I think most direct consumer businesses do, right, and really worked on the product and understood how
to get it out in the market.
Retail really is our bread and butter. So, we have a massive movement going on right now with retailers going zero waste, right, with really aggressive
commitments, and it's inspiring, it's exciting. There is -- just the amount of movement that's happening in the cleaning space right now is really,
really unprecedented. So, that's really where we'll live.
So we are in about 3,500 retail stores today, including CVS, Bed Bath, and Beyond, Meijer. We've actually moved into Canada, and we're in three major
Canadian retailers. And you can see us essentially nationwide. So our goal is to help really mass market go green and go zero waste, again in a way
that just works really well on store shelves.
So by the end of this year, we're going to be in about 5,500 doors, and next year, almost 10,000. So we're really trying to help people make this
change without (AUDIO GAP).
CHATTERLEY: Yes, the focus of some of these retailers as well, and to your point about having greater degrees of sustainability in the products that
they have on their shelves is going to be, I think, a challenge, and you can talk about that.
But I guess at the start of your business, actually direct to consumer and online was vital for your business. And that, in light of the conversations
we've been having on this show in the last few days in particular brings probably social media advertising for small and medium-sized businesses to
mind.
Is that what you were doing? And I guess, let's be clear, Facebook -- how important has Facebook been for advertising for your business?
LUPBERGER: Yes, Facebook is everything. It was a drug. It is the only thing, right? So I think a lot of early brands talk about marketing, a
whole list. You have to get the brand right, the design right. Obviously, the value prop right, but really, the whole function of distribution is
through Facebook, right?
So 90 percent of our 2019 sales were driven by Facebook, 80 percent of our 2020 sales were driven by Facebook, and our model works better for retail,
right? And that's really where we live.
But at the same time, we're moving and transitioning because it's getting really expensive, right? We're seeing all these challenges. And if our
costs in the platform go up over 50 percent, that's our economics, right? That's our model.
So it was a real challenge seeing all the shifting landscape online. I think a lot of brands right now are struggling to figure out where they
fit, and really how they can grow in the market.
CHATTERLEY: Yes, this is fascinating. It's a completely separate conversation. But the idea that it is big advertisers that make Facebook so
potent is really not true. As you said, basically, your business wouldn't exist based on the proportion of sales that you were generating in previous
years from advertising on Facebook. That's a fascinating point.
Let's talk about profitability, because I did actually come across you not via seeing you on Facebook or in a supermarket, but actually talking to one
of your investors that said, you know, people do care. Investors do care about a path to profitability.
Are you profitable today? And if not, tell me about the path to profitability because this is important, too. At some point, you want to
make money.
LUPBERGER: Yes, yes, I agree. That's my goal, in addition to really helping the stores. I think for us, it really just comes down to two parts,
right? We had five years of really intense research and development, right? So we had to build our own machines, we had to build our own packaging. We
have over 14 patents pending in the market, right? And really trying to be first in a system that really reduces waste, right?
So for the first three years, profitability was not a focus, right? But I think that's really starting to shift. And as we've seen, less and less
venture dollars, frankly, get put to consumer brands, because the exit landscape for consumer isn't $20 million mostly, right, usually it's much
more in the $300 million, $500 million, to $800 million range.
So because of that, we have to be profitable, right? So that's the other reason moving into retail. Retail is a (AUDIO GAP) for us, shipping
pallets, we are shipping in large quantities. You're working with customers that are really used to scale where direct consumer is expensive, right?
Online, you have to ship heavy liquid products. You have to talk to every individual customer.
But for us it's really both, right, so we're going to balance our direct to consumer growth so we can really get personalized feedback, and then retail
for scale and really balancing that. So for us, we think we're going to be profitable at the end of basically 2024, but continuing that focus on
making our products the best we can be and really not sacrificing there.
CHATTERLEY: We shall see. Come back and speak to us soon and I do like the colors behind you. It is very soothing. The packaging definitely works for
me. Pretty.
LUPBERGER: Yes, I've enjoyed meeting you. Thanks again.
CHATTERLEY: Thank you. Ryan Lupberger there, the CEO of Cleancult, and I apologize for our viewers for the slight interference there. We did manage
the conversation, nonetheless.
You're watching FIRST MOVE. More to come.
(COMMERCIAL BREAK)
[09:52:13]
CHATTERLEY: Welcome back to FIRST MOVE. Expo 2020 in Dubai is highlighting the progress of humankind through its Mobility Pavilion. The project looks
at how exploration has driven social development and scientific advances across the ages.
CNN's Eleni Giokos explains.
(BEGIN VIDEOTAPE)
ELENI GIOKOS, CNN BUSINESS AFRICA CORRESPONDENT (voice over): With big aspirations by wanting to create an unrivaled visitor experience, in 2017,
the Expo 2020 team traveled 14,000 kilometers to New Zealand.
RICHARD TAYLOR, COFOUNDER AND CEO, WETA WORKSHOP: The scale of the Mobility Pavilion for us was fairly significant, really not since the seven
and a half year journey on the "Lord of the Rings" where we looked after five different departments and we tackled something of such similar scale,
but in half the length of time.
GIOKOS (voice over): For months, Richard Taylor and his team set about designing a monumental tribute to the epic journey of human mobility.
TAYLOR: We created three eight times larger than life size giants. If they were to stand up they'd be nearly 16 meters tall. The three characters are
Al-Bakri, who is a great geographer and historian. We also did Battuta, who is the great scholar and explorer, and we did Ibn Majid, who is a navigator
and cartographer.
GIOKOS (voice over): Creating these hyper-realistic replicas was no easy task.
TAYLOR: Just in their clothing alone, there's one and a half kilometers of fabric in each piece of clothing. Dressing them with forklifts and cranes
20,000 individual holes drilled into the face to insert the beard. The eyes are 3D printed.
GIOKOS (voice over): Not to be done with just creating giants, the team set out to showcase the history of mobility down through the centuries
through a type of art called bas-relief.
TAYLOR: Our bas-relief is 53 meters long. It's got over 200 human figures, a hundred animals, over a hundred vehicles that tells the story of mobility
from people emerging out of the beginnings of the world, and then finding mobility by forming tribes, inventing footwear and then of course on to the
mobility of vehicles and ships and airplanes.
[09:55:01]
GIOKOS (voice over): Now, their final home at Expo 2020, the displays are set to wow visitors by paying tribute to how mobility has been the driving
force behind mankind's development.
Eleni Giokos, CNN, Expo 2020, Dubai.
(END VIDEOTAPE)
CHATTERLEY: And finally, on FIRST MOVE, Andrew Lloyd Webber, the man who created the legendary musical, "Cats" has bought a dog. Why? Because the
movie version of "Cats" was so bad, and whilst I can't disagree. In an interview with "Variety" Magazine, he said it was, quote, "off the scale,
all wrong." He said the movie left him emotionally damaged, quote, "So his pet pooch is officially classed as a therapy animal." No doctor's note
required. Meow.
That's it for the show. If you have missed any of our interviews today, they will be on my Twitter and Instagram pages. You can search
@jchatterleyCNN.
And in the meantime, stay safe. "Connect the World" with Becky Anderson is next.
We will see you tomorrow.
(COMMERCIAL BREAK)
[10:00:00]
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