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First Move with Julia Chatterley
Ukrainian President Zelenskyy Proposes 10-Point Peace Plan; Berkshire Hathaway Buys $4B Stake in Taiwan Chipmaker TSMC; Krugman: Inflation Lags the State of the Economy; Celebrities get Caught up in FTX Collapse; How Animal Agriculture Impacts the Climate Crisis; Elon Musk's Tesla Pay Package Subject of Lawsuit. Aired 9-10a ET
Aired November 15, 2022 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:00]
(COMMERCIAL BREAK)
JULIA CHATTERLEY, CNN HOST: A warm welcome to "First Move", a busy show, as always this Tuesday, including the crypto world proving FTX is fiery feet.
Elon Musk says he has too much work on his plate. His huge Tesla pay check has a plenty of irate. Walmart's results still looking great, but will
holiday sales be a little sedate.
And fresh look at inflation at the factory gate and let's begin there just released numbers show inflation at the wholesale level, aka factory gate
prices rising some 8 percent year over year last month that is a substantial easing from September levels and month over month CPI raising
half as much as expected too.
Today's numbers of course coming after last week's encouraging read on consumer prices too. We'll dive into the data with Nobel Prize winning
economist Paul Krugman, later on in the program. The big question remains have we seen peak inflation? And of course, how quickly will it come down?
Here's the post PPI price action U.S. futures ready to rally. Tech futures are up some 3 percent or near so you can see that in the middle of your
screen Europe mostly higher too, as Germany enters a new bull market for stocks. New data shows Investors they're feeling better about the inflation
picture too.
That said, of course inflationary concerns certain to factor into the holiday shopping outlook. Walmart today posting very strong third quarter
sales numbers they're also raising their guidance. It's a strong contrast of course to Amazon, which is reportedly set to layoff some 10,000 workers
after warning of weaker holiday sales.
In the meantime, though nothing but green arrows in Asia today a fresh push higher. After conciliatory words from the U.S. and China at their Monday
meeting in Bali and we discussed that yesterday strong online shopping data from today, China also helping too.
Alibaba and Tencent soaring in fact more than 10 percent the HANG SENG where those two stocks are listed is now up more than 12 percent over the
past three sessions. You can see that some pretty beaten up levels but wow, what a turnaround.
And another Big Tech winner, Taiwan chip Colossus TSMC Warren Buffett's Berkshire Hathaway revealing a multibillion dollar investment, chipmakers
already on a roll in recent weeks. But this move has also huge geopolitical implications, too. We'll discuss that later on in the show.
But first, we've just learned that, there have been two explosions in Kyiv. Air raid sirens astounding across Ukraine and people are being asked to
shelter in place. Government officials say air defenses have been activated.
And Sam Kiley joins us now. Sam, I know this is literally just happening as we're speaking. What more can you tell us?
SAM KILEY, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, there are at least three locations across the country that has reported missile threats or
incoming missiles. We have at least two strikes in the Capitol Kyiv, Julia with the Mayor Klitschko saying that, as far as his initial reports are
medical services that are on the way too. Two residential buildings that have been hit, and a number of other incoming missiles or drones or
possibly, indeed, cruise missiles and launch cruise missiles seems to be the most of the evidence leading to that.
Those strikes there that we've also got reports from Poltava that South of Kharkiv in the center of this country, where there have been reports of
more strikes. And the Mayor of the Mykolaiv in the south of the country, Vitaliy Kim is saying that he is warning his citizens against the third
wave. Now Mykolaiv, of course, is very close, relatively close to Kherson recently liberated regional capital that the Russians evacuated just a few
days ago.
Now there had been a reduction in the amount of air strikes and missile strikes carried out over the period perhaps of the Russian evacuation. But
there's definitely been in last 60 minutes Julia, significant uptake. This is not entirely unexpected, particularly in the case of the G 20 or the G
19 as President Zelenskyy of Ukraine would rather call it following the speeches made by Sergey Lavrov, the Russian Foreign Minister, and of
course, the Ukrainian President himself, Julia.
CHATTERLEY: Sam, great to have you with us. Thank you so much for that updates there and any further developments we'll bring them too. For now,
Ukrainian official posted to social media that the attack is Russia's response to President Volodymyr Zelenskyy speech at the G 20 Summit in
Bali.
[09:05:00]
CHATTERLEY: President Zelenskyy proposed a 10-point peace plan in his speech delivered via video link and he linked the liberation of Kherson to
World War Two Normandy landings, just listen to this.
(BEGIN VIDEO CLIP)
VOLODYMYR ZELENSKYY, PRESIDENT OF UKRAINE: It is like, for example, D-Day, the landing of the allies in Normandy, it was not yet a final point in the
fight against evil, but it already determined the entire further course of events. If the victory will be ours in any case, and we are sure of it,
then shouldn't we try to implement our formula for peace to save thousands of lives and protect the world from further destabilization?
(END VIDEO CLIP)
CHATTERLEY: Ivan Watson joins us now. Ivan, Zelenskyy there stealing the show once again, I think this time at the G20. What was the response to
what he said both pleading for the grain deal that's set to end this week to continue but also his plan for peace?
IVAN WATSON, CNN INTERNATIONAL CORRESPONDENT: Right, well, the Russians don't like his proposed plan for peace partially because it's pretty. It
basically demands that the Russians withdraw completely from Ukraine, calls for the establishment of a special tribunal to investigate allegations of
Russian war crimes calls for Russia to stop making nuclear threats. It basically says, you know, Russia is a bad actor here and allows Ukraine to
restore its independence and sovereignty and territorial integrity.
And this was Volodymyr Zelenskyy taking the center stage at this international gathering here virtually, with a roughly 20-minute speech
from what we're hearing, repeatedly calling the gathering the G19 instead of G20, which is an obvious snub at Russia because Vladimir Putin, though
he was personally invited by the Indonesian President was a no show here. Here's a little bit more of a taste of what Zelenskyy had to say to the
assembly.
(BEGIN VIDEO CLIP)
ZELENSKYY: We will not allow Russia to wait it out, build up its forces and then start a new series of terror and global destabilization. I am
convinced now is the time when the Russian destructive war must and can be stopped.
(END VIDEO CLIP)
WATSON: Now Vladimir Putin standing here was the Russian Foreign Minister Sergey Lavrov. And he spoke to some Russian journalists at his hotel before
I believe the Russian delegation left. We saw a plane leaving the airport just within the last hour before the end of the G 20 Summit.
And he basically accused the west of being responsible for what he described as a hybrid war in Ukraine. He said that Zelenskyy's speech was
militaristic, aggressive and Russophobic. The Kremlin spokesman Dmitry Peskov has since said that he saw the Kremlin has seen Zelenskyy's peace
proposal and says that it's proof that Ukraine has no interest in negotiating right now.
Now, President Biden came here having secured and he's leading basically an international coalition that's seeking to isolate and punish Russia for its
deadly invasion of Ukraine and got additional statements of condemnation from countries like South Korea and Japan at a trilateral meeting in
Cambodia right before coming to Bali. But Senior U.S. Administration Officials have conceded they're unlikely to get all of the G 20 members to
condemn Russia at this gathering, in part because, hey, Russia is one member of the G 20. Another member is China, which is a close ally of
Russia, as well Julia.
CHATTERLEY: President Zelenskyy kept referring to the G 19, didn't he? Have to emphasize that point about excluding the Russians, any hopes of peace,
clearly if there were any. Indeed, they're severely dented after what we've seen in the last 12 hours or so. Ivan Watson, thank you so much for that.
And Chinese President Xi Jinping continues his G 20 diplomacy action meeting with the leaders of France, South Korea and Australia. He said a
good relationship with Canberra is in the fundamental interest of both countries. It's his first meeting with an Australian Prime Minister in six
years in fact.
Selina Wang joins us now all of those countries. I think they have strategic interests in outcomes in what North Korea is doing with Taiwan,
of course with trade. Australia is an interesting one, though them in the last meeting between the two leaders. Last Prime Minister, I believe was
Malcolm Turnbull back in 2016. China's put on a thawing effort, I think, a relationship boring effort. It does seem to be working?
SELINA WANG, CNN CORRESPONDENT: Yes, Julia, I think that is the way to put it that what we're seeing here is just the beginning of the thawing of
relationships between all of these countries and China specifically, when it comes to Australia, so much damage had already been done in recent years
that this is just the start of trying to simmer those tensions.
[09:10:00]
WANG: What we're seeing with all of these meetings with U.S. allies is that all of these relationships have significantly deteriorated in recent years.
Like the U.S. those countries have hardened their positions on China they increasingly see China as a competitor with security concerns. And as you
say, the most closely watched meeting on Tuesday was Xi's meeting with Australian Prime Minister Anthony Albanese.
This is a critical relationship for Australia. China is Australia's largest trading partner in this meeting was a big deal because of what it means for
the future of Australia. The two countries they've been locked in a trade dispute and diplomatic free since early 2020. That is when China slapped
tariffs on Australia after it called for an investigation into the origins of COVID-19.
Australia's also increasingly alarmed by China's growing influence in the Pacific Islands. Meanwhile, China is anchored by Australia's Military
alliance with the U.S. and the U.K. So at this meeting, Xi told Albanese that good relations between the countries are the fundamental interests of
both our people and take a listen here to what Albanese said.
(BEGIN VIDEO CLIP)
ANTHONY ALBANESE, PRIME MINISTER OF AUSTRALIA: Today, I think both countries took an important step to moving forward. There are many steps of
course that we are yet to take and what I have said consistently, since before I became Prime Minister will cooperate where we can disagree where
we must act in the national interest.
(END VIDEO CLIP)
WANG: Albanese said he brought up trade issues, human rights and the detention of Australian citizens in China that includes journalists Cheng
Lei and writer Yang Hengjun. And Xi also had a string of other meetings with U.S. allies and his meeting with French President Emmanuel Macron. Xi
advocated for a ceasefire peace talks and a stop to the war in Ukraine.
Now the readout from the French side was slightly different. The French side said both reaffirm their position on preventing the use of nuclear
weapons. There was also a meeting with South Korea in which South Korea's President asked Xi for a more active and constructive role on North Korea.
But similar to the Biden- Xi meeting yesterday, the outcome of these in person talks is not a full set of relations with breakthroughs. We're
talking about deep, fundamental disagreements between these countries. But this is really about keeping those lines of communication open and stopping
the relationships from getting even worse.
CHATTERLEY: Selina Wang, thank you so much for that. And meanwhile, back in China, Zero COVID policy anger boiling over in China's Guangzhou region in
defiance of local orders, residents broke through barriers meant to confine them to their homes. Nearly 18,000 cases were reported yesterday across the
nation. That's the highest impact since last April as Kristie Lu Stout reports.
(BEGIN VIDEOTAPE)
KRISTIE LU STOUT, CNN CORRESPONDENT (voice over): Angry residents are taking to the streets and the lockdown hide you district of Guangzhou.
Images circulated widely on Chinese social media show residents under lockdown in Guangzhou defying local orders. Some are seen breaking through
roadway barriers that were meant to confine them at home.
And in one video, a woman's voices heard in the background saying "They are revolted". Now CNN has been able to geo locate these images to the hydro
district of Guangzhou, but we cannot independently confirm them. On Tuesday, local officials confirmed that large parts of the district are
still under lockdown with the area's Deputy Head Su Ming-Qing saying this "We have also realized many of our shortcomings".
Guangzhou is a major economic hub that's home to 90 million people as become the epicenter of a nationwide COVID 19 outbreak. On Monday,
Guangzhou reported record COVID 19 infections along with other major cities including Beijing. And even though the case numbers are very low compared
to global standards, China has been holding tight to its zero COVID policy a policy of mass testing lockdowns and border controls, which has disrupted
both lives and livelihoods of the protests in Guangzhou come weeks after video emerged of a rare protest in the Tibetan capital of Lhasa over
China's tough pandemic rules.
And that brazen protest in Beijing that directly attacked China's zero COVID policy. One banner read in part "No to lockdown, yes to freedom". And
despite the rising public discontent, China is sticking with zero COVID.
To Beijing, the policy is necessary to save lives and to protect China's medical systems. But as we're seeing once again, played in Guangzhou many
simply have had enough as anger and desperation continue to rise in zero COVID China. Kristie Lu Stout CNN, Hong Kong.
(END VIDEOTAPE)
CHATTERLEY: And in the midst of tensions between China and Taiwan, Berkshire Hathaway is buying a $4 billion stake in the Taiwanese Tech Giant
TSMC, which accounts for around 90 percent of the world's super advanced computer chips. Paul La Monica joins us now. Paul LA, I think the strategic
interest and is clear from that introduction.
[09:15:00]
PAUL R. LA MONICA, CNN REPORTER: Yes, without question, it is very interesting to see Berkshire Hathaway, Warren Buffett not necessarily known
in the past as being a fan of tech stocks. You know, he's a guy that has really liked things like banks, insurers, railroad companies and stodgier
old economy firms. But he's evolving obviously, as an investor; Apple is now the biggest holding for Berkshire Hathaway.
And I think that he probably recognizes that there could be some opportunities within the semiconductor sector, a lot of people wondering if
maybe this is an area that has finally bottomed after companies like Intel and Nvidia have been just really pummeled this year. So pretty interesting
also, Julia remember that Charlie Munger, he is Vice Chairman, who runs his own company, daily journal, he's been a big fan of Alibaba, and, you know,
the Chinese economy for a pretty long time as well. So you got to wonder how much of Munger's footprints are potentially on this purchase by
Berkshire Hathaway of Taiwan's semi?
CHATTERLEY: Yes, it's a really interesting point. It's also caught up in all the geopolitics that we've been discussing, as well. And this concern
from the rest of the world, not only for Taiwan, and then the risks surrounding, perhaps, sort of suspected or concerns over some form of
altercation between the two.
But also the impact on the rest of the world, if indeed, that does take place. And the Reliance everywhere else in the world and chips,
particularly given what we saw during the pandemic and, and the impact on supply chains. I think everyone will agree it's a big sigh of relief when
they heard President Biden yesterday saying, as far as they're concerned, no imminent threat of an altercation between China and Taiwan.
MONICA: Yes, and you'd have to think, you know, Warren Buffett is someone who obviously is more of a classic value investor guy. He will talk about
geopolitical situations, but I don't think he wants to weed into the political muck of this. He obviously must feel that Taiwan semi is in a
somewhat secure place that it is in a sound investment.
But bottom line, he's looking at revenue, he's looking at earnings, he's looking at valuation, he's probably not sweating, the Biden-Xi situation
all that much, especially since if Buffett's lucky enough to he'll be around for a little bit longer. Maybe Xi isn't going anywhere anytime soon,
but who knows who the next President is going to be in 2024? That's obviously a lot of the question marks surrounding that, of course.
CHATTERLEY: Yes, even though the rest of the show gone. Paul R LA Monica thank you so much for that. OK, straight ahead. It's the Fed versus
inflation, round three, or maybe even more, economist Paul Krugman joins us to discuss all things pricing, and of course, the Federal Reserve, stay
with us.
(COMMERCIAL BREAK)
[09:20:00]
CHATTERLEY: Welcome back to "First Move", the Federal Reserve could be turning the tide against inflation. As I mentioned earlier in the show new
data released this morning shows U.S. wholesale prices rose by 8 percent year over year last month. That is, in fact a slower pace than the 8.5
percent we saw back in September.
Now our next guest says the Central Bank of may have done enough already to tackle rising prices, though Investors did overreact to last week's
inflation report. And Paul Krugman joins us now he's Nobel laureate, economist, columnist for the New York Times and a Professor of Economics at
City University of New York. Paul, fantastic to have you on the show as always!
One data point does not a trend make, especially in this crazy world and economic cycle. But just talk us through your thinking and why you believe
Investors certainly overreacted to last week's print with such great enthusiasm?
PAUL KRUGMAN, OP-ED COLUMNIST, NEW YORK TIMES: Yes, I mean, it's clear, I mean, monthly data are really noisy. And you really shouldn't be reached
conclusions based on one month. That's been the lesson all the way along.
But the thing about inflation, I think the issue here is that if you look under the hood, if you look below the headline numbers below the standard
calculations. But we know that there are issues, there's a lot of evidence that inflation is coming down, and wage growth has been decelerating. A lot
of the growth we've been seeing in the CPI is shelter inflation, which we know lags far behind actual market rents, which have drastically
decelerated.
The trouble I think for markets was it was hard to believe that even though people know about all of that. It's really hard to place your faith in
underlying sources when the headlines keep on coming out bad. And so these now two inflation reports that are favorable, are, you know, are a good
basically give people the excuse they needed to look at the underlying data.
CHATTERLEY: The critical thing in there, I think, tied to inflation expectations and the trouble of letting go our perceptions and our beliefs
on something. The other key word was the lag. And that's always my concern with the inputs into this calculation for inflation.
It lags where the reality of the economy is today. And just explain that, because you've also been quoted and widely quoted as saying you think the
Federal Reserve has probably done enough tightening at this stage? And I think we know they're going to continue to tighten.
KRUGMAN: Yes, I mean, there are lags on all levels. There's inflation lags the state of the economy, and actually the way we measure inflation, not
out of any kind of malice or bad calculation. But you know, the, the measures we use, particularly the consumer price index is to measure the
cost of living.
But we're using it as a gauge of the state of the economy and because shelter prices play such a large role, when they those basically feed off
of market rents. Well, most people who rent have leases that are a year or more. And so you don't actually see what's happening in the market for a
long time.
So there's a big lag in published inflation numbers behind what's actually happening in the market, then there are long effects of monetary policy
that Milton Friedman said monetary policy works with long and variable lags. When the Fed raises rates, that has to work its way through it
operates largely through housing. So you have to have a decline in housing starts, which then translate some months later into a decline in real
residential investment.
And that, in turn, has multiplier effects on consumer spending, all of that takes quite a while. The channel that runs through the value of the dollar
takes even longer. So, you know, what is the Fed is doing now is really going to have its impact on the economy, you were into 2023. So there's a
pretty good case. And I will say that the consumer spending is surprisingly strong, the economy is surprisingly strong.
But I still think there's between the fact that we know there's a fair bit of inflation reduction in the pipeline already and the fact that we know
that a lot of the effects of monetary tightening have yet to be felt. There's a pretty good case for saying that the Fed has already done enough.
CHATTERLEY: We can't rely on a world of perfect information, but we can hope for a world of perfect knowledge and understanding of how all this
works as you just you just explained.
[09:25:00]
CHATTERLEY: How long do you think? Or how many more inflation prints like that as we see it coming down? Or indeed what level of inflation do you
think makes the Federal Reserve in its totality say, OK, we've probably done enough here. - given what's still coming?
KRUGMAN: If we had two more good inflation prints, I think that would be decisive, that would cause the Fed to call a halt. Because the odd thing is
that we've kind of also we all know that year on year rate, inflation rates are just lagging too far behind reality. But we also know that monthly data
are noisy, and almost everybody in this business now that I know, is relying a lot on three month rates of change.
And relying on you know, what's happened over the past three months as a kind of compromise that filters out some of the noise, but it's still
fairly close to current events. If we end up with a 3-month inflation rate that is way down and that would be two more good prints, then I think the
Fed would say, OK, let's, let's freeze this thing.
So it'll be a little while before they're willing to do that. But you know, they're making the same, they're operating in much the same framework as
all of us on the outside looking at them. And I think they may be inclined to be tougher, because they feel they need to make up for having under cold
inflation before, but ultimately, it's the same, it's the same logic. And if we get a couple more favorable inflation prints, I think that's it for
tightening.
CHATTERLEY: OK, all of this tied too, I know, one of your favorite subjects, which is crypto, and what we're seeing in the crypto space. And
perhaps more likely now I can already see your face, more responsible monetary policy, perhaps causing problems including tightening for
whatever's going on in this space and the fact that whether you've borrowed money or not.
The cost of capital is rising as a result of what the Federal Reserve is doing? What do you make of what's going on currently in the crypto space
with the collapse of FTX, the concerns over fraud and more generally?
KRUGMAN: Well, I mean, what's been happening in crypto all along is that in addition to the fact that the underlying assets have no fundamental value,
that's been the issue all along. On top of that, crypto is recapitulating, the history of banking, of conventional banking, and sort of at internet
speeds. They just, they reinvented the free banking era with all of the bank runs and collapses that was characteristic of the 19th century.
In the 19th century, there used to be something called Wildcatting, which was people, would open banks that were out in the wilderness where there's
nothing but Wildcats and would issue notes that people would accept, if you actually tried to redeem those notes that you couldn't find the bank. Well,
that's essentially what happened with FTX.
I mean, it's so they're basically managing to rediscover the wheel. They're finding out why we have bank regulation, why we have deposit insurance, why
we have the whole structure, we have all of it starting with the belief that regulation is evil. And we need to free ourselves from Central Banks
and the government and the end they're discovering actually why the world is the way it is.
CHATTERLEY: So you think very quickly on this, that actually, it becomes whether we agree or disagree on the underlying technology and the
fundamentals of that. This does accelerate regulation in the same way perhaps after the financial crisis, the great financial crisis, actually,
that we saw an acceleration of a regulation in the financial sector too, the traditional financial sector.
KRUGMAN: Yes, at the very least, we're finding out that straight up fraud is a really, really big issue here. And at the very least, then we want to
protect ordinary consumers and Investors from outright fraud. So I think a lot more regulation is coming now whether, you know, if the thoughts
enterprise makes no sense, it may not end up being highly regulated, may end up just disappearing but at least for the time being. Yes, I mean,
there should have been a lot more safeguards against what appears to be going on.
CHATTERLEY: This is going to drive the crypto community wild pull probability that it all goes to zero, but it all disappears. You raised it
there.
KRUGMAN: I mean, where is it? Yes, I mean, what's it the question has always been what problem does crypto solve? And we still haven't gotten an
answer to that. And we've discovered a lot of problems that creates but none that it solves.
CHATTERLEY: --Great to chat to you as always, thank you so much for your time.
KRUGMAN: Thank you, take care.
CHATTERLEY: Thank you, you too. OK, still to come here on "First Move", the Miami Heat feeling the burn in the week of FTX is free fall. All the
details after the break, thank you.
(COMMERCIAL BREAK)
[09:30:00]
CHATTERLEY: Welcome back to "First Move" with a turnaround Tuesday on Wall Street U.S. stocks rallying after that downward inflationary surprise that
we've been discussing throughout the hour here so far on "First Move", prices at the factory gate easing by a greater than expected amount last
month encouraging sales news from Wal-Mart also helping sentiment to the largest U.S. retailer reporting strong third quarter sales.
Grocery sales, in fact the strongest we've seen, Wal-Mart launching a $20 billion stock buyback and raising guidance to, all this admits a backdrop
of improving stock markets worldwide. The German DAX entering bull market territory again, investor confidence is on the rise there on inflationary
hopes or at least that we've seen the worst there too and Hong Kong's HANG SENG up almost 17 percent over the past two weeks.
Wow, what a recovery over there too. Now one of the crypto currencies that biggest players FTX is in crisis. We've been discussing this now for a
number of days, the $32 billion company plunged into bankruptcy in less than a week.
Its Former CEO Sam Bankman-Fried told The New York Times "You would have thought that I'd be getting no sleep right now. And instead, I'm getting
some it could be worse".
Big names from Tom Brady to Steph Curry went all in on FTX and now they're dealing with the fallout of its sudden collapse. Christine Romans has more.
(BEGIN VIDEOTAPE)
CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT (voice over): The implosion of the Crypto currency exchange FTX, one of the most powerful
figures in the industry has left investors grappling with the aftershocks.
SAM BANKMAN-FRIED, FOUNDER AND FORMER CEO, FTX: How much of this is effectively an empty product?
ROMANS (voice over): FTX's CEO Sam Bankman-Fried is facing multiple investigations after reports that he mishandled billions of dollars in
customer funds, causing the 30 year old to see his own $16 billion fortune erased overnight. Now the stunning collapse is reverberating across the
trillion dollar industry.
Gwyneth Paltrow, Reese Witherspoon, Kim Kardashian and Matt Damon are among the celebrities who have endorsed the crypto craze.
UNIDENTIFIED MALE: But four simple words that have been whispered by the intrepid since the time of the Romans. Fortune favors the brave.
ROMANS (voice over): So does fortune favors the brave for those that invested $1,000 in Bitcoin when actor Matt Damon started touting it just
over a year ago. That investment is now worth around $300 dropping almost 70 percent.
[09:35:00]
ROMANS (voice over): Bloomberg reporting that billionaire Mark Cuban's investment in the Titan token tumbled 99 percent this August. Tampa Bay
Buccaneers quarterback Tom Brady bought an equity stake in the now failed FTX.
Along with Brady, Tennis Grand Slam champion Naomi Osaka, basketball star Steph Curry and Baseball Hall of Famer David Ortiz among top athletes who
will reportedly lose millions with the collapse of FTX.
UNIDENTIFIED MALE: Whoa, whoa, whoa, slow down, you're getting into crypto, the FTX.
ROMANS (voice over): But no franchise took a bigger hit than the Miami Heat basketball team who terminated their 19 year $135 million naming rights
deal with FTX leaving them scrambling for a new sponsorship partner one month into the season.
(END VIDEOTAPE)
CHATTERLEY: And CNN Chief Business Correspondent Christine Romans joins us now. Christine, I think this emphasizes how well regarded SPF was that he
was talking to regulators he was helping shape the future of regulation. I think a lot of people here very shocked.
ROMANS: Very shocked. And you know the really sad thing about this is that there was such an era of legitimacy about this business. And with all of
these celebrities lending their own reputations, I think a lot of individual Investors didn't know how much risk they were taking here. And
it like any get rich, quick scheme it is the regular Investors who the last ones are in and the first ones burned. And I think that's what happened
here.
CHATTERLEY: Yes, there are huge questions about the use of client money. But certainly in the beginning, that was said to be segregated. The company
was very clear about that in the beginning; it's sort of what happened when interest rates start rising, they've lent money out to other people.
The cost of that increases, they demand their money back and you suddenly get, as we've discussed in the past with this, what we're calling around
the bank, clearly it's not a bank, let's just be clear about that.
ROMANS: Without those protections, without those protections of a bank. And I think that that's what really surprises people. I mean, when there's a
run on the bank, your deposits are guaranteed by the government. This is a complete unregulated Wild West, you know, this is money that some people
couldn't, didn't know, it could go to zero. And for some people, this went to zero.
CHATTERLEY: Yes, and this is the key. I think there are two things here. And I think you were listening in to the conversation I was just having
with Paul Krugman, whether or not this accelerates the kind of regulation and the speed upon which that we saw after the financial crisis that really
tried to lock down on the financial sector and address some of the critical concerns.
But the other thing I think, again, the separation of underlying technology, the use of block chain that's already in use all over the
world, crypto, what's known as decentralized finance and centralized finance. There was a boss here that was making decisions. And I think
that's key too.
ROMANS: Yes. And I think that Paul Krugman interview was so good Julia. And I think he said something I found very interesting. He said you will see
regulators coming in here as they should, as is their job to protect Investors to protect the public. But then he said if it's something that
doesn't make any sense, you can't regulate something that doesn't make sense, then it just goes away. It goes out of business. And I found that to
be a really interesting, two choices here.
You either have something that makes sense that's regulated properly by governments, or it goes away. And I think I don't know what percentage
chance there is of that ladder. But that I think is a fascinating opinion on that.
CHATTERLEY: Yes, I tried to push them on that, didn't I?
ROMANS: Yes.
CHATTERLEY: Yes, difficult, because there's only so many times you can burn people. But you know, I guess the only other example I would say, you know,
Enron, Tyco. Parmalat we've had businesses within sectors collapse, fraud, all sorts of issues without it taking down the whole sector but this is
nascent technology and yes, time will tell. Christine, thank you.
ROMANS: Nice to see you Julia.
CHATTERLEY: Christine Romans. OK after the break sustainable meet alternatives where the talk of the town not long ago. Now Eat Just expand
me on the menu. Eat Just is fairly on the menu at the COP27 Climate Summit and their CEO is up next.
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[09:40:00]
CHATTERLEY: Welcome back to "First Move". While leaders meet in Bali for the G20 back in Egypt, delegates at COP27 continue to discuss ways to
address the climate crisis, including how we grow and produce food. And to be specific raising livestock for human consumption generates nearly 15
percent of all greenhouse gas emissions, that's more than transportation yet, look how much we talk about that.
It impacts biodiversity; it's a leading cause of deforestation. And yet as I mentioned, it's rarely discussed. Well, our next guest is determined to
turn the planet away from this type of farming and focus on this instead grown in a lab.
He describes it as sustainable, safe and importantly doesn't compromise on texture or taste. The company behind it insists this is still real meat,
meat without killing animals or tearing down forests. Enjoyed by diners attending COP27 meat substitutes, though, have struggled to go more
mainstream in the real world, including how to make the entire business itself profitable.
And that's how we find Josh Tetrick. He's the CEO of Eat Just. Josh, fantastic to have you on the show! Now I leadingly there said people were
enjoying it at COP27. What was the feedback from people that got to taste it and try it?
JOSH TETRICK, CEO, EAT JUST: The feedback was, I'm glad we're talking about meat in not just fossil fuels, because to deal with climate change, we need
to transition away from fossil fuels. But we also need to transition away from farming animals. And then the second piece of feedback was it tastes
like chicken because this is not joy of plant based chicken. It's not plant based meat. It is real meat, but you don't need to slaughter an animal.
CHATTERLEY: OK, so you have to explain that because it's really funny. I've done probably a test of 20 people in the last 24 hours. And I've explained
that but this is lab grown. This is meat cells effectively grown in a lab rather than from the way we traditionally consume meat and people have all
gone, whoa.
TETRICK: It is a bit different. So there are about 80 billion animals on the planet right now. And we use about a third of our habitable land to
plant soy and corn to feed those animals. I mean, think about that Julia, a third of the entire planet.
So what we're trying to do is to say we don't need all that, we don't need all the land, we don't need all the animals, and we don't need all the
carbon emissions. Let's start with the cell. That's step one. Step two is identifying nutrients for the cells.
So think amino acids, fats, sugars, salts. Step three is we place that cell on with the appropriate feed in a vessel. It's a stainless steel vessel
that essentially enables a cell to grow. And then step four, we get the meat out.
So it's a way from sell to final product, making meat without all the resources and we have 8 billion people on the planet today. How many more
animals can we have? How much more of our planet can we actually use to feed them? This is a different way. And ultimately we think it's going to
be the way that we all produce meat.
CHATTERLEY: What's your point? We have to find new ways. You mentioned nutrients. What about things like hormones, preservatives, additives,
because I think part of the challenge that we've seen for some of the other competitors and then I am talking plant based or at least alternatives is,
this discussion over clean food. And what's actually in the food compared to some of the alternatives that we are eating currently?
[09:45:00]
CHATTERLEY: Just talk to me about what else is in there and what's required and the time it takes even to produce pound for pound.
TETRICK: So this definitely sounds like a different process. But it's actually entirely non GMO, it's free of antibiotics, it's free of hormones.
And if you look at the microbiological profiles, so things like E coli, Salmonella, and even contamination of a fecal matter, you don't have the
issues with making meat in this way, it's just a cleaner, more sterile processes also little to no risk of zoonotic disease.
Now, the big challenge is different, it sounds a little bit different. And we've talked to lots of consumers about it. And basically, if you're under
the age of 30, what you say is, listen, I don't care if my meat is made in a stainless steel vessel, and if you're over the age of 50, you have lots
of questions about it.
And if you compare the time, so let's use a chicken as an example, it takes from chick to slaughter about 45 days for chicken to grow to produce our
meat, the time it takes to do it with a cell is about 12 to 14 days. So it's a quicker, cleaner, safer, much more carbon efficient process. And
ultimately, in addition to it just tasting like chicken, this is why we think it's going to win.
CHATTERLEY: Define that though, pound for pound in terms of meat. What's the relative cost between a chicken a pound of chicken that I would buy in
the supermarket versus a pound of chicken that might one day be available here in the United States? That's lab grown.
And also you mentioned, a far less a carbon footprint. Can you quantify that for me in any sense? I know it's a, it's going to be rough. But can
you do that for me?
TETRICK: Yes, so from a carbon footprint perspective, it's about 70 percent less and then more or less the same in terms of land and water about 70
plus percent less than the conventional way of doing things. In this, ultimately, if you look at the cost of conventional beef, chicken and pork
today, it's roughly about $4 a pound.
Today, we're many times and the only place in the world where this is sold is us. In Singapore, we were the first company to ever do this. And we've
been selling for about a year and a half. So it's many times that today.
But ultimately, as we make more and as we move to larger vessels and we get our feed costs down, we see a path before the end of 2028 to be below the
cost of conventionally produced chicken, beef and pork. Animal meat technology today just doesn't make sense for a single planet with 8 billion
people.
You know, when we had half the population, when we weren't using a third of the world to plant soy and corn, maybe it made a little bit more sense. But
things are changing. And you know, we think although this sounds a little bit different now, eventually it's going to be boring, and no one's going
to want to interview anyone who does it because it's just going to be the meat that we all consume.
CHATTERLEY: So I think for most investors, particularly at this given point in time, if you say to them, hey, and I'd seen quotes from you that said
somewhere between the next three to 10 years, in terms of making this profitable as a business, you're saying, hopefully, sort of within six
years, you can do that.
What do investors say when you say that to them? Are they like, you know, I get the big picture here in the story that even if we can continue to
sustain our lifestyles, the way we're doing for the next 5,10, 15 years, if we really want to do the work to tackle climate change, we have to do
something more sustainable. Do they get it?
TETRICK: Yes, not all. But most I mean, most investors get I mean, I'm here at COP 27. I think most people at COP27 get that. If you want to stay under
one and a half degrees, it's not that complicated. We need to transition all the way possible.
CHATTERLEY: You're preaching to the choir there, though.
TETRICK: Yes.
CHATTERLEY: They're believers.
TETRICK: Even outside COP27, we need to transition away from fossil fuels. And we also need to transition away from farming animals. Now some
investors think well, maybe the time horizon is a little bit too long. But Solomon, we've raised close to $300 million for this, think the opportunity
is so significant.
And it's greater than a 50 percent probability that we're going to figure out and they want to be a part of something meaningful. Listen, people want
to return on capital, but they also have a life and they want their life to be contributing to something that hopefully could create a lot of good.
So we don't get everyone to be a part of it. But we don't need everyone. We need the right people in this moment. We've got to build the infrastructure
and we've got to be able to be transparent with consumers. And we have to keep selling in Singapore.
And we're actually here at COP27 because we launched the next version of our chicken and we felt like what better place to launch the next version
of this than right here in Egypt.
CHATTERLEY: Yes. And we'll come back. We'll talk to you again, because I know you're talking about filing with regulators, perhaps in China this
year, perhaps in the United States, I believe next year. Do you eat it, Josh? Is this what you eat? Eat any other meat?
[09:50:00]
TETRICK: I do, I kind of have a strange diet Julia in that I'm a plant based eater, so I like sweet potatoes and green leafy vegetables, but I eat
our meat. And the reason I eat our meat is there's no harm associated with it. And I'm trying to eat in a way that is minimizing the amount of harm
that causes.
And I grew up in Alabama eating fried chicken, so I'm not someone who's turned off by eating meat. I'm turned on by it and every time our chefs
have a little bit extra, I sneak it and I have some fried chicken.
CHATTERLEY: Josh, great to chat to you. Come back and talk to us soon, thank you.
TETRICK: Well, thanks, Julia.
CHATTERLEY: Josh Tetrick there, CEO of Eat Just, thank you. We're back after this.
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CHATTERLEY: Welcome back to "First Move". From CEO on Twitter to CEO in court, Elon Musk has his hands full trying to master Twitter. Well, he's
now being forced to take a courtroom detour to defend his more than $50 billion Tesla pay package.
Now one of the world's richest men has been seeing read recently. Clare Sebastian joins us on this and a few other callers I think as well,
including Blue. Clare, these things are tied because he's openly said he's going to stay now, he's going to live at the Twitter HQ in order to fix the
situation at Twitter.
He's constantly it seems on Twitter and part of the challenge in his court cases. The plaintiffs are saying, look, he's sort of paid for more than he
works. And he shouldn't be able to be paid this kind of money while working part time. What do we make of this?
CLARE SEBASTIAN, CNN CORRESPONDENT: Yes, Julia. So this court case actually sort of started like, long before he bought Twitter. But I think the timing
of it coming to court is significant because of course, he has now taken on an extra company on top of the many companies, but he already runs or works
for overseas.
So the time we've had an interesting, they're arguing that the 56 billion pay package that was set out in a series of sort of incentive based
milestones four years ago, that was really too much that he didn't need that kind of incentive to stay at the company that it breached the
fiduciary duty of the board, that he had too many sort of cozy relationships with other members of the board, including his own brother,
for example, that helped them to sort of agree to that pay package, which was controversial.
At the time, the plaintiff, a Tesla shareholder is arguing that the pay package should be rescinded, so that court case started on Monday Julia. We
expect Elon Musk himself to testify in court on Wednesday, tomorrow, but it will take several months even after this trial is done this week for a
decision on that to be made.
CHATTERLEY: Yes, I mean, this is a whopping pay package. Let's be clear, but he's also a unique individual. Would Tesla be who Tesla and what Tesla
is without Elon Musk.
Because you could also argue that what they were trying to ensure was that he stuck around and whatever Tesla is, is because of whom he is and what
surrounds him, one could make that argument perhaps.
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SEBASTIAN: You know, and they absolutely did at the time. They said that, you know, Tesla was on its way to try to establish itself as the leading
electric car company that they really needed Elon Musk to stick around and made the point as well that this was - there was no actual guaranteed pay
in this - it was all incentive based.
It just so happens that between when they announced that package and the peak of Tesla's stock, which was about a year ago, it went up some 2,000
percent. So he has now hit 11 out of 12 milestones in that pay package, which has made him the world's richest man.
I think you could argue that as the plaintiff in this case is that he already owned a big chunk of Tesla's, he was already incentivized to stay
in that regard. They didn't need to shell out 56 billion, which by the way, the lawyer for the plaintiff pointed out was in the vicinity of the GDP of
the state of Delaware where the case is taking place similar, he said to about 15 rebuilding of the World Trade Center.
But nevertheless, you know, they are arguing that that was too much and that he didn't need that to be incentivized to say.
CHATTERLEY: The pay packet six times larger than the top 200 CEO salaries combined in 2021 according to research from Equilar, it's a big package.
OK, Clare Sebastian, thank you for that. And that's it for the show. "Connect the World" is up next, we'll see you tomorrow.
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