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CNN MONEY

Stock Market Woes; Google's Magic Leap; Yahoo's $1 Billion Bet on Tumblr; 24 Hours with a Comic-Con Star

Aired October 25, 2014 - 14:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


CHRISTINE ROMANS, CNN HOST: October was off to a spooky start. Investors fears eased.

I'm Christine Romans. This is CNN MONEY.

Exploding airbags, federal regulators urging car owners to get them replaced and it's not just one automaker's problem.

A 15-second video of a holographic baby elephant has the Internet losing its mind. We'll show you why.

And later, the 28-year-old who sold his blogging site to Yahoo! for $1 billion. How he keeps control of his invention and what it's like the work for Marissa Mayer.

But we start with stocks. What goes up must come down and apparently back up again. October has been a rough month for the major averages, but this week, fear gave way to buying and strong profit reports led the market to its strongest rally of the year, but now, Ebola is in New York City and we're seeing a ripple effect in stocks.

That leads our CNN MONEY top five this week. Our CNN MONEY panel is here. Paul La Monica and Cristina Alesci.

Paul, we haven't had a correction yet in the stock market in three years. Not a true correction in the S&P 500 in three years. Is this streak going to continue? Especially if we do still have uncertainties about Ebola out there.

I think there's a decent chance that we may avoid a full blown correction. Yes, Ebola is scary, the news of the doctor in New York City really amplifies those fears, but right now, I think the more important point to make about the broader market is that don't focus so much on the indexes. So many stocks have fallen from their highs.

ROMANS: Right.

PAUL R. LA MONICA, CNN MONEY DIGITAL CORRESPONDENT: More than 10 percent, some more than 20 percent, so some stocks are in bear markets.

ROMANS: Yes.

UNIDENTIFIED MALE: I think we have had a correction even if it's not in name only, so I think that is something that's important here and a lot of buyers are scooping up these bargain stocks that were probably oversold.

ROMANS: Corrections are a good thing.

UNIDENTIFIED MALE: Yes. It's not --

(CROSSTALK)

ROMANS: Because if you have to get in to lower stock prices, that's how you do that.

Let's talk a little bit about the Ebola factor, though, here because you still -- you have Ebola in New York City, you have the big corporate titans now giving money away, giving $25 million in the case of Facebook, $100 million in the case of Paul Allen, giving money to the cause. You have stocks actually that are moving some of these, hazmat suits.

I mean, it is a factor in the market even if it's not bringing the whole market down.

CRISTINA ALESCI, CNN MONEY BUSINESS CORRESPONDENT: Absolutely it's a factor. And you know, I didn't think I would be saying that about a month ago. I look at that and I said, you know, Ebola is not going to move the market.

ROMANS: Right.

ALESCI: But now that it's in New York, you have this, you know, very big city that's a global entryway and it really hits home for a lot of people, so that could influence -- it's the outlier that we haven't really focused on until now. I think New York changes the game, especially because it's the center of Wall Street. It brings it home.

Also, on a tech billionaire front, it does seem like they are trying to outdo themselves, you know, one after another. Paul Allen recently saying he's going to increase his commitment to $100 million.

ROMANS: Right.

ALESCI: That's a lot of money especially considering the fact that you have industries like the chocolate industry, that is perhaps the one most exposed to this crisis because that's where they get their supply of coco. And they're only contributing about $600,000 to the effort, so this puts pressure on industries.

ROMANS: Yes.

ALESCI: And potentially other big billionaires to give some more.

ROMANS: From buying stocks to buying, well, everything else, Apple Pay launched this week, but not without a few hiccups. The Bank of America customers were charged twice for purchases. Apple says it only affected a small number of users. The company and Bank of America worked a fix to refund all of those duplicate charges.

And you know, Apple has rollouts, guys, rollouts have glitches, that's going to happen. But big picture, are we at the dawn of a cashless society here?

LA MONICA: I think we still need to see more big retailers adopt this. I mean, Wal-Mart --

ROMANS: Wal-Mart is not on board.

LA MONICA: Is not on board. Best Buy is not on board. That will limit the use of Apple Pay to a certain extent, and also even though yes, most of the big banks such as Bank of America, to the chagrin of our own Samuel Burke, has adopted Apple Pay, I also think that there are a lot of people, particularly in middle America, that don't bank with one of the giants.

ROMANS: Right.

LA MONICA: So are we ever going to see community banks and credit unions adopt Apple Pay as well.

ROMANS: Well, will Apple take the standards --

LA MONICA: You really going to see that. Yes.

ROMANS: Because there have been other attempts. You know, the Google -- there have been other attempts to do this and it's been trying to change consumer sentiment that has been the hurdle. Making people feel like it's safe and they want to use it.

I've been asking all week of people how much money you have in your pocket and everybody I talked to actually has money in their pocket. So, you know, we still are this society using credit cards.

LA MONICA: Definitely.

ROMANS: We have the phone -- you know, the credit card in our phone and also cash in our wallet.

LA MONICA: Right. So I'm not sure the credit card companies go extinct because I think they're going to be a big part of it.

ROMANS: Yes. Absolutely.

ALESCI: Well, they're now -- they are in the middle now.

LA MONICA: Right.

ALESCI: But the question is going down the line, are they even necessary?

ROMANS: No questions all those very different in just a few years. No question.

OK. Fresh off of GM's recall nightmare. Another disconcerting development for auto safety. Safety regulators are telling millions of car owners with airbags made by Japan's Takata replace them immediately. Nearly eight million cars have been recalled, made by automakers including GM, Toyota, Honda, BMW. Now this is urgent. When these airbags inflate, they can send exploding metal fragments into your face and neck.

Cristina, safety investigators said they know of six incidents. Could there be more?

ALESCI: Well, there's definitely one that's very graphic. It's the woman in Florida who was in a car accident and there were stab-like wounds in her neck after the airbag exploded. Local authorities say that the car crash alone could not have killed her, so it had to have been --

ROMANS: And that initially --

ALESCI: It has to have been the debris from the airbag.

ROMANS: And they initially investigated it as a homicide because --

ALESCI: Right. They thought the wounds were so --

ROMANS: Because of the condition of the body.

ALESCI: It was so bad. But the recalls themselves were focused in areas of persistent high humidity and heat.

ROMANS: Humidity.

ALESCI: Right? And some Congress members have come out and said that's ridiculous. This should be a nationwide recall because it is so dangerous to be in a car with one of these airbags. You know, the natural regulator shot back saying we don't have enough parts to address the entire nation. Let's address the areas where this has hit most acutely and make sure that those cars are addressed first.

LA MONICA: Right --

ROMANS: The Gulf coast, Florida, Puerto Rico. That's what we're talking about.

LA MONICA: Big surprise someone in Congress wants to hold a hearing in midterm election year.

ALESCI: Right.

(LAUGHTER)

LA MONICA: But I think one of the things that we need to keep in mind, though, the automotive companies have all been recalling everything for the most -- you know, the slightest problem imaginable.

ROMANS: This one matters.

LA MONICA: So this one is big. And it's surprising that the automakers themselves are not out front more.

ROMANS: I think one in five cars on the road is recalled right now and people have recall fatigue, but in this case, in particular, really important to note that regulators saying it is urgent, urgent that that car has to be fixed. That airbag has to be fixed.

From cars to tech, investors fed up with Amazon. Shares falling sharply after the company reported a $437 million quarterly loss.

Now losing money, guess what? That's nothing new for Amazon. Sales jumped 20 percent, but it looks like shareholders may have done -- maybe done waiting for Amazon to turn profitable. On the flipside, investors loving Microsoft. Sales soared 25 percent the latest quarter on the back of Cloud services, Xbox, even surface tablets and Nokia smartphones.

Paul, who needs Windows?

LA MONICA: Despite all of the problems that they had, the PR nightmare with Nadella's comments regarding women and not asking for raises.

ROMANS: Asking for a raise.

LA MONICA: Nadella is the right person for the Microsoft job right now. He's the Cloud guru. Every software company including Amazon is going the Cloud route. And that is the way software is going to be sold.

ALESCI: Well, that is also -- that is also a problem that you're going head-to-head with Amazon because I have -- I have spoken to people in the marketplace who say that it is a race to the bottom with the Cloud because --

LA MONICA: Without question.

ALESCI: -- it's very price competitive. So, yes, revenue from this particular segment was up, but what are the margins like on this business?

ROMANS: Here are some toys that would never make it to a Happy Meal, guys, but they did make it into Toys 'R' Us. Action figures depicting characters from the TV series "Breaking Bad" upset a group of moms in Florida this week. They started an online petition that got 9,000 signatures and thousands of likes.

Toys 'R' us eventually removed the product from the store, but not before actor Brian Cranston weighed in. This is what he tweeted, "I'm so mad, I'm burning my Florida mom action figure in protest." He of course played the chemistry teacher turned meth dealer Walter White in that series.

Is this the power of social media or an overreaction by parents?

ALESCI: Paul, would you buy one for your children?

LA MONICA: I would not buy a Walter White figurine for either of my sons.

ROMANS: It clearly says it's meant for 15 years or older. LA MONICA: Because one is about to turn 5 and the other is, you know,

16 months. They're not going to watch "Breaking Bad" obviously anytime soon, but I think this might be a little bit of an overreaction. I mean, we've had this all the time, even before social media. Remember when you had moms protesting "Married with Children" when that show first came on FOX.

ROMANS: Yes.

LA MONICA: I mean, yes, the toys are a little insensitive. I mean, they could have had a lot worse for any fans to the show, you think about a Tortuga figuring or Gus with half his face coming off.

(LAUGHTER)

ROMANS: Gross.

LA MONICA: Yes. So hey.

ROMANS: I do think this gives -- social media gives people a voice or maybe this would never have risen to the surface. Now everyone can talk about that.

ALESCI: Yes, I do remember situations where moms or other parents had issues with over --

ROMANS: With a kind of Barbie.

LA MONICA: Yes.

ALESCI: Right. Over sexualized female doll figures so.

LA MONICA: And Aaron Paul tweeted about Barbie, saying, you know, hey, what's more offensive here? He plays Jessie.

ALESCI: Exactly.

ROMANS: All right. Well, for the record, those things were meant for 15 and higher. They shouldn't be on a Toys 'R' Us.

LA MONICA: And they might have been in a Los Pollos Romanos.

(LAUGHTER)

ALESCI: What 15-year-old doesn't go to Toys 'R' Us, by the way? Do 15-year-olds --

ROMANS: I don't know. I don't know.

LA MONICA: Does anyone go to Toys 'R' Us?

(LAUGHTER)

ALESCI: That's a better question.

ROMANS: That is a better part of the question. All right, coming up, thanks, guys, nice to see you.

Is this baby elephant worth hundreds of millions of dollars? Google thinks so, next.

(COMMERCIAL BREAK)

ROMANS: Imagine an elephant in the palm of your hand. Magically, Florida based startup says it wants to use technology to bring magic back into the world and some big companies including Google are pulling big bucks out of a hat to make it happen.

Rachel Crane takes us inside the optical illusion.

(BEGIN VIDEOTAPE)

RACHEL CRANE, CNN MONEY CORRESPONDENT: A 15-second clip of a floating baby elephant has made the Internet lose its mind. A mysterious Florida based company called Magic Leap is behind the dazzling display and it's a technology they're calling cinematic reality. It seems to be a mixture between augmented reality and virtual reality on steroids.

Whatever it is, it's freaking cool and apparently, worth a lot of money.

The biggest name in virtual reality right now is Oculus VR, which Facebook recently bought for $2 billion. Now Magic Leap says that their technology could potentially blow Oculus out of the water.

Operating in stealth mode, Magic Leap just had one of the most successful second rounds in history, raising $542 million. The lead investor is none other than Google. But everyone is asking, what is it?

Here's what we do know. Magic Leap uses digitized light yields to overlay 3-D images on to the real world. It's not virtual reality which totally submerses the viewer in a completely artificial environment. Instead, it's a mixture of real and artificial. It sounds similar to augmented reality, which is something that already exists on your smartphone but early users claim it's way better. One venture capitalist backing the company put it this way. It's so bad ass you can't believe it.

Lots of questions remain surrounding Magic Leap. The biggest being, will this stealth company actually deliver in reality? No baby elephant yet.

(END VIDEOTAPE)

ROMANS: Very cool.

All right. Coming up, how's this for a start-up fantasy? Drop out of high school, create a simple but genius Web site, sell it to Yahoo! for $1 billion. That's David Karp's reality, the 28-year-old wonder kid who created Tumblr, next. (COMMERCIAL BREAK)

ROMANS: Making the purple portal cool again. That's CEO Marissa Mayer's goal at Yahoo. Whether she's succeeding depends on who you ask.

The company beat profit and sales estimates in the recent quarter, but its core advertising is still struggling. Now Myer is betting big on flashy acquisitions, spending $1.6 billion since she took over in 2012. And most of that was on one company. Tumblr. The blogging site founded by David Karp in 2007 when he was just 20 years old. He sold it to Yahoo! 15 months ago for $1.1 billion.

I sat down with him recently and he told me how Tumblr is evolving.

(BEGIN VIDEOTAPE)

ROMANS: What has changed for Tumblr over the past year plus since you've been under the wings of Yahoo?

DAVID KARP, CEO, TUMBLR: It's been changing for the last eight years. This last year has been pretty remarkable, though. The promise was Tumblr continues to operate as this independent company.

ROMANS: Right.

KARP: With our independent leadership and we get help from Yahoo! and all of the places where they're able to help us move faster. So the big examples of that in this first year has really been around the ad technology. We're building this ad business, the technology part of that, the stack that runs all of that advertising is actually some really advanced engineering, something we were going to have to build from scratch.

ROMANS: You've got this vibrant community that's growing, right? Still growing, 290 million now. Mobile presence and this engineering talent, all -- those are all the ingredients. How do you bake the cake that has profit with all of that? Are you getting closer?

KARP: We have a community now of hundreds of millions of these indie creators who've made now more than 100 billion posts.

ROMANS: Yes.

KARP: Seem like a natural to say, all right, advertising guys, we think you can do this as well as any of us. You've got some of the most talented, creative resources in the word. So we're now a couple of years into our ad business with hundreds of these biggest brands in the world now spending money on Tumblr, now creating extraordinary campaigns on Tumblr, and doing stuff on Tumblr that they really can't do.

ROMANS: Right.

KARP: They literally don't have the space to do in those little blue links that they get everywhere else or in those banner ads that they get everywhere else on the Internet today so the thesis is starting to prove true. We have more and more of these brands that are starting to get -- it's starting to do really great stuff.

ROMANS: You have to be creative. They have to, like, think a little differently.

KARP: They are, though. But remember that's --

ROMANS: They have to think a little differently.

KARP: That's how you get to be a billion dollar brand. You don't get to be Coca-Cola without telling great stories, without making ads that really move people.

ROMANS: Who do you look to for advice? Or who do you look at around you?

KARP: Lots of people, but I mean, that's the trick. If there's one maybe defining thing about, you know, my -- how I see myself as a leader. It's just the acknowledgment or the acceptance of the fact that I haven't been through a lot of this stuff before. I lean on Marissa, I lean on her board, I've been incredibly fortunate to be able to surround myself with incredible leaders, who are on our team to work with incredible managers. I've managed to build up a leadership team that hovers with the fact that they have a 28-year-old CEO.

(LAUGHTER)

ROMANS: How does that make you feel, to always have David Karp, boy genius?

KARP: Very uncomfortable.

ROMANS: It does?

KARP: I hope they don't actually say that.

(END VIDEOTAPE)

ROMANS: Oh, but they do. They really do. He's got a lot that he's done. He's got a lot more that he's doing in the future. No question.

Coming up, the future of CNN MONEY is here. Where we're going, what we're doing and why you should follow us there. That's next.

(COMMERCIAL BREAK)

ROMANS: Dressing up in crazy costumes, traveling the world, posing for photos and getting paid to do it. Welcome to the life of a professional cosplay character. It's a mix between comic and play. And it's how some people are making a living. Take a look.

(BEGIN VIDEO CLIP) LINDA LEE, COSPLAYER: I'm Linda Lee and I am a professional cosplayer. Cosplay is two works put together. It's costume play. For most people, it's generally really fun. Could even be some costume that you find at a Halloween store at a discount price.

You definitely have to be a little bit crazy. It's not the most usual thing for people to do. To wake up and say, hey, I want to walk around as my favorite character. That's not normal.

My mom is actually a tailor and a seamstress. We couldn't really afford all the nice costumes, so my mom made our costumes for us. But at the time I was -- I wasn't super happy about it, but then I guess like I got used to it and then now I'm doing it as a profession.

If you're a women into cosplay, generally, they're like, oh, you're totally into the sexy version of this, or something like that, which is not a bad thing, but for me, I generally go the art route.

My character is Death Stroke if you guys are familiar with Death Stroke. He is a bad ass. I've always wanted to make this costume. It's literally all armor.

Generally, people don't make a lot of money, but for the ones that do travel and take this quite seriously, they can make onwards to six figures. The people that are hiring me generally are toy companies in Japan like Kotobukiya, Capcom who do Street Fighter.

I travel three to four weeks out a month. Sometimes, I'm never home. Like this month, I just got the see my bed once. I really miss my bed.

Comic-Con has changed a lot. Prepare yourself for long lines. Make sure that you have water and you have some food in your backpack because you're going to be hungry. The scene was a bit small before when I used to go to Comic-Cons, I used to get to talk to my favorite artists. Now it's like it's so hard to even get a wave in.

Every year, it's getting bigger and bigger. It's nothing but love for each other.

For me, cosplay is definitely not so much play because I take a lot of pride in my costumes that I make and they generally run up a really big bill for me. Costumes cost about $200 onwards to like $4,000.

I would generally like to say that I'm making an ode to the creator of the specific character. If the producer were to walk by one of my costumes, they'd be like, hey, that looks exactly how I designed it. That would be the utmost artistic compliment to me.

(END VIDEOTAPE)

ROMANS: All right, thanks for watching CNN MONEY. You have invited us into your home every Saturday. We've loved every minute of it.

CNN MONEY is signing off from TV, but we're just getting started online. CNN MONEY.com is where business gets personal, delivering the money news that matters most to you.

Here's a peek at some of the amazing content we're building.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Worst-case scenario would be the annihilation of humanity.

ROMANS: We're going to ask Eric Schmidt of Google. What is twerking?

ERIC SCHMIDT, GOOGLE CEO: Twerking is a new form of dancing.

UNIDENTIFIED FEMALE: That strain right there, that's a strain of plastic.

UNIDENTIFIED MALE: That's a strain of air carbon plastic.

UNIDENTIFIED FEMALE: They can get an accurate representation of how I move when I'm playing soccer.

UNIDENTIFIED MALE: I left my job driving motorcycles from Argentina to Los Angeles.

(END VIDEO CLIP)

ROMANS: Tech, luxury, media, interviews with titans of corporate America, you're going to find it all at CNN MONEY.com.

Plus, check us out on Twitter, Facebook, and Instagram and for you early risers you can catch me every weekday morning on "EARLY START."

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Have a great weekend.