Return to Transcripts main page
First Move with Julia Chatterley
Google Restricting Access To The Chinese At Tech Giants From Use Of Its Apps; Deutsche Bank Stock Hitting A Record Low Following A UBS Downgrade "Game Of Thrones," The Latest Casualty Of The U.S.-China Trade War. Aired 9-10a ET
Aired May 20, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, FIRST MOVE: Live from the New York Stock Exchange, I'm Julia Chatterley. This is FIRST MOVE and here is
your need to know. No way Huawei. Google restricting access to the Chinese at tech giants from use of its apps. Deutsche Bank stock hitting a
record low following a UBS downgrade and more questions about presidential dealings. And winter is coming, but not to China, it seems. It the "Game
of Thrones," the latest casualty of the U.S.-China trade war. It's one day let's make a move.
Welcome to FIRST MOVE once again. I hope you all had a great weekend. We did of course, get the final episode of "Game of Thrones" as I mentioned
there. No spoilers, I promise. We aren't getting the latest episode. And of course, it is the ongoing trade battles between the United States and
China, plenty of discussion of that once again coming in the show. The question is, how should investors be reacting right now?
Well, I can tell you that news weekly, "Barron's" has an idea. Take a look at this. Urging investors to keep calm amid the trade turmoil. I actually
think that investors have been pretty resilient so far. I'm not sure why given the state of negotiations, even Chinese media overnight saying that
the U.S. had quote "extravagant expectations for a trade deal."
So did we all, I think. U.S. stock market futures pointing to a lower open. The NASDAQ down some one and a half percent, dragged lower by many
of the big semiconductor chip producing firms who are reportedly restricting access now in terms of sales to China's Huawei.
Qualcomm down more than 4 percent pre market. It also fell 5 percent last week, too. Micron, Broadcom, also suffering, too. And it's not just U.S.
firms, of course. European chip makers that supply Huawei also in focus. Infineon, as well as STMICRO Electronics all falling in overseas trading,
too.
Weakness in tech helping drag those European shares lower. German and French stocks down approaching that 2 percent lower territory in fact.
Chinese stocks also lost ground overnight. The Shanghai Composite now down over six and a half percent so far this month; 11 percent of the recent
highs.
We've got one breaking news story that we will go through in more detail we're getting word that the Sprint-T-Mobile deal, remember this $26 billion
worth is going to go through. Both companies making concessions, but right now, a lot of optimism we are seeing in the stocks pre-market. More, as I
said late on in the show, but for now for all the trade twists and turns, U.S. stocks didn't fare too badly.
Last week, too, the White House seems to be choosing its battles wisely here. The decision to remove aluminum and steel tariffs on Canada and
Mexico and delay auto tariffs on other allies easing some concerns here. That sector of course, remaining front and center today, the technology,
for good reasons and for bad reasons and that's where we begin today's drivers.
Google banning Huawei from access to some of its apps and updates. All those orders, of course, from the Trump administration banning U.S. firms
from selling their products to Huawei without a license.
Samuel Burke joins us now. Samuel, I just need you to give us some context, because we are talking about the second largest smartphone
producer here in the world when we're talking about Huawei, but they run on Android platform internationally. So what is this going to mean going
forward?
SAMUEL BURKE, CNN BUSINESS TECHNOLOGY CORRESPONDENT: Dead in the water. That is how one analyst described the usability of Huawei phones outside of
China because of course, more than 80 percent of phones depend on Android. So any phone maker that gets into this business that isn't Apple, depends
on everything.
The entire ecosystem is built on Google's operating device, operating software, as well as their app. So yes, in China, they don't use Google
Apps, so that's an easy way that Huawei will be able to get around this, but in literally every single country outside of China, Huawei phones are
really going to be useless and anybody including Google that tries to tell you, "Well, there will be workarounds and we will keep certain things
updated."
At the end of the day, if your phone cannot be regularly updated and use the regular apps that so many companies depend on, whether it's Uber,
Airbnb for maps, your phone is rendered useless, as this analyst said. So for a company like Huawei, that's spending $11 billion on parts and
software in the United States, this makes it incredibly difficult to move forward, incredibly difficult for consumers and U.S. businesses like
Qualcomm that depends so much on the revenues you get from Huawei. It's no surprise that they're down 4 percent this morning in premarket.
[09:05:10] CHATTERLEY: Yes, everybody recognizing what the spillovers here and the fallout is going to be. Very quickly then, two questions. Do they
have their own viable alternative in terms of platform that they could go look, we've been working on this, we can substitute it in and given that
Huawei was a lower cost producer smartphone, does this mean higher prices for consumers out there, too?
BURKE: This for sure will mean higher prices for consumers because there will be less competition, and at the end of the day, I'm sure Huawei has
something up their sleeves but likely that will work for China, but unlikely that that will be a quick alternative for the rest of the world.
CHATTERLEY: What about 5G?
BURKE: Listen, it's two different stories here with the same route. At the end of the day, we've tried to keep 5G separate from the smartphones
because they're two totally different realms that Huawei moves in. But at the end of the day, if you have Trump pushing you on both sides, it just
makes it that much more difficult. It really makes the waters very contaminated for Huawei, because the brand is so much weaker.
Anytime you put pressure on the smartphone part, it just makes it harder for countries here in Europe to say we want to move forward if the consumer
and businesses and politicians keep on having this view of Huawei that is moving in a negative direction.
CHATTERLEY: Wow, Samuel Burke full of the analogies today. Dead in the water and contaminated waters. Samuel Burke, thank you so much for that.
All right. Let's move on to our next driver. OPEC, saying that it's in no rush. Speaking in Jeddah ahead of the June OPEC meeting, the Saudi Oil
Minister hinted that output cuts will be carried over into the second half of 2019.
John Defterios joins me now. Great to have you with us, John. The Oil Minister of Saudi ...
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Thanks, Julia.
CHATTERLEY: ... also saying that the Kingdom isn't "fooled", quote, by crude prices and he believes the market is still fragile here. I mean,
prices, about 40 percent year-to-date. They've got the U.S. presidential wild card out there, too. Is he right?
DEFTERIOS: Well, I think he wants to be overly cautious Julia, remember this time last year we had the conversation and Khalid Al-Falih and his
counterpart from Russia released a lot of oil because of the threat from Donald Trump to take away the waivers from Iran and that didn't happen.
And then they got burned.
So I think what we're seeing here is the art of nuance from Khalid Al- Falih, the Minister of Energy from Saudi Arabia, saying we don't need to act right now because we see rising inventories in the United States. But
we're willing to take action if necessary.
Now, this is a tough game he is playing because Donald Trump is keeping the pressure on those Saudi Arabia and the United Arab Emirates saying they
were already releasing the crude just about four weeks ago. And absolutely, that was not the case.
So what the Saudi Arabia do? They go to the basics. They go to the meeting, saying, we're just making a business decision right now, we don't
need to move on anything at this stage. But we've always proven in the past that we've been able to act.
Let's bring those prices back up, though, Julia, and I'm wondering why we're seeing only a slight gain before earlier in the session up about a
dollar, then we come back down again, but $72.00 a barrel, and around $62.00 to $63.00 a barrel for WTI is not factoring in the risk of the
threat that we're seeing here in the Middle East.
I think there's just a lot of focus on the U.S. and China right now, whether the trade dispute will get solved or not, what impact this will
have on demand going forward. But if you look at Iran, the war in Libya, and even Venezuela and the Minister was at that meeting in Jeddah
complaining about the sanctions from the United States, at one point the market is going to wake up and say, there's overall risk, downward pressure
in terms of production coming to the market, and it could push prices even higher going forward.
CHATTERLEY: Yes, it's such a difficult analysis, I think to make it whether it's the supply side of the issues that we've got here, or as you
said, the bigger demand question over a potential economic slowdown here.
The other wild card, not just in terms of prices, of course, is what goes on now between the United States and Iran, perhaps more broadly, the
implications for the region.
I mean, the President tweeted that if Iran wants to fight that will be the official end of Iran. I mean, it's the Saudis. It's the UAEs who has seen
their own oil industries come under recent attack? How do we expect them to respond? What are they thinking in light of the noises that we're
getting from the United States here about Iran?
DEFTERIOS: We can almost suffer whiplash, if you will, from the mood changes from Donald Trump. Remember just having that interview with Fox
last Thursday and trying to suggest we don't want war with Iran, but we want them to change. And then you see overnight, that tweet that was very
bellicose and the language.
Here in the region, we've seen both Saudi Arabia and the UAE suggesting they don't want to war right now. But they want to reserve the right to
defend themselves, if necessary. Even that was the tone coming from Iran again until we saw the tweet from Donald Trump.
Now, of course, Saudi Arabia and the UAE don't want an expansionist Iran into Yemen, Lebanon, Syria, of course, is the big concern, the relationship
they have now with Iraq, they don't want attacks against their Pujura (ph) tankers off the coast of the UAE or the oil installations in Saudi Arabia.
But they want pressure on Iran, but they don't want a war. But the problem is that their partner is -- and Donald Trump is very unpredictable, Julia.
[09:10:24] DEFTERIOS: And this is very challenging for those like us that sit in the region because you see the tensions extremely high, they come
back down again, and then Donald Trump throws it back up and then you see a response from the Iranian Foreign Minister, Mohammad Javad Zarif suggesting
the Iranians have been around for a millennia. People have tried to challenge us in the past, and we remain here. Don't threaten the Iranians.
So again, we're backed up at this nine out of 10 threat that we see today, Julia, that's not very comfortable. Let's put it that way.
CHATTERLEY: Just have got to be incredibly cautious. John Defterios, thank you so much for that. All right, let's move on to our next driver.
Deutsche Bank shares trading at record lows premarket down more than 3 percent after a downgrade by UBS. Reports also in the "New York Times"
this morning that employees flagged concerning transactions involving President Trump and Jared Kushner's business operations.
Cristina Alesci joins me now. Cristina, we can take a pick here. But let's deal with the reports in the "New York Times" here. What do we know
about this?
CRISTINA ALESCI, CNN BUSINESS POLITICS AND BUSINESS CORRESPONDENT: Well, in essence, what this comes down to is the paper reporting that some
employees in the bank's Anti-Financial Crimes Unit expressed some concerns, they elevated those concerns to the senior bankers and then the senior
bankers ultimately decided not to refer the issues to the Treasury Department, which is sometimes done when suspicious transactions are
flagged.
But at the essence, the story seems like a disagreement between some employees and senior management as to whether or not these transactions
should have been forwarded to the Treasury Department.
One of the employees is saying that she feels like she was retaliated against and potentially fired because Deutsche Bank didn't like the fact
that she was raising concerns and in response to that, Deutsche Bank came out and said, "At no time was an investigator prevented from escalating
activity identified as potentially suspicious. Furthermore, the suggestion that anyone was resigned or fired in an effort to quash concerns related to
any client is categorically false."
It does appear, Julia that the proper protocols were followed. But again, it's not great for the bank overall, because it's had so many other
problems with money laundering and controlling these kinds of situations.
CHATTERLEY: Yes, absolutely. I mean, you raise the perfect point. Right now it's the last thing Deutsche Bank needs amid a downgrade from UBS in a
what-next question hanging over them with regards to the failed merger with Commerzbank. Cristina Alesci, thank you so much for that.
All right. Let me bring you up to speed now with some of the other stories that we are following around the world. The former South African
President, Jacob Zuma has appeared in court. A panel of judges will determine whether he should face trial on charges including fraud and
racketeering. Zuma denies wrongdoing, and is appealing to get the charges dropped.
Ukraine's new president, Vladimir Zielinski was sworn into office today in Kiev. RThe former comedian turned politician wasted no time making
changes. He dissolved Parliament and called for snap elections during his inauguration speech. Zielinski also pushed for peace in the eastern part
of the country, calling it his first priority in office.
Indian stock market staged their strongest rally in more than three years after exit polls suggested Narendra Modi will be reelected. Official
election results are not expected until Thursday. But the Prime Minister's ruling coalition appears likely to win a clear majority. Nikhil Kumar
joins now from New Delhi with more.
So basically what we're looking at here, Nikhil, and great to have you with us is private polls -- exit polls. I'm a little bit skeptical here because
they've been wrong in the past. So and how much should we trust the readings that we're getting at this stage?
NIKHIL KUMAR, CNN NEW DELHI BUREAU CHIEF: That's right, Julia, they have been wrong in the past. In 2004, for example, they predicted that the then
BJP-led coalition would come back to power. It was kicked out of office. So we'll have to wait until the 23rd to see if the predictions and the
projections following the end of polling on Sunday, if they are going to come true.
If they are true, then it looks like Mr. Modi is on course to win a second term. And the big question, of course, is what will this term hold? In
the last term, the last campaign in fact, in 2014, when he first came to power, he came to power promising a lot of economic reform. He promised to
generate more jobs for India's young people, many of whom enter the workforce every year and struggle to find employment.
He promised to make India an easier place to do business and fix other things in the economic architecture here. Has he succeeded in doing that?
Well, you know, there's a lot of people who questioned whether he has in fact succeeded, whether he's in fact dealt with some of the big economic
problems that exist in this country both in terms of generating employment, making this a better place for business.
[09:15:13] KUMAR: Fixing, for example, the banking sector, which in India has a lot of bad loans. He has not done enough, economist say, to deal
with that.
This campaign has in fact been less about the economy, more about nationalism. So if he does win, it's not clear, where we will go in terms
of economic policy. A lot of people are hopeful that maybe if he does come back, he will renew a push for more reform, but the campaign itself hasn't
been particularly promising on that front --Julia.
CHATTERLEY: Yes, and that's important for the result, too. If we look to his credentials as he promised economic reform, there are big questions
there. Nikhil Kumar, we await for that May 23rd, of course, the official result.
All right, we're going to take a quick break here on FIRST MOVE, but coming up as Beyond Meat share price continues to sizzle, I'll be grilling one
investor who says the same just been beyond stupid.
And caught in the crossfire as the U.S.-China trade war claimed "Game of Thrones," as its latest victim. We will tell you why after this.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE live from the floor of the New York Stock Exchange this Monday morning where we are expecting a weaker open for
U.S. stocks.
Let me give you a look of what we're seeing as far as the futures are concerned. Tech stocks, a lot of the pressure focused on this index in
particular, the NASDAQ. Chip companies that supply Huawei set to come under some steep pressure once again this week.
Also, we're going to be watching the retail sector and talking this through again. Home Depot, Nordstrom, Target -- all reporting earnings. They'll
get a chance to discuss how a trades tariffs might affect prices. Remember Walmart warning about that from last week's earnings report, too.
If we look at the past month, the S&P retailing index has fallen almost 6 percent outpacing losses for the overall market. One thing in this vein to
watch as well, over in currency land, the Chinese yuan versus the dollar, it's fallen almost 3 percent since the latest round of trade tensions,
which began of course, on May the 5th.
[09:20:13] CHATTERLEY: A lot of discussion being had behind the scenes now about whether China will allow the currency to weaken further beyond that
seven, that key line in the sand, seven yuan to the dollar to counter some of the impact, of course of rising tariffs, i.e. make your exports cheaper.
Let's talk about all these things. Now, we're joined by Brian Belski, the chief investment strategist at BMO Capital Markets. Great to have you with
us.
BRIAN BELSKI, CHIEF INVESTMENT STRATEGIST, BMO CAPITAL MARKETS: Thanks for having us.
CHATTERLEY: Looking healthy and shiny on a Monday morning.
BELSKI: Thank you.
CHATTERLEY: What do you make of what we're saying right now? I guess trade front and foremost.
BELSKI: You know what's really interesting, the conversations we've had with our clients who are portfolio managers, chief investment officers for
major fund complexes, they're kind of freezing right now, meaning that they're not really doing anything, meaning selling big positions or buying
big positions, because things are so fluid now overnight.
CHATTERLEY: Yes.
BELSKI: So you do want to be reactive. I think the answer is no. I think that's why things have kind of settled, and you would consider all the
headlines, you think the markets would be down a lot more.
And so I think people are starting to become, dare I say comfortable with this back and forth type of saber rattling. And so I think it remains to
be seen whether or not we ought to make big decisions here ahead of the big summit coming up.
CHATTERLEY: I mean, it's quite fascinating to see the rhetoric that's flying back and forth here and the noises behind the scenes, even the
Chinese overnight saying that, you know, the U.S. was extremely optimistic, exaggeratedly so about getting a deal here.
I just worry whether we're being too complacent about the prospect of a deal being made here because it doesn't look like the President is willing
to have a deal that doesn't have teeth here or bite?
BELSKI: Well, I think what we've seen with the market, Julia is that people become so reactive, we have to wait until we actually see if we can
reach out and touch it and then we can believe it. Because right now, we've proven to ourselves that if you get ahead of your skis, quote
unquote, "a little bit too much," you're going to lose some of your profits.
CHATTERLEY: Chipped around.
BELSKI: Exactly.
CHATTERLEY: So what happens if the President says fine, we're going to enact the further $325 billion worth of tariffs at 25 percent? Do we
reprice lower at that point? Because that argues a further escalation or do we just go, "It's more rhetoric."
BELSKI: I think it's going to be to the point we're going to have to see more rhetoric, because six months from now, a year from now is when you
actually fundamentally start to feel the impact of those tariffs.
I think from a sentiment standpoint, Americans feel like China has been a disservice to them from the consumer standpoint, remember, 70 percent of
our economy is the consumer. So I think to some degree, it could be a positive near term, but longer term, really, from a fundamental
perspective, you need those tariffs to kick in.
CHATTERLEY: And we were discussing on Friday consumer sentiment at a 15- year high right now, what should we be looking at as far as stocks are concerned? Because what we are seeing right now is a repricing of
particularly the semiconductors, the chip stocks, those that are most sensitive to the situation.
BELSKI: Right, and I think that's good fundamental work that they are the most sensitive and remember to last year, they were some of the most --
especially in the fourth quarter the most volatile stocks.
So traditionally, two semiconductor stocks, Julia, are more volatile in terms of earnings anyway, so then you dovetail, this is happening in China.
So that's why we always say stick with the bellwether tech companies because they have the most cash and they're the most stable, longer term.
CHATTERLEY: Define bellwether in this market that you're talking about there?
BELSKI: No, thank you for qualifying that. I would say the consumer staples like -- I know that there were some headlines overnight about
Google, but Google, Apple, Microsoft, they touch our everyday life and we are using them almost on the minute basis.
CHATTERLEY: Okay, perfect. But you're also looking at value stocks here, too, particularly versus valuations and how relatively inexpensive they
look and I'm being very careful with my language here.
BELSKI: No, to be a value investor has been painful. And I just go back to the late 90s when I was a strategist, and we'd go to fund complexes and
value was so out of sight and out of vogue, yes.
And then we had this great move in the early 2000s in value. That's I think we're back down to that limit again, finally, and remember, too that
financials are the largest portion of the value of portion of the market. Its financials that dramatically underperformed for 10 years for the most
of the part of 10 years.
So we think those stocks, in particular from our institutional clients around the world are massively under owned. And that's where the big
opportunity is.
CHATTERLEY: At this moment, even with everything else going on, you can be selective and pick up these things.
BELSKI: We do and I think it's -- I think we've entered a market where it's less about value, less about growth, less about hyper growth. It's
just buying good companies.
The market is a stock -- the market is a market of stocks and companies. So buy the best companies, and a lot of them right now are paying great
dividends in terms of the financials. These big money center banks like Bank of America and JPMorgan, they're under owned, we believe by a lot of
our clients.
CHATTERLEY: What about outside of the stock markets right now? I mean, if I could mention -- we just had a discussion off camera about the Chinese
yuan and the risk perhaps that China continues to devalue its currency in the sort of ripple effects that that takes on because there still is a
dollar strength story that underlies that shift tire in the currency there.
BELSKI: Right, which then you have to worry about emerging markets and the onset of that and we should never buy companies or countries, Julia, based
on currency. We only buy them on fundamentals. And so whether or not sales and earnings are starting to improve in China or emerging markets,
that's the real question. So we always caution people to buy countries or let alone markets, based on currency only.
[09:25:19] CHATTERLEY: The other thing that we are seeing if we look at the bond markets is that an 80 percent chance of rate cut coming from the
Federal Reserve this year, so there's still that psychology, whether it's in the stock market or in the bond market that the Fed has got investors'
backs here.
BELSKI: In control.
CHATTERLEY: Yes.
BELSKI: Well, that's exactly right, especially considering how the Fed was aggressive last year and raised rates and in a kind of "misstep," quote-
unquote, in the fourth quarter.
You know, we've said that this year 2019 is this generation's 1995. So we saw that misstep in late '94. Greenspan came out and admitted it. So now
you're talking about the pivot, and the Fed becoming more, let's say, dovish, and so I think investors are kind of anticipating that, but if we
get a positive China accord, the Fed may not have to cut, and I think might be the biggest surprise of all.
CHATTERLEY: And you see a repricing there for the bond market.
BELSKI: Repricing and stability and that would be very good.
CHATTERLEY: We're still talking about the prospect of a trade deal coming. I am really quite concerned about this, Brian. It's brilliant to have you
on the show.
BELSKI: Thanks so much for having us.
CHATTERLEY: Thank you so much. Brian Belski, the chief investment strategist at the BMO Capital Markets.
All right, we are counting down to the market open this morning. Let me give you a look at futures once again. Remember the tech stocks, very much
front and center. The semiconductors, the chip stocks most sensitive because of the earnings that they generate out of China in focus.
We're also going to be walking you through that Sprint-T-Mobile deal. the belief that that's not going to go through with concessions coming from
both companies.
Brian Stelter will be joining us with all the details on that and plenty more to come including a short seller, renowned short seller, Andrew Left
and his views on Beyond Meat. Is share price move too extreme? We will discuss. The market open next. You're watching CNN.
(COMMERCIAL BREAK)
[09:30:00] CHATTERLEY: Welcome back to FIRST MOVE. That was the opening bell here at the New York Stock Exchange on this Monday morning, the first
session of the week and we have but a much weaker open as anticipated.
Tech stocks well and truly in focus and under pressure. We've got Google confirming that it is going to be cutting back business with Huawei as we
discussed earlier on in the show. A lot of the major chip makers also reportedly complying with that U.S. order to blacklist Huawei.
In the meantime, we've got other things to worry about as well. Fed Speak this week to Jay Powell, delivering a speech tonight. We've got the Fed
minutes out this Wednesday of course. Fed investors wanting to understand where the Federal Reserve stands with regards to the ongoing trade tensions
and the disappointment of course over not seeing a shorter term deal.
As we just discussed with the Brian Belski as well, the bond market overwhelmingly believing a rate cut is likely this year. We shall see
whether we get any more clarity from the Fed Speak this week.
For now, let me walk you through the global movers. Tesla well and truly in focus in this session. Wedbush analyst, Dan Ives, a regular on this
show slashing his price target further. He says his major concern is about Tesla's growth opportunities and hitting profit goals will be a quote
"Kilimanjaro-like uphill climb."
He said the company is losing its focus on the moonshot projects. Tesla, of course, trading now at its lowest level in two and a half years. His
big concern here is Model 3 demands not only here in the United States, but translating that into places like China and Europe, too, down more than 4
percent in the session.
Lyft also in focus, it's being hit with an investor lawsuit. The suit says the company issued false and misleading statements and overstated its
market position before the IPO. No response as yet from Lyft. But remember, its shares have now fallen some 30 percent plus since going
public. Ouch. Down some two and a half percent in the session so far.
Sprint and T-Mobile gaining strength. Sprint rallying the most on reports of both companies have reached a deal with regulators that will allow the
$26 billion merger deal to go through. They're expected to see an announcement from regulators saying with the new merger terms today, but
they will not formally approve the deal just yet. More context on that. Sprint right now up some 25 percent.
All right, we're going to talk more about that in just a few moments. But for now let's look at what's going on for some of these chip makers in
particular. Clare Sebastian joins me now.
We've been talking throughout the show, Clare, the pressure for companies that have a huge chunk of their revenues coming from China, the likes of
Qualcomm, of course Broadcom, Intel, all of these guys are under pressure.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Absolutely, Julia. You really get a sense looking at the stock moves today just how tangled the
global supply chains for smartphones.
Let's bring up some of those stocks. Qualcomm, as you say, is a supplier to Huawei; Intel as well. Both of those stocks down sharply. Qualcomm
also heavily exposed not just to Huawei, but to China as a whole, about 67 percent of its revenues last year came from China. Intel, as well about a
quarter of its revenues last year from China.
So all of this ratcheting up the tensions between the U.S. and China also hitting those stocks today. And then you see some of the competitors --
Nokia and Ericsson -- both leading providers of networking equipment alongside Huawei in the global industry, they are looking at this as a
potential to pick up more market share.
So a lot of movement on that today. And as you see, you know really rippling through global supply chains. I think the question is will Huawei
be able to really come up with its own alternatives, to use its own alternative technology to bypass some of this pressure?
CHATTERLEY: Yes, the losers and also the potential gainers here. The question is, does this all go away if at some point a trade deal is
reached? It's really challenging for investors right now. Clare Sebastian, thank you so much for walking us through those moves.
All right, Let's go to the breaking news now. Sprint-T-Mobile's U.S. merger has moved a step closer to approval. The two giants have apparently
made concessions to appease regulators. We're joined by Brian Stelter with the details.
Talk through what the potential concessions might be here, Brian?
BRIAN STELTER, CNN CHIEF MEDIA CORRESPONDENT: Yes, these are significant concessions by T-Mobile and Sprint in order to gain FCC approval of the
deal and FCC Chair, Ajit Pai is saying, he is accepting those and now moving forward.
Here is his statement that just came in. He says, "In light of the significant commitments made by T-Mobile and Sprint as well as the facts
and the record to date, I believe this transaction is in the public interest and I intend to recommend to my colleagues that the FCC approve
it."
Some of the concessions include assets, sales, and some guarantees about service to rural America, parts of the company that don't have reliable
wireless service right now.
As a result of the FCC Chair's decision here, you can see Sprint up more than 25 percent, T-Mobile up almost 6 percent. Both companies benefiting
from this news. This is a $26.5 billion deal that's been long in the works.
[09:35:08] STELTER: T-Mobile and Sprint, the number three and four wireless carriers in the U.S. coming together. They believe they need more
scale to take on at AT&T which is CNN's parent and Verizon. So now the FCC Chairman is recommending this move forward. There will be a vote in the
coming weeks. Presumably this will go ahead and clear now that the Republican-controlled FCC is supporting the deal.
CHATTERLEY: Yes, and regulators clearly very sensitive on what this means for consumers, for pricing in particular. The prepaid business for me is
quite fascinating here because we're talking about pay as you go mobile access for people, low-income families, for example, just getting access to
a contract phone in this country is incredibly difficult. Talk to me about the decision there potentially, too.
STELTER: Yes, that's a very good point. I think a lot of folks, especially in cities, you know, people who are watching this program all
around the world, they take for granted wireless service. They expect it to work all the time. And they expect their prices to remain relatively
stable.
Because right now, these companies have been in a price war where they've been competing on price. But there are a significant number of markets and
a significant number of people across the United States and in other countries that are still getting online for the first time, getting
wireless subscriptions for the first time, T-Mobile and Sprint have been capitalizing on some of that, with as you said that pay as you go model.
The concerns from consumer advocates has been bringing T-Mobile and Sprint together, is going to reduce choice and it's going to cause prices to go
up. Clearly though, the FCC Chairman believes he is at a point now where he feels he can greenlight this deal.
CHATTERLEY: Yes, it's quite fascinating. I mean, as a newcomer to the United States and I can tell you my credit is not bad and I struggled to
get a contract phone here. So yes, watch this space. Brian Stelter, thank you for joining us on that story.
All right, up next. The man who says Beyond Meat has become beyond stupid. Why renowned short seller is betting against the recent Wall Street wonder.
That's next. You're watching FIRST MOVE.
(COMMERCIAL BREAK)
[09:40:10] CHATTERLEY: Welcome back to the show and to look at today's boardroom brief. Ford has just announced that it is cutting its 7,000
white collar jobs or about 10 percent of its salaried workforce. The move is part of a cost-cutting effort that the company said will save around
$600 million a year.
And it could have been worse. Tesla Motors posted a drop in profit for the fourth quarter, but did better than analysts expected, falling from 48
percent. Big cost cuts as Jaguar Land Rover brought the U.K. unit into the green. Tesla zeroed in on JLR last quarter after its high cost of weak
sales led to the worst profit drop in the company's history.
Chinese smartphone maker, Xiaomi posted quarterly revenues beating expectations. The company says smartphone revenue jumped more than 16
percent year-over-year and global sales reached nearly 28 million units. Shipments of Xiaomi smartphones is said to be ranked fourth in the world in
the first quarter.
Beyond Meat has built its brand doing what should be impossible from inventing a meatless meat to a share price that leapt more than 160 percent
on its first day of trading. Is it all too good to be true though? Well, our next guest think so. He says the rise and rise and rise of the share
price is quote "beyond stupid."
Joining me is Andrew Left, founder of Citron Research and renowned short seller, of course. Andrew, always a pleasure to have you on the show. Why
do you think that this rally is beyond stupid? One of the lines that you said is that the stock, the market cap of this stock is actually bigger
than the entire industry that should set alarm bells off.
ANDREW LEFT, FOUNDER, CITRON RESEARCH: Well, it's bigger than the industry right now. I think people are excited, retail investors are very excited
without actually understanding the fact that this is not a technology company, it's food. So it's not as scalable as people would like it and
just because you like the product doesn't necessarily mean you should go out and buy the stock at any price.
If you look at Robinhood, which is the retail trading platform, it is the number one traded stock on Robinhood right now, Beyond Meat.
So it's not to say that product isn't good and not to say that meat alternatives will not have a big future. It's highly competitive, it gets
lower multiples. It's not scalable, and I think it's got a bit over its skis right here.
CHATTERLEY: Impossible Foods as well is going to be a big competitor and they could come to market. How important is that also here?
LEFT: Well, there could be many competitors. The more competitors that come to market, the more it's going to take valuations that compress them
and give you an actual gauge.
But we don't know. This is not Uber. This is not Lyft. This is not some mega trend that's just started penetration. This is something that is
still pretty much experimental. It's not that much healthier than regular meat. They're not trending towards vegetarian market, Beyond Meat is
trying to convert meat eaters to eat beyond.
So it's still, you know, out there. The jury is out on it and if people like the product, that's great, but keep it in perspective. This is not a
SAS company.
CHATTERLEY: Have you tried one?
LEFT: I haven't tried one yet. I've read a lot of reviews. I admit, I'm not going to lie. I knew you were going to ask me that. I was actually
thinking about getting one last night for that reason.
I hear a lot of reviews. They're mixed. So you know, I'm not going to say one way or the next, whether they're good, whether they're bad, it is
preferential taste. The question is, does the stock deserve to be at $85.00, $86.00, $90.00? And probably the answer is no.
But you still respect the fact that it's a small float and this is the game of supply and demand, the stock market. So if someone was to short, it is
an extremely high borrow rate, I don't recommend it to be a bigger position. But if you own the stock from a lower price, thinking this is
going to be something you hold for the next five years, I think it would be a good time to take a profit.
CHATTERLEY: But just to be clear, you're short right now when you think this stock is more reasonable around $65.00 a share?
LEFT: I think by next earnings, once the stock starts going lower and sobriety sets in, I think we'll see somewhere in the 60s. And that's just
what I'm looking at. Yes, I am short on the stock. It is not a large position because of the borrow rate on it -- what you're paying to borrow.
CHATTERLEY: But as you mentioned as well though, I mean, I looked at the numbers. Thirty thousand people who have Robinhood accounts added this
because they wanted to get long. The risk here is for small and individual investors, if that price starts coming down, you kind of get a snowball
effect because people start panicking.
LEFT: Yes, I mean, you have that on the long side and you have that on the short side. But you're right. You know, it was ridiculously price at
$70.00. It's ridiculously priced at $60.00. It just went public at $21.00, what? Two months ago? A month and a half ago?
So yes, if their stock price goes lower because of the large retail ownership, it'll probably continue to go lower.
CHATTERLEY: Talk to me about Lyft because this one has been really punishing for people who got involved on IPO Day. You say it's an amateur
short. Tell me why.
LEFT: Well, first of all, Julia, I'm most amazed, since when does the stock market care about profits? Since when all of a sudden Uber and Lyft
go public and everyone says, but are they profitable?
CHATTERLEY: Since now.
[09:45:10] LEFT: I mean, tell me when that bell rang and people started -- I mean, as a short seller, I've been waiting for this. Uber and Lyft in my
opinion are complete megatrends. Ride sharing is just scratched. I think it's right now, maybe 1 percent of all miles driven on the road, I have no
doubt it would go to 10 percent of the amount of people between the ages of 14 and 17, will start using this in the next three years are just amazing.
So I just look at the rate of adaptation of ride sharing, and it cannot be denied. We are at the start of a mega trend. Now, if profitability
matters, then you don't buy the stock. But if you think you want to own something that in the next 10 years is just going to be completely beyond
disruptive that's what these two stocks are.
CHATTERLEY: Isn't there messaging there somewhere though perhaps all the benefits have accrued to private investors that got involved and gave the
money in the private markets and actually, there's little left. There is a company Uber that is still having to buy revenues nine years later, you
have those questions.
LEFT: Not at all. Actually -- no, no. Actually, it's not at all. Uber pricing is completely of the IPO. It came completely down. They expect to
get a pop. I mean, Uber investors were buying this four years ago, I think at $28.00 a share in the private market.
So not been one of those situation as "Oh, let's take the IPO," and the retail guy doesn't have a chance. The retail guy actually is getting in at
a fair price here, if you believe the bigger story, and that's key. This was supposed to be I think, $80.00 to $90.00 a share a few months ago.
CHATTERLEY: Yes, I want to move on now because I'm going to run out of time battling with you over this. Tesla, talk to me about this one because
one of the big boys out there on the street, Wedbush coming out now for a second time and going look, "I'm really worried." You've got concerns for a
long time.
LEFT: Well, you know, it's the key. It's funny, we saw it with -- you saw it with an Uber when Travis came out. When you have a company that's
telling a big growth story, you need a CEO that people have confidence in.
Remember, two months ago -- and I like Tesla. I like the product. Yes, I've driven one, I don't own one. Elon Musk lost everyone -- even his
supporters -- he lost their confidence a few months ago and you saw the stock price and you saw the big shareholder selling at around $260.00,
$270.00 and I mean the product is still the product.
He has not been able to articulate as a supply issue. Is it a demand issue? Now today, Wedbush is already is concerned about his side projects?
He has had these side projects for years, why do they have concern today?
So it didn't matter until it matters. And as soon as you lose confidence in the CEO, it's just so tough to own a stock.
CHATTERLEY: How much lower do you think it goes under?
LEFT: I mean, at these levels, I liked obviously the upside more than the downside.
CHATTERLEY: I know.
LEFT: At these levels -- but if it went another 10 to 15 -- you know, things always overshoot. So they overshoot high, they overshoot low. But
you know, there's been a lot of bad press, whether it be the fires, the autonomous, the CEO, so let's just suck it all in and fill a high short
interest then let's see how those numbers come out over the next few months of how many cars they're selling.
Because at the end of the day, the most important is how many cars are you selling?
CHATTERLEY: So show me stock. Netflix, very quickly, because since you and I last talked about this, we've had Disney plus offerings, and we've
got a sense of what their pricing is going to be. You always said Netflix is a $300.00 share price stock. It's right now $350.00. What do you think
on this one?
LEFT: I mean, all you hear is streaming wars, streaming wars, and as an investor, I want to stay out of a war. You know, Netflix was ready to
write the tombstone for Disney, for Time Warner, for AT&T, I just don't know if that can be done.
But the consumer still has to vote. So we'll still see. They're still giving a long leash, Netflix. Let's see if they can raise prices. I heard
the most ridiculous thing, they said, "Well, if we can't license friends, with just create our own friends." It's not that easy, Netflix. So let's
see what happens.
I just -- as an investor, whenever there's a word "war" involved, I'll sit on the sideline or I'll own Disney, who is a value player in this war.
CHATTERLEY: Awesome. Andrew Left, always a pleasure to have you on the show. The founder, of course, of Citron Research.
LEFT: Nice to be here.
CHATTERLEY: Thank you so much for joining us. All right, so we're going to take a quick break, but still ahead from what's moving the markets to
what is stirring the emotions of fans, the finale of "Game of Thrones," no spoilers. Some are happy, some are disappointed, but in China, some are
downright furious. We will explain why. Stay with us.
(COMMERCIAL BREAK)
[09:51:47] CHATTERLEY: Welcome back to FIRST MOVE. The battle for the Iron Throne has come to an end and we can now reveal who was victorious.
No spoilers. Don't panic. I'm talking HBO.
("GAME OF THRONES" SCENE PLAYS)
CHATTERLEY: An indescribable level of suspense after eight seasons, the final episode of "Game of Thrones" has aired here in the United States, but
like Daenerys and Irri there, we are keeping quiet as I keep saying, no spoilers here.
Frank Pallotta couldn't quite make it to Wester Ross for our report. But New York you know, it's close enough. Frank, millions and millions of
people just in the United States have checked in each week in order to watch the latest episode. Are we expecting another record breaking
following last night, too?
FRANK PALLOTTA, CNN BUSINESS MEDIA WRITER: I'd be completely shocked that this wasn't the biggest or I should say most watched episode in the series'
history. My guess last night before the episode hit was about 21 million that would be a new record. The record right now is 18.4, which was set by
last year's record.
You have to remember, this is one of the most anticipated series finales of all time. So I'd be really shocked if we didn't see a ratings record this
afternoon.
CHATTERLEY: So what happened in China because there were reports overnight that the Chinese were all sitting down ready to watch it and Tencent of
course, who was the rights decided to tell them, it wasn't going to be shown. Wild speculation about why? What do we know?
PALLOTTA: Well, we're still kind of trying to figure out what exactly happened in China. But when you think about it, how terrible must it be
for all the fans in China that you're coming into this huge episode, this culmination, this finale of this epic story, and it's just not there.
Could you imagine if that happened here? There'd be riots in the streets. People would actually take up swords. It would be insane.
CHATTERLEY: So what else does HBO got coming up? If "Game of Thrones" is over? What more have they got because as great as this has been, how do
they keep enticing us to come back weekend after weekend?
PALLOTTA: Well, HBO is kind of in a transition right now as it would be for anyone after leaving a huge show like this behind, but it has some
heavy hitters potentially on its way. It has still the Season 3 of "Westworld," which is somewhat popular in 2020.
It has this new series called "Watchmen" which is based on a graphic novel, it's about a world of superheroes. It's a little bit dark, and then it
still has a bunch of other shows as well, such as like "Pretty Little Liars," and other things of that nature, "Big Little Lies," excuse me. I
always get those two shows mixed up.
But they all have the -- HBO has a bunch of contents still going forward, but they have nothing compared to "Game of Thrones" at least right now.
CHATTERLEY: Pretty and big, we'll go with that, and I haven't watched any of the last series, so I'm very excited. I took all the anticipation to
come. Frank Pallotta, thank you so much for joining us on that story.
All right, now this is a great one. This is my favorite one of the day. Making bright futures shine even brighter when Robert F. Smith rose to
address them, new graduates of Morehouse College in the U.S. State of Georgia were probably expecting to receive information, perhaps even some
inspiration. What they got, though, was liberation.
The billionaire investor freed the entire class from years of debt by wiping out tens of millions of dollars' worth of student loans.
(BEGIN VIDEO CLIP)
[09:55:03] ROBERT F. SMITH, ENTREPRENEUR AND PHILANTHROPIST: On behalf of the eight generations of my family who have been in this country, we are
going to put a little fuel in your bus.
And my family is making a grant to eliminate your student loans.
(Cheering and Applause)
(END VIDEO CLIP)
CHATTERLEY: The year's graduates of the historically black college to pay it forward by going on to help future classes realize their dreams. What a
great gesture.
All right, that just about wraps it up for the show. Let me give you a look once again at what we're seeing for the market at this moment.
Remember the pressure on the NASDAQ down some one and a half percent. The semiconductors, the chip stocks, those that generate most significant
proportion of their business, their revenues from China. The likes of Qualcomm of course and Intel under most pressure.
We will continue see throughout the session and I'll be back in a couple of hours' time to walk you through what we're seeing in a couple of hours'
time on "The Express."
For now, you've been watching FIRST MOVE, time to go make yours. I'll see you later.
(COMMERCIAL BREAK)
[10:00:00]
END
