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First Move with Julia Chatterley
The LSE Turns Down Hong Kong's Takeover After Blaming Uncertainty As Well As Political Risk, The Startup, WeWork Plans To Go Public, But The Founder Shakes Up Its Structure To Do So; Why Businesses Is So Keen Make "Friends" 25 Years On. Aired 9-10a ET
Aired September 13, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:09]
ISA SOARES, CNN INTERNATIONAL ANCHOR: Live from London, I'm Isa Soares, and here is what you need to know. Rejected: The LSE turns down Hong
Kong's takeover after blaming uncertainty as well as political risk. WeWork-ing towards an IPO. The startup plans to go public, but the founder
shakes up its structure to do so. Brands be there for you. Why businesses is so keen make "Friends" 25 years on. It is Friday and this is FIRST
MOVE.
A very warm welcome. Isa Soares sitting in for Julia Chatterley. It is Friday, the 13th. It is two o'clock here in London, Friday the 13th but it
seems the signs are that it's bringing good luck not bad, at least on Wall Street. Have a look at the futures pointing to a higher open there. The
futures, Dow up three tenths of a percent. The NASDAQ just a tenth of a percent or so. S&P similar picture. All pretty much looking pretty good
on the week as well.
Investors have gotten most of what they were looking for this week, not just a new short of monetary stimulus, if you remember from the ECB - the
European Central Bank. We are also seeing signs of a break in the U.S.- China trade war. Of course, the question is, how long will that last?
Early on Friday, China delivered the latest in a series of what the U.S. President calls goodwill gestures. State media saying American pork as
well as soybeans will be exempt from new tariffs. I will take you to Wall Street in just a minute to get a sense really how investors are
interpreting this.
Have a look at the European markets though as we come to a few hours or so until the end of trade. Xetra DAX up almost half the percent; Paris CAC
40, a quarter; Amsterdam, a flat there, but the Milan MIB half of one percent.
Now in Europe, if you remember, ECB President Mario Draghi really dividing opinion on Thursday with a new round of stimulus. But European markets all
taking on this stride, all in the green this Friday, the 13th.
And don't forget the Federal Reserve. They're holding another rate meeting next week. The big question for marketers, will the Fed follow with fresh
cut? And markets is where we begin our drivers today.
Alison Kosik joins me now from New York. Alison, we will talk about the Fed in just a moment. But let's talk stocks because we seeing stocks
really edgy, near those record highs. Is everyone just feeling very optimistic about that U.S. and China extending olive branches to one
another here?
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: There may be a little bit of that, Isa, but I think more of the optimism is coming from the expectation
that the Fed will cut another quarter percentage point and make that cut next week.
Of course the market is definitely going to be watching whether the Fed says, whether there will be more cuts. So that really is another step that
the Fed would have to take to continue the optimism, but the optimism really is incredible when you look at the S&P 500 and the Dow, they are
fractional percentage points away from all-time highs. Never mind the trade war, despite softening a little bit is far from over.
Many multinational companies are expecting to report weak third quarter earnings. You know, never mind the fact that there's been a contraction in
manufacturing for the first time in three years. And never mind the fact that Donald Trump continues to duke it out with the Fed.
So we're seeing stocks really hold up well, despite a little bit of a rough August. We did see stocks bounce back. So this bull-run really still has
legs to run. There is an expectation at least from one analyst from BTIG strategist, Julian Emanuel, he thinks that the S&P 500 could get to 30 to
50 by the end of the year. That means that's an almost nine percent jump from where it is now -- Isa.
SOARES: Well, pretty impressive. Let's talk about the Fed and next week and what you're hearing from the trader that you've spoken to. We know,
President Trump, he has been highly critical of the Fed's policy. In fact, he tweeted this week regarding ECB saying that the ECB had acted quickly,
while the Fed didn't act. In fact, he even called for rates of zero or lower in a tweet.
From those you've been speaking to, what are you hearing? Which way will the Fed move here?
KOSIK: Yes, the expectation once again is that the Fed will cut a quarter percentage point. You know what Donald Trump wants is to see a half a
percent. Many are thinking that's just too much. The data that we've been getting, despite it being mixed, you know, showing once again, a
contraction in manufacturing, but still showing that jobs are still hanging on as far as the numbers go.
The question is whether the Fed is justified to make even a quarter percentage point cut, but many are still expecting that to happen. Because
the data still is mixed. The inverted yield curve is still a factor in in the Fed's thinking even though it shouldn't be, it probably is that Fed
members do consider, you know, the big picture when they make that decision next week -- Isa.
[09:05:15]
SOARES: Alison Kosik, thank you very much. Good to see you, Alison. And some developing news to bring you, in the past couple of hours, in fact,
the London Stock Exchange has rejected the Hong Kong exchanges takeover offer. Our Clare Sebastian has more on this. Clare, talk us through the
reasons for rejecting the offer, what concerns did they have here?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Well, Isa, the LSE has published a letter to the management of the Hong Kong Exchanges and
clearing group this morning and it was brutal. They really criticized almost everything about this deal.
The first point they say was that the problem was this was contingent on them dropping an existing kind of a purchase of Refinitive, which is a
market data company that has been, they say, extremely well received by the market.
By contrast, they say a takeover by the Hong Kong Exchanges would be quite a significant backward step for the LSE group strategically. So it's a
pretty strong language there.
The second problem they say is that the regulatory approval process for this takeover would have been very long and created a lot of uncertainty
for shareholders. Part of the problem of that is that they say, "There is no doubt that your unusual Board structure and your relationship with the
Hong Kong government will complicate matters."
We know that the Hong Kong government is the biggest single shareholder in the Hong Kong Exchanges and clearing. There's a lot of concern about China
tightening its control over the city. That has been the root of a lot of the protests that we've seen in recent months, so clearly; that was a
factor in this decision as well.
And they didn't like the structure of the deal, either. The fact that three quarters of it was made up with shares in Hong Kong Exchanges, and
they were disappointed. They said that this went -- they went public with this just two days after notifying the LSE, so a stinging rebuke there,
Isa. Pretty unusual to see that kind of criticism in this context.
SOARES: Pretty -- pretty damning. There was nothing positive there, but actually I am going to now ask, Rob, our producer to bring the share price
because actually, the London Stock Exchange stocks actually are doing pretty well on the news, and Clare, you and I know this because analysts
had widely expected the bid to fail, talking about worries, about Chinese influence over financial infrastructure.
Actually, we're looking at the share price now, almost up three and a half percent. But going back to the deal, you know, putting that aside the
financial infrastructure and the concerns, was the proposition attractive in any way for shareholders, Clare?
SEBASTIAN: Well, I mean, it's pretty interesting actually looking at the share price, Isa, because it did go up about five percent on the day that
this emerged, this news of a potential takeover bid, but as you see, as well up on the rejection, as well.
So I think that kind of -- that clearly has won out. And of course, the share price is up significantly more than 25 percent since the Refinitive
deal was announced back in July. So clearly that is the proposal given that it was a binary choice between the two that shareholders prefer.
There was a grudging kind of nod in the letter to the fact that this takeover by the Hong Kong Exchanges would have provided greater access to
the Chinese market and all of that growth there, but the LSE is saying that they already have access through a partnership they have with the Shanghai
Stock Exchange.
So overall, you know, I think, we can hark back to the fact that the CEO of the Hong Kong Exchanges described this as a corporate Romeo and Juliet. I
think he may now live to regret that because it seems to have been doomed from the start -- Isa.
SOARES: Brilliant. Clare Sebastian there for us. And Clare will be here for us later, as we talk "Friends." Thanks, Clare. We will speak to you
in a minute.
Now, workspace startup, WeWork plans to go public on the NASDAQ. The development comes as the company changes its governance structure. This
includes appointing a new independent director by the end of this year. Matt Egan is with me. Matt, now this is fascinating story because I've
been looking at WeWork in the last couple of days. Talk us through how they've changed the governance structure, whether that critically, Matt is
enough to attract investors to their public offering here.
MATT EGAN, CNN BUSINESS LEAD WRITER: So Isa, this is what it looks like when a company is desperate to salvage its IPO. Right? I mean, this
WeWork debut was really on life support, because investors were very concerned. They really didn't want to touch this thing, due to concerns
about massive losses and questionable corporate governance issues.
And so now, WeWork is taking this sort of unusual step of just weeks before its IPO, it is announcing a series of corporate governance changes that
they seem to be designed to sort of reassure Wall Street that this company is willing to grow up at least if that's what it takes to go public.
So just running through a couple of those changes. Lead independent director appointed by yearend, the power of the super voting shares are
going to get cut in half, no member of CEO, Adam Neumann's family will sit on the Board. If Neumann becomes incapacitated or dies, his wife will no
longer get to pick his successor.
[09:10:02]
EGAN: You know, of course, I think all of this raises a question though. I mean, if WeWork thought these were such smart moves, why didn't announce
them earlier? Why did it take the fact that the IPO was on the verge of collapse before it did that? Now, that may rub some shareholders the wrong
way.
But even if they do reassure people who are worried about these management issues, there is still this question about whether or not the company even
has a path to profitability, right? Because WeWork has lost $4.2 billion since the start of 2016. It lost more than $900 million just during the
first six months of this year. So Isa, it's no wonder why this company is in such a rush to raise more money.
SOARES: And on that point, Matt, I do wonder whether you know, these changes suffice in many ways, because I was reading a fascinating article
by a journalist in "The Guardian" here who is basically saying that WeWork looks like a bubble waiting to burst, basically arguing its value is
inflated. What are you hearing?
EGAN: Well, we're hearing that the valuation is coming down really, really sharply, which is very telling, right? Because in the last round of
funding as a private company, WeWork was valued at $47 billion. That was just earlier this year. Now, "The Wall Street Journal" is reporting that
the IPO valuation, if it happens, is going to be below $20 billion. That is really a remarkable shift.
And I think it's indicative of this serious skepticism about this company, given the corporate governance issues, given the massive losses. And I
think there is a bigger picture. There's kind of a rethink on Wall Street about the need to really be cautious around some of these companies with
high valuations. You sort of wonder if WeWork, wished it went public, maybe you know, nine months ago or so.
SOARES: Very good point, Matt Egan there for us. Thanks very much. Matt will keep an eye on WeWork, we know there will be several shifts in the
next few weeks. Thanks, Matt.
Now, I want to take you to -- keep you in the U.S. because a potential merger between two the Americans biggest cigarette companies could go up in
smoke as the Trump administration cracks down on e-cigarettes. Paul La Monica has more from New York.
And Paul, we heard both from the Trump administration and the FDA both really pushing to ban flavored e-cigarettes because of health concerns as
well as teen addiction. Does this crackdown, Paul, make a merger harder to swallow, do you think?
PAUL LA MONICA, CNN BUSINESS REPORTER: I think it's going to be tougher, Isa because when you consider that Altria has made this big bet on the
private unicorn, Juul Labs, which is one of the leaders in the vaping market, that was obviously a move that they did to try and minimize the
loss that they're seeing in traditional tobacco cigarette use in the U.S, so the hope was that they can latch on to the vaping trend.
Then Philip Morris, which wants to merge with Altria, potentially, to reunify these companies that broke up, you know, more than a decade ago,
Philip Morris has its own vaping technology called IQOS. So that is also, I guess, going to come into question whether or not that is as valuable as
that company it may be hoped if the FDA is looking to put more, you know, limits on the sale of you know, vaping and e-cigarette products.
SOARES: One investor was suggesting perhaps that even if Philip Morris isn't planning to pay top dollar, let's say for Altria, a deal may not be
viable because as you put it, it's an asset with a murky fundamental outlook.
LA MONICA: Yes, exactly. That really, I think is the big question right now, Isa, and I think you had prior to this regulatory crackdown, the
possibility of Altria and Philip Morris getting back together. It was not going to be about what the old company was, not traditional tobacco
cigarettes. The hope was that vaping would lead to growth and then potentially also even cannabis, because keep in mind Altria has a huge
stake in Cronos, one of the leading Canadian cannabis companies.
So now if vaping is no longer potentially going to be the growth industry that people had hoped, it does beg the question, why did these two
companies need to get back together and even if they do, the price would probably be a lot lower than what Altria might have been hoping for just a
few weeks ago.
SOARES: Paul La Monica there for us, breaking it all down. Thanks, Paul. We'll speak to you a bit later. Now, let me bring you up to date with the
stories making headlines around the world this hour. Another chance to shine for 2020 hopefuls. For the first time, the top 10 Democratic
candidates hoping to challenge Donald Trump squared off in Texas. Everything from gun control to health care was on the agenda. Take a
listen.
(BEGIN VIDEO CLIP)
JOE BIDEN (D), PRESIDENTIAL CANDIDATE: My plan for healthcare costs a lot of money, it costs $740 billion. It doesn't cost $30 trillion.
SEN. ELIZABETH WARREN (D-MA), PRESIDENTIAL CANDIDATE: Medicare-for-All. Costs are going to go up for wealthier individuals and costs are going to
go up for giant corporations.
[09:15:09]
SEN. BERNIE SANDERS (I-VT), PRESIDENTIAL CANDIDATE: I wrote the damn Bill, if I may say so, the intent to eliminate all out-of-pocket expenses.
(END VIDEO CLIP)
SOARES: Now people in the Bahamas have barely begun to rebuild from the devastation of Hurricane Dorian, now, a new warning has been issued as
another Tropical Storm forms in the Atlantic. In the aftermath of the hurricane, 1,300 people are unaccounted for. The death toll stands at 50,
but that is expected to rise as search efforts continue.
Still to come right here on FIRST MOVE. The Brexit bank robbery. The U.K. House of Commons Speaker has a stern warning for Boris Johnson.
And the one with the anniversary. Hit sitcom "Friends" is still there for you, believe it or not, 25 years on. We'll bring you the latest, next.
(COMMERCIAL BREAK)
SOARES: Welcome back to FIRST MOVE. Let's check in on Sterling. The British Pound is doing its trading, we're bringing the graphic up for you.
There is 1.24 against the dollar that is the strongest it has been since July and comes as investors judge the prospect of a no-deal Brexit. They
are seeing that as receding.
So is a Brexit breakthrough on the cards? Why is Sterling so optimistic? Well, British Prime Minister Boris Johnson we have found in the last few
hours will go to Luxembourg on Monday to meet Jean-Claude Juncker, the outgoing E.U. Commission President.
This was Mr. Johnson meeting voters in Yorkshire in the North England earlier today. Meanwhile, House of Commons Speaker, John Bercow has warned
the Prime Minister that in his quest to deliver Brexit, there is no justification it seems for breaking the law. Take a listen.
(BEGIN VIDEO CLIP)
JOHN BERCOW, SPEAKER OF THE BRITISH HOUSE OF COMMONS: One should no more refuse to request an extension of Article 50, because of what one might
regard as the noble end of departing from the E.U. as soon as possible, than one could possibly excuse robbing a bank on the basis that the cash
stolen would be donated to a charitable cause immediately afterwards."
(END VIDEO CLIP)
[09:20:15]
SOARES: We'll talk about Bercow. Melissa Bell is joining me now in just a second. Let's talk about this meeting on Monday. Is this a sign? I mean,
Sterling is looking at this as something positive that perhaps there might be a deal, there might be a proposal that the E.U. hasn't seen?
MELISSA BELL, CNN CORRESPONDENT: Well, because this samples the need to find some kind of resolution, some kind of way out. And there is now this
talk, this whisper really, for the time being, Isa that one of things that Boris Johnson may be willing to look at is the very thing that Theresa May
had been opposed to that had been an E.U. suggestion over the course of those long and laborious negotiations, which was essentially a Northern
Ireland only backstop.
Her objection had been that this would drive a customs line through the Irish Sea, essentially creating or threatening rather the constitutional
integrity of the United Kingdom. There is a suggestion so far confirmed that one of the things that may be being explored in the talks that are
going on now, between the British government and the E.U. is this possibility that perhaps, in fact, Boris Johnson might consider this as a
palatable -- more palatable -- alternative than the backstop that is on the table.
We will have to wait until this meeting on Monday to find out whether that is something that he is willing to explore and willing to put on the table,
but that is for the time being the only solution, the only way out of the impasse in which we find ourselves. So perhaps a little hope is better
than no hope at all.
SOARES: No, completely. But they haven't received any proposals, I'm guessing as of right now.
BELL: No. And we've heard from Michel Barnier, the Chief E.U. Brexit Negotiator being very clearly, as he spoke to MEPs saying, "Look, the ball
is again in London's court. We wait to hear what concrete proposals they have to make that might be acceptable to the 27." So this is far from
done. It is far from even the beginning of a negotiation, as far as we know, in terms of where they're actually talking about.
But for the time being, because of all that's happened over the last couple of weeks, Boris Johnson's only hope for the time being, is this idea that
maybe something might be able to be reached that would prevent this blockage from taking hold.
He spoke a moment ago in Rotherham saying again, that he was cautiously optimistic that a deal might be reached, but that he doubled down -- but
doubling down again on the idea that if it was not, we would be leaving on the 31st of October and this is of course, at the heart of this battle
that's going on now between Downing Street and all of the institutions that underpin British parliamentary democracy -- its legislature, its judiciary.
So a battle that has not seen its end yet and that continues very much and we were reminded of it a moment ago, when a heckler put to him in the
middle of his speech, he had to be quoted as saying, "Look, why don't you get to Parliament and sort out this mess that you've created, Mr. Johnson."
SOARES: Melissa Bell. Thank you very much. We'll have much more after a very short break.
(COMMERCIAL BREAK)
[09:25:55]
SOARES: As prominent proponents of a no-deal Brexit has Tim Martin, the founder of one of Britain's largest pub chains, JD Wetherspoon. I spoke
with him just before the show. Take a listen.
(BEGIN VIDEOTAPE)
SOARES: Do you still believe or think that we can get a deal at this stage?
TIM MARTIN, FOUNDER AND CHAIRMAN, JD WEATHERSPOON: Well, I hope we don't get a deal because I think a deal will be bad for the country. A deal ties
your hands. If we leave without a deal, we can eliminate tariffs on thousands of non-E.U. imports, and we can avoid payment of 39 billion
pounds, regain control of fishing.
But the most important economic thing we can get is greater democracy and democracy is economic steroids. Look at South Korea versus North Korea.
Look at how well Japan did when it became democratic.
SOARES: Tim, today we heard from John Bercow, the Speaker of the House of Commons who basically said that Boris Johnson would be acting -- and I'm
quoting him here -- "like a bank robber" if he refuses to delay Brexit. What are your thoughts on those comments? And what we've had from Bercow
in the last couple of weeks?
MARTIN: I think Bercow and his cohorts are the bank robber. The government sent a leaflet to every house in the country in 2016 saying.
"This is a referendum. It's once in a generation, you decide. The government will implement your decision." Most MPs were elected, 85
percent of them on a manifesto which honored the referendum. And it is Parliament and Mr. Bercow who haven't honored the referendum.
SOARES: But had said that elite remainers are ignoring the big picture. What do you mean by that?
MARTIN: Elite remainers are ignoring the big picture, because what they're doing is they're ignoring the fact that tariffs on 93 percent of the world
will be reduced and that we save 39 billion pounds, and that we increase the level of democracy.
They find it very difficult to input into their computers the effect of increasing democracy. They find it quite easy to say the ports will be
blocked for three days.
SOARES: As a businessman, I want to get your take on what you've seen from the Yellowhammer report, a report really outlining some of the short
impacts, the impact the country may face, everything from health care to medication delays at ports. How does that, if it does impact your business
at all?
MARTIN: Yellowhammer, as I understand it is an exercise in trying to think of what might go wrong, which is a legitimate thing for a business or a
government to do. All the things which are supposed to have gone wrong haven't gone wrong.
People said the planes won't fly. Now, Ryanair has said that will no longer be an issue. We've heard that by now tens of thousands of jobs
would have left the city of London. That hasn't happened. I think Yellowhammer is an exercise in caution, and that's okay. It is not
economic reality. We will do better if we leave without a deal.
SOARES: If there is chaos, would you be able to live with the fact that you're saying actually, this is the worst case scenario that it is not
going to be as bad, can you live with that?
MARTIN: We're trying to regain democracy in the U.K., which is the biggest beneficiary for freedom and prosperity. One and a half days chaos at the
ports. There's no reason there should be.
SOARES: For example, your burgers, tomato, salad, lettuce -- a lot of that comes from the E.U. What's your backup plan? Do you have a strategy? Do
you have a plan in place if those produce can't come in?
MARTIN: I think what will happen is the E.U. suppliers will say, "We can't afford this." We've just -- Kopparberg, one of our suppliers of excellent
Swedish cider have switched their production to the U.K. and we sold a million pints of Kopparberg back in July. That's trade.
(END VIDEOTAPE)
[09:30:10]
SOARES: And that was the opening the bell on Friday, the 13th. The Dow and the S&P, if you remember yesterday closing off just short of record
highs. U.S. stocks opening -- expected to open at a high today. There you go. Dow Jones, quarter of a percent; S&P, a tenth of one percent.
Investors feeling rather positive in fact for Friday, the 13th as trade tensions appear to be easing between the U.S. and China. And of course
after you saw a stimulus from the ECB on Thursday.
So starting this Friday or ending the week, depending how you want to see it in the positive, in the green as you can see there.
In terms of global movers we are keeping our eyes on, Southwest Airlines, they're trading higher. Stock got upgraded to outperform. Macquarie says
the airline will be able to run efficiently after the Boeing 737 grounding ends.
Another stock we're looking at, you can see there is Apple. Stocks down at one and a half percent, almost one and a half percent lower. That's after
Goldman Sachs reduced the tech giant's price tag. And now it's predicting and a 26 percent downside risk. Now, this is because of the accounting
method Apple will use for its new streaming service that we brought to you here on CNN all this week.
SmileDirect also stocks are up as you can see there. The Club, it is up four percent, doing pretty well actually, still trading well below the IPO
price of $23.00. Now the company, which makes teeth-straightening kits listed on the NASDAQ on Thursday, and still enjoying that celebration.
They are up four percent or so.
Hugh Gimber, Global Market Strategist of JPMorgan Asset Management joins me now. Hugh, thanks for being here with me. Plenty for us to get our teeth
into. Let's start first with what we saw in the markets. We're seeing a pretty stellar week, I have to say, with stock markets, so different from
what we have been seeing in the last few weeks. How much of this is traders getting very excited about what the Fed has next week? Or trade --
the lack of trade war -- the trade war easing between China and the United States?
HUGH GIMBER, GLOBAL MARKET STRATEGIST, JPMORGAN ASSET MANAGEMENT: Sure, I think the equity market really is causing a bit of a tug-of-war at the
moment with trade uncertainty and slowing global growth on one side, and then Central Bank stimulus on the other. And it is really about which of
those two sides is pulling hardest in one direction.
SOARES: Which one is it?
GIMBER: And so this week, I think the trade news has been positive for the market. Investors are reading into the developments between the U.S. and
China very positively, and really hopes of building for a deal or a mini- deal potentially of some sort later this year.
SOARES: But we've been her so many times.
GIMBER: Exactly. I think you're right, therefore, so it's a question whether this optimism in the market is appropriate. There have been ebbs
and flows in the U.S.-China trade negotiations throughout the past year or so. And I think we're really in in another one at the moment. And so
we're not reading too much into the optimism in the market currently.
SOARES: So maybe this might be short lived. We will keep an eye on that. Let's talk Fed. What are your expectations for next week? Alison Kosik at
the New York Stock Exchange is basically telling us, expecting of a cut. But that might not be enough for President Trump here.
GIMBER: Yes, I think a cut is broadly expected, and I would agree with that personally at 25 basis point cut it looks likely next week.
SOARES: Yes.
GIMBER: For me, it will be about the direction of travel for the Fed thereafter. And so I think markets will be looking for any signs as to
whether this is going to be a couple of cuts from the Fed. And then they're going to try and pause and let the economy run or whether this is
really the start of a more significant cutting cycle.
SOARES: And as our viewers will know, language is key. What we hear from the Fed, not so much what they announce. But you know what -- reading
between the lines, what do you want to hear? What will it tell you that this is -- we're in the right track here, Hugh?
GIMBER: Sure. So the assessment of the Fed's outlook for growth both domestically and globally will be very important. And I think if you were
to see a softening in their tone concerns, building perhaps around the global outlook then that may cause markets to start to price in greater Fed
easing ahead.
SOARES: Will the Fed be looking at the ECB and its move here this week trying -- will they be looking at each other? How does it -- do they work
in tandem in terms of the global economy?
GIMBER: I wouldn't say that they're looking at each other, as much as I'd say they're looking at similar conditions globally. So they're facing
similar challenges in terms of inflation not being quite as high as they may like, in terms of slowing growth, and so it's fair to say that their
reaction is similar, but I don't think it's one leading the other.
[09:35:03]
SOARES: We heard from President Trump. You know, President Trump has been very critical of the Fed's policy. He tweeted this week about the ECB, the
European Central Bank saying -- basically saying, they acted quickly, and basically saying why the Fed didn't act.
President Trump also has been tweeting and calling for rates of zero lower in a tweet. I mean, I've never even thought that we would get to this,
this sort of comments, would you imagine of getting right through a zero? Is that even possible at this point?
GIMBER: It all depends on your time horizon, I think. So the path of rates in my view is lower from here. But as to whether we do start to
approach zero, I think that says to how the macro picture plays out.
So if as I say, this is more of a significant cutting cycle, I think it's because growth weakens through this year and further into 2020. And then I
do you see the path of Fed rates moving significantly lower. As to whether we approach zero, I think that's quite a negative macro scenario for that
to come about.
SOARES: What are your concerns as you look to Europe? We've seen ECB move, quantitative easing, that's something that markets seem to have
liked. Where are your concerns when you look at the European economy?
GIMBER: I think if you look at the market reaction yesterday, it was quite confused. Investors weren't quite sure whether to read this as good news,
because there's more stimulus coming.
SOARES: Or more news, as a warning.
GIMBER: Exactly. So I think that explains some of the volatility that we saw in asset prices immediately after the event yesterday. From my
perspective for Europe, the open nature of the European economy does make it particularly vulnerable to the trade disputes, and so even more so than
the U.S. or China, for example, it's that openness and that high exposure to trade volumes that makes Europe vulnerable in this scenario.
SOARES: And I am being told to wrap, and I need to ask you this. Sterling, I don't know if you can bring it, Rob, Sterling doing
particularly well today, hopes of a deal. There it goes. Up 1.24 against the dollar. What are you your thoughts, Hugh?
GIMBER: So Sterling, there are two very binary outcomes here. So you have no deal, I think Sterling would have significant room to move lower if we
were to approach a no deal either at the end of October, or potentially early next year. At the same time, we're starting to hear noises about a
deal not being completely written off over the next six weeks or so.
And so when faced with these two very binary scenarios, for us, it's about not taking heroic calls on either side really, and that applies for
Sterling and for U.K. assets more broadly.
SOARES: Hugh, thank you very much. Lovely to meet you. Thanks for coming in.
GIMBER: Thank you.
SOARES: Now, time for one more "Crypto Crazy" as we wrap up all our week of all things Bitcoin and co. We show you how a veteran investor decided
to ditch traditional assets and go for crypto. We'll explain, next.
(COMMERCIAL BREAK)
[09:40:50]
TEXT: Crypto Crazy.
SOARES: Now in the last part of our Crypto Crazy week, we look at what your cryptocurrencies have for mainstream investors. Travis Kling is the
Founder and Chief Investment Officer of IKIGAI Assessment Management. He spent 10 years in traditional finance leading institutions. Last year, he
left that world to focus solely on investing in crypto. Julia spoke with Kling and asked him what got him into it in the first place.
(BEGIN VIDEOTAPE)
TRAVIS KLING, FOUNDER AND CHIEF INVESTMENT OFFICER, IKIGAI ASSESSMENT MANAGEMENT: I'm not really a tech investor by background, and I'm not
really a tech kind of guy. I don't own an Apple Watch. I think Alexa is Big Brother. I've always kind of been like that. So you know, I saw
Bitcoin pretty early, not nearly as early as some people, but around when the time Silk Road got shut down in late 2013. And then in early '14, Mt.
Gox got hacked, and that was sort of confirmation to me that this wasn't really an investable asset class. So I stopped paying attention to it in
early 2014.
And then fast forward to the back part of '16, the price started going back up again and it popped back up on my radar, and I started doing more
research and then Ethereum and all of the ICOs in early '17, those started going crazy, so I started doing more research around those.
As I was doing that that period of self-study, I just kept coming across revolutionary concept after revolutionary concept. And collectively, over
about probably 500 hours of self-study in the summer 2017 convinced myself that this technology was going to be the most important innovation since
the internet the first time around. And as such, was likely to be the most significant investment opportunity of a generation.
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, FIRST MOVE: Why? Because I feel like up until that point, what was going on, whether it's in
cryptocurrencies or in the underlying technology here was something very separate from what was going on in the rest of the world. And I do feel
like, right now it feels like we're in an intersection where we talk about cryptocurrencies, in particular, in relation to what's going on as far as
monetary stimulus, a lack of fiscal stimulus, perhaps from governments, it's like the intersection the two things that tied, particularly now.
KLING: Yes, so now is an incredibly interesting time from a global macro perspective, and it also is, you know, to borrow phrase from the Old
Testament, it appears that crypto has been created for such a time as this, with what we have with monetary and fiscal policies from Central Banks and
governments, big tech overreach, government overreach in general, data privacy issues that are coming to the front and center of the sort of
collective consciousness and specifically with Bitcoin and maybe we can put sort of Bitcoin in one bucket and put, you know, all the other crypto
assets in a different bucket.
Bitcoin has gone through a number of different sort of identities or phases over its ten and a half year history, and I think part of the confusion
that the sort of average person has with understanding Bitcoin and other crypto assets is because of these evolutions of identity.
So just to be clear, Bitcoin is a non-sovereign, hard cap supply, global, immutable, decentralized digital store of value. And that's a lot of
different adjectives, but all of them are very important. And what that leads us to is, it is a hedge against monetary and fiscal irresponsibility
from Central Banks and governments globally.
CHATTERLEY: You're basically saying actually, that at a time when it looks like some of the biggest economies and the Central Banks in those economies
are enacting a race to the bottom, as far as their currencies are concerned, pushed by stimulus to support the economies, actually,
cryptocurrencies, like Bitcoin offer a better, an alternative source of protecting your wealth. Is that what you're saying? Because you use the
term hedge there, which is an interesting way to describe them.
[09:45:04]
KLING: Yes, so the way that I think about it is, it's apparent that major Central Banks are all racing to devalue their currency faster than
everybody else. And if all of these Central Banks are doing that at the same time, what are they devaluing against? They are devaluing against
things that have provable scarcity and gold has provable scarcity. Bitcoin has even more provable scarcity than gold.
In Austrian economics terms, it is the hardest money in human history, and I understand that it's not sort of bite size for you know, the average
person to understand this. You have to understand, you know, some amount of cryptography and computer science and game theory and sociology and
governance and mechanism -- there's a lot of things that you have to understand.
But simplistically, it is an insurance policy against monetary and fiscal policy irresponsibility. And it's apparent that the world needs that more
today than they did yesterday, and they are going to need it more tomorrow than we need it today based on what Central Banks and governments are
doing.
CHATTERLEY: We spend some of the time talking about Bitcoin, what do you think of some of the others because from what I've seen, particularly on
social media, there is a great deal of -- let's call it enthusiasm about XRP, there's a great deal of enthusiasm from certain quarters about things
like Ethereum, what do you think of each of these? And what do you actually trade here?
KLING: Yes, so at IKIGAI, we consider the top 150 cryptos by market cap, it is our investible universe. We have that universe divided into sectors
and subsectors that kind of look like the S&P 500, so there's many use cases for distributed ledger technology.
Money is the killer app for distributed ledger technology right now. Specifically, store of value and people -- I think, some people try and put
a knock on Bitcoin that it's too slow to be very good for payments right now, to be used as a method of exchange right now. And my argument there
is, Bitcoin is too good at being a store of value right now, to be a good method of exchange right now.
Because nobody wants to be the Bitcoin pizza guy that spent 10,000 Bitcoin on a pizza, and as the price increases over a number of years, and the
volatility decreases, which is certainly our expectation, it's going to be better for a method of exchange. But in the meantime, it's a great store
of value.
CHATTERLEY: So your messages to people that are perhaps looking at this, maybe they've dipped their toes into Bitcoin, maybe they're thinking about
it. It's a good time to invest right now, and don't spend your Bitcoin if you've got it on a pizza.
KLING: Yes, I mean, look, that's exactly right. I mean, they're making it increasingly easier to spend Bitcoin. And that's great. But then you look
at like, all of the centralized method of exchange crypto projects, and Libra is a great example of that. Right?
And specifically in the United States, like two years ago, like in the summer of 2017, we thought that Bitcoin's sort of use case for the world
was so that Americans could buy cups of coffee, which is like really silly, right? Because we have a really great method of exchange system right now.
I mean, look at Venmo, right? Like Venmo works awesome. And in in China, you have WeChat and Alipay. And those are sort of proliferated methods of
exchange. Their levers trying to run it that same use case, but all of those are backed by fiat currencies that Central Banks are racing to
devalue as quickly as possible.
So however easy it is to use WeChat and Alipay and Line in Japan and Kakao in South Korea, and Libra and all these things. The underlying currency
that you're still using to spend there is still these fiat currencies, which over time are going to prove to be an inferior store of value
relative to Bitcoin.
(END VIDEOTAPE)
SOARES: Travis Kling, the Founder and Chief Investment Officer of IKIGAI Assessment Management speaking to our Julia Chatterley.
Now if getting your head around cryptocurrency makes you feel old, then you might not want to hear that the TV series "Friends" began a quarter of a
century ago. But don't worry, we'll be there for you. Next.
(COMMERCIAL BREAK)
[09:51:47]
(BEGIN VIDEO CLIP)
JOEY TRIBBIANI, FICTIONAL CHARACTER, "FRIENDS": Look, turning 30 is not that big of a deal.
ROSS GELLER, FICTIONAL CHARACTER, "FRIENDS": Oh, really? Is that how you felt when you turned 30?
TRIBBIANI: Why, God, why? We had a deal. Let the others grow old. Not me.
(END VIDEO CLIP)
SOARES: I kind of feel what he felt when I turned 30. It was Joey's party and he could cry if he really wanted to, but in real life, the cast of the
sitcom "Friends" are celebrating their anniversary. They don't really need to feel so glum about 25 years of their iconic show, one that almost feels
as popular as ever. Clare Sebastian is in New York for us.
And Clare, I think it's still very popular even when those people, the much younger generation I may add, how are businesses making a mint out of this
anniversary though?
SEBASTIAN: Yes, the extraordinary thing about this is that friends of course came of age in a world before the iPhone, before Instagram, before
Netflix, where it still, you know, lives on and certainly as someone who grew up with the show feeling pretty old today, but the thing about this
show is that it continues to be relatable and aspirational at the same time. Viewers want to watch it, but they also kind of want to live in it.
And this is where brands and companies are coming in and trying to get a piece of the action. Take a look.
(BEGIN VIDEOTAPE)
SEBASTIAN (voice over): From product placement --
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: This wonder broom is amazing.
(END VIDEO CLIP)
SEBASTIAN (voice over): To memorabilia and even haircuts, "Friends" has always been a brand that sells.
SEBASTIAN (on camera): And 25 years on that hasn't changed. It's still not enough of you as just to watch the show. They want to live in the
world of Monica, Chandler Ross, Rachel, Phoebe and Joey and that means eating their food, sitting on their couch and of course, drinking their
coffee.
And businesses are taking advantage. Coffee chain, Coffee Bean and Tea Leaf jumped at the chance of a tie up for the anniversary launching a
special edition range of coffee specialty drinks and memorabilia.
(BEGIN VIDEO CLIP)
DARRIN KELLARIS, VP MARKETING, COFFEE BEANS AND TEA LEAF: Our "Friends" themed coffee mugs we pre-released and actually sold out in about three
hours.
(END VIDEO CLIP)
SEBASTIAN (voice over): They also hosted two pop up Central Perk events in Los Angeles in August.
(BEGIN VIDEO CLIP)
KELLARIS: Those two locations we saw significant spikes in foot traffic, but more importantly as a business it really bolstered system wide sales.
RACHEL GREEN, FICTIONAL CHARACTER, FRIENDS: Isn't it cool? It's an apothecary table.
(END VIDEO CLIP)
SEBASTIAN (voice over): "Pottery Barn" also brought back the famous apothecary table which despite its thousand dollar price tag is a top
seller in its department, the company says, it must be the antique properties.
(BEGIN VIDEO CLIP)
PHOEBE BUFFAY, FICTIONAL CHARACTER, FRIENDS: You can almost smell the opium.
(END VIDEO CLIP)
SEBASTIAN (voice over): Even Lego is getting in on the action with a $60.00 replica of Central Perk. Lego says it's one of its fastest selling
sets ever.
SEBASTIAN (on camera): Now, of course, none of these promotions would work nearly as well if "Friends" hadn't experienced a revival in the age of
streaming. Last year, it was Netflix's second most watched show and the company reportedly paid around $100 million to keep the rights to the show
for one more year before it goes on a break, moving to Warner Media's HBO Max streaming service in 2022.
(BEGIN VIDEO CLIP)
DAN IVES, EQUITY ANALYST, WEDBUSH SECURITIES: It's an iconic show and ultimately it's really one of the crown jewels of streaming. Everything
change now with HBO coming in a major shot across the bow of Netflix taking "Friends" and I ultimately believe two to three percent of Netflix viewers
watch it just because of "Friends."
(END VIDEO CLIP)
SEBASTIAN (voice over): So for those who say "Friends" and money, don't mix.
(BEGIN VIDEO CLIP)
BUFFAY: What's more important? Your friends or money?
(END VIDEO CLIP)
[09:55:06]
SEBASTIAN (voice over): This 25-year-old sitcom still gets the last laugh.
(END VIDEOTAPE)
SEBASTIAN: And Isa, those last few shots you see in the piece, they are from a New York City pop-up experience for "Friends." Tickets are actually
sold out, you have to put your e-mail on a list. There has been an extraordinary response from "Friends."
Lego is also sold out of that set. Pottery Barn launched another couple of products things like mugs and tea towels. They are not shipping until
December, so people are clearly going crazy for all of these products and I think that's why you see the brands keep flogging.
SOARES: Absolutely. And Clare, at this point what we really want everyone wants to know is whether they're going to get back together again.
SEBASTIAN: I think it's unlikely. I think it was Chandler, the actor, Matthew Perry who once told "Variety" that he would worry that if they did
that, people wouldn't watch. So I think there's an element that they don't want to mess with what the magic was the first time around -- Isa.
SOARES: Yes, if it's working, just leave it that way, isn't it? Clare Sebastian, thanks very much. Good to see you.
And that doesn't for me. Thanks very much for watching. I am Isa Soares. The "International Desk" with Robyn Curnow starts after a very short break.
Do stay right here with CNN.
(COMMERCIAL BREAK)
[10:00:00]
END
