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First Move with Julia Chatterley
Third Quarter U.S. GDP Numbers Come In Slightly Better Than Expected, Rep. Rick Larsen (D-WA) Talks About Boeing CEO Being Questioned On Boeing's 737 MAX Jet Investigation; General Electric Stocks Jump As The Company Beats Expectations On The Earnings Front. Aired 9-10a ET
Aired October 30, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:13]
ELENI GIOKOS, CNN BUSINESS AFRICA CORRESPONDENT: Live from the New York Stock Exchange, I'm Eleni GIokos in for Julia Chatterley. This is FIRST
MOVE. And here's what you need to know.
Slowing but growing: Third quarter U.S. GDP numbers come in slightly better than expected.
A rate cut count down. Markets expect it, but what happens next is anyone's guess.
And GE whizz. General Electric stocks jump as the company beats expectations on the earnings front.
It's Wednesday. Time to make a move.
Welcome to FIRST MOVE. Really good to have you with us today and a slew of economic data that we are digesting at the moment. Lots of earnings as
well from corporate America. And of course, that rate cut decision coming up later today. So a lot to get through. So let's take a look at those
third quarter U.S. GDP numbers coming in at 1.9 percent, slightly better than markets had expected.
In fact, people were talking about the number closer to 1.6 percent. So closer to two percent is a good news. It is weaker than what we saw in the
second quarter of this year. We also had U.S. jobs numbers showing that private employers added 125,000 jobs over that same month, and of course,
it is better than the 100,000 that people were anticipating.
But what's interesting is that in September, there was a huge revision downwards by 45,000 jobs. So that is going to be interesting to see how
that impacts the numbers, the non-farm payroll numbers that we expecting to come through on Friday.
Now the Fed is going to be pouring over all of this data ahead of its policy meeting later today. An interest rate decision is expected just
five hours from now. As investors await the Fed, it's looking like mostly a flat open for U.S. stocks, and that's after lower close on Tuesday.
The S&P pulled back from record highs in the previous session. The NASDAQ fell over half a percent. Stocks fell amid fears that the U.S.-China trade
deal might take longer than expected to sign and nervousness ahead of today's Fed decision is also playing quite a big role as well.
After the closing bell, we will of course get profit reports from the likes of Apple and even Facebook. So a lot of things to get through today. And
we'll keep you updated on all the latest insights.
Now, we've got Christine Roma's joining us to unpack some of the economic data that we've seen. So, slightly better than expected on the third
quarter GDP. Is this good news? I mean, I know that we were expecting a lower number, but look again it's below two percent.
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS: It is below two percent. It is below two percent for the first time since the end of 2018. It is
two quarters in a row of deceleration in growth. That hasn't happened in a decade.
So in the summer, you saw these concerns that began in the spring. You saw them continue. So I would say that you're looking at an economy here that
is running cooler, certainly than the White House forecast has been, certainly cooler than that the President has wanted.
As one economist just e-mailed me, this isn't the economy driving into a ditch, but the engine is tired this late in the bull cycle.
Let me show you what it looks like, Eleni, because I think it's important to look at the long trend here. Below two percent, you can see below the
first quarter numbers. You can see there was some activity earlier in the year, but whatever that boost was earlier in the year, it seems to have
faded a bit.
And as you stretch back, you can see how difficult it has been for the economy on a quarter basis to be able to stick above three percent. Now
when you look at annual numbers, we know for the year last year, 2.93 percent was the annual number, still having difficulty really blowing out
of the water those numbers we saw during the Obama administration, which has been, of course, a promise of this President -- Eleni.
GIOKOS: Yes. So we also had ADP numbers coming through and better than expected, but interesting to see that we saw a big revision downwards in
September - that coupled with these, you know, economic numbers, do you think that the markets not definitely expecting a rate cut later today?
ROMANS: I think there's a couple of things going on here. You have the Boeing MAX problem. Boeing is a huge part of the American economy and a
huge part of the labor force. GM -- the GM strike, there's going to be some noise from that. So you really have to look at the trends and that's
what the Fed looks at.
And this afternoon, we will hear from the Fed. Later today, we will hear from the Fed and we will find out if the Fed is going to cut interest rates
25 basis points, the third rate cut in a row here.
What I really want to know is what the Fed is saying about the trade war, about a slowing global growth and what the Fed is going to hint about doing
going forward.
If you continue to see a deceleration in GDP and specifically this business investment number in here, it shows you that businesses have grown quite
nervous and they're not spending the money you would have thought they'd spend with this big tax cuts, right?
So the effects of the tax cuts are cooling. The consumer is still strong. What's the Fed going to say about it? What does the Fed telegraph for down
the road?
[09:05:19]
GIOKOS: But let me tell you, look, the guys here on Wall Street, they're expecting a rate cut.
ROMANS: Oh sure.
GIOKOS: I think they will be very disappointed if they don't get one, and of course with the uncertainty with China, and of course with the economic
growth, do you think the Fed should be this proactive and or do you think they're going to be losing out on all their tools for, you know, for sort
of a later date?
ROMANS: That is the debate, Eleni of the moment. It really is, because you've got the President demanding that the Fed even go to zero rates,
right?
The Fed sort of waxing poetic about, look at Japan, look at Europe. They have negative rates. People get paid to invest their money. That is a
sign of distress.
The President also tweeting that this is the best American economy in history. Can you have both at the same time? The best American economy in
history and you want negative rates? So the Fed is walking this tightrope right in the middle, it doesn't want to give up all of its tools. You've
got to have flexibility if something happens and you do have a recession.
These numbers I see here are not recessionary. This is still an economy that's growing. That's important to say. But that growth is slowing.
It's petering out and puts the Fed in a very difficult position.
GIOKOS: Well, I mean, let's also look at what happens if you keep rates low for too long. But anyway, we'll talk about that another day, if and
when a bubble emerges. Thank you so very much. Christine Romans, much appreciated for your time.
And now we're moving on to another story and a merger in the works. Fiat Chrysler is in the market for a mega merger. Now in talks for a tie up
with France's PSA Group, which owns Peugeot. If the merger does go ahead, we're talking about creating one of the world's largest automakers.
We've got Anna Stewart standing by with all the details and we've seen this kind of consolidation happening with the auto space and PSA has been at the
forefront of that. Now they're eyeing out more, can they get it done and do you think the French government is going to approve this deal?
ANNA STEWART, CNN REPORTER: A lot of questions there. I mean, it's been discussed today as a marriage of equals, but was so far from either side
saying I do. Now, it would create a company worth some $50 billion.
And the reason it makes is Fiat Chrysler really needs to scale up in Europe and likewise, Peugeot doesn't have nearly enough of a presence in the
United States. So on that sense, it works. Possibly, it doesn't address Chinese sales, but we'll leave that to one side.
Like all carmakers, we've seen so much consolidation in the space in the last few months, the last few years, like so many car makers, it needs to
spend more on R&D, and to do that, it needs scale, it needs power. They may not realize the profits from all this technology, and they're having to
fight against all the big tech giants for many years to come.
However, we have been here before, of course, we saw Fiat Chrysler challenged by Renault by earlier in the year. Those talks broke up in June
and I just want to read you, Eleni, what Fiat Chrysler said when those talks broke up. They said, "It has become clear that the political
conditions in France do not currently exist for such a combination to proceed successfully." Sure. We're talking about Peugeot, a different
company, but it's still French.
GIOKOS: Yes, absolutely. Okay. So I mean, the regulator is going to be really important, as well in the greater scheme of things, Anna, what are
we hearing on that front?
STEWART: Well, that's the biggest risk. Will politics get in the way again? I mean, France owns a 12 percent stake in Peugeot, slightly less
than it did with Renault, but it's still fairly sizable. They are likely, the French government, to want some sort of protection on jobs should this
deal progress any further. It's still very, very early stages at the moment.
Of course, if France, the state, wants their carmakers to succeed, they're going to have to support some sort of consolidation in the future. This is
how they're going to survive the R&D wars that are ready beginning really.
With Renault, perhaps the added complication was the Renault-Nissan alliance and that was under so much pressure following the arrest of Carlos
Ghosn, so in that sense, perhaps this marriage, this relationship is slightly less complicated -- Eleni.
GIOKOS: Yes, I mean, I'm just looking at the market cap of these companies, the French company has 23.6 billion euro market cap, FCA sits at
around $22 billion. I mean, it looks like it's, as you say, a merger of equals, but what kind of price points are we looking at here? Do we have
any detail on that?
STEWART: No, it's too early to say. Currently, all we know there are talks that are ongoing and it's interesting to hear that talks have really
probably been ongoing all year. They just paused while Fiat flirted a little with Renault, but of course that fell apart.
It'll be interesting to see what we hear in the rumor mill from the French government before I think we get to any kind of price point here. Is it
worth these talks going any further -- Eleni.
GIOKOS: All right. Anna Stewart, thank you very much for that update and those insights. So a Dow original that looked down and out is making a
comeback, and it's in the form of really strong earnings.
General Electric defying grim expectations on its outlook, and shares are up more than eight percent. Take a look at that. We've got Matt Egan
joining us now and Matt just looking at these numbers and one of the things that people like to look at as a gauge of efficiency is of course, just how
much free cash flow they have, and that's sitting at around $650 million.
They're saying that's going to increase down the line as well. It's got investors really excited but how they're going to get this right?
[09:10:09]
MATT EGAN, CNN BUSINESS SENIOR WRITER: Well, listen, everyone loves a comeback story and GE seems determined to give us just that. There were
some major obstacles facing the company and facing all companies. I mean, there was the global economic slowdown. There's the trade war, and there's
this Boeing 737 MAX crisis. But despite that, GE posted results this morning that really wowed investors.
I think there were three really important positives. One, earnings and revenue beat expectations. Two, they stopped burning cash. GE actually,
as you mentioned, generated $650 million of industrial free cash flow, and GE expressed confidence in the future. They are now projecting up to $2
billion of industrial free cash flow in 2019. And that's because they expect the power business to do better.
Now the CEO, Larry Culp, who was brought in about a year ago to turn around this company, he said that these results really do show that they're making
progress on this transformation. But we should really kind of caution people that despite the really dramatic increase in the stock price
premarket, it's not like GE is firing on all cylinders right now.
The power business posted another loss. They continue to really get hurt by this shift away from fossil fuels in favor of renewable energy like
solar and wind. They also have aviation. That business suffered a slowdown in orders and that's because of the 737 MAX crisis which is
obviously the plane has been grounded. Also the healthcare and renewable energy businesses, they've been hit by higher costs related to tariffs.
So all in all, GE is certainly showing some progress, but I think the CEO summed it up best during the conference call. He said, make no mistake, we
still have work to do.
GIOKOS: Yes, I mean, we know that they have been trying to run an efficient business, but on the aviation front, this is where it does get
interesting. Because they are warning about that when you look at the sale of engines, we've seen that up around 50 percent, which is far better than
people had anticipated, despite the impact of Boeing. Why do you think they are still giving out such a pessimistic tone? Is that kind of a hint
of things to come with their relationship with Boeing?
EGAN: Yes, you know, I think it's a really tricky situation. GE is saying that they are working very closely with Boeing and the airlines to try to
get the plane back up in the air and I think in the near term, it is causing a cash headwind for GE due to the timing here.
But you know, bigger picture, the aviation business is the bright spot at GE and it has really been a booming business industry wide for several
years. But some of the analysts that I've talked to have said, it's hard to see how aviation gets much better from here.
Even though it's been a strong business, it does face headwinds, particularly given the slowdown in the economy. And if there's any sort of
a recession, we could see an even sharper slowdown.
So that's one of the problems facing GE, it is that its brightest business might not really have that much more room to grow.
GIOKOS: Great stuff. Thank you very much, Matt Egan. Much appreciated. All right, time now to take a look at stories making headlines around the
world.
California is bracing for winds of up to 115 kilometers per hour and extremely low humidity -- conditions that authorities say will make the
raging wildfires even harder to contain. It's the first time ever the U.S. National Weather Service has issued an extreme red flag signaling
potentially historic fire conditions.
CNN has obtained the opening remarks of two U.S. State Department officials who will testify in front of impeachment investigators today. The
officials are expected to describe influence Rudy Giuliani -- President Trump's personal journey -- has had on U.S. policy with the Ukraine.
A short while ago, the U.K. Prime Minister addressed Parliament hours after lawmakers voted to hold a December snap election. Meanwhile, a new report
says Mr. Johnson's Brexit deal would cost the U.K. economy around $90 billion over the next decade. We've got Nic Robertson joining us live now.
This isn't the first time we've actually heard the impact that it's going to have on the economy. The IMF is talking about, you know, three to five
percent drop in GDP in the U.K., these are stock numbers that politicians are going to have to absorb heading into the election that's coming up in
December.
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: And these are numbers that the government has been keen to avoid. They were asked specifically
to give the numbers from their own assessment of what Brexit was going to mean. I mean, currently, the current assessment now, not the government
one, but the figures that the Treasury actually has in hand, two and a half percentage points down now compared to 2016.
If Brexit hadn't happened, the economy would be two and a half percentage points better off and that big figure you're talking about, the $90
billion, well, in 10 years' time the outlook would be for three and a half percentage points worse than it is now.
[09:15:07]
ROBERTSON: So these are stark figures and absolutely these are going to be critical in the campaigning here with essentially Prime Minister's Question
Time today, very fiery between Boris Johnson and the leader of the opposition, Jeremy Corbyn and both sides unsurprisingly, setting out their
election agendas. Boris Johnson clear on his.
GIOKOS: Yes, and this is interesting, Nic --
(BEGIN VIDEO CLIP)
BORIS JOHNSON, BRITISH PRIME MINISTER: We are going to deliver a fantastic deal by which this country will come out of the European Union, a deal that
he is trying to block and that we will deliver. That is the future for this country. Drift and dither under the Labour Party or taking Britain
forward to a brighter future, under the Conservatives. That is the choice this country faces.
(END VIDEO CLIP)
ROBERTSON: Then he went on to say that under Labour that the economy would be even worse off. The Labour leader for his part riposted with quite some
implying that the Conservative Party is the party that will, you know, give tax benefits to the red shirts, the workers who are being more greatly
affected that they will be worse off.
He said that under, you know, a Boris Johnson Brexit deal, the National Health Service, which is getting a lot of scrutiny at the moment, the
National Health Service would be part of a Trump trade deal. Prices of medicines would go up.
He said -- the Prime Minister said that isn't the case. But we can clearly see the economy, workers' rights and Britain's National Health Service are
going to be some of the central issues as well as that sort of towering issue of Brexit running in parallel in what's going to be a very heated
campaign.
GIOKOS: Exactly. It's going to be election campaign, as you say, you know, let's just go through some of the top priorities that Brits want to
hear about and what they think is going to be important in making the final decision.
At the end of the day, some people feel that this is basically kind of a proxy decision on whether Brexit should happen or not.
ROBERTSON: You know, there is deep disquiet on the backbenchers of both the major parties because there are MPs within the Labour Party and
Conservative Party who believe that their leaders are taking a gamble by going into the election. There's no certain outcome here. The country is
deeply divided.
The Labour Party if you look at its traditional base, some of them want to leave. Some of them want to remain. I think we can expect for that reason
the Labour Party to campaign on more traditional issues.
We've heard Boris -- excuse me -- Boris Johnson, already articulate the issues that he thinks are important to the people: Security, the health
service, 20,000 more police is what we hear him speak about a lot, supports in Social Services, better education. So these are the issues, but Brexit
will be the spoiler in all of this.
The Conservative Party has a narrower field; to the right of it, the Brexit Party could quite easily cost the Conservative Party votes and therefore
potentially cost them seats. The liberal Democrats are clearly for remain. The Scottish National Party will take seats from the Conservatives in
Scotland. The Labour Party not doing so well in the polls. It is very hard to predict at the moment.
GIOKOS: Yes, I'm sure. Thank you so much for that. Nic Robertson live for us out of London.
And we're going to a short break. When we come back, a deep dive into the markets as we await that Fed rate decision in a few hours' time.
And later, the Boeing CEO is such testify again after an emotional day on Capitol Hill. We will be speaking to the Chairman of the House Aviation
Subcommittee. Stay with FIRST MOVE.
(COMMERCIAL BREAK)
[09:21:37]
GIOKOS: Welcome back to FIRST MOVE live from the New York Stock Exchange. U.S. stocks are on track for a flat to modestly higher open. Take a look
at that. Tech stocks look safe for the best gains, all of this after stronger than expected reading on the health of U.S. economy.
A preliminary reading shows U.S. GDP growing an annualized rate of 1.9 percent in the third quarter. It was expected it would only grow by 1.6
percent, but that's thanks to continued strength in the U.S. consumer. Analysts were, of course, hoping that the number was going to come in
better than expected and it did.
But today's number is weaker than the two percent growth we saw in the second quarter. Sam Stovall joins me now with his take on JP and the Fed.
And he is the Chief Investment Strategist of U.S. Equity Strategy at CFRA. Great to have you with me, Sam.
SAM STOVALL, CHIEF INVESTMENT STRATEGIST OF U.S. EQUITY STRATEGY, CFRA: Happy to be here.
GIOKOS: Okay, so are you excited that we're at 1.9 and not at 1.6? You know, it's better than expected, but is that something that we should
actually be hopeful that it's not going to deteriorate further?
STOVALL: Yes, and I don't even think we have to say hopeful. Our expectation is we're going to be seeing GDP growth between the fourth
quarter of '19 and the fourth quarter of 2020, anywhere from 2.2 to 2.5 percent.
So things are actually going to be strengthening in the next couple of quarters and then flattening out.
GIOKOS: Is that taking another rate cut into consideration in those models that you're looking at?
STOVALL: Yes. And our expectation is that the Fed will cut rates today by one quarter of one percent. But then they'll go on hold. No more cuts for
the rest of this year, and we don't have any priced in for next year as well.
Our feeling is, as we're seeing with GDP, as we will likely see with the employment data on Friday that the economy remains solid and sustainable.
GIOKOS: So there is this thinking that perhaps the Fed is just using too many of its tools and it's not going to have any ammunition left if
something does go wrong down the line, is that a concern on your part?
STOVALL: I think it's wise that the Fed is deciding not to use all the arrows in its quiver because it's not a matter of if, it's a matter of
when. This is the longest economic expansion since 1857. It's just a matter of time when we do fall into a recession, but our expectation is
that we will not likely see it until 2021.
GIOKOS: All right, so I know that you're talking about rotation. Stock rotation is something that you guys do and you're always recalibrating.
Looking at the amount of earnings that we are getting through, we getting a lot of them better than expected, but some are not really doing that well.
How are you positioning yourself in the current earnings environment?
STOVALL: Well, basically, we look at the market activity and remind ourselves that prices lead fundamentals. Even though Wall Street consensus
estimates are now calling for a minus 2.3 percent this quarter, which is better than the minus 4.3 seen earlier, they are borrowing a lot of growth
from the fourth quarter of this year and into 2020.
Expectations were for more than a 10 percent gain, now, it's a nine percent gain, so that could soften as we head into next year. But that's simply
based on what the forecasts are based on what people know now.
I think that the market is heading higher because investors expect the fundamentals, GDP and earnings to improve as the quarters proceed in 2020.
GIOKOS: It's interesting because markets normally price in what the future economic environment is going to be like. And here we have sort of a
reverse happening where earnings are not doing as well as we'd hoped and markets are sitting at record high on the premise that the economy is going
to recover, we're going to have a lot of stimulus. I mean, is that an interesting kind of play for you?
[09:25:20]
STOVALL: I don't think it's a reversal. I think what it is saying is that this -- that everybody is aware of what the forecasts are today. What
they're not aware of is which direction will those forecasts take? Will they actually get weaker or will they get stronger? And I believe that
higher equity prices imply that GDP and earnings growth will actually get stronger as time goes on, but it's just not being seen right now in the
numbers.
GIOKOS: So how much of a risk is U.S. and China? I mean, we've been going to and fro, sometimes we're very close to a deal, and then nothing
materializes. So it just -- does it still get a lot of uncertainty? Or is it just something that we'd have to deal with on a day to day basis?
STOVALL: Well, it's on the back burner right now the way Brexit is, but I think that global trade is the fulcrum of the seesaw, that if the optimism
is there, then prices go up. If optimism is down, then the prices recede, mainly because it's a cascading effect.
If we have global trade problems, then that will hurt our earnings growth because a good 50 percent of revenues within the S&P 500 come from overseas
operations. And if you have lower earnings, then you have lower PE multiples, you have lower prices.
GIOKOS: Very quickly. Are you looking at what bond yields are doing and how important is that for you in your part?
STOVALL: It is important from a sentiment perspective. We're out of the inverted yield curve scenario, which is a positive, but the dividend yield
on the S&P 500 still exceeds the yield on the 10-year note and since 1953, whenever that has happened, the market was up a median of 18 percent 12
months later.
GIOKOS: Fantastic, Sam. Thank you very much for joining us. Okay, so we'll have the opening bell right after this short break. Don't go
anywhere.
(COMMERCIAL BREAK)
[09:30:05]
GIOKOS: Welcome back to FIRST MOVE. I am Eleni Giokos live from the New York Stock Exchange. That was the sound of the opening bell here on Wall
Street. Let's take a look to see how markets are faring as we kick off trade this Wednesday -- mostly on a flat start, flat bias. They're trying
to digest some better than expected U.S. GDP and employment data that came through. Remember, third quarter GDP came out at 1.9 percent, much better
than people had expected -- 1.6 percent is what people were looking at.
And of course, we got the Federal rate decision later today that comes out in less than five hours. The U.S. Central Bank is expected to cut rates
for a third time this year, but the Fed could signal a pause in the rate cutting cycle going forward. So it's definitely one to watch.
Now, another big story playing out, Boeing CEO Dennis Muilenburg is back on Capitol Hill today after being grilled by lawmakers in yesterday's session
and confronted by grieving family members as well.
More than a dozen sat behind Muilenburg yesterday holding large pictures of loved ones lost in 737 MAX crashes. Muilenburg acknowledged he was aware
of internal e-mails and instant messages that raised concerns about the 737 Max before the second crash.
In a fiery exchange, one Democrat senator told the Boeing CEO, it is no way that he would board a 737. Take a listen.
(BEGIN VIDEO CLIP)
SEN. JON TESTER (D-MT): I would walk before I wish to get on a 737 MAX. I would walk. There's no way.
(END VIDEO CLIP)
GIOKOS: All right, so joining me now, we're joined by Congressman Rick Larsen, Chairman and of the U.S. House Aviation Subcommittee. Congressman,
really good to have you on. I'd like to get a sense from you after hearing Dennis Muilenburg yesterday. In terms of the messaging that you heard, do
you feel we're making progress in this inquiry? And what do you think the outcome is going to be?
REP. RICK LARSEN (D-WA): Well, I think our Committee is opening a new stage of our own investigation with the Boeing CEO coming to testify before
us and answer our questions.
I think the outcome isn't exactly clear, but I do think we're headed towards looking at how the F.A.A. certifies airplanes. I think the way the
F.A.A. certifies airplanes is in need of repair.
I think that we've seen from the Indonesian report, the F.A.A.'s own report for the Joint Authorities Technical Review, the N.T.S.B. recommendations,
all pointing towards needed changes in how we certify airplanes in the United States.
GIOKOS: We know that in your home state, in Washington, Boeing has the largest facility of its kind there. How is that impacting people in
Washington state? And what is the messaging that you're getting from people that have worked on the Boeing 737?
LARSEN: Yes, it's a real important question. I represent more Boeing employees and any member of Congress and I can tell you two things. One,
they're very proud of the product they design, assemble and build and they're also very distraught that this product contributed to the deaths of
346 innocent people.
You know, we have a very good economy in the Pacific Northwest, but we're known for our great clouds and rain and this 737 MAX, these crashes and put
another set of gray clouds and rain over the feeling about how we feel about the local economy.
We are really unsure where this is headed, but we have to think safety first as we move forward in this investigation. That has to be our number
one priority.
GIOKOS: Absolutely. Look, we heard from Dennis Muilenburg yesterday admitting to knowing about messages, admitting to knowing about your issues
before the second crash. Is there a sense that there was deception and deceiving that came through -- that came from the very top within Boeing?
And if that is the case, what kind of outcome should we actually be seeing here apart from just, you know, executives losing their jobs?
LARSEN: We opened our investigation om March of this year on the House Committee on transportation and infrastructure, and we have received
thousands of documents from Boeing and we need to receive more from them and more from the Federal Aviation Administration.
We still have a lot of information gaps that we're trying to fill. So to answer your -- I don't have an answer to your question, right now. Our
focus has been on the legislative, the statutory framework. Are we giving too much authority to the F.A.A. to give too much authority to the industry
in certifying airplanes? And that's what we're looking at.
GIOKOS: So how do you see the regulatory environment playing out because you know, just weeks before the crash, Boeing was lobbying to get the
F.A.A. to rubber stamp, you know, manufacturing designs and approvals and almost handing more responsibility to the manufacturer as opposed to the
regulator.
And here we are today saying, well, we need to see an overhaul and we don't even know what that's going to look like.
[09:35:22]
LARSEN: Well, that's why we're doing this investigation. I think, as we move through this investigation, we will come up with a more clear
definition of what kind of changes we need. For instance, today's hearing, I expect to be asking Mr. Muilenburg questions based on his testimony
yesterday.
He said, mistakes were made at Boeing. Well, I want to know who made those mistakes. Why were those mistakes made? Who did they report to? All of
those answers can point us in a more firm direction about the kind of changes that we need to make to ensure that always that the U.S. aviation
system remains the safest.
GIOKOS: What's also interesting here is it's about safety and it is also about making sure that people feel that they can get on a plane and that
everybody has done their job in the entire value chain. Is the Boeing 737 going to fly again? Do you think we're close to that? A lot of airlines
have lost business because of it.
And of course, the customers are not feeling hopeful at this point in time and they don't feel safe either?
LARSEN: Yes, a lot of customers, at least in the U.S. are delaying putting the MAX into service. They're planning not until next year. The F.A.A.
has to make a decision about whether or not to return the plane to service.
Boeing hasn't yet given the F.A.A. the full package that the F.A.A. needs to evaluate it, but it's going to be an F.A.A. decision. But safety has to
be the timeline. We cannot point to a date on a calendar nor should we. Safety has to be the only timeline the F.A.A. uses to make a determination
about return to service.
GIOKOS: Yes, Congressman, and we know that when the first crash happened, Boeing was quick to blame pilots there. You know, they said they weren't
trained adequately. At the end of the day, it's almost like they wanted to shift blame. Do you feel that Boeing is starting to take responsibility
for this?
LARSEN: I do think Boeing is taking some of the responsibility for this and it should, as a company it should. The safety culture is under
question. That's I think why Boeing changed their own safety organization and engineering organization within the company.
But I also note that as we saw the Indonesian investigation, and as we've seen in many types of accidents, when our own N.T.S.B. does an
investigation, they find there are a variety of factors that contribute to these accidents.
Sometimes these accidents aren't as tragic as we saw with the MAX crashes, but especially when they are tragic as these, we need to be sure that we
look at all the contributing factors and try to make changes to those factors to ensure the longer term safety of aviation.
GIOKOS: Yes. Thank you very much, Congressman. Great to have you on the show. Much appreciated for your insights. That was Congressman Rick
Larsen, Chairman of the U.S. House Aviation Subcommittee.
All right, so now, time to take a look at our Global Movers today. General Electric shares are sitting up around nine percent. The troubled
manufacturing giant is reporting better than expected third quarter earnings and revenues. It is also raising its 2019 cash flow guidance.
Despite the encouraging numbers, GE's CEO says there's still more work to be done to turn the company around.
Shares of toymaker Mattel are up around 20 percent. The company has reported better than expected earnings and revenues. It has also finished
up an internal review of its accounting practices after a whistleblower complaint. Now the company's CFO will leave a company as a result.
Shares of Yum Brands are tumbling nine percent. The parent company of Taco Bell, KFC and Pizza Hut is reporting profits that missed expectations by a
wide margin. Revenues also came in light.
All right, so shares of Tupperware are down by over 20 percent. The household products company is reporting weaker than expected earnings and
guidance as their sales are under pressure in Brazil and China, as well as in North America.
All right, so no shortage of big names at the so-called Davos in the Desert after last year's boycotts in facts, and we'll be bringing you an update
right after this short break. Stay with us.
(COMMERCIAL BREAK)
[09:42:25]
GIOKOS: Some high-profile guests from the U.S. have taken to the stage in Riyadh to tell Saudi Arabia's economic potential and its forum is known as
Davos in the Desert -- that continues. This is where we find our John Defterios. John, look, we know there was a boycott last year, a sea change
this year. Now, we're talking about economic potential. What are you hearing?
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Well, you know, this is a clear strategy, I think, Eleni, to restart investment and revive the
brand of the vision 2030 by the Crown Prince, which stalled arguably because of Jamal Khashoggi and even going back to the arrests here at the
Ritz Carlton in 2017, after the first Future Investment Initiative.
But they did get a huge helping hand with high-profile business by Jared Kushner, who took to the stage last night, and Steve Mnuchin, the Treasury
Secretary today.
Now, what's interesting, Mnuchin was only on the stage for maybe five minutes, but it was clearly long enough for him to voice the support for
the reform package and encourage them to go even further of Mohammed bin Salman. Let's take a listen.
(BEGIN VIDEO CLIP)
STEVE MNUCHIN, U.S. TREASURY SECRETARY: I think the potential role that Saudi can play in the regional hub of the economy is very important.
And I think, His Highness the Crown Prince's execution of this transformation will be the critical vision on getting that done. So I
think the opportunity is here and really, now it's important to provide a roadmap and specifics for U.S. investment and others. No need for others
really, just plenty of U.S. investment.
(END VIDEO CLIP)
DEFTERIOS: Steve Mnuchin stressing the need for the U.S. players to come into play here. Let's take a look at the venue because we just had the
African panel wrap up.
So there was a big African contingent, but I'm told that 80 percent of the people attending, it was the United States, Europe and Asia with half
coming from the U.S. themselves. So a very large presence on the ground. Wall Street widely represented here.
I approached at least 10 of the CEOs, either via e-mail or directly on the ground, nobody wanted to go public. So it is the support on the ground for
Saudi Arabia, without banging the drum internationally.
They're letting the deals do the talking. The Ministry of Investments said $15 billion of deals, Eleni. I saw concretely about a fifth of that $3
billion in transactions, but that equals this foreign direct investment in 2018. So not bad.
The biggest deal of all, though, did get announced at the F.I.I. That's Aramco. We may get a very clear indication early next week what the
roadmap is to the end of the year, whether it's the Riyadh listing, and then going to Asia thereafter in 2020.
[09:45:07]
GIOKOS: John, thank you very much for that. Much appreciated. John Defterios in Riyadh for us. Now, it's a critical time for the Indian
banking sector with the country's economy growing at its weakest pace in six years.
Credit growth has dropped to its lowest level in nearly two years, as the consumption slow down, it is drag on demand. That's leading to warnings of
a slowdown in retail lending in the coming year. Add to that, slowing growth, high debt levels and corruption.
And you can see there's a lot to contend with. Rajnish Kumar is the Chairman of the State Bank of India and the incoming Chairman of the Indian
banks Association, and I asked him if he was concerned about the World Bank downgrading India's growth this year to six percent.
(BEGIN VIDEOTAPE)
RAJNISH KUMAR, CHAIRMAN OF THE STATE BANK OF INDIA AND INCOMING CHAIRMAN OF THE INDIAN BANKS ASSOCIATION: In India, the target has been that we have
to grow at least eight percent. So if it is benchmarked against eight percent, then we are not doing as well.
But I think it has more to do with a lot of changes which came in the Indian economy in the last three to four years. The combination of all the
factors around introduction of many reforms, which are very far-reaching in nature.
So Indian Economy is undergoing that transition. Comments from IMF Chief Economist that next year, we could come back to seven percent. And that
means that thereafter, it can grow further.
GIOKOS: Okay. So, I mean, in terms of the way that it impacts the banking sector, if you've got low growth, that could mean corporate defaults. That
means, you know, retail defaults and the banking sector is going through a transition in itself. Are you in a banking crisis? Because that's what
seems to be going on at the moment?
KUMAR: I don't call it a banking crisis, because --
GIOKOS: Bad debt crisis?
KUMAR: No, no.
GIOKOS: A bad debt crisis?
KUMAR: Bank debt crisis we had in 2017 and '18. Consistently, the nonperforming loans of the banking system are coming down. What would have
been expected is debt. The decline in the NPS would have been faster.
But because of the certain developments, it has not come down as fast as I would have expected it to be. But the situation around NPS or defaults, it
peaked in 2018. March 18 was the first year and for my own bank and from the banking system, the graph is downwards.
GIOKOS: We're also hearing, I mean, look, you're the new Chairman of the Indian Banks Association. So you're basically the representative body for
the banking industry there. We're hearing of fraud. We're hearing about a liquidity crunch. We're hearing people taking money out because they are
worried about banks folding. What is going on right now in terms of this?
KUMAR: You seem to have a very pessimistic view of the things.
GIOKOS: I am asking you to clarify for me. Because this is the interesting thing, right? So mean if you're hearing these headlines coming
through and these are run on the banks, that thing creates a systemic problem within the country.
KUMAR: There has been no run on any bank so far. There was a default by one of the cooperative banks and that was unfortunate, but cooperative
banking system in the country, it has been relatively weak and multiple regulators are there. So, that has its own problems.
But otherwise, as far as the banking system in the country is concerned, there have never been any failures to be allowed as far as the scheduled
commercial banks are concerned and about the frauds, the calculated fraud what we have to also understand that there is a double counting. We count
them as NPL and because there is some diversion of funds by some of the promoters, so that gets classified as fraud also.
So as far as the P&L is concerned, it does not impact you as much. But otherwise, it does cause concern that the fraud amount is increasing and
where it becomes big headline, but the fact is that we should not double count.
(END VIDEOTAPE)
GIOKOS: All right, well, still ahead, the FAANGs out in force on this day before Halloween. Popular FAANG stocks, Apple and Facebook report after
the closing bell. Lots for investors to sink their teeth into, don't go anywhere.
(COMMERCIAL BREAK)
[09:51:34]
GIOKOS: All right, so welcome back. Apple shares are flat in early trading today, all of this ahead of the company's eagerly awaited earnings
report that comes out after the closing bell and Apple shares as you can see flat, with most likely positive bias. They've risen though 50 percent
year-to-date and are sitting near all-time highs.
Shares of Facebook in the meantime are lower in early trading, too. The social media giant is also out with profits later on after the closing
bell. It agreed to pay a $645,000.00 fine to the U.K. Government today in the Cambridge Analytica user data scandal. It is down four-tenths of a
percent.
Ivan Feinseth is the Chief Investment Officer at Tigress Financial Partners. He joins me now. The FAANG stocks, right? So Facebook, Apple
that you're expecting. We are talking about Google and Alphabet offline as well. What are your favorites within the tech space at the moment because
everyone seems to have a little bit of problems coming to the fore?
IVAN FEINSETH, CHIEF INVESTMENT OFFICER, TIGRESS FINANCIAL PARTNERS: Of the big names, I like -- in the FAANG names, I like them all, but Netflix.
So I like Facebook. I like Apple. I like Google.
GIOKOS: So let's talk about Facebook. I mean, we've got results coming out later. They're dealing with so many issues leading up to the
elections. We've been hearing from Mark Zuckerberg about whether they should allow political ads online as well. I mean, is that going to have a
fundamental impact on the way that you see this as an investment stock?
FEINSETH: Well, no matter what, more controversy, if you will, more information, more viewership will continue to -- will drive more of their
members to stay on Facebook. It's all about user engagement. The more the users engage, the more potentially they can click on ads, and the fact that
they have such a massive user base of over 2.7 billion users globally, it's where advertisers want to be, so more engagement leads to more ad revenue,
and even through all of the controversies, they continue to gain members and gain advertisers. So that is their business model.
GIOKOS: And Apple, I mean, they're coming up with a streaming service. Lots happening there. Stock is up. Incredibly, by you know, year-to-date
numbers, if we look at that. What -- do you think it's looking very expensive in Apple already? Would you hold? Would you sell?
FEINSETH: I continue to say you want to buy Apple on any dip. It is a very important and very well-liked company. It has had a good run up. So,
I think that the results today -- tonight will be, you know better than expected because that they have had a huge increase, surprising increasing
demand for the new iPhone 11 when people thought that the demand was fading, it's not fading, it's increasing.
And they're continuing to shift this service revenue initiative, which includes the launch of their streaming service on Friday. But --
GIOKOS: It is a very competitive space, however.
FEINSETH: Yes, but well, I think in streaming, the winner is going to be Disney because content is King and Disney is the King of content. And
Disney Plus is giving you an incredible amount of content for only $7.00/
GIOKOS: That's why you don't like Netflix at this point in time.
FEINSETH: Yes, because it is the growth is for Netflix to lose. The multiple is not going to be supported. They owned the game for a long
time. But now you've got four big competitors. You've got Amazon Prime, you've got Apple TV Plus, Disney Plus and yesterday, AT&T formally
announced the launch of HBO Max which will be $15.00 a month direct to consumer streaming service.
[09:55:12]
GIOKOS: Alphabet also out with results this week. What did you make of the numbers?
FEINSETH: I thought they were still very good. I like companies that beat on revenue. They missed on earnings, because they're investing in the
business. And I like --
GIOKOS: Because you didn't like it initially, you saw that --
FEINSETH: Well, I like when companies invest in making their company better, and that's what they consistently do. And if you look
historically, when they invested in marketing, the stock sold off. They came back and went higher.
When they invested in hiring more people, the stock sold off, and it came back higher.
Here, they are investing in their Cloud infrastructure, and I think that will drive further gains in the stock.
GIOKOS: Someone tells me that you're the only person that has a buy on a company we haven't heard of in a while, Garmin
FEINSETH: Yes.
GIOKOS: Why? Very quickly.
FEINSETH: They're one of the most clever and innovative companies yet people don't understand them. They just announced an incredible new
product today, a completely autonomous emergency airplane landing system. I mean that alone is incredible.
GIOKOS: Thank you, sir. Great to have you with me.
Thanks very much for joining us on FIRST MOVE. I'm Eleni Giokos live from the New York Stock Exchange. Cheers for now.
(COMMERCIAL BREAK)
[10:00:00]
END
