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First Move with Julia Chatterley
China Reports Its Deadliest Day, But A Lower Number Of New Cases; Daimler's Profits Drop And The Dividends Get Slashed; T-Mobile Finalizes Its Megamerger. Aired 9-10a ET
Aired February 11, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:00]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Live from the New York Stock Exchange, I'm Julia Chatterley. This is FIRST MOVE. And here's your need to
know. Controlling coronavirus -- China reports its deadliest day, but a lower number of new cases.
Dieselgate's dent. Daimler's profits drop and the dividends get slashed.
And sprinting to the finish line. T-Mobile finalizes its megamerger.
It's Tuesday -- it's clearly going to be a long one. Let's make a move.
I'm still laughing. A warm welcome to FIRST MOVE. Clearly, it's going to be a sprint today.
Great to have you with us. Now, the good news is and you can take a look at what we're seeing for markets right now. We have a firmer tone,
particularly compared to what we saw this time yesterday and I was describing to you, U.S. stocks right now higher premarket. The S&P and the
NASDAQ sector have been at all-time highs in fact.
Europe and Asia following suit, also trading in the green. Investors seemingly shrugging off fresh words of warning from the World Health
Organization. The WHO chief saying overnight that the coronavirus, "Holds a very grave threat for the world."
And yet, China's top medical advisers saying today that the outbreak may peak this month, as the rate of growth in new cases slows.
Soothing words, too, from famed investor Ray Dalio who says the impact of the virus on markets has probably been exaggerated and will likely be short
lived.
You know, we've been arguing that stocks are telling us one thing about what we're seeing right now. Bonds and commodities that have come under
pressure, commodities like oil telling us a different story.
Take a look at what we're seeing there. Ten-year yields are a bit firmer today. They've recently though fallen to three-month lows and the three-
month and 10-year yields have inverted yet again. Remember, we were talking about that in the middle of last year.
Oil prices, meanwhile, rising today. They hit 13-month lows on Monday on continued fears that the virus will slow global demand. We'll talk all of
this through later on in the show.
But just keep an eye on Fed Chair Jay Powell's testimony before Congress today. In his prepared testimony, he said that the current virus has the
potential to harm the global economy. But he says the current U.S. monetary policy is appropriate for now.
The coronavirus, as I'm sure you've already guessed, remains our top driver today. An update first. China, as I've mentioned reporting the deadliest
day of the outbreak so far. The number of deaths in a single day crossing into triple digits. Worldwide, the death toll now tops 1,000 lives. Cases
globally, totaling over 43,000.
The good news though, and I do want to remind you of this, some reports of recovery. Four thousand patients in fact treated and released from hospital
in China. David Culver joins us now from Beijing.
David, a lot to discuss here. The good news here that people are recovering, and it's important that we talk about these numbers, in
particular too. Also, the words of the Chinese that perhaps we see a peak this month, and I'm going to couch that in great detail here. What more are
we hearing?
DAVID CULVER, CNN CORRESPONDENT: Julia, it is important, and I'm glad you've done this, just put it into context because a lot of numbers are
being thrown at us with this outbreak. And so you've got to look at what really is pertinent versus those that can just cause hysteria.
So when we're seeing the total death tolls from each day increasing or staying the same, but certainly not declining, that in of itself is
alarming.
But you also have to look at the recovery rate and that's something that you pointed out and again, these are data and figures that are coming from
the Chinese government. So take that for what it is, but at the same time, it's all we can rely on for this.
And so you see the recovery rate and it is now at 8.2 percent, as the Chinese health officials have said compared with 1.3 percent just two weeks
ago. So some successes there.
And then you look overall at the number of daily reported cases, and this is something that Chinese health officials are certainly stressing and
there have been at least five days of decline from the previous day over the past two weeks.
So putting that in perspective, we now hear from an epidemiologist here in China, a man named Zhong Nanshan, who is very well-known with the outbreak
in 2003, from SARS and really gained international fame for his handling and assessment of that situation, and he is the one who has come up with
this mid-February to late February potential peak in the number of cases.
He also suggests that he has factored in several things, including some of the real-time developments, so the day-to-day numbers that we get and in
turn share with you, as well as the risk factors and how the Chinese containment effort has been carried out, and there's been a lot of
criticism about that containment effort because to be quite frank, it is extreme in some places.
I mean, telling somebody, only one person in your house can leave the home every three days, which is the case in some local jurisdictions is pretty
extreme.
[09:05:07]
CULVER: Nonetheless, this epidemiologist suggests that that is actually the right approach here and believes it's going to be effective going
forward.
Now, ultimately, the containment effort is something that officials are still trying to figure out its effectiveness. They're really not sure where
it stands, but one thing we do know is that the central government is showing publicly their displeasure with the local government.
And we saw this, Julia, coming about. When this was rising from the City of Wuhan and Hubei Province in particular, we noticed the central government
came in and swooped in, took control and was trying to, as it was perceived by the public, clean up the mess that was not taken care of early on.
And now, we know at least two health officials at the provincial level have been fired. We're also reading in state media, I just pulled up an article
looking through a short time ago of "Global Times," and they suggest that several other officials, Julia had been called from Wuhan up to Beijing to
be scolded by the central government.
It seems like this is only the beginning in what will be a series of reprimands.
CHATTERLEY: Yes, I mean, there's so much to analyze and assess here. Clearly, there's an underlying desperation for the worst to be over here.
But we have to be very, very cautious with suggesting anything here.
David, great job. Thank you so much. David Culver there.
All right. Let's move on to our next driver. Deal done. Stock in the mobile giant's Sprint soaring some 72 percent in premarket trading after a judge
ruled in favor of allowing its merger with T-Mobile, that stock is up some nine percent, too.
Clare Sebastian joins me. Clare, clearly the market have become incredibly cautious about this deal ever getting done. But I think we should describe
how unprecedented this was. It had Federal approval. This was individual U.S. states going, hang on a second. We've got a problem.
And now a judge has said, we're not having it. The deal goes ahead.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Julia this was highly unusual. This was a deal that was approved by the Department of Justice and
by the Federal Communications Commission last year, but more than a dozen State Attorneys General, led, of course, by the Attorney General of New
York decided to fight this in court.
They have now lost. The judge in a very large, 170-page opinion has basically struck down all of their key arguments, one that they were trying
to prove that this would be anti-competitive, that the reduction in the U.S. wireless market from four major players including AT&T and Verizon,
down to three would lead to higher prices eventually for consumers. He said they failed to prove that.
He also said they failed to prove that Sprint could continue to be a viable player on its own, a viable fourth player. He said, given their
consistently declining ability to meet their targets that was also unproven.
And finally, one of the major concessions that the two players made in in agreeing this deal with the regulators was that they would divest
significant assets to DISH Network which is a satellite provider so that they could start to become a wireless player in their own right and build
out their 5G network.
Now the states were trying to argue that they would not eventually be able to do that and the judge also struck that down.
So it looks like this is now going to go through that four major players in wireless in the U.S. will become a three, but of course DISH being in
theory, a new entrant there. So this is a major moment for this market -- Julia.
CHATTERLEY: Yes, there's enough competition out there. That's what the judge was assuming, I think in this case. It is quite fascinating, though,
because what we've seen since 2018 is wireless prices actually staying pretty steady.
But we know that they've been pushing prices lower to try and steal customers from AT&T and Verizon. Interesting to see where prices go from
here on out perhaps.
SEBASTIAN: Yes, I think that that's a critical point. It was interesting that both Verizon and AT&T stock were up today on this deal. Perhaps you
might read into that that may not be a good sign for the consumer. But of course, this is also a lifting of uncertainty over the market in general.
It was interesting, the judge did talk about this in his opinion. He said that T-Mobile has redefined itself over the past decade as a maverick that
has spurred the two largest players in its industry. That's of course Verizon and AT&T to make numerous pro-consumer changes.
He said he believes that given their track record, they will continue to do that, the new T-Mobile now combined with Sprint.
So the judge clearly feels that while there is a risk, he did say in the future, that this could lead to anti-competitive changes in the market, but
overall the risk of that was lower, partly because of this track record of T-Mobile.
I will say, a characteristically colorful reaction from T-Mobile's outgoing CEO, John Legere, he said, this is a huge victory. In his statement, he
said, "Look out Dumb and Dumber and Big Cable -- we are coming for you."
CHATTERLEY: And some very happy investors today as a result, certainly wealthier, too. Clare Sebastian, thank you so much for that. It's going to
be fascinating to watch.
All right, let's move on and talk Daimler now. Dealing with a collapse in profits. We're talking 60 percent collapsing profits. The company says cost
cutting is the only road forward. It's still paying huge fines too related to Dieselgate.
Paul La Monica joins me now. Paul, I mean, this is the fourth profit warning, I believe since May of last year. They've slashed the dividend
now. They've already announced job cuts. What more can they do here? Because this looks really painful.
PAUL LA MONICA, CNN BUSINESS REPORTER: It is looking increasingly bleak, Julia. As you point out, they've slashed the dividends. That's bad news for
shareholders. They are cutting costs. They've already announced some job cuts last year and I think, now the big question is, how can Daimler adjust
to the new reality that is an auto world where electric is what everyone is talking about.
This little company named Tesla has obviously disrupted the entire industry, and Daimler needs to invest in electric vehicles a lot more
aggressively in order to become competitive.
Even Volkswagon, Daimler's German rival that has been struggling because of Dieselgate as well, they have at least been able to invest more in electric
cars and become a bit more of a presence there. Daimler doesn't really have that yet. So that's going to be a big problem, I think for this company
going forward.
CHATTERLEY: And that's the key for investors here. They were simply slow to make a decision to invest in electric vehicles. So even with the legacy
issues of the Dieselgate, in addition to now having to get up to speed with European regulations, of course, which tightened up in January of this
year, they simply haven't got the direction of the company, right, to focus on cars of the future.
LA MONICA: Exactly. The good news for Daimler is that sales are still growing and Mercedes had a great year. So obviously, Daimler owns one of
the preeminent luxury brands in the auto world. Now, they have to figure out a way to transition to a more electric future, and that obviously
includes the Mercedes brand.
CHATTERLEY: Yes. Another one that's fascinating to watch. Tough times in the car industry. Paul La Monica, thank you so much for that.
All right. Let me bring you up to speed with some of the other stories that we're following around the world. Voters in the U.S. State of New Hampshire
heading to the polls right now in the first of nation primary.
Senator Bernie Sanders clashing with former Mayor Pete Buttigieg after their heated contest in Iowa, and Senator Amy Klobuchar looking to emerge
as a surprise contender. Miguel Marquez is live in Dover, New Hampshire for us.
Miguel, is this going to be the story of the night. It's the Buttigieg versus Bernie Sanders, but also what happens with Biden here? Because there
are a lot of people looking at this and saying, actually, this is sort of the beginning of the end for Biden after this vote today.
MIGUEL MARQUEZ, CNN NATIONAL CORRESPONDENT: Yes, I mean, I think most people expected Bernie Sanders to do very well in New Hampshire. I think
after his poor showing in Iowa, the Sanders campaign was really looking to at least, maybe not win, but at least place or show here in New Hampshire,
and I think the pressure is on for them to do that.
They move on then to South Carolina and Nevada and then on to many more states. So I think the Biden campaign hopes to sort of just get out of New
Hampshire in one piece and then move on to areas that are more diverse, and maybe play to his strengths a bit more.
What we're seeing -- we're in Andover Ward One, there's about 20-something thousand votes across the City of Dover at play here. This is a very
Democratic area.
Officials thought it would be very busy at this point and it really hasn't been. It's been steady, but certainly not gangbusters with the number of
voters coming in here.
The last time you had a contested race like this was in 2008, and they had, for this particular ward, about 2,600 voters come through. There's about
4,000 total available for this particular ward. At this pace, they'll be below that. So that will be a concern to Democratic officials if they don't
get those numbers up and show that sort of enthusiasm.
Perhaps, later today after work, they will get a big rush here. This place is going to be open for 12 hours today.
I've spoken to a lot of voters as they've left this area and left voting, most of them voting for Senator Bernie Sanders, some for Pete Buttigieg,
some for Elizabeth Warren, but that rift between the center lane in American politics and the left lane is even evident here today.
I was talking to one Bernie Sanders supporter, and as I was chatting with him, somebody walked by and muttered socialist, and the guy just sort of
shrugged it off and said, well, you know, people have -- they think too much of him. They put him in a box, and it's not really true.
And he likes a lot of his more progressive policies and says, no matter who the nominee is on the Democratic side, whether it's Joe Biden or Pete
Buttigieg or Bernie Sanders, they will support that person, because everybody I've spoken to here, this is a Democratic and Republican primary,
but mostly Democrats are showing up. They are showing up because it's contested.
Democrats say no matter who the eventual nominee is, they will vote for that nominee because they want to oust Donald Trump -- Julia.
[09:15:05]
CHATTERLEY: Yes, I feel like for our international audience here, they will be looking at this and going for
Annual nominee is they will vote for that nominee because they want to oust Donald Trump. Julia, for an international audience here, they'll be looking
at this and going, first question, to what extent is a place like New Hampshire representative here of America more broadly, because the copy
says that Pete Buttigieg is the unlikely nominee, that Bernie Sanders is the unlikely nominee here for the Democratic Party.
And then I think the other big question would be, why is New Hampshire different from Iowa and the chaos that we saw there? Can you explain those
two things for me? You decide there, sorry, that's a tough one.
MARQUEZ: Yes. So the caucus process in Iowa is a much different process. They completely changed everything from the way the ballot looks to the way
that they report everything, and it clearly did not go very well.
This is a primary where people walk in. They're registered to vote. They go in, they vote. They tick a box and it's done, essentially. And there's only
one question on the ballot today, who are you voting for in the presidential primary? Either Democratic or Republican.
There's actually 32 individuals on the Democratic ballot, but they only get to pick one of those 32. So it's a much simpler, much more straightforward
voting process than Iowa.
They don't -- they do not expect any big drama later in the evening when it comes to reporting the results here. I can tell you they've had about 300
people so far come through the doors here, which is steady, but not exactly gangbusters busy.
And New Hampshire is -- look, it's not as diverse as other states. It's much more white as Senator Bernie Sanders is from Vermont next door.
Elizabeth Warren is from Massachusetts next door, so those two were sort of picked to perhaps do better here.
Pete Buttigieg has sort of picked up some momentum since Iowa. Amy Klobuchar seems to have picked up some momentum since Iowa and since her
performance in the debate here just before the election just last week. So it is an open question as to what will happen.
These first four contests: Iowa, New Hampshire, Nevada and South Carolina though, it is a tiny number of the vote that Democrats need. Once you get
into the bigger days, like Super Tuesday on March 3rd, then we'll have a much better sense of where this race is -- Julia.
CHATTERLEY: Yes. All about Super Tuesday. Good job. There was no need to sigh there. You handled it perfectly. And my apologies for lots of
questions. Keeping you on your toes. Thank you so much, and great to have you with us.
MARQUEZ: Thank you.
CHATTERLEY: All right. Let's move on. North Korea accused of violating the U.N. sanctions again. According to a confidential U.N. report seen by CNN,
Pyongyang has been enhancing its missile and nuclear weapons programs and illegally exporting coal to pay for it.
The report says North Korea used to ship to ship transfers to Chinese vessels. Beijing has denied it is helping Kim Jong-un evade international
sanctions.
All right, we're going to take a quick break on First Move. But got coming up, exaggerated effect? Hedge fund giant, Ray Dalio make some bold
predictions about the coronavirus and current asset pricing.
Plus, it wasn't us. China's full-on denial insisting it had nothing to do with that mega Equifax data breach. There's more to come, stay with FIRST
MOVE.
(COMMERCIAL BREAK)
[09:21:32]
CHATTERLEY: Welcome back to FIRST MOVE, live from the New York Stock Exchange this morning, still looking like a solid open for U.S. stocks as
we await Fed Chair Jay Powell's testimony before Congress today.
The NASDAQ and the S&P 500 set to hit fresh record highs at the open, too. The Dow closing in on record territory once again.
Amazon was the big mover in the previous session closing above $2,100.00 a share for the first time ever. Look at that. It's higher by 2.6 percent
premarket, too.
Oil. Let's take a look at what's going on there. Falling oil prices continue to pressure, the energy sector. Exxon Mobil, a big Dow loser on
Monday, falling over one percent as you can see there.
Let's talk to what we're seeing in commodity markets. Joining us now, Jeremy Weir. He is CEO of commodity trading multinational, Trafigura. Did I
get that right?
JEREMY WEIR, CEO, TRAFIGURA: You did. Good morning, Julia.
CHATTERLEY: Yes. We're doing well this morning. We're improving.
WEIR: Yes.
CHATTERLEY: Can you talk to us about what you're seeing? Because I know you operate across 41 different countries, you have a great global sense. A
quarter of your business is China based as well. What are you seeing in terms of contract activity?
WEIR: We are seeing the slowdown in China. The main issue is that you've got a combination of Chinese New Year, which is often a slower period, and
then we've had the coronavirus on top of this.
So therefore we've had a lot of people were not able to relocate back to their offices, and they're prohibited in doing so. They're prohibited in
traveling.
So once that happens, what's happened in demand is you've seen probably a 20 percent reduction in gasoline demand and aviation fuels as well because
people aren't flying anywhere.
So therefore, the response by the Chinese market there is possibly a reduction of circa three million barrels of oil a day in refining capacity.
So there's been a bit of a shock to the system. We're also seeing this in the minerals and metals business as well, where just demand is off and
production is slowing down as well and materials are just not flowing.
CHATTERLEY: I mean, that makes sense to your point, things were already slow normally, seasonally at this time of year because of the Chinese New
Year, but we just haven't seen the pickup that we would normally see afterwards.
WEIR: That's correct. But I do think, you know, what we're seeing is some measures by the Chinese government. There's liquidity measures in the
banking sector, but the general feeling is that we're going to start to see a pickup in activity once we get over this issue of the coronavirus.
We've already seen for example, in the state grid, they've brought forward some construction of high voltage lines, which is going to, you know,
utilize metals, et cetera.
But I think we're going to see some stimulation by the Chinese government, which is going to see a pretty rapid pick up once we get over this problem.
CHATTERLEY: I mean, what we've seen reported in the last 24 hours in particular is sort of broken contracts with buyers in China saying, look,
this is a natural disaster equivalent. This is one of those get out clauses in our contracts here.
Are you seeing that, too? And I don't want to get into the legalities of what that means.
WEIR: Sure. We are seeing pressures around contract performance, potential force majeure declarations around these contracts.
CHATTERLEY: Right.
WEIR: We have seen a significant fall in prices. If you think the oil price was at sort of north of $60.00, it is now $50.00. Okay, we've seen a
small increase this morning. And copper prices, zinc prices, now the metal prices are down between 10 and 15 percent.
And when you see such significant moves in these markets, you start to get sort of problems around contractual performance. So that's also adding to
the problem.
[09:25:02]
CHATTERLEY: Right. So if those prices picked up because at some point, if, when -- I'll be very cautious about what I say -- we see a stabilization
and the recovery, as far as this virus outbreak is concerned, if those prices come back up, people could go, okay, we'll still honor those
contracts, or it just --
WEIR: Look, it could be a renegotiation process. So you would start to see more performance. If you have stable prices. Typically, you'll see, you
know, you won't have these sorts of issues.
But we are seeing a lot of pressure on businesses. So therefore, to some degree, it's understandable what we're seeing.
I think what is interesting, though, is when you see what has happened under the trade negotiations in the U.S., in the second half of the year,
we expect to see a significant increase in oil demand and oil shipments from the U.S. to China in the region of over 200 percent increase compared
to what we were witnessing before either trade dispute started.
CHATTERLEY: We still think they're honor that in light of what's going on.
WEIR: That's a government decision. So therefore, but look, I think, you know, it's very much effected into our calculations that we are going to
see a very big increase in demand and we may well see sort of price impacts as a result of that.
CHATTERLEY: Have investors overreacted in your mind to what we're seeing? Are the markets pricing an overreaction to the drop in activity that you've
seen?
WEIR: Look, it's been severe, and I think the fact is, it's a great unknown. If we had -- if we were very certain about what the recovery rates
would be or how long -- how prolonged this virus situation would be, I think we can then make comment to that.
But the fact is, we don't know at this stage. So there is a high degree of uncertainty, and there's been very sort of drastic measures imposed by the
Chinese government.
And so therefore, let's put if you like, a little bit of concern around international markets, and they've reacted very, very quickly.
CHATTERLEY: Jeremy, fantastic to have you on. We'll get you back because you have a fascinating business and we'll talk to you in more detail about
that next time.
WEIR: Sure, sure.
CHATTERLEY: Jeremy Weir there, the CEO of Trafigura. The market open is next. Stay with us.
(COMMERCIAL BREAK)
[09:30:00]
CHATTERLEY: Welcome back to FIRST MOVE. That was the opening bell this morning at the New York Stock Exchange and we're seeing nice gains for U.S.
stocks.
The tech sector outperforming now. I have to say, the S&P and the NASDAQ in fact hitting all-time highs early on in the session. Key this morning, as
we've mentioned, the Fed chair Jay Powell Beginning two days of economic testimony on Capitol Hill.
His prepared statement already mentioning the risks of the coronavirus outbreak, potentially spilling over to the U.S. economy, but right now, he
says Fed policy seems appropriate. Any further headlines on that, we will bring them to you.
For now, the Global Movers. Sprint and T-Mobile shares sprinting ahead in the sessions. A Federal judge signing off on the $26 billion merger of the
two wireless giants today thwarting an attempt by more than a dozen states to block the deal and no further concessions, important too.
Under Armour, meanwhile, shares tumbling after disappointing results. The apparel giant's Q4 sales missing expectations and the company says their
first quarter results will take a more than $50 million hit due to the coronavirus outbreak.
In the meantime, Samsung shares finished higher in the South Korean trading session today. The tech giant officially unveiling its new Samsung Galaxy
S20 phone. It's been called the first major 5G phone to hit the market. Samsung will also show off its new Galaxy Z flip phone, too. Wow. Back to
the Future on that one -- flip phones.
All right, let's move on. A full-throated denial from China today on charges that launched one of the largest cyberattacks in history against
credit rating firm, Equifax.
The U.S. has charged four members of the Chinese military with the 2017 cybercrime. Sensitive data on some 145 million Americans was exposed, as
well as the details of the inner workings of the company.
The U.S. has blamed Chinese hackers for previous cybercrimes as well, including the theft of personal information from health insurer, Anthem,
some five years ago.
The CEO of Equifax joins us now. Sir, fantastic to have you with us. Thank you so much for being on the show. Your response at this stage. First, two
authorities in the United States finally pointing the finger and saying there were Chinese actors involved, but also their denial here. You remain
confident.
MARK BEGOR, CEO, EQUIFAX: Thanks, Julia. Thanks for having us on. Yesterday's announcement was a really important milestone for Equifax after
the 2017 cybersecurity event.
You know, we've been collaborating with the authorities, both the F.B.I. and the Justice Department as they did their investigation, and to have
this milestone where they've indicted the military arm of the Chinese government is an important step forward.
But I think for all of us, not only Equifax, every company around the globe, it really raises the stakes around cybersecurity and the kind of
attacks that companies are under when the military arm of a foreign government is actually conducting it.
CHATTERLEY: I mean, the belief here is that these individuals will never be brought to justice in the United States. Do you think actually just the
announcement, particularly given what you went through as a company and the individuals, the consumers that were involved, do you think it's enough of
a deterrent particularly at this moment in time when we're all very aware of the risk of cybersecurity attacks?
BEGOR: It's a higher bar now, there's no question. You know, when you've got sophisticated, well-funded military arms of foreign governments
conducting these attacks on the United States, on U.S. consumers, and on U.S. companies, it's a different bar, and it requires us to really up our
game even further, when it comes to cybersecurity.
We're in the middle of a three-year program following the cyber event, of investing a billion and a quarter in our technology and security with the
goal of being an industry leader in data security.
And I think for all of us, when you have these kind of attackers, you know, it is one thing when it was a hacker, or a criminal ring trying to steal
credit card numbers for identity theft purposes, it's very different when you have this kind of an organization that's linked to a foreign government
attacking U.S. companies in this fashion.
So we just really have to be more diligent and more focused around data security, and obviously, that's the path Equifax is on.
CHATTERLEY: You have a global business. You operate in more than 20 different countries around the world. You mentioned the more than a billion
dollars' worth of spending just to shore up the security measures that you operate as a company, but where do you see the greatest vulnerabilities
here?
BEGOR: It's one you know that we're really focused on data security, we really house is in every market we're in really sensitive consumer and
commercial data and protecting that is paramount, particularly after the 2017 cyber event.
[09:35:06]
BEGOR: As you said, we operate in 23 markets around -- or the outside the United States, in Australia, New Zealand, Canada, Spain, U.K., Latin
America, you know, we have credit reporting agencies in those markets, and we have the same protocols around data security and technology in those
markets.
And that investment of a billion and a quarter is a very substantial amount for a company of our size. Back in early 2018, we had really two paths to
go. We could have spent a few hundred million dollars and taken security to really an industry leading capability in our legacy environment.
We decided that the right decision was not only to enhance our security industry leading capabilities, but also to take our entire legacy
environment to the Cloud.
We believe that's going to provide better security, but as importantly, better utilization for our customers and consumers around using and
protecting that data.
CHATTERLEY: I mean for you, as a company, you have to put data privacy. You have to put security, front and foremost to ensure trust from consumers
at this stage, but that's business responsibility. What about government responsibility?
Because if we talked just specifically about the United States and China here, we've just seen a Phase 1 trade deal. There was hopes actually that
there would be more concrete measures to protect against the threat of state actors, all of those associated with the state to prevent this kind
of attack going forward, and a lot of people were disappointed that the word more concrete measures. Do you share that disappointment, sir?
BEGOR: Well, I have to tell you that we're quite proud and pleased with the work that the F.B.I. and the Justice Department did over the last two
years, and if you listened in to Attorney General Barr's press conference yesterday, the attack was incredibly sophisticated. It had multiple
individuals involved. They did it over a long timeframe.
And the fact that the United States number one, was able to find the culprits, the Chinese military that did this is really a big deal and
second, that Attorney General Barr is really taking these kind of actions to make sure other foreign nation states that are doing the same thing
understand that the U.S. is going to take action and we think that's a big deal.
CHATTERLEY: Is and are customers now that have their data with Equifax safe? Can you give that assurance at this stage? And I think my follow up
question to that is, I've read recently that six months after that enormous data breach, half of people still hadn't checked whether their data had
been compromised, that they hadn't checked their credit scoring.
Do we all need to be more careful about where we put our data and about following up with these kinds of things? Two question for you.
BEGOR: Yes, so the first question, Julia is, you know, when I joined in April of 2018, the first thing I said to our team, to our customers, to
U.S. consumers and to the regulators is that we are going to take security to the top of our priorities and we are going to be not good at security,
not even great at security, we're going to be an industry leader.
And I think the billion and a quarter we're investing, the people that we brought in, the seriousness of that really exhibits how serious we are
about data security.
When it comes to consumers, we really encourage and actually Attorney General Barr yesterday in his press conference suggested that, too, as well
as the F.B.I. representative that consumers should watch their credit reports, look for activity that's not theirs and make sure they're aware of
it.
Most of us, most U.S. consumers don't do that and we think that's an opportunity. And there's also a lot of free services. You can come to
Equifax and get a free credit report. You can go to the other credit reporting agencies and check, you know, what's happening with your credit.
But the bar is higher, and Equifax is taking that very seriously. We know our competitors are and the whole industry is, and just one last point,
Julia, is we're really working hard to be really transparent and sharing, you know, with not only our competitors, our customers and other industry,
you know this cybersecurity kind of attacks is going to happen to all companies.
We get attacked every day at Equifax and defending it is one that we have to take on. But it's one that the industry -- and doing that through
sharing information, sharing best practices, and we're trying to be really transparent about what happened to Equifax so it doesn't happen to another
company.
CHATTERLEY: Yes. Couldn't agree more. Mark Begor, great to have you with us. The CEO of Equifax there. Come back and speak to us soon, please.
BEGOR: Thank you.
CHATTERLEY: All right. Thank you. After the break, investors struggling to work out when the coronavirus will ease. Billionaire investor, Ray Dalio,
playing down the market impact. We will have all the details after this.
(COMMERCIAL BREAK)
[09:42:39]
CHATTERLEY: Welcome back to FIRST MOVE and as you heard at the beginning of the show, the famed investor, Ray Dalio says the market impact of the
coronavirus has been exaggerated and is likely to be short lived.
The billionaire hedge fund manager told a panel in Abu Dhabi, he is expecting a rebound in assets.
John Defterios chaired that panel and joins us now live.
John, great to have you with us. Fascinating comments from Ray Dalio. What was he assuming in order to make that judgment?
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: You know what's interesting here, Julia, is that when the co-founder of the largest hedge
fund speaks, people listen. You could hear a pin drop in the audience today. It was wall to wall. It was spilling over into the hallways.
It's interesting. He is taking the premise here, Julia that he has visited China about 70 times over the last 35 years. So he thinks that he knows the
infrastructure -- the infrastructure of government.
He says, I am not a specialist when it comes to viruses. But I can tell you even though it was a sputtering start, and the response from the province,
from the top down with President Xi, he is extremely confident they can put an action plan into place and deliver. Let's take a listen.
(BEGIN VIDEO CLIP)
RAY DALIO, AMERICAN BILLIONAIRE INVESTOR, HEDGE FUND MANAGER, AND PHILANTHROPIST: It's a big one time shock. How big it becomes? I can't
say. We all have our thoughts and opinions. Probably, it's contained, probably it passes, I assume.
And then in terms of the pricing of assets, I think it's probably had a bit of an exaggerated effect on the pricing of assets, because of the temporary
nature of that. So I would expect more of a rebound.
I think it most likely will be something that in another year or two will be well beyond and we won't be talking about it.
(END VIDEO CLIP)
DEFTERIOS: That's like looking back to the SARS crisis of 2003. But Dalio admits that we're looking at a $14 trillion economy. The commodity shock
here has been felt in the Middle East, of course, because of the bear market we're seeing on oil.
But Dalio did say, Julia, what I thought was fascinating, we're not in the best position to confront a major Black Swan like this.
We've been printing money, interest rates have been low. We have an asset bubble, and he suggested not a crisis at this stage depending on how this
plays out in China, but looking two years down the road, can the Central Bank play as a lender of last resort and prop up growth and not worry about
price inflation going forward and asset inflation.
[09:45:13]
CHATTERLEY: Yes. And a fascinating comment meets your point, and we've been discussing it on the show as well, the idea that commodities are under
pressure, oil markets in a bear market, yet stocks today here in the United States are record highs.
But I do want to just redirect what he was saying to one of the other potential swans out there, which of course, is the broader battle between
the United States and China. Technology, geopolitics.
He said, that's a balance that has to be managed, very delicately, I believe. What did he have to say on this front?
DEFTERIOS: Well, this is in our sit-down interview, which we will be airing a little bit later because we're working on putting that together as
we speak.
But he was saying over the last 500 years, we've had major changes in cycles in leadership; of the 16 times that we've done it, 12 have led to
war and he is not suggesting the U.S. and China will go to war. But he says we have to wake up to the realities today.
China has grown into a middle income economy, but more importantly, it's a leader in technology innovation right now, and the U.S. can't stand in the
sidelines.
So he said, trade -- get this, Julia -- trade is the tip of the iceberg. There's many more things to worry about in U.S.-China relations. It is
about geo-economics, geopolitical power, of course, and managing the transition so it doesn't spiral out of control.
He didn't think it was going to be the case, but he says that's why it is so tense today between Washington and Beijing.
CHATTERLEY: Yes, a rising superpower challenging and incumbent. History says that means big trouble.
DEFTERIOS: That's exactly right.
CHATTERLEY: John Defterios, we look -- yes -- we look forward to that interview later on in programming today. Thank you for that and great job
with the panel.
All right, coming up, a battle of New Hampshire. U.S. Democratic presidential contenders fighting to win the first in the nation primary.
Why today's results could be make or break in some of the candidates. That's next.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. Democratic voters heading to the polls across New Hampshire to pick their candidate for the White House.
The latest CNN poll show Senator Bernie Sanders leading in the state with 29 percent of the vote support, followed by former Mayor Pete Buttigieg and
then former Vice President Joe Biden.
Billionaire Mike Bloomberg did not file for the New Hampshire primary focusing on Super Tuesday next month instead.
Meanwhile, President Trump holding a rally in New Hampshire yesterday looking to draw attention away from that Democratic contest.
Greg Valliere is chief U.S. policy strategist at AGF Investments. Greg, fantastic to have you with us. We could have a debate about who comes out
on top here and it's looking like a Pete Buttigieg versus Bernie Sanders. But you see the real headline here actually is the sort of ongoing slump
and demise of Joe Biden here in terms of support. Is this the beginning of the end?
[09:50:06]
GREG VALLIERE, CHIEF U.S. POLICY STRATEGIST, AGT INVESTMENTS: I think so, Julia. Great to see you. I think that Biden can't finish fourth two weeks
in a row. He finished fourth in Iowa, he could finish fourth in New Hampshire. You just can't do that without your financing drying up. No one
is going to want to contribute to him if he keeps finishing fourth.
So this is a really crucial night for him. I wouldn't predict he's out of the race in a week or two. But I'm not sure how long he can last not
finishing first or second.
CHATTERLEY: You know, we were talking earlier on the show about honing in on Super Tuesday, and I made the point that Pete Buttigieg is referred to
as the improbable candidate for the Democrats here. Similar story with Bernie Sanders.
Are we starting to look like all roads lead here to the person who spends most, which is Mike Bloomberg?
VALLIERE: Yes, I think that's a great point. I mean, there doesn't seem to be a dominant player. I've talked to lots of Democrats in the establishment
of the party who are terrified by Bernie Sanders. They feel not only would he lose to Trump, but almost as importantly, with him at the top of the
ticket, they lose Senate seats, House seats, gubernatorial seats.
So out of desperation, they may agree to a very awkward marriage with Mike Bloomberg, who was said quite clearly that he is prepared to spend $2
billion to $3 billion on this campaign.
CHATTERLEY: You know, Greg, it is quite interesting because he used the word terrified there of Bernie Sanders, the word communist, socialist gets
thrown around in the same sentence as him and yet, I saw some quite fascinating stats today from Goldman Sachs.
At a conference in November, between 80 percent and 90 percent of participants believe that Trump would get reelected in November. Is that
why investors aren't really looking at what's going on for the Democrats here because they're all assuming Trump will win here and is that
complacent?
VALLIERE: Yes, I mean, there are no certainties in politics to say the least. Who thought that he would lose to Hillary -- he would beat Hillary
Clinton?
So I'd say the markets may be a little bit ahead of themselves right now. They certainly are sanguine about whoever wins. I would say this though, if
Bloomberg wins, I think he has got a better chance to get to 270 electoral votes. It won't be easy. But if he's really willing to spend billions and
billions of dollars, that's a game changer.
CHATTERLEY: We are going to have to watch and see. He is clearly willing to spend the money. The question is, do voters follow him at this stage? Do
you think the Democratic Party come to a conclusion that he is as good as it gets for them?
VALLIERE: Well, you know, you touched on the key issue, and that is the growing dissent within the party.
I think a lot of young leftwing Democrats won't go out turn out to vote. If Bloomberg is at the top of the ticket, they'll just say, I'm going to stay
at home.
I think when they go to Milwaukee for their conference, their Convention in July, these fissures in the party will become quite obvious. Still another
reason to believe, at least for now, that Trump is the favorite.
CHATTERLEY: I want to about turn now and talk to you about what's going on in markets and fascinating comments from a panel that my colleague, John
Defterios did. Ray Dalio saying that the markets are overreacting here to the coronavirus outbreak. And in the end, we will end up higher than we are
today.
Interesting divergence between what we're seeing in stocks and other assets, quite frankly, bonds and commodities. But what do you make of Ray
Dalio's call here?
VALLIERE: I think the markets are under reacting to this. The amount of people infected has not peaked yet. There's talk of maybe hundreds of
thousands when all is said and done who have been infected.
Admittedly, it doesn't kill people as SARS did, but at the same time, this is deadly serious and I think it has crippled the entire economy of China,
the second biggest economy in the world.
People aren't going out. They're not going to movies. They are not going into stores, and I think that the markets have actually been a bit too
sanguine about this.
CHATTERLEY: You know, it's interesting, there is a definite lack of information, I think and trustworthy information about what's going on here
about infection rates, about just understanding the details here, which is a complication here, Greg. What do you want to hear from Jay Powell today?
Is there anything do you think that he can say, for not only the U.S. economy, of course, but investors will be keenly watching, too?
VALLIERE: He has to address the virus and I think he'll make it clear that the Fed is prepared to do more if they have to. The markets are expecting
one rate cut probably in the summer, he might make it clear that could very well happen. Maybe another one as well.
So I think he is going to sound very, very accommodative. The idea that there could be a rate hike, we've got a great jobs report, as you know,
last Friday, but a rate hike isn't even remotely on the table I think for the rest of this year.
CHATTERLEY: So Jay Powell is on side as far as Donald Trump is concerned heading into 2020 at least.
VALLIERE: Yes. Right.
CHATTERLEY: Inadvertently, perhaps
[09:55:05]
VALLIERE: We're not done yet with the Trump-Powell fight. If Powell doesn't cut rates and we go well into the summer with rates steady, the
fight resumes and Trump will begin tweeting once again about the Fed Chairman.
CHATTERLEY: Yes, watch this space. Greg Valliere, fantastic to have you with us, as always. Have a great day.
VALLIERE: You bet.
CHATTERLEY: And that just about wraps up the show. I can give you a look at where we're trading as far as U.S. markets are concerned.
We are in the record territory for the S&P and the NASDAQ, inching ever higher for the Dow here. We will continue to watch this for you. We are
back in a couple of hours' time with "The Express," but for now, you've been watching FIRST MOVE. Time to go make yours. Have a great day wherever
you are in the world.
(COMMERCIAL BREAK)
[10:00:00]
END
