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First Move with Julia Chatterley
Two Plans, $2 Trillion Apart, No Time To Lose In D.C.; Twitter, Facebook, YouTube Removing A Fake COVID Cure Video Seen By Millions; Sales Plummeting At McDonald's. Aired 9-10a ET
Aired July 28, 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 BUSINESS ANCHOR, FIRST MOVE: Live from New York, I am Julia Chatterley. This is FIRST MOVE and here is your need to know.
Stimulus showdown. Two plans, $2 trillion apart, no time to lose in D.C.
Tech takedown. Twitter, Facebook, YouTube removing a fake COVID cure video seen by millions.
And an unsavory slowdown. Sales plummeting at McDonald's.
It's Tuesday. Let's make a move.
A warm welcome to all our FIRST MOVErs across the globe. It is great to be back with you, but once again the numbers tell the story in the fight
against COVID-19 and that's where I want to begin.
Almost 16.5 million people, the number of confirmed cases to date, globally. More than 650,000 people have lost their lives. However, there
are 25 potential vaccines in human trials now around the world. There are also 230 active trials going on for potential treatments. Moderna, Pfizer
beginning late stage trials of their vaccines. The U.S. says Moderna's shot could be ready for rollout by the end of the year.
So, it's a tale of two halves here. It's the positives that investors continue to focus on, the positive medical news helping support global
stocks. Wall Street, though, softer as you can see in front of you after strong gains yesterday where tech once again outperformed.
Similar story in Asia as well where the session was mostly higher. The Hang Seng's new tech index soaring on day two after a lackluster debut on
Monday. The Chinese tech giant, too, Tencent popping higher. That's now overtaken Facebook as the world's most valuable social media firm by market
cap, too.
So we've got the tech sectors around the world gaining, the science seems to be getting there. The stimulus, meanwhile, further stimulus, has a fair
way to go.
Mind the gap. That's the message from D.C. after the Republicans revealed a $1 trillion aid package. Remember, the Democrats want something three times
the size of that. It may take weeks for Congress to agree on this and key parts of the present support package run out this month.
Manu Raju joins us live with the latest from Capitol Hill. Manu, I'll hone in on what happens with the bump-up in unemployment benefits because the
Republicans here are saying, you've been getting too much for too long, and they want to reduce them.
MANU RAJU, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Yes, they do, from $600.00 a week, which is what was approved in the March stimulus law, to
the Republican proposal calling for $200.00 a week and then that would transition into a program that would allow for 70 percent wage replacement
over a two-month time period.
The Democrats have already rejected that out of hand. They have called for an additional $600.00 a week to be extended, but that's not the only
difference. There are significant differences.
You mentioned it. One is just simply on the price tag, roughly $2 trillion difference between what the Democrats propose and what the Republicans
propose, and there are a whole range of issues in between, whether it's the amount of money for state and local governments here in the United States,
the Democrats want a trillion dollars for that. The Republicans don't ask for nearly as much.
The Republicans only ask for $105 billion to help with the insistence of opening up schools. The Senate Democrats instead have asked for $430
billion to deal with just that.
So you have to deal with the money, but you also deal with some of the specific policy issues, too. One of the redline issues for the Senate
Republicans is to ensure that businesses that reopen will not get sued as well as healthcare workers will not get sued. Schools will not get sued.
They want those liability protections. That's a red line for the Senate Majority Leader, Mitch McConnell. The Democrats are not in favor of that.
They have pushed their own protections for workers, so those are the things that they have to sort out.
But on top of all that, that unemployment benefit program expires at the end of this week. People are going to start to lose that paycheck, so
there's real pressure on Congress to get something, but what they'll ultimately get and when they will get it remain the big questions here on
Capitol Hill -- Julia.
CHATTERLEY: Yes, it's fascinating. The University of Chicago estimated that 68 percent of those receiving benefits were getting paid more than
they were before, pre-COVID, but at the same time, we're a spending driven economy. Somehow you have to try and support growth.
Manu, I want to move on though because there was something at the bottom of that little screen that we were showing, which was a minor sum in the grand
scheme of things, but it was $1.75 billion for redevelopment of the F.B.I. HQ, a specific request from the U.S. administration.
A few eyebrows raising over this one. What do we know?
RAJU: Yes, no question about it. This has been a controversy for some time because the President has called for the rebuilding of the F.B.I. building
in downtown D.C. to occur on the same plot of land in which it currently exists, and why that's significant is because the Trump Hotel is right
across the street from the F.B.I. building.
So the concerns are the President is trying to keep that property on Federal land -- controlled by the Federal government to prevent another
hotel from coming in there, potentially, and taking away business from the Trump Hotel.
Now, this issue has essentially been stalled for some time, but the administration demanded money in this COVID relief package of $1.75 billion
for a new F.B.I. building in downtown Washington, D.C.
[09:05:35]
RAJU: Now, the Senate Republicans are not in favor of that. Mitch McConnell, the Majority Leader of the U.S. Senate wasn't even aware that
was in there when he was asked last night and he said that you have to ask the administration why they wanted that.
Administration officials were on Capitol Hill. We tried to ask them multiple times why that money is in the package. They would not respond to
questions about that.
But clearly, the Democrats believe this is an effort to help the President's business and they're going to push back on this. The question
is, ultimately, how much does the President dig in? Does he demand this money in there or does it fall by the wayside -- Julia.
CHATTERLEY: Yes, I'll give you one guess, quite frankly, and perhaps you'd be forgiven for missing it given it's on page -- what -- 177 of the
Appropriations Section of the package. Hmmm is all I can say. Manu Raju, thank you so much for that.
RAJU: Thanks.
CHATTERLEY: Now, a video making false claims about a coronavirus cure has been scrubbed from social media, but not before it was seen some 14 million
times on Facebook alone.
This video published by the rightwing outlet, Breitbart was also taken down from Twitter and from YouTube. Hadas Gold joins us now.
Aha. Hadas, we found the bar here for seeing dramatic action within the space of a few short hours from the social media giants. But this one was
pretty bad and it was shared by President Trump in numerous ways.
HADAS GOLD, CNN BUSINESS REPORTER: Yes, Julia, it was shared by President Trump. It was shared by his son as well. And this video featured a group of
people calling themselves America's frontline doctors. They did a press event in front of the Supreme Court and this video showed these people
saying that you don't need masks, claiming there is a cure out there, that hydroxychloroquine is effective and that recent studies showing otherwise
are fake science. They claim that the virus has a cure.
Now, this video went viral on social media, partly because of outlets like Breitbart and also of course because of President Trump and his son who
obviously have huge followings and although the platforms did ultimately take the video down, they, as you said, this video got more than 14 million
views on Facebook alone.
And there's, of course, more views on YouTube, more views on Twitter and it's still, I have to say, pretty easy to find this video online if you
want to. Just because these social media platforms took action to scrub them, just goes to show you how quickly things like this misinformation can
spread.
Now, these social media platforms have really ramped up their misinformation policies in the past few months to respond to situations
like these and to deal with coronavirus misinformation.
It is a very rapidly evolving situation, but it just goes to show you how quickly viral videos like this, especially when you have a President and
his family who tend to like to share or retweet things like this, that it's really hard to manage.
Now, when you go to President Trump's Twitter feed, you actually see quite a few tweets that say this tweet has been removed because it doesn't comply
with our policies. Of course, this does not prevent people from seeing this video.
This does not prevent people from listening to what this video has to say, but it's something that social media companies have to deal with and they
are for sure actually going to hear questions about this tomorrow because all the CEOs of some of the biggest internet platforms, we're talking
Facebook, Google, Amazon, and Apple are all going to be facing questioning tomorrow in Congress for that big antitrust hearing.
Now, this hearing is ostensibly about antitrust, but without question, Julia, there will be questions about misinformation and about this video
tomorrow. I can guarantee you.
CHATTERLEY: Yes. They cannot control content that is fake, that is out of control in this manner when it's being spread and goes viral, but the other
thing, Hadas, here I think which is key, and you've pointed to it, they can react really quickly, at least to try.
Hadas Gold, thank you so much for that.
All right, now, from the dramatic rise in coronavirus cases here in the United States and the discussion about it to Asia where even a small number
of new infections triggers strict action across the region.
Kristie Lu Stout has the details.
(BEGIN VIDEOTAPE)
KRISTIE LU STOUT, CNN CORRESPONDENT (voice over): Takeaway in Hong Kong, it's not just about grabbing a quick meal to go anymore. As of Wednesday,
it's a city mandate.
The new order is part of a government plan to try to stamp out a third wave of coronavirus in the city. Indoor dining will no longer be allowed.
The restaurants can stay open for carryout, some workers worry they won't make enough money to get through this latest round of restrictions.
"It has affected us quite a bit," one woman says, "Because our takeaway sales are not that great, and now by banning all dining, it's very hard for
us to survive."
[09:10:08]
STOUT (voice over): Authorities also issued tougher requirements for masks, which will now be mandatory even when outdoors with a fine of
$645.00 for anyone who doesn't comply.
But the coronavirus isn't just surging in Hong Kong. In Mainland China, local transmissions are the highest they've been in almost five months.
Singapore surpassed 50,000 cases. Vietnam, which is reported only a handful of cases since April, is evacuating 80,000 people after Da Nang after an
outbreak in the popular resort town. The Prime Minister is urging citizens to social distance again. "We need to remain calm," he says, "And take the
matter seriously, to find an effective way to stop the virus from spreading."
But many countries are struggling to do just that, especially in densely populated areas like India where in just one day, nearly 50,000 new
infections were reported. Record numbers in Australia, too, which recently had its deadliest day of the pandemic. The Premier, the State of Victoria,
which is under a second lockdown, says people are simply not following the rules.
(BEGIN VIDEO CLIP)
DANIEL ANDREWS, VICTORIA PREMIER: It's just a matter of fact. We have too many people who have symptoms and they are going to work. And what that
means, even with mask wearing, even with hand hygiene, even with distancing, that is an unacceptable risk in terms of transmitting this
virus.
(END VIDEO CLIP)
STOUT (voice over): A virus that is still thriving across Asia and is especially tenacious when people let their guard down.
Kristie Lu Stout, CNN, Hong Kong.
(END VIDEOTAPE)
CHATTERLEY: Even with all the measures put in place. Now, officials in Mainland China are reporting 68 new cases today as COVID-19 infections
spiked in the western region of Xinjiang. The capital, Beijing, also reporting two new cases.
David Culver joins us now with more. David, we keep talking about this. When we compare in terms of notional amount, what's going on in places like
China with the United States, you just can't compare because they are so small, but the reaction that they get, dramatically outweighs and outsizes
what you're seeing elsewhere.
DAVID CULVER, CNN CORRESPONDENT: Julia, you're so right about that. I mean, when you mention single digits or even double digits in new daily
reported cases, it's laughable to some folks who are looking at hundreds if not thousands of new cases reported each day.
Nonetheless, the response here is very different, and it happens in compartmentalized fashion. So we saw it in Beijing, for example, just last
month where there was a cluster outbreak that stemmed from a market.
Immediately, what we saw within Beijing were parts of the city, a city of 20-plus million people, coming to Wuhan-style lockdowns. People sealed
inside their homes in certain communities, basic needs having to come to them.
It had just returned to a sense of normalcy for a lot of those folks. Most of us were able to get around and do things as we were pre-COVID-19.
However, immediately, you're jolted back into this pandemic reality.
The same is true for what's playing out right now in Xinjiang, the far western region of China. They right now have the highest number, this
cluster outbreak is centered there. They're not given a timeline as to how long the lockdowns are going to be in place, because quite frankly, they
just don't know. It's as long as it takes to suppress this.
What we do see, though, is even if it happens, for example, in a city like Beijing, like we saw last month, what happens is, life continues outside of
those compartmentalized lockdowns.
Business is resuming in those parts that kind of border those areas, and the reason is, it allows the economy to keep going. I mean, you and I have
talked about just how devastating the 76-day lockdown was for Wuhan. A lot of those businesses never reopened, and those that have are still
struggling to come back online.
They're trying to avoid that here at a wider level, but at the same time, trying to stem the spread of this virus.
CHATTERLEY: Yes. And in order to do that, you need comprehensive testing and you need to be able to trace if you want to tackle it at a localized
level.
David, thank you so much for that. David Culver there.
All right, let me bring you up to speed as well with some of the other stories making headlines around the world. In the next hour, the U.S.
Attorney General will face tough questioning from Democrats on Capitol Hill.
They're accusing William Barr of abusing his office to protect the interests of President Trump. In testimony before a House Committee, Barr
is expected to defend his actions, including the deployment of Federal agents to Portland.
Guilty on all charges, Malaysia's former Prime Minister Najib Razak was sentenced to 12 years in prison in the first trial over the multibillion
dollar scandal at state fund 1MDB. He was also fined nearly $50 million.
The court found Najib guilty of looting money for his personal benefit from Malaysia's government investment fund. He's vowed to appeal.
Police on Tuesday searched a garden in Germany as part of the Madeleine McCann investigation. The three-year-old girl disappeared in 2007 during a
family holiday in Portugal.
Prosecutors in Germany say evidence suggests a man jailed for a different crime killed Madeleine, but no trace of her has yet been found.
All right, we're going to take a break here on FIRST MOVE, but coming up, is capitalism at risk from an overreliance on government in times of
crisis? We'll discuss.
And some startling numbers about the number of businesses going under due to coronavirus. These numbers are shocking. Stay with us. Plenty more to
come.
(COMMERCIAL BREAK)
[09:18:31]
CHATTERLEY: Welcome back to FIRST MOVE live from New York where U.S. blue chips are under pressure this morning after weak results from Dow
components 3M and McDonald's. That's the picture as we see it right now.
As you can see, tech stocks set to pull back, too, after gaining some 1.5 percent in yesterday's session. Elsewhere, let's look at something sparkly.
Gold pushing higher again after hitting record highs yesterday.
Goldman-Sachs out with a bullish new call on gold. They see it rising to $2,300.00 an ounce over the next year. Goldman also sees silver rising to
$30.00 just to give you a sense of that, too, over the next 12 months as well. Very much tied, of course, what we're seeing for the U.S. dollar.
The dollar index bouncing a little today after falling to two-year lows. As we mentioned, the dollar weakness is a big theme on global markets for --
particularly for big corporates that have foreign earnings. It fell more than 1.5 percent last week.
All right, as we've been discussing, as Republican lawmakers unveil their massive new stimulus plan here in the United States, our next guest says
government rescues are ruining, I quote, "capitalism." In a "Wall Street Journal" op-ed, Ruchir Sharma, the Head of Emerging Markets at Morgan
Stanley Investment Management also said government intervention leads to weaker growth, less innovation, and greater inequality, and Ruchir joins us
now.
Ruchir, fantastic to have you on the show. I loved this op-ed. Your point is not that it's -- we shouldn't be helping stimulate the economies as a
result of COVID. But just that there are significant downsides, particularly when you're stimulating in bad times and in good times. And
that's where we are today.
[09:20:17]
RUCHIR SHARMA, HEAD OF EMERGING MARKETS, MORGAN STANLEY INVESTMENT MANAGEMENT: Exactly, Julia. That's really what's been the story of
capitalism over the last 30 to 40 years, that it's been greatly deformed.
It's no secret that modern society increasingly looks to government to intervene, whether it's got to do with health emergencies or to do with
economic rescues, and we seem to think that that's fine, as long as the government intervenes and is able to somehow prop growth up without any
apparent consequences, it's fine for that to happen.
And the point I'm trying to make in that "Wall Street Journal" essay that you refer to is that the downside of constant government intervention is
much more insidious than we think it is. It leads to lower productivity over time, and that's been one of the big paradoxes of the last decade or
two.
We are in the midst of this incredible tech boom, and yet productivity numbers around the world have been declining, and I tried and find out as
to what's happening, and link it much to the increased government intervention that we're seeing at every level from the Fed increasingly
involved in the marketplace to the fact that government spending everywhere has been going up and this pandemic has only accelerated many of the trends
that we have been seeing over the last few decades.
CHATTERLEY: You're suggesting that the more money that we're throwing at the system, it helps the strong get stronger, and we've seen this with the
Big Tech companies at the cost of smaller companies in particular. They get squeezed out, and actually, that ends up suppressing innovation, which ties
back to your point about, in fact, lower productivity and weaker growth rather than stronger in the end.
SHARMA: What's being crowded out here are the start-ups. If you look at the number of new start-ups, those have been declining over time. They're
getting squeezed at both ends.
As you point out, at one end, you have the rise of these very large companies, virtual monopolies that's taking place. At the other end, we
have the rise of these zombie companies, companies which are not able to even earn enough to make good on their interest payments any year, so they
have to keep coming to the market to borrow.
Just in the United States, the number of zombie companies, the share of the total number of companies has risen from a number as low as two percent in
the 1980s to nearly 20 percent now. To believe that 20 percent of all companies in the United States, as an example, can be classified as zombie
companies or companies that don't even earn enough interest to -- or enough profit, rather, to make good on their interest payments, and so they have
to keep going to the market to borrow.
So, these very inefficient companies that are kept alive at one end and the rise of monopolies and what gets squeezed out in the middle is these start-
ups. So that, I think, is something which is so against the very idea of capitalism, which is about creative destruction. It's about price
discovery.
These notions have been lost as we see increased government intervention and this fear that we can't let anybody fail, whether it's too big to fail
or even too small to fail.
CHATTERLEY: It also works for nation states as well. You make the point of Cyprus, it had all sorts of troubles seven years ago and now it's raising
20-year money at around one percent, which is incredibly eye-opening. But I want you to hone in on the point that you just made there, which is, you
know, we don't see creative destruction anymore.
When you start to use those kind of terms, people get scared. How do you protect the weakest, but still allow economies to go into recession because
we've forgotten what that looks like.
SHARMA: Right. So I'm not arguing for the fact that in a recession, the government shouldn't help. Yes, the government's job has been in the post
Great Depression era to help during recessions to try and smoothen out business cycles.
What I'm against is that that continues even after the recoveries are well entrenched. So, right in the last decade, before this pandemic, we saw
continuous increase in zombie companies and also this fear that no country can also be allowed to default. So, the number of countries today which are
defaulting on their debt is also close to a record low level.
So, the fact that no one is allowed to go past -- there's no cleansing of the system at all, and we keep on supporting the entrenched players. I
think this is also something, why so many people, especially the young, are growing increasingly disenchanted with the system, because they think we
have capitalism, whereas, as I argue in the piece, what we really have is a form of socialism just for the rich and the powerful.
[09:25:10]
CHATTERLEY: Yes, just a different form of socialism that's benefitting the richer, rather than everybody as the traditional format is supposed to be.
What does a format reboot look like, Ruchir, because what we're saying here is this form of capitalism, this form of constant rescues, clearly isn't
working, and actually, it's costing jobs, it's raising the level of inequality. What does a reboot look like?
SHARMA: A reboot really is that we've got to sort of go back to the times when -- that the moment a recovery begins, I think that the Fed or the
government in general need to step back from their intervention.
This whole notion that you keep on intervening because there are no consequences, as long as there's no inflation, we can keep on intervening.
I think that idea needs to be re-examined. So, I think that the reboot that you're talking about means that once you have some sort of a recovery,
which begins, we need to -- the government needs to step back.
And I think in some way, an example is that of Germany. It's not the best example, but it is a good example. Germany, for example, they saved during
the recovery periods. They ran government surpluses. And then when you have a big recession like we did in the last few months, you go out and spend
big to try and smoothen out the business cycle.
But what I'm against, which is what the United States did, is that even in the tenth year of its economic recovery, it was running very large budget
deficits to try and boost economic growth. That is not the job of stimulus to boost economic growth so late in the stages of a recovery.
CHATTERLEY: Yes. The challenge here is for any government making this kind of decision to perhaps pull back, how do you do it and get re-elected?
Ruchir, always great to chat with you and I recommend everyone reads the op-ed, it's fantastic. Ruchir Sharma, Head of Emerging Markets at Morgan
Stanley Investment Management, always great to have you on the show, sir.
All right, we're back after this with the opening bell.
(COMMERCIAL BREAK)
[09:30:25]
CHATTERLEY: Welcome back to FIRST MOVE. U.S. stocks are up and running on Wall Street this Tuesday, and they're moving lower. We have got a lot to
watch. Actually, I'm lying to you. Look at the -- oh, no, it's frozen. There you go. The joys of live TV. Lots to watch. I'll let you know as soon
as we start to see that moving again.
We've got the Democrats and the Republicans also set to meet for a second day of those stimulus negotiations heat up in Washington. We've also got
the Federal Reserve beginning their two-day policy meeting in Washington, D.C., too, so it's going to be interesting to see what their take is on the
latest stimulus and where we stand as far as the U.S. economy is concerned.
Also going to be watching plenty of headlines from the tech sector, too. The CEOs of Amazon, Facebook, Apple, and Alphabet as Hadas was mentioning
earlier, testifying before Congress tomorrow on antitrust issues and we've got tech earnings from all four of those FAANGs out on Thursday. Wowzers.
That's going to be a busy day.
In the meantime, McDonald's shares lower after the company reported a 23 percent drop in global sales for the second quarter. Clare Sebastian joins
me now. Clare, they pulled their guidance. We know they were challenged, but this was very much about the international business as much as what
they were seeing domestically. Just walk us through the numbers here.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Julia, it was not a pretty set of numbers. Some of them missed expectations. That's why you see
the stock down today, 23 percent drop in comparable sales. That's basically a loss of a quarter of their business. So that is a pretty big deal for a
company like McDonald's, 30 percent drop in revenue. Earnings were down by two-thirds.
So it was an ugly quarter, but especially in international where I think they struggled to reopen even more. In the U.S., they saw a significant
improvement. It was only down 2.3 percent in June, but it was still internationally down about 18 percent in June in their key international
markets, so that is definitely something to watch.
But the crucial point about this is that sequential improvement and what we wanted to hear from the call was whether that is continuing into July and
they said it was.
They said comparable sales have actually, in the U.S. in particular, started to turn positive. In July, the CEO saying that he expects the
second quarter will be the low point of the year because they've put in all this effort to adjust their stores, to implement safety protocols, to sort
of cut back their menu -- to do all they can to try to support their company stores and their franchisees, which make up most of the business.
But the bottom line, Julia, is that, it does look like there will be a long-term shift away from dining rooms and into drive-thru. There was a lot
of discussion about just how much of a competitive advantage that the markets that have a high concentration of drive-thru stores are seeing and
how they expect that will help them gain market share as customers start to come back.
CHATTERLEY: Yes, that's such a great point. All the efforts to invest in digital technology, drive-thrus, helping prove the point over this last
several months. But I was just looking at the expectations here for their earnings per share ranging between 50 cents per share and $1.27 per share.
I mean, we were operating in the dark in particular in this one, so yes. What a challenge. Clare Sebastian, thank you so much for that.
Now, as Clare was illustrating, the devastation to America's restaurant sector has been well and truly laid bare. Data from Yelp showing 60 percent
of restaurants which shut down during the pandemic are now closed for good. That surpasses shopping and retail where just under half closed
permanently.
Yelp reports the highest number of closures are in states which have seen the highest number of COVID cases namely California, New York, and Texas,
though clearly some of the largest states in America, too.
Justin Norman is Vice President of Data Science at Yelp and joins us now. Justin, these are shocking numbers.
JUSTIN NORMAN, VICE PRESIDENT OF DATA SCIENCE, YELP: Yes, and thanks for having me on. They absolutely are. And unfortunately, what we're starting
to see is that there is a shift from temporary to permanent business closures over the last recent weeks.
We're starting to see those numbers make that shift as states are going back into lockdowns as the pandemic begins to spike back up again,
especially in some of the most affected geographic areas.
CHATTERLEY: Talk about that in particular. I mean, I just mentioned there, when you're talking about the likes of New York, of California, of Texas,
the numbers are going to look bad in terms of size, simply because they are such huge states, but even beneath that, there's real concerns about
viability of businesses not just now but even going forward.
NORMAN: Yes, absolutely. So, what we've seen in particular for the restaurant category that you mentioned earlier is that the protections for
PPP and other types of assistance are beginning to run out and so restaurants are really, quite frankly, low margin businesses and difficult
to operate efficiently even under the best of circumstances.
So a lot of businesses, especially that were local ones or owned by sole proprietors or small groups, really struggle because they don't have the
cash reserves to weather repeated shutdowns or decreases in revenue for long periods of time.
[09:35:26]
NORMAN: Now, there have been some notable exceptions to these types of categories and those restaurants that are able to shift into a delivery,
takeout, or other service category but even then, that doesn't necessarily last forever.
And so, we've seen in some areas a plateau of what we're calling temporary closures, that's businesses in cities and states that are reopening that
can take sort of pause, but as the pandemic continues to grow, especially in places like Arizona, Texas, and Florida, where there are the highest
spikes of COVID-19 cases recently, unfortunately, we do believe and have seen a trend towards permanent closures, which mean that these businesses
likely we'll never be seeing again.
CHATTERLEY: Yes, it's the uncertainty, isn't it? And the ongoing aspect of this, it just makes it so hard for businesses to plan.
To your point, and I do think this is very important, have you seen any correlation between the types of businesses that are reopening, let's say,
indoor dining, gyms, for example, bars, all the potential hot spots and then a rise in COVID cases later?
NORMAN: Yes, so, actually, we have, and it is very interesting, as you said. Now, I want to say up front that we did see a statistical
correlation, not making any claims about causation yet.
That's simply not the data we have, and there certainly hasn't been enough time to be able to give that relationship, but we did see a trend towards
that and in particular, restaurants, bars, any type of night life, and gyms, indoor activities like that, where there were, you know, sort of the
decrease in COVID-19 cases and people went back to these locations, back to these activities, especially en masse, we saw a clear spike in COVID-19
cases within those same locations right afterwards.
And in those sort of ten states where these -- there was a massive increase in COVID-19 cases, we did see that correlation between that type of
activity and in particular places like Florida, South Carolina, Arizona, and Texas, the usual suspects were represented there.
CHATTERLEY: Yes. It's quite fascinating, isn't it? And you make a great point that we shouldn't make suppositions based on this data but just
comparing the data sets certainly suggests something here.
I want to talk to you about consumer behavior and what you're seeing in terms of black-owned business, too because even as the news flow has
shifted away from the protests in light of George Floyd's death, on to -- and back on to the rising COVID cases around the nation, you're still
seeing people, it seems, trying to support these businesses or at least looking for them, and in significant size.
NORMAN: That's right. And you know, it's one of the lone good stories coming out of the data, which is really great to see for many reasons, but
your point is well made about the sustained nature.
So, from May 25th to July 10th, we saw over 2,500,000 searches for black owned businesses on Yelp and that's compared to about 35,000 over the same
time period last year, so that's a 7,000 percent increase, which is something we've, quite frankly never seen before in any specific category
and in particular, people are looking for different types of black owned businesses.
It's not just restaurants. They're interested in black owned hair salons, black owned coffee shops, and that has begun to show a trend that's going
to persist beyond just the few weeks surrounding George Floyd's death, but actually into a durable behavior that has signaled a shift in consumer
behavior overall.
And you know, there are a lot of really great ways to connect with black businesses, but in particular, Yelp connected itself with a campaign called
My Black Receipt, which was a movement that had a mission to empower the black community through spending directly in between May 25th and June 6th.
And the goal is about five million, and that goal actually was surpassed quite a bit to 7.5 million. And so, we're seeing that people are not just
looking for and interacting with black pages online or interested in them, but they're spending more money over time and that's something we hope
continues.
CHATTERLEY: Yes, absolutely. It's creating direct action, to your point, as opposed to just perhaps searching and not following through and doing
something about it.
Justin, very quickly, there was a plot of debate when we saw the small business loans going out that actually, there wasn't enough pushed out to
black owned, minority owned businesses. Do you track the data and break it down in terms of those that are black owned or minority owned that are
perhaps struggling versus others? Do you see anything in the data that supports the concern?
NORMAN: So, actually, we only recently have launched an attribute which allows businesses to self-identify.
[09:40:10]
NORMAN: And to -- which is a great thing and I think many people have taken advantage of it, what we're seeing in the data, but it hasn't been
live enough for us to -- long enough for us to take any significant analysis of it, but we'll certainly be looking at that in the future.
But we do know, anecdotally that a lot of the businesses that are in of the areas that we do track are disproportionately people of color owned and of
course they've been impacted just as much, if not more than those that are in areas where they're not that high area of distribution.
So, it's certainly something that's important to watch, and it's a thing that many of us in the sector who are supporting small and local businesses
want the government and states and local officials to continue to provide support for.
CHATTERLEY: Absolutely. It's all arming you to fight the battle. Justin Norman, thank you so much for that. Great to have you with us, and come
back and talk to us when you have collected more of that data, because we want to keep talking about it, too.
NORMAN: Thank you.
CHATTERLEY: The Vice President of Data Science at Yelp. Thank you.
All right, up next, the pandemic reshapes banking in Brazil. It was already happening, but we speak to the CEO of Nubank, Latin America's biggest
digital bank. We will find out what they're up to. Stay with us.
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CHATTERLEY: Welcome back to FIRST MOVE, and we're heading to Brazil now where the coronavirus outbreak is the worst in the world after the United
States, and like many places in the world, it's changing the way people bank.
Nubank is a digital bank that offers mobile based banking and a no fee credit card to 26 million customers. The bank was already growing at a
staggering rate. It quadrupled its customer base last year alone, and the pandemic has only fueled that further.
The bank has expanded now into Mexico and recently acquired U.S. software company, Cognitect. Joining us now is David Velez, the founder and CEO of
Nubank.
David, fantastic to have you with us on the show. In your own words, just explain the incredible growth that you're seeing. Was it simply just the
lack of any product, not necessarily a digital one or otherwise?
[09:45:14]
DAVID VELEZ, FOUNDER AND CEO, NUBANK: Hi, Julia, thanks for having me. Yes, for a very long time, we've seen, obviously, a very fast adoption of
digital technology in Brazil and in banking. But what happens is for a segment of the population, they still wanted to go to the banking branch
and have a coffee with their branch manager and stay there for 30 minutes, an hour, and have a conversation.
Suddenly, all the banking branches are closed, and there is no -- there's no alternative beyond digital banking, and so for a large percentage of
populations, particularly above 60-years-old, and in certain areas of the country, we've seen very, very fast adoption through the pandemic. They're
looking for the top digital banking solutions. They're having to receive money from government. They're having to send money abroad.
And so, all of those solutions have really expanded and accelerated our growth rate.
CHATTERLEY: But that doesn't explain what was happening in 2019. I mean, you went from five million to 26 million customers in the space of a year.
What exactly was driving that, even before the pandemic hit?
VELEZ: Sure. That's right. So, we started in 2013 with a view that the banking industry in Brazil and Latin America was a banking industry
dominated by five banks, very strong oligopoly that for a very long time had had no competition. They were charging some of the highest fees and
interest rates in the world, and customers were really experiencing a lack of access, a lack of customer experience.
When we launched with a full digital solution, we were able to offer banking products with no fees since we had no physical branches and we have
no very expensive overhead. But also very, very much focused on the customer experience. Really using a different type of language, a different
type of experience, and really enabling a really great customer experience.
And so we started seeing the development and sort of the growth in 2014, 2015, early adoption by the millennials, but really by 2019, the market has
really embraced digital alternatives and 2019 was the year where we really accelerated as the leading digital bank in Brazil.
CHATTERLEY: You know, it's fascinating as well, I look at some of the statistics in Mexico, half the population is under 24 years old. They get
digital, they're engaged with that, but less than what? Ten percent of Mexican adults actually have a credit card, so you clearly saw an
opportunity there to do exactly what you have done in Brazil, and off you go.
VELEZ: That's right, and it's a problem both on the banked consumers and really in all Latin America and Mexico and Brazil, banked consumers are
paying just too high of fees. They're getting bad consumer experience. They're having to go to a branch or having to wait over an hour to get
service.
So, for those banked consumers, we have been able to really offer way better experience, no fees, but you have over 250 million people in Latin
America that has no access. People that were never -- they never felt welcome inside of a branch. They felt that the banking manager was making
them a favor by opening an account. And so they have to do long way lines, and they'd rather put their money under their mattress.
So, for both of those type of customers, we really are becoming a great solution and we're seeing even in Brazil today, we have customers in 100
percent of all the Brazilian municipalities. We have customers in the Amazons. We have customers in the south.
Banking branches only exist in 80 percent of those, so the financial inclusion aspect is something that's growing really, really fast for
Nubank.
CHATTERLEY: Yes, and it's something we're really passionate about on this show as well. What's the biggest challenge here, David, very quickly? Is it
about finding engineers, finding coders as you grow and expand, or does it -- competition at some point kick in?
I mean, if I think about some of the European digital banks, N26, Revolut - - they know Mexico in particular is a huge opportunity. Does that kind of competition make it more expensive to operate there? What's the biggest
challenge?
VELEZ: The biggest challenge, really is finding the very best people, the very best talent. We are not worried about competition. We think
competition is great.
Ultimately, 90 percent of our customers are in the big banks. They are in five banks that own any of these markets, and so we are here to try to
offer better products. It really is the talent that becomes a big bottle neck.
Latin America, unfortunately, hasn't had a big ecosystem of technology and engineering talent. There is not a lot of quantity. So, developing that
talent in-house and really importing a lot of talent from around the world has been a big focus to allow us to scale.
CHATTERLEY: Very quickly, David, because I have about 30 seconds. Cognitect, what is this acquisition going to mean for the customer
experience?
[09:50:08]
VELEZ: Well, Cognitect, they are the developers of Clojur and Datomic -- these are two pieces of technology that Nubank is the largest user in the
world. What that ultimately means for the customer experience is, our ability to scale faster and larger, being able to offer better products,
maintaining a very, very efficient infrastructure to pass that efficiency to the end consumer and continue to offer the best customer experience.
CHATTERLEY: We're going to continue this conversation. I know Tencent is a big investor and it was lessons learned in China as well being adopted in
Lat-Am that was part of the ethos.
David, we shall continue this. For now, it was great to chat with you. David Velez, there, founder and CEO of Nubank. Stay safe, sir.
VELEZ: Thank you, Julia.
CHATTERLEY: Thank you. All right, coming up, the U.S. Attorney General gets ready to testify on Capitol Hill in a long, long awaited showdown with
House Democrats. We've got his opening remarks straight ahead.
(COMMERCIAL BREAK)
CHATTERLEY: As you heard earlier on the show, U.S. Attorney General, William Barr is set to testify before the House Judiciary Committee in the
next hour. The hearing now scheduled to begin at 10:45 a.m. Eastern Time, this after Committee Chairman Jerry Nadler was involved in a car accident
on his way to Washington.
CNN's Joe Johns joins us live. The Democrats have been waiting 14 months for this so they can wait a little bit longer. Do we know about Jerry
Nadler's health? Is he okay?
JOE JOHNS, CNN SENIOR WASHINGTON CORRESPONDENT: Right. The understanding is that Jerry Nadler is okay, that he was not injured, but it doesn't sound
like this hearing is getting off to a good start for him, given the fact that Democrats have been waiting so long for this opportunity to question
William Barr.
Really, the takeaway, if anything, on this, Julia, is that he is set to go before the Judiciary Committee, probably in about 45 minutes, and to push
back against the narrative that he is essentially a tool of the White House, that he's just there doing the bidding of the President, and
Democrats have said that again and again. And in fact, they want to question him about a variety of issues, a variety of things he's done in
office.
As for his statement, part of his statement, which has been released to the media, it's pretty clear that Nadler first wants to push back against that
narrative, and then he also wants to talk about Federal involvement and police involvement in the unrest around the country that we've seen that's
been very controversial, in fact. He wants to justify it and say, essentially, that the Federal government has been under attack.
Again, Democrats are going to probably go far and wide in the questioning because there are many who believe the Attorney General has been involved
in grave abuses of power since he first took the job -- Julia.
CHATTERLEY: Yes. They believe the Department of Justice is more focused on serving the President rather than the people here.
Joe, very quickly, what do we expect from him? He once said or alluded that the President made it impossible for him to do his job.
[09:55:13]
JOHNS: Right. Well, the fact of the matter is, we expect him to align himself with the President but also to make it clear that in his view, he
has independence, he has autonomy, and no one at the White House, he will say, or is expected to say, has ordered him to do anything, including the
President, that he has done his job under his own volition and using his own assessments, as you will, on which way to go on particular matters.
Back to you -- Julia.
CHATTERLEY: Yes. The judgment remains to be seen. Senior Washington correspondent, Joe Johns, thank you for that.
And stay tuned for Barr's testimony right here on CNN. But for now, that's it for FIRST MOVE. I'm Julia Chatterley. Stay safe, and I'll see you
tomorrow.
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[10:00:00]
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