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First Move with Julia Chatterley
Trump Tweets, "It Can Get Worse," And Now It Does, China Retaliates And Futures Plunge; Oil Prices Spike As Saudi Arabia Says Two Oil Tankers Have Been Attacked; Uber Shares Sliding Free Markets After Friday's IPO Flop; Actress And Singer, Doris Day Has Died. Aired: 9-10a ET
Aired May 13, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JULIA CHATTERLEY, CNN INTERNATIONAL HOST, FIRST MOVE: Live from the New York Stock Exchange, I'm Julia Chatterley. This is FIRST MOVE, and here's
your need to know.
Trump tweeted, "It can get worse," and now it does. China retaliates, futures plunge. Sabotage: Oil prices spike as Saudi Arabia says two oil
tankers have been attacked; and no pickup for Uber. Shares sliding free markets after Friday's IPO flop. It's Monday, let's make a move.
Welcome to FIRST MOVE. Once again, where investors were already battling with a weekend hangover related to the trade related rhetoric that we saw,
of course, flying back and forth between China and the United States.
Well, I can tell you, as you had there, no respite today. China responding now with a tariff rise of its own on $60 billion worth of goods. The
tariff rate from 10 percent to 25 percent. Nothing about what we're seeing here suggests that compromise is anywhere close at this stage. And that's
what you're seeing investors reacting to this morning.
Right now, we're down some 2 percent across the board for U.S. futures and that is just adding, of course to Friday's losses. I want to keep in mind
here, though, that for all the pressure that we saw last week and the headlines that was screaming that it was the worst week for the Dow since
March, we're still only some 4 percent here now off record highs, if you include the pressure that we're seeing today.
Some analysts are suggesting we could see equity markets repricing lower here by as much as 10 percent to 15 percent. We'll get you some context on
that later in the show.
President Trump back on the trade case this morning, tweeting that China is at fault here. China backtracked on agreements and reiterating that U.S.
consumers will not be paying the cost here.
Larry Kudlow, his economic adviser admitted the opposite, in an interview on U.S. television this weekend. More importantly, we could get further
details today of additional tariffs on $325 billion worth of goods Chinese imports into this country. So investors again are going to be closely
watching for any further headlines today.
As for China's response, this tweet overnight really struck me. It was posted by the editor-in-chief of China's "Global Times." I'll read it to
you, "The sooner new tariffs on $300 billion worth of Chinese goods come, the better. That means the trade war comes to the first turning point,
shifting from a comprehensive U.S. offensive to a stalemate. The two sides will then compete on endurance. China's political system will ensure we
won't lose." Aka, bring it on.
On Saturday, President Trump has said that it will be wise for China to get a trade deal now or risk worse terms after his reelection in 2020.
This is so critical. Remember, President Trump has to win an election in 2020. President Xi does not. In my mind, that's leverage.
Let's get to the drivers. Cristina Alesci joins us now. Cristina, nothing of what we've seen, including China's response this morning suggests to me
compromises coming anytime soon. And we're kind of seeing that reflected by investors pre-market today.
CRISTINA ALESCI, CNN BUSINESS POLITICS AND BUSINESS CORRESPONDENT: Investors are clearly rejecting this antagonistic approach that President
Trump is taking with China, and it resulted in retaliation that we got this morning, an increase on $60 billion worth of Chinese goods.
Look, at the end the day, it comes down to who has leverage and whether or not we get past the impasse that we're at right now really depends on
whether each side feels like they need to get a deal done.
And right now, the Chinese and the U.S. clearly don't feel like they need to. To your point, though, that might change as we head into the 2020
election cycle and that really starts to heat up. President Trump may not want this kind of disruption in the market.
At the same time, the price is being paid for these tariffs by the U.S. consumer, and as they feel it more and more that might put pressure on
Trump as well. So the U.S. may have leverage now and that may change going forward.
CHATTERLEY: I mean, what we've seen on the Chinese side is the economy seemingly solidifying to some degree as far as the data is concerned, then
we have to look at what kind of market reaction we see back in the United States and the impact that it has on the economy ultimately in the United
States, too.
I mean, we've got analysts out there saying that the markets could we priced 10 even 15 percentage points here.
[09:05:10] CHATTERLEY: And we know how the President feels about record highs in markets and a strong U.S. economy.
ALESCI: Yes, I think investors are clearly sending a message to the administration and the question is, to your point, how low do we have to go
in order for the administration to go ahead and come to the bargaining table? I think that remains to be seen.
Look, we could see a drop as low as 10 percent to 15 percent when we had the dramatic selloff in December, that was sparked by, you know, the
potential for higher interest rates, in addition to uncertainty over trade. That was at about a 20 percentage point drop. We may see, you know,
something less than that here. But clearly, it's going to be dramatic. And this is the way that Wall Street intends to send them message to the
President.
CHATTERLEY: Yes, completely shocked, I think by the developments in the last week and a half. Cristina Alesci, thank you so much for that.
All right, let's move on to our second driver this morning. Saudi Arabia is saying two oil tankers have been attacked in what they are calling
sabotage. They said it's a dangerous threat to the security of a global oil supplies. Right now, as I mentioned, oil prices are higher. And John
Defterios joins us now with the details.
John, just even looking at all prices. I have to imagine here that if we weren't seeing the broader risk asset selloff, perhaps oil prices will be
even higher here. What do we know about these attacks?
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Well, first Julie, right near the high for the day, so the market has woken up to the threat
that's out there. And who would think we'd be thanking the U.S.-China trade dispute for taking off the shocks of the tanker attacks right now.
A senior Saudi source was suggesting that they were expecting a sharp fall off today because of the rhetoric between the U.S. and China and now we see
what the tariffs look like. So the fact that we're up nearly 2 percent of the day is quite alarming.
Now, a couple of things here. The market percolated up because of the official statement coming out of Saudi Arabia. I thought it was
fascinating, it came for the Minister of Energy himself, Khalid al-Falih -- Saudi Arabia is the number one exporter -- when they suggested there was
damage to two Saudi tankers and significant damage to the structures, that's what I saw the line go up in terms of prices.
We also have confirmation from UAE officials there was a UAE flag tanker and also one from Norway. Now the other thing if we can bring up the
graphic here looking at the Strait of Hormuz and south of it, I thought this is very strategic. Whoever the perpetrator really was that they hit
130 miles south of the Strait of Hormuz.
This whole Port of Fujairah was designed to remove the chaos, if you will, around the Strait of Hormuz and threats from Iran before. I think there's
a signal here to Saudi Arabia and the UAE, be careful what you ask for because it's not just within the Strait of Hormuz that's up for grabs right
now, but areas that are designed to avoid this chaos in the past.
The UAE has invested billions of dollars on oil pipeline going to the Port of Fujairah which sits at the Gulf of Oman, and also the refinery and
bunker businesses that are there. And the fact that these four tankers are all in that area outside of UAE territorial waters is a very strong signal
of things are ratcheting up pretty badly, pretty nasty at this stage.
CHATTERLEY: As you said, there's a lot of things that we know and also don't know at this stage. But given the rising tensions in the region, the
ongoing rising of tensions between the United States and Iran and the threats that Iran have made in the past as far as the Strait of Hormuz is
concerned, you have to be incredibly cautious here.
I do want to bring it back, John, to what you were saying as well about the trade impact and the direction perhaps that oil prices will be going if it
weren't for what we're seeing there right now in these apparent sabotage attacks.
How important is the United States and China in terms of trade where energy is concerned? And if we are looking at a broader trade risk here, the risk
of economic slowdown impacting two critical countries, but for energy consumption?
DEFTERIOS: Yes, in fact, they take up about a third of global energy demand, which is 100 billion barrels a day, just below that to be
absolutely frank. So it is a risk that's out there in the market.
There's also the art of what we're hearing from Tehran right now, Julia, and I'll just spend a minute on that. We hear from the Revolutionary Guard
that they're not concerned about the threat of the military ships that the U.S. is putting into the Gulf right now. They're actually saying they're
easier targets for Iran. So that's fairly aggressive.
But at the same time, the Ministry of Foreign Affairs put out a statement from Iran today, saying that these attacks are worrying. So trying to
create some distance, if you will, between the regional rival Saudi Arabia, the UAE and Tehran itself saying, "We don't want this to escalate. We
don't like to see the attacks."
Let's bring up a one-year chart to answer your question about oil demand and supply right now. We're near the $72.00 peak for the day, pretty close
to $75.00 a barrel, Julia, that we saw when President Trump said he would take Iran's exports down to zero, but we're fair amount away from $86.00 a
barrel that we saw in October of 2018 when President Trump announced the waiver.
[09:10:11] DEFTERIOS: So it's not a major danger zone right now, but it is pretty fascinating having covered it for so long, Iran's exports are down,
Venezuela's production is plummeting, and so as Libya's and we don't have a shortage in the market. It tells us that everybody is worried about your
point between the U.S. and China and where the trade conflict actually goes.
CHATTERLEY: Yes, absolutely at the crux of the intersection of politics and economics. John Defterios, thank you so much for that.
All right. Next driver, an Uber nightmare. Let's call it that. The stock of Uber falling, in fact under $40.00 pre-market. In fact, higher a little
bit now, but it is only the second day of trade since the debut on Friday.
Paul La Monica joins me now -- painful for investors of all shapes and sizes here in Uber at this moment, and also SoftBank, of course, a big
investor under pressure overnight, too.
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, SoftBank, Julia is one of the largest investors in Uber. So clearly, the big drop that we're expecting
about, you know, 5 percent or 6 percent on top of the fall Friday for Uber is not great news for SoftBank.
I would imagine that SoftBank shares falling in Japan also on concerns about U.S.-China trade tensions, because remember, SoftBank is also a major
investor in Alibaba, the Chinese e-commerce giant that will likely be hit by any trade tensions that continue to escalate.
So this is not a great day for two of SoftBank's top investments, and I think with regards to Uber, there are just growing concerns that even
though they price the offering, arguably more reasonably then Lyft did, investors are just very nervous about the huge amounts of money that Uber
is losing in order to fight Lyft in the U.S. in this market share battle.
CHATTERLEY: Yes, huge questions being asked of these guys, and of course, we've got more coming up. WeWork, one of the other that SoftBank has
invested in also set to debut in the coming months. And I think, again, another one where perhaps we have to look at the valuations here, loads of
losses. And just as question how it's going to get priced here and whether again, we need to be yet more conservative, when it comes to market.
LA MONICA: Exactly. Slack as well, which is going to pursue a direct listing. I think investors are going to be very skeptical of WeWork.
There has been a lot of negative press lately about the company and the culture, almost cult personality, if you will.
You know some people that I talk to kind of cynically joke that this is essentially a real estate play that's trying to transition or have tried to
pitch itself as a tech juggernaut, when it may be really isn't.
So I think there will be a lot of skepticism regarding WeWork, especially because it does have some similarities to Uber in the sense that it is
losing a lot of money.
CHATTERLEY: Yes, also, a huge question, I think for private investors at the back end of the process. I mean, the Saudi government invested at
$48.77 a share back in June 2016. So clearly, they're underwater, too.
LA MONICA: Yes, lots underwater.
CHATTERLEY: Choose your timing wisely.
LA MONICA: Yes, I think that there are legitimate questions about whether or not some of the big VC firms and sovereign wealth funds are -- they were
just maybe too enamored with the growth stories that some of these private unicorns had, and yes, the revenue growth is phenomenal, it's eye-popping.
But I think, there is this wake-up call. Wall Street remembers what happened to 20 years ago to all those tech firms that were going public.
And it's like, "Hey, we're going to monetize eyeballs. We're pre revenue. We don't need a business strategy, because everyone is going on the
internet."
People feel that right now, I think even though 1999, for a lot of people's ancient history, there are a lot of people on Wall Street who are remember
it pretty acutely and how painful it was and those people I think, are going to be increasingly wary of getting burned again with these unicorns.
They're saying, "No, uh-uh. Not today. We're not going to be buying these stocks just to see them fall in value."
CHATTERLEY: Couldn't agree more. Public market implications and private market implications, too. Paul La Monica, thank you so much for that.
All right, the fourth driver today. In the past hour, Mercedes Benz maker, Daimler unveiling its bold, green ambition touting the fleet will be carbon
neutral by 2039. And they are putting a renewed focus on electric and hybrid cars.
Matt Egan has all the details for us. Matt, what else did we hear from them?
MATT EGAN, CNN BUSINESS LEAD WRITER: Julia, your automakers are in a race to go carbon neutral. Mercedes Benz this morning with this bold
announcement to make its car fleet carbon neutral by 2039 that appears to one-up pledges made by other automakers, including Volkswagen, which said
that it'll go carbon neutral by 2050.
So how will Mercedes get there? Well, in part by slowly phasing out the traditional combustion engine. Mercedes Benz said that it wants to make
electric vehicles and hybrids more than half of its sales by 2030.
[09:15:15] EGAN: And it also wants to really rely on renewables for its vast manufacturing operations. It said that it will, in particular lean on
wind power.
Now, it's important to remember that this announcement from Mercedes does not include some of its sister brands at Daimler, which include the
commercial vehicles made by Thomas Built Buses, and also freightliner trucks, but Julia, what I think is really interesting is Mercedes
explicitly pointed to environmental concerns, as the reason why it's doing this.
The company said in a statement that it has set a clear course to help prevent further acceleration of climate change and it also said that it
doesn't look at the Paris Climate Agreement as just an obligation, it sees it as the company's conviction.
CHATTERLEY: Yes, a necessity. Going for green. Matt Egan, thank you so much for that.
All right, let's bring you up to speed with some of the other stories that we are watching around the world.
Swedish prosecutors have reopened an investigation into a rape allegations made against Julian Assange, the WikiLeaks founder, who is currently jailed
in the U.K. has denied the accusation. He is also facing possible extradition to the United States over computer intrusion charges.
British Prime Minister Theresa May meanwhile, is facing new a pressure from her party to step down ahead of an expected thrashing it this month's
European elections. Many conservatives are expecting votes will be lost to Nigel Farage's new Brexit party. In the meantime, cross party Brexit talks
also close to collapse with a deadlock over giving the public a second confirmatory referendum.
U.S. Secretary of State Mike Pompeo postponed a planned trip to Moscow and headed to Brussels instead. He is currently meeting key European allies
discussing a response to Iran's announcement that it will stop complying with parts of the International Nuclear Accord signed back in 2015. Pompeo
still plans to meet the Russian President, Vladimir Putin in Sochi on Tuesday.
All right, still coming up, we're going to be talking through these markets as we see an acceleration in light of China's retaliation. Plenty more to
discuss and is there a path to a compromise solution here? We'll discuss. Stay with FIRST MOVE.
(COMMERCIAL BREAK)
[09:20:31] CHATTERLEY: Welcome back to FIRST MOVE and again, a look at what we're seeing as far as price action is concerned pre-market here.
We've got the Dow and the S&P futures off some 2 percent as you can see. The NASDAQ off by 2.6 percent. So again, we're losing further ground in
the last 15 minutes or so.
Let me give you a look at what we're seeing in the bond markets as well. Classic flight to quality flight to safety action. Right now we have the
U.S. 10-year bond yields at 2.41 percent, so holding above that to 2.40 level, but watch this space again, I think in this session today.
Also a quick look of what we're seeing in price action in terms of the currency markets. The Euro a little bit higher, as you can see there
versus the U.S. dollar. But we are seeing, again, flight to safety, things like the Japanese yen, the Swiss franc tend to get stronger when we see
cautiousness in the markets. And that's exactly what you're seeing right now. Trade, of course, the tensions between the United States and China
front and center.
Let's talk this through. I'm joined by Ambassador Bruce Heyman. He was the U.S. Ambassador to Canada between 2014 to 2017. He's also the co-
author of the book, "The Art of Diplomacy." Fantastic to have you with us, Ambassador.
BRUCE HEYMAN, FORMER U.S. AMBASSADOR TO CANADA: Great to be here, thank you.
CHATTERLEY: What do you make of the situation between the United States and China right now? How is the U.S. handling this?
HEYMAN: Well, I think poorly actually at this stage and while we all agree that the Chinese take advantage of the U.S. on intellectual property and
access to markets, and we need to have a better level playing field, I think that the President operates in this art of the deal, where it's "I
win, you have to lose," and the reason we even wrote this book is, "The Art of Diplomacy" is about finding outcomes where we can win-win together. So
that's number one.
Number two, we don't have any allies at the table with Donald Trump, because he has alienated them all with tariffs and Trade war, threats, et
cetera. So he is doing this alone.
Number three, he is embarrassing the Chinese and the Chinese is saving face and it's really important to them. And so embarrassing them publicly the
way he did over the last few days, I think is going to make this next path ahead very difficult.
CHATTERLEY: The sense from reading between the lines was that the United States was requiring the Chinese to enshrine whatever was agreed in law,
despite the fact that the United States is not going to do that, for whatever they agree with China at this stage.
Do you think there's some kind of compromise there if the United States appreciates that even law change in China is a complex process, perhaps
even far more complex than it is here in the United States. Do you think there's a compromise there in recognizing that?
HEYMAN: First of all, there are always compromises and that's the whole art of diplomacy that you need to come together and find those compromises
and work together.
But with regard to votes and making law in the United States, the President still doesn't have backing for USMCA at this point.
CHATTERLEY: The re-agreement, the re-NAFTA.
HEYMAN: The re-NAFTA, the new NAFTA agreement. And so, you know, the vote in Congress, probably next to healthcare, a trade vote is the hardest vote
of all and we're now entering 2020 campaign season, early as it is, we're entering 2020. These will be very difficult votes on a going forward
basis.
So to enshrine this in law in the United States may be much more difficult than anything else.
CHATTERLEY: It's interesting, one of the lines in the book that really hit me was the point that you said, you know, when you get made an Ambassador,
you keep that title for life.
HEYMAN: Correct.
CHATTERLEY: There is a huge responsibility in that to continue to try and I think, educate and help people understand what actually the art of
diplomacy is if you want to do the art of the deal, and you have people from both sides when the United States and Canada were trying to negotiate
going, how do we handle this? What on earth is going on here?
What was your response in that situation to perhaps try and help people understand what this administration is about right now, because damage has
been done between two countries that all were very, very close in Canada and the United States?
HEYMAN: You know, in all deference to a lot of other countries out there, Canada is our best friend because it's our next door neighbor. It was
probably our best trading partner in the world going into all of these negotiations. They've been there for us on world security issues, et
cetera. And the Canadians view themselves as partners, allies and friends and family even.
But when the President is treating them like a disposable relationship, like you know, "Either you give me X or I'm going to crush your auto
industry, or I'm going to do these things," I think that's taken the Canadians aback.
Now we've reached this agreement on USMCA and I personally want to see this move ahead, but the USTR really bungled this by not negotiating it faster
and having it presented before a Republican House and Senate, so now they're behind.
[10:25:18] CHATTERLEY: So the core of the relationship is Huawei and the arrest of the CFO of Huawei, and that the trouble that's presented, Canada
effectively caught in the crossfire between the United States and China. If we don't see a deal here, there was some assumption that I think that
there would be a carve-out for Huawei, and that would resolve some of the tensions.
I mean, where does that leave Canada in this situation? And if you have to put a percentage on the ability here with the Chinese and the United States
to reach a deal, how high or low is it at this stage?
HEYMAN: Well, it will eventually reach a deal? It's going to happen? It's not if but when and how and how we get there. More damage could
happen in between.
CHATTERLEY: This year? Do you think it happens this year?
HEYMAN: I hope so. But look, it might not, you know, the President -- everybody has got their back up, and now it's tit for tat. And the problem
is the Canadians are caught in the crossfire.
Prime Minister Trudeau let President Trump know that very clearly this last week in a phone call directly and said, "Look, we're taking one for you,
America, you know, with China with your steel, aluminum tariffs. You've got to have our back here, and what are you doing? Come on, let's get
together."
And I don't think the United States is behaving like an ally anywhere in the world right now with our allies and Canada in particular.
CHATTERLEY: We're behaving but not listening. Ambassador, fantastic to have you with us. Great book, loved reading it.
HEYMAN: A pleasure. Thank you.
CHATTERLEY: Some other people could perhaps benefit from reading it, too, but will remain nameless. The market opens next. We've got you covered.
Stay with FIRST MOVE.
(COMMERCIAL BREAK)
[09:30:0] CHATTERLEY: Welcome back to FIRST MOVE. I am live from the New York Stock Exchange. I'm Julia Chatterley and we are looking at a
significantly weakened start to the equity markets here in the United States. We were expecting some 2 percent losses even more for the NASDAQ
this morning, so we'll continue to watch those in particular -- very, very sensitive about any form of trade related headlines at this moment.
China of course, responding with 25 percent tariffs on $60 billion worth of imports this morning. We've been expecting that over the weekend, of
course, too and watching headlines from the United States as well. Bob Lighthizer, the trade and negotiating here in the U.S. suggesting that they
may provide further details of the tariffs on the additional $325 billion worth of Chinese imports and that could come as early as today.
So investors certainly poised very cautious at this moment, watching for further developments and just looking at the handover from Europe as well,
also down from one and a half percent for the German markets. Remember the export engine, they have really felt the pressure of this latest escalation
in the trade environment right now.
Let me walk you through some of the global movers, some of the individual stocks that we continue to watch for you. Uber, of course, we've talked
about it already this morning on the show.
The ride hailing app's trading debut continues to disappoint. It fell more than 10 percent below its IPO price pre-market on its second day of
trading. The slump reflects investor skepticism about ride sharing profitability; of course investors, also, the broader market sentiment
right now is a shifting away from riskier assets amid those so treat tensions, as I mentioned.
Right now, down 15 percent that's going to be volatile in the session, so we'll keep you posted on that throughout the day, of course on CNN.
All right, Apple also in focus caught firmly in the middle of the Chinese- U.S. trade war. Shares falling some 7 percent almost in the last five trading days, the worst week so far in 2019.
To make matters worse, of course, China now retaliating by raising those tariffs on $60 billion worth of U.S. imports right now, down some 4.2
percent. Just coming of course, after an earnings report where Tim Cook seemed to be a little bit more positive about the outlook for China. So
just repricing that out of the shares at this moment.
Boeing, also in focus. Again, we're watching the "Global Times." The editor-in-chief of the Chinese tabloid speculating that China may reduce
Boeing's orders, that in a tweet this morning. It may just be rhetoric, but it's adding fuel to the fire here.
Buckingham Research Group cautioning the investors that the trade dispute is one of the biggest risks facing the company that's already dealing with
the fallout of the crisis related to the two recent plane crashes. Boeing saying in a statement that it is confident the U.S. and China will continue
to trade discussions and eventually come to an agreement.
All right, it's right down some 3 percent. Let's get back to trade. In the past couple of hours Beijing announcing those retaliatory tariffs as I
mentioned.
Matt Rivers is tracking the story for us. Matt, just a further escalation, but an anticipated one, I think, from the Chinese. They promised to
respond, and now they have.
MATT RIVERS, CNN INTERNATIONAL CORRESPONDENT: Yes, absolutely. And, you know, this is something that we have been expecting, as you mentioned,
Julia, despite the fact that the President of the United States tweeted out this morning that China shouldn't retaliate, nobody thought that this
wasn't going to happen.
China, to its credit, at least, bit's not usually known for its transparency, this government. But when it comes to trade, they don't hold
back when saying we're going to retaliate and then they do retaliate.
China has been very clear that this is coming. The big question coming into tonight, here in Beijing was, well, what exactly are these
retaliations going to look like? And I don't think when we look at what China did here, raising tariff rates on a roughly $60 billion worth of
American imports, I don't think this ups the ante, necessarily.
And what I mean by that is that the United States raised its tariffs first. This isn't China, basically, you know, pushing the nuclear option, right?
This is more of an in-kind retaliation. They did not expand the list of American imports that are currently facing tariffs, they merely took $60
billion of the $110 billion worth of goods that are totally facing tariffs here in China, and they raised those rates.
So we're seeing right now within that $60 billion figure; some of those goods went from a 10 percent rate to a 25 percent rate. Others went from
10 to 20 and others went from five to 10. So yes, that is a big hike, some two and a half times in terms of some of those goods. But this isn't China
expanding, this isn't China restricting market access. This isn't China's saying no, we're not going to grant any new mergers between U.S. and
Chinese companies.
[09:35:10] RIVERS: They could have done farther than this if they wanted to, and they still might. But at least in this first round of action,
Julia, it does appear that this is more of an in-kind retaliation after what we saw happen with the Trump administration on Friday.
CHATTERLEY: Such a great point. This is not an escalation. This is direct and proportional retaliation, which admittedly, they promised all
the way along. Matt Rivers, thank you so much for that.
All right, let's move on because we're going to take a quick break here. Uber, has joined the stampede of unicorns heading to market and like the
ride hailing firm, not all of them have found a sure footing. What about the ones that are following? We look at that, next.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. I just want to give you a quick look at what we're seeing in terms of price action in this market session
gets underway.
As can see, well, we've gained about two tenths of a percent back right now, off some 1.8 percent for the down and the S&P, down 2.2 percent for
the NASDAQ. It's going to be an interesting session, I think, obviously focusing in on greater losses in the technology stocks, always more
sensitive in these kind of environments.
One of those that we're keeping a sharp eye on right now is Uber in early trade. This is its second day of trading on the New York Stock Exchange.
You can take a look at what we're seeing right now, trading at $38.00. It priced, if you remember, Thursday night at $45.00.
The ride hailing firm is the latest in a wave of tech unicorns that are going public. Let's discuss what happened and what happens next with Rett
Wallace. He is the co-founder and CEO of Triton Research. Great to have you with us.
RETT WALLACE, CO-FOUNDER AND CEO, TRITON RESEARCH: Thank you.
Chat What do you make of what happened? There was a real sense of disquiet before that priced when it was supposed to go at $45.00. We were
expecting it to pop higher and suddenly, it tracked lower and of course, the pressures only continued.
WALLACE: Sure. Well, I think everyone was surprised because it's not supposed to happen like this.
CHATTERLEY: No.
WALLACE: So technology IPOs in general, even the weak ones show a pop, right? We haven't seen a company like this break price since Facebook
really, and Facebook even had the good taste to go up on its first day, right?
[10:40:20] WALLACE: So I think people are sort of struggling for analogies at this point because even though there were problems with this deal, they
sold $8.8 billion worth of stock in the series of rounds over the course of three years at $48.77 a share. And then they sell another eight and change
billion dollars of stock at $45.00 a share and then lo and behold, the next morning, you see someone stock offered at $42.00 to $43.00. It's really
hard to make this whole thing compute.
CHATTERLEY: Wait. So what you're saying is they raise billions of dollars at a higher share price.
WALLACE: Much higher.
CHATTERLEY: So you wouldn't expect those guys to come to market on Friday and start to sell because why would you lock in a loss?
WALLACE: Why would anybody pay $45.00 on Thursday, only the comments sell at $42.00 to $43.00 on Friday? So one suspects those weren't the sellers
who were there at the open.
Now, once things start to turn, people who have paid $45.00, who couldn't get out at $43.00 and limit their losses and called it a day that starts to
make sense.
But the establishment of the initial downward trend is very difficult to understand right at this moment.
CHATTERLEY: When you go into these things, though, people put in their bids, and they say, look, I want X amount and I asked for way more than I
actually want because I think ultimately, we are going to get a lot less.
WALLACE: I think it's usually people ask for 10 percent of what they really want and I think in this case, people got more than they thought
they were going to get. So it ended up with much bigger positions than they thought.
But I think if we can look at for example, the Lyft analogy. Lyft priced its stock at $72.00 a share and then opened at $87.00, so anybody who
paints $72.00 who you saw $87.00 thought great, this is it. I will take my dollars right now off the table.
So you have a catalyst for selling which didn't it exists for Uber. So it's really particularly difficult to understand why people decided to sell
at these low prices, when the basis was so much higher for so many sophisticated investors.
CHATTERLEY: You know, looking at this and going, "I knew this." There are huge questions here. Losses, no path to profitability.
WALLACE: Yes, told you so.
CHATTERLEY: What does this mean for others? WeWork I know is one that you've focused on set to come to market. Do they have to look at this now?
Do the underwriters have to look at this thing and go, "We need to have a real think about what this market is willing to accept?"
WALLACE: Sure. Well, I think that Uber was willing to say we're not Lyft, and so it's not comparable. But now that you have Lyft and Uber, I think
it's going to be very difficult to say, "Well, this is just a ride hailing thing. It's not unicorns with billions of losses thing."
So I mean, WeWork loses a billion nine on the bottom line versus a billion eight on the top line, right? So we haven't seen that sort of --
CHATTERLEY: Wait, wait. Revenues, its sales of --
WALLACE: Sales of a billion eight, losses of a billion nine, right, so you haven't seen a dispersion like that since Snap, right? And people
obviously got smoked on Snap. So I think people are going to be really wondering like, "Okay, what is the capitalization future of companies like
WeWork?
Now, you know, Slack, we're going to see what happens with Slack this week. Are they able to float the shares at anything like the profit market
prices?
CHATTERLEY: Going direct to market.
WALLACE: Correct, so we'll see. I mean, the Uber market price, where are we? $37.00 or something like that right now. So $48.00, obviously was not
any kind of backstop for the shares of Uber. Slack will be a bellwether, also.
And also, we have three deals that are sort of ready to go like Fastly is already on the road, like how does that do?
CHATTERLEY: Is it a fair argument to make that last week, the market was blindsided by deterioration in trade.
WALLACE: Yes.
CHATTERLEY: They thought they were going to get a trade deal. They didn't get it. We were going into a weekend where anything could have happened.
China, as we've discussed on the show, could have done all sorts of things in retaliation here. You could argue that Friday was not the day to be
buying risk of any kind.
WALLACE: Well --
CHATTERLEY: Is that a fair argument?
WALLACE: Sure that's fair. I mean, like Uber set their dominoes falling long ago, and so the timing was the timing, and they can't really control
that. I think, you know, what skeptics would say is, look, all the China stuff, the trade stuff, the generally adverse tape, the Lyft problem was
all in the market anyway, that the Uber disaster isn't quite explained by all of those factors and we're looking for other causes for why the stock
went down so much at the opening.
CHATTERLEY: I think I would have said, you know, at some point, I'm going to buy this a lot cheaper than it is pricing today, and maybe I'll hand off
and buy cheap -- cheaper.
WALLACE: So our smart customers basically said, I mean, all our customers are smart, of course, but some of them said "Look, at this price at this
time, I don't see a catalyst to move. I think I'm going to wait. I'll buy it cheaper later.
CHATTERLEY: Bingo.
WALLACE: Yes.
CHATTERLEY: Rett Wallace, co founder and CEO of Triton Research. Thank you so much for that. Always great to have you on.
All right, some breaking news now from Hollywood. Actress and singer, Doris Day has died. She started in the mid-20th Century Hollywood
blockbusters like "Calamity Jane" and Alfred Hitchcock, the man who knew too much. The Hollywood legend and animal welfare activist died early this
morning at her home in California.
[10:45:10] CHATTERLEY: Doris Day was 97 years old. What a great actress. We'll be right back.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. Now there are business launches and there are business launches. Once the stuff of science fiction, today
the space industry is quite literally taking off. And it is full of big names with really big ideas from Elon Musk in his Mars mission to Jeff
Bezos and his moot shoot to Richard Branson who is moving Virgin Galactic into its very own spaceport. Listen in.
(BEGIN VIDEO CLIP)
RICHARD BRANSON, FOUNDER, VIRGIN GALACTIC: I think the exciting thing for the world now is that you have Jeff, you have Elon, you have ourselves
creating you know, different approaches to take people into space to colonize places like the moon in future years. So, an incredible new era
of space exploration has arrived.
(END VIDEO CLIP)
CHATTERLEY: It's a super exciting, but also an increasingly crowded space. We are in the chat room with the rocket man who is taking on the likes of
Elon Musk and Jeff Bezos, in a different way by leaving the world behind. He is Jim Cantrell, he is co-founder and CEO of space rocket company,
Vector Launch. He was also a co-founder of SpaceX, so great to have you on the show.
JIM CANTRELL, CO-FOUNDER AND CEO, VECTOR LAUNCH: My pleasure.
CHATTERLEY: Tell me what Vector does?
CANTRELL: So Vector is a launch company. We think of ourselves as a space access company. But we're building small rockets instead of large rockets
like SpaceX and Jeff Bezos, and really there's two competing economic models in the rocket delivery business.
So we're taking satellites, putting them in space with small rockets that are mass manufactured. So by using mass manufacturing, we can get the cost
points down to single digit million dollars and you don't have to go for a ride on a very large rocket like SpaceX or Bezos with a hundred other
customers.
So for the small satellites, we can send you where you want when you want.
CHATTERLEY: What do you mean, where you want when you want? Are you talking about an individual or are you talking about just sending a
satellite up and that satellite then being used for whatever your purpose is?
CANTRELL: So we send only satellites up. We don't send people up.
CHATTERLEY: Yes, I was about to -- I wanted to be clear on that.
CANTRELL: To be clear, and SpaceX and Bezos are really -- those big rockets are designed to launch people. When you launch people, they have
to be so big. And oh, by the way, they happen to launch satellites, which helps their revenue base. We are solely focused on launching satellites.
And the majority of the satellites today are small. They're becoming smaller and more numerous with time just like PCs did.
In the old mainframe era, when I went to college, they got smaller and smaller and more numerous. So that same thing is happening in satellites
and we're simply responding to that market force with hundreds of small rockets that can be launched a year.
CHATTERLEY: I mean, you've basically looked at SpaceX. You worked there with the co-founders there, and now, you're looking at this model and
you're arguing actually that this business model is better?
[10:50:11] CANTRELL: Well, it's more appropriate for satellite launches, because it fits the market better. Number one, it fits the customer pain,
which, if you're in business, time is your enemy and if you have to wait around for a year to have a launch that everybody agrees on the time to go
and where to go, that's not optimum for your business.
CHATTERLEY: What is the purpose here ultimately? I mean, I think everybody finds space fascinating. They love the idea of some of these big
billionaires say colonizing Mars or going to the moon or whatever it is. But what is the purpose of putting these satellites in space? Is it about
ultimately owning the ecosystem of whatever 5G technology or the ecosystem of autonomous vehicles, for example? Is it about owning the skies?
CANTRELL: Yes, so space is just another economic frontier.
CHATTERLEY: Right.
CANTRELL: You know, it's the final frontier if you listen to "Star Trek," but the reality is, is it's an economic frontier. For me, it looks just
like the internet, that we don't know exactly how it will end up being monetized and what kind of applications and value creation will be there,
but we can definitely see it.
CHATTERLEY: You just want to own it.
CANTRELL: Yes. And we want to be there. So we're in the business -- we, at Vector are in the business of developing the infrastructure for this
next economy, first to launch, and then second through something we call Galactic Sky, which is a software layer that once other people's assets are
in space, we can actually create a software layer like the Apple Store, where you can create apps and users can simply create an app to access
space.
CHATTERLEY: Okay, so who are your clients? Who are the customers that are looking to do this at this stage? And actually, answer that question
first, and then I'll follow up.
CANTRELL: So we have a combination to commercial and military, U.S. government and commercials worldwide. And we look to be one of the largest
launch providers in the world if we reach our goals and the U.S. military likes very much what we're doing as well.
CHATTERLEY: And this is the key because there is military context here. Why is the private sector, the likes of what you guys are doing? SpaceX?
Jeff Bezos with the Blue Origin as well? Why are they so much more efficient than the governments around the world?
CANTRELL: It's simple capital deployment. Okay and if you look at the U.S. Defense Department, I lovingly call them a Soviet economic system
because they have a five-year plan and they set the price, they set the product, right?
In capitalism, we have to invest other people's money and we have to make money on it and so to do that, we have to really look at the market. So
we're much more efficient with capital deployment. We take more risks, we take different risks.
CHATTERLEY: But the innovations are far better for you guys being behind it.
CANTRELL: As a result of taking those risks, the innovation is more because people when the amount of dollars come down, they're willing to
take more risk.
CHATTERLEY: It's brilliant to have you on. I can't wait to hear more about the company as well.
CANTRELL: Thank you.
CHATTERLEY: Jim Cantrell there. Thank you so much. All right, straight back to work now where escalating tariffs have sent stocks plunging.
Just over an hour ago, China announced their retaliatory measures against the United States unveiling some of their own of course, 25 percent tariffs
now on $60 billion worth of goods. That's what we're seeing right now.
The Dow, the S&P 500 losing ground in just the last sort of five to 10 minutes or so; 2.6 percent losses now for the NASDAQ, too.
Christine Romans joins us now. Christine, I think a bit more recognition here from global investors that there's no deal coming anytime soon.
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: I think when it's a 2 percent move, it's real. You know, and I'm actually surprised how
resilient the market has been, even last week was the worst week, you know, since March for the S&P and for the other averages back to December, but it
could have been a lot worse. Honestly, just one to one and a half percent moves and then finding buying a lot of times in these very volatile
sessions.
So a 2 percent move tells you that investors are sending a signal to the White House, I don't know? To President Xi? I am not sure. But certainly
investors are voting here that a trade war -- a protracted trade war would not be good for American consumers, for investors, for corporations, and
also, you know, for stability between the trading relationship between the United States and China.
CHATTERLEY: Yes, and I'll add the losses that we're seeing in this session to the two percent, two and a half percent losses that we saw last week.
And actually, then we're sort of pulling back a significant amount from the record highs and there are analysts out there that say, look, if this thing
really drags on, and the kind of rhetoric and the tensions that we're seeing continue, then we could see a correction here in stocks of 10
percent, someone was even saying 15 percent, then it becomes really real. It also becomes real for the White House, too, watching this.
ROMANS: I think it does, and I think there are two messages here and now, look stocks are still up, the S&P still up something like 14 percent this
year, and you know, the President likes to use the stock market as his personal barometer, really his personal scorecard, if you will.
There's a second part to this story and that is the damage that could be done to farmers in the Midwest. These are important states that voted for
Donald Trump and put him in the White House and when you see Chinese retaliation, right here in planting season -- this is planting season right
now -- these farmers have to decide if they're going to plant corn or soybeans and they have to figure out how to get it into their flooded
fields and they've got last year's soybeans that are still sitting in storage.
[09:55:09] ROMANS: So you've got these two constituencies, the stock market and American egg that right now are really the big, big kind of
pulse points of this trade war and we don't see any resolution, right, until at least June when these two men sit down together and maybe sit down
together at a G-20 in Japan.
CHATTERLEY: Yes, that's certainly is going to be highly anticipated, but you have to think that the markets can move a long way between now and
June, quite frankly. Christine Romans, thank you so much for joining us there.
All right, once again, I'll reiterate that we are now down some 2.8 percent for the NASDAQ. Now losses of more than 2 percent for the S&P 500. We
will continue to watch this for you over the coming hours. We're back in two hours' time, of course with "The Express" watching for any further
details on additional tariffs on $325 billion worth of goods that has been hinted at, news on that could come as early as today. So we'll watch that,
too.
For now, that's it for the show. I'm Julia Chatterley, you've been watching FIRST MOVE. Time to go make yours.
(COMMERCIAL BREAK)
[10:00:00]
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