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First Move with Julia Chatterley
Two Oil Tankers Are Suspected Of Being Attacked In The Gulf Of Oman, Oil Prices Jump; Cyberattack In Hong Kong: The Messaging App Telegram Says It Was Disrupted Amid The Protests; Netflix Goes Into Gaming With Its Hit Show "Stranger Things." Aired: 9-10a ET
Aired June 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 ANCHOR, FIRST MOVE: Live from the New York Stock Exchange, I'm Julia Chatterley. This is FIRST MOVE and here's
your need to know. Tanker attack. Two oil tankers are suspected of being attacked in the Gulf of Oman, oil prices jump. Cyberattack in Hong Kong.
The messaging app Telegram says it was disrupted amid the protests. And stranger than reality. Netflix goes into gaming with its hit show
"Stranger Things." It's Thursday. Let's make a move.
Hello, and once again, welcome to FIRST MOVE. Another jam packed show for you. Right now, the energy markets on high alert with Breaking News over
in the Middle East. Take a look at what we're seeing right now for oil prices, up around four percent at this moment, after, as I mentioned,
suspected attacks on two tankers sailing through the Gulf of Oman. This of course, coming less than a month after four tankers were attacked of the
coast of the UAE. We'll get you all the details the latest on that shortly.
But for now, I want to give you a quick look at what we're seeing for the broader markets. Overall, this news at this moment not having an impact on
broader risk sentiment. Futures are right now higher following two sessions of a minor losses. We are on our very own Jay Powell pause, I
think at this stage. We're waiting for direction consolidating on the strong month of gains so far.
As I keep mentioning rate cuts and trade talks remain the key drivers. Deutsche Bank right now though winning the prize for predicting the most
rate cuts. They're now saying the Fed will cut three times this year -- July, September and December.
I've been asking all week and you'll remember how can the Fed cut rates at this stage or just some two percent off record highs? The inflation
numbers was soft yesterday, and I guess that argues for more. But more data I think required.
Fact set says firms that get more than 50 percent of their sales outside the U.S. will see a near 10 percent drop in profits in this upcoming
earnings season. I'm not sure that's been factored in stock markets right now.
Speaking of stock markets, let's take a look at what we're seeing in the Asia session today. Chinese shares finished flat. Hong Kong market
stabilized; that following Wednesday's 1.7 percent fall. We did see smattering of more protests today in Hong Kong, but nothing like the scale
that we saw on Wednesday.
Some interesting developments, though, on that story, too. And that's coming up shortly, too. But for now, I want to get straight to the
drivers. So starting with that breaking news in and the Gulf of Oman.
Gul Tuysuz joins us from Abu Dhabi; Clare Sebastian also watching the energy markets for us, too. Gul, just give us the details here and great
to have you with us. What do we know so far?
GUL TUYSUZ, CNN PRODUCER: Well, at this point, we're still trying to piece together what happened to these two shipping vessels in the Gulf of Oman.
This appears to be an attack of some sort. At this point, we can say it's a suspected attack on these two shipping vessels as they were in the Gulf
of Oman.
One of them is an oil tanker, the other one was carrying chemical cargo when these explosions that then resulted in fires occurred. And there were
of course, crew on board both of these shipping vessels. They appear to be safe at this point. Some of them are on -- were saved by a U.S. Navy ship
that was nearby, and others seem to have been aided by the Iranian Navy.
There was one person who was wounded in what occurred. But at this point, we simply don't know what happened. Was this absolutely an attack? There
are investigations ongoing by a variety of actors that, of course, have a vested -- have an interest in what happened to these tankers, still
ongoing.
So there's going to be more developments coming in the coming hours. But at this point, we can say that both of these ships are still in the water
in the Gulf of Oman and they are floating. The crew is safe, but we're just going to have to wait to see what it is that actually caused this
security incident in the Gulf of Oman.
CHATTERLEY: Yes, as you said, so many unknowns at this stage. But our own reporting suggests a degree of similarity, and I mentioned it earlier
between the attacks that we saw less than a month ago on May the 12th on four tankers off the coast of the UAE. Can you just give us any further
information on that that the apparent and reported similarities between the two things?
[09:05:02] TUYSUZ: Absolutely. Well, this just goes to show you what a tinderbox this region is. Of course, this has been tensions ratcheted up
about a month ago when the incident that you were talking about occurred.
The resulting investigation after that, the UAE here came on to report and said that they suspect that there was a state behind -- a state actor
behind what happened a month ago, but didn't necessarily point the finger at any specific state. But the tensions here are high.
Just yesterday, there was an incoming fire at a Saudi airport, and you can just see how it is that this kind of tension here in this region in the
Middle East, is starting to just slowly get more and more.
The Iranians and the Saudis have been carrying out, have been fighting through proxies in a myriad of battlefields in Yemen, in Iraq and Syria.
But these kinds of incidents, both the one that occurred last month, and what seems to have happened today, could end up making it so that these
conflicts that have been raging over proxies could become direct confrontations. And that, of course, is a very scary thought for this
region.
CHATTERLEY: Absolutely. Everybody being very cautious here, as you said over accusations and finger pointing, not that we didn't see it last time,
of course. Fantastic to have you with us. Thank you so much for that.
Clare, come in here, of course, because what we've seen up to this point is oil prices continuing to weaken on demand concerns, but the disruption on
the supply side, including the tensions with Iran still a hot button issue for this market, and obviously that filtering into what we're seeing in
price action today.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, absolutely, Julia. I think the demand concerns are still there. That's perhaps why we haven't
seen a bigger move here. The macro context is that oil prices have been moving lower really since the end of April and concerns about the U.S.-
China trade was slowing growth in some critical economies like Russia, Brazil, India.
OPEC actually cut its demand forecast for this year in its monthly report out today. So that is the tug of war that we see going on here.
But it's interesting, because when that incident happened on May 12th last month, there's four tankers attacked off the coast of the UAE. We saw a
similar move lower in oil prices, but not as big as the one we see today.
That was around the same time that we saw the real escalation in U.S.-China trade tensions. You can see at the beginning of that chart, that is where
that last incident happened. At the end, you see the move today.
This move today was much sharper. I think now that we're seeing something of a pattern emerging, oil investors are really on notice, and the risk
premium does seem to be rising, Julia.
CHATTERLEY: Yes. And that's such a great point, I think, Clare, because all we've seen today with a four percent rally so far is taking back the
four percent losses that we saw yesterday as a result of higher inventories and the concerns over demand here.
But the sense that if we are seeing similarities here and a pattern building, perhaps we need to continue to focus on that and perhaps more so
than we have. Clare Sebastian, thank you so much for that.
All right. Let's move on to our next driver. To Hong Kong now where questions are being asked off to an encrypted messaging app faced a
cyberattack. Telegram -- that's the name of it was disrupted while protesters were trying to use it during demonstrations yesterday.
Matt Rivers back with us from Hong Kong. Matt, great to see you. Talk to me about what the founder of Telegram has said. He said, the disruption
that the app faced was emanating from China.
MATT RIVERS, CNN INTERNATIONAL CORRESPONDENT: Yes, that is what he is saying, Julia, and let's just tell our viewers, you know, how Telegram was
being used here.
There were thousands and thousands and thousands of protesters that were relying on Telegram and specifically groups that were created in Telegram
to kind of get their updates on what was going on with the protest -- where to go, when to stop, what places to target -- that kind of stuff. It was
really just a way to organize the thousands and thousands of generally younger people using the app who also wanted to be a part of that protest.
And obviously, authorities knew that. There were probably some authorities who were in those groups monitoring them. And so what Telegram then was
saying is they were under a pretty massive denial of service attack from IP addresses, according to the company's founder, that were emanating from
China -- from Mainland China.
And so that's what he was saying, I guess they're working on getting Telegram restored to its full service. But clearly, it was something that
was being used by protesters who were very much not in favor of this Extradition Bill that Beijing is in favor of, and so the link there is
pretty obvious if you believe what the owner of Telegram is saying that these denial of service attacks were originating from IP addresses in
Mainland China, it would seem that perhaps there were people in China, whether they'd be working for the government or otherwise that were trying
their best to disrupt the protests that have really gripped Hong Kong since Sunday.
[09:10:11] CHATTERLEY: Yes. And it's funny. I mean, we were saying after the protests on Sunday, and last night, how organized and coordinated these
protests look. So quite fascinating to understand kind of what we were seeing there, particularly in the aftermath and learning about this.
Talk to me, though, about the debate on the Extradition Bill, because it was delayed once again, and we were talking about the standoff now between
the protesters and whether or not the Hong Kong government can bring this bill back for debate without facing more protests here, so something has to
give.
RIVERS: Yes, and we can expect that there will be more protests moving forward. Now, what happened today on Thursday here in Hong Kong, was that
the legislature did not reconvene in the Legislative Council Building and they're not expected to do so tomorrow.
So the debate over this extradition bill has officially been canceled for this week. No further confirmation in terms of when that the next debate
will be scheduled. It could happen next week. But what we do know is that more protests will happen this weekend.
So on Sunday, organizers are calling for another mass march here in Hong Kong. It will be interesting to see what kind of numbers of people come
out as opposed to last Sunday. You'll remember that's when over a million people, according to organizers came out in Hong Kong and really kind of
kicked off this series of events.
And then they're also calling for another rally on Monday, presumably the next possible date that the legislature here could reconvene. But we don't
have a specific date yet. I can tell you, though, Julia, that protesters are determined to fight this bill to the very end. So I can guarantee you
that the next time Hong Kong lawmakers go back into the Legco Building, as it's called here, they are going to face protesters.
CHATTERLEY: Yes. We will continue to watch it. Matt Rivers. Great job. Thank you so much for that. All right, let me bring you up to speed now
with some of the other stories that we're following around the world.
The U.S. President says is nothing wrong with accepting an offer from a foreign government to dish the dirt on a political opponent. That's
despite a two-year Special Counsel investigation into contacts with Russians during his election campaign.
In an ABC interview, Donald Trump said he wouldn't necessarily report such a contact to the F.B.I.
(BEGIN VIDEO CLIP)
GEORGE STEPHANOPOULOS, ABC ANCHOR: Your campaign this time around foreigners -- if Russia, if China, if someone else offers you information
on an opponent, should they accept it, or should they call the F.B.I.?
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: I think maybe you do both. I think you might want to listen. I don't -- there's nothing wrong
with listening. If somebody called from a country -- Norway -- we have information on your opponent. Oh, I think I'd want to hear it.
STEPHANOPOULOS: You want that kind of interference in our elections?
TRUMP: It's not an interference. They have information. I think I'd take it. If I thought there was something wrong, I'd go maybe to the F.B.I. if
I thought there was something wrong.
But when somebody comes up with oppo research, right, they come up with oppo research. Oh, let's call the F.B.I. The F.B.I. doesn't have enough
agents to take care of it. But you go and talk honestly to congressmen. They all do it, they always have and that's the way it is. It's called
oppo research.
(END VIDEO CLIP)
CHATTERLEY: Four-time Tour de France winner, Chris Froome will be forced to miss this year's cycling race after a horrific crash during a practice
ride Wednesday.
Froome's team's general manager said he crashed into a wall going around 60 kilometers per hour. He sustained multiple serious injuries and remains in
intensive care.
Boris Johnson has emerged as the clear front runner in the race to succeed Theresa May. He was backed by 114 votes in the first stage of the process
to electing a new Conservative Party leader and U.K. Prime Minister. His nearest rival Jeremy Hunt won 43 votes. Three candidates were eliminated
from the running.
Phil Black joins us now. It really is like a game of it's a knockout here, Phil, what next? How quickly are we going to narrow this down to two
candidates and Boris certainly looks way out in front at this stage.
PHIL BLACK, CNN INTERNATIONAL CORRESPONDENT: Yes, that's right, Julia. So we should know by the end of next week who the final two are and the clear
takeaway from today is Boris's big win, 114 votes. Clearly, he is, as suspected, the candidate to beat or put another way, it is his contest to
lose, because if he does maintain that level of support that sort of momentum that he should undoubtedly be among those final two who are then
voted on by the broader Conservative Party membership.
But as is often pointed out, Boris Johnson is an often unpredictable politician whose greatest nemesis can sometimes be himself. But you'd have
to think based upon that that he'd really have to mess up over the coming week to not make it down to the final two.
The other big takeaway is that everyone else is a long way behind. Jeremy Hunt, the current Foreign Secretary, he is the closest on 43. So in the
coming days, you will see remaining candidates, well, scrambling to try and win the support of those who voted for the three candidates who were
knocked out today, but they were people who are clearly voting hard Brexit politicians, so it's only likely that a handful are likely to attract them
as supporters.
[09:15:06] BLACK: And it's also possible that you will see some reflective thinking over the weekend or so, as some of those who survived today, but
perhaps didn't do as well as they'd hoped, consider whether or not they should continue in this contest, or perhaps simply bow out, throw their
support behind one of the bigger beasts in the hope of securing a big government job in the victor's future government.
So, as I say, all of this, we should know, by the end of next week, because that's when you'll get the final two, they then go out and campaign across
the country, and to try and win the support of an electorate of just 160,000 people that is the Conservative Party membership who will not only
be choosing the next leader, but of course, the next British Prime Minister -- Julia.
CHATTERLEY: You know, I think for everybody watching this outside of the U.K. and for investors, in particular, what they ultimately care about at
the core of this is whether or not we risk seeing the U.K. leaving the E.U. on October 31st without a deal.
What are the two most likely candidates -- Boris Johnson and Jeremy Hunt -- saying about that prospect? And what are the noises around them and
perhaps Parliament stepping in to prevent that, or the Conservative Party itself deciding that that's actually not what they want to do to the U.K.
at this stage? What do we think?
BLACK: It's undoubtedly one of the key issues in this campaign because the Conservative Party is broadly more pro-Brexit than the broader electorate
in this country.
And so all those contenders pretty much exist on a scale of enthusiasm for a no-deal scenario, bar a couple of the candidates, Boris Johnson is at one
end, where he's saying, quite simply, that it is something that we should be prepared to do, although he is saying it's not his preferred option.
Jeremy Hunt is towards that he would accept it with a heavy heart end of the spectrum.
So in order to have credibility among conservative voters who are ultimately deciding this contest, it is seen by many of the candidates that
they must be willing to embrace this at least as an idea. Parliament itself, while it tried yesterday led by the Labour Party and other
opposition parties to try and block that outcome to try and prevent the future Prime Minister pursuing a no-deal scenario, it lost that vote.
And now at this stage, it is unclear if Parliament has any leavers left to try and -- to try and stop that outcome. But there is no doubt that there
are members of Parliament who are committed to stopping that at all cost.
And you're right in terms of business. It is the most feared scenario because it is simply the one with the greatest uncertainty -- Julia.
CHATTERLEY: Yes, the wrangling and the wrestling gives me a heavy heart. Phil Black, thank you so much for that. We will continue to watch that,
too.
Now, we're going to take a quick break here on FIRST MOVE, but when we return, U.S. states making a threat on tech, warning Silicon Valley's
biggest companies, a crackdown could be coming for them.
Plus CrowdStrike strikes it rich. Software security firm soaring in its market debut. My conversation with the CEO coming up after this. Stay
with us.
(COMMERCIAL BREAK)
[09:21:09] CHATTERLEY: Welcome back to FIRST MOVE live from the floor of the New York Stock Exchange where we are looking at a positive open after
two straight sessions of, what? Possibly unchanged to a touch low.
We've got some key data coming up between the United States and China on Friday, both countries reporting industrial production and retail sales
numbers, so we'll watch for those.
In the session today, keep an eye on energy stocks. Right now, premarket they're moving higher along, of course with the price of oil. Both Brent
and WTI currently up around three and a half percent. We continue to monitor the news out of the Gulf of Oman where there are two tankers, of
course that have come under suspected attack as we were discussing earlier on in the show.
The counter to what we're seeing there and continuing the momentum that we have been seeing in the oil market. OPEC today cutting its outlook for
global oil demand because of the impact of the trade wars. It says forecast could be cut further in the coming months, too.
Wow. There's a lot going on. Let's get some context. Jeffrey Kleintop joins us now. He's the Senior Vice President and Chief Global Investment
Strategist at Charles Schwab.
Jeffrey, fantastic to have you on the show. As I mentioned, there is a lot going on. You point out in your recent notes that actually the timing of
the trade war couldn't have come at a worse time. And now you can throw in Middle East tension here as well. What do you make of it? What most
concerns you?
JEFFREY KLEINTOP, SENIOR VICE PRESIDENT AND CHIEF GLOBAL INVESTMENT STRATEGIST, CHARLES SCHWAB: There are so many factors right now in the
context of a vulnerable global economic backdrop.
We've gotten the global manufacturing sectors declined 13 months in a row, the leading economic indicator from the OECD is now at 99. That's been the
threshold at which global recessions have started into the last seven started right around when that index fell to at 99. There's so many other
factors I could point to including a weaker jobs report on Friday here in the U.S. and slumping retail sales in many places.
I note that even in China, auto sales are now falling year-over-year pretty dramatically, double digit percentage declines. So it's a vulnerable
global economic backdrop to then factor in the threat of a trade war, increasing tensions with Iran over its concerns over its nuclear
negotiations. Of course, North Korea is still out there and could stir up conflict as well, in addition to Brexit and so many other factors.
So the global economic backdrop is vulnerable to any one of these shocks, but we don't just have one, we have several.
CHATTERLEY: You know, it's interesting, the counter to that would be if we bring it back to the United States for a moment that actually consumer
confidence has remained pretty high that actually they've been pretty resilient in the face of all these broader concerns.
You kind of have a counter to that, too, and say, actually, that can be a warning sign to at this point in the cycle. Talk me through that.
KLEINTOP: Maybe they're a little too confident. Confidence is very high. In fact, it's in line with levels we've seen before.
For example, we saw it in 2007, 2000, and back in 1990, right before the recessions began, maybe six months later, after we saw those levels of
confidence. So we're at a point now where consumers are maybe vulnerable to starting to worry a little bit more, and that maybe they are confident
as they're likely to be.
By the way, it's not just the U.S. we see that, in European consumer confidence surveys and in Japan as well.
CHATTERLEY: It's interesting, if we look at the past couple of months, in particular the relative outperformance that we've seen in emerging markets
here and you have some great charts to show, some of the import substitution that we're seeing.
Yes, the United States is importing less from China, but it is importing a lot more from other countries like Mexico, like Vietnam. Talk me through
this because you make a really quite fascinating point about this. And perhaps that's playing into what we're seeing in the markets, too.
KLEINTOP: Yes, it is interesting, we can even trace product categories like auto parts, for example. Auto parts shipments from China have really
fallen dramatically, but they've picked up very sharply from other Asian providers, and in Mexico and other emerging markets as well.
[09:25:04] KLEINTOP: So it appears that as China is losing share, so to speak in exports to the U.S., many other emerging markets are picking up
that share.
So it's not going back to domestic U.S. production, it seems that other emerging markets are picking up the slack. So we're going from one
emerging market business, say in China, to another one in another country. And that might mean that emerging markets may fare a little better through
this trade war concern that many investors had feared at least, had feared back in April and early May.
CHATTERLEY: If we see the Federal Reserve cut rates, does that add an extra kicker here? Or does that add some broader cautiousness if they've
got a reason to do it, ultimately? What do you expect from the Federal Reserve this year? Because the range of options are broad.
KLEINTOP: Yes, they sure are. You know, it's certainly looking more and more likely that the Fed may cut rates one or even two times later this
year. But I think we have to reflect on what that's meant in the past.
You know, in the past when the Fed cut rates for the first time after hiking them for a while, I think back to 2007 that didn't stop the 2008 or
2009 global recession. When they cut in January of 2001 that certainly didn't stop the recession that began just three months later in March of
2001.
So I'm not sure that the markets are going to embrace this as saving the day, but certainly they're hopeful that the Fed may lend some support to an
economy clearly showing some signs of weakness.
CHATTERLEY: Yes, two percent away from record highs. I think there's a lot of hope here that the Federal Reserve will save the day to use your
terminology there.
Jeffrey, fantastic to have you on FIRST MOVE. Jeffrey Kleintop there with his context on the market.
So all right, we are counting down to the market open this morning. We are anticipating a positive start for the first time in three sessions. Do we
get it? Well, we'll see.
And we'll take a look back on what we're seeing in the Middle East, too. Stay with us. You're watching FIRST MOVE and the market is next.
(COMMERCIAL BREAK)
[09:30:00] CHATTERLEY: Welcome back to FIRST MOVE. I'm Julia Chatterley live from the New York Stock Exchange -- that was the opening about this
Thursday and we do see a higher open for stocks. The bulls hoping to break a two-day losing streak. Can we do it? We shall see.
The new evidence today that U.S. inflation remains muted. A good sign for the Federal Reserve and are looking to perhaps create some more easing room
here.
We saw U.S. import prices falling from 0.3 percent in May, the largest drop in fact this year and a greater drop than expected, thanks perhaps to a
continued strong U.S. dollar. It follow that consumer inflation data that we got on Wednesday, too.
Let's move on, and also take a look once again at what's going on in oil prices at this moment. Oil prices surging higher by more than three
percent. This, as we've been discussing on the show after suspected attacks on two tankers in the Gulf of Oman less than a month, of course,
after four tankers were attacked off the coast of the United Arab Emirates.
Nic Robertson joins me now. Nic, just once again, what details do we have on the attacks that we've seen in the Gulf of Oman today or the suspected
attacks, I should say, and I know you were over there, on around May the 12th and saw what happened with those four tankers. So talk me through
potential similarities hereto.
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Sure, there are similarities. These are commercial vessels that were targeted that they
were on the same sea, the Gulf of Oman. But there are significant dissimilarities, if you will.
Significantly the last attack, the ships weren't anchored. They were targeted with relatively small mines that appeared to be placed on the
vessels magnetically overnight. They went off in the morning.
These vessels today, a huge oil tanker and a chemical tanker that were moving through the sea that were struck it appears from the picture -- from
the videos that we've seen to have been struck broadside on.
Significantly, that last attacks, no one was injured, no one was forced off the vessels. This time, the crews, all 44 total crew members from these
two ships had to abandon ship. One of the crew members was injured.
And the accounts that we're hearing coming from those ships are on one account of one of the ship being targeted by some sort of shell and the
account from that ship saying that there was two of these shells that hit the ship, and aboard the other ship, the account is indicating that there
were three -- that they heard three different explosions targeting or hitting the ship, if you will.
So this seems to be a significant escalation of what we saw happen before. Last time, close to the coast of the Emirates, the ships have anchored,
this time the ships passing much closer to the coast of Iran, and this time, on way to their destinations full of fuel and chemicals.
CHATTERLEY: Nic Robertson, thank you so much for bringing us up to speed on that and giving us context, of course. And to Nic's point there, the
fact that the markets aren't waiting around to decipher this suggests, as Clare was saying earlier, as well, we're seeing perhaps a bigger reaction
than we saw back in May 12th in terms of oil prices here.
It's starting to look a little bit like a pattern, any further information, we will bring it to you. But for now, let me give you a look at what we're
seeing in terms of the global movers in the session today.
Dryships, the cargo ship operator shares skyrocketing free market after receiving a buyout proposal from the SBI Holdings. That company is
controlled by the Dryship CEO. The special committee and the independent directors will consider the proposal. I mentioned premarket bear of
course, but now the markets are open. Stick with me. It's been a long week.
Twitter, also in focus. MoffettNathanson analysts reiterating their bearish calls saying now is an opportune time to sell the stock. It claims
the social network isn't spending enough on safety. The stock meanwhile, up some 30 percent so far this year.
CrowdStrike -- keep an eye on this one. The security software vendor soared as much as 97 percent in his first day of trading yesterday even
after pricing the shares at the high end of the expected range. It ended up closing up more than 70 percent from its IPO price, pushing its market
cap above $11 billion.
The CrowdStrike CEO told me that the company is here to stop the breaches, not to set the stock price. I asked him whether he was pleased or unhappy
with that kind of rally in the share price on the first day of trading. Because did he leave some money on the table? His response was pretty
cute. I also asked him what he's going to do with the money. Listen in.
[09:35:07] (BEGIN VIDEO CLIP)
GEORGE KURTZ, PRESIDENT, CEO AND COFOUNDER, CROWDSTRIKE: We continue to invest in our platform, and I think that's one of the key areas that really
differentiates what we've done versus the rest of the industry. We've really built out the first true Cloud security platform. And you know, I
think it's one of those areas where the customer demand has shown itself.
So we want to continue to build that out on the R&D side. We want to continue to expand our geographic reach. Obviously, we started in the U.S.
and now we have offices around the world. But we want to be able to make sure that we can service customers around the globe.
CHATTERLEY: Talk to me about the competition in this space? Because you said, "Look, this is going to be a $35 billion industry over the next
couple of years. But I look at some of the competition, and I think it's fierce. Are enough companies looking at using your kind of technology? So
Cloud-based to detect attempted security breaches? The risks surrounding a company here. Or are you facing pretty stiff competition?
KURTZ: Well, I think you have to look at other industries and where there's been seismic shifts and just technology changes. If you look at
Siebel versus Salesforce, that move to the Cloud was really a structural shift, and you've seen the results.
And I think we're seeing the same thing in security. In the past, security has really been a point product solution, trying to identify malware
instead of really focusing it at the platform level and trying to prevent breaches. It's much different when you think about it that way.
Preventing a breach is much more important than preventing malware. Malware is obviously important, but it's a subset of preventing a breach.
And I think that's what we've been able to really do to capture our customers and their mindshare is we're providing an incredibly valuable
technology and service in an area where the landscape on the threat side is ever evolving.
(END VIDEO CLIP)
CHATTERLEY: Eleven billion dollar market cap, potential size of the business. The sector in total $35 billion not making money. I know about
valuations, but something there is surprising to me. All right, let's move on.
U.S. states are joining the fights to rein in big tech. Several reportedly launching investigations into giants such as Facebook and Google. Hadas
Gold joins us now. Hadas, the idea that we could have 50 different states trying to regulate these big tech giants in their own way seems pretty mind
boggling to me. What are they planning here? Or at least, what are they saying?
HADAS GOLD, CNN BUSINESS REPORTER: Julia, it can be a bit of a regulatory headache for these tech companies because you're right, there could be 50
different front lines. Now, it probably won't reach that level of 50 separate cases. But states have their own antitrust laws.
Now they often mirror the Federal antitrust laws, but they can sue just like the Federal government can. And often you'll see states join up with
the Federal government signing on to some other antitrust cases. I'll point out that for example, the AT&T-Time Warner case. No state signed up
on to that antitrust case, which gave a signal of how many state AGs thought this was going go.
But this week, actually Attorneys General from 41 states, D.C. and Guam, they signed a letter to the Federal Trade Commission, urging that large
tech platforms hold too much personal data and that insulates them from competition and makes it harder for startups.
They're trying to convince the Federal authorities to go harder against these tech companies. And what we see is actually State Attorneys General
are often sort of the front lines on a lot of these cases before the Feds get in on it.
And what we heard from including one Attorney General from Nebraska, he said the states, they need to move faster, taking on the mantra that we
know so well from Facebook, they want to move fast, and then see if they should break things up -- Julia.
CHATTERLEY: Yes, it's such a great point. If you want to try and level the playing field to some degree. But you know, one of the big questions
for me as we head into 2020 elections is, is this what the voters want?
I saw a poll from the Progressive Policy Institute saying the majority of voters don't want to tackle big tech. They don't want to limit innovation.
Fascinating.
GOLD: Yes, Julia. It's really when you look into some of these poll numbers, you see a lot of people getting very wary of tech companies and
very wary of how they handle their personal data. But then when you ask them about certain things, like, "Well, are you willing to pay for your
personal data to be protected?" You get different answers.
And then when it comes to breaking up big tech, there was actually a recent NBC-Wall Street Journal poll, which found almost a split 50 to 47 percent;
50 percent saying that big tech shouldn't be broken up.
They were asking specifically regarding Elizabeth Warren's plans, she's a candidate, a Democratic presidential candidate. She wants to break big
tech up and people are a little bit more unsure about whether they want to break big tech up.
Another question asked about whether it should be the free market or the governments who sort of level the playing field here and more than 60
percent said they think the free market should be the one to level the playing field -- Julia.
CHATTERLEY: Wow. Love that. Hadas Gold. Great insight. Thank you so much for that. All right. We're going to take a quick break here, but
coming up two years old and worth more than $2 billion. We'll be talking to the 22-year-old cofounder of a credit card unicorn. Stay with us.
(COMMERCIAL BREAK)
[09:43:13] CHATTERLEY: Welcome back to FIRST MOVE. The FinTech unicorn, BREX gives credit cards to startups without personal guarantees or
deposits. It's only two years old and it's launched its first product around 12 months ago. Although it's already valued at $2.6 billion, it is
now expanding into other areas like cards for e-commerce companies.
But the competition is fierce from both traditional players like American Express, and rival startups, too. Joining us in the "Chatt Room" is
Henrique Dubugras. He's the co-CEO and cofounder of BREX. Fantastic to have you with us.
HENRIQUE DUBUGRAS, CO-CEO AND COFOUNDER, BREX: Thank you for having me.
CHATTERLEY: Where did the idea come from?
DUBUGRAS: So we were in this accelerator program called Y Combinator that we actually came in have a completely different idea. And within Y
Combinator, we saw that all peers there, they had raised like millions of dollars, and they couldn't get a credit card. And we thought that doesn't
make any sense. Why can you like raise millions of dollars and not get a card? So that's kind of how the idea sparked.
CHATTERLEY: So then you dumped the idea that you went there with and you were like, actually I can see a real problem with this group of people and
we can fix them.
DUBUGRAS: Yes, exactly.
CHATTERLEY: So how many spending traditionally do people do? Because I think this was a problem after the financial crisis for any individual. If
you didn't tick a certain set of boxes, you struggled to get credit, even if behind that you had assets or wealth or ideas that could provide it.
DUBUGRAS: So it depends a lot, right? Because some of our companies are small startups with two people and then there's not allowed, but a lot of
them actually grow a lot into companies of hundreds or thousands of employees, and then there's a lot more spend. So the average is not a
metric we track too much, but it varies according to size of company.
CHATTERLEY: You're not worried enough or you don't need to be worried. How do you judge the risk that they present because for any credit card
company, whether it's you guys or American Express or somebody that's the key here?
[09:45:06] DUBUGRAS: So there's two main insights for us judging the risk. The first one is we don't bucket all companies in like one SMB basket. We
say, hey, we understand that startups are different in restaurants, they are different in hotels. So we evaluate risk for them differently.
CHATTERLEY: Okay.
DUBUGRAS: So that is like one. So for startups, the main way we look for it is their cash balances. So let's say you're a startup, you have a lot
of cash, we will give you a card. If you don't have cash, we won't. It's very simple. So that's one.
The second way we do it is that traditionally, banks had this what we call a static underwriting model, in which they look at your financial history,
and they give you a limit, and then based on that, you know, that's basically your limit of the next two years.
What we do is that we reevaluate every customer every day, based on new information that we get. So because we have a lot less risk by doing that,
we can then have no personal guarantee, and much higher limits than everybody else.
CHATTERLEY: Okay, so talk to me about expansion plans then. Initially startups, but we just mentioned there, e-commerce companies, there are
other people now that are looking at using this card, what makes you different? What makes you special?
DUBUGRAS: So you know, we just launched Life Sciences, that's actually our newest release in terms of cards. So, you know, pharmaceutical, cosmetics,
like all these new kind of health and life sciences now can use BREX, too.
In terms of differentiation, as I said, we give -- we require no personal guarantee, much higher limits than everybody else. And our technology is
actually the best. So it's really easy -- really easy to do your expenses, really easy to add users and users set limits, controls things like that.
CHATTERLEY: Cost? How much does it cost to use your card?
DUBUGRAS: It's $5.00 per user per month.
CHATTERLEY: Okay, but what about interest costs?
DUBUGRAS: It's a charged part. So you have to pay it in full by the end of the statement.
CHATTERLEY: Okay.
DUBUGRAS: So you cannot keep a balance with that.
CHATTERLEY: So you don't charge -- you don't charge interest in the interim, but at the end of the month, the balance has to be clear.
DUBUGRAS: Exactly.
CHATTERLEY: Now, that's the best way to manage risk there. What happens if they don't pay the balance?
DUBUGRAS: Then we're just shut down the card.
CHATTERLEY: Oh, so if they don't clear the balance, you say, "Guys, pay ASAP."
DUBUGRAS: Yes, but that doesn't really happen, because a hundred percent of our customers are auto pay. It's actually -- most of our customers see
that as a feature. They don't have to remember to every month go and pay, it just kind of takes care of itself.
CHATTERLEY: Have you ever had to take a card away from someone?
DUBUGRAS: Well, yes, I think companies go out of business from time to time, and we have a very frank conversation, and they're actually happy
that they have no personal liability there.
CHATTERLEY: But they have to pay the money back.
DUBUGRAS: They have to pay the money back.
CHATTERLEY: Okay, $2.6 billion valuation. Does that make you nervous?
DUBUGRAS: Obviously, a little bit, but we're still super confident in the company.
CHATTERLEY: What conversations that you're having with investors? I mean, you're 23 years old.
DUBUGRAS: Yes. I think, you know, investors are super excited about the size of the opportunity. If you just look, you know, in the U.S., the size
of the market in terms of commercial parts is around $12 billion in revenue per year. That's not like market cap, it's like real revenue opportunity,
right?
And there has no one that has disrupted that market so far. So if you see companies like Stripe on the online markets or Square in the offline market
is disrupting the online payments and offline payments market, the corporate credit card market is as big and still haven't been disrupted.
So we with that, I think that makes us very excited.
CHATTERLEY: What's the risk that an American Express or Visa just replicates your model and goes, "You know what? We can come up with the
same technology. We can do it, and we can probably do it cheaper."
DUBUGRAS: There's definitely a risk there. But if you look, historically, banks haven't adapted that fast to startups and FinTech. The reason being,
we have systems and technology that was built 30 years ago, it is really hard to adapt.
So because we've rebuilt all our systems from scratch, you know, two years ago, it's easier for us to build new functionality versus for them to
migrate something really big and you know, old is much harder.
CHATTERLEY: They could always buy you. Are you having conversations with them about being bought?
DUBUGRAS: The only way this company is exiting is through IPO.
CHATTERLEY: Why?
DUBUGRAS: We sold the company before when I started BREX, so we started this company last year of high school and we worked on it for three and a
half years. Sold it. And for this company now, we decided that we want to run it for the rest of our lives.
CHATTERLEY: So you want you want to go public and you want to be on that.
DUBUGRAS: Yes, I like that feeling that is just happening right there. It seems really fun.
CHATTERLEY: Something tells me you might be there. Great to have you on. Thank you so much.
DUBUGRAS: Thank you so much for having me.
CHATTERLEY: Come back and talk to us. Wow. That's the only thing I can say about that conversation. The CEO of BREX there, Henrique. Thank you
so much.
All right, we're going to take a break. Up next, Netflix turns gaming upside down, Stranger things have happened. That's a pretty big clue.
Stay with us. We'll have all the details.
(COMMERCIAL BREAK)
[09:51:51] CHATTERLEY: Welcome back to FIRST MOVE and a look at today's "Boardroom Brief." Walmart is overhauling the online retailer jet.com and
says it will absorb most of company with its online business.
Walmart bought the startup for more than $3 billion in 2016. The President of jet.com, Simon Belsham is set to leave the company in August.
Lululemon shares are raising higher after the sportswear maker raised its outlook for the year. The company told investors that it's on a roll and
expects to make more than three and a half billion dollars this financial year. It's right now up some five percent. Wow.
Netflix is turning its smash hit series, "Stranger Things" into a video game set in the shadowy upside down world. Netflix's latest move is book
players and the gaming industry, too.
Paul La Monica joins me now. Paul, I've got a confession. I've never watched "Stranger Things." But I hear really great things about it. Talk
to me about their foray now into gaming.
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, this is a fantastic show by the way. I'm very excited for Season 3. And what's really fascinating
here, Julia, is that the game that Netflix just announced is going to be a mobile game, 2020 it's coming out and it sounds a lot like Pokemon Go.
It's going to be a location based puzzle game.
So what we're actually going to be looking for and the clues we're trying to find, it's going to be fascinating to see. It's apparently set in the
very shadowy upside down area, which is very important to fans of the show.
But this is not the only game that Netflix has tied to "Stranger Things." They have another one that's a more traditional console game that's also
going to be on PCs and mobile that's coming out on July 4th tied to Season 3's release date, and that's going to be a retro game kind of modeled more
like Super Nintendo games from the 90s, which should be pretty interesting since this is a show set in the mid-80s.
CHATTERLEY: It's quite fascinating, isn't it? How damaging can Netflix be to this segment? I mean, we've seen them disrupt TV viewing, with their
streaming offering so comprehensively. What do we think about their entry into gaming here particular given, as you point out, they have got great
content that they can play with here.
LA MONICA: Yes, I think that Netflix is going to be very careful with what they decide to make games out of. There's another game they're developing
off of the "Dark Crystal" series, you know, based on a new cartoon that's coming out that was based on a very popular Jim Henson, "Dark Crystal"
movie from the 80s.
But I don't think you're going to see Netflix go crazy here like an "Orange is the New Black" prison game. Not so sure that's a great idea. So I
wouldn't expect that. But I think that Netflix particularly with their you know, kids-themed shows and a show like "Stranger Things" that attracts all
ages and has that 80s retro feel that could be a natural fit for Netflix to do more games out of.
CHATTERLEY: Yes, they've got to be careful with it. Your choices here. Now speaking of excitement of that July the Fourth launch of the latest
series of "Stranger Things," Burger King is getting in on the action here. What a whopper. Take a look at this. Paul, how do you feel about this?
An upside down hamburger?
[09:55:04 ] LA MONICA: Yes, it got basically the bottom bun on top. They flipped it, a nod to the upside down of "Stranger Things." I do wonder
whether or not there will be an Impossible version even though obviously plant-based food was not a thing in the 80s so to speak, you just had bad
veggie burgers as opposed to the more authentic meat-like food that we get from Impossible and Beyond Meat now.
But there are so many companies latching on to this. It's not just Burger King, Coke is even bringing back new Coke, the disaster that that was for
the launch of "Stranger Things" because that debuted in the mid-80s when this show is set as well.
CHATTERLEY: I love that we're having a serious debate about this. I mean, all they did was flip the thing. It's just upside down, it will be an
accident if it weren't a great PR opportunity. Paul La Monica, with his Impossible Burger thereto, I'm sure they will. Thank you so much for that.
LA MONICA: Thank you.
CHATTERLEY: All right, we have to wrap up the show. A quick look, once again at what we are seeing in the energy markets. The oil markets in
response to the breaking news that we've been talking about throughout the show, of course, two tankers that are suspected of being attacked there.
More to come on "The Express" in a couple of hours. But for now, that's it for the show. You've been watching FIRST MOVE, time to make yours.
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