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First Move with Julia Chatterley
Bank Of America's Earning Show A Solid Consumer, But Rate Cut Clouds Are Gathering; Facebook Is Back On Capitol Hill After Tuesday's Lashing For Cryptocurrency, Libra; Elon Musk's Latest Venture Involves Planting A Chip In Your Brain. Aired 9-10a ET
Aired July 17, 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 is
your need to know.
The beat goes on. Bank of America's earning show a solid consumer, but rate cut clouds are gathering. Off balance. Facebook is back on Capitol
Hill after Tuesday's lashing for cryptocurrency, Libra. And read my mind: Elon Musk's latest venture involves planting a chip in your brain. It's
Wednesday, let's make a move.
Welcome once again to FIRST MOVE, a huge tech focus in the show again today and of course earnings. Bank of America just out; Netflix after the bell
as well. And I can tell you stranger things have happened. It doesn't look like we've got a pretty flat open for stock markets here in the U.S.
following yesterday's pullback.
There was a decidedly summer feel yesterday, I have to say sideways trading, light volumes, right up until the moment President Trump warned
that the U.S.-China trade deal is still a long way off and he threatened more tariffs.
Bottom line, guys, trade it still matters; and it's having an impact on global economic data. Take a look over at Singapore. Non-oil exports
plunging more than 17 percent year-on-year in June. That was the biggest drop in six years. Export oriented economy, remember this, so expect, I
think more easing from the Central Bank. They're just one of the many global Central Banks making dovish noises right now, including, of course
Fed Chair, Jay Powell reiterating yesterday that the international outlook remains a key concern.
Another sign that despite some of the recent stronger data here in the U.S., the Fed is set to cut rates in July and he wasn't alone actually
yesterday. The Chicago Fed President hinting two rate cuts might be necessary this year. The bank also warning of course, that this will mean
lower profits and perhaps less lending to the real economy.
Bank of America, meanwhile, though, having a pretty solid quarter, despite the risks, let's get to the drivers and those numbers. Matt Egan joins me
now. Matt, once again, strengthen the U.S. consumer. It was the retail bank here that was the real outperformer for Bank of America.
MATT EGAN, CNN BUSINESS LEAD WRITER: Right, Julia. You know, Bank of America really painted a very optimistic picture about the economy, despite
all of this talk about a slowdown and Fed rate cuts. And as you mentioned, it's really about the consumer.
Bank of America's consumer bank profits were up solidly. They reported growth in loans and in deposits. CEO Brian Moynihan said all of this
points to a steadily growing economy and healthy consumer trends really across the board, which really jives with what he told me last month when
we interviewed him and he said that he didn't really think that a recession was in the cards.
It also supports those strong retail sales numbers that we saw for the United States for the month of June that were reported yesterday. And you
know, it's not just about the consumer, though, Bank of America reported healthy numbers when it comes to businesses as well.
It said that corporate lending and corporate leasing rose, but like the other big banks, one of the concerns continues to be markets. Bank of
America's global markets, profit fell seven percent; equity trading volume was down 13 percent, fixed income off by eight percent.
So Julia, you know, this looks like another example of a bank that is benefiting from the real economy. But you know, it's being held back a bit
by the market forces.
CHATTERLEY: Yes, the muted trading activity that we're seeing from clients warning concerns, among them, of course, about what kind of trading
environment we're going to have going forward offset by businesses and consumers that continue to show some strength here.
Another point, I know that you discussed with him when you interviewed him as well, but also that we saw in these numbers, is the ability to make
profits here, the net interest income, another key feature of all of these bank earnings with bank saying, look, actually, it's simply going to get
tougher to make money here as rates come down.
EGAN: That's right, Julia. So, Bank of America's net interest income actually increased year-over-year, but it was down from the previous
quarter. And that is, of course, because interest rates have already fallen very sharply due to the Feds really dramatic pivot from very hawkish
to very dovish, and those rates could continue to come down or at least stay low, because the Fed is thinking that it may in fact, lower interest
rates.
And so the problem for banks is that it's going to hurt their margins. And we've seen all these different banks, including Citi and JPMorgan, which
lowered its net interest income outlook yesterday. They're all talking about this as a potential headwind.
So it's another interesting factor that the Fed while it is trying to actually support the real economy by lowering rates, it is going to
potentially dent bank profitability -- Julia.
[09:05:08] CHATTERLEY: Yes, absolutely. Matt Egan, thank you so much for that on banks watch for us this week.
All right, let's move on to our next driver, Amazon getting hit by another E.U. probe. This time, looking at how it uses other retailer's data.
Hadas Gold is on this story. So Hadas, what we're looking at here is how Amazon operates both as a retailer itself, but also as a host for other
retailers and doesn't use those -- that data and that advantage to serve its own purposes. Talk us through this.
HADAS GOLD, CNN BUSINESS REPORTER: That's the question the European Commission plans to probe in this investigation, this antitrust
investigation, and it comes actually, towards the end of Margrethe Vestager, the Competition Chief of the European Commission, the end of her
five-year term, but it's been a probe that's been long expected.
Vestager has been talking about it for some time, but now, it is officially launched. And as you noted, they will be looking into how Amazon, both as
the marketplace and the retailer, because it sells its own products on Amazon. But then there's also the place for third-party independent
sellers to sell their products. And the question is whether Amazon is inappropriate using some of the data from those third-party independent
sellers, really their competitors that that it is somehow being used to an unfair advantage.
This is everything like the Buy Box, which is the box you might see on your Amazon search results that automatically that you can click on it and puts
the product into your cart without you having to go through the product page.
Now, I want to read a bit of what Vestager said today in the announcement. She said, "We need to ensure that large online platforms don't eliminate
these benefits through anti-competitive behavior." She said, "I have therefore decided to take a very close look at Amazon's business practices
and its dual role as marketplace and retailer to assess its compliance with the E.U. competition rules."
Now this could be one of the biggest antitrust competitive investigations into Amazon that we've seen so far that Amazon said in response, "We will
cooperate fully with the European Commission and continue working hard to support businesses of all sizes and help them grow."
Now, this obviously comes on the heels of a lot of action we're seeing in the sort of regulate Big Tech space. We've got the hearings going on in
Washington. We've got a lot of investigations and potential, for example, digital taxes being talked about here in Europe.
But it's clear -- it's not clear how long this probe will take. They actually said there's no specific deadline. But if Amazon is found to be
violating any of these competition rules in the European Union, they could be liable for up to 10 percent of their global revenues in a fine.
And if you look at the 2018 revenues for Amazon, that could be around $23 billion of a fine -- Julia.
CHATTERLEY: Yes, I mean, what you've got to prove here ultimately is that the consumer is being hurt here. And even Vestager agreed that, look, this
gave us better choices. It brought prices down for consumers. The question is, now, given the sheer scale and the power that Amazon has, is
that working in reverse? And this is the question that we're asking here.
I mean, I know Amazon, the pushback here would be, look, if we look at the United States, fine. They've got what? Around 40 percent of the e-
commerce market share here, but it's less than five percent of overall commerce.
The question is, is that a powerful enough argument, Hadas? What about in the United States? Because when we were looking at those hearings
yesterday, what we heard in Congress was them zoning in on Amazon of all the Big Techs, and asking exactly the same questions here that the E.U. is
asking.
GOLD: Right. And well, that's the argument that we heard from Big Tech in those hearings yesterday in Washington. It was them saying, "Yes, we do
have a lot of power, but our competitors are especially China," and that they were trying to get China really into the conversation yesterday in
Washington to sort of alert to the politicians that look, you might want to be monitoring us, but keep in mind who we're competing against. We're
competing against a lot of these big websites from China that a lot of people don't think about, but they are huge, huge platforms in those other
countries.
But I do have to say the conversation in terms of investigating and regulating Big Tech, it's much further along here in Europe than it is in
Washington.
We are seeing some action in Washington, like those hearings we're seeing this week. But in terms of actual action, actual announced probes, we are
not quite there yet. We might get there because we know that the F.T.C. and the D.O.J. in Washington have sort of split up the looking into all the
different FAANG, the Facebook, Apple, Amazon, as they're investigating possible antitrust violations.
But we haven't seen anything publicly from that yet. We might be seeing the politicians yesterday in Washington said that at the end of some of
these hearings, at the end of this top to bottom probe of tech, we might see some new legislation come out.
But they are all looking at Europe and seeing what Europe is doing in these fines that Europe is starting to put out to kind of see what the roadmap
might look like.
CHATTERLEY: Absolutely. You're definitely on the front foot on this in this regard. Hadas Gold. Thank you for that.
All right. Next one, not the only company getting lashed yesterday in Congress. Facebook, of course, faces further hearings today on Capitol
Hill. Their cryptocurrency, Libra got a pretty hostile reception yesterday. Clare Sebastian has been tracking this story for us. Clare, my
favorite quote was from the Democratic Senator Sherrod Brown. He compared Facebook to a quote, "toddler who has gotten his hands on a book of
matches." Ouch.
[09:10:14] CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, it was a really frosty reception, Julia. You know, this really felt like more of a
dressing down in parts than an actual hearing. Clearly, the big takeaway is just how little Congress trusts Facebook.
Sometimes, it wasn't even about Libra that they were dressing them down. But, you know, really, this is something that unites politicians on both
sides of the aisle. I want to play some of the more colorful moments here.
(BEGIN VIDEO CLIP)
SEN. SHERROD BROWN (D-OH): Facebook is dangerous. Now, Facebook might not intend to be dangerous, but surely they don't respect the power of the
technologies. They are playing with like a toddler who has gotten his hands on a book of matches.
Facebook has burned down the house over and over and called every arson a learning experience.
SEN. JOHN KENNEDY (R-LA): Isn't it true -- and I really want your opinion that Facebook has chosen to advance a set of values in which truthful,
truthful reporting has been displaced by flagrant displays of [bleep].
DAVID MARCUS, VICE PRESIDENT OF MESSAGING PRODUCTS, FACEBOOK: I don't have to answer that question, sir.
KENNEDY: Okay.
(END VIDEO CLIP)
SEBASTIAN: So Julia, some colorful language there from Senator John Kennedy, and clearly you can see they veered off topic on occasion. But
Facebook's David Marcus, who is the head of the Calibra unit, which is the unit that's going to build a digital wallet to use the Libra currency, he
said repeatedly that this isn't just about trusting Facebook, there are 28, founding members, all of which are going to have equal power.
He said that Facebook are going to keep the financial data that they have in Calibra system separate from their social media apps. And he did
promise that they're not going to launch this project until all of the regulatory concerns have been addressed.
But like, he heads to the House today. He is going to be in front of the House Financial Services Committee. I think, if possible, that reception
might be even frostier. Maxine Waters, the Chair of that Committee is advancing draft legislation that will try to keep Big Tech out of finance
all together. So it'll certainly be interesting to see what happens there.
CHATTERLEY: Yes, I mean, I go back to what Carly Fiorina said to us yesterday, this is inviting a level of scrutiny at Facebook that the
company simply didn't need at this moment.
But Clare, I totally hear exactly what you're saying here. I just wonder whether a lot of the pushback that we got was about Facebook and Facebook's
involvement in something like this, or pushed back more broadly on cryptocurrencies themselves? Because I think if I was an ether or a
Bitcoin investor here, I'd be looking at this and going, "Wow, the sentiment right now in D.C. for this kind of opportunity is negative to say
the least."
SEBASTIAN: Definitely, Julia, and we've seen that reflected in the price of Bitcoin and various other cryptocurrencies, particularly overnight.
Bitcoin, down below $10,000.00 now. It has lost about a quarter of its value in the last week.
I think it was interesting because when Libra was first announced, there were a lot of people who are, you know, diehard fans of Bitcoin, who were
really happy about this. They thought it would bring this finally into the mainstream. It might bring together some of the patchwork of regulation
that we already have into something more comprehensive.
I think now that the publicity has become so negative, there are concerns, but look, they do want Libra to get off the ground because of that
regulation, and because if you go even deeper into the diehard Bitcoin community, there are those who feel that Libra is really essentially a
useful detour that will eventually bring people back to Bitcoin, because of the backlash against Facebook and because Libra isn't really as Bitcoiny as
Bitcoin.
It is because of the backing by Facebook that is seen as less decentralized. So it's a kind of a nuanced view of it from the crypto
community, but we are seeing those prices fall.
CHATTERLEY: Yes, I am sure some people will be scooping them up at these levels for that. We shall see. Clare Sebastian, thank you so much for
that.
All right. My favorite story of the day now. In the battle of man versus machine, Elon Musk sees a potential ways to win, merging man with machine.
He has unveiled bold plans to connect our brains with our devices. Anna Stewart has the lucky prize of reporting on this story for us today.
I mean, the details on this are pretty astonishing. It's not specifically new science, but Elon Musk just make several dramatic advances. Talk us
through the science here.
ANNA STEWART, CNN REPORTER: It is easy, the science, yes, like all Elon Musk announcements, this one hurts my brain thinking about the
possibilities, Julia.
Now in terms of the science itself, as you said, the technology isn't necessarily new. That's what scientists were taking to Twitter and saying
last night, but the device itself is cutting edge. What it is, is a thread like device thinner than a human hair, it gets inserted through our skull
and on it are thousands of electrodes which monitor brain neurons and transmit that data back.
That means, because it's so thin, it's much less invasive than similar procedures at the moment. Plus, what's really different about this company
and the fact that Elon Musk has backed it is that his ambitions are far beyond medicine, for instance, far beyond just helping someone who can't
speak to communicate.
[09:15:11] STEWART: They are looking to create symbiosis with artificial intelligence to superpower a healthy human brain. And, you know, this is
something that Elon Musk has discussed before, his fear of AI, which he once called humanity's biggest existential threat. Take a listen to what
he said last night.
(BEGIN VIDEO CLIP)
ELON MUSK, FOUNDER, NEURALINK: I think even in a benign AI scenario, we will be left behind. And so hopefully, it is a benign scenario. But I
think with a high bandwidth brain machine interface, I think we can actually go along for the ride. And we can effectively have the option of
merging with AI.
(END VIDEO CLIP)
STEWART: So as robots about become more human like, we can become perhaps more robot like -- Julia.
CHATTERLEY: I have to say, when I was reading the story, I was imagining downloading a language overnight or maybe even studying a degree overnight.
This would be so great. Testing on humans next year, according to Elon Musk, Elon Musk time scale here admittedly.
STEWART: Exactly. So we discovered last night in the Q&A that they've already tested this on a monkey. And I will quote Elon Musk here, so don't
get it wrong, "The monkey was able to control the computer with his brain, just FYI."
Next up human trials, they need to get that through the FDA. That could be a pretty big hurdle, to jump. And then of course, even if they get the
technology, and they can superpower a human brain and do all the things that we'd like it to do. What about consent? What about equality? What
about privacy? It raises a whole host of issues.
What if CNN implants a chip into your brain, Julia, and you have real time stock market data, and they don't give me one, it just wouldn't be fair.
CHATTERLEY: We don't need that kind of technology. We're all over it. Anna Stewart, come on. To be fair, and I just want to make one point, the
President of the company that's doing this Neuralink, basically said, look, this is not about hype. This is about recruitment. We want more
scientists coming in to help us work on this.
So I will make that point, but for now, Anna, we will continue to look at the boards and their good work. Anna Stewart. Good job. Thank you for
that.
All right. Let me bring you up to speed now with some of the other stories that are making headlines around the world. In Washington, the House of
Representatives has voted to officially condemn Donald Trump's racist tweets targeting four Democratic Congresswomen of color. All Democrats
voted yes, but only four Republicans and one independent supported the measure. President Trump says he doesn't have a racist bone in his body.
In Sudan, the opposition and the military have signed a preliminary political agreement. It stipulates the military will rule for the next 21
months, and then civilians take over for another 18, after which the transition period will end. The agreement comes after months of tensions
between the military and civilians.
Mexican drug lord, El Chapo is to be sentenced in New York later today. He was convicted in February of all 10 charges against him. They included
engaging in a continuing criminal enterprise and drug trafficking. U.S. prosecutors are seeking a life sentence.
All right, we're going to take a quick break here on FIRST MOVE, but still to come, debt deal or no deal. The clock is ticking in D.C. to raise the
debt ceiling as another U.S. government shutdown looms, and we have lift off. We will talk to one company that took the moon landing to infinity
and beyond. That's coming up on FIRST MOVE. Stay with CNN.
(COMMERCIAL BREAK)
[09:16:43] CHATTERLEY: Welcome back to FIRST MOVE, still looking at a pretty flattish open for U.S. markets a day after a bit of a pullback
yesterday amid concerning trade headlines from the President, of course, a long way to go to get a trade deal.
Also keeping an eye on the banks of course this week, Bank of America shares set to open a touch lower in the session reporting record profits
for the quarter, of course, but broader concerns about bank profitability amid lower rates. Of course, with the Federal Reserve in focus.
Let's talk this through. Joining us now Scott Minerd. He is the Global Chief Investment Officer at Guggenheim Partners. Scott, fantastic to have
you on the show.
SCOTT MINERD, GLOBAL CHIEF INVESTMENT OFFICER, GUGGENHEIM PARTNERS: Oh, Julia, it's always fun.
CHATTERLEY: So you're anticipating the Fed cuts rates by 25 basis points, a quarter of a percent in July?
MINERD: July.
CHATTERLEY: But three times this year.
MINERD: Probably, a couple of more times. I think that -- look, the Chairman made it very clear that he is concerned about the prospects of a
recession. And so he has jumped into this cutting rates thing by both feet.
Now, the risk to my forecast is the risk we faced back in December, which was, if you remember that December meeting, everything was on autopilot.
And then and then suddenly, we reversed course.
So you know, I can only be as certain as you know, as Powell is. But right now, he is sending signals and the market is pricing for three rate cuts.
If they don't give the market what it expects, a disappointment, then they're basically you know, running the risk that they're going to increase
the probability of a recession if they don't give it to them.
CHATTERLEY: Yes, I mean, you make such a great point here as well about the sort of ping pong that we've played with the Federal Reserve here. Is
the bar now really high to disappoint the market or at least to confuse the market again, given as you said, we have gone from being on autopilot as
far as monetary policy is concerned to being okay, now we're having insurance cuts here to prevent a broader slow down.
MINERD: You know, it seems, at least for the Chairman, the bar is pretty low. That is that, you know, he is willing to change his mind and look to
his defense, he'd say, you know, I'm looking at the data and things changed, and I'm being flexible.
The reality though is when you look at the data, and what we would have expected in December for the database playing out this year, with continued
rate cuts, it's playing out just as we expect. Inflation starting to accelerate, the economy is doing just fine.
Europe is sort of bouncing off the bottom here, it seems like we're going to get stimulus there. I mean, the trade war was always on the radar
screen. But you know, China is going to do whatever it has to do to avoid a recession.
So the bottom line is the liquidity spigots are on full force around the world. And I think we're in for some interesting times ahead.
CHATTERLEY: You know, it's interesting, the President warned again yesterday that a trade deal is still a long way away. He could slap China
with yet more tariffs on the additional $300 billion here.
I mean, you could argue -- a cynic could argue here that there's opportunity here for the President to hold off on signing a trade deal.
Get those three cuts from the Federal Reserve. Then he will sign a trade deal. And, you know, you've got maximum stimulus in the monetary side and
some of the uncertainty goes away longer term.
MINERD: Well, you know, it's very -- it is interesting if you thought that the President really wanted the Fed to cut rates, which he did. He has
played this brilliantly.
CHATTERLEY: Yes, he has.
MINERD: Now, did he do it intentionally? I don't know.
CHATTERLEY: Ask him.
[09:25:05] MINERD: But he has basically forced to handle the Fed. And, you know, I think the President may be a bit smarter than we give him
credit for.
CHATTERLEY: So you've been warning that we could touch your recession indicators, at least, your equity model has suggested that we could see the
December lows before the end of the year. But you've also said we could see 3,500 in the S&P 500. How does that play out given everything that
you've just said?
MINDERD: You know, it's really interesting. The allegory for what we're going through today is the 1998 experience. And that is, you know, there
was -- there were forces overseas in Asia that caused the Fed to reduce rates by 75 basis points, the stock market took off, and, you know,
liquidity just pushed risk assets higher.
So, you know, I've always felt this was a risk that we were going to do this, but the downside to that is, as we all know, in the 1998 experience,
the follow on was the crash in the market that came later.
And so, you know, are we just setting ourselves up for a run up with stocks that ultimately will get reversed and more? You know, when the Fed
ultimately, if it is successful, has to turn around and start fixing rates again.
And so, you know, I think the Fed would like that. I mean, I don't think they want to crash the market prices, but I think they'd like to get the
economy to essentially overheat a bit more and then come back in and have to raise rates so you can get further away from the zero bomb.
CHATTERLEY: All right, we've got the market open next. We're going to continue this conversation. And I'll be asking you what investors should
be doing in order to handle that kind of situation. Yes, that's a good reaction.
MINERD: That's a tough question.
CHATTERLEY: The market opens next. Scott Minerd back with us very shortly. Stay with us.
(COMMERCIAL BREAK)
[09:30:00] CHATTERLEY: Welcome back to FIRST MOVE and Wednesday's opening bell here at the New York Stock Exchange. Pretty much unchanged for stocks
right now. Still trading very close to those record highs, of course. So a bit of a pause in light of all the earnings that we've got coming this
week and next makes sense here, I think.
We're also going to get the Fed's Beige Book, which will give us a sense of how the trade impact is having on regional areas around the United States,
too. So we're certainly be watching out for that particularly given how, and the focus ahead of those great cuts.
Also keeping an eye on what's going on in the energy market. Take a look at oil prices right now. We are seeing a stabilization after that sharp
drop in Tuesday's session. Brent trading at that $65.00 a barrel level. U.S. crude trading around $58.00 a barrel.
John Defterios joins us now. John, a bit of confusion I think going on in the oil markets. Comments yesterday that perhaps there's progress, at
least heading towards talks between the United States and Iran.
But the Iranians suggested that they weren't willing to compromise on their ballistic missiles. So what are you hearing, John, because you're always
the man in the know on these things.
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Well, on two fronts, I think the Trump administration has jumped the gun here both on China
willing to negotiate. And the same thing could be said about Iran.
But I think the message coming from Mike Pompeo, the Secretary of State, and also President Trump in that Cabinet meeting was we're willing to sit
around the negotiating table, if ballistic missiles are part of the equation, and then we had Foreign Minister Zarif as you're suggesting,
Julia, pour cold water on that concept.
Now a senior Gulf source was just telling me over the last three or four days, they don't want the U.S. to push Iran too far to have these
unintended consequences, and then stumbling into conflict. And that's the biggest worry.
So we know a win-win would look like the both sides put down their guns, sit down at the table and see if they can find common ground. A no win, of
course, that you have an accidental conflict, and that's what the Gulf neighbors there in the UAE, Saudi Arabia, Kuwait, clearly do not want to
see, but we know what risk means to the markets, Julia.
The first hint of a potential compromise, we have a sell off of three to four percent when we had those tanker attacks taking place around Fujairah,
we saw spikes up four to five percent when the pumping station in Saudi Arabia was hit.
Also later in the day, we should take a look at how deep the inventories are in the United States and whether the trade tensions in China and the
slowdown we're seeing outside the United States is also going to keep the inventories very high and keep downward pressure on prices.
But we see the spike up about one to one and a half percent, with now the talks with Iran and the U.S. not proceeding at least in the latest hours
that we've been talking.
CHATTERLEY: Yes, I mean, the fact that U.S. producers are going gangbusters here that the concern about demand going forward between the
U.S. and China really is the dominant theme.
But interesting to hear the Iranian Oil Minister saying irrespective of what's going on that those guys are going to be pretty militant about
providing exports to nations. Talk me through this because this was pretty punchy from him, too.
DEFTERIOS: Yes, you know, we had that interview with Minister Bijan Zanganeh at OPEC and he took a fairly firm line, I would suggest as a much
tougher line because he was speaking before the Iranian Parliament.
Now, there's some domestic issues here. He's seen as a reformer back at home. So he has to kind of line up with those from the Revolutionary Guard
and the Supreme Leader fighting the national cause. He is not giving any clues on where these exports are going. But one has to think that both
Russia and China are supporting the cause.
Now, I was looking at the latest OPEC report that just came out this week, suggesting that their production dropped another 142,000 barrels last
month. But those aren't official reports from Iran, but from a collection of secondary sources. It is costing them $50 billion a year and exports.
But it's also interesting, Julia, the harder line comes because their budget now requires just 30 percent from oil revenues, and there's no
reason to negotiate while President Trump is an election cycle. They'd rather wait. There's no advantage of them sitting at the bargaining table.
So they're tightening their belts. And I think that's the harder line we hear from the Oil Minister Zanganeh today.
CHATTERLEY: Yes, fascinating. John Defterios, thank you so much for making that clearer for us.
DEFTERIOS: Nice to see you.
CHATTERLEY: Lots to watch. All right, let's bring it back to markets now because Scott Minerd of Guggenheim is back with us. And he is hiding his
crystal ball behind his back.
Continuing the discussion of what we were saying before about so many uncertainty points here and the calibration of policy, both, I think from
the White House, but also on monetary policy in the monetary policy front here. How do investors approach these markets?
MINERD: Julia, the bottom of the market was 300 percent and if you've been investing, you've made a fair amount of money. And you know, I've been
advocating for the last year or so that people really should try to de- risk, move toward cash. I was in favor of you know, bonds for quite a while I think with the run up we've had in bonds now. Even they don't
really look very attractive.
[09:35:12] MINERD: So, you know, it's probably not a time to try to preserve capital.
CHATTERLEY: Capital preservation here. The problem is, that's a tough call to make. And it's tough to say that to investors when they look at
something like the S&P 500, and they say, "Wow," but that's up 18 percent, if I would have been sitting on loads of cash, I wouldn't miss lots of
opportunity here.
MINERD: Well, you know, look, I turned bullish in October of 2008. I was too early. The load didn't come until March of 2009. But you know, I tend
to be early. And so you know, I've said many times, Baron von Rothschild, when asked the secret of his great wealth said, "I sold early."
So you know, being early is not such a bad thing. I mean, if you look at where we've come in the market since January of 2017 to where we are today,
it's kind of not very interesting.
And so you would have been better off owning bonds, or things that people would have looked at and thought were unattractive.
But today, I mean -- but if we are in this liquidity driven market, which I think we are from the Central Banks.
CHATTERLEY: There's so many Central Banks now making noises that they'll provide more stimulus.
MINERD: Right. And that's why, you know, if you probably see an opportunity in risk assets, but candidly, I think precious metals,
especially silver, probably for the next year or so is probably a great place to up the allocation for investors.
CHATTERLEY: Interesting. We just need to be a bit more careful about how you're putting money to work here.
MINERD: That's right.
CHATTERLEY: If we go back to conversations that we've had this week, Krishna Memani of Invesco said that the rate cuts that we've got coming
from the Federal Reserve, the global liquidity, the stimulus support that we're talking about could extend the U.S. business cycle for several years.
Can you can you imagine that happening?
MINERD: Well, I don't think so. I mean, we have a -- I go back to the 90s again. In '95, there was a similar sort of rate cut experience like we're
anticipating now. But we were well above full employment. Unemployment was much higher, there was a lot more slack in the economy.
When we get to 1998, we were -- had a situation like today where we're beyond full employment. Today, there are more job openings than there are
workers. So you know, the minute this thing starts to heat up again, and we -- and the Fed steps on the accelerator, if they've got limited runway
before constraints start to show up in the system, and they'll probably get what they wish for, which is more inflation, and so ultimately --
CHATTERLEY: Wage growth perhaps because people are struggling to hire people.
MINERD: Well, that's right, and possibly, if minimum wage increases. And then on top of that, you know, the people who are getting the most wage
growth are the people who have the highest propensity to spend the money. And so I think it will be the very stimulant to the economy.
CHATTERLEY: Wow, the U.S. government might have to try and get more immigrants into the United States to take up all those jobs. Wouldn't that
be an interesting policy?
MINERD: That would seem to be an interesting twist to the story. But you know, I've been an advocate of a more rational immigration policy that we
need. We need foreign workers to come into the country to help the economy grow.
You know, the President's plan to be, you know, very selective. I don't think that's such a bad idea. But at the same time, the place where we
really need workers are people to build houses and to pick the crops. And these are low-skilled jobs that American workers don't really want, and
they don't pay very much.
So of course, the argument is that drags down wage compensation. But if you talk to somebody who is producing food in the Imperial Valley, the last
thing they want to hear about is that they're going to drive the price of food up by increasing wages dramatically.
CHATTERLEY: It's an interesting conundrum. Final question here on the debt ceiling. We have seven legislative days. We're going to talk about
later on in the show, how worried are you once again, particularly in light of the economic concerns that we're heading towards a shutdown? Or do you
think both sides understand here that we don't want to have a repeat of earlier this year?
MINERD: I never want to predict that Washington will choose the path that doesn't have drama attached to it. But at the end of the day, politically,
it's in nobody's interest to have a big fight about this thing.
I think the plan, which is interesting now to talk about a two-year extension, it is clearly an attempt to avoid having to do this in an
election year. So I think Washington, the odds are I think, they'll come up with a deal sooner than later, but never count it out. This is a
cliffhanger of the story.
CHATTERLEY: Never say never. Very quickly, a little birdie told me that somebody may have tapped you to join the Federal Reserve.
MINERD: Well, they haven't asked me to join this week, so --
CHATTERLEY: Not formally.
MINERD: Yes, exactly.
CHATTERLEY: But you'd be up for the request at least?
MINERD: Look, I think it would be a great honor and privilege to serve at the Fed. You know, I would -- I would say it would probably suit me more
when I'm kind of 70 than like when I'm 25, as I am today.
CHATTERLEY: Exactly.
MINERD: So you know --
CHATTERLEY: You have so much time.
[09:40:08] MINERD: So you know, maybe I should wait a bit longer.
CHATTERLEY: But you're in favor of rate cuts. That's probably the biggest advert. Scott Minerd, don't answer that -- of Guggenheim Partners.
All right, I've been naughty now taking too much time. Plenty more on FIRST MOVE to come. Stay with us.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
[09:43:30] NEIL ARMSTRONG, NASA ASTRONAUT: It's one small step for man, but a giant leap for mankind.
(END VIDEO CLIP)
CHATTERLEY: Those are the historic words spoken by Neil Armstrong 50 years ago as he became the first man to walk on the moon. Among the many
technical wonders of Apollo 11's lunar landing, one of them is the crystal clear transmission of those words. That feat is down to the communications
company Poly. It made Neil Armstrong's headset for the extraordinary mission.
And joining me now is the company's CEO, Joe Burton. Joe, fantastic to have you with us.
JOE BURTON, PRESIDENT AND CEO, POLY: Thank you for having me.
CHATTERLEY: I'll never tire of listening to those words. Explain to me how this came about because you actually produce the headset that Neil
Armstrong was wearing there and obviously we heard him speak those words as a result of.
BURTON: Well, you know, it's a really amazing story. Plantronics, now Poly was started in the early 1960s by two airline pilots that wanted to
have a better headset that was lightweight for long haul flights.
As NASA was developing the communication system for the astronauts, they contacted Plantronics, which was what Poly was called at the time and asked
about adapting our MS50 headset for use by the astronauts.
CHATTERLEY: And that's exactly what you did. In fact, you did it in 11 days and you made it fit their sort of Snoopy hats that we see them
wearing, the black and white hats.
BURTON: Absolutely. So literally from the time that NASA contacted Plantronics to the time that we were actually back in Houston with the two
microphones sticking out of their Snoopy hat, was literally 11 days.
[09:45:07] CHATTERLEY: I mean, the idea was brilliant, but the technology has been pretty revolutionary. I mean, versions of this is still being
used today.
BURTON: Indeed literally. The headset was the MS50 headset. One of the questions I actually asked our team the other day is when did we make the
last MS50 headset? And the answer was last Wednesday, it's still in production today.
CHATTERLEY: Wow. So if you get back, it wasn't just the Apollo missions, as pivotal is this was of course, and we remember it, there were a whole
host of missions where this technology was used as well. And it was kind of revolutionary.
There have been issues with communication in prior fights. I mean, the Mercury Redstone 4 mission, I believe, was actually where NASA realized, we
need to do something about this fast because we simply can't communicate properly.
BURTON: Indeed, there was an early mission with Gus Grissom, where they the door blew off the capsule, the capsule almost sunk and he almost
drowned. Thankfully, he didn't.
But they went looking for a lightweight communication system that could fit on the astronauts, contacted a couple of companies, including Poly, and
literally every Gemini mission, every Apollo mission, the Space Lab and beyond, were all done with Poly headsets.
CHATTERLEY: Kind of what you're wearing now. This is like the latest edition as the technology has improved. You're actually wearing one now.
BURTON: You know, in many ways, it is indeed a direct derivative of that. This is actually the Poly -- the Poly Voyager 6200, a lightweight headset,
it hangs around your neck. I can put it in one ear or two ears and so forth, and just have crystal clear communications with my mobile phone, my
desk phone to literally anywhere in the world.
In fact, we like to say we're on the same mission we were on their creating instant, meaningful voice and video communications anywhere in the world or
even to the moon and back.
CHATTERLEY: Absolutely. And why do you think it has taken so long? I mean, it's fascinating? We're talking about the 50-year Anniversary of
Apollo 11's landing. Why do you think it's taken so long for us to sort of recapture the excitement, the investment, the sort of potential of space
travel? Why has it taken so long?
BURTON: Well, I have to say, as a technologist and of course, a space buff, it's deeply frustrating to me as well. It's terrible. You know, I
think that after several successful moon missions in a row that were very, very expensive.
In today's dollars, each mission ran into the hundreds of billions of dollars. There was a real feeling that they had been there and done that.
I'm just delighted that we're back in public and private partnership now and really looking at going back to space, the moon and beyond finally.
CHATTERLEY: So, is the likes of Jeff Bezos, Elon Musk, the guys that are launching the private companies now and working with NASA in many cases
that actually are transforming this technology and the ability that we can to, to sort of go back to space travel of old?
BURTON: They really -- they really are. It's an incredibly exciting time over the next few years for space travel, I think.
CHATTERLEY: Yes, I am always bouncing off of my chair when I start talking about this. Fantastic to have you on and congratulations. That's an
incredibly rich history, I think your company. Joe Burton there.
All right, let's move on. Washington also marketing the anniversary with this amazing tribute to the Apollo 11 mission. The Washington Monument lit
up to look like a rocket blasting into space complete with the Kennedy Center's, countdown clock at the base if you could see it.
Incredible images. For two hours every day, I believe. I was very excited when I saw that. CNN's coverage of the 50th Anniversary of the moon
landing is just beginning on Saturday. Our Dr. Sanjay Gupta host "The First Steps" with Michael Collins, one of the Apollo 11 astronauts. That's
on at 8:30 a.m. in New York, 1:30 p.m. in London right here on CNN. Don't miss that. I can tell you, I will be watching.
All right, out of money and out of time as the clock ticks down towards the summer holidays for U.S. lawmakers. Last minute talks are on to keep
funding the machinery of government. Stay with us. We've got the latest.
(COMMERCIAL BREAK)
[09:51:23] CHATTERLEY: Welcome back to FIRST MOVE. The U.S. government is running out of money and there are just seven legislative days to fix it
before the summer holidays begins.
House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have been trying to find a solution. Lauren Fox is in Washington. Lauren, we should
be clear, it's twin budgets and debt ceiling negotiations, and therein lies the key. What concessions is House Speaker Pelosi asking and is progress
being made?
LAUREN FOX, CNN POLITICS U.S. CONGRESSIONAL REPORTER: Well, the fact that they have talked almost every day for the last week or so is really a
promising sign, another promising sign. They're starting to sort of expand who they're talking to about their conversations.
You know, the fact that this is House speaker Nancy Pelosi and Steve Mnuchin reveals just how high level these talks are at this point. But
yesterday, I saw Nita Lowey who is the Appropriations Chairwoman going into Pelosi's office. I'm told that there are conversations happening with top
leaders.
They're trying to make sure that any agreement that Pelosi and Mnuchin would come to could be agreed upon by of course, the President of the
United States and Senate, Republicans and Democrats. So that's something to be watching, Julia, that's really positive
But I'm told that one of the key sticking points is over how to pay for the VA Mission Act, which passed in 2018. Essentially, it gives more money for
Veterans Healthcare. The question, of course, how do you pay for that? Which bucket of money do you put it in? Does it come out of domestic
spending or defense spending? And that's been a key sticking point. They're still trying to figure that out. It's unclear exactly whether or
not that's been figured out at this point.
But that's just one of the key sticking points, and as you can imagine, when you're coming up with a massive budget, and you're trying to come up
with these top line numbers, there are more things beneath the surface that can come up and become distraction.
So nothing's agreed to until this is agreed to wholly, and I think that that's what all the negotiators are keeping their eye on at this point.
But obviously only a few legislative days before this congressional recess in August.
Whether or not this is all going to come together in time, given how much time it takes to actually put this budget deal together is still pretty
unclear -- Julia.
CHATTERLEY: Do you think, Lauren, that lessons were learned earlier this year with a partial government shutdown? It hurt, in terms of economics,
it hurt in terms of politics for both the Democrats and the Republicans here. Do you think calm heads prevail here when we do reach a deal?
FOX: It's always hard to predict, you know what the sticking points are going to be whether it's going to be Republicans or Democrats. If you
remember, just a couple of weeks ago, liberals in the Democratic Party were torn with their moderate colleagues over that border of supplemental
emergency deal that they had to come up with.
So I think that another key sticking point that we're going to have to be looking at is whether any deal Nancy Pelosi comes up with, with the
administration can actually pass muster for some of the liberals in her caucus.
You know, Democrats have the majority in the House, but they don't have that many votes. So is Nancy Pelosi going to be able to get both the
liberals and the moderates in her caucus on board is still a big question.
And that's before you get to whether or not Pelosi can agree with the Trump administration on an overall budget agreement -- Julia.
CHATTERLEY: Yes, Lauren Fox over in D.C. there, thank you so much for that update.
All right, so let me give you a look now at today's "Boardroom Brief." Amazon made more sales during its Prime Day event than last year's Black
Friday and Cyber Monday combined. It sold a total of 175 million products over the two-day sale this week. The event with open to Prime members in
18 different countries.
[09:55:03] CHATTERLEY: Step aside Bill Gates, the CEO of luxury goods maker, LVMH, Bernard Arnault is now the world's second richest person. He
overtook Bill Gates on Tuesday with a net worth of around $108 billion. That's according to Bloomberg's Billionaires Index.
Amazon's Jeff Bezos, of course still holds the number one spot. Wow. Imagine how much trouble you could get into with $180 billion. And you
could do a lot of good as well, which of course is what Bill Gates has done to the tune of $35 billion, I believe.
All right, let me give you a look at what we're seeing for the markets this morning of course. Still trading very close to record highs. Keep an eye
on what we're seeing right now. Pretty much unchanged summer markets. I think that's the broader point here, but plenty of earnings to come this
week, and next, of course, to keep an eye on for now.
All right, that just about wraps up the show. You can also listen to our podcast if you go to cnn.com/podcast. If you can't wait until tomorrow, of
course, you can listen to the show again, but for now, I'm Julia Chatterley, you've been watching FIRST MOVE, time to go make yours.
(COMMERCIAL BREAK)
[10:00:00]
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