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First Move with Julia Chatterley
Beijing Weighs In On The Recent Protests, But Says It's Hong Kong's Problem To Solve; Pfizer Selling Off Its Generic Drugs Unit Tying Up With Epipen Maker, Mylan; A 16-Year-Old American Boy Wins The Fortnite World Cup And A $3 Million Prize. Aired 9-10a ET
Aired July 29, 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 needs to know. China condemns. Beijing weighs in on the recent protests, but says it's Hong Kong's problem to solve. Very generic: Pfizer
selling off its generic drugs unit tying up with Epipen maker, Mylan. And a real game changer, a 16-year-old American boy wins the Fortnite World Cup
and a $3 million prize. It's Monday. Let's make a move.
Welcome once again to Monday's FIRST MOVE. I hope you all had a really restful weekend because I tell you, this day could really be the calm
before the storm. The calm part of that is what we're seeing right now for U.S. stock futures.
Let me give you a look at what we're seeing that of course, after that record breaking run last week. We're at record highs for the NASDAQ and
for the S&P 500. The storm part and the fate of this recent rally of course hangs on, well, exactly that, FATE.
Let me explain F for this week's Fed meeting, A for Apple's earnings among many this week, T for the trade talks starting tomorrow, and E, the
economic report front and center. Of course, it's U.S. jobs week and payrolls numbers on Friday.
Of all these fateful events though, the Federal Reserve is front and center. What do we get in terms of rate cuts? But also, what do they say
about the guidance here in future rate cuts because that's going to be the driver, I think. A quarter -- I've got my teeth in -- point cut is baked
in here. But there's still some debate over whether we see or see more, a half a percentage point cut, how much insurance is needed right now? And
do those rate cuts make it less urgent for the U.S. and China to strike a long-term trade deal?
We've got a guest coming up who says don't overreact to the trade war theater. Well, the latest act, Chinese state media saying over the weekend
that Beijing has purchased millions of tons of U.S. soybean since June's trade truce. It is Beijing call it a goodwill step. We will see.
Very little goodwill right now, though, in Hong Kong where stocks fell some one percent overnight following another weekend of protests and warnings
that the city could face a serious longer term economic hit. That is where we're going to kick off the drivers. So, let's get to it.
That warning coming from China, in fact, Beijing calling the protests horrendous incidents that have caused serious damage to the quote "rule of
law." Sherisse Pham is on this story.
An unprecedented response in the fact that China is even weighing at this stage, but they've backed Carrie Lam, the Chief Executive and they back the
police as well here. Talk us through it.
SHERISSE PHAM, CNN BUSINESS REPORTER: Yes, this is the first time that we've heard from Beijing, China's top Hong Kong official policy official
breaking that silence today saying that Hong Kong protesters have committed, I want to get this right, "evil and criminal acts" and as you
said seriously damaged the city's economy, its public order and the city's international image.
And of course, Julia, Hong Kong's image is as a safe and stable place to conduct business and Hong Kong's top financial chief saying over the
weekend, that that has seriously been hurt that weeks -- eight straight weekends of protests -- are starting to hurt local shops that are reporting
that they are seeing a significant drop in business.
And you saw that play out well a little bit in the in the markets this morning with the Hang Seng dropping, I think almost two percent, 1.6
percent at one point. They pared back some of those losses, closed down one percent. And of course also, important to note that investors are
rattled by other things, including a slowing economy and the U.S.-China trade talks.
And I do want to point out, too, as well, we have been seeing these images of violent clashes that have happened recently, but I have covered the
protests. I have witnessed marches weekend after weekend here in Hong Kong and they have largely been peaceful.
But of course the big question now, Julia is how much will two months of protests weigh on Hong Kong's economy? We will have a clear answer on
Wednesday when GDP numbers come out.
CHATTERLEY: Yes, you make a great point. Actually, you make a few of them. One in that the pictures look very dramatic, but by and large it is
while sizable, a peaceful protest here, it is just a small element that are creating all of the drama and the violence here.
But you know for international investors watching this, part of the reason why Hong Kong is so strong as this sort of conduit into China here is
because of the rule of law as Beijing mentioned here.
[09:05:07] CHATTERLEY: I mean, how nervous is this making international investors, many American companies? You have thousands of workers there.
PHAM: It is starting to shake some confidence in the city. The American Chamber of Commerce came out with a statement today, calling on the
government for some firm leadership to restore business confidence.
I know you guys are going to talk to the President, Tara Joseph a little bit later in the show, but businesses are reporting that they are seeing
immediate drops in revenue. They're seeing some disruptions to the supply chain, and they are starting to shelve investment plans. So yes, it is
having an impact.
But I've also talked to analysts who have said, "Look, one month, two months of protests that happened really on one or two days a week. It's
not going to change the economic trajectory of this city." But you are absolutely right, and as business groups have been saying, it is absolutely
shaking investor confidence.
CHATTERLEY: Yes, if it weren't for the trade war, of course, because that's another kicker here. Sherisse Pham, thank you so much for joining
us on that. All right, now, we're going to head over to a mega merger between two pharma giants.
Pfizer tying up with Mylan, the Epipen maker as I mentioned. Mylan shares up a whopping 21 percent right now premarket. Matt Egan is on this story.
So, just so that I'm getting this straight, they're combining Pfizer -- their less lucrative generics drug unit here -- with Mylan and Mylan of
course, they got at a really low price here. It's lost what? Around three quarters of its value over the last four years. Cheap, perhaps.
MATT EGAN, CNN BUSINESS LEAD WRITER: Perhaps, Julia, but you have Viagra, Lipitor and Epipen -- some of the best known treatments in the world
joining Forces all under one roof in what will be a global generics powerhouse.
But as you know, this is not really a deal being done from a place of strength. For Pfizer, it's a way to retreat from what has been a slow
growth, low margin, off patent drug business. Pfizer really wants to focus on trying to hit the next home run by finding blockbuster drug treatments.
Now, for Mylan, as you're alluding to, it's a way to get out of what has really been a very difficult situation. The stock is down coming into
today, 76 percent from its 2015 high. That's because of all this pressure on generic drugs. That's also because of the backlash against the
notorious Epipen price hikes.
Now as part of this deal, Mylan announced that CEO Heather Bresch, really is one of the most controversial figures in healthcare is retiring. That's
after nearly eight years at the helm.
So, let's go through some of the details of this deal. The new company will be renamed. They haven't announced what the name will be yet, it's
going to be based in the United States and what's going to happen here is Pfizer is going to spin off its China based Upjohn division, and it will
simultaneously combined an all-stock deal with Mylan.
And so it's going to create a very large company, it's going to be in 165 markets up to $20 billion in revenue. And the two companies say that by
2023, they will generate about a billion dollars in annual synergies.
But Julia, at first glance, you know, it looks like Wall Street doesn't really think that this has been a great deal for Pfizer, as we noticed
Pfizer stocks moving lower premarket, Mylan is up. And so it's interesting to sort of see the first reaction from Wall Street here.
CHATTERLEY: Yes, interesting. I mean, when you're seeing approach, you don't necessarily tend to see a positive reaction in the acquirer here.
But to your point, exactly and to my raised eyebrows when I asked cheap or not. But what we are seeing here is that broader consolidation, it is
streamlining of many of these big pharmaceutical companies here. They all seem to want to be, at least in the top three of whatever sector or
subsector they're operating in.
It kind of makes sense because this is a severely competitive area, particularly when you've got a sort of pipeline and popular drugs like
Viagra rolling off and becoming generic or face the competition from generics.
EGAN: I think that's right. I mean, it just costs so much money for these companies to develop the next treatment. And then after a certain period
of time, they're going to lose the exclusivity to those treatments.
So there is a lot of pressure on the drug makers. We're seeing so much pressure on generic drugs, in particular, but as you've mentioned, we've
seen a number of very big deals, including with Pfizer.
You know, Pfizer, last year, it announced plans to spin off its Consumer Health Division and other low-growth business with a GlaxoSmithKline. It
also announced plans last month to buy a cancer drug treatment company as well.
And so clearly, Pfizer has focused on this, this pivot to innovation and to growth and in order to finance that, they are spinning off some of their
slower growing businesses -- Julia.
[09:10:08] CHATTERLEY: Yes, absolutely, Matt Egan. Great context. Thank you so much for that. All right, let's move on to our next driver in
delivery app, takeaway.com sinking its teeth into rival Just East in a $6 billion deal. Anna Stewart has been that looking at all the details for
us. Anna, set to create one of the world's biggest delivery -- online delivery companies here and taking the fight perhaps to Uber Eats
particularly in Europe.
ANNA STEWART, CNN REPORTER: Yes, we're seeing so much consolidation in this space. And if you look at some of the markets, the U.S., the U.K.,
they are already mature. So growing is really hard and we are just seeing them gobbling each other up at a pretty fast rate.
We actually already had Takeaway acquiring British deliverer, Hero, last year. Now of course eating up Just Eat. If you look at the share price,
investors very pleased with this. I think Just Eat was up well over 20 percent, nearly 30 percent at one stage, and activist shareholder, Cat
Rock, they own around two and a half percent of Just Eat.
They are absolutely thrilled about this and have been campaigning for tie up like this for ages. But it just so happens, Julia, they also have four
percent stake in Takeaway.
CHATTERLEY: Aha. I see. So, they've been pushing to something and they benefit on both sides. We like that, don't we. That's called strategic
investing. What about the competition here, though? Because, I mean, recently, we saw Amazon backing Deliveroo. I mentioned Uber Eats here,
which is a sort of monster company, particularly with financial resources behind it.
What's the comparison here in terms of scale, number of transactions and sort of how big of a behemoth are we seeing created here?
STEWART: Well, it's interesting, like many of the sectors we talk about as these Big Tech giants entering the space, as you said, Amazon backing
Deliveroo. You always have Softbank there backing DoorDash, Uber has Uber Eats.
And while Just Eat is a massive dominant player in the U.K., Takeaways a dominant player in Germany, I think you can expect to see lots more
consolidation from those big tech giants that can afford to chuck more money into it. It's going to continue to be a threat.
And some analysts today say they wouldn't be surprised if we see a counter bid for Just Eat. Perhaps that's why share price is up so high today --
Julia.
CHATTERLEY: Yes, watch this space. Anna Stewart, 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. A six-year-old boy is among three people who was shot and killed by a gunman at a Food Festival in the
U.S. State of California on Sunday. A further 12 people were hurt.
The gunman was shot dead by police shortly after the suspect began firing. Sara Sidner is in Gilroy, California for us. What more do we know, Sara,
about who carried out this attack.
SARA SIDNER, CNN CORRESPONDENT: Very little at this hour. Police though have said that they have shot and killed the suspect that they engaged
within one minute of this shooting happening.
Within that one minute, however, three people had been killed, including a six-year-old boy named Steven Romero. We now know that 12 people were
injured. Police had initially counted 11 with gunshot wounds, the 12th person ended up taking themselves to the hospital. So, now that number has
gone up by one in the last couple of hours.
We should mention that this Festival is something that is well-loved here in Northern California. Lots of folks love coming to this, a hundred
thousand people, end up usually showing up at the Gilroy Garlic Festival. And you can certainly not mistake where you are because you can smell the
garlic as you're coming into town, a place that processes and grows garlic and is famous for its garlic.
And people just came here on a Sunday to enjoy themselves, to have a good time. Things were starting to wrap up. And then all of a sudden the
sounds of gunshots. Something that has happened too many times in this country.
And we understand from police that there is a second person they're seeking. They're not sure what that person's role might be. But they are
saying that there is a second suspect that they would like to be able to contact at this hour.
They also say that the shooter ended up getting in not through the normal ways of walking through security, but cutting through a fence in order to
get in and engage all of those innocent people.
At this hour, there are people still in the hospital trying to recover from gunshot wounds, including that six-year-old's mother who has been injured,
shot at least in the hand and stomach as we understand it.
But I want to let you hear what witnesses said as this was all happening last night.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: We saw him shooting and running towards our tent.
UNIDENTIFIED FEMALE: Yes, we saw it. We heard the pop. That's when we walked out the bathroom. We heard the pop. I didn't think nothing of it.
We both looked the same -- at the same time and saw him. He was putting the thing in, and then also he just started walking towards our tent and
just started shooting like this.
UNIDENTIFIED FEMALE: And so then we ran the other way and everybody else was running. And then she remembered her granddaughter and people kept
telling me, "Run. Get down." And so then she was went back to the tent and I was on the other side.
UNIDENTIFIED FEMALE: It was pandemonium. It was just chaos, but it was like everything happened so fast. And then it was over with.
[09:15:07] UNIDENTIFIED FEMALE: We hugged each other and said, you know, "Thank God, it could have been us." You know, just two minutes, but --
UNIDENTIFIED FEMALE: It's just much. It's too much to handle. Too much to even do all this stuff. I just can't comprehend --
UNIDENTIFIED FEMALE: And we don't know how her granddaughter is going to process it. She had, you know, stuff in her hair.
UNIDENTIFIED FEMALE: She saw the whole thing. She saw --
QUESTION: She is how old?
UNIDENTIFIED FEMALE: Ten.
UNIDENTIFIED FEMALE: Ten. She saw the whole thing.
QUESTION: Ten years old.
UNIDENTIFIED MALE: She saved a three-year-old. She grabbed him and hid him.
UNIDENTIFIED FEMALE: Just 10 years old, yes.
(END VIDEO CLIP)
SIDNER: This is just the latest place in America where a mass shooting has happened, this time at the Gilroy Garlic Festival here in Northern
California -- Julia.
CHATTERLEY: Sara Sidner there in Gilroy, California. Thank you so much for that update, and of course our hearts and prayers with all those
impacted.
Let's move on. A funeral service has been held for an Italian police officer, who authorities allege was stabbed to death by two American
tourists. Mario Cerciello Rega was laid to rest in the same Church he was married in less than two months ago.
Police say he was stabbed 11 times while investigating a drug deal that had gone wrong. Two American teenagers have been arrested and are being held
in Rome. A photograph appearing to show one of the suspects blindfolded at a police station has been leaked to Italian media. Officers say they are
investigating.
Donald Trump has nominated a staunch loyalist with less than five years' experience in national politics to be his next Director of National
Intelligence.
John Ratcliffe is seeing here on the right. He would replace Dan Coats as American spy chief after Coats stepped down -- steps down next month.
The outgoing director said he wasn't resigning over one particular incident; however, he has always had a tense relationship with the
President exemplified most famously by the moment he learned last year that the Russian President would be visiting Washington.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: I do want to say we have some breaking news. The White House has announced on Twitter that Vladimir Putin is coming to the
White House in the fall.
DAN COATS, OUTGOING DIRECTOR OF NATIONAL INTELLIGENCE: Say that again?
(Laughter)
UNIDENTIFIED FEMALE: Vladimir Putin coming to --
COATS: Yes, I heard you. I heard you. Okay.
(Laughter)
COATS: That's going to be special.
(END VIDEO CLIP)
CHATTERLEY: Special. All right, we're going to take a quick break here on FIRST MOVE, but coming up, there's new items on the vegan menu. We've got
a company looking to bait investors with plant-based seafood and there's nothing fishy about it.
And the kids have arrived at the Fortnite World Cup. How this virtual game has made some teenagers into millionaires. That's up next. Stay with
FIRST MOVE, you're with CNN.
(COMMERCIAL BREAK)
[09:20:58] CHATTERLEY: Welcome back to FIRST MOVE live from the floor of the New York Stock Exchange this Monday. Right now, futures are relatively
unchanged. We'll call it a tough time to be optimistic. The question is, will the S&P and the NASDAQ move further into record territory this week?
We've got a hugely busy week of earnings season to come. Apple and some of the major oil names like Exxon sector report, obviously the Federal Reserve
as we've mentioned. In the U.K. as well, let's take a look at what's going on over there. We've got the FTSE up almost two percent, helped by a 15
percent jump in shares of the London Stock Exchange Group. It's in talks to buy a financial data firm Refinitiv. The deal is activated at around
$27 billion. Investors clearly are liking that, which is very interesting.
Also supporting the market of course, a fall in pound versus the U.S. dollar. Down some one percent in light of, I think, Boris Johnson, the new
Prime Minister's tone with Europe here and raised fears of a hard Brexit scenario come October 31st.
Also raised tensions of course over in Hong Kong as we've already discussed. Mass protests and escalating violence over the last few months
taking a toll on the city's economy. The Hang Seng suffered its worst drop in a week on Monday with property developers and retailers among the
hardest hit.
The American Chamber of Commerce, AMCHAM in Hong Kong is now calling for a quote, "firm government leadership response to restore sagging business
confidence."
And joining us now is the Tara Joseph, President of AMCHAM. Tara, fantastic to have you on the show. Well, talk about what response you want
to see from the Hong Kong authorities. But first, I know you've been surveying businesses that you represent, what are they saying to you about
the impact of these protests?
TARA JOSEPH, PRESIDENT, AMERICAN CHAMBER OF COMMERCE, HONG KONG: Well, as the protests go on and on, Julia, there is sort of a pessimism or a worry
developing, that there's no end in sight. And of course, that makes people a little nervous.
People are used to a Hong Kong that is so well-connected to the world, and generally, a risk free place to do business.
What our members would really like to see is a sense of what can be done by the Hong Kong government to restore confidence and some real communication
as to what the end game could actually be here.
CHATTERLEY: Be specific, because in the short term, what do you want to see? Is it a case of a removal? A complete removal of the Extradition
Bill so that the belief is that it won't come back? Because I know people fear that at some point that risk is going to return.
An investigation into how the police responded to these protests. But do you also want to see Carrie Lam step down here because as the architect,
the Chief Executive of presenting this Bill, unfortunately, the protestors look at her as part of the problem here now, not part of the solution?
JOSEPH: Well, you mentioned two key things that our members are telling us. The first is, while we were happy to see the Extradition Bill shelved.
There is a feeling amongst our membership that if the word "withdraw" were used, or if it were withdrawn, that would help to soothe the protesters and
help to make things better.
The other area there is some sort of inquiry or a research into what's been behind the protest that is seen as fair. Hong Kong has rule of law, some
sort of fair look into this that doesn't see one sided is also seen as really important.
I don't want to get into who should be running the government. But we would like to see some statements from the government, some sense of
leadership at this point. It's been very quiet as of late.
CHATTERLEY: If we just look at the American businesses, though, that are operating. I mean, you represent what, 1,400 American businesses; a
hundred thousand employees working in the area. Are they saying to you, "Look, there are other options, we could go to Singapore, for example.
This is not how we intend to operate going forward if we can't be convinced that the rule of law and some of the benefits of being in Hong Kong with
the proximity to China will be adhered to." Are they talking about looking at other options here?
[09:25:06] JOSEPH: Well, certainly there are backup plans being made as people start to survey what could happen in the long term.
But to be fair, Hong Kong still is a great environment to operate in. People don't want to leave here unless they have to, the gateway city to
China, connected to Southeast Asia, great connections to the United States and to Europe.
But the other aspect of it is there are cities across Asia that are becoming increasingly competitive. Singapore is an obvious one where
multinationals increasingly feel comfortable.
There are other places, Bangkok or Kuala Lumpur that are trying to bring foreign investors in. So, the more Hong Kong loses a sense of comfort, the
more other cities will try to compete for that business.
CHATTERLEY: Is the worst thing that could happen here that the People's Liberation Army steps in and takes action here. Is that the worst thing
that could happen here? And do you think both China and the Hong Kong authorities recognize that that would be a huge problem?
JOSEPH: I think it's fair to say that that is very much a worst case scenario. And earlier today, when we heard statements from the central
government in China, they seem to be putting the effort back to the Hong Kong government overall, even though they were condemning the protest.
And I think that's important to put it back to Hong Kong to not have Mainland China and the U.S. gets hugely involved in this. So, there's not
a tit-for-tat and Hong Kong doesn't get right in the middle.
CHATTERLEY: Yes, that independence needs to be preserved. Tara Joseph fantastic to have you on the show with us, the president of AMCHAM there.
JOSEPH: Thanks, Julia.
CHATTERLEY: All right, stay with us. The market open his next, and there's plenty more to come.
(COMMERCIAL BREAK)
[09:30:00] CHATTERLEY: Lots of fist pumping and smiles there. Welcome back to FIRST MOVE live from the New York Stock Exchange and the opening
bell this morning. We've had a cautious start for U.S. stock markets this morning ahead of what's going to be an incredibly busy week for earnings
and economic data to more than 150 companies in the S&P 500 reporting this week.
And don't forget the big Fed interest rate decision on Wednesday, too. Former Fed Chair, Janet Yellen said over the weekend that she supports a
quarter point cut. However, she doesn't see this as the start of a major Fed cutting cycle. What we did see though, is the S&P and the NASDAQ
closing out last week at record highs.
The Dow is around half a percent away from records mostly because of the weakness in Boeing. We discussed this last week. Its stock tumbling some
eight and a half percent after reporting an almost $3 billion Q2 loss due to the 737 MAX crisis.
All right, let's talk more broadly about what we're seeing and what we can expect this week. Robert Shiller is Professor of Economics at Yale. He
won the Nobel Prize for Economics back in 2013, and he joins us now.
Professor Shiller, fantastic to have you on the show. I want to talk about the Federal Reserve first, there's debate over whether we see a quarter
point, a half a point cut. There are others that look at the markets that look at conditions and say the Fed probably shouldn't be cutting at all.
Where do you stand?
ROBERT SHILLER, PROFESSOR OF ECONOMICS, YALE: This is a close call, I'd have to say. The unemployment rate is near record lows. That would be a
time for raising rates to cool the economy. On the other hand, the inflation rate is a little bit below target. So, if you're trying to hit
the target, you would cut rates.
I think it's a close call. I would have to study carefully if I were on the FOMC at this point in time.
CHATTERLEY: Back in March, you were saying that there's a 50 percent probability of a recession in the next 18 months. Do you think that we can
head that off and extend the business cycle here, even the bull market perhaps in equities, too, by preemptively cutting rates here, insurance
rate cuts as the Federal Reserve has referred to them?
SHILLER: Right, right. Yes, I think that we just passed the milestone in June. We passed -- we are now in record territory for the longest
expansion in U.S. history since the NBER started calculating these in the 1850s -- referring to the 1850.
So, it looks like a recession might be overdue. But you might say that this time is different. I don't know. It doesn't seem like there's strong
recessionary expectations, which might be a self-fulfilling prophecy. So, maybe we'll go for a while longer before we finally slip into one.
CHATTERLEY: You know, it is interesting, the Fed keeps talking about the international economy and the fact that for most people here, it's less
about trying to stimulate the U.S. economy versus prepare and mitigate the risks elsewhere in the world.
You said investors shouldn't overreact to the trade war theater. Do you think the Federal Reserve is guilty perhaps of overreacting to the trade
war theater here, too?
SHILLER: Yes. Well, that's another important -- it's good that you use the word "theater," because it is a show. It's an emotion laden show of
anger being brought up. And I think that anger does have a risk to the markets into the economy, because people might pull back on doing
eventually some things.
They might feel anxious about the outlook, and that would slow down business planning and business investments. We've already seen that in the
latest data. It's not that -- I think markets thrive on certainty, not uncertainty.
CHATTERLEY: How important is the ongoing rally in the market though for confidence? To your point, you know, you're a specialist in in behavioral
economics. Is the biggest risk perhaps to the bull market here fear of the end of the bull market rather than anything else?
So again, it's right to perhaps cut rates here and mitigate the drama and the back and forth here over trade, if nothing else?
SHILLER: You said it exactly right. The question of the drama. So what is the more important thing for the Fed to do to cool this drama down? So,
I thought that pushing interest rates back up to a normal level would kind of reassure people that normalcy, you might call it, is here.
[09:35:03] SHILLER: On the other hand, maybe cutting rates helps assuage our growing fears. It's a difficult call, I have to say. I don't know how
people can be sure about how they will affect the drama of the trade war, as you describe it.
CHATTERLEY: Do you worry about the fact that the United States needs to leave some kind of cushion to be able to support the economy in a more
material slowdown in the past? Or is the fact that actually, unlike many other Central Banks, the Federal Reserve has managed to raise rates to a
far larger extent and therefore has bought itself the ability to provide insurance rate cuts at this moment?
SHILLER: Right. Yes, this is more of a problem in Europe ECB problem, where they've already pursued quantitative easing at a high level, and
their interest -- their basic interest rate is at a negative territory.
So, they've kind of run out of ammunition. We do have more ammunition in the United States with the Federal fund rate just under two and a half
percent. We have a lot of potential, a lot more potential for cutting.
But even so, it's not as big as it was in past years when the Federal funds rate was in double digits.
CHATTERLEY: Where did you think this ends? We're going to have the Bank of Japan this week, perhaps lowering their inflation target, because
despite the fact that they've lowered rates and bought a huge chunk of equities and bonds in Japan, they've not managed to perk inflation up. The
United States is struggling. To your point, the European Central Bank is struggling. What's the end game here?
SHILLER: Well, I think that the invention of inflation targeting, which goes back to the Central Bank of New Zealand at the beginning of the
century is actually an important invention. And in the long run, it will serve to stabilize the rate of inflation at a good level.
We used to target the exchange rate. It's better to target the inflation rate, because that is more on the minds of most people. And I think that
ultimately, we're pretty much a success with that.
And so inflationary expectations aren't such a drama, as they were in past years. So, I expect that this will die. Apparently, the Fed then is right
now, making this move in good part because of the Federal funds rate drifting down, it's not dramatically below target. It's about one and a
half percent.
But that's enough, I guess, to make a little adjustment to fine tune this is interest rate, and it keeps people from getting involved in the drama,
of worrying about inflation if they see it. You know, what's the difference between two percent and one and one and a half percent? It's
not exciting news. That's where we want to keep it, not exciting news.
CHATTERLEY: Yes, de-drama, if we could de-drama the global economy; that will be great. Professor Shiller, thank you so much for joining us.
Professor Robert Shiller there, Professor of Economics at Yale. Great to have you on the show.
All right, the pharmaceutical industry topping our global movers today. Let's take a look at those. Shares of Mylan Labs, rallying some 18 percent
right now, just under, as you can see that following the announcement of a major deal with Pfizer. Pfizer separating off its patent drug unit and
will merge that then with Mylan, which is already a leading seller of generic medications.
Mylan CEO will step down as part of the all-stock deal to be replaced by Pfizer's Unit President. The combined company expected to generate annual
revenue of around $20 billion. Pfizer shares, as you can see, it's slightly lower here by some one percent.
Separately today, it announced, too, its second quarter earnings and it came in above expectations, but revenues missed estimates. And in the
meantime, shares of cancer research firm Genomic Health are higher, a cancer diagnostics firm. Exact Sciences is buying the company for some
$2.8 billion and shares of the French drug-maker, Sanofi, are higher. It posted strong Q2 results today and raised its 2018 earnings guidance.
Wow. Lots going on in that space. All right. We're going to take a quick break. But up next on FIRST MOVE. You've heard of meatless meat, but what
about fishless fish? Are you hooked? Well, we've got an investor who is coming up, the man making waves in the plant-based food industry. Stay
with us.
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[09:42:47] CHATTERLEY: Welcome back to FIRST MOVE. Beyond Meat is releasing its second quarter earnings after the close today. That's after
an astonishing early run since its IPO in May. The California based company set its IPO price at $25.00. It opened at $46.00, if you remember
and since then, it's been on one meaty climb, currently trading at around $230.00. That is pretty bonkers.
Joining me now in the "Chatt Room" is Chris Kerr. He is the Investment Officer at New Crop Capital, and also an early investor in plant-based food
companies. Chris, great to have you with us.
CHRIS KERR, CHIEF INVESTMENT OFFICER, NEW CROP CAPITAL: Thanks for having me.
CHATTERLEY: An early investor in Beyond Meat, too. That's a whopping rise. Congratulations.
KERR: Very happy with the outcome, I have to say.
CHATTERLEY: Sure, you are.
KERR: There's no complaints there. All I wanted was a really good tasting burger, and what I got was a nice return on investment. It's very
pleasant.
CHATTERLEY: Does it worry you that sort of shift up in price? I mean, this is a small market getting access to these kind of companies that are
doing this right now is tough. Do you worry about sort of the meteoric rise? Oh, just saw what I did there.
KERR: Not so much. I mean, you know, the fact is, there's a lot of different ways of entering into this market. There's a lot more innovation
that still has to come. And we're just talking about burger right now. I mean, there's a lot of different ways that this commodity product has
turned into a finish good for consumers.
CHATTERLEY: Okay, so we'll take a step back, you're a vegan. You were looking for decent food options and you were struggling, you were like,
"You know what, I'm going to invest in companies and help them commercialize on a small scale what they're offering."
KERR: Yes, I mean, on my way down here, my wife, Kirsten and I, we were walking past and Dunkin Donuts and a Beyond Meat Sausage came out. My head
would have exploded in 2002 if that happened. I would have eaten my sausage sandwich and gone about my business, but instead then that didn't
really exist.
The number one ingredient back in those days was disappointment in our food, and so what we wanted to do was say, "Look, if we can bring
innovation into this space, take a base product and apply it to a demographic, that changes all over the globe." You know, you think about
the way that meat is put together, it's maybe globally used, but it's locally accepted.
CHATTERLEY: Yes.
KERR: And so what we wanted was a based product that could be applied to different demographics and that's what Beyond Meat has been doing. It's
been doing -- Good Catch and the other products in our portfolio.
CHATTERLEY: Now, Good Catch is interesting because this is plant based fish alternatives. Like I feel with meat, it's one thing, but with fish,
it's something different.
[09:45:08] KERR: We eat between 200 to 300 different types of sea creatures. We eat about 30 different types of land animals. Right? When
you look at the culinary arts, first of all, we always start with taste.
Like I said, in 2002, I was basically eating cardboard from burgers and unmeltable cheese, if it even existed, all I wanted was a grilled cheese
sandwich that melted.
Those days are kind of gone now. So, we look at the culinary innovation and inside seafood, if you have 200 to 300 different types of applications,
think of all the culinary innovation that can happen there. Take that and then apply it to the localized innovation, which is dishes, just
preparation, which is form. This is really a global opportunity.
CHATTERLEY: It was Silicon Valley that was a real -- sort of the game changer here, the innovator, because I feel like the interest, the
innovation, it's all kicked off over the last four or five years. And now we're all talking about the alternatives out there.
And it's not just for people who are vegans, it's for people who want to be healthier or worried about overfishing in oceans. I mean, there's many
reasons to look at alternatives here.
KERR: Yes, so it's a mega trend because there's lots of different levers that are being pulled. So, it's not just a hungry vegan like me who's an
animal guy. This could be, you know, someone who is lactose intolerant, or allergen or religion or diet or likes climate, you know, those are lots of
different levers that are pulling that that's why it's a mega trend and not a fad.
CHATTERLEY: How big is this market now? Because I've seen you use a great example of plant-based milk, and that was one percent of the overall market
ten years ago. Now, it's 10 percent of the market and they're everywhere.
If we go back to meat specifically, or plant-based meats, how big is the industry now and how big do you see it growing perhaps over that time
horizon?
KERR: Well, the industry is small, it's a couple of billion dollars. The opportunity is over a trillion dollars. You're talking about disrupting
the cab business with Uber, that's maybe $35 billion to $40 billion industry. We're talking about a trillion dollars that's global.
That's how I look at the market, because that's the way we're heading. Right now, you look at seafood as an example. Large fish still have to be
hunted. It's one of the few foods that we actually still have to hunt. We go to very long distances to get there.
The market is really big when you look at all the different applications that come with it.
CHATTERLEY: I saw an interesting survey, Americans will need to cut their average consumption of beef by around 40 percent, Europeans by 22 percent
for the world to continue to feed the 10 billion people expected to live on the planet by 2050.
So, you can list a whole number of reasons why you have to do this, but that's kind of a necessity, quite frankly.
KERR: Time is not on our side. We have a lot of things that are in crisis mode. You know, you look at collapsing seafood stocks. You've got land
aggregation, climate change, healthcare, diabetes, you're looking at entire nations.
You look at the correlation between diabetes and the rise of pork in China, it's ridiculously close. Those types of things should be concerning to
most consumers. You also have a more educated consumer now. Right? They're catching on to the options, but at the end of the day, we make
decisions around food based on price, awareness, convenience, and taste. Taste is the driver. Everything else falls in after that.
So, we have to solve all four of those things. If you look at what Beyond Meat is doing, we look at what Good Catch is doing, a few others,
Impossible -- solving all four of those things, but they have -- it takes time to do it.
And it's not going to be as fast as milk, it will take a little bit longer because we're not tapping into an infrastructure that milk was able to do.
We're dealing with an entirely new supply chain.
CHATTERLEY: I have to get you back to talk more about this because I could keep you talking for half an hour, but very quickly because it is a
question that I get, yes or no? Is a meat, a plant-based alternative healthier than a meat version?
KERR: Well, I think it is. It depends on how you eat. Now, I could eat nothing but Skittles and Mountain Dew every day and still be a vegan. That
doesn't solve the problem.
CHATTERLEY: Burger to burger.
KERR: That's right. But you can eat everything from a very, very simple quinoa burger all the way up to the most complex, you know, Impossible
Beyond burger. There's a whole spectrum in there. Consumers get to decide that. We do that today.
CHATTERLEY: Yes. Chris, we will get you back.
KERR: Thank you very much for having me.
CHATTERLEY: Chris Kerr, the Chief Investment Officer at New Crop Capital. Great conversation.
All right, still ahead, after hundreds of hours of training, seeing four million other players, and quite a few arguments with his mother, we will
have the details of the latest eSports star millionaire. That's coming up.
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CHATTERLEY: And that was the moment a 16-year-old gamer became a multimillionaire, in case you missed it. The Tour de France wasn't the
only major international sporting event this weekend. Video Game, Fortnite held its first ever World Cup right here in New York in front of a packed
Arthur Ashe Stadium, and an online audience of more than a million fans.
American teenager, Kyle Giersdorf beat 100 other players to take home a very cool $3 million. Incidentally, and for competitive purposes, the
winner of the Tour de France, Egan Bernal took home $550,000.00. Some difference.
Clare Sebastian is here with more. Clare, you know, when I saw this story, I can hear my mother saying to my brother, "You will never make your
millions playing computer games." Oh, how wrong she could have been.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes --
CHATTERLEY: Talk us through.
SEBASTIAN: I think we're all in the wrong job, Julia. You can take $3 million by just basically sitting in a chair and playing a video game.
But the really shocking thing about this is, is the staggering size of this event itself. $30 million was the total size of the prize pool. You
actually got $50,000.00 just for qualifying for the finals. Every player went home with at least $50,000.00, although they did have to qualify over
10 weeks, three million, the first prize, obviously.
There were 40 million players who took part in the qualification process over those 10 weeks. And all of this contributes, of course, to the
valuation of Epic Games, which the latest estimate we've got on that from last year is $15 billion.
But of course, there are small numbers to take note of as well, Julia, and those were the ages of the players. Many of them younger than 16. The
oldest -- among the oldest was the third placing player who was 24, considered elderly in this world.
So, this is a game that's turning teenagers into millionaires overnight, some of them considering making this a career. And of course, the bottom
line of all of this is that Fortnite is free.
It's become this multibillion dollar Empire by reaching this incredibly wide audience. They're having almost zero dollar barrier to entry.
CHATTERLEY: Yes, I mean, there's so many things in there. By the time you're 25, you're completely past it, judging by the rankings here.
But also the amount of time that goes into preparing for one of these. I mean, they stream -- they stream this game on a weekly basis, in some cases
80 hours a week of playing computer games, in order to get good enough to compete here. Is that right?
SEBASTIAN: That's right. Certainly, players have told CNN that that does get in the way of the school, if they're young enough to still be at
school. But this is something that it's not just Fortnite, but people have begun to turn video games into careers. They are helped obviously, by
platforms like YouTube, by Twitch, which is owned by Amazon.
We know that content creators are already making careers out of YouTube. But this is something that I find really staggering about video games.
It's no longer just to play a sport. It's a spectator sport as well. And that's why eSports is becoming such a big deal.
CHATTERLEY: Yes, a million viewers. Incredible. Clare Sebastian, thank you so much for that. Yes, alternative career choice, not me.
All right. Let me bring up you to speed with today's "Boardroom Brief."
Ryanair has posted a 21 percent drop in quarterly profits. The Irish airline says it has cut prices to stimulate demand, especially in Germany
and the United Kingdom.
CEO Michael O'Leary has also taken a swipe at Boeing over the grounding of its 737 MAX jets, saying the plane maker has to get it "beep" together with
regulators. Wow.
[09:55:10] CHATTERLEY: Shares, Heineken sinking the most in eight years after it missed its profits target. The world's second largest beer maker
reported operating profit of $1.97 billion. But analyst expected over $2 billion. It's currently down some five and a half percent.
The London Stock Exchange Group is trading up more than 15 percent. It comes after the company confirmed it's in talks to by financial data
provider, Refinitiv for $27 billion, including debt. Analysts are welcoming the deal while warning it will likely face significant regulatory
hurdles.
And we've got a quick programming note, CNN is hosting the next 2020 Democratic debates. They'll be live on CNN on Tuesday and Wednesday and
coverage begins at 8:00 p.m. Eastern Time here in the U.S., but you can see encore presentations at 7:00 a.m. London, 2:00 p.m. Hong Kong time the day
after, only on CNN.
And that just about wraps it up for the show. Plenty more to come. I'll be back in a couple of hours' time on "The Express," but for now, you've
been watching FIRST MOVE. Time to go make yours. Have a great Monday.
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