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First Move with Julia Chatterley
Investors Brace For The Fallout As China Announces Tariffs On The U.S.; President Putin Orders What He Calls A Symmetrical Response To U.S. Missile Test; The F.B.I. And A Retail Executive All Wrapped Into One Outrageous Story. Aired 9-10a ET
Aired August 23, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA NEWTON, CNN INTERNATIONAL CORRESPONDENT: Live from the New York Stock Exchange, I'm Paula Newton, sitting in for Julia Chatterley and here
is what you need to know right now.
Duck and Cover: Investors brace for the fallout as China announces tariffs on the U.S. and Jay Powell gets ready to speak. Russian Retaliation:
President Putin orders what he calls a symmetrical response to U.S. missile test. And a Russian spy, the F.B.I. and a retail executive all wrapped
into one outrageous story. We will explain. It's Friday, and this is FIRST MOVE.
Welcome to FIRST MOVE. Well, believe it or not, it was looking like a higher open for quite a while, but just a short time ago as Jay Powell get
set to speak in Jackson Hole in about an hour, big news from China to steal Powell's thunder.
Now futures have done a complete 180 this past hour. Take a look at those numbers. It's looking like a weak Wall Street open right across the board.
Now futures were even lower than that a few minutes ago, China announced that it will slap retaliatory tariffs on some $75 billion worth of U.S.
goods beginning September 1st. And remember, this includes the resumption of tariffs on U.S. cars -- so important -- which will take effect in mid-
December, and this is also concerning tariffs are going up on U.S. soybeans and crude oil.
Remember, the American farmer already saying loud and clear that they are suffering. All of this in response to new U.S. tariffs on China that are
set to go into effect September 1st.
Now, the trade war of course, is making Fed Chair Jay Powell's job lot tougher some would say; some would say it's making it easier. He is
gearing up for that all important speech as I said in about an hour.
We found out yesterday that factory activity growth in the United States contracted this month for the first time in a decade. That is because that
trade war is starting to bite. St. Louis Fed President James Bullard said today the trade makes new U.S. rate cuts absolutely essential.
The three other regional Fed Presidents say they're not ready to sign off on those cuts just yet.
Over to Europe now where stocks have turned mostly lower as well. Asia stocks closed higher, and that was before the new tariff mayhem struck.
Now if Powell disappoints investors today, yes, I don't have to remind anybody here, look out below. We've got you covered on all the latest
developments. We want to start with trade though. Our John Defterios joins me.
You know, John, the conventional wisdom here is that China can't hit back the way the U.S. can. It simply doesn't buy as many American products.
And yet why is the market taking this as a sign that much worse is to come in this trade war.
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Well, you make some good points, Paula. But the U.S. may be China's number one single market.
That is a fact. But this is certainly a signal coming from China that it's ready to stand toe to toe with the United States even though it is its
number one export market by a wide margin, of course, they have very strong exports to the European Union.
But I think the overriding concern here for China is it's not going to be showing any flexibility to the United States despite the proclamations by
Donald Trump, that President Xi Jinping of China is ready to sit down.
It did occur to me, you mentioned a couple of these key points. But this came before the U.S. market open before the Fed Chairman is going to be
speaking in Jackson Hole, and on the same day as the start of the G7 Summit and Biarritz in France. This is clearly a message that China want to send
here.
And it also followed the same structure on the toe to toe analogy that I'm talking about here. It is going to phase in the tariffs, some in September
and some in December, like they did to Donald Trump in very sensitive sectors as well. Again, another message. Autos and auto parts, a range of
products covering $75 billion; also oil and gas products -- this is a new market for the U.S. going forward.
And this is a very politically sensitive issue for Donald Trump, as you know, Paula, but in the farm goods that you singled out because this is
very important to the re-election of Donald Trump in 2020.
So if anybody had any doubts that China was willing to back down and show some flexibility, the message here across many, many fronts, the symbolism
is extremely strong from Beijing.
NEWTON: Yes, definitely. And you make such good points on the timing. The other issue about the timing, though, is that, you know, advisers to
Trump like Larry Kudlow are saying, look, we could have face to face talks sometime in September.
This is also for them to strengthen their position going into that bargaining session, right? And yet you wonder -- what is the -- you know,
the incentive for anyone, whether it's the Trump administration or China to back down right now because you know, the rumors that we all hear, John,
it's that before that 2020 election happens, this could be the uncertainty facing the market for more than a year to come.
[09:05:16] DEFTERIOS: Yes, I just wrote a column on this, Paula for the Middle East papers, because I'm normally based in Abu Dhabi. I think about
a quarter ago, President Xi Jinping, the light switch went on, and he switched his perspective and suggested, "I'm sitting on $3 trillion of
foreign exchange reserves. I own about a third of the U.S. bond market, it is my number one market. I'm growing around six percent which is not good
for China. My industrial production, in fact, was the worst in 17 years. But I'm not up for reelection. I can play hardball when I want to."
And I know Peter Navarro, the Trade Czar for Donald Trump, who wants to restart these talks in September has extended the list here to talk about
cyberterrorism, intellectual property rights, forced technology transfer on U.S. companies. Those are all valid concerns for U.S. CEOs.
But again, they don't want to be slipping into a recession in 2020 in that threat. Now, I think the initial position of the U.S. President and his
administration is that look, "We're growing around two percent. We can withstand it."
But you can always know that 10 years into a cycle that the economies are very fragile, including China. But I think China has to suggest here,
we're not going to bend over here for the United States. We will play hardball, we will be reasonable, but don't expect us to give up right
across the board. And I think that clearly is what President Xi Jinping is suggesting, I have other markets in Europe, Southeast Asia, Africa, I've
built my relationships. It's not all about Washington and Donald Trump.
NEWTON: Yes. And as we've learned over the years, China is expert at playing the long game. And as you point out, has many tools to do that,
perhaps more than other countries. John Defterios, really thank you for recapping that for us. Appreciate it.
Now investors, as we've been saying, will be watching Jerome Powell in an hour's time as he speaks at Jackson Hole. Now, the Fed Chair is of course,
under pressure from President Trump to cut interest rates. But will he give a hint as to his thinking?
And you know, right on cue, the President has just tweeted, "Now the Fed can show their stuff." Matt Egan joins me with more. I will spare you
having to translate exactly what that tweet means. But look, we see it right, Matt, given the China news that we just have out right now.
I mean, doesn't this give that whole concept of having an insurance policy, a new cutting cycle? And we're not talking about just one or two cuts,
right? Isn't it a better bet to try and have that insurance now? Doesn't it kind of make Jay Powell's job actually easier? Because you can put it
in that insurance rate cutting cycle, make the President happy, obviously, and hopefully mitigate against any possible recession in the United States?
MATT EGAN, CNN BUSINESS LEAD WRITER: Paula, I think it's safe to say that Jay Powell is in really a no win situation, right? He is never going to be
able please everyone. Some people think that the economy is in some trouble. And so he needs to come in and say, "Listen, the Fed is here, and
we're going to rescue the economy."
Other people think that this is really overblown, and so he should really strike a more optimistic tone, and he's also got to try to avoid making
these recession fears a self-fulfilling prophecy by striking too negative of a tone.
And obviously, he's never going to please President Trump, who, as you mentioned, just tweeted about the Fed again. You know, President Trump is
somehow simultaneously arguing on the one hand, the U.S. economy is really strong. And on the other hand, the Federal Reserve needs to come in and
dramatically lower interest rates and relaunch quantitative easing, which are really two extreme steps that normally you would only do in a crisis.
It's pretty hard to make sense of that.
And what I think is really important to note is that the Trump administration seems to be trying to shift the blame on the Fed, right?
Listen, maybe the Fed shouldn't have raised rates that last time in 2018. But borrowing costs are not the major concern here. Businesses are not
complaining about high interest rates. They are complaining about this global economic slowdown in manufacturing in countries like China, and
Germany and South Korea. And that, of course, is being exacerbated by the trade war.
So again, Jay Powell has to try to navigate all of these different challenges and try to calm everyone down. It's not an easy job right now -
- Paula.
NEWTON: Yes, definitely not. And this is from a Fed that continues to say they are data dependent, right? They want to see some of that evidence in
the economy to see where they go next. Now, we don't need any more proof, right, that there's a lack of consensus on that Fed Board.
James Bullard, a Fed Board Member was unequivocal. He is saying cut. A few of his colleagues already on the record saying they're not so sure. I
mean, how significant will these differences of opinion be given the fact that they are supposed to be data dependent?
[09:10:07] EGAN: So Paula, there were two dissents during the last meeting, I think the market can live with that. At a certain point,
though, you know, investors are going to be more concerned, if it looks like the Fed is really sharply divided here.
The Fed has much more influence when it is unanimous, or at least close to unanimous, because it shows that maybe they know what they're doing. And
if there's a lot of people disagreeing with what the Fed is doing inside the Fed itself, that's only going to undermine confidence further. And it
also will make investors less clear about what the Fed is going to do next.
So it is really important that Jay Powell works hard to try to build a consensus for whatever he thinks the Fed should do next.
NEWTON: Yes, a tall order. And as you point out, a lot of that lack of consensus is mirrored on the markets that are going through some wild
swings. We remind everybody, the market is now still poised for a lower open. Matt, thanks so much, really appreciate it.
In the meantime, we have a lot to cover here this morning, because now Vladimir Putin has ordered the Russian military to prepare response to what
has been a recent U.S. military test. Now this comes of course as the G7 is meeting in Biarritz, France. That meeting is just getting underway.
Jim Bittermann is there. And he joins us from St. Jean-de-Luz in Southwest France.
Now Russian President, as we were saying Vladimir Putin ordered, he was calling it a symmetrical response to this recent us cruise missile test.
That's what the Kremlin says anyway.
I mean, this was likely a predictable reaction, given that that nuclear agreement between the U.S. and Russia has now faded away. But how does the
G7 respond, Jim? I mean, you've covered so many of those. There is perhaps historically, this is the -- you know, he even -- Macron even did
away with the communique. That's the lack of consensus that they have around that table that way. So how do you respond?
JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Exactly. Well, I think, you know, on that particular subject, the Russians and the INF
ready, and the threat of another nuclear sort of standoff and build up, I would think that the Europeans are going to be really nervous about that.
You're too young to remember this, Paula, but in fact, the excruciating negotiations that led to the INF Treaty in the first place years ago, 20
years ago, were something that the Europeans watched with great anticipation and finally when it happened, it's been something that they've
looked on as sort of guarantor of their freedom and peace in Europe for the last 20 years.
Now all of a sudden, you have the Russians breaking the treaty, you have the American saying that they are going to disregard the treaty as of
earlier in the summer. So all of us is taking the Europeans into this kind of uncertainty that they have not known for 20 years.
And no doubt that this will come up. It could come up as early as Saturday evening, tomorrow night, down here, because the leaders are meant to talk
about security issues at that opening dinner that takes place tomorrow night.
So it will no doubt be a topic on the table. And another topic, of course, on the table that they've talked about, at least on the fringes of this or
at least Donald Trump is talking about is a possibility of the re-inclusion of Russia into the G7 increasing it to a G8 once again, that hasn't been
that way since 2014.
But it's possible that that was something he would raise and I would think the Europeans then would be even more adamant against the idea of bringing
Mr. Putin in, especially if there's going to be some kind of a nuclear tit- for-tat standoff -- Paula.
NEWTON: Yes, it will be interesting to see if any of that is discussed around the table and of course we've got the trade wars and of course we
also have the issue of Iran. Our Jim Bittermann will continue to cover it all for us from France. Appreciate that.
Now, our next driver is an absolute head spinner. Overstock CEO, Patrick Byrne resigned his post, but that's not even the headline. Byrne left
after making shocking claims of a deep state. He claims the F.B.I. asked him to pursue a relationship with Maria Butina, who happens to be a
convicted Russian spy.
Sara Murray is following all this. I mean, look, Sara, the more I read about the story, the further my jaw dropped to the floor. And please
explain. It gets more complicated by the hour and really, it is quite grave in terms of its implications politically here.
SARA MURRAY, CNN POLITICAL CORRESPONDENT: Well, look, it just gets weirder and weirder. I mean, as you pointed out, Patrick Byrne, the CEO of
overstock.com resigned yesterday. This is after he caused quite a stir when he came out publicly and admitted he had a roughly three-year romantic
relationship with Maria Butina, a Russian woman who has pleaded guilty to acting as an unregistered foreign agent to try and infiltrate political
groups including the National Rifle Association in the U.S.
But the other thing that Patrick Byrne did is he said he was providing the F.B.I. information about her and he now believes that he was actually part
of some kind of deep state conspiracy aimed at political espionage.
Now after he put this in an Overstock press release, it may be no surprise to you that the stock tanked. And then soon after that, he resigned and
the stock rebounded.
[09:15:22] MURRAY: And so now, he has been doing these interviews, where he has been saying that actually, the F.B.I. told him that he should
continue this relationship with Maria Butina, that he should have a romantic relationship with her, and that he should continue to provide the
F.B.I. with information about that.
James Comey, the F.B.I. Director at the time has denied that this was the case. Andrew McCabe, the Deputy F.B.I. Director said that's just not the
kind of thing that the F.B.I. would do.
NEWTON: And yet, do we have any other kind of official government response? I mean, obviously, these allegations are explosive, but we have
yet to see any kind of trail of evidence.
MURRAY: Right, exactly. You know, we haven't seen any corroboration from Patrick Byrne. And CNN has not independently corroborated this. But one
thing we can tell you is the U.S. officials said that they spoke -- the Justice Department officials spoke to Patrick Byrne earlier this year, and
they did feel like he had some credibility, talking about the early stages of the Russia investigation.
They felt like he had some operational information that was not widely known. But again, we've now heard from the folks who were running the
F.B.I. at the time, they deny that they ever knew who this guy was or that they were involved in any kind of operation like this.
So, you know, we will see as more information trickles out around this, but right now, essentially what we have are some very explosive and unproven
allegations from the former Overstock CEO.
NEWTON: Yes, unbelievable. Sara, you did a brilliant job putting all of that together in a story. I know you'll continue to follow. Really
appreciate it. And meantime, these are the stories making headlines right around the world.
American business magnate David Koch has died at the age of 79. His death was announced in a statement by his brother Charles, the Chairman of Koch
Industries.
You know, he was one of the richest people in the world and David Koch used his vast wealth for philanthropy, but also very controversial conservative
political activism.
French President Emmanuel Macron says the wildfires burning in the Amazon rainforest are an international crisis. He is calling on world leaders at
the weekend's G7 Summit to discuss it as a matter of urgency.
Brazil's populist President meantime though, Jair Bolsonaro has voiced his annoyance, saying Mr. Macron is using the issue for political gain.
And right now in Hong Kong, thousands of people are holding hands in a chain. You see the video there right now stretching across several
districts in the city. Protesters say they don't intend to cause disruption, but to show solidarity and these protests are now heading into
their 12th consecutive weekend with more demonstrations planned on Saturday and Sunday.
Coming up, right here on FIRST MOVE. Monopoly meets Peppa Pig. The toymaker, Hasbro makes a play from for children's entertainment and
addressing that very gray large elephant in the room. The CEO of Alma on what you could call the WeWork for therapists. Stay with us.
(COMMERCIAL BREAK)
[09:21:18] NEWTON: And welcome back to FIRST MOVE. We are live from the floor of the New York Stock Exchange where we are still tracking
unfortunately, a lower open this morning on Wall Street. China has now announced new retaliatory tariffs against the United States, $75 billion
worth. The tariffs begin going into effect September 1st, the same day the new U.S. tariffs are going into effect against China.
Now, these are sweeping tariffs on U.S. goods including cars, oil and soybeans. Shares of U.S. automakers are being hit hard, as you can imagine
from the news. Ford and GM shares are down almost two percent premarket.
We are also of course, awaiting that all important speech in about a half an hour's time from Jackson Hole, Wyoming. And we now will continue to
watch those market moves as we are about 10 minutes from the open here.
Joining me now is Darrell Cronk, he is the President of the Wells Fargo Investment Institute. Thanks so much for being with us.
DARRELL CRONK, PRESIDENT, WELLS FARGO INVESTMENT INSTITUTE: Thanks, Paula.
NEWTON: So we were just talking about this, another head spinning day of news here on the market. Some people say that, look, you can be prudent,
but people are being too pessimistic about this that we're talking ourselves into a recession. What do you think?
CRONK: I don't think we're talking ourselves into a recession yet. That's always a risk, right, if sentiment and confidence turns too low. Next
week, we'll get a key measure of consumer confidence, which will likely be dented by all the news of Brexit, Argentina, Italy, U.S.-China trade, Hong
Kong --
NEWTON: The list is long.
CRONK: The list is long, so I think we have to be cognizant that we want people to be smart in the market, but be smart about where you're taking
the risks, right? So don't be out over your skis on high beta sectors right now that we don't think you're getting risk reward for, so things
like small cap equities, maybe emerging market equities are just not places to have good exposure right now, in our opinion.
NEWTON: And that's the thing in terms of strategy. Everybody is now looking at the Fed and saying when do they actually waltz in here and try
and save the day? Two questions for you. Should they do that in terms of a rate cutting cycle? I don't mean one cut -- one quarter one cut in
September, one; and two, will it make the difference that people wanted to make? Including the President?
CRONK: Well, the real question is, should they do it? Or will they do it? I think some are saying they shouldn't do it. But I think they will.
Right? So we'll watch very closely the language this morning.
I think if they dial out the -- if Fed Chair Powell dials out the mid-cycle adjustment language in his speech, I think you can read into that, that
they are for sure go in September, and you may even have 50 basis points on the table instead of 25 basis points.
So I think that's a real key indication. I don't know whether -- so the Fed only has limited amount of efficacy here, right? With having raised
rates eight times. They've lowered once, if they lower again. I think what would really be important for the economy and you get a bigger market
reaction and a bigger economic lift for Middle America would be fiscal policy.
NEWTON: Okay, and you've opened up a whole can of worms right there --
CRONK: I did. I did.
NEWTON: And you know, that my issue has always been the fiscal policy has in the United States been absolutely dead? It is dead.
CRONK: Yes.
NEWTON: Do you have any prospects for that? Are there, Darrell, past -- and before 2020?
CRONK: It's probably unlikely, although I think the administration will keep suggesting ideas. So like the payroll tax cut that was suggested
earlier this week. Things like indexing inflation on capital gains or indexing capital gains to inflation will be key.
Remember that the tax cuts are a form of fiscal policy. Right? So we did get fiscal policy stimulus in December 2017. The benefits of that largely,
though, got derailed from all those news cycle items, particularly the trade tariff issues that we had.
NEWTON: If we then have some lines -- I want to get back though to another question. So we're going to sideline fiscal policy for a second. The
efficacy though, of those -- of that monetary policy, do you think that's something worrying the Fed right now?
Again, I talk about runway all the time. I go back to the financial crisis of 10 years ago. Those countries got together. They could do something.
Do they have that kind of leverage anymore in these global markets?
[09:25:20] CRONK: No, I don't think they do. I think Central Banks largely have lost some of that efficacy. We've seen it in Europe. We've
seen it in Japan. It's interesting, just yesterday, the Japanese 10-year set a new all-time low at negative 25 basis points. So the BOJ doesn't
have much left ammunition to use.
The ECB we think will come to the table with both rate cuts and QE coming up here in September. And the Fed has limited action on the short side of
the curve and interest rates.
Now, what's interesting is, you could have a conversation about the balance sheet, right, about possibly reducing their Treasury.
NEWTON: On the Fed side of things.
CRONK: On the Fed side, reducing their Treasury holdings in the summer portfolio, or even extending the issuance of long term Treasuries, right?
Thirty-year, 50-year at generational low interest rates, which could also steepen the curve as well.
NEWTON: And a lot of things to consider there with the Fed considering to say that they are data dependent. Before we go, one other thing on the
trade war here. When you hear about this retaliation back and forth, how much does that worry you in terms of we'll get real anecdotal evidence of a
slowing economy by let's say, October-November?
CRONK: Yes, we actually saw the leading indicators yesterday. They were up five tenths of a point. But that was for July. That was before all of
this stuff. So the data is probably going to soften here in August and September, so that's going to be the key and we have to watch for it.
NEWTON: And I'll have to leave it there. Darrell, thanks so much. Really appreciate you coming in.
CRONK: My pleasure, Paula.
NEWTON: Have a great weekend. Really, appreciate it.
CRONK: You, too.
NEWTON: And we are set here on the floor of the Stock Exchange for an open that is set to be lower. Perhaps not as great as anyone was thinking.
We'll be back with the opening bell in just a moment.
(COMMERCIAL BREAK)
[09:30:00] NEWTON: And welcome back to FIRST MOVE. We, of course, as you can hear it, are live from the New York Stock Exchange as that opening bell
rings. And as we were saying this market is off to a lower start this morning.
We are obviously trying to digest that China announcement of new retaliatory tariffs against the United States. Those tariffs include new
levies on U.S. soybeans, more pain for farmers and oil and a resumption, of course on those tariffs on U.S. cars, which is why you are seeing the
American car makers lower.
Despite all of this though, the White House Trade Adviser Peter Navarro said today that trade negotiations between the two countries will in fact
continue.
Now, in the last few minutes that senior policy adviser to Donald Trump, Mr. Navarro has in fact said that those talks are still on track and
perhaps could happen in September in person. Take a listen.
(BEGIN VIDEO CLIP)
PETER NAVARRO, SENIOR POLICY ADVISER TO PRESIDENT TRUMP: This is well signaled. Breaking News, it is going to be Jay Powell telling us the Fed
is going to engage in more rate cutting because maybe China raise tariffs because maybe the ECB is lowering their rates. But we can grow with three
percent instead of two percent. But we need help --
JIM SCIUTTO, CNN ANCHOR: Is the U.S. economy slowing today?
NAVARRO: Well, we went from three percent in Q1 to two percent in Q2, but the reason why it's slowed based on my read of the data is a pure Federal
Reserve raising rates too far too fast.
Here's the thing, you can't play checkers in a chess world. The Fed cannot be raising rates when every Central Bank and the rest of the world is
lowering their rates. That only leads to a wide spread between interest rates between us and them, in this thing called a carry trade where you
borrow euros and you buy dollars. And a small handful of rich people make a bunch of money and hurt American workers and factories --
(END VIDEO CLIP)
NEWTON: There is a message there for the Fed. And that is for Jay Powell, who will talk in about a half an hour from now. And you know, one of the
key issues has been for decades now is the communication of the Fed and how well they handle that piece of communication.
We've seen it before, markets gyrate on just the slightest turn of phrase. Our Clare Sebastian has more now on trying to get that message right.
(BEGIN VIDEOTAPE)
ALAN GREENSPAN, FORMER FEDERAL RESERVE CHAIRMAN: I think the question may be moot.
(END VIDEO CLIP)
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT (voice over): There was a time when Central Bankers said as little as possible.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Forecast of a range of uncertainty --
(END VIDEO CLIP)
SEBASTIAN (voice over): In the early 20th Century, "never explain, never excuse" was said to me the motto of Montague Norman, Governor of the Bank
of England, and several generations later, Fed Chair Alan Greenspan, famously gave it a name in this CNBC interview, "Fed Speak."
(BEGIN VIDEO CLIP)
GREENSPAN: It is language of purposeful obfuscation.
(END VIDEO CLIP)
SEBASTIAN (on camera): And yet over the past two decades, the Fed has been getting more and more transparent. They not only now have a statement
after every meeting, where they explain their policy decisions. They are also giving forward guidance. And they are giving not only four, but now
eight press conferences every year.
SEBASTIAN (voice over): There are also economic projections, and a dot plot, a chart of how individual policymakers see rates evolving over time.
(BEGIN VIDEO CLIP)
NARAYANA KOCHERLAKOTA, FORMER PRESIDENT, FEDERAL BANK OF MINNEAPOLIS: Now with respect for Chairman Greenspan, I thought what he said was completely
disconnected from the role of the Fed as an agent of the public and its job is to communicate to the public what its policy vision is, what its policy
choices are, why it's making the choices that it is --
JEROME POWELL, FEDERAL RESERVE CHAIRMAN: Their independence brings with it an obligation for transparency.
(END VIDEO CLIP)
SEBASTIAN (voice over): All of that transparency though comes with risks. Over the past few months, small utterances from Fed officials, especially
Chairman Jerome Powell --
(BEGIN VIDEO CLIP)
POWELL: Essentially, in the nature of a mid-cycle adjustment --
(END VIDEO CLIP)
SEBASTIAN: Has sparked big market moves.
(BEGIN VIDEO CLIP)
SAM STOVALL, CHIEF INVESTMENT STRATEGIST, CFRA: I think it's added to volatility, certainly a lot more critics, because in the past, if you
really didn't know what was being done, you couldn't criticize it.
(END VIDEO CLIP)
SEBASTIAN (voice over): And that criticism coming not just from the markets.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: Jay Powell and the Federal Reserve have totally missed the call.
We don't have a Fed that knows what they're doing.
(END VIDEO CLIP)
SEBASTIAN (voice over): Powell now facing the double challenge of having to communicate his policies and his independence.
(BEGIN VIDEO CLIP)
POWELL: We don't think about short term political considerations. We don't discuss them, and we don't consider them in making our decisions.
KOCHERLAKOTA: I think the Fed is complete -- just is responding to economic conditions. There are certainly those out there who think the Fed
is responding to the President. And that could become a problem if we actually saw inflationary pressures pick up because then people might doubt
the willingness and the credibility of the Fed to go after those inflationary pressures.
(END VIDEO CLIP)
SEBASTIAN (voice over): Still, there's more to transparency than just talk. The Central Bank is worried about running out of room to act on
interest rates --
(BEGIN VIDEO CLIP)
POWELL: ... to ensure against downside risks.
(END VIDEO CLIP)
SEBASTIAN (voice over): Words are powerful tools.
(BEGIN VIDEO CLIP)
POWELL: We will act as appropriate to sustain expansion.
(END VIDEO CLIP)
SEBASTIAN (voice over): Clare Sebastian, CNN, New York.
(END VIDEOTAPE)
[09:35:05] NEWTON: And now it's time for a look at our global market movers. We are closely watching trade sensitive stocks today as China
announces new retaliatory tariffs against the United States. Shares as I was saying of automakers like GM are falling. China is set to resume
tariffs on U.S. cars they just announced beginning December 15th.
And you can imagine shares of Caterpillar now also under pressure. It is closely tied to the U.S. farm sector and it is lower as well. China is set
to raise tariffs on U.S. soybeans. That means more pain for American farmers.
Meantime, Footlocker shares their tumbling 10 percent in early trading. That was quite a miss. The sports retailer's second quarter earnings and
sales missed expectations.
Meantime, we go to Hasbro that is also lower. Now, the toy giant is buying entertainment firm, E1 the owner of popular franchise -- drumroll please --
Peppa Pig. Now the price tag, $4 billion -- this has been a busy year for Hasbro -- as it tries to bounce back from the collapse of the Toys 'R Us
toy chain.
Back in June, it announced a content partnership with Netflix. Anna Stewart joins me now and she was going to explain to me why in the heck I
have to resuscitate Peppa Pig having been so annoyed by them for so many years as my children were young. But I digress. And let's talk about the
market in my -- not my parental analysis -- into my economic analysis. This is a big price tag for this company, I think and maybe that's what's
thrown off the shares. I don't know.
ANNA STEWART, CNN REPORTER: Yes, but the deal itself makes a lot of sense, I think, if you look at the fact that a toy's success these days really
relies on its content creation and whether it's Peppa Pig, which started as a TV series and has since spread its tentacles into absolutely everything
else.
Or if you look at Hasbro's much more traditional brands, the ones that I remember from my childhood, "My Little Pony," "Transformers" they started
off as toys, now they are viewed in terms of TV/movie content. So a brand's success in the kids' world very much relying on content.
Now, Hasbro does have a distribution and production company, but it's pretty small. Most of its main brands, they get licensed to big film
studios. So perhaps by buying E1, it can actually bring some of that in- house.
And then Paula, we have to get Peppa Pig. It does own some mega brands. And that's probably the biggest and while I like you, do not quite get
Peppa and her family and the interest around them, we are alone.
This franchise is huge. It's across 180 territories. It is absolutely massive in some real key markets like China. And it's such an attractive
business, E1 with that and all of its other brands.
That actually, Paula, analyst are saying we could see a rival bid, maybe from Liberty, maybe from Netflix, and I want to show you that E1 share
price because while Hasbro may be down today, Entertainment One has rocketed up over -- look at that -- over 30 percent, I think that's because
people may think that there could be a bidding war, although perhaps not getting quite the same synergies that you get with Hasbro and the whole toy
product line -- Paula.
NEWTON: Yes, to me, I'm not going to argue, okay, Peppa Pig, whatever. And you made some very good points with the content deal. It's the price
tag. And while we are talking about that price tag, you know, this is a lower pound environment that we're dealing with.
We're going I know -- I know the pound has rallied a little bit this week, but it is still historically quite low. We're going into Brexit and all of
that uncertainty. Could there possibly be a lot more foreign targets in Britain for foreign takeovers?
STEWART: I think, absolutely. We are already seen such a flurry of deals just in the last few months. The pound has absolutely been decimated by
Brexit since 2016. And it has fared particularly badly actually since Boris Johnson became Prime Minister and further raised the risk of a no
deal.
Just to run you through some of the deals we've seen just this summer when it's supposedly everyone should be away, but British Brewer Greene King
that's just been snapped up by the Hong Kong billionaire, Li Ka-shing. Just Eat, a food delivery group in the U.K. that's been bought up by a
Dutch rival.
And Cobham, this is an aerospace and defense supplier that is being bought by an American private equity company. Very controversial here. Lots of
concerns about national security, but quite clearly all this summer, there has been a big for sale sign over British PLC -- Paula.
NEWTON: Yes, they sure are and I know that you will continue to track those deals. I hope you can stop tracking Peppa Pig though for everyone's
sake. Anna Stewart there in London. Truly appreciate it.
Now, coming up right here on FIRST MOVE. Google blocks YouTube accounts targeting the Hong Kong protesters. You'll want to hear this story and why
it's following the footsteps of Facebook and Twitter. That's next.
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[09:42:34] NEWTON: Google has disabled more than 210 YouTube channels for uploading videos about the Hong Kong protests in a quote, "coordinated
manner."
Now earlier this week, Twitter and Facebook also closed hundreds of accounts with Twitter saying the people behind them were sowing discord.
Now responding to the latest shut down, the Chinese Foreign Ministry said it is impossible to block the will of 1.4 billion people.
For more on this, we're joined by Donie O'Sullivan who joins us now live from New York. Donie, I know you follow this really closely, and a lot of
people might ask as those Hong Kong protest continue at this hour. You know, how do they find these accounts? And how do they then determine when
to take action?
You know, a lot of these cases they've been criticized, but not taking action quickly enough, and yet on the other hand, at what point are you
stifling free speech?
DONIE O'SULLIVAN, CNN BUSINESS REPORTER: Yes, I mean, I think part of the issue here is that it's not a very transparent process. How all of this
started was earlier this week, it seems to be Twitter that found that something was going on. And they're obviously watching traffic on their
platform. And what they found was that there was thousands of accounts -- 900 accounts, specifically very active, which were claiming to sort of be
independent news outlets and independent individuals, and they were attacking the Hong Kong protesters.
They were comparing them to Islamic State terrorists, calling them cockroaches, and it turned out according to Twitter, and you know, they
have access to IP addresses and all the various different information that the public doesn't have access to. They said it was being run out of
China, out of Beijing, and that it was tied to the government. Facebook had a similar finding.
Last night, Google came out and they said they had removed 210 YouTube channels, which were posting about Hong Kong, but they didn't tell us how
many, you know, people were following these channels, how many views the channels had. Had they hundreds of millions of views or just a few hundred
views? And they also didn't tell us what type of content was on those channels.
So this is, I think, a very big challenge for these companies. And they're sort of getting into a space, which I don't think they ever imagined that
they'd have to get into which is, you know, attributing significant cyber actions to nation states, which is normally something which was done by
governments or by the top cyber security companies in the world prior to all of this.
NEWTON: Yes, it will be interesting to see as well how this will change obviously, because any kinds of these operations can change because they
will morph, so the point that perhaps these companies cannot spot it so easily.
Given though the statement from the Chinese Foreign Ministry, is this a consideration? Perhaps this shouldn't be a consideration, but is it that
they will have fierce retaliation from China about trying to take down any of this? And we have to remember, in Mainland China, a lot of these
platforms aren't even allowed, you know, Chinese nationals aren't even allowed to use some of these platforms.
[09:45:21] O'SULLIVAN: Yes, I mean, I'd imagine that is a huge concern on the part of these companies. I mean, you know, here you have Google,
Facebook and YouTube, literally pointing the finger at Beijing and saying, "What you guys are doing on our platform is not okay, and we're removing
it, and we're shutting it down."
Of course, the world, you know, sort of came to know about this covert social media activity after 2016, when Russia targeted the U.S. with you
know, tons of -- thousands of accounts, posing as real Americans that were sort of engaging in political activity in the U.S.
After that, you know, these platforms, the companies, they're all American companies, of course, came under intense scrutiny. And Facebook, all the
companies actually released and showed publicly what type of content Russia was posting as they were posing as Americans.
So it'll be interesting to see if the company's -- Facebook and Google or Facebook and Twitter I should say, have released some of the posts of what
these, you know, alleged Chinese accounts who were posting. YouTube has provided no information. So it would be interesting to see if they afford
that courtesy that they did to Americans to the people in Hong Kong.
NEWTON: Yes, and as you said at the outset, the transparency is an issue here and it will help everyone to kind of know what's going on and what to
look out for. Donie O' Sullivan, thank you so much.
And you want to now walk with me right here into that "Boardroom Brief." Trade unions, as we were discussing Hong Kong are now demanding that Cathay
Pacific and what they call all forms of white terror. It comes after a division of Cathay dismissed the head of its Flight Attendants Association.
The Union say she was targeted because of opinions she expressed on Facebook.
Cathay Pacific has come in for heavy criticism after promising to fire staff who participate in pro-democracy demonstrations.
PC and printer maker HP says its CEO and President Dion Weisler is stepping down. It says Weisler who has run HP since 2015 is returning to his native
Australia because of a family health matter. Enrique Lores is the President of HP's imaging business and will take over from Weisler in
November.
Coming up right here on FIRST MOVE, I speak with CEO of Alma, a company saying it wants to bring soulfulness into the world.
(COMMERCIAL BREAK)
NEWTON: And welcome back to FIRST MOVE. With growing concerns around the world about treating mental health issues, the tech industry is searching
for ways to help more people and you know to try and modernize the whole process. Some investors are betting on Alma to do just that.
Now the company is a membership based group for mental health professionals. It is described as the WeWork for therapists. And Harry
Ritter is the founder and CEO, and he joins me now.
[09:50:12] NEWTON: You know, the statistics are staggering. You know, one in five Americans experience a mental illness in any given year, you know,
you can't mirror that around the world. But I'd be willing to bet humans being humans, it's probably pretty close to that. And yet, you know, we
just had the example there. Okay. You're the WeWork for therapists. But why is that a value add?
HARRY RITTER, FOUNDER AND CEO, ALMA: It's a great question. I mean, first of all, to your point about just the incredible burden of mental health, I
think --
NEWTON: I am glad you use that word. Because I think that people need to see it as that, that within a family in terms of mental illness, it is a
burden that unfortunately, goes untreated. So go ahead.
RITTER: That's absolutely right. That's absolutely right. It's also something we just don't think about, in the same way that we think about
physical health. So it's absolutely something that we should be treating in that kind of a way.
But around the world, it's close to a billion people that report mental health issues. So this is a global problem. And that's probably widely
underreported considering the stigma associated with mental health.
Our model, when we think about what we're doing at Alma, we look at the state of the industry, we look at the fact that only one in three Americans
with a mental health issue is actually receiving treatment today.
And yet, you have this incredible community of providers, over 700,000 providers in the United States, who have really been neglected by the
technology and business communities and not provided with the necessary infrastructure and platform to be successful at delivering their care.
And we believe as a company, if you're able to provide great providers with technology and services to help them grow their practice, they can deliver
higher quality, more affordable, better care.
So we do that through a model that is a co-practicing community model. We provide our members access to a full stack technology and service platform,
so that they're able to manage and grow their business. We give them access to a community for learning, collaboration and support. And then we
provide them flexible access to office space, where they're able to see clients in an environment that's beautiful, inviting, and treats mental
health as it should be, as something that's really something we should be proud of tackling in a meaningful way.
NEWTON: And when we talk about tackling this in a meaningful way, I think that's the issue. Some people would wonder, okay, how do you know who is
using these facilities? How can you make sure that if you're in something that's branded as Alma, that you know what you're getting? And is that
part of your vision for this?
RITTER: Absolutely. I think mental health is a space that has generally been somewhat opaque. And I think that's a reflection of the stigma that's
been associated with mental health over many years. We are living in a time where that's changing.
I think younger people today are much more willing to speak openly and honestly about their mental health struggles. You see politicians and
business leaders really telling their own stories, and so bringing that to the forefront. And then when you have a platform like Alma that brings
together providers, gives them technology, creates the opportunities to understand the data around utilization, and how people are actually
experiencing care, you create the necessary infrastructure to really transform questions of quality and questions of experience over time.
NEWTON: And when we about the enthusiasm for this, how does that translate in terms of trying to raise money for your venture?
RITTER: You know, it's -- we've had a really positive experience, we're very lucky to have some incredible investors on board who are helping us to
really realize our vision as a business. What we found is that there's, I think, two important trends; one, people are really appreciating the impact
of mental health on society at large and appreciating how powerful it can be when you tackle that head on.
And I think our model of really focusing on the providers first, trying to create a space of respect for that provider-client relationship and really
supporting that as the essence of what we do, it has resonated significantly.
I think the other part here is, we're all living in this incredibly interconnected world, but we're all kind of lonely, and there's a movement
in the venture world --
NEWTON: I mean, studies show that these things actually make us feel more alone and not more connected.
RITTER: Absolutely. There's definitely a role for a virtual component to how we connect, but we also strive for and really appreciate that
connectedness that we get from being with others, whether that's a care provider or other members of your professional discipline.
And so we're seeing at Alma is that investors are really resonating with that idea of how do we bring together providers into communities, give them
that opportunity to collaborate and grow together.
NEWTON: Now, this is a for profit model.
RITTER: Yes.
NEWTON: And that shouldn't shock anyone who is in the United States, a lot of medical services are for profit. And yet, how do you calibrate that?
Right? Because you're a medical doctor yourself? I'm sure that you know, you want what's best for patients, and sometimes that doesn't mean the
highest margin on everything.
RITTER: Yes, look, I think there's been interesting news, but just a few days ago from some of the top CEOs in the country talking about corporate
responsibility and what is ultimately the goal of a corporate entity, in terms of the various stakeholders that you serve.
I think for us as a business, we take that very seriously. We obviously are very committed to our investors that will create a business that is
viable, that grows and that is able to service a national community of providers and really transform how we think about mental health.
But we also and very much equally think about our provider community and how are we helping them be successful at building their practice and
delivering credible care. Same goes for obviously the clients that come through our doors that experience what we have at Alma.
We take things like privacy very seriously as a business. We take things like experience and really putting that first as key components of our
model and what we care about.
NEWTON: Okay. We will leave it there for now. We'll continue to follow the story as perhaps maybe a lot of corporations are looking as to how they
can integrate a lot of this mental health model just within their own benefit. So, Harry, thanks so much. Really good to see you.
RITTER: Thank you very much for having me.
NEWTON: Appreciate it. And in the meantime, we continue to follow some markets here. We continue to see losses obviously because of that news
coming out of China.
Remember, we are about five minutes away from that speech from Jay Powell from Jackson Hole. He says he is data dependent, but many people will be
hanging on every word he says today, even though the meeting isn't until mid-September.
Listen, you guys have a great weekend. That was FIRST MOVE. Thanks for watching. I'm Paula Newton. IDesk with Robyn Curnow starts right after
this short break.
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