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First Move with Julia Chatterley
The U.K. Prime Minister Says He Wants A Brexit Deal, The Irish Prime Minister Says He Has Seen Nothing New; JPMorgan Comes Up With An Index, "Volfefe" To Decipher How The President's Tweets Move Markets; Crazy For Crypto. Aired 9-10a ET
Aired September 09, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:05]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Live from the New York Stock Exchange, I'm Julia Chatterley. This is FIRST MOVE, and here is your need
to know. An Abundance of Proposals: The U.K. Prime Minister says he wants a Brexit deal, the Irish Prime Minister says he has seen nothing new.
A Tweet Tracker: JPMorgan comes up with an index, "Volfefe" to decipher how the President's tweets move markets. And FIRST MOVE goes crazy for crypto.
We begin our series decrypting all things cryptocurrency. It's Monday, let's make a move.
Welcome once again to FIRST MOVE this Monday. I hope you had a very relaxing weekend because this week is set to be anything but, whether it's
Central Banks, whether it's data, presidential tweets potentially, too, there's a lot coming up.
Right now let me give you a look at what we're seeing for U.S. majors at this moment. We're in the green for us to add to the gains of what? One
and a half percent or more last week. It was the first two-week winning streak for stocks in fact since July of this year.
Remember, for all the recession fears, we are now less than 2 percent away from record highs on these U.S. majors. Were up some 19 percent on the S&P
500 since the start of this year, and we're even up six percent from the start of last December swoon if you remember, the worst month of trade
since the Great Depression. It's all about Central Bankers right now.
And we've got the European Central Bank up this week. Mario Draghi expected to announce his last big stimulus push before he exit stage left,
so watch, I think for a bit of disappointment potentially there. We've also got the Federal Reserve following next week, a rate cut of a quarter
of a percentage point is assumed. I guess the question remains, will they do more?
We could also ask the same question of China, of course, too. Fresh data this weekend showing Chinese imports falling yet again. Take a look at the
export numbers though. The exports to the United States falling 16 percent year-over-year. Trade war, anyone.
China's Central Bank taking measures to stimulate the economy aimed at boosting lending this time around, but again, the expectation is that they
do more. That hope certainly helps support Chinese stocks overnight.
The Shanghai Composite now up some three and a half percent over the past five sessions alone. But elsewhere, of course, hope for a solution on
Brexit is another thing entirely. And that's what we're going to kick off the drivers. So let's get to it.
The British Prime Minister looking and hoping to break the Brexit deadlock. The Boris Johnson's government expected to push again today for an early
election within what's going to be a pretty busy day for the Prime Minister overall.
Earlier he was in Dublin for talks to resolve the backstop border situation between Ireland and Northern Ireland; however, he declined to share with
the media and the Irish it seems what proposals he's actually got. Listen in.
(BEGIN VIDEO CLIP)
BORIS JOHNSON, BRITISH PRIME MINISTER: There are an abundance of proposals that we have. I just don't think if you -- if I may say so, I think it's
entirely unreasonable to share them with you today, Karl. We will be producing ideas for our friends and partners, at least here in Dublin about
how to take this forward.
LEO VARADKAR, IRISH PRIME MINISTER: In the absence of agreed alternative arrangements, no backstop is no deal for us. All it does is kick the can
down the road for another 14 months -- another 14 months of uncertainty for business, another 14 months of uncertainty for people north and south of
the border. So that's not -- it's not an option that we find attractive at all.
(END VIDEO CLIP)
CHATTERLEY: Bianca Nobilo joins us from Westminster. Bianca, I have to say, he has got an abundance of proposals. Now is the time to share them.
It follows a dramatic weekend with Amber Rudd, the Work and Pension Secretary stepping down because she said she believes this government only
wants a no-deal exit here. What is the message from this government?
BIANCA NOBILO, CNN CORRESPONDENT: Well, you're right, now is the hour to come forward with these proposals. And Boris Johnson hinted in the press
conference that what they might be. He said they would be around trying to somehow remove the backstop, and he mentioned facilitation like those
trusted trade schemes we've heard him speak about numerous times.
And he also talked about an agro foods area for United Kingdom and for Ireland. But as Leo Varadkar underscored, he hasn't seen concrete
proposals yet, and that's a message that we keep hearing from the European Union.
But Boris Johnson remained optimistic. He said that a deal was his priority. He thought a deal could be found, he said, which is a very
unpopular opinion that there's just the right amount of time to strike a deal, despite the fact now, Julia that we learned that Parliament is going
to be prorogued today, which means it's going to be returning on the 14th of October.
[09:05:08]
NOBILO: Now, that's just five days before his deadline. But he has to write to the European Union and ask for an extension, something he has
promised time and time again, he is never going to do.
CHATTERLEY: Yes, it's quite fascinating, isn't it? And the expectation is the vote today to try and hold fresh elections. He needs a two-thirds
majority. He is not expected to get it.
There was also rumors over the weekend that perhaps he could not abide by the law, asking for that extension and ruling out a no-deal exit. I mean,
are we even looking at a situation here where that may happen? Or is that just rumors, speculation and threats here that won't be fulfilled?
NOBILO: Well, it's remarkable, isn't it, the Foreign Secretary had to address this on the Sunday news shows in the United Kingdom as to whether
or not Boris Johnson will be prepared to go to prison to fight for his Brexit deadline.
Now, the Conservative Party is traditionally the party of law and order in the United Kingdom. And all this speculation is happening while the Home
Secretary, Priti Patel was addressing a conference of policemen and speaking to them this morning. So the contrast, the dichotomies are so
stark at the moment.
As for whether or not Boris Johnson would do that, as a last resort, it's something which a lot of people are whispering about in Westminster. It
would obviously be a very extreme position to take. For the time being, the government have said that they are going to test the law to its limit,
that they will respect the law.
And we can be sure, Julia that if there was ever any inkling that Boris Johnson might be planning on doing that, then he would be met with strong
legal challenges from the same cast of characters that we've seen, challenge him time and time again, such as the former Attorney General
Dominic Grieve and others.
But for now, Downing Street is certainly not suggesting that Boris Johnson would take that approach. But he has said that he is not willing to extend
that deadline. And despite the fact Parliament has now legislated that he will have to ask for an extension as to avoid a no deal, he still doesn't
seem willing to accept that. So something has got to give at some point, Julia.
CHATTERLEY: Since when have we ever had a British Prime Minister arrested on the job? But I'm only half joking here. Bianca Nobilo, thank you so
much for that. Unprecedented times, indeed.
An unprecedented change, in fact, in Saudi Arabia, which is our next driver, a new Energy Minister over there, one that comes this time from the
Royal family. John Defterios joins us now from Abu Dhabi.
John, you have been speaking to the new face there at the Energy Ministry. Talk us through what was he saying about this?
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Well, we're at the World Energy Congress. It was his first full day on the job as Minister of
Energy, Abdulaziz bin Salman, the half-brother of the Crown Prince and the older brother kept his cards very close to his vest, not using the laser
gun that we've gotten so used to, Julia, with Khalid Al-Falih.
But listen very carefully to this one-on-one doorstep I had with him and then the other reporters kind of swarmed in, when he said that Saudi Arabia
is not going to be the only one carrying the can going forward in the OPEC- non-OPEC Alliance. He wants a coherent policy. But he left out the option here, everybody has to participate. Let's take a listen.
(BEGIN VIDEO CLIP)
ABDULAZIZ BIN SALMAN, SAUDI ARABIA MINISTER OF ENERGY: This is my first day, I think I would like to gain the benefit of the presence of so many of
my colleagues today and the next couple of days, I would be able to have a much better, more focused, if you how -- even also there are so many
representatives of industry here, one could also benefit from their presence to talk to them about the market.
DEFTERIOS: Can I ask you something there? You're going to be -- is it going to be a sharp departure from current policy? That's what everybody
wants to know, after such a radical move with Minister Al-Falih, who you know very, very well.
BIN SALMAN: There is nothing radical in Saudi Arabia. We all are civil servants, we work for the government, and we fulfill our duties, and one
person come and one person go; and at the end of the day, we serve our cause and our purpose.
DEFTERIOS: The clear and present concern is whether you change the OPEC- non-OPEC Alliance and see deeper cuts needed because of a global slowdown?
BIN SALMAN: As I said earlier, I am here -- I am a good listener as you know me. So I'd like to use and make the -- you know, use or benefit from
the presence of my colleagues, talk to them, and then formulate my opinion based on what I hear from everybody.
DEFTERIOS: So no abrupt changes is what you're suggesting there?
BIN SALMAN: We have always worked for a cohesive, coherent, collective efforts within OPEC and non-OPEC. As you know, John, we've spent a little
lot of time with myself or many of the Ministers that preceded me in making sure that the producers get together, work together and prosper together.
DEFTERIOS: Okay, thanks very much. But the OPEC Alliance does survive though with non-OPEC? You're not abandoning them?
BIN SALMAN: With the will of everybody. Yes, it will survive.
(END VIDEO CLIP)
[09:10:28]
DEFTERIOS: With the will of everybody, we'll survive, but it was the will of Khalid Al-Falih, Julia, many times you've seen him at an OPEC-non-OPEC
meeting, he would buttonhole a Minister and say, "You need to get in line." This is a different message, "You need to get in line," because Saudi
Arabia is not going to be the only one cutting a million barrels a day and carrying the full weight of this Alliance.
CHATTERLEY: Yes, hardball set to be played. Fascinating. What about being more in line with MBS over a future Aramco IPO though, because that
was my first thought on this JD? What do we think here?
DEFTERIOS: Well, I think your instincts were correct, because Khalid Al- Falih was never a huge fan of the Aramco IPO, but particularly, he thought that valuation of $2 trillion was lofty. I heard it from a number of
different sources.
But one international oil company CEO told me privately today, Saudi Arabia has a problem. They don't want to continue cutting to hold up the price of
oil, they do need a price of at least $70.00 for the IPO. So it's a difficult position for Prince Abdulaziz.
Secondarily, we're hearing leaks now that they may go with a Riyadh listing initially with perhaps JPMorgan, leading with NCB of Saudi Arabia, maybe
Morgan Stanley, push it through on the Riyadh Stock Exchange, maybe pick Tokyo, not something like New York where the litigation is a big worry.
So they're pushing forward with the IPO. That's the message here, Julia, with further details to come.
CHATTERLEY: Yes. Are you credible in saying that you're not going to be the only ones supporting prices here when you know you need a higher price
in order to do the IPO? John Defterios, thank you so much for joining us there from Abu Dhabi.
All right, let's move on to our next driver now with nearly 100 percent of British Airways flights canceled as British pilots strike over pay. Anna
Stewart is in London. What do the pilots want here and that sounds like a lot of disruption.
ANNA STEWART, CNN REPORTER: A lot of disruption. It is going to be very expensive. Apparently, three days will equal around $150 million for the
airline in lost revenue, but also rebooking all those flights and all those travel arrangements.
Now, what do they want? They want money. It's a traditional old school sort of strike. Pilots will want more money. But Julia, what's
interesting about this strike? Firstly, did you know British Airways pilots have never actually been on strike before -- that surprised me.
Secondly, is the amount of money we're talking about, this has caught some people's attention. So a BA Captain -- pilot -- they earn currently
$200,000.00 on average a year, with the 11.5 percent salary increase that BA have offered but has been rejected, that would take their salary to
$250,000 a year.
Now, the First Officer which is slightly lower down, they currently earn around $110,000.00 a year. So already quite a lot. Now, from the other
side of things. That's the BA stance.
The other side of things BALPA, the Union representing these pilots say, "Listen, the pilots took huge pay cuts after the financial crisis. BA has
huge profits now. Management's getting paid a lot, it's time these guys got more money.
So they have rejected any calls for the 11.5 percent increase over three years. They're going to sit this one out.
CHATTERLEY: Yes, it's fascinating, isn't it? I don't know how I feel about this. These guys are responsible for hundreds of people's lives
every day in the safe travel across the globe, I'm kind of in favor of more pay even if it has the business.
What happens if they don't get what they want? Because they've got more strike days planned.
STEWART: So we've got the strike today, we've got the strike tomorrow. And then we have another strike that's currently planned for September
27th. Now, there's always time for talks in between there. And I've spoken to British Airways this morning, because BALPA, the Union said
they'd try to arrange a meeting last week Wednesday, and they never heard back.
Now, there's some dispute over that. British Airways saying they are always open for constructive talks, but talks that do not have conditions
attached. So some disagreement there. Of course, this could all get fixed, but I'm not quite sure how. It looks at the moment like the pilots
are not going to budge.
But this is very expensive. $150 million if all three strike days take place. And Julia, it's not just the strike days that you have to be
worried about and you know, passengers, if they're planning to travel, they must call the airline before they go to the airport. But it's also the
days that follow because cruise and planes will all be in the wrong places like a usual sort of airline disruption, this could go on for a few days.
CHATTERLEY: Yes, they have my sympathy right now. But if I get caught in that, I'm not sure how long I can pretty much last? 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 globe. The number of people known to have
been killed by Hurricane Dorian in the Bahamas has now risen to 45 with local officials saying it will go much higher, hundreds are still missing,
and nearly 70,000 people have lost their homes. Many are desperately trying to leave the islands only to be turned back.
[09:15:07]
CHATTERLEY: This is what passengers on board a ferry headed to the United States heard on Sunday.
(BEGIN VIDEO CLIP)
VOICE ON LOUDSPEAKER: -- let you come in to the USA, so you won't have a problem. So please, all passengers that don't have U.S. visas, please
proceed to disembark.
(END VIDEO CLIP)
CHATTERLEY: In case you couldn't hear that, the loudspeaker announcement called on anyone without a U.S. visa to disembark, or they would, quote
"will have a problem."
A powerful typhoon in Japan has left one million households without power and forced airlines to ground more than a hundred flights. It made
landfall at the coastal city of Chiba bringing heavy rain and winds up to 190 kilometers per hour.
South Korea says four crew members of a cargo ship are missing after it began listing heavily off the coast of the U.S. State of Georgia. The U.S.
Coast Guard is now trying to find them. We had the 20 people on board removed before a fire forced rescuers to stop.
All right, coming up on FIRST MOVE, Crypto Crazy FIRST MOVE kicking off a week of cryptocurrency coverage by going back to blockchain basic and
making "Kovfefe" great again. JPMorgan launches an index to measure the impact of every Trump tweet. If you're confused, don't worry, we'll
explain that later on in the show. Stay with us. We're back in two.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE live from the floor of the New York Stock Exchange and a look at today's at "Boardroom Brief." We're shaking
it up a little bit today.
Apple has admitted one of its Chinese supplier factories broke rules on working conditions. The company says it's trying to correct the problem.
It was alleged, the Foxconn plant imposed forced overtime, didn't pay bonuses and illegally hired workers.
Apple said most of the allegations are false while Foxconn found some compliance issues, but no evidence of forced labor.
[09:20:10]
CHATTERLEY: Trade war anyone? Japanese automaker, Nissan has outed its CEO saying an internal investigation revealed misconduct over executive
pay. Hiroto Saikawa last week admitted to Japanese media that he received higher bonuses than he was entitled to. Saikawa became CEO after Carlos
Ghosn was arrested last year on the accusations of financial misconduct.
Shares of AT&T in focus. They are over five percent in premarket trading. The activist fund, Elliott Management says it has accumulated a stake of
3.3 percent in the telecoms giant and is pushing to restructure the business. AT&T, of course, is the owner of CNN.
All right, let me give you a look now at U.S. futures this morning, too. It does look like we're on track for a higher open. Stocks beginning the
week at their highest level since late July in fact on hopes for upcoming U.S.-China trade talks and fresh global stimulus.
Deutsche Bank now believes that the Fed will lower rates by a four percentage point over the next four meetings. In the meantime, report say
China is offering to buy more U.S. agricultural goods to help reach a trade deal if the United States makes concessions of its own.
All right. There's a lot going on. Joining us now Krishna Memani. He is Vice Chairman of Investments at Invesco. Great to have you with us.
KRISHNA MEMANI, VICE CHAIRMAN OF INVESTMENTS, INVESCO: Thank you. Thanks for having me.
CHATTERLEY: Happy Monday.
MEMANI: Yes.
CHATTERLEY: There was a lot going on this week. What should we focus on first? The European Central Bank actually feels very pivotal this week,
too.
MEMANI: I think ECB and what they do with respect to their quantitative easing program is probably front and center for everyone involved in the
markets.
CHATTERLEY: What can you expect to hear from them?
MEMANI: A deeper rate cut.
CHATTERLEY: Right.
MEMANI: Maybe roughly 20 basis points, and a future restart of the quantitative easing program, maybe 20 billion to 30 billion euros of
purchases of securities on a monthly basis.
CHATTERLEY: Wow. So European Central Bank back to buying assets again.
MEMANI: Indeed, indeed.
CHATTERLEY: Twenty billion to thirty billion euros worth a month, you think.
MEMANI: A month, indeed.
CHATTERLEY: Not happening immediately, happening at some point in the future.
MEMANI: Yes, because they need to set up the logistics of doing that sort of a program, define what they're going to buy. So all of that takes a bit
of time. But I think this is a good opportunity for them to actually go out and announce it.
CHATTERLEY: Is this is a good thing?
MEMANI: Well, so you know, good thing or bad thing is in the eye of the beholder, right?
CHATTERLEY: A necessary thing.
MEMANI: But it is a necessary thing, because the European economy is certainly slowing down. And without this, they will probably have a
recession in Europe and the real -- the real activity should be on the fiscal front. But there is no appetite for doing anything on the personal
front by German politicians. So this is the only game in town we have.
CHATTERLEY: You know, it's interesting, and you wrote a great blog this week saying, you know, "Hang on a second, we shouldn't be hammering the
Central Banks for doing effectively what they have to do here, which is try and support the economy and prevent a more material slowdown in the absence
of politicians and actually governments doing more to support the economies themselves."
MEMANI: Absolutely. The people who can make a world of difference are the politicians on the fiscal front. But because there is really no movement
whatsoever, Central Banks have no choice but to take the leadership position with respect to taking policy action to revive the various
economy.
CHATTERLEY: The obvious response to that would be actually not many, not many of these countries, particularly in Europe, have the room and have the
capacity to spend. One country that clearly does is Germany and it doesn't do it.
MEMANI: Yes.
CHATTERLEY: Does that change, do you think?
MEMANI: So I think Germany has the most amount of fiscal room to do something really creative. And given the size of their economy, that'll
have a meaningful impact on all of Europe, however, no action whatsoever.
CHATTERLEY: And at the same time, they lambast the European Central Bank for doing more to stimulate the economy. It is nonsensical. We could talk
about this in the next 30 minutes.
I want to talk about the Federal Reserve, too, because you're also one of those that thinks that they cut rates in September, they cut rates in
October, and they cut rates in December. Why?
MEMANI: Well, so for two reasons. One, the economic environment on a global basis continues to slow. And despite what you will see on the
inflation front, this week on the CPI, I think the inflation picture is looking much more subdued, because of some softening in in the labor
market. So as a result, they have plenty of room and there's no significant downside to them cutting rates.
If you go back, 2018 Fed tightening, the magnitude that they did was a policy mistake and they effectively have to unwind that. I think if you
think about it that way, it makes perfect sense.
CHATTERLEY: What about doing a half a percentage point cut in September? Does that make sense even if they can't get the votes for it?
MEMANI: Well, so I think if they really wanted to jumpstart things, that's what they would -- they should probably do. But should and would are two
different things because there's not enough of a consensus within the community for them to be cutting rates by 50 basis points in one month.
[09:25:09]
MEMANI: This way they remain data dependent. So if they cut 25, and if the economy -- everything is okay, they cut another 25 and another 25 in
December.
CHATTERLEY: Which arguably is the message that they should be giving and just sticking to it. We're just watching the data. But what we've
basically painted here is a picture of stimulus everywhere.
MEMANI: Yes.
CHATTERLEY: China.
MEMANI: Yes.
CHATTERLEY: The Federal Reserve here in the United States, the European Central Bank potentially buying bonds again. Is this a reason to buy risk
assets here?
MEMANI: Oh absolutely. So coming into 2019 that had been our thesis. When we came out and said, there will probably be five more years of
economic growth. It was based on the fact that growth is moderating on a global basis, and therefore policymakers in absence of inflation will be
far more simulative, and therefore can manufacture outcomes that are going to be good for a risk market.
CHATTERLEY: So for all the recession fears that we're talking about in the United States, the slowdown in manufacturing? Do we get a trade deal or
don't we? You say, "Don't worry, because fortunately, or unfortunately, the Central Banks are going to stimulate to support."
MEMANI: There is a real slowdown in the manufacturing sector, but for the U.S., consumption is 70 percent of the economy. So as long as labor
markets, income growth and consumption remains good. We are not going to have a recession.
Hopefully, the stimulus revives the manufacturing sector. We certainly need a trade deal, without a trade deal, the pressure would still be on
this particular sector. So hopefully that comes to some sort of a resolution as well.
CHATTERLEY: Krishna, always fantastic to have you on the show. Thank you so much.
MEMANI: Thank you.
CHATTERLEY: Krishna Memani there, of course, the Vice Chairman of Investments at Invesco. We are counting down to the market open. Plenty
more to come. We'll take a look at some of our global movers. And of course, we're crypto crazy this week, too. So stick around. We're back
after this with the market open.
(COMMERCIAL BREAK)
[09:30:00]
CHATTERLEY: Welcome back to FIRST MOVE. That was the opening bell here live from the New York Stock Exchange, as expected, a higher open for
stocks. Wow, an excitable start to the trading week as well. I can barely hear myself talk.
The first full week of trading, of course for September here on Wall Street, it can be a rough one for stocks, but so far this month, the majors
are up what? Some one and a half percent or more that despite the recessionary concerns in the manufacturing sector, the weak factory data
and Friday's slightly softer read on jobs. I will point out, still solid but big U.S. banks updating investors on the outlook for profits and
profitability.
This week, it's low interest rates, of course, pressure results. We're looking for banks to tweak expectations lower, perhaps also interesting to
see what their outlook is on the economy more broadly, too.
The 10-year yield, a touch high today, currently sitting at some 1.6 percent. So thanks to calm this week, as we've already discussed, but in
the short term.
Let's go back to Brexit, the U.K. Parliament set for another future election debate. If you think you've seen it all before, well, you're not
wrong. With a no no-deal and a no early election already decided by Parliament, you've got to wonder where the Prime Minister can go from here.
John Longworth joins us now from Westminster. He's a Brexit Party MEP and former Director General of the British Chamber of Commerce. John,
fantastic to have you with us. I'll ask you that question. Where can the Prime Minister go from here? And how do you rate his handling of the
situation since taking the leadership role?
JOHN LONGWORTH, MEP, BREXIT PARTY: Well, I think he has been totally committed to some form of Brexit since he was made Prime Minister. I think
he made a serious error in not talking out the Bill in the House of Lords. It still remains to be seen exactly why that happened.
Obviously, people are saying that it's because there was a deal to have a general election. But if that's the case, he has been fooled on that. I
think he is actually somewhat boxed in at the moment. And the only things he can possibly do are to either go back on what he said, and extend, or to
actually ignore the legislation that's coming through.
Of course, this is a treaty matter and has some prerogative. So as the executive, there is an argument for saying that he could ignore it. After
all, what judge is going to put the British Prime Minister in jail for supporting the majority votes of the British people and asking for general
elections?
CHATTERLEY: Interestingly, I asked this question on air earlier. I only half joking about the prospects of the British Prime Minister being
arrested here. What's ultimately best for the country here? Best for business? Because this is the angle that you always take here. And you're
one of the first and a key representative of British business saying actually, you believe leaving is the best option. Do you agree that
leaving with no deal can still be the best option here?
LONGWORTH: A clean break Brexit is now the best option without a shadow of a doubt, because it provides the maximum freedom for the U.K. government to
boost the economy, and so for businesses to take advantage of the opportunities that Brexit affords.
Most importantly, of all, of course, many businesses up and down the country, even those that voted remain, business people that voted remain
are saying, "Let's just get it done." Because actually, it's the uncertainty that's the problem. I mean, there's a massive boost waiting
for the economy, the moment that we actually leave, and we need to get on and do that.
CHATTERLEY: Are they actually saying, "Let's get it done without a deal," though. I mean, I appreciate that everyone wants an end to the uncertainty
here. But if the end to the uncertainty involves having no real certainty about what the future looks like, is that really what they're asking for
here? Is that really what Brexiteers voted for, too?
LONGWORTH: Absolutely. I mean, there are only two things on the ballot paper, there was remain and there was leave. It never said anything about
a deal on the ballot paper. Brexiteers are absolutely hoping for a clean break Brexit because that's actually what they voted for.
But remain business people that I know are just completely fed up of the uncertainty that not Brexiting creates, in fact, being very clear that we
are having a clean break Brexit provides absolute certainty, because people know exactly where they stand then and can prepare for it appropriately.
CHATTERLEY: You are one of those that was advising the Prime Minister to go to Geneva, go and talk to the World Trade Organization and understand
what the options are. Do you think he took your advice and actually understands what his options are as far as falling back on World Trade
Organization rules are concerned? Because for me, this is pretty vital.
[09:35:10]
LONGWORTH: Well, there are many people in the government who do understand what WTO means, and there are people in the government who are dissembling
even within the Cabinet now, who are trying to undermine the idea of a WTO Article 24 standstill, for example.
The reason I said that he should go to the WTO before going to Berlin or Paris or Brussels is to first of all to send a clear signal that Britain
intends to leave come what may, and also to have a proper understanding.
The WTO can help to facilitate things. And the real facilitation, of course, takes place between the E.U. and the U.K. and it requires the E.U.
to want to play ball on an Article 24 standstill. But believe me, the moment we leave in a clean break Brexit, the minds of Europeans countries
will be concentrated on a free trade arrangement. I've no doubt about that.
CHATTERLEY: Yes, the threat that they won't, though, is a valid threat at this point, with so much uncertainty at this stage. I mean, what we've
seen and what we're expecting to see from Parliament today is to rule out - -
LONGWORTH: Well, I am not sure I --
CHATTERLEY: Go on.
LONGWORTH: I was just saying, I'm not sure I agree with you on that, you see, because one of fallacies that people have in relation to this business
of having trade deals is that they are absolutely essential.
The things that the economy can do to boost are entirely independent of trade deals. We can unilaterally remove external tariffs, which provides
either the U.K. government with a fund to boost industry or reduces the cost of living thus boosting the economy.
We can maintain tariffs where we think it's necessary to boost British industry. For example, if we have tariffs on finished automobiles, German
cars will end up being 25 percent more expensive than they were in 2016, and people will buy British cars as a consequence. Manufacturing in
Britain will boom.
We can actually also adjust taxes in the nine billion net contribution that we will get back. We'll have a 39 billion pound fund to boost the economy
through our business support mechanisms and also through provision of better infrastructure. You know, that's a bigger number than we've spent
after World War II in the Marshall Plan in today's money. It is huge.
CHATTERLEY: John, the E.U. says some of that money is owed. We're going to have to continue this conversation because I have to finish it here.
But there's plenty more to discuss. And I promise you we will. John Longworth there joining us from Westminster, Brexit Party MEP. Always a
pleasure to talk to you, sir and we shall reconvene. Okay, we're taking a break here on FIRST MOVE. Plenty more to come. Stay with us.
(COMMERCIAL BREAK)
[09:40:53]
CHATTERLEY: It's so exciting. Welcome to FIRST MOVE. A crypto crazy week where we begin with some good old fashioned myth busting. Cryptocurrencies
are so called because they are digitally encrypted assets. But as a currency that's hard to decipher. The name is fitting for that reason,
too. To unravel some of the most common misconceptions, I talked Luke Martin, the founder of Coinist Research, an independent cryptocurrency
analysis company. He began by addressing what he sees is one of the biggest.
(BEGIN VIDEOTAPE)
LUKE MARTIN, FOUNDER, COINIST RESEARCH: I think the biggest thing that still gets brought up and maybe is misunderstood or not known is how well
Bitcoin has done. Even this year, a lot of people still think that everyone is underwater on the Bitcoin they bought.
There's only been maybe three month, I think at the end of 2017, up until January of 2018, the Bitcoin trading higher than where it is today. And we
hit 13K earlier this year, and have three X nearly in value. So there's still a stigma that everyone is underwater, when in fact, it's been the
best performing asset for five years, three years and this year.
CHATTERLEY: I mean, that's fascinating, isn't it? I guess, some part of that is the sheer volatility, and depends where as an investor you got in
here because you could have bought high and sold low, unfortunately. But your point is if you look over a longer period of time, you're still up.
MARTIN: Certainly. I mean that there was a very small window where yes, if you did by the top somewhere between November and early January of 2018,
then yes, you're definitely underwater. But I think that gets overblown, and it also kind of keeps investors from getting into an asset that's been
uncorrelated to other assets, and there's also performance as well.
CHATTERLEY: We'll, we'll come back to that.
MARTIN: Yes.
CHATTERLEY: Lack of correlation. Volumes. One of the key questions we got asked was look, explain the volumes here, are the volumes fake?
MARTIN: Yes. Volumes, it's a bit of a gray area because reports come out. "Bitwise" did an excellent report where they covered and said all of the
volume was fake, or most of the reported volume is fake. And that might be true based on reported volume, but there is a lot of real volume as well.
I talked to a trading team, Alameda Research out of Asia, which does billions in volume every single day and they do more volume than even
"Bitwise" said was happening on some these exchanges. So there's a large amount of real volume, and also a large amount of reported fake volume.
There is a lot of things happening here. Reporting is maybe the tough part.
CHATTERLEY: The Gemini twins, I remember going back to -- was it 2013 -- and they said that they're at least one percent of the Bitcoin market. And
everyone went, "Whoa, the Bitcoin whales." What percentage is still dominated by big players perhaps versus the broader retail participation
that we see right now?
MARTIN: Sure, will still make up a good portion of the market, they will. Right?
CHATTERLEY: How good?
MARTIN: It's hard to say, it's hard to quantify, right? That's what makes the reporting part so tough, but it's also a very retail driven market as
well. A lot of Wall Street and other institutions just can't get in due to operational risk or regulatory risk. And that's what makes retail makeup
such a large percentage of the market.
CHATTERLEY: Another thing that's thrown around, it's used by criminals. It's used to launder money, perhaps more so than U.S. dollars, for example,
which we could cite as an example hereto. What's your response to that?
MARTIN: My response to that is, the U.S. dollar has been the choice by criminals and money launderers for as long as it's been around. If you
look at Bitcoin, since it is -- it is pseudo-anonymous, right? My name isn't attached to an address, but it's a publicly transparent ledger. And
as Justice Departments and criminals alike are finding, if you have an exchange or if you are money laundering or whatever it might be, you can
actually track that address, every single transaction is recorded permanently forever.
CHATTERLEY: It's traceable.
MARTIN: It is traceable. Correct. So let's say a criminal does try to launder money or does steal money from an exchange, you or I or a chain
analysis firm could look at that address, blacklist it, and then eventually when they do want to on or off their money on an off ramp like Coinbase or
Gemini here in New York, it's not possible, right? Because you can actually trace it. With dollars, not so much. It's a lot harder to do
with Bitcoin.
CHATTERLEY: And look out for that suitcase. You said the magic word there "hack." And that's one of the things actually that get thrown at me by a
more traditional analysts, I have to say that aren't crypto specialists and they say, "Look, crypto can be hacked here." And I think we have to
distinguish between what's being hacked, whether it's the exchange or whether it's the currency itself.
[09:45:06]
MARTIN: Sure. Yes, this gets brought up so much. The easiest analogy is a bank robbery to a bank. That doesn't make you question the legitimacy of
the fiat currency system or banks in general.
When a centralized third party has a security and vulnerability, let's say Finance gets hacked, right? It's not -- it has nothing to do with the
Bitcoin network or the Bitcoin software. Bitcoin itself being hacked. It's a business or a centralized third party being hacked.
And the revolution with Bitcoin that people don't bring it up when they talk about hacks is, essentially, it is a digital bear asset. You can
actually control your coins. You control the keys, you control the coins, so you can mitigate that risk as an investor, as an institutional investor,
as well as Coinbase and Xapo are coming to the game.
CHATTERLEY: The other thing I get is -- "rolls eyes" -- explain what a cold wallet is. And this idea that the cryptocurrency itself is not
actually held at the exchange. So even if the exchange is hacked, the crypto is held separately. Explain a cold wallet.
MARTIN: Yes, exactly. So let's say you do have your exchange, your coins on an exchange like Coinbase or Gemini here in New York, you can withdraw
those coins to a device that looks like a USB device, or you can keep a seed phrase in your head. So you can actually store these assets
digitally, which wasn't possible before Bitcoin. You can mitigate against that risk of a hack or trusting any other centralized third party.
CHATTERLEY: Why do we keep talking about Bitcoin, by the way? Because another criticism we get is, look, there's other currencies out there --
Ethereum, Ripple -- what's the relevance of Bitcoin as a proportion of the market perhaps in crypto?
MARTIN: Yes, so Bitcoin right now makes up, I believe, it's close to 70 percent of the total market cap of all crypto assets.
CHATTERLEY: Wow.
MARTIN: And the reason being is Bitcoin has established itself as a clear value prop, as kind of a digital scarcity or that digital gold, a store of
value. And a lot of other currencies, it's still early. They're crypto assets. They're interesting. Ethereum and NFTs and different things like
that. It's just still very early, they're kind of fighting for that use case.
CHATTERLEY: So what about feather dilution? More and more cryptocurrencies get launched. Libra, an example of course, from Facebook,
just in the last couple of months or so.
MARTIN: Yes, that's the other side of this equation is since Bitcoin has established itself as a store of value, as digital scarcity, there will
only be 21 million coins. All of these other coins that cost nothing to produce increases the supply of other coins, and Libra doesn't do anything.
It's really just kind of a basket of other fiat currencies. It shouldn't be even put really in the same category as Bitcoin.
CHATTERLEY: We have to separate the two things -- completely different things.
MARTIN: Correct.
CHATTERLEY: One of the other things I think that people look at is the price right now of Bitcoin. Like, "I've missed it. It's too expensive."
People need to understand that if they want to invest, they can take a piece of a Bitcoin.
MARTIN: Yes.
CHATTERLEY: And not a full.
MARTIN: You can buy a fraction of a Bitcoin. Yes. You can buy as -- one sand is actually the smallest denomination you will go to, so you can buy
one sand, which is 0.08 in a one set of a Bitcoin. Yes.
CHATTERLEY: Talk about transaction costs.
MARTIN: Transaction costs. So this gets overblown a lot as well. If you want to send a Bitcoin to me or to one of your friends, or whoever it might
be, to be included in the next block, which would happen in about 10 minutes, it only costs 83 cents, or a dollar. So transaction costs are
actually much lower than a lot of maybe competing coins will make you believe.
And also, you have to consider the average transaction size of a lot of Bitcoin transactions are much higher than a typical credit card transaction
or a typical cash transactions go.
CHATTERLEY: So actually, it is lowering the cost -- transaction costs here.
MARTIN: Correct.
CHATTERLEY: What about regulation? If we see broader regulation, whether that's of exchanges or announcements of crypto to some degree, because the
decentralized nature here is arguably one of the selling points, too. Does that help or hinder?
MARTIN: I don't think there's a bad thing with regulation as long as it's not stifling innovation. There are some negative side effects of this of
users or residents in New York or some parts the United States aren't able to buy or trade certain cryptocurrencies.
But as long as it's aimed at helping or protecting retail investors, I think that's a good thing. We're already seeing it was on off ramps with
Gemini here in New York or Coinbase, as well.
CHATTERLEY: Okay, final question here and then we will get you back. Is Bitcoin ready to be a safe haven? Buy at this stage?
MARTIN: Yes. So there's been a lot of talk about Bitcoin acting as a safe haven lately, and while correlations have increased, it is trading more in
line with gold, and we are starting to see, you know, as equities decrease, maybe Bitcoin and gold doing well on the back end of that. I'm not so sure
you can draw that conclusion yet.
If you look longer than just this year, the correlation on a relative scale is still pretty much uncorrelated to everything, and that's actually a good
thing. It's still providing positive returns uncorrelated to other assets, which is kind of a dream asset for a lot of investors.
CHATTERLEY: So there is an argument here to have it as a little piece of your broader portfolio, even if it's not a safe haven, in your mind here.
MARTIN: Exactly. In some ways, it is actually reducing the risk of your total portfolio and earning you those returns.
CHATTERLEY: Yes, the lack of correlation with other assets. Luke, a pleasure. We'll get you back.
MARTIN: Thanks for having me.
CHATTERLEY: Thank you.
(END VIDEOTAPE)
CHATTERLEY: That was Luke Martin, the founder of Coinist Research. Stay with us on Crypto Week because tomorrow, I will be speaking to Ben Mezrich.
He is the author of the book, "Bitcoin Billionaires: The True Story of Genius Betrayal and Redemption." It's about the Winklevoss twins, the
founders of the Gemini Exchange. That's coming up tomorrow. All right, still ahead. Anyone for "Kovfefe"? Well, something is brewing at
JPMorgan, and you can thank President Trump's Twitter feed for that. If you're confused, don't worry, we'll explain, next.
(COMMERCIAL BREAK)
[09:52:27]
CHATTERLEY: Welcome back to FIRST MOVE. It was the tweet that launched a thousand theories. What did President Trump mean by the word "covfefe"?
Well, we're still no closer to finding out because he never corrected himself, but now JPMorgan Chase is paying tribute with its very own
"Volfefe" Index which is designed to reflect how the President's tweets move markets. Clare Sebastian Justin has more on this.
It was clearly an autocorrect typo, I blame that, Clare, but talk us through JPMorgan's "Volfefe."
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Right, Julia. You know, you and I have been talking about this for months now. We know that the
President's tweets can move markets. We've seen it happen on practically day-to-day basis.
But JPMorgan is now trying to quantify this. They've created a model that tries to spot market moving tweets and contract their impacts going
forward. That is what "Volfefe" as they've somewhat brilliantly frankly called it, that's what that does.
And they findings are interesting. They say that it is statistically significant that tweets are moving market. Secondly, they're finding that
the volume of market moving tweets has ballooned in the last few months particularly in August and the topics -- perhaps, this is not surprising
because the topics that particularly move the markets are trade and monetary policy.
They found the most market moving words within the tweets. Take a look at them. These are the top five, Julia. They are: China, Billion, Products,
Democrats, Great. You really get a sense of the kinds of particularly trade-related tweets that have been moving the market.
So that is significant. But they really good deep into the weeds of the President's Twitter feed, Julia. They say that you can pretty much set
your watch by it. They say that -- this is a quote, "The President's Twitter activity display some strong intraday cyclicals, while tweets can
and will arrive at any hour of the day, noon to 2pm Eastern Time is the most likely window ... a time
fortuitously coterminous with some of the best intraday liquidity in U.S. rate markets."
They're specifically looking at the impact of the tweets on volatility in the rates markets, Julia, but they say that it can be applied also to
currencies and equities.
CHATTERLEY: Yes, I mean, it's fascinating is that we joke around, but there is a serious matter here and when it is policy, like tariffs being
enacted over Twitter, it's become a real problem.
Some of the other things for me that were quite fascinating, they judge when he presumably sleeps, which is between 5:00 a.m. and 10:00 a.m.
Eastern Time because that's simply when there's far less tweets than the rest of the time of day. That's not enough sleep.
SEBASTIAN: It's not enough sleep, plus he misses the market open by that measure, Julia. So yes, there's a lot of detail. And I think there's a
couple of interesting points to make. They do say that there is a potential variable here that's hard to quantify, and that's the feedback
loop. There are sometimes more presidential tweets when the market is volatile, so he can react to that as well.
[09:55:12]
CHATTERLEY: But they do say that while this is causing clearly anxiety in the markets, this does -- the volume of these tweets -- the fact that we
get to see frankly, the sausage being made, the inner workings of the Executive Branch on Twitter provides an unprecedented opportunity to look
at and to study the impact of the Executive Branch and their daily machinations on the stock markets and the rates market.
So I think that is super interesting here, but we do have to point out as well, that despite all of this intraday and intra-month volatility, the S&P
500 is still up more than 30 percent since Trump's inauguration.
CHATTERLEY: Such a great point, Clare Sebastian, thank you so much for that. A great point to note there. All right. Let me give you a quick
look at what we're seeing for U.S. markets at this moment. We are adding to those gains that Clare just mentioned there. As you can see, holding in
positive territory.
We'll be back in a couple of hours with "The Express." We're on all of these stories for the latest, but for now, you've been watching FIRST MOVE.
Time to go make yours. We will see you tomorrow.
(COMMERCIAL BREAK)
[10:00:00]
END
