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First Move with Julia Chatterley
Mario Draghi Cutting Rates And Restarting Bond Buying To Support The Eurozone Growth; President Trump Delaying Tariff Hikes, China Says It's A Goodwill Gesture; The Ripple Effect: How XRP Cryptocurrency Gets Used. Aired 9-10a ET
Aired September 12, 2019 - 09:00 ET
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JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Live from the New York Stock Exchange, I'm Julia Chatterley. This is FIRST MOVE. And here's your need
to know. To Infinity and Beyond: Mario Draghi cutting rates and restarting bond buying to support the Eurozone growth.
Goodwill Hunting: President Trump delaying tariff hikes. China says it's a goodwill gesture. And the Ripple Effect: Day four of Crypto Crazy with the
CEO of Ripple how their platform works and how XRP, the cryptocurrency gets used. It's Thursday, let's make a move.
Welcome to FIRST MOVE once again. Well, there is no Goodwill Hunting required, I see goodwill everywhere right now. President Trump delaying
the tariff hikes by two weeks; China, perhaps looking at further agricultural purchases. It's like the last month never even happened, and
we've got stimulus coming from the European Central Bank. Everyone is happy, unless you're a saver in Europe right now, in which case, it
continues to be pretty painful.
Let me give you a look of what we are seeing for U.S. futures right now. The stock markets here higher. We will move closer, potentially to record
territory early on in trading today. We are less than one percent away in fact, from fresh record highs for the Dow for the S&P 500 right now,
helping us along here, as I mentioned, the news that President Trump will delay tariffs that were due to kick in on October 1st.
The delay in fact is only for two weeks, but it does follow China's gesture of goodwill, let's call it, earlier this week. And right now it seems
that's enough, though, I have to say the impact of the trade war once again displayed in the European data this morning.
Eurozone factory output contracting by almost half a percent in July, much worse than expected. Germany, again one of the worst hit. The IFO
Institute saying a German recession now likely.
Step forward too much fanfare, Super Mario Draghi at the European Central Bank, a positive reaction right now from European stock markets as the ECB
announced a restart of bond buying and a rate cut and provided no end date whatsoever. Where does this end?
Well, right now, for this session, at least, the Euro heading lower. It's below 1.10 euros to the dollar. European bond yields also dropping, too.
Anna Stewart has been watching Super Mario Draghi and all the action. Talk us through the details, Anna and then we'll analyze it.
ANNA STEWART, CNN REPORTER: Yes, so this was the penultimate meeting for Super Mario. But it's very much his monetary policy swan song delivering
on his career of doing whatever it takes with this latest package. And he kind of had to deliver here because it was really baked in, he really
signaled back in June in a meeting that there was going to be a rate cut, there was going to be QE and that is exactly what we've got.
But let's run through it. We've got the deposit rate reduction of 10 basis points to minus 0.5 percent. The introduction of a tiered system for banks
to try and cushion the pain of those negative rates. The QE issue. This is the one where I feel like some investors we disappointed.
QE of 20 billion euros of monthly asset purchases but with no end date and that's key. The forward guidance in this meeting was very different, very
dovish, no end date in sight for the rates or the QE -- Julia.
CHATTERLEY: Yes, it's quite interesting, isn't it? You have to wonder though when you're cutting rates further into negative territory, it's
painful for the banks. Is it really ultimately going to make them lend more and is it going to ultimately help the Eurozone economy? I don't
know. I'm a skeptic here. The toolbox feels empty.
However, one man very displeased, but actually trumping what the European Central Bank is doing here, President Trump he said, "The European Central
Bank acting quickly cutting rates. They're trying and succeeding in depreciating the Euro against the very strong dollar here, hurting U.S.
exports and the Fed sits and sits and sits. They get paid to borrow money while we are paying interest."
What do we make of this because we are seeing a weaker Euro ultimately, as a result of this and this does help European exporters?
STEWART: It does, Julia. But I mean, first of all, let's just say that that tweet was baked into today as the rate cut and the QE was frankly --
we all expected the President to tweet fairly quickly. Although, I say the speed at this suggests that perhaps he'd already drafted the message before
the ECB made its decision.
Anyway. First off, the ECB does not target currency. They target inflation and I'm sure that is going to be asked from Mario Draghi. He is
doing the press conference right now. There will be Q&A coming up soon and I'm going to dive back in there and may be ask him that very question.
[09:05:09]
STEWART: However, President Trump does have a point here, you know, it is extraordinary that we are seeing negative rates that banks are being --
sorry, you know, negative rates here, the U.S. not so much, but the U.S. economy is growing faster. I think that is just the way things are. He is
going to keep using it to lambast the Fed. I'm not sure whether it'll work.
CHATTERLEY: No, I agree. And you know what, Mario Draghi is looking for a job obviously, pretty soon. President Trump wants to hire me. You can
ship him on over to the Federal Reserve, why not?
I do think that November 1st date is interesting though. It is after the Brexit date of 31st of October, I am potentially seeing or not seeing auto
tariffs from the United States on Europe, too. So I think there's more strategy here than meets the eye. Anna Stewart, we look forward to that
presser and seeing you in action. Thank you so much for that.
All right, let's move on. A gesture of goodwill. President Trump delaying a tariff hike on $250 billion worth of Chinese goods until after the next
round of U.S.-China trade talks. David Culver is in Beijing for us. I am looking at the reaction there. China also, David -- and great to have you
with us -- and potentially looking at pork and soybean purchases. Like I said earlier on the show, it's almost like the last month of escalation
didn't happen. We're kind of back to post Osaka meeting.
DAVID CULVER, CNN CORRESPONDENT: We are. We're seeing this back and forth here, and it seems like things have started to ease for now. But as you
point out, it's been this back and forth. So there's this cautious optimism surrounding the trade talks.
Perhaps the earliest indicator of a positive reaction comes out of the markets, the Asian markets closing here upwards. The U.S. futures also
showing an upward trend. And then politically, it's been received quite well here. We had China's Commerce Ministry holding a press briefing
today. They seem to welcome the President's delay of these tariffs by two weeks saying that this is creating a positive environment for trade
negotiations.
Interesting even looking at how soft the President's tweet was on this, seeming to come out of respect for China's National Day, a day, Julia that
marks 70 years of the founding of the Communist China.
So with the seemingly easing of tensions around trade talks, there is some of this hope going forward. But it comes after, of course, China decided
to ease 16 of the items of the tariffs that were on U.S. goods coming into China, things like cancer drugs. They had things like shrimp and animal
feed, but noticeably missing on that list, Julia were some of the big ones.
As you point out, soybeans, pork, U.S. cars. So we're talking agriculture and manufacturing, those are huge for the President's base. So ahead of
2020, we thought perhaps the Commerce Ministry would maybe ease some of the tariffs on those. Today, they said that Chinese companies have inquired
about that. But they stopped short of actually going forward with the concession and putting those on the list.
CHATTERLEY: Yes, feels strategic, David, doesn't it? You know, for me, as important as this is, and clearly investors are energized by the prospect
of any de-escalation or even stability here as far as hopes for a trade deal are concerned. It doesn't help us tackle the underlying issue here,
which is concerns about technology theft. And that has nothing to do with this, and a deal on that feels as remote as ever right now. Do you agree?
CULVER: Absolutely. And I think that's the concern here, certainly from the Chinese side is, it is trying to figure out how to keep all of this
lumped together and to find a way to move forward and find agreement and compromise, when for the U.S. side of things, for President Trump and his
administration, it is very difficult to separate the two especially ahead of 2020.
This has been something that has fed that hard line response particularly when it comes to the trade war. And so going forward, to define the
agreement is going to be a difficult one and yet right now, it seems both sides are playing nice. That could change tomorrow, we know that.
CHATTERLEY: Yes. It's such a great point. Intrinsically tied. Never mind separation. David Culver, great to have you with us. Thank you so
much for that.
All right. Staying Asia now. $1 billion wiped off the value of stocks in Hong Kong Exchanges. The owner of course, for Hong Kong Stock Exchange,
the LSE could be about to reject their bid. That's according to reports in "The Financial Times." Investors, of course concerned and we were
discussing this yesterday that regulators won't sign off on the deal.
Clare Sebastian joins us on this. Is it that, Clare? Or the fact that the CEO of Hong Kong Exchange has described this deal -- this is brilliant --
as a corporate "Romeo and Juliet" story. Big love story, bad ending. What do we make of that?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Julia, I think you know, it is slightly unfortunate comparison there. Presumably he was referring
to the original love affair, other than the fact that they both ended up dead. But look, I mean, they do look a little bit star crossed at the
moment as the dust has settled and analyst investors have had a chance to go through some of the finer details of this.
[09:10:10]
SEBASTIAN: It does seem like they're going to be big hurdles. We heard from the U.K. government yesterday, they said that the London Stock
Exchange is a critical part of the U.K. financial system and they will be looking very closely at the details here.
We think the regulators are going to have some issue with the potential for Chinese or Chinese-linked ownership here, of course, Hong Kong-Chinese
territory. There are concerns there about the rising unrest rooted in fears that China is tightening its grip in Hong Kong.
Of course, the Hong Kong government is the biggest single shareholder of the Hong Kong Exchanges and clearly, they have the power to appoint more
than half of the Board Directors there. There are concerns about reduced competition. That's a traditional concern when you see consolidation of
stock exchanges, concerns about data security, and it's not just the U.K. regulators, Julia.
The U.S. regulators are also likely to take an interest because the London Stock Exchange also owns the London clearinghouse, which clears almost all
U.S. interest rate swaps. So this is an international issue, and you see with the Hong Kong Exchange's stock price down today that there is, you
know, some concern that this might not go ahead.
CHATTERLEY: Yes. Star crossed indeed. Let's talk AB InBev as well. Their Asia IPOs back on the menu, slight adjustment, of course, because
they've sold off the Australian business. Is it more appetizing then this time around?
SEBASTIAN: Yes, it certainly seems like it this is a more focused second attempt, Julia. They sold off their Australian business just a few days,
frankly, after they shelved their original plans. That $9.8 billion IPO back in July.
They said at the time that part of the reason for that was the prevailing market conditions. They still say that could be a factor. There's no
guarantee this will go ahead.
But without the Australian business, this does look like a more focused IPO and that it's going to be more focused on China, which is one of their
fastest growing areas. The world's biggest market for beer, it is actually the biggest export market for Corona, which is one of AB InBev's brands.
So perhaps, a slightly smaller price tag than the original $9.8 billion and a more focused attempt. But again, no guarantee this is going to go ahead.
CHATTERLEY: No guarantees. Clare Sebastian, thank you so much for that. All right. Let's move on now to a modern medical crisis, a modern day
medical crisis. President Trump announcing news to ban flavored e- cigarettes here in the United States. Dr. Sanjay Gupta joins us now.
Dr. Gupta, fantastic to have you on the show with us. Given everything we know and perhaps what we don't know about the situation. Do you think this
is the right move at the right moment?
SANJAY GUPTA, CNN MEDICAL CONTRIBUTOR: Well, you know, the big concern, aside from what's been going on most recently with these illnesses and some
of these deaths associated with vaping, one of the big concerns has been, look, even if these e-cigarettes help adults stop smoking, which maybe
there's some evidence that it does, that is still being investigated. Could it also be causing younger people to start smoking? That is one of
the big concerns?
And I'll show you quickly, Julia, this data that I think is pretty compelling coming from the National Institute of Drug Abuse, basically
saying that young people who start vaping, about 30 percent of them will go on then to smoke real cigarettes -- combustible cigarettes versus people
who don't vape about eight percent go on to start smoking real cigarettes. It's a huge difference, Julia. And I think that's always been the debate.
Even if it helps adults stop smoking, it should not come on the back of creating a new generation of smokers. And I think that's what's really
driving what came out of the White House this week.
CHATTERLEY: You know, it's quite fascinating to see the debate around this. And I know you were talking to the American Vaping Association
President on air earlier today. And he was saying, "Look, you're removing the life-saving options to smokers out there.
It is a less harmful alternative." Is that the message here? It perhaps is safer than traditional forms of smoking? It doesn't mean that it's a
good thing, particularly when some estimates say 25 percent of high school students right now have tried this in the last 30 days, maybe even more.
GUPTA: Yes, no, I think that's -- you're exactly right. I mean, I think there may be evidence that it's not as harmful as smoking. I mean, smoking
is, you're smoking tobacco. You're getting all those various chemicals. There's plenty of data to show the harm there. With vaping, we don't have
a lot of that data yet. It is nicotine. Nicotine is highly addictive.
Having said all of that, you could make the argument that it's safer than traditional cigarettes. But that's not really the concern here. The
concern is, first of all, a lot of people are doing this that would have otherwise not done anything, they wouldn't have vaped, they wouldn't have
smoked anyway. So it's attracting these people.
And then on top of it, you've got this concern now with so many people getting sick, we don't know exactly what's going on there. It could be
that people are vaping these black market THC sort of cartridges and things like that. That's still being investigated.
But you have both of these issues sort of going on simultaneously, and again, up on the screen, people are looking at this. I mean, I've been
talking about this, Julia for a couple of years, 12 percent of high schools students were admitting to vaping back in 2017. Now 27.5 percent.
[09:15:15]
GUPTA: I mean these numbers are extraordinary. I talked to my own kids, and they tell me that, look, in high school, probably everyone has tried it
at one time or another. That's how prevalent it has become.
CHATTERLEY: Yes, I feel like this is one case where the regulators need to act first and perhaps ask questions, and we learn more later. Dr. Sanjay,
fantastic to have you on the show with us. Thank you so much for that.
GUPTA: Thank you, Julia.
CHATTERLEY: All right. Let's bring you up to speed now with some of the other stories that we're following around the world. A Norwegian oil
company is working to clean up a spill in the Bahamas after Hurricane Dorian ripped through its facility, damaging some tanks.
The company says aerial surveillance reveals the oil may have spread to open waters near the Abaco Islands. Meanwhile, the Bahamian government
says the number listed as missing has now grown to 2,500 people.
Israeli Prime Minister Benjamin Netanyahu is headed to Sochi, Russia to meet with President Vladimir Putin, as election is now only five days away.
The meeting comes as Prime Minister Netanyahu takes heat for his plan to annex parts of the West Bank if he is reelected. Also on the agenda, of
course, the war in Syria.
The British Prime Minister Boris Johnson has denied lying to the Queen over the five-week suspension of Parliament. It follows the Scottish Court's
ruling that his government's advice to the Monarch was unlawful.
(BEGIN VIDEO CLIP)
QUESTION: Did you lie to the Queen when you advised her to prorogue, to suspend Parliament?
BORIS JOHNSON, BRITISH PRIME MINISTER: Absolutely not. And that -- and indeed, as I say, the High Court in England plainly agrees with us. But
the Supreme Court will have to decide.
(END VIDEO CLIP)
CHATTERLEY: Yes, now onto the Supreme Court. All right, still to come here on FIRST MOVE. Oil guns and cryptocurrencies. The U.S. briefly
overtakes Saudi Arabia as the world's top oil exporter. America's CEOs step into the gun debate and the Ripple Effect. We speak to the CEO of the
platform and get insights on the cryptocurrency, XRP. That's all coming up. Stay with us.
(COMMERCIAL BREAK)
[09:20:26]
CHATTERLEY: Welcome back to FIRST MOVE live from the floor of the New York Stock Exchange. Futures still pointing to a higher open here in the United
States after yesterday's rally. Some good news as well on the trade front. More concessions, minor though they are, coming from the United States. As
well, a delay to tariff hikes. We've had the ECB -- the European Central Bank -- announcing fresh stimulus, also breaking through some key
psychological barriers for the U.S. majors here as well.
The Dow beginning today's session above 27,000. That's the first time since July. We've got the S&P 500 above 3,000. The small cap Russell 2000
out of correction territory. In fact, the small caps have risen more than five percent this month, easily outpacing the Dow, the S&P and the NASDAQ.
Let's talk this through, Alicia Levine, Chief Strategist at BNY Mellon, she joins us. Great to have you with us.
ALICIA LEVINE, CHIEF STRATEGIST, BNY MELLON: Thanks for having me back.
CHATTERLEY: Talk us through because we have got some minor concessions. It feels like investors, the moment they see something positive on trade,
they are joyful.
LEVINE: Yes. So we have 13 different times that we've heard that the U.S. and China are speaking and negotiating.
CHATTERLEY: Oh you just mean talks, never mind the headlines.
LEVINE: And yes, the headlines.
CHATTERLEY: The calls.
LEVINE: So the talks are actually happening. And it's true that the market really is primed for good news. It wants to hear something good.
You know, in the back of everybody's mind, there's an assumption that there is some kinds of deal before the election in 2020. Right?
CHATTERLEY: No, that's not the only assumption that investors are making here. And we'll come back to the trade deal, but we've got the list of
even just a few of them, and you can you can rattle through them here. We are making a lot of assumptions about good things coming or bad things not
happening.
LEVINE: That's right. And even with the sell-off in August, and the risk move in August, there's so much good news and so much positive stuff for
equities priced into the market now. So the market is still pricing in 125 basis points cuts from the beginning of the cutting cycle to the end of
2020.
CHATTERLEY: Yes, so one quarter, we're passed.
LEVINE: We actually think that's a lot. So we think we're going to get 25 in September, and probably another 25 by the end of the year. But the 2020
cuts are really up in the air.
The only thing the market is pricing in is that inflation will never rear its ugly head again. And you have to ask yourself, "Is it really different
this time?" And the truth is, the CPI numbers and the TCE numbers very slowly are starting to tick up. I wouldn't call it a run on inflation, but
I would say that they're not as depressed as they were six months ago.
CHATTERLEY: The other thing you're saying, more stimulus from the European Central Bank, we got that. Some form of Brexit deal.
LEVINE: Right. The markets are clearly pricing in a negotiated deal here. Clearly because otherwise the pound would be much weaker.
CHATTERLEY: Do you think so?
LEVINE: I do think so.
CHATTERLEY: So despite all of the chaos that is going on, potentially lying to the Queen, "Off with his head" if necessary. You think deal is
expected?
LEVINE: I think the market is pricing in a negotiated deal, some form of negotiated deal.
CHATTERLEY: Okay, so what does it say for investors right now? Because I see a lot risks therefore.
LEVINE: It does look like there is a lot of risks. I'll say this, all the cyclicals really get killed over the summer. So there's a catch up trade
going on. And you just mentioned the Russell 2002, the small caps have about seven or eight percent to catch up with the S&P performance. So
tactically that feels like the right trade right now.
And I'll say this, if the trade war goes to a low simmer, as opposed to a hot tariffs, I think the market moves higher.
CHATTERLEY: Do you?
LEVINE: Because the market can absorb the certainty of the simmer, but it cannot absorb the escalation overnight, slapping on of more tariff and
killing the consumer sector. That's what -- the market can't absorb that.
CHATTERLEY: This is such a great point. For all the noise and the headline risk, whether it's businesses or whether it's consumers. They
can't really react on a day-to-day basis, you have a long-term decision. So if things are really stable, you have some degree of certainty amidst a
great deal of uncertainty, I guess.
LEVINE: That's right. And actually the Fed put out a paper just last week, which was really interesting. They talked about the effective trade
policy uncertainty. And if it was just the first round of tariffs, we actually would be right, recovered in growth by now because the economy can
handle it. It's the uncertainty that the economy cannot handle.
CHATTERLEY: It's such a great point. The uncertainty, not even the actual impact of the tariffs here. We said that in the beginning, didn't we?
That is just a tiny fraction, and actually the manufacturing in the industrial section is a small fraction of the U.S. economy, too.
LEVINE: That's right.
CHATTERLEY: But it's the fears.
LEVINE: It's the fears and actually the interesting thing about the ISN Manufacturing number is that profits tend to follow that, so even though
manufacturing is only 12 percent of the U.S. economy, you tend to see markdowns in corporate profits when you see the ISN number come down.
[09:25:15]
CHATTERLEY: So the message to investors here is, as long as the trade remains simmer not boiling point again, then this is a good time to invest.
LEVINE: It's probably the time to invest because you have a global easing cycle clearly, and yet you do not have a recession. And we really don't
think there is a recession here. The way you get a recession here is if you wind up doing the tariffs in the middle of December, and you really
hurt the consumer sector.
CHATTERLEY: Right.
LEVINE: Because you're already seeing a pulling back of CapEx. So then if you kill the consumer as well, then you have a recession going. But absent
that, you're actually set up for a leg upward.
CHATTERLEY: feel like if President Trump is watching TV in the United States, he's had that message one or two or several times. You're up for
award tonight.
LEVINE: I am.
CHATTERLEY: We are a huge fan of your insight. Talk to me about the award that you're up for tonight.
LEVINE: So I'm up for a Top Women in Asset Management Award tonight, up for the Business Role Model of the Year. It's really exciting. I've been
in this business. I love this business. I've been on the investment side as well as the marketing side and the strategy side.
And I just think that helping people and businesses and, you know, institutions figure out what to do with their capital, how to make it grow,
how to take care of their constituents is the most important thing. And so I love the business.
CHATTERLEY: Yes, you've got our vote. FIRST MOVE is behind you. Alicia, fantastic to have you on the show. Thank you so much for that.
LEVINE: Thanks so much.
CHATTERLEY: All right, we are counting down to the market open this morning. A positive open, expected as I mentioned, watching some key
levels as well, too.
Coming up for the second half of the show, we're going to be following on with our "Crypto Crazy" week, the Ripple CEO. His interview coming up
shortly. Stay with us. The market open is next.
(COMMERCIAL BREAK)
[09:30:00]
CHATTERLEY: Welcome back to the FIRST MOVE. A double ringing of the bell here at the New York Stock Exchange this morning. "Don't stop" is the
message and investors aren't. We have a higher open as expected for the U.S. majors this morning. Goodwill Hunting, we called it. Plenty of
goodwill.
The United States announcing a tariff delay by two weeks to take them after the next set of talks with China. The European Central Bank announcing a
new bond buying program November 1st, the start date there. Perhaps no surprise, one day after a decision potentially or not on whether or not we
see a no-deal Brexit, as well, strategic it feels.
Tech stocks among some of the biggest gainers today. The NASDAQ rising for the fourth time in four -- the first time in four sessions. My apologies.
Bank stocks also outperformed. They are trading a little bit lower today, continuing to watch bond yields and they've come down slightly here. We've
got the 10-year yield once again, below 1.7 percent.
All right, let me walk you through our global movers and the stocks that we're focusing on in the session. Broadcom, moving higher. The chip maker
reporting after the close tonight. The stock has been on an upward trend, but has been underperforming its peers. So we'll be watching for those
earnings later.
Oracle, under a bit of pressure here. The co-CEO of the software company announced on Wednesday, he would be taking a medical leave of absence. His
co-CEO and also the Oracle Founder, Larry Ellison will take over his duties. The company also posted first quarter revenues that missed
expectations.
Yelp, this after speculation that the online review company could be a takeover target for Groupon. "The Wall Street Journal" reported the Daily
Deals company, Groupon was looking for an acquisition. Yelp -- that was not an exclamation of distress. Yelp is higher in the session so far. The
belief is that Yelp could be a good fit.
All right, what's going on in the energy space as well? Oil prices falling more than two and a half percent right now. The IEA warning of a potential
surplus in 2020. The United States -- also an interesting addition here -- briefly, the world's number one oil exporter in the month of June.
John Defterios joins us now and he has been sitting with the Chief of the IEA the underlying takeaway and we kind of underscored it there, John is
that demand is softening, the trade war here is not helping. And oh boy, is oil ill -- or the U.S. exports of oil having a really detrimental impact
on the price of oil here. It will be significantly higher without them.
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Well, quite a number you saw there in June, right, with the U.S. surging to number one above
Saudi Arabia and Russia. But it's very difficult to see a breakout in prices right now, Julia.
According to three reports, in fact that we saw this week, the EIA in the States, OPEC out of Vienna, then the IAE, the International Energy Agency,
as you are suggesting, they didn't downgrade the report. They said it's flat. But then they added that caveat that you were talking about here
that it will be, in a word, "daunting" to mop up that excess supply in 2020.
So there could be downward pressure because of the geopolitical elements like U.S.-China trade, but just generally slower growth. And then we have
this other twist here that nobody talks about, Julia, and I'm glad you brought it up.
Let's bring up the graphic here. Between 2009 and 2019, it is extraordinary that we've had five countries within OPEC lose more than six
million barrels a day. The United States filled the void.
But you have to wonder, what would oil prices be doing now if that supply was still on the market, and you still have that expansion in shale
production? But the IAE's Executive Director took the opposite position. What if the shale wasn't there? Let's take a listen.
(BEGIN VIDEO CLIP)
FATIH BIROL, EXECUTIVE DIRECTOR, IEA: You should look at the problem from the consumer's side as well. If there was no U.S. production growth, we
could have seen oil prices skyrocketing as we have seen in the past when there was a geopolitical tensions in the Middle East.
We have seen now Iran and Venezuela productions going down. We could have seen oil prices skyrocketing and thanks to production growth in the United
States, we have now a stable oil price.
(END VIDEO CLIP)
DEFTERIOS: I'm sure that's not how the big Middle East producers or Russia see that equation, but that's the view of the consumers from Fatih Birol --
Julia.
CHATTERLEY: Yes, we can't underestimate the pressure this is putting on the OPEC players as well and their supply cut agreement they've got, but
John, we have to wrap it up there. Thank you so much for joining us. We will discuss further in the future, no doubt. John Defterios, thank you so
much for that there.
The legendary oil man and corporate raider, T. Boone Pickens died on Wednesday at the age of 91.
[09:35:02]
CHATTERLEY: Born in Oklahoma, he became known as the Oracle of Oil, and from the 1950s onwards, his investments reshaped the American energy
landscape.
He is perhaps best known for audacious leverage buy attempts in the 1980s targeting companies such as Philips Petroleum. While the bids all
ultimately failed, Pickens made millions in the process. We will be right back. Stay with FIRST MOVE.
(COMMERCIAL BREAK)
TEXT: Crypto Crazy.
CHATTERLEY: In our week of "Crypto Crazy," we've been looking at ways cryptocurrencies can be a force for positive change. One example is
Ripple. It's a platform used to make international monetary transactions faster and cheaper. Now one way Ripple facilitates that is by using the
cryptocurrency XRP. I asked CEO Brad Garlinghouse to explain what XRP actually is, and how it all works. Listen in.
(BEGIN VIDEOTAPE)
BRAD GARLINGHOUSE, CEO, RIPPLE: XRP is like a Bitcoin. It is a digital asset. It's today, the third most valuable digital asset. And what we do
is we take a transaction between banks, and instead of having a bank pre- fund an account at the other bank, which is how correspondent banking works today, the Bank of Brad in dollars would prefund the Bank of Julia perhaps
in pounds, and then I would debit and credit that.
But that means I have to prefund and have dormant capital sitting at that other bank. What we allow banks to do, what our payment providers do is to
tap into the liquidity of XRP liquidity.
So today there's lots of liquidity chain XRP in U.S. dollar. There's lots of liquidity in XRP and British pound and you could tap into that to move
value in real time in seconds. And even compared to Bitcoin which takes up to 12 minutes to complete one transaction, XRP is extremely fast at about
three seconds per transaction. That has meant XRP is extremely scalable in contrast to how Bitcoin works.
[09:40:04]
CHATTERLEY: So it basically goes, Bank Brad has dollars, dollars get transferred to XRP, then XRP is transferred to Sterling, and Sterling then
hits Bank Julia. That's how it works.
GARLINGHOUSE: That's exactly right. And so from a consumer point of view and how we're working with, for example, Money Gram, the consumer itself
doesn't actually see that it's flowing through XRP to solve their problem. What the consumer sees is simply a better product at a better price.
That's good for MoneyGram, that's good for MoneyGram's customers.
And so we're seeing more momentum than we've ever had around using XRP to move this liquidity around the world. And so we couldn't really be happier
about how that has played out.
In a world where there's still a lot, I think of fud, a lot of uncertainty, a lot of doubt about what's going on in crypto. This is a real use case
solving a real problem for real customers.
CHATTERLEY: Okay, so which banks right now are actually using Ripple?
GARLINGHOUSE: We have signed up about two over 200 banks around the world, some of those banks just use our software to do that debit and credit fiat
to fiat. And some of them are using XRP in those flows.
We have banks like Santander that we've been working with for years and are moving lots of volume through Ripple's technology. And then as I mentioned
earlier, payment providers like MoneyGram, or Ria, or Azimo that are using XRP, actually to move that liquidity and really reducing their costs and
improving the product.
CHATTERLEY: Just in terms of the transactions though that you're seeing using Ripple, what proportion of those actually use XRP versus direct and
just where do you see that ratio going? I'm just trying to get a sense of how much XRP itself is actually used as part of the Ripple platform?
GARLINGHOUSE: So I would say either/or magnitude when think about it is similar to the proportion of customers. So if we've got, you know, a
couple hundred customers, we have launched 10 to 15 of them, we've talked about using XRP. I would use that ratio as the total ratio between what's
happening with Ripple's technology overall.
(END VIDEOTAPE)
CHATTERLEY: Okay, institutions using Ripple can choose whether to use the cryptocurrency, XRP. SAome do, some don't, as you've just heard there.
XRP like Bitcoin and other cryptocurrencies has been volatile. I asked Brad if the message to investors is don't use XRP to speculate.
(BEGIN VIDEO CLIP)
GARLINGHOUSE: People are going to speculate on different asset classes. People speculate on gold, currencies. I mean, you name it. People are
going to speculate.
When we think about this, and what I've said very publicly is I think the long-term value of any digital asset is going to be derived from the
utility it delivers. There is a lot of hype in the crypto market space.
You know, we've seen that even recently, you know, a lot of attention around what's going on with Libra and Facebook's announcement around Libra.
Today, that's just a white paper. It actually -- it isn't live, it hasn't launched. So I think that the hype often gets ahead of reality in many
technologies. I think that's true in the crypto space as well.
What I would encourage any person looking at this marketplace is to really understand what is real, what is not real and understand, is there a use
case? Is there utility? Bitcoin, I am long on Bitcoin and Bitcoin I think has real utility around being a store of value, it is digital gold.
But if a Bitcoin transaction takes on average 12 minutes to confirm, and the transaction cost is over $1.00 per transaction, that's not going to be
great for a payment solution. So around payments, we think XRP is uniquely and extremely well-positioned to solve that payments problem. It's
extremely fast, it is about three seconds per transaction. And it costs about a thousandth of a penny to actually enable that transaction.
So we often make the where Bitcoin is very profound in solving that store value, an XRP transaction is about a thousand times faster, and it's about
a thousand times cheaper per transaction.
CHATTERLEY: I saw some Twitter traffic, one in particular Crypto Bitlord that threatens to take over, because they say that, you, the company is
dumping, that you're pushing supply out to the market. Can you explain to me the difference between XRP and Bitcoin with regards to supply? And with
regards how much ownership Ripple itself actually has as a proportion of XRP out there at this moment?
GARLINGHOUSE: So the first thing to understand is that these are all open source technologies. When people talk about, you know, forking
technologies. You have seen Bitcoin fork multiple time. You have Bitcoin cash, Bitcoin DSV, Bitcoin Cash, Bitcoin Diamond, Bitcoin -- I can't name
them all. There's four or five forks of the Bitcoin blockchain. Bitcoin, obviously, the primary BTC has remained kind of the most notable.
[09:45:06]
GARLINGHOUSE: But in the same way, people then take XRP and open source technology and hypothetically they could fork that if they chose to do so.
Now, around the ownership piece, as is the case with Bitcoin, there's some big whales that are early in the Bitcoin community. There's one wallet
that has a million Bitcoin in it, nobody knows who owns it.
In the XRP community, Ripple is the largest owner. And the point I have made is, we are the most interested party in the success of the XRP
ecosystem. We're very focused on our use case, and how do we solve problems with XRP.
But one of things I'm excited about is you're seeing a growing ecosystem of other players, investing in other use cases around XRP. Just recently, we
announced a partnership with Coil, which is doing micro payments for content. So next time you're reading a story on "The Financial Times"
website, you hit that paywall, you hypothetically you just pay, "Hey, here's is a dime. Here's a quarter. Here's 50 cents."
Where today, you know, that's a pretty hard problem. And at companies like Coil, they are going to use XRP for those micro payment transactions. So
yes, Ripple owns a lot of XRP. We're very interested in success of XRP. But the accusations of us dumping, you know, that's not in our best
interest to do that.
You know, we're clearly interested in a healthy, successful ecosystem, and so we would never do that and in fact, we have taken steps to lock up most
of the XRP we own in escrow such that we can't touch it.
CHATTERLEY: Interesting. So, but you agree that you can control the price to some degree, because ultimately --
GARLINGHOUSE: Oh no.
CHATTERLEY: The Ripple community has so much power. No?
GARLINGHOUSE: No, I'm if you look at the correlations between XRP and most of the crypto market, we're often called the alt coins. You see a very
high degree of correlation. You know, Ripple can't control the price XRP any more than, you know, the whales can control the price of Bitcoin.
You know, some of these markets, particularly smaller tokens that are, you know, have a lower market cap and lower float, if you will, you know, they
are at risk of people manipulating them. But you know, you're talking about XRP trades, you know, order of magnitude a billion dollars, according
to coin market cap trades, you know, an order of magnitude, a billion dollars a day of activity. So, I don't think anybody is in a position to
really manipulate those prices.
CHATTERLEY: It's quite funny. One of the big questions that I was asked when I was talking to people about XRP, they said, "What price do you sell
XRP to, to the financial institutions that you're dealing with here?" Do you give them a discount? And is there a lock up? Can you answer those
questions? Because this kept coming up.
GARLINGHOUSE: Yes, sure. So I mean, let's use Money Gram, as the example. When Money Gram is moving money from U.S. dollars to Mexican peso, they're
buying at market. They're not -- there's no special sweetheart deal there.
There are times when we work with institutional investors who might say, "Hey, we want to buy $10 million of XRP." And we would have lock up so it
would prevent them from dumping -- you know, we don't want some other party buying a whole lot of XRP and dump it on the market.
And so we would hypothetically have restrictions about what they could sell and how often -- and usually those are based upon volume in the market.
CHATTERLEY: Yes, you might give them it slightly cheaper, but you say to them, "Hey, you're not allowed to sell it for six months" let's say or a
year.
GARLINGHOUSE: Correct. That's basically correct.
(END VIDEO CLIP)
CHATTERLEY: So just in a time when cryptocurrency investments are battling to become more mainstream, a behemoth facing some skepticism on its own
part is trying to enter the space. Facebook announced plans to launch its own cryptocurrency recently, Libra.
Now their scale could be potent. Could that be a bad thing or a good thing though going forward? I asked Brad that very question.
(BEGIN VIDEO CLIP)
GARLINGHOUSE: I think it's been net good for the industry to bring the attention that Libra has brought on the industry. I think that part of the
maturation of the industry is that transparency and that that debate, that healthy debate. And so net-net, I think it's been a good thing.
I think it's way too early to predict exactly what the implications are going to be. You know, Facebook, obviously, is a consumer oriented
company. It came out and talked about how they're more aggressively competing with financial institutions. They highlighted Western Union as
an example.
So our view is, hey, we can we can partner with those financial institutions and help them solve the problem at scale that we've talked
about here. So I think it's too early to tell. I think Facebook came out in a way that probably wasn't as engaging to regulators as maybe they could
have been, and that stirred up a lot of concern.
And we've made the point that we shouldn't paint the entire crypto industry with a broad brush. There's different types of projects, some are trying
to be very regulatory-compliant, like what Ripple is doing with XRP. There's also some that are trying to circumvent regulators, things like
Monero that are intentionally trying to be, you know, they're about anonymity.
And so I think, as regulators look at the category, they just need to be thoughtful about not painting it with one broad brush, and that's really
what we've tried to emphasize.
[09:50:08]
CHATTERLEY: The CEO of Ripple there. Now speaking of Libra, the French government is coming out strongly against it. The French Finance Minister
saying, "This eventual privatization of money contains risks of abuse of dominant position and contains risks to sovereignty and risks for
consumers, and for companies."
He also pointed to a systematic risk or a systemic risk due to the sheer number of Facebook users, two billion people. For those reasons, according
to Le Maire, Libra cannot be developed in Europe. The challenges remain. All right, coming up on FIRST MOVE. The company is taking aim at American
gun violence, why Uber, Levi Strauss, and many more are criticizing Congress and calling for action, next.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. One hundred and forty five companies are calling on the U.S. Senate to act on gun violence. In a
strongly worded open letter, brands like Levi Strauss, Uber and Twitter are saying current inaction is quote, "simply unacceptable."
Christine Romans joins us on the story. Christine, great to have you with us. It's the strongest message I think yet from the business community to
say, look, we want broader background checks. We want Red Flag Laws here and actually public sentiment is on their side it seems, does it get any
action?
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: It's interesting because public sentiment is more in line with what you're
hearing from these CEOs than what you're hearing from Washington, D.C. And this is another example I think, Julia, of corporate leadership. We've
seen it in other issues over the past few years.
But these companies are saying that their customers and their employees are demanding that the status quo is not good enough, that gun safety -- gun
violence in this country is a public health crisis. Let me read you a little bit from this letter and they're asking the Senate to take up this -
- to take this up. This is directly to Members of the Senate, "Doing nothing about America's gun violence crisis is simply unacceptable and it
is time to stand with the American public on gun safety."
It's very detailed in its recommendations as well. It wants background checks. These CEOs want background checks on all gun sales and they want
to have stronger Red Flag Laws.
They want courts to be able to issue life-saving risk protection order so that families and law enforcement when they see something about a young
person or someone who maybe, they talk about suicide, someone who is struggling with depression and maybe on the path to taking his or her life
that there can be a court intervention here as well to help somebody -- prevent somebody from getting a gun. So very detailed in its diagnosis of
what's wrong with American public health crisis from guns and what to do about it.
CHATTERLEY: You know, it's a saving lives issue. It's a financial issue for some of these politicians, depending on whether they take financial
support from. The last time I checked, there were 500 companies in the S&P 500 and there are only 145 companies on this list. It's a tough one, isn't
it? You know, even companies that take bold stances on other issues like climate change are off this list.
[09:55:20]
ROMANS: It's interesting because some companies that aren't on this list have also moved on this. For example, you've got Walmart, which is
changing some of its policies for what it sells. It has already raised the age to buy ammunition and to buy weapons in its stores. And it's
interesting as Walmart is both a big seller of ammunition and firearms, but it's also has been the scene of -- a crime scene, you know, 22 people were
killed in El Paso, 48 shot there overall.
So some of these companies have found themselves sort of on both sides of this issue. I think that there's momentum in corporate America on this and
I think executives, I know that when you talk to them, I do, I ask them, "What's your company's stance on guns?" This is going to be the issue of
our time, I think.
CHATTERLEY: Yes, and this is not contravening Second Amendment rights. Christine Romans, thank you for that. That's it for the show. You've been
watching FIRST MOVE. Time to go make yours.
(COMMERCIAL BREAK)
[10:00:00]
END
