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First Move with Julia Chatterley
Hopes Rise Ahead Of A Presidential Meet With Chinese Negotiators Later Today; The E.U. Raising Hopes Of A Brexit Deal Breakthrough, Sterling Jumps; If All Else Fails, We'll Talk Flying Cars - Boeing And Porsche Teaming Up And Taking Off. Aired 9-10a ET
Aired October 11, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:00]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, FIRST MOVE: Live from the New York Stock Exchange. I'm Julia Chatterley. This is FIRST MOVE and here's
your need to know.
A Trumpian trade truce? Hopes rise ahead of a Presidential meet with Chinese negotiators later today. Positive Signals: The E.U. raising hopes
of a Brexit deal breakthrough, Sterling jumps. And if all else fails, we'll talk flying cars. Boeing and Porsche teaming up and taking off.
It's Friday. Let's make a move.
Welcome to FIRST MOVE once again. Happy Friday. Lots going on at once again this morning. We've got some moments of trading truth potentially.
We've also got a Brexit breakthrough, potentially, too.
All I can say is FIRST MOVE has lots of potential today. As always, potentially. Investors certain things so. Take a look at what we're
seeing for U.S. futures at this moment. Futures rallying looking to add to yesterday's half a percentage point gains, too. Also boosted this morning
as well by energy stocks and I'll explain why shortly in a few moments' time.
Guys, we may be detail light on all of these potential breakthroughs, but I tell you, the mood is positive. President Trump first and foremost meeting
with the Chinese Vice Premier Liu He later today. He said yesterday, and I'll quote him, "Talks are going very well." Yes, we've had that once or
twice or many times before, but it does feel like a face-to-face meeting between these two gentlemen is key here and it is fueling expectations of
some kind of mini deal here to delay the tariff rises set to kick in next week.
That's the hope at least. The question is, will it be tariff tears is or a terrific truce triumph. We should know much more later today.
Trade optimism though helping to boost European stocks. Take a look at these, too. Asian shares finishing the week higher as well. The Shanghai
Composite -- take a look at that, seeing its loss just rise in a month. And what's interesting here overall to me is that October began as the
worst start to a quarter on Wall Street for a decade.
But if we hold on to the premarket gains that we're seeing today, and I appreciate that could be a long shot, we could virtually erase the month's
losses so far.
We're kicking off trading today with the Dow and the S&P 500 down more than one percent, but hope certainly floats. Let's get to the drivers right now
because Clare Sebastian joins us and she has been reading the trade truce tea leaves.
Clare, we have heard the President be optimistic before and then all bets are off with the next tweet. But right, now the meeting between Liu He and
the President today feels important.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Very important, Julia. I think both sides are aware in this trade war that nothing really gets done
until the principals are at the table and it has been a while since they were, but yes, the consensus have slightly improved optimism from quite a
low by, we will say going into this. The President saying that the negotiations so far have been going very well.
Sources telling our White House team that progress yesterday which involved the Vice Premier Liu He and the U.S. Trade Representative, Robert
Lighthizer, they went better than expected. Apparently, they blew through a plan at lunch break such as the momentum of the talks.
But you're right in saying that really the sense is that we're not going to get an overarching deal here. There's not going to be real progress on the
structural issues that the U.S. has been pushing for.
The real core of this trade war from the beginning, which are things like intellectual property rights in China, market access, industrial subsidies,
forced technology transfer, all of those things that frankly, have bipartisan support and support even from businesses in the U.S., Julia.
Really, they're looking more at things like you know, currency agreements, perhaps a pact that would avoid China devaluing its currency, increased
Chinese agricultural purchases, which would reduce that trade deficit that President Trump hates so much.
And anything really that will avert the tariff increase that we're expecting on October 15th. That is really what they're thinking here.
CHATTERLEY: Yes, and this is so key as well. It's the medium term and the longer term if you're talking about the thorny issues like technology
theft, intellectual property protections, in the short term, at least politically for the President, it would help to have a deal that supports
the manufacturing sector and the agricultural sectors that have felt recessionary for a while.
Let's play devil's advocate, Clare, here. What happens if we don't see an agreement? What tariffs on what are set to kick in in the coming weeks?
SEBASTIAN: Yes, this is crucial, because of course, I think if anything that's certain about this trade wars is that we don't know what's going to
happen until it happens. It's all very unpredictable and based on the moods and the happenings in the room and the tweets that come after, Julia.
I think we can pull up that that graphic that we just had on screen. The next shoe to drop is next week, next Tuesday, October 15th. The tariff
hike on $250 billion worth of Chinese imports to the U.S. will go from 25 to 30 percent. That's mainly interim products used by businesses. But
there are some consumer goods on that there.
[09:05:10]
SEBASTIAN: The next tariff issue is December 15th, the 15 percent tariff on about $156 billion of Chinese imports. Now that is including laptops
and smartphones. This is where it really gets interesting for the U.S. consumer. Apple in the firing line there.
And there's another one we should mention, the Huawei waiver. This is a waiver that allows U.S. businesses to continue to do business with Huawei
on a limited basis - that expires on November 18th.
There was a report this week that the Trump administration was considering granting some licenses to U.S. businesses that would go beyond that waiver
when it expires, but that is not confirmed. And this of course, a crucial issue for China.
CHATTERLEY: Yes, it's funny, isn't it? Just listening to that, the timing here key heading into the Christmas shopping season in particular, but also
how low our expectations have been brought that actually just a ceasefire and not seeing these final tariffs applied is a cause for optimism here --
Clare.
SEBASTIAN: Yes, I mean, I think that's where we are, Julia. Certainly, expectations have been royally reset over the past, not just a week or so.
But we saw what happened in August where you know, the U.S. labeled China a currency manipulator, various retaliatory tariffs were announced by China.
Things have really been difficult since the talks broke down in May. There's really been very little progress to speak of, so a lot of talk
here, a few optimistic noises. But ultimately, we don't really know how they're going to make real progress on the big issues as such.
The best case scenario, Julia, as we say, is that they avert those tariff increases going forward and that we move towards a meeting between
President Trump and his counterpart President Xi in November at the APEC Summit, but of course, we've been here before. It felt very similar last
year.
So again, very difficult to see at this stage where exactly this is going.
CHATTERLEY: Yes, it's such a great point. But again, that key meeting between the Presidents. An important watch word, their announcement today
to watch out for. Clare Sebastian, thank you so much for that.
All right, let's move to the U.K. now where the U.K. pound in leaping on Brexit deal optimism, right now up for nearly two percent versus the U.S.
dollar. The E.U. says it's getting positive signals regarding a potential Brexit deal.
Nic Robertson is back with his on this story. Nic, you and I are doing our best to curb enthusiasm and manage expectations yesterday. Is this
tactically positive spin or are you sensing that something material may have changed in the last 24 hours?
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: I think we were. However, the positivity that came out of that meeting between Boris
Johnson, British Prime Minister and Leo Varadkar, the Irish Prime Minister or the Taoiseach yesterday is in the air, clearly.
Look, there were caveats supplied to that. The markets have responded the way that they will. It is positive. We've heard Michelle Barnier, the
E.U.'s Chief Negotiator today after meeting with his British counterpart, Stephen Barclay both saying that the meeting was constructive.
Barnier now saying that they're ready to intensify talks, but he is also talking about it as being a mountain to climb. You've got to remain
vigilant. You've got to remain patient.
One diplomat has talked about this tunnel as being, you know, which is kind of the language that's used for this intensifying discussions. Though no
one saying they're in the tunnel, but there's a small light on the tunnel.
I think we're still at that stage of, look, I mean, let's feel good about where we are. Let's respond to that. But the reality is, there's still a
long way to go, and I think key in all of this, you know, if you really want to be sitting on the markets with a big ear to the political
machinations here is what have you heard from Number 10 Downing Street since yesterday? You've heard nothing. So that tells you this is very
sensitive.
Otherwise, you know, Boris Johnson might have been tempted to put his spin on how everything went. A very sensitive stage still.
CHATTERLEY: Yes, the only thing that fell short about that tunnel, quite frankly, at this stage, Nic is the time we've got to get to the end of it,
which is of course, the 19th of October potentially or having to request an extension.
What might Boris have had to give up here -- very quickly -- because that was my read from this? What did Boris have to concede in order to get this
optimism from the E.U.?
ROBERTSON: So the two big sticking points yesterday were customs and consent. Now, customs, the issue of an open border across the border of
Northern Ireland. No customs barrier there. That's the E.U. barrier.
So Leo Varadkar, the Irish Prime Minister came out and said he had seen positive movements from the British Prime Minister on that.
Consent is the other big issue here that people are talking about, the consent of the people of Northern Ireland to whatever is agreed here
because it's going to affect them and the border.
Leo Varadkar yesterday talked about consent in the terms of the long-term final arrangements, which is less than what Boris Johnson have put on the
table before which was sort of a more immediate consent, and then a rolling consent which was not acceptable to the E.U. after that.
So where has the ground been given? I go back to the point that we haven't heard from Boris Johnson, and the reason is his margin for movement on this
is small because the Democratic Unionist Party in Northern Ireland would be would have a hard time giving up any of the proposals they put forward so
far.
Consent will be an important sell for them to their constituency. Customs and the border again a tough one.
[09:10:19]
CHATTERLEY: Yes, and the Brexiteers will be all over him on the other side. Nic, fantastic to have you with us. Thank you so much for that.
All right, to the Middle East now for our next driver. Reports: Two missiles struck an Iranian oil tank in the Red Sea near the Saudi ports of
Jeddah. Oil prices are climbing on the news, too.
Fred Pleitgen joins us now. Fred, great to have you with us. What more do we know and are the Iranians pointing fingers at any potential culprits
here yet?
FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, that was pretty unclear earlier today, Julia. It was quite interesting how all of
this evolved.
Right now, the Iranians say that for the time being, they're not pointing fingers. They are however sticking by their story saying that this tanker
which as you said was about 60 miles, about 100 kilometers off the coast of -- or off the Port of Jeddah that it was struck by two missiles.
They say this happened in the very early morning hours of today. They say one attack happened at 5:00 a.m., and one happened at 5:20.
Now, it was quite interesting to hear, because the head of the National Iranian Tanker Company, he came out earlier today, and he said that the
tanker had been struck by missiles possibly launched from Saudi Arabian soil. Those were his words.
Now, later, the National Iranian Oil Company came out and dismissed that report. The current Iranian line is that it's unclear where these attacks
were launched from; however, the Iranian Foreign Ministry has condemned these attacks.
Now as far as the damage is concerned, also some conflicting reports going on there. Initially, we were hearing from the Iranians that both
containers of that tanker containing oil that had been damaged in that attack that oil had been leaking into the Red Sea.
It seems as though from the reporting that we're getting right now that that leak is under control. And that tanker we can confirm now is actually
on the move.
The Iranians are saying it's moving at a slow pace back towards the Persian Gulf. The last that I checked on marine trafficking sites was it seems to
be moving at around nine knots an hour at the moment. It currently seems to be sort of on the height of about Port Sudan still in the Red Sea.
So the tanker is moving. The Iranians moving away from saying that the Saudi Arabia might be behind all of this, but still very much in anger, as
we've seen from that official reporting there from the Iranians saying that they believe this was an attack. There's going to be an investigation and
they say someone is going to be held accountable -- Julia.
CHATTERLEY: Yes, but watch this space. Fred, fantastic to have you with us. Thank you so much for that.
All right. I'm saving myself to go around the world today. It's coming up after the break. Plenty more to come from FIRST MOVE. Stay with us.
We're back in two.
(COMMERCIAL BREAK)
[09:15:46]
CHATTERLEY: Welcome back to FIRST MOVE with a look at some of the stories making headlines around the world.
Wildfires are spreading across Southern California. Winds gusting at more than 96 kilometers per hour re fanning the flames and forcing mandatory
evacuations in the Los Angeles area. Dozens of homes have already burned and two major freeways have now been shut down.
The former U.S. Ambassador to Ukraine is expected to testify before Congress as part of the Impeachment Inquiry into Donald Trump. Marie
Yovanovitch is due to testify behind closed doors.
Suzanne Malveaux is in Washington. What do we expect from this? And I made the point it's behind closed doors here, but clearly a lot of people
are looking to see what we get from this testimony. What are we expecting here?
SUZANNE MALVEAUX, CNN NATIONAL CORRESPONDENT: Julia, there's a lot of anticipation about this because of course, the big question right now
within this hour is whether or not she is going to show up to this behind closed doors type of hearing and testimony that is because before as you
know, she is still a State Department official and before her counterpart, Sondland was actually pulled just an hour before he was supposed to
testify.
So there's a lot of questions so far. Everything seems to be a go. But everybody is waiting for a phone call, perhaps even an e-mail.
I just spoke with a member of the Intelligence Committee, and they would actually receive notice if there is a change.
So having said that, they're assuming that she is coming. She will be able to answer some questions. She is a key figure.
As you know, Yovanovitch was actually named in the whistleblower complaint as somebody who was raising red flags about President Trump's a potential
abuse of power using his power with a foreign government to dig up dirt on his political opponent.
We also know that she came in the crosshairs of the President's Personal attorney, Rudy Giuliani that he tried to get her dismissed, recalled from
her position. He ultimately was successful in doing that.
There were a lot of unfounded conspiracy theories that were swirling around about her working for George Soros, the liberal donor; or Hillary Clinton.
Those of course debunked.
And then finally, her name is the subject of the phone call, the infamous phone call, July phone call between President Trump and the Ukrainian
President Zelensky in which he says that she is bad news and that there are things that are going to happen to her.
Zelensky replying that he agrees one hundred percent. And then we heard from the President from the White House, again, emphasizing that this is
someone who is bad news.
And so we know that she can shed some light on what did she know about Giuliani's role in the diplomacy, the shadow diplomacy that he was engaged
in in Ukraine? Why did she come under such fire from the President and his personal attorney? And does she think in fact that it was a political hit
job that was done on her when she was removed from her position -- Julia.
CHATTERLEY: You know, I am glad you mentioned Rudy Giuliani, of course, President Trump's personal lawyer. Talk to me about Igor and Lev, two
associates of Rudy Giuliani, who were arrested at the airport yesterday with one-way tickets. What do we know about these two characters? And I
say characters because that's what they look like.
MALVEAUX: There are there are some people who would agree with you there, Julia that they are characters, but in fact this it does kind of read
almost sort of sound like some sort of spy novel, if you will.
But yes, they were arrested yesterday and these two individuals really are at the center of their relationship here with Rudy Giuliani.
It was Giuliani himself, who told CNN that these two individuals helped him. Actually, it was their job to try to get information about Trump's
political enemies in Ukraine, to essentially dig up dirt, including on Joe Biden.
These were also fixers, if you will in Ukraine, introducing him to people who were former as well as current officials in Ukraine to help him out
here and they also donated hundreds of thousands of dollars to a pro-Trump political -- a PAC, which of course is a violation of campaign finance
laws.
And so these two individuals very much at the heart of this and their documents already subpoenaed by the committees that are conducting this
Impeachment Inquiry -- Julia.
CHATTERLEY: Yes, sometimes it feels like we're operating in a parallel universe. Suzanne, fantastic to have you with us. Thank you so much for
giving us the details there.
All right, let's bring it back to markets because we are joined by Mohamed El-Erian, the Chief Economic Adviser at Allianz. Mohamed, always fantastic
to have you with us.
I want to get away from politics here and talk about trade and hopes of a potential trade truce or a deal here. You've said on Twitter we'll end up
somewhere between a mini deal and a ceasefire. What did you mean by that?
MOHAMED EL-ERIAN, CHIEF ECONOMIC ADVISER, ALLIANZ: So think of conflict resolution going on a spectrum from a very temporary ceasefire to a
durable, comprehensive resolution, and in the middle, you have either truce that holds for a while, or you have a mini deal.
And I think what the market is expecting is a mini deal, and that's quite a move in consensus expectation.
However, the market is cautious long term. So you see short-term optimism with long-term caution.
CHATTERLEY: If we bring it back to the thorniest issues here, the intellectual property theft, the trade technology theft concerns, that was
always going to be a far more difficult agreement to reach.
Are you happy with the idea that we have a mini deal in the short term that perhaps relieves some of the pressure on the agricultural sector in the
United States? Perhaps from the manufacturing sector, too, with tariff relief, potentially, and leave those thorniest subjects to later assuming
it ever happens?
EL-ERIAN: Look, it's a really difficult judgment call and I'm not in the room and those who are going to argue that a mini deal can be a stepping
stone to something bigger.
And there's the other side, which will say no, keep the pressure on, if not now, when? And that's the judgment call that the President is going to
have to make and what complicates things for people like me trying to evaluate where we're going to end up. It is also the domestic political
side playing on both sides.
So this is a very complex issue and ultimately, it will be the call of the President of the United States mainly.
CHATTERLEY: The other person and team in fact that's trying to grapple with the outcomes here is the Federal Reserve and Jay Powell. Do you think
some form of truce here or a mini deal is enough to stay Jay Powell's hand at the end of this month on further cutting rates? Or do you think it's
effectively a done deal here and he really has no choice but to comply with market wishes?
EL-ERIAN: So interesting, the market expectations have come down about market -- about the Fed cutting from about 75 percent down all in the high
60s, having said that it is very hard for the Fed not to validate market expectations.
From an economic perspective, they should not cut. They should keep the ammunition dry for when they really need it.
However, I don't think this is a Fed that's willing to take on the market. So I still think that the baseline is for another cut in interest rates.
CHATTERLEY: The other fact, too, that the Federal Reserve is dealing with on a global basis or at least keeping an eye on is what's going on in the
U.K., critical date, October 31st, the Summit coming up at the back end of next week, too.
What's your assessment of what you're seeing there and your base case for whether or not a deal can be reached or we see an extension or perhaps
something else?
EL-ERIAN: So again, you know, Julia, it's very hard to call. The market expects a deal, a mini deal. So the market is focused on too many deals,
and has been trading very much like that whether you look at equities doing better, whether you look at yields on government bonds going up or whether
you look at currency, where the British Sterling has been outperforming.
The market expects too many deals to be announced in the next few weeks and days, and if it doesn't get that, there's going to be quite a reaction.
But in both cases, there is longer term caution. We haven't resolved the longer term issues yet.
CHATTERLEY: Yes, the other story -- and there's a reason why I mentioned these three things in succession is Greece.
We all know the concerns that the market has had about Greece. Yes, we've had leadership change, a leader that many people know Brussels knows. But
this week, we saw Greece being paid to issue debt.
The Greek government now being paid to issue debt. Is there a degree of complacency in the market where Greece can raise money for free or be paid
to do so? And you keep saying that we're expecting deals and agreements and the best case scenario here. Should we be worried?
EL-ERIAN: Look, we should be worried that markets are distorted and Greece trading at negative yield, which as you point out means that you lend to
Greece and you pay for the privilege of lending to Greece. Who would have thought that? That is one of a very long list of unthinkables.
[09:25:10]
EL-ERIAN: And if we want to explain these unthinkables in the financial world, you've got to point the finger at Central Banks and then
particularly, the European Central Bank.
When you want negative policy rates, and you tell the world you're going to use your printing press in the basement to buy securities, you distort
markets and you encourage people to do things that in a few years' time are going to look very silly.
But in the short term, people are trading off the actions of Central Banks, and the risk is that they are distorting asset allocation. They're
encouraging excessive risk taking. But that is what they have to do when other policy makers aren't stepping up to the plate. That's the big
problem, Julia, is that the other policymakers have been paralyzed by the political polarization that we're seeing all over the world.
CHATTERLEY: Is part of the answer here buy crypto, Mohamed? Get some diversification in there potentially if you are struggling with traditional
assets perhaps?
EL-ERIAN: I say part of the answer is to have a layer of what I call regret minimization. The world is highly uncertain, unthinkables have
become reality.
The probability of making a mistake is considerable not because anybody wants to make a mistake, but because things have become so fluid, so
unpredictable. It is this concept of unusual uncertainty.
I think when you are navigating that, you want a level of regret minimization, it means higher cash, up in quality in the stocks you hold
and cut down the maturity of your fixed income exposure.
CHATTERLEY: Yes, regret minimization. I like it and be vigilant. Mohamed, fantastic to have you on the show. Thank you so much for joining
FIRST MOVE. Mohamed El-Erian there, Chief Economic Adviser at Allianz.
The market opens next. Stay with us.
(COMMERCIAL BREAK) [09:30:00]
CHATTERLEY: Welcome back to FIRST MOVE in the final trading session here at the New York Stock Exchange of the week. As expected, a strong start
for U.S. equities this morning. Investors awaiting the outcome of the second day of talks between the United States and China.
President Trump meeting with China's lead trade negotiator Liu He later today. Him saying -- the President saying earlier that the trade talks
were going well. As we were discussing before the break, a mini deal between the two countries that could lead to an increased Chinese
agricultural purchases, that's also helping give a boost to corn and soybean prices this season, too.
That said, China imported some 30 million metric tons of soybeans from the U.S. before it suspended purchases this year. So there is a lot of ground
to make up. So that's going to be one of the interesting areas to watch here, even though with a mini deal, stocks won't be completely out of the
woods.
Earnings season starts again next week with the major U.S. bank reporting of course, and once again trade will be front and foremost in some of the
commentary to watch there.
Let me talk you through some of the Global Movers this morning, too. Shares of streaming service Roku trading higher. The investment firm,
Citadel has taken a five percent stake in the company. This intensifies the Wall Street debate into Roku's worth amid increased competition in the
streaming space.
SAP shares also rallying this morning. The longtime CEO, Bill McDermott is stepping down. The German software giant has decided not to renew his
contract. Two Board members will become co-CEOs of the company. They say SAP is performing well with little negative effects from the trade war.
Slack shares also in focus. The workplace productivity apps says daily active users, up some 37 percent from the same time last year. Its 12
million daily users are now almost on a par with the rival Team app from Microsoft. And those are today's Global Movers.
All right, let's bring it back to you one of our top stories today, to the Turkish incursion in Syria.
The Turkish Defense Minister saying this morning that they are determined to quote, "terminate the existence of terrorists."
The government says more than 200 people have been killed as its forces press further into Northern Syria. Kurdish fighters who helped us defeat
ISIS are believed to be among the dead.
CNN's Arwa Damon is live in Northern Syria for us. Arwa, what have we seen so far today?
ARWA DAMON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Julia, there's a lot of conflicting reports about what the actual death toll is when it comes to
the Syrian Kurds, the YPG that Turkey is now attempting to take on inside Syria.
If you look behind me, right underneath, you have the Turkish town of Ceylanpinar and behind that, you have the Syrian town of Ras al Ain. This
town in particular has been one of the ones that has really been in the crosshairs of the Turkish forces, along with their Syrian Arab allies on
the ground, a fighting force made up of former Syrian rebel fighters, as they have been pushing through.
The Turks are saying that they cleared villages on either side. This fighting has really displaced tens of thousands of people. It has already
cost civilian lives and there are a lot of unanswered questions especially since by all accounts, Turkey is absolutely determined to eradicate what it
deems to be an existential terrorist threat emanating from Syria.
And that is because of the historic ties that exists between the Syrian Kurdish fighting force, the YPG and the Kurdish separatist group that
Turkey has been battling for decades, the PKK.
Turkey is issuing severe warnings to anyone who dares to criticize it. Turkish President Recep Tayyip Erdogan is telling his Western allies that
if they criticize this operation -- this is especially being directed at Europe -- if they criticize this operation, he will unleash 3.6 million
Syrian refugees that currently reside in Turkey. Meaning he will open the gate once again of the European refugee trail.
He is not listening it would seem to any of his allies. He is not seeming to be taking any sort of criticism we now have. Russia's voice being
added, President Putin is voicing his concern that this offensive could allow ISIS to reemerge, re-strengthen once again, because inside Syria, the
forces on the ground those Kurdish forces, the YPG that were being backed by the U.S.-led coalition, they were the main fighting force against ISIS.
[09:35:02]
DAMON: They have now suspended that operation. They are the ones who are guarding all of the camps and prisons that hold either former ISIS fighters
or their family.
They are saying that they have had to pull back forces from those positions to bring them to this battle ground.
So it's a very violent situation, Julia. War is always ugly, and does claim casualties on all sides. We've had mortar artillery rounds inside
these Turkish border towns as well that killed children just yesterday, and it doesn't seem like, Julia, it is going to be ending anytime soon.
CHATTERLEY: No, it certainly doesn't. Arwa, fantastic to have you with us. Arwa Damon there. All right, we're back in two. Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. Another busy week in crypto land and First Move is watching.
How about this, if you're looking for positive vibrations. UNICEF, the United Nations Children's Fund has made a move into the crypto world,
setting up a fund accepting donations from both Bitcoin and Ethereum.
Such enthusiasm for crypto is echoed by our next guest. He predicts Bitcoin will spike up to $20,000.00 within 18 months. Mike Novogratz is
the CEO and Chairman of Galaxy Digital and joins us now. Great to have you with us.
MIKE NOVOGRATZ, CEO AND CHAIRMAN, GALAXY DIGITAL: Thank you very much.
CHATTERLEY: That's optimistic.
NOVOGRATZ: Not necessarily. I think UNICEF is saying, we will take crypto. Lots of charities and foundations and endowments are saying you
want to give us money, you can give us Bitcoin, you can give us Ethereum. You can give us Apple stock. And so it's just more and more people
accepting Bitcoin as a financial asset.
CHATTERLEY: This is what we need to see greater mainstream adoption. Better understanding is people like charities saying look, you know, we're
going to be a bit more adventurous of what we accept as well -- charity is charity.
NOVOGRATZ: Yes. And listen, there are some endowment so some charities will take the Bitcoin, they'll sell it and put it into dollars because
they're more conservative, but there's some endowments, the Yale Endowment, famously because usually where Yale goes, all the rest of the endowments
follow.
CHATTERLEY: Yes.
[09:40:02]
NOVOGRATZ: They've made investments in Bitcoin. Yale, Harvard, and Stanford, have all invested in venture funds that both own Bitcoin and own,
you know, venture properties in the space.
CHATTERLEY: But you have a whole different career as a macro investor in traditional assets, let's call them that.
And then obviously a second career in crypto and as you said, as sort of an expert and becoming an expert in this field in particular, one of the
strongest arguments I see people making today is that we're seeing a debasement of currencies. We're seeing Central Banks around the world
printing money.
It's one of the strongest arguments for investing in an alternative asset, like crypto. Would you agree with that?
NOVOGRATZ: A hundred percent. Listen, we're in a very strange macro environment. When Greece is raising money at negative interest rates.
CHATTERLEY: Yes, we talked about it.
NOVOGRATZ: You're like, wait a minute, I look back, just in the last five years, there are 40 emerging market currencies that have devalued more than
40 percent.
And so we look back, you know, in real terms, even the U.S. dollar is down 96 percent in a hundred years. In the last thousand years, no one currency
stayed -- the reserve currency more than basically 125 years and we're at that level almost in the U.S.
And so we've got geopolitical uncertainty. We've got negative rates. It's all bullish for gold, you know, and it's bullish for Bitcoin.
CHATTERLEY: You know, it's interesting, I called the International Monetary Fund crypto-curious. They cited specifically that the idea that a
country around the world could shift and see predominant use of a cryptocurrency rather than their own is a risk rather than as a benefit.
NOVOGRATZ: Well, listen, there's -- and you've got to be careful. So like China already broadly has a digital currency. And they're working on a
crypto one. They've got Alipay and WeChat, that everybody buys everything on in China, and they're rolling that out to countries abroad.
China has got a huge effort in Africa and South America. And so one reason I think that our regulators and our government should be more willing to
look at things like the Facebook Libra program is because it's an arms race.
And you know, we have to look at the predominance of the U.S. dollar as the reserve currency - that gets put at risk real quick if everybody is buying
and selling things on Alipay.
CHATTERLEY: India is another country that's looking at a digital coin as well, a digital stable coin, just to throw another country in there. Why
is it an arms race? What is the risk here if the likes of China or India manage to adopt and foster this technology quicker than the United States
for example?
NOVOGRATZ: Well, so -- and you've got to a little careful this gets nuanced. A centralized cryptocurrency is a really, really dangerous
proposition because cryptocurrencies are programmable money.
So if you think of China's version of cryptocurrency is -- it is centralized. They own it. They have amazing technology already because 95
percent of Chinese payments are done on phones. All of those phones get pushed into a shared database that the government forces.
So Alibaba, WeChat they all take all your spending data and give it to a government clearinghouse. You now take AI and machine-based learning, you
plug it into that government clearinghouse and you know a lot about a lot of people. It didn't exist five years ago.
If you have all the spending data in the world, we can do much with it. But now, you put the computers to it and they know who is gay and who is
not gay, to a man and a woman.
CHATTERLEY: Yes.
NOVOGRATZ: And so if you're a liberal country, great. But if you've got a new ruler who decides he doesn't like gays, and it's a digital -- I mean,
it's a cryptocurrency centralized, he can shut their money off overnight.
If you think about what's going on in Hong Kong with the protest right now, facial recognition cameras everywhere, let's just shut their money off.
CHATTERLEY: That kind of power is very dangerous.
NOVOGRATZ: It's really why we need decentralized systems. You're seeing it perfectly right now in this China situation.
And quite frankly, when I look at China and Hong Kong, I think I know how it's going to end and it's not going to end with tanks rolling in the
street. It's going to end with what they call white terror - that they're going to slowly say, you know what, that guy doesn't get credit anymore. I
don't think he needs a job anymore.
And so we're in a world that is crying out levying for decentralized systems.
CHATTERLEY: I want to -- I want to sort of make a tangent here and it's something that I know you've discussed. It's very important to me, I think
in this regard.
When I talk to people about cryptocurrencies and it doesn't matter which one I'm talking about, this story or the definition of what it is changes
and it infuriates me and the other thing that infuriates me is particularly on social media, the interaction between people who like XRP or believes in
XRP, Ripple or those that like Bitcoin or and there is a sort of a fight.
NOVOGRATZ: Yes.
CHATTERLEY: If we want to see mainstream adoption though, we need to be more inclusive and recognize that adoption of one, understanding of one is
good for all.
NOVOGRATZ: I think people should nominate me chairman of the galaxy.
CHATTERLEY: Oh, there we go.
NOVOGRATZ: Because I see things pretty clearly. I think Bitcoin is the only cryptocurrency that really has one store of value lane. Gold -- gold
has got a nine trillion dollar market cap.
You can fit all the gold that's in every mine in a 25 meter cube. It is valuable because we say it's valuable. All the rest of the elements on the
Periodic Table, like there are 114 elements, they're valuable because we use them.
[09:45:11]
NOVOGRATZ: I think Bitcoin is going to be valuable just because we say it's valuable, but the rest of the cryptocurrencies are going to need to be
used. And it's going to take a while for those economies to develop, right?
When we had a bubble, they all went up because they were all the next Bitcoin. But I am telling you, they are not all the next Bitcoin.
It doesn't mean the Ethereum project isn't an awesome project and in three or four and five years, it could be a spectacular project. It will have a
huge amount of value, but it's not going to get valued the same way Bitcoin does.
CHATTERLEY: So there's an interaction between a good store of value and good for transactional purposes and one doesn't necessarily lead to the
other.
I've got a million more questions for you. But there's also another important subject that we're going to get to. Mike Novogratz is staying
with us.
Coming up after this, we're going to be getting real about the Real Act and talking U.S. prison reform because it's something close to Mike's heart.
Stay with us. We're back in two.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to the show. Earlier, we spoke to Mike Novogratz on all things crypto. But he is joining us again now to talk about
something else he is passionate about, and that is prison reform in what he calls the prison to school pipeline.
In an op-ed on cnn.com, and I'll tweet it out later. He says, it's been sabotaged. Here in the United States, nearly half of all people released
from prison return there within three years. But it doesn't have to be this way. Mike, why this? Why are you so passionate about this?
NOVOGRATZ: You know, I stumbled on to the issue of really, first with bail and the more I dug in, the more outraged I got.
And so it's one of these things around fairness. I think I grew up thinking everything should be fair. This may be naive. And, you know, our
criminal justice system is unfair. It's unjust. It's punitive. It's mean spirited. It's really a scourge on our democracy.
And so there are so many facets of it that needs changing. We need a complete overhaul, and probably, we have to ask ourselves the question, do
we want to lock people in cages for whatever reason they're in there and leave them to rot and pay for them with the rest of their lives? Or do we
want to help rehabilitate them and help them come back and be -- you know, do we believe in redemption in this country?
CHATTERLEY: I mean, there was something if you go back to the 1960s, called Pell Grants, which allowed people who have been incarcerated in the
United States put in prison to get access to effective college education.
They allowed themselves to be educated. They were given access to the money to do it, and then as a result of law change in the 90s, it was lost
or petered out and you're saying, bring this back. Let these people have access to college education.
NOVOGRATZ: The crime bill in the mid-90s, you know Joe Biden has got a lot of flack for it because he was part of it, you know, different time but it
was a horrible bill. It built a lot of new prisons. It literally stripped out Pell grants for people that are incarcerated. That's insane.
There's a 43 percent less chance of coming back to prison if you've gotten educated in prison. And so just economically it's insane. Morally, it's
insane.
[09:50:10]
CHATTERLEY: Wait, pull that stat out again. So just under 50 percent of people tend to end up back in prison within three years without any
fundamental change to their education. However, if they are educated in prison --
NOVOGRATZ: There's 43 percent less --
CHATTERLEY: Forty three percent less end back in prison within three years.
NOVOGRATZ: And 12 percent get jobs faster. And so essentially, I would have thought the jobs would have been easier, but it's hard for people that
are coming out of prison to get jobs. Employers don't want to hire them.
It's starting to change given that we have a three and half percent unemployment rate.
CHATTERLEY: Right.
NOVOGRATZ: And there's -- the winds of change in this country on the whole criminal justice thing are happening. There's a tailwind for the first
time in 30 years.
I know 15 to 20 billionaires that have thrown their weight behind this movement. Four years ago, when I first got involved, there was about $100
million a year philanthropically coming into the space. Today, that's $600 million.
CHATTERLEY: Wow.
NOVOGRATZ: And so guys like Michael Rubin from Fanatics and Dan Loeb and Robert Kraft. John Arnold is the heavyweight in this space.
I mean guys that made their fortunes on Wall Street or in industry all are looking at this and saying, it makes no economic sense and it makes no
moral sense.
CHATTERLEY: Cost? What would the cost be of providing this education? And can you do a net? Can you net out the cost of the fact that you keep
having to put these people in prison again, and they reoffend and people get hurt?
NOVOGRATZ: These are not $40,000.00 grants. These are $6,000.00 to $8,000.00 education or even less. Remember, people in prison have no
money. Half the reason that's why they're in prison.
We set up the Bail Project because 60 percent of America doesn't have $1,000.00 in savings. And so if you get arrested for something and they
give you an $800.00 bail, not only can you not pay, you don't even have a friend to call. Like that's why our country is in crisis.
CHATTERLEY: There will be people who are listening to this and go hang on a second, I can't afford to send my children to school. I work two or
three jobs. Why should people who have committed bad acts, who are in prison be given access to an education that perhaps they can't afford for
their children?
NOVOGRATZ: Well, I mean, if you can just be economic about it, do you want to pay for that person for the rest of his life? Or do you want him to be
able to learn to fish and fend for themselves?
Forget the moral argument. There's an economic argument that's really strong. However, it's quite funny, one of the reasons this is the most
bipartisan issue, it's the only bipartisan issue right now.
I was laughing and I had a panel at my house and I had Jared Kushner on one side and, you know, Desmond Meade who ran the Florida Restoration Act on
the other, and, you know they are talking --
CHATTERLEY: They agreed on this.
NOVOGRATZ: And they are agreeing on this.
CHATTERLEY: The Real Act. I mentioned it. Something that's going through Congress right now. How likely is it that we see bipartisan action to
provide this kind of funding? Just to your point on an on economic base?
NOVOGRATZ: I think it's -- I think it is likely. Listen, we had the First STEP Act, right? You know, my buddy Van Jones really was one of the spear
headers of that, and no one thought it could get done. I mean that Van Jones and Donald Trump would be in the White House, you know, smiling next
to each other is shocking.
CHATTERLEY: Yes, that's a good image.
NOVOGRATZ: It's is shocking. So you have to have imagination. There's momentum there. Will it get done in this political environment in the next
few months? I don't know.
But I would tell you in the next 18 months, two years, you're going to see a lot of things change.
CHATTERLEY: And ultimately improving people's lives, lowering reoffending rates, and to your point, people who perhaps didn't have any form of
advanced education, starting out, get a chance later on.
NOVOGRATZ: I had a party at my house -- well, an event two nights ago -- and there was a young 32-year-old kid who had been arrested when he was 16
years old for murder in Los Angeles and he got clemency from the government after spending 16 years in jail. He is an amazing artist.
And I spent a lot of time with him and he had become a beautiful soul. He had taken complete ownership of his mistakes and he felt horrible about it.
And you've got to ask yourself, are we our worst moments or are we going to learn to forgive? And after a guy has paid a certain --
CHATTERLEY: Due.
NOVOGRATZ: Due. Let him move on. He is is going to be an amazingly productive member of society. He's going to bring joy to people. He is
going to help people.
And so that's the world I want to live it and I think our country does. I think at our core, our country really is good and we've got to get away
from this kind of mean-spirited punishment cycle.
CHATTERLEY: Are we our worst moments? No, we're not. Mike, it's a great cause to fight for. Mike Novogratz, CEO and Chairman of Galaxy Digital.
We will get you back to talk both actually. Progress on this and crypto, of course, too.
All right, so let me bring you up to speed with today's "Boardroom Brief." Finally Renault getting its second CEO in less than a year as its boardroom
turmoil continues.
The French carmaker has appointed its Finance Director to take over as interim boss. She replaces Thierry Bollore who was appointed after Carlos
Ghosn was arrested in Japan on financial misconduct allegations.
Boeing and Porsche teaming up to develop an electric flying car. Yes, you heard that right. The two firms say they want to explore the premium urban
air mobility market, but their announcement didn't include any details on when any vehicle would take off or how much it would cost or anything.
Yes, detail light.
[09:55:15]
CHATTERLEY: SpaceX and NASA could be sending people into space together as early as 2020. NASA has clashed publicly with SpaceX CEO, Elon Musk last
month over delays to the project.
NASA says it's now very confident that the Crew Dragon spacecraft could be ready to send astronauts into orbit next year.
Now, final, ending on good vibrations, too. Before we go, President Trump tweeting on China, "Good things are happening at China trade talk meetings.
Warmer feelings than in the recent past, more like the old days. I will be meeting with the Vice Premier today. All would like to see something
significant happen."
We shall see it -- we shall believe it when we see it. I am getting mixed up. It's a good show. Positive vibrations I said to you, potential.
That's it for the show. You've been watching FIRST MOVE. It is time to go make yours. Have a great weekend.
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[10:00:00]
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