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First Move with Julia Chatterley
Uber Loses Its London License Again; The Tesla CEO Touts 200,000 Cyber Truck Orders; Tiffany Says Yes To LVMH In A $16 Billion Deal. Aired 9-10a ET
Aired November 25, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:22]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Live from the New York Stock Exchange, I'm Julia Chatterley. This is FIRST MOVE and here is you need to
know.
Uber and out. Uber loses its London license, again.
Musk's Cyber Monday. The Tesla CEO touts 200,000 cyber truck orders.
And here is to the happy couple. Tiffany says yes to LVMH in a $16 billion deal.
It's Monday. Let's make a move.
Welcome once again to FIRST MOVE. Happy merger Monday and never mind getting excited about Thanksgiving dinner later on this week. Today, it is
all about Breakfast at Tiffany's and the markets right now seemingly like it.
Markets like mergers. All U.S. stock markets set to open higher. That's following a strong session in Europe, too. And it kicks us off of course
for a holiday shortened trading week here in the United States.
We've also got Charles Schwab and TD Ameritrade confirming their $26 billion tie up, too, so we'll be watching the financials when the session
gets started in around 30 minutes time as well.
We did see the major averages slipping late last week as well. The S&P 500 though -- and this is the key point -- still only around half a percent
away from record highs. History, as well suggests we could get back there perhaps this week. U.S. Stocks rise more than 80 percent of the time
during Thanksgiving week. That's according to Barron's over the weekend.
Something also to be thankful for in terms of trade negotiations, too, perhaps -- over the weekend, China announcing new guidelines to help curb
intellectual property theft. Remember, this is one of Washington's major sticking points.
Beijing is saying that stronger IP protections and penalties for IP theft may be coming shortly. The big question of course, is whether or not that
will be enough to prevent fresh tariffs being imposed on some $150 billion worth of Chinese goods on December 15th.
I think this also probably helped the Asia session, too, where Hong Kong stocks also outperformed following a record turnout at local elections that
saw big gains for pro-democracy candidates. All the details on that in just a few minutes' time.
But for now, let's get to the drive is where there could be a lot less driving in fact, in London. Uber hitting gridlock over there, the city
stripping it of its operating license. The stock down over three percent here premarket. Hadas Gold joins us now on this story.
Hadas, great to have you with us. I saw Wedbush Securities this morning called it a seismic blow if this ban is upheld. Talk us through why
because I think the details on this is pretty alarming.
HADAS GOLD, CNN BUSINESS REPORTER: Hey, Julia. This would be a huge blow for Uber if they were to actually lose the license and not be able to
continue driving in London because London is one of the top five markets for Uber and it's one of the only markets outside of the Americas that is
so big and so important for the company.
Now Transport for London, announced that as of midnight tonight, the license would technically be expired because they say it's a series of
regulatory breaches. The main issue they say is about driver identification.
They say over the past few months, certain drivers have been able to upload their photos to other drivers' accounts and drive under those accounts --
pretty much being unauthorized driver -- they say some 14,000 trips were taken that as a result uninsured.
They say that there's certain problems around how Uber has been identifying drivers, saying that it's putting passengers safety at risk.
Sadiq Khan, the London mayor said in a tweet, "I know this decision may be unpopular with Uber users, but their safety is the paramount concern.
Regulations are there to keep Londoners safe and fully complying with TFL's strict standards is essential if private hire operators want a license to
operate in London."
Now, Uber has 21 days to appeal. So it's not like as of midnight tonight, Uber drivers will stop being able to be operating on the streets of London.
And Uber says they will appeal. They are calling this extraordinary and wrong.
The Uber CEO saying in a tweet, "We understand we're held to a high bar as we should be. But this TFL decision is just wrong. Over the last two
years, we have fundamentally changed how we operate in London. We've come very far and we will keep going for the millions of drivers and riders who
rely on us."
So Julia, I don't think that Uber is going to absolutely stop operating in London. I could see this appeals process continuing to drag on.
[09:05:01]
GOLD: Uber doing something that will somehow satisfy the regulators here. This just goes to show you how important these fights between the
regulators, these cities, and companies like Uber are playing out because all it takes is the city say, nope, you don't have a license, and then Uber
can have just billions of its valuation completely just wiped off.
CHATTERLEY: Yes, even with these concerns, you have to assume that for consumers, it would be a real inconvenience. I have to admit, that was my
first thought.
Hadas Gold, great to have you on that story. Thank you for that and we shall watch developments.
All right, next driver, they're engaged. Luxury powerhouses LVMH and Tiffany getting together, LVMH is buying the jeweler for around $16.2
billion. Paul La Monica is on this story for us.
The largest luxury deal ever, Paul, here, and I make that what? A 37 percent premium to the closing price on the initial approach on October
26th. Wow, that's a price tag.
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, it's a lot of little blue boxes here, Julia, clearly, and yes, I mean, I think LVMH realized that
Tiffany was kind of vulnerable. This is a company that has had some issues over the past couple of years with sales not being as good as hoped for,
for a variety of reasons.
They had issues way back in, you know, the lead up to the 2016 election because of disruptions around Trump Tower, the Tiffany flagship store on
Fifth Avenue. That was an issue back then.
There's been problems internationally due to the sluggish economy globally as well. Fewer tourists coming to the U.S. also because of the trade war.
So I think LVMH realized that they could scoop up Tiffany and Tiffany stock has done well in the past couple of weeks, because of this speculation, but
this is a merger that creates an even bigger luxury goods giant and will possibly make Bernard Arnault, the head of LVMH even wealthier and may even
have him surpass Bill Gates and Jeff Bezos on the world's wealthiest rankings.
He has inched closer to the two of them based on the stock price move of LVMH today, Take a look there, you know how he is within spitting distance
of Bezos and Gates, and well ahead of poor Warren Buffett at a mere $85.9 billion.
CHATTERLEY: Poor Warren.
LA MONICA: I know. Hard to be the oracle of Omaha these days.
CHATTERLEY: I mean, there are so many different directions -- there are so many different directions we can take there.
I love your point about this, providing LVMH with access to U.S. consumers, but also fast-growing Chinese consumers as well.
And in return for Tiffany's, perhaps branding help with millennial customers here. But to your point, how close is it then on the global rich
list rankings?
LA MONICA: Yes, I mean, we will see what happens with the markets in New York as they're about to open. It looks like Amazon and Microsoft could
rise along with the broader market on trade hope, so that gap may now -- you know, may widen again, but LVMH is inching higher obviously on the
trade talk, I mean on this merger talk and, you know, if that means that you know, Arnault's net worth jumps alongside LVMH, then he could inch
closer to Gates and Buffett -- I mean, Gates and Bezos.
CHATTERLEY: Yes, lots of diamonds -- lots of diamonds in those little blue boxes, however many of them there are.
I will point out though, as well Credit Suisse had a price target on this at $140.00. Cowan said $160.00. So, you know, the other side of the coin
here is perhaps they've got it cheaper than they might have done.
Paul La Monica, thank you so much for that. We like that story.
We also like this story though. The next driver. Elon Musk tweeting 200,000 orders for his cyber truck despite all the debate over the weekend.
Just $100.00 deposit required in order to get that order in.
Remember, we talked about this in Friday's show. The armored glass window shattering during the demonstration. Clare Sebastian joins us once again
on this story.
Clare, there's so much to talk about. More details about perhaps why -- why that window shattered? Also explanations for why the shape of the
cyber truck is the way it is. But what do we make of the 200,000 to start?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Well, Julia, it's a good number -- 200,000, but they are not orders. They are more like
reservations and as you said, they only needed to put down $100.00 to get that and it's fully refundable if they change their mind.
Now the 200,000 good news, similar numbers what we saw from the Model 3 when that first released. That was up to 325,000 in a week and we're only
four days post the launch of this one.
So it does show strong demand. It does show the pull of Elon Musk's vision despite all of the controversy around the car itself and the launch -- and
as for that launch, and the controversy around that, as you say Musk on Twitter over the weekend, setting the record straight.
Take a look at the video he tweeted of his chief designer, who before the event did again throw that metal bull at the window and worked.
So during the event, of course, you see it shattered, but they posted a video on Twitter before the event where it actually works. So Musk trying
to set the record straight on that.
[09:05:00]
SEBASTIAN: He also tweeted in defense of the shattering glass saying that when they took a sledgehammer to the side of the car, that we weakened
window and if they hadn't done that first that would have actually worked with the glass. So he said he should have done the glass first and the
sledgehammer second.
But as for those orders, setting the stock up a little bit premarket there, Julia. So clearly, that's some good news for Elon Musk and for Tesla.
CHATTERLEY: Yes, I have to say I do double takes when I see Teslas driving down the street, but this one I'm still on the fence with regards to the
shape and size, but no marketing, no PR because we do it for him.
It's quite fascinating, 200,000 order even if it is just $100.00. Clare Sebastian, thank you so much for that.
All right. Let me bring you up to speed now with some of the other stories that we're following around the world. Hong Kong markets jumping after a
landslide victory for the territory's pro-democracy movement in local elections.
According to local media, the pro-democracy candidates dominated supporters of Mainland China, winning almost 90 percent of the District Council seats
up for election.
Nick Paton Walsh joins us now from Hong Kong. These local elections Nick were seen as a protest vote against China's role and the approach that
they've taken here. We clearly got that. The question is, does it make a difference here?
NICK PATON WALSH, CNN SENIOR INTERNATIONAL CORRESPONDENT: Not to the standoff here tonight, which echoes many over the past month, perhaps less
violent that we've seen.
Let me explain what you're seeing behind me. Protesters who were originally gathering down towards the Poly U where there are a handful
possibly protesters still inside behind the police cordon are not being allowed out at this point.
They decided that a wedding of a police officer was occurring in this hotel and moved down here and began shining laser lights, shouting up at the
windows. They think they found some guests at that wedding and began frankly, giving them a lot of aggravation.
They have now moved inside and some media it seemed burst into the lobby. That seems to have diffused, but it just sort of shows the slightly
chaotic, sporadic nature and the fury, frankly. They are still on the street here.
You might think the protesters would be perhaps overjoyed to see this extraordinary result at the polls where they got 90 percent or so according
to local media of the Council seats and also a 70 percent turnout.
Let me just walk with our cameraman over here in this direction. The crowd seems to be rushing towards the street, because it's over here, the police
are gathering up on one of the many walkways in Hong Kong. There have been sort of abuse exchange from the police over the past hours or so as well,
as well as lights shone in each other's eyes.
Now, Julia, the question really here that's absolutely key is this local Council election has delivered. Many saw a referendum's mandate to the
protesters saying essentially that despite the extraordinary disruption that they wrecked upon Hong Kong, the damage to its infrastructure and to
its economy that's now in recession, the people are still behind these protesters, regardless of the continuing violence.
What we're seeing today though, is common scenes echoing what we saw in the days leading up to the votes. Protesters very keen, it seems to not do
anything that could allow authorities to cancel the election. But still, the same standoff persists.
The problem being that I think protesters really feel emboldened by this mandate, this extraordinary display, a record display at the polls backing
them up, but that hasn't translated overnight into a change in how Hong Kong is governed, because these local councilors control waste collection,
control various bus routes, but they don't actually have the hands on the levers of power. That's still Beijing very much.
So nothing has really changed in how Hong Kong runs overnight, except that Carrie Lam backed by Beijing has said she will seriously reflect on this
results.
China, however, have simply said Hong Kong is part of it and it will remain so no matter what. So this is perhaps what we're going to see more of --
anger on the streets at the police still, and possibly that may build as people who thought their vote changed Hong Kong realize that actually it
didn't -- Julia.
CHATTERLEY: Yes, check mate it seems continuing on all sides. Nick Paton Walsh, thank you so much for that update there.
All right, let's move on. "The Washington Post" reports White House officials scramble to justify President Donald Trump's original decision to
withhold military aid to Ukraine.
It cites e-mails and documents where officials showed concerned the decision was made without assessing its legality. The revelations could be
used by Democrats in their Impeachment Inquiry.
Thieves stole scores of priceless exhibits from a museum in the German city of Dresden early Monday morning. Curators say diamonds, pearls and rubies
were among the items taken from the green vault in Dresden Castle. It was home to one of the largest collections of treasures in Europe.
Police say they set up a Special Commission to investigate.
All right, we're going to take a quick break here on FIRST MOVE, but coming up, surviving the trade war this Christmas. Retailers hunker down and hope
the future looks bright.
Plus what's in the stars for Libra? Hard questions in store for one of the founders of Facebook's digital coin. Stay with us. That's coming up.
(COMMERCIAL BREAK)
[09:18:09]
CHATTERLEY: Welcome back to FIRST MOVE live from the floor of the New York Stock Exchange where we are expecting a positive start to U.S. markets this
morning. We've got merger news and of course, trade optimism from the news over the weekend from China on intellectual property theft, I think feeding
into a broader sentiment here.
We also had U.S. consumer sentiment numbers on Friday, which I want to point out to you. Economists call it the best consumer environment in some
20 years helping to offset the pullback that we continue to see in U.S. business investment.
We've also got estimates on retail sales as well that they could rise more than four percent this holiday season after soft sales last year.
Let's get some context on this. Joining me now, Dryden Pence. He is Chief Investment Officer at Pence Wealth Management. Great to have you with us.
DRYDEN PENCE, CHIEF INVESTMENT OFFICER, PENCE WEALTH MANAGEMENT: Great to be here again.
CHATTERLEY: And Happy Almost Thanksgiving as well. Let's talk about the retail environment.
PENCE: Sure.
CHATTERLEY: Because if we compare what we're expecting to see this year with what we saw last year, the comparables have to be favorable given that
we were in the midst of a really strong stock market selloff in December last year, this time last year in particular.
PENCE: Well, both from the stock market and from basically the economy overall, I think we're in a better position this year than we were last
year. I think that we're going to continue to move forward.
I mean, most people forget that we have almost two million more people working this Christmas than we had last year. That's going to be a big
driver.
CHATTERLEY: I mean, I think one of the underlying factors that have kept the economy going so well, actually, this year is the strength of the
consumer. Are you surprised by that? Or do you think actually, it ties very much to what we've seen in terms of jobs numbers and the fact that
that has remained strong, too?
PENCE: I think that's very, very true. More people are working and making more money than ever before. If you've got a job this Christmas, you feel
better than you did last Christmas. You're going to spend a little bit more, and so the economy continues to be the strong underpinning that moves
our overall economy and the markets forward kind of regardless of what this headline volatility maybe.
[09:20:06]
CHATTERLEY: Headline volatility meaning trade tensions.
PENCE: Exactly.
CHATTERLEY: What happens if we see further tariffs come December 15th?
PENCE: Well, I mean, there certainly is a chance and the President has found his favorite weapon system. And his favorite weapon system now is
the tariffs or the threat thereof and the ability to execute on them. And so I think that that's going to be a key thing in the war.
You don't know if it's going to happen on the 15th or not. If it does, there will be some headline volatility around that. So we try to be ready
for it.
But in the end, as we've always said, trade wars end and sooner or later, this is going to be over.
CHATTERLEY: Yes. And if you tread the headlines on the trade war situation, then you get chopped around regardless.
PENCE: It is very easy to get whipsawed, yes.
CHATTERLEY: You pointed out something interesting from earnings season, though, and that was that the number of mentions of tariffs of the trade
war reduced compared to last quarter and I do think that's important.
PENCE: It is important because now -- I mean, tariffs are effective when they occur. They changed from the previous period. But now people are
beginning to get used to them. You're seeing manufacturing move out of China and to other places to get around it.
So there's some adjustment that goes through the supply chain, into the purchase chain. So it's not as big a deal this year as it was last year
and we're beginning to see fewer mentions of that.
CHATTERLEY: More mentions, in fact, of a strong U.S. dollar and FX headwinds. So is that a justification for continuing to look at stocks
that have domestic consumer focus rather than make a greater share of their money internationally?
PENCE: We are still very focused on U.S. domestic stocks. Stocks that make their money here in the United States from consumers in the United
States, because that's the strength that we see and we're still focused on that. It is going to take a little while for these currency things to
adjust even though the Fed is probably off the table now for a while.
CHATTERLEY: Amazon? One of your top picks.
PENCE: Still love it.
CHATTERLEY: Still love it.
PENCE: Still love it.
CHATTERLEY: Even though -- and there are analysts out there that go look, we love it, too, but it looks relatively well priced here. It looks lofty.
Perhaps we could see some kind of pullback for the technology stocks that have led us higher. Any of those justifications ring true for you?
PENCE: You've got to get the great big things right, and the great big thing is that, you know, currently e-tailing and online is about 11 percent
of consumer demand in the United States. Whereas you look overseas and other countries like China, it is 23 percent of the market.
So we're continuing to see this dramatic growth of continued online retailing, and as that grows, that's going to do very well for Amazon.
They're absolutely dominant in that space. And those are the companies that we like.
CHATTERLEY: Walmart?
PENCE: We like Walmart. Walmart and Target, both are beginning to get this e-commerce piece, right. And Walmart is in a good position to
integrate, you know, grocery -- I mean, 25 percent of the country buys their groceries at Walmart. They are in that store.
So then you coordinate the e-commerce with the store delivery and all of those things, so we think Walmart long term is going to continue to do very
well and move forward in this space of e-tailing and make that a bigger segment of their business.
CHATTERLEY: You know, interesting, I just got back from Singapore. We were talking about e-payment systems, the rise of alternative payment
systems, and the challenge that they present, too, the Visas and the MasterCards of this world you like these names. Is the point here that you
like them for the foreseeable future and these challenges are going to take time to really compete?
PENCE: Sure, I mean, we -- you know, Visa and MasterCard together control 85 percent of all the payments in the United States, 96 percent of all of
those in Europe. Every time you make a transaction, they're getting a little piece of it. So as the economy continues to grow, they're going to
do well.
While there's a lot of other entrants into that market, all of them are still needing the same focus of the habitual payments and things like that.
So while others are coming in, we think they've got a long way to go before they begin to challenge the absolute dominance of Visa and MasterCard.
CHATTERLEY: We will watch those market share numbers and if they start to come down, perhaps, you ask questions, but for now --
PENCE: Yes, everything has got to fight every quarter.
CHATTERLEY: Dryden, great to have you with us. Dryden Pence there. Chief Investment Officer of Pence Wealth Management.
PENCE: Happy to be here.
CHATTERLEY: Now, as we were just mentioning in that conversation, China over the weekend signaling its plans to improve the protection of
intellectual property.
The government announced Sunday it wants to increase penalties for theft of IP and business secrets. The U.S., of course, and we've talked about this
a lot, they've complained for years that China tolerates breaches of American companies' property rights.
Well, Kristie Lu Stout spoke to the CEO of memory disk maker, Micron Technology to discuss this exact issue. Listen in.
(BEGIN VIDEOTAPE)
SANJAY MEHROTRA, CEO, MICRON TECHNOLOGY: We want overall, a free market based economy. We want respect for intellectual property. We want to be
able to absolutely engage with the customer ecosystem here in China across -- as well as all across the globe.
And we -- you know, continue to monitor the world trends today in terms of enabling a system that will allow us to do that and allow our semiconductor
industry to do that as well. It's important for the entire semiconductor industry to be able to engage with customers worldwide.
And I'm certainly hopeful that U.S. and China will be able to address their issues, their differences, and that we will have opportunity to be able to
do the business based on level playing field, fair market principles, as well as respect for intellectual property.
KRISTIE LU STOUT, CNN INTERNATIONAL CORRESPONDENT: Yes, and given the lack of a resolution for the trade war and a political environment that's
getting increasingly fraught, are you making adjustments in terms of your relationships with customers, in terms of your supply chain, in the event
that this is not going to be resolved anytime soon?
[09:25:45]
MEHROTRA: So we have, as I said, very well-diversified set of customers across the globe, exciting part for our businesses that memory and storage,
DRAM and flash are absolutely at the heart of all of the technology trends today. AI to IoT to autonomous.
We have a manufacturing supply chain that is well-diversified across the globe. We have manufacturing operations in 10 different countries, and so
we have a very diversified footprint that really enables us to be very resilient, very adaptive, very agile.
And of course, we remain extremely focused in this exciting time of more need for more memory and storage and continuing to keep our eye on the ball
with respect to technology innovation, product development, and engagement with customers to bring the full value of our portfolio to the customer.
This is what we remain focused on, and this is what I think, you know, regardless of some of the ups and downs that may occur due to macroeconomic
conditions or geopolitical issues, I think, you know, technology has a way of powering through that and memory and storage will absolutely be key in
that regard in the future.
(END VIDEOTAPE)
CHATTERLEY: Monday's market open is next. Stay with us.
(COMMERCIAL BREAK)
[09:30:02]
CHATTERLEY: Welcome back to FIRST MOVE live from the New York Stock Exchange and that was the opening bell this Monday, a higher open as
anticipated as we begin this holiday shortened trading week.
Trade hopes, big merger deals all helping stock sentiment in this morning's session. So far, we're higher by some two-tenths of one percent.
Also Chinese newspaper, "The Global Time" says a Phase 1 trade deal is very close, echoing what President Trump here in the United States said on
Friday. China also as we've been discussing, announcing new guidelines intended to help combat intellectual property theft. This is a big demand
in the U.S. trade side of the negotiations hereto, so if that pulls through, that could be a help for Phase 1 dealing.
Now, in the meantime, two big U.S. firms impacted by tariff uncertainty. Best Buy and heavy machinery maker, Deer give business updates later this
week, too. So we have to watch out for those.
What about these Global Movers? Well, it's a merger Monday and that's what we're focusing. Brokerage firm TD Ameritrade up nearly three percent after
it agreed to be taken over by Charles Schwab. We've been waiting for the concretes -- the confirmation of that deal now for a while.
Look at the sparkle on Tiffany, too. Higher by some 5.8 percent after they accepted a $16.2 billion offer from France's LVMH.
And a shot in the arm for the Medicines Company. That stock rising fast after Novartis announced to take over worth nearly $10 billion. Right now,
that stock up some 22.5 percent.
Also among the big movers, recently, so on crypto currencies or digital assets, Bitcoin recovery slightly as you can see after plummeting to a six-
month low on Friday. It is down over 40 percent in fact, from its 2019 high back in June, now back over to the $7,000.00.
Ripple down some two and a half percent as well around 21 U.S. cents. Ethereum also in a little bit of pressure as you can see. Now volatility
may be a key feature of crypto at the moment, but one big player is betting that it's only a matter of time before the growth in e-payments fosters a
more mainstream adoption.
Facebook announced the launch of its own digital currency back in June, and the backlash was pretty fierce. Lost in the noise though, with some of the
detail about what their digital coin Libra actually is, and what Calibra itself is and how that operates.
Now I sat down with one of the currencies co-creators Christian Catalini. He is now Head Economist at the Facebook subsidiary, Calibra. Calibra is
the financial services and software. The so-called wallet for Libra coin. It's also just one of 21 members of an organization that operates
independently from Facebook.
I began by asking Christian just for a basic explainer on what Libra and what Calibra is.
(BEGIN VIDEOTAPE)
CHRISTIAN CATALINI, CO-CREATOR, LIBRA: The project was incubated originally within Facebook, but as you know now is being passed to the
Libra Association.
CHATTERLEY: Yes.
CATALINI: So, at a high level, Libra is a network and a protocol for moving value and essentially doing global payments at a very low cost.
So Libra and the association behind it will be the governance body behind this network that would allow anyone not just Facebook or Calibra to
operate on top of it.
Calibra will be one of the many services that you would see on that network, and particularly, it will be a wallet that will allow you to send
money across borders, extremely cheaply and conveniently.
And so essentially, you know, you can think of -- if you're looking for an analogy, e-mail, you know, being the network and being Libra and Calibra
being one of the many services that allow you to send e-mails like Gmail or Yahoo mail or many others.
CHATTERLEY: You basically looked at the global remittances system and said, some people around the world are paying extortionate amounts of
money. We have billions of users. We can facilitate cheaper, easier, quicker payments, perhaps better than anybody else. Was that the thinking?
CATALINI: The thinking was, you know, starting from the problem. When you look at 1.7 billion people today that are unbanked, and there's even more
that are unbanked, often the opportunity is really that they have access to a mobile phone.
So essentially, they have an opportunity to be connected with the global financial system. The challenges being that there's no service or no
product that can satisfy those needs, and really drastically lower costs on cross border payments.
Remittances average seven percent today, but that hides a lot of dispersion, so in some regions, the average can be much higher 20 to 30
percent and just imagine if you're sending money back home to your family through a remittance service, and now you're taxed 30 percent every time we
do that action, that's the problem we started from.
[09:35:05]
CATALINI: That's where we, you know, started thinking about a network that could make this cheap, fast and convenient on a global scale.
(END VIDEOTAPE)
CHATTERLEY: Regulators have been skeptical about Facebook's cryptocurrency plans from the get go. France and Germany have already said they will
block the currency using Europe.
I asked Christian Catalini whether he is worried about the initial pushback, and how much of that resistance is simply down to the Facebook
factor?
(BEGIN VIDEO CLIP)
CATALINI: I think, you know, whenever you have a new innovation being proposed, there's often pushback. We've seen this throughout history from
you know, telecommunications to the early days of the internet, to all sort of new technologies.
We expected this phase and in fact, we very much welcomed it in the sense that this part of collaborative dialogue with a number of regulators on a
global basis is one where now we have a chance as Calibra, but also, together with the other 21 founding members of the association to really
work together through the challenges and issues that a new system entails.
But also to keep in mind, you know, what is the best way to achieve that mission to build on financial inclusion? And we need to deliver new types
of services that we don't have, you know, that don't exist today?
CHATTERLEY: Do you think the reaction would have been the same if it has been a different company? If it hadn't been Facebook and Mark Zuckerberg
and the privacy issues that we've seen Facebook having to deal with over the past months and years? Do you think the reaction might have been
different? Or do you think, to your point, people are afraid of new technologies?
CATALINI: I think in general, you know, any player that has a large user base would have been met with the same type of scrutiny. And so to some
extent, you can imagine that many of this dialogue we would have had later if it was a smaller company or a startup.
That said, I think this part is quite productive because it is essentially allowing us to think through what are the challenges that the system would
face if it is successful in a few years.
And so yes, the level of scrutiny is probably higher. But I see that as a feature, not a bug.
CHATTERLEY: You keep reiterating, and I want you -- that there's a group of individuals involved in this now. This is not purely Facebook, and it
is sort of separate from what Facebook does and is even if it will be fostered within the technology of Facebook and the apps that are provided.
You know, I think one of the things that I've certainly learned about Facebook is the utility value that it provides outweighs individual's fears
about privacy, about data, about information, utility value comes first.
Do think that will be the same in this case, when we're talking about financial information? The utility value and the value that we place on
that is perhaps higher than the risk that we are giving off our financial information to a broader system and a big one like Calibra?
CATALINI: So I think here, there's an important distinction, right? So on the Calibra side, so on the wallet, first of all, there was a recognition
that users, especially in the U.S. and Europe, they don't want the commingling of social and financial data. And that's why Calibra is
essentially separating social and financial.
And again, from a privacy perspective, I think what's really important to keep in mind is that people will have choice. So one of the key advantages
of having a fully interoperable protocol, like the Libra network and having governance that is really distributed, again, since you know, October 14th,
Facebook is only one of 21 members with one vote.
So you know, there's many NGOs that are now around the table and they have the same governance influence of Facebook. You have a different governance
structure, you have an open source code base, which makes the platform extendible and also very open for others to build and improve on.
And overall, this promise of interoperability will allow for all sort of new business models to emerge, and also for, you know, different wallets to
compete on different features.
We're not just talking about price, and you know the cost of sending a remittance would be also on privacy. So I think the goal was really to
create a vibrant ecosystem. Well, eventually consumers will be able to choose, you know, the product, the wallet, the financial intermediary that
fulfills their needs.
(END VIDEO CLIP)
CHATTERLEY: Now, among the concerns about Libra is the impact it could one day have on the financial system. Some regulators -- and this was a hot
topic in Southeast Asia when I was there -- given the dominance of Facebook's applications around the world, Libra, we're talking Instagram,
we're talking WhatsApp, it could challenge the Central Bank issued currencies one day. I asked Christian Catalini about that potential
threat.
(BEGIN VIDEO CLIP)
CATALINI: This is the part where I think there's a fair degree of misunderstanding.
CHATTERLEY: Yes.
CATALINI: Libra was designed from the ground up to be a compliment to existing currencies. It is not meant to compete with the dollar or the
Euro or any other currency. It is meant to really enable a new type of functionality on them. So that again, you can send that cross border
payment or that remittance with low friction and especially with low cost.
[09:40:03]
CATALINI: In thinking about, you know, Libra from an economic perspective, we always wanted to keep in mind, a world where, you know, Central Bank
digital currency like a Fed coin are already available.
Those assets are not available today and that's why we have to go to greater lengths in thinking about how do we structure our reserve to
deliver a kind of a digitized version of for example, of a set of currencies, like in the Libra basket, but you know, if those currencies
were to become available, they could tightly integrate with Libra most because Libra is really meant to be a payment network and something that
allows it to move value, it is not meant to compete with Central Banks or with monetary policies.
CHATTERLEY: You're not trying to create an alternative to the U.S. dollar, for example.
CATALINI: Absolutely not. And in fact, the way we think about the public- private partnership is one where, you know, each sector can focus on what they do best.
Monetary policy is the province of Central Banks and Libra is not designed to interfere with any of that. The assets behind Libra are assets that are
generated, maintained and controlled by Central Banks.
On top of that, you can build a very efficient payment network and all sort of new applications where you know, innovation can thrive, and sort of sort
of new players from startups who tech players to financial players can come in and compete on a level playing field.
CHATTERLEY: Do you accept though, that if we look at the monthly active users for Facebook, 2.4 billion, approximately, if even just half of them
decided that they were going to use Libra as a digital currency or a digital asset here, the risk that you accidentally become an alternative to
a U.S. dollar or a Euro, does exist?
CATALINI: So from an economics perspective, there's actually very good reasons for why that shouldn't be the case. Right?
So for example, if I'm paying for coffee domestically, why would I take on foreign exchange risk? Again, taking a step back, Libra is really
optimized for that cross border experience.
So transactions where already today you're incurring fees, and there's like many intermediaries through the value chain. They all charge their own
spreads, and so when you look at the end result, consumers and users are really excluded because of cost.
CHATTERLEY: For anywhere in the world where I use the U.S. dollar, arguably, I could use Libra?
CATALINI: Again, I think, you know, wallets and intermediaries and exchanges operating on the Libra network will all have to comply with local
jurisdictions and local laws. And so I think in many cases, we are very similar to what you would come to expect from modern payment systems.
(END VIDEO CLIP)
CHATTERLEY: Christian Catalini there. All right, we're going to take a break. But up next, the threat of new tariffs looming over the Holiday
Season. We'll take a look at how retailers are managing that risk. Stay with us.
(COMMERCIAL BREAK)
[09:45:50]
CHATTERLEY: Welcome back to FIRST MOVE. The U.S. and China continue to drive markets with the on again off again on again dance around the
question of a Phase 1 trade deal.
The next pivot point comes just before the height of the Holiday Season. New U.S. tariffs are due to take effect on December 15th unless a deal is
done to prevent it.
And despite positive words from both sides, that seems right now far from certain. Our next guest is Rick Helfenbein. He is President and CEO of
the American Apparel and Footwear Association, and he says over 90 percent of clothes imported from China and more than half of the imported footwear
are already subject to tariffs of 15 percent. Fantastic to have you with us.
RICK HELFENBEIN, PRESIDENT AND CEO, AMERICAN APPAREL AND FOOTWEAR ASSOCIATION: Thank you.
CHATTERLEY: What does that mean, in terms of pricing to the consumer? How much of that rise has been passed on?
HELFENBEIN: Well, small retailers are being hit harder than the big retailers, so consumers will feel it. They won't feel it full force. We
are less worried about this Holiday Season than we are about the 2020 where there's no place to bury it or hide it or work around it.
And it would be very helpful that, you know, maybe these tariffs will go away. There's been some positive movement on the China side on
intellectual property in the last 24 hours. The market seemed to be reacting to that.
It looks like USMCA may be sidelined, so maybe there will be more focused on China and --
CHATTERLEY: That's the Mexico, Canada trade deal.
HELFENBEIN: Yes, yes. It seems that that may be delayed. I think that will move forward, but I think it's being held back a little bit.
CHATTERLEY: We forget that because there's so much in there as far as the retailers are concerned. I mean, we have to keep making the point that
it's U.S. companies, ultimately, that pay the tariffs.
HELFENBEIN: Yes.
CHATTERLEY: Whether or not they can negotiate with Chinese suppliers and saying that you need to drop your prices a little bit because -- to offset
some of that 15 percent tariff, because otherwise we have to then pass on more to the consumer.
Can you give us any sense of, you know, are we talking five percent increase in prices for U.S. consumers? And how much they are being able to
negotiate on the Chinese side and say guys, you need to drop your prices because both of these things are critical?
HELFENBEIN: Let me give you the reality of what really, really happened. On August 1st, we got the notice, we might get hit with tariffs. Nobody
knew exactly what or when, but we might get hit.
So everyone jumped on a plane and flew over to China, and worked with their suppliers and said, look, we're stuck at 41 percent of all apparel coming
to the United States that comes from China. So you know, we need to get through this Holiday Season. You know, the term Black Friday is when
retailers go into the black. They make their money in the fourth quarter of the year.
CHATTERLEY: That's all about this week.
HELFENBEIN: Help us, help us, help us and we'll deal with next year and next year. So you know, some of it got passed through. Some of it got
worked around. Some of it moved.
Like I said, we'll get through this holiday. This holiday should be pretty good. We're looking at about a four percent increase. Shop, shop, shop.
We're encouraged about that.
But prices will go up. Come 2020, unless these tariffs go away and I'm talking about what we call trench 4A and 4B. The 4A is the 15 percent that
hit us September 1.
CHATTERLEY: Yes.
HELFENBEIN: The 4B that might hit us December 15th. Unless those go away, you will see dramatic price increases into next year. And remember, hats
and handbags and gloves have already been hit and they've been hit at 25 percent. That's painful now.
CHATTERLEY: Yes. You make such a great point, though, that we've got this sense that the companies stockpiled. They negotiated for this period. But
2020, all bets are off if we still have these tariffs which is a really important point.
You know, we were just talking off camera about various travels to Asia. I was in Southeast Asia and actually, one of the things that really hit home
to me there was 28 percent of the world's manufacturing base is China right now; 0.2 percent is Vietnam.
So when we talk about perhaps looking for other supply chains, it simply not so easy, particularly when you're talking about things like shoes,
which skilled -- it is skilled labor.
[09:50:01]
HELFENBEIN: Shoes are 69 percent of all shoes coming in America come from China, and on the apparel side, 41 percent of apparel comes from China, 14
percent comes from Vietnam. That's 55 percent between the two countries.
So go to Vietnam and you check it out and you find out they are at capacity.
CHATTERLEY: Yes, totally maxed out.
HELFENBEIN: They're doing double shifts. They're not going to do triple shifts. We can't get any more out of Vietnam. So we're kind of stuck and
that means the American consumer will ultimately pay that increase if it is passed on. That's why we're so hopeful that they will back off on these
tariffs.
It's not a win for us in the apparel and footwear if those tariffs don't go away.
CHATTERLEY: Yes. It continues to be a real problem, even if they are just held where they are, for example. Fine, we don't get the December 15th,
but even given what's happened already, it's a real problem.
Okay, so predict forward then, 2020, you said the larger companies can weather this better simply because they have more ability to cope with the
margin squish. But for some of the smaller companies, what are they saying to you? Are they saying perhaps they may even go out of business if this
carries on?
HELFENBEIN: You know, if you look at the retail landscape, it's not really pretty right now.
CHATTERLEY: Not already.
HELFENBEIN: In this calendar year, we've had almost -- we've had 9,000 announced door closings with 5,000 last year. By the end of the year, we
may have doubled the door closings from last year.
So retail is suffering. It is suffering big time. We've lost a lot of square footage. We've lost malls, running out of places to sell and online
is not picking up all of the fallout from brick and mortar.
So we're in the trouble zone and we don't need any more trouble or we're struggling to learn how to deal with this, quote, "new millennial customer"
and we're just sort of getting there with a nice mix between online and brick and mortar.
But the tariffs are not a help to the future.
CHATTERLEY: Yes.
HELFENBEIN: We need them to go away and we need them to go away now.
CHATTERLEY: Yes, bold message. Sir, great to have you with us. Rick Helfenbein there. The President and CEO of American Apparel and Footwear
Association. Thank you.
All right, we're going to take a break. Elsa is back with more magic. "Frozen 2" well and truly heating up the box office around the world. No,
I didn't see it, but it's on my list. That's next.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE with another look at global stocks. We're seeing early gains across the board here in the United States.
In fact, the S&P 500 and the NASDAQ right now on track for a record close. The tech stocks, the big gainers here with the NASDAQ as you can see up
over nine tenths of one percent.
Solid gains in the European session, too and for the Asia session as well.
The Hang Seng, the outperformer, up one and a half percent. Big gains for pro-democracy candidates in Hong Kong's local elections I think helping
stocks advance.
[09:55:01]
CHATTERLEY: What about a look at today's "Boardroom Brief." India's Paytm, a privately owned digital payments company reportedly raising $1
billion in fresh funding. The report say the new investment values the company at $16 billion now.
Softbank's Vision Fund already a backer of the firm is said to have subscribed for more shares.
HP reiterating that it won't accept to take over from Xerox saying the $33.5 billion bid significantly undervalues them.
Xerox last week threatened to go ahead with a hostile offer if Hewlett Packard didn't agree to friendly discussions.
"Frozen 2" broke a box office record for Disney this weekend. The sequel to the 2013 hit raked in $127 million. That's the highest grossing debut
ever for a production from a studio. Disney is expecting more great things.
"Frozen 2" is on track to be the company's $6 billion film this year. I'll watch it this week.
That's it for the show. I'm Julia Chatterley. You've been watching FIRST MOVE. Time to go make yours. Have a great day.
(COMMERCIAL BREAK)
[10:00:00]
END
