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First Move with Julia Chatterley
The World Health Organization Holding An Emergency Meeting As The Coronavirus Spreads; Facebook Facing A New Reality Following Data Scandals; Tesla Stocks Soaring Premarket As Q4 Earnings And Deliveries Beats. Aired 9-10a ET
Aired January 30, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:11]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Live from London, I'm Julia Chatterley. This is FIRST MOVE. And here's your need to know.
Confronting coronavirus. The World Health Organization holding an emergency meeting as the virus spreads.
The price of privacy. Facebook facing a new reality following data scandals.
And Tesla's turbo drive. The stocks soaring premarket as Q4 earnings and deliveries beats.
It's Thursday, let's make a move.
Welcome to FIRST MOVE once again where we are live from the City of London or just across from the City of London on the eve of Brexit. More on that
coming right up in the show.
But for now, I want to bring you up to speed with what we're seeing for the global price action and I can tell you, sentiment remains pretty fragile at
this moment.
U.S. futures indicating we'll see a lower open to market trade today, that despite some strong earnings, as I've mentioned already from the likes of
Tesla, but also Microsoft after the market closed yesterday.
What about Europe as well? You can see it, a sea of red. All the majors down right now over one percent. What about the commodities markets, too?
Oil sharply lower. Both Brent and WTI off by more than two percent right now, a double whammy.
U.S. inventories coming in at greater than expected amid the global growth fears tied to the coronavirus threat, too.
The Asia session really felt it, too. Stocks there pummeled overnight. The Hang Seng falling some 2.6 percent, adding to the three percent losses that
we saw in Tuesday's session. Taiwan stock market also playing catch up here, losing some five percent, the first day of trade there since the
Lunar New Year holiday.
Chinese markets of course remain closed until next week, but we did see some action in the offshore currency - that weakening below that key seven
level versus the U.S. dollar.
In terms of individual stocks, Asia carriers like China Southern, Cathay still losing ground in the session overnight. Tokyo listed chip stocks like
Advantest falling 6.4 percent.
Taiwan listed Foxconn, a key Apple manufacturer supplier in the region fell almost 10 percent, too. So much uncertainty about the short and the medium
term impact here and what the latest of course, will be from the WHO.
Let's get to the drivers on this story. The coronavirus could be declared a global health emergency when the World Health Organization meets later
today. The infection rate is rocketing -- almost 8,000 cases now and 170 deaths have been confirmed just in China alone.
In Europe, more than 6,000 passengers are being held in a cruise ship off the coast of Italy amid fears of a case on board. More than 100 cases have
been identified in at least 20 countries worldwide.
David Culver is in Beijing for us. David, great to have you with us once again. The WHO until now has held off from calling this a global health
emergency, but they have praised the, "massive efforts" that the Chinese are making here. Talk us through the latest.
DAVID CULVER, CNN CORRESPONDENT: That's right, Julia, and we know earlier this week, the head of the WHO was actually here in Beijing meeting with
President Xi Jinping, discussing bringing international scientists to China to share and collaborate as they move forward with their research and
hopefully sharing data so as to better understand how this disease transmits from one person to another.
It's also important because they could then figure out what the effectiveness of a quarantine period would be. Right now, it's assessed it
up to 14 days -- two weeks -- and we're seeing that put into place, as far as international communities are concerned and restricting people who have
either traveled to Hubei Province or to the City of Wuhan, the epicenter of all of this and saying, essentially, if you come into our country, you then
have to wait at least two weeks before getting out of yourself quarantined. Those are some of the lighter restrictions. More serious ones also coming
down.
Meantime, we do know that Russia, according to state media there, is closing its far eastern border with China, so taking extreme measures. They
also have suspended some of the tourism and the charter flights that come into China, and so moving forward with that.
Now, it's interesting to note that out of Hubei Province in particular, which as I said, is the source of all of this, there are some updates as
far as how the government is handling things there.
We're just hearing that as far as testing for the virus, which has been an issue that we've been hearing about over and over, my team and I here in
Beijing, touching base with healthcare workers there who say essentially that there are backlog of delays, people either getting tested, but then
not getting the results right away or some people not getting tested for days as it is.
[09:05:05]
CULVER: So they have now announced that the number of tests made available within Hubei Province has jumped from 200 a day to 4,000.
So the hope is that that would then allow for a more, honestly, a realistic view as to how many people will be impacted by the coronavirus.
But as of now, people are still explaining the struggle that they're going through and not knowing whether or not they have it, so the anticipation is
that this would change that.
Meantime, there are also some regulations coming down from public safety officials to be quite frank, they are suggesting that anybody who may have
the virus and who is not willingly treating themselves or even self- quarantining themselves and perhaps could be a transmitter, Julia, could face criminal charges if they spit in public, or if they put themselves at
an area that would expose themselves essentially to someone else.
So they're having to lay down the law, so to speak with some of these restrictions that they're putting out there right now.
Going forward, we do anticipate that they're also trying to figure out who may have this virus and they're doing that we're hearing through big data.
In fact, they're looking at some of the railway data, in particular. The railway authority announcing here that they're looking at who traveled to
Wuhan, who traveled to Hubei Province, and then they're trying to confirm who may have come into contact with those individuals so as to try to track
the exposure -- Julia.
CHATTERLEY: Yes, I mean, you're painting such a picture here of the desperate attempts to contain this and to quarantine people and to identify
cases. Fascinating. David, great to have you with us, and thank you for keeping us up to speed with the latest there from Beijing.
Well, the U.S. Federal Reserve among those keeping a watchful eye on the potential economic impact of this coronavirus outbreak. Chair Jerome Powell
called it a "very serious issue," one which the Central Bank was "very carefully monitoring."
Christine Romans joins us now. Christine, great to have you with us. He also said it's far too early to tell, and that's the key here. We just have
to wait and watch, just one of the risks that all the Central Banks here are having to contain and deal with.
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: Yes, absolutely. And you know, we have some, I guess not so recent guide here.
When you look at 2002-2003, the SARS epidemic, 800 people died there and Asian growth in general slowed because of that. It did get over that hump,
but it was a shock to the system.
But think of that 2002-2003, that was 17-18 years ago, China is much more - - is much bigger as a part of the global economy and part of the region right now. A lot has changed and the supply chains have changed. So they're
just trying to game out economists and companies trying to game out what this is going to mean.
You're already seeing the practical impact, of course, you know, you heard David Culver talking about it. You're talking about airlines, you're
talking about casinos, and you're talking about hotels -- all kinds of different companies, stopping their air travel or their business travel to
China.
And when they're when their employees are home, they're telling them stay home for a couple of weeks. Don't go into the office.
So there's a ripple effect across business, even if you aren't physically in the country. So they'll watch this. The Fed, you know, kept interest
rates unchanged yesterday after three rate cuts last year, but U.S. growth last year -- we just heard from the U.S. government, growth last year was
2.3 percent, Julia. That is the slowest growth of the Trump administration. That's not the supercharged growth that the President had promised.
So the coronavirus and the Boeing problem, that'll shave a little bit off GDP in the U.S., at least. It will probably have a ripple effect on
suppliers as well. Those are two wrinkles for 2020 that come at a time when you know, growth overall around the world and the U.S. isn't quite as
robust as it's been in recent years.
CHATTERLEY: Yes, just as we was setting aside some of the trade tension fears, admittedly, the tariffs remain, but we were least hoping not to see
a further ratcheting up in 2020. We've got other things to deal with here.
Christine, just pull out for me the consumer in this GDP number in the fourth quarter because yes, it is backward looking, but all the strength
has been about the consumer in 2019 in the United States. What did we see in the data there amid hopes that that can at least continue in in 2020?
ROMANS: It is still the consumer and it is also government spending that are the drivers here. It's not the big business investment, and this is
what is so interesting and may become a political hot potato in this country, Julia, is because, you know, the President and his team promised
for years that their tax cuts would be paid for by supercharged economic growth.
So you don't have the supercharged economic growth to pay for the tax cuts and you have huge government spending, and really holding up, I mean, GDP
is fine -- 2.3 percent is fine.
But you know, holding up the economy is the government and the consumer, not business who got the big tax cuts. That could be a political problem
this year.
CHATTERLEY: Yes, watch this space. Christine Romans, thank you so much for that.
ROMANS: Welcome.
CHATTERLEY: Let's move on to our next driver, Tesla stock soaring premarket on strong fourth quarter numbers including some records
deliveries and the firm's first annual profit.
[09:10:05]
CHATTERLEY: Peter Valdes-Dapena joining me now. Billions of dollars being added again to the market cap here for Tesla. What a year. It started out
incredibly awkward, but what a strong finish.
Talk us through your highlights here, Peter, and then we'll delve into some of the numbers more deeply.
PETER VALDES-DAPENA, CNN BUSINESS SENIOR AUTO WRITER Well, probably some of the biggest highlights here are, especially looking forward to next year
when Tesla says, look, we're going to be able to easily beat the 500,000 cars we delivered this year. And next year, we're going to have the China
factory fully up and running.
They're opening a factory in Berlin. They're going to be adding the Tesla Model Y crossover, and given the popular popularity of crossovers in the
market, there's obviously a lot of big hopes pinned on that.
So Tesla says, look, we're in the clear now. We're going to be able to fund our own operations from here on out and be a consistently profitable
company, which is almost like a different Tesla from what we've seen up to now.
CHATTERLEY: I couldn't agree more to be honest, and I think pivotal to the change in sentiment and the story is, is what they've done in China in the
10 months between groundbreaking manufacturing facilities there and then delivery Model 3s.
What did they have to say about those facilities and the impact or at least the potential impact of the coronavirus here, because that surely at least
in the short term could be very important?
VALDES-DAPENA: Yes, and they said in the short term, they're monitoring that. And here they are, here, again, speaking about a different Tesla,
they actually opened their factory in Shanghai ahead of schedule and got it in production ahead of schedule, something new for Tesla, and now they're
hit with this. The whole country is hit with this and the whole industry is hit with this.
Right now, they said it's not going to have a big impact in the short term, because the factory is only just getting going and the long term it is not
going to -- but in the long term, they're going to have to just wait and see and see how long this goes on before they can restart production and
get things going.
CHATTERLEY: Yes, certainly something to keep an eye on. But for now, I was running some numbers earlier, Peter, they now have a market cap of $104
billion. It's more than Ford, GM and Fiat Chrysler combined.
VALDES-DAPENA: Yes.
CHATTERLEY: Wowsers. We will come back to that.
VALDES-DAPENA: They are the largest -- the largest. It's amazing. This is the most valuable American car company by miles, the second most valuable
car company in the world.
And as we just said, they just had their first annual profit just now.
CHATTERLEY: Yes, it's not a car company. It's a tech company, blah, blah, blah. Peter Valdes-Dapena --
VALDES-DAPENA: Yes, I have to say I am a little confused as to the stock value myself, but there you go.
CHATTERLEY: Others aren't. We will reconvene. Peter Valdes-Dapena there.
All right, shares of Facebook are plunging in premarket trading despite an earnings beat. This, after the social media giant reported its slowest ever
revenue growth for the fourth quarter. Facebook's costs and expenses also jumped nearly 35 percent from a year ago.
Clare Sebastian joins us on this. Clare, the numbers for me here are quite fascinating. Users growing, increasing numbers of advertisers, monetizing
versus that user count here great, but oh boy, the expenses here, really spiking.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: And it's not over yet, Julia. The CFO is saying that the revenue growth could continue to decelerate in
this current quarter as they continue to have to spend on all these various things. Their infrastructure, privacy is a big one.
He said also that the headwinds from the global privacy regulations, the impact of that, and most of it has yet to be felt. So there's definitely
more to come.
One number that stood out for me is headcount, Julia. That was up 26 percent over the course of the year, so it's not only technology and
infrastructure, they're also spending on more people.
Facebook, obviously facing investigations and legal issues and that is expensive as well, but these numbers are interesting because while it was
the slowest revenue growth in the company's history, it did actually beat expectations.
I think when you look at the reaction in the stock price today, you have to look at the run up that we've seen. Facebook grew 56 percent over the
course of 2019. It's close to its record highs. I think some of that context is now built into the reaction today.
CHATTERLEY: Yes, absolutely, and you know, for all the criticisms, for all the concerns, I go back to the point that we were making here.
One, people are still using more across the platforms at Facebook, the WhatsApp, the Instagram -- they're adding those and even advertisers, for
all the debate we have about the interference in elections, the concerns about content, more advertisers are flocking to them. So they're
diversifying that base, too.
SEBASTIAN: Well, advertisers don't have a lot of options, don't forget, Julia. Facebook and Google pretty much dominate the online advertising
market, but they are facing pressure.
There was a lot of interest on the call about things like Instagram check out, advertising in stories. They are facing pressure to innovate because
of course, they now have, they say about 2.9 billion people using one of their family of products that includes Instagram and WhatsApp over the
course of a month.
So while they have this almost saturation in terms of global Internet users, they do have to find ways to make more money out of the users and
advertisers that they do have.
[09:15:11]
SEBASTIAN: But it was interesting when you look at the stance of Mark Zuckerberg during this earnings call, how he has evolved. He said that his
goal over the next decade is not to be liked, but to be understood.
He says he is going to continue to stake out the controversial positions that he has when it comes to not fact checking political ads when it comes
to encryption, and he says that if he communicates that clearly, he thinks that he'll be trusted more. I think that remains to be seen -- Julia.
CHATTERLEY: Yes, I love that you pulled up that quote. He doesn't need to be understood, he just needs to get it right, quite frankly. And in the
meantime, the share price goes up, but not today. Clare Sebastian, great to have you with us.
All right, so let me bring you up to speed now is some of the other stories making headlines around the world.
Today, will be day two of questions for senators in the impeachment trial of President Trump.
Last night, the President's lawyer, Alan Dershowitz argued that before an election, the President's personal interest and the national interest are
the same thing.
(BEGIN VIDEO CLIP)
ALAN DERSHOWITZ, TRUMP ATTORNEY: Every public official that I know, believes that his election is in the public interest, and mostly, you're
right. Your election is in the public interest.
And if a President does something which he believes will help him get elected in the public interest that cannot be the kind of quid pro quo that
results in impeachment.
(END VIDEO CLIP)
CHATTERLEY: Israeli Prime Minister Benjamin Netanyahu met with Russian President Vladimir Putin to discuss the Middle East peace Plan.
Speaking in Moscow, Mr. Netanyahu described President Trump's plan as a new opportunity. He also thanked President Putin for releasing an American-
Israeli backpacker imprisoned in Russia on drug charges.
Okay, we're going to take a quick break here. You're watching FIRST MOVE, but coming up, global markets continue to slide as the coronavirus
continues to spread. We will have analysis next.
And Facebook falls. Rising costs give investors jitters. I'll speak to the author of "Zucked: Waking up to the Facebook Catastrophe," to get his take.
We're back after this. Stay with us. You're with CNN.
(COMMERCIAL BREAK)
[09:20:25]
CHATTERLEY: Welcome back to FIRST MOVE. We are live in London and counting down to Brexit tomorrow. We're also watching global markets very closely
hereto. As we mentioned before, stocks lower on coronavirus fears yet again.
U.S. stocks set to fall around half a percent in fact at the open this morning. European majors also down by well over one percent here. The yield
on the 10-year U.S. Treasury has fallen below 1.6 percent. Safe haven gold up around half a percent in it trading today.
Joining me now Erik Nielsen. He is the Group Chief Economist at UniCredit. Erik, fantastic to have you with us.
ERIK NIELSEN, GROUP CHIEF ECONOMIST, UNICREDIT: Good to be here.
CHATTERLEY: It's so tough to quantify this. I can see the market is under pressure. There's real concerns. What are you thinking at this moment?
Coronavirus fears?
NIELSEN: Uncertainty, right. And I think way too much comfort in the market that we compare to the SARS episode where life is very different.
The Chinese travel a lot more than they did in that period about six times more.
It has spread and it predates from the release that was there, much, much faster, but the death rate is lower.
So -- but this is ultimately -- unless it's the ultimate disaster. Hopefully not. It's the story of fear, right? And people protecting
themselves.
So trouble comes down, movements come down. People still don't go to the shop to the same extent, so we would be a little bit more worried.
CHATTERLEY: That's quite fascinating, actually, because you made some great points there actually there's been an explosion in travel and
relative trade actually since 2003 with the SARS virus.
NIELSEN: Exactly.
CHATTERLEY: If we look at the economic impact on China then, it was a hit to GDP that year of, I believe 0.8 percent of GDP.
So what you're saying is just even on a relative basis, that the spread, the acceleration and spreading of this and the sheer growth in travel and
all the associated impact, it could be a lot bigger than that.
NIELSEN: It could. Also remember that coming into the SARS crisis, China's GDP expanded by about 10 percent. Now, it's about six.
So you take this number down and believe it or not, the share of private consumption in China is actually bigger now than then because it only
started quite late.
CHATTERLEY: The economy is far bigger.
NIELSEN: Yes, yes, of course. Right. So we just don't know. My point was simply that I worry that the markets take a little bit too much comfort in
just extrapolating from SARS and I think there are too many uncertainties. Life has changed too much.
So hopefully, we see the peak soon. But it's uncertainty, right and --
CHATTERLEY: We're waiting for the World Health Organization to give their assessment, or at least their latest assessment later today.
From an investor perspective, do you think they we're saying look, okay, now this is a global health emergency, and we're designating that. Will it
be sort of positive or negative for risk assets, considering you're saying you're worried about a degree of complacency here among investors?
NIELSEN: Yes, I think for me -- if I were investing, what we say to all our clients, I would say, let's see, the actual number of contagion coming
down, and the death rates that are coming down and people started to feel a little bit less.
It's very important if the WHO come out and say these things, if the Chinese really contain people or if the Chinese can, in a sense, maybe they
start to help in that sense, but until we see where this thing goes, how contagious it is, the incubation period, how contagious are they in that
period -- all of these uncertainties, until we get clarity on this, you have to be worried.
CHATTERLEY: Yes. I want to weave into your broader picture here because when I look at your forecast for 2020, you are actually far more cautious
than most other analysts, even to the point of perhaps seeing the Federal Reserve cutting four times this year.
How? How do we get from where we are today? Admittedly, in light of the conversation we just had, too. The Federal Reserve here really being very
cautious about the growth outlook.
NIELSEN: Yes, and how do they tell us after everything they tell us that life has changed. So our fundamental disagreement with consensus is that we
think the U.S. economy is more vulnerable than most people.
CHATTERLEY: Why?
NIELSEN: Predominantly because it's all dependent on private consumption and that segment last year, in 2019, there was about two thirds of whatever
contribution to GDP from fiscal policy is petering towards the end of the fiscal.
So the question is how robust are the consumers? And if they get nervous, there's a problem. If the labor market start to ease, which we think it is
about to do, openings are coming down quite significantly. The corporate earnings, if you take a model on corporate earnings and extrapolate or
estimate the probability of a recession, it's about two thirds probability of a recession within about a year.
[09:25:10]
CHATTERLEY: Wow.
NIELSEN: So it's -- so there's a lot of vulnerability underlying these numbers, and I just think that it's not a given, but is not a 50/50 chance.
Well, if you get to zero, we get to a quarter percent or something into the year. I don't know. But it's --
CHATTERLEY: I mean, the markets are trading very close to record highs in the United States, the idea that the Federal Reserve can go from, to your
point, doing what it's doing right now to then starting to cut and communicating its concern, there is a risk of panic.
NIELSEN: Yes. And what do people do then? How do you -- if suddenly the Fed comes out -- but again, I mean, look, you quoted before the yields on
Treasuries is up. They are starting to price a bigger probability also.
CHATTERLEY: And that's very important. The bond market is telling us a different story here.
NIELSEN: That's right. That's right.
CHATTERLEY: And then the stock markets.
NIELSEN: And I'm buying more into that story. I think the market is more right than the consensus of analysts here.
CHATTERLEY: And just very quickly because we have around 30 seconds, the CEO survey from PwC -- corporates, CEOs are very pessimistic at this
moment. Record levels.
NIELSEN: Stunning. Stunning.
CHATTERLEY: So it's worth listening to the noises here.
NIELSEN: The survey has like 1,500 CEOs around the world. It has switched within two years from record optimistic to record pessimistic. Same picture
we hear from our corporate clients around Europe. People are nervous. Nervous about trade, nervous about regulation and life in general, and now
comes the virus on top.
So it's not it -- and with all of that uncertainty and discomfort, it's not usually good for growth.
CHATTERLEY: No, it's going to be fascinating to watch, but your message here I think is just to be a little bit perhaps more cautious than markets
reflect.
Erik, great to have you with us.
NIELSEN: Yes. Good to be here.
CHATTERLEY: Erik Nielsen there. Group Chief Economist at UniCredit.
You're watching FIRST MOVE. The opening bell back in our native home in New York is up next. Stay with us. We're back after this.
(COMMERCIAL BREAK)
[09:30:00]
CHATTERLEY: Welcome back to FIRST MOVE live from London. You are looking at the opening bell over at the New York Stock Exchange this morning.
All the fist pumping and jumping in the world, not managing to lift these markets. We have got a weaker open for U.S. stock markets this morning.
This as the number of coronavirus cases in China rises to almost 8,000.
We're also seeing sharp losses of course, as we've mentioned, over in Europe as well. A real degree of nervousness, I think for investors at this
moment.
Here in the U.K., to the U.K. Bank of England, keeping interest rates steady today, also around 50/50 actually that they would cut a further
time. It was Mark Carney's last meeting as the Bank of England Governor. He warned that the U.K.'s level of growth will slow following Friday's
official Brexit.
The pound meanwhile, rallying up more than half a percent in this session.
Let's take a look at the Global Movers this morning, too. Coca-Cola is in focus. Their shares are rising. Earnings matching expectations, but
revenues beat estimates. What else? Microsoft also in focus this morning, too. They beat on both the top and the bottom lines and they raised
guidance as well.
I've just realized I'm not showing you any of the stocks that I am mentioning. So if we can get some of these, we shall, but right now I'm
showing you some other ones. It's live TV.
Tesla is also rallying, too, after posting its first annual profit. Facebook also sharply lower as we discussed. Fourth quarter results topped
expectations, however, the company reported its slowest ever revenue growth. Investors are also concerned about Facebook's rising costs and its
expenses.
Elevation Partners co-founder Roger McNamee joins us now. He is also the author of "Zucked: Waking up to the Facebook catastrophe.
Great to have you with us, sir, always a pleasure to have you on the show. Roger, what do you what do you make of the numbers here? Because we did see
advertisers increasing quite dramatically, the monetization in terms of level of users rising, too. But, oh boy, costs increasing. Is that a good
sign from your perspective?
ROGER MCNAMEE, CO-FOUNDER, ELEVATION PARTNERS: So, Julia, from an investor's perspective, the good news is entirely in the fact that Facebook
remains a unique and incredibly valuable resource for advertisers. It is also I think, relative to what you get, a relatively cheap stock.
The bad news, though is a much longer list. It was just earnings yesterday. The second thing that came out was a decision in Illinois, a $550 million
judgment -- a settlement basically against Facebook relative to biometric data which they had been taking without permission and Illinois' new
privacy law basically created the window for this.
And I think it signals the larger issues for Facebook, you can't just look at it as though the numbers are the whole story.
Regulation is coming. As you know, you're in Europe right now, the General Data Protection Regulation has radically altered the whole world view
towards privacy. And in many territories -- the United Kingdom, the United States and some parts of Asia -- there are moves afoot that are going to
make the business more difficult not just for Facebook, but also for Google, Amazon, Microsoft and other people who play with that advertising
based business law.
CHATTERLEY: You know, I have two problems with that though, and it looks like we're far more likely to get sporadic state by state regulation in the
United States and actually something at least in the interim at the Federal level, but two, the fines that they're getting are peanuts relative to the
money that they're generating here. It's not enough, Roger. Would you agree?
MCNAMEE: No, that is exactly correct. In fact, I think, in a sense, the reason why you have to pay attention to smaller judgments is that these
companies are fully automated.
They want to behave the same way globally, and so in a sense, they have to adjust all their systems to whatever the most severe form of regulation
is.'
So if you get different regulations in different territories, they're not going to try to tune in each territory for that local market, unless the
difference is really dramatic.
And so what you're going to see, I think, is as happened with GDPR, that they take a global approach that at least leans in that direction, and if
you add all that up, and you realize that that is a trend, from an investor point of view, it just says the overhang and the incremental costs of
compliance are going to be rising for the foreseeable future. And as an investor, I think you have to look at that.
I also think the U.S. presidential election has a huge impact because Facebook is a tool that Donald Trump is using very effectively in his
reelection campaign. If he is reelected, that is probably a much better outcome for Facebook than if he's not.
But it's not obvious to me that Donald Trump being reelected is a thing that's good for markets or good for investors. And so you have these really
difficult, I think, analytical things because they're binary.
[09:35:22]
CHATTERLEY: Yes, but you started by saying though that the stock on a relative basis is undervalued here. So to go back to your point that even
if we see and even if the U.S. President loses the 2020 election, is the stock still undervalued here and is it still a reason to hold? Because I
know you still own Facebook, I believe?
MCNAMEE: So Julia, here's what I think is the big problem in all of this for any kind of investor looking at it, is that this has been the greatest
industry, the tech, you know, advertising supported tech platforms have been the best thing for investors for years.
And we're at this valuation level now that's basically as recently as two days ago was records across the board, and if you were to have a
significant correction here, it would not be a surprise in any way at all.
And so I just think for investors, you have to look at these things with a great deal of caution, recognizing there will be better points of entry
than today.
And, you know, I look at this as an activist who's been trying to help Facebook, trying to help Google look at the business and recognize that
some of the business practices they've had are just too harmful for society.
I think the tech platforms, a little bit today, Julia, where the chemicals industry was in 1960 when they were still pouring mercury and other waste
products into freshwater. You know, that kind of thing had to stop.
Society values technology too highly to allow these guys to do so much damage, and so that's going to change. The margins are going to come down
structurally, and we're going to have to see what that looks like before we know what is really cheap.
CHATTERLEY: Roger, I completely agree with you on all of this, but you know, you and I have had this debate before and I have an issue with the
word activist when Mark Zuckerberg has the majority of the votes here, but something that he said yesterday stuck out to me.
MCNAMEE: I am with you, Julia. Right --
CHATTERLEY: I know.
MCNAMEE: I make a lot of noises, it's not clear I have any impact.
CHATTERLEY: Oh, no, we're trying though. His quote said, "My goal for this century is not to be liked. It's to be understood because in order to be
trusted, people need to know what you stand for."
It was an interesting quote for me, Roger, because if it's not ethics, if it's not privacy, if it's not damage to democracy and interference in
elections, what makes investors like yourself, sell here and be a real activist? She says, with a raised eyebrow.
MCNAMEE: Yes. So Julia, I think -- fundamental issue here is that Mark, as well as the founders of Facebook, they are engineers at heart, and so in
their mind, they look at things in an engineering mentality.
So for them, efficiency is the value that they optimize for. And remember, in any kind of liberal democracy like the United Kingdom, like Western
Europe, like the United States, we value the enlightenment things of self- determination, we value democracy, and those things are inherently inefficient.
And at the moment, the business model of Facebook and Google is in conflict with democracy and self-determination. And it's not because these guys are
bad guys, it's just they have a different way of looking at the world.
And my goal as an activist is just to have conversations about that, just to make sure that people understand that that's really what we're talking
about here.
And, you know, I think it is fine for Mark to want people to understand him. I think I understand it pretty well. I respect him enormously. I just
happen to disagree with the values he's aiming for.
CHATTERLEY: Profits before privacy. Roger McNamee, thank you for putting up with me.
MCNAMEE: Julia, you're fantastic.
CHATTERLEY: It's always a pleasure.
MCNAMEE: No, I think you're the best. You're the best. I look forward to being on again. Take care.
CHATTERLEY: Thank you. You can come back. Thank you, sir. All right. We have to wrap it up there, but when we return, it was the night before
Brexit when all through the Houses of Parliament, not an MP is stirring. Yes, yes, yes. You get the drift.
We've got one day to go until Britain leaves the E.U. Former Conservative Party chairman, Michael Howard -- Lord Michael Howard will be here. Stay
with us. That's after this.
(COMMERCIAL BREAK)
[09:42:19]
CHATTERLEY: Welcome back to FIRST MOVE. One day to go until Britain finally bows out of the European Union. Day-to-day life won't change much
outwardly as the U.K. enters a transition period with a deal in hand, but there were emotional scenes in the European Parliament on Wednesday with
MEPs breaking into a rendition of the famous Scottish folk song, "Auld Lang Syne" and roughly translates to time's gone by.
I'm joined by Lord Michael Howard, the former Conservative Party leader and former U.K. Home Secretary. We sing that Christmas as well. Sir, fantastic
to have you with us.
LORD MICHAEL HOWARD, FORMER CONSERVATIVE PARTY LEADER AND FORMER U.K. HOME SECRETARY: Thank you.
CHATTERLEY: We know things won't change in the interim, but what does this day mean to you?
HOWARD: It's Freedom Day.
CHATTERLEY: Freedom Day.
HOWARD: Freedom Day. We will be taking back control, as you say, not immediately, but we will be taking back control of our laws, our money and
our borders, and that's a great thing.
CHATTERLEY: The theory sounds good, the practice has been far more difficult than that throughout this process, do you think it gets more easy
or harder, actually, over the next 10 months? The clock is ticking once again.
HOWARD: It can't be harder than the miserable last three and a half years.
CHATTERLEY: Really? That's a bold call.
HOWARD: Where Parliament was wracked by indecision and vacillation, but we have a new Parliament and a new Prime Minister, and there is a new
determination to push on and get things done.
So I think we'll have this deal done within the year, and then we'll be able to make trade deals with other countries in the world.
The rest of the world is growing at a faster rate than the European Union, so there are great opportunities awaiting us.
CHATTERLEY: You make an interesting point though about speed of execution, and not having to mess around and debate to a certain degree because this
government is now actually very powerful. Is selling a deal to the public, even if it's not necessarily a great deal or economically, as good as being
closer to the single market, is that part of being a good politician here?
HOWARD: The public wants to get things done.
CHATTERLEY: Yes.
HOWARD: Overwhelmingly want to get it done. So I -- you know, I didn't think it would be too difficult to sell the deal to the public.
Of course, the proof will be in the pudding, and so when the deal is done, if as I believe our economy would grow and prosper, and we would take
advantage of all these opportunities, everyone would be happy.
If the moaners and the scaremongers are right, I don't think they are, and we run into economic difficulties. Well, there'd be problems, but I don't
think that's going to happen.
CHATTERLEY: How long does the honeymoon period for Boris Johnson last before people get frustrated with that? Has he got until the end of this
transition period?
HOWARD: I think he has got as long as things are going well. If things are going well, the honeymoon period will last. If they are not, it won't.
[09:45:08]
CHATTERLEY: You made an interesting point about the Scottish Nationalists and actually if Brexit goes perhaps better than some of the doom mongers
think, they might be convinced that Brexit is a good deal for Scotland and to remain as part.
HOWARD: It would be a good deal for Scotland. As long as Scotland remains part of the United Kingdom, it will benefit from all the trade deals we
will be doing with the rest of the world, from all the opportunities that are opening up for us.
CHATTERLEY: Can they afford to leave anyway? Or is that just a moot point at this stage?
HOWARD: I didn't think they can. I mean, if you look at the figures, if you look at the size of their budget deficit, they'd have to join the Euro,
which I don't think they're terribly keen on. I don't think they can.
CHATTERLEY: I've got a quote from Margaret Thatcher in 1975 regarding the European community, she said, "If Britain were to withdraw, we might
imagine we could regain complete national sovereignty, but it would in fact, be an illusion, lies would be increasingly influenced by the EEC, and
yet we would have no say in the decisions which would vitally affect us." What's changed?
HOWARD: Everything.
CHATTERLEY: Why?
HOWARD: Everything has changed. She said that in 1975. That was at the time of the referendum as to whether we should stay in the European
Economic Community. I campaigned for us to stay in.
CHATTERLEY: I know.
HOWARD: It was an economic community. Now, it's a political entity. There is a great drive towards creating something resembling a United States of
Europe.
CHATTERLEY: Yes.
HOWARD: And that's not what we want to be part of.
CHATTERLEY: You see it as an anchor, rather than something cohesive that lifts all boats here.
HOWARD: It's worse than an anchor. Anchors are quite good things with that thing.
CHATTERLEY: If not, you'd be floating away in a drift.
HOWARD: Yes, there's a lot of resentment without an anchor. No, I think that there are too many rules and regulations. Many of which we have
literally say over and we are going to be better off on our own.
Had the European Union being prepared to respond positively to David Cameron's attempt to reform it, everything would have been different. I had
been on the other side in the referendum campaign.
CHATTERLEY: Right.
HOWARD: And I think the other side would have won the referendum campaign. But because the European Union made it absolutely clear, they weren't
prepared to budge. They weren't prepared to reform. They weren't prepared to move --
CHATTERLEY: Here we are.
HOWARD: Much better off outside than in an unreformed European Union.
CHATTERLEY: And before you break, Lord Michael Howard, sir, thank you so much.
HOWARD: Thank you.
CHATTERLEY: Lord Michael Howard there, the former Conservative Party leader.
Now, it's a long way from chilly London to the more temperate climate of Mauritius, and that's where we find innovation used to tackle problems with
the world's food supply.
And in this case, it all begins with some bees. Listen in
(BEGIN VIDEOTAPE)
ZOUBEIR EMAMBOKUS, ALC FACILITATOR: My name is Zoubeir Emambokus I am Mauritian and I'm a faculty member in the Electrical Power Systems Engine
Program on the African Leadership College.
So two years ago, I was giving a guest lecture to some MBA students, and this is where I met this guy named Terrence and he had this very passionate
project about big conservation on the continent, and as we spoke more about it, we identified potential use for technology there, and thus waking me to
click that.
This was an ideal opportunity for my undergraduate students back in Mauritius.
The first thing we did was we actually went to Black River, we met a beekeeper to understand what it is that they actually need. And this is
what we started picturing understanding more about the inner workings of a hive and what kind of parameters beekeepers would actually like to track
and based on these fundamental requirements, we go to the drawing boards and we start tracking okay, what sensors are going to be able to do that?
What process are we going to use?
So we start basically from the outcome that we want and backtrack from that.
Now, the end vision of this project is a future where we have tech enabled the beekeeping industry in Africa. These are critical to pollination, which
is the fundamental process for the food chain for life on the planet.
So very often when people hear the word innovation, especially in the engineering space, they tend to think of state of the art high-tech et
cetera.
I would say that innovation doesn't always have to be high tech. And in our case, actually, it is quite the opposite. What we're trying to do here is
minimal design. The fundamental goal is to have this spread and deployed across Africa.
So we want to make it affordable for the African farmer. So we're trying to use instead of over engineering it, trying to get off the shelf components
and finding the right selection that can work together to have an affordable device.
That's where the innovation is, for me personally.
As an educator however, I see different kind of innovation also applicable to this project, which is the way in which we are teaching the students.
The students who work on this project work on it not just for a technical experience, but because they were passionate about the outcome of
conservation.
(END VIDEOTAPE)
[09:50:20]
CHATTERLEY: You're watching FIRST MOVE. We'll be back right after this. Don't move a muscle.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. Let's bring it back to markets here. I showed you earlier and I want to show you again, oil down sharply.
The fear that the coronavirus will slow the economic growth -- global economic close playing out here.
Over the last month, the price was already falling with the supply driving down prices. Now, concern about the virus accelerating that downward
pressure.
John Defterios is here. We must stop meeting like this, John.
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Yes, we just came from Davos.
CHATTERLEY: I know.
DEFTERIOS: With the banks and the --
CHATTERLEY: Less snow here. Talk about the impact here because there's a double whammy you've been describing. U.S. inventory is higher than
expected, and of course, the uncertainty here created by falling oil demand as a result of the coronavirus.
DEFTERIOS: Well, coming into this, I think we're underestimating -- it is the past prologue. I mean, the habit in the market is to go back to the
SARS threat of 2002 and 2003 and the natural thing is to say, okay, that was a two percent drop in the quarter.
But from a much higher base, by the way, nine percent down to seven percent, six percent. A lot of people don't believe that number down to
four percent. And this would be quite a shock.
But I'm looking at road traffic, for example, airline passengers, even the ministries are suggesting in China, we're seeing drops of 30, 40, 50
percent.
So we did have that inventory build in oil, of course, but this is really about future demand in China. Early estimates are saying that demand will
go down a million barrels a day, that's 10 percent of their supplies.
Worst case scenario from plants is suggesting a 25 percent drop in oil demand. Now, there was some discussion at OPEC Plus, that they're going to
meet March 5th, and then they may back that up into February. Sources I spoke to in the last hour before I came up with you were saying, we're not
panicking just yet.
But they're looking at the crystal ball, and when we had the discussion at the beginning of January, we had $70.00 a barrel on Brent, and we're just
above $58.00 right now. So they thought they were going to go into this easy period of the first quarter, not have to make a decision.
And now it could be China that provides that shock -- Julia.
CHATTERLEY: I mean, we were just talking to Erik Nielsen from UniCredit earlier and he said, and he was making the comparison that the SARS
adjustment here is irrelevant, because this scale of travel, of infrastructure here and the movement from China is six times the size it
was back in 2003, and he believes we are underestimating the impact here.
DEFTERIOS: Well, I hundred percent agree with him. $14 trillion economy and the original belief in the World Trade Organization was that Southeast
Asian economies or Far East Asian economies get swamped by China. Actually, they've benefited from China.
But now we have to think about the supply chains for South Korea, Japan, Southeast Asia, Thailand, Singapore, and Malaysia. They're all really
dependent on China.
One thing that's overlooked, what do you do with the workers? If they're parked at home, consumer spending is going to collapse. Do you continue to
pay people if you're telling them to get off of work? That's going to hit the bottom lines of the companies.
[09:55:07]
CHATTERLEY: And then we have to think in a broader context. I know, you know, being based in the Middle East, they've been reaching out to the
Chinese and saying, we want you to come to the Middle East and North Africa, Jordan, Egypt, you know, the hubs of Dubai, Abu Dhabi, Qatar, and
then you have to think of Italy and China, you know, going to Greece.
I mean, with Christmas in Italy, swarms of Chinese and they welcomed them and they're spending and they like to have them.
We have to think of the knock on effect, and I think this is not a comparison to SARS, but it's China in 2020.
CHATTERLEY: Yes. The ripple effect here of China on way down is very, very dangerous. John Defterios, great to have you with us. Thank you for that.
That just about wraps up the show. I'm Julia Chatterley, you can listen to our podcast on cnn.com/podcast.
For now though, you've been watching FIRST MOVE. Time go to make yours.
(COMMERCIAL BREAK)
[10:00:00]
END
