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First Move with Julia Chatterley
The Fed Chief, Jerome Powell Says Don't Bet Against America, But More Help Is Needed; Biotech Firm, Morderna Makes Vaccine Progress, Stock Soar Premarket; Softbank Sees Its Worst Losses Ever. Aired 9-10a ET
Aired May 18, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:16]
JULIA CHATTERLEY, CNN BUSINESS ANCHOR, FIRST MOVE: Live from New York, I'm Julia Chatterley. This is FIRST MOVE and here's you need to know.
Powell's punch. The Fed chief says don't bet against America, but more help is needed.
Moderna's medicine. The biotech firm makes vaccine progress, stock soar premarket.
And blurred visions. Softbank sees its worst losses ever.
It's Monday, let's make a move.
Welcome to all our FIRST MOVErs around the world. As always, I hope everyone had a safe and a restful of the weekend. We have a good start to
the week whichever applies to you.
Lots coming up on the show this morning including Huawei's Chief Security Officer on the latest U.S. restrictions, and what their response is.
And David Rubenstein, too, co-founder of private equity giant, the Carlyle Group will be weighing in on his views on the global recovery reality.
So, part of that reality rests on whether and when a vaccine is developed.
Take a look at futures. Spiking higher this morning on news as I mentioned, they're from biotech firm, Moderna. The firm's vaccine study is producing
some positive results.
We've got all the details and analysis very shortly. It comes after Fed Chief Jay Powell spoke again this weekend saying growth is likely this
year, but he also reiterated that the Federal Reserve and Congress will likely need to do more.
He said the Federal Reserve does have the ammunition required. For now, the United States continues its process of reopening this week. That includes
major U.S. automakers getting back to production.
The big unknown here is what shape some of the smaller businesses in their supply chains have been left in as a result of the shutdown. That's going
to be key going forward.
In the meantime, Apple set to reopen more than 25 YS stores this week, more than 100 around the world have already reopened.
Let me give you a look at the global stock snapshot -- get my words in gear -- Europe in the green as you can see, Italy announcing it will begin
welcoming tourists next month and Asian stocks managing to post gains this Monday's session, too, despite the Japanese economy falling into recession.
The government, of course, they're already talking about adding more fiscal support to the economy. So, I think as you can tell, the themes of today's
show already taking shape.
The science and the stimulus to help us on the path to recovery.
Let's get to our drivers right now. U.S. Federal Reserve Chair Jay Powell says a vaccine maybe the only real cure for the U.S. economy, but he adds
he is confident of a recovery even without one. He spoke on CBS's "60 Minutes."
(BEGIN VIDEO CLIP)
JEROME POWELL, U.S. FEDERAL RESERVE CHAIRMAN: This economy will recover. It may take a while. It may take a period of time. It could stretch through
the end of next year. We really don't know.
QUESTION: Can there be a recovery without a reasonably effective vaccine?
POWELL: Assuming there's not a second wave of the coronavirus, I think you'll see the economy recover steadily through the second half of this
year.
For the economy to fully recover, people will have to be fully confident and that may have to await the arrival of a vaccine.
(END VIDEO CLIP)
CHATTERLEY: Christine Romans joins me now. Twice in one week for Jay Powell, Christine and I read the whole transcript. He is great in tailoring
what he says to an appropriate audience. And this I think was a sort of a push for more confidence from the American people.
But again at the same time, Congress and the Federal Reserve likely needs to do more.
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: Absolutely. You know, he is saying that right now is really painful and he
acknowledged, you know, it's hard to put in words the pain and suffering of American families and workers who are out of work.
It is the second time he has acknowledged that in the last week. You're absolutely right. But he looks to the future and he says we can get through
this.
This isn't like a housing bubble. It's not like the financial crisis. This time, it's a different kind of a crisis that we are -- the economy was in
good shape heading into this and he thinks we can get back there.
The timeline, the timing, I think is interesting. You'll notice that he said, assuming there's not a second wave of the coronavirus, so that's
really important here.
We'll get through this painful period, depression-like period right now, but it won't be a depression. Sometime next year, you'll start to get back
to normal.
But he said, end of next year could be a likelihood here and a lot depends on that vaccine.
CHATTERLEY: Yes, a lot depends on the vaccine, a lot depends on what kind of shape businesses and individuals, consumers are in coming out of this.
We have some kind of blueprint to the end of June-July, let's call it. We've given billions of dollars to small businesses in the United States.
[09:05:09]
CHATTERLEY: You and I have huge reservations over how that money can be used and that greater flexibility is needed.
But at the same time, if you can perhaps adjust that so that people have an incentive to go back to work rather than be paid to stay at home, you
perhaps find a better balance. It looks like Congress and Treasury considering all of these things.
ROMANS: Absolutely. "The Wall Street Journal" is pointing at that Paycheck Protection Program could have some tweaks that make it a little bit easier
for the loan forgiveness for these small business owners who have some restrictions on them, quite frankly.
I mean, honestly, when they were writing this legislation, I don't think you could have foreseen that this was not going to be all over and said and
done in June, right?
So, a little bit more flexibility there. But you know, there's another big package probably coming down the pike. They're going to fight over it. I'm
sure sometime in June, maybe you're going to see some more stimulus.
The Democrats or Republicans are on different -- you know, different sides on this at the moment, but Jay Powell making it pretty clear, I think that
there needs to be more support for American families going forward, not just what we're seeing here.
He said in that interview that they need to keep workers in their homes, keep them paying the bills, and keep families solvent. So, I think you're
going to be talking about another round of payments to American families and maybe an extension of unemployment benefits, the enhanced unemployment
benefits for longer.
All of these things, I think are going to be up for negotiation days and weeks ahead.
CHATTERLEY: Because quietly telling lawmakers what to do makes a change, doesn't it? Even if it's very carefully done. Christine Romans, thank you
for that.
All right, some promising news now from a company working on a coronavirus vaccine. U.S. based Moderna says early results from its trials show
participants developed antibodies against the virus.
The news has seen Moderna's stock skyrocket, and that's not the only thing, futures premarket in the U.S. markets and globally also rocketing on this.
Everyone has high hopes.
CNN medical correspondent, Elizabeth Cohen joins us now. Elizabeth, I know what you're going to do. You're going to say, curb your enthusiasm a little
bit. There were only eight people I believe in this study. But there's a reason to be optimistic, too.
ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: Julia, I don't even need to show up, you know exactly what I'm going to say.
CHATTERLEY: No, I know where you're going.
COHEN: That is exactly right. There is reason to have some enthusiasm, but we do need to temper it. This was eight people.
What they found is when they were vaccinated, they developed what are called neutralizing antibody. So, these are antibodies that not only bind
to the virus, but disable it from infecting cells.
Again, this is only eight people and we don't know exactly how this will work in real life. It's one thing to see something in a lab, it's another
thing to see it in real life.
But they did notice that the levels of these antibodies were just as high if not higher than people who had a natural infection and then recovered.
So, I spoke this morning with Dr. Tal Zaks. He is the Chief Medical Officer at Moderna. Let's take a listen.
(BEGIN VIDEO CLIP)
DR. TAL Zaks, CHIEF MEDICAL OFFICER, MODERNA: These antibodies were proven to be able to block the ability of the virus to infect cells. So, this is
really a very first important step in the journey towards having a vaccine available for the people who need it the most.
What it tells us is even at the lowest dose that we tested, the 25 microgram dose, we are already seeing an immune response at the level of
people who have been infected with this virus and our belief now, not to be susceptible to further disease.
(END VIDEO CLIP)
COHEN: Now, again, speaking of tempering enthusiasm, it is -- there have been other vaccines that have gotten to this point, but when you try them
in the real world, they haven't worked as well.
So, let's take a look at the timeline for studying this vaccine further.
So far, Moderna has vaccinated somewhere between 60 and a hundred people. In July, they will start large scale clinical trials that's typically tens
of thousands of people and that's when you know if it works in the real world.
Dr. Zaks, who we just heard from thinks that a vaccine could be available between January and June if all goes well, but Julia that is somewhat
aspirational.
He is not saying it will happen. He just thinks that that is a reasonable timeline to hope for going forward.
CHATTERLEY: And we will maintain our hope. Elizabeth Cohen, great to have you on the show. Thank you so much for pouring over those details.
Chinese President Xi jingping says Beijing has been transparent with the world about the coronavirus outbreak contrary to accusations from the
United States, but it covered up the truth.
International support is growing for an investigation into the origins of the virus. President Xi was speaking remotely to the World Health
Organization, which has also been under pressure over its response to the pandemic.
Ivan Watson is live in Hong Kong for us. Ivan, I would expect the Chinese President to say nothing less than what he said today, but they also are
making moves to provide greater financing support to the World Health Organization, sort of the opposite move of what the United States is doing.
A stark contrast there.
[09:10:01]
WATSON: Yes, I mean, what's conspicuously absent at this virtual meeting of the World Health Assembly is an American presence.
It's an unusual annual meeting because this year, people can't gather in Geneva for it. So, it's being done on video conference. There have been
some glitches throughout. The South African President didn't show up. His connection didn't quite come together.
We heard from a number of heads of states, the leaders of France, of Germany, of China as well did not hear from the U.S. President at all.
There is a draft resolution for this gathering, which is taking place amid this unprecedented global pandemic, from more than a hundred countries
calling for an impartial, independent and comprehensive evaluation of kind of how COVID-19 blew up into this global pandemic.
Now, Australia had initially called for an investigation into China because of course, coronavirus, this was first discovered in the Chinese city of
Wuhan in December.
The Chinese government has really bristled at any suggestion like this and attacked Australia for these suggestions. But it can't oppose the fact that
more than a hundred countries are calling for this. After all, their economies have been brought to the halt, their citizens are dying.
In the end, Xi Jinping did address the assembly, again virtually, he pledged $2 billion dollars over two years to help battle COVID. He pledged
more help to the African continent as well, endorsed the World Health Organization's involvement here.
Meanwhile, the leader of the World Health Organization has come out and said that he will in fact, agree to an independent evaluation at the
earliest appropriate moment to review and learn any lessons drawn to prevent a repeat of what the world is experiencing right now -- Julia.
CHATTERLEY: Yes, the world agrees with that. We can never be place in this situation again. So, whatever needs to be learned, lessons -- questions
need to be asked and those lessons learned. Ivan Watson, thank you so much for that.
Now, as I mentioned earlier on the show, Japan now officially in a recession. The world's third largest economy shrinking 0.9 percent between
January and March. It's a blow to a country that was already struggling with its finances even before the pandemic hit.
Kaori Enjoji explains.
(BEGIN VIDEOTAPE)
KAORI ENJOJI, JOURNALIST: Japan's economy is back in recession for the first time in four and a half years. GDP slipped 0.9 percent on the quarter
in the first three months of this year, which translates into a drop of 3.4 percent on an annualized basis.
But economists say the situation could get far worse and that this quarter, Japan's economy may be slipping at its fastest rate since the end of the
Second World War.
Exports are falling as supply chains are crippled. Manufacturing is drying up. And consumption also remains very weak because shoppers are forced to
stay at home.
The Japanese government is likely to top up the $1.1 trillion in stimulus measures that it has already announced with fresh moves by the end of the
month.
It is preparing billions of dollars to try and get Japanese companies to move their manufacturing out of China and back home here in Japan
And that's similar to the phrase that we're hearing from the U.S. which is also trying to decrease its dependence on China.
That's the latest from Tokyo. I'm Kaori Enjoji.
(END VIDEOTAPE)
CHATTERLEY: An example of a Japanese company hurting right now, Softbank reporting its biggest loss ever, also Alibaba founder Jack Ma is leaving
Softbank's board.
Sherisse Pham is with us. Sherisse, we were expecting eye watering losses given this company's investments. WeWork is a classic example. Uber another
one, but oh boy. These are some really, really steep and painful losses.
SHERISSE PHAM, CNN BUSINESS REPORTER: Oh boy indeed. This is a bad day for Softbank. Historic losses. They lost Jack Ma and Masayoshi Son talking
about unicorns falling into the valley of coronavirus.
This company, of course has been hammered by the COVID-19 pandemic. The Vision Fund in particular has suffered enormous losses. WeWork is now a
fraction of what it was worth before it planned to IPO before that IPO was botched. Uber of course is suffering huge losses.
All of that because of the restrictions that millions of people around the world are still under. No one is -- very few people are traveling, many
people are hunkered down at home and that is not good for the ride-hailing business or the co-working shared space.
And Son calling this time of crisis. He was a lot more somber today that he has been in past presentations. But he was also at times comical, if maybe
by accident. He likened the coronavirus to a valley into which some of the biggest Vision Fund billion dollar tech fund companies could fall into.
Have a look and a listen.
[09:15:14]
(BEGIN AUDIO CLIP)
MASAYOSHI SON, CEO, SOFTBANK GROUP (through translator): Because of the valley of coronavirus all of a sudden happened and unicorns been dropping
into such valley, and that this is a big crisis for many of us.
But even under such circumstances, some of them being able to jump up the body and flying up with the wings to catch up with the momentum.
(END VIDEO CLIP)
PHAM: So, a few unicorns will be able to fly over that valley of the coronavirus and make it out on the other end of this crisis in good shape.
But until then, Softbank reporting historic losses, $18 billion in losses operating losses for the Vision Fund and that was enough to wipe out any
gains that the Softbank other businesses had been made in the carrier unit and the chip making unit -- Julia.
CHATTERLEY: Yes, more focused on unicorns lost and lost magic than anything else, but those presentations are always, unique, let's call them
that.
Sherisse Pham, thank you so much for that update there.
All right, still to come, Huawei hits back. The Chinese tech giant says it is, quote, "categorically" opposed to new U.S. restrictions.
We speak to one of the company's top U.S. executives in the wake of Huawei's first public comments.
And don't bet against America, so says, the Fed's Jay Powell. I discuss the economic outlook with David Rubenstein, cofounder of private equity firm,
the Carlyle Group. That's all coming up. Stay with FIRST MOVE.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE live from New York this Monday where U.S. futures are in the green helped along by word from biotech firm,
Moderna reporting progress on a COVID-19 vaccine as we've been discussing.
In the meantime, shares of Grubhub also rising premarket amid reports that it's rejected the latest takeover offer from Uber.
[09:20:06]
CHATTERLEY: Talks between the two companies, however, are said to be continuing. U.S. Senator Amy Klobuchar coming out against any proposed deal
yesterday calling it bad for competition and consumers.
Now in Huawei's first official statement since the U.S. restricted its access to chip suppliers, the Chinese tech giant called the new rules
arbitrary and pernicious. It says the move will quote, "inevitably hit its business" and outlined the global cost of the ruling networks in 170
countries worth hundreds of billions of dollars will be hit and three billion customers impacted, the company says.
Joining us now, Andy Purdy, Chief Security Officer for Huawei Technologies USA. Andy, great to have you on the show.
You've pointed out what you see is the bigger costs here to global infrastructure and demand, but this is a devastating blow for Huawei
specifically, surely.
ANDY PURDY, CHIEF SECURITY OFFICER, HUAWEI TECHNOLOGIES USA: Well, it certainly harms us and we're not sure just how much it's going to hurt us.
This represents a significant escalation, an unfair one, we believe, by the U.S. government in its efforts to hurt Huawei, to hurt China, and it's
being made irrespective of the impact on the significant jobs in the U.S. semiconductor space.
CHATTERLEY: There were reports overnight, Andy that Taiwan semiconductor, TSMC has halted new Huawei orders. Can you confirm that?
PURDY: I cannot yet, no.
CHATTERLEY: But that, if they did decide to comply with the U.S. ruling, would be a further devastating blow. Surely this is exactly what the U.S.
is trying to achieve.
PURDY: Well, we expected companies like that to get a number of their components from American semiconductor companies will in fact comply with
the U.S. government structure, absolutely, yes.
Chat How much of the business are we talking about here, Andy? When I look at it, it is smartphones, it's laptops, it's networking equipment for 5G.
The base stations.
This is critical when I look at the broader international business for Huawei.
PURDY: Well, it is, and you see that last year, the entity list, the restrictions, the U.S. government restrictions on the ability of American
companies to sell to Huawei had about a $12 billion impact on Huawei's revenue.
We worked through it, so we still had a revenue increase last year. We're going to work through this. We're not sure what the outcome is going to be,
but we're going to be fine in the end.
But if we're forced to not buy from American companies or companies that buy from American companies, it's going to have a long term impact on
American jobs. They will not come back.
CHATTERLEY: It's not just about American jobs here, surely. This is about the survival of your company.
PURDY: No questions about the survival of our company. But frankly, from my perspective, I'm more concerned about American jobs and with 40,000 or
50,000 direct American jobs depending on the ability of 300 American companies to sell to Huawei, that's a great concern.
And those who want to hurt us to hurt China aren't thinking about it dispassionately on the potential impacts on American jobs and the fact that
although there'll be some short term harm for us, in the end, we're going to be fine.
CHATTERLEY: What about response from the Chinese government here? Chinese state media, on Friday suggested that Apple, Qualcomm, even Boeing orders
could be impacted if China decides to respond. Do you want to see a response that in some way tries to help protect Huawei?
PURDY: I think escalation in any situation, whether it was the earlier situation with tariffs or this situation is a bad thing.
It's important for folks to sit down and talk these things through. The tit-for-tat for tariffs, the increasing escalation in this respect, I would
hate to see China put restrictions on the ability of Apple to sell them to China.
We have to have conversations to resolve these issues. And I believe we can do that, and I think it's important for us to deal with now rather than
waiting 30 or 40 years.
CHATTERLEY: Andy, you've been pushing for a transparency initiative, and yet in the last week, the F.B.I. has reported that Chinese connected
hackers were trying to access COVID-19 research. Trust couldn't be any lower at this point and Huawei is at the center of that.
PURDY: Well, we're not the center -- we're not at the center of what you just talked about in terms of the hacking, but certainly, we support
greater international efforts to fight cybercrime, to hold people accountable for cybercrime and organizations and governments.
We support stronger intellectual property protection, stronger standards in independent testing. We believe that the global community has to not
decouple, but strengthen standards so that we can address real cyber security risks and we can fight the kind of malicious activity that you're
talking about.
CHATTERLEY: Do you think that's possible under this administration, or do you have to wait for the next one or perhaps if this one remains the one
after that?
PURDY: Well, I can't predict what's going to happen in terms of the Presidential Election. I do believe that the kinds of things that we
support doing on the international stage, whether or not Huawei is allowed to sell into the U.S. or buy from the U.S., those efforts to reduce the
frequency impact and risk of malicious activity in cyberspace, they have to go on.
[09:25:18]
PURDY: And I think there are folks within this administration who believe that's important, and will do something about it, and the effort to
strengthen intellectual property protection and have better attribution of where cyberattacks are coming from or thefts of intellectual property, I
think this administration supports those kinds of activities.
And I hope they'll also weigh into international standards efforts, because we need the U.S. to be involved in 5G standards much more substantially.
CHATTERLEY: Andy, there'll be people that are watching this saying that you're lying, you're forced to lie and that Huawei can't be trusted. And
this is the point that the U.S. administration is trying to make.
What do you say to those people that were being skeptical to try and change their minds and it ties with, I know, your Global Analyst Summit today, the
future of Huawei. Tie those two things together. How do you rebuild trust? And what does the future look like?
PURDY: Well, I think it's important for people to listen to the conversation. I'm not saying to trust Huawei. I'm not saying to trust
China.
I'm not saying to trust anyone. In fact, we need a mechanism and a framework to address risk where we don't trust anyone.
There are five nations in the world who have the ability to virtually implant hardware and software. I commend to you a report that was just
released two hours ago by the East West Institute calling for a global framework for standards in conformance programs.
Those kinds of activities, if we can build and strengthen international framework that's going to help what Huawei is trying to do in terms of our
revenues, but we're in partnerships around the world and active in platforms, whether it's 5G or mobile devices, the use of artificial
intelligence.
There is going to be an increase of like $23 trillion in gross domestic product by 2025. These collaborative international efforts need to maintain
a uniform set of standards and conformance programs so we can hold everyone accountable.
That's important for the benefit of the U.S. and the global economy.
CHATTERLEY: You're talking about some form of independent arbitrator here to take a look at the technology, to understand what the risks are and
ensure that whoever is using the hardware or the software is safe.
Would Huawei be willing to come to the table and say, look, this is our technology. You analyze it. Take a look at what we're providing. We are
safe.
PURDY: We are not only open to that, we are doing that in terms of what our customers can do in our internal center and for example, our external
transparency in Brussels, and the kind of effort the East West Institute is calling for, we support that.
We support independent conformance and frankly, the 5G standards of the world that are so important. U.S. has not been very active in that. It's
very important as we roll out the new business scenarios of 5G that the U.S. government and private companies be part of that effort.
So that way, we're all working together so we can get the benefits of technology while we address the risks in a way that's transparent.
So as folks come in, come to our facilities in China, we want to open up the kimono and show what we do and how we do it and invite experts to give
us their ideas and the ideas for us and our competitors as well.
CHATTERLEY: Yes, more communication, more information, more transparency - - desperately required.
Andy, always great to chat with you. Thank you for that. Andy Purdy, Chief Security Officer for Huawei Technologies USA. Great to chat with you.
All right. The market open is next. Stay with FIRST MOVE.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. U.S. stocks are beginning the week with solid gains this morning amid word that a COVID-19 vaccine from
biotech firm, Moderna is showing progress in early tests.
That's the picture. Investors are also hardened perhaps by new comments from Fed Chair Jay Powell. Powell said in a "60 Minutes" interview last
night that the U.S. economy may not completely recover until next year, but his overall message was one of hope.
(BEGIN VIDEO CLIP)
POWELL: We have highly industrious people. We have the most dynamic economy in the world. And, you know, we're the home of so much of the great
technology in the world.
So, in the long run, I would say, the U.S. economy will recover. We'll get back to the place we were in February, we'll get to an even better place
and I'm highly confident of that.
So, I think we're going to need to help each other through this. And we will.
(END VIDEO CLIP)
CHATTERLEY: And the message there, too, likely more support from the Fed and Congress needed, but he also said in the interview that one should
never bet against the U.S. economy, a potent message for investors and business leaders trying to navigate these challenging times.
Joining us now David Rubenstein, the cofounder and cochairman of private equity giant, the Carlyle Group. He's in constant contact with business and
investment leaders as they try to plan for the future.
David, great to have you with us. Fantastic to have you on FIRST MOVE.
DAVID RUBENSTEIN, COFOUNDER AND COCHAIRMAN, CARLYLE GROUP: My pleasure.
CHATTERLEY: Your peer to peer conversations has also gone virtual. I've watched your interviews with the NASDAQ chief, with Eric Schmidt, of
course, too. What's your key takeaway from the business leaders, their message at this moment?
RUBENSTEIN: I think business leaders think that this is something we haven't seen before. There's never been a situation where we had an economy
that went down as much as this, also a healthcare pandemic at the same time.
But I think most business leaders feel they have adapted reasonably well, but they recognize it's going to take some time to recover, and until there
is a vaccine, I don't think people are going to feel completely comfortable going back to work in the way they did before.
CHATTERLEY: That was part of the message that Jay Powell gave yesterday. Are we putting too much emphasis and hope? I watched U.S. markets this
morning jumping at the results from Moderna and its eight people in a trial. Are we putting too much emphasis on a vaccine? And what are your
views on timing of a recovery here?
RUBENSTEIN: Well, recoveries after recessions since World War II generally take about three years before you get back to where you were before. That
doesn't mean you have a partial recovery. You can have a partial record before.
But getting back to the peak of where you were before the recession, since World War II generally takes three years, but I don't know it will take
that long in this case. It might take a year as Jay Powell said. I don't know exactly for sure.
Moderna is very promising. I should disclose my son-in-law used to work at Moderna. He owns some stock there. I don't own any stock there. But it's
promising and I am going to be interviewing the CEO of Moderna sometime soon, and I think they have a very promising technique.
But it hasn't been proven before in terms of the technique they're using. But clearly, the market is looking for a vaccine.
I think a vaccine would make people feel more comfortable going back to work. If there is no vaccine, if it takes three or four years for a vaccine
to develop, clearly, people are going to go back to work before then, but I think they'll do much more social distancing and you'll have masks and a
different kind of work environment than before.
[09:35:07]
RUBENSTEIN: And I think more and more people will be comfortable working remotely.
CHATTERLEY: What are you having in terms of conversations internally about getting people back to work? Are we going to be in an environment where far
fewer people are operating in an office environment where they can, and that may be for the foreseeable future?
RUBENSTEIN: I think most employers have been surprised how productive it has been to get things done remotely.
Not all businesses can be done remotely. Supermarkets and so forth cannot be, but things that can be done remotely have worked reasonably well. Some
have taken a while to catch up to the remote style that is now more prevalent, but I do think that a lot of employees are worried about going
back, particular they don't have childcare, and therefore I think they're going to work remotely for a while and I think it'll become relatively
normal.
And I think that it is something that people will come to accept and I don't think will be seen as unusual one year from now.
On the other hand, there's no doubt that if you go back to work physically, and you actually are in the same working environment with other people, it
probably is more productive. But there's no doubt that productivity has increased remotely from what it was just a couple of weeks ago.
CHATTERLEY: Yes, we surprised ourselves. Talk to me about how you view what we're seeing at this moment? If I just look at the stock market
performance, there have been winners in tech firms. There have been those that have survived this shutdown period.
There have been ones that have been desperately hit like retail, like tourism, for example. And we've got questions over timing of recovery for
them. How do you judge value in these markets, David?
RUBENSTEIN: Very, very difficult to know. Clearly, people are uncertain about what the future is going to be. So, that's why you see so much
vacillation in the markets because there's so much uncertainty and a little piece of information can make markets go up or down.
The industries that have been the hardest hit, travel related industries, airlines for example, or hotels, or restaurants, those are going to take
some time to recover, obviously, though they will come back in time.
I think the industries that have been the most helped by all of this, I won't say help, but I should say that have done quite well are the
technology industries for sure, or companies like Amazon that have done quite well.
And I suspect they'll continue to see a lot of strength as we go forward.
CHATTERLEY: It matters for you, guys, too though if you're looking to monetize deals that you're currently in, the exit point for your deals.
What's your thinking on that, too?
RUBENSTEIN: Well, private equity has done reasonably well during good and bad times. During the last recession, private equity firms actually, they
did pretty well, but they're like everybody else.
Private equity firms mostly care about the health of their employees, the health of the employees that work in their companies, those are the most
important considerations.
After that, then they can worry about how the existing companies they've made investments in are performing and then after that is okay, and they
seem to be all right if they are, then they can look at new investments.
And new investments made at a bottom of a recession then turn out to be good if you know what you're doing and you have some good luck and many of
the best investments made in the last 10 years or so came from investments that were made near the bottom of the last recession.
CHATTERLEY: It's interesting when I look at the performance of private equity since the financial crisis. You consistently outperformed stock
markets.
We've talked about this in the past, too. As we look about the evolution of the money management industry, does it make sense perhaps for a BlackRock,
for example, to look at buying someone such as yourselves just to get that alternative investment potential and the upside that could come over the
coming years? What do you think?
RUBENSTEIN: Well, we're not for sale and I don't think all the large private equity firms are for sale. They're in pretty good shape, and they
have a lot of dry powder.
I think their people and their investors are quite happy with them today. I don't know whether large money managers are interested in getting more into
this space or not. It does have the advantage of having a long tied up capital.
So typically, the capital we have is kind of tied up for 10 years or so, and therefore that makes it relatively appealing.
But I think the private equity firms have done reasonably well in making certain that their existing companies are in pretty good shape. And while
nobody is a magician, and some companies won't work out perfectly, on the whole private equity investments are in reasonably good shape right now,
from what I know.
Clearly, there'll be some ups and downs, and we can't know exactly how the economy is going to go, but the private equity industry, I think, is in
reasonably good shape.
But we'd always use, you know, additional support or help, but I think we're in reasonably good shape.
CHATTERLEY: That was a clear message not for sale, but David, I'll take that away. You've also said something else which caught my eye and it was
about reflecting on the fragility of life throughout this period.
RUBENSTEIN: Yes.
CHATTERLEY: And I just, I just wondered what your views were on this and whether we behaved differently, that we're better as a result of what we've
experienced.
RUBENSTEIN: Yes. I mean, I'll just give you my personal reflection. I am 70 years old and as a baby boomer, I've thought since the baby boomers are
the most important generation the world's ever seen we would live forever because God would want us to be here forever.
[09:45:12]
RUBENSTEIN: But as I recognize the severity of this situation, I realized that it's possible that if I got infected, I could be gone in a week
without even seeing my family. And it's an unusual situation.
People my age generally, are 77 percent of the people my age are still alive. Now, there's people -- well, let's put it this way. People born in
1949, 77 percent or so are still alive. That means, roughly 23 percent are not.
But why am I so lucky? I don't know. I'm still alive. And I suspect I will be around for a while. But if I were to catch this disease, I would realize
that the chance of surviving might not be good for my age.
So, it has made people like me feel the mortality in ways we haven't felt before.
Generally, baby boomers have been thinking we will live forever. But I think this has made us all realize that life is much more fragile than we
thought before, and therefore, if you want to get certain things done on your bucket list, you might have to do them sooner.
But you have to also be very careful about your health. It's one thing to say I'm in great shape at 70 years old, it is another thing to recognize
that this disease does not recognize you being in great shape necessarily, and you could be gone relatively quickly.
So, it has scared a lot of people my age, and it scared me, too. But I recognize there's nothing I can do about it, except try to be socially
distanced from other people, wear a mask and practice the best hygiene I can.
CHATTERLEY: Yes, it's a challenge, isn't it? To value the things that perhaps you don't value enough before.
RUBENSTEIN: You're so much younger, you're not quite worried about this as much as I do. You're much younger, but clearly when you get to a certain
age, I used to see myself as an aging baby boomer. Now, people look at me as a senior citizen.
So, when I go to the super supermarket, there's a senior citizen line, I can go in that. I never realized I was a senior citizen until this crisis
came along and people now look at me differently.
People call me all the time and say, are you okay? I guess, they're kind of wondering because of my age, am I not okay, but so far I'm okay.
CHATTERLEY: Certainly senior in intellect, sir, if nothing else and young at heart. Great to have you with us. Stay safe, please and great to get
your wisdom on the show this morning.
David Rubenstein there, the co-executive chairman of the Carlyle Group. Great to chat with you, sir.
RUBENSTEIN: Thank you.
CHATTERLEY: We need to take a break. Coming up on FIRST MOVE, the coronavirus impact on Africa. How the largest e-commerce company on the
continent is navigating the challenges of the pandemic. We'll talk to the CEO of Jumia after this.
(COMMERCIAL BREAK)
[09:45:44]
CHATTERLEY: Welcome back to the FIRST MOVE. It's a big week for retailers. Walmart, Target and Alibaba set to show their e-commerce performance when
they report earnings this week.
It comes after Jumia, a company known as Africa's Amazon and Alibaba -- wow -- reported a growing shift towards online shopping across the continent.
Jumia currently operates in more than 10 nations across the African continent. And joining us now is the Jumia CEO, Sacha Poignonnec.
Sacha, fantastic to have you on the show. COVID has been a challenge and you have a pretty diverse business. Just talk me through the net impact
because we have seen widening losses for the company.
SACHA POIGNONNEC, CEO, JUMIA: Yes, it's been very much, you know, a work in progress and we are seeing the impact every day. We just reported our
results a week ago, and from a usage perspective, we've seen a bit of a mixed bag.
We have certain areas of the business doing very well and some areas doing less well, and mainly due to some, you know, challenges that sometimes we
face in terms of supply and logistics.
Where we face those challenges, of course, the demand is not as strong. Where we are not facing those challenges, then we have a lot of demand.
So it's, you know, from a top line perspective, it's a mixed bag. And from a bottom line perspective, it's been a pretty good quarter for us where we
have started to reduce our loss, and I think that is a good step.
CHATTERLEY: You've got groceries, you've got logistics. You've got -- as a business place, a marketplace for businesses to come onto the platform and
use, you've also got a payments business, too.
That's a lot going on across lots of diverse African nations. You've reduced by three the number of nations that you're working in.
Do you need to hone further and just focus on perhaps three, four, five nations in Africa and get those right first?
POIGNONNEC: You know, in terms of service, Julia, it's a good question that you're asking. We are essentially connecting sellers with consumers
and those sellers, they may be selling fashion items, grocery, but at the end of the day, this is an e-commerce business, right?
So from a core offering, we really operate e-commerce, and then we have one additional, if you will, service which is food delivery, which is very
complimentary to the e-commerce because it's about bringing physical goods to consumers, but with a one-hour delivery, right?
So, from an offering perspective, we're not that diverse in the sense that we have really e-commerce and food delivery, then payment is both for us
something that we need to do because we want to have consumers transact with Jumia Pay instead of cash on delivery.
So, it's more of an enabler of our business that we are turning it into a business opportunity. So, from an operating model perspective, it's not
that complex, really.
And then from a geographical perspective, you know, we were very sad, of course to exit those three geographies, and we are now active in 11
countries, and this presence enables us to have a lot of advantage as a company, right?
We get a lot of economies of scale. We get a lot of also partnerships with key brands. We want to operate into all those countries.
We get a lot of learnings and mobility for our talents, and at the end of the day, this is also important from a macro perspective as you have seen
just when we reported last week, we had a good quarter although Nigeria was not so good because of the COVID situation.
So, it's also a very good benefit for us to be very diverse in terms of geographical exposure, and have some diversity in our portfolio of
geographies.
CHATTERLEY: Talk to me about payments because this is an area that excites me although when I look at countries like Kenya or Ghana, the governments
there were pushing in light of COVID-19 to see greater focus on digital payments, which I thought was fascinating.
You've got pretty stiff competition in Nigeria, too. What differentiates your product?
POIGNONNEC: Payment is a very exciting space in general in the industry and the way we are approaching the opportunity is to very much bring the
Jumia users to Jumia Pay by making them trust the online payment on the platform a little bit if you want like eBay and PayPal did back in the
days, right?
[09:50:23]
POIGNONNEC: So, you have to think the consumers are on Jumia and they are in the mindset of transacting, right?
So, that is the case and that is the mindset for us to bring Jumia Pay to them, and from there, once they have created a Jumia Pay wallet, to create
more opportunities for them to use it and create more opportunities for them to save time and save money.
So really, the way we are approaching the opportunity is to drive the adoption of the payment platform through Jumia, which is a transactional
engine to drive that.
And then once the consumers are on Jumia pay, then we can create more, you know, use cases and more opportunities for them to benefit and access
financial services.
And I think if you look, there's a lot of different players, who are trying to tackle the opportunity in different directions.
For us the -- you know, the asset that we have is we have the use case. We have the eBay for PayPal if you see what I mean, and it's the same thing
also in China, with Alibaba and AliPay when you have a use case, and then an engine to drive the adoption, it is more powerful and more, I would say
relevant to the users.
CHATTERLEY: I think everyone sees the opportunity whether it's in e- commerce or in digital payments on the continent. It's just the execution that's the challenge here.
You said in your IPO, and obviously if I look at the share price since the IPO, it's been pretty challenged that your path to profitability focuses on
2022.
Is that still feasible in your mind or do you need to push back that time horizon?
POIGNONNEC: It's a good question. And, you know, we have taken away sort of the discussion on the timing, because in a way 2022, you know,
especially now if you consider the COVID and everything is something which is anyway, too far to talk about.
And what we have focused on instead is to say, look, we want in the next few quarters, and that was six months ago, so in the next four or five
quarters, to show clear progress, clear milestones and a clear trend towards profitability, right?
And that means that we want to reduce our absolute, you know, loss every quarter then we are getting profitable after fulfillment every quarter, and
that things are moving in the right direction, right?
So, I think for us to focus now is the execution in 2020. And then, as we do that, we may -- we may give another time horizon, but for now, we're
really focused on you know, walking the talk this year of, you know, this path to profitability.
CHATTERLEY: Makes sense to me, sir. Stay in touch. We want to keep track of your progress. Sascha Poignonnec there.
POIGNONNEC: Thank you, Julia.
CHATTERLEY: The CEO of Jumia. Great to chat to you. We'll keep in touch. Thank you.
POIGNONNEC: Take care. Thank you very much.
CHATTERLEY: Coming up on FIRST MOVE, the NASCAR drivers racing to praise frontline workers. That's after this.
(COMMERCIAL BREAK)
[09:55:19]
CHATTERLEY: We're racing to the FIRST MOVE finish line today with a very special NASCAR race.
Drivers returning to the track this Sunday for the Real Heroes 400, an event held with empty stadiums, and don't as a nurse is opening the race
from afar. Watch this.
[VIDEO CLIP PLAYS]
CHATTERLEY: Drivers paying their own tributes to the staff covering up their own names and replacing them with names of healthcare heroes. The
event, part of the Real Heroes Project, an initiative by more than a dozen sports leagues to pay tribute to medical professionals fighting at COVID-
19.
Now and always, to our healthcare heroes.
That's it for the show. Stay safe, and we'll see you tomorrow.
(COMMERCIAL BREAK)
[10:00:00]
END
