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First Move with Julia Chatterley
California Re-Imposing Restrictions As COVID Cases Surge; U.S. Bank Giants Stockpiling Cash And Warning About Uncertainty; The U.K. Government U-Turns On Using The Chinese Firm's 5G Tech. Aired 9-10a ET
Aired July 14, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:08]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Live from New York, I'm Julia Chatterley. This is FIRST MOVE and here's your need to now.
California closing. The U.S. state re-imposing restrictions as COVID cases surge.
Banking on buffers. U.S. bank giants stockpiling cash and warning about uncertainty.
Wave away, Huawei. The U.K. government U-turns on using the Chinese firm's 5G tech.
And --
[VIDEO CLIP PLAYS]
CHATTERLEY: The TikTok star forcing Disney's Bob Iger to marvel.
It's Tuesday. Let's make a move.
Welcome once again to all our FIRST MOVErs around the globe. Great to be with you on this July 14th. It's Bastille Day in France. Banks day, as I
mentioned there here in the United States, and it's a COVID crunch.
Three of the biggest U.S. financials reporting a massive Q2 profit drop of more than 50 percent. JPMorgan says provisions for credit losses totaled
$10.5 billion in the quarter. That's money set aside.
The big unknown of course is just how much of this cash the banks will actually have to use given the ongoing challenges to consumers and
businesses. We are talking billions and billions of dollars.
Wells Fargo, meanwhile, reporting a $2.4 billion loss and they cut their dividend for the first time in over a decade. More analysis on the banks
coming right up.
Futures, meanwhile, are pretty muted this morning after the Dow gave back a two percent gain yesterday and volatility spiked once again.
A different story, meanwhile, in Asia, with Hong Kong leading the region lower after announcing tightening social distancing measures to combat
fresh COVID cases there. Geopolitical tensions also weighing with China readying sanctions against Lockheed Martin for their arms sales to Taiwan.
Meanwhile, take a look at South Korea, doubling their stimulus plans to more than $130 billion, and potential green shoots, more green shoots from
China, exports and imports rose unexpectedly last month.
The import data suggesting that domestic demand for overseas goods is holding up. But I have to say, the weakness in global trade overall dealing
a harsh blow to export driven Singapore, which saw its economy collapse more than 40 percent in the second quarter compared to the first. That
country now officially in deep recession.
Singapore, a stark reminder to the entire world that COVID is a global problem and the path of the virus will ultimately determine the speed of
our global recovery.
Let's get to the drivers and that global fight against coronavirus. Just in the past four days, India has recorded 100,000 new cases. Nearly 24,000
people have now died there since the pandemic began.
Meanwhile, the Philippine City of Navotas is going into a two-week lockdown following a sharp rise in cases. Residents will each have just one day
allocated to them per week to go shopping.
And Disneyland in Hong Kong, which reopened last month, is closing down again. Fifty two new infections were reported in the city on Monday.
A different story, meanwhile, in Florida, where Disneyworld resort is still undergoing a phased reopening. In other parts of the United States, the
focus is now, however, reclosing, as Stephanie Elam reports.
(BEGIN VIDEOTAPE)
STEPHANIE ELAM, CNN CORRESPONDENT (voice over): This morning, Los Angeles on high alert, and on the verge of a complete shutdown.
(BEGIN VIDEO CLIP)
MAYOR ERIC GARCETTI (D), LOS ANGELES, CALIFORNIA: We've never had as many people infected or infectious. We've never had as many recorded positive
cases each day. And we've never had as many people in the hospital.
(END VIDEO CLIP)
ELAM (voice over): Los Angeles County reported nearly 2,600 new coronavirus cases Monday. As California added more than 8,300 new infections the same
day.
Governor Gavin Newsom taking action, closing indoor businesses like dine-in restaurants, bars, movie theaters, museums and zoos statewide.
(BEGIN VIDEO CLIP)
GOV. GAVIN NEWSOM (D-CA): We were able to suppress the spread of this virus. We were going to knock down the growth of this in the beginning.
We're going to do that again.
(END VIDEO CLIP)
ELAM (voice over): And in 30 of the hardest hit counties, venues like gyms, places of worship, indoor malls, barbershops and hair salons are no longer
open.
(BEGIN VIDEO CLIP)
KRISTIN BEST, OWNER, DYLAN KEITH SALON: It's the most heart-wrenching because this is our livelihood and so many hairdressers, they live paycheck
to paycheck.
(END VIDEO CLIP)
[09:05:03]
ELAM (voice over): For California's small business owners, closing again will be tough. But many like Tyler Emery who owns a gym in Burbank say it's
necessary to follow the rules.
(BEGIN VIDEO CLIP)
TYLER EMERY, OWNER, TYLER'S GYM: We can adapt, we can improvise, we can come together. And ultimately that's the only option we all have.
(END VIDEO CLIP)
ELAM (voice over): Newsom's move after Los Angeles and San Diego school districts announced classes will be held online this fall.
Meantime, in Florida, schools are still scheduled to open next month with the Sunshine State announcing over 12,600 new cases Monday, its second
highest daily total.
Governor Ron DeSantis says parents should decide whether their children go back to the classroom.
(BEGIN VIDEO CLIP)
GOV. RON DESANTIS (R-FL): I'm not going to dictate how everything goes. A lot of school districts around the state that are going to just go open up
and that's going to be it because they haven't faced a similar epidemic that you've seen in places like Miami-Dade County.
(END VIDEO CLIP)
ELAM (voice over): In Texas, Houston's mayor proposing a two-week shutdown.
(BEGIN VIDEO CLIP)
MAYOR SYLVESTER TURNER (D), HOUSTON, TEXAS: I think it's important to reset. We have to slow down this virus. The only way we can reverse course
is that we have to separate and then we have to continue to put on our masks, engage in the social distancing.
(END VIDEO CLIP)
ELAM (voice over): And with 37 states seeing new cases rise over the past week, some local leaders fear this is just the beginning of another
dangerous spike.
(BEGIN VIDEO CLIP)
MAYOR KEISHA LANCE BOTTOMS (D), ATLANTA, GEORGIA: In Georgia, I hate to say it, but it looks like we're going to be even worse than we were in the
spring if this transmission continues at this rate.
(END VIDEOTAPE)
CHATTERLEY: Stephanie Elam reporting there. The COVID challenge meaning a significant second quarter earnings decline for banking giants, Citigroup,
JPMorgan, and Wells Fargo.
However, JPMorgan and Citigroup were saved by the strength of their trading operations. JPMorgan shares, as you can see are up premarket. Citi and
Wells Fargo shares are lower.
Christine Romans joins us now. Christine, we knew it was going to be ugly.
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: Yes.
CHATTERLEY: Let's just hone in on JPMorgan. I mean, their earnings, their profits for the second quarter, virtually halving, billions of dollars here
set aside as well for potential losses going forward.
ROMANS: Yes and that money set aside, the three biggest banks altogether set aside about $28 billion, so I think that shows you what they're
expecting in terms of loan losses and trouble from the pandemic on companies and consumers going forward.
And the CEO, Jamie Dimon, saying he was cautious really about the future here and talked about his fortress balance sheet being a port in the storm,
so he is trying to project some confidence that they are setting aside enough money and that they are going to hunker down here for whatever comes
ahead, but noting that caution ahead -- Julia.
CHATTERLEY: Yes, absolutely. Fortress balance sheet. This is what you need in these kind of times and this kind of environment. Wells Fargo, we knew
it was going to be challenged. They were going to come under pressure and they've cut the dividend as a result.
ROMANS: Yes, to up to ten cents a share. Look, and it was worse than Wall Street. We knew it was going to be bad and it was far worse than Wall
Street had expected and its CEO, you know, disappointed by the performance of Wells Fargo.
I think, when you look at the premarket share price, as you can see, the reaction on Wall Street, a five percent decline in premarket trade.
We'll see what happens here during the normal trading session, of course, but I mean, banks really are the leaders here of this earnings season, and
this is the first coronavirus quarter and banks -- how we're seeing banks fair here is telling us, I think, how we -- how the economy at large and
the financial system has been faring in the near term.
I want to hear more guidance from these CEOs about what they're expecting in the future, though, because this is certainly, it doesn't look like the
V-shaped recovery that so many has had wanted, especially from what you're hearing from the other industries like the airlines, now that you've seen
the virus resurgence in the U.S., and that has sort of tamped down any optimism of a recovery right away for some of those airlines, too.
So, this is going to be, I think, a turbulent, turbulent earnings season. No question.
CHATTERLEY: I couldn't agree more with you on the share prices. The banks, for me, reflect the real economy. Take the stock markets in aggregate and
you can be really confused and we make this Wall Street-Main Street comparison all the time.
The banks reflect the pain. There is a lot of pain in these share prices. They're down -- what -- 30 percent, 40 percent year-to-date.
ROMANS: Yes, far worse than the S&P 500. I think the banking interest is down something like, yes, much worse than the S&P 500.
I mean, the S&P and the Dow, by the way, yesterday, were actually positive on the year for a moment and I think that is just a remarkable place to be,
right? Positive on the year for a moment, probably reflecting all of that stimulus that we've been seeing coming into the economy.
But I think the resurgence of the virus and what we're going to be hearing from these companies, these CEOs in this earnings season, you know, it's
going to be -- I expect some more volatility here, no question.
CHATTERLEY: Yes. A true reflection of the sheer uncertainty at this stage. Christine, great to have you with us. Christine Romans there.
Now, a major blow to China tech giant, Huawei. The British government is reversing policy that will now ban Huawei's equipment from the country's 5G
network.
Telecom operators in the U.K. must remove Huawei's hardware by 2027.
Hadas Gold has all the details for us, potentially angering China here, pleasing the United States, so the U.K. caught in the middle, but Huawei
does have seven years and the companies that are operating with them to get out and remove these relationships. How badly is that going to stymie the
U.K.'s efforts as far as 5G is concerned?
[09:10:30]
HADAS GOLD, CNN BUSINESS REPORTER: Well, Julia, it will definitely affect the 5G efforts and it will delay them and that's something the Digital
Culture Secretary freely admitted when he was making this announcement early today, saying that it will cause probably around a two to three
potential year delay of the 5G rollout and cost billions more pounds for the United Kingdom.
But this is a dramatic U-turn reversal from what we saw in January where Huawei was given a limited role in building out 5G. But this change today
comes after not only increasing pressure from the Trump administration, but also from Boris Johnson's own Conservative Party.
But the real trigger here, though, was this U.S. Department of Commerce decision in May to issue new sanctions against Huawei, and what the new --
this caused a new U.K. security review, and the Culture Secretary said today that the security review found that because of these new sanctions,
they can no longer pretty much trust that Huawei would be able to get the supplies needed in order to help them build this 5G network.
And as a result, we now have this ban. No telecoms operator is allowed to buy new Huawei equipment after January and they must remove all existing
Huawei equipment from their 5G network by 2027.
Now, existing Huawei equipment and things like 4G, those can remain. It's the 5G networks that will be directly affected.
This is a huge win for the Trump administration. They have been wanting this. They had even said that a military and security cooperation from the
U.K. and the U.S. could be affected by this decision.
So clearly, a win for them. Obviously, it's a huge loss for Huawei, who has been in the United Kingdom for 20 years. They said in a statement, it's
disappointing. They said that this decision is about U.S. trade policy and not security.
They said it threatens to move Britain into the digital slow lane and as we noted, it is a loss for consumers because it will delay the rollout of the
super fast 5G network here in the United Kingdom by at least a year, probably two to three years.
CHATTERLEY: Yes, absolutely. Uncomfortable timing when you're caught in the middle of the world's largest nation and the world's second largest nation
during Brexit negotiations and you need these trade partners desperately.
But I think that's part and parcel of the challenges here. Hadas Gold, great to have you with us. Thank you for that.
Now the wild ride for Tesla investors keeps getting wilder, the stock jumping 16 percent on Monday to an all-time high, only to sink back again,
closing down three percent. It's up over five percent in premarket trading.
Clare Sebastian joins us now. Hold on to your car seat, Clare Sebastian. One way to describe this stock for me now, irrational exuberance. It's a
parabolic move.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, $300.00 swing in the space of one day, Julia, all in a day's work for Tesla given the crazy ride
that we've seen from this stock. Recently, up again, you know, some might have said that that swing yesterday might have heralded sort of a turn
around, some profit taking.
We've seen even some of the most ardent Tesla bulls sort of coming out there and saying this might be time to actually take some money off the
table, but up again premarket.
We think that's partly because of a report that Tesla -- a Tesla exec in China has been meeting with officials from another region, Changqi in the
southwest of the country, could signal some expansion there. China, obviously a critical market.
But overall, this stock, I mean, it's up some 314 percent since its March lows. Its value has gone up six times over the space of 12 months. There
are reasons behind that.
It has now been profitable for three straight quarters. The latest sales numbers vastly outperformed estimates there. Some say, it puts them on
course for a fourth straight profitable quarter that could put them in line to be included in the S&P 500, which could give the stock another boost.
They've got a Battery Day coming up. There's good sales in China. So, all in all, there's a lot that sort of, you know, the wind -- put the wind in
Tesla's sails.
But they are facing the same challenges that all companies out there are facing, Julia and that's the macro headwinds, and I think that's one of the
reasons why you saw the stock turn around yesterday.
The same as everyone, the fact that California is now re-imposing new measures and that virus cases in parts of the U.S. are rising.
CHATTERLEY: And of course, Tesla having the infamous battle or Elon Musk having the infamous battle with the local authorities there to reopen
production and of course, President Trump weighing in as well to try and allow it.
But I think your critical point here, and this is very key, is whether or not they do see inclusion in the S&P 500 because you've got all sorts of
index -- people that track the index then having to buy Tesla's stock and it will depend on sort of what proportion it takes of that index that it
continues to be sort of chased higher and higher.
That move looks suspect to me, I have to say.
SEBASTIAN: Well, I think a lot is resting, Julia, on what happens next week with earnings. If that is a profit, then, you know, I think the stock could
have another stretch higher than even what we've seen.
There was a price target raised just yesterday from Piper Sandler up to $2,322.00. That's a huge premium on what we're seeing now, even Elon Musk
on Twitter said, wow, when he saw that.
So I think that is really the next sort of milestone for this stock. If that is a profit, that's huge. Then we have Battery Day in September where
they're supposed to be showcasing a million mile battery.
So, they've got a lot of big potential news coming up, and I think while we wait for that, there could be some volatility, some increased volatility,
and then we could see, you know, big reactions to those milestones.
[09:15:49]
CHATTERLEY: Yes. July 22nd. All-important release of those numbers there. Clare Sebastian, thank you so much for that.
All right, coming up here on FIRST MOVE, building a bridge to a vaccine. How searching human cells can reveal our most potent antibodies.
Later in the show, summing up 2020. This TikTok star shows us how to make friends and influence people like the Chairman of Disney. Stay with us.
We're back after this.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE live from New York where U.S. futures are set to lose a bit of ground at the open today.
We've had earnings from major U.S. banks showing the extent of the economic damage suffered during the second quarter, suggesting this Q2 earnings
season will most definitely be a challenging one as expected.
JPMorgan Chase and Citigroup's results would have appeared far worse without strong results from their trading desks.
We've got more analysis coming up on the show, but for now, JPMorgan Chase CEO, Jamie Dimon striking a cautious tone on the outlook for the economy
today. So, too, did the CEO of Delta. He says ticket demand has now stalled as U.S. states put in place lockdown measures once again.
All of this, only emphasizing the need for effective treatments to tackle the virus, something infectious disease expert, Dr. Anthony Fauci discussed
this week.
[09:20:05]
(BEGIN VIDEO CLIP)
DR. ANTHONY FAUCI, DIRECTOR, NATIONAL INSTITUTE OF ALLERGY AND INFECTIOUS DISEASES: Given the experiences that we have had with Ebola and monoclonal
antibodies, I think that that's almost a sure bet is monoclonal antibodies directly against the virus to be given in a single or couple of intravenous
infusions and people early in the course of the disease to prevent the necessity of them going into the hospital.
(END VIDEO CLIP)
CHATTERLEY: One firm working on exactly that is Abcellera. It's groundbreaking technology involves screening a blood test sample from a
recovered patient, sifting through more than five million immune cells to identify and isolate the most potent antibody that could be used to help
future victims.
Joining us now is AbCellera's CEO, Carl Hansen. Carl, fantastic to have you with us on the show. I hope I got that right from our discussions.
It's basically about harnessing the human body's best defenses to fight this.
CARL HANSEN, CEO, ABCELLERA: Yes, Julia, that was spot on. Pleasure to be here today.
CHATTERLEY: Fantastic. Talk me through how your team have done this because it's not just about groundbreaking technology. It's about the speed upon
which you've done this, too.
HANSEN: That's right. As everyone knows, this is a unique situation and moving quickly while not leaving any stone unturned has been what this is
all about.
So, really, two things have enabled this. One is AbCellera, which is a biotech company in Vancouver, has for the last almost decade been
developing a next generation technology that lets us deeply scan into the depths of natural antibody responses to find the very best molecules that
can be developed for therapeutics.
Now, usually, we do that for the top end of the drug discovery industry, but over the last two years, working with the DoD, we had been preparing
this technology for exactly this scenario, which is a pandemic response.
So, shortly after the first American patient was identified with COVID-19, we mobilized that team and on March 1st, we were able to start screening
the very first blood sample that was available.
Then, shortly after that, made a collaboration with Eli Lilly and together with them taking the heavy lift on the manufacturing and the clinical
development, and ultimately the commercial development, we have been able to go from that first sample to find the very best of the millions -- the
very best antibody from millions of cells and bring that into clinical testing in only three months, which is, by far, a world record to date.
CHATTERLEY: Yes, it's just mind-blowing. I mean, we are talking about the best antibody that we can find, but I want you to define what that means
because it's surely got to be a balance of potency and tackling and fighting COVID-19, but at the same time, as you point out, with your work
and your partnership with Eli Lilly, it's about what can be easily scaled up and manufactured.
HANSEN: Well, that's exactly right. So, antibodies are nature's response to infection and disease and if a patient is infected with COVID-19, the
patient will not just make one antibody, but perhaps tens of thousands of different antibodies and each of these is not made equal.
So, what we are looking for is to scan through all those antibodies within days and find the antibodies that can stop the virus in its tracks at very
low concentration are potent, but also that have the other properties that you want for drugs.
That they're safe for humans and a human-derived antibody against COVID is likely to be safe, but importantly also that those antibodies can be
manufactured easily and in this situation, a pandemic response, that is absolutely critical because we do not have the luxury of time to fix an
antibody that has problems.
So, in doing that, we were able to go at record speed in large part because we searched very deeply at the beginning. And I'll just add to that that
while in the early days, we had one sample and were focused on getting the best possible therapy out there, we have not stopped.
The work with Eli Lilly, we continue to screen additional patient samples in order to bring further generation antibody to the clinic.
CHATTERLEY: This is a really important point, I think, the fact that you're still searching, you're still looking to see if you can find a superior
antibody. I think you need to give our audience a sense of how this will be used, if indeed you succeed in getting this to a point where it can be
given to individuals, because just an incremental, tiny improvement in the antibody that you're using could have a massive increase in capability in
terms of how many people, surely, you can get this out to and help treat.
HANSEN: That's exactly right, and we just heard the clip from Dr. Fauci saying that antibodies are one of our best chances and the antibody being
developed by Eli Lilly and AbCellera is now the first therapeutic that was custom-made for COVID-19, and the first developed in the clinic.
So, that antibody is extremely potent, and in most situations, that would be enough and you would just continue along your way to work on the
clinical development.
If this antibody is successful and we have every reason to think that it will be, it could be used for multiple different patient groups, for the
very sick, for those that have recently become ill and also for patients that are at risk of becoming ill, those, perhaps, the elderly or
immunocompromised.
Once you start to do the numbers and you look at how many patients may be able to benefit from this therapy, in particular before vaccines are
developed, you quickly realize that there are many, many patients, and if you can use less antibody, then the manufacturing capacity that is
available can be used to help more people.
And so for that reason, we continue to search deeper and we've gone through now an additional ten patients and we have many thousands of antibodies,
including a handful that are even better than the one that's gone forward, and those could be brought forward as a next generation therapy to help
even more patients recover from COVID-19.
CHATTERLEY: And it's -- just to be clear, it's a one shot dose, so you simply boost the body's own antibodies that it's creating to fight the
virus and it just provides a bigger, more potent army to fight COVID-19 within the system?
HANSEN: Yes. I would say that it is both an advanced guard and also a reinforcement to the body's own immune response. So, by giving an antibody,
unlike a vaccine, you don't rely on the patient to mount an antibody response. You've taken the very most powerful part of one patient's
antibody response, manufactured it, and delivered it to another.
That should provide immediate protection and help patients that have not made their own antibodies to fight the virus. Of course, during the
infection, patients will also make their own antibodies so coming out of infection, they should be reinforced with their own immune response and
this is in order to bridge that gap and to help those that, for some reason, are not able to mount an antibody response quickly enough to
recover.
CHATTERLEY: Yes, and this is why I was so excited when I read about this because it sort of bypasses all the questions that we're asking right now
about potency of our own antibodies, how long they last, whether they deteriorate.
It sort of bypasses that process and just boosts the work that the body is doing itself.
Carl, how quickly could we see this if everything goes smoothly with the trials -- how quickly could we see actually this being used in practice?
And are you allowed to give me a hint on cost as well?
HANSEN: Well, Julia, as I said before, this is moving at absolutely light speed, and normally, to go from the start-up program to the approved drug
would be several years. It wouldn't be unheard of for that to be more than 10 years.
This program started in March. It got to the clinic in only three months, and it's already advanced to Phase 2, so if everything goes smoothly, we
believe, we're optimistic that a therapy could be available this year and there's already been manufacturing at risk to make sure there are more
doses to have maximum impact in 2020.
In terms of pricing, I can't comment on that. Eli Lilly is driving the commercial effort. What I do know is that they're going to take every step
that they can to make sure that as many patients as possible have access to this drug.
CHATTERLEY: Yes, I know, an incredible partnership between Eli Lilly, yourselves and the regulators of course pushing this through as well. Carl,
thank you for the optimism that I walked away with and I hope our viewers did here, too.
Great work by your team because I know you're working 24/7 as well. Thank you. And stay in touch.
HANSEN: Thank you very much, Julia. We're fiercely proud of the team and the collaborators at Eli Lilly. Take care.
CHATTERLEY: Yes, you're right to be. Carl Hansen, CEO of AbCellera. Thank you so much for that.
All right, the market opens next.
(COMMERCIAL BREAK)
[09:31:31]
CHATTERLEY: Welcome back to FIRST MOVE. U.S. stocks are up and running this Tuesday; as expected, a lower start. Tech stocks taking a hit in early
trading. Second quarter results, of course, too, from JPMorgan Chase and Citigroup showing they're weathering the COVID-19 storm thanks to the
strength of their trading desk, offsetting some of the broader challenges and those reserves as well, but they're stockpiling against future losses.
Wells Fargo reporting a wider than expected loss of some $2.4 billion for the quarter as it set aside almost $10 billion for potential soured loans.
Just giving you a look at how all three banks are doing in early trading. Wells Fargo taking a big hit, down more than 5.5 percent and even though
we're seeing losses for tech overall, Tesla shares are up in early trading after an extremely volatile day of trading yesterday and volatility
premarket, too.
We've got lots to discuss. Fortunately, we're now joined by the John Petrides, he is Portfolio Manager at Tocqueville Asset Management. John,
fantastic to see you on the show, even if it is long distance. It's been a while since we've been at the stock exchange.
Talk me through what you're thinking with the banks here, perhaps no surprises.
JOHN PETRIDES, PORTFOLIO MANAGER, TOCQUEVILLE ASSET MANAGEMENT: Yes, I mean, the banks have been -- outside of energy, financials and the banks
have been the worst performing sector of the S&P 500 year-to-date, so, you know, clearly, as we've entered the end of Q1 and into Q2, with the economy
being shut down as much as it was, you knew there was going to be struggle and deterioration. That's why the banks have sold off so much.
What you're seeing out of banks today with their results is equivalent to what many people were doing in March and April, and that was hoarding, you
know, instead of hoarding toilet paper, they're hoarding cash.
They're stockpiling not their pantry with pasta and tuna fish, but they're stockpiling it with reserves. And the banks are, you know, battening down
the hatches and is preparing for the worst, you know, really uncertain as to what the future holds.
But you know, by and large, the regulations that we've seen post the great financial crisis of 2008 and 2009 are holding strong. We saw that with the
Fed stress test back in June -- the end of June, and now we're seeing it today that despite the reserve build, the banks are prepared for if there
is another lockdown in the economy and we have to shut down parts of the economy due to COVID.
CHATTERLEY: Yes, what did Jamie Dimon call it -- fortress balance sheet. Incredible that you can see your earnings halved and own $4.7 billion and
have $10.5 billion worth of reserves set aside.
It's so many challenges here. It is low interest rates and for the foreseeable future, so it is tough to make money from lending. The
potential credit losses coming from consumers and from businesses, too.
Saved in terms of JPMorgan and is Citi by the trading desks, it is a different story for Wells Fargo.
PETRIDES: Yes, I think with Wells Fargo, the big issue and why you're seeing a relative underperformance of Wells Fargo today versus the other
banks is the cut to the dividend was significantly more than what investors and analysts have been expecting.
Wells Fargo is paying 51 cents per quarter per share in a dividend. Analyst expectations were for that to be cut to around 30 cents, so, you know, big
dramatic cut, a little bit less than half, and they cut it to 10 cents per share.
To me, this looks like Wells Fargo is taking a big bath in terms of their results. They're cutting their dividend more than -- way more than
expectations. They've made a lot of key hiring across many platforms in the portfolio, which increased their operating expenses because they had to pay
them the big salaries.
Remember, Wells Fargo, prior to COVID, was still trying to turn itself around from all the nefarious actions that prior management had taken in
2016, 2017, 2018, and they were in the Fed's penalty box from a capital standpoint because of those issues.
[09:35:40]
PETRIDES: So, here, it looks like Wells Fargo is doing a lot of things to really wipe out as many expenses as possible, really cut the dividend in
the short-term and to me, it seems like Wells Fargo is hitting the reset button, battening down the hatches and preparing for the future that
they're hoping to set the floor in the bottom so they can now projectile from here.
That's kind of how I'm reading Wells Fargo. But their call is around 11:00 or 11:30 today. We'll find out more. But clearly, that seems to be the case
from my standpoint.
CHATTERLEY: Yes, take the hits all in one go. We were just looking at the share price down some seven percent there. Very quickly, because I do want
to ask your thoughts on Tesla here.
At what point are we going to look at the banks, given that they are off 30 percent to 40 percent year-to-date and go, actually, there's a lot of bad
news in the price here and perhaps, it's time to dip your toes back in?
PETRIDES: I think there's -- you highlighted a lot of the concerns in the market just to your comments before. Interest rates are low and they're
probably going to be low for the foreseeable future.
We don't know the economic repercussions of where COVID is going to lead, all right, so what does that mean for the loan portfolio? And the banks are
dealing with new accounting issues.
There's a new regulatory issue called CECL - Current Expected Credit Losses, which means the banks have to mark down their -- the loans that
they make now, they have to make an educated guess on how much of those loans are going to be defaulting on in the future.
So think about that. They're not making -- they're not taking the loss of previous loans. They're taking the loss of future loans. So, that's
impacting their book value so you have all of those things baked in the cake and part of the reason of why the banks are down so much, but when you
look at the amount of deposits that are on the bank's balance sheet, if you look at their capital ratios, they're still well above where the Fed wants
them to be.
And banks are trading around or at a discounted book value, I think for the long-term here, if you can withstand near term volatility, I think the
long-term for the banks is quite attractive.
CHATTERLEY: Now, speaking of volatility, short-term, never mind long-term here, what are your thoughts on Tesla? Even if I didn't know what the stock
was or anything about the fundamentals, if I look at the chart, the short- term chart here, I know which direction I think this stock is going in at some point and it's not higher. What do you think of this, John?
PETRIDES: Right. Well, I think what you're seeing in Tesla here is the market pricing in that it is game, set, match on the electric vehicle car
market.
You know, Ford and many of the other big car -- auto manufacturers, in 2016, 2017, 2018 were rolling out electric cars, and they were talking
about 2020-2021, where they were going to be putting a tremendous amount of capital expenditures and cash flow towards billing out their electronic car
fleet and then COVID happens.
So, now, instead of investing for future growth, these companies are taking this cash to really stop the bleeding, because car sales have plummeted.
So which gives Tesla added room to grow as being the first mover advantage in the car market. And Tesla, the other day, lowered the pricing on the
Model Y which, again, is looking to take more market share, and if they can get more people buying their electric car than others, they continue to
increase their dominance and other players in the competitive market have really taken a step backward.
This reminds me a lot of the smartphone market. The app, at one point in time, you had Apple, Samsung, HTC, Palm, Blackberry, Nokia, Microsoft, all
of these companies were involved, even Amazon tried to get into the handset market at one point in time, and basically, it's a two-horse race.
CHATTERLEY: It's all about Apple.
PETRIDES: Between Apple and Samsung. Apple is the higher-end, higher ticket price, you know, versus Samsung, which is a lower ticket price, and I think
that's what the market is pricing in on the electric car market and you know, to make a comparison, the market is equating Tesla to Apple.
CHATTERLEY: So, I have, like, five seconds. You'd buy at this price?
PETRIDES: I would not be buying -- well, it depends on your time frame. I would probably not be buying Tesla. I would not be buying Tesla at this
price.
CHATTERLEY: You were giving it the bold buy there, okay, John, great to have you with us.
PETRIDES: Well, you know, at some point valuation matters and when the stock price is up --
CHATTERLEY: Yes, I agree.
PETRIDES: It is up a percent in a market that's down, and the market cap of Tesla equals that of Toyota, Ford, and General Motors, you know, the market
is pricing in a lot of very good news and the hurdle rate is really high, and so, you know, there's better value to be had elsewhere than Tesla at
this point.
[09:40:32]
CHATTERLEY: Yes. I hear you, my friend. Thank you so much for joining us on the show. I'm being shouted at now for taking too much time. John Petrides,
thank you so much. I was warming up to my subject. Thank you.
All right, coming up on the show, a young TikTok star who became an internet sensation catching the eye of millions, including Disney's
chairman. You won't want to miss this. Stay with us.
[VIDEO CLIP PLAYS]
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back. And now to a TikTok star who clearly believes the force is with him.
[VIDEO CLIP PLAYS]
CHATTERLEY: Meet Julia Bass, a 20-year-old who's been making videos for nine years using some pretty stunning special effects.
In this TikTok video viewed millions of times, he transforms, as you can see, into a succession of super heroes, but it took only one tweet to put
him on a far bigger stage.
He wrote, "If y'all can retweet enough times that Disney calls, that would be greatly appreciated." Well, Disney Chairman, Bob Iger responded, saying,
"The world is going to know your name."
So, what happened next? Well, let's find out. Julian joins us now. That was my poor attempt at an American accent there, Julian. Great to have you with
us.
This video has now been watched almost 23 million times and I could be out of date. Were you ever expecting this kind of response?
[09:45:08]
JULIAN BASS, TIKTOK STAR: I really had no clue that this was all going to happen. You know, this video was just another in a long line that I was
just planning to make, and this has just been quite the whirlwind.
CHATTERLEY: And just to be clear, this is you producing this video. You're doing all the special effects, the editing, this is all your work?
BASS: Yes. It's all me. You know, we've been quarantined, so we've had a lot of time to ourselves. So, yes. I just set up my phone and then -- and I
just film it, edit it, do everything.
CHATTERLEY: And Bob Iger got in touch. I believe the boss of Marvel Studios has also been in touch. What was that like?
BASS: It's insane. You know, as a fan of these things, you know, you just don't expect to ever get a phone call like that. You know, I watched the
first "Iron Man" when I was eight years old and I'm 20 now and it's been around for basically, like, over half of my life, and so now just to be --
get all this buzz and to maybe be a part of it, it's like, I don't really know how to process that. But it's definitely unreal.
CHATTERLEY: And you are at college studying, we should be clear as well. You're studying Theater Studies so you have ambitions to be an actor one
day, at the very least, given your technical skills here as well.
Talk to me about TikTok, how using this as a tool has been a great launch pad for you.
BASS: Yes, TikTok has a way about it, you know, people ask me, like, what's the secret? How do you go viral? I'm like, look, I just make engaging
content, so you know, the landscape is very different, and it's just like one of those once in a lifetime platforms that, you know, when YouTube
started up, that was it. When Vine happened, that was it.
And TikTok is it right now, and it's just one of those sensational things where, you know, I start the video holding a light saber so you're going to
keep watching, obviously, and that's how I just do my stuff. And that's how it just unfolds.
CHATTERLEY: It's amazing to hear you call it a once in a lifetime thing. I'm sure, as many of you content creators on TikTok are aware, the U.S.
government sort of taking steps perhaps to restrict it here in the United States.
We're already seeing companies saying to their employees, hey, we want you to delete the app. What is that going to mean for you? What do you think
about potentially seeing this restricted?
BASS: Well, lucky for me, I just got out of it, you know? I just transcended that a bit, so I kind of lucked out there.
But it just -- it would be much different because I just have, I think, I'm getting close to about 900,000 followers over on TikTok, and it's a great
community, a great community of people who, like, support me, love my work, and it's been so instrumental in how I create and how I'm continuing to
create, and how I started to make money, too. That's another big thing as well.
Like a lot of people, you know, TikTok is their profession to a certain extent. So, it's just, you know, I was on the -- I was on calls with
TikTok, people who work there, and they're not necessarily worried that the app's going to go down.
It's, you know -- it's neither here nor there. It's just, you know, TikTok itself.
CHATTERLEY: It's interesting to hear you make the point that it's helped you become an entrepreneur and to make money using this tool as well and to
be paid for your talent. Julian, do you have an agent? This is the big question for the moment.
BASS: As of today, I'm going to be signing with ICM.
CHATTERLEY: Oh, wow.
BASS: I'm going to be going with ICM Partners and, you know, I've been -- I've spoken to pretty much every agent you could think of.
But it's been one of those processes where it's just like, you know, you feel it out and you like that group the best and you're going to give them
a call today. So ...
CHATTERLEY: Congratulations, Julian. The sky is the limit and we'd like your first interview, please, when you become one of the future Marvel
movie super heroes. You can say yes.
BASS: Absolutely.
CHATTERLEY: There you go. I'm going to hold you to that. Julian Bass, great to have you with us, and congratulations, great work. What an awesome
video.
BASS: Thank you. Thank you so much.
CHATTERLEY: All right. Coming up after the break, Richard Quest back where he belongs, in the skies and in an airport, too.
(BEGIN VIDEO CLIP)
RICHARD QUEST, CNN BUSINESS ANCHOR, QUEST MEANS BUSINESS: The airport is pretty sparse. All the restaurants --
(END VIDEO CLIP)
CHATTERLEY: Pretty sparse indeed. His transatlantic experience has changed. Richard joins us next.
(COMMERCIAL BREAK)
[09:51:55]
CHATTERLEY: Welcome back to FIRST MOVE. Delta Airlines has posted its worst loss since 2007. The U.S. carrier losing $2.8 billion in the second
quarter. Revenue was down 91 percent from a year earlier, and the airline is trimming its schedule yet again as coronavirus spreads even faster
across the United States.
In a moment, Richard Quest in London will join us to take apart those numbers, but first, his journey from New York's Newark Airport to Heathrow
and his first flight in four months.
(BEGIN VIDEO CLIP)
QUEST: The airport is pretty sparse. All the restaurants seem to be closed, or at least it's not immediately obvious where you can get something to
eat.
Everything is getting ready and perhaps will be, but it's not there yet.
I have done this flight so many times, and yet it does feel different, knowing the circumstances, knowing the paler state of the airline industry,
being aware of the number of flight attendants and crew that are about to lose their job.
Something that has been so normal for me, so special, now very different.
If you look at a flight as being the plane took off, the engines kept going, and the pilot knew the way, then it was pretty much like any other
flight.
But it was far from that. I got quite emotional. For somebody who travels so much, like me, it really was quite an experience. The first flight after
four months, and everything is totally different.
(END VIDEO CLIP)
CHATTERLEY: A quarantined, Richard, of course, joins us now from his lounge in London. Richard, always great to have you on the show. I could hear the
emotion in your voice there. It's very different.
QUEST: Yes, and I think what surprised -- two things that I took away therefrom it. Firstly, the flight crew, the flight attendants. They were
absolutely wonderful in very difficult circumstances. And many of them, most of them facing possibly the loss of their job, and they still went
through exactly what they were supposed to, were charming, friendly, and there was excellent service.
The second thing, you take off from New York, there's the pandemic. You fly over Greenland, the pandemic. You fly over Ireland, the pandemic.
You come in and you see London, and England -- Southern England, the pandemic.
I started to really feel the global nature of this pandemic. It doesn't matter where you fly, when you get off the plane, it will be there,
coronavirus, the pandemic.
CHATTERLEY: How many people were on the flight, Richard? Just give us a sense. What were people saying? Were they nervous to be on that flight?
Because there will be people watching this going, should I and can I get on a flight right now?
[09:55:10]
QUEST: There were about, I don't know, ten of us, 12 of us in business class, premium economy had one or two and there may have been 20 or so
sparsely dotted out, 30 over economy.
Yes, I'm sure people are nervous, and you know, I can recount all the same facts, the filters, the hospital filters, the fact that they used
electrostatic cleaning, that everything's fresh.
The meal tray, for example, nothing on the meal tray had been touched by anybody else. The food was still in -- was still in foil. The biscuits or
the dessert, that was all still sealed and wrapped in plastic. So they have accommodated and they've done a really good job that they've done this.
And to the airline's credit, and I know this isn't going to be popular because people sort of think big, bad airlines, but to the airline's credit
-- Delta, United, American, BA -- all of them, they're still running flights for people like you and me and everybody who wants to fly and
losing money in doing so.
So, when you put it in that context, you realize this is a unique industry, and one perhaps, Julia, that does deserve support because without it, this
backbone of communication, physical communication, would have just disappeared.
CHATTERLEY: A backbone of the global economy, let's face it. Richard, thank you so much for sharing your views and making the trip for us and stay safe
there in quarantine.
QUEST: Thank you.
CHATTERLEY: Richard Quest there. All right, that's it for the show. You've been watching FIRST MOVE. I'll be back tomorrow. Stay safe in the meantime.
(COMMERCIAL BREAK)
[10:00:00]
END
