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First Move with Julia Chatterley
The U.S. Government Restricts TikTok and WeChat; Outgoing U.S. Ambassador Blames Beijing for COVID-19; Investors Seem Keen to Play into Unity's IPO. Aired 9-10a ET
Aired September 18, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:11]
JULIA CHATTERLEY, CNN BUSINESS ANCHOR: Live from New York, I'm Julia Chatterley. This is FIRST MOVE and here is your need-to-know.
Plug pulled. The U.S. government restricts TikTok and WeChat.
China cover-up. The U.S. Ambassador blames Beijing for COVID-19.
And strength in Unity. Investors seem keen to play into the game maker's IPO.
Thank goodness it's Friday. Let's make a move.
Welcome once again to FIRST MOVE this Friday and what a week it has been. We've had Fed meeting agitation, Snowflake IPO celebrations and TikTok
deal, well let's call it mutation, assuming it even goes ahead.
Let's get to the breaking news in the past hour on that. I can tell you the United States is planning major new restrictions on TikTok and WeChat from
Sunday this weekend.
The U.S. Commerce Department says the two social media favorites will be prohibited from app stores and the U.S. will make it illegal to host data
from WeChat. What does this all mean? Selina Wang has more.
Selina, I can tell you what I think, I've read through the whole Commerce Department briefing. This looks to me like Trump turning the screws and
playing hardball over this deal and it's consistent with concerns about security risks and it is consistent with concerns about who actually gets
to own TikTok U.S. Talk us through what's in this release. What do we make of it?
SELINA WANG, CNN CORRESPONDENT: Julia, we've been talking about this for weeks and every twist and turn has been pretty difficult to predict. As you
said, the Trump administration says that this is all about ensuring national security.
The announcement we're getting from the Commerce Department today is really in response to that Executive Order Trump had announced on August 6th
giving 45 days to get an elaboration on exactly what types of transactions would be banned.
Now, for TikTok and WeChat, this means that as of Sunday, Apple and Google cannot anymore have this app on their app store. So no longer will it be
downloadable.
It is unclear though what it means for that deal between ByteDance and Oracle and if this enough to save TikTok. Just hours ago, I reported
according to a source that they had reached a tentative deal with the U.S. government. One expert told me this could be a way for Trump to gain more
leverage and have a negotiating tactic here to put even more pressure on ByteDance to agree to more concessions and agree to give up that majority
ownership, which does seem to have been a sticking point.
And this particular point here, I don't know if you picked it up in that announcement, shows that there is potentially some wiggle room. It says the
President has provided until November 12th for the national security concerns posed by TikTok to be resolved.
If they are, the prohibitions in this order may be lifted. So it could be reached before Sunday or potentially this could go in place and then it
could be lifted again if they're able to reach that agreement.
CHATTERLEY: Yes, it's such a great point, because -- and you said it right at the beginning, this is consistent with what the President himself has
been saying all along.
Look, is this or is this not a security concern? And that comes down to one, who controls it; and two, the source code for this. Whichever U.S.
company or companies control this have to be able to own and have ownership of both the data and the source code for what creates TikTok and that's
what it comes down to.
So it's consistent with playing hardball, I think with China at this moment.
Selina, you hinted at it. What does it mean for users in the interim, assuming this goes ahead on Sunday and then we've got the window between
Sunday and November 12th, if indeed we see or don't see a deal? What's it going to mean for users?
WANG: Julia, there's still so much that we don't know about what it's going to look like in practice. As the reading says, it means that you're not
going to be able to download it from the app stores. There will be certainly issues in updating the app.
But for current users who still have these apps, they may still be able to use them until they're out of date. And for WeChat, it's quite confusing
because we had received a statement from the Department of Justice saying that it's not going to target people who use this app for communication
purposes, because of course WeChat is a lifeline for the Chinese diaspora, for people who need to speak to family and friends back in China.
It's also incredibly important to American businesses who use it as a marketing tool and we know that U.S. businesses have been trying to explain
to the trump administration how critical it is that they're still able to use this app.
And earlier, you were really emphasizing this national security aspect of this. The security experts I've been speaking to about months on end, about
this particular case of what the Trump administration say that, yes, there are legitimate security concerns when it comes to Chinese companies
operating in the United States and the idea that there is a blurred line between the private and public sector.
But there are ways to mitigate those risks without outright banning them, which sets a bad precedent for future foreign technology companies
operating in the U.S. and in the proposed deal, which I reported according to sources, Oracle would be able to review the code, be able to make sure
that there were no back doors.
They were going to be security mitigations put in place which the companies clearly thought was enough to satisfy those security concerns. So we still
have to wait and see if Trump is eventually going to agree with that.
[09:05:43]
CHATTERLEY: Yes, can't look like you agree to this without going in for a fight, Selina. Perhaps it comes down to that to your point.
Very quickly, what's the likelihood that we see a flurry of downloads between now and Sunday night. It's quite after when you get told you can't
do something. You actually do it whether you wanted to or not.
WANG: Well, we know that the TikTok community has been extremely fervent saying, "Please, save TikTok," and Oracle, this software enterprise giant
was deemed as a savior by TikTokers.
I've been seeing tweets flooding saying that, "Quick, hurry up and download TikTok before it gets banned."
CHATTERLEY: Get on it.
WANG: So I will keep you posted on what type of data we see from there.
CHATTERLEY: And you're on TikTok, I believe.
WANG: I am. I certainly am.
CHATTERLEY: Yes. You see, I'm not.
WANG: I've had a lot of impassioned folks saying that let's hope this deal goes through.
CHATTERLEY: Yes, still not taunted. Not going to be joining in the next 24 hours. There we go. Selina Wang, thank you so much for that.
All right, let's get more reaction from China, too, because David Culver is in Beijing for us. David, we can joke about this, but let's be clear, the
broader tensions between the United States and China are about far more than just one entity like a TikTok or a ByteDance.
It's defining, I think, the relationship -- continuing to define the relationship going forward. And of course, the businesses and individuals,
navigating those tensions, too.
DAVID CULVER, CNN CORRESPONDENT: No question, Julia, and I can also say that Selina is on WeChat, too, and it is not just about messaging, because
we use that here when she lived in here in Beijing and most of us in Mainland actually have to really live off of it because it's what we use
for our everyday payments.
In fact, this is an anecdotal experience. We've noticed, foreigners, that is, when we've been logging into our WeChat Pay to make a purchase, they've
been making us re-enter personal information, including photos of our passports and expiration dates and they keep track of all of that.
It is not clear if it is related to what's going on now, but it is certainly suspicious in timing. And speaking of timing, I mean, we cannot -
- I am not trying to diminish any national security concerns there that are being brought up by the White House, but we can't look past the timing of
this leading up to the election and the campaign mode that we're in right now.
Part of that is the really strong rhetoric that we're seeing that is anti- China, and that was echoed today in an interview that I had with the outgoing U.S. Ambassador to China.
Terry Branstad is leaving his post after more than three years. It comes at a very, very tense time. As you pointed out, Julia, we are looking at
several different issues from Hong Kong national security law to rising tensions in the South China Sea, to Xinjiang, and the allegations of
widespread human rights abuse, to conflict at the India-China border. It is all over the place.
And one thing we're seeing now come out from this outgoing U.S. Ambassador, is that he is holding strong to President Trump's criticism of China, in
particular with regards to the coronavirus outbreak. Take a listen.
(BEGIN VIDEOTAPE)
TERRY BRANSTAD, OUTGOING U.S. AMBASSADOR TO CHINA: The Chinese system was such that they covered it up and they even penalized the doctors that were
pointing it out at the very beginning, so the result was what could have been contained in Wuhan ended up becoming worldwide pandemic and that was
what is so sad.
CULVER: What do you assess of President Trump's dealing with President Xi? Because you know what it's like to deal with Xi. President Trump's approach
has been -- well, it's been a little bit all over the place, to be quite honest.
I mean, earlier this year, we saw that he was saying that President Xi was a good friend, a gentleman, complimenting his leadership, even as the
outbreak was starting, and now, we've seen he has not criticized President Xi by name, but he is clearly slamming China and the party.
Is that the right approach, do you think?
BRANSTAD: There's been more telephone contact between President Trump and President Xi than any other American President with a Chinese leader. And
initially, I think President Trump believed the Chinese when they said what they said about the virus, and then he and the rest of the world found out
that what they said was not true and misinformation and cover-ups occurred and the result was, we are faced with a worldwide pandemic.
And it's really, I think, the communist system of China and their unwillingness to admit wrongdoing that caused this whole thing to happen
and that's the tragedy of it.
(END VIDEOTAPE)
[09:10:13]
CULVER: A very harsh assessment there, Julia. I asked the outgoing Ambassador, I said what's next?
He said this is retirement from being Ambassador. He is very specific in that wording. I said, are you going to campaign for President Trump as you
return to Iowa? He says if the President asks, he'll do it.
CHATTERLEY: I was going to say, David, terrible timing in terms of the relationship between the two countries, but clearly a decision has been
made that he's more potent campaigning for the President back home here, but -- and you made this great point that all of this we have to look
particularly at this moment through a prism of proximity to the U.S. Presidential election, but culturally here, the differences, whether it's
the fact that one of these presidents has an election to win, the other nothing happens in China without Xi's say so and the importance of the
dominance of the relationship and those calls and the relationship between the two Presidents that's going on.
How important is culture and the point that he made about the need to save face in China?
CULVER: You know, it is interesting, Julia, because the Ambassador, while he is very critical there of the initial handling and what he alleges to be
the cover-up and even what we reported as the silencing of whistleblowers, he also points out the positive, and culturally what we have seen just
living here is that things have returned to near normal, as though life pre-COVID, and part of that falls into the, as he portrays it, the
authoritarian regime and their ability to control these cluster outbreaks and to control mass testing and contact tracing. And essentially to control
the spread of the virus, to contain it.
So from a cultural aspect, I mean, obviously the mishandling early on is something that is being highlighted, but as he points out in the same
breath, is that, there's also how they're handling it now in the aftermath compared to within the U.S. and it seems to be a success.
CHATTERLEY: Yes, the downside of all the freedoms that get discussed here and perhaps the inability for leadership to control a situation like a
pandemic. Such a great point. David Culver, thank you so much for that.
CULVER: Right, thanks, Julia.
CHATTERLEY: David Culver there in Beijing. Thank you.
All right. Let's get right back to business now and the tech IPO blizzard continues. Games software developer Unity making its debut to the New York
Stock Exchange today. Paul La Monica is with us.
Before it is even trading, Paul, and great to have you with us -- they are already adjusting the price higher, so we're seeing the enthusiasm here.
But just explain what Unity is once again so our audience understand the lure.
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, definitely. The lure of Unity. We know how red hot the world of mobile gaming is and still console gaming
for that matter with new Xboxes and PS-5 coming out from Sony soon.
What Unity does is it helps develop -- a software that develops big popular games, EA is a customer, Take 2 is as well. This is a company that also
helped develop Pokemon Go, which was the virtual reality mobile game that took the world by storm a few years ago.
So, they are very well-known in the gaming industry. They sell subscriptions to the big gaming developers to use their software to help
create hot new games.
CHATTERLEY: It is quite fascinating. We had Ruchir Sharma of Morgan Stanley Investment Management on a week and a half ago and he said, look, there's
$120 billion market for mobile apps, three-quarters of which is spent on gaming apps at this moment.
He was talking about the power of these gaming companies and the 3D platforms that they are building to host the future of the internet
economy. It's part of what gave Epic the confidence perhaps to take on Apple over charging fees.
What do you make of that when you look at an IPO and a stock opportunity like this, if we are talking about defining the future of the internet and
an internet economy?
LA MONICA: Yes. Exactly, Julia. You mentioned, interestingly, Epic. Epic is a competitor to Unity because they have one of their own engines as well to
help develop games.
So it's going to be interesting to see how that battle develops, and I think that you've got clearly many younger and people my age, middle-aged
consumers, who are happy playing these mobile games.
Everyone talks about -- you know, Netflix even has pointed out that you look at competition for Mind Share and Time right now for entertainment and
it's not just about streaming TV shows and movies on platforms like Netflix and Amazon Prime, it is playing video games as well.
It is a burgeoning business that has billions of dollars every year. It's bigger than Hollywood in some respects with the number of games that come
out and the revenue that's generated compared to Hollywood blockbusters.
And obviously with people staying at home because of the pandemic, gaming is only going to get bigger and that should help Unity.
[09:15:03]
CHATTERLEY: Gaming revenues, $20 billion in 2010, $160 billion this year. To your exact point, as box office receipts have collapsed and they're down
97 percent approximately, gaming revenue is up between 50 percent and 100 percent.
I mean, part of this is the pandemic, but to your point, this is not dissipating once we get through it. Paul La Monica --
LA MONICA: Yes, and Unity had a big chunk of the revenues, up about 40 percent from a year ago.
CHATTERLEY: And there we go. Wow. See another thing I've missed.
Paul La Monica, thank you so much for that. I am not a big gamer. I have to say -- like at all. All right, thank you, Paul.
These are the stories making headlines around the world. U.S. Democratic presidential nominee Joe Biden casting doubt on President Trump's claim
that a coronavirus vaccine could be ready in time for the November election.
Biden held an outdoor drive-in Town Hall Thursday night speaking with voters who parked their cars around the stage.
(BEGIN VIDEO CLIP)
JOE BIDEN (D), PRESIDENTIAL NOMINEE: I don't trust the President on vaccines. I trust Dr. Fauci. If Fauci says the vaccine is safe, I'd take
the vaccine.
Now, we should listen to the scientists, not to the President
(END VIDEO CLIP)
CHATTERLEY: A key point here of course, is that a vaccine may be ready, it just might not be available for broader use.
President Trump in the meantime is dismissing recommendations by medical experts to avoid large gatherings, saying this at his own rally Thursday
night.
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: By the way, officially this is called a protest. You know that? We no longer call it rallies. We don't
use the term rally, okay? Rachel knows.
We don't call them rallies anymore because you're not allowed to have a political rally for more than ten people, you're not allowed to go to
church, you're not allowed to meet, you're not allowed to talk to anybody. You have to stay in a prison.
[BOOING]
TRUMP: Your home has become your prison.
(END VIDEO CLIP)
CHATTERLEY: In Israel, a resurgence of coronavirus is forcing a second nationwide lockdown just as the Jewish New Year is beginning. It comes as a
number of infections reached a new high of nearly 5,000 a day.
All right, still to come here on FIRST MOVE, what could the latest U.S. move against Chinese apps mean for investors and for consumers? We'll be
talking more about the TikTok-Oracle deal or a long deal. We will see.
And going digital, the startup that's on a mission to modernize hospitals in Africa. That's coming up. Stay with us.
(COMMERCIAL BREAK)
[09:20:35]
CHATTERLEY: Welcome back to FIRST MOVE live from New York, where we are looking like a mostly higher open on Wall Street this Friday. Tech set to
outperform as the NASDAQ tries to break a two-week losing streak.
Tech has actually gone from all the rage to all the range. The NASDAQ began the week bouncing, progressively lost steam. Apple down almost three
percent in the past five sessions. Facebook and Amazon, too, down around five percent.
In the meantime, we've also got fresh uncertainty for U.S. banks. It's not all about tech. The Federal Reserve announcing an unprecedented second
round of financial stress tests this year.
Powell and co want to know whether the nation's 34 largest banks can still handle severe economic strains. Limits on share buybacks and dividend hikes
could be extended, too. Probably prudent in light of recent softening in the data like retail sales and ongoing jobless benefit claims, particularly
if Congress can't agree on more financial aid.
A quick look at Asia now. Green across the board. Chinese stocks ended the week up some two percent. The Chinese yuan also benefiting from the pickup
in data that we're seeing over there, on track for its best weekly gain in around two years.
All right. Let's bring it back to our top story now. The U.S. Commerce Department moving to block WeChat and TikTok downloads in the United States
beginning as soon as Sunday. This, on national security and data privacy grounds. The move represents a major escalation in the fight for the future
of TikTok here in the United States.
Dan Ives joins us now, Managing Director of Equity Research at Wedbush Securities.
Dan, I said this was Trump turning the screws. This deal not done yet. What do you make of it?
DAN IVES, MANAGING DIRECTOR OF EQUITY RESEARCH, WEDBUSH SECURITIES: Look, it's a game of high stakes poker and this really puts teeth in terms of
some of the talk that you've seen out of the White House, as well as the Commerce Department. It really gives them 48 hours to get a deal done.
I continue to think the issue here is the majority ownership of oracle as well as Walmart, as well as the source code situation. That continues to be
at the crux of the issues here.
Now, ByteDance's back against the wall, the plug gets pulled, the valuation goes down 70 percent to 80 percent day one.
CHATTERLEY: Okay, so two things. Majority ownership. There was a suggestion that if you add in Oracle's stake, if you add in Walmart's stake, if you
add in some of the strategic investors, Sequoia Capital, for example, that would total to an effective majority stake for U.S. companies.
But the bottom line is, I think, that ByteDance has to hand over the source code surely to Oracle.
IVES: That's the crux of the issue. Because it goes back to the whole reason of Dell and Microsoft that deal didn't happen. It was a source code
algorithm, because of the Chinese export rules.
Now, that's all going to need to get a greenlighted by Beijing going into Sunday night.
CHATTERLEY: Talk about those export rules because this is critical. This was Beijing saying, hang on a second, you're effectively forcing us to sell
one of our companies. This was at the back end of August. They said we're going to put restrictions in foreign technology being exported out of China
to countries like the United States. It's kind of an effective poison pill potentially to this deal.
IVES: That's exactly what it is. That really put a poison pill on an acquisition. First time they've obviously changed that since 2008. But then
it came down to, okay, a partnership with Oracle, that was something that could get greenlighted, majority ownership.
I believe the Rubik's Cube information here is that source code algorithm. They need to open that up for Oracle as well as the Commerce Department's
CFIUS to approve the deal. That's going to be the key issue over the next 48 hours.
CHATTERLEY: The key of the deal is that both sides have to walk away feeling like they won or at least they won something and didn't cave. Who
does this deal and the survival of TikTok ultimately on the Chinese side matter to? Because the United States has 100 million potential voters, two
months out from a presidential election that may not be able to use TikTok beyond November 12th.
IVES: Yes, that's really the focus here because the White House put a line in the sand. So has China and Beijing in terms of just the issue around
source code.
Now, for ByteDance and TikTok, I think they're willing to accept a majority ownership. Source code continues to be the issue. Potentially, you could
have an IPO in the next year, some of the media reports talked about it.
But Julia, the reason this is so important, this could be a ripple effect, almost a looking-forward-something-moment in terms of the U.S.-China Cold
Tech War depending on what happens over the next 48 hours.
[09:25:24]
CHATTERLEY: This is such a great point. This is not just about one company or entity like a ByteDance or a TikTok, but this is about defining what the
future relationship, I think, not just about technology, too, but surely the two nations ease-like going forward. I think that --
IVES: Yes, that's the big issue here, and I think my dog agrees with you, too. Because ultimately, look -- but that's the broader issue. It's about
enterprise. It's about consumer, it's about 5G, and it's about the battle for security.
There's a line in the sand here. Now, okay, who caves -- we can say that. But it comes down for ByteDance and TikTok, this really puts teeth in, you
know, what you've heard from the White House in terms of getting a deal done. Majority ownership, access of the source code -- that continues to be
the crux.
CHATTERLEY: On the flip side, though, let's look at the bright side. If a deal does get done, perhaps it creates some kind of model for how the two
countries can work together, protect data, provide assurances on the Chinese side, for example, for the United States that, look, this entity is
secure and your data is with it.
IVES: It's a fork in the road situation. Because to your point, on one side, we can take the negative side ratcheting up of tensions, U.S.-China
Cold Tech War; on the other side, an agreement happens. I don't expect the U.S. and China to be going to a candlelight dinner, but it does help in
terms of from a tech perspective, which is a big focus of the street, of course Huawei and 5G and everything else.
That's why the ramifications here are massive. Now, again, for Apple, I continue to view that the WeChat issue is contained because I think there's
not going to be a ban on WeChat in China for iPhones.
CHATTERLEY: Very quickly, Dan, I was just pouring over what the President said last night and he said, I guess Microsoft is still involved. He didn't
offer any further details. We'll make a decision.
What's the probability that we see some new surprise and Microsoft, perhaps, is back involved at some point in the future?
IVES: Look, it's a long shot, but it's possible, right? It's one where -- I think this is one where originally, in the Dell and Microsoft -- only one
for an acquisition, could they partner? Could they get back in with Walmart? I think this soap opera is going to have a lot of twists and turns
in the next 48 hours.
CHATTERLEY: But you still think ultimately an Oracle-TikTok deal takes place?
IVES: I think 65 percent to 70 percent deal, it still happens, just given the scheme of high stakes poker, but no doubt right now. You know, I think
at least the White House and the Commerce Department showed their cards.
CHATTERLEY: Yes. Two months out from a presidential election. We are not going to make this look easy. Dan Ives of Wedbush Securities.
IVES: Thank you.
CHATTERLEY: Great to get your wisdom and hi to the dog.
IVES: Thanks.
CHATTERLEY: The market opens next.
(COMMERCIAL BREAK)
[09:31:27]
CHATTERLEY: Welcome back to FIRST MOVE. U.S. stocks are up and running on the last trading day of the week and we've been following, of course, the
breaking news throughout the show from Washington today. The U.S. moving to block new downloads of TikTok and WeChat as of Sunday this weekend.
Overall, tech sentiment though not dented by the news with the NASDAQ solidly higher as you can see in early trading, some four-tenths of one
percent. A word of warning, though. We could see oversized price swings on this quadruple witching Friday on Wall Street when lots of option bets
expire. That tends to create some funky price movements. So just watch out for that.
Now, it may be called software, but it's packing a hard punch on the markets. It has been a big week for IPOs with Unity Software, as we
mentioned earlier, JFrog, too, hot on the heels of the listing of Snowflake.
Brian Belski is Chief Investment Strategist at BMO Capital Markets. Brian, great to have you with us. Lots to discuss today. Let's start with the IPOs
here for variation. What do you make of what we've seen this week?
BRIAN BELSKI, CHIEF INVESTMENT STRATEGIST, BMO CAPITAL MARKETS: I think it's pretty positive, Julia, especially given the fact there's been a
scarcity of new ideas in technology and it's been one of the arguments on why people have been concentrated in some of those names. I think as you
start to see new leadership as identified by some of these IPOs, but other companies in tech as well.
You know, we've said for a long time that tech is going to be the leading sector for years to come. It's a secular quote-unquote "category killing."
We think a tech revolution is under way.
But it is really important to see new leadership in any new bull market, which we think actually began as the second half of our 20-year bull market
for the next 10 years that began on March 23rd. So, this is very promising for the tech sector.
CHATTERLEY: Oh, you've made a great point there, and that's I guess, diversification. We often talk about the FAANG stocks and the sheer scale
upon which they represent in the broader index.
You're saying actually for investors here just having another option that looks like a good growth company is beneficial.
BELSKI: It is, because remember when growth is scarce, growth outperforms and that is why there has been such concentrated buying in some of those
tech names. But as we start to see emerging technologies and new companies that access technology and have those technology types of operations, the
growth will diversify and that's going to be very good for the economy and obviously, very good for the stock market.
CHATTERLEY: But none of that justifies the soaring ramp-up in the first day of trade for Snowflake. Is that irrational exuberance? Is that sort of the
technical of the market of how companies list? We talked about it on the show yesterday, this idea that no one really wants to sell and lots of
people want to buy and it just forces the price up.
BELSKI: Well, that's part of it. And again, it goes back to the scarcity thing as well. I just believe that it is going to be part and parcel to a
burgeoning new investment banking boom with respect to not only in new public offerings, but secondary offerings as well.
You've seen stock splits and stock buybacks. Now, I think you're probably going to start to see more stock in the market. And again, it takes out of
that scarcity proposal and adds new capacity to the tech market and the market overall, which, again, is very good.
CHATTERLEY: Okay, so you're positive because you're talking about tech leadership, you're talking about the start of a sort of burgeoning tech
innovation period, I guess.
And yet we have a 60 percent rise in the technology sector from the lows back in March. We, then in three days pulled back just over 10 percent and
everyone is making comparisons to the dot-com era and panicked and is this now a time perhaps to lessen positions?
Brian, you say that's a load of baloney basically.
BELSKI: A load of baloney.
CHATTERLEY: Give us the reason why.
BELSKI: Well, I think it's -- I'm so glad you brought it up, Julia, because I think it's really part and parcel of what's going on in our society, it's
a rush to judgment bull-point analysis. We don't go deep in terms of our thoughts and leadership and how we understand things.
I think the tech bearishness is so unimaginative, just to focus on 1999 -- in 2000, I'm sorry. If you go back and look at the fundamental construct of
the technology sector, it's dramatically different than it was in 1999- 2000.
Just the sheer number of dividend paying stocks to cash levels to the discernibility and stability of earnings, we've said for a long time that
technology is the new consumer staple. That also includes members of the communications services sector, much different than the construct again of
the technology sector in 1999-2000.
[09:35:47]
BELSKI: We have to be careful now to say it is different this time because it is not different this time in terms of certain trends with respect to
concentration of stocks. That's why the new stocks and the IPOs and the new leadership in technology is so important right now.
CHATTERLEY: Can you put some numbers on that? Because you raise great points about the proportion of dividend paying stocks, relative valuations,
even balance sheet strength, I think is another comparison that you can make.
Can you give my audience a sense of what we're talking about here in terms of the differences?
BELSKI: Yes, just to keep it real simple, two to three times as many companies in the technology sector right now are paying dividends relative
to what was happening in 2000. That's dramatically different and technology has become actually a strong dividend growth player globally.
In terms of cash flow, cash flow is to the double-digit tune relative now to where it was in 1999-2000.
With respect to earnings, the level of earnings is nearly triple what it was in 1999-2000. Remember, a lot of the companies didn't have earnings or
even sales in 1999-2000 and were really valued on enterprise value.
And then, lastly, the biggest argument against tech is this whole notion of a 30 to 40 times multiple, where it is approaching the level of earnings
have to go back and look at where prices are and earnings are, and the earnings component of tech is much different, again, right now.
So, I think to go back and compare a trailing earnings multiple does not have a lot of grounding to it.
CHATTERLEY: And all of these things point to a greater maturity, I think, of the company, a company that's able to pay dividends, that has earnings.
It just suggests a stronger foundation for the companies that you're buying into.
BELSKI: It really does. Now, think about, you know, just the whole vaccine notion. We talk about it every day and how important technology is going to
be to not only developing the vaccine but distributing the vaccine.
Technology companies were not involved in these types of things back in 1999 and 2000, but still was really early on in its renaissance. So, the
maturity of the technology sector, I think really goes unnoticed sometimes.
CHATTERLEY: Okay, you think, and you've talked about this on the show that we're in a 20-year cyclical bull market. It's different, though, from the
sort of bull market for the first 10 years after the financial crisis just in the way that you have to look at it and also the way that you have to
invest. Explain why and what you mean.
BELSKI: Very different. And thanks for mentioning that. You know, on March 23rd when we came out and said that stocks would rally 40 to 50 percent
than those lows, we really believed that was the control-alt-delete.
If you know what a PC is, a lot of millennials don't know what a PC is, but sometimes we have to restart our computer. I think that restarted the bull
market. The first 10 years of the bull market was all based on negativity and momentum and commodities and emerging markets and some of these things,
and finally, toward the end of it, we started to see the new leadership, which is clearly technology, communication services, and parts of consumer
discretion.
I think going forward, the next 10 years is going to be all about themes, company managements, products, services, good old-fashioned bottoms up
fundamentals, where you're going to find growth in value stocks and value in growth stocks. I think it's going to be not that simple to apply
mathematics and academics, and most importantly, macro variables to be buying stocks. You are going to be buying stocks based on stock market
variables.
So the market is a market of stocks and the less macro -- the more bottom's up fundamental, that's why we like areas like technology, consumer
discretionary and communication services and parts of financials and healthcare, I think are also going to be very, very good going forward.
CHATTERLEY: Yes, I call it the fluffy stuff, the management. Things like this that are so intrinsic to a company that you have to understand. Bottom
up fundamentals from a company and beyond.
Brian, always a pleasure. Thank you so much. Brian Belski there.
BELSKI: Thanks, Julia.
CHATTERLEY: More on FIRST MOVE after this. Stay with us.
(COMMERCIAL BREAK)
[09:42:41]
CHATTERLEY: Welcome back to FIRST MOVE. Fears of wider restrictions and new lockdowns caused by the pandemic in Europe are dragging European airline
stocks down. Let me give you a look of what we're seeing in the European season.
Ryanair, EasyJet and British Airways owner, IAG all falling heavily. Look, that's the picture there. It comes as Ryanair announced today -- and this
is Europe's largest airline -- that they would cut October capacity by a further 20 percent. That's in addition to the 20 percent cut already
announced in mid-August. It's expecting its October capacity to fall from 50 percent to approximately 40 percent of the levels that we saw in October
last year.
The airline industry, of course, facing two major challenges at this time. It's the fear of flying, the safety fears amid a pandemic, but also for
those that do travel, the logistical issues of what happens at the other side. The quarantine restrictions and what that means for individuals,
whether you're working or not.
That's where flights to nowhere come in, which take off and land at the same airport. Richard Quest reports.
(BEGIN VIDEOTAPE)
RICHARD QUEST, CNN BUSINESS ANCHOR (voice-over): It may have been the fastest selling flight in Qantas history, a seven-hour trip around
Australia, where you don't get off the plane at all. Demand is high. Tickets sold out in just 10 minutes. One of the pilots is just as excited
to get going.
(BEGIN VIDEO CLIP)
DAVID SUMMERGREENE, FIRST OFFICER: It's been a few months since I've been back in an airplane, and I cannot wait to go flying. I cannot wait to see
people on the airplane. I cannot wait to see excited, happy people going flying.
(END VIDEO CLIP)
QUEST (voice-over): The date of this Flight to Nowhere and back is October the 10th. And the plane is a Boeing 787 Dreamliner, one usually reserved
for international travel. In fact, I flew on it on the Perth to London nonstop. This time though, it's a long, local cruise.
(BEGIN VIDEO CLIP)
SUMMERGREENE: So, we have a fantastic day planned, which will see us depart Sydney around midmorning. From there, we're going to head up the New South
Wales coast. There will be some great viewing on both sides of the aircraft as we make our way up.
At this point, we'll follow the Great Barrier Reef for about 90 minutes, and we'll be doing some flights over certain reef marks at high and low
altitudes. So, it'll be great viewing for about 30 minutes at the middle of the route.
Once we finish with that, we'll be then heading back to Sydney. Upon arrival, which will be getting close to sunset, we'll be doing a flyover of
the harbor and the beaches of Sydney before landing, finally, back in Sydney.
(END VIDEO CLIP)
[09:45:12]
QUEST (voice-over): Flights like these have become more common in recent months, as people who have been under stay-at-home orders because of the
pandemic are itching to get back on a plane.
In July, Taipei's Songshan Airport began the first of three flights to nowhere, where passengers got on board a plane, and it never actually took
off. Royal Brunei Airlines did a dine-and-fly sightseeing tour in August. And Singapore Airlines is reportedly considering a new route, as well, to
nowhere.
For Qantas, the flight has some additional perks. Food from the Chef Neil Perry, a gift bag, and an auction of memorabilia from Qantas's recently
retired 747s.
The beauty of these flights, as Qantas says, is there's no passport or quarantine required. And it is proving the old travel adage true, it is
better to have traveled then to have arrived.
Richard Quest, CNN, London.
(END VIDEOTAPE)
QUEST: Fascinating on this. A couple of observations for me, the geographical locations of these countries, countries that have handled the
pandemic and continue to do so well, but also that consumers seem to be getting over the fear of flying amid a pandemic.
Again, I go back to the point about quarantine. Perhaps there's something about the recovery of airline stocks if and when, when we get through this
pandemic.
All right, we're going to take a break. Moving from paper to digital records, we speak to a co-founder of a startup reshaping how African
hospitals offer and fund healthcare.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. Keeping the population healthy and safe from COVID-19, and of course other diseases starts from the ground up.
That's been the long-term thinking for the founders of Nigerian startup Helium Health.
They say 90 percent of Africans healthcare records just to begin are on paper, which clearly makes care inefficient but has other big consequences.
Helium Health's flagship product helps hospitals electronically store business records, patients' records and their information. It's now being
used by over 300 hospitals in Nigeria, Ghana and Liberia. And the company says the next big step is turning that data into extra financial support.
Adegoke Olubusi is the CEO of Helium Health and he joins us now from Lagos. Fantastic to have you on the show, and what a great idea. I want to talk
about your company, but I first want you to set the scene of what healthcare in Nigeria looks like.
ADEGOKE OLUBUSI, CEO, HELIUM HEALTH: Thank you very much for having me, Julia. When you think about the healthcare sector across Nigeria now, and
there is definitely a very fragmented healthcare market and there is a large need and demand for more capital for healthcare provisions, so we can
have more hospitals, more care being provided properly and because we also have an issue with lots of doctors and medical practitioners leaving the
country as well.
[09:50:15]
OLUBUSI: So there's a huge demand for more infrastructure for healthcare and more importantly, digital infrastructure as well, so we start to gain
more oversight and insight into what's actually going on in the health care sector and that's the role that Helium Health starts to -- plays in this
ecosystem.
CHATTERLEY: It looks like private companies effectively start up and they create a hospital, but they never actually seem to expand. I saw this
astonishing statistic that just under 60 percent of hospitals don't borrow money and part of the reason I think for that perhaps goes to your point
about paper.
If 90 percent of the records are paper, how do you prove that you're making ends meet?
OLUBUSI: Absolutely. And the first level, there is a problem about efficiency and operational efficiency, understanding your numbers as a care
provider, understanding both your business and your revenue numbers and your operations. But that is hard and almost impossible to do except if you
have some form of technology.
One of the issues we face is that more than a third of the time, our hospitals that sign up for our platform, they give us numbers, they are
estimated numbers for their volume of patients they see on paper versus what the system -- the computer -- our technology tells us after is
marginally off, usually or it is significantly off, usually about a third of the time. So they can't even tell how many patients they're seeing
before we start talking about deeper issues.
So there's first the operational problem where it's hard to run a hospital on paper. You need technology to service the data and insights that you're
required to actually scale and then there's the access to capital problem where hospitals themselves have not been -- there isn't that much capital
available and in order to access it as well, there are so many hoops you have to go through in order to get a loan from a bank to expand or get more
clinical equipment, like an MRI machine or CT scan, for example.
So there's the access to capital problem, but there's a deeper problem of running a hospital or any kind of facility on paper. It's practically
impossible because you're not going to have the real time insights and data you need to understand your business.
CHATTERLEY: Yes, I mean, at its core is better patient care, and if there's no consistency -- and we were just showing a statistic on screen of there
being 40 percent of records have some form of inaccuracy in them. You can't provide consistent care for people, too, if you're sort of doing some
degree of guesswork over how they've been treated in the past.
So it is about expanding and about improving care, but it's also about the direct benefits to individuals actually of having a digital record of what
care they've had in the past.
OLUBUSI: Absolutely. It is a public health concern because not only do you have a fragmented healthcare system where you have thousands of hospitals
and providers and clinics in different sizes all across the country, but then because they run primarily on paper, it's almost as if patient data,
vital patient information is siloed in different hospitals across the nation, in thousands of hospitals across the nation.
And in order to move and to actually accelerate our transition into a more data and technology driven healthcare system, there is the deeper need for
us to start to digitize our individual providers.
Whatever care has been provided to start going digital, that's when we start to get the data that we need on a micro level for the hospitals to
actually be more efficient and deliver better care to the patients, but also on a macro level as well, because there's a lot of data and insight
that's missing to actually understand what's going on in the healthcare sector overall. Everything from both from the immunization and the
vaccination side all the way to actually disease surveillance, and this became more apparent this year because of COVID.
CHATTERLEY: Yes, a hundred percent, and I do want to talk to you about the COVID response, but, again, the beauty of data, as you know what your
spending outgoings are, you know what your incoming are and then you can go to a bank or someone like you guys now with Care Credit and go, this is
what we look like, we can borrow money. And that's what you're providing now?
OLUBUSI: That's correct. Our Helium Credit platform, which we just launched essentially digitizes the process of accessing credit, requesting a loan,
whether it's to open a new location or to purchase equipment for -- you know, to just cover operating expenses for hospitals and clinics, care
providers and even pharmacies within Nigeria where we have launched this Helium Credit product now.
And the way it works is, it essentially takes in all the insight from our Helium EMR, Electronic Medical Record System, our hospital management
system and it is able to dynamically provide you with an instant score on your hospital, on your credit score -- instant credit score for your
hospital and then we are able to tell you how much we're able to lend to you almost instantly.
So if you use your technology, our EMR system, we essentially now offer access to credit as well because we've seen with the pool of hospitals we
serve, there are hundreds of them, but so many of them need more capital to scale their locations and hospitals and care provision is actually a great
business in this economy as well.
So we're providing access to capital and it's completely automated using machine learning algorithms, because we're able to gain all the insights to
be able to understand your hospital's potential to scale and your affordability, what line of credit you can take on and your
creditworthiness as well.
We can do that almost dynamically in real time using the data that is imputed on the system, from using our solution at your hospital.
[09:55:38]
CHATTERLEY: And I know you're offering payments, insurance and tele-clinic services as well. Okay, you're going to have to come back because I've
asked you so many questions, I've run out of time. So we are going to talk about how this helped during COVID-19.
You have an open invitation to come back. Thank you so much for talking to us.
OLUBUSI: Thank you, Julia.
CHATTERLEY: Great to chat with you. We shall reconvene. I do say this a lot. I talk too much.
Adegoke, great to be with you. The CEO of Helium Health.
That's it for the show. Thank you for joining us all week, as usual.
Have a safe weekend and we'll see you same time, same place, Monday.
(COMMERCIAL BREAK)
[10:00:00]
END
