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First Move with Julia Chatterley
Congress Debates More Aid as Thousands More Americans Request First Time Help; U.K. Prepares for Vaccine Delivery as Russia Boost Production; U.S. Prepares Laws that could Eject Chinese Firms from the U.S. Stock Markets. Aired 9-10a ET
Aired December 03, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:25]
JULIA CHATTERLEY, CNN BUSINESS ANCHOR, FIRST MOVE: Live from New York, I'm Julia Chatterley. This is FIRST MOVE, and here is your need to know.
Stimulus struggles. Congress debates more aid as thousands more Americans request first time help.
Injection impact. The U.K. prepares for vaccine delivery as Russia boost production.
And delisting drama. The U.S. prepares laws that could eject Chinese firms from the U.S. stock markets.
It's Thursday. Let's make a move.
A warm welcome once again to FIRST MOVE. Thank you for joining us on a day of new hopes, but also new heartbreaks in the global pandemic.
The U.S. yesterday recording both its highest ever death toll and the highest level of hospitalizations. Meanwhile, in Germany set to extend its
partial lockdown restrictions until January of 2021.
Cases meanwhile, have hit records in Russia and in Indonesia, and cases in Iran have just surpassed the one million milestone. And yet, hopes for
vaccines couldn't be higher at this moment.
The U.K. health officials saying today that a first shipment of the Pfizer- BioNTech jab will arrive there within hours, and U.S. health officials meet to potentially greenlight that same vaccine next week as we've been
discussing this week already.
Meanwhile, Russia will open mass vaccination centers in Moscow on Saturday. We'll head there later in the show for full details of that. It was this
medicinal momentum that meant bumper stock market gains throughout November, including more than 10 percent gains for the Dow.
Now, what we're seeing, I think, is a bit of consolidation as investors measure longer term hopes against as I mentioned, shorter term challenges.
The science is coming, the stimulus of financial aid, at least here in the United States remains less certain even as a further 712,000 Americans
signed up for jobless benefits last week, that's a sizable drop from the previous reading on the week before, but we've got keep this in
perspective, more than 20 million Americans are still getting some form of assistance, and an estimated 12 million of those could lose that support by
the end of this month.
Let's get to the drivers. Christine Romans joins us now. Christine, I'm trying to decide which number to talk to you about here.
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: Hello.
CHATTERLEY: The fact that there is 712,000 people mean that the number came down -- it's still a shockingly high number -- or the fact that of the
20 million Americans, over half of them could lose that help this month.
ROMANS: I know. You know, I look at that decline in the number, the 712,000 numbers, it is a direction you want to see. But it was a
Thanksgiving week in the United States last week, that means there was probably a day and a half there where people weren't filing for first time
jobless benefits. So I think that could have been some noise in that number.
And you step back, you know, every week, when we look at what's called this high frequency data, you know, it's the little changes in direction that
we're trying to glean some information from, but it's really the level of the data that really, really concerns me.
You've got 37 weeks now of unemployment -- first time unemployment claims that would have been a record in any time before this pandemic, 37 weeks in
a row. Any one of those weeks would have been devastating and blown away the record of any time pre-pandemic. So I think that shows you just how
deep the pain is.
I know there's some questions, the G.A.O., the Government Accountability Office has said they are concerned there might be some double counts or a
miscounting in some of these numbers because simply, the crush of layoffs, the crush of the jobs crisis is so big that the numbers can't keep up.
So I think what that tells you is this is a flashing red light for Congress. Their hair should be on fire to make sure that the people who are
going to lose benefits and lose benefits soon don't fall off a financial cliff here.
CHATTERLEY: Yes, it's such a great point, Christine, and you made it so eloquently there. You know, I point to the people who should know when they
look at these numbers, just how unprecedented they are.
Alan Greenspan, when I spoke to him a week and a half ago, and he said, look, we don't have rule books. I've never seen this before, and this is a
man that's been looking at numbers like this for 70 years, seven decades or more, quite frankly.
We've had Janet Yellen calling it a tragedy. Congress has to act. You and I skeptical, I think, of the a meet in the middle prospect here, at least
this year, rather than waiting until next year, and you know, a new government seeing what they can do. Is there any hope?
[09:05:20]
ROMANS: You know, my concern is that in Washington, they're not feeling this heat. Why? Because the stock market is setting records.
So on Wall Street, the heat from what is a jobs crisis is not really reflected. In Washington, inside the Beltway, there's not the heat from the
job crisis, really, the elections are behind them and Wall Street is doing fine.
I'm really concerned that the kitchen table fallout from this is being completely ignored. And you've got politics -- and I've seen this before.
We saw this during the financial crisis 12 years ago, however, then the stock market was falling apart. So there was a little more urgency in
Washington, but I'm really concerned about scarring, permanently scarring the labor market if they don't really do something quickly to help small
businesses, and to at least just help the unemployed right here.
CHATTERLEY: Yes, it's such a great point. The longer people are out of the workforce, the harder it is to come back into the workforce and find a job
and unfortunately, these big businesses have louder voices in D.C. when actually they should be listening to the small guy on the street, the
struggling, the families that are going to food banks and the small businesses that are going out of business because they don't have help.
Christine, thank you. We will keep fighting their fight for them. We try.
ROMANS: We will.
CHATTERLEY: Christine Romans, thank you. In the midst of this economic crisis, the human toll gets worse and worse. Yesterday, just over 2,800
COVID-19 deaths were reported in the United States, nearly 14 million people have been infected so far. Hospitalizations remain at an all-time
high, and the system is buckling, as Adrienne Broaddus reports.
(BEGIN VIDEOTAPE)
ADRIENNE BROADDUS, CNN CORRESPONDENT (voice over): Across the United States, the coronavirus pandemic passing devastating milestones this
morning.
GOV. ANDY BESHEAR (D-KY): No way to sugarcoat it. It is the deadliest day that we have had.
BROADDUS (voice over): The country recording the most deaths in one day since the pandemic began. And more than 100,000 people are in the hospital
with the disease.
The Director of the Centers for Disease Control and Prevention warns that number will only increase saying there could be close to 450,000 deaths by
February.
DR. ROBERT REDFIELD, DIRECTOR, CENTERS FOR DISEASE CONTROL AND PREVENTION: I actually believe they're going to be the most difficult time in the
public health history of this nation, largely because of the stress that's going to put on our healthcare system.
BROADDUS (voice over): Los Angeles County this week reporting its highest number of people in the hospital with the virus, and with new cases on the
rise the city's mayor enforcing a stricter, safer at home order.
MAYOR ERIC GARCETTI (D), LOS ANGELES, CALIFORNIA: It's time to hunker down, it's time to cancel everything. And if it isn't essential, don't do
it.
BROADDUS (voice over): Health experts are bracing for an even higher number of new cases and hospitalization in the upcoming weeks when
infection stemming from Thanksgiving gatherings surge. This pushing the C.D.C. to again call for people to cancel travel plans for the winter
holidays.
DR. FRANCIS COLLINS, DIRECTOR, NATIONAL INSTITUTES OF HEALTH: It's likely that unless really major efforts are to push harder with the public health
measures, we could be facing the kind of circumstance that we really hoped not to where many hospitals just run out of capabilities to take care of
all the sick patients.
BROADDUS (voice over): According to Operation Warp Speed, the first shipments of Pfizer's vaccine will be delivered on December 15th and
Moderna's one week later on the 22nd, both still need F.D.A. approval.
Federal officials say 40 million doses should be available by the end of December, enough for 20 million people to be vaccinated.
DR. MONCEF SLAOUI, CHIEF SCIENTIFIC ADVISER, OPERATION WARP SPEED: Between December and end of February, we will have potentially immunized 100
million people, which is really more or less the size of the significant at risk population: the elderly, the healthcare workers and the first line
workers.
(END VIDEOTAPE)
CHATTERLEY: Adrienne Broaddus reporting there. Let's talk about vaccines. The U.K. says it expects the first doses of the newly approved BioNTech-
Pfizer vaccine to arrive in the country today. Distribution of course begins next week.
Here in the United States, three former Presidents have said they would take an F.D.A. authorized vaccine in public and on camera. President Barack
Obama, George W. Bush and Bill Clinton aiming to promote public confidence in a vaccine cleared by regulators.
Meanwhile, in Russia, President Putin has ordered his government to start large scale COVID vaccinations next week. Russia was the first country to
approve its coronavirus vaccine, the Sputnik V back in August.
Matthew Chance joins us now to discuss. Matthew, great to have you with us. What are we talking about in terms of mass scale vaccinations? How much
production capability Do they have and doses do they have ready to do so?
[09:10:06]
MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: So, according to the Russian President speaking yesterday, on a sort of televised sort video
conference with his government ministers. They've got two million doses of Sputnik V, this Russian made vaccine, which is done in -- you know, in part
of its undergoing sort of third phase of human trials, two million doses, they need two doses for each person. So that's enough to vaccinate one
million people.
Vladimir Putin, the Russian President said he wanted that large scale vaccination efforts to begin as early as next week. And in fact, the Moscow
authorities within the past couple of hours has said that they're going to be setting up mass vaccination centers in this city, the Russian capital,
70 of them all over the city from the weekend from Saturday, the fifth. And so that effort is getting into full swing here.
In terms of the production capabilities, a country of 140 million people, they're going to need a lot more vaccine. The Russian authorities that are
overseeing the production is saying that they hope to have between five and seven million doses ready by the end of the year, or at least into January.
And so look, I mean, they've had some issues, I think, with their production capability. They've had to refit some of their production
centers and that set them back in terms of the volume of vaccines they are able to manufacture here in Russia and deliver to Russian people.
Having said that, already, according to the Russian Health Minister, a hundred thousand, more than a hundred thousand people in Russia have
received Sputnik V, most of those people are people taking part in trials. They are people in the military, they are frontline medical workers,
teachers as well.
All of those kinds of individuals or a lot of those individuals, a hundred thousand of them or more have already received the vaccine. Obviously, what
the Russians want to do now, like any other country in the world, want to step up as much as possible, that vaccination program to end this pandemic
as soon as they possibly can in this country.
CHATTERLEY: Absolutely. As every nation does. Matthew Chance, thank you so much for that update there.
All right, let's move on. The U.S. House of Representatives passing a bill that would prevent Chinese companies from trading on Wall Street unless
they comply with audit oversight rules. President Trump could sign it into law quickly because the Senate already approved the bill earlier this year.
David Culver is live in Beijing with more.
David, great to have you with us. It will clearly be more enhanced scrutiny of these Chinese companies and certainly the numbers that they present.
But the United States will say, look, this is about protecting American investors and their money versus perhaps tackling and being more fierce
about Chinese companies. How do the Chinese view it?
DAVID CULVER, CNN CORRESPONDENT: Hey there, Julia. Good to be with you as well. And just when we thought perhaps the election might have calmed
things between the U.S. and China, we've got this new turn.
I mean, as far as what this House Bill would first do, as you point out, this would prevent the companies that refuse to open their books to U.S.
accounting regulators from trading on U.S. stock exchanges.
Now, the legislation, interestingly enough, had bipartisan support within the U.S., and while it would apply to any foreign company, it's obvious
that China is the focus here. It's because China requires companies that are traded overseas to keep their audit papers here in Mainland China,
thereby blocking foreign agencies from reviewing their books.
Now, this bill would require all U.S. listed companies to disclose whether they are owned or controlled by a foreign government. That includes China's
Communist Party, so to become law, as you point out President Donald Trump has got to sign the bill. It would give him another way to put pressure on
China before he leaves office in January.
We know the administration already blames China for mishandling the coronavirus pandemic. It's come down on Beijing's tightening grip over Hong
Kong and its alleged human rights abuses in Xinjiang.
Trump also has gone after Chinese companies TikTok, Huawei to name a couple. Because of the worsening relationship. It seems several Chinese
companies have announced secondary listings on the Hong Kong Stock Exchange. This seems to be a contingency plan.
It's not known, though, how immediate the impact would be if this bill becomes a law. Some analysts have said it could take years before a company
that refuses to open its books is forced to delist.
Meantime, Julia, we know that officials here in Beijing, they are not happy. They're reacting strongly saying the U.S. is politicizing securities
regulation by setting up barriers as they put it.
CHATTERLEY: Yes, it's fascinating, isn't it? I mean, I read that you'd have to fail to comply with U.S. audit requirements for three years in a
row in order to risk being ejected from your U.S. stock market listing. But I love the point about the contingency, the hedging here by doing the
secondary listing in Hong Kong or perhaps even indeed in China as well.
David, I wanted to ask you about the point that you made as well about the consistency or the continuity and pressure under President Biden, too.
I read that interview with Tom Friedman from "The New York Times" with President-elect Biden saying, hey look, we want a global consensus on how
to handle China.
For now, the tariffs that the United States and President Trump imposed will remain. Interesting.
[09:15:21]
CULVER: It is, and Julia, we've heard throughout the campaign, the foreign policy, probably the number one foreign policy point was being tough on
China.
And so you would imagine that will continue under Biden. Here is what also is quite fascinating. I sat down today with a professor at the University
of International Business and Economics here in Beijing, and one thing that he pointed out, as he tends to have a pro-China view of things is that
initially, there was a lot of concern with dealing with Trump, mostly because they felt like he was completely unpredictable and things.
However, they felt like Trump at least provided here within China, a unity that he is considered, in fact, his Chinese nickname was "nation builder"
referring to building up the Chinese nation because it united the people here.
The concern with a Biden administration is that there will be unity amongst the allies, something that Trump didn't always get to do. And in fact, you
could look at one ally in particular, Australia, which if you look between the U.S. and China, and Australia, we know that Australia relies on the
U.S. for security, but you could say it relies on China for prosperity, however, the relationship between those two countries has been worsening.
Biden could be that person who can bring them together, meaning, the western democracies and put more pressure on Beijing. That said, the same
expert that I spoke to today, Julia said that with a Biden administration, you could at least perhaps look at coming to the table. There would be
dialogue, right?
CHATTERLEY: Yes, less unpredictable, in terms of the engagement, perhaps between the United States and China. But what a fascinating point rather
than the United States that's tackling different nations at different times and in different ways, a Western consensus over how to tackle China could
be very potent, and more of a challenge perhaps in China than what they've been through in the past few years. Fascinating.
David, always great to have you on the show. Thank you, David Culver.
CHATTERLEY: Thanks, Julia.
CHATTERLEY: All right, still to come here on FIRST MOVE, the entrepreneurial spirit, America's small businesses get creative in the
struggle for survival.
We're joined by the CEO of Gravity Payments to discuss what they're going through.
And small is the new big says the CEO of hotel chain, OYO. He joins us later in the show for his take on the future of travel. Stay with us.
That's next.
(COMMERCIAL BREAK)
[09:20:35]
CHATTERLEY: Welcome back to FIRST MOVE. It's been a subdued premarket in the United States after the S&P's record close on Wednesday. Investors
clearly encouraged and continue to be by all the vaccine news out this week. But as with ordinary Americans, still hoping for fresh action on
emergency aid news.
The first time jobless claims rose by a further 712,000 people last week, only heightens the need for more help from Washington. Also manufacturer,
3M announcing today, it will cut a further near 3,000 jobs globally. That's around three percent of its workforce.
With Republicans and Democrats so far apart on a stimulus or financial aid deal for the economy, America's small businesses are putting their renowned
creativity into the struggle for survival. Among them is credit card processing company, Gravity Payments.
Earlier this year, its employees willingly took a pay cut. Now its CEO is promising to backdate pay rises once the company recovers. Joining us is
Dan Price, CEO of Gravity Payments.
Dan, always great to have you on the show. You process payments for what -- around 20,000 small businesses. Just give us a sense of what you've seen,
not only throughout the peak of the crisis, but up to what we're seeing today.
DAN PRICE, CEO, GRAVITY PAYMENTS: Well, Julia, thanks for having me on. I'm sorry to say, it's a really difficult situation right now. A lot of
these small businesses, you know, they've really done nothing wrong.
They created great businesses very much in line with what we're all wanting, and we need them in some cases to, you know, change their business
or the government has required them to stay closed in certain situations.
And so what we've seen is 30 percent of those small businesses have gone under, but the 70 percent that are still in business, they are struggling
and they're in danger of joining that 30 percent. And this, at a time when Amazon and Walmart are looking at doubling in terms of their profit and
they are using that advantage to continue to throttle the small business world, and so we really need to assist these small businesses, if we want
to have a vital economy going forward.
And it would be a shame just for six or nine months or something like that, to lose all those small businesses and then be in a world where the major
corporations were controlling everything.
CHATTERLEY: I mean, Dan, that's a shocking statistic: 30 percent of the small businesses that you were looking after and working with, gone out of
business since the pandemic began. And I'm assuming these were healthy businesses before the pandemic. There was no reason if they had been given
support to get through this period that they couldn't have remained in business.
PRICE: Yes, I'll give you a perfect example. There's a business here in Seattle called the Fat Hen and it's close to our office. And you know, it
is an amazing place. People go there and they make really artistic, wonderful food. They sustain it in a very socially and ethically
responsible way.
And people love going there because you get that kind of artsy foodie experience for a really good price. That doesn't translate well to this
kind of high efficiency to go food where you're just trying to control cost.
And so we all want this business to still be around six months from now, the entire community does. But when you have a government lockdown to
protect our public health system, this business needs an assistance and we have options. We can extend the PPP program. We can do all sorts of things.
And we can also support their employees in a way that allows them to close down, you know, stay safe, and then reopen and cut costs.
Rent is also a major problem because landlords -- even my own landlord where our office has been closed since March is saying, we're not going to
cut you any kind of a deal. And so without some type of protection or legislation or something to solve some of these problems, you know, at
Gravity, we've been able to overcome some of these things, but a business like the Fat Hen, they don't have the same flexibility because of what
their core competencies are, and yet we want to protect this business.
We don't want to be eating at Applebee's and McDonald's, you know, six months from now.
CHATTERLEY: Yes, it favors -- it favors the chain restaurants or the franchisees that have some big parent perhaps that can they can go to and
say hey, can you just see us through or provide some support?
If you're in individual small business, a mom and pop style small business, you're kind of on your own.
00:00:08]
PRICE: You are and you did make a good point though. The ingenuity that we're seeing is fantastic. So I'm really proud of one of our employees at
Gravity, Austin Kamin, he volunteered to deliver this food personally to try to make it good. And he, for six weekends, volunteered his time on the
weekend just to try to keep this business open.
So we have solutions like that which are not sustainable, but we're also creating and seeing the implementation of all sorts of solutions, like we
have a business that we work with called Joe Coffee, that provides Starbucks quality order ahead to mom and pop coffee shops.
And so what Gravity has been focused on, we've always been a payments company, but now we're focused on working with software companies that can
allow these small businesses to compete with the likes of Amazon and Walmart.
And, Julia, it's worth pointing out that all of our lives are so much better with small businesses. They are the main driver of new employment,
they account for 50 percent of our GDP, and so this is an issue of national security, of national health for the very long term.
And I can't stress enough that we all need to come together and support them in whatever way we can so that they're still around.
CHATTERLEY: Dan, what do you make of what's going on in Congress? I mean, we've had plans proposed, different size plans, actually a lot of agreement
on needing to provide a bump up again -- once again -- in unemployment benefits, broader support, pandemic assistance, small business support.
They have agreement, they just can't agree in totality.
PRICE: Yes, well, I'm reminded -- I went to a presentation one time about it. It was a consultant. He was talking about how the best investment that
large corporations can make is in lobbying efforts, and in efforts to basically manipulate, you know, the United States Congress and the Federal
institutions and the state and local institutions.
These are supposed to be institutions that are controlled by the will of the people, but more and more, we see corporations controlling them. And a
perfect example is Mitch McConnell and the Senate have said, we will provide some measure of relief, if we can allow the businesses to go ahead
and act with impunity and if people die or get sick, they can't be held liable.
And so you can see the amount of leverage that these large corporations have over our entire system. And of course, if we give them that leverage,
they're going to squeeze small businesses.
And so while we all kind of like, fight and have things get divisive, and pick our teams and engage in this type of tribalism, the politicians can
really be controlled by the corporations and enrich themselves.
If you look at the politicians, so many of them are millionaires, so many of them, like from my home state in Idaho, Jim Rich, a Senator, you know,
he started not as a millionaire. Now, he's a multimillionaire, and he's been a politician his entire life. How did that happen? And we're seeing
that all over the place.
It's because of the influence of corporations -- we have to find a way to get that under control.
CHATTERLEY: What's the answer, Dan? Do we need you to go into politics to fight for the little guy, quite frankly? And actually, you make so many
points, and I always run out of time talking to you.
But you know, you took a pay cut when the crisis happened. You said, look, I'm going to have to lose 20 percent of my employees. And yet your
employees themselves decided to take a pay cut in order to keep everybody together and we've talked about this on the show before.
You know, there will be some small businesses that say, look, we can't provide our workers with a living wage. We won't stay in business if we do,
like minimum wage is even tough for us. Dan, what's the biggest solution here? Is it more government? Is it better government? Less government?
What's the answer?
PRICE: Well, in the short term, it's pretty easy. We need to extend the PPP. We need to have some sort of structure like a moratorium on rent,
where there's also forgiveness for the mortgage holder, for the landlord in that scenario, they have some process.
And we need to extend the PPP loan and come up with other solutions and we need to put money into the hands of everyday Americans. That more than
anything, help small business, help entrepreneurship because these large companies when they have so much financial leverage over us, we basically
have to do their bidding.
So those are the short term measures, but in the long term, we need structural change, things like rank choice voting. You know, considering
things like the filibuster. You know, the composition of the Senate, the Electoral College, all of these mechanisms that are basically allowing us
to be controlled by wealthy and corporations, we can make some of those changes.
And Julia, I don't really think it's any one person. So I don't think if I, for example, became a politician tomorrow, it would really solve the
problem.
I think what we have to do is we have to come together and I appreciate what you said about Gravity, I think we showed how you can come together
because we have people of all political backgrounds that work at the company, but we care about each other and we're working together.
If we can allow something like that to spread at the rate that the virus has spread at times over the past year, then we can solve this together.
And if we don't, the future is going to look much more dark than it is today.
[09:30:23]
CHATTERLEY: Yes, and it has to start somewhere, and it has to start now.
Dan, always great to chat with you. And thank you for your wisdom and I agree with you, short term is easy. Longer term structural issues are
tough, short term easy. Get money to people and just support the economy for now.
Dan Price, CEO of Gravity Payments. Great to chat to you, sir. As always.
The market opens next. Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. U.S. stocks are open up for trade this Thursday and we've got consolidation going on.
We're higher by some three tenths of one percent for the Dow and the NASDAQ. I think investors continue to wait imminent vaccine shipments on
the one hand and hopes for a future recovery versus record COVID cases and hospitalizations here in the United States at least on the other.
The Dow up more than 10 percent since early November. What a month it was. It's filled with the cyclical stocks that could outperform of course the
Dow when we start getting shots and stimulus. We've seen huge rotation into value of course, too.
Global markets are doing even better though. The MSCI world ETF up almost 13 percent in the past month. Emerging markets keeping up with that pace,
too.
Morgan Stanley now saying stocks are overbought and at risk for a 10 percent pullback as U.S. Treasury yields move higher. U.S. yields remain at
one-month highs. Plenty to discuss.
Alicia Levine joins us now. She is Chief Strategist at BNY Mellon Investment Management. Alicia, great to have you on the show as always.
Stocks had a bumper month. At least in the short term, can we continue to see this Kind of positive momentum in your view?
ALICIA LEVINE, CHIEF STRATEGIST, BNY MELLON INVESTMENT MANAGEMENT: Hi, Julia. Great to see you for a new month. So yes, stocks did have a banner
month in November, not just here but globally. As you know, Europe had one of the best months ever on record in the month of November.
And so the question that's really surrounding everyone is, well, we know the fundamentals are going to be a little bit soft in the next few months
with regional lockdowns as the coronavirus sort of ravages economies.
But then on the other side, we have we have the vaccines coming. So how does this play in the market? Right? And that's really the tug of war.
[09:35:39]
LEVINE: So do we think that we pulled some of December's returns into November? Probably a little bit, but not entirely, and I say that because
if you look at the history of months, where the markets up double digits, which is what November was, you tend to have positive returns over the next
six to 12 months.
And the last time that we had two months in a calendar year that were up double digits, we have it this year, April and November. The last time that
happened was 1982. And if you go back in time, you realize what a huge bull run we had starting in 1982.
So just keep that in mind when you think about can the bull run continue after November?
CHATTERLEY: I also look at some of the things like the Greed Index that CNN runs as well and the amount of bullishness out there and they're all at
extreme levels. And when I see that kind of thing, particularly bearing in mind what you just said, consolidation, nervousness, perhaps filtering and
at some point makes sense, particularly given the fundamental backdrop that we see here.
LEVINE: Right, so we are talking about this period as we're coming to the air pocket, and in a sense, you know, we can't get there from here without
going through the air pocket of slower growth, maybe some higher unemployment here in the U.S. and we've seen it in Europe, growth is going
to be negative in the fourth quarter, because of the lockdowns.
We don't think growth is negative here in the U.S. in the fourth quarter, because October was really strong. The issue was how do you leave December?
How do you exit December and go into January, and we think it's going to be weak-ish.
There will be some reaction in the market. We do think there will be consolidation here, some kind of testing of the 200-day moving average
would be sort of a normal pullback. But we think pull backs our Bible here, because we do think there's going to be a boom in the second half of next
year.
CHATTERLEY: You know, it's fascinating when you look at the cash on the sidelines. It looks lofty. There's still money that can come into play here
and you can talk me through this.
I just wonder when we talk about that, when we talk about a potential future Treasury Secretary who is very conscious of the challenges in the
economy, and we've got Jay Powell making all the right noises about needing more support, how concerned we are about the risk of seeing interest rate
rises in the United States.
And to mention, once again, what I mentioned about Morgan Stanley saying, you know, there's a risk here that we see a recalibration in bond markets
and that gives a sort of downside push to stocks. How concerned are you about the interplay?
LEVINE: Yes, so look. That's a great point. And right now, we're really seeing a bit of a tug of war on the stimulus front between the monetary
side and the fiscal side. And the Fed has essentially pleaded with lawmakers to come up with another fiscal package.
Well, I am more optimistic on that skinnier deal that we've been talking about for the last 24 hours than I was previously in the lame duck session,
only because one of the most important things that Joe Biden said two days ago was let's pass what we can pass now, and then we can do more later,
once I become President.
When he said that he really gave the greenlight for the Democrats in the House to start negotiating a much lower number. And so I think there's a
way to get to yes here.
It's very clear that the employment situation in the U.S. is on a bit of a precipice as we go to the end of the year and those benefits start rolling
off.
So we do hope to see that. We do think that'll stabilize markets.
As for the bond market, we do think that there will be some sort of yield curve control if in fact, bond yields start spiking upwards on the premise
of higher growth and the expectations are perhaps higher inflation in that we think the Fed will start buying longer dated maturities in order to help
control that.
So we don't see a full risk of that. But yes, that is a possibility as is a source of cash, because most of the flows this year went into the bond
market by a five to one margin over the equity market.
CHATTERLEY: Yes, I'm with you. Any sign of that and Jay Powell and the Federal Reserve is going to be straight in to make sure we don't see too
much of a spike in bond yields here or bond prices coming down.
Alicia, always great to have you on the show. Thank you. Alicia Levine Chief Strategist at BNY Mellon Investment Management.
LEVINE: Great to be with you.
CHATTERLEY: I was noticing a "Star Wars" theme there as well over your left shoulder. That was noted. I'm sure there'll be viewers like, look at
that.
LEVIN: It's Star Destroyer.
[09:40:11]
CHATTERLEY: I know it is. Here is a "Star Wars" fan here, too. Alicia, great chat. Thank you.
All right, so after the break, the hotel and hospitality industry hanging on for the vaccine just like the rest of us. The CEO of one major chain
betting on a big recovery. We'll hear from him next. Stay with us.
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CHATTERLEY: As the hotel industry holds on to hopes for recovery in 2021, one of the biggest chains out there says it's bullish about the future. OYO
Hotels and Homes operates in 800 cities around the world. It reports that room revenue is between 60 and 80 percent of pre-pandemic levels. And it is
saying it is holding on to close to a billion dollars' worth of cash.
Now it's focusing too on key markets India, China, Japan, and Southeast.
Ritesh Agarwal is the founder and Group CEO and he joins us now. Ritesh, great to have you on the show once again.
It's good to be positive about the future, but you have to deal with the present and this year has been a challenge. Talk us through what you're
seeing now and where you're most worried, and also most optimistic.
RITESH AGARWAL, FOUNDER AND GROUP CEO, OYO HOTELS AND HOMES: Thank you for having me here, Julia. As you remember, I met you when I flew in from China
to the U.S. around the period of time when COVID was just kicking in.
So good to be here. Of course, last few months, a lot has changed. I also, you know, have been following your coverage very closely.
So when COVID hit, it was tough on us. The business and the gross margin dollars fell by upwards of 66 percent in a short order of time and we had
to make substantial changes, including that of restructuring talents sending people on furloughs.
We issued a percent and a half of ownership to our team members to ensure that, you know, we did right by them. But what I've seen in the last few
months, Julia is three to four important trends.
[09:45:09]
AGARWAL: One, people are itching to get out of their houses. They want to go travel, they want to see places around. Road trips are much more in
vogue than that have long travels. This is that globally, what we are seeing is India is starting to recover quite significantly, which is one of
our biggest markets. We are back to around 40-ish percent of our pre-COVID occupancies here.
U.S.A. has done surprisingly well, where you see all the budget hotels doing very well. We are back to around 120 to 130 percent of revenue and
hundred percent of pre-COVID RevPARs. Southeast Asia, we are at 50 to 60 percent recovery. Europe had a great summer.
But as the second version of COVID hits in. We're keeping a very close eye as to what the next summer bookings look like. And China frankly, has
recovered very strongly and the RevPARs are at 75 to 80 percent of pre- COVID levels.
So what I'm seeing in summary, Julia, is that small hotels and holiday homes are the ones that were able to hold on to the crisis relative to
other upmarket products because customers could self-isolate, as well as have a good experience close to their houses.
CHATTERLEY: Fascinating. So actually, it's the vacation homes, the holiday homes where you can get privacy and you can socially distance versus the
hotels that cushioned the broader business.
You also changed the business model as well. Originally, you were sort of minimum guarantee, I remember discussing this for hoteliers in exchange for
price controls, and now you've gone to sort of a revenue sharing business model, which makes sense because you're burden sharing when it's good, it's
good; and when it's bad, you share the risks.
Ritesh, is that a permanent move now? A different business model for the business.
AGARWAL: Absolutely, Julia. As you know, crisis brings clarity. It has been the mantra of all the companies in these times. And as they say never
waste a crisis. One of my inspirations, Marc Benioff says this, and I've always followed that.
I think through this crisis, we moved our business, we accelerated our movement towards revenue share. And on the other hand, we ramped up our
efforts on technology for our partners. For example, on pricing, we kept pricing control and ensured that we delivered better returns for partners.
For example, like I told you, we kept RevPARs, one of the best in the industry, we delivered better customer experience for lower cost. We ensure
that our partner NPS improved by 20 to 30 points by means of improved pricing controls, weekly reconciliation.
Sometimes partners, if you remember, Julia, when he spoke to hoteliers, they would say, if we had the choice to make little changes on the pricing,
this would have been a much better partnership. We launched a feature called Tariff Manager, so our partners could make a few dollars of changes
on both sides.
A lot of these things have enabled us to make sure that on one side, at a time when we changed our business model, we not only kept our partners
together, we were able to deliver them good results.
So yes, it is going to be a long term change that will continue to be a company that comes in to the small hotels, gives them increased occupancy
with our technology systems brand and so on, but take a percentage of the fee. If it's doing well, we take the higher fee; if it's not doing well, we
share the risk.
CHATTERLEY: Yes, and it makes sense. I mentioned the cash burn this year, around $500 million, the $1 billion that you have in terms of cash on the
balance sheet. There will be people going -- and I know you and I talked about this and you're incredibly sad about the people that you had to let
go even early on in the pandemic and the workers that you've lost.
There will be those that look at this and say, hang on a second, you've got all this cash on the balance sheet, you've let workers go. The business
seems to be stabilized. Can you bring these people back? How are you thinking about the workforce and the challenges of the human aspect of the
challenges that the company has been through?
AGARWAL: Absolutely, Julia. As you can imagine, this was extremely hard for everyone in the hospitality industry, but especially a company like
ours, which has so many young people, this was further harder.
April 14th, I made a short video and then had a discussion with lots of our OYO-preneurs over the last few months. So a few things, one, yes, we would
absolutely work hard to try and bring back as many OYO-preneurs as we can.
We turned all our HR organization also as outplacement agents, and we have also not only brought a couple of hundred people back into the system, we
are also working hard to ensure that as technology structurally makes changes to some of the departments and organizations, we make people,
entrepreneurs, a large part of OYO employees are starting to become for instance, our new hotel partners or hotel operators as partners for us and
we're trying to give them first dibs on opportunities such as those.
So my view is that in the hospitality industry, as the business stabilizes, jobs and the employment will come back substantially and you will actually
see a lot of people coming out of not just OYO, but also from companies such as Airbnb and others actually become entrepreneurs and become
homeowners, small hotel managers and so on, leading to a further rise in the industry in the times to come.
[09:50:23]
CHATTERLEY: Yes, it's fascinating, isn't it? The evolution of the business in such a short space of time. I remember asking you about pandemic
proofing or recession proofing and, wow, this has been a period for that.
Ritesh come back and talk to us soon, please. I want to track your progress.
Ritesh Agarwal, founder and CEO of OYO Hotels and Homes. Great to chat with you once again.
All right, coming up on FIRST MOVE, a new effort to support the pandemic stricken oil market. OPEC and non-OPEC deal negotiations. We've got the
latest, next.
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CHATTERLEY: Welcome back to the show. OPEC Plus members meeting right now to discuss a possible extension of those supply cuts. Our man in the know,
John Defterios is live in Abu Dhabi. John, prospects of a deal to extend these cuts. What do you make of it?
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Well, we're not off to a very good start, Julia. Let's put it that way. I just got official
word by a tweet here that the meeting started nearly two hours late. They're trying to keep this disparate group of 24 producers glued together
after four years of collaboration.
We have to remember, they came together during the 2016 crisis, and for the most part, over the four years they've been cutting production. So where do
we stand right now as they sit down and they've had all the backdoor conversations trying to find a compromise.
Sources are suggesting there's kind of three major options on the table, add a half a million barrels a day starting in January. They think this 25
percent gain in November. You have Russia, the UAE, Nigeria, Iraq, all saying come on, let's come back on for some market share. Wait until
February to add a million barrels a day there.
Or you go down the Saudi path, Julia, and that is let's let it ride for another quarter with cuts of 7.7 million barrels a day about eight percent
of the market share. This is why it is so difficult right now.
And Julia, I think we're in that space in between. You get excited about vaccines, the price recovers; but the second wave is destroying demand
again. So it's not an easy job to keep all these players at the table and say what's the best thing to do? And they're trying to find the middle
ground right now and that is not easy as prices rise, because if they get too high, you know what happens, Julia. The shale producers come back in
and create more competition for these major producers around the world.
CHATTERLEY: Yes, but I do feel like they've got a bit complacent with the rise that we saw in in November. Do they not remember the collapse, the
cataclysm that we saw over the price war in March and then the pandemic hit and they got doubly smacked?
Surely, Saudis and the Russians want to avoid what we saw back then, not make the same mistake twice.
DEFTERIOS: Yes, well, that led to a price war as you remember in March and I was in Vienna when all broke out and they don't want to replay of that,
for sure.
[09:55:06]
DEFTERIOS: And Julia, I think that's why I'm talking about these three different options on the table. In days gone by, I think Saudi Arabia would
have said, we are the de facto ruler. We say, let it ride for another quarter. And that's the way it is.
That's not the way it is anymore. Russia is suggesting let's ease this way through and they're not doing it publicly. I'm hearing this on background
and from other sources, the vocal words to go forward.
And there's a bigger issue at hand, Julia, going forward. You know, Saudi Arabia is looking for the stability. It needs the revenue to balance its
budget.
But the UAE for example is investing, that's where I'm sitting, $120 billion over five years to produce more oil. Russia makes money producing
more oil.
So this is going to be a tug of war during that energy transition where renewables start to rise and that money on Wall Street goes in at the same
time.
That's why this is a very difficult OPEC Plus meeting.
CHATTERLEY: Yes, it's not just about the next three to six months. There are far bigger issues at play here. Two hours late. Let's hope they can
come up with something.
John Defterios, thank you so much for that as always.
And that's it for the show. You've been watching FIRST MOVE. I'm Julia Chatterley. We will see you tomorrow. Stay safe, and we will be back.
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