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First Move with Julia Chatterley
Clashes in Bethlehem as the Regional Rocket Fire Continues; Famed Investor Michael Burry's Big Short; Amazon's Reported $9 Billion Bid for MGM. Aired 9-10a ET
Aired May 18, 2021 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:17]
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.
Palestinian protests. Clashes in Bethlehem as the regional rocket fire continues.
Tesla torment. Famed investor Michael Burry's big short.
And a prime purchase. Amazon's reported $9 billion bid for MGM.
It's Tuesday. Let's make a move.
A warm welcome to the show, as always, and we begin with breaking news from the Middle East.
Israeli media reporting that two civilians have been killed in a mortar attack near the border with Gaza, with rocket fire from the Gaza Strip also
resuming after an overnight lull. Earlier, Israel imposed a partial closure on the West Bank amid Palestinian calls for day of demonstrations and masks
strikes.
Nic Robertson joins us now. Nic, and we're just showing our viewers earlier images of what took place in Bethlehem. Talk about what we saw and also,
what more do you have on this mortar attack?
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Yes, well, the firefighters are right behind me here, putting out the fires that this
mortar attack set off.
It is the deadliest single attack so far by Hamas or the militant groups from Gaza into Israel. Two people were killed here, seven were wounded.
They were all overseas workers who were working in this agricultural area, this farm area around a small town here right down towards the southern tip
of Israel close to the border with Gaza.
So mortar rounds, they don't fly as far as rocket rounds.
So this is relatively close for about nine and a half kilometers from Gaza here. The Iron Dome defensive system is not effective against mortar
rounds. So these agricultural workers who were killed here today, perhaps weren't as aware as a lot of people will have been in other parts of Israel
today of attacks coming in.
Earlier on this afternoon, in Ashdod, a rocket managed to get through the Iron Dome system and struck an apartment building in the middle of Ashdod.
There were sirens going off there, sirens going off in the town of Ashkelon as well. This does come after a relatively quiet night where there were
very -- there were no sirens going off in the vicinity to let people know that there were rockets coming out from Gaza between about 11:30 at night
and about 4:00 or 5:00 a.m. in the morning.
But really the tempo of rocket and mortar fire from Gaza has picked up today, and as you say also, a national strike has been called by
Palestinians in the West Bank today to show their support for the suffering of the people in Gaza. Protests there are turning into clashes with police
in the West Bank.
CHATTERLEY: Nic, I'm going to let you go there, and I apologize to our viewers for a bit of interference there. Stay safe, and we will come back
to the story later on in the show. Nic Robertson there for now.
And as always, we'll bring you the latest on the Israeli-Palestinian conflict throughout the day here on CNN.
In the meantime, we'll bring it back to business and a pretty good picture for global stocks at this moment. Tech set to rebound. The German DAX also
hitting record highs as you can see there. It's only Tuesday, but already, this week, AT&T has announced a massive media spin off. We've got Elon Musk
denying a Tesla Bitcoin selloff, and major U.S. retailers are saying their bottom lines are better off.
We have a lot to come on the show.
Shares of Home Depot, Walmart and Macy's rising premarket on strong quarterly results. Home Depot saying they're seeing, quote, "unprecedented
demand." Walmart also raised its guidance and reported a stunning 37 percent rise in e-commerce sales.
All the details on what they were saying, coming up, but clearly all three still benefiting from COVID related stimulus check spending and a benefit
bump. The big question of course is: what are they seeing in terms of product availability, potential shortages, and are they raising prices and
how easy or not is it to hire?
As I mentioned, we will discuss.
Also noteworthy today, Japanese GDP growth falling at a weaker than expected annualized rate of 5.1 percent in the first quarter as persistent
COVID lockdowns batter growth there. And just released minutes of the Australian Central Bank's latest policy meeting show officials still ready
to hold off on raising rates until at least 2024, at the earliest. Yes, you heard me right.
And as we keep saying here on FIRST MOVE, it is going to take much longer to normalize economies following those reopenings than it was to shut them
down.
Okay, on to today's drivers and with the outlook for Tesla once again in the driver's seat.
[09:05:10]
CHATTERLEY: Tesla-tormented, famed short investor Michael Burry has placed a sizable short position in Tesla's stock. Burry rose to Wall Street fame
by profiting from the 2008 subprime mortgage crisis.
Clare Sebastian joins us with all the details. Clare, many a short seller has fallen foul of a position in Tesla. What more do we know about this guy
because he has had some huge success in the past?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, he has proved extremely prescient, Julia, and this isn't a straight short. This is a put option. He
has a put option on 800,100 Tesla shares at a value of more than $530 million as of the end of the first quarter, so March 31st.
So we can't blame the latest Bitcoin/Dogecoin/SNL even antics for this, but looking at the potential reasons behind it. He -- you know, he has said in
the past that he believes that the Bitcoin share price is overvalued. He called it ridiculous in a since deleted tweet back in December and said at
the time that he was short.
The share price, he advised Elon Musk at the time to issue more shares, because of that share price. He's also in the past, called out regulatory
credits, these environmental credits that Tesla is able to sell to other car companies that have juiced their profits.
So those are some of the things that he's been vocal about in the past. But of course, we know the context around Tesla's share price up some 740
percent over the course of 2020 has now been coming down. It's now down about 35 percent from its peak in January, about 25 percent in the past
month.
So it does look like he has had some success already in predicting the fall of Tesla, although, we don't know at what price he is able to sell that
option.
CHATTERLEY: We rallied eight times though last year. So to your point, it's a little blip here relative to the scale of the rise that we saw last
year. What do we know about these tax credits because we often talk about this and how it has managed to help Tesla with profitability stats and of
course, several quarters of profitability is why they managed to get access to the S&P 500, too.
Stellantis, which was formed through the merger of FCA and France's PSA said this month, I believe that they expect to achieve their carbon dioxide
emission targets without having to buy anything from Tesla.
What do we need to understand about these tax credits? And why is announcements like this -- why are announcements like this so important?
SEBASTIAN: Yes, so Tesla has been able to benefit really quite a hugely from these credits. These credits, they operate in 11 U.S. states and other
jurisdictions like the E.U., and indeed China as well and they basically set targets for car companies to produce a certain amount of zero emissions
vehicles.
Tesla, of course, produces all zero emissions vehicles so it gets a lot of credits, and they are able to sell to other car companies who don't meet
their targets so that they can sort offset. In the last quarter, Tesla made more than 500 million from those credits in 2020 alone and made about $1.6
billion.
So according to sort of a core measure of net income, it would not have been profitable without that. So that is something that a lot of Tesla
bears are pointing to. Others, of course, say that its car business has been growing margin, so it would be profitable without these credits. It
really depends who you talk to when it comes to Tesla. It still remains an incredibly divisive stock, but the company itself has admitted that these
are unpredictable, sort of elements of its balance sheet and it doesn't know how long they're going to last.
So to your point with F.C.A., there are unpredictable elements to this. It is a risk for the company that they will go away.
CHATTERLEY: Not to mention Bitcoin, talking about unpredictable elements of one's balance sheet quite frankly. Yes, yes, Elan Musk has been busy.
Clare Sebastian, thank you so much for that.
Okay, let's move on. The iconic roaring lion entering primetime perhaps.
[VIDEO CLIP PLAYS]
CHATTERLEY: Roar. Amazon, is reportedly in talks to buy MGM, the studio behind the "James Bond" and "Rocky" franchises. The reports coming just a
day after CNN's parent company, AT&T announced a merger of its media division with Discovery and Brian Stelter is here with more.
Brian, the news keeps flowing in this space, and I think we can expect it, too. Jeff Bezos and crew casting a golden eye perhaps on MGM.
BRIAN STELTER, CNN CHIEF MEDIA CORRESPONDENT: Oh my gosh. First, you let out a roar, and you go with golden eye. It's amazing. Amazing. All right.
CHATTERLEY: Sorry. I know. I am sorry, I can't help myself.
STELTER: All right. I think it's so interesting that this deal has been in the works for weeks, which means it predated yesterday's big news about
Discovery and WarnerMedia. It just goes to show the deal flow, the amount of energy in the media and tech worlds right now, as everybody tries to
leapfrog one another and come out ahead in the streaming Olympics.
It's really remarkable. This report first crossed like, you know, 10 hours after the Discovery-WarnerMedia deal was announced. As you can see, there's
clearly some posturing and haggling going on, some stories describing this as a $10 billion valuation; others saying this move is only worth $6
billion or $7 billion. Either way we know Amazon can afford it. The question is whether Amazon decides to go ahead and pull the trigger and
actually bring "James Bond" and "Golden Eye" and these famed films into Amazon's collection.
[09:10:12]
CHATTERLEY: It's also -- it's all about having that content library, isn't it? And you and I were discussing the sheer quantity of spending that
Discovery and WarnerMedia is going to take this year comparing it to the likes of Netflix, I believe it's around $11 billion in content production
for Amazon. They need -- or Amazon Prime -- they need that library of resources to fall back on to the point about giving consumers choice and
making them come to you and stick with you.
STELTER: Yes, and Amazon is a unique company in these streaming Olympics because, you know, it's all within Amazon Prime. Some people subscribe to
Amazon Prime never actually watch any movie or TV shows, but others very much love the portfolio programming that Amazon provides.
So it's kind of an opaque business. We don't know a ton about how Prime video functions or how many people watch, but from all outside signs. It's
a big priority for Jeff Bezos and for the senior leadership because they are pouring money into Amazon Prime video. They are making more and more
shows including a massively expensive "Lord of the Rings" series.
So to do this with MGM would be another sign. Look, Amazon rarely makes acquisitions that are this size, right? We know Whole Foods went for $13
billion to $14 billion. If Amazon ends up paying $7 billion to $10 billion for MGM, that would be a remarkable move by Amazon even though again, they
can afford it, it would be another statement about how they want to compete in what one analyst calls a streaming arms race between Netflix, Amazon,
Apple and all the rest.
CHATTERLEY: Yes, quick before the sky falls. Sorry. That was not a great one.
STELTER: Oh, there it is again.
CHATTERLEY: I was trying.
STELTER: I still can't get over the "roar," but that's just me.
CHATTERLEY: It was a little more than that. Brian, thank you. Brian Stelter, I am not doing it again.
All right, let me bring you up to speed with some of the other stories making headlines around the world. President Joe Biden says the U.S. will
share an additional 20 million COVID vaccine doses with countries around the world by the end of June. That's on top of the 60 million Washington
already promised.
The U.S. has one of the most successful vaccination drives in the world, but other countries are struggling. In Africa, less than two percent of
people have received even one dose.
For more, we're joined by CNN's Larry Madowo. Larry, fantastic to have you on the show. The statistics there, I think say it all.
In the United States, we are creating lotteries, $1 million lotteries to get people to take a vaccine and where you are, in your part of the world,
a fraction of people, vulnerable people still haven't even got a look in.
LARRY MADOWO, CNN CORRESPONDENT: That's correct, Julia, because Kenya only got one million shots of the COVID-19 vaccine, that's the AstraZeneca shots
from COVAX, which is this World Health Organization body helping low and middle income countries get vaccines and they don't know when the next shot
is coming.
So this is what hospitals around the country are doing. This is an oxygen production plant at one private hospital here in Nairobi. They're doing
this because when Kenya had a third wave back in March, they didn't have any oxygen, and it was so bad that people had died because hospitals just
could not treat them because oxygen is so critical in the treatment of patients who have COVID-19 as we've been seeing from India.
But the other big concern is with Kenya, having used up more than 91 percent of its available vaccines. If there is another wave, there will be
a real crisis here at the hands of the country. And I have been speaking to the Chairman of the Kenya Healthcare Federation that represents all the
private health institutions in the country.
This is what he tells us about where Kenya is and with a fear.
(BEGIN VIDEO CLIP)
DR. KANYENJE GAKOMBE, CHAIRMAN, KENYA HEALTHCARE FEDERATION: March was a bad month. Easter was a terrible period to my staff and I because all of us
were oxygen shopping. That was the primary job the entire management in this place was doing, we are looking for oxygen and we are looking for
critical care beds, ICU beds, because Nairobi ran out of ICU beds, oxygen was in short supply, so that is what we are focusing on doing.
We are simply trying to make sure that we do not go through that kind of crisis again.
(END VIDEO CLIP)
MADOWO: Dr. Kanyenje Gakombe there. He is the CEO of this hospital in the East Lands neighborhood of Nairobi. They have imported this equipment, the
elements -- this for instance, came from Germany, some of this equipment back here came from the U.S. They flew it in so that they're prepared in
case there's another surge in the country with so many people unvaccinated, they're ready.
So I am fully vaccinated. That's only because I've been living in the United States. My grandmother who is 96 and lives in the west of Kenya has
still not been vaccinated, Julia. That is a crisis.
CHATTERLEY: Yes, it's heartbreaking. It's not good enough. The whole world needs to be listening to this and to understand that more support is
required, and our hearts go to your grandmother.
Larry, talk to me about the hospital specifically because that is fascinating and I can't help but compare to India that got so caught off
guard in the last several weeks. This is a hospital that's going, you know what, we're not going to take any chances. How many people can be treated?
What more can you tell us about the preparations that they've made because these oxygen containers vital and could be incredibly vital going forward.
[09:15:10]
MADOWO: It could be, especially in this neighborhood where a lot more people just do not have the ability to go to more expensive hospitals. They
went to great expense to import this and fly them into the countries that have the usual longest shipping process and they are piping it into
hospital beds.
It's a small community hospital, about 140 beds, and when they have excess capacity, they will be sharing it with other hospitals in this neighborhood
and in this region, and some other government-run hospitals are trying to do the same.
The government of Kenya gave them a waiver on all the equipment importation, just so that they realized how critical this is for the
country, and how very few people are vaccinated. This is one of the ways to do that. So that if there's that was fourth wave that is being predicted
for Kenya, somewhere around July or August as many hospitals as possible are prepared to deal with it. Because if there's a massive surge, Julia,
the country's healthcare system can just not deal with it and you will see the same kind of heartbreak you've been seeing in India.
CHATTERLEY: Yes, I'm so glad you brought us that story. And Larry, fantastic to have you at CNN. Huge hug. Welcome, my friend.
Larry Madowo there. Okay, thank you. Let's move on.
MADOWO: Thank you.
CHATTERLEY: Okay, as India fights a brutal wave of COVID infections, now this. The strongest cyclone on record hit India's West Coast, slammed into
Mumbai and surrounding cities on Monday night.
At least 26 people were killed. Search and rescue operations are underway at sea for missing Navy personnel.
More than 6,000 migrants have turned up in a beach in the Spanish enclave of Ceuta in Northern Africa, including children. The migrants have been
swimming from two beaches in Morocco. The Spanish government sees nearly 3,000 migrants have already been sent back.
Spain's Prime Minister has vowed to reinstate order.
Okay, still to come here on FIRST MOVE, cut all spending to new fossil fuel projects to hit 2050 climate targets, so says the International Energy
Agency.
We take a look at their ambitious plan.
And Masterworks says you can own a Warhol without paying millions. We talk to its CEO on the model revolutionizing the art market. That's all coming
up. Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. U.S. majors still on track for a higher open as retailers Walmart, Home Depot and Macy's all boost guidance
and we've got consolidation talk heating up in the media space as discussed, too.
Robust retail earnings though playing into the strong U.S. growth scenario that is putting upward pressure on oil prices.
[09:20:10]
CHATTERLEY: Oil, pulling a little bit back in the past few minutes, actually relatively unchanged, but Brent still flirting with $70.00 a
barrel.
ExxonMobil shares meanwhile, now more than 50 percent year-to-date. That's some recovery.
Now as the race to contain climate change grows ever more urgent, you may wonder how it can ever be done. How do we cut emissions high enough to
reach those carbon neutral targets? Well, the International Energy Agency just published a detailed and highly ambitious plan.
It says the path to net zero in 2050 leads to 400 milestones that require the transformation of the energy industry. Just to give you a sense, the
recommendations include no more investment in new fossil fuel supply projects, the sale of passenger cars powered by combustion engines must
stop by 2035, and the rollout of solar PV generation must step up four times from the current pace.
Joining us now is Fatih Birol, he is Executive Director at the International Energy Agency. Sir, fantastic to have you on the show.
I have to say, I've read the report late last night, I have to say and it was daunting. This is a huge mission if we're going to achieve net zero by
2050.
FATIH BIROL, EXECUTIVE DIRECTOR, INTERNATIONAL ENERGY AGENCY: You're completely right, and many thanks for reading the report yesterday, much
appreciated.
It's a daunting task, and it is -- it requires the transformation of our energy system that we have built since centuries in a very short period of
time. And here, of course, the governments around the world are in the driving seat.
We have seen in President Biden's Leaders' Summit only a few weeks ago that the governments around the world have committed -- most of the governments
-- to have a carbon neutral economy by 2050, which is a must to save our planet.
What we have done, we translate that target to the real action. What needs to be done to reach that target, reach that commitment that governments
have talked about in the Climate Summit of President Biden and a different fora, and we came up with some of the milestones that some of you have
currently spelled out.
And to be honest with you, when I look at the numbers in our report, the pathway to reach those targets is very narrow, but still achievable if we
move quickly and in bulk terms.
CHATTERLEY: What I loved about the report was precisely that, that you actually made it practical. You said it's okay making these grand
statements about what you're going to achieve over the next 15, 20, 25 years, but let me just put it into actual action.
And I mentioned solar for a reason. The solar requirements that you're talking about require or are the equivalent to installing the world's
current largest solar park every single day, between then and now. It's unimaginable.
BIROL: It is a tall order. So I completely agree, it's a tall order. But this is what needs to happen. If the governments honor their commitments,
this is the -- this is the way it goes, and I can tell you that the -- when we look around the world, the capital is available to make this happen.
Technology, bulk of the technologies available today, some of them are under development, this is also there.
What we need is that all governments around the world need to come with a roadmap or pathway for the domestic -- their domestic energy sector, which
are hopefully compatible with our global roadmap.
So the issue is, I am very happy with the commitments coming from the governments, but I would be happier if I see what are the credible energy
policies to reach those targets? Unfortunately, I should say most of the government's, if not all, have not met their homework yet.
CHATTERLEY: And to your point, and this was another thing that hit me square between the eyes. In 2050, almost half the technologies that we
require are only an experimental phase, what kind of financial investment are we talking about requiring at this stage in order to boost the R&D and
be in a position where we're even capable of tackling this? Because it's surely not something that individual countries need to tackle alone. We
need a collective force.
Everyone needs to be discussing this and the biggest players, most of all, China, the United States, India, for example, critical -- Europe.
BIROL: You are completely right and congratulations to you that you read yesterday night the report.
CHATTERLEY: I really did.
BIROL: You have highlighted the key, key points. It's a key point here. Congratulations for that.
[09:25:10]
BIROL: Now, we have -- although, there are some technologies, clean technologies which are available in the market, such as solar, such as
wind, such as electric cars, such as energy efficiency. First of all, we have to make the most out of them. But this is not enough, even if you make
the most out of those because there are some applications energy we use, for example, in aviation.
In Ireland, still, you cannot run them with the wind. You have to find new technologies. And here, such as the advanced battery technologies, hydrogen
solutions. For this, we have to mobilize incredible amount of investments.
Today, just to give you a ballpark. Today, the global -- entire world -- energy investments is at about $2 trillion for coal, oil, renewables
efficiency, about $2 trillion, and it is to go up to $5 trillion, a big surge in the investment is needed. And once again, the capital is there.
What is needed is that the governments should give an unmistakable signal to investors that if you invest in these technologies, you will make money
in the future.
This unmistakable political signal will be very important to mobilize investments in advanced economies. But more importantly, as you just
highlighted, in the emerging world, such as Indonesia, China, India, and others that the bulk of the emissions in the future will come from.
CHATTERLEY: The capitals there is the commitment. I think is the point that's required here. But what about the security challenges, too? I mean,
the IEA was saying -- what -- a week or so ago that you're recommending that nations stockpile some of their resources that are required for
electric cars, for example, and the battery technologies in order to smooth their production capabilities going forward.
I mean, that sets up potential supply challenges. We're already seeing bottlenecks, and then also in that vein, I think if you're asking nations
to transition away from fossil fuels, you're going to have the power of their production concentrated in a very small proportion of countries in
the world. If I look at OPEC nations, for example, and how do they manage their economies as we transition away. I can see challenges here, pushback.
BIROL: Yes, in fact, when we prepared our report, we not only prepared the pathway to reach the climate goals, but at the same time, the energy
security issues have been taken into consideration, the economic implications.
When it comes to energy security, you mentioned two of them, very critical. The first, if we built so many electric cars, solar panels and wind, they
do not need oil, gas and coal, but they need lithium, cobalt, magnesium, different type of critical metal materials, we call it. And they are
currently concentrated on a very few number of countries.
But the potential deposits are everywhere in the United States, Canada, Australia, Europe, governments need to -- need to -- provide incentives for
the miners and others in order to increase the production of this critical materials.
And I think yes, the Department of Energy is making serious efforts there. This is number one.
Number two, I think it is energy and beyond, a geopolitical issue. What will happen in a net zero world, which means emissions going to zero and
the fossil fuel use diminishes to the countries whose economies are closely, if not exclusively, linked to oil and gas revenues? We see a huge
decline in their incomes, in those countries in Middle East, in Russia and elsewhere. And in most of those countries, population is growing and the
young population is growing. It's a major issue.
The message is clear: diversify your economies as soon as possible.
CHATTERLEY: Yes, there's no time like the present. And you also, and we've run out of time, but you give a snapshot of how good it could be in 2050
and that's that energy demand is around eight percent smaller than today, but it serves an economy twice as big and 90 percent of electricity
generation comes from renewables. So fingers crossed.
Fatih, great to have you with us.
BIROL: Yes, this is the energy efficiency. Energy efficiency.
CHATTERLEY: It's all on paper. Now, we need it in practice. Thank you, sir. Fatih Birol there from the International Energy Agency. Great to chat
with you.
You're watching FIRST MOVE. More to come.
(COMMERCIAL BREAK)
[09:32:51]
CHATTERLEY: Welcome back to FIRST MOVE, and to more breaking news from Israel now.
At least two civilians were killed and several others injured in Israel in a mortar attack. Meanwhile, Israel has stopped trucks carrying
international aid to Gaza following mortar attacks on the crossings.
Elliott Gotkine joins us now with more. Elliott, what more can you tell us about that international aid suspension? It comes at a time when reports
suggesting medical supplies in Gaza -- fuel, water -- are all running low.
ELLIOTT GOTKINE, JOURNALIST: So Julia, yes, so humanitarian civilian aid was being allowed through the areas crossing in the northern part of the
Gaza Strip, when according to the Israeli Defense Forces, the IDF, a mortar round landed nearby and shrapnel from which injured a soldier who was taken
to hospital.
Separately, there were more mortars fired in the surrounding region from the Gaza Strip into Israel, and one of them scored a direct hit on an
agricultural packaging factory that resulted in the deaths of two 30-year- old men according to the ambulance service Magen David Adom, they are believed to be foreign agricultural workers in Israel, and there are about
half a dozen injuries as well.
And this is slightly interesting, because we've seen the according to the IDF, the Iron Dome Aerial Defense System able to take out around about 90
percent, nine in 10 of the rockets that it wants to take out. It can take out mortars as well. But given the shorter range, and the shorter length of
time that these are in the air, it is much harder for them to be taken out.
And so this may be a slightly different tactic from the part of the militants, but it's certainly one that from their perspective, seems to be
perhaps having more success.
CHATTERLEY: Elliott, what are people saying to you there? How frightened are they that this continues for some more days for the foreseeable future?
And what do they think about hopes for a ceasefire?
GOTKINE: I think Israelis within Israel are obviously, you know, concerned and some of them are scared when having to run to the shelters, we had to
do so about three times this afternoon when another barrage was being fired into Israel.
But I think at the same time, for now, most Israelis, you know, would want to see the outcome of this latest flare up, a latest confrontation results
in, you know, a long period of calm and an ability to not have to worry about these rockets going forward.
[09:35:25]
GOTKINE: There are reports on Israeli TV that Prime Minister Netanyahu has spoken to local mayors saying that this could go on for a few more days.
But you know, for now, unfortunately, Israelis are kind of used to this happening every few years and no doubt, when there is a ceasefire, this
time round, these things will flare up again in a few years' time, and the cycle will continue.
CHATTERLEY: Yes. Elliott, great to have you with us. Thank you so much for that, Elliott Gotkine.
Okay, up next, famous artworks for a fraction of the price. We speak to the man who says, you too can own a Basquiat, or at least a little piece of it.
Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE.
In an uncertain start to the trading day on Wall Street with U.S. stocks losing a lot of the gains that we were seeing premarket, relatively
unchanged, perhaps inflationary concerns.
Take a look at what we're seeing in the commodities market. That rally still going strong with gold in fact rising to fresh four-month highs.
Lumber however, continues to pull back from records, wow, down some 14 percent in the session so far today.
Also a volatile day in crypto land, Bitcoin a little softer, but gains for the likes of Ethereum as you can see. Litecoin and XRP also seeing bumper
gains in the session.
Tesla, meanwhile, extending losses suffered yesterday on news that well- known short seller, Michael Burry has taken out a half a billion dollar options bet against the EV giant, better known for its subprime mortgage
short fame.
Now major U.S. retailers Home Depot, Macy's and Walmart now trading mix despite posting strong Q1 results with all three retailers raising
guidance. Walmart's CEO saying U.S. customers, quote, " ... clearly want to get out and shop."
Paul La Monica joining me now. Paul, what's the standout from these results beyond the fact that all of these guys have benefited during the pandemic
period?
I guess the outlook on what happens from here on out is the critical part of this.
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, I think Walmart and Macy's had a pretty robust outlook, which is clearly encouraging and obviously as
well, consumers are eager to get back out there and shop, but they are also still digitally inclined as well. And you see that clearly with Walmart's
numbers, their e-commerce retail revenue, about 37 percent. So that is very strong. Of course, Walmart, a very viable competitor to Amazon.
One thing I'll point out, though the Macy's numbers, while good are still below 2019. So I think we have a tale of two retail kind of earnings here.
Walmart and Home Depot legitimately are crushing it, they are doing well. Macy's is still a turnaround story, things are getting better, but they're
still well below where they were before the pandemic.
[09:40:52]
CHATTERLEY: Yes, I saw Walmart is talking about pent up demand, continuing to drive sales going forward, whichever part of the business that we're
talking about, Paul. But for me, the key thing is, pricing pressures. What are they saying about potentially raising prices and also seeing price
pressures, but also what happens now that we've seen the C.D.C. in the United States remove that mask mandate?
I saw also at Walmart talking about demand for tooth whitening treatments as well as people start removing their masks, which made me laugh. What did
we see on that beyond the tooth paste?
LA MONICA: Yes, a potential, beneficiary of people starting to smile again, and not necessarily needing to cover up their mouth with a mask. I
think inflation though, obviously is going to remain a major concern for many retailers.
You already pointed out, Julia, how lumber prices have been pulling back a little bit, but the surge in lumber is something that has impacted you
know, obviously the broader housing market with regards to new home construction, but it also has been a boon for Home Depot, lumber sales, one
of the main things that have helped drive revenue for Home Depot.
Of course, this is a company that's doing well, broadly, as many consumers hunker down in their homes, even if they're not looking to sell and do some
improvements. We'll probably get some good results for Lowe's tomorrow morning when they release their latest results as well.
CHATTERLEY: And we shall watch for that. Paul La Monica, thank you so much for that.
Okay, now to a company applying the stock market model to the art world whether you dream of owning a Basquiat or Warhol or a Banksy, Masterworks
has found a way to make that dream come true -- at least in part.
It buys blue chip art worth millions and then sell shares to many different investors. When the art is then resold, each investor gets a fraction of
the profit.
Masterworks charges an initial 10 percent fee and annual administrative fee of one and a half percent and a 20 percent cut of the profit when the
painting is resold.
Joining us now is Scott Lynn, founder and CEO of Masterworks. Scott, great to have you with us. It's a democratizing access, I think, to the art
market, at least as an investment. Did I get all the financials right there? Because that's certainly pretty complex.
SCOTT LYNN, FOUNDER AND CEO, MASTERWORKS: Yes, you did get them right. Yes, so we've just been seeing a huge amount of investors interested in
investing in art, particularly with inflation concerns right now.
So as governments are printing money, and as people are looking for different ways to invest, art is becoming one of the hot topics.
CHATTERLEY: So what's my minimum investment if I want to buy a fraction of a painting?
LYNN: Yes, you know, we don't actually typically have minimum. So investors go to our website, they request access, and they speak to someone
on our membership team. So minimums range anywhere from $500.00 to $25,000.00 depending on the size of a portfolio of the investor.
CHATTERLEY: And can I actually see the art or are you tending to see people that sign up to do this, it's to your point, it's not really about
having access to the art itself and viewing a beautiful picture, it is about the potential financial rewards of an alternative asset like art.
LYNN: Yes, so today, we really -- I mean, in a COVID era, we have a gallery in Soho, but we're not -- we're not hanging that many paintings. We
do have paintings that are on loan to institutions or museums, so we have a Banksy painting right now with the museum in the Netherlands.
But generally, the paintings are not on display.
CHATTERLEY: And when do you actually get payout? Because if you hold this painting for, say, five years, I was just trying to do the math, I guess my
fee is going to be one and a half percent times five plus the 20 percent. Take the profits, so I'm going to pay you 27 and a half percent of whatever
the upside is.
LYNN: Well, not quite right. So it's 20 percent of the profits --
CHATTERLEY: Understood. That's under the law.
LYNN: I think the math is wrong there, but generally, if you look at the contemporary art market overall, it has appreciated 14 percent a year for
the past 25 years. So it's one of the best performing asset classes. It's been the S&P, it's been real estate, it's been gold. We did a research
project with Citigroup effectively concluded that it was uncorrelated asset class.
[09:45:01]
LYNN: So we fundamentally believe that it has a role in any portfolio. You know, the way that liquidity works as we buy the painting, you invest in
the painting, you hold the painting for seven to 10 years, ultimately sell it. But we do have trading markets now where people are trading shares and
paintings just like the trade shares and companies.
So if you need interim liquidity, the trading markets are there.
CHATTERLEY: Wow. I mean, that was a great return. You can correct me on the math. Let's say you hold a picture for five years, and then you sell
it, what is my fee on that final sale? And how are you working out the return on these things? Because surely, it depends how great you are at
picking art. And that actually, that art increases in value versus decreases, because a lot of this art is worth nothing in five to ten years,
rather than making a profit.
LYNN: Yes, you know, really, so the paintings that we're buying, these are multimillion dollar paintings, right? So our least expensive paintings are
a million dollars, our most expensive paintings are $15 million or $20 million. So they definitely are in the top end of the art market.
Our management fees are very straightforward. They're one and a half percent per year, plus 20 percent of the profit when a painting sells,
which is very similar to a venture capital or private equity.
But you know, this is an asset class that's still very early. I mean, it is $60 billion a year that's traded between ultra-high net worth individuals,
right, effectively, billionaires in many cases.
So it's never -- it's never been democratized. People have never had an ability to invest in it until now.
CHATTERLEY: So how much art have you bought, say, in 2020? And what do you plan to buy this year? Because you describe yourselves now as sort of a big
power player in the art market? You buy a lot of art.
LYNN: Yes, I mean, we think we're probably the number one buyer in the art market now. This year, we'll buy $300 million to $400 million in art, which
for the art market is sizable. The business is growing more than 300 percent a year at this point. So we're just seeing tons of demand from
investors interested in allocating to the asset class.
CHATTERLEY: What do you make of what's going on in the art market? We've just had the Christie's sales and the Sotheby's sales. What did you make of
what we saw there?
LYNN: Yes. You know, so last week there were there sales at the two main auction houses, which is the first time we've actually seen lots of
activities since COVID. There was a Marie Therese Picasso that sold for $103 million. Basquiat had the second most expensive painting ever sell for
$93 million.
You know, fundamentally, our prices continue to go up despite COVID, despite what's happening with macro dynamics.
CHATTERLEY: Forty percent of that, though, I saw it, Christie's was guaranteed to ensure that they sell and there were relatively fewer lots
compared to previous years. And admittedly, we're in a pandemic, but that, to me suggests an element of caution in the market, too. Is that not what
you're seeing?
LYNN: That's not what we're seeing. I mean, we have the only research team that really analyzes returns in the art market. So we're very specific
about trying to understand how artists markets are appreciating, and independent of all of the dynamics, COVID, volume, et cetera. We continue
to see prices go up.
CHATTERLEY: Talk to me about NFTs, Scott, nine crypto punk portraits ended up selling for $17 million. What do you think of NFTs?
LYNN: Yes, I mean, as you can probably see my body language. I'm -- so you know, we don't know how to think about NFTs from an investment perspective.
You know, we were very close to the Beeple sale, which was a $60 million digital image that effectively sold at Christie's, you know, we have
difficulty understanding that. We don't view NFTs as investments.
I know a lot of your viewers will probably disagree, but fundamentally, when we think about investments, we think about risk adjusted returns, we
think about lots of historical data. You know, the art market of the world that we live in has been around for four centuries. Sotheby's is 275 years
old.
So this NFT craze, if you can call it that, is you know, is a blip in the overall history of the art market. My understanding is the prices of NFTs
have now come down and that market is quieting, but I struggle to advice on how to think about that from an investment perspective.
CHATTERLEY: I think some of your investors will perhaps be glad about your honesty, with regards not being sure how to define it, quite frankly. Very
quickly. I know you've not been around that long, 2017, I believe you started. What return have you provided to clients so far? Can you give us a
sense of that so far, annualized?
LYNN: Yes, sure. So our annualized cash and cash returns right now, net of fees is roughly 32 percent. That's a very, very high number. We don't
expect sort of 32 percent obviously in the future, but that those are our cash and cash returns at this point.
CHATTERLEY: How interesting. Yes. Beats the S&P 500 over that time. Certainly, Scott, great to have you with us. Scott Lynn, founder and CEO of
Masterworks. Thank you for that.
All right, coming up. It turns out, the stuff science fiction isn't always fiction. The U.S. military acknowledging some UFO sightings are the real
deal. Stay with us, that's next.
(COMMERCIAL BREAK)
[09:52:19]
CHATTERLEY: Welcome back to FIRST MOVE. Now here are some nonfungible tokens or NFTs in the making.
These images are truly out of this world encounters, could well be their own NFTs as The Pentagon confirms the authenticity of videos and photos of
UFOs.
Oren Liebermann has all of the details.
(BEGIN VIDEOTAPE)
OREN LIEBERMANN, CNN CORRESPONDENT (voice over): On object skimming the surface apparently at high speed when --
UNIDENTIFIED MALE: Got it.
LIEBERMANN (voice over): Bullseye. The aircraft sensors home in on the -- the thing, the unidentified flying object. It's one of a few videos of
these UFOs The Pentagon confirmed as authentic.
ALEX DIETRICH, FORMER NAVY PILOT: You know, I think that over beers, we've sort of said, hey, man, if I saw this solo, I don't know that I would have
come back and said anything because it sounds so crazy.
Your mind tries to make sense of it. I'm going to categorize this as maybe helicopter or maybe a drone. And when it disappeared, I mean it was just --
LIEBERMANN (voice over): Alex Dietrich has never told her story publicly. She's one of several Navy pilots who spoke with "60 Minutes" who've seen or
picked up on sensors similar objects, often moving fast with odd shapes, and no obvious method of propulsion.
DAVID FRAVOR, FORMER NAVY PILOT: There's definitely something that -- who is building it, who has got the technology, who's got the brains? But
there's -- there's something out there that was better than our airplane.
LIEBERMANN (voice over): No one is using the word "aliens" here. The Pentagon calls them UAPs, Unidentified Aerial Phenomena.
UNIDENTIFIED MALE: There's a whole fleet of them. Look on my SA. Oh, my God. Going against the wind. The wind is 120 miles west.
LIEBERMANN (voice over): Pilot Ryan Graves picked this up on his infrared sensor in 2004 off the coast of San Diego.
UNIDENTIFIED MALE: Look at that thing.
UNIDENTIFIED MALE: It's very steady.
RYAN GRAVES, FORMER NAVY PILOT: The highest probability is it's a threat observation program.
BILL WHITAKER, HOST, "60 MINUTES": Could it be Russian or Chinese technology?
GRAVES: I don't see why not.
LIEBERMANN: Late last year, The Pentagon created a task force to look at the nature and origin of UAPs. What are these things? Where do they come
from? And is there an intent here?
The government sees this as a possible threat, something that may be able to outperform military capabilities. Lawmakers are demanding and be treated
seriously.
SEN. MARCO RUBIO (R-FL): We have things flying over our military bases and places where we're conducting military exercises and we don't know what it
is and it isn't ours. So that's the general question to ask.
If it's something outside -- from outside this planet that might actually be better than the fact that we've seen some technological leap on behalf
of the Chinese or the Russians or some other adversary.
LIEBERMANN (voice over): Next month, the Director of National Intelligence and the Defense Secretary are scheduled to deliver an unclassified report
on UAPs to Congress. Former Director of National Intelligence, James Clapper, applauds the transparency, but isn't expecting too much yet.
JAMES CLAPPER, CNN NATIONAL SECURITY ANALYST: I expect this report will be filled with ambiguity as well, and people, depending on their leanings will
extract what they want out of this report.
[09:55:23]
LIEBERMANN (on camera): For years, the government and the military largely downplayed or ignored reports of UFOs. Now, The Pentagon's handling of
these reports is under its own investigation.
The DoD Inspector General announcing earlier this month that it will look at how The Pentagon handled reports of UFOs in the past.
Oren Liebermann, CNN at The Pentagon.
(END VIDEOTAPE)
CHATTERLEY: Just wow. Okay, that's it for this show. If you've missed any of our interviews today, they will be on my Twitter and Instagram pages.
You can search for @jchatterleyCNN.
In the meantime, stay safe. "Connect the World" with Becky Anderson is next, and I'll see you tomorrow.
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[10:00:00]
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