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First Move with Julia Chatterley
The Facebook Whistleblower Set to Appear before Senators; Big Questions over What Caused Facebook to Go Down; Another Chinese Real Estate Firm Misses a Debt Repayment. Aired 9-10a ET
Aired October 05, 2021 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:07]
ALISON KOSIK, CNN BUSINESS ANCHOR: Live from New York, I'm Alison Kosik, in for Julia Chatterley. This is FIRST MOVE. And here is your need-to-know.
Tech testimony. The Facebook whistleblower set to appear before senators.
Outage outrage. Big questions over what caused Facebook to go down.
And property problems. Another Chinese real estate firm misses a debt repayment.
It's Tuesday. Let's make a move.
And a warm welcome to FIRST MOVE. Great to have you with us this Tuesday, one day after Facebook's historic fumble.
Shares of the social media giant are gaining a bit of ground in the premarket after Monday's almost five percent drop. More on the company's
massive service outage just ahead as well as what's in store for Facebook on Capitol Hill today.
A better picture overall for U.S. futures overall after Monday's across the board slump. Tech was Monday's biggest loser dropping well over two
percent. The tech heavy NASDAQ is now down more than seven percent from its most recent highs.
Green arrows in Europe right now as well, but it was a rough session in Asia. The Nikkei fell more than two percent and briefly fell into 10
percent correction territory. The Hang Seng eked out a gain after its two percent drop Monday, but property stocks sold off sharply.
Shares of deeply indebted Evergrande were halted for a second day. All this, as a smaller Chinese property developer, Fantasia missed more than
$200 million in debt payments, just weeks after assuring investors that it was doing okay. More on China's real estate was coming up.
Let's get right to the drivers now, and we begin with what is expected to be devastating testimony about Facebook on Capitol Hill.
A former employee will tell senators she believes its products quote, "harm children, stoke division and weaken our democracy." Facebook is already in
crisis management mode following a six hour outage of its apps. Let's bring in Oliver Darcy he joins me live. So Oliver, you know this interview that
the whistleblower gave on "60 Minutes," it really was a blockbuster in its own right. What more is she expected to say during today's hearing?
OLIVER DARCY, CNN BUSINESS SENIOR MEDIA REPORTER: Yes, it's really not a good week for Facebook so far. You mentioned that crippling outage
yesterday, and now in just about an hour, the Facebook whistleblower, Frances Haugen is set to testify that Facebook has helped weakened
democracy and that they know that their product, Instagram, is damaging to the wellbeing of young teenage girls, but they have not disclosed that to
the public.
So some really damning revelations she is supposed to share before the Senate. Of course, a lot of this information has come out over the last few
weeks in the "Facebook Files," which is a series of articles published by "The Wall Street Journal" based on the documents that she secretly took out
of the company and leaked to the outlet.
But she is supposed to be very candid with the Senate. In her opening testimony, she'll talk about how speaking out against this company, one of
the most powerful companies on Earth could lead to -- be harmful for her career, that the company could destroy her essentially. But she believes
she says that the public does not really have a great understanding of what is going on inside Facebook so that she feels the need to come out before
the Senate and explain it to everyone.
KOSIK: Okay, so more bombshell testimony expected. She is going to actually put it on the record by sitting in front of the Senate and telling
them what her vision is of what's going on at Facebook and Instagram.
Talk to me about what is going to come out of this hearing though? Look, Congress, Senate, House, they always have these hearings, what actionable
something will come out of this?
DARCY: We'll see if anything actually does come out of this. I mean, Mark Zuckerberg and other executives have been on the Hill testifying before
Congress for years now and we really haven't seen a tremendous amounts of movement in terms of regulation of Facebook and other tech organizations,
and we should also note that Facebook is going to mount an aggressive defense. They have been mounting an aggressive defense over the past few
days, as the whistleblower has come out on "60 Minutes" and now, before the Senate.
They've pushed back against her assertions. I'll read you part of a statement in fact, from a Facebook spokesperson kind of summarizing the
company's positions about the narrative that she is presenting toward the public. That Facebook spokesperson said the other day, "Every day, our
teams have to balance protecting the ability of billions of people to express themselves openly with the need to keep our platform a safe and
positive place. We continue to make significant improvements to tackle the spread of misinformation and harmful content. To suggest we encourage bad
content and do nothing is just not true."
[09:05:15]
DARCY: So beyond whether lawmakers on Capitol Hill can get their act together and agree on something, regulations for companies like Facebook,
they are also going to be dealing with Facebook, which is mounting an aggressive defense and saying that the whistleblower is really just taking
the research out of context.
KOSIK: Okay, Oliver Darcy, thanks for breaking all that down for us, and we'll bring you that testimony live on CNN in the next hour.
Let's now talk about that serious outage Facebook and its other services like WhatsApp and Instagram suffered on Monday. Anna Stewart is following
that part of the story. So Anna, what's the latest on the impact that outage had on the company? It hit three of its platforms. And what is
Facebook saying caused the outage in the first place?
ANNA STEWART, CNN REPORTER: I mean, what an outage. This wasn't a small glitch at all, it is now over. But this lasted around six hours across all
three platforms. And unlike many outages we've seen so far this year, it wasn't just one geography, this was all around the world.
Now, the immediate concern, I think, for everyone, once you've checked your phone actually does work and it's not the phone's fault was, is this the
result of a cyberattack? And thankfully, it doesn't appear to be.
Facebook have said this was caused by a configuration change related to some of their routers. Unfortunately, it sounds rather similar to what led
to an outage back in 2019, raising concerns that this could happen again. They said that they apologize for the outage and that no user data has been
compromised, which is really quite crucial.
This comes though, Alison, after we've had other outages this year for other websites. Those ones related to CDNs, Fastly, ACME -- and I think
this just goes again to highlight the fragility of the internet and the infrastructure that props it all up.
Now during this outage, people flocked to Twitter and other social media rivals to find out what was going on including Facebook. They had to tweet
out updates to their users, and Twitter had a very fun little tweet to say as well, I can show it to you now. They said, "Hello, literally, everyone."
Let's hope that after that sort of shout out for all that, they don't fall foul of the next outage.
Facebook share price down nearly five percent yesterday, it's actually down 15 percent on the month as a result of this outage, but also all these big
concerns about the ethics, the credibility, the risk of further regulation, as well as data privacy and that share price is certainly one to watch as
we go on through the day with that subcommittee hearing coming up -- Alison.
KOSIK: Yes, we all enjoyed Twitter's reaction, but they better watch out. You know what? Karma can be -- I'll leave it for another day. Anna Stewart,
thanks a lot.
Facebook was just one of a number of big tech stocks that took a face-plant on Monday. Facebook, Apple, and Amazon have now fallen 10 percent from
their most recent highs. The unresolved debt ceiling battle, rising bond yields, and the prospect of less Fed stimulus, that is all weighing on
sentiment.
Paul La Monica joins me now. So, I just listed some of what's worrying Wall Street? Do you think we could be in the middle of a rolling correction
where prices go down, but not all at once, like in a standard correction? I mean, it just in the past five sessions, we've seen the Dow fall a total of
800 points.
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, I think that's a great question, Alison. There is certainly a reason to suspect that stocks need
to pull back after this epic rally that we've had so far in 2021, which is the continuation of a huge move from the COVID induced market lows of last
year.
I think what's going to be interesting, though, is that tech stocks might bear the brunt of this selloff for the foreseeable future because of the
things you mentioned -- rising bond yields, which might put investors back into other stocks like bank stocks, which benefit from higher yields. And
then obviously, the energy sector could continue to rally as well because oil prices have been spiking dramatically higher in recent weeks.
KOSIK: You mentioned oil prices. Crude futures climbing to a new seven- year high, what's causing this price rise and what does it mean for the economic recovery from the pandemic?
LA MONICA: Yes, I think it's going to be a bit of a challenge for many consumers who are still struggling to come out of the pandemic, if you
will, because it's not really a case where demand has shot up all of that dramatically to explain and justify this rise in crude prices.
You have a lot of producers in countries sitting on huge pockets of oil that are wary of producing more because they remember what happened in the
early stages of the COVID pandemic.
So these supply constraints are pushing oil prices higher, and I think that is going to be a continued problem for consumers that are dealing with
higher prices at the pump and to heat their homes, but it should be great news for any investors in big energy stocks, your Exxon-Mobil's and
Chevron's of the world, as well as all the oil services companies that help these big oil giants drill and give them the equipment for their rigs and
what have you.
[09:10:22]
KOSIK: Just curious what your thought is about this, what the next real catalyst is for Wall Street? Do you think the concern more is about the
debt ceiling or the next earnings season coming up?
LA MONICA: Yes, I think the debt ceiling concerns have abated a little bit. There still, obviously their earnings are going to be key, and don't
forget also, President Biden, the clock is ticking. Is Joe Biden going to announce that Jerome Powell will get a second term or that he is going to
nominate him for a second term as Fed Chair? Or does he decide to go with another person? That I think is going to be a very important question that
Wall Street will be watching extremely closely.
KOSIK: And that's not something we necessarily talk about all the time. I'm glad you made that point, Paul. All right, thanks for your great
perspective, Paul La Monica.
A debt crisis in China's property sector spreading beyond the troubled Evergrande, luxury homebuilder, Fantasia has failed to make a bond
repayment and Cynic Holdings says some of its subsidiaries missed interest payments.
Clare Sebastian has all of the details. So Clare, is this it? Is this the contagion that everybody has been concerned about?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Alison, I think partly it is. Certainly, I think contagion can lead to a loss of confidence among
lenders for these property companies. But I think more than that, this is about the fact that all of these property companies are facing the same
sort of external issues, the forced de-leveraging by Beijing that came into force last year, that's forcing these companies to use up the cash they
have on hand for deleveraging.
And then at the same time, they're not able to make as many sales as they were before because we're seeing a sustained slowdown in the Chinese
property sector. That is sort of a secular issue outside of this.
Fantasia, I will point out, a much, much smaller company than Evergrande. Its revenues in the first half of the year were about one-twentieth of
Evergrande's, so not sort of a significant contagion risk for that company. But they are in perhaps a worse situation than Evergrande. They're now --
they've now been downgraded just today by Fitch and by S&P to selective default or restricted default, because of missed payments on -- well,
actually they've missed not even an interest payment, but a principal payment on a bond. So that puts them in essentially a default because
there's no grace period on that.
So they are in a pretty dire situation, and I think at the same time, you've got to look at the property sector as a whole. As I said, according
to MacQuarie, sales in the top 30 Chinese cities plunged 31 percent in September from a year ago.
So you really see the sort of crunch we're in for the property sector, and that is ultimately what's playing out here.
KOSIK: And the fact that we're talking about -- we're focusing at least today on another property company, let's dial the wheel back a bit. Can you
update me on where Evergrande is?
SEBASTIAN: Yes, so Evergrande's shares were suspended on Monday in Hong Kong. It looked like that might be pending an announcement. There was
rumors of a buyout by another property company, but there is no news has emerged on that yet. So investors are still guessing.
And meanwhile, you know, Evergrande, we know has been trying to sort out its domestic debts. It paid off a loan by using a divestment to do that
last week. It has paid down a yuan denominated bond, still no word on two interest payments on dollar denominated bonds.
So we sort of have a sense that, that foreign investors are going to be sort of the first to be left holding the bag in this case, and still no
word, Alison, on Beijing and what their plans are if they're going to help guide the companies through some kind of restructuring if there is perhaps
even less likely going to be some kind of a bailout.
So still a lot of questions around Evergrande at this stage.
KOSIK: Still a lot of uncertainty. Clare Sebastian, thanks very much.
And these are the stories making headlines around the world. Catholic Bishops in France are asking for forgiveness following the explosive
results of an investigation. A report estimates more than 200,000 minors were sexually abused by clergy in the French Catholic Church over the past
70 years.
The head of a group representing victims called Catholic Church leaders a disgrace to humanity.
CNN's Cyril Vanier joins me now live from Paris. So, walk us through this, Cyril. What does the report reveal and how is the French Catholic Church
responding?
CYRIL VANIER, CNN CORRESPONDENT: Well, the report reveals the full extent, the full scope of abuse on minors within the church dating back to 1950
here in France, and so we can now put a number on that question of how many minors were abused. The number, an estimated 216,000 people. That number
surges to 330,000 if you include the wider Catholic social environment and by that, I mean schools, I mean youth movements, I mean Catholic Charities.
So just think about that for a moment. Let that sink in.
[09:15:10]
VANIER: Three hundred and thirty thousand children who had been placed in the care and the trust of either a priest, a deacon, a member of the church
or a member of the wider Catholic social environment, that number is staggering. And so there is going to be a before and an after publication
of the report for the French Catholic Church.
We spoke just after the report was published to a priest, who was himself a victim and who testified before the commission. I asked him whether he had
been able to forgive the church. This is what he told me.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE (through translator): Forgiveness is a journey you undertake every day, a true understanding of the harm suffered makes it
even more difficult to forgive.
(END VIDEO CLIP)
VANIER: So look, he just couldn't bring himself to say that 30 years on, he had forgiven the Church and this is a man who now represents the
institution because he is a priest, but he does hope that with this report on the back of the report, it will be deeply reformed. And the independent
commission which is carried out all this forensic statistical research has laid out a number of recommendations that they're also calling on the
Church to adopt.
KOSIK: All right, Cyril Vanier, thanks very much.
Taiwan's President says the self-governing island will not bend to pressure after China flew a record 56 war planes into its Air Defense Identification
Zone. Tsai Ing-wen when says Taiwan will defend itself if its democracy is ever threatened, and she said the consequences for regional peace would be
catastrophic if the island were to fall to China.
California's Governor has declared a state of emergency in the southern communities affected by an oil slick. Official say more than 140,000
gallons of oil may have spilled into coastal waters and beaches from a breached pipeline. Authorities are investigating if the line was ruptured
by a ship's anchor.
Still to come on FIRST MOVE, gridlock in the Port of Los Angeles adds to the strain in supply chains. I'll be talking with the port's director.
And space gets a new star, a Russian cruise shoots into orbit to film the first movie to be made in space.
(COMMERCIAL BREAK)
[09:20:04]
KOSIK: Welcome back to FIRST MOVE, I'm Alison Kosik. U.S. stocks remain on track for a higher open, a better feel to the markets after Monday's across
the board drop driven in part by uncertainty over the debt ceiling.
Treasury Secretary Janet Yellen saying today that she considers October 18th to be the drop dead date to raise the U.S. borrowing limit. She
insists that both parties need to come to an agreement together to get the deal done instead of Democrats having to do it by themselves.
Investor attention beginning to turn to third quarter profit season as well. Just released results from PepsiCo were fizzy with much better than
expected earnings in sales. The soft drink and snack giant raising its future guidance, too, despite supply chain challenges. Its shares are set
to rise a bit in early trading.
As we told you earlier, Facebook facing more trouble in the hours ahead following a six-hour outage on Monday. A former employee is set to tell
U.S. senators that the company is quote "an urgent threat to the American people."
The whistleblower says Facebook knows its products cause harm, but is barring the evidence. That hearing on Capitol Hill, it begins in less than
an hour's time. And joining me now is Dan Ives. He's Managing Director of Equity Research at Wedbush Securities.
Great to have you with us today.
DAN IVES, MANAGING DIRECTOR OF EQUITY RESEARCH, WEDBUSH SECURITIES: Great to be here. Thanks.
KOSIK: Let's talk about the stock price first and just the company overall, because despite the fall that we saw for shares yesterday,
Facebook has had quite a run. Its shares are up 19 percent this year. Since it went public in 2012, it is up 753 percent, which shows that its business
model is super profitable. But the selloff also tells us something and it shows that investors are nervous.
Do you think that Facebook, the company, will actually take a hit on what the whistleblower said when talking about the long term?
IVES: Yes, look, it's been a tough one for like models, especially on advertising in terms of billions of users and monetization. That's what
Wall Street cared about. But I believe you're starting to see the walls cave in a bit in terms of what you're seeing from a regulatory focus. And
in terms of Facebook, I think it's a potential moment of reckoning. And I think investors now are starting paying more and more attention to what's
happened in terms of the hearings, and more and more of these worries, which could cause impacts to the business model.
KOSIK: Okay, so you mentioned the walls are kind of close again. So what would regulating Facebook actually look like? You listen to the
whistleblower, she makes the comparison to cars, driving down a highway with no seatbelts.
What can Congress do here? What are some of the changes that can make a difference? And secondly, do you think changes will actually come out of
this hearing?
IVES: That's a great point because it needs to be more than grandstanding. There needs to be ultimately teeth to it. And no, I think when it comes to
whether it's winning acquisitions, looking more and more to Instagram, and WhatsApp and that combined platform, a lot of it is about content and
safety.
And I think what we're seeing here is that thus far, it's had minimal impact to Facebook's business model despite I think, you know, many have
thought over the last few years, they would have become more of a hit.
I think going forward, it is not just Facebook or Big Tech. I think you're going to see more and more regulatory scrutiny around potentially a content
business model changes, and it all comes down to limiting acquisitions.
A big part of Facebook's success has been Instagram and WhatsApp acquisitions. And I think this is similar to what we saw almost with the
tobacco hearings in the mid-90, it is almost tax potential reckoning coming on the beltway.
KOSIK: Let's go to China because, you know, the regulatory crackdown, it kind of rattled markets, you know, over the past couple of weeks, not so
much today. Do you think Chinese companies, though, are investable?
IVES: I don't -- I mean I think if you like jumping off a cliff without a parachute, and then maybe you'd invest in them. But today, given the
regulatory crackdown, and we're talking about in the U.S., but at least there's watching that need to happen.
In China overnight, the rules are changing, and I think you've seen across the board as Big Brother's crackdown from Beijing, from Alibaba to DiDi and
others, that's why there continues to be a massive rotation of Chinese tech money into U.S. now. Of course, there's regulatory risk. But what we're
seeing coming out of China is really a horror movie, at least, from an investor perspective, given the regulatory crackdown.
KOSIK: Let's quickly go to Tesla for a moment delivering third quarter earnings topping expectations. Its shareholder meeting coming up this week.
What do you expect to hear?
IVES: Yes, this green tidal wave continues to play. I mean, Tesla even despite the chip shortage, they had the massive 3Q number. I think what we
will hear at the shareholder meeting, it is really about strategically where this company is going and I think that's something that Musk is going
to talk about.
Obviously, there has been a major area of success on EVs, but I continue to view this as a thousand dollar stock and, you know, I don't think anything
is going to come out of the shareholder meeting to make it any more negative or less positive. It all comes down to deliveries.
It's a green tidal wave. Tesla continues to lead the charge, but there's many others that are going to benefit, GM and Ford among others.
[09:25:21]
KOSIK: Okay, very quick question on Microsoft Windows 11 launching today, how is it going to measure up to Apple?
IVES: Yes, I think that's a good question. And obviously from Microsoft right now, it's all about just putting more of a moat around its customer
base. This is important, it's all part of Nadela's broader strategy.
Microsoft continues to be a core Cloud name, and I think this -- in terms of what we're seeing on Windows 11, I think you're seeing more and more of
that come to the consumer, a positive and a step in the right direction that continues to be one of our favorites along with Apple on this 5G
super-cycle with iPhone 13 front and center.
KOSIK: Okay, Dan Ives, we've touched out a lot of topics. Great talking with you and great getting your perspective.
IVES: Thank you.
KOSIK: Dan Ives, Managing Director of Equity Research at Wedbush Securities. Thank you.
And the market open is next.
(COMMERCIAL BREAK)
KOSIK: Welcome back to FIRST MOVE. I'm Alison Kosik.
The opening bell sounding on Wall Street and as expected, stocks are moving higher, about to move higher in early trading. Tech stocks look like
they're trying to bounce back, at least in the premarket after falling more than two percent in the past session. It's the fourth drop this past week.
The S&P, we haven't seen levels like this since July. Energy was one of the few winning sectors in the previous session after OPEC's decision to raise
it production only gradually. Oil on the march today as well. We'll keep an eye on that.
A former Facebook employee turned whistleblower is set to share her story on Capitol Hill today.
Frances Haugen says the social media giant knew users were being harmed, but buried its own research to protect profits. Donie O'Sullivan has the
details.
[09:30:10]
(BEGIN VIDEOTAPE)
DONIE O'SULLIVAN, CNN CORRESPONDENT (voice over): "Eternally starved." "I have to be thin." "Skin and bone."
All Instagram pages, the platform's algorithm suggests an account registered to a 13-year-old girl should follow.
SEN. RICHARD BLUMENTHAL (D-CT): What we did was to create a 13-year-old who expressed interest in weight loss and dieting. And within a day, she
was flooded with recommendations for accounts concerning eating disorders and personal injury.
FRANCES HAUGEN, FACEBOOK WHISTLEBLOWER: And what's super tragic is Facebook's own research says, as these young women begin to consume this
eating disorder content, they get more and more depressed, and it actually makes them use the app more.
And so they end up in this feedback cycle where they hate their bodies more and more. Facebook's own research says it is not just that Instagram is
dangerous for teenagers, that it harms teenagers, it is that is distinctly worse than other forms of social media.
O'SULLIVAN (voice over): That's whistleblower Frances Haugen who leaked thousands of documents from Facebook, including the company's own research
like this, a presentation about the dangers of Instagram for teenagers.
"We make buddy issues worse for one in three girls," reads one slide. "Teens who struggle with mental health say Instagram make it worse," reads
another. Instagram said "Eternally Starved," "I have to be thin," "Skin and Bone" the accounts is promoted through its algorithm, broke the company's
rules encouraging eating disorders, but they only removed the accounts after being contacted by CNN.
Senator Richard Blumenthal of Connecticut is a leading lawmaker calling for change.
BLUMENTHAL: This experience shows very graphically how these claims to protect children or take down accounts that may be dangerous to them are
absolute hogwash. In fact, that was not taken down until CNN brought it to their attention.
O'SULLIVAN (voice over): A spokesperson for Instagram's parent company, Facebook, said it uses technology and reports from users to remove content
or violates its rules on eating disorders as quickly as it can, adding they're always working to improve.
CHELSEA KRONENGOLD, SPOKESPERSON, NATIONAL EATING DISORDER ASSOCIATION: With eating disorders and social media, we do know that there is this
social comparison component, and so, the more time people spend on social media, and they're looking at accounts that may be inspiration, or there's
a term that's called sin-spiration or fitspiration, we know that that can definitely increase social comparison and therefore result in negative body
image, negative mental health.
O'SULLIVAN (voice over): And if you are affected by any of the issues we touched on in that story, here are some resources that might be able to
help.
(END VIDEOTAPE)
KOSIK: Okay, Donie O'Sullivan joins me live from Washington. I know, Facebook certainly had a 48 hours of a rough time and the hearing that
you're about to sit in on is happening after the shutdown impacted, you know, Facebook, Instagram, and WhatsApp. Was this worldwide outage just a
coincidence?
O'SULLIVAN: So we know very little about this outage right now at the moment, Alison. The company came out with a statement late last night here
in the U.S. on the East Coast, saying that it was caused by a glitch. Basically, computers at Facebook's data centers stopped talking to each
other because of a configuration error.
Now, the timing is obviously, of course, raising a lot of questions. Might it have been a rogue employee who was doing one final act before they left?
I am sure Facebook is investigating that and we have asked for clarity on that. But at the moment they are suggesting that it's a glitch, and they
importantly are pointing out that they say there is no evidence that user data was compromised.
As you mentioned, in the next hour, the whistleblower, Frances Haugen will be testifying in the committee room here behind me. She just arrived in the
past few minutes here, we believe. It is going to be a very, very, very tough day for the company.
We have heard so many of these revelations that this whistleblower has brought to light and the difficult thing for Facebook is this is -- a lot
of it is Facebook's own internal research. So that is going to be a big challenge as the company tries to downplay or essentially discredit some of
its own research work -- Alison.
KOSIK: Now, she has already given -- the whistleblower has already given a bombshell interview, detailed interview about what's been happening behind
the scenes of Instagram and Facebook. What other details is she expected to add to the conversation today?
O'SULLIVAN: Yes, I think you can expect here today, as you saw on that report there, I mean, Senator Blumenthal's office did that very simple
experiment of setting up an account as a 13-year-old teenage girl. Once that account started following some dieting accounts, and some eating
disorder accounts, Instagram's own algorithms began immediately recommending more and more accounts that were glorifying eating disorders.
[09:35:24]
O'SULLIVAN: So that really gets to the heart of the issue here of how the algorithm pushes dangerous accounts like this. So, I think we're going to
hear a lot about that. That is the point of the hearing today, it is the harms on teenagers. But I would also expect that the senators will go in a
little bit about the allegation she brought forward on "60 Minutes" here in the U.S. on Sunday night, that the company essentially dropped the ball
between the Election Day and the insurrection, that some of the guardrails they had in place on election misinformation, they dropped right after the
election, and in the ensuing months in that critical period between the election and the insurrection, all of this organizing and misinformation
was happening on the platform.
Finally, it is important to point out that Facebook is pushing back on all of this. They are saying their research is being taken out of context by
this whistleblower. They are saying claims are being overstated and they essentially are arguing that they are a good for society more than a bad --
Alison.
KOSIK: All right, that hearing starting in less than a half hour. Donie O'Sullivan, we will be watching along with you right here on CNN. Thank
you.
America's biggest cargo port is clogged up with container ships. We will speak to an exec from the Port of LA as it struggles to keep up.
(COMMERCIAL BREAK)
KOSIK: Welcome back. Let's get a quick check of the markets.
Wall Street is higher across the board in early trading with tech among the top performers. This bounce coming after the NASDAQ fell more than two
percent in the past session. Energy is the best performing sector with both Brent and U.S. crude up an additional one percent today.
There are a few places where the global supply crunch is more visible than the Port of Los Angeles. The busiest cargo port in North America is facing
record backlogs. There are an estimated half a million containers on ships waiting off the southern coast of California. The port has just announced a
new program aimed at extending operating hours and is asking the Fed for help.
Gene Seroka is the Executive Director of the Port of Los Angeles and he joins us live via Skype. Grateful for your time today. Great to see you.
[09:40:13]
GENE SEROKA, EXECUTIVE DIRECTOR, PORT OF LOS ANGELES: Good morning, Alison.
KOSIK: So paint a picture for us because we're not at the port. Describe for us the global shipping crunch that's happening at the Los Angeles Port
that you're seeing. You know, what does it look like from 360-degree view? How many ships are waiting to dock? What are the wait times for those ships
to unload? And what is the crux of the problem here?
SEROKA: What you're seeing is the American consumers buying power on display here at the nation's largest gateway. Factory output is at recorded
highs in Asia. Thirty percent increase in vessel capacity in the Trans- Pacific trade, and it is like taking 10 lanes of freeway traffic and moving them into five when the cargo gets here to the port.
We're still more productive than. Ever ship and vessel productivity are up 50 percent year-on-year and the average exchange, load and unload of each
vessel that calls here in Los Angeles is over 11,300 container units. That's the best in the world.
But we're having difficulty absorbing all of this cargo into the American supply chain, and the U.S. importer is sitting on that cargo longer than
ever here at the port.
KOSIK: And so just out of curiosity, what are some -- what is the longest waiting time for some of these ships to actually get to the dock and
unload?
SEROKA: As of late last night, there were 76 container ships at anchor outside the ports of Long Beach in Los Angeles, and they are averaging 10
days waiting to get berthing rights here at the port complex.
KOSIK: But extending hours has helped alleviate some of the pain of the situation, right?
SEROKA: We've extended hours. We're working weekends, late at night, but here is the key, Alison. Thirty percent of truck appointments go unused
every day and they are perishable. That means that during prime business hours, when our longshore labor is on deck, our gates are open and the port
is in operation, 30 percent of those truck appointments go unused, and that's why we've seen a number of different areas of where we can improve
the supply chain.
We've got two billion square feet of warehousing from the shores of the Pacific out to the desert region of Southern California, and they're
overflowing with goods. Also needing help of workers in those warehouses.
Of the truckers that have license to do business at this port, only half are calling at least once a week. And the third segment of our dock workers
here at the Port of Los Angeles and Long Beach have been on the job six days a week since the pandemic began, churning out in record numbers and
heightened productivity.
KOSIK: We're learning now that officials are investigating if one of California's biggest oil spills may have been caused by a cargo ship. One
of the ones maybe that you've mentioned was waiting to dock. Its anchor may have struck a pipeline on the ocean floor. What's your reaction to this
investigation and the possibility that the shipping crunch could be impacting the environment?
SEROKA: I've seen those reports. The National Transportation Safety Board along with the United States Coast Guard and allied agencies are all
investigating this unfortunate incident with the pipeline here in Southern California. We have no strong conclusions just yet, but we'll report out
soon as we hear from those authorities.
KOSIK: Is this a situation where the government should intervene? Has it gotten to that point?
SEROKA: We've been working directly with the White House, the National Economic Council, Cabinet members, and senior officials from Washington on
all things supply chain. I've given five short term recommendations and five longer term ones to Secretary of Transportation, Pete Buttigieg and
other senior officials.
We've got to make the best use of the operations we have right now. And longer term, we've got to invest in the infrastructure here. The cargo that
moves through this port in Los Angeles reaches each and every one of our nation's 435 congressional districts, and when it comes to return on
investment for the American citizenry, all roads lead to Los Angeles.
KOSIK: Now the infrastructure bill pending in Congress, I know that's on your radar. What's in that bill that could help improve the situation at
the Los Angeles port?
SEROKA: There's about $17 billion designated to ports and waterways, but there is also money specifically for electric vehicles of which we have
aspirations to move into a zero emissions environment.
Grid resiliency, which is so important here in the State of California with climate change, and nationwide broadband. We have the nation's first and
still only port community information sharing system. And the United States is about three decades behind trading nations in Asia and Europe. We've got
it improve how we share information across the supply chain.
[09:45:04]
KOSIK: What does the global shipping crunch that we're currently under mean for holiday shoppers? What should they expect?
SEROKA: Well, the American importer has been quite savvy. In fact, they pulled forward much of the holiday inventory earlier than we've seen in
past years. As we began to pivot from the traditional seasonal products back to school, fall fashion, and even Halloween of which we just broke
records, the American importers began bringing in holiday season cargo in June, some two to two and a half months ahead of schedule.
Now, while the supply chain remains choppy globally, I think we have a pretty good chance at making sure inventory levels are appropriate. But to
the American consumer, look online a little bit early. Judge lead times and maybe shop at your favorite store earlier than you normally would think as
we're now in the first week of October of our shopping season.
KOSIK: There is a report that a coalition of unions that represent shipping workers around the world, they are warning of an imminent global
transport systems collapse. Do you agree with this? Because what you're experiencing, it's not the only port experiencing this issue. I mean, from
Los Angeles to China, to Texas, to New York.
SEROKA: I saw the article, and I don't have evidence of a global shipping collapse. But this supply chain has been choppy for some time. Workers have
been out there toiling for over 18 months during COVID-19. Seafarers around the world had been working elongated schedules compared to normal. We have
to take care of the worker, put health and safety first, but keep the economy moving at the same time.
We've got the best in the business around the supply chain of which more than 95 percent of cargo moves on water today in international trade.
KOSIK: How soon can we see things ease up?
SEROKA: I think we see imports to the United States strong through an early Lunar New Year in February of next year, and that North American
retailers are telling me that the second quarter of 2022, they will be focused on replenishing their inventories as the inventory sales ratio
nationwide is the lowest it's been since pre-recessionary days.
And then we gather ourselves and we'll pivot pretty quickly into a peak season next summertime. So, this important buying surge will continue for a
while and coupled with those other events that I've mentioned.
KOSIK: Okay. Jean Seroka, Executive Director of the Port of Los Angeles. Thanks so much for your time.
SEROKA: Thank you.
KOSIK: For one Russian actor, it was preparation for a screen role like never before. She is now on her way to make a movie that's out of this
world -- literally. We will explain.
(COMMERCIAL BREAK)
[09:50:03]
KOSIK: At this year's Expo 2020 in Dubai, the talk is about sustainable living and with nearly 200 countries represented, many are putting their
ideas for a cleaner, greener environment on display.
CNN's Eleni Giokos takes us inside Singapore's nature themed pavilion.
(BEGIN VIDEOTAPE)
ELENI GIOKOS, CNN BUSINESS AFRICA CORRESPONDENT (voice over): As the race to finish the Singapore Pavilion was underway, smart urban innovation is
being used to bring its Garden City vision to Expo and Dubai.
CHANG HUAI-YAN, FOUNDER, SALAD DRESSING: You are seeing the boys up there. They are usually on the skyscraper of Dubai. There is 45,000 of plants that
are being planted on the tree green cone down here.
GIOKOS (voice over): It's a delicate job. Each plant is placed carefully in pots in massive cone like structures.
Plants that can tolerate the harsh Dubai sun are moved to the front, while the more fragile are placed in the shade. Technology ensures that each gets
the exact amount of water it requires.
TENG JOO CHONG, DIRECTOR, SINGAPORE PAVILION: What you see down here is a tube that is inserted into the soil and it's going to water the soil.
That's all calculated very carefully for different plants to get different amount of water.
GIOKOS (voice over): The technology doesn't end there. Robots are being used to inspect the plant's health and to collect environmental data.
CHONG: How sustainable? The top. It's a huge solar canopy and comprises of 517 solar panels. It provides shades for the pavilion and down below, we
also draw groundwater and desalinate the groundwater for the use of the pavilion. So we aim to have a self-sufficient container, a closed-loop zero
energy pavilion throughout the six months period.
GIOKOS (voice over): Through the use of smart design, a solar canopy and thousands of plants, the designers claim that the temperature will drop by
10 degrees inside, all to prove Singapore's view that through sustainable techniques, we can coexist with nature.
CONG: With smart innovations, I think that is achievable regardless of the climate, whether it is in the tropics or in a desert condition.
GIOKOS (voice over): Despite being delayed by a year because of the global pandemic, with the event finally underway for the next six months,
Singapore is ready to showcase their lush innovative design to the world.
Eleni Giokos, CNN, Expo 2020 Dubai.
(END VIDEOTAPE)
KOSIK: Are you a fan of space movies? Well, how about one that is actually filmed in space?
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: And the first umbilical now retracting. Engine ignition, turbo pumps coming up to flight speed and lift off.
(END VIDEO CLIP)
KOSIK: A Russian actor and her director are on their way to the International Space Station. Julia has more on a groundbreaking production.
JULIA CHATTERLEY, CNN BUSINESS ANCHOR, FIRST MOVE (voice over): It's the final frontier of filmmaking, and the first for one lucky star who will
feature in the first movie made in this stars.
It seems like a roll custom made for actor Tom Cruise known for his gravity defying stunts like hanging off the side of a plane or scaling the world's
tallest building. Last year, NASA said it was planning to make a movie with crews on the International Space Station.
But the winner of this space race is Moscow over Hollywood.
Russian actress, Yulia Peresild lifts off Tuesday in a Soyuz spacecraft to travel to the International Space Station in what could be one of the most
unusual commutes ever to a movie set.
YULIA PERESILD, RUSSIAN ACTRESS (through translator): I'm not afraid of anything. I just really want us to make a good movie, and I really want our
health, which as it turns out to be generally good, to not let us down.
CHATTERLEY (voice over): The lead actress will be accompanied into space by a her director, both had to learn not only their screen parts, but work
with professional cosmonauts for months, undergoing weightlessness training with a backup crew, as well as centrifuge tests and parachute drills.
KLIM SHIPENKO, DIRECTOR (through translator): During this time, they really tortured us. They didn't beat us up though, but made us memorize a
lot of unknown abbreviations and squeezed us completely.
CHATTERLEY (voice over): The two will spend 12 days filming on the space station. Cosmonauts on the ISS will also appear in the movie, which is
currently titled "The Challenge." And that is what the actress say she expects the experience to be as she and her colleague will have to play
multiple roles.
[09:55:02]
PERESILD (through translator): Since he will have to be a camera operator, director, and a lighting engineer, I will have to be a makeup artist,
costume designer, and an actress.
CHATTERLEY (voice over): Fans will have to judge if the film becomes an international blockbuster, but its out of this world location already makes
it a ground-breaking movie.
(END VIDEOTAPE)
KOSIK: And finally on First Move, the Powerball lottery has just made someone very, very rich. A single ticket bought in Morro Bay, California
matched all six numbers hitting the jackpot worth almost $700 million. That's the seventh biggest in U.S. history. No one had one since June 5th.
The lucky winner can either take their price in annual installments over the next 29 years or collect nearly $500 million all at once. They'll pay
tax on it, whichever they choose.
Not bad either way, but I suggest taking a lump sum.
Thanks for watching. Be sure to connect with me on Instagram and Twitter @AlisonKosik.
Up next, live coverage of testimony in the U.S. Senate from the Facebook whistleblower.
I'll see you soon.
(COMMERCIAL BREAK)
[10:00:00]
END
