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First Move with Julia Chatterley
Bitcoin Set For A New Trading Milestone; North Korea Launches A Missile From The Sea; From Ships To Farms Supply Chain Chaos Could Compromise Christmas. Aired 9-10a ET
Aired October 19, 2021 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:29]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Live from New York. I'm Julia Chatterley. This is FIRST MOVE and here is what you need-to-know.
ETF. WTF. Bitcoin is set for a new trading milestone.
Test fire tensions. North Korea launches a missile from the sea.
And talking to Turkey. From ships to farms supply chain chaos could compromise Christmas.
It's Tuesday. Let's make a move.
A warm welcome once again to FIRST MOVE. We've got another great show lined up for you this Tuesday. Let's call it a Tom Cruise Tuesday in fact, where
we delve into parts of the market, some might call it risky business. We will speak to Bruce Richards of multibillion dollar asset manager, Marathon
Asset Management to discuss a cocktail of risks, navigating inflation risks, supply chain challenges, investing in distressed assets and his top
recovery trades.
Plus, as I mentioned there, it's a milestone in the world of crypto. Top Gun Bitcoin rallying around half a percent as you can see closing in on
all-time highs as ProShares launches the first ever Bitcoin futures exchange traded fund in the United States. Don't panic, we will explain all
and we'll hear from ProShares' head of investment strategy later this hour, too.
Now on Wall Street, we're on cruise control. The majors seeing all the right moves at premarket moving ever closer to records after the fourth day
of gains for the S&P and the NASDAQ. Tech, in fact shrugging off the volatility that we've seen more recently in bond yields.
European indices muted though, as big firms caution on the pressures buffeting business. French food giant, Danone, says it is sticking to its
guidance, despite rising costs. Telecom giant Ericsson taking a Q3 supply chain hit and warning of a weaker market share in China and the tech
turnaround in Asia, too, in more ways than one.
The Hang Seng closing at five-week highs driven by a five percent rally in smartphone maker Xiaomi. It is promising to begin mass producing cars by
2024 no Mission Impossible there.
Let's get right to the drivers. And we begin with Bitcoin buzz, a landmark moment for cryptocurrencies as the first Bitcoin futures ETF starts trading
today. Paul La Monica is following the story for us.
This is seen -- and Paul, great to have you with us -- as a huge stepping stone, I think in the acceptance of cryptocurrencies by regulators. But
you've got to read the small print on this. Just explain what an ETF is on Bitcoin futures.
PAUL LA MONICA, CNN BUSINESS REPORTER: Exactly, Julia. What we have now is a fund that will invest in Bitcoin futures contracts. So this ProShares ETF
and others that might be coming out after it, they are not going to be investing directly in Bitcoin. You, if you buy this ETF don't have
ownership of Bitcoin. So, that is one thing that I think any investor needs to do their homework and realize, but the good news is that more of these
funds are likely coming. This probably opens the wave for several funds to eventually be approved by regulators.
And also, this brings more regulation to an industry that for some novice investors, they may feel that crypto is a little bit of the Wild, Wild
West, which I don't believe is a Tom Cruise movie, but that's going to be something that is good. So, you're now you can have your crypto cocktail.
CHATTERLEY: Not a Tom Cruise movie yet, Paul, I'm sure you're giving them ideas there.
What's it going to mean for liquidity? Because I think you raise a great point, which is for many people out there, they do see the crypto sector as
the Wild West, perhaps they can't invest in it, but they can invest in exchange traded funds, and if they want some access, or at least something
that mirrors in some way the underlying price movements of Bitcoin or Bitcoin futures in this specific case, this gets them access. What is the
upside? What is the downside?
LA MONICA: Yes, I think that the potential upside is that you do open the floodgates for more investors having access to cryptocurrencies, who maybe
previously had been intimidated. I mean, when you hear stories about how you need to have very high-powered fancy PCs or servers, mining Bitcoin and
all the power that that entails, that's not something that your average retail investor may be wanting to do.
[09:05:12]
LA MONICA: But to be fair, I think that there are some who would also argue that this may not change the playing field that much because we've already
had things like Robinhood and Coinbase, and other brokerages that have also made it easier and more accessible for retail investors to buy Bitcoin,
Ether, or other cryptocurrencies.
So yes, the ETFs do potentially make it even easier for investors, but it's not as if we had been in this world where the only way to access Bitcoin
before having the ETF was to mine it yourself, you were able to buy Bitcoin at a brokerage account fairly easily.
CHATTERLEY: Yes, and there's obviously going to be additional transaction costs when you're investing in an ETF or an exchange traded fund as well.
So lots to consider here, but it is seen as sort of laying the path perhaps one day to seeing an ETF based on Bitcoin itself, and then the floodgates
really open, I think.
Paul La Monica, thank you so much for that.
And after the opening bell today, ProShares head of investment strategy, as I mentioned, will be on the show, so stick around for that. Paul, thank
you.
And we move on. Christmas shopping spree, more like a hiring spree, Amazon is looking to hire 150,000 temporary workers ahead of the holidays.
Christine Romans joins us now. Christine, great to have you on the show. Not only in a relatively tight labor market, are they looking to hire
150,000 temporary workers, but they're willing to pay them to get them through the door.
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: They really are. $18 an hour, which is more than its own minimum wage, right, $18 an
hour and a $3,000.00, signing bonus. And for some of these jobs, depending on where they are in the country, and what the job is, it is an additional
$3.00 an hour on top of that.
So, this to me is really a sign of the competitive nature of the American job landscape right now. You've got a lot of other companies that are
hiring and going to be rushing to hire as well. So Amazon is getting out there ahead with the highest wage that I've seen for these temporary hourly
positions.
You've also got Walmart that will be adding 150,000 temporary jobs. Target will be adding 100,000 seasonal jobs and 30,000 new permanent jobs along
its supply chain. UPS, Kohl's, Macy's, Nordstrom, right, so Amazon trying to get out there and get the workers that it needs.
It is an incredibly competitive job market, and some of the recent surveys, including from indeed.com, which is a, you know, a job searching site have
found that the desire for seasonal work has actually been declining in the past few weeks. So, there might be writing on the wall there that people
aren't sure they want to go back to just a seasonal job in the middle of a pandemic, but Amazon is certainly paying up in the hopes of trying to lure
the workers there.
CHATTERLEY: Yes, it's interesting, I just wanted to know how lawmakers will view this because particularly for the Democrats pushing for a higher
minimum wage, failing to tackle that, but seeing wages go up is a good thing.
At the same time, there's been criticism of Amazon, whether it's a marketplace or not for much smaller businesses, in many cases, also, its
competition. And if you think of the small businesses that we know, we're also having challenges in hiring people, how do they compete with a
juggernaut like a Walmart or an Amazon that's willing to pay, you know, in this case, up to $21.00 an hour to get workers in the door?
ROMANS: And to be honest, I mean, look, we have a real crisis in the childcare sector right now, at least anecdotally, when you've got $12.00 an
hour as the typical pay for a childcare worker, $18.00 an hour, even for temporary work at Amazon looks pretty darn good, doesn't it? So that keeps
the pressure on certain parts of the economy, where the pay is just certainly not enough to lure new people into the labor market.
I think you see job hopping when you see this kind of numbers. We know that Walmart and others have been investing in their front end for several years
with all kinds of different perks and higher wages because they know there is job hopping in retail simply going for the highest wage. And now you're
seeing some of that job hopping even across industries and sectors because the free market at work here I guess, right?
I mean, you don't have Congress raising minimum wage, but you have business raising the minimum wage because of supply and demand. They need the
workers the wages rise when you don't have enough supply.
CHATTERLEY: Yes, I mean, we would have been cheering about this two years ago, and I guess we are today as well. At least some workers will have some
more money.
Christine Romans, thank you so much for that.
ROMANS: You're welcome.
CHATTERLEY: To East Asia now where tensions are rising following a new missile test by North Korea. South Korea says it appears the North fired a
ballistic missile from a vessel at sea, possibly a submarine into waters of Japan.
Will Ripley joins us with the latest. Will, just moments of course, after the United States says it would be willing to restart diplomatic talks over
the nuclear program in North Korea and then we see this missile launch, but there's some debate over whether it came from a submarine or a water-based
platform of some sort. What do we know?
[09:10:10]
WILL RIPLEY, CNN INTERNATIONAL CORRESPONDENT: Absolutely, because back in 2019, Julia, North Korea launched a submarine launched ballistic missile
from an underwater platform, but kind of you know, in their state media propaganda made it look like it was coming from a submarine, and it was
later determined not to be. So if now this test did come from one of North Korea's relatively antiquated submarines. We're not talking about the high-
tech nuclear fleet of the United States or the U.K. and perhaps in the coming years, Australia.
But nonetheless, if North Korea does have the capability to launch a ballistic missile from its submarines, that just adds yet another
potentially dangerous weapon to its already dangerous arsenal. It was just within the last, you know, number of weeks, they tested what they claim is
a hypersonic missile that can travel five times or more the speed of sound.
China also denying that they tested a hypersonic missile, although it is clear that China has already deployed those hypersonic missiles along with
Russia. They're the only two countries that have that technology, maybe North Korea, an impoverished tiny country with an oversized defense budget,
Julia.
And so obviously, there are questions about what we're going to see in North Korean state media in the morning hours here local time. Usually it
takes about 24 hours after the rest of the world hears about a test before they hear about it inside North Korea, because they want to make sure that
all the images and video they released are vetted, and, you know, touched up if need be. But it'll be interesting to see what they show.
CHATTERLEY: And as far as the United States is concerned and hopes for potential diplomatic talks surrounding North Korea's nuclear program. This
is a pretty clear message.
RIPLEY: It is and I mean, the timing of this is so unusual. Think about it. The two Koreas just reopened their inter-Korean hotline so they have calls
every day in the morning and in the afternoon. So at 9:00 a.m., they have their call. And then an hour later, North Korea tests this missile,
possibly two. Japan says to South Korea says they detected one and they're looking into it.
And later in the afternoon, they're going to have their phone call again. So, it'd be interesting to see what the readout is if they even release it,
of what the conversation was between the guy sitting in the north, the guy sitting in the south. Oh, will they talk about the missile launch? Or will
they just talk about the weather.
Another really important thing that we just heard out of Tokyo, Julia, is that the Japanese Prime Minister is now using this North Korean launch as
to kind of bolster his case for enemy base strike capability. That would mean that Japan which has a pacifist constitution could go from, you know,
just trying to bolster its missile defense systems to having offensive weapons that could actually go and destroy an enemy's base.
And this is as Japan also prepares to put missiles and soldiers on its islands that are just a hundred miles from the main island of Taiwan,
because concerns are mounting about China and its intentions in cross strait relations.
So you put the pieces together here. There's a lot happening in this part of the world. There's a lot of moving parts, a lot of countries with new
weapons, and a lot of room potentially, Julia, for miscalculation.
CHATTERLEY: Yes. And a great need for diplomacy. Let's hope more than the weather gets discussed on that call. Will Ripley, thank you for tying all
those pieces together. We appreciate you. Thank you.
Okay, let me bring you up to speed now with some of the other stories that making headlines around the world. A gang that kidnapped a group of
missionaries in Haiti is demanding $17 million for their release. Sixteen Americans and one Canadian were abducted near the capital Saturday after
visiting an orphanage.
Haitian officials say they're working with the U.S. to secure the release of the group which includes five children, as CNN's Joe Johns reports.
(BEGIN VIDEOTAPE)
JOE JOHNS, CNN SENIOR WASHINGTON CORRESPONDENT: CNN has confirmed that the kidnappers here in Haiti are now demanding $1 million apiece for each of
the 17 individuals they are holding that includes possibly five children, one believed to be about eight months old. That $17 million is a
significant escalation from previous demands by this group known as "400 Mawozo." They started very small, stealing livestock, then automobiles,
then kidnapping individuals off the streets. Now, they are taking entire groups.
We're told that the Federal Bureau of Investigation is working alongside Haitian authorities to try to resolve the situation. The bad news is, it
could take weeks or months.
Big picture, the people here in Haiti are sick and tired of the kidnappings, which have gone on, on the roads for decades and they are
demanding change. There is a strike going on here in this country by transportation workers who say the kidnapping must stop.
(END VIDEOTAPE)
[09:15:01]
CHATTERLEY: Joe Johns there.
U.N. health workers say three children lost their lives Monday following an airstrike near the capital of Ethiopia's Tigray region. State-run media
reported that Ethiopia's Air Force launched an attack. Ethiopian forces have been at war with the Tigray People's Liberation Front for nearly a
year.
Myanmar has freed hundreds of political prisoners, state media reports. Seven hundred and twenty-seven detainees were let out of two prisons on
Monday. It follows the junta's announcement that it would release more than 5,600 people arrested for protesting against military rules since a coup
back in February.
Okay, coming up here on FIRST MOVE. Farmers in a flap. We're live at a turkey farm where they're working hard to make sure supply shortages don't
ruin Christmas. We'll have a story on a wing and a prayer. Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. Call it a U.S. futures bash on the anniversary of the market crash. It's actually the 34th anniversary of
Black Monday on Wall Street when the Dow lost almost a quarter of its value. No black as you can see today, just green on the screen, a
continuation of Monday's gains amid more positive earnings news.
Dow component and COVID vaccine and COVID maker J&J, little change premarket but raising full year guidance Meanwhile, blue chip, Procter &
Gamble beating on the top and bottom lines, but warning that price hikes can't make up for higher commodity costs that the company is facing. The
relentless rise in commodities continuing to fly in the face of the transitory inflation argument.
U.S. crude gushing up more than 70 percent year-to-date, natural gas aflame up more than 90 percent. Food on fire too with oats, feeling their oats, an
82 percent jump there. Cotton, an almost 40 percent rise. And of course, this is just commodities. What does all this mean for consumers and
investors alike?
Well, we can discuss with Bruce Richards. He is the chairman and CEO of Marathon Asset Management with $23 billion worth of assets under
management. Bruce, fantastic to have you on the show one again. Let me start by talking about inflation. Is this the big question that you're
being asked from investors? How transitory is it? How concerned are you by rising prices? And what does it mean for behavior and for our portfolios.
BRUCE RICHARDS, CHAIRMAN AND CEO, MARATHON ASSET MANAGEMENT: Yes, that's a great question. And yes, it's the number one question on people's mind.
Number one question of this past year in COVID, and its related impact and today it is inflation and its related impact.
[09:20:10]
RICHARDS: So we have CPI running at 5.4 percent. We have the cost of living adjustment passed through by the Social Security Administration that was
just 5.9 percent for the seniors, which is the highest advancement of increase that we've seen in over 40 years. And we have producer prices
coming in at about eight percent per annum at the current pace, but that doesn't tell the whole story.
Housing prices 20 percent up year-over-year, food cost up over 20 percent year-over-year, cost of automobile up eight percent, fuel at the tank up 50
percent, and your heating bill over the winter coming in the coming months, probably going to be up to 50 to a hundred percent year-over-year
especially for those in the cold domain.
So, it's very much impacting the consumer, it's very much impacting businesses. You know, the whole discussion about transitory is an
interesting one and it is something that's being propagated by the Fed. You know, I love this guy, the Fed President from Atlanta, President Bostic --
Raphael Bostic. He has got a transitory BS jar on his desk that every time you mentioned that word in his office, you have to put $1.00 in.
And so it's not transitory. Transitory, you know, refers to something that happens in the short run and this is something, especially with the supply
chain is going to be with us for some extended period of time. It's impacting markets. It is impacting portfolio decisions, you don't pack
investment returns.
CHATTERLEY: You know, I think you're sort of making an argument here, and actually we tackled the San Francisco Fed on that point exactly. And she
sort of said, we're trying to get away from that transitory word. But she also said that she didn't think that rate rises would tackle some of the
price increases that we're seeing in this.
There's lots of different triggers and things that you can use, tools that you can use, perhaps to rein in some of the free money that we've got
sloshing around. From your perspective, we are saying that one, we think that they're going to be slow to raise rates for a whole host of reasons.
And indeed, I think the impact it would perhaps have on the consumer, but also that these price rises are here to stay.
How do you sort out those that can perhaps win in this scenario, can pass the costs on versus those that perhaps can't? Is that how we have to view
the world when you're looking at investing?
RICHARDS: I think when you're looking at companies looking at equities and looking at the credit side of equation as well, it's really important, but
to a prior point that you made about the Fed, there's not much they can do. You know, coming into last year, the money supply M2 was at $15 trillion.
Today, it's at $21 trillion.
The government between the Treasury and Fed has printed 40 percent more currency than ever existed before. And so there's a lot they can do, which
is start the tapering, and stop printing so much money and that will have a lot to do with the level of forward inflation.
There is nothing -- nothing we can do to take back time, but certainly will impact, and for all those, you know, economists that think about monetizing
our debt, it's a really bad idea for the middle class and the working class in this country, because it's eroding their ability to save and their
ability to afford, you know, dinner and, you know, the trip to wherever they're going.
So it's really important that we wake up and understand the amount of money we're printing and the amount of money we're spending, and that all comes
from Washington.
You know, to the point of companies. It's a very interesting discussion because there are companies that can pass through the cost. And, you know,
it shows up in CPI and companies that can't pass through the cost and that's problematic.
And so when you project forward to the extent that inflation is going to start to slow the economy at some point in the future, that might be more
of a problem. I know here at Marathon, we've kind of pivoted from distressed investing last year, in the year 2020, it was a record year of
distressed capital raisings and capital deployment.
There's over $300 billion that we've raised in the markets with $500 billion in spending power for distressed, which helped a lot of these
companies, you know, make it through their problems. But right now, today, we have at least a dozen, probably around 18 term sheets in front of
companies, companies that can't pass through the price increases that need a bridge to a stronger economy for their recovery and that's companies in
travel and entertainment, in certain manufacturing businesses, even in healthcare.
So, it's a broad spectrum where inflation is hurting both companies, as well as the consumer, and it certainly won't get better. It'll only get
worse in this coming year.
CHATTERLEY: You know, you raise such a great point though, and I want to get back and talk about it, about the erosion of purchasing power when
we're talking about rising prices for individuals. We often talk about it from a market perspective and whether investors can withstand the pullback
of monetary policy and all the excess support that the Federal Reserve in particular has provided, never mind the fiscal support that the government
has provided.
Do you think this Federal Reserve recognizes the sort of risk reward of what they've provided? And actually, that perhaps the situation will look
more stable if they do start to rein in policy even from next month?
[09:25:34]
RICHARDS: It's a very interesting question, and it's a very large macro question to try to understand. Having said that, it's a catch 22. The Fed
starts to raise rates, it will slow the economy. And so they understand that. They don't raise rates, inflation will continue to gravitate higher.
So, I think they are in a very tough position right now and some of it has been created, because, of course, we need the stimulus and the monetary
policy initially in COVID. The question is that that last bit that we've seen in the last year has accelerated forward, and that maybe was some
wasteful spending, and some printing of money that maybe didn't have to happen.
So that's what they're asking themselves now, and this a little battle going on in Washington behind the scenes, those that are fiscally more
responsible versus those that are fiscally wants to provide this enormous safety net to a wider audience that's going to cost a lot in terms of
building up our deficits and creating a problem for the next generation that is going to have to pay off these debts and live with the
ramifications of these decisions.
So it's tough questions of policy, as opposed to a moral decision.
CHATTERLEY: Yes. Who'd want to be a Central Bank Governor, quite frankly?
I want to talk to you about the future of transport because I was looking at your portfolio. And as you said, you sort of coined the recovery trade.
I know you are you invested in container shipping, which has been, I'm sure, a fabulous trade throughout this period and this recovery period, but
you also invested in Hertz, the car rental company and Europcar.
So I want to not only talk to you about sort of the pickup in value in recovery trade, but also project forward. What does the future of transport
look like? And what do you see in terms of value for these particular firms and companies?
RICHARDS: Well, first of all, start with airlines for just a second. So we think that air travel is going to come ripping back. In the coming weeks,
the United States is going to open up to 33 countries international travel, and we think the business travel is going to come back in a very big way in
the coming year. And so we're very bullish on business travel.
Despite the flexibility of work from home or work from anywhere. We think business travel comes ripping back. We think with that, hotels will benefit
from that, not only from personal travel and leisure travel, but also for the business traveler coming back for these business hotels.
So we're bullish hospitality. We're bullish airlines.
And as it relates to, you know, Hertz and Avis and Europcar, you know, you pick up your phone and you can order your Uber, how about picking up your
phone and ordering your rental car because you want to drive yourself? And you know, the flexibility and mobility and investment in mobility by these
rental car companies is staggering.
And so we think all the rental car companies are tremendously undervalued. Volkswagens is buying Europcar, the number one rental car company in the
country -- in Europe, rather. Marathon is the second largest shareholder of that company behind Volkswagen, and we're very bullish on that opportunity.
Hertz, we think has 30 to 40 percent upside from here just to catch up in terms of multiple to our Avis and we're bullish on the whole sector here in
the United States, in terms of rental car, because of this advancement of mobility.
And then when you talk about shipping. Shipping is a problem, right? So you know, you talk -- you think about the ports and how they're all backed up.
But how about the truckers? You know, you look at the U.K. and I mentioned that just recently that there's 18,000 less truckers in the U.K.
transporting petrol from the ports to the stations versus where you were prior to Brexit.
And here in the United States, just look at Long Beach in LA for instance. In Long Beach in LA on a typical day, you have 9,000 truckers coming to the
ports to pick up goods to distribute them throughout the country. But there used to be 15,000, and now there is 9,000. That's a 40 percent decline in
truckers.
And so you can open up those ports 24 hours a day and allow for transports to come in and out, which is the measure of the administration's event.
CHATTERLEY: Finally done.
[09:30:13]
RICHARDS: But where are you going to get your labor? So what we really have is a tremendous labor shortage, where we need it for logistics, and just in
time delivery.
So it's impacting everything. It's impacting everything from Apple's ability to deliver chips, and chip manufacturing, to being able to get
hopefully, you know, Christmas gifts come this December.
So the impact is wide and vast, and it's everything from your lawn furniture, to lumber, to television, to chips, and so at the point where
you're flying chips on cargo planes, just to get it there in time. So you can see how inflationary that is because the cost is 10 times to fly it
than to ship it. So, it all has to be passed through and it all is being passed through and it's a problem.
CHATTERLEY: Never mind transitory cookie jar. I think, we need a bath or a swimming pool, quite frankly, because when you put it like that it's
clearly going to be around for a lot longer than Fed officials hope.
Bruce, great to chat with you as always. Bruce Richards, the Chairman and CEO of Marathon Asset Management, and I have plenty more to discuss with
you, so please come back again and talk to us.
RICHARDS: Julia, thank you.
CHATTERLEY: Thank you. Okay, still to come here on FIRST MOVE.
Can't wait to gobble up a turkey this Christmas? Good luck getting one. We will explain, next.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE and U.S. stocks enjoying a Tuesday trading torrent with financial and energy shares making fresh upside moves.
The S&P 500 now less than one and a half percent away from records. We can call it a purple patch in the pumpkin patch. At this rate, we will hit all-
time highs before Halloween.
[09:35:05]
CHATTERLEY: Shares of Robinhood are moving higher, too. The SEC out with a report on the meme trading mania we saw earlier this year. It suggests
regulators should take a closer look at how popular trading apps function, including how Robinhood is able to offer free trading to consumers via its
payment for order flow relationship with market makers like Citadel Securities. The report though didn't include specific policy
recommendations.
Early crunch on Christmas as global supply chain disruptions continue. The Christmas tree could become the next item caught in the fallout from
massive shipping backlogs as David Culver reports.
(BEGIN VIDEOTAPE)
DAVID CULVER, CNN CORRESPONDENT (voice over): With Americans starting their holiday shopping, whether or not they tick off one essential item on their
list depends on what's happening thousands of miles away.
Here in Southern China, workers in this factory twist, pull, cut, and crimp together shredded plastic strips, creating branches for artificial
Christmas trees destined for the U.S.
CULVER (on camera): And these are the finished product. They do about 500 trees a day in this factory alone, then they're packaged up, and shipped
out. But in this case, they have nowhere to go.
CULVER (voice over): The reason --
JAMES LI, SUPPLIER FOR NATIONAL TREE COMPANY (through translator): Because many ships went to the United States this year, got stuck at the ports, and
did not return, so we are waiting for the ships to return.
Our factories goods are therefore staying here and cannot be shipped out.
CULVER (voice over): James Li says his factory has a backlog of about 150 containers worth about $3 million just waiting to be shipped out.
CULVER (on camera): It's led the company to rent storage space right here in China. This warehouse has two floors just like this packed with trees.
The inventory that normally this time of year would already be in the U.S., well ahead of Christmas.
CULVER (voice over): Li warns if the shipping backlog continues --
LI (through translator): Many consumers may not be able to buy Christmas trees at Christmas this year.
CULVER (voice over): CNN followed the jammed supply chain from Li's factory in China to where most of the goods usually end up, The National Tree
Company in New Jersey, a large wholesaler of holiday decor that sells to retailers like Target and Amazon.
The company's CEO Chris Butler, blames the ongoing global supply chain crisis for the shipping backlog.
CHRIS BUTLER, CEO, THE NATIONAL TREE COMPANY: So COVID created some of the shortages. COVID -- post-COVID has created this enormous post-COVID demand.
CULVER (voice over): It's in turn jamming up ports like these in Southern California with a recent flyover showing some 60 container ships sitting
anchored off the LA coast.
BUTLER: Every day is a fight to get containers who are fighting against toy manufacturers, electronic manufacturers, other manufacturers to get the
containers and we're having to pay a lot more for those containers.
CULVER (voice over): The company says it is paying 10 times more this year to bring their products across the ocean compared to last year.
BUTLER: Because of that, we're having to pass on some of those price increases to the consumer.
CULVER (voice over): The result -- a 20 to 25 percent increase in the price of artificial trees this year if you're lucky enough to still find one by
Thanksgiving.
David Culver, CNN, yKiautschou, China.
(END VIDEOTAPE)
CHATTERLEY: It's not just the Christmas tree that could be missing this year, what you put on the table is also being affected by the supply chain
issues and labor shortages. Anna Stewart is at a turkey farm in Essex in Southern England for us, too.
Wow. Anna, and you're appropriately dressed as well coordinating with your turkeys. Talk to me -- talk to me about the challenges other than being
pecked. Be careful.
ANNA STEWART, CNN REPORTER: I'll just say live reporting here is really very challenging. But this is a sector that has had issues for over a year
now. Huge shortage of workers. And of course, it is reaching a real crunch point as we approach Christmas, about 15 percent of the workforce is
frankly just missing. There aren't enough people to pluck these turkeys and frankly, I might start plucking them myself, if they keep pecking me.
But it's no surprise really if you consider that 60 percent of the poultry workforce in the U.K. came from Europe. So, a result of the pandemic plus
Brexit and that many have left and they're simply not coming back. And this issue here within the poultry sector has been compounded by all sorts of
shortages throughout the food and drink supply chain, which is what the CEO of the food and drink federation told me earlier.
(BEGIN VIDEO CLIP)
IAN WRIGHT, CEO, U.K. FOOD AND DRINKS FEDERATION: The shortages are the result of labor shortages. As I say, we haven't got enough workers at
various pinch points, so haven't got enough in abattoirs. We haven't got enough in famously in HGV drivers. We haven't got enough in certain factory
roles and we don't have enough in hospitality.
(BEGIN VIDEO CLIP)
STEWART: The U.K. government has in recent weeks issued 5,000 temporary visas for truck drivers, five and a half thousand visas for poultry
workers. Not clear yet how many of those have actually been taken up but frankly, it is too late for poultry workers who work in Christmas turkeys,
these guys were hatched in Easter.
So of course they had to predict what their staffing would be for November and December, many, many months ago and the big worry is that it won't just
be this Christmas, but it's not looking very good for next Christmas either -- Julia.
[09:40:13]
CHATTERLEY: Wow. So what is it actually going to mean then? Is it going to mean shortages this Christmas, and if not, higher prices.
STEWART: Exactly. There will not be as many British turkeys on the shelves or hopes they can import more, but then you have to consider all the other
supply chain shortages we're seeing when it comes to shipping and the costs are going up. People are having to pay people that pluck turkeys or pick
fruit a lot more just to get the workforce that they need, so that their crop or their birds aren't simply wasted.
So it's going to feed into the wider inflation story, and this is just one snapshot really, isn't it, of a huge problem facing the U.K. and right
around the world. And the U.K., it of course has been exacerbated by Brexit.
CHATTERLEY: Anna, what's in your pockets because those turkeys really want to get whatever's in your pocket? Is there some food in there or something?
STEWART: These turkeys -- these turkeys are great fun. They are very vocal, if you clap. I mean, in some ways, they are a great audience, but they are
quite pecky.
CHATTERLEY: Your own round of applause. That was fabulous. Might I suggest -- and I've just been googling -- oh, there you go. I suggest you add
tryptophobia to your CV in future, which I believe is a fear of turkeys.
STEWART: I think I'm developing this fear of turkeys right now. Thanks, Julia.
CHATTERLEY: Another round of applause please for, Anna. Fabulous. Anna Stewart, in a turkey farm in Essex. Thank you. Good luck. We lost her
there. She has to make a run for it.
All right, after the break when two of the hottest worlds in investments collide -- ETFs and Bitcoin. ProShares is here to talk us through what's
taking place today. Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: ProShares ringing the opening bell at the New York Stock Exchange a few moments ago, and an exciting day for crypto fans and
investors looking to ride the Bitcoin bandwagon without the hassle of buying directly in case you're wondering what the U.S. regulator, the
S.E.C. has to say about the Bitcoin futures ETF. Well, there's a note of caution, investing has risks -- surprise, surprise -- effectively though
giving the go ahead to ProShares and the companies following it.
[09:45:16]
CHATTERLEY: Simeon Hyman is Head of Investment Strategy at ProShares and joins us now. Simeon, great to have you on the show. It's being talked
about as a huge moment for the crypto space and a sort of endorsement perhaps by the regulators. How do you view this moment?
SIMEON HYMAN, HEAD OF INVESTMENT STRATEGY, PROSHARES: Look, we're really proud to bring the first Bitcoin linked ETF to the U.S. marketplace. This
is a great belt and suspenders combination of the regulated futures market, and a plain old 1940 Security Act ETF that puts Bitcoin as a possible
exposure into people's regular brokerage accounts.
There are a lot of people out there who, you know, don't understand the exchanges. They are often in an unregulated place. You need keys -- warm
key, cold key -- and this just makes it really, really simple for folks to have the opportunity to add this exposure in the way they would, you know,
have an ETF for any other asset class, stock or bond.
CHATTERLEY: You know, I think people -- most people to some degree are getting to grips with Bitcoin as a cryptocurrency or a digital asset. But
in this case then, we have to overlay that this is a future based on Bitcoin, and then it's an exchange traded fund. Simeon, can you help us
understand and put this in English. What's the difference here between an exchange traded fund based on Bitcoin itself and a future because it
matters for investors looking to get access to this.
HYMAN: It does matter and it's important. So the futures are a marketplace where investors speak of what the price of Bitcoin will be in the future. I
know that sounds totally logical, but the most important piece of this is that in many ways, there are many experts who see that futures market as
being the better place for price discovery, the better place for information to be reflected immediately in those future prices.
You know, as an example, the CME futures, that's what we're trading here, the CME futures actually trade more volume than the largest U.S. Bitcoin
exchange. So if you will, this is a robust feature, not a bug. And of course, putting that then in the ETF wrapper, the ETF instrument just makes
it a much easier way for folks to be able to access this exposure, and we think there are a lot of people who have been waiting for this.
CHATTERLEY: Do you think it will take some of the volatility out of the underlying Bitcoin price to be a hedging tool, perhaps? So if you're long
Bitcoin or you hold Bitcoin and you see some volatility ahead, or it starts to get rocky in terms of volatility, rather than selling the Bitcoin
itself, you could perhaps go into the market and say, look, I'm going to sell some of this ETF and hedge my position. Do you expect to see people
doing that, too? This is a trading tool as well as an investment opportunity.
HYMAN: That's true. So, another important instrument in the ecosystem, if you will, I hate that word, but I'll have to use it because people kind of
accepted it. But another tool like BITO does bring more opportunities for a wide range of investors both buy and hold folks and traders to express
their views. And we think this can't be but a healthy thing for the overall ecosystem in terms of the ability for people to indicate what they think
collectively of the direction of Bitcoin.
CHATTERLEY: Is the risk there, though, that perhaps when Bitcoin is going down, this could overshoot to the downside? And likewise, when Bitcoin is
going up, this product could overshoot to the upside? Investors need to be aware of some of the challenges here, too.
HYMAN: So the good news is, if you look at the way, a future strategy would have behaved over the last several years since the CME futures have been in
place, they track Bitcoin really, really well. So you know, the volatility of --
CHATTERLEY: How well?
HYMAN: Well, so as an example, if you look in the month of September as just a snapshot, the average daily difference between that near month and
the next month contract on any given day was only about 20 basis points. So there's not that much going on here. But what I would say is, Bitcoin
itself has its own volatility and it to some extent, again, it's a feature not a bug in the sense that Bitcoin can be a powerful diversifier in
investor's portfolios.
No one is saying it should be, you know, three quarters of your portfolio, but a small amount of a thing that doesn't behave like other things -- that
was Nobel Prize winning language -- a thing that doesn't behave like other things can be really invaluable in your portfolio, whether it's an
inflation hedge, an alternative currency, or virtual gold. People are describing it in several different ways. But it really can be an important
diversifier and now, you can slot it right in there with the rest of your investments in that same account in the same way that that many investors
are familiar with.
[09:50:09]
CHATTERLEY: How much does it cost versus just buying the underlying asset because there is the complication, perhaps of people opening up another
trading account, a Coinbase account, for example, if they want to invest in the underlying? If they're already investing in stocks and ETFs and this
gives them access as we've already discussed, but there's an additional cost for that, too.
HYMAN: You know, so there's always a management fee with an ETF. Ours is 95 basis points, which we think compares quite reasonably with all the other
ways that you might look to invest in Bitcoin. Remember that that number you see in the corner of your screen on TV, that thing is un-investable.
You have to pick some way to transact in it and there is a cost with all, and we certainly think that our value proposition is a robust one.
CHATTERLEY: One of the big questions, I think that's being asked now is, how long does it take for the regulators like the S.E.C. to be on board
with an ETF, as we've discussed rather than tracking futures is tied to the underlying itself to Bitcoin? How far in the future do you think that is
before we're having this discussion with you launching?
HYMAN: We don't know. What we do know is what neither the S.E.C. has said publicly, and what they've said publicly about the benefits of the futures
market and its regulation are certainly consistent with what we see as the important value of a futures based approach, but we really don't have a
crystal ball with regards to other opportunities in the future.
CHATTERLEY: Years?
HYMAN: We just don't know.
CHATTERLEY: I'm just pushing. He actually just said an alternative channel, Gary Gensler, the S.E.C. Chief that this sector, futures has been regulated
by the commodities futures regulators for a really long time. So, he is certainly trying to distance himself from the timing on that question when
pushed, so it could be a while, I guess, is the answer.
HYMAN: We just don't know. But I see Gensler's head in the corner of my eye as well.
CHATTERLEY: Do you think it comes eventually?
HYMAN: We really don't know. We really don't know.
CHATTERLEY: With his fingers crossed.
HYMAN: But look, we have a history of innovation at the firm. We will be -- we are obviously continuously monitoring that maturation and evolution of
the spot market itself, and we are obviously closely attuned to the evolution of the regulatory environment and should there be opportunities
for us to bring other solutions to investors, you'll be sure to hear from us.
CHATTERLEY: There you go. That was a corporate response, and we thank you for it.
Simeon, great to have you with us.
HYMAN: Thank you very much.
CHATTERLEY: Simeon Hyman there, the Head of Investment Strategy at ProShares. Thank you for making time for us today.
HYMAN: Thank you.
CHATTERLEY: All right, coming up, after the break, what on earth is a gorilla doing facing off with the wolf on Bull Street? The whole thing
completely bananas. We'll explain more after the break.
(COMMERCIAL BREAK)
[09:55:06]
CHATTERLEY: Welcome back to FIRST MOVE, and finally here on FIRST MOVE, a new arrival on Wall Street is leaving tourists a little perplexed. This
giant gorilla statue is a marketing stunt by a Spanish social media network pointing out wealth inequality and how Wall Street in their view has quote
"gone bananas."
And in case you're wondering, the food will be distributed to food banks afterwards, so a bull versus a gorilla and lots of bananas. I think there's
a bunch in there somewhere.
That's it for the show. If you've missed any of our interviews today, they will be on my Twitter and Instagram pages shortly. You can search for
@jchatterleyCNN.
In the meantime, stay safe. "CONNECT THE WORLD" with Becky Anderson is up next.
We'll see you tomorrow.
(COMMERCIAL BREAK)
[10:00:00]
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