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First Move with Julia Chatterley
UK Health Expert: No Reliable Omicran Data Before 2022; Bank of England Raises Rates in Surprise Move; Turkish Lira Sinks to Record Lows as Central Bank Cuts Rates; Super Typhoon Rai Slams into the Philippines; U.S. Investors Undeterred by Fed's Aggressive Taper; Fed Could Begin Hiking Rates in the Spring; J.P. Morgan Council: Cyber "The Most Dangerous Weapon"; Crypto Platform FTX Partners with Golden State Warriors; Meme Stock Traders' Favorite Reddit Files for IPO. Aired 9-10a ET
Aired December 16, 2021 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:20]
JULIA CHATTERLEY, CNN ANCHOR: Live from New York, I'm Julia Chatterley. This is "FIRST MOVE." And here's your need to know.
Record rises. COVID surges and borders closed as the world reacts to Omicron.
Price pressures. The bank of England raises interest rates to fight inflation.
And lira losses. Same pressures, different response. Turkey cutting interest rates.
It's Thursday. Let's make a move.
(MUSIC PLAYING)
A warm welcome to "FIRST MOVE" as always.
And it's a hark the herald Central Bankers sing show today. The U.S. Federal Reserve announcing a major policy swing wrapping up government bond
buying by the spring and looking for three rate hikes next year. That's no small thing.
The Bank of England already hiking to dampen the inflationary sting while over in Turkey as mentioned, President Erdogan still says rate cuts are
king.
And yet, for all this news, global stock markets still showing a bullish zing. The S&P set to hit new records at the open undeterred by that Fed
pivot. Most of all, it was widely expected, I think. Plus, the Fed will remain supportive even as it dials back support.
Jerome Powell shrugging off criticism that they should have acted sooner on prices. I think the Fed was happy to sit on its hands and ensure the
recovery it well was well aware of where it was. I think in the cycle and timing.
J.P. Morgan's chief U.S. economist, Michael Feroli, will give his take very shortly. In the meantime, they're hanging around.
Over in the UK, the Bank of England raising rates for the first time since the pandemic, but emphasizing that they remain flexible, something that the
European Central Bank, the Bank of England, and the Federal Reserve all have in common. They remain flexible. Details just ahead.
Different story in Asia though as the Australian Central Bank chief sees no rate hikes at all next year.
China widely expected to announce fresh stimulus too to help boost its growth. Global policymakers, hopeful, but I think humble too in the face of
COVID uncertainties.
No change there. Let's get to the drivers.
The UK's daily COVID cases have hit a record high, driven by the Omicron variant.
France has restricted travel from the country. Health authorities warn they will not have reliable data on the variant until the New Year.
Salma Abdelaziz joins us now.
Record cases, Salma, but give us some context on that as well. So far, I believe, the health secretary saying just 15 people hospitalized.
SALMA ABDELAZIZ, CNN REPORTER: That's right, Julia, and that's because you're going to see a lag between the number of cases rising and that
actually translating into hospitalizations. Over the course of the pandemic, that lag has been about two weeks. And that's why health
officials say now is the time to act. And it already feels like this country is really bracing for impact, bracing for that tidal wave of
Omicron that the prime minister has warned about.
Many of the streets in Central London are empty because people have been recommended to work from home, and everyone -- literally everyone is
reconsidering their Christmas plans.
I mean, even the queen has canceled a pre-Christmas lunch with her loved ones out of abundance of caution.
And that's the concern here is that Omicron is doubling rate, is happening every two days. That's twice as many cases every couple of days. There's
only a finite number of hospital beds in this country as there is in any country. And health officials are going to be watching that number very
closely.
Yes, only 15 people in hospital now, but we know that the number of hospital admissions has risen by 10 percent in the last seven days.
Yesterday, the prime minister and the top chief medical officer rather of this country were on air warning everyone to be very careful. They said,
think twice before you go to the pub. Think twice before you meet with your friends. Think twice before celebrating with someone you don't know.
Now, critics of the prime minister might say, well, then maybe you should close the pubs because we do have restrictions in place, but the country is
absolutely not under any tough restrictions like lockdowns that we're seeing in Western Europe.
So, right now, it's really on every single individual to think about their Christmas plans closely, to be vigilant over the course of the next few
days while the health officials just continue ramping up their warnings. Julia?
CHATTERLEY: Yes. And the French, they've thought twice. They've thought a third time, and they've decided to add more restrictions on those coming
from the UK into France. Talk to us about those restrictions too.
ABDELAZIZ: Yes. This is going to hit hard, and it's kind of the first travel restriction of the season. So, it already starts to make people feel
like, will I be able to make it home this Christmas?
[09:05:06]
I know that thought crossed my mind as well. So, the French government saying today, if you are coming from the UK into France, you must have a
compelling reason unless you're a French resident or a citizen of France. Otherwise, don't come.
If you are a tourist, don't come into France. If you have to come, if you have that compelling reason, you're going to be subject to showing a
negative COVID test rather 24 hours before your departure. You'll be asked to self-isolate for a week once you've arrived in France, but you can be
released early if you have a negative test after 48 hours.
So, really tough, really stringent measures here. And that's because Omicron right now seems to be moving very quickly through the UK, faster
than it is in other European countries, and France looking to really just keep that variant out. Julia?
CHATTERLEY: Yeah. Four times more transmissible. We're going to see the numbers.
Salma Abdelaziz, thank you for that. As heartbreaking as it is to hear.
Rapid resurgence of COVID in Asia. Meanwhile, to China sees another day with new cases in double digits. And in South Korea, the number of
critically ill patients is at a record.
David Culver reports.
(BEGIN VIDEOTAPE)
DAVID CULVER, CNN CORRESPONDENT: Another day of double-digit cases here in China which for many other countries may seem like a successful day, but
in a country where they are still trying to maintain a zero COVID policy, it's a continued struggle. And they do say they have two cases of Omicron
detected in the south, but as of now, the most recent outbreak in Zhejiang province which has double digits continuing to be reported. Well, those
don't seem to be involving any of the Omicron variant. That according to health officials here in China.
One point of concern is coming out of a study from Hong Kong. The University of Hong Kong researchers, there saying that Sinovac which is
widely used here in the Mainland and in many other countries is not going to be very effective against Omicron.
Now they're basing that on the number of antibodies that are generally needed to neutralize this new variant. The study suggesting that there
could be many breakthrough infections, meaning those who have received the vaccine Sinovac could very well still contract Omicron.
Now, going forward, China determined to maintain their very strict contact tracing likewise the mass testing and the targeted lockdowns. Certainly,
going to keep those in place as we expect the Beijing Winter Olympics to get underway in February of next year.
I want to take you to Australia now. It's there where they're seeing a record number of daily confirmed cases in the state of New South Wales. And
it may seem concerning given that this is a record number going back to the start of the pandemic, but health officials there are really focused more
so on the number of hospitalizations. And as of now, while they're still urging folks during this holiday season to try to keep a social distance,
they're saying that the number of hospitalizations is at a manageable number.
South Korea though experiencing another story. They right now are seeing a record number of critical care patients being admitted for COVID-19. The
number is roughly 989, and the real concern is that it hits 1,000 patients in ICU. If they hit that number, health officials there say they could
actually see a trickledown effect for others who seek treatment for other illnesses at several of the hospitals in South Korea.
So, what are they doing to try to counter that? Well, starting this weekend, they're going to implement social distancing measures. For
example, in Seoul, they're going to reduce the number of people allowed for social gatherings from six down to four. All of this going to continue
through Christmas and the New Year. All part of an effort to stop the rising numbers.
David Culver, CNN, Shanghai.
(END VIDEOTAPE)
CHATTERLEY: Global policymakers juggling the impact of the pandemic on the one hand, surging prices on the other. Well, for the Bank of England, it's
raised its main interest rates to tackle inflation. It was a surprise to those expecting rates to be frozen which is exactly what happened.
Meanwhile, at the European Central Bank, Anna Stewart has been watching all of them from London for us.
Let's start in the UK. Uncomfortable time to be raising rates when the headlines of course are fixed on rising prices, the impact of COVID as we
were just hearing from Salma there. But the Bank of England saying rates are incredibly low. And we're going to raise them.
ANNA STEWART, CNN REPORTER: And they have, but moderately. You know 15 basis points.
CHATTERLEY: Yes.
STEWART: And it shouldn't really come as a surprise if we take out the spread of Omicron. You look at inflation, a 10-year high in November coming
at 5.1 percent.
In the minutes from the bank today, they're saying they expect that to potentially reach 6 percent next April. That is triple its target.
And of course, Omicron actually could exacerbate some of the inflationary pressures we see supply sites certainly going forward.
Plus, the data on jobs, we have had some really strong data looking at the jobs market. That is data that the Bank of England said they were going to
hinge this decision on.
[09:10:00]
So, why this come as such a surprise? Well, that is the spread of Omicron which is so rapid. As Salma was there, the highest number of daily cases
since the pandemic began. And that does have a very real risk for the economic outlook for the UK.
Now, there's no lockdown imposed. People are being told to work from home if they can, but anecdotally coming to London today into the office, London
looks pretty empty right now.
Of course, the issue had they frozen rates as was expected largely by the markets would be how do you then respond to further shocks down the line,
and my gloomy thought of the day is that things can always get worse.
The IMF had warned the Bank of England early this week that they shouldn't - they shouldn't have an action bias. I think the bank heard that. I think
they agreed with it. It wasn't even a tight call. Eight to one. Julia?
CHATTERLEY: Yeah. I think investors were expecting it last time didn't get it. So, then they thought, OK, well then maybe we're not going to get it
this time. And then the Bank of England surprised them. So, I think to your point, it was 0.15 percent just to translate to people out there may not
understand basis points. It's an incredibly small move, and you're right, fire power just because it's an uncomfortable decision doesn't mean it's
the wrong one. What about for the European Central Bank, Anna, same challenges?
STEWART: Same challenges, slightly more dovish response, and absolutely no surprise here whatsoever.
Christine Lagarde speaking in a press conference talking a lot about flexibility. They are wrapping up the pandemic asset purchase plans. Sorry,
that is a pep as we know it.
In March, as planned, the concurrent asset purchase program which runs alongside it, which is older. That would be setup ever so slightly to sort
of bridge that transition. No rate hike, an unexpected even next year. So, we're looking more at 2023 there.
Christine Lagarde has spoken before about how the bank raised rates too early after the financial crisis. They are not going to make that mistake
again.
Super Thursday of course. So, lots of action across the board.
We had Norway and Sweden. Norway raised rates. Sweden didn't. Different strategies to balance the same -- very different, very serious inflationary
risk but threat from Omicron. So, a very delicate balance we're seeing here and different strategies to combat that. Julia?
CHATTERLEY: Yeah. And for many of them as well, they've tied it to jobs and the recovery and much stimulus that has already been provided. So, I think
we have to - we have to emphasize here, one, and you've already done it. The flexibility that all of these Central Banks are saying they still
remain flexible. If things change, but also that lot of work has been done to support economies and we can take a little bit back. Would you agree?
STEWART: Absolutely. I think unwinding particularly the asset purchases is critical. You have to be able to act. Things can always get worse. Julia?
CHATTERLEY: Yes. Ugh. Yuck. Yes.
STEWART: Sorry.
CHATTERLEY: That's OK. Anna Stewart, thank you for that.
Turbulent Turkey, meanwhile, the lira sinking to new record lows after the country's Central Bank cut interest rates for the fourth month in a row.
Now to 14 percent. The lira has lost about half of its value against the U.S. dollar this year.
Jomana Karadsheh joins us now with more.
Great to have you with us on the show.
Talk to me about Turkey because when we're comparing interest rates with the likes of the United Kingdom, the European Central Bank, the United
States, Turkish rates are far, far, far, far higher, but when you face the price pressures, the credibility challenges that Turkey does, cutting rates
doesn't feel like the right answer.
JOMANA KARADSHEH, CNN CORRESPONDENT: Well, not according to the Turkish president, Julia, who believes that the way forward is to continue to cut
interest rates. I mean, this decision today by the Central Bank was absolutely no surprise. And we saw markets already reacting to this before
the decision was announced.
The lira hitting a new low, record low of more than 15 lira to the U.S. dollar. I have really lost count as most people here have of the record
lows the lira has hit over the past few weeks. I mean, in November alone, it lost 30 percent of its value.
And Julia, experts here, economists would tell you that this all boils down to President Erdogan's unorthodox monetary policies. You know to fight
inflation, most countries as you know very well, would raise interest rates. In Turkey it is the opposite.
President Erdogan has always been a strong (ph) opponent of interest rates. He describes them as an evil that makes the rich richer and the poor
poorer. And he has made it clear that the path forward for this country is to continue cutting interest rates as we are seeing right now.
He believes that this is going to turn the economy around. He believes that this is going to create more jobs, more growth, create more Turkish
exports, bring in tourism, and he's promising that this economic plan that he has is going to deliver results in the next six months or so. And so
many experts are questioning this as we are now watching inflation rate more than 20 percent.
I mean it is an absolutely devastating situation, Julia. We've spent time out in the markets here talking to people.
[09:15:02]
And the majority of people would tell you that they feel they're getting poorer on a daily basis. They're watching their life savings. Their incomes
lose value pretty much on a daily basis. They are really struggling to make ends meet, you know or try, and you know people are really trying to cut
down their expenditure. It has gotten so painful that people are unable to buy the most basics. You're seeing bread queues in Istanbul for example,
subsidized bread. Those queues are growing.
It is a very, very painful situation, but the Turkish president is adamant that this is a struggle for what he calls economic independence for the
country, and that is going to deliver results.
In the past couple of hours, we heard President Erdogan announcing that they are raising the minimum wage by nearly 50 percent by -- in early 2022.
That would probably, you know, provide some relief for people who have been really struggling right now, but the question is, for how long when you are
watching these -- this rising inflation rate?
CHATTERLEY: Yes. One could argue that this moment in time, your policymakers particularly your Central Bank need to be absolutely
independent. Incredible. It's not what we're seeing, unfortunately.
Jomana, great to have you with us. Thank you.
Jomana Karadsheh there.
OK. Let me bring you up to speed with some of the other stories making headlines around the world. A super typhoon Rai has slammed into the
Southeastern coast of the Philippines with winds of 260 kilometers per hour. It's bringing torrential rain, it threatens to cause widespread
flooding, landslides and storm surges. Authorities have evacuated nearly 200,000 people and taken them to government shelters.
CNN's Vedika Sud is following developments from New Dehli and joins us now.
Vedika, what more can you tell us? What's the latest?
VEDIKA SUD, CNN REPORTER: Well, super typhoon Rai smashed into the eastern coast of the Philippines earlier today, Julia. And what's happened is that
we have got to know that the landfall was made in a holiday island called Siargao. And we have reports coming in of power outages there.
But here's what's interesting. In the leadup to that landfall, Julia, this cyclone upgraded from a typhoon to a super typhoon which was - which is
equivalent to a Category 5 hurricane in the Atlantic. So, it was quite potent and powerful, but the extent of devastation, any casualties is yet
to be reported.
I think we'll know more by tomorrow morning, because it's already past 10:00 local time in Philippines currently. But what we do know is that
preemptive steps were taken earlier this week. Evacuations started, there were storm measures also in place like you mentioned.
About 200,000 people were evacuated. 90 flights were canceled this morning, and according to officials, the Coast Guards had banned sea travel because
of which almost 4,000 passengers are stranded at seaports at various points.
What's also interesting is that there is no off season in this region of the West Pacific Tropical area. There are hurricanes that take place all
the time through the year. In fact, this is the 15th typhoon that's taken place this year. Along with COVID and other issues they have had to face,
typhoons through this entire year.
Now the biggest concern will of course, be in the coming hours when there's daylight again in the coastal areas. The question will be, will there be
landslides? Will there be flash floods? And that is going to be the main concern along with the worry of casualties in the area. Julia?
CHATTERLEY: Of course, and we'll continue to watch it. Vedika, thank you for that.
Vedika Sud there.
OK. Still to come here on "FIRST MOVE."
Security slipup. Packers rush to exploit a software flaw that could impact the whole Internet.
And Reddit seeks more sweet bets. The platform behind all the stock mayhem this year, files to go public.
(COMMERCIAL BREAK)
[09:20:00]
CHATTERLEY: Welcome back to "FIRST MOVE."
And the bullish are certainly not idling on the shelf on Wall Street. U.S. stocks set to rise in early action of the Wednesday's strong Fed driven
advance which there were more than 2 percent jump for the tech sector with the Nasdaq now in positive territory for the month. And forget about the
three kings this Christmas too. Investors focused on the three rate hikes the Fed sees next year.
Powell and crew set to wrap up their emergency bond buying in a few months, also with little tightening. bringing some frankincense to inflation or
will Chair Jay Powell have to be more aggressive. He says what the Fed is doing is appropriate for now.
(BEGIN VIDEO CLIP)
JEROME POWELL, CHAIR, U.S. FEDERAL RESERVE: I believe that inflation may be more persistent and that may be putting inflation expectations under
pressure, and that the risk of higher inflation becoming entrenched has increased.
That's part of the reason behind our move today s to put ourselves in a position to be able to deal with that risk.
(END VIDEOTAPE)
CHATTERLEY: Powell also saying nothing about when the Federal Reserve might begin to shrink its balance sheet and begin selling the assets on his
books.
This time for that. Michael Feroli joins us now. He's the chief U.S. economist at J.P. Morgan.
Great to have you on the show as always.
Powell's pivot, pretty much what you were expecting, I think, yesterday? You called it.
MICHAEL FEROLI, CHIEF U.S. ECONOMIST J.P. MORGAN: Yeah, that's right. I mean, this was a pretty well-telegraphed meeting for about two or three
weeks ahead of time. Most notably of course, speeding up the pace of tapering which puts themselves in position to hike perhaps as early as
March.
Now that would be a pretty rushed pace particularly given that they're signaling three hikes for next year. So probably the first, you know, I
think they intend the liftoff to be more toward the middle of the year, but again, much of this was telegraphed by that pivot that happened later in
November.
CHATTERLEY: And for all dedicated to pricing pressures, he did emphasize it was the underlying economy, the jobs outlook, the strength, in fact, of the
jobs market that allowed him to do that. And I do think this is an important point to make.
FEROLI: That's right. You know, he was pretty clear about what caused them to change their mind, and most of the factors he listed related to the
labor market. And the labor market, you know, has really been quite impressive in terms of how fast the unemployment rate has declined, how
much wage growth has picked up. And I think also he -- he kind of casts some hesitation on the idea that labor force participation was going to
pick up notably in coming months which would relieve pressures -- wage pressures.
So that did seem to be, you know, they have been seeing high inflation readings really since March of this year. They have been pretty calm
throughout that, but I think what they saw over the last, you know, six weeks was really how fast the labor market was tightening, and that seemed
to be pretty decisive in this latest change and their attitude toward the economy.
CHATTERLEY: And it's been a great deal of debate over whether or not they're what we call behind the curb late to reacting in terms of
tightening policy. And you know I would argue at this point and you can tell me if I'm wrong, that they are, and they know it. That's what they
wanted. They wanted to ensure that the recovery was in place before they moved.
The question is now, how does the economy respond? What are some of the challenges that they face including COVID and the uncertainties? But
they're certainly comfortable I think with where they are today. Would you agree? Whether or not people think they're behind the curve. Yeah.
[09:25:00]
FEROLI: Yeah. I do agree with that. And I think you make a good point which is that they intended to be behind the curve.
CHATTERLEY: Right.
FEROLI: Now, I think what's notable is that being behind the curve, they don't feel too concerned or rushed about getting back up to the curve.
So, you only have -- even the most hawkish participants only anticipate for rate hikes next year whereas, you know, you have people out, you know, out
there in the market talking about 50 bases point rate hikes and going every meeting. You know even the hawks don't -- aren't that worried about this
development, or the developments that we've seen on inflation on labor markets.
So, you know, we can debate whether they are behind the curve. But in their own minds, they really don't seem all that worried about where they are, at
least given their projections.
CHATTERLEY: What are you forecasting for next year? Because certainly, the message from the White House and they're desperately trying to control
this, is look we've seen the worst now as far as price pressures are concerned. And we're simply not going to be having this level of debate and
conversation about price rises six months down the line.
Even if we are, do you think there's some payback coming? We've seen prices accelerate faster than wages in 2021.
FEROLI: Mm-hmm.
CHATTERLEY: Do we see perhaps the flip side of that in 2022 which will be positive for people's incomes?
FEROLI: I do.
CHATTERLEY: At the very least.
FEROLI: Right. So, wage growth as I mentioned earlier has picked up and that tends to be pretty persistent phenomena. So, I would expect wage
growth to remain strong next year whereas a lot of the price increases we've seen this year have been in volatile categories like vehicle prices
which we think as some of these bottlenecks ease up, should cause inflation in those categories to come down.
You know, we don't expect inflation to come down to what it was in the 2010s when it was persistently below 2 percent. We do think the type of
increases we saw earlier this year are behind us. So that should be good news for workers if wages as you said, in the reverse of this year, wages
should be growing faster than prices, we believe next year.
CHATTERLEY: Actually, we're all pretty positive into 2022. The wild card remains what we see as far as COVID is concerned, and the pickup in COVID
cases and whether or not it impacts the economy, and to what extent. What's your view? What are you forecasting, Michael?
FEROLI: So, we -
CHATTERLEY: I know it's a tough one.
FEROLI: Yeah. It is a tough one. We have been forecasting a slow slowdown in growth. In the fourth quarter, it looks like we're growing around -
something around 7 percent annualized.
CHATTERLEY: Wow.
FEROLI: And we do expect a pretty notable slowdown going into the fourth quarter of -- I'm sorry, going into the first quarter of next year of 2.5
percent annualized.
So, pretty big step down, but it's still pretty decent growth. And a lot of that just given the seasonality of the virus which obviously occurred last
year. And we are starting to see the signs again. That's occurring this year.
However, we would expect if, you know, if last year is a template, that growth would pick up as we go into the spring months. So, I do think we,
you know, we're in for probably a patch here of a few months where this toward pace of growth we've seen for much of this year actually slows down
a little bit, but I wouldn't project that into the remainder of 2022.
CHATTERLEY: Yeah, and much of the seasonality effect that we saw between this year and the past year is altered by the fact that far more people are
vaccinated this year even if it's not enough.
FEROLI: Yeah.
CHATTERLEY: Yeah.
Michael, great to chat to you. Have a great Christmas season, holiday season. Thank you.
Michael Feroli, the chief U.S. economist at J.P. Morgan.
Stay with us. We're back after this.
(COMMERCIAL BREAK)
[09:31:40]
CHATTERLEY: Welcome back to "FIRST MOVE."
U.S. stocks are up and running this Thursday. A pivoting pile, no cause for investors to scowl. Lots of green on the screen with the S&P 500 close to
fresh records in early price action.
U.S. investors in particular undeterred it seems by the Federal Reserve's tightening announcement on Wednesday. The U.S. Central Bank will end its
emergency bond-buying program by this spring allowing it to raise rates immediately after.
Three rate hikes for now penciled in for next year with four more on tap in 2023. Fed Chair Jay Powell says the U.S. economy is strong enough to
withstand a reduction in support, emphasizing the dramatic improvement in the employment picture, as we were just discussing. COVID, of course, could
also change the Fed's trajectory.
Apple announcing it will delay plans for employees to return to work indefinitely. Due to uncertainty over the new variant, it hoped to begin
welcoming employees back in February. Apple also giving workers $1,000 to spend on home office equipment on to which massive global tech firm might
benefit from all of that.
In the meantime, it's the most "dangerous weapon in the world," politically, economically and militarily, quote. The grim warning comes
from a former U.S. Defense secretary, Bob Gates. In the report from the J.P. Morgan International Council. It comes just as we learn that millions
of devices could be exposed to a critical security flaw.
Matt Egan with more on this exclusive report.
Matt, great to have you with us.
I think and I hope this isn't the most underappreciated and underreported of the year, but I'm glad there is a council out there that is well and
truly raising the alarm on this. What more does the report say?
MATT EGAN, CNN REPORTER: Yeah, Julia. Well, you know, business leaders and former policymakers, they are clearly ringing the alarm here on cyber.
CHATTERLEY: Right.
EGAN: This J.P. Morgan International Council issuing this report obtained by CNN that really urges a business and the government to team up here and
really address what they see as a very serious threat to not only the economy, but to national security. And this council includes J.P. Morgan's
CEO Jamie Dimon, Johnson & Johnson CEO, Alex Gorsky, and also former U.S. Secretary of State Condi Rice.
And let me read you a key line this from Bob Gates who is the vice chairman of this council. And he said, "The public and private sectors must work
together to fortify our business and government activities against this threat and adequately educate the American people about how dangerous this
weapon is."
And look at the last year or so. I mean this has really been a wakeup call for all of us about the cyberthreat. We had the colonial pipeline hack, the
JBS hack on the meat producer. There was the solar winds infiltration.
And so, that's why as you can see there, they're putting out these series of recommendations. They want there to be better collaboration between the
public and private sectors, ramping up the hiring of cybersecurity experts particularly in government, enhancing intelligence sharing among like-
minded nations and also defining and enforcing the norms of cyber behavior.
Julia, you know there are so many urgent issues right now. We've got our climate crisis, the supply chain mess, historic inflation. There's a lot on
the plate of government and business.
[09:35:01]
Hopefully they make some time and put some energy aside for cyber because it's a big deal.
CHATTERLEY: It's a huge deal. I couldn't agree more. And it's funny we had Ian Bremmer from GZERO on the show a couple of weeks ago and he was saying
actually it's fascinating to see some of the big tech companies stepping to role that government should be playing. Particularly in areas like this
SolarWinds case was a huge example. And Microsoft step up and said, look, we've got a huge problem here. Step forward Microsoft once again, again
pointing out that we've got a problem with a potential security flaw, and the risk of hacking. What is Log4j, and how may it be exploited, Matt? Can
you tell us more about this?
EGAN: Yeah. Well, Julia, you know hundreds of millions of devices around the world could be at risk from this software vulnerability. Microsoft is
warning that hackers from China, Iran, North Korea, and interestingly, Turkey as well. They've moved to exploit this critical flaw in software.
Microsoft said the Iranian hacking group has a history of using ransomware. And we know ransomware was used during the colonial pipeline hack, and it
had a really, you know, major impact on everyday American people. So, we don't want to see any more of that ransomware. And a top Biden cyber
official warned this week that this vulnerability is, quote, "one of the most serious flaws" that she's seen in her entire career.
Now the pressure is on tech firms to try to clean up their software code here, and on businesses to make sure that they haven't been hacked. Julia,
you know, unfortunately we can expect to see more of these types of cyber events in 2022.
CHATTERLEY: Yeah. The council, we need an identifier and response team in addition to what we're seeing in terms of the discussion.
Matt Egan, great to have you with us. Thank you for that.
EGAN: Thank you.
CHATTERLEY: Now after the break, crypto and sport go hand in hand. The CEO of FTX talks sponsorship deals, that $25 billion valuation and much, much
more. Stay with us.
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CHATTERLEY: Welcome back to "FIRST MOVE."
Crypto and sport make great bets it seems, as big names clamor to sign sponsorship deals. The cryptocurrency exchange FTX is the latest with a $10
million tie with the NBA's Golden State Warriors. It includes every player listing NFTs, yes, those nonfungible tokens on their website.
[09:40:00]
Two stakeholders of FTX are NFL quarterback Tom Brady and his wife, Giselle Bundchen. They even star in their TV commercials. They're calling it a
platform built by traders for traders.
At the helm is a billionaire who's not yet 30 years old. Sam Bankman-Fried is the CEO and joins us now.
Sam, great to have you with us. For my viewers who may not be familiar with what FTX is, just talk to me about what you offer, what differentiates you,
and then we can talk about some of those sponsorship deals.
SAM BANKMAN-FRIED, CEO, FTX: Totally. You know we are a global cryptocurrency platform. We offer, you know, markets in standard assets. We
have a pretty wide range of products from, you know, sport prods, features, NFTs and other things. And, you know, we have really been product for --
we've come from behind in terms of user base in one of the major exchanges to start off and have been you know gaining traction over the last few
years.
CHATTERLEY: For traders by traders. So, do people have to have experience of cryptocurrencies or at least decent understanding of cryptocurrencies in
derivative products to join your platform?
BANKMAN-FRIED: You don't have to. And, you know, over time we have been putting more and more emphasis on the less intense parts of it. As we build
out a much friendlier retail interface. I think the first iteration of it you know when we launched a few years ago was very much tailored towards
the most sophisticated traders. We now have products that expand the spectrum.
CHATTERLEY: It sort of looks Bloombergy from what I'm looking at on the screen.
BANKMAN-FRIED: Yeah. I think that's about right.
CHATTERLEY: Am I allowed to say that?
(LAUGHTER)
Yeah. OK.
So, I've read, and you've made some comments saying look, at times, you're up to 85 percent lower in terms of fees than your competitors and yet
you're profitable. How is that even possible? Are the margins on this so large?
BANKMAN-FRIED: They are pretty healthy margins in the business. You know one of the nice things is that it's a -- it's a pretty low expense business
if you think about it. It's all online, and it's also direct-to-consumer which means that unlike the typical equities market structure where you
might go through 20 different country -- companies from start to finish, all the intermediaries, all the brokerages, the clearing firms, the PIFA
firms. In crypto, it's totally disintermediated. The only players are the buyer and seller and the exchange. And that can create a much more
efficient model for everyone.
CHATTERLEY: It also means that when you see those kinds of lucrative numbers, and I think my viewers again will be familiar with coin base,
simply because the IPO this year. It attracts others to come into the space and genuinely very quickly and everyone competes for those kinds of margins
and it drives them down. Is that one of the big risk that you just can't sustain the kind of money that you're making today?
BANKMAN-FRIED: You know, I think that when you look at the kind of heavy retail side where some people have been charging really large fees, I do
expect to see if there a bit of impression there. But I think that when you look at, you know, the space we have been most active in which is a much
more competitive piece of this, I think you're going to see less.
And you know we've already taken our fees to be much lower than what the industry standard is, and, you know, in anticipation of few of the
impression that I do expect to see as you said in the industry overall. So, I think we might see it for a lot of players. I don't expect that we're
going to necessarily see it.
CHATTERLEY: Yeah. So, you're basically sort of buying market share anyway with those fees and if these guys suffer because they're charging too much,
then it's going to hurt them a lot more than it does you at least in the interim.
We are sharing on this -
BANKMAN-FRIED: (INAUDIBLE)
CHATTERLEY: Go on.
BANKMAN-FRIED: Oh, you know that's -- it gives the best experience to the user and hopefully other things will work themselves out.
CHATTERLEY: Yeah. We were just showing a lot of NFTs on the screen as well. Talk to me about what you provide in this regard. Oh, and we'll talk about
sponsorship deals because now I'm showing that too. We're teasing our audience.
BANKMAN-FRIED: Yeah. So, you know, we have a fully-fledged NFT platform. On FTX, it's cross-chain between Ehereum and Solana. Basically, it's a
platform where you can do everything you want to in NFTs from minting them, trading them, auctioning them, depositing, and withdrawing.
And it's also a platform that can act as the back end for other people. Whether they're video games, you know, whether you're looking at music or
anything else that wants to integrate NFT technology.
CHATTERLEY: So, we had the electronic DJ Steve Aoki on the show last week. And we've had all the guests say these tours that they believe that
somewhere between 98 and 99 percent of all the NFTs that are being minted and sold in the secondary market or the primary market at this stage are
going to be worthless very quickly.
Sam, what do you - what do you make of that? Do you have a view on this? Now you are investor in all of the things that you're providing in terms of
access to for customers.
[09:45:02]
BANKMAN-FRIED: So, I think that the NFT space as a whole is extremely exciting and I expect to see growth in it over time, you know, over the
next few years. That doesn't mean that every individual NFT will grow. And, you know, I would not be surprised to see a lot of the current ones, you
know, fail to grow in the way that that may be the space overall would. Because I think that we're really in the early beginnings here, and I think
that a lot of the NFTs that we see just there isn't that much behind them.
They aren't you know all that cool. I think some of them are, but many of them aren't. And yeah, I don't know that that all of them you see today
will necessarily you know hold their price, but that doesn't mean that the best of them won't. That doesn't mean that the future isn't super cool for
them.
CHATTERLEY: Yeah. I just -- I was just going to ask you whether you're selective about what you provide access to on the platform. Only because
we've seen with new exchanges that open up, and the volatility that we've seen in crypto at times, sometimes it can be a challenge later on when
people say, hey, we bought this, and you're signed. And we shouldn't have done, and you didn't warn us, and I can just envision in the future
particularly as we start to see more and more regulation, challenges in this space like any other asset class.
BANKMAN-FRIED: Absolutely. And you know, we are very careful about generally what we list on the platform.
CHATTERLEY: Right.
BANKMAN-FRIED: You know we - I -- on the NFT side, we do give a portal for users to list their own NFTs. And so, you know, we let people do what they
want with the platform, and communicate what they want with it, but certainly on the token side, you know, we have a rigorous listing process
that we go through. That being said, you know, most things in the crypto ecosystem are volatile, and, you know, whatever vetting we have for them,
you know, users should be aware that these are volatile assets. And you know you should not be investing money that you're not comfortable losing
in them.
CHATTERLEY: Yeah, they come with health warnings at times too or stress warnings like any other asset.
BANKMAN-FRIED: Yep.
CHATTERLEY: Now Eagle IPO will notice that you're coming from the Bahamas there as well, and I know you set up in Hong Kong, and then you decided to
move. I mean there are plenty of crypto-friendly areas in Asia or in Southeast Asia. Why did you leave Hong Kong? And why did you move to the
Bahamas? And it sorts of ties to the border question of what does good regulation look like in this space? Because I know you're a proponent of
regulation. Why move, and what does good regulation look like?
BANKMAN-FRIED: Totally. So, you know, I think that there is really large potential for the crypto ecosystem. I think in order to get there, you're
going to have to see some regulatory changes. And I do think that we will see them. And I think some of this frankly is - is in getting more
oversight than we have today of some parts of the ecosystem. I think that there isn't enough.
And I think that other parts of this are finding ways to get, you know, clarity to everyone involved. I think that, you know, one thing that I
would love to see is oversight of stable points. I think they're really exciting and awesome pieces of technology. But I also think that it's in a
position where there isn't oversight for most of them from many regulators to confirm that they're back the way they say they are.
And I think that's like one example of a place where it would be really natural, and I think helpful for the space for there to be a regime built
out. There are not very many countries today frankly that have done this.
You know you look at the number of countries that have built a comprehensive regulatory regime for crypto. Small single digits. And, you
know, you had a prior regime where many countries were not regulating it at all. That is by and large gone now. And, you know, country after country is
starting to regulate them.
But it's going to be a long time before there's really kind of built-up regimes for them, and it's in a messy in between period in most
jurisdictions right now. Bahamas is one of the few places that has passed comprehensive crypto regulation program, but I expect a lot more to follow
suit over the next few months.
CHATTERLEY: Sam, you don't speak like you're under 30, but you are. And I mentioned in the introduction the rising wealth and what you have built
here. It means that at least on paper, you can explain otherwise, if not you are a billionaire which is for most people just an unimaginable amount
of money and speed of wealth creation. And I'm sure it's been incredibly hard work and still will be.
How do you feel about that kind of wealth, creation? And how do you feel about the current debate in the United States in this moment about a wealth
tax, a billionaire tax? In favor or not in favor?
BANKMAN-FRIED: So, you know, the first thing that I'll say is I think that, you know, I think for everyone, but especially somebody who is fortunate to
be in a position that I am. You know it's incumbent upon us to give back.
[09:50:00]
And it's incumbent upon us to give back not just for own sake and not just for our own legacy or reputation. It's important to give back to help the
world and to prioritize the output of that.
You know I plan to donate almost everything that I make over the course of my life to you know causes that can help the long-term (INAUDIBLE) of the
world the most. And you know have been giving to everything from you know global poverty, normal welfare, you know pandemic preparedness, global
warming related charities.
So, that's the first piece and I think the most important. And that doesn't just mean that, you know, it doesn't just mean any donations. I think
there's a big difference between some which are mostly consumption, you know, naming buildings after yourself versus, you know, versus really
focusing on what it is that would really help the people that need it the most.
You know on the tax side, I'm not an expert there. I think that it would be totally reasonable to reform parts of the tax code and try to collect more
tax from people like me. I think that there are holes that could be patched. And I think I would be generally supportive of looking into that.
I think that you know like some versions of this would make more sense than others and I think that you need to watch out for are some versions that
have been proposed where the taxes levied could actually be more than the amount of money that people have to pay them.
CHATTERLEY: Yes.
BANKMAN-FRIED: I think that's a problem that you run into with you know some things like unrealized schemes, tax where you just haven't realized
against there needs to be a tax bill yet. So, I think there's a lot of complicated implementation details there, but generally totally supportive
of, you know, making sure that the best of pay their fair share and maybe more.
CHATTERLEY: Sam, a pleasure to chat to you. Thank you so much, and we'll speak again soon.
BANKMAN-FRIED: Thank you.
CHATTERLEY: Sam Bankman-Fried there, the CEO of FTX. Take care. Thank you.
We're back after this. Stay with us.
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CHATTERLEY: Welcome back to "FIRST MOVE."
A Wall Street test for Wall Street bets. Reddit has filed to go public. The social media platform hosts the infamous sub reddit that drove the meme
stock frenzy earlier this year.
Paul La Monica joins me now.
The meme mothership monetizers. That's what this is.
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes.
CHATTERLEY: For people that are completely bewildered by what we're talking about. Explain. Because we don't actually have much knowledge now - right
now about the IPO.
LA MONICA: Yeah.
CHATTERLEY: We need to understand what is best due.
LA MONICA: No, we don't.
So, they actually haven't really given too much detail about what the ticker symbol will be. Will it be Redt perhaps? Will it be WSB? That could
be a fun joke. Ape perhaps is the Wall Street bets fans love to be heard themselves as.
Reddit is a social media platform where you have a lot of people posting, you know, content, you know, and it's a very bare bones social media site
that has really just exploded in popularity because of all of these subreddits, these very specialized boards of interest. And Wall Street bets
has become incredibly popular because of the meme stock revolution.
[09:55:14]
So, will reddit when it goes public actually do well? Advertising revenue is surging. It was in the second quarter the company said up nearly 200
percent to $100 million from a year ago. So, that's obviously very strong growth, but is Reddit profitable? Will Reddit actually be able to have any
sustained momentum in a world where clearly, you've got the likes of Facebook and Snapchat and Twitter, you know, and TikTok as, you know, major
social media companies all fighting for ad dollars and users?
CHATTERLEY: Some of the Wall Street bets users are really funny though. I mean we've got one here that I can show you, and obviously bits of this are
blacked out, but wait. If WSB, Wall Street bets goes full, and we all pump the - out of the Reddit stock. Then we profit off of them profiting off us
profiting.
Says it all, Paul. We've got 10 seconds.
LA MONICA: It's interesting how the WSB crowd will happily take what they can get even if they have to bash Reddit.
CHATTERLEY: Yes.
LA MONICA: You know, I mean there's going to be a lot of people that will be shorting Reddit using Reddit posts to talk how they hate Reddit.
CHATTERLEY: Bingo. Deep bingo.
Paul La Monica, thank you.
That's it for the show. Stay safe.
"Connect the World" is up next. And I'll see you very soon.
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