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First Move with Julia Chatterley
U.S. Futures, European Stocks Fall after Tuesday's rally; Biden set to Propose Federal Gas Tax Holiday Later Today; MicroStrategy's Bitcoin Bet; WTO agrees Process to Reform itself; Bitcoin has fallen more than 50 percent Year-to-Date; Saylor: We're here for the Long Term, Bitcoin will Outlast us. Aired 9-10a ET
Aired June 22, 2022 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:00]
(COMMERCIAL BREAK)
JULIA CHATTERLEY, CNNI HOST: Hello and welcome! I'm Julia Chatterley in New York. It's a warm welcome to "First Move" this Wednesday great to have you
with us as always.
Investors enjoy the sunny market move Tuesday, the first day of summer the second day well, not such an up and comer. Take a look at this rapidly
moving from sunshine to storm clouds on Wall Street Futures pointing to losses of around 1.5 percent, if not more, it's just volatile.
Europe has an inclement bent as well. I'll give you a look at that all this after the best gains for U.S. stocks in almost a month yesterday, with
energy firms providing much of the stock market fuel today the oil patch also not at scratch.
Brent and U.S. Crude tumbling some 5 percent plus right now investors - once again I think that global rate hikes was slow economies and weakened
demand Citigroup saying the chance of a global recession is now close to 50 that's 50 percent. Then you can throw in new UK consumer inflation numbers
prices rose at a steamy 9.1 percent year-on-year in May. That's well above levels seen in the United States.
Discouraging data, I think for all inflation fighting central bankers. But don't expect Fed Chair Jay Powell to throw in the tightening towel today as
he begins two day testimony before Congress. And you can add to that we'll hear from President Biden today on his proposed gas tax holiday.
It might ease the burden on consumers for a short while but risks making the Fed's job harder if it ends up raising fuel demand. Lots of discuss
Rahel Solomon joins us now. Rahel, let's talk about Powell, because he's got a very fine line, I think to walk today he's got to hold the line on
being tough on inflation, but he doesn't want to spook on higher risks of recession, difficult balance.
RAHEL SOLOMON, CNN CORRESPONDENT: It's a very delicate balance for Federal Reserve Chairman Jay Powell yes. And it could be a cool summer for
consumers, Julia, if prices certainly at the pump and really across the board don't start to ease.
Inflation is going to be the topic of discussion today, when Chairman Powell will speak before the Senate Banking Committee, we expect him to be
grilled on not just inflation one how we got here, but also how do we get out of this mess.
But two the probability of avoiding a recession, the probability of pulling off a soft landing, some say, arguably, it's only happened one time in
1994, as you pointed out Citi now putting its probability at about 50 percent of hitting a recession.
And also the decision from the FOMC and the Federal Reserve last week to raise interest rates by three quarters of a percent that was the highest
hike and a single meeting since 1994. So lots to discuss when the Chairman speaks before the Senate Banking Committee in about 30 minutes, and also
lots of blame to go around Julia, as you know, some have pointed the finger at the White House.
Others like Economist Mohamed El-Erian, who I know you speak to quite a bit and spoke to yesterday on the show have pointed the finger squarely at the
Fed, it's going to be an interesting meeting in about 30 minutes.
CHATTERLEY: And - did a lot of spending in the run up to this too, and to your exact point. I think it's why we're going to get the President out
today President Biden talking about the possibility of a proposed three month moratorium on a fuel levy that there is in the United States.
The problem is Rahel you can tell me perhaps more easily than I can guess the probability of Congress even passing this even debating this because
I'm struggling to find anyone who's in favor other than the President.
SOLOMON: It's a great point. In fact, I just got off the phone with an oil industry consultant who said, when I asked about this, does this even get
through Congress? He said at this point in this high inflationary environment that we're in; he actually said that he can't see Congress not
passing this sort of measure.
So let's go through what it looks like. So it would be an 18.4 cent a gallon suspension for gasoline and about 24 cents for diesel for three
months. As you pointed out, the President also expected to encourage states to do the same. But yes, the Congressional challenges are stiff.
I mean, folks within the President's own party have criticized this. President Barack Obama in the past has called it a gimmick. Nancy Pelosi
has said it showbiz. Larry Summers, also saying that it's not a good idea.
And of course, the concern is that it doesn't really get to the root of the problem in oil prices, right? There is much more demand than there is
supply. But it does, however, allow the White House to say, look, we did something. We tried to do something they can point the finger at Congress
if they don't pass it.
But it also buys them some time Julia to maybe get at the root cause perhaps get some more oil supply on the market. So it gives them sort of a
breather, but there are lots of criticisms about this idea, but it is certainly a tough time for the White House. And they are in search of
solutions. We'll see if this is one of them.
CHATTERLEY: Yes, PL 100 percent probability zero.
SOLOMON: I said it.
CHATTERLEY: We'll see. Rahel Solomon thank you for that! OK, UK inflation hits 9.1 percent in May. That's the highest in 40 years and the highest in
the G7 at this moment the government says. It has tools to tackle soaring prices.
[09:05:00]
(BEGIN VIDEO CLIP)
RISHI SUNAK, BRITISH CHANCELLOR OF THE EXCHEQUER: Forecasters will make their predictions, you know, but I am confident that we're providing the
right support to the economy at this time to help people ease through some of the challenges they're facing with a rising cost of living and rebuild a
stronger economy for the long term.
(END VIDEO CLIP)
CHATTERLEY: Clare Sebastian joins us now. There's a follow through in that previous conversation, of course, because the U.K. Government have gone for
a windfall tax on some of these energy companies. But when you look at this inflation print, it is eye watering. And it's not the peak Clare, they're
predicting higher later on this year.
CLARE SEBASTIAN, CNN CORRESPONDENT: Yes, this is the highest that we've seen in 40 years already, Julia and the Bank of England expects that it
will stay above 9 percent throughout the summer and could peak at 11 percent in October, Julia.
The central piece of that forecast is energy costs. This latest inflation reports show that motor fuel, for example, rose almost 33 percent in the
last 12 months that was the highest in its instance record keeping of that data began. So that is not just affecting consumers. That is an input cost
of businesses.
We're here at this East London market. It's actually the end of lunch break. But there certainly were quite big crowds here. People are still out
are still buying things. But people we ask are feeling the pressure in all sorts of different ways. Take a listen.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: I think food shops especially are just so ridiculous. You can't get anything on offer. Just so yes, adds up too much. But yes,
unfortunately, money doesn't go so far.
UNIDENTIFIED FEMALE: I have also been busy trying to fix my mortgage, because we're facing significantly rising mortgage rates as well.
UNIDENTIFIED MALE: The oil has gone up. The vegetable oil and the price of the chicken have gone up basically. But we've not passed it on yet. Because
trying to keep it - so the absolute minimum so we can.
(END VIDEO CLIP)
SEBASTIAN: So that paella stole there Julia, not passing on the cost to their customers yet other businesses because we of course know are. And the
fear is that you have this situation in the U.K. where inflation is rising, the Bank of England is trying to act to bring it down.
We've had five rate rises so far that as you heard there is hitting people's mortgage rates. And at the same time, you know GDP readings for
March and April showed a contraction. So this is raising concerns, but it could tip the economy into a recession.
And the other big concern that we've had here at this market coming off the rail strikes that we've heard this week is that kind of disruption could
intensify as inflation rises and wages just don't keep up.
CHATTERLEY: Yes, significant backlash already beginning. Clare Sebastian, thank you so much for that report there. Now China's President Xi
criticized the west sanctions on Russia as a double Edged Sword that weaponizes that world Economy. He was speaking at the opening of the BRICS
Business Forum in Beijing. President Putin is due to attend the virtual summit his first major appearance on the world stage since he launched the
invasion of Ukraine.
Selina Wang joins me now interesting that this is what President Xi chose to speak about on the first day of this summit, of course, facing their own
sanctions with regard to United States and this talks that perhaps those will be removed at some point soon. But honing in on a bunch of countries
that may have misaligned different ambitions and ideologies but equally, I think, together in their neutral stance on this war.
SELINA WANG, CNN CORRESPONDENT: Yes, Julia, we heard Xi Jinping, basically hammer home this relentless criticism from China of Western sanctions,
arguing that they don't actually solve the problem, they worsen the global economic system.
This is exactly what he said at this keynote speech, Xi Jinping said "Facts have proven time again, that sanctions are a boomerang and a double edged
sword, politicizing instrumentalizing and weaponizing the world's economy, adding that sanctions take advantage of the international financial system
to bring harm to the people of the world.
Now Julia, China has claimed that it's not taking sides of the conflict, but it has not called it an invasion and China along with the other BRICS
nations, they have not outright condemned Russia.
But still, Putin's invasion of Ukraine does complicate the relationship of these BRICS nations with as you say they have already long struggled to
find alignment amid varying ideologies and oftentimes conflicting geopolitical interests.
But what this does show to have Putin virtually on screen along side the other major economies at this virtual event when it does show the world is
that Putin is not completely alone, that he is not a pariah state, to every country.
And BRICS has long tried to present itself as this sort of alternative to the G7. China along with the BRICS nations they have tried to push against
what they see as disproportionate powers of these western capitalist democracy nations. And China has even called the BRICS Summit, a force
against "The evil interests aligning of these Western nations forming cliques around the G7". And important to note here that these BRICS
countries they do comprise more than 40 percent of the global population they do comprise about a quarter of the world's GDP.
[09:10:00]
WANG: Along at the summit we're also expected to hear discussion about potentially how these countries can find ways to trade in their own
currencies, which has become more important as a system that's outside of the U.S. dollar system. As we've seen more of the sanctions on Russia, this
is becoming even more pertinent to these BRICS nations.
Now, Russia is now China's largest supplier of oil and Russia is also a key supplier of defense equipment to India. So that is of crucial importance to
them. And symbolic of course, as well as that in just a few days' time, you're going to have leaders competing at the G7. And they have been united
and their strong language against Russia and actions as well, Julia.
CHATTERLEY: Yes, brilliant summary, it's going to be a fascinating couple of days. And we'll see how President Putin utilizes this platform when we
hear from him too? Selina, great job, thank you, Selina Wang there!
OK, let me bring up speed now with some of the other stories making headlines around the world. A powerful earthquake struck Eastern
Afghanistan killing at least 1000 people and injuring hundreds more. It happened near the City of Khost close to the border with Pakistan.
The Taliban government called on aid agencies to send relief teams to the area. CNN's Vedika Sud joins us now from New Delhi with the latest. Vedika,
good to have you with us! The problem is a lot of these international aid agencies left once the Taliban took over who's there to help and what can
you tell us in terms of the latest recovery and support efforts?
VEDIKA SUD, CNN REPORTER: That's a very important question you asked there Julia. But let me first get you up to speed with what's really happening on
the ground in the Eastern region of Afghanistan, where a very powerful and devastating earthquake has already claimed over 1000 lives and injured over
1500 people.
We're talking about the Eastern region of the country. Now at about 1:24 am local time in Afghanistan this quake hit the region, most of the people
were in their homes in bed. We talked about two areas that have been severely impacted, one of them being Paktika and the other being Khost. Now
both these regions are near the Pakistan Afghanistan border.
Now this region Julia is mostly a remote village area where homes are made of mud. Now, the Indian monsoon has already had a huge impact on these mud
homes. And when that quake struck, it just made it worse. And you saw a lot of rubble and devastated home soon after.
Now, what we also do know about this region is that according to officials, the depth of this earthquake was about 10 kilometers, which made the
casualty figure really go up. Now, about eight hours ago, when we were reporting on this Julia, the figures stood at about 280. 8 hours later,
it's already over 1000. And according to officials, that death toll will only go up and rise further.
We know about the conflict that this region has seen over the last few decades. We know that they have very poor infrastructure. And that's why
when you talk about agencies coming to help them and like you said most of them left the area after the takeover, very few in this area can actually
get to this remote location, but they're trying their level best.
Now, we also do know that Afghanistan is going to one of its worst humanitarian and economic crisis recently, according to the World Food
Programme, almost half the population of Afghanistan is in search and need of food.
So this situation is going to unravel this quick information that we're getting details will be unraveling over the next few days, perhaps weeks.
We don't know the extent of damage yet. Like I said, this is a remote area in a mountain region.
So we're just hoping that this death toll really doesn't cross more than 1000. And if it does, if it crosses more than about 1150 it will be the
worst earthquake that Afghanistan has seen in the last two decades, Julia.
CHATTERLEY: Our prayers to all those involved in helping provide attention and support too. Vedika thank you for that Vedika Sud there! Now Ukraine
acknowledges that it's losing territory around a key city in the Eastern Donbas region. One local official says Russia is now fully controlled two
towns near Lysychansk, South of Sievierodonetsk Kyiv also reporting heavy fighting in the South of the country too.
An investigation is underway after a passenger jet crash landed at Miami International Airport. It happened when the plane's landing gear collapsed
after touchdown. 140 people were on board three of them were hospitalized with minor injuries. The flight was coming from the Dominican Republic.
Straight ahead here on "First Move" a $4 billion bet on Bitcoin. How did that go for MicroStrategy? We're laser focused on the CEO and who wants to
do this? Negotiating trade deals amid Frank relations and supply chain crisis and Russia's war in Ukraine. The Director General of the World Trade
Organization on what's been agreed and what hasn't up next?
(COMMERCIAL BREAK)
[09:15:00]
CHATTERLEY: Welcome back to "First Move"! In a welder so in growth rising inflation war in Europe 164 nations accounting for 68 sorry 98 percent of
global trade have agreed a series of landmark deals including a limit on overfishing and the sharing of COVID vaccine knowledge.
The World Trade Organization's Director General called it an unprecedented deal. Some critics call it underwhelming given the degree of compromise
required to get everyone to agree, listen in.
NGOZI OKONJO-IWEALA, DIRECTOR-GENERAL, WORLD TRADE ORGANIZATION: This will impact lives and I totally disagree with those who say it's underwhelming.
Let me tell you why. First of all, is just this whole thing about what it means for multilateralism?
We had Russia, Ukraine, the U.S., China, all those countries that are normally involved in global tensions, all of them members of the WTO they
were all party to signing these agreements. And I think that what we've done here demonstrates that multilateralism is alive for multilateralism is
good for solving problems. So that's the first point.
Let me now touch on the agreements themselves. The first one I want to talk about is the trips waiver what is known as a waiver of intellectual
property for access to patents for vaccines. Now, this has been at the WTO been argued for almost two years with no results.
And we finally managed to get a compromise agreement, which enables developing countries to be able to access patens for a period of time, so
that they can manufacture vaccines. This decentralizes and diversifies manufacturing and helps to solve the problem of inequity of access to
vaccines. So this will touch lives and that is nothing trivial or small about it.
Now the compromise you can see that it's been criticized by civil society that it's not enough because they wanted 100 percent waiver for vaccines,
therapeutics and diagnostics. It's been criticized by the pharmaceutical industry as being too much. So Julia, I think we found the right sort of
compromise between the two parties so that's the first one.
[09:20:00]
CHATTERLEY: Can I just ask on that point?
OKONJO-IWEALA: Yes.
CHATTERLEY: And you can come on to your second one. The quote that caught me was "Doctors without Borders" and I know you're quite right. You're
criticized on either side. But they called it a devastating global failure for people's health worldwide, that you didn't manage to incorporate
treatments and testing for COVID too.
And that decision was postponed for six months, do you think you can get an agreement if you come back to this in six months' time, because I don't
want to be glass half glass half full. But it would be a critical further element to tackling this pandemic if you could achieve that?
OKONJO-IWEALA: Well, I would hope. We'll certainly give it a try, Julia. But I think we need to acknowledge what we've been able to do? It is better
to start this way, and then see how we can get to therapeutics and diagnostics, then be locked up for years has been the issue.
You know, in the Trips Council, the Intellectual Property Council here, members were just talking past each other with no results whilst people
were losing their lives. So I'm very happy that we're able to find the compromise of vaccines. And I hope that six months down the line, we'll be
able to do it for therapeutics and diagnostics.
It's not going to be easy, obviously, because the pharmaceutical industry and the medical supplies and industry and medical treatments, we are going
to have the same sort of pushback. But I think that members haven't done it once I hope I'm very hopeful that they will see through this and be able to
do it again.
CHATTERLEY: As you point out some action is better than no action and on this that's vital. One of the other issues, and I think you were going to
allude to it and I rudely interrupted you was the food security crisis. And I know you've warned about the risk of hunger of pushing people into famine
of social issues, potentially of riots, too.
Are you confident that the World Food Programme now that was raising the flag and saying, look, we can get access to what we need? Are you are you
confident now that they'll be able to access what's required and that you've managed to as a result of these agreements prevent further barriers,
and export restrictions rising, which we know in the past has significantly contributed to the pain of higher prices for individuals?
OKONJO-IWEALA: Yes, Julia, I'm very happy about the World Food Programme, the lifting of export restrictions so that they can access food in any of
our members for humanitarian supplies. Of course, the World Food Programme needs two things, it needs money, to be able to buy the food, and it needs
free trade and free flowing access to food supplies, where members or countries have surplus.
So by agreeing to not have these export restrictions on humanitarian supplies, the World Food Programme can freely access food in those
countries so that they can buy and take to others where people are dying of hunger. I think that's a major achievement.
And I think the second aspect is that there was a food security declaration, where members also pledged to do their best to make sure that
there's free trading food that they do not put these export restrictions or where they have them that they're really temporary, and they're done
transparently.
So they don't result in spikes in prices, as we've seen on the international markets, for wheat, for rice, for vegetable oils, and other
types of vital food supplies. This is important because as you were saying, Julia, so many people depend on food imports from around the world.
There are many food import dependent countries, you know, 35 countries in Africa import food from the Black Sea region alone, and 22 import
fertilizer. So having access to these is critical in order to help stave off hunger.
And I can't end this without saying that we also agreed a modality for going forward on reforming the WTO. We wanted to make sure that this during
this MC 12 this meeting with a great process for reforming the organization. So it can be modernized and be fit for purpose for the 21st
century and we agreed that.
So when you look at all of these, that's why I tell you that no one expected this package of agreements. I thought I had said right at the
beginning that if we got one or two of these, this would be success because if you look at the past meetings of the WTO, they've not had much success.
So yes, this is a significant package.
CHATTERLEY: There are big nations that circumvent the rules. I mean, the United States itself handicap the appeal system. Is it credible to say all
of these countries are buying into reform and some of the biggest nations are at times the worst offenders?
[09:25:00]
OKONJO-IWEALA: Well, I mean nations that offend us at one time or the other, we have to admit that. But what is very important at the WTO is
monitoring function and our transparency function. And so we monitor what all the nations do. And so when they are contravening WTO rules, it's very
easy to see that and to put the spotlight on them.
CHATTERLEY: And tied to this, there is rumors that the United States is going to remove some of the barriers that were added under the previous
administration on trade with China, what difference will that make at a time of global growth slowdown in your mind?
OKONJO-IWEALA: Well, you know, from the vantage point of the WTO, what we prefer to see as few barriers as possible to trade between nations. So
removing that, number one, it will be very much in tune with the WTO rules two it to send a very strong signal that in spite of these geopolitical
tensions, two very important countries who are members of our organization are able to, you know, talk to each other sort out the differences and
remove whatever barriers are in the way. And thirdly, it's very good for the multilateral trading system to see this done. So I do hope it will
happen.
CHATTERLEY: And final question and I know it's a tough one. I believe you need 75 percent of members. And it's complicated to remove a nation from
the WTO. But I just wanted to ask you in light of some of the challenges, and then the walkouts and the difficulty that you had at times, and you
mentioned Russia being part of this negotiation, was it morally right to have Russia involved in these discussions at this moment in time?
OKONJO-IWEALA: Well, Julia, yes, it's a very tough question. And we've had very difficult times here, as you said, there have been times when members
walked out because they didn't want to engage with or talk to Russia, we had to find different ways of negotiating because some members would not
negotiate with Russia.
And we had to devise a negotiation in small groups, and then try to bring all the results together. Normally, we negotiating everyone in the room
with the agreement up, and different members will say what it is they want or don't want. But this time, we had to break up in small groups. So it's
been difficult, the tension has not been easy, but we managed it.
Now let me say this, that there has to be a way have also been able to talk to Russia, it's still a member of the WTO. So they had a right to be here
at the meetings. We need to be able to reach them and talk to them. If we're ever going to have peace you cannot make peace by isolating a member.
So the war in Ukraine is very, very tough. And for me, as a person, it's very difficult to watch what happens because of the war I went through when
I was a teenager from 12 to 15, the Nigeria Biafra War, we were running; my family was running from place to place.
So the images are very tough, and our hearts and minds and sympathies with Ukraine, but at the same time, I believe that there has to be a way to
engage with Russia. So that's, the way I see it and multilateralism is the key.
CHATTERLEY: Thanks so much there to Ngozi Okonjo-Iweala the Director General of the World Trade Organization! OK, so still to come bullish on
Bitcoin will a big bet ultimately pay off for MicroStrategy, the CEO joins us next?
(COMMERCIAL BREAK)
[09:30:00]
CHATTERLEY: Welcome back to "First Move"! Fed Chair Jerome Powell set to begin providing testimony on Capitol Hill at this hour Powell appearing
today before the Senate Banking Committee. And in the meantime markets a bit wary I think of the Powell inflation prognosis and the need for
aggressive monetary medicine.
All the major averages are down by around 1 percent in early trade on renewed recession concerns that is off the lows though a reversal however,
of Tuesday's gains, riskier assets like crypto currencies extremely sensitive to Fed rate hikes too, it seems Bitcoin down some 2 percent today
still above that sensitive $20,000 per Bitcoin level. But down more than 50 percent year-to-date underperforming over this times period, at least the
major global stock markets and there's the comparison performance there.
Now one key investor and proponent of Bitcoin is Michael Saylor who turned his software business MicroStrategy into one of the world's largest public
holders of Bitcoin. At the end of March, the company had over 129,000 Bitcoin valued at nearly $3 billion.
Saylor has bet big borrowing millions from crypto bank silver gate to buy more but recent declines have raised questions over whether it is Bitcoin
or bust. Michael Saylor, the CEO of MicroStrategy joins us now Michael, great to have you on the show! Let's just rule that out to begin. Can we
say no matter what the level of Bitcoin there will be no bust?
MICHAEL SAYLOR, CEO OF MICRO STRATEGY: We're in here for the long term, Bitcoin going to outlast all of us. I'm quite sure of that.
CHATTERLEY: And what about sitting on paper losses of $1 billion in the Bitcoin portfolio? Can I just confirm that you've not sold any? So it is
paper losses? It's not been crystallized?
SAYLOR: No, no, we're not a - we're committed for the long term. I think you got to step back and look at the big picture. The S&P has got the worst
start since 1970. So we are witnessing the birth of a new industry during the worst financial crisis of 50 years.
If you roll the clock back to 1900, there were 3000 car companies, when Spindle top was discovered in Beaumont, Texas in 1901, 1500 oil companies
were launched in a single year. You know, lots of them went bust 99 percent but the rest is history.
We've got cars oil business is a huge business that changed the future of the world. And if you look back 100 years, no one's going to remember who
made money or losing money building New York City. And I think that people understand Bitcoin understand that this is the same thing. This is a
totally new industry.
CHATTERLEY: Quite right, there are many comments I could make there. I guess the great financial crisis could be argued to be the biggest
financial crisis that we've seen over the last 50 years. But I think the bigger point here is that this is going to hang around for longer.
What you said is that people understand that but the problem is many people don't and if you look at some of the events that we've seen over the past
month, it plays into all the stereotypes of this being the Wild West, deeply unregulated, overleveraged.
Can you sympathize with those that look at this and say, I never understood it? It's obviously going to zero and it's completely corrupt. And this
proves it, the bubble popped?
SAYLOR: OK, well, from first principles. Bitcoin is digital energy. It's incorruptible and destructible programmable it lasts forever. And you know
the average person has to sift through thousands of stocks, thousands of coins, thousands of investment properties.
[09:35:00]
SAYLOR: All of these have risk, there's a lot of confusion. But one thing we're not confused about is the Bitcoin hundred times bigger than the next
digital energy network. It's the dominant one. And, you know, if you're looking at it as an investor, well, you know, what your choice is?
You can't dollar cost average into commercial real estate. You can't stockpile oil for the next decade. Bitcoin, on the other hand, is something
that you can accumulate monthly you can keep it for your entire life. And so it's fundamentally different than anything that's come before it.
CHATTERLEY: Michael, I understand everything you're saying. And I think the big sign ahead of you saying that, said everything about the questions that
I'm asking. But again, I'd go back to the people that have never invested in this. And that's the vast majority of investors out there still.
And they look at this and say, just because Bitcoin is an example is way bigger than the other what 19,000 digital currencies or tokens out there
don't make it a good investment prospects? So I guess I asked the same question.
And you have to give me a different answer. And I apologize for that. Does Bitcoin go back up? And does it take regulation of all kinds to get us
there to rule out some of the obvious criticisms that have been pushed over the last two months?
SAYLOR: Yes, I think it's clear that people are confused and regulation will be constructive, because clarity will help the market mature. The
people are confused about what's the currency, what's the commodity? What's the security? What are tokens?
There are 19,000 Cryptos out there, and I think we can see in the crypto crash that the average investor has been taken advantage of by traders and
by wild cat crypto banks. And as the regulator's come in and they clear up this confusion and they introduce rules of the road, it's going to be good
for mainstream investors, it's going to be good for corporations.
It'll be - it will catapult the industry from the entrepreneurial offshore, anything goes stage into an institutional, mature asset class.
CHATTERLEY: You know you said something really important there, I think, which is a lot of people got taken advantage of it through this period. Is
the argument then to be made, that until this regulation, this should be thought sophisticated, and I hate the word, but I'll use it sophisticated
investors only, actually, retail participation here is too high risk?
SAYLOR: Well, I think the challenge is if you wait for a decade for everything to be cleared up, the price of Bitcoin is going to be 10 or
100X, more than his right now. So you have to choose whether or not you want to enter knowing that there are about a dozen things that are going to
mature the asset class and make them more transparent.
Or whether you want to wait for all those things to take place, and then pay a much higher price when it does? And everyone has to decide where
they're going to land there. But Julia, let me make one big point, the flight to safety is a grand illusion, you don't have the choice to do
nothing and comfortably move forward.
For example, the true inflation rate in all of our currencies run 7 percent and the best years 14 percent and bad years and 20 percent or more in a
crisis. The Yen has strengthened sorry is weakened against the dollar 19 percent, the Great British Pound 12 percent and the Euro 10 percent, just a
year-to-date.
So if you put all your money in a currency bank account, and then you had to go buy oil, which is up 33 percent or wheat, which is up 32 percent.
What you found is the safe risk free strategy is resulting in you paying 50 percent more and local currency for the things you have to eat, and you
have to use in order to keep from freezing to death. So there's no safe haven.
CHATTERLEY: But I would argue Michael, in this situation, Bitcoin certainly wasn't a safe haven this year either. You can make a bigger point about
investing over a period of years. But on that comparative basis, Bitcoin had a shocker too?
SAYLOR: Yes. If you're looking for something in the next three months, clearly, you have to sit in currency but you're losing 20, 30 or 40 percent
of your value sitting in the currency. Bitcoin gone through three boom and bust cycles in the last two years but if you zoom out, look at the five
year picture Bitcoin up 50 percent a year in the last five years 50 percent a year for the past two years 120 percent a year in the past 10 years.
That's 10 X better than NASDAQ. That's five to 10 X better than pretty much any other option.
So if you want peace and calm the near term there is no safe haven. The long bond is down 23 percent year-over-year.
[09:40:00]
SAYLOR: So what you have to do is decide, are you going to stay on a sinking ship? Or are you going to get on a lifeboat and be tossed about on
the stormy seas? And Bitcoin represents a lifeboat and its hope for everybody in the world, if you can take the long view and focus on the
fundamentals.
CHATTERLEY: Yes, I mean, you point about capital preservation, never mind capital return in this kind of economic environment and financial market
environment, too. I want to hone in on MicroStrategy itself. I mentioned at the beginning in the introduction that you borrowed money in order to
invest in Bitcoin, and there have been all sorts of questions over margin calls and the commitment of the lenders.
Can I just ask whether they've put any constraints on the use of the money that you have? There's no risk of them calling in the loan early. And just
in general, how do your shareholders feel about your ongoing commitment to this because it was a huge shift for the business, it remains that case and
you're sort of doubling down by saying, we're sticking with it?
SAYLOR: So Julia, if the currency collapses by 90 percent, over the course of a decade, then the smartest thing you can do is have debt on your
balance sheet. So what MicroStrategy did is borrowed $2.2 billion at a blended interest rate of 1.8 percent.
CHATTERLEY: That's big money.
SAYLOR: The jump bond yield rate is 8.5 percent right now. So the inflation rate is running 8 percent CPI but probably 15 percent or more if you look
at other assets and 30 percent against commodities.
So we took a debt position paying effectively 1 to 2 percent interests on long term debt, most of it in fact, none of that debt I mentioned is
collateralized by Bitcoin. It's not marked to market debt, we have a very thin layer, like 200 million against a multibillion dollar balance sheet
which we have to collateralize and we're 10 X over collateralized.
CHATTERLEY: Right.
SAYLOR: So our balance sheet is great. Our position is when the inflation rate is running dramatically higher than the interest rate, you're better
off to be a debtor than to be a creditor.
CHATTERLEY: And that's cheap debt in this environment too. Very quickly, yes or no have you bought more in recent weeks?
SAYLOR: We will buy more over time?
CHATTERLEY: But not yet.
SAYLOR: We don't sell we just keep accumulating and we do with our cash flow. So as we generate more cash flows, we buy more Bitcoin.
CHATTERLEY: Great to have you with us thank you Michael Saylor CEO of MicroStrategy there thank you, sir! And that's it for the show. If you've
missed any of our interviews today, there will be on my Twitter and Instagram pages you can search for at @jchatterleycnn. Marketplace Europe
is up next.
(COMMERCIAL BREAK)
[09:45:00]
RICHARD QUEST, CNN CORRESPONDENT: A spring time Davos and the stakes could hardly be higher of those attending the World Economic Forum dealing with
Europe's crises.
Hello, and welcome to "Marketplace Europe" from the World Economic Forum in Davos. From the moment we arrived, it was obvious things this year would be
different. Well, for instance, there's no snow to begin with. But that was only the start.
Because wherever we looked and whatever was being discussed, the sense of crisis was real and the differences were everywhere.
(BEGIN VIDEOTAPE)
QUEST (voice over): We all know the drill at Davos, snow, ski lifts, and sub-zero conditions. It's a regular rhythm for tackling the regular
economic themes. In 2022, though, things changed. After two years of COVID cancellations, this annual summit was moved to May for the first and only
time there's green grass on the mountains, and instead of snow, mostly rain, it's warmer, but not much brighter.
And the economic agenda is as confused and as irregular as this late spring weather. There's the historic inflation hitting consumers and companies
alike. There's the war in Ukraine with the fallout, its bringing economic and geopolitical. Some analysts are predicting recession, yet executives
here are still hopeful for the Chairman of Publicists, the French PR and Advertising Firm. It's a huge conundrum.
MAURICE LEVY, CHAIRMAN OF THE SUOERVISORY BOARD, PUBLICS GROUPS: Most of our clients are mostly still optimistic. There are some areas where there
are some issues obviously we're particularly when there are some issues of supply chain. But there is a kind of dichotomy between the real economies
that we are witnessing is it on the consumer behavior or the optimism of the CEOs of the board.
And on the other hand, there is the stock market which is in free fall, at least for the tech companies, and also the noise that we are hearing
regarding either recession which is coming or inflation, which is going up. And there is a situation which is a little bit strange, because it is -
there is no convergence between what we are hearing and what we are seeing in the market.
QUEST (on camera): Is it that the market and these other events are merely ahead and all this optimism is about to get a cloud on the head?
LEVY: Personally more on the optimistic sides as an individual. However, there are some aspects which will lead to some kind of deceleration, but I
don't see a recession. I may be wrong, but I don't see a recession coming.
QUEST (on camera): So much, of course is dependent upon the war. And I'm wondering, as you look at that, from your point of view, the awfulness is a
given. But what happens next, this rethinking of every aspect of values that you and I have grown up with and lived with, and are now having to
rethink?
LEVY: We are changing the way we are looking at business. In the good old days business means business period. Today, business means values. So you
cannot do business without taking into account values.
And that the reason why we have decided to pull off from Russia, there was no reason to do it from a war point of view because our country is not in
the war with Russia. But from a human and devalue point of view we couldn't stay there.
QUEST (voice over): It's not only businesses having to rethink strategies. Germany's Chancellor says the world is at a turning point, as it redefines
its relationship with Russia. The Chief Executive of Volkswagen told Julia Chatterley things are moving faster than anyone predicted?
[09:50:00]
HERBERT DIESS, CEO VOLKSWAGEN: Is definitely a structural break. No, nobody expected. I didn't expect until the last day that Putin would do that. And
so this is a structural break and it makes us rethink.
But I would say the first reaction is always OK, we have to become self- sufficient. We have to go back into, let's say our fortresses, and I think that doesn't help that's probably a short term solution, but long term it's
very bad for the world.
CHATTERLEY: My sense on this government is it's moving dramatically and the finance minister said to me look, it took us two decades to build an
airport in Berlin. He said, we are going to change our entire energy complex in one year and I was like, good point.
Those kinds of decisions those policy decisions are tough. It's not always easy to make the right decisions, swiftly ramping up LNG capacity leasing
floating LNG tanks.
DIESS: Even LNG has to sell--
CHATTERLEY: Of course it does, particularly if we're trying to move to a cleaner world.
DIESS: Absolutely.
CHATTERLEY: And we're talking to the government and saying guys sharing your Titan a business are you saying are we --?
DIESS: I think all they're doing really a great job and you have to imagine these tradeoffs they have to consider. Oh well-being and I think they are.
CHATTERLEY: You recognized the challenges?
DIESS: It's very difficult to criticize from the outside. They know many things probably in more detail than we are doing. And you have to deal with
this situation and then some of the decisions might be wrong. It's a long term no but you have to decide.
QUEST (voice over): Next year's Davos will be back in January in the winter snows until then, whatever the weather it's going to be a slow slog up the
mountain ahead. The message from Davos the world is at an historic turning point after the break the Chief Executive of Solvay.
(COMMERCIAL BREAK)
QUEST: With so many overlapping global crises, perhaps the temptation is to put issues like diversity sustainability, the environment on the
backburner. That is not an option for Ilham Kadri. She is the Chief Executive of Solvay that $10 billion Belgian Chemical Company. She believes
diversity must remain at the core, as she told Julia Chatterley.
(BEGIN VIDEOTAPE)
ILHAM KADRI, CEO SOLVAY: When I joined Solvay three years ago, we're not what we call Solvay One Planet. But it was not only about the climate, of
course, we're taking in the greenhouse gas emission and our journey to decarburization.
But also resources, like water, which is scarce, but the better life the people, and the people are about also diversity, equality and inclusion.
I've been in the industry for 25 years, always failed in DENI because when I leave the company, you know, it's not there. It's not sticky.
And you know, diversity, the good people, they leave you first if you don't - if you're not inclusive, and you don't listen to them. So I'm putting the
- I before the D now, the inclusion first, and we launched what we call Savoy One - puts in dignity at the heart of everything we do. Equality is
important. We just published the wishes gap between men and women. Can you believe it?
CHATTERLEY: Well, how bad is it?
KADRI: It's not good, except that in Belgium. In Belgium with us by salary, because I mean, Belgium, women are paid more than men. But it's an
anecdote. So we need to be - we need to they're being transparent and just work on closing the gap.
CHATTERLEY: I mean, you're at the cutting edge of all the challenges that we've talked about here in Davos, this time around, be it inflation be it
commodity price inflation be it the challenge of addressing all those short term issues, but also keep pushing for the goals in terms of the planet
sustainability.
How much does shareholders really care about sustainability when they start to see margin slip because you're doing OK you're sort of passing price
increases on your raising your forecast?
KADRI: Absolutely.
CHATTERLEY: When does that balance slip?
[09:55:00]
KADRI: Well, I'm first believer that you have to do both sustainability and the big end profitability. It's not against each other. I'm not running a
charity organization. And believe me, I've been in road show in the U.S. just a week ago, there was not one single meeting with our shareholders,
what we didn't talk about the ESG at Solvay One Planet.
And what we've done since three years, and when I joined Solvay, we were not aligned with Paris. Since three years, we did almost double Paris,
profitably with a return above 15 percent. Our carbon pricing internally globally, is 100 Euro per ton, where there is no carbon pricing a federal
one in the U.S. as you know.
CHATTERLEY: I mean, this is - this is a critical point I think. If all those conversations are involving this now is that because you see it as a
risk to the business?
KADRI: You will not survive. You will have you know, the Kodak moments you will disappear. Now, I truly believe that first of all you do is because
there is a tone at the top, you're a believer sustainability started in my home when I grew up in Morocco with scarcity of resources around me. So I'm
frugal. I'm frugal with the resources inside my company, right?
Second, because we had an employer, look at the youth. They want to join companies with the purpose, right? They want to see what's you're going to
do, and frankly, because I'm a man and I want to deliver and you know, leave a plan is better than the one I'm getting. But it's not easier.
Specifically the chemical industry we are branded as part of the problem.
CHATTERLEY: Yes.
KADRI: But we are part of the solution.
CHATTERLEY: Well, you can't be part of a solution.
KADRI: Of course, we are in electrification lightweight and in your bio shampoo, right so all of this - the chemical industry is the mother of all
industries.
CHATTERLEY: Did you ever believe you'd be the CEO of massive chemical company?
KADRI: No.
CHATTERLEY: What would you go back and say to that young woman in that lab coat in that lab about shortening and you're very young with shortening the
journey from there to here?
KADRI: Oh, I would not change anything. I would just tell her continue believing in your dreams, right? Be passionate. By the way, the destination
was not that much important to me. The journey was more important than the destination.
(END VIDEOTAPE)
QUEST: And that's "Marketplace Europe" for this month. Interestingly, Davos has already announced that in 2023, we will be back in January and the snow
which is pretty much what we discovered. When we asked people here on the whiteboard, more people said they preferred Davos in the winter and the
snow in the spring.
So we'll be back in the cold next year until the next "Marketplace Europe" I'm Richard Quest, whatever you're up to, I hope it's profitable.
(COMMERCIAL BREAK)
[10:00:00]
END
