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First Move with Julia Chatterley
Ukraine: Preparations for Counteroffensive almost done; The Good, the Bad and the Cloudy in Tech; Concerns Rise over Government Debt Ceiling Crisis; Fed set to Release report on SVB, Signature Failure; Art Sales Grow Despite Looming Recession Risks; Serving Up Pizza with the Help of AI. Aired 9-10a ET
Aired April 28, 2023 - 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)
RAHEL SOLOMON, CNN HOST: Warm Welcome to "First Move", I'm Rahel Solomon in today for Julia Chatterley. And just ahead on today's show Ukraine under
attack, Russia launches a wave of deadly airstrikes on Kyiv and other cities. The largest in months, more than a dozen people killed will have a
live report.
Plus, ceasefire extended Sudan's warring generals agreed to a fresh truce, but clashes still being reported across the country. And in business news,
tech turbulence, Amazon warning of slowing cloud computing growth, and so out with its largest quarterly loss ever we'll discuss with tech Analyst
Dan Ives.
U.S. inflation numbers also out this is the Feds preferred measure of inflation, the core PCE index, it eased a bit year over year but so clearly
well above the Fed's 2 percent target 4.6 percent You can see there, the rise month over month coming in as expected all of this ahead of the
Central Bank's critical policy meeting next week.
And as markets digest all of this data we've got a softer U.S. open on tap their banking jitters also helping pressure the major averages you can see
the S&P, NASDAQ and DOW all off between about a quarter of a percent too, let's call it a quarter of a percent. Europe also mixed disappointing
Eurozone GDP numbers hitting sentiment there.
Asia meantime, higher the NIKKEI jumping almost 1.5 percent after the Bank of Japan's latest policy statement Chairman at the helm but no big policy
changes here see NIKKEI up about 1.4 percent, HANG SENG about a quarter of 1 percent, lots to get to you today.
But we want to begin with the latest from Ukraine. A wave of Russian missile attacks on Kyiv seas including Dnipro and Uman. Missiles hit
residential buildings early Friday morning killing at least 17 people, some of them children. Nic Robertson has the details now.
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: --the body count claiming it's claimed again, police just updated us here 17 people dead, 18
injured three of the dead children look over my shoulder here -- going to zoom in there. And you can see the firefighters clustered around the lower
part of the building the first floor of the building there, they're still searching the rubble there.
The police say they're going to focus on that -- going to pan up and take you higher up in the building. They're up towards the eighth floor. There's
smoke still coming out of that. And I can tell you a tragic story about what happened there overnight were spoken to a lady.
Her friends lived in one of the apartments up there on the eighth floor, the husband is in hospital the wife managed to escape but there is a 13-
year-old and a 7-year-old daughter still missing the lady telling this was an absolute floods of tears still missing somewhere out there on the eighth
floor and the police say that's where they're going to go to next.
They say they're not going to stop searching here until they've gone through everything and turned it over all the debris here. 109 people
registered living in this building. And as I'm talking to you here, behind --, there's a line of people just waiting here to find out what's happened
to their loved ones.
What's happened to their friends, a lot of emergency workers here? The Ukrainians sadly are getting all too experienced about clearing up after
Russian strikes like this 21 of the 23 missiles Russia fired into Ukraine last night went to center. This is what happens when just one gets through.
And this is the fear that we've been hearing from neighbors here. Not knowing if this is going to happen again. A lady who lived in the building
right here told me she heard the bush of the missiles put her kids in the bathtub, put a blanket over their house and just hope that they will see
the daylight come up in the morning.
SOLOMON: And all of this happening as Ukraine is gearing up for a counter offensive. The Defense Minister there says that preparations are almost
complete. And according to NATO, Ukraine's allies have delivered 98 percent of the combat vehicles they promised. Nick Paton Walsh is live in
Zaporizhzhia in Southern Ukraine now. So, Nick, preparation is nearly complete. What's the very latest there?
NICK PATON WALSH, CNN CHIEF INTERNATIONAL SECURITY CORRESPONDENT: Yes, interesting comments this morning from Ukraine's Defense Minister Alexei
Resnikoff, saying the preparations for the counter offensive are coming to an end. And he goes on to say in a global sense; we are ready in a high
percentage mode.
The next question is up to the General Staff and as soon as it's God's will, the weather it's been raining pretty badly on off here for the past
two weeks, and the commander's decision we will do it now. This is from a government who has over the past two weeks been quite clear.
They're not going to give us sort of a starting bugle are an indication as to when they decided to start this counter offensive and made it absolutely
clear to that secrecy is of a high imperative that's even been echoed by U.S. Military Officials who say there was testing and training to make this
a "surprise attack".
[09:05:00]
(BEGIN VIDEOTAPE)
WALSH (voice over): So it is interesting to hear this sort of detailed discussion about readiness about whose decision it is about when that
particular decision may indeed come? And we saw on the frontline ourselves a growing sense of anticipation, if not even movement, suggesting the
counter offensive is imminent if not possibly seeing its opening stages.
Spring is here after winters frozen horror, and the buzz and sting of Ukraine's looming counter offensive is growing. Aiming at Russian positions
within 30 seconds the Ukrainian unit has moved away. It may be a precise operation, but the Russian response is not slamming into the nearby town,
edging closer to us.
WALSH (on camera): Impossible to tell what the Russians is trying to hit but another example of the intense bombardment their bid to stop the
counter offensive from starting.
WALSH (voice over): It is ordinary civilians caught in the rising dust behind us who bear the brunt of Russia's frustrated rage. Along and around
the brutalized towns where Ukraine says it may launch its attack, there are more signs it is underway, lurking in the foliage than Ukraine has given
publicly.
That's because Ukraine has said nothing at all about when, where or how it will attack? But among machine gunfire in the nearby trenches, drone
operators hidden in the rubble. The detailed intimate picture they have of their enemy, just two fields away is startling. Watching and trying to kill
each other every hour. They've noticed the Russians pulling back.
UNIDENTIFIED MALE: I doubt with these noises they can hear the drones. They got smart; they took everything to the rear. Heavy armor and stuff -- they
don't have it. Sometimes I noticed some real professionalism. They precisely lock the drone with an anti-drone gun and then shoot it with all
they got.
WALSH (voice over): Another drone team has seen the Russians also left defending ruins written by chaos in their ranks.
UNIDENTIFIED MALE: Often they shoot at each other. They fight amongst themselves too. They live like they do at home. Helicopters shoot at them -
- their own.
WALSH (voice over): It won't be long until that's coming or chaos meets a decisive test in this flat, open and perilous space.
(END VIDEOTAPE)
WALSH: The real issue obviously if Ukraine here is the speech in which it can achieve some strategic success here because the Russians while you
heard of their ineptitude, and we've seen it well over the last year or so have been able to bring mass to this particular area, the south
Zaporizhzhia, which many thinkers any target for Ukraine's counter offensive.
They've dug trenches; they sent a lot of people to those areas. And so some analysis thinks that if Ukraine gets bogged down in a war of attrition
along that long defensive line, it could potentially find success much harder to reach its potential for victory here is to move fast.
And we've heard a lot of pinpoint strikes over the past week or so particularly high value Russian targets yesterday, a lot in Novomoskovsk,
some in Melitopol as well. And that many I think assess is a way of trying to soften up Russia's defenses here quite what else may be happening.
As we hear this increased drumbeat towards Ukraine beginning this counter offensive is unclear. But as I say, it's up to Kyiv really to show to its
western partners here who've supplied training, weaponry financing for a counter offensive key of and so much of NATO want to see to be decisive, to
be able to affect something relatively quickly and not get caught in a long war of attrition that ultimately may play into the blundering sort of mass
nature of Russia's force in that area.
SOLOMON: It's a great point, Nick and I would argue a long war that many people don't want to see. Nick Paton Walsh, live for us there, thank you.
And just hours, -- said the latest ceasefire in Sudan, people woke to the sounds of fighting in Khartoum, the danger of the airlift operation
becoming increasingly clear.
[09:10:00]
These are bullet holes that you were seeing in a Turkish plane that was shot out earlier today before landing ultimately safely at an airport in
the Capital, no one was injured here. Larry Madowo joins us now from Jeddah in Saudi Arabia that's an entry point for thousands of evacuees. Larry,
walk us through what you're seeing on the ground there and really the state of the evacuation process.
LARRY MADOWO, CNN CORRESPONDENT: Rahel, -- Jeddah in Saudi Arabia has become one of the main landing points for so many people who are leaving
Sudan. But to get here, they first have to get to Port Sudan on the Red Sea. And that is a 500-mile journey from Khartoum to the east of the
country, in the middle of a war zone in the best of times.
That's a 12-hour journey but right now, it's taking up to 30 hours, at least one person told CNN, and when they get to Port Sudan, they have to
try and get on one of these Saudi ships that's coming across the Red Sea here. So far, the Saudis say they've evacuated at least almost 3000 people,
only about 100 were Saudis.
The rest were from 80 different nationalities, including Americans and nationalities from all over the world. So that is one key operation that's
getting as many people as possible out of Sudan. It's not just foreigners who are trying to leave Sudan; many Sudanese people are trying to leave as
well.
Some of them go to the Egyptian border, or to Chad, or to South Sudan, or to Ethiopia, but a lot of them are heading to that Port Sudan rather than
over here to Jeddah because then they can go into different parts of the world. So the American government still insists that it's still not safe to
coordinate an evacuation of private U.S. citizens.
That's why so many people are making across to Port Sudan and over here, but other countries like France and Germany and the Indians, the Chinese
have run some evacuations from inside Sudan or to Port Sudan. That's one way why you see so many people coming over here to Jeddah, and then to
other parts of the world.
After just two weeks of constant fighting, so many people already killed more than 500. It just doesn't seem like this is about to come to a close
anytime soon, Rahel.
SOLOMON: Larry, it's a great point that I think bears repeating nearly 3000 people coming through that port evacuated from 80 nationalities. It really
gives you a sense of just how broad the scope is in terms of the crisis and how many people and nations have been impacted. Larry Madowo, thank you.
And turning to business news, that cloudy picture for the cloud Amazon shares under pressure pre market after it warned of softer growth and cloud
computing, you can see shares are off about 2.2 percent pre market. The same issue is also facing Microsoft's cloud unit.
Amazon however, back in the black in a very big way after last year's losses, also strong guidance for the quarter as well. Clare Duffy joins me
now. So Clare, this list is not just back in the black. This is a pretty big swing from a loss of 3.8 billion in the quarter a year ago to now a
profit of 3.2 billion in this first quarter. So how did they do it? What do we learn?
CLARE DUFFY, CNN TECH WRITER: So Amazon has been aggressively slashing costs these last few months; it's laid off nearly 30,000 employees since
the start of this year in two separate rounds of layoffs. It has been nixing products that weren't getting traction, for example, a Telehealth
service and some wearable products.
And it's also been slowing its expansion of its physical retail stores. And you know, pause construction of its HQ2 and so the company has really been
trying to cut back on costs. And at the same time revenue was up 9 percent year over year during the quarter and so sales are going strong.
I think with a lot of these big tech companies, what you're seeing is this sort of continued recovery process from the switch up that happened where
they were growing with really rapid speed during the start of the pandemic and then things really slow down in a way they didn't necessarily expect.
So still sort of more progress that needs to happen. But the recovery has definitely started for Amazon.
SOLOMON: And Clare, I know you mentioned briefly there that sales were up. Talk to me a bit more about that. Because as you know, Amazon really
spooked a lot of people, certainly a lot of investors, when they reported previously that the consumer was pulling back on spending, what did we
learn in terms of their e-commerce business and how consumers are spending?
DUFFY: Yes, Rahel, it's really interesting. I think consumer spending looks really strong at this point, its net product sales were up this quarter.
And look, Amazon benefits from the fact that it has this real mix of products at different price ranges. And it's been cutting back on the costs
of sales and fulfillment.
And so I think that part of the business is looking, you know, maybe even stronger than expected, what we are seeing is that it's businesses that are
pulling back on their spending. And you've talked a little bit about this this week with all these economic reports. This is a broader trend.
But that is really reflected in Amazon's cloud spending, which has seen growth decelerate and again, they said that they expect in the current
quarter the growth to continue to decelerate and I'll be interested to see if the same thing will happen to its advertising business of some of these
businesses that are trying to cut costs will also pull back in that area.
SOLOMON: Yes, Clare, I think it's a fascinating time to be in this space, because we're really on this whipsaw of sales are up, sales are down
consumers are spending down they're not businesses are spending now they're not. Clare Duffy, great to have you, thank you appreciate the insights.
And attack earning season not over just yet. Apple, the largest U.S. Company by market cap. Well they report next week. Dan Ives Managing
Director at Wedbush Securities is here with his take on earnings so far. Dan, always great to see you the good, the bad and the cloudy!
[09:15:00]
So I want to start, Dan, with a recent tweet of yours you're an avid tweeter you say the cloud industry is holding up strong digital advertising
we're seeing slight optics and Silicon Valley is benefiting from cost efficiencies. This is not what most expected. What's happening here?
DAN IVES, MANAGING DIRECTOR AT WEDBUSH SECURITIES: I'd say it's really Goldilocks relative to, you know, choppy macro for Tech, natural eye tech
stocks are up. You're not just this year, but throughout earnings, because it's better than feared in terms of what you're seeing play out. You there
be a softening, but cloud, especially from Microsoft, Google, and Amazon relative was better than feared. And I think that's the narrative that's
playing out, which is why in our opinion, is still a green light during tech stocks.
SOLOMON: Yes, NASDAQ is up I think about 16 percent year to date so far, so is the worst behind us in terms of tech, the tech wreck is that behind us?
IVES: Look, I think you're clearly going to see some weekends play out; you saw a snap and some other names. So some of the names that are bad position
in this macro, I mean, those could fall by the wayside. But I do believe these tech companies, they rip the band aid off with guidance, cut cost
after spending like 1980s rock stars.
And there's really put a bottom on the stocks and still a lot of investors are watching tech from the sidelines.
SOLOMON: And, Dan, to that point, in terms of cost cutting, we just heard Clare Duffy talk about it with Amazon, in terms of the significant cost
cutting are these tech companies done? And I mean, specifically, in terms of the layoffs that we've seen is that behind us?
IVES: I think we're probably about 80 percent through either layoffs or tackling a lot of these tech companies. I mean, they've almost cut costs,
assuming mild recession. So you start to now see spending called stabilize the uptick, even when you look in med on digital advertising.
I think that really we're getting to the 8th, 9th inning of a lot of these cuts. But at the same time, there's an AI Game of Thrones going on, you
don't have a billion-dollar market opportunity over the next decade. These companies are spending aggressively there. And that's important because
that's going to be gold at the end of the rainbow in terms of what they're chasing.
SOLOMON: Well into that point to AI you say that this is probably the biggest technology trend we have seen in 25 years. It seems like at least
from my vantage point, Microsoft is sort of leading the pack here. Who else do you see a really investing heavily in this space?
IVES: Yes, Microsoft right now I mean, they continue to be well ahead in his arms race because the ChatGPT -- been aggressive. But then you look at
Google I mean clearly stumbled that the gates but they're aggressively betting on AI is number two player then you look at Meta focused on AI from
a consumer perspective and Amazon.
And I think especially Apple, we'll hear from Cook next week and the developer conference in June spending right now combined, we're talking 18
to 20 billion combined spending on AI and tech.
SOLOMON: What about ads, what's happening in the digital advertising space? It seems like I'm getting some conflicting signs from some of the reports.
IVES: Look, Snapchat, I mean, I think those data points and three hours get your cup of coffee, right? I mean, they continue to just miss execute. I
think the better barometer, look at Alphabet. Look at Meta stabilization on digital advertising. That's important as that plays out, because that was
really a big overhang for a lot of these tech names.
You start to see digital advertising now stabilize, combined with cloud and I'll call enterprise spending better than feared. I think investors had a
lot of white knuckles, -- going into this week, and now sort of drinking a cappuccino, relax and going into the weekend as a tech investor.
SOLOMON: And then I don't have much time left, Dan, but before I let you go, what names do you like most in this space? I know you think that
there's more room to run here. What tech names do you like best?
IVES: I think Apple, Microsoft, -- AI playing in cybersecurity power out though. I think those are really the core names here in terms of ways to
play the trend Apple continue to be our favorite. That golden install base and Cupertino, I think will shine through next Thursday.
SOLOMON: Dan Ives, great to see you, thank you. He is the Managing Director at Wedbush Securities.
IVES: Thank you.
SOLOMON: Good to have you. And coming up on "First Move", debt ceiling showdown looms the possible impact of the U.S. government hitting its
spending limit. We will discuss coming up next.
(COMMERCIAL BREAK)
[09:20:00]
SOLOMON: And welcome back to "First Move", the key U.S. inflation gauge coming in line with Wall Street estimates core PCE the Personal Consumption
Expenditure index excluding food and energy increased 0.3 percent last month. Meanwhile, concerns are rising over a U.S. debt ceiling crisis.
The Republican controlled House passed a bill to raise the ceiling this week but Senate Democrats in the White House are firmly opposed to that
house plan. Goldman Sachs warning one tenth of all economic activity would stop if Congress fails to increase the government's borrowing limit.
And Moody's estimating even a brief breach of the debt limit would cost almost a million jobs. Joining me now Mark Zandi, he is the Chief Economist
at Moody's Analytics. Mark, great to have you always a pleasure to chat with you!
MARK ZANDI, CHIEF ECONOMIST AT MOODY'S ANALYTICS: Thanks, Rahel.
SOLOMON: Top line reaction to this PCE report that came in line with expectations but on the back of a GDP report that was weaker than most were
expecting.
ZANDI: Well, I thought, we're looking for slower growth. I mean, the Federal Reserve is working hard to get inflation back down to something
that we all feel more comfortable with. And that will require an economy that's growing more slowly. And that's what we got in the first quarter GDP
growth, about 1 percent.
That's about half the economy, so called potential. So if we stay there, then that means we'll see much less job growth and unemployment will start
to notch higher. And that's exactly what the Federal Reserve wants to see. And that's exactly what we need to get the Federal Reserve to stop raising
interest rates.
SOLOMON: Yes.
ZANDI: So hopefully, you know, seems odd to say, but hopefully we get a GDP reports like the one we got yesterday, for the next, you know, for the
remainder of the year that I think that would be ideal.
SOLOMON: Yes, Mark, I think one thing that most people don't want to see, is this debt ceiling breach? I don't think the Fed wants to see it. I don't
think many people want to see that from your POV, what's the X-date looking like from your perspective?
ZANDI: Well, it's highly uncertain, it depends very critically on April tax receipts. But right now the receipts are coming in on the soft side of
expectations. It feels like the X-date, the day when the Treasury runs out of the cash necessary to pay everyone on time. It's going to be in early
June.
So you know, just a few weeks away, so there isn't a whole lot of time here for lawmakers, the Congress and the President to get it together and sign a
piece of legislation increasing the debt limit. I suspect what they'll do is kick the can, though, maybe pass a piece of legislation suspending the
debt limit.
So that they can line it up with the budget decision they need to make by the end of September, because as you know, they need to pass another piece
of legislation that would fund the government in the fiscal year 2024. So I suspect that's the next step here.
SOLOMON: And Mark, of course, as you know, we've never actually had a debt breach of this sort, right. And so this is all highly uncertain, but walks
me through the forecast in terms of what is expected to happen if in fact that does happen this time around?
[09:25:00]
ZANDI: Yes, Rahel, we really don't want to see that, you know, breach means someone's not going to get paid on time. And as you say, we've never done
that in our entire history since the founding of the nation. And that is a cornerstone of the financial system, the global financial system in our
economy that, you know, if you buy U.S. Treasury debt, you get paid back on time.
And if we don't do that and we shake investor confidence, which we will, that we'll be paying higher interest rates for the debt we need to borrow
for generations, and the cost will be significant. And of course, in the most immediate aftermath of breaching the debt limit.
I think financial markets would be up ended that means that this means lowers a lot lower stock, prices higher interest rates and lower value of
the dollar; it would be a financial chaos. And of course, given how weak the economy is, we are growing very, very slowly, we clearly go into a
severe recession.
SOLOMON: Now, you could argue it's the worst possible time for something like this to happen. And Mark, you've made the point before that the closer
we get to whenever that X-date is and the longer perhaps we stretch beyond that, the worse it gets. But are we already starting to see the jitters in
the financial community in terms of some of the short term treasuries.
ZANDI: Yes, we are, it hasn't broken out all over. So stock markets still fine so it hasn't, you'll see deeper into the plumbing. But if you want to
buy insurance on the default of the Treasury that you can do that the cost of buying that insurance, the premium you need to pay to guard against that
default is now as high as it's been in the data that we have, you know, even higher than back in 2011, the last time we had a pretty significant
debt drama.
Also, you look at interest rates; you look at one-month treasury bill. So that's a bill that pays back within one month, the yields on that are
plunging. And that's because investors are piling into that one-month security, knowing that they'll get paid back on time if they buy that one
month.
But if you go look at the three month, which is on the other side of this X-date, that has not come down. So that's another indication that you know,
in the plumbing investors are now starting to discount the possibility that there's a breach here.
SOLOMON: Yes, it's been really interesting to see the difference between the one month and three months. Mark, we have this debt ceiling, potential
crisis, we have banking jitters clearly still at play, at least with First Republic, we have interest rates that have been hiked almost 5 percent in a
year. I could go on, but what worries you most?
ZANDI: --, Rahel, you know, what worries me the most is we all lose faith, right? Because at the end of the day, a recession is a loss of faith, you
know, consumers, you and I, we kind of get nervous about our jobs and thinking that we're going to be laid off and we pull back on our spending,
businesses lose faith.
They're thinking that they're not going to be able to sell whatever it is they produce, and they start laying off workers, and you get into this kind
of self-reinforcing vicious cycle, that's the recession so far, that hasn't happened, you know, everyone was on edge, everyone's nervous and cautious.
But you know, we're still doing what we typically do, we're out buying and businesses are still hired. And, you know, the economy is still moving
forward. But I fear that, you know, given all these things you just listed, and then some, you know, at some point where we're just going to pack it
in, and that would be a recession.
SOLOMON: And then some as a great way to put it. And, Mark, before I let you go, you and I spoke about this yesterday, when I was reporting on the
U.S. GDP report, but explain to me a bit about what we're seeing here in this GDP report. And why it seems to be a bit different than how we tend to
see slowdowns and that businesses are really pulling back their spending but the U.S. consumer -- just remarkably still spending.
ZANDI: Yes, good point. I mean, this is key. This is how we stay out of recessions. That mean the consumer is the engine that drives the economic
train. They're the firewall between recession and --. And they're hanging in tough there, you know, they're not spending with people aren't spending
with abandon, but they're kind of doing just what they need to do to keep the economy going forward.
But the real kind of fault line in the economy think that this looks like it might be more of an issue is that businesses appear to be growing more
cautious and starting to pull back their investment, spending money on equipment, information processing equipment, transportation equipment,
that's down and weakening.
And that may be a leading indicator to some layoffs down the road here. So I think if we're going to go into recession, it may not be consumer led,
which typically is it may be in fact business -- which would be very unusual, but everything about this economy as you know, Rahel, we were
discussing is unusual.
SOLOMON: Well said, everything about this economy is unusual, which makes it an interesting time to be a financial journalist and an economist I
would imagine.
ZANDI: Anytime--
Exactly, Mark Zandi pleasure to have you! Have a great weekend thank you!
ZANDI: You too.
SOLOMON: And coming up urgent talks underway to try and prevent another bank collapse, the latest from First Republic Bank crisis coming up next.
[09:30:00]
(COMMERCIAL BREAK)
SOLOMON: Welcome back to 'First Move' opening bell sounding on Wall Street as we speak the last trading day of the week and the month as well the
major averages on track for a positive April but stocks still under a bit of pressure today.
She was the First Republic Bank actually higher yes higher in early trading. That is something I have not said all week investors hoping that
some kind of rescue package can be put together to save the firm. First Republic shares down more than 90 percent so far this year.
As depositors really pulled billions from the bank in the first quarter the biggest let down for shares coming in just the last few days after it
reported earnings. And later today, the Federal Reserve releases its report on what caused the collapse of both the Silicon Valley Bank and Signature
Bank.
The failure of both U.S. lenders helping spark the global banking troubles that continues to reverberate today. Christine Romans CNN Chief Business
Correspondent joins me now. So Christine, look, I think we had a pretty good idea, a pretty good sense of what went down here. What more are we
expected to learn?
CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: Well, will then you know will the Federal Reserve point to any anything that it missed in
particular? Or will this be cast as simply a case of classic case of financial mismanagement?
That will be very interesting to tell it we'll also hear from the FDIC, later today about Signature Bank, which was also a very niche bank that
grew very, very quickly and clearly its compliance and risk management didn't grow as quickly as the bank did.
So we'll get a sense of postpartum post Martin mortem, if you will, get the word out on what went wrong here. But the implosion of those two banks
really sent shockwaves through the financial system.
Just think this was backing March 10, the week of March 10. At that time, first republic bank, for example, had her stock price on March 8 of $115 a
share I mean went down all the way down to an all-time low earlier this week.
[09:35:00]
So, you know, this has revealed those two banks that failed three, actually they failed last month really caused a lot of scrutiny and a loss of
confidence elsewhere in the banking sector. And remember, so much of banking is about confidence.
I remember when they put together when these 11 banks put together sort of a private sector, investment deposit infusion into first republic bank,
someone who was involved in the negotiations told me, this is a good bank.
I mean, First Republic is a good bank. And when you have a consumer so concerned about what is a good bank, you know, that was a sign of just how
jittery people were in the system a month ago. So this will be I think, critical for what happens also pretty quick review.
You know, usually can take a long, long time to get to go through what exactly happened. So the Fed has been, you know, has it nose to the
grindstone trying to make sure that they could get a report out quickly to tell the public just what exactly happened here.
SOLOMON: Like, I think it's a great point, Christine, you know, a senior portfolio manager that I spoke to earlier this week also told me that their
loan quality is stellar. So in a lot of ways it is and was a really good bank.
Before I let you go, Christine, any sense that what we learned today might provide a bit more clarity for Investors about whether the fall of those
three banks were more idiosyncratic, or whether it was actually more concerning in a larger way?
ROMANS: My sense is you're going to find that those were idiosyncratic, right that the overall the financial system is strong. We have heard from
regulators and bank CEOs big and small for weeks now that mismanagement and you know, breaking banking rules 101 is the problem here.
The higher interest rates revealed the lack of risk management, quite frankly, but in the weeks that have passed, every bank CEO has been
scouring their books, trying to make sure that they have the right kind of exposure here and tweaking what they need to tweak to make sure that
they're not you know, caught out when the tide goes out as well.
So my suspicion is you will find that this is they will highlight exactly what these banks did wrong and stress that the overall banking system is
solid, certainly more solid than it was during the great financial crisis because of changes that were made after that.
SOLOMON: Absolutely. Christine Romans, great to have you a lot more to watch here. Thank you.
ROMONS: Yes.
SOLOMON: And Police departments in the U.S. are turning to artificial intelligence to try to improve accountability. AI is being used to scan
body cam footage and determine whether an officer acted professionally and some Police chief's think that it could help save lives as Vanessa
Yurkevich now reports.
(BEGIN VIDEOTAPE)
VANESSA YURKEVICH, CNN, BUSINESS AND POLITICS CORRESPONDENT (voice over): Officer Dan Janeda is on patrol. He has all his tools for the day,
including his body worn camera, which automatically captures videos of his encounters with civilians. 20 videos a day over hundred hours a week, his
final invisible piece of equipment artificial intelligence, a program called Truleo, which analyzes what he records.
YURKEVICH (on camera): Did you have fears about what it meant to have artificial intelligence tracking your day to day?
DAN JANEDA, OFFICER, CASTLE SHANNON, PENNSYLVANIA POLICE: I did have apprehensions it is technology can sometimes have drawbacks. It's not
perfect, but at the same time, I've seen things play out enough where technology has helped us.
YURKEVICH (voice over): And that is what Truleo's Co-Founder and CEO Anthony Tassone is aiming for.
ANTHONY TASSONE, CO-FOUNDER AND CEO OF TRULEO: I started Truleo after George Floyd was murdered in May of 2020. How do we prevent this from
happening again?
YURKEVICH (on camera): What percentage of body camera footage gets reviewed now?
TASSONE: Fraction of 1 percent.
YURKEVICH (on camera): And Truleo could look at what percentage of body cam video?
TASSONE: One hundred percent.
YURKEVICH (voice over): The AI was trained by humans to detect 5 million key terms -- like profanity non-compliance, as well as professional
language or explanations. The goal is detecting early problematic police behavior before it turns deadly.
TASSONE: I get an email alert every day at six o'clock.
YURKEVICH (voice over): Dan Janeda's Chief Ken Truver of Castle Shannon PD in Pennsylvania has been using Truleo for a year. He's also an advisor.
YURKEVICH (on camera): These are the keywords that you put in?
KEN TRUVER, CHIEF OF CASTLE SHANNON, PENNSYLVANIA POLICE: They are so stop resisting custody, arrest anything to do with a pursuit. I'm looking for
high risk things.
YURKEVICH (voice over): Truleo transcribes entire encounters from body cameras, but pinpoints the exact moments that need review?
TRUVER: Not a whole lot of resistance, but it was giving me exactly what I was looking for.
YURKEVICH (on camera): And so for you this is a good interaction with one of your officers in a civilian?
TRUVER: It is.
YURKEVICH (voice over): The Alameda Police Department in California has been using Truleo for a little over a year. It's seen a 36 percent drop in
use of force by Officer Tassone says the AI pointed out risky interactions with civilians giving officers the chance to review and change their
behavior.
[09:40:00]
YURKEVICH (on camera): What would Truleo's involvement have been in a situation like Tyre Nichols?
TASSONE: I feel very strongly that Truleo, not only would have recognized obviously the event of the murder of Tyre Nichols, but the hundreds of
events that took place prior to that. I believe Truleo would have prevented the death of Tyre because it would have detected the deterioration in the
officer's behavior years prior.
YURKEVICH (voice over): There are 18,000 police departments in the U.S. just 20 are using Truleo with 20 more signing on this year, including
Aurora PD in Colorado.
CHIEF ART ACEVEDO, AURORA, COLORADO POLICE: It will be an early warning system that will help save careers and ultimately maybe even save lives.
YURKEVICH (voice over): In 2019 three Aurora Police officers were charged with the death of Elijah McClain using excessive force during his arrest.
ACEVEDO: If we see just a little change in the officer's performance will be able to actually intervene early on, get them help get them counseling,
get them training, do whatever it takes to get back on the right track.
YURKEVICH (voice over): Back in Castle Shannon Chief Truver says the technology has only proven what he already suspected about his officers.
YURKEVICH (on camera): What has this changed anything?
TRUVER: No. And I don't think that's bad thing. I want to catch something before it happens. I don't want to be reactionary. We want to be looking
ahead to make sure that we stay ahead of the game ahead of any issues. And I don't think that's a bad thing.
YURKEVICH (voice over): Vanessa Yurkevich, CNN Castle Shannon, Pennsylvania.
(END VIDEOTAPE)
SOLOMON: And from AI in policing to AI and art, just one of many exciting debates in the art world right now. And after the break, why Investors are
taking a long hard look at art and volatile times got the picture that's coming up next.
(COMMERCIAL BREAK)
SOLOMON: Welcome back at a time of volatility in stock markets and also slowing global economic growth. Also, when inflation bites and seemingly
stable banks fail, you can't blame investors for looking at alternative assets.
And that's where art comes in. According to Statista Global Artsy market sales rose 3 percent last year too nearly $68 billion Artsy connects over
4000 galleries, auction Houses Artsy and institutions from over hundred countries to the world's art collectors.
And it's exciting time in the sector with a debate raging over the use of artificial intelligence. And of course, it's an investment opportunity
which is highly subjective. After all, if you don't love it, you still do have to live with it. Mike Steib is the CEO of Artsy and joins me now Mike,
welcome to the program great to have you.
[09:45:00]
MIKE STEIB, CEO, ARTSY: Great to be here.
SOLOMON: So let's start with when is the best time to buy art as an investment because as we pointed out, economic growth is slowing inflation
is high markets are volatile is now a good time to buy art as an investment?
STEIB: The way the economy has been for the last even 15 years is the reason smart investors have been investing in art for centuries. Arts
uncorrelated to the stock market, art is a hedge against inflation.
And you know, the Fed can always print more dollars the fed. The Fed cannot print more Warhol's. So in a moment when people are really worried about
inflation, you continue to see a shift towards our
SOLOMON: Pharaoh. Certainly, the demand of the supply of Warhols is very limited in terms of art as an investment in how it performs up against
equities. What type of performance is we seeing there our connection are we seeing there?
STEIB: Of course, it depends on when you chop the market, but pretty consistently, contemporary art outperforms the stock market. And if you
look at the last, the stock market over the last 25, 26 years, a basket of contemporary are traded in the secondary market has performed 130 better.
SOLOMON: And how much of that though, the secondary market obviously is skewed by the larger, higher value pieces that perhaps ordinary people
can't afford?
STEIB: It really that depends year to year and by the market. If you look at the art market last year, the art market was almost $70 billion, the
market grew 3 percent. But the biggest growth segment was artworks over $10 million.
At the same time, if you look at what's happening now in 2023, in the last quarter prints and multiples, which tend to come at a much lower price
point than original works of art are up 38 percent year over year.
So what we're seeing in this sort of shorter term is that there's this shift among the average art buyer toward more accessible prices and names
of artists who they're familiar with. And we've seen on Archie principle, we're doing really well right now.
SOLOMON: So Mike to that point for someone who wants to buy something a bit more affordable, a more affordable piece, what's your best piece of advice,
if you love Artsy but you're not necessarily sure where to even begin in terms of choosing a piece that you love, but you also hope appreciates in
value? What's your advice?
STEIB: Well, it's a wonderful question. And a lot of your audience is comfortable today buying handbags and watches and jewelry and other things
that are expensive branded products that they feel comfortable, they feel confident buying.
And that same person today might walk into an art fair or an art gallery and not really know where to start. The prices aren't always transparent,
the availability the works are unclear. And if you haven't been in the art world before, historically, you weren't sure why one painting was worth X,
and another painting was worth hundred times x.
What we've done at Artsy, is we've brought 2 million works of art from around the world, from the top artists in the world all the way down to new
emerging artists and your local market. And all of the things that were secrets held by people inside the art world we've brought forward in the
product.
Availability, secondary market prices, value signals, whether this artists had been collected by museums solo shows group shows, all of these really
interesting data points that start to give hints to the collector that this is an artist who's going to be of greater cultural significance in the
future.
SOLOMON: I see. So you sort of pulled back the curtain a bit on the process that used to happen in the shadows, you're trying to bring that a bit to
the forefront to help Investors make a better a better decision. Let me ask before I let you go in terms of how our team is using AI tell me a bit
about how that that process is working.
STEIB: Well, the AI discussions happening in the art world today, generally around whether or not AI is affecting artistic creative process and we have
2 million paintings prints multiple sculptures on artsy and virtually all of them have been created by human beings, not by computers.
There's a second element of AI, which is smart technology companies are using AI using machine learning to derive insights and create better
products. One of the things that collectors who follow artsy have noticed is that we're able to bring a lot of the data about the art world and about
artists forward in a way that they can consume.
Because we have this massive set of collector intent data what are people shopping for what are people interested in what artists are growing the
fastest? What kinds of artists markets are starting to take off and we're able to use technology.
SOLOMON: Fascinating.
STEIB: Data science to bring that forward and collectors can make better decisions.
SOLOMON: Yes, Mike, I have so many more questions but I have been told that we must go we have run out of time but wonderful to have you on the program
thank you we'll have you back I'm sure and stay with CNN we'll be right back after this.
[09:50:00]
(COMMERCIAL BREAK)
SOLOMON: From the Industrial Revolution to the present day advances in Tech have really transformed the way we live right now the development that has
the whole world talking is ChatGPT people from all walks of life have found innovative ways to use it, including a pizza chef into by looking to serve
up tasty new toppings.
(BEGIN VIDEOTAPE)
SOLOMON (voice over): A pizza be a like this one in Dubai isn't usually the first place that comes to mind when you think of how artificial
intelligence is being used in businesses. But for smart talk a route you yawn the brand Chef of Dodo pizzas AI technology is what's helping him
think outside the box.
SPARTAK ARUTYUNYAN, BRAND CHIEF, DODO PIZZAS: Customers really appreciate when you do something creative instead of just developing a new taste a new
flavor of the development itself can be creative, and can be innovative.
SOLOMON (voice over): As the restaurant opened its doors just a few months ago. Chef Spartak knew he was up against a lot of competition, but he saw
an opportunity to bring something different to the table with the help of ChatGPT.
ARUTYUNYAN: Oh, there you go two pizzas by ChatGPT. Why is a melting pot of cultures and flavors and tastes? And it's really hard to combine it all in
one product and make it special. I realized that I'm not capable of getting all these cultural nuances and to make them work just by myself.
SOLOMON (voice over): Using the chat pot to create a unique recipe for customers in Dubai. This was the result a pizza representing a fusion of
Arabic and European flavors.
ARUTYUNYAN: Yes, what both of these pieces are the recipes are made by ChatGPT.
UNIDENTIFIED MALE: Oh my god. Yes.
SOLOMON (voice over): And Chef Spartak isn't alone. According to investment firm UBS; more than one hundred million people started using ChatGPT, only
two months after its launch last year. While the tool was developed to help with tasks that most would consider as time consuming like research and
data analysis.
Businesses and all sorts of industries are now using it to their advantage. Researchers at PWC say that by the year 2030, AI could contribute up to
$15.7 trillion to the global economy. That's more than the current output of China and India combined, according to PWC, but like all new kinds of
technologies, there are still some concerns.
SOLOMON (voice over): By far the most common question I get is am I going to lose my job because of this technology? There will certainly be some
jobs that disappear and they'll be other new jobs created. But by far the biggest category will be jobs that are transformed.
The key is going to be looking for ways to complement what you're doing rather than to substitute for it cheaper. ChatGPT large language models
generate the answers on the fly and different times you use it you'll generate different answers. But you also have to be very careful that what
it generates is not always completely factual.
[09:55:00]
SOLOMON (voice over): That's why spar talk is taking most answers he's generated from ChatGPT with a pinch of salt, from optimizing operations to
delivering personalized customer experiences. Businesses in all kinds of industries around the world are continuing to take a slice out of the
proverbial AI pie, just to stay ahead.
(END VIDEO TAPE)
SOLOMON: And finally, before I go, a friendly reminder that children and cows don't mix, just in case you were curious Police in Illinois were
called after high school seniors brought some animals to campus for a prank and those animals included a cow which escaped and ended up loose in a
Chicago suburb.
Police as we can see here had to corral the cow turning a quiet neighborhood into a real life radio. Wow. That is something you don't see
every day and hopefully, those neighbors and that Chicago suburb moved out of the cows way. You got it. That is it for this show. I'm Rahel Solomon
Connect the World' coming up next.
(COMMERCIAL BREAK)
END
