WEBVTT - Daybreak Weekend: Fed Decision, Cybersecurity Conference, China Eco 0:00:00.240 --> 0:00:07.720 Bloomberg Audio Studios, Podcasts, radio news. 0:00:10.119 --> 0:00:13.360 This is Bloomberg Daybreak Weekend, our global look at the 0:00:13.400 --> 0:00:16.000 top stories in the coming week from our Daybreak anchors 0:00:16.079 --> 0:00:18.800 all around the world. Straight Ahead on the program, we'll 0:00:18.840 --> 0:00:21.599 look ahead to the final monetary policy decision from the 0:00:21.640 --> 0:00:24.040 Fed of twenty twenty five and how that could affect 0:00:24.079 --> 0:00:27.640 interest rates into the next year. I'm Nathan Hager in Washington. 0:00:27.720 --> 0:00:30.160 I'm Caline Hegger in London, where we're looking ahead to 0:00:30.240 --> 0:00:33.320 the black Hat cybersecurity conference in London. 0:00:33.520 --> 0:00:37.040 I'm Doug Prisner looking at why China's economy is stuck 0:00:37.080 --> 0:00:37.880 in deflation. 0:00:38.920 --> 0:00:42.919 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:42.960 --> 0:00:46.000 eleven three zero, New York, Bloomberg ninety nine to one. 0:00:45.960 --> 0:00:51.440 Washington, DC, Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, 0:00:51.840 --> 0:00:54.080 Sirius XM one twenty one, and. 0:00:54.120 --> 0:00:56.960 Around the world on Bloomberg Radio, dot Com and the 0:00:57.000 --> 0:01:04.760 Bloomberg Business app. Good day to you. I'm Nathan Hager. 0:01:04.880 --> 0:01:08.679 We begin today's program with the Federal Reserve. The Central 0:01:08.720 --> 0:01:11.320 Bank holds its final two day policy meeting of twenty 0:01:11.360 --> 0:01:15.720 twenty five this week, issuing its final monetary policy decision 0:01:15.720 --> 0:01:18.760 of the year on Wednesday. So for more on the 0:01:18.800 --> 0:01:21.560 path ahead four interest rates, we are very pleased to 0:01:21.600 --> 0:01:26.160 be joined by Stuart Paul, us economist with Bloomberg Economics. Stuart, 0:01:26.160 --> 0:01:28.160 thanks for being with us. And it seems as though 0:01:28.200 --> 0:01:30.560 the market is all but fully priced in that we 0:01:30.640 --> 0:01:33.640 are going to get a rate cut this week. Did 0:01:33.720 --> 0:01:36.440 some of the private data that we've seen ahead of 0:01:36.440 --> 0:01:38.720 this decision sort of shake any of that, bet? 0:01:38.800 --> 0:01:40.320 I don't think so. When we look at some of 0:01:40.360 --> 0:01:43.560 the private sector data, including the ADP report showing a 0:01:43.560 --> 0:01:47.040 pretty cool labor market, and then some of the official 0:01:47.120 --> 0:01:52.480 data as well, relatively weak manufacturing in the month of September, 0:01:53.200 --> 0:01:56.480 import prices that were relatively dull. When we receive those 0:01:57.040 --> 0:02:01.320 data points earlier last week, it basically gave the green 0:02:01.400 --> 0:02:03.560 light for this rate cut. So I don't think that 0:02:03.600 --> 0:02:08.800 the Fed is going to be that concerned about whether 0:02:08.840 --> 0:02:12.080 it can defend its decision to cut when it meets 0:02:12.080 --> 0:02:14.720 this week. I think that the bigger conversation around the 0:02:14.760 --> 0:02:18.160 table at the FOMC meeting is going to be what 0:02:18.720 --> 0:02:21.480 message to send to the markets and what message to 0:02:21.560 --> 0:02:25.160 send to interested parties out there when it releases it's 0:02:25.200 --> 0:02:28.120 summary of economic projections. I think that's where we're going 0:02:28.160 --> 0:02:30.560 to see a more division and in fact, maybe a 0:02:30.560 --> 0:02:31.520 little bit of confusion. 0:02:32.440 --> 0:02:35.560 How so, I mean, I guess we have seen sort 0:02:35.600 --> 0:02:39.359 of diversion of thinking when it comes to where policy 0:02:39.440 --> 0:02:42.440 should go from even some of the FED speakers ahead 0:02:42.480 --> 0:02:45.040 of this meeting. But I mean, how much of a 0:02:45.160 --> 0:02:47.720 change could we see in the dot plot. 0:02:47.919 --> 0:02:50.120 I think it's going to be pretty significant in twenty 0:02:50.160 --> 0:02:53.000 twenty six. And I think that even more important than 0:02:53.120 --> 0:02:57.480 the dispersion of dots in the dot plot included in 0:02:57.520 --> 0:03:01.639 the summary of Economic projections, is to remember that the 0:03:01.720 --> 0:03:04.880 voters on the FMC next year are going to be 0:03:04.919 --> 0:03:08.120 shifting pretty dramatically. There is going to be a contingent 0:03:08.240 --> 0:03:13.359 of hawkish regional Fed bank presidents that become voters, and 0:03:13.400 --> 0:03:17.079 among them are Dallas FED President Laurie Logan, Cleveland FED 0:03:17.120 --> 0:03:20.480 President Beth Hammock. Those are some folks who were among 0:03:20.600 --> 0:03:24.639 the more hawkish, among the more hawkish and the more 0:03:24.800 --> 0:03:29.560 vocal FED speakers over the last several months, and when 0:03:29.560 --> 0:03:32.000 they become voters, it's going to be all the more 0:03:32.040 --> 0:03:34.880 important to try to identify which dots they are and 0:03:34.920 --> 0:03:37.920 I expect they're going to be among the more hawkish 0:03:37.960 --> 0:03:40.800 cluster when we look into twenty twenty six. A lot 0:03:40.800 --> 0:03:44.440 of attention has been put toward who the next FED 0:03:44.600 --> 0:03:46.760 chairman is going to be. But I think then more 0:03:46.800 --> 0:03:50.120 important actually than who the next FED chairman is is 0:03:50.640 --> 0:03:54.680 this point about division on the FED, because we're going 0:03:54.680 --> 0:03:55.960 to see a lot of it. We're going to see 0:03:55.960 --> 0:03:58.520 a growing division on the FED, and. 0:03:58.560 --> 0:04:02.160 We've even heard some concerns raised. I guess you could 0:04:02.240 --> 0:04:06.000 say about whether that next FED chair is going to 0:04:06.080 --> 0:04:08.760 be able to deliver the kind of rapid rate cuts 0:04:09.120 --> 0:04:11.720 that President Trump has been looking for. We heard from 0:04:12.080 --> 0:04:14.440 p Jim's Greg Peters just in the last couple of 0:04:14.480 --> 0:04:17.240 days saying, even if it is Kevin has it, the 0:04:17.279 --> 0:04:20.640 President's White House Economic advisor, he might not be able 0:04:20.680 --> 0:04:23.320 to get that kind of consensus. How do you see it. 0:04:23.680 --> 0:04:25.440 I think that's right. I think it's going to be 0:04:25.480 --> 0:04:28.880 difficult for the next FED chairman to build a coalition 0:04:29.040 --> 0:04:31.800 of voters that can show some sort of a united 0:04:31.880 --> 0:04:34.520 front around the pace of rate cuts. I think that's 0:04:34.560 --> 0:04:37.760 going to be true of any FED chairman. It seems 0:04:37.800 --> 0:04:39.520 as though a lot of attention over the last week 0:04:39.560 --> 0:04:42.239 has turned to whether or not somebody like Kevin Hassett, 0:04:42.320 --> 0:04:46.279 someone coming from the White House, has the credibility that 0:04:46.920 --> 0:04:50.000 the Fed will remain devoted to its two percent inflation target. 0:04:50.480 --> 0:04:54.920 Somebody like that has the credibility to keep markets calm. 0:04:55.279 --> 0:04:58.200 I will say that when the trial balloon was floated 0:04:58.680 --> 0:05:02.160 a couple of weeks ago. Now regarding Kevin Hassett as 0:05:02.279 --> 0:05:06.800 the finalist for the chairmanship, he passed the markets test 0:05:06.880 --> 0:05:10.480 with flying colors. Equities rallied, two and ten year rates fell. 0:05:10.520 --> 0:05:13.120 It's exactly what the White House wants to see. So 0:05:13.240 --> 0:05:15.480 as much as we've heard chatter over the last week 0:05:15.600 --> 0:05:19.760 questioning whether somebody like Hassett has the credibility to build 0:05:19.800 --> 0:05:23.240 a coalition or to maintain the FEDS two percent inflation target, 0:05:24.240 --> 0:05:27.200 it seems as though the market thinks he has enough credibility. 0:05:27.480 --> 0:05:30.520 It seems as though to me, no matter who the 0:05:30.560 --> 0:05:32.919 next FED chairman is, it's going to be difficult to 0:05:32.920 --> 0:05:36.719 build a coalition. I think that's just the nature of 0:05:36.880 --> 0:05:40.360 the evolving voting roster at the FOMC right now. 0:05:40.720 --> 0:05:44.440 So, given the evolving roster, how much attention should the 0:05:44.480 --> 0:05:48.680 markets be putting on chairman Powell's news conference after the 0:05:48.720 --> 0:05:50.400 decision on Wednesday. 0:05:50.200 --> 0:05:52.320 I think that markets will put a lot of weight 0:05:52.360 --> 0:05:55.800 on it. Basically, no matter what, he still is the 0:05:55.839 --> 0:05:58.880 person who will be leading the FOMC for pretty close 0:05:59.160 --> 0:06:02.400 to six months, and I think that the question is 0:06:02.400 --> 0:06:05.880 going to be around whether the FED will maintain any 0:06:05.920 --> 0:06:08.719 sort of cutting pace in the first half of next year, 0:06:09.160 --> 0:06:12.040 given the expectation that a new more dubbish chairman will 0:06:12.080 --> 0:06:14.640 take the reins starting in May. So I think that 0:06:14.920 --> 0:06:19.120 when we see this press conference from FED Chairman Powell 0:06:19.440 --> 0:06:21.960 on Wednesday, the question is really going to be what's 0:06:22.000 --> 0:06:23.880 it going to look like in January, what's it going 0:06:23.960 --> 0:06:25.680 to look like as we get towards the end of 0:06:25.760 --> 0:06:30.040 Q one and into Q two, What is the Board 0:06:30.080 --> 0:06:33.600 of Governors and what are the regional Fed bank presidents 0:06:33.640 --> 0:06:36.160 thinking about cuts in the first half of next year. 0:06:36.800 --> 0:06:39.880 Right now, our base case in Bloomberg Economics is for 0:06:39.920 --> 0:06:42.520 the FED to move more towards a quarterly cadence of 0:06:42.600 --> 0:06:45.560 quarter point cuts next year, and that's based on our 0:06:45.720 --> 0:06:50.640 expectations for economic fundamentals right now. I think that FED 0:06:50.720 --> 0:06:54.320 Chairman Powell is going to try his best to not 0:06:54.480 --> 0:06:59.520 show his hand in any one direction. But again when 0:06:59.560 --> 0:07:01.560 we just at the evolving roster, it's going to be 0:07:01.640 --> 0:07:05.640 very difficult next year to deliver quick rate cuts the 0:07:05.720 --> 0:07:07.040 kind of the president wants. 0:07:07.279 --> 0:07:09.800 Yeah, it is going to be a fascinating discussion and 0:07:09.840 --> 0:07:13.400 a fascinating final decision coming up later this week. Thank 0:07:13.440 --> 0:07:15.440 you for this, Stuart, really great having you on with us. 0:07:15.480 --> 0:07:19.560 That is Stuart paul Us, economist with Bloomberg Economics. We 0:07:19.680 --> 0:07:22.800 move next to more corporate earnings in the tech space. 0:07:22.880 --> 0:07:26.720 We hear from two big names on Wednesday, Oracle and Adobe. 0:07:27.040 --> 0:07:30.640 Let's bring in Bloomberg Intelligence technology analyst Anurag Rana from 0:07:30.640 --> 0:07:33.840 More on this latest round of tech results. Anurag, these 0:07:33.880 --> 0:07:35.480 are a couple of names that have kind of been 0:07:35.520 --> 0:07:39.120 hit pretty hard lately around the question about whether artificial 0:07:39.120 --> 0:07:43.000 intelligence valuations have gotten two stretch. So let's start with Oracle. 0:07:43.520 --> 0:07:45.360 How high is the bar for their earnings? 0:07:45.560 --> 0:07:47.440 So I think they have to come out and basically 0:07:47.520 --> 0:07:50.360 explain that the big backlock of orders that they have 0:07:50.440 --> 0:07:54.080 from open AI, how is that going to get funded 0:07:54.440 --> 0:07:57.720 and how is that going to get recognized into revenue. 0:07:58.400 --> 0:08:01.920 That is the single biggest question in our mind at 0:08:01.920 --> 0:08:04.440 this point, especially when you go back and look at 0:08:04.440 --> 0:08:07.520 the stock chart. It had a massive run up when 0:08:07.520 --> 0:08:11.160 they Oracle announced that big order book from open Aie. 0:08:11.520 --> 0:08:13.800 But in the last you could say, two months, two 0:08:13.800 --> 0:08:15.680 and a half months, there has been a lot of 0:08:15.720 --> 0:08:18.920 scrutiny in the market as to how some of this 0:08:19.120 --> 0:08:21.400 is going to get funded, and that I think is 0:08:21.840 --> 0:08:24.760 what has been being on the stock. So the management 0:08:24.800 --> 0:08:28.440 has to come and explain their strategy of data center 0:08:28.480 --> 0:08:31.720 expansion and where that money is going to come from. 0:08:31.960 --> 0:08:34.120 Yeah, to your point, I think we saw in just 0:08:34.200 --> 0:08:37.520 the last few days report that the cost of protecting 0:08:37.640 --> 0:08:41.480 Oracle's debt from default at its highest level in more 0:08:41.520 --> 0:08:44.920 than fifteen years. I mean, what kind of explanation can 0:08:44.960 --> 0:08:48.160 we expect for how Oracle can kind of service that. 0:08:48.440 --> 0:08:50.000 So one of the things you have to think about 0:08:50.000 --> 0:08:53.800 it is there is a lot of investor demand for 0:08:53.840 --> 0:08:56.959 anything that's related to data center expansion because I think 0:08:56.960 --> 0:09:00.200 people understand that's an area where you are looking act 0:09:00.280 --> 0:09:03.320 more and more build up over the next several years. 0:09:03.520 --> 0:09:06.480 So you know, whether it's private credit or whether it 0:09:06.600 --> 0:09:09.920 is private equity. A lot of these companies may be 0:09:10.040 --> 0:09:12.559 able to fund some of that expansion. But the big 0:09:12.640 --> 0:09:15.160 question is you know at what level, because one of 0:09:15.160 --> 0:09:18.520 the things is open AI has talked about, you know, 0:09:18.679 --> 0:09:22.600 several hundred billion dollar investments out in the public for 0:09:22.840 --> 0:09:26.040 those data centers, so the appetite is not so much. 0:09:26.080 --> 0:09:28.880 And also remember Oracle is not the one that's funding 0:09:28.920 --> 0:09:31.520 a lot of that from their own balance sheet or 0:09:31.559 --> 0:09:34.080 their cash flow. They go out in the market, they 0:09:34.440 --> 0:09:38.760 raise the funds with the help of a consortium, and 0:09:38.800 --> 0:09:41.760 that goes you know, into that special purpose vehicle that 0:09:41.840 --> 0:09:47.120 does not impact Oracle's balance sheet directly, but at the 0:09:47.200 --> 0:09:48.640 end of the day, they are the ones who will 0:09:48.640 --> 0:09:51.080 be recognizing some of the revenue from it, not just 0:09:51.160 --> 0:09:54.480 the investors. So they have to come out and explain 0:09:54.520 --> 0:09:55.640 a bunch of these things. 0:09:55.960 --> 0:09:58.360 Where do you see Oracle stacking up compared to some 0:09:58.400 --> 0:10:00.480 of the other hyper scalers. I mean, think of the 0:10:00.520 --> 0:10:03.920 Magnificent Seven all the time, and Oracle, of course isn't 0:10:04.000 --> 0:10:07.120 part of that cohort. Is it going to stay behind? 0:10:07.520 --> 0:10:09.240 So one of the things that we have talked about 0:10:09.320 --> 0:10:12.120 quite a bit over the last few years when it 0:10:12.160 --> 0:10:15.720 comes to cloud computing, there are three big players, Amazon 0:10:15.760 --> 0:10:18.600 being the biggest one, Microsoft after that, and then Google, 0:10:18.920 --> 0:10:22.720 you know, the third player. But because of this massive 0:10:22.760 --> 0:10:27.160 demand for AI infrastructure and AI infrastructure workloads, Oracle has 0:10:27.240 --> 0:10:30.000 really kicked up and become what we call us the 0:10:30.040 --> 0:10:33.160 fourth hyperscale cloud providers. And the big question is are 0:10:33.200 --> 0:10:36.240 they each other taking market share from each other? There 0:10:36.280 --> 0:10:39.080 is a little bit of that going along, but at 0:10:39.080 --> 0:10:42.480 the same time, the market has expanded very very strongly 0:10:42.760 --> 0:10:44.440 because one of the things that you have to do 0:10:44.520 --> 0:10:48.200 is when you're running an application like chat GPT, you 0:10:48.280 --> 0:10:50.760 will be running on a cloud infrastructure. You typically don't 0:10:50.840 --> 0:10:54.840 run that in somebody's internal data center. Same thing for 0:10:54.920 --> 0:10:57.760 an enterprise when they are expanding some of these AI workloads, 0:10:57.960 --> 0:11:00.920 cloud is usually where it's hosted. So when you take 0:11:00.960 --> 0:11:04.440 a look at that, the the end markets, which is 0:11:04.640 --> 0:11:09.240 cloud infrastructure, has actually grown quite nicely, which gives growth 0:11:09.240 --> 0:11:13.000 opportunities for all foward vendors and not just one or two. 0:11:13.200 --> 0:11:15.520 Let's talk about Adobe. Now, looking at a chart on 0:11:15.600 --> 0:11:19.080 that stock it's kind of upper left to lower right 0:11:19.240 --> 0:11:23.080 for the whole year here. So what are the expectations 0:11:23.120 --> 0:11:24.440 around Adobe's results? 0:11:24.679 --> 0:11:27.240 Yeah, I think that seems to be a big story 0:11:27.320 --> 0:11:29.880 when it comes to Adobe, that you know their lunch 0:11:29.960 --> 0:11:33.720 is going to get eaten up by AI related tools 0:11:33.760 --> 0:11:36.240 that are out there, free tools. So when you look 0:11:36.280 --> 0:11:38.560 at Adobe and you go back a few years before 0:11:38.559 --> 0:11:41.920 the launch of any large language models, this company used 0:11:41.960 --> 0:11:46.120 to trade even higher than Microsoft because of high free 0:11:46.160 --> 0:11:49.720 cash flow, the perception that nothing can happen to some 0:11:49.800 --> 0:11:54.760 of their marquee products, that is Photoshop or Acrobat, et cetera. 0:11:55.280 --> 0:11:58.400 But what has happened is when you're seeing these free 0:11:58.400 --> 0:12:03.120 products that can create images and videos, investors allverrid that 0:12:03.320 --> 0:12:05.839 their code business is going to get attacked and they 0:12:05.840 --> 0:12:08.319 won't be able to protect that. Now, when you look 0:12:08.360 --> 0:12:11.120 at their results, at least in the last three quarters, 0:12:11.160 --> 0:12:15.120 they have reported decent results, but at the same time, 0:12:15.440 --> 0:12:18.480 you know they have not seen any acceleration, and I 0:12:18.520 --> 0:12:21.280 think that's always brings that question mark. So we're going 0:12:21.320 --> 0:12:23.080 to see that a little bit of the same thing. 0:12:23.480 --> 0:12:25.679 They're going to come out talk about how they can 0:12:25.720 --> 0:12:27.880 grow next year, They're going to talk about their own 0:12:27.920 --> 0:12:31.160 AI products. The question is whether that's going to be 0:12:31.280 --> 0:12:34.880 enough to pacify this this little fear that's out there 0:12:34.920 --> 0:12:38.320 in the market that Adobe is a net casualty of 0:12:38.440 --> 0:12:40.439 AI related developments. 0:12:40.640 --> 0:12:42.560 Thanks for this on a rock, great having you with us. 0:12:42.679 --> 0:12:46.880 That's honorog Ran, a technology analyst for Bloomberg Intelligence, and 0:12:46.920 --> 0:12:49.439 coming up on Bloomberg Daybreak weekend, we look ahead to 0:12:49.480 --> 0:12:53.960 the black Hat Cybersecurity Conference in London. I'm Nathan Hager, 0:12:54.160 --> 0:13:08.160 and this is Bloomberg. This is Bloomberg day Break weekend, 0:13:08.200 --> 0:13:10.960 our global look ahead at the top stories for investors 0:13:10.960 --> 0:13:13.920 in the coming week. I'm Nathan Hager in Washington. Up 0:13:14.000 --> 0:13:16.560 later in the program, we'll preview upcoming data out of 0:13:16.640 --> 0:13:19.680 China in the health of the Chinese economy. But first, 0:13:19.880 --> 0:13:25.320 cybersecurity challenges facing Europe are clear. Airports, businesses, financial institutions 0:13:25.360 --> 0:13:27.840 are all at risk from an increase in cyber attacks 0:13:27.840 --> 0:13:31.280 by criminals and state actors. That's the black drop to 0:13:31.320 --> 0:13:34.320 the Black Hat Europe conference in London, which gathers top 0:13:34.320 --> 0:13:37.920 professionals for briefings on modern day strategies to counter those 0:13:37.920 --> 0:13:41.319 threats online. Let's get more from Bloomberg Daybreak Europe banker 0:13:41.360 --> 0:13:43.720 Caroline Hepger in London, Nathan. 0:13:43.800 --> 0:13:47.640 The Black Hat cyber Security Conference in London over the 0:13:47.679 --> 0:13:50.040 next few days will look at the latest trends in 0:13:50.080 --> 0:13:54.600 cyber security, as attacks are becoming increasingly costly for governments 0:13:54.640 --> 0:13:58.640 and businesses, sometimes into the billions. Briefings will be held 0:13:58.679 --> 0:14:02.160 on how to bolster sign defense strategies in both the 0:14:02.200 --> 0:14:07.280 public and private sector. The Bloomberg London Tech Summit recently 0:14:07.679 --> 0:14:11.800 featured interviews with top CEOs on how businesses can build 0:14:11.840 --> 0:14:17.240 resilience in a rapidly changing threat landscape. Speaking at that summit, 0:14:17.440 --> 0:14:21.000 Yevgeny Dibrov, who is the CEO of the cyber security 0:14:21.080 --> 0:14:25.160 firm Armis, who explained why there's been such a surge 0:14:25.160 --> 0:14:27.640 in interest in the company, the. 0:14:27.600 --> 0:14:30.960 Great demand that we are witnessing right now because of 0:14:31.480 --> 0:14:38.200 attacks on critical infrastructure. Basically all the geopolitical tensions Russia, Iran, 0:14:39.000 --> 0:14:42.480 North Korea, everybody. You see a lot of targeting infrastructure, 0:14:42.520 --> 0:14:46.960 targeting national infrastructure, the most critical areas from airports to 0:14:47.120 --> 0:14:50.760 grids to manufacturing in the US, in the Mia, we 0:14:50.880 --> 0:14:53.120 see a lot of UK as well. 0:14:53.560 --> 0:14:57.880 That was Armis CEO Yevgeny Dibrov being interviewed there by 0:14:57.880 --> 0:15:03.200 Bloomberg's senior cyber security reporter Jordan Robertson, and Jordan is 0:15:03.200 --> 0:15:06.520 with me. Great to have you on the program. It 0:15:06.720 --> 0:15:12.040 has been such an important and interesting year, hasn't it? 0:15:12.160 --> 0:15:17.280 For your beat? The era of rapid digital advancement of AI. 0:15:17.800 --> 0:15:21.480 Can you just talk to us about the elevated kind 0:15:21.520 --> 0:15:24.760 of cyber threats levels that we're seeing in the UK 0:15:25.080 --> 0:15:27.320 in Europe. I mean you heard it in that interview 0:15:27.320 --> 0:15:31.280 that you did. It's everything from big companies to personal 0:15:31.360 --> 0:15:35.640 data to airports. This ahead of discussions at black Hats. 0:15:35.720 --> 0:15:37.400 Sure, yeah, thanks for having me on. You know, if 0:15:37.440 --> 0:15:39.200 you take a look at the conference agenda for this 0:15:39.240 --> 0:15:41.160 Blackhat conference, I mean, first of all, it's a very 0:15:41.160 --> 0:15:45.240 technical conference. It's technical content for technical people, but the 0:15:45.400 --> 0:15:48.440 overarching themes are still the same that people would kind 0:15:48.440 --> 0:15:50.520 of recognize. And there are two main themes that are 0:15:50.520 --> 0:15:53.440 happening in cybersecurity right now. One and perhaps the biggest 0:15:53.440 --> 0:15:56.880 one is ransomware. Computer hacks used to be pretty secret things. 0:15:57.040 --> 0:16:00.440 Companies by and large could keep these events secret unless 0:16:00.480 --> 0:16:02.400 certain data was leaked, and they could prove that certain 0:16:02.480 --> 0:16:05.640 data was leaked, personal information, things like that. But most 0:16:05.680 --> 0:16:08.480 cyber attacks were secret and companies were allowed to do that. 0:16:08.800 --> 0:16:12.120 You can't keep secret a ransomware attack because your business stops. 0:16:12.480 --> 0:16:14.320 And we saw that this year with the you know, 0:16:14.360 --> 0:16:16.280 the attacks on m ands. We saw that this year 0:16:16.280 --> 0:16:19.600 with the attacks on Jaguar Land Rover, you know, which 0:16:19.600 --> 0:16:23.000 brought really significant critical operations to a halt. And this 0:16:23.160 --> 0:16:27.000 idea of ransomware, which very often is executed by by 0:16:27.040 --> 0:16:30.240 young people, by kids. In many cases you're talking about teenagers. 0:16:30.520 --> 0:16:33.680 You're talking about young people who connect online and kind 0:16:33.720 --> 0:16:36.880 of I guess, get radicalized if you will, and see 0:16:36.880 --> 0:16:39.640 this as a real business, business opportunity. There are millions 0:16:39.640 --> 0:16:42.600 of pounds to be made through some of these hacks. 0:16:43.040 --> 0:16:46.280 These attacks are very easy to do, they're extremely disruptive. 0:16:46.440 --> 0:16:48.400 You can get a lot of money in extortion fees 0:16:48.440 --> 0:16:50.880 if you're the hacker. So, you know, one of the 0:16:50.880 --> 0:16:54.520 things that the cybersecurity industry, including this conference this coming week, 0:16:54.840 --> 0:16:57.479 you know, is really focused on, is, you know, technically, 0:16:57.560 --> 0:16:59.720 how do you get ahead of these attacks? Like are 0:16:59.760 --> 0:17:03.880 there technical countermeasures you can put in place to repel 0:17:04.080 --> 0:17:07.120 ransomware attacks? And it's a really hard problem because it's 0:17:07.119 --> 0:17:09.560 not so simple as saying there's a bad actor on 0:17:09.600 --> 0:17:12.240 my network, therefore they are not allowed to do anything. 0:17:12.680 --> 0:17:16.960 Bad actors routinely impersonate real users or steel credentials of 0:17:17.119 --> 0:17:20.480 real users. So if you're running a large network, the 0:17:20.520 --> 0:17:23.159 biggest threat to your network is going to be somebody 0:17:23.160 --> 0:17:25.879 on your network, that is using credentials that belong to 0:17:25.920 --> 0:17:28.840 your employees. So very very hard problem. There are no 0:17:29.000 --> 0:17:32.359 easy technical solutions. But that's one of the themes of 0:17:32.359 --> 0:17:35.440 this conference, and another which is kind of a perpetual theme. 0:17:36.280 --> 0:17:38.480 You know, ransomware is here to stay. And one of 0:17:38.520 --> 0:17:40.879 the things I like to describe is that we didn't 0:17:40.880 --> 0:17:44.320 have ransomware before we had crypto, Like we have crypto 0:17:44.400 --> 0:17:47.400 and now we have ransomware, and the two are interrelated 0:17:47.440 --> 0:17:50.919 because prior to crypto hacker, it was really hard for 0:17:50.920 --> 0:17:54.320 hackers to get paid. They would sell data on the 0:17:54.400 --> 0:17:58.040 dark web, and you know, they'd have fake bank accounts 0:17:58.040 --> 0:18:01.080 and it was very, very challenging to actually collect revenue 0:18:01.560 --> 0:18:04.200 from your hacks. But now that you have digital currencies, 0:18:04.200 --> 0:18:06.920 that's that's what's facilitating all of these attacks and making 0:18:06.960 --> 0:18:10.439 it easier for making it possible for criminals get paid. Okay, 0:18:10.560 --> 0:18:13.240 the other side of the ledger are espionage attacks, as 0:18:13.280 --> 0:18:16.440 you heard the Armiss CEO talk about, which is now 0:18:16.480 --> 0:18:20.760 that everything is digitized from obviously from telephones to cars, 0:18:20.840 --> 0:18:24.439 to transportation networks to you know, the power grid. You know, 0:18:24.480 --> 0:18:27.480 everything will have a digital footprint. So every country on 0:18:27.520 --> 0:18:30.480 the planet has intelligence services that's trying to build up 0:18:30.520 --> 0:18:35.040 their cyber capabilities to potentially disrupt their adversaries. And you 0:18:35.040 --> 0:18:37.960 know that can range from hacking into a power grid 0:18:38.280 --> 0:18:41.600 and not doing anything but positioning yourself so that if 0:18:41.640 --> 0:18:44.760 there is some sort of armed military conflict, you can 0:18:44.800 --> 0:18:47.720 flip a switch and turn off the lights. And those 0:18:47.760 --> 0:18:49.879 are the threats that people are trying to protect against. 0:18:50.080 --> 0:18:52.480 Yeah, and wow, that's the kind of head spinning list, 0:18:52.560 --> 0:18:54.760 isn't it, in terms of the threats that are out there. 0:18:54.840 --> 0:18:57.800 And you mentioned a little bit about the difficulties of 0:18:57.840 --> 0:19:01.280 how businesses come up, specifically business is with strategies to 0:19:01.320 --> 0:19:03.440 try to count these attacks. Maybe we can talk about 0:19:03.440 --> 0:19:06.480 that a bit more, because the thing that was extraordinary 0:19:06.560 --> 0:19:09.840 about the JLR hack in the UK was that the 0:19:09.880 --> 0:19:14.520 government agreed to an emergency loan for Jaguar land Rover 0:19:14.720 --> 0:19:17.320 so that it could pay its suppliers. They were worried 0:19:17.560 --> 0:19:21.960 about the fallout across the UK, and so that is 0:19:22.480 --> 0:19:24.040 something very novel as well. 0:19:24.119 --> 0:19:27.240 Yeah, the Jaguar hack was very significant in many ways, 0:19:27.440 --> 0:19:29.919 and we did some pretty great coverage of it, and 0:19:29.960 --> 0:19:32.760 as you mentioned, the most significant aspect of it was 0:19:33.040 --> 0:19:36.840 the UK government stepped in and underwrote an emergency two 0:19:36.840 --> 0:19:40.360 billion dollar loan to Jaguar land Rover, which by the way, 0:19:40.520 --> 0:19:45.400 is owned by a five hundred billion dollar foreign conglomerate, Caltata. 0:19:46.040 --> 0:19:48.760 You know, UK government underwrote that loan to bail out 0:19:48.760 --> 0:19:52.000 the company. It's not because the parent company couldn't pay. 0:19:52.440 --> 0:19:56.000 It was the concern that if this breach dragged out, 0:19:56.280 --> 0:19:58.639 you'd have people out of work for a long time, 0:19:58.840 --> 0:20:02.240 potentially forever, if the factories had to close. And it's 0:20:02.280 --> 0:20:04.200 the first time to our knowledge that we've seen a 0:20:04.240 --> 0:20:08.440 government underwrite a rescue of a ransomware victim, especially to 0:20:08.560 --> 0:20:11.840 this degree. You know, governments will often send their cyber 0:20:11.880 --> 0:20:14.679 experts into these you know, critical companies, you know, nationally 0:20:14.720 --> 0:20:18.240 important companies to help them investigate breaches. But you know 0:20:18.320 --> 0:20:20.479 now that the UK has kind of gotten into the 0:20:20.520 --> 0:20:26.040 business of underwriting the rescue packages for a ransomware victim. 0:20:26.320 --> 0:20:28.679 You know, it raises this question of precedent and it's like, 0:20:28.800 --> 0:20:30.760 is this what we're doing now and what are the 0:20:30.760 --> 0:20:33.600 implications of that? And I mean, to be clear, this 0:20:33.720 --> 0:20:36.080 is a loan that needs to be repaid. But when 0:20:36.200 --> 0:20:39.720 if you're a ransomware operator and you're a hacker. This 0:20:39.840 --> 0:20:42.440 is the best news you could have asked for, because 0:20:42.800 --> 0:20:46.320 you know, and you are basically guaranteed that the companies 0:20:46.320 --> 0:20:49.760 that you are hacking will survive long enough to potentially 0:20:49.760 --> 0:20:51.440 pay you, and that's what they're after. 0:20:52.160 --> 0:20:55.040 Yeah, if they dissrupt things enough that there would be 0:20:55.040 --> 0:20:56.399 a pay date at the end of it. You know, 0:20:56.920 --> 0:21:01.040 you've also covered the threats to buy things and critical 0:21:01.160 --> 0:21:05.560 financial infrastructure of particular interest. I imagine to our audience, 0:21:05.880 --> 0:21:09.960 how would you quantify and characterize the increase in hacks, 0:21:10.320 --> 0:21:13.160 especially from China, but maybe other countries. 0:21:13.280 --> 0:21:15.840 Yeah, this is such an interesting topic because whereas ransomware 0:21:15.880 --> 0:21:18.600 is in your face, I mean, security experts describe ransomware 0:21:18.920 --> 0:21:21.879 as an exit strategy. The exit strategy is announcing to 0:21:21.920 --> 0:21:24.359 the world that this has happened and then demanding payment, 0:21:24.560 --> 0:21:27.639 so everybody sees a ransomware attack. These attacks on the 0:21:27.640 --> 0:21:30.800 financial system, however, that we've been writing about largely are 0:21:30.800 --> 0:21:34.120 designed to be totally invisible. And you know, what hackers 0:21:34.160 --> 0:21:37.040 in those cases are after is not disruption. In fact, 0:21:37.080 --> 0:21:39.600 it's the opposite. What thereafter and that in those cases 0:21:39.600 --> 0:21:43.600 are intelligence, our information about how the financial system works. 0:21:43.920 --> 0:21:47.320 Who's under investigation who's under investigation for sanctions and things 0:21:47.359 --> 0:21:50.120 like that. You know, powers of the government, whatever government 0:21:50.160 --> 0:21:53.879 that is, US, UK, wherever governments have extraordinary powers to 0:21:54.040 --> 0:21:57.840 sanction individuals, and foreign governments that may be targets of 0:21:57.880 --> 0:22:02.800 those investigations, are extremely interested in understanding who's on that list, 0:22:03.160 --> 0:22:06.359 who's being investigated, what information do they have. So there's 0:22:06.400 --> 0:22:09.159