Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is Bloomberg Daybreak Weekend, our global look at the
Speaker 2: top stories in the coming week from our Daybreak anchors
Speaker 2: all around the world. Straight Ahead on the program, we'll
Speaker 2: look ahead to the final monetary policy decision from the
Speaker 2: Fed of twenty twenty five and how that could affect
Speaker 2: interest rates into the next year. I'm Nathan Hager in Washington.
Speaker 3: I'm Caline Hegger in London, where we're looking ahead to
Speaker 3: the black Hat cybersecurity conference in London.
Speaker 4: I'm Doug Prisner looking at why China's economy is stuck
Speaker 4: in deflation.
Speaker 2: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
Speaker 2: eleven three zero, New York, Bloomberg ninety nine to one.
Speaker 4: Washington, DC, Bloomberg ninety two to nine, Boston, DAB Digital Radio, London,
Speaker 4: Sirius XM one twenty one, and.
Speaker 2: Around the world on Bloomberg Radio, dot Com and the
Speaker 2: Bloomberg Business app. Good day to you. I'm Nathan Hager.
Speaker 2: We begin today's program with the Federal Reserve. The Central
Speaker 2: Bank holds its final two day policy meeting of twenty
Speaker 2: twenty five this week, issuing its final monetary policy decision
Speaker 2: of the year on Wednesday. So for more on the
Speaker 2: path ahead four interest rates, we are very pleased to
Speaker 2: be joined by Stuart Paul, us economist with Bloomberg Economics. Stuart,
Speaker 2: thanks for being with us. And it seems as though
Speaker 2: the market is all but fully priced in that we
Speaker 2: are going to get a rate cut this week. Did
Speaker 2: some of the private data that we've seen ahead of
Speaker 2: this decision sort of shake any of that, bet?
Speaker 5: I don't think so. When we look at some of
Speaker 5: the private sector data, including the ADP report showing a
Speaker 5: pretty cool labor market, and then some of the official
Speaker 5: data as well, relatively weak manufacturing in the month of September,
Speaker 5: import prices that were relatively dull. When we receive those
Speaker 5: data points earlier last week, it basically gave the green
Speaker 5: light for this rate cut. So I don't think that
Speaker 5: the Fed is going to be that concerned about whether
Speaker 5: it can defend its decision to cut when it meets
Speaker 5: this week. I think that the bigger conversation around the
Speaker 5: table at the FOMC meeting is going to be what
Speaker 5: message to send to the markets and what message to
Speaker 5: send to interested parties out there when it releases it's
Speaker 5: summary of economic projections. I think that's where we're going
Speaker 5: to see a more division and in fact, maybe a
Speaker 5: little bit of confusion.
Speaker 2: How so, I mean, I guess we have seen sort
Speaker 2: of diversion of thinking when it comes to where policy
Speaker 2: should go from even some of the FED speakers ahead
Speaker 2: of this meeting. But I mean, how much of a
Speaker 2: change could we see in the dot plot.
Speaker 5: I think it's going to be pretty significant in twenty
Speaker 5: twenty six. And I think that even more important than
Speaker 5: the dispersion of dots in the dot plot included in
Speaker 5: the summary of Economic projections, is to remember that the
Speaker 5: voters on the FMC next year are going to be
Speaker 5: shifting pretty dramatically. There is going to be a contingent
Speaker 5: of hawkish regional Fed bank presidents that become voters, and
Speaker 5: among them are Dallas FED President Laurie Logan, Cleveland FED
Speaker 5: President Beth Hammock. Those are some folks who were among
Speaker 5: the more hawkish, among the more hawkish and the more
Speaker 5: vocal FED speakers over the last several months, and when
Speaker 5: they become voters, it's going to be all the more
Speaker 5: important to try to identify which dots they are and
Speaker 5: I expect they're going to be among the more hawkish
Speaker 5: cluster when we look into twenty twenty six. A lot
Speaker 5: of attention has been put toward who the next FED
Speaker 5: chairman is going to be. But I think then more
Speaker 5: important actually than who the next FED chairman is is
Speaker 5: this point about division on the FED, because we're going
Speaker 5: to see a lot of it. We're going to see
Speaker 5: a growing division on the FED, and.
Speaker 2: We've even heard some concerns raised. I guess you could
Speaker 2: say about whether that next FED chair is going to
Speaker 2: be able to deliver the kind of rapid rate cuts
Speaker 2: that President Trump has been looking for. We heard from
Speaker 2: p Jim's Greg Peters just in the last couple of
Speaker 2: days saying, even if it is Kevin has it, the
Speaker 2: President's White House Economic advisor, he might not be able
Speaker 2: to get that kind of consensus. How do you see it.
Speaker 5: I think that's right. I think it's going to be
Speaker 5: difficult for the next FED chairman to build a coalition
Speaker 5: of voters that can show some sort of a united
Speaker 5: front around the pace of rate cuts. I think that's
Speaker 5: going to be true of any FED chairman. It seems
Speaker 5: as though a lot of attention over the last week
Speaker 5: has turned to whether or not somebody like Kevin Hassett,
Speaker 5: someone coming from the White House, has the credibility that
Speaker 5: the Fed will remain devoted to its two percent inflation target.
Speaker 5: Somebody like that has the credibility to keep markets calm.
Speaker 5: I will say that when the trial balloon was floated
Speaker 5: a couple of weeks ago. Now regarding Kevin Hassett as
Speaker 5: the finalist for the chairmanship, he passed the markets test
Speaker 5: with flying colors. Equities rallied, two and ten year rates fell.
Speaker 5: It's exactly what the White House wants to see. So
Speaker 5: as much as we've heard chatter over the last week
Speaker 5: questioning whether somebody like Hassett has the credibility to build
Speaker 5: a coalition or to maintain the FEDS two percent inflation target,
Speaker 5: it seems as though the market thinks he has enough credibility.
Speaker 5: It seems as though to me, no matter who the
Speaker 5: next FED chairman is, it's going to be difficult to
Speaker 5: build a coalition. I think that's just the nature of
Speaker 5: the evolving voting roster at the FOMC right now.
Speaker 2: So, given the evolving roster, how much attention should the
Speaker 2: markets be putting on chairman Powell's news conference after the
Speaker 2: decision on Wednesday.
Speaker 5: I think that markets will put a lot of weight
Speaker 5: on it. Basically, no matter what, he still is the
Speaker 5: person who will be leading the FOMC for pretty close
Speaker 5: to six months, and I think that the question is
Speaker 5: going to be around whether the FED will maintain any
Speaker 5: sort of cutting pace in the first half of next year,
Speaker 5: given the expectation that a new more dubbish chairman will
Speaker 5: take the reins starting in May. So I think that
Speaker 5: when we see this press conference from FED Chairman Powell
Speaker 5: on Wednesday, the question is really going to be what's
Speaker 5: it going to look like in January, what's it going
Speaker 5: to look like as we get towards the end of
Speaker 5: Q one and into Q two, What is the Board
Speaker 5: of Governors and what are the regional Fed bank presidents
Speaker 5: thinking about cuts in the first half of next year.
Speaker 5: Right now, our base case in Bloomberg Economics is for
Speaker 5: the FED to move more towards a quarterly cadence of
Speaker 5: quarter point cuts next year, and that's based on our
Speaker 5: expectations for economic fundamentals right now. I think that FED
Speaker 5: Chairman Powell is going to try his best to not
Speaker 5: show his hand in any one direction. But again when
Speaker 5: we just at the evolving roster, it's going to be
Speaker 5: very difficult next year to deliver quick rate cuts the
Speaker 5: kind of the president wants.
Speaker 2: Yeah, it is going to be a fascinating discussion and
Speaker 2: a fascinating final decision coming up later this week. Thank
Speaker 2: you for this, Stuart, really great having you on with us.
Speaker 2: That is Stuart paul Us, economist with Bloomberg Economics. We
Speaker 2: move next to more corporate earnings in the tech space.
Speaker 2: We hear from two big names on Wednesday, Oracle and Adobe.
Speaker 2: Let's bring in Bloomberg Intelligence technology analyst Anurag Rana from
Speaker 2: More on this latest round of tech results. Anurag, these
Speaker 2: are a couple of names that have kind of been
Speaker 2: hit pretty hard lately around the question about whether artificial
Speaker 2: intelligence valuations have gotten two stretch. So let's start with Oracle.
Speaker 2: How high is the bar for their earnings?
Speaker 6: So I think they have to come out and basically
Speaker 6: explain that the big backlock of orders that they have
Speaker 6: from open AI, how is that going to get funded
Speaker 6: and how is that going to get recognized into revenue.
Speaker 6: That is the single biggest question in our mind at
Speaker 6: this point, especially when you go back and look at
Speaker 6: the stock chart. It had a massive run up when
Speaker 6: they Oracle announced that big order book from open Aie.
Speaker 6: But in the last you could say, two months, two
Speaker 6: and a half months, there has been a lot of
Speaker 6: scrutiny in the market as to how some of this
Speaker 6: is going to get funded, and that I think is
Speaker 6: what has been being on the stock. So the management
Speaker 6: has to come and explain their strategy of data center
Speaker 6: expansion and where that money is going to come from.
Speaker 2: Yeah, to your point, I think we saw in just
Speaker 2: the last few days report that the cost of protecting
Speaker 2: Oracle's debt from default at its highest level in more
Speaker 2: than fifteen years. I mean, what kind of explanation can
Speaker 2: we expect for how Oracle can kind of service that.
Speaker 6: So one of the things you have to think about
Speaker 6: it is there is a lot of investor demand for
Speaker 6: anything that's related to data center expansion because I think
Speaker 6: people understand that's an area where you are looking act
Speaker 6: more and more build up over the next several years.
Speaker 6: So you know, whether it's private credit or whether it
Speaker 6: is private equity. A lot of these companies may be
Speaker 6: able to fund some of that expansion. But the big
Speaker 6: question is you know at what level, because one of
Speaker 6: the things is open AI has talked about, you know,
Speaker 6: several hundred billion dollar investments out in the public for
Speaker 6: those data centers, so the appetite is not so much.
Speaker 6: And also remember Oracle is not the one that's funding
Speaker 6: a lot of that from their own balance sheet or
Speaker 6: their cash flow. They go out in the market, they
Speaker 6: raise the funds with the help of a consortium, and
Speaker 6: that goes you know, into that special purpose vehicle that
Speaker 6: does not impact Oracle's balance sheet directly, but at the
Speaker 6: end of the day, they are the ones who will
Speaker 6: be recognizing some of the revenue from it, not just
Speaker 6: the investors. So they have to come out and explain
Speaker 6: a bunch of these things.
Speaker 2: Where do you see Oracle stacking up compared to some
Speaker 2: of the other hyper scalers. I mean, think of the
Speaker 2: Magnificent Seven all the time, and Oracle, of course isn't
Speaker 2: part of that cohort. Is it going to stay behind?
Speaker 6: So one of the things that we have talked about
Speaker 6: quite a bit over the last few years when it
Speaker 6: comes to cloud computing, there are three big players, Amazon
Speaker 6: being the biggest one, Microsoft after that, and then Google,
Speaker 6: you know, the third player. But because of this massive
Speaker 6: demand for AI infrastructure and AI infrastructure workloads, Oracle has
Speaker 6: really kicked up and become what we call us the
Speaker 6: fourth hyperscale cloud providers. And the big question is are
Speaker 6: they each other taking market share from each other? There
Speaker 6: is a little bit of that going along, but at
Speaker 6: the same time, the market has expanded very very strongly
Speaker 6: because one of the things that you have to do
Speaker 6: is when you're running an application like chat GPT, you
Speaker 6: will be running on a cloud infrastructure. You typically don't
Speaker 6: run that in somebody's internal data center. Same thing for
Speaker 6: an enterprise when they are expanding some of these AI workloads,
Speaker 6: cloud is usually where it's hosted. So when you take
Speaker 6: a look at that, the the end markets, which is
Speaker 6: cloud infrastructure, has actually grown quite nicely, which gives growth
Speaker 6: opportunities for all foward vendors and not just one or two.
Speaker 2: Let's talk about Adobe. Now, looking at a chart on
Speaker 2: that stock it's kind of upper left to lower right
Speaker 2: for the whole year here. So what are the expectations
Speaker 2: around Adobe's results?
Speaker 6: Yeah, I think that seems to be a big story
Speaker 6: when it comes to Adobe, that you know their lunch
Speaker 6: is going to get eaten up by AI related tools
Speaker 6: that are out there, free tools. So when you look
Speaker 6: at Adobe and you go back a few years before
Speaker 6: the launch of any large language models, this company used
Speaker 6: to trade even higher than Microsoft because of high free
Speaker 6: cash flow, the perception that nothing can happen to some
Speaker 6: of their marquee products, that is Photoshop or Acrobat, et cetera.
Speaker 6: But what has happened is when you're seeing these free
Speaker 6: products that can create images and videos, investors allverrid that
Speaker 6: their code business is going to get attacked and they
Speaker 6: won't be able to protect that. Now, when you look
Speaker 6: at their results, at least in the last three quarters,
Speaker 6: they have reported decent results, but at the same time,
Speaker 6: you know they have not seen any acceleration, and I
Speaker 6: think that's always brings that question mark. So we're going
Speaker 6: to see that a little bit of the same thing.
Speaker 6: They're going to come out talk about how they can
Speaker 6: grow next year, They're going to talk about their own
Speaker 6: AI products. The question is whether that's going to be
Speaker 6: enough to pacify this this little fear that's out there
Speaker 6: in the market that Adobe is a net casualty of
Speaker 6: AI related developments.
Speaker 2: Thanks for this on a rock, great having you with us.
Speaker 2: That's honorog Ran, a technology analyst for Bloomberg Intelligence, and
Speaker 2: coming up on Bloomberg Daybreak weekend, we look ahead to
Speaker 2: the black Hat Cybersecurity Conference in London. I'm Nathan Hager,
Speaker 2: and this is Bloomberg. This is Bloomberg day Break weekend,
Speaker 2: our global look ahead at the top stories for investors
Speaker 2: in the coming week. I'm Nathan Hager in Washington. Up
Speaker 2: later in the program, we'll preview upcoming data out of
Speaker 2: China in the health of the Chinese economy. But first,
Speaker 2: cybersecurity challenges facing Europe are clear. Airports, businesses, financial institutions
Speaker 2: are all at risk from an increase in cyber attacks
Speaker 2: by criminals and state actors. That's the black drop to
Speaker 2: the Black Hat Europe conference in London, which gathers top
Speaker 2: professionals for briefings on modern day strategies to counter those
Speaker 2: threats online. Let's get more from Bloomberg Daybreak Europe banker
Speaker 2: Caroline Hepger in London, Nathan.
Speaker 3: The Black Hat cyber Security Conference in London over the
Speaker 3: next few days will look at the latest trends in
Speaker 3: cyber security, as attacks are becoming increasingly costly for governments
Speaker 3: and businesses, sometimes into the billions. Briefings will be held
Speaker 3: on how to bolster sign defense strategies in both the
Speaker 3: public and private sector. The Bloomberg London Tech Summit recently
Speaker 3: featured interviews with top CEOs on how businesses can build
Speaker 3: resilience in a rapidly changing threat landscape. Speaking at that summit,
Speaker 3: Yevgeny Dibrov, who is the CEO of the cyber security
Speaker 3: firm Armis, who explained why there's been such a surge
Speaker 3: in interest in the company, the.
Speaker 7: Great demand that we are witnessing right now because of
Speaker 7: attacks on critical infrastructure. Basically all the geopolitical tensions Russia, Iran,
Speaker 7: North Korea, everybody. You see a lot of targeting infrastructure,
Speaker 7: targeting national infrastructure, the most critical areas from airports to
Speaker 7: grids to manufacturing in the US, in the Mia, we
Speaker 7: see a lot of UK as well.
Speaker 3: That was Armis CEO Yevgeny Dibrov being interviewed there by
Speaker 3: Bloomberg's senior cyber security reporter Jordan Robertson, and Jordan is
Speaker 3: with me. Great to have you on the program. It
Speaker 3: has been such an important and interesting year, hasn't it?
Speaker 3: For your beat? The era of rapid digital advancement of AI.
Speaker 3: Can you just talk to us about the elevated kind
Speaker 3: of cyber threats levels that we're seeing in the UK
Speaker 3: in Europe. I mean you heard it in that interview
Speaker 3: that you did. It's everything from big companies to personal
Speaker 3: data to airports. This ahead of discussions at black Hats.
Speaker 8: Sure, yeah, thanks for having me on. You know, if
Speaker 8: you take a look at the conference agenda for this
Speaker 8: Blackhat conference, I mean, first of all, it's a very
Speaker 8: technical conference. It's technical content for technical people, but the
Speaker 8: overarching themes are still the same that people would kind
Speaker 8: of recognize. And there are two main themes that are
Speaker 8: happening in cybersecurity right now. One and perhaps the biggest
Speaker 8: one is ransomware. Computer hacks used to be pretty secret things.
Speaker 8: Companies by and large could keep these events secret unless
Speaker 8: certain data was leaked, and they could prove that certain
Speaker 8: data was leaked, personal information, things like that. But most
Speaker 8: cyber attacks were secret and companies were allowed to do that.
Speaker 8: You can't keep secret a ransomware attack because your business stops.
Speaker 8: And we saw that this year with the you know,
Speaker 8: the attacks on m ands. We saw that this year
Speaker 8: with the attacks on Jaguar Land Rover, you know, which
Speaker 8: brought really significant critical operations to a halt. And this
Speaker 8: idea of ransomware, which very often is executed by by
Speaker 8: young people, by kids. In many cases you're talking about teenagers.
Speaker 8: You're talking about young people who connect online and kind
Speaker 8: of I guess, get radicalized if you will, and see
Speaker 8: this as a real business, business opportunity. There are millions
Speaker 8: of pounds to be made through some of these hacks.
Speaker 8: These attacks are very easy to do, they're extremely disruptive.
Speaker 8: You can get a lot of money in extortion fees
Speaker 8: if you're the hacker. So, you know, one of the
Speaker 8: things that the cybersecurity industry, including this conference this coming week,
Speaker 8: you know, is really focused on, is, you know, technically,
Speaker 8: how do you get ahead of these attacks? Like are
Speaker 8: there technical countermeasures you can put in place to repel
Speaker 8: ransomware attacks? And it's a really hard problem because it's
Speaker 8: not so simple as saying there's a bad actor on
Speaker 8: my network, therefore they are not allowed to do anything.
Speaker 8: Bad actors routinely impersonate real users or steel credentials of
Speaker 8: real users. So if you're running a large network, the
Speaker 8: biggest threat to your network is going to be somebody
Speaker 8: on your network, that is using credentials that belong to
Speaker 8: your employees. So very very hard problem. There are no
Speaker 8: easy technical solutions. But that's one of the themes of
Speaker 8: this conference, and another which is kind of a perpetual theme.
Speaker 8: You know, ransomware is here to stay. And one of
Speaker 8: the things I like to describe is that we didn't
Speaker 8: have ransomware before we had crypto, Like we have crypto
Speaker 8: and now we have ransomware, and the two are interrelated
Speaker 8: because prior to crypto hacker, it was really hard for
Speaker 8: hackers to get paid. They would sell data on the
Speaker 8: dark web, and you know, they'd have fake bank accounts
Speaker 8: and it was very, very challenging to actually collect revenue
Speaker 8: from your hacks. But now that you have digital currencies,
Speaker 8: that's that's what's facilitating all of these attacks and making
Speaker 8: it easier for making it possible for criminals get paid. Okay,
Speaker 8: the other side of the ledger are espionage attacks, as
Speaker 8: you heard the Armiss CEO talk about, which is now
Speaker 8: that everything is digitized from obviously from telephones to cars,
Speaker 8: to transportation networks to you know, the power grid. You know,
Speaker 8: everything will have a digital footprint. So every country on
Speaker 8: the planet has intelligence services that's trying to build up
Speaker 8: their cyber capabilities to potentially disrupt their adversaries. And you
Speaker 8: know that can range from hacking into a power grid
Speaker 8: and not doing anything but positioning yourself so that if
Speaker 8: there is some sort of armed military conflict, you can
Speaker 8: flip a switch and turn off the lights. And those
Speaker 8: are the threats that people are trying to protect against.
Speaker 3: Yeah, and wow, that's the kind of head spinning list,
Speaker 3: isn't it, in terms of the threats that are out there.
Speaker 3: And you mentioned a little bit about the difficulties of
Speaker 3: how businesses come up, specifically business is with strategies to
Speaker 3: try to count these attacks. Maybe we can talk about
Speaker 3: that a bit more, because the thing that was extraordinary
Speaker 3: about the JLR hack in the UK was that the
Speaker 3: government agreed to an emergency loan for Jaguar land Rover
Speaker 3: so that it could pay its suppliers. They were worried
Speaker 3: about the fallout across the UK, and so that is
Speaker 3: something very novel as well.
Speaker 8: Yeah, the Jaguar hack was very significant in many ways,
Speaker 8: and we did some pretty great coverage of it, and
Speaker 8: as you mentioned, the most significant aspect of it was
Speaker 8: the UK government stepped in and underwrote an emergency two
Speaker 8: billion dollar loan to Jaguar land Rover, which by the way,
Speaker 8: is owned by a five hundred billion dollar foreign conglomerate, Caltata.
Speaker 8: You know, UK government underwrote that loan to bail out
Speaker 8: the company. It's not because the parent company couldn't pay.
Speaker 8: It was the concern that if this breach dragged out,
Speaker 8: you'd have people out of work for a long time,
Speaker 8: potentially forever, if the factories had to close. And it's
Speaker 8: the first time to our knowledge that we've seen a
Speaker 8: government underwrite a rescue of a ransomware victim, especially to
Speaker 8: this degree. You know, governments will often send their cyber
Speaker 8: experts into these you know, critical companies, you know, nationally
Speaker 8: important companies to help them investigate breaches. But you know
Speaker 8: now that the UK has kind of gotten into the
Speaker 8: business of underwriting the rescue packages for a ransomware victim.
Speaker 8: You know, it raises this question of precedent and it's like,
Speaker 8: is this what we're doing now and what are the
Speaker 8: implications of that? And I mean, to be clear, this
Speaker 8: is a loan that needs to be repaid. But when
Speaker 8: if you're a ransomware operator and you're a hacker. This
Speaker 8: is the best news you could have asked for, because
Speaker 8: you know, and you are basically guaranteed that the companies
Speaker 8: that you are hacking will survive long enough to potentially
Speaker 8: pay you, and that's what they're after.
Speaker 3: Yeah, if they dissrupt things enough that there would be
Speaker 3: a pay date at the end of it. You know,
Speaker 3: you've also covered the threats to buy things and critical
Speaker 3: financial infrastructure of particular interest. I imagine to our audience,
Speaker 3: how would you quantify and characterize the increase in hacks,
Speaker 3: especially from China, but maybe other countries.
Speaker 8: Yeah, this is such an interesting topic because whereas ransomware
Speaker 8: is in your face, I mean, security experts describe ransomware
Speaker 8: as an exit strategy. The exit strategy is announcing to
Speaker 8: the world that this has happened and then demanding payment,
Speaker 8: so everybody sees a ransomware attack. These attacks on the
Speaker 8: financial system, however, that we've been writing about largely are
Speaker 8: designed to be totally invisible. And you know, what hackers
Speaker 8: in those cases are after is not disruption. In fact,
Speaker 8: it's the opposite. What thereafter and that in those cases
Speaker 8: are intelligence, our information about how the financial system works.
Speaker 8: Who's under investigation who's under investigation for sanctions and things
Speaker 8: like that. You know, powers of the government, whatever government
Speaker 8: that is, US, UK, wherever governments have extraordinary powers to
Speaker 8: sanction individuals, and foreign governments that may be targets of
Speaker 8: those investigations, are extremely interested in understanding who's on that list,
Speaker 8: who's being investigated, what information do they have. So there's
Speaker 8: so much, you know, reporting this year focused largely on
Speaker 8: the US Treasury, which has suffered a series of very
Speaker 8: devastating espionage attacks in recent years. And what we looked
Speaker 8: at was how does the US Treasury, which has a
Speaker 8: large cybersecurity team, which has a great budget for cybersecurity
Speaker 8: and increased budget, you know, for this this kind of work,
Speaker 8: how do they keep getting hacked at a very deep
Speaker 8: level by Russia and China in particular. And the answer
Speaker 8: is a little bit complicated. But one thing that you
Speaker 8: take away from it is there is no silver bullet
Speaker 8: in cybersecurity. If there were, everybody would use it. There
Speaker 8: are best practices, there are approaches, there are techniques you
Speaker 8: can use, but there is no silver bullet. And you know,
Speaker 8: so what you're left with is whether it's ransomware or
Speaker 8: whether it's an espionage attack. You know, cybersecurity is an
Speaker 8: even more difficult problem now than it was before. Even
Speaker 8: though we have more cybersecurity protections, we have more venus.
Speaker 8: Like the Black aut conference, there will be it's a
Speaker 8: vendor conference with research as part of it, so they're
Speaker 8: going to be there selling cybersecurity technologies that you know
Speaker 8: they all do something. But if there were a technology
Speaker 8: that could cure cybersecurity attacks, you know, everybody would obviously
Speaker 8: would be the most valuable company in the world.
Speaker 3: It's the game of chase, isn't it? With all crime?
Speaker 3: Is how you know all perhaps criminal and other activities,
Speaker 3: how to keep pays. A final word then, too, on
Speaker 3: AI and what difference artificial intelligence is making, because this
Speaker 3: is another area that you've reported on in a big
Speaker 3: way over the past few months.
Speaker 8: So what I've what I've been doing the past couple
Speaker 8: of years is with most sources I meet, and these
Speaker 8: are your senior cybersecurity people at governments and companies or whatever,
Speaker 8: and I will ask I will try to ask every
Speaker 8: single one of them, how is your organization using AI today?
Speaker 8: Like practical examples, not like experimenting, but like practical examples,
Speaker 8: how are you using AI? It's been really revealing, Like
Speaker 8: most of them have said, not really at all, very
Speaker 8: surprising to me, with some exceptions. And the reason that's
Speaker 8: surprising when it comes to cybersecurity, you're dealing with hackers
Speaker 8: the way it's been explained to me. You're dealing with
Speaker 8: hackers that in most cases are trying really really hard
Speaker 8: not to be detected. If you're writing that code to
Speaker 8: perform those attacks, you're not going to outsource that to
Speaker 8: a large language model which can hallucinate and make mistakes
Speaker 8: and maybe blow up your operation. So we're seeing that
Speaker 8: there's not a lot of utility for these llms in
Speaker 8: custom hacks, espionage attacks, really high level stuff. There's too
Speaker 8: many uncertainties around it. Where we are seeing AI being
Speaker 8: used is especially true in spamming. So if you're doing
Speaker 8: a spam operation. It's kind of a funny story is
Speaker 8: we're seeing increased spam activity in countries that previously didn't
Speaker 8: have a lot of it. Japan comes up a lot,
Speaker 8: so places where you have character based languages that are
Speaker 8: not really used elsewhere in the world. Some of these
Speaker 8: countries have seen very very low rates of spam for decades.
Speaker 8: There just isn't a lot of that activity because crafting
Speaker 8: the messages in the local language is very challenging. You
Speaker 8: have to have subject matter experts. Large language models have
Speaker 8: really helped the hackers in that regard, Jordren.
Speaker 3: That means many more stories I expect from you and
Speaker 3: from your colleagues. Thank you for being with me. Been
Speaker 3: a hugely fascinating conversation about cyber security, Bloomberg's senior cyber
Speaker 3: security report at children Robertson. Thank you, and we'll have
Speaker 3: full coverage on Bloomberg Radio of developments on this topic
Speaker 3: and the black Hat cyber security conference in London in
Speaker 3: the coming days. I'm Caroline Hepcker here in London. You
Speaker 3: can catch us every weekday morning for Bloomberg Daybreak Europe,
Speaker 3: beginning at six am in London. That's one am on
Speaker 3: wol Street.
Speaker 2: Nathan, Thanks Caroline, and coming up on Bloomberg day Break Weekend,
Speaker 2: we take a look at why China's economy is stuck
Speaker 2: in deflation. I'm Nathan Hager, and this is Bloomberg. This
Speaker 2: is Bloomberg Daybreak Weekend, our global look ahead of the
Speaker 2: top stories for investors in the coming week. I'm Nathan
Speaker 2: Hager in Washington. This week China releases the latest readings
Speaker 2: on consumer and producer prices. For more, Let's go to
Speaker 2: Bloomberg's Doug Prisner, host of the Daybreak Asia podcast.
Speaker 4: Nathan the Chinese economy is caught in a deflationary trap,
Speaker 4: and the factors that led to steadily declining prices appear
Speaker 4: to be firmly entrenched. Bloomberg Economics is saying it's going
Speaker 4: to be tough to shake and to make matters worse.
Speaker 4: Economic growth in China in the current quarter has been weak.
Speaker 4: Let's bring in Bloomberg economist Eric Zu, who covers China
Speaker 4: and other economies in the Asia Pacific. Eric joins us
Speaker 4: from Hong Kong. Eric, thank you so much for making time.
Speaker 4: This period of deflation in China has been going on,
Speaker 4: as we know for several years. Why the stubbornness.
Speaker 9: I think the reason is the demand side, so the
Speaker 9: consumer side, business side, I mean the demand domestic demand
Speaker 9: is too weak, so it's not enough to you know,
Speaker 9: driving and sustain inflation especially. I think a key issue
Speaker 9: the confidence here. So we see lots of data, you know,
Speaker 9: see the consumer they're deleveraging, corporation they're also delaverging, so
Speaker 9: noing is willing to borrow, you know, to expand consumption
Speaker 9: spend investment. So there are lots of downward pressure on
Speaker 9: the pricess on the from the domestic side. So I
Speaker 9: think so people are over anxiety, they overwork, so basically
Speaker 9: they don't have time to consume. And at the same time,
Speaker 9: you know, the income is slowing, you know, the job
Speaker 9: looks are not looking great. So people are very cautious,
Speaker 9: you know, on spending, and if they have any you know, money,
Speaker 9: they would rather you know, say for the future. Right
Speaker 9: in the case I lose my job or I got
Speaker 9: income cut, so it's it's better to saving for you know,
Speaker 9: in a certain future rather than spend whatever I have
Speaker 9: right now. So I think that's long a deep rooted
Speaker 9: issue which is creating a very deflationary economy right now.
Speaker 4: At the same time, I think we need to mention
Speaker 4: the issue of excess factory capacity, and this is something
Speaker 4: that many of China's trading partners have been critical of China,
Speaker 4: essentially exporting deflation.
Speaker 9: They're you know blaming China for you know, down pins
Speaker 9: of chief goods into their country and you know, taking
Speaker 9: their markets. So but just at the same time, I
Speaker 9: think the key issue is China's although trying to have
Speaker 9: a very big domestic market, but just right now that
Speaker 9: demand is too slow, nobody willing to spend, so they
Speaker 9: cannot digest or the production within the country.
Speaker 4: Under these circumstances, Eric, do you believe it's possible for
Speaker 4: China to achieve that growth target of around five percent
Speaker 4: or will a lot more be required in terms of stimulus.
Speaker 9: I think in sery it's possible. You see this year,
Speaker 9: so although the four Q the last quarter, I think
Speaker 9: the data is quite weak, but they basically have done
Speaker 9: that within the first three quarters or within the first
Speaker 9: half of the year, so I think it's probably the same,
Speaker 9: you know style next year. They want front load some stimulus,
Speaker 9: you know, at the beginning of the year, make sure
Speaker 9: we have a strong first half. Then on the second
Speaker 9: half they might you know, relax the momentum a little bit.
Speaker 9: But I think in theory we do not really think
Speaker 9: China needs to maintain a five percent every year. So
Speaker 9: if you look at the five year plan they just
Speaker 9: release in October, some reading is that if you still
Speaker 9: want to achieve the twenty thirty five, the develpment go.
Speaker 9: I think it's a mostly you just need four point
Speaker 9: five percent girls over the next decade. So I think
Speaker 9: probably next year they're still going to maintain five percent
Speaker 9: girls target, but I think further on they might gradually,
Speaker 9: you know, be more relaxed on the girls time. It's
Speaker 9: no longer I don't think five percent is a must
Speaker 9: hit target. Maybe next year, but in the future years,
Speaker 9: I think they want to give more room, even solve
Speaker 9: the language, which means we no longer have to hit
Speaker 9: a hot target of five percent. They might you know,
Speaker 9: change your language like a range, right, we will have
Speaker 9: a range target instead of a very hard five percent target.
Speaker 4: So help me understand how the currency enters into all
Speaker 4: of this. Lately, the Chinese you want has been stronger,
Speaker 4: particularly against the dollar, and if anything, you would think
Speaker 4: that authorities in China would want to slow that down
Speaker 4: just a bit.
Speaker 9: I don't think the government, you know, will allow a
Speaker 9: very quick appression, just like they won't let depreciation to
Speaker 9: happen very quickly. So I think the government is okay
Speaker 9: with you know, appreasion, appreciation or depreciat They just don't
Speaker 9: like hit a very sharp one way, you know movement,
Speaker 9: so they're more like, you know, you can you know,
Speaker 9: gradually do that. But I think that the fundamental reason
Speaker 9: is one is the weaker dollar so globally because of
Speaker 9: the US policy. And another thing is I think it's
Speaker 9: some funds coming to China, you know, betting on China's
Speaker 9: tech boom. And also the tear side, the China US
Speaker 9: relations seems you know, in quiet a periodore right now.
Speaker 9: So I think before the next excalation next year probably so,
Speaker 9: I think it's will be give a window for the currency,
Speaker 9: Chinese currency to gain stronger. But on the PBOC side,
Speaker 9: I think they will only try to manage this to
Speaker 9: happen in a you know, slow motion, not overnight.
Speaker 4: So if you had to speculate on what more stimulus
Speaker 4: might look like, give me some possibilities, what might Beijing offer?
Speaker 9: Yeah, I think next year it's probably quite similar to
Speaker 9: this year. I think on the monetor side, they're doing
Speaker 9: to be some monist modest eating you know, interestry cards
Speaker 9: and the triple our cards. I think it's more emphasis
Speaker 9: on the fiscal side, So like this year, I think
Speaker 9: again next year they will do some short term consumption tuments, right,
Speaker 9: the subsidies for trading program. And also I would like
Speaker 9: to see you know more some long term structure, you know,
Speaker 9: measures like I just mentioned, you know, more subsidy for childcare,
Speaker 9: for elderly care for you know, services consumption, so which
Speaker 9: can help consumers ease their living off course burdens. So
Speaker 9: I think if the government continued to do that this,
Speaker 9: you know, in a sustainable way, that will give consumer
Speaker 9: more confidence. Okay, the government really you know, cared about
Speaker 9: consumption and they want to support us. Although the amount
Speaker 9: may not be such big, but you add this at
Speaker 9: that together, I think it can create you know, more
Speaker 9: stumulus for for for the consumption next year.
Speaker 4: As we know, the weakness of the property market has
Speaker 4: been central to the problems with Chinese an. Can you
Speaker 4: envision some sort of recovery that may take place, let's
Speaker 4: say in twenty twenty six.
Speaker 9: Depends how defire recovery. So my definition of recovery is,
Speaker 9: you know, like the government's saying, holt in the decline.
Speaker 9: So if we can achieve to you know, decline, you know,
Speaker 9: decline less than this year, so I will I think
Speaker 9: that of progress, and I think that's also the target
Speaker 9: of the government. I think they they're okay, you know,
Speaker 9: with the correction in the property market. But the bottom
Speaker 9: line is there are no collapse. So as long as
Speaker 9: you know, the adjustment is milder than this year, I
Speaker 9: think they will feel comfortable. But that being said, I
Speaker 9: think in the near term they still want to you know,
Speaker 9: prevent a very sharp you know slow down, and they
Speaker 9: want to you know, put a flaw in the market,
Speaker 9: right so you can, you can, you can go downward,
Speaker 9: but just like you know, five percent or ten percent down,
Speaker 9: it's okay, but like twenty thirty percent, I think that
Speaker 9: will create monitors for the governments. So I think we
Speaker 9: must still see some support measures in the new term,
Speaker 9: so some you know relaxing more mortgage relaxation and the
Speaker 9: more you know, just reducing the transaction costs, so which
Speaker 9: can help, you know, stimulate the demand a little bit,
Speaker 9: you know, trying to stabilize the market. But I don't
Speaker 9: think the correction will be over next year. We still
Speaker 9: we're going to still see the markets down, but probably
Speaker 9: the magnitude of downwardjustment will be bounded than this year.
Speaker 9: So that's where still be some progress.
Speaker 4: Eric will leave it there, thank you so very much.
Speaker 4: Bloomberg economist Eric Ju from Hong Kong. We turn to
Speaker 4: digital currency next and the firm you Trip. This is
Speaker 4: a fintech platform based in Singapore and it's known for
Speaker 4: a multi currency travel wallet. Well now you Trip is
Speaker 4: planning an expansion into Australia as it looks to target
Speaker 4: that outbound travel market. We caught up with you Trip
Speaker 4: co founder and CEO Secilia Chew about her company's growth strategy.
Speaker 4: She spoke with Bloomberg TV host April hon and Shay
Speaker 4: on talk to us.
Speaker 10: About why Australia. Why do you see so much opportunity
Speaker 10: in that market? Yeah? Absolutely. You Trip is a multi
Speaker 10: currency digital wallet that comes with a travel CUD, so
Speaker 10: users can actually use us to buy anything online offline
Speaker 10: around the world in any currencies at the best ethics rates.
Speaker 1: We started a.
Speaker 10: Business seven years ago here in Singapore twenty eighteen, and
Speaker 10: now we are category leaders in both Singapore Thailand, serving
Speaker 10: millions of travelers and Australia. It's a really important and
Speaker 10: strategic market for us. What we are committed to do
Speaker 10: is actually to invest into the market for.
Speaker 1: The long term.
Speaker 10: Australians love to travel, just like many of us. You know,
Speaker 10: every year there's more than twelve million people going overseas
Speaker 10: and spending more than fifty billion dollars on this category.
Speaker 10: We think it's going to be such a strategic choice
Speaker 10: for us.
Speaker 1: To be there.
Speaker 10: And many of the people also tends to make longer trips.
Speaker 10: You know what we saw in Singapore Thailand, we tend
Speaker 10: to travel about six to seven days each time. For Australians,
Speaker 10: they like to make longer trips like fifteen days on
Speaker 10: average each time. So I would say that, you know,
Speaker 10: for our no fee proposition, best ethics race, we hope
Speaker 10: we can actually make a meaningful impact on how they
Speaker 10: travel and how they spend. That's in Australia is a
Speaker 10: market where we do have already quite long established local
Speaker 10: grown players. How do you expect to differentiate yourself? So
Speaker 10: absolutely right, you know, in terms of the banks who
Speaker 10: also might have a very similar offering to us, I
Speaker 10: would say we differentiate ourselves with our laser focus on
Speaker 10: the travel assignment, on the crossbord assignment. So when you
Speaker 10: really take a look at the big banks, right, so
Speaker 10: they do many things. They have saving products, they have
Speaker 10: lending products, they have mortgages. They might have twenty cuts
Speaker 10: in just the cut portfolios. So how we differentiate it's
Speaker 10: over the last seven years we actually have created and
Speaker 10: optimized our business model, our pricing, our partnership network, and
Speaker 10: also our product features to be sure that we actually
Speaker 10: offer the best and most competitive products for travelers in
Speaker 10: any of our markets.
Speaker 1: So, Cilia, that sounds like you're going to need a
Speaker 1: lot of employees to do all of that. Your expansion
Speaker 1: seems to be accelerated at this point. What does your
Speaker 1: workforce look like? Are you hiring more white regions? Are
Speaker 1: you putting more people in So.
Speaker 10: A key part of our market expansion strategy is localization.
Speaker 10: So of course, over the years, we now have three
Speaker 10: hundred people in the business and we're growing in size.
Speaker 10: But for Australia, we have established a office, we are
Speaker 10: building up our team, we already have boots on the ground,
Speaker 10: and most importantly, we are going to do much more
Speaker 10: in the market. So we are going to have partnerships team,
Speaker 10: we are going to have customer operations, we are going
Speaker 10: to have product compliance, marketing, really all aspects of the business.
Speaker 10: So I would say localization is a key aspect when
Speaker 10: we think about our strategy going forward, when we think
Speaker 10: about growth, because it's very important for us to show
Speaker 10: that deep understanding and also appreciation of the local preferences
Speaker 10: and also the local culture and people.
Speaker 4: That was you Trip. CEO Cecilia Chew speaking with Bloomberg
Speaker 4: TV host April Hong and Sherry On and I'm Doug Kristner.
Speaker 4: You can catch us weekdays for the Daybreak Asia podcast.
Speaker 4: It's available wherever you get your podcast.
Speaker 2: Nathan, thanks Doug, and that does it for this edition
Speaker 2: of Bloomberg day Break Weekend. Join us again Monday morning
Speaker 2: at five am Wall Street Time for the latest sun
Speaker 2: markets overseas and the news you need to start your day.
Speaker 2: I'm Nathan Hager. Stay with us. Top stories and global
Speaker 2: business headlines are coming up right now