WEBVTT - Fed Will Struggle to Cut Balance Sheet to $3 Trillion (Podcast) 0:00:05.800 --> 0:00:08.360 Welcome to the Bloomberg p m L Podcast. I'm pim 0:00:08.400 --> 0:00:11.200 Fox along with my co host Lisa A. Brahmowitz. Each 0:00:11.240 --> 0:00:14.440 day we bring you the most important, noteworthy, and useful 0:00:14.480 --> 0:00:17.079 interviews for you and your money, whether you're at the 0:00:17.120 --> 0:00:20.360 grocery store or the trading floor. Find the Bloomberg p 0:00:20.520 --> 0:00:32.760 m L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. 0:00:32.840 --> 0:00:35.800 Joining us now is Nathan Sheets, chief economist for pe 0:00:35.960 --> 0:00:39.760 JIM Fixed Income, helping to manage more than seven hundred 0:00:39.760 --> 0:00:42.400 billion dollars. They are based in Newark, New Jersey. He 0:00:42.479 --> 0:00:45.280 joins us here in studio. Nathan Sheets, thank you very 0:00:45.360 --> 0:00:47.559 much for being here. Maybe you could just give us 0:00:47.640 --> 0:00:51.600 your reaction to yesterday's Federal Reserve activity and what you 0:00:51.720 --> 0:00:56.480 think the Fed will do in T nine. So it's uh, 0:00:56.640 --> 0:01:00.280 it's a pleasure to be with you this morning. Uh, 0:01:00.360 --> 0:01:04.200 the Fed took a careful look at the US economy 0:01:04.240 --> 0:01:06.080 and I think on the one hand, they say, well, 0:01:06.120 --> 0:01:10.440 the consumer looks pretty good, and uh, the unemployment rate 0:01:10.440 --> 0:01:12.839 in the labor market they're looking pretty good, and there's 0:01:12.959 --> 0:01:17.080 ongoing fiscal stimulus. So the near term growth look outlook 0:01:17.240 --> 0:01:21.000 is is pretty solid. Now at the same time, they 0:01:21.040 --> 0:01:26.160 also see a housing market the softening and a substantial 0:01:26.520 --> 0:01:32.040 increase in market volatility and concerns in financial markets about 0:01:32.080 --> 0:01:35.480 the medium to long run outlook. And consistent with that, 0:01:35.600 --> 0:01:39.200 the Fed notch down its expectations as to what it 0:01:39.240 --> 0:01:43.000 would need to do for monetary policy and the number 0:01:43.040 --> 0:01:46.400 of rate hikes next year. And uh, you know, I 0:01:46.440 --> 0:01:51.800 think most likely they'll do what they're suggesting in the dots. 0:01:52.280 --> 0:01:56.000 So I'm prepared and expecting a couple of a couple 0:01:56.040 --> 0:01:58.600 of rate hikes next year. But the Fed will be 0:01:58.720 --> 0:02:02.920 very data dependent. Oh, look and see where the economy 0:02:03.120 --> 0:02:06.640 is and whether things are evolving as well as they 0:02:06.680 --> 0:02:09.120 think they will. You know, the focus really after the 0:02:09.120 --> 0:02:11.440 press conference was on the balance sheet and the fact 0:02:11.440 --> 0:02:15.680 that Fed share Powell seemed to dismiss concerns that a 0:02:15.880 --> 0:02:19.080 rolloff of the four trillion dollar federal reserve balance she 0:02:19.200 --> 0:02:22.919 was having a disproportionate effect on markets. Now he seemed 0:02:22.960 --> 0:02:24.560 to say, you know what, this has been put on 0:02:24.600 --> 0:02:27.080 a preset course. We're fine with it, and we're going 0:02:27.120 --> 0:02:29.680 to just focus on rate hikes. Is he wrong? Is 0:02:29.680 --> 0:02:33.600 he too sanguine about the effect here? So? Uh, certainly 0:02:33.720 --> 0:02:36.240 there have been pressures at the short end of the 0:02:36.320 --> 0:02:40.760 yield curve this year, and my reading is that bills 0:02:40.840 --> 0:02:45.320 issue once and some of the after effects of of 0:02:45.800 --> 0:02:49.320 the tax reform are at work. But I think the 0:02:49.360 --> 0:02:53.760 fact that bank reserves in the system are steadily falling 0:02:53.800 --> 0:02:58.639 and likely to continue to fall are also a factor. 0:02:59.120 --> 0:03:01.800 But I think what we're seeing here is the Federal 0:03:01.840 --> 0:03:07.560 Reserve has meaningful political incentives to try to get the 0:03:07.639 --> 0:03:11.880 balance sheet down to the three trillion dollar range that 0:03:12.680 --> 0:03:15.880 the j. Powell told car Wait hold on a second, 0:03:15.880 --> 0:03:18.000 three trillion dollars. If we found that out, that would 0:03:18.000 --> 0:03:21.079 be news. If he confirmed that that was their end target, 0:03:21.440 --> 0:03:24.240 that would actually be even more hawkish for markets. So 0:03:24.400 --> 0:03:27.040 I think that they want to get as close to 0:03:27.160 --> 0:03:32.000 that as they can without creating disruptions in that market 0:03:32.560 --> 0:03:36.160 now in order to to to continue to lean into it. 0:03:36.560 --> 0:03:38.960 I think he's got it for now. Say we're going 0:03:39.040 --> 0:03:42.400 to continue to reduce the balance sheet now. As two 0:03:42.440 --> 0:03:45.800 thousand nineteen unfolds, I'd expect there will be a conversation. 0:03:46.320 --> 0:03:49.120 But the make no mistake, a big balance sheet is 0:03:49.120 --> 0:03:52.280 a political risk for the Federal Reserve. I think they're 0:03:52.360 --> 0:03:55.400 very worried about an interview with the Senate Banking Committee 0:03:55.640 --> 0:03:58.080 where let's say there's a trillion and a half dollars 0:03:58.440 --> 0:04:01.320 uh a bank where reserves out there, and the Fed 0:04:01.360 --> 0:04:04.160 funds rates at three percent, and the members of the 0:04:04.200 --> 0:04:07.720 committee are saying, Mr Chairman, why are you paying the 0:04:07.800 --> 0:04:11.840 US banks forty five billion dollars a year? That's money 0:04:11.880 --> 0:04:13.960 out of the pocket of the U S tax beer. 0:04:14.280 --> 0:04:16.960 That's the that's the downside with the big balance sheet? 0:04:17.920 --> 0:04:20.760 Is there a downside that we enter a period of 0:04:20.800 --> 0:04:24.600 even greater dollar shortage because of the way that the 0:04:24.600 --> 0:04:28.039 Federal Reserve is unwinding the balance sheet? Uh? And that 0:04:28.200 --> 0:04:32.440 is what they're monitoring so far. The Federal Reserve is 0:04:32.560 --> 0:04:35.400 kind of uh pointing at and say, don't look at us, 0:04:35.839 --> 0:04:39.080 look at the treasury because of the fiscal situation in 0:04:39.120 --> 0:04:44.880 the bills issuance. But I think during two thousand nineteen, UH, 0:04:44.960 --> 0:04:48.479 we're likely to see some further stresses and I think ultimately, 0:04:48.560 --> 0:04:50.760 just to be clear, I think they'd like to get 0:04:50.800 --> 0:04:52.320 to three. I don't think they're going to be able 0:04:52.320 --> 0:04:54.680 to get back all the way And there will be 0:04:54.760 --> 0:04:59.640 a discussion of this as markets feel some continued pressures 0:04:59.640 --> 0:05:01.320 at the or in of the curve in the year 0:05:01.360 --> 0:05:04.080 I had. You know, it's I love that you have 0:05:04.160 --> 0:05:07.040 the experience that the Federal Reserve. Uh, you also have 0:05:07.240 --> 0:05:10.440 incredible experience at the Treasury Department. You are the under 0:05:10.440 --> 0:05:12.839 Secretary of the U. S Treasury for International Affairs, and 0:05:12.880 --> 0:05:14.719 that is very much in the four especially as we 0:05:14.720 --> 0:05:18.960 were just hearing about the prosecutors going after hackers in China. 0:05:19.240 --> 0:05:22.080 I just want to read this quote FedEx Chief executive 0:05:22.080 --> 0:05:24.680 Officer Fred Smith saying most of the issues that we're 0:05:24.680 --> 0:05:28.120 dealing with today are induced by bad political choices. Do 0:05:28.200 --> 0:05:31.919 you think that the economy is slowing to the degree 0:05:31.960 --> 0:05:35.520 that it is because of bad political choices? When I 0:05:35.680 --> 0:05:39.240 look at the global economy and I think about headwinds 0:05:39.279 --> 0:05:42.120 that it faces, I mean trade war has got to 0:05:42.160 --> 0:05:45.320 be number one on the list, and that is a 0:05:45.520 --> 0:05:50.320 discrete political choice. I think it's increasing uncertainty. It's likely 0:05:50.360 --> 0:05:55.320 weighing on investment in the United States and probably abroad 0:05:55.360 --> 0:05:59.560 as well. UM I think Brexit is weighing on the outlook, 0:05:59.600 --> 0:06:02.080 and that's a different kind of political choice, but very 0:06:02.160 --> 0:06:04.599 much a political choice. And you could go around the 0:06:04.640 --> 0:06:07.760 world and point to other examples. What's going on in France, 0:06:07.760 --> 0:06:11.960 what's the uncertainties and rests in Italy, UH, the in 0:06:12.040 --> 0:06:16.839 the emerging markets, the new the new administration in Mexico, 0:06:17.000 --> 0:06:19.600 and there's a you know, it's it remains uncertain as 0:06:19.640 --> 0:06:22.360 to what an Omlo government's going to do. But there's 0:06:22.400 --> 0:06:25.800 more uncertainty there than has been the case in the past. 0:06:26.040 --> 0:06:29.200 So I very much agree these geopolitical rest these these 0:06:29.480 --> 0:06:33.480 political decisions, some made by those elected and others quite 0:06:33.520 --> 0:06:38.039 frankly reflecting the outcomes of elections. And I think that's 0:06:38.040 --> 0:06:41.640 a very important point, is what we're seeing in some 0:06:41.800 --> 0:06:45.760 of this is the discontent of the body politic. In 0:06:45.880 --> 0:06:49.200 many countries, are many people that are saying the global 0:06:49.279 --> 0:06:52.440 economy isn't working for me the way I expected to. 0:06:53.279 --> 0:06:55.640 So just give you about twenty seconds. I know it's 0:06:55.680 --> 0:06:59.160 tough to do this. What would be the investment position 0:06:59.200 --> 0:07:05.200 you want to assume whom going into so? Uh. On 0:07:05.279 --> 0:07:07.359 the one hand, I think we have to bear in 0:07:07.440 --> 0:07:10.120 mind that there is a strong there is a strong 0:07:10.240 --> 0:07:13.080 case for that kind of baseline view that the fat 0:07:13.200 --> 0:07:17.080 is articulated that the US economy will be slower next year. 0:07:17.720 --> 0:07:20.000 But by the same token, you've got a hedge against 0:07:20.280 --> 0:07:22.800 you've got a hedge against these kinds of extraordinary tale 0:07:22.880 --> 0:07:25.360 rusks Nathan Sheets. It's always a pleasure having you here. 0:07:25.440 --> 0:07:27.400 Thank you so much for being here, Nathan. She's chief 0:07:27.400 --> 0:07:31.360 economist for Peacham Fixed Income, which oversees more than seven 0:07:31.560 --> 0:07:34.600 billion dollars in Newark, New Jersey, formerly of the FED 0:07:34.680 --> 0:07:37.880 and the Treasure Department, uniquely positioned to talk about the 0:07:38.320 --> 0:07:57.440 current environment. We were just hearing from FBI Director Christopher Ray. 0:07:57.600 --> 0:07:59.960 Before that, we had heard from US Deputy Attorney General 0:08:00.200 --> 0:08:05.920 Rod Rosenstein. Uh, some pretty pretty dramatic language. They're accusing 0:08:06.040 --> 0:08:11.920 state sponsored actors in China of hacking into corporate and 0:08:12.280 --> 0:08:17.320 state Frankly, Uh, you just use the US agencies, including 0:08:17.360 --> 0:08:21.400 some military agencies, US Navy, UM and you know, basically, 0:08:21.440 --> 0:08:24.680 one of the most interesting parts of their words was 0:08:24.720 --> 0:08:27.160 when they really tried to emphasize that they are working 0:08:27.200 --> 0:08:30.640 shoulder to shoulder with American allies. It's not just the 0:08:30.760 --> 0:08:34.680 US unilaterally going after Chinese state sponsored bad actors that 0:08:34.720 --> 0:08:39.439 are hacking into and stealing information from corporations and governments, 0:08:40.040 --> 0:08:44.559 but that other nations are working with them. Really a 0:08:44.600 --> 0:08:49.240 strong language and really highlights a broad based, multi year, 0:08:49.640 --> 0:08:54.840 multifaceted attempt to break in to to to US companies, 0:08:54.880 --> 0:08:59.920 and yes, these folks specifically about the increased enforcement activity 0:09:00.000 --> 0:09:03.640 that would be necessary over cipher mergers and acquisitions as 0:09:03.640 --> 0:09:07.520 well as how to protect our own telecommunications infrastructure. I 0:09:07.559 --> 0:09:10.160 want to bring in Rob Lefforts, Microsoft's corporate vice president 0:09:10.160 --> 0:09:12.920 of Security. Rob. We're so glad to have you today, 0:09:13.080 --> 0:09:16.840 especially given given this news understanding that you don't necessarily 0:09:16.840 --> 0:09:19.440 know the details of this particular indictment that was just 0:09:19.760 --> 0:09:24.000 unsealed moments ago. Does it come as a surprise to 0:09:24.040 --> 0:09:28.600 you that state sponsored activity from China hacking into US 0:09:28.720 --> 0:09:30.800 entities is as widespread as they were making it out 0:09:30.840 --> 0:09:34.040 to be. Well, without making a specific comment about China, 0:09:34.200 --> 0:09:36.960 it unfortunately does not come as a surprise at all. 0:09:37.600 --> 0:09:41.760 This kind of activity is ongoing, uh. And there are 0:09:41.800 --> 0:09:46.600 many organizations, some state sponsored, some purely criminal, who spend 0:09:46.640 --> 0:09:49.520 a great deal of time and investment to break into 0:09:49.960 --> 0:09:54.680 companies cyber infrastructure. And so that means if you have 0:09:54.720 --> 0:09:56.800 a company today, you had need to have a really 0:09:56.880 --> 0:10:00.280 modern security stance thinking about how are you going to 0:10:00.320 --> 0:10:03.600 protect yourself and how are you going to detect when 0:10:03.679 --> 0:10:08.120 these kinds of cyber criminals and experts break into your organization. 0:10:08.440 --> 0:10:12.920 Does that expertise means something different in a world where 0:10:12.960 --> 0:10:16.560 companies are migrating much of their data and operations to 0:10:16.600 --> 0:10:20.640 the cloud. It does. And Uh, in some ways this 0:10:20.720 --> 0:10:24.760 actually creates an opportunity because we're able to bring more 0:10:24.960 --> 0:10:29.600 cloud technology to bear to actually provide more sophisticated protection. 0:10:30.000 --> 0:10:33.400 It just opens up new fields like machine learning, where 0:10:33.400 --> 0:10:35.760 we can really monitor a lot more of what's going 0:10:35.800 --> 0:10:40.040 on and be faster to detect and respond. I gotta say, 0:10:40.160 --> 0:10:42.920 especially when you think back at um what was the 0:10:44.320 --> 0:10:50.760 hotel chain Marriott that the breach about half a billion user, right, 0:10:50.800 --> 0:10:53.480 but it happens over years, and it makes me think 0:10:53.559 --> 0:10:56.079 that just sort of the detection is part of the issue. 0:10:56.080 --> 0:11:00.360 It's hard to detect this, it's critical detect and actually 0:11:00.360 --> 0:11:04.960 gets back into a conservative, old school security stance would say, 0:11:05.040 --> 0:11:07.760 I'm going to build castle walls around my organization and 0:11:07.800 --> 0:11:10.760 make sure that nobody ever gets in. The sad truth 0:11:10.840 --> 0:11:13.480 is people will get in, and so a modern stance says, 0:11:13.480 --> 0:11:16.080 I acknowledge that, and I am ready to detect them 0:11:16.120 --> 0:11:18.840 how and when it happens. In the Marriat case, I heard, 0:11:18.880 --> 0:11:21.400 I wasn't directly involved that they were there in the 0:11:21.440 --> 0:11:26.600 network for four years, and so having modern tools like 0:11:26.679 --> 0:11:29.520 Microsoft Threat Protection is actually the way to think about 0:11:29.720 --> 0:11:32.400 how am I going to be more alert and watching 0:11:32.520 --> 0:11:35.520 the whole ocean of behaviors going on in my environment. 0:11:36.120 --> 0:11:40.480 One of the focus focuses that the Christopher Ray FBI 0:11:40.559 --> 0:11:44.199 director mentioned has to do with who are the people 0:11:44.400 --> 0:11:49.680 behind these attacks? He mentioned hackers, uh, perhaps business people 0:11:50.000 --> 0:11:53.640 in China or around the world that maybe working on 0:11:53.720 --> 0:11:58.920 behalf of Chinese state sponsored entities, but he also mentioned 0:11:58.960 --> 0:12:03.840 the co opting of employees at the very companies whose 0:12:03.880 --> 0:12:09.040 secrets are being targeted. UH. Based on your experience, what 0:12:09.120 --> 0:12:12.640 kinds of procedures or what kinds of activity can companies 0:12:12.960 --> 0:12:15.720 do in order to forestall that? There's two things you 0:12:15.720 --> 0:12:17.720 really need to think about. One is at the hiring 0:12:17.760 --> 0:12:19.560 time when you need to think about how do I 0:12:19.640 --> 0:12:23.080 screen and monitor employees in a way that respects privacy 0:12:23.160 --> 0:12:26.400 and that's honestly hard for all companies to do. It 0:12:26.520 --> 0:12:29.440 is something that cloud companies like Microsoft can do in 0:12:29.440 --> 0:12:32.439 a more robust way. The second thing is you also 0:12:32.520 --> 0:12:35.240 need tools that watch what goes on in your network, 0:12:35.280 --> 0:12:38.400 what employees are doing. Are they trying to gain access 0:12:38.400 --> 0:12:41.199 to servers and data that they wouldn't normally use as 0:12:41.240 --> 0:12:45.760 part of their day job. As far as Microsoft's effort 0:12:45.960 --> 0:12:51.760 to secure the networks of the various customers, one of 0:12:51.800 --> 0:12:57.679 the the Rod Rosenstein mentioned that it was managed service providers, 0:12:58.000 --> 0:12:59.880 and I'm wondering if you could just sort of exp 0:13:00.040 --> 0:13:03.240 and on what technically that means, because he said that 0:13:03.320 --> 0:13:06.320 this was something that is not just about the United States, 0:13:06.360 --> 0:13:09.800 this is throughout the world. Now, well, I'm honestly not 0:13:09.840 --> 0:13:11.880 sure exactly what he meant by that phrase, because it 0:13:11.960 --> 0:13:14.080 is a phrase that could be used to apply to 0:13:14.160 --> 0:13:17.120 a number of different things. But the one comment that 0:13:17.160 --> 0:13:20.760 I will make is that for a modern organization, there's 0:13:20.920 --> 0:13:23.640 lots of moments in the life of your digital data 0:13:23.679 --> 0:13:26.640 as it flows through a network, as it's stored in 0:13:26.760 --> 0:13:29.600 some service, maybe even if one of your employees puts 0:13:29.600 --> 0:13:32.520 it out on the public Internet, and having a big 0:13:32.559 --> 0:13:35.120 picture about all of that, not just what happens to 0:13:35.200 --> 0:13:38.280 laptops and file servers, is a huge challenge and a 0:13:38.280 --> 0:13:40.920 lot of complexity. Uh. The other point I'd like to 0:13:40.920 --> 0:13:44.760 get across is, uh, you talked about the sophistication of 0:13:44.800 --> 0:13:48.560 the attackers, and they are very sophisticated and moving quickly. 0:13:48.960 --> 0:13:50.559 And this is a space where you need to make 0:13:50.600 --> 0:13:54.880 sure that you're taking advantage of good guys and defenders 0:13:55.200 --> 0:13:58.560 who are just as focused on moving quickly and tracking 0:13:58.559 --> 0:14:00.839 what they do. That was actually exactly where I was 0:14:00.840 --> 0:14:03.920 going to head, which is talent and the difficulty finding 0:14:03.960 --> 0:14:07.720 the people who can move just as quickly. You know 0:14:07.800 --> 0:14:11.280 how difficult is that for you? Well across the globe. 0:14:11.440 --> 0:14:15.240 Finding great cybersecurity talent is a crisis h And every 0:14:15.280 --> 0:14:18.000 time I hear a statistic about it, the numbers seem worse. 0:14:18.200 --> 0:14:20.920 I think the last one that I heard was by 0:14:21.520 --> 0:14:26.600 the planet will be short three point five million security professionals. 0:14:26.680 --> 0:14:29.080 They'll have that many more jobs than people who can 0:14:29.160 --> 0:14:33.200 capably fill them. And so as we think about that, 0:14:33.240 --> 0:14:36.960 we think about having a pool of incredibly talented researchers 0:14:37.000 --> 0:14:40.680 at Microsoft and then using tools like machine learning in 0:14:40.680 --> 0:14:43.200 the power of the cloud to bring those talents to 0:14:43.280 --> 0:14:46.280 bear to help companies around the planet and to help 0:14:46.320 --> 0:14:49.520 governments around the planet. Which countries are producing the most 0:14:49.680 --> 0:14:54.560 cybersecurity professionals who are the best? Uh, it's pretty distributed. 0:14:55.000 --> 0:14:58.280 I will say the United States has some great programs 0:14:58.320 --> 0:15:03.200 and we work with research organize stasions there. England Israel 0:15:03.240 --> 0:15:06.200 happens to have a lot of cybersecurity talent. Uh. And 0:15:06.680 --> 0:15:09.960 in places where you find bad guys, you also find 0:15:10.000 --> 0:15:12.320 the potential for talent that wants to help and do 0:15:12.400 --> 0:15:15.720 the right thing. Just to put it into perspective. According 0:15:15.800 --> 0:15:22.480 to your notes, thirty million attempts on average a day 0:15:22.640 --> 0:15:29.280 to log into Microsoft accounts by adversaries. Thirty million a day. Yeah, 0:15:30.240 --> 0:15:32.960 you can't handle those one by one. You need you 0:15:33.000 --> 0:15:36.760 need machines. You need machines and tools that help handle 0:15:36.840 --> 0:15:40.800 that for you. One thing that I'm wondering passwords, Yes, 0:15:41.080 --> 0:15:44.560 password security. I mean, part of the problem with password 0:15:44.600 --> 0:15:46.800 security is that they can become so secure that you 0:15:46.840 --> 0:15:48.600 don't remember any of your own passwords, and then it 0:15:48.640 --> 0:15:51.520 just becomes a huge mess. What's what's sort of the 0:15:51.560 --> 0:15:55.240 what what's the progression here? Yeah? Uh, passwords are bad 0:15:55.280 --> 0:15:59.320 for the planet. Like, let's be clear, people can't remember them. 0:15:59.400 --> 0:16:04.080 They can't. Let's fossil fuels and passwords. Yeah, it is 0:16:04.120 --> 0:16:09.680 true that continuing to use passwords is the easiest way 0:16:09.680 --> 0:16:12.080 for any organization to get in. I don't know how 0:16:12.360 --> 0:16:15.720 these attacks were carried on, but over the attacks on 0:16:15.760 --> 0:16:19.000 any organization are very simple. I'm going to trick you 0:16:19.040 --> 0:16:21.120 into giving away your password, and then I'm just going 0:16:21.160 --> 0:16:22.720 to log in and do a whole bunch of bad 0:16:22.720 --> 0:16:26.240 stuff on your behalf. And so getting people away from 0:16:26.280 --> 0:16:28.840 passwords where they log in using more than one thing 0:16:28.880 --> 0:16:31.440 at a time, So use your phone and a password, 0:16:31.840 --> 0:16:35.320 or even better, get away from passwords all together, where 0:16:35.320 --> 0:16:37.920 you just log in with your phone and biometrics on 0:16:37.960 --> 0:16:40.440 your phone and that's registered to you. You didn't have 0:16:40.480 --> 0:16:44.200 to remember your password, and not only is your experience better, 0:16:44.320 --> 0:16:47.520 but under the covers it was way more secure. Is 0:16:47.560 --> 0:16:52.440 it hackable? Everything is hackable. Everything is hackable if you 0:16:52.480 --> 0:16:54.680 cut off someone's finger and stick it on there. I 0:16:54.720 --> 0:16:58.000 meant once once the information is stored in in some 0:16:58.080 --> 0:17:02.560 kind of device. Uh so, the most of the techniques 0:17:02.600 --> 0:17:05.800 for biometrics keep those biometrics on the device. That's true 0:17:05.800 --> 0:17:09.359 for Windows Hello, So you'd have to have that laptop 0:17:09.800 --> 0:17:14.920 and the finger. So anything is doable, but that's pretty hard. 0:17:16.400 --> 0:17:19.119 One thing that I'm wondering is how well prepared do 0:17:19.160 --> 0:17:23.439 you think that American corporations are against hacking? They are 0:17:23.480 --> 0:17:25.560 not very well prepared. I mean, is it is it 0:17:25.640 --> 0:17:27.880 sort of would we be shocked if we knew how 0:17:27.960 --> 0:17:33.120 unprepared they were. We, the whole industry, and Microsoft as 0:17:33.160 --> 0:17:35.919 a responsible part of that industry, need to push a 0:17:35.960 --> 0:17:40.280 lot harder on making everything much more safe. Do you 0:17:40.320 --> 0:17:43.680 believe that it's going to take some kind of incident 0:17:43.800 --> 0:17:47.800 in order to wake people up in their individual industries. 0:17:49.080 --> 0:17:52.919 Those incidents are happening every day and we read about them. 0:17:52.960 --> 0:17:55.800 You talked about Marriott. If you just look back Sony 0:17:55.880 --> 0:18:00.679 and Target people experience, people are way picking up and 0:18:00.720 --> 0:18:02.960 there is a huge focus on this. I think that's 0:18:03.000 --> 0:18:05.600 why we talk about things like the huge demand for 0:18:05.720 --> 0:18:09.160 talented professionals to help. Thanks very much for being with us, 0:18:09.359 --> 0:18:13.080 Rob Lefforts, appropriate you're here today. Rob Lefforts is corporate 0:18:13.160 --> 0:18:17.840 vice president of Security for Microsoft, telling us about the 0:18:17.920 --> 0:18:21.919 efforts on behalf of corporations and the US government to 0:18:21.960 --> 0:18:42.040 secure our networks. President Trump did decide to pull troops 0:18:42.160 --> 0:18:44.560 out of Syria against the advice of some of his 0:18:44.640 --> 0:18:49.639 closest advisors, creating something of a pushback from even some 0:18:49.720 --> 0:18:53.040 of his staunchest Republican allies, Lindsay Graham writing it is 0:18:53.080 --> 0:18:55.880 not fake news that Russia, Iran, and Assad are unhappy 0:18:55.920 --> 0:18:59.200 about our decision to withdraw from Syria. They are ecstatic. 0:18:59.280 --> 0:19:02.320 This was via Twitter joining us now Toby Harshaw, national 0:19:02.359 --> 0:19:05.679 security writer and editor for a Bloomberg opinion, joining us 0:19:05.720 --> 0:19:09.359 here in the Bloomberg Interactive Broker studio. Uh, Toby, what 0:19:09.440 --> 0:19:11.360 do you make of this move? How do you interpret 0:19:11.680 --> 0:19:14.240 President Trump's decision to do this? Uh? There are a 0:19:14.320 --> 0:19:17.560 few explanations. The first is that this was simply a 0:19:17.600 --> 0:19:21.600 campaign promise, UM, that he's making good on he you know, 0:19:21.720 --> 0:19:24.720 he went against the advice not just of the Pentagon, 0:19:24.840 --> 0:19:27.960 but also of John Bolton, his national security advisor, who 0:19:28.000 --> 0:19:31.359 had really been, you know, the voice in his ear 0:19:31.720 --> 0:19:35.720 on these issues before this. UM. In addition to that, 0:19:35.880 --> 0:19:39.800 I think that UM, he he wants to be very 0:19:39.800 --> 0:19:43.200 careful about Turkey. UM. Turkey had said that they will 0:19:43.240 --> 0:19:46.919 send troops in UH to remove the Kurds who have 0:19:47.000 --> 0:19:51.159 been our allies, the Syrian Democratic Forces. UH. And I 0:19:51.200 --> 0:19:54.879 don't think that, you know, Trump wanted the possibility of 0:19:54.920 --> 0:19:59.080 Tornado allies getting in shooting fight. You tell us the 0:19:59.200 --> 0:20:03.480 disposition of US military assets in the Middle East. UM, 0:20:03.520 --> 0:20:07.520 I can't give you the exact disposition because the Pentagon 0:20:07.600 --> 0:20:12.959 is not releasing UM. The breakdowns from how many troops 0:20:12.960 --> 0:20:15.920 are in which theater. That's a new thing that they're doing. 0:20:16.480 --> 0:20:19.200 Actually that's made a lot of members of Congress unhappy. 0:20:19.800 --> 0:20:23.199 But we know that we have military assets in the 0:20:23.240 --> 0:20:28.040 United Arab Emirates, in Turkey, Saudi Arabia, Qatar, as well 0:20:28.080 --> 0:20:34.119 as in Oman, Kuwait, Jordan's Summon, Israel, Iraq, Egypt, Djibouti. 0:20:34.200 --> 0:20:37.600 The list goes on. At what point does the effort 0:20:37.720 --> 0:20:42.600 on the military front just become a zero sum game 0:20:42.640 --> 0:20:45.560 and the President says, we're not getting anything out of it, 0:20:45.840 --> 0:20:49.280 let's leave. Yeah, I mean most of those uh, most 0:20:49.320 --> 0:20:52.159 of those troops are actually stationed there. I mean Cutter 0:20:52.240 --> 0:20:55.040 is where the giant airbases, Bahrain is where the giant 0:20:55.160 --> 0:20:59.200 naval bases. Those are permanent presences. Um. But yeah, we've 0:20:59.240 --> 0:21:03.160 got we've troops well beyond Iraq and Uh and Syria. 0:21:03.160 --> 0:21:06.719 We've got them in North Africa, We've got them in Jibouti. Um, 0:21:07.040 --> 0:21:11.960 we've uh, yeah, at some point we have expanded too far. Um. 0:21:12.000 --> 0:21:15.720 This war is you know, is based on legally on 0:21:15.800 --> 0:21:18.240 something Congress passed in two thousand and one that they've 0:21:18.280 --> 0:21:21.800 never updated. Uh. And and what we're doing goes way 0:21:21.840 --> 0:21:25.160 beyond the authority that the White House was given. One thing, 0:21:25.280 --> 0:21:27.880 there was a Lumur editorial out today that I thought 0:21:27.960 --> 0:21:31.200 was really interesting talking about how this particular move is 0:21:31.240 --> 0:21:34.639 a little bit different because it comes as something of 0:21:34.680 --> 0:21:40.200 a rude shock and not a pleasant one for our allies. Yeah. Um, 0:21:40.240 --> 0:21:43.200 I mean the Kurds are you know, a rag tag 0:21:43.280 --> 0:21:47.159 militia that we've armed and trained. Um, they're you know, 0:21:47.240 --> 0:21:50.240 not important on the global scale. But if we hang 0:21:50.280 --> 0:21:52.400 them up to dry, if we let either the Turks 0:21:52.520 --> 0:21:55.720 or the Syrians, um simply run over them, as the 0:21:55.720 --> 0:21:59.080 Turks have promised to bury them in the holes they 0:21:59.080 --> 0:22:02.639 have dug. Um, that sends a signal to our bigger 0:22:02.680 --> 0:22:05.200 allies that the US you know, doesn't have our back. 0:22:05.240 --> 0:22:07.840 And that's you know, that plays right into the rhetoric 0:22:08.040 --> 0:22:10.840 that Trump has been using with our NATO allies and 0:22:11.280 --> 0:22:15.239 our allies in in the Far East, um using, you know, 0:22:15.400 --> 0:22:19.680 threatening to to pull away the security blanket unless they 0:22:19.840 --> 0:22:22.960 change their trade policies. Um. It's a it's a whole 0:22:23.000 --> 0:22:27.199 new level of Uh, it's an entirely different foreign policy. 0:22:27.240 --> 0:22:29.760 I think that's very, very scary to the allies. And 0:22:29.800 --> 0:22:32.080 that's one reason that the French are talking about starting 0:22:32.080 --> 0:22:35.200 a European army. What has been the reaction, if any, 0:22:35.320 --> 0:22:39.399 so far from the Saudi Arabian government. Um, there hasn't 0:22:39.440 --> 0:22:42.720 really been one. UM. The Audies are being very quiet, 0:22:43.200 --> 0:22:47.080 uh for obvious reasons. UM. The Saudis have have helped 0:22:47.080 --> 0:22:51.400 in the coalition against ISIS UM, but not dramatically. In fact, 0:22:51.480 --> 0:22:55.080 the u A either very close ally and neighbor UM 0:22:55.119 --> 0:22:58.000 has been a far bigger part of it. Could some 0:22:58.040 --> 0:23:01.800 people say that that the pulse that President Trump just 0:23:01.840 --> 0:23:05.119 sort of demonstrated is actually absolutely the right one. That 0:23:05.200 --> 0:23:07.360 we're not going to win. This is a messy kind 0:23:07.359 --> 0:23:11.080 of situation. It's unclear what our role there is. Why 0:23:11.119 --> 0:23:15.359 are we there? Um? Well, the mission was to defeat 0:23:15.400 --> 0:23:19.840 ISIS UM. Defeating ISIS isn't something you can do entirely. UM. 0:23:19.880 --> 0:23:22.520 But it's not true that that they've been entirely defeated. 0:23:22.520 --> 0:23:25.400 They no longer hold any territory. They were forced out 0:23:25.440 --> 0:23:28.600 of Hygiene, the last city that they held. UM. But 0:23:28.640 --> 0:23:32.840 there's about two thousand fighters probably who slipped away. They're 0:23:33.000 --> 0:23:36.080 they're fighting in the little villages UM. They're probably gonna 0:23:36.080 --> 0:23:38.439 slip across the border into a rock where there are 0:23:38.480 --> 0:23:41.240 a lot of sleeper cells um that have been carrying 0:23:41.280 --> 0:23:46.000 out you know, attacks and bombing, attacks and kidnappings and 0:23:46.040 --> 0:23:50.960 things like that. Based on your reading of the situation 0:23:51.320 --> 0:23:55.159 and the relationship between the United States and Turkey and 0:23:55.240 --> 0:23:58.120 NATO ally, do you think this will have any effect 0:23:58.600 --> 0:24:05.400 on Turkeys per just of of Russian made anti aircraft missiles. Yeah, um, 0:24:05.840 --> 0:24:08.800 the Turks. Right as this was happening, the Turks agreed 0:24:08.920 --> 0:24:11.120 on a three point five billion dollar package to buy 0:24:11.119 --> 0:24:14.680 Patriot missiles from US. UM. The big problems with the 0:24:14.840 --> 0:24:17.160 S four hundred were a that it was giving money 0:24:17.160 --> 0:24:19.880 to the Russians um, and be that they are not 0:24:20.000 --> 0:24:25.639 combatible with with NATO's hardware UM and couldn't have been 0:24:25.680 --> 0:24:28.440 a part of that common defense. The Patriot missiles, which 0:24:28.440 --> 0:24:31.879 are American obviously are. The difference is is that Patriots 0:24:31.880 --> 0:24:34.119 are very short range and the S four hundred, the 0:24:34.200 --> 0:24:37.600 Russian system, has much greater range. Uh So the fear 0:24:37.680 --> 0:24:39.720