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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene with

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Speaker 1: David Gura. Daily we bring you insight from the best

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Speaker 1: of economics, finance, investment, and international relations. Find Bloomberg Surveillance

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Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course

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Speaker 1: on the Bloomberg Turning us first in our Bloomberg eleven

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Speaker 1: three year studios Charles Cantor, he's the founder and senior

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Speaker 1: portfolio manager in New Burger Berman and Charles Kinder. Great, great,

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Speaker 1: have you with us here in our studios in New York.

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Speaker 1: Let me start by just having you take a look

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Speaker 1: at the lay of the land here again, we have

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Speaker 1: this close above twenty thou yesterday. There's a symbolism there

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Speaker 1: in and all of that. But what's your sense of

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Speaker 1: how the equity markets are doing at this point? I

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Speaker 1: think the equity markets um a story around the the

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Speaker 1: earn easy trumps the rhetoric, and and as you think

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Speaker 1: about the environment today, it looks very similar to that

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Speaker 1: of about two years ago and three years ago. The

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Speaker 1: narrative around UM nice nice earnings growth, low inflation, low,

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Speaker 1: low corporate brand yields, um tight credit spreads or recently

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Speaker 1: typed credit spreads. It's just it's been a really really

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Speaker 1: good environment. UM. And and it should should should remain so, UM,

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Speaker 1: no doubt. UM. There's been a shift in tone around

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Speaker 1: what we thought Washington could deliver um to to the market. UM.

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Speaker 1: I think as you think about the rhetoric after the

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Speaker 1: general election, there was tremendous hope that fiscal policy could

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Speaker 1: deliver lots of tail winds to the financial markets. UM.

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Speaker 1: That pieceis, of course, has not yet played out and

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Speaker 1: and certainly been pushed back a good amount. And I'd

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Speaker 1: say the financial markets today believe, unlike they did three

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Speaker 1: or four or five six months ago, that Washington will

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Speaker 1: deliver them almost nothing in terms of of of tail

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Speaker 1: winds to to to profits, earnings and financial securities. So

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Speaker 1: if your view, controversially maybe is one where you will

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Speaker 1: actually get something productive out of Washington eventually, whether that

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Speaker 1: be lower taxes, a tax holiday, to to bring back

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Speaker 1: all our capital that's tied overseas, whether that be um UM,

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Speaker 1: even more discussions around regulations and more friendly business conditions.

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Speaker 1: If you believe that, UM, and you you would be

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Speaker 1: in the minority today. And therein possibly lies lies the opportunity.

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Speaker 1: I'm not suggesting you'll get that. I don't have a

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Speaker 1: strong view on that, but it would be important, um

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Speaker 1: as we enter twenty eighteen that we get a little

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Speaker 1: bit of of of of push from from from from

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Speaker 1: our leadership. I'm just gonna ask you, if you're if

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Speaker 1: you're a believer, if you're you're holding that controversial view,

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Speaker 1: do you do you retain some optimism here that that's

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Speaker 1: going to happen. Look, I think it's not that popular

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Speaker 1: for for the politicians, but but our financial markets in

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Speaker 1: aggregate UM are stronger than than than leadership over long

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Speaker 1: periods of time. It's not to suggest that clarity around

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Speaker 1: regulation and rules of the game UM and certainty around

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Speaker 1: that isn't a vital ingredient for making investment decisions, whether

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Speaker 1: you're a corporate CEO or an asset manager UM, and

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Speaker 1: so clarity there is is always helpful. We haven't had

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Speaker 1: a lot of clarity UM for a good amount of time,

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Speaker 1: and and and if we're to get some clarity that

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Speaker 1: would be that would be terrific. The market is just

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Speaker 1: fine because underpending the market earnings depending on where you

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Speaker 1: want to start, has been the story this year. It

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Speaker 1: wasn't the story last year. The story last year was

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Speaker 1: a about multiple expansion. The story this series about earnings

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Speaker 1: um and and the pick up in the global economies

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Speaker 1: that started UM well before a new president was sworn

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Speaker 1: into office. Um and As goes those things, so go

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Speaker 1: the markets. And and I wouldn't bet against that for now,

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Speaker 1: even though it's popular to do so. Charles Cancer with

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Speaker 1: us with Newer Berman, really special for Global Wall Street

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Speaker 1: to open, UH this hour with him. It's a little

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Speaker 1: bit of stagflation out of the BOE announcement, really really

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Speaker 1: interesting tape on at six or two vote uh, David Gura.

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Speaker 1: The idea here truly of a modeled higher inflation and

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Speaker 1: with a real stag element to growth into wage growth

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Speaker 1: as well. Sterling really gives up the one thirty two

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Speaker 1: ghosts weaker Sterling. Over the last ten minutes, I've been

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Speaker 1: dying to ask you this question. We're on the edge

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Speaker 1: of Jack Welch. All of a sudden, everybody's talking about

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Speaker 1: a lack of pricing power. You basically arbitrage. You look

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Speaker 1: for value, you look for stocks and aren't work And

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Speaker 1: at the revenue line is price and quantity, price and volume.

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Speaker 1: How does a lack of pricing power diminished P at

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Speaker 1: the revenue line? How does it fold into your work?

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Speaker 1: Is that a good thing or a bad thing? In aggregate,

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Speaker 1: it's a bad thing um. UM. And one of the

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Speaker 1: things we've we've noticed UM saying the industrial sector, because

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Speaker 1: we had any number of companies in the industrial segments

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Speaker 1: reporting over the last ten days or so, is UM

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Speaker 1: despite the the the uptick in certain commodities which would

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Speaker 1: generally which our input costs foremost industrial companies, generally those

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Speaker 1: things get passed along in higher prices and over time

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Speaker 1: reflect themselves in in more a more stable margin profile

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Speaker 1: for the underlying company UM and and for the inaggregate.

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Speaker 1: Again a broad generalization, but in aggregate, the industrial companies

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Speaker 1: showed very good volume UM, but didn't raise price UM

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Speaker 1: to offset the rising raw material casts. UM. We're not.

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Speaker 1: We find that curious. UM. It would seem for now

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Speaker 1: UM either the CEOs in aggregate are unwilling to to

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Speaker 1: unsettle the apple card. Maybe they haven't seen an environment

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Speaker 1: where they've had commodity input prices go up and a

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Speaker 1: nervous to raise prices worried about UM losing market share. UM.

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Speaker 1: But But but these are CEOs need to start tilting

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Speaker 1: to to two more of being the investor unless of

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Speaker 1: being the productivity manager financial engineering maybe said it's vogue, David.

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Speaker 1: What can we can we learn about consumer staples with

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Speaker 1: what's happened with that with Whole Foods here over these

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Speaker 1: last couple of months. I know that you were agitating

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Speaker 1: for Whole Foods to do more to to to improve

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Speaker 1: its business. We're doing immigration earlier, David on television, we're

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Speaker 1: mentioning the immigration in stocking produce like your blessed organic

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Speaker 1: like organic. I don't two to one vote. Uh what what?

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Speaker 1: What can we learn about the sector as a whole

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Speaker 1: from what we've seen the Whole Foods go through and

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Speaker 1: do here? Look, I mean as there's a lot to learn.

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Speaker 1: Um specifically over to your question, I think it speaks

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Speaker 1: to the power of the brand and brands in general

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Speaker 1: and what folks will pay for brands. Um and and

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Speaker 1: brands means something more than just price. Brands means an

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Speaker 1: emotional connection to the thing or the company that you're

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Speaker 1: engaging with. And I think you'll find UM and you

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Speaker 1: have seen in the consumer staples sector more broadly that

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Speaker 1: those companies that have created unique brands are selling at

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Speaker 1: astronomically high prices UM as measured by say um you know,

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Speaker 1: ibadad to enterprise value, and so I think there will

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Speaker 1: always be room for the innovators, for the brand builders,

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Speaker 1: for people that that build an emotional connection UM with

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Speaker 1: their customers, and and those that maybe potentially the larger,

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Speaker 1: larger consumer staple companies, or those that are looking to

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Speaker 1: both scale with with their with their you know, with

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Speaker 1: their wholesale base. They will always be looking to to

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Speaker 1: to buy the attractive consumer staple bands brands in the

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Speaker 1: hope of winning more shell space, in the hope of

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Speaker 1: engaging the customer. More so so despite all the technology

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Speaker 1: UM and and and the idea that there isn't pricing

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Speaker 1: power UM, I think investing in a brand and and

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Speaker 1: getting it right, it's it's easy to say invest in

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Speaker 1: the brand, It's a lot harder to get it right

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Speaker 1: over time. But I think you'll find you'll continue to

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Speaker 1: see very attractive prices for for those that have both

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Speaker 1: brands and have reached a certain scale we spoke to

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Speaker 1: in the last are really important interview. Look for that

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Speaker 1: on bloomber Digital is well. Charles character with us here

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Speaker 1: found at Citior Portfolio Manager in New Berger Berman. Uh,

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Speaker 1: let me ask you maybe a broad question here about

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Speaker 1: what you're enthusiastic about in the markets right now when

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Speaker 1: it comes to sectors, when it comes to types of companies,

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Speaker 1: What's what's attractive to you here? Halfway through a two

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Speaker 1: thousand seventeen look, I think companies that can produce um

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Speaker 1: believable growth UM evaluations that on nosebleed remained very attractive

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Speaker 1: to us. I think we're in an environment where where

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Speaker 1: where gross difficult to come by um and if you can,

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Speaker 1: and I'm not talking about double digits organic growth, I'm

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Speaker 1: kind of talking about three or four or five basis

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Speaker 1: points above, you know, where treasury yields are so so

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Speaker 1: called mid single digit types of things. We love those businesses.

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Speaker 1: We love those businesses they come with with less capital

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Speaker 1: intensity versus more. We actually love businesses candidly that look

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Speaker 1: like Bloomberg, where where you're creating data sets, create them

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Speaker 1: once and use them many times. We own companies like

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Speaker 1: Various and and an I H. S Market that that

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Speaker 1: would fit that type of building. Lots of you know,

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Speaker 1: the Google to look like look like that. We love

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Speaker 1: those types of businesses. And then because of where where

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Speaker 1: aggregate tenure treasuries are, we've always liked capital intensive businesses

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Speaker 1: that produce stable and growing streams of income. Um. The

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Speaker 1: key there, though, is is to make sure that their

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Speaker 1: returns on equity are reasonably stable over time. What what

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Speaker 1: tends to allow that on average to happen more than

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Speaker 1: often more often than not? Is there in regulated businesses UM.

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Speaker 1: So these are very capital intensive businesses that make a

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Speaker 1: small spread versus their cost of equity, positive spread versus

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Speaker 1: their class of equity because the regulators asked them to

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Speaker 1: take on the risk of bringing large infrastructure projects to

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Speaker 1: market on time and under budget, so the company takes

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Speaker 1: on that risk. So those those are kind of be

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Speaker 1: the cornerstone of how we're thinking about investing. It's been

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Speaker 1: the cornerstone of how we thought of investing for a

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Speaker 1: long time. Then occasionally we'll we'll find something that that

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Speaker 1: that just feels like there's a shift in in in

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Speaker 1: in how the boil and management will allocate capital on

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Speaker 1: a go forward basis. And generally what we're looking for

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Speaker 1: is is more capital rationalizations doing more with less not popular,

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Speaker 1: but but so those are the three broad elements of

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Speaker 1: what we find attractive. Let's use the industrial test. If

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Speaker 1: you mentioned industrials, are Mr Flaherty at General Electric? Can

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Speaker 1: you get on board Generous Electric now knowing that Flatty

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Speaker 1: is going to cut costs and do a better capital

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Speaker 1: allocation than the trias that Jeff Amal had to do.

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Speaker 1: I think we increasingly finding companies UM that are fit

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Speaker 1: and focus very attractive. We actually want businesses to to

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Speaker 1: to to separate their best assets and to allow guys

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Speaker 1: like us, and and and and our female competitors the opportunity,

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Speaker 1: you know, to value those assets. I mean, in example,

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Speaker 1: last night were the resorts announced earnings and they're splitting

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Speaker 1: up their time share business from their branded business. We

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Speaker 1: think that strategy, if it can be done tax effectively

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Speaker 1: to shareholders, is very favorable. UM. And I think one

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Speaker 1: of the listen, EMMO, did a really good job of

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Speaker 1: of of setting as many financial assets as you could.

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Speaker 1: He was he was dealta a very difficult hand, I think, UM.

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Speaker 1: But the challenge will be if there's certain assets there

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Speaker 1: that are meaningfully menifically under value because they carry the

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Speaker 1: conglomerate discount UM, those businesses should probably be put in

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Speaker 1: the public markets. Independently and let let the great talent

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Speaker 1: and the Nietzsche run those businesses. Thank you so much

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Speaker 1: for starting to Do you get do you whenever I

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Speaker 1: go to whole Foods or out of broccoli? Do you

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Speaker 1: like broccoli? Do you have a special cond to it

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Speaker 1: for broccoli? We we in the Caunter household, driven by

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Speaker 1: my daughter Abigail, are huge consumers of broccoli. She can Bailey,

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Speaker 1: I know it's without it. It's probably my wife freezer.

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Speaker 1: It's a cantor daughter. She's doing a daughters buying apple.

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Speaker 1: The broccoli the crown by the crowd. Very good tru

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Speaker 1: advice on broccoli. It's way and it's like makeup. It's

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Speaker 1: way in the back corner. They make you walk through

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Speaker 1: and to get to the broccoli, so farthest thing from

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Speaker 1: the front door. Evil. Yes, thank you so much. We continue.

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Speaker 1: This is Bloomberg Pleasure. How to be joined by Peter

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Speaker 1: west Away. He's our chief chief European economist at Vanguard. Peter,

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Speaker 1: let me just start with your your broadest takeaway from

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Speaker 1: what we learned today, from the inflation forecast, from the

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Speaker 1: policy decision itself. This was a six to two decision.

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Speaker 1: I'm struck by the degree to which Brexit is is

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Speaker 1: weighing on all of this. Again, I shouldn't be surprised

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Speaker 1: saying that, but clear from the questions and answers at

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Speaker 1: least that this is front and center for the Bank

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Speaker 1: of England. Yeah, it's it's from incenter for the Bank

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Speaker 1: of England. It's from a center for those of us

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Speaker 1: that they're thinking about what's going to happen next in

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Speaker 1: the UK economy. And while some members of the Policy

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Speaker 1: Committee had been and actually still are thinking about the

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Speaker 1: the worries about inflation headline inflation picking up, it seems

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Speaker 1: a very odd time to be thinking about raising rates

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Speaker 1: with with the data coming out week, and with all

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Speaker 1: of these uncertainties around Brexit. So really the slightly dovish

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Speaker 1: message that the Bank of England have sense seems to

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Speaker 1: me to be completely appropriate. Slightly devish. Help me understand

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Speaker 1: what changed at that ECB forum in Portugal a few

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Speaker 1: weeks back, of course, the Governor of the Bank of

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Speaker 1: England speaking, they're talking about the potential here to to

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Speaker 1: remove some monetary stimulus. Uh, if the trade off facing

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Speaker 1: the NBC continues to less than the policy decision Accordingly,

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Speaker 1: becomes more conventional. What changed at that forum with regard

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Speaker 1: to the conversation about central banking, both in the UK

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Speaker 1: and Europe. I think what was happening was that, maybe

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Speaker 1: in a slightly ham fisted way, central bankers were trying

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Speaker 1: to signal that these this period of exceptional monetary accommodation

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Speaker 1: wasn't forever, and so they were trying to soften the

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Speaker 1: market up to a removal of policy stimulats in the

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Speaker 1: case of the UK, tapering of the asset purchases in Europe,

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Speaker 1: which remember is still adding to stimulus, is just doing

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Speaker 1: it at the slower rate, and I think that's a

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Speaker 1: lesson that the market does need to take on board.

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Speaker 1: But I think maybe, especially in the case of the

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Speaker 1: e c B, it was overinterpreted and I think that

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Speaker 1: we've then seen a lot of rowing backwards from the

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Speaker 1: ECB um a little bit different with the Bank of

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Speaker 1: England because I think the data has changed. I think

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Speaker 1: we've seen more information about than the economy that that's

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Speaker 1: happening here. It is a good thing to have Mr

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Speaker 1: Peter west Away on because he has a twisted sense

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Speaker 1: of economics. We now got a line your quadratic Gaussian economics,

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Speaker 1: as we can only do with Peter Westwood. Peter, Peter,

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Speaker 1: I look at the mathiness of your work out of

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Speaker 1: York and out of Cambridge with great respect, and it

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Speaker 1: goes to the glib comments made by all suits and

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Speaker 1: ties of reaction functions. Do we have a clue the

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Speaker 1: linear straight line or quadratic curved reaction functions to come?

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Speaker 1: Is there anything orthodox? Now? Are we on new linear

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Speaker 1: quadratic Gaussian territory? I do like it when people take

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Speaker 1: me back to my my early days and then you

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Speaker 1: just dimly remember those those things that I used to do.

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Speaker 1: Got that right on over the square root of two pie.

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Speaker 1: That's all I read. Don't test me on it again.

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Speaker 1: But but I mean you're making a serious point to

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Speaker 1: which is a relative to a simple world. Just before

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Speaker 1: the financial crisis, when frankly, Central mantas myself included, thought

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Speaker 1: that understood the way the world worked. We knew that

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Speaker 1: we had to control inflation. We cut interest rates up

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Speaker 1: and down, and that was really it. I think we're

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Speaker 1: now in this much more complicated world where balance sheets

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Speaker 1: of banks are also coming into play. Constitutive easing, which

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Speaker 1: we thought had been confined to the textbooks, the textbooks

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Speaker 1: of history, and now right back front and center. So

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Speaker 1: all of these things are now making life very complicated.

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Speaker 1: And why that makes it really complicated looking forward for

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Speaker 1: those of us that are trying to work out what

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Speaker 1: happens next, is that the reaction function of central banks

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Speaker 1: is quite hard to predict because they don't really know

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Speaker 1: how things are going to playut because this is new

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Speaker 1: territory for them, this is completely uncharted territory, and so

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Speaker 1: there's going to be a lot, a lot of trial

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Speaker 1: and error in the way they withdraw the stimulus. You know.

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Speaker 1: So as the Fed starts to wind down their balance sheets,

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Speaker 1: everybody expects that will start pushing yield kids up, curves up.

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Speaker 1: But we don't know whether it's going to happen all

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Speaker 1: in one day or whether it's going to So that's

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Speaker 1: what makes this complicated for polity magors and the rest

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Speaker 1: of us trying to predict it. You keep us employed,

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Speaker 1: Peter West you, thank you, thank you, thank you, thank you.

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Speaker 1: This morning with Vangor greatly appreciate um the David Dura

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Speaker 1: and Tom Keen in our Bloomberg eleven three oh studios

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Speaker 1: in New York. John Kelly spending his first week as

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Speaker 1: Chief of Staff at the White House. Of course, he

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Speaker 1: was formerly the Secretary of the Department of Homeland Security.

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Speaker 1: Someone else who had that role as Michael Chertoff. He's

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Speaker 1: the former U S Secretary of Homeland Security, co founder

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Speaker 1: and executive chairman of the Church Tough Group. He joins

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Speaker 1: us now on our phone line. Great to speak with

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Speaker 1: you once again, Mr Secretary, And yesterday we had the

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Speaker 1: privilege of talking with Adael James Steuvrita's about what makes

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Speaker 1: a good chief of staff in the White House. Let

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Speaker 1: me turn things around a little bit to ask you

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Speaker 1: about what makes someone well equipped for the job that

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Speaker 1: John Kelly is now vacating. You were the second in

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Speaker 1: that position. I imagine still learning your way around what

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Speaker 1: was still a very new job at that point. What

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Speaker 1: equips someone well to be U S Secretary of Homeland Security. Well,

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Speaker 1: I think it's useful to have a perspective on where

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Speaker 1: global threats are, and not just threats that are man made,

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Speaker 1: but also a natural threats, because one of the remarkable

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Speaker 1: things about Secretary of Homeland Security is that you have

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Speaker 1: responsibility for a wider range of risks, whether it's hurricanes

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Speaker 1: or earthquakes, you can be terrorist attacks, it would be

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Speaker 1: even playing a role with respect to a massive epidemic

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Speaker 1: or pandemics. Um steadiness and a kind of a wide perspective,

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Speaker 1: I think are the qualifications for that job. It struck

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Speaker 1: me when I interviewed John Kelly when he was a

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Speaker 1: secretary of that department, how heavily the responsibilities of the

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Speaker 1: job way on somebody in it. And I wonder if

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Speaker 1: you could talk a little bit about that. I think,

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Speaker 1: what so far as to say, it's difficult to sleep,

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Speaker 1: but knowing that something could happen, how do you deal

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Speaker 1: with that, the weight of uncertainty. Well, of course I

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Speaker 1: came into this having had the experience of being into

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Speaker 1: the farm prossstive sense of tender eleventh, two thousand one,

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Speaker 1: and so I ardly remember the way in which we

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Speaker 1: were anticipating what the next attack might be, and it

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Speaker 1: was really an oil, hands on deck effort to stave

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Speaker 1: off what might be round two or around three of

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Speaker 1: al Qaeda attacks. So I came into the job with

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Speaker 1: that experience. I think one of the things that is

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Speaker 1: comforting though, in the job of Secretary of Home and

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Speaker 1: Security is you're working with a superb team of people.

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Speaker 1: It really is not an individual effort, but it is

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Speaker 1: a team effort. So you have the people who are

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Speaker 1: on the board, and you have the people who are

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Speaker 1: monitoring and screening what goes on in aviation, and you

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Speaker 1: have your partners in other departments as well. Uh, that's

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Speaker 1: your secretary. One of want to speak to again, Uh, Michael,

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Speaker 1: turnoff with us, folks. You have the incredible privilege of

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Speaker 1: working with John hard Eli years ago, one of the

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Speaker 1: giants of American law, and he would be It's tragic

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Speaker 1: he died so young, and he would be a perfect

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Speaker 1: voice of wisdom now across all politics. With the certitude

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Speaker 1: that's going on right now. John hard Eli fought every

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Speaker 1: day against the certitude of this is m or that

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Speaker 1: is um. Are we drowning in certitude right now? Both

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Speaker 1: on the right and both on the left. Well, I

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Speaker 1: think maybe where you're asking me is are we having

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Speaker 1: more opinion now than fact? And I do think to

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Speaker 1: touch a change who I mean John Hue who I'm

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Speaker 1: when I was back quite a while, was a believer

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Speaker 1: in a healthy skepticism and that our institutions were built

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Speaker 1: to learn the idea that nobody has a monopoly on wisdom,

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Speaker 1: and we want to have checks and balances in order

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Speaker 1: to be a will to modify our opinions in the

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Speaker 1: light of experience, and I think we need to recover

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Speaker 1: some of that now. It's just fascinating. I mean, I

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Speaker 1: mean the prescriptionary first of all, is there an opening

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Speaker 1: it Homeland Security? Do you want to serve again as

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Speaker 1: Secretary of Homeland Security with that work? For Michael? Turn

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Speaker 1: off my four years enough and look to be honest, meat,

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Speaker 1: fresh blood. I think one of the things has musical

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Speaker 1: about our system is we do get turned over, and

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Speaker 1: no matter how good you wanted a job, after several years,

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Speaker 1: it's good to have a fresh pair of life. And

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Speaker 1: I think that's useful. And how much security as well?

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Speaker 1: Secretary turt Off. A few weeks ago, I was having

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Speaker 1: a conversation with Sir Martin Soil of w p P.

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Speaker 1: Of course, that company among others that were hit by

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Speaker 1: a cyber attack of a very large scale, maybe just

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Speaker 1: over a month ago now, and we talked about the

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Speaker 1: way his company's dealt with that, and I moved toward

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Speaker 1: more coordination or conversation among companies. What do big come

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Speaker 1: pennies yet understand about the threat of cybersecurity. Well, I

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Speaker 1: think everybody realizes now that it is one of the

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Speaker 1: big risks any big company faces. And just as you

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Speaker 1: are concerned about your financial position or your core business assets,

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Speaker 1: you have to be concerned about your I T system

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Speaker 1: and your cyber particularly because there's not just a lot

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Speaker 1: of information that can be hacked if somebody gets into

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Speaker 1: your network, but it can actually interfere with your operations.

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Speaker 1: And that's what we saw with the exploits that was

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Speaker 1: part of the attack on w PP but also went

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Speaker 1: around the world and did everything from shut down the

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Speaker 1: National Health Service in Britain to affecting MURSK shipping. When

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Speaker 1: you when you look at that attack, what does it

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Speaker 1: portend to you? And are we going to see more

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Speaker 1: attacks like this? What can companies like w PP, like

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Speaker 1: Morisk due to prepare for attacks like this one? Imagine

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Speaker 1: of course, this is seven job fending off attacks like these.

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Speaker 1: What more can companies do? Well? I do you think

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Speaker 1: we're going to see more attacks and we're going to

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Speaker 1: see the scale of the attacks grow. And this is

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Speaker 1: really a problem of risk management. You can't eliminate the risk,

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Speaker 1: but you can manage it. And some of it is

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Speaker 1: a question of having a governance and a policy structure

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Speaker 1: that regulates who can get on your network, what they're

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Speaker 1: allowed to do on the network, what kind of monitor

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Speaker 1: monitoring the res of the network. Some of it has

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Speaker 1: to do with educating people so they don't download things

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Speaker 1: by mistake or leave themselves vulnerable, because one of the

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Speaker 1: challenges with cybersecurity is you're only as strong as the

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Speaker 1: weakest link, so you have to have a deliberate approach

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Speaker 1: to driving down the risk over a period of time.

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Speaker 1: You mentioned in your notes the thing that always comes back,

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Speaker 1: it depends. It doesn't matter if it's Wall Street or cybersecurity,

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Speaker 1: which is corporate culture. My experience, sir, is that the

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Speaker 1: corporate culture is to have the fear of God and

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Speaker 1: you to go out and higher tech experts that can

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Speaker 1: do the technology of cy security. Are we at that

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Speaker 1: stage yet where boardroom, you know, people in suits and

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Speaker 1: ties are so scared that they're actually going out and

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Speaker 1: finding people with expertise in these thugs. Well, we certainly

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Speaker 1: see boards focused on this issue, and um part of

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Speaker 1: that is getting a technical solution. But as we like

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Speaker 1: to tell companies, it's about people, not technology. In the

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Speaker 1: end that people who are attacking you are not operating autonomously.

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Speaker 1: They've got an agenda, and that means you've got to

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Speaker 1: think about it as a human problem. So first and foremost,

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Speaker 1: you have to really understand what are your key assets

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Speaker 1: and what are you most concerned about protecting. And then

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Speaker 1: you have to build a system of policies and practices

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Speaker 1: that are designed to allow your business to function, but

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Speaker 1: to do it in a way that drives down the

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Speaker 1: risk to the key assets. And only when you've got

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Speaker 1: a strategy like that does the technology play a role

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Speaker 1: in enabling and implementing match strategy. In these last few

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Speaker 1: minutes we have with you, I'd love to talk some

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Speaker 1: about immigration. And there was a remarkable exchange yesterday during

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Speaker 1: the Daily Press briefing at the White House about immigration policy,

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Speaker 1: the President coming out in support of a piece of

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Speaker 1: legislation on Capitol Hill that doesn't enjoy a whole lot

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Speaker 1: of support from from all Republicans. Uh, conversation about merit

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Speaker 1: based immigration. Of course, immigration is something that you had

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Speaker 1: to deal with when you were at the Department of

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Speaker 1: Homeland Security, and I know you've been on the Immigration

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Speaker 1: Task Force at the Bipartisan Policy Center as well. Do

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Speaker 1: you see a path forward at this point for immigration

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Speaker 1: reform amidst all that's going on in Washington, d C.

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Speaker 1: Where do you think this this falls and the hierarchy

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Speaker 1: of conversation about policy. Well, I do think immigration reform

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Speaker 1: is important and it's long overdue. We talked about doing

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Speaker 1: this ten years ago when I was at the Department

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Speaker 1: of Homeland Security, and I think that the surprising fact

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Speaker 1: is that if you really look at the serious proposals

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00:26:52,760 --> 00:26:56,040
Speaker 1: they're often isn't that much different. It tends to be

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Speaker 1: more a matter of rhetoric and arguments, and it is substance.

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Speaker 1: I've we all believe that we should have a regulated

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Speaker 1: system of immigration where we know who's admitted, what they're

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Speaker 1: doing here, and we can check when they come and go,

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Speaker 1: and I don't see an argument against that. I think

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Speaker 1: we also believe we ought to have a way of

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Speaker 1: regulating and controlling the borders and not just have them

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Speaker 1: open to human smuggling or drug smuggling or other kinds

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Speaker 1: of of unauthorized activity. The question is how do you

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Speaker 1: get there in a way that is humane and practical

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Speaker 1: and efficient. Which company is your best practices company when

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Speaker 1: with your earned prestigian public service and your work for

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00:27:39,000 --> 00:27:42,320
Speaker 1: years now in security and cybersecurity, is there a company

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Speaker 1: it's the best practice company. Well, I don't want to

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Speaker 1: redose a particular company. I'd like to say that the

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Speaker 1: companies on whose boards I served, I think do take

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Speaker 1: cybersecurity seriously. The boards do monitor what goes on, not

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Speaker 1: at a microscopic level, but um they do get a

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00:28:02,480 --> 00:28:06,680
Speaker 1: report from the chief security officers. Are metrics Uh, when

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00:28:06,720 --> 00:28:09,600
Speaker 1: there is an issue, they drove down into what the

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Speaker 1: cause of the issue isn't how do we correct it?

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Speaker 1: And again, it's not trying to convert a board into

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Speaker 1: a technical operating committee, but it is having the board

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00:28:19,640 --> 00:28:24,359
Speaker 1: exercise oversight and making it clear to management that it

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Speaker 1: treats the issue of cyber risk as a top flight risk.

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Speaker 1: One general question, sir, I have to do this with

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Speaker 1: your clerkshire for William Brennan years ago over to the

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Speaker 1: Supreme Court, and we'll let you go on with your day.

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Speaker 1: How many justice decisions are we away from a conservative

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Speaker 1: Supreme Court? Are we one justice away, two justices away?

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Speaker 1: Or could it be even further? You know? I would

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Speaker 1: say that generally, if you look at the way the

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Speaker 1: corporates down. It's uh tips to what most people would

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Speaker 1: call conservative um by by five to four. But certainly

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Speaker 1: Justice Kennedy on some issues takes positions that conservatives probably

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Speaker 1: would disagree with. Obviously, if you get one or two

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Speaker 1: more conservative appointments, that's going to tip it more in

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Speaker 1: one direction. But one thing I'd emphasize is this, a

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Speaker 1: lot of times people think that the composition of the

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Speaker 1: court or the orientation of the court is political in

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Speaker 1: the sense of an election out commits, and it's really not.

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Speaker 1: If you look at Justice School, who was a wonderful

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Speaker 1: justice and I was privileged to be friendly with. Sometimes

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Speaker 1: he took positions that he believed the law required that

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Speaker 1: many people would not regard as conservative, for example where

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Speaker 1: he ruled in favor of a criminal defendant. When I

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Speaker 1: was a judge, I sometimes made decisions because the law

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Speaker 1: required it, even if on a personal or political level

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Speaker 1: I might have disagreed. And the beauty of our system

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Speaker 1: of the rule of law is the judges of whatever persuasion,

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00:29:55,480 --> 00:29:59,720
Speaker 1: apply the law faithfully, not based on their personal preferences,

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Speaker 1: but based on a philosophy of law. Very valuable. Michael chertof.

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Speaker 1: Thank you so much, David Gura in time. If you

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00:30:06,200 --> 00:30:09,000
Speaker 1: love that conversation, look for that out on iTunes. Our

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Speaker 1: podcasts subscribe today, This is Bloomberg. Thanks for listening to

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Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on

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00:30:28,280 --> 00:30:33,880
Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm

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00:30:33,920 --> 00:30:37,480
Speaker 1: on Twitter at Tom Keene. David Gura is at David Gura.

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Speaker 1: Before the podcast, you can always catch us worldwide. I'm

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Speaker 1: Bloomberg Radio