WEBVTT - A Surprise Dollar Rally Would Be Potentially Disruptive: BNP's Katzive 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:34.080 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. The 0:00:34.159 --> 0:00:38.000 dollar is down more than seven percent versus the world's 0:00:38.159 --> 0:00:41.240 major currencies so far this year. That is the most 0:00:41.640 --> 0:00:44.960 in over a decade. So what are we expecting for 0:00:45.040 --> 0:00:47.600 next year? Will it just be more of the same. 0:00:47.720 --> 0:00:50.400 Here to answer that question is Daniel Katsi. He's head 0:00:50.400 --> 0:00:53.440 of FX Strategy in North America for BNP Pariba and 0:00:53.479 --> 0:00:55.680 he joins us now. Danielle, thank you so much for 0:00:55.760 --> 0:00:58.760 joining us. Thank you. So what are you expecting for 0:00:58.800 --> 0:01:01.280 next year for the dollar? Well, more of the same 0:01:01.360 --> 0:01:03.200 on net. I think by the end of next year 0:01:03.240 --> 0:01:05.920 the dollar will be weaker again. But we think right 0:01:05.959 --> 0:01:08.520 now we're in a period where the dollar is bouncing 0:01:08.520 --> 0:01:11.800 a little bit counter to that that structural move, uh 0:01:11.800 --> 0:01:13.760 and we think we have it maybe three or four 0:01:14.280 --> 0:01:16.200 five percent move ahead of us. For a lot of 0:01:16.240 --> 0:01:20.040 the dollar pairs over the next few weeks and months 0:01:20.080 --> 0:01:22.959 before the longer term down trend resumes. Wait, just to 0:01:23.000 --> 0:01:25.039 make sure that I'm understanding that. In other words, you 0:01:25.040 --> 0:01:29.319 think that the dollar could strengthen four against a number 0:01:29.360 --> 0:01:34.560 of its peers before returning to a down trend. Exactly. Yeah. 0:01:34.600 --> 0:01:37.640 We think right now the markets under pricing the significance 0:01:37.680 --> 0:01:40.480 of what US rates have been doing, under pricing the 0:01:40.720 --> 0:01:44.880 likelihood UH and the and the consequences of tax legislation, 0:01:45.480 --> 0:01:47.760 and it is generally just under owned. In a world 0:01:47.840 --> 0:01:51.040 where markets looking for a rates and you'll and you'll 0:01:51.560 --> 0:01:54.880 yield delivering currencies, Well, what is held back the dollar 0:01:55.000 --> 0:01:58.720 from posting those kinds of gains recently? I mean this 0:01:58.840 --> 0:02:01.560 is not none of this is in new news. No, 0:02:01.680 --> 0:02:03.960 that's true. I think the market has built up a 0:02:04.000 --> 0:02:05.960 short position to some extent, and I think part of 0:02:05.960 --> 0:02:09.320 that reflects this understanding that, yes, the structure, even if 0:02:09.360 --> 0:02:12.320 you have the opportunity for a cyclical bounce, the big 0:02:12.600 --> 0:02:15.320 ten percent type moves over the next few years are 0:02:15.360 --> 0:02:17.440 going to be to the dollar downside. So there's been 0:02:17.400 --> 0:02:20.040 a reluctance to own the dollar. I think the market 0:02:20.040 --> 0:02:23.919 has been reluctant to fully priced in, uh the consequences 0:02:23.919 --> 0:02:26.560 of tax reform until it actually passes, having kind of 0:02:26.600 --> 0:02:29.600 gotten caught the wrong way, um, the legislative agenda before 0:02:30.040 --> 0:02:33.960 and UM. I think there's a cumulative effect of rising 0:02:34.000 --> 0:02:36.120 front end rates, which is what's been happening in the 0:02:36.200 --> 0:02:39.320 US over the last uh two months. The US front 0:02:39.360 --> 0:02:41.440 and rates have been grinding higher, and this does have 0:02:41.480 --> 0:02:45.799 a cumulative effect on hedging decisions and investment decisions, which 0:02:46.000 --> 0:02:48.359 I think is going to only show up potentially over 0:02:48.400 --> 0:02:50.120 time if the market does can't price it in ahead 0:02:50.160 --> 0:02:52.400 of time for whatever reason. So, just to put this 0:02:52.480 --> 0:02:56.240 all into perspective, the moves in the dollar will be 0:02:56.280 --> 0:02:59.320 tremendously important to a lot of different asset classes. And 0:02:59.440 --> 0:03:03.200 I'm thinking increasingly as I talk with investors and analysts 0:03:03.240 --> 0:03:06.400 that there is a growing complacency that perhaps the dollar 0:03:06.440 --> 0:03:09.080 will rally a little bit against its peers, but ultimately 0:03:09.320 --> 0:03:12.000 will remain in this sort of weekend state, if not 0:03:12.680 --> 0:03:15.520 decline in value over the next year. And I'm just 0:03:15.560 --> 0:03:18.040 wondering what happens if it goes the other way. Let's 0:03:18.040 --> 0:03:20.560 say it does strengthen, how much would it have to 0:03:20.880 --> 0:03:24.720 gain against its rivals in order to disrupt things like 0:03:24.840 --> 0:03:27.760 emerging markets. Well, I think it's a very good question. 0:03:27.800 --> 0:03:29.639 I mean, I think the one thing when I talk 0:03:29.680 --> 0:03:32.840 to people about what's going to happen next year, uh, 0:03:32.880 --> 0:03:34.840 the one thing that would really surprise people, as if 0:03:34.840 --> 0:03:37.200 the dollar moved back to the kind of levels we 0:03:37.240 --> 0:03:41.240 saw after the election, that that would really challenge a 0:03:41.240 --> 0:03:43.720 lot of assumptions about where things are going. We don't 0:03:43.720 --> 0:03:46.200 expect that. It's not our base case either. But if 0:03:46.200 --> 0:03:49.040 I'm looking for the pain trade or the surprise uh 0:03:49.120 --> 0:03:50.800 for markets in the in the first half, and often 0:03:50.800 --> 0:03:52.600 we do get surprises in the first few months of 0:03:52.640 --> 0:03:54.360 the year, it would be the dollar does a lot 0:03:54.400 --> 0:03:57.480 better that this cumulative tightening that the fed from the 0:03:57.480 --> 0:04:00.040 FED finally begins to kick in, and that all the 0:04:00.120 --> 0:04:02.040 things that people talk about, well, other central banks are 0:04:02.080 --> 0:04:03.880 hiking as well, that that's too far in the future 0:04:03.880 --> 0:04:06.680 to really provide sustained support for their currencies, and we 0:04:06.720 --> 0:04:08.400 get kind of a move to something like one ten 0:04:08.480 --> 0:04:12.320 and euro USD and yet again not our base case, 0:04:12.360 --> 0:04:13.680 but I think that would be a big surprise for 0:04:13.720 --> 0:04:16.559 the market and which challenge UH a lot of different 0:04:16.560 --> 0:04:19.880 asset classes to to respond. Well. Daniel talking about that 0:04:19.960 --> 0:04:22.680 response from different asset classes. What does that translate to 0:04:22.920 --> 0:04:27.400 lower oil prices, lower inflation? It could uh, you know, 0:04:27.520 --> 0:04:30.640 for if the example I would go back to is, 0:04:30.839 --> 0:04:33.280 you know, how things played out in early seen. At 0:04:33.320 --> 0:04:35.359 that point, the dollar had been gaining a lot, and 0:04:35.400 --> 0:04:39.479 I think many people in the market underestimated how much 0:04:39.839 --> 0:04:43.920 feedback that would create into the economy, into um uh, 0:04:44.279 --> 0:04:49.000 credit markets, energy markets, equity markets, um into the Fed's 0:04:49.040 --> 0:04:51.640 own thinking um and just you know, remember at that 0:04:51.680 --> 0:04:54.080 point the year on year rate in the broad trade 0:04:54.080 --> 0:04:56.120 weighted dollar it got up to about something like like 0:04:56.200 --> 0:04:58.320 fifteen percent. It's hard for us to do that now 0:04:58.360 --> 0:05:01.000 because the base effects just really aren't really the same 0:05:01.000 --> 0:05:02.640 as they were in twenty sixteen, and or wards of 0:05:02.680 --> 0:05:05.720 dollars already still, even though it's been weak this year, 0:05:05.720 --> 0:05:08.120 as you pointed out, the dollars still at relatively strong levels. 0:05:08.400 --> 0:05:09.919 It's gonna be hard to get as much of a 0:05:10.000 --> 0:05:12.480 headwind from f X as we got at that time. 0:05:12.920 --> 0:05:15.240 But even something you know, smaller than that, you know, 0:05:15.360 --> 0:05:19.919 does create a lot of feedback into other markets. So, Daniel, 0:05:20.080 --> 0:05:22.280 how much do you think that the dollar will weakend 0:05:22.800 --> 0:05:26.000 versus its peers by the end of next year compared 0:05:26.040 --> 0:05:28.480 with where we are today. Well, we've been using our 0:05:28.600 --> 0:05:31.560 long term equilibrium fair value model to try and answer 0:05:31.560 --> 0:05:34.120 that question, and the idea is that you know, the 0:05:34.160 --> 0:05:38.520 dollar got very expensive during the period in when FED 0:05:38.600 --> 0:05:41.800 policy was diverging from policy everywhere else, and over the 0:05:41.800 --> 0:05:44.720 next few years, as other central banks start tightening and 0:05:44.760 --> 0:05:47.760 the FED ends its cycle, uh, we're gonna have reconvergence 0:05:47.760 --> 0:05:49.520 and monetary policies. So we think we could go back 0:05:49.520 --> 0:05:53.240 to these long term equilibrium levels. The biggest excrepancies are 0:05:53.279 --> 0:05:56.200 in versus currencies where the other central bank has been 0:05:56.240 --> 0:05:59.560 doing QI. So, for example, you're a USD our long 0:05:59.640 --> 0:06:03.000 term mac librium estimate is one thirty three UM. We 0:06:03.000 --> 0:06:05.360 don't think we're gonna get there in We think we'll 0:06:05.360 --> 0:06:07.280 get there by the end of so that'll be a 0:06:07.600 --> 0:06:09.920 gradual process with ups and downs along the way. By 0:06:09.920 --> 0:06:13.960 the end, we're thinking one twenty two for euro USD 0:06:14.040 --> 0:06:16.520 so it's basically getting back to where we got around 0:06:16.560 --> 0:06:18.760 the middle of this year. We think dollar end could 0:06:18.800 --> 0:06:22.080 get UM as low as well as high as one 0:06:22.240 --> 0:06:24.680 seventeen in the near term, but then back down to 0:06:24.760 --> 0:06:27.279 one twelve by the end of next year. So a 0:06:27.279 --> 0:06:29.719 bit of a you know, uh V shape or upside 0:06:29.760 --> 0:06:32.200 down V shape. You know, I just want to follow 0:06:32.279 --> 0:06:34.480 up on that, because when you talk about Europe and Japan, 0:06:34.520 --> 0:06:36.600 we're we're heading into a week of a lot of decisions. 0:06:36.640 --> 0:06:38.240 We're going to hear from the e c B in 0:06:38.279 --> 0:06:40.720 the Bank of England, and I'm just wondering, you know, 0:06:40.800 --> 0:06:42.880 who's driving the bus here? Is it the e c 0:06:43.040 --> 0:06:45.159 B or is it the Fed? You know, people talk 0:06:45.200 --> 0:06:48.040 about Trump and the Trump trade, but is it really 0:06:48.080 --> 0:06:50.159 that Europe is doing better than expected, that they're going 0:06:50.200 --> 0:06:54.080 to be forced to start tapering and possibly even lift 0:06:54.080 --> 0:06:57.400 deposit rates sooner than people are expecting. The market is 0:06:57.520 --> 0:07:01.320 very sensitive to any indication that these currency central banks 0:07:01.320 --> 0:07:03.760 like the ECB and the Bank in Japan might be 0:07:03.960 --> 0:07:07.000 beginning to exit. Uh So, you see, whenever the ECB 0:07:07.040 --> 0:07:09.960 says anything even slightly hawkish, you see a big reaction 0:07:10.000 --> 0:07:11.680 in your U s D for example, Whereas the FED 0:07:11.760 --> 0:07:15.000 can actually hike rates, and you know, the benefit for 0:07:15.040 --> 0:07:17.240 the dollar seems much smaller. I think that reflects the 0:07:17.280 --> 0:07:20.360 Euro's cheapness as always expensiveness, and this perception and over 0:07:20.400 --> 0:07:22.559 the next few years things are going to be changing. 0:07:23.160 --> 0:07:25.480 But you know, what I think, really the market sometimes 0:07:25.560 --> 0:07:28.240 forgets is that even if the ECB is talking a 0:07:28.280 --> 0:07:30.680 little bit more about exit, there's still a year away 0:07:30.720 --> 0:07:33.720 from doing anything really meaningful new on the on the 0:07:33.800 --> 0:07:36.400 rate front, at least a year away. And in the meantime, 0:07:37.440 --> 0:07:39.559 if you want to be long euros and hold Euros, 0:07:39.600 --> 0:07:42.520 you have to pay uh, you have to pay care. 0:07:42.600 --> 0:07:44.400 You have to be you know, if your your dollar funded, 0:07:44.440 --> 0:07:46.480 you have to pay a negative rate differential to hold 0:07:46.520 --> 0:07:49.160 that position. So that you know, I think it's important 0:07:49.200 --> 0:07:53.280 to listen to the signal, but not forget that the 0:07:53.360 --> 0:07:55.400 reality on the ground right now is that policy is 0:07:55.440 --> 0:07:58.760 still very accommodative in Europe. Yes, the economy is hot, 0:07:58.840 --> 0:08:02.040 but what that does is create a real downward pressure 0:08:02.080 --> 0:08:04.920 on real rates. Because inflation goes up in Europe, nominal 0:08:05.000 --> 0:08:07.679 rates are held stable and real rates actually get get lower, 0:08:08.080 --> 0:08:10.320 which can hurt the currency in the near term. Thanks 0:08:10.440 --> 0:08:13.000 very much for being with us. Daniel Katze is the 0:08:13.080 --> 0:08:17.240 head of FX strategy in North America for BNP party. Bob. 0:08:32.559 --> 0:08:36.160 There was an election yesterday in al Obama and the 0:08:36.360 --> 0:08:41.160 verdict was somewhat surprising. This very red state turned blue 0:08:41.240 --> 0:08:44.720 for the first time in more than twenty years. Here 0:08:44.760 --> 0:08:47.720 to talk about what the implications are is Jonathan Bernstein, 0:08:47.720 --> 0:08:51.920 Bloomberg View columnist, coming to us from San Antonio. Jonathan, 0:08:51.960 --> 0:08:54.440 thank you so much for being with us. What's your 0:08:54.480 --> 0:08:57.960 main takeaway from the election of Doug Jones to be uh, 0:08:58.080 --> 0:09:04.520 the senator representing the long read Alabama in the Senate. Well, 0:09:04.600 --> 0:09:07.640 we'll be in the Senate. You know, every single Senate 0:09:07.760 --> 0:09:10.040 vote counts, and there's a huge difference between having a 0:09:10.080 --> 0:09:13.800 fifty two majority as the Republicans did you know still 0:09:13.840 --> 0:09:17.599 do until he gets went into having a majority. You know, 0:09:18.360 --> 0:09:21.040 the Vice President Pence has already had to break ties 0:09:21.120 --> 0:09:25.360 six times because Republicans couldn't keep all fifty two together. Um, 0:09:25.840 --> 0:09:28.720 you know, all else equal, Republicans would have lost all 0:09:28.760 --> 0:09:30.760 six of those votes, and we're gonna have more of 0:09:30.840 --> 0:09:33.120 that in the year to come. Well, Jonathan, maybe just 0:09:33.200 --> 0:09:35.760 go through some of the list of the defeated Todd Aiken, 0:09:36.559 --> 0:09:42.160 Richard Moredock, Christine O'Donnell. This could have been the Republicans time, 0:09:42.280 --> 0:09:46.000 but something happened. Yeah, you know, this is yet another 0:09:46.080 --> 0:09:52.280 time where a tea party or an extremist Republican got nominated. Um. 0:09:52.760 --> 0:09:55.400 You know, before Steve Bannon was involved in politics at all, 0:09:55.440 --> 0:09:57.719 this was happening, and now it happens even more with 0:09:58.760 --> 0:10:03.559 Bannonite UH candidates, UM, and they're they're nominating people who 0:10:03.640 --> 0:10:06.679 they should give away seats. Alabama, this should have been 0:10:06.720 --> 0:10:11.000 a lack election, even with the president very unpopular overall. 0:10:11.320 --> 0:10:13.719 Alabama is a very Republican state. They should have won this, 0:10:13.840 --> 0:10:17.199 but they nominated somebody who was a terrible candidate. Well, so, 0:10:17.320 --> 0:10:21.559 Jonathan to that point, how much is this an idiosyncratic 0:10:21.679 --> 0:10:24.720 issue that had to do with choosing a bad candidate 0:10:25.360 --> 0:10:28.000 and how much is it a harbinger for next year 0:10:28.080 --> 0:10:31.800 we get a whole slew of midterm elections. Well, it's 0:10:32.040 --> 0:10:35.880 in some cases both. Um. The three things went into 0:10:36.280 --> 0:10:40.520 the victory for Doug Jones the Democrats. One was that 0:10:40.800 --> 0:10:44.040 Roy Moore has always been unpopular in Alabama. He's won, 0:10:44.200 --> 0:10:46.840 but he won by much less than Republicans typically one 0:10:46.920 --> 0:10:49.959 in his previous statewide races. The second was the scandal 0:10:50.760 --> 0:10:52.839 um which came up after he was nominated. And the 0:10:53.000 --> 0:10:56.920 third was that Trump is just a very unpopular Republican president. 0:10:57.040 --> 0:11:01.520 So it's idiosyncratic of the specific things that happened with 0:11:01.559 --> 0:11:05.440 more but it's not even astocratic that Republicans have made 0:11:05.480 --> 0:11:08.760 a habit of nominating these terrible candidates, and every time 0:11:08.840 --> 0:11:11.120 that happens, they give away a seat. They may wind 0:11:11.200 --> 0:11:14.360 up doing it in the Senate races in Nevada and 0:11:14.640 --> 0:11:18.240 or Arizona. So, Jonathan, I want to press you on 0:11:18.320 --> 0:11:20.439 that one point. You said that this has to do 0:11:20.640 --> 0:11:23.920 with President Trump being very unpopular. Does it? I mean, 0:11:24.000 --> 0:11:26.240 can we really gauge that this had anything to do 0:11:26.400 --> 0:11:30.880 with that, because ultimately, if Roy Moore was unpopular, he 0:11:31.000 --> 0:11:34.200 was unpopular, and yes, Trump added his support at the end, 0:11:34.679 --> 0:11:37.880 But is this really a referendum on him. It's not 0:11:38.000 --> 0:11:40.240 something to a referendum. It's not the people you know 0:11:40.720 --> 0:11:43.200 in Alabama said I'm going to vote against more because 0:11:43.200 --> 0:11:45.840 of Trump. But having an unpopular president of your own 0:11:45.880 --> 0:11:50.560 party depresses enthusiasm within the party. Voters are less likely 0:11:50.640 --> 0:11:53.959 to turn out the other party is more enthusiastic. Um. 0:11:54.160 --> 0:11:58.240 You know, that's what produced a landslide for Republicans against 0:11:58.920 --> 0:12:04.559 Barack Obama and funny ten and um. Right now, Donald 0:12:04.559 --> 0:12:08.200 Trump is about twelve point percentage points less popular than 0:12:08.240 --> 0:12:12.160 Obama was at the same point by years ago. Jonathan, 0:12:12.200 --> 0:12:13.880 you make the point in yours and one of your 0:12:13.880 --> 0:12:18.720 most recent columns, you talk about how Florida's Senator Marco 0:12:18.840 --> 0:12:21.880 Rubio and Utah's Senator Mike Lee had an amendment to 0:12:22.000 --> 0:12:26.679 expand the child credit. Just tell people exactly how that 0:12:26.880 --> 0:12:30.400 played out and what that informs you of. Well, you know, 0:12:30.480 --> 0:12:33.040 that was an interesting case where you had two Republican 0:12:33.120 --> 0:12:35.760 senators who had an amendment that they wanted to push. 0:12:35.800 --> 0:12:39.199 It would have increased the child tax credit, and it 0:12:39.240 --> 0:12:41.520 would have they would have raised the corporate rate a 0:12:41.559 --> 0:12:43.240 little bit or you know, not lowered it as much 0:12:43.280 --> 0:12:47.560 to make up for two senators in a fiftiest majority. 0:12:47.920 --> 0:12:52.600 They didn't have the cloud by themselves to force miss 0:12:52.679 --> 0:12:55.840 mcconnald to make a deal. Now, some people criticize them. 0:12:55.840 --> 0:12:57.840 They could have still tried to They could have found 0:12:57.880 --> 0:13:00.240 a third senator. But now with a fifty one already 0:13:00.280 --> 0:13:04.360 nine two senators, any two senators, Republican senators could go 0:13:04.440 --> 0:13:06.120 to Mitch mcconllull and say, I'm not going to vote 0:13:06.120 --> 0:13:08.720 for this unless you give me my amendment. That one. 0:13:09.120 --> 0:13:10.959 You know, it seems like it's not a big deal, 0:13:11.040 --> 0:13:14.000 one out of a hundred, but in fact, it makes 0:13:14.040 --> 0:13:18.520 it easier for different small groups to be able to 0:13:18.600 --> 0:13:20.880 get their way in the Senate, making it much more 0:13:20.920 --> 0:13:22.640 difficult for the Senate to get anything done for the 0:13:22.679 --> 0:13:27.040 Republicans in the Senate to get anything done. So, just 0:13:27.320 --> 0:13:31.640 going forward, what sort of the strategy for the GOP, 0:13:31.840 --> 0:13:35.160 how are they going to frame this? Well, you know, 0:13:35.920 --> 0:13:38.719 there's what they need to do is to find some 0:13:38.880 --> 0:13:42.679 way to improve the two things, to find some way 0:13:42.720 --> 0:13:46.520 to defeat uh these Bannon type Tea Party type candidates 0:13:46.520 --> 0:13:48.560 who are terrible candidate, who are giving away seats. They 0:13:48.600 --> 0:13:50.920 haven't figured out a way to do that. Um, they 0:13:50.960 --> 0:13:53.600 had thought they did. Mitch McConnell thought that they were 0:13:53.960 --> 0:13:57.760 making some progress in that in the nomination season. We'll 0:13:57.800 --> 0:14:01.240 see what happens as goes along. The other thing that 0:14:01.320 --> 0:14:02.840 they need to do is find some way to make 0:14:02.880 --> 0:14:07.000 Donald Trump less unpopular. You know, good luck figuring that 0:14:07.080 --> 0:14:09.360 one out. I want to thank want to thank you 0:14:09.559 --> 0:14:14.319 very much. Jonathan Bernstein. He is a Bloomberg View columnist 0:14:14.440 --> 0:14:18.640 and previously political science professor at the University of Texas 0:14:18.760 --> 0:14:24.800 at San Antonio. Fascinating, fascinating election yesterday, and the turnout 0:14:24.880 --> 0:14:27.720 was really interesting, and that was definitely something that people 0:14:27.720 --> 0:14:31.200 are to be watching. Is uh is the Democratic Party galvanized? 0:14:31.840 --> 0:14:33.960 What will it take to galvanize the Republican Party in 0:14:34.000 --> 0:14:35.640 the same kind of way for the mid terms. Yes, 0:14:53.880 --> 0:14:58.760 technology alone cannot save your business from cyber attacks, so 0:14:58.960 --> 0:15:02.120 says our net guest. Chris Young is the chief executive 0:15:02.200 --> 0:15:06.080 of McAfee, of course, previously purchased by Intel, and he 0:15:06.240 --> 0:15:09.000 joins us here in our eleven three oh studios. Chris Young, 0:15:09.040 --> 0:15:10.720 thank you very much for coming in. What do you 0:15:10.800 --> 0:15:14.040 mean by this? Technology alone isn't going to save a 0:15:14.160 --> 0:15:17.960 business from cyber attacks. So technology is really important and 0:15:18.080 --> 0:15:21.920 obviously putting together the foundation for security for any organization, 0:15:22.520 --> 0:15:25.520 but you have to have an addition to that, a 0:15:25.680 --> 0:15:29.120 culture of security across your organization. This is really important. 0:15:29.160 --> 0:15:33.240 Security has got to be something that everybody from your employees, 0:15:33.400 --> 0:15:36.720 your partners, your executive staff, as well as your board, 0:15:37.200 --> 0:15:40.080 all parties involved, have to make sure that security is 0:15:40.160 --> 0:15:43.320 a priority and it's something that's part of our consciousness 0:15:43.400 --> 0:15:46.320 and inside of any organization. So that culture is critical 0:15:46.720 --> 0:15:49.560 to augment. Also, you know, augment what you're doing with technology, 0:15:49.880 --> 0:15:53.000 all right? When you walked in here, I asked, ingest, 0:15:53.560 --> 0:15:55.760 do you live in a constant state of paranoia. And 0:15:55.840 --> 0:15:57.760 you were talking about how you would never plug your 0:15:57.800 --> 0:16:00.800 phone into a public outlat outlet because you don't know 0:16:00.840 --> 0:16:02.720 who's on the other side of it, And I have 0:16:02.920 --> 0:16:05.520 to wonder, I mean, I operate by going around thinking, 0:16:05.960 --> 0:16:08.200 are there that many people out there that are trying 0:16:08.280 --> 0:16:12.520 to fleece me? Are there? In reality, the number of 0:16:13.880 --> 0:16:16.400 the number of people who get you know, hit a 0:16:16.520 --> 0:16:19.160 hit in these in these situations are pretty small from 0:16:19.200 --> 0:16:23.480 a mathematical perspective. But the problem is, you know, cybersecurity 0:16:23.640 --> 0:16:26.320 and cyber attacks are getting more pervasive. The numbers are 0:16:26.360 --> 0:16:29.080 going up every year, um, and it's something that everybody 0:16:29.160 --> 0:16:31.240 has to pay attention to well. But I guess from 0:16:31.240 --> 0:16:36.120 a corporate standpoint, have the number of attacks increased exponentially 0:16:36.360 --> 0:16:39.160 and have they gotten more and more sophisticated to the 0:16:39.240 --> 0:16:44.240 point where uh, companies are facing daily barrages that they're 0:16:44.280 --> 0:16:46.920 having trouble keeping up with. So the answer to that 0:16:47.120 --> 0:16:49.520 is yes. I mean we see literally, if I was 0:16:49.600 --> 0:16:52.040 to show you any chart and pick it an attack type, 0:16:52.200 --> 0:16:54.280 literally every attack type is up into the right in 0:16:54.400 --> 0:16:57.440 terms of absolute numbers that we see, Um, we've got 0:16:57.520 --> 0:16:58.840 If I was if I was able to show you 0:16:58.920 --> 0:17:01.040 a presentation. I've got a presentation that I do that 0:17:01.160 --> 0:17:04.879 shows the last thirty years of cyber attacks. One of 0:17:04.920 --> 0:17:07.399 the things you see is that no individual form of 0:17:07.440 --> 0:17:10.760 attack actually ever goes away. They all change, they more 0:17:10.800 --> 0:17:13.480 if they get more sophisticated over time. And now what 0:17:13.560 --> 0:17:15.560 we're seeing a lot of these guys do is there 0:17:15.560 --> 0:17:18.840 actually combining attack types to come up with new attacks 0:17:18.880 --> 0:17:20.639 that you that a lot of those of us who 0:17:20.680 --> 0:17:24.560 are defending have a hard time conceptualizing because they're completely 0:17:24.640 --> 0:17:28.399 different approaches to UH achieving your mission, so to speak, 0:17:28.440 --> 0:17:30.439 if you're a cyber attacker. Well, and it seems as 0:17:30.440 --> 0:17:35.040 though they're also combining the fruits of their labors. For example, 0:17:35.160 --> 0:17:37.840 there is a database that's been reported of about one 0:17:37.920 --> 0:17:42.440 point for billion user passwords has been discovered on the 0:17:42.720 --> 0:17:48.520 dark web, and this is data that is UH taken 0:17:48.640 --> 0:17:53.520 from LinkedIn, MySpace, Netflix, a variety of other sites. And 0:17:53.800 --> 0:17:56.280 the comment is that none of the passwords are encrypted, 0:17:56.640 --> 0:17:59.080 and they've already tested them so that now they can 0:17:59.160 --> 0:18:01.399 be sold through out the world. This is really a 0:18:01.440 --> 0:18:03.760 big business, isn't it. It's one of the reasons you 0:18:03.840 --> 0:18:06.240 have to change your password frequently. I know For some 0:18:06.400 --> 0:18:09.119 people they feel that's annoying to have to change their password. 0:18:09.200 --> 0:18:12.000 But it's back to that culture of security. Security is 0:18:12.040 --> 0:18:15.280 everyone's responsibility, whether you're the person on the street or 0:18:15.400 --> 0:18:18.120 the CEO of an organization, whether you're in the business 0:18:18.280 --> 0:18:21.639 like we are at McAfee of protecting people, um, or 0:18:21.720 --> 0:18:25.120 whether you're there the person who answers the phones here 0:18:25.160 --> 0:18:28.440 at Bloomberg. Everyone has to take responsibility. So how much 0:18:28.520 --> 0:18:32.800 have McAfee's profits gone up. We've we've we've been a 0:18:32.920 --> 0:18:36.159 successful business. As you know. We just spun ourselves out 0:18:36.240 --> 0:18:39.879 of Intel earlier this year in April, to be exact, 0:18:40.080 --> 0:18:43.720 and we've you know, we're one of the largest independent 0:18:43.760 --> 0:18:47.639 cybersecurity companies today. UM, we are, you know, we're I 0:18:47.760 --> 0:18:51.000 like to joke internally that we're um, we're kind of 0:18:51.080 --> 0:18:53.119 like a startup, but we're actually quite large. You've been 0:18:53.119 --> 0:18:56.399 in the business for for several years and it's something that, uh, 0:18:56.960 --> 0:18:59.359 we're very proud of. What do you actually do? So 0:18:59.520 --> 0:19:04.800 we're we provide cybersecurity products and services across consumer markets 0:19:04.880 --> 0:19:09.239 as well as commercial markets. We serve governments and businesses. UM. 0:19:09.359 --> 0:19:11.840 We provide products, we've got services, we do a lot 0:19:11.880 --> 0:19:15.119 of protection and at the foundation of everything we do 0:19:15.960 --> 0:19:20.760 is really strong threat detection and helping stop threats. You 0:19:21.240 --> 0:19:24.080 you recently made a purchase of a sky High UH 0:19:24.400 --> 0:19:27.040 Networks and this has to do with cloud computing. Are 0:19:27.080 --> 0:19:31.520 there specific risks associated with so much data and corporate 0:19:31.560 --> 0:19:36.119 activity moving to the cloud where the people involved may 0:19:36.200 --> 0:19:38.760 not even know where the data resides. They're absolutely, they 0:19:38.760 --> 0:19:40.800 absolutely are. If you think about where the world is 0:19:40.880 --> 0:19:44.119 going in the future state, it's going to be a 0:19:44.240 --> 0:19:46.920 worker in any any organization is just gonna be They're 0:19:46.920 --> 0:19:50.280 gonna be on some device, They're gonna be accessing applications 0:19:50.320 --> 0:19:53.359 and data that are in the cloud, potentially in a 0:19:53.400 --> 0:19:55.719 public cloud environment, and that's going to be the way 0:19:55.760 --> 0:19:58.720 the world is going to work. And so we at McAfee, 0:19:58.960 --> 0:20:01.320 you know, have decided that together when we close the 0:20:01.359 --> 0:20:03.800 transaction with sky High, which happens in the early part 0:20:03.840 --> 0:20:06.280 of next year, will now be able to provide that 0:20:06.520 --> 0:20:08.440 end to end security from you know, kind of the 0:20:08.520 --> 0:20:11.439 devices that users are working with all the way out 0:20:11.480 --> 0:20:13.480 through the applications and data that are in the cloud. 0:20:13.520 --> 0:20:17.480 Where Skyhis establishes established themselves as a leader, we think 0:20:17.520 --> 0:20:19.680 that's the future of where the world is headed not 0:20:19.800 --> 0:20:22.440 only from an I T perspective, but the cybersecurity models 0:20:22.480 --> 0:20:24.800 got to operate that way as well. Just quickly, what's 0:20:24.840 --> 0:20:27.280 your biggest fear with respect to some kind of massive 0:20:27.320 --> 0:20:30.639 data breach? UM? My biggest fear when it comes to 0:20:30.760 --> 0:20:35.159 attacks is is you know the impact on um, you know, 0:20:35.280 --> 0:20:37.880 on major systems. You know, like I, for example, at 0:20:37.880 --> 0:20:39.720 a conference a couple of years ago, I had Ted 0:20:39.840 --> 0:20:42.320 Coppel come and talk because he wrote that book called 0:20:42.400 --> 0:20:44.680 lights Out on you know, an attack, potential attack on 0:20:44.760 --> 0:20:47.560 the power grid. UM. So I do worry about those things. 0:20:47.640 --> 0:20:49.680 I think those are real issues that we have to 0:20:49.760 --> 0:20:52.680 wrestle with, and I think there's a lot of infrastructure 0:20:52.720 --> 0:20:54.200 that needs to be put in place. I think there's 0:20:54.200 --> 0:20:55.800 a lot of process and a lot of back to 0:20:55.920 --> 0:20:58.960 my cultural security, a lot of prioritization that has to 0:20:59.000 --> 0:21:02.480 be placed on the cyber security model in and around 0:21:02.480 --> 0:21:04.800 those critical systems. I do have to say, though, when 0:21:04.840 --> 0:21:08.520 you change your passwords so frequently, it leads to people 0:21:08.720 --> 0:21:11.360 writing down all their passwords in one place, which could 0:21:11.400 --> 0:21:13.520 just just then get hacked. I'm just saying before you 0:21:13.600 --> 0:21:16.520 could use a password manager, that's true, I guess you could. 0:21:16.560 --> 0:21:19.040 You could get more tech savvy Christian. Thank you so 0:21:19.160 --> 0:21:22.080 much for joining us Christians. Chief executive officer of McAfee, 0:21:22.480 --> 0:21:25.399 based in Santa Clara, California. I hope that you are 0:21:25.440 --> 0:21:44.359 okay with the wildfires. It's supposed to be a quiet 0:21:44.440 --> 0:21:48.080 time of the year for municipal bond issuance, but preliminary 0:21:48.160 --> 0:21:51.119 numbers indicate that at least nine billion dollars worth of 0:21:51.240 --> 0:21:53.960 muni debt is expected to be issued during the week 0:21:54.080 --> 0:21:57.160