1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 2 00:00:08,760 --> 00:00:11,560 Speaker 1: Along with my co host Lisa Abramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:32,400 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. We 7 00:00:32,440 --> 00:00:36,239 Speaker 1: turn our attention now to energy. After Hurricanes Katrina and 8 00:00:36,360 --> 00:00:39,000 Speaker 1: Rita hit the US about a dozen years ago, the 9 00:00:39,040 --> 00:00:44,919 Speaker 1: International Energy Agency released emergency petroleum reserves. This time, there 10 00:00:45,000 --> 00:00:47,440 Speaker 1: doesn't seem to be any need to release these stocks 11 00:00:47,720 --> 00:00:51,800 Speaker 1: because inventories remain high. Here to tell us more about 12 00:00:51,840 --> 00:00:54,760 Speaker 1: the effects of Hurricane Harvey on the energy industry is 13 00:00:54,800 --> 00:00:58,520 Speaker 1: Andy Lipow. He is the president of Lippow Oil Associates 14 00:00:58,520 --> 00:01:01,200 Speaker 1: and they are based in Houston, and he joins us 15 00:01:01,240 --> 00:01:04,440 Speaker 1: in our eleven three oh studios here. Thanks very much 16 00:01:04,480 --> 00:01:06,280 Speaker 1: for being here, and first of all, maybe just tell 17 00:01:06,360 --> 00:01:09,920 Speaker 1: people you're from Houston. You can't get back home, correct, Uh, 18 00:01:10,160 --> 00:01:13,000 Speaker 1: that's right. I can't get back home because the airlines 19 00:01:13,200 --> 00:01:16,120 Speaker 1: are not restoring their full schedules. So even though the 20 00:01:16,160 --> 00:01:19,840 Speaker 1: airports have begun operations, if if you were to look 21 00:01:19,920 --> 00:01:22,800 Speaker 1: the amount of flights is a handful every day, but 22 00:01:22,920 --> 00:01:26,559 Speaker 1: it appears that I'm flying on Southwest. I'll restore full 23 00:01:26,600 --> 00:01:30,880 Speaker 1: operations by Sunday, Okay. So can we apply similar kind 24 00:01:30,920 --> 00:01:34,160 Speaker 1: of perspective when it comes to the energy industry that 25 00:01:34,640 --> 00:01:38,360 Speaker 1: even though that you may say are certain refineries are 26 00:01:38,400 --> 00:01:43,039 Speaker 1: shut down, the effects ripple through the entire energy complex. Well, 27 00:01:43,040 --> 00:01:45,679 Speaker 1: they certainly do. And if one looks at how Harvey 28 00:01:45,880 --> 00:01:49,920 Speaker 1: has impacted the Texas Gulf Coast, it started in Corpus 29 00:01:49,960 --> 00:01:53,160 Speaker 1: and it moved over to the Houston area and now 30 00:01:53,200 --> 00:01:55,680 Speaker 1: it's in the Beaumont Port author area. So we've had 31 00:01:55,720 --> 00:01:59,920 Speaker 1: this ripple effect from west to east, shutting down refineries. 32 00:02:00,440 --> 00:02:04,200 Speaker 1: As we stand here today, the refineries in Corpus Christie 33 00:02:04,240 --> 00:02:08,600 Speaker 1: are in their startup operations and we expect to see 34 00:02:08,800 --> 00:02:12,960 Speaker 1: a similar events happen in Houston over the next few weeks. 35 00:02:13,000 --> 00:02:15,760 Speaker 1: But Beaumont Port author really has taken the brunt of 36 00:02:15,800 --> 00:02:19,239 Speaker 1: the flooding event and it may be several weeks or 37 00:02:19,280 --> 00:02:22,120 Speaker 1: even a month to get them back. So right now 38 00:02:22,120 --> 00:02:24,720 Speaker 1: I'm looking at gasoline futures that are at the highest 39 00:02:24,919 --> 00:02:28,480 Speaker 1: level since two thousand and fourteen. Also Uh. They have 40 00:02:28,680 --> 00:02:33,799 Speaker 1: risen just today alone nearly thirteen percent. So definitely is 41 00:02:33,840 --> 00:02:37,600 Speaker 1: a lot of expectation that gas supplies refined UH guess 42 00:02:37,800 --> 00:02:41,200 Speaker 1: refined crude, they're going to be in short supply. Do 43 00:02:41,240 --> 00:02:45,400 Speaker 1: you think that the current UH market sentiment is overblown 44 00:02:45,639 --> 00:02:49,960 Speaker 1: or do you think that gasoline has further to climb? Well, 45 00:02:50,000 --> 00:02:54,280 Speaker 1: I think the market looked at UH today's news when 46 00:02:54,360 --> 00:02:56,800 Speaker 1: Motiva said it's going to take them two weeks just 47 00:02:56,880 --> 00:03:00,960 Speaker 1: to assess the damage in Port author and are extrapolating 48 00:03:01,000 --> 00:03:03,480 Speaker 1: that to the rest of the refineries in that region 49 00:03:03,840 --> 00:03:07,880 Speaker 1: that account for eight percent of the total refinery capacity 50 00:03:07,919 --> 00:03:10,440 Speaker 1: in the US. So we are going to see these 51 00:03:10,440 --> 00:03:14,320 Speaker 1: spikes until we see more refineries get back online. Can 52 00:03:14,360 --> 00:03:17,280 Speaker 1: you speak a little bit about the Colonial Pipeline, because 53 00:03:17,280 --> 00:03:20,440 Speaker 1: there's been some back and forth about the information about 54 00:03:20,520 --> 00:03:25,080 Speaker 1: the pipeline and about the fuel that normally flows through it. Sure, So, 55 00:03:25,160 --> 00:03:30,320 Speaker 1: Colonial Pipeline originates in Houston and picks up refined products 56 00:03:30,320 --> 00:03:33,400 Speaker 1: from Houston and then Beaumont Port Author than the Louisiana 57 00:03:33,480 --> 00:03:36,840 Speaker 1: refineries as well as Mississippi. And it had been reported 58 00:03:36,840 --> 00:03:40,200 Speaker 1: that the entire pipeline for both gasoline and diesel fuel 59 00:03:40,520 --> 00:03:44,040 Speaker 1: had been shut down, but that's actually not quite correct. 60 00:03:44,480 --> 00:03:48,400 Speaker 1: What is correct is that Colonial Pipeline continues to operate 61 00:03:48,720 --> 00:03:52,960 Speaker 1: by receiving refined products from those operations in Lake Charles 62 00:03:53,080 --> 00:03:57,480 Speaker 1: or New Orleans or Pascagoula, Mississippi. But it is true 63 00:03:57,560 --> 00:04:01,119 Speaker 1: that they in fact are shut down out of Houston 64 00:04:01,240 --> 00:04:05,360 Speaker 1: and Beaumont Port author locations because those refineries simply aren't running. 65 00:04:06,160 --> 00:04:09,240 Speaker 1: Andy I'm looking right now, the average gas price at 66 00:04:09,240 --> 00:04:12,760 Speaker 1: the pump in the United States right now is about 67 00:04:12,800 --> 00:04:16,600 Speaker 1: two dollars and forty four cents, maybe forty five cents. UH. 68 00:04:16,640 --> 00:04:20,560 Speaker 1: It's obviously actually it's much lower right now in Texas, 69 00:04:20,560 --> 00:04:22,560 Speaker 1: which is interesting because a lot of people have talked 70 00:04:22,560 --> 00:04:25,279 Speaker 1: about perhaps the entire gasoline supply getting cut off for 71 00:04:25,279 --> 00:04:27,800 Speaker 1: a while. How high do you expect prices to go 72 00:04:28,080 --> 00:04:31,559 Speaker 1: in the near term, Well, I think they're gonna jump 73 00:04:31,600 --> 00:04:34,440 Speaker 1: another twenty cents a gallon from where they are today. 74 00:04:34,480 --> 00:04:36,080 Speaker 1: If we were to look at the price in the 75 00:04:36,120 --> 00:04:40,200 Speaker 1: pipeline system or the wholesale price, it's up fifty cents 76 00:04:40,200 --> 00:04:44,640 Speaker 1: a gallon as UH retailers and refiners scramble for supply. 77 00:04:44,880 --> 00:04:47,120 Speaker 1: So a lot of that increase is going to be 78 00:04:47,200 --> 00:04:50,719 Speaker 1: passed into the consumer. We're looking right now at NIMEX 79 00:04:50,800 --> 00:04:55,839 Speaker 1: gasoline futures. They're up more than uh Andy, what kinds 80 00:04:55,920 --> 00:04:59,360 Speaker 1: of maintenance and what kinds of damage can you assess 81 00:04:59,440 --> 00:05:01,919 Speaker 1: based on your previous knowledge of what happens when you 82 00:05:02,000 --> 00:05:06,479 Speaker 1: flood a refinery. So the biggest damage occurs to the 83 00:05:06,520 --> 00:05:09,320 Speaker 1: electric motors that have been submerged, so they have to 84 00:05:09,320 --> 00:05:12,640 Speaker 1: be pulled out of the refinery in many cases rewired 85 00:05:13,120 --> 00:05:15,400 Speaker 1: and then brought back. But when you have so many 86 00:05:15,480 --> 00:05:18,920 Speaker 1: pumps and motors that have been damaged, you simply run 87 00:05:18,960 --> 00:05:22,280 Speaker 1: out of repair shops if you will to get them 88 00:05:22,279 --> 00:05:27,400 Speaker 1: back online really quickly. Andy, when I talk about rising 89 00:05:27,520 --> 00:05:29,920 Speaker 1: gas prices, I have to think someone is going to 90 00:05:30,080 --> 00:05:32,960 Speaker 1: benefit from this, because someone is getting paid more for 91 00:05:33,120 --> 00:05:37,840 Speaker 1: their gasoline. Who is it? Well, the biggest beneficiaries are 92 00:05:37,920 --> 00:05:42,040 Speaker 1: those refiners who continue to operate and are being able 93 00:05:42,080 --> 00:05:45,680 Speaker 1: to sell product into the market. So which ones are they? 94 00:05:45,760 --> 00:05:48,080 Speaker 1: So the ones here in the US that come to 95 00:05:48,160 --> 00:05:54,240 Speaker 1: mind right away are PBF Energy, Holly, Frontier two, Sorrow, CVR, 96 00:05:54,600 --> 00:05:57,839 Speaker 1: or DELK because they all have operations that are far 97 00:05:58,080 --> 00:06:03,000 Speaker 1: from the horror cane Harvey impacts, as well as European 98 00:06:03,040 --> 00:06:06,560 Speaker 1: refiners are now benefiting because their strong demand for them 99 00:06:06,600 --> 00:06:09,640 Speaker 1: to make gasoline to ship over to the US. Will 100 00:06:09,680 --> 00:06:13,400 Speaker 1: they find more customers, for example, in Latin America, because 101 00:06:13,440 --> 00:06:16,719 Speaker 1: don't they Latin American countries they rely on imports from 102 00:06:16,720 --> 00:06:20,800 Speaker 1: Texas and Louisiana for their refined product. Well, that is 103 00:06:20,800 --> 00:06:23,040 Speaker 1: certainly going to happen. If we were to look at 104 00:06:23,080 --> 00:06:27,320 Speaker 1: Mexico specifically, who's buying about three barrels a day of 105 00:06:27,360 --> 00:06:30,880 Speaker 1: gasoline from the US. They need to scramble for supplies 106 00:06:31,000 --> 00:06:33,680 Speaker 1: from other parts of the world, so where they look 107 00:06:33,760 --> 00:06:38,480 Speaker 1: to is Europe and Asia. What about the argument that 108 00:06:38,520 --> 00:06:41,680 Speaker 1: you're going to see such reduced demand from people in 109 00:06:41,800 --> 00:06:45,680 Speaker 1: Texas that that will eventually create some equilibrium in the market. 110 00:06:46,120 --> 00:06:47,600 Speaker 1: Do you think that's the case and do you expect 111 00:06:47,640 --> 00:06:51,799 Speaker 1: shortages of gasoline in Texas during this whole cleanup? Well, 112 00:06:51,839 --> 00:06:54,800 Speaker 1: while there has been some demand destruction in Texas, it's 113 00:06:54,839 --> 00:06:59,920 Speaker 1: nowhere near the loss of refineries supply. We've had thirty 114 00:07:00,080 --> 00:07:04,320 Speaker 1: one percent of the refineries UH in the US being 115 00:07:04,360 --> 00:07:09,720 Speaker 1: affected by Harvey. At the same time, refiners have reduced 116 00:07:09,800 --> 00:07:12,560 Speaker 1: runs by over five million barrels a day, even though 117 00:07:12,600 --> 00:07:15,480 Speaker 1: some of them are in partial operation, So there is 118 00:07:15,480 --> 00:07:18,720 Speaker 1: a big impact, and that's why you're seeing sore and gasoline, 119 00:07:18,800 --> 00:07:22,560 Speaker 1: diesel and jet fuel prices. Will you see any changes 120 00:07:22,600 --> 00:07:25,080 Speaker 1: in the way that the refinery or energy industry does 121 00:07:25,120 --> 00:07:29,560 Speaker 1: business or protects its assets after this hurricane. Well, it's 122 00:07:29,680 --> 00:07:32,440 Speaker 1: very difficult to protect yourself from four and a half 123 00:07:32,480 --> 00:07:35,720 Speaker 1: feet of rain. So, uh, you know, they may look 124 00:07:35,760 --> 00:07:38,960 Speaker 1: at raising their electrical pumps, you know, to a little 125 00:07:39,000 --> 00:07:41,240 Speaker 1: bit higher, a couple of three or four feet off 126 00:07:41,240 --> 00:07:43,720 Speaker 1: the ground, but I don't think as a practical matter, 127 00:07:43,800 --> 00:07:45,760 Speaker 1: they're going to be able to do much unless they're 128 00:07:45,760 --> 00:07:48,800 Speaker 1: able to build dikes around the refineries to keep the 129 00:07:48,800 --> 00:07:52,000 Speaker 1: water out. Well, any good luck getting home. I'm sure 130 00:07:52,040 --> 00:07:54,320 Speaker 1: it's going to be a trying expedition and even once 131 00:07:54,360 --> 00:07:56,800 Speaker 1: you get there, just getting to your home might be 132 00:07:56,960 --> 00:08:00,480 Speaker 1: quite adventure. Yeah, yeah, thank you very much. I appreciate it. Yeah, 133 00:08:00,520 --> 00:08:03,840 Speaker 1: all our best. Andy Lippo is president of Lippout Oil Associates, 134 00:08:04,160 --> 00:08:07,280 Speaker 1: which is based in Houston, but he is marooned here 135 00:08:07,280 --> 00:08:09,920 Speaker 1: in New York City. Uh. There could be worse places 136 00:08:09,960 --> 00:08:12,400 Speaker 1: to be marooned, but we really wish you all the 137 00:08:12,440 --> 00:08:27,680 Speaker 1: best getting back and getting back to normal in the area. 138 00:08:28,400 --> 00:08:31,720 Speaker 1: Jared Kushner, Donald Trump's president, Donald Trump's son in law 139 00:08:31,800 --> 00:08:35,120 Speaker 1: and top advisor. Uh, he wakes up each morning to 140 00:08:35,240 --> 00:08:38,360 Speaker 1: a growing problem, and here tell us what that problem 141 00:08:38,559 --> 00:08:41,720 Speaker 1: is and the extent to which that problem seems to be. 142 00:08:41,760 --> 00:08:45,720 Speaker 1: Deevil him is our own reporter for Bloomberg Business Week, 143 00:08:45,960 --> 00:08:49,200 Speaker 1: David Kochanski and David, thanks very much for being with us. 144 00:08:49,440 --> 00:08:52,960 Speaker 1: Can you describe for people, maybe they're not familiar with 145 00:08:53,040 --> 00:08:57,160 Speaker 1: Jared Kushner's family business, what exactly does his family do, 146 00:08:57,280 --> 00:08:59,880 Speaker 1: how did it get into the real estate business, and 147 00:09:00,440 --> 00:09:04,320 Speaker 1: what kind of issues are they facing. Um. The Christiers 148 00:09:04,320 --> 00:09:07,400 Speaker 1: have been a real estate family for several generation. UM. 149 00:09:07,480 --> 00:09:11,760 Speaker 1: Jared's grandparents, who are Holocaust survivors, started a small construction company. 150 00:09:12,480 --> 00:09:14,679 Speaker 1: His dad took over the company in the eighties when 151 00:09:14,679 --> 00:09:19,199 Speaker 1: they had about four thousand apartments, and by the two thousands, 152 00:09:19,200 --> 00:09:22,520 Speaker 1: early two thousands, they had twenty five thousand apartments, mostly 153 00:09:22,679 --> 00:09:27,880 Speaker 1: in the suburbs. UM. In two thousand and seven when Jared, 154 00:09:27,960 --> 00:09:30,760 Speaker 1: shortly after Jared had kind of taken control of the company, 155 00:09:30,920 --> 00:09:33,160 Speaker 1: they moved into New York real estate and they bought 156 00:09:33,160 --> 00:09:35,920 Speaker 1: a tower at six sixty six Fifth Avenue. They bought 157 00:09:35,960 --> 00:09:38,079 Speaker 1: it at the height of the market, paid a lot 158 00:09:38,080 --> 00:09:40,160 Speaker 1: of money, took on a lot of debt, and have 159 00:09:40,280 --> 00:09:43,720 Speaker 1: been struggling with that asset ever since. They paid one 160 00:09:44,440 --> 00:09:48,560 Speaker 1: billion dollars correct and that was a new record. Yes, 161 00:09:48,600 --> 00:09:50,320 Speaker 1: there was a record for any building in the US 162 00:09:50,400 --> 00:09:53,920 Speaker 1: at the time. UM. It was highly leveraged UM and 163 00:09:53,960 --> 00:09:56,760 Speaker 1: in order to make it work UM they had to 164 00:09:56,800 --> 00:09:59,160 Speaker 1: take on a lot of debt. They had to sell 165 00:09:59,679 --> 00:10:02,600 Speaker 1: some the most expensive assets. There's some retail on the 166 00:10:02,600 --> 00:10:05,560 Speaker 1: lower floors of it that was profitable, but they had 167 00:10:05,600 --> 00:10:08,320 Speaker 1: to sell that off. They had to refinance and kind 168 00:10:08,320 --> 00:10:11,440 Speaker 1: of turnover of the rest of the building to Tornado, 169 00:10:11,600 --> 00:10:16,000 Speaker 1: the big, very profitable real estate company. UM. Now with 170 00:10:16,120 --> 00:10:18,680 Speaker 1: the debt is coming to UM the motage that we 171 00:10:19,160 --> 00:10:22,280 Speaker 1: is do in en They've only been paying interest so far. 172 00:10:22,600 --> 00:10:24,200 Speaker 1: They got to figure out a way to make this 173 00:10:24,320 --> 00:10:27,200 Speaker 1: building work. And as of now there's some quarters where 174 00:10:27,200 --> 00:10:29,760 Speaker 1: it is not profitable, so refinancing it is going to 175 00:10:29,800 --> 00:10:32,120 Speaker 1: be difficult when it's not turning a profit. They've been 176 00:10:32,160 --> 00:10:34,720 Speaker 1: searching the globe trying to raise money and get foreign 177 00:10:34,720 --> 00:10:37,200 Speaker 1: investment to profit up. And that's what our story is about, 178 00:10:37,480 --> 00:10:41,200 Speaker 1: right And and part of the story was the complications 179 00:10:41,240 --> 00:10:45,199 Speaker 1: that come along with looking for international financing when you 180 00:10:45,280 --> 00:10:47,760 Speaker 1: are the son in law of the president of the 181 00:10:47,840 --> 00:10:50,160 Speaker 1: United States. Correct, And that's sort of becoming somewhat of 182 00:10:50,200 --> 00:10:54,400 Speaker 1: an obstacle as well as an advantage. Yes, And you know, 183 00:10:54,520 --> 00:10:59,120 Speaker 1: in January, Jared Krishner UM divested of his interest in 184 00:10:59,160 --> 00:11:01,760 Speaker 1: the company. He try for the company to other family members, 185 00:11:01,760 --> 00:11:04,640 Speaker 1: so he technically is not involved in it. UM, But 186 00:11:04,760 --> 00:11:07,840 Speaker 1: because he's a top advisor to the president, there are 187 00:11:07,880 --> 00:11:11,040 Speaker 1: a lot of concerns about potential conflicts of interest and 188 00:11:11,600 --> 00:11:14,319 Speaker 1: UM we laid out in the story for the first 189 00:11:14,320 --> 00:11:17,520 Speaker 1: time that there were a sovereign wealth fund in South 190 00:11:17,600 --> 00:11:20,040 Speaker 1: Korea that he and his father had met with to 191 00:11:20,080 --> 00:11:23,559 Speaker 1: ask for investments during this campaign in sixteen and Donald 192 00:11:23,600 --> 00:11:26,600 Speaker 1: Trump was making his way to the White House. UM, 193 00:11:26,640 --> 00:11:31,319 Speaker 1: there's a Saudi investor who in the family had preliminary 194 00:11:31,360 --> 00:11:34,840 Speaker 1: talks with that had not been mentioned before. UM. And 195 00:11:35,200 --> 00:11:38,640 Speaker 1: what we saw in our reporting is that UM, you know, 196 00:11:38,760 --> 00:11:41,080 Speaker 1: until fifteen or so, they had a hard time getting 197 00:11:41,160 --> 00:11:45,040 Speaker 1: anyone to UM show interests and many times not even 198 00:11:45,040 --> 00:11:48,400 Speaker 1: take meetings with them. As Donald Trump rose UM and 199 00:11:48,480 --> 00:11:51,720 Speaker 1: Jared's prominence rose, there a lot of people interested UM 200 00:11:51,760 --> 00:11:55,880 Speaker 1: including some UH. One that has been reported before was 201 00:11:55,960 --> 00:12:00,040 Speaker 1: a bad the Chinese corporation that's tightly tied closely to 202 00:12:00,120 --> 00:12:04,120 Speaker 1: the government. UM. The Krishners UH after the election came 203 00:12:04,640 --> 00:12:06,560 Speaker 1: to a deal where an Bang was going to bail 204 00:12:06,600 --> 00:12:10,360 Speaker 1: them out. UM. After the deal, the details of that 205 00:12:10,400 --> 00:12:14,320 Speaker 1: deal came public. That fell apart. UM. But what we 206 00:12:14,440 --> 00:12:16,160 Speaker 1: found in our reporting is that there's a lot of 207 00:12:16,160 --> 00:12:18,440 Speaker 1: other places they've been looking for money and they still 208 00:12:18,480 --> 00:12:20,520 Speaker 1: at this point have not figured out a solution to 209 00:12:20,600 --> 00:12:24,360 Speaker 1: the building. Well, David and your reporting, what kind of 210 00:12:24,400 --> 00:12:29,320 Speaker 1: options are there for for the Kushner real estate company. Well, 211 00:12:29,360 --> 00:12:32,640 Speaker 1: you know Laurent Morale who we interviewed as the president 212 00:12:32,640 --> 00:12:34,920 Speaker 1: of Krishner Companies. He said that they have several options. 213 00:12:35,000 --> 00:12:37,720 Speaker 1: The first is this what was called the Mega project 214 00:12:37,800 --> 00:12:41,440 Speaker 1: is grand UM this grand vision where they would knock 215 00:12:41,480 --> 00:12:45,520 Speaker 1: down the building UM and build a gigantic eight story 216 00:12:45,640 --> 00:12:48,040 Speaker 1: tower with five floors of retail, something that looked like 217 00:12:48,080 --> 00:12:50,839 Speaker 1: oz or Abu Dhabi. That's there has been drawings of it, 218 00:12:51,160 --> 00:12:53,520 Speaker 1: UM and it's this glittering thing, but it would be 219 00:12:53,559 --> 00:12:57,280 Speaker 1: so astronomically expensive. UM. A lot of you know, most 220 00:12:57,280 --> 00:13:00,240 Speaker 1: of the investors, as they've approached, are hesitant to get 221 00:13:00,240 --> 00:13:03,800 Speaker 1: involved because they think that the Manhattan real estate market 222 00:13:03,920 --> 00:13:07,280 Speaker 1: and retail market can't sustain the kind of numbers that 223 00:13:07,320 --> 00:13:09,440 Speaker 1: we take to build something that big. So that's the 224 00:13:09,480 --> 00:13:12,280 Speaker 1: big one. And Mr Rowley told us that they still 225 00:13:12,600 --> 00:13:15,160 Speaker 1: are out there trying to do that. If it is not, 226 00:13:15,320 --> 00:13:17,280 Speaker 1: If they can't get that, they say that they'll have 227 00:13:17,320 --> 00:13:19,440 Speaker 1: to try to bring other investors and maybe work the 228 00:13:19,440 --> 00:13:23,280 Speaker 1: building out as UM an office building. But it has 229 00:13:23,320 --> 00:13:26,080 Speaker 1: proven so far. UM. You know, it's been tough for 230 00:13:26,080 --> 00:13:28,440 Speaker 1: them to do it because it's an older building. The 231 00:13:28,520 --> 00:13:32,080 Speaker 1: layout of the building makes it kind of tough to UM. 232 00:13:32,160 --> 00:13:34,760 Speaker 1: It's not like a modern airy building it has. It 233 00:13:34,840 --> 00:13:37,800 Speaker 1: has tight columns and kind of lower ceilings and not 234 00:13:37,920 --> 00:13:41,720 Speaker 1: the kind of light and spacious field that modern offices 235 00:13:42,040 --> 00:13:45,800 Speaker 1: UM businesses want to pay top dollar for. And there's 236 00:13:45,800 --> 00:13:48,760 Speaker 1: also been a change in the Manhattan real estate market. 237 00:13:48,800 --> 00:13:52,960 Speaker 1: I mean Midtown where they are at fifty umty three 238 00:13:53,280 --> 00:13:56,560 Speaker 1: and fifth is not as hot a market as as 239 00:13:56,600 --> 00:13:57,880 Speaker 1: it has been in the past, and there's a lot 240 00:13:57,920 --> 00:14:00,360 Speaker 1: of development going out on the West Side and UM, 241 00:14:00,440 --> 00:14:02,760 Speaker 1: so to get the kind of rent that they would 242 00:14:02,760 --> 00:14:05,840 Speaker 1: need to make that building work, UM will be a challenge, 243 00:14:05,840 --> 00:14:07,880 Speaker 1: and if they can't get the mega project built, it 244 00:14:07,960 --> 00:14:10,640 Speaker 1: probably would involve some kind of renovation that would be difficult, 245 00:14:11,160 --> 00:14:15,840 Speaker 1: um and expensive to carry off. Real quick twenty seconds. 246 00:14:15,840 --> 00:14:19,360 Speaker 1: Have you heard a response from the Kushner family. We 247 00:14:19,440 --> 00:14:21,200 Speaker 1: have not heard from the Christian family. We spoke to 248 00:14:21,280 --> 00:14:24,440 Speaker 1: them extensively and went over all the details of it beforehand, 249 00:14:24,480 --> 00:14:27,840 Speaker 1: and um, so we have they've they've got haven't said 250 00:14:27,840 --> 00:14:29,800 Speaker 1: anything about it at this point. Well, thank you so 251 00:14:29,880 --> 00:14:32,960 Speaker 1: much for joining us and for the interesting reporting on 252 00:14:33,160 --> 00:14:37,240 Speaker 1: this building. Six sixty six Park Avenue and UH one 253 00:14:37,280 --> 00:14:39,120 Speaker 1: point eight billion dollars is a lot of money for 254 00:14:39,160 --> 00:14:43,160 Speaker 1: a building right now. David COCHINESK Cochinski, thank you so 255 00:14:43,200 --> 00:14:45,440 Speaker 1: much for joining us. He's a reporter for Bloomberg Business 256 00:14:45,480 --> 00:14:49,120 Speaker 1: Week who wrote this story, which is truly fabulous. You 257 00:14:49,120 --> 00:14:52,840 Speaker 1: should definitely read it in the latest edition of this 258 00:14:52,920 --> 00:15:07,440 Speaker 1: This week, we hear a lot about cyber crimes, about 259 00:15:07,440 --> 00:15:10,680 Speaker 1: cyber security. We've heard rumors that perhaps that had something 260 00:15:10,720 --> 00:15:14,240 Speaker 1: to do with the crash UH in Southeast Asia. We've 261 00:15:14,240 --> 00:15:17,880 Speaker 1: heard about what the hacking that went on with the 262 00:15:17,960 --> 00:15:22,120 Speaker 1: election and around that with the emails. Now I want 263 00:15:22,160 --> 00:15:25,320 Speaker 1: to talk about the areas that are least protected that 264 00:15:25,400 --> 00:15:29,480 Speaker 1: perhaps will become a little bit more protected against these 265 00:15:29,600 --> 00:15:31,600 Speaker 1: cyber attacks going forward. I want to bring in I'm 266 00:15:31,640 --> 00:15:34,640 Speaker 1: none of our lev He is president of Checkpoints Software, 267 00:15:34,880 --> 00:15:37,040 Speaker 1: which is based in Tel Aviv, but he joins us 268 00:15:37,040 --> 00:15:39,560 Speaker 1: here in our Bloomberg eleven three oh studios. I'm not. 269 00:15:39,720 --> 00:15:41,720 Speaker 1: Can you give us a sense of where you think 270 00:15:41,840 --> 00:15:46,400 Speaker 1: the biggest vulnerability remains. Well, I think the biggest vulnerability 271 00:15:46,440 --> 00:15:49,960 Speaker 1: is actually where the most critical part of our lives states, 272 00:15:50,000 --> 00:15:54,640 Speaker 1: which is our critical infrastructure, our electricity, water, are the 273 00:15:54,760 --> 00:15:57,640 Speaker 1: very basic things that we do today in our lives, 274 00:15:57,760 --> 00:16:00,560 Speaker 1: and the cows it will happen in those critical infrastructure 275 00:16:01,000 --> 00:16:05,360 Speaker 1: would be infected. And those environments are much more conservative. 276 00:16:05,880 --> 00:16:08,840 Speaker 1: Their approach there is if it's not broken, don't fix it. 277 00:16:09,440 --> 00:16:11,680 Speaker 1: And I think they have to get the stand out 278 00:16:11,680 --> 00:16:14,600 Speaker 1: of the rest of the industry for this critical infrastructure. 279 00:16:14,720 --> 00:16:16,120 Speaker 1: But you know a lot of people think about that 280 00:16:16,160 --> 00:16:21,920 Speaker 1: infrastructure is being perhaps less connected then others and therefore 281 00:16:22,280 --> 00:16:25,320 Speaker 1: more immune to some of the cyber attacks. Yes, but 282 00:16:25,960 --> 00:16:28,560 Speaker 1: surprisingly or not, there's this trend that I can tell 283 00:16:28,600 --> 00:16:32,120 Speaker 1: you that networks tend to connect every networks tend to 284 00:16:32,120 --> 00:16:34,760 Speaker 1: connect to others, and I think Internet changed that because 285 00:16:35,000 --> 00:16:38,440 Speaker 1: people are connecting all the time. Network are connecting all 286 00:16:38,440 --> 00:16:41,800 Speaker 1: the time, and I've seen different environment networks are connected. 287 00:16:42,600 --> 00:16:44,640 Speaker 1: And not only that. I don't know if you remember 288 00:16:44,920 --> 00:16:46,880 Speaker 1: there was a big attack on I around many years ago. 289 00:16:47,120 --> 00:16:49,920 Speaker 1: It was totally unconnected network, but with a USB or 290 00:16:49,920 --> 00:16:53,440 Speaker 1: can get it into the network and then everything block inside. 291 00:16:53,480 --> 00:16:57,960 Speaker 1: So those networks are are very vulnerable. And I believe 292 00:16:58,040 --> 00:17:00,600 Speaker 1: that when I'm looking at overall happening the world, most 293 00:17:00,640 --> 00:17:04,119 Speaker 1: of the countries actually have cyber warrior not to defend, 294 00:17:04,160 --> 00:17:07,679 Speaker 1: but to offend, and they will go after those environment. 295 00:17:07,720 --> 00:17:09,879 Speaker 1: They will not go after a Google of Facebook. They 296 00:17:09,880 --> 00:17:13,720 Speaker 1: will go to critical infrastructure. You know. One of the 297 00:17:13,800 --> 00:17:16,560 Speaker 1: things that has been in the news of these accidents 298 00:17:16,600 --> 00:17:19,399 Speaker 1: that the U. S. Navy, as Lisa alluded to, have 299 00:17:19,520 --> 00:17:22,720 Speaker 1: been involved in the most recent one involves the destroyer 300 00:17:22,760 --> 00:17:26,600 Speaker 1: the U S. S. John McCain, this was an accident 301 00:17:26,600 --> 00:17:30,280 Speaker 1: with the tanker near Singapore, and I one if you 302 00:17:30,280 --> 00:17:32,600 Speaker 1: could offer your thoughts on do you believe that there 303 00:17:32,720 --> 00:17:37,919 Speaker 1: was any involvement from electronic cyber attacks in any of 304 00:17:37,960 --> 00:17:40,840 Speaker 1: these To be fair, I don't have any details. Of course, 305 00:17:40,880 --> 00:17:43,719 Speaker 1: I'm listening like you, So I don't have anything. I'm 306 00:17:43,760 --> 00:17:47,600 Speaker 1: just saying that all of those environments controlled by computers, 307 00:17:48,520 --> 00:17:51,959 Speaker 1: and all of those computers can be accessed in different ways. 308 00:17:52,359 --> 00:17:54,960 Speaker 1: So if you're asking possibility like that exists, the answer 309 00:17:55,040 --> 00:17:57,520 Speaker 1: is yes, if that's what's really happening, I really don't know, 310 00:17:57,560 --> 00:17:59,720 Speaker 1: because there I mean, there have been reports in the past. 311 00:17:59,760 --> 00:18:04,560 Speaker 1: I mean, for example, in two thousand thirteen, graduate students 312 00:18:04,560 --> 00:18:07,600 Speaker 1: were able to break into the GPS system of a 313 00:18:07,680 --> 00:18:12,760 Speaker 1: yacht and actually directed it way. Of course, that's possible 314 00:18:13,080 --> 00:18:15,880 Speaker 1: with just about any network. You're saying, I can tell 315 00:18:15,920 --> 00:18:20,040 Speaker 1: you basically that every system can be hacked, from your 316 00:18:21,440 --> 00:18:25,879 Speaker 1: robot that clean your house to electricity system everywhere, So 317 00:18:26,280 --> 00:18:29,760 Speaker 1: every system can be hacked. Well, with that uplifting idea, 318 00:18:30,160 --> 00:18:33,840 Speaker 1: what it could be done to prevent this? And are 319 00:18:34,240 --> 00:18:38,720 Speaker 1: big countries doing what's necessary? I think that the private 320 00:18:38,760 --> 00:18:43,560 Speaker 1: sector is actually doing much more and he's investing much more. Um. 321 00:18:43,880 --> 00:18:47,200 Speaker 1: The countries, for different reasons, are way behind. They start 322 00:18:47,240 --> 00:18:50,320 Speaker 1: with regulation, they have good regulation systems, and they start 323 00:18:50,320 --> 00:18:54,160 Speaker 1: building like security operating systems, but they don't have the fundamentals. 324 00:18:54,400 --> 00:18:58,040 Speaker 1: Think for a second, the allegory for physical environment. You 325 00:18:58,119 --> 00:19:02,440 Speaker 1: have policemen. You have military, you have sheriffs that when 326 00:19:02,480 --> 00:19:04,439 Speaker 1: there is an incident, you just send those forces and 327 00:19:04,440 --> 00:19:07,280 Speaker 1: they block it. But what happened when there's cyber attack 328 00:19:07,320 --> 00:19:11,280 Speaker 1: in in the US you don't have those soldiers. And 329 00:19:11,280 --> 00:19:13,520 Speaker 1: I think the next evolution that can't will have to 330 00:19:13,640 --> 00:19:16,000 Speaker 1: head that they will have to have those kind of 331 00:19:16,520 --> 00:19:20,320 Speaker 1: cyber sniffer's friend around the network. When they know that 332 00:19:20,359 --> 00:19:22,960 Speaker 1: it's an attack, they can actually activate them and block 333 00:19:23,080 --> 00:19:25,000 Speaker 1: those attacks. And they have to do that, you know. 334 00:19:25,080 --> 00:19:28,240 Speaker 1: I have to say that this raises a little bit 335 00:19:28,240 --> 00:19:32,520 Speaker 1: of concern when I hear about having cyber police officers 336 00:19:32,560 --> 00:19:35,280 Speaker 1: but of the state, because it sort of brings to 337 00:19:35,400 --> 00:19:39,320 Speaker 1: mind a very nineteen eighty four type of situation that 338 00:19:39,560 --> 00:19:43,520 Speaker 1: is trying to curtail people's First Amendment rights and interfering 339 00:19:43,560 --> 00:19:47,120 Speaker 1: with their daily lives, spying on them. How can how 340 00:19:47,160 --> 00:19:52,040 Speaker 1: can there be sort of some resolution to those tensions? Well, 341 00:19:52,320 --> 00:19:56,840 Speaker 1: it's a very complex, uh questions, and a complex subject 342 00:19:57,720 --> 00:20:00,119 Speaker 1: by any means. I think the ideas should not be 343 00:20:00,320 --> 00:20:03,119 Speaker 1: with having a big brother watching on you, uh, in 344 00:20:03,200 --> 00:20:07,160 Speaker 1: any way. I just think that it's a matter of balance. 345 00:20:07,280 --> 00:20:09,640 Speaker 1: It's the same way that you're going to an airport 346 00:20:09,680 --> 00:20:11,720 Speaker 1: and you need to take your shoes off, or when 347 00:20:11,720 --> 00:20:13,240 Speaker 1: you go to the street and there is a policeman 348 00:20:13,320 --> 00:20:15,760 Speaker 1: over there, you you accepted that, and we should accept 349 00:20:15,760 --> 00:20:19,480 Speaker 1: the fact that somebody will help us by protecting us, 350 00:20:19,480 --> 00:20:21,640 Speaker 1: not by watching on us, by any means, and that 351 00:20:21,680 --> 00:20:26,439 Speaker 1: have to be very clearly prevented and regulated. But there 352 00:20:26,440 --> 00:20:29,679 Speaker 1: should be a case when I already knows about attack, 353 00:20:30,040 --> 00:20:33,200 Speaker 1: then I can actually stop it, which today it's not happening. 354 00:20:34,080 --> 00:20:36,560 Speaker 1: You've been quoted as saying that one of the rules 355 00:20:36,640 --> 00:20:39,679 Speaker 1: or one of the secrets of being a CEO is 356 00:20:40,040 --> 00:20:42,640 Speaker 1: don't try to be loved. Yeah, what does that mean 357 00:20:43,480 --> 00:20:46,760 Speaker 1: first time? The president of the CEO of Checkpoint. Ah, 358 00:20:46,880 --> 00:20:49,960 Speaker 1: it's meant that you should not be popular just doing 359 00:20:49,960 --> 00:20:52,680 Speaker 1: things because the market is asking for that, or because 360 00:20:53,040 --> 00:20:55,880 Speaker 1: there's a pushback from from you know, Wall Street to say, 361 00:20:55,920 --> 00:20:57,360 Speaker 1: hey you have to do that. I think you need 362 00:20:57,400 --> 00:21:00,080 Speaker 1: to stick to your DNA and people will respect you 363 00:21:00,160 --> 00:21:02,800 Speaker 1: for that. I think people that are trying just to 364 00:21:02,840 --> 00:21:06,600 Speaker 1: do things because there is a fashion, uh like, hey, 365 00:21:06,680 --> 00:21:10,120 Speaker 1: I have to now grow my business twice and I 366 00:21:10,160 --> 00:21:12,879 Speaker 1: just became i mean not profitable and stuff like that. 367 00:21:12,920 --> 00:21:14,879 Speaker 1: So so you need to make sure that you have 368 00:21:14,920 --> 00:21:17,600 Speaker 1: a principle upon you build your business and you manage 369 00:21:17,600 --> 00:21:21,000 Speaker 1: your business and stick to them. That's much more important 370 00:21:21,080 --> 00:21:23,800 Speaker 1: than just to do what everybody asks you to do. Well, 371 00:21:23,840 --> 00:21:26,280 Speaker 1: given that and the fact that you're in the US, 372 00:21:26,359 --> 00:21:30,439 Speaker 1: I imagine you're you're speaking with potential clients, and I'm wondering, Uh, 373 00:21:30,480 --> 00:21:34,240 Speaker 1: you know, even though the government is less perhaps advanced 374 00:21:34,240 --> 00:21:37,440 Speaker 1: in their attempts to regulate some of these cyber attacks, 375 00:21:38,240 --> 00:21:41,399 Speaker 1: are they receptive to the suggestion that they need to 376 00:21:41,440 --> 00:21:44,240 Speaker 1: have some kind of task force, police force, some way 377 00:21:44,240 --> 00:21:47,439 Speaker 1: to regulate. Uh, that's better than what Yes, it's happening 378 00:21:47,440 --> 00:21:49,800 Speaker 1: in the U S. It's happening in other countries. UM. 379 00:21:49,840 --> 00:21:52,920 Speaker 1: I think US overall administration is very complex and much 380 00:21:52,960 --> 00:21:56,040 Speaker 1: more difficult than we We are actually dealing with many 381 00:21:56,359 --> 00:22:00,119 Speaker 1: smaller countries which things are simpler to do. But and 382 00:22:00,200 --> 00:22:02,679 Speaker 1: government are accepting the fact that they need to build 383 00:22:02,720 --> 00:22:07,359 Speaker 1: systems that allow them to deal with cyber attack like 384 00:22:07,480 --> 00:22:10,040 Speaker 1: they do for physical attacks. So they understand that and 385 00:22:10,080 --> 00:22:12,480 Speaker 1: they're evolving on that. The same things happened also in 386 00:22:12,520 --> 00:22:14,280 Speaker 1: the U S. It's a bit slower, but it's happening 387 00:22:14,280 --> 00:22:16,720 Speaker 1: here as well. Thanks for spending time with us and 388 00:22:16,760 --> 00:22:19,480 Speaker 1: coming by. I'm Non bar lev Is, the president of 389 00:22:19,600 --> 00:22:22,720 Speaker 1: Checkpoint Software. He is an expert in the world of 390 00:22:22,760 --> 00:22:28,040 Speaker 1: cybersecurity and also in protecting your network against malware and 391 00:22:28,080 --> 00:22:42,080 Speaker 1: other cyber attacks. Let's turn our attention now to Brexit 392 00:22:42,160 --> 00:22:45,479 Speaker 1: and Brexit negotiations. Joining us Ed Ludlow he is our 393 00:22:45,640 --> 00:22:48,440 Speaker 1: UK correspondent for Bloomberg. He joins us here in our 394 00:22:48,480 --> 00:22:51,680 Speaker 1: eleven three oh studios. Ed, thanks for being here. Maybe 395 00:22:51,760 --> 00:22:54,199 Speaker 1: just bring everyone up to date on are there actually 396 00:22:54,240 --> 00:22:57,040 Speaker 1: negotiations on Brexit? Are they actually taking place and talking 397 00:22:57,080 --> 00:22:59,560 Speaker 1: about things that mean things? So I say where we 398 00:22:59,600 --> 00:23:02,560 Speaker 1: are now this afternoon. We just finished the third formal 399 00:23:02,680 --> 00:23:06,880 Speaker 1: round of negotiations. Okay. One of the big questions has 400 00:23:06,960 --> 00:23:10,520 Speaker 1: been the pace of negotiations, how often they're meeting, because 401 00:23:10,520 --> 00:23:12,680 Speaker 1: it's all done behind closed doors. This is how it works. 402 00:23:12,920 --> 00:23:15,440 Speaker 1: David Davis, the UK Bracklet Secretary, rocks up on the 403 00:23:15,480 --> 00:23:20,000 Speaker 1: Monday's Brussels. He makes a statement alongside his EU counterpart Barnier, 404 00:23:20,400 --> 00:23:22,800 Speaker 1: then closed doors for a few days, they come back 405 00:23:22,840 --> 00:23:25,399 Speaker 1: and they update on progress. And this is the point 406 00:23:25,400 --> 00:23:27,919 Speaker 1: after three rounds. From what we've heard today at that 407 00:23:27,920 --> 00:23:31,960 Speaker 1: press conference, there isn't any progress, and there's disagreement between 408 00:23:31,960 --> 00:23:34,680 Speaker 1: the two on their position on what you know, on 409 00:23:34,720 --> 00:23:38,359 Speaker 1: what each sees as it's a tug of war, you know. 410 00:23:38,520 --> 00:23:40,920 Speaker 1: Britain say, you know, we want flexibility from you, the 411 00:23:40,960 --> 00:23:44,560 Speaker 1: European Union, we want flexibility, and the European Unions say back, 412 00:23:44,680 --> 00:23:46,960 Speaker 1: we want progress from you. We want evidence that you've 413 00:23:47,000 --> 00:23:50,560 Speaker 1: thought about these points of the divorce. And so earlier today, 414 00:23:50,760 --> 00:23:53,760 Speaker 1: look at the language that Mischieur Bannier was using. He 415 00:23:53,840 --> 00:23:56,880 Speaker 1: was saying sufficient progress. This is like the EU buzzword 416 00:23:56,960 --> 00:24:01,240 Speaker 1: sufficient progress. And it's all about when they can finish 417 00:24:01,280 --> 00:24:04,480 Speaker 1: the divorce talks and move on to trade talks. That's 418 00:24:04,520 --> 00:24:06,960 Speaker 1: the key point here, and there's a frustration from both 419 00:24:07,000 --> 00:24:09,360 Speaker 1: sides and for all of us waiting there sitting watching 420 00:24:09,359 --> 00:24:11,480 Speaker 1: for the updates. So in other words, there's no progress 421 00:24:11,480 --> 00:24:16,320 Speaker 1: being made. So remember the deadline okay in March. Okay, 422 00:24:16,400 --> 00:24:20,240 Speaker 1: And what we're saying, what we're seeing is Britain wants 423 00:24:20,280 --> 00:24:22,960 Speaker 1: to move quickly on to trade negotiations. Davis was saying 424 00:24:22,960 --> 00:24:26,040 Speaker 1: the press conference earlier. They are They're inexplicable, they're one 425 00:24:26,080 --> 00:24:29,040 Speaker 1: and the same. You have to negotiate divorce and trade 426 00:24:29,040 --> 00:24:31,320 Speaker 1: at the same time. What the EU are saying is 427 00:24:31,320 --> 00:24:34,840 Speaker 1: that we refuse to move on to trade until you 428 00:24:34,920 --> 00:24:37,520 Speaker 1: have proved that you're going to meet your financial obligations. 429 00:24:37,560 --> 00:24:39,360 Speaker 1: I'll come onto that in a second, that you've got 430 00:24:39,400 --> 00:24:41,520 Speaker 1: your citizens right issue sourced out, and that you've got 431 00:24:41,520 --> 00:24:44,280 Speaker 1: a solution to the border between Northern Ireland and the 432 00:24:44,280 --> 00:24:47,680 Speaker 1: Republic of Ireland. Now, people familiar matter we spoke to 433 00:24:47,720 --> 00:24:50,400 Speaker 1: earlier today said actually, what the Brits have been doing 434 00:24:50,400 --> 00:24:53,000 Speaker 1: in these sessions is trying to pick holes in the 435 00:24:53,040 --> 00:24:55,600 Speaker 1: e u s position on the financial bill, rather than 436 00:24:55,640 --> 00:24:58,399 Speaker 1: saying what they're willing to pay. So you know, you 437 00:24:58,440 --> 00:25:01,320 Speaker 1: want them to sess the financial bill, their financial obligations. 438 00:25:01,480 --> 00:25:03,040 Speaker 1: They're saying this is how much we think it is, 439 00:25:03,320 --> 00:25:05,080 Speaker 1: rather than Britain say well, actually, this is how much 440 00:25:05,160 --> 00:25:07,520 Speaker 1: we're willing to pay. They've been picking holes in the 441 00:25:07,520 --> 00:25:10,199 Speaker 1: EU's number. That's pretty that's pretty bad. That's that's not 442 00:25:10,280 --> 00:25:13,000 Speaker 1: a good sign. That sort of signifies that there's quite 443 00:25:13,000 --> 00:25:14,879 Speaker 1: a ways to go before people kind of get to 444 00:25:14,880 --> 00:25:18,359 Speaker 1: an acceptance. Where are markets pricing all this? I mean, 445 00:25:18,400 --> 00:25:22,960 Speaker 1: how are traders sort of reflecting the lack of agreement 446 00:25:23,080 --> 00:25:26,160 Speaker 1: here in prices and what assets? So you looking at particular. Yeah, 447 00:25:26,160 --> 00:25:29,400 Speaker 1: we speaking to Neil Jones of Miszoojo this morning, who's 448 00:25:29,400 --> 00:25:31,960 Speaker 1: head of sales side, and he was basically saying that 449 00:25:32,160 --> 00:25:35,800 Speaker 1: Sterling is now a political currency and that there aren't 450 00:25:35,800 --> 00:25:38,080 Speaker 1: the sharp, volatile moves that we've seen, but you see 451 00:25:38,119 --> 00:25:41,399 Speaker 1: weakness as investors look at the commentary coming out of 452 00:25:41,440 --> 00:25:44,360 Speaker 1: the discussions when the two men are speaking Brussels. Investors 453 00:25:44,359 --> 00:25:46,320 Speaker 1: are watching the wait to see how we've got progress. 454 00:25:46,400 --> 00:25:51,200 Speaker 1: No Sterling weaker throughout the morning. Now you've also got 455 00:25:51,400 --> 00:25:54,880 Speaker 1: the other angle, which is growth in the UK. And 456 00:25:55,320 --> 00:25:58,040 Speaker 1: when you look at the six months that followed Brexit, 457 00:25:58,400 --> 00:26:02,119 Speaker 1: you know the UK economy was surprisingly resilient if you 458 00:26:02,119 --> 00:26:04,919 Speaker 1: look at the data. But what we're seeing now is 459 00:26:04,960 --> 00:26:10,159 Speaker 1: a different picture. Business investment is down significantly because those exporters, 460 00:26:10,160 --> 00:26:13,320 Speaker 1: these UK exporters, what's their biggest market is the European Union. 461 00:26:13,560 --> 00:26:16,400 Speaker 1: They don't know what the relationship with that market will 462 00:26:16,440 --> 00:26:19,399 Speaker 1: be when the when Brexit comes to fruition, and so 463 00:26:19,440 --> 00:26:23,119 Speaker 1: they're not in boosting their volumes. But Neil Jones was 464 00:26:23,160 --> 00:26:25,480 Speaker 1: telling me this morning that he thinks he'll see other 465 00:26:25,600 --> 00:26:29,480 Speaker 1: UK assets start to reflect that. The smaller MidCap companies 466 00:26:29,600 --> 00:26:32,719 Speaker 1: right where the EU is their biggest market and they 467 00:26:32,760 --> 00:26:37,159 Speaker 1: are sensitive to Sterling and they're sensitive to that trade relationship. 468 00:26:37,359 --> 00:26:39,520 Speaker 1: But mostly we're seeing it in this what he calls 469 00:26:39,560 --> 00:26:43,159 Speaker 1: the political currency GDP. Yeah, I'm trying to think of 470 00:26:43,320 --> 00:26:45,359 Speaker 1: you know, which, which area you can point to that 471 00:26:45,480 --> 00:26:49,760 Speaker 1: might even lead to some success, But it's a challenge. Um, Europe, 472 00:26:49,840 --> 00:26:52,359 Speaker 1: the European Court of Justice, right, I mean the rules 473 00:26:52,359 --> 00:26:57,720 Speaker 1: and regulations that supposedly government relationships between countries and so on. Um, 474 00:26:57,760 --> 00:27:00,440 Speaker 1: what happened? What? What are the thought? So? I mean 475 00:27:01,000 --> 00:27:04,600 Speaker 1: is there any transitional program even being put into place? 476 00:27:05,000 --> 00:27:10,000 Speaker 1: So there's the two sides are odds. So basically consider 477 00:27:10,080 --> 00:27:13,200 Speaker 1: Brexit day the deadline day itself. Britain's position is that 478 00:27:13,240 --> 00:27:16,399 Speaker 1: the European Court of Justice can have jurisdiction on matters 479 00:27:16,440 --> 00:27:19,560 Speaker 1: that are already underway, cases already underway up until and 480 00:27:19,640 --> 00:27:23,360 Speaker 1: including that day, Brexit deadline day. But after that they 481 00:27:23,400 --> 00:27:26,200 Speaker 1: say that the European Court of Justice should not have 482 00:27:26,320 --> 00:27:30,600 Speaker 1: any jurisdiction of any business matters, civil matters Here in 483 00:27:30,640 --> 00:27:33,520 Speaker 1: the UK, the EU are saying that the e c 484 00:27:33,720 --> 00:27:36,960 Speaker 1: J should be able to deal with cases after Brexit 485 00:27:37,320 --> 00:27:40,240 Speaker 1: where you know they have they had an existing mandate 486 00:27:40,320 --> 00:27:43,000 Speaker 1: to do so in civil rights cases and in other 487 00:27:43,040 --> 00:27:45,919 Speaker 1: business dealings, so that there are odds there. What is 488 00:27:45,920 --> 00:27:47,920 Speaker 1: the compromise is that one says that the u c 489 00:27:48,080 --> 00:27:50,639 Speaker 1: J should the other says it shouldn't. Is it that 490 00:27:50,680 --> 00:27:52,680 Speaker 1: they find areas of commonality where the u c J 491 00:27:52,840 --> 00:27:57,520 Speaker 1: can continue? There are There is a court that adjudicates 492 00:27:58,000 --> 00:28:01,879 Speaker 1: the relationship between the EU and non EU countries, for 493 00:28:01,960 --> 00:28:06,399 Speaker 1: example like Norway and Switzerland, but that has limited power. 494 00:28:06,480 --> 00:28:09,040 Speaker 1: And the question is whether Britain can accept some kind 495 00:28:09,080 --> 00:28:11,919 Speaker 1: of transitional court like that ed You're born and bred 496 00:28:12,080 --> 00:28:15,879 Speaker 1: London night and how has how has the environment changed 497 00:28:16,040 --> 00:28:20,200 Speaker 1: since the Brexit vote? It is different. London is a 498 00:28:20,240 --> 00:28:23,840 Speaker 1: multicultural city, as anyone that will have been knows. And 499 00:28:24,000 --> 00:28:26,160 Speaker 1: one thing you know I was talking to people about 500 00:28:26,160 --> 00:28:31,080 Speaker 1: earlier is the issue of students. Okay, now people underestimate 501 00:28:31,359 --> 00:28:34,199 Speaker 1: the vast numbers of international students that come into London, 502 00:28:34,520 --> 00:28:36,440 Speaker 1: many from the European Union. We have what is called 503 00:28:36,440 --> 00:28:39,720 Speaker 1: the Erasmus Scheme. It is a European Union funded scheme 504 00:28:39,760 --> 00:28:43,800 Speaker 1: whereby British and European Unions, students can come and travel 505 00:28:43,840 --> 00:28:47,680 Speaker 1: and study freely in the UK or vice versa. One 506 00:28:47,720 --> 00:28:50,320 Speaker 1: of the questions is what happens to that scheme. People 507 00:28:50,360 --> 00:28:53,360 Speaker 1: are putting off their decisions, just like businesses putting off investment. 508 00:28:53,640 --> 00:28:55,640 Speaker 1: People are putting off their decision to come to the UK. 509 00:28:56,120 --> 00:28:59,080 Speaker 1: It's changing people's perception and actually, you know, amongst I 510 00:28:59,120 --> 00:29:01,720 Speaker 1: don't want to talk about so an executive evidence, but 511 00:29:02,600 --> 00:29:05,000 Speaker 1: amongst young people that is a big thing. It changed 512 00:29:05,040 --> 00:29:08,040 Speaker 1: people's vision of Britain. Ed Ludlow thank you so much 513 00:29:08,080 --> 00:29:10,040 Speaker 1: for joining us. It's a pleasure to see you in person, 514 00:29:10,160 --> 00:29:12,280 Speaker 1: in the flesh in our New York offices. Ed Ludlow 515 00:29:12,600 --> 00:29:17,000 Speaker 1: is our UK correspondent for Bloomberg News based in London. 516 00:29:18,880 --> 00:29:21,440 Speaker 1: Thanks for listening to the Bloomberg P and L podcast. 517 00:29:21,760 --> 00:29:25,040 Speaker 1: You can subscribe and listen to interviews at Apple Podcasts, 518 00:29:25,040 --> 00:29:28,959 Speaker 1: SoundCloud or whatever podcast platform you prefer. I'm Pim Fox. 519 00:29:29,080 --> 00:29:32,400 Speaker 1: I'm on Twitter at pim Fox. I'm on Twitter at 520 00:29:32,520 --> 00:29:35,560 Speaker 1: Lisa Abramo. It's one before the podcast. You can always 521 00:29:35,600 --> 00:29:37,600 Speaker 1: catch us worldwide on Bloomberg Radio.