WEBVTT - Refineries Still Operating Will Benefit Most From Harvey, Lipow Says 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.560 Along with my co host Lisa Abramowitz. 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 --> 0:00:32.400 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. We 0:00:32.440 --> 0:00:36.239 turn our attention now to energy. After Hurricanes Katrina and 0:00:36.360 --> 0:00:39.000 Rita hit the US about a dozen years ago, the 0:00:39.040 --> 0:00:44.919 International Energy Agency released emergency petroleum reserves. This time, there 0:00:45.000 --> 0:00:47.440 doesn't seem to be any need to release these stocks 0:00:47.720 --> 0:00:51.800 because inventories remain high. Here to tell us more about 0:00:51.840 --> 0:00:54.760 the effects of Hurricane Harvey on the energy industry is 0:00:54.800 --> 0:00:58.520 Andy Lipow. He is the president of Lippow Oil Associates 0:00:58.520 --> 0:01:01.200 and they are based in Houston, and he joins us 0:01:01.240 --> 0:01:04.440 in our eleven three oh studios here. Thanks very much 0:01:04.480 --> 0:01:06.280 for being here, and first of all, maybe just tell 0:01:06.360 --> 0:01:09.920 people you're from Houston. You can't get back home, correct, Uh, 0:01:10.160 --> 0:01:13.000 that's right. I can't get back home because the airlines 0:01:13.200 --> 0:01:16.120 are not restoring their full schedules. So even though the 0:01:16.160 --> 0:01:19.840 airports have begun operations, if if you were to look 0:01:19.920 --> 0:01:22.800 the amount of flights is a handful every day, but 0:01:22.920 --> 0:01:26.559 it appears that I'm flying on Southwest. I'll restore full 0:01:26.600 --> 0:01:30.880 operations by Sunday, Okay. So can we apply similar kind 0:01:30.920 --> 0:01:34.160 of perspective when it comes to the energy industry that 0:01:34.640 --> 0:01:38.360 even though that you may say are certain refineries are 0:01:38.400 --> 0:01:43.039 shut down, the effects ripple through the entire energy complex. Well, 0:01:43.040 --> 0:01:45.679 they certainly do. And if one looks at how Harvey 0:01:45.880 --> 0:01:49.920 has impacted the Texas Gulf Coast, it started in Corpus 0:01:49.960 --> 0:01:53.160 and it moved over to the Houston area and now 0:01:53.200 --> 0:01:55.680 it's in the Beaumont Port author area. So we've had 0:01:55.720 --> 0:01:59.920 this ripple effect from west to east, shutting down refineries. 0:02:00.440 --> 0:02:04.200 As we stand here today, the refineries in Corpus Christie 0:02:04.240 --> 0:02:08.600 are in their startup operations and we expect to see 0:02:08.800 --> 0:02:12.960 a similar events happen in Houston over the next few weeks. 0:02:13.000 --> 0:02:15.760 But Beaumont Port author really has taken the brunt of 0:02:15.800 --> 0:02:19.239 the flooding event and it may be several weeks or 0:02:19.280 --> 0:02:22.120 even a month to get them back. So right now 0:02:22.120 --> 0:02:24.720 I'm looking at gasoline futures that are at the highest 0:02:24.919 --> 0:02:28.480 level since two thousand and fourteen. Also Uh. They have 0:02:28.680 --> 0:02:33.799 risen just today alone nearly thirteen percent. So definitely is 0:02:33.840 --> 0:02:37.600 a lot of expectation that gas supplies refined UH guess 0:02:37.800 --> 0:02:41.200 refined crude, they're going to be in short supply. Do 0:02:41.240 --> 0:02:45.400 you think that the current UH market sentiment is overblown 0:02:45.639 --> 0:02:49.960 or do you think that gasoline has further to climb? Well, 0:02:50.000 --> 0:02:54.280 I think the market looked at UH today's news when 0:02:54.360 --> 0:02:56.800 Motiva said it's going to take them two weeks just 0:02:56.880 --> 0:03:00.960 to assess the damage in Port author and are extrapolating 0:03:01.000 --> 0:03:03.480 that to the rest of the refineries in that region 0:03:03.840 --> 0:03:07.880 that account for eight percent of the total refinery capacity 0:03:07.919 --> 0:03:10.440 in the US. So we are going to see these 0:03:10.440 --> 0:03:14.320 spikes until we see more refineries get back online. Can 0:03:14.360 --> 0:03:17.280 you speak a little bit about the Colonial Pipeline, because 0:03:17.280 --> 0:03:20.440 there's been some back and forth about the information about 0:03:20.520 --> 0:03:25.080 the pipeline and about the fuel that normally flows through it. Sure, So, 0:03:25.160 --> 0:03:30.320 Colonial Pipeline originates in Houston and picks up refined products 0:03:30.320 --> 0:03:33.400 from Houston and then Beaumont Port Author than the Louisiana 0:03:33.480 --> 0:03:36.840 refineries as well as Mississippi. And it had been reported 0:03:36.840 --> 0:03:40.200 that the entire pipeline for both gasoline and diesel fuel 0:03:40.520 --> 0:03:44.040 had been shut down, but that's actually not quite correct. 0:03:44.480 --> 0:03:48.400 What is correct is that Colonial Pipeline continues to operate 0:03:48.720 --> 0:03:52.960 by receiving refined products from those operations in Lake Charles 0:03:53.080 --> 0:03:57.480 or New Orleans or Pascagoula, Mississippi. But it is true 0:03:57.560 --> 0:04:01.119 that they in fact are shut down out of Houston 0:04:01.240 --> 0:04:05.360 and Beaumont Port author locations because those refineries simply aren't running. 0:04:06.160 --> 0:04:09.240 Andy I'm looking right now, the average gas price at 0:04:09.240 --> 0:04:12.760 the pump in the United States right now is about 0:04:12.800 --> 0:04:16.600 two dollars and forty four cents, maybe forty five cents. UH. 0:04:16.640 --> 0:04:20.560 It's obviously actually it's much lower right now in Texas, 0:04:20.560 --> 0:04:22.560 which is interesting because a lot of people have talked 0:04:22.560 --> 0:04:25.279 about perhaps the entire gasoline supply getting cut off for 0:04:25.279 --> 0:04:27.800 a while. How high do you expect prices to go 0:04:28.080 --> 0:04:31.559 in the near term, Well, I think they're gonna jump 0:04:31.600 --> 0:04:34.440 another twenty cents a gallon from where they are today. 0:04:34.480 --> 0:04:36.080 If we were to look at the price in the 0:04:36.120 --> 0:04:40.200 pipeline system or the wholesale price, it's up fifty cents 0:04:40.200 --> 0:04:44.640 a gallon as UH retailers and refiners scramble for supply. 0:04:44.880 --> 0:04:47.120 So a lot of that increase is going to be 0:04:47.200 --> 0:04:50.719 passed into the consumer. We're looking right now at NIMEX 0:04:50.800 --> 0:04:55.839 gasoline futures. They're up more than uh Andy, what kinds 0:04:55.920 --> 0:04:59.360 of maintenance and what kinds of damage can you assess 0:04:59.440 --> 0:05:01.919 based on your previous knowledge of what happens when you 0:05:02.000 --> 0:05:06.479 flood a refinery. So the biggest damage occurs to the 0:05:06.520 --> 0:05:09.320 electric motors that have been submerged, so they have to 0:05:09.320 --> 0:05:12.640 be pulled out of the refinery in many cases rewired 0:05:13.120 --> 0:05:15.400 and then brought back. But when you have so many 0:05:15.480 --> 0:05:18.920 pumps and motors that have been damaged, you simply run 0:05:18.960 --> 0:05:22.280 out of repair shops if you will to get them 0:05:22.279 --> 0:05:27.400 back online really quickly. Andy, when I talk about rising 0:05:27.520 --> 0:05:29.920 gas prices, I have to think someone is going to 0:05:30.080 --> 0:05:32.960 benefit from this, because someone is getting paid more for 0:05:33.120 --> 0:05:37.840 their gasoline. Who is it? Well, the biggest beneficiaries are 0:05:37.920 --> 0:05:42.040 those refiners who continue to operate and are being able 0:05:42.080 --> 0:05:45.680 to sell product into the market. So which ones are they? 0:05:45.760 --> 0:05:48.080 So the ones here in the US that come to 0:05:48.160 --> 0:05:54.240 mind right away are PBF Energy, Holly, Frontier two, Sorrow, CVR, 0:05:54.600 --> 0:05:57.839 or DELK because they all have operations that are far 0:05:58.080 --> 0:06:03.000 from the horror cane Harvey impacts, as well as European 0:06:03.040 --> 0:06:06.560 refiners are now benefiting because their strong demand for them 0:06:06.600 --> 0:06:09.640 to make gasoline to ship over to the US. Will 0:06:09.680 --> 0:06:13.400 they find more customers, for example, in Latin America, because 0:06:13.440 --> 0:06:16.719 don't they Latin American countries they rely on imports from 0:06:16.720 --> 0:06:20.800 Texas and Louisiana for their refined product. Well, that is 0:06:20.800 --> 0:06:23.040 certainly going to happen. If we were to look at 0:06:23.080 --> 0:06:27.320 Mexico specifically, who's buying about three barrels a day of 0:06:27.360 --> 0:06:30.880 gasoline from the US. They need to scramble for supplies 0:06:31.000 --> 0:06:33.680 from other parts of the world, so where they look 0:06:33.760 --> 0:06:38.480 to is Europe and Asia. What about the argument that 0:06:38.520 --> 0:06:41.680 you're going to see such reduced demand from people in 0:06:41.800 --> 0:06:45.680 Texas that that will eventually create some equilibrium in the market. 0:06:46.120 --> 0:06:47.600 Do you think that's the case and do you expect 0:06:47.640 --> 0:06:51.799 shortages of gasoline in Texas during this whole cleanup? Well, 0:06:51.839 --> 0:06:54.800 while there has been some demand destruction in Texas, it's 0:06:54.839 --> 0:06:59.920 nowhere near the loss of refineries supply. We've had thirty 0:07:00.080 --> 0:07:04.320 one percent of the refineries UH in the US being 0:07:04.360 --> 0:07:09.720 affected by Harvey. At the same time, refiners have reduced 0:07:09.800 --> 0:07:12.560 runs by over five million barrels a day, even though 0:07:12.600 --> 0:07:15.480 some of them are in partial operation, So there is 0:07:15.480 --> 0:07:18.720 a big impact, and that's why you're seeing sore and gasoline, 0:07:18.800 --> 0:07:22.560 diesel and jet fuel prices. Will you see any changes 0:07:22.600 --> 0:07:25.080 in the way that the refinery or energy industry does 0:07:25.120 --> 0:07:29.560 business or protects its assets after this hurricane. Well, it's 0:07:29.680 --> 0:07:32.440 very difficult to protect yourself from four and a half 0:07:32.480 --> 0:07:35.720 feet of rain. So, uh, you know, they may look 0:07:35.760 --> 0:07:38.960 at raising their electrical pumps, you know, to a little 0:07:39.000 --> 0:07:41.240 bit higher, a couple of three or four feet off 0:07:41.240 --> 0:07:43.720 the ground, but I don't think as a practical matter, 0:07:43.800 --> 0:07:45.760 they're going to be able to do much unless they're 0:07:45.760 --> 0:07:48.800 able to build dikes around the refineries to keep the 0:07:48.800 --> 0:07:52.000 water out. Well, any good luck getting home. I'm sure 0:07:52.040 --> 0:07:54.320 it's going to be a trying expedition and even once 0:07:54.360 --> 0:07:56.800 you get there, just getting to your home might be 0:07:56.960 --> 0:08:00.480 quite adventure. Yeah, yeah, thank you very much. I appreciate it. Yeah, 0:08:00.520 --> 0:08:03.840 all our best. Andy Lippo is president of Lippout Oil Associates, 0:08:04.160 --> 0:08:07.280 which is based in Houston, but he is marooned here 0:08:07.280 --> 0:08:09.920 in New York City. Uh. There could be worse places 0:08:09.960 --> 0:08:12.400 to be marooned, but we really wish you all the 0:08:12.440 --> 0:08:27.680 best getting back and getting back to normal in the area. 0:08:28.400 --> 0:08:31.720 Jared Kushner, Donald Trump's president, Donald Trump's son in law 0:08:31.800 --> 0:08:35.120 and top advisor. Uh, he wakes up each morning to 0:08:35.240 --> 0:08:38.360 a growing problem, and here tell us what that problem 0:08:38.559 --> 0:08:41.720 is and the extent to which that problem seems to be. 0:08:41.760 --> 0:08:45.720 Deevil him is our own reporter for Bloomberg Business Week, 0:08:45.960 --> 0:08:49.200 David Kochanski and David, thanks very much for being with us. 0:08:49.440 --> 0:08:52.960 Can you describe for people, maybe they're not familiar with 0:08:53.040 --> 0:08:57.160 Jared Kushner's family business, what exactly does his family do, 0:08:57.280 --> 0:08:59.880 how did it get into the real estate business, and 0:09:00.440 --> 0:09:04.320 what kind of issues are they facing. Um. The Christiers 0:09:04.320 --> 0:09:07.400 have been a real estate family for several generation. UM. 0:09:07.480 --> 0:09:11.760 Jared's grandparents, who are Holocaust survivors, started a small construction company. 0:09:12.480 --> 0:09:14.679 His dad took over the company in the eighties when 0:09:14.679 --> 0:09:19.199 they had about four thousand apartments, and by the two thousands, 0:09:19.200 --> 0:09:22.520 early two thousands, they had twenty five thousand apartments, mostly 0:09:22.679 --> 0:09:27.880 in the suburbs. UM. In two thousand and seven when Jared, 0:09:27.960 --> 0:09:30.760 shortly after Jared had kind of taken control of the company, 0:09:30.920 --> 0:09:33.160 they moved into New York real estate and they bought 0:09:33.160 --> 0:09:35.920 a tower at six sixty six Fifth Avenue. They bought 0:09:35.960 --> 0:09:38.079 it at the height of the market, paid a lot 0:09:38.080 --> 0:09:40.160 of money, took on a lot of debt, and have 0:09:40.280 --> 0:09:43.720 been struggling with that asset ever since. They paid one 0:09:44.440 --> 0:09:48.560 billion dollars correct and that was a new record. Yes, 0:09:48.600 --> 0:09:50.320 there was a record for any building in the US 0:09:50.400 --> 0:09:53.920 at the time. UM. It was highly leveraged UM and 0:09:53.960 --> 0:09:56.760 in order to make it work UM they had to 0:09:56.800 --> 0:09:59.160 take on a lot of debt. They had to sell 0:09:59.679 --> 0:10:02.600 some the most expensive assets. There's some retail on the 0:10:02.600 --> 0:10:05.560 lower floors of it that was profitable, but they had 0:10:05.600 --> 0:10:08.320 to sell that off. They had to refinance and kind 0:10:08.320 --> 0:10:11.440 of turnover of the rest of the building to Tornado, 0:10:11.600 --> 0:10:16.000 the big, very profitable real estate company. UM. Now with 0:10:16.120 --> 0:10:18.680 the debt is coming to UM the motage that we 0:10:19.160 --> 0:10:22.280 is do in en They've only been paying interest so far. 0:10:22.600 --> 0:10:24.200 They got to figure out a way to make this 0:10:24.320 --> 0:10:27.200 building work. And as of now there's some quarters where 0:10:27.200 --> 0:10:29.760 it is not profitable, so refinancing it is going to 0:10:29.800 --> 0:10:32.120 be difficult when it's not turning a profit. They've been 0:10:32.160 --> 0:10:34.720 searching the globe trying to raise money and get foreign 0:10:34.720 --> 0:10:37.200 investment to profit up. And that's what our story is about, 0:10:37.480 --> 0:10:41.200 right And and part of the story was the complications 0:10:41.240 --> 0:10:45.199 that come along with looking for international financing when you 0:10:45.280 --> 0:10:47.760 are the son in law of the president of the 0:10:47.840 --> 0:10:50.160 United States. Correct, And that's sort of becoming somewhat of 0:10:50.200 --> 0:10:54.400 an obstacle as well as an advantage. Yes, And you know, 0:10:54.520 --> 0:10:59.120 in January, Jared Krishner UM divested of his interest in 0:10:59.160 --> 0:11:01.760 the company. He try for the company to other family members, 0:11:01.760 --> 0:11:04.640 so he technically is not involved in it. UM, But 0:11:04.760 --> 0:11:07.840 because he's a top advisor to the president, there are 0:11:07.880 --> 0:11:11.040 a lot of concerns about potential conflicts of interest and 0:11:11.600 --> 0:11:14.319 UM we laid out in the story for the first 0:11:14.320 --> 0:11:17.520 time that there were a sovereign wealth fund in South 0:11:17.600 --> 0:11:20.040 Korea that he and his father had met with to 0:11:20.080 --> 0:11:23.559 ask for investments during this campaign in sixteen and Donald 0:11:23.600 --> 0:11:26.600 Trump was making his way to the White House. UM, 0:11:26.640 --> 0:11:31.319 there's a Saudi investor who in the family had preliminary 0:11:31.360 --> 0:11:34.840 talks with that had not been mentioned before. UM. And 0:11:35.200 --> 0:11:38.640 what we saw in our reporting is that UM, you know, 0:11:38.760 --> 0:11:41.080 until fifteen or so, they had a hard time getting 0:11:41.160 --> 0:11:45.040 anyone to UM show interests and many times not even 0:11:45.040 --> 0:11:48.400 take meetings with them. As Donald Trump rose UM and 0:11:48.480 --> 0:11:51.720 Jared's prominence rose, there a lot of people interested UM 0:11:51.760 --> 0:11:55.880 including some UH. One that has been reported before was 0:11:55.960 --> 0:12:00.040 a bad the Chinese corporation that's tightly tied closely to 0:12:00.120 --> 0:12:04.120 the government. UM. The Krishners UH after the election came 0:12:04.640 --> 0:12:06.560 to a deal where an Bang was going to bail 0:12:06.600 --> 0:12:10.360 them out. UM. After the deal, the details of that 0:12:10.400 --> 0:12:14.320 deal came public. That fell apart. UM. But what we 0:12:14.440 --> 0:12:16.160 found in our reporting is that there's a lot of 0:12:16.160 --> 0:12:18.440 other places they've been looking for money and they still 0:12:18.480 --> 0:12:20.520 at this point have not figured out a solution to 0:12:20.600 --> 0:12:24.360 the building. Well, David and your reporting, what kind of 0:12:24.400 --> 0:12:29.320 options are there for for the Kushner real estate company. Well, 0:12:29.360 --> 0:12:32.640 you know Laurent Morale who we interviewed as the president 0:12:32.640 --> 0:12:34.920 of Krishner Companies. He said that they have several options. 0:12:35.000 --> 0:12:37.720 The first is this what was called the Mega project 0:12:37.800 --> 0:12:41.440 is grand UM this grand vision where they would knock 0:12:41.480 --> 0:12:45.520 down the building UM and build a gigantic eight story 0:12:45.640 --> 0:12:48.040 tower with five floors of retail, something that looked like 0:12:48.080 --> 0:12:50.839 oz or Abu Dhabi. That's there has been drawings of it, 0:12:51.160 --> 0:12:53.520 UM and it's this glittering thing, but it would be 0:12:53.559 --> 0:12:57.280 so astronomically expensive. UM. A lot of you know, most 0:12:57.280 --> 0:13:00.240 of the investors, as they've approached, are hesitant to get 0:13:00.240 --> 0:13:03.800 involved because they think that the Manhattan real estate market 0:13:03.920 --> 0:13:07.280 and retail market can't sustain the kind of numbers that 0:13:07.320 --> 0:13:09.440 we take to build something that big. So that's the 0:13:09.480 --> 0:13:12.280 big one. And Mr Rowley told us that they still 0:13:12.600 --> 0:13:15.160 are out there trying to do that. If it is not, 0:13:15.320 --> 0:13:17.280 If they can't get that, they say that they'll have 0:13:17.320 --> 0:13:19.440 to try to bring other investors and maybe work the 0:13:19.440 --> 0:13:23.280 building out as UM an office building. But it has 0:13:23.320 --> 0:13:26.080 proven so far. UM. You know, it's been tough for 0:13:26.080 --> 0:13:28.440 them to do it because it's an older building. The 0:13:28.520 --> 0:13:32.080 layout of the building makes it kind of tough to UM. 0:13:32.160 --> 0:13:34.760 It's not like a modern airy building it has. It 0:13:34.840 --> 0:13:37.800 has tight columns and kind of lower ceilings and not 0:13:37.920 --> 0:13:41.720 the kind of light and spacious field that modern offices 0:13:42.040 --> 0:13:45.800 UM businesses want to pay top dollar for. And there's 0:13:45.800 --> 0:13:48.760 also been a change in the Manhattan real estate market. 0:13:48.800 --> 0:13:52.960 I mean Midtown where they are at fifty umty three 0:13:53.280 --> 0:13:56.560 and fifth is not as hot a market as as 0:13:56.600 --> 0:13:57.880 it has been in the past, and there's a lot 0:13:57.920 --> 0:14:00.360 of development going out on the West Side and UM, 0:14:00.440 --> 0:14:02.760 so to get the kind of rent that they would 0:14:02.760 --> 0:14:05.840 need to make that building work, UM will be a challenge, 0:14:05.840 --> 0:14:07.880 and if they can't get the mega project built, it 0:14:07.960 --> 0:14:10.640 probably would involve some kind of renovation that would be difficult, 0:14:11.160 --> 0:14:15.840 um and expensive to carry off. Real quick twenty seconds. 0:14:15.840 --> 0:14:19.360 Have you heard a response from the Kushner family. We 0:14:19.440 --> 0:14:21.200 have not heard from the Christian family. We spoke to 0:14:21.280 --> 0:14:24.440 them extensively and went over all the details of it beforehand, 0:14:24.480 --> 0:14:27.840 and um, so we have they've they've got haven't said 0:14:27.840 --> 0:14:29.800 anything about it at this point. Well, thank you so 0:14:29.880 --> 0:14:32.960 much for joining us and for the interesting reporting on 0:14:33.160 --> 0:14:37.240 this building. Six sixty six Park Avenue and UH one 0:14:37.280 --> 0:14:39.120 point eight billion dollars is a lot of money for 0:14:39.160 --> 0:14:43.160 a building right now. David COCHINESK Cochinski, thank you so 0:14:43.200 --> 0:14:45.440 much for joining us. He's a reporter for Bloomberg Business 0:14:45.480 --> 0:14:49.120 Week who wrote this story, which is truly fabulous. You 0:14:49.120 --> 0:14:52.840 should definitely read it in the latest edition of this 0:14:52.920 --> 0:15:07.440 This week, we hear a lot about cyber crimes, about 0:15:07.440 --> 0:15:10.680 cyber security. We've heard rumors that perhaps that had something 0:15:10.720 --> 0:15:14.240 to do with the crash UH in Southeast Asia. We've 0:15:14.240 --> 0:15:17.880 heard about what the hacking that went on with the 0:15:17.960 --> 0:15:22.120 election and around that with the emails. Now I want 0:15:22.160 --> 0:15:25.320 to talk about the areas that are least protected that 0:15:25.400 --> 0:15:29.480 perhaps will become a little bit more protected against these 0:15:29.600 --> 0:15:31.600 cyber attacks going forward. I want to bring in I'm 0:15:31.640 --> 0:15:34.640 none of our lev He is president of Checkpoints Software, 0:15:34.880 --> 0:15:37.040 which is based in Tel Aviv, but he joins us 0:15:37.040 --> 0:15:39.560 here in our Bloomberg eleven three oh studios. I'm not. 0:15:39.720 --> 0:15:41.720 Can you give us a sense of where you think 0:15:41.840 --> 0:15:46.400 the biggest vulnerability remains. Well, I think the biggest vulnerability 0:15:46.440 --> 0:15:49.960 is actually where the most critical part of our lives states, 0:15:50.000 --> 0:15:54.640 which is our critical infrastructure, our electricity, water, are the 0:15:54.760 --> 0:15:57.640 very basic things that we do today in our lives, 0:15:57.760 --> 0:16:00.560 and the cows it will happen in those critical infrastructure 0:16:01.000 --> 0:16:05.360 would be infected. And those environments are much more conservative. 0:16:05.880 --> 0:16:08.840 Their approach there is if it's not broken, don't fix it. 0:16:09.440 --> 0:16:11.680 And I think they have to get the stand out 0:16:11.680 --> 0:16:14.600 of the rest of the industry for this critical infrastructure. 0:16:14.720 --> 0:16:16.120 But you know a lot of people think about that 0:16:16.160 --> 0:16:21.920 infrastructure is being perhaps less connected then others and therefore 0:16:22.280 --> 0:16:25.320 more immune to some of the cyber attacks. Yes, but 0:16:25.960 --> 0:16:28.560 surprisingly or not, there's this trend that I can tell 0:16:28.600 --> 0:16:32.120 you that networks tend to connect every networks tend to 0:16:32.120 --> 0:16:34.760 connect to others, and I think Internet changed that because 0:16:35.000 --> 0:16:38.440 people are connecting all the time. Network are connecting all 0:16:38.440 --> 0:16:41.800 the time, and I've seen different environment networks are connected. 0:16:42.600 --> 0:16:44.640 And not only that. I don't know if you remember 0:16:44.920 --> 0:16:46.880 there was a big attack on I around many years ago. 0:16:47.120 --> 0:16:49.920 It was totally unconnected network, but with a USB or 0:16:49.920 --> 0:16:53.440 can get it into the network and then everything block inside. 0:16:53.480 --> 0:16:57.960 So those networks are are very vulnerable. And I believe 0:16:58.040 --> 0:17:00.600 that when I'm looking at overall happening the world, most 0:17:00.640 --> 0:17:04.119 of the countries actually have cyber warrior not to defend, 0:17:04.160 --> 0:17:07.679 but to offend, and they will go after those environment. 0:17:07.720 --> 0:17:09.879 They will not go after a Google of Facebook. They 0:17:09.880 --> 0:17:13.720 will go to critical infrastructure. You know. One of the 0:17:13.800 --> 0:17:16.560 things that has been in the news of these accidents 0:17:16.600 --> 0:17:19.399 that the U. S. Navy, as Lisa alluded to, have 0:17:19.520 --> 0:17:22.720 been involved in the most recent one involves the destroyer 0:17:22.760 --> 0:17:26.600 the U S. S. John McCain, this was an accident 0:17:26.600 --> 0:17:30.280 with the tanker near Singapore, and I one if you 0:17:30.280 --> 0:17:32.600 could offer your thoughts on do you believe that there 0:17:32.720 --> 0:17:37.919 was any involvement from electronic cyber attacks in any of 0:17:37.960 --> 0:17:40.840 these To be fair, I don't have any details. Of course, 0:17:40.880 --> 0:17:43.719 I'm listening like you, So I don't have anything. I'm 0:17:43.760 --> 0:17:47.600 just saying that all of those environments controlled by computers, 0:17:48.520 --> 0:17:51.959 and all of those computers can be accessed in different ways. 0:17:52.359 --> 0:17:54.960 So if you're asking possibility like that exists, the answer 0:17:55.040 --> 0:17:57.520 is yes, if that's what's really happening, I really don't know, 0:17:57.560 --> 0:17:59.720 because there I mean, there have been reports in the past. 0:17:59.760 --> 0:18:04.560 I mean, for example, in two thousand thirteen, graduate students 0:18:04.560 --> 0:18:07.600 were able to break into the GPS system of a 0:18:07.680 --> 0:18:12.760 yacht and actually directed it way. Of course, that's possible 0:18:13.080 --> 0:18:15.880 with just about any network. You're saying, I can tell 0:18:15.920 --> 0:18:20.040 you basically that every system can be hacked, from your 0:18:21.440 --> 0:18:25.879 robot that clean your house to electricity system everywhere, So 0:18:26.280 --> 0:18:29.760 every system can be hacked. Well, with that uplifting idea, 0:18:30.160 --> 0:18:33.840 what it could be done to prevent this? And are 0:18:34.240 --> 0:18:38.720 big countries doing what's necessary? I think that the private 0:18:38.760 --> 0:18:43.560 sector is actually doing much more and he's investing much more. Um. 0:18:43.880 --> 0:18:47.200 The countries, for different reasons, are way behind. They start 0:18:47.240 --> 0:18:50.320 with regulation, they have good regulation systems, and they start 0:18:50.320 --> 0:18:54.160 building like security operating systems, but they don't have the fundamentals. 0:18:54.400 --> 0:18:58.040 Think for a second, the allegory for physical environment. You 0:18:58.119 --> 0:19:02.440 have policemen. You have military, you have sheriffs that when 0:19:02.480 --> 0:19:04.439 there is an incident, you just send those forces and 0:19:04.440 --> 0:19:07.280 they block it. But what happened when there's cyber attack 0:19:07.320 --> 0:19:11.280 in in the US you don't have those soldiers. And 0:19:11.280 --> 0:19:13.520 I think the next evolution that can't will have to 0:19:13.640 --> 0:19:16.000 head that they will have to have those kind of 0:19:16.520 --> 0:19:20.320 cyber sniffer's friend around the network. When they know that 0:19:20.359 --> 0:19:22.960 it's an attack, they can actually activate them and block 0:19:23.080 --> 0:19:25.000 those attacks. And they have to do that, you know. 0:19:25.080 --> 0:19:28.240 I have to say that this raises a little bit 0:19:28.240 --> 0:19:32.520 of concern when I hear about having cyber police officers 0:19:32.560 --> 0:19:35.280 but of the state, because it sort of brings to 0:19:35.400 --> 0:19:39.320 mind a very nineteen eighty four type of situation that 0:19:39.560 --> 0:19:43.520 is trying to curtail people's First Amendment rights and interfering 0:19:43.560 --> 0:19:47.120 with their daily lives, spying on them. How can how 0:19:47.160 --> 0:19:52.040 can there be sort of some resolution to those tensions? Well, 0:19:52.320 --> 0:19:56.840 it's a very complex, uh questions, and a complex subject 0:19:57.720 --> 0:20:00.119 by any means. I think the ideas should not be 0:20:00.320 --> 0:20:03.119 with having a big brother watching on you, uh, in 0:20:03.200 --> 0:20:07.160 any way. I just think that it's a matter of balance. 0:20:07.280 --> 0:20:09.640 It's the same way that you're going to an airport 0:20:09.680 --> 0:20:11.720 and you need to take your shoes off, or when 0:20:11.720 --> 0:20:13.240 you go to the street and there is a policeman 0:20:13.320 --> 0:20:15.760 over there, you you accepted that, and we should accept 0:20:15.760 --> 0:20:19.480 the fact that somebody will help us by protecting us, 0:20:19.480 --> 0:20:21.640 not by watching on us, by any means, and that 0:20:21.680 --> 0:20:26.439 have to be very clearly prevented and regulated. But there 0:20:26.440 --> 0:20:29.679 should be a case when I already knows about attack, 0:20:30.040 --> 0:20:33.200 then I can actually stop it, which today it's not happening. 0:20:34.080 --> 0:20:36.560 You've been quoted as saying that one of the rules 0:20:36.640 --> 0:20:39.679 or one of the secrets of being a CEO is 0:20:40.040 --> 0:20:42.640 don't try to be loved. Yeah, what does that mean 0:20:43.480 --> 0:20:46.760 first time? The president of the CEO of Checkpoint. Ah, 0:20:46.880 --> 0:20:49.960 it's meant that you should not be popular just doing 0:20:49.960 --> 0:20:52.680 things because the market is asking for that, or because 0:20:53.040 --> 0:20:55.880 there's a pushback from from you know, Wall Street to say, 0:20:55.920 --> 0:20:57.360 hey you have to do that. I think you need 0:20:57.400 --> 0:21:00.080 to stick to your DNA and people will respect you 0:21:00.160 --> 0:21:02.800 for that. I think people that are trying just to 0:21:02.840 --> 0:21:06.600 do things because there is a fashion, uh like, hey, 0:21:06.680 --> 0:21:10.120 I have to now grow my business twice and I 0:21:10.160 --> 0:21:12.879 just became i mean not profitable and stuff like that. 0:21:12.920 --> 0:21:14.879 So so you need to make sure that you have 0:21:14.920 --> 0:21:17.600 a principle upon you build your business and you manage 0:21:17.600 --> 0:21:21.000 your business and stick to them. That's much more important 0:21:21.080 --> 0:21:23.800 than just to do what everybody asks you to do. Well, 0:21:23.840 --> 0:21:26.280 given that and the fact that you're in the US, 0:21:26.359 --> 0:21:30.439 I imagine you're you're speaking with potential clients, and I'm wondering, Uh, 0:21:30.480 --> 0:21:34.240 you know, even though the government is less perhaps advanced 0:21:34.240 --> 0:21:37.440 in their attempts to regulate some of these cyber attacks, 0:21:38.240 --> 0:21:41.399 are they receptive to the suggestion that they need to 0:21:41.440 --> 0:21:44.240 have some kind of task force, police force, some way 0:21:44.240 --> 0:21:47.439 to regulate. Uh, that's better than what Yes, it's happening 0:21:47.440 --> 0:21:49.800 in the U S. It's happening in other countries. UM. 0:21:49.840 --> 0:21:52.920 I think US overall administration is very complex and much 0:21:52.960 --> 0:21:56.040 more difficult than we We are actually dealing with many 0:21:56.359 --> 0:22:00.119 smaller countries which things are simpler to do. But and 0:22:00.200 --> 0:22:02.679 government are accepting the fact that they need to build 0:22:02.720 --> 0:22:07.359 systems that allow them to deal with cyber attack like 0:22:07.480 --> 0:22:10.040 they do for physical attacks. So they understand that and 0:22:10.080 --> 0:22:12.480 they're evolving on that. The same things happened also in 0:22:12.520 --> 0:22:14.280 the U S. It's a bit slower, but it's happening 0:22:14.280 --> 0:22:16.720 here as well. Thanks for spending time with us and 0:22:16.760 --> 0:22:19.480 coming by. I'm Non bar lev Is, the president of 0:22:19.600 --> 0:22:22.720 Checkpoint Software. He is an expert in the world of 0:22:22.760 --> 0:22:28.040 cybersecurity and also in protecting your network against malware and 0:22:28.080 --> 0:22:42.080 other cyber attacks. Let's turn our attention now to Brexit 0:22:42.160 --> 0:22:45.479 and Brexit negotiations. Joining us Ed Ludlow he is our 0:22:45.640 --> 0:22:48.440 UK correspondent for Bloomberg. He joins us here in our 0:22:48.480 --> 0:22:51.680 eleven three oh studios. Ed, thanks for being here. Maybe 0:22:51.760 --> 0:22:54.199 just bring everyone up to date on are there actually 0:22:54.240 --> 0:22:57.040 negotiations on Brexit? Are they actually taking place and talking 0:22:57.080 --> 0:22:59.560 about things that mean things? So I say where we 0:22:59.600 --> 0:23:02.560 are now this afternoon. We just finished the third formal 0:23:02.680 --> 0:23:06.880 round of negotiations. Okay. One of the big questions has 0:23:06.960 --> 0:23:10.520 been the pace of negotiations, how often they're meeting, because 0:23:10.520 --> 0:23:12.680