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Speaker 2: It's safe to say we are living in a world
Speaker 2: fullest of prelatives. Pick your topic right. It feels like
Speaker 2: our Bloomberg team noting and what will go down is
Speaker 2: the most spectacular it failure that the world has ever seen.
Speaker 2: A Box software update from cybersecurity firm CrowdStrike holdings crashing
Speaker 2: countless Microsoft Windows computer systems globally. It's important to note, right, David,
Speaker 2: this wasn't a cyber hack, not a.
Speaker 3: Cyber hack as we understand it, and this is just
Speaker 3: part of a routine fix. But this is clearly something
Speaker 3: that was so pervasive in so many computer systems around
Speaker 3: the world they had a major effects. Microsoft and CrowdStrike
Speaker 3: rolling out fixes. Systems are being restored for several hours.
Speaker 3: Bankers in Hong Kong, doctors in the UK, emergency responders
Speaker 3: in New Hampshire, all over the place finding themselves locked
Speaker 3: out of programs that are critical to keeping their operations afloat.
Speaker 3: Here is CrowdStrike co CEO George Kurtz. Earlier today on NBC.
Speaker 4: News, the system was sent an update and that update
Speaker 4: had a software bug in it and caused an issue
Speaker 4: with a Microsoft operating system. And we identified this very
Speaker 4: quickly and remediated the issue. And as systems come back online,
Speaker 4: as they're rebooted, they're coming up and they're working. And
Speaker 4: now we are working with each and every customer to
Speaker 4: make sure that we can bring them back online for
Speaker 4: more and what happened.
Speaker 3: And what's happening next. We're joined now by Bloomberg Intelligence
Speaker 3: senior tech industry analyst man Deep Sing who's here in
Speaker 3: our studio in New York, along with Bloomberg News cybersecurity
Speaker 3: reporter Jamie Tavey who's in our Washington, DC bureau and Deep.
Speaker 3: Let me start with you, the co CEO. They're saying,
Speaker 3: this process is underway, how long is it going to take?
Speaker 3: And we were marveling at sort of how it affected
Speaker 3: so many parts of the economy, how widespread was thises
Speaker 3: and how bad could it have been?
Speaker 5: Yeah, I mean, look, the good thing, as you noted
Speaker 5: rightly is it's not a cyber attack. The last thing
Speaker 5: a cyber security company wants is a cyber attack on
Speaker 5: their own system, so that's not the case. But clearly
Speaker 5: the impact is wide reaching, simply because the number of
Speaker 5: endpoints the networks. If you take that into account, and
Speaker 5: I know the CEO said we have rolled back the changes,
Speaker 5: it requires a lot of manual steps. Even though they
Speaker 5: have rolled back the code or the content changes they
Speaker 5: made to their software, but that doesn't fix the issue.
Speaker 5: Otherwise the systems would have been all up by now.
Speaker 5: We know they're not. So the reason why this will
Speaker 5: linger on for a bit and god knows if it's
Speaker 5: going to be weeks or months. But clearly there are
Speaker 5: manual fixes to be done. And you have to remember
Speaker 5: not all of the Windows environments are at the same
Speaker 5: operating system. They're running different versions, some of them are
Speaker 5: very old. How do you fix that? Because I think
Speaker 5: the fix or the software update that they did impacted
Speaker 5: the different versions in a different way.
Speaker 2: Interesting, man, how did this happen? Why did this happen?
Speaker 2: I mean, Microsoft knows what they're doing, right you roll
Speaker 2: out something.
Speaker 6: CrowdStrike knows what they're doing.
Speaker 2: How did this happen.
Speaker 5: I mean, it's a big, I think failure in terms
Speaker 5: of the testing procedures that these companies have to carry
Speaker 5: out before rolling out their code changes. And the CEO
Speaker 5: said it wasn't a code change, it was a content
Speaker 5: file change, so basically a configuration change that runs at
Speaker 5: the operating system layer. Otherwise, how do you bring down
Speaker 5: an entire system if it's not at the operating system level.
Speaker 5: And it also puts into questions, you know, the single
Speaker 5: point of failure aspect, because all these companies invest in
Speaker 5: back end systems and replicating you know, backup environments that
Speaker 5: should come online if something like this were to happen,
Speaker 5: but that apparently didn't happen and everything went down at
Speaker 5: the same.
Speaker 3: Time, Jamie the uninitiated, how does this kind of software work?
Speaker 3: We talked about sort of the scale of this, how
Speaker 3: many companies are using it, but what is the kind
Speaker 3: of security software the CrowdStrike has pioneered? And I've been
Speaker 3: thinking a lot just about kind of the psychological ramifications
Speaker 3: of this that people are now going to have fear
Speaker 3: there's going to be this kind of instability in our
Speaker 3: connected world.
Speaker 7: It's a really it's a really interesting question. And I
Speaker 7: think it really does speak to the inter connectedness of
Speaker 7: all of the technology and all the systems that we
Speaker 7: have today. You know, I think that what CrowdStrike does
Speaker 7: is because it provides endpoint security protection, it has to
Speaker 7: have access to your system and that's what that's where
Speaker 7: it's sort of the compromise of the Microsoft system came
Speaker 7: into play. And look, it's it's not a good day
Speaker 7: for the cybersecurity industry. It's something that everyone is they're
Speaker 7: concerned about it because it is a real question about
Speaker 7: well how you know, as men Deep said, you know,
Speaker 7: testing before you put it out there. But while it
Speaker 7: isn't actually a cyber security incident, we do hear and
Speaker 7: we are hearing from people that this is a perfect
Speaker 7: opportunity for a lot of people to take advantage of
Speaker 7: those systems being down, to get in there and try
Speaker 7: to attack it, attack systems in some way. So the
Speaker 7: vulnerability right now is it's there, and there are people
Speaker 7: who would be using as an opportunity to take advantage
Speaker 7: of that.
Speaker 2: It makes me wonder though, as we know talk so
Speaker 2: much about generative AI and increasingly more data out there
Speaker 2: and more data maybe up in the cloud or some
Speaker 2: of it on premise. But I do wonder Mandeep, I mean,
Speaker 2: is this just the beginning of probably similar system failures.
Speaker 5: I think again, it's hard to extrapolate we are going
Speaker 5: to see attacks like this because clearly, if it wasn't
Speaker 5: for an operating system level outage, we wouldn't be talking
Speaker 5: about this, and you know, the magnitude of it wouldn't.
Speaker 6: Be this big.
Speaker 5: The reason why this had a far reaching impact then
Speaker 5: a cyber attack would is because it touches the Windows
Speaker 5: operating systems of you know, Windows, Linux and Apple having
Speaker 5: their own operating there are three operating systems that control
Speaker 5: all your devices right now. You can't roll out a fix.
Speaker 5: If your operating system is down and it needs to
Speaker 5: be rebooted, you can't do anything. There is no patchwork.
Speaker 5: And that's where you know, all the backup systems didn't
Speaker 5: work because there was no way to bring anything online.
Speaker 5: So that I think is a risk that companies need
Speaker 5: to think about. But I would say cyber attacks. We
Speaker 5: have had a lot of cyber attacks, and look, there
Speaker 5: are data breaches, you have to pay fines. In this case,
Speaker 5: what I'm really interested in is who's Libel Is it Microsoft?
Speaker 5: Is it CrowdStrike, who will pay the customers for the indemnification?
Speaker 5: I mean clearly there was asso. Yeah, I think CrowdStrike
Speaker 5: probably has to take a lot of the blame. But
Speaker 5: clearly Microsoft and look, these are the two biggest endpoint
Speaker 5: security companies. CrowdStrike actually competes with Microsoft in that space,
Speaker 5: so even though it was on Microsoft system they can say, oh,
Speaker 5: we will bundle our security solution. And if that was
Speaker 5: the case, you know, we wouldn't be in this situation.
Speaker 2: So David, you ready put you all your medical information
Speaker 2: out there?
Speaker 3: Got to say we saw this play out in medical
Speaker 3: offices in the hospitals as well. But Jamie, we're using
Speaker 3: this term endpoint and I want to ask you a
Speaker 3: bit about that. Men deep talking about sort of how
Speaker 3: companies are processing this and dealing with this. I mean,
Speaker 3: companies have had to allow access to their systems. This
Speaker 3: company to have access to their systems. Does this change
Speaker 3: that calculus at all? I mean I think of the
Speaker 3: days when like I bought on cd RAM the McAfee
Speaker 3: software and put it on my computer and that was
Speaker 3: like us protecting it from threats? Then what lo those
Speaker 3: many decades ago? But talk about just the level of
Speaker 3: comfort that companies have using or outsourcing security in this fashion,
Speaker 3: what this might do to that.
Speaker 7: That's a really good point, and I think that a
Speaker 7: lot of the conversation now is about third party vendors
Speaker 7: and third party entities that you invite into your systems
Speaker 7: to protect them. And look, every time something like this happens,
Speaker 7: there is a moment of awareness, there's a moment of oh,
Speaker 7: let's put in all these protections, let's put in all
Speaker 7: these guardrails, let's try to figure out how we can
Speaker 7: mitigate this, and then we go back down again. And
Speaker 7: you know, it's ironic that you sort of mentioned like refixes, right,
Speaker 7: because the last time this happened was with the McAfee bug,
Speaker 7: you know, in twenty ten, and we did have this
Speaker 7: kind of level of outage across systems universally. So it
Speaker 7: kind of ebbs and flows, and where at the point
Speaker 7: where we're seeing the government still exhibit a lot of
Speaker 7: frustration with people trying to impose minimum cybersecurity standards on
Speaker 7: a lot of their systems. This doesn't help at all
Speaker 7: in terms of giving people faith in the security systems
Speaker 7: that they're meant to be installing. But at the end
Speaker 7: of the day. Look, this is going to make everyone
Speaker 7: hyper aware about what they're putting in and what they're
Speaker 7: sending in as updates, and I would like to think
Speaker 7: that this would actually give people a little more concern
Speaker 7: about Okay, before we launched this, are we sure? Are
Speaker 7: we double sure? Are we triple sure? Just because just
Speaker 7: the sheer impact that we've seen, not just on crowdstrikes
Speaker 7: bottom line, but just as Mende said, across the planet.
Speaker 2: Reminds me of my dad, who was an engineer and
Speaker 2: so like he had flashlights and back up flashlights and
Speaker 2: backup redundancy was a big part of our family growing up.
Speaker 3: That's a lot.
Speaker 2: Jordan Robertson, you're with us cybersecurity reporter at Bloomberg News,
Speaker 2: joining us from London. Our teams in Asia London have
Speaker 2: been following this story as it impacted the globe. Jordan,
Speaker 2: where are we right now? What's the update? What can
Speaker 2: you add to this story at this you know, what
Speaker 2: is it? Two to eleven pm Wall Street time on
Speaker 2: this Friday.
Speaker 8: Yeah, it's been a wild day, you know, I mean
Speaker 8: the day starts with, you know, massive outages related to
Speaker 8: both Microsoft and CrowdStrike, and we've had to figure out
Speaker 8: kind of which ones are responsible for which, And as
Speaker 8: you said, what has turned out to be the case
Speaker 8: is that CrowdStrike kind of alone is responsible for this
Speaker 8: massive outage. And you know, what we've learned today is
Speaker 8: that CrowdStrike has apologized for the They've released kind of
Speaker 8: instructions for how to fix this problem, but those instructions
Speaker 8: call for manual fixes. You know, people are going to
Speaker 8: have to go machine by machine to fix this problem,
Speaker 8: and it just highlights kind of the fragility and the
Speaker 8: vulnerability of the modern IT system which is built on
Speaker 8: you know, really just a few companies that you kind
Speaker 8: of have to trust and hope are doing the right
Speaker 8: things when it comes to deploying these patches responsibly.
Speaker 3: Jordan County among those who thought that the blue screen
Speaker 3: of death was something from years past that we weren't
Speaker 3: going to face that once again. But you know, you
Speaker 3: talk about the steps that one has to take now
Speaker 3: to reboot manually to make this happen. Just play that
Speaker 3: out a little bit for me now. And men Deep
Speaker 3: was talking about this a few minutes ago, just sort
Speaker 3: of what this process looks like and how long it's
Speaker 3: going to take. I'm sure that every chief technology officer
Speaker 3: is sending out that strongly worded memo telling the staff
Speaker 3: to do this immediately as quickly as possible. But what's
Speaker 3: your sense of how long this is going to take?
Speaker 3: And indeed, you know how hard it's going to be
Speaker 3: to get every employee a company to do this. I mean,
Speaker 3: there are a lot of Windows machines I imagine at
Speaker 3: most major companies around the world.
Speaker 8: Yes, someone remarked online today that you know, this is
Speaker 8: this is the best malware of the year, you know,
Speaker 8: and it was delivered by by CrowdStrike. You know, it
Speaker 8: has essentially the same effect as ransomware does you know
Speaker 8: a lot of times when we when we write about
Speaker 8: ransomware cases, we'll talk about, you know, the recovery time
Speaker 8: will typically take several weeks to a month, and maybe
Speaker 8: two months or longer. We're looking essentially at that for
Speaker 8: this incident, you know, according to folks that we've been
Speaker 8: talking to. And the reason for that is simple. We
Speaker 8: work in kind of a remote work era. Now, not
Speaker 8: everybody is in an office where they have their computers,
Speaker 8: and unfortunately, for these affected organizations, in order to implement
Speaker 8: this fix, you have to have a technician physically touch
Speaker 8: the computer and with administrative privileges delete this one file,
Speaker 8: tiny little file, one file only, but they have to
Speaker 8: have a physical hands on the machine to delete that file.
Speaker 8: You can't do that remotely. So we've talked to organizations
Speaker 8: that are having their remote employees, you know, FedEx their
Speaker 8: laptops in if it got broken, or servers and things
Speaker 8: like that. So that's why it's going to take so long.
Speaker 8: And you know this this update isn't It's simple. Once
Speaker 8: you get your hands on a machine, it might take
Speaker 8: fifteen twenty minutes only to do that. But if you've
Speaker 8: got thousands of machines and you've got to do this
Speaker 8: for you're going to prioritize your critical systems first, of course.
Speaker 8: But to get through thousands of machines, that's what's going
Speaker 8: to take weeks or potentially longer.
Speaker 2: It's not just control all delete I guess. Okay, So, Mandy,
Speaker 2: So what's changed now in our world because of this?
Speaker 5: Well, so from a stock perspective, I would say, you know,
Speaker 5: CrowdStrike was a darling when it comes to the software
Speaker 5: company's twenty times zv DO sales premium valuation. They couldn't
Speaker 5: do anything wrong, you know, top line growth steady. I
Speaker 5: mean the fact that it happened to them. I think
Speaker 5: they will be definitely a big brand hit that they
Speaker 5: will take from this. And look, people typically.
Speaker 2: Move no excusing them, but was it a case of
Speaker 2: them growing too fast or no?
Speaker 5: Or no, no, they were doing everything right in terms
Speaker 5: of execution, but just goes to show there is always
Speaker 5: idiosyncratic risk when it comes to these companies, and no
Speaker 5: matter how good you are, there are little things that
Speaker 5: can take you down. And in this case, everyone is saying,
Speaker 5: you know, people will move past this outage and they'll
Speaker 5: forget it. I think the brand has taken a big hit.
Speaker 5: And I mean if it the longer it takes come
Speaker 5: to restore the systems and come out of it, I
Speaker 5: think the bigger the damage will be. And don't forget
Speaker 5: the lawsuits. I think it's critical here to think about
Speaker 5: what kind of payouts they.
Speaker 3: May have and don't forget the lawsuits. It's the mantra
Speaker 3: Jamie for everything, Jamie altern to user, what are you
Speaker 3: watching for here in the days and weeks to come
Speaker 3: as we sort of see this process play out.
Speaker 7: We're looking for impact. We're looking to see how long
Speaker 7: it takes people to get back online and also obviously
Speaker 7: anyone trying to take advantage of this opportunities. As Jordan said,
Speaker 7: you know, it's like the malware of the year, and
Speaker 7: it's going to be something to watch. You know, there
Speaker 7: are massive reports about all kinds of compromises around the
Speaker 7: world and delays and clearly you know, how long is
Speaker 7: it going to take to get everything back online and
Speaker 7: just watching to see, you know, the reaction in terms
Speaker 7: of the sort of the scrutiny about having these critical
Speaker 7: supply chains dependent on these tiny little pieces of software
Speaker 7: and just you know what kind of comes from that
Speaker 7: and the risk involved in that.
Speaker 2: Yeah, good point, Jordan, last thirty forty seconds for you,
Speaker 2: It's been a long day for you as you get
Speaker 2: into the weekend and probably looking forward to getting some sleep.
Speaker 2: What's top of mind for you, you know, next day, weekend
Speaker 2: Monday story.
Speaker 8: I think that you know, as I mentioned, lots of
Speaker 8: it technicians are going to be trying to fix these
Speaker 8: machines throughout the weekend and then the coming weeks. I
Speaker 8: think the biggest question is going to be for CrowdStrike,
Speaker 8: whether they will you know, outline how this this really
Speaker 8: bad little piece of software made it past their quality
Speaker 8: assurance program? Was there a quality assurance program? Did anybody
Speaker 8: look at this before it went out? That's going to
Speaker 8: be the next big question.
Speaker 6: You guys, rock.
Speaker 2: Thank you so much much. Bloomberg Intelligence Senior Tech Inustry
Speaker 2: Alas Mandeep seeing Bloomberg News cybersecurity reporter Jamie Terraby and
Speaker 2: Bloomberg New Cybersecurity reporter Jordan robertson everything you need to
Speaker 2: know about that was right there.
Speaker 1: I watched for the.
Speaker 3: Reboots in the lawsuits.
Speaker 2: Main takeaway from that t shirts hots being made.
Speaker 1: Right now, you're listening to the Bloomberg Business Week podcast.
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Speaker 2: One other sector of the market that we've been watching
Speaker 2: closely today is the airline group. And I'm looking at
Speaker 2: the S and P five hundred supercomposite Airlines subindustry index
Speaker 2: was down almost two percent right now, it's up about
Speaker 2: nine tenths of a percent round noon today. The FAA
Speaker 2: put out a post on x David that the global
Speaker 2: IT issue could continue to affect flights this week, and
Speaker 2: that it's still working with airlines to kind of closely
Speaker 2: keep an eye on the issue.
Speaker 3: This is airlines begin slowly resuming some operations following that
Speaker 3: widespread global software melt down. Thousands of people delayed on
Speaker 3: canceled flights, likely to cascade through the systems for days.
Speaker 3: As the FAA said airlines stocks as a whole down
Speaker 3: one point nine percent earlier today. With more on this
Speaker 3: aspect of the global it OT outage story, we welcome
Speaker 3: in long time airline industry analysts planne Becker, TD Cowan
Speaker 3: Managing Director and senior research analysts. Let me just start
Speaker 3: big picture here. This is something I think it's safe
Speaker 3: to say the airlines must have been fearing, and just
Speaker 3: give us your perspective from your vantage of how disruptive
Speaker 3: and devastating this has been for airlines.
Speaker 9: Yeah, thanks for the question.
Speaker 10: So it disrupted operations as you noted, all day, and
Speaker 10: because there will be crews out of place, in aircraft
Speaker 10: out of place, it'll probably cascade into Sunday. I would
Speaker 10: say Friday and Sunday are probably the worst two days
Speaker 10: to have issues because those tend to be the days
Speaker 10: when we see the most number of people flying, especially
Speaker 10: as summer Friday. So I know the airlines were offering
Speaker 10: waivers if you wanted to change your plans, but pragmatically,
Speaker 10: if you're going on vacation today, you kind of want
Speaker 10: to go.
Speaker 7: That's.
Speaker 9: Yeah.
Speaker 10: So so I'm I guess you know, I'm hearing reports
Speaker 10: that air reports are starting to get aircraft out, airlines
Speaker 10: are getting air crept out. Yeah, obviously with massive delays.
Speaker 10: So I would say, before you go to the airport,
Speaker 10: check your flight status. But that said, they're going to
Speaker 10: do their best to get you where you want to go.
Speaker 2: Is there do you edicipate a kind of financial impact
Speaker 2: material impact here as of this out of this excuse me?
Speaker 10: Yeah, yeah, no, So we're going to treat it as
Speaker 10: if it was a storm, sort of a winter weather
Speaker 10: event or summer thunderstorm, and and there will be, you know,
Speaker 10: a little bit of an impact for sure, but we're
Speaker 10: early enough in.
Speaker 9: The quarter that they'll be able to recover.
Speaker 10: And also, since almost three million people are traveling on
Speaker 10: Fridays and Sundays these days, if you're starting your vacation,
Speaker 10: you're going to still persevere. And if you're ending your vacation,
Speaker 10: you obviously have to come home and seeing with a
Speaker 10: business trip, if you're ending a business trip, you have
Speaker 10: to come home. Not a lot of business trips start
Speaker 10: on Fridays.
Speaker 3: Fair enough, the good ones, Helena, I was thinking that far.
Speaker 9: Actually Farnborough starts Monday.
Speaker 5: There you go.
Speaker 2: Trips that started on a Friday or Saturday.
Speaker 10: I'm not going this year, but a lot of my
Speaker 10: friends we're leaving tonight.
Speaker 3: A few extra days in London, you know. I was
Speaker 3: just in Atlanta and while waiting for my plan, I
Speaker 3: looked over and I love when that there was a
Speaker 3: dot matrix printer at the gate. And I'm always so
Speaker 3: amazed at the longevity of the dot matrix printer, particularly
Speaker 3: in airports. But I bring this up to say, how
Speaker 3: old are these systems, how outmoded are these systems. If
Speaker 3: we're to step back and look at any kind of
Speaker 3: broader takeaways of what's happened here, does it say anything
Speaker 3: about how good this infrastructure is. We were talking earlier
Speaker 3: with men deep Singh just about how people are running
Speaker 3: all kinds of versions of Windows don't have they're running
Speaker 3: Windows ninety five. But no one's on the same thing
Speaker 3: or the most modern thing and I always feel that,
Speaker 3: particularly acutely when I'm at the airport. It feels like
Speaker 3: the systems that a lot of these airlines are using
Speaker 3: are pretty outmoded.
Speaker 10: Yeah, you know, that's another good observation actually, because Southwest
Speaker 10: was one of the least impacted airlines today and as
Speaker 10: most people know, they have one of the oldest systems
Speaker 10: out there. So thinking about it over the years that
Speaker 10: and you pointed out, I've been doing this a long time.
Speaker 10: Airlines were early adopters of technology, and then because of
Speaker 10: all the issues they had and the bankruptcy filings in
Speaker 10: the last no it's two decades ago. It's just kind
Speaker 10: of shocking. But with all those issues, they weren't able
Speaker 10: to necessarily keep up, and they've spent the last four
Speaker 10: or five years, especially using the time in the pandemic
Speaker 10: to start upgrading their systems. And so I know that
Speaker 10: most of the airlines and a lot of the airports
Speaker 10: were caught out by it. But you know, in fairness
Speaker 10: to them, they're doing everything they can to push information
Speaker 10: to the customer. I think United is probably on the
Speaker 10: leading edge of this. They rolled out earlier this month,
Speaker 10: the traffic the weather app that they're using to show
Speaker 10: you because it's sunny where you are and it's sunny
Speaker 10: where you're going, but there's thundersperms in between. So they're
Speaker 10: pushing that to people's cell phones now, and they're doing
Speaker 10: their best to keep up and get ahead of technology.
Speaker 10: But to your point, some of the systems are just
Speaker 10: slow to be updated, on the dot matrix printer being
Speaker 10: one of them.
Speaker 2: Oh my god, I want a new headline on a story, Well,
Speaker 2: the dot matrix printer aside. I mean, it's safe to
Speaker 2: say though increasingly, you know, there is a lot of
Speaker 2: technology still. Though when it comes to the airline industry,
Speaker 2: do you anticipate I mean that we're going to see
Speaker 2: more incidents like this potentially.
Speaker 9: Well I don't.
Speaker 10: I'm hoping not, of course, But it seems like there
Speaker 10: are always issues that aren't necessarily their fault, that they're
Speaker 10: a victim, and they weren't the only ones, right, I mean,
Speaker 10: you guys have been talking about this all day. There
Speaker 10: have been other industries. Banking was very affected. I know
Speaker 10: when I locked on this morning, I didn't have any issues,
Speaker 10: but it was just an accident of timing. By the
Speaker 10: I was a little late this morning, so by the
Speaker 10: time I locked on, the issues had been resolved within
Speaker 10: our firm. But in general, I think the industry is
Speaker 10: going to continue to invest in technology and they're going
Speaker 10: to use every tool available to try to keep their
Speaker 10: aircraft running on time. Obviously is safe operation and so on,
Speaker 10: and so will these incidents is continue to occur, of course,
Speaker 10: because it's not only airlines that are always affected.
Speaker 9: There are other industries.
Speaker 10: But in as long as we all rely on so
Speaker 10: much technology, we're going to be exposed. So I don't
Speaker 10: think there's anything you can do about that. But when
Speaker 10: you think about the millions of flights that we have
Speaker 10: on a monthly basis, on an annual basis, the system
Speaker 10: is still working pretty well and the industry is still investing.
Speaker 10: I think each of the big airlines probably invests close
Speaker 10: to a billion dollars a year in technology, and then
Speaker 10: above and beyond what they invest in in in aircraft cutbacks.
Speaker 9: So I don't think that's going to change.
Speaker 2: All right, We're gonna leave it there, Hey, listen, thanks
Speaker 2: so much for carving out some times. Have a great
Speaker 2: week and always good to check in with. Clane Becker.
Speaker 2: She's managing director, Senior research analyst Ever at td Cowan
Speaker 2: joining us in New York City. I'm looking at airlinestocks, David.
Speaker 6: They're actually as.
Speaker 2: A group up about one.
Speaker 3: How about that treating it like a storm. I thought,
Speaker 3: that's my big takeaway from that, saying this is kind
Speaker 3: of an anomaly.
Speaker 2: For I feel like things are just bouncing back so quickly.
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Speaker 2: As we continue our coverage at the global IT outage,
Speaker 2: Hey listen. One other area that we were thinking about
Speaker 2: looking at and it seemed to be impacted was retail.
Speaker 2: There was a story in the Bloomberg Starbucks online system
Speaker 2: order ahead on mobile apps appeared to be down this morning,
Speaker 2: so workers were having to actually take orders by hand.
Speaker 3: David, take orders by hand. Other reports mentioned grocery stores, retailer's,
Speaker 3: fast food giants affected around the world. I think I
Speaker 3: saw one Blomberg News article at a hotel in Hong Kong,
Speaker 3: they were checking people in my hand, which is actually
Speaker 3: see a big corporate hotel. Do you know what's Yeah?
Speaker 3: I think that's just just you know, digress a little bit.
Speaker 3: What gives me the most pause is just to think through,
Speaker 3: like in our line of work and other lines of work,
Speaker 3: what you have, what would you have to do if
Speaker 3: you weren't able to get online or get access to yourself.
Speaker 2: I always say this to my husband because increasingly, like
Speaker 2: all of our systems are online, like turning on lights,
Speaker 2: turning on this, turning on that, and I'm like, what
Speaker 2: happens like as things go down a kind of our world?
Speaker 3: Stop the bloomberg performing without missing a beat? I want
Speaker 3: to point out shamelessly.
Speaker 2: No, all right, so let's talk a little bit about
Speaker 2: what's going on in the retail world. Nikki Bairtt is
Speaker 2: with us. She's vice president of retail Innovation at the
Speaker 2: retail technology solutions company APTOS. They work with companies from CROCS,
Speaker 2: callhon to LLB and Michael Cores. Nikki joining us from Denver, Colorado. Nikki,
Speaker 2: good to have you here with uh, David and myself.
Speaker 2: I was going to say Tim and myself, so sorry
Speaker 2: about that, Like a Robot, David and myself, how are
Speaker 2: you good?
Speaker 6: Good? Good?
Speaker 11: Definitely watching all the news roll in about the outage myself.
Speaker 2: I am curious. You guys work with a wide swath
Speaker 2: of the retail group. What are you hearing from the
Speaker 2: retail world in regards to the outage.
Speaker 6: Yeah, it's really been kind of all over the place.
Speaker 11: Like from our perspective, it's been a very limited impact,
Speaker 11: and it's mostly up to kind of the configuration and
Speaker 11: the setup of our clients, the choices that they've made,
Speaker 11: as opposed to like our ability to deliver solutions. So,
Speaker 11: you know, we definitely with point of sale in particular,
Speaker 11: you really have to think about how you handle things
Speaker 11: when things go down and whether you've got to pull
Speaker 11: out the calculator and the notepad in order to figure
Speaker 11: things out. And so, you know, we really have focused
Speaker 11: on that offline resiliency. Even if the store had that
Speaker 11: kind of trouble, we'd still be able to transact. That's
Speaker 11: that's a really important part of delivering point of sales
Speaker 11: solutions these days.
Speaker 3: Nikki, I wonder what happens when you have an event
Speaker 3: like this to the trust that consumers have in the
Speaker 3: businesses that they're dealing with with the retailers that they're
Speaker 3: transacting with. Do they take a pause? How do retailers
Speaker 3: kind of combat that, you know, acknowledging the fact that
Speaker 3: a lot of them are using this kind of third
Speaker 3: party endpoint software to keep their systems secure. Of course,
Speaker 3: by doing that, acknowledging the fact that, like other companies
Speaker 3: are in their systems making sure that the systems are secure,
Speaker 3: I imagine that there's a fine line to tow there
Speaker 3: for these companies.
Speaker 11: Yeah, you know, I think we see a lot from
Speaker 11: like the data breaches for example, that companies take kind
Speaker 11: of an immediate hit, but when they kind of go
Speaker 11: through their rehab, their public rehab, then consumers come back.
Speaker 11: So whether that's fortunately or unfortunately, I'm not sure what
Speaker 11: to say about that. But consumer's memory tends to be
Speaker 11: pretty short. So unless it is repeated issues, or unless
Speaker 11: those issues are so egregious that you know, it wipes
Speaker 11: out everybody's bank account, it'll come back. I don't really
Speaker 11: think it has a huge long term impact on consumers
Speaker 11: trustticularly of retailers who are taking their credit cards and
Speaker 11: making payments.
Speaker 2: Hey, I do wonder to Nikki, any of your systems
Speaker 2: you guys at your company that were impacted.
Speaker 6: No, we had very very limited impact. Yeah.
Speaker 11: I think we had a few customers who had some
Speaker 11: minor issues with some back office computers in stores themselves,
Speaker 11: but it wasn't from like our solutions and how they're delivered.
Speaker 11: It was really from their own use of the technologies
Speaker 11: that were impacted.
Speaker 2: How are you guys though, What are the discussions you're
Speaker 2: having at your company though because of what happened and
Speaker 2: maybe thinking about the different strategies or protecting the solutions
Speaker 2: that you provide to make sure nothing like this happens
Speaker 2: in the future.
Speaker 6: Yeah, we're very very active.
Speaker 11: We have multiple people and we have a critical response
Speaker 11: team to really jump on all of those things whenever
Speaker 11: something like that happens. I think, you know, we definitely
Speaker 11: spend a lot of our time preaching on it. Industry
Speaker 11: best practices don't auto update things you might want to,
Speaker 11: like pause before you auto up eight. But it's hard
Speaker 11: with security because some of those things are so urgent
Speaker 11: that you almost do want to turn on the auto update.
Speaker 11: But when you do things like that, then if there's
Speaker 11: anything that goes wrong, then you aren't doing anything to
Speaker 11: stop it and you've got to roll it all back.
Speaker 11: So we spend a lot of time really focusing on
Speaker 11: kind of it best practices to help protect yourself from
Speaker 11: some of those automated things that happen as much as possible.
Speaker 3: Nick, you want to step back and just ask you
Speaker 3: sort of what's front of mine for retailers right now?
Speaker 3: We're in mid July the school year. Yeah, sadly is
Speaker 3: around that. It does feel like I just got my
Speaker 3: kids out of school and now we're talking about back
Speaker 3: to school. But how much is that kind of the
Speaker 3: marquee item on retailer's calendars right now? How much emphasis
Speaker 3: are they placing on that and what does it mean
Speaker 3: for the sector more broadly?
Speaker 11: Yeah, absolutely, it's definitely important. We have some retailers that
Speaker 11: like normally there's from a technology perspective, a holiday freeze,
Speaker 11: right so starting in mid October, maybe they won't have
Speaker 11: any changes that get rolled out to stores because they
Speaker 11: don't want to impact their ability to deliver on the
Speaker 11: holiday season. Well, we have some retailers that also do
Speaker 11: that same blackout period for back to school. It's that
Speaker 11: important to them and they do not want anything that
Speaker 11: will impact that. So it's definitely become probably the second
Speaker 11: most critical holiday event for retails. Not to call it
Speaker 11: a holiday, because I'm sure kids don't think that, but
Speaker 11: it's on that level of holiday spending.
Speaker 2: I don't know. My daughter kind of enjoyed all the
Speaker 2: back to school shopping. It felt like a holiday. It
Speaker 2: felt like Christmas like ten times over. To be quite
Speaker 2: honest with you, Hey, having said that, you know you do. Guys,
Speaker 2: you have a great window into the retail group, which
Speaker 2: we know how important the consumers to the economy.
Speaker 6: What would you say that?
Speaker 2: What are you hearing from most retailers how things are going,
Speaker 2: because we keep talking about how consumers are looking for value.
Speaker 11: Yeah, I think that is definitely very much at play.
Speaker 11: For sure, the back to school spending really kicked off
Speaker 11: earlier than ever this year, and I think we saw
Speaker 11: that in consumer surveys as well. We're seeing it in
Speaker 11: the stores. Consumers are shopping early, but they're shopping early
Speaker 11: looking for those deals. So I think there's the you know,
Speaker 11: the whole Amazon Prime days and all of the retailers
Speaker 11: like Target and Macy's and Walmart who kind of piled
Speaker 11: on around those that Prime week. You know, they all
Speaker 11: are trying to take advantage of the fact that consumers
Speaker 11: are shopping earlier for back to school to kind of
Speaker 11: get in front of those deal seekers. But that said,
Speaker 11: I think most of them are really trying to cherry
Speaker 11: pick up front and then also trying to look for
Speaker 11: those deals.
Speaker 6: As they get towards the end of the season.
Speaker 11: Which for back to school is a little bit more
Speaker 11: challenging for retailers because it's not like there's one day
Speaker 11: like Christmas Day, where you have a deadline and you know, like,
Speaker 11: if you don't hit this day, it's over. For back
Speaker 11: to school, it kind of spreads across the end of August,
Speaker 11: beginning of September, sometimes even as late as mid September,
Speaker 11: so there are more opportunities I think for consumers to
Speaker 11: kind of spread that spend out a.
Speaker 6: Little bit if they need to.
Speaker 3: Very quickly. Here, I wonder if you're seeing signs of
Speaker 3: any strain on consumers, and so we talk about so
Speaker 3: often is what the Fed's thinking and what it might
Speaker 3: do and sort of how its war on high inflation
Speaker 3: is affecting consumers. Are you seeing them strained and our
Speaker 3: companies doing anything particularly interesting as a result.
Speaker 6: Yeah, the promotions are back on deck for sure. You know,
Speaker 6: we saw it earlier in the year with.
Speaker 11: Some of the restaurants fast food kind of offering bringing
Speaker 11: back their meal deals and things like that. And I think,
Speaker 11: you know, my company focuses on apparel companies very much
Speaker 11: so the fashion industry, and we've seen the same deal
Speaker 11: that you've got to be pretty pretty targeted in your
Speaker 11: promotions and you've definitely got to offer value in order
Speaker 11: to get customers. I think one of the things with
Speaker 11: back to school in particular is that it is a
Speaker 11: very unique store traffic opportunity. So, as you mentioned Carol, right,
Speaker 11: you want this to be a really great experience for
Speaker 11: your kid. You want to take them, you want to
Speaker 11: have them pick the backpack, you want them to be
Speaker 11: emotionally invested in the new school year. And that's a
Speaker 11: particular opportunity to take advantage of that traffic both in
Speaker 11: the moment, but also to put together a really great
Speaker 11: experience that could lead the holiday spending DOW.
Speaker 2: I'm just gonna say, Niki, what I wanted it to
Speaker 2: be is one store eno.
Speaker 3: Like you were going to pick that backpack, you were
Speaker 3: going to fill it.
Speaker 5: And no, I have to have this one.
Speaker 2: No, this one's just fine, Nikki, thanks so much. Get
Speaker 2: to check in with you, Nicki Baird. She's vice president
Speaker 2: of Retail Innovation. Over the app doos.
Speaker 1: You're listening to the Bloomberg Business Week podcast Can't Just
Speaker 1: Live weekday afternoons from two to five pm Eastern Listen
Speaker 1: on Apple, car Play and and Broyt Auto with a
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Speaker 2: You are listening and watching Bloomberg Business become Carol Master.
Speaker 2: Timstenbeck is off with me as David Gora, and we've
Speaker 2: got about eighteen minutes left in today's trading session, bouncing
Speaker 2: around off our loads of the session, but too far off.
Speaker 2: And you've got most of the major industry groups in
Speaker 2: the S and P five hundred and nine out of
Speaker 2: eleven are lower in today's trade. So a lot going on.
Speaker 2: As we keep saying, I feel like a little bit
Speaker 2: of a broken record. I'm very happy it's Friday, getting
Speaker 2: ready for my glass of red wine. So let's get
Speaker 2: to it. Our drive to the closed. Tracy mcmillion is
Speaker 2: with US, head of Global Asset Allocation Strategy over at
Speaker 2: Wells Fargo Investment Institute, joining us from Winston Salem, North Carolina. Tracy,
Speaker 2: There is so much that we could start with, whether
Speaker 2: it's the presidential race, whether it's the global IT outage,
Speaker 2: whether it's earnings fed policy. What matters most to you
Speaker 2: right now on this Friday afternoon.
Speaker 12: You're right, Carol, there is a lot going on right now,
Speaker 12: and I think for us, the most important thing is
Speaker 12: to continue to advise investors to look at their portfolios
Speaker 12: and those stocks that have outperformed the most so much
Speaker 12: so far this year, and that's going to be stocks
Speaker 12: and information technology, communication services. Take games there and reallocate
Speaker 12: into those sectors that should benefit as due to the
Speaker 12: earnings recovery as that continues through the end of the year.
Speaker 12: So those are sectors like industrials, energy, materials, healthcare, and financials.
Speaker 3: You mentioned information technology. We were talking about Nvidia kind
Speaker 3: of recentrough road that it's been on. Something that's always
Speaker 3: of endless curiosity to me is when that enthusiasm for
Speaker 3: AI moves to smaller companies in the space and we
Speaker 3: see kind of secondary and tertiary effects of that. Are
Speaker 3: you seeing that when you make those recommendations, Are you
Speaker 3: suggesting any of that money go into other AI companies?
Speaker 3: Where are you really kind of making a more counseling,
Speaker 3: a more defensive play.
Speaker 12: Yeah, so you're right. AI has certainly driven a lot
Speaker 12: of the returns so far the year, and it's been
Speaker 12: the megacap Ai companies, and you know, as AI continues
Speaker 12: to proliferate and to the build out continues, we think
Speaker 12: that it will the benefits to investors will move from
Speaker 12: that direct investment in technology names to peripheral types of
Speaker 12: sectors that should benefit as data centers are built out,
Speaker 12: as energy use is electrification you know, continues to be needed.
Speaker 12: So we do think that that's kind of the next play,
Speaker 12: and that's where we're asking investors to focus their assets.
Speaker 2: Having said that, Tesla reports next week, Alphabet reports next week.
Speaker 2: So if we get I'm thinking about Alphabet in particular,
Speaker 2: some up eating numbers from Alphabet, do you rethink kind
Speaker 2: of that big tech story? Because I feel like just
Speaker 2: when everybody says we're done with big tech, all of
Speaker 2: a sudden something happens and we all go roaring. Are
Speaker 2: you see investors moving a lot of money back into
Speaker 2: the sector. So I don't know, how do you balance that?
Speaker 12: Yeah, So the way that we're playing that right now
Speaker 12: is to be neutral technology and what that means for
Speaker 12: US large cap investor who is neutral the index, that's
Speaker 12: about one third of their US large cap exposure. So
Speaker 12: that's a lot of exposure to technology. We just wouldn't
Speaker 12: be overweighted here. And because these stocks have done so well,
Speaker 12: that's exactly what we're seeing and a lot of portfolios
Speaker 12: is that it's it's more heavily weighted than the index.
Speaker 12: So that's where we're saying, pair some pair some of beholdings,
Speaker 12: pair some gains, and reallocate to other areas. Not that
Speaker 12: we don't see technology continuing to perform well, it's just
Speaker 12: that there's a lot of risk there when it gets
Speaker 12: when the performance gets as conscience concentrated as it's been
Speaker 12: so far this year.
Speaker 3: Tracey Carroll start off asking you what's top of mind
Speaker 3: for you? Let me turn that question on its head,
Speaker 3: and what's top of mind for your clients when they
Speaker 3: come in to you worrying about what they should be doing,
Speaker 3: Curious what you would advise them to do, buy and large,
Speaker 3: what are they asking about, what are they saying and
Speaker 3: sort of how often do you have to set them straight?
Speaker 3: So what's the most common kind of misconception that the
Speaker 3: investors that your clients have right now, I'd.
Speaker 12: Say, right now it's probably wanting to reallocate based on
Speaker 12: the political environment, wanting to reallocate based on who is
Speaker 12: leading in the polls. And we are telling investors that
Speaker 12: they should not make significant changes to their portfolios based
Speaker 12: on what is happening right now in the polls, that
Speaker 12: it's much too soon to make any changes to the portfolio.
Speaker 12: We've certainly seen some very extraordinary headlines coming out of
Speaker 12: this race so far, lots of twists and turn it's
Speaker 12: a long way to November. We just think it's speculative
Speaker 12: at this point to be investing based on what might
Speaker 12: happen at that time.
Speaker 2: Tracy, is there a point though in the race, I
Speaker 2: don't know, two weeks out, a month out, like where
Speaker 2: you really look at the polls and you say, all right, guys,
Speaker 2: it's you know, hey, clients, it is time to make
Speaker 2: some adjustments.
Speaker 12: So we probably would want to wait until we get
Speaker 12: more confirmation about you know, who's at the top at
Speaker 12: the you know, who is the presidential candidate who has
Speaker 12: been elected, and then we'd want to see how Congress
Speaker 12: also has has shaped up after the election. So it's
Speaker 12: really the total picture that may help us to direct
Speaker 12: clients to certain sectors, certain industries that might benefit more
Speaker 12: based on what policies are likely to come to fruition.
Speaker 3: Just have a couple seconds left here. I wonder when
Speaker 3: you look at the wide swath of economic data, what's
Speaker 3: most important for you is you kind of game out
Speaker 3: what the FED might do sor where things are headed.
Speaker 3: What do you pay closest attention to.
Speaker 12: Yeah, we're really paying closest attention to three things. There
Speaker 12: are three things that we think have been supporting these markets,
Speaker 12: and two of the supports are starting to weekend. One
Speaker 12: is the labor market that has started to weekend. Financial
Speaker 12: liquidity is also less ample. And then the third thing
Speaker 12: is inflation. And with inflation falling, that we think leads
Speaker 12: to better purchasing power for investors, lower rates, better credit availability.
Speaker 12: And that scenario to us tells us that we're probably
Speaker 12: going to see a shallow decline and growth followed by
Speaker 12: a reacceleration next year.
Speaker 2: Interesting, right, So touch and go it feels like see
Speaker 2: mcmillion over at Wells Fargo Investment Institute. Thank you so much.
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