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White House Lax Protocol Opens Window For More Security Breaches · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
• 0:15
  Speaker 1: you and your money, whether you're at the grocery store
• 0:17
  Speaker 1: or the trading floor. Find the Bloomberg P and L
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. How
• 0:33
  Speaker 1: difficult is it to hack into the US election system? While,
• 0:38
  Speaker 1: according to one report, Florida's Department of State has criticized
• 0:43
  Speaker 1: an experiment to thwart hackers because an eleven year old
• 0:47
  Speaker 1: hacker needed only ten minutes to bust into a replica
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  Speaker 1: site and make it look like the wrong candidate had
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  Speaker 1: won a presidential election. Here to tell us more about
• 0:56
  Speaker 1: the situation is Clint Watts. He is a senior fellow
• 0:59
  Speaker 1: for the Far Policy Research Institute. He is also Senior
• 1:03
  Speaker 1: Fellow at the Center for Cyber and Homeland Security at
• 1:06
  Speaker 1: George Washing at the George Washington University. He was previously
• 1:10
  Speaker 1: an infantry officer in the United States Army, executive officer
• 1:15
  Speaker 1: of the Combating Terrorism Center at the US Military Academy
• 1:20
  Speaker 1: at West Point, and a former FBI official. Clint watts.
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  Speaker 1: Should we just go back to paper ballots? Yeah, I
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  Speaker 1: would seem that way, doesn't it. I it's amazing that
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  Speaker 1: our tech, you know, we should expect it to be
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  Speaker 1: able to return a vote very quickly and to do
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  Speaker 1: that efficiently, but it is almost impossible to secure it
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  Speaker 1: if it has any sort of connection to the web.
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  Speaker 1: And at the same point, we're relying on just a
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  Speaker 1: few programmers to try and prevent thousands or even you know,
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  Speaker 1: hundreds of thousands of potential hackers out there over time
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  Speaker 1: from breaking into systems. So we're in a tough spot.
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  Speaker 1: And I think the important thing America is that we
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  Speaker 1: have some sort of audit trail and paper ballot backup
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  Speaker 1: so that we can verify a vote, because we've seen
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  Speaker 1: this happen, particularly Ukraine for example, of Russia had hacked
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  Speaker 1: into the system there and the Ukrainians caught it before
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  Speaker 1: it went live. But we will always have this threaten
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  Speaker 1: as long as we have candidates that are as also
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  Speaker 1: going that maybe we can't trust the vote, we're going
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  Speaker 1: to have these sorts of problems over the horizon. You know.
• 2:24
  Speaker 1: Pim raised a good point, which is there are these
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  Speaker 1: tests and studies being done of just how compromise the U. S.
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  Speaker 1: Electoral system really is right now, And I have to wonder,
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  Speaker 1: especially as we head into the midterm elections, just how
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  Speaker 1: far have hackers gotten, How how pervasive has some of
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  Speaker 1: the influence already been, And are you worried about the
• 2:44
  Speaker 1: integrity of these elections. I'm not so much worried about
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  Speaker 1: the integrity as much as the perception of the integrity.
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  Speaker 1: And by what I mean by that is it actually is,
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  Speaker 1: you know, fairly difficult to change the votes. We have
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  Speaker 1: a lot of people looking at it, but we still
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  Speaker 1: have about five states. It sounds like that don't have
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  Speaker 1: a sufficient audit trail or a paper ballot backups that
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  Speaker 1: we can verify. What I'm more nervous about, though, is
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  Speaker 1: the perception or the casting of doubt about the integrity
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  Speaker 1: of elections. We saw this in twenty sixteen when we
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  Speaker 1: were watching Russian influence. UH. When I was studying this,
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  Speaker 1: the second way was really about making people nervous that
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  Speaker 1: democracy isn't true or that their votes didn't count. And
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  Speaker 1: we're seeing that come up again in twenty eight team.
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  Speaker 1: We're already worried about it now months in advance, but
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  Speaker 1: looking forward we're hearing Canadas say that the vote is
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  Speaker 1: going to be rigged or the election is rigged against me.
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  Speaker 1: That sort of doubt is almost impossible. And even if
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  Speaker 1: you didn't change a vote, let's say you just took
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  Speaker 1: a proemptive hack, you just made it look like you
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  Speaker 1: hit a voter database, or you change something and then
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  Speaker 1: dumped it out online. That would create widespread doubt in
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  Speaker 1: the electoral system. That's an attack on democracy and it
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  Speaker 1: really under undermines the trust and integrity in both are
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  Speaker 1: elected officials in our institutions. Clint, what do you believe
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  Speaker 1: that any conversation or communication is secure, particularly if it
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  Speaker 1: takes place in the White House. Yeah, it's it's fascinating.
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  Speaker 1: I would have said yes up until now. I just
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  Speaker 1: don't know. We've seen unprecedented things in the last two years. Uh.
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  Speaker 1: One example is the Russian Foreign Minister lab Ra going
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  Speaker 1: into the Oval office without any US media there, but
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  Speaker 1: there was Russian media there. Uh. We've seen cases in
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  Speaker 1: Helsinki with the president is talking with Ladimir Puttin one
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  Speaker 1: on one and there's no witnesses and we don't know
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  Speaker 1: what the electronic situation was there. And then this amrose
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  Speaker 1: to tape that that came out in the last week.
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  Speaker 1: These are all unprecedented things, and so I don't have
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  Speaker 1: confidence right now in terms of communications, uh, the way
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  Speaker 1: I did pre two thousand sixteen. I just know working
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  Speaker 1: in the government, you didn't take a cell phone in
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  Speaker 1: anywhere or recording device in anywhere. So it's pretty startling
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  Speaker 1: to see these revelations come forward, if they're true. And
• 5:01
  Speaker 1: just to be clear, uh, Omar rosso Manigald Newman, she
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  Speaker 1: was a former White House advisor who got fired uh
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  Speaker 1: and is releasing tapes that she made of President Trump. Uh.
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  Speaker 1: And she is saying that she has more that she
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  Speaker 1: will release. President Trump has a couple of colorful tweets
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  Speaker 1: in response, for example, I'll read you the latest one. Well,
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  Speaker 1: I know it's not presidential to take on a low
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  Speaker 1: life like Omar Rossa. And while I would rather not
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  Speaker 1: be doing so, this is a modern day form of communication,
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  Speaker 1: and I know the fake news media will be working
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  Speaker 1: overtime to make even wacky h Omar Rossa look legitimate
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  Speaker 1: as possible. Sorry, So what is the possible consequence other
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  Speaker 1: than being this sort of soap opera that everybody is following.
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  Speaker 1: What is the potential security consequence of have somebody taping
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  Speaker 1: the current president in the White House and potential advisors.
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  Speaker 1: What is the security concern here? Yeah, Well, as we
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  Speaker 1: talked out with the uh eleven year old that may
• 6:02
  Speaker 1: be hacked into a simulated voting machine, we don't know
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  Speaker 1: who's hacked into those devices. Uh, John Kelly, the Chief
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  Speaker 1: of Staff, there was another point just a few months
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  Speaker 1: ago where there was reporting that his personal phone had
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  Speaker 1: been compromised at one point or hacked into. We know
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  Speaker 1: the President tweets a lot, and so he's carrying around
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  Speaker 1: a device as well, and so all of the security
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  Speaker 1: protocols that they're not being followed through on provide an
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  Speaker 1: open window, uh, you know, either in terms of access
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  Speaker 1: via microphone, email, or even possibly video at some point
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  Speaker 1: into our government. And this is just unprecedented. Usually, I know,
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  Speaker 1: working at the FBI and even with the military, you
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  Speaker 1: leave your phone in the car, you leave it at
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  Speaker 1: the door, checked into a box. And so this is
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  Speaker 1: the highest pinnacle of our government and we have people
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  Speaker 1: carrying around devices, not only using them uh in places
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  Speaker 1: maybe they shouldn't be, but using them to record each other.
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  Speaker 1: Just think the erosion of trust on that staff, right,
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  Speaker 1: now if you thought you were being recorded by your coworkers,
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  Speaker 1: where you couldn't openly discuss policy or move forward. It
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  Speaker 1: slows down the wheels of government at every single level.
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  Speaker 1: And it also probably makes long time civil servants in
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  Speaker 1: our country very nervous to not be sure that they
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  Speaker 1: can openly and discuss policy freely with leadership without maybe
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  Speaker 1: being recorded by one of their colleagues or with somebody
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  Speaker 1: in the administration. It's a really dark time in terms
• 7:26
  Speaker 1: of personal trust inside the White House. Clint Watts, do
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  Speaker 1: you believe that your communications are monitored or have been monitored,
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  Speaker 1: either by US intelligence forces or by overseas intelligence agencies.
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  Speaker 1: I assume so, you know, in a certain context. I
• 7:44
  Speaker 1: traveled overseas before. I know in in certain countries just
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  Speaker 1: in terms of their cyber capabilities, and in authoritarian regimes
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  Speaker 1: in particular, they tend to monitor very heavily. That's whether
• 7:57
  Speaker 1: you're in Southeast Asia, China, you know, Europe, whatever it
• 8:01
  Speaker 1: might be. I always kind of operate under the assumption
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  Speaker 1: that when I'm particularly in a foreign country or accessing
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  Speaker 1: through WiFi when I'm traveling, that I'm putting myself at risk,
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  Speaker 1: because that's it's just different. The standards of surveillance are
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  Speaker 1: different in different countries. In terms of the United States,
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  Speaker 1: I can't say that that's the case, but I've definitely
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  Speaker 1: had hacking attempts against me and and institutions that I've
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  Speaker 1: worked for. Clint Watts, thank you so much for being
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  Speaker 1: with us and for all your insights. Clint Watts is
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  Speaker 1: a former FBI Special Agent. He is currently Senior Fellow
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  Speaker 1: at the Foreign Policy Research Institute. He also is UH
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  Speaker 1: a Senior Fellow at the Center for Cyber and Homeland
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  Speaker 1: Security at the George Washington University. You know, Lisa, at
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  Speaker 1: the beginning of the year, one dollar would get you
• 8:58
  Speaker 1: three point seven for Turkish lira. How many you get today? Yes,
• 9:03
  Speaker 1: good question, six point nine one. That is a drop
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  Speaker 1: in value of more than eighty per cent. Dr Win
• 9:12
  Speaker 1: Thin is the global head of Emerging Markets FX for
• 9:15
  Speaker 1: Brown Brothers harrim and he joins us now. Dr Win Thin,
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  Speaker 1: were you able to call this decline in the value
• 9:22
  Speaker 1: of the Turkish lira? Well? Uh, first of all, thanks
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  Speaker 1: for having me. Um. Yes, I've been embarrassed on Turkish
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  Speaker 1: lever for most of this year, but I think the
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  Speaker 1: speed of this decline is is great than anyone imagined.
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  Speaker 1: Why Well, I think in general markets surprise that there's
• 9:39
  Speaker 1: been a putal lack of action by the policymakers. Um,
• 9:43
  Speaker 1: if they'd come in and allow the center brank to
• 9:45
  Speaker 1: high grades. Uh, it takes some orthodox measures. We wouldn't
• 9:50
  Speaker 1: be in the situation who we are now, I think.
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  Speaker 1: But by waiting so long, the situation is really close
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  Speaker 1: to getting out of hand. Um. And you know at
• 9:58
  Speaker 1: this point the sky's limit, all right, So when you
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  Speaker 1: stay close to getting out of hand, what's the worst
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  Speaker 1: case scenario and how much should investors in other parts
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  Speaker 1: of the world care? Well? Luckily? Well, let nas the
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  Speaker 1: second part first, that you know lucky. I have been
• 10:13
  Speaker 1: down playing the denotion of compasion. I mean, if you
• 10:16
  Speaker 1: look at em and we've been in a bear market
• 10:19
  Speaker 1: for e M for for really much of this year,
• 10:23
  Speaker 1: and so you know, I shy away from atasion. I
• 10:26
  Speaker 1: think you know, we have rising US interest rates, we
• 10:28
  Speaker 1: have rising global tensions, we have economic ris from China.
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  Speaker 1: There's all very negative em. So my what I've been
• 10:34
  Speaker 1: telling clients is that well, within this bears e M backdrop,
• 10:38
  Speaker 1: we've got five currencies that are have idiosynocratic risks. That
• 10:42
  Speaker 1: are underperforming. That would be Turkish Layer, Argentine Pasto, Brazilian Real,
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  Speaker 1: Russian Rouble, South Africana Ran. So if you hold any
• 10:48
  Speaker 1: five of those currencies, and yes, that would be very concerned.
• 10:50
  Speaker 1: That's the bad news. The good news is if you
• 10:52
  Speaker 1: look at your wonderful w c RS page, you see
• 10:54
  Speaker 1: here to date we actually have the Colombian paste to
• 10:56
  Speaker 1: in the mixing pay up here to date Malaitian ring
• 10:59
  Speaker 1: get only down three proven sold down when so there's
• 11:03
  Speaker 1: definitely divergences within e M and that to me sort
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  Speaker 1: of speaks less of the sort of contagion and more
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  Speaker 1: sort of divergences within a bear market. Do you believe
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  Speaker 1: that there are going to be any surprises from European
• 11:16
  Speaker 1: banks that hold large amounts of Turkish debt? Well, we
• 11:20
  Speaker 1: know already from ECB that there are several European banks
• 11:25
  Speaker 1: that have exposed to Turkey. But uh, you know, if
• 11:27
  Speaker 1: we're talked about systemic risk, I don't think it's big enough,
• 11:31
  Speaker 1: big enough that big of a concern. Strongly they'll be
• 11:35
  Speaker 1: against either scar risks to certain corporates, certain banks, but
• 11:38
  Speaker 1: in terms of a widespread systemic um sorry or two
• 11:44
  Speaker 1: seven eight type crisis. I really would downplay that. I
• 11:47
  Speaker 1: don't think we're as leveraged as we were back in
• 11:49
  Speaker 1: those days. The fundamentals in many of these countries are better.
• 11:53
  Speaker 1: You know, of course I always hesitate to say this
• 11:55
  Speaker 1: time is different, but uh, you know, I'm going to
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  Speaker 1: kind of go on a limb and and and say
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  Speaker 1: and downplay the systemic risk. Well, just to be Debbie Downer,
• 12:03
  Speaker 1: what would you have to see in order to change
• 12:05
  Speaker 1: your view that perhaps this does have more potential for contagion. Uh, well,
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  Speaker 1: I think we have to see, uh, some greater knock
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  Speaker 1: on effects. I think the global growth and in that respect,
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  Speaker 1: Turkeys is no China. Uh, It's one of the larger
• 12:19
  Speaker 1: EM countries, but it's it's it's by no means a heavyweight. Uh.
• 12:23
  Speaker 1: We have uh several other EM current countries that are
• 12:26
  Speaker 1: much more important to the sort of the global supply chain.
• 12:29
  Speaker 1: You know. I think the one sort of big unknown
• 12:32
  Speaker 1: as sal political risk. I mean, in that respect, Turkeys
• 12:37
  Speaker 1: certainly punches above its weight. Um, but you know, again
• 12:40
  Speaker 1: it's you know, I think the banking systems in the
• 12:44
  Speaker 1: developed world are much stronger now after crisis. Again, you know,
• 12:47
  Speaker 1: we've been through a multi year period of de leveraging. Again,
• 12:52
  Speaker 1: that's not to say they're not gonna be individual victims
• 12:54
  Speaker 1: and individual casualties. But again I'm I'm at this point
• 12:57
  Speaker 1: downplaying the systemic risks, al right, down the risks. What
• 13:01
  Speaker 1: if there is some political repercussions in Turkey because of
• 13:06
  Speaker 1: this in terms of its relations with the West, or
• 13:12
  Speaker 1: were relations internally with the government of of President Urdwan
• 13:18
  Speaker 1: because of increased inflation, or because of the inability of
• 13:23
  Speaker 1: the country in order to import its necessary fuel obligations. Well,
• 13:28
  Speaker 1: I will say this, Um, you know, in some ways
• 13:31
  Speaker 1: urd One is lucky this happen after selection, because obviously
• 13:34
  Speaker 1: there's gonna be a terrible pain. I went back and
• 13:37
  Speaker 1: look back at the two major crisis Turkeys. Turkey that
• 13:39
  Speaker 1: suffered in recent years. We had a seventy percent evaluation
• 13:45
  Speaker 1: that year. The economy contracted five back in two thousand one. Uh.
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  Speaker 1: The litteral loss I think, uh seventy percent of its
• 13:53
  Speaker 1: value UH and the economic contract about six per So
• 13:57
  Speaker 1: at the very least, I think that the risk of
• 13:59
  Speaker 1: a hard land are there. The way things are going,
• 14:02
  Speaker 1: we're going to the brink. We're gonna have hard landing. Whoever,
• 14:05
  Speaker 1: recession in Turkey, spiky inflation, corporate default um and probably
• 14:12
  Speaker 1: some banking failures. Yes, that's very bad for Urwan, but
• 14:15
  Speaker 1: he's lucky. He just got releacted, so he's he's safe
• 14:17
  Speaker 1: the next four or five years. So and one of
• 14:19
  Speaker 1: the things, we get your crisis, you might as well
• 14:20
  Speaker 1: get it early in your term. Well, he certainly has
• 14:23
  Speaker 1: a crisis on his hands, but he's got plenty of
• 14:25
  Speaker 1: play of runway to go there. Dr Winton, thank you
• 14:28
  Speaker 1: so much for being with us. It's always a pleasure
• 14:30
  Speaker 1: having new Dr Winton is Global Head of Emerging Markets
• 14:33
  Speaker 1: f X for Brown Brothers Harriman in New York City.
• 14:51
  Speaker 1: Another day, another announcement of new tariffs. It is hard
• 14:55
  Speaker 1: to keep track of which country and which as a
• 14:58
  Speaker 1: class commodity is getting hit. Arlen Siderman is going to
• 15:01
  Speaker 1: help us understand where we need to be focused right
• 15:03
  Speaker 1: now when it comes to the commodity market. Arlan is
• 15:06
  Speaker 1: Chief Commodities Economistic I N T l f C S Stone,
• 15:11
  Speaker 1: or rather I N T l F C Stone, based
• 15:14
  Speaker 1: in Kansas City, Missouri. Thank you so much for being
• 15:17
  Speaker 1: with us, so Arlena, and just we do hear about
• 15:19
  Speaker 1: President Trump? Doubling tariffs and Turkish steel and aluminum Russian sanctions. Obviously,
• 15:24
  Speaker 1: we have the escalating tariff off with China and European Union,
• 15:28
  Speaker 1: although that's cooled a little bit. Which set of tariffs
• 15:31
  Speaker 1: so far have had the greatest impact on commodity prices
• 15:36
  Speaker 1: from your view, Well, certainly the trade war with China
• 15:40
  Speaker 1: has had the biggest impact. China is the largest importer
• 15:43
  Speaker 1: of commodities overall, and they tend to set the tone
• 15:46
  Speaker 1: for the world, and to to lose that market is
• 15:49
  Speaker 1: certainly has the biggest impact. Well, they might lose a
• 15:53
  Speaker 1: certain market, but what about the market for energy that's
• 15:57
  Speaker 1: made by the United States. Hasn't that changed things? Well,
• 16:01
  Speaker 1: it certainly has, and we saw as Bloomberg reported on
• 16:04
  Speaker 1: Friday that China lifting the tariff, the retaliatory tariff on
• 16:08
  Speaker 1: crude oil, I think really shows a significance that the
• 16:11
  Speaker 1: United States plays now in the global energy markets. And
• 16:15
  Speaker 1: I think it also shows a crack in the armor
• 16:18
  Speaker 1: armor of China. Their economy cannot afford to see inflation
• 16:22
  Speaker 1: pressures right now. Even some of the social media within China,
• 16:27
  Speaker 1: UH seeing some resistance starting to come up from the
• 16:30
  Speaker 1: general public. UH comments that the soybean cargo from the
• 16:34
  Speaker 1: United States that was holed up in their port for
• 16:36
  Speaker 1: about five weeks trying to get unloaded. That all this
• 16:40
  Speaker 1: is going to end up costing the consumers. So there
• 16:43
  Speaker 1: are some signs of the cracks in the armor there
• 16:45
  Speaker 1: in China. I don't expect an end anytime soon. Um,
• 16:48
  Speaker 1: but it's still the big player. The big question, Arlen,
• 16:52
  Speaker 1: is at what point will all of these tariffs significantly
• 16:56
  Speaker 1: slow global growth? And I'm particularly talking about the tip
• 17:01
  Speaker 1: for Chad that we're seeing between the US and China.
• 17:03
  Speaker 1: What's the answer. Well, I think we're seeing it already
• 17:06
  Speaker 1: in China and the US numbers are still strong. Uh.
• 17:10
  Speaker 1: China United States are certainly big players in the world market. UH.
• 17:14
  Speaker 1: China has an influence on Europe as well. And so
• 17:18
  Speaker 1: I think as we go forward and we look at
• 17:20
  Speaker 1: the fourth quarter, we probably start seeing some numbers. I
• 17:23
  Speaker 1: think we probably, in my opinion, we get a trade deal,
• 17:26
  Speaker 1: probably negotiated somewhere in the November December time period. By
• 17:31
  Speaker 1: that time we'd probably be starting to see some effects
• 17:34
  Speaker 1: on global economic growth. But if we get a deal
• 17:37
  Speaker 1: in that time period, then I think some of the
• 17:39
  Speaker 1: other trading partners that we have spats, we start to
• 17:42
  Speaker 1: fall in place as well, and we start picking some
• 17:44
  Speaker 1: momentum backed up again in the first second quarter of
• 17:47
  Speaker 1: next year. Arlen, what can you tell us about the
• 17:50
  Speaker 1: soft commodity complex, specifically when it comes to soybeans and
• 17:54
  Speaker 1: wheat and corn and how their prices have just tumbled
• 17:58
  Speaker 1: I mean soybeans nearly twent in just the last sixty days. Oh,
• 18:04
  Speaker 1: it's a really amazing since we're setting record exports this summer,
• 18:08
  Speaker 1: for this time of year now, the fall is our
• 18:10
  Speaker 1: big exports season. Of course, China is a big part
• 18:13
  Speaker 1: of that, but with China being the only customer really
• 18:17
  Speaker 1: for Brazil, Brazil has a captive customer. Their prices are
• 18:21
  Speaker 1: running about above US prices, So the rest of the
• 18:26
  Speaker 1: world's coming to United States for soybeans and will likely
• 18:29
  Speaker 1: continue to do that as supplies become tight in Brazil,
• 18:33
  Speaker 1: this falling right into probably late January February when they
• 18:37
  Speaker 1: have new crop supplies available. Uh. Corn and wheat are
• 18:41
  Speaker 1: really little affected by this, so they're really caught up
• 18:44
  Speaker 1: in the current. And if you look at the numbers
• 18:46
  Speaker 1: from USDA on Friday, they were really pretty positive even
• 18:50
  Speaker 1: though it had a bigger corn crop than expected. We're
• 18:52
  Speaker 1: still seeing domestic stocks decline year on year and just
• 18:56
  Speaker 1: in time supplies and global stocks are falling at a
• 18:59
  Speaker 1: fast space. When you look at the major exporters of
• 19:02
  Speaker 1: wheat in the world, supplies are near thirty year lows
• 19:06
  Speaker 1: at around fourteen percent stocks to use the ratio, but
• 19:09
  Speaker 1: corn and wheat were pulled under by the tsunami of selling,
• 19:13
  Speaker 1: and soybeans did some chart damage. I think at some
• 19:16
  Speaker 1: point the trade starts to see the disparity between them
• 19:20
  Speaker 1: and starts a trade appropriately. Marlyn, is there a commodity
• 19:24
  Speaker 1: that you think has really big upside a really big
• 19:26
  Speaker 1: downside going forward? The people perhaps aren't pricing in I
• 19:30
  Speaker 1: think a long term the big story is in corn,
• 19:33
  Speaker 1: and I think corn and the energy has come out
• 19:36
  Speaker 1: the winter. In any trade agreement we've got have with China,
• 19:40
  Speaker 1: UH coming maybe at the end of the year or
• 19:42
  Speaker 1: early next year. Corn supplies globally are just in time
• 19:47
  Speaker 1: supply heavily dependent upon US production year in and year out,
• 19:51
  Speaker 1: and and UH we're continually falling short. Production is falling
• 19:55
  Speaker 1: short of demand. Then if you throw China in there
• 19:58
  Speaker 1: with their move towards ethanol, blending mandate by they're rapidly
• 20:04
  Speaker 1: building ethanol production facilities there. They do not have enough
• 20:08
  Speaker 1: production to meet that demand. They'd like to clear up
• 20:11
  Speaker 1: their air ahead of hosting the next Olympics. And uh,
• 20:16
  Speaker 1: they've got some real shortages of corn. They're rapidly moving
• 20:19
  Speaker 1: through their reserve supplies and they need to get this
• 20:22
  Speaker 1: trade deal done before they need to start importing corn.
• 20:25
  Speaker 1: And I think corn is probably the long term winner
• 20:28
  Speaker 1: once we get a trade deal with China. Thanks very
• 20:31
  Speaker 1: much for being with us. Arlen Superman is the chief
• 20:34
  Speaker 1: Commodities economist for International fc Stone talking about corn. The
• 20:54
  Speaker 1: Kingdom of Saudi Arabia's public Investment Fund had approached to
• 20:58
  Speaker 1: Elon Musk going back almost two years about taking Tesla private.
• 21:03
  Speaker 1: It's according to a blog post by Elon Musk, the
• 21:06
  Speaker 1: founder and the president and chief executive of Tesla, also
• 21:11
  Speaker 1: happens to own nearly of Tesla shares. Here to tell
• 21:15
  Speaker 1: us more about this potential investment is Matthew Martin, our
• 21:19
  Speaker 1: Mid East finance reporter for Bloomberg. He's based in Dubai,
• 21:23
  Speaker 1: but he joins us from London today. Matthew, thank you
• 21:27
  Speaker 1: very much for being with us. What can you tell
• 21:28
  Speaker 1: us about the interest that the Saudi Arabian Investment Fund
• 21:33
  Speaker 1: has has made in Tesla? Well, thanks for having me. UM. Look,
• 21:37
  Speaker 1: I think the Public Investment Fund really embarked on a
• 21:42
  Speaker 1: very strategic shift about two years ago. It used to
• 21:46
  Speaker 1: be very domestically focused and investing within Saudi Arabia, and
• 21:50
  Speaker 1: then under the new rulers in Saudia, Saudi Arabia that
• 21:54
  Speaker 1: the the onus came on the fund to start looking
• 21:57
  Speaker 1: at investing outside um and in start trying to diversify
• 22:01
  Speaker 1: the country away from the reliance on oil and obviously,
• 22:04
  Speaker 1: you know, one of the biggest oil exporters in the world,
• 22:08
  Speaker 1: so they're looking at ways that they can diversify around that.
• 22:10
  Speaker 1: And I think, you know, as we've seen from what
• 22:13
  Speaker 1: Elon Musk has said, as long ago as two years ago,
• 22:16
  Speaker 1: they had identified Tesla as being part of that strategy.
• 22:20
  Speaker 1: And I think we've seen the Saudi Is now being
• 22:22
  Speaker 1: very interested in the electric vehicle space as as a
• 22:26
  Speaker 1: way of hedging against the country's obviously huge oil exposure.
• 22:30
  Speaker 1: UM So I think you know we're going to see
• 22:31
  Speaker 1: the Saudis being very keen on seeing this transaction go
• 22:35
  Speaker 1: through UH and and and very keen on playing a
• 22:38
  Speaker 1: big role in Tesla's future. So, Matthew, you said it's
• 22:42
  Speaker 1: the Saudi Arabia would be very keen on seeing this
• 22:46
  Speaker 1: transaction go through. Are you talking about Tesla going private?
• 22:50
  Speaker 1: Is this transaction? And if so, why are Saudi Arabia
• 22:53
  Speaker 1: only committing to a five percent stake of Tesla when
• 22:56
  Speaker 1: there's a lot more up for graps. Well, so, yeah,
• 22:59
  Speaker 1: I think they what we've seen them do is they've
• 23:01
  Speaker 1: quietly built up this steak of five percent um just
• 23:07
  Speaker 1: or just under five percent to avoid having to disclose
• 23:11
  Speaker 1: what they've been doing, so that they've quietly built that
• 23:13
  Speaker 1: up in the market in the background while they've obviously
• 23:16
  Speaker 1: been having these conversations with Elon Musk. Um And now
• 23:19
  Speaker 1: I think now that the potential is there for a
• 23:22
  Speaker 1: deal to take Tesla um off the public markets. Um,
• 23:26
  Speaker 1: the p i F is very keen to be part
• 23:28
  Speaker 1: of that. And you know, I think that the question
• 23:31
  Speaker 1: now is going to be how significant um an amount,
• 23:35
  Speaker 1: how big a check can the p i F right
• 23:37
  Speaker 1: to support Elon Musk's plan of taking Tesla private? You know,
• 23:42
  Speaker 1: clearly with the sort of patient sovereign capital that the
• 23:47
  Speaker 1: p I f has behind it the much that then
• 23:50
  Speaker 1: they're going to be interested in the sort of short
• 23:52
  Speaker 1: term volatility that we've obviously seen in Tesla stock, and
• 23:57
  Speaker 1: I'm making a much longer term bet on the future
• 23:59
  Speaker 1: of electric vehicles, right. I guess that, Matthew. There has
• 24:03
  Speaker 1: been a lot of skepticism about how serious Saudi Arabia's
• 24:06
  Speaker 1: Sovereign Wealth Fund can be. If soft Bank, which is
• 24:09
  Speaker 1: partnering with for a lot of its assets to invest,
• 24:12
  Speaker 1: has basically said they're not interested in Tesla, and when
• 24:14
  Speaker 1: you have a lot of mainstream, large producers of cars
• 24:19
  Speaker 1: getting into the electric car business, in other words, they're
• 24:21
  Speaker 1: big competitors for Tesla, and they actually have shown that
• 24:24
  Speaker 1: they can produce the cars that they promised to make.
• 24:27
  Speaker 1: Do you have a sense of sort of given the
• 24:30
  Speaker 1: fact that soft Bank is not interested, how serious Saudi
• 24:32
  Speaker 1: arabia Sovereign Wealth Fund could really be. The impression that
• 24:37
  Speaker 1: we've got speaking from sources close to the Saudi Fund
• 24:41
  Speaker 1: is that they are very serious about this transaction. Um
• 24:45
  Speaker 1: and uh and yeah, and they do see this as
• 24:48
  Speaker 1: part of building that strategic portfolio, hedging their oil exposure.
• 24:53
  Speaker 1: I think in terms of the relation between what the
• 24:55
  Speaker 1: Saudis do themselves through p IF and what they also
• 24:58
  Speaker 1: do through the very big exposure they have to the
• 25:01
  Speaker 1: soft Bank Vision Fund UM. I mean, look, I think
• 25:04
  Speaker 1: you know, clearly the two of them cooperate a lot
• 25:06
  Speaker 1: in some ways UM, and I think this is one
• 25:09
  Speaker 1: of those instances where their views are probably going to differ.
• 25:13
  Speaker 1: And I think Soft Bank and the Vision Fund thinks
• 25:16
  Speaker 1: that it has to some extent made its bets on
• 25:19
  Speaker 1: on electrification UM. But the p I f is UH
• 25:24
  Speaker 1: is keen to go further on that and and do
• 25:27
  Speaker 1: some more. And you know, I think I've had this
• 25:29
  Speaker 1: discussions with other people as well about you know, obviously
• 25:32
  Speaker 1: that there is a question of you know, why not
• 25:34
  Speaker 1: get exposure to another car manufacturer which is also UM.
• 25:39
  Speaker 1: Other car manufacturers obviously also exploring UM creating electric vehicles UM.
• 25:44
  Speaker 1: And sure that opportunity is there. But I think if
• 25:47
  Speaker 1: you look at the kind of the ambition of the
• 25:49
  Speaker 1: Kingdom around the new Crown Prince Mohammad beIN Salman, the
• 25:54
  Speaker 1: way he talks about the sorts of investments they want
• 25:56
  Speaker 1: to do, is they want to be you know, this
• 25:57
  Speaker 1: is a thirty two year old UM, a guy who's
• 26:01
  Speaker 1: you know, ultimately directing the fund and its investments. Um,
• 26:05
  Speaker 1: and he wants to he wants to take very big
• 26:07
  Speaker 1: and aggressive and headline grabbing bets, and so you know,
• 26:11
  Speaker 1: putting a big steak into something like Tesla um fits
• 26:15
  Speaker 1: into that character profile, probably a lot more than than
• 26:19
  Speaker 1: putting some money into an established carmaker that also has
• 26:22
  Speaker 1: a sideline in electric vehicles. Matthew, just quickly give you
• 26:26
  Speaker 1: twenty seconds. Is there any evidence to support that previous
• 26:30
  Speaker 1: investments that are similar to this in nature by the
• 26:33
  Speaker 1: Investment Fund have been successful? Very early to say the
• 26:38
  Speaker 1: strategy is um two years old. UM so um. You know,
• 26:43
  Speaker 1: I think we've still got to wait a little while
• 26:45
  Speaker 1: before we see whether they can ride this out. But
• 26:49
  Speaker 1: clearly the appetite for risk is very very high if
• 26:53
  Speaker 1: you look at also taking stakes in companies like Uber
• 26:57
  Speaker 1: um uh you know, and Tesla. You know, these a
• 27:00
  Speaker 1: companies which are not big revenue generators yet, but have
• 27:03
  Speaker 1: that promised to be in the future. Right, Matthew Martin,
• 27:05
  Speaker 1: thank you so much for being with us. Matthew Martin
• 27:08
  Speaker 1: is mintist finance reporter for Bloomberg News. Thanks for listening
• 27:15
  Speaker 1: to the Bloomberg P and L podcast. You can subscribe
• 27:17
  Speaker 1: and listen to interviews at Apple Podcasts, SoundCloud, or whatever
• 27:21
  Speaker 1: podcast platform you prefer. I'm pim Fox. I'm on Twitter
• 27:25
  Speaker 1: at pim Fox. I'm on Twitter at Lisa abramowits one
• 27:29
  Speaker 1: before the podcast. You can always catch us worldwide on
• 27:32
  Speaker 1: Bloomberg Radio