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Market Will Live And Die On China Trade Deal: Colas · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul Sweene. You,
0:05
Speaker 1: along with my co host Lisa Brahma wits each day
0:07
Speaker 1: we bring you the most noteworthy and useful interviews for
0:10
Speaker 1: you and your money. Whether at the grocery store or
0:12
Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
0:15
Speaker 1: podcast or wherever you listen to podcasts, as well as
0:17
Speaker 1: at Bloomberg dot com. Let's welcome to Jenny Leonard. Jenny's
0:23
Speaker 1: a Bloomberg trade reporter UH and Nicholas nicka's co founder
0:27
Speaker 1: Data Trek Research LLC. Uh and Nick is also a
0:30
Speaker 1: Bloomberg Opinion calumnist. Jenny just wanted to get your thoughts.
0:33
Speaker 1: I know President Trump just now made some comments about trade, um,
0:37
Speaker 1: you know, suggesting that perhaps this September meeting may not happen.
0:41
Speaker 1: What is your sense of kind of the next couple
0:43
Speaker 1: of steps here between the US and China on trade. Yeah. Look,
0:48
Speaker 1: that he said that the September meeting might be off
0:51
Speaker 1: is actually one of the things that I noted in
0:53
Speaker 1: my notebook as news because we've heard and when he
0:58
Speaker 1: escalated the tariffs last week up until now the September
1:02
Speaker 1: meeting is on. We had you know, Peter Navarro, Larry Cudlow,
1:05
Speaker 1: everyone reinforced that narrative saying, the Chinese are still coming here.
1:09
Speaker 1: You know, we are doing what we're doing, but we're
1:11
Speaker 1: we still want to go back to the table and
1:13
Speaker 1: we're hoping that China is going to make the agg
1:15
Speaker 1: purchases that promised. So the fact that the President now said, well,
1:19
Speaker 1: you know, if we don't have that meeting, um, then
1:22
Speaker 1: we're still fine, that's news. At the same time, I
1:25
Speaker 1: would say the president always is a good cop bad
1:27
Speaker 1: cup in basically the same sentence, So you know, the
1:30
Speaker 1: meeting might still be on, and he just wants to
1:33
Speaker 1: basically play it both ways. So um yeah, Jenny, Jenny,
1:37
Speaker 1: do you have a sense of whether Trump's advisors are
1:41
Speaker 1: weighing in here on the moves that he makes when
1:43
Speaker 1: it comes to trade or is this a complete unilateral
1:45
Speaker 1: kind of negotiation and uh tactic. That's a good question.
1:50
Speaker 1: I think it always depends. It's a case by case matter. Uh.
1:54
Speaker 1: You know, for example, when you look at the currency
1:57
Speaker 1: manipula manipulator label, Uh, there was there are meetings about this,
2:02
Speaker 1: you know, there were meetings about currency intervention and We've
2:05
Speaker 1: heard different narratives coming out of the White House from
2:08
Speaker 1: Trump and his advisor Larry Cudlow, And you know, now
2:11
Speaker 1: we have Trump saying no, he doesn't want to intervene.
2:14
Speaker 1: We have you know, Larry Cudlow and uh Stephen manutrition
2:18
Speaker 1: also meeting with tex c Eos trying to kind of
2:21
Speaker 1: uh find a path forward for the WAWI licenses, and
2:24
Speaker 1: that again was overruled by Trump, which he just um
2:27
Speaker 1: confirmed the story that we wrote last night, saying that
2:31
Speaker 1: there won't be any licenses coming in the near future
2:34
Speaker 1: because China is holding off on a purchases. So you know,
2:37
Speaker 1: he definitely appreciates a vivid debate um in front of him,
2:42
Speaker 1: But then it's always up to him. And we hear
2:45
Speaker 1: this from every single person we talked in the administration.
2:48
Speaker 1: It's always up to the president. Um. So advice is
2:51
Speaker 1: is is you know, appreciated but not necessarily followed. So, Nick,
2:57
Speaker 1: I just want to get your thoughts here. I mean,
2:58
Speaker 1: how do you it was clear just if you just
3:00
Speaker 1: look at the trade Nicolas co founder of Data check Research,
3:04
Speaker 1: which I ended unsed before. Yeah, anyway, so, um, the
3:09
Speaker 1: so the sense Nick, is just kind of how you
3:12
Speaker 1: think the markets we just saw this week from trading
3:14
Speaker 1: up and down, up and down each day, trade is
3:16
Speaker 1: really remains at the forefront of the market. How are
3:19
Speaker 1: you thinking that trade is going to play into the
3:21
Speaker 1: market going forward, because it doesn't appear like we're gonna
3:23
Speaker 1: get any near term resolution. No. I agree with that,
3:26
Speaker 1: and I would say that, you know, we're seeing a
3:28
Speaker 1: pretty typical pattern for the year in terms of volatility,
3:31
Speaker 1: in terms of narratives. So in the beginning of the year,
3:33
Speaker 1: we had the Fed announcing they changed their minds on rates,
3:36
Speaker 1: culminating in the July thirty one rate cut. That story
3:39
Speaker 1: is played. We're done with the rate cut story in
3:42
Speaker 1: terms of supporting stocks, and now we're going to live
3:44
Speaker 1: and die based on trade negotiations because the other part
3:48
Speaker 1: of the equation with the discount rate for stock earnings
3:51
Speaker 1: is kind of off the table. So this is the
3:53
Speaker 1: one and only issue now. So I'm trying to figure
3:55
Speaker 1: out how much of the trade tensions have already been
3:58
Speaker 1: baked into markets. Do you think that any sort of
4:01
Speaker 1: complete breakdown and lack of a deal is already in
4:04
Speaker 1: the price of stocks. I think that the majority of
4:07
Speaker 1: it is. We did a survey of our clients just
4:09
Speaker 1: last week and asked them when they thought a trade
4:11
Speaker 1: deal would happen, and the majority said not until after
4:14
Speaker 1: after the elections. And these are all professional investors, So
4:17
Speaker 1: I would say that that expectation is largely baked in.
4:20
Speaker 1: What's not baked in is what impact that has on
4:22
Speaker 1: global growth in two thousand twenty one, impact that has
4:25
Speaker 1: on earnings in two thousand twenty and to what degree
4:28
Speaker 1: it further endangers particularly Europe in terms of over session. So, Jenny,
4:32
Speaker 1: you want to bring you back and get your sense
4:34
Speaker 1: of as we think about trade here. I know you
4:36
Speaker 1: follow this very closely. Um Dan in d C. Is
4:40
Speaker 1: this is a consensus growing that we won't get a
4:43
Speaker 1: trade um deal probably after the election. If you listen
4:49
Speaker 1: to the president whose advisors in the past couple weeks
4:53
Speaker 1: and days, it seems like it because he is really
4:57
Speaker 1: upset about the fact that, you know, it seems like
5:00
Speaker 1: and I was trying to wait him out and waiting
5:02
Speaker 1: for a democratic president to come in and what he says,
5:05
Speaker 1: you know, get a get an easier pass on on
5:08
Speaker 1: a trade deal. And the president does have other tools
5:12
Speaker 1: in his arsenal that he hasn't used yet. So you know,
5:14
Speaker 1: if the tariffs go forward on September one, which he
5:18
Speaker 1: said will be uh ten percent on three billion, which
5:21
Speaker 1: is basically the remaining imports from China, he could still
5:24
Speaker 1: up that tear of rate from ten per cent to
5:28
Speaker 1: or even higher, you know. And there's other um tools
5:32
Speaker 1: that the White House has held off on uh previously
5:37
Speaker 1: because you know, they assess their options and said this
5:40
Speaker 1: is not the right time to do this. But those
5:42
Speaker 1: advisors say could be back on the table. And that's
5:45
Speaker 1: you know, something like sanctions on Chinese surveillance companies that
5:49
Speaker 1: we've written about, you know, months ago, and that we're
5:52
Speaker 1: put on hold because it looked better uh in in
5:55
Speaker 1: the trade talks, and now it looks worse. So you know,
5:57
Speaker 1: those could easily be back on the table. Jenny Leonard,
6:00
Speaker 1: We're gonna let you get back to it, and we
6:02
Speaker 1: really appreciate spending the time. We know you're always busy
6:05
Speaker 1: trying to cover the the progression of these trade negotiations.
6:09
Speaker 1: Jenny Leonard is a Bloomberg trade reporter coming to us
6:12
Speaker 1: from Washington. D C. Nicolas still with us, Nick, I
6:14
Speaker 1: want to get your sense of what the best trades
6:17
Speaker 1: are given this protracted trade war that could potentially deepen
6:21
Speaker 1: even further. What are the best assets to own right now? Okay,
6:25
Speaker 1: so thinking about volatility now for the rest of the year,
6:27
Speaker 1: So let's just talk about what's going to happen for
6:29
Speaker 1: the rest of two thousand nineteen. It seems pretty clear
6:31
Speaker 1: that you were going in for a pretty choppy period
6:33
Speaker 1: for stocks. Bonds are not necessarily a great trade because
6:36
Speaker 1: they've run so far, so fast and so quickly. So unfortunately,
6:40
Speaker 1: you're not left with a lot of great options. Cash
6:42
Speaker 1: is one option, reducing risk is one option. Gold has
6:45
Speaker 1: been working for a whole variety of reasons and probably
6:47
Speaker 1: should continue to do so because of negative rates in Europe.
6:51
Speaker 1: But there is just not a great selection of choice
6:54
Speaker 1: aside from just reducing risk, because as we saw today,
6:57
Speaker 1: as we've seen this week, you know that the through
6:59
Speaker 1: the whole the market story has flipped and is now
7:02
Speaker 1: one purely about what's going to happen to the global
7:04
Speaker 1: economy in the face of trade wars. So, Nick, even
7:07
Speaker 1: if you want to get a little bit defensive, and
7:08
Speaker 1: in the equity market, some of those classical defensive sectors,
7:12
Speaker 1: you know, they kind of bringing a valuation risk that
7:13
Speaker 1: you don't typically have historically when when you transition into
7:16
Speaker 1: those names, how do you kind of think about the
7:18
Speaker 1: defensive sectors, whether it's utilities or real estate. Yeah, that
7:21
Speaker 1: is exactly the right point. You know, the classic defensive
7:24
Speaker 1: players are already extremely rich on a p basis and
7:27
Speaker 1: even on a yield basis in some cases. And that's
7:29
Speaker 1: why it's hard to recommend any of them. I think,
7:31
Speaker 1: if you have to put a finger on one, if
7:32
Speaker 1: you really many defensive utilities of revenues are in the
7:35
Speaker 1: US at least as no international exposure, and you get
7:38
Speaker 1: a yield pick up. But aside from that, it's really tough.
7:40
Speaker 1: That's why you know, we're telling clients just d risk,
7:43
Speaker 1: take equity risk off the table. So here's the reason
7:47
Speaker 1: why I struggle with that. You've got all these companies
7:50
Speaker 1: that have been buying back their shares and accelerating their
7:52
Speaker 1: purchases when the market does sell off, or at least
7:55
Speaker 1: that's Goldman Sacks analysts have been putting out there. Doesn't
7:59
Speaker 1: that provide I had enough of a technical boost that
8:02
Speaker 1: stocks are going to be fine. Public equities are going
8:04
Speaker 1: to be okay as long as there isn't a material deterioration. Yeah,
8:09
Speaker 1: two points. First look at Q four two eighteen. Buy
8:11
Speaker 1: backs were very heavy last year. Didn't help in Q four.
8:14
Speaker 1: H Point number two is you're right, I mean net income.
8:18
Speaker 1: Corporate net income basically goes into dividends and stock buybacks
8:20
Speaker 1: and nothing else, which means that buybacks are directly quality
8:23
Speaker 1: to stock and earnings. If you see earnings go flat,
8:26
Speaker 1: then buy backs go flat. If you see earnings go
8:28
Speaker 1: down ten percent, then buy backs go down fifteen because
8:30
Speaker 1: stuff to cover the dividend. So if that's the only
8:32
Speaker 1: leverage point, and it makes companies and stocks very beholden
8:36
Speaker 1: to earnings outlooks, and that hasn't been great this year.
8:38
Speaker 1: Down half a percent in the first quarter, probably flatten
8:41
Speaker 1: Q two, Down in Q three, probably flattened Q four.
8:44
Speaker 1: So there's really not of incremental And you know, it's
8:47
Speaker 1: a very good point. But at the end of the day,
8:49
Speaker 1: I still think back the Q four last year and
8:51
Speaker 1: think that down fifteen SMP it didn't really help because
8:54
Speaker 1: when those selling comps as it did in December, there's
8:56
Speaker 1: not enough buy back firepower to support it. Real quick
8:59
Speaker 1: tenset recession coming a little bit less, a little bit
9:04
Speaker 1: less than well, that's actually with consensus. I mean, you've
9:07
Speaker 1: got economists basically saying there's a thirty seven percent chance
9:10
Speaker 1: I believe has a recession the next twelve months. I
9:15
Speaker 1: actually think that might be the number according to a
9:17
Speaker 1: recent Bloomberg survey. My mind, dads, ridiculous things sometimes, Nicholas,
9:21
Speaker 1: thank you so much for being with us. Nicole Is
9:24
Speaker 1: is a co founder of Data Check Research and a
9:26
Speaker 1: Bloomberg Opinion calumnists. It is time where we check in
9:43
Speaker 1: with our Bloomberg opinion columnists and uh in columns. Right
9:48
Speaker 1: now we want to focus on the United Kingdom. We
9:50
Speaker 1: got some data out this morning showing the first or
9:53
Speaker 1: the first downturn, the first decline in growth going back
9:57
Speaker 1: since right after the financial christ Is Terras Raphael joining
10:01
Speaker 1: us now Bloomberg Opinion editor covering European politics and economics.
10:05
Speaker 1: How concerning was this to you? The sort of UK
10:07
Speaker 1: data that came out, Well, I think to some extent
10:10
Speaker 1: this is expected and part of a broader picture that
10:14
Speaker 1: shows that the UK is just underperforming and has been
10:17
Speaker 1: really since the since the Brexit vote, where you know
10:22
Speaker 1: a lot of people have noted, well, the economy hasn't
10:25
Speaker 1: responded as negatively as many predicted before the friendum, but
10:29
Speaker 1: really it's sacrificed a lot of potential growth and now
10:33
Speaker 1: we're actually seeing some some real downside now that will
10:35
Speaker 1: affect Boris Johnson, the Prime Minister who has come to
10:39
Speaker 1: power both threatening to leave without a deal if the
10:41
Speaker 1: European Union doesn't agree to his demands, but also delivering
10:45
Speaker 1: this message of optimism and uh, you know, opportunity for
10:50
Speaker 1: the country once it leaves the EU. And this complicates
10:54
Speaker 1: the picture, and especially as I wrote today in a column,
10:57
Speaker 1: it complicates his uh you know other big challenge, which
11:01
Speaker 1: is keeping the United Kingdom together, which is, you know,
11:03
Speaker 1: four constituent nations including Scotland, Wales and Northern Ireland. So
11:07
Speaker 1: trust that's kind of where one of the go your columns.
11:09
Speaker 1: Fascinating give us the latest on kind of how that
11:12
Speaker 1: might play out, keeping the United Kingdom together. Well, the
11:16
Speaker 1: news this week was that for the first time in
11:18
Speaker 1: a couple of years, uh, the Scottish people are telling
11:21
Speaker 1: posters that they would prefer to leave. They want a second,
11:25
Speaker 1: a second referendum on Scottish independence. There was one inteen
11:30
Speaker 1: Now Scotland would be hurt, uh quite substantially by Brexit,
11:34
Speaker 1: to the tune of at least perhaps eight percent of
11:37
Speaker 1: of Scotland's UM growth uh of Scotland's g n P
11:43
Speaker 1: if there were to be a no deal brexit. So
11:45
Speaker 1: you know, you would expect this to accelerate demands for
11:48
Speaker 1: independence in Scotland. At the same time, you have Northern Ireland,
11:52
Speaker 1: where um, the Good Friday Peace Agreement allows for the
11:55
Speaker 1: possibility of rejoining Ireland, of having a vote to do
11:58
Speaker 1: that if there's a majority for that. We don't see
12:01
Speaker 1: that yet now, but you can imagine a scenario in
12:03
Speaker 1: which the Northern Irish economy is hard hit and that
12:06
Speaker 1: and there begins to be a clamor for uh, you know,
12:10
Speaker 1: for what they call a border pole. I was interested
12:12
Speaker 1: to is that the foot seat was actually not that down.
12:16
Speaker 1: In fact, it pretty much is flat. I'm trying to
12:18
Speaker 1: understand why markets didn't respond more severely to this, uh,
12:22
Speaker 1: this contraction. Well, I think there's been a big question
12:26
Speaker 1: for some time now why markets are so sanguine when
12:29
Speaker 1: you know, the rest of us are looking at the
12:30
Speaker 1: picture and and you know, wanting to to, you know,
12:33
Speaker 1: sort of run for cover because it really does look
12:36
Speaker 1: like we're heading toward a nodal Brexit. I mean one
12:38
Speaker 1: you know possibility that there is a you know, general
12:41
Speaker 1: strength in the UK economy. It has proved a very
12:44
Speaker 1: resilient economy. It's you know, it's a fairly large economy
12:47
Speaker 1: of the world's fifth largest. Um. You know. Also we
12:50
Speaker 1: have a fair bit of um, you know, of of
12:53
Speaker 1: bad news priced in already. UM. But uh, you know,
12:58
Speaker 1: obviously you know, trading is I think quite quite thin
13:01
Speaker 1: in a lot of stocks. So Terre's one of the
13:04
Speaker 1: arguments and support of Brexit is that an independent UK
13:08
Speaker 1: would be able to forge a strong trade deals on
13:11
Speaker 1: its own, particularly with the United States. What are what
13:14
Speaker 1: are those Brexit folks thinking about now, is they look
13:16
Speaker 1: at the US trying to negotiate on and off again
13:19
Speaker 1: with China. Um is that strength in your argument or
13:22
Speaker 1: weaken it? I mean, I think it's been a weak
13:24
Speaker 1: argument from the beginning, for you know, for several reasons. Um,
13:28
Speaker 1: the the the UK is a minnow compared to the
13:31
Speaker 1: U S which is a whale on the on the world.
13:34
Speaker 1: Thank you so much for joining us at Bloomberg. Opinion
13:35
Speaker 1: columnist Terras Raphael guess what treasures are rolling yet again?
13:57
Speaker 1: Right now, tenure treasure yields all right, at the lowest
14:00
Speaker 1: since October twenties sixteen, investors taking a look at the
14:03
Speaker 1: escalating trade rhetoric between the US and China, taking a
14:06
Speaker 1: look at the disappointing pp I the producer product prices UH,
14:11
Speaker 1: the producer Price index not coming in as high as expected,
14:16
Speaker 1: and saying that that's gonna cut rates. The question is
14:18
Speaker 1: how much lower can yields really go? Joining us down
14:21
Speaker 1: to discuss is Scott Kimball. He is a portfolio manager
14:24
Speaker 1: of the Bibo tc H Core plus von Fund. He
14:27
Speaker 1: is a portfolio manager focused on fix income for BEMO
14:30
Speaker 1: Global Asset Management with two d and two billion dollars
14:33
Speaker 1: under management. So, Scott, are you bullish on treasuries here?
14:37
Speaker 1: Even after the incredible rally we've seen now? I think
14:40
Speaker 1: what we found is that investors are are rethinking the
14:43
Speaker 1: view on the treasury position. Uh. We've sort of always
14:46
Speaker 1: operated with the ideas as we got closer to zero
14:49
Speaker 1: that treasuries were just more fully valued. We've seen now
14:52
Speaker 1: with negative rates persisting around the world, that it's really
14:56
Speaker 1: very difficult to make a call on overall portfolio to ration.
15:00
Speaker 1: And we're more staying neutral, not so much out of bullishness,
15:03
Speaker 1: but by the fact that you know, within very negative
15:05
Speaker 1: term premium and negative rates overseas. UH, it's very difficult
15:08
Speaker 1: to make a case against treasuries in this type of
15:11
Speaker 1: a market paradigm that we've entered. So, Scott, you've mentioned that, Um,
15:15
Speaker 1: you think the Fed has mishandled that mid Uh, that correction,
15:20
Speaker 1: that rate cut they just made. What do you mean
15:22
Speaker 1: by that? What do you think they should have done?
15:24
Speaker 1: Our our view going into this was, if you're trying
15:26
Speaker 1: to stimulate stimulate inflation, that their policy had been rather
15:30
Speaker 1: effective so far, and that the tightening cycle was very
15:33
Speaker 1: prolonged and it really allowed the economy to get a
15:35
Speaker 1: lot of traction on the street. Uh. The challenge though,
15:38
Speaker 1: is that then when they reverse course, they used the
15:41
Speaker 1: term mid cycle adjustment. So our our preference was not
15:44
Speaker 1: to cut rates and not punish savers by lowering rates further,
15:47
Speaker 1: but rather to stay the course. But now they use
15:50
Speaker 1: the term mid cycle adjustment, and if that means what
15:52
Speaker 1: we think they think it means, that should have been
15:55
Speaker 1: fifty basis points, not twenty five. Doesn't do anything to
15:58
Speaker 1: change bank activity. It certainly doesn't do anything to stimulate
16:01
Speaker 1: credit markets. It doesn't do anything to benefit the consumer.
16:04
Speaker 1: What all it's done is caused a forward looking path
16:06
Speaker 1: for the FED if you look at it to sort
16:09
Speaker 1: of have this escalator like UH decline back towards one percent,
16:12
Speaker 1: which is not the mid cycle adjustment. That's not the
16:15
Speaker 1: policy they wanted to to put in place, So the
16:17
Speaker 1: market interpretation and reaction was not congruent with what their
16:21
Speaker 1: directive was. Do you think that inflation is dead or
16:23
Speaker 1: do you think that people are underpricing the risk of inflation? UH?
16:27
Speaker 1: Inflation for now, in our opinion, is not going to
16:29
Speaker 1: be too much of a of a challenge. You know,
16:32
Speaker 1: in our our Core plus fund, we've we've exited most
16:34
Speaker 1: of our inflation link positions and the challenge that we're
16:37
Speaker 1: we think it, particularly as it as it relates to
16:38
Speaker 1: the FED, is inflation. Over the long term. We'll have
16:42
Speaker 1: mechanisms and times where it will accelerate. And we do
16:45
Speaker 1: think this expansion in the US, although it's been the
16:47
Speaker 1: most hated one in history, UH is pretty durable. But
16:50
Speaker 1: the challenges the old inflation model doesn't account for things
16:54
Speaker 1: like transparency in pricing. If you think about the power
16:56
Speaker 1: of transparency you have from just a smartphone from a
16:59
Speaker 1: consumer were perspective. Uh, that squeezing retail margins. It's causing
17:04
Speaker 1: a recycling and the labor market away from retail and
17:07
Speaker 1: all of that is very disinflationary. So for this whatever
17:10
Speaker 1: is left in this cycle, we don't see inflation as
17:12
Speaker 1: a problem. So, given where we are with your outlook
17:15
Speaker 1: for the FED and inflation kind of how are you
17:17
Speaker 1: thinking about your allocation of investment grade and high yield
17:21
Speaker 1: and emerging markets? How do you kind of stack them? Certainly,
17:24
Speaker 1: I'll start off by saying an area that we're not
17:26
Speaker 1: focused on right now is emerging markets. Uh, the exposure
17:29
Speaker 1: the global economy is already seeping into the US corporate
17:33
Speaker 1: bond market enough that if you add emerging market debt,
17:36
Speaker 1: the spreads and yields there are not giving you and
17:38
Speaker 1: our our estimation the the the extra compensation you need
17:42
Speaker 1: to include them. High yield we will acknowledge some repricing primarily,
17:46
Speaker 1: and energy has opened up the door. If you've been
17:48
Speaker 1: watching a few bonds, that boy, I'd like to buy
17:51
Speaker 1: that at six, seven or eight percent, but it's been
17:53
Speaker 1: yielding for and now it's repriced. It is a good
17:55
Speaker 1: opportunity to to find some exposure. But on overall, and
17:59
Speaker 1: the way we're posis shooting our fund is a focus
18:01
Speaker 1: on investment grade. The problem is when you talk high
18:04
Speaker 1: yield versus investment grade, people like to talk yield in
18:07
Speaker 1: one and spread in the other. So if we look
18:09
Speaker 1: at spread for both, the accredit spread you're getting for
18:12
Speaker 1: high yield does really isn't really accounting for what could
18:16
Speaker 1: be some upward pressure on on the default rate. Given
18:19
Speaker 1: this backdrop, are you treating more or less than you
18:22
Speaker 1: normally do? Less much too? Probably the sigrin of some
18:26
Speaker 1: of our counterpartiess no, but this is interesting to me
18:28
Speaker 1: because it seems like a lot of people are in
18:30
Speaker 1: the same boat. It's sort of not not much incentive
18:32
Speaker 1: to relation shift your portfolio around. Agree, So interesting enough.
18:36
Speaker 1: If you look at a core plus fund, our our
18:37
Speaker 1: average turnover statistic is about and we tend to take
18:41
Speaker 1: on positions with a twelve to twenty four month kind
18:43
Speaker 1: of an outlook. But even now our turnover is probably
18:47
Speaker 1: lower or probably running closer to and to your point,
18:50
Speaker 1: if you have a bond and you're comfortable with the
18:52
Speaker 1: story and it's giving you a yield premium. If you
18:55
Speaker 1: want to sell it, you have to replace it. And unfortunately,
18:58
Speaker 1: with where credit spreads have gone on, you're looking at
19:01
Speaker 1: a you know one s for the investment grade credit universe.
19:05
Speaker 1: It's it's a pretty expensive time to buy from an
19:07
Speaker 1: all in yield or spread perspective. Right, Scott Campbell, thank
19:10
Speaker 1: you so much for joining us. We appreciate it. Scott's
19:12
Speaker 1: portfolio manager focusing on fixed income for BEMO Global Asset Management.
19:17
Speaker 1: He's based in Miami. He has a tan line for
19:19
Speaker 1: his sunglasses. That's how Miami this guy is. But he
19:22
Speaker 1: joined us here in our blue interactive jealous so he
19:26
Speaker 1: joined to here in a Bluebriken interactive broker studio. We
19:28
Speaker 1: appreciated making the trip up to the Big Apple, but
19:30
Speaker 1: I'm sure he's going to be jetting back to Miami
19:33
Speaker 1: very quickly. Well, I'm looking at some interesting data. The
19:50
Speaker 1: cost of a data breach has risen twelve over the
19:53
Speaker 1: past five years and now costs on average three point
19:56
Speaker 1: nine two million dollars, and that's according to IBM. To
20:00
Speaker 1: dig a little bit deeper into the all issues cybersecurity,
20:03
Speaker 1: we welcome Wendy Whitmore. Wendy is a global partner and
20:06
Speaker 1: director for x Force Threat Intelligence at IBM. She's based
20:10
Speaker 1: in Los Angeles. Lisa and I love that title, Wendy. Wendy,
20:13
Speaker 1: thanks so much for joining us. Um, just give us
20:16
Speaker 1: a sense, you know, kind of what are the biggest
20:18
Speaker 1: risk two organizations right now? Hey, Paul and Lisa. So yeah,
20:24
Speaker 1: you know, having responded to some of the biggest breaches
20:27
Speaker 1: in the world over the past almost twenty years, now, UM,
20:30
Speaker 1: you know, I can tell you one thing is consistent,
20:32
Speaker 1: and that's that if attackers can find a way to
20:35
Speaker 1: make money from stealing data, they will. Um. That becomes
20:38
Speaker 1: problematic today because we're in a data economy and a
20:41
Speaker 1: lot of people aren't familiar with the fact that the
20:44
Speaker 1: dark web actually represents the world's third largest economy coming
20:47
Speaker 1: in and almost six trillion dollars. So what that means
20:50
Speaker 1: is that attackers can leverage that as a forum to
20:53
Speaker 1: share information, to buy data, to sell it. So when
20:56
Speaker 1: we're looking at, you know, which organizations could be attacked,
20:59
Speaker 1: what are the biggest risks? Ultimately, if an organization has
21:03
Speaker 1: data that is of interest that could be monetized in
21:05
Speaker 1: some way, whether it's a financial record or a healthcare record,
21:08
Speaker 1: for example, all of that information becomes very valuable in
21:11
Speaker 1: this type of dark web economy, and a lot of
21:14
Speaker 1: organizations don't necessarily think of that. They look at their organization,
21:18
Speaker 1: you know, as as in their eyes versus how an
21:21
Speaker 1: attack or sees it in terms of kind of being
21:22
Speaker 1: a gold mine to potentially make some money. Paul, I'm
21:25
Speaker 1: going to force you to call me the director of
21:28
Speaker 1: X Force Yield Intelligence, because I think that that that's
21:31
Speaker 1: going to have to be my title. Wendy, you just
21:34
Speaker 1: got back or you're actually you're on site at the
21:37
Speaker 1: black Hat conference in Las Vegas, which is the world's
21:40
Speaker 1: leading information security event. I just picture a whole lot
21:44
Speaker 1: of people who are incredibly paranoid by nature, sitting around
21:47
Speaker 1: and imagining worst case scenarios. What were the most hotly
21:50
Speaker 1: debated topics there. Yeah, I think you've got an accurate
21:54
Speaker 1: picture in your in your head, Lisa, But um, I
21:57
Speaker 1: think kind of first and foremost is just the regular
21:59
Speaker 1: to a landscape. Right, So we're looking at what is
22:02
Speaker 1: going on with these fines that are raging from you know,
22:05
Speaker 1: two million dollars upwards of five billion dollars, and that
22:09
Speaker 1: really going to have a dramatic impact on our industry,
22:12
Speaker 1: but ultimately on the way organizations from the CEO and
22:16
Speaker 1: board levels on down think about investing in cyber security. Right,
22:19
Speaker 1: Will they continue to buy more cyber insurance, will they
22:22
Speaker 1: allocate money for fines? Will they do things like continue
22:26
Speaker 1: to invest more proactively insecurity? UM. I think all of
22:30
Speaker 1: those things will happen. But that's certainly a very hotly
22:32
Speaker 1: debated topic right now. So when the following the Capital
22:36
Speaker 1: One breached, definitely people raising the questions about the cloud
22:39
Speaker 1: and the security of the cloud. I think Capital One
22:41
Speaker 1: at one point was even suggesting, you know, touting that
22:44
Speaker 1: the cloud was more secure, but that may not be
22:46
Speaker 1: the case. How should we think about that? Well, you know,
22:49
Speaker 1: we've got teams of people on site responding these attacks
22:52
Speaker 1: all over the world, and some of them are cloud
22:55
Speaker 1: based and many of them are not. UM. The reality
22:58
Speaker 1: is that whether the data is in the cloud or not,
23:00
Speaker 1: I think the number one thing that companies still struggle
23:02
Speaker 1: with is actually knowing where their most sensitive data is
23:06
Speaker 1: and ensuring that they have adequate controls and protecting that
23:09
Speaker 1: right UM. At this point, specific to the cloud, about
23:12
Speaker 1: forty three percent of attacks are related to misconfigured cloud databases,
23:17
Speaker 1: So that means that you know, access is freely available
23:21
Speaker 1: or there are some loopholes for an organization of an
23:23
Speaker 1: outsider to get into that data. But the reality is
23:26
Speaker 1: the number one thing is if companies can understand where
23:28
Speaker 1: their most secure data, as sensitive data is, they can
23:31
Speaker 1: secure it much more effectively. And at this point most
23:34
Speaker 1: organizations just don't have the visibility needed to answer those
23:37
Speaker 1: questions pretty quickly. What do you which industries are seeing
23:41
Speaker 1: the biggest uptick in cyber attacks? Yeah, great question. I mean,
23:45
Speaker 1: time and again, we always see financial services being attacked. Uh.
23:50
Speaker 1: One of the things that we found this year though,
23:52
Speaker 1: is that transportation actually moved from number five to number two.
23:56
Speaker 1: So when we say that, we're talking about commercial transportation,
23:59
Speaker 1: aviation sector, certainly travel brands as well, and we're seeing
24:04
Speaker 1: a tremendous amount of attacks that are increasing in those
24:07
Speaker 1: and you've certainly seen some seen some fines recently in
24:10
Speaker 1: those sectors as well. So when day to what extent
24:13
Speaker 1: can our data ever really be secure? I mean, I
24:17
Speaker 1: think some people are just saying, you know what, you
24:19
Speaker 1: just can't do everything. How shou we think about that?
24:22
Speaker 1: It's true? I think the reality is that um the
24:25
Speaker 1: need to secure data is not just actually on the
24:28
Speaker 1: company side, it's also on the consumer side as well, right,
24:31
Speaker 1: so there are things that we as consumers can do
24:34
Speaker 1: to actually protect some of our more personal and sensitive data.
24:37
Speaker 1: And um one of those things, for example, would be
24:40
Speaker 1: to make sure that if you're using um, you know,
24:43
Speaker 1: financial banking transactions, which ever institution you're using, that you're
24:48
Speaker 1: using some sort of a two factor authentication or multi
24:50
Speaker 1: factor authentication. And the same thing with your social media sites,
24:54
Speaker 1: with your email accounts, all of those are now pretty
24:58
Speaker 1: simple to manage, even for people who may not be
25:00
Speaker 1: as technical. That's really important. And the next thing I
25:03
Speaker 1: would say would be with password managers, so you can
25:05
Speaker 1: use that so you're not kind of replicating you know, um,
25:09
Speaker 1: I love my dog, for example, as your password for
25:11
Speaker 1: every site that you use and revealed me blending. Uh.
25:17
Speaker 1: You know. I want to go back to the image
25:18
Speaker 1: of a group of paranoid people sitting around and wondering
25:21
Speaker 1: what next could potentially go wrong in a worst case scenario.
25:24
Speaker 1: And I'm wondering, what are most of the people who
25:27
Speaker 1: are work in cybersecurity do, I mean, do they just
25:30
Speaker 1: eliminate their presence is almost entirely from the web. Uh,
25:35
Speaker 1: you know, it's kind of almost the opposite. It really depends.
25:37
Speaker 1: There's certainly a group that's extremely a paranoid that never
25:40
Speaker 1: has a presence. But the reality is for most people,
25:43
Speaker 1: not just cybersecurity professionals, but people around the world really
25:46
Speaker 1: need to kind of highlight their social media presence and
25:49
Speaker 1: their online presence for career advancement. And so the reality
25:53
Speaker 1: is that we have the same concerns everyone else does. Um,
25:56
Speaker 1: we may be a bit more paranoid than than usual,
25:59
Speaker 1: but we're doing things, like I mentioned, so making sure
26:01
Speaker 1: that we're kind of taking the extra steps so that
26:04
Speaker 1: it's a little bit more difficult. Um. The way we
26:06
Speaker 1: communicate that to our clients, um, And it's the same
26:09
Speaker 1: thing personal is all about limiting the impact. So if
26:12
Speaker 1: I can make it an attack or take longer to
26:15
Speaker 1: achieve their goal, which is usually to steal steal data
26:18
Speaker 1: from an organization or to steal it from me personally,
26:21
Speaker 1: and if I can buy more time um along that way,
26:24
Speaker 1: that allows me more time to detect the attack, to
26:26
Speaker 1: defend against it, and then ultimately to limit the impact,
26:30
Speaker 1: which you know personally would be a limit steeling of
26:33
Speaker 1: information but on a business side, limiting the impact of
26:36
Speaker 1: a huge you know, theft, which translates to a tremendous
26:39
Speaker 1: amount of money spent. Thank you so much for being
26:43
Speaker 1: with us. We will always love having you on just
26:46
Speaker 1: so that we can say your title, also because you
26:47
Speaker 1: give us fabulous information. Wendy with More, Global partner and
26:50
Speaker 1: director of the X Force Threat Intelligence at IBM, which
26:55
Speaker 1: is a fabulous again, fabulous side. Thanks for listening to
26:59
Speaker 1: the Bloomberg pan Ol podcast. You can subscribe and listen
27:01
Speaker 1: to interviews at Apple Podcasts or whatever podcast platform you prefer.
27:05
Speaker 1: I'm Paul Sweeney. I'm on Twitter at pt Sweeney. I'm
27:08
Speaker 1: Lisa Abram Woyds. I'm on Twitter at Lisa Abram woits
27:10
Speaker 1: one before the podcast, you can always catch us worldwide.
27:13
Speaker 1: I'm Bloomberg Radio