Latest / Bloomberg Intelligence / Eaton Vance Sees Buying Opportunities in HY, IG Credit

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Eaton Vance Sees Buying Opportunities in HY, IG Credit · 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 A. Bramowitz. Each day
• 0:11
  Speaker 1: we bring you the most important, noteworthy, and useful interviews
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  Speaker 1: for you and your money, whether you're at the grocery
• 0:17
  Speaker 1: store or the trading floor. Find the Bloomberg P M
• 0:20
  Speaker 1: L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com.
• 0:27
  Speaker 1: Time to turn our attention to the world of credit.
• 0:30
  Speaker 1: Henry Peabody is the portfolio manager for Eaton Vans, helping
• 0:33
  Speaker 1: to manage more than four hundred and fifty billion dollars
• 0:37
  Speaker 1: of customer assets. Based in Boston, and he co manages
• 0:41
  Speaker 1: the Eaton Vans Multisector Income Fund. Henry, thank you very
• 0:45
  Speaker 1: much for being with us, and happy New Year to you.
• 0:49
  Speaker 1: Maybe you could tell us start off by speaking about
• 0:51
  Speaker 1: this whole idea of investors holding on to cash because
• 0:55
  Speaker 1: now they can earn something if they keep cash at hand.
• 1:00
  Speaker 1: Is that true? It is, And that's a theme that
• 1:03
  Speaker 1: we've been talking about for the multisector and core plus
• 1:07
  Speaker 1: funds here to Advanced for a while. And um that
• 1:10
  Speaker 1: is this year you've seen a sort of an alternative
• 1:13
  Speaker 1: asset to risk ussets come into play in the form
• 1:15
  Speaker 1: of a two year note north at two percent, So
• 1:18
  Speaker 1: that that that concept of holding ash holding cash is
• 1:21
  Speaker 1: an attractive one, and most assets have actually underperformed cash,
• 1:24
  Speaker 1: whether you're talking commodity, equity, credit, you you pick your
• 1:29
  Speaker 1: you name it, and it's underperformed cash this year. So um,
• 1:32
  Speaker 1: it's probably offers an opportunity to go the other way
• 1:36
  Speaker 1: going into two thousand nineteen at least a little bit. Um.
• 1:39
  Speaker 1: Investment grade and hig yield spreads is selling off fairly
• 1:42
  Speaker 1: dramatically here in the month, and it's a testament to
• 1:45
  Speaker 1: the market tending to you know, under price but overreact
• 1:49
  Speaker 1: to news, certainly when there's a lack of liquidity. So
• 1:52
  Speaker 1: it's these markets that actually get us a little bit excited.
• 1:55
  Speaker 1: So in other words, you're seeing buying opportunities in both
• 1:57
  Speaker 1: high yield and investment grade right now. I think we're
• 1:59
  Speaker 1: star too. And I'm not saying you need to go
• 2:02
  Speaker 1: all in on anything, but this month you just take it.
• 2:05
  Speaker 1: Just eyeball the market in the month of December and
• 2:08
  Speaker 1: you see several high yield names down five, ten, fifteen
• 2:11
  Speaker 1: points um. Liquidity is being pulled from the market. There's
• 2:14
  Speaker 1: a year end um process UM and and the market
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  Speaker 1: tends to overreact. Now, I don't think the market is
• 2:22
  Speaker 1: priced for recession. That is not part of our forecast.
• 2:24
  Speaker 1: But you're starting to see some attractive opportunities arise. And
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  Speaker 1: I think that having a shopping list in spite of
• 2:30
  Speaker 1: how the holiday season being behind us, but having a
• 2:32
  Speaker 1: shopping list in two thousand nineteen early on at least
• 2:35
  Speaker 1: to start to nibble at this market makes a little
• 2:38
  Speaker 1: bit of sense. Okay, But I have to wonder, have
• 2:40
  Speaker 1: you been really active in the past few weeks during
• 2:43
  Speaker 1: the lack of liquidity and some of the tumult and
• 2:46
  Speaker 1: if so, is there more of an opportunity in high
• 2:48
  Speaker 1: yield or investment grade UM. We have not been fairly active. UM.
• 2:52
  Speaker 1: We think it's a it's a fool's errand to get
• 2:55
  Speaker 1: too caught up with price signals that may not be
• 2:59
  Speaker 1: fully act right given the sort of year end lack
• 3:01
  Speaker 1: of liquidity UM for us, I think that right now
• 3:05
  Speaker 1: investment grade is starting to look reasonably attractive given the
• 3:08
  Speaker 1: rate rise UM there UM since uh since really the
• 3:12
  Speaker 1: beginning of last year UM, with rates moving higher with
• 3:15
  Speaker 1: spreads moving wider rather aggressively. All that said, UM, I
• 3:19
  Speaker 1: do think that the opportunity in high yield is starting
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  Speaker 1: to present itself as well. UM. Several markets are looking
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  Speaker 1: attractive to us. We've talked all year really about the
• 3:28
  Speaker 1: non dollar space and emerging markets, and that's been one
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  Speaker 1: that's it's hurt our position this year, but we feel
• 3:33
  Speaker 1: very optimistic about it next year. Now you have domestic
• 3:36
  Speaker 1: credit UM also filling in that gap. So it's it's
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  Speaker 1: really a market that gives multisector managers like us opportunity
• 3:44
  Speaker 1: to take a bite at several markets at the same
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  Speaker 1: time and have a value approach as opposed to focusing
• 3:48
  Speaker 1: on beta. So we're pretty excited and Rean wondering if
• 3:51
  Speaker 1: you could expand on that very thought about non dollar
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  Speaker 1: non US investments, particularly in Mexico, Brazilian, Canada. Yeah, so
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  Speaker 1: we think that the non dollars space UM is a
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  Speaker 1: fairly attractive one one. We we feel that we're getting
• 4:09
  Speaker 1: closer to the end of a FED cycle, and whether
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  Speaker 1: it's one hike or three, the fact of the matter
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  Speaker 1: is we're closer to the end than the beginning. And
• 4:17
  Speaker 1: really Pale has talked for a long time about his
• 4:20
  Speaker 1: desire to unwind the balance sheet, so I don't think
• 4:22
  Speaker 1: it's one and done here. Um. This is something that
• 4:26
  Speaker 1: the president has been aware of. All that said, we're
• 4:28
  Speaker 1: getting closer to the end than the beginning, so that
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  Speaker 1: dollar positioning for us, or the non dollar positioning is
• 4:35
  Speaker 1: an attractive space to be in. The dollars stretched from
• 4:38
  Speaker 1: evaluation standpoint, we're getting to the end of the cycle.
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  Speaker 1: A strong dollar is not in Trump's nor frankly Powell's
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  Speaker 1: interest here at the moment um, so we do think
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  Speaker 1: that that dollar likely comes off in two thousand nine.
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  Speaker 1: Mexico is an interesting place to talk about because we
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  Speaker 1: think that sentiment is an important indicator. Sentiment got very
• 4:57
  Speaker 1: negative after Amma was elected. Um, it pushed the pace
• 5:01
  Speaker 1: out to some fairly weak levels. We had the airport
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  Speaker 1: cancelation and step. You know, the markets reasonably concerned about
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  Speaker 1: a more nationalist, um, more more populist president and his
• 5:11
  Speaker 1: fiscal policies, but he came through with a budget that
• 5:13
  Speaker 1: was relatively in line and the market reacted positively. Now,
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  Speaker 1: reform there is probably stalled, so you don't think that
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  Speaker 1: We don't think you're gonna see a major reversal in
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  Speaker 1: the pay so, but sentiment was weak and you can
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  Speaker 1: get an attractive carry and an improvement in that pay.
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  Speaker 1: So by having exposure there Canada for US as an
• 5:30
  Speaker 1: inflation hedge UM, we do think that inflation is most
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  Speaker 1: likely um uh, the most likely outcome of fiscal expansion
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  Speaker 1: and policy going out the next year. So for US
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  Speaker 1: that negative dollar, stronger Canada and frankly Australia dollar block
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  Speaker 1: currencies are a good place to be to have an
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  Speaker 1: inflation hedge. Um. That's a good place to be while
• 5:50
  Speaker 1: US credit it starts to become more volatile and opportunities
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  Speaker 1: to present themselves there, which we're starting to see. So
• 5:57
  Speaker 1: he could actually, you know, hopefully see the Portfoli fire
• 6:00
  Speaker 1: in several cylinders next year, Henry, just about thirty seconds here.
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  Speaker 1: I'm just wondering, could you see any scenario in which
• 6:05
  Speaker 1: tenure treasury yields rise above three and a half percent? Yes, yes,
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  Speaker 1: I I do. UM. I think it's possible if we
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  Speaker 1: see a couple more hikes out of the Fed, perhaps
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  Speaker 1: three um, we should see the two year not moving
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  Speaker 1: lockstep with that at this point, and that can push
• 6:20
  Speaker 1: long rates higher. Also, oil is likely to start rising higher.
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  Speaker 1: It's reached a technical support level. You're gonna see those
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  Speaker 1: cuts filter through and UH concerns about a weak economy
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  Speaker 1: coming out of the market, so you should see oil
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  Speaker 1: move higher towards the end of the year and that
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  Speaker 1: could push inflation up a little bit as well. There's
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  Speaker 1: a great deal of wage pressure building as we see
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  Speaker 1: the really the inequality that theme in the market, labor
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  Speaker 1: versus capital, which is going to be so important, start
• 6:49
  Speaker 1: to come out and rate wages rise, so that could
• 6:51
  Speaker 1: push rates higher. Henry Peabody, thank you so much for
• 6:53
  Speaker 1: being with us, love speaking with you. Happy New Year.
• 6:56
  Speaker 1: I hope you enjoy it with family and friends. Henry
• 6:59
  Speaker 1: Peabody by President and portfolio manager for Eaton Vance talking
• 7:03
  Speaker 1: about their outlook for twenty nineteen should be interesting given
• 7:07
  Speaker 1: how much there has been a sell off, particularly in
• 7:10
  Speaker 1: investment grade credit, which has underperformed in the United States,
• 7:13
  Speaker 1: worst year since the credit crisis. Next year should be
• 7:17
  Speaker 1: interesting China. Joining US an expert on China Michael Herison.
• 7:24
  Speaker 1: He is a Director Asia for the Eurasia Group. He
• 7:27
  Speaker 1: is in charge of their coverage of China. He previously
• 7:30
  Speaker 1: served three years as the U. S. Treasury's Chief representative
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  Speaker 1: in Beijing. Michael Harrison, thank you very much. For being
• 7:37
  Speaker 1: with us Happy New Year. If we were to go
• 7:40
  Speaker 1: to China right now, what kind of reaction do you
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  Speaker 1: believe is being expressed in government hallways and offices about
• 7:49
  Speaker 1: the conversations that take place and then are publicized on
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  Speaker 1: Twitter between the United States in the form of President
• 7:56
  Speaker 1: Donald Trump and President of China Jijing Ping Well. I
• 8:01
  Speaker 1: think it's very cautious optimism. There is a sense on
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  Speaker 1: the Chinese side that clearly the situation is better than
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  Speaker 1: it was before President's Trump and she met in Argentina
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  Speaker 1: on December one, But they've seen reversals from the Trump
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  Speaker 1: administration on trade tensions repeatedly over the last year. So
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  Speaker 1: I don't think the leadership in Beijing or the government
• 8:29
  Speaker 1: is is banking on this truce lasting. But they're picking
• 8:34
  Speaker 1: up signs from President Trump that he is eager to
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  Speaker 1: make some kind of deal work, and so I think
• 8:39
  Speaker 1: they're feeling a little bit better than they were several
• 8:42
  Speaker 1: months ago. Michael, I'm trying to understand how the negative
• 8:46
  Speaker 1: economic data out of China affects this whole discussion of trade,
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  Speaker 1: because we did get the first decline or the weakest
• 8:54
  Speaker 1: reading of manufacturing in China since two thousand sixteen overnight,
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  Speaker 1: and I'm just wondering, is this basically calling China's bluff,
• 9:02
  Speaker 1: basically pushing them into a trade deal. That is certainly
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  Speaker 1: a big part of the Trump administration's approach, and to
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  Speaker 1: some extent they may be misinterpreting the signals in the
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  Speaker 1: sense that most of China's slowdown this year is really
• 9:19
  Speaker 1: because of domestic policies, its efforts to reign in debt
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  Speaker 1: that have been under way for several years now. The
• 9:27
  Speaker 1: trade war is starting to really affect activity, and we've
• 9:30
  Speaker 1: seen that this month and last month, but the trade
• 9:35
  Speaker 1: war is not the main culprit of China's slowdown to date.
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  Speaker 1: So I think there's no question that the soft economy
• 9:43
  Speaker 1: in China is leading Beijing to be more willing to
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  Speaker 1: make a deal. But when it comes to the very,
• 9:51
  Speaker 1: very tough issues that really involved technology and that both
• 9:55
  Speaker 1: governments regard as important for economic competitiveness, but to some
• 10:00
  Speaker 1: extent also for the geopolitical rivalry, I think that's going
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  Speaker 1: to be quite difficult, and really no amount of weaker
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  Speaker 1: growth in China short of a crisis, is going to
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  Speaker 1: lead Beijing to just, you know, completely surrender to the US.
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  Speaker 1: So to speak, Michael hereson, based on your experience, do
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  Speaker 1: you believe that the Chinese government supports intellectual property theft? Uh.
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  Speaker 1: That's a complex issue, and it depends on what we
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  Speaker 1: mean by i P theft in terms of the everyday
• 10:32
  Speaker 1: concerns trademark infringement and and that kind of commercial i
• 10:36
  Speaker 1: P theft. I think it's fair to say that China
• 10:39
  Speaker 1: is far from perfect, but has been making progress in
• 10:43
  Speaker 1: recent years, and that's partly because of demands coming from
• 10:47
  Speaker 1: their domestic industry. If if China is looking to become
• 10:50
  Speaker 1: an innovative economy, it needs to be able to protect
• 10:53
  Speaker 1: i P, both for domestic firms and foreign firms. Where
• 10:57
  Speaker 1: it becomes quite a bit more complicated is strategic industries,
• 11:03
  Speaker 1: where the Trump administration has said that China is in
• 11:07
  Speaker 1: violation of agreement between President's Obama and she basically pledging
• 11:15
  Speaker 1: not to undertake cyber espionage for a commercial gain. So
• 11:20
  Speaker 1: that's a more sophisticated, more targeted um form of IP
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  Speaker 1: theft where you know, I think it's it's fair to
• 11:28
  Speaker 1: say the US administration thinks China has not been holding
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  Speaker 1: up its end of the bargain, you know, Michael, I
• 11:33
  Speaker 1: want to. I want to just head back to the
• 11:34
  Speaker 1: economy in China for a second here, because I guess
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  Speaker 1: it's sort of interesting that the markets did not respond
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  Speaker 1: both in Asia and the US did not respond really
• 11:45
  Speaker 1: negatively to the the economic data that was weaker than
• 11:48
  Speaker 1: expected out of China, and there seems to be this
• 11:51
  Speaker 1: belief that if the market, if economic data does decline
• 11:55
  Speaker 1: in China, that just means that the Chinese economy, that
• 11:57
  Speaker 1: Chinese leaders will unleash more stimulus on the economy, and
• 12:01
  Speaker 1: it might actually be a net benefit for the entire
• 12:05
  Speaker 1: Asian region that it depends on China's explosive growth because
• 12:09
  Speaker 1: it will juice growth. How much more ammunition does China
• 12:12
  Speaker 1: have to stimulate its economy. I think they have considerably
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  Speaker 1: more ammunition. What the leadership in Beijing is looking to
• 12:22
  Speaker 1: do right now is to stabilize the economy, stabilize expectations,
• 12:28
  Speaker 1: but to only stimulate as much as they need to
• 12:31
  Speaker 1: the government. The leadership is really still committed to trying
• 12:35
  Speaker 1: to rein in financial risks because they recognize if they
• 12:39
  Speaker 1: just allowed debt risks to continue to grow, then this
• 12:42
  Speaker 1: could compromise economic and political stability. Maybe not right now,
• 12:47
  Speaker 1: but certainly not into the far future. So there's an
• 12:51
  Speaker 1: effort to um incrementally stimulate the economy, but really not
• 12:56
  Speaker 1: to unleash the kind of eve of infrastructure stimulus that
• 13:01
  Speaker 1: we might have seen, say five years ago, from a
• 13:04
  Speaker 1: different leadership in Beijing. So I think all that is
• 13:07
  Speaker 1: to say, on the one hand, I do think they
• 13:10
  Speaker 1: have ammunition. But on the other hand, the market shouldn't
• 13:13
  Speaker 1: assume that Beijing is going to go past going to
• 13:17
  Speaker 1: go back to this previous playbook of just flooding China's
• 13:20
  Speaker 1: economy with lose money. I think we're past that point,
• 13:23
  Speaker 1: and so anyone who's expecting a V shaped rebound in
• 13:27
  Speaker 1: China's economy I think is being over optimistic. You have
• 13:31
  Speaker 1: experience dealing with and meeting with a variety of actors
• 13:36
  Speaker 1: and players in China. Do do the Chinese see the
• 13:41
  Speaker 1: map of their country surrounded by threats or by opportunities? Well?
• 13:48
  Speaker 1: I think it's a very interesting point. I mean, you
• 13:50
  Speaker 1: look at Beijing's geographic and geopolitical situation and they see,
• 13:56
  Speaker 1: if not immediate threats, certainly a neighborhood that's not nearly
• 14:00
  Speaker 1: as favorable as you know in the US, where we're
• 14:03
  Speaker 1: surrounded by Mexico and Canada. UM, and so much of
• 14:10
  Speaker 1: China's foreign policy has really been focused for the most
• 14:13
  Speaker 1: part on its immediate region and trying to UM trying
• 14:18
  Speaker 1: to focus on issues near at home, like Taiwan, or
• 14:22
  Speaker 1: like regional stability. Where Beijing has been moving in recent
• 14:27
  Speaker 1: years under Shijin paying is looking to project force, and
• 14:31
  Speaker 1: some of that is about challenging the United States for
• 14:35
  Speaker 1: military supremacy in Asia, but it's also a reflection of
• 14:38
  Speaker 1: the fact that China's economic interests now are increasingly far flung.
• 14:44
  Speaker 1: Through the Belt and Road initiative, China has been building
• 14:48
  Speaker 1: ports and infrastructure and industrial parks and factories really all
• 14:52
  Speaker 1: over Asia. So China can no longer afford to just
• 14:55
  Speaker 1: be looking in its immediate neighborhood and is really looking
• 14:58
  Speaker 1: to become the kind of military power that can protect
• 15:03
  Speaker 1: China's assets overseas. Yeah, Michael Herson, thank you so much
• 15:05
  Speaker 1: for being with us. Definitely going to be a continued
• 15:08
  Speaker 1: theme for us in Michael Herson is the director for
• 15:11
  Speaker 1: the Eurasia Group focused on the Asian region. Also uh
• 15:15
  Speaker 1: he did serve as the U. S Treasuries Cheap representative
• 15:18
  Speaker 1: in Beijing, so really coming to this with authority. Perhaps
• 15:26
  Speaker 1: one of the most hotly debated issues of eighteen will
• 15:31
  Speaker 1: be in retrospect, how much of the positive performance in
• 15:34
  Speaker 1: the first half of the year was due to a
• 15:37
  Speaker 1: sugar high from the tax cuts, and how much did
• 15:40
  Speaker 1: the tax cuts provide lasting, longer term growth in the
• 15:44
  Speaker 1: United States. Joining us to weigh in, Chris Mackie, founder
• 15:47
  Speaker 1: of solution Omics. He is also a contributor to the
• 15:49
  Speaker 1: FED beij book, has advised the FED and also a
• 15:53
  Speaker 1: number of the biggest US companies. Chris, thank you so
• 15:56
  Speaker 1: much for being with us. I would love to get
• 15:58
  Speaker 1: your take one year after the tax cuts were implemented
• 16:02
  Speaker 1: as of December twenty second, what have the biggest effects
• 16:06
  Speaker 1: have been from it? Well, it's great to be with you.
• 16:09
  Speaker 1: It's a great way to finish the year. So you know,
• 16:12
  Speaker 1: the biggest effects were in the first half of the year.
• 16:15
  Speaker 1: There were more psychological than anything. Markets were very excited.
• 16:18
  Speaker 1: They expected uh, significant and sustained stimulus. Unfortunately, the reality
• 16:25
  Speaker 1: was that it was a sugar high. It was mostly
• 16:29
  Speaker 1: a psychological sugar high more than an economic sugar high.
• 16:32
  Speaker 1: Because you know, eleven months into this, what we're seeing
• 16:36
  Speaker 1: is that you know, wage growth has grown a whamping
• 16:39
  Speaker 1: twelve cents an hour or about two forty dollars a
• 16:42
  Speaker 1: year more relative to the rate of wage growth prior
• 16:46
  Speaker 1: to the passage, So nowhere near the four to nine
• 16:48
  Speaker 1: thousand was promised. The job growth is about one quarter
• 16:53
  Speaker 1: of what was promised, and maybe most surprisingly given the
• 16:59
  Speaker 1: media deductibile and expensing of equipment, equipment investment growth actually
• 17:05
  Speaker 1: is down nearly thirty billion versus the same period the
• 17:09
  Speaker 1: prior year. So it hasn't been as advertised, but there
• 17:13
  Speaker 1: are things we can do to improve it and make
• 17:15
  Speaker 1: it better. Chris, maybe just talk about the concept of
• 17:19
  Speaker 1: conditionality and how that affects the overall tax bill. Certainly.
• 17:26
  Speaker 1: So the bill was passed with the concept of unconditionality
• 17:31
  Speaker 1: and universality. So basically what the bill said was any
• 17:36
  Speaker 1: company in every company, including companies that are firing Americans
• 17:40
  Speaker 1: and companies that are not increasing wages, we'll get the
• 17:44
  Speaker 1: same tax cut as a company increasing jobs in America
• 17:49
  Speaker 1: and increasing wages. So what happened was you actually created
• 17:52
  Speaker 1: a disincentive. You basically said, look, you can do whatever
• 17:55
  Speaker 1: you want, and whatever that is, we're still going to
• 17:57
  Speaker 1: give you the same tax cut. Now, the opportunity to
• 18:00
  Speaker 1: day is to have an incentive based or conditions tax
• 18:05
  Speaker 1: policy where you say, look, if the objective is to
• 18:07
  Speaker 1: create more jobs and to increase wages, then let's have
• 18:11
  Speaker 1: the companies that actually who are doing that or thinking
• 18:14
  Speaker 1: about that, let's provide them the incentive to go ahead
• 18:18
  Speaker 1: and do that. And here's the great thing about it, Pim.
• 18:21
  Speaker 1: If you limit it to the companies that actually increase
• 18:24
  Speaker 1: hiring in increased wages, you actually have a bigger pile
• 18:28
  Speaker 1: of money of tax cuts to give to those companies,
• 18:32
  Speaker 1: creating an even greater incentive because you're not giving it
• 18:34
  Speaker 1: to the companies that are firing and not increasing wages. So, Chris,
• 18:39
  Speaker 1: it sounds like you have a lot of criticisms about
• 18:42
  Speaker 1: how this tax cut was unrolled and sort of how
• 18:45
  Speaker 1: effective it was in stimulating the U. S economy. Is
• 18:47
  Speaker 1: there anything good you can say about this tax cut
• 18:50
  Speaker 1: and its effects. Well, the thing that I can say
• 18:54
  Speaker 1: that is good about it and its effects is that
• 18:56
  Speaker 1: it got people focused on corporate tax policy because core
• 19:00
  Speaker 1: tax policy for years has been a hope based corporate
• 19:04
  Speaker 1: tax policy. You cut corporate tax rates and you hope
• 19:07
  Speaker 1: that jobs are creating wages or increased So we've got
• 19:11
  Speaker 1: people focused on the right subject, which is corporate tax policy,
• 19:15
  Speaker 1: and now we need to take it to the next
• 19:17
  Speaker 1: up in te and make it a tax policy that
• 19:20
  Speaker 1: has r OI based or return on investment. We really
• 19:23
  Speaker 1: need to bring more of the approach of the UH,
• 19:26
  Speaker 1: you know, the corporate world, of business world and r
• 19:28
  Speaker 1: o I into our corporate tax policy. Chris, are you
• 19:32
  Speaker 1: surprised at the debate or the attention that has not
• 19:37
  Speaker 1: been given and not been had over the increase in
• 19:40
  Speaker 1: deficits as a result of this tax move? Well, you
• 19:45
  Speaker 1: know there it's interesting, Um, when you use the word debate,
• 19:49
  Speaker 1: I'm surprised there hasn't been more discussion. Um. The debate
• 19:53
  Speaker 1: is pretty much an open and closed case. I mean,
• 19:56
  Speaker 1: you know, the latest estimates UH from the Congressional Budget
• 20:00
  Speaker 1: Office AER for a one point nine trillion dollar increase
• 20:04
  Speaker 1: UM in death sits over the next ten years. Um.
• 20:07
  Speaker 1: You know, that's a that's a staggering number. And what's
• 20:10
  Speaker 1: unfortunate is that, you know, in business, if you invest effectively,
• 20:14
  Speaker 1: if you're investing one point nine trillion, you would expect
• 20:17
  Speaker 1: to get a very good return on investment. The problem
• 20:20
  Speaker 1: is not only the debt that we're taking on, but
• 20:24
  Speaker 1: what we're not getting for it. And that's why I'm
• 20:28
  Speaker 1: focusing on the concept of return on investment, because we
• 20:30
  Speaker 1: really need to bring that discipline from the private sector,
• 20:35
  Speaker 1: from the corporate world to our corporate tax policy, because
• 20:38
  Speaker 1: it's not just the debt, it's also the fact that
• 20:40
  Speaker 1: we're not getting what we were promised for that debt.
• 20:43
  Speaker 1: So how hopeful are you that this could be sort
• 20:46
  Speaker 1: of transformed into a tax policy that does have a
• 20:49
  Speaker 1: net beneficial effect on the US economy versus one that
• 20:54
  Speaker 1: will simply increase the deficit without a commensurate boost to
• 20:57
  Speaker 1: the economy. Sure. Well, you know, we're finishing up, we
• 21:03
  Speaker 1: start to look at our resolutions for nineteen and I
• 21:06
  Speaker 1: hope that one of the resolutions is that Congress and
• 21:09
  Speaker 1: the President can work together and as opposed to sniping
• 21:12
  Speaker 1: at each other and trying to angle for political positioning. Uh,
• 21:17
  Speaker 1: they can look at and say, look, how do we
• 21:19
  Speaker 1: really get a better r O I Because you know,
• 21:22
  Speaker 1: I can tell you on the other side of the
• 21:24
  Speaker 1: spectrum just looking at corporate tax policy and saying, wow,
• 21:27
  Speaker 1: this didn't work. So let's just go ahead and you know,
• 21:30
  Speaker 1: universally and unconditionally raised tax rates to where they were
• 21:33
  Speaker 1: before we cut them. That's not an answer either, because
• 21:37
  Speaker 1: that still doesn't get to the concept of our oy.
• 21:39
  Speaker 1: So you know, I guess i'd say, is we look
• 21:42
  Speaker 1: to a new year. Um, you have to maintain hope,
• 21:45
  Speaker 1: and I think over time, as members of Congress get
• 21:49
  Speaker 1: familiar with the concept of r O I and their
• 21:52
  Speaker 1: constituents hopefully start getting more involved and saying, look, this
• 21:57
  Speaker 1: is something that we demand, we demand a better turn
• 22:00
  Speaker 1: of investment, then we can start to see things change
• 22:03
  Speaker 1: in a different approach to this. Yeah, but Chris, I mean,
• 22:06
  Speaker 1: you've got demands for the government to open. When over
• 22:09
  Speaker 1: eight hundred thousand federal workers are not being paid because
• 22:13
  Speaker 1: of this federal government shutdown. They can't get the government open.
• 22:18
  Speaker 1: What is your prognosis for them having a serious conversation
• 22:23
  Speaker 1: about dealing with the implications of this tax cut. Sure, well,
• 22:29
  Speaker 1: when the polling data and when the election results start
• 22:36
  Speaker 1: to affect those who are involved in this and those
• 22:38
  Speaker 1: are making the decisions, Um, then you'll start to get
• 22:41
  Speaker 1: to see some change. Um. It's it's an uphill battle.
• 22:44
  Speaker 1: But look, we're the country that sent a man to
• 22:46
  Speaker 1: the Moon, were the We're the country that has cured
• 22:50
  Speaker 1: multiple diseases. What I do know is that Congress saying, oh,
• 22:54
  Speaker 1: we're not going to do it differently or it can't
• 22:56
  Speaker 1: be done, is not acceptable. And if it's not, then
• 22:59
  Speaker 1: it's time to vote him out. And we saw in
• 23:01
  Speaker 1: the last midterm election. We saw a significant increase in
• 23:06
  Speaker 1: voter turnout, we saw a significant change in the composition
• 23:10
  Speaker 1: of the House of Representatives. So it is very possible.
• 23:13
  Speaker 1: All right, well, we'll have to leave it on that
• 23:16
  Speaker 1: hopeful note. Chris Mackie, the founder of solution Omics, talking
• 23:21
  Speaker 1: about the results, the ramifications, and the potential for the
• 23:26
  Speaker 1: US government and its economy and tax cuts. If you
• 23:33
  Speaker 1: ask the chief executive officer of a major US corporation
• 23:37
  Speaker 1: what is your biggest fear, A lot of them will
• 23:40
  Speaker 1: say a cyber attack and so to go into their
• 23:43
  Speaker 1: worst nightmares. Let's bring in Michael Bremer, vice president of
• 23:46
  Speaker 1: Data Breach Resolution for Experience, who's joining us with some
• 23:50
  Speaker 1: of his predictions for the biggest cyber risks heading into
• 23:55
  Speaker 1: en So, Michael, let's look into our doom globes and
• 23:58
  Speaker 1: find out, you know, what can we expect next year? Well,
• 24:02
  Speaker 1: we made five predictions and this is our sixth year
• 24:05
  Speaker 1: doing these predictions. UM. It really starts with the opportunity
• 24:11
  Speaker 1: for biometric hacking. UM. Biometrics are in our airports, time
• 24:16
  Speaker 1: and attendance to log in law enforcement device access because
• 24:20
  Speaker 1: we you know, we have facial recognition or fingerprint recognition
• 24:23
  Speaker 1: to get in your phones as well as banking, and
• 24:26
  Speaker 1: it just takes and a bit of a misconfiguration or
• 24:30
  Speaker 1: adulteration of the biometrics to be able to get in
• 24:34
  Speaker 1: and pass at least one layer of authentication. Now, now, Michael,
• 24:38
  Speaker 1: this can happen because what you can manipulate the sensors. UM. Absolutely,
• 24:43
  Speaker 1: it's as simple as putting a piece of uh sell
• 24:47
  Speaker 1: tape UM over your fingerprint and using that actually as
• 24:51
  Speaker 1: someone else's fingerprint, or they now have three D printed
• 24:56
  Speaker 1: facial mass that that mimic your face facial recognition features
• 25:01
  Speaker 1: to be able to get into an uh A cell phone.
• 25:05
  Speaker 1: So it's as simple as that. So, Michael, moving on
• 25:07
  Speaker 1: to the next nightmare scenario. I love this. It's sort
• 25:09
  Speaker 1: of you sitting down, what's the worst thing that we
• 25:11
  Speaker 1: could think of someone hacking into your bank account and
• 25:14
  Speaker 1: taking all your money is that a realistic possibility. Well, um,
• 25:18
  Speaker 1: given the fact that not all banking institutions have uh
• 25:23
  Speaker 1: multiple factors of authentication, it just takes in some cases
• 25:27
  Speaker 1: someone getting your password, let alone using your phone and
• 25:31
  Speaker 1: and being able to spoof and a text message over there.
• 25:35
  Speaker 1: So yes, And the worst case scenario is if you
• 25:38
  Speaker 1: have a debit card that may be connected to your
• 25:42
  Speaker 1: banking account and or your line of credit and you
• 25:45
  Speaker 1: use that in an online transaction, somebody gets ahold of
• 25:49
  Speaker 1: that and they can drain your bank account that way
• 25:51
  Speaker 1: as well. One of the big growth areas in is
• 25:55
  Speaker 1: going to be online gaming and betting, specifically the expansion
• 26:01
  Speaker 1: of online sports betting. To believe that that's going to
• 26:04
  Speaker 1: be a target, Well, the gamers, um, they like to
• 26:10
  Speaker 1: be anonymous, they have great computer skills, and the fact
• 26:14
  Speaker 1: that you have about two point two billion gamers worldwide
• 26:19
  Speaker 1: that operate in many cases very comfortably on the dark web,
• 26:23
  Speaker 1: and that's where the information is bought and sold. So
• 26:26
  Speaker 1: particularly with on online betting, which is one of the
• 26:29
  Speaker 1: fastest forms of of online activity. Um, and there's money there.
• 26:35
  Speaker 1: The old adage follow the money is going to be there,
• 26:38
  Speaker 1: So I think online betting is going to be a
• 26:40
  Speaker 1: real target in and then of course you have the
• 26:43
  Speaker 1: cloud and the possibility that somebody breaks in and gets
• 26:46
  Speaker 1: all of the information that a lot of big companies
• 26:48
  Speaker 1: have believed has been stored away securely. Is that realistic? Well,
• 26:54
  Speaker 1: we we've had three breaches this year um Uber, Time
• 26:58
  Speaker 1: Warner and accenture that in fact the root cause was
• 27:01
  Speaker 1: a miss configuration of the servers in the cloud. And
• 27:05
  Speaker 1: given the amount of data that's out there about a
• 27:09
  Speaker 1: billion gigabytes at last count, due to um or from
• 27:13
  Speaker 1: the sources, UM, it makes sense that there's going to
• 27:16
  Speaker 1: be an opportunity for with one miss configuration someone to
• 27:20
  Speaker 1: access a ton of data all at once. Michael, when
• 27:24
  Speaker 1: you use the facilities at an airport, does that include
• 27:29
  Speaker 1: the public WiFi system? One of one of the things
• 27:33
  Speaker 1: that I always recommend when people ask me what are
• 27:36
  Speaker 1: the consumer tips that are most important? Never use public WiFi.
• 27:41
  Speaker 1: Doesn't matter if it's offered free in the hotel or
• 27:44
  Speaker 1: in an airport or a public park. Um, it really
• 27:48
  Speaker 1: can because there aren't the security protocols in place. UM.
• 27:53
  Speaker 1: Even sometimes with your own VPN or having encrypted data,
• 27:58
  Speaker 1: it's still just knew not a good idea. So spend
• 28:01
  Speaker 1: the extra few pennies, use your cellular data, and avoid
• 28:05
  Speaker 1: any public WiFi. So, Michael, do you use all of
• 28:09
  Speaker 1: do you like avoid common electronic devices? At this point?
• 28:13
  Speaker 1: Do you just sort of hole in your home and
• 28:14
  Speaker 1: use cash? I wish it was that easy. Um, Unfortunately
• 28:20
  Speaker 1: I haven't gotten to that point. UM. I'm I'm still
• 28:24
  Speaker 1: a tech junkie. I use a phone and a computer
• 28:27
  Speaker 1: and and operate UM that way. UM, I do stay away.
• 28:31
  Speaker 1: I haven't gone to one of the voice recognition whether
• 28:34
  Speaker 1: and Selexa or an echo because I love the story yesterday.
• 28:38
  Speaker 1: I think it was the fifth grader who was using
• 28:42
  Speaker 1: Alexa to get his homework done if his mom caught
• 28:45
  Speaker 1: him out, and I thought that was pretty funny. Yeah.
• 28:47
  Speaker 1: If that's the worst that happens, though, it's not that bad,
• 28:50
  Speaker 1: Michael exactly. Michael Bremer, thank you so much for being
• 28:53
  Speaker 1: with us. Mike. Michael Bremer as vice president of Data
• 28:55
  Speaker 1: Breach Resolution at Experience. Thanks for listening to the Bomberg
• 29:00
  Speaker 1: P and L podcast. You can subscribe and listen to
• 29:03
  Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.
• 29:08
  Speaker 1: I'm PIM Fox. I'm on Twitter at pim Fox. I'm
• 29:11
  Speaker 1: on Twitter at Lisa abramoits one before the podcast. You
• 29:15
  Speaker 1: can always catch us worldwide on Bloomberg Radio