Irish Border Issue Is Increasingly Difficult to Solve: Harkin

issue of the Irish border. And here to talk about this with us ahead of St. Patrick's day tomorrow in the US Marian Harkin, European Union parliament member representing Ireland. Uh. But she is here with us here in our eleven three studios in New York. Thank you so much for joining us, Marion, I want to just talk about this. According to several diplomats in a Bloomberg News story, UH, there hasn't been a lot of progress made on this

Irish border issue. Can you just describe the issue from your perspective and what needs to happen for a deal to be reached. Well, good morning to you, sent to all your listeners. Unfortunately, today, just before I arrived here, I had a very quick look at a report which has just come out from the House of Commons Northern Ireland Committee, and they say that they have failed to find a technical solution for this frictionless soft border that

we're supposed to have. And not only do they say that, they say there is no evidence that such a type of order can be found anywhere in the work. So what is the soft border. It's basically a way for Ireland to maintain access direct access to the Union. Correct, Well, a soft border would be between the Republic and Northern Ireland as of now free floor goods, people's services, animals, etcetera. But after breakfit, we will have a different regulatory regime,

we will have different rules, etcetera. And we have to find a solution because we do not want a border on the island of Ireland. Now, I understand that there is going to be a European Commission in Irish government and UK government meeting that will take place March that will last until April the eighteen and the idea is to resolve these issues about policing the Irish border when the UK leaves the European Union. If this Committee does

not reach some kind of consensus. What's your worst case scenario for what the border looks like after the United Kingdom leaves the European Union. Well, I hate even say what the worst kiss scenario. It's because nobody, absolutely nobody north or south of the border wants to see that. We do not want to go back to the bad old dates when there were customs points, police soldiers, et cetera on the border. And the issue is him that.

Just before Christmas, the British Government signed an agreement which gave three options. Number one, the trade deal, the comprehensive trade deal it would do with the EU would solve the issue of the border. Number two, if that didn't work, they would set up some kind of a specific arrangement for the Republic and Northern Ireland. And number three the backstop option, which was that there would be full regulatory

alignment between the Republic and then Earth. And if either one or two are not possible, then three still remains. But the problem is that that would mean a border in the Irish Sea and the d up which the Democratic Union this Party in Northern Ireland have said that's not acceptable. So the main obstacle at this point is who. Well, the main obstacle is that the British government have signed an agreement to say they will either do one, two or three, and they are not coming up with technical

feasible solutions to deliver any of those three. I suppose number one the trade deal. That's for further down that. Okay, So the fact that the British leadership hasn't come up with technical solutions, how much does that reflect a broader issue that you see of this entire Brexit negotiation, of a lack of details and a lack of cohesion. Look, my personal opinion, and I know it's shared by many, is nobody thought this would happen, and when it did,

everybody was taken by surprise. And I mean we had the likes of Boris Johnson just recently saying that the border between the Republican the North was the very same as the border between two boroughs in London. I mean, such an incredible level of ignorance in the sense of not knowing about an international order is just unbelievable. So that is part of the if you like, the background to all of this, that nobody was prepared for this,

nobody thought true. What the main outcomes of a Brexit would be on the island of Ireland, so you know the British government are as as Jean clad Yunker said, I listened to him in the Parliament. I was sitting there listening to him this week and he said it's time to turn at fine words into treaties. In other words, we need the detail, we need to sort this and we're not getting it from the British is the European

Union and leaders in the European Union. Are they trying to push or have they pushed UK Prime Minister Theresa May into a corner from which it is more difficult for her to extricate herself. And this is in the context that, as you mentioned, the d u P has ten members of Parliament which are part of her governing coalition in Westminster, and she has not only two assuage their demands, but also she needs to be I guess remained firm in this in gaining taking the support of

her UH fellow Conservative members of Parliament. Well, again, my perspective on this since pim that Brexit day one was about a split and the Conservatives and the question is what's changed, what's new. Look at what's happening. So to some extent, you're right, she is in a corner. But the question is who put her there? How much of this is her own making or Cameron's a making? And you know, what can the EU do to try to

ensure that we can reach some kind of agreement. This whole phrase of cake and eat it is still there, It's still part of the negotiations. As I said, I don't think anybody actually ever thought this would happen, and therefore no plans in place to deal with it. Marian real quickly. Do you think that the mersiness is discourage discouraging some of the populism that we had seen previously

in the UK? Yes, well, I think I saw a program the other night where a very well known British chef for cook Poulte, she'd be seen as sort of a very sensible sort of woman, and she actually just said, look it time just to get on with us, and there was everybody in the audience capped, even though there were people in that audience who are remain and people who are breakfast. So that the I think the feeling may be coming to the point that we just have to deal with this. What it is a days and

it's all over. So I think maybe that's the way British people are beginning to think, not maybe they can influence the negotiators. Marian Harkin, thank you very much, European Union parliament member representing Ireland. Shares of Walmart dropped yesterday after a Bloomberg News exclusive story that talked about a whistleblower suit against the company charging that they encouraged manipulation

of some of their on line sales numbers. Here to talk about that and other issues that Walmart is currently facing is Jennifer Batasha's senior US food retail mass merchant wholesale restaurants analyst for Bloomberg Intelligence, and Alan berga agricultural reporter for Bloomberg News. Jennifer, I want to start with you to talk about this whistleblowers suit. What was your reaction to it? Does it seem feasible? Does it pass

the smell test? Um? You know, when when you look at how the market reacted, there was an initial initial reaction and this the stock really regained a lot of

what it lost fairly quickly following the news. Um when you when you look at it, it's hard to believe that Walmart would really open itself up to this sort of risk, especially when you think of all the measures that put into place following the bribery probe that that it was involved with UM that started back in two thousand and twelve when Walmart was accused of being engaged in a multi year bribery campaign in Mexico. So that the company is very sensitive about its ethics and compliance

at this point. So it's hard to believe that, um, that something of this scale UM would be taking place. Well, Jennifer just tells who is actually the whistle blower, give us a little background. UM. Well, so the whistleblowers is an ex employee, UM, you know, someone who has been involved in the e commerce side of the business ummerly

at Amazon, formerly at Amazon. UM. And and really you know, the calms center around the idea that that UM, there's some artificial manipulation in the numbers that were actually published UM, whether it's by under reporting returns or not processing returns or things of that nature. UM. And so you know, it's it's it's difficult with a retail business the size of Walmart to to you know, assume that everything happens

exactly when it's supposed to. Um. But the fact that you know the employee, UM, you know it just it seems that it seems that if something happened, it maybe more of an isolated incident than the pattern of abuse. That is, you know that it's alleged in this although the fact that the stocks responded at all highlights this increasing challenge that Walmart faces to keep up with Amazon and to lower costs going forward. Alan, I want you

to come on in here. There was a story that caught our attention about how Walmart might consider using drones to help reduce agricultural costs, in other words, planting and weeding and doing other things like that. Can you explain what is this? Well, this sounds like nothing that has anything to do with a whistleblower suit, but there actually

is a connection here. UM. Walmart gets more than half of its revenues from groceries at this point, and of course Amazon is becoming a big entrant into the grocery market, and Walmart is looking at ways to make itself ever more efficient, um, and part of that is looking at

agricultural drones. Walmart is known for very tight control of its supply chains, and ultimately one of the things it could do is fine technology that allows it to even have more control by requiring farmers, for example, to use these specific drones to cut down on pesticide applications, be as of the efficiency of using something mechanized rather than

human beings who tend to be more wasteful. Alan, you know, I have to confess that you and I share a love of videos looking at the variety of planters, automatic planters that a variety of agriculture companies have come up with in order to sow the seeds literally of farms. Well, I mean, and I think you here the out one

out here, Lisa, Yeah. Well, and the reason I bring this up is because I wonder if you could just discust that pack and describe for people that you know, they may not understand exactly the mechanization and the automation that is taking place on the farm. Sure, I mean, the story of agriculture is the story of mechanization. I mean, people stop being hunter gatherers because they learned to domesticate crops.

You know, the tractor was a big innovation of the nineteenth and twentieth centuries, and things like the reaper, and now we have precision agriculture that you know, gives you opportunities to put your seeds exactly where they're most fertile in the soil. A lot of people are seeing the sort of drone technology as the next frontier Right now. Drones are very much used to sort of map fields, fly around, serves oil soil tops, see how the harvest

is going. But this would be where you could be using big data and a drone basically to come up with a most efficient application of inputs to your field possible. One of the patents for that Walmart has it's gotten a lot of attention, actually deals with bees, the idea that you can start mechanically pollinating things rather than using insects. So, Jennifer coming in here, I love your take on whether Walmart is doing enough or spending too much on sort

of nascent technologies that could eventually reduce costs. Yeah, so so you know, to me, this story um is less about bees, um, but more about the the idea that Walmart is taking a broad approach to technology UM. And then it's really a reflection of all of the investments that they have been making since two thousand and eleven. UM. I think that right now in a world where technology

is progressing at such an unprecedented rate. Um, Walmart can't afford to not be participating in all of these iterations of potential technologies. Um. Whether you know, it seems that they've done fairly well in terms of bell thing the the the cost of participating in the technology evolution versus

running their day to day business. Um. You know. However, investors are expecting that there is a payoff with regards to seeing actual growth in sales, and not only in their stores, but on the in line, on the in the online e commerce world as well. Alan, just a thought for you, is this not just limited to the planting and cultivation of crops, This is also about harvesting as well. Yes, I mean you're looking for patents off. Walmart has filed forty six patents dealing with everything from

the planting to the logistics of it. And I would respectfully disagree with my co guests. I actually think this is all about bees in the sense that bees are a variable cost. Pollination becomes more and less expensive, and what Walmart's trying to do as they get their costs down, as they try to make things more reliable down the road, find the technology that allows them to compete with Amazon

and beat them at their own low price game. So, you know, metaphorically, some of the stuff seems very very you know, space age and in several years away, and maybe it's just gaining some intellectual property so you can sue Amazon down the road. We don't know. But the point is, you know, as we've been saying, Walmart is trying to get the technology that gets them ahead so that they can win not in just today's marketplace, but tomorrow's as well. I want to thank you both very much.

Alan burga joining US our agriculture reporter for Bloomberg News, and Jennifer A. Bartash, senior US food and retail analyst for Bloomberg Intelligence. Him you're going to have to share some of those scintillating videos with me. You just haven't shared the I just got an email all about the bees. It's all about the bees and these and these videos. Well check it out. It's an amazing story, the automation of the U S farm, and none better than Alan

burg gonna tell us about it. A ruling from the Federal Energy Regulatory Commission touched off a sell off in Master Limited Partnerships yesterday, at one point the Larian MLP index was off by about ten percent. It ended up closing lower by about four and a half percent. The issue has to do with master limited partnerships operating interstate pipelines and they charge customers a price under a cost

of service model. Now they also have to collect a portion to cover corporate tax charges, but because they're massed limited partnerships, they don't actually pay these taxes. Here to help us understand this more is Chuck Lieberman. He is a Bloomberg profit and also chief investment officer and managing partner for Advisors Capital Management. Chuck, maybe you could just expand on my attempt to explain what is going on here. Well,

you did a pretty good job him. So there are count acts for pipelines that are done as cost plus, and the question then is what is included in costs? And there's an allowance for corporate tax rates, although, as you point out, the pipelines structured as partnerships do not in fact pay taxes. And that's why, uh, it was disallowed. Now, it's a long term issue. It's been debated for twenty years. The courts weighed in and that finally pushed for to

kick that stuff out. Now, keep in mind that most contracts are not cost plus, they're negotiated between the pipeline and the shipper. UM. And now, of course, one way to get around this ruling is to renegotiate those contracts, the cost plus kite contracts on a negotiated basis directly with the shipper and restructure them. Uh. There's also another aspect of it, which is it only affects companies that are structured as partnerships. A lot of these pipeline companies

are structured as C corporation standard corporations. They do pay tax. Those companies can, in fact, uh in a cost plus contract add in the cost of the tax. Uh. And it is likely that uh, this ruling will accelerate the consolidation of partnerships with their C corporation parents. Uh. That's another trend that's been going on in the industry, and probably more companies will do it sooner than expected because

of this ruling. Yeah, you know, just broadening out so so clearly there are people on both sides here who think that this is going to her MLPs and other people who think that the move has been overdone. I thought It was interesting though, because the biggest exchange traded fund that tracks America's energy pipelines, hillaryon e t F, saw one hundred and eighteen million dollar outflow yesterday, which is the biggest one day with all since July of

last year. What this indicates to me is that the retail investors are sort of the peripheral investors will be quick to leave should there be any threat to the tax benefit that these funds enjoy. How much of a concern is that to you just the perception of these funds. Uh, it's a youth concern, and that's actually the primary driver in the entire sector. So if you go back to two thousand fourteen, oil prices fell that actually boosted demand

for products like gaslene. So some pipeline saw an immediate boost to shipments. Some of the downstream pipeline businesses saw an increase in business and an increase in profitability. Don't confuse me with facts. They sold off too because there's a general lack of understanding on the part of retail investors. So they have been getting out of the space. They've

lost money in the space. Therefore they've been getting out of the space, and all of this has driven all of these stocks literally across the board, including companies that really have not been affected by the decline in oil prices, that have seen an increase in business volumes anyway, they have still decline in value. And most of these things are trading at low low levels, meaning very very attractive valuations.

And now this is just one more kick in the rear end at a time when the stocks are already down. And I'm sure there are a lot of unsophisticated investors who were saying, I've been I've lost too much money. This doesn't seem to be turning around. I don't understand

what's going on. I want out. So I'm sure that it's a negative, okay, But as a sophisticated investor, and of course that's one of the reasons we speak to you, Chuck this and what maybe presents an opportunity because number one, uh, it may have been an exaggerated response to this ruling. But also if these master limited partnerships decide, you know what, we can't spend all this time, money and effort educating

people about what we really are. We're just going to turn ourselves into a regular CE corps that's going to make it more attractive for institutional investors to buy them. Right, That's exactly right, and I expect all of that to happen. I do think that a lot of these unsophisticated investors are going to methodically continue to pull out because they don't understand the institutional investors will want to get in, and in fact, some of them have been getting in.

But I think what will really turn it around is if more of the companies turn themselves into C corporations and then become part of indexes, because then they can be all of that will bring in new buyers and they'll take advantage of the fact that pricing is very, very attractive. Thank you so much for being with us.

Charles Lieberman, Chuck Lieberman, Bloomberg Profit and chief investment Officer and managing partner at Advisors Capital Management talking about the MLP ker fluffle yesterday, and you know, it's funny, PIM. In the past few years, there have been record amounts of MLPs that have I p oed, So it's very interesting to see the turmoil now and wonder whether retail investors are going to exit until the opportunity is lost. Cyber attacks are literally happening hundreds of thousands of times

a day. This according to Energy Secretary Rick Perry in a speech to lawmakers during a hearing yesterday. Here to speak about these attacks which are ongoing UH and are targeting the US electric grid is Dr Eric Cole, chief executive officer of Secure Anchor Consulting in Ashbourne, Virginia. He comes to us from Los Angeles today. Dr Cole, thanks so much for being here. I just would love to get your perspective on where these attacks are mostly coming

from and infrastructure they are targeting. They're coming from the usual players Russia, China, North Korea, but what we've seen in the last six months is that cyber attacks level the playing field. There are some small countries that can't play in the nuclear weapons space. It's either too expensive or they're regulated. But when it comes to cyber weapons, anybody can build them. So we're even seeing some of these smaller countries, Pakistan and others starting to target the

US infrastructure. And what they're really trying to do is have command to control capability, so they're targeting water, electrical, nuclear, air traffic control. And most people think if they break in that they're gonna want to go in and take it down to destroy, but it's really more of a threat. If they have control of our nuclear power plans, they now can influence the United States in a lot of

different areas. Dr Cole, And what if you could just step back, and perhaps this is not your purview, but I want to give you an opportunity. Do we have a clear definition of who, quote, the enemy of the United States is or who are our enemies? The way I always say in the real world we have allies. In cyberspace there is no allies, So in cyberspace I would say every other country other than the US is our enemy. And even surprisingly a lot of cyber attacks

against the US are coming from Canada. Okay. The reason I asked this is because Article three, Section three of the U. S Constitution seems pretty clear. If a subversive act has any tendency to weaken the power of the United States to attack or resist its enemies, aid and comfort has been given, that's a definition of treason. Why is this so difficult for both the prosecutors, it seems, of these acts and those that are defending this as

a freedom of speech notion? Why are they so Why is the Constitution not able to be used in order to prosecute this. The biggest problem in cyberspace is attribution, knowing who's actually doing the attack. So, for example, we know that attacks are coming from Russia, but finding the

exact location, the physical location is very hard. Also, we have seen cases where we had attacks that we thought were coming from China and it was actually the Russians breaking into Chinese systems and then attacking us from there, so it looked like the Chinese, but it was actually the Russians. So the attribution is our big challenge, and that's why this takes a lot of work and a lot of time and energy to figure out who's really

behind the attacks. All right, So Eric, one thing that's notable is there is this report by the US government talking about how Russian in particular has launched many attacks on a variety of different infrastructure systems, whether it was the electric grid, water processing plans, air transportation facilities, etcetera. Why haven't we heard more about this? Why haven't they been successful? The reason why they've been successful is we

aren't making it easier for them. Typically in the past, when you designed and built nuclear reactors in the computers that supported them, known as c D as critical digital assets. They were always disconnected from the Internet. They never had any connectivity, so there was no way for somebody to attack remotely. In the last year, we are starting to interconnect these systems to make it easier to monitor and

more functionality. And that's really the big problem. We're taking systems that were never designed to be accessible on the Internet and making them accessible. And the reason why it's taking so long, and this is a scary part, we're not detecting these attacks. It's taking us fifteen to twenty months to catch and find the fact that they've broke

into our systems. Well, but Eric, I mean, just to play devil's advocate, Okay, perhaps they've broken in, but we haven't heard about incredible disruptions in the power grid or the water system. Are they being hidden? Are they are they affecting uh, people's access to clean water? Or is this uh? Is this just sort of more subtle type of attack. It's more subtle, and right now it's more the fear of the threat and the analogies. It's like nuclear weapons. The Russians have a ton of nuclear weapons,

but they haven't used them. But just the fact that they have them put them in the power SORR a position of power, and it's similar here. They've breaking into our systems, they've taken can troll. They haven't done any massive attacks, but that gives them a position of power to be able to negotiate differently with the United States. Dr Cole, if you were to advise the chief executives of corporations that control these essential utilities, what would you

be advising them today March six to do? The first thing I would recommend is to any critical systems, any critical infrastructure, disconnect from the Internet. I work in a lot of these areas. I travel around the world with critical infrastructure. It's not worth the benefit. Second, do a discovery exercise to know where your critical data is. In so many cases organizations don't even know where the data

is located. And then third, assume you're compromised. And now go in and say, okay, if we are compromised, how do we find and get them out of our networks? As opposed to just accepting it and not dealing with the problem. Is it also something as prosaic as preventing people from using their own personal communication devices within the actual physical plants of these institutions. That's absolutely a component of it is not allowing people to bring personal devices.

We have seen many cases where people bring cell phones that inadvertently are infected with malware. They plug it in to a control system to charge the USB and it affects the system. So you really want to have what we call air gap where there's no connectivity with any other device from the outside world. And just finally, a doctor called do we know? I mean, you mentioned that we don't know a lot about what's going on as

far as the attacks. Do you believe that these organizations, these companies in the United States, that they know their own vulnerabilities. I believe they know some, but they don't know all. And we have a lot of situations like with the Equifax and others, where there's one or two systems that they didn't know about that led to the compromise. And that's the problem. Security means two percent exposure and it's always the part you don't know about that causes

the problems. Our thanks to Dr Eric Cole. He is the chief executive of Secure Anchor Consulting. They are based in Ashburn, Virginia. You can follow him on Twitter at d r. Eric Cole. Thanks for listening to the Bloomberg p m L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. It's one before the podcast.

You can always catch us worldwide on Bloomberg Radio