Surveillance: Pipeline Hack With Amrita Sen

and of course on the Bloomberg Terminal. Right now, in Oil with a global view on what we've witnessed with cyber attacks in the United States, Amrita send joins US Energy Aspects Director of Research in chief Oil Analysts Emery Day. If as you look at the distribution of hydro carbons worldwide, how vulnerable are they to a cyber attack? Well, in great question, I would say pretty much everywhere. More and more,

I think everybody is. I mean, the Colonial pipeline is a great example, but look at the Middleast, a lot of even up kick to that matter, there were elements um of kind of cyber attacks involved in that, but even more recently within the Middle East you do get a lot of infrastructure um, not necessarily disruptions, but targets um And I think this is just the new normal. There are more and more companies spending on this and it just needs to get higher from here, because you

know it's not the warfedge generally is changing. The landscapes completely changed. I mean in Malaysia they're they're doing a twenty four mile thirty mile key pipeline having to do with the distribution. I believe it's up the west coast of Malaysia. How many spots do you perceive to be out there like the colonial pipeline worldwide? Is it ten

other hot spots or is it hundreds? It's gonna be hundreds, because if you think about the distribution, I mean, if if you're really going down that route, you're talking about a huge distribution or pipeline net works within China, within India, even Europe. Europe has a huge network both for crew down for products. Looking more broadly then and racon when way to talk to any one of the commodity market. Right now, they're not concerned about this colonial pipeline shut down.

There's just a belief that will adjust, it will come back online and will get back to normal. Any aspects of the infrastructure, the distribution in America, the transportation of energy that you would be concerned about, No, I mean not right now, and not the scale at which this attack has happened. I do agree with what you just said. I think the pipeline and just generally everything should be back up and running in about three to five days.

But you don't never say never. This is it's definitely unprecedented in the scale at at which is happening, So it will require coordination from various government bodies and that can take some time. Um. I don't think there's going to be more and I think after this attack, I do think a lot of US networks natural gas as well. Let's not forget that they will probably tight and up what they can do to protect their networks going forward. I'm ready to coming forward from here build on the

other issues surrounding the old market. Right now, we've talked a ton about supply, let's talk about it a little bit more out if Iran can we open things up a little bit more. What the negotiations look like. If you said twelve eighteen months ago that we'd have a president Joe Biden, a democratic sweep, we'd be talking potentially about loosening things up with Iran, and we still having

that discussion. Yeah, we are, and you know we've always said that we're expecting some kind of a breakthrough over kind of April and May and then sanctions relieved by July. I will say, however, talks are progressing, but progressing probably a bit slower than we've been expecting. No, no major changes. But the thing I will warn is that everybody is expecting a deal in the coming weeks and then sanctions

relief over Q three UM. But if there isn't a deal before they are in an elections, which are next month, that's the thing to watch out for because then it could get dragged on and then the deal becomes a twenty two story. I don't think that's in the price at all. What is the link em right up that you see between oil is a huge weighting of c RB or the Bloomberg Commodity Index with all the other commodities. They don't trade and lack step do they No, not at all. And I mean if you you guys were

saying as well, just s and B it recordized. But if you look at metals, metals markets are soaring, and you know oil oil has been a very strong performance this year, but still hasn't been um as a strong as some of the other commodities and part of that is because you know, transportation was the worst hit during COVID. It is coming back, but it's not fully back yet. But there's also so much kind of talks around working from home, how much are we going to lose permanently

for oil demand? But I mean, I will say, there's all the data we're getting right now. Personal incomes are back at pre COVID levels, and many many parts of the world. I think the summer is going to be huge. People are going to spend, and the bounce back in oil demand it's probably going to be significantly more than people have been expecting. That is the line that Jeff carry A government is pushing too. I'm Reachel, it sounds like you're on the same page. It's gonna hear from you.

I'm ready to send their energy aspects. We're talking about this huge environmental transition on top of a demand boom. Two pins some of that as well. So the traditional sychnical rate that you might get from copper it's a little bit distorted this time around, given the political environment that we're in at the moment. The clear message of two thousand twenty one being different from two thousand two

from Mr curry at Golden Saxon. That has always been a consistent theme with Ian Bremer of Eurasia Group, whose books are too many to mention. I can pick one of them, one of their titles and say it is also about this moment. We welcome Dr Bremer this morning as we speak of every nation for itself. Dr Bremmer, once again, food dynamics. Rice in Cambodia really matters rice in America less. So what does the food dynamic that

you observe a this commodity lift. It just tells me that the gap between rich and four countries on the back of the pandemic and the rebound from the pandemic is being felt so so greatly differently. Um, you know this is UH that you already have UH before the pandemic. Yet about a quarter, for example, of everyone in Yemen being food stressed, not being able to have enough to eat, and Sudan numbers are similar. Those numbers are doubling on

the back of the pandemic right now. One of the one of the most disheartening statistics that was indirect from the pandemic was the fact that we had an increase of fifty million of extreme four people around the world. The first time that number has gone up UM in well over uh in generations. It's like forty years since that numbers increased year on year. That's that's that's you know, that means food insecurity, that's first and foremost the most

important things to be that kid. And you're gonna see that play out in so many of these contries with these prices have gone up and the people, the governments don't have any capacity to provide support. And I'm sure you saw Arama Chander Gua's magnificent essay and the ft I'm gonna say ten days ago about the collapse of his India. Do you eurise your group? Look at this pandemic and the horrific news from India is being politically and your Aisia group destabilizing for the region. Um, It's

it's not destabilizing inside India. You know on India's Prime Minister Modi, despite having incredibly badly mishandled the last wave of this crisis, um is still um. You know, the popularity base that he had was higher coming in that of any other major leader. So he has a long way to go Before you talk about domestic instability domestic opposition would have a long way to strengthen before they could be cohesive and and really pose a chat olenge

to him. But but there's no question that when you see the India variant spreading as much as it is across Southeast Asia. Now, when you see the fact that the Indians, who have been the largest producers of vaccines around the world, and now they have massive shortages inside their own country, they've had to suspend all export. Most of that export was going to other countries in the region. So this is now where the broader epicenter of coronavirus

crisis is. It's India, but it's also South and Southeast Asia. It's also the region that's going to have some of the least capacity to actually fight it. And and by the way, um, the the India based and Chinese based vaccines aren't as effective as the m R and A vaccines. And I saw some extremely disturbing UH news. I don't know if you noticed this from the Seychells say Shells has had more vaccine rollout than any other country in

the world for their small population. They now also have more human to humans spread per capita in cases new cases than India. That's astonishing, and that's because most of the vaccines are are coming from coming from China and they don't have the efficacy in stopping spread. That's again a serious problem for the developing world right now, largely isn't about Madearna Advisor, which is much more efficacy. So yeah, I'm actually quite worried about what this is gonna look

like over the coming month. How the West can have that's the big question right now, and I've got to say the answer to that question is so in some real division between Europe and the United States at the moment, the US, as you know, in trying to suspend IP protection at least trying to push that issue through the w c O, and then you've got Europe turning around and saying, well, we don't think that's going to help. Germany is looking at the United States for holding vaccines

and not exporting them. What did you make of the U S decision last week? And without bringing the allies on board, because this is playing out quite publicly, and it did so through the weekend. Yeah, this is playing out publicly. But you know the funny thing, first of all, I mean the German response, um that this is not the way to actually provide help in the near term. That's true. I mean it would take a very long time.

We're talking about not just weeks or months with his urgent need right now, but but a year or more to get the kind of manufacturing capacity that would be aligned with just opening up the patent. So it's it's important symbolically um for a lot of progressives in the Democratic Party, and Biden will will benefit from that. But this isn't what's going to move the needle for the problem that we just talked about. The big issue is that here's a Biden administration trying to do the right

thing and not coordinating with allies in advance. That's the mistake. It feels just like the announcement to leave Afghanistan. I mean, when your allies are absolutely critical, you shouldn't be in a position where the German government, where the EU is caught blindsided by you saying you're gonna suspend IP protection. The Americans in talking about helping the rest of the world in terms of this endemic, we need to be talking in advance of our announcements with all of the

key allies. It's such an easy thing to do. The Biden team should be good at this. This is where they're following. Um. I think because they're used to do. These are experienced men and women that have been around foreign policy establishment for decades and for them, UM, you know, multilateralism means the United States does the right thing and other allies just go along with us. It doesn't mean that we actually might be wrong or might have to compromise.

Because we've been a position of such strength and because the alliance itself has been so much more cohesive. That's not as true today. Part of that has been four years in the Trump administration, but part of that is just Europe itself is moving in a different direction. There.

Their feeling of their social contract, their feeling of the effectiveness of their representative democracy, UM, just is different than that of the United States right now, and I think we're living that experience a firm or your top risks of two thousand twenty one, you have been out front and saying we have to pay attention to cyber. You talk about a cyber tipping point in January, and here we are talking about it for real with this pipeline

across the nation. Give us an update on the tipping point, you see. Yeah, I mean the funny thing is, I don't think the tipping point is between the US and Russia, between the US and China, because there is a level of deterrence on cyber attacks between those countries. We do espionage against them, they do espionage against us. We use the data in ways that are useful for US, but we don't break things. We don't go in and and

destroy critical infrastructure. We don't take the kind of actions that could precipitate a kinetic response a hot war where when you the problem is unlike news where you had that nuclear balance, but those were only the the only countries that had that capacity in the Cold War. Um in the case of cyber you know, we stop the audience from developing News were trying to get back into

a deal to do that. We haven't stopped them from developing some of the world's most effective offensive cyber capabilities. Criminal networks in Russia and Eastern Europe, in the United States, around the world have incredibly sophisticated cyber capacity to destroy things. And we see that with the smash and grab both on the data of this critical pipeline over the weekend, but also in the in the the ransomware attack to shut them down. UM, and you know, we just don't

have cyber defenses to deal with this. I was I've particularly worried that they were going to shut down hospitals UM in the middle of vaccine rollout. You know, in the early days, that was something they were clearly capable of doing, these these criminal networks, and thankfully for us, they didn't. But the vulnerabilities massive and it's gonna catch he writes, A great president and found a let's brink in. Jared woods Champ, we thank for America Securities, Head of

Research Investment Committee. Can we just start with the supply side at the moment, Jared, whether it's the Colonial pipeline and the issues there, we can solve them with higher prices. If you want to import some gasoline from Europe, if it's the labor market shortage, you can hire, put up wages. What do you see in that dynamic on the supply side. Can it all be addressed with higher prices? Well, some of it can be addressed, not all of it. I

mean semi conductors is the big one. I think that's that's an affected even the labor market possibly, uh in that latest report, and something is going to take a little while to sort out as far as we can tell. UM. But it's also not, you know, a sort of catastrophe. But most of the big headlines, whether it's in commodities or or in labor, we think can be addressed with higher prices, higher wages UM. And you know, it's it's

uh kind of a two period market. I think everyone's ready and I think proper should be strapped in for what could be very wild summer. But if we look ahead six months, we looked at the end of the year, UM, we expect fairly normal conditions, even inflation back down to levels that were more consistent with what we saw before

the pandemic. Sign on bonuses transitory, JAREDS. You've made this point that the conversation Tom and I were having early this morning ten minutes ago on the labor market, Steve Fault offering an appreciation bonus UBS for certain bankers getting a bonus if they get a promotion. That is all discretion were spending, Jared, in terms of just the extra bonus.

It's not base salary. And Jared, I just wonder from your perspective whether that plays into the fed's hands a little bit on the labor market that on either end of the waste spectrum, we're talking about bonuses and we're not talking about higher base. Yeah, that's this is exactly what the third wants. I think if if you're if you're worried about long term wage price spiral, I think I think you you can relax a little bit here

because assigning bonus is not a raise. You know, whether it's fifty dollars to show up for McDonald's you know, job and review or yeah then I mean or at the high end, these higher bonuses at the high end, these are not permanent salary increases. If they were, that's a different conversation. But so far there's no evidence of anything persistent because employers and workers both understand that. Again, six and nine months from now, things are probably gonna

be a lot more uh normal than we expect. Yeah, John, it was great. All from New Jersey sent me a fifty dollar check and said, sure there's change liftover. How did you count on McDonald's. I don't know. It was great. There were two value meal and you know what coffee? I went large. I got the extra large fries just to get me through today, Jared, you have a single sentence in your note that's just so so important and really wise. You gotta have the courage to buy inflation

surge when there's no inflation. But then, what do you do when inflation expectations finally go? What do you do when the expectations of inflation are finally there to sell? Well, look, let's let's look a little bit of history. Okay, our economists expect I think three point six percent cp I this quarter. Um, you know, I think that's exactly right. And if you look at what's happened in the past, we've seen inflation surgeries above three and a half percent

just the past thirty years. There's been quite a few of those occasions. We looked at the market, you know, impact market data around those prints, and if you bought all the inflation trades and commodities, you know you're versus us, etcetera on those occasions past thirty years, on average, one

year later your inflation trades loss money. Now, So that so to me, that says that if you believe the inflation trade, now you know it is something you have to buy when it's already priced into the market at those trades, some of those trades have already done really well, then you've got to be convinced that this is the big one, and we just don't see any evidence of that. Instead, we we think investors still have to keep a kind

of a balanced approach within the inflation trades. Within the inflation trades, we still like financials very much, but I think that the you know, the commodities and materials and energy, there's just not enough evidence on that on the on that side, and if you do see more more dips um corrections, even in attack and the growth kind of trades,

for a long term investor, those have to be viable opportunities. Jared, what do you think of the fans David Costons at the dust Star, Gold and Sex making a big splash this weekend on valuation of the things. Do you agree that the fangs actually offer value given their growth characteristics

versus the ten uere yield. I think the trading vehicles, you know, perhaps at this point some of these big megacap growth trades um and so you can use they're they're they're almost kind of like a macro expression of what's happen with growth inflation. But but they're not. I don't think people are looking at them as devalue. But by any means, if you if you like the sort of the tech and and and and growth type stocks,

I think small and midcaps are more attractive here. Jed caught up with a Greater to a black Rock a couple of days ago on Friday, and he was talking about running a higher cash position across some of the portfolio. Was something in the double digits mad teens. Maybe does that make sense going into some attempt that dry powder. I think it does make sense to have to have some cash ready to deploy if it's if it's a

question of something tactical to to be ready. If there's some big dislocations you know and I or either end, we could see overheated reflation trades um that you know you want to sell to go rotate back into growth. You could see the reverse where we get another bad job sprint and people start to really get gloomy. Either case,

you want to have cash ready. I don't think it's a it's a good moment to be sort of allocating higher permanent portfolio positions into into cash or anything else that's um that's gonna change your fundamental mix because right now, you know, there's so many cross currents. You can roll the dice and and and any you know, it's can tell you any number of ten different things. When there's that much confusion in the market, that much confusion the labor data, I don't think it's a good time to

make permanent decisions just quickly without challenge. What would fund that position? Would you trind broadly or some hi specific Well, it would trade some of the mega cap stocks, whether it's tech or or otherwise. Um, my colleagues to be the superman, and is I think been fairly you know, uh, you know, neutral on on some of the mega cap stocks for a while and and uh and at the bank where we're much more favorable on small and mint caps.

So I think that the trades that have already done very well, the really liquid names, are the obvious places to look for cash um and and that can even include an investment great credit for multist portfolios. We're kind of bearish on on that part of the credit market and see better opportunities elsewhere. Gonna see you gotta cash up on a range of asuas John would have been head of Research Investment Committee, this is the right person at the right time to talk about the retail cadence

of America. Friday, we get retail from the lowest price point to the highest price point. And Steve Sadov is expert at this. Mr Sadoff is with master Card senior advisor. But that barely describes his contribution and retail herbal lessons and all that boom a million years ago in shampoo. It's Sadov's fault and he's the guy at SAX who

exclusive is literally inventing that out of pixie. Does Steve say, let me talk about MasterCard and the knowledge that MasterCard has tick by tick and you say it even goes over to the department stores are enjoying this resurgence. Good to see you, Tom, And yeah, I think that the month of April, the master Card spending pulse numbers show that the consumer is really coming back with a vengeance.

You saw overall sales and this is now not just the MasterCard sales, but it cuts across all forms of tender. Sales were up twenty three point three percent versus year versus year ago, but importantly they were up ten point eight percent versus nineteen and this is ex auto and gas. So you're seeing a consumer that's coming back, and it's

across all sectors. You mentioned department stores, but it's in restaurants, it's in the categories like uh, jewelry and apparel, and you're starting to see the consumer saying, hey, I want to get back out of it. Let me ask yourself side question, then, are we pulling forward next autumn sales? Are we redoing the closet now where nothing ebbs as we go into the holiday season? What is that dynamic? Well,

there's no question that that we're redoing our closets. We've been wearing sweatpants for the last year, and you're seeing a new fashion cycle starting. Uh. The guys in the gene business are all talking about bagg year higher ways. It's a new newness, excitement getting out again, and you're seeing it hit just the apparel fashion, but you're seeing

it in the UH handbags, the shoes, the jewelry. So I don't know that it's necessarily pulling forward the volume from the fall because there's so much pent up demanded savings that's out there. And the interesting thing is it's not just online anymore. Online is now of all commerce and growing still at but people are back in the stores and brick and mortars started to see that ent up demand. Steve, I'm going to avoid the baggy, higher waste things somehow. I don't think the higher waste genes

can work on me as well. Steve, you are a student of all this. And if I can move up the scale to luxury and such, will there be a consolidation we have? We have luxury which is three big French companies. You know it better than me. But how does how does how do we come out of this on an equity basis further consolidation or is it going to be entrepreneurial with I p O s and the rest. I think it's gonna be a combination of both. That you have, the strong ones are going to be picking

off some of the big brands. You'll see the consolidation for the lvm ages and the reached months of the world. But you're seeing companies like the Tapestries performing uh much better. You're I think you're gonna continue to see these niche segmented brands that come out and do their I p O s. Uh. The consumer wants values, they want a story, they want to and I think that in the luxury space you're going to continue to see a lot of innovation.

Steve said, how did you bring it back to master Card in your work for them now as a senior advisor? How is our relationship with our cards changing? There's a lot of dynamics in fintech and digital dynamics. How does master Card model that forward? Well, I think what you have as a consumer that is going much more cash less, so that they want touchless, they want ease of transaction. They still love their cards, and I think that it's it boats very well for the master Cards of the

world in terms of the changing behaviors. And it's not just the transaction, it's what you do with some of the data and the analytics and the ability to understand consumers better. Right. I think that this is the value added proposition that all of these UH retailers need, and you're seeing a lot more of that coming out of the use of data and meeting the consumer needs. On a level of one, What is the permanent change of the consumer out of this natural disaster we've all lived.

I think the consumer go back to the value and values. They're want to be safe, they want to be able to get what they want when they wanted. This omni channel shopping is here to stay. Uh. These are some fundamental changes that had started earlier before the pandemic that it probably accelerated six years over the last year in terms of the shift to come the channel and segmented

and differentiated brands. You just described Amazon. They're doing an a trunch offering today of a gazillion dollars in bonds. How does Amazon adapt to the Steve Sadoff world. Oh, Amazon's a winner. I think the Amazon's the Walmart. The targets continue to do well. Doesn't mean they are the only ones that are going to do well. But marketplaces are important in this environment. They're not gonna be Amazon is not the only marketplace. You're gonna have the far

fetches of the world that will do well. But the consumer loves convenience ease. Amazon sets the standards the way that they do, the pres dentation of the product, They understand the personalization. That's going to be the expectation. Amazon's a winner over time, but I think that there's gonna be a lot of others as well. And you also have the new evolving, whether it's the resale, the rental. All of this is this new age in terms of how retails evolving. S does Amazon take luxury from luxury?

I mean, as Gucci gonna actually sell off Amazon. My guess is the answer is probably not. I think that the Gucci's and the lvmhs are going to play in other kinds of market places. Maybe they'll play in the far fetches, the Netta portes, the Sacks dot com which is separated from the full line stores. I don't know that those brands play in the Amazon world. But Amazon will play very They'll be the major player in uh in apparel. I'm just not so sure it's gonna be

at the very high end luxury. It's been too long. Thank you so much, greatly appreciated inventing retail and exclusives at Sacks and of course a master card as a senior advisor. This is the Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays from seven to ten am Eastern on Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from the best in economics, finance, investment,

and international relations. And subscribe to the Surveillance podcast, on Apple Podcast, SoundCloud, Bloomberg dot com, and of course, on the terminal. I'm Tom Keene, and this is Bloomberg