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tv   Bloomberg Markets  Bloomberg  March 1, 2016 12:00pm-2:01pm EST

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from bloomberg world headquarters in new york, i'm scarlet fu. alix: and i'm alix steel. we are seeing the best first day of march in 14 years. we will see if they have some staying power. berkeleyshares of taking a dive. cost-cutting lies ahead. alix: apple and the fbi prepared to face off in a security versus privacy hearing. we will have it live for you when it happens. scarlet: we want to get a snapshot of today's market activity. julie hyman has been tracking the latest session highs. march 10 supposed a 2.2% gain. julie: and it also rises more
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often than not. i was looking at the research group. 68% of the time going back 50 it.s, we see past performance does not determine future results, but you do see that pattern. highs of the session right now. again almost across the board with the exception of utilities. thanks and technology lead the upside. consumer and discretionary also help leading the gains. a lower than average volume we have been seeing is starting to change a little bit today. it is about in line with the 20 day average.
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that has been lower than the past 100 day average. that we are catching up today has a lot to do with a surge in volume in energy names today. a 66% gain over the 20 day average. there has been quite a bit of volatility. russia meeting with the heads of has createducers some volatility. oil is also rising to the highs of the session. energy movers that we are watching in terms of the individual stocks being affected by the gains. a lot of the services providers are gaining on the day. the s&p 500 trading at its highest since january 7. it seems like it is very much a risk on rally so
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far. gold which has been rallying so much and people being concerned about global growth, is coming down today. seeing selling in treasuries today. that is pushing yields hires -- higher. we have the 10-year note. the yield has been rising. coming on the back of that manufacturing data that you all alluded to. not falling by as much as estimated. alix: hasn't bottomed? that's the question. scarlet: let's check in with mark. voters are heading to polling and caucus places today.
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it is super, the busiest day of presidential primaries. democrats will vote in 11 states and american samoa with 865 delegates up for grabs. republicans will vote in 11 states with 595 delegates at stake. p.m. for a5:00 special two-hour edition of with all due respect for extensive super tuesday coverage. president obama is meeting with senate republicans who promised to block anyone he names to the supreme court. they are hoping to keep the seat open for a republican to fill. obama will discuss the historical precedent for confirming justices in an election year. loretta lynch is calling on tech companies and the government to find common ground after a dispute over the use of encryption. cyberarks for the rsa security conference in san francisco, the attorney general
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says we have to be engaged in open dialogue so we can draw upon each other's resources and learn from each other's perspectives. bloomberg west to anchor emily anchor- bloomberg west emily chang will have an exclusive interview with loretta lynch right here on bloomberg television. the cease-fire is in day 4. the united nations will take advantage by delivering more humanitarian aid. both sides in syria's civil war have reported violations of the truce. the u.n. hopes to deliver aid to areas under siege by government and rebel forces. day.l news 24 hours a i'm mark crumpton. u.s. stocks kicking off
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with a bank. the s&p 500 rebounding from its third straight monthly decline. guest callednext for a 10% decline when he joins us at the end of january. doug ramsey, chief investment officer at wheaton capital management joins us now. call for a 10% .ecline back on january 25 w do you still see another 10% direction in the cards? to theink from here bottom of the cyclical bear market we expect it's going to be larger than that. i think the low we put in 2.5 solid one.s a pretty bear market rally is way. that would be a 10% bear market rally. we are playing it to the extent
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that our disciplines allow. we covered some short equity hedges in both january and the second week of february. our net equity exposure -- we in ourlot of latitude technical funds. we can go between 30% and 70%. we have been as low as 32%. %. are now about 43 there were some bottoming signs two and half weeks ago. we do this rally in the context of a broader bear market. it's the decline around the world, just numerous factors. tell us what the distinction is here. -- how did thee mega caps fit into this? havee mega cap valuations
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not come down all that much -- are still much higher than the average stock. one that we have been focused on recently to illustrate that is the price to sales ratio on the market. it's still up in the top 5% of all historical readings. it's 1.7 times sales. this is on the s&p industrials. the only times you have been higher than 1.7 times sales historically, basically 18 months on the either side of the tech bubble in march of 2000. small caps are not cheap, but they haven't run out most of the valuation excess as we saw 12 or 18 months ago.
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the relative risk we think is in those big stocks now. alix: so in the big stocks, what kind of level do you foresee in the s&p when that cycle starts to turn? we are more on conditions that we are on price targets. we have a fundamental target on the s&p 500 of 1705. that is virtually exactly a 20% incline. 1705 based on multiple valuation measures going back to the mid-50's, that would be long-term median valuations on the s&p. coverget there, we will more hedges regardless of the other conditions. bear market's typically take you down to average valuations and a little bit more. i think a reasonable target for a cyclical bear market would not entail ansarily
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economic recession. we could certainly get down to 1600 which would be about -- i think that is a pretty likely outcome once the rally has run its course. the dow is up by 300 points right now. can you give us your timeframe for this rotation? >> this rally could last a number of more weeks throughout the month of march. we would probably be looking to increase hedges. you talked about the weaker volume. that's a little bit of a concern. the veryd out defensive nature of market leadership. the fact that there has been a huge flow of money into these defensive stocks. food stocks. campbell soup. kellogg's. mcdonald's.
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all these classically economically defensive stocks have held up very well. the cyclicals, it is just the yawning gap. i think that will close. usually near the end of a bear market -- that could happen in the next two to six months. away --ready 10 months the typical cyclical market is 10 to 12 months. scarlet: the value stocks outperformed growth stocks just a touch. talk about what you plan to do. you have avoided real estate investment trust since spring 2013. if we get to the bear market following this rally, talk about how you may look for opportunities in those sectors? >> it is getting interesting from a valuation basis. i don't think the decline is over. but that would be an alternative
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position we could add later in the year. i think on a sector basis, the energy stock valuations are there. i expect we will take a pretty big position in energy stocks at some point later this year. also emerging markets. -- you lot with these have the u.s. market at about 20 times earnings. there is an enormous valuation gap that will begin you to close. he talk about the rotation into value stocks. that's one good outcome of a bear market to the extent there is any sort of good outcome. you typically see leadership rotation out of expensive stocks and it is happening right now. with the value stocks. it confirms our bear market thesis.
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alix: thank you for your insight. scarlet: doug ramsey, chief investment officer of google wheaton capital management. barclays will be cutting its shares. and today is the biggest test of the 20 16th presidential race. will trump have the big night most are expecting? shares oft: valeant hitting a low. can the pharmaceutical company survive this? ♪
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alix: welcome back to bloomberg markets. i'm alix steel. scarlet: and i'm scarlet fu.
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will no longer pursue a combination with united technology. united tech has set the honey will offer was too low and there were antitrust concerns. expects morgan stanley to hire 75 advisors to target rich latin americans as part of a strategy to focus on the region as other international banks retreat. morgan stanley would have 435 people helping foreigners with their u.s. investments. alix: sports authority is preparing to file for bankruptcy. upals will be there to pick the pieces. sports authority has talked about selling stores and intellectual property. modell's may end up buying some source -- stores. that is your bloomberg business flash update. scarlet: barclays is hoping some short-term pain will pay off in the wrong -- long run.
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shares plummeting today as it cut its dividends. the ceo talked about what is important to barclays at these -- this time. isthe most important issue the consumer business, corporate business, and investment banking business. that core franchise generates a return on tangible equity in double digits today. that's a very important thing. investment banking industry is not covering the cost of capital. on view is we cannot rely bank balance sheets to fund economic growth. we need a robust capital market. in ae to believe that robust capital market, the investment banking industry will have to be financially healthy and it will be. vonnie: some analysts have suggested some quite radical
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action at barclays. at bernstein's they said, maybe they do notsell -- think you are big enough to compete in the u.s. market. what do you think about that research? greatthink we have a business model being a transatlantic bank. i do believe there is value in being large and diversified. having the balance of a wholesale business throughout the financial crisis demonstrated that there is a diversification in the revenue benefits the safety and soundness of those large banks and we have those portfolios of assets. we have a core franchise. we have the defined noncore businesses of businesses that we are getting out of and selling. we need to accelerate the winding down of that business so withnverge group results
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poor results and the stock price will take care of itself. scarlet: that was the barclays ceo earlier on bloomberg. alix: still ahead, more on barclays. u.s. stocks are sitting near session highs, bouncing back after yesterday's rough and to the month of february. what stocks are on the move when bloomberg markets comes back. ♪
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scarlet: this is bloomberg markets. i'm scarlet fu. alix: i'm alix steel. scarlet: julie hyman has a check on the company's missing out on the rally. julie: the rally is continuing to extend. 2.2%e seeing the nasdaq up
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, the dow gaining 279 points. but there are some losers. this company came out with a earnings yesterday. take a look at this two day chart. down nearly 62%. after the close of trading, executives held a conference call that failed to reassure investors and then some. there's an sec investigation. in response to a question about the investigations impact on fees and expenses related to relationships with another company, the ceo's head there are costs that flow through. it is unclear what's going to happen in this case. kevin barker said profitability for this company is still a long ways out. this is being reflected in what's going on with the shares today. also moving to the world of shoes.
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crocs coming out with its numbers. loss of the price of shares is -- the company's forecast also below analyst estimates. the medical device maker, third-quarter operating margins are below what analysts anticipated. the company apparently affected by currency. the shares are down. scarlet: barclays cut dividends for the next two years and reduced its stake in our cleat africa -- barclays africa. alix: joining us now is michael moore, head of the u.k. finance team in london. a lot of pain here. what was most striking to you? there's the cutting the dividends, getting out of africa investment.
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the call when he said he was not going to exit investment banking. >> i think the dividend was the big surprise to investors. investors thought they would try to boost the capital levels. called for them to shrink the investment bank to do that. they want to stick with that business in its current form and chose to cut the dividend in order to fund a quicker run down of the non-core business. that they have been trying to bring down for a while now. for some companies, didstors say, thank god you it, now i feel better about your company. what can he do to make investors feel that way? >> i think they want to see a little bit of growth. wantt growth, then you
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some payout. barclays has been building capital since the financial crisis and investors have been waiting for some sort of payoff. it looks like it's going to be further down the line before getting a larger dividend or buyback. i think you are seeing some selling here. scarlet: absolutely. the bank is drinking. it's going to pair down its assets. where is the growth likely to come from? >> it seems like he is betting on it coming from the investment banks. from that business coming back over the next few years. they have a strong credit card business. they have a strong u.k. consumer business. those have been at the core. those were never in question. those have been producing pretty good returns. it's the non-core business that's dragging things down. it's also the investment bank
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weighing it down. they brought him in as an investment banker to turn that around. alix: thank you, michael moore. scarlet: still ahead, about a quarter of the nation will vote today on super tuesday. will donald trump and hillary clinton pull out the victories most are expecting or will we get upsets? ♪
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♪ from bloomberg world headquarters in new york, welcome back to bloomberg markets. i am alix steel. scarlet: let's start with the
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headlines this tuesday afternoon. mark crumpton has more from our news desk. mark: thank you so much. u.s. supreme court has issued its first opinion since the .eath of justice antonin scalia the court upheld a lengthy prison sentence for a man convicted in a child pornography case. wrote thetomayor sentence. the united nations eight security council votes today on whether or not to impose more economic engines on north korea. the move comes nearly two months after the regime carried out an underground nuclear test. the sanctions would prevent the expectation of chemicals for foreign currency. the last will and testament of osama bin laden has been declassified and made public. he claims he had 29th million
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dollars -- $29 million in personal wealth, the bulk of which, he wanted to be used on jihad. as scarlet mentioned, it is super tuesday. donald trump hillary clinton are hoping to put some distance between themselves and their rivals. , trump'sepublicans favorite and most of the primaries and caucuses being held in a dozen states and territories. ted cruz and marco rubio are in a battle to stop him. hillary clinton is expected to extend her lead over bernie sanders for the democratic domination. roughly a quarter of the nation 's voting today. join us at 5:00 new york time for a special edition of "all respect."l due global news 24 hours a day, powered by are 2400 journalists in more than 150 news bureaus
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around the world. crumpton. back to you. alix: thank you so much. they give into super tuesday, lookre now taking a live at a trump rally in ohio. megan murphy, the hardest working woman on television, with more of what to expect on super tuesday. night, wherea big does the republican party go from here? : the republican party is in a real crisis. they are trying to think among do?selves, what do we how are we going to keep lawmakers on the line -- are we going to risk the senate, are we going to look ahead to the statehouse as we have held and policy roles? this is a real moment of reckoning for them. they need to decide if this is
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going to be the eventual nominee -- which it does look like -- how are we going to deal with this. some members have already signed themselves over. chris christie endorsing trump. the governor of maine endorsing donald trump. megan:. i think there will be a wave of establishment figures. was a landmark moment. there are going to be others who will not fall down that line and will say, look, some of the things coming out of his mouth are reprehensible to me, and the party. i think we will see some serious warfare in the weeks to come, if he has the kind of night we expect him to have tonight. alix: why did this catch the republican party so off guard?
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: it's a great question. it caught a lot of people off guard, it caught the media off guard. the trump juggernaut is a of things. how people can pay for college, can't get the credit on their homes -- he is speaking to a moment of anger in this country, .nd has really tapped into it his visions are all over the map. he likes planned parenthood, except for the abortion thing. he will force people out, but let them back in if they are good people. i think people are surprised that a person with such disparate statements could make such progress, but he is becoming unstoppable at this point. party leaders have to come to our awareness -- come to awareness of that. scarlet: the attacks from
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marco, ted cruz, a lot of people are saying too little too late. see ifwe will be able to the attacks have helped. there are a lot of people in the party who see the race going down to the level it is, saying, we don't want any part of it. whether that will help marco rubio winning in the general election against hillary clinton, her campaign will be clipping. scarlet: she will be working all night. alix: bitterly. literally. our coverage of super tuesday continues with a special edition respect."all due valeant, its biggest show hotel -- shareholder felt the pain. scarlet: joining us now is
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cynthia cohen. talk about how it has been a mammoth 48 hours for the company . what has changed? cynthia: the stock is not as down as much today. the problem with the situation we are in now is because there is no information really, since they stopped from having a call one,rday -- they schedule and then cancel that. anything could happen now with the stock. it is starting to john great. a lot of analysts have price that are $100, even $200 per share. anything could hurt the stock. the company really has to now get together and put a face together for the public, and do
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a call. i think they know that. i think they are scrambling to do that. that is really necessary now to stem the bleeding. alix: this stems from your finding that the sec had an investigation open for valeant. that is not necessarily bizarro news for the world of corporations, and for valeant. why was this such a trigger point for the stock? cynthia: when there are some investigations, that is not necessarily a shock. think it was not disclosed, and the investigation was starting in the fourth quarter. we don't know what it was about. it was what the volatility was about in the fourth quarter. we still don't know what the investigation is about. certainty is what makes this worse.
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investors want to know -- and, what it could mean for financial penalties down the road, that is the big risk. scarlet: it is hard for them to quantify the risk when they don't know what the investigation is about, and what the punitive risks could be. cynthia: some research i looked know,ys, given what we total fines at this stage took like $500 million to $2.5 billion. that is all the legal action they have estimated. the numbers really are guesses because we don't know what the investigation will find, and principally, what they are about. see,, we have to wait and which is how we have been operating for a while now. from the stock perspective, even if it is just a little bit, the more information they could get the market at this stage, the better. alix: clarity and --
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thank you. scarlet: coming up in the next 20 minutes, greece being a bailou roadblock in the bailout package. and: harrison associates now glencore. scarlet: is privacy a real risk here? ♪
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♪ abigail: welcome back to
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bloomberg markets. rally led by biotech. one of the biggest drags on the nasdaq at this time is a now small cap biotech name, pcd therapeutics.- shares are down, plunging last week, after the f pa declined an application on a key drug. today, down 25% after a fourth quarter loss. one of the top nasdaq 100 stocks at this time is seagate technology. shares are up sharply. analyst whoan
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says it is from comments at a recent conference. he said that business conditions are not as bad, and likely to as improve. now, more bloomberg markets. ♪ you're watching bloomberg. i am scarlet fu. alix: i am alix steel. here is your global business report. scarlet: barclays is serving tough news to investors. alix: a new suitor is to assign london stock exchange. scarlet: greece hitting a roadblock with creditors. we begin in london, where barclays dropped a bombshell on investors. the british bank slashing dividends and reporting of fourth quarter profit that fell 50%. joeas the first for
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staley. >> we will exhibit five the bank .eeing a transatlantic bank we have had a number of franchises in the transatlantic -- generating double-digit we're the number one credit card issuer in germany, lots of investments. scarlet: staley says he will scale down the stake in africa. alix: a bidding war may be brewing for the london stock exchange. exchange saysal it is considering making an offer. and i can't know already owns york stock exchange. if they jump in the ring, they
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will compete with dorsch. scarlet: greece and its creditors have to agree on reforms that would lead to a budget surplus. agree on howannot to come to that. greece wants lenders to provide greater debt relief. it adds to their troubles as they threaten to strand thousands of migrants in the nation. glencore's worst year as a company. its net income plunged and commodity prices tumbled. glencore executive struck an upbeat note, the chief executive officer says they will scrap its dividend, cut its cost, and sell assets. forlet: luck may change
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macau casinos. revenue in 2014, 5 times that of the las vegas strip. your globals business report. for more stories, visit bloomberg.com. we are looking at live pictures of the house judiciary committee, where apple and the fbi will be testifying in just a few moments. we will bring you the q&a and testimony live. ♪
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♪ alix: welcome back to bloomberg markets. and james comey are minutes away from ta giving testimony on capitol hill. interview.e
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gethat i would do is say, the greatest minds and industry to work with the government to come up with a solution that could be laid out to the american people in a way that does both. scarlet: our next guest says abouts not a battle privacy rates, but rather, a battle about appearances. he joins us from palo alto. apple helps prosecutors's unlock iphones previously, and only recently decided to drop a line > -- draw a line in the sand. why now? unlock015, they help secrets for law enforcement in the u.s., in the first half of 3000 times alone.
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in the san bernardino case, apple has already uncovered secrets held in the icloud. they drew a line in the sand around the phone, and i think in fact it is a pr issue. apple made a very spectacular request publicly for apple to -- the fbi made a request publicly for apple ii unlock the iphone in the san bernardino case, and i think they chose that case because it made apple feel pinned against a wall, quote unquote, helping the terrorists. asked apple to ite the request sealed, but became public. it starts to feel like a hot and public debate where apple says, we stand up for customers, and the fbi says, are you accidentally on the side of terrorists.
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of course, no one actually think that apple is on the side of terrorists. what is actually about is about resources. the fbi could crack the iphone themselves. it is possible. the chinese government has already done so. the nsa has already done so. the fbi is of the asking apple to do so. here is what will probably happen. apple is raising the bar. they say, you are relying on an perhaps979, very old, obsolete. congress has not come up with how to make these kinds of requests mandatory. let's have that debate today. instead of having to reply to every single request from a da, let's raise the bar so there really truly is only issues of national security. that is probably what is going to happen. the guy apple sent to testify
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ewell, theruce s government relations guy, the lawyer. he will make a legal case. they know this is a legal dispute. they know they will lose, but they did not send the engineer, the product person. scarlet: of course, that is no question it's either because victory -- courtroom either because apple had a courtroom victory. alix: the rhetoric seems to be that some point apple will comply, but they wanted to make a point before they did it. >> that's exactly right. i think they scored a partial victory because they will thelenge congress to raise
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bar. is there an elevated requirement for an elevated more and, for example. does after reach -- doesn't have to reach a level of review in the doj to get the attention they have given freely in the past. thinks the terrorists will get away with it. there will be an accommodation. in the in the meantime, there
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is a lot of public theater. we are looking at a live shot on capitol hill where the fbi director will be testifying along with the apple executive, and lobbyist, according to michael. the outcry over privacy surprises me. >> i think the privacy -- i'm very glad that privacy is such a big issue -- but, what privacy turns into in this context is a currency and trade. apple is saying, not only to its customers in america, but chiefly, outside of america, where it has been a death match with android. they have a great dominance in the united states, but are perhaps losing the race outside the u.s. europe and asia are very concerned about privacy, and are concerned that their privacy could be compensated by an judge thousands of miles away. you are seeing the eu and the united states enter into a fresh battle of a fresh redefinition of the safe harbor provision that makes it clear that european data stored by american companies has to be stored differently. are verycitizens concerned about their privacy. you can credit, or discredit, julian assange. the issue of privacy at large
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has captured the attention of consumers around the world. apple is very much in the middle of the firing line. you will see the apple is trying to turn this into a statement that, you can trust us, people the world, we have your back, we will protect you. keep buying art iphones instead iphones, phones -- our instead of google phones. we see the bar being raised by the fbi, asking for data. i think you are going to have a stat o set of standards emerge. something that always looks like a very easy solution, a group of people who will come together for law and government, and convene on how best to comply with important issues of mice and men. that is probably what will
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happen. over the coming year or two, there will be a set of settled rules, promulgated by agencies or members of congress. then, we will see i set of cases that will further define or refine that set of rules. i don't think you will see a lot pr.ngoing alix: thank you very much. we have to leave it there. a great breakdown of what to expect. scarlet: we will stay on the story for you. up next, we will take you live to capitol hill in washington where apple and fbi director will be testifying at a house judiciary committee. alix: at 4:00, don't miss loretta lynch. ♪
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alix: it is 1:00 p.m. in new york. scarlet: welcome to bloomberg markets. ♪
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scarlet: from bloomberg world headquarters in new york, i am scarlet fu. apple and the fbi square off on capitol hill. scarlet: you are looking live at the room where the house judiciary members will be questioning james, it. but first, let's go to julie hyman. julie: this big bounce inequities is interesting. once again, there aren't huge catalysts. china came out with worse than expected economic data, leading investigators -- investors to stimulus is more
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likely than not. what does this mean for the longer term? it looks like at least for now, the stocks are pointing to the bottom of the year on february 11. if you take a look at the bloomberg, i have gr are on the s&p 500. consumer discretionary stocks have led percentagewise. as you can see, all of the groups are in the dream. -- in the green. and in terms of the individual one-monthis is the chart. mcnamara and -- also
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has been bouncing because of on thess worse numbers casino business, particularly in macau. alix: it had such a horrible decline before. julie: yeah. a little bitn is suspect. it is a lot better than we thought. on it?se has wound up oil has had a bounce back. but it is more substantial because the lines are more substantial, up 31% in that period of time. then there is gold also worth mentioning since that stock's bottom. it has had a slight decline. .gain, not surprising
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interesting is, obviously, this is much less of a trend than we so with either gold or stocks because there is still that appetite for hedging at the very least in the market. you both still, despite the rally, feeling a little nervous, it is like. withet: let's check in now mark crumpton. you so much. we are moments away from a house judiciary committee hearing where apple's lead lawyer in the head of the fbi, james comey , who has just entered the room, will testify. tim higgins of bloomberg news is covering the story. he joins us live from capitol hill with the latest. the united states, where is the country in the debate right now over digital privacy rights and national security? tim: it is a debate that has no
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clear winner at this point. you look at the recent opinion data and the country is essentially divided. and d the nation wants both. they want privacy and they want security. that creates a question for capitol hill. we will be looking closely at lawmakers in the mood they have on this subject. mark:mark: it was a breakdown on where either side is on this debate, where apple stands and where the government stands. what are their arguments? tim: we will see apple stop layer come in here today and frame a couple of questions, key questions that they have. a, should the country prohibit a company like apple to use the latest technology to protect your data? fbi force apple to make something they don't currently make. what apple is saying is that they are asking them to makes observed code to unlock the
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iphone. those are the key questions on apple's side. and the fbi will frame the debate as privacy and security that the nation wants and the data they are looking for a similar to the kinds of data they would traditionally find in maybe your file box or in your office normally. and if they need the tool -- and that they need the tools to get into these devices. mark: there was a ruling in brooklyn, a federal magistrate criticized government in its fight with apple. this had to do perhaps with unlocking the phone and getting information for someone who was a convicted drug dealer. what ruling will that have? will it have what the judge called some presidential value -- precedential value. tim: it goes in is a win for apple today.
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it doesn't affect the discussion in the court in california though. mark: tim higgins joining us live on capitol hill. congressman gundlach opening the committee hearing. director,y, the fbi and apple's lead lawyer will be testifying about privacy versus national security. alix: the biggest names in cyber security are in san francisco today. apple's case is likely a hot topic of the conversation. allen is the former u.s. coast guard commandment and is the lead responder in hurricane katrina.
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what are things like an rsa with apple lurking in the background? commander allen: everyone in operations is here. you can imagine that to the apple case has dominated the conversation. scarlet: what is the common comment you have heard? commander allen: security and privacy are two sides of the same coin. they are connected and they cannot be disenfranchised from each other. these issues are very nuanced. they have strong compelling arguments on both sides. i think there is a general agreement that probably the last place you want to try to solve this is on capitol hill or the courts. you need a measure of trust between industry, the government, former governing officials, and those officials are going on right now. these things have to be resolved
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by the people who are the competency to fix it. has to be between apple and tech. commander allen: in my view, we need a common ground to have this conversation in. there's a number of people who are working on it. the equilibrium project discussed here on thursday, the chertoff group has put out a on basically the history of encryption and why it is very difficult to create a backdoor into a system and not have that exploited at some point. we need to put anything on the table and everybody needs to be honest, frank and transparent. and we need to innovate. this is one of those things that we have new technology brought into our society, much like nuclear power. we need some discourse around it. scarlet: right, that discourse, that discussion, the compromise might be years in the making. this might be an obvious question, but can't the
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government just hire someone from hewitt cap -- hewlett-packard to do this? allen: if you have legislation, basically, the same thing is going to happen. what we need to understand is we have a connected society and it is agnostic to borders. there are global of locations to this conversation. there's issues about competitors of u.s. i.t. firms. all of that needs to be taken into country of -- into account. i like the way you put that, agnostic to borders. effective a case, how is it if it does not include other countries? commander allen: i think we need to understand that, if we put i.t.tions on the manufacturers in this country, though same conditions will be placed in china or elsewhere. and we will have to look at this as a global condition of the
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future and what technology is doing to us as a society and it needs to be discussed in that context here -- context. what do you hope comes out of this conversation? allen: i would hope they generate light and not heat. we need a reasoned discourse on this. into a decision prematurely with all the factors considered for the folks that live in this technology and have to deal with it in a law enforcement situation everyday, it would be to close the argument too soon. scarlet: what would be the worst case scenario? commander: i don't want to speculate. my point is this is a very nuanced situation that requires some really deliberate discussion. new ways of thinking
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about technology and society. this is a threshold moment in history where technology is changing relationships and challenging the traditional notion of physically-described borders. this is something i don't feel can be reduced to a simple court case. alix: we just spoke with michael fertik. he has some very strong words. he says it all boils down to pr and reputation in that apple has a long backlog of requests from the fbi, but it is this case, this time that the fbi and apple choose to lock heads. what you think about that kind of theory? allen: you are going to -- you're not going to solve it by contact avoidance. you're not going to solve it through -- there is a
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compelling argument after the events examiner do now. but we need to understand there are long-term applications. it requires us to be thoughtful and how we are going to move forward. there will be a discussion panel on thursday that will delve into this. we need to listen very closely. scarlet: we survey will need to. the context for this testimony on capitol hill today is that yesterday apple scored a courtroom victory in new york. how does that help frame or perhaps reframe the debate taking place right now? i've beenallen: involved in law enforcement my entire career. tom boarding ships at sea being involved in drug interdiction. it will require a new way to think about law enforcement varied it is probably -- law enforcement. it is probably overly simplistic.
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we will have to look at things like pattern of life, what other information that is out there that might make a law enforcement case, and how do we go about actually understanding how these individuals and trafficking organizations or whatever work and how we want to case in courte a that can stand up when we know we may not have access to the encrypted information. alix: thank you very much for your time. we will be right back on bloomberg markets. ♪
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alix: welcome back. scarlet: we have headlines we want to alert you to. dow extendingthe
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its gain by 300 points. 29 stocks gaining. -- utx down. alix: oil prices spiked immensely higher. you hear vladimir putin meeting with russian oil companies. you imagine they will talk about a potential freeze as discussed with other opec company -- opec countries. production is turning to slip a little bit. bailout could hear in the u.s. also strange rollover. -- e are seeing scarlet: we also did get some
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read on the broader economy as well. manufacturing is still contracting, but not as much as anticipated. that is certainly a good piece of good news for anyone who wants the u.s. economy doing better. construction also rising in january. alix: we are awaiting for fbi testimony.mes comey we want to get to tim higgins who is standing by on capitol hill. what can we expect? we will look for two things. apple trying to frame the debate here in congress, that this is a question of whether the government can limit their ability to make devices to keep people's data safe and whether the fbi can force apple to make something they say they don't have, that is a key to unlock these phones. we will also look for the fbi to frame the debate on the need of this kind of data to be
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accessible in criminal investigations to keep the country safe. scarlet: do we know where -- whether the lawmakers questioning apple will be tilted to pro or anti-apple? tim: we will be looking for this kind of reactions. it into thirds. a third of the group will come down very hard with the fbi. a third will be there with apple. it is that middle ground of uncertainty that will help shape the debate going forward. at this point, if you look at y are unclearhe about what they want. alix: who's coming from apple? lawyer, a's top veteran of several legal battles, including apples fight -- apple's fight with samsung
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over patents. kind of a legend in the valley. a quiet voice rabble, someone who doesn't necessarily in the limelight. does it say about apple that they want to bring in a lawyer rather than a technician who knows the software? in top executive meetings in the country -- and the company and has been integral in the conversations about security going back for years now. this conversation really started to ignite in a late 2014 when apple came out with its latest .pdate of the stop door the fbi was locked out at that point. that is when at the i really became unhappy with apple. there's been this behind-the-scenes struggle since then leading up to this point. scarlet: as we await james comey to begin speaking, he spoke last
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week, testified before congress on this topic. what is likely to be different? the emphasis is the fbi wants both things. they want security for data. they think that is of paramount importance. but they need the ability to have the tools for investigation they need for criminal and safety issues. wehink one of the issues will hear in the deck -- in the director's comment early on is the need for this kind of data that traditionally they had access to. now the way the technology is in the way we are living modern life is that the iphone has become the receptacle for so much of our personal life. think about what is in your iphone right now. it is financial data, health data, geographic data, e-mail, communication, photos of loved ones. it tells a story of who you are and the fbi is making the case that they cannot do the investigations they have traditionally done without that
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data. in some waysomey has a lot more way to -- oh, he is being sworn in. we will be listening into the testimony. let's listen in. >> i will begin by introducing our first witness, director james comey of the federal bureau of investigation. he began as an assistant united states attorney for both the southern district of new york in the eastern district of virginia. after the 9/11 terrorist attacks, director, he returned to new york to become the united states attorney for the southern district of new york. in 2003, he was appointed deputy attorney general under the united states attorney general john ashcroft. graduate ofey is a the college of william and mary. director, welcome. your entire written statement will be made a part of the record and i ask that you
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summarize your testimony in five minutes very we have the timing light you are well familiar with on the table. we are pleased you are here and you may begin your testimony. director comey: thank you for hosting this conversation and for helping us all talk about an issue that i believe is the hardest issue i have confronted in government, which is how to balance the privacy we so treasure that comes to us through the technology that we love and also achieve public safety safety, which we also hold very much a treasure. i worry a little bit that we have been talking past each other, both folks in the government and folks in the private sector, when it comes to this question of encryption, which we call going dark. take three oro four minutes and try to frame the way i think about it, any hope -- in a is fair-minded. and if it's not, i hope you will poke at me and tell me where it is not. first, that the logic of encryption will bring us in the not-too-distant future to a
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place where all of our conversations and all of our papers and effects are entirely private. that is, where no one can listen to our conversations, read our texts, reader e-mails unless we say so. and no one can look at our stuff, read our documents, read wings we file away, without our agreement. that ithe first thing believe, that the logic of encryption is taking us there. lot of good about this. a lot of benefits to this. all of us will be able to keep private and key protected from thieves of all kinds the things that matter most to us. our ideas, our innovation, our secret thoughts, our hopes, our dreams. there is a lot to love about this. we will all be able to have storage spaces in our lives that nobody is can get into. the third thing i believe is that there are many costs to this. for the last two centuries, public safety in this country has depended in large measure on the ability of law enforcement
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agents going to courts and obtaining warrants to look in storage areas or apartments or to listen with the appropriate predication oversight in conversations. that is the way in which law enforcement brings us public safety. it is very, very important and it has been a part of the balance in order to liberty. liberty.d sometimes people's stuff can be looked at and only with vacation and approval of independent judiciary. the fourth thing i believe is that these two things are in tension in many contexts increasingly in our nexus -- our national security work and in law enforcement work across the country. we see it honestly in isil's effort to get into this country and using apps that are encrypted to kill people in the united states. that is a key feature of the national secured work and a nationalediment to our
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security work. we cannot decrypt that which is covered by strong encryption. we see tragically last year in baton rouge were a pregnant woman was killed by some and she opened the door to. her mom says she kept a diary but it's on her phone which is locked. so the case remains unsolved. most recently as both mr. conyers and the chairman mentioned, we see it in san --nardino, a case where both where to terrorists killed people and left behind three phones, to which, the cheaper models, they smashed beyond use. and the third was left locked. investigation is done competently, the fbi would try to get access to that phone. it is important that it is a live ongoing terrorism
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investigation, but an investigator would try to use all lawful tools to get access to the device. that is what you see happening in san bernardino. the san bernardino case is about that case. it highlights the broader issue and will be looked upon by other judges and other litigants. but it is about the case and try to do a competent job of understanding is there some eels and are there clues to what else might have gone on here. that is our job. the fifth thing i believe is that democracies resolve these hard questions through robust debate. the fbi's job is very limited. we have two jobs. the first is to investigate cases like san bernadino and to use tools that are lawful and appropriate. is second thing is our job to tell the american people the tools you're counting on us to use to keep you safe is becoming less and less effective. it is not our job to tell the mecca people had to resolve that problem. the fbi is not some alien force imposed upon america from mars.
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we are owned by the american people. we only use the tools given to us under the law. our job discipline to tell people there is a problem. everybody should care about it. everybody should want to understand. warned-proof spaces in american life, what does that mean and what are the costs of that and had with it about that? i don't know what the answer is. it may be the men and people through congress and the courts decide. or it is something that we have to find a way to fix to achieve a better balance. i don't know. my job is to try to offer thoughtful expo nations about the tools the fbi has and to bring it to the attention of the american people and answer questions about that. so i'm very grateful for this forum, for this conversation. there are no demons in this debate. the companies and not evil. the government is not evil. you have a whole lot of good people who see the world about different -- see the world
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through different lenses and care about things. companies care about public safety. the fbi cares about innovation and privacy. we devote our lives to stop people from hacking into our devices and stealing her secrets. we care about the same things among which should make this any way an easier conversation which i much look forward to. >> thank you. i will begin by recognizing myself. director, there has been quite a bit of debate about the government's reliance on the all writs act, which most people had never heard of until the last week or so. that is being used in this case to try to compel apple to bypass the auto erase functions on the phone. it has been characterized as an antiquated statute dating back to 1789 that was never intended to empower the courts to require a third-party to develop new technology. how do you respond to that characterization?
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has the fbi relied on the act in the past? and is the act limited to the circumstances on which congress has already imposed a statutory duty on a third arty to provide assistance? director comey: i smiled little bit when i hear that because older doesn't mean bad. i am rapidly approaching that point. the constitution is as old or older than the old writs act. it is a tool that i used. every assistant u.s. attorney knows it. i used it when i started as a usa in 1987. it is an act that congress pass when the constitution was a baby so there was a vehicle for judges to get their orders complied with. and it has been used many, many times and interpreted by the courts many times, including by the supreme court. the cases at hand are simply about what is the reach of the all writs act. it is still good law, but how far does it extend, especially given how technology has changed? i think the courts will sort that out.
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there was a decision yesterday in new york. there will be decisions in california. there will probably be others because this is something law-enforcement enforcement is seeing all of the country. inin new york, in its brief, the california case, apple says prohibits the magistrate to find a means to override the auto erase options on the phone. just yesterday, a magistrate in new york upheld that argument. can you comment on that? director comey: not in an intelligent way because i haven't read the decision out of new york. i understand the basic contours of the argument. data at rest. i think this is the kind of thing judges do they take acts of commerce and try to understand what it means, especially given changing circumstances. i expect it will be bumpy. it will be lots of lawyers paid for lots of hours of work i'm a but we will get to a place where
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the courts have an understanding of its reach. successful inis requiring apple to unlock this phone, that won't really be a one-time request, correct? director comey: the issue of locked phones certainly not. fort will set a precedent other requests from the federal bureau of investigation and any other law enforcement agency to seek the same assistance in many, many other cases. director comey: sure, potentially, because any decision of a court about a matter is potentially useful to other courts, which is what a precedent is. i think, having taught to experts, there are technical limitations given how the phones have changed. but sure, other courts, the prosecutors, other lawyers or companies will look to them for guidance or to try to distinguish it. that technology, once developed, they could destroy again but then will have to re-create hundreds of times. how confident are you, whichever
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procedure apple decided to do, how confident are you that what you are requesting, which is the creation effectively of a key, a you -- how confident are that will remain secure and allow all the other customers of apple and when this is applied ' technologypanies as well, how confident are you that it will fall into the wrong hands and make everyone's communication devices less secure in a more secure? director comey: i have to google a little bit with the premise of your question. quibble a little bit with the premise of your question. we are asking apple to take the guard dog away and let us take the lock. there are doors. faith.a lot of maybe i don't know them well enough. in the company's ability to
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secure their information. they are very good at protecting their information and their innovation. no thing is for certain, but i think these folks are pros. >> thank you very much. conyers: welcome again to our forum. you are a regular visitor to the judiciary committee. director comey, it has been suggested that apple has no interest in helping law enforcement in any criminal case and that the company cares more about marketing than about investigating a terrorist attack. view, are companies like when generally cooperative the fbi asked for assistance,
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accompanied by appropriate legal process? did apple assist with this particular investigation? director comey: i think in general, all american companies -- i cannot think of an exception sitting here -- want to be helpful, especially when it comes to public safety because they have families and children just like we do. so that is the attitude we are met with. as ins particular case, many others, apple has been helpful to us. we have had a lot of conversations about what we have been able to get this device open. i don't question their motive. they have said we are not willing to go further. the government says we have an avenue to go further. but i don't question their motives. representative conyers: thank you. -- youst you are still indicated last week that this litigation may guide how other courts handle similar requests.
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could you elaborate on that, please? i have beeney: tried to explain to people that this case in salmon or dino is about this case. i worry about -- case in salmon adeno is about this case -- san is about this case. i want to make sure that the fbi remains grounded in the fact that this is about that case. my wife has a saying that helps keep me grounded. it is not about you, dear. it is not about the fbi. it is not about apple. it is not about congress. it is about an active case. any decision by a judge in any forum will be potentially precedential. the government lost a case yesterday in brooklyn. we could lose the casein san
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asnadino and it will be used a precedent against the government. that is the way the law works and i think it is a good thing. representative conyers: if you succeed in this case, will bf ei returned to the courts as will the fbi returned to the courts in other situations to demand apple and other private companies assist you in unlocking security devices -- secure devices? .irector comey: potential yes if the all writs act is available to us and fits the powers of the statute, of course. conyers: i think we can acknowledge that this case will set some precedent. and if you succeed, you will have won the authority to access encrypted devices, at least for now. ask us to provide you with that authority, since
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taking your position at the given that congress has denied you that authority so far, can you appreciate our frustration that this case appears to be little more than an enron around this committee? director comey: i don't think so. the administration's position has been to not seek legislation at this time. we are investigating a horrific terrorist attack in san bernardino. there is a phone to unlock belonging to one of the killers. reasonablethere is a request. if i did not do that, i'll to be fired, honestly. that this is a broader conversation. this case will be solved by the
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courts. it does not solve the problem we are wrestling with. representative conyers: i think the director. thank you, mr. chairman. chairman: mr. chatted for five minutes. representative chatted: i happen to be a graduate of the college of william and mary. anything nice she would like to say about the college of william and mary? director comey: i could tell there was a glow coming from your seat. representative chanot: there are currently two members. this hearing is about electronic data security.
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as is already indicated, this is about electronic data security, or as you described it, keeping our stuff online private. so i would like to ask you this and it may seem a little off topic. but i don't think it is. a few weeks back, the fbi's general counsel james baker acknowledged that the fbi is "working on matters related to former secretary of state's use of private e-mail." officials said that hillary clinton is not a target of this investigation and it is not trending in that direction." the president then weighed in, even though he rarely had never been briefed on the matter, commenting he did not see any national security applications
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in hillary's e-mails. obviously, this is a matter of considerable import. is there anything you can tell us as to when this matter might be wrapped up one way or the other? director comey: i can't. as you know, we don't talk about our investigations. what i can assure you is that i am very close personally to that investigation to ensure we have the resources we need, including people and technology, and that it is done in a way that the fbi trusted to all its work, independently, constantly, and probably. -- and promptly. chanot: i thought you might say that, but you cannot blame me for trying. if apple tries -- chooses to comply, maybe it does have the technical expertise and time and finances to create such a vulnerability so we can get in and get that information. but let me ask you -- what about a small business?
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mandate for aa small startup with four for five or six employees, would it that be a huge burden on a small business to have to comply with this sort of thing? director comey: i think it might be. that is one of the factors courts considered in passing an .ll writs act request how much will it cost them? and how much time and effort i think apple's argument is that it would take them a lot of time and effort and money to do it. so it is a consideration built into the judicial interpretations of the act. representative chabot: as chair of the committee, we ask you to consider how this could affect seven out of 10 new jobs created in the economy or small busine folks. half the people employed in this country in the private sector are small businesses and i think we should always consider them. let me move on to something else. . in testimony from december 2015 about hr 699, the e-mail privacy
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act, richard little hale, the assistant special agent in charge of criminal investigation division of the tennessee bureau of investigations voiced a frustration with the increasing technological capabilities of both criminals and non-criminals. arguablyan trying to infringe on the fourth amendment rights of all americans, would it be possible to better train our law enforcement officers and equip them to keep up with this changing world that we are discussing today? director comey: there's no doubt that we have to continue best in training so that all of our folks are italy literate and able to investigate in that way. the problem we face here is all of our lives are on these devices, which is why it is so important that they be private. that also means that all criminals and pedophiles and terrorists lives are on these devices. and if they are warned proof, even a -- if they are
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warrant-proof, i don't care how good the copies or the agent's, that is a big problem. that we can't quite train our way around. representative chabot: let me conclude with goat tribe. thank you. nadler: let me point out that, among others, thomas jefferson, who among his minor jeffersons was also a graduate of william and mary. [laughter] , we are alley certainly condemning of the terrorist attacks in san bernardino and our hearts go out to the families and victims. we commend for fbi on everything you have done to investigate this matter. two of the terrorists are dead ad a coke is there sir -- and co-conspirator is in jail.
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the fbi has done a great job already. let me ask you a few questions. the attack in san bernardino was not in any way planned are coordinated by isis. is that correct? maybe inspired but not directly the floyd. director comey: correct. youesentative nadler: have discovered -- have you seen any evidence of connection? director comey: we have not seen any evidence of that. nadler: since no evidence of any coordination of twoody else, the home-grown, self-motivated, perhaps inspired by isis terrorist, the investigators seize the iphone on december 3 onthe fbi reached out to -- december 3.
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the fbi reached out to apple for assistance on december 5. then on december 6, at the instruction of vi, san bernardino -- at the instruction changedsan bernardino -- password of if the fbi had it had not instructed san bernardino county to change the password on the icloud account, you would have access. director comey: i want to choose my words very carefully. there is no direct evidence of connection to overseas terrorist organizations.
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this investigation is not over. i'm worried that you understood me to be saying that. as i understand from the experts, there was a mistake made in the toy four hours after the attack where the county at the fbi's request took steps that made it impossible later to cause the phone to back up again to the icloud. we would still be a litigation because the experts tell me we would have gotten everything off the phone from a backup. i have to take them at their word. but that part of the premise of your question is accurate. nadler: it wasn't later,lmost 50 days january 22, when you served the warrant, given the allegedly critical nature of its information, why did it take the fbi 50 days to go to court?
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a whole lot of conversations and that interim with companies in other parts of the government and other resources to figure out if there was a way to do it short of going to court. i thinktative nadler: we all understand that this not a specific case. however the courts resolve this, statutoryssentially a and your petition case and the book will stop here. if congress were to pass a law forcing u.s. companies to provide law enforcement with access to encrypted systems, would that law stop that actors from using their own encryption? director comey: it would notdirector comey:. nadler: so the bad actors will get around it. director comey: sure. encryption has been available to backers. commission nadler: if we said apple or whoever had to put backdoors into the systems, the
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bad actors, with all the --ropriate -- with all the not appropriate -- all the server vendors of privacy, etc., etc., the better actors can get around that by making their own incursion system. director comey: i think we are mixing together two different things. data in motion and data address. bad guys cannot make your own phones. but they can have a device that is extremely encrypted. representative nadler: put foreign companies and that actors do that? director comey: sure, potentially people could say i love the cement and device head but because i worry about an it, i may buys to it from somewhere else. that could happen.
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for documents to be placed in the record. 0240732, patent 27353, additionally a cop a sea includes any" that essay chief backs iphone. additionally, "science and article.y," an additionally and lastly, the "political" today on the new york judge's ruling in favor of apple. >> without objection.
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: thank you,ve issa mr. chairman. the gentleman is recognized for five minutes. said that'scalia what i'm going to quote almost 30's ago in arizona ready hicks, in which he said there is in the realization that the constitution sometimes insulates the criminality of a few in order to protect the embassy of all of us. i think that stands as -- the privacy of all of us. i think that stands as the view i have to balance when asking you questions. as i understand the case and lawyers and experience people who know about the all writs act. but i understand that you come in the case of apple in california, are demanding through court order that apple invent something.
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fair to say they have to create something. if that's true, then my first question to you is the fbi is the premier law enforcement organization with laboratories that are second to none in the world. thatou testifying today you and/or contractors that you employ could not achieve this without amending an unwilling partner do it? director comey: correct. you do thisve issa: because you have researched this extensively. director comey: yes, we worked very, very hard on this. arson: --tive representative issa: did you demand the source code from apple? director comey: not that i'm aware of. representative issa: so you can't handy software person a source code and do this if you don't have it. who did you go to that you consider an expert on writing
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source code changes that you want apple to do for you? you want them to invent it, but who did you go to? director comey: i'm not sure i am following the question. issa: i'm going to assume that the burden of .pple is ask but before you get to apple doing something it does not want to do because it is not in their economic rest interest and they say they have real ethical beliefs that you are asking them to do something wrong, sort of their moral fiber, but you are asking them to do something and there is a burden. no question at all. they have to invent it. i'm asking you if you have fully viewed the burden to the government? spend 4.2 trillion dollars every year. you have a multibillion-dollar budget. is the burden so high on you that you could not defeat this product either through getting the source code and changing it or some other means? director comey: i see. we wouldn't be litigating if we
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could get we have engaged all parts of the u.s. government to see if any may has a way short of asking apple to do it with a five seat running ios nine to do this and we do not. representative issa:: ok then ios 9.o through the 5c does it have the selection switches for the phone settings located in the encrypted data? director comey: i don't know. representative issa: well, it does. take my word for it for now. that means you can in fact remove from the phone all of its memory, all of its nonvolatile memory, its disk drive, if you will, and set it over here and have a true copy of it that you could conduct infinite number of on.cks the system you can make an infinite number of copies once you make one copy of, right? director comey: i have no idea. representative issa: i'm doing this because i came out of the security business and this is a
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funnels me that you haven't looked at the source code and you don't really understand the disk drive leap to answer myra the dumb questions, if you will -- my rather dumb questions come a few well. that nonvolatile memory sits here. the chip has an encryption code burned into it. you can make 10,000 copies of this chip, this nonvolatile memory hard drive. then you can perform as many attacks as you want on it. you have specifically asked apple to defeat the finger code so you can attack it automatically, so you don't have to punch and codes. you have pass them to eliminate the tenant destroyed. ok,you haven't asked them, if we make a thousand copies or 2000 copies of this, and we put it with the chip and we run five tries and then throw that image away and put another one in a do that 2000 times, won't we have
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tried with a non-changing chip and an encryption code that is duplicated 2000 times, won't we have tried all 10,000 possible combinations in a matter of hours? if you haven't asked that question, the question is how can you come before this committee and before a federal judge and demand that somebody else invent something if you can't answer the questions that your people have tried this? director comey: first, i am the director of the fbi. that question, could there be something dysfunctional in my leadership? representative issa: i didn't ask youth network work -- i didn't ask you if that would expectingin you are 72 obey an order to do something they don't want to do and you haven't even figured out whether you can do it yourself. you just told us we can't do it that you did not ask for the source code and you did not ask the questions that i am asking here today. >> the gentleman's time is
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expired and the director is asked to answer. director comey: i'm not sure the questions you are posing. apple has never suggested to us there is another way to do it other than what they have been asked to do in the all writs act. representative testifies, we may have breakthrough. but i am totally open to suggestions. people have e-mailed ideas. ,omeone has suggested mirroring maybe that is what this is. i have a lot of folks watching this and so if somebody understands what you're saying, maybe we will try it. >> thank you for your service to our country and efforts to keep us safe. it is appreciated by every member of this committee along with your entire agency.
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we do value your service and appreciate it. school thea law phrase "bad cases make bad law." i think this might be a prime example of that rule. we can't think of anything worse than what happened in salmon adeno. to terrorist -- in san bernardino. two terrorists, it sickens the country. but the question is where is the rule of law here? where are we going with this? opening hearing your statement talking about a world where everything is private, it may be that the alternative is a world where nothing is private. because once you have holes in encryption, the rule is not a matter of if but when those
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holes will be exploited and everything that you thought was protected will be revealed. oftenited states law tends to set international norms, especially when it comes to technology policy. in fact, china removed provisions that require backdoors in its counterterrorism law passed in december because of the strong international norm against creating cyber weaknesses. but last night, i heard a report that the ambassadors from america, the united states, canada, germany and japan sent a joint letter to china because they are now thinking about encryption in in the new policy. did you think about the implication for foreign policy, what china might do, when you file the motion in san bernardino or was that not part of the equation? don't remember i
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thinking about it in the context of this particular investigation, but i think about it a whole lot broadly. there are undoubtedly international applications. i have no doubt that there are international applications. i don't have insight into what china requires in the devices in the country. i know it is an important topic. representative laporin: i would the record annto article in "the los angeles times." you mentioned in apple, they had done a pretty good job of protecting their code. if you take a look, for example,
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at the situation with juniper networks. their job is cyber security. they felt they had strong encryption and yet there was a vulnerability. and they were hacked and it put everybody's data, including the date of the u.s., of the fbi and the state department and the department of justice at risk. and we still do not know what was taken by our enemies. did you think about the juniper networks issue when you filed the all writs act report remedy >> no. and think about that and a lot of similar hacks all day long. it is the fbi's response ability to stop those all day long. comntas struck by your

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