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tv   Bloomberg West  Bloomberg  March 2, 2016 6:00pm-7:01pm EST

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supporters he does not see a path forward. he will speak about his portable future on friday at the conservative political action conference in maryland. mitt romney will speak tomorrow in utah. case for whyt his donald trump should not be the party's standardbearer. united nations security council has unanimously approved the harshest sanctions on north korea in 20 years. its recent missile launch and nuclear test. inspections of cargo entering or leaving north korea. an attorney for drug lord el chapo says he wants to be extradited to the u.s. soon.
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♪ mily: this is bloomberg west. we speak the attorney about the apple encryption issue. can cable companies spend their way to more subscribers? the battle over original content
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is officially on. the debate over privacy rages from capitol hill to the rsa conference right here in san francisco. pitting individual privacy against national security. at the heart of the current debate, how much does encryption hinder law enforcement? former u.s. secretary of , michaelsecurity chertoff. co-author of the usa patriot act. been very public about its use on encryption. how much does apple compared to the rest of silicon valley? are all of these other tech companies taking as aggressive a stance? chertoff: a number of companies and after we filed briefs in support of apple in this case. been has traditionally
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focusing more on security and encryption of data rather than a business model that involves looking at the data and using it for marketing purposes. all the tech companies are in the same boat. not just a question of privacy that question of security. if you force people to create backdoors. you are creating security vulnerabilities that are going to hurt innocent people. : you have a new white paper out about the impact of encryption on law enforcement. the argumentake of that phones can't become a warrant proof space in america? chertoff: law enforcement has a very important job to do. i was part of it for many years. they need to collect as much information as they can. their system in this country does put restrictions on law enforcement.
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there are many tools that are available to law enforcement. including metadata. very helpful in identifying people that might be a threat. the issue here is whether the marginal benefit of handing out the encryption for the occasional case is worth the fact that you are opening millions of users to a risk from criminals are from foreign powers to get their data. i would argue that in the long for people tolly maintain trust in the internet it is important to allow us to continue to build more security medications and better encryption and reduce on her abilities so that people don't get our stuff. emily: should there be any warrant proof devices? michael chertoff: it is not that they are legally warrant proof.
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that may incidentally preventer law enforcement from getting out information. the fact that we don't have a perpetual recording device in our houses don't make it easy for law enforcement like in the book 1984 doesn't mean we are doing something wrong. we're balancing personal security and privacy against other issues. emily: i spoke with attorney general loretta lynch yesterday. lynch: if there was a box of documents in someone's house that i could show a court may have evidence of a crime and there was a lock on the door, i .eeded someone to help me that is what we're asking apple to do. don't take that risk. don't pull them out yourselves. years untildid for about a year ago and help us
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with this particular matter. emily: is that how encryption works? michael chertoff: the analogy is misplaced. this is not about picking a lock. this is about building a master key that would open every lock. and then hold the key recognizing that we have experienced how easy it is for someone to come in and steal a use that to break into other people's houses. that is what the issue is. emily: you believe that is the only technical way to do this? michael chertoff: there may be other ways. i don't have the engineering experience. they are also trying to prove a point. whether we should permit innovation in the area of security and encryption. emily: cyrus vance the
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new york district attorney testified on capitol hill. cyrus vance: criminals understand that this new operating system provides them with a cloak of secrecy. they are quite literally laughing at us. chertoff: no that is not happening. even if you had a rule that requires all american companies to provide this their apps that will be impermeable. ways to going to find avoid the law enforcement. in the old days when we had wiretaps you know what criminals dated? they walked out of the building and they walked around the block and they had their conversation out of earshot. this is an issue with law-enforcement always deals with. you don't have perfect visibility. but somehow we managed to make these cases again and again. we did it that way the old days we can do it again. appointed the head of a
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pentagon advisory board. a little bitms contradictory. given the stance that google is taking in support of apple. chertoff: it is actually very smart move. they do set up these advisory panels. they bring in people with different experiences and different points of view. this is the same type of issue. bringing in people who understand modern technology and how it develops. getting the benefit of their expertise. a good way for the government keep the door open to the tech community. the former secretary of homeland security. thank you very much. facebook the latest tech company under investigation in europe. thean authorities say social network may have abused its market dominance. forcing users to agree to its terms on how their data is used. amazon and google are already
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being investigated in europe. say they havels been in touch with their european counterparts regarding this probe as well. sarah: it is important to put this in context. facebook has had run-ins with privacy issues during the whole existence of the social network. he terms of service he through the whole thing. what the germans are saying here is that by being a monopoly ofer and having these terms service that people might not fully understand what happens to their data. it might be illegal. they are taking steps to make it totally legal. giving people options with their privacy. giving so much data to advertisers without their explicit consent.
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that is what worries german authorities. has so many companies have come under scrutiny in europe. this is facebook's year to be targeted. emily: those messages are somewhat encrypted. ink zuckerberg has come out support of apple. how far is facebook willing to go? are they willing to go as far as apple? sarah: i don't think your facebook account is quite like your iphone. much of what you do was public anyway. communications with other people. people aren't storing documents on facebook. not doing much that is hidden. they are messaging so that is part of it.
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facebook was able to cooperate with authorities on san bernardino without much of an issue. emily: thank you. coming up, major internet companies from google to uber are lining up in support of apples stance on encryption. but who is going to go as far as tim cook has? we will ask the head of the internet association. interviewanging with apple attorney ted olson. why he believes this is a civil rights violation. ♪
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emily: yahoo! is reportedly
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taking a meeting with the activist investor that is pushing for sale of the company. separate reports say yahoo! is ready to discuss a deal. asking potential buyers to sign ca confidentiality agreements. the ongoing fight between apple and the u.s. government over encryption. yesterday we heard the two sides make their case before lawmakers on capitol hill. here's what to watch next. the tech community has until midnight on thursday to file amicus briefs on behalf of apple. on the 10th, the government's response is due. apple has until five days later to respond to that. apple is planning a major product unveiling this month.
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first event amicus brief deadline. the internet association is one of several organizations backing apple. the group speaks for major tech heavyweights including google and uber and amazon. how united these companies actually are in their support of apple. principal for the internet industry is the you can't have the government compelling companies to create a vulnerability in their system. all these companies rely on strong encryption to protect their users. to protect our infrastructure. to protect our national security and allowing vulnerability that is being pushed for the government will make us all less safe and less secure. it is important that we stand up and make sure that encryption is maintained for the national security of our country. emily: these companies do vastly different things.
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for dataere asking from pandora or netflix would not be a different story? >> every company has a bit of a different business model. the key point is under the law. the warrants that were issued for apple were done so under a statute that was written in the 1700s that predates even the fourth amendment to our constitution. we don't think that was a legal way to go about this. compelling people to write technology that would undermine their own products and the run services in a way that weakens protections for users. emily: you think they will be willing to go as far as tim cook? >> he can defend apple. oure is not a member of association. the we see this as a conversation that is much broader than one iphone. the former director of the nsa general hayden has been saying
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that encryption is a fundamental part of our national security. we have to remember that. by creating backdoor vulnerabilities in the system which this clearly would do makes us all less safe and it is something we need to keep an eye on. emily: you have to tech companies distancing themselves from the government. but you have to commit becoming the head of a pentagon advisory board. >> i don't know if it is contradictory. there needs the recognition of the important role the tech companies play in our national security safety. for law enforcement agencies doing a terrific job to keep us safe. both sides need to work together and have some appreciation for the role that each of them plays. it needs to be done under the law.
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a warrant that came out from a 1700s statute that no longer applies. emily: it seems that google has been taking a different position from the rest. we haven't seen anything from larry page or the google blog. the internet association is finally in our grief. google's ceo has tweeted on the same side as apple and the rest of the tech industry. it is a very complicated issue. getting a little heated. it is not the case that every single executive needs to tweet about it. but we've been clear about this going forward.
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emily: i am told that android phones are easier to hack. on making itsan android system is difficult to break into as iphone is? >> security is essential. coming outpany's are in favor of strong encryption. it does protect users. protects our national security. there will be difference between what the phones look like. but the principle is the same. emily: some social media cap have been asked to police themselves and take down accounts that could be links to terrorists. is that fair? >> social media companies have gone above and beyond in helping law enforcement under the law. they've taken the initiative to take down accounts that are
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terrorist related. they've been on the front lines of doing this. fighting against isis and other terrorist organizations. toy are doing serious work make sure that terrorism is being fought around the world. emily: thank you. netflix's massive programming budget is setting off an arms race for cable giants. what investors stand to lose. ♪
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millennialou're a they may have something for you. the companies are striking a deal to develop content for smart phones. two channels will launch this spring. aimed at young people living in red states.
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another one is a comedy news network. the channels will be distributed across verizon's mobile network. financial terms were not disclosed. have a newnies strategy to combat declining viewership at the tv networks. spend spend spend. he could keep viewers with three runs but not anymore. is spending nearly $5 billion to turn out original content. sparking a sort of arms race with the other media companies. our bloomberg news media reporter is here. lucas: that netflix numbers going up sharply. $5 billion. it were not willing to just sit
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through commercials on cable tv. what they are all doing his plumbing a lot more money into regular programming to try to produce hits to compete with netflix and hbo and all these other companies. it means they are spending is going up as well, but not quite as dramatically as netflix. emily: netflix is spending the most but are they seeing the most success. netflix's wedding in the sense that they are adding a ton of new customers. what the media companies would counter is that netflix is not yet profitable. or they are barely profitable. most media companies report profits in the billions. itflix has promised that will eventually be profitable. spendary part is if they a lot of money to try and keep up. and the show stonework that it goes down. what kind of shows are
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they spending all his money on? what they'll try to get their own game of thrones? ares: a lot of people trying to get their own game of thrones. bred in the guide and kevin reilly who is trying to bring in that edgy drama that has worked on hbo and amc. and if, that means spending a lot more on original kids programming for nickelodeon. up with that hit scripted show on nickelodeon or vh1 rather than just relying on reality tv. there's a lot of riskier for investors. lucas: investors are torn. they are concerned about what is happening with cable tv. if you look at what a lot of saying, itre is a risk but one that could pay off. it really depends on how investors feel about that.
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in the case of a viacom there is therencertainty because is generally uncertainty about viacom. in the case of time warner is more mixed. emily: thank you. my in-depth conversation with apple attorney ted olson as he rolls up his sleeves for his battle with the u.s. government. if you like bloomberg news check us out on the radio. app and onadio sirius xm. ♪
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>> i am mark crumpton and are watching bloomberg west. floating janse is kelly is a potential nominee for the supreme court according to
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the new york times. is not granting interviews on the matter. senator marco rubio insist that he has a shot at winning republican nomination. said super tuesday was a positive night given his win in minnesota. missingnew clue in the airlines flight. an official says that the airline part comes from the same type of flight -- plane, a boeing 77. cuba has its first case of the zika virus. arrived --venezuelan 28-year-old dennis whalen arrived in the country.
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2400 journalists and more than 100 offices around the world. it is just after 6:30 p.m. wednesday in new york. i am joined by paul allen with a look at the market. a strong start in the u.s. means a strong start here in the asia-pacific as well. futures are expected to be performing very well also. looking closely at a bhp shares this morning, the largest minor currently up more than 5%. with theeached a deal brazilian government over their joint ventures. this relates to an incident in
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november. homes were destroyed. some of go has reached an agreement with the brazilian government. three years at $5.1 billion over the next 15 years. we are looking at china services pmi, and show swelling. we are expecting a trade balance to generate which shows that the deficit narrows to $3.2 billion. we're expecting a good boost for tourism and construction figures as well. emily: turning our attention back to apple, the company's battle with the fbi is intensifying after the general
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counsel and fbi director -- master key create a to unlock its proprietary software. renowned lawyer ted olson is leading their defense. we asked him about congress's role in this ongoing battle. >> i think congress should consider the alternatives. our elected representatives are put in that position in order to do that. and that's what this debate was all about. the government does not have the authority to require apple to redesign its iphone to disable the characteristics that it put into the system which is what the customers wanted. there is no legal authority for that now. some discussion about how to solve this problem,
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at you cannot conscript private company such as apple to do some to change its products. we of civil rights that prevent that sort of thing. >> i spoke with loretta lynch yesterday who said the middle ground is the courts. let it be decided case-by-case basis in the judicial system. under any circumstance, would that satisfy apple? >> i'm amazed that she would say that. it would not solve anybody's problem. fbi director komi himself yesterday said this is a problem. he said it is one of the most difficult problems whenever faced as an fbi director and before that he was the deputy attorney general. different outcomes
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in different cases. or over 100i system cases in which they are trying to do this in federal court. the manhattan district attorney city of 205 iphones he wanted into. solution is no solution at all and i'm amazed that he would say that. >> i have spoken to security experts who say they believe there are alternatives here that do not involve building a master key to all of our iphones. the former head of the national security agency told me he does not buy that this is the only technical way. are there technical alternatives? >> director komi yesterday when asked about whether he had consulted with other branches of government to solve this problem
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so they can force apple to said he this product will talk to everyone. has he consulted with the nsa? i don't know the answer to that question. the experts at apple which two there isphone not another way to do this except to redesign the system to break down its security system which is what hundreds of million have relied on. there depending on the security that apple built into the iphone. the government would like to destroy that. so the need to figure out a way to get around that problem itself without causing apple to redesign the iphone. they should do something like that. my question, is there
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a middle ground. it's as like apple says there isn't. >> there isn't a middle ground that i know of that requires apple to go to the government. the constitution does not allow the government to conscript private citizens to invent products or change the products they have invented to look into the product or cause the product to do what it wants. that is a very significant thing. consideredent has immunityke this, from assistance to law enforcement act and it specifically exempted companies like apple from having to do this sort of thing. whether fox or the wall street journal or apple cannot be made
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to redesign their programs to supply assistance to law enforcement. the government does not have the power to do this except in the most exigent circumstances and they have not mistreated those circumstances exist. we are talking about a system that would break down the phone -- not just in this case. the government has said it was in one phone but now director komi admits -- director comey admits it is not about one phone. point. a very important lawyer ted olson. we will hear more from him on apple's legal strategy. next. ♪
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emily: back to apples impassioned battle with the fbi. we heard from their attorney ted olson earlier today and i asked what congress should do next. do its job should which is to consider the various alternatives and impact on citizens against the concerns of law enforcement which we respect.
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apple has cooperated in every possible way with the government except for throwing out the design of the iphone and redesigning it. needs to consider technological resources that exist and what can be done by the government without conscripting private citizens to -- there should be hearings, there should be testimony. for director james comey, i have enormous respect, but have testimony from him. have testimony from the nsa and other security agencies. testimony from experts who work in the private sector and testimony from law enforcement. let's have a debate. director comey has asked for the debate. the ceo of apple has asked for that debate.
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let's have the discussion we will see where it takes us. emily: when i spoke to attorney general i -- loretta lynch she shot down the argument that it violates the first and that the minute. she says apple is not a target, we are not alleging they have done anything wrong. >> apple has first amendment rights whether it is accused of doing something wrong or not. you're right that apple has done nothing wrong. director comey says that apple has been very helpful in this and every investigation. apple has a responsibility. it is being asked to communicate with iphones all around the world -- that is a first amendment right. i'm surprised at the attorney general that's he would should -- that she would suggest only people accused of doing wrong have first amendment rights.
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have a first amendment right and no one is accusing you of having done anything wrong. apple has first minute rights to protect its product, to avoid government compulsion of what it should have to say to its products in order to change the design of those products. it has a responsibility to protect the integrity of all of the people that have been all over the world who depended upon apple. use with respect to these phones -- you can imagine what a karen eckel government can do to individual privacy of individuals wishing to communicate with one another or their neighbor in private. we are talking about the rights of apple to make sure that it's iphone has the integrity that it carefully built into it. all of those are constitutional rights. everyone has civil rights in this country, not just people
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accused of crime. >> apple is also arguing that its responsibility to its customers is greater than any responsibility that it has to the government but there is an other argument to be made that apple may not even have an iphone if it did not benefit from the government's on investment in technology. what if the government made it a condition that to benefit from all of the investment apple would have to comply with legitimate law enforcement requests. >> i hate to get extreme about this but it reminds me of the 13th amendment. the united states government made it illegal to have slaves. overstatement, but the government cannot conscript private citizens. they cannot say that for you to use technological information that might have been producing
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put in the public to by the government you have to agree to work for the government question mark that does not work and i do not know or that would come from. emily: that is ted also there. i want to bring in our bloomberg news legal reporter who has been covering this very closely. during the congressional hearing apple when pressed -- we could not get an answer from apple on what they want congress to do. were you satisfied with ted olson's answer? >> it's very interesting that apple has reiterated this talking point over and over again that congress should side. don't think that means they will not be continuing to fight these battles in court. i think that means they are trying to bolster their argument laws as they the today are not sufficient
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to compel apple to do what it doesn't want to do. as we heard from ted olson, apple does not think it should have to comply with this warrant. they civil liberties claims in saying that the should not be forced to do something they think is wrong or damages its product. but fundamentally, what is at issue legally today are not is e 200-year-old law that the government has used time and again to compel compliance with warrants and what apple has said in court is that that law should not apply to the situation. in very wellts with this claim that congress needs to do this. congress is to take the step. it's stating again that the law as it is written should not make apple do what it does not want to do. >> what about his response to attorney general loretta lynch is amazed that she
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would suggest it be solved on a case-by-case basis and then to go so far as to say that there is no middle ground. >> i think that shows that the division here between apple and the government is a very big divide. they are not coming to an agreement anytime soon. is no middle ground suggested is a chance to reach a compromise. as he highlighted and mentioned in his criticism of what loretta lynch said it is true that if you litigate this in court on a case-by-case basis that you are going to have a lot of decisions that are different. that can be good or bad for apple or the government. already we have seen this happen and play out in the cases that have come before judges so far. in san bernardino the judge said that apple needs to comply. and the case in brooklyn, new york involving a drug dealer xfone, the judge came out and came outrently
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with a ruling that apple should not have to comply. these will play out at the magistrate judge level. the low-level questions that are not really precedent setting. legal experts say these are not precedent-setting decisions but they are persuading the public debate so we will have to see how this plays out. >> i know that you will continue to follow this story aggressively, thank you for joining us. road to apple driverless cars include fiat chrysler? show, markva motor said i would assume we have the credibility to be one of the players they have looked at. he went on to say that he understands apple's syntax and would work on apple's terms and maybe begin production as early
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as 2020. on today's funding for the messaging service, according to people familiar with the matter they are seeking an investment that would value the company up to $4 billion. if successful it would certainly buck the trend. it seems to be moving in the other direction as a funding round less than a year ago it was valued at $2.8 billion. shark loans maybe running out of time. will foxconn be able to save the day for the troubled japanese electronics maker? more from bloomberg west, next. ♪
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emily: the clock is ticking for
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sharp. they could face a potential cash crunch. the rescue deal invests billions of dollars of new capital into the struggling sharp. editor of managing asia companies joins us live from tokyo. tell us about the reasons for this and what is going on here. in110 billion loans and credit lines set to expire at the end of this month. this is the pressure that company was getting. at aa local funder looking buyout of the company. last week to voted
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proceed with the foxconn offer. in one of the more bizarre turns, foxconn said they were not ready to proceed with the deal. they had heard about new liabilities and wanted to get to the bottom of last it. so these loans are set to expire. foxconn in sharp still need to work out the final parts of the deal. they need some kind of resolution by next week. emily: how much time to have to renew the loans? >> it should be ok if they are able to reach final terms by next week. the issue is that the companies are still quite far apart. companies told us that they are going through a number of ¥300 billion and liabilities. they're trying to sort out how they will manage those liabilities.
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foxconn is already paying a premium and they do not want to take on extra billions of dollars in liabilities. there's also the possibility that foxconn will try to adjust the terms of the deal they've already ordered. what do you see as the timeline for this to play out? fast.has to happen it is bizarre. thought we had a deal last week. by the end of this month, they have to pick a direction. alstom lifeis peter from tokyo, thank you for waiting in.
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weighing in. who is having the best they ever? donald trump. john oliver recently a real -- revealed that the donald trump donald drumpf. more googleg searches than any of the other candidates such as marco rubio. that does it for bloomberg west. ♪
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