tv Bloomberg West Bloomberg March 23, 2016 11:00pm-12:01am EDT
mark c.: i'm mark crumpton. you are watching "bloomberg west." the u.s. is waiting for more -- it could be an indication that both attacks are links to the same cell of the state. belgians remain on high alert. seen on this surveillance video. president obama is pledging the united states will go after i saw aggressively at a joint press congress -- conference in one of iris. esther obama also said the u.s. would provide any assistance it can to belgian authorities.
russia's foreign minister is accusing ukraine's government of dragging its feet on implementing last year's cease-fire agreement at a joint press conference in moscow. action by kiev is the main stumbling brock -- block. force investigating the flint, michigan water crisis calls it a story of government failure. the panel are the governor cited belligerence that has no place in government. global news, 24 hours per day, howard by our 24 hundred journalists -- from new york, i am mark crumpton. bloomberg west is next.
♪ emily: this is "bloomberg west." the fbi says a third party is helping unlock the san bernardino gunman's iphone. we break down the methods they may be trying. plus, a little-known startup gets permission to build an uber-style business using autonomous cars. and how bubbly is the housing market? we asked real estate website trulia to break down the numbers. the fbi's strategy to get out of its messy court case with apple. the bureau said it was approached by a third-party with a possible way to get into the phone without apple's help. let's break down the methods the fbi may have in mind. there is a so-called proposal that involves removing the phone's memory and copping the -- copying the content onto a drive.
there are reports saying they may be working with an israeli company called cellebrite. the company declined to comment. then there is the equities review created by the obama administration to determine if security flaws should be kept secret or disclosed. a specific timeframe for alerting companies to these particular flaws. for more on the possible technology being used by the fbi i want to get to our roundtable , of experts. join me from florida, adam wandt, a professor. and also alex webb who has been all over this case. in particular there are two ways , we are talking about this. a hardware way and a software way to break into this phone. discuss. >> the mirroring thing is a way of pumping the iphone with multiple commendations and if it wipes the hard drive, you can
reload the hard drive. you have saved it elsewhere beforehand. you don't lose all of that data. there is a software way, we don't know what they might be able to do. with every upgrade, they find some flaw which they plug. there were some flaws plugged on monday. some of them could be used. we don't know. that is something we need to look into. emily: do we think apple has fixed the flaws that would have made this possible to get into the phone? >> if there were flaws, it would not have affected this phone. to do an upgrade, you need to have the pass code to begin with. it might be if there was one, on your phone, as long as we did the upgrade, we would be fine. emily: adam, talk about the second way, using this israeli company, cellebrite, to get into the phone. they've actually had a contract
to work with the fbi for a few years. >> they are the standard when it comes to mobile forensics. they sell their equipment to law enforcement organizations around the world. they are able to break through almost any mobile device other than the iphone 6 or 5c. cellebrite is ahead of just about everybody else in the market. they might be using a software solution, which is what they normally use. their software solution could be as simple as creating the operating system for the fbi that the fbi asked apple to create in the first place. or, they may be going to a hardware solution, such as the focused ion beam, the nand copping. it is hard to tell what cellebrite could be doing because there are a lot of methods that would work. we know that. cellebrite has a bunch of options to try.
emily: adam, talk about how difficult these solutions are and how costly they are. adam: >> they are very difficult and costly in general. the ion solution, just setting it up and getting it done may cost $1 million plus. it takes a lot of time and energy. what that ion solution is, the nand cell solution is removing the chip from the phone using an acid to move the surroundings and then using a focused laser to bit by bit, micron by micron read the information off of the , uid, out of the secure enclave, the data flash drive, and reconstruct the entire iphone in a virtual environment. that is an extremely time intensive task. software engineering, which
might be one of their other again, extremely time intensive. it could take a team of 10 people a month or two in order to reengineer, reverse engineer and re-create the software that could be loaded onto the phone. emily: the u.s. government has said they are optimistic about whatever method the third-party is using. what happens after this case if they get into this phone? this is something hillary clinton has been talking about. take a listen to what she had to say. mrs. clinton: the fbi may have found a workaround. there will be future cases with different facts and challenges. so the tech community and the government have to stop seeing each other as adversaries and start working together to protect our safety and our privacy. emily: this issue is not going
away. especially if my phone is even more on hackable -- un-hackable. what happens next? >> a lot of people have been saying the fbi taking this to court was a way of forcing companies to work with them. perhaps as adam was saying, the fbi has been able to get to this phone because they are loath to admit it. in the election, we will see it recur in presidential debates and various discussions along the line. emily: adam if it is possible, , maybe not easy, certainly possible, as you say, to do this, what method do you expect will be used? how long will it take because of they can get into the phone, it undermines the case against apple. if not, makes it a moot point. >> i agree.
it is a moot point already. it has been four weeks. the fbi and most professional experts know they are able to get into the phone. i would expect a resolution within two months. if not less. it, ier we find out about can tell you. a company like cellebrite with the resources should be able to get into it within about two months. i have been saying for some time that a number of technologists could get into this with about $1.5 million. in about two months. the theory of getting into the phones has been around since 1986. is focused ion beam is not a new technology. what is new is we are going to be using it on the iphone 6. emily: could your team get into the newest operating system? so, from the iphone 5s 5c,
and above, they are pretty much all the same. they use a secure system to be able to store the data, the password encryption. they are all the same method of getting into all of the phones. the real question is now that we know these vulnerabilities, now that they are out there, now that cellebrite will be able to get into the iphone 6, will apple make future upgrades to lock cellebrite out? i have cellebrite at work. i use it, i train on it, i teach it. one of the things about cellebrite, every time a new phone comes out, it usually takes cellebrite 6-8 months to be able to figure out how to -- apple'ses security and then they push the updates to their technology and then everybody has that access. emily: interesting. learned a lot. alex webb, who covers apple for us. the case has been so fascinating.
it unfolded in many unexpected ways. now to amazon, responding to a request on gender pay. finding that women working for the company in the u.s. earned 99.9 cents for every dollar men earned during the same job. amazon said it hired an independent labor economist to conduct the study, but not without a fight, first. the activist arm called on amazon to report on the gap between male and female worker'' pay. amazon wrote to the fcc, seeking to omit the resolution arguing it was so vague it would be unable to determine what actions the proposal requires. in response the sec disagreed , and rejected the request. coming up, the secretive startup that is taking on google in the race to make self driving cars. we will tell you about a status update for the company.
emily: uber is taking its battle with their indian rifle -- rival to the courts. uber accuses them of creating 90,000 fake accounts with fabricated phone numbers and then setting up 400 face bookings and canceling them to frustrate drivers. ola denies the accusations, calling them frivolous and false. uber has been accused of the same thing by lyft. one more company got the go-ahead to test drive cars and this one you may not of heard of. zoox are the 12th company to receive such a permanent joining
-- a permit, joining giants like alphabet, ford, and tesla. the startups goal is to create a service made up of self driving cars. i want to bring in tim from washington. what do we know about zoox, this very secretive company, which frankly, i have never heard of? tim they are still in stealth : mode. they have hired some people. they have some jobs posted on linkedin. including the former general counsel of apple and other tech companies. one of the recruiters put together autopilot. bringing together a team and hitting a major milestone becoming the 12th company to get , this permit, which is not going public with a strategy, but indicates the technology is getting to a point they want to tested on public roads. emily: how does one company get a permit to do this?
what does it mean about how advanced the technology is? tim it does not mean they have a : car to test. you look at google, they are testing the software have have installed in one of those lexus suv's you see driving around. but most likely means they have some software they are trying out. what is interesting is they join ed this list of established players, google, tesla, some major auto suppliers and companies like ford. if you looked at the list prior to them joining, only one company, kind of, you said they , are not a traditional player. they were just purchased by general motors to help augment their self driving program. so that is the fact, if they
are on the street, it would suggested they should be watched in the future. emily: who is furthest along in the process? we hear about google. there is no official cars on the road yet that can be owned by regular people. tesla's cars have self driving features, as do many players. who is winning? tim you have an interesting : division of strategies. you have google recently in washington before congress asking for new powers for the department of transportation to expedite the approval of getting these cars on the road. you have them indicating they are getting on the road to having it, and you've got gm, that is investing in companies like lyft, and cruise, and really talking about a strategy of having an uber-like experience where they think the
way to get the technology well adopted is for people to have the experience of calling the car and sharing it with somebody else rather than buying the car and having it in your garage and having to deal with the uncertainties and the changes of the technology. emily: all right. we can add zoox to the list. tim higgins, thanks so much. still to come, elon musk has spacex. jeff bezos has blue origin. how difficult is it to get a space startup off the ground if you are not a billionaire? we will hear from the world's first accelerator for this industry later this hour. ♪
but first, let us take a look at how the markets ended today. the s&p and the down down about a half percent. the nasdaq was down the most. by about 1.1%. it was the biggest loser today. in fact at its lowest in a week. for every stock up, there were four down. some of the laggards included google, alphabet, basically the biggest weight on the nasdaq today. the reason is because of google's business in russia. it turns out that russia's federal and time in a police service says they violated antitrust rules and the antimonopoly chiefs basically said there was no compromise that was going to happen with google. shares falling about two thirds of a percent. in the disk space, seagate falling because of a downgrade from ubs. it is falling to its lowest since mid-december. ubs lowering its price target to $24 because of weakening pc
sales and western digital also falling in sympathy. emily: predominantly a down day. there were some risers. what is the story with amazon? >> with amazon, the biggest lift on the nasdaq today. the reason for this is because apple is having an influence saying it is years away from leaving its cloud vendors and you will remember we were talking about how amazon actually signed a deal to shift some of its cloud operations to apple. you can see the lift and then closing up by about 1.6%. i want to end on an airline, not a tech stock, but the virgin atlantic. it rallied today up by more than 13%. the reason is because the airline is thinking about selling all or part of itself after getting takeover interest. it is unclear as to who that might be.
some analysts have been talking that it could be delta or jetblue. bloomberg did reach out to those companies and they declined to comment. it is the number 14 best performer on the nasdaq. i know corey has more. emily, back to you. emily: thanks for the rundown. we are going to take a look at virgin america. cory johnson, our editor at large joining us now. , dig in for us. cory: he said it was not a tech stock. emily: a lot of tech people like virgin america. cory: it has positioned itself as a tech company. they have positioned itself to --themselves to be in front of tech workers when they launch a new service. in denver they focused marketing on tech people in san francisco and silicon valley and the denver tech community. it may be interesting to see how they run it. they run it like amazon.com.
of course as they add new , routes, i want to take you inside, let me show you the stock movement. stock was trading a lot higher. it has been a great year to be an airline. a big move in the stock after they get this offer today. they are going to look at other office, maybe look at partial offers. you can see the way they run the business, like a tech company. they are running it for growth. if you look at the free cash flow from the company, you can see diminished free cash flow. some quarters they might be up 75 million. last quarter down about 110 million. free cash flow as a percentage of revenue, what is left, you see this business is run in a way they have in the top about .2%. at the bottom, about .28%. in other words, really running this company like a tech company. reinvesting every dollar into the customer experience, the
technology that runs the wi-fi on their planes. they were the first company to fleet with wi-fi and television in every seat. they are focused on the company experience, spending fortunes to do it. they are plowing it back into the business. that is how they have gotten so big. listen to what richard branson had to say when i spoke to him via skype about their popularity with tech workers and beyond. here is richard branson. richard virgin america, the last : nine years we have been voted best airline in the states. the team has done a great job. therefore, we attract tech people who want to be flown in a slightly more hip airline. cory: that focus on positioning itself as a tech company and
investing money like a tech company to grow their business makes this interesting to look at through our "bloomberg west" filter. emily: what is the likelihood it -- that this heat -- this deal will happen? cory: branson does not have a history of selling his businesses. with oil prices where they are, it has been a profitable time to be in the airline industry, which is a nightmare for investors traditionally. i've spent a quarter of my life on their planes, i hope they don't screw this up. conde nast is ranked everyone's favorite airline. i'm completely biased here. emily: i was not going to say it. you are virgin america's most frequent flyer. thank you. coming up, it is no secret the real estate market is white hot. what does it mean for first-time buyers? new data on what is happening. if you like bloomberg news, check us out on the radio,
>> top stories this hour. samsung looking to overcome flat salesforce devices. executive president says the company wants to use some of its $61 billion in cash to become more of a software driven company. expect anvestors to loss for this quarter. the ceo says he was blindsided by a buildup in liquid trading positions that will likely spark a plunge in revenue of up to
45%. he promised to make deeper cuts to minimize those losses. is going toustry change more in the next five years than it has in the past 20, he says. opening up the new york auto show, he says a tiny -- economy and electrification will be bigger things in the next few years. he says what is not changing is the u.s. love affair with big pickups and that application -- the domination of the rustic brands. those are the headlines in bloomberg news. all right, let us get the latest the markets right now. how is the asia-pacific markets doing? david? david: it gives a silver lining. a high hurdle to overcome given that flat trading we have seen this week. i think we will take it, it
makes my job easier. overnight andex overseas, we are still seeing dollar strength. this rally has picked up pace since about midmorning here in asia. this is run-up that we have seen five state days -- five straight days. it is life. don't discount the possibility they may need to raise -- they might raise rates come april. 9614, everything else falling against the dollar with the exception of a few other currencies. if that's that, we will have a look at the majors. itsar yen gets back from lunch break 11275. confidence that the impact of negative rates will have -- at some point will
reach economies. he did not elaborate wedding. the equity market is looking like this. volumes are still quite low. improve as we to move through the afternoon session. ♪ >> this is bloomberg west. i am emily chang. valley, it will be the homebuyers biggest challenge is not raising enough cash for the down payment, it is also a lack of inventory. 'se problem across the u.s. housing stock down 39% from four years ago. julia is out with a new report on the tightening market. a -- trulia is out with a new market.
>> a bubble bursts, a plateau does not. and during amaybe slow, soft landing. the reason being, 10 years ago, when there was a bubble, lending was out of control. anyone could get a mortgage without documentation. when the bubble collapsed, there were a lot of people who lost their homes because they should not have been given a mortgage in the first place. those days are essentially over. we don't think that lenders are being as freewheeling with money as they were 10 years ago. certainly, what will determine whether or not we are going to enter a new plateau phase or not is really what happens with the general economy in the bay area. about tech in general. new homes are very much out of reach. inventory is so small. what trends are you seeing?
nationally, all inventory is down about 44%. downer home inventory is 44%. that is the segment being hit the hardest. in the bay area, it is much worse. in fact, the bay area really epitomizes what we have seen at the national level. -- there is soe much competition. nationally.n 44% in the bay area, it is about 70% to 80%. it is a huge drop. those really feeling the brunt of it are those in the middle tier, which is also down quite a bit. francisco, how is demand outside the city? quite that is one of the -- >> that is one of the reactions is to look outside the city. we're actually seeing some
shifts of people moving to nearby areas such as a orramento or vallejo anywhere in the central valley. that is one of the natural places people would move because it is a little more affordable with so close to the bay area. >> there is new housing being built, but san francisco has historically been bursting at the seams. there is not enough places for people to live. given how many people want to live here. -- new construction helps. new construction certainly helps. most inventory actually is not new construction. most inventory is existing homes on the market. what we watching is whether or not people will start up their homes on the market and sell over the next couple of years. really, what determines that is whether or not they can find another suitable home. what we are now is gridlock. one of the ways that gridlock might be broken is if certain types of owners can't afford
other homes. another release mechanism is if investigators -- investors decide to sell their investment homes, which might free up inventory for those looking for starter homes. >> are you seeing any signs of the jitters among homebuyers because of volatility in the homeowner market, because of foreign buyers, because of this slowdown in tech hiring that we are seeing in the tech -- start a community? let's know. homebuyers are telling us that owning a home is part of their dream. the question is, why is not not happening in mass question marks we surveyed homebuyers last year asking what would have to happen for them to buy another home. two things they told us. one, get a raise, so money is part of the equation. we see the labor market
tightening and we might see wages go up. actually saving up for a down payment. that is one of the biggest hurdles that homebuyers are actually telling us. in the bay area, where prices are growing faster than incomes, it makes homebuying increasingly difficult. -- shouldare a buyer we buy now, should we sell now? have a crystal ball. we would expect over the next two or three years, prices will start to come down a little bit. increases will start to come down. to or three years, we're expecting them to moderate. five to 10 orng maybe one to five as we get further away from the middle of the cycle. that is what we are expecting. isin, what really matters the performance of the local economy and the new supply.
interesting report today from trulia chief economist. the dutch itunes for news is expanding its offering to the us-based readers. the start about to transform the way people consume news and the company has some major partners, including the new york times, the washington post, and others. it offers newspapers and magic -- magazines. $.40 for newspaper piece, to $.59 for magazine stories. one of the perks, no ads. coming up, the real-life tech wizards of middle earth in our new series, "hello earth," we introduce you to some of the innovators. a sneak peak, next. ♪
emily: billionaire paul allen is betting big on bioscience. he is set to give away $100 million in funding to explore and advanced bioscience. universities are receiving the biggest grant amounts. smaller grants will be given to support early-stage research. this is the step toward allen's plan to advance the science. now, to a new series we are launching this week on bloomberg.com, "hello world." it is a fresh look at the explosion of technology across the globe. peter jackson's moviemaking empire, new zealand, remains an incredible hotbed of talent in
affects artistry. effects artistry. >> it is our primary means of communication. terms ofen untapped in a computer-human interface. it connects you and a humanlike way which is emotional, cognitive. gettingwhen you start to a sort of interesting place. >> the one you meet next is a madman in the best possible way. a computer scientist at the university of auckland. >> you look at that. famous forame
building super detailed simulations of the human body and ended up winning a couple of oscars for his work on films "avatar," and "king kong." mark is trying to verse into near the human brain. he is building simulations around how the human face moves and how our neurons fire. next it has its own sort of existence in a way. .hat we are going to do is run what we are here is a computer that can live. be is looking at us and hearing us. if i make a loud noise, she can get a freight. she can see us. -- she is responding to me.
a page and show her something that she has been looking at to get her attention. baby. what do you see? >> puppy. mark: very good. just because we are in new zealand, you have got to show -- hi, baby, what you see, baby? >> sheep. mark: very good. the long-term goal is can we create a model of consciousness # is there thought or not? look around, what we are getting now is to remove her pace, basically, and this is what is driving in the background. what she is looking at now, these are the connections lighting up as the baby is doing stuff. let's this is a simulation of
what would be happening in a person's brain? mark: yes. a you have got to create similar reaction -- simulation of what is going on in the human brain. you have got biological neural networks connected to artificial intelligence models and the potential for that is enormous. that is where the future is probably going to be. >> maybe. and that is a sample of our new series "hello world. from sanford, ashley. tell us where else you will be going? to australia,g germany, england, all over the place. it was really just an excuse to get outside of silicon valley
and see what these different pockets of innovation were up to and each country's unique twist on technology. someone who has covered silicon valley for so many years, what surprised you most about this whole adventure and seeing these sort of technology hubs or pockets around the world? >> it really came out of my reporting for business week magazine. you just saw that the technology was improving a lot, pretty drastically. i would go on these trips and find these subcultures of people that seemed to be interpreting our request to make our future in different ways. you go to somewhere like new zealand, only 4.5 million people, and they are making rockets, doing cutting-edge ai stuff, and this fantastic special effects technology. it is really stuff that challenges silicon valley absolutely. emily: new zealand is also the home to kim.com, the target of
the biggest copyright infringement case in history. you opened up a whole new world. what else can we look forward to in this particular episode? i know we can watch the whole show on -- online. >> it was formed by one guy who never went to college. they are looking to do rocket trips for $4.9 million, which is much cheaper than you can do today, essentially to sense things like satellites into space. you can think of it like democratizing space. we go down to wellington in the south of the north island, hang out at p are jackson's company jackson's company at weta. emily: we are very excited to see where you take us. next, ashley, bloomberg. you can watch the full episode at bloomberg.com, or this friday
emily: a story we are watching. haspentagon's top investor -- unresolved deficiencies in the costliest u.s. weapons reports.revious it is projected to cost the defense department nearly $380 billion. the air force is buying the biggest share of them. in recent years, we have seen the first real commercial space startups develop, spacex, blue
origin, virgin galactic. what do they all have in common #? billionaire founders. starburst accelerator is trying to help. it is the first accelerator providing seed money and big-name mentors. founded ininally paris, but now has a u.s. presence in l.a.. founder joins us with more in the studio. why did you start this accelerator? what do they need aside from a lot of cash? >> i am an engineer. i had the opportunity to work for the u.s. air force research labs. i am passionate about aerospace. i have been doing construction and innovations for the last 20 years. emily: you are in paris, l.a., singapore, why these places? fore wanted to be global
our startups. our startups need to be global. locations were, for us, the major hub combining aerospace, corporate aerospace, and entrepreneurs. we wanted to be at these locations where the startups can meet and collaborate with these large corporations. emily: where does the talent cluster? where'd you find these people?? are they coming to you? stanford, m.i.t., the same in europe and asia. these people, these engineers, to dose phd's, they want something different. they don't want to work for large corporations anymore, they want to make a difference. they want more autonomy. they want to put their name in
musk did forlike spacex. there are so many different subjects and so many startups working. we are with more than 300 of them across the globe. out of the different area, we cars,me a lecture vertical takeoff and landing capabilities. we can talk about 20 startups working in that area. one of them wants to work on satellite constellations, whether to communications. -- there are a lot of things going on in the cabin, with more .onnectivity, comfortable seats there are more and more sensors. thatnt to operate aircraft
it's a smarter and more efficient. emily: a lot of people think as spacex as the only space startup, but there is also sierra nevada. you think we're going to see a lot more space and aerospace startups on the main age -- stage? when and why? have a proper business model, some good evaluations. we showed the way to many more of them. more who wantre's to intern in the segment. entrepreneurs who want to work on their own startups. maturere 300 to 400 startups with their own technology, world class products that are coming into the market. maybe not all of them will succeed, but at least the landscape in 10 years to 15 years is helping. emily: elon musk is helping out?
>> of course. he announced he wanted to launch a flying car. an electrical one. by showing the way, he is helping a lot. emily: thank you so much. it is really interesting to hear what you guys are working on. thank you for joining us. starburst accelerator. now, it is time to find out who is having the best day ever. today's winner is vice media. it recently premiered its viceland channel. they released many episodes online, and the numbers are huge. the first episode of the new popular withost 6.3 million viewers. followed by the first episode of "noisy," which drew 3 million. we will hear from the ceo of one of the fastest growing cyber security startups out there.
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