tv Bloomberg Markets Bloomberg August 25, 2016 12:00pm-2:01pm EDT
from bloomberg world headquarters in new york, good afternoon. i am scarlet fu. matt: and i am matt miller. we are covering stories out of italy for the next hour. here is what we are watching. saint jude medical, citing security flaws in cardiac devices. we will hear about it in an interview. plus, the firm that worked with many waters to hack into the medical devices. allegations --e saint jude says the allegations are absolutely untrue. janet yellent will say tomorrow? look out for the pound, the yen, the kiwi. let's check on the
market. >> a lot of different nuggets today. everything from a short trade to mixed commodities, as well as mixed earnings. this is where we stand right now. you can see, pre-much mixed and close to the flat line. the nasdaq is up by .1%. let's take a look at what happening in terms of the s&p. so far today, a very volatile, up-and-down day. the most around 11:30 a.m., and now we are close to the flat line. markets, as well as volume, not happening today. down by 8% against the 20 day moving average. jeweler, up by about 7%. earnings per share beat estimates by $.84 versus $.71.
there is bad news as well. same-store sales dropped. less buying there. is up higher, shares rebounding after falling 11% the last three or four days. programs toanding help people pay. they are not lowering their own retail price for the a b pan, but they are expanding the program to help people pay for them. is up, helped by rising oil on the day. let's take a look at the chip makers, micron as well as western digital. hp saying it expects a shortage memory.s well as flash this is a positive for micron. raised to $20now from $16.
also, let's take a look at what as well asn workday salesforce. workday is saying its subscription revenue had a blowout quarter, 37 percent higher than estimated, $306 million there. volume is higher because of takeover speculation, up 2.6%. update onyou have an a big merger. >> yes, we are talking about 3.6%.jude, down by we hit a session low in the last 15 minutes, but the news that this is carson block's new favorite short trade is definitely heading. heart block saying that devices are vulnerable to hackers. we are going to keep getting updates on this throughout the day. scarlet: thank you so much.
matt: let's go to mark crumpton for the first word news. mark: rising inflation and employment should lead to higher interest rates. thee spoke to bloomberg at kansas city fed symposium in jackson hole, wyoming. most recent meeting, i did express my view that i thought it was time to continued to does continue to process interest rates. when i look at the job market -- time to continue to process interest rates. when i look at the job market and the forecast, i think it's time to move. could be says her mind changed by economic data before the fed meets next month. in italy, it's a battle against time. digging through the central part of the country, looking for survivors from the earthquake. townsake flattened three
and many of the buildings that collapsed were built centuries ago. they had not been reinforced to survive a quake. an impeachment trial today, expected to oust the president in brazil. she is not expected to get enough votes to save her job. authorities in shanghai are looking for ways to cool off the city's red-hot housing market. new home prices have risen 27% in the last year. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. you to: we want to get
some breaking news. carson block is taking on st. jude medical. he said that st. jude medical pacemakers are exposed to hacking vulnerabilities and he said the company must be held accountable. >> this is a company that for years has put profit ahead of patience when it comes to cyber security. we think it is important to make users are made aware of the risks and held accountable. the ceo of saint jude joins us now. you guys figured out there were some security flaws in the st. jude medical devices and you took it to money waters. why not go to the company? 18my team spent the last
months looking at medical devices. we looked at incidents across the board. once we saw the results, particularly at saint jude outcal, saint jude stood far and away as severely deficient when it came to security mechanisms. so, we were shocked. an impact thisen significant before in my career. so we say what do we do with this information? i understand that standard operating procedures are to approach the manufacturer, but what we have seen with saint jude medical is a history of sweeping issues under the carpet. as far back as 2015, we know saint jude was approached by a researcher with some security folder abilities within the suite. we have seen that the same issues exist to this very day.
in 2014, the dhs launched an investigation into st. jude medical and other manufacturers. guidelines were issued requiring manufacturers to prioritize diverse security when it comes to their devices, but we are seeing the complete absence of in saintprotections jude's medical equipment. keep in mind, this is across the whole ecosystem of their devices. so, st. jude medical could come back and say back then we were run by a different ceo. the effort to reach out should have been there, no? >> what we are interested in achieving here is mitigation. but really, what you are interested in achieving is profitability. profit byze
publishing this short rather than going to saint jude first. >> we believe in holding companies accountable. we want st. jude medical to be held accountable and to respond with urgency. and we want the patience and the public to be aware. the public has a right to know about risks associated with technology. very strongly that st. jude medical would want to shut this up and do nothing about it. but first and foremost, this is a business model to make money. craigslist is not software only. -- >> this is not software only. of course, we are looking to recover our cost's. to holdmotivations are saint jude accountable, mitigate
the situation as quickly as possible. keep in mind, this is not going to be a small undertaking because of the inherent vulnerabilities in the system, and to draw attention in the public eye so that patients are aware of the risks. matt: what do you think about the company's response? saint jude comes out and says the allegations are absolutely untrue. the chief information officer says there are several security layers in place. >> welcome a i don't know what kind of security assessments they are conducting. what i do know is that we found vulnerabilities -- well, i don't know what can of security assessments they are conducting. what i do know is that we found vulnerabilities. we put together three different attack scenarios which were reproduced internally under
different conditions, and we presented them to muddy waters. they verified them as well. there are vulnerabilities in st. jude medical equipment that is being deployed today. step back a's moment. what are your credentials? atnow you used to work bloomberg. tell us specifically what are your qualifications for finding and figuring out a fix to these types of security flaws. have been working with the security research community and managing the security research community since the late 1990's. i have run large departments , and theyou mentioned dow jones. i have also founded and managed security research companies that are very specialized in exactly
this type of work. i have a fair amount of experience, and i am used to working on this type of thing. why focus on medical security? >> i think it's misunderstood, to be honest with you. i think medical device manufacturers have been lucky with what they've got no wave -- gotten away with in recent years. there could be the use of or authentication, they arebasics, and absent from the saint jude protocol we analyzed. we looked at the hardware, the software, the operating system, all the way up to the network. these are devices that are interconnected. communication protocol, which should at minimum include -- yption of privacy data
talked with carson about this earlier. there is a way to fix this. saint jude could do something about it. the devices implanted in people already could be fixed. >> they could be updated. of our advisors we are very lucky to have on board is a cardiologist who specializes in heart rhythms. he is recommending that patients disconnect there at home monitoring equipment. he is developing an immediate patch to disable communication. the top of that, there needs to be an extensive overhaul with regards to the architecture of the systems, and that will not
be a quick undertaking. abbott labs may not want to go through with their $30 billion takeover of st. jude's now. >> i can't speak for abbott labs, but i do know that st. jude medical needs to pay attention to cyber security within their products. you are monetizing your research and you obviously have a relationship with money waters. tell us how you make money. do you make money regardless of whether they go through with is it only based on the results? fee? are you taking a >> our profit is connected to his investments. are you worried that this paints a sign on the back of st.
jude medical devices? wants toor group launch a hack attack, it now knows to go to saint jude. >> we are not aware of any immediate threat. having said that, we should not assume that others are not out there looking at the same suite of technologies we have looked at. so if there are immediate mitigations st. jude medical can deploy, to minimize the risk, but security is a subset of quality. they need an expensive overhaul and they need to examine the way they are designing, deploying, and updating their technology. there are a lot of questions about whether this is
ethical, the way you are approaching this. at any point did you struggle with that question? >> we recognize that it is nontraditional. law'sven saint jude history of brushing these issues to one side and making no changes to their technology, despite the research, despite the dhs, despite the requirements that cyber security be prioritized, nothing has changed in the st. jude medical technology suite. we did not feel confident that the most effective way forward was to approach st. jude medical. we believe people have a right to know what they are looking at. matt: it's a fascinating story and a fascinating case for your company. justine is the ceo of med tech, and you can read all about it on bloomberg.com or on the bloomberg. once againive you
the response from phil eggeling, the saint jude chief technology officer, just so you have it. allegations, he says, are absolutely untrue. there are several layers of security measures in place. and of course, a quick mention that saint jude shares are down off their session lows. thank you, justine. coming up, will this short have any impact on the deal between saint jude and abbott labs?
scarlet: as we discussed, money waters is betting against the strength of saint jude, potentially affecting a takeover labs.ed -- abbott >> how much money do you have at risk? >> we don't discuss trading. at risk.u have money the processe is in of being acquired by abbott. part of the consideration is abbott stock. for every one share of saint , we are going to receive
about .8 shares of abbott stock. so, right now, we are short saint jude and long abbott in a ratio that reflects one-.87. this is to reflect the reality that -- >> yes. this is a hedge for us. right now, the market is pricing in and over 90% probability that this deal completes in december. it very well might. we have seen stranger things happen before. we don't know whether the deal goes through, but we are short. what could happen if a consensus develops? that the equipment is in
jeopardy. >> well, presumably, the stock price would start to reflect that, and that's why we have our position on. >> shouldn't the lawyers and accountants that abbott labs hired to conduct due diligence have figured this out? >> it's an interesting question. >> it's a $30 billion deal. cyberht, but in business, security is still so esoteric that it's probably not part of standard due diligence. it could very well be -- no fault to add bit, but they are assuming that saint jude cyber security conforms with industry standard. performing,t's that's probably acceptable. to be honest, i don't think acquirers are yet looking at
cyber risks to their acquisition targets. think we have talked about .his in interviews before you have the pricing of risk or underpricing of risk around the world in so many ways, but because of the network of things, we live in an increasingly complex but fragile world. risk premiums don't reflect that. we can probably trace that to monetary policy. cyber security is something that really needs to be more than just hey, did you read about that hack? as a societye really need to evolve beyond
that and start taking things seriously as a society. election u.s. potentially being affected by a russian hacker. this is serious. matt: we are joined by jeff mccracken and michelle cortes, bloomberg news health reporter reporting specifically on this. jeff, let me ask you about the abbott deal. it in jeopardy? shares are down. >> right, but we are only like an hour into it. it's not like we have a lot of insight. the people working on the abbott side of the deal, one of the biggest deals of the year, i am sure over the course of the next few days we are going to find out whether those advisors or outside medical analysts have concerns. at this point, it is too soon to say. in the time i have been doing a deal have not seen
fall apart because a short seller came in and said something about a target. there may have been something about oil collapsing or disagreements about tax treatment, but something like this is highly unusual. abbott has said these allegations are completely untrue. the market seems to be voting with its feet. ?ow do you see it >> as jeff points out, it's still very early to know. we have to assume abbott is looking through all of its information, checking out cyber security protections. at this point, we don't know how secure saint jude is. if they have something behind the blockerlls that -- that carson block or is unaware of. abbott is refusing to
comment on carson block's short position, as you would probably expect. and as your previous guest said, there is a way to modify it. matt: there is a band-aid. >> the sale price could be lowered if there were material concerns, but it is obviously way too soon to know. this deal started when the year to april.e they have put in a lot of time to get it done. matt: interesting ethical issues. ♪
in the newsroom, mark crumpton. mark: the search for survivors from yesterday's earthquake that flattened three towns in central italy. at least 200 50 people are dead, hundreds more injured. the of the buildings in region were built hundreds of years ago and had not been retrofitted to withstand earthquakes. no claim ofen responsibility for the attack on the american university of afghanistan that left three people dead and three others wounded. the assault began with a suicide car bombing. the nine hours seizure ended when the assailants were killed by police. is meeting with minority campaign volunteers as he tries to increase his outreach to black and latino voters. beenaims democrats have
very disrespectful to minorities and taken their votes for granted. laterinton will speak today in reno, nevada. she will press her view that trump is taking a hate movement mainstream and link his candidacy to the altar right wing of american policies. at miami national airport, a power outage. you are looking at a live picture. to follow thise story and bring you the latest development as soon as we get it. news 24 hours a day powered by more than 2600 than 120ts in more countries. i am mark crumpton. this is bloomberg. matt: thank you. investors are eagerly awaiting jacksonllen's speech in
hole, tomorrow morning. meanwhile, the kansas city fed chair met with michael mckee and gave her take on what is needed. >> i think it is time to continue the normalization of interest rates. when i look at what is happening in the job market and what is forecast, i think it is time to move. matt: goldman sachs sees the pound, they yen, and the new zealand dollar as most of all durable to a surprise from yellen tomorrow. in anre, we bring investment expert. how likely is it that we will get a surprise from janet yellen? it is not widely expected, is it? >> great to be with you.
i think we have to take a step back and look at what jackson is all about. it's an exchange of ideas. , it's about creating a framework. the kansas city fed is hosting. her focus is not so much inflation. its financial stability. she doesn't like low rates because of financial stability concerns. now, janet yellen, the paper she is going to present is about the monetary policy toolbox. i have a difficult time thinking about how a policy toolbox speech is going to be conceived as hawkish. this is the sort of thing you talk about when you say, are we going to do qe or negative rates ? does she want clarity and think
she is going to step in the footsteps of the device chair. if there is one thing yellen has been consistent on, it is that she has not provided clarity. the dollar-yen pair is the most sensitive g 10 pair. come inside the bloomberg. up white line is shooting past the three month, which is the blue line. the one-month captures the doj meeting. there.the line there is no need to pay a next her premium for the next two months. i included the one week here. it's fairly low. that signals that traders are more concerned about the doj aboutbout -- boj then
yellen in jackson hole. traders areke you, not expecting any more clarity from the fed, right? from the boj, they have something to work with. >> i think the key driver here is that as the yen potentially reaches the 100 mark, yes, of course, there is a potential timestamp when a new policy could happen, but everybody talks about what can the boj do. i would not be surprised if the beer g -- if the boj came out with a move like switzerland id, and with that, have a tool
of printing and unlimited amount of money. that's sort of helicopter money. it's a radical move. the bank of japan knows that these short-term fixes are mostly expensive and don't last very long. scarlet: you mentioned japan coming out with a ceiling. that would be issued by kuroda at jackson hole? when would that take fire? >> at some point out of the blue without much signal or preparation. general --in currency manipulations in general are more effective when there is low liquidity in the market, like on fridays. to put in a general permanent p, like a ceiling, we know in switzerland, how well that will work. are kind of
desperate. if you want to do something radical, that is something the table fors on them. i don't know when it will happen, but the risk is elevated. scarlet: everyone is going to focus on what janet yellen says tomorrow morning. wrotemberg contributor what her message should be. he said the fed's practice of releasing official forecasts of rate changes every three months doesn't help. yellen -- and we will be having him on bloomberg television a 4:00 p.m. definitely something you don't want to miss. but let me ask you what you .hink about his point so many traders i have talked to have said the fed's credibility because what they said
last year has not come to fruition this year. indeed, when we walke talk to my managers, they are frustrated with the fed's lack of clarity. fruition this year. indeed, when we walkedshould t'd this attempt at transparency that just seems to bite it in the back in the end? >> we know things that don't work at the fed, and i would include just about everything in that these days. dependency, and you're making everybody look at noisy data, which is a key problem. the key problem is they don't know what they want to do. they know they want to get out
of a low rate environment, but they don't want to shock the market too much. we have the tail wagging the dog. scarlet: not all data is created equal, of course. what is the data that is most import now as opposed to three months ago? >> the compression of risk premium. volatility is so low. that is what the concern is. in many ways, the fed does look market is too the complacent, they talk about a rate hike. that's not a strategy. supposed to focus on inflation and employment, not managing volatility. they have increased asset prices and if they were to do something more radical, we would potentially have a crash with
economic reproductions. matt: thank you for your time. coming to us by satellite from stamford, california. don't miss our interview at 4:00. that will be right here on bloomberg television. fromet: coming up, more carson block of muddy waters announcing saint jude has medical flaws in its devices. >> number one, it should stop selling these devices until it has a way -- until it has developed a new, secure communication protocol. in the interim -- and i am speaking not from a medical -- users should speak with their doctors -- but from a security perspective,
scarlet: this is bloomberg markets. i am scarlet fu. and i am matt miller. apple is developing a video sharing and editing application and testing features for its iphone and ipad operating systems. i want to bring in marker men of bloomberg newsof in san francisco. love following your reporting. what exactly does this mean for apple? is this a way to boost sales of the new iphone when it comes out in just under a month? >> i think this is more of apple
realizing that it created a so-called pie in the app store, are snapchat and facebook taking a big chunk of. apple wants to play in the social networking game is well with its own application. we hear they are coming out with a snapchat-like, instagram-like video blogging tool that will allow people in under one minute to shoot a video, edit it, and send it to their favorite existing social networks. scarlet: how would apple go about monetizing this? apple has started to rely less on hardware sales and higher-margin software sales. advertising-based? >> well, the application, which -- which is now right now a conduit to existing social networks, apple has not reached the point in its
prototyping were it is working on monetization. in a way, this is apple trying to catered to younger users. if people start using this application, it will catch on, and the people who grew up with facebook, snapchat, twitter, will be more open to buying iphones versus android phones, for example. able to shareo be things from one application to another. it would be great to be able to take an instagram photo and post it on facebook. sometimes you can, sometimes you can't. apple is notoriously closed off in the way it works. what do you know about its interaction with other businesses? >> from what we are hearing at bes point, it is going to the opposite. it will be connected to every social network you can access on
an iphone. once you finish creating your clip, you will be able to post it to any social network that supports the iphone, and perhaps multiple at the same time. earlyis still in the stages with this application. we will see how that changes between now and the presumed launch next year. quick so this would be part of the upgrade of the ios? >> it will either be a standalone operation or they might just bond all the functionality into the existing functions of the iphone. productvery early stage but it is apple's goal to be more prevalent in the social media space in the coming years. new: when do we get the
new role? part of ation to be great challenge for the future. lamborghini is a great brand. of audi, we have a very solid base on which to grow and be loved for the future. it's a totally different market than we are used to. we have so many things to do and we are so excited about it. head ups a privilege to such a fantastic company. matt: when you think of a who is that?river, >> normally men. that is a target we may change in the future. young entrepreneurs who want to characteristics
that are recognized all over the world. they want to be listened to. they want to be heard. so we encounter them through our networks. they know the customer. they want to tell us what they .eed matt: what do you think about turbochargers? we see them in so many great sports brands you would not expect. ferrari. will lamborghini have to do the same thing? is connected to a
different for loss of fee. matt: it's connected -- the front philosophy. it's connected to regulation. >> but we may see things a different way. .or sure, turbo is the solution the new suv will have a turbocharged. but we will come up with new technological solutions in the future and, as we used to say, do the follow-up shortly. we aret what to say going to do turbo or not turbo, we want to put everything on the
table and come up with a solution. of ther the needs customer. consider the regulation. consider the markets. we need to make sometimes difficult calls, but that is why we are here. matt: the d12 is not going to go away. i had the privilege of driving barcelona, and i have also been able to drive here on the twisty back roads of upstate new york. i cannot decide which one i like that are. what about you? do you have a favorite? what is your favorite thing about driving them? if you ask me personally, the way i am as a man, the perfect car for me is the american spider --her a can
hurricane spider. it has the angeles and to push and certain conditions. for me -- undulation to push and certain conditions. to drive it in italy, that is my favorite place. matt: what about the centenary a spider question mark did you get one of those. there were only 40. or the roadster. >> that is not for me. matt: is that why you put out , tosuper special editions reward loyal customers? >> i would say two things. the first is to anticipate technology we can bring later to the products. we see thes potential from the customer's point of view.
cars that are few club.f this super we have special customers, special clients, and there is value for the future. we made 20 coupes, and they already sold out. what is phenomenal is that the customer, without seeing the car, says i want to be there. i want to have it. that to me means a lot. were willing to pay $2.3 million apiece for each of those 30 special editions. they were sold out before they were even unveiled at pebble beach last week. i guess if you have that kind of cars --d you care about
you had to take it before you before -- had to take it they even finished the version. $2.3 million. scarlet: carson block is working with a hacker to expose flaws in saint jude. take a look at shares today. the company cause the allegations absolutely untrue. at one point, it dropped as much as 10.4%. it is now down 8%. this is bloomberg. ♪
scarlet: from bloomberg world headquarters in new york, good afternoon, i'm scarlet fu. matt: i'm matt miller. we take you from washington to san francisco and cover stories out of brazil. carson block of muddy waters targets medical device maker st. jude, saying they are vulnerable to hacking. good think there is a very chance it is about to lose close to half of its revenue for a period that could be two years or longer, and this would be due to device recalls. the jackson hole summit gets underway today, we hear from kansas city fed president esther george who says gains in inflation may mean it is time for a rate hike. s valuation may be north of $50 billion but the company faces challenges in profitability. what does that say about its business model?
halfway through the trading day, let's go to the markets desk. ramy inocencio has been tracking the moves. the markets are in a hold pattern right now, looking at the majors. holding to the flat line just above and below th. the nasdaq is the biggest gainer right now, up less than .2%. markets so much moving right now, everything from carson block to mixed earnings, commodities which were lower, but are now higher. take a look at what is trading right now. , with all ofally this moving, not much of a trading range. 8.8he s&p, just a range of points and this is close to the yearly low of six points, which happened a few days ago.
dog days of summer here, a lot of people still on the sidelines , especially as we look forward to jackson hole. that said, let's take a look at some of the movers. oil and gas moving higher. , inx crude is up about .2% part, because a report out that iran's minister may join that meeting at the end of september, where they could be talks about a production freeze. natural gas up .2 -- 2.2% right now. up nine out of the last 10 days. expecting warmer weather over the labor day weekend pushing prices up. natural gas stockpiles also coming in bigger than expected. a lot of other market movers. let's keep going in terms of st.
jude. down. lost $1.9unt, it had billion in terms of market cap, on track for its biggest fall since october. a couple of other movers, mylan shares rebounding. they had been hired by about 2%, but this is the whole fiasco with regard to the epipen and the company raising those prices. now they say they will be expanding programs to help people pay for them. but leaving the price at $600. ramy: that is the important point. if they cannot get that, they still have to pay that $600. scarlet: now let's get to first word news with mark crumpton. hillary clinton and tim
kaine will not be campaigning or running ads on september 11. the day will mark the 50th anniversary of the 9/11 attacks in new york, washington, and pennsylvania. no word on whether donald trump will follow suit. mrs. clinton leads mr. trump by 10 points in a new national poll. the survey from quinnipiac university puts clinton at 51% to donald trump at 41%. with third-party candidates included, her lead shrinks slightly. the brazilian senate is debating whether to permanently remove president dilma rousseff from office. she is currently suspended and is accused of illegally shifting money between government budgets to mask deficits. she denies any wrongdoing and says her enemies are conducting, in her words, a coup. in switzerland, former fee for
president set letter is appealing his dan from football to use blogging to accept the verdict of the court of arbitration for sport. he denies wrongdoing and authorized a $2 million payment to a former vice president in 2011. paisley park, the private estate music superstar prince, will open up for daily public towards getting in october. the company that runs elvis presley's graceland will manage it. the complex encompasses 65,000 square feet. it is where print died of a drug overdose in april. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. our mark crumpton. this is bloomberg. scarlet: short seller carson block enters new territory. muddy waters is betting against the financial strength of st. jude medical, even as the device
maker is in the middle of a takeover by abbott laboratories. and a report to investors the least this morning, he claims the devices are vulnerable to be hacked. tens of thousands of americans with pacemakers and differ berliners are at risk of potentially fatal disruptions. he spoke with erik schatzker in san francisco. >> i want to raise an ethical question. the information you are publicizing here could get somebody hurt, possibly killed. does that concern you? it concerns me. >> we obviously were very concerned about this information , and we have taken a lot of time to figure out what is something we can publicize and what we cannot publicize. argument,ay make the if you kept your mouth shut, everybody would be safer, but when they really? world. a dangerous
if you believe it is possible state actors are aware of this already, we have to be more concerned with nonstate actors, but we believe the balance of interest is clearly in informing people of the risks and holding the company accountable so that something can be done. i do not believe that sticking one's head in the sand and pretending a problem does not exist and hoping nothing goes wrong, i don't believe that is the ethical course of action ever. >> why do it in a public form as opposed to a private channel? >> we don't have confidence that st. jude would do anything to make patients aware of this. about the fda, why not inform the fda? >> there is precedent, a researcher that identified flaws in one of the insulin con's informed the fda, and ultimately
became frustrated because nothing happened and he went public. sounds the fda -- it like they are more concerned about cyber security and more attuned to the risk, but i have never done with the fda. we feel it is important that users know -- we just don't have confidence in st. jude, and maybe even some of the institutions of government that the right thing will happen. st. jude is a large company, i'm sure it is very politically connected, it could bring a lot of pressure to bear on the fda if there was a private that channel discussion -- this is just the real world here. we did not want to risk that. erik: how many people are at risk? jude's, the number of implantable device users, we don't know still have devices, in since 2008, it looks like the u.s. about 1.1 million of
these devices planted. that includes crt's. i want to make clear, people should read our report because there is important detail that we cannot get into here. one of the things that is an important caveat here, med sec tested icd's and pacemakers. part of the same ecosystem, they use the same protocol, but because of lack of device availability, they were not able to test those. the crt portion remains theoretical. not treatingfda is cyber security as a critical, binding issue for the device makers, why should investors feel any different? >> that is draft guidance, which they have given industry time to comment on. there will be a version that goes effective that should largely resemble that. generally, over 90% of medical device recalls have been
initiated by manufacturers. that is probably because there is this sort of damocles where the fda has said, if you don't recall this, we will. fda'suidance shows the current thinking on cyber security and it is really important for people to understand that come in that guidance, there is an example of an implantable cardiac device compromised, where the fda says this would likely rise to the level of, this would be an uncontrolled risk that would mandate some sort of remediation. based on that guidance, it is clear to us, our interpretation of the guidance, that the st. jude implantable devices fall far below the standard established by the guidance. when we say we think they are at substantial risk of having to recall their devices, it is
based on looking at that, which illustrates their thinking on the matter. you point out,s these are draft guidelines are to be finalized. we don't know the calendar for that. in the meantime, what reaction are you hoping for? at a minimum, what needs to happen if your short is successful? >> look, there is what we hope happens, and there is what probably happens. i have been publicly shorting companies for six years. very seldom have they said, some of this criticism is valid. we are expecting to be told patient security is number one, these guys are short-sellers, they are looking to profit on the back of a price decline. erik: a wall ben sheets clothing. st. jude's will say. they could take it seriously. , andcould investigate this they could, without kicking and
screaming, recall the devices and stop selling them until they fix the problems. erik: if that does not happen? hoping the fda, which we expect to facilitate a dialogue between the fda and med sec, will say, you need to recall these devices. that was carson block and an exclusive interview in his latest that against st. jude medical. st. jude issued a statement. it is the st. jude chief technology officer. the allegations are absolutely untrue, there are several layers of security measures in place. we conduct security assessments on an ongoing basis and work expertsernal specifically on merlin at home and on all of our devices. st. jude medical takes the security of devices and their data seriously, protection of confidential patient and consumer information is a high priority or us. we will remain vigilant to the ever increasing sophistication
of those seeking unlawful access to such data. st. jude medical has an ongoing program to perform security testing on our medical devices and network equipment. i want to bring in jordan robertson, our tech reporter. he helped to break the story. it is interesting, jordan, the story in and of itself, but also this new business model -- i do not want to: hackers. medsec is made up of very educated, highly skilled people to do this for a living, so they are not hackers, but they have figured out a way to monetize hacking into these medical devices. is right. the sub story here is the sequence of events that led up to this information flow into carson block. it was this cyber security firm that was doing research on these devices for 15 months, and then brought this information to carson.
from there, formulated this short hypothesis. totally unprecedented in a cyber security space. typically, researchers find bugs, they tell the company, either for free or they get a bounty payment, or they just tell the government. in certain cases, if they are criminally minded, they sell into the criminal underground. when it comes to medical devices, there is no business model to monetize it. medsec and carson block have pioneered a very interesting and controversial model. scarlet: we spoke with the ceo of medsec. this is what she said about her decision to approach money waters as approach to the company. the timegnize a lot of standard operating procedures are to approach the manufacturer. what we have seen, unfortunately with st. jude, is a track history of sweeping these issues under the carpet. scarlet: in the discussion of whether what her firm did was
ethical, you and i have discussed earlier what tends to happen when a security researcher finds a flaw and approaches a company. , doess the usual m.o. anything get result? said is fairly common, which is companies, unfortunately, do not always react the way the public would expect them to. as you mentioned, professional, successful cyber security researchers bring them information about hacking vulnerabilities. what happens far too often is they sue the researchers. they put gag orders on them in court so that vulnerabilities cannot be disclosed. or if they accept the information, it takes a long time for them to be fixed. what medsec and carson block have done, they pioneered this business model which demands a response from st. jude and the abbott. ad very controversial and very new.
however, they have st. jude and fda's attention. matt: let's talk about the crux of the story, which is that hackers could gain access to medical devices like the defibrillator's or pacemakers, and potentially injure fatally hundreds or thousands of people, if these vulnerabilities are real. how likely is that? that is the scariest part of the story, right? >> of course. an important point, the vulnerabilities that have been described to us are apparently very serious and real. however, the likelihood of an attack against somebody with one of these implanted devices to harm them is very low, close to zero. the reason is, most hacking is driven by criminal profit motive. to date, there is no criminal business model that has been pioneered around making money
from hacking medical devices in a criminal pursuit. note, theseant to are serious vulnerabilities that the companies need to fix, and some have fixed these liabilities. however, the likelihood of an attack against people with these devices to harm them, at this point, seeing very low. matt: on the other hand, last summer, some hackers with "wired got into a jeep cherokee and stopped it from functioning on the freeway. in the past year, we have heard more and more about hackers stealing cars by accessing such vulnerabilities. these vulnerabilities become public, there is sort of an inspiration effect that is hard to quantify. it makes it all the more important for companies that become aware of these things to fix the box. one of the heartening things to come out of the medsec research, i have been reading about these
for about eight years, when some of these first came to light in different products. medsec told us they tested for different leading companies. three had made good gains in their cyber security, which means the industry is moving in the right direction, in their view, st. jude had not. scarlet: and now paying for it in this very public short price. thank you so much. we will hearup, from ethan harris. he will give us his take on whether the fed should revise its inflation target. a possible solution to an age-old conundrum. this is bloomberg. ♪
markets." i'm scarlet fu. matt: i'm matt miller. scarlet: central bankers around the world are coming to the view that as economic times have changed, so, too, should interest rate targets. we are talking about the neutral right. so should the fed start to think about ways to push away from the zero bound on interest rates? inflation, ouro next guest says the target is too low but that the fed should overshoot. ethan harris is with us. how would raising the inflation target actually get us higher inflation? we are having trouble as it is generating 2% inflation. ethan: right now the objective is just to get to 2, and and the low inflation. thequestion after is due to fed want to let the economy run hot for a couple of years and 2.5, three.o
that way, they are in a better position to deal with the next recession. that is what the next debate is about, getting ready for the next recession. matt: you worked at the federal reserve bank of new york for nine years. 1960 -- now, early what was the debate like in terms of setting inflation targets, did they even do that? was it controversial? now it seems like it is widely accepted to have a 2% inflation target. ethan: the fed was one of the last central banks to do it. meetings,t one of the janet yellen asked alan greenspan, what is our target? we are supposed to have an objective of reaching some level of inflation but internally we don't even have a target. that was the beginning of the first informal targets. by 2007, they pretty much announced they had a target.
the idea here is that central banks believe you need some inflation in the system to grease the wheels, you need inflation to avoid deflation during a bat period in the economy, and you need a bit of inflation so that in normal times interest rates are high enough so that when a crisis comes, you can cut them to fight the crisis. the targets came in as a way of creating buffers against deflation, giving central banks room to cut during recessions. scarlet: when stanley fischer says that we are within hailing distance of 2%, how do you interpret that, what does that mean? will the fed allow inflation to run hotter, or will it move before we get to 2%? ethan: i think the fed is already moving but the idea is they don't want to stop the pickup in inflation, they wanted to accelerate. the big decision they will need to make is if the pickup continues and they approach 2%, do they then slam on the brakes
to stop the rise in inflation? i don't think they will do that. i think the fed -- they keep buting about getting to 2 not beyond, but their body language does not suggest that. they are really acting as if 2% feel comfortable with, but maybe a little bit of overshooting is ok as well. i think that is the attitude they should have. lending on the brakes any time in the next two years would not be a good idea. matt: inflation picking up somewhat. i have a chart here that hillary clark put together. lines,s the two colored cleveland median cpi, sticky cpi. the white line you see is the atlanta gdp now forecast. inflation,growth, and then we hear esther george saying it is time to normalize. do you agree? ethan: here is what the general public gets confused about.
when the fed is talking about inflation up a bit, they are not just talking about price inflation, but wages. really, what the fed is trying to do is, after seven years are really poor wage growth, get wage growth back to normal. that would complete the healing process -- matt: what is normal? ethan: we have been stuck at 2%, moving to 2.5%. i would expect 3% would be acceptable. on a wage front, we still have a lot of room to improve. this is really the fed finishing the job of healing the labor market. normal, you ask about natural rates at which the economy does not speed up too much or falter too much. if you look at the history of natural rates, it has gone down. with all of this discussion on whether we are looking at a new natural rate, things to john williams, who brought it up again, what does that mean right
now for on the ground investors who are trying to position themselves for the next move from the federal reserve? ethan: it means the fed will go extremely slowly, as we have seen. they started off talking about hiking four times a year, which would be half the normal pace. thene have had one in and on hold for eight months. they will go extremely slowly. they know they only want to hike as fast as the economy can handle. the last thing you want to do is risk a recession. matt: ethan, thanks for joining us. studio,o us live in the the head of global economics research at merrill lynch. scarlet: moore jackson hole coverage coming up.
hey how's it going, hotcakes? hotcakes. this place has hotcakes. so why aren't they selling like hotcakes? with comcast business internet and wifi pro, they could be. just add a customized message to your wifi pro splash page and you'll reach your customers where their eyes are already - on their devices. order up. it's more than just wifi, it can help grow your business.
you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business. matt: you are watching "bloomberg markets." i'm matt miller. scarlet: i'm scarlet fu. let's begin with the headlines in the first word news. mark crumpton has more. in italy, rescue crews are
using their bare hands in some cases to search for survivors from yesterday's killer earthquake. a short time ago, a 4.3 magnitude aftershock was felt in the town of amatrice. at least 250 people were killed and hundreds more injured in wednesday's quake. that flattened three towns in central italy. many of the buildings were built hundreds of years ago and have something retrofitted to withstand earthquakes. russian president vladimir putin today ordered snap military drills on land and sea. the exercises will last until the end of the month and involve a variety of soldiers from paratroopers to the northern fleet. the drills come a week after president putin criticized ukraine for allegedly carrying out acts of sabotage in russia
and crimea. the airport in miami and fort florida have reopened after power was restored to the air traffic control center that monitors arriving and departing flights. the faa stopped arrivals and departures at miami and fort lauderdale hollywood international airport for less than an hour. it is unclear how many flights were affected. president obama has gone where no u.s. president has before, into virtual reality. he is narrating a 360 degree representation of yosemite national park. national geographic teamed up to produce the free video. it is being done to mark the centennial of the national park service. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. global central bank
leaders gathering in jackson hole wyoming today. with everyone looking forward to the main event, which is janet yellen's speech on friday. mike mckee sat down with esther george, who made the case for raising interest rates. express my view that i thought it was time to continue with process of normalization of interest rates. when i look at where we are with the job market, one i look at inflation in our forecast, i think it is time to move. where it will look by the september meeting, we will have to wait to see if anything changes fundamentally. >> you are looking at inflation in the job market, are you believe are in the phillips curve? >> i think we are beginning to see signs of that, inflation strengthening. cpi is beginning to show some movement, so yes, i think we should expect that.
wein, i do not think that are going to need to have high interest rates, i don't think many need to cool off the economy by any means, but i think it would be appropriate to begin the process of continuing the normalization. mike: you say normalization. what is a normal interest rate in this post crisis environment? esther: a lot of questions about that today, what is normal. dot plothis in the forecast that the participants have been putting out, that is coming down. regardless of where you would peg that today, there is scope to begin to remove accommodations. we are at negative real rates today. whether we go back to something ort looks normal precrisis something less, i think we would judge as we move along. do you think current monetary policy is still stimulating the economy? esther: i do.
we still have a large accommodation, a large balance sheet, negative real rates. i think that is providing stimulus to the economy. would you argue in favor of stopping investment or paying down the balance sheet? esther: i would be in favor of that. that was not the majority view of the committee, but i thought opportunities to begin to cease those three investments and let that balance sheet come done naturally would be an opportunity for us. i hope there is a chance talk about that, going forward. pare downou start to the balance sheet, some banks need more reserves these days. are you comfortable with holding a large balance sheet, even if it is not the size it is today? theer: i'm comfortable with principles the fomc has laid out, which is to return that balance sheet to the smallest size necessary to conduct monetary policy.
i do not think that is the size it is today, but again, that process will come later after we have begun the short-term interest rate cycle. mike: there are a number of people on wall street, analyst who have started to more than maybe the fed would have to move faster than the market is anticipating. you say the fed should begin the process. how fast do you think you need to move? esther: we began the process last december. i, like others, thought the process would go gradually. i thought the economy would be best served by doing that. but excessive patience, i think, is not warranted, as we have seen the economy continue to unfold the way it has with 4.9% unappointed rate, inflation looking like it is moving back to target. i think we should continue the process. be inwhere would your dot
terms of 2017, 20 18, where the fed funds rate should be? esther: i have not come off markedly from what i think is a normal market rate. i judge that to see whether something fundamentally has changed. as we look at the rate of growth in the economy and other factors, i'm open to that. observable is not an rate, hard to know where it is. i think under any metric you use today, it would be time to move. scarlet: that was kansas city fed president esther george speaking with mike mckee. when janet yellen begins speaking tomorrow, i will be on theg fed go bloomberg, the one-stop shop related to any fed news, for our viewers and customers. this is where you see the different events, news stories, program,n the qe 3 long-term bond purchase charts. i am going to take a look at who else is coming up.
tomorrow, we have janet yellen speaking at 10:00. after that, it is radio silence until august 31, when boston president eric rosengren speaks to a financial conference in beijing. as people debate whether she will say very much, that will be market moving tomorrow, that will give any indication as to whether september is a go or december is more likely, you will not get much of a follow-up for an opportunity to clarify until much later. matt: she will talk about the tools the fed can use in order to drive policy. that is the theme of the speech. ethan harris, who worked at the federal reserve bank of new york for nine years, he was the assistant to the president, now at bank of america merrill lynch, put on this report. one of the tools they could use the rather than saying two or three or four, they could just agree to overshoot, and maybe by
half a percent or maybe a full point. scarlet: let it get to 3%. matt: not step on the brakes immediately and worry about letting it come back down and let the recession naturally do the dirty work for you. tce,e a picture of core which is what the fed watches. , which is what the fed watches. although we came back considerably in december, january, february, we have started to roll over a little bit. that has to be concerning for a dove like janet yellen. scarlet: and this is 2%, this was the fed's target. chair said, the vice in recent days, that we are within hailing distance of 2%. how do you interpret that? that herpretation was was more hawkish and fed is prepared to move perhaps as
early as september but more likely in december. matt: don't miss our interview today with the former president of the federal reserve of minneapolis marriott all the cultura. we will take him for a full three blocks in tv parlance. in real time, about 30 minutes. very important ahead of this jackson hole meeting. four :00 eastern, 1:00 on the west coast. scarlet: he has written extensively on what the fed's message should be. fromg up, more coverage the jackson hole economic symposium throughout the day and tomorrow. we will break down janet yellen's much-anticipated speech which begins at 10:00 eastern time. and do not miss some of the biggest voices on bloomberg tomorrow including james bullard, robert kaplan, and dennis lockhart, and fed governor jerome powell. is said to be posting
scarlet: this is "bloomberg markets." i'm scarlet fu. matt: i'm matt miller. scarlet: it is time for the bloomberg business flash. the vendee posted second-quarter earnings that missed analyst estimates. the company's pay-tv unit continues to lose money and subscribers in france. plans to reduce kospi
$350 million. this will help the company reach breakeven for the channels in france. --t: apple is securing issuing a security update. the spyware takes advantage of three previously undisclosed weaknesses in apple's mobile operating system, including being able to take complete control of handsets. apple says it fix the vulnerabilities immediately after learning about them. scarlet: maryland congressman elijah cummings is calling for a hearing in september over mylan's drug prices. the company has been under fire for the sharp increases in the epipen product. he is calling the effort a pr move. he also says drug ceos are profiting off of a "corrupted business model." is making a u-turn on
his profitability in the u.s.. that it hadizing made money, the company now says they posted a huge loss in the first six months, as much as $1.2 billion. joining us now is our tech start up reporter eric newcomer, who broke the story. congratulations on the school. ,s this very bad news for uber or is this part of travis kalanick's plan? has been going up against dd in china, so this is helping them. given that they have had to negotiate, it was not totally insane, but at the same time, losing $100 million in the united states in one quarter after trying to be profitable is pretty aggressive spending in the market. matt: $1.2 billion worldwide.
is the minimum. they may have lost more. i know they lost at least 520 million in q1. they lost about that and at least 750 million in q2. matt: so they cannot just keep burning cash. at some point, they will have to stop if they want to go public and convince investors it is a good bet. we have seen a lot of growth companies like amazon spend a lot to tell a growth story, but uber is a special case, burning through may be more than we have ever seen in a private company. but they have a lot of money. $8 billion in cash alone. owes them a credit line, $1.2 billion in loans. they have money to tap if they want to spend more. scarlet: not in need of more cash, certainly.
you mentioned they may need to show profitability to investors. is that a necessary precondition before they go public? eric: one of the amazing things , theyuber's business is can say, look at the city where we are profitable where we don't have a competitor, but in this city, we need to fight the competitor. it is like amazon. we are going to make our money on diapers, we are going to lose money on matchboxes, or whatever. makesimilarly says we can money here, we may lose money there. if they can point to a story in the future, you would think that would be ok, but maybe they would have to make more money. does this say about their valuation, does it have any bearing on it? the mutual funds update the valuation, so we will see if investors change it. private market valuations do not really fluctuate that much. we will have to see if uber
needs to raise more money before it goes public. it may just raise debt if it needs more money, at this point. the real valuation is price by what people -- and by what price people are willing to invest at. we may not know until they go public or something else happens. matt: when will they go public? is that an option? does travis kalanick talk about this with other executives, or is this so far off that they do not have their eye on it? eric: they are always publicly pushing it off. uber has plenty of relationships with banks, close to many of them, goldman is an investor. if it needed to start getting ready for a roadshow, it could when it wants. travis has always said, we are going to take as much time as we need. talks publicly and privately, that is true. matt: thank you, eric newcomer. scarlet: coming up, we hear from
blackrock. he says emerging markets rally has more room to run. the: it is very clear to me markets in the last couple of weeks have run out of steam. emerging markets have run out of steam, and there are a lot of good reasons. most of which, we are coming hole, boj, american elections, but also other reasons. enormous amounts of money have come into the asset class. if the market is starting to technically it, is not as supportive as before. having said that, the question is, do we think the rally has led them up in some form of consolidation? i think the answer is yes. is stillxt for em's conducive for further rally from here. that in one area
of the markets, looking at etf's on the bloomberg. i looked at emerging market etf's. this covers everything from vwo etf's.ty $4.5to date flows of billion into fixed income, $10 billion into equities. it seemed like a no-brainer at the beginning of the rally to get into etf's. you had all of the big banks on the sell side, advising clients to do that. is it also a no-brainer to take some money off the table at this point? amer: i don't think so. managers, we are still overweight, still comfortable with that position. knowing perfectly well that the technicals are no longer as supportive. we think the underpinning of the story and the valuations. cork fixedin west
income is still offering you know rates or no yield or negative yield, em stands out. the valuation is particularly attractive. i think we can afford some wobble and the rally after. scarlet: that was amer bisat. i want to bring in joe weisenthal. in this interesting discussion about emerging markets and the money flowing into it, people do not talk about china anymore. no one can really figure out what the target is when it comes to the yuan. we know that they are appreciating it gradually. as long as it does not shock the markets, everyone is ok with that. >> if we were to see another ock, that would royal emerging markets. if we were to see signs of severe deterioration. right now, it looks like a fairly low volatility decline in the yuan.
it does not look like a hard landing. it is all about the fed, and to a lesser extent, fundamentals of any given country. it has made china something of a boring story -- i don't want to say that because it is still a massive economy. still showing incredible growth relative to the rest of the world. but people are not clamoring to invest in china as they once were five years ago. even from the perspective of this year, going back to january, february, we would have guessed chinese growth would have been much more of a story than it turned out to be. matt: mark mobius says helicopter money will be japan's next big experiment, and it could happen next month. he spoke exclusively with us here at bloomberg. they will engage in helicopter money with great care and reluctance.
of coarse, if they do it to carefully, it will not have the desired effect. that is the dilemma they are facing. so they would use great care instead of just dumping buckets of money from the sky, and reluctance. that is the key part of what he said. joe: the argument that people whether helicopter money or any other form of central policy, somehow banks have to commit to being on credible. in order to bring people out of this believe that they will tighten at the first sign of inflation, they have to convince the markets that they are totally wild. if they do it carefully, maybe it will not work. although the conversation has shifted from helicopter money to fiscal stimulus. already indicated that more fiscal stimulus is on the way. the bank of japan, there is the dance going on over there about whether the government take it on. operations a delicate
. an economist the other day said central banks can move inflation by tens of basis points. it is when you are talking about decimals that it is tough. joe: the argument that trying to get inflation in a narrow gauge is tough. you could really blow without, but that is tough. it also raises the question that i do not think has been answered by a lot of people, why helicopter money is better than aggressive fiscal stimulus on its own. matt: thank you. coming up, the former minneapolis federal reserve president narayana kocherlakota. this is bloomberg. ♪
david: we are live in new york. watching.at we are we continue to monitor the follow-up of carson block announcing his short of st. jude medical on television earlier today. st. jude denies the allegations but what are the real risks of packers breaching its products? vonnie: [indiscernible] could result in the permanent ousting of de la rue said. can the country handle political instability? david: tim cook has led the tech giant for five years. how much he has been compensated as shares have doubled. two hours left in trading, markets have turned negative. ramy inocencio is standing by. ramy: markets are now in negative territory.