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tv   Bloomberg Business Week  Bloomberg  August 5, 2017 3:00pm-4:00pm EDT

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>> welcome to bloomberg businessweek. >> we are coming to you from inside the magazine's headquarters in new york. >> inside president trump's chaotic white house. >> and how brothers managed to turn lines of code into millions of dollars. >> and uncovering the secretive powerbrokers in china's most influential companies. >> ahead on bloomberg businessweek. ♪ >> we are here with the editor
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in chief megan murphy, josh green takes a look at what has been going on at the white house. >> josh green who is one of the writers for business week, peeled back beyond the administration before it was the administration. an inside look, the ks we saw -- the chaos we saw during the campaign in terms of who is in and who is out has only continued. we can laugh about it with anthony scaramucci being ousted this week as communications director. he was the fourth official to depart in 10 days. the gravity and seriousness of this is something we need to start thinking about in terms of, if they are unable to get a hold on their own white house -- if it will be a revolving door -- if we will not be able to see stability in terms of how it is run, the leeks, how the press is dealt with, how they are operating as a white house? there is little hope -- is there
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any hope they will be able to progress with a legislative agenda. the collapse of health care, moving into a phase where they need to get something done. and they want to get tax reform done. >> i was thinking about coverage, we continue to seek chaos but how do you continue to cover the score at -- the story. >> especially when there is no communications director. >> it is tough to cover any news that is constantly rolling. we need to take a step back and way in -- get beyond the noise and comity. there has been an element of levity in all of this. this is the leader of the free world. we see venezuela and north korea and the middle east with the battle against isis. people who need health care in the u.s. and you want to see manufacturing and whose life is not based on out 22,000 but based on everyday ordinary choices. we try to connect the chaos with the everyday impact in foreign-policy initiatives and
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domestic policy. that disruption we see is very unusual and will really doom this white house to failure unless they can get a handle on it. >> another story is the -- the hna story. tell us about it. >> this was an old-fashioned, we were talking a conglomerate that spans everything from investments and airport infrastructure to apartment buildings, buildings in new york. we don't see these conglomerates that much more in the u.s.. in europe they are a little more common.
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this is a huge company that has that on this acquisition spree in recent years. like it isng to look teetering a little bit. it has more regulatory scrutiny. its lenders are circling now. this is a much bigger problem in china, this is a highly very similarpany, to top five companies in china. dangeroused about how it could be. hna is a part-- of it. >> it is a complex story. >> hna is an incredibly acquisitive very dynamic chinese company that has emerged from total of security over the last -- total obscurity over the last few years to be the most dealmaker among chinese corporations.
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one of the funny things about is its ownership structure and the in penetrable subject of lurid speculation within china. not in the sense of a western firm is it easy to understand. >> why we care that we understand what is going on? >> quite simply this is a company that is going to own a large number of assets in the world. it is a systemically important organization that by its own , buying strategic assets in airairport space travel and transportation so knowing who is behind it is an understandable
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thing for regulators and investors and journalists to want to understand. >> a big customer is the acquisition of sky bridge capital, former white house -- thisations recently is the first time i have heard of it. how important has that acquisition been to thrusting hna into the public spotlight? >> this brings a lot of attention. divesting in the expectation of the white house rule which did not arrive in this -- in the summer, which was taken away. it was something seen in the context of the trump presidency. you have seen in the brief time when mature -- when mr. scaramucci was in the white
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was behindow who hna, what are its connections to government officials in china? because if they are in fact, paying a large amount of money for a company owned by a close adviser to president trump, that is the kind of thing you would want to know. whether that fades from the scene, this debate become something that no one pays attention to -- with mr. scaramucci leaving, that remains to be seen. >> you are tasked with finding out, what is hna -- how easy was that to do? >> you run into interesting walls. for example, for a long time hna has said that a chinese businessman has owned a large chunk of its shares. book value of $18 billion. the thing about him is no one has ever seen him. no one has been to an event where this person has appeared. he has never run a public company. on paper, he should be enormously wealthy, he is very
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obscure. bloomberg and other organizations have sent reporters to various addresses around beijing associated with him from corporate filings and they are invariably not the places you would expect. a nondescript office or small apartment, a beauty spa in one case. he is nowhere to be found. >> hna was turned into a cover story for asia. the cover for asia is a company that is well known in asia and you make it look ominous. >> we did not know much about the company until we did the story. it is worth a lot of money but its finances are suspect. we wanted to get at the fact there are dubious things happening with this company -- there was no shoot, the ceo is very hard to get a hold of. we took the letters hna and applied this scary graphic.
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>> how do you portray this unknown corporate situation -- the story is really about who is behind this. what are their motives? how do you portray that visually -- in this case it is very red and bold? >> was very challenging in cases like this. we have the headline which help explains -- which help explains -- putting letters on the cover is not much. part of it is applying the dark treatment and the scary letters -- even if you do not know what it is, it makes you want to know. >> up next is a goldman sachs veteran who could end up leading the world's most expensive and influential central bank. >> more decline for the dollar. >> this is bloomberg. ♪
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>> welcome back to bloomberg businessweek. >> you can find us online as well. >> in the politics section, gary cohn went from president of goldman sachs to top economic advisor of president trump. >> but his sites may be set even higher. >> there has been a lot of
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speculation in washington over the past couple months that he wants this job even though publicly he said he loves his job right now, as the top economic adviser privately he has been telling people that he does want this job. trump has signaled recently that cohn closeg consideration, and in a bloomberg whole of -- bloomberg poll he has rocketed to the top as the lead contender for the nomination. the market expects him to get it. it is not surprising that any president especially this president would want to put his man, in this case, in a position. when you think about powers invested in the presidency to establish a legacy beyond their term, you have two things. the ability to appoint a supreme court justice and the ability to appoint the chairman of the fed. on the campaign trail, trump had not nice things to say about chairman yellen, and it is
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understandable he would want his own person. >> it sounds like the presidential bucket list. let me ask you, we all want to be out to the party, i'm sure gary cohn, it is a feather in his cap to be considered. does he really want this job? a thoughtful job, lots of research, lots of meeting, it is not the high profile thing he had a goldman sachs or at the white house. >> let's think about who he is. what his career has been and how he would fit in. gary cohn is a guy who was at goldman sachs for 25 years. he spent the last decade as the firm's number two. the skills that make a successful trader -- aggressive and risk-taking and relying on gut instinct and hypercompetitive. how does that translate to being a fed chair where everything is done by consensus?
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he speak softly. when we think about janet yellen over the past three years and going up to the hill and the market watching every word that she says. the difference between the word moderate and modest to describe their expectations for economic growth. there is a lot. you wonder whether this kind of hyper aggressive trader is going to be a good fit to an institution that is more of an academic almost university setting than an investment bank? >> president trump loves to talk about the u.s. stock market i record high. >> but he is not so vocal about the u.s. dollar. >> he's right for the equity markets, but he is wrong on the currency markets. the currency market has been off the dollar very hard this year.
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the currency market is very skeptical of donald trump's ability to push through his agenda. we saw after the election that there was a lot of euphoria in markets about this progress stimulus agenda infrastructure, tax reform -- that has not materialized. currency traders are skeptical. oliver: let's start with the equity market. do you think about what drives equity markets? there are unknowns. the dollar and the currency market, you might be able to is more of a pure or relative market. is that what is important? what drives the dollar that can be a read through for trump's performance? >> you got it right. the currency is the play against country versus country. if you are looking at the dollar against the euro, we know the
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u.s. economy is doing all right. we know the fed will inch toward higher rates. we did not know the european economy would do so well. the euro has risen against the dollar. the highest since 2015 yesterday because of the upside surprise on the european economy. it is a pure play. the u.s. economy is going along as people expected while other places are doing better. >> the currency market is a huge market and it is an indicator about how investors feel about a country and the economic outlook? >> it is the biggest financial market in the world. 5 trillion a day changes hands. people looking at currency -- they are looking at the u.s. economy and its stability while global peers are heading toward the exit door of qe. this boosts the outlook of other currencies relative to the u.s..
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>> why is the story important? >> we have had a four-year rally in the dollar and investors have seen these easy trades -- the fed will hike rates and the dollar will rally -- that has eroded and collapsed this year. it is important for investors to look at portfolios and think about what that means out of this rotation of long dollar trades and into short dollar trades. i don't think people are particularly prepared for it. oliver: up next, why some investors are starting to wonder if the stock market is to calm for its own good. >> why 3g, and warren buffett are obsessed over hot dogs. this is bloomberg. ♪
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oliver: welcome to bloomberg businessweek. carol: you can also listen to us on radio. here is how you can listen to
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us. oliver: and in london and asia. in the finance section, investors who have made bets have done well recently. carol: that does not necessarily mean smooth seas ahead. >> volatility index is a measure of the ups and downs in a market based on the s&p 500. chicago board maintains it and when the vix goes up it means that people are uncertain and it is usually when the stock market is going down. sometimes people say it is a good hedge -- you buy a product connected to the vix, protection against losses and your stock portfolio. carol: but it is a fear sentiment? >> exactly. lately it has been low.
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i just did a calculation -- there have been only 26 days since 1990 when the vix was below 10. 17 have been since this may. oliver: 10 straight days below 10, first time ever. they keep racking up the superlatives on how low the vix is. usually when we think about the vix, it moves inversely to the stock market. people pay attention when it is high. we are now paying attention because it is very low. there are a lot of theories about what that could mean for the market. what did you determine in what did you set out to clarify with this article? >> what i found out is -- the natural thing to do if you fear the stock market is high is to buy protection by getting into the vix.
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futures, options, exchange rate notes. people do that. then they found out that they were losing money doing that. for one thing, the feared stock market correction never happened so it was like spending insurance. it was extremely expensive form of insurances because of the way the notes tend to be based on vix futures contracts. the way one rolls into another can cause you to lose a lot of money even in an ordinary market. some people said, i have an idea. let's go the other way. let's bet on the vix going down. which seems kind of perverse when it is super low. yet that has been a huge winning bet. carol: in the future sections, 3g capital has gained a reputation. oliver: it is looking to change that reputation. >> they were selling less hot dogs and losing market share and
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overall hot dogs have an image problem. that all added up to a big problem for the company that owns the oscar meyer brand. it is one thing to be losing sales of the categories growing. our marketing is off -- but you add up the fact that people are buying more of other people's hotdogs in the category was declining which makes it a market share fight -- this was a problem for craft-heinz. oliver: the thing about the hot dog situation is it is also about the ability of a company who is renowned for going in and buying -- 3g here, buying companies and taking private equity and stereotypically going in creating opportunities and removing excesses. the hotdog initiative was a challenge for them. taking a brand and investing and rebuilding it. >> that is right. what we tried to do with the story was use the hotdogs to
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show what kraft-heinz is trying to do. they're owned by 3g capital which is this notorious private equity firm for -- they are famous in the u.s. now. they bought burger king, they did the heinz deal, they got together with warren buffett and merged heinz and kraft. now they run kraft heinz. they tried to buy unilever earlier this year and they got rejected did the model with them is -- they got rejected. the model with them is you buy a company, you spend two years hacking the costs out, the margins out, stock price goes up . and then you buy something else and start doing it again. oliver: what happened with unilever? was that a result of their style be known on the street and unilever saying they did not want that? >> pretty much yes. they said the price wasn't right publicly. we know that privately, unilever freaked out.
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the ceo of unilever, his thing was profit with the purpose. they thought they could serve the bottom line and do right socially. there was skepticism. they said no way are we going to let 3g come in here and destroy everything we built. that's what investors expect. they are not buying stock because they think these guys are selling cheese and mustard and ketchup. it is about doing deals. when unilever said that, it is a real problem. carol: so go back to the hotdog problem. they cannot buy up company stock, now they have to look at the company and look at the business and figure out how to perform better at selling hotdogs. >> there is still a lot of speculation that they will do a deal this year but we do not
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know what it will be. the company does insist, we were going to do this hotdog thing regardless of whether the unilever deal happened. it started last summer. it depends on what you think about where they were and their imaginations about unilever at that time. what this company does best is by other companies -- buy other companies. the packaged food business is not great out there. the sales are down quarter after quarter. people are not buying as much of this stuff as they once did. the hotdog is a great example. the who says don't eat hotdogs. their carcinogenic and toxic. people are trying to avoid processed meat. oscar meyer is an older brand with heyday behind it. hero these guys now suddenly facing looking that industry square in the face and saying we have to sell more food. carol: revamping how online business is being done. oliver: and a contraceptive pill
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for men. carol: this is bloomberg businessweek. ♪ who knew that phones would start doing everything?
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>> welcome back to bloomberg businessweek. >> still ahead, tesla model -- tesla to the masses. >> good ideas to compete online. >> and a spanish architect is building beautiful and affordable homes. >> all ahead on bloomberg businessweek. ♪ oliver: we are back with megan
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murphy to talk about more must reads in the magazine this week. tesla, what about the price point? megan: the thing that is interesting about this is what market is tesla chasing here? people who are looking at porsche and mercedes and audi or trying to compete away from previous, energy conscious middle-class price point? the car has had great review so far -- people are excited. the challenge will be can they make enough to tap into that demand and what is the lifespan of tesla? will it be consistent? is that sustainable as a business model given the valuation that tesla has? carol: the stock is been up tremendously and everyone is expecting it to be a mass-market carmaker. megan: it has not shown yet that it is a mass-market carmaker. it isn't there yet in terms of
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production. one thing about elon musk, these grand visions that he has have a funny way of coming true. he has launched rockets, reused them, -- oliver: he is so nonchalant about it. megan: what is so fascinating about this is the massive shift toward the electric car industry. we see what is going on in europe and the u.k. with outlawing diesel cars as of 2040. this is a seismic shift. he has proven to be ahead of it. for tesla the game will be meeting that demand. the position a lot of companies would love to be in. oliver: there are so many things investors have trouble with with tesla. elon musk is such a unique person. he will say that the stock is overvalued -- at the end of the day, it feels like there is,
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because of those visionary ideas, people might just keep giving him money. megan: we will have to see what happens with the model three. it deals like the product has delivered already. what we talked about in this article, they loaded on option packages. what comes in at $35,000 can end up as $40,000 with add-ons. people are attracted to tesla for the idea and the hope, the optimism of tesla. the product has to deliver. once he gets those two matchup, it is possible that it is worth what people are paying for it now. carol: two brothers, i love the story. you probably haven't heard this but it is crucial to the internet. >> this is stripe, founded by brothers in ireland. they are now in silicon valley.
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they specialize in the backbone infrastructure of online payments. they have done a deal with amazon, another big step, their company is worth a shade under $10 billion trade this is a brutal industry. everyone knows from their credit card fees. they have built something that has relied -- for so many transactions. americans spend billions of dollars every day online. so much of that is going through their payment processing. what i love about their story is, these brothers are interesting. patrick graduated at 16 and got into m.i.t. based on his sat score. they have an unusual company. oliver: a lot of smart guys and a great disruptive tale which we love. we have that story.
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from editor that begin. >> >> on any given day in the u.s. we spend $1.2 billion online. that will probably double five years from now. stripe runs a lot of the infrastructure that we use to buy things online. you will never see it and you won't know it's there but without it you would definitely recognize that you don't have it. >> stripe is essentially solving a problem of outdated software and infrastructure that was behind the transaction process of online purchasing. online commerce. how do a few brothers and not a lot of corporate experience behind them get into an industry that i would think is largely dominated by some of the biggest financial institutions and corporate behemoths in the world. >> e-commerce is crazy in that it outpaced the infrastructure
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behind it. it was growing rapidly but the scaffolding below it really wasn't there. the people that were designing that scaffolding were not exactly going to win awards for elegant coding. these were banks and middlemen. they were doing it in a slap -- way. in 2010 along come these brothers. it helps to be a genius and a prodigy -- carol: and they really are. >> they are prodigies and geniuses. they are incredible. they decided to debug this process. starting in 2010, they said there is a big opportunity here and we can fix this and we don't need a big bank behind us or a large company. we just need good code. if we had an institution like that behind us we would probably not be able to do it as fast and elegant as we want to. carol: in developing the code,
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crucial, they also developed relationships with banks and others so that they could actually go to uber and say, i have a product and we will handle all of your processing. >> if you think about running a business and receiving payments, before a company like striking along, you had to go to the bank or get a lawyer or pay a lot of fees -- before stripe it was inefficient. if you are a company, you are thinking awesome. it is the least exciting part of setting up a business. you can make a lot of mistakes. they came in and said we will do this forward with seven lines of code that you can cut and paste into your website. oliver: turning stripe into a
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cover image was a job for the creative director. how did you think about bringing this into an image? >> we did shoot one of the brothers in israel months ago but the company was by both of them so we needed to get both of them on the cover. luckily we were able to shoot them in new york a couple of days before we had to ship the magazine. the photos turned out great. the photo represents who they are. not these silicon valley bros. we got this nice shot and we ran it. carol: people will look at it and have no idea who they are. but talking about these three lines of code which represents what they are all about. a few lines of code can impact a lot of sellers online. >> it is one of those spaces that is not exciting but it is challenging.
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that they have managed to carve this massive space and begin that realm is impressive. oliver: up next how venture capitalists are trying to break the code in silicon valley. carol: and the medical product that is coming up. ♪
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oliver: welcome back to bloomberg businessweek. carol: you can also find us online at businessweek.com. oliver: and our mobile app. silicon valley is trying to change the culture that has been sexist for a long time. >> for a certain group of men and venture capital, it is almost like the catholic priest situation. where people suspect or sometimes actually know that the person is a bad actor -- praise
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on women who come to him for funding and instead of dealing with the problem, the best way is to shuffle this guy a long to another venture firm. they get moved along often with glowing recommendations, sometimes it seems like a situation where the person banks, ok i am in a new environment, i will start russian everything will be fine. but then they slip back into there'll habits and start treating the female print doors in a poor -- female entrepreneurs in a poor way and then the person gets moved along again or the investors often are -- do a lot of diligence and think they know everything about this venture capitalist and then it turns out, they haven't been able to get a full picture. carol: so this goes beyond and is more extreme than the club enis of -- of the clubbiness of it being a man's world. >> it is related to that in that you know you will have to do business with this person again.
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morally the right thing may be to speak up but you know that that same guy is going to be on a deal that maybe you want to get in on the deal to sell you need to smooth things over and maintain good relations with the person. you don't know when you will be in a situation when you need a reference from him too. let's say you are raising a new fund and a potential investor calls you up -- or calls up that guy -- you want him to say good things. there is this kind of unspoken code where people will say good things about other vc's that they know to be poor actors. >> male birth control could be a $33 billion business.
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oliver: why has no one figured it out yet? >> if people have been paying attention to the news over the last for years you might have noticed every few months there seems to be a headline saying, new breakthrough in male birth control. this will hit the market in a year or two years and time goes and we don't see anything. i want to delve why that is. there are a lot of ideas out there. there are a lot of hurdles that make it difficult and maybe more difficult than female birth control. one of them is basic biology. most women release one egg every month at a predictable time and stop ovulating when they are pregnant. the female birth control pill works by mimicking pregnancy. men make sperm constantly and there is no natural off switch for that process so it is
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difficult to find something that stops it. oliver: i thought that was a good quote in the story, there is no conspiracy behind it is just hard to stop. >> let me go to the supply side of the equation. do men want to take a pill? >> most surveys find that acceptance is theoretically high. men say they would be willing to do it and they are interested in it. you never know when something actually hits the market -- and when you look at a hormonal solution like what women have, it is famously associated with side effects. there is a question that men are theoretically interested but what happens when you are actually faced with that choice. carol: let's talk about some of the research. it is complicated. what are we seeing? is it small biotech companies doing it or the large pharmaceutical industry?
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this is a potentially huge market -- billions of dollars. >> it is definitely not the big companies. they were involved in funding research in the 1990's but have mostly pulled out. it is small biotech companies, academic scientist at universities, nonprofits, people at the gates foundation have traditionally been interested in this. it runs the gamut. the commit -- the conventional approach is a hormonal approach but there are a lot of other ideas out there ranging from a pill to something like a medical device. a german company that is making a switch that would be implanted that literally you can turn the flow of sperm on and off. oliver: up next how animals can predict the future. carol: and the winemaker rescuing old european grapes from obscurity. oliver: this is bloomberg businessweek. ♪ carol: welcome back to
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bloomberg businessweek. oliver: you can also catch us on the radio on these channels. carol: in london and over in asia. in the technology section, an online database tracking animals and predicting national disasters. oliver: we talked about the icarus project. >> over in germany, he is been working for the last decade or more to develop concepts about movement ecology. oliver: what is that? >> the idea is that by studying movements of groups of animals whether herd migration or a
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handful of cows and chickens running away when they should be asleep or resting -- you can get a better sense of what is coming? the most part the research is focused on earthquakes. carol: we've seen in the past where animals can feel changes in the environment or weather and move to a safer place. it has been somewhat reliable. >> that is what this guy is developing. in indonesia in 2004 it demonstrated that elephants plead the tsunami -- ran away from the sin on me before anyone knew of -- ran away from the tsunami before anyone knew about it. this also happened with sheep
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and goats around volcanic eruptions. after a few more years of research he is preparing to launch a satellite that will give him a better birdseye view and a larger database to play with. oliver: this is interesting because their culture and a lot of things we think about we often see animals as being predictors of changes and the environment but this is actually putting data behind it. this is a big data project here at tell us about what is behind this and the institute that is doing this? this could be pretty costly. where is this coming from? >> the german-russian space agency put up a combined $13 million to develop a single you satellite and get it up into the stratosphere. the russian agency will be doing a spacewalk to put it into orbit. for the most part this is a general research effort funded predominantly by the max plank institute.
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oliver: in the pursuit section, this architect is making innovative homes. carol: they are amazing and relatively affordable. >> we have a story on a spanish architect. he lives in valencia and he creates amazing modernist homes on the coast of spain. he is been doing this for years. he is only 41 years old. his practice has been taking off. what they do is they think about the homes holistically. how does the exterior relate to the interior of the home? it is a new practice that is invoked. it used to happen a long time ago and people are thinking back to, this is what i want. the interior reflects the exterior. carol: like flank right -- like frank lloyd wright. oliver: they look incredible but
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when you move to the details it has a lot of square footage. it is about efficiency. >> a lot of times the homes are bigger than they appear. he is able to tuck space into places you would not necessarily see. basements and attics that are open with big glass sheets. from the outside it just looks like a cool spaceship. carol: how did he come to be? >> he had a job in portugal doing municipal work and creating buildings. he decided it wasn't for him and he wanted to be able to experiment more. it is a lot of bureaucracy when you're dealing with big buildings. he decided to move home to valencia and open his practice which is making small family
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homes. he thought he would be able to experiment more and he has been. carol: having looked at his homes, their stunning. they look like museums. how do you run a family in this home that is all white -- where are the items? >> when you look at it you think you would never want to make spaghetti sauce in their because it would be ruined. but they have incorporated household items like the toilet plunger or garbage can or door handles, they have thought the details through so they are integrated seamlessly into the home so you're not thinking about them and they look like design pieces. in this way they are allowing clients to live seamlessly and not worry about the stuff. carol: also a california winemaker planting vines in sandy soil. oliver: and it is gaining admirers. >> he is been making zinfandels
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and many other popular wines. halfway through his career he wanted to make it his mission to find forgotten vineyards growing forgotten grapes and resurrect these old styles of wine that people have forgotten about. carol: have they forgotten for a good reason? >> they are a more pharrell -- more wild flavors. their wines that were made to be put into blends. oliver: when i hear that, it sounds like a big task. >> it is a -- these are all grapes that are grown and rocky soil in abandoned areas. these are not really wines that
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you would have heard of. carol: are they good? >> yes. they are served in restaurants. these are really serious lines. carol: are they expensive? >> no. a lot of people are not competing for these grapes so he is able to make the wines for a low price and sell them for under $130 a bottle. -- under $30 a bottle. oliver: i thought that was interesting, the part about the actual cost of production, the bottom line is affected because these are not highly in demand. he can keep the price low. it seems like from the interview, he is not terribly interested in trying to squeeze out every dollar possible. >> one of the things that disappoints them about california wine is that it has become too expensive. people are saving these bottles are not actually enjoying them. a lot of how it works is people
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are buying grapes from other people. it is almost like trading. he is finding vineyards where people are not competing. carol: bloomberg businessweek is available on newsstands now. oliver: as well as on bloomberg businessweek.com. what was your favorite story? carol: stripe. if you and i do something online, they are probably handling transactions. they have a partnership with amazon, $9.2 billion valuation and you learn about the company and the two brothers behind it. i love it. how about you? oliver: i like the icarus project. i loved talking about how to use the instinct of natural animals to better prevent ourselves from natural disasters. i also really like the
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architect. carol: i love it. oliver: incredible imagery. bloomberg television starts right now. ♪ announcer 1: the following is a
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