♪ welcome to bloomberg businessweek. jason: we are inside bloomberg headquarters in new york. >> coming up, donald trump promised to drain the swamp in washington. tim o'brien, his biographer, shows he has done quite the opposite. jason: also in washington facebook and twitter executives , were there last week, promising more transparency. google founder larry tate was not.

he disappeared not just from the nation's capital, but from silicon valley as well. >> he is missing. and as we mark 10 years since the start of the last financial crisis. where the next one may come from. jason it's a buzz kill, : especially for investors who have been enjoying a record bull run. >> it's been a run, one of the most unloved run ups in history. come to my terminal, this is a really good basic story that i love. the s&p 500 going back since 1924. this is the longest in history. we are already up on the s&p 500, almost at the 2900 level. really interesting heading into the fourth quarter, you have a lot of analysts revising up their price target. we have already met those goals so far earlier on in the year. jason: >> so much to look forward to potentially but so

much behind it in this bull market. this chart sets us up nicely for this cover story in bloomberg businessweek, the most boring bull market ever. >> in the age of index funds, even a boom can feel blah. we spoke to a reporter in london. >> this particular story i think , it's safe to say it was of thely boringness stock market's relentless advance. boring was one thing that people were hoping for 10 years ago, and they would have gladly taken it. the story does look at a kind of disinfection that is going on. one of the editors is working.

-- one of the editors working on this with me used the term "look bloodless." i think that's what we are trying to capture. while passed ball markets have been pretty raucous and pretty celebratory, this one hasn't been like that. >> it's interesting you say that. you say boring, but it has been one of the most hated bull markets as it continues to grind higher and higher. chris, i love that you use the word this infection -- disinfection. companies aren't going public like they used to. >> that's probably one of the big features of this market. when you have tons of companies, they were going public in the 90's, that is the pace we are comparing the current 12. it is way below it, -- the current one to.

it is way below it. 75% below it. reasonable people can differ on which is the correct rate. there's no question that this bull market, one of these big features hasn't been the sexy ipo companies and young companies. there have been big mature companies going public. and companies getting very huge right after going public, like facebook, but i don't think the same celebratory aspect has happened. there are a bunch of reasons to that that we get into in the story. >> those three letters, ipo, had been less popular. three letters that are popular are etf. this whole shift took passive from active. what are the implications of this market? >> from a journalistic perspective, it becomes incredibly difficult to write compellingly about. you have a monolithic structure in the stock--

market where laws of different people don't own individual stocks. monolithic, unbelievably successful, quasi-monopolistic companies that just get bigger and bigger. the rest of the people's investing experience is these passive products, where you have the ultimate buy and hold. they are machine intermediated, where etf's are possible because of the infrastructure of the market. the most interesting things they give themselves to are these strategies that no one totally gets. , not inike smart beta etf realm, but in the program passive rounds. risk parity. they are all math experiments with the populist at large. they feel like they wanted to get involved in them, but they

are not yahoo! and aol going up 30% a month, that sort of stuff you had back in the 90's. >> chris, you are tasked with making a couple of covers this week. let's talk about the domestic cover. it is all about the long bull run. what went into the thinking here? >> we were thinking about ways we don't lean on the cliches. we find the opportunity that just leans really hard into it. kind of does a little bit of a wink. >> i love this cover. you are having fun. dumbest way to make the joke. something, you can't stop looking. once we did it, perfect, it's great. >> let's talk about the international cover. you also did something. this is what the magazine is

known for. simplistic, clean, but kind of powerful. >> this one took me a while to get this one. it's a fun one. and the stories are really interesting. i think this one pulls people in. >> looking for larry page, he didn't show up in washington with the other tech ceos. even in silicon valley, people can't find him. >> we use this kind of interface, it all has per a timing and everything came together. >> really clever cover. thank you. >> one of the world's best-known investors tells us where the next economic downturn may come from. >> and at a time when tech executives need to be accountable, where is larry? google's larry page is missing, and that's a problem. >> this is bloomberg "businessweek ." ♪

>> welcome back bloomberg businessweek. >> you can find us online on businessweek.com.

>> and on our mobile app. >> google is facing probably what is the biggest challenge in its 20 year history and its beounder, who is meant to running the country, is nowhere to be found. >> a couple of tech ceos were up on capitol hill testifying about u.s. election meddling. ceo twitter jack dorsey was there. sandberg was there. larry page of google, a no-show. >> an empty chair in washington. the mystery extends to silicon valley where people are saying where is larry? >> we spent a lot of time with my colleague, mark bergen, trying to figure out where he is. no one has heard from him in the past couple of years. the issues that have arisen around the big challenges, the societal challenges, people are

asking that same question. where is larry page right now? where iso you mean larry page? he runs this massive company. is he not at headquarters? terms of day-to-day involvement, he is the ceo of bet which works for a , number of subsidiaries underneath. a lot of people say we haven't seen him as much as we used to years ago, the reporting suggests he's more withdrawn than ever. more taking on an emeritus role. while google disputes this, it is clear he is not involved in some of the more societal challenges facing the company. >> and the societal challenges so interesting to me. this of course is the company that, years ago, came out and said don't be evil. they have always put on this cloak in many ways, been good for the world, caring in a more holistic way than companies typically do.

he was a chief architect of all of that with his cofounder and created this company that is admired in many ways for all of those things. absent at this moment seems especially conspicuous. how do you circle that square. >> this should have been a home run pitch for larry page to show up and present some values he stood for long ago when he founded the company. , he didn't.ce is that absence was quite jarring compared to jack dorsey and sheryl sandberg being there. he really has to come out of the shadows and speak to what the values are right now. whether that don't be evil model has evolved at the company. i think you are completely right. shareholders deserve

perspectives. there are so many interesting to,oids, people you spoke larry page's inner circle. what do they say about what he is up to and where his head is? >> that is interesting. he has always been attracted to the most sci-fi and futuristic projects. the larger question is whether that is the most relevant to be thinking about. it's not the future that is the challenge, but the present of alphabet. one was called the helios. >> this is amazing. >> there is no better way to describe this. >> very elon musk. r> it is like a hyperloop fo bikes. bet a crazy, out there as alphabet calls them.

that a large floating tube connects san francisco to the mountain view campus. it sounds crazy, it sounds insane. but those are things that are capturing larry page's focus in the past few years. >> another person who could have sat in that seat is the ceo of google. where is sundar? >> just to be clear, sources tell us only larry page was technically invited to the hearing. as mark zuckerberg and others in -- as mark zuckerberg sending sheryl sandberg, the senate intelligence committee was fine with that. >> to be fair, mark zuckerberg had gone before several hearings in front of lawmakers. exactly. the ceo of google also declined the opportunity to go.

sources indicate the senate would have been fine with sundar as well, but he also chose not to testify. i think there is a bet there that facebook and twitter would take most of the hits. it turned out to be the opposite. a prettyaid at the top steep price for not showing up. the senate, the lawmakers essentially doubled down and kept bringing up the absence. do you think they didn't anticipate that blowback, or they thought they would ride through it. part of 58 it and go is the theatrics, the showboating. in some instances, that the actor x played against it, they kept a blank notepad there and kept a microphone in front of it which was muted the whole time.

which is a fascinating symbol looking for larry page right now. >> on a world where everyone is caught on a cell phone or there are tons of cameras there, that shot became what so many of us remembered from that day. especially compared to help present ceos are today. ceo on a podcast recently jeff bezos auana, very public-facing ceo. where is larry? >> coming up, there will be another financial crisis. russian is are we ready? , >> and hedge fund tightened -- titan has some thoughts on the threat. this is bloomberg "businessweek." ♪

>> welcome back to "bloomberg businessweek." i am jason kelly. >> and i am carol massar.

in this week's remarks, we talk to fail. big if you remember, 10 years ago this week lehman brothers collapsed, really triggering the worst financial crisis of that century. >> are we better equipped now to deal with the inevitable next crisis? >> the question is if there is a crisis, and inevitably there will be another you can do one. everything you can to prevent crises, but somehow they will break out. what then? the story focuses on the what then part. do we have the apparatus to stop the crisis once it inevitably starts? my concern is we are less prepared in that department than before. >> why? >> partly because of the crisis

itself, what it engendered. what it engendered was a real anger in the public. the bad guys got bailed out while the little guys suffered all the consequences. as josh green said, there was no testament justice. >> he was right. even if they had metered out old testament justice, people would still be angry. also the very fact that the session dragged on for so long, that was partly because the republicans were not passing the fiscal stimulus. the fact is, people were and are angry, and they put that anger into legislation -- congress did. significantly tying the hands

of l legislators. three key measures. the federal reserve act had -- which is the provision that allows them to use extension circumstances to help nonbank financial companies bear stearns and the aig. that has been circumscribed. >> under the new dodd-frank? >> not under the same terms. the fed would have to cook up justification to why it was advancing credit or aid to a whole class of financial institutions. they couldn't single out one. >> you said three things? the fdic said there could be a run of the banks. a key thing the fdic did during

the crisis was push a blanket guarantee, covered by the positive insurance. the fdic said there could be a run of the banks. even if depositors are protected. put in a temporary hearing tv. that is not permitted anymore under dodd-frank -- temporary guarantee. that is not permitted anymore under dodd-frank. the treasury department in the tol of 2008 provided help money market mutual funds, part of the shadow banking system. an alternate way for people to save and invest. permitted the be same way today as it was then. three of the crucial firefighting tools don't exist. >> we have been talking to well-known investors during the financial crisis. getting their perspective of where we are. you did, too. what were his observations? >> he does not think we are on the verge of a crisis. bubblets out several

indicators are flickering, but not flashing. bridgewater has the depression on in 2008. clicked it is not on now. when we do have one, many years from now, he shares the concern geithner that tim we lack those firefighting tools. >> one of the influential folks that he talked to was tim geithner. he founded bridgewater, the world's biggest hedge fund and he is one of the most influential voices on all things financial and all things -- we wanted to hear more. >> he doesn't think that we are in a bubble right now. he does see the growing financial and political risks. they remind him of a previous era. >> >> i don't think we are in

the midst right now. let me clarify. when you hit zero interest rate skew have a different type of debt crisis. you are more likely to have a depression. i think the period we are in is period.to the 1935-1940 let me explain. 1929 to 1932, we had a debt interestd rates hit zero. there is only one thing for central banks to do. that is to print money and buy financial assets. that pushes financial asset prices up, puts liquidity in, and contributes to a greater wealth gap. those who own financial assets benefit. as a result in both periods of time, and economy not improving,

for a large segment of the population we have populism. the last time we would say when is populism popular, it would be in that period of time. that populism issue is important. as we look forward and we say when the next downturn comes, which will happen probably in a couple of years, we are going to have a different type of downturn. very similar to the one that happened in 1937 to 1943. 1937-1940. we are part of the cycle now and banks are beginning to tighten monetary policy. asset prices are sensitive to monetary policy. both assets have lengthened. central banks have to be careful not to raise interest rates much faster than it is built into the curve. with that populism, we have an issue.

the next downturn will be different than the one in 2008. it will be one in which the social and political problems will be great because of the wealth gap in populace. i think there will be more conflict. are good, and we are sort of at each other's throats and that. i also worry about the effectiveness and monetary policy because monetary policy has interest rates and we can't lower interest rates as much. and it has quantitative easing, the purchases of financial assets to push other assets out and get liquidity in the system. that is at its maximum. when we have a downturn we are , not going to be as effective. our form of downturn won't just be debts. it will also be pension and health-care obligations. i think, one more thing, i think

it will be about us happen to sell a lot of treasury bonds to the rest of the world. that will also be an issue of two years out. two years out is when i'm worried about. i would think that is for these various reasons. financial terms, if we look at what we are seeing through the lens of the markets, how bad is it going to be relative to what we went through in 2008, 2009? >> i don't think it's going to be as sharp and severe. i think it's more going to grind on. all of these obligations will be a problem to be funded. i think it will be more back there of the dollar crisis than a debt crisis. troublesto come, the that tesla keep coming. maybe there is a simple

solution. isn't easy the swamp when the swamp keeps filling up. >> this is bloomberg businessweek. ♪

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>> welcome back to bloomberg businessweek. help, someoneeeds to keep him in check. inand how about a gut check washington, specifically the trump administration.

the threat of a financial crisis is looming large this week. joel, i feel like everyone is back from summer and it is getting busy. what went into the thinking behind this week's issue? >> we wanted to include the idea that we are 10 years after lehman brothers. this reshaped wall street and the financial industry. we have written about it for 10 years. it was an opportunity to pivot forward and not just talk about lehman brothers. we are in the midst of the longest bull market ever. let's not forget what that means. >> what is your conclusion? this is an area that bloomberg is uniquely.suited to cover you have the ability to tap this massive amount of talent in the newsroom. what came back?

>> there is a phenomenal story from the head of the u.s. equities team here. one element that is profound is even someone who covers this day today, there has been -- day to day, there has never been anything like this where it keeps going on and on. it seems like trump throws candling on the fire, and it keeps going. how are you going to talk to your grandkids about what we are seeing? we don't know when this will end, but it will. how are we going to look back at the ride we have been on? >> it seems like 100 years ago we had big tech names on capitol hill, but it was 10 days.what are the implications of that ongoing story ? >> one thing we noticed when washington convened the meeting is there was a pretty prominent , which wasas vacant

really interesting. this was a moment in time when we think tech is going to be under the microscope in a new way than they ever have been before. >> facebook's sheryl sandberg jackhere, twitter's dorsey. google, a literal empty seat. >> where is larry page right now? it is a question everyone should ask, especially google shareholders. about where is larry is facebook has been under the microscope, has had everyone's ire. what about google? if you don't show up prepared to discuss your business and the modern climate of tech, you leave yourself vulnerable. inlooks like a major error hindsight. and it is a quest to find him,

who has not had a press interview in about 4 years. >> tim o'brien is the executive editor of bloomberg opinion and knows a thing or two about the president, having written a biography of president trump. he takes another look at the president and his administration. >> it is freewheeling and financially conflicting. many came to the campaign with extensive business and investments, and they maintain them in office. many have been caught doing things illegal or clearly swa mpy. >> he has filled the swamp with bigger alligators. one promise he made is he would go to washington and constitute ethic codes when members of congress could become lobbyists, the activities that lobbyists could engage in -- we haven't seen any of that.

we have seen lobbying and conflicts of interest become cores of the trump administration. >> look at other administrations, there have always been conflicts of interest. what is different? >> we start with mark twain from the gilded age. you are right, this is not a new problem. we have had administrations to allow the 19th century riddled with corruption and conflicts of interest. we begin a cleaner government in the 20th century, but you had scandals in the warren harding administration. presidential relatives were problematic, billy carter, for example. i don't think there has been an administration in the post-world ra with as many conflicts of interest and indictments attached to it as this one. this stands in a class by itself. person you point out in

the administration is wilbur up aswho has been caught much as any cabinet officials in a lack of disclosure and lack of effort to unwind what he owned through his work as an investor before he became the commerce secretary. put him in context. >> wilbur ross is a great example. i don't think we should say people with deep business experience should not go to washington. we want them in washington, they are talented people. the argument is how do you take money out of the equation so voters are certain good decisions are made. wilbur ross has a vast portfolio and is 80 or so years old. he has been in scores of companies. it is almost inevitable that

something he will touch in the administration could be attached to something he had a business stake in in his past. you should just trust someone to do the right thing. when they haven't been -- when they still have investments, that goes out the window. same with that's a davos. they came in with lucrative portfolios of actively traded companies or privately held concerns. in ross' case, he owned shipping enterprise that had ties to the chinese government. and another company that did steel transactions with companies based in south korea. can heeasonable to ask, negotiate any trade deal with south korea or china uninfluenced i what is in his wallet. betsy ross had investment in for-profit education ventures, including collecting money from

indebted students. they had a contract with the department of education, which she was over saying. it speaks to a lack of process. they did not have a good transition team, people saying it could look really bad if wilbur ross or betsy devos has this stuff. it is much of a problem with ethics as much as bad management. >> another pair of leaders in trouble, this time in the corporate world. wherert with elon musk, tesla is in crisis again and again. >> and the chinese giant, attention on its leader revealing shareholder risks. ♪

"bloombergback to businessweek." here is a shocker.

tesla was in the news. elon musk tweeting about customer response times. also the most bullish analyst on wall street downgrading the stock. >> they also lost another high-ranking finance official. some suggesting elon musk needs another pair of hands to help him run the country. boulder solution, elon musk needs a new board. is showing.n there have been stories about ambien use, and the recent podcast. i'm concerned about hope that the company, help running tesla. this is another idea that what neededthere that what is is another pair of safe operational hands to help. >> an adult in the room. we saw that play out with google. >> on paper it is an attractive thought.

there is a good reason to have coo at a manufacturing company. for me, it ignores a deeper problem he would have to fix first. >> that is -- governance? >> fixing the board. why is the board the way it is? it is stocked with people very friendly to this there a dynamic, and by many accounts brilliant, ceo and entrepreneur. he put these folks together? >> in some ways it is similar of what you get at any tech darling company that explodes onto the scene. the problem with tesla is a couple of other factors. the board really looks like kind of bored you might have at a startup. his brother is still on it. the lead independent director goes way back with him.

sits on the board of some of his other ventures, invests in his other ventures. the otherave situation where it elon musk is the chairman of the board, the biggest shareholder in the company. for many people, he is synonymous with tesla. they cannot separate the two. >> it is not unusual you see this at a company, it is stocked with buddies of the ceo. >> it is not unusual, but tesla is eight years of a listed company. is hard to say it is a startup and you make allowances. >> in the technology sector we look at richard liu. he is facing criminal accusations. the company, a smaller rival to alibaba, finds itself dealing with the fallout. >> if they got attention when liu was arrested on suspicion of

rape. those legal woes are putting this company at risk. it is the number two market place in china after alibaba. a much smaller company worth $38 billion right now on the open market, but nonetheless a big deal in china. they have been trying to expand abroad for several years. founder, chiefre executive, and founder has gone to aspen and davos. he has set up a new york gallery branded with jd swag, that sort of thing. the first time he has popped on international headlines for him and the company is when he was arrested over the weekend. >> what are the allegations? >> he was arrested on suspicion of rape, and he was released with no charges filed and

allowed to go back to beijing. has not been charged with anything, but the investigation is not closed. >> what is interesting is the story gets into the structure of the company and how much control he has. liu'ss is any question of being on the sidelines or incarcerated for a period of time has much bigger ramifications for jd then it might for other companies acause jd is structured as variable interest entity. -- it iss in practice relatively rare in the u.s., but common among chinese internet companies -- it means that liu jdd other key executives thaat control most of the important assets and intellectual property torating assets that jd has

contract with liu to profit from dividends in those assets. >> he has been on the road according big-name investors that would be exposed in a meaningful way if this were to go sideways? >> absolutely. they key element, what they call and therisks for jd whenny is liu is essential it comes to closing a deal with google, for example. or other mega companies that have taken an active interest in the company. >> walmart is another key player. while alibaba is well known and jack ma is up front, this is a company data into global e-commerce with more ambitions beyond china? >> absolutely.

dealingplicates things with a founder who controls about 15% of the outstanding the votingut 80% of shares thanks to the dual class structure. reasonsvariety of having to do with the vie structure, and some not. the board of jd cannot even meet without liu, even if he has been kidnapped or incapacitated. >> up next, it has been almost a year since hurricane maria devastated puerto rico. that island economy was struggling already. now it is looking at novel ways to fix it. this is bloomberg businessweek. ♪

>> welcome back to "bloomberg businessweek." >> you can also listen to us on , in new york, boston, and washington, d.c. >> and the bay area and london. in the economics sector, particularly puerto rico -- we know it is struggling to come back from last year's hurricane, and struggling to come back from a decades long recession. it is counting on small the transformative industries and ideas to bring back the economy. , movie production, even medical marijuana. onlyria was not the disaster it visited the island in 2017. they filed for the largest municipal bankruptcy in u.s. history. $74 billion makes detroit, $18

billion, look like nothing. the economy was on its back because of federal tax break had lured pharmaceutical companies to manufacture on the island. there is a 10-year sunset which ended in 2006 and tons of jobs left the island. the storm blew entire parts of the island away. a destroyed the energy grid, which has to be rebuilt. the government is taking this approach of making bets on different kinds of industry. described it they as creating a venture capital fund. small, risky bets, hoping one of google.omes a won their betting on is blockchain technology. >> earlier in the year, brock

pierce, a big name in that community -- he made it to forbes list of the richest , king of thenaires mighty ducks franchise -- he wants to create a community in puerto rico of crypto investors. income from investments. >> very attractive to john paulson and a number of wealthy traditionally new york or east coast investors. >> pierce does reside there now. >> you have blockchain. you have weed apparently. rush. great american weed who wants to be left out? the island is trying to rebuild pharma foundation

they had. the governor has a degree in biomedical engineering. he wants the university to turn into an innovation center for marijuana. -- what he has done is made sure that the laws are very clear. puerto rico had legalized medical marijuana three years ago, but the law was unclear, so to church investment. he clarified some of that with the new law. we are seeing investment coming in. we got the photograph of the growth facility inside of an old government building that has been rehabbed as a marijuana farm. this company called nextgen hopes to be able to expand. >> we will end on a lighter note. it has been going on 2 two decades, every fall in miami.

has transformed the city and made unsafe locations safe and hip. >> the company thinks it may have the secret sauce to help other cities. >> it started in miami, now in hong kong. the company behind it was getting requests from other cities to do with a dead, particularly -- what they did for miami in other places. it is turning miami, a town with different neighborhoods full of art, and bringing miami back into the international scene. >> kind of sparking a revival. neighborhoods are now places you go and hang out, and there are luxury stores. a lot of people are pointing to basel. for that. they developed a miniature

version of what they do in hong kong and miami and are doing their first one in buenos aires. >> what is fascinating is we have seen cities over time go for what you referred to in the bao effect. bill he puts together an amazing museum. a lot of places say i want to get a piece of that. >> very famously, he had the frank gehry museum. it cost $228 million, and a recouped their money quickly. normally it takes a minute backty 150 just to get -- takes a municipality years to get back their money. art could turn to cities around if the city is struggling. it hasn't traditionally worked. tural projects

have been transformative. not affect. in valencia, there was one that cost a billion dollars that immediately had construction problems. in rome, one cost over $15 million, and the museum faced a budget crisis. people thought the effect would help other places, but it didn't happen in valencia. >> it did happen in l.a. downtown l.a. is another example people look for. >> another frank gehry building. a lot of it had to do with the global downturn. a lot of the project happened in the last 10-15 years. this is a miniature version but as don't have to invest $100

million in a building. you can use funding for our to already had in your municipal plan. this company comes in with the anddex and infrastructure knows how to draw international attention and artists to the city, and hopefully you get some of the boosts, attention, and investors to check out your city. >> bloomberg businessweek is available on newsstands. >> what is your must-read? >> i love tim o'brien. that story is wonderful. he really looked at the administration, really knows a lot about donald trump, and has written about him. there is a visual component to his story. you go to the website, click on different members of the team. >> i love the story about larry page. where is larry? it is very much in the news. he has been here for five minutes and delivers a story

that everyone needs to read to understand what is going on in washington and silicon valley. more bloomberg television starts right now. ♪

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♪ nejra: life after lehman and we take a look at the financial landscape a decade after the crisis. are we ready for the next one? regulating wall street, what is next? welcome to "bloomberg markets, rules and returns." i'm nejra cejic. we bring you special programming to cover the 10 years since the lehman brothers. here is how our colleagues