and get 15% off your mattress - and free shipping too. just go to buyleesa.com today. you need this bed. carol: welcome to "bloomberg businessweek." i'm carol massar. jason: and i'm jason kelly. we are here at bloomberg headquarters in new york. carol: this week, what rupert murdoch's kids plan to do after the media mogul cashes out to disney. jason: and plans to create the world's largest home flipping operation the world has ever seen. carol: trouble building homes for low-income residents of new orleans. jason: and we begin with a long

reach of the last economic crash. bloomberg businessweek editor joel weber joins us now. so much to dig into now. it has been 10 years. joel: we want to take all of your real estate dreams and anxieties and just put them in one place and contain them for you. so we did. jason: it is amazing, the scope of this. how do you choose what stories to tell in this case? joel: you have to start with the long reach of the last crash. all right? because we are barely 10 years after that and we are still feeling the effects of that, as peter coley writes in the opening essay. that is primarily a phenomenon that comes from the lack of homebuilding. it has also led to a derth of inventory. that has also pushed prices to a point that a lot of people cannot afford to actually get in the game. carol: that is that is it in a nutshell, right, joel? from 10 years, we went from oversupply which led to -- here we are, undersupply.

jason: the overhouse phenomenon is what that is at about. -- joel: the overhouse phenomenon is what that is at about. other opportunities. i love the zillow story. it's a company -- if you got the real estate, you cannot stop looking at what your house is worth, what your neighbor's house is worth. mate.: the zesti joel: this is a company that has made a strategic choice to actually get into the home buying game. they have rolled out this phenomenon in 14 u.s. cities. there is an instant cash offer that you can sell your house and no longer have a broker. this is a real disruptive force. they are not alone in it. we did a great job of looking at what this phenomenon might mean for u.s. housing overall. jason: as you say, it all goes back to that crash we saw 10 years ago. a lot has changed and maybe some things haven't. carol: joel weber, thank you so much. we have more on this overall story with editor bret begun. bret: we are not about to have another crash like we just did. when that happened, you had overbuilding and you had a lot

of pretty speculative pricing that was not really taking the overbuilding into account. that combination does not exist right now. what we actually have at this point is under building. we are actually underhoused in america. and that really comes from the fact the large builders the last time were all but almost wiped out. and the smaller builders, if they wanted to try to build more, they can't. they don't want to build on spec. they don't want to be stuck with homes that no one wants, and they can't get the loans, frankly, to build at that rate. we are sort of seeing a different issue now, which is that when you don't have enough homes for people, the existing stock becomes more expensive and people are getting priced out. carol: right, and we talk about this so often. i feel like the magazine has covered this so well, whether it is silicon valley, whether it is up in portland, seattle -- some of these markets have certainly gotten so expensive for many of the people who live and work there. or try to live there.

bret: san francisco, l.a., in many of those areas and cities, it is all but impossible for somebody to buy a house. they are just basically getting priced out of those markets. and you see that sort of happening really -- the only city in america that is considered undervalued right now if you are thinking about moving would be chicago. that would even -- that was before the polar vortex. carol: even more so now. so we talk about could we have another housing bubble? yeah, i guess at some point, but that is really not the worry, as you said, it is the undersupply. and a lot of other factors. tight workforce. builders, it is a hard thing to find workers. bret: that's right. it is very hard to hire right now, the labor market is very tight. with interest rate hikes -- as interest rates go up, you are thinking about moving in your mortgage might have been more expensive, you're not really going to move. so you are not moving, you are not making your house available to somebody who would want to move.

so you've got a lot of stagnancy there because of that. carol: and there is also that nimby -- not of in my back yard in terms of building. bret: you've got new zoning regulations that have popped up in the last 10 years. national association of homebuilders have had a lot of complaints about regulations since the last housing crisis. those are definitely having an effect on the number of available lots that are there to build on, even if you wanted to. carol: some things have changed. we are still feeling the effects in some ways because some of those bad loans have been yet to be cleaned up. bret: that's right. the government is still dealing with some of these federal housing loans. again, the long reach of the last crash extends in many ways, and that is one of them. there have been issues with some of those loans. you also have -- we are not free of bubbles here. ubs does this global listing. there are many, many, many cities that we hear about often where basically it is impossible. hong kong is number one.

in the u.s., san francisco is the only city in the top 10. carol: up next, the challenges brad pitt has faced building houses for low-income residents of new orleans. jason: and this is a story inspired by a road trip. carol: it's really cool. this is "bloomberg businessweek." ♪

carol: welcome back to "bloomberg businessweek." i'm carol massar.

jason: and i'm jason kelly. join carol and me for bloomberg businessweek every day on the radio from 2:00 to 5:00 p.m. wall street time -- also catch up on the daily show by listening to our podcast. subscribe at itunes, soundcloud. carol: you can find us online at businessweek.com and on our mobile app. movie star brad pitt faces an uphill battle helping new orleans build after hurricane katrina back in 2005. jason: his make it right foundation is being sued by residents of its homes for allegedly using substandard materials. carol: right, jason, and the foundation is suing its lead architect. jason: take a look at this map. it illustrates where make it right has build homes in new orleans' lower ninth ward. buildings,e black that is exactly where make it right has done some redevelopment. it is an interesting story and a lot going on. some controversy. we caught up with the editor for more. dimitra: there are these houses that have been built by a foundation called the make it

right foundation, which is one of the nonprofits that went in. it was started by brad pitt. he had been in new orleans, love d new orleans. have come to know it through various movie shoots. invested in some property there, a yeara home there, and after katrina as he was going on a tour on parts of the city, he was struck by the fact nothing happened to the lower ninth ward. jason: the initial response from the community was pretty enthusiastic, right? dimitra: very enthusiastic. because they wanted to stay. people were interested in better homes in the area. they were really sold on this idea of new homes that would be built. they committed to build 150 homes. at the end of the day, they built 109. carol: he was really trying to replace their homes but really make them better. dimitra: homes that people could be excited about, feel good about, and energy-efficient. greater affordability. they were priced very affordably. they were subsidized.

one of the sources in our story is a woman who talked to rob about -- the problems which we can touch on, she was able to get her home for $130,000 with some subsidies, and the going rate was $150,000 and that was quite less of what it cost to build these houses. colorful homes. homes that would really instill just some pride. there is great homeowner pride in the neighborhood. jason: and what happened? dimitra: and so, you know, within a matter of a few years of houses being up and moved into and people settling into their homes, there are several, several homeowners of the 109 or so -- it is 106 houses, like three condo type townhouse units. i don't remember the precise numbers, but there have been many problems with the houses and serious problems. serious. jason: yeah, not everyday maintenance type things but mold

issues. dimitra: mushrooms and mold growing in houses. carol: was it a case of, all right, these folks had good intentions. they built a lot of homes, came close to what they said they would. there were problems and they have been fixed or haven't been fixed? where are we? that we arel, some aware of were addressed, but then there were ultimately decisions, like one house was demolished last summer completely. it got a lot of play locally in the local press and it was portrayed as really like the entire organization completely missing in action. that is -- one of the important things we are really emphasizing in the story is that the best of intentions won't help you if the organization is not structured in a way to be prepared for anything that might come in the years, the many years after these houses are built.

we offer an example of another nonprofit and effort because it seemed what they intended to do was just less conspicuous, much simpler, but a structure and an organization in place to ensure there is follow-up and follow-through and you don't have residents feeling, as many do now, abandoned and nowhere to go. there are some people, kamaria allen is a resident that rob has interviewed, and she is now living in a house that her parents owned. she bought one of her own but had to move out of it because of the problems -- and she is living in the home that her parents bought an encouraging her parents to simply walk away from it. it has gotten to that point, where they are not getting the responsiveness they want. she thinks, let's just find some place else to live, because why are we going through this? which is tragic when you think about losing a home to begin with and potentially losing one again. it is a very sad story. we did not go into this thinking

we were going to tell a super uplifting story, but we wanted to highlight something where intentions, by almost all counts -- i mean, you have some residents who are still very committed to the work of make it right and what they did. robert green, who says they build houses, i will not argue with that. i at least have a house i can point at and tell you that is my house. and there was no house before. jason: also in the special real estate section, how monotonous five-floor apartment buildings have conquered america. carol: it's definitely a trend. justin fox telling us about the forgettable, yet unavoidable five over one phenomenon. justin: five floors of wood framed building over one floor of concrete. but there are buildings that have the general look that are only three stories high and the tallest are five over two. five stories over concrete. they are basically -- i came across somebody on a blog comment calling them stumpys.

i want to push that, that is really good. jason: i'm at the stumpy on the corner. but they are limited in height by building code. it is partly structural concerns that you cannot build a 30 story building out of two by fours, but it is partly fire concerns. there is actually this movement to build taller buildings out of wood but a different kind of wood. big, holding pieces, not two by fours put up in the same way as single-family houses are traditionally built in this country. jason: as you dug into this, are there specific people, either architecturally or construction-wise who are especially successful, at made -- who have made this a big part of their business? justin: i kept trying to find the group that was pushing it. clearly, there are big apartment developers. there are big -- avalon bay has a lot of these buildings all

over the country, but so does equity. it is like it is not one particular group driving it. humphreys and partners in dallas is probably the biggest multifamily architectural firm. they have lots of buildings with this look, but there are lots of buildings that look like that that are not buy them. carol: an interesting aspect is the use of wood. i think for a while, we have gotten away from it because of some horrendous fires that wiped out cities and areas. actually, most recently, even in new jersey here. so tell us about the use of wood. justin: basically by the early 20th century, you pretty much were not allowed to build lightweight wood frame buildings at all in central areas of some cities. carol: right. justin: and above two stories pretty much anywhere. it was pretty much relegated back to single-family home construction. and kind of bit by bit over time, partly because of fireations like

sprinklers, which make these buildings a lot safer than they would have been before, but also by pushing and nudging of various building trade groups and wood industry groups and others, we have gotten to this point you can build five stories of lightweight wood frame. carol: up next, does the u.s. need another stock exchange? we will tell you why some heavyweights on wall street -- they think so. jason: they certainly do. and a hot new trend in regulation -- or rather, deregulation. what you need to know about financial sandboxes. carol: this is "bloomberg businessweek." ♪

jason: welcome back to "bloomberg businessweek." i'm jason kelly. carol: and i'm carol massar. you can also listen to us on the radio on sirius xm and am 1130 in new york, 1061 in boston 91.1 , fm in washington, d.c.

jason: in london on dab digital, and the bloomberg business app. in the finance section, wall street's biggest traders are beginning their own exchange. carol: they are indeed. the proposed members exchange is meant to help traders win the battle for lower fees. jason: nick baker brought us the story. nick: who is behind it -- nine huge firms, some of the biggest traders out there. so they've got lots of trades they could, in theory, start directing to this market. so, this is a business that could take off. it is still preliminary. they have not filed for regulatory approval. we are probably maybe a year away from it existing, but it is still early yet. but the reason why it exists it is these firms -- basically everybody on wall street other than exchanges are angry at the exchanges, the current ones, because they believe those exchanges currently charge too much. carol: it is not like they can disconnect from the new york stock exchange. they are going to still have to be connected, but but what they can do, these owners of the new exchange or the backers of the new exchange, they can direct trades they are doing to their

new exchange, correct? nick: right. i mean, they will not be able to ignore the other exchanges. -- this space just adds more complexity to an already complex marketplace. one more place to plug into. something called the members exchange. so it does add to the complication, but the owners of the exchange have a ton of order flow that they could in theory start sending there. it means they can start doing a lot of business. jason: are we in a moment where -- that is, shall we say, ripe for this kind of disruption? nick: in theory, it is part of the solution. they are a small part of the market, only 2% to 3% of the market, but charged dramatically less for things than the big incumbents. they are in a way aligned with the members exchange, but they are really small. if anyone remembers the book "flash boys" and the marketing campaign around that -- investment exchanges alienated a lot of potential customers with some of their rhetoric.

so i think the numbers exchange, just because they have not alienated themselves against some of the folks, they may have a better shot. the investors exchange is not fighting the good fight in some respect. in this battle, there were a lot of folks that were turned off by some of the rhetoric over the years. so the numbers exchange, they may have a better shot. jason: these are real names that people know on the trading sites. --ll, virtue -- sit is l citadel, virtue obviously being the biggest. also some well-known brokerage houses as well. they could get some real volume here. nick: when you talk to folks associated with this company, it is clear they don't want this to just be a retail market. but that is kind of -- much of the order flows they are bringing to this exchange is retail potentially. but i think for the exchange to succeed, it will have to have a diversity of order flows. you will have to have big investors trading there, little investors trading there. it will be interesting to see how this plays out. to be clear, right now this is all preliminary.

in talking to some folks, even a threat of this thing existing is making a point. the thing in theory does not even have to open if they get concessions from the big exchanges. carol: that is what i wonder, ultimately, right? if it is about forcing the big exchanges to cut their costs and fees. nick: that is one theory. of course, for it to be a threat, it cannot be in empty threat. they actually have to go through the motions of creating the thing, you know? if you set that aside, if they create it, it gives them a more tangible voice in the industry. so even though there is this threat, in theory, it could be a success even if it does not open, if the exchanges cut fees. i think them creating it does ultimately help them get a stronger voice in the industry. carol: also in the finance section, some countries around the world are finding a new way to deregulate. jason: so-called financial sandboxes like china, canada and even arizona. they are supposed to give fin

tech space to grow. carol: but they may also remove some key protections. paula: it is like a playhouse for financial technology companies. generally, these are startups that are doing something digital. and the idea is they will compete with the big banks or the big wealth management firms. but to get started, it is very hard because they don't have all the legal and regulatory traps set up. so they don't have lawyers, and they don't have regulatory advisors, so they need to get started up very quickly. sandboxes are a place where they can work in a controlled environment but under relaxed rules. taylor: walk me through how many regulations there are able to avoid. paula: what they are doing is a company in their sandbox will not have to follow things like the truth in lending act or equal credit act. all sorts of things. and they will be immune from federal lawsuits, state lawsuits and private lawsuits. so consumer groups are saying that is pretty scary. we are going to have to rely on them to say that this is a

deregulatory environment, but also keep a close watch on these companies. which is it? they are either deregulated or they are not. so there is a lot of apprehension about this program. taylor: give me an example. what is one company you have been following in your story? paula: there are no companies yet, not in the united states, because the sandbox that exists right now is in arizona. there are only three companies that have been approved in that sandbox. one of them is called sweet bridge. and it is a combination of a blockchain company with a type of cryptocurrency that they call a token. it is completely digital. what they do is they allow you to make, to borrow against the title of your car. so this is a thing called title lending. consumer groups are very wary of title lending. it is a lot like payday lending. so it sounds very risky to consumer groups. the company says no, it is not risky at all.

we have all sorts of controls. the arizona attorney general -- which will be overseeing this experiment -- says no, no, no, it is not risky at all. don't worry. it has not started yet. we cannot see what any of the results are. we cannot see with their --see what their marketing materials are. we cannot see if any of the consumers who have used the service have defaulted on their loans and what happened to them. taylor: is this just a big lobbying effort to sort of cut out the competition or are their legitimate concerns about the -- are there legitimate concerns about the lack of consumer protections that they are really trying to highlight? paula: the big banks and big wealth management companies at first were very wary of these things called sandboxes. it has been going on in the united kingdom for several years and considered the model. about 100 companies have gone through that sandbox. but in the u.k., they monitor them very closely. in fact, sometimes they are even more scrutinized than a regular financial company. they have not relaxed the regulations or laws.

in the u.s., it is different. it is more relaxation of laws and rules that are envisioned. but the big banks and big wealth management companies at first were very wary of this, but now i think they have bought in because they can start sandboxes of their own so they can play in the sandbox too. and the startups that are more nimble may or may not have an advantage, although i think that is one of the upsides of sandboxes. you have the financial industry in the united states and globally in the hands of very few companies now. a handful of big banks. a handful of wealth management companies. and more competition is welcome, so if sandboxes can do that, that is a good thing. but it has to be done so that consumers are not abused or we don't set up another financial crisis like what we had in 2008. carol: up next, zillow finds a new use for its home pricing algorithm. estimates, famous z

still ahead. and a supercar maker wants to go mainstream. check this car out. you deserve it. carol: this is "bloomberg businessweek." ♪

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and get 15% off your mattress - and free shipping too. just go to buyleesa.com today. you need this bed. jason: welcome back to "bloomberg businessweek." i'm jason kelly. .arol: and i'm carol massar still ahead in this week's issue, saudi arabia does valentine's day. jason: also, the shine coming ministernada's prime -- we are talking about justin trudeau, worse. course.n trudeau, of carol: and in the special real estate section, the next evolution of zillow. jason: so many of us were familiar with the website and we

used it to price homes and spy on our neighbors and see what the price of their houses are. carol: now, zillow plans to start buying homes and then reselling them at a profit. we have a great graphic in the magazine to show you just that. you are looking at, of course, the country, but these maps show you where zillow plans to be buying and selling homes. jason: and they are not alone, those red circles are redfin, another well-known company in the real estate space. so zillow, which has had a lock on those estimates, is getting into a much more competitive business. we talked to patrick clark. he dug into what is going on with zillow. patrick: you can go to their website, give them your address and enter information on top of that. they pull together public records, whatever else and they quickly come up with a number they are willing to offer you for your house. carol: and that is it. so take this number, we'll give you cash right here and now. you are out of your house.

patrick: almost. they will send a person the house and make sure that is not a whole the roof and everything looks right. there will also have a local real estate expert in phoenix or whatever other markets they are in -- they are in a dozen, or they will be in a dozen soon. they will have an expert eyeball it and make sure, this is not crazy, is it? then they will offer to you. and the value proposition is that you can transact today, two weeks, you kind of get to pick your closing. carol: and zillow gets a fee for it. jason: a little higher than what you would typically pay a real estate broker, right? patrick: indeed. 6-9%. they may also make a little bit of money by selling home for -- selling the home for a little more than what they buy it for. they're saying they're aiming to not make money on appreciation, but by charging the fee. carol: they have become a big homebuyer in areas like phoenix. patrick: yeah, that's right. they're buying hundreds of homes. they will buy thousands of

homes. they will have to borrow a lot of money to do it. zillow finances each of these purchases, they are a line item in cash. of ons a higher amount the ground employees, but does -- those employees have to manage teams of contractors. speed is of the essence for zillow because the longer they hold the home, the more they are paying financing costs, homeowner association fees, taxes, insurance, all that. so they are trying to get a rapid turn. jason: why did they feel the need to get into this tougher business? other people were doing it? patrick: yeah. and i think there is this kind of long-term competitive risk for them. which is if this becomes the way people really want to sell their homes and a lot of people start doing it, and you can't do it on zillow but you can do it on this other website, you have no use for zillow. jason: so the other website

becomes the starting point for this home buying process. patrick: but there are other reasons as well, zillow has always carved out a business by selling advertising to agents with homebuyers. it is a lot harder for zillow to reach people who are selling their homes. that is a whole other universe of potential ad sales that zillow can now access by going in this direction. and if you go and say zillow, give me an offer for my house and then say i would never sell for that, zillow's going to then try to connect you with a traditional real estate agent who will manage the process, and eventually -- they are not yet selling these as leads, but eventually they will sell leads to the seller's agent. the theory is that these will be high-quality leads, people who have already entertained and -- entertained in their mind the idea of selling. it is better than somebody who is starting to think about it. jason: one of the challenges

does appear to be that the algorithm has got to be right. as much as they are making money on the fees, if they are routinely not selling a house for as much as they think they can, as you say, either they are holding it for too long and stumbling on the carrying costs, or they are just not making the margin they need. how confident are they they can get this technology right? patrick: there are famous examples of the estimates the way off. the ceo of zillow once sold his house for a significant discount was kindstimate, which of fun for everybody complaining about the zestimate on their own home. jason: and then bought a new home at a high premium to these zestimates. patrick: and it was also off by a bit. it was tough. they have different levers they can pull and i have a lot of

-- and they have a lot of data, they are getting a lot of data. they think they can read with -- they think they can read where the market is going. if the market looks risky to them, they can charge more for their service, right? if the market looks risky, they can just stop buying homes. but there is the risk they will wind up holding hundreds of thousands of homes on the books and they are going to realize the market has turned on them and they can't sell them for what they thought they could -- and that will be sticky. carol: zillow expanding its business model. taylor riggs is here with another look at the company. taylor: expanding the business model and their income statement. if they go into loan origination and flipping homes, that is an expensive business but they have done it to get ahead of some of their competitors. long-term, it will provide value, short-term it puts pressure on margins. so what i have in this chart

here are earnings before the interest tax appreciation. those margins are turning see into as you can 2018 going into 2019. but long-term, it might pay off. carol: and you have heard this from the investment community. they are just watching to see what it means for the company. jason: really smart take on where this goes next. taylor riggs, thanks. and next, where the murdoch empire goes after the merger. jason: this is "bloomberg businessweek." ♪

jason: welcome back to "bloomberg businessweek."

i'm jason kelly. carol: and i'm carol massar. join us for bloomberg businessweek every day on the radio from 2:00 to 5:00 p.m. wall street time. you can also catch up on our daily show, just check out our podcast. it's on itunes, soundcloud, and bloomberg.com. and find us online via businessweek.com and our mobile sale -- the app. the sale to disney is coming soon. carol: the murdoch family fortune is about to balloon. our reporter -- our reporter -- jason: our reporter told us what to expect from rupert's next-generation. >> the question was whoever would take over. and looking at this, it is this great bit of a state planning. so rather than give the keys the empire to one of my children, i will sell most of it to disney and that will position them to build their own empires. once this deal with disney closes, and it's getting pretty close, they will have a huge amount of money to play with. carol: how much?

>> about $12 billion will be coming out to the family. so they will be pretty well-positioned. carol: three siblings. felix: there are three siblings from his second marriage. and elizabeth., what kind of very much people are keeping an eye on. -- it is very much what people are keeping an eye on. it is kind of fascinating. from the start, he positioned auckland to take care of fox. it is still a third of the size of the previous company, but it will probably grow. i mean, they have said that we will be out there, buying stuff, making acquisitions. the question is what is his taste? jason: and james goes with -- felix: he will set up his own investment company. maybe a little incubator. the question is what is he interested in? people are like he's looking at

the live streaming tv space, but he's also really into environmental causes. so maybe that is something there. he had a lot of success in asia, particular building up star, and he has a lot of relationships there, so potentially people are thinking maybe he could make some investments there. but also he has been sitting on the tesla board, and people are thinking, of any of the siblings, james seems the most likely. he is in the mid to late at this 40's point, a lot of runway in front of him, a lot of money. he might be making some big moonshot investments that could be surprising to some people. carol: what about elizabeth? felix: after she sold her production company back to her father's company in 2011, the shine group, she set up her own investment vehicle, and she has been making investments in kind of the production, artistic creative side of the media industry, animation. she has this company in los angeles called vertical networks

which makes short form video for snapchat and facebook. youtube. so i think people expect her to do that, only on a bigger scale. carol: do we know if this was his original intention and mission? how much time did we talk about who's going to be his successor? felix: it is also such a contrast to other big succession recent in the media in years, what happen with simon redstone. that just evolved into this huge mass of competing lawsuits and acrimony. so maybe rupert murdoch saw that and said, i don't want to end up there, let's take care of this. this 87 years old, and positions himself and his children really well for the future. carol: in the politics section this week, justin

trudeau is facing a general election this year. jason: but the prime minister has been causing headaches for his liberal party. >> trudeau was elected in 2015, and he was a surprise winner -- at least the scale was surprising. at the time, canadians seems pretty comfortable with it. his numbers soared and he had at -- he had a lot of allies at the provincial level. things were going well. since then, he has had these accumulated controversies that incumbents often have. so the tables have turned a bit heading into the election this october. he once had a fairly large lead over his next closest rival in canada's multiparty system. that has shrunk to maybe a percentage point or so to now a razor thin lead for him. and he is dealing with a lot of controversies, the most recent one, a pretty explosive one about whether he pressured his then-justice minister and attorney general to

intervene on sec level in -- intervene. carol: that justice minister was helping to oversee rural areas that have a lot of big-city mistrust. how important has that scandal been? josh: the justice minister was part of all of the changes to throw an effort to urban voters. effort to affect urban voters. she was shuffled from justice to veterans affairs, which is substantially less prestigious. it raised eyebrows at the time. fast-forward months later, we have this revelation that hey, this newspaper is reporting that trudeau had been leaning on his justice minister to play ball with this company. so this has been a huge, explosive question. so now trudeau has a lot of problems that are scattered regionally across canada. he is trying to calm rural voters, many of whom wrestle at istleny of whom br at the very urban, liberal,

downtown party he runs. he's trying to save seeds out west, an important region, that is where that justice minister is from. and he is trying to court quebec. guess where this company involved in the scandal is? it is based in montreal. so all of these things are crossing together as he looks at his electoral map and thinks how can i scrape together enough to have another majority government? taylor: you talk about other parties, and enter this character, who looks to be the main competition to trudeau this fall. josh: sheer is an interesting guy, fairly mainstream as far as conservative parties go. he flirts with elements of globalization. for instance, he supports brexit, and goes out of his way to remind people he supports it. he is skeptical about the u.n. a -- u.n. migration pact that we have seen a lot of right-wing

parties globally motivating their supporters around. so it would definitely be a shift to the right if andrew sheer won power, but it is steadily those two parties that have governed canada historically. trudeau's liberals, the middle, and sheer on the right. the big question is the third party on the left, the new democrats. they are in a bit of a freefall right now. that could be good news for trudeau, because their voters will probably favor him over sheer. carol: up next, how one might say "i love you" on valentine's day in saudi arabia. jason: plus, sweden's supercar dreams. this is "bloomberg businessweek." ♪

carol: welcome back to "bloomberg businessweek." i'm carol massar. jason: and i'm jason kelly. you can also listen to us on the radeon sirius xm channel 119 and

am 1130 in new york, 1061 in boston, 91.1 fm in washington, d.c. carol: the bay area, in london on dab digital, and on the bloomberg businessweek app. the superrich have a super secret, a supercar they love to drive. jason: it is really something. we are talking about the swedish carmaker that makes million sports cars. dollarcarol: the company wants to go mainstream. >> they came up with a car that is, right now, the fastest street legal car you can buy in the world. it hits 249 miles per hour, but it also sells for $2.1 million. so it is not the kind of thing to run down to the dealership on route 10 and pick up, this is something that aims at the truly superrich. so we thought it was an interesting place to take a look at, because the company has they do not just

want to target the superrich, they want to make things for just the rich. so they're coming up with a new car that will sell for a little over $1 million, putting them squarely in competition with the super luxury cars that a lot of us have heard of. taylor: what are the business aspects of his car? trying to reduce the price to $1 million, ferrari is a big competitor. what do they have that this guy wants to achieve? jim: ferrari is considered to be the most profitable on a per car basis of any in the world. it's estimated you have about $80,000 in profit in each ferrari. you say, is that a lot of money? yes, it's a lot of money. a typical luxury car, a mercedes or an audi, you are thinking about $17,000 in than $25,000. the thing about a ferrari, you can go back into the history

books and bring in and reintroduce models that collectors want, update them. it has got a brand that people understand they want. so what koenigsegg wants to do is get to that. to do that, however, they have to make a change in how they are manufacturing the cars. taylor: so talk to me about the change in the manufacturing. jim: they are joining forces with another company, remember saab? the old swedish car maker that is now on hiatus in building cars? the company has been bought by a chinese businessman who has maintained the factory. he has kept going and operating by doing testing work for other carmakers that has let him keep about 700 people working. and it has kept the factory ready to start building saabs again someday. part of the crazy plan they have is to get ready for that, he will joint venture with koenigsegg to build koenigsegg's

new car. and then, they will have the factory building more cars and then on the side, they will start rebuilding and eventually rebuild the factory. the factory was actually very large, even though it is hardly doing any work now, it could go for years doing both sabbs -- saabs and koenigseggs. so give them a real facility and at least a jumpstart to get the old factory working. they're both in southern sweden and both actually near one another, so it makes a lot of sense that way. jason: in the economic section, valentine's day used to be tense in saudi arabia. carol: that's right. the holiday was actually banned, but attitudes are shifting. jason: that means a potential new market for red roses and greeting cards. here is economics editor christina lindblad. christina: valentine's day was never banned in saudi arabia, never officially, but in

practice, people who tried to buy and sell merchandise, you know, they were punished. but there have been lots of changes socially under the de facto ruler of the country. ,nd i think this year businesses felt a bit emboldened to push the envelope. in past years, there have been outright edicts warning florists not to sell red flowers in the days leading up and the days immediately following the holiday. carol: they talk often about opening up the market, releasing some of the restrictions and, of course, we know we have some really atrocious things have been going on in saudi arabia as well. so i guess we are trying to tell this to valentine's day, in terms of restrictions easing what is going on really. cristina: yeah, so this is a tension at the heart of leadership in that country that has relaxed a lot of social

mores, but in other areas, has tightened a lot. so dissent has been sanctioned. we've all heard in various different ways. so i think that that is that as people feel like in their personal lives they enjoy more freedoms, that they will not be pressing so much for maybe democracy or what we see in other countries. carol: there are so many things that i think we take for granted, silly holidays or celebrating birthdays. and if we do a strict interpretation of the muslim religion, these are things that they don't -- cristina: i was not aware until i edited the story that there are some muslim holidays that allowed tot celebrate. no birthdays, no imports from the christian religion. so we did talk to some people, consumers, who said it is not for me. i mean, they weren't against

having stores selling merchandise and people going to restaurants and celebrating valentine's dinners, but they said that is not for me. jason: this gets to the heart of the case in saudi arabia that this is an economy that has to be diversified, and so much of that ties into the politics and the relationship between the ruler and people. cristina: that's right, and local businesses have had a very hard time in the past couple of years because there has been this government austerity program. the bigger goal of trying to steer the economy away and developfrom oil and other industries. we did a story last year about how many businesses were going out of business. jason: right. cristina: so i think it is important that they allow these spaces. it reminds me a bit of cuba, where there is there, they say the government grips and

relaxes, grips and relaxes. the idea is sort of in times of great economic strains, the authorities, it's what you said. they look the other way. so they are not saying we sanction this, yes, go ahead. carol: "bloomberg businessweek" is available on newsstands now. jason: also online and on our mobile app. must read this week, i have to go with this real estate section. still jumped out to me as i love things like zestimates. everyone uses them. but zillow getting into the home buying is a whole new business. carol: and talking about strategy, what is next for the murdoch family? they have sold off so much from the company empire and media empire, so now you wonder about the next generation of murdochs, what are they going to do with those billions of dollars? what kind of investments they will make. jason: gillette told that story so well. carol: you can find more stories

from businessweek.com over the weekend, so check that out. jason: and check out our podcast. carol: more bloomberg television starts right now. ♪ i'm a veteran

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