jason: welcome back to "bloomberg: businessweek." carol: still ahead, america's favorite cold grocer tries its welcome to "bloomberg businessweek." i am carol massar. jason: i am jason kelly. carol: thousands of dominicans are searching for a treasure that may not exist. jason: a focus on europe's most important economy. carol: who will fill angela merkel's shoes? jason: how to help germany's

biggest bank, deutsche bank. editor joel weber joins us now. carol: why focus on germany now? >> brexit has taken up a lot of their we talk about europe. we know brexit has been kicked down the road until october. germany is the biggest economy, and we are starting to see three elements, one is the economic story has gotten tepid. the political story, ms. merkel is the most powerful real political figure europe has, and there is a succession story. the third is the banking story, deutsche bank being a once upon a time bank of germany, and became an international bank. now it is grappling with the size it is supposed to be. jason: wide-ranging implications in germany and the global financial system.

ed robinson brought us more. >> these banks are the twin pillars of the commercial banking system in germany, so they are vital institutions. they are also weak institutions, both banks have struggled to generate revenue growth, profitability, to show the kind of strength and resilience a lot of european banks have started to produce after years of recovering after the crash. it is funny, but it is the german banks which many would think would be the strongest that have become the laggards in the european banking scene. jason: why? what happened? you are right on both accounts. the assumption would be these are strong german banks, deutsche bank especially, it should be at the heart of the financial system, yet it has fallen by the wayside relative to its big u.s. competitors. where did they go wrong? >> looking at deutsche bank specifically, it essentially made a big bet in 2012, and that is where the story focuses. this decision driven by the chairman, who is still the

chairman today, that while the other european banks would adjust to the post crash reality, the new regulations, the capital they had to set aside, the big changes. these other banks downsizing and getting ready for a different reality. deutsche bank decided, we are going to pounce, we are going to expand, we are going to grab the business our arrivals shed, and we will be europe's answer to goldman sachs, a world beating global investment bank. that was the decision, the chance that they took in 2012, and all these years later, they are left in a situation where they have to begin restructuring and reorganizing. this is stuff they should have done six years ago. jason: did they get it wrong

because the market did not come to them unless they thought it would? or, is it an economic problem in europe? is it mismanagement? where did it take a left turn? >> it is all of the above, all of the above. primarily, what you had was a situation of a bank that was disorganized, fragmented, a bank that did not know what was going on in its far-flung units, when you get legal scandals, that hits confidence, the shares get pounded. on the other side, you have a week european economy, remember the sovereign debt crisis, interest rates went to zero. that is bad news for a bank to bolster revenue. it did not get help on the macro side. finally, you have competition. the u.s. banks, wall street came

back strong over the last few years, and increasingly these banks, jpmorgan, bank of america, citigroup, they have been taking european customers that used to depend on deutsche bank and other banks, now they say why don't i go with jpm, bank of america? those are the main forces. jason: let's talk about the proposed merger, it is out in the open, you have the german government playing some sort of role. they are being coy up to chancellor merkel. where do we see this playing out?

this is not strength on strength with these two institutions. >> the whole premise behind a potential merger of these two institutions, these week banks form a strong bank, which critics say that does not really work, that does not compute or add up. you have a situation where the alternative, letting them continue on their own might be worse. those of these banks need some kind of transformative change to get back on their feet, to get on stronger ground. this is a swing for the fences type of decision. that is why it is difficult to say at this point whether it happens. it seems like the momentum is for some kind of merger, but there could be cold feet. the number one issue is political.

if these two banks come together, chances are they will have to fire between 20000 and 30,000 bank managers, bank tellers, ordinary workers in germany. at the same time, you could have a situation where highly paid investment bankers in london and new york keep their jobs. those are bad optics, not a good look, it is a real political problem and we do not know how it will break. carol: in terms of deutsche bank, it has not been easy, we have a great chart on the bloomberg terminal that takes a look at what would happen if you added commerzbank revenues to deutsche bank. the white line is deutsche bank's revenues, they have come off their peak as of late. the blue line, adding commerzbank, it would not get deutsche bank to peak levels that we have seen in the past. jason: this is why there are skeptics on this deal. also use the terminal to check out the latest headlines, because this is a fast-moving story. up next, bmw's painful push to embrace electric engines.

carol: the woman who may be germany's next chancellor as long as she steps out of angela merkel's shadow. jason: this is "bloomberg businessweek." ♪

you and me carol: welcome back to "bloomberg businessweek." jason: join carol and me on radio, and catch up on our podcast, subscribe at itunes, soundcloud. carol: you can find us online. in a special section on germany, "bloomberg businessweek" introduces us to angela merkel's handpicked successor. akk has been working to shed her image as a merkel disciple. yousef: she is coming in after angela merkel who has been in office, her fourth term now. she has become the de facto leader of europe over the past

couple of years. i think the people are concerned, can this woman from a small state actually lead germany the way angela merkel has. jason: tell us about where she does come from, not an area known to people outside of the country. >> she comes from a small state in germany, and it is an area that was not part of the republic until the mid-1950's when they had a referendum when the voters chose to come back from france. it is a tiny place. it is like delaware without washington being nearby. if delaware was where montana is, that is where it would be. jason: help us understand her as a politician on the political spectrum, which seems to be changing a bit, not unique to germany given the world we are living in. where does she need to fit in?

>> what has happened of the past five to 10 years, merkel has moved the cdu, the right party that has tended to be conservative. she has moved it left on social issues, and that alienated the far right voters and created an opening for the afd, the alternative for germany, a populist hard right party in the mold of the national front in france. what she is doing is trying to bring them back to the right and get those voters who defected. jason: how is she fitting into the leadership role? merkel is in the role, but no one knows whether she will make it to the end of her leadership

term. >> the betting is she probably will, but she could be bounced tomorrow. there is no real way of knowing. she is going to be out by 2021, she has pledged to leave. she will not run again. that puts akk in the pole position to become the next chancellor because the cdu is likely to prevail in the elections, and she is already elbowed her way to the lineup. carol: carmaking is central to the economic strength, and that is troubling given the end of

the combustion engine and the general decline in car ownership. how bmw is preparing for and electric future. >> bmw is undergoing changes like other carmakers. the biggest generational shift for carmakers. if things go to plan, we could replace the combustion engine at the heart of the car industry with battery electric vehicles. in bmw's case, they have no less than four engine plants around the world, one in china, one of the u.k., one in germany. what happened with its workers during this transition seems unclear. many of them will shift to new positions, and the shift will occur gradually.

electric cars have not quite taken off in terms of people buying them. the way this will play out is unclear. in terms of this shift, the engine being replaced with the electric engine is what is driving carmaking strategies now. jason: take us inside bmw now as a company, even beyond this shift from the eight internal combustion engine. where does it fit in the scope of global carmakers? >> close to the pinnacle in the industry, i would say. for many years, up until 2016, bmw was the world's biggest luxury carmaker, they are now number two behind daimler. they promised they want to get back on top and go past daimler again.

the company has been around for more than 100 years. it is known the world over as producing the ultimate driving machine, which has been the slogan since the 1970's. as a company, the brand really stands for cars people aspire to. a lot of the brand specific attributes are changing as well. jason: how does it change, you started to talk about this a little bit, how does it change the workforce, the production line, the company's global footprint when it comes to manufacturing? >> in terms of making electric cars compared to combustion cars, the setup is simpler. you need fewer parts. if we look at the engine, the engine is made of 1200 parts alone, whereas the electric motor on its own will take two dozen parts.

that means you need fewer people to develop the engines. fewer people to procure the parts for the engine. also, the assembly of the vehicles will be simpler, and you need fewer people. carol: how college graduates are selling stakes of themselves to investors. jason: ways to manage a baby boomer brain drain. carol: this is "bloomberg businessweek." ♪ jason: welcome back to

"bloomberg businessweek." i am jason kelly. carol: i am carol massar. new can listen to us on radio.

jason: and on the bloomberg business app. carol: wall street has created a new way to pay for college. jason: students can agree to hand over part of their future earnings. carol: claire boston has our story. >> i look at student debt, mortgage debt, the universal consumer debt. when you look at student debt, it is a crisis in america. i have been fascinated with what will happen. carol: a crisis for what? >> college costs keep going up, no one knows how to fix the problem, and that is tied to the government so investors are concerned. it is affecting the economy in big ways, but people think they will get paid back. so it is not a crisis in the

finance world, but it is bad news for students. enterprising companies are trying to find a way to make this better for students, how can they take on lesson debt. one proposal is income sharing agreement. carol: isa's. >> instead of a $10,000 loan, you would have $10,000 front did to you, and you pay it back in the real world with a percentage of your income. maybe 5% of your income for eight years after you graduate. jason: there are so many things interesting about this story. purdue is a named school adopting this. how does it work there? >> purdue has been doing this for a couple years. they want to make education a, and this program might help with that. what they are doing, they have a program open to juniors and seniors, -- they want you to take out loans, but be competitive with private student loans. if you are an english major, at purdue you will pay higher than an engineer.

jason: as a former english major looking at that, ok, they do not think i will make a lot of money. >> they have a lot of research on what their graduates make in their first years out of school. they look and say, what percentage of your income can you pay? carol: what happens if you lose your job. >> students say this is what stands out to them, if you lose your job, as long as you are looking for a new one, you do not have time added on the other end, and you are not making payments. with a student loan, you have to

pay no matter what. jason: wow. wall street, because they like to securitize everything have found a way to get into this. >> there are hedge funds to figuring out, can i buy these? they bring these into pools, and fund about $17 million of investor money into these. it is a growing area. i have been talking to investors, there is interest. if you see student loans as a crisis, this is a social program that can change that. jason: from paying for college to paying for retirement, the solutions section looks at how to manage a shortfall in your 401(k). carol: how employers are managing retiring baby boomers.

>> one thing we want to do is look at the wisdom out there, advice that is solid which is save early. you have kids, they are in college and cost a lot of money. maybe you were laid off, you changed jobs. are you doomed by 60 if you have not saved enough? chris farrell who was a businessweek staffer and is expert in these things, he has a new book out on this stuff. he takes a look at the idea that you can make up for some time once the kids are gone, the empty-nesters are well-positioned because that is a huge expense. a huge expense is gone. not to say you will be freed up to spend on yourself, splurge, that is another thing empty-nesters look for. but food allowances, clothing, it is a substantial chunk, and when you pull that out, you can increase savings substantially and make up for lost time.

carol: that is the point, up it big time. >> based on where you are at. targeting people in the early 60's, but the age range can span several years. workout, if you have a financial advisor. the key is do not throw up your hands and say, that is it. i am not 45 or 35, what am i going to do? i will be poor and destitute in my old age. carol: this is a number everybody is working with, it works out to $600 a month. >> where can you live on $600 a

month? the closer we get to observing older parents, $600 a month does not cover -- let's say you have a helper, $600 a month is not a lot. you are looking at pulling out more, extending the number of years you are working. carol: you are going to be working forever. >> that is definitely not necessarily a positive message, but it is. because longevity is such, we are living longer, we are living in some ways healthier, and people who are older are maintaining their health in different ways than people 30 years ago. people more and more are used to this idea that work can be good for you, that the brain

engagement with other human beings. i do not think it is all a negative. basically, the story we confront, this is a story about companies confronting the baby boom brain drain. you have so many millions of people who will be leaving the workforce, and yet taboo is the subject of retirement, and approaching people in the workplace whether you are at a manager, and saying, when are you thinking of hitting the golf course full-time? you can have conversations, but you have to approach them strategically, and you have to think about the ways as a company you will devise a strategy to have a safe space to talk about this, so you and the individual can plan. jason: up next, long-lost on an international treasure hunt. carol: this has got to be a movie.

and this is "bloomberg businessweek." ♪

jason: welcome back to "bloomberg: businessweek." carol: still ahead, america's favorite cold grocer tries its magic. jason: and an economist asks gamblers and surfers how they manage risk. carol: and on the cover, the legend of gold. jason: an incredible story about how there are thousands searching for ancestral riches that may not actually exist.

our editor is back with us, i was blown away. >> many months ago, they came to us and said i think there is this amazing story about this long-lost gold and his family looking for it. they think it is in a european vault of a bank. we said that is really interesting, one of you go see what you can find. the story is the culmination of that. carol: it is unbelievable, and it goes on for a while. >> longest or we have published, 9000 words. you'll probably get to watch some day as a netflix movie, it is that good. it is like chapter after chapter. what it is really about is the lawyer who is put himself in the

middle tween the family who thinks there is gold and the banks who say we don't know what you are talking about. >> a fascinating story. carol: thank you so much, we got more from our correspondent. >> i picked up the phone and got the guy live. i did not have the heart to say i don't care, goodbye. he said he wanted to meet me because he wanted to tell me about his story. soy had some coffee and tea he unravels this incredible tale about how, for five generations, his family had known they have an incredible inheritance in switzerland and spain. because their great, great whatever had a boat in the used to take mined gold and take it to spain as tribute and put the rest of the bank. throughout generations, they have always known this. i have a look up with a lawyer, who investigated and said there is no there there. so they give up for a couple of

years. suddenly, he came back and says it's back on. jason: he has found a guy. >> his cousin, who is so obsessed with the inheritance moved to the dr and was looking up genealogical documents to help prove the claim. he somehow bumps into this lawyer who is looking for inheritance for another family, a bigger family about 20,000 people, the rosario's. he says i've connected to the guzman fortune and now the hunt is on. jason: you go to these places because this is where this lawyer has been going. and you discover that maybe even

those trips are not exactly what they seem to be. >> just be clear, when i started, i knew it was the longest of long shots. i did not know anything about inheritance or dormant accounts or anything like that. i started to think it could not be real, but the next thought became if it is not real, why is he doing this? i do not understand. he was going to get 30% of whatever he found, but in the u.s., you don't get any money until you crack the case, with the case. so i am thinking this, i go to switzerland with them, spain with them. both times i realize they're supposed to have all of these meetings, don't have any meetings, they are touring the whole time there. when i come back, a interview somebody who says i have to pay

him to be a client. and you know, it came to a $200, a lot of money in the dr i have to pay him to give him power of attorney and i had pay him when i turn in my documents for processing. the lightbulb goes on, now i understand. carol: up next, the true winners of donald trump's tax law. jason: and how his trade war is impacting what is most important voter bases. carol: carol: this is "bloomberg: businessweek." ♪ jason: welcome back to

"bloomberg: businessweek." carol: join us every day on the radio from two-5 p.m. wall street time. and also catch up on our daily show on itunes, soundcloud. jason: and through our mobile app. carol: we did the math to find out just how trump's new tax law played out. >> we saw who the real winner of the tax law was, and perhaps this is not a huge surprise, but it was very wealthy people, in particular chief executives. people who benefited the most from the corporate tax cut and the reduction. to be clear, the tax law helped everybody, the vast majority of people got a tax cut. despite what people might be seeing with their tax refunds, but the biggest winners overall where the multimillionaires of the world.

jason: why is that? >> the biggest reason is the cut in the corporate tax rate from 35% to 21%. the way to think about that is that the tax savings from something on that flows through to people who own those businesses. most of those businesses are owned by the very wealthy. so it is very difficult to have a cut in the corporate tax rate without that flowing through the wealthiest people in the country. i don't know if you remember, but back when trump named him as his nominee for treasury secretary, steve mnuchin said that he wanted whatever tech-support they came up in width to not be an absolute tax cut for the wealthy. but the experts i spoke to said the minute they heard that, they knew they would not be able to follow through. that is simply because of this corporate cut.

you cannot do a huge cut without those benefits accruing to rich people. jason: and in the economics section, trump's trade policies have been challenging for american farmers. carol: that's right, from lost markets to unsold grain, the agricultural industry says it will be dealing with the consequences for years to come. >> one of the things we always forget with trade is that they are happening in a context and there is a broader economy. if you are a farmer or manufacturer, you have a reality you are dealing with. and in the farming industry, the biggest exporter or producer of apples, they're going to this amazing transformation which all hangs on this wonder apple. they are ripping out old orchards, the kind that you don't buy anymore because you, like american consumers, don't like those apples anymore.

they're putting in new orchards to the point where, a few years from now, one in six apples will be these cosmic crisps. the ideas they are addressing and changing consumer tastes. but this is all gotten hung up in the trade wars. exports from washington state, the big business, they export to india, china, mexico is the biggest market, they've all been hit by tariffs, meaning less revenues. and for a lot of these businesses, that means less capital to invest in new orchards. jason: what are the farmers saying to you? when you get down to brass tacks, are they having to spend less on these new investments? what are the ramifications? >> i sat down with a guy named sean gilbert, a 38-year-old former college baseball pitcher who took over the family business.

a 100 plus year old family business called gilbert orchard's. last year, they were planning to renovate 180 orchards, instead they went 120, a third less than planned, one third less productive orchards that will generate higher value of higher-margin apples and more revenue. jason: as you say, this is not just flipping a switch, these are decisions that have to be made that have implications years in the making. >> yeah, and this is one of the biggest impacts we're seeing. and it is hard to quantify, have you quantify a factory that has not been dealt or people who have not been hired? we hear a lot of this in earnings calls, big ceos talk about all the time. and when you get right down to it, it is about the new orchard. or i was in louisiana talking to a soybean farmer, and he is not

going to spend $300,000 this year on a new combine for this farm because he lost $300,000 last year in the form of 1000 acres of soybeans he believe in the field. jason: how does this all come together in the aggregate politically? are we seeing an inflection point in this trade war? >> one of the fascinating things is the way farmers have reacted to the trade wars politically. a lot of them voted for trump, and a lot of them are sticking with him. that is a function of what he has done on tax reform, what he is done on deregulation, things like the use of water that he

has loosened up the regulations, important for farms. a lot of that means there's still residual support, but there is a time limit, and that gets into the economic impacts. it feels like we haven't talked about trade war forever, but economically, we are only just starting to see and understand a lot of consequences. that is true on the farm. you talk to the farmers and they say it last year was the worst i've had a long time. i'm still with him now, but i have another year like this, i'm not sure i will stick around. carol: up next, the top supermarket chain in the u.s. is expanding, but don't expect it to be a household name. jason: and what happened when an economist walked into a brothel? carol: is this a joke? jason: it is not, and we will talk to the author of a book about just that. carol: and latest trend in bars that is not the taste buds but earbuds. jason: this is "bloomberg: businessweek." ♪ carol: welcome back to

"bloomberg: businessweek." jason: you can also listen to us on the radio on sirius xm channel 119, and on a.m. 1130 in new york, 106.1 in boston, 99.1 f.m. in washington, d.c. carol: a.m. 960 in the bay area, london on dab digital, and through the bloomberg business app. our podcast in this week is with an economist and author. jason: it has something of a risky title, "what happens when an economist walks into a brothel?" >> i always had the idea that this was an unexplored area of economics. you would not think so, but i felt like it applied to all areas of economics, not just financial markets. i was floating with this idea and it was businessweek who called me and said we want to do a column to exploit different ways to export risk in unconventional places. finances the study of risk, and that is what got me to the idea.

jason: this is a few years in the making. how long does it take to assess risk through this lens? >> assessing the risk of writing a book? jason: [laughter] yeah. >> terrible, it has to truly be a creative endeavor. that was 2014 and it was me starting to think about how risk could be reported, rather than just be in a financial model. models always have this rough idea that financial models are just little parables, told with. it was businessweek when i started exploring if i can take that same parable and reported and find stories that match. jason: how did you find your footing that then as a journalist versus an academic? climb out of the ivory tower. [laughter]

>> what is hard to do is that as academics, we don't really talk to people. in fact, we are discouraged, and sometimes for good reason. it is not a lack of curiosity, it is that you don't want anecdotes to bias your analysis, so it was how to talk to people and connect and how to get them to open up to you. jason: what if you become an economist in the first place? >> like a lot of economists, i grew up with a lot of questions in a community where there was bimodal income distribution. jason: where was this? >> northeastern connecticut, there is a lot of declining industry but also the university. i was actually the fourth generation to drop their, i was felt really connected to lower income people even though i have professional parents. i could not figure out why this was happening generation after generation. i member even when i was 15, i just wanted to know more. i think that is why i knew early i would go all the way and get a

phd because every time i learned an answer i had to question. jason: for our full interview, check out our extra podcast wherever you download podcasts and bloomberg.com. carol: in the business section, how a small family run grocery in rochester, new york has found a cultlike following. jason: and you never would have heard of them if you live outside the northeast or mid-atlantic. and check this out, we've heard of it, if you are not inside his geographic concentration, maybe you haven't. carol: and it how they are trying to slowly expand.

the red are their existing locations, yellow is planned, including one opening here in the brooklyn navy yard market. but they have been so concentrated and they are slowly spreading out. jason: moving south into publix territory. carol: we got more details from our reporter. >> imagine you combine the breadth and size of a walmart, the product quality of a whole foods, and the quirky kooky appeal of trader joe's. carol: triple threat. >> exactly. i'm looking at what companies are, you never want to say immune, but who are the most resistant. and they are more than anyone else because of the experience they deliver.

carol: many are publicly held, this is not. >> blink and you miss it, nine billion in sales, 98 stores, private, family run for four generations. fewer stores than walmart has in new york alone. they are often like what is a wegmans? why are people camping out the night before they open a store? but you really do have to experience it, you have to be in the store, interact with the employees who are so well-trained, look at the food displays, and then look at the prices, which are no higher than your average supermarket. that is what is so special, it

is not like some haute cuisine. carol: $30 watermelon. >> you can get your coke and your:'s, but you can also sit down and have a restaurant quality meal. jason: and they are coming to brooklyn, a bold expansion. the navy yard. >> a lot of new yorkers don't even know where that is. carol: where? >> the northwest quarter, it used to be the place for shipbuilding. but it was decommissioned as we no longer need it, and then it just sort of lay vacant. and in the city took over, but where the wegmans is going is this one area in a corner of the yard called admiral's row. that had been completely desolated, it was an eyesore. people were afraid to walk past it. eventually, in 2015, the city entity that manages the navy yard awarded the development

contract to doug steiner, you might know him from steiner studios, the massive film production studio also in the navy yard. he had worked with wegmans once or twice, so he knew that, new they would be a great tenant. but the challenge is wegmans has never been in a major metro area. they have stores on the outskirts of boston, stores in rochester. but rochester is not brooklyn. carol: and pursuits, we have a new kind of cocktail. jason: they call them listening bars. carol: let's get all the facts from our editor. >> the opener is about listening bars. you have drinks and food, but the primary purchase is to listen to music. and if you want to try one out, you can. they had just built public records for a new place where a beautiful, lofty space.

you go and check while he would your friends and with the vinyl. jason: and you talk about the volume of voices and the volume of music, kind of needs to be a balance in a way that is refreshing to those of us of a certain age who are tired of going and yelling at dining companions. >> are restaurant critic in london loves to go into restaurants with a decibel meter, because restaurants are getting loud. they played music loud to get over the din, then you have to shout over the music. when we get the story, this is the first time i have learned about listening bars, but a lot of people on my team are cooler and had known about it. you got to the bar, are you not like to allowed to talk? and no, you can talk. because of the panels and sound

system, it is a pleasure. jason: as a consumer and connoisseur of so many new trends, why now? >> it is one of those things we learned from the japanese, actually. there is a bar in oakland where the owners were in tokyo and saw these kind of bars. it is in a certain district, one that they really loved. they said i can't believe it does not exist in new york or in america. it should be a place to go and really get a break, which is what bars sort of are. this is what they are. and while it might be expensive for you too invested in your house, it is another way to

appreciate music. carol: "bloomberg: businessweek." is available on newsstands now. jason: and on our mobile app. what is your must-read? carol: i love the massive oil story on wegmans, i knew it from visiting my mother in law most don't know this chain. they have figured out how to do it well. jason: their customers love it, the employees love it, it is an amazing tale. carol: i know your favorite story. jason: the cover story for the search for gold. they are one of my all-time favorite journalists, full stop. it is so well told of a story about hope and technology and ultimately about human nature. carol: it ain't over either. you can find more stories on businessweek.com. jason: and check out our daily podcast available in itunes, soundcloud, and bloomberg.com.

carol: more bloomberg television starts now. ♪

♪ announcer: the following is a paid program. the opinions and views expressed do not reflect the views of bloomberg lp, its affiliates or its employees. ♪ announcer: the following program is sponsored by operation smile. every year hundreds of thousands of children are born with cleft lip and/or cleft palet. >> why should any child anywhere on this planet live a life of misery? >> a lot of people think that children born with these deformities are cursed. imagine a life alone.