tv Bloomberg Business Week Bloomberg February 13, 2016 9:30pm-10:01pm EST
>> definitely a lot of topical stories. something that caught my attention had to do with amazon, and their quest to rule the world. there is a report they had out for a few years, and internal report. they want to be big in terms of delivery. going head-to-head with the likes of ups, and alibaba, --filling the filmglobally fulfillment space globally. another thing about the canadian dollars, the weakest, and the effect that this having on the national hockey league.
carol: currency causing a lot of problems around the globe. diapers, you know them. i know them. we have had kids. adult diapers, and this is a business that is growing rapidly and outpacing the diapers you see for kids. interesting area, stranger, but a growth business. i was going to talk about crude oil. it is plummeting more than 70% from its 2014 high, the s&p 500 off to its worst start since 2008. david: oil and stocks have developed an unhealthy, codependent relationship. carol: in this week's cover story, peter coy has that story for us. bad time for it to be breaking up, i don't know. this correlation has investors confused. >> we saw it last week, the amazing decline in oil that seemed to alarm investors and they sold stocks. it is continuing this trend we have seen all year long, an unhealthy, codependent relationship just in time for valentine's day. i think it is overdone.
carol: the relationship? >> people should not be responding this way. first of all, i don't think the fall in oil is justified. it is just overshot. we are at levels now where people can't make money, and drilling is going away. eventually production will fall and the price will shoot right back up again, but even leaving that aside, if you assume oil prices stay down here, it does not justify the decline and stocks we have seen. i think it is because people are assuming that if oil goes down, it must be evidence that there is a problem in the demand side of the global economy. if people don't consume oil, that will be bad for global growth, which will hurt
corporate profits, which will hurt the s&p. that's not what were seeing here. carol: you break down statistics and numbers and talk about supply and demand. people are using more oil, aren't they? >> they are people other than using less oil, they are using more. you go from the third quarter of 2015, 2013 through the third quarter of 2015, the most recent data available, the demand for oil globally went up 3.1 million barrels per day. the only reason the price is down is that the supply grew by 5 million barrels a day, so the issue with the low price of oil is a supply problem, not a demand problem that everybody seems to be worried about. david: you talk to investors and look at how financial stocks have done lately, and you look at banks, who are worried that they have lent money to these energy companies. they are over extended. is that unfounded? >> i think that is overdone as well. i'm glad you brought it up.
if you look at the data -- let's take the u.s. and look at the problem areas, russia, venezuela, other high-cost energy producing nations, the u.s. is not lending money to those countries. the u.s., yes there is some , lending going on to the shale producers in the u.s., but if you look at them as a share of the total bank lending, it is tiny. i didn't interview with bca research that says that most of those loans will eventually get repaid, even if the companies have to go through bankruptcy to do it. carol: what's interesting is the correlation in terms of we typically get an oil spike before a recession. >> exactly. if we had oil spiking, then i would be worried about a recession. it is quite common for a
recession to follow a huge increase. here we have a cut in the price of oil, people are saving money at the pump, they have more money to spend, and we're suddenly worried about a recession. what is wrong here? carol: it doesn't make sense. david: there is a psychic effect. the keyboarding about these levels. -- we keep worrying about these levels. this week we saw oil go below $28 a barrel, $27 a barrel, people get spooked when that happens. how does the market shake that? >> it is a psychological factor, but i would counter it with another psychological factor that the markets aren't paying attention to, but ordinary americans are. they are pulling up to the pump and seeing prices they have not seen in a long time and are feeling good about that, helping consumer confidence, spending, and eventually helps the economy. carol: what about the capital expenditures by the oil companies. these major integrated oil companies spend a lot of money when it comes to capital expenditures. if they are pulling back, you feel that. >> we have a quote in the story from somebody saying that total
reduction in capital expenditure is something on the order of $1 trillion. but you have to lay that against the overall size of capital spending in all sectors of the economy, including the ones energized by the cheaper cost of oil and will be able to invest so it is not a zero-sum game more. so it is not a zero-sum game here. carol: you are the optimist. >> i'm trying to be. david: last question, how do you as an investor shake this? -- therell lose heart are all these reasons why the u.s. economy is doing well, but this still looms on the horizon. is it possible to be an investor and ignore what you are seeing in oil prices? >> if you are a long-term investor, and i would think most people should be long-term investors, then you want to be able to look through the ups and downs of the market. oil gyrates, it always has and always will. it is the nature of oil to be like that. stocks are also volatile.
if you are hanging in for the long term, you want to think about what is the underlying health of america and the other countries where you are putting your money, and if you are confident in that, stay invested. carol: on this valentine's day weekend, time for the love relationship to be over? >> yes. it is time to break that intimate connection between oil and stocks. carol: it is a great story. a great cover. david: check it out online where it is animated. >> thank you so much. you can read peter's story and the latest edition of bloomberg "businessweek". it is available online and on newsstands. david: coming up what's ahead , for viacom? we will take a look at the details when "businessweek" on bloomberg television returns. ♪
david: a changing of the guard at cbs and viacom. carol: and an end to sumner redstone's reign over a company that he has controlled for 30 years. david: let's talk about the void that sumner redstone's departure leaves. >> this is the moment that people have been waiting for for a long time. there have been all these rumors, conflicting reports, about sumner redstone's health. he is 92 years old, so finally the moment comes where he steps down as chair of cbs and viacom. immediately cbs, no drama, no surprise, les moonves, he is well thought of. he is a ceo elevated to chair. viacom, totally different story. carol: why is it a different
story? >> basically the last year and a half, two years, viacom has been struggling, cable networks, nickelodeon, falling off a cliff. it is not a diversified business. it is the cable channels, plus paramount pictures. as the ratings have fallen, the stock price has gotten crushed, down more than 50% over the past year, and as all that has happened, investors have said , ok, something needs to change. reviewed new management, a new strategy, something. but basically as long as sumner has been in the picture, he is very close with the ceo of viacom, and people are like it's not going to change until something changes with sumner, but as these reports about his health were going along, ok, sometime he will have to step down. there was all this mounting pressure. he cannot handle his duties, and then finally this moment comes, everyone is watching, and for the first hour or two look like
-- it looked like there was going to be a shakeup because his daughter, sherri redstone, comes out immediately with a statement essentially saying that i don't want philippe dauman taking over his chair. david: there have been so many reports about his health. you write about a moment in an where theynference show a still from "weekend at bernie's," but what do we know definitively about how he is doing and why it took so long to happen? >> there are still conflicting reports. nobody, no reporter has set down with sumner for years now. meantime, he has missed shareholders meetings, has not been out there public. david: he sounded weird. >> yeah, so on one hand you had people like philippe dumont and say he has job
problems, he does not get around to well, but it's still mentally sharp as a tack. he is able to make his own care decisions. and at the same time you have this other portrait of his health which came out in this lawsuit in los angeles. his former girlfriend filed this lawsuit this past fall in november, and it gave this very grim, dire portrait of not only his physical health, but she alleged that he is not there mentally as well. carroll: it is amazing if you think about regulators. this is a publicly held company. there is a fiduciary responsibility to investors. you wonder how long may be he , has been out of it, and other people have not been talking about it. >> right, so you have had investors, and activist investors came out in january asset management, and put this 99 page -- totally laying out the case against viacom, against philippe dauman, saying you
cannot have sumner as chairman of this company anymore and putting the pressure on. other investors have joined in and saying, what do we really know about him? so there has been pressure, and this is the first moment where finally he is stepping down as chair. he is still the majority controlling owner of both viacom and cbs, so this is not over yet by any means. david: you have investors agitating for changes. how much is the leadership of viacom -- how much are we going to see a reflection of that leadership change in how viacom is operating and what shape is that company in today? comedy central is not what it is, mtv is not what it is. are there plans to change it? >> there has been a lot of talk for years now. philippe dauman had his first earning call this week, and his reaction sounded like a lot more of the same. we're doing some stuff with
snapchat, we are selling ad inventory. you're listening to that and saying that that is going to cannibalize more of the audience. carol: this does not turn the boat around. >> yes. so it is hard to imagine what will happen, although at this point the share prices dropped so low that you think they would be a good target for acquisition. carroll: it is funny that you bring that up, because you point out in the story, and this is a number that stood out, how much philippe dauman has been paid. they have made a lot of money as the share price has gone down. >> yeah, some people were very upset when his compensation package came out this year, where it turns out he is getting paid a total compensation above $50 million, 20% more than last year while the revenue is down, stocks are down, profits down, domestic advertising revenue has been down.
they are having problem with their affiliate fees and negotiations. they had this big negotiation with dish looming. there has been trouble on all fronts. yes, in part, it is true that the viewing behavior of young people has changed a lot since mtv and comedy central became these dominant brands. now kids are going on youtube, have all these other options, netflix, but at the same time you look at the company and they have had a decade of a lot of profits to figure out acquisitions. what have they done under philippe dauman? his strategy has been plowing profits into share buybacks. david: people calling it a lost decade. >> yeah, in the meantime in retrospect it seems like there would have been better ways to use those profits. also, at the same time paramount , has had a very slim slate of movies, too, so they have been trying to bulk that up, trying
to do tv production in addition to movie production, but that also feels like they are a little bit slow to get into that. david: such a great piece. thank you so much. carol: so much more to come. david: coming up, this week's etc. section in the magazine. carol: we talk about an up-and-coming company and its move to be the patagonia of hunting gear. we have the details when bloomberg tv returns. ♪
carol: for hillary clinton and bernie sanders, the next out of -- battleground will be nevada and south carolina. we have hillary appearing at a town hall in >> august. we have got a proven track record of doing what works better, and now we just need another democratic president to build on the successes of these two terms, because otherwise we are just going back to that land of trickle-down economics, one of the worst ideas of the 1980's, along with shoulder pads and big hair and stuff like that. david: josh joins us now with conversation about this campaign. talk to us about robby mook, the head of hillary clinton's campaign, a man who has a lot of experience in this day.
>> that's right, in 2008 he was running the clinton campaign in nevada and he fought to arguably a draw with obama, getting 600 more votes, but the obama campaign got more delegates. robby mook took a community-organized approach that got noticed by the clintons. his elevation to run the whole campaign this time is a vote of confidence in his style, his no-drama style, but also the strategy he approached it with, which now the team that is picking up where he left off in nevada, trying to go the distance against bernie sanders. carol: talk to us about the nuances of nevada and his approach. why it works. >> one of the things is that the
person running the campaign this time told me that she looked at in 2008 as an area where they lost, and that led to them not winning overall, is that delegate mass being different. the delegate mass in nevada means a vote in one precinct is not worth the same amount as one in another on caucus day. the obama campaign out to did -- did the clinton campaign in that area, and the clinton campaign has learned from it this time. that is part of why, as i reported the story, you see a real effort from the clinton folks to go outside of the top population centers in the state. you also see them picking up what both the clintons and the obamas did last time, a focus on a volunteer-centered approach, where you just on have volunteers who come in for a night and make phone calls.
you have volunteers take a sense of ownership of a particular group of voters, take ownership of tasks and central responsibilities on caucus day, take ownership of other volunteers, bringing them in and overseeing them, and so a lot of the life and responsibility of the campaign rests with those volunteers, and a lot of work of the staff is about leading and developing those volunteers. carol: josh, thank you for that. we appreciate it. >> thank you very much. carol: now it is time to take a look at the etc. part of the magazine. it is the back of the book stories in bloomberg businessweek. for that we bring in brett, who edited the section. david: speaking of the cover story you have a guy wearing , camouflage that i have not seen before, a new brand of hunting gear. >> the company was started by a guy named jason who spent a little time in the nfl. on weekends he was going on hunting trips and found himself often wearing a lot of name brands, but having to wrap himself in cheap, heavy camouflage. david: like patagonia with a
generic camouflage on top. >> exactly. after a while he thought he could do better. he launched the company that he launched with a friend from college. they ended up selling the company and launched the new company. , iol, when i read about it thought it couldn't be this big a market. but it it is a real sizable market. david: yeah, hunting is huge. there are 50 million people a year who apply for hunting licenses, 50 million people year. and the industry, apparel and gear, takes in $23 billion a year. it is huge, so there are so many business opportunities. david: any of these companies, who have been reluctant to embrace hunting of any stripe really. >> the market has seen the hunter as overweight and underpaid, and it is a market they haven't wanted to get into.
there really was an opening there. the hunting gear that was available was really kind of awful. it was not cut for someone who is athletic or who was accustomed to the kind of performance where that we are, with labels like north face, columbia, patagonia. carol: i feel like that is what they are doing for hunting gear. what is it about the materials they use in their approach? they are coming up with their own camouflage patterns? >> most camouflage is a license, generic, everyone knows what it looks like, and that's designed to have you blend in with your surroundings, so if you're in a duck blind for instance you don't want ducks to notice you are there. they do the opposite with her pattern. it is patterned on the african wild dog. predators get so confused by its lines and colors that they run away. they don't know what to make of it, and that is the approach that he took with their camouflage. david: how are they doing in the
business, in terms of where it is distributed? >> it is completely online carol: and that it is different from his first business, right? >> very different. a jacket that might normally go for $450, goes for about $300, which is expensive for camo gear, but not expensive given what is on the market. carol: thank you so much. that does it for this week's edition of "businessweek" on bloomberg television. i am carol massar. david: i am david gura. the latest stories are online and on newsstands. carol: we'll see you again next week for "businessweek" right here on bloomberg television. ♪
♪ david: coming up, the stories that shaped the week around the world. janet yellen speaks on capitol hill. tech and mak media companies see a mixed picture in the year ahead. deutsche bank spends tense days trying to sooth investor anxiety. >> this is a long-term game. we are reacting to traders. rum budget proposals, to primary it has been an eventful , week. >> the democratic bow will be longer and nastier than people thought it would. david: some of the finest minds in business to make sense of market turmoil. >> markets be