tv Bloomberg Business Week Bloomberg July 10, 2016 8:00am-9:01am EDT
carol: welcome to "bloomberg businessweek." we are inside the magazine headquarters in new york city. target taps toddlers, colossal debt, and a puerto rican murder mystery. that's all ahead on "bloomberg businessweek." ♪ carol: i'm with the magazine editor. ellen, you guys take a look at the airbus a3 80. it is a huge airplane but is it too big for its own good? ellen: it may be too big. it's enormous and very luxurious.
it has a sweeping staircase going up to a second deck. they make you drinks. it is mammoth and it competes like ther jumbo jets 747. but big airplanes are not as an fashion as they once were. everyone is looking for fuel efficiency. and the main customers turned out to the emirates and a lot of their other orders are not coming through. what airlines are looking for now are the small jets of a hold smaller numbers of people, that are more flexible, work with the hub system better, more fuel-efficient. i mean, it is a big plane that was envisioned 20 years ago by people no longer there. carol: it's in some years and money developing these planes. airbus is kind of stuck with it and they are trying to make their money back. ellen: they are stuck because at this point if they say they are
going to stop, they have plans in light of bill these things. they have employees building these things and they have orders outstanding. and the resale value of the planes already sold would go way down. so, they are kind of stuck. carol: it's also a big problem in italy. this is in the global economic section, the international cover story. you look at the amount of debt in the city of rome and italy overall. ellen: it's an enormous amount of debt. you think about greece. they are overwhelmed with debt. really italy is right behind. and of course, in the last few weeks people and been talking about brexit. but italy is coming up as the next headache for europe. carol: the debt has been around for decades. so it is funny you say the next decade. ellen: it has been around for so long that some of because all the way back to the 1960's. the new mayor of rome, she is
from this new party called the five-star movement. she made the debt a big issue. she is saying, why hasn't this been restructured? they are paying much higher interest rates than they would if they restructured. the party is using this as a weapon against the prime minister. carol: it's interesting to see a newer party coming in a power in gaining momentum. ellen: and basically gaining more and more support as it looks like the old establishment has not been able to do anything with the economy and there is big unemployment and people are fed up. carol: speaking of figuring out how to do something, target on the cover story this week. they have got to figure out how to bring back that target that was around years ago. they are targeting kids clothing to do that. ellen: they have figured out that they need several areas if they are going to focus to keep profits up and keep the momentum going.
they have lost a lot of their cool during the recession when they were trying to cut prices and focusing on that because people did not have as much money they were competing with walmart and amazon, etc. they realized they needed some of that cool back. carol: i spoke to susan burke field about this. >> the kids clothing business is important to target for sure. you know it has been a very stable business, kind of a , multibillion-dollar all told. know, it wasn't a business that was broken, but it was a business they thought had a lot more potential. it's true, people come in. you are going to buy granola bars and juice boxes and you might the running couple of t-shirts for your kids because they cost less than five dollars. what target is hoping to do with this new kids line is -- say, the new line
called "cat & jack." we got an inside look over the past few months and how they have designed it. it is with the intent of making target a place for you actually go for the kids close as opposed to something you kind of toss in the cart for doing your shopping. what is interesting is, and i love this story because i feel like toymakers do this all the time. they put toys in front of kids to figure out what works. target went to kids to figure out what designs made sense. instead of just asking kids do you like this are like this, they said why you like it? beyond that, they did a lot of research with a lot of kids. and they have come to an understanding that as parents you might not be too surprised to hear things like girls like science, interested in outer space. >> come on, barbie he geared
that out. >> it doesn't have to be all parts and butterflies and rainbows and eiffel tower. in some ways target was getting up to where probably even designers were as parents, but where it as a mass merchant was not. they are modernizing in that sense. they are trying to break down the gender barriers that they had. you know. there can be dinosaur t-shirts with sequins. and you know, boys might wear colors other than red and blue. in terms of their graphic tees, they have made a big effort. and kids nowadays are not really as competitive, there were more collaborative. so they are considering that. carol: and they want their close to reflect that. susan: and slogans on the t-shirts which will be a big
part of the business. carol: for those that follow the consumer area in the retail area, do they think target is on the right track? susan: i think it's always a risk when you change something that is doing ok. circo and cherokee are the brands that are being phased out and will be replaced by cat and jack. right, so those lines sold. what target is hoping this would do and will sell better. they have said they want it to grow twice as fast as the industry average. it will be a kind of billion-dollar brand from the start just by virtue of what it is replacing. that is pretty big. but yeah, you know, they are involving kids a lot more. they are taking a few risks and they have got to put it in the stores and see what people say. carol: are retailers looking at what target is doing? it is such a competitive landscape. i'm curious if other folks are
kind of watching the target is doing. susan: i think for walmart apparel remains -- they have tried in the past and decided that is not really where they are going to stand out. target has a history of fashionunderstanding trends. they are trying to a play the high-level thinking to the level of kids. sorry kids. i saw it. like to me some of it looked , like j.crew crew cuts but cheaper. that is good. carol: look at how the magazine created this week's cover, i spoke to robert vargas. robert: they are known for you know, their cool designer collaborations. into that business has fallen off. they are trying to give back to that place by now consulting actual kids about what they should do with their kids lines. kids were doing -- they would call kids in and have them take everything from color swatches to designs to patterns.
sort of like the kind of things that someone in fashion would do, like a professional fashion person would do. so we had this idea of taking iconic fashion person that we can think of. carol: that's what i said. that's anna wintour. of vogue. robert: from there we incorporated t-shirts in the target line and header sort of motioning as if she was taking her favorite one. carol: kids rule target. that is part of the cover, right? robert: we embraced the kitty theme. there are a lot of lego themes and a stuffed bunny. so we just went full child. carol: what is it like working with kids in doing this?
robert: fortunately or unfortunately was not at the shoot. but she is a professional. they went to a casting agency and found her. from what i heard from the photo editor she was very great. carol: there is a lot of white. i think if you goo a fashion shoot or something, that is what you see so much. robert: we even took inspiration from the devil wears product -- prada, the furniture was very sleek and mirrored the effect. carol: up next the mystery behind the murder of a bank executive in puerto rico. and how staples may bring home the olympic gold from rio. and why bernie sanders seems unwilling and unable to end his failed campaign for the democratic nomination. all that ahead on "bloomberg businessweek." ♪
♪ carol: welcome back to "bloomberg businessweek." you can find us on radio on sirius xm channel 119. in the features section a story that resided tele-novella. a bank executive gunned down on a bridge. rumors of pagan ritual and secret payments. you write about memories. who is he. >> he is a banker from new jersey. he had a spirited regional banks across united states. in 2011 he was found by headhunters and went to work at a bank in puerto rico as its number two executive. carol: this was a troubled bank? zeke: they had been battered by the decline of the puerto rican economy. they were just four years
removed from being bailed out by a group of wall street investors. maurice was there to try to turn things around, get the operations in puerto rico in order. carol: he uncovered some things and he questioned him was going on. zeke: he, according to lawsuits filed later, he has some disputes with other people at at the bank and he thought there were inflated payments to contractors. but he did not have it chance to pursue this because after just a few months of working there he was murdered. carol: driving home one day. zeke: he was driving on a busy highway, rush-hour. someone pulled up alongside his lexus and fired at least nine shots. hit him and he died. carol: the investigation is still ongoing. i mean what are they thinking , about what happened to him? zeke: the fbi has not said. they said they are close to solving the case but they want a -- will not say exactly which
way they are leaning. what i investigated was his widow, marissa, a few years a lawsuit claiming his death was connected to fraud he uncovered at the bank. what i found was people involved in the investigation say maybe there was something to her theory. and that what maurice discovered may have led to his death. carol: in terms of after his death, there were investigations and things came to light, including an interesting religion followed by a lot of folks in puerto rico. it seemed to have maybe a little bit of a role here. zeke: after dural went bankrupt last year and were reports in the local papers saying people have practiced santeria at the bank and conducted rituals to try to bring the bank good luck. santeria is a popular religion in puerto rico. one of the main powerful rituals you can do is sacrifice an
animal to the gods. i found this at first a little far-fetched this would happen of the bank, but after talking to a bunch of ex-employees they are adamant it did happen. carol: there was a ceo at the time who was obviously his boss. zeke: the next ceo that came from ge had dabbled in santeria. he says this is not true, but the ex-employees say his secretary was the one who kind of introduced the religion to others at the bank. carol: and religion not a bad thing, but there were some interesting rituals that might have happened at the company. zeke: the strangest part is that apparently, at least according
ex-employee, some of the banks employees brought a kamen, a mini alligator into the boardroom and conducted a ritual to ensure that the bank would get a bailout it was looking for at that time from wall street investors. and apparently whatever they did worked, because the money did come through. carol: there are a lot of interesting moving parts to this story and we are waiting to figure out what happened. zeke: i hope the fbi solve the case soon. carol: and they are looking into it? right? zeke: they are looking for clues. maurice's widow marissa has announced a reward. the fbi is also getting a reward for information that leads to an arrest. carol: staples makes a successful olympic bid. ♪
♪ carol: welcome back. david gura is on assignment this week. how staples may end up bringing home olympic gold this summer. i spoke to evan about the company's road to rio. evan: staples is an underground juggernaut to india olympic merchandise and apparel world. they are one of two companies that essentially has exclusive rights to make all the cobranded olympic apparel for sponsors. we are talking about t-shirts that visa gives its employers -- employees with the olympic rings and visa logo. sponsored athletes from hershey's is wearing a shirt. all that stuff is made by staples. it gets weirder.
there are water bottles, hats. visa is making a six foot surfboard provided by staples. they do the entire back and for this stuff. carol: there are a ton of a big sponsors. staples is responsible for all that merchandise connected with it. evan: there are 40 u.s. olympic sponsors. are the only two big ones in this space. for olympics, they are the only two. carol: how is it different? i'm thinking about the opening ceremonies and they were in ralph lauren. that is different? evan: ralph lauren and 90 our exclusive sponsors. they are paying a lot for the athletes to whether things at the opening ceremony. nike is paying a lot for them to where the loungewear, etc., in the olympic village.
you will see it everywhere around the games, leading up to the games, and on the ground there are huge delegations from all these sponsors. they use it as an opportunity to reward employees. they will do sweepstakes, they will bring down vips and clients. staples handles all that stuff they will be wearing. they handle the signage that has both logos on it. it is a huge business. they will make over $20 million -- over 20 million pieces of a -- of olympic merchandise in this cycle. this is a huge part of what staples does now. almost 40% of their business. staples did $20 billion in business last year, sales. the b to b part was $8.6 billion. so 40% of the overall business. injured her. i think of them as filofax's and desk chairs. carol: right.
the eye need a ream of paper kind of thing. when did they get into this business? evan: they acquired corporate express about 10 years ago. $4.3 billion acquisition. that really kind of vault of them into this world. now they are the bullet -- biggest promotional company in the world. they deal with half of the fortune 1000 companies. 24 hour fitness, another u.s. olympic sponsor, staples makes all their employee clothing. they supply all the supplies for the janitors. there is obviously printing supplies and things like that. the gyms have day care centers. all the toys are provided by staples. carol: coming up, a setback for the white house when it comes to unions and why bernie sanders is not throwing in the towel. ♪
♪ carol: welcome back. we are inside the magazine's headquarters in new york city. still ahead, bernie sanders just will not quit. who owns your fingerprints? and even the wealthiest families sometimes can't hide for the tax man. that's all ahead on "bloomberg businessweek." ♪ carol: i'm here with editor ellen pollack. there are many more must reads this week. in the markets and finance section you talk about a company that's going after high-frequency traders and using interesting techniques to do so. ellen: it's called renaissance technologies. they are a successful trading firm. they actually patented a new way of treating really quickly. -- trading really quickly. it is unusual for one of these firms to patent something because it means they are going public with it, but they decided it's more important to protect it they and to hide it.
it involves algorithms and atomic clocks. it's really, really complex and technical. carol: we care about it because in terms of the volume on wall street, it is a lot. ellen: it is half of the trading in u.s. stocks is high-frequency traders. there is a lot of competition. it is controversial because some people think it means that retail investors and others who are not as fast are at a disadvantage. carol: let's talk about the politics and policy section. you guys talk about donald trump and he has a bit of a fight going on with the u.s. chamber of commerce, which is interesting because the chamber of commerce support for public and candidates. ellen: it's very unusual to the chamber is taking umbrage at something ever public in candidate for president is saying. and, trump has been very vocal about the trade deals that are now in place. nafta, obviously an old trade deal. carol: he doesn't like a lot of
trade deals. ellen: and he doesn't like tpp which is coming up and has a lot of support. he thinks he can negotiate them better. he thinks there should be more trade litigation. he just thinks the united states is not taking care of business. carol: he talked about china and the wto. he thinks there should be penalties, right, when people do not abide by the rules. ellen: and he -- whether that will work is questionable because i have been some studies that show even after there is litigation in these trade organizations they are often -- it is not more advantageous for the country that is suing. carol: let's talk about the opening remarks and bernie sanders. because he can't seem to walk away. ellen: he can't. and we call it bern out. ] iggling
we thought we were clever. we basically talk about why bernie sanders cannot bring himself to admit defeat and embrace the democratic party and hillary clinton. and what josh green, our author says is that this is the way he has always operated. carol: you mentioned joshua green. josh: the thing that puzzled so many democrats and alarm liberals is that he has not embraced her the way the runner-up usually does when you get to this point in a race. not only has he declined to endorse her, he is out there often attacking her and sending mixed signals that suggests he does not want to go through and follow the protocol we usually see where the front runner kind of passes the torch to the nominee, gets the speaking slot of the convention, and then can use that positioning to exert some influence on where his party and nominee go in the future. sanders is just wiping his hands of that as far as we can tell. carol: what is wrong with bernie sanders?
why can't he end his campaign in a graceful way? josh: that is the question everyone is asking. and what i say in this piece is if you look at his personal history and political style, it should not be that much of a surprise. sanders has been in congress for 25 years. he has very few tangible achievements to show during that time because he has always stood outside the party system and criticized it the same way he has the campaign trail. sanders was an independent until the eve of the campaign. he only register to become a democrat because he thought he gave him the best shot at the white house.
the problem sanders has in the problem democrats have with sanders is that the ordinary enticements that are offered to a runner-up like sanders, which is basically the idea that you have got to be loyal to the party and you will be able to advance your standing in the party if you go along gracefully, they don't really have any pull on sanders, who it really views himself as an independent. carol: his supporters have loved him because he is kind of taking back against his own party or he has up to this point. that is why he has been so appealing. but it's also complicating him unwinding himself from this. josh: not just unwinding himself but being able to use the substantial political capital he had during the primary. he won 22 states. he got over 12 million votes. an out of nowhere power in the democratic party he could have used that position to extract real meaningful concessions from hillary clinton if he had been willing to endorse her on the eve of the california primary when it was clear he was probably not going to be the nominee. but the clinton folks were still worried about the possibility he could win and make her look bad.
if sanders had wanted to, he could have secured clinton commitments to certain pieces of legislation or maybe said i have a handful of key staffers i want to have important roles in your administration. usually you get those kind of concessions if you're willing to negotiate. but sanders' style as a political candidate and also as a congressman has been to absolutely not negotiate. that is thrilling for a lot of people that vote for him, but it makes a very ineffective as a politician at this stage we are in right now. carol: you say it's no accident that he, bernie sanders, through fewer endorsements from his congressional colleagues and ted cruz. it's hard to get your head around, but it gives you some if here. josh: what sanders did for 25 years was an independent. he caucused for the democratic party. he availed himself of all the perks that come with that. he got senior positions even though he was not technically a democrat, but he did not what it raise money for the party and do the sorts of things that
ordinary democrats and republicans do. i think that bread the a little bit of the reasons meant. but the style of politics was not the kind of buckled down and negotiate to get incremental advances on bills and laws he wanted past. it was to stand apart from the system and criticize everybody from a position of moral righteousness and say you guys , you know, are all corrupt. the same speech we heard him give on the campaign trail. that does not really endear you to the democratic colleagues. if that is the basis of your run for president. carol: courts deal a setback to president obama and unions. i spoke with allison hoffman. the labor secretary announced a new regulation that would require companies to disclose any time they hire consultants to advise them on strategies for blocking unionization efforts. the regulation was set to go into effect but a group of consultants and business groups and ten states have sued to block it. a judge in texas issued an injunction nationwide.
carol: this ruling by the obama administration seems pro-union. is it? how do people see it? >> it's an extraordinary step in many ways. there has been a law on the books that requires companies to disclose when they actually bring consultants into the building to be directly with workers who are being lobbied by a union and organized by a union. what companies don't have to do right now is disclose when they are just paying advisors. but those advisors can give specific strategy talks and coach supervisors who then in turn meet with employees directly. what the obama administration says is that is not fair and the union's essay, that is not fair. equalt to be on and footing. we have to disclose our spending so the company should too. carol: what is the argument
against it? >> what they are saying is this is not speech you are treating equally. this is an infringement of our first amendment rights. we are allowed to talk about whatever we want behind closed doors. and if we want to spend this money, we should be allowed to. they are not meeting directly with the workers so why should anybody know what we are spending. carol: there is some litigation going on? >> there is litigation in three different states. one in texas, one in minnesota, and one in arkansas. the texas case is the one out front. the judge has frozen the entire program, which because we are in the last few months of the administration is putting it in great danger of never being activated. there was another judge in minnesota that said i would not put an injunction on this but i really think it is a nonsense regulation. he actually used the word incoherent in one of his rulings. they have not said whether they will challenge the injunction yet, but they only have until
♪ carol: welcome back to "bloomberg businessweek." you can find us on radio on sirious xm channel 119, a.m. 1130 in new york, 1200 in boston, 99.1 fm in washington. bay area.960 in the why hillary clinton and donald trump need pandora's listeners. tim: this election will be very important to reach latino voters
and pandora is an important way to do that. one in four of their customers are latino. it's an important and useful tool to reach that audience. carol: and they have a whole what? political division within pandora that is targeting latinos and african-americans? tim: they have a political sales team that can help the campaign reach various demographics around the country. latinos are part of that. i look at a campaign that was in 2014 and they used pandora data to target various communities in florida. in that campaign it was helpful in turning out victory for them. carol: it's important when you look at the latino voters, right? because i think they are expecting a record number of latino eligible voters this time around. and in some cases in swing states it's really important. tim: a lot of those new voters will be millennials. and the data would show that the millennials among the hispanic communities are more likely than other groups to be using their mobile phones to consume media.
and so this is a good way to , reach them. it is also -- pandora is a perfect accommodation because the latino community in general is a big user of radio and in a consumer of music. the kind of combination of streaming radio on those mobile devices is really hitting a sweet spot in the community. carol: and pandora has been targeting the latin community for four or five years. hillary clinton, donald trump. trump not doing a lot of ad spend when it comes to traditional media. but hillary you is making use of pandora? tim: priorities usa already has ads often places like florida. up in june hitting donald trump for comments he made about a judge with mexican heritage. and so we are kind of expecting to see more of that. the indication is that they will be hitting the hispanic community very hard. they have $35 million budgeted
for digital ads and it's going after the spanish-speaking voting population. carol: and the technology section, a look at the fight to control biometric information. i spoke with jim lawrence. what is this act? june: it's one of the few laws that deals with how private companies can use biometric information. it's an illinois law passed in 2008. it seems like a long time ago. it basically says you have to tell consumers when you're going to collective biometric information, tell them how you will use it. you can't sell it and you have to tell them when he will destroy it. carol: is that a crazy document that's really fine print, that what i am putting my fingerprint i have no idea what i just agreed to? dune: i think it's still in development. the idea is you get more --licit consent they and
than just signing off on some huge amount of small print. carol: how do companies want to use this biometric information? whether it's your fingerprint, or retinal screening. dune: a lot of the pushes for security reasons because there have been so many problems with stolen identity. biometrics are more secure. but then that raises its own security issue. once your fingerprint is stolen or your voice print or your iris scan, it's hard to change. we know how hard it is secure this information. any kind of financial or valuable data from identity thieves. carol: the big worry is what? what a consumer groups worried about? dune: the big worry is the security issue. once it is stolen, you were kind of screwed. privacy groups are just generally saying this is very intimate information and when he to be very careful with it and no one is watching out for this. carol: and there are several lawsuits brought against well-known tech companies. we were talking about google and facebook or shutterfly. there are a lot of companies.
>> this is the first test of that illinois law. one of just two or three laws that look at this issue and try to safeguard the consumer privacy. it is very untested. but so far these lawsuits have held up pretty well. they have survived motions to dismiss, the first step. carol: what do regulators say? why isn't there some bigger, broader measure coming out of lawmakers in congress? dune: part of it is that the government sees a lot of value in being able to connect -- collect biometric data for
security purposes. the whole privacy issue, on the government side they don't it be with the privacy issue. it complicates their efforts to use this how they want to use this. carol: and companies don't want to have their hands tied too much? dune: it is a pain. it would require them to do more than they do now. right now our data is money in the bank for them. carol: just another example if you like where the regulatory environment is like keeping up with technology. dune: it is hard to keep up with technology. carol: the art world dynasty fighting for a half $1 billion tax bill. and a global fitness empire. ♪
carol: and they are huge? right? >> arguably the most famous art dealers in western europe and the united states. they have locations in the work -- new york and paris. they used to have one in london and buenos aires. they are everywhere. carol: if you are wealthy and wanted to buy art, he often went through them. your story says how did this get so ugly? i mean, what happened? james: the patriarchs died and his sons claimed their entire net worth was around $45 million. a huge amount except for the fact that a suit by their stepmother uncovered the fact that instead of being worth $45 million the family was worth billions of dollars. a big difference. and senate having a tax bill around 17 million euros, they are now facing a tax bill of around 445 million euros.
they have to pay the french government. carol: how did they think they were going to cover this and keep this all hidden? didn't they think you would eventually come out? james: the amazing thing is they got away with it. only after they paid their taxes by giving a sculpture to the french government did then they have to kind of go back to trial because their stepmother opened a criminal investigation against them. it is not how do they think they were going to get away with this, it's they got away with it and then they got screwed later. it's a carol: it's a much bigger financial empire. james: they have a 75,000 acre ranch in kenya. they have a townhouse in new york worth around $100 million. they have a mansion in central paris. they used to be the owners of the largest private home in metropolitan paris. these are people of extraordinary wealth.
carol: and then there is the art. james: as part of this lawsuit or criminal prosecution against the family a $1.1 billion trust comprised of paintings and other artworks wasn't covered. these are kind of hidden away in various parts of the world. most of it is in switzerland and the u.s. carol: what was the most interesting part of doing this story? james: it was the history of it. we try to find the sources of the family's wealth. all you have to do is look on the walls of the metropolitan museum of art to see how much money these people made.
they sold the painting in 1918 for $226,000. adjust that, that's worth $2 billion alone today. carol: what may be the beginning of a fitness empire. i'm talking about kayla and her bikini boot camp. >> she is basically building a global fitness empire, one burpie at a time. she is a 25-year-old from australia and has 5.3 million instagram followers. eight times more than jillian michaels. mightitness celebrity you know. she basically built this empire recommending that women exercise really hard, work out really hard, and she basically says riding the elliptical and reading people magazine is not going to cut it. what is happening is she is very smart and gotten a lot of clients in these before and after photos on instagram. women spend weeks and weeks working on these photos, posting them, and they are building kayla'army -- kayla's army.
about 150,000 women in it. carol: her fitness app has generated more revenue than any other out there? >> it's beating nike, under armour. it is huge. she has been able to generate this tremendous following, incredible loyalty for the real message of positivity which is everyone looks great. you are beautiful, doing a great job. that kale salad, you might want to eat it but it will make you look beautiful. carol: and she doesn't leave her native australia often? >> when she does, she goes to cities like l.a. she was recently in new york. there were 4000 women in new york. some fluid from places like toronto, washington, d.c. just to attend this workout. carol: but she does not believe in drinking wine? >> she does a fitness guide and a food guide. people that worked in the food guide sent the one fight they have of her was about alcohol. he says if you are trying to get
♪ >> i am cory johnson in for emily chang it, and this is the best of "bloomberg west." all of the top interviews from this week in technology. buzz.l dig into the idaho plus, tesla feeling the heat. highway traffic and ministration is investing the second terrifying crash involving the tesla autopilot. we will discuss.