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tv   Bloomberg Business Week  Bloomberg  December 31, 2016 7:00am-8:01am EST

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♪ carol: welcome to "bloomberg businessweek". i am carol massar. am oliver renick. another disappointing sign in a disputed south china sea. oliver: all that is ahead on "bloomberg businessweek". ♪ carol: we are with the editor in chief macon murphy of business week. look like they are taking moves that could shore up
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the steel industry. ,> this is one of the concerns this massive oversupply in the steel market, and even though there has been a concerted national domestic policy to address that collect, it hasn't manifested. on the supply side, they are trying to trim that down. that to go down to have the steel price go up to make this supply and demand work for an industry that has been hit hard by massive oversupply. bys he's does show that limiting production, that is having a positive impact and shows signs of progress in terms of bringing that price up and making it more sustainable as an industry. let's talk about transparency as it applies to our president-elect. megan: good luck. be in: donald trump will
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washington, d.c., and you look at the conflict. is in ahat hotel, it famous building, one of the most prime pieces of real estate in washington dc, steps from the white house and pennsylvania avenue. incredible,es were beenand up, and it has recently ruled that he will have to divest his personal interest in this property. the complex is large. to get the price he needs, and the norm ofl, not that city, so whether he will be able to get out at a price that makes sense remains to be seen. this will be a question he faces across a lot of his business interests as we look across the conflict of the trump organization. carol: you also take a look at in terms of the
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cabinet members and the charity foundations they are involved in. megan: we have a lot of very re.lthy people in the one figure has an estimated net worth in excess of $500 million. the education except fo secretary is also incredibly wealthy. so these people have a lot of money. we look at where that charitable giving has gone. there are a lot of the things you would see on the charity circuit, and it is something that will be scrutinized by people coming in, although some won't have confirmation hearings , but it gives a glimpse into the way they spent their own personal money. oliver: it gives insight into
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the different viewpoints of the trump. >> there were two things in our head as we started looking at this, just how rich this group of people is. that is not fall, and already the net worth is about $500 billion. right after the election, trump's had a filing online that had we made a big mistake. guidinge rules nonprofits meant to prevent nonprofit leaders from using charity money to benefit themselves, and that is what the trump foundation said they did. atthought let's take a look the other members of the trump team and where they are giving their money. carol: let's start with steven mnuchin. interesting guy close to my heart because i have written a profile of him. he went from being a classic new york banker to moving to california, not only to run a
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bank but make hollywood investments, so you can see even though dom and trump about the global elite, steven mnuchin, given this clastic coastal elite way where they donate not only to east coast institutions like yale university, new york police , rather new york hospital, and an l.a. fun and associated with the film industry. it is a classic coastal elite. to the inlandmove u.s., where the incoming second lady, the wife of mike pence. tell us about the charities she is involved with. the first lady of the indiana, she had a charitable foundation, and there is no overlap i found between steven mnuchin and mrs. pence when it comes to their giving,
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because she gives, these are $500 to $1000, and one much bigger donation per year. for example, she gave $500 to 1000 dollars to women who drive their own dodge chargers. there is a chapter of the daughters of the american revolution, something called the christ child society of fort wayne, so these are smaller groups in smaller towns. how many for education secretary? >> in addition to just saying here is some money, here is a donation for you, she and her loans to they give nonprofits and they say here is $1 million, two million dollars, or $3 million, and you have to pay us back. oliver: how much are we talking?
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>> they are interest-free, or we found one at 1%. other interesting layer is that these are nonprofits they are connected to. they gave a 5 million loan, some forgiven, some paid back. they loaned 3.5 main dollars to another organization, not interest-free, 1%. we found the west michigan aviation academy, which if you know about betsy, you won't be surprised that that is a charter school. one prediction about, trumps first 100 days as president as president is that it will feature a lot of fighting. >> it seems as though one of the big contests will be between the budget hawks, the one who put
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high priority and shrinking the budget deficit and balancing the budget, paying down the national debt. we have heard that from trump and his followers, but we have heard people who say we have to make america great again, requiring spending and tax cuts. some independent budget analysts 'sve said that trump plan, if you take them at their word, would create some of the biggest budget deficits in history, so i see a big clash coming in donald trump's first 100 days over this issue. oliver: who will be on the other side? paul ryan, we know about, where but heads before, but who are some of the new players? >> a new caucus was formed, the freedom caucus, and that is an
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organization that is on the right hand of the spectrum within the house, and it's singular purpose is to crack down on deficit spending. carol: extreme deficit hawks. >> these were people willing to go to the mat and shut down the government if necessary to prevent overspending, but what is so ironic now, in the last few days, the founder of that caucus, has just become nominated as president-elect trump's office of management and budget chief. carol: he is the guy who, ok, you want to do this policy, this is what it means. the person who started the congressional budget office decades ago sees the job as notch is not just the mechanical balancing of the budget, but a policy person too, so what is going to happen?
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will he stick to his freedom caucus agenda? if so, it would put him in conflict with the people in the pentagon and other parts of the administration, or the tax , or is he going to go along with that agenda in which he has abandoned the freedom caucus? oliver: it seems like trumps liaison maybe somebody that potentially if he came from the other side were trump currently stands, maybe there is a bridge to be built there? >> we don't know. you can imagine a positive outcome, but stepping back, trump seems to have a high tolerance for conflict, and not just conflict with outsiders. oliver: that is a delicate way to put it. >> he is welcoming conflict into the white house. carol: russia's deadly game in the middle east. oliver: can trump convince
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congress to go pro nuclear. ? carol: this is bloomberg. ♪
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carol: welcome back to "bloomberg businessweek". i am carol massar. oliver: i am oliver renick. we talked to carol matlock. carol: russia is on a mission in the middle east. what are they doing to broaden what they are doing beyond syria? that areave interests diplomatic, geopolitical, and commercial, very specifically, they are starting to do a lot more deals in countries across the region, and that would include doing a deal just in the tot few weeks with qatar
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take a stake in russia's biggest oil company. that would include some very major dealmaking in iran, where the sanctions are being lifted and there is a lot of opportunity for oil and gas development in that country. anthe same time, there is effort by russia to rekindle, rebuild relationships with countries such as egypt and libya, where they had more influence in soviet times than they have in recent years. oliver: how much of this is motivated by oil, getting access to regions that do obviously have a lot of oil? russia has not only been involved in these countries, but opec as well. >> obviously russia has a tremendous interest in oil, and so do most of the countries in this region, and that is why russia was key, and vladimir putin played a direct role, speaking by phone, during the recent negotiations that led to
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the agreement between opec and the non-opec countries to curb oil productions to shore up prices. carol: that was pretty significant, that december 10 final agreement to cut production. andeally shows opec non-opec nations are paying attention to what vladimir putin has to say. >> well, yes, absolutely. he is clearly a major player in this, and you know, he think have some ability to bring people together. oliver: speaking of bringing people together, you mentioned that part of vladimir putin strategy is to engender support for his administration and himself by winning little battles. tell us what you mean by that. a it has been observed by number of people, including one of the analysts we spoke to come of conducting small, winnable wars, and that tends to help him
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at home, and we have seen that in chechnya, the separatist rebellion there. formerthat with the soviet republic of georgia, and quite frankly, with the annexation of crimea. t gained him tremendous political support at home. oill: the energy sector, and gas, lng, but it is also about arms because the middle east is an important market when it comes to russian arms sales. >> that's right, and it is growing. ofs lacked off after the end the soviet union, but we look at arms sales in the last few years to the region, they have been significantly more than in previous decades. it tends to go towards countries like algeria, where the wealthy gulf states tend to have arms
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relationships with united states , but i think there will be an effort to sell more arms all across the region. oliver: in the politics and policy section, donald trump signaled he is pro-nuclear power. is it enough to sustain the industry? it is a fairly big deal in the u.s., but not profitable. oliver: when you think about nuclear, it's the last type of energy resource we talk about. we are talking about the polluting stuff for clean stuff. how has it been forgotten over the years? >> three mile island says it all. meltdownhe big nuclear in japan after the earthquake, and that has been a big deal there.
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these plans have been operating fairly quietly for decades now. carol: fairly quietly, but not profitable, which is tough for the companies that run them. there are subsidies that have helped many of the players out. talk us through that. >> one of the date players are really dependent on subsidies, looking particularly at three mile island, a plant the company says it is trying to find a path to profitability for it, but it is this old plant that has this accident associated with it. the question is how much does the government want to do to keep these nuclear plants, which do produce clean power, which everybody says they want, so how much will the government due to keep them alive? you run into the split of what we mean by government. what exactly does
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government intervention look like? precedent, any history we can look at, to see what other power plants have done? has the u.s. demonstrated they are willing to go in and find some funding to keep these places a float? >> the problem is that where all the action is today is not with nuclear, but solar and wind. environmental activists would just assume solar and wind, clean power sources that don't come with the risk of nuclear power. it is hard to convince people in this country to invest in nuclear power. carol: the energy market has changed dramatically in the last couple of years, particularly because of fracking and the ability and abundance if you will and the low cost of natural gas. that has been an impact on the desire or lack thereof of more nuclear power? this creates a catch-22 for
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environmental activists. group that says, hey, we would love to shut down nuclear power. youproblem is that when shut down nuclear power, what fills in behind it is natural gas because it is cheap, plentiful, domestically produced . it is sort of your perfect power source. carol: signs of trouble in apples mack team. oliver: ranchers and environmentalists find common ground when it comes to wolves. this is bloomberg. ♪
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oliver: welcome back to "bloomberg businessweek". i am oliver renick. .arol: i am carol massar you can also listen to us on radio.
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london, and then a share the bloomberg radio plus app. mac division is -- brought apple back. they were close to bankruptcy in the 1990's, and the first imac introduced by steve jobs brought apple back on the scene. a halfe next decade and for so, the ipod, the iphone, and the ipad, and that has led them to forget the makkah little bit. cycles have become linked here. the macbook pro was the first update in over 500 days. their fastest desktop for professionals, has not been updated in over 1000 days.
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the macbook air design is the same design that was introduced in 2010. to be fair, they came out with the retina display they want to replace the air with, but that design has not changed in a very long time. why isn't it getting any love at apple? right, the first and most important thing to know is that apple has a responsibility to its shareholders, employees, and everyone really to come out with new products that feed their theits and revenues, and iphone and ipad are two of apple's highest margin, revenue driving products. 75% of apple revenues in 2016 were from the iphone and ipad, is around 10% of apple's overall revenues, but still an important product to
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apple's bottom line. the problem is that if apple c lessgiving the ma attention, they all sing. if you don't use a mac, maybe you will look at other products from competitors like microsoft or google. apple guy, not an but everybody else in new york uses macs and loves them. >> from a design perspective, there's something to be said if don'ts not broke, fix it, but the question is does continue to change design and innovate to spur sales into the future? these are higher-priced products. ,he average prices are higher so it is important from a revenue and earnings perspective, but the biggest question are the processors, the chips, the speed.
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the pace of technology becomes faster and faster every year, and we are talking about computers for professionals that have not been updated in years, which means their processors, technologies, ports, some are years behind from competitors. carol: where is the lack of push in terms of maybe creating a macbook that has more battery life, faster, a lot more bells and whistles? it is a collaboration, right, they work with the chip companies, or is it internally with an apple that they are not interested in pushing it? >> i would say a lot of engineers on the team and project care about it. inis about getting that push approval and vision from the company senior executives, who are obviously focused on the ipad, iphone, the apple watch, all the products around this ecosystem. l, it is morente
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difficult to make faster processors these days. of my colleagues had a story in business week about how makes a chip, so it is a combination of factors. to your battery life question, apple tried to make a macbook battery, buttter in development, the battery technology failed to some key tests and they were not able to get that new tech out the door in time for the holidays. up next, the app that matches chinese students with american teachers. designerw one fashion is using her unique connection to fight for global equality for women and girls. ♪ with the xfinity tv app,
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oliver: welcome to "bloomberg businessweek". i am oliver renick. i am carol massar. china kids get a connection to a teacher. oliver: all that ahead on "bloomberg businessweek". ♪ megan: we are back with murphy to talk about most read stories. one is about a company there will be doing some teaching abroad for kids in china. it is a great story that
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shows how entrepreneurs are targeting markets in china. one is chinese parents want their children to learn english and are dissatisfied with the current system and how that is being taught. bys company was set up a chinese woman in america, and she did not like the learning system. she thought it was to region. one of her teachers ripped up a comic book she was reading in class. what she has done is set up this online system where chinese parents can have their kids taught by an american teachers $1500 for 21 classes, cost-effective, and does it in an online module of learning. we profile a teacher who is doing these classes online. 8:00orks from 3:00 a.m. to
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a.m. and makes the equivalent of $4000 a month, the same she would make as an adjunct at a university. 10,000 toetting 20,000 applications a month. the growth is phenomenal, unbelievable, and kobe bryant invested in it. that is nothing to sneeze at. you guys take a look at an interesting woman involved in the fashion industry. she has founded a nonprofit and is doing some good things. way toshe looked at a take this nonprofit and add her n skills, looking at women and their role and going to suppliers and companies along the chain that really address the issue of women equality. it is not easy to do. companies, nike, have
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looked at dealing with impoverished migrant workers, but bringing a women's equality issue to the forefront, that has not been vacant fashion. this talks about two women driving that forward. is an adjusting marriage between charity and high in clothing. the material they are making is pretty nice stuff. megan: the reason she got into , so that's where the marriage came in. it shows that in the corners of the business world that don't come to mind as the guiding ares, that many people putting themselves on the line and using their networks to drive sustainability. carol: that is what the issue is all about. oliver: we got more details on this story. >> it happened because of a .oman named henrietta ernst
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she has spent decades working for a number of eight brands, big brands, luxury lines, she ranjust by chance, into this woman who is the head of a global organization to support girls and women's rights , and was so inspired that she said, can i come in and make coffee for you and volunteer? i am really good at making lunches. sheny way possible, because wanted to do something more than be a fashion designer. carol: how did she just run into this woman? >> she read an open letter to hillary clinton by a journalist, and was so inspired that she wrote to this journalist and said when you come to new york, contact me.
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i want to have a lunch in your honor. i will make all the food and you can invite whoever you like. the journalist happen to invite this amazing human rights lawyer who is the global head of equality. oliver: tell us about the organization equality now. what does it do and what are the causes they are championing? with local working women around the world and talking to them about what they stuffeducation for girls, that is hard to talk about like jenna don't you duration, abuse, so they are out there trying to help. carol: a lot of people have great intentions and this idea of wanting to do more, she did create this fashion line and fashion brand. how did she do it? ngo's are not known for their good design necessarily.
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she is upfront about that. she says people will usually by these things out of the goodness of their heart and maybe throw is terrible,h especially with fashion being one of the biggest polluters in the world already. henrietta saw the designs and they made her uncomfortable and she said this is a great idea. i will make something beautiful and use my contacts and making top-quality luxury items, but do and giveis good cause 30% of the profits to equality now. oliver: the profits would be solid because these are high-end items. we are talking hundreds of dollars for scarves, $50 or $60 for shirts. >> it is all relative of course.
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, organicmade with silk cotton, cashmere, all hand-drawn patterns. she really did the same process she would for this brand, and selling it at a somewhat enterprise by selling it exclusively online. carol: the compromise that was forged in washington state. a fantastic is story. it is a great one to read and look at because the photos are incredible. tell us at this stage where exactly does the story take place? >> this takes place in northeastern washington, where there is primarily rural cattle beingng, so wills reintroduced to this part of the state has lots of great environmental impact, but no
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particular pain point for the ranching community, so much of the story is about francine brought these two sides together to mediate a solution to stop killing wolves, but also find ways to appease the ranching communities so that they are not losing their livestock. population had gone down, then that built it back up again, and it became problematic. there is acrimony between the hunters, ranchers, and conservationists. tell us more about francine. give us the background. inshe specializes human-animal conflict haslution, so this is, she done work in other countries, but this is the first time this kind of approach is being tested. brought together stakeholders from the conservationist point of view as well as from the ranchers, and
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this commission kind of came up with a set of ground rules for what can be done to avoid when itwolves, but also is basically justified to kill the wolves. carol: the group is the advisory group trying to figure things out, but were having a hard time doing it on their own. >> right. we sent a photographer who has done a lot of work for national geographic primarily to spend time with the ranchers. one rancher in northeastern washington, but she also went to the wolf sanctuary near seattle, and that is where our big star wolf was shot. carol: francine is interesting, and you detail it in the story. she got all sides together, where they would talk about policy, write come of it then get together for drinks and dinner and they could not talk odyssey and they got to know each other as people, and i
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guess that helps to break the ice and understand the other side's position. part, but that is what is interesting is that some of the measures they made as a , wolves sort of help won't go in places where they see something like a red flag, so there are these simple steps that ranchers can take to make the environment feel uncomfortable enough for the wolves that they will stay away. carol: the devastating consequences of china building bases on reefs in the south china sea. a board game to help you improve your ethical decision-making. this is bloomberg. ♪
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oliver: welcome back to "bloomberg businessweek". i am oliver renick. carol: and i am carol massar. trying to stop the destruction of reefs in the south china sea. oliver: how did you come across what was happening here? >> i used to be based in china, so i tend to follow developments and asia, but the south china sea is one of those conflicts i had not been following. i thought, what are they fighting over? in july, they had a tribunal ruling, the philippines had made a complaint under international all, very unusual, gone on for years, so i read the tribunal ruling about who had what rights in the south china sea and what was going on. there was so much about the environment, and i had not focused on that element. this man's name kept coming up, john mcmanus. unusual to bet
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this scientist thrown into the midst of geopolitics. to quantifythe one all this environmental damage that had happened to these reefs and the south china sea. i thought, ok, i want to talk to the sky and see how he ended up in the middle of this geopolitical debate. ofol: he is a professor marine biology and ecology at the university of miami. tell us why it is so important. >> it goes back a long way. he had been based in the philippines for years, and he had done this very early study of exactly what was happening in the spratly islands. they are mostly reefs and a tolls. carol: you look at a global map, and they are like nothing. that isare tiny, and
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what everyone is fighting over. this was back in the 1980's and early 1990's, back in the philippines, trying to figure out where fish were coming from, how these fisheries were getting repopulated. and he did this study based on archaic methodology, looking at rrows on them,h a rose on th and he figured out the spratly islands were the source for the fisheries on the coast, and providing these replenishing pulses of fish, if you will. carol: did he call it a genetic reserve? >> yes. at the time, the spratly islands were contested already, but were not overfished. there weren't fishermen's going going out there and taking all these fish.
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he is a scientist, but decided to make this policy proposal. the policy proposal was we should create a marine park. theirne should freeze claims and manage this shared resource together. dismissed in general. not just to dismiss, but it seemed impractical, so he went on and did another large study with other scientist looking at how the spratly islands were genetic reserves, then he could not get a lot of funding, and he has done a lot of other work, fs, whattracking ree they do worldwide, and what is happening to them. about theis concerned ecological impact of that the chinese and others have had on that area, and you write in your story, this number blew my mind, 62 square miles of damage to that area in terms of the reefs
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across the south china sea, and much of it from the chinese clam fishers. giant clams have been overfished and are not easy to get from the ocean beds. giant clams,live but not enough to satisfy the demand in china for giant carvings from giant clams, so what also interested me about the story is that it was a market story. in a way, it is about market forces gone wild. oliver: the new cosmetics trend. carol: trouble making good choices? we have a board game for you. this is bloomberg. ♪
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carol: welcome back to "bloomberg businessweek". i am carol massar. oliver: i am oliver renick. you can also catch us on the radio. carol: and in london, and in asia on the bloomberg radio plus app. oliver: ramping up production and a fast-growing industry worth $27 billion. carol: we are talking about makeup. man namedolar is a
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abdullah, and he is based in germany and goes into different companies and certifies their plans as compliant. the he has to do is look at entire assembly line can make sure there is no alcohol use, animal products, and he looks at the entire process from raw materials to shipping. hear halal, and i think food. need thisof places control he brings? >> there are many types of halal what he is looking at our factories that are producing raw materials for cosmetics, personal care products, household products,
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makeup, especially makeup. why is the marketiver: for these products in an upswing right now? is it growth of the population or a cultural shift? things. a number of one is the population is growing rapidly. some laws passed recently, particularly indonesia, the largest muslim nation with 250 million people. by 2019, any product imported, any consumer product that goes into that country, will have to be certified as halal. the other thing is that products are not just sold to muslims. they are like organic products. they offer a certain level of security to consumers in terms of cleanliness, in terms of the ingredients being natural, and that is important to people who
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are even not religiously observant. carol: in the good is the section, a board game to help you make better choices. has beennd there progress made, setbacks taken. interesting way of characterizing this in a centerfold in the magazine. do a boarddecided to game to appeal to the inner child and all of us. it is called good choices, the game, and basically it allows you to make your way through 2016 as an ethical consumer, which we all try to be. we all do our best, but are often met with challenges as we do that. carol: let's play the game of good choices. >> you have to provide your own pieces. carol: you have cage free e ggs, teslas.
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>> you might be part of the problem. carol: free range eggs, sounds like a good thing. foodlot of the fast companies, walmart, they are all moving in that direction. has been a lot of pressure on these companies to do this, so then it turns out though that you tried to buy these cage free eggs and there are reports that basically say when you have hens running around in an so you are perhaps more likely to inhale some of this if you are a worker. there are reports that it is less safe for workers who work in these places, so that knocks you back a few places in the board game. this happens all over the place come almost everything you try to eat. oliver: that is kind of the crux
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of it. there are a lot of side effects of these things. that is one of them. carol: don't say it. i will not listen. ag avocados at hasht on instagram, there are tens of thousands of hits. it has led to deforestation in mexico. i'm not saying that you have to keep this in mind every time you eat breakfast. .he other product is quinoa you now see it everywhere, right. in 2012, ita boom was actually so expensive that the people who farm quinoa, the indian farmers, the bolivians, could no longer afford to eat it because it was fetching six dollars or seven dollars a kilogram, and then everybody started producing quinoa.
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quinoa on might farm the weekends for all i know, but everybody. everybody started -- carol: my kale farm. >> exactly. the price of quinoa has plummeted, so there are now worries that the indian farmers can't make enough to earn a living wage. carol: tessler, sounds like a good thing, electric vehicle. >> electric cars, right? carol: two steps forward on that one? >> there is a headline in wired recently that says electric cars might not be as green as you think they are. everything you try to do, another company, jessica alba's on this company, which has come under fire for selling products that may not be as toxic free as
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they claim, although they dispute that. the same olduying industrial products you can buy at the drugstore or major chains. carol: "bloomberg businessweek" is available on newsstands now. oliver: and also online. your favorite story? carol: the south china sea, china building up its presence, building islands on the reef, laying claim to that area. at the same time, chinese fisherman decimating those reese. you have a professor in miami who has been studying what is going on, worried about the ecological implication. oliver: i have a soft spot for wolves. even though it does not seem to apply out of the region, at the end of the day, it is a compromise, the ranchers and environmentalists finding a
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common ground. it does have a poignant theme to it. more bloomberg television starts right now. ♪
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♪ david: coming up on "bloomberg best," the stories that shaped the year in business in the americas. >> if i do not get donald trump with change, i'm going to get hillary clinton. >> he has not been able to control himself when he is this close to the presidency. he is not going to change. david: a presidential race like none in history with a business leader in the white house. >> it is going to be a very business friendly administration. the markets wait for the fed to move, and not always patiently. >> janet, get off of this fixation of lower interest rates providing economic growth. david: plenty of reaction to the


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