tv Bloomberg Business Week Bloomberg February 4, 2017 7:00am-8:01am EST
carol: welcome to "bloomberg businessweek". i am carol massar. oliver: i am oliver renick. a secret alliance between two old enemies in the middle east. carol: the irs wants a piece of michael jackson. oliver: all that ahead on "bloomberg businessweek". ♪ carol: we are here with editor in chief megan murphy. was welike the thinking
heard on the campaign trail was just rhetoric and that is not what we will see in terms of policy, but maybe that is not true and that is whirring businesses. megan: we will see this filter through. person who is saying he will do what he said he would do, but then you are surprised because some of these policies were quite strange, and when you look at a muslim ban or extreme vetting or changing that program , the implementation of that policy is such a marked shift with the obama administration. i think what businesses are convulsing a bit, he said he would do it, was very clear, but now seeing it in practice is surprising a lot of people just in terms of the speed. carol: this is why this is the
cover story. there are a lot of issues at play. oliver: a bloomberg columnist takes an interesting look, starting off with the immigration policy, the non-financial policy, and points out that so far it seems like and these financial regulations are largely taking a backseat, and when will they take front seat. every that is what business is grappling with. drugmakers was another industry waiting for the other shoe to drop. on the other side, he said he would remove regulations. banking is another example. populist he take the rhetoric and put into place those actions? when we look at the reality, he said he would pare back elements of dodd-frank. whatshould help the, but
everyone is worried about is that you will try to plot business decisions, investment decisions come the things you really want to do going forward with your employees, and one day you could wake up to a tweet that says goldman sachs is the worst company in the world, and that is what people are cautious about. carol: what is scary is the rule of law. we have seen this with the immigration ban. here we are, lawful immigrants who had a right to be in this country and the rules have changed. rules are crucial to doing business anywhere. positionthink matt's is interesting. it is a discussion we need to have. when you look at regulation, extreme bedding, temporary bar on immigrants, what the issue rd holdersreen ca
were suddenly going to be stopped from coming back to a country where they had the legal right of residence. any lawyer would tell you that is problematic on the face of it, and that's why we saw the challenges crop up. is that disruptive in terms of the overall playing field? presidents have brought in executive orders on policies for decades. he is not taking a page out of the playbook in a sense that no one has ever done this before. it is more what he is proposing and the things he is targeting people'sly anathema to sensibilities about. i think matt raises a provocative question. , ishis level of disruption that something that will hit the
business community and the level of agitation we have seen. see a lot of these expectations for financial deregulation from companies. executives have bumped up their capital expenditure expectations, sentiment levels rising, but that his on the idea he will get around to it, that at a certain point, there will a realization appeared when expectations come back, you have to reprice assets. the dollar is a perfect example. where will the dollar move in response to this. what is interesting is when you put trump into a global context, the u.k. finding its place in a post-brexit world. that on press conference between theresa may and donald trump.
donald trump is not operating in isolation. francepopulism rising in , so it is an ought situation where his push is other people's ull, and other world leaders are watching him to see the response. having populism by trial in several countries. onre are differing takes these, immigration, clamping down on the banking sector, it has ripple effects globally, and often we look at him as an isolated figure, where as the interconnected web has amazing consequences. oliver: he is at the very least tearing up the playbook. means andut what that the cover was the job of rob vargas.
rob: we played around with a couple of versions, but our department is no stranger to these me rved mes. oliver: he had been signing these orders, and he would turn and look at the camera, asking for this thing that has gone viral where people put in different things. you took that and made it serious and summarized those executive orders in one sentence. rob: we made it our own.
carol: welcome back to "bloomberg businessweek". i am carol massar. oliver: i am oliver renick. did donald trump's executive order on immigration ban muslims on the basis of religion? carol: that is a question federal judges will have to address. you look at this immigration ban in your story. if you look at our constitution, is this unconstitutional?
>> that is a question for the courts. aco you say it is unconstitutional. four district court judges temporarily blocked parts of the order. the did not get to constitutional issues, but the constitutional issues will be whether this is violation of equal protection, people are treated the same regardless of origin or religion, due process, whether this whole thing is done up to constitutional muster, and most significant, the first amendment establishment clause, which says the federal government can and act no law which prefers one religion over another religion, and because president trump has spoken in recent months going back to 2015 about keeping muslims out of the bentry, the argument will made that his intention with
this executive order was to keep muslims out of this country and favor christians over muslims. carol: there is a lot of information. >> that's right. that can be evidence in a lawsuit. the government action can seem neutral on its surface, but if the challenger can prove the neutrality is a pretext, then you can get something knocked down. one extentseems like to which trump has damaged himself, no matter how much or how little the executive order lines up for that, he has created a situation where you can say this is how you have talked about this before. >> it's not just trump. gave an interview in which he said trump came to him and said we want to keep muslims out of the country, how can we do it legally? that does not in the topic, but
shows trump was discussing the idea of this favoring muslim immigrants. oliver: what will be the weakest link? chink in the the armor? >> where they going after muslims because of their religion? once the first amendment establishment clause is squarely where the, that is main focus will be. the strongest argument for the government will be that in ordinary circumstances, the the executive branch gets tremendous leeway to establish immigration rules and say which noncitizens can come in and out of the country. politics,ying in
trump wants to build the keystone xl pipeline. oliver: does it still make economic sense? thaten he made the order he wants america to cash in on this pipeline, he said during the campaign that he thought this would be a big, profitable new pipeline. my article says maybe not. if it is built, it will require labor and pipes, but the idea the pipeline itself will be a profitable enterprise, that is what i am questioning. there is a lot of evidence that the conditions that existed in 2008 when trans canada petitioned to build this pipeline don't exist anymore. it still might make money, but will not be the gusher trump expects it to be. apart: what has changed fro from the price of oil? >> oil from canada is relatively
cheap because it is not as high and difficult to transport. they need a high price of oil so they can make some money. oil isworld price of low, their prices lower and it becomes hard to break even, which means less demand to send oil to the united states, which means the pipeline doesn't make money. a lot ofhere was hubbub around the executive is on somethe onus institutions, it can't all come from president trump, right? there has to be an incentive is ization on it? . i don't think that has a big effect on the economics of the
pipeline. there are american pipe makers whose prices are roughly the same as you would charge in the world market. half are owned by european companies, but they would be made in the u.s.. carol: what if president trump puts a border tax on things coming into the united states? >> that might be the single biggest obstacle to the building of the keystone xl, this border adjusted tax, which is part of the house republicans plan. , then for put on various reasons, it would increase the incentive to buy american-made oil, again a big blow to the economics of the keystone xl. oliver: if you had that border tax, would that affect materials going to build it?
>> more the oil. oliver: been drilled from canada and brought through two refiners in the u.s., how does that work startsit when the oil moving through that it gets taxed? >> you would have to know ahead of time if this taxes on the books that your future potential is lower and that might cause you to rethink. i spoke with a veteran oil who thinkscolorado that under the current conditions, which could change, but current conditions, he thinks the pipeline might not even be built. it is something to think about. carol: up next, cadillac looks for its next act in china. oliver: some uber drivers are so busy that they are sleeping in their cars. that is next on "bloomberg businessweek". ♪
oliver: welcome back to "bloomberg businessweek". i am oliver renick. i am carol massar. you can also listen to us on radio on serious xm 119. and in london and in asia on the bloomberg radio plus app. industriesanies and section, cad lack has been trying to resurrect itself for almost 20 years. carol: it may finally have met its match. was the luxury brand going back many decades. they passed on the packard in and it rodeon years a wave of postwar wealth. 70's,it their peak in the ,978 they sold 370,000 cars
which is massive for a luxury brand. problemse were quality and it started to haunt the brand. they started making cars slightly nicer versions of those mobiles and buicks. oldsmobilesns of and buicks. the whole thing went away because the cars got too much alike, and they had bad timing because they were selling cadillacs that weren't that great, mercedes and bmw came to ,he u.s., then the lexus brand and baby boomers attached to luxury brands, and those three dominated luxury and they are the ones fighting it out every year for luxury sales crown. selling half or two thirds of what they sell in the u.s., and they have been trying to build the brand for 20 years. of ar: is that an issue
brand that has diluted the luxury element? we see it and fashion. it was the pinnacle. is that what happens when you try to broaden your market beyond the very top? it is., they had such a dominant position in luxury in the 1970's wealthy,s, among the it became big put us -- ubiquitous. there were too many of them out there, and when i lived in new jersey for a couple of years, seeing a mercedes or bmw was andst like seeing camrys chevys and any other market. they really were everywhere. that did happen to cadillac. they lost their exclusivity of
it he and did not have cachet, and they went into a long decline. they have been investing for 20 years to get out of it. they had hoped in the early 2000's, investing $4.5 billion in new models. on, andlade had caught cadillac became cool again, then going into the bankruptcy of 2009, four-five years of financial hardship and the investment was cut off. here they are rebuilding it again. carol: may be so cool in the united states, sales fell last year. but the chinese market, cadillac sales are soaring. grew 46% last year. luxury sales are booming in china right now.
big boom in population of young professionals and they want luxury cars. audins, bmw, mercedes, and have 45% of that market. some upstarts, and cadillac is one of them, are starting to make inroads. it used to be 80% german brands, now it is 75%. cadillac has a real opportunity because american brands are not .een as subpar these are chinese consumers condition to buy nike, starbucks, apple. to youngs kind of cool chinese professionals. cadillac has an opportunity to ride to that. uber is now a and full-time job for a growing
number of americans. some of them areer: sleeping in their own car. >> many drive from rural areas to cities, work all day picking up passengers, then at night find a parking lot, sleep and their cars, and start it over the next day. about thesetalk campsites where they convene, but the story did a good job of chronicling the state of uber as a company right now. we learn about the fact that people are convening, sleeping in their cars, what does this tell us about pricing and the regions where people are driving? tilted's company on two sides of the marketplace. built its company on two sides of the marketplace. there has been a lot of focus on the driver, but over time, uber has found it hard to recruit
drivers and tries to fend off the competition, so it has become increasingly important to the company. they called this year the year of the driver, so trying to improve the product for drivers. it is central to the core , so iitive aspect of uber wanted to dig into that. in theirr who sleeps car is the most extreme example of this full-time driver that uber as i found out is super dependent upon. carol: you do have these hard-core drivers at uber. tell us about their experience and how many uber drivers. as you say, until we get driverless cars, uber needs these drivers. how many people are sleeping in their cars who are uber drivers and so on? >> it is hard to count the
number of drivers sleeping in their cars. the u.s.,ll over chicago, san diego, san francisco, boston. there are places all over the country, writing about walmart parking lots, forums discussing where to find somewhere safe to sleep in your car, so this is a big phenomenon. in terms of forget sleeping in your car, uber drivers working more than 35 hours per week, one of the things i found out is that it is about half of drivers working full time. message that this it is about flexible, part-time work, and it is true, 60% of drivers work 10 hours a week or less, but what they don't say is half of the work is getting done
oliver: welcome back to "bloomberg businessweek". i am oliver renick. carol: i am carol massar. israel and saudi arabia find common ground in cyberspace. trying to protect players in the nfl. oliver: all that ahead on "bloomberg businessweek". ♪ oliver: we are back with bloomberg businessweek editor in chief talking about must reads in this magazine. let's talk about the wall, arguably trump's biggest
promise. let's talk about the hurdles he will run into with folks on the border there. megan: there are many hurdles to the wall. i love when we have a story that mentions eminent domain, one of my favorite legal terms. mostf the things that is interesting is that there are golf courses on the path of where this wall would be dealt. this has always been an issue. there is a structure in place to crossing,ople from but there are areas where it will be incredibly difficult from a pure geographic landscape , and you take property will have to use eminent domain. is a bigump said he fan of eminent domain. this is a large parcel you will have to stitch together. oliver: you have golf courses,
immigration, he will have to pick one. megan: he is talking about financing the wall, it has change so rapidly. originally mexico would pay, then the billions of dollars that flow from legal immigrants as well as people who don't have a legal right, sending money back to mexico, then we will in pose this order tax on imports from the country, otherwise known as a tariff. it is a constantly shifting narrative on how mexico will pay for it. immigration has been in the news since president trump immigration ban, but the tech community is worried that maybe they will take it to another step and restrictive visas. the h-1b program has been a constant source of controversy because they say it is ringing
in too many highly skilled foreign workers that american workers should be able to take or scaling them up to a quick them to take them. it has not been devoid of controversy. what worries tech companies is they don't have the pipeline of talent to fill these jobs, jobs that pay in excess of $100,000. these are workers they basically place in american companies that handle the outsourcing in india, and their argument is that if visas,t the number of thes you will get migration out of america. the argument they have to make is the jobs will go offshore, and it may build pressure on the american education sector and
tech sector to say are we building the employees we need for the jobs going forward. this is not going away in terms of the jobs we need in that sector. story in the features section, about israeli and arab relations, some interesting company and business dynamics. megan: it is a great story. always tries to inspire and innovate. it is cooperation on important cyber security issues, all done , benjaminet netanyahu's administration putting people close in who are heading these deals, big infrastructure projects, and it shows there is a lot of heated political rhetoric, what you think is decades-old animosity, and behind the scenes, some different work is being done. carol: i think this is my
favorite story of the week. >> fear really has driven these parties into one another's arms, we are talking about israel, which has had a long-standing conflict with arab nations nearby, not with egypt and jordan, but further a field with the arab countries in the persian gulf, primarily saudi arabia, which is the dominant power there. our story is about how over the last 5-8 years some israel he businesses led generally by former israeli intelligence people have done very well helping the gulf on security matters. the israelis excel at cyber security and other computer-related security defenses, and they have then extremely helpful to gulf-arab countries, including saudi
arabia, and that is a shocker because very little has been documented in the way of israelis and arab countries working together, and we do so quite extensively in this business week issue. talk to us about his company and what he is doing with some middle eastern countries. >> he runs a company which is a company, a data miner that finds things in the deep web. they have contracts with the nsa, cia, fbi and the united states. he got a call to bring years ago from a saudi person -- oliver: he is probably not quite used to it? >> absolutely not.
when you has spent 30 years in israeli intelligence, you have ,een tracking arabs, saudis iranians, these are israel's adversaries, and that is what your job is come so first, it wasn't email that said we heard about your company and your technology and would love to talk to you about helping us. inhink he was somewhat disbelief, but then the up with enough call, and sure this person at a high level in the saudi power structure said we need your help. we have a problem with islamic extremists and potential terrorists and we would like you to go in and figure out who these folks are, if they are living in saudi arabia, and help us track them down, and he did that. carol: that is the common ground, that fear of extremist terrorism. lyings is not the lion
down with the lamb. both about mutual fears, of the gulf arab countries, especially saudi arabia, and israel, have an existential fear of iran. we heard prime minister netanyahu address that at length. thatboth really believe the iranians have it out for them, meaning the gulf cooperation council countries which are led by saudi arabia and israel, which has its own dispute with the islamic regime in iran, so they have come together in a security collaboration. carol: moving to the markets and finance section, investors are placing bets on a brazilian. who is he? >> he is the founder of a
private equity firm called 3g capital which has made big waves in the food industry. carol: it's not a name we talk about a lot. >> he is very secretive. there was a kidnapping attempt on his family years ago, and they do not really talk publicly about this stuff. names everybody knows, burger king, anheuser-busch. carol: consumer goods, consumer products? >> that's right. they got together with warren buffett to take heinz private, kraft, and now there is speculation they are gearing up to do something else. they don't boost sales per they are not magicians in terms of improving sales. cut jobs, and they've been on this two-year cycle. people are wondering what they
were by next. carol: let's talk about the possibility of other deals. you have a laundry list of companies. >> those are the names that come up. general mills, campbell, kellogg's, monfils are -- mondelez, those of the names that come up most. carol: did they come back together again? >> no, that was not the rationale, but the strong dollar, sluggish growth in brazil, china, it has not worked out that well. the macro ideas behind why that copy was split off and the strong dollar has weighed them down. they make 70% of the revenue outside of north america. their goods are expensive. bringing that money back is
weighing down the top line, so people think craft is mainly a business, american and maybe it makes sense to put those companies back together again, and that would give them a lot of fat to cut. their margins have lagged to the industry, so you do your work at kraft-heinz, so now it is time to cut again. general mills, campbell, kellogg's, they have struggled for the reasons we know about. the customer is looking for better products, natural, less processed. they are in these legacy categories that are not doing great. carol: up next, a way to diagnose a degenerative disease. ♪
i am oliver renick. carol: i am carol massar. oliver: the nfl is turning to life sciences company to help test for brain trauma. sciencesre a life company in lexington, massachusetts, and they have been given 800,000 dollars in funding and grants to pursue a concussion blood test. diagnose when you second concussion, it is subjective. bookook at the symptoms, if their eyes contract, and ask them questions. leaves a lot of gray area about when the player is ready to go back and things like that, so they are working on finding these biomarkers in your blood. carol: this is ultimately about cte/ ? >> right. carol: that is the in game.
>> right, the markers show you found in 90 nfl players brains. there is no way to diagnose it in a living person right now, so that is the goal, a blood test or some kind of test for cte, which would be a huge thing to treat people, but could shake up the nfl. oliver: what is their partnership with the nfl? you talk about the nfl commissioner writing a letter about the company, so they are actively working together? >> they had a challenge they did with the ge and awarded work aroundants for helmet technology, numeral science research.
goodell inlso, roger a public letter, named the company and said they're working on something that could be a major breakthrough. this has been a shift for the the first case was found in mike webster's brain in 2000 to minimize it and say this is not conclusive, may be at has nothing to do with football, and now they are getting on board and saying we want to find out. you said back to what earlier. if they do figure out a blood test for cte. if you get a test that is an early indicator and you go to a team that has won the super bowl and said we have five players on your team testing positive for cte, then what? is very complicated,
because this disease is a neural-degenerative disease. by the time the symptoms show, you are far along. there are these pathways that carry the neuron's across the across thesignals brain cells, that start to collapse, and that chokes the brain from within, and once this is advanced, it is too late to do much. you can't treat the symptoms, but it is limited. so if they could see this is beginning to happen or this is pretty far along, then you would have difficult decisions about taking players out of the league in forcing retirement, or at least telling them the risks. the nfl would have to deal with the fact that a lot of parents who are ok with the idea of a concussion, and injury from which you can theoretically recover, different from a disease that is slowly damaging the brain from within and that
seems to have no cure. that is a different thing, and also for fans, so they could have less talent if they find out this is widespread or they have to change the rules and make the game look different isn what we see today, so it an open question and at a lot of risk for the league, but the leak is saying the right things, we just want to find out. next, the irs wants its share of michael jackson's legacy. entrepreneurternet expands his man cave with his own private racetrack. that story is next. ♪
you can also catch us on the radio. and in asian london on the bloomberg radio plus app. section, death and taxes, michael jackson is worth more than ever. oliver: the irs once it's cut. >> he did not leave a a lot of money. he left a lot of debt. he was near bankruptcy when he died. he had not performed in a long time. a big getting ready to do comeback, but he died before died,appened, so when he he had $55 million in debt, but he has had a big comeback since. is centerpiece of the story an attorney who is for a well-known and music industry circles.
he has represented everybody, the beach boys, buried give, don henley, more than 30 members of the rock 'n roll hall of fame. beingbest known for michael jackson's attorney, and was named as an executor along with another guy in michael jackson's will, so when jackson died, he took over the estate. it, he ism tell responsible for the posthumous not back, because he was only bankrupt, but had clouds over him from criminal investigations, things he did with his face, and on and on. oliver: was the comeback enough to get him in the black? i think thathat, is finally happening now. they have this piece of debt. owned half of a huge publishing company that
controls the copyrights to most ,eatles songs, and last year they negotiated a deal to sell that piece to sony. it was for 750 million dollars, and i believe at that point they finally paid off this big chunk that jackson had borrowed against his half of the publishing company, but it has taken a while. it has taken seven years, so it would take a lot of deals and money to do that, but the irs said this was foreseeable. died,n as jackson everybody was going to be falling over themselves to do deals, so the executors don't deserve any credit for it. carol: that is what is interesting. there was of value put on the estate after michael jackson died. is that supposed to be the figure the irs deals with?
lotestate is now tied at a more money potentially because of the deals that have come down. what was that value initially? a greatot have reputation. you talk about the molestation charges, the plastic surgery, his reputation was at a low and plays into the value. >> the estate said jackson was died, a million when he snapshot on the day of death. so irs comes back in 2013 they have the benefit of hindsight and say it is $1.1 billion, a huge variance. items the big ticket subject of the dispute is name which is this right to publicity, your ability to use his face on coffee cups and t-shirts and things like
that. the estate said at his time of death he was worth a little over $2000. the irs says it is almost $500 million, so that is the big sticking point right now, and the only way you can get to a number that low for michael jackson is to say he was so all thatd by controversy, two criminal investigations, granted he settled one, was acquitted in the other, but that hung over and he was a pariah. buildingohn morris is the world's longest racetrack in the nevada desert. carol: and he wants you to visit. 2004, he went out to nevada and saw a racetrack and decided to buy it. it was two miles at the time. he is now in the process of building the world's longest racetrack, 16 miles. carol: but he is creating a
disneyland for adults. if you think about it, this is 45 minutes west of las vegas. what he is trying to do is filled a play land where you can fly drones, race cars at 180 miles per hour, and if you want the money. spend he has built a lake where you can jet pack. it is a play land, he's getting a lot of people showing up, paying $45,000 to be a member. you are outdoors, getting exercise. where does this guy come from? a semi-retired internet entrepreneur. he sold the company for $30 million and told the company i want all cash and never contact me again. in hawaii andtime basically realized i want to build a racetrack for my friends
, but then they said i have other friends who want to experience this too. corvette has a driving school there. a lot of manufacturers might test out equipment there. it is a $30 million annual company at this point, and it keeps growing. oliver: so he is turning his find into a business? >> fast right. -- that's right. carol: "bloomberg businessweek" is on newsstands now. oliver: favorite story? with air ofng nations against the backdrop of middle eastern conflict, gave me a sense of hope. oliver: i like the man cave we just talked about, except it was like a man town. his semi-retired career
♪ coming up on "bloomberg best." the stories that shaped the week in business around the world. central banks keep policy in a holding pattern. no news indications of good news? >> the fed did not push back against the markets view regarding interest rates. >> how many ways can you stay neutral without saying neutral? business leaders react to orders from the white house. >> we are beginning to see cracks in this very brief embrace between big business and the trump administration. >> i don't know why anybody expects anythingif