Transcripts For BLOOMBERG Bloomberg BusinessWeek 20161126

I want to start with the Global Economics section because europe is really getting kind of a super election cycle underway. Were watching a referendum in italy. People are looking at italy because its a good barometer of way that the voters across europe think about how happy they are with their government. Even though the referendum is something that seems fairly arcane, changing the way the parliament is set up in italy, cutting down the number of senators there. We all seem to have lots of governments turning over. They have over 300 senators and they are cutting it down by about two thirds. It is supposedly going to streamline government but allows lots of things within government to change. It tells you if people are angry enough that they want big changes in government. If that happens, you will see it across the continent in places like france and have important elections later this year. Oliver it is sort of a petri dish. That will be important for this sort of globalization coming to a halt. That is one of the problems. Populism has gotten a big boost because there have been employment problems, people worried about immigration. Security is an issue. We have to figure out how angry people are and how much change they want. Oliver a slightly less serious topic. It is a fascinating story because zahra has gone from a single store to being the biggest fashion retailer in the world. You think there is a style. World. Somebody is out there saying this is what people wear. Theyve put that upside down and their 350 designers in spain and they try to figure out what is hot. They use data and information they get from countries around the world. Every night, they are getting information from websites. Also, they are getting information from consumers in big, major markets like moscow, new york, tokyo. What they have done is they have moved a lot of the Production Capacity to spain. It doesnt sound smart because its spain. But what happens from the far east, it takes months to sell it. They want to do it much quicker so that they can turn passion and a couple of weeks. What happens is, people think it is new. Ive got to buy it. This is 24 7 fashion. That is the cover story like pipeline explosion. Tell us about this narrative. This one pipeline basically carries gasoline for millions of people. Pipeline safety has become an issue. Carol Christopher Leonard actually visited the pipeline and we caught up with him. The pipeline was built in 1962. The time it was built, it was the largest privatesector Infrastructure Project in u. S. History. It is a pipeline that serves a really vital role in the u. S. Energy infrastructure. The pipeline begins in texas and louisiana where there is a large concentration of oil refineries, really vital role in the u. S. Energy infrastructure. And it takes a finished fuel product by diesel fuel and gasoline all the way across the southeast, of the eastern seaboard from atlanta to new york and ends in new jersey. Amazingly, about half of the fuel used along the east coast is transported through this single pipeline. 50 Million People a day depend on it for fuel. Carol 1. 4 million gallons of gasoline every day go into the pipeline . Correct. That is just the line that carries gasoline fuel. Another line carries an equivalent amount of diesel fuel and other fuel products as well. About the Colonial Pipeline this halloween, you probably learned about it because it is a big story. There was a big explosion. It was sort of a followon effect for the large accident that happened in september. Back in late september, this pipeline spring a leak, essentially. About 330,000 gallons of gasoline went spilling out into the surrounding woodlands. It underscored the importance of this pipeline. They had to shut off the gasoline flow. And when that happened, gasoline reserves on the east coast of the United States plunged it their fastest level in u. S. History. Stocks fell all across the eastern seaboard as gasoline stations realize they werent getting supplies to come. Colonial tried to fix this wiki section of pipe that spring a leak in september. They hired a crew in october to start doing permanent fixes on this aging section of pipe. What happened on halloween was really tragic. We dont have the details yet, but we know a crew of nine men was excavating earth around the pipeline and somehow, the earth moving tractor struck a pipeline. It exploded. A column of flame shot more than 50 feet in the air. One worker was killed immediately. Four other construction workers were terribly burned and taken to the nearby town, birmingham, to be treated. We saw the flow of gasoline was immediately stopped. Carol youre going to have accidents in any industry, but what is worrisome is that there has been an increase in the number of accidents or explosions in the last 12 months. It is an aging piece of infrastructure. About 50 years old. They have had six incidents. Six weeks this year alone. Leaks this year alone. Thats as many as they had an alabama for the previous five years altogether. There has been a sharp increase in incidents just in alabama. The company would not comment to me at all as to what is driving that increase. We dont know what going on in alabama at this point. If you go back and look at the pipeline structure as a whole, we are also seeing an increase in accidents yearoveryear. We are seeing the accidents are getting more and more expensive and doing more and more property damage. Colonial federal regulators, the National Transportation safety board are all investigating at this time. Carol turning it into a cover image was the job of the creative director rob vargas. In october, the Colonial Pipeline it was hard to get an image of that because it happened very quickly. We didnt have a photo, so we turned to photoshop. We created this morning sign warning sign. In this hellish blaze. Stating pretty plainly. The fire on the background. Carol its not often you take an image and blowout the cover. From the images we did see, it did look like a Small Nuclear explosion. It seemed like a very intense blast. We wanted it that without showing the news photo from afar. The company itself is also exploding as a result. They have had a few incidents and we want to make sure that that gets on there as well. Carol john paulson bet on donald trump when most of wall street said, no, thanks. Now hes reaping the rewards. Oliver and Hillary Clinton supporters on wall street are changing their attitude about a trump white house. Carol welcome back to Bloomberg Businessweek. Oliver in the markets and finance section, john paulson seeing a huge payoff. Carol i spoke to reporter joe light. He is famous for a big short he made before the financial crisis. Subprime mortgage loans. Billions of dollars. And hes moving on to other issues. Carol fannie mae and freddie mac. Hes also had some interest in for a good reason. Joe thats right. At fannie mae and freddie mac are at the center of the u. S. Mortgage market. There are a couple companies taken over by the government in 2008. And eventually received 188 billion in taxpayer bailout money. The curiosity is that even though the government took over the companys, they left a lot of fannie and freddie, and shares. At the time, they seemed worthless. As the Mortgage Market started to turn, certain investors, paulson among them, though we dont know when he bought his shares, they started to see the value there. He is making money on it . The share prices have risen a great deal since the drop of the crisis. Fannie and freddies bailout. All the profits to the u. S. Government. The seal those profits start flowing to shareholders again. It is very much an outstanding question whether the administration or congress will it to happen and court cases where they start to change that policy. Carol this is where the story gets interesting. I think everybody has been trying to get their head around them for years before the crisis. Are they Government Agencies, cause i Government Agencies . They were publicly held entities. Its kind of interesting. John paulson made a bet on donald trump. He was out there early, backing donald trump. Its curious to see what kind of leverage they will have, maybe be more favorable. Those profits will ultimately go back to shareholders. John paulson has been spending money lobbying or supporting donald trump and his affiliated campaigns, if you will. Joe also became involved in the Trump Campaign early on when it seemed like trump didnt have a chance of winning the presidency. He has given more than 300,000 to not only trump, but also to the republican before becoming involved in the Trump Campaign and thousands of dollars on lobbyists. Basically trying to get in the halls of congress, get in the ear of lawmakers who have influence on proposed reforms. Democrats want to save fannie and freddie, democrats who want to eliminate and save on the republican side, they have been trying to convince some lawmakers to go to bat for what paulson would say are the rights of shareholders. The right to a share of these profits. Carol some clinton supporters are turning around. Its not that they suddenly dislike clinton and love donald trump, the reason is they think they will have things go well for their wallets. They are expecting tax cuts, to be deregulated, Interest Rates to go up. They mightve had their feelings hurt during the campaign when trump was making fun of them, but now i think they know to look at their wallets. They say im really upset about the things donald trump says about muslims, women, and then i get greedy and i know things are going to be good times. It was amazing to hear someone say that to me in an interview. At least he was being honest. He was saying what a lot of people are feeling. You work for a big bank. You come through this era where bankers had to deal with a lot of regulation. The dodd frank act was put in place to prevent a Global Financial crisis and it meant some of the rules of the road will change and people will expect those rules are going to change again and will make life for the big banks a lot easier. Oliver it doesnt take a genius to look at trump when he talks about whether or not its going to be good for Financial Markets and banks. So why is the sudden of tiffany that this guy is going to be great for us they had to know that along the way . Was it the toxicity of supporting trump in a major urban area . I think a lot of people just didnt think he was going to win. There is also a third dynamic that hints to what youre talking about. Trump is inconsistent. He talks about rolling back doddfrank. Bankers expect life is going to get better for them. On the other and of course doing things like a moratorium on new regulation. On the other hand, the republican platform for 2016 has in it that there will be a new glasssteagall which would be really disruptive to wall street. Glasssteagall put up a wall in the stock crash when the Great Depression started. New glasssteagall would be pretty annoying for citigroup which would be putting together with travelers. When citigroup was created, they were doing it illegally with the expectation that the wall was going to come down and it did. That is what we still have citibank. If it comes back, these banks are in trouble. You can say the bankers really believe when trump says hes going to lower their taxes and deregulate their industry. They do not believe him when he says this populist rant against wall street and the republicans suggest a new glasssteagall. That is my understanding after speaking to these people. Carol do autocrats know how to lead a democracy . Oliver Paul Manafort reemerges as a player at trump tower. Carol welcome back to Bloomberg Businessweek. Oliver you can also listen to us on the radio. 1200 in boston. 99. 1 fm in washington, d. C. Carol and in asia on the Bloomberg Radio plus app. A controversial figure in trump land emerges. Oliver we spoke to reporter bob coulter. Steve bannon was supposed to be the mastermind that was going to bring trump of victory. He resigned in august. It seemed like that was going to be it. And we would never hear from him again. What ive reported out is the idea that he never went away. He stayed close to trump all the way through and he articulated the strategy that brought trump the victory. Steve bannon was making noise with fringe groups. In order to get the real center of america to go on trumps side, that was all Paul Manafort. It speaks to his power as an unseen force for decades. I take a look at the scope of his career and evaluate what might be in store for him in the future. Carol the trump administration, we believe he will be antiestablishment but it doesnt seem like it will ultimately work out that way. Paul manafort seems to be the ultimate washington insider. Insider is the perfect word for him. He came up in the 70s in young republican circles and health of the gerald Ford Campaign and Ronald Reagan campaign and invented the culture of lobbying donald trump seems to make a lot of noise about not liking. It was manna for that brought these controversial foreign figures to the bush white house. It was manna who worked on the Dole Campaign in 96 and trump turned to him because he couldnt find anyone else to help him when his primaries looked like the end of him last spring. Oliver he popularized the phrase influence peddling. Its a synonym for lobbying. Most of the time, he likes to be below the radar. A flashy and welldressed guy. Hes not a public guy. Hes not flamboyant. During this hud scandal in the late 80s, he played a part in the directing of federal funds. He said flat out to the public that some call it lobbying and some call it influence titling. It depended on how you define it. Carol you made a lot of money doing this. You profile him. Hes a nice dresser. He has lovely places. He is a lowkey guy but he is involved, from one we are hearing, still, in the trump administration. He was in touch directly with trump on how to handle the jim comey revelations that the fbi was going to look again at hillary hoss emails. Hillarys a males go back to michigan. Hearing, still, in the trump administration. You can win michigan and trump did win michigan. Tell us about the background and how they got to know each other. They met in the 70s through roy cohn of all people. One of those ragtag group swirl of famous people need each other. Defending his casinos against indian casinos that were going to come up. He knew manna for it that way. When manna for was in charge of the Republican National convention, it would bring george bush a victory. Trump came and visited in there and took a look at the campaign operation. He was very impressed and started to get a feel for the and took a look at the campaign sort of thing that manna for did. Paul manafort did. At least two friends of his say youve got to get metaphor to help you with the campaign. He called them and pick them up and the rest is history. Carol why trump conflicts of interest may become the new normal. Oliver and 700 thousand immigrants currently shielded from deportation in the u. S. Carol welcome back to Bloomberg Businessweek. Oliver still ahead clues on how , donald trump might run his presidency by looking at autocrats around the world. Carol and what it would take to remove conflicts of interest. Oliver and the tool that businesses have to fight Sexual Harassment. Carol it is all ahead. Oliver were here with jim ellis. Somebody must reads as always. One that is particularly interesting is what is happening in london and in particular, Chinese Investment in london. Seems like a strange time to be doing that. It is a strange time given postbrexit. That londonworried as a Financial Center is at risk. They are talking about not investing in london order of using reducing staff. The chinese have decided that a bunch of banks are putting money behind huge Financial Services development in london that would basically be the home for lots of chinese businesses in london. They continue to believe that london will remain a financial market. And i believe the fact that they can make a lot of money as well. It is sort of counterprogramming. If it works, it works big. They are hoping that wont happen. They really do think that because they have so many of their own companies, it gives them an advantage. Carol the technology section, wannabe. Er there are fun elements. It is a fun story because we hear so many people that want to aliento the ride business. It started in london. It was supposed to have raised 250 million. It turns out they really only raised 40 million. But they spent as if they had raised 1 billion. They spend big on offices, multiple continents. They had parties. The ceo had a party in las vegas with everything from freeflowing champagne to exotic dancers. All of this on the company dime. Thingsere cars, all the that gave the impression of the big money was there. It turns out it did not work. At the same time, the app that this was all supposed to go for didnt work as well. So this is a true story of investors and markets getting ahead of themselves. Oliver ascertaining what donald trump is going to do as president , you look to a particular type of leader, the autocrats already in place. Right. What was interesting about that, everybody keeps saying that donald trump, weve never seen anything like him. So we do not know how to react to him. An electedtion of autocrats has been done in europe. We have seen it with putin, mussolini, people who come in with a very strong right wing, authoritarian leaders. But who got elected as opposed to seizing power. We try to take a look at the common things there. And it gives you a hint of whether we can see trump follow the same thing. Carol were talking about donald trump and in politics and policy, you take a dive into why unwinding donald trump is not going to necessarily be so easy. It will be almost impossible. One of the problems is donald trump is is business. He is a giant licensing machine that trades on with him and his persona. It makes it difficult to think about how you can take trump off of all these buildings that are there trying to get people to pay more for rent or office space. Because it has his name on it. And a lot of those might contractually need to have him involved. And he does not want to separate his business. It is a big problem. He wants to maintain the structure and keep his children running them. I will not even say the word conflict of interest, but we never had anything quite like this before. What happened in the past committee usually take assets and put them into blind trusts. Oliver a lot of questions. We spoke to the reporter. Carol donald trump sold all of his business interests, it would get rid of the conflict of interest problem. Walk us through that. Right, right now what everybody seems to be talking about, the media, he has these Business Partners coming to visit him as hes making these transition decisions. And more importantly, Going Forward he will have business and with the lenders others. Everybody is really concerned about how that will affect how trump governs. What his stagecraft looks like. All of that is up in the air. What we are trying to figure out is one, if anything he can do to distance himself from the businesses that could pose a lot of problems and a minimally keep everybody questioning why he is doing what hes doing as he engages in countries where they have business ties. Carol selling his businesses are not so easy. Trumps businesses are incredibly unique. Like you have trump golf , courses. You have his licensing deals with International Partners where hes giving his name to owner developers, getting higher prices for condos. More hotel rooms. It is hard to separate trump the man from that business. Do i want to own the rights to put his name on things when i am not trump and dont get to control what he does . Or what he does as president. There are other things were hes a minority partner. He would need to get their permission for that. It is a whole bunch of quibbles and corbels with a selling the businesses. Carol also in the politics section, the fear gripping immigrants working in the u. S. Legally. An individual, why is he nervous . He doesnt know if hes going to lose his permit to work in and his protection from deportation within the next couple of months. He is someone that can be a poster child for president obama for the childhood arrivals program, who was brought here is as a sevenyearold on a visa that he and his family stayed past the expiration of. Hes spent almost his whole life in the United States. They werent able to work legally in 2012. Until 2012. The executive authority has people whoer 700,000 have been here for a long time and came here early in their lives, from being threatened with deportation and has provided them with work permits. So he actually hesitated about applying in 2012, because he worried about what would happen if mitt romney got elected. Now he is looking at this unexpected victory of donald trump and what it would mean for him. Carol his name and address and everything the government now has. Yes, he like thousands of others, provided information to the government which people involved in the program have confirmed now will be information thats available to President Trump and to his government which he is committed , to take a more aggressive approach when it comes to forcing people to leave the country. Oliver what has trump said about this specific docket . About repealing it, addressing it. How specific has he been . Ithe says he is going to end and other executive moves by president obama on day one. What remains to be seen is how literally and specifically he chooses to keep that pledge. And of course, if he does, if somehow he can be swayed by others, including people in the Business Community to change his view. Among the questions is if he would revoke, immediately and instantaneously, all of the work authorizations. Meaning someone who is legally employable one day would be unemployable the next day or if he would allow them to run out. And also, how much of a deportation risk there would be for people who previously were protected. And have provided information to make it easier to track them down. Carol up next, why elon musk is a target of fake writers on the internet. Oliver and ibm preparing for cyber warfare. Carol welcome back to Bloomberg Businessweek. Oliver in the technology section, the trolls elon musk thinks are behind many internet complaints and mysterious attacks online. Carol lets begin by talking about shepard stewart. Phil is the who is he . He is a fake oped writer. His byline appears on websites, particularly the politically conservative websites. And whoever is behind in identity is intent on criticizing elon musk. The very wellknown tech entrepreneur and mogul who is affiliated with Companies Like tesla and spacex. And he has enemies in the world that want to attack him but dont want to do it in a straightforward way. Specifically, you delved into a part of the internet, specifically opposition he faced from an industry specific standpoint. People whose best interests may not be aligned with elon musk. Tell me where these people are from. My strong suspicion is that his commercial competitors , perhaps at a couple of levels , have hired firms who are going out and putting websites up. Hiring fake oped writers and so forth. But i was not able to connect all the dots. I cannot say it is the coal industry that is behind this type of thing. In some instances, you can identify what group is behind a website. There is one website which is a relentlessly negative website that portrays him as someone who sucks up federal subsidies and does nothing in return for it. That website is affiliated with a conservative group in that and that group is a 501 c four group. So it doesnt have to disclose donors and you dont really know who is providing the money. Are they making up stuff . For the most part, they are aggregating stories with bad news about his companies and the companies have had a rocky upanddown history. And in addition to that, you get the mock editorials. It is very negative opinions about everything he does. His companies have received in centers from government at different levels. Is that a terrible thing or is that smart policy to encourage solar energy through his Company Solar city . Hes not the only person receiving those incentives. But with these writers, the opinion is always negative. Help us understand the not so easy to understand world of the of preventing cyber attacks, hacking, and what you looked at to prevent this type of stuff. There is an increasing Awareness Among companies that have had a large breach. Target and other companies. Basically, pick your hack the last few years. It can be a huge brand damaging event. But it is not one that the parts of the teams and corporations that dont normally do security are really prepared for. If you take target for example. It was a breach that happened around christmas time. Turns out that the company itself had overlooked some warnings that couldve prevented the whole thing. By the time it all leaked out, the ceo ended up resigning. So i think what is going on in cambridge is that ibm has taken the initiative to create a simulator. It is a pilot simulator where you can put in the characters involved in a big breach. It could be the ceo or the Security Team itself, put them into a room and run them through a very complicated scenario that sort of illustrates what a company deals with when they deal with a massive breach and you see what happens. What they are doing, they have set up a Cyber Security training center. Its not just about the technology, but crisis management. You went and visited, so tell us what you saw. They spent a lot of money creating an environment that can realistically create not just the conditions of an actual breach but the things that happen afterwards. It can create this traffic that goes along with a corporate network. They can simulate the traffic of a Major Corporate network and say you have a Security Team in that room trying to figure out what happens after a fishing email is open. Or trying to track down a hacker in realtime. And they have all of these other things that allow them to put the rest of the Management Team through the paces. So they will have this beautiful room that has a huge screen on the front of it. And this technology that comes from hollywood. And they have a studio where they can do mock interviews upstairs. Basically, they will start to throw things into the mix, like to the press and an fbi investigation, and to see how the team handles it. Carol up next, the psychology on why women dont come forward to report Sexual Harassment. Oliver welcome back to Bloomberg Businessweek. Carol you can listen to us on the radio on sirius and also on a. M. 1130 in new york. And a. M. 960. Oliver and in london and in asia on the Bloomberg Radio plus app. Carol a threepart look at Sexual Harassment and how companies try to fight it. Oliver why more victims dont come forward. Carol and how victims describe the harassment in their own words. It is something we have talked a lot about as a country recently. The first thing that really hit the news, roger ailes from fox news. Recently megyn kelly, her book alleges that he made demands 10 years ago and she never said anything until carlson sued. And on top of that, president elect trump has been accused of also harassing or groping women. He has been caught on video saying that himself. I wanted to look at the state of harassment in the workplace specifically and why, despite decades of laws and lawsuits, peoples careers have been ruined over this, why it is still so common. How did you find these women . Some are connected to cases in the media, but some are not. Yes some of them have sued , their employers or past employers and i found them through looking old news looking at old news articles. And then i put a call out for this. I had friends of friends, complete strangers contact me online. Actually ends up being much easier to find people than you would expect. I had an absolute flood of responses. Carol that is what i wanted to ask you. How many people once you put out, do you know anybody, you got a lot of responses . I had friends that are not at all in the story but tell me things i didnt even know and we had been friends for years. I had been a reporter for over 10 years now and i had never gotten the response that i had in this article. Oliver you mentioned the surprise that was inherent in putting the story together. What were the biggest takeaways that took you by surprise . I will back up a little bit. To understand Sexual Harassment, it is such a broad term. It was coined in the 1970s and it was meant to to mean all the ways that women were made to feel uncomfortable at work from leering to groping and actual propositions for sex. You know, women that were told that if they didnt submit to this, they would lose their jobs. But from a legal perspective, it is very broad. Over the years, the courts have had it down to a couple of things. Quid pro quo. You do this or you lose your job. I thought that that was sort of the mad men era thing that did not happen very much anymore and it is what Gretchen Carlson accused roger ailes of. They settled out of court. He has never admitted to it but it is done now. Maybe it wasought, just an unusual situation. And i talked to to attorneys and women and it turns out that that still happens. It is usually women or anyone, it could be men as well, about 16 of harassment claims are made by men who dont have power in their job that maybe you or i have. A lot of Service Workers and that type of thing. And it can happen at major establishments as well. I was surprised by that. And there is something that we call hostile work environment. Youre not going to lose a paycheck or anything monetarily, but this is just the general atmosphere you have to work in and thats what most women complain about. Most of the complaints today are hostile work environment. Carol most Big Companies have policies. And a lot of companies in general have policies, but the way that employers deal with it. I felt through your example, some can be very supportive of the women making the claim and some are not. Pick any company off the top of your head, you can find a policy that says they have no tolerance for harassment. Some of them stick to that policy and some of them dont. The way i have thought about it and described it to people, when somebody asks you what it like where you work, dont say according to our employee manual, we have this and this. You talk about the people that you work with. All of that sort of stuff. And thats what women think about when they decide whether or not theyre going to come forward and it is the real policy of companies. These what is it about sort of loopholes that have emerged, they do not quite good announced. Companies dont take this seriously at all. I have spoken to women who have had egregious things happen to them and nothing really happened. To give companies the benefit of the doubt, most of them know this is a problem culturally and want to do something about it. But when it is brought to their attention, most of the time it is unfortunately a he said, she said the situation. So they are faced with potentially firing someone over something that they dont have proof about. Oliver Bloomberg Businessweek is available on newsstands. Carol and also online. Liked themarks, i story that looked at autocrats. Trying to figure out what type of President Donald Trump will be. He has no background and has not governed before. We look to some of the developing markets where there have been autocrats elected. And have kind of controlled the media. Breaks that down and that was fascinating. How about you . Oliver i think i will go with ibm because it is kind of a nice relief from the politics stuff, looking at how companies can prepare for cyber attacks. This will be a big part of the market. Ibm buying up these companies. The warfare center. Carol exactly. Fascinating. More Bloomberg Television starts right now. The following is a paid program. The opinions and views expressed do not reflect the opinions of bloomberg lp, its affiliates or employees. The following is an Important Program about humana Medicare Advantage Prescription Drug plan. Welcome to your medicare, your decision, the program that guides you through the Medicare Options available from humana. There are many different medicare choices available today. Are you sure you have the right medicare plan . Are you with the right company . Do you wonder if you could save money with a different plan . No matter what Medicare Coverage you have now, this program will give you the information and