tv Studio 1.0 Bloomberg February 20, 2016 11:30am-12:01pm EST
we have balance sheet that need to be cleaned up, business lines that need to be sorted out, and again, even though you would think this would attract aggressive investors, there are so many unknowns and so many future losses that could hit these banks that activists are, in europe, staying away. alix: part of what we hear when european banks are at risk is oh, no worries, mario draghi has your back some of the ecb will help you, there is a lot of liquidity. in terms of profitability, mario draghi cannot help them with that. chris: you're right. lloyd blankfein was speaking at a conference, and his words were, the european banks have access to ample amounts of funding, and he was more worried about the counterparts, the suggestion of that, the share price performance. european banks in most cases have got a long, long way to go until they actually get way studies eight u.s. banks are in. as you know, a lot of u.s. banks buffer the cost of capital at
the moment. alix: exactly. what is the next wave of trauma for the european banks? chris: i suppose it is whether or not the ecb will take rates down further and there will be more, sort of, soul-searching about what do negative interest rates -- if the ecb suggests a goes down, what does that mean for profitability, and does that have another negative impact? is there any growth out there, which will start -- if you want to alleviate that problem? shery: still ahead, the best interviews of the week. mark cuban on silicon valley, bernie sanders on the supreme court, and the fed president who thinks big banks should be broken up. that is coming up on "bloomberg best." ♪
shery: welcome back to "bloomberg best." i am shery and. it has been a week of period controversial conversations on bloomberg television. bernie sanders describes his ideal supreme injustice. minnesota fed president neel kashkari explains why he is open to breaking of the biggest u.s. banks. let's begin at the nba all-star weekend where stephanie ruhle went one-on-one with dallas mavericks owner mark cuban. mark: in silicon valley, they are in their own little world. they have insulated themselves, they have lost touch with reality. kids get an $8 million valuation, they raised $2 million, keep 75% of the company -- it is ridiculous. stephanie: what is going to
happen? mark: they are getting written down to nothing. if you invest in 95% of silicon valley coming out, the minute you write that check and it clears, you should write it to $0 because that is what it is worth. they have no chance. some companies are good, but 95% are done before they start. 5% will be amazing. stephanie: marc benioff has been outspoken saying stop avoiding the public market. if you have a lead, go public, get testing. mark: i have been a proponent of that for a long time. what is happening in the market right now -- there is a dearth of high-growth companies. we look at facebook, netflix, google as hypergrowth companies when their hypergrowth is behind them. they are still growing quickly.
what is happening now is the hypergrowth in private companies is being bought out by private investors, right? i do not know that uber will accelerate their growth. in their growth rates are probably going to decline. stephanie: and early investors cannot get out. mark: they are stuck. stephanie: when you think about all of your businesses, when you think about what you are most concerned about, what is it? especially being from detroit. dan: the biggest concern is the overreaching power of the federal government and the kinds of things they are doing today that we have never seen before, at least not in my lifetime. it is very disconcerting to businesses. i get calls every day from ceo's, public companies, private companies just with stories that are not even out there of stuff going on. so that to me of the biggest concern. also this belief that companies and corporations are evil across
the board. shareholders of public companies -- shares are owned by pension funds and public unions, this is america. we create wealth through shareholder value. so the path that some folks are telling that the system is evil to me is the biggest concern. stephanie: are we not promoting entrepreneurship as much as we can? is the government? dan: absolutely not, currently to not think they believe in it. >> you raised the subject of the replacement for justice scalia. you said anybody you appoint would have to be an opponent, would be in favor of overturning citizens united. basically the litmus test, essentially, i think, so how is that different from the litmus test that republicans apply, we will only appoint a supreme court justice who is for overturning roe v wade? sen. sanders: i'm not a great fan of litmus tests. what i am saying is this issue of citizens united is so
significant, is so fundamental to the future of this country -- this is democracy, and right now, what we are seeing in this campaign are people like the koch brothers, wall street, and other billionaires buying elections, and if we allow them to buy elections, then every thing else does not matter because you do not have a democracy, so this is one issue that i am saying yeah, i want my nominee to be loud and clear that he or she would vote to overturn citizens united. it goes without saying that i am pro-choice. not terribly likely that i will be nominating somebody who is anti-choice, etc. but this is a litmus test to me because i'm worried about the future of american democracy.
neel: we all remember the crisis, 2007, 2008. i was in the middle of it. we hated that we had to develop the banks. i think americans across the political spectrum hated that as well. we see the anger of the american people still today. none of us want to be in a situation again, so dodd-frank was passed very quickly because -- which i supported. but the more transformational measures were taken off the table, things like breaking up the banks or putting so much capital and big banks that you turn them into utilities, so they virtually cannot fail. there are a number of other options. here we are six or seven years later, and in my view, we have done some good. the banks are safer, they have more capital, deeper liquidity, but we have not taken the risk of a bailout off of the table. if a number of banks run into risks at the same time, policy makers will have to bail them out. stephanie: you never take risk out of the system. somebody will be left holding the bag. it is those investors who have risky assets. insurance companies, 401k's, so
it is not evaporating -- it is going somewhere else. neel: i agree. in the late 1980's, 1000 savings and loans failed. that was terrible for those firms, but there was no crash. late 1990's, we had the crash, devastating for silicon valley, but no risk of an economic collapse. that is where we need to be. howard: volatility is normal, fits of volatility. i wrote a memo recently where i talked about my friends, sandy, an airline pilot who describes his job as hours of boredom punctuated by moments of terror. stephanie: hours of boredom punctuated by moments of terror. howard: i think that is right. this is one of the last six weeks in the stock market have been one of those moments of terror, but it is normal.
the reasons are not quite normal, but we have kind of one-off. i think people have gotten used to dealing with normal economic cycles -- recession, recovery, etc., but we have now kind of cosmic issues that people do not have any experience with and do not know how. china, oil, rates, terrorism are just for example is. stephanie: is the fear exaggerated or punctuated by the presidential election? when you see donald trump putting fear in the economy, speaking and declared a statement, does that affect the market? howard: i cannot tell you definitively because i do not have any research on the subject, but i would guess so. they are scaring the hell out of people. donald says the chinese are killing us. the mexicans are killing us, the japanese are killing us, but we are going to get the jobs back.
shery: you are watching "bloomberg best." i am shery ahn. this week, the singapore airshow brought together the biggest players in the aviation industry from top airline executives to manufacturing ceo's. my colleagues has haslinda amin and stephen engle were there to cover it from every angle. haslinda: airlines enjoyed the most profitable year in 2015, and expect further gains.
tony tyler joins us this morning. such optimism, tony. tony: we are forecasting airline profits globally for the morning. it is up 33 billion dollars over last year. that forecast was made last december, and we will be updating it in june. a lot will happen between december and june. the fuel price coming down as a large part to play in that. haslinda: china is going down. why isn't china a risk to the aviation sector? tony: you are right, china's economy is slowing down, although air travel is not slowing so much because the economy is reshaping itself, restructuring itself, and consumers are spending a bit more, and they are spending on travel. so we are not seeing it as such a big factor at the moment. fabrice: i think we are firm. the board will be above one, and
it means we will consult it a backlog of 6800 aircraft. stephen: low-cost carriers in this part of the world, what are you seeing? fabrice: many people talk about it, but we do not yet. the reality is we have customers, so profitable, so it is true as well that the segment is very dynamic, so there is a lot of growth. there is a big surprise among some competitors. so all in all, i can confirm that we see it and for a simple reason. asia accounts now for 40%. so this is the area of growth, and it will continue, except if everything collapses, but this
is not the prediction. haslinda: airlines undergoing a massive restructuring because of massive losses amounting to more than $1 billion. already cut most of the european group. christoph: we are refocusing on emerging economies, strong gdp growths, and creating new relationships between malaysia and those countries, the most prominent being china. no more cuts to be expected. we will change it every year, like every airline. we did not have enough work for all the people we employed, so that was very unfortunate, but also that is over. haslinda: how does it look in
asia? what does it look like? john: globally, we expect about 350 aircraft in space, 25% of that is going to come from asia, including china. so it is an enormous possibility for us. we have 20 customers in 11 countries with over 200 aircraft flying in the region. we have a lot more work to do in this region. a big operation in beijing. we are committed to the region we want to grow here. haslind: but you will face increasing competition. japan's mitsubishi aircraft trying to get into the space you are in. you have dominated this for a long time, but competition is heating up. john: those competitors book and where we are. they are at the low end. part of our view on competition is we take them all seriously
whether they come from russia, japan, or china. there is no arrogance or hubris when we think about our competitors area what we can do to address the competition is try to improve our offering on a can distance -- on a consistent basis. haslinda: the regulations and orders amounting to about $1 billion. yugo: thank you very much. haslinda: so your orders so far from japan, the u.s. -- how about the rest of asia? what are you doing to gain? yugo: asia is the most expanding region, and we are doing our best in this region, and we feel it very strong potential. haslinda: how do you view the competition, because you have to break the duopoly. are you prepared for that? can you do it? yugo: first of all, we are the newcomers. we have designed aircraft that has a huge advantage compared to the existing product. so with these frank, strong
points, -- haslinda: what is your competitive advantage, and houston can you make -- how soon can you make it? yugo: our product is pure consumption. our product will have better consumption by more than 3%, and this will save the field last very much -- the fuel costs there he much for airline customers. akbar: i do not think it is a good idea for oil prices to be below $50 a barrel. it is not good for the economy is, it is not good for airlines. it is not increase the bottom line is much as i would like to because as i said earlier, because people travel less, and of his same time, because people are traveling less, we have capacity.
there is competition for this capacity, so it is downward. stephen: how are you hedged? akbar: we are hedged only a small amount of fuel, but at a very high price. i hope that we will be able to hedge waiting for the oil price to go, and it needs to be below $30 a barrel for me to take a hedge against that big amount. stephen: do you expect it to? akbar: you never know. it is fluctuating so much. either it will go this way or that way, but we hope it will increase because we want businesses to increase. people expect because of lower oil prices we're going to reduce our affairs. -- fares. yes, we have produced by giving passengers the fuel surcharge we used to charge, but they should not expect too much reduction in fares, because when oil prices reached nearly $150, we did not increase our fares 150%.
shery: as we wrap up this edition of "bloomberg best," let's take a look at some of the week's most interesting and entertaining charts. tom: let's go to our single best chart. i did not know what this chart would look like when we made it, but has to do a lot with education matters. going back 25 years, that is the growth in employment of those with a college degree versus those without a single bit of
college as well. the starkness of that -- you can see the tensions of 2007 and 2008 -- everybody flattens and rolls over, and the college degrees, professor porter, just take it right up. prof. porter: scale is powerful, and people with scale are doing well in america and other parts of the world. the college degree has in the ticket to that definition of being scaled and being educated. brendan: today, we will play the game called guess the european periphery economy. right here, we have got gdp growth. it looks reasonable, up at 3.9%. anybody would dream about that kind of growth right now. correspondingly, this is the spread against german bund going down, down, good gdp growth, things are looking great. something happens, however. right now for the last two years, that has been rising. someone tell me there is a clue
in the colors. stephanie: pink is supposed to give us a call? brendan: that is red and white, the colors of russia. you are supposed to figure it out. >> that stumps the judges. brendan: poland's justice party, you have good economic growth, bad -- >> so taylor swift wins three grammys, won album of the year for "1989." 1989 is the year she was born. what if you had invested as her parents in various assets the day she was born december 13, 1989? look what i came up with. they had, of course, being americans, would only invest in assets and the dollars. you invest in the s&p 500 are you are sitting on returns of
446%. you decide to put your money into gold. you are sitting on returns of 190%. the dollar index gives he returns up 2%, and the yield on the 10-year treasury has come from 7.8% to 1.75%. so if you are mr. and mrs. swift, you're not only happy that you produce taylor, but your portfolio of u.s. dollar assets has done remarkably well. well done, mr. and mrs. swift. shery: that is it for "bloomberg best" this week. remember, you can always find the latest business news from around the world at bloomberg.com. i am shery ahn. thank you for watching bloomberg television. ♪
carol: welcome to bloomberg businessweek. coming up, we profile one of the most important and least known members of a leadership team at apple. why marco rubio is one of the presidential candidates looking to connect with the hot brand for political gain. the alamo drafthouse dine in movie theater may be the back to the future answer you're looking for. other stories that caught my eye, writing about antonin scalia and the impact he has had in class action suits.