tv Bloomberg Best Bloomberg February 27, 2016 8:00am-9:01am EST
vonnie: coming up on "bloomberg best," the stories that shaped the week in business around the world. the pound dropped. could rates the next to fall? donald trump stays on a primary winning streak. >> can you stop him, and where? ofnie: from the frontiers innovation to the frontiers of opportunity -- insight from the leading edge of technology and adjustment. -- >> 5g is exciting, but it is 4, 5 years away. >> there is tremendous demand. ourie: our profile --
guests is headlined by bill and melinda gates. mr. gates: you look down the road. vonnie: it is all straight ahead on "bloomberg best." vonnie: hello, i am vonnie quinn, and welcome to "bloomberg best." us begin with a day by day look at the top headlines. with the june 23 date set for a u.k. referendum on eu membership, campaign season on brexit began in earnest monday, and it was an immediate financial and economic impact. cameron answering questions from lawmakers in the house of commons. these are live pictures you are
watching. david cameron has made the case , buttaying in the union the campaign, is it all about volatility -- doesn't really matter how many people turnover to the boris johnson's fight? one of the most recognizable politicians in the u.k. and his decision to support brexit has had quite an effect on the pound. jon: we have a chart -- is the brexit risk premium exaggerated? rob: we have been arguing for many months, it is something investors need to take notice of . events over the weekend are risk.ially raising the whereas now having a referendum
date, the issue is a lot more tradable than it was. the possibility the so-called brexit continuing to weigh on the pound today. bank of england governor mark carney said the central bank is doing contingency planning. governor kearney -- governor carney: this has enhanced uncertainty, and that will have an effect on the markets. mark carney recognize that and said they will make plans. this is a global event and it might well have an impact on global financial markets. this is raised uncertainty on the world's biggest economy. alix: six months ago, we were talking about the possibility of a rate hike. now it seems like a hike is off the table, but the probability of a cut has risen. what will we see first -- a height -- hike for a cut? mr. blanche faller: -- mr.
blanchflower: i think in short order, we will see rate cuts. in the u k there are more -- there is more moved to maneuver. that was the talk today. the markets probably got it right. vonnie: another big win for donald trump. he won the nevada caucuses by a rubioargin, topping marco and ted cruz by more than 20 percentage points. win for donald trump, not just because it is three states in a row, but the margin of victory for which you mention, is just massive. if you add up the second and third place republicans, they do trump's numberld headed together. tuesday, had of super can the momentum we stopped here? en: that is the question.
ted cruz is investing in his home state of texas. he is leading in the polls there. it would be a big state for ted cruz to lose. a firewall. if he loses that, where can ted cruz when --win? he has been investing a lot of the south. donald trump -- this is his territory. others will try to cherry pick certain states. the real question is whether or not donald trump code, as it seems like he has done in the last three contests, suite a majority of -- suite a majority of the contests, and in the question is how to stop them, and where? ry: it has been an active day of comments from both sides in the battle for encryption. argument here is about fighting terrorism. that is the government is
putting forward -- it is about one phone and stopping terrorists. what you make of the apple response saying it is not about terrorism, and it is not about one phone? >> apple has a good response. they hinge on two things -- one is it is unreasonable burden to comply. they are saying it will take two to six weeks and four to 10 engineers. they say this impinges on first amendment rights by code being speech, and they do not want to write code that makes them do something they do not believe in. this is a strong case, but the justice department did not take the battle if they did -- pick the battle if they didn't think they had a good case. ford: it is not an insane thing to say if you are working in the industry -- it is almost
like you're talking to other programmers and the computer. cory: is the privacy argument enough to carry the day here? mr. white: it is not, in my view. in reality -- we seat privacy all the time. de: it is not, in my view. we seat privacy all the time. has said they have multiple policy risks to assess downside risks. >> i was at this stage. we should know he was speaking in english, which shows you he was catering to a mostly international audience, at least at that time. to ease.here is a need interest rates -- real rates are on the way up, and the real
debate -- what was not answered, if you will, was how they plan to do that. we are in a situation where capital outflows are getting exacerbated by speculation that the abo see will ease. they cannot exactly cut rates. he also made the point on speculation that there is absolutely no basis whatsoever. look at the fundamentals of the chinese economy -- there is no basis for a persistent decline in the value of the remnant be. theyspeaks volumes to what are now using to turn off -- if you will, the speculation that the yuan will fall further. it has gotten expensive. massivee seen a drawdown on the reserves, which he says is not a trend. beenis that people have talking about -- they need to manage expectations. later, tech leaders tell us what is on the horizon for and u.s. treasury
vonnie: welcome back to "bloomberg best." i am vonnie quinn. let's go around the world with a look back at the major company news -- banking and commodity firms have been hit harder this season, and it appears their struggles are far from over. hsbc, europe's biggest bank, down today, posting its first quarterly loss in more than five years. shares were off as much as .5%. why do we have this loss? -- hsbcbe is suffering
is suffering along with the commodities crash. it has shown loan impairments increasing, slowing down of the loans they have been able to give in the regions. under certain risk controls, it expand ase to aggressively as they planned. the ceo said they are slowing a job higher program in china by two years, and they will also not put $100 billion of assets in the country as quickly as they planned. what we see is ambitions to expand in china check by the macro environment, and he is looking like he will have to find a plan b. mark: that is the big question -- we have had measures announced in june -- cutting 25,000 jobs. is plan be more cuts? stephen: plan b might very well be more cuts. already announced
might not go far enough in the current environment. curiously, the only division ii report an increase in fourth-quarter profit -- division to report an increase in the fourth quarter profit. >> it was better than analysts expected, and in the higher range of the company forecast. cheaper oil helps to boost growth. half a billion in share buyback. why not a dividend? >> because of the cumulative tax losses we have had the last two years, we do not have a huge amount of frank dividends which is important for the australian shareholders. after having a look at the best way of returning the surplus cash we have to shareholders, we
and the board felt buyback was the most efficient way to do that. itshp billiton has cut dividend for the first time in 90 years. underline profit came in at $412 million in the six months to the end of december, compared to 4.9 billion dollars earlier. towhat are they doing counter the downturn -- how do you deal with the headwinds? sharea nutshell, it is and spend less. they will cut spending in the following year by about $2 billion. it is really about the dividend. they are joining a lot of companies saying with us commodity cycle we cannot guarantee greater dividends. tom: how are you going to cut expenses one 90% of your delta on your -- when 90% of your delta on your incomes they went is that?ome statement
>> we have been a good job cutting debt. in this financial year, we are guiding another 2.1 alien dollars of productivity gains. having said all that, clearly in the space of 30% reduction in prices, you cannot make up for that. that is the reality of a cyclical industry. >> time inc. is interested in buying yahoo!'s core business. they are competing with firms like bain capital, and tpg. -->> how would good deal how would the deal work? offhen one company spins assets, they merge it in a stock for stock deal.
time is well-sized for this transaction to go through. it would be tax-free, which are be some benefit to you all. >> this would be a disaster -- i think time incorporated is a struggling company that is struggling to find itself in the digital world, little mobile digital world. -- let alone the mobile digital work. putting these companies together would be a mistake. hotels saysinental it plans to return $1.5 billion to shareholders in the form of a special dividend. we are joined from the london stock exchange by the company ceo richard solomons. aboutrket was looking for one billion. you're gone for $1.5 billion. why the exercise? -- the extra size? a goodomons: we have had year, prospects look good, so we have increased our regular
dividend, and as you said, we are returning $1.5 billion to shareholders, which will make about $12 billion since we became a business. it is another step on the road. -- oneuncing a shakeup year after the carmaker replaced its chief executive. who is in, who is out? >> we heard the president speaking earlier this morning. he is still holding these press conferences in tokyo. out, have a look at who is tonges see the chairman retire in june, part of the management shakeup that was the eight other executives leave the company. , we have seen ike 1983.ve the job since it shows how honda has underperformed peers.
it has fallen 18% since april, 2013. compare that to the blue line. toyota. they gains of 23% under the same period. stephanie: shares of jpmorgan are trading down after the bank held its annual investor conference. sales and trade revenue was down 20% so far this year due to market turmoil and lower fees. >> it is a tough environment -- lower rates, lower stocks, low capital markets. stephanie: investors sitting in cash. >> so the expectations are pushed out to next year. it is delayed. that was the bad news. it is the bad news. stephanie: what did you ask jamie? : my question was is it good to be -- why is a good to
be a big bank? the public dislikes big big -- banks. was because a 787 is a safe airline. i think he should have elaborated. he could've given a better answer. i think jamie dimon struck out on that last answer. >> shares tumbled after foxconn said they would buy the troubled electronics maker, and then postponed the deal. what went wrong? terseconn issued a release the same new information has come from sharp and they require more time to discuss it. our sources tell us the point of contention is something called contingent liabilities -- these are costs related to potential, possible restructuring and layoffs. sources are saying they could be a nexus of $300 billion, but could also be a lot less. at this point, without knowing
vonnie: you are watching ."loomberg best i am vonnie quinn. a showcase for dazzling new gadgets -- check out these images. it was also an industry summit featuring influential leaders such as mark zuckerberg, who publicly backed apple in its dispute over privacy with u.s. authorities. caroline hyde was there to cover the news and gather interviews. caroline: we see the subjects being debated by mark zuckerberg -- i merely his own wealth. remember the 99% given away --
why wasn't that a foundation? he also discussed his disappointment that india has banned the use of free basic -- free access to certain websites like facebook, wikipedia. that has been banned. notably, the shift to video -- 360 degree video, and what is needed for the telecom equipment makers and operators that she needs them to stopping competitive and become vacant. we spoke to jason taylor, head of infrastructure for facebook. mr. taylor: building infrastructure is a fundamentally hard thing to do, and if we solve a problem through this project, or, say, an operator solves a problem, and they share it through this project, the odds of their neighbor, maybe one of their competitors actually seeing the same bottleneck are probably really low, but that idea or that particular solution will probably find a home somewhere
else over the globe. caroline: mark zuckerberg -- a bit of a call to arms just today, getting operators, equipment makers to push together 5g g. where are you in the 5g spectrum because i know you are looking for digit announcements -- new initiatives with many of the players. >> we are. we are working on technology, the processing capability to support 5g. as we look at the future, the so-called internet of things, with 40 or 50 pieces, by 2020, it will required technology to facilitate that. we want to provide that not only on the endpoint, the mobile wallet, connecting cars, connecting devices, but also in the structure to facilitate that. ofoline: what sort investment is needed to get to the end goal -- whatever 5g actually is -- we do not have the exact recommendation?
>> it requires all the companies to work together, making sure we have a common platform to support that, and provide the the ability to move data in an efficient manner. think about the bandwidth required to support that. caroline: are you worried about the section -- saturation in the smartphone market? >> not at all. the smartphone begun 7, 8 years ago. we're not worried about that. we still see growth from the os side and the hardware side. it is still growing. there's a lot of gas in the tank. what is exciting is what is behind the glass. the innovation will be behind it -- what drives it, and how we solve problems for our customers. caroline: when you say it is
still growing, do you see demand for higher end phones at the same pace? mr. lurie: same pace is a different discussion, but it is still growing. we see it really everywhere. everyone wants a smartphone, and 90% of what comes on to our network are smartphones. caroline: already you are envisioning 5g -- the next way you and i can get download speed even faster. you have teamed up with intel, ericsson, but facebook is calling for everyone to work together, share learnings, get 5g out there faster. do you agree? mr. lurie: what everyone is saying is we want broadband everywhere -- we want broadband to be unicredit. it is 4, 5ing, but years away. first of all, let's maximize what we have today. there are advantages in the next generation, but what we have today is awesome.
caroline: what size of market will we get to in terms of the internet of things -- have you done much thinking about the scale -- the next scale? numberillion was the last year, and jim littell billy it is around 75 billion, or even more by now. t will be a huge market. there are many forecasts for how big this will be. wrong,etty sure they are but i am certain this will be a big market that brings new opportunities, markets. caroline: also new risks. s: i have been talking about security. it is the theme at the moment. it is conventional computing -- websites being hacked. deployed, you have to talk about security in a different way. the good news is now is the right time to do it.
the technology is in its infancy. we are working on some of the low-level building blocks to allow secure software to be built on top of secure hardware architecture. paint a picture for me -- carolyn: paint a picture for me in the next few years. when will i not be driving -- one not need to do any of that? >> what we have said in the past is we will probably see by the end of the decade somebody willing to is a fully economist vehicle --autonomous vehicle. caroline: lily bu? -- will it be you? mr. fields: it could be. the level we are shooting for is to come up with a vehicle where the driver does not have to take control in a defined area, but when we come out with one, we want to make sure it is true to our brand, and our brand has
been about accessibility -- make sure it is accessible to millions, and not just folks that by luxury vehicles. you,ine: who wins out -- google, apple -- do they become your competition? view is we want to make sure we are a leader in the area. it is interesting to it we are not only a leader in our core business, great cars and trucks, a we are a leader in semi-tommy -- semi at thomas features -- semi autonomous features, things that will adapt your speed on the highway. we are a leader there. we are tripling our engineering investment in semi-autonomous features. at the same time, we're also investing in autonomous vehicles, and as we do that, we will work with a lot of different partners, so our clear goal is to make sure we are a leader in this space, and where it makes sense to work with others, we will, and where it
vonnie: welcome back tovonnie: "bloomberg best." i am vonnie quinn. u.s. treasury secretary jack lew frankly assessing economic backdrop to the g-20 summit. let's start with bill and melinda gates who joined bloomberg to discuss their annual letter. they shared their thoughts on the state of american business and its potential. sectore in the tech amazing novation.
i see in the health sector fantastic innovation whether it is stem cells or genetic editing. i see in the energy and materials sector real opportunities for breakthroughs. we are able to understand the basic physics of materials and catalysts. >> it is interesting you say that. you and i have argued about this for a long time. you look at energy and we keep hoping for this to come through. all the things we keep hoping are going to change have not yet come through. energy seems to be an exception. ironically for the climate challenge, the hydrocarbon area has been the most innovative. particularly now that you have slack in demand. the cost reduction work they are doing about the inputs they have makes the bar tougher for the clean solution to come along. but energy is cheaper.
paths to see so many get an energy solution, i think the chance in the next 15 years we did get the breakthroughs is very high. that is an optimistic view, but it is based on my view of the science. you have long-term views and take long-term action. are you concerned more of the world has followed into a short-term mindset and business practice? melinda: we try to promote the idea you have to go long-term. if you don't, you will have these acute crises. what you are seeing in europe with the refugee crisis is not just because of conflict. that is because people cannot find economic opportunity in their own area so they move. if we make the right long-term investments in these places, people want to stay where they are if they can be healthy and get a job. we feel you have to always focus on the long-term.
we are always coming back to that message because it is important. stephanie: you live your lives that way. how do you make this a call to action for others? c.e.o.'s today cannot because they have shareholders and activists banging down the door and regular americans don't have the means to make long-term decisions. bill: best government is where you look down the road 10 or 20 years and build the institutions that will help you. the united states is the envy of the world because our universities and national laboratories in all the key areas driving change are set. any ofs, i.t., biology, those specific areas. continuing to drive that forward is why the u.s. economy is somewhat better off than most of the others. >> it is unacceptable to target
exchange rates to gain unfair advantage outside of your country. a question of who gets more of the existing pie. it does not grow the pie. as i talked to my counterparts, they want to be clear that is not a direction the world community can go in. i'm hoping the g-20 reinforces that. let's be here business leaders say the problem is a demand problem at this point. what could be done? do you hope the agreement does have specifics about how global demand could be stimulated? think this isn't a moment in time where you see individual countries make specific commitments made in other contexts marked by real crisis. this is not a moment of crisis. this is a moment where you have real economies doing better than markets think in some cases. you have a future that could be
influenced very much by the kind of policies i am describing. the idea is how to avoid having things go to a place you don't want them to go. that is a different conversation than what you do in the middle of a full-blown crisis. the only time you see the kinds of detail is once you have gotten beyond the point. i am hopeful the kind of conversation i am describing moves the dial. whatuld you take off as you see as the biggest risks to stability in europe? >> there are factors we have to see. there are specific reforms that have to be undertaken. there is a certain risk this low interest rate environment gives incentives for budgetary consideration and with respect to structural reforms.
finished. has germany is in this camp that perhaps our challenges are more long-term. they are there. we have to act and not aggravate the problems with actions. this is one. level,t the european there are decisions that can influence positively long-term growth rates. creation of the single market digital products but also the capital markets. most importantly is a consistent framework for our european union which consists of one long-term policy combined with 19 independent fiscal policies. this creates specific challenges of aligning liability control. vonnie: i want to ask you first
about brexit. c.e.o.'s of european got together and said it would be a bad thing for eurozone and european business. do you feel the same way? >> i think when david cameron spoke of the referendum, it he made a huge mistake. we are seeing the result of that mistake. i'm very much in favor of the u.k. inside europe, provided they are playing the game of the union. more today, they are much selfish and it is breaking down the e.u. with a lot of people wanting each one to have a different status. is that u.k.sult statusve a very specific
and there is no du because of them, i prefer they go on their own. this would be much worse for them than for the european union. >> talk of the brexit. you have been very much in favor believe,g -- saying i how do you game this out as the rhetoric heats up? >> i think it is going to be a close call. it was looking much more likely the vote would be to stay in before boris and carly fiorina. boris is an incredibly charismatic human being. he has an enormous amount of energy. he is an incredible self promoter. the risk for the camp that wants to stay in is that boris galvanizes the league camp -- le
he acts as a figurehead, and you have a population voting as an x factor. for the exciting boris not thinking about the tragedy for europe and the u.k. if we left the e.u. >> how much does it affect ipo's and m&a leading up to it? >> i think it would affect it more as we get closer. the same way the u.s. election will affect people more as it gets closer. it is a very scary year. you have the risk the u.k. leaves the european union. you have a u.s. election where trump is continuing to defy expectations. people in europe have no idea what that would bring. in france, you have the rise of le pen. right around the restroom world, you have a tremendous -- right around the western world, you have tremendous uncertainty. the only place that seems
vonnie: you are watching "bloomberg best." i am vonnie quinn. this week, bloomberg hosted the inaugural africa business and economic summit bringing game changers from across the african continent together with seo's, investors, and policymakers from around the world. under discussion, the opportunities and challenges for investment and growth in africa. erik schatzker was there to speak with business leaders who understand both. erik: you championed africa and barclays business when you are c.e.o. of the bank. possible that tuesday we will find out barclays is exiting all or part of its investments in africa.
simple question. will barclays regret that move? will it look at it as a mistake? >> i know barclays business in africa very well. i know it from the time i was there. i don't know anything about an announcement on tuesday, so that is news to me. i also respected incredibly as a competitor of that business now. barclays africa is a terrific platform. , i think they are top three in nine or 10 of those countries. i think barclays has done well, particularly in getting synergies from clients and products. the credit card technology developed in the u.k. has come to africa as an example. they have done a terrific job connecting corporate's in the u.s. and u.k. who have businesses in africa here. erik: you make it sound like a business they should want to keep. question you should ask
is what is the problem you're trying to sell. i think it is not is barclays africa a terrific business, it is is it a global bank -- is a global bank the right owner from a capital point of view? erik: is it? years,the last 20 or 30 being large and global and owning markets and the emerging markets brought capital synergies. today, the best model is a regional model, not a global model. the issues they face is the regulatory requirement to hold 100% capital when they have 62% economic ownership. it is a tax on the global balance sheet as opposed to just the domestic balance sheet. some of the impact on the earnings, i think the last time a cell barclays africa earnings it was a 16% r.o.e., so a pretty good standalone business. erik: what people talk about what they talk about investing in africa is for capital to be deployed in a way that is
sustainable, that promotes governments. -- governance. how do you balance your need an obligation to do that with another need, that of delivering a need to your share --returned your shareholders? >> this is a great story about africa. you look at the returns would can get on something like a wind power investment, a wind farm. i was yesterday at home field. they were looking at a gross return of over 20%. even if you adjust down for a 5% appreciation of the currency, ignoring we had some big step says last year, you have to that is still net after all expenses a return well into double digits. erik: on a currency
adjusted net basis. >> that is the story. you have to be patient capital investor. there is no way you can come in and out in a short time. erik: g.e. has tripled its revenue in africa since 2011 from about $1 billion to more than $3.5 billion. can you do that again in the next four to five years? >> i hope so. that would be the goal. erik: what is realistic? >> i would say maybe double, that would be helpful. to buildis we continue pace that builds back block that we deliver on over the next three to four years. somewhere hopefully in the three to five range. power is the big one. here, our oilot and gas business was our biggest business. it still is. percentagewise, it is getting less as the other businesses grow. power is a huge opportunity. there is true and is demand. health care is another huge one
and then rail. erik: we know growth is slowing. we know economic fundamentals are deteriorating and fiscal budgets are under a tremendous amount of pressure. how much riskier does that make it for banks like yours operating in africa? >> what is interesting is if you look at how we were running our businesses before the global financial crisis, you take the south african banking system, it came through the global crisis without any banks requiring to be bailed out. i think what we have got is a very strong banking system going into choppy waters. erik: you continue to deploy capital. that is not the case for many foreign investors. africa,ase of south there are investment outflows. the same could be said for many other countries in the region. what is this going to mean for what is consonant badly needs? more rails, more water, more electricity? >> it makes it harder to finance
the requirements for growth on the african client ms contin it. hopefully we will see at the time investors start taking money out of these geographies, that creates opportunities for other investors to start to come in. if you take south africa now, the rand depreciated last year by 25% against the dollar. if you look at the rand measured against purchasing power parody, demand is about 20% undervalued. tohas always trended back purchasing power parity overtime. ♪
transformations in human history that have not happened yet. it looks at the oil glut we are expensing now and how it could create unforeseen demand for electric cars. >> the world is running out of oil. least, that was the idea behind the peak oil that dominated economic thinking for decades. it turns out with fracking, deepwater drilling, and oil sands, there's a lot more oil in the world than we once thought. peak oil eight happening. out if instead of running of oil, we just stop buying stuff? there are one billion task is in cars on the road worldwide today and only .1% have a plug. even by 2040, they will make up just 1%. but don't be so sure. s curves are used to describe the spread of new technology
over time like refrigerators and color tvs. when the product starts to connect with everyday people, we have liftoff. eventually, the market gets saturated and growth tapers off. predicting s curves for electric cars is extreme difficult because we are making assumptions about demand for a type of vehicle that does not exist yet. fast, affordable, and spacious cars that have a range of 200 to 300 miles. here is what we know. in the next few years, tesla, nissan, and chevy pledges to selling long-range electric cars in the $30,000 range. other companies are investing billions on dozens of new models due out in the next four years. by 2020, some of these will be faster, safer, cheaper, and more convenient than the gasoline counterparts. like the plan when the escargots vertical. to start an oil crash, he just
need to reduce the number enough to cause a glut of unwanted oil. consider the oil crash that started in 2014. that was caused by too much supply. when producers started pumping out an extra 2 million barrels a day. when electric vehicles are able to displace that much on the demand side, you should also see a crash. when light that happen --when might that happen? tesla is building factories to go to 500,000 sales in 2020. let's assume tesla can meet its own forecast. let's assume other carmakers maintain their current market share. if each electric vehicle displaces 15 barrels a year, using the -- here is the impact. at this rate, we hit our benchmark of 2 billion barrels displaced a day as early as 2023. that is an oil crisis. the thing is, that is just the
beginning. it is not unreasonable to send by 2040 nearly half of the world's new cars will have a plug. sure, you are skeptical. the price of electric cars still needs to come down. there are not enough fast charging stations for convenient long-distance road trips. many new drivers in developing countries are still going to choose gasoline and diesel. imagine a future where the streets of new york and new delhi suddenly fall silent electric engines. one if global demand for oil starts to fall? trillions invested in oil will be lost while trillions in new energy will be won. the power of nations will be shuffled. that is the promise of the new peak oil, and it may be coming sooner than you think. vonnie: of course, you can always find more stories like these as well latest business news from around the world at bloomberg.com. that is offer this edition of "bloomberg best." i am vonnie quinn.
>> so much news over the place. the republican establishment versus donald trump. >> we are going to show you some of our key interviews with the former romney advisor, the actor danny glover, and more. but first, donald trump heading toward super tuesday. forward forthe path republican candidates hoping to get their party nomination. >>