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tv   Bloomberg Best  Bloomberg  February 27, 2016 11:00am-12:01pm EST

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♪ vonnie: coming up on "bloomberg best," the stories that shaped the week in business around the world. as the brexit nears, the pound dropped. could rates the next to fall? donald trump stays on a primary winning streak. >> the big question is can you stop him, and where? vonnie: from the frontiers of innovation to the frontiers of opportunity at bloomberg's africa summit. we got insight from the leading edge of technology and adjustment. >> 5g is exciting, but it is 4, 5 years away. is a huge opportunity. there is tremendous demand. vonnie: our roster of high profile guests are headlined by bill and melinda gates.
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mr. gates: the best governance is where you look down the road 10 to 20 years. and oil with the future of electric cars. it is all straight ahead on "bloomberg best." ♪ vonnie: hello, i am vonnie quinn. welcome to "bloomberg best." a weekly look at the most important business news and analysis from around the world. let's 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. there was an immediate financial and economic impact. u.k. prime minister david cameron answering questions from lawmakers in the house of commons. these are live pictures you are watching.
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cameron has been making the case for staying in the european union. but cameron's stance is suffering a setback as long as the london mayor is rallying for a brexit. does it really not matter how many people turnover to the force johnson side? >> he is 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 that shows the odds, the risks of a brexit. is the brexit risk premium exaggerated? rob: there does seem to be a serious risk of brexit. it is something we are arguing for months that investors need to take notice of. events over the weekend are potentially raising the risk. because of boris johnson. but it is actually now having a referendum date, the issue is a
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lot more tradable than it was. alix: the possibility the so-called brexit continuing to weigh on the pound today. which is near its lowest level against the dollar since 2009. addressing lawmakers in london today, bank of england governor mark carney said the central bank is doing contingency planning. mr. blanchflower: this has enhanced uncertainty. so this will have a big impact on the markets. mark carney recognize that and said they will make plans. but this is obviously a global event and might well have an impact on global financial markets. this has raised uncertainty in the world's biggest economy. fifth alix: six months ago, we were talking about the possibility of a rate hike for the bank of england. seems like a hike is totally off the table this year. but the probability of a cut has risen 22% in what will we see december. first -- a hike or a cut? mr. blanchflower: i think in
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2016, perhaps in short order we , will see rate cuts. and perhaps more qe. in the u.k., there is more move to maneuver. rates are at .5%. there is more move 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 wide margin with nearly 46% of the vote topping marco rubio and , ted cruz by more than 20 percentage points. on hiss predicting he is way to lock up the republican nomination. >> it is a big win for donald trump, not just because it is three states in a row. obviously he has momentum. but the margin of victory, which you mention, is just massive. if you add up the second and third place republicans, marco rubio and ted cruz they do not , reach donald trump's number headed together. vonnie: ahead of super tuesday, with home states involved, can the momentum be stopped here?
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steven: that is the question. ted cruz is investing in his home state of texas. he is leading in the polls there over donald trump. it would be a big state for ted cruz to lose. a firewall, so to speak. if he loses that, where can ted cruz win? ted cruz has been investing a lot in the south. donald trump -- this is his territory. other candidates will try to cherry pick delegates here or there. weather in southern states or in certain districts that reward large delegates. the real question is whether or not donald trump could as it , seems like he has done in the last three contests, sweep a majority of the contests, and the question is how to stop them, and where? cory: it has been an active day of comments from both sides in the battle for encryption. a court filing from apple insisting the justice department is overstepping authority by demanding they unlock one of the iphones used by one of these san
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bernardino attackers. the argument here is about fighting terrorism. that is what 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. when you read the ruling, they to saying it will take two four weeks and six to 10 engineers to write the code. they say this impinges on first amendment rights by code being speech, and they do not want to write code that compels them to do something they do not believe in. this is a strong case. but the justice department did not pick the battle if they didn't think they had a good case. >> but a lot of code functions as speech. it gets shared as much between people as it is being used. it is not an insane thing to say if you are aware of how the
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industry works. 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. ziade: it is really not, in my view, because in reality, we cede privacy all the time. certain facts and evidence is put forth, we find ourselves in a situation where privacy has to for our safety. started withting the g-20 in shanghai, but china signaled they are open to more easing. china has said they have multiple policies to assess any downside risks. >> i was at the speech where the poc governor was speaking. we should note he was speaking in english which shows you he , was catering to a mostly international audience, at least at that time. he said there is a need to ease. but we know that. interest rates -- real rates are on the way out.
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the real debate and what was not answered was how they plan to do that. we are in a situation, now, in china where capital outflows are getting exacerbated by speculation that the pboc will ease. they cannot exactly cut rates. he also made the point on speculation that there is absolutely no basis whatsoever. you look at the fundamentals of the chinese economy. no basis for a persistent decline in the value of the renminbi. i guess that speaks volumes to what they are now using to turn the if you will, and all of speculation that the yuan will fall further. it has gone very expensive to defend it. they have seen a massive drawdown on those reserves which , he says is not a trend. i guess that is what a lot of people have been talking about. come out andd to manage expectations. vonnie: later, tech leaders tell us what is on the horizon for
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smartphones. and u.s. treasury secretary jack lew says we are not in a moment of economic crisis. but next, more news in the world of business with big companies facing very big questions. ♪
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♪ vonnie: welcome back to "bloomberg best." i am vonnie quinn. let's go around the world with a look back at the week's major company news. banking and commodity firms have been hit especially hard this earnings season and it appears , their struggles are far from over. >> shares of hsbc, europe's biggest bank, down today, posted its first quarterly loss in more than five years. shares were off as much as .5%. why do we have this unexpected loss? >> hsbc is suffering along with asian commodities.
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and with the commodities crash, it really has shown loan impairments increasing. it has shown a slowing down of the loans they have been able to give in the regions. under certain risk controls, it is not able to expand as aggressively as it had planned. when i spoke to the ceo they are , slowing a job hire program in china by two years, and they will also not put $100 billion of assets in the country as quickly as they planned. so what we are really seeing is ambitions to expand in china checked by the macro environment here. it is looking like he will have to find a plan b. mark: that is the big question . we have had measures announcements in june to cut 25,000 jobs. is plan b more cuts? stephen: plan b might very well be more cuts. speculation from analysts when the results came out where that the program already announced might not go far enough in the
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current environment. curiously, the only division to report an increase in fourth-quarter profit is the investment bank. it is earlier case of the investment bank propping up the consumer and what divisions. >> qantas shares take a dive in sydney, this by rising to a record 660 $6 million in the first half of the fiscal year. that was better than analysts expected, and in the higher range of the company forecast. cheaper oil also helped boost growth. you decided half a billion in terms of a share buyback. why not a dividend? >> because of the cumulative tax losses that we have had the last few years, we do not have a huge amount of frank credits left to pay frank dividends which is important for the australian shareholders. after having a look at the best way of returning the surplus cash that we have to shareholders, we and the board felt buyback was the most efficient way to do that.
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>> bhp billiton has cut its dividend for the first time in 15 years. a reported a 92% drop in first half profits. underline profit came in at $412 million in the six months to the end of december, compared to $4.9 billion a year earlier. >> what are they doing in this business to counter the downturn. how do you deal with the headwinds? >> in a nutshell, it is share and spend less. they will cut spending in the following year by about $2 billion. but it is really about the dividend. they are joining a lot of companies, saying with this kind of commodity cycle we cannot guarantee greater dividends. tom: how are you going to cut expenses when 90%-some of your delta on your income statement is price changing commodities? how much more fat is there to cut? >> we have done an outstanding job in cutting costs.
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we have productivity gains of $10 billion the past three years. we think that will continue to be an important factor. in this financial year, we are guiding another $2.1 billion 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 possibly buying yahoo!'s core business. verizon,ompeting with at&t, and comcast, as well as buyout firms like bain capital and tpg. how would this work? >> the structure would be this reverse markets trust. that is lingo for when one company spins off assets, they merge it in a stock for stock deal with a company that is slightly smaller than it. so time is well-sized for this transaction to go through.
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it would be a tax-free transaction, which would be some benefit for yahoo!. >> this would be a disaster. time inc. is a struggling company that is struggling to find itself in the digital world, let alone the mobile digital work. so i think you have -- putting these two companies together would be a mistake. >> intercontinental hotels says 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. good morning. the market was looking for around $1 billion. you have gone for $1.5 billion. why the extra size? mr. solomons: we have completed our proposal program. we had a good year. prospects look good.
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so we increased our regular dividend by 10%. and as you said, we are returning $1.5 billion to shareholders, which will make about $12 billion since we became an independent business. it is another step on the road. >> honda announcing a shakeup at the top with quality concerns persisting a year after the carmaker replaced its chief executive. who is in, who is out? takahirord president speaking earlier this morning. he is still holding these press conferences in tokyo. i guess he is still putting a stamp. if we have a look at who is out, the changes that the chairman to retire in june, part of the management shakeup that was the eight other executives leave the company. under chairman ike, we have seen him have this job since 1983. he joined honda in 1982. if we look at the chart in the bloomberg it shows how honda has , underperformed.
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it has fallen 18% since april, 2013. compare that to the blue line. that is toyota. they have seen gains of 23% under the same period. stephanie: shares of jpmorgan are trading down after the bank held its annual investor conference yesterday. jpmorgan investment banks david patel -- david pinto said sales and trade revenue was down 20% so far this year due to market turmoil and lower fees. >> it is a tough environment -- you have low rates and low oil, low stocks low capital markets. , stephanie: investors sitting in cash. >> so the expectations for earnings this year are pushed out to next year. next year's are pushed a year further. it is delayed. that was the bad news. it is a tough environment. stephanie: what did you ask jamie? mr. mayo: my question was why is it good to be a big bank? you see the public sentiment.
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you have the movie "the big short" up for an oscar the sunday. public dislikes big banks. stephanie: his answer? >> his answer was because a 787 is a safe airline. i thought he should have elaborated on that more. he could've given a better answer. i think jamie dimon struck out on that last answer. >> shares in sharp tumbled more than 60% the past few days after foxconn said they would buy the troubled electronics maker, and then postponed the deal. what went wrong? >> foxconn issued a terse one paragraph statement saying new information has come to life from sharp. they require more time to discuss it. nothingpanies have had -- have said nothing else. 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 that they could be a nexus of $300 -- in excess of $300 billion,
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but could also be a lot less. at this point, without knowing more about what the liabilities are, it is hard to tell if there is a major roadblock for the deal. ♪
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♪ vonnie: you are watching "bloomberg best." i am vonnie quinn. the mobile world congress in barcelona this week was a showcase for dazzling new gadgets. check out these images captured by bloomberg's photo team. it was also an industry summit featuring the industry's most 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 all the news and gather interviews. caroline: we see sensitive subjects being debated by mark zuckerberg. i merrily his own wealth.
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-- primarily 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 basics -- free access to certain websites like facebook, wikipedia. that has been banned. he talked of his disappointment there, with the push for notably, the shift to video -- the shift to 360 degree video, and what is needed from the telecom equipment makers and operators. he needs them to stop being competitive and be collegiate. this is something 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
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globe. caroline: mark zuckerberg -- a bit of a call to arms yesterday. trying to get the operators, equipment makers to push forward collectively to get to 5g. where are you in the 5g spectrum, because i know you are strategicr announcements new initiatives , with many of the players. >> we are. we are working on technology, the processing capability to support 5g. we think as a look at the future, the so-called internet of things with 40 or 50 billion pieces by 2020, it will required technology to facilitate that. we went to ensure we can provide that not only on the endpoint, , the mobile wallet, connecting cars, connecting devices, but also in the infrastructure to facilitate that. caroline: what sort of investment is needed to get to the end goal -- whatever 5g actually is -- we have not had the exact recommendation
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for what 5g will be. >> it requires all the companies to work together, making sure we have a common platform to support that, and provide the ability to move massive amounts of data it in a very efficient manner. with 50 billion pieces think , about the bandwidth required to support that. caroline: are you worried about the highation point in end smart phones? mr. lurie: not at all. the smartphone really just begun 7, 8 years ago. we're not worried about that. we are still seeing growth, still seeing great innovation whether from the os side or the hardware side. it is still growing. there's a lot of gas in the tank. what is exciting about that is what is behind the glass. everyone talks about what is behind it. the innovation will be behind it -- what drives it, the apps and , how we solve problems for our customers. caroline: when you say it is
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still growing, do you still see demand for higher end phones at the same pace? mr. lurie: same pace is a different discussion, but it is still growing. we are seeing in their pre-pay segment. we are seeing 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 in which you and i can get download speed even faster. you teamed up with the likes of intel, ericsson, but facebook is now calling for everyone to work together, share learnings, get 5g out there faster. do you agree with what facebook is pushing for? mr. lurie: what everyone is saying is we want broadband everywhere -- we want broadband to be in the good us and everyone should have -- to be ubiquitous. 5g is exciting, but it is 4, 5 years away. the key to 5g for us is 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 sort of size
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market will we get to in terms of the internet of things -- have you done much theorizing about the scale? we have had 50 billion. mr. segars: $50 billion was the number last year, and it is around $75 billion, or even more by now. we think iot will be a huge market. there could be billions, hundreds of billions. there are many forecasts for how big this will be. i am pretty sure they are wrong, but i am certain this will be a big market. one that brings new businesses, new markets. caroline: also new risks. talk to us about security elements. mr. segars: i have been talking here are the conference about security in iot. it is the theme at the moment. it is conventional computing -- websites being hacked. with iot, when it starts getting 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.
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if we let iot be deployed and try to fix security leader, that will be a real problem. so we are working on some of the low-level building blocks to allow secure software to be built on top of secure hardware architecture. caroline: paint a picture for me in the next few years. when am i going to be driving not -- when will i be not driving? you are ready invest in driver assist. when do i need to not do any of that? mr. fields: what we have said in the past is we will probably see , by the end of the decade, somebody will introduce a fully autonomous vehicle. caroline: will it be you? mr. fields: it could be. when we come out with an autonomous vehicle -- and we need to identify what that is. there are different levels. the level we are shooting for is 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
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been about accessibility. we want to make sure it is accessible for millions, and not just folks that buy luxury vehicles. caroline: who wins out -- you, google, apple -- do they become your competition? mr. fields: our view is we want to make sure that we continue to be a leader in the area. it is interesting. we are not only a leader in our core business, great cars and trucks, but at the same time we , are a leader in semi-autonomous features, things that will keep you in your lane. that will adapt your speed on the highway. we are a leader there. whenever the announcements we are making here is we are actually 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 are going to 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 makes sense to work on our own, we will.
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vonnie: coming up, the best interviews of the week. straight talk on present -- on brexit from top ceos. and bill and melinda gates on the tech sector and what some companies still need to learn. ♪
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vonnie: welcome back to "bloomberg best." i am vonnie quinn. among his weak's tough interviews on bloomberg television 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 foundation's annual letter. they shared their thoughts on the state of american business and its potential. >> i see in the tech sector amazing innovation.
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ic and 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. bill: ironically for the climate challenge, the hydrocarbon area has been the most innovative. particularly now that you have slackening demand, the cost reduction work they are doing about the inputs they have makes the bar tougher for the clean solution to come along.
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but energy is cheaper. because i see so many paths to get an energy solution, i think the chance in the next 15 years that we do get the breakthroughs is very high. that is an optimistic view, but it is based on my view of the science. stephanie: 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
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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 money 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. robotics, i.t., biology, any of those specific areas. continuing to drive that forward is why the u.s. economy is the u.s. economy -- 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
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country. that is a question of who gets more of the existing pie. it does not grow the pie. as i talk 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. >> we year of economists and 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? jack lew: i don't think this is 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
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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. >> did you pick off what 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. enthusiasm has finished.
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-- the enthusiasm has somehow vanished. germany is in this camp that perhaps our challenges are more long-term. they are more related to demographic, but they are there. we have to act and not aggravate the problems with actions. this is one. point two is at the european level, there are decisions that can influence positively long-term growth rates. i think the 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
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about brexit. a group of european c.e.o.'s 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 -- 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. as of today, they are much more selfish and it is breaking down the e.u. with a lot of people wanting each one to have a different status. if the end result is that u.k. will have a very specific status and there is no e.u. because of them, i prefer they go on their
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own. this would be much worse for them than for the european union. >> talk of the brexit. you have been very much in favor of saying i believe, how do you -- of staying, i believe. 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 entered the arena. 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 lead camp, he acts as a figurehead, and you
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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 western world, you have tremendous uncertainty. -- political uncertainty. the only place that seems
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certain is russia with putin. ♪
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vonnie: you are watching "bloomberg best." i am vonnie quinn. this week in cape town bloomberg , hosted the inaugural africa business and economic summit bringing game changers from across the african continent together with ceos 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. as everyone knows, it is a real possible that tuesday we will find out barclays is exiting all or part of its investments in africa.
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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 respect it incredibly as a competitor of that business now. barclays africa is a terrific platform. 11 countries, 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 corporates 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. >> the question you should ask
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is what is the problem you're trying to solve? i think it is not -- is barclays africa a terrific business? it is -- is a global bank the right owner from a capital point of view? erik: is it? >> for the last 20 or 30 years, 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. face amongbarclays their african ownership 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 i saw 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 governance.
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how do you balance your need and obligation to do that with another need, that of delivering a return to your shareholders? >> this is a great story about africa. you look at the returns would -- returns we could 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 ar adjust down for % appreciation of the currency, ignoring we had some big step downs last year, you have to say that is still net after all expenses a return well into double digits. erik: on a currency adjusted net basis.
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healthy double-digit returns? >> 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. the goal is we continue to build pace that builds a backlog that we deliver on over the next three to four years. somewhere hopefully in the $3 billion to $5 billion range. power is the big one. when i first got here, our oil 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 tremendous demand. health care is another huge one
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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. in the case of south africa, there are investment outflows. the same could be said for many other countries in the region. what is this going to mean for what this continent badly needs? more rails, more water, more electricity? >> it makes it harder to finance the requirements for growth on
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the african continent. 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 parity, the rand is about 20% undervalued. if you take a long-term view of the rand it has always trended , back to purchasing power parity over time. ♪
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vonnie: this week, a new animated web series makes its debut on it examines some of the biggest transformations in human history that have not happened yet.
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the first installment 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. at 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. the old peak oil ain't happening. what if instead of running out of oil, we just stop buying stuff? there are one billion task is in -- one billion gas guzzling cars on the road worldwide today and only .1% have a plug. opec contends even by 2040, they will make up just 1%. but don't be so sure. consider the s curve. s curves are used to describe
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the spread of new technology over time like refrigerators and color tv's. 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 extremely 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 carmakers and tech 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. it sure seems like the plan when int when the s
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curve goes vertical. to start an oil crash, you 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 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 for -- market share for plug-ins. if each electric vehicle displaces 15 barrels a year, here is the impact. at this rate, we hit our benchmark of 2 million 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
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-- to assume 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. what if global demand for oil starts to fall? at first by a trickle, but then by a rush. 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 that is all for this edition of "bloomberg best." i am vonnie quinn.
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thanks for watching bloomberg television. ♪
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carol: hello and welcome to "bloomberg businessweek." coming up, big business is bytting roughed up republicans and democrats this year. we take a look at how the lobbying group to get their act together. the amazing story of the south china tiger, he is trying to save the cap from extinction. -- the cats from extinction. take the spring fashion quiz. all that and more as we go behind the scenes of the latest issue of "buisnessweek" right here on bloomberg television. ♪


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