tv Street Signs CNBC February 4, 2016 4:00am-5:01am EST
good morning, everybody. welcome. you're now watching "street signs." i'm louisa bojesen. our headlines today, restructuring taking its toll on credit suisse. shares plunging almost so% after the swiss bank posts its first full-year loss since 2008. but a cheerful oil stocks drags european markets higher.
>> we are heading towards a rebalancing of the oil market gradually. i think we're getting into that situation within the next 12 months. >> now daimler taking its foot off the accelerator, saying it sees growth despite a surge in fourth quarter profits. and the risks of acting too late outweighs the risks of acting too early. mario draghi sending a firm message on boosting inflation, thereby sending the euro sharply higher. hi, everybody. good morning. welcome to "street signs." very happy you're with us today. what a ride we saw yesterday. complete roller coaster taking place. in the states, the dow surging in a 420-point range. this morning in europe, we were called just moderately higher across the board. hanging on to some slight gains. in asia overnight, we saw a rally coming through after those
wild swings in oil as well. a lot of people saying the positioning in the price of oil to the downside has been overdone at this stage. we'll be talking more about the oil markets and where we're heading from within the price of crude. again, our european indices just opening slightly higher. again, the vast majority of europe hanging on to these gains. the xetra dax up a little. and the ftse mib higher by half a percentage point or so. that's what we're looking at. we've had a whole bunch of corporate news out this morning. let's kick off with one of the bigger stories out there. credit suisse lower by more than 10% at the moment. paying a huge price for restructuring its business. now, shares, they've really been reacting after it booked this
impairment charge it had to take during the fourth quarter. that resulted in credit suisse's first full-year loss since 2008. julia has legged it to zurich, where she's been talking to the man in charge. >> reporter: thanks so much, louisa. actually, that goodwill charge was lower than expected. it still means the underlying business conditions are tough. he said, january's been incredibly tough. overall, net profit for the full year weaker than expected. net profit attributable to shareholders also weaker than expected. i have to say, given the conditions more broadly in the banking sector, i think there's a heightened sensitivity at the moment to the results these banks are putting out and the mood sense we're getting from them, which has impacted the share price. i'm not saying that people aren't disappointed with the numbers here, but i argue perhaps there's other issues in play here, particularly ginn what we've seen more broadly in
the european banking sector. we talked about the investment bank. very tough. we know they've switched away from the likes of fx and rates, which is what shielded to some degree the spread widening. so that's been difficult. i think for analysts overall, they're looking at the targets to double their profits by 2018 and going, hang on a second, this quite frankly is not achievable. for most analysts, they're saying they're going to come in 20% below that. when i spoke to the ceo, i said, look, can you achieve these targets because investors, analysts here are doubting you. listen in. >> it's not the first time in my career we've had disagreement. >> so you're going to prove them wrong? >> i'm just noting a fact. and we're working very hard to deliver what we committed to delivering. i think it's completely achievable. we are well on track. these results show it.
>> how do you convince investors of that? if i look at the share price, 25 -- >> the share price doesn't mean anything. you know what's been going on in the world. i don't create a sharp decline in oil prices. right now is a complete disconnect between share prices and value. i've seen the share price at 195, i've seen it at 17. there i really would argue very strongly. i was talking to one of my major investors yesterday that this share price does not reflect. it's convenient. >> what breaks this disconnect? what's going on in the market? >> time. time, chinese results, and a bit of -- they tend to focus on the
downside, and we tend to focus on extreme scenarios. >> look at broader european banking sector. look at the u.s. banking sector. we're pricing in global recession. >> i think it's a good time to buy back. >> is it? >> yes. because really, the world would have to come to an ends. first of all, because of global banks, the important banks, there's $4 trillion of capital. we're completely in a different place. there's no scenario where banking blows up today. those are kind of doomsday scenarios. they're not justified. there's an overemphasis on the
oil sector. there's a big -- two theories of what's going on out there. we as a house think it's completely a supply problem. people are scaring themselves about china. the slowdown in china is by design. >> but people are concerned about a broader depreciation of the currency and the spillover effects in asia. you think it's a complete overreaction? >> of course these are real worries, but i think there's an overstatement. it's difficult to manage. it's a difficult transition, but the consumer is really reacting well. the oil prices is very good for the u.s. consumer, good for pmi
and consumer surveys in europe. so all of that is going to have a positive feedback in the economy over time. >> you said time solves this. how much time? >> i'm not going to make a call. >> one quarter, two quarters? >> i think it's a few quarters. >> you said the share price doesn't reflect your plan for the bank, but what about your employees? because they're looking at the share price. >> no, they're not. >> morale is not low? >> morale is not low. you think morale is low with profits of 25%? >> what about europe? >> i'm closing on profitable businesses. you live in london. morale is not great, but london is a real challenge.
the world doesn't limit itself. morale is not low everywhere. >> reporter: the ceo telling me that investors are not questioning the strategy. net revenues down some 34% in the fourth quarter. they've got cost-cutting going on in the backdrop, the macro environment for them is really tough. he's saying, look, the strategy is not being questioned. i think the problem is they want the strategy to be bearing fruits sooner perhaps than it takes. restructuring does take a great deal of time. what i want to draw your attention to, though, in stark contrast to what we heard from ubs this week as well is they did see net new money of 4.4 billion swiss coming into their asia-pacific business. he pointed out, this is an example of why our strategy is going to work. when i challenged him and said, ub said to me, we're not going
to pay up for unprofitable business, he said, look, this is profitable business and this is going to be the strategy going forward and this will work. guys, investors very cautious and concerned about what they're hearing today. back to you. >> julia, good to see you this morning. thank you very much. interesting comments from the ceo there. let's look at oil, since they were talking about oil and the impact on the general markets. oil having had a real whip saw past 24 hours. we're now up towards $34 a barrel again on brent. wti crude, 32.50. talking an "squawk box" earlier, the ceo pledged to up the company's investme mtments and maintain a stable dividend. >> we will invest. that's a very important part of our message today.
we're preparing ourselves to invest in the highly attractive portfolio. actually, we've taken down the breaking prices for the nonsanctioned portfolio that's up for sanctions over the next couple years. we're preparing to invest. we have the capacity to do that. >> now, shell shares you may have noticed this morning firmly in positive territory amid a relief rally for crude prices. this happening after this oil major posted earnings that were broadly in line with expectations. nevertheless, annual income was still at its lowest in 13 years. the broader oil and gas sector, as said, getting a boost this morning. maybe riding on a bit of that wave. you can see that here. all of these stocks picked out for you. all trading in positive territory. let's talk more about oil and some of these oil-related stocks. eric moore is a fund manager.
he joins us here at the top of "street signs." welcome, eric. >> thank you for having me. >> so shell vowing more cuts. their annual profits sinking on this weaker oil price as well. their lowest annual income in at least 13 years. yet, the stock is up by 4% plus. >> yes, confusing, isn't it? with the oil price pinging around by 8% per day, it's obviously very tricky for investors to work out what's going on. but i think if you step back a little bit and say, think what oil price the majors need for their businesses to be sustainable in the medium run, and it's a lot higher than $35, obviously there's been a lot of cap x coming out. there's deflation in the industry. so the break-even costs are falling. but shell is a business that, you know, has been thinking about an oil price of $70 to $110. we're a long way down below that. >> but you said, i don't like shell. >> i'm not keen on shell mainly because i think the bg
acquisition they've made, i don't like the way that's been played out. i mean, to be charitable, you could say they've certainly gone early in their acquisition of bg. if you wanted to be more unkind, you could say they've been stubborn in the way they've pursued it. since they made the bid, the oil price halved. there's no way i would believe that in any of their planning assumptions had a $30 oil price. so the investment case they were thinking about for buying bg has dramatically changed. >> do you think it ends in tears? could we see a reversal and they salvage it and come out on top? >> i don't know about the oil price. i'm sure they have a better view of it than i have. who am i to say they're wrong? but i would observe that the oil price needs to double before the bg acquisition looks like it's going to be really good value
for money. and the other thing that's changed is since they made the deal, the acquisition, bg's business itself has deteriorated. two things that shell would really like in the bg portfolio, brazil. that's got worse because petro has become mired in a scandal. also, the other thing shell liked was lng. it's quite possible the best days are behind us. >> i studied your most recent research. i have to say, i really enjoyed it because you got into some calls which will bring viewers just after the break on which stocks you like at the moment and which you don't like. you also taught me something. you said global oil use actually rose in 2015. this while we're talking about this lack of demand, right. so it actually rose in 2015. you also say the oil and gas sector went up in january, which many of you might not know as well. so this is quite confusing. >> so i think the problems in the oil market are ones of
oversupply, not of demand. demand is growing less than gdp, but it still grows a bit. that's because of a growing population. gdp growth in asia. more cars, more planes. this all drives demand for fuel. but there's a supply overhang. probably about 1 million barrels a day. that oversupply probably persists into 2018. even just a few barrels oversupply is enough to be dampening price. the swing effect of that marginal barrel is devastating to prices. but that said, all the big oil companies have declining production rates. eventually, the market will right itself, but there's still some way out. >> eric, you're staying with us. we're going to get into more of your calls. get involved out there. it's fantastic to have your
voices. we can be reached on e-mail. thank you very much for all your long mails yesterday. the address is on screen in a second. email@example.com. we're also live on twitter. or you can tweet me directly here on the show. @louisa bojesen. ahead here on the show, let the mud slinging continue. if you were confused by donald trump's gracious speech after losing in iowa on monday night, don't be. because he's now saying that he was robbed. >> now, the guy that came in second but actually i think i came in first because if you take a look, okay. you know? oh, that voted evoter fraud. these politicians are brutal. they're brutal. they are a bunch of dishonest cookies. i want to tell you, that's one of the reasons i'm going this.
hi, everybody. welcome back. you're still watching "street signs" here on this thursday. i'm louisa bojesen. we were talking about these volatile swings seen in our global markets overnight. asia, not to be left out, the s&p asx up by 2% or so. you have the nikkei just slightly lower. a little bit of a drop seen there. and the shanghai composite hanging on to gains as well ahead of the lunar holidays. but you have got a lot going on at the moment. by and large, many people would argue that the moves we saw yesterday, the volatility, was oil driven. you had the sudden reversal in the dollar. you had a drop in oil. excuse me, drop in the dollar, sending oil higher by some 8% in yesterday's session alone. now, kyle bass, who made a fortune from the subprime mortgage crisis, has reiterated
his concerns about china. he believes that the day of reckoning could be around the corner. >> their gdp print for the fourth quarter was the lowest nominal gdp print in 40 years, year over year at 5.8%. this isn't an aberration. this isn't a speed bump. this is china's excess that's called misallocation of capital coming home to roost. you can't grow your banking system 1,000% in ten years and not have a loss cycle. your currency won't stay strong when you go to rectify that imbalance. this is simple. >> the transpacific partnership, which has been labeled as the biggest trade deal in a generation, was signed today in auckland. matt taylor is in auckland with the latest on this. this has been a long time coming, matt. what are the financial or economic implications going to be? >> reporter: hi there, louisa. yeah, seven years in the making when it comes to this transpacific partnership deal. going to represent about 40% of
the world's economy. so a wide-ranging economic implications when it comes to this deal. but the next challenge is going to be ratifying it. seven years of negotiations. now the signatories have another two years to ratify it. we need to see 6 of the 12 partners making up 85% of the total tpp gdp. ratifying this. and of course, when you look at a number of countries and signatories to the tpp, there's a lot of opposition on both sides of the political spectrum. in the u.s., the republican side, not so sure about it. calling for any ratification to be delayed until after. we did speak exclusively to the u.s. trade representative. he says it is high on the agenda to get this thing through. take a listen. >> the benefits
disproportionately go to american workers. we have a real opportunity, both to level the playing field for our exports and raise standards all over the world. people are looking to the u.s. for leadership. this is a key part of our rebalancing towards asia. it's got broad economic and strategic implications. i think as we go back to washington and talk through those issues to members of congress, we'll get the necessary -- >> reporter: the world bank has done some early analysis on the tpp and the numbers are quite interesting. it says in 2030 when everything has been said and done and implemented, a number of those trade barriers broken down, it's only going to add about 0.4 percentage points to gdp. countries that will benefit more, places like vietnam, where it will add 10%. another factor we're watching today with significant protests, these were always planned, but we did see two large protests in the center of auckland.
one large group that was quite loud. we didn't see any significant violence. right around the venue where the tpp was being signed. of course, these protesters are saying they reckon the tpp means countries like new zealand have to give up their sovereignty. they're worried about the lack of power they're going to have in making decisions going forward. of course, all of the delegates and signatories move to reassure everyone today that, that was not the case. but the next big thing now, ratification by the 12 signatories. back to you. >> matt, good to see you. thank you very much. matt taylor joining us there live out out of auckland. now, astrazeneca shares
climbing after warning on a 2016 revenue decline. vodafone says it sees underlying revenue growth rebounding on the back of strength in europe. its most important market. this as the u.k. telecom group posted a 1.4% lift in third quarter revenue. eric moore is still with us. you own both. >> i do, yeah. >> why? >> i think astrazeneca offers defensive characteristics in what continues to be a low growth world. you have an ageing population. that means more people are going to take more medicines. a growing population in the east. and it's going to be a beneficiary. the numbers today are a little disappointing, mainly on the cost side. but it's a transition story. 2016 was always going to be a very tough year. the company has always been trying to focus investors. don't look at 2016.
look at 2017 and the growth from '17 to 2022. when the market is feeling happy, it's prepared to do that and look through. >> i guess we all have grumpy phases every now and again. but you tend to be underweight banks and overweight pharmaceutica pharmaceuticals, including glaxosmithkline. how are your current positions working for you? >> that's exactly right. we're overweight pharmaceuticals. got about 20%. they've been very good over the last three to five years. it's been a steady progress. none of them kind of shooting the lights out. but they benefit from long-term structure trends and are doing steadily despite the nasty headlines. there will is quite a lot of
exciting new pharmaceutical invention coming through finally. it's been long promised, but it looks like it's finally coming through. >> and the underweight banking position. >> underweight banks for a really long time, since the credit crunch. i still think it's really difficult for the banks. there's still too much debt. that hasn't been resolved. in a world of too much debt, it's hard to extend new credit. and the regulatory pressures continue to be pretty brutal. the interesting debate in the u.k. is whether we are past peak bank bashing. so maybe the banks are getting more interesting. that's something we look at. it's not going to be right to be negative on them forever. >> in about 15 seconds, why are you reducing your exposure to the housing builders? >> we've been selling some of our building materials companies. we're a little bit cautious about the pricing outlook there. so we've sold out of sheffield insulation group. >> okay. eric, thank you very much for your time this morning. eric moore, fund manager at
mitne funz. we're really enjoying your entertaining comments. keep them coming through. you can find us on twitt twitter @cnbcstreetsigns. we're also on e-mail. firstname.lastname@example.org. daimler shares hitting a bump in the road, trading sharply lower this morning. this after the carmaker said it's only expecting a slight increase in earnings in 2016 amid the slowdown seen in china. meanwhile, profits before interest and tax rose by 36%, just shy of expectations. we will be speaking first to daimler ceo dr. dieter zetsche. that's at 11:35 cet here on cnbc. the cement giant reported that, quote, regulatory issues forced it to review its divestment plan. the dutch lender ing has beaten
estimates to post underlying fourth quarter earnings of 822 million euros. ing cited strength in its german business and a fall in bad loan provisions. speaking to "squawk box" earlier, the ing cfo patrick flynn said the bank continued to successfully navigate a negative rate environment. >> we're actively managing our deposit rates. we're also looking to optimize our balance sheet. i increased the amount of lending. we've grown our lending book by 4%. that's 22 billion last year. so the combination of those things has enabled us to grow. we've increased our interest income 5%. that's a formula that's worked and we're going to continue to use it. >> hello, everybody. i'm outside the bank of england in the british capital. we have an interest rate decision today. we're also going to get the inflation report. it's super thursday. i'll tell you more about what to expect when we come back.
hi, everybody. welcome back. you're still watching "street signs." i'm louisa bojesen. these are your headlines this morning. restructuring taking its toll on credit suisse. shares plunging by almost 10% after the swiss bank posts its first full-year loss since 2008. >> for us, macro has been a bad business across the cycle. >> but a cheerful oil stocks taking the european markets higher. shale shrugging off a plunge in earnings. >> we are headings towards a rebalancing of the oil market gradually. i think we're getting into that situation within the next 12 months or so. >> and daimler taking its foot off the accelerator saying it
sees only slight earnings growth in 2016. and the risks of acting too late outweighs the risk of acting too early. the ecb president mario draghi sending a firm message. hi, everybody. welcome back. if you're just joining us, if you're just waking up in the states, very early for you. if you're on the east coast, it's like 4:30 for you. but the u.s. opening in around 4 1/2 hours' time. we're looking at our u.s. markets being called just a little higher. just as we saw here in europe, our european markets were being called a bit higher as well. we've been hanging on to those gains. as you can see right here, as if by magic, all the green appearing on our screens once again. yesterday, what a volatile day. the dow in this 420-point range. you saw this drop in the dollar,
sharply lower move. a very quick reaction there. apparently setting off a whole bunch of stop loss selling orders. you saw then on top of that oil rallying. then it got everybody going. so then we started to see this rally taking hold, both in the states and asia. speaking of the dollar, let's show you the fx markets at the moment, especially off the back of the mario draghi comments. the euro-dollar 1.11 right now. half a percent higher. you've got the dollar against the yen still a little bit lower. japanese investors, suddenly we're seeing this yen strength. they took a little bit of a back toot in terms of equity trading on the nikkei. and the pound is going to be in focus as well with the bank of england rate decision coming up. no change anticipated there. nevertheless, still worth watching out for. mario draghi has warned the risk of acting too late to reverse ultra low inflation outweighs the risk of acting too early.
the ecb president cautioned the wait-and-see stance could damage confidence. draghi warned a much more monetary policy would be needed to counter such a knock to confidence. i mentioned the bank of england. it announces its latest rate decision. we'll have full coverage here on the program. the u.k. central bank is expected to keep rates on hold in the face of weakening british wage growth and signs of a fading global economic rebound. jeff is outside the bank of england. jeff, we always look at these inflation forecasts. i just wonder how much we should be looking at them these days, given that they tend to get it quite wrong. >> reporter: i think both of those are fair comments, louisa, but i would say that the bank tends to use the two to three-year forecast. there's a signaling device. so the economists who have to write up their own reports on
where are the b.o.e. currently stands will be looking fairly closely at those forecasts because they'll give you a sense of the mood within the organization about when interest rates might start gradually being lifted. but of course, that conversation is a very, very long way away from where we are at the moment. there is speculation that maybe members of the monetary policy committee will have to start talking about another rate cut before they start talking about a rate hike. that may be premature, but it is one area where potentially we could move markets today. if we hear anything in the press conference acknowledging that that conversation is taking place, that could be a dovish surprise for the markets. but i also want to just make it clear, there is the potential also for it to go the other way. i think we're in a very interesting place right now where the data is quite mixed on the u.k. economy.
so the wage issue clearly is key. but we've had strongish property price increase numbers out of the halifax. we had a slightly positive services pmi number. there are pockets of activity within the u.k. economy. i think the bank will continue to plow a very cautious furrow at this stage. i'm just going to pop into the lock-in now, have a look at the inflation report, then we'll be back together later to talk about the decision that's been taken. back to you. >> jeff, thank you. again, that decision being brought to you live on decision time, a special program dedicated to precisely that bank of england decision. now, goldman sachs says sterling could fall if britain votes to leave the eu. add that into the mix, and then at the same time, another call
from goldman sachs. this time on the fed. expectations have been scaled back for rate hikes in 2016. they're citing tighter financial conditions. they see the fed holding in march and proceeding with the next hike in june. what do you think? do you think that we are looking at a scaling back officially now of expectations? are we going to continue to see the type of volatility we had yesterday based on these changes to fed opinion? >> well, yes, i think this morning the world for once is a happy place. not only we have the high oil prices but the fed was quite dovish last night. financial conditions have tiektened quite a lot since december. that clearly could feed through
the fed's function. so that's a trend we have there. the ecb more dovish. i think that is contributing this morning to the better risk environment. >> but an 8% drop? i mean, in -- well, 8% rise, excuse me, in the price of oil. i'm thinking of the massive drop in the dollar. aren't we seeing the dollar drop overdone? >> i think the pullback of the u.s. dollar is a function of both the higher oil prices and also a function of the fed being more dovish. that is very positive for risk. i think oil itself, a rebound in oil prices, especially if it's driven by hopes of production cuts, is not really going to change dramatically the risk environment. for me, that would be a negative supply shock.
that's never that positive for the economy. what makes a difference here is also that the fed is getting more dovish and the market is noticing that. >> stanley fisher did say he doesn't know, you know, when the fed is going to move. he said that just in his recent comments. at the same time, then we look at the swedish central bank, the danish central bank, the eu, japan, switzerland. all with negative interest rates. i start seeing more and more research indicating that we potentially might be looking at the fed speculating about negative interest rates. could we go down that path? >> i think it's premature to talk about that. the market has very much reconsidered the fed view. i think we're still quite far away from that. you would need much weaker u.s. economic numbers for that to happen. but i agree the boj decision
clearly marked an escalation in what with e call the race to the bott bottom. that could make the ecb even more dovish than people think. >> you say that they're a ways away from even considering this now. just head online and check out a piece on cnbc.com about why the fed should be looking towards negative interest rates at the moment. he argues it would encourage spending and you need to encourage spending, you have to encourage growth, and that would come via the negative interest rates. companies and banks wouldn't want to be parking their money. they'd want to put it to use. >> that's a big topic of discussion. i get the point, but also investors believe out there that monetary policy and conventional policy follows a low of diminishing return. action from the central banks today are probably much less effective than they were when the fed started qe, for example.
asset prices are higher. how much benefit would that bring? >> we've got to go. thank you very much for coming in to visit with us this morning. i think we've only met virtually. never in person. so it's lovely having you in the studio. >> thank you. >> global head of rates and fx strategy. now, the race for the white house is heating up with less than a week to go before the first u.s. presidential primary. hillary clinton and bernie sanders faced off in a televised town hall gathering, and donald trump says he won iowa, not ted cruz. tracie potts joins us from nbc news. that's news to me, tracie. >> reporter: well, donald trump argues ted cruz didn't play fair. he sent out mailers that could have misled some voters into thinking in iowa that they were in some sort of legal trouble because of their voting record.
and that's being -- he's taking a look at that. the other thing was there was this rumor that ben carson was dropping out. he's not as of yet dropping out. it was repeated by some of those in the cruz camp. put together, donald trump says that misled a lot of voters. because it was so tight, he believes he would have won if cruz had played fair. and cruz's response to all of that, he's losing it. he says he's laughing at donald trump. no one is really laughing at their numbers because new hampshire is very different than iowa. that's where the focus is now. and donald trump has a double-digit lead there. now, you talked about the democrats. bernie sanders has a double-digit lead over hillary clinton. and that is causing some sparks between the two. we saw a cnn town hall last night. there will be an msnbc debate tonight. really, her final chance face to face with bernie sanders to make her case before this primary on tuesday. he's accusing her of not being a
real progressive. and he's also been hammering her on the money that she's taken from wall street for speeches, for donations. she's fighting back, but she is quite frankly the underdog here, at least when you take a look at the numbers. >> tracie, when looking at clinton prevailing in iowa, how much of a boost has this given her? >> well, it was such a tight race. it's given her a little bit of a boost. in other words, it says that hillary clinton can win. she's got a good ground game. she's got a good organization to get those voters out. but she won by a hair. this one went all night long. we were up, we were there all night watching these numbers come in. so it doesn't put her in the strongest position going into new hampshire, where is she's very far behind. >> tracie, good to see you again. thank you very much. tracie potts up nice and early in washington to give all of you guys the latest on what's taking
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hi, everybody. welcome back. syrian peace talks have been suspended after just two days due to lack of progress. the head of the syrian opposition blamed the bashar al assad led government for the breakdown saying that the regime is, quote, doing it again. president barack obama has defended the american-muslim community. in his first visit to a u.s. mosque during his presidency, he said, quote, we have to reject the politics that seeks to manipulate prejudice or bias and
targets people because of religion. former pharmaceutical executive martin shkreli's brokerage about he used to secure bail has suffered a $40 million decrease in value. that's according to a u.s. prosecutor. the account mostly contained shares of a drug company that shkreli briefly ran. and brazilians have been called on to help stamp out the mosquito that carries the zika virus. thousands of armed personnel and public officials will be working to eradicate environments in which the mosquitos live. all right. welcome back, everybody, here to the last part of "street signs." you can get in touch with us on e-mail, on twitter, as said before. many of you have already. good morning. a lot of comments on the big move we saw in oil yesterday. a lot of comments on the dollar as well. incidentally, linda says, market
indicators are still oil but now also banks. she makes the point that hedge funds took the bait of the u.s. rate rise. surprise, she says. u.s. dollar is going down. do you agree? what do you think? you can find us on twitter or on e-mail. we'll be floating the addresses here for you throughout the show. now, shares in cbs rose by 4% in after hours trade after the kbaen named the ceo as chairman, replacing the ailing sumner redstone. his daughter declined an offer to become executive chairman but would remain on as vice chair. meanwhile, viacom's board will be meeting today to replace sumner as company's ceo a california judge ruled in january that redstone should submit to a mental competency exam as part of an ongoing dispute about whether the
92-year-old billionaire was fit to remain chairman of the companies. shares popping by more than 9% in after hours trade. and gopro's fourth quarter earnings missed expectations, causing shares in the wearable camera maker to fall as much as 19% in after hours trade. the company reported the fourth quarter loss of 8 cents per share. that's compared to a profit of 99 cents per share just a year earlier. gopro is one of a series of very high-profile tech stocks that now trades below its ipo price. we just got a number for you here. another is twitter, which is due to report earnings after the bell today. a couple more details on this story. we were talking about it yesterday. namely that of yahoo!. a number of private companies that are reportedly looking into buying yahoo!'s core internet business. according to the "financial times," bain capital and tpg are weighing a potential approach after the tech company announced
it is exploring various options for the unit as part of a wider revamp. speaking first on cnbc yesterday, the yahoo! ceo marissa mayer defends the combined value of yahoo!'s internet properties, excludeing the alibaba stake. >> we obviously don't think that they are worth zero. we think they're really valuable properties. our users and advertisers think that as well. so our goal is to show their value to the market and be recognized for that value. >> now, the president of the federal reserve bank of boston says that progress has been made, reducing the risks posed by financial institutions. he said that things are getting better, but he warned that it's important to remember that significant work still remains. president and founder at training the street. scott, good to have you with us. do you agree? do you think things have gotten
better? has it become harder to become too big to fail? >> well, the regulatory environment has definitely changed. you can take both sides of an equation. the banks are facing -- i think the bigger issue they're facing is the market turmoil. the start of 2016 has been rough, and the price of oil has been challenging them. but look, it's a regulatory environment that's ever shifting. when you see a fed official speaking like that, it's going to grab headlines. >> i quite take the point that you make that regulatory differences between the u.s. and europe are shaping a very big income gap that exists between junior bankers. how is that going to play out? >> well, if you've seen the credit suisse news this morning of their announcement of their restructuring and their results, there's definitely a little bit of a performance gap, if you will, between european banks and
american banks. a lot of the american banks took their restructurings and took their massive layoffs and write downs years ago during the financial crisis. you're seeing that now. credit suisse is a prime example. the junior level of compensation banks broadly speaking is comparable across the board. they have to move together, have to work lock step. they're competing for effectively the same talent pool when they're recruiting students out of colleges and students out of business school, which are two of their primary sources. so when we're training people in london or hong kong or in new york, around the globe, broadly speaking the professionals are going to be paid within a comparable band. >> what will you anticipate 2016 compensation is going to look like compared to 2015, or is it too early to tell? >> it's probably too early to tell because the formula that banks usually take, especially
for their deal professionals, so if you think about the investment bankers, traders, and the ones that are generating in the front lines, if you will, of generating fees, the formula that roughly takes hold is the firm's performance, their division performance, and their own personal individual performance. for example, in 2015, if you were a mergers and acquisitions personnel and your firm did well, you probably had a good year. if you were in a commodities driven business and your department didn't perform as well, you probably had a down year. so it's early february, let's hope things are -- the markets settle down and things start rising up u which will push more transactions through. but it was not a nice ipo month in january, especially here in the united states. m&a activity is a little more muted. but there's still possibilities and momentum for that to come
through. you mentioned previously with the private equity interest in yahoo!. they've got a lot of dry powder sitting on the sidelines. so i would not expect -- i would expect, excuse me, see them be opportunistic and take advantage of strategic situations like this. it's too early to tell. it's early in the year, but we'll see how things shake out. >> how about tax savings from inversion and how that stacks up compared to just straight investing in companies that aren't dealing with these issues? >> sure. the tax inversions has been a major topic over the last few years here in the united states. this often comes up in our classes. it's a very complicated area. you need to speak to a tax specialist. broadly speaking, what we try to emphasize is mergers and acquisitions transactions need to make strategic sense first. you need to do a deal that's going to first of all have the synergistic value, combining those operations, expanding
product lines, expanding geographic reach wherever the case may be. if there is ability to have tax savings, that's going to be more of what people like to say, the icing on the cake. in other words, you're not going to do a deal primarily just for the tax savings. you're going to do the deal for the strategic reasons. then if the tax savings also is going to make a good deal better as opposed to making a so-so deal, that's generally not what you're going to see a prudent company and management team and planning happen. it's going to be, this is a good transaction, makes sense, and the fact we're able to get additional financial benefits is going to make it better. >> sure. do you think companies have a tendency to now ignore some of the more strategic arguments and instead look at the financial benefits of buying a company on the cheap? >> there's a simple thing we often bring up in class of looking at the acquirer's price to earnings multiple. you can also look at the
acquirer's ability to borrow or use existing cash where it's at or near record levels. you can look at those and use the word that's often thrown out, transactions are accretive. but i would still go back and harp, a deal needs to make strategic sense first. an example i often use in class is, you know, a company like a google or a facebook could go out and acquire a brick company and it's mathematically probably going to be accretive, but that deal doesn't make strategic sense. >> scott, we've got to run. the day is moving on. thank you very much. now, we've got some 4 1/2 hours before the market open in the
states. if you're just waking up super early, getting a cup of tea, well, you can expect the u.s. markets to open slightly higher. all of the three indices being called up. here in europe, just to recap, we're seeing green across our screens as well with a little bit of a rlly going on. ftse higher by 1.5%. the xetra dax, the cac, the ftse mib adding to gains. being led higher by that move to the upside in oil and gas. that's it for today's show. i'm louisa bojesen. we've got more coming up. decision time at noon with the bank of england's rate decision. stay with us here on cnbc. i'll see you soon.
oil shock. crude prices jumping on dollar weakness and opec rumors. >> and new this morning, credit suisse posts its first loss since 2008. >> and the end of an era. sumner redstone stepping down at cbs. are major changes up next? "worldwide exchange" begins right now. good morning. welcome to "worldwide exchange" here on cnbc. i'm sara eisen. >> i'm dominic chu