Stay Up Too Late Reading Yaoi

I have this one friend in school..He has a best friend that he always call names on. He would say You're dumb, weak, or stop being a pussy to his best friend since pre-k. I mean he's nice to the girls and kids, but he's always mean with the boys. I always hear him saying bad things about his friends when they're not around. He's also very cocky. He thinks that everyone is afraid of him. He's also a hypocrite. One time his friend(a girl) was joking around and called him short. He got very mad and agrued with her. Even though I also joke around and call him short too. I heard from my one friend that he said that me and him was dating. Of course i called that off. I agreed to be his valentine, not his gf. One time at lunch, he said "This is the asian group" and left out his best friend, which is also asian. I spoke up about it, and then he just said it was a joke. He always calls his best friend names and then say it's a joke. This is always happening and it doesn't seem like a joke anymore. He once said to me "I want to punch him(his best friend)". Although he is well like by girls, sometime he calls his friends names and they just ignore it. He's really ignorant, I want to punch him but I don't want to get in trouble. Sometimes he's a nice friend, but other times he makes fun of others...He's my only friend that I'm comfortable with, What should I do?