WEBVTT - 2% Inflation is a Ceiling Not a Target, Kashkari Says 0:00:00.120 --> 0:00:02.920 Brought you by Bank of America, Mary Lynch. Investing in 0:00:03.000 --> 0:00:07.840 local communities, economies and a sustainable future. That's the power 0:00:08.080 --> 0:00:12.360 of global connections. Mary Lynch, Pierce Fenner and Smith Incorporated 0:00:12.760 --> 0:00:27.400 Member s I p C. Welcome to the Bloomberg Surveillance Podcast. 0:00:27.840 --> 0:00:31.520 I'm Tom Keene with David Gura. Daily we bring you 0:00:31.600 --> 0:00:36.600 insight from the best in economics, finance, investment, and international relations. 0:00:37.000 --> 0:00:41.600 Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and 0:00:41.680 --> 0:00:51.680 of course on the Bloomberg. Now joining us is someone 0:00:51.760 --> 0:00:54.400 that was way out front. In fact, maybe President Trump 0:00:54.440 --> 0:00:58.120 read his book The Price of Civilization. Jeffrey Sachs is 0:00:58.120 --> 0:01:01.440 at Columbia University. He is a guide to world liberal 0:01:01.560 --> 0:01:03.760 He is someone who does not agree with the president, 0:01:04.000 --> 0:01:07.360 but he has to see how the president applies policy here. 0:01:07.600 --> 0:01:10.600 You were way out front on the struggles of this 0:01:10.720 --> 0:01:15.200 nation with your book Price of Civilization. The President struck 0:01:15.240 --> 0:01:19.280 a third rail with the American public, a poorer opulated, 0:01:19.560 --> 0:01:21.800 the different other issues that are out there that are 0:01:21.840 --> 0:01:23.920 all in your book. I mean you were at what 0:01:24.160 --> 0:01:27.959 is the prescription to get this administration to begin a 0:01:28.080 --> 0:01:34.319 constructive dialogue with liberals, independence, and Republicans. This administration is 0:01:34.360 --> 0:01:38.560 not having a constructive dialogue with anybody right now. What 0:01:38.680 --> 0:01:42.039 happened at the G twenty this weekend was alarming. Actually, 0:01:42.400 --> 0:01:47.200 they couldn't even make a statement opposing protectionism because Steve 0:01:47.280 --> 0:01:50.920 Manuk in the Treasury Secretary, held the ground to say, no, 0:01:51.120 --> 0:01:54.760 we're not going to oppose protectionism. We're not going to 0:01:54.800 --> 0:01:59.080 make a statement about climate change. It's so nineteen to one. 0:01:59.800 --> 0:02:04.920 The US Trump is absolutely arraying the whole world against 0:02:05.000 --> 0:02:07.640 the U S. You watch it step by step, That's 0:02:07.720 --> 0:02:10.799 that's what's happening. Would you suggest and just in one issue, 0:02:10.840 --> 0:02:14.480 the opioid epidemic, Rob Portman, I'm going to suggest doesn't 0:02:14.560 --> 0:02:18.960 read Jeffrey Sachs. He's a Republican, a moderate from Ohio. 0:02:19.000 --> 0:02:21.280 He probably is aware of your work, but he doesn't 0:02:21.320 --> 0:02:23.560 read it word for word. And except right now, you 0:02:23.680 --> 0:02:27.040 and the senator from Ohio have more common ground than 0:02:27.120 --> 0:02:31.239 with the president. Can the Democrats co opt a Republican 0:02:31.400 --> 0:02:35.280 centrist group to oppose this administration? But let me just 0:02:35.400 --> 0:02:39.320 say a word about what's happening. Our society is falling apart. 0:02:39.320 --> 0:02:43.200 This has been clear for years. There's a divide between 0:02:43.440 --> 0:02:47.240 those who have a college education, times couldn't be better. 0:02:47.800 --> 0:02:51.760 And those who have a high school degree. Jobs are falling, 0:02:51.760 --> 0:02:57.760 wages are falling, mortality rates are rising, opiate addiction rising, 0:02:57.880 --> 0:03:03.280 suicide rates rising. So along comes the Republican Health Plan. 0:03:03.800 --> 0:03:07.120 It's to cut the tax at the top and throw 0:03:07.200 --> 0:03:10.839 more than twenty million people off of healthcare coverage. Are 0:03:10.880 --> 0:03:15.080 they kidding? Are they kidding? What are they doing? It's 0:03:15.240 --> 0:03:18.200 dreadful what's going on right now? And we have to 0:03:18.240 --> 0:03:22.240 say it today. You know you said I'm you introduced 0:03:22.280 --> 0:03:25.440 me earlier. Is miserable mood because today is supposed to 0:03:25.480 --> 0:03:29.120 be world It is World Happiness Day and we are 0:03:29.200 --> 0:03:33.880 releasing the World Happiness Report. The United States is in 0:03:33.919 --> 0:03:37.440 a free fall right now. Out of the thirty four 0:03:37.520 --> 0:03:42.000 o C countries, the US Cayman twenty one. We're going 0:03:42.040 --> 0:03:46.920 to come back to that. Yeah. But so, Jeffrey, this 0:03:47.000 --> 0:03:49.080 is why people voted for Trump, right, He's trying to 0:03:49.160 --> 0:03:53.120 fix a problem. Now you're saying he's fixing it badly 0:03:53.160 --> 0:03:55.800 and he's focusing on the bad things, or he's going 0:03:55.840 --> 0:03:58.960 about it the wrong way. How would you deal with 0:03:59.000 --> 0:04:02.120 this unhappiness or this uneasiness that we clearly saw in 0:04:02.120 --> 0:04:05.720 the American people to give them something better. We would 0:04:06.160 --> 0:04:10.160 have rich people pay taxes and we would have poor 0:04:10.240 --> 0:04:15.200 people on healthcare. That's simple. We would say, we tell 0:04:15.280 --> 0:04:17.599 the truth in this country that the rich have never 0:04:17.680 --> 0:04:21.160 had it better, they've never had more money, they've never 0:04:21.240 --> 0:04:24.279 had more rise of incomes, and they should do something 0:04:24.480 --> 0:04:28.680 for our society. And what he's doing is exactly the opposite. 0:04:28.800 --> 0:04:32.600 He's given every single position in this administration to Goldman 0:04:32.680 --> 0:04:35.440 Sacks so that they can cut taxes at the top. 0:04:35.680 --> 0:04:39.440 It's a but he was but he was voted on 0:04:39.440 --> 0:04:41.800 that platform, right, Yeah, But then it's bait and switch. 0:04:42.680 --> 0:04:45.600 It's complete bait and switch. He said I'm going to 0:04:45.720 --> 0:04:49.040 fight Wall Street and then he gave every top position 0:04:49.040 --> 0:04:52.800 in the administration to one company. How much more bait 0:04:52.880 --> 0:04:54.800 and switch can it be? We have to tell the 0:04:54.800 --> 0:04:58.520 truth about what's happening in this country. It's dramatic, it's 0:04:58.520 --> 0:05:02.240 a word on the poor. But Jeffrey Sax, do you 0:05:02.800 --> 0:05:04.600 actually admit that a lot of people in the US 0:05:04.720 --> 0:05:07.920 voted for President Trump because he was going to deregulate 0:05:08.320 --> 0:05:11.280 and they voted for him. Again, I'm not saying it's 0:05:11.279 --> 0:05:13.480 boutter wrong, but this is what people voted for. They 0:05:13.560 --> 0:05:16.840 voted for him because he made promises to them and 0:05:16.880 --> 0:05:19.960 he is lying. I'm sorry, this is the biggest, very 0:05:20.360 --> 0:05:23.359 very quickly here did Secretary Clinton loses election because she 0:05:23.400 --> 0:05:27.280 didn't go after Midwest Democrats who are more conservative than 0:05:27.320 --> 0:05:31.240 the East Coast liberals like you. She lost the election 0:05:31.279 --> 0:05:34.520 because she was a lousy candidate and she didn't have 0:05:34.560 --> 0:05:37.600 a position that people trusted. And Donald Trump said I'm 0:05:37.640 --> 0:05:40.520 going to help you, and what he's doing is helping 0:05:40.760 --> 0:05:44.920 his billionaire buddies. It's so clear, it's obvious as long 0:05:44.960 --> 0:05:47.119 as we look at what he's really doing. Don't watch 0:05:47.120 --> 0:05:50.080 what he tweets, watch what he says, watch what he's doing. 0:05:50.440 --> 0:05:53.520 I feel miserable. We're gonna talk happiness to Jeffrey Sachs 0:05:53.560 --> 0:05:56.560 here in Am. I just had a nightmare thought Jeffrey 0:05:56.560 --> 0:06:01.640 Sachs playing golf with Donald Trump floor around. That would 0:06:01.640 --> 0:06:05.120 be quite around, to say the least. Jeff Sex, thank 0:06:05.160 --> 0:06:19.680 you so much. Feel l joining us some p K 0:06:20.440 --> 0:06:24.039 burlicer on oil. Phil. We've got your new research note 0:06:24.640 --> 0:06:26.960 and folks, we protect the copyright of our guests. I'm 0:06:27.000 --> 0:06:28.919 not going to send it out to you, and you 0:06:29.000 --> 0:06:32.240 go right to gasoline. Why does a pro like you 0:06:32.560 --> 0:06:38.400 look at gasoline dynamics, Well something, Gasoline is probably excuse, 0:06:38.560 --> 0:06:42.640 probably the most important component of petroleum demand, and it's 0:06:42.680 --> 0:06:46.800 also the one that's most influenced by economic cycles and 0:06:46.839 --> 0:06:50.560 by expectations. UH. And and this report, UH what I've 0:06:50.560 --> 0:06:53.839 been writing about for a while. I've been looking at 0:06:54.560 --> 0:07:00.920 the failure, essentially of most following the market to recognized 0:07:01.000 --> 0:07:06.080 the consumers respond in an anticipatory fashion. You know, I 0:07:06.160 --> 0:07:10.239 take take my cues from my gold class making good friends. 0:07:10.240 --> 0:07:15.600 Stand Fisher of the FED Monitorists talk about expectations and 0:07:15.640 --> 0:07:19.600 how consumers adjust ahead of time when they hear news 0:07:19.640 --> 0:07:22.440 about changes in the FED. Right, consumers have done the 0:07:22.480 --> 0:07:25.280 same thing. In the case of gasoline. We had strong 0:07:25.320 --> 0:07:29.440 growth and gasoline on a year over year basis every 0:07:29.480 --> 0:07:32.040 month UH in two thousand and fifteen and two thousand 0:07:32.040 --> 0:07:35.120 and sixteen until OPEC said, oh, Saudi Arabia said we 0:07:35.120 --> 0:07:37.920 want to raise oil prices. And then consumers heard the 0:07:37.920 --> 0:07:43.080 news and immediately began changing their consumering pattern. Nothing surprising here. 0:07:43.360 --> 0:07:46.720 The big surprises that those who follow the market, follow 0:07:46.760 --> 0:07:50.600 oil markets totally ignore this. And gasoline is you know, 0:07:50.800 --> 0:07:53.920 a good portion of petroleum demand. How tight is this 0:07:53.960 --> 0:07:56.200 market getting right now? How tight is the gas market getting? 0:07:56.680 --> 0:08:00.400 Gasolene market is getting a little tighter because people produced 0:08:00.400 --> 0:08:03.440 a less less and because a good deal of gasolene 0:08:03.440 --> 0:08:08.360 has been exported. Uh. The gasolene was flashing around the 0:08:08.360 --> 0:08:11.520 East Coast two or three weeks ago to uh maybe 0:08:11.600 --> 0:08:15.320 a month ago, and large volumes were sent to other 0:08:15.360 --> 0:08:17.840 parts of the world because the prices just couldn't be 0:08:17.880 --> 0:08:22.600 held up. But you know, gasoline supply is getting a 0:08:22.600 --> 0:08:26.480 little tight, but gasolene demands looks to be down relative 0:08:26.600 --> 0:08:30.960 to UH last year by about two three. I know 0:08:30.960 --> 0:08:33.400 you're paying close attention to that Sarah conference in Houston 0:08:33.679 --> 0:08:35.920 a week or two ago, the h s Market conference. 0:08:35.920 --> 0:08:37.400 And what's the biggest news that came out of there 0:08:37.480 --> 0:08:40.400 is you listen to all those speakers on stage in Houston. 0:08:40.880 --> 0:08:44.640 Um I was. I wasn't there. Uh you know you're 0:08:44.679 --> 0:08:51.400 gonna and I haven't spoken since uh and the but 0:08:51.679 --> 0:08:54.360 the news that came out to me was the attempt 0:08:54.480 --> 0:08:58.520 by the oil exporting countries to try to get US 0:08:58.559 --> 0:09:02.360 producers to cooperate. Uh. They had a dinner, UH, they 0:09:02.360 --> 0:09:06.480 had the Nigerian delegation. I had had the dinner, and uh, 0:09:06.520 --> 0:09:09.479 every anti trust lawyer in the country must have been squirming, 0:09:10.080 --> 0:09:13.120 because you know, the idea of a group of producers 0:09:13.120 --> 0:09:16.040 getting together to talk about controlling production any place in 0:09:16.040 --> 0:09:18.320 the world is scary, but doing the United States is 0:09:18.360 --> 0:09:25.320 really dangerous and it shows opex desperation, the producer desperation. Uh. 0:09:25.720 --> 0:09:29.800 With essentially the change in technology and drilling and finding oil. Uh, 0:09:29.840 --> 0:09:33.040 they are working. Uh. You know, the U S producers 0:09:33.040 --> 0:09:36.080 are working extremely hard to drive costs down. And and 0:09:36.120 --> 0:09:42.240 More's law the more from Intel that technology doubles every uh, 0:09:42.360 --> 0:09:45.960 with every new generation or speed doubles applies to oil fracking. 0:09:46.000 --> 0:09:49.040 So suddenly people are talking about being profitable with twenty barrel. 0:09:49.120 --> 0:09:52.840 So we had a real moment ten days ago. Edward 0:09:52.920 --> 0:09:56.719 more Stark on the door the acclaimed oil or theologist 0:09:56.720 --> 0:10:00.800 at City Group and basically said, oils stupid. Maybe it 0:10:00.800 --> 0:10:04.559 works higher, but he said, given a longer time frame 0:10:05.080 --> 0:10:07.720 we go to the land of Phil Verlager, which is 0:10:07.880 --> 0:10:13.640 cheaper oil, what will be the catalyst if we have stability, 0:10:13.800 --> 0:10:16.080 if we go to somewhat of a higher per barrel, 0:10:16.559 --> 0:10:19.000 what will be the catalyst to get us to the 0:10:19.080 --> 0:10:23.640 Verlager vision? Well, it'll be it'll be a the same 0:10:23.679 --> 0:10:29.520 sort of catalyst, the catalysts technology. Uh, the fact that 0:10:30.040 --> 0:10:34.920 every every time we drill another well, we're finding new things. 0:10:36.200 --> 0:10:38.600 One of the stateless lumber shades president out there came 0:10:38.600 --> 0:10:41.760 out with a statement that the amount of data one 0:10:41.840 --> 0:10:44.840 uses right now for a well, uh, is the amount 0:10:44.840 --> 0:10:48.880 of constitutes the amount of data on to high definition television, 0:10:49.040 --> 0:10:52.800 tell of movies. I mean, big data is just beginning 0:10:52.840 --> 0:10:55.520 to arrive into the oil business. And when did it arise. 0:10:56.720 --> 0:10:59.640 We're just going to have an overwhelming falling calos and 0:10:59.720 --> 0:11:03.920 an overwhelming expansion and opportunity. And it's gonna happen here. 0:11:03.920 --> 0:11:07.560 It's gonna happen in Argentina where there's a great opportunity. 0:11:07.559 --> 0:11:09.360 It's gonna happen in Russian where there's a great deal 0:11:09.360 --> 0:11:12.720 of shale. Uh, we're gonna you know, two years ago 0:11:12.800 --> 0:11:15.559 or a year and a half ago, Spencer Dale of 0:11:15.679 --> 0:11:18.120 BT came out with a thing, and I think I 0:11:18.160 --> 0:11:22.360 came out with about the same simultaneously. But is the 0:11:22.400 --> 0:11:25.760 oil is no longer a finite resource? Uh, so much 0:11:25.760 --> 0:11:27.320 oil is gonna have to be left in the ground. 0:11:27.360 --> 0:11:31.160 It's really a race to see who loses. You are 0:11:31.240 --> 0:11:33.720 you very kindly quote and praise our colleagues that Liam 0:11:33.760 --> 0:11:36.280 Denning and Halfier have bloss here of Bloomberg News on 0:11:36.280 --> 0:11:39.200 the issue of technology. And what I find fascinating is 0:11:39.200 --> 0:11:42.200 how the old hands, the oil producers are processing all 0:11:42.240 --> 0:11:44.360 of this technological change. Talk a bit about that, how 0:11:44.360 --> 0:11:49.240 they're how they're facing this change. Well, it's not the 0:11:49.600 --> 0:11:52.040 it's not really the oil producers, it's the companies like 0:11:52.120 --> 0:11:54.679 Slumberge and so on. Now I'm a visiting fellow at 0:11:54.679 --> 0:11:57.360 the School of Minds. We've just moved here to Denver, 0:11:57.840 --> 0:12:00.720 and the School of mind produces some of the best engineers, 0:12:01.480 --> 0:12:04.200 uh in the world. It's been recognized for years. And 0:12:04.200 --> 0:12:06.960 what what what's happening is all these young engineers are 0:12:07.000 --> 0:12:09.839 coming out knowing all these new technologies. So a woman 0:12:09.840 --> 0:12:12.960 I know is working uh for for slumbers j I 0:12:12.960 --> 0:12:17.280 think down in Texas comes out is totally trained in 0:12:17.400 --> 0:12:20.800 new technology and everything, and they bring all this technology 0:12:20.840 --> 0:12:22.800 to the to the drilling companies, and then the drilling 0:12:22.800 --> 0:12:26.959 companies apply it steadily, uh, to the to the wells 0:12:27.160 --> 0:12:31.520 and and just essentially bring along these the companies who 0:12:31.520 --> 0:12:34.600 are are developing. It's it's in many ways. It's like 0:12:34.640 --> 0:12:39.040 the agricultural business. It's the farmers are the customers for 0:12:39.080 --> 0:12:42.160 the John Deere's and the Monsantos, the Montsando's producers of 0:12:42.240 --> 0:12:46.679 the new the new UH seeds, and the farmers by 0:12:46.720 --> 0:12:50.160 the seeds and double the triple their their products. So 0:12:50.559 --> 0:12:53.800 it's it's it's that sort of relationship. And the universities 0:12:53.840 --> 0:12:56.680 and the companies like Slumber, J. Baker Hughes are just 0:12:56.800 --> 0:12:59.720 all developing these technologies and driving costs down. What do 0:12:59.760 --> 0:13:02.560 you do in Golden Colorado? Is this like a big 0:13:02.600 --> 0:13:05.880 salary and a six pack? Of course, every time it 0:13:05.960 --> 0:13:09.880 comes out of the faucet. I've moved down their UH. 0:13:10.200 --> 0:13:12.800 Friend of mine who's teaching there, I was supposed to 0:13:12.800 --> 0:13:14.440 teach their back in the early nineties and had a 0:13:14.440 --> 0:13:19.160 medical issue. Um asked me. They have a new research institute, 0:13:19.160 --> 0:13:22.560 the Pain Institute. And what I'm looking for is is 0:13:22.600 --> 0:13:24.760 an opportunity to work with some of these younger students 0:13:25.320 --> 0:13:28.160 and and spread the economics and and and as I 0:13:28.200 --> 0:13:30.920 said when I was talking about the demand here in Gasolene, 0:13:31.040 --> 0:13:35.360 is the monetary economists have moved ahead with rational expectations. 0:13:35.360 --> 0:13:39.120 And you just read their material and Stanley's and I've 0:13:39.120 --> 0:13:43.480 watched therely for years and that this whole economics, the 0:13:43.520 --> 0:13:47.160 way of thinking about backing out demand for petroleum has 0:13:47.480 --> 0:13:50.280 Let's come back soil f earliger with this on the 0:13:50.320 --> 0:13:53.240 Colorado school of mind. What have we learned about the 0:13:53.320 --> 0:13:56.160 role of OPEC now and going forward in light of 0:13:56.280 --> 0:13:58.040 what we've seen since that deal was inked a few 0:13:58.040 --> 0:14:04.360 months back. Well, OPEC has been struggling to be relevant 0:14:05.480 --> 0:14:10.960 for several years UM. In the early part of this decade, 0:14:11.559 --> 0:14:17.199 we had a series of disruptions of supply in Nigeria, Libya, 0:14:17.840 --> 0:14:22.200 Syria and the tight oil market, and you know, OPEC 0:14:22.920 --> 0:14:26.280 essentially ignored what was going on and produced at full rate, 0:14:26.360 --> 0:14:31.280 so it was no different than the market for week uh. 0:14:31.680 --> 0:14:37.720 When the production disruptions essentially passed and the US oil 0:14:37.760 --> 0:14:43.160 supply came in, the organization looks to try to reorganize 0:14:43.160 --> 0:14:46.960 and this is the way Cartel's work and cut production 0:14:47.040 --> 0:14:52.200 and the sustained prices, and what they have found is 0:14:52.320 --> 0:15:00.280 that essentially in today's world they are at best a 0:15:00.440 --> 0:15:04.280 very marginal player as an organization. The reason is that 0:15:04.640 --> 0:15:07.800 demand is now a good deal more price sensitive. Who 0:15:07.840 --> 0:15:11.920 spoke about the consumers responding quickly to news of higher prices. 0:15:12.600 --> 0:15:17.840 Consumers are more astute. And secondly that the supply response 0:15:19.040 --> 0:15:22.480 is much quicker and the costs again as we were 0:15:22.480 --> 0:15:25.440 talking on the previous segment, are falling much more rapidly. 0:15:25.520 --> 0:15:31.680 So OPEC I think is opex day has passed? And 0:15:32.080 --> 0:15:35.920 UH the organism attempts by groups of countries such as 0:15:36.120 --> 0:15:40.800 especially high cost countries producers like Venezuela are waging a 0:15:40.880 --> 0:15:44.920 regard war that they are not ultimately going to be successful, 0:15:44.920 --> 0:15:47.680 but they may hold prices up a little bit and 0:15:47.760 --> 0:15:53.280 just provide a much greater incentive for UH lots of 0:15:53.320 --> 0:15:57.400 small producers, relatively small problem producers such as E G, 0:15:57.960 --> 0:16:01.080 E O G and others, and UH pioneer just to 0:16:01.400 --> 0:16:04.920 keep pushing ahead and expand supply. UH. You know, if 0:16:04.920 --> 0:16:08.280 you want to say, put it bluntly, UH, they've been 0:16:08.320 --> 0:16:14.440 overtaken by technology. I'm still confused here about the metrics 0:16:14.480 --> 0:16:16.920 that we use to gauge how these countries are upholding 0:16:16.920 --> 0:16:18.880 their ends of the barn. With Saudi Arabia in particularly, 0:16:18.880 --> 0:16:20.960 they released their own figures. We had figures from the 0:16:20.920 --> 0:16:23.520 International Organization as well. What do you prize more when 0:16:23.560 --> 0:16:25.680 you're when you're looking for for outputs, say what are 0:16:25.680 --> 0:16:28.680 you looking at? I very rarely try to do that. 0:16:28.960 --> 0:16:31.080 What I do is I turned to the market. I 0:16:31.160 --> 0:16:34.160 turned to the futures market. Uh you know. I was 0:16:35.120 --> 0:16:37.480 when the company called Drexel Burning was around. I was 0:16:37.560 --> 0:16:43.240 helping create this market. And today we have over five 0:16:43.280 --> 0:16:47.360 and almost five and a half billion barrels of oil 0:16:48.840 --> 0:16:51.800 outstanding in futures contracts. And what you do is you 0:16:51.840 --> 0:16:53.720 look at the shape of the forward price curve and 0:16:53.760 --> 0:16:56.160 how the companies are responding, and you look at the 0:16:56.160 --> 0:17:00.480 cash prices. It is you know what OPEC says it's 0:17:00.560 --> 0:17:04.160 doing is it has become irrelevant. Now I know this 0:17:04.240 --> 0:17:06.400 is this is what people have watched for fifty years. 0:17:06.400 --> 0:17:09.000 And as I'm moving into this new home, we got 0:17:09.000 --> 0:17:11.240 a hundred boxes of file cabinets and books and you 0:17:11.240 --> 0:17:12.880 look at all these old books and so on where 0:17:12.920 --> 0:17:15.560 people talked about OPEC and how we had to follow 0:17:15.720 --> 0:17:19.320 production and so on, and and it's all quaint. It's 0:17:19.359 --> 0:17:23.120 it's like filing away old train schedules when you used 0:17:23.119 --> 0:17:26.320 to use the train to go across the country. I mean, 0:17:26.320 --> 0:17:29.080 I look still at where we are, and we've gone 0:17:29.080 --> 0:17:31.600 from a hundred dollar framework down to twenty nine and 0:17:31.640 --> 0:17:34.720 back up to fifty ish. When you think about it 0:17:34.840 --> 0:17:37.960 every day, what is the thing our audience should watch 0:17:38.440 --> 0:17:44.520 in the oil market? If I were what, you know, 0:17:44.880 --> 0:17:48.959 if i'm I thought, I'm an investor, I wouldn't be 0:17:49.000 --> 0:17:51.960 watching so much the oil market because it's it's it's 0:17:51.960 --> 0:17:56.239 not going to move dramatically. Uh. What I'm watching is 0:17:56.520 --> 0:18:01.040 uh North Korea. Uh so you go act of political 0:18:01.119 --> 0:18:06.040 analysis that if somebody does something that takes a lot 0:18:06.040 --> 0:18:10.600 of demand off the market, which is what an attack 0:18:10.640 --> 0:18:13.639 on North Korea would do, or takes a lot of 0:18:13.680 --> 0:18:16.399 supply off the market, you're going to be in a 0:18:16.600 --> 0:18:20.880 very different situation. And every commodity market is this way. 0:18:21.000 --> 0:18:23.760 You know, you look at copper. There's this big strike 0:18:23.960 --> 0:18:28.520 down in Chili that's changed the dynamic copper market. It 0:18:28.840 --> 0:18:32.359 is something like that. You know, I picked North Korea 0:18:32.480 --> 0:18:35.919 because that's the highest scary thing right now, but it 0:18:36.119 --> 0:18:40.800 is you know, it is not in the oil market 0:18:40.880 --> 0:18:43.400 right now. Okay, so we gotta leave it there. Feel 0:18:43.440 --> 0:18:46.560 really good, Thank you so much, and congratulations on analysis 0:18:46.600 --> 0:18:51.080 of gasoline. Is the dynamic going into the warmer season 0:18:59.280 --> 0:19:02.800 brought you by Bank of America. Mary Lynch dedicated to 0:19:02.880 --> 0:19:06.760 bringing our clients insights and solutions to meet the challenges 0:19:06.920 --> 0:19:10.640 of a transforming world. That's the power of global connections. 0:19:11.000 --> 0:19:15.960 Mary Lynch, Pierce Federan Smith Incorporated Member s I p C. 0:19:19.160 --> 0:19:23.240 On the Spectum Enterprise phone line. Jack Bogo, Mr Bogo, 0:19:23.240 --> 0:19:26.280 wonderful to speak to you again. What has changed is 0:19:26.359 --> 0:19:29.120 not so much the migration of billions of dollars from 0:19:29.160 --> 0:19:32.800 active to passive, but just in the last six months 0:19:33.080 --> 0:19:35.800 we are now it what appears to be a crisis 0:19:35.920 --> 0:19:41.200 moment for active managers, mergers, mergers, mergers, cutting of costs, 0:19:41.240 --> 0:19:46.640 et cetera. Where will active management be in five years, Well, 0:19:46.680 --> 0:19:49.480 it will almost certainly be a smaller proportion of the 0:19:49.520 --> 0:19:53.000 mutual fund industry and than it is today. And today 0:19:53.040 --> 0:19:59.199 passive is around mutual fund equity mutual funds, and you know, 0:19:59.240 --> 0:20:02.560 it could get it gets very tough to build these numbers, 0:20:02.560 --> 0:20:06.120 these share numbers. But I would say probably five years 0:20:06.119 --> 0:20:10.000 from now it would be maybe maybe over forty five. 0:20:10.600 --> 0:20:13.000 There's a very strong tide out there, tom as you know, 0:20:13.680 --> 0:20:18.639 and amazingly, I mean the the e t F I'm sorry, 0:20:18.680 --> 0:20:22.280 the Total Index fun business. I was doing a bad 0:20:22.600 --> 0:20:26.119 forty billion last year and this year forty billion a 0:20:26.119 --> 0:20:29.080 month a month, and this year in the first two 0:20:29.119 --> 0:20:32.320 months it's something like sixty seven billion. That's a huge 0:20:32.400 --> 0:20:36.960 increase in UM in index fund close. I haven't seen 0:20:36.960 --> 0:20:39.400 all the data for active management, but they're still very, very, 0:20:39.560 --> 0:20:41.639 very negative. I want to quote a letter here from 0:20:41.680 --> 0:20:45.080 one Warren Buffett of Omaha, Nebraska. Quote. If a statue 0:20:45.119 --> 0:20:46.920 is ever erected to honor the person who's done the 0:20:46.920 --> 0:20:49.320 most for American investors, the hands down choice should be 0:20:49.920 --> 0:20:52.920 Jack Bogel. What's your relationship like with with Warren Buffett? 0:20:52.960 --> 0:20:55.280 And how how closely, how in sync or your two 0:20:55.520 --> 0:21:01.760 investing strategies. Well, are in many accidentical. And I first 0:21:01.800 --> 0:21:04.920 met Warren probably in about five out of the State 0:21:04.960 --> 0:21:09.800 Securities Commissioners meeting and in San Diego, California. We had 0:21:09.800 --> 0:21:12.560 a nice chat and we stayed in touch really a 0:21:12.560 --> 0:21:15.600 little bit. Ever since. He's written forwards to my books. 0:21:16.480 --> 0:21:19.639 He's done a great blurb if you will endorsement of 0:21:19.720 --> 0:21:22.520 the tenth anniversary edition of my little Book of Common 0:21:22.560 --> 0:21:24.840 Sense Investing, which will be coming out in the ball 0:21:25.280 --> 0:21:27.240 and it's right there in the cover of the book 0:21:28.080 --> 0:21:31.119 and that book has been He greatly admired that book, 0:21:31.880 --> 0:21:34.679 greatly admires it, and every time he speaks about it, 0:21:34.720 --> 0:21:36.800 up go the sales. He has a lot of a 0:21:36.800 --> 0:21:40.160 lot of effect. But you know, it's so close. He 0:21:40.160 --> 0:21:43.240 he recommends the S and P five just about every 0:21:43.280 --> 0:21:48.240 regular investor. He's leaving a trust for his wife and 0:21:48.280 --> 0:21:53.600 he has directed that invested in the Vanguards seven s 0:21:53.640 --> 0:22:01.080 and Index fund. You know, decades on he gets a 0:22:01.080 --> 0:22:08.439 shameless plug in. There again, you got the plug in 0:22:08.480 --> 0:22:12.560 for the Vanguard funds. Jack there with Mr Buffet, I 0:22:12.560 --> 0:22:16.600 get there's David continued, I. I can't avoid the plug. 0:22:16.640 --> 0:22:18.280 He was the one that plug there you go, there 0:22:18.359 --> 0:22:20.880 you go. We were talking with Arthur Levin a moment 0:22:20.920 --> 0:22:23.840 ago about the passive versus active debate, and I asked 0:22:23.920 --> 0:22:26.480 him how close we are to settling it? What's what's 0:22:26.520 --> 0:22:31.240 your sense of that? Well, we've seen something very very 0:22:31.240 --> 0:22:33.160 few people have talked about this, but what we've really 0:22:33.200 --> 0:22:38.720 done has moved active to a different section. Exchange traded funds, 0:22:38.720 --> 0:22:40.960 which are the big driver this year. They haven't always 0:22:40.960 --> 0:22:43.600 been in recent years, but they are right now. And 0:22:43.640 --> 0:22:45.399 that is people who are doing a lot of trading 0:22:45.400 --> 0:22:49.919 a lot of activity in their index fund investing. And 0:22:50.000 --> 0:22:51.760 you know, you can buy an index fun and bet 0:22:51.760 --> 0:22:53.720 whether the markets going up or down today and get 0:22:53.720 --> 0:22:56.840 three times leverage. I'm not sure exactly what sense that makes, 0:22:56.880 --> 0:22:59.600 and I would recommend nobody do it. But there's some 0:22:59.720 --> 0:23:02.479 very aggressive e t s out there. There's a very 0:23:02.560 --> 0:23:05.879 undiversified e t s out there, and there's a lot 0:23:05.920 --> 0:23:07.960 of trading. These e t s are turning over it 0:23:08.720 --> 0:23:11.080 while the Spider, the most popular stock in the world 0:23:11.119 --> 0:23:13.200 every day, the Standards and Boors five under e t 0:23:13.440 --> 0:23:17.240 F run by State Street has an annualized turnover at 0:23:17.240 --> 0:23:21.560 the moment of two thousand percent a year. Two percent 0:23:21.600 --> 0:23:23.679 a year. I mean, I'm the kind of guy Toma 0:23:23.760 --> 0:23:26.480 thinks three percent a year is pushing the envelope. Yeah, 0:23:27.000 --> 0:23:29.280 I mean, I I look jack at this debate, and 0:23:29.320 --> 0:23:31.520 again I look at the M and A, and it 0:23:31.640 --> 0:23:34.359 really just comes back to the theory, which you know 0:23:35.160 --> 0:23:40.440 your expert on among others of modern portfolio management. What 0:23:40.600 --> 0:23:45.639 did they get wrong the act of tom Let me 0:23:45.880 --> 0:23:49.359 respectfully disagree with that. You know, I had never heard 0:23:49.400 --> 0:23:53.119 of modern port folio theory. And when I started the 0:23:53.160 --> 0:23:59.960 first FUN back in back in nineteen seventy five recommend 0:24:00.000 --> 0:24:01.919 into the board of directors and got it approved here 0:24:01.920 --> 0:24:04.760 at Vanguard, the first index fund, And all I did 0:24:04.760 --> 0:24:08.000 was look at the record. I'm the pragmatic indexer. The 0:24:08.080 --> 0:24:11.000 record shows very clearly, and it showed the same thing 0:24:11.080 --> 0:24:14.679 to the great economist Paul Samuelson, that the record shows 0:24:14.760 --> 0:24:19.480 clearly that most managers, if not all managers, cannot consistently 0:24:19.880 --> 0:24:22.760 beat the stock market. And when you think about it, Tom, 0:24:22.920 --> 0:24:26.160 how could they. They're all average, They're competing with each other, 0:24:26.200 --> 0:24:28.560 and the market is the average. So if you take 0:24:28.560 --> 0:24:30.119 out a little bit every year, you'll do better than 0:24:30.119 --> 0:24:31.879 the guys that are taking out the great hunks of 0:24:31.880 --> 0:24:36.920 money every every day. Very quickly. Here, I'm just I'm disappointed, sir, 0:24:36.960 --> 0:24:40.199 you don't have Princeton the champion of the final four. Gonzaga. 0:24:40.280 --> 0:24:44.200 What is it about Gonzaga that Jack Bocal likes. Well, 0:24:44.240 --> 0:24:48.840 they're they're little, they were pretty unknown four or five 0:24:48.920 --> 0:24:53.120 years ago, and they've gone from being a constant underdog 0:24:53.640 --> 0:24:57.520 to you know, a rising star. And one of these 0:24:57.560 --> 0:25:00.320 days that the star will will be aligned with some 0:25:00.320 --> 0:25:03.280 pretty good things. So that was my guest. That's good, 0:25:03.359 --> 0:25:06.280 Jack Bogel, thank you so much greatly appreciated. Mr Bogel, 0:25:06.960 --> 0:25:09.320