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Speaker 1: This is a Bloomberg Business Flash. Good morning, I'm John Tucker.
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Speaker 1: com slash. C m E grew up ahead of the
Speaker 1: FED decision today. Getting some readings on the economy right now.
Speaker 1: Industrial production these are month over month numbers down four
Speaker 1: tenths of a percent after the seven tenths of repercent
Speaker 1: rise in the prior month. Right now, also capacity utilization.
Speaker 1: The numbers coming in a little weaker than what the
Speaker 1: analysts expected seventy four point nine percent. The expectation was
Speaker 1: for seventy five point two percent. Futures appeared some earlier
Speaker 1: games has some few futures right now two points higher,
Speaker 1: that's up a tenth of a percent, to down futures
Speaker 1: up thirty three that's up two tents and as they kee,
Speaker 1: mini futures seven points higher. That is up two tents,
Speaker 1: up a percent. We check the markets for you every
Speaker 1: fifteen minutes during the trading day right here on Bloomberg Radio,
Speaker 1: Michael and Tom. All right, John Tucker, thank you very much.
Speaker 1: Taking a look at some of that industrial production numbers, Tom,
Speaker 1: it's banned across the board, and not just a headline number,
Speaker 1: but manufacturing down four tents. You would like to see
Speaker 1: a rebound in that area. This is a May number,
Speaker 1: and we had seen weakness in manufacturing over the last
Speaker 1: couple of months. A lot of that motor vehicles off
Speaker 1: four point two percent. Utilities were down eight percent. Of
Speaker 1: course it was a rainy, yucky May, so not a
Speaker 1: lot of energy generation. Mining here's an interesting one. I
Speaker 1: want to go back and look at this because are
Speaker 1: the chart I have in front of me doesn't go
Speaker 1: back far enough, but it was up two tenths. When
Speaker 1: was the last time mining was up was August of
Speaker 1: last year. I would look at capacity utilization, which is
Speaker 1: maybe the most fossil like chart, most ancient chart that
Speaker 1: we have, and the vector down is getting back near
Speaker 1: the bottom of the two thousand one recession. It is
Speaker 1: an ancient chart, capacity utilization, which means we must speak
Speaker 1: to an ancient gentleman with terrific wisdom and perspective. Who
Speaker 1: would that be, Mike, Well, he's not an ancient gentleman.
Speaker 1: He's an investor of a certain age. Yes, and well
Speaker 1: and well preserved. We might Bogle the founder of Vanguard
Speaker 1: UH and things have changed in investing over the years,
Speaker 1: and yet you are arguing, as you always have, that
Speaker 1: passive investing still is the way to go for investors.
Speaker 1: Never mind all this quant stuff, never mind umping in
Speaker 1: and out to arbitrage small price opportunities. By and hold forever,
Speaker 1: basically is your advice, that is my advice. By and
Speaker 1: hold a total stock market forever or equity position, and
Speaker 1: the total bond market for your bond position. I want
Speaker 1: to congratulate you, Mr Bogglan. You know you and I
Speaker 1: have talked many times over the years of your wonderful
Speaker 1: speech in Washington. You're important speech to the Institute of
Speaker 1: Quantitative Finance. Did they throw their crape susette at you
Speaker 1: while you were speaking? How did they greet That's a
Speaker 1: that's a great question, Tom. And then the reality is
Speaker 1: that the audience was very intentive. Attentive gave me a
Speaker 1: not not a standing ovation, but a pretty nice ovation
Speaker 1: at the end. And I talked to those quants down there.
Speaker 1: I'm in the guess the majority of them, and maybe
Speaker 1: the vast majority of them when it comes to their
Speaker 1: own money, are investing in Vanguard index funds. Listen to
Speaker 1: you promoting what's the pragmatic school? Do your pragmatic school?
Speaker 1: What do you do given negative interest rates, new low
Speaker 1: terminal values, and frankly great regimes that a young John
Speaker 1: Vogel knew, Well, yeah, we had that during my career
Speaker 1: in this business. Uh Now, sixty five years or so,
Speaker 1: or soon to be sixty five years, I should say,
Speaker 1: the average return on stocks has been around twelve and
Speaker 1: the average return on bonds has been about five. That
Speaker 1: is not going to be true in the future. You
Speaker 1: may not like the fact that it won't be true
Speaker 1: in the future, but the fact is in best we must.
Speaker 1: You know, what are you gonna do with the money
Speaker 1: that you have your regular investing or your capital your
Speaker 1: capital fund? And do you take it out of the
Speaker 1: markets and sit on it In the long run That
Speaker 1: is a bad idea. In the short run, it may
Speaker 1: be a great idea, but who knows where the long
Speaker 1: the short end. So um, it's uh, it's accept the
Speaker 1: returns over it by the market and don't take risks
Speaker 1: to get higher returns, whether you're talking about bonds or stock.
Speaker 1: And that's not a very palable thing. I mean, I
Speaker 1: think it's reasonable to reasonable think that stocks might return
Speaker 1: four to five percent in the next decade. And it's
Speaker 1: reasonable to think given the very low level of interest
Speaker 1: rates that then your treasury is around one point six
Speaker 1: percent or something. You have to buy that when you
Speaker 1: can go longer. You can on corporates, but Jahn probably
Speaker 1: get around it two and a half percent, you on bonds.
Speaker 1: So balanced portfolio is going to produce you know, maybe
Speaker 1: a three percent return something in that range. That's the fact.
Speaker 1: And there's another fact that time it's even worse. And
Speaker 1: that's before the cost of investing. And if the return
Speaker 1: turns out in the balanced portfolio, you know, I could
Speaker 1: be a little on the low side. I don't think
Speaker 1: I'm gonna be um on the high side very much. Um.
Speaker 1: When you take a couple of percentwich points, which is
Speaker 1: what it course you to all mutual funds, you take
Speaker 1: that three down to one, I won't come in on
Speaker 1: tax in effie of most mutual funds, but it's every
Speaker 1: bit of one. So it's you just do the best
Speaker 1: you can in the environment as it exists today. Take
Speaker 1: what's there and don't reach. Don't if somebody reserved once. Um,
Speaker 1: if you've lost in the first seven races, don't take
Speaker 1: all your money in any any anything you have left
Speaker 1: and bet in the favorite in the eight. It's not
Speaker 1: a good it's not it's not gonna be. Yeah, but
Speaker 1: any time period, you know, you could still catch a
Speaker 1: rising knife. I know what's you know, a star treker.
Speaker 1: You could find something that will make you a lot
Speaker 1: of money. And that's the always the kind of the
Speaker 1: grail for people. Well sure that's the grail for people.
Speaker 1: But the reality is for every stock that beats the
Speaker 1: total stock market, there is essentially not quite this simple,
Speaker 1: but almost there's a stock that loses to it. So
Speaker 1: if you're sure you can always buy the winners, please
Speaker 1: be my guests. But I've never been anybody check Bogle. Well,
Speaker 1: have to leave it there today, shorter day because of
Speaker 1: FED day. Thank you so much, greatly appreciate it, and
Speaker 1: folks that really commend to you. Mr Bogel's speech to
Speaker 1: the Institute for Quantitative Finance at Washington, uh here a
Speaker 1: few weeks ago, Mr Bogel, I believe is with vanguard
Speaker 1: in shape and forms futures of four down features of
Speaker 1: thirty nine. I haven't mentioned oil today week or Brent
Speaker 1: down of dollars seven seventy six. We begin our coverage
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