1 00:00:12,920 --> 00:00:15,680 Speaker 1: This is Wall Street Week. I'm David Weston bringing you 2 00:00:15,800 --> 00:00:19,640 Speaker 1: stories of capitalism. This week, trade is at the center 3 00:00:19,720 --> 00:00:22,880 Speaker 1: of President Trump's economic policy. We bring you the story 4 00:00:22,880 --> 00:00:25,600 Speaker 1: of what he's trying to accomplish and whether he's likely 5 00:00:25,760 --> 00:00:30,320 Speaker 1: to succeed. Plus, Vanguard celebrates the fiftieth anniversary of its 6 00:00:30,360 --> 00:00:33,519 Speaker 1: first fund. We'll go to its headquarters in Pennsylvania to 7 00:00:33,560 --> 00:00:37,400 Speaker 1: hear from CEO Salem Ramji about what he thinks they've 8 00:00:37,400 --> 00:00:40,840 Speaker 1: accomplished so far and where they go next. And birth 9 00:00:40,920 --> 00:00:44,000 Speaker 1: rates are dropping through much of the world, with governments 10 00:00:44,040 --> 00:00:46,400 Speaker 1: at a loss for what to do about them. We 11 00:00:46,479 --> 00:00:48,960 Speaker 1: bring you the story of what one Japanese company has 12 00:00:49,000 --> 00:00:51,919 Speaker 1: done to ensure it has a workforce for the future. 13 00:00:52,720 --> 00:00:55,760 Speaker 1: But first we visit the complicated world of Jay Powell, 14 00:00:56,200 --> 00:01:01,040 Speaker 1: caught between a slow economy, stubborn inflation, and who can't 15 00:01:01,120 --> 00:01:04,280 Speaker 1: quite decide what he wants to do with the FED chair. 16 00:01:05,800 --> 00:01:10,360 Speaker 2: And inflation is basically down and interest rates came down 17 00:01:10,400 --> 00:01:12,800 Speaker 2: despite the fact that I have a FED person who's 18 00:01:12,920 --> 00:01:15,320 Speaker 2: not really doing a good job. But I won't say that. 19 00:01:15,760 --> 00:01:17,760 Speaker 2: I want to be very nice. I want to be 20 00:01:17,840 --> 00:01:22,320 Speaker 2: very nice and respectful to the FED. You're not supposed 21 00:01:22,319 --> 00:01:24,480 Speaker 2: to criticize the Fed. You're supposed to let him do 22 00:01:24,520 --> 00:01:26,280 Speaker 2: his own thing. But I know much more than he 23 00:01:26,319 --> 00:01:27,479 Speaker 2: does about interest rates. 24 00:01:27,480 --> 00:01:33,560 Speaker 1: Believe me, Larry. We have FMC meetings next week. What 25 00:01:33,600 --> 00:01:34,920 Speaker 1: do you expect the FED to do. 26 00:01:35,640 --> 00:01:39,480 Speaker 3: I'd be very surprised if they moved interest rates. I 27 00:01:39,520 --> 00:01:44,000 Speaker 3: think they'll continue to convey vigilance and a sense of 28 00:01:44,120 --> 00:01:49,280 Speaker 3: uncertainty about where the economy is and their determination to 29 00:01:49,360 --> 00:01:55,200 Speaker 3: monitor both the cyclical risks and the inflation risks. I 30 00:01:55,240 --> 00:01:57,400 Speaker 3: think the FED has to be very careful given all 31 00:01:57,400 --> 00:02:00,240 Speaker 3: the political pressures that have been put on it, even 32 00:02:00,320 --> 00:02:03,040 Speaker 3: that the tariffs are potentially going to be an important 33 00:02:03,040 --> 00:02:07,040 Speaker 3: inflationary impulse in the economy, and also given the substantial 34 00:02:07,120 --> 00:02:13,040 Speaker 3: signs that the economy is slowing. If I were at 35 00:02:13,040 --> 00:02:16,880 Speaker 3: the FED, I would be trying to have an uneventful 36 00:02:16,960 --> 00:02:22,000 Speaker 3: meeting and not produce any substantial reaction in the markets. 37 00:02:22,080 --> 00:02:25,240 Speaker 3: And my guess is that that will be their course. 38 00:02:25,400 --> 00:02:27,960 Speaker 1: President Trump seems to have a different view. He thinks 39 00:02:28,000 --> 00:02:30,600 Speaker 1: that they should have cut already, that they're behind on 40 00:02:30,639 --> 00:02:33,480 Speaker 1: the cut, and there is some slowing in the economy. 41 00:02:33,480 --> 00:02:35,320 Speaker 1: We saw the GDP numbers at least for the first 42 00:02:35,400 --> 00:02:39,200 Speaker 1: quarter come in light. We saw core PCE actually pretty 43 00:02:39,200 --> 00:02:42,640 Speaker 1: modest this week. Is there a growing case for what 44 00:02:42,720 --> 00:02:44,400 Speaker 1: President Trump is arguing for. 45 00:02:45,400 --> 00:02:49,320 Speaker 3: I think the economy probably looks softer today than it 46 00:02:49,400 --> 00:02:53,160 Speaker 3: did a couple months ago, but I think there are 47 00:02:53,200 --> 00:03:00,120 Speaker 3: also some troubling signs of inflation risk going up. I 48 00:03:00,120 --> 00:03:04,280 Speaker 3: wouldn't argue with the market's judgment that the full set 49 00:03:04,320 --> 00:03:09,600 Speaker 3: of developments in the economy points towards more easing than 50 00:03:10,400 --> 00:03:15,560 Speaker 3: look like it would be necessary a month or two ago. 51 00:03:16,040 --> 00:03:18,400 Speaker 3: But I think it would have been a grave mistake 52 00:03:19,200 --> 00:03:22,919 Speaker 3: to have eased already, and would be a very serious 53 00:03:23,080 --> 00:03:28,920 Speaker 3: error to ease at this upcoming meeting. I think the 54 00:03:29,000 --> 00:03:32,880 Speaker 3: results would be a lack of confidence in the Fed's 55 00:03:32,919 --> 00:03:37,960 Speaker 3: determination on inflation, and that would mean higher interest rates 56 00:03:38,000 --> 00:03:41,000 Speaker 3: at the long end, and that would mean higher mortgage 57 00:03:41,040 --> 00:03:47,080 Speaker 3: rates and would probably ultimately mean more economic weakness. So 58 00:03:47,560 --> 00:03:52,800 Speaker 3: I think the President's advice is really quite misguided, both 59 00:03:53,000 --> 00:03:57,640 Speaker 3: as to the substance and as to the appearances. I've 60 00:03:57,680 --> 00:04:02,440 Speaker 3: said many times, FED for a president is a fool's game. 61 00:04:02,920 --> 00:04:06,200 Speaker 3: The FED doesn't listen, and so short term interest rates 62 00:04:06,240 --> 00:04:09,760 Speaker 3: don't go down. The market does listen, and so long 63 00:04:09,840 --> 00:04:11,080 Speaker 3: term interest rates go up. 64 00:04:11,520 --> 00:04:14,280 Speaker 1: Talking about short term interest rates, we had church and 65 00:04:14,320 --> 00:04:17,560 Speaker 1: sectary vestent this week say that if you look at it, 66 00:04:17,640 --> 00:04:21,200 Speaker 1: the short rates are below the federal funds rates right now. 67 00:04:21,520 --> 00:04:23,960 Speaker 1: And when the short rates are below the federal fund rates, 68 00:04:24,120 --> 00:04:27,000 Speaker 1: that really argues for a cut. Is that a good benchmark? 69 00:04:27,560 --> 00:04:31,600 Speaker 3: I don't think so. The two year interest rate reflects 70 00:04:31,680 --> 00:04:37,839 Speaker 3: the expectations of what the future short term rates are 71 00:04:37,960 --> 00:04:41,760 Speaker 3: going to be, So all that's really saying is that 72 00:04:41,800 --> 00:04:45,479 Speaker 3: the market is expecting that there will be cuts. That's 73 00:04:45,520 --> 00:04:49,159 Speaker 3: not the same thing as saying there should be cuts. 74 00:04:49,720 --> 00:04:55,400 Speaker 3: So I think it's pretty analytically unsound to reason from 75 00:04:55,440 --> 00:04:59,240 Speaker 3: the two year to what the FED should do. And 76 00:04:59,279 --> 00:05:03,120 Speaker 3: it's pretty in a appropriate for the Treasury Secretary to 77 00:05:03,200 --> 00:05:09,480 Speaker 3: be commenting in that way on the FED. In many ways, 78 00:05:09,520 --> 00:05:14,760 Speaker 3: it's actually even worse than the president commenting, because people 79 00:05:14,920 --> 00:05:19,520 Speaker 3: understand that presidents are political figures who are called on 80 00:05:20,240 --> 00:05:25,240 Speaker 3: to address all issues, whereas they think of Secretary of 81 00:05:25,320 --> 00:05:31,719 Speaker 3: the Treasury as sophisticated financial professionals who should know all 82 00:05:31,760 --> 00:05:33,760 Speaker 3: about the independence of the FED. 83 00:05:34,720 --> 00:05:37,560 Speaker 1: The independence of the Federal Reserve doesn't depend on the 84 00:05:37,560 --> 00:05:40,960 Speaker 1: will of the president alone. Congress set it up that way, 85 00:05:41,040 --> 00:05:43,680 Speaker 1: and ultimately the courts may have something to say about it. 86 00:05:44,120 --> 00:05:47,000 Speaker 1: Catherine Judge is a professor at Columbia Law School and 87 00:05:47,040 --> 00:05:49,240 Speaker 1: has studied how the FED has evolved. 88 00:05:49,560 --> 00:05:53,600 Speaker 4: So it was actually restructured quite significantly in nineteen thirty 89 00:05:53,640 --> 00:05:57,799 Speaker 4: five to be significantly more independent. That year matters. Actually 90 00:05:57,920 --> 00:06:00,559 Speaker 4: it was right after the Supreme Court decid a major 91 00:06:00,600 --> 00:06:04,040 Speaker 4: decision Humphrey's Executor, which made it clear that Congress was 92 00:06:04,080 --> 00:06:07,159 Speaker 4: able to create independent agencies. And it was in the 93 00:06:07,160 --> 00:06:11,279 Speaker 4: wake of that decision that the Congress really restructured the 94 00:06:11,320 --> 00:06:14,320 Speaker 4: FED to its current structor. And it's a complicated structure. 95 00:06:14,320 --> 00:06:18,080 Speaker 4: We sell twelve reserve banks across a different country, but 96 00:06:18,160 --> 00:06:20,520 Speaker 4: then we have the Board of Governors and they alserve 97 00:06:20,560 --> 00:06:24,000 Speaker 4: for fourteen year terms and they can only be removed 98 00:06:24,000 --> 00:06:27,080 Speaker 4: for cause, and that really serves as the bedrock of 99 00:06:27,120 --> 00:06:28,200 Speaker 4: the Fed's independence. 100 00:06:28,680 --> 00:06:31,440 Speaker 1: There have been times, even more recent history, when the 101 00:06:31,440 --> 00:06:35,320 Speaker 1: Federal serve seems to have been really addressing that concerns 102 00:06:35,360 --> 00:06:38,279 Speaker 1: the president. Under President Nixon, for example, that certainly happened. 103 00:06:38,920 --> 00:06:41,280 Speaker 1: What were the consequences of that and what corrected and what. 104 00:06:41,320 --> 00:06:43,719 Speaker 4: Gave us vulgar Yeah, I mean I think it was 105 00:06:43,760 --> 00:06:47,120 Speaker 4: actually what happened with Nixon and Arthur Burns, who was 106 00:06:47,160 --> 00:06:49,719 Speaker 4: then the FED chair, that led to the Vulgar era. 107 00:06:50,160 --> 00:06:52,800 Speaker 4: And really what we've had subsequent to the Vulgar Era, 108 00:06:53,000 --> 00:06:56,480 Speaker 4: which has been a real respect among politicians for FED independence. 109 00:06:56,920 --> 00:06:59,520 Speaker 4: And what we saw there is the classic stereotype of 110 00:06:59,560 --> 00:07:02,279 Speaker 4: a president who wants a slightly healthier economy and short 111 00:07:02,360 --> 00:07:05,279 Speaker 4: run is putting pressure on the FED chair and a 112 00:07:05,279 --> 00:07:07,920 Speaker 4: FED chair who felt the need to be somewhat accommodative 113 00:07:08,400 --> 00:07:11,920 Speaker 4: to those pressures, and the result was really destabilizing. We 114 00:07:12,040 --> 00:07:14,600 Speaker 4: ended up with a period of meaningful stagflations. We had 115 00:07:14,680 --> 00:07:17,560 Speaker 4: high rates of inflation, high rates of employment. It was 116 00:07:17,600 --> 00:07:20,720 Speaker 4: not healthy for really the economy or for anyone else 117 00:07:20,760 --> 00:07:23,800 Speaker 4: within the economy's longer term. And one of the real 118 00:07:23,920 --> 00:07:27,760 Speaker 4: challenges and was how does the FED re establish credibility? 119 00:07:28,080 --> 00:07:31,880 Speaker 4: How does the FED convince the public, convince markets that 120 00:07:32,000 --> 00:07:37,600 Speaker 4: it is going to tighten monetary policy even when it's 121 00:07:37,640 --> 00:07:41,600 Speaker 4: facing pressure to be more commodative. And Volga really came in, 122 00:07:42,200 --> 00:07:45,960 Speaker 4: took the reins and had that long term objective and 123 00:07:46,120 --> 00:07:50,040 Speaker 4: was willing to cause some significant short term economic pain 124 00:07:50,800 --> 00:07:54,160 Speaker 4: and to face some meaningful threats in the process, but 125 00:07:54,280 --> 00:07:57,480 Speaker 4: he managed to do a remarkable job re establishing the 126 00:07:57,480 --> 00:07:58,480 Speaker 4: Fed's credibility. 127 00:07:58,800 --> 00:08:03,040 Speaker 1: Recent presidents inuneral have been reluctant to comment on the 128 00:08:03,080 --> 00:08:05,920 Speaker 1: actions petruing a monetary policy of the Fair Reserve. President 129 00:08:05,920 --> 00:08:07,560 Speaker 1: Trump has been very explicit to saying, I can say 130 00:08:07,560 --> 00:08:08,920 Speaker 1: what I want to say. If I want to comment, 131 00:08:08,920 --> 00:08:11,280 Speaker 1: and I'm going to comment in it, can he be 132 00:08:11,400 --> 00:08:15,520 Speaker 1: free to I'll say, jawbone the Fair Reserve consistent with 133 00:08:15,600 --> 00:08:16,280 Speaker 1: its independence. 134 00:08:16,360 --> 00:08:17,640 Speaker 4: I would say that's part of what we're trying to 135 00:08:17,640 --> 00:08:21,040 Speaker 4: figure out right now. The challenge that we're facing with 136 00:08:21,120 --> 00:08:23,600 Speaker 4: President Trump is not just that he has an opinion 137 00:08:23,640 --> 00:08:26,840 Speaker 4: on interest rates I think is actually legitimate and even 138 00:08:26,840 --> 00:08:29,360 Speaker 4: though it's not been done in recent presidency, is not 139 00:08:29,400 --> 00:08:31,440 Speaker 4: inappropriate for a president to be able to have a 140 00:08:31,560 --> 00:08:35,520 Speaker 4: view the challenges. He's expressing that view while also having 141 00:08:35,600 --> 00:08:38,320 Speaker 4: taken the position that he has the authority to fire 142 00:08:38,400 --> 00:08:41,160 Speaker 4: Jerome Powell, the current chair of the Federal Reserve, and 143 00:08:41,200 --> 00:08:45,480 Speaker 4: while also having removed other commissioners from other agencies that 144 00:08:45,559 --> 00:08:48,800 Speaker 4: have explicit four cause removal protection. So it really is 145 00:08:48,800 --> 00:08:52,120 Speaker 4: that combination of not only having an opinion, but having 146 00:08:52,320 --> 00:08:56,280 Speaker 4: views about his legal authority that are incredibly expansive, that 147 00:08:56,320 --> 00:08:59,440 Speaker 4: have the potential to really undermine the credibility, and that 148 00:08:59,559 --> 00:09:02,720 Speaker 4: expect that the Federal Reserve will be able to maintain 149 00:09:03,040 --> 00:09:05,920 Speaker 4: the independence that it's enjoyed and that has allowed the 150 00:09:05,960 --> 00:09:09,559 Speaker 4: economic flurishing that the country has enjoyed for the last 151 00:09:09,559 --> 00:09:10,280 Speaker 4: four decades. 152 00:09:10,559 --> 00:09:14,000 Speaker 1: If we are looking for guardrails, do they come from 153 00:09:14,200 --> 00:09:16,280 Speaker 1: laws we like to say, we're a nation of laws, 154 00:09:16,320 --> 00:09:20,480 Speaker 1: not of men. Or might they come from bonds? Because 155 00:09:20,480 --> 00:09:22,720 Speaker 1: there's been a fair amount of reaction in the bond 156 00:09:22,760 --> 00:09:24,600 Speaker 1: market to some of what President Trump has said. 157 00:09:24,800 --> 00:09:26,200 Speaker 4: I was going to say, I have to say I've 158 00:09:26,240 --> 00:09:28,520 Speaker 4: personally welcomed all of those reactions, and I think it's 159 00:09:28,520 --> 00:09:31,840 Speaker 4: it appropriate for a president to be responsive to understanding 160 00:09:31,880 --> 00:09:35,720 Speaker 4: what the market is telling them about the likely impact 161 00:09:35,800 --> 00:09:40,080 Speaker 4: and the potential destabilizing impact of policy choices of threats. 162 00:09:40,720 --> 00:09:43,360 Speaker 4: That being said, we can't rely on the bond markets alone, 163 00:09:43,400 --> 00:09:45,560 Speaker 4: and there's a lot of danger and that having be 164 00:09:45,840 --> 00:09:47,520 Speaker 4: too much of an indicator or too much of an 165 00:09:47,520 --> 00:09:49,719 Speaker 4: influence coming up. 166 00:09:49,920 --> 00:09:52,920 Speaker 1: Tariffs may be President Trump's favorite word, but much of 167 00:09:52,960 --> 00:09:56,040 Speaker 1: the world seems to have problems with it. We examine 168 00:09:56,080 --> 00:09:59,480 Speaker 1: what us trade policy can accomplish and what tools are 169 00:09:59,559 --> 00:10:03,640 Speaker 1: fit for purpose. That's next on Wall Street Week. You're 170 00:10:03,679 --> 00:10:07,520 Speaker 1: listening to Bloomberg Wall Street Week with David Weston from 171 00:10:07,520 --> 00:10:08,560 Speaker 1: Bloomberg Radio. 172 00:10:14,480 --> 00:10:18,560 Speaker 5: This is Bloomberg Wall Street Week with David Weston from 173 00:10:18,600 --> 00:10:19,640 Speaker 5: Bloomberg Radio. 174 00:10:20,440 --> 00:10:24,040 Speaker 1: This is a story about means and ends. At this point, 175 00:10:24,080 --> 00:10:26,880 Speaker 1: we all know the means. President Trump has chosen to 176 00:10:26,920 --> 00:10:28,760 Speaker 1: advance his economic agenda. 177 00:10:28,640 --> 00:10:30,160 Speaker 6: Tariff, tariff, tariff. 178 00:10:30,320 --> 00:10:33,080 Speaker 2: I am a tariff man. To me, the most beautiful 179 00:10:33,080 --> 00:10:34,920 Speaker 2: word in the dictionary is tariff. 180 00:10:35,160 --> 00:10:38,040 Speaker 1: But if tariffs are the means, it's not always as 181 00:10:38,120 --> 00:10:40,960 Speaker 1: clear what ends he hopes to accomplish with them, which 182 00:10:40,960 --> 00:10:44,200 Speaker 1: makes it harder to evaluate whether he's winning or losing. 183 00:10:49,520 --> 00:10:53,320 Speaker 2: Tariffs are about making America rich again and making America 184 00:10:53,360 --> 00:10:56,559 Speaker 2: great again. And it's happening, and it will happen rather quickly. 185 00:10:56,800 --> 00:10:58,800 Speaker 1: All of us are becoming fluent in the talk of 186 00:10:59,000 --> 00:11:02,440 Speaker 1: US trade power, whether we want to or not. But 187 00:11:02,520 --> 00:11:04,920 Speaker 1: in the end, what is it that trade policy is 188 00:11:05,000 --> 00:11:07,800 Speaker 1: meant to accomplish for the America? The President wants to 189 00:11:07,800 --> 00:11:08,760 Speaker 1: make great again. 190 00:11:09,320 --> 00:11:13,000 Speaker 7: So the goal of trade policy I think should be 191 00:11:13,559 --> 00:11:19,120 Speaker 7: enhancing economic well being in the United States and internationally, 192 00:11:19,160 --> 00:11:23,200 Speaker 7: because you should be able to use trade as part 193 00:11:23,400 --> 00:11:28,280 Speaker 7: of an economic strategy that grows an economic pie. 194 00:11:28,600 --> 00:11:32,079 Speaker 1: Susan Schwab served as the US Trade Representative under President 195 00:11:32,080 --> 00:11:35,719 Speaker 1: George W. Bush and now teaches international trade at the 196 00:11:35,840 --> 00:11:38,520 Speaker 1: University of Maryland School of Public Policy. 197 00:11:38,920 --> 00:11:42,280 Speaker 7: This is not a zero sum exercise where I when 198 00:11:42,360 --> 00:11:45,120 Speaker 7: you lose, it should be you grow the economic pie. 199 00:11:45,760 --> 00:11:49,000 Speaker 7: It is a policy where you create rules of the 200 00:11:49,080 --> 00:11:53,960 Speaker 7: road and then you enforce them rigorously. It is a 201 00:11:54,320 --> 00:11:59,480 Speaker 7: policy where you make sure that as you build those rules, 202 00:12:00,000 --> 00:12:06,000 Speaker 7: they are rules that Again my opinion and historically our 203 00:12:06,120 --> 00:12:12,480 Speaker 7: view of trade, trade barriers are sort of the last result. 204 00:12:12,600 --> 00:12:16,280 Speaker 7: You know, free trade, open trade, market based trade is 205 00:12:16,400 --> 00:12:19,600 Speaker 7: the norm is what the goal where you'd like to be. 206 00:12:20,760 --> 00:12:25,439 Speaker 7: But life is reality is deviations from that norm, and 207 00:12:25,480 --> 00:12:32,040 Speaker 7: you want to minimize the trade distorting interventions in the market. 208 00:12:32,120 --> 00:12:35,360 Speaker 7: You want to use trade in the most positive sense, 209 00:12:35,559 --> 00:12:39,160 Speaker 7: but you also need to be defensive because you don't 210 00:12:39,240 --> 00:12:45,880 Speaker 7: want trade distortions to undermine your national security, interests, your 211 00:12:46,400 --> 00:12:50,000 Speaker 7: you know, the economic well being of your population. But 212 00:12:50,080 --> 00:12:52,320 Speaker 7: you don't want to pretend that trade is the be 213 00:12:52,440 --> 00:12:55,840 Speaker 7: all and end all and that it's going to cure everything. 214 00:12:56,200 --> 00:12:59,080 Speaker 1: Free trade has gotten a bad name in some parts 215 00:12:59,120 --> 00:13:02,520 Speaker 1: of Washington these and the accusation I think is that 216 00:13:02,559 --> 00:13:05,719 Speaker 1: it's actually hurt some workers in some industries, at least 217 00:13:05,760 --> 00:13:07,520 Speaker 1: in parts of the country. Is that fair? 218 00:13:07,840 --> 00:13:10,040 Speaker 7: Much as I hate to say it, I don't think 219 00:13:10,080 --> 00:13:12,560 Speaker 7: we've ever had free trade. I don't think any country, 220 00:13:13,440 --> 00:13:17,199 Speaker 7: no matter how pure they think they are, is actually 221 00:13:17,240 --> 00:13:22,080 Speaker 7: a free trader. Trade can impact, can hurt, and has 222 00:13:22,240 --> 00:13:29,360 Speaker 7: hurt different communities, different individuals. And the question is how 223 00:13:29,440 --> 00:13:34,760 Speaker 7: much of that is quote structural, you know, how much 224 00:13:34,840 --> 00:13:39,160 Speaker 7: of that is I'm not sure that Americans ever want 225 00:13:39,160 --> 00:13:45,240 Speaker 7: to make labor intensive footwear or labor intensive apparel again. 226 00:13:46,440 --> 00:13:50,280 Speaker 7: And how much of that is unfairly traded imports that 227 00:13:50,320 --> 00:13:55,080 Speaker 7: have been subsidized, that are selling that are dumped into 228 00:13:55,120 --> 00:13:57,920 Speaker 7: the market, that are selling it less than the cost 229 00:13:57,960 --> 00:14:01,640 Speaker 7: of production. I'll give you a different example. In the 230 00:14:01,760 --> 00:14:07,079 Speaker 7: seventeen nineties, over ninety percent of US of the proportion 231 00:14:07,200 --> 00:14:11,280 Speaker 7: of US workers, we're in agriculture today, that's what less 232 00:14:11,280 --> 00:14:15,120 Speaker 7: than two percent, less than three percent. Nobody argues that 233 00:14:15,320 --> 00:14:22,080 Speaker 7: US agriculture is uncompetitive. US agriculture is a major competitive producer, 234 00:14:22,720 --> 00:14:27,200 Speaker 7: but we do it without the same proportion of labor 235 00:14:27,440 --> 00:14:33,400 Speaker 7: needed productivity enhancements. Technology has taken over that function. 236 00:14:33,480 --> 00:14:36,640 Speaker 1: And that has been a foundation of President Trump's trade policy, 237 00:14:37,080 --> 00:14:41,520 Speaker 1: making America great again by quite literally making stuff in 238 00:14:41,600 --> 00:14:42,520 Speaker 1: America again. 239 00:14:43,160 --> 00:14:46,760 Speaker 7: People claim we don't make things anymore. In fact, we 240 00:14:46,880 --> 00:14:50,400 Speaker 7: make things all over the country, and manufacturing output in 241 00:14:50,440 --> 00:14:53,440 Speaker 7: the United States has continued to go up and up 242 00:14:53,480 --> 00:14:55,560 Speaker 7: and up and up, contrary to what a lot of 243 00:14:55,600 --> 00:14:59,840 Speaker 7: our politicians say, Republicans and Democrats, by the way, manufacturing 244 00:15:00,000 --> 00:15:02,880 Speaker 7: employment has gone down, has been going down since the 245 00:15:02,960 --> 00:15:08,360 Speaker 7: nineteen fifties, in part because more automation, more technology, but 246 00:15:09,520 --> 00:15:11,840 Speaker 7: also in part if you talk about, for example, the 247 00:15:11,960 --> 00:15:19,520 Speaker 7: China shock late nineteen nineties into the twenty ten twenty eleven, 248 00:15:19,720 --> 00:15:22,640 Speaker 7: there was no time for structural adjustment, no time for 249 00:15:22,800 --> 00:15:28,280 Speaker 7: the workers to adjust, and workers and communities were severely impacted. 250 00:15:28,400 --> 00:15:31,640 Speaker 7: Their non market economy model is a bad model, and 251 00:15:31,640 --> 00:15:35,240 Speaker 7: they're exporting their economic mistakes, so they have overcapacity and 252 00:15:35,280 --> 00:15:37,280 Speaker 7: they're dumping them all over the world. 253 00:15:37,600 --> 00:15:40,640 Speaker 1: China's non market economy maybe a bad model, but it 254 00:15:40,640 --> 00:15:42,120 Speaker 1: doesn't look like they're going to move off of it 255 00:15:42,160 --> 00:15:45,080 Speaker 1: anytime soon. So in the meantime, what do you do. 256 00:15:45,640 --> 00:15:48,160 Speaker 1: With a non market economy as big and as powerful 257 00:15:48,200 --> 00:15:49,040 Speaker 1: as China. 258 00:15:48,960 --> 00:15:51,920 Speaker 7: We should be doing a much better job of enforcing 259 00:15:52,000 --> 00:15:55,600 Speaker 7: existing rules at the wto running up the score against 260 00:15:55,600 --> 00:15:58,680 Speaker 7: them puts us in a much better position to make 261 00:15:58,720 --> 00:16:02,400 Speaker 7: the point they are centers right. So that's the first thing. 262 00:16:02,760 --> 00:16:05,640 Speaker 7: The second thing is we need to be working with 263 00:16:05,840 --> 00:16:10,960 Speaker 7: our trading partners to get them to stop to block, 264 00:16:11,240 --> 00:16:16,280 Speaker 7: let's say, block their exports of those dumped and subsidized goods. 265 00:16:16,480 --> 00:16:18,880 Speaker 1: I'm not sure that President Trump seems to be pursuing 266 00:16:18,920 --> 00:16:22,640 Speaker 1: a route to getting our trading partners on side thus far. 267 00:16:23,880 --> 00:16:26,720 Speaker 1: How could one do that that might be somewhat different 268 00:16:26,760 --> 00:16:27,800 Speaker 1: from what we're seeing right now. 269 00:16:28,160 --> 00:16:31,520 Speaker 7: Well, you've got you know, we talk a lot about tariffs, 270 00:16:31,520 --> 00:16:34,000 Speaker 7: and it only seems to be in terms of raising them, 271 00:16:34,480 --> 00:16:36,000 Speaker 7: and we talk about reciprocity. 272 00:16:36,800 --> 00:16:40,800 Speaker 1: President Trump's tariffs have begun to take effect. Customs duties 273 00:16:40,840 --> 00:16:44,200 Speaker 1: jumped sixty percent in April to an all time high 274 00:16:44,240 --> 00:16:47,480 Speaker 1: of more than fifteen billion dollars, a number that does 275 00:16:47,520 --> 00:16:51,080 Speaker 1: not yet include the universal ten percent tariff introduced on 276 00:16:51,160 --> 00:16:55,240 Speaker 1: April second. But Schwab believes reciprocal tariffs aren't a means 277 00:16:55,280 --> 00:16:55,800 Speaker 1: to an end. 278 00:16:56,480 --> 00:17:01,120 Speaker 7: The reciprocity thing I don't think works, but I do 279 00:17:01,200 --> 00:17:04,800 Speaker 7: think that you can get to yes in trade agreements 280 00:17:05,320 --> 00:17:09,560 Speaker 7: where you have more comprehensive and more comprehensive scope. The 281 00:17:10,280 --> 00:17:13,719 Speaker 7: key thing I believe is not to have a trade 282 00:17:13,720 --> 00:17:20,360 Speaker 7: policy that renders your own production uncompetitive, because ninety five 283 00:17:20,359 --> 00:17:23,840 Speaker 7: percent of the world's consumers are outside this border. If 284 00:17:23,880 --> 00:17:29,000 Speaker 7: you put up trade barriers against the wrong things like inputs, 285 00:17:29,080 --> 00:17:32,600 Speaker 7: because over half of what we import are actually inputs 286 00:17:32,840 --> 00:17:36,199 Speaker 7: to our manufacturing, then you're going to make what we 287 00:17:36,320 --> 00:17:40,040 Speaker 7: manufacture uncompetitive and we can't export them. 288 00:17:40,240 --> 00:17:43,679 Speaker 1: If the goal is to have competitive industries, can we 289 00:17:43,800 --> 00:17:48,240 Speaker 1: have competitive industries without competing, that is to say, by 290 00:17:48,280 --> 00:17:51,400 Speaker 1: protecting our industries from competition from abroad. 291 00:17:52,280 --> 00:17:55,080 Speaker 7: I don't think so. Or let's say that the history 292 00:17:55,119 --> 00:18:00,600 Speaker 7: of that is would make one doubtful. If you think 293 00:18:00,640 --> 00:18:07,040 Speaker 7: about our auto sector. Our auto sector, domestic automakers in 294 00:18:07,119 --> 00:18:11,040 Speaker 7: the late seventies early eighties came in for a really 295 00:18:11,040 --> 00:18:15,520 Speaker 7: big shock when the Japanese autos arrived on these shores 296 00:18:16,040 --> 00:18:19,640 Speaker 7: and our automakers had not been exporters, and they met 297 00:18:19,680 --> 00:18:22,040 Speaker 7: their competition on these shores for the first time and 298 00:18:22,080 --> 00:18:25,960 Speaker 7: discovered that Americans wanted to buy Japanese autos that had 299 00:18:26,160 --> 00:18:33,280 Speaker 7: fewer errors, that had features that their US automakers had 300 00:18:33,320 --> 00:18:33,800 Speaker 7: not seen. 301 00:18:33,840 --> 00:18:43,000 Speaker 1: Fit to add, it's not just Schwab citing the example 302 00:18:43,040 --> 00:18:45,760 Speaker 1: of the Japanese automakers of the nineteen nineties. 303 00:18:46,440 --> 00:18:48,960 Speaker 8: One thing would be to say, we're just not letting 304 00:18:48,960 --> 00:18:51,440 Speaker 8: anything come into the United States, and that would mean 305 00:18:51,480 --> 00:18:54,199 Speaker 8: that as of like the nineteen nineties, we would have 306 00:18:54,280 --> 00:18:56,760 Speaker 8: lost the benefits of all these things that were discovered 307 00:18:56,960 --> 00:19:02,000 Speaker 8: in Japan about just in time, manufacturer and statistical quality control, 308 00:19:02,119 --> 00:19:03,400 Speaker 8: higher quality vehicles. 309 00:19:03,520 --> 00:19:06,840 Speaker 1: Remember Paul Romer is a Nobel laureate and former World 310 00:19:06,880 --> 00:19:08,080 Speaker 1: Bank Chief Economist. 311 00:19:08,760 --> 00:19:11,600 Speaker 8: What we did then was instead of saying, Okay, we're 312 00:19:11,600 --> 00:19:13,960 Speaker 8: just cutting off any connection with Japan, We'll live with 313 00:19:14,000 --> 00:19:16,680 Speaker 8: our cars the way we are, we said, you can 314 00:19:17,000 --> 00:19:19,520 Speaker 8: take what you know, but you have to set up 315 00:19:19,520 --> 00:19:22,840 Speaker 8: auto plants and hire workers here in the United States. 316 00:19:23,160 --> 00:19:26,080 Speaker 8: So the ideas about how to make new quality cars 317 00:19:26,119 --> 00:19:28,439 Speaker 8: come in they can be used to compete with the 318 00:19:28,520 --> 00:19:29,320 Speaker 8: existing firms. 319 00:19:29,760 --> 00:19:33,040 Speaker 1: Roamer now leads the newly formed Center for the Economics 320 00:19:33,040 --> 00:19:35,160 Speaker 1: of Ideas at Boston College. 321 00:19:35,359 --> 00:19:39,200 Speaker 8: My whole work has all been about ideas versus objects. 322 00:19:39,400 --> 00:19:41,480 Speaker 8: So I started playing with well, what if we had 323 00:19:41,760 --> 00:19:46,000 Speaker 8: restrictions on flows of objects but didn't restrict the flows 324 00:19:46,000 --> 00:19:46,639 Speaker 8: of ideas. 325 00:19:47,280 --> 00:19:51,480 Speaker 1: So what would happen? Take the solar industry, for example. 326 00:19:51,320 --> 00:19:54,000 Speaker 8: Those solar panels have gotten much cheaper because of the 327 00:19:54,040 --> 00:19:58,159 Speaker 8: subsidies provided by the Chinese government to increase output, and 328 00:19:58,200 --> 00:20:01,679 Speaker 8: so quote they control that indo, but they've made solar 329 00:20:01,720 --> 00:20:05,000 Speaker 8: electricity way cheaper all around the world. But then the 330 00:20:05,080 --> 00:20:08,240 Speaker 8: question is how do we respond. I think it's a 331 00:20:08,320 --> 00:20:11,399 Speaker 8: bad policy to try and protect like an industry or 332 00:20:11,440 --> 00:20:16,000 Speaker 8: a firm with a tariff barrier, But it's okay if 333 00:20:16,000 --> 00:20:19,480 Speaker 8: some government wants to subsidize something, and if they're subsidizing 334 00:20:19,680 --> 00:20:22,760 Speaker 8: solar panels so aggressively that we don't even want to 335 00:20:22,760 --> 00:20:25,639 Speaker 8: get in that game, fine, we can go do batteries 336 00:20:25,920 --> 00:20:30,400 Speaker 8: or you know, stationary batteries, electrical system sized batteries, or 337 00:20:30,720 --> 00:20:35,159 Speaker 8: you know one hundred other things. But the point of 338 00:20:35,200 --> 00:20:38,200 Speaker 8: this distinction of ideas and objects is that new ideas 339 00:20:38,280 --> 00:20:42,440 Speaker 8: fly by wire, cheaper solar panels, those new ideas are 340 00:20:42,480 --> 00:20:46,960 Speaker 8: really valuable, and we should have governments subsidizing them. We 341 00:20:46,960 --> 00:20:49,520 Speaker 8: shouldn't be so worried about trying to punish the other 342 00:20:49,560 --> 00:20:51,720 Speaker 8: guys for doing what we would really like to be 343 00:20:51,760 --> 00:20:52,240 Speaker 8: able to do. 344 00:20:52,680 --> 00:20:55,760 Speaker 1: But do you tell China, fine, subsidize your solar panels, 345 00:20:55,800 --> 00:20:57,440 Speaker 1: but come make some of them on shore. 346 00:20:57,640 --> 00:21:01,000 Speaker 8: That's what I'd say, Yeah, exactly, So we could invite 347 00:21:01,040 --> 00:21:05,160 Speaker 8: in all of that kind of expertise, but say, realistically, 348 00:21:05,240 --> 00:21:08,080 Speaker 8: to people in the United States, there'll be jobs for you, 349 00:21:08,320 --> 00:21:10,800 Speaker 8: Like the people you knew in Flint. There will be 350 00:21:10,880 --> 00:21:13,280 Speaker 8: a there'll be a future for you. Now, now let 351 00:21:13,280 --> 00:21:16,679 Speaker 8: me step back and say, I'm trying to describe a 352 00:21:16,720 --> 00:21:19,760 Speaker 8: policy we could evaluate. It's got some costs, it's got 353 00:21:19,760 --> 00:21:22,639 Speaker 8: some benefits. Not everybody is going to agree that this 354 00:21:22,760 --> 00:21:25,800 Speaker 8: is the best one. But what's missing at the moment 355 00:21:25,920 --> 00:21:28,680 Speaker 8: is nobody's even said what's the policy, So we didn't 356 00:21:28,680 --> 00:21:32,360 Speaker 8: even know how to total up the costs and benefits. 357 00:21:32,600 --> 00:21:36,159 Speaker 1: President Trump argues his tariffs will make America richer, but 358 00:21:36,280 --> 00:21:40,120 Speaker 1: which parts of America. Romer says, a sound trade policy 359 00:21:40,200 --> 00:21:42,280 Speaker 1: is one that benefits all Americans. 360 00:21:42,680 --> 00:21:44,560 Speaker 8: I think a good way to think about this is 361 00:21:44,600 --> 00:21:48,639 Speaker 8: we want the average income like GDP per capita, to grow, 362 00:21:49,160 --> 00:21:52,320 Speaker 8: but we also want to share that relatively evenly, at 363 00:21:52,400 --> 00:21:56,000 Speaker 8: least in the sense that everybody can expect some growth 364 00:21:56,480 --> 00:21:59,880 Speaker 8: along with growth for the nation. We've always known as economists, 365 00:21:59,880 --> 00:22:03,119 Speaker 8: the downside of free trade, even though it's good at 366 00:22:03,240 --> 00:22:07,480 Speaker 8: raising average income, is that it can widen income and equality. 367 00:22:07,880 --> 00:22:09,960 Speaker 8: And we always said, well, don't worry about it. There's 368 00:22:10,000 --> 00:22:13,280 Speaker 8: ways to redistribute the games, so everybody's a winner. But 369 00:22:13,400 --> 00:22:16,200 Speaker 8: redistributing the games is not that easy, and we haven't 370 00:22:16,280 --> 00:22:16,679 Speaker 8: done it. 371 00:22:17,040 --> 00:22:20,280 Speaker 1: The answer, according to Romer, lies not just in tariffs 372 00:22:20,320 --> 00:22:23,640 Speaker 1: and balance sheets, but in the exchange of ideas. 373 00:22:24,240 --> 00:22:27,280 Speaker 8: If BYD says we're happy to make our cars in 374 00:22:27,280 --> 00:22:29,840 Speaker 8: the United States when we sell them in the United States, 375 00:22:29,960 --> 00:22:31,960 Speaker 8: will you let us come in and use what we 376 00:22:32,040 --> 00:22:34,240 Speaker 8: know and make and sell cars to the United States. 377 00:22:34,520 --> 00:22:37,719 Speaker 8: If they say yes, then then I think it's probably 378 00:22:37,960 --> 00:22:40,080 Speaker 8: going to be an okay policy. If they say no, 379 00:22:40,280 --> 00:22:43,480 Speaker 8: then we're kind of back in that move towards autarchy, 380 00:22:43,520 --> 00:22:45,880 Speaker 8: and I'd be worried about where that goes. 381 00:22:48,200 --> 00:22:48,720 Speaker 9: Up next. 382 00:22:48,840 --> 00:22:52,159 Speaker 1: Vanguard is celebrating the fiftieth anniversary of its first fund. 383 00:22:52,600 --> 00:22:55,080 Speaker 1: Its CEO takes us through how it got to where 384 00:22:55,080 --> 00:22:57,280 Speaker 1: it is and what comes next. 385 00:22:58,040 --> 00:23:03,280 Speaker 5: You're listening to Bloomberg Walls with David Weston from Bloomberg Radio. 386 00:23:09,000 --> 00:23:12,520 Speaker 5: You're listening to Bloomberg Wall Street Week with David Weston 387 00:23:12,920 --> 00:23:14,240 Speaker 5: from Bloomberg Radio. 388 00:23:15,040 --> 00:23:18,159 Speaker 1: This is a story about going with the flow whenever, 389 00:23:18,240 --> 00:23:20,720 Speaker 1: the pluses and minuses of trying to beat the market 390 00:23:20,840 --> 00:23:23,960 Speaker 1: when it's reasonably stable at a time when it's swinging wildly, 391 00:23:24,160 --> 00:23:28,040 Speaker 1: risk is out and safety is in. That's the philosophy 392 00:23:28,080 --> 00:23:30,800 Speaker 1: that gave rise to passive investing a half century ago. 393 00:23:31,320 --> 00:23:34,280 Speaker 1: Katie Greifeld brings us the story of Vanguard marking the 394 00:23:34,320 --> 00:23:37,840 Speaker 1: fiftieth anniversary of its creating the first fund as it's 395 00:23:37,920 --> 00:23:40,320 Speaker 1: ridden the wave rather than trying to beat it. 396 00:23:42,119 --> 00:23:44,520 Speaker 8: I don't want anything, but sometimes you have to take 397 00:23:44,600 --> 00:23:46,080 Speaker 8: beneicit to fix Uping. 398 00:23:47,040 --> 00:23:50,119 Speaker 6: Market centered a period of extreme volatility at the beginning 399 00:23:50,119 --> 00:23:53,679 Speaker 6: of last month after President Trump announced expansive tariffs on 400 00:23:53,800 --> 00:23:56,879 Speaker 6: allies and adversaries alike. In the two days that followed 401 00:23:56,880 --> 00:23:59,600 Speaker 6: the so called Liberation Day on April second, the S 402 00:23:59,640 --> 00:24:02,440 Speaker 6: and P one hundred fell by over ten percent By 403 00:24:02,440 --> 00:24:04,640 Speaker 6: the end of the following week. That amounted to ten 404 00:24:04,800 --> 00:24:08,280 Speaker 6: trillion dollars in losses globally, but there were bright spots 405 00:24:08,560 --> 00:24:12,760 Speaker 6: among them ETFs. The week after the announcement ETFs saw 406 00:24:12,800 --> 00:24:16,440 Speaker 6: net inflows of more than thirty five billion dollars. 407 00:24:17,240 --> 00:24:20,840 Speaker 10: We had about four of our five highest trade days 408 00:24:20,880 --> 00:24:24,560 Speaker 10: in our history in the past six or eight weeks. 409 00:24:25,480 --> 00:24:30,679 Speaker 10: In every case, clients were buying rather than selling, and 410 00:24:30,920 --> 00:24:32,919 Speaker 10: in each of those cases, they were going back to 411 00:24:32,960 --> 00:24:37,280 Speaker 10: these original principles of diversification, staying aligned with your goals, 412 00:24:37,359 --> 00:24:39,359 Speaker 10: and investing for the long term. 413 00:24:39,720 --> 00:24:42,359 Speaker 6: Salima MG is the CEO of Vanguard, which has been 414 00:24:42,400 --> 00:24:45,280 Speaker 6: battle testing its approach to investing for half a century. 415 00:24:45,800 --> 00:24:47,960 Speaker 10: So some of it just comes from kind of our 416 00:24:47,960 --> 00:24:52,200 Speaker 10: client's behaviors and as you said, whether we're attracting clients 417 00:24:52,200 --> 00:24:56,720 Speaker 10: who like what we stand for. In many cases it's 418 00:24:57,080 --> 00:25:01,440 Speaker 10: they're exposed to individual securities and they're seeing the risk 419 00:25:01,480 --> 00:25:06,639 Speaker 10: and volatility in owning individual names, and they're looking for 420 00:25:07,320 --> 00:25:10,760 Speaker 10: a much more diversified set of exposures. But the biggest 421 00:25:10,760 --> 00:25:14,480 Speaker 10: part of client's portfolios are often individual securities, and so 422 00:25:15,160 --> 00:25:17,960 Speaker 10: there's a lot of money coming in from clients who 423 00:25:18,000 --> 00:25:21,240 Speaker 10: want more diversification than they might get from owning individual 424 00:25:21,240 --> 00:25:22,080 Speaker 10: stocks and comments. 425 00:25:22,760 --> 00:25:25,280 Speaker 6: In the fifty years since Jack Bogel founded the company, 426 00:25:25,680 --> 00:25:28,879 Speaker 6: Vanguard has seen six recessions in the US, including the 427 00:25:28,920 --> 00:25:32,200 Speaker 6: dot com bubble, the GFC, and more recently the COVID 428 00:25:32,280 --> 00:25:33,160 Speaker 6: nineteen recession. 429 00:25:33,680 --> 00:25:37,119 Speaker 9: Let me give a shout out to Vanguard. They created 430 00:25:37,119 --> 00:25:38,920 Speaker 9: indexing for the individual investor. 431 00:25:39,920 --> 00:25:42,440 Speaker 6: David Booth has been part of the evolution of indexing 432 00:25:42,520 --> 00:25:45,320 Speaker 6: since day one. He was around for the early days, 433 00:25:45,400 --> 00:25:47,360 Speaker 6: working with pioneer Eugene Fama. 434 00:25:48,000 --> 00:25:50,920 Speaker 9: We were all kind of friendly and worked with each 435 00:25:50,920 --> 00:25:53,199 Speaker 9: other to the point that the group I worked on 436 00:25:53,200 --> 00:25:56,480 Speaker 9: in Wills Fargo, which was one of the first, came 437 00:25:56,520 --> 00:25:59,440 Speaker 9: out one of the first passive fund first index funds. 438 00:25:59,560 --> 00:26:04,639 Speaker 9: Jack had created the framework for providing indexing to individuals. 439 00:26:05,440 --> 00:26:08,600 Speaker 6: Bogel was the legendary founder of Vanguard who went against 440 00:26:08,600 --> 00:26:10,280 Speaker 6: what was then the investing grain. 441 00:26:11,400 --> 00:26:14,640 Speaker 11: How to decide in the funds is a little bit difficult, 442 00:26:15,320 --> 00:26:19,000 Speaker 11: I'd say, taking the most important part perhaps the equity 443 00:26:19,040 --> 00:26:22,240 Speaker 11: fund selection. I think a beginning investor in particular should 444 00:26:22,240 --> 00:26:23,879 Speaker 11: go for sort of middle of the road funds, like 445 00:26:24,000 --> 00:26:27,800 Speaker 11: fairly conservative growth and income funds or growth funds, and 446 00:26:27,880 --> 00:26:31,200 Speaker 11: even suggested by your remarks at the outset, maybe a 447 00:26:31,200 --> 00:26:33,440 Speaker 11: little seasoning of index funds wouldn't be so bad. 448 00:26:34,040 --> 00:26:36,520 Speaker 8: Describe you as in industry states when you said when Bogel. 449 00:26:36,240 --> 00:26:38,600 Speaker 6: Appeared on Wall Street Week with Lewis Rukaiser. In the 450 00:26:38,640 --> 00:26:41,760 Speaker 6: early nineties, Vanguard had around one hundred billion dollars in 451 00:26:41,800 --> 00:26:44,600 Speaker 6: assets under management. Today it's grown to more than ten 452 00:26:44,800 --> 00:26:49,440 Speaker 6: trillion dollars, and through the growth, Bogel's philosophy remains, well, 453 00:26:49,480 --> 00:26:51,760 Speaker 6: you have a really interesting job because you know, you 454 00:26:51,880 --> 00:26:54,720 Speaker 6: have to thread saying true to the roots that Jack 455 00:26:54,760 --> 00:26:58,400 Speaker 6: Bogel laid down fifty years ago, but also positioning Vanguard 456 00:26:58,520 --> 00:27:01,240 Speaker 6: for the future, and you know, future proofing Vanguard. 457 00:27:01,560 --> 00:27:01,760 Speaker 3: Yeah. 458 00:27:01,760 --> 00:27:05,400 Speaker 10: I think first is understanding our history and understanding our culture. 459 00:27:05,880 --> 00:27:09,920 Speaker 10: And I've also benefited that First Bogel wrote a lot, 460 00:27:10,320 --> 00:27:12,479 Speaker 10: and so not just in his books, but in all 461 00:27:12,520 --> 00:27:15,720 Speaker 10: the historical archives and speeches and in the memos, and that, 462 00:27:15,920 --> 00:27:16,360 Speaker 10: like you, it. 463 00:27:16,359 --> 00:27:19,639 Speaker 6: Was a culte machine. One of Bogel's famous sayings tells 464 00:27:19,640 --> 00:27:22,399 Speaker 6: the story of passive investing. Don't look for the needle 465 00:27:22,400 --> 00:27:25,840 Speaker 6: in the haystack, just by the haystack. It's a philosophy 466 00:27:25,960 --> 00:27:29,600 Speaker 6: so popular it generated an online following of passive investors 467 00:27:29,840 --> 00:27:30,879 Speaker 6: known as Bogel Heads. 468 00:27:31,480 --> 00:27:34,879 Speaker 10: One of the interesting things is Vanguard's always changed, like 469 00:27:34,960 --> 00:27:38,520 Speaker 10: we've maintained our sense of consistency around our purpose. Well, 470 00:27:38,520 --> 00:27:40,639 Speaker 10: whether you can think about our moves into advice, or 471 00:27:40,680 --> 00:27:43,480 Speaker 10: moves into ETFs, or moves into you know, if you 472 00:27:43,560 --> 00:27:47,200 Speaker 10: go back into the nineties, or moves into retirement, these 473 00:27:47,200 --> 00:27:50,880 Speaker 10: were all changes in the business model. But so it's 474 00:27:51,280 --> 00:27:53,199 Speaker 10: I sort of look at what I'm here to do 475 00:27:53,320 --> 00:27:56,200 Speaker 10: is to continue that tradition and that kind of duality 476 00:27:56,720 --> 00:27:59,960 Speaker 10: between staying true to the purpose and also changing things 477 00:28:00,119 --> 00:28:01,960 Speaker 10: as we need to change and adapt based on our 478 00:28:01,960 --> 00:28:02,679 Speaker 10: client needs. 479 00:28:03,560 --> 00:28:06,159 Speaker 6: Buying that haystack today looks a little different than it 480 00:28:06,200 --> 00:28:09,399 Speaker 6: did during Bogles days, but Vanguard makes no apology for 481 00:28:09,440 --> 00:28:12,240 Speaker 6: sticking to its tried and true approach to indexing that 482 00:28:12,280 --> 00:28:15,359 Speaker 6: avoids the trends of the day. You could start to 483 00:28:15,440 --> 00:28:17,120 Speaker 6: have to really think about how do you stay ture 484 00:28:17,200 --> 00:28:20,200 Speaker 6: the roots. Well, also, you know, giving clients what they want, 485 00:28:20,240 --> 00:28:24,000 Speaker 6: because those clients, specifically in advice and wealth management, I 486 00:28:24,000 --> 00:28:27,040 Speaker 6: could imagine them requesting private assets, which I know that 487 00:28:27,119 --> 00:28:29,439 Speaker 6: Vanguard is pursuing. But I could also see them asking 488 00:28:29,600 --> 00:28:36,639 Speaker 6: for bitcoin and crypto, which famously Vanguard isn't too hot on. 489 00:28:36,760 --> 00:28:39,760 Speaker 6: So I wonder how you're thinking about those sort of 490 00:28:39,760 --> 00:28:40,720 Speaker 6: potential run ins. 491 00:28:41,160 --> 00:28:43,360 Speaker 10: We're not going to be everything to everybody, and that's 492 00:28:43,400 --> 00:28:45,800 Speaker 10: okay with us. That's been true for kind of the 493 00:28:46,960 --> 00:28:49,960 Speaker 10: history of the firm. But where we see opportunities to 494 00:28:50,040 --> 00:28:53,400 Speaker 10: partner with others, including in things like private markets, and 495 00:28:53,440 --> 00:28:56,120 Speaker 10: we think it's good for clients' long term portfolios, we'll 496 00:28:56,160 --> 00:28:56,959 Speaker 10: absolutely do it. 497 00:28:57,000 --> 00:28:58,880 Speaker 6: So it sounds like that's a no. Like if you know, 498 00:28:58,920 --> 00:29:00,920 Speaker 6: a client came to you and said, you know, I 499 00:29:00,960 --> 00:29:04,240 Speaker 6: really want to add bitcoin, or I really like the 500 00:29:04,240 --> 00:29:06,600 Speaker 6: looks of this leverage single stock UTF, it sounds like 501 00:29:06,640 --> 00:29:09,200 Speaker 6: that's not something that's not a road that Vanguard is 502 00:29:09,240 --> 00:29:09,880 Speaker 6: going to go down. 503 00:29:10,080 --> 00:29:12,800 Speaker 10: Yeah, We're always going to be focused on what we 504 00:29:12,880 --> 00:29:15,959 Speaker 10: think is a good way to build long term wealth 505 00:29:16,560 --> 00:29:19,239 Speaker 10: and that is suited to the client's individual needs. And 506 00:29:19,320 --> 00:29:22,840 Speaker 10: so that may mean saying no or saying that we 507 00:29:22,880 --> 00:29:28,200 Speaker 10: don't think that particular product in that particular offering is 508 00:29:28,280 --> 00:29:30,520 Speaker 10: right for the client. And you know, we may not 509 00:29:30,560 --> 00:29:33,959 Speaker 10: get caught up in the in the latest fad, but 510 00:29:34,000 --> 00:29:36,000 Speaker 10: we're dependable for the long term. 511 00:29:36,240 --> 00:29:38,560 Speaker 9: Your comparative advantage is not going home at night and 512 00:29:39,120 --> 00:29:43,080 Speaker 9: trying to think of the next big winner. Your comparative 513 00:29:43,080 --> 00:29:46,400 Speaker 9: advantage is going home figuring out here's my circumstance. You know, 514 00:29:47,080 --> 00:29:49,440 Speaker 9: I just decided to retire, or I won the lottery, 515 00:29:49,560 --> 00:29:52,880 Speaker 9: or whatever the changes are, How does that impact the 516 00:29:52,920 --> 00:29:55,120 Speaker 9: way I want to invest? That makes a lot of 517 00:29:55,160 --> 00:29:57,560 Speaker 9: sense to spend the rest of your time playing with 518 00:29:57,600 --> 00:30:01,920 Speaker 9: the kids, you know. It's it's a that's kind of 519 00:30:01,920 --> 00:30:03,600 Speaker 9: a side benefit of all of this. You can come 520 00:30:03,640 --> 00:30:07,200 Speaker 9: up with sensible investment solutions that have a great chance 521 00:30:07,200 --> 00:30:12,440 Speaker 9: of winning over the long haul without getting just emotionally 522 00:30:12,480 --> 00:30:13,360 Speaker 9: fixated on it. 523 00:30:14,080 --> 00:30:18,000 Speaker 6: Vanguard is known for making diversification easier for investors through indexing, 524 00:30:18,240 --> 00:30:21,480 Speaker 6: but also making it cheap. In February, it announced its 525 00:30:21,520 --> 00:30:25,000 Speaker 6: two thousandth and largest ever fee reduction, cutting its average 526 00:30:25,040 --> 00:30:28,680 Speaker 6: asset weighted expense ratio to just seven basis points. That 527 00:30:28,720 --> 00:30:31,640 Speaker 6: compares to the industry average of forty four basis points. 528 00:30:31,920 --> 00:30:37,800 Speaker 10: We're always investing back into technology and into capabilities that 529 00:30:38,000 --> 00:30:42,160 Speaker 10: enhance our economies of scale. It's true in our investment team, 530 00:30:42,200 --> 00:30:44,920 Speaker 10: it's true across the firm because there are lots of 531 00:30:44,960 --> 00:30:48,800 Speaker 10: advances as you can imagine, that are just making investing 532 00:30:48,960 --> 00:30:52,480 Speaker 10: kind of easier, making it more efficient, and we need 533 00:30:52,520 --> 00:30:55,320 Speaker 10: to be at the forefront of that. Back in February, 534 00:30:55,360 --> 00:30:58,560 Speaker 10: we announced kind of record fee reductions, but it was 535 00:30:58,600 --> 00:31:01,479 Speaker 10: the two thousandth time we done that, right, So it 536 00:31:01,520 --> 00:31:05,000 Speaker 10: was a very vanguard kind of oriented thing. And when 537 00:31:05,080 --> 00:31:08,160 Speaker 10: we think about kind of the future, we just see 538 00:31:08,240 --> 00:31:12,480 Speaker 10: so many opportunities to extend the Vanguard effect, whether it's 539 00:31:12,520 --> 00:31:15,520 Speaker 10: in fixed income, whether it's in things like cash, whether 540 00:31:15,600 --> 00:31:16,760 Speaker 10: it's in things like advice. 541 00:31:17,560 --> 00:31:19,520 Speaker 6: Its competitors have been forced to keep up with the 542 00:31:19,600 --> 00:31:21,560 Speaker 6: race to the bottom in the fewer or to find 543 00:31:21,600 --> 00:31:23,560 Speaker 6: other ways to differentiate themselves. 544 00:31:23,920 --> 00:31:27,200 Speaker 9: It's one thing to say, look, I have slightly higher fees, 545 00:31:27,400 --> 00:31:29,760 Speaker 9: that it only works if you're What really counts is 546 00:31:29,960 --> 00:31:34,000 Speaker 9: what your return is. And we now have forty three 547 00:31:34,080 --> 00:31:38,440 Speaker 9: years of performance that's showing that this kind of approach 548 00:31:38,480 --> 00:31:38,960 Speaker 9: can work. 549 00:31:39,760 --> 00:31:43,400 Speaker 6: Over its fifty years, Vanguard has changed investment management, but 550 00:31:43,440 --> 00:31:45,959 Speaker 6: it has also evolved to meet investors appetite for new 551 00:31:46,000 --> 00:31:49,720 Speaker 6: products and services. In mid April, Blackstone came out and 552 00:31:49,760 --> 00:31:51,440 Speaker 6: said that you know, it teamed up with you and 553 00:31:51,520 --> 00:31:55,800 Speaker 6: Wellington to build investment accommodations with stocks, bonds, and alts, 554 00:31:56,120 --> 00:31:58,960 Speaker 6: which is interesting. Private markets have been the talk of 555 00:31:59,000 --> 00:32:01,440 Speaker 6: the town for months yet now, and it seems like 556 00:32:01,480 --> 00:32:04,240 Speaker 6: every issuer is trying to figure out how to incorporate 557 00:32:04,280 --> 00:32:06,880 Speaker 6: that into their strategies. Why go that direction? 558 00:32:07,560 --> 00:32:11,360 Speaker 10: Well going the partnership route was well a very vanguard 559 00:32:11,400 --> 00:32:14,120 Speaker 10: thing to do. The first Vanguard funds fifty years ago 560 00:32:14,160 --> 00:32:18,120 Speaker 10: were managed by Wellington, and it's actually Gene Hines over 561 00:32:18,160 --> 00:32:21,720 Speaker 10: at Wellington, the CEO. She came with this idea around 562 00:32:21,760 --> 00:32:24,920 Speaker 10: could we partner with another firm that does private markets 563 00:32:24,960 --> 00:32:28,800 Speaker 10: as well as Wellington does fundamental equities as well as 564 00:32:28,840 --> 00:32:32,160 Speaker 10: we do things like index and active fixed income. And 565 00:32:32,320 --> 00:32:35,680 Speaker 10: this idea of going the partnership route was, as I said, 566 00:32:35,880 --> 00:32:39,760 Speaker 10: something that we've done for fifty years now. We have 567 00:32:39,840 --> 00:32:43,200 Speaker 10: plenty of other active equity managers. Wellington is our longest 568 00:32:43,200 --> 00:32:46,360 Speaker 10: standing and largest, but when we started to think about 569 00:32:46,760 --> 00:32:49,920 Speaker 10: how do we branch into private assets on behalf of 570 00:32:49,960 --> 00:32:52,760 Speaker 10: our clients, it was really that Wellington came up with 571 00:32:52,960 --> 00:32:55,760 Speaker 10: the kind of the idea in the proposal, and that 572 00:32:55,880 --> 00:32:59,200 Speaker 10: was really the beginnings of I think what you've. 573 00:32:59,080 --> 00:33:02,000 Speaker 6: Heard about ETFs are meant to diversify risk and make 574 00:33:02,040 --> 00:33:05,719 Speaker 6: investing safer for retail investors, but indexing might be creating 575 00:33:05,760 --> 00:33:06,720 Speaker 6: another kind of risk. 576 00:33:07,880 --> 00:33:11,360 Speaker 9: It's got the point now with ETFs that they've kind 577 00:33:11,360 --> 00:33:14,600 Speaker 9: of created this giant investment casino. You know, here's how 578 00:33:14,600 --> 00:33:16,840 Speaker 9: you can place your debts. You know, you've got all 579 00:33:16,840 --> 00:33:18,440 Speaker 9: these industry and you can put some money over here 580 00:33:18,600 --> 00:33:21,600 Speaker 9: in time. Because the question often comes up as well, 581 00:33:21,600 --> 00:33:26,360 Speaker 9: if everybody indexes, I won't markets become inefficient? And so 582 00:33:26,440 --> 00:33:29,440 Speaker 9: now people instead of picking stocks, they place the debts 583 00:33:30,120 --> 00:33:33,680 Speaker 9: on industes. I mean, I hope you know, and I 584 00:33:33,680 --> 00:33:36,080 Speaker 9: think that's unfortunate because now you're back in with the 585 00:33:36,080 --> 00:33:39,160 Speaker 9: same suit that you're in before, which is in order 586 00:33:39,200 --> 00:33:42,080 Speaker 9: to in order to beat the market, you've got to 587 00:33:42,080 --> 00:33:43,440 Speaker 9: pick the right industries at the right time. 588 00:33:43,600 --> 00:33:46,160 Speaker 6: The growth in ETFs has brought with it competition for 589 00:33:46,280 --> 00:33:49,959 Speaker 6: mainstays like Vanguard. Which competitor do you think about the 590 00:33:49,960 --> 00:33:51,320 Speaker 6: most and why is it black Rock? 591 00:33:53,360 --> 00:33:53,479 Speaker 9: Uh? 592 00:33:53,640 --> 00:33:56,760 Speaker 10: The competitor I think about the most is friction. The 593 00:33:56,800 --> 00:34:00,680 Speaker 10: biggest impediment I think to clients achieving the of investment 594 00:34:00,720 --> 00:34:04,920 Speaker 10: success that we would hope for is that investing is 595 00:34:04,960 --> 00:34:10,320 Speaker 10: still too complicated and there are ways that we're always 596 00:34:10,360 --> 00:34:12,960 Speaker 10: looking for to how do you make it easier, How 597 00:34:12,960 --> 00:34:14,880 Speaker 10: do you make it easier to open an account, to 598 00:34:14,920 --> 00:34:15,800 Speaker 10: fund an account? 599 00:34:16,239 --> 00:34:19,279 Speaker 6: Ten years from now, when it's Vanguard's sixtieth anniversary, and 600 00:34:19,320 --> 00:34:22,200 Speaker 6: we're sitting here again, what do you want to have accomplished? 601 00:34:22,600 --> 00:34:26,280 Speaker 10: Vanguard plays a really unique role in the investment community 602 00:34:26,360 --> 00:34:29,279 Speaker 10: because of our client ownership, because of our focus on 603 00:34:29,360 --> 00:34:32,319 Speaker 10: giving people a fair deal, and I certainly don't want 604 00:34:32,320 --> 00:34:33,920 Speaker 10: that to change in ten years. I don't want that 605 00:34:33,920 --> 00:34:36,279 Speaker 10: to change in twenty years, or thirty years or well 606 00:34:36,320 --> 00:34:37,120 Speaker 10: into the future. 607 00:34:38,760 --> 00:34:40,560 Speaker 1: That does it for us here at Wall Street Week, 608 00:34:40,640 --> 00:34:43,960 Speaker 1: I'm David Weston. Join us next week for more stories 609 00:34:44,040 --> 00:34:56,520 Speaker 1: of capitalism.