WEBVTT - P&L: Consumer Confidence's Nine-Year High Is 'Screamingly Good' 0:00:04.760 --> 0:00:07.720 Welcome to the Bloomberg P and L Podcast. I'm Pim 0:00:07.800 --> 0:00:11.080 Fox along with my co host Lisa Abramowitz. Each day 0:00:11.119 --> 0:00:14.360 we bring you the most important, noteworthy, and useful interviews 0:00:14.400 --> 0:00:16.280 for you and your money, whether you at the grocery 0:00:16.320 --> 0:00:19.360 store or the trading floor. Find the Bloomberg pm L 0:00:19.480 --> 0:00:28.680 podcast on iTunes, SoundCloud and at Bloomberg dot com. Now, 0:00:28.680 --> 0:00:31.920 I want to bring in Lynna Franco Director of Economic 0:00:32.000 --> 0:00:35.640 Indicators of the Conference Board, taking a look at the 0:00:35.760 --> 0:00:40.360 latest reading which is very positive. US consumer confidence increased 0:00:40.360 --> 0:00:42.720 in November from a month earlier to the highest level 0:00:43.040 --> 0:00:47.320 since July two thousand and seven. Lynn, this seems to 0:00:47.400 --> 0:00:51.400 be a screamingly good sign. Is there anything I'm missing here? 0:00:52.000 --> 0:00:54.880 Not at all. I mean, we've had a good rise 0:00:54.920 --> 0:00:58.320 and consumer confidence. It's pretty much across the board. Consumers 0:00:58.320 --> 0:01:01.520 are telling us that current conditions have strengthened even more. 0:01:01.640 --> 0:01:03.160 And coming on the heels of a good g d 0:01:03.240 --> 0:01:06.000 P report this morning, I think that's welcome news and 0:01:06.160 --> 0:01:08.760 expectations are that we're going to continue along this path. 0:01:09.280 --> 0:01:11.560 Can you explain what the details are, because in looking 0:01:11.600 --> 0:01:15.360 at the GDP report that three two third quarter print, 0:01:15.680 --> 0:01:18.640 it seems as though, consumer spending is what's driving that 0:01:18.760 --> 0:01:24.280 move higher. Absolutely, it is consumer spending that's driving the economy, 0:01:24.360 --> 0:01:27.600 and based on these confidence report that we have today, 0:01:27.640 --> 0:01:29.360 it looks like it's going to be the consumer that 0:01:29.400 --> 0:01:32.120 continues to drive the economy, especially when we take a 0:01:32.120 --> 0:01:34.440 look at the particular at the income question that we had. 0:01:34.480 --> 0:01:36.280 We had some rather good news there which I think 0:01:36.319 --> 0:01:38.800 is going to support spending and we've seen signs of 0:01:38.800 --> 0:01:41.400 that already with the holiday numbers coming in. You know, Lynn, 0:01:41.480 --> 0:01:43.479 one thing that I've been watching is the City Group's 0:01:43.800 --> 0:01:48.320 Economic Surprise Index, which has surged recently to the highest 0:01:48.400 --> 0:01:51.320 levels in well in a couple of months, which is 0:01:51.440 --> 0:01:54.560 still significant to me because there has been um a 0:01:54.640 --> 0:01:57.400 feeling that, you know, the economy will grow but as 0:01:57.440 --> 0:02:00.160 slower pace. But the data is coming in better than 0:02:00.240 --> 0:02:05.320 people are expecting. What are all of those economists missing, UM, 0:02:05.360 --> 0:02:08.040 I'm not sure that we're missing very much. I think 0:02:08.280 --> 0:02:10.960 we're all just happy to see that the consumer remains 0:02:11.080 --> 0:02:15.360 rather resilient, UM. And I think we also expect growth 0:02:15.360 --> 0:02:17.839 to continue along this path, which I think is very 0:02:17.840 --> 0:02:20.280 welcome news. UM. And you know, when we take a 0:02:20.280 --> 0:02:23.080 look at these figures that we got in today, it's 0:02:23.680 --> 0:02:25.919 it's more of more good news, and I think it's 0:02:25.919 --> 0:02:28.000 going to spell you know, good news for for fourth 0:02:28.080 --> 0:02:31.480 quarter growth, holiday sales, and for the economy as we 0:02:31.520 --> 0:02:34.360 head into you know. Then, one of the other reports 0:02:34.360 --> 0:02:36.720 we got today had to do with home prices, and 0:02:36.760 --> 0:02:40.000 we're taking a look at the SNP Case Schiller core 0:02:40.040 --> 0:02:44.359 Logic National Index prices for US for homes in twenty 0:02:44.440 --> 0:02:49.360 US cities climbing five point one in September. I'm just 0:02:49.400 --> 0:02:54.000 wondering how that works with increases in mortgage rates. We've 0:02:54.040 --> 0:02:56.839 seen interest rates move just a little bit higher, they're 0:02:56.880 --> 0:02:59.840 still at historical lows, but how is that consistent with 0:03:00.200 --> 0:03:03.240 the higher cost of money. Well, what we're seeing there 0:03:03.280 --> 0:03:06.960 obviously is you know that sort of impedes first time 0:03:07.000 --> 0:03:10.000 buyers or lower income folks from sort of stepping into 0:03:10.040 --> 0:03:13.680 the housing market. On the flip side, the price appreciation 0:03:14.040 --> 0:03:17.239 helps consumers wealth. So I think we're seeing sort of 0:03:17.280 --> 0:03:20.320 a dual effect here where not only have home prices 0:03:20.360 --> 0:03:23.120 gone up, we're seeing stock prices going up, and we're 0:03:23.120 --> 0:03:25.839 seeing earnings in terms of what people are taking home 0:03:25.880 --> 0:03:28.639 going up. So I think across those fronts that's why 0:03:28.680 --> 0:03:32.360 we're seeing in our income question a more optimistic consumer um. 0:03:32.400 --> 0:03:35.840 We also got GDP numbers that the U S economy 0:03:36.120 --> 0:03:40.440 expanded more than previously reported last quarter due to more 0:03:40.480 --> 0:03:44.360 household spending. So, you know, does it seem like there 0:03:44.360 --> 0:03:47.960 has been enough momentum that's been gathering steam for long 0:03:48.080 --> 0:03:50.640 enough that that we can see these sort of upward 0:03:50.680 --> 0:03:53.360 surprises for a while and that the consumer will really 0:03:53.400 --> 0:03:56.720 support uh faster growth in the US. Well, I think 0:03:56.760 --> 0:04:00.160 what we expect to see as consumers supporting growth, not 0:04:00.240 --> 0:04:03.400 necessarily much stronger growth. So we're not anticipating growth of 0:04:03.440 --> 0:04:05.840 you know, three and a half percent or four percent, 0:04:05.920 --> 0:04:09.040 but we are going to at least anticipate that the 0:04:09.080 --> 0:04:13.240 consumer will continue to drive the economy as far as 0:04:13.920 --> 0:04:16.920 the future, because that's what you're you know, as an economist, 0:04:16.920 --> 0:04:18.680 we always want you to get that. At Crystal Ball, 0:04:18.720 --> 0:04:21.760 at what what does the report today tell us about 0:04:22.080 --> 0:04:24.600 the rest of the quarter? I think it tells us 0:04:24.600 --> 0:04:27.279 that it's going to be a consumer driven quarter. We're 0:04:27.279 --> 0:04:29.880 seeing consumers telling us that the momentum that we've been 0:04:29.920 --> 0:04:32.719 seeing building up is continuing into the fourth quarter. And 0:04:32.720 --> 0:04:35.480 this is shopping, this is retail or is this spending 0:04:35.560 --> 0:04:38.159 on a variety of items, a variety of items, but 0:04:38.200 --> 0:04:41.280 I think in terms of spending, it's a very favorable 0:04:41.320 --> 0:04:44.159 outlook that we're seeing coming out of today's report. Happy 0:04:44.240 --> 0:04:47.560 Black Friday, Lynn Franco, Director of Economic Indicators at the 0:04:47.560 --> 0:04:50.200 conference board taking a look at some of the positive 0:04:50.200 --> 0:04:52.800 indications that we've been getting. And it's not just Black Friday, 0:04:52.839 --> 0:04:55.160 I mean Cyber Monday. My colleagues reported that more than 0:04:55.279 --> 0:04:59.000 one billion dollars of sales in one day. We're made 0:04:59.360 --> 0:05:14.080 on mobile click, click and buy. All right, now, let's 0:05:14.120 --> 0:05:17.080 talk about oil. We've got an expert, and Marie Horden 0:05:17.400 --> 0:05:21.599 is live in Vienna for a Bloomberg executive producer and Marie, 0:05:21.640 --> 0:05:24.640 what can you tell us about OPEC Russia and the 0:05:24.680 --> 0:05:29.839 conflict that exists inside this oil exporting consortium. Over the 0:05:29.920 --> 0:05:32.640 last hour or two, actually Bloomberg had an amazing scoop 0:05:32.640 --> 0:05:35.320 and we learned that Saudi Arabia said to be ready 0:05:35.360 --> 0:05:37.599 to walk out of all talks to subject doing a 0:05:37.680 --> 0:05:41.000 deal without any compromise by Iran and a rock, So 0:05:41.040 --> 0:05:44.040 they're really taking a hard line here. Meanwhile, the Iranian 0:05:44.080 --> 0:05:47.040 oil minister arrived in the last hour as well. Um 0:05:47.200 --> 0:05:50.120 he is saying that they will not cut production. You know, 0:05:50.160 --> 0:05:53.760 this verbally came from his mouth earlier this morning um uh, 0:05:55.160 --> 0:05:58.839 late in New York time. Um He the Oil Ministry 0:05:58.839 --> 0:06:01.360 of Iran tweeted that they will not have a cap 0:06:01.480 --> 0:06:03.760 and then before he came to Vienny spoke on STATV 0:06:03.920 --> 0:06:06.440 saying it's the will of the people to continue pumping, 0:06:06.440 --> 0:06:08.920 to go back to pre sanctioned level um And then 0:06:09.000 --> 0:06:11.400 when he arrived here he is not budging. They say 0:06:11.440 --> 0:06:13.600 they will not co production, and the Saudi say without them, 0:06:13.640 --> 0:06:15.880 they're not doing a deal. So it's looking to be 0:06:16.000 --> 0:06:19.120 quite a sticking point here. Um. One analyst described it 0:06:19.160 --> 0:06:22.200 as a Greek tragedy, but he said maybe sometime for 0:06:22.279 --> 0:06:24.440 happy ending. But they are really coming down to the wire. 0:06:24.920 --> 0:06:26.920 Is there any chance that if they do not come 0:06:26.920 --> 0:06:28.560 to a resolution, that there is another time in the 0:06:28.560 --> 0:06:30.440 near future where they can come together and try to 0:06:30.800 --> 0:06:34.000 resolve some of the differences. Well, if you if you 0:06:34.040 --> 0:06:37.520 look at the past year in terms of an unusual 0:06:37.640 --> 0:06:40.920 opec here in April this happened where talks collapsed in 0:06:40.960 --> 0:06:42.320 Dohan and then it took them in the four or 0:06:42.320 --> 0:06:46.040 five six months UH to reach an agreement. Is talks 0:06:46.120 --> 0:06:49.040 collapse here. Anything can happen. They can decide to meet 0:06:49.080 --> 0:06:52.320 next week, but likely what would happened is um, they'll 0:06:52.320 --> 0:06:55.160 see where oil prices landed. We see what some analysts 0:06:55.200 --> 0:06:58.200 are saying in the twenties in January. Uh, you better 0:06:58.240 --> 0:07:00.160 believe o pack is definitely gonna start talking up in 0:07:00.240 --> 0:07:02.000 each other to try to get the price back up. 0:07:02.279 --> 0:07:05.920 And Marie just quickly. Iran and Saudi Arabia are they 0:07:05.960 --> 0:07:09.000 at odds over this politically or is this because Iran 0:07:09.080 --> 0:07:13.400 just needs the money? Well, no, for the Iranians, it 0:07:13.480 --> 0:07:17.640 is definitely political. They've said for years they've had sanctioned 0:07:18.040 --> 0:07:20.560 and Saudi has been able to pump. You know, for 0:07:20.760 --> 0:07:23.000 Saudi for the last past two years, it's been about 0:07:23.000 --> 0:07:26.160 market share, pump that will as much as they can. Um. 0:07:26.240 --> 0:07:29.520 So this is political baggage. I mean what also, what 0:07:29.560 --> 0:07:32.800 we're hearing is being discussed is about seven percent of 0:07:32.840 --> 0:07:36.360 oil that the Saudis wants, that Theorians wanted Staudi don't. 0:07:36.400 --> 0:07:39.080 So the rain Thereans want to cut about want to 0:07:39.120 --> 0:07:41.680 pump at four million bartars a day. Socialities are said 0:07:41.720 --> 0:07:44.720 to offer something like three point seven in change. So 0:07:44.760 --> 0:07:47.120 if you think about it, it's not a ton of barrel, 0:07:47.200 --> 0:07:49.480 but they are literally fighting over every barrel of oil 0:07:49.840 --> 0:07:53.200 and this really comes down to politics. And Marie Hordern 0:07:53.600 --> 0:07:57.200 live in Vienna talking about OPEC talks. UH, and Marie 0:07:57.240 --> 0:08:00.320 Hordern of Bloomberg News, thank you so much for being 0:08:00.440 --> 0:08:03.520 with us for a look at what the full implications 0:08:03.600 --> 0:08:07.440 are of this opaque discussion. I want to go to 0:08:08.000 --> 0:08:11.720 Rich Pontillo, senior director at NASDAC specializing in utility oil 0:08:11.760 --> 0:08:15.120 and gas sectors. Rich, how big of a casualty would 0:08:15.160 --> 0:08:18.280 it be for not for OPEC if they were not 0:08:18.440 --> 0:08:22.480 to come to resolution here? Yeah, like morning Lisa and him, 0:08:23.080 --> 0:08:27.600 I think it would be fairly significant, given what's your 0:08:27.600 --> 0:08:30.480 inspired over the last few months. UH. If you go 0:08:30.560 --> 0:08:35.560 back to September, OPEC members held informal meetings in LG 0:08:35.640 --> 0:08:39.480 years and the outcome there was that they were able 0:08:39.520 --> 0:08:42.120 to draw a consensus that they would agree at least 0:08:42.880 --> 0:08:46.960 on a production on a on a production cap. So 0:08:47.160 --> 0:08:51.120 I think that would certainly contradict directly, UH, in terms 0:08:51.120 --> 0:08:53.880 of if they if they cannot reach a resolution tomorrow, 0:08:54.559 --> 0:08:59.319 I think it will only further cement almost the end 0:08:59.400 --> 0:09:02.640 of any knee meaningful influence that OPEC has going forward. 0:09:02.679 --> 0:09:06.000 On the global oil markets again, given its lack of 0:09:06.040 --> 0:09:12.199 ability to coalesceer consensus again, particularly especially after after the 0:09:12.760 --> 0:09:17.120 the the informal agreement that was reached in late September. Well, 0:09:17.120 --> 0:09:19.439 we're seeing the price of oil decline. It's down nearly 0:09:19.480 --> 0:09:25.040 four percent right now. Rich the combination of politics and 0:09:25.320 --> 0:09:27.040 crude oil. How does that play out in the in 0:09:27.080 --> 0:09:29.440 the United States? I was looking at a Golden Sacks 0:09:29.440 --> 0:09:32.560 report today saying that they say prices to be moderately 0:09:32.640 --> 0:09:36.160 higher next year. They talk about the structural shift uh 0:09:36.360 --> 0:09:39.000 in the cost curve of oil? What does that? What 0:09:39.040 --> 0:09:42.160 does that mean? How did they get to that conclusion? Yeah, 0:09:42.240 --> 0:09:45.680 it's a good point them And actually, uh myself, I 0:09:45.559 --> 0:09:48.240 was reading that Golden Sacks note and just a a 0:09:48.400 --> 0:09:52.840 side note that that report cited there's implied volatility in 0:09:52.840 --> 0:09:56.520 the near term options market of a roughly six dollar 0:09:56.640 --> 0:10:00.680 price swing in either direction on Brent oil futures UH 0:10:00.720 --> 0:10:03.760 in response to tomorrow's meetings. So basically there is a 0:10:03.800 --> 0:10:06.960 lot hinging on this decision tomorrow UH, and we're going 0:10:07.000 --> 0:10:11.959 to see a very violent binary effect once that outcome 0:10:12.040 --> 0:10:15.439 has made public. UM In terms of next year, again, 0:10:15.520 --> 0:10:18.600 I I think they're obviously trying to cover both sides 0:10:18.640 --> 0:10:22.560 of any potential decision. Um, if you look at what 0:10:22.760 --> 0:10:25.800 has transpired in the US over the last twelve to 0:10:25.880 --> 0:10:32.679 twenty four months, you've seen domestic producers become much more 0:10:32.200 --> 0:10:33.840 put here. I'm sorry, we're gonna have to cut it. 0:10:33.880 --> 0:10:36.840 Their senior advisory solutions at NASDAC. Thank you so much 0:10:36.840 --> 0:10:51.079 for joining us. This is Bloomberg, all right. Joining us 0:10:51.080 --> 0:10:54.520 now is Chris Aileman. He is the manager chief investment 0:10:54.520 --> 0:10:57.600 officer of calstar as, the nation's a second largest public 0:10:57.640 --> 0:11:00.200 pension fund assets totaling about a hundred and nine d 0:11:00.320 --> 0:11:04.560 two billion dollars as of the end of October. Their 0:11:04.600 --> 0:11:08.120 investment philosophy long term patient capital buying, a long term 0:11:08.200 --> 0:11:12.760 net cash flows and capital gain potential at a reasonable price. 0:11:12.840 --> 0:11:14.880 Chris Saleman, thank you for being with us. It's always 0:11:14.880 --> 0:11:17.360 a pleasure of my favorite radio show. Well, we love 0:11:17.400 --> 0:11:22.360 having you, and thank you. Reason. I love reasonable price. 0:11:22.559 --> 0:11:26.600 I always love it when reasonable and reasonable is intuitive 0:11:26.679 --> 0:11:32.040 but also analytical. How do you determine reasonable price? Um? 0:11:32.080 --> 0:11:34.080 You have to look at historical norms, and you really 0:11:34.080 --> 0:11:37.120 have to focus in on things like price earnings ratios 0:11:37.240 --> 0:11:40.040 or cap rates in real estate and look at the 0:11:40.080 --> 0:11:42.600 price you're paying relative to where it's been saved the 0:11:42.640 --> 0:11:44.480 last thirty years, and I think that gives you a 0:11:44.520 --> 0:11:47.120 guide of whether you're paying up for something or whether 0:11:47.200 --> 0:11:50.280 it's reasonably priced. You're not going to find investments at 0:11:50.280 --> 0:11:52.520 a bargain. Very often people hate them if they're at 0:11:52.520 --> 0:11:54.720 a bargain. So but a lot of it is what 0:11:54.800 --> 0:11:57.720 you guys are just talking about. It's psychology, um, and 0:11:57.960 --> 0:12:01.360 understanding how investors think they tend to chase markets and 0:12:01.440 --> 0:12:04.640 run them up to extremes um. Chris. I wanted to 0:12:04.679 --> 0:12:06.800 ask you there was a story that I was reading 0:12:06.880 --> 0:12:09.880 last night about Cowper is the biggest public US pension 0:12:10.320 --> 0:12:12.720 in the country with almost three billion dollars of assets, 0:12:12.720 --> 0:12:16.120 and how they're actively debating whether or not to substantially 0:12:16.200 --> 0:12:20.040 lower their assumed rate of return going forward from about 0:12:20.200 --> 0:12:22.240 seven percent or a little more than seven percent to 0:12:22.320 --> 0:12:24.480 six percent, which is a which is a massive move 0:12:25.080 --> 0:12:27.760 uh in in in pension land. Can you talk a 0:12:27.760 --> 0:12:31.440 little bit about what your current assumed rate of return 0:12:31.640 --> 0:12:34.520 is and what's appropriate over the next three decades or so. 0:12:35.080 --> 0:12:37.800 Ours is seven and a half UM, and what you're 0:12:37.840 --> 0:12:41.880 seeing across the country is pension plans, reevaluating that they're 0:12:41.880 --> 0:12:46.640 getting pressure from their actuaries, their investment consultants to reassess 0:12:46.720 --> 0:12:49.079 what they think is as you said, over a thirty 0:12:49.160 --> 0:12:51.040 year time period. So it's not just going to be 0:12:51.040 --> 0:12:53.120 the one year return or even the five year return. 0:12:53.520 --> 0:12:55.319 And when I asked people to step back and say, well, 0:12:55.320 --> 0:12:57.400 wait a minute, what's a realistic return over the next 0:12:57.440 --> 0:13:01.120 thirty years, that's where you come into somewhere in the seven. 0:13:01.200 --> 0:13:02.959 We used to say it was as much as eight. 0:13:03.400 --> 0:13:07.120 But demographically the US is maturing, and so you're gonna 0:13:07.120 --> 0:13:09.480 expect a little bit less growth out of it. But 0:13:09.520 --> 0:13:12.439 it's been a very active debate. Certainly cal Pers has 0:13:12.480 --> 0:13:16.160 been the most vocal about it. Our board is evaluating 0:13:16.200 --> 0:13:18.840 that all the time. It's a constant debate. But again, 0:13:18.880 --> 0:13:21.680 since it's a thirty year number, you're not going to 0:13:22.240 --> 0:13:24.360 change it overnight. You're going to really just try and 0:13:24.400 --> 0:13:27.600 look at what's historically happened. Let's talk about what the 0:13:27.640 --> 0:13:30.800 consequences would be for lowering the assumed rate of return 0:13:31.080 --> 0:13:35.520 that much. How much more would taxpayers, uh, you know, workers, 0:13:35.760 --> 0:13:38.360 how much more would they have to contribute to these plans? Well, 0:13:38.400 --> 0:13:40.680 you hit on the head. There are only two inputs 0:13:40.679 --> 0:13:43.920 to retirement plan, the contributions, and that goes whether it's 0:13:43.960 --> 0:13:46.839 a defined benefit plan in a public setting or your 0:13:46.880 --> 0:13:49.679 own four oh one K. The two inputs are your 0:13:49.720 --> 0:13:52.400 contribution rate and your investment return. So you want a 0:13:52.440 --> 0:13:55.680 reasonable investment return, and that's what you're trying to decide, 0:13:55.720 --> 0:13:57.800 is fact to that question of what's reasonable to assume 0:13:57.840 --> 0:14:00.160 for the next thirty years. The minute you lower or 0:14:00.160 --> 0:14:03.600 that assumption, it definitely goes to the contribution rates. And 0:14:03.600 --> 0:14:07.040 in many cases that's the employer first, but then also 0:14:07.160 --> 0:14:09.920 in some cases the employee, and that's what it's always 0:14:09.920 --> 0:14:13.480 a big debate, But for for California, by and large, 0:14:13.480 --> 0:14:16.000 it's going to mostly hit the employer on that side 0:14:16.040 --> 0:14:18.400 of it. I'm glad you used the word debate, but 0:14:18.440 --> 0:14:20.640 I'm going to just shift it a little bit, because 0:14:20.680 --> 0:14:23.560 there is a lack of debate when it comes to 0:14:23.720 --> 0:14:27.200 ideas that people do not like. For example, let's say 0:14:27.240 --> 0:14:29.800 you have a fund manager who happens to sit on 0:14:29.840 --> 0:14:32.800 the board of an institute that has a position that 0:14:32.960 --> 0:14:36.800 is contrary to let's say a union leader whose members 0:14:37.040 --> 0:14:43.080 are also your customers, your clients. Is this intolerance that 0:14:43.160 --> 0:14:46.920 seems to infect not only the political discourse but also 0:14:46.960 --> 0:14:49.600 the social discourse. Finding ideas that you only agree with. 0:14:50.560 --> 0:14:53.680 Is that something you think is here to stay or 0:14:53.880 --> 0:14:57.400 as a manager, a steward of capital? Uh? Do you 0:14:57.440 --> 0:15:01.280 find it that is just making things ridiculous sleep difficult? 0:15:01.320 --> 0:15:03.640 I mean, you're hiring people to make you money, not 0:15:04.000 --> 0:15:07.600 to give them your political views. Exactly. Our job is 0:15:07.640 --> 0:15:10.920 to find the best money managers we can. Uh. And 0:15:10.960 --> 0:15:13.680 I've often said I don't care whether I like a 0:15:13.720 --> 0:15:17.080 money manager or dislike them. I don't care whether they're 0:15:17.320 --> 0:15:20.480 they're male or female, whether they're purple, they're green, they're 0:15:20.480 --> 0:15:22.960 from Mars. They just have to make us money, and 0:15:23.000 --> 0:15:25.360 that's what we want to focus on. But you're right, 0:15:25.480 --> 0:15:28.160 what's happened in our country and obviously around the world 0:15:28.360 --> 0:15:32.160 is society has gotten more fragmented, and therefore everything is 0:15:33.040 --> 0:15:35.440 more critical. There are fewer people in the middle. So 0:15:35.480 --> 0:15:38.880 there has been a big, big debate and a big 0:15:38.920 --> 0:15:42.320 discussion with us about factoring those kinds of considerations in 0:15:42.400 --> 0:15:44.640 when we hire money managers of not just whether they 0:15:44.680 --> 0:15:47.280 make us money and what's their philosophy, but what are 0:15:47.280 --> 0:15:49.560 they doing, what's the culture of the firm, what is 0:15:49.600 --> 0:15:52.520 the firm doing, what are the principles doing? And that's 0:15:52.520 --> 0:15:54.800 something that we're really trying to figure out. Okay, how 0:15:54.800 --> 0:15:58.120 do we factor that in? Frankly, my biggest concern has 0:15:58.160 --> 0:16:01.280 been less that, but more sustainable investing. Are they thinking 0:16:01.360 --> 0:16:04.120 long term and their investment philosophy. Are they thinking long 0:16:04.200 --> 0:16:07.400 term personally? Because I want them to incorporate things like 0:16:07.480 --> 0:16:11.240 sustainability into their decision model, not just what are they 0:16:11.240 --> 0:16:14.600 doing politically this year or next. They've got to do 0:16:14.640 --> 0:16:17.520 what's right for their clients. Were the source of their capital, 0:16:17.600 --> 0:16:19.920 so you have to pay attention to that. And that's 0:16:19.920 --> 0:16:21.600 the best way I can describe it is they have 0:16:21.680 --> 0:16:25.040 to be at least aware of whether their actions are 0:16:25.120 --> 0:16:28.560 helping their clients or making their life miserable. Money managers 0:16:28.560 --> 0:16:30.880 don't want to get a phone call from me saying 0:16:31.080 --> 0:16:33.880 you are giving me a headache and here's the problem, 0:16:34.040 --> 0:16:35.640 right that you've got a letter or you've got an 0:16:35.680 --> 0:16:38.360 email from someone a union leader. Perhaps it says I 0:16:38.360 --> 0:16:40.720 don't like this money manager that you hired because they 0:16:40.760 --> 0:16:42.800 sit on the board of something that I disagree with. 0:16:43.200 --> 0:16:46.480 Correct and and what they'd rather. They don't want that 0:16:46.480 --> 0:16:48.280 phone call at all. For me. But what they'd rather 0:16:48.400 --> 0:16:51.720 know is I'm unhappy with their investment performance rather than 0:16:51.760 --> 0:16:53.920 and And the problem is you're getting into First Amendment 0:16:54.000 --> 0:16:57.840 rights their own individual activities. UM, how far do we 0:16:57.880 --> 0:17:00.440 go before we question, you know, my act? So I 0:17:00.520 --> 0:17:02.000 like to ride my bike? Is that a good thing 0:17:02.080 --> 0:17:04.439 or a bad thing? Good thing? I objectively say that 0:17:04.520 --> 0:17:05.920 it's a good thing for you to ride a bike 0:17:06.080 --> 0:17:07.840 as a fellow bike rider. UM. I want to talk 0:17:07.880 --> 0:17:10.520 a little bit about when you're talking about money managers, 0:17:10.520 --> 0:17:13.600 a shift away from hedge funds um and even among 0:17:13.680 --> 0:17:18.000 some pensions to more index strategies. Have you also seen 0:17:18.000 --> 0:17:21.640 a sort of similar shift among your own funds. We've 0:17:21.680 --> 0:17:24.760 been long index funds and overweight index funds for almost 0:17:24.800 --> 0:17:28.840 thirty years, so we very much, we very much believe 0:17:28.880 --> 0:17:31.840 in in index funds and have doubted the value of 0:17:31.840 --> 0:17:34.040 active management. And I think when you look back at 0:17:34.240 --> 0:17:36.840 two thousand and sixteen, you'll say it was a year 0:17:36.840 --> 0:17:39.800 where the equity market traded in a channel. It should 0:17:39.840 --> 0:17:42.959 have helped active managers. They should have been able to outperform, 0:17:43.040 --> 0:17:47.200 Yet they won't. And to me, that's just another year 0:17:47.240 --> 0:17:51.280 of compounding evidence that active management is really losing its 0:17:51.280 --> 0:17:54.119 ability to operate. And I think investors really have to 0:17:54.200 --> 0:17:56.680 question the price that they're paying, because that's where it 0:17:56.720 --> 0:17:59.600 gets killed. The price is so high in active management. 0:17:59.720 --> 0:18:02.280 They've got a question. It's not worth the money people, 0:18:02.440 --> 0:18:05.879 It's not worth the cost of active management. People should 0:18:05.880 --> 0:18:21.480 make their retirement plans in passive investments. Kathleen Sebelius is 0:18:21.520 --> 0:18:25.200 the former head of Health and Human Services, former governor 0:18:25.320 --> 0:18:29.439 of Kansas joining US now. Governor Sebelius, thank you very 0:18:29.520 --> 0:18:31.960 much for being with us. Glad to be with you 0:18:32.080 --> 0:18:34.520 him now. Just wondering if you could give us your 0:18:35.040 --> 0:18:39.399 impression and your thoughts on the selection of Tom Price 0:18:39.920 --> 0:18:42.560 as the new head of the Department of Health and 0:18:42.640 --> 0:18:46.199 Human Services by President elector Donald Trump. He is a 0:18:46.320 --> 0:18:53.160 representative Republican representative from Georgia. Well, I had the opportunity 0:18:53.320 --> 0:18:58.600 to work with Dr Price Um during my tenure as Secretary. 0:18:58.760 --> 0:19:02.840 He served the Ways and Means Committee, which has a 0:19:02.880 --> 0:19:06.080 lot of jurisdiction over JHS. So I would start by 0:19:06.080 --> 0:19:09.800 saying he um he is a health care provider, and 0:19:09.840 --> 0:19:12.000 I think that's helpful in the Department of Health and 0:19:12.080 --> 0:19:16.800 Human Services to have that broad personal background. He also 0:19:17.800 --> 0:19:21.920 Um has served on a key committee with j g 0:19:22.000 --> 0:19:26.320 S jurisdictions. So he will come to the post assuming 0:19:26.440 --> 0:19:32.760 he's confirmed, with again an array of experience that that 0:19:32.840 --> 0:19:36.399 will be very helpful. I think JHS has a huge 0:19:36.440 --> 0:19:42.040 footprint UM covering everything from you know ni H kind 0:19:42.040 --> 0:19:47.040 of gold standard on research throughout the world, CDC with 0:19:47.119 --> 0:19:52.960 Public Health which is in Georgia. Dr Prices home area UM, 0:19:53.080 --> 0:19:56.400 you know CMS that covers almost one out of every 0:19:56.440 --> 0:20:01.240 three Americans is involved in Medicare or Medicaid. So there's 0:20:00.920 --> 0:20:09.080 a very substantial UH base of the leven operating agencies, 0:20:09.119 --> 0:20:11.080 and I think it's really helpful to have someone who 0:20:11.119 --> 0:20:14.160 has familiarity with a lot of the programs. Right. Dr 0:20:14.240 --> 0:20:18.200 Price is an orthopedic surgeon from Georgia. It's just mentioned 0:20:18.280 --> 0:20:22.160 UM and he's also been a vocal critic of the 0:20:22.200 --> 0:20:25.800 Affordable Care Act or Obama Care UM and was working 0:20:25.840 --> 0:20:30.600 to UH disabled parts of it. Based on your experience 0:20:30.600 --> 0:20:33.960 working with him, Governor Sapilius, what's your sense on what 0:20:34.160 --> 0:20:37.879 aspects of the Affordable Care Act he's most critical of 0:20:38.000 --> 0:20:42.680 and will try to disable first? Well, I think you'll 0:20:42.680 --> 0:20:46.960 have to let um congresson Price speak for himself in 0:20:47.000 --> 0:20:54.360 that regard. I do UM know that everyone, including Dr Price, 0:20:55.240 --> 0:21:02.600 has been UM skeptical of the calls of health insurance 0:21:02.640 --> 0:21:06.720 provided in the marketplace. And you know, frankly, I think 0:21:06.800 --> 0:21:10.840 it would be wonderful if UH there is a plan 0:21:11.000 --> 0:21:16.280 to fully ensure the individuals the twenty million people who 0:21:16.320 --> 0:21:22.240 now have insurance through various programs and UM and UM 0:21:22.359 --> 0:21:25.440 lower the costs. I think that would be a widely 0:21:26.600 --> 0:21:32.240 applauded move. UM. I do know that he has not 0:21:32.480 --> 0:21:38.280 voiced as much enthusiasm over the pre existing condition limitation, 0:21:38.600 --> 0:21:42.119 making sure insurance companies actually don't lock out our price 0:21:42.160 --> 0:21:45.320 out people with some kind of pre existing condition. In fact, 0:21:45.359 --> 0:21:50.280 he has in the past supported high risk pools as 0:21:50.320 --> 0:21:55.360 an alternative, and I think that is potentially very very 0:21:55.440 --> 0:22:00.000 dangerous for a lot of Americans who have serious health conditions, 0:22:00.040 --> 0:22:03.560 because a high risk pool, by its very nature, is 0:22:03.600 --> 0:22:09.080 not insurance coverage and is bound to be hugely expensive. 0:22:09.280 --> 0:22:13.440 So I think UM around the goal that everyone deserves 0:22:13.440 --> 0:22:16.960 a right to health insurance, everyone should have access to 0:22:17.960 --> 0:22:20.400 best care at the lowest possible cost, I think there'll 0:22:20.440 --> 0:22:24.320 be a lot of bipartisan support for ideas he may 0:22:24.359 --> 0:22:27.400 bring to the table. Governor I wonder if you could 0:22:27.400 --> 0:22:30.160 speak a little bit about your future plans. Your two 0:22:30.200 --> 0:22:34.159 time governor of the state of Kansas, obviously serving in 0:22:34.320 --> 0:22:38.360 the Obama administration, but also you were the former chair 0:22:38.400 --> 0:22:41.880 of the Democratic Governors Association. Do you have any plans 0:22:41.920 --> 0:22:47.520 to participate in actively participate in the ongoing efforts of 0:22:47.560 --> 0:22:52.080 the Democrat Party to make their voice heard. Well. I 0:22:52.119 --> 0:22:58.040 certainly will be engaged and involved with individuals and groups 0:22:58.119 --> 0:23:05.320 who are eager to UM save the health program that 0:23:05.440 --> 0:23:08.960 has made such a difference in twenty million people's lives. 0:23:09.160 --> 0:23:12.680 Does it have to look exactly the same now? UM? 0:23:12.720 --> 0:23:15.240 But you'll continue to speak out on issues like pro choice, 0:23:15.280 --> 0:23:19.120