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P&L: Consumer Confidence's Nine-Year High Is 'Screamingly Good' · Bloomberg Intelligence

• 0:04
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim
• 0:07
  Speaker 1: Fox along with my co host Lisa Abramowitz. Each day
• 0:11
  Speaker 1: we bring you the most important, noteworthy, and useful interviews
• 0:14
  Speaker 1: for you and your money, whether you at the grocery
• 0:16
  Speaker 1: store or the trading floor. Find the Bloomberg pm L
• 0:19
  Speaker 1: podcast on iTunes, SoundCloud and at Bloomberg dot com. Now,
• 0:28
  Speaker 1: I want to bring in Lynna Franco Director of Economic
• 0:32
  Speaker 1: Indicators of the Conference Board, taking a look at the
• 0:35
  Speaker 1: latest reading which is very positive. US consumer confidence increased
• 0:40
  Speaker 1: in November from a month earlier to the highest level
• 0:43
  Speaker 1: since July two thousand and seven. Lynn, this seems to
• 0:47
  Speaker 1: be a screamingly good sign. Is there anything I'm missing here?
• 0:52
  Speaker 1: Not at all. I mean, we've had a good rise
• 0:54
  Speaker 1: and consumer confidence. It's pretty much across the board. Consumers
• 0:58
  Speaker 1: are telling us that current conditions have strengthened even more.
• 1:01
  Speaker 1: And coming on the heels of a good g d
• 1:03
  Speaker 1: P report this morning, I think that's welcome news and
• 1:06
  Speaker 1: expectations are that we're going to continue along this path.
• 1:09
  Speaker 1: Can you explain what the details are, because in looking
• 1:11
  Speaker 1: at the GDP report that three two third quarter print,
• 1:15
  Speaker 1: it seems as though, consumer spending is what's driving that
• 1:18
  Speaker 1: move higher. Absolutely, it is consumer spending that's driving the economy,
• 1:24
  Speaker 1: and based on these confidence report that we have today,
• 1:27
  Speaker 1: it looks like it's going to be the consumer that
• 1:29
  Speaker 1: continues to drive the economy, especially when we take a
• 1:32
  Speaker 1: look at the particular at the income question that we had.
• 1:34
  Speaker 1: We had some rather good news there which I think
• 1:36
  Speaker 1: is going to support spending and we've seen signs of
• 1:38
  Speaker 1: that already with the holiday numbers coming in. You know, Lynn,
• 1:41
  Speaker 1: one thing that I've been watching is the City Group's
• 1:43
  Speaker 1: Economic Surprise Index, which has surged recently to the highest
• 1:48
  Speaker 1: levels in well in a couple of months, which is
• 1:51
  Speaker 1: still significant to me because there has been um a
• 1:54
  Speaker 1: feeling that, you know, the economy will grow but as
• 1:57
  Speaker 1: slower pace. But the data is coming in better than
• 2:00
  Speaker 1: people are expecting. What are all of those economists missing, UM,
• 2:05
  Speaker 1: I'm not sure that we're missing very much. I think
• 2:08
  Speaker 1: we're all just happy to see that the consumer remains
• 2:11
  Speaker 1: rather resilient, UM. And I think we also expect growth
• 2:15
  Speaker 1: to continue along this path, which I think is very
• 2:17
  Speaker 1: welcome news. UM. And you know, when we take a
• 2:20
  Speaker 1: look at these figures that we got in today, it's
• 2:23
  Speaker 1: it's more of more good news, and I think it's
• 2:25
  Speaker 1: going to spell you know, good news for for fourth
• 2:28
  Speaker 1: quarter growth, holiday sales, and for the economy as we
• 2:31
  Speaker 1: head into you know. Then, one of the other reports
• 2:34
  Speaker 1: we got today had to do with home prices, and
• 2:36
  Speaker 1: we're taking a look at the SNP Case Schiller core
• 2:40
  Speaker 1: Logic National Index prices for US for homes in twenty
• 2:44
  Speaker 1: US cities climbing five point one in September. I'm just
• 2:49
  Speaker 1: wondering how that works with increases in mortgage rates. We've
• 2:54
  Speaker 1: seen interest rates move just a little bit higher, they're
• 2:56
  Speaker 1: still at historical lows, but how is that consistent with
• 3:00
  Speaker 1: the higher cost of money. Well, what we're seeing there
• 3:03
  Speaker 1: obviously is you know that sort of impedes first time
• 3:07
  Speaker 1: buyers or lower income folks from sort of stepping into
• 3:10
  Speaker 1: the housing market. On the flip side, the price appreciation
• 3:14
  Speaker 1: helps consumers wealth. So I think we're seeing sort of
• 3:17
  Speaker 1: a dual effect here where not only have home prices
• 3:20
  Speaker 1: gone up, we're seeing stock prices going up, and we're
• 3:23
  Speaker 1: seeing earnings in terms of what people are taking home
• 3:25
  Speaker 1: going up. So I think across those fronts that's why
• 3:28
  Speaker 1: we're seeing in our income question a more optimistic consumer um.
• 3:32
  Speaker 1: We also got GDP numbers that the U S economy
• 3:36
  Speaker 1: expanded more than previously reported last quarter due to more
• 3:40
  Speaker 1: household spending. So, you know, does it seem like there
• 3:44
  Speaker 1: has been enough momentum that's been gathering steam for long
• 3:48
  Speaker 1: enough that that we can see these sort of upward
• 3:50
  Speaker 1: surprises for a while and that the consumer will really
• 3:53
  Speaker 1: support uh faster growth in the US. Well, I think
• 3:56
  Speaker 1: what we expect to see as consumers supporting growth, not
• 4:00
  Speaker 1: necessarily much stronger growth. So we're not anticipating growth of
• 4:03
  Speaker 1: you know, three and a half percent or four percent,
• 4:05
  Speaker 1: but we are going to at least anticipate that the
• 4:09
  Speaker 1: consumer will continue to drive the economy as far as
• 4:13
  Speaker 1: the future, because that's what you're you know, as an economist,
• 4:16
  Speaker 1: we always want you to get that. At Crystal Ball,
• 4:18
  Speaker 1: at what what does the report today tell us about
• 4:22
  Speaker 1: the rest of the quarter? I think it tells us
• 4:24
  Speaker 1: that it's going to be a consumer driven quarter. We're
• 4:27
  Speaker 1: seeing consumers telling us that the momentum that we've been
• 4:29
  Speaker 1: seeing building up is continuing into the fourth quarter. And
• 4:32
  Speaker 1: this is shopping, this is retail or is this spending
• 4:35
  Speaker 1: on a variety of items, a variety of items, but
• 4:38
  Speaker 1: I think in terms of spending, it's a very favorable
• 4:41
  Speaker 1: outlook that we're seeing coming out of today's report. Happy
• 4:44
  Speaker 1: Black Friday, Lynn Franco, Director of Economic Indicators at the
• 4:47
  Speaker 1: conference board taking a look at some of the positive
• 4:50
  Speaker 1: indications that we've been getting. And it's not just Black Friday,
• 4:52
  Speaker 1: I mean Cyber Monday. My colleagues reported that more than
• 4:55
  Speaker 1: one billion dollars of sales in one day. We're made
• 4:59
  Speaker 1: on mobile click, click and buy. All right, now, let's
• 5:14
  Speaker 1: talk about oil. We've got an expert, and Marie Horden
• 5:17
  Speaker 1: is live in Vienna for a Bloomberg executive producer and Marie,
• 5:21
  Speaker 1: what can you tell us about OPEC Russia and the
• 5:24
  Speaker 1: conflict that exists inside this oil exporting consortium. Over the
• 5:29
  Speaker 1: last hour or two, actually Bloomberg had an amazing scoop
• 5:32
  Speaker 1: and we learned that Saudi Arabia said to be ready
• 5:35
  Speaker 1: to walk out of all talks to subject doing a
• 5:37
  Speaker 1: deal without any compromise by Iran and a rock, So
• 5:41
  Speaker 1: they're really taking a hard line here. Meanwhile, the Iranian
• 5:44
  Speaker 1: oil minister arrived in the last hour as well. Um
• 5:47
  Speaker 1: he is saying that they will not cut production. You know,
• 5:50
  Speaker 1: this verbally came from his mouth earlier this morning um uh,
• 5:55
  Speaker 1: late in New York time. Um He the Oil Ministry
• 5:58
  Speaker 1: of Iran tweeted that they will not have a cap
• 6:01
  Speaker 1: and then before he came to Vienny spoke on STATV
• 6:03
  Speaker 1: saying it's the will of the people to continue pumping,
• 6:06
  Speaker 1: to go back to pre sanctioned level um And then
• 6:09
  Speaker 1: when he arrived here he is not budging. They say
• 6:11
  Speaker 1: they will not co production, and the Saudi say without them,
• 6:13
  Speaker 1: they're not doing a deal. So it's looking to be
• 6:16
  Speaker 1: quite a sticking point here. Um. One analyst described it
• 6:19
  Speaker 1: as a Greek tragedy, but he said maybe sometime for
• 6:22
  Speaker 1: happy ending. But they are really coming down to the wire.
• 6:24
  Speaker 1: Is there any chance that if they do not come
• 6:26
  Speaker 1: to a resolution, that there is another time in the
• 6:28
  Speaker 1: near future where they can come together and try to
• 6:30
  Speaker 1: resolve some of the differences. Well, if you if you
• 6:34
  Speaker 1: look at the past year in terms of an unusual
• 6:37
  Speaker 1: opec here in April this happened where talks collapsed in
• 6:40
  Speaker 1: Dohan and then it took them in the four or
• 6:42
  Speaker 1: five six months UH to reach an agreement. Is talks
• 6:46
  Speaker 1: collapse here. Anything can happen. They can decide to meet
• 6:49
  Speaker 1: next week, but likely what would happened is um, they'll
• 6:52
  Speaker 1: see where oil prices landed. We see what some analysts
• 6:55
  Speaker 1: are saying in the twenties in January. Uh, you better
• 6:58
  Speaker 1: believe o pack is definitely gonna start talking up in
• 7:00
  Speaker 1: each other to try to get the price back up.
• 7:02
  Speaker 1: And Marie just quickly. Iran and Saudi Arabia are they
• 7:05
  Speaker 1: at odds over this politically or is this because Iran
• 7:09
  Speaker 1: just needs the money? Well, no, for the Iranians, it
• 7:13
  Speaker 1: is definitely political. They've said for years they've had sanctioned
• 7:18
  Speaker 1: and Saudi has been able to pump. You know, for
• 7:20
  Speaker 1: Saudi for the last past two years, it's been about
• 7:23
  Speaker 1: market share, pump that will as much as they can. Um.
• 7:26
  Speaker 1: So this is political baggage. I mean what also, what
• 7:29
  Speaker 1: we're hearing is being discussed is about seven percent of
• 7:32
  Speaker 1: oil that the Saudis wants, that Theorians wanted Staudi don't.
• 7:36
  Speaker 1: So the rain Thereans want to cut about want to
• 7:39
  Speaker 1: pump at four million bartars a day. Socialities are said
• 7:41
  Speaker 1: to offer something like three point seven in change. So
• 7:44
  Speaker 1: if you think about it, it's not a ton of barrel,
• 7:47
  Speaker 1: but they are literally fighting over every barrel of oil
• 7:49
  Speaker 1: and this really comes down to politics. And Marie Hordern
• 7:53
  Speaker 1: live in Vienna talking about OPEC talks. UH, and Marie
• 7:57
  Speaker 1: Hordern of Bloomberg News, thank you so much for being
• 8:00
  Speaker 1: with us for a look at what the full implications
• 8:03
  Speaker 1: are of this opaque discussion. I want to go to
• 8:08
  Speaker 1: Rich Pontillo, senior director at NASDAC specializing in utility oil
• 8:11
  Speaker 1: and gas sectors. Rich, how big of a casualty would
• 8:15
  Speaker 1: it be for not for OPEC if they were not
• 8:18
  Speaker 1: to come to resolution here? Yeah, like morning Lisa and him,
• 8:23
  Speaker 1: I think it would be fairly significant, given what's your
• 8:27
  Speaker 1: inspired over the last few months. UH. If you go
• 8:30
  Speaker 1: back to September, OPEC members held informal meetings in LG
• 8:35
  Speaker 1: years and the outcome there was that they were able
• 8:39
  Speaker 1: to draw a consensus that they would agree at least
• 8:42
  Speaker 1: on a production on a on a production cap. So
• 8:47
  Speaker 1: I think that would certainly contradict directly, UH, in terms
• 8:51
  Speaker 1: of if they if they cannot reach a resolution tomorrow,
• 8:54
  Speaker 1: I think it will only further cement almost the end
• 8:59
  Speaker 1: of any knee meaningful influence that OPEC has going forward.
• 9:02
  Speaker 1: On the global oil markets again, given its lack of
• 9:06
  Speaker 1: ability to coalesceer consensus again, particularly especially after after the
• 9:12
  Speaker 1: the the informal agreement that was reached in late September. Well,
• 9:17
  Speaker 1: we're seeing the price of oil decline. It's down nearly
• 9:19
  Speaker 1: four percent right now. Rich the combination of politics and
• 9:25
  Speaker 1: crude oil. How does that play out in the in
• 9:27
  Speaker 1: the United States? I was looking at a Golden Sacks
• 9:29
  Speaker 1: report today saying that they say prices to be moderately
• 9:32
  Speaker 1: higher next year. They talk about the structural shift uh
• 9:36
  Speaker 1: in the cost curve of oil? What does that? What
• 9:39
  Speaker 1: does that mean? How did they get to that conclusion? Yeah,
• 9:42
  Speaker 1: it's a good point them And actually, uh myself, I
• 9:45
  Speaker 1: was reading that Golden Sacks note and just a a
• 9:48
  Speaker 1: side note that that report cited there's implied volatility in
• 9:52
  Speaker 1: the near term options market of a roughly six dollar
• 9:56
  Speaker 1: price swing in either direction on Brent oil futures UH
• 10:00
  Speaker 1: in response to tomorrow's meetings. So basically there is a
• 10:03
  Speaker 1: lot hinging on this decision tomorrow UH, and we're going
• 10:07
  Speaker 1: to see a very violent binary effect once that outcome
• 10:12
  Speaker 1: has made public. UM In terms of next year, again,
• 10:15
  Speaker 1: I I think they're obviously trying to cover both sides
• 10:18
  Speaker 1: of any potential decision. Um, if you look at what
• 10:22
  Speaker 1: has transpired in the US over the last twelve to
• 10:25
  Speaker 1: twenty four months, you've seen domestic producers become much more
• 10:32
  Speaker 1: put here. I'm sorry, we're gonna have to cut it.
• 10:33
  Speaker 1: Their senior advisory solutions at NASDAC. Thank you so much
• 10:36
  Speaker 1: for joining us. This is Bloomberg, all right. Joining us
• 10:51
  Speaker 1: now is Chris Aileman. He is the manager chief investment
• 10:54
  Speaker 1: officer of calstar as, the nation's a second largest public
• 10:57
  Speaker 1: pension fund assets totaling about a hundred and nine d
• 11:00
  Speaker 1: two billion dollars as of the end of October. Their
• 11:04
  Speaker 1: investment philosophy long term patient capital buying, a long term
• 11:08
  Speaker 1: net cash flows and capital gain potential at a reasonable price.
• 11:12
  Speaker 1: Chris Saleman, thank you for being with us. It's always
• 11:14
  Speaker 1: a pleasure of my favorite radio show. Well, we love
• 11:17
  Speaker 1: having you, and thank you. Reason. I love reasonable price.
• 11:22
  Speaker 1: I always love it when reasonable and reasonable is intuitive
• 11:26
  Speaker 1: but also analytical. How do you determine reasonable price? Um?
• 11:32
  Speaker 1: You have to look at historical norms, and you really
• 11:34
  Speaker 1: have to focus in on things like price earnings ratios
• 11:37
  Speaker 1: or cap rates in real estate and look at the
• 11:40
  Speaker 1: price you're paying relative to where it's been saved the
• 11:42
  Speaker 1: last thirty years, and I think that gives you a
• 11:44
  Speaker 1: guide of whether you're paying up for something or whether
• 11:47
  Speaker 1: it's reasonably priced. You're not going to find investments at
• 11:50
  Speaker 1: a bargain. Very often people hate them if they're at
• 11:52
  Speaker 1: a bargain. So but a lot of it is what
• 11:54
  Speaker 1: you guys are just talking about. It's psychology, um, and
• 11:57
  Speaker 1: understanding how investors think they tend to chase markets and
• 12:01
  Speaker 1: run them up to extremes um. Chris. I wanted to
• 12:04
  Speaker 1: ask you there was a story that I was reading
• 12:06
  Speaker 1: last night about Cowper is the biggest public US pension
• 12:10
  Speaker 1: in the country with almost three billion dollars of assets,
• 12:12
  Speaker 1: and how they're actively debating whether or not to substantially
• 12:16
  Speaker 1: lower their assumed rate of return going forward from about
• 12:20
  Speaker 1: seven percent or a little more than seven percent to
• 12:22
  Speaker 1: six percent, which is a which is a massive move
• 12:25
  Speaker 1: uh in in in pension land. Can you talk a
• 12:27
  Speaker 1: little bit about what your current assumed rate of return
• 12:31
  Speaker 1: is and what's appropriate over the next three decades or so.
• 12:35
  Speaker 1: Ours is seven and a half UM, and what you're
• 12:37
  Speaker 1: seeing across the country is pension plans, reevaluating that they're
• 12:41
  Speaker 1: getting pressure from their actuaries, their investment consultants to reassess
• 12:46
  Speaker 1: what they think is as you said, over a thirty
• 12:49
  Speaker 1: year time period. So it's not just going to be
• 12:51
  Speaker 1: the one year return or even the five year return.
• 12:53
  Speaker 1: And when I asked people to step back and say, well,
• 12:55
  Speaker 1: wait a minute, what's a realistic return over the next
• 12:57
  Speaker 1: thirty years, that's where you come into somewhere in the seven.
• 13:01
  Speaker 1: We used to say it was as much as eight.
• 13:03
  Speaker 1: But demographically the US is maturing, and so you're gonna
• 13:07
  Speaker 1: expect a little bit less growth out of it. But
• 13:09
  Speaker 1: it's been a very active debate. Certainly cal Pers has
• 13:12
  Speaker 1: been the most vocal about it. Our board is evaluating
• 13:16
  Speaker 1: that all the time. It's a constant debate. But again,
• 13:18
  Speaker 1: since it's a thirty year number, you're not going to
• 13:22
  Speaker 1: change it overnight. You're going to really just try and
• 13:24
  Speaker 1: look at what's historically happened. Let's talk about what the
• 13:27
  Speaker 1: consequences would be for lowering the assumed rate of return
• 13:31
  Speaker 1: that much. How much more would taxpayers, uh, you know, workers,
• 13:35
  Speaker 1: how much more would they have to contribute to these plans? Well,
• 13:38
  Speaker 1: you hit on the head. There are only two inputs
• 13:40
  Speaker 1: to retirement plan, the contributions, and that goes whether it's
• 13:43
  Speaker 1: a defined benefit plan in a public setting or your
• 13:46
  Speaker 1: own four oh one K. The two inputs are your
• 13:49
  Speaker 1: contribution rate and your investment return. So you want a
• 13:52
  Speaker 1: reasonable investment return, and that's what you're trying to decide,
• 13:55
  Speaker 1: is fact to that question of what's reasonable to assume
• 13:57
  Speaker 1: for the next thirty years. The minute you lower or
• 14:00
  Speaker 1: that assumption, it definitely goes to the contribution rates. And
• 14:03
  Speaker 1: in many cases that's the employer first, but then also
• 14:07
  Speaker 1: in some cases the employee, and that's what it's always
• 14:09
  Speaker 1: a big debate, But for for California, by and large,
• 14:13
  Speaker 1: it's going to mostly hit the employer on that side
• 14:16
  Speaker 1: of it. I'm glad you used the word debate, but
• 14:18
  Speaker 1: I'm going to just shift it a little bit, because
• 14:20
  Speaker 1: there is a lack of debate when it comes to
• 14:23
  Speaker 1: ideas that people do not like. For example, let's say
• 14:27
  Speaker 1: you have a fund manager who happens to sit on
• 14:29
  Speaker 1: the board of an institute that has a position that
• 14:32
  Speaker 1: is contrary to let's say a union leader whose members
• 14:37
  Speaker 1: are also your customers, your clients. Is this intolerance that
• 14:43
  Speaker 1: seems to infect not only the political discourse but also
• 14:46
  Speaker 1: the social discourse. Finding ideas that you only agree with.
• 14:50
  Speaker 1: Is that something you think is here to stay or
• 14:53
  Speaker 1: as a manager, a steward of capital? Uh? Do you
• 14:57
  Speaker 1: find it that is just making things ridiculous sleep difficult?
• 15:01
  Speaker 1: I mean, you're hiring people to make you money, not
• 15:04
  Speaker 1: to give them your political views. Exactly. Our job is
• 15:07
  Speaker 1: to find the best money managers we can. Uh. And
• 15:10
  Speaker 1: I've often said I don't care whether I like a
• 15:13
  Speaker 1: money manager or dislike them. I don't care whether they're
• 15:17
  Speaker 1: they're male or female, whether they're purple, they're green, they're
• 15:20
  Speaker 1: from Mars. They just have to make us money, and
• 15:23
  Speaker 1: that's what we want to focus on. But you're right,
• 15:25
  Speaker 1: what's happened in our country and obviously around the world
• 15:28
  Speaker 1: is society has gotten more fragmented, and therefore everything is
• 15:33
  Speaker 1: more critical. There are fewer people in the middle. So
• 15:35
  Speaker 1: there has been a big, big debate and a big
• 15:38
  Speaker 1: discussion with us about factoring those kinds of considerations in
• 15:42
  Speaker 1: when we hire money managers of not just whether they
• 15:44
  Speaker 1: make us money and what's their philosophy, but what are
• 15:47
  Speaker 1: they doing, what's the culture of the firm, what is
• 15:49
  Speaker 1: the firm doing, what are the principles doing? And that's
• 15:52
  Speaker 1: something that we're really trying to figure out. Okay, how
• 15:54
  Speaker 1: do we factor that in? Frankly, my biggest concern has
• 15:58
  Speaker 1: been less that, but more sustainable investing. Are they thinking
• 16:01
  Speaker 1: long term and their investment philosophy. Are they thinking long
• 16:04
  Speaker 1: term personally? Because I want them to incorporate things like
• 16:07
  Speaker 1: sustainability into their decision model, not just what are they
• 16:11
  Speaker 1: doing politically this year or next. They've got to do
• 16:14
  Speaker 1: what's right for their clients. Were the source of their capital,
• 16:17
  Speaker 1: so you have to pay attention to that. And that's
• 16:19
  Speaker 1: the best way I can describe it is they have
• 16:21
  Speaker 1: to be at least aware of whether their actions are
• 16:25
  Speaker 1: helping their clients or making their life miserable. Money managers
• 16:28
  Speaker 1: don't want to get a phone call from me saying
• 16:31
  Speaker 1: you are giving me a headache and here's the problem,
• 16:34
  Speaker 1: right that you've got a letter or you've got an
• 16:35
  Speaker 1: email from someone a union leader. Perhaps it says I
• 16:38
  Speaker 1: don't like this money manager that you hired because they
• 16:40
  Speaker 1: sit on the board of something that I disagree with.
• 16:43
  Speaker 1: Correct and and what they'd rather. They don't want that
• 16:46
  Speaker 1: phone call at all. For me. But what they'd rather
• 16:48
  Speaker 1: know is I'm unhappy with their investment performance rather than
• 16:51
  Speaker 1: and And the problem is you're getting into First Amendment
• 16:54
  Speaker 1: rights their own individual activities. UM, how far do we
• 16:57
  Speaker 1: go before we question, you know, my act? So I
• 17:00
  Speaker 1: like to ride my bike? Is that a good thing
• 17:02
  Speaker 1: or a bad thing? Good thing? I objectively say that
• 17:04
  Speaker 1: it's a good thing for you to ride a bike
• 17:06
  Speaker 1: as a fellow bike rider. UM. I want to talk
• 17:07
  Speaker 1: a little bit about when you're talking about money managers,
• 17:10
  Speaker 1: a shift away from hedge funds um and even among
• 17:13
  Speaker 1: some pensions to more index strategies. Have you also seen
• 17:18
  Speaker 1: a sort of similar shift among your own funds. We've
• 17:21
  Speaker 1: been long index funds and overweight index funds for almost
• 17:24
  Speaker 1: thirty years, so we very much, we very much believe
• 17:28
  Speaker 1: in in index funds and have doubted the value of
• 17:31
  Speaker 1: active management. And I think when you look back at
• 17:34
  Speaker 1: two thousand and sixteen, you'll say it was a year
• 17:36
  Speaker 1: where the equity market traded in a channel. It should
• 17:39
  Speaker 1: have helped active managers. They should have been able to outperform,
• 17:43
  Speaker 1: Yet they won't. And to me, that's just another year
• 17:47
  Speaker 1: of compounding evidence that active management is really losing its
• 17:51
  Speaker 1: ability to operate. And I think investors really have to
• 17:54
  Speaker 1: question the price that they're paying, because that's where it
• 17:56
  Speaker 1: gets killed. The price is so high in active management.
• 17:59
  Speaker 1: They've got a question. It's not worth the money people,
• 18:02
  Speaker 1: It's not worth the cost of active management. People should
• 18:05
  Speaker 1: make their retirement plans in passive investments. Kathleen Sebelius is
• 18:21
  Speaker 1: the former head of Health and Human Services, former governor
• 18:25
  Speaker 1: of Kansas joining US now. Governor Sebelius, thank you very
• 18:29
  Speaker 1: much for being with us. Glad to be with you
• 18:32
  Speaker 1: him now. Just wondering if you could give us your
• 18:35
  Speaker 1: impression and your thoughts on the selection of Tom Price
• 18:39
  Speaker 1: as the new head of the Department of Health and
• 18:42
  Speaker 1: Human Services by President elector Donald Trump. He is a
• 18:46
  Speaker 1: representative Republican representative from Georgia. Well, I had the opportunity
• 18:53
  Speaker 1: to work with Dr Price Um during my tenure as Secretary.
• 18:58
  Speaker 1: He served the Ways and Means Committee, which has a
• 19:02
  Speaker 1: lot of jurisdiction over JHS. So I would start by
• 19:06
  Speaker 1: saying he um he is a health care provider, and
• 19:09
  Speaker 1: I think that's helpful in the Department of Health and
• 19:12
  Speaker 1: Human Services to have that broad personal background. He also
• 19:17
  Speaker 1: Um has served on a key committee with j g
• 19:22
  Speaker 1: S jurisdictions. So he will come to the post assuming
• 19:26
  Speaker 1: he's confirmed, with again an array of experience that that
• 19:32
  Speaker 1: will be very helpful. I think JHS has a huge
• 19:36
  Speaker 1: footprint UM covering everything from you know ni H kind
• 19:42
  Speaker 1: of gold standard on research throughout the world, CDC with
• 19:47
  Speaker 1: Public Health which is in Georgia. Dr Prices home area UM,
• 19:53
  Speaker 1: you know CMS that covers almost one out of every
• 19:56
  Speaker 1: three Americans is involved in Medicare or Medicaid. So there's
• 20:00
  Speaker 1: a very substantial UH base of the leven operating agencies,
• 20:09
  Speaker 1: and I think it's really helpful to have someone who
• 20:11
  Speaker 1: has familiarity with a lot of the programs. Right. Dr
• 20:14
  Speaker 1: Price is an orthopedic surgeon from Georgia. It's just mentioned
• 20:18
  Speaker 1: UM and he's also been a vocal critic of the
• 20:22
  Speaker 1: Affordable Care Act or Obama Care UM and was working
• 20:25
  Speaker 1: to UH disabled parts of it. Based on your experience
• 20:30
  Speaker 1: working with him, Governor Sapilius, what's your sense on what
• 20:34
  Speaker 1: aspects of the Affordable Care Act he's most critical of
• 20:38
  Speaker 1: and will try to disable first? Well, I think you'll
• 20:42
  Speaker 1: have to let um congresson Price speak for himself in
• 20:47
  Speaker 1: that regard. I do UM know that everyone, including Dr Price,
• 20:55
  Speaker 1: has been UM skeptical of the calls of health insurance
• 21:02
  Speaker 1: provided in the marketplace. And you know, frankly, I think
• 21:06
  Speaker 1: it would be wonderful if UH there is a plan
• 21:11
  Speaker 1: to fully ensure the individuals the twenty million people who
• 21:16
  Speaker 1: now have insurance through various programs and UM and UM
• 21:22
  Speaker 1: lower the costs. I think that would be a widely
• 21:26
  Speaker 1: applauded move. UM. I do know that he has not
• 21:32
  Speaker 1: voiced as much enthusiasm over the pre existing condition limitation,
• 21:38
  Speaker 1: making sure insurance companies actually don't lock out our price
• 21:42
  Speaker 1: out people with some kind of pre existing condition. In fact,
• 21:45
  Speaker 1: he has in the past supported high risk pools as
• 21:50
  Speaker 1: an alternative, and I think that is potentially very very
• 21:55
  Speaker 1: dangerous for a lot of Americans who have serious health conditions,
• 22:00
  Speaker 1: because a high risk pool, by its very nature, is
• 22:03
  Speaker 1: not insurance coverage and is bound to be hugely expensive.
• 22:09
  Speaker 1: So I think UM around the goal that everyone deserves
• 22:13
  Speaker 1: a right to health insurance, everyone should have access to
• 22:17
  Speaker 1: best care at the lowest possible cost, I think there'll
• 22:20
  Speaker 1: be a lot of bipartisan support for ideas he may
• 22:24
  Speaker 1: bring to the table. Governor I wonder if you could
• 22:27
  Speaker 1: speak a little bit about your future plans. Your two
• 22:30
  Speaker 1: time governor of the state of Kansas, obviously serving in
• 22:34
  Speaker 1: the Obama administration, but also you were the former chair
• 22:38
  Speaker 1: of the Democratic Governors Association. Do you have any plans
• 22:41
  Speaker 1: to participate in actively participate in the ongoing efforts of
• 22:47
  Speaker 1: the Democrat Party to make their voice heard. Well. I
• 22:52
  Speaker 1: certainly will be engaged and involved with individuals and groups
• 22:58
  Speaker 1: who are eager to UM save the health program that
• 23:05
  Speaker 1: has made such a difference in twenty million people's lives.
• 23:09
  Speaker 1: Does it have to look exactly the same now? UM?
• 23:12
  Speaker 1: But you'll continue to speak out on issues like pro choice,
• 23:15
  Speaker 1: which you're a big advocate of. Absolutely, I think women's
• 23:19
  Speaker 1: health and women's choices and UM making sure that Americans
• 23:24
  Speaker 1: don't go back to the point where insurance companies get
• 23:26
  Speaker 1: to pick and choose who gets coverage and who doesn't.
• 23:30
  Speaker 1: UH is progress that I would hate to see unraveled.
• 23:34
  Speaker 1: And I think that there is a lot of support
• 23:37
  Speaker 1: for UM making sure that we don't return to the
• 23:42
  Speaker 1: days where only people who could be medically underwritten by
• 23:46
  Speaker 1: insurance companies and allowed into a insurance plan if they
• 23:51
  Speaker 1: bought individual coverage would be covered. So yes, I feel
• 23:55
  Speaker 1: very strongly we've made huge progress in women's health, which
• 24:00
  Speaker 1: HUCH progress and individuals health who didn't have affordable coverage
• 24:04
  Speaker 1: in their workplace, and I will very much continue to
• 24:07
  Speaker 1: be engaged and involved in those efforts. I want to
• 24:09
  Speaker 1: thank you very much for spending time with us. Kathy
• 24:11
  Speaker 1: and Sibelius is a former two term governor of the
• 24:14
  Speaker 1: state of Kansas and former Cabinet Secretary of Health and
• 24:17
  Speaker 1: Human Services. Thanks for listening to the Bloomberg P and
• 24:26
  Speaker 1: L podcast. You can subscribe and listen to interviews at iTunes, SoundCloud,
• 24:31
  Speaker 1: or whatever podcast platform you prefer. I'm Pim Fox. I'm
• 24:35
  Speaker 1: out there on Twitter at pim Fox. I'm out there
• 24:38
  Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast.
• 24:41
  Speaker 1: You can always catch us worldwide on Bloomberg Radio.