From our studios in new york city, this is charlie rose. Charlie larry think is here, the manager and ceo of blackrock. It overseas 4. 6 trillion. Blackrock owns more shoulders in more American Companies than any other party. For all of those reasons, i am pleased to have larry fink back at this table. Interesting to talk to you at this moment. Just give me a sense of where you see things today in terms of the Global Economy in terms of markets, in terms of what factors are influencing them like the price of oil, like deflation. As you have framed the world, you have framed a divergent world. The world is a very divergent place. We have crosscurrents. We have political issues that are impacting us that we never even dreamed of 10 years ago five years ago, two years ago, and we have an uncertain economy worldwide. We still have a middleclass having witnessed huge market movements upward and seeing Wealth Creation for some. We have seen stagnation in so many parts of the world. This is the part of the equalization of the world. It is hard to talk in one country about equalization but i talk about this divergent world. We have had the biggest rise in middleclass income worldwide in mans history. A lot of good things are happening. Charlie china . China, brazil. Its mexico. Turkey. Charlie emerging markets. Yeah. If you listened to the news, you would be confused about the good things going on, because the dominance is this divergence. The divergence is going to be with us. We have to overcome some of the negativity and focus on some of the other things going on at some of the things that are quite strong. The world is improving. The u. S. Economy is growing little faster than last year, probably weaker in the First Quarter because of the energy change. Charlie right around 3 . A little lower. 2. 8 . Europe is going to be incrementally better than last year because they finally fixed their banking crisis. They have benefited by a very weakened euro, and they are benefiting from a common date of on accommodative central bank. Then you have economies like india with a new government, with modi, who i happened to visit a few weeks ago. You have an economy that was stagnating around 5 ish a year ago, and they are going to receive the benefit of this lower oil price. That is going to at least one then percent of gdp to india alone. The reforms Prime Minister modi are focusing on will and 1 or 2 . You can see india going from typing percent to 8 5 to 8 . China is going through a modest reduction in gdp. Five years ago, it was growing at 10 . Right now, it is growing at 7 . China may grow at 6. 8 , a reduction of 2 10, but the upswing of india will overcome all of the weakness in china. Charlie will the lower crude reduce the man . Just because china and india are both importers of crude importers of natural gas, the commodity cost is down so much they are able now to produce more. Consumers were buying kerosene and oil, they will be able to benefit and spend more. The most remarkable thing that i think about the world is how technology is in front of our faces. The last time i was here, i was talking about the benefits to the United States because of energy. The United States was creating one Million Barrels incrementally over where we were two years ago. This is in front of us, and yet oil was staying at 100 and was being tested in early 2015 2014. We had isis, uncertainty in iraq, and yet oil did not spike. Then we had the imf talking about Global Growth slowing. The reason why i found this to be so remarkable, the change in the oil market is altered in by technology. We talk about technology in so many other areas. We spend too little time focusing on how technology has changed our everyday economy, like gasoline, how it is changing everything. I look at this as transformational. This new technology and the cost of the new technology is going to create a permanent reduction in the cost of petroleum products. Can oil go back from where it is around 50 to 70 for 80, but i dont think we will see it back at 100. Mexico is focusing on their reforms. One or two years out, they are going to begin their hydraulic fracking and energy reform. We are going to see more and more oil being produced. Unlike all of the other oil shocks we have witnessed in our lifetimes, most oil shocks were demanddriven. This is an oil shock that was supplydriven and the supply was created by new technology. Our theme is about how technology is going to be changing everything we touch whether its our sharing economy. I believe there is so much focus on Companies Like uber, how it may change the taxi industry. I think uber may change car ownership. If you live in new york city or san francisco, for those people, they dont really need to own a car anymore. When you buy a car, it depreciates the day you bought it. You have to pay maintenance. You have to pay for storage. If you have some form of sharing this is a remarkable transformation in society. I think the millenials are not so wrapped up like i was as a young kid to own a car. I think now the whole concept of sharing a car, whether its uber or Something Different in five years, this sharing concept it started with sharing music on the internet, and then we started sharing our hard drive calling it the cloud. We are just expanding this whole concept of sharing, and now it is touching the consumer really importantly. These are transformational items , and one of the dynamics is why i remain bullish on the United States, these technologies are helping this country. Charlie how are they effective in manufacturing . Some worry about displacement of jobs . We are seeing a displacement of jobs because so many mechanized jobs or jobs are becoming mechanized. For educated economies like the United States, we are going to be a big beneficiary of that. My worry about jobs in the next 10 years is going to have a bigger impact in these rising population economies that are just beginning to find a route towards the middle class. These economies have been based if you talk about the emerging market, most of the emerging markets, their economy growth was based on cheap labor. Even in china today, china was the largest purchaser of robotics of any country in the world. Chinas wages have gone up considerably. Their middle class has grown dramatically. China, to remain competitive now, has to start having more efficient factories, which means less even labor, which means more mechanized processes. I believe the manufacturing process worldwide is going to change but the engine of this ingenuity in the United States and over a long cycle will have displacement in the long cycle, we are going to be creating men and women who will be able to deal with this technology, to deal with charlie more leisure time . Larry we have an aging population. We are going to need more people helping the aged. Over a long cycle, im not worried about the shortterm displacement that technology does. In this country im more worried about displacement than other countries. For those men and women being displaced, it is a very worrisome, troublesome period. In some instances, it is difficult to get another job. If you look at the labor statistics in the last two announcements related to our Unemployment Rate, actually Unemployment Rates for the High School Graduate only has come down over 2 . The Unemployment Rate is still too high at 8. 5 , but in 2008 2009, we were hovering at 12 been percent 12 . We have seen a dramatic decline in unemployment for the High School Graduate. Even if you look at breaking up by ethnic group, we are seeing a dramatic decline in unemployment for africanamericans and hispanics. Charlie lots of president ial candidates make their way to your doorstep in order to seek your advice as well as ask for your support. Most of those candidates are trying to articulate a theory of the case about the middle class income inequality, about how to make the economy more robust. What do you tell them . What is your own theory of what ought to be the best prescription for america that resonates to those questions . Larry unfortunately, it is time and education. Time and education are longterm solutions. Shortterm solutions . Its creating a more dynamic also, time. There were many people more unemployed two years ago then we have now. I think we are going to see Wage Inflation later this year. The statistics tell me it is harder to find educated Young Workers in the job market today. That is why it is filtering down. We are reaching lower and training. That is with the markets tell me today. I think that is going to start showing up possibly later this year, definitely next year, and we are going to start seeing Wage Inflation. That is going to start lifting everybody up. We have already seen what 23 states that raised minimum wage i dont know if that number is correct, but i think that is approximately right. You are starting to see companies volunteer to raise minimum wage. I think it is happening. The statistics do bear out the top 1 have benefited mightily more than the other parts of our society. Charlie you just described things that are happening as a matter of course in terms of Wage Inflation dipping down deeper in terms of people and retraining them. What does the government need to do, what does the private sector need to do . Do we need tax reform . Larry president obamas proposed Free Education in the community schools, there is a start. If that is approved, that is a powerful beginning. That is a longterm trend to reeducate and retool. Im a big believer in tax reform. I believe we need to make sure this is a nation where everybody wants to come. Getting back to my statement about the mechanization of manufacturing, we have fewer workers today. The Positive Side about whats going on now, labor represents a smaller component of unit cost on the manufacturing side. We are now seeing more Companies Bringing back manufacturing and onshoring than weve seen in tens of years. Charlie what is causing that . They dont have the same labor costs as they had before . Larry labor represents a smaller cost of the overall many vectoring we have mechanized it so much that we have fewer workers on the factory lines. Could we afford to spend five dollars, 10 more in our on our labor . That would be a little higher in the component, but we wont have the transportation cost of shipping something from china or korea or indonesia here. Secondarily, you have one advantage in the United States that no other western economy has we have the cheapest natural gas of any nation in the world. If you are a manufacturer that depends on all the forms of natural gas from plastics to fertilizers these are all derivatives of natural gas. Our component costs are cheaper than what it would cost to manufacturer the same item manufacture the same item in germany or even japan or china. We have this big structural advantage over every other manufacturer today. Charlie oil prices 52 today. Larry it may go down to 30 before it goes back up to 70. Charlie what will decide that . Saudi arabia . Larry no. The markets, demand. Opec has less control over the oil markets than theyve ever had. They represent 30 of the overall market. You have to understand the market is priced to the last 2 Million Barrels, the last one Million Barrels. If we had incremental more demand or incremental more supply, that is going to change the overall price for the entire market. That is what is going on. We have a supply and balance. The supply and balance the sixmonth First Six Months of the year is greater than it was last year. All the wells we started to build out last year are now producing. We are not producing as many wells going forward, and that is going to impact prices in two years. Canada already spent huge sums of money on their oilsands. They have 500,000 more barrels of oil this year than they did last year. Then you have mexico, which a year or two years down the road, will see a real surge in production. We see more supply. Now the key is if we have more Global Demand for carbon, we will find an equalization. That equalization, from our longterm statistics, is probably 70 80. That doesnt mean it doesnt touch 30 for a moment. We believe longterm value is 20 or 30 lower than it was last five years. Larry do you believe the keystone Larry Charlie do you believe the Keystone Pipeline is necessary . Larry it is more of a simple today. The fact that we did not do keystone i was not against doing keystone when it was proposed, with the fact that we did not do keystone, we became more active in north dakota in producing more oil. We actually became more selfreliant because we did not do keystone. Charlie not doing keystone had a positive impact. Larry yes. It had a very positive impact to the companies that transport like the trains. Charlie why build it . Larry the question i would raise, we have witnessed over the last few years some very horrid thick horrific accidents with trains transporting oil. If you want to talk about the risk of these oil tankers going through towns, dont you think a pipeline is safer . Im not going to get into a political debate. I did not understand why we vetoed it originally. It to me, it is now more political. Do we need it today . No. My strong view is that north america is the best place to be in the world today. Xcode, canada, and the United States, the fact that we cannot create a regional bowl regional, cooperative Energy System is a shame. Keystone became a symbol more than a fact. Mexico is going to produce a huge amount of pipelines. I dont hear any backlash on their proposed pipeline. Texas has many pipelines now because they are piping oil and natural gas to mexico. This became a political symbol more than a fact. Charlie u. S. Growth. What would help u. S. Growth . The first question is, if we see it at 2. 8 , could you imagine gdp growth in the u. S. Over the next 10 years reaching 4 . Larry sure. Easily. Charlie can i tell you how many people three years ago, four years ago would sit at this table, smart people, and say, i cant imagine u. S. Gdp grew at 4 . Growth at 4 . Larry those same people couldnt imagine is becoming energy independent. Charlie people talk about deflation. What do they mean . I realize its the opposite of inflation, but what does it mean in terms of our economy . Larry inflation means stagnation more than anything else. Lets separate stagnation. I believe we use too broad of a word in deflation. It means everything. I actually believe there is good deflation. You cant tell me that oil prices at 52 versus 100 is not good deflation. To me what deflation represents for me i dont want to talk about other people it may mean stagnation, that we cant get out of this global poorperforming economy. We look to japan as a great example of 20 years of gdp plus or minus 1 . That is the stagnation. Larry in the last quarter charlie in their last quarter didnt they come out of recession . Larry the economy fell over 5 . Last quarter, it grew 2. 3 . One of the big things about abenomics, they have for the first time in 20something years, wages are up 2. 5 year this year. It is patriotic to raise peoples salaries in japan. Deflation is overly used. It means we are going to have a stagnant economy. If we really had true deflation that is really bad for Financial Markets, very bad for financial assets. Deflation is truly one of the worst outcomes of any economy because it really just shows that we are regressing. This concept that we are trying to have our children have a better life than we will, that can never happen in a deflationary environment. Charlie do you have a theory of the market, so that you just look at companies, individual companies or do you primarily look at a macro economy, or do you primarily look at what . Larry im not an investor. I manage investors. I spend all my time focusing on the macro economies. A. L. Out my investors to find what is the best i allow my investors to find out what is the best stock. I believe focusing on the big macro pictures and translating that into individual stocks or Asset Allocations. One of the big reasons why ats are the fastestgrowing component of the capital markets, you dont have to be a stock picker, but you can have exposure. If you believe that india is the place to be, you could buy an etf just for indian stocks. If you believe that pharmaceuticals are going to be the best place to invest, you could buy an etf just for pharmaceutical stocks. You are buying the index. You are buying the whole index. If you really understand the markets, which very few people do, but Asset Allocation probably represents 80 of performance. Unless you have a longterm horizon look at what Warren Buffett has done Warren Buffett has had a 40plusyear horizon of looking at companies picking good Leadership Companies in a good position. He is using topdown analysis of where to go. I think one of the most brilliant moves Warren Buffett data, he believed the u. S. Economy was always strong. During the height of the financial recession in 2009, he buys burlington northern. He possibly could have said, i think oil products should be translated transported in cars, too. If you dont have a long horizon like Warren Buffett, i do believe you need to focus on investing more in indexes. To me, it is a bearish view on the oil markets. Charlie that they are going to go down . Chinas economy is slowing. Br