Rose funding for charlie rose has been provided by rose additional funding provided by and by bloomberg, a provider of multimedia news and Information Services worldwide. Captioning sponsored by Rose Communications from our studios in new york city, this is charlie rose. We have political issues that are impacting us, we never dreamed of even two years ago and an uncertain economy worldwide. We still have the middle class. You know having witnessed huge market movements upward and seeing real wealth craigs for some. And to the world. Now. Hard in any one company to talk about that equalization process but at the same time i talk about the divergent world over the last ten years. We have had the biggest rise in middle class income worldwide in mans history so a lot of good things are happening and i think right now most of that was china . It is china, brazil, mexico, it is turkey, but so as you listen to the news you would be confused about all of the good things going on because the dominance is all of this divergence, and the divergence is going to be with us, so we have to overcome some of the negativity and focus on some of the other things going on and some of the things that are quite strong. So where the world is today the world is improving. The u. S. Economy is going to grow a little faster than last year. Probably a little weak never the First Quarter because to the energy change. It is going to put it right around three percent . Lower, perhaps 2. 8, 2. 7. Europe is going to be incrementally better than last year because they finally fixed the banking crisis and they have benefited by a very weakened euro, and they are benefiting by a very accommodative central bank so you are starting to see modest improvement in the european economy and 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 5ish percent a year ago, and now they are going to receive the benefit of this lower oil price. That is going to add at least one percent to gdp to india alone, the reforms that prime nine officer modi is focusing on will probably add one or two percent to gdp so you will see india going from a five percent economy to an eight. Now india china is going through a modest reduction in gdp, if you remember five years ago it was growing at ten percent and now hovering around seven percent, probably going to grow slower this year but china may grow at six, eight, this year so another reduction of two tenths of sixtenths but the up swing of india will overcome all the weakness in china. Because they will produce demand . Or what . Well, just because china and india are both big importers of crude. Yes. Big importers of natural gas alone the commodity costs is down so much they are able to now produce more, produce the consumers who are buying all the kerrkerosene and all the oil are going to be able to benefit and spend more. So this is always a good thing, but the most remarkable thing i think about the world is how technology is in front of our faces, we talk about it and i think the last time i was hear i was talking about the benefits of the United States because of energy and the United States was creating a Million Barrels incrementally above it was two years ago and probably 2 million incrementally over the last few years and this is in front of us and yet oil was staying at 100 and being tested in early 2014 we has isis and the uncertainty in iraq and many issues and yet oil did not spike upward, and then we had the imf talk about Global Growth slowing modestly and you had the breakage of oil. Now, the reason why i found this to be so remarkable the change in the oil market is all driven by technology, and we talk about technology in so many other areas, whether social media or other things. We spend too little time focusing on how technology is changing our every day economy, like gasoline or how we are how it is changing every thing, and i look at this as transformational. This is going to be this new technology and the cost of the new technology is going to create a permanent reduction in the cost of petroleum products. Now, can it can oil go from 50 back to 70 or 80 . Sure. But i dont think we are going to see it back at 100 and mexico is focusing on their reforms now. One or two years out, they are going to be beginning their hydraulic fracking and their energy reform, they are going to produce more oil so we will see more and more oil being produced, so unlike all all the other oil shocks we witnessed in our lifetimes most oil shocks were demand driven, this is oil shock that is supply driven and the supply was created by new technology. And our theme is about how tek following is going to change everything we touch, whether it is our sharing economy i believe there is so much focusni on Companies Like uber how it may change the tech i have, i think charlie that uber may change carni ownership so if you live in new york city or you live in san francisco, for those people, you dont really need to own a car anymore. When you buy a car, it depreciate it is day you buy it you have to pay maintenance and you have to pay for storage and if you have some form of sharing, and this is a really remarkable transformation in society, i think the millennials are not so wrapped up like i was as a young kid to own a car. And i think now the whole concept of sharing a car, whether it is an uber or Something Different in five years, this whole sharing concept, and it started with sharing music on the internet and then we started sharing our hard drive calling it the cloud so, you know, we are just expanding this whole concept of sharing, and now it is touching the consumer, really importantly4zg items and one of the dynamics is, while i am still and remain steadfastly bullish on the United States these technologies are all being created in this country. How are they affected in manufacturing . And what are the some worry about displacing the jobs . Exactly. No question. We are seeing a displacement of jobs, because so many mechanized jobs or jobs are becoming mechanized. I think for educated economies like the United States we are in the next ten years we are going to be a big beneficiary of this too. My worry about jobs in the next ten years it will have a bigger impact in the rising population economies that are just beginning to find a route towards middleni class. These economies have been based and if you talk about the emerging market most emerging markets were based 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 consider my as we talked aboutxd the middle class has grown dramatically there. China to remain competitive now has to start having more efficient factories which means less human labor which means more mechanistic processes. And so i believe the manufacturing process worldwide is going to change, but the engine of this ingenuityco is in the United States and over a long cycle, not a short cycle we will have displacement in the short time and in the long cycle we are going to be creating more and more men and women who have the ability to deal with this technology, to deal with. More leisure time . We are going to need more people working on leisure time, helping people in leisure time as we have an aging population which i talk about the longevity, we are going to have more people helping the aged. So over a long cycle i am not worried about the shortterm displacement the technology does, in this country i am more worried about displacement in other cubs, but nevertheless for those men and women being displaced right now it is a worrisome period of their lives and in some instances it is very difficult to get another job. Now, if you look at the labor statistics in the last two announcements by labor related to our Unemployment Rate actually Unemployment Rates for the High School Graduate only has come down over two percentage points, so the Unemployment Rate is still two high at eight and a half percent but in 2008, 2009 2010 we were hovering at 12 percent so we have seen a dramatic decline in unemployment for the High School Graduate. And if you even look at the breaking up by ethnic group we are seeing a dramatic decline in unemployment for africanamerican and hispanics. Lots of president ial candidates will make their way to your door stop in order to both seek your advice and as well as ask for support. Most of those candidates are trying to articulate a theory of the case about middle class, income inequality about how to make the economy more. Robust. Robust what do you tell them . What is your own theory of what ought to be the best description for american that resonates to those questions . Well, unfortunately, it is time and education, and time and education are longterm solutions, shortterm solutions is creating more education. And also time. As we saw, many for people unemployed two years ago as we have now. What i am saying is time. I think we will see Wage Inflation later this year and the statistics tell me it is harder to tell me educated Young Workers in the job market today. And that is why it is now filtering down. We are reaching lower in training. Thats what the markets tell me today. And i think that is going to start showing up possibly later this year, definitely next year and we will start seeing Wage Inflation and that Wage Inflation is going to start lifting everybody up. We already have seen what 23 23 states who waged minimum wage i dont know if that number is correct but i think that is approximately correct. You are starting to see companies volunteer to raise minimum wage when they have a lot of workers so. I think it is happening. But the statistics do borne out the top one percent have benefited mightily more than the other parts of our society. Obviously you just described things that are happening as a matter of course in terms of Wage Inflation dipping in deeper in terms of people who in retraining them. Yes. What does the government need to do what does the private sector need to do. Do we need tax reform . President obama proposed Free Education in the community schools. Right. Will is a start. If that is approved and it happens to me that is a very powerful beginning but that is honk term trend to reeducate and to retool. I am a big believeco never tax reform, i believe we need to make sure this is a nation where everybody want to come,co getting back to my statement about the neckation of, neck khannationni of. The Positive Side object what is going on now labor represent as smaller component of unit cost in the manufacturing side. We are now seeing more Companies Bringing back manufacturing and on shoring again we have seen in tens of years. What is causingnr that . You dont have the same labor costs we had before . Labor costs labor represent as smaller component of the overall cost of manufacturing because we mechanize it so much. We have fewerni workers on the manufacturing line so could we spend a few dollars more on labor because that would be offset that would be a little higher on that component cost but we wont have a transportation cost the shipping 0 something from china or korea or indonesia here, second date one advantage 0 in the United States no western economy has we have the cheapest natural gas of any nation in the world, so if you are a manufacturing, it depends on all of the forms of natural gas from, you know, from plastic to fertilizers these are all derivatives of natural gas. And so our component costs are cheaper than what it would cost the manufacturing of those same items in germany or even in japan or china. So we he have this big structural advantage over every other manufacturer today. What is the decline of oil prices to 52 i think it was today and it may go up, you suggest it may go down to 30 before it goes to 70 yes. What will decide that . Saudi arabia . No. The markets. The demand. Saudi arabia opec has less control of the oil markets than it ever had. They represent 30 percent of the market of the overall market, you have to understand the market is priced to the last 2 Million Barrels, the last Million Barrels, and so if we have incremental more demand or incremental more supply, that is going to change the overall price for the entire market. And that is what is going on. We have a supply imbalance and then some supply imbalance in the First Six Months of the year is actually greater than it was last year, because of all the wells that we started to build outlast year are now on stream and then are producing. We are not producing as many new wells Going Forward and that will Impact Oil Prices in two years. Canada already spent huge sums of money in their oil sands. That they have 500,000 more barrels of oil this year than last year. And then you have mexico which a year or two years down the row rowedni will start seeing a real surge in production, so we see more supply, now key is if we have more Global Demand for carbon then we will find an equalization and that equalization from our longterm statistics is probably 70co to 80. That doesnt mean it touches 84 or spike up around there but we believe longterm central is probably 20 to 30 lower than it was for the last five years. You believe the Keystone Pipeline is necessary . Certainly not necessary. It is a stipulate boll today. In fact, one thing people dont talk about, the fact that we did not do keystone and i was not against doing keystone when it was originally proposed but the fact that we did not do keystone, no one talks about it, we became more active in north dakota in producing more oil with we became more self reliant because we did not do keystone. So not doing keystone had a positive impact . Yes very positive impact to the companies that transport, like all the train rose so why billion dollars it . Well the question i would raise, we have witnessed over the last few years some very horrific accidents with trains transporting oil. Now if you want to talk about a risk, these oil tankers going through towns, dontni you think a pipeline is safer and environmentally putting all of this oil in a tanker and going through all of these you know, the country side and towns . But i am not going to get into a political debate. I did not understand why we vetoed it originally. To me, it is now more political and do we need it today . No but my big strong view is, north america is the best place to be in the world today and talk about mexico and canada and the United States, the fact that we cannot create a Regional CooperativeEnergy System is a shame, and so keystone became a symbol more than aconi fact. We are you know, mexico is going to produce huge amount of pipelines. And i dont hear any backlash on their proposed pipeline. Texas has many pipelines now because, you know, they are piping oil in and natural gas to mexico. This became a political symbol more than a would help u. S. Growth . And first question is, if we see 2. 8, can you imagine the gdp growthsgrowth in the u. S. Over the next ten years reaching four percent . Sure. Easily. Easily. Can i tell you how many people three years ago, four years ago, five years sat at this table, smart people and said i cant imagine u. S. Gdp growth at four percent. Because of the same people probably could not imagine us becoming energy independent. Yes. So people talk about deflation. Yes. Tell me what they mean and what is the i mean i realize it is the oppositenr of inflation but what does it mean this terms of our Economy Today . Deapplication means stagnation more than anything else. Lets separate stag nation for a second. I believe we use too broad of a world calling it Deval Patrick application because it meansnr everything deflation, i actually believe there is good deflation. Oil prices at 52 versus 100 you cant say that is not good deflation so to me, what deflation represents for me, i dont want to talk about other people, it represents that it may meanconi stagnation, you cant get out of this global this global poorco performing economies. We look to japan as a great example of 20 years of gdp plus or minus one percent. And that is the stagnation that everybody in the last quarter did we come out of recession . They actually had a very strong first part of last year and they raised the consumption tax and the companies who sold over five percent last quarter grew 2. 3. So and one of the big things about economics which is successful they have for the first time in 20 something years wages in japan are up two and a half percent this year. It is patriotic to raise peoples salaries in japan. But so deflation is overly used, it means we are going to have a stagnant economy. And if we really had true a0deflation that is really bad for Financial Markets, very bad for financial assets. Deflation is truly one of the worst out comes of any economy, becapq it really just shows that we are regressing. The whole concept we are trying to have our children to have a better life than we will that can never happen in a deflationary environment. Rose do you have a theory of theni market or so that you look at just look at companies individual companies and make decisions or do you primarily look at a Macro Economy or do you primarily look at what . I spend all of my time because i am not annr investor i manage investments. I spend all my time focusing on the macro economies. I allow my investors to find what is the best stock within a sector, but i believe in the 0 concept of