WEBVTT - Surveillance: Bloomberg Global Business Forum 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Ley. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:28.160 Bloomberg dot Com, and of course, on the Bloomberg It 0:00:28.280 --> 0:00:31.080 got real for Wall Street yesterday to compete five hundred 0:00:31.240 --> 0:00:34.520 equities gapping lower off the back of several headlines around 0:00:34.560 --> 0:00:36.879 the impeachment inquiry. I want to bring in Lorie Calvasino 0:00:36.920 --> 0:00:40.280 of MPC. She heads up the Equity strategy division over there. Laurie, 0:00:40.320 --> 0:00:43.200 what changed for you yesterday in the last twenty four hours, 0:00:43.240 --> 0:00:46.280 if anything at all? Well, look, I think, you know, 0:00:46.400 --> 0:00:49.080 talking to investors about what happened yesterday, I think there's 0:00:49.080 --> 0:00:51.760 still a state of disbelief, you know, questions I was getting, 0:00:51.760 --> 0:00:54.200 are is this real? What will really change? I think 0:00:54.200 --> 0:00:56.720 the street is still digesting this. But you did see 0:00:56.720 --> 0:00:58.880 a negative reaction in the market, and we've thought that 0:00:58.960 --> 0:01:01.800 the stage was set for a pullback anyway before year end. 0:01:02.160 --> 0:01:04.280 This is bringing some of the potential triggers for that 0:01:04.319 --> 0:01:07.759 into focus. Lord the regressor forward is the earnings call 0:01:07.880 --> 0:01:10.520 for October. We spoke with b MP Perry by yesterday. 0:01:10.560 --> 0:01:13.840 They've got an exceptionally cautious view on equities and it 0:01:13.920 --> 0:01:17.560 centers back to earnings. What is your earning UH call 0:01:17.720 --> 0:01:21.839 at RBC and how does it fit into owning equities today? 0:01:22.120 --> 0:01:24.319 So we're at one six five for this year, one 0:01:24.440 --> 0:01:26.720 seventy four for next year. You know, I think that 0:01:27.240 --> 0:01:31.000 the concerns about second half Earnie's expectations have died down 0:01:31.040 --> 0:01:32.600 a little bit. I do think there's going to be 0:01:32.680 --> 0:01:36.240 some teriff adjustment that has to happen generally, though companies 0:01:36.280 --> 0:01:38.399 have been finding a way to sort of deal with 0:01:38.440 --> 0:01:41.200 these issues in the short term. I think the real issue, 0:01:41.200 --> 0:01:43.759 frankly is next year. I think Arnie's expectations are way 0:01:43.760 --> 0:01:45.960 too high. The street is still at ten percent. I'm 0:01:46.000 --> 0:01:48.160 at five and a half percent. I have what I 0:01:48.160 --> 0:01:51.560 think are pretty reasonable assumptions on GDP growth slowing a bit, 0:01:52.120 --> 0:01:54.400 buy back slowing a bit. Those numbers are going to 0:01:54.480 --> 0:01:56.320 have to be cut at some point. My guess as 0:01:56.320 --> 0:01:58.160 we do that before the year is up. Laurie, I 0:01:58.160 --> 0:01:59.840 know you're doing your best to look through the political 0:02:00.080 --> 0:02:01.840 know and I also know you're adding just a little 0:02:01.840 --> 0:02:04.240 bit of sicklicality pulling away just a little bit from 0:02:04.240 --> 0:02:06.760 the defensive sectors in the equity market. Give us a 0:02:06.800 --> 0:02:09.399 little bit more detail on that. So look, I think 0:02:09.440 --> 0:02:11.480 the move in bond fields that we saw, you know, 0:02:11.520 --> 0:02:14.519 sort of late August, early September, and that vicious style 0:02:14.720 --> 0:02:16.720 rotation that we saw was a little bit of a 0:02:16.760 --> 0:02:19.520 wake up call um, and I think we do, you know, 0:02:19.600 --> 0:02:22.080 sort of we have a lot of concerns, especially on 0:02:22.120 --> 0:02:23.920 the tariffs in the short term. You know, I'm not 0:02:24.000 --> 0:02:26.360 convinced that this is necessarily a turning point, as a 0:02:26.360 --> 0:02:28.960 tipping as opposed to a tipping point in the economy. 0:02:29.120 --> 0:02:31.399 That being said, I think we're trying to look through 0:02:31.400 --> 0:02:33.440 the day to day trading. We're trying to think about 0:02:33.680 --> 0:02:35.919 in three or five years, what will we have wished 0:02:36.000 --> 0:02:39.000 we did today, And we simply found we kept talking 0:02:39.040 --> 0:02:42.600 to investors about industrial stocks, we think they're pricing in um, 0:02:42.680 --> 0:02:46.640 pretty onerous outcomes. You're literally back at financial crisis lows 0:02:46.639 --> 0:02:48.959 if you look at a relative pe against the broad market. 0:02:49.440 --> 0:02:51.360 So we think that you should shouldn't be so worried 0:02:51.360 --> 0:02:53.480 about what this quarter is going to look like. Take 0:02:53.520 --> 0:02:55.560 advantage of the fact that they've been derisked and we 0:02:55.600 --> 0:02:57.840 actually think you should be taking money out of consumer 0:02:57.880 --> 0:03:00.400 stocks where all the good news and resilience is baked. 0:03:00.919 --> 0:03:04.760 LORI thank you so much, flour Kelvinsina, RBC Company, Marcus 0:03:04.760 --> 0:03:22.760 here at the Bloomberg Global Business Forum. This is joy John, 0:03:22.800 --> 0:03:24.840 because this is as John tafted in his book a 0:03:24.919 --> 0:03:28.120 number of years ago about stewardship. And what is so 0:03:28.200 --> 0:03:31.600 wonderful here with the descendants of the Mars family of 0:03:31.639 --> 0:03:35.200 Minnesota from years ago is they got together, they had 0:03:35.200 --> 0:03:38.720 the courage to make with Wrigley of Chicago, and I 0:03:38.800 --> 0:03:41.480 remember the emotion of that day. Stephen Badger joins us 0:03:41.600 --> 0:03:45.080 right now of the Mars family and driving forward the 0:03:45.120 --> 0:03:48.680 Mars Wrigley story as well. The company is not Mars Wrigley. 0:03:48.720 --> 0:03:51.720 It's Mars, right, Mars Incorporated. Yes, I mean, it's so 0:03:51.840 --> 0:03:54.480 interesting what you've brought in. You've brought in dog food, 0:03:54.520 --> 0:03:57.760 you've brought in the chewing gunment all that. Are you 0:03:57.880 --> 0:04:01.520 the dominant confectionery player now in the world, Well, we 0:04:01.560 --> 0:04:03.880 would certainly in any given market be the leader. And 0:04:04.160 --> 0:04:05.880 we have some of the leading brands in the world 0:04:06.120 --> 0:04:09.080 with M and M's and Snickers and so forth. See 0:04:09.120 --> 0:04:11.600 how he did that he wa, I can't concentrate. I 0:04:11.640 --> 0:04:14.640 can't concentrate from what we were like growing up in 0:04:14.680 --> 0:04:17.400 a family like that with with that kind of business 0:04:17.480 --> 0:04:20.520 around you. Well, you know, it's a normal family, it 0:04:20.560 --> 0:04:23.920 really is. Uh. You know, in normal families go through 0:04:24.000 --> 0:04:27.640 normal family issues. That being said, we were very clear 0:04:27.839 --> 0:04:31.880 that uh, as we matured that we had a responsibility 0:04:31.920 --> 0:04:34.800 with regards to the business and the associates that we have, 0:04:34.920 --> 0:04:38.640 and and really we're here today at Climate Week because 0:04:38.640 --> 0:04:42.719 of that responsibility. We we see the science that has 0:04:42.760 --> 0:04:44.880 been out for some period of time and which which 0:04:44.920 --> 0:04:47.479 is only getting clear about the threat to the climate 0:04:47.600 --> 0:04:50.799 that uh, there's a real and significant issue that needs 0:04:50.800 --> 0:04:55.400 systemic changed and transformational action to really address the issue. 0:04:55.400 --> 0:04:57.560 And so I think one of the great things that 0:04:57.560 --> 0:04:59.520 that we grew up with and that I carry with 0:04:59.560 --> 0:05:02.600 me today is that sense of responsibility. So I told 0:05:02.600 --> 0:05:04.280 to us about the kind of things you focused on 0:05:04.400 --> 0:05:06.680 the monment. What are you guys standing to address that? Well, 0:05:06.800 --> 0:05:09.320 we've had for many years in place what we call 0:05:09.360 --> 0:05:12.320 are sustainable and the generation plan that we are spending 0:05:12.360 --> 0:05:15.359 a billion dollars on. We've also are spending a billion 0:05:15.360 --> 0:05:18.360 dollars on what we call responsible cocoa sourcing, and we're 0:05:18.400 --> 0:05:21.280 here this week to really advocate for the fact that 0:05:21.320 --> 0:05:24.679 we need to all collectively step up the actions needed 0:05:24.720 --> 0:05:27.719 to address climate change. The issue is only ever more serious. 0:05:27.800 --> 0:05:29.840 I would suggest you're in the cross ears here on 0:05:30.000 --> 0:05:32.520 two items. One is you make small items thing a 0:05:32.560 --> 0:05:36.240 pack of Wrigley's Experiment gum that when my father had 0:05:36.279 --> 0:05:38.960 for years, or you make the fame candy bars which 0:05:39.000 --> 0:05:41.039 got me through three years of my youth. I get 0:05:41.080 --> 0:05:43.320 that for the Mars bar, Folks is the one I 0:05:43.360 --> 0:05:47.320 always went for. You've got the little units of sustainability 0:05:47.600 --> 0:05:49.960 along with the messaging to children. You're here over the 0:05:50.000 --> 0:05:52.600 head constantly about sugar. You know we don't need to 0:05:52.640 --> 0:05:55.680 get into that today, But how do you handle sustainability 0:05:55.720 --> 0:06:00.919 given the responsibility of kids and your small unit product show? Well, 0:06:00.960 --> 0:06:03.440 if you look at the totality of our business, whether 0:06:03.480 --> 0:06:08.120 it's gum or or chocolate, or pet food or other 0:06:08.160 --> 0:06:10.919 brands like Uncle Ben's, all of those products buying large 0:06:10.920 --> 0:06:15.040 rely upon smallholder farms around the world for their ingredients. 0:06:15.120 --> 0:06:18.080 Explain that with a pack of gum. How does that work? Well? 0:06:18.240 --> 0:06:21.920 Mint mint is the key ingredient in one of the 0:06:22.000 --> 0:06:25.200 key ingredients and gum. It's grown by farmers in the US, 0:06:25.240 --> 0:06:28.120 but also by many farmers in India who are struggling 0:06:28.160 --> 0:06:31.480 to deal with the effects of climate change and in 0:06:31.640 --> 0:06:35.560 how they in their growing operations, and so helping them 0:06:35.640 --> 0:06:39.240 actually become more sustainable to generate a greater income and 0:06:39.320 --> 0:06:42.880 also address issues like women's empowerment. Uh IN at the 0:06:42.920 --> 0:06:46.200 local level is key to the ongoing sustainability of products 0:06:46.279 --> 0:06:49.080 like that. You can be incredibly focused on sustainable production 0:06:49.240 --> 0:06:51.000 and then all of a sudden, imagine there's a line 0:06:51.040 --> 0:06:53.960 of banks and a line of investors knocking on the 0:06:54.000 --> 0:06:56.279 door and sounding you you can do it better, you 0:06:56.279 --> 0:06:58.600 can make more money. How do you keep slapping them 0:06:58.600 --> 0:07:01.039 away year after yet? Well, the reality is if we 0:07:01.080 --> 0:07:03.880 don't deal with climate change, of business doesn't face into 0:07:03.880 --> 0:07:06.520 the reality of climate change, there there will not be 0:07:06.600 --> 0:07:09.040 a future as we know it. Uh So for us 0:07:09.080 --> 0:07:11.880 to have a sustainable future, we have to spend money 0:07:12.280 --> 0:07:14.960 on this issue, and that's what we're committed to doing, 0:07:15.040 --> 0:07:17.720 both through the commitments that we're making and trying to 0:07:17.720 --> 0:07:20.480 galvanize the industry, as well as through our own commitments 0:07:20.560 --> 0:07:22.720 with our business. I gotta get to the sensitive topic 0:07:22.760 --> 0:07:25.400 as well, not just about sustainability and climate change, but 0:07:25.440 --> 0:07:29.320 as Tom mentioned, sugar, the war against sugar, thebasity epidemic 0:07:29.520 --> 0:07:31.400 in this country and in other other countries in the 0:07:31.400 --> 0:07:33.960 developed world as well. What you're role going to be 0:07:34.040 --> 0:07:36.440 in all of that, Well, obesity is a global issue 0:07:36.440 --> 0:07:38.840 without a shadow of a doubt, uh. And we're a 0:07:38.880 --> 0:07:42.040 food business and so we have a great responsibility to 0:07:42.160 --> 0:07:45.960 ensure that we're marketing uh and selling our products responsibly. 0:07:46.040 --> 0:07:47.920 We have a marketing code that's been in place for 0:07:47.960 --> 0:07:51.880 many years and we adhere to that strictly. And it's 0:07:51.880 --> 0:07:54.880 all about how we position our products, particularly in terms 0:07:54.880 --> 0:07:57.960 of confectionery, as treats that are are to be enjoyed 0:07:57.960 --> 0:08:01.000 on occasion, as opposed to you know, daily so to speak. 0:08:01.080 --> 0:08:02.960 And what do we do about the kids where it's 0:08:03.000 --> 0:08:06.600 not daily, it's not portion control the corporate messaging, what 0:08:06.640 --> 0:08:10.160 do we do about the X percent of any nations 0:08:10.240 --> 0:08:14.600 kids that don't have that discipline around them. Well, I 0:08:14.640 --> 0:08:17.560 think it's about trying to be clear as to what 0:08:17.680 --> 0:08:19.640 the role of a food business is, what the role 0:08:19.640 --> 0:08:21.720 of government is, and what the role of parents are. 0:08:22.120 --> 0:08:25.400 It's a collective issue and no one actor can solve it. 0:08:25.640 --> 0:08:28.080 But what we can do is we can take responsibility 0:08:28.120 --> 0:08:30.720 for our part, be very clear about that and try 0:08:30.760 --> 0:08:35.200 to galvanize the industry to to step up agree with this. 0:08:35.280 --> 0:08:36.840 And the thing is the parents have to have a 0:08:36.840 --> 0:08:40.040 massive discipline here. So when the Snickers is developed, I 0:08:40.120 --> 0:08:44.120 get half, you get half, and the time we got left, 0:08:44.120 --> 0:08:45.920 I gotta talk. And this is wonderful that you hear 0:08:45.960 --> 0:08:49.320 Steve Badger and we celebrate Friday, folks. I am thrilled 0:08:49.320 --> 0:08:51.880 that Ken Burns will be with us with his magisterial 0:08:52.280 --> 0:08:55.640 effort on national and country music. Everybody in the music 0:08:55.679 --> 0:08:58.400 industry goes thank you, thank you, thank you, Stephen Badger 0:08:58.920 --> 0:09:01.520 for what you did with the House of Wilson Pickett. 0:09:01.600 --> 0:09:06.040 Muscle Shoals is beloved. There's a sound, there's an authenticity there. 0:09:06.080 --> 0:09:08.760 It goes back to him and B Three's did things 0:09:08.840 --> 0:09:11.760 that no one had ever heard before. What was it 0:09:11.840 --> 0:09:15.360 like to put together your wonderful film and Muscle Shoals? Well, 0:09:15.400 --> 0:09:17.520 thank you, You're so kind of reference that it was. 0:09:17.920 --> 0:09:20.320 It was it was incredible, I mean it was. It 0:09:20.360 --> 0:09:23.600 was an emotional journey, a spiritual journey, a lot of 0:09:23.640 --> 0:09:26.800 hard work and it was a great joy and honor 0:09:26.880 --> 0:09:29.000 to be able to engage with the folks in Muscle 0:09:29.000 --> 0:09:31.800 Shoals and the other artists who made that. Lack has 0:09:31.800 --> 0:09:34.720 his wonderful movie Catholic Records of Beyonce, and in it 0:09:34.800 --> 0:09:37.640 they've got the Stones show up in nineteen sixty whatever, 0:09:37.679 --> 0:09:40.360 like Children from England. Did you talk to Mick Jagger 0:09:40.440 --> 0:09:42.439 or any of the Stones about Muscle Shoals. I had 0:09:42.440 --> 0:09:44.960 the great pleasure and opportunity to talk to Keith and 0:09:45.040 --> 0:09:48.959 to Mick uh and they couldn't have been more gracious 0:09:49.040 --> 0:09:52.079 and and um have a greater love for Muscle Shoals 0:09:52.160 --> 0:09:55.040 than you know I then I would have expected. And 0:09:55.040 --> 0:09:57.960 and more more recently in terms of some of the 0:09:58.000 --> 0:10:00.199 heroes and Muscle Shoals, Rick Hall, the dear Rick Hall 0:10:00.240 --> 0:10:02.679 has passed away. Jimmy Johnson just passed away. I didn't 0:10:02.679 --> 0:10:04.480 know that. So to be able to capture those guys 0:10:04.520 --> 0:10:08.040 on film before that transparred was great. Like he's got 0:10:08.040 --> 0:10:11.920 a terrible job, isn't it still on the planet. I mean, 0:10:12.200 --> 0:10:14.360 Chuck Levols been a wonderful friend of the show up 0:10:14.400 --> 0:10:16.599 playing with the Stones keyboards. He's with us once or 0:10:16.600 --> 0:10:21.080 twice a year on himself, and he talks about the room. Sound. 0:10:21.640 --> 0:10:23.560 I mean, it's all about the room, isn't it. It's 0:10:23.600 --> 0:10:27.319 it's a concrete block, right, It's town. It's town, absolutely, Steven. 0:10:27.360 --> 0:10:30.400 A final question in it comes from home. It comes 0:10:30.400 --> 0:10:33.000 from my mom. Oh you're the Good Morning was about 0:10:33.040 --> 0:10:35.400 many decades the Snickers Bar used to be called the 0:10:35.440 --> 0:10:38.760 Marathon Bar in the UK. But we're gonna make that 0:10:38.880 --> 0:10:41.280 change again. Can we have a special edition? I wish 0:10:41.320 --> 0:10:43.600 I could say otherwise, but no. We we moved it 0:10:43.600 --> 0:10:46.079 to Snickers because we're a global business. We operate in 0:10:46.120 --> 0:10:48.760 eighty countries and they're just are some efficiencies that come 0:10:48.760 --> 0:10:55.040 along with Yeah, there's God bless this is this is 0:10:55.040 --> 0:10:57.120 a can we tell company secrets here with Steve bar 0:10:57.200 --> 0:10:59.200 please day carry. I come out of the meeting every 0:10:59.200 --> 0:11:01.240 morning usually was team coming out of my years and 0:11:01.280 --> 0:11:03.880 the only thing that saves me is I wander by 0:11:03.920 --> 0:11:06.840 the desk of a hundred and six mayor of New York. 0:11:07.080 --> 0:11:10.040 There's a small candy thing and it is a Mars 0:11:10.120 --> 0:11:13.880 container and Mike Bloomberg every single morning saves me with 0:11:13.920 --> 0:11:16.000 the TwixT. Well, thank you. We we need we need 0:11:16.040 --> 0:11:18.600 to make sure that he's a wealth stocked going into 0:11:18.600 --> 0:11:20.840 the future, Steven, great to catch up you, thank you, 0:11:20.880 --> 0:11:23.760 thank you, Stephen Badger of the mass Family. Fasciniting conversation. 0:11:23.800 --> 0:11:40.199 Tell how much more coming up? This is an annual visit. 0:11:40.200 --> 0:11:42.079 We're going to crow bar him in here right now. 0:11:42.240 --> 0:11:45.520 Dr Ferguson, of course, his public service at the Federal 0:11:45.559 --> 0:11:50.560 Reserve System serving Sherman Greenspan, and particularly on September eleven, 0:11:50.720 --> 0:11:54.120 his esteemed academics, his public service to the Economic Club 0:11:54.120 --> 0:11:56.120 of New York is should point out. I get to 0:11:56.200 --> 0:12:00.760 enjoy the lunches. Roger Ferguson serves at the Economic uh 0:12:00.040 --> 0:12:03.480 of New York as well. But I really want to 0:12:03.480 --> 0:12:07.840 devote this entire time with Vice Chairman Ferguson to his 0:12:08.000 --> 0:12:11.200 true expertise with t I A and his public leadership. 0:12:12.000 --> 0:12:14.079 And I don't know if it's a number one problem 0:12:14.080 --> 0:12:16.600 in the nation, Roger, but let's just begin by saying, 0:12:16.640 --> 0:12:21.720 retirement in America is in a terrible, terrible state. Good morning. 0:12:22.800 --> 0:12:26.000 We we talked to you a year ago. In my 0:12:26.080 --> 0:12:29.520 frustration is just do something. How close are we to 0:12:29.559 --> 0:12:31.720 a Roger Ferguson. I mean, you're one of the most 0:12:31.720 --> 0:12:34.880 impatient guys I know in the crucible of a meeting. 0:12:35.000 --> 0:12:40.600 How close are we to ferguson immediacy in slow motion Washington? Look, 0:12:40.600 --> 0:12:42.360 I think we're a long way away from it. Frankly, 0:12:42.840 --> 0:12:45.520 on the other hand, there are some green shoots that 0:12:45.559 --> 0:12:47.920 might give us some optimism that we're returning to this 0:12:48.040 --> 0:12:53.240 really big, important, long term issue. So, um, why don't 0:12:53.240 --> 0:12:55.720 I say we're a long way away from it? Every Congressman, 0:12:55.800 --> 0:12:59.200 every Senator must have the constituent saying, look, it was 0:12:59.240 --> 0:13:02.240 all best in engines, but actually it is not worked 0:13:02.320 --> 0:13:06.640 out for anybody of any given age. The incentivizing of 0:13:06.720 --> 0:13:10.160 younger people, the middle age, those confronting the failure of 0:13:10.200 --> 0:13:14.720 Arissa seventy four that do something is front center. Why 0:13:15.080 --> 0:13:18.439 is its slow motion in Washington? It's slow motion Washington 0:13:18.559 --> 0:13:22.280 because this is one of those really long term, slow 0:13:22.440 --> 0:13:27.080 moving challenges. It's not an immediate crisis. Washington, I think 0:13:27.200 --> 0:13:31.360 is wired towards the immediacy of the headline. And this 0:13:31.520 --> 0:13:34.280 challenge is, you know, to use a cliche, a bit 0:13:34.280 --> 0:13:39.200 of a melting iceberg, and society, policymakers, etcetera. All turn 0:13:39.240 --> 0:13:42.360 their attention much more slowly to these slow moving challenges. 0:13:42.880 --> 0:13:45.280 The second reason why it's it's a little bit difficult. 0:13:45.400 --> 0:13:49.200 Is the answers are all difficult. Um, you know, figuring 0:13:49.200 --> 0:13:53.319 out how to fix Social Security means for sure, maybe 0:13:53.440 --> 0:13:57.560 touching retirement age, which people are uncomfortable increasing retirement age 0:13:57.600 --> 0:14:01.240 and may mean cutting benefits for certain of people, may 0:14:01.280 --> 0:14:05.120 mean increasing taxes. All of those are tough calls. Politicians 0:14:05.120 --> 0:14:09.120 are not wired towards making the toughest calls very very quickly. 0:14:09.280 --> 0:14:11.840 So Dr Fergus, just for our listening audience, could you 0:14:11.880 --> 0:14:15.240 scale out what you think is really again kind of 0:14:15.240 --> 0:14:17.960 the scale of the issue, the problem some just some 0:14:18.000 --> 0:14:22.520 broad numbers. Okay, So let me start with my uh friends, 0:14:22.520 --> 0:14:25.120 former colleagues were fed. They've come up with numbers of 0:14:25.280 --> 0:14:29.960 a shortfall and retirement savings of anywhere from four to 0:14:30.120 --> 0:14:35.320 seven trillion dollars. So that's a massive number. Another way 0:14:35.320 --> 0:14:38.280 to think about it is only about half of Americans 0:14:38.280 --> 0:14:43.440 have access to retirement savings at work. So that's the 0:14:43.480 --> 0:14:47.200 second way to think about it is stunning. Third way 0:14:47.200 --> 0:14:49.160 to think about it, it's something we already know, which 0:14:49.240 --> 0:14:52.600 is that you know, more than half of Americans couldn't 0:14:52.640 --> 0:14:57.000 get hold of four hundred dollars for an emergency, and 0:14:57.080 --> 0:15:00.680 so there are lots of different ways to scale this problem. 0:15:00.760 --> 0:15:03.440 As this problem, he's gotten worse, is it? How has 0:15:03.480 --> 0:15:06.080 it evolved over the last couple of generations. Well, it's 0:15:06.080 --> 0:15:09.200 actually gotten more. So Here's here's what's happened. For our 0:15:09.240 --> 0:15:13.040 grandparents generation. The vast majority of them had of retirement 0:15:13.080 --> 0:15:17.760 plan at work called a defined benefit plan. Now only 0:15:17.800 --> 0:15:21.440 about ten of Americans have a defined benefit plan. So 0:15:21.480 --> 0:15:24.560 the vast majority of Americas now defend on a so 0:15:24.680 --> 0:15:28.520 called defined contribution plan. And that has pushed risk from 0:15:28.760 --> 0:15:32.040 the company to the individuals at a point when we 0:15:32.080 --> 0:15:35.000 know individuals have a low level of financial literacy, so 0:15:35.400 --> 0:15:37.800 the problem has become more challenging. If you're just joining us, 0:15:37.880 --> 0:15:40.280 the former vice Chairman of the Federal Reserve System, Roger 0:15:40.320 --> 0:15:42.640 Ferguson with us an annual visit here at the Bloomberg 0:15:42.640 --> 0:15:45.480 Global Business Forum, and we're thrilled to focus on his 0:15:45.640 --> 0:15:50.000 true expertise and leadership in America's retirement crisis. The Times 0:15:50.040 --> 0:15:54.000 of London two weeks ago Roger the business section, the 0:15:54.040 --> 0:15:57.720 big headline the annuity. You get a retirement pot, you 0:15:57.760 --> 0:15:59.840 buy a life annuity for you and your wife whatever. 0:16:00.360 --> 0:16:03.120 The annuity at a number of four point one percent. 0:16:03.640 --> 0:16:07.160 We are nowhere near the proper actual assumption, are we 0:16:07.400 --> 0:16:10.320 That's exactly right. Uh, And that's yet another thing that 0:16:10.360 --> 0:16:13.040 makes us challenging. So in an interest a low interest 0:16:13.120 --> 0:16:16.880 rate environment, lower for longer, may be lower forever. There's 0:16:16.920 --> 0:16:20.280 no doubt that generating the returns have become more difficult. 0:16:20.760 --> 0:16:25.640 There's a solution of that, which is a broadly diversified portfolio. Right, 0:16:25.680 --> 0:16:28.080 And so people think of retirement is being driven by 0:16:28.360 --> 0:16:32.000 fixed income and think of low interest rates. But the 0:16:32.040 --> 0:16:34.720 reality is a really good retirement will be driven by 0:16:34.920 --> 0:16:40.280 fixed income, by alternatives, by equities, thereby giving a chance 0:16:40.320 --> 0:16:43.720 to get to a much more sustainable retirement income. And 0:16:43.760 --> 0:16:46.080 so one has to think about, you know, the basic 0:16:46.200 --> 0:16:49.800 rules of investing apply for retirement as well as anything else, 0:16:49.840 --> 0:16:53.160 and diversification is one of those basic rules which will 0:16:53.200 --> 0:16:56.320 help overcome the challenge that we're currently seeing. So as 0:16:56.360 --> 0:16:58.360 we think about, you know, thinking about some of the 0:16:58.680 --> 0:17:02.040 solution to this grand problem, which is so complex, it 0:17:02.160 --> 0:17:04.200 sounds like it might be one of those situations where 0:17:04.200 --> 0:17:08.359 it's some combination of government, of corporate, the private sector, 0:17:08.440 --> 0:17:11.080 of educating the individual. I mean, it seems like it's 0:17:11.600 --> 0:17:13.600 it can't just be the government stepping in and no, no, 0:17:13.880 --> 0:17:19.680 And the reality is to rethink retirement involves three separate components. UH. 0:17:20.080 --> 0:17:23.760 Government for sure, because the government drives social security, and 0:17:23.800 --> 0:17:26.480 here we need to think about reforming social security. The 0:17:26.480 --> 0:17:30.280 Social Security administrators have told us that the trust fund 0:17:30.640 --> 0:17:34.000 UH will be pretty much out of out of gas, 0:17:34.040 --> 0:17:39.600 so to speak, UH, completely utilized by the twenty seventeen 0:17:39.960 --> 0:17:43.880 I'm sorry, something like that, maybe a little further out. 0:17:44.520 --> 0:17:47.560 And so we do need government solutions in that space. UM. 0:17:47.600 --> 0:17:50.080 The government can also help by setting up rules and 0:17:50.119 --> 0:17:54.000 regulations that help create more savings in the private sector. 0:17:54.280 --> 0:17:57.040 So there's an act now in Congress called the Secure 0:17:57.280 --> 0:18:00.919 Act has been passed in the House, has passed the Senate. 0:18:01.440 --> 0:18:04.080 That would be very helpful in creating more safe and 0:18:04.080 --> 0:18:06.720 secure retirement. So we need to get government acting in 0:18:06.800 --> 0:18:09.280 that way to increase the private sector. Can I ask 0:18:09.280 --> 0:18:12.240 a dumb question of the day, I do I do 0:18:12.440 --> 0:18:16.280 and ariska define contribution. Whatever the program is, I get 0:18:16.480 --> 0:18:19.480 immediate tax savings which can build the growth and down 0:18:19.520 --> 0:18:22.439 the road, I end up paying the taxes due to 0:18:22.480 --> 0:18:25.639 the government. Why does the government, Why are they so 0:18:25.760 --> 0:18:29.200 reticent to let anyone put more money into their account 0:18:29.480 --> 0:18:31.800 if they know they're going to get the money eventually, well, 0:18:31.800 --> 0:18:33.600 you put your finger on it, it's actually the time 0:18:33.680 --> 0:18:39.240 value of money. And so they're concerned that broke. Look 0:18:39.280 --> 0:18:41.480 the laying trillions of dollars and taxes until all of 0:18:41.560 --> 0:18:43.479 us get to be seventy or seventy two. It's not 0:18:43.560 --> 0:18:45.600 to be taken lightly when you think about the state, 0:18:46.359 --> 0:18:49.280 the fiscal situation United States, and so you know, the 0:18:49.320 --> 0:18:53.520 tax view around retirement has always been we're willing to 0:18:53.600 --> 0:18:57.320 let you differ, but until a certain age, and then 0:18:57.400 --> 0:18:59.800 you know, it's seventy two and a half. They required 0:18:59.840 --> 0:19:01.879 the distributions in part to make sure they get the 0:19:01.880 --> 0:19:04.200 taxes paid where they're going to get the Texas paid 0:19:04.200 --> 0:19:07.040 down the road. We've got experts at what what number 0:19:07.640 --> 0:19:12.959 of people across the broad American wage paying wtube landscape 0:19:13.280 --> 0:19:17.280 are below their actual assumption. It's a big statistic. It's 0:19:17.320 --> 0:19:19.919 a big statistic at this stage, What where is the 0:19:20.119 --> 0:19:23.040 urgency if there's no cost to the government other than 0:19:23.080 --> 0:19:26.000 as you correctly state, the time value of money. That's 0:19:26.080 --> 0:19:28.040 that's part of the issue. And you know, the urgency 0:19:28.080 --> 0:19:30.720 is starting to come from the citizen to me. As 0:19:30.760 --> 0:19:33.480 we all get older and older, and we start to 0:19:33.520 --> 0:19:36.880 recognize the insecurity that we face around retirement, and that's 0:19:36.880 --> 0:19:38.800 going to drive what happens in more. I mean, Paul, 0:19:38.840 --> 0:19:42.520 the number of people I know older than me who 0:19:42.600 --> 0:19:48.320 are seriously looking to move abroad because they can't afford 0:19:48.400 --> 0:19:53.000 to retire here. Those are tangible numbers for people thinking. 0:19:53.240 --> 0:19:56.080 You know, obviously it's always been Florida, but even North Carolina, 0:19:56.200 --> 0:19:59.040 low tax states, things like that. But I haven't heard 0:19:59.119 --> 0:20:03.359 they're moving to Pan Costa Rica. Thailand is very popular. Yeah, 0:20:03.400 --> 0:20:10.080 you know Italy, I mean Rogers, you know, this is 0:20:10.160 --> 0:20:12.680 very popular, right, These low income states are very very popular. 0:20:12.800 --> 0:20:15.720 What is the study that you have researched at T. I. A. 0:20:15.840 --> 0:20:19.560 Kraft about across different death stiles of the American population. 0:20:20.240 --> 0:20:22.200 If you say you can put in all you want, 0:20:22.320 --> 0:20:24.960 do they put in more money? The answer is it 0:20:25.040 --> 0:20:27.760 depends um. And so what we see for the younger 0:20:27.760 --> 0:20:32.760 individuals is because of the student loan and students issues, 0:20:33.240 --> 0:20:37.399 they are delaying retirement and delaying putting money into retirement. 0:20:38.040 --> 0:20:41.320 Middle income folks tend to be doing better, and obviously 0:20:41.359 --> 0:20:46.280 the older individuals are staying with a frenzy, perhaps because 0:20:46.280 --> 0:20:49.000 they started too late um. And so what this is 0:20:49.000 --> 0:20:52.080 all ending up with is another study that we did 0:20:52.080 --> 0:20:55.720 recently that shows is the degree of financial insecurity is 0:20:55.920 --> 0:20:58.119 very high. So we surveyed a bunch of folks on 0:20:58.119 --> 0:20:59.960 only about a third of them said they were feeling sick. 0:21:00.040 --> 0:21:03.640 You're about their retirements. We've got people listening worldwide. Al 0:21:03.720 --> 0:21:05.639 from New Jersey emails in and says, when you talk 0:21:05.720 --> 0:21:07.800 to about something that matters, because they Al's got his 0:21:07.880 --> 0:21:11.920 retirement all set up. I believe Vice Chairman Ferguson I 0:21:12.200 --> 0:21:14.360 there's any number of ways to go with a beleaguer 0:21:14.440 --> 0:21:17.959 Chairman Powell, the criticism to the FED and FED independence, 0:21:17.960 --> 0:21:20.800 we've got the repo uproar of the recent days. I 0:21:20.840 --> 0:21:22.920 want to talk to you about something that you're quite 0:21:22.960 --> 0:21:25.840 good at. And this is off of your steam work 0:21:25.880 --> 0:21:30.320 at Harvard, which is the experiment of negative interest rates. 0:21:30.359 --> 0:21:33.200 This wasn't This wasn't on the chalkboard at Harvard, was it. 0:21:33.359 --> 0:21:35.800 This was not on the chalkboard at Harvard, nor wasn't 0:21:35.840 --> 0:21:37.639 on the chalkboard at m I T on the University 0:21:37.680 --> 0:21:42.240 of Chicago. So they we are in uncharted territory. UH 0:21:42.400 --> 0:21:46.560