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Speaker 1: This is a Bloomberg Business Flash and I'm Karen. Moscow
Speaker 1: stocks are retreating from nine week highs following the SNP
Speaker 1: five hundred's longest winning streak in five months, after worsening
Speaker 1: economic data from Asia reignited concern over the outlook for
Speaker 1: global growth. We check the markets every fifteen minutes throughout
Speaker 1: the trading day on Bloomberg SNP five hundred down eight
Speaker 1: tenths per cent or fifteen points to nineteen eighty five down,
Speaker 1: Jones Industrial Average down six tenths percent or a hundred
Speaker 1: eight points to sixteen thousand, nine hundred sixty five, and
Speaker 1: the nastacs down seven tenths percent or thirty four points
Speaker 1: to forty six seventy four. Ten year treasury of twenty
Speaker 1: three thirty seconds, the yield one point eight two percent
Speaker 1: yield on the two year point eight six percent. Nimax
Speaker 1: screwed oil down two point one percent or seventy nine
Speaker 1: cents to thirty seven on eleven a barrel comax gold
Speaker 1: of three tenths per cent or four dollars to twelve
Speaker 1: sixty eight announced the euro a dollar ten forty one
Speaker 1: again one to Wealth points seven zero to United Continental
Speaker 1: Holding shareholders will nominate airline turnaround artists Gordon Bethune to
Speaker 1: lead a slate of new directors in an effort to
Speaker 1: overhaul the airline's management. We're in Buffett's Berkshire. Hathaway said
Speaker 1: it will sell bonds and part to repay a ten
Speaker 1: billion dollar loan used to finance its purchase of Presision
Speaker 1: cast parts, and Senna, Fie and Mark planned to end
Speaker 1: a two decade long joint venture to sell vaccines in
Speaker 1: Europe as revenue from the product's dwindles. And that's a
Speaker 1: Bloomberg business flash, Tom and Mike Karen, thanks so much.
Speaker 1: Bloomberg Surveillance is Tuesday, but you by marks Paneth l
Speaker 1: LP ranked among the top three forensic accounting firms in
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Speaker 1: looking forward to the seventh year in a row, the
Speaker 1: sixth year in a row that they work in this
Speaker 1: difficult area forensic accounting. Brian jacobs In is a brave soul.
Speaker 1: He's wells Fargo, and he thinks about what to do
Speaker 1: with money, particularly in a single digit world. Brian, you
Speaker 1: beautifully revisit dollar cost averaging, which by definition works within
Speaker 1: greater volatility and a double digit world. Can dollar cost
Speaker 1: averaging work in a lethargic, low return world? Well, thanks
Speaker 1: for having me on, And uh, you know it's not
Speaker 1: that brave to say, let's go with the tried and
Speaker 1: true method of saving early and saving often, which entails
Speaker 1: dollar cost averaging. The problems I think everybody's trying to
Speaker 1: pick a top or pick a bottom as far as
Speaker 1: when they're doing their allocations and living in a binary
Speaker 1: world like that can create a lot of volatility with
Speaker 1: your portfolio. And in fact, if you have a volatile market,
Speaker 1: the dollar cost averaging can really help you sort of
Speaker 1: smooth out the cost basis of your portfolio. Yes, ideally
Speaker 1: we'd like to pick the bottom for getting in, but
Speaker 1: that's somewhat of a pool's errand yeah, but within that
Speaker 1: is the new regime we're in. I mean, if we
Speaker 1: can all agree, we've moved from twenty percent a year
Speaker 1: to twelve percent a year too somewhere self the major
Speaker 1: metric I see as we just have to put aside
Speaker 1: more money. I mean that's what we've heard interview after interview,
Speaker 1: when there's that desperation to put aside more money. Is
Speaker 1: the first order condition to just put it aside? Or
Speaker 1: does d A really work well? I think that the
Speaker 1: first thing you need to do is to increase the
Speaker 1: amount that you are saving to reach those long term
Speaker 1: financial goals because in a low interest rate environment, if
Speaker 1: you think about it's not just a low interest rate environment,
Speaker 1: but we all face the prospect, thankfully of having longer
Speaker 1: life expectancies when we're in retirement, and that increases that
Speaker 1: that liability effectively that you're trying to fund. So you
Speaker 1: have that longer time frame and you have lower interest rates,
Speaker 1: and that means that now you need to save a
Speaker 1: little bit more, which is I think behaviorally what people
Speaker 1: have been doing. We've seen an uptick in the savings
Speaker 1: rates in the United States, so that's encouraging. But for
Speaker 1: investors who are looking at how then to enter the market,
Speaker 1: I think that dollar cost averaging where you're doing it
Speaker 1: every single month or maybe even every single week, if
Speaker 1: you can increase the frequency with which you do it.
Speaker 1: That can really help. So even if you don't have
Speaker 1: a directional market where it's moving up boards moving down,
Speaker 1: even if there's just that volatility where you've got lots
Speaker 1: of ups and lots of downs. Uh, the dollar cock
Speaker 1: averaging can cover over a multitude of market timing sins.
Speaker 1: You mentioned Save early, save often. Let me bring up
Speaker 1: something I was talking about with Jack Boggle a little
Speaker 1: while ago, and that's these firms. Now I realize you're
Speaker 1: at Wells, but firms that suggest you direct deposits some
Speaker 1: of your paycheck into stock funds that they manage, you know, passively.
Speaker 1: Um is the market the best place to save for
Speaker 1: many people, it might not be the best place to save.
Speaker 1: If you aren't necessarily fully funded with what I refer
Speaker 1: to as your your liquidity bucket or your precautionary balance bucket.
Speaker 1: You might want to fill those up first before you
Speaker 1: look at some of those, uh, you know, perhaps riskier
Speaker 1: parts of the market. I think that for a lot
Speaker 1: of people it's somewhat uncomfortable to see the volatility in
Speaker 1: their portfolio if they don't first build up that base
Speaker 1: level of savings that they need to weather certain market storms.
Speaker 1: One of the old classics in financial economics is almost
Speaker 1: if you think about it as building a pyramid, if
Speaker 1: you will, you know, everybody's probably heard of Maslow's hierarchy
Speaker 1: of needs. You've got to take care of that base
Speaker 1: level first, and I think for a lot of people
Speaker 1: you have to have that safety first principle, which is
Speaker 1: make sure you have enough cash balances and precautionary balances
Speaker 1: that you don't have to fixate on the daily ups
Speaker 1: and downs of the market. Brian Jacobson where this wells Fargo,
Speaker 1: Brian um I turned to the Center for Retirement Research,
Speaker 1: Boston College, Alicia Minel and the people up there are
Speaker 1: doing absolutely brilliant, acutely mathematical work on what we're doing
Speaker 1: actually with our money. And one of their great studies
Speaker 1: of the autumn of last year is the basic idea
Speaker 1: as the kids leave home, and it's it's laughable how
Speaker 1: minimal people increase their four oh one case their retirement
Speaker 1: plans when supposedly the tuition bills are done. What is
Speaker 1: your prescription to change retirement savings behavior? Does the government
Speaker 1: have to step in and and just massively increase the
Speaker 1: incentives to go to four oh one k. You know,
Speaker 1: that's a real tricky question because they have increased the
Speaker 1: incentive to go to the four one k, but that
Speaker 1: doesn't really seem to be doing it for a lot
Speaker 1: exactly exactly. I think changing the rule us as far
Speaker 1: as you know, they took a big step forward by
Speaker 1: having a default enrollment as being an option, effectively taking
Speaker 1: care of taking advantage of our laziness. I think that
Speaker 1: might be a good way to perhaps nudge people into
Speaker 1: saving more prudently for their retirement. You can put things
Speaker 1: more on autopilot in terms of having automatic escalations of
Speaker 1: your contributions to your four one K. So I think
Speaker 1: that just allowing plan sponsors to design plans that better
Speaker 1: fit the behavior of plan participants will really go a
Speaker 1: long way to helping people fund their retirements. Otherwise you
Speaker 1: get into a situation where, like it or not, will
Speaker 1: just all have to work a little bit longer in retirement.
Speaker 1: My headline on this, and this comes from a lot
Speaker 1: of work. A major shout out to Peter Orzag and
Speaker 1: his time at Brookings is the bottom half, bottom two
Speaker 1: thirds of the country have to be massively incentivized to
Speaker 1: get going on this. Well, now we've talked about people
Speaker 1: putting their money in the markets, what are you expecting
Speaker 1: from the markets? You had a fairly aggressive call for
Speaker 1: the SMP five this year, and we've had a fairly
Speaker 1: lousy first couple of months. Are you still sticking with that?
Speaker 1: I am, And actually there was a Bloomberg brief that
Speaker 1: just came out this morning where they did a little
Speaker 1: interview a Q and A with me, and that was
Speaker 1: a lot of fun to discuss. And unlike a lot
Speaker 1: of people, I haven't really lowered my targets for the
Speaker 1: SMP five hundred for the balance of the year. I
Speaker 1: still think we could see the SMP five hundred. I'm
Speaker 1: not saying we're going to end the year at those levels.
Speaker 1: I think that you know, trying to pick what's the
Speaker 1: level of the SMP at, you know, the last day
Speaker 1: of the years, why not just ask me what it's
Speaker 1: going to be on you know, June three or some
Speaker 1: other random date. I think that I usually think of
Speaker 1: these things in terms of trading ranges, and I think
Speaker 1: that we could move up to if we get UH.
Speaker 1: There's three key things that we need to see. I
Speaker 1: think we need to see additional policy moves out of
Speaker 1: China to stabilize their economy and their currency. I think
Speaker 1: we need to see the ECB instead of having a
Speaker 1: draggy disappointment like we had in December. I think he
Speaker 1: needs to beat expectations when they meet on March tenth,
Speaker 1: and we need to see the Said be very patient
Speaker 1: when it comes to hiking rates. I think that Leo
Speaker 1: Brainard when she was speaking yesterday, she did a very
Speaker 1: good job of outlining the reasons for why the Said
Speaker 1: should be very cautious when it comes to hiking rates. Brian,
Speaker 1: thank you so much. Brian Jacobson with Wells Fargo with
Speaker 1: something we don't spend enough time on, which is the
Speaker 1: shaky retirement structure of the nation. Mike, I can't say
Speaker 1: enough about Alicia Minnell's work at Boston College at the
Speaker 1: scene our leader on that, and it's it's just it's
Speaker 1: just jaw dropping. I will mince no words. The failure
Speaker 1: of Arissa of seventy four is just stark as can be,
Speaker 1: and you know we can't do enough discussion of that.
Speaker 1: Should bring her on and she can give us advice
Speaker 1: for people who have children who will need to be
Speaker 1: educated and therefore cannot retire. But you know, we came
Speaker 1: out of this, folks with Eisenhower and then Jimmy Carter
Speaker 1: and and and President Reagan and others jumped starting ourselves
Speaker 1: in an organized retirement. It was all based on choice
Speaker 1: and freedom. And remember you got toasters and free flags
Speaker 1: and bagels were served. And for I believe the working
Speaker 1: number Alicia has is of Americans eight out of ten.
Speaker 1: It hasn't worked, and it's just all there is to
Speaker 1: it will somehow. I think we'll be doing more of
Speaker 1: that as we go through two thousand sixteen. Right now
Speaker 1: and pausing. The market has been really a good number
Speaker 1: of days negative on the down then down thirteen points
Speaker 1: in the s, the Doubt under seventeen, the House in
Speaker 1: the Vics eighteen point four zero. One year trailing return
Speaker 1: SMP five under negative four, the Doubt negative five looking
Speaker 1: back twelve months. We are produced by y U Yan
Speaker 1: ken Folio, our global technical director, as Bloomberg surveys