WEBVTT - Jacobsen: save early, save often

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<v Speaker 1>Global business news twenty four hours a day at Bloomberg

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<v Speaker 1>dot com, the Radio plus Mobile Act and on your radio.

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<v Speaker 1>This is a Bloomberg Business Flash and I'm Karen. Moscow

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<v Speaker 1>stocks are retreating from nine week highs following the SNP

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<v Speaker 1>five hundred's longest winning streak in five months, after worsening

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<v Speaker 1>economic data from Asia reignited concern over the outlook for

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<v Speaker 1>global growth. We check the markets every fifteen minutes throughout

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<v Speaker 1>the trading day on Bloomberg SNP five hundred down eight

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<v Speaker 1>tenths per cent or fifteen points to nineteen eighty five down,

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<v Speaker 1>Jones Industrial Average down six tenths percent or a hundred

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<v Speaker 1>eight points to sixteen thousand, nine hundred sixty five, and

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<v Speaker 1>the nastacs down seven tenths percent or thirty four points

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<v Speaker 1>to forty six seventy four. Ten year treasury of twenty

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<v Speaker 1>three thirty seconds, the yield one point eight two percent

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<v Speaker 1>yield on the two year point eight six percent. Nimax

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<v Speaker 1>screwed oil down two point one percent or seventy nine

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<v Speaker 1>cents to thirty seven on eleven a barrel comax gold

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<v Speaker 1>of three tenths per cent or four dollars to twelve

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<v Speaker 1>sixty eight announced the euro a dollar ten forty one

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<v Speaker 1>again one to Wealth points seven zero to United Continental

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<v Speaker 1>Holding shareholders will nominate airline turnaround artists Gordon Bethune to

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<v Speaker 1>lead a slate of new directors in an effort to

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<v Speaker 1>overhaul the airline's management. We're in Buffett's Berkshire. Hathaway said

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<v Speaker 1>it will sell bonds and part to repay a ten

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<v Speaker 1>billion dollar loan used to finance its purchase of Presision

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<v Speaker 1>cast parts, and Senna, Fie and Mark planned to end

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<v Speaker 1>a two decade long joint venture to sell vaccines in

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<v Speaker 1>Europe as revenue from the product's dwindles. And that's a

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<v Speaker 1>Bloomberg business flash, Tom and Mike Karen, thanks so much.

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<v Speaker 1>Bloomberg Surveillance is Tuesday, but you by marks Paneth l

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<v Speaker 1>LP ranked among the top three forensic accounting firms in

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<v Speaker 1>New York by the New York Law Journal for the

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<v Speaker 1>sixth year in a row. Visit marks Paneth dot com.

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<v Speaker 1>M A r K s pan of P A N

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<v Speaker 1>E t H marks Paneth dot com. We thank them

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<v Speaker 1>looking forward to the seventh year in a row, the

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<v Speaker 1>sixth year in a row that they work in this

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<v Speaker 1>difficult area forensic accounting. Brian jacobs In is a brave soul.

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<v Speaker 1>He's wells Fargo, and he thinks about what to do

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<v Speaker 1>with money, particularly in a single digit world. Brian, you

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<v Speaker 1>beautifully revisit dollar cost averaging, which by definition works within

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<v Speaker 1>greater volatility and a double digit world. Can dollar cost

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<v Speaker 1>averaging work in a lethargic, low return world? Well, thanks

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<v Speaker 1>for having me on, And uh, you know it's not

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<v Speaker 1>that brave to say, let's go with the tried and

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<v Speaker 1>true method of saving early and saving often, which entails

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<v Speaker 1>dollar cost averaging. The problems I think everybody's trying to

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<v Speaker 1>pick a top or pick a bottom as far as

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<v Speaker 1>when they're doing their allocations and living in a binary

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<v Speaker 1>world like that can create a lot of volatility with

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<v Speaker 1>your portfolio. And in fact, if you have a volatile market,

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<v Speaker 1>the dollar cost averaging can really help you sort of

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<v Speaker 1>smooth out the cost basis of your portfolio. Yes, ideally

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<v Speaker 1>we'd like to pick the bottom for getting in, but

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<v Speaker 1>that's somewhat of a pool's errand yeah, but within that

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<v Speaker 1>is the new regime we're in. I mean, if we

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<v Speaker 1>can all agree, we've moved from twenty percent a year

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<v Speaker 1>to twelve percent a year too somewhere self the major

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<v Speaker 1>metric I see as we just have to put aside

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<v Speaker 1>more money. I mean that's what we've heard interview after interview,

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<v Speaker 1>when there's that desperation to put aside more money. Is

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<v Speaker 1>the first order condition to just put it aside? Or

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<v Speaker 1>does d A really work well? I think that the

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<v Speaker 1>first thing you need to do is to increase the

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<v Speaker 1>amount that you are saving to reach those long term

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<v Speaker 1>financial goals because in a low interest rate environment, if

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<v Speaker 1>you think about it's not just a low interest rate environment,

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<v Speaker 1>but we all face the prospect, thankfully of having longer

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<v Speaker 1>life expectancies when we're in retirement, and that increases that

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<v Speaker 1>that liability effectively that you're trying to fund. So you

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<v Speaker 1>have that longer time frame and you have lower interest rates,

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<v Speaker 1>and that means that now you need to save a

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<v Speaker 1>little bit more, which is I think behaviorally what people

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<v Speaker 1>have been doing. We've seen an uptick in the savings

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<v Speaker 1>rates in the United States, so that's encouraging. But for

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<v Speaker 1>investors who are looking at how then to enter the market,

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<v Speaker 1>I think that dollar cost averaging where you're doing it

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<v Speaker 1>every single month or maybe even every single week, if

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<v Speaker 1>you can increase the frequency with which you do it.

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<v Speaker 1>That can really help. So even if you don't have

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<v Speaker 1>a directional market where it's moving up boards moving down,

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<v Speaker 1>even if there's just that volatility where you've got lots

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<v Speaker 1>of ups and lots of downs. Uh, the dollar cock

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<v Speaker 1>averaging can cover over a multitude of market timing sins.

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<v Speaker 1>You mentioned Save early, save often. Let me bring up

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<v Speaker 1>something I was talking about with Jack Boggle a little

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<v Speaker 1>while ago, and that's these firms. Now I realize you're

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<v Speaker 1>at Wells, but firms that suggest you direct deposits some

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<v Speaker 1>of your paycheck into stock funds that they manage, you know, passively.

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<v Speaker 1>Um is the market the best place to save for

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<v Speaker 1>many people, it might not be the best place to save.

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<v Speaker 1>If you aren't necessarily fully funded with what I refer

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<v Speaker 1>to as your your liquidity bucket or your precautionary balance bucket.

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<v Speaker 1>You might want to fill those up first before you

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<v Speaker 1>look at some of those, uh, you know, perhaps riskier

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<v Speaker 1>parts of the market. I think that for a lot

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<v Speaker 1>of people it's somewhat uncomfortable to see the volatility in

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<v Speaker 1>their portfolio if they don't first build up that base

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<v Speaker 1>level of savings that they need to weather certain market storms.

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<v Speaker 1>One of the old classics in financial economics is almost

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<v Speaker 1>if you think about it as building a pyramid, if

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<v Speaker 1>you will, you know, everybody's probably heard of Maslow's hierarchy

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<v Speaker 1>of needs. You've got to take care of that base

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<v Speaker 1>level first, and I think for a lot of people

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<v Speaker 1>you have to have that safety first principle, which is

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<v Speaker 1>make sure you have enough cash balances and precautionary balances

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<v Speaker 1>that you don't have to fixate on the daily ups

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<v Speaker 1>and downs of the market. Brian Jacobson where this wells Fargo,

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<v Speaker 1>Brian um I turned to the Center for Retirement Research,

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<v Speaker 1>Boston College, Alicia Minel and the people up there are

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<v Speaker 1>doing absolutely brilliant, acutely mathematical work on what we're doing

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<v Speaker 1>actually with our money. And one of their great studies

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<v Speaker 1>of the autumn of last year is the basic idea

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<v Speaker 1>as the kids leave home, and it's it's laughable how

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<v Speaker 1>minimal people increase their four oh one case their retirement

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<v Speaker 1>plans when supposedly the tuition bills are done. What is

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<v Speaker 1>your prescription to change retirement savings behavior? Does the government

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<v Speaker 1>have to step in and and just massively increase the

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<v Speaker 1>incentives to go to four oh one k. You know,

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<v Speaker 1>that's a real tricky question because they have increased the

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<v Speaker 1>incentive to go to the four one k, but that

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<v Speaker 1>doesn't really seem to be doing it for a lot

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<v Speaker 1>exactly exactly. I think changing the rule us as far

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<v Speaker 1>as you know, they took a big step forward by

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<v Speaker 1>having a default enrollment as being an option, effectively taking

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<v Speaker 1>care of taking advantage of our laziness. I think that

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<v Speaker 1>might be a good way to perhaps nudge people into

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<v Speaker 1>saving more prudently for their retirement. You can put things

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<v Speaker 1>more on autopilot in terms of having automatic escalations of

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<v Speaker 1>your contributions to your four one K. So I think

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<v Speaker 1>that just allowing plan sponsors to design plans that better

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<v Speaker 1>fit the behavior of plan participants will really go a

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<v Speaker 1>long way to helping people fund their retirements. Otherwise you

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<v Speaker 1>get into a situation where, like it or not, will

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<v Speaker 1>just all have to work a little bit longer in retirement.

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<v Speaker 1>My headline on this, and this comes from a lot

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<v Speaker 1>of work. A major shout out to Peter Orzag and

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<v Speaker 1>his time at Brookings is the bottom half, bottom two

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<v Speaker 1>thirds of the country have to be massively incentivized to

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<v Speaker 1>get going on this. Well, now we've talked about people

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<v Speaker 1>putting their money in the markets, what are you expecting

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<v Speaker 1>from the markets? You had a fairly aggressive call for

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<v Speaker 1>the SMP five this year, and we've had a fairly

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<v Speaker 1>lousy first couple of months. Are you still sticking with that?

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<v Speaker 1>I am, And actually there was a Bloomberg brief that

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<v Speaker 1>just came out this morning where they did a little

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<v Speaker 1>interview a Q and A with me, and that was

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<v Speaker 1>a lot of fun to discuss. And unlike a lot

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<v Speaker 1>of people, I haven't really lowered my targets for the

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<v Speaker 1>SMP five hundred for the balance of the year. I

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<v Speaker 1>still think we could see the SMP five hundred. I'm

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<v Speaker 1>not saying we're going to end the year at those levels.

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<v Speaker 1>I think that you know, trying to pick what's the

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<v Speaker 1>level of the SMP at, you know, the last day

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<v Speaker 1>of the years, why not just ask me what it's

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<v Speaker 1>going to be on you know, June three or some

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<v Speaker 1>other random date. I think that I usually think of

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<v Speaker 1>these things in terms of trading ranges, and I think

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<v Speaker 1>that we could move up to if we get UH.

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<v Speaker 1>There's three key things that we need to see. I

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<v Speaker 1>think we need to see additional policy moves out of

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<v Speaker 1>China to stabilize their economy and their currency. I think

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<v Speaker 1>we need to see the ECB instead of having a

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<v Speaker 1>draggy disappointment like we had in December. I think he

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<v Speaker 1>needs to beat expectations when they meet on March tenth,

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<v Speaker 1>and we need to see the Said be very patient

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<v Speaker 1>when it comes to hiking rates. I think that Leo

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<v Speaker 1>Brainard when she was speaking yesterday, she did a very

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<v Speaker 1>good job of outlining the reasons for why the Said

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<v Speaker 1>should be very cautious when it comes to hiking rates. Brian,

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<v Speaker 1>thank you so much. Brian Jacobson with Wells Fargo with

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<v Speaker 1>something we don't spend enough time on, which is the

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<v Speaker 1>shaky retirement structure of the nation. Mike, I can't say

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<v Speaker 1>enough about Alicia Minnell's work at Boston College at the

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<v Speaker 1>scene our leader on that, and it's it's just it's

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<v Speaker 1>just jaw dropping. I will mince no words. The failure

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<v Speaker 1>of Arissa of seventy four is just stark as can be,

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<v Speaker 1>and you know we can't do enough discussion of that.

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<v Speaker 1>Should bring her on and she can give us advice

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<v Speaker 1>for people who have children who will need to be

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<v Speaker 1>educated and therefore cannot retire. But you know, we came

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<v Speaker 1>out of this, folks with Eisenhower and then Jimmy Carter

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<v Speaker 1>and and and President Reagan and others jumped starting ourselves

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<v Speaker 1>in an organized retirement. It was all based on choice

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<v Speaker 1>and freedom. And remember you got toasters and free flags

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<v Speaker 1>and bagels were served. And for I believe the working

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<v Speaker 1>number Alicia has is of Americans eight out of ten.

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<v Speaker 1>It hasn't worked, and it's just all there is to

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<v Speaker 1>it will somehow. I think we'll be doing more of

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<v Speaker 1>that as we go through two thousand sixteen. Right now

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<v Speaker 1>and pausing. The market has been really a good number

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<v Speaker 1>of days negative on the down then down thirteen points

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<v Speaker 1>in the s, the Doubt under seventeen, the House in

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<v Speaker 1>the Vics eighteen point four zero. One year trailing return

0:10:56.320 --> 0:11:01.000
<v Speaker 1>SMP five under negative four, the Doubt negative five looking

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<v Speaker 1>back twelve months. We are produced by y U Yan

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<v Speaker 1>ken Folio, our global technical director, as Bloomberg surveys