00:00What are you going to write for Monday? I want to know right away, what's the Monday theme for
00:03Gabby Santos? Well, I'm really interested in this idea about artificial intelligence and what it can
00:09and can't replace. And just listening to the conversation about wealth management,
00:14I think investing is fundamentally a human activity. And on a day like today, where all
00:21of a sudden you have stocks down one and a half, three percent, all of a sudden an allocation that
00:27felt good when things were going well, all of a sudden doesn't. And this is crucial when it comes
00:33to investing, because the ability to actually stay invested is what actually determines success or
00:38failure. Well, that's your hallmark, staying invested. But there's a single sentence in this.
00:42This is a money mustery with Gabriela Santos of J.P. Morgan. And the last sentence is a money
00:47sentence. For a 65-year-old couple, there's a 50 percent chance that one of them will live to age
00:5390. You're looking at me or beyond 35 years in retirement. The solution, saving and investing
01:01more. This is Peter Orszag over at Lazard 101. The biggest problem with ERISA 74 is we all thought
01:08we could have put a little bit of money in and we'd be fine. And you're front and center in
01:12this.
01:12OK, how much do we have to put in? So I think that the important thing is really to plan
01:18ahead.
01:19So it's not to plan to get to retirement, but it's to plan to get to and through retirement.
01:26And so just the time horizon is very different, I think, than people normally think about. It's
01:31having enough wealth and income gains to get you through 35 years plus of a dignified, enjoyable
01:39retirement. And I think this is where sometimes personal behavior can get in the way. Because on
01:46days when the market is down, it may be tempting to say, look, I have this long-term plan. It
01:50all
01:51sounded good at the time, but let me get out. I'll get back in. The market actually tends to have
01:56good
01:56days clustered around the worst days. And if you just missed the 10 best ones over the last 25 years,
02:02you could have cut your return in half. The other thing that's important to do is also to change your
02:07allocation over time. So of course, as you're younger and if you have a certain risk appetite to take
02:14on more risk, but as you get to retirement and through retirement, to really think about that
02:20glide path of the riskier assets coming down and you're more income focused going up.
02:25So I'm glad you mentioned that because I know Tom doesn't want to retire because he's having too
02:29much fun. And we just locked him into Bloomberg money for the next couple of years. How does he
02:33preserve his capital without losing it all to inflation? I mean, the traditional safe plays like
02:38treasuries didn't work in 2022, didn't even work in late March. Gold is like a meme stock.
02:43So they're not reliable. Yeah. So I think the number one thing is this difference between
02:47saving and investing. So cash isn't always king. Actually, cash rates are now below inflation. But
02:56even when they were above inflation, it can only do so much for you. The real growth piece is going
03:02to come from other asset classes. If you look at corporate credit, if you look at equities, if you
03:07look at private markets, then when it comes to the actual keeping up with inflation, I think what's
03:14important to think about is actually a lot of asset classes like equities are nominal asset classes,
03:19right? It's about the volume and the price. So inherently, there's a certain inflation protection
03:24there. But if you think directly about diversifying inflation shocks, that's where bonds can only do so
03:31much for you. They can hedge against recession shocks or demand side shocks, but they're not
03:36very good at inflation shocks or supply side. So that's where we've really thought about diversifying
03:41the diversifiers. There's no one magic solution. I like that. You can look at a variety of things,
03:47whether it's options to directly hedge the downside. Private markets have a lot to offer like real
03:52estate infrastructure, transportation. So there's a lot to do, but it's very different than the post-GFC
03:58period. Diversifying the diversifier. So there's saving and getting through retirement. And there's
04:03also saving for kids college. And you put that in a separate bucket. One year of college, by the way,
04:07is now six digits. I was reading New York Magazine and they said, when you add in all the miscellaneous
04:12expenses, at least 16 schools have already passed the $100,000 mark. And that includes NYU and USC.
04:19I know you just posted something about 529 plans on May 29th. Do we need these plans to do more
04:25than what
04:26they're currently built to do? So it was a fascinating conversation I had around college
04:32savings. It's very top of mind. For me, I have a six-month-old son. Congratulations. Thank you. And
04:37the team, college savings team, was calculating for me how much it could cost in 18 years to send him
04:44to my alma mater pen. And they estimate it could cost $800,000. Okay, that's the heart of the matter.
04:51Per year? No, total. But I mean, like at that point. We're going to rip up the strip now. We're
04:56doing an $800,000 savings plan. Where do you start? Right. And so I think separating, right,
05:03you have your retirement money, which is still really important to continue saving for. What
05:08we see is a lot of families end up actually using their retirement money. They borrow from it because
05:13A. Manson wants to go to some fancy seventh grade school. That's right. And so I think,
05:17ultimately, you can, as soon as you're really expecting a child or even just planning ahead,
05:22you can already set up a separate tax-free college savings account, which accumulates over time. And
05:30that makes a huge difference, even if you put a little bit over time.
05:33Can I say, Huey? Please, Huey.
05:35Is it okay? Gabrielle Santos is here, and she's very good. Arnott and Harvey over at the CFA
05:42are blowing up the growth and value model. We were all weaned on, you're either in growthiness
05:48or you're in value. And they're saying there's only two things left, growth cheap or growth fancy.
05:55Where is value now, the traditional low PE multiple value? Is it dead?
06:03Absolutely not. And I think whether you measure it directly by the price to earnings ratio or not,
06:09I do think valuations or expectations are crucial. I mean, if you think about a day like today,
06:16all of a sudden, you have a bit of a correction in the market. Not because fundamentally anything
06:21has changed, but because expectations were very elevated. Positioning was also very concentrated.
06:27And anything that you have that doesn't meet expectations, all of a sudden becomes an issue.
06:34So we always think about the actual fundamentals, but what is actually implicit in the price?
06:40We're going to bring up this now. This is too important, Gabby, off of your wonderful comments
06:43earlier on life expectancy. But let's just fold it into the Santos 800,000 plan for Ignatius.
06:49Here it is, changing life expectancy. If you're 30-something like Gabby, the answer is you got 81 more
06:56years to figure all this out. A fossil like me, I got like 10 years to figure it out. Maybe
07:0112 or that.
07:02The heart of the matter for JPMorgan Asset Management is ERISA 74 or 1994. It's all changed. We're
07:09living forever with education costs and retirement. And for my son, for example, he should plan on living
07:16100-year life. That was a wonderful book I read. And so how do we plan not just to have
07:21these really
07:21long lives, but to live them in dignity? And that's ultimately to save, but to take that extra step to
07:27actually invest. And I very much agree with what Lizanne was talking about previously,
07:32that there's also a difference between investing and betting. And I think that's where we need to
07:39remember that. Because saving for the long term really involves having very diversified asset
07:46classes, sticking to them and thinking about the ABCs, appreciating fundamentals, but also balancing
07:52with valuations and concentrating on concentration risk.
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