00:00What's the biggest mistake you see in the day-to-day grind at BNY that people are doing
00:05on their retirement? I think the biggest mistake that we see, like we're in the wealth business,
00:12is wanting to trade the allocations or wanting to swap out all the time because of headlines
00:19and essentially trying to pretend that building wealth is the same thing as being a hedge fund
00:24manager. That is the biggest mistake that we see. And that is one of our messages that we always
00:30talk about, which is wealth is built over decades and that trading actually gives you worse returns
00:37than if you did the hypothetical experiment and you missed the five best days of the year,
00:45you underperformed by 5% annualized going forward over the next 20 years.
00:51Do you blame Scarlet Fu and the media? Whoa. No, I don't blame the media because there are plenty
00:56of businesses out there that are hedge funds, that are trading, that are using derivatives,
01:01trying to hedge some near-term risk. But the wealth, building wealth is very, very different.
01:07And building a future where you feel confident is very different than trading. And it's not day
01:13trading and it's not even annual trading. And I think that's the biggest business because
01:16we hear scary stories. We hear tariffs, we hear war, we hear oil at $105,000. And you feel you
01:22need to respond. And you feel like you have to get out, you have to do this. And in the
01:25end,
01:25those typically, 100% of the time, tend to be mistakes. And look at 2008. That was a mistake as
01:32well. When the market started rallying, it was like a rocket to the upside.
01:36So I feel like, I think about the investment products that do really well. They get a lot of
01:40inflows. And you can talk about buffer ETFs. You can talk about these equity income ETFs using
01:45derivatives to generate high yields. Is there a place for that kind of strategy, that kind of
01:49thinking, that kind of approach in your retirement account at all?
01:52So there is a place for that. But I think it's really, I think you just go back to the
01:57simple
01:57thing, which is what are you trying to do? You're trying to grow your capital. End of sentence.
02:03So there's a really easy way to grow capital. And that's equities. And that's being fully
02:07diversified globally in all sizes. And you let it run. And the question you have to ask yourself is,
02:13when am I retiring? What's my, when do I think I'm retiring? And when do I have to start
02:17transitioning towards protecting those gains or something more conservative? But if you're in
02:23the growth phase, it's pretty simple.
02:27Alicia Levine with us writing 24-7. Let's look at the latest note here as we can. The earnings in
02:32CapEx backdrop, well, it remains much stronger than in prior tightening cycles. That's why Alicia Levine
02:38seeing resilience. Inflation-sensitive assets deserve attention. Is a general statement at
02:45BNY, are people too afraid? Are they too much in cash, too much in bills, notes, and bonds of lesser
02:50duration instead of, not the cliche of owning NVIDIA, but just being in the market?
02:56So I'd say people have been worried really since 2020, right? People are just worried a lot because
03:02it's been a very noisy period. A lot of geopolitical events. We see the fracturing of the world trade
03:08system. And we see the building of debt, the $40 trillion. Again, these are the headlines. I'd say
03:13people are worried all the time. I wouldn't say that there's a lot of cash out there because the
03:19cash tends to be pretty, pretty steady, right? We talk about what the money market accounts,
03:25like that's not going to change. Yeah, $8 trillion.
03:26Yeah, but as a percent of the S&P, it's smaller than it was 15 years ago, even though the
03:30absolute
03:31number is higher. We talk about the absolute number, but as a percentage of the S&P, it's
03:35actually smaller. I think the issue is that there's more conversation about why you should
03:42not be trying to trade this, why you should not be going to cash over time. And one down year
03:47in
03:47the market does not make it a reason to get out of the market because we all know that there
03:52are
03:52downturns in markets, and that's fairly normal.
03:55Well, speaking of scary headlines, the $40 trillion in national debt that we have out
04:00there, this idea has been prominent for decades. But even the experts are now talking about it with
04:06this new level of urgency that we haven't heard before. We've, of course, yet to see a policy
04:10response, and it's going to take a lot of pain from either side. So that's why we probably haven't
04:15seen anything. But is this idea of all this debt actionable for individual investors, especially
04:20when it comes to people's exposure to treasuries or to municipal bonds?
04:24So I'd say the actual number, in a sense, is part of the growing story of the growing debt. Like
04:30I feel
04:30every few years we have a panic. It's a big number. It's a round number. It's a zero number or
04:34it's a
04:34five number, like birthdays, and it tends to get people's attention. I'd say for now, like what we're
04:40doing in our client portfolios is really being in the belly of the curve, intermediate to short term
04:45duration, five to ten year. I think there's risk any longer duration here. There is concern that I
04:53think the Fed hiking right now into what is the inflation that's being caused by the increase in oil
05:00prices may not be that effective, actually. And so what kind of inflation hedge can we have in
05:06portfolios? And that's what we're doing in portfolios here. So it's not just like short
05:11and intermediate bonds, but also looking at real assets and infrastructure. You just had a previous
05:16conversation about that as well, because we think we're just in a higher inflationary world since
05:21COVID. The reshoring, the friendshoring, the nationalizing of businesses for critical industries,
05:29whether it's pharmaceuticals or whether it's chips, manufacturing capacity, that's all coming back
05:37to home countries. It's happening in Europe as well. And that is inflationary. And there is no
05:42central bank that's going to hike high enough to squeeze it out to get to 2%. Yeah, to address it.
05:48Can I do a Bloomberg Money Audible? Do it. We can do this with Alicia Levine. I think of everyone
05:53I know
05:53in the game. And there's a few others. I think of Anna Wong out of Chicago as well with Bloomberg.
05:59You have prodigious math abilities to move, you know, folks to get fancy about it, to move not in
06:06the XY space, but to move almost three-dimensionally through this act is profound. And you do it every
06:11day. Alicia, when did math happen for you? Math in girls is a really, really delicate thing.
06:20Not in my world. Math in girls. Love that answer. What was the catalyst? It got Alicia Levine,
06:26math, go. Okay. This is, so math, let me say it. It was arithmetic and that was early. And that
06:35was
06:36like second nature. And I've never thought about arithmetic. It just happened. And that was first
06:41or second grade. And then we had a public school system, New York City public schools, second grade
06:48in Queens. Our teacher decided that we all should be doing fourth and fifth grade math. And she taught
06:53it in second grade. And nobody ever complained. And no one ever said girls couldn't do it. And my
06:59cohort, girls were doing math. And there was no conversation around it. We just did it.
07:04How hard is it going to be to be a math major and be able to find jobs in the
07:08age of AI?
07:09That's an interesting question. I think it's not just math. I think it's a lot of it. I think you're
07:13best
07:13up with a math major right now over many other majors. Because the ability to think critically
07:19and to reframe a question in a different way is very much a mathematical way of thinking,
07:27right? Like if I change this variable, if I change this input, I'm going to get a different output.
07:31That's what math teaches you to do. It teaches you to think.
07:33You've been great about the bond market really not giving us total return over X number of years.
07:40And yet it's still bonds, bonds, bonds. Are you lesser bonds now?
07:45So we are technically underweight bonds given our benchmark allocation. But we do have an
07:51allocation to emerging market debt. And we do have an allocation to high yield,
07:55which has been very additive. It's been the core bond portfolio that's been more challenged than the
08:01EM debt or the high yield. So we do like fixed income. We're just not focused on the treasuries.
08:08You just see it playing a different role. We see it playing a different role. Because
08:11if we're going to be in fixed income, we want to know why we're there. So we have all kinds
08:16of
08:16clients. Some want to keep me rich, the preservation, or I want less risk in my portfolio. And there are
08:21ways of doing that. And so we do different parts of the fixed income market. So we still like fixed
08:26income. It's just not as heavily weighted. And again, it's really where you are in your life cycle.
08:32Are you in the growth phase? Or are you in the consolidation? And I want to keep what I have.
08:37And then we have to allocate differently for that.
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