Jul 29, 2013|
Tom Anderson, Chief Investment Officer at Boston Private Bank
Transcript - Not for consumer use. Robot overlords only. Will not be accurate.
Morning to England and welcome -- -- exchange came here and -- Armstrong with you. Jim Weaver a special -- we do I feel especially far from you this summer between -- Tommy Anderson is with us this morning he's the chief investment officer. At Boston private bank time it's great to have you with expert on the news -- -- thanks for having me today so far does it seem like what it sounds like. You know I always wonder visually it seems like what it sounds like it's so much better -- He's all the right -- we're like the top 1% of what radio people normally look like -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- it pretty good day for stocks are -- I was up 45 points we got some housing data and Tom and are gonna dig into that. But housing. Across the country up about 12%. And I actually have the numbers in Boston how much is the Boston housing -- year -- bureau for yourself. We'll dig in to all of that but Jim I came across a study in -- from the Bureau of Labor Statistics. And it reflects that. You know our generation. Is not working nearly as much as our parents generation so my question for you is what did your father do for a living. Well my father was a regional manager of life insurance company he -- it -- and he did not work for solely by eating infected that was a sixty hour week job -- was on the road a lot. One he traveled a lot. But that these statistics to me. Are surprising. But at the same time I think there's a real logical reason behind -- your dad retired debt retired. About. We'll probably about 78 years ago bulky -- fairly recently could write the number from DL lesson -- correct me if I'm wrong but it said. Back in 1964. The average workweek was 38 hours and it has slipped to under 34. Right in 2013. Yeah. Making making it very clear that that's the average -- you know there are certainly people out there or just crazy but I think. A lot of it has to do with the fact so many people are working part time though it's a lot of part time workers. And in a lot of households that's mom yup. Mom who's got that part time job that may be after the kids go back to school and she wants to work a few hours during you know that the nine months at -- school -- kind of think. So that's accounting for people being in the workforce but I'm not working that full four I wonder also. If it has something to do with employers saying gee if we if we hire somebody park town we don't have to get my pension. You don't have to give -- health insurance not a given that all the fringe benefits right. So let's keep let's let's hire this little more per hour rather than -- eighteen dollars an -- -- pay 22 dollars and can afford to do that. But -- gonna work three days a week in early and work part time basis. That we weakening lead health care all the French teacher Kirk's ankle along with the planet but I. It's a staggering number to think that in 1964. The average hours worked were 38. Hours per week. And now it's the use 38 point two to be exact. And now it's 33 point seven hours worked per week and -- me -- -- a bit surprised it was 38. Hours back in 64 I'm like it was more -- out of -- -- working more than -- we all those situations you know I think of people working blog like -- -- in the investment business. I can guarantee I I I don't know Tom and first time I've met him. But he's the chief investment officer at Boston private bank. Never it was last time you worked less than sixty hours. Besides occasionally it's been all along pastures and it be just the nature of his job to rate is minimal. Ten to twelve hours a day Monday through Friday when the markets are open. And then. It's just the nature of that beast and it it and I think that's seen this ad for anybody who self employed if you're running a business. Definitely you're you're you're not working well and there's no set hours and network. World that's just your working until the -- -- you know I think it's interesting because we live such a harried life at this point people would tell you they're more stressed now than they've ever been in their lives. And more -- than their parents work. And yet we're working -- hours during the -- -- and maybe that's reflective to again of the economy at times are just tougher and more work in -- hours and that's not cut it doesn't add up anyway does lead to our question of the day in it that it does the Bureau of Labor Statistics is reporting as we said that the effort to work week is dropped from 38 hours a week back -- 6434. Hours that we -- 2013. So. Do you work last that your parents can text us at 6868. Or can answer that question on FaceBook. And it's these financial exchange on FaceBook and you just might win for will watching tickets if you answer the questions for. Atomic did wanna talk to we're gonna have Gary Schilling joining us in a few minutes but wanted to talk to you about the job market Lou what what's your perception. Of unemployment I have a few. Little tidbits that it I'm I'm getting a little bit of information that leads me to believe we're gonna see a decline in the rate of unemployment. During the next nine months but I'm dying to hear what you have to say. Well when we look at the markets and and as we're building portfolios for clients and I think that there are some very key drivers yeah. To what's what's leading to an improving economy in and improving housing looked -- them sounds and we'll talk about that a little bit yeah later. But employment is a huge factor here now we're seeing -- it's tied to housing is not it is tied to housing. It's tied to we have this can. Be consistent. Slow drop in jobless claims -- generally week after week after week. Unemployment has been falling very gradually some of that is from a drop in the participation rate but overall. It's improving. And you're actually seeing some reductions as well in. The number of long term unemployed so that's in the and that's -- new phenomenon so that's all very powerful. To these are these are big drivers in in helping the economy continued to get it to get better. And actually be a big part of the calculus the Federal Reserve uses when they're factoring in what their next steps are on tapering and on -- and -- Well anyway here's what we have we've got Gary shilling. From Bloomberg he's the president of A Gary shilling. He's the author of the book the age of deleveraging investment strategies for a decade of slow growth and into deflation that's the name of his book. He joins us. At about 1030. QB he'll be coming on with -- us. To talk to us about what's going on in the unemployment market. When we return we're gonna take a look at the housing numbers and we're gonna talk about the Federal Reserve what's going on over at the Federal Reserve. Maybe you know to be AD can you tell us that the next fed president's going to be that's coming up next on the financial exchange came we're getting a robust response to our question of the day which is the Bureau of Labor Statistics. Is reporting that the average work week. Has dropped from 38 hours a week in 1964. All the way down to 34 hours per week in the year 2013. My question do you folks is do you work less or do you work more than your parents did text us your answer at 68680 or answers on FaceBook. We are the financial exchange on FaceBook Jim what do you on the -- -- and gets so much I can't believe it I work one full time job as does my wife and that I work two part time jobs. Working much more than my parents ever did and 64 years old this is 50 wait he says. I'm retired collecting social security and working forty plus hours is an independent contractor something my parent. Never did again. And it goes on on very we've got a lot of like this up if if this is what's so interesting is that the people who. Respondent. And most people I know you are working more than forty hours they're working a lot of hours. You know the best thing that I get to it impacted by my dad was working back in 1964 always very hard worker worked for a company. He worked an internal auditing. And I don't know how many hours you work but I would guess it to be in that forty to fifty sure -- He didn't seem NAFTA do much of the way of weekend were apparently -- us today Tom. Tom is doing a lot and I'm doing a lot of of weekend work just -- from the standpoint it's research which is. Your passion any rain earlier chief investment officer it's what you would. Yeah he brought a golf that Lecce read journals in the economist at Wall Street Journal weekend edition things like that. I've certainly given up on golf that -- I know why. And I think the other issue is am were connected all the time. So in there may have been an ability to get away from things because we didn't have these devices that would tonight Panama. Blackberry or an iPhone that kept you connected and you need you feel the need -- to jump into it overlooked. At the you know -- -- -- I think about it idolize are sent emails to and please on Saturday yours and and I expect them to get back to me Saturdays. But they love that only eight. Come on Monday morning with a big smile on. Everybody's like that. It's it's your your wired in Toms -- -- -- -- that I I think we're gonna see this shift away from. Woods there was a generation that was able to retire at age 55 to sixty that you see guys that would retire at 5560. I think that's my dad retired when he is 56 years old and that was not that unusual right back twenty years ago when he retired today I don't see people retiring that. I agree. On FaceBook you know with interest and FaceBook page most of the people. TC Carlton said my husband works fifty to sixty hours -- -- so he he works more than my parents. I'm Doreen stole Camara says I work more on the Peter Grant says no I work more than my parents do. I have an easier job my mother reminds -- of that -- on a daily basis so it's it's kind of all over the it is in terms of the response from the audience. -- I have won this one or just a report by 34 hours there I get that and by Wednesday. I'll I'll bet he's self employed to -- asked me to work for myself it really -- that's that tends to be the situation. -- -- Tom Anderson wanted to talk to you about the company's stock market's been -- -- care. With the S&P up 1820% this year nineteen point 6% the sport right. That to me is if we go based on old economic principles when you've got a 90% increase in the S&P 500 for seven months of the year. Does not mean that the economy is -- project the stock market is telling us the economy's gonna get markedly better over the next 6018 months or am I misinterpreting. Well I think that's part of it I think it's a reflection that. There is expectations. That and the economy is is going to get better is starting to get better. There's another factor play here. Interest rates are so artificially low largely from the -- efforts of the Federal Reserve. That in many cases for investors there aren't a lot of alternatives right now there in the choices are. Bonds that yield very low. Amounts. Cast that essentially yields nothing break and when you have clients when you have individuals that are or institutional investors who are trying to achieve. Particular long term investment goals this type of environment drives them in to stop. Well let me let me ask you do you still have -- at Boston private bank do you still have customers coming in or new clients coming in saying. I sold out of the stock market back in 2009 or 2008. I'm sitting in cash which should idea is that does that ever happen at the bank. Not the -- that -- conversations to fortunately we are discretionary managers -- clients so yeah we work with them we we build -- yeah customize -- know location for them. And work for them to identify what's the best way to invest to achieve your Colston however when you look at what happened in 2008. And we had the the financial crisis there definitely were clients to. The reaction to that was that we need to pull back my equity exposure. And that resistance. In some cases for some clients has persist. He rate the worst possible time to do so well I mean if you look and realize that in march of 2009. That was bottom in the market and and it came back. However I think it's always important have to realize. We always fixated on the return to the market. What's the S&P 500 doing it's up 19%. -- not everybody is the S&P 500 and it comes down to what is your reaction and you can you handle. Being in heavily in equities. When you know that it might drop ten. Percent twelve and -- -- area what about the ten months back in 20089 winners down 50% in nine months right -- that he ever asked that you have to ask yourself that question. In my willing to lose 50% of my money in nine months. That would let it will say it is to finish the answer the question is what we have. We are seeing and what we're working with our clients on those clients who do have new cash coming in. Or who had cash on the sidelines. We are working with them -- to identify ways to step that money into the market we had since November of 2012. We went. Almost. Six months without a single 5% -- -- we saw that first 5% pullback at the very end of June rate. And anyone of these little pullbacks have turned out to be buying opportunities. In this latest round. So Ian it's part of that is the market's really on strong but let's look for Smart times and ways to to put some money that. You want to work in the market team we're gonna put Tom on the spot when we come back. And ask them win the next market corrections going to be. And how bad -- it should I tell you parties and I want is a pain I have an island here wanna hear what Tom has to say. In Italy can make some trades that make that's coming up next on opening Tuesday. -- here at. We haven't had food market collection. Losses congress -- and back in 2011 and every member of the president Hussein Ali -- -- -- your Social Security check right back I was a pretty good correction we -- 22%. I think it was David -- down 22% in April to August 2000. Says -- everybody are going back and get good correction we. Bury it back in June that came when Bernie came out and start talking about. Cutting back -- that was going to be a correction that a couple of days so we at 7%. At 7% in June when we -- -- went winner -- and again at 1015%. Correction in stock prices. I don't know you don't know I I think good answer I. -- that the I think the next time you're going to see. Some chopping this is going to be -- around those Federal Reserve. Both of them oh FOMC meetings. In their mid to late September because of their discussions about tape all all of the expectation is. Is it that's going to be the first point with a could potentially say. Where either starting at war we've already star mountain. And I still think it's 5050 at this point whether it starts that early. How big of an impact has that hat on stalks me from your estimation you know is is that responsible for the last 2000 points on the Dow elect. Quantitative easing. You know basically when you when you do that you're artificially depressing interest rates. And seemingly you're pushing people out on the risk or to buy more stocks. Well I guess -- looking at it -- is it's that in the market doesn't like inflection points it doesn't like in the so called uncertainty and it's when you when we moved from this -- period of guess what easy money for ever for as long as you know in. If QB Infiniti QB for -- When you move away from that that causes consternation and that's when you get. On the volatility is when you see the vick's. Do you then the markers of risk in the market he see those things spike up temporarily. I think the bigger issue is not so much. How the equity market -- it it's how the bond market to the joint. At least we already saw on June. It sharply negative month for bonds we've seen outflows from bond mutual funds. So I think there is the risk -- and this tapering does get announced whether it's September it's later in the fourth quarter. Of seeing another jump in in bond yields. We don't think it'll be as extreme as what we just saw -- so basically a hundred basis point move her a full 1% move in a very short time period. Coming up next Gary Schilling talking to us about unemployment that's our next segment on the financial exchange. Tommy Anderson is the chief investment officer at Boston private bank and make it to questions before the break. First one was who's more qualified. To be the next Federal Reserve Chairman Tom we'll go with -- first. I think the way -- answer that is in this particular scenario I I think Janet Yellen. Is the wiser choice I think she is more qualified -- -- the Federal Reserve has done something in the last five years. That's unprecedented. And I think the transition out of the current situation. Will be equally unprecedented if not. You more dangerous than actually getting into the the UQB in this in the stimulus that we've had. So I think it's very important as the market digests this. You you wanna have. At least what's perceived to be a -- hand at the -- and I think that bringing in. What might be more interest thing. And dynamic per -- or entertain -- far more entertaining like Larry Summers I think. Sightings of the looked at UC IEU. High cheering for Larry Summers you know what happened to our ratings will -- the except leave your gas prices will be regalia -- -- added a whole world particularly out of public part. Minor detail -- But you so you -- what is it EU just think -- think they're both Smart but you think -- because she's been their for the last five years is the more competent selection. I think competence is the right word and yet I think in this situation you you're you don't want a personality then. In this role if it -- isn't it you don't wanna celebrity. You know head at the Federer is. So how does this happen and just as the job that had this happened it went two to three months ago it was a given. Janet Yellen will have the job it was and then all of a sudden Larry Summers -- -- name images for -- -- right now all of a sudden we're learning that Larry -- plays golf with the president once a -- -- plays tennis for the present every week in -- best friends and -- you know. It -- how did this happen. I've never seen anything like this -- there's almost dueling marketing campaigns underway right now between the two camps and you'll see compete competing. Op Ed articles in the Wall Street Journal or in the New York Times and it like it is it's like. -- -- Advertising campaigns tell us you've probably heard you know in the last week when Larry Summers -- kept coming up coming up all the sudden congressional members. Sent a letter and and and had a lot of them signed it including our own senator here Elizabeth Warren. Saying you know we've got to go with gallon that's -- -- average balance there. And I think it is important to note there is a lot on the Federal Reserve's table in going forward we obviously. That this concept of tapering. One we get through tapering which is the reduction in the bond buying program they're buying combined 85 billion dollars. In mortgages and treasurys a month. Taper that down. At some point rates will start to go off again. When that happens say -- say they stopped tapering it takes them two years wanted to finish their tapering to say let's assume they start January 1 fourteen. They conclude tapering. January 1 of sixteen how much the interest rates go. -- it's hard to -- and I think that you'll see. At the end normalized. Ten year treasury yield to fifty wood today the in the mid threes made three so I think three to three and a half I think would be. You know when I -- when they're at that point you know. If that doesn't sound that bad day it doesn't sound that that side I think I'll mortgage rates and that means they -- to interpret that for our audience right that means if if the ten year treasuries at three and a half and means of thirty year fixed rate mortgage is probably the five and a half 575 Tom. That sounds reasonable right yeah it's I -- I think that there's big implications for the bond market in the if you're an investor. There's big implications on your -- Portfolio so what do you do -- how how how do you manage your your duration risk score you're. That let's simplify what how do you manage your fixed income portfolio. In this kind of environment especially given what's going on in the Muni market. Sure well. -- the way we are doing -- our clients is a couple things one is weak we have targeted. On very short duration. So the average maturity of the the bonds in the portfolios. Are short relative to an index so. Instead of yes three and a half years for the next we're at about two and a half years couldn't just Smart so that protects you brief rates -- while using floating rates at all. Only on the margin right now we've Battier added some floating rates using a fund that can. But in terms of core -- he's keeping generation very low. Providing the opportunity and we we buy individual bonds to our clients who buy individual taxables treasuries and and Munis. But allowing the opportunity. That's as rates start to move higher will have bonds maturing and will be able to take advantage of higher rates the interesting thing they came out of the head of the rise in rates at the end of June is suddenly bonds went from being unattractive. Is there were opportunities. In the bond market particularly on the municipal side so despite all the the coverage of Detroit ten. You see Meredith Whitney being quoted as this is the beginning again of all the bankruptcies. The municipal bond market has taken Detroit's. Bankruptcy instruct. How long can she be wrong and still get a lot of media attention I don't know how launching it media attention I think she can be wrong for quite some time right. And what we're finding is Munis in this environment. Looks super attractive if you if you if you will -- -- how to -- him. If you know how to buy them but it's just attacks. In the images you know as tax rates go up our clients in California and are paying such high taxes if you can look at a 4%. Munis that we see rates back up a little bit more in you can get I mean it's paying -- 4% yield. That's six to six and a half even higher percent on an after tax base. We were gonna talking with -- when we come back let's talk to Tom about municipal bonds because I -- a lot of people I know there -- a lot of people listening program. That are scared off of Muni bonds because of Detroit Detroit absolutely so maybe you can give us a lesson on how to -- Munis. Given the environment that we live in today. Talk to a client the other day very concerned about municipal. Bonds Tommy Anderson. What do you do about municipal bonds given the environment you've got. Detroit in bankruptcy you've got the entire state of Illinois in severe financial trouble. Massachusetts. Carrying huge pension deficits related to their public pensions. What are you telling your clients. Well I think the first thing you we will always advocated is you you wanna be working with the managers today you trust you know I'm I'm fortunate to Boston private bank we have an excellent on team. Who's been working together on this for fifteen years when he -- together. But the nice thing as you read the headlines. And you see all the bad news agency Illinois EC yet Detroit. But as we just saying in the break Detroit has and that junk bond rate credit. Since 1992. So it's no surprise if he owns the Detroit bonds. It was a speculative investment you weren't this is not what you would they were uninsured here and you did not put the Internet the core safe party your portfolio and -- was a different party report well. So so what he'd do you invest in high quality. You what I wanna buy a mass Muni today. Considered high quality right mass has a very good credit rating with a subpoena just an uptick right what do you infirmary. -- -- -- I have to check and I think that right right now a year depending on how far you can allow. You're getting in the twos and three him right now in terms of yields. Solo album Cali and Cali it's it's actually a little bit better you know because they're they're not as highly rated -- So early and is are we gonna -- meritless dot -- Whitney back out there last week saying. Detroit's tip of the iceberg I told you this was coming he's going to be hundred of -- hundreds of municipal defaults going forward is that true. No it's not been in effect. We actually. Two years ago on her when her book came out talking about that. It created an amazing buying opportunity in Muni bonds because he drove all the all the prices down all the yield higher. And anyone who is investing was able to take advantage is actually -- when she comes out -- an offensive it's good news for the industry. And back to my earlier point I think that if we see rates back up a little bit more. You know -- -- we would still within the Bonn portfolio. Follow that same philosophy we had before we would stay short duration but opportunistically. If you can find a way to lock in. Hi 3% or 4% yield because rates back up. On an after tax basis that's going to be tremendously appealing -- our clients many of whom are really looking for. And bring it to try to drive income anyone on a tax free basis that's the that's the trick. Ari when we return here's we've got coming up for the second hour. -- Jo white from the Wall Street Journal's -- Joyce Kim. 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