Wall Street Week With Fortune

A. Coming up on this special edition of Wall Street Week With fortune. Hello I'm a balanced guy and I'm going to teach you how to Ruin Your Financial Life. And you know what. You'll thank me for it. Welcome to Wall Street Week With fortune. Will is made possible in part by Nuveen investments

as any savvy investor can tell you. It's not what you heard it's what you keep. ETF connects an educational website of Nuveen investments is prone to support Wall Street Week With fortune. Welcome to Wall Street Week With fortune. I'm Karen guess and I'm Jeff calling. Well last year more than a million Americans filed for bankruptcy a figure that has been rising fast. Every year it seems more and more of us are facing financial ruin. How to Avoid It. Well there's nobody better to ask than actor financial expert author of many books including How to Ruin Your Financial Life. At our request Ben recently visited a family that is in deep financial trouble. Hi are you guys time Ben Stein Michael that's so nice to meet you Michael. To meet the defense is a nice touch.

We're doing pretty well for themselves. They even started a retirement plan. Yet somehow. They've ruined their financial lives. How much savings you have in the way of like liquid savings if some emergency came up a good job. So not including. The retirement I mean I. Never figured out how much your monthly payments are all yours. And when it comes to the debt it gets even worse. Oh my gosh. The defense or the natural rule. How does it. Things happen to such people. Let's start from the beginning. We actually met at the first annual outdoor film more snow and the movie I was just really compelled to reach out and touch. It was like love at first sight I don't know some kind of thing that passed between us Irish just like touch. I just needed to touch it. It just happened and he looked down and found

the end to be sure. We just clicked in my head. Janice is so unappropriate you don't know this person what are you doing. Everyone brings baggage to a relationship. Michael brought 40 grand in credit card. It was scary for me I just wanted to say to her Look this is what I'm bringing to this relationship financially. My parents had gotten divorced because of financial problems and I just in my head I was replaying my parents life and I didn't want to repeat the mistake. And I told her that I was going to go bank file for bankruptcy so that we can have a new start. With a clean slate Michael asked for her and promise to change his ways forever. All these credit card companies would send me 0 percent for a year where nine point nine for life time. The idea that he didn't have any credit card debt anymore and the bills are command now to center this suspicious to me. I gotta admit i like I like to buy things I like to find a

good deal. So I opened them up and found that there is a good $4000 worth of debt there. I mean he just he said it'll stop it'll stop at all and it'll go away it'll get better don't. Don't worry about this was just a mistake. I did hurt my friend and her myself. I am really really angry. Mind you the teacher might. Promise or you weren't going to overspend. So when you promise somebody whom you love very much you're not going to do something and then you could do it. It shows it's a very serious compulsion. When we postpone the wedding I actually put men who are better than I. So how did you like the others and it actually was it was amazing it was helpful a little Debtors Anonymous some couples therapy and everything was back in order. We're wiser now. They had a new house they had to fill up

time to go shopping. That is a lot of the range of them you feel like that I've ever seen before in my life that actually was $600. We have to point out the ventilation system in which I actually doubled the price and ended up going to $2000. I'm not sure in terms of using gas it doesn't use that much gas but He uses a hell of a lot of money. He's he's an excellent. Very excellent. Well for example the shirt and I'm wearing this is this is an $80 shirt regular I got this for 10 bucks. My friend just the prof. Michael can't resist a bargain. Let me ask you a question. Do you drink a lot of coffee. Retail for twelve hundred dollars. It was new justifying $200 for a coffee maker. Somehow Michael shanghaied me into wanting it anyway. Whereas the line of credit for a mattress it costs $30000 for a mattress. My dad actually

doesn't seem that different from most because you have the kids have a really rich person there are no other words for it by the way my whole life suddenly caught by this incredible dishwasher you know well this is our look for your very high painted white dress and all it is like for you. So there are no wheels now and the cars no brakes no pedals and it cost a thousand dollars if we took the thirty five hundred dollars. When you buy the summaries are you a nine you got out there was a supermarket would you buy that. I'm not a close ideations. Let me ask you a question. When you find these things like this incredible range of coffee maker there's a link you just feel fabulous. Yeah and Mexico great. It does make you grow wonderful as young as I was like a drug you don't get on my buys from buying things right away knowing that the nonsense you get nauseous hardly provides any easier and you get nauseous for a minute and hear something that's making Jenny even

more nauseous. Well it's amazing. Unexpectedly she's pregnant. This is the worst. Oh and did I mention it's twins. Oh my goodness. This is frighteningly frightening reads here I've been staying up late at night worrying about it. The defense is in three months until the baby is due with no financial solution in sight. Michael and I have a really great relationship and we get along really well in every place except for money and I just don't want that to be the reason that we don't make it. Dan thank you very much thank you very very much you're a wonderful young couple the streets are there to be able to help you a lot and I might say you already have a lot of good things going for you. Yeah those retirement plans you have this beautiful house and I see you're young and in love and that's the main thing. All thanks to like you very much for the work yourself. Well now I'm just seeing now two very wonderful young people going through in their financial life. And promote what we're going to see how they can save it.

We have collected the defenses financial data. Ben Stein joins us from Washington D.C. filled to music from Los Angeles. They have crunched the numbers. First off Phil you are not just an investment advisor you're a psychologist also and that seems to be a good thing in this case particularly. Now you've counseled a lot of families about money all the psychological issues typically as important as they are in this case very extremely important where you have cases of reckless spending. You typically have somebody who has a sense of entitlement whereby they think anything that they want they somehow deserve to have. It's a very dangerous assumption to make to get in real financial trouble you have to have a disconnect between cause and effect. If you really follow cause and effect you're following arithmetic. The defense serves our Mr. Defense or has simply been the reality of arithmetic. He is simply spending as if he had an unlimited amount of money to spend.

He doesn't. He's got to get that through if he had I think Debtors Anonymous like many 12 step programs is incredibly powerful and getting across the basic idea of cause and effect. And Bill counsels people and I and I think he would agree with me that psychological counseling takes months years back Debtors Anonymous says. Very simple. Stop the spending stop overspending especially on unsecured debt right now. I will figure out the psychological whys and wherefores later. And actually Jen had some insight into the psychological whys and wherefores of her own money. Then really I sense some thanks to me and I really believe a lot of it has to do with watching my parents fight so badly about it. I don't want to end up possibly divorced and have they can't see that it was money that was doing. Every person who's married knows that there is some kind of tractor beam from the Death Star that inexorably pulls us to where a lot of our

intentions recreate our own parents marriage. It may be that there is something like this happening here. Now I'm not recommending 50 years of psychoanalysis to try to get to the bottom of this. But I think that a course of short term therapy where they could at least hammer out some kind of contract about how they're going to deal with finances that puts basically gender in control and puts Michael on an allowance but does it in a loving way and not in the scolding parent naughty child way would be a vital first step. Let's talk about solutions and let's start with that. House all to mostly are they going to have to get rid of their house which they love not have to get rid of that house. They can make it without getting rid of that house. And in fact I would say they have to hold on to that house their house that house as their anchor to windward. That house is going to go up and up and up in value I've been in that house it's a lovely house with that house and with their other spending under control. They will eventually have so much anger in the house that they can move to another

house and still have equity they can put into their savings they get and then move on to another bigger house. Well that house was a labor of love for them they put a huge effort of their own into renovating it. But they have enormous interest payments their after tax income is about forty four hundred dollars a month. Thirty three hundred dollars a month in interest on the mortgage and their non mortgage debt. Either they have a great future and that house is a big part of it but they've got to get themselves under control and they've got to get themselves in a position where they realize that their love for each other and for tag each other from worry and anxiety is greater than the value of an titanium bicycle frame that shouldn't be that hard to do. Phil do you think they need a very specific program and if you got any suggestions for them. Yes there are personal computer at home has a software program called Quicken on it and I think Microsoft makes one called Microsoft Money is a potential God said to people like this they can put in all their finances. You can generate a budget for them. The question is do they have the will to do it. If they do it will

help a lot. Do they have any chance of accumulating any savings they admitted they have zero savings and this is a big problem. Everyone has a chance of accumulating savings they just have to want to do it. You know a very rich person I know when I once said How did you do this he said its not about how its about why and if you really want to do it you can do it even if they just started saving 10 dollars a day saving roughly 300 dollars a month with proper allocation of that investment it will grow. And of course they do have this new mega factor about to come into their lives which is the twins which were not expected as Jan explained to me. In my head I'm thinking. Right now I'm. Not the plan was to wait two years times 10 times. The money. Was there a time for. Me. Bringing the bunny around.

He's got to raise his human capital he's got to learn more about his Homeland Security so that he can move to a higher GI s grades and raises them. She's got to learn more about some higher paid job than work in nursing although she's apparently very good at it and she's got to raise her. But they are going to a wealth of expenses with children I mean children are incredibly unbelievably expensive just ask me their unbelievably expensive. Yes they are and Phil there the couple is about to lose one third of their income because Jan is not going to be working with those kids report. But it's actually much less than that because remember that if Jenna were to keep working she'd be having to spend a fortune on child care for twins. That ain't cheap. So after taxes after these expenses the difference only comes to maybe $5000 a year that it was added by her working versus her not working. Now let's think long term Finally about this couple because they're young and yet they do need to think about retirement just like everybody else and in fact they have done so Jen has thought about

her ideal retirement my ideal retirement. This possibly in our retirement community like the one where it's happening and it's nice to not have to work. I want to know that if one of us got sick or something isn't right now they're not well situated for retirement. They have the good thing is they started a program they started their savings but they need to save a lot more going forward and they need to also reallocate the accounts they do have each of which is a perfect reflection of their personality. Her account is 100 percent in fixed income in bonds. His account is 90 percent in stocks. I mean that's a perfect mirror of what's going on. They should be in a more sort of normal long term growth portfolio of about 60 percent stocks and 40 percent bonds at their young age it could be even more stocks than bonds. The iron rule is diversification as Phil so aptly says one

wants to own a little piece of everything and they should be changing that right away because if they can add a couple of percentage points of growth a year starting at their young age it will make an enormous difference by the time they are in their 60s. You know people think oh what's 3 percent and 6 percent is only present. No it's not it's a hundred. I would be pushed or at least 70 per Sat. I think they should make sure they have mostly stocks and very diversified and lots of foreign stocks the real action and seems to be in the next 30 years is going to be in the developing markets in countries like Korea Turkey Pakistan and South Africa Brazil and I think they should have plenty of exposure to those areas. Then as houses in all those countries then give us a point by point program for the defense or one gathers anonymous at least three times a week for Mr. defense or to make an actual budget of how much

they have to spend every day and stick to it rationalize their retirement plan along the lines of fill the skies and then maybe a little bit of what I discussed to make a solemn commitment to each other. Their goal is to make each other happy and to keep the marriage alive. They have got to be committed to keeping that marriage alive giving them marriage alive and well especially for the sake of the kids as a lot more and more than any man or any titanium bicycle frame or any custom made coffee maker. Marriage a long time to save your financial lives. But make a commitment to it right now and do it with numbers. Well I agree with everything that Ben said hammer out a contract probably with the aid of a therapist for how the finances will be handled going forward. I think it'll be by Jennifer by the way. Then Quicken on their computer to set up a budget and stick to that budget religiously. They should sell one of their cars and use that to establish a short term urgency fund for when Janet's control

and then pay off some of their short term debt. They need to reallocate their retirement accounts to maximize the long term growth there. They both need to think about how they can maximize their human capital by expanding their marketability in the workplace. Thank you very much. We are honored. Thank you very much. Well Ben Stein is not the only person suggesting that defenses look outside the U.S. for good opportunities. A recent survey of top money managers found that an overwhelming majority of the pros are bullish about stocks and markets around the globe. That was just one of the interesting findings from the quarterly investment poll conducted by Russell investment group. Randy loot is the company's chief portfolio strategist and he joins us from headquarters in Tacoma Washington. Randy thanks for joining us. Happy to be here. Thanks for having me. How many top money managers did you poll.

This time around we had 97 respond. The average asset size of the managers or responded is about 43 billion under management. And what's the basis for their optimism. Why I think the basis for their optimism is fundamentally a valuation argument. Most professional money managers want to look at stocks relative to bonds. So when they're looking at valuation they're asking how is stocks priced against Bonds in this particular case. Stocks do look fairly valued if not even somewhat attractive relative to the fixed income alternatives. Where do they see the best opportunities is it going to be value or growth will it be large cap small cap. Domestic or international. Right. The number one area that the managers are focusing on I might say have been focusing on in the last couple surveys that we've done have been in the area of large cap growth that definitely reflects a belief that there's going to be a shift in this style environment that we've been in since the middle of 2000 it has been a very strong value market in

response really I think to some of the excess over pricing of the growth sector during the technology bubble back in the late 90s. But right now the the general feeling is that value has now become overpriced. If it sort of sounds oxymoronic How can value be overpriced. But the sector of the market constitutes value is quite high. Quite high priced relative to the forecast growth rates. So the argument here really is that you can buy quality growth stocks and not have to pay a premium for accessing the growth in earnings that would accrue to shareholders. On the other hand there's a there is a strong interest as well in the non-US markets as you mentioned. When we first came on and that is driven I think by both a combination of again a valuation argument and in this case it's boosted by the relative weakness in the U.S. dollar. Well the Fed is well into it's a raising of interest rates and while that eventually support the dollar just as those higher interest rates are hurting.

The managers and I save managers we talk to even outside the context of the survey and our manager of managers business have been calling for a fairly bad bond market for well over a year now. And what we finally have had some movement in the tenure 50 60 basis point increase in yield here over the last six weeks let's say it's been a long time coming and I think that there has been some question as to whether or not the the depth of negativity on Bonds is in fact going to be realized. What does the increase in rates portend for the housing market and real estate investment trust as an asset class. Despite their spectacular returns. Of the of the last couple years of the current climate for reads this probably. Is average or below average is you're likely to find Having said that that's not necessarily a recommendation to get rid of them. It's just to not expect the type of returns you've had. But I think in general the question with the general residential housing market will

pretty much revolve around overall strength in the economy job creation and level of rates. Well getting back to stocks and U.S. stocks in particular what industries what sectors. The money managers looking for the best opportunities. The number one sector by far is health care which is which was interesting to us and has been health care by the way this for the last four surveys. Despite the fact that in general as a sector it hasn't performed very well and furthermore has had a lot of relatively well publicized issues associated with it certainly in the area of pharmaceuticals. Even more fascinating in that context is that the number one sub sector of the managers like within health care turns out to be pharmaceuticals and second a fairly close second is medical equipment or device manufacturers. Is this a bad on the baby boomers and the push that they're going to put into the sector. Well I think it's a combination of things I think you can never get away from the demographic argument of an aging population when you talk about health care in the long term growth opportunities

within health care. Health care often is the sector that managers like to go to when they believe that the economy may be slowing down. So even though no one is really forecasting a recession per se there certainly is a general consensus of an overall slowdown in economic growth. Well the economy did grow quite well at the end of the fourth quarter the final numbers three point eight percent but if your top money managers are talking about an economic slowdown How should investors position the south in the event of a slowdown. What the managers are suggesting is that we get into this slower mode. This is when we want to rotate in to where at least make sure we're at our long term policy waves with things like large cap growth stocks because large cap growth stocks are the types of companies that weather economic slow downs better that are more likely to continue to produce some level of earnings growth that a shareholder can count on. And in this particular instance they've also been coming through a period of very significant underperformance.

Well you were also chief portfolio strategist for the Russell investment group. How are you advised to your clients right now. The key thing that we're focusing on with our clients is while we always focus on staying balanced this environment is one where we think the risks would be extremely high with maintaining a continuing over exposure to value. So we're really urging our clients to get back to a full weighting in their growth and in their large cap sectors. Randy thanks so much for joining us. My pleasure. Wow. Stocks were mixed this week. Sluggish job growth and record high oil prices left the Dow with a 38 1/2 point weekly loss. The Nasdaq slipped six and a quarter point. But the S&P to a 1 and a half point. Well you know it's almost April 15th Are you feeling the pain of doing your taxes. If so some of the tax scams have been getting away so

long. More than any other television now.

To learn more about this program visit PBS dot org. For a transcript of this program send $5 through transcripts. Wall Street Week With fortune. Maryland Public Television Owings Mills Maryland 2 1 1 1 7. 5. Investor Education segment supported in part by NASB Investor Education Foundation. Wall Street Week With fortune it was made possible in part by Nuveen investments as any savvy investor can tell you. Its not what you earn it's what you keep. ETF connect an educational website of Nuveen investments is proud to support Wall Street Week With fortune.