Five Notable Quotes from the Conference

Jason Stipp: I'm Jason Stipp for Morningstar and welcome to a special Morningstar Investment Conference edition of the Friday Five. Joining me as always with the Friday Five is Morningstar Markets Editor Jeremy Glaser. Jeremy, thanks for being here.

Jeremy Glaser: You're welcome, Jason.

Stipp: So, what do we have for the special Morningstar Investment Conference Friday Five?

Glaser: Well, we're going to look at five notable quotes about how the crisis has a new address; the ups and downs of liquidity; the (p)retirement craze; the erosion of trust; and finally, we're going explore if TV actually rots your portfolio.

Stipp: Well, starting from the top with the new address for the crisis: Rudolph-Riad Younes from Artio, debt weighs heavily on his mind, his quote – his choice quote -- had a lot to do with that. Tell us a little bit about that?

Glaser: I think so. Younes says that we went from a dot-com bubble to a dot-gov crisis. And the idea is that, right now, we're less worried about what's happening in the corporate world or about dot-coms or anything like that, and much more worried about what's happening with governments. How are they going to get their fiscal situations in line? How are they going to get out of these incredible monetary steps they've taken to stabilize the economy? Until we get those questions answered about the government, we're not going to be able to have a sustainable recovery, and that's the real crisis we're in right now.

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Stipp: Yeah. Younes also said to me that it's like kicking the can down the road with the government – additional government spending. But he said eventually, there's going to be have to be a correction, they're going to have to address the debt, and it could be pretty painful.

So, also speaking of the crisis, the credit crisis recently, liquidity was nowhere to be found. Artisan's Mark Yockey was talking about [the fact] that there is a flip side to that, however.

Glaser: Sure. We always think about how not having liquidity is a big problem, but he points out that having too much liquidity is a major issue as well. In 2007-2008, when he saw these enormous deals getting done just with incredible debt levels, it showed that there was really just too much money sloshing around the system looking for some place to go.

He saw that as a sign that maybe he shouldn't be buying European financials, he shouldn't be buying financials in general, got out of some of those maybe a little bit earlier than other people. Definitely something to keep in mind when euphoria is getting a little bit too much, that liquidity could be a problem.

Stipp: On the personal finance front Christine Benz ran a very popular panel today about investing for retirement income. There don't seem to be a lot of solutions, but there was an interesting idea that came from Christine Fahlund, who is from T. Rowe, she was on that panel. And she had an interesting idea of how you might be able to (p)retire.

Glaser: It's really difficult right now to be almost entering retirement, because if you're expecting to have some high-yield instruments to get that money that you need to live day to day, it's just not there right now, so people have to extend their working years.

But the way that Christine explains it, is that you should (p)retire. So you can stop making those contributions to your 401(k) and to your Roth IRAs to your regular IRA. And you can use that money to kind of treat yourself to go out on a trip or go out for that special dinner. Because that money that you're going to invest now, in the five or 10 years that you have to work longer until you can retire, that money is not going to do much for you. You might as well enjoy it now, so you can get some of that quality of life you wanted in your retirement even though you have to keep working.

Stipp: It's certainly not a great prospect for people who have to continue working but maybe a way to sweeten it a little bit.

On the mutual fund front, we also heard from McNabb from Vanguard, the CEO, he talked a little bit about an erosion of trust problem that mutual fund industry is having, and why it's important to regain that.

Glaser: Certainly, investors have lost a lot of trust in the investment industry. I mean, we saw first with the incredible crash after the subprime crisis, but then also with the flash crash that you have all of these little events that seem to be completely uncorrelated, or big events as the case may be, that are uncorrelated to the fundamentals of the business, the fundamentals of the economy, and it gets people worried. They were told that you should save and invest, and people who have done that over the last decade, they don't have a lot to show for it.

So he thinks that the investment industry really needs to step up their level of transparency and communication and rebuild that trust, so that they don't lose another generation of investors.

Stipp: Lastly, the opening address, Jeffrey Gundlach, yesterday, he had some interesting things to say about the state of debt. He was also talking a lot about debt. But he also talked about one of the problems and one of ways that we got into debt has to do with something that's plugged in, in your living room?

Glaser: Yeah, he thinks the TV was one of the big drivers of all of the debt that we got ourselves into. Before TV was really a mass media, people didn't aspire to have all of these consumer products. And once TV was there telling you, "oh! You should drink Coke or you should drive this car or own this giant house," people started taking on debt to finance that.

As they took on the debt, governments took on more debt and the whole credit crises really started from TV, according to Gundlach. So, I think it was up to him, he would unplug the box and hope that we could get some austerity measures in place to bring that deficit into line.

Stipp: Well, Jeremy, thanks for pointing out some key insights from the first two days of the Morningstar conference.

Jeremy: Very welcome, Jason.

Stipp: For Morningstar, I'm Jason Stipp. Thanks for watching.