Focus: How aggressive should individual investors be in planning their own retirement
>> we want to make a correction to a story we brought you before the closing bell. in a report from the new york stock exchange on some of the movers, we did mention hewlett-packard and in the report we incorrectly said hewlett-packard would have job cuts. here’s that correct version. shares of hewlett-packard rose 4.6% after the new chief executive, mark hurd, said he plans to slash costs across the company. analysts said that may mean 15,000 job cuts. we apologize for the misinterpretation. we want to turn our attention to investment strategy in the meantime. how aggressive should individual investors be in planning their own retirement? brian sullivan asked scott budde, managing director at tiaa-cref, which has more than $325 billion in assets under management.
>> we spend a lot of time at tiaa-cref talking with investors. we have over three million investors who are using tiaa-cref to save for retirement and when we get questions about how they should allocate assets, we strongly urge them, particularly as they get into the 45-year range, to sit down and talk with someone about what asset allocation works for them because when you put a group of 45-year-olds in a room, they have very different attitudes about what they want do in retirement, what their assets are and tolerance for risk is.
>> vanguard says just buy index funds or e.t.f.’s, active portfolio managers say, no, put your money in the hands of someone who will make individual stock decisions.
>> the most important thing, rather than one versus the other, if you’re looking for active funds, look for active funds that are fully invested in what they say they’re in, stock funds that stay in stocks, bond funds that stay in bonds and not look for ones that deviate substantially from that. that kind of market timing --
>> don’t market time?
>> don’t market time and it makes it hard for individuals to stick with the asset allocation they said if the manager is going into a class that’s not part of the fund.
>> what about a breakdown on average of stocks, bonds, real estate, et cetera?
>> if you look at our investors overall and we have a long and fairly conservative philosophy of how we advise people and educate them on asset allocation issues, you’d find overall the system would be a little over 50% in equities with the balance broadly diversified across fixed income, including treasury inflation protected securities.
>> are you more favorable on t.i.p.s. than you were?
>> we would try to steer away from immediate changes for or against any of these asset classes. for planning for retirement on a long-term basis, because of the inflation protection t.i.p.s. offer, should be part of someone’s portfolio.
>> we had the c.p.i. later today, do you think we should be protected from inflation in any manner going forward here?
>> for a diversified portfolio we think that sort of inflation protection is a key component. it’s also not really available through nominal bonds so having those in a mix with nominal bonds is a good idea.
>> we’ve had your counterparts in illinois this week tell us real estate is an investment they’ve made. i wonder if tiaa-cref, managing money for teachers, et cetera, thinks real estate is a safe place to put pensioniers’ money?
>> we believe in broad diversification so we certainly would include real estate in that mix. we have a very long history, one of the largest real estate investors within our general account as well as having one of the only accounts available for individual investors who use tiaa-cref on the retirement side that invest in income-producing real estate.
>> what do you think of% president bush’s plan for putting money into private accounts? is that a good thing?
>> as a company, we don’t take political stands one way or the other on social security. so i think we’d leave that up to individuals.
>> if we look at overall retirement plans, how aggressive do we need to be for income versus growth and i guess what i’m trying to say is when you look at breaking out stocks, do i say, you know what, let’s do something real safe with a nice dividend or do i want to buy an intel? where do we go?
>> if you look at broadly diversified equity strategies, strategies that involve exposure to all the corners of the equity market value and growth, large, mid and small cap stocks, you’ll see broadly diversified strategies over longer periods do very well in terms of a competitive return and tend to be lower risk than more specialized strategies which can look great in the short term but over a longer period, don’t seem to offer the same sort of positive risk-return tradeoff that the broad funds do.
>> that was scott budde, managing director at tiaa-cref. taking a break, when we return, microsoft hopes to do something different with the next x-box video game console, make money. we’ll speak about the video game wars with analyst charles di bona from sanford c. bernstien.
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gains of 1.3%. the s&p trading higher by 1%. for the s&p, it was financial companies such as citigroup gaining and leading the advance. you had the inflation report come out today. what it did was signal to investors that the federal reserve may be closer to ending its series of interest rate increases. also, raw material producers such as alcoa jumped today after a report from china on industrial production came in stronger than expected. the rally across the board. let’s now focus on pricing power. i mentioned inflation and a new product. this product at palmone, the maker of the trio mobile fun releasing a device intended to compete with the ipod. michael snyder asked the c.e.o., edward colligan, how similar the device is to the ipod.
>> the ipod is intended just to play music. this is about your life has become digital and in a short period of time, a lot of things we use in our lives from documents to music to videos to photographs, have all gone digital and this device allows you to carry all those with you, have them with you anywhere you go, and view them, share them. it’s got wireless technology built in so you can connect to the network. it’s really a very powerful device to help you manage your digital lifestyle.
>> it’s got wi-fi, also bluetooth?
>> it has wi-fi so you can connect to your network in the home or office. it’s got bluetooth so you can, through another cellular connection, a phone, you can connect up to the internet so you can do web browsing, you can retrieve email. it allows you to get documents off of your network. you can look at excel spread sheets or word files on it. there’s a portable keyboard you can buy as an accessory, you can use this almost as a laptop replacement.
>> the estimated u.s. price of $499, is that accurate? and what does this product mean to your bottom line this year?
>> i think it can be significant. it’s an attempt by us, really, to redefine the handheld computing category. we call it a mobile manager, a new category of product. there’s nothing really like it, allowing you to manage both your office productivity documents and view movies. it spans a broad range of capabilities.
>> you have a sales projection for the year?
>> we don’t talk about specific projections for individual products but we think it can add significantly, especially at this price point.
>> can you be a little more specific in terms of how significant it will be to your bottom line?
>> i think it will be a profitable product and reinvigorate the handheld category, in this particular area of the market . it has been under pressure, so our trio smart phones have been really selling quite well but the connected organizers are an area under pressure. we think this product will reinvigorate that end of the category.
>> the trio―there is talk you may use a microsoft operating system?
>> we’ve always said we’re open to other technologies. we don’t focus on that as what we’re trying to deliver to our customers, just a great value product that does some applications particularly well. if it makes sense for us to reach new markets or new opportunities by leveraging other operating systems, we can go ahead and do that. right now our entire product line is placed on our operating system.
>> there is talk that palmone could buy palmsource that it spun off a while back. any truth with in that?
>> no, we are focusing on working with them as a partner.
>> you have discussed in the past palmone having problems with product delivery. what have you done to deal with that?
>> we really, that is something that probably happened more than a year and a half ago at this stage. we’ve been able to deliver our products effectively over the last year and the trio, we’ve been launching on a whole range of networks around the world. we just announced our verizon relationship and we’re delivering that in volume to verizon customers today. we have new relationships throughout europe with orange and telecom italia and telefonica so we’re delivering product and the life drive product will be coming out this month and be in stores like circuit city and best buy, available to our customers.
>> your pricing power, how easy is it for you to pass on costs and raise prices if you want to?
>> i think we’re really focused on value. in our category, we are a leader. we feel like we have a reasonable level of pricing power but really this is a very competitive market and the idea that you can raise prices and not provide the value that a customer wants is not really.
>> that was edward colligan, chief executive of palmone and he was speaking with mike schneider. we have after-the-bell earnings out from intuit, reporting net income of $1.61 a share, $1.55 excluding items. analysts were looking for $1.55. the company saying revenue was up 20% to $849.5 million, topping what analysts were expecting. you see shares down almost 3% in extended trade. let me note, as well, the company saying that for the fourth quarter it anticipates a loss of nine to 12 cents a share. analysts, on average, have been anticipating a loss of six cents, steeper than analysts anticipated for the fourth quarter. the company saying that fourth-quarter sales should come in about $270 million, also below what analysts were forecasting. analysts were forecasting sales closer to $302 million. let me tell you about earnings from b.e.a. systems, the software maker. a 35% increase in net income coming in, excluding items, at nine cents a share, matching analysts’ expectations. sales coming in stronger than expected, $281.7 million. taking a break, when we return, tiaa-cref, largest retirement fund in the u.s., what are they saying about strategy.
