◼ FINANCE Bloomberg Businessweek August26, 201922
THEBOTTOMLINE Wealthyretirees’reluctancetodrawdown
theirsavingsis trappingmillionsofdollarsthatcouldbestimulating
theeconomy.● MichaelHasenstabhas amassed
a bigbetagainstTreasuriesThe $115 Billion
Bond Con rari n
Treasuries—bettingthatrateswillriseandbond
priceswillfall.Thisputshimattheepicenterofa
debatethat’ssplitglobalmarkets.
If he’sright,theworldeconomyisturninga
corner,centralbankswillfinallybeabletoraise
interestratesbacktotheirprecrisislevels,and
globalbondyieldswillstopgrindingeverlower.
If he’s wrong, it may be because the global econ-
omy is too weak for central banks to stop trying
to pump it up. So far, the scoreboard doesn’t look
good,eitherfortheeconomyorforHasenstab:
Afterincreasingratesforthefirsttimeinalmost
a decadein2015, the U.S. Federal Reserve is back
to cutting, and the Templeton Global Bond Fund
has lost 4.8% in the past month. The damagefor Morningstar Inc.’s Investment Management
Group. “The question now is what comes next.”
Meanwhile, trillions of dollars sit in bank
accounts and conservative investments that strug-
gle to keep up with inflation. Corporations hold
almost $2 trillion in cash and buy back their own
stock instead of making large capital investments.
The rate of new business creation in the U.S. is stag-
nant. Individual giving as a percentage of dispos-
able income has been roughly flat for more than a
decade, according to the Giving USA Foundation,
and it actually dropped 3.4% last year in terms of
inflation-adjusted dollars.
The biggest beneficiaries of the wealth generated
over the past 10 years may be the children of the
rich. The more conservatively their parents spend,
themorethey’llinherit.There’sonecomplication,
though:Thegapinlifeexpectancybetweentheaver-
ageAmericanandthewealthyandwell-educated is
growing. While longevity is flat and even falling for
many in the U.S., the well-off can expect to live well
into their 80s and 90s. In other words, if the next
generation is waiting for an inheritance check, it
could take quite a while to arrive. �Ben StevermanFewprominentinvestorshavebeenpunished
harderforbeingonthewrongsideofplummet-
ingbondyieldsthanFranklinTempleton’sMichael
Hasenstab,whomanagesfundswithtotalassetsof
about$115billion, including the Templeton Global
Bond Fund.
The flip side of falling yields and interest rates
has been a rally in the bond markets. As yields drop,
bond prices rise, and in recent months, owning U.S.
Treasuries has been an easy way to make money.
So it’s been a tough time to hold the view that the
long era of low rates—which began with the financial
crisis more than a decade ago—is about to reverse.
Hasenstab’s not only less bullish than
most bond managers, he’s actively shortingSurvey of Consumer Finances, its comprehen-
sive study of household wealth completed every
three years, shows the typical U.S. household was
poorer in 2016 than in 2007, adjusted for inflation.
Onlyoneagegroupsawitsmediannetworthcom-
pletelyrecoverfromtheGreatRecessioninthat
time:families headed by someone 75 or older.
Even as some workers and retirees enjoy health-
ier nest eggs, millions of other Americans are strug-
gling. “Affluent folks who are adequately prepared”
often need to be encouraged to enjoy their retire-
ment, says Marguerita Cheng, a financial planner
at Blue Ocean Global Wealth in Gaithersburg, Md.
Meanwhile, she adds, “there are people who are
woefully ill-prepared for retirement. Perhaps they
didn’tsaveenough,butjobloss,illness,divorce,
andfamilysituationscompoundedanalready
precarious situation.”
While many current retirees can rely on
defined-benefit pensions to produce income that
supplements Social Security and protects against
longevity risks, most future retirees won’t be so
lucky. They’ll end their careers with just a 401(k)
or other retirement account, a pot of money they
need to make last. “Collectively as a country we’re
still saving not enough to accomplish retirement,”
says David Blanchett, head of retirement research“Collectively
as a country
we’re still
saving not
enough to
accomplish
retirement”