|Bid||104.06 x 0|
|Ask||104.10 x 0|
|Day's range||103.01 - 105.58|
|52-week range||1.13 - 192.99|
|Beta (5Y monthly)||1.18|
|PE ratio (TTM)||17.43|
|Earnings date||23 Oct 2020|
|Forward dividend & yield||N/A (N/A)|
|Ex-dividend date||27 Feb 2020|
|1y target est||221.84|
(Bloomberg Opinion) -- A recent column on 401(k) plans that I wrote attracted a lot of attention. On the positive side, most agreed the benefits of these retirement plans are eroding due to changes in tax rates and interest rates since they were created some 40 years ago, more employers reducing or eliminating matches, and the failure of some plans to keep up with declining fees on other financial products. On the negative side, many objected to my contention that for some young median-wage workers in bad plans, contributing to a 401(k) no longer made sense, and that these accounts might become poor choices for a significant portion of workers if current trends continue.My proposed solution was for the U.S. Congress to restore the tax benefits that 401(k) plans originally enjoyed for median household income workers. But as some rightly pointed out, waiting for Congress to solve your problems is not a winning strategy. It’s fair to ask what I think individuals should do to help themselves save for retirement. I have some answers, but they’re not great.Young median-wage workers face overwhelming financial retirement issues. Very few have access to private defined-benefit plans. Social Security, Medicare and most State and local pension plans have no money to pay for benefits 15 or 20 years down the road, and are taking more money from young workers and reducing their access to benefits to pay for retired workers. Under any plausible analysis I can come up with, these retirement systems net reduce the retirement wealth of young workers today.The tax benefits of 401(k) and other deferred-tax accounts are still healthy for upper-income workers, and these people are more likely to be in good plans with employer matches, low fees and good investment options. And retail financial services outside of 401(k) plans have improved enormously in quality since 1980, while costs have plummeted. If you earn a lot, you can save a lot.My recent column looked at 25- to 34-year-old workers with household incomes between $40,000 and $50,000 per year in 2017 (the last year for which data are available). This covers roughly the 40th to the 60th income percentile(1) for the age group. Households in this income range are generally in the 12% marginal tax bracket for federal income taxes.(2) Income taxes are not the big problem for this cohort, as they pay only 1.8% of pretax income in federal income tax and 1.9% in State and local income tax, after all exemptions and deductions.A much bigger problem is the 9.4% of their paychecks that goes for Social Security and other mandatory pension contributions -- benefits these workers may not see. And you should really double that figure because employer contributions (which equal employee contributions for Social Security and could be more or less for pension plans) probably come out of employee wages in an economic sense.As a result of heavy pension contributions, those with the average household income of $41,682 cannot cover the $42,731 of average expenditures. You might say workers should reduce their expenditures, but a look at the line items in the Consumer Expenditure Survey reveal it’s not easy to find fat. Yes, a healthy, single person in a low-cost area without student debt should be able to save money out of an $800 per week paycheck before deductions, but it’s a lot to ask of a family in a high-cost city.It’s not like further education would improve their prospects. Some 70% have college degrees already, and 82% of the adults in these households are working (the remainder are mostly unemployed or taking care of children and homes). Some can hope for higher earnings in the future, but hope is not a plan.As a result, the average household in this group sank deeper into debt by $3,731, or 9.0% of pretax wages, in 2017—a year when the S&P 500 Index rose 19.4% and the Bloomberg Barclays U.S. Aggregate Bond Index gained 3.54%. Rising markets don’t directly help people who can’t find the money to invest. But when markets go down, as in 2008 and earlier this year, it inflicts pain on everyone.So what advice do I have for a younger worker in this wage bracket who has a high-cost 401(k) without a match and with poor investment choices? Sure, there is some psychological advantage to making regular automatic contributions to a savings plan. But it probably makes more sense financially to pay down high-interest debt or making extra mortgage payments if they are homeowners to reduce outstanding principal at a faster rate. And buying a home might be a better strategy for renters who can manage such a purchase financially. Also, without an employer match, a self-directed tax-deferred account, or a tax efficient exchange-traded or mutual fund, can beat a high-cost 401(k). The biggest criticism of my original column was that even discussing whether 401(k) plans are good investments might cause many workers to stop saving altogether rather than switching the money to superior financial options. Ultimately, people have to either take charge of their financial future or depend on Congress for help. Right now, Congress does not seem to be up to the challenge.(1) It's actually 41st to 58th for those who like precision. All numbers come from the Bureau of Labor Statistics Consumer Expenditure Survey.(2) Even a single filer earning $50,000 with no dependents or other exemptions or deductions would have taxable income of $37,600 after the 2020 standard deduction, and the 22% bracket doesn’t kick in until $40,126. In my original column, many people objected to my applying 2020 tax rates to 2017 income figures, but I’m trying to get at what a 401(k) is worth going forward, not what it was worth in 2017 with higher marginal tax rates.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Aaron Brown is a former managing director and head of financial market research at AQR Capital Management. He is the author of "The Poker Face of Wall Street." He may have a stake in the areas he writes about.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Britons are lagging Europe in the march back to the office, but the U.K.’s status as the standard-bearer for WFH could be hard to sustain. Only 34% of U.K. office workers are working in their normal location, according to a recent survey by analysts at Morgan Stanley. In France, Germany, Italy and Spain the figure ranges from 70% to 83%. In London, nearly half of office staff are working from home five days a week, compared with just 20%-33% for peers in the financial hubs of greater Paris, Frankfurt, Milan and Madrid. The U.K. entered lockdown later than other European countries, and emerged later as the summer holiday season got underway, potentially one factor in resistance to going back to the office. The official guidance has been that you should do your job from home if you can. But this month, that was softened, making the question of how to work safely a matter for employers and employees with WFH “one way” of doing so. Individual ministers are being much more explicit in saying people have to get back to work in city centers to support the economy.For workers in London’s commuter belt, weighing whether to return means answering yes to questions more easily answered no. Do I want to trade the 15 hours a week I’ve gained from not commuting for the heightened risk of contracting Covid-19, on the train or elsewhere? Do I want to forgo the serendipitous savings from those nosebleed suburban rail fares?For parents with younger children, the scaling back of holiday childcare provisions made the decision for them. Anecdotally, all-day childcare appears to be less available in the U.K. than on the continent this summer.It’s probably millennial workers who have most gladly taken the path back to the office, perhaps even those who had decamped to work from their childhood homes. Cooped up in small flats or house-shares closer to their workplace, many understandably crave the chance to work away from the room they sleep in — and to hang out with peers. Plus they can probably more easily walk or cycle in. Even though they can renew acquaintances in the office, they will still miss out on learning by osmosis from senior colleagues who are staying put in suburban gardens and loft-conversion studies. And lunch options remain limited with many shops still shut in central London. Without a critical mass of people returning, the zombified atmosphere of this usually buzzing financial center risks becoming self-perpetuating.So far, employers have been a weak counterbalancing force. They must respect the government guidance and can’t pull staff back en masse before making offices safe. London has more than 2,600 high-rise buildings, compared with less than 1,000 in Frankfurt and Paris, according to real-estate data provider Emporis. It’s hard to get people through turnstiles and up lifts in numbers with social distancing.Meanwhile, many office-based businesses have traded well during lockdown. Fearful of losing their jobs, homeworkers have reinvested commuting time in work. The big investment banks still captured the revenue opportunity created by crisis-driven bond issuance and widespread market volatility. Multibillion-dollar M&A deals have been agreed online. BP Plc this week hosted a slickly produced interactive strategy update praised by zoomed-in investment analysts as if it was even better than the real thing.True, these factors apply in all European cities. They just apply more so in London and the U.K. We shall see how long this lasts. Bosses are changing their tune. Barclays Plc Chief Executive Jes Staley said in April that big offices were likely history. Just over a week ago, he said he wanted his people back at their desks over time.Transmission rates are key. But employers will face mounting pressure to accommodate staff fed up with WFH and how it’s encroached on their work-life balance. Multinational firms probably have overdue projects in the wings that are just too big and complicated to be done 100% on Zoom or Microsoft Teams. Assuming schools return in September, the WFH anchor for some will slip loose. For now, employers technically have discretion on WFH, but it’s clear what the politicians want them to decide.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- The Bank of England risks being in a category of one. On Thursday, in its quarterly monetary policy report, it presented a surprisingly chipper assessment of how it expects the U.K. to recover from the pandemic lockdown.Its relative optimism was in jarring contrast to the gloom that’s engulfed Britain’s big lending banks. BOE Governor Andrew Bailey has had a decent crisis up until now, but he’ll dent his credibility if he’s seen as being too much of a cheerleader.Barclays Plc, HSBC Holdings Plc, Lloyds Banking Group Plc and Natwest Group Plc presented an unremittingly pessimistic outlook for the U.K. with their earnings results over the past couple of weeks. Collectively, the big lenders have taken 17.2 billion pounds ($23 billion) of cumulative writedowns this year, mostly in anticipation of future loan losses caused by the Covid lockdowns and the subsequent economic damage.By contrast, the BOE’s recovery scenario looks positively heroic, with an expectation that Gross Domestic Product will grow by a whopping 18% in the third quarter. The central bank also expects overall U.K. loan losses this year to be somewhat less than the 80 billion pounds it anticipated in May.This divergence of economic views between Bailey’s team and Britain’s top bankers is unusual. A central bank typically tries to provide balanced economic forecasts, finding a mid-point between the worst and best possible outcomes. But most of the risk in this one appears to be on the downside, something the governor acknowledged on Thursday.The biggest leap of faith is the BOE’s year-end unemployment forecast of 7.5%. That is nearly double its pre-Covid level, but NatWest expects an increase to 9.2%-9.8%, with a worst-case estimate of 14.4%. High unemployment is a very serious problem for Britain’s banks, who are heavily exposed to consumer and mortgage lending.You can see why Bailey would want to make the banks feel less despondent. The BOE needs them to lend, as that is its main transmission mechanism for getting money into the real economy. The banks have funds available but that doesn’t make them willing lenders when they fear the specter of bad loans, a phenomenon the European Central Bank has long struggled with. The sensible thing would be further enticements to get banks to use the BOE’s super-cheap borrowing pot — the so-called term funding scheme. Lenders can use this tool to get loans from the central bank, which they can in turn lend to small and medium-sized businesses. Bailey could make this more widely available or even make the loans essentially free to the banks.At the moment, the banking sector is hearing mixed messages from different parts of the BOE. The monetary policy committee may well be saying now that loan losses will be less severe than forecast in May, but the central bank is also the regulatory supervisor for the industry and lenders are fearful about getting into trouble by eating into their capital buffers.In fairness to Bailey, it’s natural that the commercial banks will be as conservative as possible in their assumptions, given that they can’t be blamed for the pandemic. But it still feels odd that these two parts of the City are singing such different tunes. The BOE has often acted in lockstep with the U.K. government, via the Treasury, in its response to the crisis. It’s troubling that it’s so out of sync with the bankers.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Marcus Ashworth is a Bloomberg Opinion columnist covering European markets. He spent three decades in the banking industry, most recently as chief markets strategist at Haitong Securities in London.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.