Steve Rattner: People who own stocks did very well

>>> welcome back to " morning joe ." it's time for battle of the charts. please. do not try this at home. you could get hurt. with us now, in one corner, finance editor for "today" and personal finance guru, jean chatzky. she has charts and she's the challenger. but before we get to her charts, we have the reigning chart champion, steve rattner has some charts on how the market stacks up to other economic measures over the past few years. chart number one, steve rattner. the ball is in your corner.

>> chart winner only by volume, not necessarily by quality.

>> okay.

>> anyway, so you've been talking a lot this week. looks like we're going to have another record at least opening today on the stock exchange . and so we have a lot of winners among stock owners. let's talk about who some of the losers are. one loser is the average american whose incomes are up 6% in nominal terms. i can't draw on this.

>> you're thrown off by jean being here.

>> i'm thrown off --

>> this is the worst chart performance i've ever seen.

>> i've been thrown off by limited technological capabilities. the stock market is up 13.3% since the beginning of 2007 , the green line . individual incomes are up 6%. now, that's before you count inflation. after inflation, they're down 6.7%.

>> oh, my gosh.

>> you've got the number of jobs, down 1.7%. and you've got housing, of course, down 28%. so the point here is that people who own stocks did very well. people who had incomes, people who didn't have a job, people who had houses did a lot less well.

>> let's put the charts up again and just put it in perspective. if you look at the numbers, this goes back to 2007 . housing is down 28%. so if you invested in housing pre- 2007 , a tough run for you. jobs, down 1.7% since that time. median income , is that right?

>> median income up 6%, before inflation, down 6.7% after inflation. the stock market up 13.3%, back to a record. you.

>> basically have a 26% swing between income and stock market .

>> you've got a huge swing, yes, that's right.

>> so what's caused that?

>> what's caused that is the next chart , actually. if you look at the next chart , you're going to see what's going on in america, which is you see your stock price line. the green line again. up 14.7%. and then you see corporate profits up even more.

>> household income is down 5%, 6% over the past four years. poverty rates are up. wall street 's up almost 25%. why?

>> why? because can we go to the last chart ? you'll see why maybe a little bit more clearly.

>> the answer is always on the chart , steve .

>> if you read your script, you'd know.

>> i don't have to do that.

>> this looks a little messy, but the real gist of it, if you look over at the left, back in 2001 , personal income was 65% of all of our national income . corporate profits were 8.5%. look all the way over at the right. skip the recessions and all that. corporate profits are up to 14.2% of our economy. and personal incomes are down to 61.7%. the share of our economy going to work has gone down. why? because of globalization where companies can source their labor any way they want all around the world often at lower prices where workers can't demand pay increases. so the connecting fiber here, joe, is high corporate profits because they've been able to lower their labor costs . which means lower family incomes. and that's really what's been going on in this economy.

>> jean, the fall of 2008 , terrible for a lot of people and their retirement plans .

>> absolutely.

>> it's come back a little bit. what do we do?

>> it hasn't come back a little bit. it's actually come back a lot. when you look -- and i want to go -- can i go to chart three before i go to chart one or chart two?

>> yes.

>> the people that we're most worried are the people closest to retirement. as always, they have the least amount of time to recover from a big dip in the stock market . if you can continue to participate in your 401(k), if you continued -- here are the balances from people in that age group . and we've broken it down by the length of time they've been with their company. but the left side is 2007 . the right side is now. and you can see these people have recovered. and they've recovered --

>> everybody's recovering.

>> they've recovered. and a lot of people -- the smaller balances are going to give people a source for worry. how can you be 55 and only have $50,000 in your account? what we have to remember is that people change jobs so often these days. they've got multiple 401(k)s. they've got i.r.a.s on the side because they've rolled over other balances. but the key to all this and the thing people have to remember as the stock market goes down, because inevitably, it will have its correction at some point when the fed decides to stop supporting the markets. you've got to keep putting money into your 401(k). you have to hold on because if you look at charts one and two, you see that the people who stopped contributing, they are way down. these are, again, those 55-year-olds. and they are way down. 19% below where they were in 2007 . on the next chart , if they continued to contribute, you can see they're up 24% where they were in 2007 . that is a huge, huge difference. and it doesn't matter where they put the money. i mean, if they put it into stocks at the right time, great. but we can't time the market . we don't have the skills to necessarily do that.

>> we're at record highs now, steve rattner. obviously we're going to have a drop. we're going to have a direction. is the advice around the table when that happens, just hold tight?

>> look, this is an important point because individual investors and sophisticated investors have a terrible time timing the market. timing the market is a stupid way to invest, especially when you're a long way from retirement. your 401(k) people, you're right, they put their money in 2005 through 2007 , they would have been fine. the mistake they make, they take their money out, they wait for it to double, which it has, and now you see stories every day about them putting their money back in. that is not the way to do it.

>> billions of dollars. $460 billion in the last five years have come out of stock mutual funds . $54 billion has gone in just since the beginning of this year because people get emotional. and they don't like to lose money a lot more than they like to make money. and so they make bad decisions. we can't leave it up to ourselves to make these decisions. we've just got to get in and put it on autopilot and stay in.

>> unlike my dad that bought lockheed at 63 and sold it at 3. not a good move. let's talk about the 4% rule. for a long time, a lot of people thought the solution was 4% rule. don't take any more than 4% out of your retirement every year. you say that's not the way to go.

>> well, and "the wall street journal " said it before i did. they looked at research that essentially said you've got to watch it. because if the market goes down during your early years of retirement, chances are pretty good if you adhere to that rule, you're not going to have enough money to last you the 30 years that retirement can last. a better solution may be to take some of that retirement money off the top and use it to buy yourself an income in the form of a very simple annuity. simple low-cost annuity. i know a lot of people hear the word "annuity," and they go whoa, i don't want to go there. there are low-fee, simple immediate annuities where you essentially buy yourself what your grandparents used to have. you buy yourself a pension or a paycheck. and you can layer them over time . you don't have to buy them all at once. you take the same $50,000, and you spend it at age 65 on an annuity. if you use another $50,000 at age 70 or 75, you're going to get more every single month because of your age and your life expectancy .

>> young sam stein?

>> yeah, i brought a chart , too, by the way.

>> don't show that chart .

>> i have a chart .

>> don't show that chart , sam .

>> can we zoom in on this? on the one hand, we have number of tv viewers and then we subtract over time .

>> this is cold. this is horrible.

>> that's accurate. i'm sorry.

>> do i detect a tinge of jealousy?

>> yes, i don't have charts. no one told me to bring charts.

>> you brought your own, young sam stein. have you invested yet in a 401(k)?

>> yeah.

>> do you?

>> a very small amount, but yeah. it's only, you know, it's pragmatic to do something like that. i put everything in facebook stock as soon as it came out.

>> excellent.

>> i know why you keep him around.

>> is that doing all right?

>>> coming up, mayor cory booker and former senator bill frist . they're going to join us for a healthier america. we're going to offer some munchkins to them. see how they feel about that. more " morning joe " when we come back.