How long will the correction last?

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bankwannabe's picture
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Maybe we can get some insight from you experienced guys.....any thoughts on the current market trends?  Analysis is welcome...

TexasRep's picture
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correction will last until the full 10% or until the official June 29th rate hike-- AND if corporate profits continue to stay strong-- if profits hold, get ready for a whiplash buying frenzy as the mkt seems to be way oversold-
if profits head down as the fed rate heads up tho--- duck.
 

peanutbroker's picture
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I agree with Tex...market will go up after the rate hike.

doberman's picture
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Ok, here's the bottom line. I've been in this business since 1992 and I don't have a clue where this market is headed. Yep, not one clue. If I did, I would be on a beach somewhere, with my laptop, trading market futures and laughing all the way to my offshore bank.
As a rookie, I was full of market opinions, with most of them wrong. I was wrong for 7-8 years about internet stocks and, as a result, my business suffered. Then in 1999/2000, I was right about internet stocks and my business blossomed.
As I matured from being a rookie, I gradually learned that it's much easier to simply take advantage of the bargains the market offers, rather than overpay for a stock and hope it goes higher.
I practice a form of asset allocation, but with a twist. Rather than dividing a chunk of money between 5-8 asset categories, knowing that 4 of them are probably "overpriced" (historically speaking), I'll withhold investing in the "overpriced" categories until they become more reasonably priced. 
Is this a perfect science? No, but as Warren Buffett says, "I'd rather be approximately right, than precisely wrong."
I tell clients that this form of investing can take as long as 3-5 years before they're fully invested in all the major asset categories at reasonable prices. Again, I don't know where the market is heading, but maybe we can pick-up some bargains along the way.

bankrep1's picture
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who cares?  Get back on the phone...

Revealer's picture
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I am of the opinion we are in a secular bear mkt. These kind of mkts. are where we earn our keep. Pretty simplistic to expect mkt to rally after next fed hike.(17th in a row?) Valuations need to get to historic lows before next bull starts. 10X earn? Who says current P.E. is cheap? Only about at 70 yr. average.Keep in mind that some pretty smart people (Buffet/Gross) are saying to expect 5-6%/yr. for foreseeable future. With that said, RALLYS in bear markets tend to be fierce (and brief.) BTW, for all you managed money afficionadoes out there, you better darn well be prepared to explain 1-2% fees in a 6% world.

scrim67's picture
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Revealer,
With the recent correction I have gotten those phone calls with clients who are losing money on top of their fees.
How do you explain it to your clients so that they don't jump ship?
Thanks in advance for any feedback.
scrim

bankrep1's picture
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Scrim,
These people probably don't belong in the market.  I have gotten 0 calls and if someoe did call me we would have that discussion only one time.  A variable annuity would ease their fears and let them earn a higher return than a CD look into it.  John Hancock has an excellent new annuity with 1.1 M&E
Revealer,
I agree we may see 6% in the US Large cap indexes in the future, we may also see 12% (who knows) if your clients only own the S & P 500 index fund please pass along my name and number and I will help them earn the 8-10% they need to retire comfortably by investing in a multitude of asset classes.

Indyone's picture
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scrim67 wrote:
Revealer,
With the recent correction I have gotten those phone calls with clients who are losing money on top of their fees.
How do you explain it to your clients so that they don't jump ship?
Thanks in advance for any feedback.
scrim
Scrim, you've just made another excellent case for the lowly VA...

scrim67's picture
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Joined: 2005-04-28

Indy,
I spoke to a wholesaler of a VA today.
He mentioned his product is simple.
They will give my client their entire principal back in five years if it's less than the original amount invested.
I was thinking that sounds like a pretty good deal until he mentioned that it must be a 60/40 allocation.
I thought the whole idea was you could be aggressive?
A 60/40 model is hardly aggressive.
scrim

bankrep1's picture
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Scrim,
Interview more wholesalers talk to AIG, ING, John Hancock, Hartford to name a few. 

RedJacobs's picture
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Joined: 2006-06-11

I am new on this forum but I have been trading and investing for a while.
I believe we have a buying oppprtunity in the Dow under 10,500 it will probably drift to 10400/10300 just to really squeeze everyone,but it should pull back above 10,700 after the fed decision. My call is not only derived from the technicals but several other factors.
1) Out of 169 companies who annouced earnings 70% of those exceeded analysts expectations  (BLOOMBERG) not an easy task these days.
2) Bonds rally, Gold falls, Oil falls, all good for equity markets(the only real fear is the hurricane/tornado possibilities for the oil)
3) Money coming out of Housing, Emerging markets and Global markets that have had a great run,where is it going to go?
SECTOR ROTATION INTO HIGH QUALITY US LARGE CAP.  The question is when? I am sure we will be tested - meaning a one day fall exceeding 300 or 400 points this would certainly kill the weak.
Then the fun begins, before then we will probably hear of hedge funds  going out of business due to bad gold or emeging markets investments - the curse of leverage   this is the norm
Just some talking points sorry to go on, It would be great to hear some of your possible scenarios.        &n bsp;         &n bsp;     

STL Indy's picture
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bankrep1 wrote:
Scrim,
Interview more wholesalers talk to AIG, ING, John Hancock, Hartford to name a few. 

American Skandia and Western Reserve Life to name two more...
principle guarantees are great, but not if they force the client into a more conservative allocation.  I'd pass on that annuity Scrim and look at the competition.

frumhere's picture
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Joined: 2005-02-22

that sounds like nationwide's product.  i also hate the forced allocation. axa has a product, but that thing is SO freaking confusing! 

rightway's picture
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Joined: 2004-12-02

RedJacobs wrote:I am new on this forum but I have been trading and investing for a while.
I believe we have a buying oppprtunity in the Dow under 10,500 it
will probably drift to 10400/10300 just to really squeeze everyone,but
it should pull back above 10,700 after the fed decision. My call is not
only derived from the technicals but several other factors.
1) Out of 169 companies who annouced earnings 70% of those exceeded
analysts expectations  (BLOOMBERG) not an easy task these
days.
2) Bonds rally, Gold falls, Oil falls, all good for equity
markets(the only real fear is the hurricane/tornado possibilities for
the oil)
3) Money coming out of Housing, Emerging markets and Global markets that have had a great run,where is it going to go?
SECTOR ROTATION INTO HIGH QUALITY US LARGE CAP.  The
question is when? I am sure we will be tested - meaning
a one day fall exceeding 300 or 400 points this would
certainly kill the weak.
Then the fun begins, before then we will probably hear of hedge
funds  going out of business due to bad gold or emeging markets
investments - the curse of leverage   this is the norm
Just some talking points sorry to go on, It would be great to
hear some of your possible
scenarios.         &n
bsp;          &n
bsp;      

Good post.

Revealer's picture
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bankrep1 wrote:
Scrim,
These people probably don't belong in the market.  I have gotten 0 calls and if someoe did call me we would have that discussion only one time.  A variable annuity would ease their fears and let them earn a higher return than a CD look into it.  John Hancock has an excellent new annuity with 1.1 M&E
Revealer,
I agree we may see 6% in the US Large cap indexes in the future, we may also see 12% (who knows) if your clients only own the S & P 500 index fund please pass along my name and number and I will help them earn the 8-10% they need to retire comfortably by investing in a multitude of asset classes. Call Omaha information and ask for Berkshire Hathaway (which I own the "big" shares). Also, look up Pimco on internet and get Gross' ph.#. They'd like to hear about your multitude of asset class ideas. While you're at it, call Bob Rodriquez @ FPA (#1 multi-class fund for 15 yrs.) and share your ideas. Last I saw, Rodriquez was around 42% CASH. I'm sure he needs to put that dough to work.

bankrep1's picture
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Joined: 2004-12-02

Revealer,
Bill gross is constantly bearish, he said the DOW would fall to 6500 3 years ago when it was at like 9000 remember that and alls it has doen is go up.  He just tries to scare everyone into what? BONDS hmmmmm....
Call Rothenburg, Fama, Ibbotson
Check out DFA for a lesson about the ebnefits of mutli asset investing from the smartest minds in finance:
www.dfafunds.com

 

 

 
 
Revealer wrote:bankrep1 wrote:
Scrim,
These people probably don't belong in the market.  I have gotten 0 calls and if someoe did call me we would have that discussion only one time.  A variable annuity would ease their fears and let them earn a higher return than a CD look into it.  John Hancock has an excellent new annuity with 1.1 M&E
Revealer,
I agree we may see 6% in the US Large cap indexes in the future, we may also see 12% (who knows) if your clients only own the S & P 500 index fund please pass along my name and number and I will help them earn the 8-10% they need to retire comfortably by investing in a multitude of asset classes. Call Omaha information and ask for Berkshire Hathaway (which I own the "big" shares). Also, look up Pimco on internet and get Gross' ph.#. They'd like to hear about your multitude of asset class ideas. While you're at it, call Bob Rodriquez @ FPA (#1 multi-class fund for 15 yrs.) and share your ideas. Last I saw, Rodriquez was around 42% CASH. I'm sure he needs to put that dough to work.

spikedkoolaid's picture
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Joined: 2006-04-20

Peanut and TexasBroker,
Do you boys have any original thoughts or are you just repeating Skrainka's (onionhead) script?

TexasRep's picture
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Joined: 2006-02-18

spikedkoolaid wrote:
Peanut and TexasBroker,
Do you boys have any original thoughts or are you just repeating Skrainka's (onionhead) script?

who's that?
 
 

Revealer's picture
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bankrep1 wrote:
Revealer,
Bill gross is constantly bearish, he said the DOW would fall to 6500 3 years ago when it was at like 9000 remember that and alls it has doen is go up.  He just tries to scare everyone into what? BONDS hmmmmm....
Call Rothenburg, Fama, Ibbotson
Check out DFA for a lesson about the ebnefits of mutli asset investing from the smartest minds in finance:
www.dfafunds.com

 

 

 
 
Revealer wrote:bankrep1 wrote:
Scrim,
These people probably don't belong in the market.  I have gotten 0 calls and if someoe did call me we would have that discussion only one time.  A variable annuity would ease their fears and let them earn a higher return than a CD look into it.  John Hancock has an excellent new annuity with 1.1 M&E
Revealer,
I agree we may see 6% in the US Large cap indexes in the future, we may also see 12% (who knows) if your clients only own the S & P 500 index fund please pass along my name and number and I will help them earn the 8-10% they need to retire comfortably by investing in a multitude of asset classes. Call Omaha information and ask for Berkshire Hathaway (which I own the "big" shares). Also, look up Pimco on internet and get Gross' ph.#. They'd like to hear about your multitude of asset class ideas. While you're at it, call Bob Rodriquez @ FPA (#1 multi-class fund for 15 yrs.) and share your ideas. Last I saw, Rodriquez was around 42% CASH. I'm sure he needs to put that dough to work. You forgot Buffett and Rodriquez. They always bearish, too? You mention DFA. I would guess that GMO (specifically Grantham) holds their own against ANYONE in the asset allocation game. Grantham is bearish/cautious also. Point is, I am usually suspicious when someone tells me that they have this "method" to beat these GREAT minds.

WealthManager's picture
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RedJacobs wrote:3) Money coming out of Housing, Emerging markets and Global markets that have had a great run,where is it going to go?
I agree 100% with you about housing and global markets but I think that emerging markets will continue to be a good place to stay...at least for part of the portfolio.
I see a good trend continuing in value.  Growth should be good but I'm unsure how good.

lawsucks's picture
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scrim67 wrote:
Indy,
I spoke to a wholesaler of a VA today.
He mentioned his product is simple.
They will give my client their entire principal back in five years if it's less than the original amount invested.
I was thinking that sounds like a pretty good deal until he mentioned that it must be a 60/40 allocation.
I thought the whole idea was you could be aggressive?
A 60/40 model is hardly aggressive.
scrim

Every annuity has its quirks - some require you to use a model, some don't, but put a cap on the amount of gains, some only ratchet up on a yearly basis, while others ratchet up quarterly, and they all play with the annuitization rates. 
The reality is that the majority of people that purchase an annuity won't need the guarantees that it can provide - if that weren't true, the insurance company would go bankrupt.  That doesn't mean the client shouldn't have put their money in an annuity, because only hindsight will tell who is in the majority, and some people won't invest without the guarantee.  But it does mean, in my opinion, that you choose the annuity with the best investments and the lowest costs.  For the majority of your clients, the guarantees are only window dressing, and it will be the actual account value that matters.

scrim67's picture
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When you post how do you cut and paste what others have said before you.
I can't figure this out

lawsucks's picture
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scrim67 wrote:
When you post how do you cut and paste what others have said before you.
I can't figure this out

Hit the "quote" button.

troll's picture
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bankrep1 wrote:
Revealer,
Bill gross is constantly bearish, he said the DOW would fall to 6500 3 years ago when it was at like 9000 remember that and alls it has doen is go up.  He just tries to scare everyone into what? BONDS hmmmmm....

I agree completely. Gross's "market calls" alays have the bottomline that the equity markets are about to collapse, credit ratings are vastly overstated on the bullish side and that he's not being paid enough to hold debt. IOW, he spends every second of any period he's on the air jawboning on bonds...

troll's picture
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Revealer wrote: You forgot Buffett and Rodriquez. They always bearish, too? ....... Point is, I am usually suspicious when someone tells me that they have this "method" to beat these GREAT minds.
 
1) I can't speak about Rodriquez, but both Warren and Gross are usually on the bearish side and have been for as far as I can recall. I guess it comes from their respective  perspectives, Warren with traditional value and Gross as a bond guy.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
2) I think you're right to be suspicious of any "system", OTOH, I think you're equally right to remember that Warren and Gross have both been far less than "genius" during various market cycles.
That's no slam on them, it's simply that their investing styles goes in an out of favor. When they're "hot" they're "genius", when they're not, the same voices wonder aloud how they lost their way. I respect how they stick to their respective philosophies and strengths regardless of the market cycle we're in, but I think it’s key to keep in mind they’re never fools NOR omnipotent, they’re simply very good at their respective styles of investing, which go in and out of favor with market cycles.
 

scrim67's picture
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lawsucks wrote:scrim67 wrote:
When you post how do you cut and paste what others have said before you.
I can't figure this out

Hit the "quote" button.

 
Thanks!

Revealer's picture
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mikebutler222 wrote:
Revealer wrote: You forgot Buffett and Rodriquez. They always bearish, too? ....... Point is, I am usually suspicious when someone tells me that they have this "method" to beat these GREAT minds.
 
1) I can't speak about Rodriquez, but both Warren and Gross are usually on the bearish side and have been for as far as I can recall. I guess it comes from their respective  perspectives, Warren with traditional value and Gross as a bond guy.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
2) I think you're right to be suspicious of any "system", OTOH, I think you're equally right to remember that Warren and Gross have both been far less than "genius" during various market cycles.
That's no slam on them, it's simply that their investing styles goes in an out of favor. When they're "hot" they're "genius", when they're not, the same voices wonder aloud how they lost their way. I respect how they stick to their respective philosophies and strengths regardless of the market cycle we're in, but I think it’s key to keep in mind they’re never fools NOR omnipotent, they’re simply very good at their respective styles of investing, which go in and out of favor with market cycles.
  Oh. I'll ignore Buffet's 40 yr. record then. I'll also ignore the fact that PTTAX has outperformed the largest equity fund AGHTX by about 200 bps/yr for past 5 yrs. and outperformed the S&P by about 400 bps/yr in same time. Past 5 yrs. doesn't even cover ALL of the 2000-2003 "great unpleasantness". (This is how the genteel southern ladies refer to the Civil War.) I realize that the past 5 yrs. have been perhaps an anomaly, but agree that the previous 5 yrs indeed were. Those 50 yr. olds are now 60 and are RUNNING OUT OF TIME.

troll's picture
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mikebutler222 wrote: <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Revealer wrote: You forgot Buffett and Rodriquez. They always bearish, too? ....... Point is, I am usually suspicious when someone tells me that they have this "method" to beat these GREAT minds.
 
1) I can't speak about Rodriquez, but both Warren and Gross are usually on the bearish side and have been for as far as I can recall. I guess it comes from their respective  perspectives, Warren with traditional value and Gross as a bond guy.
2) I think you're right to be suspicious of any "system", OTOH, I think you're equally right to remember that Warren and Gross have both been far less than "genius" during various market cycles.
That's no slam on them, it's simply that their investing styles goes in an out of favor. When they're "hot" they're "genius", when they're not, the same voices wonder aloud how they lost their way. I respect how they stick to their respective philosophies and strengths regardless of the market cycle we're in, but I think it’s key to keep in mind they’re never fools NOR omnipotent, they’re simply very good at their respective styles of investing, which go in and out of favor with market cycles.
 
Revealer wrote:  Oh. I'll ignore Buffet's 40 yr. record then.

I wouldn't ignore it, <?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Warren deserves credit for it and I have great respect for him. OTOH, don't forget how he missed the 1990s and how often the learned members of the financial world wondered how (then) he’d lost his way. Now that we’ve seen a few years of a value market, Warren’s a genius again, and the growth managers are dunces. He was never omnipotent and he was never a fool. He’s a great value manager and when value’s in favor, he looks even better, when it’s out of favor, he doesn’t. That’s not rocket science.
If we were having this conversation in 1998 we wouldn’t be talking about Warren as a star, is all I’m saying.
 Revealer wrote:
I'll also ignore the fact that PTTAX has outperformed the largest equity fund AGHTX by about 200 bps/yr for past 5 yrs. and outperformed the S&P by about 400 bps/yr in same time.

That’s an intermediate term bond fund, which in a period of rapidly declining interest rates (the vast majority of the last 5 years) has been favored over a stock market that’s seen the bubble of 2000 burst, a recession and 9/11. Again, not to take anything away from Gross, his fund has earned 3 stars from MorningStar, 72% rank in category this year, 33% in three years, 11% in 5 yrs (but 90 bps on a bond fund is high, imho) but there’s no real genius behind beating the domestic equity markets in a period like this. It’s just an advantage ALL fixed income managers have had over equity managers in the past 5 years.
Revealer wrote:
Past 5 yrs. doesn't even cover ALL of the 2000-2003 "great unpleasantness". (This is how the genteel southern ladies refer to the Civil War.) I realize that the past 5 yrs. have been perhaps an anomaly, but agree that the previous 5 yrs indeed were. Those 50 yr. olds are now 60 and are RUNNING OUT OF TIME.
 
 

 
How are 60 year old “running out of time”, really? Are they going to go 100% into fixed income the day they retire, or do they invest with an eye towards current income, keeping in mind they’ll have to stretch that assets base fro perhaps the next 30 years?
 
 
 
 
 

troll's picture
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BTW, that's the "recent unpleasantness"

bankrep1's picture
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Just when your getting nervous we have a 300+ bounce didn't I tell you to get back on the phone.......  Please..... 
I love how people over react Scrim, calll everyone who called you and tell them how ridiculous there actions were and tell them....   This is going to happen again next time maybe worse.  Do you want to be in the market or o you need some security (VA).....

menotellname's picture
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bankrep1,
Why not both?
With the Allstate Advisor VA and a True Return rider the client can choose to guarantee up to 200% of their premium 20 years out (3.6%) and invest in the market.  Worst case scenario the client gets their account value or the True Return guarantee...whichever is greater.
Yeah...we all know that a properly allocated portfolio will perform better over 20 years but some clients need to have some sort of contractual minimum guarantee to invest in variable products.

reaganalvin's picture
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The prices of the commodities and energy have suffered too versus the greenback now a days and this brings lots f worries to the growht of the economic stability which are triggered sfter the data from another side.

whiplash

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