Rant

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skeedaddy2's picture
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As both an advisor and an investor, I am sickened by the events of the last year and half. When I started in the brokerage industry, George Bush 41 was the President and I started at the training program at PaineWebber in NYC. Working in NYC, I learned about many things, quickly. I learned about goat cheese, sushi, triple tax frees, sector rotation, french cuffs, how to smile and dial and how to ask for the order. I fell in love with capitalism and the capital markets. I remember when one of my prospects, a self-made type, listened to my pitch and then asked me how much of my own money I had in that investment. I fumbled the answer and didn't get the account. That day, I vowed never to let that happen again, and I started to invest myself. The biggest fear brokers had was Schwab taking business away from full service brokers.

Having my own money on the line kept me on top of the game. I grew increasingly interested in the technicals of the market. I befriended the oldest dude in the office who kept his own point and figure charts by hand. I remember him telling me throughout 1999, that it looked like a major top was forming. I started placing trailing stop losses on all of my and my client's positions weekly. The market eventually topped on March 10th of 2000. By the 15th of March, my stops were getting hit and soon after I was out of the market completely. I survived the dotcom crash but I never thought the NASDAQ would still be at less than half the peak-eight years later. Then, the biggest fear brokers had was online brokers and decimalization.

Along the way, we encountered Enron, Worldcom, Tyco and Long Term Capital. I sold my UBS when I rolled over my 401k in 2004. As the yield curve flattened, I passed on investing in financials. I am sorry for those of you who still have shares and worthless options. Today, I'd say that our biggest fear is that investor confidence has been shattered. Will it return? How? Will boomers give up on the market after treading water for almost a decade? Will younger investors get interested? Personally, I've gone from being a Republican to feeling like a Democrat. My portfolio's value is down, my home's value is down and my income is down.

How could regulator after regulator have failed so miserably? How could rating agencies have issued AAA ratings on securities that they knew were time bombs? How could quants have developed valuation models where housing prices only went up? Is there an auditor in the Big 4 that can actually read a balance sheet? How could Citibank's board of directors have been so reckless with their shareholders? How can AIG take a bailout check and then throw a lavish corporate retreat? How can Madoff have duped regulators for so long? How can John Thain head a troubled company and then spend over a $1 million to decorate his office using a company check? Can we bring back the uptick rule? Can analysts start analyzing instead of being spoon fed guidance by companies? Is printing $1 trillion more dollars our best option? Will increased regulation from Washington result in bringing back confidence or will it bring more unintended consequences?

HymanRoth's picture
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fritz's picture
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"I survived the dotcom crash but I never thought the NASDAQ would still be at less than half the peak-eight years later."
 
Nasdaq 100 will NEVER hit 5000 again.  I see a day in a few years they get rid of that index and create a new one with maybe 25-50 names.  Stocks like Dell, Ebay, Intel, Msft, Yhoo etc etc all going to single digits.  See them going private in the next year or two.

buyandhold's picture
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Joined: 2008-09-23

Great post.

Hank Moody's picture
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fritz wrote:"I survived the dotcom crash but I never thought the NASDAQ would still be at less than half the peak-eight years later."
 
Nasdaq 100 will NEVER hit 5000 again.  I see a day in a few years they get rid of that index and create a new one with maybe 25-50 names.  Stocks like Dell, Ebay, Intel, Msft, Yhoo etc etc all going to single digits.  See them going private in the next year or two.I heard about an index that has 25-50 names. It's called the Dow Jones Industrial Average. Check it out, some time.

Squash1's picture
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Joined: 2008-11-19

Indexes are becoming so useless..
 
The Dow is not suppose to hold stock under $10... oops
The S&P 500 has small cap in it...oops.
 
There is so much garbage in bonds now that I wouldn't go near an index(of course there are some great deal in individual bonds) where is the protection in a bond fund..oops
 

jkl1v1n6's picture
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As an advisor in the "semi" rural midwest (read uber-conservative) I am seeing what skeedaddy2 foretold.  The extreme lack of investor confidence in people age 55 on up.  They are moving money out of the market and into fixed income, primarily CD's.  We may be witnessing the greatest transfer of wealth in history but if they follow lessons like their parents did coming out of the depression, that money will not go back in to the markets. 

MinimumVariance's picture
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Joined: 2008-08-20

How could regulator after regulator have failed so miserably? How could rating agencies have issued AAA ratings on securities that they knew were time bombs? How could quants have developed valuation models where housing prices only went up? Is there an auditor in the Big 4 that can actually read a balance sheet? How could Citibank's board of directors have been so reckless with their shareholders? How can AIG take a bailout check and then throw a lavish corporate retreat? How can Madoff have duped regulators for so long? How can John Thain head a troubled company and then spend over a $1 million to decorate his office using a company check? Can we bring back the uptick rule? Can analysts start analyzing instead of being spoon fed guidance by companies? Is printing $1 trillion more dollars our best option? Will increased regulation from Washington result in bringing back confidence or will it bring more unintended consequences?
 
LOVED UR POST!!!
 
lET ME OFFER an explanation. When real investment banks decided to become public corporations.
 
How's that U ask? When the partners of a hundred firms all suddenly became 'managers' for the shareholders, and not caretakers of their own wealth, and since quarterly compounded increasing returns are the sin qu non of the public, the concept of risk was divorced from the concept of returns.   Everything else you write of is a consequence. A mere bagatelle if you will.

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MinimumVariance wrote:How could regulator after regulator have failed so miserably? How could rating agencies have issued AAA ratings on securities that they knew were time bombs? How could quants have developed valuation models where housing prices only went up? Is there an auditor in the Big 4 that can actually read a balance sheet? How could Citibank's board of directors have been so reckless with their shareholders? How can AIG take a bailout check and then throw a lavish corporate retreat? How can Madoff have duped regulators for so long? How can John Thain head a troubled company and then spend over a $1 million to decorate his office using a company check? Can we bring back the uptick rule? Can analysts start analyzing instead of being spoon fed guidance by companies? Is printing $1 trillion more dollars our best option? Will increased regulation from Washington result in bringing back confidence or will it bring more unintended consequences?
 
LOVED UR POST!!!
 
lET ME OFFER an explanation. When real investment banks decided to become public corporations.
 
How's that U ask? When the partners of a hundred firms all suddenly became 'managers' for the shareholders, and not caretakers of their own wealth, and since quarterly compounded increasing returns are the sin qu non of the public, the concept of risk was divorced from the concept of returns.   Everything else you write of is a consequence. A mere bagatelle if you will.
 
You nailed it.  Think about it.  Why did partnerships exist?  CPA firms, brokerages, law firms, etc.....to make the partners wealthy, not have to answer to anyone other than fellow partners, and be able to protect your wealth.  So what happened?  Partners became "managers", the partners sold out eons ago, and no longer exist.  The people (i.e. Executives) that still want to be "partners" need to resort to free-agency type employment deals of 10 of millions (hundreds sometimes) of dollars to do this.  And to garner these deals, they must rely on ever-increasing stock prices.  In order to hit these nearly-impossible, ever-increasing stock values, they must resort to tactics they would NEVER dream of doing if it were their own capital at risk.  And in most cases, they get fired for not performing, but the golden parachute they negotiated more than compensates for the "capital" they put at risk by taking a million stock options.  To make a long story short, they are gambling with other people's capital in order to enrich themselves.  As true "partners" in a private company, there are too many checks and balances, as everyone's personal wealth hangs in the balance.
 
IPO's were the death knell to this industry, even if it took 10-20 years for it to come to fruition.  Actually, I can't even remember when all the major firms started going public.  Wasn't Merrill the first back in the 80's?  And I think Goldman was the last?
 
Can you imagine what would happen if law firms all started going public?  Jesus, there would be even more shitty lawsuits than there are now!

HymanRoth's picture
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jkl1v1n6 wrote:As an advisor in the "semi" rural midwest (read uber-conservative) I am seeing what skeedaddy2 foretold.  The extreme lack of investor confidence in people age 55 on up.  They are moving money out of the market and into fixed income, primarily CD's.  We may be witnessing the greatest transfer of wealth in history but if they follow lessons like their parents did coming out of the depression, that money will not go back in to the markets.  I've seen some of that as well....earlier today I was pondering how many folks have gotten to the point where they have no faith or interest in the financial markets.

Raindog's picture
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Joined: 2008-02-17

When the retail investor is no longer interested in the market, isn't that usually an indicator that it's probably time to be wading back in?

jkl1v1n6's picture
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Joined: 2008-10-06

The retail investor hasn't been interested in the market since October! 

Spaceman Spiff's picture
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HymanRoth wrote: jkl1v1n6 wrote:
As an advisor in the "semi" rural midwest (read uber-conservative) I am seeing what skeedaddy2 foretold.  The extreme lack of investor confidence in people age 55 on up.  They are moving money out of the market and into fixed income, primarily CD's.  We may be witnessing the greatest transfer of wealth in history but if they follow lessons like their parents did coming out of the depression, that money will not go back in to the markets.  I've seen some of that as well....earlier today I was pondering how many folks have gotten to the point where they have no faith or interest in the financial markets.
 
So, that begs the question: What now?  How do we, as the professionals, move forward from here?  Do we change our strategies?  Our product mix?  Do we use all VAs with all kinds of guarantees?  If indexes suck and are changing their composition, who do you use them as the benchmark?
 
How do you communicate to a guy who is 60 and wants to retire in 5 years that he can't afford to pull his money out of the market because the market is the only real shot he's got at making it back.  These people want to run for the hills, taking their money in gold double eagles in their pockets, and never look back. 
 
I've got a crusty old guy as a client who has convinced his kids that the market is a scam.  It's getting more and more difficult to tell him he's wrong. 
 
How do you market to a group of people that have been severely burned by the markets and just want to curl up into a ball.  That's pretty much how most baby boomers think.  I'd bet 50% of them haven't even looked at their statement since Sept.  The 70+ crowd may never want to invest in the market again.  CD rates suck along with MMKT rates.  Any decent corp bonds are trading at ridiculous premiums.  
 
Where do you go from here?     

snaggletooth's picture
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Spaceman Spiff wrote:
So, that begs the question: What now?  How do we, as the professionals, move forward from here?  Do we change our strategies?  Our product mix?  Do we use all VAs with all kinds of guarantees?  If indexes suck and are changing their composition, who do you use them as the benchmark?
 
How do you communicate to a guy who is 60 and wants to retire in 5 years that he can't afford to pull his money out of the market because the market is the only real shot he's got at making it back.  These people want to run for the hills, taking their money in gold double eagles in their pockets, and never look back. 
 
I've got a crusty old guy as a client who has convinced his kids that the market is a scam.  It's getting more and more difficult to tell him he's wrong. 
 
How do you market to a group of people that have been severely burned by the markets and just want to curl up into a ball.  That's pretty much how most baby boomers think.  I'd bet 50% of them haven't even looked at their statement since Sept.  The 70+ crowd may never want to invest in the market again.  CD rates suck along with MMKT rates.  Any decent corp bonds are trading at ridiculous premiums.  
 
Where do you go from here?     
 
I know EXACTLY where I'm going from here.  As a matter of fact, I had cold called a very qualified guy in 2007 who said he had his IRA's at Edward D. Jones, and that the advisor is a really good buddy of his, so he wouldn't move that account.
 
So today, I was cold calling to show our newly hired cold caller how to do it and I call the guy.  Here's the gist of the conversation:
 
"Hey, I spoke with you back in May of 2007, and I wanted to call to touch base.  First, I want to apologize to you for not touching base sooner.  I know the market has crashed since we last spoke and it's tough.  I know your buddy manages your accounts at EDJ and I don't know what's going on there, but I wanted to tell you what's working for our clients, and the thing is, it's not available at EDJ, would that be ok with you?"
 
He says, "Yes".
 
"Well it's a type of account that participates when the market goes up, does not lose anything when the market goes down, and has no fees.  Now I don't know if this is right for you, but I'd like to get together to meet and see if it could be a good fit, would that be ok with you?"
 
He says, "Yes, let's get together in 2 weeks".
 
That was lead #1.  Called another guy that was a pure cold call and described the same thing.  We are set to get together at the end of the week.
 
I esentially set two appointments in 10 minutes and 4 contacts.
 
I actually feel legitimately sorry for you guys that can't offer some of this stuff.  It's like sending out a soldier to war without a gun.

newnew's picture
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Joined: 2007-02-23

no fees?

snaggletooth's picture
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Joined: 2007-07-13

newnew wrote:no fees?
 
None.

now_indy's picture
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Joined: 2006-07-28

I'll bite. What product is it?

anonymous's picture
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"So, that begs the question: What now?  How do we, as the professionals, move forward from here?  Do we change our strategies?  Our product mix?  Do we use all VAs with all kinds of guarantees?  If indexes suck and are changing their composition, who do you use them as the benchmark?"
 
Spaceman Spiff, nothing has really changed other than the fact that  people's attitudes have changed.  Yet, this change isn't a change.  Investors have always gotten into the market after it goes up.  They get out after it goes down.  Investors are going to continue to underperform the market just like they've always done.
 
There is a very important lesson in the intersection of investment returns and investor returns.   There are many people who simply should not be investing in the market.   If a sharp market downturn is going to cause someone to take their money out of the market, they need to be savers and not investors. 
 
We know that this is a better time to invest than 2 years ago.   We don't know if this is a good time to invest.  We'll never know.  Since we'll never know, does what happened yesterday, last week, last month, last year even matter?  I don't think so.
 
Nothing's changed in my practice.  Every client gets treated as an individual.  My first question, then and now, is "What is your greatest financial concern?"  I then shut up for as long as possible.  The answer will tell me product mix, etc.   The subject of benchmarks never comes up.  My clients aren't trying to beat the S&P or something similar.  They are trying to send their kid to school or retire at a certain age or never outlive their money, etc.
 
"How do you communicate to a guy who is 60 and wants to retire in 5 years that he can't afford to pull his money out of the market because the market is the only real shot he's got at making it back.  These people want to run for the hills, taking their money in gold double eagles in their pockets, and never look back. "
 
You do it openly and honestly. 
 
"John, we have a real problem here.  We don't know if the market is going to return 25% a year for the next 5 years or lose half of it's value.  We never know what the market will do.  Based upon your retirement goal of retiring in 5 years with the same standard of living, you are going to need close to a 10% average return. "
 
"We have a few choices.  1) We can pull your money out of the market.  You won't lose any more money.  You also won't be able to achieve your goal.   If we go this route, you are going to have to choose to keep working past 65 or retire with a lower standard of living. "
 
"2) We can keep your money in the market.  You may achieve your goal.  It is also possible that the market can go down.  If you lose money, you will most likely have to work into your 70's and depending on the size of the loss, retirement may never be an option."
 
"3) We can invest in the market with guarantees.  You may achieve your financial goals if the market does well, and if you don't, the guarantees will still allow you to retire in the future, but not at age 65 with the standard of living that you want"
 
Whatever the client wants to do is fine with me.  It's his money.  I just need to make sure that he understands the consequences of his actions and I want my practice to be positioned in such a way that I'll get paid regardless of the road that he wants to take.
 
"I've got a crusty old guy as a client who has convinced his kids that the market is a scam.  It's getting more and more difficult to tell him he's wrong."
 
He might be right.  You certainly don't want to convince him that he's wrong.  If you do, he'll invest his money.  When the market goes down, he'll get out, which means he shouldn't have been in.  Everyone doesn't belong in the market.   Being in the market has consequences.  Being out of the market has consequences.  The client needs to understand both sides. 
 
 

Sportsfreakbob's picture
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Great post Anon,I think what Spiff is referring to is simply the fact that after what has happened, there are going to be a lot moe investors in the category of "doesnt belong in the market". Confidence has been shot, and a lot of people are going to leave the table and not come back for a long time. They will come back, but only years from now, when greed finally returns.And therein lies the problem. A smaller pool of qualified prospects...which is why there will be thousands and thousands fewer of us doing what we do in a year or so. Which is ultimately good news, for those of us that survive this mess.So my question to you Spiff, is , are you one of the guys that is going to survive? That question is put to you with constructive intent, so dont take it as a dis.Think about it. There's your challenge!If i'm you, i wouldnt worry about whats gonna happen, i wouldnt worry about the cards in your hand, i'd worry about how i'm gonna play them. I'd be tighteing up my A and B books, and working on a marketing plan, whatever yours is. Then i wuold just do nothing but focus on executing the plan. And survive.We would all do well to spend our energy marketing, and building our practices, instead of worrying about retention and all the other bullsh*t that the firms are distracting us with.

anonymous's picture
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"And therein lies the problem. A smaller pool of qualified prospects"

 
I don't see that at all.  I just see that my prospects want to buy different things.  
Ex. Client is 70 and thinks that equities are great investments for themselves.  They will buy equities.  I make money.  Client is 70 and scared of the market and needs income.  They will buy a SPIA.  I make money.

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B24
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"Confidence has been shot, and a lot of people are going to leave the table and not come back for a long time. They will come back, but only years from now, when greed finally returns."
 
And the worst part is, they are probably going to decide to get back in after 3 or 4 years of up-market recovery years.  And guess what happens next......yup, they lose more money and become convinced that the markets are a scam.  Some people should have never been in the market to begin with.

newnew's picture
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original poster was spot on. disgusting.

skeedaddy2's picture
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After a couple Glenfiddich I sat to write, "Rant". I began to contrast my early experiences with current events and got carried away. Why? Because some of the hardest-working, most talented, and generous people I know work in our field. So when I see irresponsible, stupid and inconsiderate acts committed, it really ticks me off. The arrival of the economic downturn has exposed high-profile scandals involving behavior ranging from recklessness to possible crime, but these hard times merely put a spotlight on ethical lapses that have been around for years. Let me say that I appreciate the expressions of solidarity and the various points that were brought up. In particular, Minimum's point about Wall Street abandoning the partnership model in favor of becoming public companies was especially on point. Perhaps the purest form of asset management is the hedge fund. Sure its easy to criticize the fee structure, but where else is are the interests of the investor and the fund manager more closely aligned? Others raised the point about retail capitulation marking the bottom. Well, if it turns out that my rant marked the bottom, then that is a label that I will gladly wear. The World Economic Forum in Davos is an event that I look forward to. Having over 1000 of the world's business leaders gathered in one place is of great interest to me. One notable economist is conspicuously absent from the WEF. Apparently his bona fides weren't vetted in time. He is a brash and outspoken critic of the economic stimulus plan. You can see his latest update on youtube: http://www.youtube.com/watch?v=hoEbMrZ5uaA

Morphius's picture
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skeedaddy2 wrote: Perhaps the purest form of asset management is the hedge fund. Sure its easy to criticize the fee structure, but where else is are the interests of the investor and the fund manager more closely aligned?
I know you are referring to the common practice of the manager taking 20% of profits above a boggie or the high water mark, and while that can align interests, especially in the short run, it also has a couple big unintended negative results.

First, since the hedge fund manager's primary compensation comes from the 20% profit cut, their main goal is to achieve not simply good consistent returns, but outsized returns that earn them the performance fees. That usually cannot be achieved without taking on outsized risks. In other words, they have more of an incentive to swing for the fences, when the investor might well be more content to have them hit for averages.

Second, the high water mark aspect means once the fund has a big down period - like so many have in the last year or two - or has had a period of very strong performance - their chances of ever getting back above the highwater mark (and therefore once again earning performance fees) are so slim that many instead opt to simply close down the fund and distribute assets back to the investors. Many then simply open another fund under a different name and start over again, now operating a fund that isn't so far under their high water mark.

But I really agree with you about the Glenfiddich. Great stuff.

Borker Boy's picture
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snaggletooth wrote:    
 
I know EXACTLY where I'm going from here.  As a matter of fact, I had cold called a very qualified guy in 2007 who said he had his IRA's at Edward D. Jones, and that the advisor is a really good buddy of his, so he wouldn't move that account.
 
So today, I was cold calling to show our newly hired cold caller how to do it and I call the guy.  Here's the gist of the conversation:
 
"Hey, I spoke with you back in May of 2007, and I wanted to call to touch base.  First, I want to apologize to you for not touching base sooner.  I know the market has crashed since we last spoke and it's tough.  I know your buddy manages your accounts at EDJ and I don't know what's going on there, but I wanted to tell you what's working for our clients, and the thing is, it's not available at EDJ, would that be ok with you?"
 
He says, "Yes".
 
"Well it's a type of account that participates when the market goes up, does not lose anything when the market goes down, and has no fees.  Now I don't know if this is right for you, but I'd like to get together to meet and see if it could be a good fit, would that be ok with you?"
 
He says, "Yes, let's get together in 2 weeks".
 
That was lead #1.  Called another guy that was a pure cold call and described the same thing.  We are set to get together at the end of the week.
 
I esentially set two appointments in 10 minutes and 4 contacts.
 
I actually feel legitimately sorry for you guys that can't offer some of this stuff.  It's like sending out a soldier to war without a gun.
 
Has anyone ever thought to ask you why EDJ and every other major firm out there (even the big, bad wirehouses that are willing to do just about anything to make a dollar) won't offer "this stuff?"
 
Have you ever thought about why?
 
 

Hank Moody's picture
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Borker Boy wrote:snaggletooth wrote:    
 
I know EXACTLY where I'm going from here.  As a matter of fact, I had cold called a very qualified guy in 2007 who said he had his IRA's at Edward D. Jones, and that the advisor is a really good buddy of his, so he wouldn't move that account.
 
So today, I was cold calling to show our newly hired cold caller how to do it and I call the guy.  Here's the gist of the conversation:
 
"Hey, I spoke with you back in May of 2007, and I wanted to call to touch base.  First, I want to apologize to you for not touching base sooner.  I know the market has crashed since we last spoke and it's tough.  I know your buddy manages your accounts at EDJ and I don't know what's going on there, but I wanted to tell you what's working for our clients, and the thing is, it's not available at EDJ, would that be ok with you?"
 
He says, "Yes".
 
"Well it's a type of account that participates when the market goes up, does not lose anything when the market goes down, and has no fees.  Now I don't know if this is right for you, but I'd like to get together to meet and see if it could be a good fit, would that be ok with you?"
 
He says, "Yes, let's get together in 2 weeks".
 
That was lead #1.  Called another guy that was a pure cold call and described the same thing.  We are set to get together at the end of the week.
 
I esentially set two appointments in 10 minutes and 4 contacts.
 
I actually feel legitimately sorry for you guys that can't offer some of this stuff.  It's like sending out a soldier to war without a gun.
 
Has anyone ever thought to ask you why EDJ and every other major firm out there (even the big, bad wirehouses that are willing to do just about anything to make a dollar) won't offer "this stuff?"
 
Have you ever thought about why?
 
 Because they're getting kickbacks from  the mutual fund companies.

snaggletooth's picture
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Borker Boy wrote: 
Has anyone ever thought to ask you why EDJ and every other major firm out there (even the big, bad wirehouses that are willing to do just about anything to make a dollar) won't offer "this stuff?"
 
Have you ever thought about why?
 
 
 
Yes I thought deeply about this.  It seems to me the companies would rather have their advisors charging 1.5% annually vs. .80% annualized out over 10 years or 1% annualized over 5 years.

Edisfree's picture
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Over the last seven years I have totally turned away from company research and fundamentals except as a final "sometimes" screen.  I've become a successful trader in my own accounts and used that to translate over to what I do for my clients.  I use technical analysis and it works.  I have to work my ass off but doing it all my self, all discretionary for the most part, all stocks "mostly ETFs," but it saved me last year.  We lost some but not much.  My transactions have increased dramatically and I dont like that but the bottom line is the bottom line.  Today I added a triple short position to put me into a market neutral position.  If this thing turns south again which the probability of happening is increasing in my opinion I'm going to jump all over it with shorts.  If not, I'll take the shorts off and go triple long.  My core positions dont change but I trade around them to flow with the trend.  I think advisors need to recognize that it's all about protecting clients money right now.  Figure out a way to do it and you will make them happy.    

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snaggletooth wrote:Borker Boy wrote: 
Has anyone ever thought to ask you why EDJ and every other major firm out there (even the big, bad wirehouses that are willing to do just about anything to make a dollar) won't offer "this stuff?"
 
Have you ever thought about why?
 
 
 
Yes I thought deeply about this.  It seems to me the companies would rather have their advisors charging 1.5% annually vs. .80% annualized out over 10 years or 1% annualized over 5 years.
 

You never did tell us what it is that you are using that is so wonderful.  Doesn't lose money, participates in the ups, no fees.  If it were me, I'd be thinking that I can't have my cake and eat it too, so there has to be a catch in there.  So, what is it that is so great, but companies like EDJ won't offer it?

Hank Moody's picture
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Spaceman Spiff wrote:snaggletooth wrote:Borker Boy wrote: 
Has anyone ever thought to ask you why EDJ and every other major firm out there (even the big, bad wirehouses that are willing to do just about anything to make a dollar) won't offer "this stuff?"
 
Have you ever thought about why?
 
 
 
Yes I thought deeply about this.  It seems to me the companies would rather have their advisors charging 1.5% annually vs. .80% annualized out over 10 years or 1% annualized over 5 years.
 

You never did tell us what it is that you are using that is so wonderful.  Doesn't lose money, participates in the ups, no fees.  If it were me, I'd be thinking that I can't have my cake and eat it too, so there has to be a catch in there.  So, what is it that is so great, but companies like EDJ won't offer it?If he told you, you'd hate your job.

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Joined: 2008-09-16

Hi, I'm D.P Schitt with a reputable company here in town and I would like the opportunity to tell you about a place to put your money that you can't get anywhere in the securities market. When there are gains, you keep the gains, when it goes down, you get a fixed percentage rate of return. You can't lose money - it's win-win.Oh, I'm sorry - you already have an equity indexed annuity? Well I do have a huge opportunity for you where you can make a ton of money. Have you ever heard of Quixtar?

now_indy's picture
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Joined: 2006-07-28

snaggletooth wrote:Borker Boy wrote: 
Has anyone ever thought to ask you why EDJ and every other major firm out there (even the big, bad wirehouses that are willing to do just about anything to make a dollar) won't offer "this stuff?"
 
Have you ever thought about why?
 
 
 
Yes I thought deeply about this.  It seems to me the companies would rather have their advisors charging 1.5% annually vs. .80% annualized out over 10 years or 1% annualized over 5 years.
 
I don't buy that argument. If that were the case, we couldn't buy CD's or bonds in a brokerage account (no trails, or ongoing fees). 
 
When I was with Jones, they mentioned a study they did that looked at EIA's vs. split-tickets (% of money into a zero, or fixed annuity, to give you the principal back after x years, the rest of the money into a balanced mutual fund) and the split-ticket beat the EIA EVERY time! 
 
I don't hate EIAs as much as I used to (except for the 18 yr surrender ones I have seen), but I still don't think I would use them.

snaggletooth's picture
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Joined: 2007-07-13

now_indy wrote: 
I don't buy that argument. If that were the case, we couldn't buy CD's or bonds in a brokerage account (no trails, or ongoing fees). 
 
When I was with Jones, they mentioned a study they did that looked at EIA's vs. split-tickets (% of money into a zero, or fixed annuity, to give you the principal back after x years, the rest of the money into a balanced mutual fund) and the split-ticket beat the EIA EVERY time! 
 
I don't hate EIAs as much as I used to (except for the 18 yr surrender ones I have seen), but I still don't think I would use them.
 
You don't have to buy it.  Many other people do though. 

deekay's picture
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Joined: 2007-05-15

now_indy wrote:snaggletooth wrote:Borker Boy wrote: 
Has anyone ever thought to ask you why EDJ and every other major firm out there (even the big, bad wirehouses that are willing to do just about anything to make a dollar) won't offer "this stuff?"
 
Have you ever thought about why?
 
 
 
Yes I thought deeply about this.  It seems to me the companies would rather have their advisors charging 1.5% annually vs. .80% annualized out over 10 years or 1% annualized over 5 years.
 
I don't buy that argument. If that were the case, we couldn't buy CD's or bonds in a brokerage account (no trails, or ongoing fees). 
 
When I was with Jones, they mentioned a study they did that looked at EIA's vs. split-tickets (% of money into a zero, or fixed annuity, to give you the principal back after x years, the rest of the money into a balanced mutual fund) and the split-ticket beat the EIA EVERY time! 
 
I don't hate EIAs as much as I used to (except for the 18 yr surrender ones I have seen), but I still don't think I would use them.
 
When the goal is ZERO chance of loss, it's gonna be hard to convince a prospect to put money into a balanced fund that involves the risk of loss. 

snaggletooth's picture
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Joined: 2007-07-13

deekay wrote:now_indy wrote: 
When I was with Jones, they mentioned a study they did that looked at EIA's vs. split-tickets (% of money into a zero, or fixed annuity, to give you the principal back after x years, the rest of the money into a balanced mutual fund) and the split-ticket beat the EIA EVERY time! 
 
I don't hate EIAs as much as I used to (except for the 18 yr surrender ones I have seen), but I still don't think I would use them.
 
When the goal is ZERO chance of loss, it's gonna be hard to convince a prospect to put money into a balanced fund that involves the risk of loss. 
 
Hey Dee, isn't it funny when people look at things in a vacuum?  I wonder how many of the people that had done the split-ticket with a balanced mutual fund sold out because of the losses???

Borker Boy's picture
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Joined: 2006-12-09

If you're guaranteed to get your principal back, is there a chance of principal loss?
 
The money in the market is icing on the cake, and I have yet to have anyone sell out of this strategy because they're guaranteed to at least have their principal returned to them. Hence the name, Principal Protection Strategy.
 
Of course, the commission is almost nothing, so that'll rule out 99.9% of advisors from offering it as an option. 
 
I'd love to see what our books would look like if every investment paid the same commission.

snaggletooth's picture
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Joined: 2007-07-13

Borker Boy wrote:
 
I'd love to see what our books would look like if every investment paid the same commission.
 
If that was the case, I would use the least time consuming products/investments.  I wouldn't want to deal with tax forms, profit/loss statements, and other things that could create headaches.  I also wouldn't want to be losing people's money in supposedly "safe" things.  Of course, if someone wanted to take on that risk, I can help them. 
 
My only point is that I love my annuity clients.  They do not take up my time and I don't have to hold their hand.  I can spend more time looking for more clients.
 
Also, if everything paid the same, why would I want to sit and stare at a quote screen all day long?  Unless I had a passion for that, I just don't care to do that.  I'd rather F around on the computer, phone, TV, and find new clients. 

Morphius's picture
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Joined: 2007-07-21

Borker Boy wrote:I'd love to see what our books would look like if every investment paid the same commission.
Strikingly similar to what most RIA books looks like, except instead of the commission being the same it is the fee being the same. 

Borker Boy's picture
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Joined: 2006-12-09

Morphius wrote:Borker Boy wrote:I'd love to see what our books would look like if every investment paid the same commission.
Strikingly similar to what most RIA books looks like, except instead of the commission being the same it is the fee being the same. 
 
Touché.

Hank Moody's picture
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Joined: 2008-11-10

Borker Boy wrote:If you're guaranteed to get your principal back, is there a chance of principal loss?
 
The money in the market is icing on the cake, and I have yet to have anyone sell out of this strategy because they're guaranteed to at least have their principal returned to them. Hence the name, Principal Protection Strategy.
 
Of course, the commission is almost nothing, so that'll rule out 99.9% of advisors from offering it as a option. 
 
I'd love to see what our books would look like if every investment paid the same commission.There's no way I would work for "almost nothing." I'm in business to make a profit.

MinimumVariance's picture
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Joined: 2008-08-20

Are we back on EIA's? The wet dream  of the insurance industry. What are they"? in actuality its a 'security' with a long put and a short call, both out of the money. Why is this relevant? Because there are markets for puts and calls, and the benefits of an EIA can be synthetically created for your accounts wherein the over lying options are dynamically rebalanced to achieve Delta neutrality.  

Gaddock's picture
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Joined: 2007-02-23

Al Goldman is "bullish" on the market again...sigh.
 
I'll never forget his comment about the sub prime thing being "a mile wide and 1/2 inch deep"
 
Gleefully called the bottom just before the big slide.
 
GREAT GUY Great writer.
 
If he claims we are on the bottom get ready for leg five.

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