Equity Indexed Annuities

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heddy32's picture
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What is everyone's thoughts on Equity Indexed Annuities.  Due to these markets, its a great time to offer downside protection with upside potential.  Can someone suggest a clean/intuitive product that would be suitable for my clients.  I've been hearing about a new product called the Structured Allocation Annuity developed by Annexus Financial, LLC.  Its a 6 year pt. to pt. with very little moving parts.  I think I might take a look at it.

mm06's picture
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Wow, I actually have heard about this new product I also dug a bit deeper and it truly is unique.  I can't find another firm that has anything close to this, its so transparent.  Looks like its underwritten by AVIVA which is a huge insurance company out of England getting into the US market.

henryhill's picture
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Joined: 2007-08-23

The EIA's I have seen have huge surrender charges.  I've seen as high as 20%.   The people selling EIA's have typically been people without a securities license and quite frankly clueless.  I cannot think of ANY situation where an EIA makes sense to anyone but the salesman selling it.

mm06's picture
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Henry, let me ask you a ?  Do you have any clients currently worried about the market or looking to get out all together?  How do you guarantee your clients downside protection as well as piece of mind?  In my research the Structured Allocation Annuity is a 6 year pt. to pt.  with no moving parts and a surrender of 9,9,8,7,5,3
With the current rates the product looks pretty sweet
 
 

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

Here's how some guys in my area have used EIAs to make themselves very, very wealthy:
 
1. Aggressively tell everyone you know that investing in the stock market is like gambling in  Las Vegas.
2. Tout the wonderful upside potential and downside protection of EIAs.
3. Don't talk about surrender fees, loooong maturity dates, the fact that the 10% "free withdrawal" causes them to lose any and all interest that was credited to the amount they're withdrawing, the fact that they'll have to annuitize to get the interest and the bonus they were promised when they bought the annuity or that even the death benefit cannot be withdrawn in a lump sum without incurring surrender fees.
4. Sell the annuity to them and make as much as 15% on the transaction.
5. Call them 13 months from the time of the original purchase and tell them you've found a better annuity that they should move their "free withdrawal" money into. (There's another commission for you.)
6. Get a prescription for Ambien to sleep at night.
7. Start over at step #1.

heddy32's picture
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Joined: 2008-04-04

Great feedback Borker Boy.  I know EIA's have had a tainted image.  However, I have to disagree with you because there is a need for this strategy in a client's portfolio.  But in all honesty, can you come up with a stratgey that offers downside protection with upside potential other than an EIA.  According to what I have read, the Sructured Allocation Annuity is not an annual reset, its a 6 year pt. to pt. thats priced daily so your client realizes gains to date thereby eliminating the typical look back provision of an annual pt. to pt.  That sounds pretty innovative and compliant to me. 

mm06's picture
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hey heddy, I think you hit the nail on the head!  It also looks like the product your speaking of addressed some of issues that were wrong with EIA's.  They gave it liquidity and a better tax efficiency that addresses the age old "phantom income" it looks like.

anonymous's picture
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Joined: 2005-09-29

Dearest heddymm06,
 
Thanks so much for gracing us with your presence.   I'm sure that we can count on you to continue to educate us on this issue.   Please hurry up and tell us how we can get involved with Annexus.  Also, don't forget to let us know why all of our clients will benefit from this fine product and how this is the best EIA. 
 
 

mm06's picture
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Joined: 2008-04-04

Mr. Anonymous, since I'm feeling a little tone in your message.  How does the expert "Mr. Anonymous" manage downside risk?  Do you have any recommendations for EIA's?  I came across the Annexus one and can't find anything out there that could compare.

Ashland's picture
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Joined: 2007-03-07

Can anyone say, WHOLESALER?!

The giveaway was that both of you buttheads(heddy & mm06) joined today, and you've only posted in 1 thread...

Now, please leave.

heddy32's picture
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Joined: 2008-04-04

Ashland "Mr. 2 Million AUM"...  How you manage downside risk? 

mm06's picture
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Ashland Pumpkin!  why are you getting worked about a discussion forum.  I don't know who heddy is and on top of that I'm really interested in the EIA biz!  you leave!

Spaceman Spiff's picture
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Joined: 2006-08-08

Wow, we've had some bold people come visit us from time to time, but this guy takes the cake.  Do you really believe that we think mm06 and heddy32 are two different people? 
 
Some questions about your wonderful annuity, since you didn't give us any details:
 
1) Annual fees
2) Surrender period and provisions for free withdrawal
3) What is it indexing
4) Participation Rate
5) Is there a cap on the participation rate
6) guaranteed minimum
 
Finally, one more question.  How do you feel about the regulators calling for the adoption of the NAIC's Suitability of Annuity Transactions and requiring indexed product training for sellers of EIAs, which could take effect sometime this year?  How's it feel to be a part of an industry that has virtually no accountability to any regulators for ethical standards and sales practices?  I think I'd take Borker Boy's advice and go ask your doc for some Ambien.
 
 
 
 
 
 

anonymous's picture
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Joined: 2005-09-29

heddymm, Can you give me a specific situation in which an EIA would be the best product for the client?   Furthermore, can you please tell me why the EIA that you are pushing would be the best one for the client to buy?  Finally, how much money will I make from selling this EIA to the client in this situation? 

heddy32's picture
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Joined: 2008-04-04

Mr. Anonymous, 
 
Have you had clients that have lost most of their nest egg due to the volatile market?  Now they're afraid of the market and want to be invested in instruments that barely keep up with inflation.  I'm not saying to put all of your clien't eggs in one basket, but I believe a portion deserves principal protection with upside potential ties to the market.  Do  

anonymous's picture
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Joined: 2005-09-29

Heddy, for these clients, which EIA should I use?

heddy32's picture
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Mr Anonymous...  Why you do think I posted this thread?  I am looking for some advice.  What would you use as an alternative to EIAs if you believe they are all unsuitable? 

Indyone's picture
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Joined: 2005-05-31

I've used Jackson National's EIA.  Five year surrender and half the commission of similar VAs, so I'm certainly not selling it to people to make more money!
 
Anon, my slot for such an EIA is in between VA's and FA's...no downside risk, a small guaranteed return, even if the crediting index doesn't work (Jackson pays 3% on 90% of the initial deposit...not much, but at least not a goose-egg at five years), and some market potential.  Return locks in each year.  The audience is limited...a client should make more in a VA, but every once in awhile, I get a client who (1) needs somethings besides a CD, (2) wants assurance that they will make SOMETHING and get their principal back too, (3) do not want a long-term committment (five years in my example and they are out with profits of they want) and (4) Could benefit from some sort of minimal equity exposure.
 
I think some of the newer EIAs are quite a bit more transparent and less costly than the old ones that I demonize along with most of the rest of you.  I've seen some truly terrible abuses in EIAs and have thus been very slow and very cautious to adopt.  If there are holes in my suitability analysis and any of you have better suggestions, I'd gladly hear them.  I'll admit that I'm pretty new to the EIA game, and I'm sincere in being very open to better suggestions.  As near as I can tell, these things probably average in the 5-8% return range...a little better than fixed annuities and probably a bit lower than VA's.

Ashland's picture
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Don't feed the troll.

heddy32's picture
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Joined: 2008-04-04

Thanks Indyone for the great info.  I do agree that the newer contracts are much more transparent.  My only issue with annual pt. to pt. is that you do not know what your client is going to receive year to year because of the volatile options market.  Would you agree?  Ashland... Go pound sand

anonymous's picture
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"Mr Anonymous...  Why you do think I posted this thread?  I am looking for some advice.  What would you use as an alternative to EIAs if you believe they are all unsuitable?" 
 
Heddy, Work on your reading comprehension.   You haven't seen me post one negative thing about EIA's.  I think that you are posting because you have a vested interest in the sale of a specific EIA.
 
I'll repeat what I say every time that the subject of EIA's come up.  EIA's are simply fixed annuities with a different crediting methods than traditional fixed annuities.  They are appropriate whenever a fixed annuity is appropriate and the client wants the opportunity to make a little bit more in exchange for taking the risk that they may make a little bit less.
 
I may be the exception, but I really haven't had clients say too much in this market.  I think that it may be because one promise that I make to all of my clients is a promise that I will lose money for them.  (no sarcasm intended)
 

Spaceman Spiff's picture
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Joined: 2006-08-08

Hey heddy32 - how about you answer my questions so we can see how good this annuity you have really is?  Feel free to add any other info you might feel is pertinent.

heddy32's picture
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Joined: 2008-04-04

Spaceman Spiff.  Why do they call you spaceman?  I do not have product specs for any contract. 

mm06's picture
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Guys it sounds to me like heddy32 is just blowin smoke, but I would definitely look into Annexus.  Leaving now its happy hour somewhere in the world

scrim67's picture
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Joined: 2005-04-28

anonymous wrote:
"Mr Anonymous...  Why you do think I posted this thread?  I am looking for some advice.  What would you use as an alternative to EIAs if you believe they are all unsuitable?" 
 
Heddy, Work on your reading comprehension.   You haven't seen me post one negative thing about EIA's.  I think that you are posting because you have a vested interest in the sale of a specific EIA.
 
I'll repeat what I say every time that the subject of EIA's come up.  EIA's are simply fixed annuities with a different crediting methods than traditional fixed annuities.  They are appropriate whenever a fixed annuity is appropriate and the client wants the opportunity to make a little bit more in exchange for taking the risk that they may make a little bit less.
 
I may be the exception, but I really haven't had clients say too much in this market.  I think that it may be because one promise that I make to all of my clients is a promise that I will lose money for them.  (no sarcasm intended)
  I had to comment simply because in many of my conversations I tell my clients the same thing:   "Mr X, if I am doing my job correctly there will be a minority of years where we will lose some principal"
 
If you NEVER want a year where you lose some principal here are a few products that may be appropriate for your situation.
 
scrim

henryhill's picture
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Joined: 2007-08-23

Spaceman Spiff was a character from Calvin & Hobbes. 
 

anonymous's picture
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Scrim, I don't even say "minority".  I just straight out promise to lose money for them some years.  I then explain why we don't care and why it is important that we have safe money also and this includes long and short term safe money.

Ashland's picture
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OK, Heddy. Do you represent this annuity?

heddy32's picture
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Joined: 2008-04-04

Everybody...  It was a pleasure conversing with all of you.  I certainly learned alot and put, what I learned, into action as I try to enhance my book of business.  A portion of baby boomers and retired individuals assets belong in EIAs unless you want to have to constantly answer to individuals when the market is making rapid swings.  Good night and God Bless.   

Indyone's picture
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Joined: 2005-05-31

heddy32 wrote:Thanks Indyone for the great info.  I do agree that the newer contracts are much more transparent.  My only issue with annual pt. to pt. is that you do not know what your client is going to receive year to year because of the volatile options market.  Would you agree?  Ashland... Go pound sand
 
I'll start by saying that if you are here promoting a specific EIA, you're wasting your time.  As others have noted, there are some suspicious elements to the two personalities that showed up nearly simultaneously and pounding the table about the same EIA that none of us have ever heard of and that I frankly don't have desire to do due diligence on.  Most of us here have about all the product we want.
 
That being said, Jackson has plenty of crediting methods other than point to point.  There's monthly sum and monthly average, so you can play it several wasy in the same contract if you're concerned about options volatility.  In the end, EIAs fit a very small part of my practice and therefore, if I have a vendor I'm satisfied with (and I am), it's pretty doubtful that I'll make a change without compelling evidence that another contract is better.  While the one referenced MIGHT be better, I've yet to see any compelling evidence.  If you can address the questions that have been posed, I may change my mind, but so far, your posts sound like an endorsement without answering why.  Give us proof why yours is better and perhaps you'll get a more positive response.

Ashland's picture
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OK, mm06, do you represent this annuity?

anabuhabkuss's picture
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heddy32 wrote:Everybody...  It was a pleasure conversing with all of you.  I certainly learned alot and put, what I learned, into action as I try to enhance my book of business.  A portion of baby boomers and retired individuals assets belong in EIAs unless you want to have to constantly answer to individuals when the market is making rapid swings.  Good night and God Bless.   
 
God bless? You sell piker products to clients who probably deserve better but you still have time to grace us with God's blessing?
 
Freaking crooks. Sell an equity linked CD if you want upside potential with no downside. You guys are a waste of oxygen.

deekay's picture
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anabuhabkuss wrote:heddy32 wrote:Everybody...  It was a pleasure conversing with all of you.  I certainly learned alot and put, what I learned, into action as I try to enhance my book of business.  A portion of baby boomers and retired individuals assets belong in EIAs unless you want to have to constantly answer to individuals when the market is making rapid swings.  Good night and God Bless.   
 
God bless? You sell piker products to clients who probably deserve better but you still have time to grace us with God's blessing?
 
Freaking crooks. Sell an equity linked CD if you want upside potential with no downside. You guys are a waste of oxygen.
 
Why is an equity-linked CD better than an EIA?
 
Mind you, I do not sell EIAs or equity-linked CDs, I would like to know how one is better/worse than the other.  TIA.

heddy32's picture
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An equity-linked CD offers little to no liquidity... not to mention annual tax implications for your clients.

Ashland's picture
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Back again, I see.

Incredible Hulk's picture
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I had an insurance guy last year try and convince me EIAs made since and he showed me a specific one. I don't recall which one, but it was capped at 6% in the perfect market scenario, with a 1% guaranteed minimum. On average the market is down 1 in 4 years so you should expect to make 1% in one of those years. If you make the best at 6% the other 3 your avg return is still only 4.75% (assuming no flat or imperfect market). Why would that be better than the 4.5% FIXED annuity for 5 years with only half the surrender charges that I can get today (I think it was better than 5% last year when he discussed it). I just don't get it.

Full Discolsure: At EDJ I couldn't have sold it if I wanted to.

mm06's picture
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Hey Ashland how was your weekend?

Ashland's picture
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It was great, mm06, thanks for asking. Say, along with this EIA that you represent, do you have a contraption that can recycle butter?

Indyone's picture
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heddy32 wrote:
An equity-linked CD offers little to no liquidity... not to mention annual tax implications for your clients.
 
You've got a lot to learn about these...as of this post you are 0-2.

Indyone's picture
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Incredible Hulk wrote:I had an insurance guy last year try and convince me EIAs made since and he showed me a specific one. I don't recall which one, but it was capped at 6% in the perfect market scenario, with a 1% guaranteed minimum. On average the market is down 1 in 4 years so you should expect to make 1% in one of those years. If you make the best at 6% the other 3 your avg return is still only 4.75% (assuming no flat or imperfect market). Why would that be better than the 4.5% FIXED annuity for 5 years with only half the surrender charges that I can get today (I think it was better than 5% last year when he discussed it). I just don't get it. Full Discolsure: At EDJ I couldn't have sold it if I wanted to.
 
I don't blame you for not liking that piece of crap.  Just know that it's far from representative of all EIA contracts.  That kind of high-commission, low-potential crap is why EIAs have such a bad name.  Just know that there are better contracts out there than that one...they just don't pay the advisor as well...

heddy32's picture
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Indyone.  I believe you need to study up a little on these products cause I think your 0-2...
Liquidity Risk.  Investors typically will have limited opportunities, if any to redeem their equity-linked CDs prior to maturity.  Moreover, the financial institutions do not guarantee the existence of a secondary market.  Many equity-linked CDs do not permit the early withdrawal of your investment without the consent of the financial institution.  If you need to withdraw your investment before the CD matures, you will incur withdrawal penalties.  You also will lose any interest that you would accrue in a regular CD that has the same terms. There is no exception for CDs held in either a traditional IRA account or a Coverdell Education Savings Account (CSA).  Therefore, you should carefully consider your retirement needs or the educational needs of a beneficiary of a CSA before investing in equity-linked CDs.  Other equity-linked CDs allow for redemption only on pre-specified redemption dates.  Therefore, you may not be able to redeem your equity-linked CD when you may want or need your money to be available.

  • Tax Treatment.  Equity-linked CDs may be treated differently than traditional CDs for tax purposes.  Before investing in these products, you should carefully review the disclosures concerning the reporting of interest income and consult a tax adviser if appropriate.
  •  
     

    Indyone's picture
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    Alright, alright...I didn't see the word CD.  I thought you were talking about an EIA. I stand corrected as I was answering the wrong question.
     
    That answers my question about why you jumped the fenced so quick on EIAs...I'll try to read more carefully next time.

    deekay's picture
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    heddy32 wrote:Indyone.  I believe you need to study up a little on these products cause I think your 0-2...
    Liquidity Risk.  Investors typically will have limited opportunities, if any to redeem their equity-linked CDs prior to maturity.  Moreover, the financial institutions do not guarantee the existence of a secondary market.  Many equity-linked CDs do not permit the early withdrawal of your investment without the consent of the financial institution.  If you need to withdraw your investment before the CD matures, you will incur withdrawal penalties.  You also will lose any interest that you would accrue in a regular CD that has the same terms. There is no exception for CDs held in either a traditional IRA account or a Coverdell Education Savings Account (CSA).  Therefore, you should carefully consider your retirement needs or the educational needs of a beneficiary of a CSA before investing in equity-linked CDs.  Other equity-linked CDs allow for redemption only on pre-specified redemption dates.  Therefore, you may not be able to redeem your equity-linked CD when you may want or need your money to be available.

  • Tax Treatment.  Equity-linked CDs may be treated differently than traditional CDs for tax purposes.  Before investing in these products, you should carefully review the disclosures concerning the reporting of interest income and consult a tax adviser if appropriate.

     


  •  
     
    Next time you pass yourself off as the expert on equity-linked CDs, try not to copy a source that is the first link listed in a google search of "equity-linked cds".
     
    http://www.sec.gov/answers/equitylinkedcds.htm
     
    Tell us, since you are an impartial witness to all of this, what are the downsides of an EIA?

    heddy32's picture
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    Hey Deekay.  Mr. Senior Idiot....  I stated what the downsides were in my previous post anddyone obviously did not believe me so I need concrete evidence you moron.  There are definitely downsides to an EIA, but I'm sure you already know them Mr. Deekay...

    mm06's picture
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    Hey Ashland where are you?

    Spaceman Spiff's picture
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    heddy32 wrote:Spaceman Spiff.  Why do they call you spaceman?  I do not have product specs for any contract. 
     
    You, or your alter ego, started out this thread with some hype about this new Structured Allocation Annuity from Annexus.  You tout it as a "clean/intuitive" product suitable for your clients.  Then you tell us it's underwritten by a company out of England.  The only real detail you give us is that it is a 6 year point to point.  If it's that great and suitable for your clients, how come you don't have any other details?  Surrender period?  Caps?  Participation rate?  You're going to sell this to your clients, but you don't have any product specs available to answer such simple questions?  Nowhere in your posts did you talk about any downsides of this EIA.  So, why don't you grab whatever prospectus type document you might have for this thing and give  up some of the details.   

    deekay's picture
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    heddy32 wrote:Hey Deekay.  Mr. Senior Idiot....  I stated what the downsides were in my previous post anddyone obviously did not believe me so I need concrete evidence you moron.  There are definitely downsides to an EIA, but I'm sure you already know them Mr. Deekay...
     
    I simply wanted you to, in the future, cite your sources when explaining your point.  You made it seem like the comments you cut and pasted were your own.  When, in fact, it was off the SEC website.   I asked earlier what the downsides of an EIA are.  Would you care to enlighten me, or should I google that as well? 
     
    The only reason you're getting so bent out of shape with me is because you know the other posters have already called you out.  You're a thinly-disguised annuity wholesaler, passing yourself off as a retail rep.  Frankly, I wouldn't be suprised to find out you are a sub-par wholesaler at that.  Your grammar and thin skin are a dead giveaway.

    heddy32's picture
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    Deekay...  We can compare W2s anyday...  I'm not getting bent out of shape.  I find it amusing how serious you folks take this online forum...

    mm06's picture
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    Hey deekay take it ease

    deekay's picture
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    heddy32 wrote:Deekay...  We can compare W2s anyday...  I'm not getting bent out of shape.  I find it amusing how serious you folks take this online forum...
     
    You called me a moron and you tell me I take it too seriously? 
     
    Well, either way, you're mentally deficient.  And we'll leave it at that.

    henryhill's picture
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    did anyone see the dateline story yesterday on salesman selling EIA's?  Chris Hanson made them look like the crooks that they are.

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