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Inflation and Idiots

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Sep 25, 2009 5:45 pm

I am so sick of explaining the risks of inflation to prospects/clients/idiots. Anyone have tips in order to get people to take a realistic view of money.

Sep 25, 2009 6:17 pm

That’s bank customers for you!

Sep 25, 2009 6:17 pm

This works well with older clients.  Ask them, "Did you pay more for your last car then your first house."

Sep 25, 2009 6:19 pm

You could get one of those birthday cards from about 30 years ago that shows how much things cost back then.  Can’t remeber the company that makes them.

  But have a few things on hand, like a movie ticket stub or loaf of bread or whatever.  Ask them if they plan on eating or going to movies in retirement.  They say yes.  Then tell them, 30 years ago, if you were starting your retirement, the loaf of bread would have been .25 cents and the movie ticket would have been $1.   Then put a $1.25 in front of them and ask them, "If I gave you $1.25, would you be able to go to the movies or eat in retirement?".   Pick whatever items you want.  You can find those prices of things 30 years ago online I'm sure.   Off to play some charity golf...
Sep 25, 2009 6:43 pm

[quote=snaggletooth]You could get one of those birthday cards from about 30 years ago that shows how much things cost back then.  Can’t remeber the company that makes them.

  But have a few things on hand, like a movie ticket stub or loaf of bread or whatever.  Ask them if they plan on eating or going to movies in retirement.  They say yes.  Then tell them, 30 years ago, if you were starting your retirement, the loaf of bread would have been .25 cents and the movie ticket would have been $1.   Then put a $1.25 in front of them and ask them, "If I gave you $1.25, would you be able to go to the movies or eat in retirement?".   Pick whatever items you want.  You can find those prices of things 30 years ago online I'm sure.   Off to play some charity golf...[/quote]   Just don't use technology as an example or even cars.  I had a 97 Toyota Corrolla, and looked at the old window sticker one day - $17,995 (boy have things changed in 12 years).
Sep 25, 2009 7:01 pm

Ron:

Use Stamps.

  The rate for First Class stamps in 1932 was 3 cents the rate for a First Class stamp in 2009 44 cents.  3 cents to 44 cents over 77 years is a 3.49% rate of inflation.

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On a shorter time horizon you can use the cost of stamps from 1999 33 cents to the cost of stamps from 2009 44 cents. 33 cents to 44 cents over 10 years is a 2.88% rate of inflation.

Go out and buy some old stamps, show your clients the old stamps and a new stamp and it will show them how much inflation adds up.
Sep 25, 2009 7:45 pm
Moraen:

That’s bank customers for you!

  There is no doubt that the type of customers I am dealing with is part of the issue.
Sep 25, 2009 8:16 pm

I use stamps. Put a .03 and a current first class in front of them and ask what does this mean?

  Then tell them about the guy that was styling in 1975 with his early retirement $20k a year pension. He was the envy of all his friends and family. Then say loudly with conviction pound your fist once on the table and stand up squarely facing them...    NOW HE CHOOSES BETWEEN FOOD AND MEDICINE!   Stare them right in the eye and say nothing, don't even blink and wait until they look away (when  they do you have set the hook, now reel them in)   A DOLLAR IN THE MID SEVENTIES WOULD TAKE $3.28 TODAY TO HAVE THE SAME BUYING POWER.   Here you use the words we & us while putting the back of one hand into the other with intonation on the words we & us...   WE WILL NOT LET THIS HAPPEN TO US!!   Now lower your voice to below normal just a little bit as if there has been a great weight taken off your chest and sit as you're saying it.   We need to start asap Mr. prospect, like maybe today, no - YESTERDAY!   You in? (nodding your head up and down a tiny bit while saying it.)   Look them in the eye and then look off into the sunset for a few seconds and look back like you would as if you just took a drag off a cigg after having great sex.   SHUT UP AND DONT SAY A WORD. Anything less than a yes or no you simply repeat the question and do the same.   All the world is a stage. The above truly works well he he he.
Sep 25, 2009 8:52 pm

Thats gold, thank you Gaddock.

Sep 25, 2009 9:05 pm
Ron 14:

Thats gold, thank you Gaddock.

  Oh yeah, when they agree you say to them;   Doesn't that feel good? grabbing your future by the horns?     No prob Ron. I've said it hundreds of times. I say it with conviction as I believe it to be of the highest importance and it's a right now account opener.   When they say yes have the paperwork ready to go and talk as little as possible. Try to move as many questions forward as possible. Talking about anything at this point can only shoot you in the foot and that's enough for them to chew on for one appointment as well. Once that's done you tell them the next thing they are going to do is get all their statements so you can provide a review on the next visit.
Sep 25, 2009 9:05 pm

Biofreeze-

Well I give them suckers and free checking. Isn't that enough for someone to trust me during the first meeting ?
Sep 25, 2009 10:01 pm

Who are we talking about here? Old folks? How much inflation protection does a 70 something need? And, even for  40 somethings, exactly what would you propose as an inflation hedge? Please don’t say stocks, because we all know that stocks are no longer the answer. Well, maybe in a disinflationary world.

Sep 25, 2009 10:31 pm
BondGuy:

Who are we talking about here? Old folks? How much inflation protection does a 70 something need? And, even for  40 somethings, exactly what would you propose as an inflation hedge? Please don’t say stocks, because we all know that stocks are no longer the answer. Well, maybe in a disinflationary world.

  Age isn't relevant when speaking of idiots .   "we all know" That's a pretty broad brush stroke. I for one don't know that at all.   I think your posts are very informative and I'm surprised that you appear to think inflation isn't relevant to investing decisions. Please correct me if my interpretation of your post is wrong.   That being said a 60-65 year old it becomes very relevant. If he put his $$ in a SPIA and lived to 100 he would be the guy in my 1970's $20K guy.   Beyond that it's important to use a real return number when considering an investment.   As for stocks they are the very best answer especially when you hedge them.   "exactly what would you propose as an inflation hedge?"   My accounts are up 40 to 70% (depending on the baggage they brought with them) YTD and just under 20% from the high tick of the bubble. That is clearly a hedge against inflation and damned good return to boot.    
Sep 25, 2009 10:41 pm

Stocks are no longer the answer ? What is the answer, bonds ?

It is more than just providing income for 20 year retirements. It is also about multigenerational wealth. If your father was a big time executive who retired in 1990 and will be leaving you his fortune in 2020, do you want that nut in 2% CD's or in stocks paying a 3% dividend, regardless of the short term principal fluctuation. How about the portion of that nut that will be paying for his grandson's college in 2030 ?
Sep 25, 2009 11:56 pm

[quote=Ron 14]Stocks are no longer the answer ? What is the answer, bonds ?

It is more than just providing income for 20 year retirements. It is also about multigenerational wealth. If your father was a big time executive who retired in 1990 and will be leaving you his fortune in 2020, do you want that nut in 2% CD's or in stocks paying a 3% dividend, regardless of the short term principal fluctuation. How about the portion of that nut that will be paying for his grandson's college in 2030 ? [/quote]   I would choose neither CDs or stocks.  If the intention is to leave the money behind, I want it in life insurance.
Sep 25, 2009 11:59 pm

[quote=anonymous][quote=Ron 14]Stocks are no longer the answer ? What is the answer, bonds ?

It is more than just providing income for 20 year retirements. It is also about multigenerational wealth. If your father was a big time executive who retired in 1990 and will be leaving you his fortune in 2020, do you want that nut in 2% CD's or in stocks paying a 3% dividend, regardless of the short term principal fluctuation. How about the portion of that nut that will be paying for his grandson's college in 2030 ? [/quote]   I would choose neither CDs or stocks.  If the intention is to leave the money behind, I want it in life insurance.[/quote]

No sh!t ... I would have never guessed.

How do you solve world hunger?  life insurance
How do you solve health care? life insurance
How do you shut windy up? life insurance
Sep 26, 2009 12:25 am

[quote=voltmoie] [quote=anonymous][quote=Ron 14]Stocks are no longer the answer ? What is the answer, bonds ?

It is more than just providing income for 20 year retirements. It is also about multigenerational wealth. If your father was a big time executive who retired in 1990 and will be leaving you his fortune in 2020, do you want that nut in 2% CD's or in stocks paying a 3% dividend, regardless of the short term principal fluctuation. How about the portion of that nut that will be paying for his grandson's college in 2030 ? [/quote]   I would choose neither CDs or stocks.  If the intention is to leave the money behind, I want it in life insurance.[/quote]

No sh!t ... I would have never guessed.

How do you solve world hunger?  life insurance
How do you solve health care? life insurance
How do you shut windy up? life insurance
[/quote]    That with a sprinkle of DI and a DRB (wow I'm reaching way back for that one)
Sep 26, 2009 12:25 am

[quote=voltmoie] [quote=anonymous][quote=Ron 14]Stocks are no longer the answer ? What is the answer, bonds ?

It is more than just providing income for 20 year retirements. It is also about multigenerational wealth. If your father was a big time executive who retired in 1990 and will be leaving you his fortune in 2020, do you want that nut in 2% CD's or in stocks paying a 3% dividend, regardless of the short term principal fluctuation. How about the portion of that nut that will be paying for his grandson's college in 2030 ? [/quote]   I would choose neither CDs or stocks.  If the intention is to leave the money behind, I want it in life insurance.[/quote]

No sh!t ... I would have never guessed.

How do you solve world hunger?  life insurance
How do you solve health care? life insurance
How do you shut windy up? life insurance
[/quote]   LOL ! Why do you insurance guys feel so confident that these insurance companies will be able to pay off all of these benefits in the future, but you don't feel confident in stocks for the long run ? If you don't think stocks are going up then the insurance companies are going to lose a ton because they are all betting on the increasing value of their own investments. It all goes hand in hand. If the long term view of the stock market isn't up, the entire system folds and it doesn't matter if your money is in mattress federal, stocks, or bonds because nothing will have value.  
Sep 26, 2009 12:27 am

[quote=Gaddock] I use stamps. Put a .03 and a current first class in front of them and ask what does this mean?



Then tell them about the guy that was styling in 1975 with his early retirement $20k a year pension. He was the envy of all his friends and family. Then say loudly with conviction pound your fist once on the table and stand up squarely facing them…



NOW HE CHOOSES BETWEEN FOOD AND MEDICINE!



Stare them right in the eye and say nothing, don’t even blink and wait until they look away (when they do you have set the hook, now reel them in)



A DOLLAR IN THE MID SEVENTIES WOULD TAKE $3.28 TODAY TO HAVE THE SAME BUYING POWER.



Here you use the words we & us while putting the back of one hand into the other with intonation on the words we & us…



WE WILL NOT LET THIS HAPPEN TO US!!



Now lower your voice to below normal just a little bit as if there has been a great weight taken off your chest and sit as you’re saying it.



We need to start asap Mr. prospect, like maybe today, no - YESTERDAY!



You in? (nodding your head up and down a tiny bit while saying it.)



Look them in the eye and then look off into the sunset for a few seconds and look back like you would as if you just took a drag off a cigg after having great sex.



SHUT UP AND DONT SAY A WORD. Anything less than a yes or no you simply repeat the question and do the same.



All the world is a stage. The above truly works well he he he.[/quote]



First place is a Cadillac ElDorado. Second place is a set of steak knives. Third place is…you’re fired.
Sep 26, 2009 12:33 am

[quote=Ron 14] Stocks are no longer the answer ? What is the answer, bonds ?

It is more than just providing income for 20 year retirements. It is also about multigenerational wealth. If your father was a big time executive who retired in 1990 and will be leaving you his fortune in 2020, do you want that nut in 2% CD’s or in stocks paying a 3% dividend, regardless of the short term principal fluctuation. How about the portion of that nut that will be paying for his grandson’s college in 2030 ? [/quote]



You are assuming that US stocks will resume its past behavior in the future. Take a look at the Nikkei and see what Japan has been experiencing for the last 19 years - US is probably not that far behind.