Inflation and Idiots
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.
That’s bank customers for you!
This works well with older clients. Ask them, "Did you pay more for your last car then your first house."
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=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).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.<?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />
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.There is no doubt that the type of customers I am dealing with is part of the issue.That’s bank customers for you!
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.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.Thats gold, thank you Gaddock.
Biofreeze-
Well I give them suckers and free checking. Isn't that enough for someone to trust me during the first meeting ?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.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.
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=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=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=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)
[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.
[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.
[quote=Ron 14] Stocks are no longer the answer ? What is the answer, bonds ?
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.
Yes, I am. So you mean to tell me stocks arent going to provide any returns moving forward, but other products like bonds, cds, insurance will ?
[quote=2wheeledbeemer] [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.[/quote] Reality is BIG MONEY!! YEEEEEEEEEHA for all involved.
I love stocks. I’ve made lots of dough investing in stocks using strategies of every ilk. Everything from day trading to dividend roll to bull spreads to position building to long term hold. I’ve been around a long time and I have the balls and where-with-all to try a lot of things. Still, the days where i could pull out a stamp from 1952 and pound the table that equities are the SUREST way to guard against inflation are gone.
The evil that unregulated capitalism has become has wrecked the wealth building gravy train that equities once were. Meanwhile advisors rely on statistics that were built in a different era to continue to build a case that equities are the answer. That's not to say, don't buy stocks, and that's not to say that there aren't some exceptional geniuses among us that can still get positive returns without burning down the house every six or seven years. But for us average geniuses, we scratch our heads and wonder why top quality companies like GE are trading at 1/3 of where they were just seven or eight years ago? What happened to the market in 2001-2003 was an explainable event. What happened to the market in 2008 was a criminal event. And, until the government moves to put back the regulatory safguards that they removed over the past decade I can't look any retirement prospect in the eye and say "Stocks are the answer!"[quote=BondGuy]I love stocks. I’ve made lots of dough investing in stocks using strategies of every ilk. Everything from day trading to dividend roll to bull spreads to position building to long term hold. I’ve been around a long time and I have the balls and where-with-all to try a lot of things. Still, the days where i could pull out a stamp from 1952 and pound the table that equities are the SUREST way to guard against inflation are gone.
The evil that unregulated capitalism has become has wrecked the wealth building gravy train that equities once were. Meanwhile advisors rely on statistics that were built in a different era to continue to build a case that equities are the answer. That's not to say, don't buy stocks, and that's not to say that there aren't some exceptional geniuses among us that can still get positive returns without burning down the house every six or seven years. But for us average geniuses, we scratch our heads and wonder why top quality companies like GE are trading at 1/3 of where they were just seven or eight years ago? What happened to the market in 2001-2003 was an explainable event. What happened to the market in 2008 was a criminal event. And, until the government moves to put back the regulatory safguards that they removed over the past decade I can't look any retirement prospect in the eye and say "Stocks are the answer!" [/quote]I see alot of words but not answers.
I do believe the decades of 15% annual returns are gone. 8% annual returns over 10 year periods in stocks is still very much achievable and I believe has to be part of an effective retirement portfolio. If bonds are in the 4% range and with an obvious risk premium to stocks, 8% is a mathematical probability. 20 years ago you could only make money is US markets, now it is global. JUMP ON !!!
I do believe the decades of 15% annual returns are gone. 8% annual returns over 10 year periods in stocks is still very much achievable and I believe has to be part of an effective retirement portfolio. If bonds are in the 4% range and with an obvious risk premium to stocks, 8% is a mathematical probability. 20 years ago you could only make money is US markets, now it is global. JUMP ON !!!
Well, you are forgetting volatility, and that is what will make clients nervous. You have volatility on no-margin equity competing with leveraged commodities - that is not a good sign. I don't have a crystal ball, but I would venture to guess that our situation is very similar, if not worse, than Japan. The debt on our balance sheets here will take a long time to manage.
I would say that equities sectors on the international front are viable, so I will agree with you there. I just think it is almost over here for the time being. Investing internationally is not trip in the park either since the equity swings, as I mentioned above, can give you ulcers.
No, I am not forgetting volatility, that is exactly where the RISK PREMIUM is. People, like yourself, have given up on stocks because of the last 10 years. The only people getting ulcers from holding stocks are the ones with no faith in the future. As Nick Murray would say, “Optimism is the only realism.”
People, like yourself, have given up on stocks because of the last 10 years. The only people getting ulcers from holding stocks are the ones with no faith in the future.
I haven’t given up on equities, I just trade it smarter than people like yourself - but that is for my own account. You are forgetting that you have to deal with OTHER people’s expectations and risk tolerance. Unless you are a CTA, and have the client base that understands volatility, good luck to you.
[quote]As Nick Murray would say, “Optimism is the only realism.”[/quote]
That is a gambler’s mentality. I think we are in the business of capital preservation first, then results second.
How many investors have you met that were 100% exposed to Japanese equities over the last 19 years ? Zero. And that would have them getting in after their index went from 200, which was where the Dow was at the same time, to over 40,000. Give me a break.
How many investors have you met that were 100% exposed to Japanese equities over the last 19 years ? Zero. And that would have them getting in after their index went from 200, which was where the Dow was at the same time, to over 40,000. Give me a break.
Just from your statement, you like to deal in absolute terms. Good luck to you.
Buying diversified equity holdings, asset allocation, and rebalancing is the gambler's mentality, but trading in and out is logical ? Ok. Sounds good Jim Cramer, See you at S&P 2000.
Buying diversified equity holdings, asset allocation, and rebalancing is the gambler’s mentality, but trading in and out is logical ? Ok. Sounds good Jim Cramer, See you at S&P 2000.
Well, that is for my personal account and not for client's. BTW, I would have them in bonds for the majority and not equities going forward. With the market tanking 50% and then rising 30% I would say it is a gambler's market now. You also misread my response to your optimism quote - it was only until afterwards did you define that term.
As for your James Cramer crack (who I don't care for, but you seem to have labeled me), that is why there are rich and poor folks in this business. Many of the successful hedge fund managers are really traders - the term buy and hold doesn't exist for them. Their results are quite dramatic and superior compared to straight equity holdings. That is why they are able to command 2%-3% management fees and 20% incentive since they deliver results. This market going forward may be a hedge fund manager's dream - I wish I was as confident and absolute as you are.
Bonds going forward with interest rates at all time lows? Sounds like a wonderfully disasterous philosophy. You go ahead and put people in bonds. I will continue to buy the great companies of the world at unbelievable prices. I will also let those companies pay me a dividend that is about 80% of what your glorious bonds are paying with no upward gain in principal.
Bonds going forward with interest rates at all time lows? Sounds like a wonderfully disasterous philosophy. You go ahead and put people in bonds. I will continue to buy the great companies of the world at unbelievable prices. I will also let those companies pay me a dividend that is about 80% of what your glorious bonds are paying with no upward gain in principal.
Who said that rates will go up anytime soon? You think the balance sheet of consumers and corporate in the US are any stronger than Japan was in 1990? Look at the BOJ's discount rate for the last 15 years - it is about where we are now. And...there is no credit (at ZERO rates) to get us out of this hole. Neither Keynesian or Supply-side will help at this point.
Sounds like a wonderfully disastrous philosophy of putting your clients in equities that will do nothing for the next 10 years. I will continue to make money for my clients year after year in bonds, with no dividend loss and lower share prices due to lower corporate revenues.
There is always 2 sides to a trade buddy. Good luck to you.
I will, thanks. And most of them aren't 70 years old, so if it takes 20 years for the S&P, or whatever gauge of the broad equity market you want to use, to reach 2000, so be it. Did you sell your home and start renting ? You should because with your outlook real estate won't have increased in value either.
[quote=Ron 14]
I do believe the decades of 15% annual returns are gone. 8% annual returns over 10 year periods in stocks is still very much achievable and I believe has to be part of an effective retirement portfolio. If bonds are in the 4% range and with an obvious risk premium to stocks, 8% is a mathematical probability. 20 years ago you could only make money is US markets, now it is global. JUMP ON !!!
[/quote] How so? I'm quadrupling that now. I guess it's all how you play the game.[quote=BondGuy] I love stocks. I’ve made lots of dough investing in stocks using strategies of every ilk. Everything from day trading to dividend roll to bull spreads to position building to long term hold. I’ve been around a long time and I have the balls and where-with-all to try a lot of things. Still, the days where i could pull out a stamp from 1952 and pound the table that equities are the SUREST way to guard against inflation are gone.
The evil that unregulated capitalism has become has wrecked the wealth building gravy train that equities once were. Meanwhile advisors rely on statistics that were built in a different era to continue to build a case that equities are the answer. That’s not to say, don’t buy stocks, and that’s not to say that there aren’t some exceptional geniuses among us that can still get positive returns without burning down the house every six or seven years. But for us average geniuses, we scratch our heads and wonder why top quality companies like GE are trading at 1/3 of where they were just seven or eight years ago?
What happened to the market in 2001-2003 was an explainable event. What happened to the market in 2008 was a criminal event. And, until the government moves to put back the regulatory safguards that they removed over the past decade I can’t look any retirement prospect in the eye and say “Stocks are the answer!”
[/quote]
I have a theory as to why GE is trading so low. After the 2000-2002 recession, there was a “flight to quality” of which people thought GE was one. Analysts assumed the valuations were fair, but in reality, all valuations needed to be looked at under a microscope. To be fair, I don’t think GE is valued accurately now, but you could make a case that it should only be slightly more pricey than it is now.
[quote=voltmoie] [quote=BondGuy]I love stocks. I’ve made lots of dough investing in stocks using strategies of every ilk. Everything from day trading to dividend roll to bull spreads to position building to long term hold. I’ve been around a long time and I have the balls and where-with-all to try a lot of things. Still, the days where i could pull out a stamp from 1952 and pound the table that equities are the SUREST way to guard against inflation are gone.
The evil that unregulated capitalism has become has wrecked the wealth building gravy train that equities once were. Meanwhile advisors rely on statistics that were built in a different era to continue to build a case that equities are the answer. That's not to say, don't buy stocks, and that's not to say that there aren't some exceptional geniuses among us that can still get positive returns without burning down the house every six or seven years. But for us average geniuses, we scratch our heads and wonder why top quality companies like GE are trading at 1/3 of where they were just seven or eight years ago? What happened to the market in 2001-2003 was an explainable event. What happened to the market in 2008 was a criminal event. And, until the government moves to put back the regulatory safguards that they removed over the past decade I can't look any retirement prospect in the eye and say "Stocks are the answer!" [/quote]I see alot of words but not answers.
[/quote] You're right! I don't have the answer and i admit that i don't have the answer. That seperates me from about 99.999% of the advisors out there who claim they do have the answer. Advisors whose battle cry is "We will go to the edges of this flat world to get you the returns you need!"
Morean, Obviously GE was over valued. As was most of the market. But a 2/3 drop? And then there is this: it is only with the 20-20 benefit of hindsight that WS recognizes its valuation miscue. Where does that leave us today?
I will, thanks. And most of them aren’t 70 years old, so if it takes 20 years for the S&P, or whatever gauge of the broad equity market you want to use, to reach 2000, so be it. Did you sell your home and start renting ? You should because with your outlook real estate won’t have increased in value either.
The powers of equity from a home are gone. Many small business relied on HELOC and 2nd mortgages to start and increase their business...those days are gone. I am a small business owner, with a 7 figure revenue base.I would not have achieved that without tapping into my home equity.
No credit = no growth (like is use to be)
The US is in a much different place. Economies are dynamic and change regardless of what some robots like Barton Biggs or Abbie Cohen say on weekly basis. When Long Term Credit was the canary in the cave of the hazards of leverage, so is Japan on the excess of credit growth. The US didn't take the lessons of both, and now we are in that boat.
FA's have to step up to the plate and become more global or learn to trade in these markets (like Gaddock) - if their clients expect returns above bonds. I can tell you from first hand experience is that if you have one bad month, you would rather have your mother-in-law scream in your ear 24/7 then hearing from a pissed off client.That is why I would rather concentrate on raising money and put them in bonds - less headaches.
Morean, Obviously GE was over valued. As was most of the market. But a 2/3 drop? And then there is this: it is only with the 20-20 benefit of hindsight that WS recognizes its valuation miscue. Where does that leave us today?
I didn't buy GE until it was actually undervalued. Not in the late nineties. So if you bought undervalued back then, you would be fine today. Just because everyone SAYS that something is quality, doesn't mean it is.
[quote=iceco1d][quote=Gaddock][quote=Ron 14]
I do believe the decades of 15% annual returns are gone. 8% annual returns over 10 year periods in stocks is still very much achievable and I believe has to be part of an effective retirement portfolio. If bonds are in the 4% range and with an obvious risk premium to stocks, 8% is a mathematical probability. 20 years ago you could only make money is US markets, now it is global. JUMP ON !!!
[/quote] How so? I'm quadrupling that now. I guess it's all how you play the game.[/quote] Gad, I'm curious to know something (and this is a serious question)... Do you expect the returns you've gotten over the past 18 months or so to continue once the market returns to "normal?" Market neutral or not, I don't think a regular trading environment really plays into your hand. Obviously, don't reveal anything proprietary, OR anything that would compromise your identity for the sake of answering this question.[/quote] Just like knowing where the market is going, like many of the talking heads on TV think they do, I have zero clue where it will go. Same thing with my trading I can't foresee the future. I can say this; it brings in an additional stream of revenue few use. If I keep my probabilities at 85% or better the larger the sample the more relevant the percentile becomes. That being said and again having that extra stream I should still be able to bring additional alpha to the table that others are not. The beta I'm kicking out at the moment is .37. As far as risk is concerned I consider this strategy to be significantly lower than others that are having like returns. I do admit I have used the volatility to my benefit and will be sorry to see it go.[quote=Gaddock][quote=iceco1d][quote=Gaddock][quote=Ron 14]
I do believe the decades of 15% annual returns are gone. 8% annual returns over 10 year periods in stocks is still very much achievable and I believe has to be part of an effective retirement portfolio. If bonds are in the 4% range and with an obvious risk premium to stocks, 8% is a mathematical probability. 20 years ago you could only make money is US markets, now it is global. JUMP ON !!!
[/quote] How so? I'm quadrupling that now. I guess it's all how you play the game.[/quote] Gad, I'm curious to know something (and this is a serious question)... Do you expect the returns you've gotten over the past 18 months or so to continue once the market returns to "normal?" Market neutral or not, I don't think a regular trading environment really plays into your hand. Obviously, don't reveal anything proprietary, OR anything that would compromise your identity for the sake of answering this question.[/quote] Just like knowing where the market is going, like many of the talking heads on TV think they do, I have zero clue where it will go. Same thing with my trading I can't foresee the future. I can say this; it brings in an additional stream of revenue few use. If I keep my probabilities at 85% or better the larger the sample the more relevant the percentile becomes. That being said and again having that extra stream I should still be able to bring additional alpha to the table that others are not. The beta I'm kicking out at the moment is .37. As far as risk is concerned I consider this strategy to be significantly lower than others that are having like returns. I do admit I have used the volatility to my benefit and will be sorry to see it go.[/quote] Gaddock, you know I am referring to the returns of the overall equity market during the 80's and 90's. You and I have discussed this at length. What you are doing is much different than 99% of advisors out there. Im referring to simple asset allocation, rebalancing, etc.[quote=Ron 14][quote=Gaddock][quote=iceco1d][quote=Gaddock][quote=Ron 14]
I do believe the decades of 15% annual returns are gone. 8% annual returns over 10 year periods in stocks is still very much achievable and I believe has to be part of an effective retirement portfolio. If bonds are in the 4% range and with an obvious risk premium to stocks, 8% is a mathematical probability. 20 years ago you could only make money is US markets, now it is global. JUMP ON !!!
[/quote] How so? I'm quadrupling that now. I guess it's all how you play the game.[/quote] Gad, I'm curious to know something (and this is a serious question)... Do you expect the returns you've gotten over the past 18 months or so to continue once the market returns to "normal?" Market neutral or not, I don't think a regular trading environment really plays into your hand. Obviously, don't reveal anything proprietary, OR anything that would compromise your identity for the sake of answering this question.[/quote] Just like knowing where the market is going, like many of the talking heads on TV think they do, I have zero clue where it will go. Same thing with my trading I can't foresee the future. I can say this; it brings in an additional stream of revenue few use. If I keep my probabilities at 85% or better the larger the sample the more relevant the percentile becomes. That being said and again having that extra stream I should still be able to bring additional alpha to the table that others are not. The beta I'm kicking out at the moment is .37. As far as risk is concerned I consider this strategy to be significantly lower than others that are having like returns. I do admit I have used the volatility to my benefit and will be sorry to see it go.[/quote] Gaddock, you know I am referring to the returns of the overall equity market during the 80's and 90's. You and I have discussed this at length. What you are doing is much different than 99% of advisors out there. Im referring to simple asset allocation, rebalancing, etc. [/quote] I guess, if that's true it's sad. I think we should consider how to add alpha to our clients accounts and reduce their fees at the same time. Here come the referrals.What is sad about it for you ? You are exactly where a business wants to be. You are offering a unique service, at a low cost, that nobody else is offering.
Why are you sure that GE is under valued today? GE is one market shake up from being 10 or lower. And if we have to be so careful as to nitpik whether or not a company of GE's size and stature is "Quality", what does that say for the rest of the U.S. equity markets. But i digress, GE isn't the point. Using the stock market as an inflation hedge is the point. With the S&P 500 still about 25% lower than where it started the decade stock's days as an inflation hedge that a retiree could count on are done. Most who did count on them are in the hole. The average mattress has outperformed stocks over the past ten years and retirees would have been better off investing with Sealy than with financial advisors selling stocks as an inflation hedge. And, that advisors charged a yearly fee for that advice is classic sheep getting shorn. A year ago the fear ruled this board. Now everyone is a genius again. Not unlike the crash of 87. When the market crashed, fear ruled. Everyone had been burned and no one liked how it felt. A year after the crash you'd be hard pressed to find anyone who'd lost money. They all saw it coming and got out.[quote=BondGuy] Morean, Obviously GE was over valued. As was most of the market. But a 2/3 drop? And then there is this: it is only with the 20-20 benefit of hindsight that WS recognizes its valuation miscue. Where does that leave us today? [/quote]
I didn’t buy GE until it was actually undervalued. Not in the late nineties. So if you bought undervalued back then, you would be fine today. Just because everyone SAYS that something is quality, doesn’t mean it is.
BondGuy - I was never one ruled by fear. Static buy and hold policies will get you nowhere as an inflation hedge. Accurately pricing securities will. As for GE being “quality” - that was certainly not my opinion. My personal opinion is that GE is currently close to being overvalued - when that occurs, we will sell all of our positions in GE.
I’ve postulated this before. Most analysts are have a condition known as “anchoring” and have a difficult time accurately pricing equities. They are anchored to these higher prices and thus their calculations are off.
As for the “average mattress”. I completely agree. I believe my job is to not be “average” for people. Others will say that that is crap. But just my personal opinion. I’m always looking for ways to add value to my company’s clients.
BTW - “Investing with Sealy” is hilarious!
Just so you know, I am disagreeing respectfully. I appreciate your posts and have gotten a lot out of them. Most of mine are inane and useless. Your contributions are appreciated by a lot of people, including me.
Bondguy - I am no genius and I did not see this coming, nor did I get anybody out. I follow the classic asset allocation, rebalancing, boring philosophies that nobody, advisors included, believe in anymore. In 10 years of a flat market a balanced strategy is right at a 5% annual return. In a 10yr period that included two absolute disasters that isnt bad at all. It sure as hell isn’t going to scare me away from equities.
A year ago the fear ruled this board. Now everyone is a genius again. Not unlike the crash of 87. When the market crashed, fear ruled. Everyone had been burned and no one liked how it felt. A year after the crash you’d be hard pressed to find anyone who’d lost money. They all saw it coming and got out.
The increased volatility (and I think trading range of US equities) is going to force advisors to become more dynamic. It will be detrimental since many of them will start to actively manage, or trade, and that will be disastrous. Learning to trade with client's capital is not good.
It takes years, and some experienced hedge fund guys still manage to blow-up. That is why many refuse to have watermarks on their performance.
5% return on a re-balanced portfolio is too low considering the volatility of this last year. If you have 50% swings on non-margined accounts, that should warrant a much higher return at year-end. Take a look at the John Henry Systematic Funds - he regularly takes those type of swings with leveraged accounts, but with returns in the mid 20's over the last few decades.
Everytime something unusual happens in the market the cry is “this time is different.” It isn’t even a market thing, it is a cultural thing. People want results, now. They don’t want to be patient, they don’t want to put effort in, they just want easy money, easy returns, easy weight loss. You can take your ab roller and your jenny craig and it may or may not work, daily exercise and a balanced diet will and always has. You can take your hedge funds and your Jim Cramers and all that crap, it may work and it may not. Taking ownership stake in quality companies while sticking to diversification, asset allocation, and rebalancing always has.
Define a “quality company” Ron.
Ron, I have to agree with you here. Look at where we have come from when the Dow was at 6700. Of course you have the self proclaimed experts who warn of a huge selloff instead of being optimistic. I'm not saying that it's not going to happen but because of these "warnings", how many people are sitting on the sidelines? The world was going to end after 9/11, according to the media and that time it was "different" as well. Emotions obviously have an effect on what is going on as well. Markets go up, markets go down but over the long haul, they go up a lot more than they go down. I, for one, will continue to pick up some good stocks at these discounted prices. When you have Bank of America, that was trading at $3/share and now is trading at $17, that's a bad thing? People slammed Mitt Romney during the elections when he said it's a buying opportunity. He was right.Everytime something unusual happens in the market the cry is “this time is different.” It isn’t even a market thing, it is a cultural thing. People want results, now. They don’t want to be patient, they don’t want to put effort in, they just want easy money, easy returns, easy weight loss. You can take your ab roller and your jenny craig and it may or may not work, daily exercise and a balanced diet will and always has. You can take your hedge funds and your Jim Cramers and all that crap, it may work and it may not. Taking ownership stake in quality companies while sticking to diversification, asset allocation, and rebalancing always has.
Morean- How do you define quality?
BTW- I'm not saying don't buy stocks. I'm saying don't sell them as an inflation hedge. And even for you genius market timers/position builders out there- there is no way as an investor that i would trust your ability to protect me from harm. No one is that good![quote=BondGuy] Morean- How do you define quality?
BTW- I’m not saying don’t buy stocks. I’m saying don’t sell them as an inflation hedge.
And even for you genius market timers/position builders out there- there is no way as an investor that i would trust your ability to protect me from harm. No one is that good!
[/quote]
BondGuy - I believe in varying levels of quality companies. I was mocking the “flight to quality”. In my opinion, there aren’t really any quality companies, because they can very quickly become “crap”. You do the best you can based on what you think is true value given a thorough analysis. And not value as most analysts see it.
I believe in quality indexes. Stocks are not an inflation hedge per se, inflation is not good for stocks. But if you look at all of the professionals trying to beat indexes, and you look at some mixture of stocks and bonds over time (60-40/40-60), I think you can still provide a lot of value to the average Joe.
Mainly through the accumulation of yield and dividends, obviously, stocks have been flat for over decade, and bonds have outperformend over longer time frames now. BUT, what about going forward? With the U.S. printing and borrowing money, interest rates are going to have to rise to attract foreign capital. The dollar is increasingly funny money. In that sense, going beyond the historical time frame of ten or more years, but without dumbly relying on the "stocks have outperformed over long periods of time" mantra, I think you can still say, " We own good quality dividend producing stocks to help hedge inflation". Along with your home, your business, and any other "real" assets. As for bonds, obviously, as we need to tighten duration and quality, they are less attractive. And in my view, short term bond indexes are more attractive over trading individual issues. Not saying my way or the highway, just saying, Americans are a little bond (fund) crazy right now, with respect to stocks and cash. http://www.milyunair.com/I don't. I don't have the time or knowledge or research power to be out kicking the tires of enough companies to give any type of individual stock recommendations and this is exactly what I tell my clients. That is why I hire asset managers to do it for me.Define a “quality company” Ron.
[quote=Moraen]Define a “quality company” Ron.
I don’t. I don’t have the time or knowledge or research power to be out kicking the tires of enough companies to give any type of individual stock recommendations and this is exactly what I tell my clients. That is why I hire asset managers to do it for me. [/quote]
How do you know that the asset managers are buying “quality” companies?
[quote=Moraen] [quote=Ron 14] [quote=Moraen]Define a “quality company” Ron.[/quote]
I don't. I don't have the time or knowledge or research power to be out kicking the tires of enough companies to give any type of individual stock recommendations and this is exactly what I tell my clients. That is why I hire asset managers to do it for me. [/quote]
How do you know that the asset managers are buying "quality" companies?[/quote] We hire guys like you Moraen.
[quote=Moraen] [quote=Ron 14] [quote=Moraen]Define a “quality company” Ron.
I don’t. I don’t have the time or knowledge or research power to be out kicking the tires of enough companies to give any type of individual stock recommendations and this is exactly what I tell my clients. That is why I hire asset managers to do it for me. [/quote] How do you know that the asset managers are buying “quality” companies?[/quote]
We hire guys like you Moraen. [/quote]
Yes. Ron - let me take a look at your clients’ portfolios. I’ll get them set up.
You too Army.
According to any equity American Fund MSFT is about the only quality company on the planet.
I don’t exactly, but I do have faith in some managers over others because of what they have done through different market cycles. Yes, I used the word faith, because going forward that is all we really have. If I don’t think a manager can do it I use an index. Joe the plumber doesn’t need to beat the market by 10% each year, he just needs long term market returns with some guidance so he doesn’t chop himself up.
You don't want 500, 50k accounts. I don't think I do either !!
Joe the plumber just needs to pay his taxes.
I’ll tell you what Ron, I’m worried about you and this reliance on mediocrity - it’s downright un-American! A little socialistic!
If you don't think it is different, then maybe you should take the time and explain why things are the same. I would love to hear your economic explanation.Everytime something unusual happens in the market the cry is “this time is different.” It isn’t even a market thing, it is a cultural thing. People want results, now. They don’t want to be patient, they don’t want to put effort in, they just want easy money, easy returns, easy weight loss. You can take your ab roller and your jenny craig and it may or may not work, daily exercise and a balanced diet will and always has. You can take your hedge funds and your Jim Cramers and all that crap, it may work and it may not. Taking ownership stake in quality companies while sticking to diversification, asset allocation, and rebalancing always has.
Let’s be honest, you aren’t worried about me a bit ! You wouldn’t even know it if I get hit by a car on my way to lunch. (Driver will probably be a client in Class A Founding Funds that I picked up at Jones 2 years ago) I don’t think helping Joe the Plumber or Issac IT or Samantha the Stripper navigate their way through all of the financial trash that is out there and get to a comfortable retirement is being mediocre. Sure, at this stage, my business is mediocre, in 5 more years I don’t think it will be. If it is they will find me in the bank break room hanging from my own shoelace.
Sad for others who are not giving the same to their clients. Or at least something more.What is sad about it for you ? You are exactly where a business wants to be. You are offering a unique service, at a low cost, that nobody else is offering.
I don't. I don't have the time or knowledge or research power to be out kicking the tires of enough companies to give any type of individual stock recommendations and this is exactly what I tell my clients. That is why I hire asset managers to do it for me. [/quote] With all due respect .... My GOD! You call yourself a broker??? Dude that's so f-ing lame. Go get a book called fundamental analysis for Dummies and a stock screener. If you truly believe this you are doomed to pathetic mediocrity along with your clients. Are you trying to manage money or be an overdressed peddler?[quote=Moraen]Define a “quality company” Ron.
Oh its that easy. Buy a book and a stock screener and start peddling stocks. Give me a break. If I could buy and sell stocks at accurate prices I would do it for myself. I try to give you a compliment and you become Mr. Tough guy, you arrogant prick.
"Stockbrokers" died long ago. Very few guys are analyzing stock valuations and buying and selling on a discretionary basis for clients accounts. Most are building financial advisory practices and charging a wrap fee on the assets.Sorry Ron, I tried to delete the post it wont let me, it’s not worth the trouble.
I have no doubt you do what you think is best.Obviously, you think what I do is a joke. I just don’t know why we have to go around and around about the same sh*t every post.
Ron, it sounds like you are running into people who don’t want to own stocks, and not people who don’t understand inflation.
I’ve never met anyone over the age of 60 who didn’t understand inflation. They see gas going up in price, they see their meds getting expensive, they understand inflation.
I do meet lots of people who don’t want to own stocks. But that’s OK – you can get where you want to go without stocks, as a client or an adviser.
I don’t think people can get where they want to go without at least a small percentage in stocks. If they understand inflation, but they don’t want to own stocks, they aren’t really seeing the forest through the trees. Yes, everyone will admit they have experienced price increases on basic goods their entire life, but they rather lose money to inflation “safely” (CD’s, Bonds)then by watching their account values go up and down. (equities)
They will be able to survive their own retirement because of the physical dollars they have, but when they leave 500k behind for the college of 10 grandkids equities could have paid for all 10, but the 30 yrs of CD investments will only pay for 3. Oops.I know lots of financially successful people who own zero stocks, except the shares in their own business. Your theory is severly flawed, Ron. Your problem is you can’t make money unless you bamboozle someone into owning some crap mutual fund.
Michael Moore has his millions in a savings account.
Exactly. When you save a crapton of your income as opposed to spending it, you don't need to take on risk to outpace inflation. But Ron doesn't get paid on savings accounts, so he screams bloody murder when someone uses a strategy that will only net 2-3%.Michael Moore has his millions in a savings account.
Exactly. When you save a crapton of your income as opposed to spending it, you don't need to take on risk to outpace inflation. But Ron doesn't get paid on savings accounts, so he screams bloody murder when someone uses a strategy that will only net 2-3%.[/quote] LOL. I don't care how much you have or how much you save. Each dollar in circulation is worth less each and every year. Now does that matter to Bill Gates, no because he has so many dollars. But you can't tell me that all the money you will ever need in a 1% savings account doesn't lose purchasing power over time whether you need the funds or not. I am not talking about financial success. Anyone with a lot of money is financially successful, that doesn't mean they are investing properly. Also, how exactly are people netting 3% on savings accounts ? You have FDIC insured accounts with no surrender paying over 4.5% ?[quote=Moraen]Michael Moore has his millions in a savings account.
Michael Moore and Bill Gates are far more the exception than the rule. When we work with our clients, our job is to get them to their goals the most effective and efficient way possible. Lets say we have two clients: Client A and Client B. They're both 30 years old and their goal is to get to a million dollars by the time they hit 60 years old to fund their retirement; this is their only goal in life.
Client A, using equities and other asset classes will require about $995/month at a 6% rate of return to get to a million dollars at 60. Client B will require $1716/month at a 3% rate of return to get to a million dollars at 60. Now, not saying Client B scenario is not possible but let's say that they both do that and both hit their goals at the same time. Who actually comes out ahead? Client A does because he had $721 more a month for other stuff like insurance and standard of living stuff, like healthier food and gym dues, so that when he is 60 years old, he doesn't drop dead because he's out of shape and obese. Or he had $721 more a month to just have fun and enjoy life. We can argue which one is more riskier but I didn't say 10% rate of return, I kept it really conservative at 6%. To say that one can get to their goals without equities or very little is ridiculous. Even amongst this mess that happened, guys like Nick Murray will still swear by equities all day long. Just my 2 cents . . .That is exactly where I stand. Well said.
Exactly. When you save a crapton of your income as opposed to spending it, you don't need to take on risk to outpace inflation. But Ron doesn't get paid on savings accounts, so he screams bloody murder when someone uses a strategy that will only net 2-3%.[/quote] LOL. I don't care how much you have or how much you save. Each dollar in circulation is worth less each and every year. Now does that matter to Bill Gates, no because he has so many dollars. But you can't tell me that all the money you will ever need in a 1% savings account doesn't lose purchasing power over time whether you need the funds or not. I am not talking about financial success. Anyone with a lot of money is financially successful, that doesn't mean they are investing properly. Also, how exactly are people netting 3% on savings accounts ? You have FDIC insured accounts with no surrender paying over 4.5% ? [/quote] Nope. They're not FDIC-insured, but they're backed by much better-run institutions than FDIC. But, I've got liquid, safe accounts that net 3% minimum that are creditor-protected, tax-deferred, self-complete in the event of disability, bypass probate, and pay a multiple of what's in the account at death tax-free. By the way, how are those equity positions doing these days versus inflation? What kind of rate of return will you need on them next year to get them back to where they were 3 years ago? You know, when they were supposedly outpacing inflation?[quote=deekay][quote=Moraen]Michael Moore has his millions in a savings account.
Doesn’t matter because I don’t put people in equities when they have a three year time horizon.
I would rather win games 28-10 than 10-7.
I see your point and it is possible, I just don't think it is logical.[quote=Ron 14]
I would rather win games 28-10 than 10-7.
I see your point and it is possible, I just don't think it is logical. [/quote] You may want to win in blowout fashion with the chance of losing, but what do your clients want? Are they truly that dumb that they can't be trusted with any of their money?[quote=deekay][quote=Ron 14]
I would rather win games 28-10 than 10-7.
I see your point and it is possible, I just don't think it is logical. [/quote] You may want to win in blowout fashion with the chance of losing, but what do your clients want? Are they truly that dumb that they can't be trusted with any of their money?[/quote] The clients are not the dumb ones in that relationship.[quote=deekay][quote=Ron 14]
I would rather win games 28-10 than 10-7.
I see your point and it is possible, I just don't think it is logical. [/quote] You may want to win in blowout fashion with the chance of losing, but what do your clients want? Are they truly that dumb that they can't be trusted with any of their money?[/quote] Well if they knew exactly what to do with their money they wouldn't need you or me. From what you are telling me you coach people to save more of their income. Big f**king deal. Great value added service. That is genius ![quote=Jebediah][quote=deekay][quote=Ron 14]
I would rather win games 28-10 than 10-7.
I see your point and it is possible, I just don't think it is logical. [/quote] You may want to win in blowout fashion with the chance of losing, but what do your clients want? Are they truly that dumb that they can't be trusted with any of their money?[/quote] The clients are not the dumb ones in that relationship.[/quote] And there is Jeb, the market timing guru who again comes out of left field with commentary that doesn't make sense. What country are you from Jeb ? It definitely isn't English speaking.[quote=Ron 14][quote=deekay][quote=Ron 14]
I would rather win games 28-10 than 10-7.
I see your point and it is possible, I just don't think it is logical. [/quote] You may want to win in blowout fashion with the chance of losing, but what do your clients want? Are they truly that dumb that they can't be trusted with any of their money?[/quote] Well if they knew exactly what to do with their money they wouldn't need you or me. From what you are telling me you coach people to save more of their income. Big f**king deal. Great value added service. That is genius ![/quote] Not only do they need to save more, I give them advice on where to save. Unlike you, I don't need to shill some garbage mutual fund in order to make money off a client. I don't have a problem with someone who wants to invest in a piece of real estate if they're set up properly. You have to convince them they shouldn't in order to make a paycheck.That is exactly it. I get paid the most on laddered fixed annuities so I have no idea what this guy is talking about. I also benefit from referring back to bank partners. If anything I have more options available to me because I am in a bank program. Whatever. This guy is selling glorified savings accounts and coaching people to save more. I think establishing an emergency fund is financial planning 101, but this guy is building a practice on it.
Wrong. I'm able to show clients that they don't need to put as much money at risk as you do to reach their full potential.That is exactly it. I get paid the most on laddered fixed annuities so I have no idea what this guy is talking about. I also benefit from referring back to bank partners. If anything I have more options available to me because I am in a bank program. Whatever. This guy is selling glorified savings accounts and coaching people to save more. I think establishing an emergency fund is financial planning 101, but this guy is building a practice on it.
When did I say how much I put at “risk” ? I didn’t. So you don’t really have a clue. 25% equities is that evil ? 50% ? 75% for a 40 year old ? Nevermind. I don’t even want your explanation.
Ron, honest question…
Aren't you afraid of a W shaped recession? I look at the market (like the run-up today) and can't help but feel that it's totally irrational and that we are due for a correction.I have no idea. Could we retest lows ? Yes. Is it possible the Dow never goes below 8k again, EVER? Yes. Since I don't know exactly what is next, and if someone claims they do they are nuts, why play that game? Diversify, Own different Asset Classes, and Rebalance.
Keep in mind I work at a bank where my average account is around 100k and I dont have 100% of most of my clients assets. Is there a better way ? Do these people need anything else ? Does it matter if I do the same thing with someone who has 1mil ?You're right. You didn't. But you are convinced you have to put your prospects money at risk when they don't want to. And that's my point - to outpace inflation, you can either put more systematic money into one's savings and growth accounts, or they can put more money at risk. I'd say on average, my clients have a more conservative allocation than most people of a similar age. The difference is they save more of their income than their peers. They could put more money at risk if they wanted to, but they don't want to.When did I say how much I put at “risk” ? I didn’t. So you don’t really have a clue. 25% equities is that evil ? 50% ? 75% for a 40 year old ? Nevermind. I don’t even want your explanation.
I put more of my clients money at risk then they want to ? No, I profile them and their tolerance for account fluctuations. If they don't want it, fine. Do I think they should ? Yes, and I tell them so.
How does that work? If you have a savings account with a 2% APY, putting more money into it outpaces inflation? Deekay, I assume you are talking about Par WL. I do agree that some of the big mutual companies that pay pretty good div rates is pretty astonishing and very conservative.to outpace inflation, you can either put more systematic money into one’s savings and growth accounts, or they can put more money at risk.
Because you've never lived in a hyper-inflated world, don't believe that you never will. Jus' saying.…So, you are telling me that 6%+ returns aren’t going to keep pace with inflation? …
[quote=LockEDJ]
Ice ... No ... I don't think I missed it, although I perhaps overstated my point. A simple return to 1979 America would be sufficient, not Zimbabwe, to destroy seniors that might (overweight) investments in intermediate to long term individual bonds today ... in only five years. And I've read some evidence that investing in any laddered bond portfolio (particularly in callable bonds) that suggests it might in and of itself be flawed as a strategy, but that's another story. FWIW - I disagree with the tenor of attempting to change a client's predisposition. Right or wrong, I believe my job is only to educate the client of the ramifications of his many choices and faithfully execute his wishes after that point, incurring the least possible expenses along the way. In that we agree. [/quote] This is total crap!Does anybody worry that if interest rates go up that bond funds will do poorly.
Isn’t the reason that bonds have gotten 6 pct over the past 20 years is that interest rates have gone down steadily.
Because you've never lived in a hyper-inflated world, don't believe that you never will. Jus' saying. [/quote][quote=iceco1d]…So, you are telling me that 6%+ returns aren’t going to keep pace with inflation? …
I'm starting to think "just saying" is pretty worn out. Just saying...
These boards are entertaining to say the least. I’ve been a long time lurker. I particularly enjoy when one part of the argument is that ‘old strategies, buy and hold, etc’ don’t work it’s a brave new world, etc etc. Then a few pages later the argument of ‘we could return to 1979 hyperinflation, or the remember back in such and such date when…’.
And then on top of it all, people will bash 'experts' on TV or analysts or some other person for their thoughts. It's as if having a few years in the industry has made everyone a genius with their product, clients, etc but they fail to think that it's made anyone else a genius also. The bottom line is that no one knows the right answer. They think they know but they don't. You cannot say with certainty anything. You can however point to the past and use that as a guideline. The arrogance of anyone who says their way is the only way is astounding. Why slam mutual funds? They are more expensive, but they for the most part, outpace inflation and give clients and opportunity to put themselves in a better position for the future. Real Estate, Options, Commodities, VUL's, Leveraged Debt, Fixed Income, Equities, etc, all have a place in someone's portfolio. No one strategy is a must. Stop acting like you guys are any more qualified to espouse your theories than a talking head like Cramer.LSUAlum, please tell me where VUL belongs in someone's portfolio.
Someone concerned with a Death Benefit, someone looking to get a Gift Tax exemption by putting them into an account for someone else, estate planning, etc.... Please tell me ONE investment vehicle out there, just one, that has ZERO suitability for a particular investment.
Don't be arrogant, everything suits at least one person or is desirable for one person.While it is rare that B Shares make more sense than A or C shares, an argument can be made for them.
If a client does not qualify for break point cost reduction, AND has a time horizon of 6-9 years an argument can be made for the b share. The crux of the argumet is how certain they are about their time horizon (shorter or longer makes a signficant difference) and would having their full initial investment working for them materially matter? It is certainly rare, but not impossible that B shares make more sense in those instances. P.S. the tounge in cheek part of the comment was not lost on me[quote=LSUAlum]
Someone concerned with a Death Benefit, someone looking to get a Gift Tax exemption by putting them into an account for someone else, estate planning, etc.... Please tell me ONE investment vehicle out there, just one, that has ZERO suitability for a particular investment.
Don't be arrogant, everything suits at least one person or is desirable for one person.[/quote] Sorry, LSUAlum, I'm not trying to be arrogant here. I'm still trying to find the real world situation in which a VUL would be the best choice for someone. If you can give me the specifics of a situation where VUL would be the best choice, I'd really like to know what it would be. I have not been able to figure out what this situation would be. The situation probably does exist, but I don't know what it is. Everything that you said pertains to life insurance in general, but not to VUL specifically.[quote=anonymous][quote=LSUAlum]
Someone concerned with a Death Benefit, someone looking to get a Gift Tax exemption by putting them into an account for someone else, estate planning, etc.... Please tell me ONE investment vehicle out there, just one, that has ZERO suitability for a particular investment.
Don't be arrogant, everything suits at least one person or is desirable for one person.[/quote] Sorry, LSUAlum, I'm not trying to be arrogant here. I'm still trying to find the real world situation in which a VUL would be the best choice for someone. If you can give me the specifics of a situation where VUL would be the best choice, I'd really like to know what it would be. I have not been able to figure out what this situation would be. The situation probably does exist, but I don't know what it is. Everything that you said pertains to life insurance in general, but not to VUL specifically. [/quote] If you feel that the equities markets will perform well (i.e. above the guaranteed rate of return for other permanent life products) and/or you want the flexibility of premiums as a consumer VUL may be a suitable option. The downside of decreasing death benefit you may feel is offset by your feeling that participating in the market gives you upside. It's all about options. If the client wants payment flexibility and wants the risk (and associated return) of being in the market versus a guaranteed return (in addition to the potential tax benefits associated with Life Insurance as an asset class).[quote=LSUAlum]
Someone concerned with a Death Benefit, someone looking to get a Gift Tax exemption by putting them into an account for someone else, estate planning, etc.... Please tell me ONE investment vehicle out there, just one, that has ZERO suitability for a particular investment.
Don't be arrogant, everything suits at least one person or is desirable for one person.[/quote] A zero coupon bond with a 30 year expiration, no call date & no secondary market to a guy that's 102 years old and has NO errs. A Bernie Maddoff product? Shares in MO to a guy that's at hospice for smoking related cancer?An index annuity funded with money set aside for child’s college education. 10 year term. Parent 41 at time of purchase, child 12. 12% surrender fee until the bitter end. I have actually seen this.
Hence the reason that I said that every investment has at least one person that it makes sense for. Since the two previous posters showed examples of investments that were poor choices for their respective investors, it illustrates that point.
No investment is perfect for everyone, and every investment has at least one person it is right for. As for the Madoff investments, well, to be fair, people did make over 3x the S&P with their money for some time. Now, did they allow redemptions at any point ? I would assume they did (or else the scheme would have been found out before this year). So, if you got in, made 3x the S&P and got out in 5 years....that would have been a great choice (almost too good to be true...irony not by accident).[quote=LSUAlum]
As for the Madoff investments, well, to be fair, people did make over 3x the S&P with their money for some time. Now, did they allow redemptions at any point ? I would assume they did (or else the scheme would have been found out before this year). So, if you got in, made 3x the S&P and got out in 5 years....that would have been a great choice (almost too good to be true...irony not by accident).[/quote] Until the money is clawed back by the trustee settling the crime.[quote=Wet_Blanket][quote=LSUAlum]
As for the Madoff investments, well, to be fair, people did make over 3x the S&P with their money for some time. Now, did they allow redemptions at any point ? I would assume they did (or else the scheme would have been found out before this year). So, if you got in, made 3x the S&P and got out in 5 years....that would have been a great choice (almost too good to be true...irony not by accident).[/quote] Until the money is clawed back by the trustee settling the crime.[/quote] I would be willing to bet that there is no way they can or will clawback monies redeemed by 'shareholders' of the madoff funds. The negative press regarding the destruction of wealth of 'innocent' investors won't be helped by the notion of clawbacks on the money that some of the 'innocent' investors already cashed out. Madoff goes down for this but no way the investors who cashed out do, unless of course they were privy to the ponzi scheme details. In that case, they weren't investors they were collaboraters and it's a different story.[quote=LSUAlum][quote=Wet_Blanket][quote=LSUAlum]
As for the Madoff investments, well, to be fair, people did make over 3x the S&P with their money for some time. Now, did they allow redemptions at any point ? I would assume they did (or else the scheme would have been found out before this year). So, if you got in, made 3x the S&P and got out in 5 years....that would have been a great choice (almost too good to be true...irony not by accident).[/quote] Until the money is clawed back by the trustee settling the crime.[/quote] I would be willing to bet that there is no way they can or will clawback monies redeemed by 'shareholders' of the madoff funds. The negative press regarding the destruction of wealth of 'innocent' investors won't be helped by the notion of clawbacks on the money that some of the 'innocent' investors already cashed out. Madoff goes down for this but no way the investors who cashed out do, unless of course they were privy to the ponzi scheme details. In that case, they weren't investors they were collaboraters and it's a different story. [/quote] They can't let it go. The legal precedences it would set will simply not allow it. It will take a generation to truly unwind this case and at the end of the day anybody who used the funds will get screwed as they never had constructive ownership of the funds.It is my understanding that there has been claw back already (or an attempt), because realized gains taken by those investor weren't real - they should get their principle back though (I believe).
So the best outcome is that they had money tied up for 30 years and didn't earn a dime.
On a realated note, anyone ever read the Victims’ Statements submitted to the judge for Bernie’s sentencing? Heart breaking (some cases).
Paint me as a cynic, but for the most part I don't feel bad for the investors. They were sold a bill of goods that wasn't true and that's unfortunate, but they were enticed by it because of their own greed. When you're being told that you can return 20% a year you should KNOW that something is rotten in the state of Denmark. If it sounds too good to be true, it is. It's the same level of greed that contributed to the housing bubble, the Dot.com bubble, and almost every other bubble. If you want out of the ordinary returns, you have to know that there is a distinct possibility that you will lose alot (most/all in many cases) of your money. It is nothing but shear greed that causes someone who has 5 million dollars to feel they have to 'beat the market' and get 3x the return of the S&P. Am I a greedy person? Of course. Would I take high risks for high possible returns? Absolutely. They key is I wouldn't feel bamboozelled (sp?) if I lost it all, and I would expect zero sympathy if it happened.On a realated note, anyone ever read the Victims’ Statements submitted to the judge for Bernie’s sentencing? Heart breaking (some cases).
[quote=Gaddock][quote=LSUAlum][quote=Wet_Blanket][quote=LSUAlum]
As for the Madoff investments, well, to be fair, people did make over 3x the S&P with their money for some time. Now, did they allow redemptions at any point ? I would assume they did (or else the scheme would have been found out before this year). So, if you got in, made 3x the S&P and got out in 5 years....that would have been a great choice (almost too good to be true...irony not by accident).[/quote] Until the money is clawed back by the trustee settling the crime.[/quote] I would be willing to bet that there is no way they can or will clawback monies redeemed by 'shareholders' of the madoff funds. The negative press regarding the destruction of wealth of 'innocent' investors won't be helped by the notion of clawbacks on the money that some of the 'innocent' investors already cashed out. Madoff goes down for this but no way the investors who cashed out do, unless of course they were privy to the ponzi scheme details. In that case, they weren't investors they were collaboraters and it's a different story. [/quote] They can't let it go. The legal precedences it would set will simply not allow it. It will take a generation to truly unwind this case and at the end of the day anybody who used the funds will get screwed as they never had constructive ownership of the funds.[/quote] What legal precendet exactly are you setting? That an 'innocent' investor is involved in a scam unknowingly and benefits from it by cashing out? Should share holders of Enron who happend to sell at the height of the Energy Boom have to pay back the money they 'earned'? I would beg to differ that as an unknowing participant they can clawback the money. Lets say, you already lost the money you had cashed out. Would they force you into asset liquidation to pay for the clawbacks, even though you had no knowledge of the scam? I cannot see how they would do that. In fact, I would venture a guess that they would be sued if they tried. I don't see it ever happening.[quote=LSUAlum]Paint me as a cynic, but for the most part I don’t feel bad for the investors. They were sold a bill of goods that wasn’t true and that’s unfortunate, but they were enticed by it because of their own greed. When you’re being told that you can return 20% a year you should KNOW that something is rotten in the state of Denmark.
If it sounds too good to be true, it is.[/quote] Not saying that they weren't entirely at fault, a lot of them had all of their money with Madoff. But I do feel sorry for some of them. They were uneducated investors who put their faith in the system - which failed them (SEC). We've all met people that it is nearly impossible to explain what A, B, and C shares are - let alone stock and bonds - and to expect them to be able to conduct effective due diligence on a "RIA" is ridiculous. Read some of the victims' statements. It is worth a read. Some of the other investors got what they deserved though.[quote=Wet_Blanket][quote=LSUAlum]Paint me as a cynic, but for the most part I don’t feel bad for the investors. They were sold a bill of goods that wasn’t true and that’s unfortunate, but they were enticed by it because of their own greed. When you’re being told that you can return 20% a year you should KNOW that something is rotten in the state of Denmark.
If it sounds too good to be true, it is.[/quote] Not saying that they weren't entirely at fault, a lot of them had all of their money with Madoff. But I do feel sorry for some of them. They were uneducated investors who put their faith in the system - which failed them (SEC). We've all met people that it is nearly impossible to explain what A, B, and C shares are - let alone stock and bonds - and to expect them to be able to conduct effective due diligence on a "RIA" is ridiculous. Read some of the victims' statements. It is worth a read. Some of the other investors got what they deserved though.[/quote] Some of those were pretty awful (I posted the link below for those that are too lazy to Google it). And I think you're right about the due diligence thing. Being registered is supposed to mean something. So far as investors deserving it because they were too greedy, the world of investing is primarily a world of greed, otherwise you would just be buying T-bills for yourself and clients. We are all looking for decent returns, and the fact that an investor thought they had a trustworthy way of doing it does not mean they deserve to get done like that. That's like seeing a girl in a miniskirt and saying she deserves to get raped. That's insane. http://www.huffingtonpost.com/2009/06/15/madoff-victims-statements_n_215912.html“What legal precendet exactly are you setting? That an ‘innocent’ investor is involved in a scam unknowingly and benefits from it by cashing out?”
If they 'cashed out' with money that was illegally obtained it was not their money to use. That's where unwinding this thing will take years. If Bernie paid you with money he got from me illegally it is still my money not yours. Same principal applies to people families that have been awarded artwork that was stolen from their family in WW2 and then sold to a museum for huge money. Legally the person selling it never actually had ownership so the fact that the museum paid for it isn't relevant to who actually owns it. Same reason a pawn shop doesn't want to pay for a stolen item. The interesting part is going to be how far they take the recovery of the funds. Will they go all the way back to the bakery that made the bead? Think of the logistical nightmare trying to follow the money. What's even more scary is how many dollars will be used to recover one? I'll bet the answer to that when it's all said and done will be staggering. Imagine an army of lawyers with an open check book via Uncle Sam.The idea that people deserved to loose their life saving because they should have known Madoff was a crook when not even the smartest people in the world for the most part didn’t get it is just plain RETARDED!!!
If they were only making 5% would they be less deserving of being financially destroyed for a lifetime of work and saving? The very thought IMHO makes your credibility in question. At what point do you feel it becomes OK for a person to be financially destroyed? Can you actually delineate this? Is there a hierarchy or just a broad brush stroke?[quote=Gaddock]The idea that people deserved to loose their life saving because they should have known Madoff was a crook when not even the smartest people in the world for the most part didn’t get it is just plain RETARDED!!!
If they were only making 5% would they be less deserving of being financially destroyed for a lifetime of work and saving? The very thought IMHO makes your credibility in question. At what point do you feel it becomes OK for a person to be financially destroyed? Can you actually delineate this? Is there a hierarchy or just a broad brush stroke? [/quote] While no one deserves to be taken advantage of, there is more than a modicum of responsibility to do one's own due dilligence when investing. People that are unwilling/unable to do that before investing have that right. They are also not the people that should be investing in a product or service they do not understand. The reason the SEC put in the 'sophisticated' investor rules is so that the unsophisticated investors will not embark on investing their money when they don't understand the product or vehicle they are investing in. Alot of this argument boils down to where you stand on the responsibility of the consumer when entering into a contract or agreement to use a product or service. I already feel that there is too much regulation in government and that there is a lack of personal responsibility or accountability for one's own actions. To rule of thumb used to be that if a 'resonable' person would or should have known that the results are 'too good to be true' then the courts would assume the investor knew. So that begs the question, should a resonable person have known that the madoff scam was 'too good to be true' and thus given less sympathy for their loss? My answer is yes. A reasonable person should assume that quoated returns that are 3x the S&P and GUARANTEED are too good to be true. They are either not acting reasonably, or they are not sophisticated enough to know what reasonable is, either way, they have a responsibility to know this before they enter into an agreement. Feeling bad for someone is NOT the same as feeling like they should be entitled to recourse. Your bakery comment is intriguing. I agree wholeheartedly that you can't really draw a line where to 'follow the money'. So if a client cashed out and say spent that money on a different house. The person selling the house was paid in ill-gotten funds, are they responsible too?[quote=Gaddock]The idea that people deserved to loose their life saving because they should have known Madoff was a crook when not even the smartest people in the world for the most part didn’t get it is just plain RETARDED!!!
If they were only making 5% would they be less deserving of being financially destroyed for a lifetime of work and saving? The very thought IMHO makes your credibility in question. At what point do you feel it becomes OK for a person to be financially destroyed? Can you actually delineate this? Is there a hierarchy or just a broad brush stroke? [/quote] I realize my above post does not answer the questions you posed so I'll answer them in this one. Most of the 'smartest' people in the world did know that Madoff was scamming, they just didn't know exactly how. They knew that it was too good to be true. The same way that you know intuitively if someone tries to sell you something that works too well, or doesn't cost enough for what they say it will do. Your intuition tells you that something's wrong so you don't buy it. If they had been promised 5% and everything seemed in order and MADE SENSE based on historical returns, then yes they would be entitled to more recourse. Again, it's about what seems resonable. Promises of great wealth with little risk raises a giant red flag screaming 'IT IS TOO GOOD TO BE TRUE, PASS IT UP' to just about everyone.As for the point at which it's ok for a person to be financially destroyed, can I deliniate this. Sure. When someone is trying to significantly outpace the overall returns of the market (defining market is a bit more murky. I would define it broadly as the returns of the S&P but that is simplistic also). If someone is trying to get around the fundamental concept of Risk V. Reward and fails to do so; it is perfectly ok for them to be destroyed financially. Conversely, it is perfectly acceptable for someone to take on an inordinate amount of risk and achieve the reward (I actually applaud that concept). Bottom line is with high yield potential you have to accept the risk of financial ruin or else you can't have a true fair market economy. Harry Markowitz has been publishing information on Efficient Frontiers for Risk V. Reward returns on Modern Portfolio Theory since 1959 (earlier some in 1952 but comprehensively since 59). Now, it's not widely known by lay persons that he's done this, but what IS widely known is the concept of Risk V. Reward. Just as if you may not understand the math behind how to compute Gravity as Isaac Newton did, you can understand the concept of gravity because it is REASONABLE. "People want capitalism on the way up, and socialism on the way down." I love the poignancy of that quote.
Yeah, Inflation has made a great impact on people. But I’ve read of all the traders here who mention trading has changed their life, they are independent, free and have found their way. Before that though they lived a certain lifestyle and now they live a new one. How do you people deal with the change?
Forex
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