Next Week

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Oct 26, 2008 3:33 pm

Does anyone else have a big, nervous pit in their stomach for next week? 

Oct 26, 2008 3:38 pm

Yes.  I'm hoping for some stability.

Oct 26, 2008 4:13 pm

New Home sales come out tomorrow I think; hopefully this will be up, though it will probably be drowned out by everything else. 

Consumer Confidence on Tuesday; we know where this is going. 

Durable Goods on Wed: we'll see. 

GDP numbers come out Thursday, which people are saying .05% contraction.  Hopefully that's already priced in. 

If we can make it through this week, hopefully we won't see the massive fund redemption that everyone is expecting sometime between now and November 15th. 

Oct 26, 2008 4:40 pm

I just fear another 1000 point drop.

Oct 26, 2008 7:00 pm

futures are up about .80%.  Might not last, but sure beats the friday close futures of -5.00%

Oct 26, 2008 11:02 pm

I hope the market does go down this week. My retired clients are positioned well. My clients with college funds are positioned well. I'm doing more business now than I ever have. Call your clients. Remind them of the plan. Tell the ones that are worried that today is not their number. Their number is 5-10 years from now. Stick with the plan. What I've enjoyed most about this market is the number of walk-ins from other firms... actually mostly banks. Most of all lose the fear. You can't lead from fear.

Oct 27, 2008 12:59 am
breaking news:

I hope the market does go down this week. My retired clients are positioned well. My clients with college funds are positioned well. I'm doing more business now than I ever have. Call your clients. Remind them of the plan. Tell the ones that are worried that today is not their number. Their number is 5-10 years from now. Stick with the plan. What I've enjoyed most about this market is the number of walk-ins from other firms... actually mostly banks. Most of all lose the fear. You can't lead from fear.

 
Yeah, it's tough when the plan is down 40%.  Even with cash on the sidelines and VA's for the long term, the plan doesn't look very good to clients right now.
Oct 27, 2008 6:40 am

Snags,

 
For the past few weeks, everytime that you open your mouth, I hear an advisor who's going to let the economy torpedo his career.
 
You don't know what will happen tomorrow.  You never did.  You never will.  Your clients' problems aren't your problem. 
 
This is what you should be doing:  You make recommendations for your clients to follow and you warn them that all of your projections will be wrong and investments do lose money.  In fact, you promise all of your clients that they will lose money.  You let them know that they need to earn 8% on their investments (or some other #) to accomplish their goals.  You let them know that they can invest very conservatively and guaranty that they can't reach their goal, but any losses should be manageable.  You let them know that they can invest aggressively and they may reach their goals, but it is also possible that they can lose lots of their money.
 
You lay out options.  You don't sugarcoat anything.  You tell them that you don't have a clue as to what will happen.  You document everything.   The market going down and your client's inabilities to achieve their fiancial goals has to be their problem.  Your problem is supporting your family and achieving your financial goals.
 
For all of your clients in the accumulation phase of life, you should be wishful that the market is going down.  For your clients who need money now and have invested too much in equities, you should be wishing that the market goes up.  A market downturn is good for some clients.  It is bad for others.  There is no reason for you to have a rooting interest.  Your clients need you either way and you'll earn a good living either way.
 
The problem arises if your clients are counting on you for picking good investments.   You don't have the knowledge or the skill to do that.  That's not a put down.  My clients know that I can't pick good investments.  If I could, as I tell them, I wouldn't be talking to them; I'd be on my yacht.
Oct 27, 2008 9:50 am
anonymous:
For your clients who need money now and have invested too much in equities, you should be wishing that the market goes up.



Nail on the head. 

Oct 27, 2008 11:18 am

Just saw this in the WSJ; a nice point for those of us who weren't here for the 70's:
http://online.wsj.com/article/SB122488709542968173.html

"In truth, bear markets often end not in a crescendo of selling but a
cloud of indifference. For example, take Dec. 6, 1974, a day that will
long live in market infamy. The Dow closed at 577.60, down 45% from its
levels in January 1973. Total trading volume was a tepid 15.5 million
shares; a few days earlier, it had totaled only 7.4 million, tying the
lowest level in more than three years. Lucien Hooper, one of the
nation's leading security analysts, told The Wall Street Journal that
day that the market was "just waiting the bad times out." Far from
throwing in the towel, most investors weren't even at ringside.


"The most interesting thing about [the 1974 market bottom] was its
dullness," veteran fund manager Ralph Wanger recalled to me. "It wasn't
a crash, it was a mudslide. You came in, watched the market go down a
few points and went home. The next day you went through the same thing
all over again." And then, without a moment's warning, the bull woke up
and took off. By Jan. 6, 1975, the market had shot up 10%, and a year
after that the Dow had risen 54% from its 1974 low."


Oct 27, 2008 12:30 pm
anonymous:

Snags,

 
For the past few weeks, everytime that you open your mouth, I hear an advisor who's going to let the economy torpedo his career.
 
You don't know what will happen tomorrow.  You never did.  You never will.  Your clients' problems aren't your problem. 
 
This is what you should be doing:  You make recommendations for your clients to follow and you warn them that all of your projections will be wrong and investments do lose money.  In fact, you promise all of your clients that they will lose money.  You let them know that they need to earn 8% on their investments (or some other #) to accomplish their goals.  You let them know that they can invest very conservatively and guaranty that they can't reach their goal, but any losses should be manageable.  You let them know that they can invest aggressively and they may reach their goals, but it is also possible that they can lose lots of their money.
 
You lay out options.  You don't sugarcoat anything.  You tell them that you don't have a clue as to what will happen.  You document everything.   The market going down and your client's inabilities to achieve their fiancial goals has to be their problem.  Your problem is supporting your family and achieving your financial goals.
 
For all of your clients in the accumulation phase of life, you should be wishful that the market is going down.  For your clients who need money now and have invested too much in equities, you should be wishing that the market goes up.  A market downturn is good for some clients.  It is bad for others.  There is no reason for you to have a rooting interest.  Your clients need you either way and you'll earn a good living either way.
 
The problem arises if your clients are counting on you for picking good investments.   You don't have the knowledge or the skill to do that.  That's not a put down.  My clients know that I can't pick good investments.  If I could, as I tell them, I wouldn't be talking to them; I'd be on my yacht.
 
Thanks Anon.  I hear you and agree with everything you wrote.  Truth is, I tell clients all those things you said.  I tell them we must prepare for bad markets because it's a ball we have to push back up the hill once in every 5 years on average.
 
The only clients that I worry about are the ones that are close to retiring...1-2 years.  We allocated in a way that, at the time, I thought would hold up.  Yes, looking back, I would have allocated differently.
 
Problem is when there are bond funds down almost 30% and "balanced" portfolios down 35%, what can you do? 
 
So I tell them we need to stick to our plan, we're in it for the long term, you're not cashing everything out the day you retire.  I've been saying this from Dow 12,000, 11,000, 10,000, 9,000, and 8,000.
Oct 27, 2008 2:11 pm

Snags,

 
Repeat after me.  "My clients' problems are not my problems."
 
Look, it sucks for them, but it's not your problem.  I'm not trying to be callous.  Understand that I'm not a callous guy.  I care very deeply about my clients and you obviously do also or you wouldn't be bothered.    
 
Your job is to help your clients achieve their goals.   You don't have the power of hindsite.  You probably had two choices.  1) Invest in a very conservative way and guaranty that the clients couldn't achieve their financial goals.  2) Invest in a less conservative way and take a chance that they might achieve their goals and they might not. 
 
You and your clients went with choice #2.   In hindsite, it turned out to be wrong.  So what?  You pick up the phone and you explain to your clients in this position that they have two choices.  1) Retire with a lower standard of living or 2) Work longer.  It's just reality.  It's better that this happened before they retired than after. 
 
I tell them we must prepare for bad markets because it's a ball we have to push back up the hill once in every 5 years on average.
 
Be careful with that type of line.  They will then expect to lose money only 1 out of 5 years.  What if it's 2 of 5 or 3 of 5 or 5 out of 10?  You want to continuously be underpromissing and overdelivering. 
 
For instance,instead of telling them that they will lose money 1 out of 5 years, promise them that they will lose money and that it will happen at the worst possible time.  Trust me that this won't cost you any clients and in fact, will help you keep clients.
 
Oct 27, 2008 3:39 pm

Anon, it sounds like you could use a few lessons in basic option strategies.

Oct 27, 2008 4:39 pm
snaggletooth:

[quote=anonymous]

 
......So I tell them we need to stick to our plan, we're in it for the long term, you're not cashing everything out the day you retire.  I've been saying this from Dow 14,000, 13,000, 12,000, 11,000, 10,000, 9,000, and 8,000.
 
Hang in there guys.  It's almost a "half-off" sale!
 
(and in the background the Feds come galloping in on their horses, commercial paper in hand....)