Mbia/ambac
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Not nearly? You are entitled to your own opinion. There are Huge cracks in the global economic foundations. inflation adjusted, bank write offs have already exceeded 1929! And we are not even close to being done. I'm sure my clients that are heavy cash (short cd), short positions and commodities have faired much better than people that have been long equities. [/quote] For the last few months, perhaps. Is that a long term winning position? Doubtful. Our job is, among other things, to not be as prone to emotional swings as our clients. It's not always easy, but it is always what we're paid for.[/quote] Amen. The real measure of success is can you predict market cycles with any degree of accuracy and get your clients back into the market in time to take advantage of the inevitable upswing. If not, all the good work you did calling the downside (assuming you did it in a very timely manner) is wasted as you're left in the dust on the up cycle and your overall returns revert to the mean (or less). Be careful about making huge bets to the downside....you are fighting a very very long-term trend of market appreciation that has survived much larger crises than we have today. I had a boss that got fired for making such a bet in 1995 and costing our clients a lot of money. ...and if you're not talking to your clients in times like this, you are setting yourself up for defections...get on the phone!!![quote=Broker7][quote=OldLady][quote=Broker7]economic crisis 2000-2002 times 20[/quote] Not nearly!!! If that’s the case, what are you advising your clients?
I had 3 appointments yesterday (all referral) with one portfolio losing 37% since october! Buy and Hold…Buy and Hold… and the third is a long stock portfolio. The buy and hiolds have lost about 10-15%…were talking american funds good growth and growth and income funds.
My clients that made the referrals are the ones that listened and are actually break even or on the plus side since october. I acated 2 on the spot and will have the 3rd one coming in next monday. Thanks for your concern indy one. I read your discussion on your boss in 1995. Too bad for him. Luckily, I am my own boss..only my clients can fire me. I feel my decisions are very sound given the current status. As long as you feel like you are doing your clients right..there is nothing more to be done. You are right on the deflections..these new clients havent heard from their borker in months.[quote=Broker7]Better to get back in late than to get out late! Our job is to make money when possible, and to PRESERVE money when it is not. [/quote] <?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />
"Get out late"? If you have a plan, when does "late" come into the math? When you first spoke with the client about this account, did you mention the market sells off 20% every 4-5 years and unexpectedly? Did you tell him you knew in advance when that would happen? If not, where does "late" come from? Don't get me wrong, I'm not saying "buy and fall asleep", but wholesale changes of a plan because the market does the usual correction thing that you should have accounted for out at the beginning of the process doesn't make sense to me.
BTW, you can easily lose more money getting back in late than in failing to "get out early". Ask Elaine Garzarelli. She famously got her clients out (or at least made the call) the week before the decline of 1987. However, she didn't get back in until the market was above where she'd got out (kept thinking the market recovery was just a head fake). Her clients would have been better off staying put. You have to make the market call right twice, and I’ve yet to see anyone do it so well that it’s an investable strategy. Now I’m using clients in my book, people mostly interested in income and preserving wealth, so ymmv.
[quote=Broker7]We all know something isnt quite right with the market and economy..don't we? If not..please research. [/quote]
I’m trying to think of the last time when you couldn’t say that…..
[quote=Broker7]All of you buy and hold mutual fund brokers (you know who you are..this is not the time to hold equities), please look at the option of within fund family exchanges to treasuries or money markets. Not all of it (you and your client can determine that....enough to ballast portfolios during these rocky times. This is no cost to your client, and it shows you have their best interest at heart.
[/quote]
This is not the time to hold equities? I’d say this is no time to hold funds, what with the inflows and outflows working against you.
You can move into the money market if you like, that’s not a strategy I favor. In fact, at this point I’m buying with the cash we’ve held on to all along. The cash the client would often ask “why do we have that?” about.
No offense intended in anything I’ve said. You do what makes you and your clients comfortable.
mike,
I certainly appreciate your input. You make some solid points. But my studies and research point towards recession, on a global scale. It is what it is, an I have prepped my self and my clients. My point is many brokers do not do research, those brokers that believe in CNBS and main stream media will be beat down or out of business here in the near future. I am comfortable with my positions as are my clients. You know when you lose 50%..that it takes a 100% return to get back to even. I have more leway to get back in :-)[quote=Broker7]mike,
I am comfortable with my positions as are my clients. [/quote]What is your position, in general, 45 year old looking to retire in 20 years. Plenty of cash flow and healthy bank balance?
[quote=Broker7]mike,
I certainly appreciate your input. You make some solid points.[/quote] [quote=Broker7] But my studies and research point towards recession, on a global scale. It is what it is, an I have prepped my self and my clients. [/quote] OK, let's say you're right, so what? Didn't you plan for that when you first spoke with the client? Wasn't that part of their plan? What do you stand to gain if you're 100% right? What could you lose if you're 100% wrong? [quote=Broker7] My point is many brokers do not do research, those brokers that believe in CNBS and main stream media will be beat down or out of business here in the near future. [/quoye] I guess there are brokers like that. I don't know any, but I guess there are. [quote=Broker7] I am comfortable with my positions as are my clients.[/quote] Well, that's what matters. [quote=Broker7] You know when you lose 50%..that it takes a 100% return to get back to even. I have more leway to get back in :-) [/quote] Ask Ms Garzarelli about that one.While I agree about the principal preservation in down times I don’t think this is an economic crisis of epic proportions. So the way that I’ve handled it is:
1 - Used SPIA’s for people needing to take distributions for the 5 yr term. A lot have taken this advice & some wish they had!
2 - Reduced allocations to stocks by 10 - 15% in June/July of last year(for anyone that would listen).
3 - I believe this is fully a crisis of confidence so I’m dollar cost averaging the positions I scaled back into stocks over the next 3 months. So if the client’s benchmark is 70/30, they were at 55/45 until the beginning of last week & we’re moving to 60/40 this week, 65/35 next month & back to 70/30 in March. The studies that I have done indicate that it’s time to start buying back when you believe that you are at least 50% down to the bottom. The reason for this is that A - All markets recover & go to new highs. B - The typical length of decline in a crisis of confidence is about 3 months w/ the last month looking the ugliest - looking like we’re going to 0. C - Since it takes more return to get back to even($1 -> $.5 = -50%; $.5 -> $1 = 100%), clients make more money by being early than by being late.
Backup - From Google Finance Charts…
1987 - High was Aug 21st: 2709. Low was Dec 4th: 1766. % decline: 35%.
1990 - High was July 13th: 2980. Low was Oct 12th: 2398. % decline: 19.5%
1998 - High was July 17th: 9337. Low was Sept 4th: 7640. % decline: 18.2%.
2007 - High was Oct 12th: 14093. Recent low was Jan 18th: 12099. % decline: 14.1%
Don’t you wish that funds allowed for automatic dollar cost averaging? It would make our lives easier…
To a degree, they do…systematic purchases and systematic exchanges (from MMKT funds if you like) accomplish this.
[quote=Ashland] While I agree about the principal preservation in down times I don’t think this is an economic crisis of epic proportions. So the way that I’ve handled it is:
1 - Used SPIA’s for people needing to take distributions for the 5 yr term. A lot have taken this advice & some wish they had!
2 - Reduced allocations to stocks by 10 - 15% in June/July of last year(for anyone that would listen).
3 - I believe this is fully a crisis of confidence so I’m dollar cost averaging the positions I scaled back into stocks over the next 3 months. So if the client’s benchmark is 70/30, they were at 55/45 until the beginning of last week & we’re moving to 60/40 this week, 65/35 next month & back to 70/30 in March. The studies that I have done indicate that it’s time to start buying back when you believe that you are at least 50% down to the bottom. The reason for this is that A - All markets recover & go to new highs. B - The typical length of decline in a crisis of confidence is about 3 months w/ the last month looking the ugliest - looking like we’re going to 0. C - Since it takes more return to get back to even($1 -> $.5 = -50%; $.5 -> $1 = 100%), clients make more money by being early than by being late.
Backup - From Google Finance Charts…
1987 - High was Aug 21st: 2709. Low was Dec 4th: 1766. % decline: 35%.
1990 - High was July 13th: 2980. Low was Oct 12th: 2398. % decline: 19.5%
1998 - High was July 17th: 9337. Low was Sept 4th: 7640. % decline: 18.2%.
2007 - High was Oct 12th: 14093. Recent low was Jan 18th: 12099. % decline: 14.1%
Don’t you wish that funds allowed for automatic dollar cost averaging? It would make our lives easier…[/quote]
This is why clients/prospects should avoid Indys and some other firms. You get reps who are in their own little world with their own (usually unproven) investment philosophy. That is very dangerous.
That hurts… I haven’t laughed so hard in a long time.
Now, please, I would love to learn how it’s done right. Please share with us your cookie cutter, wirehouse provided strategy. I’d also appreciate if you’d help me understand how you call the bottom because in the 12 yrs I’ve done this I’ve never been able to get it right.
Joseph, please feel free to tell us about your proven investment strategy that works better than staying invested in the market.This is why clients/prospects should avoid Indys and some other firms. You get reps who are in their own little world with their own (usually unproven) investment philosophy. That is very dangerous.
[quote=josephjones107]This is why clients/prospects should avoid Indys and some other firms. You get reps who are in their own little world with their own (usually unproven) investment philosophy. That is very dangerous.
Joseph, please feel free to tell us about your proven investment strategy that works better than staying invested in the market.[/quote]
Market timing does not work. Asset allocation with the vast majority invested in equities works. rebalancing annualling to get back to portfolios target levels (large cap, mid, small, europe, pacific, emerging, ect ect.)
It’s mind boggling to think their are advisors out there who stay in the business for long time periods because they are good at selling but don’t know jack shtt about managing money
I love how some of my clients “KNOW” that the market is going to get worse. They just “KNOW” it! It kills me. I try and nicely tell them that no one “KNOWS” anything about the future of the market. If someone says they do, they are either:
1. A Liar 2. Crazy I put my 2007 SEP contribution in on Tuesday of this week! I'm not saying it can't go lower in the near term, but who really cares. You can't predict the market, so don't miss the upside! And, if it does go down, my dividends are reinvesting at lower prices.[quote=now_indy]I love how some of my clients “KNOW” that the market is going to get worse. They just “KNOW” it! It kills me. I try and nicely tell them that no one “KNOWS” anything about the future of the market. If someone says they do, they are either:
1. A Liar 2. Crazy I put my 2007 SEP contribution in on Tuesday of this week! I'm not saying it can't go lower in the near term, but who really cares. You can't predict the market, so don't miss the upside! And, if it does go down, my dividends are reinvesting at lower prices.[/quote] Or 3. Maybe an educated guess... or perhaps well informed. Don't just keep preaching what the company you used to work for preaches. That methodology does not apply to this market. Way too many optimists hear..get real.That sounds a lot like staying invested. For a moment, I thought you’d joined the flat earth society.
josephjones - tactical asset allocation is very different market timing. In June/July the market was clamoring for rate cuts & it was going up in hopes that the Fed would cut dramatically and soon. I felt this juxtaposition A - A ‘need’ to have rates cut with B - a dramatically increasing market to be based on faulty logic. What if the Fed didn’t cut rates or didn’t cut them as fast as the market wanted? Oil & commodity prices were at highs & the dollar was falling. It just didn’t make sense to me.
So, I told my clients that the market’s continued rise didn’t make sense to me & that I felt it was time to take some profits. I didn’t claim to be calling the top. Just that bad news of that sort & an increasing market don’t usually follow. I also don’t claim to know where the bottom is. I feel, though, that we’re at least halfway there. So, I’m inching my clients back in. They’re very happy that I’m handling it in this way, and so am I. I have gotten not 1, not a single person, call to sell out due to market fluctuations(Although I’ve been calling them to set up beginning of the year reviews). People believe I’m watching their money, and that’s going to be good for them and for me.
Some of the original questions asked were about what bond insurers actually insure. Here is a link from MorningStar that is pretty detailed: http://news.morningstar.com/classroom2/course.asp?docId=5399&page=1&CN=COM
To sum up: Insurance will pay for both interest and principal if the municipality defaults.