Dr. Doom
Who the hell is this whacko?
http://www.cnbc.com/id/27171452
[quote=snaggletooth]
Who the hell is this whacko?
http://www.cnbc.com/id/27171452
[/quote]Who knows...an' why should ya care what he thinks what 'chew thinking man?
[quote=GWB43] [quote=snaggletooth]
Who the hell is this whacko?
http://www.cnbc.com/id/27171452
[/quote]Who knows...an' why should ya care what he thinks what 'chew thinking man?
[/quote] He scares people. So does this biotch: http://www.cnbc.com/id/27184545
Do you favor the idea that your clients do not hear all points of view"
I believe him.
I don’t think the financial and government elites have yet addressed what happened here, let alone come up with a solution.
A couple of years ago there was a guy named Put Trader who posted on this forum. He warned that the market could go down and virtually all of the “advisors” on the forum whined that he was hurting their feelings, making them sad.
One, a baby broker at a bank, declared that Put Trader didn't know what he was talking about because the stock market always goes up because earnings always go up. Put Trader also suggested that clients paying 1% of AUM was acceptable to them when the 1% tended to reduce the client's annual return from, say, 15% to 14%--but that they would not be as willing to allow their return to go from negative 20% to negative 21%. Again the "advisors" all whined about how that made them feel sad. That they were "professionals" and that paying them 1% of a portfolio's value was acceptable because they send their clients a birthday card and invite them to a BBQ on the office parking lot.Welcome back Put!! It was getting very boring around here. I would like to hear what’s in your personal playbook right now.
Hah, these are "provocative" old remnants floated by a compulsive and passive aggressive personality-disordered advisor wannabe. Real advisors know their own value and won't take that bait.
After meeting with and talking to all of their clients, good advisors will sharpen their professional skills (knowledge) or take up raquetball, thus meeting new potential clients (who desperately want the benefit of our perspective and experience)in tough times like these. Stand back and watch, Spears, your "Put" has no genuine ideas for the times, only deconstructive agitation during the storm.Put,
Regardless what the market is doing, a loser is still a loser.
Putsey,
I've been wondering where you have been.Here’s something you could do to add some ooomph to a portfolio.
Buy Fluor for 37 and write a Nov 40 straddle for 11. If the stock rises to 40 next month kiss it goodbye. You'll have made 14 points on an investment of 26 points in a month. That's better than 50% in a month. If the stock is below 40 next month you can either allow stock to be put to you, or roll the position to December for a small credit--buying more time for it to rebound. There is a bottom in here somewhere. A similar trade is possible in Apple--I'm long the stock and short the Nov 120 straddle. Ditto for Research in Motion--go long the stock and short the November 65 straddle.You have to learn about puts and straddles to pass the series 7. Being able to master the basics is why they say, "the series 7 is basically an intelligence test to screen out the dummies."
Not using them takes real intelligence. I don't think you're gonna learn how to BS here, consider moving along now. For some real excitement, research the economic term, " law of diminishing returns."Let me see if I have this right. If FLR moves from 37 to 40 my strategy earns a 13 point gain and, according to the "advisor" calling himself "walking9," I'm not intelligent if I do it?
Yeah, that 50% in a month is something nobody would want. My bad.Uh huh.
I guess buying GE at 19.50 and writing a Dec 20 straddle for $4.40 would be insane. The return would only be about $5 on $15–33% in two months.
Maybe there's an ex date in there to help bump 33% in two months up to something like negative 25% that walking9 has been getting the suckers who think he's an "advisor."Anyone who can afford to waste time here (myself included) is in a different market or discipline than what you describe.
Invest in your own education, and come back after you make it. Good luck.The problem with using options as part of an overall strategy is that the “advisor” has to have an above average IQ so that he or she can explain them to the client.
The Options Clearing Corporation is frustrated that the bright advisors are retiring leaving dim bulbs who believe that their role in the grand scheme of things is to meet with their client once a year to give them a summary of the tax implications of their activity--and, of course, to send the client a birthday card and a $100 Outback gift card at the end of the year. I'm I being too honest?Naive might be a kinder and gentler way to put it.
You'll not get a rise out of your attack, consider investing in some passive aggressive counseling. ( I mean that in a kind way. ROI. )[quote=Provocative Put]Here’s something you could do to add some ooomph to a portfolio.
Buy Fluor for 37 and write a Nov 40 straddle for 11. If the stock rises to 40 next month kiss it goodbye. You'll have made 14 points on an investment of 26 points in a month. That's better than 50% in a month. If the stock is below 40 next month you can either allow stock to be put to you, or roll the position to December for a small credit--buying more time for it to rebound. There is a bottom in here somewhere. A similar trade is possible in Apple--I'm long the stock and short the Nov 120 straddle. Ditto for Research in Motion--go long the stock and short the November 65 straddle.[/quote] OK...this is definitely you, Put. Where the heck have you been?For some reason I am not able to take part like the rest of you, but I am able to find little windows of opportunity.
I want to explain something that has worked very well for me a number of times. Google makes it a practice to announce its earnings on the Thursday before the third Friday of the month--something about options in there. Anyway, at 3:45 today GOOG was trading in the 340 range and I decided to make a wager that it would rise about 10% on earnings--to the 370 range. So I bought 20 Oct 380 Calls, wrote 20 Oct 370 calls (forming a bear call spread wagering the stock would be beow 370). I also bought 20 Oct 360 calls and wrote 20 Oct 370 calls (forming a put bull spread wagering the stock would be above 370). I did it for a net credit of $9.50 per share or $19,000. Commissions at Fidelity are $8 per leg ($32) plus 75 cents per contract ($30) so my net credit is 18,957.43--the 57 cents is that weird taxes stuff. So what could happen? Well, tomorrow the stock could close at 370. It's at 373 in the after hours market right now. If it's at 370 tomorrow afternoon everything will expire adn I'll keep ALL of the money, which makes me happy. On the other hand if it's below 360 I'll have to buy 2,000 shares at 370, but I'll sell them for 360 so I'll lose $20,000 on that, or $1,043 more than I collected this afternoon. That will make me sad, but will not ruin my life or anything. If it's over 380 tomorrow I'll have to sell 2000 at 370, but I can buy them for $380 so I'll lose $20,000 on that--but I get to keep the money from today so I'll be out of pocket $1,043 for that too. That too will sadden me, but won't ruin my life. If it's between 361.60 and 379.40 I'll avoid losing. As of now I like the odds. If I didn't know how to craft things like this myself I'd be willing to pay an "advisor" to suggest them to me. I bet there are thousands of guys like me out there--wishing somebody would call them with ideas that might return hellatious profits if they work out.Ouch…doesn’t look like that GOOG trade worked out so well…at least thus far…
And people ask Jones advisors how come we don't do options.
Probably because it's more fun to fly to Vegas, take a $20,000 cash advance on your credit card, put the chip on red or black and spin the wheel. At least while you're there you can catch a show.Aw, he’ll only lose a bit more than a grand either way…that’s probably in Putsy’s trading budget. Options are interesting, but for the most part, I’ve limited myself and clients to covered call-writing. Not very sexy, but pretty easy to explain to clients and a great way to produce income, if you don’t mind having to sell stock positions from time to time.
If somebody bought in 1998 and held till today they'd be even. The idea of buy and hold has fallen out of favor among the baby boomers.
I showed you nimrods a way to risk $1,000 and possibly make close to $19,000 in a single day. I can assure you that there are thousands of guys--and gals--who are desperate for advice on how to take advantage of the volatility without risking much. As I said last night, you have to have an IQ higher than room temperature in order to appreciate things like this, and be able to form complete sentences in order to able to explain them to your clients.The idea of buy and hold has fallen out of favor among the baby boomers.
Partly what they pay us for. As I said last night, you have to have an IQ higher than room temperature in order to appreciate things like this, and be able to form complete sentences in order to able to explain them to your clients. Why others get MAs in counseling, and why you consider retaining one and paying for help with your apparent passive-aggressive personality disorder. A college education might help your social skills, too.That "paying you" idea is falling out of favor faster than the Dow. The idea that Joe and Joanne need to pay you 1% of their account so that you can tell them to buy and hold is a scam, and more and more of them are figuring it out every day.
On the other hand, if you also brought to the table the abilty to intelligently discuss the markets, the effects of volatility on option premiums and how to capitalize on those premiums without extraordinary risk you may actually be worth a few basis points.So long, then.
[quote=Provocative Put]
That "paying you" idea is falling out of favor faster than the Dow. The idea that Joe and Joanne need to pay you 1% of their account so that you can tell them to buy and hold is a scam, and more and more of them are figuring it out every day.
[/quote] 1%? That's getting off cheap. They should be paying us at least 1.5%. Case in point: Say we recover in 5 years and are back at Dow 14,000. The average investor might have already bailed out. If we can keep our clients in the market, it seems like 1.5% a year would be better than locking in a 40% loss.What if the Dow trades between 7000 and 10,000 for ten years?
Will wonders ever cease?
Don’t be so dismissive. We just went through a 10 year period where we went from 8500 to 8500.
What specialized training do you have for helping somebody with their budget?
Well, I worked on the floor of the CBOE for a couple of years. But the best training I had was that I was a Regional Sales Manager for Institutional Options strategies with an NYSE firm with 287 branch offices and 3,600 registered reps.
If you uncovered a hot prospect and asked for an "expert" to come help you--that person was one of four. I was one of them.I believe that a well constructed portfolio would commit 15 to 20 percent to speculation such as I suggest.
The average investors are screaming for help, and they deserve more than platitudes such as "Hold On, It Will Come Back............Some Day." Sadly the average "advisor" is not intellectually capable of doing much more than that.I suggest taht everybody should set aside 15 to 20 percent of their portfolio for speculation. Should they lose that money they should stop and the remaining 80 to 85 percent will eventually recoup the loss.
The strategy I suggested yesterday--go long Fluor at 37 and short the November 40 straddle cannot possibly result in a loss greater than 66 points, which would only happen if Fluor goes bankrupt within the next four or five weeks. While that may happen the odds are long, very long. The stock is down from 100 earlier in the year. It has a hell of a beta, but with those high betas come opportunity. The upside gain is limited. If FLR, which was at 43 on Monday is at or higher than 40 in a month the gain will be 16 points. The 11 points the come from the straddle can be used to pay for the shares, leaving a cash requirement of only $2,600. By the way, today the trade was available at 35 with 10 1/2 coming in from a 35 straddle--max gain only 10 1/2 in a month. I find it curious that so many "advisors" sneer that that is not worth their attention or attempt to understand.Put,
I sympathize with what you’re saying. I really do. If I had the time to do it for all my clients, I would. At the moment, with my client base, I really only have time to write covered calls for some people.
At some point, it becomes economy of scale. Tell me you have the time to balance accounts, make sure cash disbursements are being met, advise clients on educational funding, insurance, estate planning, taxes, day-to-day stuff, annual reviews, and then be able to establish and manage option strategies on top of it all.
If I had 10-50 clients with 100m-500m AUM, then I would consider it, I really would! Unfortunately, I’m servicing more than that.
I really don’t think anyone here is too dimwitted to set up option strategies, but I do think many of us have a large client base that makes it difficult to micro-manage such transactions.
How would you handle it?
It is not at all time consuming to engage in sophisticated options strategies--just choose one that you believe in, put it on, and have a planned exit strategy should it not work out.
The true danger to the stock market is on the short side--either shorting shares or writing calls naked. The downside risk is scary as we've seen in the last several weeks--but it is not unlimited so there is no reason to be super cautious. Especially now that the market has already lost 30 to 40 percent. The danger to today's clients is not further erosion so much as not mounting a significant advance for a decade or longer. Your clients are going to have to AVERAGE huge returns in order to return to what they had last October by the time they retire. It ain't gonna happen in diversified stock fund. It ain't gonna happen in an annuity. It ain't gonna happen in muni bonds. It might happen in commodities, but if you think that options are scary............. I know, I know---hold on, it will come back if you live long enough. Meanwhile let's talk about how you can cut 10% off your electricity bill by weather stripping those windows. I'm a professional financial advisor...........see, my business card says so.Is this Ferris Bueller the biggest cypher I’ll encounter on this forum, or are there others who are more vapid than he?
are there others who are more vapid than he?
Could be you. One who tries to make a virtue out of trading options, while attacking the fee-only model as being expensive, appears to be dull. Why don't you call yourself, "tempest in a teapot." Try taking up squash, and prove yourself on the court, man.When the client’s results in a fee only model is a negative return, and that fee increases the negativity the model is wrong.
Fee only can be justified so long as the asset base grows so that the man-child who is the "advisor" is able to pillage the account for the pound of flesh and still leave a reasonable return for the sucker client. Not unlike making a mortgage loan to a borrower that will default, but the home will be worth more so the default--while inconvenient--will not affect the lender's bottom line. The idea that a twenty-five year old kid who achieved a GPA of 2.2 before dropping out of some third rate college in his junior year brings something worth having to the table is specious. When the market was roaring along somebody like that--let's call him Jason--was thought he was a financial wiz kid because his accounts were growing. They were not growing any faster than anybody else's, but that was irrelevant--they were growing. Then one day the music stopped. All across the fruited plain there are families staring at their statements, and staring at the fees that are being sucked out of those balances, by the Jasons of the world. I'm not saying they're not nice guys. They don't beat their wives, they don't kick their dogs, and they pay their bills. But they're pretenders--posers strutting around in $300 slacks and golf shirts emblazoned with country club logos of places they drove by---perhaps even played as a guest of somebody who knows somebody they know. They introduce themselves as, "Hi, I'm Jason Jones. I'm a financial advisor, are you working with anybody locally?" As we all know, if you ask that often enough somebody will let you talk some more. As we also all know, if you talk some more to enough people somebody will actually open an account with you. As we also all know, once that account is open Jason Jones is now saying a prayer that he doesn't phuck it up. Well, not all of the Jason Jones's. There are a lot of them, sadly way too many, who are sociopaths. They don't care what happens to the clients and their money as long as they're getting paid. They see their function as nothing more than asking enough people..........you know the drill. When you think about it, doing nothing but asking enough people..........then showing them a computer print out a couple of times a year..............sending them a birthday card..........inviting them to a BBQ at the office...............is actually what could be described as a job that could be done by a trained chimpanzee. If you think that your best clients are not staring at their statement and wondering what you did to justify that fee you're naive. I first picked up a phone and smiled and dialed in 1972. I have been involved in the hiring, training and advancment of thousands--as in thousands--of men and women who come in and eventually leave the revolving door. We have experienced a stock market CRASH. This is not a bear market, this is a crash. There has never been anything like it before. Perhaps the 1929 event--but certainly not the tech bubble or the market fart of 1987. Look at GE, yesterday it traded in the 18s. Its yield is better than 6%. GE is not likely to be going bankrupt, it's just that nobody wants to buy GE. There are lots and lots and lots of those stories out there. Your clients are thinking, "What the hell is wrong with Jason? Here we are having lost 40% of our retirement fund and all he can say is hold on it will come back?" We, you and I, know that the reason that's all he can say is that he's a poser--a man-child wearing great clothes and carrrying a business card that says he's a financial advisor. It is to laugh.Why should a financial "advisor" be paid if their client experiences losses?
In the past the argument against compensating brokers with a portion of their client's gains was forbidden because it was thought that it would encourage churning accounts in a frenzy to generate large returns. Since most of today's "advisors" do little more than shove their client into a mutual fund family with a sales contest going and then tell them to hold on for the long run why not compensate them with a percentage of the fund's gain? There is much made about the client and "advisor" being teammates, partners. But unless the "advisor" stands to suffer when the client suffers it's not really a partnership at all. If an "advisor" is worth their fees they should be willing to accept nothing from the client unless the client's return exceeds a minimum expected rate of return. Telling your client, "I won't make a dime unless you earn at least 5%" is a hell of a lot more honorable than telling them, "I"m going to suck 1.5% out of your account every year even if you're losing."You have clients whose goal is to realize as low a rate of return as possible?
Putsy,
None of my clients have goals that have to do with a rate of return. My clients have goals that are things like: "I'd like to send my child to the best school that accepts them." "I'd like to retire comfortably at age 65." "I'd like my family to maintain their same standard of living if I die today." "I'd like to not be a burden on my family if I need care when I get older." Your idea stops the advisor from being a partner with his client. It encourages the advisor to invest above the client's risk tolerance.Which of those goals is not more easily realized when the client experiences a positive rate of return instead of a negative rate of return?
What does having you as an advisor have to do with their child's ability to get into a good school? I can assure you that retiring comfortably at 65 will be easier if the return is greater. Life insurance takes care of number three. I am not suggesting that one should invest for maximum return instead of buying insurance. It is far easier to not be a burden on your family if you have an "advisor" who knows how to maximize the return you are able to generate instead of establishing below average goals and then boasting that they were achieved."Which of those goals is not more easily realized when the client experiences a positive rate of return instead of a negative rate of return? "
Putsy, every goal is more easily realized when the client experiences a positive rate of return. That misses the point. Under your "plan", if I lose 20% for my client one year and then make 30% for him the next year, I make more money than if he makes 4% each year, yet he is in worse financial shape. Additionally, if we invested above his risk tolerance, he may bale out of his investments and not make the 30% then 2nd year. "What does having you as an advisor have to do with their child's ability to get into a good school?" Work on your reading comprehension. The goal has nothing to do with getting into a good school. It has everything to do with being able to send the child to that school. I can assure you that retiring comfortably at 65 will be easier if the return is greater. You absolutely can't assue this if the greater return comes with greater volatility. Joe and Sam each have $1,000,000 and need $3,000 a month to live comfortably for the rest of his life. Joe's investment gives him 3.6% every single year. Sam's investments average 5%, but with great volatility. Sam's investments take big drops during his first two years of retirement. Sam ends up broke. Joe gets his income every year and he leaves his family $1,000,000 at death. Life insurance takes care of number three. I am not suggesting that one should invest for maximum return instead of buying insurance. It is far easier to not be a burden on your family if you have an "advisor" who knows how to maximize the return you are able to generate instead of establishing below average goals and then boasting that they were achieved. Who establishes below average goals? People establish the goals that they want to achieve and are realistic. Going after high goals can lead to disaster. Ex. The client wants to retire at age 65. They would love to have $15,000/month of income. They only need $7000/month to be comfortable. Investing in a fairly conservative manner will allow them to be comfortable. In order to have $15,000, they will have to take a ton of risk and underdiversify and hope to get lucky. Oops, it didn't work out. "Sorry, client, we failed at your high goal. Now, you can't retire." This isn't life where you reach for the stars and if you fall short, you land on the moon. This is more reaching for the stars and if you fall short, you end up in worse shape than you started. If a fiancial goal is easily attainable, increased risk decreases the chance of success. If a financial goal is difficult to attain, increased risk increases the chance of success, but it can come at a cost that isn't worth paying.For those who are following along. Google opened in the 370s and almost immediately traded up to about 382.
At that point the bull put spread narrowed to 3 1/2 so I covered five of the twenty spreads. After that the stock traded down into the 360s and the bear call spread narrowed to 4 so I covered five of them. The resultant gain in the five that are now closed is just shy of 1.75 so I've reduced yesterday's closing risk of a bit more than $1,000 to about $200. Right now the stock is trading at 372--almost dead solid perfect to capture the $14,000 and change that is still on the table waiting to be picked up. Yesterday somebody referred to the idea as a "zany options strategy." It started out as no more than a $1,000 potential loss, is now a no more than a $200 potential loss and a possibility of making as much as $14,000 in a single day. That's the kind of zaniness that clients envision when you hand them your card. They don't anticipate paying you to give them an annual report, a birthday card and a hamburger or two at a BBQ on the office parking lot some spring evening. Be honest with them, ask them if they're happy with their portfolio and your "advice."What character flaw are you displaying when you assume that speculating with 15% of your money will result in a loss of 100% of your money?
I'll ask again. What would be wrong with you earning zero in a year when your client earned also earned zero? Would you be willing to accept an agreement that gave you the first two points above 5% to the client. If the client doesn't earn at least 5% you don't get paid a single penny--but if they earn 7% or more you get paid 2%. I bet you'd have to fight them off with a stick.That’s the kind of zaniness that clients envision when you hand them your card.
They can envision what they want when I hand them my card. However, when I open my mouth and tell them what I do and how I work, they realize that this isn't what they are going to get. The value that we provide our clients is not in picking the best investments. If we could do this, we wouldn't need clients. You come one here and talk about your great trades. Yet, it's obvious if you were so good at investment picking, there would be another zero or 2 zeros on the end of the size of your trades. We're not investment pickers. We're financial advisors. If I knew what was going to happen in the market, I'd borrow and invest and be very wealthy. I'm quite comfortable with my lack of knowledge as are my clients. By the way, I will make more than $14,000 today and it doesn't matter what happens to Google.I am unable to cut and paste responses.
I do not have clients, per se. I manage my own account and some money for my brother. My arrangement with him is that he will give me a Christmas gift that reflects how well I did for him during the year. I've gotten a gag gift of a lump of coal and also tickets for two on a cruise ship called The Silver Wind from Montreal to New York--with him and his wife along to share the experience. Google Silver Wind to see what it's all about if you don't know.I would rather do that quarterly...better cashflow for me.
I was born late one night, but it wasn’t last night. I’ve been around this world since the early 1970s and know that anybody who is going to earn $14,000 today as a financial “advisor” is way to busy to waste their time on an internet message board.
What is the profile of a client who engages a “financial advisor” with the goal being to generate a return of less than 7%?
What is the profile of a client who engages a “financial advisor” with the goal being to generate a return of less than 7%?
Again, your reading comprehension is failing you. People don't engage financial advisors with goals of getting a set %. We can do absolutely nothing to increase their rate of return and still add value. Here's an example from earlier this week. Nothing that I did is increasing their rate of return. We did the following: 1) Purchase term insurance from outside of work instead of inside of work 2) Supplement their DI coverage 3) Changed how they were making debt payments. They will now make minimum payments on everything except their one credit card with the highest interest rate. 4) Increased their Roth IRA contributions I was born late one night, but it wasn't last night. I've been around this world since the early 1970s and know that anybody who is going to earn $14,000 today as a financial "advisor" is way to busy to waste their time on an internet message board. It doesn't take too much time to put $400,000 into a SPIA.Everybody who believes that a $400,000 SPIA can be conjured up on a Friday morning when the rep is playing around with an internet message board please raise your hand.
How about if it was "conjured up" on Monday from an existing client and the check arrived on today? We don't make money today from the work that we do today.
It's not like this is some giant impossible to believe event.Sure it is impossible to believe–I don’t believe it.
Gotta side with Put on this one. Not so much for the one liner put downs of what I perceive as hard working well intentioned advisors, but with what the financial advisory business has become. Going back to Put’s options trades he’s exactly right. Whether these trades actually work is not relevant. It is that he is executing a well thought out investment strategy. Done enough times and a track record will emerge. That record will tell him whether he is on the right track, whether he should modify his approach or just plain stop. Included in his strategy is a stop loss, 15 or 20%. That’s as good as it gets. How many here have stop losses on their clients accounts?
Turn the clock back 25 years and Wall Street was filled with advisors coming to clients with their money making strategies. Some were short term high risk, others long term low risk. Brokers, as we were known then, employed options strategies not unlike some mentioned here, others like myself offered buy write strategies and dividend roll programs, now called dividend capture and employed by some of the biggest funds in the world today. Back then, we did it ourselves. Prospective clients had a real choice when picking a broker. Today, for the most part, that choice is gone. I'm not saying anyone here is a bad guy. It's just most in our biz are the same guy. Some are better at this than others but basically most advisors offer the same thing. What our industry offers is off the rack cookie cutter planning, execution, management, and product selection. We slap a fee on it and call it good. It is far from good. Many here may not like the messenger, but you need to hear Put's messege because he is exactly right. There is no reason on this planet for anyone to pay you a fee to lose 40% of their hard earned money and offer them nothing more than investment platitudes. His suggestion to find something you can be passionate about that seperates you from the herd should especially be taken to heart. Do something, do anything but don't just sit there and collect your fee. It could be this simple: Research 20 stocks. Pick any area you'd like. Become an expert on those stocks. Then pick 5 stocks, yes just 5. Put 20% of your clients equity portfolio in to each stock, with a 20% stop loss on each. Risk exposure to a bad pick is limited to 4%. Let me tell you something, 4% you can come back from. And if the entire prtfolio gets stopped out at 20%, that too you can come back from. Establish a strict sell policy. Whether that be at a certain profit point, or when certain financial screens tell it's time, it's important to establish a sell policy. One strategy has a sell policy built in - Find dividend paying stocks and write short term calls against them. The buy write yield right now is off the charts. The high VIX is your friend in this strategy. This strategy gives your clients exposure to favorably priced stocks, an income stream and an alternative income channel. Now that's something worth paying for. Doing this for a fee elimates all the commission cost and makes even selling just out of the money calls a good strategy. Regardless of what your strategy is or isn't, what Put is saying is being said in homes across this country. If anyone thinks their clients are down with losing 40% in a year and giving up 5 years of gains, well they are partially right, their clients are down. Find something that works for your clients, get passionate about it, and you will be worth every penny.I can blow through immediate annuity paperwork pretty quickly now. 10-15 minutes.
Say it.
I just get obnoxious when I encounter people who I do not believe belong in the industry. There are far too many poorly educated sales types who get hired by managers who are eager to fill their desks with bodies. It's easy to train a punk to make 500 phone calls a day...............as I've said we know that drill. That punk will find "X" number of suckers who will allow the punk to shove them into a mutual fund family that is holding a sales contest and then allow the punk to excuse a loss because everybody else lost too. It is offensive to charge a client a fee when the client is not making money.I think the issue to some extent is that we are talking about two overlapping, but different industries.
Bond Guy and Putsy are both guys who spent lots of time in the wirehouse environment. They focus on picking good investments. The reps today simply don't have the skills or the knowledge to do this. I think that this is why Putsy gets so upset. We're getting paid to put people in investments, yet we don't have much of a clue as to what we are doing. Putsy, I'm in basic agreement with you if we are in the industry of "investment advisors". I don't think that I'm in that industry. I'm in the industry of "financial advisor". It's more than just semantics. For example, I've probably sold more insurance policies in the last year than BG has done in his entire career. (This isn't meant to toot my horn or denigrate BG. It's just a different business.) To make it as an investment advisor, one must work with people with decent money. Great investment strategies is of great importance to someone who is already financially comfortable has all of their financial basics and is simply looking for the best way to invest their $1,000,000. This is probably BG's typical new client. My typical new client, on the other hand, is a young attorney married with 2 young children and making $120,000. He has $50,000 invested in his 401(k), a pile of debt, big expenses, etc. Picking the "right" investment is not what's most important to his achieving of his fiancial goals. Don't get me wrong. I'm not saying that investment returns aren't important. They are, but as a fiancial advisor my focus needs to be spent on getting a client to achieve their goals and not go after maximum returns if going after maximum returns lowers their chance of achieving their goals. (Getting maximum returns and going after maximum returns are not the same thing!)Anon, good post. I think you’ve hit it on the head. We are, in some caes, talking about two different things.
I believe that an insurance agent, masquarading as a financial professional is a fraud. They, the insurance types, arefo rcing the prospect/client into another insurance product, which by their very nature are never going to perform in an extraordinary manner.
When the end game is always, "Well, for you I'd recommend adding some term life and buying this annuity....." the agent is not really a financial advisor.Putsy, if the end game is always the same, you are correct.
The very nature of insurance is that it will perform in an extraordinary manner when insurance is needed. Unfortunately, I am dealing with a DI claim right now. The client has paid less than $5000 in premiums. He may be collecting $5000/month for the next 35 years. Let's hope not.I’ve been on the retail side since 1972. I have forgotten more than you’ll ever know.
So for someone who has been in this industry 8 years and wanting to provide something different in this town, because Puts correct, in that we’re all the same. Where does one get great training on options? I’m not sure LPL provides option training.
I suggest that if you are not at a shop that can do everything–as in EVERYTHING–you are pretending to be a financial professional.
It is not the role of a CPA to keep your tax bill within a certain dollar amount. It is his role to reduce your taxes as much as is legally possible. If he does that he should be paid.
If a financial advisor does not offer advice that maximizes the investor's return he should be paid less than he would have earned if his advice had been better. What is offensive to those who think as I do is the idea that the requirements to be a financial "advisor" are practically non-existant and that clients are supposed to suck it up and stop expecting good advice. If you didn't take all of your clients out of the market last October, why not?Can’t happen. My honesty and willingness to argue unpopular points of view are too much for the monitors–so they have blocked my ISP at home. I’m using another computer which is why I said I only have a day or two to play around.
Only happy faces are allowed on the forum--I'm surprised I've lasted as long as I have with my honesty.Well, my visit this week will have been a success if I have exposed you to be the epitome of the punk loser who should not be in this busiiness.
The people who read this forum day in and day out would do well to keep in mind that a real Wall Street professional cannot think too little of you and those like you.I’ll remember your words, Put. But again, I have plenty of client thank you letters in my drawer to remind me that, though some Wall Streeters might despise me, I have plenty of ordinary people who I have helped over the years realize their goals and assisted during very hard times. This time is no different.
I appreciate the opinions though.
Do you see yourself as being as big a lowlife as Ferris? Or did you make a mistake and answer using the wrong ID?
You guys have to understand that Putsy is one of those people who think that the only way to do things is his way. Of course, he tends to forget that he was only mediocre at what he did so he ended up in management.
For those who are playing along–the 15 short puts were covered early for 25 cents but the calls worried the hell out of me. I covered five of them at 6, happy to lock in a 3 point gain on five of them. That made me net profitable for the trade, and since I was playing with house money I decided to wait till this afternoon.
About 3 o'clock I decided to enter a cover 5 at 1 limit order--it filled around 3:45 leaving 5 to cover. They were covered at 1.10 with a somewhat panicked market order because the stock suddenly started to run between 3:55 and 4:00. I haven't entered them all into my spreadsheet, but it was a good day. I will go to my grave believing that there are millions of suckers paying fees for "advice" that is worthless because they're expecting to get ideas like this. The next time this will happen will be when the January cycle is expiring. It's almost as easy as robbing banks.[quote=Provocative Put]
I will go to my grave believing that there are millions of suckers paying fees for "advice" that is worthless because they're expecting to get ideas like this. [/quote] How much longer until you go to your grave?The way I see it, if somebody thinks what they’re saying is meaningful they won’t create a new identity to say it.
Real professionals know that I am right. What's even more impressive to a real professional is how I show up here, make a suggestion that will generate a great return, and then, the next day, watch how it proves itself to be close to what I suggested would happen. Bond Guy is mature and knows I'm right. Babbling Looney is mature and knows I'm right. It's you worthless punks who know you're pretending who get your noses out of joint. When you jump into argue with me about my points of view what you're doing is admitting you see yourself in what I am describing. You don't type this, but you're thinking it----"You're making fun of me, stop it!"Sorry, I lost my password and had to get a new name.
Look, I think it was Anonymous or Ferris who called this guy a snake. We're in the business of providing professional advice, expertise, service, and selling out ideas. This guy is poison. Bond Guy, him coming in here and schooling us on the obvious should not be reinforced. I'm surprised at you for feeding this troll. It's like some guy coming into your kid's orthodontist office and criticizing the work. Show me the money - don't just BS. You can't. For everyone else, the point is, don't lose your focus. Your way is the highway, and you could easily stack up to this guy's #s.BS walks. You can't back up your claim of superior performance at less cost.
Real professionals know that I am right.
Dude, prove it, or shut up. This is the "Wall Street" BS of CDSs, and such. Everyone knows how to write calls, stop-loss orders, and puts. You are an old BSer. What you do for wealthy clients is basically entertainment. I'm not saying you don't get a result, I'm saying it is not superior, you can't prove that it is.Real professionals know that I am right. (Quote.)
Heh. You know a few cranky old guys, too. He shows up at the office to abuse people, and bet at the race track, then he goes home and ***** off to the golden girls.
Boy isn’t that the truth–post all day, every day, and then when it really matters you forget your password. What a bummer.
1. So your entire visit here was to expose me to whom? To this forum, a tiny little niche in the corner of the internet world? 2. And your entire basis for judging me is based on what? You have no idea what type of business I run, how I interact with clients, or my investment strategies. So you make wild assumptions based on my internet persona. That makes you a chump. 3. Some of the things you post are interesting and maybe if the signal to noise ratio wasn't so high, we might listen. [/quote] I signed on the other day to amuse myself--to see which moron rose to the bait first. You won that hands down. I judge you because I've known hundreds of your type--death of a salesman come to life, barely hanging on enough to avoid being fired. Wasting your time on an internet message board. The signal to noise ratio was zero until you opened your mouth to fill the "room" with blustering because you had no idea what I was talking about.[quote=Provocative Put]Well, my visit this week will have been a success if I have exposed you to be the epitome of the punk loser who should not be in this busiiness.
Whatever happened to Maybeeeee? If she washed out perhaps Glamour Magazine would like to talk to her.
Here’s another idea that will add ooomph to your client’s portfolios.
There are two ETFs dealing with the oil drillers. DIG and DUG. DIG appreciates when oil rises in value and DUG is an ultra short that will appreciate when oil declines. Both are exceptionally volatile and as a result both have unusually large options premiums--lots of time value. DIG is trading for 30 today. A November 35 put is trading for 8. Write it, collect the 8. DUG is trading for 53 today. A November 55 put is trading for 11. Write it, collect the 11. If oil goes down in price DUG will go up--almost certainly above 55, so the put will expire. Short term gain of $1,100. However DIG will go down in value so the DIG put will have to be repurchased. In order for the put to cost more than the 19 that was collected from both puts the DIG will have to be 19 points below 35--down at 16. The yield on DIG is now about 15%, there is not a lot of room for it to drop. Similarly if oil goes up DUG will drop in value, but DIG will rise. The DUG put is a 55, so in order to lose DUG will have to trade below 36 in the next month. That might happen, but most observers think that oil is heading south for awhile--that even OPEC is reluctant to curtail production for fear of throwing the entire world into a depression. Anyway there's about $10 or $11 points of time value in a ONE MONTH strategy. The risk is that your client might end up owning an drilling related ETF at its historic low price. Most plans will allow an investor to write cash secured short puts. That would be $30 plus $55 minus $19. $66 per share required. If the stocks remain where they are the gain will be about 11 on 66 in one month. That's advice worth paying for.Well, old man, a bear is a bear.
You made some big claims, but you're a little short in the meat department. And then you come back whacking off with your sample betting strategies. You're like the guy who chases down Mae West, and then can't get it up.[quote=Getthere]Well, old man, a bear is a bear.
You made some big claims, but you're a little short in the meat department. And then you come back whacking off with your sample betting strategies. You're like the guy who chases down Mae West, and then can't get it up. [/quote] Ferris, I am well aware that you're unable to grasp the concepts, that's fine the world needs you too. When you wash out of this business you'll be able to find a job doing something. The rest of the boys and girls are bright enough to grasp it and it is for them that I am writing. You're dismissed.The Google trades I suggested had costs of $8 per leg plus 75 cents per contract. Yesterday I did four legs ($32) and twenty contracts ($15).
Today I did seven legs ($56). There are no per contract charges to close a trade. So the costs were $103. According to Ferris--pretending to be Getthere--that is a huge negative drag on a one day profit in excess of $14,000. He's not the brightest bulb in the room. Is he? But he's a "financial advisor." His business card says so.Let’s get back to your attack on real financial advisors.
They provide a service, get results, and get paid. You're just a putz. Who gives a crap about your hobby? If you were generating any real value, you wouldn't need to come here to prop up your ego. Nice try, BS'er. Your social intelligence with clients, or industry peers, is zero so far. But keep trying to show us something real, that we don't already know.Tell me, Ferris, why should a real "financial advisor" not suggest that his client commit 15% of his portfolio to things such as I suggested yesterday, and pulled off today?
I took $1,000 and multiplied it into more money in a single day than anything you understand could do in a lifetime. Yet you know what your clients want and I don't. We're laughing at you.Come home honey, I miss you. Stop playing this fantasy game, you know we’re broke.
Uh huh.
You can do what you want with your 15% non-correlated allocation, and BS about your big days, which will average down to the mean against your crappy trades. You get off on attacking professionals as you springboard off your hobby, which is fine, I'm just calling BS. Tell us a little about what you know about portfolio withdrawal strategies in a down market, for example, based on your experience with real clients, if you want a little credibility. Otherwise, you're just a BSing (passive-aggressive) putz.What makes you a “professional?” Carrying a business card that introduces you as a “financial advisor” does not impress me.
Hah, I thought so, big balls! You come to a professional forum, and attack members. Thought you were making some headway today, didn't you?
You don't know Jack about what we do. Go back to your Yahoo forum, and argue with your fellow hobbyists.Putsy is that you? Are you at the public library pretending to be some guru options trader? I thought Dr. Richardson told you that it was bad for your condition. Did you tell your friends here that you are the star of lemonparty.org?
Lots of folks want to know what we know, for free. If and when you become a professional, you may earn the right to challenge our professional practices.
If you want to Google portfolio withdrawal strategies in a down market and try to BS us, go for it. Mean time, go plan your next options bet, Putz.http://www.kiplinger.com/features/archives/2008/09/krr_tapping_a_portfolio_in_a_bear_market.html
Here is a link to get you started. Work with real clients for over a decade, doing accumulation, risk, tax, investment, estate and retirement planning, while maximizing value and protecting the downside using strategies like the Kiplinger link, which is just a sample, and then you will begin to earn the right to discuss who delivers value at what cost.And I’m not endorsing the Kiplinger article, rather, this is a starting point for a meaningful discussion about a critical financial planning, like portfolio withdrawal strategies.
Who gives a crap about option trading, other than selling a few calls or puts on concentrated stock positions, like executive company stock?[quote=Getthere]http://www.kiplinger.com/features/archives/2008/09/krr_tapping_a_portfolio_in_a_bear_market.html
Here is a link to get you started. Work with real clients for over a decade, doing accumulation, risk, tax, investment, estate and retirement planning, while maximizing value and protecting the downside using strategies like the Kiplinger link, which is just a sample, and then you will begin to earn the right to discuss who delivers value at what cost. [/quote] Good find. I might have a couple nervous pre-retirees read that.I will admit I do NO options for any of my clients, but I am more than willing to learn new ( i realize they are not new, but learn them more thoroughly) concepts and strategies, if nothing else we should all be able to explain WHY we don’t do them. I have seen nobody in this thread yet take 1 of his scenarios and explain why it is garbage or he is incorrect. I do take issue with the fact you are doing this for 1 person, 1 account, correct? I do not disagree that with 10-15% of an acount, for the appropriate client, not ALL of them, this could be a good way to add some value. I immediately think of the large number of engineers in my area who would walk around with a woody all day trying to digest this sort of strategy.
I run my shop more like anonymous, and simply do not have the time, and admittedly enough knowledge, to do this sort of thing for 200 households. But I think you guys dismiss him completely simply because everyone has always told us “options bad!!” and not because you understand them completely and feel they are inappropriate for reasons A, B, and C.
I don't think anyone could disagree that Double-P brings some fire back to this forum...just look at which threads have the bulk of the activity these days... There are some very interesting strategies in his option examples, and while I understand what he's doing, I wish it were second nature for me like it is for him. If I were more comfortable with spread-straddle strategies, I might actually do more for clients than covered call writing.
There ARE a bunch of friggin' pretenders in this industry. I see their damage on a regular basis when looking at client statements after they wash out of the industry. One thing Put and I will agree with is that the barriers to entry into this industry are far too low and too much damage is done to real people before the unqualified financial advisors are weeded out of the business. Some of you news will take issue with this, as will those who came into the industry with nothing but a high school education, and have beaten the odds to be wildly successful. That's fine...you may well be the exception to the rule. My argument for you is that the higher entry barriers should not prevent your success, only delay it. In case you are curious, my idea for minimums into the industry would be at LEAST a relevant bachelors degree (finance, economics, etc.), a legitimate advance certification (CFA, CFP, ChFA, etc.), and five years of industry experience working for a veteran before you self-manage your first account. Hell, even Joe the Plumber has more of an entry barrier to his industry than we do. I don't expect you all to agree with this position, and certainly, many have been successful with less qualifications, but my anecdotal evidence tells me that a disproportionate amount of the damage done to main street portfolios has been done by folks who did not (and likely could not) meet those requirements. I won't tell you that meeting those requirements is a magic bullet for sound portfolio management...I'm living proof that you can still lose a ton of money for a client in a market like we've endured this past year. I'm not at all satisfied to be beating the indexes this year. At the same time, I think clients have a right to expect that their advisor will be well-schooled in portfolio management before they start managing people's life savings. The mistakes I've made have paled in comparison to some of the stupidity I've witnessed in the past (70% of a client portolio in Munder Net-Net in 2000, for example), and I think investors would be in far better shape if the industry demanded more from it's advisors than a pathetic excuse for admittance like the series 7. That's my soapbox for the day. It's unfortunate that for all his experience and education, Double-P has, in the past, foolishly posted racist and sexist statements that caused a permanent IP ban, keeping out interesting (and yes, often provocative) posts that could be a real benefit to advisors coming here looking for ideas. Yes, the industry has changed and we've moved on. That doesn't mean that the past doesn't hold some very good ideas for client accounts.ice-i don’t think the question is whether or not they are complex. i never said they were. but to think passing the series 7 somehow makes you understand them is a stretch. i have passed alot of tests in my younger years and rarely UNDERSTOOD the material enough to explain it to someone else. most advisors do not look at the 7 manual as an instrument of learning. it is a burden and something they must memorize just enough to pass the exam, that is it.
Indy, I agree about minimum qualifications and education. That’s why some of Putz’s unchallenged ignorant investing comments bother me. Saying things like, buy and hold is passe for the boomers, advisors should not be paid if absolute returns are negative over a year, real advisors have to use options strategies, and so on.
Bond Guy quotes: Gotta side with Put on this one. Not so much for the one liner put downs of what I perceive as hard working well intentioned advisors, but with what the financial advisory business has become. Going back to Put's options trades he's exactly right. Whether these trades actually work is not relevant. It is that he is executing a well thought out investment strategy. Done enough times and a track record will emerge. That record will tell him whether he is on the right track, whether he should modify his approach or just plain stop. Included in his strategy is a stop loss, 15 or 20%. That's as good as it gets. How many here have stop losses on their clients accounts? Turn the clock back 25 years and Wall Street was filled with advisors coming to clients with their money making strategies. Some were short term high risk, others long term low risk. Brokers, as we were known then, employed options strategies not unlike some mentioned here, others like myself offered buy write strategies and dividend roll programs, now called dividend capture and employed by some of the biggest funds in the world today. Back then, we did it ourselves. Prospective clients had a real choice when picking a broker. Today, for the most part, that choice is gone. I'm not saying anyone here is a bad guy. It's just most in our biz are the same guy. Some are better at this than others but basically most advisors offer the same thing. What our industry offers is off the rack cookie cutter planning, execution, management, and product selection. We slap a fee on it and call it good. It is far from good. Many here may not like the messenger, but you need to hear Put's messege because he is exactly right. There is no reason on this planet for anyone to pay you a fee to lose 40% of their hard earned money and offer them nothing more than investment platitudes. This is mostly BS, that someone the good old days of real traders using stop loss or other options strategies, beats a long term buy and hold strategy. Prove it by talking about long term absolute return, show me the research. You can really get get burned with stop loss strategies, where market fluctutions are less severe. Of course, overconcentrated singe-stock positions should be protected. Portfolios should be diversified well before coming into a down market like this, allocations can be slightly modified for reasonable market expectations. Yield and non-correlation are important portfolio construction concepts. I agree, there are too many uneducated folks still in the business. As for beginners, stick to your strategies, and don't be intimidated by a bunch of old crotchety BS. Over the long run, bonds offer about twice the return of cash, and owners (stocks) can return up to twice what lenders make. Instead of investigating fancy options strategies, advisors should be focused on cutting out the middle man (12b1 fees), and getting paid more directly (wrap, fee only), without wasting money on admin charges or even ticket charges, so they can spend more time with each client working on comprehensive planning and investment strategies and service. Still basic concepts, discipline is simple, but not easy.Here's a little supporting paste and link as food for thought:
"While it may seem simplistic, a buy-and-hold approach to investing, characterized by continuously holding a very high percentage of equities with only very infrequent though carefully considered buy-sell decisions, can, in my opinion, give small retail investors a slight "edge" over other investors and traders based on the efficiencies cited above.Numerical Comparison
To gauge the impact of frictional costs on returns, let's compare two portfolios over a 10-year period in a market that returns 10% annually:
Buy-and-Hold: Assume no turnover. At 10% annual appreciationn, $100 grows to $259 after 10 years. After payment of 15% long-term capital gains tax on the $159 gain at the end of year 10, the net portfolio value becomes $235, for an annualized after-tax return of 8.94%.
Trading: Assume 200% annual turnover, or the equivalent of two round-trip trades per year at a cost of 0.50% per round-trip. Trading costs as stated and annual taxes of 28% on short-term gains reduce the 10% annual market appreciation to (10% - 2 x 0.50%) x (1 - 0.28), or 6.48%. At this after-tax growth rate, an original $100 investment becomes $187 after 10 years.
Assuming that trading produces no pick-up in return, the frictional trading costs and additional tax lead to an inferior after-tax annual return 246 b.p. lower (8.94% vs. 6.48%) than the return available through buy-and-hold investing. On a pre-cost, pre-tax breakeven basis, the trading strategy will need to outperform the buy-and-hold alternative by a full 342 b.p. annually in order for trading to beat the buy-and-hold alternative.
As a rough rule of thumb, then, you should engage in trading only if you honestly believe that your buy-sell decisions give you at least a three or four percentage point advantage annually (and more if your turnover exceeds 200% per year), above the buy-and-hold alternative. "
http://seekingalpha.com/article/53970-the-buy-and-hold-versus-trading-decision-which-is-the-better-option-and-whyYou can really get get burned with stop loss strategies, where market fluctutions are less severe.
You're kidding right? Risk management is no longer our job? CSCO dropped 90% in the last bear market. A stop loss was a good idea. You use stop losses to limit downside risk. Every single individual stock position in my book is pitched a stop loss. Period. During less volatile times, stop losses are effective about 60% of the time, i.e. the stock is lower than the stop loss 3 months later. What makes the strategy so effective is the average loss on the 60% of stops that work are of far greater in magnitude than the 40% of stops that are ineffective. Stocks move in TRENDS!!!!! And when is risk management even more important? Maybe during more volatile times? I recently had a large number of clients stopped out of a good quality company due the the panic selling in the market. What did I do? Bought it back 40% lower than where it was stopped out. Everybody wins. Of course I could have told them that buy and hope was the way to go as it was a good quality company. I like my way better.Couple of other points. Sure, we advisors are "average" people, serving "average" investors - mainly the mass affluent. Most clients who have more than 1m have multiple advisors - I sure they will gravitate to genius advisors like Putz, except he does not have any clients.
Second, whatever the real return of an average buy and hold portfolio, the main goals should be: accumulation and preservation. It's pretty silly to talk about short term performance in a down market, and ignore the real reason we are holding stocks: inflation, which of course is not a big problem right now. This guy Putz is somehow suggesting that our client's porfolios should not be down now, otherwise we're not real advisors. That is total BS. Burden of proof is to show a meanful alternative, not some short-term race track betting strategies. How silly to be focused on BS, when the real problem is inadequate savings. I want to be certain that the next generation of financial advisors is encouraged to maintain the course in this down market, not thrown of track by the rantings of someone who wandered over here from the Yahoo day trading forum. If you put someone in an A share American Funds balanced or equity fund or whatever, and I'm running buy and hold ETFs at 1%, we can both hold our heads up high, and we're talking to our clients about goals, and protecting the down side, and your choices for how you allocate your discretionary dollars, and cash reserves, and so on, we're doing our jobs, probably a lot better than some puffed up transactional douche bag.Second, whatever the real return of an average buy and hold portfolio.
Since we are talking about the "average" buy and hold portfolio, the performance over the last ten years has sucked due to the equity allocation held during the two, count them two biggest downturns in the market since the great depression. Keep pitching buy and hope, I like more clients.Primo, I said you can get burned with stop losses, not that they are bad. We all know that specialized strategies can work, there are also economies of scale pertaining to the size of a portfolio, and diversification. There are some pretty clever people at managed fund companies, using some pretty clever trading strategies and techniques, with some pretty crappy results.
How about showing me some research where retail advisor are adding a lot of value using Putz strategies? My point is, the evidence, as far as I can tell, is usually pretty much narrative. And some folks become performance legends in their own minds, while the actual performance results often suck.I was commenting on the naive stop loss statement. I do a little option business, but not enough to bang the drum about it. As far as research, do your own. You cannot buy past returns, so I take research with a grain of salt.
So, are you just trying to BS me, or what?
[quote=Getthere]
Since we are talking about the "average" buy and hold portfolio, the performance over the last ten years has sucked due to the equity allocation held during the two, count them two biggest downturns in the market since the great depression. Keep pitching buy and hope, I like more clients. I don't get your meaning. [/quote] I will use smaller words and simpler thoughts. Since the buy and hope mantra is you can't time the market and managers underperform their benchmarks due to this and fees, the "average" equity portion of a portfolio is negative (lost decade in stocks) over the past decade and even more so when you consider inflation. Better?Patronizing talk does not flatter you.
Make your point. So far, all I see is BS. Make your claim of superior performance, and back it up, or whatever. How does this relate to what Putz, Bond Guy, and Indy said? How does this relate to what you learned in your CFP classes, being paid a fee in a down market, buy and hold versus transactional trading using options, or any other coherent point that you want to back up using something other than narrative evidence?[quote=Getthere]
Patronizing talk does not flatter you.
Make your point. So far, all I see is BS. Make your claim of superior performance, and back it up, or whatever. How does this relate to what Putz, Bond Guy, and Indy said? I did not comment on their statements, I commented on yours. How does this relate to what you learned in your CFP Not a CFP classes, being paid a fee This is when actual work happens. A monkey could make money in a bull market, don't mistake that for brains. Lower risk (i.e. losses) in a bear market should be paid for, yes? Otherwise go to Fidelity and they will tell you what worked last year. in a down market, buy and hold versus transactional trading using options again not talking about options, or any other coherent point The market went into a negative trend in Oct 2000. Back to a positve trend in Mar 2003. Back to a negative trend on Jan 4, 2008. Act accordingly, or you could just say to hold on because the market is positive 3 out of every 4 years, maybe shove the piece showing what happens to returns if you miss the best ten days in the market and wait for the ACAT. that you want to back up using something other than narrative evidence?[/quote]or any other coherent point The market went into a negative trend in Oct 2000. Back to a positve trend in Mar 2003. Back to a negative trend on Jan 4, 2008. Act accordingly, or you could just say to hold on because the market is positive 3 out of every 4 years, maybe shove the piece showing what happens to returns if you miss the best ten days in the market and wait for the ACAT.
So? Make your point about " act accordingly" if you want to have a dialogue.Indy and iron horse - well said ! Lets face it, the 7 is a joke as to how it equates to what we do. Honestly, I believe what we have on these boards are a difference of how we manage money. Guys like Ice and Get and Walk manage money to try and “beat the market” . Lets be honest, over time no one does, not even the best fund managers. Some of us manage for absolute return. I think it also depends on your book. My best friend works at MS and has been there for 25 years. He is a Gorilla. He has about 100 clients, manages over 700 million. His clients aren’t looking to “beat the market”. They have already won that game. They want an absolute return. Options do have a place in some portfolios, as do commodities. He was the first person who I remember on the retail side ever admitting he uses both in client accounts along with some other securities that I would wager 90% of us never thought of using before and he is very successful at it.The issue is when you have inexperienced reps using securities or strategies (options, muni pfds, commodities, conv bonds, CMO’s, margin accounts, short sales) without proper training or a true understanding how they work. Ice, I dont know you or your background , but I find it odd that your firm would allow someone as inexperienced as you to run your own accounts on a discretionary basis.
If you don't know what to do in a negative trending market, then I cannot help you. But I will give it a shot anyways. If equities are in a negative trend, maybe you could cut back the equity exposure. Maybe you could institute risk management, maybe with a stop loss, or buying puts. Maybe you could add income to the portfolio by selling calls. Just a thought.
options are speculative, and don’t belong in a long term plan.
Getthere, or what ever your name is today, there is an entire realm of knowledge known as you don’t know what you don’t know. As I read your posts regarding investing I realize that much of what i write and what put has written lies within that realm. You truely don’t get it.
I will say this: Years ago in a land not so far away a bunch of guys in suits got together and decided to embrace a new way of doing business. Now, like most upper mangement types they didn't embrace the new-new thing because it was the best thing for their clients, they embraced it because it was best for them. That is their history as well as their legacy. They never did anything because it was best for the clients. That new-new thing was the wrap fee business. Investment advisory for a fee. The suits built an entire investment complex around it to sell it the public. They legitimized it with charts,graphs, and ratios. They invented terms like efficient frontier to impress the soxs off the disbelieving. Told the client base we are no longer brokers because we no longer stand between you and the transaction. Because we sit on the same side of the table we are advisors. And to Put's point, they even printed new business cards for everyone with the new title "Advisor." And the public bought into hook line and sinker. But in the end it is what it is, another money making scheme from wall street. Those of us old enough to have been around while this transition was taking place know this and hold wrap fee business in it's proper perspective. To us it's just an arrow in the quiver. Useful at times, but not the only solution. However, part of the suits plan was to raise an entirely new generation of "advisors" from pups. The plan was that this new crop of new-new advisors would only know one way to do business-wrap fee. This de-education/brain washing would be coupled with pay plans that rewarded wrap fee and discouraged any other types of business. The new-new advisors would be primarily asset gatherers trained in client service, comprehensive planning and investment strategies. In other words the suits made sure this new breed could talk the talk even though they've never walked the walk. Getthere, as you can see, your existence within the complex is that of being one small part of a larger money making scheme hand crafted by some of the smartest guys in the room, no doubt over some fine whiskey. To say that you drank the cool aid isn't quite strong enough to describe the depth of your flawed claim to the high road. The bigger issue is that, as Put has said, many investors are clamoring for money making ideas. Yet, the training of the new-new breed tells them to attack anything outside the wrap fee box regardless of it's merit. This disincents original thinking. And that is where the investing public pays a price. Every one here who has an equities heavy book could have gotten their clients off the tracks with this market had they employed a little original thinking and used some benign hedging strategies. But, hedging strategies, not in course guide of the wrap fee advisor. Instead what clients got for their 1 1/2% was the let me show you my charts and graphs and tell you about asset allocation. The shame is it cost most of them far more than 1 1/2%. And now they are offered platitudes. Right now most advisors are scratching their heads trying to figure out why their asset allocated portfolios are down 20-30-40%? They didn't know that this could happen. and yet they are charged with leading the multi year climb that will get their clients whole. Soon clients will be asking how properly allocated portfolios measured against conservative risk parameters could perform so poorly as to lose years worth of hard earned gains. I don't want to be in the room for that conversation. I won't defend putsy's personal attacks but if anyone thinks his take on the state of the industry is wrong, well, there is that bridge to no where that i could sell to you. Lest every new breed advisor think i'm against wrap fee, please understand i'm not. I just know how and where it fits. And I'm a big beleiver in the wealth generating power of long term investing. My probelm is with wrap fee investment management being sold as a be all-end all investment vehicle. If this little venture to the dark side of the investment universe has shown us one thing, it's that there is no such thing as a be all end all.Wrap fee is not the end-all be-all for sure. In fact, it can be the ‘end - all’ of your business if you think it removes the need to think critically and creatively.
I say this even though I am an avid user of some wrap-fee programs.
On a slightly different note, I cannot believe how NOW every inside wholesaler who tries to get my ear wants to talk to me about hedged equity products. Where were they 6000 Dow points ago?
As I told the newbie who called me yesterday: "Buddy, the last thing I want to do is hedge my equity exposure when I can buy into blue-chip stocks at a 40% discount from last year’s prices."
The time for hedging was 6 months ago…even 3 or 4 weeks ago. Now, IMHO, you want to keep it simple and just get as long as you can afford to be and hold on for the ride.
If equities are in a negative trend, maybe you could cut back the equity exposure. Maybe you could institute risk management, maybe with a stop loss, or buying puts. Maybe you could add income to the portfolio by selling calls. Just a thought.
"Maybe" is not a strategy. I think we agree that selling calls can add income. One of my points is, pretty dangerous strategy to give up on buy and hold if the market is flat lining. Sure, you want to protect an overweighting in positions with stop orders, and so on. As if anyone here had the foresight to know that equities would be on a ten-year flat line trend, or what will happen in the next ten years. If you are adding real value with your options strategies, great. The point of the link I added above is the show the fallacy of Putz's attack and ideas, and the weakness of the Bond Guy post. On the one hand, we are broadly attacked (as comprehensive personal financial planners who manage retail portfolios) for not using options, and on the other it is pretty obvious from the record that even specialized, professional portfolio managers have at best wildly results from transactional trading. How does the "average" old-school wirehouse trader fare for his clients? Probably not as well as he thinks, or recalls from his past. One question, are you really adding value with your strategies? Putz attacked many advisors as being stupid, unsophisticated, or even greedy or unprofessional for not using options strategies. Bond guy threw his considerable weight and prestige behind Putz's theory with some anecdotal support, I would not even call it anecdotal evidence, more like being nostalgic about the "good old days", when clients and even many advisors respected the wirehouses, it seems like years, not months, that things have changed in that regard. The irony is that guys like Putz think they are smart, and all we are really talking about here is a basic level of financial and economic education. If you want to talk about Warren Buffet buying and controlling entire businesses with a "holding period of forever", compared with our own attempts to add value through portfolio diversification, that is a different story. Putz should consider investing in some basic investment planning education. To my larger point about the demise of the wirehouse options trader, or the guy cold calling with a hot stock or options tip, again, the economic market reality is playing itself out - if you are really one of the guys who is consistly beating the market (be honest, don't compare your blended portfolios to the S&P) - great. If you are an "average" portfolio manager, like most of us, you better be looking at costs for both your clients and your own business model. options are speculative, and don't belong in a long term plan. Ezmoney's statement stands true, so far from the discussion presented here.Bond Guy, I was writing while you posted, so the above is not a response, but thanks, I’ll read your post carefully. No point in attacking my credibility on the name (W9), I resigned for a lost password, I joined,what, two weeks ago?
All right, I read your post above.
Bond Guy, from what I can see, you are a little behind the times, maybe reactionary. This de-education/brain washing would be coupled with pay plans that rewarded wrap fee and discouraged any other types of business. The new-new advisors would be primarily asset gatherers trained in client service, comprehensive planning and investment strategies. Maybe a bunch of execs at your wire house got together to see how they could survive and compete with RIAs. As you know, broker-dealers are fighting for survival. Anyway you're wrong, the "wealth management" wirehouse model has been desperately seeking "sophisticated" and unique proprietary products to pitch, with little success gauged by the recent meltdown of certain securitized debt. Might be an economic reason for the trend to cut out the middle man. I gave a specific link to an article about transactional trading, and if you want to prove how you are adding superior value through your trading, great. If you are beating the markets great, you're in the minority. Otherwise, you can just BS your way to retirement. I don't have much to prove here, except, for you new guys who sold an A share as buy and hold, or whatever, sticks to your guns unless these guys can offer some proof that their transaction trading claims are true, and would work for you.Greetings from the last stop on my road trip. Tomorrow I'll be home and unable to contribute, debate, or anything else. That freedom of speech thing doesn't hold when you make the newbies feel nervous, or the lazy types such as Getthere feel exposed.
All of the posts today are interesting--note that Getthere keeps coming back with the lazy guy's approach. Buy and holdl.
It's easy to explain, and easy to blame the client for having agreed to it when everything turns to doo doo.
Mr. Client, it's not my fault. You agreed to the buy and hold approach so that I didn't have to actually advise you on anything.
Put, thanks for showing up and putting some life back into this board. And thanks for making us question who we really are.
Come back and visit again.Getthere, reactionary? Coming from a guy who has been goaded over the last two days by someone with the name Provacative that’s rich!
Behind the times? Little reading comprehension problem on your part here. Before your time would aptly describe my prior post. The biz has morphed into what it is today - Wealth management. What i was descrbing was the biz model you use when it was in it's infancy. I did that to show you that it was created for no other reason than to provide a revenue stream to the provider. The entire wrap fee complex, AKA wealth management exists for no other reason. Is it better for the clients? Only yours , not ours.Greetings from the last stop on my road trip. Tomorrow I'll be home and unable to contribute, debate, or anything else. That freedom of speech thing doesn't hold when you make the newbies feel nervous, or the lazy types such as Getthere feel exposed.
Right, you won't be able to log in here and substantiate your attack on modern day planning and risk and investment management professionals, whether they be affiliated with Jones or independent RIA. Come back after you get your CFP or some of your own clients, old Putz! James Bond, I think it's your pal Putz and maybe Bond Guy who are trying to beat the market, or at least try to play the investment return game on their own court. Ice, I dont know you or your background , but I find it odd that your firm would allow someone as inexperienced as you to run your own accounts on a discretionary basis. BS'er. Like you say, you don't know Jack about Ice.Put, thanks for showing up and putting some life back into this board. And thanks for making us question who we really are.
Come back and visit again. I think it's great that he got some conversation going, the unsubstantiated personal attacks on (newer) advisor practices could be damaging to advisor morale and their clients. I feel like I've seen a new side of Bond Guy, too. This is a great business and I'm sure we're all here for vigorous discussion. Money talks.How is advisor morale damaged by somebody suggesting that sucking 100 to 200 basis points out of an account that is losing money, by calling it an advisory fee, is actually simple fraud?
If you don't look in the mirror every day and ask yourself if you're really an advisor as opposed to a leech you're a sociopath.Was just rereading some Nick Murray the other night:
“You can care deeply about markets, or you can care deeply about people. But I sincerely believe that nobody on earth can ever do both. And if, perchance, somebody can, I’m betting it isn’t you.”
If, Putz, this is you, send me your business card, resume and letters of recommendation, and I’ll think about hiring you on as a separate account manager.
Until then, keep the opinions coming, but just know where you stand.
Who are we kidding? This guy Put had a little success with a day trade and he’s so removed from the reality of the industry that he thinks there are still sales contests. Are there people in the industry that don’t really have the skills required to help clients? Of course. Is Put’s daytrading options strategy something that makes sense for a professional dealing with real clients and real money? Of course not.
[quote=Getthere]
If equities are in a negative trend, maybe you could cut back the equity exposure. Maybe you could institute risk management, maybe with a stop loss, or buying puts. Maybe you could add income to the portfolio by selling calls. Just a thought.
"Maybe" Sarcasm must escape you not a strategy. I think we agree that selling calls can add income. One of my points is, pretty dangerous strategy to give up on buy and hold if the market is flat lining. Sure, you want to protect an overweighting in positions with stop orders, and so on. As if anyone here had the foresight to know that equities would be on a ten-year flat line trend, or what will happen in the next ten years. If you are adding real value with your options strategies, great. The point of the link I added above is the show the fallacy of Putz's attack and ideas, and the weakness of the Bond Guy post. On the one hand, we are broadly attacked (as comprehensive personal financial planners who manage retail portfolios) for not using options, and on the other it is pretty obvious from the record that even specialized, professional portfolio managers have at best wildly results from transactional trading. How does the "average" old-school wirehouse trader fare for his clients? Probably not as well as he thinks, or recalls from his past. One question, are you really adding value with your strategies? Putz attacked many advisors as being stupid, unsophisticated, or even greedy or unprofessional for not using options strategies. Bond guy threw his considerable weight and prestige behind Putz's theory with some anecdotal support, I would not even call it anecdotal evidence, more like being nostalgic about the "good old days", when clients and even many advisors respected the wirehouses, it seems like years, not months, that things have changed in that regard. The irony is that guys like Putz think they are smart, and all we are really talking about here is a basic level of financial and economic education. If you want to talk about Warren Buffet buying and controlling entire businesses with a "holding period of forever", compared with our own attempts to add value through portfolio diversification, that is a different story. Putz should consider investing in some basic investment planning education. To my larger point about the demise of the wirehouse options trader, or the guy cold calling with a hot stock or options tip, again, the economic market reality is playing itself out - if you are really one of the guys who is consistly beating the market (be honest, don't compare your blended portfolios to the S&P) - great. If you are an "average" portfolio manager, like most of us, you better be looking at costs for both your clients and your own business model. options are speculative, and don't belong in a long term plan. Only a person who does not understand options would say this. Options can be used for speculation, AS ARE EQUITIES, however options can be used for risk management also. Ezmoney's statement stands true, so far from the discussion presented here. [/quote]honest question here put…in a down year you would favor no 12b-1’s paid also?
Put doesn’t believe in 12b-1 fees so he wouldn’t mind not having them assessed in any type of market.
I also have a thought to ponder.
Worrying about making appropriate withdrawals in a down market would
not be a problem if you were conversant in bear market strategies.
Don’t you suspect that your clients figure that you are good for advice beyond, “Buy and hold, it will come back someday.”
Getthere - your inexperience and lack of maturity shows on your posts. I think you are trying to set a record for the most posts in a 30 day period if you are in fact the former walking9. Spend more time on trying to build your business as opposed to trying to make everyone think you have all the answers. The only way you will ever succeed in this business over the long haul is to learn from your mistakes and the mistakes of others.
ICE,
It is more of an experience and training issue than anything else. Even you have to admit you have a better understanding of many things in this industry than you did in year one. As you gain more time in the business your knowledge will increase. Not all reps are cut out to run their own money or have the desire to do so. That is why we have mutual funds and seperate accounts that do it for them. It wasn’t a knock on you, just my opinion that reps should be a little more seasoned, have more portfolio management training and pass the CFA before they start running money. Look at it this way, you wouldn’t want your family doctor performing surgery on you.
Thanks for bringing me to my senses, Mr. Bond.
[quote=BondGuy]
Right now most advisors are scratching their heads trying to figure out why their asset allocated portfolios are down 20-30-40%? They didn't know that this could happen. and yet they are charged with leading the multi year climb that will get their clients whole. Soon clients will be asking how properly allocated portfolios measured against conservative risk parameters could perform so poorly as to lose years worth of hard earned gains. I don't want to be in the room for that conversation. [/quote]BondGuy, you hit it on the head. I feel like Neo just waking up and being disconnected from the Matrix. Why have these asset allocation models gone down as fast and as much as they did over the past few weeks? And our research dept. still want us to believe in it. Yeah, it was hard explaining this to clients who expected much more from a wrap account. Yes, it's just a "arrow in the quiver" as I see some clients now want hands on management of their money and putting them back into brokerage accounts where they have the only discretion. They also don't want to pay an advisor fees for money sitting in cash. Sure, these are clients who were meant to be in brokerage in the first place but probably got sold by the wrap account idea. Brokerage still has its place, and we still have clients who still feel secure in their wrap accounts, and we have people happy with their VA's. It's still really up to us to determine their risk tolerance, time horizon, investment knowledge/experience, assets, etc. and then recommend the platforms that are best for them.
And our research dept. still want us to believe in it.
Keep listening. It has been a while since we've seen correlation like this between stocks and bonds, but it happens. Sometimes it's better to nothing, you certainly wouldn't want to double down or do something stupid like start gambling with options. Guys who trade individual bonds (maybe less experienced than BG) may have gotten really burned, now they have another layer of risk - individual security risk - to figure out (hold or sell) - whereas most "average advisors" - the ones who were so roundly criticized here for holding funds and index vehicles - can afford to sit back and wait. This is a really, really hard time, and unusual. My guess is that within a couple of quarters, we'll start worrying again about whether our allocations are too conservative. About the time some Chinese investors come in and buy (most of) Wal-Mart.And our research dept. still want us to believe in it.
(Edit - quote.)My beef really here is asset allocation. I think it’s hard to believe in it when it’s not what it’s touted to be. It’s suppose to capture the entire market so that you can get returns from whatever asset class is performing the best in a given year. That’s why they tell us to be quiet and stay the course as long as you’re well allocated and diversified. But, when all the fundamentals are thrown out the window like what we’re facing now, all of these asset classes are down. Bonds that are suppose to give us returns when stocks are down aren’t doing that anymore - in general. Then, the powers that be tell us that there’s an alternative investment class that can now be added. So, that means that we really haven’t captured the entire market in the first place. What are they going to tell us next, put bear market funds in your
allocation? Why not put the kitchen sink in there too while we’re at
it.
I think that it all boils down to risk and return. I think that investors and advisors should still remember the basics. For some amount of return, you’ll need to face some risks. This is what the market is teaching us right now. We can’t sell asset allocation anymore as a universal solution to people’s retirement needs without educating them of the risks. It can sink no matter how unsinkable it is with all those compartments in there if an iceberg hits it the wrong way.
Here's the problem. Asset allocation worked in the dot com crash. If you were diversified, tech did not kill your portfolio. This time, nothing is safe, not even money markets a few weeks ago. Here's some info from PIMCO: How this September Ranked compared to every month since 1988 (240 total months): Lehman Agg Bond index: 13th worst month ML 1-3 yr Gov./Credit index: Worst month Lehman US TIPS index: 3rd worst month Credit Suisse Leveraged loans index: Worst month JP Morgan Emerging Market Bond index: 5th worst month Russell 2000 Equity TR index: 11th worst month Lehman US High Yield index: Worst month S&P 500 index: 5th worst month Lehman Long Credit index: Worst month DJAIG Commodities index: 2nd Worst month MSCI EAFE index: Worst month ML Convertible Bond index: Worst month MSCI Emerging equity index: 2nd worst month You tell me where you want to be. Truth is, asset allocation isn't working this time. You need to have a back up plan. Maybe an annuity, options, CD's, Treasuries, cash, whatever else is out there, some alternative stuff has done OK. Many good people out there thought they were doing the right thing, but it hasn't held up.My beef really here is asset allocation. I think it’s hard to believe in it when it’s not what it’s touted to be. It’s suppose to capture the entire market so that you can get returns from whatever asset class is performing the best in a given year. That’s why they tell us to be quiet and stay the course as long as you’re well allocated and diversified. But, when all the fundamentals are thrown out the window like what we’re facing now, all of these asset classes are down. Bonds that are suppose to give us returns when stocks are down aren’t doing that anymore - in general. Then, the powers that be tell us that there’s an alternative investment class that can now be added. So, that means that we really haven’t captured the entire market in the first place. What are they going to tell us next, put bear market funds in your allocation? Why not put the kitchen sink in there too while we’re at it.
I think that it all boils down to risk and return. I think that investors and advisors should still remember the basics. For some amount of return, you’ll need to face some risks. This is what the market is teaching us right now. We can’t sell asset allocation anymore as a universal solution to people’s retirement needs without educating them of the risks. It can sink no matter how unsinkable it is with all those compartments in there if an iceberg hits it the wrong way.
I looked 2x’s at your list Snags…I don’t see anything about A shares at full load…how have they held up?
[quote=Getthere]
You tell me where you want to be. Truth is, asset allocation isn't working this time. You need to have a back up plan. Maybe an annuity, options, CD's, Treasuries, cash, whatever else is out there, some alternative stuff has done OK. Many good people out there thought they were doing the right thing, but it hasn't held up. Are you kidding, you're going to switch horses now? This conversation is costing me golf time. [/quote] I'm not switching horses at all. I would if I could go back to 2007. I am looking to have more conversations about correlation and how clients' perceived definition isn't truly diversified. What would I be kidding you about?Is it possible that it’s a lack of experience with bear markets?
For all practical purposes the market has gone straight up since it
bottomed in 1982.
There are fund managers with twenty plus years of tenure who have never
had to deal with a down market for more than a few days. First it
takes a willingness to accept that the market may not go up for decades.
Once the manager has come to grips with that they can engage in
strategies that will generate income during flat to slightly down
markets–using the options market. I’m a major fan of selling
calls and cash secured puts against existing long holdings. The
problem with only selling calls is some day the market will go up again
and the shares will be called away or the calls covered at large losses.
That’s what happened in the early '80s–a strategy that had been
accepted as the equivalent of printing money suddenly fell out of favor
when a stock that was trading at, say, 80 was being called away at 50.
Clients decided it was a stupid strategy and stopped doing
it. Thats a shame, option writing portfolios perform very
well–perhaps not as well as those with several of the year’s biggest
gainers, but very well nonetheless.
Another fear is that in times like this investors begin to speculate,
in a frenzy of trying to generate a return. Suddenly a
conservative client will start talking about doing a Bean Oil Crush or
a Gold Silver spread out of frustration developed by watching another
year go by and their portfolio going no where.
Finally I really do believe that law suits are going to come out of the
woodwork, prompted by attorneys who will entice clients with ads that
say something like, "If you’ve been paying for financial advice you may
have been a victim of fraud. Call 1-800-CON-GAME for a free
consultation."
Damn, as I type this there is an ad on CNBC asking, “Have you lost
money in the recent market decline? Call the law offices of C
Douglas Kirk (I think).” Those kind of ads are going to become
commonplace and really honorable people are going to see them and come
to the conclusion that it’s their best chance at retiring.
There really isn’t anywhere to hide. Surer than hell if you go to
cash the Dow will go up 3,000 points in a straight line. If you
don’t it will go to 5,000. Or, from my point of view, the Chinese
water torture of going sideways for a decade like it did from the late
’60s to the early '80s.
I don't know...everything on the list is an index...use your imagination.I looked 2x’s at your list Snags…I don’t see anything about A shares at full load…how have they held up?
Now we realize that our investment boat is named Titanic? Doomed before it left the dock by the unthinkable, if not the unknowable. And like the Titanic, for many, not a lifeboat in sight.
Maybe. I'm not ready to throw asset allocation under the bus even if in using it we got thrown under the bus. It has merit, just a lot more risk than many believed. We all know that you shouldn't keep all your eggs in one basket. So, what do you do if all the baskets get dropped and stepped on? For those who didn't realize this could happen, well, now you know. 15, 20,25 years ago when the Bob Hope generation was still actively investing I would constantly get "I lived through the great depression, don't lose my money!" I would tell them that I wouldn't lose their money. And I didn't lose their money. My thoughts though, was that another great depression was impossible. Well, as of a month ago, I no longer think that way. I believe we have avoided armageddon but the nuclear option is still on the table entitled "Realm of possibility." We are living through some ugly history that will rewrite the books. History we need to heed.Snaggle, get a hold of yourself. Google SRLAX. This equity fund from 2005 did: 6.47, 3.66, 18.25, and is down 34% YTD. I would expect it could go down 40%, based on the historical norms. Ten year average is around 2%. Yeah, equity sucks in a low inflation environment.
Demand for most fixed equity is in a free fall, but it delivers interest in a flat equity market. This is a liquidity crisis coupled with a recession. Don't overthink this, guys. Even Bond Guy got fooled by a psycopath. Go play some golf, I'm outthere for today.[quote=Getthere]Snaggle, get a hold of yourself. Google SRLAX. This equity fund from 2005 did: 6.47, 3.66, 18.25, and is down 34% YTD. I would expect it could go down 40%, based on the historical norms. Ten year average is around 2%. Yeah, equity sucks in a low inflation environment.
Demand for most fixed equity is in a free fall, but it delivers interest in a flat equity market. This is a liquidity crisis coupled with a recession. Don't overthink this, guys. Even Bond Guy got fooled by a psycopath. Go play some golf, I'm outthere for today. [/quote] Wait a sec...I'm on your side and agree with you. I'm fine, except I won't touch asset allocation funds anymore.[quote=iceco1d]
If your asset allocation doesn't have any pieces that are positive right now, and a few pieces that are even or near even money, then you did it wrong in the first place. Don't blame "them" for it not working - I'm so sick of hearing comments like this. The problem is with the people doing the implementation. [/quote] I agree completely. The problem is, I was one of those people. But the first step to recovery is to admit I have a problem.[quote=snaggletooth][quote=iceco1d]
If your asset allocation doesn't have any pieces that are positive right now, and a few pieces that are even or near even money, then you did it wrong in the first place. Don't blame "them" for it not working - I'm so sick of hearing comments like this. The problem is with the people doing the implementation. [/quote] I agree completely. The problem is, I was one of those people. But the first step to recovery is to admit I have a problem. [/quote]Hi, my name is gregoron and I too have a problem. Not so much on implementation, but I think I should have placed an extra level of precaution when analyzing some clients' risk and investment objectives, and not just relied on asset allocation.
The thing here is that investors should be asked when their risk tolerances are analyzed how much of a percentage of their investments are they willing to lose for the potential gains they could get. For example, "Mr. Investor, how much of this $100k could you lose before you say, 'put me in cash'"? If he says 15%, then when his investment goes down to $85k, you put him in cash. With asset allocation, we give them an investor questionnaire asking them if they're growth, growth with income, principal protection, etc. If they're G&I, we give them 60% equities, 35% bonds, 5% cash. Done, fire and forget. Market is doing well, they're fine. Market is tanking, let's rebalance, buy some quality funds and they're still supposed to be ok. They're now down 30% and now they start asking where their money went despite the fact that they are in a well diversified good quality funds. Weren't they supposed to capture some bond returns, or minimize their losses, from the 35% exposure they have to fixed income?
If I had asked them how much they could stand to lose then it wouldn't be such a problem for Mr. Investor now. The thing here is that asset allocation is not a fire and forget tool for investments. Even if you do everything by the book, sometimes street smart could still save your bacon.
PS. My well-allocated portfolios are still way above their respective benchmarks.
[quote=gregoron]
Hi, my name is gregoron and I too have a problem. Not so much on implementation, but I think I should have placed an extra level of precaution when analyzing some clients’ risk and investment objectives, and not just relied on asset allocation.
[quote=gregoron]
The thing here is that investors should be asked when their risk tolerances are analyzed how much of a percentage of their investments are they willing to lose for the potential gains they could get. For example, "Mr. Investor, how much of this $100k could you lose before you say, 'put me in cash'"? If he says 15%, then when his investment goes down to $85k, you put him in cash. With asset allocation, we give them an investor questionnaire asking them if they're growth, growth with income, principal protection, etc. If they're G&I, we give them 60% equities, 35% bonds, 5% cash. Done, fire and forget. Market is doing well, they're fine. Market is tanking, let's rebalance, buy some quality funds and they're still supposed to be ok. They're now down 30% and now they start asking where their money went despite the fact that they are in a well diversified good quality funds. Weren't they supposed to capture some bond returns, or minimize their losses, from the 35% exposure they have to fixed income?
If I had asked them how much they could stand to lose then it wouldn't be such a problem for Mr. Investor now. The thing here is that asset allocation is not a fire and forget tool for investments. Even if you do everything by the book, sometimes street smart will save your bacon.
[/quote] That question is asked specifically in words and by pictures to clients in my risk profile questionnaire. The problem is, for the category that is say +20%, -15% range or whatever it is, it might put them into a 70/30 split or whatever. Based on that historical range, these clients are easily down 30-35+% after today. Regarding your idea to say, "What is your threshold before you go to cash?", what if the market is down 15% and you pull out, how do you decide to get back in? I think there are some great long term trends that can be followed which provide long term signals. Thanks Primo.
[quote=iceco1d]
!!!!!!!!!!!!!!!!!!!! Agree? Completely? Would you also agree that the Bengals are head for a miraculous 9-0 finish to the season, grab the last wild card spot @ 9-7, march thru the playoffs and win the Superbowl?
[/quote] Yes, agree completely with your prior post. The Bengals, however, are trash and should be sent to the CFL. Take the Seahawks with them. Ocho Cinco was the worst pick ever, behind Brady, Romo, Maroney, and the rest of my crappy teams.Don’t ya guyz gots real jobs?
How come dere iz so many posts during da day?
[quote=snaggletooth][quote=gregoron]
Dang, I'd better talk to our broker/dealer about putting those threshold questions in our questionnaire.
I'd get back in when the fundamentals are back in the market. That's when equities and fixed income are behaving like they should - bonds are inversely correlated to equities and vice versa. That's when the asset allocation I sold my client is supposed to work. I also wouldn't probably pull out all the assets in the portfolio in the first place. I'd leave bonds in there to get the dividends and just liquidate equities. In a way, it's a drastic rebalancing with some timing involved for equities.
“That’s when equities and fixed income are behaving like they should - bonds are inversely correlated to equities and vice versa.”
Is this what you meant to post?Unfortunately most clients risk tolerance is near sighted and based primarily on current market performance. Glad I keep their investment time horizon and long term objective in their file these days with the risk analysis!
Agree, options writing a great way to go. With the vix through the roof the premiums are crazy. An options writing program can be introduced in several ways. First, as a low cost way of owning stocks, second, as an income program, and third as an insurance strategy. As well, it can used a way to get rid of unwanted stocks by writing calls against the position. Make some dough on the way out.
Assest allocation has taken a serious hit in this market. For the sell from the chart types the problem is where are we on the chart, 1930 or is it 1932? Or are we in uncharted waters? Good luck getting anyone over 50 buying into market history theories. The charts are done. Unless you can give this group portfolio insurance they aren't going all in. Nor should they. DCA, to the extent that it is out of vogue, will make a big comeback as a risk management strategy. As we speak the investing public is still stunned by recent events. It hasn't sunk in. When it does My belief is that the delivery mode for financial services will change. The advice for a fee biz is in serious trouble. That is, unless they can explain their inability to get their clients off the tracks before getting run over by the runaway bear train. I realize this may seem unfair to those who collect these fees, in that the future is unknowable. but ongoing advice is what you sold to the client. I fear, for this group, PUt is closer to right than wrong. The liability issue will force firms to pull back from the fee model if the lawsuits do come out of the wood work. Please understand I'm not trying to denigrate anyone here. Just that this could be an outcome. And this doesn't even look at the government coming in and added layers of regulation. Right now they've got bigger fish to fry, but make no mistake our day on the stove is coming. The future of the financial services may look a lot like the past, commission per trade or fee for advice at point of sale, exactly the way other professionals bill for service, by the hour. The point going forward: Have a strategy that makes sense from a risk management POV. How you deliver that strategy and how you charge for it is much less important than having a plan.Source URL:https://www.wealthmanagement.com/forums/general/dr-doom