BABs for IRAs
Anyone else loading up on these things in clients IRAs and utilizing the interest to DCA mutual funds? I’m seeing 5.5 - 7.25% A-AAA issues and can’t find a reason why this is not great for the client. Plus, I get to annutize my business just a bit.
For example … I did a 70k rollover today. Put 50k in 5 BAB issues and 20k into an asset allocation fund.
Easy, easy sell!
I like it, except for the part where interest rates go up and the statement values of these long-term bonds go down. So, I am mixing in shoter duration bonds via UIT and mutual funds, plus TIPS or TIPS funds. (Thats just the fixed income part, so include the right mix of equities too).
It’s a government issue. They can change the rules at any time. I’d be very skeptical regardless of yields, liquidity, or rate of return.
The UITs you are selling right now do not include statement shock? Every UIT in my inventory is selling at a big premium, especially those in the short to intermediate range. What short duration bond fund do you use? I like Lord Abbot and GS.
I’m trying to solve for interest rates with the equity portion although know that’s not absolutely effective - but since it’s a moderate asset allocation fund it has some decent underlying bond funds.
It’s a government issue. They can change the rules at any time. I’d be very skeptical regardless of yields, liquidity, or rate of return.
How can they change the terms? Do they do that with Muni bonds? Never heard of it.
Its a product that has zero history and is backed by the faith and credit of the federal government. Forgive me if I'm a bit skeptical about outlier yields and 'safety'.[quote=deekay] It’s a government issue. They can change the rules at any time. I’d be very skeptical regardless of yields, liquidity, or rate of return. [/quote]
How can they change the terms? Do they do that with Muni bonds? Never heard of it.
[quote=deekay]
Its a product that has zero history and is backed by the faith and credit of the federal government. Forgive me if I’m a bit skeptical about outlier yields and ‘safety’.[/quote]
You are incorrect about it being backed by the federal government. These are taxable muni bonds backed by the issuer. The issuer get’s a tax break from the feds to issue these bonds that are supposed to create jobs. There is a two year window and then they are no longer allowed to issue. I’m happy to send you a Jones fact sheet if you’d be interested in investing
http://online.barrons.com/article/SB124657310079888921.html
Annuitize what business, you don't even have an office.Anyone else loading up on these things in clients IRAs and utilizing the interest to DCA mutual funds? I’m seeing 5.5 - 7.25% A-AAA issues and can’t find a reason why this is not great for the client. Plus, I get to annutize my business just a bit.
For example … I did a 70k rollover today. Put 50k in 5 BAB issues and 20k into an asset allocation fund.
Easy, easy sell!
[quote=voltmoie] [quote=deekay]
Its a product that has zero history and is backed by the faith and credit of the federal government. Forgive me if I'm a bit skeptical about outlier yields and 'safety'.[/quote]
You are incorrect about it being backed by the federal government. These are taxable muni bonds backed by the issuer. The issuer get's a tax break from the feds to issue these bonds that are supposed to create jobs. There is a two year window and then they are no longer allowed to issue. I'm happy to send you a Jones fact sheet if you'd be interested in investing ;)
http://online.barrons.com/article/SB124657310079888921.html
[/quote] I'm good, thanks. "Nicknamed "BAB," these are taxable municipal bonds. States and municipalities like them because the federal government reimburses 35% of the interest cost when they borrow for essential public purposes like schools, infrastructure and transportation. " I'm not saying they're bad, but doesn't the government have more pressing issues than paying 35% of the cost of repaving County Route 78 in the middle of BFE? (no offense to those who live in BFE)
We can argue with virtues projects the bonds support all day and I’ll probably agree with you.
However, I think they are great investments in our current environment and those not utilizing them in IRAs should take a close look. I’ve lead with the following question and got more roll overs than I deserve.
"Given what we’ve seen in the last decade would you have been happy to get a 6 - 7% return?"
Um, yes
"If I could show you how to do just that going forward would you do it?"
Um, yes
sold…
I'm never gonna fault someone for trying to make a prospect a client, but the BAB's deserve a 2nd and 3rd look pre- and post-sale.We can argue with virtues projects the bonds support all day and I’ll probably agree with you.
However, I think they are great investments in our current environment and those not utilizing them in IRAs should take a close look. I’ve lead with the following question and got more roll overs than I deserve.
“Given what we’ve seen in the last decade would you have been happy to get a 6 - 7% return?”
Um, yes
“If I could show you how to do just that going forward would you do it?”
Um, yes
sold…
That’s fair and good advice.
man, making $800 on a $70K rollover has to suck.
I’ll take it for 2 hours worth of work and he and his wifes much much larger 401ks a few years from now.
That's if your still around!I’ll take it for 2 hours worth of work and he and his wifes much much larger 401ks a few years from now.
[quote=voltmoie]I’ll take it for 2 hours worth of work and he and his wifes much much larger 401ks a few years from now.
That’s if your still around![/quote]
Prove you are.
Yeah Volt, I think they're good stuff, especially to land new clients. As far as 'the government could change it, because they have to pay for other things first,' well, it's possible I guess. But I haven't seen anything like that happen historically. Read up on the Tennessee Valley Authority, or parts of the Interstate Highway system. Those have worked pretty good so far for 50 years. Just sayin'. Take it from a guy who has been around long enough to sell GMAC, Lehman, & CIT bonds, etc, only to come back & have to sell out of them. I think BAB's are good. Always keep in mind diversification and maturities.
BABs are a great choice and they are much safer than corporates.
deekay, you don’t have a clue.
A-rated muni's have literally 20 times less default risk than A-rated corps. Second, all BAB's have an extrordinary call feature which allows the issuer to call the bond immediately if the Government fails to subsidize the interest payments. Third, At around 100 basis points higher than comparable corporate bonds of the same maturity, there is an innefficiency you simply must take advantage of if you recommend individual bonds. Fourth, BAB's can only be issued this year and next, meaning demand will remain high for these taxable rates long after supply is gone, lowering yields comparable to corporates long term. Fifth, other than a 35% tax credit, these issues have nothing to do with the Federal Government. They are simply backed by the underlying issuer. And given the historic relative safety of municipals, especially central services and infrastructure bonds, these are an absolute no-brainer.I don’t like the idea of taking a 70K rollover and moving 50K into BAB’s which are all long bonds and then 20K into an asset allocation fund. I would want to diversify the fixed income more than that…
noggin - that is diversification at Jones, 2 products
BABS are not all long bonds I've sold short, int., and long You indy guys need to do some homework They are long and intermediate bonds in this portfolio The asset allocation fund has a fixed income mix The asset allocation fund will grow and be a larger part of his portfolio with bond payments It's not all of his money, just a portion The left hand is talking to the right hand He has a BIG 401k which I diversifed ALL his monies were in cash prior so this we're moving in the right directionI don’t like the idea of taking a 70K rollover and moving 50K into BAB’s which are all long bonds and then 20K into an asset allocation fund. I would want to diversify the fixed income more than that…
Volt. Your headed in the right direction. They are just mad cause you made more gross off it than they did all month.
And once again, windy makes this thread about how much you produce. Next he will tell us how much he is grossing and turn this into a thread about himself. Here is an idea that you may not have considered windy, there are those on this board that produce less than you, and those that produce more than you. However, you are far and away the most likely to bring up production in any thread. Think about it.Volt. Your headed in the right direction. They are just mad cause you made more gross off it than they did all month.
BABS are not all long bonds I've sold short, int., and long You indy guys need to do some homework They are long and intermediate bonds in this portfolio The asset allocation fund has a fixed income mix The asset allocation fund will grow and be a larger part of his portfolio with bond payments It's not all of his money, just a portion The left hand is talking to the right hand He has a BIG 401k which I diversifed ALL his monies were in cash prior so this we're moving in the right direction [/quote] Ok, I tried to help you avoid a problem but you already know what you are doing. In addition, you felt the need to try to slam me when all I was trying to do was help you. Good luck![quote=noggin]I don’t like the idea of taking a 70K rollover and moving 50K into BAB’s which are all long bonds and then 20K into an asset allocation fund. I would want to diversify the fixed income more than that…
I’m just trying to share a simple sales idea with some fellow rookies. Many of the vets on this board are so jaded any idea that didn’t origniate from them sucks. I’m not even sure why they come on this site, they know everything anyway - and why they are here they “hang out” in the rookie forum. I guess some guys just can’t forget high school.
Seriouly though, Jones rookies ... this is a no brainer and a heck of a way to make you different from the crowd. None of my prospects have ever even heard of BABs - when you show them what they are, their saftey, and what they pay it's a game changer. Use the interest to annutize your business. It's not advisory solutions but it beats the heck out of all A-shares. BTW: mr. blonde is gay[quote=noggin]
Ok, I tried to help you avoid a problem but you already know what you are doing. In addition, you felt the need to try to slam me when all I was trying to do was help you. Good luck![/quote] I'm not slamming you, sorry if it came off that way. I appreaciate the feedback. Does my plan not work for the client? I know you don't know about the other parts of his portfolio but I "laddered" the best I could.And once again, windy makes this thread about how much you produce. Next he will tell us how much he is grossing and turn this into a thread about himself. Here is an idea that you may not have considered windy, there are those on this board that produce less than you, and those that produce more than you. However, you are far and away the most likely to bring up production in any thread. Think about it.[/quote] lol...I didn't say sh*t about my production.[quote=Ronnie Dobbs]Volt. Your headed in the right direction. They are just mad cause you made more gross off it than they did all month.
[quote=voltmoie][quote=noggin]
Ok, I tried to help you avoid a problem but you already know what you are doing. In addition, you felt the need to try to slam me when all I was trying to do was help you. Good luck![/quote] ...Does my plan not work for the client? I know you don't know about the other parts of his portfolio but I "laddered" the best I could.[/quote] it's an interesting approach if you fully consider what you're doing; and I use BABs extensively. However, I'm more prone to using trusts at the 50K level for diversification purposes. Naturally, you could have purchased 10, 5k pieces for all I know. Does your plan work? I don't want to speak for a former Joneser like Noggin, but had you considered what portion of your portfolio would be covered by international debt, corporate, federally back? Diversification as pertains to fixed goes beyond ladders. Again, no knowing what the rest of your portfolio contains.[quote=voltmoie][quote=noggin]
Ok, I tried to help you avoid a problem but you already know what you are doing. In addition, you felt the need to try to slam me when all I was trying to do was help you. Good luck![/quote] I'm not slamming you, sorry if it came off that way. I appreaciate the feedback. Does my plan not work for the client? I know you don't know about the other parts of his portfolio but I "laddered" the best I could.[/quote] No problems Voltmoie. I try to help where I can and try not to slam folks these days. I find great value in our forum and think it is truly a great learning tool. I agree with Lock on some of the diversification ideas, a ladder is just a start on the maturities. I am guessing the Intermediate maturities were 10 years and the long maturities that you used are 20-30 years out. You are invested in only one type of fixed income.....having an exposure to corporates, govt backed, international, TIPS, bank loan and others would diversify the client much better. I think you have some int rate risk the way you did it that you may have to deal with down the line.....Even with 50K there are ways to get greater diversification. There are many fixed income funds that actually ladder in their portfolio in addition to diversifying among many of the categories I mentioned. I also found out that if I didn't diversify each account by itself, sooner or later the client would have a problem.......It’s tough to adequately diversify a 70K portfolio with individual securities. Typically you need to use packaged products (funds, UIT’s, ETF’s, etc.) in order to accomplish this. Not impossible, but also not always practical and/or economical, especially if you try to make adjustments or rebalance. And given the environment we are in, it’s hard to assume you will not make any changes.
And once again, windy makes this thread about how much you produce. Next he will tell us how much he is grossing and turn this into a thread about himself. Here is an idea that you may not have considered windy, there are those on this board that produce less than you, and those that produce more than you. However, you are far and away the most likely to bring up production in any thread. Think about it.[/quote] lol...I didn't say sh*t about my production.[/quote] No, you followed the windy playbook to the tee, get defensive immediately and make a comment about production to bolster your position. Reread my previous post. Try ignoring the second sentence. See if it sinks in. I'm sure it won't.[quote=Jebediah][quote=Ronnie Dobbs]Volt. Your headed in the right direction. They are just mad cause you made more gross off it than they did all month.
And once again, windy makes this thread about how much you produce. Next he will tell us how much he is grossing and turn this into a thread about himself. Here is an idea that you may not have considered windy, there are those on this board that produce less than you, and those that produce more than you. However, you are far and away the most likely to bring up production in any thread. Think about it.[/quote] lol...I didn't say sh*t about my production.[/quote] No, you followed the windy playbook to the tee, get defensive immediately and make a comment about production to bolster your position. Reread my previous post. Try ignoring the second sentence. See if it sinks in. I'm sure it won't.[/quote] Here's a thought. Stick your hand down your pants and in a pinching motion pull the Victoria Secret underwear out of your ass crack. Noone wants to see another "Windy Blah Blah" argument, inculding me. It was a joke. Get over it.[quote=Ronnie Dobbs][quote=Jebediah][quote=Ronnie Dobbs]Volt. Your headed in the right direction. They are just mad cause you made more gross off it than they did all month.
I'm sure it won't.
Right again.[quote=Jebediah]
I’m sure it won’t.
Right again.[/quote]What's your point? Are you the forum police deputy fife?
[quote=Jebediah]
I'm sure it won't.
Right again.[/quote] Noone cares.Look at this… Volt and Windy… taking on all comers… how cute
Look at Ron. Wishing he was still at Jones. How sad.
Look at this… Volt and Windy… taking on all comers… how cute
Ron, please stop PMing me about checking out my picture. I'm not into guys.
Volt - I wont show anyone else, i promise.
Windy - I would rather become a garbage man than go back to jones and that is not an exaggeration. Higher pay, lower expenses, and free food.Volt, you seem to be very self conscious about homosexuals. Some say that’s a sign that someone is gay, or at least has homosexual thoughts, don’t suppress your feelings, Come out Volt! Come out!
[quote=Ron 14]
Volt - I wont show anyone else, i promise.
Windy - I would rather become a garbage man than go back to jones and that is not an exaggeration. Higher pay, lower expenses, and free food.[/quote]
Volt, you seem to be very self conscious about homosexuals. Some say that’s a sign that someone is gay, or at least has homosexual thoughts, don’t suppress your feelings, Come out Volt! Come out!
You seem to know the mating call. Does that work on those cold nights up in Canada?
You’re not a man unless you’ve gone eskimo! I guess you wouldn’t know always being the submissive one.
You’re not a man unless you’ve gone eskimo! I guess you wouldn’t know always being the submissive one.
Please stop hitting on me. Ron is your man.
Volt I can’t believe you left me for Windy. You do know Windy is with Spiff, dont you ?
Volt I can’t believe you left me for Windy. You do know Windy is with Spiff, dont you ?
It breaks my heart...
[quote=Ron 14]
Volt - I wont show anyone else, i promise.
Windy - I would rather become a garbage man than go back to jones and that is not an exaggeration. Higher pay, lower expenses, and free food.[/quote] I'm not sure what the difference between a garbage man and picking up used suckers from the floor of a bank, after giving them to old ladies for opening an account, along with a tool set.There's something intriguing about a financial advisor whose kitchen and living room are next to his office. I see why clients can really feel like they are dealing with family.[quote=Mr.Blonde] You’re not a man unless you’ve gone eskimo! I guess you wouldn’t know always being the submissive one.[/quote]
Please stop hitting on me. Ron is your man.
…crickets…
Go balance your drawer!…crickets…
I have to agree with ice on this.
Is it that Ron does not HAVE to work as hard as everybody else or that Ron is smarter for NOT having to work as hard as everyone else?
I can only speak for myself on this but Ron took the easy way out and I hate him for it.
Nah, I personally careless where someone works - we're all in the "business" hope everyone is killing it. It's just fun giving him a hard time about it. Door knocking time, you lazy bastards.I can't imagine that there isn't a new broker (especially EDJ guys) that haven't woken up one day in the office in the middle of a s***ty month and wished they were in Ron's position (I mean working at a bank, not grabbing his ankles). I know I have from time to time (again, wished I worked in bank, not grabbed my ankles).I have to agree with ice on this.
Is it that Ron does not HAVE to work as hard as everybody else or that Ron is smarter for NOT having to work as hard as everyone else?
I just read these comments and I am going to go into the lobby, grab my ankles, and hope some little kid doesn't come by with a sucker while I am there. I will be back to answer in a few minutes.........................
[quote=Ron 14]
I just read these comments and I am going to go into the lobby, grab my ankles, and hope some little kid doesn't come by with a sucker while I am there. I will be back to answer in a few minutes.........................
[/quote] Well played, Ron! Sorry, I couldn't resist.…Im back, I did swat away one kid who had one of those BIG suckers you get at amusement parks, that would have hurt.
Anyways, even though no one asked for my commentary, leaving Jones after 6 months or a year would be the easy way out, but I did give it 2 1/2 years. I posted my numbers and the bottom line is that I wasn't making any money. We are all here to make money and have the ability to make more in the future. Is the bank perfect, hell no, but it was the right move for me and my family. For what it is worth, there isn't a single guy from my Jones region, 6 years out or less who has grossed 300k in any one year.[quote=Ron 14]…Im back, I did swat away one kid who had one of those BIG suckers you get at amusement parks, that would have hurt.
Anyways, even though no one asked for my commentary, leaving Jones after 6 months or a year would be the easy way out, but I did give it 2 1/2 years. I posted my numbers and the bottom line is that I wasn't making any money. We are all here to make money and have the ability to make more in the future. Is the bank perfect, hell no, but it was the right move for me and my family. For what it is worth, there isn't a single guy from my Jones region, 6 years out or less who has grossed 300k in any one year. [/quote] Just out of curiosity, do you work for a large bank, regional, or a local bank? You can tell me to f*** off and that it's none of my business if you want.I may have said it before, but just in case big brother is watching I won't state the actual name. The only large bank that has done well recently.
[quote=Ron 14]
I may have said it before, but just in case big brother is watching I won't state the actual name. The only large bank that has done well recently.
[/quote] Aren't you the guys with all the funny cartoons on YouTube?Yes and those are absolutely hilarious and true if you take out the swear words
Hey Ron at the bank whats the money like? Base plus comm forever or just to start?
If you produce 0 for a month they will give you a 2k draw that you pay back in future months, so basically it is 100% commission because a bad month will give you a break even vs your draw
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