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May 17, 2009 4:09 pm

[quote=SometimesNowhere]

Need ideas…

I have a client that is rolling over a large CD, does not want to purchase another because rates are poor. Here are his criteria:

1) Little/no risk with some explicit guarantee

2) Short duration (has been buying 1 year CD's)   3) Yield that is greater than a CD   I know it seems easy, but I am having a hard time finding ideas. Thanks for any idea you can offer...I'll even take the inevitable smart @$$ comments [/quote]

Refer him to someone who knows what to do.
May 18, 2009 2:30 pm

[quote=Gordon Gekko] I find that there are two versions of CD buyers - those who are happy to get 3% on a 3 year renewal and those who are open minded to the idea of peeling off a chunk for more upside. It’s good for your sanity to figure out which of these categories your client is.



Thankfully fixed income is presently working so that chunk if done in the last 6 months is smoking their CD return. Some CD buyers need to stay CD buyers. [/quote]



In 8 years of chasing “blue haired, grey haired, and no haired’s” I would say no truer words have been spoken. Not only should they remain CD buyers, but they have no loyalty to anything other than 5 bps. So, unless you can match the best rate in town every time it comes due, you won’t keep the assets long.
May 20, 2009 2:47 am

40% Short Duration Bond Fund  (FALTX, CSDAX or something similar)

30% TIPS Fund  (BPRAX, PIMCO Real Return, American Century, or just buy the index) 20% High Quality Bond Fund  (FPNIX and SAMIX are a couple of my favorites in this space) 10% Non-US Bond Fund  (TPINX, INGBX, or ANAGX)   Maybe a callable CD if you can find any.  I like the Structured CD idea as well, but that may get a little exotic for someone like this.  Put together the package above, wrap it at .70, and tell him to give you 1-year.  If he's lost principal on the aggregate, you will liquidate, close his account, mail him a check and a $50 gift card to Denny's.  If he's up 3% or more net of fees, he owes you a referral.  Call it a day--you can't save 'em all.
May 20, 2009 3:18 am

1) Little/no risk with some explicit guarantee

2) Short duration (has been buying 1 year CD's)   3) Yield that is greater than a CD       This is what the OP listed as criteria.  There have been many responses, but they violate at least one of the criteria.  The simple answer is the client wants his cake and to eat it too.  We all know what they say about that.  The greatest service you could do this person (and your U4) is too tell him that.
May 20, 2009 5:21 am

[quote=Sam Houston]

1) Little/no risk with some explicit guarantee

2) Short duration (has been buying 1 year CD's)   3) Yield that is greater than a CD       This is what the OP listed as criteria.  There have been many responses, but they violate at least one of the criteria.  The simple answer is the client wants his cake and to eat it too.  We all know what they say about that.  The greatest service you could do this person (and your U4) is too tell him that. [/quote]

+1
May 20, 2009 2:03 pm

Denny’s gift card.   Funny because it’s true!  Denny’s, IHOP, Old Country Buffet.  A CD buyer’s idea of dining out.  Cheap and a lot of food. 

May 20, 2009 3:07 pm

A short structured CD may or may not get a return greater than a CD.  Other than that, I like the structered CD idea a lot since I’m bullish.  One other thing I’ve played recently is very short financial bonds.  I recently did an 18-month Citi bond at 5.5% and a 2-year Merrill bond at 6.3%.  With the threat of nationalization fading and these still showing  A-rated, I think that is an acceptable level of risk for at least SOME of his portfolio.  Combine a few of those with a short CD and he’ll definitely get a better than average blended rate with a fair degree of safety.

  If neither that nor the structured CD idea get any play from this client, I'd cut your losses and send him back to the bank.
May 20, 2009 3:25 pm

Ask him what kind of women he likes.



Does he like attractive women?



Here is the risk table:



Penny stock - Smoking hot, famous actress/model/dream girl — You can ask her out, but you’ll likely get shot down



Growth stock - Good looking woman. You will have to ride the ups and downs of the crazy train if she says yes - may end in a breakup, may not



Dividend paying stock - Good looking woman. Down to earth. Will probably go out with you. You will become a better person because of it. May end in breakup, may not.



Bond – Attractive, steady woman. There is a little crazy in her, but not enough to where you are on the constant rollercoaster. She will probably go out with you and not treat you like crap. Might end at some point.



Insurance – Unattractive, but nice body. Will go out with you, not be crazy, unless you really f-up.



CD’s – The fat ugly girl at the bar at 2 a.m. - she will DEFINATELY go out with you, but you will derive zero benefit sexually, you can’t tell your friends about it, and once you do, you have a lifetime stalker (can’t stop buying CD’s)



Also, remind your client that even if he likes fat girls, “Fat girls are like jungle gyms, they are fun to play on, but you don’t want one in your house”.

May 20, 2009 3:29 pm
Moraen:

Ask him what kind of women he likes.

Does he like attractive women?

Here is the risk table:

Penny stock - Smoking hot, famous actress/model/dream girl — You can ask her out, but you’ll likely get shot down

Growth stock - Good looking woman. You will have to ride the ups and downs of the crazy train if she says yes - may end in a breakup, may not

Dividend paying stock - Good looking woman. Down to earth. Will probably go out with you. You will become a better person because of it. May end in breakup, may not.

Bond – Attractive, steady woman. There is a little crazy in her, but not enough to where you are on the constant rollercoaster. She will probably go out with you and not treat you like crap. Might end at some point.

Insurance – Unattractive, but nice body. Will go out with you, not be crazy, unless you really f-up.

CD’s – The fat ugly girl at the bar at 2 a.m. - she will DEFINATELY go out with you, but you will derive zero benefit sexually, you can’t tell your friends about it, and once you do, you have a lifetime stalker (can’t stop buying CD’s)

Also, remind your client that even if he likes fat girls, “Fat girls are like jungle gyms, they are fun to play on, but you don’t want one in your house”.

  Amazing! Here's to all the CD's in everyone's portfolio!
May 20, 2009 4:08 pm

BTW - This works for men too. So I don’t get the “you are a sexist pig” PM’s that I got last time.



May 20, 2009 5:35 pm

That was worth the price of admission for today. 

  Morean - seriously, you need to start that great American novel.  Let me know when it's out and I'll buy a copy. 
May 20, 2009 7:16 pm

Post of the Year!   Funny, funny!

    I just printed that off.  Too good!
May 20, 2009 7:25 pm

From your post you have only 2 real options that will satisfy this clients main concern - safety of principal - cd’s or money market accounts. Neither will make you any money but will save your sanity with this client.

May 20, 2009 7:50 pm
Moraen:

Ask him what kind of women he likes.

Does he like attractive women?

Here is the risk table:

Penny stock - Smoking hot, famous actress/model/dream girl — You can ask her out, but you’ll likely get shot down

Growth stock - Good looking woman. You will have to ride the ups and downs of the crazy train if she says yes - may end in a breakup, may not

Dividend paying stock - Good looking woman. Down to earth. Will probably go out with you. You will become a better person because of it. May end in breakup, may not.

Bond – Attractive, steady woman. There is a little crazy in her, but not enough to where you are on the constant rollercoaster. She will probably go out with you and not treat you like crap. Might end at some point.

Insurance – Unattractive, but nice body. Will go out with you, not be crazy, unless you really f-up.

CD’s – The fat ugly girl at the bar at 2 a.m. - she will DEFINATELY go out with you, but you will derive zero benefit sexually, you can’t tell your friends about it, and once you do, you have a lifetime stalker (can’t stop buying CD’s)

Also, remind your client that even if he likes fat girls, “Fat girls are like jungle gyms, they are fun to play on, but you don’t want one in your house”.

  Incredible.  Nice work!
May 20, 2009 11:12 pm

I keep hearing Jones guys cast doubt on FDIC.  Is that working for you?  I would think you run the risk of looking foolish doing this.  People have lost money with insurance companies, stocks, bonds, municipalities, etc.  No one, within the limits, has ever lost money in an FDIC insured product.  I am frustrated too by these CD people but “bashing” FDIC seems silly.

May 20, 2009 11:15 pm
imabroker:

I keep hearing Jones guys cast doubt on FDIC.  Is that working for you?  I would think you run the risk of looking foolish doing this.  People have lost money with insurance companies, stocks, bonds, municipalities, etc.  No one, within the limits, has ever lost money in an FDIC insured product.  I am frustrated too by these CD people but “bashing” FDIC seems silly.

    I have a hard time believing that Jones as a company is bashing FDIC.  Maybe some idiot broker that works there, but the whole company?   I can't believe I just stood up for Jones.  I feel dirty.
May 21, 2009 2:15 am
imabroker:

I keep hearing Jones guys cast doubt on FDIC. Is that working for you? I would think you run the risk of looking foolish doing this. People have lost money with insurance companies, stocks, bonds, municipalities, etc. No one, within the limits, has ever lost money in an FDIC insured product. I am frustrated too by these CD people but “bashing” FDIC seems silly.



First of all, I am not with Jones. Second of all, who was bashing FDIC?

Do you like fat girls imabroker?
May 21, 2009 2:47 am

You are not going to meet all 3 criteria.  But, I would take a look at the ishares website and use the Fixed Income Portfolio Builder tool - let him choose the quality and duration he is comfortable with and it will show you what to use. (CSJ, SHY, IEF, MBB, LQD, AGG, etc.)

May 21, 2009 9:02 pm

Why not use some simple math and find out how much he needs to put into the highest paying 3yr cd you can find to enable him to walk away with his original principal and then invest the rest in anything else put probably for this customer low duration bond funds (pbsmx) and explain that no matter what, he will not walk away with less than his principal and what ever happens to the rest is icing on the cake. I am in a bank platform and this seems to open peoples minds a little.  I know it is not full proof but it does work.

May 22, 2009 4:12 pm

Man, I just had a penny stock walk by my office window…if I only had the capital to waste…