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Jan 27, 2009 2:22 pm

“Confidence has been shot, and a lot of people are going to leave the table and not come back for a long time. They will come back, but only years from now, when greed finally returns.”

  And the worst part is, they are probably going to decide to get back in after 3 or 4 years of up-market recovery years.  And guess what happens next......yup, they lose more money and become convinced that the markets are a scam.  Some people should have never been in the market to begin with.
Jan 27, 2009 6:30 pm

original poster was spot on. disgusting.

Jan 29, 2009 4:16 am

After a couple Glenfiddich I sat to write, “Rant”. I began to contrast my early experiences with current events and got carried away. Why? Because some of the hardest-working, most talented, and generous people I know work in our field. So when I see irresponsible, stupid and inconsiderate acts committed, it really ticks me off. The arrival of the economic downturn has exposed high-profile scandals involving behavior ranging from recklessness to possible crime, but these hard times merely put a spotlight on ethical lapses that have been around for years.

Let me say that I appreciate the expressions of solidarity and the various points that were brought up. In particular, Minimum’s point about Wall Street abandoning the partnership model in favor of becoming public companies was especially on point. Perhaps the purest form of asset management is the hedge fund. Sure its easy to criticize the fee structure, but where else is are the interests of the investor and the fund manager more closely aligned?

Others raised the point about retail capitulation marking the bottom. Well, if it turns out that my rant marked the bottom, then that is a label that I will gladly wear.

The World Economic Forum in Davos is an event that I look forward to. Having over 1000 of the world’s business leaders gathered in one place is of great interest to me. One notable economist is conspicuously absent from the WEF. Apparently his bona fides weren’t vetted in time. He is a brash and outspoken critic of the economic stimulus plan. You can see his latest update on youtube: http://www.youtube.com/watch?v=hoEbMrZ5uaA

Jan 29, 2009 2:37 pm
skeedaddy2:

Perhaps the purest form of asset management is the hedge fund. Sure its easy to criticize the fee structure, but where else is are the interests of the investor and the fund manager more closely aligned?


I know you are referring to the common practice of the manager taking 20% of profits above a boggie or the high water mark, and while that can align interests, especially in the short run, it also has a couple big unintended negative results.



First, since the hedge fund manager’s primary compensation comes from the 20% profit cut, their main goal is to achieve not simply good consistent returns, but outsized returns that earn them the performance fees. That usually cannot be achieved without taking on outsized risks. In other words, they have more of an incentive to swing for the fences, when the investor might well be more content to have them hit for averages.



Second, the high water mark aspect means once the fund has a big down period - like so many have in the last year or two - or has had a period of very strong performance - their chances of ever getting back above the highwater mark (and therefore once again earning performance fees) are so slim that many instead opt to simply close down the fund and distribute assets back to the investors. Many then simply open another fund under a different name and start over again, now operating a fund that isn’t so far under their high water mark.



But I really agree with you about the Glenfiddich. Great stuff.





Jan 29, 2009 4:16 pm

[quote=snaggletooth]    

  I know EXACTLY where I'm going from here.  As a matter of fact, I had cold called a very qualified guy in 2007 who said he had his IRA's at Edward D. Jones, and that the advisor is a really good buddy of his, so he wouldn't move that account.   So today, I was cold calling to show our newly hired cold caller how to do it and I call the guy.  Here's the gist of the conversation:   "Hey, I spoke with you back in May of 2007, and I wanted to call to touch base.  First, I want to apologize to you for not touching base sooner.  I know the market has crashed since we last spoke and it's tough.  I know your buddy manages your accounts at EDJ and I don't know what's going on there, but I wanted to tell you what's working for our clients, and the thing is, it's not available at EDJ, would that be ok with you?"   He says, "Yes".   "Well it's a type of account that participates when the market goes up, does not lose anything when the market goes down, and has no fees.  Now I don't know if this is right for you, but I'd like to get together to meet and see if it could be a good fit, would that be ok with you?"   He says, "Yes, let's get together in 2 weeks".   That was lead #1.  Called another guy that was a pure cold call and described the same thing.  We are set to get together at the end of the week.   I esentially set two appointments in 10 minutes and 4 contacts.   I actually feel legitimately sorry for you guys that can't offer some of this stuff.  It's like sending out a soldier to war without a gun.[/quote]   Has anyone ever thought to ask you why EDJ and every other major firm out there (even the big, bad wirehouses that are willing to do just about anything to make a dollar) won't offer "this stuff?"   Have you ever thought about why?    
Jan 29, 2009 4:44 pm

[quote=Borker Boy][quote=snaggletooth]    

  I know EXACTLY where I'm going from here.  As a matter of fact, I had cold called a very qualified guy in 2007 who said he had his IRA's at Edward D. Jones, and that the advisor is a really good buddy of his, so he wouldn't move that account.   So today, I was cold calling to show our newly hired cold caller how to do it and I call the guy.  Here's the gist of the conversation:   "Hey, I spoke with you back in May of 2007, and I wanted to call to touch base.  First, I want to apologize to you for not touching base sooner.  I know the market has crashed since we last spoke and it's tough.  I know your buddy manages your accounts at EDJ and I don't know what's going on there, but I wanted to tell you what's working for our clients, and the thing is, it's not available at EDJ, would that be ok with you?"   He says, "Yes".   "Well it's a type of account that participates when the market goes up, does not lose anything when the market goes down, and has no fees.  Now I don't know if this is right for you, but I'd like to get together to meet and see if it could be a good fit, would that be ok with you?"   He says, "Yes, let's get together in 2 weeks".   That was lead #1.  Called another guy that was a pure cold call and described the same thing.  We are set to get together at the end of the week.   I esentially set two appointments in 10 minutes and 4 contacts.   I actually feel legitimately sorry for you guys that can't offer some of this stuff.  It's like sending out a soldier to war without a gun.[/quote]   Has anyone ever thought to ask you why EDJ and every other major firm out there (even the big, bad wirehouses that are willing to do just about anything to make a dollar) won't offer "this stuff?"   Have you ever thought about why?    [/quote]

Because they're getting kickbacks from  the mutual fund companies.
Jan 29, 2009 4:48 pm

[quote=Borker Boy] 

Has anyone ever thought to ask you why EDJ and every other major firm out there (even the big, bad wirehouses that are willing to do just about anything to make a dollar) won't offer "this stuff?"   Have you ever thought about why?    [/quote]   Yes I thought deeply about this.  It seems to me the companies would rather have their advisors charging 1.5% annually vs. .80% annualized out over 10 years or 1% annualized over 5 years.
Jan 29, 2009 8:05 pm

Over the last seven years I have totally turned away from company research and fundamentals except as a final "sometimes" screen.  I've become a successful trader in my own accounts and used that to translate over to what I do for my clients.  I use technical analysis and it works.  I have to work my ass off but doing it all my self, all discretionary for the most part, all stocks "mostly ETFs," but it saved me last year.  We lost some but not much.  My transactions have increased dramatically and I dont like that but the bottom line is the bottom line.  Today I added a triple short position to put me into a market neutral position.  If this thing turns south again which the probability of happening is increasing in my opinion I'm going to jump all over it with shorts.  If not, I'll take the shorts off and go triple long.  My core positions dont change but I trade around them to flow with the trend.  I think advisors need to recognize that it's all about protecting clients money right now.  Figure out a way to do it and you will make them happy.    

Jan 29, 2009 10:03 pm

[quote=snaggletooth][quote=Borker Boy] 

Has anyone ever thought to ask you why EDJ and every other major firm out there (even the big, bad wirehouses that are willing to do just about anything to make a dollar) won't offer "this stuff?"   Have you ever thought about why?    [/quote]   Yes I thought deeply about this.  It seems to me the companies would rather have their advisors charging 1.5% annually vs. .80% annualized out over 10 years or 1% annualized over 5 years.[/quote]   You never did tell us what it is that you are using that is so wonderful.  Doesn't lose money, participates in the ups, no fees.  If it were me, I'd be thinking that I can't have my cake and eat it too, so there has to be a catch in there.  So, what is it that is so great, but companies like EDJ won't offer it?
Jan 29, 2009 10:55 pm

[quote=Spaceman Spiff][quote=snaggletooth][quote=Borker Boy] 

Has anyone ever thought to ask you why EDJ and every other major firm out there (even the big, bad wirehouses that are willing to do just about anything to make a dollar) won't offer "this stuff?"   Have you ever thought about why?    [/quote]   Yes I thought deeply about this.  It seems to me the companies would rather have their advisors charging 1.5% annually vs. .80% annualized out over 10 years or 1% annualized over 5 years.[/quote]   You never did tell us what it is that you are using that is so wonderful.  Doesn't lose money, participates in the ups, no fees.  If it were me, I'd be thinking that I can't have my cake and eat it too, so there has to be a catch in there.  So, what is it that is so great, but companies like EDJ won't offer it?[/quote]


If he told you, you'd hate your job.
Jan 30, 2009 12:51 am

Hi, I’m D.P Schitt with a reputable company here in town and I would like the opportunity to tell you about a place to put your money that you can’t get anywhere in the securities market. When there are gains, you keep the gains, when it goes down, you get a fixed percentage rate of return. You can’t lose money - it’s win-win.

Oh, I’m sorry - you already have an equity indexed annuity? Well I do have a huge opportunity for you where you can make a ton of money. Have you ever heard of Quixtar?

Jan 30, 2009 3:28 pm

[quote=snaggletooth][quote=Borker Boy] 

Has anyone ever thought to ask you why EDJ and every other major firm out there (even the big, bad wirehouses that are willing to do just about anything to make a dollar) won't offer "this stuff?"   Have you ever thought about why?    [/quote]   Yes I thought deeply about this.  It seems to me the companies would rather have their advisors charging 1.5% annually vs. .80% annualized out over 10 years or 1% annualized over 5 years.[/quote]   I don't buy that argument. If that were the case, we couldn't buy CD's or bonds in a brokerage account (no trails, or ongoing fees).    When I was with Jones, they mentioned a study they did that looked at EIA's vs. split-tickets (% of money into a zero, or fixed annuity, to give you the principal back after x years, the rest of the money into a balanced mutual fund) and the split-ticket beat the EIA EVERY time!    I don't hate EIAs as much as I used to (except for the 18 yr surrender ones I have seen), but I still don't think I would use them.
Jan 30, 2009 4:50 pm

[quote=now_indy] 

I don't buy that argument. If that were the case, we couldn't buy CD's or bonds in a brokerage account (no trails, or ongoing fees).    When I was with Jones, they mentioned a study they did that looked at EIA's vs. split-tickets (% of money into a zero, or fixed annuity, to give you the principal back after x years, the rest of the money into a balanced mutual fund) and the split-ticket beat the EIA EVERY time!    I don't hate EIAs as much as I used to (except for the 18 yr surrender ones I have seen), but I still don't think I would use them.[/quote]   You don't have to buy it.  Many other people do though. 
Jan 30, 2009 4:54 pm

[quote=now_indy][quote=snaggletooth][quote=Borker Boy] 

Has anyone ever thought to ask you why EDJ and every other major firm out there (even the big, bad wirehouses that are willing to do just about anything to make a dollar) won't offer "this stuff?"   Have you ever thought about why?    [/quote]   Yes I thought deeply about this.  It seems to me the companies would rather have their advisors charging 1.5% annually vs. .80% annualized out over 10 years or 1% annualized over 5 years.[/quote]   I don't buy that argument. If that were the case, we couldn't buy CD's or bonds in a brokerage account (no trails, or ongoing fees).    When I was with Jones, they mentioned a study they did that looked at EIA's vs. split-tickets (% of money into a zero, or fixed annuity, to give you the principal back after x years, the rest of the money into a balanced mutual fund) and the split-ticket beat the EIA EVERY time!    I don't hate EIAs as much as I used to (except for the 18 yr surrender ones I have seen), but I still don't think I would use them.[/quote]   When the goal is ZERO chance of loss, it's gonna be hard to convince a prospect to put money into a balanced fund that involves the risk of loss. 
Jan 30, 2009 5:04 pm

[quote=deekay][quote=now_indy] 

When I was with Jones, they mentioned a study they did that looked at EIA's vs. split-tickets (% of money into a zero, or fixed annuity, to give you the principal back after x years, the rest of the money into a balanced mutual fund) and the split-ticket beat the EIA EVERY time!    I don't hate EIAs as much as I used to (except for the 18 yr surrender ones I have seen), but I still don't think I would use them.[/quote]   When the goal is ZERO chance of loss, it's gonna be hard to convince a prospect to put money into a balanced fund that involves the risk of loss.  [/quote]   Hey Dee, isn't it funny when people look at things in a vacuum?  I wonder how many of the people that had done the split-ticket with a balanced mutual fund sold out because of the losses???
Jan 30, 2009 5:22 pm

If you’re guaranteed to get your principal back, is there a chance of principal loss?

  The money in the market is icing on the cake, and I have yet to have anyone sell out of this strategy because they're guaranteed to at least have their principal returned to them. Hence the name, Principal Protection Strategy.   Of course, the commission is almost nothing, so that'll rule out 99.9% of advisors from offering it as an option.    I'd love to see what our books would look like if every investment paid the same commission.
Jan 30, 2009 5:42 pm

[quote=Borker Boy]

  I'd love to see what our books would look like if every investment paid the same commission.[/quote]   If that was the case, I would use the least time consuming products/investments.  I wouldn't want to deal with tax forms, profit/loss statements, and other things that could create headaches.  I also wouldn't want to be losing people's money in supposedly "safe" things.  Of course, if someone wanted to take on that risk, I can help them.    My only point is that I love my annuity clients.  They do not take up my time and I don't have to hold their hand.  I can spend more time looking for more clients.   Also, if everything paid the same, why would I want to sit and stare at a quote screen all day long?  Unless I had a passion for that, I just don't care to do that.  I'd rather F around on the computer, phone, TV, and find new clients. 
Jan 30, 2009 5:45 pm
Borker Boy:

I’d love to see what our books would look like if every investment paid the same commission.

Strikingly similar to what most RIA books looks like, except instead of the commission being the same it is the fee being the same. 
Jan 30, 2009 8:07 pm
Morphius:

[quote=Borker Boy]I’d love to see what our books would look like if every investment paid the same commission.

Strikingly similar to what most RIA books looks like, except instead of the commission being the same it is the fee being the same.  [/quote]   Touché.
Jan 30, 2009 8:53 pm

[quote=Borker Boy]If you’re guaranteed to get your principal back, is there a chance of principal loss?

  The money in the market is icing on the cake, and I have yet to have anyone sell out of this strategy because they're guaranteed to at least have their principal returned to them. Hence the name, Principal Protection Strategy.   Of course, the commission is almost nothing, so that'll rule out 99.9% of advisors from offering it as a option.    I'd love to see what our books would look like if every investment paid the same commission.[/quote]


There's no way I would work for "almost nothing." I'm in business to make a profit.