This Time is Different!
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If America’s economic landscape seems suddenly alien and hostile to many citizens, there is good reason: they have never seen anything like it. Nothing in memory has prepared consumers for such turbulent, epochal change, the sort of upheaval that happens once in 50 years. Even the economists do not have a name for the present condition, though one has described it as "suspended animation" and "never-never land."
The outward sign of the change is an economy that stubbornly refuses to recover from the recession. The current slump already ranks as the longest period of sustained weakness since the Great Depression. That was the last time the economy staggered under as many "structural" burdens, as opposed to the familiar "cyclical" problems that create temporary recessions once or twice a decade. The structural faults represent once-in-a-lifetime dislocations that will take years to work out.
Among them: the job drought, the debt hangover, the banking crisis, the real estate depression, the health-care cost explosion and the runaway federal deficit. "This is a sick economy that won’t respond to traditional remedies," said Bank of New York Mellon economist Norman Robertson. "There’s going to be a lot of trauma before it’s over."
— From Time magazine — September 28, 1992
This was also part of Nick Murray's October Newsletter This time is different ? No, it is not.How many consecutive quarters of negative growth have we had? Most since we started recording it? Isn’t that a little different?
Ron14- I am so tired of people like you saying things like this. Just because in 1992 someone was wrong about the economy doesn’t mean that this time isn’t different.
A=B so A=C .... no sir. Ron this time it is different and it may take 10 yrs for all of this to work itself out but it is different this time.Sounds great. I assume you have sold your house also and you plan to rent for the next 10 yrs. Yes ?
I don’t like to say different, I like to steal from Bill Gross (I don’t know if he made it up, but he and Mauldin say it) and say that it is definitely a “new normal”. I think that the market is acting irrationally, and that old models of forecasting may not be as useful as they have been in the past.
I get what both sides are saying, I just think that economic climate is far too complex for anyone to be able to really get their arms around.Ron - Admitting that this time is different is not the same as me selling my house.
I am not telling you to sell all your clients investments but I am saying that your logic is not correct.Well if it is going to take 10 years for this crap to pass obviously you are saying there will be very little economic growth. Very little economic growth will not increase home values or the stock market at any rate that would make sense with the risk you are taking.
The current situation and how everything happened is different and had never happened before, but the recovery and eventual rebound will not be any different from the recoveries of the past.
So, with that logic everybody you come in contact with at the bank should be throwing money at you like their life depended on it. Yet, these “morons” don’t “get it”. Could it be that YOU don’t get it?
First of all I was talking about inflation. Secondly if individual investors "got it" they wouldn't need advisors. Putting all of us out of jobs. What is it that you "get" that your clients dont?
BioFreeze, I admit I'm not an annuity expert. If things really are different ( U.S. does not do right things for recovery, geopolitical risk, slower growth, so on), don't these annuities just increase their M&E fees?
In other words, if you choose to invest in stocks in annuities, or you invest in bond funds that get hammered due to interest rate increases, and stocks continue to do poorly for another ten years, don't you just chew up the subaccounts? How does pooling your money with other investors who also experience adverse returns and high expenses create value? How the does the magic happen? Does all of this depend on annuitization and relate to mortality rates? I checked one product out pretty thoroughly where, at age 65, you could withdraw 6% for life, and your beneficiaries get to keep the principle if you die. Plus, there are various lock ins of principle over time if the market does well. But, bottom line, the insurance company can just increase the expenses if the contracts "blow up". I understand 6% annuitization for life at age 65, but the rest just seems to be smoke and mirrors. And, whatever the actual subaccount value is shows on the client statement. Why do advisors and clients like these contracts? http://www.milyunair.com/Sorry, I don't sell annuities. So you're saying, the insurance company is managing the subaccounts, and client and advisor choose a participation rate, say 70% of S&P, with a "floor".
And because these are reasonably managed, the average return and floor guarantees should not put us in a situation where expenses have to be jacked up ? Basically, the main reason you are using this is for tax deferral and to take some volatility out of the account value? What would be typical total expenses on a contract that's trying to mimic a moderate portfolio, say half stock and bonds, where the client obviously has potential for less return than 50 stock/ 50 bonds? I'm trying to compare this to, say, nonqualified wrap at 1.25% using ETFs, where you have to discuss the potential impact of taxes over time on the wrap. I'm not trying to make any point about one product being better, I'm just trying to understand for myself.[quote=RealWorld]Ron - Admitting that this time is different is not the same as me selling my house.
I am not telling you to sell all your clients investments but I am saying that your logic is not correct. [/quote] Ok, so if the recovery isn't going to happen in the next 10 years what are you doing for your clients ? What is your strategy ? How do you position yourself as adding a value added service ? Anyone on the board who stands by asset allocation, diversification, rebalancing etc gets kicked in the nuts, but those who do the kicking never explain there philosophies or strategies. Lets hear them....[quote=Milyunair]
Sorry, I don't sell annuities. So you're saying, the insurance company is managing the subaccounts, and client and advisor choose a participation rate, say 70% of S&P, with a "floor".
And because these are reasonably managed, the average return and floor guarantees should not put us in a situation where expenses have to be jacked up ? Basically, the main reason you are using this is for tax deferral and to take some volatility out of the account value? What would be typical total expenses on a contract that's trying to mimic a moderate portfolio, say half stock and bonds, where the client obviously has potential for less return than 50 stock/ 50 bonds? I'm trying to compare this to, say, nonqualified wrap at 1.25% using ETFs, where you have to discuss the potential impact of taxes over time on the wrap. I'm not trying to make any point about one product being better, I'm just trying to understand for myself. [/quote] Are you writing this from a call center in India? Man I could go for some curry chicken.[quote=Milyunair]
Sorry, I don't sell annuities. So you're saying, the insurance company is managing the subaccounts, and client and advisor choose a participation rate, say 70% of S&P, with a "floor".
And because these are reasonably managed, the average return and floor guarantees should not put us in a situation where expenses have to be jacked up ? Basically, the main reason you are using this is for tax deferral and to take some volatility out of the account value? What would be typical total expenses on a contract that's trying to mimic a moderate portfolio, say half stock and bonds, where the client obviously has potential for less return than 50 stock/ 50 bonds? I'm trying to compare this to, say, nonqualified wrap at 1.25% using ETFs, where you have to discuss the potential impact of taxes over time on the wrap. I'm not trying to make any point about one product being better, I'm just trying to understand for myself. [/quote] On an index annuity, you are going to get a little better than a CD rate of return, guaranteed. There are plenty of people out there that are willing to do that. They are great for CD buyers that want a guaranteed rate of return, but not be beholden to the ups and downs of Fed policy.[quote=Ron 14][quote=RealWorld]Ron - Admitting that this time is different is not the same as me selling my house.
I am not telling you to sell all your clients investments but I am saying that your logic is not correct. [/quote] Ok, so if the recovery isn't going to happen in the next 10 years what are you doing for your clients ? What is your strategy ? How do you position yourself as adding a value added service ? Anyone on the board who stands by asset allocation, diversification, rebalancing etc gets kicked in the nuts, but those who do the kicking never explain there philosophies or strategies. Lets hear them....[/quote] Since I can't control what any market is going to do, I have my clients control what they can control: Maximum Protection with Minimum Cost Save a minimum of 15% of gross income into wealth creation vehicles Have 50% of gross income in safe accounts (savings, CDs, WL insurance, etc) Maintain control over their money at all costs Keep money in motion for additional money supply and benefits.We take what the markets give us. But we've got several contingencies in place in case the markets go pear-shaped. Hence, the rate at which we are saving and keeping significant amounts of money in cash and cash-equivalents.
[quote=Ron 14] [quote=RealWorld]Ron - Admitting that this time is different is not the same as me selling my house.
Ok, so if the recovery isn’t going to happen in the next 10 years what are you doing for your clients ? What is your strategy ? How do you position yourself as adding a value added service ? Anyone on the board who stands by asset allocation, diversification, rebalancing etc gets kicked in the nuts, but those who do the kicking never explain there philosophies or strategies. Lets hear them…[/quote]
Ron, that’s not true and you know it. I’ve explained mine, Gaddock his.
I actually was going to say besides Morean and Gaddock and forgot at the end of the post. My bad.
I wasnt giving a philosophy for retirement income, I am talking about the broad equity market and the reason it shouldn't be feared moving forward
Bobby, There is a guy in our area who sells EIAs and EIAs only. He is extremely well-known in the area, I won't say how, but he is frequently deemed a "financial expert." I was checking out his website, and he has all kinds of testimonials posted, so I'm thinking, wow, that's against regs, isn't it. I noticed the Finra logo isn't there. Turns out, he is just an insurance agent. So just out of curiosity, and please don't take offense, but are you licensed? I know you are a seasoned vet on this site, and I am just wondering, if you are licensed, what you think about the insurance agents that are simply out hawking these products.There are 3 possibilities: up, down or sideways. Prepare for all three. Index annuities are good for that.