[quote=NASD Newbie]

[quote=Indyone]

I don't always stay 100% invested, but I've seen enough to know that a lot of people much smarter than you and me have tried and failed to consistently time the market, so, generally, I'm at least 80% invested, and I tend to go to 95% when a bunch of chicken littles are screaming doom & gloom, and back down some when everyone agrees that the sky is the limit.

[/quote]

Is it ever appropriate to be 100% in cash and cash equivalents?

Last week might have been a good time. 

I have moved some of my clients into mmkt mutual funds from their more agressive mutual funds. I have been selling long bonds out and switching to mmkt or short term income investments (3 to 5 yr maturities).  For my much older clients who hold long bonds with the death put, we are holding fast although I am very worried about inflation if they are (lets be frank here) not going to die before inflation eats away at their income. For the much younger and aggressive clients we are looking to invest sytematically into the market.

I see deja vu all over again....the 1970's.  Hold on to your knickers.

[quote=NASD Newbie]

There are zillions of us, and most are facing retirement very undercapitalized.  We are the children of the inflationary years--where we bought what we could not afford for fear that we could definitely not afford it later.  Consequently most of the boomer generation does not really have enough liquidity to retire.

[/quote]

At least you bought with a thought for the future. Most (I say most not all) people in my age bracket buy, buy, buy with NO thought for the future.

I see too many younger people with big trucks, with boats, jet skis, dirt bikes, too much house for the income. Cash out re-fi's for maxed out home remodels, flat-screen tvs etc.

I always wonder....are those edible jet skis? You might need to eat them some day.

[quote=NASD Newbie]Is it ever appropriate to be 100% in cash and cash equivalents?

One of the major complaints about commission or fee driven advisors is that they rarely conclude that the appropriate place to be is on the sidelines.

Seeing as you earn your income from advising clients to be "In" can you ever imagine telling them to get "out," even though it would mean that your income would disappear?

In other words, are you truly putting your client ahead of yourself?[/quote]

As far as I know, I could go to 100% cash and still be compensated, at least for awhile.  My assumption is that eventually, compliance would want to see some trading activity to justify my fee.  That being said, I haven't seen a scenario yet where I would be comfortable going to 100% cash for long-term accounts.  There are just too many unknowns on when, which direction and how much the market will move.  By remaining mostly invested, my clients participate in the market, and with the right investments, consistently beat the market.  Thus far this year, my accounts are beating the S&P, the Lehman bros bond index, the EAFE, and all but one Russell index.  I'm satisfied with that and so are my clients.  If another advisor has the conviction to go 100% cash, he/she should.  My crystall ball is just a bit cloudy to make a drastic move like that...

[quote=Malcolm]I dissagree nasd on keeping ones enthusiasm when shorting.

There is nothing more exciting for me at least than growing clients accounts with shorts especially when the market is going down as a whole.  At least for me, it is a very satisfying thing to see my portfolios go up on big down days.  Clients love it also.  And just like any long position, you can put your stop losses in and protect yourself if you are wrong.  "up and down gaps excluded."  

The banks and wirehouses hate when you short and we have been brainwashed into thinking it is something exotic, speculative, etc. 

Not so. Brokers need to get off the Wall Street band wagon and learn how to protect clients money.  Shorting is one way of many to do that.  And by the way, most of the big banks and brokerage firms employ traders for their own accounts. 

No hard feelings I hope Indy.  Nothing wrong with not agreeing all the time.  Now I have to get off this site and get some work done.

I wish a good weekend to everyone.  I'm out.[/quote]

Absolutely no hard feelings.  It's not that hard to disagree as adults, is it?  I'm getting better at it all the time...now back to work!

[quote=NASD Newbie]

[quote=Indyone]

The only point I made is that relatively speaking, stocks are undervalued campared to the late 90's (when they were apparently overvalued).  Your charts may be right temporarily, but eventually improving fundamentals mean better stock prices.

[/quote]

How long is "eventually?"  Can Mr. Jones--the 58 year old client whose $1 million is now at $600,000 wait that long?

When you sit there and tell him, "Bill, the market will eventually come back" do you think he finds that to be reassuring?[/quote]

He's reassured for one of the following reasons:

1. VA with guaranteed income and principal protection.

2.  The bond/cash part of his portfolio.  Virtually none of my clients, even nearing retirement are 100% equities.  I always keep enough set aside to live on for years, if necessary while the market gets healthier.

3.  He's not relying on the money I've invested for retirement income.

[quote=Indyone]

He's reassured for one of the following reasons:

1. VA with guaranteed income and principal protection.

2.  The bond/cash part of his portfolio.  Virtually none of my clients, even nearing retirement are 100% equities.  I always keep enough set aside to live on for years, if necessary while the market gets healthier.

3.  He's not relying on the money I've invested for retirement income.

[/quote]

Tell me, do you think that a VA with guarantees is going to be managed agressively enough to end up with a meaningful gain?

From where I sit far too many advisors are so focused on guarantees that they have put their clients into situations with very little potential reward.

Or has the risk reward ratio been repealled?

Is such a conservatively invested vehicle appropriate for achieving the goals of a retirement account?

Why not fund the qualified plans with aggressive growth funds and use VAs for an additional source of tax deferred investing, but only after already funding the qualified opportunities?

With VA’s, I go at it quite the opposite.  If I have a guarantee to fall back on, I invest fairly aggressively, usually about 80/20.  There’s nothing wrong with using a VA guarantee in conjunction with aggresive investments in qualified plans…that’s just another way to skin the horse and depending on the client, would certainly be something I’d consider.

[quote=Indyone]With VA's, I go at it quite the opposite.  If I have a guarantee to fall back on, I invest fairly aggressively, usually about 80/20.  There's nothing wrong with using a VA guarantee in conjunction with aggresive investments in qualified plans...that's just another way to skin the horse and depending on the client, would certainly be something I'd consider.[/quote]

Are you saying that you have vehicles that allow you, Indyone, to make the decisions--and there is a guarantee if you're wrong?

That's exactly what I'm saying.  Pretty neat, huh?  The insurance company is banking on the market going up over time and skims about 2% off the top for their charges/guarantees.  My decisions are, of course limited to which managers (on the company's approved list of managers) I park the funds with at any given time.

Unlike what Suze Orman says, variable annuities are not of the devil.  Many of the newer ones come with some very reassuring guarantees.

[quote=bankrep1] [quote=NASD Newbie] [quote=bankrep1] [quote=NASD Newbie]

[quote=bankrep1] Why all the doom and gloom? The summer is often shaky, I think we are going to have a fantastic 3rd quarter![/quote]

How many shaky summers have you witnessed in order to have such certainty--do you suppose legends like Peter Lynch would think you're naive?

[/quote] I am not trying to maximize returns, I would never compare what I do with a money manager, i was just stating i am bullish[/quote]

And all I am doing is asking you to make a case for being bullish--other than knowing that if you're not what you are doing is malpractice.

[/quote]

Earnings are what drive the market, it's all about earnings[/quote]

Try again Bankrep.  Maybe you haven't heard of fear and greed.  How do you explain the tech bubble?  Earnings are only ONE factor in a much more complex game. 

[quote=Indyone]

That's exactly what I'm saying.  Pretty neat, huh?  The insurance company is banking on the market going up over time and skims about 2% off the top for their charges/guarantees.  My decisions are, of course limited to which managers (on the company's approved list of managers) I park the funds with at any given time.

Unlike what Suze Orman says, variable annuities are not of the devil.  Many of the newer ones come with some very reassuring guarantees.

[/quote]

And the commissions are the most compelling reason to shove them down unsuspecting client's throats?

I thought it was compelling for the client to have protection if his account dropped from 1m to 600k.  Obviously, that wouldn't be attractive to your former clients. 

I definitely don't think that VA's are the fix all for everyone like some, but when you are talking about that type of environment with retirees, it may not be such a crazy idea. 

NASD, you are a moron as usual.  Forget the commission for a moment...which is more attractive?

Take a 55 year old with $600,000 IRA rollover and of moderate risk tolerance.

If given the choice between being invested in a diversified portfolio of mutual funds in a wrap account (A share at NAV say around 1% plus 1.5% wrap fee) with NO GUARANTEE,

or

in a diversified portfolio of subaccounts inside a VA (say at 1.25% for the subaccounts, and 2% for the M&E) WITH AN INCOME AND PRINCIPLE PROTECTION GUARANTEE

"So Mr. Prospect, we can build very similar portfolios in each...so all things equal, your return inside the VA will be about 3/4ths of a percent less than outside."

"Is 3/4ths of a percent WORTH principle protection and guaranteed income for life????"

For most, it is.

[quote=BankFC]

NASD, you are a moron as usual.  Forget the commission for a moment...which is more attractive?

Take a 55 year old with $600,000 IRA rollover and of moderate risk tolerance.

If given the choice between being invested in a diversified portfolio of mutual funds in a wrap account (A share at NAV say around 1% plus 1.5% wrap fee) with NO GUARANTEE,

or

in a diversified portfolio of subaccounts inside a VA (say at 1.25% for the subaccounts, and 2% for the M&E) WITH AN INCOME AND PRINCIPLE PROTECTION GUARANTEE

"So Mr. Prospect, we can build very similar portfolios in each...so all things equal, your return inside the VA will be about 3/4ths of a percent less than outside."

"Is 3/4ths of a percent WORTH principle protection and guaranteed income for life????"

For most, it is.

[/quote]

If this client is going to retire in ten years and he can earn an average of 7% outside the VA and 6.25% inside the VA that guarantee will cost him $80,000.  Do you ever put it in real dollars for them?  Over 20 years it will cost around $304,000.  If you put it in those terms do you think most would think it's worth it?  I am sincerely asking.

I know earnings don’t drive a stocks short term price. FOr example MSFT might trade at 20X and then trade at 10X even though earning rose the stock price can be less I get that.



What I am saying is that there is no way that all stocks will tarde lower in 10 or 20 years. Why because earnings rise with inflation. Is anyone gonna make the argument that we won’t have inflation?



VA’s will become more and more common. I think the fees and commissions will come down. Guess what I will still use them, they are a great risk management tool.

[quote=Maxstud][quote=BankFC]

NASD, you are a moron as usual.  Forget the commission for a moment...which is more attractive?

Take a 55 year old with $600,000 IRA rollover and of moderate risk tolerance.

If given the choice between being invested in a diversified portfolio of mutual funds in a wrap account (A share at NAV say around 1% plus 1.5% wrap fee) with NO GUARANTEE,

or

in a diversified portfolio of subaccounts inside a VA (say at 1.25% for the subaccounts, and 2% for the M&E) WITH AN INCOME AND PRINCIPLE PROTECTION GUARANTEE

"So Mr. Prospect, we can build very similar portfolios in each...so all things equal, your return inside the VA will be about 3/4ths of a percent less than outside."

"Is 3/4ths of a percent WORTH principle protection and guaranteed income for life????"

For most, it is.

[/quote]

If this client is going to retire in ten years and he can earn an average of 7% outside the VA and 6.25% inside the VA that guarantee will cost him $80,000.  Do you ever put it in real dollars for them?  Over 20 years it will cost around $304,000.  If you put it in those terms do you think most would think it's worth it?  I am sincerely asking.

[/quote]

Max-

I had a couple who had put $180,000 into a VA in late 1998. When they transferred their account to me in 2001, the value was $120,000.

They didn't need the money but were MOST distressed at the value and often asked if they should just "dump it". I advised them not to.

The husband died in November 2002 and the value was $110,000- but we then were able to cash out the full premium amount of $180,000.

In this case, the client was most happy for the death benefit. And if a person were retiring in a "Correction Year" and the VA had the GMIB in place, they could be assured a steady amount of money without taking less because the Market Value had dropped.

VA's with Income riders are great tools for the some cases.

Muny,

Thanks for the info, I do understand what your saying and I think that is a very valid concern.  I just find that quoting percentages to people is just like quoting the cost of something by saying it will only cost $2 a day.  What's wrong with giving them the real numbers and facts so they can make an informed decision.  A decision that is the most important one in their lives.

Does BankFC really know what that 3/4 of a percent really costs?

[quote=BankFC]

NASD, you are a moron as usual.  Forget the commission for a moment...which is more attractive?

Take a 55 year old with $600,000 IRA rollover and of moderate risk tolerance.

If given the choice between being invested in a diversified portfolio of mutual funds in a wrap account (A share at NAV say around 1% plus 1.5% wrap fee) with NO GUARANTEE,

or

in a diversified portfolio of subaccounts inside a VA (say at 1.25% for the subaccounts, and 2% for the M&E) WITH AN INCOME AND PRINCIPLE PROTECTION GUARANTEE

"So Mr. Prospect, we can build very similar portfolios in each...so all things equal, your return inside the VA will be about 3/4ths of a percent less than outside."

"Is 3/4ths of a percent WORTH principle protection and guaranteed income for life????"

For most, it is.

[/quote]

You're too stupid to know how to spell, why in the world would I listen to you?

[quote=bankrep1]I know earnings don't drive a stocks short term price. FOr example MSFT might trade at 20X and then trade at 10X even though earning rose the stock price can be less I get that.

What I am saying is that there is no way that all stocks will tarde lower in 10 or 20 years. Why because earnings rise with inflation. Is anyone gonna make the argument that we won't have inflation?

VA's will become more and more common. I think the fees and commissions will come down. Guess what I will still use them, they are a great risk management tool.[/quote]

If there's a God in heaven an officer of your bank will look over your shoulder and realize what a moron you are and make you into a security guard instead of a financial advisor.

You are so dangerous that it is amazing you were able to con somebody into hiring you.

[quote=Maxstud]

Muny,

Thanks for the info, I do understand what your saying and I think that is a very valid concern.  I just find that quoting percentages to people is just like quoting the cost of something by saying it will only cost $2 a day.  What's wrong with giving them the real numbers and facts so they can make an informed decision.  A decision that is the most important one in their lives.

Does BankFC really know what that 3/4 of a percent really costs?

[/quote]

Max,

ABSOLUTELY agree with you there. In fact, since going INDY and getting the 24 I make certain we go over all options. AND then have the client sign acknowledgement of same. Regardless, no client has 100% of assets locked into an annuity. 

And on another note, how was Summer Regional? Did you have that free drink on me?