COUNTERCOLUMN: All Your Bias Are Belong to Us

By Maire Mhac an tSaoi.



Peace on earth, goodwill toward men.

Much love to all.

Splash, out

Jason

Labels: Christianity, Christmas, Jesus, personal

... have been somewhat exaggerated.

;-)

Labels: personal

For bonus points, the music for the first three minutes is played by Curfa, made up of a bunch of my close friends down here in South Florida.

Labels: fun, Ireland, Music, personal

Alright... I'm checking my email in the Wilton Manors, FL Starbucks, they're playing Hawai'ian music, and I'm homesick as hell.

Aloha nui loa,

Jason

Labels: Hawaii, personal

I get bragging rights: I called it precisely.

Here's what I wrote more than a year and a half ago:

The problem isn't that Mozilo cashed out a lot of stock options. That's entirely legitimate, and no one is alleging that he failed to disclose his trading in accordance with company policy and the law.

This is the most widely predicted and predictable bubble in a generation. Mozilo would be a fool not to have lightened up (though he still should have maintained a significant long position out of principle. My issue is that as far as I can tell, he has no long position.)

The real problem is that even as Mozilo was quietly unloading his own shares, Countrywide was loading up the company with debt to buy by back millions of shares at prices management obviously thought were inflated (around 40 bucks).

Actually, that buyback program was initiated almost exactly at the same time that Mozilo began selling.

Oh, and you also read it here on Countercolumn.


I am not long Countrywide, except via Weitz Value.

It's tempting. It trades at 5x official earnings (I mentally adjust that to more like 8 to 9 times "real world" earnings, and trades at 20 to 30 percent off book value. It is less than 10% into subprimes. It is about 40% into adjustables, but those adjustables are spread across the United States, and not concentrated in California (in contrast to someone like Wells, which is a western franchise, and even Washington Mutual, which is overexposed to California, which surprised me to learn.)

Countrywide also recently executed a large buyback of shares around the 40 dollar mark last year. Shares are now trading at around 18.

It's very tempting - with a nice dividend in the meantime to pay me for waiting for a recovery.

But I look at their CEO, and he is selling shares as fast as his options vest. He doesn't seem to be retaining any of them personally, and therefore I distrust him as an owner-manager.

I know. Please. Try not to gush.

What's more, it is this seeming mismatch between the CEO's own trading actions and the COMPANY BUYBACK ITSELF that will expose Mozilo and the directors to legal liability. The buyback is a key option, because it's the buyback, not the insider sales, that arguably represent a violation of fiduciary duty to shareholders.

Here's the headline today:

SEC charges ex-Countrywide CEO Mozilo with fraud and insider trading

From the story:

Mr. Mozilo set up four executive stock sales plans for himself in the last three months of 2006, all the while aware of the company’s fate and that of its loan portfolio, the SEC charged.

Between November of that year and August 2007, he exercised more than 5.1 million stock options, raking in about $140 million, bailing himself out while Countrywide and its investors crashed and burned, according to the charges.

Aside from the fraud charges, the SEC also wants the three men to pay up their ill-gotten gains, plus financial penalties, and for the trio to be barred from becoming officers or directors at publicly held companies.

Richard H. Moore, former state treasurer of North Carolina, wrote a letter in 2007 to then-SEC chairman Christopher Cox, asking him to investigate stock sales that Mr. Mozilo had made.

Ben Graham, you magnificent bastard, I read your book!!!

Splash, out

Jason

Labels: Countrywide, finance, investing, mortgages, personal

Been working myself to a frazzle. But the good news is that after a long and frustrating dry spell earlier this year, I cleared my first production hurdle as a financial professional working with small businesses owners and families with young children - amidst a very difficult market environment - and I couldn't be happier about it!

My goals now: Take on some retirement planning clients (I can do retirees a TON of good, in almost every case), and develop my small business practice.

Long time readers - those who are left - are aware of my longstanding interest in personal finance, risk management, and the financial services industry writ large. I'm getting better and better at it every day.

In the early stages of creating a financial practice, though, time management is of the essence, and unfortunately, the blog was one of the first items I had to scale back my time commitment on.

Still playing fiddle and guitar though. It keeps me sane.

Splash, out

Jason

Labels: insurance, personal, retirement

Things have come to pass much as I had predicted.

From last October:

Forward P/Es are down around the 13 level, according to the Morningstar data on the Vanguard 500 fund, which I'm using as a quick proxy, with a dividend yield of around 2.47%.

Not too bad, but those forward-looking estimates were assuming normal times, and I would have to regard them as obsolete. I think the actual earnings next year will be quite a bit less than projected, and the real P/E is closer to 20x earnings right now, looking forward. So forward multiples will expand (because of declining earnings), or stocks will continue to fall until the the ACTUAL P/E, looking forward, is 12 or less (based on dividends of 2.5% or less.)

A big chunk of dividends will disappear, as financial services companies...most of them dividend payers themselves, struggle to recapitalize by retaining earnings.

Nevertheless, look at Bank of America, now trading at 11.5x earnings, with a yield of 12.27%! Very tempting, although that yield I suspect will fall, as BofA shores up its balance sheets. It may stop altogether for a while. And of course, as every stock investor should ALWAYS keep in mind, it COULD go to zero!

And from March of 2007:

Looks like bonds will be under pressure. Real estate will be under pressure. International stocks will be under pressure (actually, already are). Growth stocks will be under pressure. Is this the Perfect Storm?

I can't wait.

Labels: economy, investing, personal

Apologies for the light blogging. I am spending the week with family in beautiful Kahalu'u, Hawai'i, actually looking across Kane'ohe bay at Chinaman's hat as I type this.

Here's Hawai'ian hula at its most powerful.

Labels: Hawaii, personal

I'm the dork in the foreground with the pizza shirt and the fiddle.



That's Eamonn Dillon on the low whistle, and John Schreiber on guitar in the back there.

The first tunes is Jenny's Welcome to Charlie, which I learned from the playing of Kevin Glackin, here played in Gm instead of the traditional Dm. The second tune is Over the Moor to Maggie, here played in Bb rather than in G, to accommodate Eamonn's whistle.

Splash, out

Jason

Labels: bloggers, fiddle blogging, friends, Ireland, Music, personal

I called a bear market in almost everything in sight back in March of last year.

Here's what I wrote:

Looks like bonds will be under pressure. Real estate will be under pressure. International stocks will be under pressure (actually, already are). Growth stocks will be under pressure. Is this the Perfect Storm?

I can't wait.

Yep. Pretty exciting for a long guy, but now that it's here, I can't say I'm terribly enthused about it. Forward P/Es are down around the 13 level, according to the Morningstar data on the Vanguard 500 fund, which I'm using as a quick proxy, with a dividend yield of around 2.47%.

Not too bad, but those forward-looking estimates were assuming normal times, and I would have to regard them as obsolete. I think the actual earnings next year will be quite a bit less than projected, and the real P/E is closer to 20x earnings right now, looking forward. So forward multiples will expand (because of declining earnings), or stocks will continue to fall until the the ACTUAL P/E, looking forward, is 12 or less (based on dividends of 2.5% or less.)

A big chunk of dividends will disappear, as financial services companies...most of them dividend payers themselves, struggle to recapitalize by retaining earnings.

Nevertheless, look at Bank of America, now trading at 11.5x earnings, with a yield of 12.27%! Very tempting, although that yield I suspect will fall, as BofA shores up its balance sheets. It may stop altogether for a while. And of course, as every stock investor should ALWAYS keep in mind, it COULD go to zero!

Remember, though...last year's earnings are not this year's earnings. Foreclosures will rise if there is a recession, forcing mortgage holders out of work or forcing upside-down homeowners to relocate to find employment. So again, I see that 11.5x earnings as closer to 16x or so. Maybe even higher.

I had zero in equities going into the fall, outside of retirement money I won't need for 25 years, though that was pretty heavy in stocks, so I got stung on paper. But I had gone entirely to cash outside of retirement, having sold the last of my non-qualified stock funds about a month ago.

Because I was super prescient?

No. Nobody's that precient. Because of the career change and I needed to cover living expenses while training, ramping up, etc.

Long term, I like the buying opportunity. But ONLY with long term money as I still smell a downside in the short term for stocks. Long-term, however, I think the upside exceeds downside potential now.

No, this is not advice. This is just my take on things for now. YMMV.

Splash, out

Jason

Labels: business, economy, investing, personal

Ok, gang, let's have some fun.

Ac.e is having some fun at his place by ridiculing ridiculous searches on Sarah Palin that find their way to his blog.

Your mission, should you choose to accept it, is to visit his blog via a Google search on something absurd, strange or vile, in connection to Palin, bikinis, thongs, homoerotic pillow fights, the word "moron," Smurfettes, Allison Stokke, swimsuits, bangs, porn, "I'd tap that," "I'd hit that," "bad librarian," dominatrix, shaved yetis, dirty, filthy skandies or some novel combination of the above, or any other common theme on his blog.

The idea is to flood his site with searches by the hundreds on ridiculous things that he and his moron minions can't blame on me. (That's why I'm not linking directly and that's why I'm not spelling his name out in this post.)

It's not enough just to search...you actually have to CLICK on his site from the google link.

Are you ready?

Go.

Splash, out

Jason

(P.S., Post in the comments what you come up with.)

Labels: bloggers, Humor, personal

I had to have a PC that would run our gee-whiz proprietary illustration and analysis software and our super-secret, high-speed, low-drag, 100mph encryption system. I got a Toshiba Satellite L-355D-S7815. I got a nice big screen so if I have to show something to senior citizens it's nice and friendly.

And I hate Windows Vista with the intensity of a thousand suns.

It lasted me all of 2 and a half weeks before I had a catastrophic boot-up failure. Nice.

It seems to be working after I spent all morning blowing out files and reinstalling it, so it's a Windows problem, rather than a hardware problem it seems. (I'll have to turn over my computer all day tomorrow for the company to install the secret-squirrel encryption software that protects client data and reinstall the illustration software. So I'll lose a day and a half of productivity on it.).

Even before the crash, though, Vista is slow, stupid, clunky, and does not translate well from Windows XP, which I was familiar with.

Furthermore, I had to go in and rename DLL files in order to get a copy of Office 2003 to work, and it's still not supporting Outlook's export feature fully.

Vista blows chunks. It's f*cked up like a soup sandwich in a chicken wire bowl.

I appreciate my MacBook Pro more and more every day.

Splash, out

Jason

Labels: computing, personal

Yes, it's been some time! So to the few people who still check in regularly, thanks very much for your patience! All is very well here. Here's what's up in my world:

Longtime readers know of my longstanding interest in financial planning and financial services. And most readers who've been reading lately know that I have been appointed as an insurance agent. Here's the deal:

I love it.

I love the freedom. I love being my own boss. I love solving problems for families. I love sitting down at kitchen tables and at closely held businesses and solving problems for families. I love the feeling I'm building a practice. The people I work with have been fantastic. The support I get is out of this world, as is the quality of the training I've been getting, both in terms of planning knowledge and expertise, product knowledge, and sales techniques. And let me tell you, sitting at a table with a young couple with no insurance, and looking across the room at two happy children, and working with parents to make sure they're protected against death or disability of one or both parents is truly a labor of love.

I didn't realize how much of one it is until I had brought a couple on board with two young girls, and I was going through the tedious process of preparing the paperwork the next day, and I wanted to get everything right, because all I could think of was the faces of those two girls. This is truly a noble profession, I think, and my only regret is that I didn't do this sooner - some friends have recently become uninsurable because of medical problems such as cancer and a car wreck. One former colleague from the marketing/pr world, is in a nursing home at the age of 32, right now, following a car wreck over memorial day weekend. (I didn't find out till I called him to invite him to get a beer.)

Another friend's brother had a stroke at the age of 29. That was last February. Knocked him out of work for months, and even now he's at a reduced capacity. My own sister, 22, was hit by a car, and injured last month, and knocked out of work for weeks and perhaps months. If I were already working, I would have been able to get a disability plan in place for her.

As another friend put it, I'm in a race against the devil.

So I've been putting in a prodigious amount of hours lately. Between the National Guard and the insurance practice, I've just been going flat out. And so the blog life has suffered.

On the other hand, I'm building a practice, and that's pretty exciting. But like anyone else launching a business from scratch, the time commitment to do it right is extreme. And because I'm with a major company, a lot of marketing support and logistics is already there for me to tap. I don't have to reinvent the wheel. And it's STILL overwhelming. Exciting, but overwhelming.

Anyway, all is well, and as I have time to post, I will. When I do post, though, I start feeling guilty. Because I should probably be working.

That's not a bad thing for a first year agent, though. It's a tough slog just starting out, and the only thing that will get me over the hurdle will be hustling.

My clients aren't rich. But I don't need rich clients to be successful. I do, however, need a rich schedule!

All the best, and thanks for reading!

Splash, out

Jason

Labels: business, insurance, personal

I was struck by the photograph in this sad story...

The collection agencies call at least 20 times a day. For a little quiet, Diane McLeod stashes her phone in the dishwasher.

But right up until she hit the wall financially, Ms. McLeod was a dream customer for lenders. She juggled not one but two mortgages, both with interest rates that rose over time, and a car loan and high-cost credit card debt. Separated and living with her 20-year-old son, she worked two jobs so she could afford her small, two-bedroom ranch house in suburban Philadelphia, the Kia she drove to work, and the handbags and knickknacks she liked.

Then last year, back-to-back medical emergencies helped push her over the edge. She could no longer afford either her home payments or her credit card bills. Then she lost her job. Now her home is in foreclosure and her credit profile in ruins.

This woman is in her 40s and struggling under a mountain of debt, with her home in foreclosure. She has to live with her 20 year old son to make ends meet (though a lot of 20 year olds still live with their parents, anyway. But not because the PARENT has to, but because the child has to.)

On top of that, she's overweight, and look at the table! A can of fully-sugared Coca Cola, a bottle of what looks to be Yoo-Hoo chocolate drink, and an ash tray.

There's just so much wrong with that picture. It's the picture of resignation, defeat, and surrender.

I wish I could buy her a cup of coffee and tell her that she doesn't have to surrender. She can still go on the attack. Pick a front and take ownership of it. It might be smoking, it might be the sugar, it might be exercising more. But small successes lead to big ones.

I should take this opportunity to highlight one of my favorite blogs: Escape From Obesity.

Some weeks back, when I quit my long-hours-at-a-desk marketing gig and had several weeks off, I decided to change a lot of bad habits. I decided I was going to make my health priority one every day. Cleaning up my diet, not overeating (I mentioned on this blog at some point, my biggest vice is stress eating.)

I started lifting weights, working out, signed up to study martial arts (krav maga), and overall kicked myself in the ass.

As a result, I've dropped about 15 pounds, taken about 2 minutes off my two-mile run time (if the treadmill calculates distance accurately), and my khakhi shorts are falling down when I walk, unless I have the presence of mind to wear a belt.)

Now, I've made some of the same resolutions before. But this time, I actually had TIME to build these good habits with a minimum of distractions. But that wasn't the only difference. The real difference was that I also had time to look to others who had overcome challenges far greater than mine - and who were successful. I read their blogs, got their tips, watched their time-lapse photos on YouTube, taken over weeks, months, and years, and cheered them on, and let their success rub off on me.

I went out and found every personal weight loss accountability blog I could find. Ok, most of them are pretty lame, to be honest. But what's NOT lame is reading the initial entry! What got them started? What was the emotional spark that got the fitness engine running? What motivated them to turn that ship around?

Anyway, Lyn, the author of Escape from Obesity, is just an amazing, human blogger. Just riveting. Most of us would regard a weight loss blog as something trivial. But that's nonsense. For some people, it's a matter of life and death. It's a life of playing with their kids or having to watch your children's childhood go by without you.

Since beginning her blog, in August of last year, Lyn, a mother of young children, has lost 62 pounds...and changed her life. But I keep coming back and reading and rereading her very first post, Why I Am Fat:

Well, here I am at 5'7 and 278 pounds, a walking, living, breathing mound of fat layered on top of a thin person. Well, not walking so much these days, as my knees are shot from the excess poundage for 10 years. Yes, I have ruined my knees, my health, my chance to move freely and enjoy this one life I have been given. Why? For a brownie. Yes, for one brownie I traded my soul and my happiness. If you are thin you might think that is ridiculous. If you are fat you know the sense of sheer desperation and loss of all sensibility when you smell a warm, freshly baked, rich, chewy, fudgy brownie. Ahhhhhh, yes, a hot brownie with a glass of skim milk. Did that one brownie make me fat? Well, technically no. But it is that one moment, that split second when one decides that a brownie is worth whatever consequences it brings... it is the hundreds of times in ten years when one brownie does not seem all that harmful... it is the accumulation of 500 brownies, 300 Big Macs, 700 Cokes, 800 chocolate chip cookies, 150 slices of cheesecake... over a ten year span, that got me to where I am. Each instance is small. Just one brownie. Just for today. Add them up and you get to be 130 pounds overweight. In each and every instance, I chose a bite of this or a taste of that for my health and happiness.

I never understood the saying, "Nothing tastes as good as thin feels." Of course it does!!! How could being thin compare to the deep dark chocolate taste in a slice of Triple Chocolate Cheesecake?? Or a plate of bacon/cheese smothered french fries drenched in salt and dunked in ranch dressing???? Being thin could not POSSIBLY compare to the ecstacy of eating those foods. But suddenly, recently, I had a revelation. It is not that 5 minutes of standing around hungry being thin feels better than shoving fantastic, greasy, near-orgasmic foods into my ever-waiting mouth. It is that 5 minutes of ecstacy in eating WHATEVER delights I can imagine, is no comparison to an hour, a day, a year, a lifetime of being healthy and alive, being able to run and play with my kids, being able to ride a horse or roller blade or fit in a normal size lawn chair without collapsing it. No brownie, no PLATE of brownies, no chest full of chocolate cheesecakes can compare with the opportunity to walk down the beach with my family and to live long enough to see and know my grandchildren. No cookie or Big Mac is worth being stuck in the house, immobile with bad knees, and knowing that my kids are embarrassed of me when I come around their friends. It is not worth it. Feeling miserable and being immobile is too high a price to pay for that brownie. I am not going to live this way anymore.

I think it was St. Bartholomew who admonishes us to be kind. For everyone is fighting a great, great battle.

Splash, out

Jason

Labels: finance, fitness, personal, weight loss

Drilling this weekend, so I don't have time to do much blogging. I did want to log on long enough to publicly pay my respects to Tony Snow, who passed away this week at the tragically young age of 53.

I haven't owned a television set since Bob Dole was running for President. But if there were more people on TV news like Tim Russert and Tony Snow, I probably would have made sure to have one all these years. Tony was eloquent, engaging, honest, likeable, and a very able spokesman for the Administration.

As the public voice and face of Government, Tony Snow's job was huge. And he handled it with grace and class every day.

RIP Mr. Snow. And thank you for your service to journalism and for your time spent in the direct employ of the people of the United States.

You will be missed.

ADDED: I had no idea, but Tony was a musician!



And here he is playing with Ian Anderson!

Labels: personal

Why should presidential candidates have all the fun?

Here are the artists, in my iPhone, in alphabetical order by first name...

Alexis Cole
Alison Brown
Anoushka Shankar
Bothy Band
Byron Berline, Dan Crary and John Hickman
Billy Kelly
Brad Paisley
Brothers Cazimero
Cathal Hayden
Cherish the Ladies
Con Curtin
Daithi Sproule, James Kelly and Paddy O'Brien
Danny Meehan
Danu
Deana Carter
Eamonn Dillon
Frankie Gavin and Alec Finn
Frankie Kennedy and Mairead Ni Mhaonaigh
Hapa
Israel Kamakawiwo'ole
Itzhak Perlman
James Kelly
John Doyle
John Williams (the concertina player, not the film scorer)
Kate Rusby
Kevin Burke
The Klezmatics
Klezmer Conservatory Band
Lara St. John
Led Zeppelin
Liz and Yvonne Kane
Liz Carroll
Liz Doherty
Ludwig van Beethoven
Lunasa
Mark O'Connor
Mark O'Connor's Hot Swing Trio
Martin Byrnes
Martin Hayes
Mediaeval Baebes
Mike Oldfield
Niall and Cillian Vallely
Nickel Creek
Oisin McAuley
Paddy Keenan
Paddy Keenan/Tommy Peoples
Patrick Street
Peter Gabriel
Robert Plant & Alison Krauss
Roisin Dillon
Sean Tyrrell
Solas
Teada
Tommy Maguire
Tommy Peoples
Tuck Andress

This is a very different list from my CD collection, which is much, much more extensive. These are just the CDs I happened to have transferred or cuts I've happened to download.

Fire away.

Jason

Labels: Music, personal

Ha ha ha ha ha. HA HA HA HA HA HA.

No, seriously... it's time for a change. I was doing marketing writing, business development, media planning, and wearing a bunch of hats in a small agency.

I find myself hurtling headlong however toward the financial services industry once again. (Longtime readers will recall that Edward Jones, a national brokerage firm and I were playing serious footsie a while ago).

Well, after a brief 2 year detour back in the marketing/PR industry I'm very pleased to be the newest as-yet-unlicensed garden variety door-knocker for New York Life.

Why?

Well, let's boil that question down some:

Why financial services?

Well, thinking ahead a few years, I expect to become, by default, the primary support for my mother, who has already had a broken hip, and has no savings of her own. Looking ahead a decade or two (and hopefully longer than that!) her retirement and elderly care is very much on my mind. Meanwhile, I need to be able to get ahead. But in South Florida, it is very difficult to do on one income. Single family home prices are still out of reach of anything I'll be able to do working for someone else as a writer/PR account manager/media buyer or anything else I'm likely to do. I enjoy writing and I'm good at it, but in the long run, that is not going to accomplish my goals. I also realized last spring I wasn't going to be able to grow that particular business.

Furthermore, although I max out a Roth IRA each year and contribute 15% to a SIMPLE or 401(k) depending on where I am, it's not going to be enough to fund a retirement. Remember...interest rates are low, and outside of certain sectors, stocks are not a screaming bargain, either. Dividends are still a fraction of their historical averages. Long term trends are inflationary, I believe. And while there are still mutual fund hawkers out there telling people to expect 10% on their equities (I even heard a Primarica representative project 12% last month, I think they are on crack. I need to up my game, and so do a lot of other people.

Boiled down: People who WRITE about financial services make $X. People who actually DO it, successfully, over a career, make $Y.

Why insurance?

Because I can make a decent living and build a good practice as an insurance agent with regular working stiffs, and work my natural market of musicians (who need health and disability insurance, anyway.... Tendonitis and arthritis can be career enders!). On the investment side, the broker winds up making just a few cents for each dollar he brings in house (or even less), which forces them all to target the same richest 5% of the population.

Further, residual income is significant - and insurance compensation rewards long-term relationships. Further, because life insurance becomes more expensive with age, as time goes by, there is a substantial competitive moat built around your clients, as your insurance becomes impossible to replace for the same premium or less.

Moreover, I don't want to have to apologize to clients and friends for losing their money - which happens to every advisor, sooner or later. You wind up having to pull them out of investments at precisely the wrong time, or you lose them to some other idiot advisor who will put them in the HOT STOCK of the day or some other stupidity.

I can also work where my family is...in Hawai'i, California and/or Oregon, plus my own home here in Florida. I'd have the freedom to spend more time with my family. I HATE having to count vacation days. But I can build a business anywhere I'm licensed.

Lastly, because I honestly believe that most families are terribly underinsured, for a variety of risks, including disability and life. I am a huge fan of transferring risks which would be devastating to a family to the financial markets which can price them efficiently and take them as a matter of course. Reading Robert Shiller's The New Financial Order a few years ago convinced me of that.

So why New York Life?

A combination of things... I knew I wanted to represent a mutually-owned company, rather than a stock company, and I wanted nothing less than a AAA rating. That narrows the field substantially to just a few carriers.

I also wanted a company that I could grow with, with access to a lot of expert help. I didn't want to become an independent, because I don't want to reinvent the business wheel (even though short term commission payouts can be better). I also wanted a company that invests in a first-class training program. There's no end to the stuff you need to know, once you start wading into business succession and estate planning issues.

And finally, I wanted a strong office local to me where I could find some very solid people to learn the trade from. Put them all together, and it turns out New York Life and I were looking for each other.

Next stop: Seeing my family for a bit, and getting my license!

Splash, out

Jason

Labels: investing, money, personal

Back from Annual Training 2008!

Highlight #1

MAJ M: CPT Van Steenwyk, I want you to take this sunscreen and apply it liberally.

ME: Ma'am, I'm sorry. I don't do anything liberally."



Highlight #2

CPT L: ...And on Thursday, there will be a hot lunch.

ME: This term "hot lunch" you keep using. I do not think it means what you think it means.

Labels: Army, personal

A couple of people, aware of my longstanding interest in personal finance issues, tipped me off to this recent Dateline piece, purportedly exposing the deceptive sales practices of salesmen hawking a product called 'equity-indexed annuities.'

Unfortunately, as is so often the case with well-meaning idiots in the national media trying to cover personal finance, the special does more harm than good.

How can I tell? The comments - riddled with commenter after commenter who watched the show, which latched onto the surrender-charge issue and made no mention of the substantial risk management properties of annuities, and came to the conclusion "annuity salesman BAD."

That's just absurd.

The result, I fear, will be thousands of unsophisticated investors across the country who got a bad taste in their mouths for annuities based on the show - and who would be vastly better off using annuities in their retirement plans than relying on brokers and mutual fund salesmen, whose sum total of response to longevity risk - the risk that a retiree will outlive his or her means - with, get this, a "Monte Carlo simulation."

Feel lucky punk?

Well, do ya?

One of the major shifts in my thinking over the past five years has been my gradual conversion from a mutual fund, low-expense purist (learned while writing for a magazine called Mutual Funds in which we barely touched annuities and insurance issues for retirement) to the belief that the insurance salesmen had it right all along: Our average senior has no business trying to accept longevity risk, and should seek to transfer the risk of outliving his or her income to a solid insurance company in exchange for a premium, so long as that premium is reasonable.

This is particularly true as life expectancy continues to increase, and PARTICULARLY true now that traditional, defined benefit pensions have become somewhat of a rarity in the private sector.

My criticism with Dateline isn't that annuity sales practices don't deserve serious scrutiny. It's that the Dateline scrutiny was so unfocused, lazy and glancing that thousands will draw the wrong conclusions.

Chris Hansen, the reporter on Dateline, focuses on the vagueness with which these salesmen in the show deal with the surrender charge. But in several cases, the salesman does indeed mention the surrender period, and in one case, where the salesman shows the prospect the brochure (I assume with a graph or table explaining the surrender period) is even specific about the percentage - for which he is soundly castigated by the state AG for not spending enough time on it.

But the sales presentation was artificially cut short by Gibson walking in in the middle of it. That's nonsense. The required disclosures are typically made AFTER a fact-finding (don't know how much fact-finding was done in any of these cases before the product was presented), and AFTER a product recommendation, and frequently on a disclosure sheet, where the client signs off, initialing on several lines to acknowledge that items such as 'no bank guarantee', 'no government guarantee' fees and surrender charges have been disclosed.

I've never sold a financial product, other than equipment leases, but I did just that on every lease application. Every client applying for credit, for example, had to sign off that he acknowledged a personal guarantee and that the lease was noncancellable.

Therefore, I'm not at all convinced that these guys were unscrupulous. Actually, I am inclined to believe that the salesman who made the pitch to Aunt Alice was absolutely on the up-and-up. But Chris Hansen has a scoop to make - and he's more than willing to damage someone's career in order to make it.

In another case, the first salesman responded to an inquiry about the surrender period (the specific question was as a result of a medical problem) by bringing up a health or long term care policy.

Chris Hansen accused him of trying to sell "more insurance." Well, no shit, sherlock. Imagine an insurance salesman trying to sell insurance! Perish the thought! Except that in this case, a long term care policy may well have been warranted. If I were the elderly gentleman and I could get it, I'd be inclined to snap that up!

Well, if the client is worried about having to access the money during the surrender period as a result of a health problem or nursing home need, and the insurance salesman can prevent that by layering an LTC or health policy that would prevent that eventuality from happening, then that salesman is hardly guilty of doing anything wrong, in my opinion. If an EIA makes sense except for a surrender period, and the purchase of an LTC policy or health policy that can protect the policy holder during the surrender period that he would probably need ANYWAY will prevent that, then the insurance salesman is doing his job: Coming up with solutions that protect the client from risks he cannot afford to bear.

Sorry - I don't believe that salesman deserved the "catch a predator" treatment, based on what I saw.

Had he been able to finish the presentation, and still didn't disclose the surrender charges, then Dateline would have had a case. But Hanson was too interested in playing 'gotcha' than in accurately portraying the situation.

The only really unforgiveable douchebaggery I saw in the Dateline piece was the one on FDIC's F- minus credit rating (a bald-faced lie, though FDIC does have its limitations), and the custom-published magazine that puts the advisor's face on the cover of a fake magazine.

But here's a newsflash: Almost every advisor out there sends periodic newsletters to their clients. You think your insurance guy has the time or inclination to write his own newsletter? Unless he's an independent, chances are he doesn't. He's not even allowed to. The compliance goons prohibit it.

Instead, the home office contracts with a marketing or custom publishing company and they crank out the newsletters for every advisor in the country. They change the blackplate and stick the advisor's pic and phone number in the corner, and out they go, to an excel spreadsheet with the advisor's mailing list on it.

It's got to be this way. Think the compliance offices at Wells Fargo, Morgan Stanley, Hilliard Lyons, Farmers Financial, or Travelers Insurance Group want to deal or have time to deal with all 10 thousand agents writing their OWN newsletters?

And those are just the newsletters I used to ghost write for advisors, personally.

I don't have a particular problem with that.

I do, however, have a problem with the magazine practice as portrayed in the Dateline special. That's just a flat-out misrepresentation on the part of the scumweasel advisor, and I wouldn't do business with someone like that.

Also noteworthy are the ghostwritten books out there. Many times a financial advisor will attend a seminar, pay a fee, and get a credential - doesn't matter which one - and as a perk he gets a book...a whole book! ... with his byline on it, and that he didn't write. He's trying to pass himself off as a published author.

I hate that shit, because I actually HAVE been published in Annuity Selling Guide, Senior Market Advisor, Bankrate, Mutual Funds, Registered Representative, and a number of other places, and I worked my ass off on those pieces!

Full disclosure: I am studying to get my own insurance license now. No, I never took a class from an insurance agency. Long time readers know I've been planning on hanging out a shingle for some time, and I'm laying the groundwork to do just that. The difference now is I'm leaning more towards the insurance side than the investment side.

Successful financial advisors of all stripes tend to make rather more than successful copywriters and reporters, anyway.

Splash, out

Jason

Labels: investing, personal, The media

In a breathtaking, orgasmic spasm of frustrated intellectual puppyhood, Professor Jay Rosen has dubbed me "troll" and banished me from the PressThink blog.

Scroll down for the comments leading up to the banishment.

Jay had specifically criticized McCain for suggesting the Iran-Al Qaeda connection. I came to McCain's defense, and attacked the notion that Shia and Sunni never worked together, number one, and number two, Iran and Al Qaeda's relationship has been well documented, by the 9/11 commission for example, and Iran has also provided material support to Sunni extremists already.

On this there is no real doubt. We have the smoking guns.

In banishing me, Rosen pretty much validates my entire thesis concerning him, but also his tribe of leftard journo sychophants:

They are a cloistered set of intellectual inbreds with no clue what they don't know.

Splash, out

Jason

Labels: personal, The Left