OK, there are lot’s of things we could say about Mr. Cramer, but you know what I kind of like what he does. Before you get the wrong impression I do think he is dangerous and makes some bad calls, i.e. the housing bottom, but he does get people interested in stocks which is a good thing.

Even though I strongly disagree with most of his views he brought up an interesting idea tonight. He says that the government should issue a 30 year bond paying 5% which he shamelessly called the Cramer Bond. The general idea is interesting, but who would give the government money for 30 years only to receive 5%? Now, he did say make it tax free, but still that is betting that inflation will stay below 5%, which it really has never done.

He says you will double your money after 14 years, plus a few months, and they should be offered directly to the public with no fees. All good ideas, but Jim a product already exists like that.

There is a product that is rated AA that guarantees to double your money in 10 years, without taxes until you withdraw the funds. It is not right for college planning, but it is perfect for retirement planning. Not only that it allows you to participate in the market and you could, potentially, do much better than a simple doubling of your money. You have different investment options and a guaranteed fixed account, sounds better than 5% doesn’t it?

There is a catch, there are fees and you have to buy it through a broker. What is it? It is a variable annuity with living benefits. You can choose a guaranteed minimum account balance option or a guaranteed income benefit, but nonetheless it is better than your proposal. I know it is not as sexy as a high tech stock or some other off the wall investment, but it meets the needs of investors, period.

Say what you will about annuities, there simply is no other investment that can do what they do. Yes, you will take a risk through both investments, but that is mitigated through guarantees, but also the risk of the insurer. However, I feel much better about insurers risk than I do about the massive debt being issued by our government. Not only that, inflation will be an issue so 5% is not good enough.

Good idea, one of your better ones, but as usual you miss the obvious. I cannot wait until I get the tell all book written by one of your employees. Should be an interesting read!

As you probably guessed we read a lot of information. Some of the information we receive comes via email from other, well, unorthodox sources. We like to know what sales people are doing all of the time, especially in these times of panic.

So, we have seen a tremendous rise in equity index annuity material hit the market place. They are saying; “See, we told you these are good and safe investments.” Well, yes you may have not lost any money on the way down, but you don’t make any money on the way up either, so what’s your point?

No matter what, people, these are not good investments if you seek equity type returns. If you want to barely outperform fixed annuities in a bull market then go for this type of product. If you want to make any money in a declining or sideways moving market equity index annuities are the WORST investment you could buy. You would receive the minimum guarantee of 3% on 90% of your principle or maybe on 100% of your principle versus a fixed product that would yield closer to 4 or 5%, depending where rates go.

I am not saying they are all bad, so save the nasty emails sales people, but the vast majority of them are bad. Times like these make people appeal to your fears and you will make a decision you will regret. What is bad today, in regards to equities, will be good tomorrow, but a bad investment today will remain a bad investment for tomorrow.

On word, we get a lot of buy these stocks now, which are all bogus, never buy a stock because you get an email. Probably the most interesting email we received was from another annuity website. You may have seen it, Annuity MD – I refuse to link to it. This site is just plain ridiculous.

He starts out by saying he was an agent (we could not find is license in Michigan where he is domiciled) and was refused appointment by an insurance company because he told people the “truth” about annuities. It is one of those long one page sites, called a squeeze page which is always a warning sign to any web visitor to quickly hit the back button, where he states that you are being lied to the industry stinks and everyone, except for him, is stupid.

He sells his wears for $47 – it was free when he changed his business model to some lawyer to sue insurance agents, but now its paid again – with an up sell of $97 or a $100 and something fee for his “gold” service, whatever that is. Anyhow, we read his material, yes we paid for it, it is rudimentary at best and not even close to the price tag.

He is trying to sell annuities either through a referral program or himself, we never enquired further. I do not know this guy, but I do know that he also used to run the 2 minute workout site as well, an annuity expert that is also a fitness trainer?? Alrighty then, I guess there is some business diversification for you.

So we bought his material which we now use as light reading material when we are, um, well indisposed at the moment to see what it was all about. As we just stated what he sells you get on our site for free, so you make the call. We now get periodic emails from him and what he is up to, this is what we got last week – the exact email, we know there are grammar errors!:

Dear bob (that’s me, like I’d give him my real name),

Before I get to the bad news, I would just like to ask the following question:

Tony

So I wrote to Tony, here is what I asked:

Dear Tony,

What qualifications do you have in order to provide timely investment advice on this current crisis, i.e. licenses or securities experience?

I have not heard back from him as of yet, that was about 10 days ago. He is selling this news letter for, what he says, ordinarily $99 per month, but is running a special for $47 a month. However, since I am a client I can buy it for only $19.95 a month.

He claims that, and I quote: “When you become a subscriber to this newsletter, it will pay for itself one thousand times over in the money that you’ll save alone! The money you will save and earn as a direct result of this relevant and detailed information can pay you back 1,000 times your minimal investment. What if you don’t invest in the annuity MD Cures newsletter and you end up making one of the mistakes that could cost you thousands of dollars in your future? Furthermore, what if one tip we give you has a significant positive impact on your financial situation (which we believe it will)?”

Talk about fear mongering and profiteering. The point is that there are people who will do anything to make a dollar. This guy is one of them, switching between some rudimentary report to an affiliate of a law firm who sues brokers, WMI or something like that, to now selling this bogus newsletter. It is incredulous that someone would sink to this level.

Just because its on the internet it does not make a viable or worth while product.

The markets have yet to test their lows again, but we are seeing it trading between 200 and 350 down which could lead to a close on the 7800 lows today. However, the last hour of trading is erratic and dangerous to take any position. We are speculating a close of down 400 for the day with Monday being a swing trade day.

Have a great weekend and be careful about bogus sales people.

While there are some good fee-based planners in the world we find it rather odd that everyone just assumes that they are the best choice for everyone. The selling point of the fee-based planner is the fact that they do not collect commissions from product sales and therefore they must be unbiased. While this seems reasonable enough to the average person are these advisors really the way to go?

The idea that a person can be unbiased just because they do not collect a commission from product sales, but collect a fee no matter what you buy, is ridiculous. Every time you read an article and the author was asked a question they tend to always recommend that you speak to a fee-based planner before you make that investment. Now, here is the problem, fee-based advisors are still earning commissions, sorry, I mean fee, for the amount of money that is invested, or my favorite, they get paid $200 an hour for their time.

By the time the average person gets done with a fee-based planner they end up paying way more than any sales load or CDSC on a regular broker sold mutual fund.

Here’s an example:

A client wishes to invest $100,000 and a commissioned broker recommends an A share mutual fund with a load of 4.25%, or $4,250 in commissions. That is all the client pays, besides annual expenses, in commissions. Now if the same client went to a fee-based planner they would recommend index funds and then slap on a 1.5% annual fee for their services. Assuming the investor holds the mutual fund for 5 years, not an unreasonable assumption, then the fee based planner would have made $7,500 in fees as compared to the $4,250 the commissioned broker would have made. What is worse is the fact that the planner probably did recommend index funds and they still have the stones to charge a fee, seriously, a trained monkey can pick an index fund. Based on this assumption, which is very fair and reasonable, it is pretty clear that at the end of the day everyone gets paid.

By the way, even if the commissioned broker sold the investor an annuity they would have only made a 6.5% commission or $6,500 from the investment which is still far less than the fees the planner charged. It is really odd that all of these magazines talk about high commissioned annuities and mutual funds while the fee-based planners get a free ride because they do not collect a commission, but charge a fee. The average fee-based planner client is paying the same amount of money per year as the variable annuity client, roughly, with no guarantees or tax deferral.

Just because someone charges a fee instead of a commission it does not make them smarter or any less human. Well, may be they are smarter as they know by chargeing fees they will make more money over the long-term, but none the less they are still sales people. We do not care how people choose to make a living, but just be honest about it and the media should be ashamed of themselves for not recognizing the obvious.

One last note, I recently read an article by Humberto Cruz who quoted a fee-based planner who said that any variable annuity that guarantees the client their money back sounds “fishy” to him. This is the other problem with both the media and the fee-based planners, they have no idea how variable annuities work and what the living benefits ultimately do. If that planner who Mr. Cruz quoted did not understand what a guaranteed minimum accumulation benefit was then he should not have even commented on it.

For years The Hartford’s Director variable annuity was the rock of the variable annuity industry. For almost a decade it was the best selling broker sold variable Annuity product, behind TIAA-CREF. Last week that legacy came to an end as the Director variable annuity ceased to exist for new investors and was folded into the Hartford Leaders product.

The Hartford’s Planco division once boasted that the Director product will always be the best selling variable annuity with the Leaders product a close second. Sadly, they were the last to see that the writing was on the walls years ago and single managed variable annuity products were irrelevant. In 2005 they tried to turn the ill fated Director Annuity around by introducing a multi-managed approach, they added some 55 different sub-accounts from various managers.

What they did not count on was that their success with the Hartford Leaders product would undo what they were trying to accomplish. The Leaders variable annuity had 4 main fund families that went deep, offering many sub-accounts from each manager. All of the fund families were top shelf names, American Funds, Franklin, MFS and AIM which are among the top selling fund families in the advisor arena. The Director annuity though went for the shallow and wide, offering many Hartford sub-accounts but only a smattering of other money managers.

The Leaders annuity saw huge growth, from nothing in 2000 to $10 billion or so in recent years. That success, in our opinion, tainted the efforts of the Director product. Also, the other issue was saturation of the marketplace with both the Leaders and the Director wholesalers covering the same advisors. It was total overkill.

It was no surprise that the Director failed, it was too little too late.

The hottest trend for investment firms is planning for income distribution for the Baby Boomers. As the Boomers age they are seeking investments that will provide income for their retirement needs. The insurance industry has had a lock on the guaranteed income angle for the better part of 200 years through annuities.

Now, mutual fund firms are trying to get in on the action. The hottest trend, besides ETF’s, are income replacement funds which will allocate the investors money and then start to pay a stream of income after a set number of years. The income is derived from income paying securities, dividends and good old fashion withdrawals. The big question is will these products work?

Well the jury is out because all of these products are brand new and have zero track record. With the existing strategies it seems feasible that they will work if the market only goes up and interest rates increase, but then again all investments look good in that scenario. The truth is only time will tell.

They can as part of a diversified portfolio, but not as a stand alone solution. Like investing at any point in a persons life diversification is key and having guaranteed income mixed in with mutual funds can make perfect sense. In a recent article a person from Morningstar was even quoted as saying that for guaranteed income the variable annuity, with living benefits, makes much more sense than just income replacement funds.

While some annuities are less than appealing, EIA’s for example…huh, hum, Steve, a variable annuity with a living benefit can provide guaranteed income along with inflation protection by keeping money invested in equities. As with any type of investment a variable annuity should be considered an asset class and not as a stand alone solution. By using mutual funds and an Annuity the investor will reduce their risk and improve long term returns, Ibbotson has proven this.

The only thing is how do you know what variable annuity is good and which ones are below par? Sign-up for Annuity IQ to find out.

Today is the last day to mail your taxes and as many people now know their investments also come with tax liabilities. Many people will tell you that investing in mutual funds is a better idea than using a variable annuity because of the long-term capital gains treatment. The irony is that the long-term tax treatment is only relevent to sales of your mutual funds that are more than 12 months old and only on a portion of your total mutual fund distributions.

The vast majority of your distributions from your mutual fund account was probably short term income distributions. That means that the gains from this account will be taxable at your ordinary income tax bracket, not the famed 15% long-term capital gains rate that many claim you will be taxed at.

With turnover rates of mutual funds hovering around 100% annually it is highly unlikely that you will pay long-term capital gains on your investments in the future, unless you sell your fund. To add insult to injury the sub-prime meltdown has handed investors hefty losses on their mutual funds and now they owe taxes on a fund that lost them money.

With a variable annuity you would have circumvented both of these situations. The tax deferral would have shielded the investor from taxes and a living benefit would have preserved the investors income or principal, depending on what type of benefit they bought. To find out what type of benefit is right for you go to Annuity IQ to find out more.

When talking about annuities the media is dumb. They never let the public know what type of annuity they are talking about or the fact that there are many different types of Annuity contracts in the marketplace. This story was NOT about variable annuities, instead it was about equity index annuities.

The problem with major media outlets is the fact that they try to tell a story in an hour or less. While the agents “caught” on the show looked like they were trying to pull a fast one, and some were, Dateline never let them finish their sales pitch. While Annuity IQ agrees that equity index annuities are not good investments, we also all agreed that the story was not telling the whole truth about the products. They also did not tell their viewers that the sales people were selling specific companies index annuities. More than likely the agents were selling Allianz, Midland National and Aviva equity index annuities, most of those products are not good for investors.

The bottom line is variable annuities were not discussed and many facts were not disclosed. Equity index annuities need to be regulated more and the industry needs to be cleaned up. While Variable annuities have their faults, they do offer much more than equity index annuities with a few differences. Variable annuities offer real upside potential for investors, shorter surrender schedules and better guarantees and liquidity. While equity index annuities offer long surrender schedules, limited, very limited, upside potential, limited liquidity and extremely high commissions to the agent.

Be very careful when selecting any annuity product and use Annuity IQ to identify the best variable annuity products.

Money Magazine and Mr. Updegrave have written another mind numbing article where he made a startling revelation to his readers. Whether or not they saw the revelation is another story, but it is right there in print.

In this article Mr. Updegrave said, “For example, I’m fine at tinkering with retirement calculators and monitoring investments – though I’m careful to keep my wife informed. She’s good at the big-picture stuff.”

The part of the quote I want to comment on is the, “She’s good at the big-picture stuff” because this is his overall problem. He is fine with ‘tinkering’ with calculators, but is poor with the big picture stuff, both of these admissions run dangerously close to self admitted lack of knowledge and imagination.

As an expert shouldn’t you do more than just ‘tinker’ with things and shouldn’t you have a grasp of ‘the big picture’? You would think so, but apparently this stuff does not matter to him. Financial advisers do more than just ‘tinker’ with calculators and peoples financial well being and try to match the investment selections for their clients to their goals, risks and objectives while keeping ‘the big picture’ in mind.

Since Mr. Updegrave does not get ‘the big picture’ and only likes to ‘tinker’ with peoples financial well being it should be a red flag to his readers. Those words, as subtle as they were, in my opinion, were an admission of the truth. He simply does not understand the common problems of investors and likes to ‘tinker’ with the advice he gives and he does not worry about ‘the big picture’.

Tinkering with people’s money and investments is horrible and an insult to people who take him seriously. Do you see doctors tinkering with people’s health? Of course not, but I guess it is OK to tinker with peoples financial health. You can not do a financial plan on a calculator because there is more to it than simple calculations.

I believe this is why his advice is so generic and cold, it is simple repetition and it always goes like this; “Invest in the S&P 500 index fund and forget other advisers advice”. When I read those recommendations all that flashes through my head is HAL, from 2001: The Space Odyssey, saying those words in his cold computer voice…am I giving away my age here?

Since he admittedly does not grasp the big picture and only likes to tinker around with calculators it is painfully obvious why he does not like variable annuities. You need independent thought to understand the product and how it works and where it fits into the big picture of retirement security.