Posted by Ray on October 28, 2008 under Main | 
Nope, they have not and they will not understand the benefits of variable annuities. This market which has devastated retirement savings has had nothing that has gone up. Even gold has now declined in value, bonds are a no go, especially corporate bonds and stocks have been horrible.
However, a variable annuity with a living benefit has done something that no other investment has done, guaranteed retirement income without annuitization. All the financial writers in the world tell you to buy index funds and to stay away from those bad variable annuities. If you listened to them you would be sucking wind in the S&P 500 with 24% or more exposure to financial stocks – pre-market meltdown – and another 20% or so in technology which as also suffered badly.
Even with reality hitting them right in the face they still deny variable annuities their rightful place as a good investment alternative. They, the financial guru’s, just don’t get it. They do not understand that the Democrats will more than likely take the Whitehouse and Congress which will ultimately raise taxes, specifically the capital gains tax.
A complete Republican controlled government did not do well, spending went through the roof along with other questionable behavior, what makes them think that Democrats will do any better when they have a much stronger history of raising taxes. Actually Obama is the only political candidate that we have ever known to be, possibly, elected on the premise that he is actually going to raise taxes.
Your political affiliation does not matter, all you need to know is what we have been saying about the 15% capital gains tax is correct, it’s going higher. Regardless of who would have been elected taxes would need to be increased given the massive debt the US has, we just never had such stark honesty from a politician who is advocating higher taxes.
So, income taxes will go up for those “wealthy” Americans, we will see what the term wealthy means after the election, and capital gains taxes will go up. This means that all distributions from mutual funds will be taxed higher and it blows the argument right out of the water for the Suze’s, Liz Pullman’s and Scott Burn’s of the world.
Oh, did we mention your retirement income is also guaranteed?
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Posted by Ray on June 22, 2008 under Main |
While the sub-prime crisis is very real it is widely overblown. Yes, firm are writing off billions in “bad Loans” and, by all news accounts, the sky is falling. What is not being made clear to many investors is the fact that these loans are really only affecting large institutions who, largely, leveraged these investments as much as 32 times. That means for every dollar they had in these investments they leveraged it to borrow $32. Only when there was a run on the bank did we see firms really start to get hurt, i.e. Bear Stearns and several hedge funds.
If these institutions did not leverage the investment so much then everything would be ok. Of course they did leverage their exposure and when foreclosures went up, about 11% right now, then this increase devastated the investment and their ability to borrow against them. However, not all of these loans are bad and that is the other issue that we are looking at.
While there are billions in bad loans, to unqualified borrowers, what we are seeing is institutions including most loans, AAA rated with sub-prime borrowers. The institution then writes off most of there loan portfolio that has some exposure, but not total exposure, to sub-prime borrowers. This is why we see billions being written off by large institutions, they are writing off everything.
Here is why they are doing it. They take the big hit, whether it is real or not, then they are getting a tax deduction for it. What they are not telling you is that such a small percentage, generally speaking, is exposed to sub-prime that many of the write offs they are taking will reappear on their books in a few years. The current tax code allows these banks to write off their loans and then, if they become profitable again, add them back to the books at a later date.
Therefore, a bank can take a $10 billion dollar write off today and lets say that only 10% of those loans are actually “bad”, or in default, take their write off today and then when this is all sorted out and $9 billion turn out to be good loans they can add them on to the books later. They are keeping all of the cash flow that these loans produce and can add them back in as an asset later, its a pretty good deal for them, kind of.
The point is that many of these loans are good cash producing investments with higher rates of return than one might think. It is similar to the limited partnership deals that went south in the 1980′s, many people got hurt, but those who held on ended up ok and the “vultures” who bought up large sums of the partnerships bought high cash flow products and made a killing. Will this happen again with these sub-prime investments?
Who knows, but we think it may be time to start looking at these investments with your play money and take a little risk. This can be done either through individual equities with high exposure to this risk, but you would be better off looking at some funds that have these investments. Again, this would be for the people who can afford to loose money if they do not pan out and one should seek the council of a qualified financial advisor before making any investment. One also must remember that the crisis is not over and there may be better buying opportunities ahead.
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Posted by Ray on June 26, 2007 under Main |
If you have not picked up John Huggard’s Book, “Fifty Reasons why variable annuities may be better Long-Term Investments than Mutual Funds” you should grab your copy today.
You can get your copy here: John Huggard This is not an affiliate program and this has nothing to do with Annuity IQ. I just believe so strongly in the information that I believe every adviser should read this material.
Here is the link again: http://www.atlasbooks.com/marktplc/00694.htm
If you do not know who John Huggard is here is his bio:
John Huggard is the senior member in the Raleigh law firm of Huggard, Obiol and Blake, P.L.L.C., limiting his practice to estate planning and financial litigation. John is also a Certified Financial Planner and full-time faculty member at North Carolina State University where he has taught introductory and advanced courses in law and personal finance for more than twenty-five years. John is an Alumni Distinguished Professor and is a member of the Academy of Outstanding Teachers at North Carolina State University. John is a Board Certified Specialist in Estate Planning and Probate Law. He is the author of The Administration of Decedents’ Estates in North Carolina (Michie Pub. Co.), The North Carolina Estate Settlement Practice Guide (West Pub. Co.), and Living Trust, Living Hell: Why You Should Avoid Living Trusts (Kendall-Hunt). Additionally, John has published several magazine articles on legal and financial matters. John has been extensively interviewed and quoted in The Wall Street Journal, Smart Money, USA Today and other financial publications. John regularly lectures to professional groups on topics dealing with variable annuities, taxation and finance. John received his undergraduate degree and law degree from the University of North Carolina at Chapel Hill and his master’s degree from Duke University. John’s hobbies include flying, competitive target shooting and scuba diving. He is recently retired from the U.S. Navy where he served as a captain in the JAG Corps.
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