Author: David Lewis

The U.S. national debt currently stands at $28 trillion and counting. 

While a lot of people are rightly freaking out about this, methinx the world will not end tomorrow and probably not in our lifetimes. 

What, me cray cray?

Nay. 

Not too long ago, I read about how the U.S. government has the power, right now, to release us all from this never-ending burden and life-sapping spiral of destruction. 

But, they don’t.

Here’s why I say that:

A report from a few years ago by the Institute for Energy Research estimated the U.S. government owns real estate, oil, gas, and mineral rights collectively worth ~$128 trillion… and that’s not including all the businesses the U.S. government has nationalized over the years, which generate ongoing income and, in some cases, have hundreds of billions of dollars in excess capital reserves which could immediately and forever be released to taxpayers. 

Assuming that’s true, that’s enough money to pay off the national debt and still have enough money left over to write a check to every single American for roughly $300,000. 

Plus… whatever refunds can be generated through the sale of government owned corporations.

It’s very likely every single American, regardless of age, would be well on their way to being a millionaire.

Infinite prosperity, zero poverty.

If that doesn’t razz your cherries, honestly, you must be either emotionally dead inside or  part of the political class.

So…

I can’t help but think this issue of a $1.9 “stimulus” plan could all be over if the government immediately and forever relinquished all rights in taxpayer property and sold it to the highest bidder, paying off the national debt, refunding every American for a year of utter bullsh!t, and every politician and government bureaucrat immediately quit their job and go find real work, and on the way out, beg for forgiveness and apologize for decades theft and for wasting everyone’s time and precious resources.

Chew on that for a second, Mojumbo. 

When I say taxation is theft, and that the government has stolen a helluva lot of money from taxpayers, I ain’t just whistlin’ dixie. 

I think any smart, decent, and honest person recognizes our current government institutions for what they really are. 

I’ll go one further:

The only thing the country really needs is a strong military to protect us from foreign government criminality, local police to protect us from neighborhood criminals, and a court system to help settle contract disputes, and enforce whatever objective laws are left after getting rid of the plethora of politically-motivated non-objective laws on the books. 

Anyway, enough wishful thinking. 

If you want a second-best option to build real, lasting, financial security or yourself and your family, one option still left in America is… dividend paying whole life insurance. 

Specifically, a custom whole life policy, like the type I design for clients. 

Life insurers are crafty creatures of survival. 

They implicitly reject self-sacrificial attitudes, which is why they’ve survived for so long.

They thrive on a mutually-beneficial business arrangement, with everyone working for his or her own rational long-range benefit — the company works in its own best interest by making long-range decisions and investing money for decades at a time. 

By doing this, the company achieves its own mission and purpose, which is to serve its policyholders (which often includes upper management, who gleefully own many millions of dollars of the company’s own life insurance policies) and increase the long-term value of the company and the value of the policies of its policyholders. 

Its policyholders, in turn, contribute increasing premium dollars which increases the long-term cash surrender value of their whole life contracts. The premium dollars become the fuel that directly benefits the life insurance company, creating an endless virtuous circle of growing cash values, death benefits, and increasing stability with each generation. 

Each party independently works for its own benefit. And, by doing so, it creates a mutually-beneficial, almost symbiotic, relationship.

It’s a business model almost no one has tried to reproduce. 

Regardless of any odd comments made by management, lawsuits brought by disgruntled individuals and profit-draining lawyers, or lip service given to “higher causes, it never changes the fact that in order for a mutual life insurance company to work, there must be — by the fact of its very existence — a sort of self-serving, capitalistic, mutually-beneficial relationship between the life insurance company and the policyholder.

Each feeds the other by feeding itself.

A mutual life insurer cannot exist — and I don’t mean this as hyperbole; it literally cannot exist — without policyholders. The very idea of a mutual insurer means a company owned by, and full of members who are, policyholders and whose management is beholden to those policyholders for the benefit of everyone involved in the mutuality.

This is the not-so-secret secret of why these companies have never died and, as long as there are policyholders willing to pay premiums, probably will never die.

A lot of people just plain don’t understand it, can’t understand it, won’t understand it. 

So be it. 

It is what it is.

But, if you want to understand it, and plug into the system, then I invite you to first download the free Monegenix® Labs and access the free trainings, courses, and special reports and get your head around the idea of how life insurance planning and financial planning really works.

Choices, choices, choices. 

At some point in the not-too-distant past, life insurance agents decided it was a cool idea to give folks a bazillion different choices, let folks choose what type of life insurance policy they want, how they want it designed, and even which company they want to go with. 

Some agents will even let their clients tell them how to design the policy, how much premium to put into term riders, base premiums, and PUA riders… and then the agent just sort of takes orders and files the paperwork.

I don’t do that. 

In fact… in my heretical opinion, agents are the experts and running an insurance brokerage that way is extremely irresponsible and probably eventually will end in a lawsuit at some point.

Agents know (or should know) infinitely more than their clients about life insurance. 

Now… don’t get me wrong. 

That doesn’t mean clients should just shut up, nod, and follow along without questioning anything.

In fact, I almost think there’s something wrong with a person who *doesn’t* ask questions before diving into whole life insurance. Makes me suspicious. Who the hell dumps $50,000 a year into a whole life policy without asking a bunch fo questions?

For my part, I show people a few different policy designs (unless they just want me to pick a company and policy for them). 

And, I explain as much about the policy as I think they’ll understand (my new Life Insurance MasterClass goes into explicit detail about anything anyone would ever want to know about any type of life insurance policy).

I even go so far as to show 2 different policies (maybe 3) from different companies, but… 

Even that can be dangerous. 

And… giving you too many choices, options, and showing you too many policy illustrations is an exercise in futility.

Here’s why:

For the most part, life insurance companies make it near-impossible to compare policy illustrations from other competing companies. 

It’s an open secret int he life insurance biz. 

Illustrations are not the same thing as your policy contract. They are a tool to explain how a policy works… not necessarily how it will perform.

Knowing how a policy works is extremely valuable information, but… it’s not the only thing you need to know. 

So, getting a policy illustration from MassMutual, and comparing it to an illustration from Penn Mutual or New York Life or Northwestern Mutual, or the Guardian will show you a few things, but it’s not as useful as you might think. 

The one thing it will show you is… which company can produce the highest guaranteed cash value and death benefit for you. 

That’s very useful information. 

Illustrations also show you how each company’s policy works. 

Also… useful.

But, in the wrong hands, illustrations can be deceptive and can be used for dishonest and deceitful purposes.

If an agent is savvy with a spreadsheet, he might be inclined to alter some of the basic assumptions in the illustration and show you policy values that have a snowball’s chance in hell of materializing. 

Or… he might downplay certain undesirable things in the policy and emphasize something that you’re sure to like. 

On the other hand… an agent might also use his powers for good. 

He might be able to reverse engineer the policy and figure out how much of the hypothetical cash value growth is due to things like a high lapse assumption (which can infer a few other things about a company). That, in turn could influence your decision to go with a particular company.

But… there are limits…

Policy illustrations won’t show you anything about how each company handles customer service, billing, how each company treats policyholders over the long-term, differences between implied promises and actual contractual promises, dividend stability over time, investment management of the general investment account, risk profile of the products being sold by the company, and so on. 

This is something that takes some investigative work and is usually not something most agents have the intelligence or inclination to do. 

What they’ll do instead is amp up the marketing angle of a company. 

For example, historical performance of a company’s whole life product doesn’t guarantee (or even imply) that company is a good company… nor does it mean they will experience the same results in the future. 

I’ve often said Penn Mutual’s dividend has been the most stable dividend out of all the mutuals over the past 20 years. That doesn’t necessarily mean it will stay that way, but what it does indicate is the company’s reputation and practice of stabilizing the dividend. 

It doesn’t say anything about future policy performance. It only says something about how management views its job in regards to running the company.

But, some agents use the historical performance of Penn Mutual to suggest that the past will be the future. 

It won’t. 

Likewise, agents sometimes use historical performance charts published by MassMutual, or the Guardian, or Northwestern, to imply that past successes will (or are likely to) translate into future successes.

When I wrote about these companies in ThinkAdvisor, I pointed out the company’s past successes, but also stressed that dividend rates change over time and are likely to continue to change based on the company’s performance in the future.

A very “DUH” statement, but you wouldn’t believe the amount of hate mail that generated from insurance agents.

Anyway, there’s just no way to know what future dividends at any of these companies will be. At most, I could say that past successes demonstrate a commitment by management to run a profitable company. But if Northwestern Mutual produces a 7% annual compound return for its policyholders over the past 20 years, it does not mean they will produce the same return over the next 20 years (and in fact, they’re not). 

They can still be profitable at a 5% return or even a 4% return.

More:

The differences between the companies I mentioned above are… huge. 

Penn Mutual and New York Life run completely different life insurance companies. 

Guardian’s business model is totally incompatible with MassMutual’s.

And, it’s the business model that drives the dividend payments at each company. 

There are reasons for choosing a life insurance company that run far beyond the policy illustration. 

So… even if you sat down and looked at the spreadsheets showing dividend payments from different companies, it tells you nothing about what’s behind those payments, the investment philosophy at each company, and how each company handles investments and products if they happen to go sideways for whatever reason.

And those differences are what really affect how you view your life insurance policy over the next 10, 20, 30 years and, ultimately, how it performs.

It’s not necessarily a matter of good or bad. 

All the companies I mentioned above are good… in their own way. They all have strengths and weaknesses. 

And, they all cater to specific markets for specific purposes.

None of this is apparent on the policy illustration though.

But, what most life insurance agents focus on (and what most policyholders are taught to focus on) is only the non-guaranteed portion of the policy’s illustration. 

They focus almost exclusively on the numbers, and ignore the underlying value of the company and its whole life contract.

It’s one column of one page of a 30-40 page document. 

And, based on that one column, on that one page, life insurance agents somehow make recommendations to their clients that will affect them for the next several decades of their life. 

It’s friggin’ insane. 

No honest and legitimate life insurance agent runs their business that way. 

Sure, it’s fun to make marketing pieces showing the potential cash value growth.

But, making a decision based solely or primarily on hypothetical numbers?

Get real. 

Now… let me take a step back for a moment here, because I’ve probably turned over at least one apple cart. 

You are not a life insurance expert (unless you’re an insurance agent). 

The easiest thing for you to see is the guaranteed cash value and death benefit of a policy. These numbers are “set in stone”. They are the worst case scenario. And, I wouldn’t blame you at all for choosing a policy based solely or primarily on these guaranteed values. 

It makes good, logical, sense. 

Your agent, however, should be able to guide you through this process, look beyond the numbers, and help you find a company that is fundamentally strong with the highest guaranteed cash value possible *and also* the highest long-term potential cash value and death benefit growth given your financial goals. 

Nobody wants a poorly performing policy. But, nobody wants an unrealistic illustration that is unlikely to pan out either. And nobody wants their insurance company to blow up and go insolvent because they mismanaged the general investment account in the name of paying an unsustainable dividend payment.

A lot of the choices an agent makes about choosing life insurance companies to work with is “behind the scenes stuff” (stuff I’ll be covering more in my Life Insurance MasterClass for interested clients). 

It’s not that you can’t understand it. But, it’s not something you’d easily remember or get a lot out of if I rattled it off during a first or even second phone meeting. It would probably be a little bit confusing. It’s stuff that’s best learned slowly, over time, and usually… learned after the fact while you are “getting to know” your life insurance policy and what it can do. 

This is why trust is so damn important in the life insurance business, and why it’s so frustrating to see life insurance agents running cheap marketing gimmicks on YouTube.

Anyway, if you want more inane ramblings about life insurance from some dude on the Innernet, go sign up to my free email list. The stuff you’re reading here is about 1/30th of the stuff that you get just by reading my free daily email.

An internet troll responds to something I wrote online:

… Monegenix.com is a whole life insurance vendor with a vested interest in persuading people stocks are “inherently speculative” so they can sell their product.

Ah, the profit motive. Everyone’s favorite villain (except when they’re the ones making money, of course). 

I do like the free plug though.

How amusing.

Recently, I’ve been spending some free time studying the nature of online trolls and bullies. As a kid, I was bullied a lot, and so I find the psychology of a bully interesting. I used to be very afraid of bullies, because they’d always threaten me with things I knew I would hate to lose. 

For example, when I was a kid, a bully once stole my bicycle and ran over it with a car. That bike was (at that time) one of my favorite toys. I remember I cried for a week after fidning out what he’d done. But… leading up t that point, I remember being full of anxiety over where my bike had disappeared to. 

Anyway, speaking of bullies and trolls… I recently read a story about the Ring of Gyges and it got me thinking about the nature of trolls and bullies. 

Now that trolling has become a sort of sport for lots of people on the Innernet, I found it especially informative.

In case you were like me and never heard this story before now, The Ring of Geyges is from Plato’s Republic. 

Yes, that Plato. 

The ring made anyone who wore it, invisible. Not unlike the Ring of Power, from Tolkien’s Lord of The Rings. 

But, The One Ring To Rule Them All corrupted the wearer, eroding their moral foundation. 

The Ring of Geyges simply exposed a person’s true self and made it impossible to ignore their own immorality. 

As the story goes, Glaucon challenges Socrates’ notion of justice and wonders how genuine any human being’s commitment to justice is. He tells the story of a shepherd who found a magical ring, which made him invisible when he wore it. He used the ring to seduce the queen of the land, and they conspired together to kill the king and take over the kingdom. 

Glaucon then wondered, ‘what if there were 2 such magical rings?” — one being worn by a “just” man and one worn by an unjust man. Glaucon imagined that the just man would be shown to be corrupt in reality, and would steal from others, seduce other men’s wives and sleep with them, would kill or free whomever he pleased from jail, and would basically do whatever he felt like, whenever he felt like it. And, if there happened to be a man who wasn’t corrupt, then everyone else would think he was an idiot, but would also not say so to the just man’s face out of fear of retribution. 

OK, but what does this have to do with the price of a Corona in China?

Well… everything these days. Everything on the Internet is basically hiding behind a sort of Ring of Geyges. 

For example, something you’ll notice about all innernet trolls is:

1. They always hide behind a veil of secrecy or anonymity. Sometimes, it’s a fake YouTube profile. Other times it’s a fake Facebook photo. Other times, it’s a fake persona online, even if they still use their real name. The Internet means they never have to face the people they’re attacking and;
2. They never ever ever address the substance of what’s being said. They never address the facts, in context, or the logic of an argument. It’s always about stirring the pot, ruffling feathers, and hurting the feels so they can take home a digital troll trophy. When you address a point brought up by a troll, they switch gears and bring up unrelated facts to make their position appear legitimate. When you make an analogy, they respond literally. When you respond literally, they respond with a metaphor. 

Everything is very cloak and dagger. Everything is about obscuring the truth. Everything is about secrecy and hiding their true self and motives. 

But… like the Ring of Geyges, trolls can’t hide who they really are. The ring exposes them, even when they are invisible. 

And, it shows you enough of who they are so you know to end the conversation quickly. Or… you can try to empathize with their point of view (which trolls hate with a passion because it contradicts their unstated cynical view of humanity).

On a related note, while I’m normally all for transparency, there are times when I think secrecy is very important. One of those times is when you want to insure and protect your savings. Tis why I often recommend at least a little bit of life insurance for most people who come asking my advice. 

The right life insurance plan can cover your savings in a veil of secrecy — even from the IRS (and yes, it’s completely legal). 

Now… don’t get me wrong. Not everyone has the right mindset to own life insurance. And, for some people, it will be a tortuous process. But, for the right mind, it will make all the difference in the world. 

Anyway, if you want more advice and information that I don’t publish to the blog, join my email list below.

Variable life and annuities are a dying business.

They’re so dying that companies like Ohio National decide to renege on asset fees and trailing commissions to advisors.

Meaning, life insurance agents, financial planners, and financial consultants who sold these products years and years ago have suddenly lost a substantial portion of their income.

At least 2 advisors have come forth to sue the company because they’re losing between $50,000 and $80,000 per year in income.

Anywho, even insurance companies who haven’t welched on their promises to advisors have scaled way back on promises to policyholders.

Here’s what I mean:

One of the things that insurance companies used to do with these products is guarantee a rate of return so long as the policyholder didn’t touch the savings balance for at least 10 years.

This is a very big deal because variable annuities and variable life insurance cash values are invested in the stock market.

The going rate for these policies used to be 7%. Then, it dropped to 6%. When I worked for a publicly-traded brokerage firm, we used to guarantee 7% annual return on variable annuities… this was back in 2004ish.

Imagine, a 7% guaranteed return on your savings…

But… those promises turned out to be way too expensive to insure.

Let that sink in for a moment and… keep that in mind next time someone tells you how easy it is to earn 8% in the stock market.

But, there’s more to this than just the returns.

If you happen to buy into the idea that life insurance and annuities are designed to transfer risk away from you and onto the insurer (which I do), then variable products don’t make a heck of a lot of sense.

Don’t get me wrong. They do technically fit the definition of insurance. They do replace loss when the policyholder dies. They also guarantee against loss to some extent (assuming the minimum accumulation benefit rider is in effect). They do shift *some* risk to the insurer, but… these products are explicitly designed to share investment risk between the life insurance company and the policyholder.

At some point, the guaranteed period ends and you’re on your own.

That’s a tall order for most people. And folks who are good enough to do their own investing, they are probably better off investing elsewhere since they pay both investing fees and also insurance fees.

In my career, I’ve seen a couple examples where this strategy might workout OK, but those were variable whole life policies which had a basic level of guaranteed cash value and also non guaranteed cash value tied to mutual funds.

You could still lose money in the contract, and it wasn’t as stable as dividend paying whole life, so planning for the future still hinged largely on the future net asset value of those mutual funds.

Not ideal.

Anyway, variable products have sort of fallen out of favor with… well… most people.

An, in my not-so-humble opinion, it’s probably for the best.

If you want stock market-like returns, invest in the stock market.

If you can’t afford to lose any of your savings, buy whole life insurance or fixed annuities.

And if you are just starting out and want to protect your future, start out by buying lots of insurance, and invest what you can afford to lose.

More details about how to start your insurance and savings plan when you join my exclusive daily email list.