Saturday, February 7, 2009


Miss Nadya Suleman has apparently given birth to eight, or octuplets. According to news reports, she is single and has six children. Reactions to the news have been all over the place.

Here's a thought. The last time I checked, America was still a free country. Of course, this may well change once Comrades Pelosi, Reid, Obama, and Soros finish their handiwork.

If Miss Nadya wants to have 14 children, or 24 children, or whatever, let her go for it. However, if Miss Nadya expects the city, state, or federal government to step in with benefits, whether food stamps, or free housing or education, or whatever kind of foolishness these mushy brained liberals can come up with, then the old girl needs to learn to keep a dime between her knees.

In fact, in the 21st century, there are fairly simple surgical procedures that can allow her to avoid getting pregnant, while still enjoying the God-designed process.

Some of these whiners, who have taken their outrage to an art form, have bought into the lie that one of our major problems in this world is overpopulation. This is absolutely not true. One of the major problems we do have is the amount of so-called free money misguided government types are prepared to throw at people who they deem to be disadvantaged, because so some sense of misplaced guilt, or because throwing other people's money is easier than actually caring.

What the whiners and those with fake outrage need to do is chill the hey out. What Miss Nadya needs to do is be sure she doesn't plan to lie sideways in the government trough, like so many inside the beltway enjoy doing. If diaper companies, or book and movie types want to support her or send her large checks, let them do it. That's the way a free market or capitalist economy works.

Whether Miss N ends up with nothing or large sums of money, she still has 14 children to get to adulthood. Her willingness and ability to do that will tell the tale of what the last 20 or 30 years of her life will look like.

Until next time...


Social Media Question

My standard line, which frankly has mold on it at this point, is that I graduated from high school with a slide rule. Being somewhat geeky, I thought I was a state of the art tech head.

As we wrap up the first decade of the new century, I find that most folks under the age of 35 have not only not seen a slide rule, many have never heard the phrase.

So what? Well, it seems I've spent the last 35 years running fast to keep up with technology, and it keeps running faster. 2009 is the year I've decided to learn the language and protocols of social media, as I believe it can be a most excellent tool and communication method.

This morning, I've been doing some reading and research, and have questions. How do I arrange my settings on my blog so I can show other blogs or websites that I like? How can I arrange the settings to allow others to show my blog, or forward its content to others? How does Google reader work? How do I arrange the settings so that when I send an email to my distribution list, and ask those folks to become fans and readers of the blog, they can actually do that?

Is there a tutorial for all this? Are there folks I can hire to help? Surely its not too complicated.

Thanks for your input.

Until next time...


Wednesday, February 4, 2009

Comp Caps

It's a sad day in America, and speaks poorly of how far we have fallen, when the president of our great country must impose pay caps on corporate leaders. Since they have chosen not to be self-governing, either before or after the bailout, this most likely was a necessary step to protect America's interest in these companies.

How do we teach our children well, in the words of that old ballad? How do we engage with life, work, and the world around us so that the generations coming behind us will appreciate life, be encouraged to build wealth, yet understand the responsibility that both wealth and power bring?

To be sure, these creative folks at the companies that are experiencing the caps will find ways to take care of the executive suite that doesn't violate the letter of the law. At the same time, what they create in the form of benefits for these decision makers will surely blow the intent of this presidential action to kingdom come.

Until next time...


Tuesday, February 3, 2009

What Taxes?

It appears that Obama has the same gene pool to draw from as the rest of the world. That is, those fallen beings known as humans. Tim Geithner, who will be overseeing quite a few dollars in his new role, is unclear how the tax system works. Tom Daschle, a former Senator, decided on January 2, 2009 it was time to pay a buck or $140,000 in back taxes.

Reality makes for a tough meal, especially for those who saw a coronation or the Second Coming on January 20th. There will be more. It's just part of the system for those who choose to spend their lives laying sideways in the government trough.

As we have said before, and will say consistently, let's throw out the current tax system completely, terminate the IRS, and adopt the FairTax. When you tax a man's wages, he becomes your slave. For far too long, Americans have been slaves to the federales, at the mercy of our elected slavemasters.

Until next time...


Sunday, February 1, 2009

Variable Annuity Wasteland

One of the favorite products of many in the financial services community is the variable annuity. It is called an annuity because it offers annuitization, or income stream options, at some point in the future. The product is used as an accumulation vehicle during the annuity owner's earning years. One of the chief benefits of annuities in general is their ability to defer tax on gain until distribution. Finally, the variable annuity, or VA, allows the owner/investor to invest in the financial markets using mutual fund-like subaccounts.

At first glance, this is a nice starter package of benefits. Income options in the future, guaranteed by an insurance company, deferral of gain while the asset is growing, and the opportunity to participate in the financial markets makes for a wonderful story. In addition, the issuing carriers have upped the ante, primarily due to competition.

Many VA issuers provide guaranteed benefits in a couple of ways. One guarantee is an income guarantee. For example, if you deposit $100,000 in a VA contract, the issuing company might guarantee that regardless of whatever else happens, they will guarantee 5%, or $5000 per year, for your life. In some cases, they will extend this guarantee to your spouse as well. When this income starts, and whether and under what conditions it extends to a spouse, are contract specific benefits.

Another guarantee is a benefit step-up. With this benefit, the insurance company guarantees that the underlying value of your annuity will increase by a pre-determined percentage every few years. What the percentage is, and how many years between the step-up is again contract specific language.

These two benefits taken together, along with the standard VA benefits, make for a tantalizing package of benefits for many consumers. Whether the consumer has lost money in the market, doesn't have the temperament for investing in stocks, or simply has a long standing distrust of Wall Street doesn't matter. This combination of benefits, along with fear of the markets embraced by many consumers, has made for a target-rich environment for annuity sales reps, especially those selling VA's.

As a side note, those licensed to sell VA's, and in most states it takes both a securities and an insurance license to do so, are well compensated for their time. The gross commission, or in the broker-dealer world, the gross concession, can range from 3% to 5% at the low end, to 12% or 15% at the higher end. It is very common for the street level commission, or what's paid to the person sitting in front of you, to be 5% to 7% of the deposit. For a $100,000 deposit, that's a commission of $5000 to $7000.

Also, in case you are wondering, there is roughly a 1 to 1 relationship between street level commission and the number of years in the surrender charge. For example, if you are looking at a VA contract with a 7 year surrender charge, the street level commission is most likely about 7%.

Now, back to the company challenges. Insurance companies, in an effort to bring dollars in the door and to stay competitive, have continued to sweeten the benefit pie to both VA owners and VA sellers. So much so that in 2006, more than $184 billion was invested in VA's. In 2007, that number dropped to $160 billion, while sales of fixed annuities increased. At the end of 2007, there was more than $1.485 trillion invested in VA's.

Unless you have been on vacation in Siberia for the last eighteen months, you know that the stock market dropped in value by 35% to 45% in 2008, depending on which index you follow. Since most VA assets were invested in the stock market, the underlying values on the statements received by VA owners at the end of 2008 were substantially lower than they were at the end of 2007. Yet, because of the guarantees offered by insurance companies, the value available to contract owners hasn't necessarily dropped significantly.

The guaranteed values, and how they work, is specific to the contract and the company. However, it is safe to say that the issuing companies have more in liabilities than the contracts have in assets to support those liabilities. What I expect to see, over the next two to five years, are some of the largest insurance companies in the world going to their respective governments for handouts, because they have made promises they can't keep.

The top ten writers of VA business in 2007 were TIAA-CREF, RiverSource (Ameriprise), Jackson National, John Hancock, VALIC, Pacific Life, Skandia, MetLife, and Hartford. These companies, along with AXA Equitable and Allianz, have traditionally led the market in VA sales.

If you have questions, our recommendation would be to contact the company directly, talk to your selling agent, or better yet, find someone who can give you unbiased counsel about your situation.

Until next time....