Muscatine

Silver vs. corporate stocks?

Why do you assume this limitation?   Have you ever heard of diversification? 

what will happen to your stocks when the dollar collapses!!! worthless just like in the depression!!!! while silver and gold will sky rocket. but good luck with that!!!!

Read my last post again.  I don't think you understood it the first time.

Are your Investments “Safe”? Debunking the Annuity Myth Part 1

By John Michael Chambers

Asset Preservation Institute

Because many of us are still operating in the old paradigm, we fail to recognize the true dangers that are facing us. We go about the business of life and living, feeling somewhat secure, however I believe this is a false sense of security. For starters, let’s see how this applies to our investment portfolio and retirement accounts.

We have our “safe money”, an annuity with a solid insurance company, C.D.’s with a big bank, and a well “diversified portfolio” of stocks and bonds, perhaps through mutual funds, index funds, or ETF’s. In good shape-very secure-right? Wrong! Here’s why…

Before I begin, I want to be very clear. I am not a financial advisor, broker, or insurance agent. I was all of the above for many years before leaving the industry. I sold investments and insurance products. I am now a “recovering financial” advisor! Today, I do not sell any investment or insurance products. Having said this, let’s take a look at the annuity contract.

There is a time and place for everything. As Kirk Elliott, Ph.D. always says, “there’s really not very many bad investments-there’s just bad timing for investments”. Today, annuities are the furthest thing from being a safe investment. For starters, annuity companies are required to invest in accordance with NAIC models and this includes approximately 80%-90% in bonds. Well the bond market is collapsing and the 27 years of low interest rates are coming to an end. As interest rates rise, bond yields drop. Watch your annuity company ratings.

Annuities are contracts that are made between the policy owner and the insurance company. Insurance company ratings are dropping significantly. Of the 5 major ratings agencies, AM Best, Fitch, Moody’s, S&P, and Weiss, only one is not paid to rate these insurers. This is the Weiss agency, the only true independent agency (rated some years ago as one of the top ratings agencies in the country by the Wall Street Journal). You can access for free the Weiss ratings by visiting www.thestreet.com. You will find that most carriers are no longer A rated, in fact many are C and below. Watch the true ratings. Your agent and insurer will not show you the current Weiss rating. You need to know.

On another note, in my opinion, if HR3200 (Obamacare) remains the law of the land; you will see most insurance companies out of business between 2012-2015. Of course there will be the one or few that our new big government will partner up with, this company or these companies will remain. Did I hear the word Fascism?

The annuity has limited liquidity, typically 10% per contact year; this is not good in the current economic crisis we are facing today as liquidity is mist important. Furthermore, annuity companies have the right to withhold a full surrender request for up to 6 months. So what happens when there is a run on the dollar and a run on the annuity companies? Do you think they just might exercise the 6 month hold? And during such time what happens to your money as the dollar crashes and inflation soars?

Insurance agents today are still talking about “guarantees”; utter nonsense. There are but two guarantees in life …death and taxes! Again there is a time and place for everything. Let’s look at these guarantees and you decide how much of a guarantee you really have in today’s world. AIG rated AAA on Friday…out of business (if not for big govt. bail out) on Monday! What happens if your annuity company goes into receivership? The answer is you may not have access to your money for some time (if ever). The state guarantee association only guarantees up to $100,000 per company per household and will not be prepared for such a collapse should this occur.

The annuity contract states that guarantees are “based upon the claims paying ability of the under lying insurer”. Strike one. How about we look closer at this and perhaps add the following disclaimer-“based upon the full faith and credit of the U.S. dollar”! Strike two. You see most all of our paper assets (like annuities) are denominated in U.S. Dollars. This brings me to the impact on your purchasing power while locked up in annuity. Let’s talk about the impact of inflation on the annuity contract.

Annuities are not keeping pace with inflation, will not and cannot keep pace with the current rate of inflation today, never mind where inflation is heading tomorrow-period-end of story. The annuity contract may offer some sort of minimum “guarantee” of say 3%. Some may even have riders (which you pay for with all kinds of fine print often not understood). But again with the unofficial rate of inflation today nearing 13% and heading to much, much higher levels towards a hyperinflation (and sooner than you may think), this is when your annuity will be completely obliterated as inflation will destroy your purchasing power. And don’t forget, you only have 10% liquidity to boot!

So all these riders, income and death benefit guarantees, indexing lock-in etc. is all meaningless in today’s world. We are in the midst of a currency and debt catastrophe-make no mistake about this! All paper assets are in harm’s way and the annuity is laced with more dangers that you can imagine. So what do we do? How do we unwind the annuity?

Next week I will discuss Annuity rescue and maximization and more information that the insurance company and your agent does not want you to know. There is a way out of the annuity and it’s not as bad as you think. In fact...it’s all good!