Gold is a way of going long on fear, and it has been a pretty good way of going long on fear from time to time. But you really have to hope people become more afraid in a year or two than they are now. And if they become more afraid you make money; if they become less afraid, you lose money, but the gold itself doesn’t produce anything.
Sage Advice on Gold
As celebrated investor Warren Buffett suggests, gold is sometimes used as the “crisis commodity.” When people are anxious or frightened and times get tough–either financially (as in the wake of the 2008 crash) or geopolitically (as perhaps now, following U.S. strikes against Syria and threats from North Korea), they often turn toward gold in the hopes it will provide a safety net.
As such, it is no surprise that clients often ask me if they should own gold. My reaction is to ask what purpose they want it to serve. A purchase of gold, after all, is not an investment; it is speculation. And it does not align with the principles of prosperity economics. And yet, it still has its allure.
“Put simply, BOLI is attractive to the banks because it can produce better returns that the banks couldn’t otherwise achieve.”
– Fool.com, “Bank Owned Life Insurance: A Little Known Way Banks Make Money”
In Part 1 of “The Banker’s Bunker,” we introduced the phenomenon of BOLI, or bank-owned life insurance that has become a significant Tier 1 asset for many U.S. banks. We looked at how these plans work, the favorable returns and tax treatment compared to other cash equivalents, and how life insurance fits into Tier 1 assets held by banks.
Today, we’ll examine the impressive growth of bank-owned life insurance, the pros and cons of BOLI, and answers to common questions. Then we’ll look at what we can learn from the BOLI trend can be applied to our personal economies.
“…The banking industry – one of the most powerful and influential industries in the United States – has a deep affection for cash value life insurance and treats it like a golden asset.” – Barry James Dyke, “Cash Value Life Insurance: Contempt Prior to Investigation”
It’s more than a bit ironic. We say “it’s like money in the bank” when speaking of a sure thing, something solid and secure. But if we’ve been paying attention to the bank failures in the U.S. over the last decade, we ought to realize that “money in the bank” is about as sure and secure as the famous “Unsinkable Ship” that hit an iceberg in 1912.
Of course, the FDIC has provided life rafts for bank failures so that savers have some protection against such failures, up to $250k. But are FDIC guarantees a solution, or simply a temporary fix that hides the risks our financial institutions take with our dollars?
Since the Financial Crisis, banks have put a lot of new cash in an old-fashioned product designed build greater protection, security, and profits they can depend on in unpredictable times. In this article (and part 2), we’ll examine what this asset is, how banks use it, how much they own, why they purchase it, and what can we learn from their example.
With the reinvention of work comes the re-enchantment of work, for good work makes for joy. – Matthew Fox
Retirement — or re-firement of the soul?
In spite of a general trend of a growing upper-middle class (detailed by Robert Samuelson in The Washington Post), the inconvenient truth is that many baby boomers are in pending financial crisis. Only 5% to 15% of this generation (born between 1945 and 1964) have saved enough to even have the option of retiring. And according to a 2015 GAO survey, an astounding 30% of these folks have no savings whatsoever.
Compounding the problem, of course, is increasing longevity. If you make it to 65, there’s a 25% chance you will live to 90. And as we’ve mentioned before, life insurers’ actuarial tables now include assumptions of life spans upwards of 120.
“We need a better plan B than just to rely on social security,” career reinvention coach John Tarnoff, author of Boomer Reinvention: How To Create Your Dream Career Over 50, said at a talk at Town Hall in Seattle recently. “We’re all going to have to keep working. The problem is: We’re not ready for this–and society is not ready for us to keep working either.”
It is not as if boomers are unaware. According to Tarnoff, many feel insecure or under-valued in their jobs, or ashamed that they have saved so little or were downsized for no valid reason. “They are unwilling to accept that their working lives are just being tossed aside,” he says. Boomers are understandably angry to find careers cut short while still at the top of their game.
So how do boomers actually reinvent their careers when they are shut out of a job market that considers them old, overpriced and out of touch?
“Change is hard at first, messy in the middle, and gorgeous at the end.” – Robin Sharma
Now that the worst of winter is past and spring is around the corner, people come out of hibernation and into action! As you’ll see, it’s the perfect time for Spring cleaning your home and your finances.
Here are five ways you can take advantage of this season to organize and streamline your finances and even put some extra spending cash into your pocket while you’re at it!
“Funding Nemo: A Pixar movie about Marlin trying to put his son through fish college.” – Twitter joke seen on Buzzfeed.com
No one told Heather Jarvis she couldn’t afford to go to Duke University, even though her modestly paid executive assistant mother and often-unemployed Shakespearean actor father couldn’t afford the tuition. She “charged it” to student loans and graduated several years later from Duke’s School of Law with honors… and a $125,000 bill. This is financial planning for college at its worst. (Learn how to finance your own education with our Ultimate Guide to Financial Planning Myths.)
Facing 30 years’ worth of $1,200/month payments and with a dream of becoming a lowly-paid public defender, Heather was in a quandary. Should she abandon her dream of standing up for those facing criminal prosecution, or just take the highest-paying job available?
Student Debt: “Say hello to adulthood, and goodbye to your paychecks.” – Anonymous
According to StudentLoanHero.com, Americans owe over $1.3 trillion in student loan debt, spread out among about 44 million borrowers. The average Class of 2016 graduate has $37,172 in student loan debt, up six percent from last year. The average monthly payment for a borrower aged 20-30 years is $351. And 11.2% of students have defaulted on their loans.
What can be done about the $1.3 trillion of student loan debt? How can you or your child escape decades of burdensome payments that drain your wealth? Or even better… how can you AVOID debt in the first place?
In this two-part article, we’ll share tips and strategies that may help you save thousands and get out of debt faster. Plus we have some important warnings of what NOT to do! And we’ll tell you where you can get help to qualify for loan forgiveness programs or refinance your debts into a lower-rate loan.
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