Bruce’s philosophy I believe would say something like this…

@bill_lyons Defeating an opponent is not fighting fire w/ fire, it’s harnessing, utilizing, deflecting and transfering their energy into your power10:20 PM Aug 10th from Twitterrific

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Prosperity on Purpose Newsletter

October 2008
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This month’s Prosperity On Purpose presents a fictitious story about John, a novice art investor, as he makes erroneous assumptions about the value of his investments.

As he experiences emotional highs and lows along with his misguided valuation of his art collection, his plight teaches us three main lessons about real dollar value, wishful thinking about investment values ‘always’ increasing, and asset stability.

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Art Lessons

LISTEN: Art Lessons [mp3 audio] (11:18)

READ: 1,766 words (Just over 7 minutes to read)

Here’s a story with a lesson:
On a trip to Europe, John bought a painting. He really didn’t know much about art, but he shelled out $25,000 because one of his trusted friends told him it was a good buy. “Hold on to it for 10 years or so, and it will probably triple in value,” the friend said.
It seemed like the friend was right. A few years later, John started seeing reports of similar paintings selling for $50,000 or $60,000. Out of curiosity, John had an art gallery owner appraise his painting. The appraiser gave an estimated value of $65,000. “Imagine that,” said John, “I’ve got $65,000 hanging on my wall. That’s pretty cool.”
As John considered the $65,000 hanging on the wall, another thought occurred to him: Why not buy a few more paintings? After all, he’d made a nice profit when he didn’t know a thing about art. Now that he was starting to understand the market, he’d probably do even better. Over the next few years, John dipped into his savings and bought a few more paintings.
Pretty soon John’s home had become a small art gallery. Not that he was bragging, but his art collection was valued at over a million dollars! “Wow. This really changes my net worth and gives a boost to my retirement plans,” said John. “And since the price of art just seems to go up, imagine what the values will be 10 years from now!” But while John might have paintings worth one million dollars, he didn’t have a million dollars. And there was a difference.
As his net worth continued to grow, John had an opportunity to buy a summer home for $250,000. It was a great deal, and on paper, John could afford it. The question was how to pay for it. “Hey,” thought John, “One of my paintings is worth about a little over $250,000 right now. Maybe the homeowner would consider a trade – I’ll give him my painting for the house.”
John was slightly surprised when the homeowner declined his offer. “I want my settlement in cash,” said the homeowner. “A painting hanging in my living room can’t pay for groceries or a vacation.” John really wanted the house, so he decided to sell the painting. He called the art gallery owner and made arrangements for a sale. The gallery owner agreed that John’s asking price was reasonable, and began soliciting some of his patrons.
A month went by, and the painting remained unsold. In fact, John didn’t receive a single offer. “What’s the story?” John asked the gallery owner. “Why isn’t the painting selling? Is it overpriced?”
“The price isn’t the problem,” said the gallery owner. “I’ve had several people say the price was fair. It’s just that they weren’t interested in buying right now. You have to remember, buyers of high-end art represent a very small percentage of the populace. Just because something is worth the price doesn’t mean there’s a buyer that will pay it.”
John considered his options. Even if he cut the price, there was no guarantee he would find a buyer. So if the painting was really worth $250,000, he would be better off waiting until he found a buyer willing to pay it. And since good art just seemed to keep increasing in value, he might as well hold the painting. He told the gallery owner to continue listing the painting, but stay firm about the price. John also told the owner of the summer home that he couldn’t meet the cash terms.
And then something completely unexpected happened. The painting he was trying to sell was found to be a forgery. It still looked nice hanging on his wall, but the painting was worthless as an investment. John was stunned and frustrated. He’d paid quite a bit for that painting. Not that he wanted to pass off the forgery on anyone else, but he couldn’t help thinking he would have been better off accepting any offer in the past year instead of deciding to keep the painting.
Disillusioned, John decided he was done with art as an investment. He contacted the gallery owner and arranged to auction his entire collection. Unfortunately, the general economy was in the tank; housing values were down, the sub-prime mortgage mess had squeezed the financial markets, and gas prices were up. The gallery owner called the night before the auction to say there simply wasn’t enough interest to justify holding the auction.
John faced a sobering reality: For all the money and time he’d invested, all he had to show for it was some canvasses on his walls.

Lesson 1: Dollar value is not the same as money.

In any society, money is a commodity or token that serves as a medium of exchange. This could be anything from shells and beads to coins or cattle. While there are many items or commodities that can serve as money, the best kind of money is something that everyone will accept in exchange for the things they have to sell.
The official “money” that everyone accepts in the United States is Federal Reserve Notes, denominated in dollars. And while there are many assets that can be valued in terms of dollars, very few of those items can serve as money. A single share of stock may have a current value of $10/share, but you can’t pay for lunch at a fast food restaurant with a stock certificate, and a bank isn’t going to allow you to make your monthly mortgage payment in baseball cards or bottles of wine. Most of the time, transactions will require the purchaser to pay in dollars.
If you look behind the curtain of the art analogy, you can make an application to the stocks, real estate and other financial assets. On paper, the dollar values are there. But it’s only when the assets are turned to money that you can determine their real value.
This distinction between dollar value and money is receiving increasing attention as a critical issue in individual financial programs. It’s not enough to accumulate an impressive portfolio; there must also be the assurance that those assets can deliver a consistent source of money when needed.

Lesson 2: If something can’t go on forever, it’ll stop.

The statement, “If something can’t go on forever, it will stop” is known as “Herbert Stein’s Law.” (Stein was an economics professor, senior fellow at the American Enterprise Institute, and chairman of the Council of Economic Advisers in the 1970s under presidents Nixon and Ford.) His statement is often rephrased as: “Trends that can’t continue, won’t.”
At various times, some financial commentators observed a trend, then decided it would continue uninterrupted into the future. There was a certainty about their opinion, as if the outcome, while not guaranteed, was still a sure thing. It was the realtor who said “the residential housing market is a great investment. Homes will always go up in value.” Or the stock market analyst who said “stocks will fluctuate on a daily basis, but the general long-term trend is always up.”
This certainty provided the justification for financial experts to make financial projections about fluctuating assets:

• Because homes would “always increase in value,” it was possible to justify making loans for 100% of the purchase price; the future appreciation would negate the risks taken by both the borrower and the lender

• Because savvy investors had been able to deliver double-digit annual return from the stock market, it became reasonable to think it was possible to retire sooner and receive more income; the inevitable upward trend would make any concerns about stability irrelevant.

But as certain as the experts might have been, there were never any guarantees. The trends in real estate and the stock market were influenced by other variables – interest rates, baby boomer demographics, tax laws, etc. When those variables changed, the trend could not continue. The result of ignoring Stein’s Law: Often a bad case of SWILS – Sudden Wealth Loss Syndrome, a term coined in a March 18, 2008 Wall Street Journal article. This isn’t just a “bad year” – it’s a wipeout; so we have to watch our thinking!

Lesson 3: Asset stability is important.

For perhaps the past two decades, “safe” in the financial world has often been associated with “boring” and “stupid.” The thinking was “Why settle for a 5% annual return when there’s an opportunity to earn 15%?” But in light of the recent financial turmoil, the stability that is a primary feature of safe financial instruments has taken on a new luster.
When the fluctuations are minor and you don’t need the money, it’s psychologically and mathematically possible to ride out the downturn. But when the losses are huge and you need the money, it’s a different story.
The ultimate objective of any investment decision is to acquire more money. Nobody buys shares of stock so they can hang the certificates on their wall. They don’t invest in real estate because they want their mail delivered to a different address. The end result of all investment is to have more money – the kind you can spend, not the dollar values that add to your net worth.
Some asset classes are well-suited to delivering money in a reliable fashion. Their dollar values are fixed, and they can be quickly converted to Federal Reserve Notes, the kind of money that’s accepted everywhere.
The knee-jerk reaction to recent events in the financial markets might be to swear off all investment opportunities and keep your remaining money in a safe at home. That’s probably an overreaction. But because of Lessons 1 and 2, it’s important to understand the place asset stability has in your personal financial program. If the ultimate goal of any financial program is to deliver money, there must be a consideration of stable, liquid financial assets. Otherwise, you run the risk of acquiring a lot of financial “art” that might look impressive on a balance sheet, but in the end, isn’t worth what you paid for it.

CONSIDERING THE EVENTS OF THE PAST MONTH, DOES YOUR FINANCIAL SITUATION NEED A BETTER PERSPECTIVE ON MONEY vs. DOLLAR VALUES? If it does, let us help.

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To your prosperity!

Kim/Todd/Ron/Theresa/Jill/Jessica
Partners for Prosperity, Inc.
(877) 889-3981

Thanks guys! Another great newsletter for all of America’s financial needs!

Bill Lyons, LEI Financial

Here is an announcement from MTL insurance company addressing the current financial climate.

A Press Release distributed by the New York Department of Insurance about the AIG situation mentions some very important points about the safety of the regulated insurance industry.  Unlike the esoteric unregulated banking industry, Insurance companies have been held to a higher standard of accounting principles by the government and their own constituents in the insurance industry.

Please keep in mind that every topic below can be a longer conversation if you wish

Concerns you should have about where your money is safe, liquid, growing (tax Free):

Where is it safer?  Bank?  Stocks & Mutual funds?  Bonds?  Buried in home equity?  IRA or 401K or any government sponsored plan? Insurance?

Bank:  Safe, yes (up to $250K in some cases now) ; Liquid , yes  ;  growth very little and not tax fee

Stocks & Mutual Funds: Safe, no; Liquid, no;  growth lots of ups and downs over the years, not tax free,  maybe get average of 9% before taxes

Bonds: Safe (somewhat); Liquid , no; growth moderate and sometimes tax free

Buried in home equity: Safe, no; liquid, no; growth, no  (home may go back up in value but the actual equity has no growth while trapped in home on paper)

IRA or 401K or most government sponsored plans: safe, usually people chose mutual funds- so No;  liquid, no; growth – most of it will be owed in taxes. 

All of the above will be examples of your dollars only being used in one place for one thing at a time.   The way to move ahead is to have your dollar working for you in many ways at one time.  A system to do this; is what you have set up in your permanent whole life insurance policy. 

Whole life Insurance placed with a Mutual type company (no stock holders):  Safe, Yes; liquid, Yes ; growth, Yes and tax free

* Troubles in the Finacial market and what type of companies have a track record of surviving extreme pressures in the market. 

Fannie Mae, Freddie Mac and Banks:  there are commercial banks (such as Lehman Brothers) and FHA programs that do the majority of their business with other corporations. There are also banks that do most of their business with individual people like you and me (the Bank of America type).

Many of the Banks that are in trouble are so because they have too many investments in low quality mortgage backed securities that aren’t worth what they paid for them.

AIG or American International Group is basically having their trouble because of Mortgage backed securities too.  AIG has a division that in a complicated way insures the investments in Mortgage backed securities and also owns a bunch of them as payment for their insurance to other banks that issued them.  We know the securities aren’t worth anything any more.  This is AIG’s problem now.  AIG does, on the other hand, have extremely healthy insurance companies that will be restructured or sold off to other companies. 

Mutual Trust Life Insurance Company, like many other Life Insurance Companies has been doing good business for over 100 years.  Not many other industries can make the same statement.  MTL has been through the Recessions and the Great Depression along with the World Wars.  It makes sense to keep your money with the proven company/industry.

*   Some important points of Whole Life insurance:

Guaranteed Death Benefit. (But that is really not that important.) What should determine that is how much cash you want to stuff it with? Warren Buffett has the most life insurance on the planet. Once he maxed out the amount he could get on himself ; aka max human life value (MHLV) he started getting policies on everyone around him that he could establish an insurable interest on. He is the owner and beneficiary still just not the insured.

In the last 100yrs not more than a couple life insurance companies have failed yet 100s of banks have. He would rather put his money here than a bank backed by the FDIC (Except Wells Fargo of course)
-Guaranteed level premium for life of policy. (Perfect hedge against inflation)
-Guaranteed cash value base
-Judgment and creditor proof
-Virtual will and trust by designating beneficiary.

-Virtual medical insurance (Accelerated Death Benefit; Meaning you can access DB now for major medical Expenses if needed)

-Virtual disability insurance (Pays for policy if you were to become disabled)
-Tax free growth and income

-Non-taxable dividends (return of premium)
-Velocity (liquidity, use and control) move the money by putting your dollars THROUGH the policy NOT TO it. (You literally can borrow the cash from it and it acts as if the money is still in there growing)
-Collateral (you can assign policy and use as collateral short term and long term)

Bottom-line one dollar can do 12 plus jobs by using the policy as a pass-through vehicle. Rule of thumb is you can front load it by 2.5 to 3x the annual premium. Anything above that the gov’t will turn into a modified endowment contract (MEC) and then it become taxable. The key is to stuff it right below the MEC threshold. It’s not going to get you 12 percent returns but it can be used as a safe, secure facility

Again take a look at the attached AIG Press Release from the NY State Insurance commission.  It outlines how secure and safe insurance companies really are…

(Thank you George Smith for contributing part of this article)

Here is a bit more for you from P4P…

LISTEN: All Is Well [mp3-audio]

(6:43)

READ:
(440 words; just under 2 minutes to read)

As news and newspapers continue to focus on all the bank failures and the subprime crisis, now, what are even being called “insurance company failures,” we want to let you know that all is well.  And the concern that you’re naturally are going to have about the financial safety and security of your money is valid, so we want to make sure that we’re addressing it and making sure that your thinking is where it needs to be.
 
You’ll recall that our very first Principle of Prosperity™ is about your thinking and to make sure that you’re not falling prey to all of the press and what is going on in the financial markets, because your thinking has a big part to do that. 
 
Interestingly enough, even Susie Orman is now recommending whole life insurance.  As shocked as we were to see it – and of course she has it with a caveat, saying “I don’t usually recommend whole life insurance” – she will even admits that it is now a very appropriate place to store cash and have the safety and security that one would be seeking.  And she actually recommended that someone purchase it in a Costco article, of all places, for a particular situation where they were going to desire that the death benefit be sure to be paid. 
 
So the insurance companies that we represent are solid, ‘been around forever’ insurance companies.  They’re not large conglomerates like AIG. AIG had an insurance company affiliated with them, but it wasn’t the bulk of their investments, and it was not the bulk of their problems.  AIG’s insurance company would have done just fine have it been left alone, but it got sucked in, with all the problems that AIG was having – and those were primarily by investing in the subprime environment with mortgages.  The insurance companies that our clients have have a very, very small percentage, if any at all, of their money invested in subprime environments. 

So you can rest assured that the money that you have and the cash value of your life insurance is safe.  The death benefits that you expect to be paid many, many, many years from now will be paid. And if this is an area of concern for you, please get a hold of us – shoot us an e-mail, or give us a call – and we’ll be happy to go over them with you, in particular, your specific company and exactly what’s going on. We look forward to continue to help you with your thinking to get us all past the challenges that are being expressed today in the press.

Kim Butler and here team have done it again in September with an awesome newsletter!

This is a must read or listen…

LISTEN: Financial Shelter [mp3 audio] (6:43)

READ:
(1,003 words; just over 5 minutes to read)

A small article on an inside page of the February 26, 2008 Wall Street Journal reads “FDIC Readies for a Rise in Bank Failures.” Hmm. Looks like the FDIC knew what was coming. Here’s the lead from a Sunday, July 13, 2008 NPR report:

The purpose of the FDIC is to insure the savings of depositors and the agency’s actions were typical for such an intervention: The government stepped in on Friday, and by Monday, the bank’s customers were being served, ATMs were working, and debit cards and checks were honored. But regulators also acknowledge that more banks are likely to fail.
 
As the housing crisis unwinds, it’s unnerving to think that even your savings might not be safe. But despite the trouble plaguing many financial institutions, guess which sector appears to be holding steady? Well-managed, mutual life insurance companies.
 
A report on the “Townsend 100″ (one hundred life insurance companies, comprising 85% of the industry) published in the July 2008 National Underwriter, showed that even in the tough economic environment of the past several years, the companies showed a record $30.4 billion in operating earnings in 2007, and a surplus gain of 6.4% over the previous year, the highest percentage increase since 2004.

As a specific example of financial strength in the midst of widespread downgrades for financial institutions, on July 18, 2008 Standard & Poor’s announced it had raised credit and financial strength ratings of the Guardian Life Insurance Company of America from AA to AA+. S&P cited a “very strong capital adequacy and liquidity, a stable earnings profile” as reason for the upgrade, and added there was “limited speculative-grade credit risk and no exposure to subprime mortgages.”
 
It’s no surprise that life insurance companies remain solid. No financial institution – bank, brokerage house, mortgage lender, insurance company – is free from the possibility of failure. But there are several characteristics of life insurance companies that tend to make them more capable of surviving financial distress.
 
Among the most prominent:

• Life insurance companies cannot practice fractional banking, i.e., they cannot lend more than they have in deposits. In addition, they must keep sufficient reserves to meet claims. These constraints promote conservative and prudent use of the premiums they collect.

• Their primary business purpose – providing monetary benefits on the death of an insured individual – is supported by extensive mathematical research. Unlike other types of insurance where coverage and costs may be manipulated through definitions of what is covered or deductibles and waiting periods, life insurance is based solely on whether one is alive or dead. This makes for stable pricing, and a very low incidence of insurance fraud.

• The mutual company model is cost-efficient. Mutual insurance companies, as opposed to stock companies, are owned by the policyholders and rely on premiums for capital to support the company, with any excess money returned as dividends to the policyholders. John Bogle, the pioneer of the Vanguard mutual funds, acknowledged that he built his company on the concept of a mutual life insurance company because it was a “structure designed to put the client in the driver’s seat. And that structure must lead to a strategy that is founded on delivering services at the lowest reasonable cost.”

In his 2006 book Money, Bank Credit, & Economic Cycles, Spanish economist Jesús Huerta de Soto provides the following assessment of life insurance companies relative to banks:

 
Occasionally, some financial commentator will criticize life insurance as a “poor investment,” comparing it to the historical return performance of some stock, index or other financial instrument. But this criticism overlooks some of the other, less tangible aspects of owning cash value life insurance. One of those intangibles is the designed financial stability that has allowed life insurance companies to remain solid in times of economic turmoil.
 
We know you’re clear on some of the aspects of life insurance, and how to use, especially the cash value while you’re living. But one of the things that sometimes we forget is how to use the death benefit while you’re living.

So, if you’re not clear on this and you need a reminder, check out: Live Your Life Insurance – The eBook for an e-booklet on using your death benefit while you’re living.
 
We also welcome any questions in this area to continue to fuel your growth of knowledge and your use of this financial tool.
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Ride the Bernanke Train Down! Get a loan tied to the LIBOR today! 

Dr. Andrea Pennington, a nationally known medical and wellness expert, touts the antioxidant benefits of Acai in an interview with Fox 4 News.

She talks to women about their health. Dr. Pennington is a medical and wellness expert who teaches how to live with more vitality and purpose. While her conference is sold out, she joined FOX 4 News for a little interview.

Dr Pennington on FOX 4 in KC says Acai is “Life in a bottle”

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Brian often thought that he was the lone voice in San Diego, blogging about mortgages….

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