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COVID 19 April 11, 2020

Posted by shaferfinancial in Uncategorized.
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Because I live in a sparsely populated state and live next to an even more sparsely populated state, I can track the virus cases pretty closely. According to the University of Washington modelers, Vermont is past peak and here in New Hampshire we are basically at peak. So far about half the deaths in New Hampshire are of institutional residents (Nursing Homes, Disabled Home). In Vermont where the deaths are detailed, 20% of all cases are from 2 nursing homes.

This is very frustrating for me, because the institutions of long term care should have been put into lockdown day 1 of this pandemic. I know this is “Monday morning quarterbacking” to some, but it is really what history tells us we should do for our most vulnerable citizens. I find it hard to believe after all we have experienced over the years with pandemics, that this wasn’t the first move. In addition, stay at home orders should have been issued for all non-working folks over the age of 60. I believe there was no need to crash the economy to protect folks. So many people think that “flattening the curve” was about saving lives, when it wasn’t really. In fact, at the end of the day, it will probably cost us lives.

Flattening the curve was an attempt to keep peaks from overwhelming the medical system, but it elongates the curve and when we reach herd immunity. And it is only herd immunity that protects our most vulnerable population. At the end of the day, I might be wrong and this virus behaves differently than all the other virus pandemics, but I think history will prove me right. This won’t be the last virus to reach pandemic status. Are we going to crash the economy every time??????

Yes, there are hot spots that require assistance with more medical workers, equipment, PPDs, etc. But, we have the know how to set up temporary MASH units for these hot spots. And yes, they would have been temporary. The virus will kill folks. That is the bottom line. That is biology or nature. Nature is bigger than us, something we need to admit. People die, something we need to admit.

At the end of the day, will more people die of this virus or from the effects of unemployment, stress, violence, homelessness, etc. that the stay at home orders caused?

Will the governors double down now and continue to issue stay at home orders even when we are weeks beyond peak?

Locally, the town of Hanover is upset because 85 or so students returned to campus (mostly international students). They feel this could overwhelm the town??????? One person quoted as saying having all these “vectors” coming back to town is a terrible injustice to Hanover. No comment on when they closed campus and sent thousands of “vectors” all over the world a month ago. I guess it was OK for colleges to send their “vectors” home, but not when a few students come back to town.

And on one evening the students were caught not social distancing and playing beer pong in their off campus apartment. Gasp…….How long before many more break social distancing requirements? I mean we can just social distance for months and months, right, with no negative effects……..

Maybe we should have given them the anti-body test to see if they are part of the cure (crowd immunity)?

OK…just my opinion and one of a small but getting more vocal minority.

Hearing from many clients lately April 6, 2020

Posted by shaferfinancial in Uncategorized.
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Been hearing from some of my clients lately. They are thanking me for getting them into an EIUL policy. This is typical when we see large stock market drops like we have seen. It is also very gratifying!

Had one client with an interesting point of view and plan of action. This client was a few months short of their 8th year anniversary of their EIUL. They had max-funded their policy, which means making 5 annual payments and then stopping. They had not decreased their face value as of yet.

In preparing for the conversation I ran their numbers and found that they had an average interest return of 8.52%. They had remained in the original suggested option of the S&P 500. Now 8 years ago when we first set it up that was the best option and their 8.5% return suggested it had worked pretty well for them. Since the cap rates for that option have gone down significantly there are several new options added on to their policy that demonstrate better historic numbers. So we discussed changing over to one of those new options.

But, what they suggested was they had a significant amount of cash in a savings account getting a small percentage of interest and they wanted to know if they could move it over to the policy. We found they could. So they are able to leverage their policy as a safe place to put their cash and gain a much higher return. In two years they will have gotten through those 10 years of high expenses and adding in money now doesn’t increase the expenses. So it was a great place to put their money. They are getting up there in years (late 50s) and getting close to retirement so this will up the amount they can take out annually significantly.

As an aside, I tried to talk the husband into getting an index annuity a few years ago as he closed in on retiring. He wasn’t convinced at the time. He could have gotten into a product that guaranteed him 10 years of 7.5% returns every year (as long as he took it as income). Instead he has a significant amount of market risk now. This along with the virus causing him business slowdown has caused him concern. This life insurance policy is their port in the storm and I thought adding in an annuity with the 7.5% with some of their retirement would make it bulletproof.

Finally, the Covid19 virus has caused the cap rates and participation rate for the uncapped option to drop for every policy out there. This is a reaction to the economy crashing and market variance going ballistic. It was nice that none of the clients I have talked to were worried about it, and most thought as I do that once we get the economy back moving the cap rates/participation rates would go back up.

Finally, a comment on the 8.52% my client has gotten inside her policy. I regularly check these out for my long term policies and this is marginally higher than the average I have looked at. The range for long term policies seems to be 7.8% to 8.8%. Note these are actual returns, not illustrated ones.

Got some TIME on my hands……COVID19, March 27, 2020

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In the past I have been unwilling to go beyond posting about financial ideas on this blog.

But, the COVID19 panic has given me much more time to post.  So, I will post, trying to be as apolitical as possible.

The governor of Vermont (a Republican for all you who don’t know) has canceled the school year.  My son is a High School senior at a school in Vermont. He is devastated. At first when he got a 3 week vacation he was pretty happy, but now realizing he won’t get closure with his friends he is pretty upset.

So, why close schools for 3 months?  Yea, I know all about the “curve” and the modeling.

Two news items have caught my attention.

First, an Italian Medical Scientist who advised the government of Italy made a few comments on the death rate in Italy:

“According to Prof Walter Ricciardi, scientific adviser to Italy’s minister of health, the country’s mortality rate is far higher due to demographics – the nation has the second oldest population worldwide – and the manner in which hospitals record deaths.

“The age of our patients in hospitals is substantially older – the median is 67, while in China it was 46,” Prof Ricciardi says. “So essentially the age distribution of our patients is squeezed to an older age and this is substantial in increasing the lethality.”

But Prof Ricciardi added that Italy’s death rate may also appear high because of how doctors record fatalities.

“The way in which we code deaths in our country is very generous in the sense that all the people who die in hospitals with the coronavirus are deemed to be dying of the coronavirus.

“On re-evaluation by the National Institute of Health, only 12 per cent of death certificates have shown a direct causality from coronavirus, while 88 per cent of patients who have died have at least one pre-morbidity – many had two or three,” he says.”


The first part is mostly known.  But think about the fact that 12% of the recorded COVID19 deaths are directly from the virus?????

Here is a little personal story:

My father went into a nursing home at age 95 due to my mother being in the last stages of Breast Cancer and not being able to care for him (my mom was 21 years younger). Most people in nursing homes get few visitors. But, for the 4 years he was in a nursing home we visited him 3-4 times a week (each year we took a 1 week vacation where we couldn’t visit). Every Sunday for 3 1/2 years we went to the nursing home, loaded him into the car and went out to eat as a family.  For the last 6 months we brought him to our house on Sunday for that meal.  He had dementia, but he always knew who I was and who his only grandchild was (He called him “the boy”). He took great joy in hanging out with “the boy.” He walked without a cane or a walker right up to his death (although he was unsteady on this feet the last couple years). Several times he got infections (pretty standard for being in a nursing home) and once he ended up in the hospital for a few days. Each infection made him weaker overall.  There were some workers in the nursing home that suggested we not treat the infection. But, I resisted and instructed the doctors to treat the infection. Maybe, it was wrong, but he was still happy to see us and eat Sunday dinners with us.

An infection is what precipitated his death.  He had a UTI and the staff did not tell us or note it for a few days.  I came to visit him a couple times while he was “not feeling well.” After maybe 5-7 days of the infection, the doctor called me and told me.  Again I instructed him to treat the infection, but it was too late at this point.  He had a heart attack and then after moving to a hospital the final stroke that killed him.

What is the point of this story?  Well on his death certificate it listed MI and CVA (heart attack and stroke) as the cause of death, not the UTI.  Probably should have just listed old age.  If it was in the COVID19 age, and he tested positive, it would have been listed as a COVID19 death.

The second thing that caught my eye was the NY governor saying that they were not denying anyone ventilator care and that some were on ventilators for 2-4 weeks before dying.

Would they have put my father on a ventilator if he was positive?  I hope not, but it sure sounded like it.  My father being in a nursing home with advance directives might have protected him from this, but who knows.

Finally, Ferguson the Brit whose modeling caused much of the panic has released new modeling that moves the deaths in Britain from 500,000 (10 days ago) to less than 20,000 now.  But what caught my eye was him saying that 50% of those deaths would have happened by the end of the year without COVID19 infection because of how sick these people are.  WOW…….now we are talking about the same effect as the influenza.

So, again schools in Vermont are shut down for 3 months.  Gyms, non essential businesses, restaurants, hair cutting salons all shut down.  Stay in home orders. Economy crashed. And the modeling as it gets better data, looks like the flu.

So, I wonder what is going on in New York City that they are running out of ICU beds and ventilators.  And what about New Orleans?? Is this because they have changed their end of life medical decisions?

Just food for thought??????

Maybe all this was worth it?  Maybe not?  But we are down this road and must deal with the repercussions. Maybe the early modeling will prove to be accurate.  Maybe it will prove to be wildly pessimistic.

Protect your assets as best as you can. Deal with your states mandates as best you can. But, keep hopeful and don’t let the media panic you.

Could you have avoided the loss of savings in your 401K? March 27, 2020

Posted by shaferfinancial in Uncategorized.

Of course. If you had read any of my blog you know you could have.
Total losses due to the stock indexes dropping 30-40% from my clients?

That’s right, EIULs don’t go negative, only share in the positive movement.
I’ve written many posts on this.
Time to get off the stock market roller coaster?
Time to get another EIUL?
Time to set up your children for the future?

Think this is the last virus induced panic?

Why I prefer Minnesota Life EIULs…… August 8, 2019

Posted by shaferfinancial in Finance, mutual funds, Mutual Funds for Retirement, Retirement Income.
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I often get asked why I prefer Minnesota Life EIULs.
There are many reasons:
1. Comdex of 95, meaning it is in the top 5% of life insurers with regards to financial stability
2. Past performance is #1 among EIULs.

But there is another reason. I have included a clip from an e-mail I sent to a client today.
Obviously I have stripped any personal identifiers from it.

ML is raising the cap rate on the blended option to 15%.
It also added an uncapped low volatility S&P 500 option to the Eclipse. This was an additional option for the Orion, their latest EIUL product last year and they also added it to most of their existing EIULs at the same time even if you purchased it years ago like you did. That option will now have a 90% participation rate, meaning that you multiple what the index does times .9. This option demonstrates the highest 28 year historical returns of all the options. (Blended is #2).

Finally, I’m not sure if you are aware, but Minn. Life added a bonus onto its EIULs after year 10 several years ago. Again, they added it onto all their existing EIULs even if you bought years ago. That bonus looks at the total interest credits from the 10 years previous years and multiplies it by .01. Crudely calculated this will add about .8% onto the return at your 11 year anniversary because your overall return average is right at 8%.

So, in short, your existing policies have been improved since you bought it and are poised to take off.

I think the uncapped option with the 90% participation rate is one to consider seriously. If we have a market index break down, history suggests that we have rapid increases after that. Since you won’t share in any index downward movement, but will get the benefit of its return that can supercharge the no cap option. Usually the more dramatic the downturn, the higher the following years returns are.

The takeaway from this note to a client is that even after purchasing, Minnesota Life added on several positive options for their existing clients. Something no other company does. Another interesting take away is that this client has averaged 8% over 9 1/2 years of ownership. I find that to be about average for folks that have owned their policies over 5 years.

Minnesota Life continues to be my go to company.

Just for fun, I looked at the 10 year average return for the S&P 500 with dividends reinvested. It was 6.8%. And that doesn’t take into account the large effect that negative numbers do to your overall total cash. In this case, since there have been only 2 negative years in the last 10 (-6.3% and -.7%) the straight index hasn’t been as affected by negative numbers as it usually is, but it’s still returning 1.2% less.

But people continue to believe in 401Ks funded with mutual funds that are pushed by the Financial Planning industry. Next post will be an explanation of why.

On the Misbehavior of Elites/Corporations March 20, 2019

Posted by shaferfinancial in Finance, mutual funds, Mutual Funds for Retirement, Retirement Income, trust.
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Last month a couple of insurance companies, ones that I don’t do business with, added new EIUL products. Both of these products are examples of companies putting out products that are not only inferior to their competition, but goes against the benefits of owning an EIUL in key areas. I am always surprised when things like this happen. It’s like back in 2004 or so when I was in the mortgage business and mortgage companies started to put out the pick-a-pay mortgages with teaser rates that lasted 3 months so they could get people qualified for property they couldn’t afford. I wonder why they would do something so harmful to consumers and would give the whole industry a black eye.

But, then I remembered there are always these folks out there. Ones that are just predatory by nature. They act the way they do because they are pretty sure there will be no repercussions, just like those mortgage executives. In that whole mortgage mess, the only people who were held responsible were a few bad mortgage brokers who took advantage of the rules set up by the mortgage companies and added in outright fraud.

So, where does that leave us? For consumers, it is even more important to deal with responsible folks who have been in the business long enough to recognize the faults within the given industry. When I was in the mortgage industry, I refused to write pick-a-pay mortgages because I knew people got fixated on that teaser rate and refused to understand the total cost of the mortgage, which was higher than the conventional mortgages. I know I lost a lot of business because of it. There was nothing I could say to someone desperate to buy a house, a house way too expensive for them, that is looking at the teaser rate and thinking they will be OK with the monthly amount. They were already into a system where the real estate agent had pushed them into a mania because of rising RE prices, got them to fall in love with a house they couldn’t afford and now the mortgage broker was going to complete the financial death with a bad mortgage that would push them into foreclosure and probably bankruptcy.

Fortunately, the bad EIUL structure isn’t going to push anyone into foreclosure. But, it will give the insurance industry another black eye and give the mutual fund/Wall street industry more ammunition against good products. (another industry full of sharks with no regard for consumers)

There is never a good time for the uninformed or the naive in the financial world. What everyone must do is find an ethical guide to get between them and these large institutions we all must deal with. That in itself is problematic as the consumer has a tough time seeing the difference between a corporate shrill and someone that truly will align your needs with the guide against the large institutional forces. It’s the conundrum of our age. Institutional propaganda plus an army of sales folks aligned in saying the same thing with no place for dissent is what we all deal with. Combine this with government interest in pushing Wall Street plans and you have a mean stew for people to deal with.

Trust is in short supply in our society now as it should be. And that might be the biggest victim in all of this. How can a society function with this loss of trust with each other, our government, our large institutions?

Sorry about this negative post, but it needs to be said. Any thoughts you have are appreciated.

Been spending some time thinking about the future of investing February 27, 2019

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Over the last year I have spent time thinking about the future of investing. No one says I am a fast thinker!!!!! Going forward I am going to write some posts about that subject. Stay tuned as I start to put forward my thinking.

Short note on Bull Market August 21, 2018

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Tomorrow, August 22nd, the bull market will officially be the longest ever in history.
While this event means nothing, you have to realize the market will go down at some point in the near future. Last two downdrafts were both over 50%. Given the length and amount of this bull market, you would think that when it does happen, it will be significant.

More Evidence of Poor Investor Performance July 24, 2018

Posted by shaferfinancial in Finance, mutual funds, Uncategorized.
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Usually, at least once a year, I post recent Dalbar, Inc. results for investor mutual fund performance.  It does get redundant to keep posting the same underperformance for investors.  The vast majority of folks will continue to ignore these results in some sort of “not me” denial of the obvious.

To break things up, here is a bar chart from JP Morgan. They include in their average investor bar the latest Dalbar results [2.6%].  Note which is the second lowest!!

What this chart is pointing out is that the average American who invests in mutual funds inside their 401K/403B/IRA and their home [80% of average American wealth resides in their home] have barely gotten over 3% returns over the last 20 years.  And they have the majority of their wealth in places that are hard to get to without penalties.  There are substantial tax penalties when drawing from a 401K even if you are over 59 1/2,  You have to pay income tax [both federal and state] on those withdrawals. [Roth’s you do not.] And real estate you either have to sell your home and pay a realtor or you have to mortgage your home and pay interest to access your money.

So, not only are Americans getting a very small return, but they have to pay for the right to access their money from these places. And when the average American really needs to get at these funds, like after being laid off or getting sick, the penalties are high and you probably won’t get a mortgage without a job.

Does this really make financial sense?

Feeling more secure now?



Latest on EIULs July 19, 2018

Posted by shaferfinancial in Finance, mutual funds, Mutual Funds for Retirement, Retirement Income.
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It has been 20 years since the Equity Universal Life Insurance product was introduced. The critics have been warning about the impending implosions of the product since the day it was introduced. Yet, none of that gloom and doom has even come close to coming true. We have been through a major recession, “to big to fail” banks, 2 major stock market swoons, real estate implosion [where were the critics on that one?], derivatives issues, and of course many good years. Through it all, the EIUL has not only survived but thrived. The growth rate has been phenomenal.

Even more important is that the product is producing exactly how it was designed too. The internal rate of return on the Minnesota Life product and the North American product [the best two in my opinion over the last 10+ years], has been 8%+. This has been accomplished in what has been a terrible interest rate environment since 2008. Cap rates have gone up and come back down, yet the overall return has been solid overall.

Folks I put into an EIUL over the last 15 years have had twice the return than the average returns of an Mutual Fund. Dalbar Inc. continues to demonstrate serious underperformance from folks in mutual funds whether inside an 401K/IRA wrapper or outside the wrapper. Note that his continues in light of almost 10 years of up years in the stock market. What is it going to look like when we have the inevitable down draft in the stock market?

I was recently asked about the future of EIULs. I think the future will look closely like the past 20 years. Overperformance compared to the government/Wall Street pushed retirement plan. Significant tax savings during your retirement years. Protection against sequence of return risk.