A recent article in the Wall Street Journal entitled “Haven Treasurys Harbor a Risk” caught my eye.
I had thought that Treasury bonds were supposed to be the gold standard for investment safety. The financial safe haven to the world.
If Treasurys are risky, then what could be a safe place for an investor to put longer-term money that generates an assured investment yield?
The WSJ article started off with the view that long-term Treasurys appeared over-valued at their recent record low yield. The argument appears to be that government bonds are too “richly valued” and therefore they should be treated as a risk asset.
There is considerable controversy over whether low bond yields reflect the likelihood of rising inflation and low economic growth as against what some economists see as an alternate reality of low inflation and increasing growth.
Contrary to economic predictions and analysts forecasts, bond yields have confounded “nearly all the experts” by continuing to fall.
The article also mentions that the stock market’s climb “looks equally fraught.”
In the same WSJ, another article, “BlackRock CEO: Investors Are Retreating to Sideline,” related that as to investors “They are afraid and they are pulling back.”
Of course, they are.
Investors are not as stupid as Wall Street and the Federal Reserve hopes they are. They realize they are caught up in a game they don’t control where the rules and costs are rigged against them. They feel that they are gambling, not investing.
This is an investment casino owned by Wall Street, which gets its cut of the table action no matter whether the market or interest rates go up or down.
If investors are pulling back, then where should they be placing their money?
Let’s think about this.
What financial product is designed specifically to shift economic risks to a financial institution where solvency is the primary requirement for licensing?
There is only one. That is cash value life insurance.
Wall Street can’t even come close to doing what cash value life can provide an investor looking for a financial safe haven. When it comes to solvency, mutual insurance companies can run circles around any of the big Wall Street banks or brokerages.
Cash surrender value life insurance is a financial contract which has a lot of benefits, but a very low, perhaps the lowest, risk of loss. By contract returns have minimum guarantees.
Mutual companies are owned by the policy owners, and the profits of the company are credited to the policy as dividends.
Effectively, insurance companies are in the best position to efficiently execute a buy and hold investment strategy. And at low cost.
Then there are the tax benefits. The income on investment build-up under the policy is tax-free. The face value of the policy, if a death occurs, is paid out tax-free. The cash surrender value can be accessed by borrowing tax-free.
Even inflation can be tamed since policy riders can provide for inflation protection.
How safe is cash surrender life insurance?
It is safe enough that it counts as Tier 1 capital for the Wall Street Banks and the Federal Reserve. It represents one of the largest items of their capital.
Banks are restricted by statute in the amount of cash surrender value life insurance they can use as Tier 1 capital. If not for that, It is likely that it would be an even bigger capital item on their balance sheet.
Are you an investor looking for a financial safe haven? May be it’s about time you looked into putting that sidelined money into cash surrender value life insurance.
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