We look forward to the Van Mueller newsletter every month. It's chock-full of sound bites, sales tips, and eye-opening statistics. Here are our favorite parts of the June 2017 edition. We're sharing the full introduction, and 2 of the 7 monthly sales ideas. If you like what you read, we encourage you to click here and become a subscriber.
Reprinted with the author's permission.
June, 2017 – 7 Ideas and Views Newsletter by Van Mueller
If you had started with an investment of $100,000 in 1987, that value would have dropped to $73,000 after the crash of 1987.
If you would have remained invested that $73,000 would have grown to $421,000 by January of 2000. The 90's were one of the hottest decades in the history of the stock market.
Again, if you had remained fully invested your $421,000 would have decreased to $126,363 by July of 2002 during the Dot Bomb Crash.
Staying fully invested, that $126,363 would have grown to $237,562 by October of 2007.
After the Credit Crash of 2007 and 2008 that $237,562 would have decreased to $104,527.
Staying fully invested after the government stimulated with TARP and all other stimulus used during the last eight years, your $104,527 would have rebuilt itself to $318,808 today.
If we have another crash and the market loses 30 percent that number will decline to $212,538. If the market declines by 50 percent, that number will reduce to $159,404.
Your original $100,000 would only have doubled over the last 30 years for an average return of around 2.5 percent annually. That is before taxes and fees.
Your original $100,000 would only have doubled over the last 30 years for an average return of around 2.5 percent annually. That is before taxes and fees.
If the market loses 50 percent in the next downturn, you would only have 60 percent of a double in 30 years for an annual average return of approximately 1.5 percent.
These numbers could be worse. Why? Because many people lost extensively before exiting the market. Then, being fearful they did not return to the market to enjoy the following growth until very late in the cycle. I believe many Americans have still not made back what they lost in the 2000 to 2002 crash and the 2007 and 2008 crashes.
Now, let's examine what happens to the same $100,000 in 1987 if you miss these three crashes.
From November of 1987 to January of 2000 your $100,000 grows to $416,470.
From July of 2002 to September of 2007 your $416,470 grows to $782,963.
From March of 2009 to the present your $782,963 grows to $2.12 million dollars. Amazing!
Now, will anyone get this part exactly right? No. However, does this provide a methodology for buying low and selling high? Would this strategy have worked far better than staying fully invested?
Is this timing the market? I would argue this is not. We are not adjusting for every little market turn.
These are essentially five course adjustments in 30 years with a sixth about to happen.
What if you could develop a strategy that would help your prospects and clients lose little or nothing and have access to their money, liquidity, to take advantage of the downturns after they happen. Couldn't that strategy be performed more confidently?
What if you could develop a strategy that would help your prospects and clients lose little or nothing and have access to their money, liquidity, to take advantage of the downturns after they happen?
Think about this: That initial $100,000 invested in 1987 is currently valued at $318,808. Even without a crash that money tripled over a thirty year period. Using the rule of 115, that is, how many years it takes for money to triple the average annual return would be less than 4 percent.
There are many fixed interest investments that I could have offered my prospects along that 30 year journey that would have yielded more than 4 percent without any of the risk.
A life insurance or annuity strategy that keeps the money safe during downturns yet allows withdrawals to take advantage of positive market moves is perfect for the times we find ourselves in.
Remember, life insurance is NOT the investment. It is a foundational product that you use to make the above strategy work for your prospects and clients. It essentially allows your prospects and clients to have successful outcomes whether they live or die and under any economic circumstance, with beneficial income tax treatment. What could be better?
Here are a couple of easy ways to explain our country's and the world's economic predicament easily. Later in the introduction I will go into more detail.
Let's start with global debt. In 2007, the world debt total was $142 trillion dollars. By 2014, just seven years later, that debt had risen to $199 trillion: An increase of $57 trillion or 40 percent in just seven years.
It is three years later and the world debt has increased to $300 trillion. This is a 50 percent increase in just three years. It is that increase in debt that is sustaining our stock, bond and commodities markets. That debt must be serviced. You are beginning to see bankruptcies everywhere. And it is not just companies, it is countries that are going bankrupt and that will continue.
It is three years later and the world debt has increased to $300 trillion. This is a 50 percent increase in just three years. It is that increase in debt that is sustaining our stock, bond and commodities markets.
The World Economic Forum just announced that they believe there is a $400 trillion savings shortfall by 2050. I will have that as one of the month's sales ideas.
Our own Social Security Board of Trustees say the trust fund backing Social Security will be exhausted by 2035; this after an eight year bull market. If we have the downturn that is expected, that year could be moved up to as soon as 2025. Proposed House legislation, (the Social Security 2100 Act) would increase the FICA tax from 6.2 percent to 7.4 percent and would completely phase out the $127,200 ceiling on earnings that are subject to payroll tax. That is a tax increase of 19 percent on every working man, woman and child in the United States.
This is the greatest time ever to be a life insurance agent. Our government will require more and more revenue in the future. Even President Trump's current budget is not a decrease, it is an increase. Our current budget is $4.062 trillion. The president's budget is $4.094 trillion. The annual deficit will begin to approach one trillion and will rise exponentially in the years ahead.
It will be harder to save for the future. It will be harder to pass on wealth. The government will require more and more tax revenues.
What a great time to be a life insurance agent.
Life insurance is pennies that buy dollars: Really, pennies that buy dollars. Or life insurance is one dollar doing the work of many dollars. Those dollars take care of your family or business or charity if you die too soon. Life insurance dollars are self completing if you become disabled and employ waiver of premium. Life insurance provides dollars if you have a critical illness like a heart attack, stroke or cancer. Many policies have terminal illness benefits that will pay even before you die so you can help those you love that are left behind to arrange their affairs in the most beneficial way. Finally, the most important benefit going forward will be the long term care benefits provided by life insurance policies. Insurance companies have struggled to properly price long term care policies, but have provided quality long term care benefits on life insurance policies that they can afford as companies.
Life Insurance Will Be A Vitally Important Product In The Decades Ahead.
If the debt increases again, and it will, it should not take long for the world to be $400 or $500 trillion in debt. We are very close to an economic calamity.
If the debt increases again, and it will, it should not take long for the world to be $400 or $500 trillion in debt. We are very close to an economic calamity.
If we can get to every grandma and grandpa in America and show them how their dollars can be leveraged without giving up control of their money we can dramatically offset the damage being done by our governments.
The second idea is even simpler. Remember, the simpler you make the idea the easier for prospects and clients to understand, the bigger the sale.
You can get the foundational information for this discussion at the website www.usdebtclock.org. It shows there are currently around 50 million people on Social Security. We are struggling to come up with the money to provide Social Security and Medicare to these 50 million people.
Around 13 years from now, in the year 2030 we will have between 80 and 90 million people receiving Social Security and Medicare with 70 percent of the Baby Boomers turning 65 between 2022 and 2029. These requirements occur in a little more than a decade. Where will the government get the revenue to meet those financial requirements for Social Security and Medicare?
Remember, when you are talking to someone who has money, ask them these questions:
- Do you know that 50 percent of Americans arrive at death or retirement with nothing saved?
- Do you know that 70 percent of Americans arrive at death or retirement with less than $28,000?
- Did you know that after an eight year bull market, 90 percent of Americans still have less than $115,000? And, according to Fidelity Investments the largest 401K provider by triple, they just reported that the average 401K balance at their firm is $92,500?
Ask your clients a few more questions and you will inspire them to take actions.
First, ask them if they live to age 95 and they only have $92,500 in their 401K, what kind of retirement will they have?
Next, and this is very important because people do NOT think about this, ask your prospects and clients who have money this question: If the government will desperately need more revenue in the future, will they get that money from the 90 percent of Americans who have no money or from the 10 percent who do? If you're in the 10 percent are you okay with the government coming and taking your money to take care of people who were not willing to save and invest the way you did?
Then, and have some fun here; ask them if they think the government is stupid? They will laugh a little. Let them know you are serious. Doesn't the government know we have ways to reduce or eliminate future taxation? If they need more revenue, how much longer will they allow us to use these strategies? Won't the only people who will be allowed to use these strategies be the ones who already have them? Do you want to be controlled by government or would you like to be in control of how much they take? Aren't you running out of time? What would you like to do?
It's all questions. I am helping my prospects and clients reason out what choices they should make to stay in control of their financial futures.
It's all questions. I am helping my prospects and clients reason out what choices they should make to stay in control of their financial futures.
Both of the preceding examples are easy to understand. They are easy to verify and they will cause serious issues for our prospects and clients.
Don't Assume Your Prospects And Clients Are Aware Of Any Of These Issues. PLEASE ASK THEM.
You will open so many cases you will not know what to do.
Because I believe the economic disaster is closer than ever, we will be discussing more economic issues and how to ask prospects and clients about their investments, retirements, businesses, etc. I believe this event is finally here. It should occur this year or early part of 2018. We must help our clients be prepared.
Here are a number of issues that we as insurance and financial professionals must make aware to our prospects and clients. The list is enormous. We will be talking about these issues for the rest of the year.
Our goal is to bring attention to these issues. Then ask prospects and clients if they want to be protected from the harm they would cause. More important and here is where the sale will always be made; what if there was a way to even take advantage of these occurrences? Wouldn't that be powerful information?
People don't buy bad news. They do buy opportunity. We only use the bad news to get their attention. We then ask simply; what if you were never hurt by bad news again and better than that, what if you could take advantage of that news rather than being hurt by it? Wouldn't that be an amazing strategy?
People don't buy bad news. They do buy opportunity.
Here are some of the bubbles we are concerned about:
- Housing Bubble – The United State, Canada and China are all facing serious housing bubbles. China's is considered to be the biggest housing bubble in the history of the world. Housing prices in Canada, especially in Toronto and Vancouver are off the charts. There is also an enormous amount of speculation in the US housing market. Many analysts are predicting crashes.
- Debt Bubble – The whole world is in debt up to their eyeballs. This will not diminish. It will increase dramatically. I don't want to be repetitive but China appears to be the biggest debt bubble in the history of the world. Nobody is sure what will happen when this debt bubble bursts; but all agree that it will not be good.
- Corporate Debt Bubble – In the next three years quite a bit of this debt has to be refinanced. Quite a bit is expected to default. It is believed there will be $1.5 to $2 trillion in losses in the next three years. What impact will this have?
- Commercial Real Estate Bubble – How much commercial real estate needs to be refinanced in the next four years? Almost all of it! How many of these properties won't appraise out because they don't have tenants? How many vacant units so we see all over the country? This will be astonishing!
- Silicon Valley Bubble – Everything in Silicon Valley is overpriced and when the crash comes, an area like this will be devastated. Bubbles usually burst in a bigger fashion than they did previously. They essentially revert to their mean prices.
- Tech Bubble – Many analysts fear we are seeing another bubble like the one that burst between 2000 and 2002. Many stocks have prices that are not supported by real earnings. When people start to realize this they will head for the door very quickly.
All of the above is complicated by the fact that stocks are being purchased using more margin than ever in history. Now over one half trillion of margin is being used. Can you spell disaster?
In the United States we have very serious issues to be concerned with. Student loan debt is now at $1.4 trillion and rising. More and more of that is in default. Over one million people have not paid anything on their student loans in over a year.
Auto industry debt is now at $1.1 trillion and rising. Much of it is subprime debt. That will never be paid back. It is conceivable that we will have to bail out General Motors and Chrysler again and this time we will have to add Ford to the list.
Credit card debt is now over $1 trillion dollars. We are essentially back to where we were before 2007 and 2008.
Many people now have enormous medical debt because of the much higher deductibles and lower co pays on health insurance. This amount will increase exponentially as we continue to diminish the quality of our health insurance.
Finally, pensions in our country are a mess. Chicago's workers pension only has enough money to last seven more years. Most pensions at the state, county, city and municipality level are dramatically underfunded and getting worse by the minute. I believe Americans will go crazy when they find out what terrible financial shape all of these pensions are in. I even believe this information could be the surprise contributing factor to the next downturn.
Let me be very clear!! None of this is bad news. None of this is good news. It's only news. There is no end of the world scenario here. If you plan and prepare using this information it is the opportunity of a lifetime. If you don't plan and prepare your finances will be devastated.
If you plan and prepare using this information it is the opportunity of a lifetime. If you don't plan and prepare your finances will be devastated.
Ask them if they would like to live during a time when they were dropping real atomic bombs or would they like to live now when we just have stupid government? They will always choose and understand the latter.
Also, be very clear. We will fix this. It will be fixed by tremendous leadership or it will be fixed by the uncontrollable forces of economics. But assure them, it will be fixed. Please remind them that the richest generation by age group is grandmas and grandpas. They lived through the Great Depression. They became wealthy because they were great savers, not great investors and they learned to live within their means. That will happen again after this next downturn.
Our industry sells the greatest savings vehicles in the history of the world. It is an exciting time to be in our industry.
There will be many great opportunities in the months and years ahead. If you read the newsletter faithfully, I promise I will share as many of these opportunities as I can with you.
Let's get started with this month's ideas. Each one used in addition to the newsletter introduction will help you to develop questions that will help you get in front of many more people and open many more cases.
THIS IS IMPORTANT!
You cannot just read the newsletter. You must try the ideas on real people so you can become conversational with the questions.
You cannot just read the newsletter. You must try the ideas on real people so you can become conversational with the questions.
These are learned skills. All that is required is practice. Let's get started with the first idea.
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We're passing on two of the newsletter's monthly sales ideas - every issue of the newsletter contains 7 ideas, plus one idea for the Canadian market. Subscribe to get them all.
Idea #1: Milliman Medical Index
Every year in May since 2001 Milliman Medical Index provides the average cost for a family of four for healthcare in our country.
The average in 2015 was $24,671. It rose to $25,826 in 2016. The new number is $26,944. The report shows how costs have tripled in the last fifteen years. If those costs triple again over the next 15 years, the average American family will need $81,000 per year just to have access to quality healthcare in our country.
Obviously, you share this information with every younger person to inspire them to save for the future. This is a great example of the impact of inflation on future costs.
The most beneficial use of this information is sharing it with the grandmas and grandpas of our country. People don't usually buy life insurance unless they can discover a good reason. That reason for grandma and grandpa is to offset the increased cost of healthcare for their children and grandchildren.
Just ask them this question, “If I could show you a way to stay in complete control of your money until you take your last breath, but instead of giving your money to the government, hospital or nursing home, you could keep that money in the family for generations to come, would you talk to me about it.”
They will always say “Yes.” This gives you a reason to discuss preserving, safely growing and even leveraging their money. Try it! It works!
Title: Milliman Medical Index: Typical American family faces $26,944 in annual healthcare costs
www.prnewswire.com (PRNewswire, May 16, 2017)
http://www.prnewswire.com/news-releases/milliman-medical-index-typical-american-family-faces-26944-in-annual-healthcare-costs-300458524.html
Idea #5: Banks Getting Weaker, Not Stronger
The top 6 banks in America have exposure to $251 trillion of derivatives. These same 6 banks have assets of $8.4 trillion. Only 3.4% of these derivatives have to default and our 6 biggest banks are bankrupt and we would have to bail them out.
Derivatives are okay when the stock market is increasing and there is no upset in our economy. They are weapons of mass financial destruction when markets and economies explode. Liquidity dries up almost immediately. We probably couldn't print enough money to bail out the banks with this massive amount of exposure. This is a real problem.
What is a derivative? It is essentially a bet. These entities are betting on the movement of all parts of the economy. Do people ever make bad bets? They sure do. This is very dangerous.
Title: The Big American Banks in 2017 Are Weak, Sparking a Banking Crisis
www.lombardiletter.com (Lombardi letter, May 18, 2017)
https://www.lombardiletter.com/the-big-american-banks-in-2017-are-weak-sparking-a-banking-crisis/10171/
Title: The Dangerous Secret Behind Banks' Earnings Report
(Wall Street Insights & Indictments, April 14, 2017)
http://wallstreetinsightsandindictments.com/2017/04/the-dangerous-secret-behind-banks-earnings-reports/
Title: Financial bubble to BURST: Top US banks have 'TRILLIONS of derivatives exposure'
www.express.co.uk (Express, May 17, 2017)
http://www.express.co.uk/finance/city/805752/US-banks-derivatives-exposure-financial-weapons-mass-destruction
Title: Top derivatives lobbyist warns on turning liquidity pools into puddles
www.fnlondon.com (Financial News, May 9, 2017)
https://www.fnlondon.com/articles/top-derivatives-lobbyist-warns-on-turning-liquidity-pools-into-puddles-20170509
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