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Gettin Ugly
I got into a bit of an Internet tussle with Marketwatch 666. This was another of those posts from the defenders of Social Security, and like most of these articles, this one fell back on an old tired line. The author quoted Ronnie Reagan: (I wanted to barf)
Social Security can’t add to the deficit.
So I dashed off a comment:
Social Security does not add to the deficit. Ronnie was right.
Social Security DOES add to the DEBT of the country.
Both statements are true. Which one is the one to focus on?
In 2013 the answer is that it is the debt that matters, not the deficit, and SS is adding to the debt.
The author, R.J Sigmund, comes right back with: (and I’m grabbing for the wastebasket again)
Bruce, the debt is not a problem....the world economy is suffering from a shortage of safe assets, and the only way to alleviate the shortfall is to increase the debt
Then he goes on to add:
you've conveniently omitted the fact that it also earned more than $117b in interest on the government bonds in the trust fund....
I love it when this happens; folks playing “gotcha”, not even understanding the facts. I come back with my standard response:
Careful where you go with that interest income line. Interest is a NON CASH ITEM. SS needs cash to make benefit payments. So SS has to hock its bonds with Treasury to come up with the CASH needed. Treasury, in turn, must borrow from the public to fund the SS shortfall.
I told them to go to SSA, and look at the bottom line results at SS for 2011:
Every penny of the $45.379B cash shortfall had to be borrowed by the Treasury. Treasury did that by issuing more Debt to the Public. I added some number about what's in store for the future with cash deficits at SS:
2010 SS deficit = $47B,
2011 SS deficit =$48B,
2012 SS deficit = $60B,
2013- 2023 SS deficit = ~$1T
Anyway, I doubt I changed RJ's views on this too much. This is an emotive topic, and I suspect it is going to become more charged in the weeks to come. It’s very hard to have a debate with someone who starts with, “debt is not a problem”. It’s even harder when the debate is ended with:
...so take your ranting back to zero hedge, where you might find some other chicken little types who'll buy into your theories...
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And you're telling ME to say something intelligent??
Your fucking foot is so far down your fucking throat right now that you'll have to wipe your ass to trim your toenails.
How's that for intellect you Keynesian fucktard?
You're either a really bad troll or a complete fucking fullretard lemming...
Omen...how fucking fitting. Groupthink asshat.
why not respond with something intelligent ? is that too taxing?
It is actually the increasingly rapacious and tyrannical government which you so dearly love that is "too taxing".
not really - marginal tax rates: 91% individual / corporate 48% / estates +60% ------1955!
prove tyrannical show me?
"prove tyrannical"
Interesting that you say this in the same breath as bitching about the MIC.
You reference a meaningless data set. Marginal tax rates are totally irrelevant. Show me the effective tax rates because that's what people / corporations / estates actually pay.
Marginal tax rates are totally irrelevant. Show me the effective tax rates
This is one of those things that always gets quoted when someone mentions tax rates from the Eisenhower period, but no one actually believes it, or you'd be demanding that taxes be *increased* on guys like Warren Buffett and Mitt Romney.
Their "marginal" tax rates are just fine, but their "effective" tax rates are very low--so why is it that if someone suggests Romney or Buffett should pay higher taxes that we always get a ration of bullshit about "tyranny"?
It's a bit too transparent a ploy to take seriously in these discussions. There's no reason to be hypocritical here.
In response to your comment about Krugman???? LOL
The word you're looking for is MOOT!
Krugman is a nobel laureate and a serious editorial writer for the NYT -- so im in good company - thank you!
MDB, is that you?
"Krugman is a nobel laureate and a serious editorial writer for the NYT -- so im in good company - thank you!"
Ok MDB, it's a little obvious sometimes, be a little more pro with teh trollinz.
Sounds like Krugman or any other central planner who thinks they know how to forecast 20 years 40 years out. Wow, read much Omen? There are things called black and gray swans. Charts sometimes change direction without notice.
CALL your local life insurnace agent and he will give you a policy for 50 years forward - what does that mean to you?
It means to me you will always find someone happily lying to you by making promises they or the system cannot keep.
However it is still your task and your task alone (no one else to call!) to determine if you believe those promises.
For the 50% commision he will tell you anything you want to hear.
Bit like Krugman,only he is much cheaper.
50 years of counterparty risk. No thank you.
What does it mean to you?
Mass Mutual and Northwestern Life - both "Best Rated" top tier and both Mutuals - have performed flawlessly and the cash values are substantially "higher" than projected when i bought them in 1982 and 1983 and 1986 all yield greater than 7% year in, year out
they do the same program today for young guys who understand risk - obviously if the cash value is greater than 40 years ago projection someone understood risk !!!
good mutual life insurance companies are few and far between but a solid low risk versus the alternatives
Hey, Northwestern Mutual is a counterparty to me as are Prudential and Met Life (yeah, I'm diversified - boo yah), but the annuity product is a lousy financial investment if you have a capital markets background.
Anyway, I am in it for the full payout option, which I fund but will never see!
Your "solid" low risk investment is a mis-leading perception, as their investment portfolios have to continue to go up the risk curve (whether that be by duration, credit quality or liquidity/asset class) in a ZIRP Yield Curve environment just to maintain the same yield.
Therefore, our counterparty risk is growing every day ZIRP is in place but without a comparable payout tradeoff in the form of increased benefit to me (my heirs).
It's a royal shafting, and Bernanke is the one responsible ! (and we haven't even factor REAL returns on investment into this question)
Hey, Northwestern Mutual is a counterparty to me as are Prudential and Met Life (yeah, I'm diversified - boo yah), but the annuity product is a lousy financial investment if you have a capital markets background.
Anyway, I am in it for the full payout option, which I fund but will never see!
Your "solid" low risk investment is a mis-leading perception, as their investment portfolios have to continue to go up the risk curve (whether that be by duration, credit quality or liquidity/asset class) in a ZIRP Yield Curve environment just to maintain the same yield.
Therefore, our counterparty risk is growing every day ZIRP is in place but without a comparable payout tradeoff in the form of increased benefit to me (my heirs).
It's a royal shafting, and Bernanke is the one responsible ! (and we haven't even factor REAL returns on investment into this question)
Well, my whole life insurance policy from MassMutual has performed far from flawlessly and the cash value is subtantially "lower" than when I purchased it in 1990 at the age of 28. Cash value $38,000+ and death benefit $133,000+ below projection on a $500,000 policy.
Suffice it to say, my policy has been shit as an "investment" on an absolute and relative basis.
Funny thing, I have long thought that the life and especially health insurance companies were the real 'red line' during the initial crisis in 2007. For one thing no one talks about them. For another thing, much of their business model involves investing premium cash. In what? Why, mortgage-backed securities and other toxic waste, just like everyone else.
If the life insurance companies were allowed to collapse it would be like a knife in the heart of 'normal' Americans' concept of security--one of the last kitchen table, rock solid assets in peoples' minds.
If the health insurance companies were allowed to collapse....LOL....would there be any hospitals or doctors open the next day?
Here, gentle ZHers, is one of the truly deep mysteries of the Long Crisis and the Japanification of America. The insurance industry, I posit, could not survive one day of mark-to-market. If those rules weren't suspended all Hell would have indeed broken loose. And the insurance bailouts, like the state bailouts, pension fund bailouts, and random giant financial institution bailouts, remain as giant 'black swans we should see coming a mile away'. The shoes waiting to drop, which rob any nascent recovery of momentum...and are in the end the very essence of Japanification. Every time you stand up, another bite to the hamstring.
Zombie insurers. What, exactly, is in their investment portfolios?
Bruce, figure that one out willya?
Omen, I am digging your perspective. But, better watch those investments!!! I know someone who invested billions for Northwestern, now a Treasury official, and let me tell you there is NO pixie dust in the portfolio. The risks are as real as anywhere else. As are the dirty tricks. And the MBS.
I believe you are absolutely right. Actually, that was one of the things Paulson used to scare the bejesus out of Congress to get them to approve TARP. He spoke of truckers who wouldn't deliver food to inner cities because their insurance would be gone, rail lines forced to shut down, etc.
Bernanke has "helped" clear out a lot of that detritus, with IBs taking their usual cut in the middle. Still, look at insurers' hurdle rates and then try to guess the return on their portfolios. ZIRP isn't helping any. Japanification, indeed.
They're going to be even fewer and farther in between thanks to living in a ZIRP World.
Every last one of them (along with any other entity requiring low-risk, interest income) is going to starve to death in this environment (well, the ones that aren't de facto nationalized along the way, that is).
You should be asking yourself how supply and demand for these "safe" investments have diverged so greatly, and what that means to the system as a whole. But I guess as long as you believe them to be safe, due diligence is not necessary, "Because hey, it worked yesterday, and it's gotten us this far!"
ace i have done my due diligence for 40 years - these two firms are BEST rated first tier every year forever - they have wide ranging portfolio - if you want to discredit them then show me why?
there is NO analyst that is calling them - shit - no one - these institutions are not Prudential or the major banks or the causality cos - whole different class - i have had policies since 1965 and the balance sheets and asset quality have always been there
can the yields go down sure due to prevailing rates sure but they measure those risks and act accordingly in new policies - Mutuals are owned by the policy holders - different game
This thread has been quite interesting. In my line of work I have encountered lots of life insurance salesmen from all the insurance companies including Northwestern Mutual and Massachusetts Mutual. And while I concur that they are the consistently best rated life insurance companies the most fitting analogy I can think of is the "cleanest dirty shirt."
What you're ignoring is the systemic risk. Additionally, i don't think there are nearly as many young professionals who can pay in premiums for decades as in decades past. Current professionals are so saddled with student loan, mortgage and credit card debt not to mention a high cost of living that they can't find the cash for those kinds of premiums. Likewise the number of young professionals married is dropping precipitously which means they have less use for life insurance in general.
The life insurance companies will be one of the first ponzi's to collapse in the ZIRP environment. If I truly thought that there was a way that this whole economy makes it my lifetime without economic collapse I would find some money for some whole life insurance.
Northwestern $400 million gold in June 1, 2009. They are not totally stupid. If they did not take delivery then they are stupid.
I think life insurance companies will hold up. They are really the last line in the sand for a first world economy. The banks woul dfail first. Many of them own commercial real estate, corp bonds, etc. If Life companies sink then it is a total reset.
Since we seem to be turning more and more into a third world bananna republic by the day I would say that it seems quite possible to me that the banks and the life insurance companies could go tits up. Even if they don't immediately and are bailed out once again, eventually our dollar denominated assets won't be worth shit.
Can someone substantiate any German life Insurance companies and large banks that went under in Wiemar? Cause f-ing Wiemar or Zimbabwe is where we eventually end up in case you can't read the tea leaves.
I think at some point in the next 20 years we will live through or die during the great reset.
Oh my God, you sell annuities, don't you?
Fair disclosure- I debunk annuities for clients. Most are crap. SSA is definitely crap unless you're already in, but there's no way out of SSA. Like all ponzi schemes, the later you get in, the worse. And it's getting pretty damned late.
I can almost smell the funk of an annuity salesman from here.
Omen - ok, I think we will just disagree and say I am happy you were on the right side of the trade.
If you like reading, I suggest you sit and read "Black Swan" or "Fooled by Randomness". They opened my eyes.
read his new book - antifragile much better than those
It finally came out? Thanks. Going to amazon right now. I am very excited about this topic.
Ok - now I know you are putting us on. Lots of fun for a Wednesday. MDB would be jealous.
**edit
Or maybe is this Joe Brusche? He has not posted in awhile?
if you are not having fun why do it? truth is i dont give a fuck about much of anything anymore - taleb speaks to "opinions only valid that are not responsible to anyone - as being truly free"
anyway Taleb is very bright guy extroadinary mind that requires - at least for me - high level of concentration as you go thru this read - so many applications to his theories about decision making
enjoy the book!
I am here to learn as the main objective and most of the time it is fun with some growing pains mixed in. They are typically WTF moments.
I am wondering why you got junked here on this reply. ZHers have their ways.
Omen, log back in as MDB...you're funnier with the little Christmas hat!
Omen is an insurance salesman or works/ed for an insurance company. They are the only ones who know the returns on better whole life policies from mutuals. The returns are quite good for the better companies in the 7% range and a few can almost push 8%.
FYI to others - Northwerstern Mutual Life bought $400 million in gold in 2009. I think the only one that ever did. They bought it around Jun 1, 2009 or around $950 an ounce. I hope they took delivery.
Interest rates are like the blond with crimson lipstick driving a convertable beemer-- the bus t-bones her and as it careens over the divider the screaming Chinese tourists spot a stunning yet bloodied leg, lying a few feet from her decapitated body. ;)
LOL! The USSA is smoking a lot worse than her old BMW in Bruce's dream or whatever that was. ObamAmerika is about to throw a rod.
No "Marvel Mystery Oil" can save ObamAmerika.
She was actually not T-bonned she was rear-ended. Nonetheless, both expessions have similar connotation. The same connotation for those who would choose SS benefits rather than anything else if available.
Yes! the break even point is accelerating faster and faster. Using game theory, It's a loosing proposition no matter how many "seasonal adjustments" (s/) you make.
Did you even read the post? Bruce must get tired of folk like you.
You think you bought a SS Annuity? If so, worst fucking annuity ever sold. Anyone else trying to sell an annuity like this would be in jail. Unless of course you raised money for Obama.
"Did you even read the post? Bruce must get tired of folk like you."
Ha,
Bruce must be used to folk like (you).
He IS like "talking to a wall." (CaliGirl)
Nobody "bought" a SS annuity. It was forced down our throats at the point of a gun. Yes, it's a bad deal for the average middle class working stiff. So's a lot of things. Some people win, some lose. Your granddaddy shouldn't have voted for FDR.
Did you even read the post? Bruce must get tired of folk like you.
You think you bought a SS Annuity? If so, worst fucking annuity ever sold. Anyone else trying to sell an annuity like this would be in jail. Unless of course you raised money for Obama.
I am pretty sure Omen IV flunked math and common sense. You can't have an intelligent conversion with a wall so why bother.
I didn't buy anything. I was forced to pay for this unfunded annuity for over 50 years. I never hear them talk about cutting back on food stamps, aid to dependent children, section 8 housing, daycare allowance and the refundable tax credit. The silence is deafening.
Benefits for the young, black and brown are sacrosanct. Retirement benefits for the old, 90% of whom are white are being taken away.
Sorry folks but this is racial politics pure and simple.
And it is going to get a lot worse.
Points towards the demographics of voters is changing, doesn't it?!?
It certainly points to the voters who are the weakest and most easily confused about the reality around them
Judging from the up/down arrows, that would include most ZH readers.
Teaser,
I'm sure you are correct, but I am very pleased with the ten years of annuity payments received thus far, since I feared, while paying in, that I would never receive a cent.
I hope everyone does as well with ' worst fucking annuity ever sold'.
No, I did not raise raise money for the president you re-elected
Respectfully, om
Looks like Omen's session in room 101 was a total success.
How many fingers am I holding up Winston ?