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Joe McGrade

Dealing in death

In the words of the late and fictional Sal Tessio, “it’s just business.” This is the mantra of the leaders of a group of investments which, while potentially adding security to your portfolio, have been making the public’s skin crawl. These investors have been labelled “Angels of Death” and preach the stability and profitability of life settlement funds.In a life settlement fund, investors purchase the right to hold someone’s life insurance policy so that they can collect the value of the claim when the seller passes away; typically this transaction takes place between large life settlement funds and elderly policy holders who are looking for short term cash. The fund continues to pay the insurance premiums on the policy for the length of the original holder’s life and receives the entire value of the policy upon their death; in short, the longer they live, the less profit the fund makes.Although the idea of making profits from mass deaths across countries is enough to put many investors, or human beings, off, there are in fact many benefits to having these funds in your portfolio. Firstly, the biggest benefit to this type of investment is the potential to hedge against market fluctuations. Life settlement funds derive their returns from cashing in life insurance policies, not market price fluctuations. Once a policy has been purchased, the value of the payout is known up front. This means that if the market dips, your life settlement fund, in theory, shouldn’t be affected. In short, the question isn’t one of “if” a return will be paid, but a question of “when.”Not only does this instrument’s isolation from standard market forces make it attractive, but past performance and returns do as well. Life Settlement Funds reported in June of last year that their standard life settlement holdings… Read More

Commodities review

Gold and oil, which only a few months ago showed steady and rapid growth, are trading today well below highs reached earlier this summer. Gold is hovering just below $1,700/oz, having fallen nearly 15% in the last 30 days, and oil is not faring any better. Crude barrels are trading at around $80, down from a high of $100 earlier in the summer. Commodities in general are falling; not only gold and oil, but copper, silver, and others as well. What is the main driver behind this across-the-board loss of ground? It all goes back to a lovely European nation on the Mediterranean Sea.After running massive deficits for a decade of relative economic prosperity, Greece faced nearly untenable debt obligations when the recession hit global markets. The Eurozone debt crisis has been ravaging markets and EU politics ever since Greece first requested an IMF/EU bailout package in April of last year.Since the beginning of the crisis, policy makers have been moving to implement austerity measures, which, when coupled with the enormous influxes of financial aid from other EU nations, were designed to move Greece into a more stable economic situation. With these new austerity measures in place, including the denationalization of companies and selling national property, an increase in taxes for anyone with a yearly income of over €8,000, additional taxes for citizens whose yearly incomes exceed €12,000 , and an overall reduction of government spending, it seemed as though stability in the Greek economy was in sight.But the Greek government announced near the end of August that Greece’s fiscal woes had grown, despite measures already implemented. Since Greece’s initial bailout, government expenses had increased by €2.7 billion, while revenues fell by €1.9 billion, hardly the response we all had hoped for. More recently, the Greek government revealed that it… Read More