Scary Insurance Companies

Policy Amount	Annual Premium	Sum of 5 Years Premiums	Implied Odds of Payout	Calculated Likelihood of Dying in 5 years
$ 700,000	$ 420	$ 2,100	0.30%	1 in 333

Questions:
Isn't this math basically correct?
What sort of margins do life insurance companies get?
How much goes to the agents, annually?

hmm....

Housing Market Perspective Update

With a child on the way in less than two months, there's been a constant itch to think about buying a home. Renting, has a stigma in American culture as being wasteful. However, in this economy, I continue to disagree that it's a great time to be a first time homeowner.

There's a lot of factors in play that make taking the home ownership plunge sound appealing. There's the $8,000 housing gift if you purchase a home (which can be used as a down payment, much to my dismay.) There's all time historic low interest rates, around 5%. Most noted, however, are all the "deals" that abound in a market. With home prices in DuPage County down 23% from their peak, it would appear that now is the time to buy!

However, I would argue that now is not the time to buy unless you are very certain you will own your property for at least five years, and definitely not the time to buy if you are looking for the best price. I repeat: We are not at the bottom of housing prices.

I have basically three reasons why I'm not buying:

1. The economy is not at the bottom. Major companies who announced layoffs in the past 6-12 months have not completed these layoffs. For those that have, many of these workers were high wage earners that received excellent severance packages and are still able to pay their mortgage. With the April 2009 unemployment rate at 8.9%, and having it increase every month, it's safe to say that foreclosures will continue to rise until this rate decreases to historical norms. This is more than one year off. Hence, I can safely choose to sign one year leases and continue to rent and not put my money into a depreciating asset. I already own two large depreciating assets, our cars. No need to add more to the list.

2. Even if the recession ended today, the housing inventory is still historically too high. With 9.8 months of inventory which took nearly two years to rise from 6.5 to 10.5 months, I don't think that we're going to see a swift turnaround. As homeowners become more desperate to sell, prices will continue downward.

What I've only seen briefly mentioned (You hear it here first!) is a recently published survey from Zillow that states 31% of homeowners would be somewhat likely, likely, or very likely to put their home up for sale if they saw signs of a real estate market turnaround in the next 12 months!


With roughly 75 million homes in the U.S. per the somewhat outdated 2000 census, this means that 75 x .31 = 23 million homes could be put for sale when the housing market "turns around". Compare this to the fact that 17 million homes where sold in the year 2006, 2007 and 2008 combined! This implies we could have up to four years of shadow inventory. The high inventory will continue downward housing prices.

3. As municipalities try to make ends meet with their budget, we can expect property taxes to increase significantly within the next several years, possibly dramatically changing the expected payments of a home. This risk and the ability to negotiate rent, compared with the complete inability to negotiate taxes, makes this another significant risk to purchasing a home today.

With all that said, I'll have to take a pass on the pulling the trigger on this one, and I advise my friends the same.

Quixtar / Amway

So, I'm going to make this quick, just to ensure that none of my colleagues, friends or family ever get sucked into the blatant scam of Quixtar, previously known as Amway.

I see ads now on Fox News just talking about the millions of people who are "independent business owners" as a part of Quixtar.

Quixtar is a manufacturer of health and beauty products. These are then sold to individual IBOs like John and Suzzie, at a discount. Theoretically, John or Suzzie would then sell these items at full price to other people and make the difference in margin. Selling Price - Cost - Other Expenses = Profit. Very simple!

Except, unfortunately, this isn't how Quixtar works for the vast majority of participants. In most cases, you have a friend of a friend who approaches you about a "business opportunity." You are told that you won't need to sell anything, and you can fire your boss in 2-5 years if you work hard.

The Quixtar way actually promotes consuming items (buying more granola bars, soap, makeup for yourself) and then finding others to buy and consume their own items. How does this make anyone money, you ask? For every individual your recruit, you get a fraction of their sales, and a fraction of the sales they make. The more people you recruit, and the more your recruits recruit, the higher your income bracket.

To make matters worse, to keep you hooked in, you'll have weekly or semi-monthly meeting to encourage you to stick with it. You may need to drive 30 miles or more to get to these meeting. Once there, you'll be pressed to buy "positive thinking" CDs to keep sticking with the business. Often times the cost of gas, time and these tapes suck any profits you might otherwise make from your recruits below you.

So if this doesn't sound particularly appealing, it's because it isn't. You don't need to take my word for it: Quixtar Income Link

IBO STATISTICS

• The average bonus and cash payments earned by a Diamond IBO in 2005 were $146,995.*
• The average bonus and cash payments earned by an Emerald in 2005 were $72,241.*
• The average bonus and cash payments earned by a Q12 Platinum, an IBO who qualifies at the Platinum level all 12 months of the year, were $47,472.*

The Average Monthly Gross Income for “Active” IBOs was $115.

*The following are approximate percentages of Direct Fulfillment IBOs of record in North America who achieved the illustrated levels of success in the calendar year ending August 31, 2005: Diamond .0120%; Emerald .0320%; Q-12 Platinum .1683%.

In other words, people do not make money with Quixtar unless you're one of the king pins at the top. The average person makes less than $1380 a year. You could get a part time job and earn that much in a month or two waiting tables!

Stay away!

Religious Tolerance vs. Multiple Truths

The Boston Globe made a recent summary of the Pew Forum's study on Americans' religious beliefs and practices.

Among some highlights:

The United States is a nation of believers: most Americans say they believe in God, they pray, and they attend worship services regularly; they also believe in angels and demons, in heaven and hell, and in miracles.

But they also say, contradicting the teachings of many faiths, that truth comes in many forms. Large majorities of Americans say that many religions - not just their own - can lead to eternal life.

I find this to be really fascinating. I'm going to try to make a pitch here, and I hope you'll stick with me. It's not going to be on a particular flavor of faith, but trying to make a rational argument for absolute truth.

Something that is absolutely true is always correct, in all places, at all moments, under any condition.

Take for example, I reach into my pocket and pull out a dime. I close my hand around the dime and you can't see what the coin is anymore. If a friend of ours walks into the room and I tell him I have a penny in my closed hand, which he believes, it doesn't affect the fact that a dime, not a penny, is still in my hand. Our friend can sincerely believe it's a penny, but he would be sincerely wrong. Beliefs about things we can or can't see do not affect reality.

Take the theory that the sun and planets in our solar system rotate around the Earth. Until Copernicus came around, everyone sincerely believed this, but it didn't affect the fact that what everyone believed was wrong and it didn't change when people changed their mind about it. The paths of planets can't both be rotating around the earth and rotating around the sun at the same time, (unless of course the Earth and Sun were in the exact same location, which they are clearly not).

Now when it comes to faith, I think that it's critically important to realize that absolute truth still applies. Let's take Henry and Andy. Henry believes in Hinduism and Andy is an atheist. Henry believes in many gods, while Andy believes there is no such thing!

1 of 3 possibilities must exist here:

1. Henry is right and Andy is wrong.
2. Andy is right and Henry is wrong.
3. Andy and Henry are both wrong. (If there is only a single God, for instance, they would be both wrong.)

What is important for both Andy and Henry to acknowledge is that they can tolerate one another while acknowledging that their combined beliefs must fall into one of the above 3 categories. This shouldn't offend anyone, this is just reasoning 101.

When I see people believing in multiple truths, like the article alludes to, one just needs to shake their head. Not everyone can be right!

I'm going to leave this post like this for now. More to come later.