In this issue
Software tip of the month
The changeability of EIA rates can be a source of
concern, but here is a way to evaluate the "worst
case scenario" for different products: compare the
minimum guaranteed rates (typically found in the
agent guide) for each credit method. But whether a
25% participation rate, 8% spread or 5% cap
holds up better isn't always clear.
MCP Suite 2007 software lets you create and save
custom Index Credit Method SIMs, then use them in
standard hypothetical or Monte Carlo comparisons.
Use this "worst case" scenario (in addition to
seeing what current rates may yield) to make an
educated credit method selection. See the
online tutorial "creating a custom SIM" or refer
to the
User Manual for step by step instructions!
New Minuteman Web Site
The updated site features a usable demo account
to test the advisor activity site. Asset allocation
has never been easier to set up and maintain for a
ETF portfolios. Visit
http://minutemanadvisor.com
Minuteman logo and "Minuteman Advisor
Services" are trademarks of MDL Associates, LLC.
'Disciplined' investing is
not a Dirty Word: 3 Great Reasons to Use
Minuteman
This new article by Mitchell Maynard explores top
reasons every advisor should consider reducing their
clients' costs and improve risk management
through rebalancing - especially in today's
environment. Posted at the Google Group "MCP
Suite Users", login/ free registration is
required to view.
Pass it on!
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U.S. Banking Bailout 2008:
It's Mr. J.P. Morgan to the rescue, again.
By Dorice Maynard
My husband has an intriguing
mind. When hearing of the recent sale of
Bear-Stearns to J.P. Morgan-Chase and former Fed
chairman Alan Greenspan stating in a televised
interview mid-September that the current financial
crisis was “a once-in-a-half-century, probably
once-in-a-century type of event”, he immediately
linked the events, recalling that in 1907 an eerily
similar banking panic was staved off by none other
than the financier and railroad tycoon John Pierpont
Morgan, founder and namesake of today’s J.P. Morgan
companies.
The assistance J.P. Morgan lent
to the U.S. government - twice - a hundred years ago
may have saved our economy from collapse. Now for a
third time, the legacy of “Morganization” (for his
practice of turning around troubled firms) has
imbued a sense of relief to the stressed financial
markets.
Indeed, a once in a century
cycle of growth and contraction is occurring.
The first time J.P. Morgan
stepped in was during the Panic of 1893 - largely
caused by bank lending practices – and he pulled
together a syndicate to loan the U.S. Government $65
million in gold to restore its dwindled reserves.
Next came the Panic of 1907,
caused by speculative short-sellers operating in
collusion with a key trust company. The high-risk
lending practice caused the trust company to implode
one fateful day, triggering runs on all major New
York banks. It was Morgan who convinced the bank
presidents to meet (some say he locked them all in a
conference room) and pushed for the issue of deposit
guarantees and an immediate $8 million influx of
cash.
However, these bank runs had
left the institutions unwilling to make short-term
loans for the needed daily stock market trades. The
stock market was crashing, and the president of the
New York Stock Exchange, feeling that trading may
need to be halted, ran to J.P. Morgan. In less than
15 minutes Morgan had convinced over a dozen bank
presidents to pledge a total of $23.6 million. The
infusion of cash kept the market open that day and
prevented a complete collapse.
But the story doesn’t end
there. New York was facing bankruptcy, unable to
meet its financial obligations because its bond
offering was not being purchased. Behind the scenes,
Morgan purchased $30 million in New York bonds.
President Roosevelt's eleventh-hour approval of a
large buyout-merger of a troubled but widely-held
company became necessary a few weeks later to stave
off a further market crash.
It took some time for the sense
of panic to dissipate. The economy gradually
stabilized. The Federal Reserve Bank system was
formed, which then as now has its severe critics,
but served to steady the country’s monetary supply
system with a plan of guarantees, lending rules and
reserve requirements.
It is abundantly clear that
economic cycles of expansion and yes, contraction,
do indeed occur. How well we weather this latest one
is yet to be seen. But the legacy of J.P. Morgan -
and the American spirit of perseverance in the face
of adversity - is
very much alive and well.
If you want to read more
about the Panic of 1907, try Wikipedia at
http://en.wikipedia.org/wiki/Panic_of_1907
EIA, Anyone ?
While banks, brokerage firms, and fund managers have been flooded with calls
from their concerned clients who are watching their nest eggs evaporate, I
daresay that the many agents who placed their clients' irreplaceable assets into
an equity-index annuity have been able to sit reassuringly on the sidelines.
Questions about AIG-related issues aside, the solvency of insurance companies
seems to be assured. However, with volatility (as measured by the VIX) at
historic highs, renewal rates are likely to remain low. Be sure to
evaluate all crediting method choices at each anniversary, to make educated
allocation decisions.
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