ReCap: Fannie Mae and Freddie Mac as Unsung Villains

Fannie Mae and its related Freddie Mac are private companies which had been blessed with special government backing. The Democrat party took them under its wings as a special means of helping the “poor” and minorities. It also became a political device to “overcome” so-called red-lining, where minorities allegedly could not get loans because banks unfairly turned them down for credit. Fannie Mae and Freddie Mac helped out.

Hundreds of billions of dollars were soon involved. Influential liberal politicians had friendly execs employed, with incentives to augment the gigantic volume of systemic mortgage growth and guarantees.

Over the years many observers noted the accumulated danger but the ensconced liberal Congressional influence, exemplified by representative Barney Frank, pooh-poohed any attempt at reducing the growing risks to the entire mortgage system.

We know now about the subprime debacle as the banks attempted to cope with the toxic assets that has resulted from being fed Fannie Mae and Freddie Mac fare. Blame has been placed on the shoulders of the bankers by the politicians who were actually responsible.

We get more of the same, regulation with Representative’s Frank’s name attached to it: Dodd-Frank legislation. You can expect more of the same fiasco resulting unless cooler heads prevail in correcting that bit of legislation.

Proper Whole Life Insurance Evaluation

Comparisons between whole life insurance and term insurance are usually simplified by the issue of price. Whole life is more expensive when you shop for protection.

On the other hand, for those who need forced savings and who would not put what they would save from lower term life premiums periodically into proper, low cost mutual funds, whole life is still a choice.

Particularly because whole life policy earnings, while lower, are tax exempted.

Another comparison often overlooked: There is always an extended term option in a whole life policy; the policyholder can convert the contract into term insurance at a later date, and without the need of a physical exam, even if otherwise un-insurable. ( See the Earl J. Weinreb NewsHole® comments.)

Stock Brokers as Advisers

New SEC regulations want to see that stock brokers will have to treat their clients differently than in the past, if they already do not.

Of course it won’t do much for most investment portfolios, but it will make bureaucrats feel better.

In the old days a broker had to be sure that an investment was ”suitable” for a client. What was suitable was often debatable, but that is what makes securities markets as erratic as they are.

Now the broker is supposed to have a “fiduciary duty” toward the client. according to SEC intentions. That should open a hornet’s nest of endless legal problems.

The main result of this is to give investors more ammunition to sue brokers for real or imagined damages. That offers more power to the lawyers. And to give brokers the excuse to become more profitable "advisers."

Investment Analyst Shortcomings

The majority of securities analysts could not operate a pushcart. Yet, they constantly critique top business executives about the way they run multi-billion dollar companies.

In addition to this prevailing fault, financial community analysts have an extremely limited time frame. While a business must look years ahead, those involved with Wall Street securities usually operate with much shorter time-goals. ( See the Earl J. Weinreb NewsHole® comments.)

Follow them too closely and you court trouble.

Volatile Securities Markets

Securities markets are generally erratic. However, when you think about it, they really ought to be calmer than they are.

Institutional investors and advisers are considered professionals. They’re the experts who account for at least 80% and, some days more, of all trades and activity. Why then should the markets behave so erratically?

These pros ought to know what they are doing, unlike the other 20% or so of the public, amateur investors who blindly follow the pros.

However, Wall Street "wizards" invariably act in a mob-like manner.

They may still make their millions, simply because they are ensconced as Wall Street inside players. ( See the Earl J Weinreb NewsHole® comments.)

Securities Experts and Analysts

Little deep investment research and thought comes from the analytical securities segment of Wall Street.

What goes for research there is primarily in the form of public company reports. These have to do with reported earnings, without any true understanding of the nature of those earnings. Furthermore, much of what earnings are announced could be the result of fanciful accounting. So all that analytical reporting may be meaningless, if not misleading.

Little is done on what is most important to the investor; the use of disciplined strategy.

Most analysts and money managers have no time for careful, insightful thought of the many, many hundreds of strategies, which, along with disciplined use, are essential.

Moreover, the investment community is incestuous, in a way which creates herd-like, impulsive instincts. This results in the inanities that has become repetitive gospel, over the years. ( See the Earl J Weinreb NewsHole® comments.)

Medicare and Social Security Ponzi Schemes

The biggest Ponzi schemes of all are being sponsored by the U.S. Government.

Prime examples: Medicare and Social Security are estimated to be short by over 110 trillion dollars. That makes them completely bankrupt, were they genuine, private insurance enterprises.

The average American has no idea how Social Security works. He or she will tell you it’s as advertised. It’s not, because there is no trust and reserve fund, though you often hear politicians mention “lock box.”.

Benefits are paid today from earnings of those still working, So, what makes this different from any other Ponzi scheme? Paying off some today with money taken from others, to whom benefits are promised tomorrow. Social Security tax funds taken in, are never really invested. They are used to pay off Social Security obligations of today.

Government has already exhausted what is supposed to be the Medicare Trust Fund. Social Security will run out of money in a couple of decades, probably much sooner, when there are not enough workers to pay off retirees.

So what does makes these programs different from other Ponzi schemes?