As the article stated yesterday---costs for PIP are not going up----there is simply more fraud and corruption lifting the costs as with Medicare and Medicaid. We are reforming Medicare and Medicaid because the health industry fraud sucked the Trusts dry. That is what is happening with PIP. The insurance and health industries are inflation costs by fraud with soaring profits and then claiming PIP needs to be dismantled because it is too costly.....same as Medicare. So, rather than having the costs of your health care covered with this auto insurance that is required by law---you are now going to be pushed into Medicaid which now mostly covers only preventative health care. This eliminates yet another outlet for health coverage for the working and middle-class while insurance and health industry profits soar.
Notice the Maryland Assembly is about to end PIP and push Maryland citizens into the most private and profit-driven health system in the nation---Medicaid and preventative care. The No Fault auto premiums are no small payment---as many times as people use it the total premium amounts paid often covered costs.
Think that at the same time, your rates go higher and higher for simply being in an accident no matter it wasn't your fault. That is what deregulating the insurance industry looks like. It gives them the ability to charge anything they want as laws are on the books requiring you to have some kind of insurance. Deregulating while making insurance mandatory----watch that disposable income disappear with rate hikes.
Tort-based auto insurance means the ambulance-personal injury lawyers that you see on TV will be the only recourse for paying medical bills and we all know these lawyers pocket most of the money won in the lawsuit with the plaintiff often receiving pennies on the dollar. So, this will cost health care more and that money will go to lawyers and it will come from taxpayer Medicaid.
So, now the insurance, the health care, and lawyers are getting a cut money that always went to actual care for the patient who will be bankrupt and/or left with little access to care.
THESE ARE NEO-LIBERAL AND NEO-CON POLICIES MOVING ALL MONEY TO CORPORATE PROFIT ON THE BACKS OF THE AMERICAN PEOPLE.
All Maryland pols are neo-liberal and neo-cons doing all of the above.
'Rates did go down initially'---before the fraud and corruption sent them soaring.
PIP and No-Fault Auto Insurance Reform
More and more states are abandoning the PIP/No-Fault form of auto insurance in favor of a tort-based set of laws. PIP/No Fault originated in the 1930s as an alternative to the often slow and expensive process of litigating claims. The intent was to speed up the process by shifting the dispute resolution from the courts to the insurance companies. In theory, this was supposed to reduce insurance rates—and rates did go down initially.
By the mid-70s, almost 20 states had some form of no-fault insurance laws. However, over time, rates again rose until "No-Fault" states had higher rates than tort-based states. Beginning in 1980, states started repealing their no-fault laws, and now only nine states (Florida, Hawaii, Kansas, Massachusetts, Missouri, Minnesota, New York, North Dakota and Utah) have mandatory no-fault laws. Eleven states plus the District of Columbia have hybrid laws (Arkansas, Delaware, Kentucky, Maryland, New Jersey, Oregon, South Carolina, South Dakota, Texas and Virginia), which are a combination of no-fault and tort systems.
The pendulum seems to be swinging back to tort-based auto insurance. What does this mean for you as a policyholder?
The Good News
Tort-based systems, in theory, give you more choices for medical payments and could save you substantial amounts of money. As an example, depending on the insurance company and coverages selected, those with Colorado car insurance (the most recent state to revert to a tort-based system) could see savings of 10 percent to 30 percent, according to several recent Denver Post articles.
The Choices
PIP, or Personal Injury Protection, is still available (in most cases), should you wish (or need) to pay for it. If you choose to drop this coverage, or if you are already under a tort-based system and don't have this coverage, you can still purchase it with most policies to cover medical expenses. However, coverage will be limited, with a general ceiling of $50,000. This additional coverage, if purchased, will pay expenses incurred by you and your immediate family for injuries resulting from an at-fault auto accident.
Since many drivers are uninsured or underinsured, it is essential that you understand the ramifications of this and make an informed decision about the "Uninsured/Underinsured Motorists" coverage option.
What if?
What happens if you are at fault? Your auto policy should pay the other person's claims. Companies normally negotiate this with each other. If you have insufficient coverage, you may have to go to court—thus displaying the tort aspect of the law. Either you or your health insurance company will pay medical expenses for you and your family once those expenses exceed your auto policy coverages.
What if you are injured by another driver who is at fault? Generally, the two auto insurance companies will work together to determine fault and pay benefits accordingly. This resolves the problem in most cases. If not, or if the amounts paid are insufficient, it may be necessary to resort back to the court system to recover damages.
What if the other driver is at-fault and has no (or inadequate) insurance? Your insurance company normally covers your medical expenses. This protection is provided under the uninsured/underinsured motorist coverage. If you do not have this coverage, your health insurance usually pays the bills, or you can sue the other party.
Consider the "Deductible Gap"
Generally, under a tort system, medical payments from your own policy are limited. However, in most cases you can choose "additional medical payments" and "Uninsured/Underinsured Motorists" coverage as part of your auto insurance policy.
After years of rising rates, many people may choose to forgo any additional coverages. Adding these coverages creates financial strain if you have high-deductible health insurance, or no health insurance at all. However, there is a potentially huge gap between the amount paid under a tort-based policy and your health insurance deductible. If you have no insurance, the out-of-pocket costs could be staggering. If you are not at fault in the accident, the tort-based system allows you to go to court to receive compensation for these costs, as well as for pain and suffering. But you must do so within a specified time period, and a lot of out-of-pocket expenses may be involved.
What does this mean for health insurance?
As more costs are shifted to the health insurance system, your insurance costs are likely to rise. This also means more people will be without health insurance.
So, what is next?
This is a good time to look at your health insurance to make sure you will have adequate coverage if you drop your PIP/No-Fault coverage. Don't wait until you're in an unpleasant situation to find out if you need more insurance. Be prepared!
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This is when PIP was working in the interest of citizens and government coffers. Insurance corporations were earning profits in the millions while the Uninsured auto insurance pool was bursting at the seams with revenue.
NOW, HOW CAN WE DIVERT THE MONEY PAID INTO THIS FUND FOR HEALTH CARE INTO PROJECTS THAT BENEFIT DEVELOPMENT CORPORATIONS.
This is when a good program was targeted for fraud and corruption just as with the other Federal programs Medicare and Federal Housing Authority. Working well for citizens, leaving government coffers flush to handle future events, allowing millions in profits to be earned---BUT THAT WAS NOT ENOUGH. You see the article below was written in 1993----HERE COMES NEO-LIBERAL CLINTON TO DEREGULATE ALL THAT HE CAN SEE......this is the deregulation that sent all of this surplus in the Maryland Automobile Insurance Fund to development corporations like Johns Hopkins in Baltimore. There's Donald Schaefer funneling money from Transporation Trusts and now MAIF to balance the budget with the public's designated money. Baltimore Development paraded all kinds of working class and poor out to praise Schaefer who was behind creating Baltimore Development Corporations to funnel all the city's revenue from where it was to go----to where they wanted to send it.
You see the insurance corporations were able to move more and more people into MAIF clearing its rolls of all but the best of drivers. It went from helping low-income people to subsidizing the costs of these auto insurance corporations. It was gutted of its funds for pet projects. I know Ravens fans love their stadium----but most of the fans are the ones no longer affording auto insurance because of the subsidy. Note that the Uninsured Motorist insurance had high premiums and should have paid all health care costs when needed.
Remember, this was done through fraud and corruption because this money was not to be fungible. It needs to come back to this government coffer.
I KNOW---LET'S SEND THIS PIP MONEY TO BUILD THE NEW FOOTBALL FIELD.----M AND T STADIUM AND BALANCE THE BUDGET WITH IT.
MAIF's embarrassment of riches
March 04, 1993|
By Frank A. DeFilippo Baltimore Sun
THE Maryland Automobile Insurance Fund has a big-time problem. It's rich. So rich, in fact, that other state agencies are itching to get their hot little hands on MAIF's $118 million surplus.
MAIF's been approached about financing a new football stadium in Baltimore. Sen. George W. Della Jr. of Baltimore has sponsored a bill that would shift $50 million of MAIF's money to the general fund. And the Schaefer administration is pilfering $5.4 million from MAIF to help balance the budget.
MAIF is Maryland's state-run insurer of last resort. Any Maryland motorist who's turned down by at least two commercial insurers is automatically MAIFed.
MAIF's rates aren't cheap. Depending on how bad a motorist's record is, the driver's age and ZIP code, bare-bones coverage can range from $2,559 to a stick-it-to-'em high of $8,677 a year.
That MAIF should be suffering such an embarrassment of riches during a time of budget cuts and deficits is an embarrassment itself. MAIF's $118 million surplus is larger than the $100 million budget shortfall that's being plugged with keno proceeds and other money.
In theory, at least, MAIF is supposed to be non-profit. It was created in 1973 as an antidote to the no-fault insurance craze at the time, kind of an everybody's-fault approach. It's run by a board of trustees and receives no state funds, nor are its assets part of the state treasury. To settle claims, MAIF has the power to attach salaries and seize property.
Over the years, the commercial insurance companies in Maryland have pumped $137 million into MAIF. In effect, good drivers subsidize the insurance of bad drivers. In 1980, MAIF had 30,000 policies. Today it has 135,000.
Much of MAIF's excess is due to changes in the way it does business as well as some shrewd investments. At the same time MAIF has reduced rates over the past three years, it's also lowered awards. MAIF is also now doing all of its work in-house instead of farming it out to free-lance adjusters and collectors.
So it should come as no surprise that the Schaefer administration's pie-slicers approached MAIF about lending the Maryland Stadium Authority $100 million to help finance a new football stadium if Baltimore wins one of two NFL expansion franchises.
There are serious legal questions about whether the Stadium Authority has a funding mechanism for another stadium if the city is awarded a team. Because of a change in the tax code, the use of tax-free bonds to finance stadiums expired at the end of 1990.
The authority argues, though, that it's confident that it can float tax-free bonds because there have been a number of test cases around the country that might allow it.
Moreover, the authority has a bonding limit of $220 million, of which it has already used $170 million to build the new baseball stadium. The authority will pocket another $30 million over three years from lottery proceeds -- on top of the $50 million in bond money left over from the ballyard -- a total of $74 million. But a new topless football stadium will cost about $130 million. Put a lid on it, and it'll cost millions more.
So here's the catch: If the authority can't float tax-free bonds, it will have to go to market with bonds at a much higher interest rate. But before it can go to market with bonds, the authority will need the General Assembly's approval to increase its bonding capacity. This could hoist the total bond package over the spending affordability limit. Allowing this is action the legislature is reluctant to take.
It's for this reason that Gov. William Donald Schaefer is bypassing the spending affordability limit and proposing the use of transportation bonds to finance improvements to Baltimore's Convention Center. Now he's trying to scoot around the spending limit again just in case there's a football team in the city's future.
So drive carefully. Get MAIFed, and the premiums you pay could wind up helping to finance some government geegaw.
Frank A. DeFilippo writes every other Thursday on Maryland politics.
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Here we are just a handful of years later and what the first article stated was in fact true in Maryland----it was the hybrid model Maryland adopted that sent auto insurance money to lawyers and doctors.
Now, they are working to end hybrid and make it all tort. People not being able to afford strong health coverage will be preyed upon -----80% of the American people.
Again, another public program that worked fine for the people gutted and dismantled by neo-liberals and neo-cons. Profit over people every time
Again, we are at the height of Reagan/Clinton's deregulation frenzy.
I wonder if those voters wanting small government wanted to be pushed out of driving because they can no longer afford car insurance?
Your Public Trusts are being gutted by small government and deregulation.
Why car insurance is so high Law suits: System encourages excessive litigation, raises premiums $130 to $150 a year
.December 23, 1996 Baltimore Sun
WANT TO LOWER your car-insurance premiums? It could happen -- if legislators in Annapolis stop catering to powerful special interests. More than 60 percent of your premium covers liability. Of that amount, 19 percent could be saved if excessive litigation and fraudulent claims were eliminated.Sadly, state legislators yawned at the problem when a gubernatorial commission sought reforms this year. Too many of them want to please trial lawyers and doctors who vigorously fight for the status quo. These special interests know that lower insurance premiums would come out of their pockets.
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I have talked about AIG spinoff HighStar and its connection with the Ivy League schools like Johns Hopkins. The subprime mortgage fraudulent loans were insured here with the idea that HighStar would break from AIG with the equity and leave taxpayers to pay 100% on the dollar for the fraudulent Credit Default Swaps. This article does a good job doing this. Geithner was the NY FED chief that watched as trillions of dollars of fraud ran through the mortgage industry and did nothing about it----he aided and abetted the massive fraud. What many people may not know AIG was more a Life Insurance agency with this HighStar hedge fund sucking all its profits into their bank accounts. Indeed, the taxpayer bailout of AIG saved the shareholders and those insured by CDS-----but it left an AIG still in business and limping along saying it is healthy when indeed it is not. AIG Life Insurance advertises on Free TV---you know , where you get life insurance with no checkup. Like you get a house without having a job.
SAME THING. THIS IS THE SUBPRIMING OF LIFE INSURANCE.
They are simply selling as many policies as they can and gaining those monthly payments knowing the coming economic collapse will bankrupt them again.
You are guaranteed to get back what you put into this Life Insurance plan-----OH REALLY???? They will spin that Life Insurance money off as they did with HighStar----probably to HighStar just as the economy is ready to crash. THEN WE WILL HEAR----WE CAN'T PAY YOUR PREMIUMS BACK!
They will keep doing this with every business sector until you and I get rid of the neo-liberals and neo-cons that have allowed this corporate system to be deregulated with no oversight and accountability.
AIG's Collapse: The Part Nobody Likes to Talk About
Hester Peirce JUN 16, 2014 12:00pm ET
Earlier this month, American International Group announced the departure of Robert Benmosche, the CEO who led the company through most of its recovery from the financial crisis. Now that the company’s postcrisis chapter is underway, it is worth taking a fresh look at AIG’s downfall and rescue and the implications for reform.
The standard AIG story lays all the blame for the company’s problems on AIG Financial Products—an allegedly unregulated, irresponsible, derivatives dealer hiding within an otherwise solid insurance company.
Former Treasury Secretary Timothy Geithner repeats this traditional line in his recent book, where he recounts how an aggressive “hedge fund-like subsidiary called AIG Financial Products” brought the otherwise healthy insurance company to its knees and ultimately drove it into the Fed’s welcoming arms. Former Federal Reserve chairman Ben Bernanke made a similar claim when he told Congress how angry he was about AIG’s Financial Products unit—“a hedge fund attached [to] a large and stable insurance company.” And former Commodity Futures Trading Commission Chairman Gary Gensler, with typical dramatic flair, explained that AIG’s “subsidiary, AIG Financial Products, operating out of London, brought down the company and nearly toppled the U.S. economy.”
This widely repeated narrative ignores or downplays a critical aspect of AIG’s downfall--the insurer’s securities lending program run for the benefit of its regulated life insurance subsidiaries.
An endnote in Geithner’s tome explains that securities lending was one of “AIG’s major liquidity needs” at the time of its rescue. As I describe in a recent working paper, the company got itself into hot water by lending securities from its life insurance companies’ portfolios. AIG took the cash collateral it received for these short-term loans and—in a departure from insurance industry practice—invested much of it in longer term, illiquid residential mortgage-backed securities.
The securities lending program grew from about $10 billion at the end of 2001 to over $80 billion by the end of 2007. When borrowers stopped renewing the loans, returned their securities, and asking for their cash back, AIG was in a bind—the borrowers’ cash was tied up in reinvestments.
To meet borrowers’ demands, AIG lent more securities and used the cash collateral from new borrowers to return to existing borrowers. This solution only aggravated the problem. When CEO Robert Willumstad took the reins of AIG in June 2008, the cash drain from securities lending worried him more than AIG Financial Products’ liquidity needs.
Losses from the securities lending program threatened the viability of a number of AIG’s regulated life insurance subsidiaries. To save them from falling below minimum capital requirements, AIG pumped billions of dollars into these units.
Government rescue money was critical to this recapitalization effort. Taxpayer funds were also critical in meeting securities borrowers’ demands for cash. Securities lending counterparties received $43.8 billion in the last quarter of 2008, comparable to $49.6 billion in collateral postings and payments to AIG’s derivatives counterparties.
As consequential as it was to AIG in a time of crisis, nobody likes to tell the securities lending part of the story. First, it doesn’t feed as nicely into the vilification of derivatives that laced crisis narratives and fueled calls for an intense derivatives regulatory regime. Second, the fact that heavily regulated insurance companies got into trouble does not support the call for greater reliance on government regulators. Finally, the rescue of a deeply troubled company is less defensible than the rescue of a healthy insurance company with a troubled derivatives subsidiary.
The Fed’s contention that its loan was adequately secured rested on the supposition that apart from the derivatives unit, AIG was sound. The banks that went in to AIG in September 2008 to assess whether it was worth rescuing concluded that it was not.
As one of the private bankers subsequently explained, “The value of the company in its entirety was not necessarily sufficient to cover the liquidity need that the company had.”
Geithner recounts in his book that—looking for confirmation that a loan to AIG would comply with the legal requirement that “the Fed can only lend against reasonably solid collateral”—he asked Warren Buffett “what he thought about the earning power of AIG’s traditional insurance subsidiaries.” Buffett “was pretty positive about their underlying value, which made [Geithner] more confident that [the Fed] could meet the legal test of being secured to [its] satisfaction.” Buffett’s words of assurance to Geithner weren’t matched by a willingness to put his own money on the line; he refused AIG’s overtures to invest during 2008.
AIG was on the verge of filing for bankruptcy when the Fed stepped in with a better deal for shareholders and creditors. The government subsequently re-rescued the company by devoting additional taxpayer funds to it and softening the lending terms. At any of these re-rescue points, the government could instead have let the company go through bankruptcy.
By continuing to prop up AIG, the government shielded the company from the toughest regulator of all—the markets. AIG’s problems were not confined to one unregulated corner; problems also arose in full view of insurance regulators. Rather than assuming the Fed will be better than AIG’s other regulators, we ought to allow the truly superior regulator—the market—to do its job.
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I spoke yesterday about Life Insurance corporations being the most leveraged and ready to collapse of the insurance industry but guess what is the next in line of threatened insurance corporations-----
THAT'S RIGHT----WORKMAN'S COMP.
They have been allowed to create the same over-leveraged financial status that will have them bankrupt with this coming economic collapse. No more worker's compensation----
THAT'S HOW YOU GET RID OF THE NEW DEAL SAY NEO-LIBERALS AND NEO-CONS! BLOW THEM UP AS WE DID THE HOUSING MARKET WITH FRAUD AND CORRUPTION!
Coming after more public wealth and no public justice in place to protect or give us recourse....that is what neo-liberals and neo-cons have been building these few decades-----Clinton and Obama taking the people's party and handing it to Wall Street. Run and vote for labor and justice in all Democratic Primaries! WE CAN REVERSE THIS!
Rapidly writing new contracts for worker's comp that they could not afford----sound familiar?
IMPLODING ALL OF THE NEW DEAL PROGRAMS TO PROTECT THE AMERICAN PEOPLE DURING HARD TIMES.
After Tower Group collapse, lingering concerns about industry’s reserve adequacy
By Adam Cancryn and Saurabh Nair, SNL Financial Posted: May 6, 2014
...................................................
Most of the concern centers on long-tailed commercial lines, particularly workers’ compensation. Claims behavior takes longer to develop than in other sectors, making it more difficult to tell how much money should be set aside even years after a policy is written. Misjudging those reserving needs can be disastrous. SeaBright Holdings Inc. sold in 2013 after reserve charges pressured its operations, and Meadowbrook’s stock dropped nearly 35% from 2012 through 2013 amid several quarters of reserve charges. Tower Group served as the highest-profile example of reserving gone wrong, with its shares losing more than 80% in the six months before it hastily agreed to a sale.
Those companies ran into problems with business written during a softer market between 2007 and 2011, when they grew their books rapidly just as the rates being charged for coverage were at their most inadequate. When claim costs far outstripped the rates they originally charged, the insurers had to quickly build up their loss reserves. Analysts now consider the 2010 accident year one of the worst performers of the cycle, attributing the troubles to low prices and more expensive claims driven by high unemployment.
“The troubles they have now is on stuff they wrote years ago,” Keefe Bruyette & Woods analyst Robert Farnam told SNL.
The 10 workers’ comp insurers with the greatest adverse development in 2013 reported an aggregate $702.6 million in charges. SeaBright and Meadowbrook did not make that list. Tower Group was also absent, as it has not yet submitted all of its filings, but it said in February that its U.S.-taxed subsidiaries recorded $269.2 million of 2013 reserve charges.
Despite the issues, the sector continues to steadily release reserves. Companies argue that Meadowbrook and Tower Group in particular are isolated situations, driven just as much by reckless growth as the broader industry conditions. The rest of the industry, they contend, was more prudent in writing business during the soft market, leaving it with less risk and the ability to make up for a few unfavorable accident years with better results from other parts of their books of business. The insurers themselves are also working with much more detailed data than analysts and outside actuaries, they say, allowing them to most accurately evaluate their reserves.
“We look at it on a much more granular basis, and we think we have certainly better information,” W. R. Berkley Corp. Vice President of External Financial Communications Karen Horvath told SNL. Analysts have singled out W.R. Berkley’s reserving position as one of the more concerning in the industry, predicting that its quarterly releases would soon slow. But the company in the first quarter released about $25 million, extending a string of favorable reserve development that dates back to 2007.
Even so, skeptics are not quite willing to accept insurers’ assurances as fact. They worry that companies are already drawing down their reserves for the 2012 and 2013 accident years to supplement earnings or balance out problems in earlier years, without enough data to be sure about how those most recent years will ultimately perform.
“There is just no way a company would know or have the type of certainty under which they would be able to release reserves from some of the most recent business,” said Standard & Poor’s credit analyst Siddhartha Ghosh, who warned that the workers’ comp sector will eventually have to strengthen reserves significantly. “We don’t think that’s a prudent way of addressing reserves.”
He pointed to the previous market cycle, when workers’ comp companies released $12.4 billion of reserves between 1994 and 2000 and then had to scramble to add back $10.6 billion from 2001 to 2005 to make up for their overconfidence.
The sector’s fortunes over the next several years will depend heavily on whether insurers can keep raising prices, analysts said. The workers’ comp business is still not reliably profitable despite recent pricing actions, and low interest rates continue to pressure investment income. If companies can continue to move their prices considerably and consistently higher over the next couple years, the new premium should be enough to cover costs. If the rate hikes falter and claims from recent policies start piling up, though, the reserving actions that insurers used to buoy earnings for so long could stick them with a deficit that will take years to fill.
“It’s a simple equation,” Ghosh said. “The premium coming in has to be higher than the losses going out.”
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This is a pretty good analysis of the coming bond market crash. Notice it states that the insurance market will be taken out----Life Insurance the first to go. See why you are seeing all those Life Insurance ads requiring no medical checkup or anything-----
THEY ARE SIMPLY GOING TO POCKET THOSE MONTHLY PREMIUMS.
This was written in 2013 acting as if the crash would come in 2014 but Bernanke allowed the QE bond bubble machine to continue another year and Yellen is now having to address it as the FED is leveraged out. The crash will come soon......the FED is simply manipulating the inevitable.
'The most vulnerable are those who can least afford to suffer losses: Seniors who are approaching or in retirement, who have shifted large amounts of their money into fixed income investments.
Your tax-free municipal bonds could tank.
Your annuities and other insurance policies could turn to dust.
Your money invested in bank and insurance company stocks could vanish right before your very eyes'.
All of this is pretty important----yet, we do not hear a thing about it from media, labor or justice, our pols---and all of these national leaders know it is coming. Their policies created this mess and labor and justice leaders are constantly backing neo-liberals. It is important to have Governors and Mayors that will work through this in the people's interest and not corporate interest.
This article is not
hyperbole---it will happen.I did edit out his marketing ---
The Next Great Bubble about to Collapse
Martin D. Weiss, Ph.D. | Saturday, January 19, 2013 at 7:30 am
130 Senator Orrin Hatch warns that the bubble has the power to “destroy the retirement savings of millions of Americans.”
Famed economist Leonard E. Burman of Syracuse University is warning the U.S. Senate of “disastrous consequences for ourselves and the rest of the world.”
Goldman Sachs … Bank of America … Morgan Stanley … Royal Bank of Scotland … JPMorgan … and Oppenheimer Funds are all warning that it could bankrupt millions of investors.
Congressman Ron Paul says, simply, “this country will be ruined.”
These and many other authorities are talking about the greatest financial bubble in human history:
A bubble that is now more than EIGHT times larger than all the stock exchanges in the United States combined.
A bubble so massive, it is four times larger than the dot-com bubble of the 1990s and the housing bubble of the 2000s combined.
Now that bubble has begun to burst.
As it implodes, it will launch interest rates into the stratosphere … crush the feeble U.S. economy … destroy major U.S. banks and insurance companies … drive your cost of living through the roof, threaten your standard of living and financial security … and push the U.S. government to the very brink of financial collapse.
But the best defense is a strong offense -- and this crisis will also create windfall profit opportunities for a select group of investors who make the right moves now.
Just a few days ago, Weiss Research analyst Tom Essaye hosted a special online summit meeting to explain exactly how, and I’ll give you a transcript of the meeting in a moment.
In our online summit, he was joined by Safe Money editor Mike Larson and Real Wealth editor Larry Edelson. Here’s the transcript…
The Next Great Bubble about to Collapse
with Tom Essaye, Mike Larson and Larry Edelson — abridged transcript
Tom Essaye: If there’s anyone who knows how to capitalize on bursting bubbles, it’s our firm, Weiss Research.
For nearly a year now, I’ve been sounding the alarm again; NOT for the bursting of a bubble in the tech sector or housing sector … but in a market that is many times larger than all the stock exchanges in the United States COMBINED.
Debt is created in the bond market. That’s where the government goes to borrow money. So do states and local governments. Companies, too.
Borrowers sell bonds — or notes and bills — that guarantee investors a certain rate of interest or “yield” over time.
Since the turn of the century, the U.S. bond market has simply exploded in size — adding $20.7 trillion in new debt.
But now, despite massive new initiatives by the U.S. Federal Reserve, the meteoric rise in prices that characterized the debt market since the turn of the century has sputtered, stalled and is now dead in its tracks.
Millions of investors all over the world — including many of the world’s richest central banks — have started to stampede for the bond market’s exit.
And now, we’re beginning to see the first cracks appearing in this massive bubble.
This chart of the PIMCO Total Return Bond Fund is a perfect picture of the bubble in the bond market — and also the beginning of the crash.
On the left side of the chart, you can see the bubble in the bond market being inflated.
On the right-hand side, you can see how prices just plunged well below their support levels.
And just look at this chart of the iShares Municipal Bond ETF: It just fell off the proverbial cliff, giving back every penny it gained since last July!
But this crash has barely begun. The last few Treasury auctions showed that bidding from foreign central banks is plunging to the lowest level in years.
In addition, U.S. investors are starting to turn bearish on Treasuries. A recent report from a top industry watchdog showed that nearly 20% of all Treasury investors have started to cut back their holdings.
Even Fitch — the normally conservative ratings firm — is warning that a massive bubble has been created in the bond market.
This is huge. Bubbles are like an enormous Ponzi scheme: They collapse when the money stops flowing in.
The moment that happens, it’s over. And it’s beginning to happen right now!
As this bubble — the greatest bubble mankind has ever seen — implodes, the consequences will be devastating for millions of unprepared investors, just like the tech bubble was and just like the housing bubble was.
The most vulnerable are those who can least afford to suffer losses: Seniors who are approaching or in retirement, who have shifted large amounts of their money into fixed income investments.
Your tax-free municipal bonds could tank.
Your annuities and other insurance policies could turn to dust.
Your money invested in bank and insurance company stocks could vanish right before your very eyes.
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