We look forward to the Van Mueller newsletter every month. It's chock-full of sound bites, sales tips, and eye-opening statistics. Here are our favorite parts of the April 2023 edition. We're sharing the full introduction, and 2 of the 7 monthly sales ideas. If you like what you read, we encourage you to click here and become a subscriber.
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April 2023 – 7 Ideas and Views Newsletter by Van Mueller
One day everything is fine. The next day you have nothing. One day you think your bank is safe and now you face uncertainty. In March, Silicon Valley Bank became insolvent because of a run on the bank. Because interest rates increased rapidly the value of their assets which included a tremendous amount of Long U.S. Treasuries decreased dramatically causing the bank to become insolvent.
This is important. The Federal Deposit INSURANCE corporation was necessary to prop up the assets of Silicon Valley Bank. Using word games, the government declared that this was not a bailout, and no taxpayer funds were being used to make depositors whole. The statements were totally inaccurate. Because Silicon Valley Bank will not exist after depositors are made whole, it is not considered a bailout. 95 percent of the depositors had more that the $250,000 Federal Deposit INSURANCE Corporation protection and yet, they will be made whole. Where did that money come from?
Why do I keep spelling out the Federal Deposit INSURANCE Corporation? Isn’t that how the government can attempt to declare that no taxpayer funds were used? Let’s talk about the Federal Deposit INSURANCE Corporation. The banks pay premiums for this protection. Those premiums reduce the yield that banks can pay. Before the Silicon Valley Bank fiasco, the Federal Deposit INSURANCE Corporation had $124.5 billion of assets and a $100 billion line of credit with the U.S. Treasury. All of the Federal Deposit INSURANCE Corporation account will be used to make Silicon Valley Bank depositors whole. One bank will use ALL the assets.
Really think about that. There are at least 200 other banks in the same situation as Silicon Valley Bank found themselves in. Here are several things to consider.
First, Won’t the Federal Deposit INSURANCE Corporation have to dramatically increase premiums to rebuild the account value of the FDIC? Won’t that dramatically lower the yields they will offer to depositors? Please remember the account will have been reduced to almost nothing.
Won’t the Federal Deposit Insurance Corporation have to dramatically increase premiums to rebuild the account value of the FDIC? Won’t that dramatically lower the yields they will offer to depositors?
Next, shouldn’t our customers ask this question? How many banks will have to fail before depositors over $250,000 will not be made whole? Where will the government get the money to continue making whole the depositors who have more than $250,000 with a bank? Is there an end time? Who will decide when that is? Ask your customers if they want to risk when the government decides not to go over the $250,000 limit.
Additionally, didn’t the Federal Reserve raise the interest rate a quarter of a percent, not because of inflation, although that was a small part of the reason, but because if they didn’t raise the rate wouldn’t that have been a signal to the American people that banks were in much more serious jeopardy than was being revealed? Why? Wasn’t the increase in interest rates the cause of the issues being faced by Silicon Valley Bank, Signature Bank and many hundreds of other banks?
As the interest rates increased and the value of the bonds the banks were holding decreased, wasn’t real danger being applied to the surplus positions of those banks. Isn’t this a classic example of why “fractionalized investing” causes real concerns every time this happens in our economy? If you truly understand this information, we are only at the beginning of a tumultuous time of volatility for the world, our country and our customers.
Finally, we were already expecting a credit crunch even before the Federal Reserve met in March. Banks, especially smaller and regional banks were already trying to preserve capital, as depositors continue to worry about how much of their money will be protected by the Federal Deposit Insurance Corporation.
Lenders in the United States have already lost over $500 billion since the Silicon Valley Bank collapse. Customers are reallocating their money to safer havens, such as money market mutual funds and bigger banks such as JP Morgan Chase. The Federal Reserve also provided hundreds of billions of dollars in liquidity trying to prevent a repetition of what happened at Silicon Valley Bank to other banks. It is possible that even more federal intervention will not be enough.
Lenders in the United States have already lost over $500 billion since the Silicon Valley Bank collapse.
Recommendations have been made to have the Federal Deposit Insurance Corporation guarantee ALL United States bank deposits. Even that might not be enough to stop the shifting of deposits from smaller banks to much larger banks. Where would the government get the money to back up that guarantee? The Federal Deposit Insurance Corporation only had 1.24 percent of the funds necessary to back up the $22 trillion of United States deposits.
Now, I would really like to blow your mind up. Non-bank financial institutions account for $250 TRILLION in accounts. Who or what will bail out these accounts when they have a problem? Let me repeat that again in case you missed it. The Financial Stability Board reports that there are $250 trillion of assets held by financial institutions without a banking license. There really can’t be a lender of last resort as the Federal Reserve and government are trying to portray themselves. There will be more regulation of these entities. There will be more costs to run these banks and non-banks including higher insurance costs for deposit insurance.
Let’s dig deeper. Our banking system is not forthcoming about the valuation of its assets. It marks assets like federally insured mortgages and long-term U.S. Treasuries to book value rather than market value. This does not work when you use a fractionalized methodology for investing. If you give a bank a million in deposits, they can loan out $10 million. If 11 percent of those loans default, the bank is in receivership or insolvent.
Don’t insurance companies also mark those same assets to book rather than market value? Why don’t the insurance companies get in trouble if they mark their assets in the same manner as banks? Doesn’t it have to be much safer because of the reserving requirements of insurance companies? We are not allowed as aggressive an investing methodology as the banks are. By the way, doesn’t that lead to another tremendous benefit that insurance companies have over banks during economic challenges currently being faced by Americans?
So, how many banks are currently insolvent if we marked their assets to market value rather than their book value? Would you believe me if I told you over 2000 banks are insolvent if they marked their assets to market? If we were to assume you have more than $250,000 in a small to mid-sized Federal Deposit Insured Bank, what would happen? If your checking account balance was $2 million. Then isn’t it true that $1,750,000 is not insured? Could the government insure all your banks uninsured deposits if there was a run on the banks? Think about this: Hasn’t Treasury Secretary Yellen declined to ensure this insurance coverage? In fact, didn’t she divulge that she would determine this benefit one bank at a time? Didn’t she also disclose that she would give the large systematically important banks special consideration? Where does that leave not systematically important banks if they get into financial trouble?
Would you believe me if I told you over 2000 banks are insolvent if they marked their assets to market?
If you are a bank customer in this situation, do you leave your uninsured money with the bank or do you go and remove that uninsured money and move it somewhere else? Couldn’t that also cause a run on these banks when the American consumer figures out we don’t have the money to bail out ALL the banks? Aren’t we at the very beginning of figuring this all out?
Finally, isn’t it true, that the Federal Reserve is creating a scenario that will cause banks to become much more cautious about lending? Do you understand that smaller banks account for an overly large share of commercial and personal loans? Midsize banks account for 43 percent of all commercial loans in the United States, while in comparison, only accounting for 25 percent of the total assets. Also, according to JP Morgan, small United States banks account for 39 percent of consumer loans, compared to just 20 percent of the assets. Banks have really ramped up the difficulty for potential borrowers to get access to credit. Because of the banking industry’s difficulties over the past two years, it will only get worse. Not Better! An analyst shared that banks and non-banks are doing the work of the Federal Reserve, helping to slow down the economy by making qualifying for loans more and more difficult.
Think about this; isn’t one of the great benefits of owning cash value life insurance and annuities access to money at the time when it is most beneficial to use it? Isn’t being able to access money to buy other businesses or properties at discounts the absolute definition of financial success? Banks reduce your access to money during economic times like we currently find ourselves in. That actually can exert enormous stress on individuals and businesses. Having access to money to maintain your business or life and access to opportunities is actually a tremendous stress reliever. What an amazing opportunity for all of us to bring CONTROL back to our customers.
Understanding the information above, here is a conversation we should all be having with our customer in the months ahead. We will be providing a tremendous service that our customer will miss out on if we don’t have these important conversations with them about the misrepresented opportunity the banks will seem to be providing.
Currently, our country has one of the biggest inverted yield curves we have eve seen. That is when short term interest rates are higher than long term interest rates. Here is a list as of March 29, 2023.
1 Month: 4.24%
3 Months: 4.75%
6 Months: 4.90%
1 Year: 4.59%
2 Year: 4.02%
5 Year: 3.68%
10 Year: 3.55%
30 Year: 3.77%
The banks are trying to take advantage of this inverted yield curve. Why do I want you to know about this? 80 percent of the CD’s in the United States are 6 month CD’s and most come due in April and October. Because of the inverted yield curve, many banks are offering 6-month, 9-month, 15-month, 18-month, even two-year CD’s that are paying over 4 percent. This is a trick. Many analysts are predicting a recession that could start as soon as 60 to 90 days from now. When the recession begins, the Federal Reserve will begin to reduce interest rates immediately. So, after that initial 6-month to 2 years increase in their yield, the banks will begin to immediately drop their rates back to the rates we’ve seen for the last 10 years. If the Federal Reserve lowers interest rates, won’t the interest rates on annuities also be lowered? Ask your customer if they understand that they are missing the opportunity to lock in interest rates for 5, 7 or even 10 years above 4 percent? They will miss this chance if they wait. Then, ask them to consider that you might be wrong and interest rates might even increase rather than decrease. Ask if they understand that we can build a strategy for that. If interest rates increase, our annuities have annual withdrawal privileges. We can take a withdrawal every year and buy a higher interest rate. The higher the interest rates increase, the longer we will lock in the guarantee. Please ask them if they understand that as the interest rate cycle increases we will be a little behind. However, at the top of the interest rate cycle we will have locked in the highest interest rates. Please remind them that you will be happy to stop by every month for your regular hug and kiss when they begin to understand what the strategy has done for them.
Ask your customer if they understand that they are missing the opportunity to lock in interest rates for 5, 7 or even 10 years above 4 percent? They will miss this chance if they wait.
Please don’t miss this opportunity. Please learn to explain what the banks are really doing so you can provide better service to your customers. This Is A Real Opportunity For Both Your Customer And Yourself.
Before we start this month’s sales ideas, I would like to cover two additional learning opportunities.
First, in order to be a better salesperson and then a better insurance and financial professional, we must become better listeners. I recently read an amazing book written by Dan Lyons entitled, The Power of Keeping Your Mouth Shut in an Endlessly Noisy World. Talk Less Listen More
Here are a few highlights of this vitally important book.
- Sooner or later, if you talk too much you will talk yourself into trouble.
- Talking is a hard habit to break. Overtalking is actually wired into your brain.
- We now live in a world that almost forces you to talk too much.
- Most powerful and/or successful people talk less than other people and listen more. In fact, they listen with great intensity.
- In almost every aspect of life, talking less gives you an advantage.
- Being a great listener doesn’t just improve your own life, you also improve the lives of the people around you.
- There are thousands of books that try to teach you how to be a better speaker. Isn’t what we really need to learn is how to be quiet and listen?
Our success lies in our ability to inspire our prospects and clients to share their opinions about how they wish their present and future to be accomplished. We cannot find out that information by telling. We must ask powerful questions and then listen as accurately as possible so we can provide that opportunity and success that our customers wish for and hope for, yet never really plan for. Agents and financial professionals are the solution. We are never the problem. Remember success lies in just these few concepts. Ask, Don’t Tell and Talk Less and Listen More. Amazingly simple, yet so few of us ever achieve an understanding of those simple realizations.
Ask, Don’t Tell and Talk Less and Listen More. Amazingly simple, yet so few of us ever achieve an understanding of those simple realizations.
The second learning opportunity is being made available to all of us May 18th and May 19th in Chicago, Il at the Loews-Chicago O’Hare. I will be attending.
The title of the meeting is the “Heroes of Zero.” Ed Slott and David McKnight will be on the same stage two days in a row for the first time ever, sharing how to achieve this most important goal. Zero Tax!
Attendees will learn two days of ideas from my heroes Ed Slott and David McKnight. In addition, you will take home a Heroes of Zero manual with over 250 pages of information and resource material.
Included with your investment will be complimentary breakfasts and lunches both Thursday and Friday. On Thursday evening a complimentary dinner will be provided. Finally, included with your investment to attend this wonderful meeting is 3 nights hotel accommodations at the Loews-Chicago O’Hare.
The normal investment to attend this marvelous enhancement for your career is $1,745. Subscribers to this newsletter will be able to attend this career enhancing educational summit for the low investment of $999. Use the code VAN999. Click on the attached link and sign up immediately. With everything that is currently happening in our country, we will have a government that will require more and more revenue in the future. You couldn’t learn more timely information.
This is an investment, not a cost. One sale that you achieve because you attended this meeting will pay you back 100 or even 1000 times over. I will be there with all of you. Don’t miss the “Heroes of Zero.” Ed Slott and David McKnight on the same stage for two days. The timing is perfect. I look forward to seeing you all there.
To Register, Visit: https://www.heroesofzero.live/
Use the code: VAN999
Idea #1: What Protection Does My Money Have?
This is an interesting article that you should carry around with you. It explains Federal Deposit Insurance and its protections. It shares how to discover Credit Unions protections. The article provides information about the Securities Investor Protections Corporation (SIPC) and explains what is covered and what is not covered. This is timely information. Customers will want to know this information. We can then share the information with our customers.
Title: Is My Money Safe? Here’s What Is Covered, and How You Can Do More
https://www.boston.com/ (Boston.com, March 14, 2023)
Idea #7: Words Matter!
Jonah Berger, marketing professor at The Wharton School of the University of Pennsylvania says, “words matter.” They can be turned into magic.
Successful people speak with a great deal of confidence. (This take practice) The customer believes that you are so certain about what you are saying that it would be foolish not to accept your advice.
Hedging signals a lack of confidence. “I think this is true or this will probably work, or this might be the best course of action” makes people less likely to take your advice. There is so much value in this article. I would read it and apply the messages imparted over and over again until they become second nature to me.
I believe this is one of the best articles I have ever shared with you.
Title: These ‘Magic Words’ Make You More Influential
https://www.thinkadvisor.com/ (ThinkAdvisor, February 27, 2023)
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