Lara-Murphy Report – The Greatest Hits

The LMR Greatest Hits are articles selected from past Lara-Murphy-Reports financial news letters that are still relevant and popular today. Paid subscriptions are available – click here for more information.

Comparing Whole Life Versus Universal

From June, 2012
In both the Lara-Murphy Report and our book, How Privatized Banking Really Works, Carlos and I explain the benefits of Nelson Nash’s Infinite Banking Concept (IBC), which involves the disciplined use of dividend-paying life insurance policies. Since Nash himself couches the discussion in terms of whole life policies, we naturally did the same. However, there are other categories of permanent life insurance policies that have “cash value” besides whole life, and people often ask us what the difference is. In the present article I’ll sketch the comparison between whole life (WL) and universal life (UL) policies.

The Mechanics of Policy Loans

From November, 2011
One of the nicest features of whole life insurance is the ability of a policyholder to “get at his money” during the entire life of the policy, as opposed to tax qualified investment vehicles that typically assess severe penalties for early withdrawals. Specifically, the whole life owner can take out a policy loan, gaining the use of his cash value, at any time. It is through taking out (and paying back!) policy loans that a person can use a whole life policy for “banking” purposes.

Where Do You Put Your Money Now?

From April, 2013
Perhaps this question is better stated this way, “In an economic environment such as what we have today, where SHOULD you put your money now?” Even with that clarification, it should come as no surprise that for a large portion of the population this question is meaningless. “What money?” they say. “I’m living paycheck to paycheck and just hoping I don't get laid off!" Others have some money but, with today’s interest rates and the volatility of the markets, are getting virtually no return on that money and are terrified of losing what little bit they do have. Still another group have some money, but have relinquished the management of it to others, and are praying that it will somehow all work out in the end.

From Bailouts to Bail-Ins: Understanding the Dodd-Frank Act

From February, 2015
On the surface, the Dodd-Frank Wall Street Reform and Consumer Act1 (January 21, 2010)—the most sweeping overhaul of the financial markets since the Great Depression— was created to provide increased preventive regulation in order to strengthen the financial markets in case of another 2008-type crisis. This new law specifically involves increased capital thresholds for financial institutions mirroring the cross-border framework and requirements of the Basel III International Reforms2 that were formulated for the banking system of the European Union by the Bank for International Settlements. (See: The Lara-Murphy Report (LMR), May 2014 edition. “Bank Deposits Are Risky—Now More than Ever.”)

IBC Is Not A Gimmick

From April, 2015
In April of 1987 a newspaper ad ran in the Wall Street Journal with the following almost unbelievable bold headlines: “All Life Insurance Lets You Provide For Your Children—Ours Lets You Buy Toys Of Your Own.” This ad was so ostentatious in its message that it became Exhibit-A in a Senate Hearing before the Subcommittee on Taxation and Debt Management on March 25th, 1988. The final outcome of these proceedings led to a dramatic change in the Internal Revenue Code treatment of life insurance unmatched by any other since the industry’s inception. Now, it’s true that even our common sense tells us this advertisement is definitely talking about special benefits for the living, not the dead. So the ad does beg the question, “Is this really life insurance?” Furthermore, who can dispute that the ad itself is shameless, especially since Congress had just enacted the 1986 Tax Reform Act the year prior seemingly closing all of the tax “loopholes” of the wealthy. But it seemed that by overlooking this remaining favorable tax treatment enjoyed by traditional whole-life insurance, Congress had somehow “inadvertently made a generous gift to a small privileged segment of society.”

IBC: The Good, The Bad and The Ugly

From June, 2013
SIMPLICITY is elusive. Nothing in recent years has convinced me more of this fact than attempting to explain the Infinite Banking Concept (IBC) to others. When I consider the number of years it took me to finally understand it, I wonder if its simplicity is not perhaps the real source of its difficulty. It is so simple it makes no sense! But, of course, that’s not it at all, there is much more to it than that. IBC involves matters having to do with money, credit and how it flows in the entirety of our economy. Those particular elements have never been simple for anybody. Nelson Nash, originator of the concept and author of the book that started it all, has made it very clear that he did not write his book for the financial professional, but instead for the average American—the middle class. What is important to realize is that this sector of the economy for the most part is in a state of utter confusion when it comes to matters of money and finance. In the past thirty years this group in particular has suffered through some of the worst periods of chronic inflation and economic upheavals this country has ever experienced. This progress of inflation, coupled with onerous taxation and erratic market volatility has served to deprive these masses of their savings and made them desperate. Therefore, it is not surprising that Nelson’s book should surge in popularity at this crucial time in American history. Finally, here appeared a book for the general public with a strategy that beat the system at its own game and promised individuals financial prosperity once again. By the time the 2008 financial crisis hit, life insurance companies began reporting dramatic increases in the sale of dividend-paying whole life insurance not seen in decades, while banks and Wall Street were in the tank. A 200 year-old product was suddenly back in the limelight, but it was not a coincidence. This just so happens to be the one financial product that is at the heart of Nelson Nash’s concept. Obviously, the IBC book, Becoming Your Own Banker, and Nash’s seminars had gotten the public’s attention and made them take action.

Austrian Economics + Whole Life Interview With Nelson Nash

From December 2011
Lara-Murphy Report: For the benefit of our readers who’ve never heard one of your seminars, can you explain how you discovered Austrian economics? Nelson Nash: It was back in the mid-50s. I had to go on active duty with the Air Force upon graduation from college. When those two years were up, I moved to Eastern North Carolina to begin my forestry career. By the way, I did not work for the government – Smoky Bear and In don’t see things exactly the same. I worked for private landowners by contract. I knew nothing about socialism, but, inherently I knew something was wrong about it. I also didn’t realize how much the ideas of socialism permeated the thought process of folks involved in forestry, so I came face-to-face with the mental paralysis that the monster creates in the human mind. I could not believe what I was witnessing! Why would anyone behave that way?

Why Dave Ramsey is Wrong About Whole life Insurance

From September. 2012
Radio talk show host Dave Ramsey has made a national name for himself guiding people out of debt. I occasionally listen to his show (Ramsey and I both live in Nashville), and I applaud much of what he tells his listeners. In particular, Ramsey stresses the importance of having a specific budget and communicating with one’s spouse about money. Furthermore, as a Christian, I also like that Ramsey ends each show by saying that ultimately, the only path to financial peace is to walk with the Prince of Peace. (Funny tidbit: I discovered months after attending that Ramsey and I actually went to the same church!) Unfortunately, as many readers of the Lara-Murphy Report know all too well, Dave Ramsey really has it out for whole life insurance. It’s not merely that he prefers term life. No, Ramsey is quite adamant that anybody buying a whole life policy is a fool, and anybody selling it to him is either a liar or an idiot. In this article I want to explain why Ramsey quite simply doesn't know what he’s talking about, when he criticizes whole life.

How Mutual Insurance Holding Companies Really Work Part II

From December 2013
We all know that long ago the Church condemned usury. As a result a special monetary device was conceived that allowed religious institutions to borrow great sums of money from the public without committing this sin. That peculiar financial instrument was the annuity. Its features worked so well that governments soon began using it too. In fact, in 1689, King Louis XIV of France used an annuity scheme devised by Lorenzo Tonti, a Neapolitan banker, to raise needed funds for the state. It was immensely successful and the plan was quite simple. Money was set aside yearly for the contributing participants. As participants died and their annuity obligation ceased, ever larger annuity amounts became available to the survivors. The longer one lived, the larger grew the annuity payout. Two centuries later, Henry B. Hyde, President of the Equitable Life Assurance Society of the United States, revived the use of this “tontine” concept and in doing so completely revolutionized the industry. This one apparatus made the life insurance companies in the United States the most powerful financial institutions in the world until the twentieth century when it was outlawed. In this article we will explore why, and what all this has to do with the “closed block” in a mutual insurance holding company (MIHC).

How Mutual Insurance Holding Companies Really Work

From November, 2013
A mutual insurance company is an insurer that is owned 100% by its policyholders. Policyholders in a mutual are “contractual creditors” of the assets of the company. This means that a policyholder has ownership, membership, and contractual rights vested to them by state law. When a mutual insurance company demutualizes it converts completely to a stock company owned by shareholders. When this happens it loses its mutuality. A mutual insurance holding company (MIHC) is something altogether different— it’s a hybrid of sorts. It is not fully a mutual because the insurance company actually becomes a stock company too, but because of the holding company feature, it is able to retain its mutuality. the policyholder’s ownership, membership, and contractual rights are all still there in the MIHC structure, but they are now separated within the new “split” company.