Comments on: Wall Street Gambles on Old People Dying

By: coreypein

coreypein — Wed, 18 Nov 2009 19:28:13 +0000

Marketing life settlements is a shady business. Check it:

http://www.sfreporter.com/stories/die_already/5177/

Echoes of the subprime bubble.

By: sisyphus

sisyphus — Fri, 16 Oct 2009 13:35:38 +0000

Just a thought…

We now know that GS has a very active lobby for issues that impact their bottom line. What happens when they lobby for disincentives for medical innovation? Worse yet, do they begin to actively stir up sentiment for a war? And when do they pair up with organized crime and begin actively killing people?

Not saying that will happen, but this is a verrrrry slippery slope here.

By: pakdawgie

pakdawgie — Thu, 17 Sep 2009 13:36:00 +0000

I’ve seen first hand how some of this stuff is priced. It’s definitely a disaster waiting to happen. I can give you dozens of specific assumptions that are being made here on mortality that are unlikely to pan out. For example mortality rates for elderly people have been consistently improving over time. This is assumed not to happen going forward. Also the companies that are involved in making life expectancy assessments have a financial incentive to shorten these to get deals done. Unless there is some major pandemic, these things are definitely going to blow up.

By: jennofark

jennofark — Sun, 13 Sep 2009 00:52:30 +0000

Well, wait what you see what they've got planned next: speculative trading in organ derivatives, per McMegan McArdle's Randian utopian musings about "why not?" legalize the sale of body parts a few months back. Perhaps organ derivatives can supply the next speculative bubble needed to get this economy moving again. Like the last one, we can game the poor and middle classes to get this bitch rolling, and when we’ve all traded 100 billion kidneys back and forth and so on, we’ll discover that there are actually only about 14 billion kidneys in real terms – and you don’t even wanna know what this bailout is gonna look like, though I suspect it will go something like this.

By: jurassicpork

jurassicpork — Sat, 12 Sep 2009 20:26:29 +0000

http://welcomebacktopottersville.blogspot.com/2009/09/big-casino.html

I’m glad you’re writing about this, Matt. You’ve always been one of my heroes and you’ve just given me another reason why I still consider you one.

By: ptpawlowski

ptpawlowski — Sat, 12 Sep 2009 08:16:19 +0000

Doesn’t surprise me. Nobody’s telling the Emperor he has no clothes, because they all want to be so much like him. “Hey honey, should we get the 46″ or 52″ plasma for the crapper. I saw Ludacris has 60″ on Cribs.” People are gross.

By: dburn

dburn — Fri, 11 Sep 2009 18:04:11 +0000

I’m waiting for Death Deafault Swaps. Or Death Defiance Swaps. People can bet against the securities if the person doesn’t die. Then they’ll start buying up pools of insurance policies sold by insurance companies on 20 Year olds. If death doesn’t occur in three years , the swap has to be paid off to the full value of the security. Of course each security will have a pool of million dollar policies where each person has had a complete genetic and physical check up. The insured , in exchange for 10 Grand has to agree not to joing the military or any other dngereous job , go out at night , have sex with untested partners and variety of other life assurances.

Then they’ll combine a 1000 of them for a one security that will be sold as a billion dollar face value, find some dip shit to buy them, find some dip shits like AIG to sell the swaps.

It will be the inverse of the Credit default swaps where a mortage could be had if a person could fog a mirror. This time they’ll be tested like crazy. Then they put tiny tranches of dying people with young and healthy people and get them rated as DIAAA (death imminent-absolutely assured accuracy) with a annualized return of 14%.

Banks will buy them with fed money to cover their lifeless non performing mortgage assets and get burned again because they are dumber than fuck.

We won’t have to bail them becuase this time the super computer that prints electronic money will have a catastrophic meltdown and the Fed won’t be able to help. So what shoulda happened last year should happen within two years. In the mean time, these fuckers will get rich as hell again.

We all will get fucked. Don’t listen to people who say there is anything redeeming about this. Life insurance prices will go sky high as actuaries reprice policies to reflect the fact that they won’t be dropped. Meanwhile the value of the death securities will drop to 1% of par as they see virtually no one is dying.

The PR people did their jobs. Now comes the scam.

By: kiapenso

kiapenso — Fri, 11 Sep 2009 02:42:10 +0000

I was working at a newspaper in a very small Caribbean country in 2004 when I got a press release announcing a press conference from a developer who wanted to build a huge project–a billion dollars worth of villas, hotels, facilities. The press conference was to be on the Friday and a church service the Sunday held by two priests from this rather strangely named church. Which sounded weird. So I spent the week reading up on the church. It had loose relations with various charities; one sent people to Russia after the collapse and had somehow already established some kind of evangelical college over there. Then there was the outfit that came to look at this possible island investment. This group, a product of the Bush faith-based initiatives, ministered to the very ill and the very old and somehow along the way also convinced them to cash in their insurance policies. The priests (two of them came to the press conference, wearing dogcollars) would then sell these to brokers for a flat fee. But this charity also then turned around and invested the money in shares of some sort of Jesus-themed investment trust and it was this investment trust that was considering the island project. Those priests were the two creepiest human beings I ever laid eyes on. I sort of fired questions at them until they laid out the whole way these deals worked. Afterwards I found myself being grilled by one of them in a way that got the hair standing up on the back of my neck–friendly but very pointed, not to say menacing. That was the one who also said, from the podium, that I looked really cute holding a mike up to my mouth. Nothing more was heard of them after that press conference and the developer (an American) left the island within the year. Oh and I also learned that at the time viatical settlements were the least regulated securities, susceptible to fraud at just about every step of the transaction, a nearly guaranteed money-loser for investors.

By: sgtdoom

sgtdoom — Thu, 10 Sep 2009 23:36:58 +0000

One of the people interviewed (analyst type) claims it is an uncorrelated situation, that is, people’s life insurance policies, or their longevity, is uncorrelated to the ups and downs of the stock market!

But wait, there is indeed a correlation as studies have demonstrated people tend to be healthier — and live longer — during recessions and economically depressed eras (with that very small demographic of suicides, but isn’t that still exempt from insurance payouts?).

Therefore, this is indeed a correlated asset. This uncorrelated argument was used ad infinitum to back every single derivatives and swap securitization.

Also, wasn’t DBRS the group who gave the high applause to the Constant Proportion Debt Obligation? That really brought down everything when those were spun down…..

By: chih22

chih22 — Thu, 10 Sep 2009 17:30:06 +0000

I also meant that the risk due to lapsing increases as life insurance carriers get into trouble because they tend to raise policy fees or lower crediting rates. Therefore policy laspsing risk increases as insurance carriers get into trouble and also the death benefit payment is also at risk. The winners of this are the ones who stucture the deal and sell the bonds.