The Agonizing Lesson From Wimbledon
Here Is What People Say
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I’ll get around to it later
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That won’t / can’t happen to me
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I have the money for that, I don’t need to consider this other stuff
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My opportunity will come again
Full credit to Carlos Alcaraz, 20 years old, who beat Novak Djokovic, 36 years old, the owner of more men’s singles grand slam titles than anyone. The age difference was the largest in a men’s major final since Jimmy Connors played Ken Rosewall (I didn’t even know what tennis was then).
That all said, Joker (Djokovic’s nickname) will rue the opportunity lost today. One swing away from taking a lead that could’ve likely led to another grand slam title. One swing, it’s here.
What Does This Have To Do With Anything?
Reminder of last newsletter (click to read): Mr. Market Has Given Many People A Gift
While the glamor occurs when the trophy is raised (stocks are higher), that is only possible when the unglamorous work has been completed. I am not shedding light on a single thing, it has nothing to do with personal finance. That is the message of this entire newsletter: people know ABC, but they throw their logic and common sense directly into the trash bin, and replace it with with methodology/thinking XYZ when it comes to money. HUH???
Life Insurance:
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Mortality tables are known and almost everyone agrees. Term life insurance for a 40 year old woman? It’s a price TIE, down to the PENNY. The guys with the calculators? They have it nailed down.
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What is much better? The crediting that you receive when you pay for life insurance premium, because interest rates are higher. What does this do? It allows your cash values to earn more, it allows the indices inside a life insurance to have higher possible crediting rates. All policy crediting has been adjusted. However, if you are not healthy, then you may not be able to take advantage of this.
Protected Income
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Interest rates higher and do you see the denominator above? It isn’t added, “T” is an exponent, which shows the power of compounding. When interest rates were (virtually) zero, that didn’t matter as much. That was 2 years ago.
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Annuity accumulation is much higher now, the guarantees are higher because you are ultimately lending money to the annuity company. If they have to get that same money from professionals, they have to pay 5% a year (approximately), every single year, for 10 years. Instead, they are able to create structures which will look far better today, than they did 2 years ago. How extreme is it? It can be that it might be better to entirely liquidate old structures in favor of the new, because the contracts have changed in response to this new reality.
Bottom Line
People simply say “I already have that,” when the correct answer should be “can I get the optimal?” The answer is that the denominator is much higher, and that single fact favors those that understand how the mechanics and pricing of how financial contracts work. EVERY SINGLE financial contract includes time and interest rates in any calculation. There are NO EXCEPTIONS.
It is worth it, while the big elements in financial markets are stable (interest rates, foreign exchange, cross-asset correlations), to look at the other parts of your financial setup.
Don’t miss the break point opportunity as Djokovic did, I promise you he isn’t thinking about his prior 23 grand slam wins today.