by Travis Johnson, Stock Gumshoe | February 24, 2015 1:01 am
This was originally published on January 21, 2015.
Man, I’m starting to have trouble keeping up with all this. The folks at the Palm Beach Letter[1] are so enamored of their “outside the stock market” investment idea that they change the name of it every few months. Whether they’re just testing out which term most appeals to potential subscribers, or because they’re ardently trying to keep their “secret” I don’t know.
But we can, at least, keep telling you what it is they’re actually talking about — whether it’s the “Babylonian Money Code” or the “President’s Private Account” or the “Invisible Retirement Fund” or the “770 Account[2].”
Yes, those are all the same thing. This is how the latest ad from Palm Beach describes the “Babylonian Money Code”:
“Outlawed by Caesar before the birth of Christ…
“Banned in France in 1681…
“Stolen by Hitler during World War II
“What you are about to discover is the tale of an asset so controversial… so coveted… that it is still cloaked in mystery today.
“Modern pundits scorn it… the rich love it… government all but censors it….”
Sound familiar? It’s a great story — Mark Ford[3] hasn’t lost his ability to teach the next generation of copywriters how to pitch an idea and make it sound fantastic. Here’s a bit more, just to give you a taste:
“The individuals who possess it-even those who have stumbled onto it-see their wealth and their fortunes flourish.
“But it’s not a tale of gold[4], silver[5], stocks, bonds, or real estate[6]…
“And its roots go much deeper than bitcoin or any of the latest financial inventions.
“No… The secret we’re going to uncover today traces its roots all the way back to the dawn of recorded history. To an ancient code written more than 3,800 years ago…
“And even though this asset appears 500 years before the Ten Commandments, it’s been scorned throughout much of history….
“In the 19th century, the Church called it ‘a speculation repugnant to the law of God and man’…
“But despite these obstacles, many of the world’s elite have long sworn by its power.”
So there’s plenty of intrigue — and the implication that this asset class has its roots in the Code of Hammurabi and the “first Wall Street” of ancient Babylon. More…
“In fact, scholars today believe this code unlocks a secret that’s made people wealthy for nearly 4,000 years…
“It’s the source of an investment formula rooted in the twin pillars of safety and prosperity-which made the Babylonians so wealthy.
“Some researchers refer to this method as the Babylonian Money Code-in honor of Hammurabi’s own text.
“For the past four millennia, it has quietly protected and grown personal fortunes.”
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And yes, “some researchers” likely means “the people at Palm Beach Letter.” Though yes, it is true that scholars credit either the ancient Babylonians or Chinese traders with the invention of what we would call insurance (depending on who you ask)… and this is a kind of insurance that Tom Dyson[7] and the Palm Beach folks are talking about. Though it’s not the kind of insurance Hammurabi would have been interested in — which was mostly insuring trade and shipborne goods — it’s life insurance[8].
Have we lost you yet?
Yes, the “Babylonian Money Code” is Tom Dyson and the Palm Beach Letter‘s most recent made-up phrase to describe the “Bank on Yourself” or “Infinite Banking” system — which is essentially a system that has individuals buy up participating whole life[9] insurance through mutual insurance companies, maximizing the cash value through “paid up additions” or other means and maximizing the potential dividends[10] from the insurance company, and borrowing against that cash value for life’s needs in the future while finally, in the end, passing the assets along to their beneficiaries in the form of the tax-free death benefit.
We’ve had many discussions of this system over the last year or two that Dyson has been touting it, so I won’t rehash the chatter for you — here’s my quick take on the many back-and-forth discussions that readers have had:
The arguments in favor are that (once the cash value has built up) you can create your own “bank” and borrow from your insurance policy to buy a car or start a business or send a kid through college; that mutual insurance companies have historically paid nice dividends to participating policyholders that can build up the cash value substantially over decades; and that the gains in the end are tax-free and eventually create a steady mid-single-digit “safe” return on savings that compounds the ultimate value of the policy.
The arguments against are that it takes ten years or so (that’s an average number I’ve heard, not a promise) before the cash value of whole life insurance starts to work for you (and not for the insurance agent), since commissions are front-loaded; that it requires discipline because you can lose the asset or the tax benefits if you don’t keep up your payments or repay your loans; and that the whole system is complex and opaque and non-standardized, so it can be very hard for consumers to set it up properly or to compare whole life plans across companies or providers, let alone the more complex riders that maximize the value of “bank on yourself[11]” (or “770 account” or “Babylonian Money Code”) plans.
So if you’d like to chat about all of this again, feel free — or you can revisit our past articles on the subject, you can find our look at the 770 Account / President’s Account here from about 18 months ago[12], and our more recent piece about the Invisible Retirement Fund here[13].
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I think there is some merit to the product if you tend to use loans to purchase cars or other big ticket items. The argument is that you make yourself a loan from the policy rather than from a bank and pay the policy back with interest. If you are fortunate enough to be able to pay cash for big ticket items, then it wouldn’t make sense.
Being a subscriber to a few investment advisory publishers for a few years has done alot to increase my knowledge of the investment alternatives . My father bought me a 10K whole life policy when I was 17 which his wealthy insurance broker and “friend” said would end up “paying for itself” after I reached a certain age which I cannot recall now (55 years later) as well as accruing a substantial cash value which I would be perfect to use for investment in a businessor a home. Well, because I respected my father, I paid the recommended premiums for the alloted time and then stopped paying them as my Dad’s “friend” suggested. But the wisdom of this bad investment ended up as a policy with no cash value and a loan, made to my business. It also turned out that I was then forced to pay yearly premiums to keep the policy from lapsing during my high income years, to avoid triggering taxation (as regular income) of the loan proceeds… about $7200. As it turned out, I let the policy lapse in my first year of retirement in which I had tax free income from other far better investments I had made on my own . So, the tax I paid was at the lowest tax bracket. I am very sure it was a real loser. I can remember talking with the agent during the years when I was paying the premiums asking him to help me out with his plan gone awry. He was such an arrogant bastard – retired in Boca with his for sure precancerous tan and gin-soaked gloating about how great his life was and how I should have gone into the insurance business. Sure, 770’s may be great if you are a person that no insurance agent can afford to screw over because he knows you have the right people on retainers to evaluate the fine print. But for the rest of us, investing is different ball game.
I am a firm on taking the term and investing the savings in ways you are qualified to understand. Whether its tech, oil, consumer products , shipping, currency , financial services or whatever. Stick to what you have deep knowledge of, be patient and diverse, cost average on the way in with stop losses, and have an exit plan that covers your back…and, for Christ’s sake, stay away from overtly religious money men. Come on! Do they really forget that money is the root of evil because , among other things, it can kill moral conscience? Sure, we all swim in the same money soup but some of us strive for peace, grace and dignity of doing right for ourselves so we can do right for our loved ones and those we share our insights with.
Laissez Faire Letter turns out to be my least favorite source of guidance. Too much tease.
A tip for anyone that shares my take away . Cut the theatrics. Gumshoe LF topics to see if its something you want to look into. Kudos to Gumshoe! Have a great day.
The root of all evil is the the love of money and not money, because in and of itself, money can do absolutely nothing. The good book also says, store up treasures in heaven and not here on earth, where it decays and thieves steal it, which includes unscrupulous insurance agents and companies. They are in business to make money and have found ways to do it beyond all belief. Stock and financial services planners are not much better, if left to their worldly vices. The balancing act is to store up, but not hoard up treasures here on earth, because not one soul living can guarantee living beyond the moment they currently occupy. Better to give with the hope of an eternal return. The Palm Beach group is nothing more than a marketing machine with a whole lot of fluff, but the products they sell are just that, products. So buyer, beware, and do your due diligence before jumping on board. Actually, it would do most readers in this former to take an insurance 101 primer, to learn about the different products and uses of each before jumping on board with any company or agent. Fact is, most agents really don’t know what those differences are. They are simply pedaling products to make a buck to survive. Oh well, I could yada, yada, yada all day and still not make a dent in the way folks think or act. Thus it’s more important to act as though you will be held accountable for the things you do here on earth, by simply following the golden rule, of do unto others as you would have them do unto you… Just be a good person, regardless of how rotten others choose to be…!!
I agree with you 100%, Paul T. The Bible says to lay up treasures in heaven, where no moth or rust can corrupt. God has promised to take care of His children (those who have been redeemed by the saving blood of Christ) and to work out all things together for good for those who love the Lord. How’s that for an insurance policy?
If you think that God does not keep His promises, take a look at what God promised Abraham, Isaac, and Jacob, and where Israel is today. We are witnessing prophecy being fulfilled today, and modern miracles as God fulfills His promises.
Omg so this highly praised shit is just create a life insurance and then burrow money in the bank, on the life insurance? I sure hope these banks never get their own paramilitary hit squad 😀
thank you for telling the truth.
saved me $49.00
If it is done as suggested, does it work as advertised?
What is the difference between waiting 10-15 years to accumulate enough to be a real asset and investing in things like a 401(k) or IRA plan for 35 years to have enough for retirement?
Without the hype and hate, does whole life insurance, with reinvested dividends actually pay off in the end?
Jerry D Young
Thanks for the info, Gumshoe. I have been going through these “presentations” with a skeptical eye and so far they have all promised one thing… to make the presenters rich off of subscriptions. There seems to be no end to the ways these guys reword, represent, and generally hash over the same stuff just to get you to bite the bait. I’m now $49 richer. Thanks!
Respect everything in life.
Design your heaven or hell in the after life….