Here’s a puzzle for you – the answer to which could make or break your financial future.
What kind of business takes your money; gives you a guaranteed minimum return and then invests the money in complex derivative securities or crummy real estate investments?
Wait, there's more.
What kind of business takes your money and gives you a guaranteed level of performance, a stop out, plus some upside in the S&P 500, and then not only fails to hedge, but invests in the very same crummy, toxic properties?
If you guessed the annuities market, go to the front of the line. Unfortunately, these days the front of the line in the annuities market heads right off a cliff.
It’s a funny thing about annuities. While they purport to offer protection, safety, and guaranteed income, annuities are, in reality, only as solid as the insurers that stand behind them.
Which brings me to some of the market leaders.
In the annuity market, companies like Hartford (Stock Quote: HIG), Lincoln Financial (Stock Quote: LNC), and Prudential (Stock Quote: PRU), are on a run of bad luck that would make a Vegas poker table washout look like Amarillo Slim. These companies, if one is to believe their trading patterns, seem to be on the wrong side of every trading ledger on a chronic basis.Why do I say, “if one is to believe?” Because just like every other financial insurer, they don’t disclose much of anything except what they broadly do, and what they broadly do is disastrous.
These companies are at the scene of so many bad trading days because nobody on Wall Street knows what happens to them if their policyholders want their money. Worse, more and more annuity providers don’t have any new money coming in to pay off the old money.