Friday, July 10, 2009

Worldwide recession no respecter of persons

I was asked earlier this week to arrange for a guest speaker at the Monday morning networking meeting in the Employment Resource Center in SLC. I suggested the name of Dave Checketts, and called him the same day to ascertain his availability.

We had a delightful conversation, getting caught up on each other's lives. I told him a little about my circumstances, and extended the opportunity for him to speak when he was in SLC the next time. He asked me to call his long-time assistant Clare to arrange the appointment, which I did.

During the conversation, he indicated that he had spoken recently at the NYC Employment Resource Center. He went on to say that in his New Canaan, Connecticutt Stake, historically one of the wealthiest stakes in the Church, there are 180 heads of household out of work currently. They have been especially hard hit in that area of the country. These people have been well positioned in their careers, but are now seeking new opportunities and many are being displaced as a result of the current circumstances.

He accepted my invitation after clearing his calendar with Clare, and he will be here on Monday, July 27th.

Yesterday, during several networking appointments I had further confirmation of the structural changes that are afoot in the markets. Longtime friend, and former business associate, Jonathan Ruga at Sentry Financial Corp. here in SLC, told me he had been in NYC for a week last month seeking capital infusions for their real estate investment fund designed to acquire distressed properties for their investors. He learned that expectations are higher than ever for profits among the investment bankers. They are seeking 30 - 40 percent returns in a three to four year window of opportunity and evidence that the investment "greed factor" is subsiding is largely mythical according to Jonathan.

Earlier this week, I attended a day-long "Discovery Day" at a company called Real Property Management, one of the fastest-growing franchisers in the country. They manage distressed properties that have emerged from foreclosure nationwide. Their franchisees, the founders of the company assured, are in a "growth industry," and in announcing their exclusive contract with Freddie Mac, stated that the number of properties they will take under management is expected to double to over 11,000 homes next year. One of the founders is a software engineer, the other a tax accountant, who together developed a proprietary system that utilizes the Internet in the most comprehensive application I've ever seen. And that Freddie Mac contract represents only the acquisition of properties from one source, Freddie Mac, excluding all others.

Sometimes we believe our troubles are somehow isolated, and that the dark clouds seem to hover directly overhead with no respite in sight for us. The old adage "misery loves company" may be true if we only circulate a little and learn for ourselves that we are not being singled out of the universe for especially harsh treatment. The tendency when one loses a job is to climb into our holes and curl up in the fetal position of perceived safety and warmth. I have learned that circulating and networking is the ultimate antidote for feelings of fear and anxiety. You instantly feel more connected and you are putting yourself in the path of discovery.

Make no mistake about it, this recession is not the average predictable recession of the past. This recession is bringing significant and irreversible structural change to the economy of the United States of America.

Last night another friend referred me to this interesting article that appeared recently in The Economist, and discusses specifically the market Legacy Now was designed to address:

In part, the article states that public awareness is growing the segment of the market in which Legacy Now has been dealing as the "antidote" for the ills of the industry known as "the life settlement business." The Economist reports:

"Americans have been free to trade their life-insurance policies since a Supreme Court ruling in 1911. In the 1980s a small market took off when AIDS sufferers were enticed to sell their policies to speculators for cash. More recently, the credit crisis has battered the savings of elderly Americans, leaving their life-insurance policies as one of their more valuable assets. Seduced by advertisements, they can sell it to a life-settlement firm for many times the amount they would get if they cashed it in with the insurer. The buyer takes over payment of the premiums in return for the payout when the policyholder dies.

"Although that gives investors a financial interest in the seller’s death, it does not, of course, mean Wall Street is about to go around bumping off American pensioners. Rather, the industry believes it can pay more to the policyholders than the life-insurance companies because it has selected those with a high risk of dying soon."

The genius of Legacy Now has always been that by assembling pools of annuities that predict and expect longer life, as opposed to certain and swift deaths in the case of life-settlement pools, by combining the two pools into a CDO the yield can be enhanced and stabilized. Some take a moral position that one should not be wagering on people's lives, and indeed that is the reason insurable interest laws were conceived -- to prevent the unknowing insured from having a total stranger take out an insurance policy on one's life without their knowledge and thus acquire an interest in their ultimate demise for purposes of a return on their investment. However, when the use of insurance products for a CDO is fully disclosed and with the proper safeguards in place, Legacy Now's design distributes a significant portion of the profit margin in the transaction up front to the participants' favorite charities and is perfectly legitimate. The power of the idea is in the "uncorrleated" nature of the transaction -- meaning that is "uncorrelated" from the vagaries of the destructive financial markets through which we have just emerged. While this article discusses the securitization of life-settlements, we are one step ahead because the life-settlements are blended with the annuities. Someday, the investment community will awaken to the value we have created, but for now we wait for the stabilization to happen if it ever will.

So what's the future looking like? New and different. Time now to position ourselves for a continued bumpy ride, and at the same time looking for new opportunities on the horizon as the recession deepens.


  1. Great Blog, Dad. I look forward to reading your words and hearing your thoughts. I love you...thank you for the years of constant encouragement and love and teaching. I like the template you chose, but I thought you didn't like brown?;)

  2. I still hate brown, but the rest of the world sesems to love it so who am I to resist any longer?

  3. I forgot to mention that I talked to Rich last night. He told me the graduating class at Creighton Law School this year is about 50% employed, higher than the national average of 33% of graduating lawyers. Even the demand for new lawyers this year is way off from historical benchmarks. The point? It's not just you if you're feeling singled out for financial heartache. We are so grateful for Rich's job that brings their family closer to home.