wall street’s next venture… death bonds

now, as the product of a good, old-fashioned, american capitalist household i’ve been raised to respect and appreciate all of the many opportunities that wall street has given me in life. but seriously… does this sit well with anyone?

“Profiting from Mortality; Death bonds may be the most macabre investment scheme ever devised by Wall Street”

Check it out here.

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3 Responses so far »

  1. 1

    Tim said,

    Hmm — I don’t know if it’s bad as all that. “Death Bonds” seems like a pretty sensationalist way of characterizing these things. The fraud that they’re describing sucks hardcore, that’s to be sure, but that doesn’t mean that the product itself is bad.

    I think that if people are comfortable with the idea of life insurance, then people should be pretty comfortable with the idea of death bonds.

    So in life insurance, you pay a monthly premium on the off-chance you die and then you get a big payoff. If it takes a long time for you to die, it’s not worth it, because the premiums you pay count against the returns from the insurance. If it takes a short time for you to die, then the returns are higher. It’s essentially you making saying to the company “Betcha I’ll die sooner than you think” and the company saying “Betcha you won’t”

    Death bonds essentially just work in the reverse way. You get paid a big sum upfront, and the company pays your premiums and collects the return when you die. If it takes you a long time to die, then the company loses. So it’s you saying “Betcha I’ll take longer to die than you think” and the company saying “Betcha you won’t”

    Plus, it’s definitely a good option to have. Consider an old guy who loses his family in a car crash or something. If he doesn’t have anyone he wants to give money to after he dies, why not let him get the money upfront and enjoy himself?

  2. 2

    hotasafrica said,

    yes i understand the benefits of having something like this, my beef with death bonds is that i don’t trust the assholes on wallstreet to not take advantage of people who dont really understand their options and what they’re about to do. plus, are they really going to give these people a fair price? i dont know. and i dont mean ‘fair in comparison to what the insurance company they bought the policy from’, i mean, a legit fair price.

    its one thing for intelligent and knowledgable investors to do something like this, i just worry that people who dont have the slightest clue as to what’s going on are going to be taken advantage of. though i suppose they can get ripped off thru other stock options as well anway…

  3. 3

    Tim said,

    Yeah, most definitely.

    I guess it’s more of an argument in favor of better financial management education.

    The big problem I potentially see in regulating financial transactions or something like that is the issue of figuring out where to draw the line. If we can’t trust people to handle financial stuff (or hire people who can handle financial stuff), it’s unclear how far we go in terms of making people make the “right choice.”

    What’s new in Siberia?


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