fbpx
Chimney

Carbon Capture & Storage

World-Saving Technology or Waste of Money?

Investment into Carbon Capture, Utilization, and Storage will play an important role in abating carbon emissions in the future. While American government investment into renewable energies increased significantly with the American Reinvestment and Recovery Act (ARRA), there is evidence to suggest that this investment crowded out private investment into renewables. Meanwhile, nearly half of the sum from this act allocated for partnerships to further carbon sequestration technologies went unspent.

Historical Energy Policy in the United States

Energy policy in the United States has historically been based on the goal of increasing self-reliance for national security. This has been done through tax benefits to companies that contribute to this end. Many of these tax preferences, such as full depreciation for intangible drilling costs allowed to be expensed in the year the assets are bought, introduced in 1916, still exist in limited form today.

In the 1970s, alternative fuels and energy sources began to be more heavily subsidized, and a greater importance was placed on energy efficiency; environmental concerns became more pronounced and national security concerns increased with the oil embargo and energy crisis of 1973. In the 1980s with the Reagan Administration, many of the tax credits previously enacted expired, as a free market approach to energy policy was adopted. Although many of the tax preferences for alternative fuels expired, the tax provisions for oil and gas remained. In the 1990s tax preferences and subsidies were revitalized under George H. W. Bush for alternative fuels, renewables, and oil and gas, along with excise taxes on gas (Energy Tax Policy: Historical Perspectives on and Current Status of Energy Tax Expenditures).

In the 2000s, energy efficiency and innovation was further incentivized with the Working Families Tax Relief Act of 2004 and The Energy Policy Act of 2005. From 2008 to 2014, energy subsidies increased with the Emergency Economic Stabilization Act of 2008 and the American Recovery and Reinvestment Act of 2009. Up until this point, most of the tax preferences were to subsidize fossil fuels, but with this legislation renewables were more heavily subsidized than fossil fuels. In 2016, 59% of energy related tax preferences went to renewables, and 25% went to fossil fuels, out of the $18.4 billion total (Federal Support for Developing, Producing, and Using Fuels and Energy Technologies).

Rationale for Government Investment

Money is invested by the government, whether it be through tax preferences or direct cash payments, with the aim of promoting something under-provided by the private sector. This often applies when a sector or technology is so nascent that the risk outweighs the potential profit. Additionally, it is the case when the positive externalities, or socially beneficial spillover effects from the investment, cannot be captured by the price of the output. This has increasingly been the case with research and development into renewable energies because of the research into the positive externalities from replacing carbon emitting fossil fuels. Accordingly, without government invented incentive to the private sector to adopt or innovate carbon sequestration technology, there is no incentive to develop it. In fact, of the $3.4 billion appropriated for fossil fuel research and development programs by the ARRA, $1.5 billion went unspent in 2015 when the deadline passed (Federal Support for Developing, Producing, and Using Fuels and Energy Technologies).

Questions remain about why this part of the stimulus package went unused. It could be because it was provided to fund relationships with utility companies to sequester CO₂ from coal plants: increasing investment into renewables, coupled with many coal plants nearing their end of life, to be replaced by natural gas, spooked decision-makers. Because it is so expensive to fund a demonstration project for carbon sequestration technology, and the subsidies were limited in duration, there was not enough incentive to outweigh the risk of private investment into the technology. Limitations on the efficiency of plants fitted with carbon sequestration technologies may not make them viable with the existence of renewable energies. By some estimates, the only reason that coal plants continue to produce electricity cheaper than renewables is that the sunk costs of building the plant have been incurred. Therefore, if a new coal plant is to be built, the electricity will be more expensive than other options that are better for the environment.

Future United States Energy Investment Portfolio

So, then, if carbon sequestration technologies are too expensive to develop for coal, even with billion-dollar subsidies from the government, is there enough of an incentive to develop them for natural gas? If there is, it is because of the cheaper cost of natural gas compared to other forms of energy, especially as the supply has increased since the shale oil boom. The CO₂ emissions from natural gas are significantly less (50-60%) than coal, but methane emissions from the transport, drilling, and extraction of natural gas, which have a more drastic warming effect on the earth in the short term than CO₂, make it an imperfect alternative. It is clear, however, that fossil fuels have a place in our energy portfolio as a state, as they offer some benefits that have eluded other renewable forms of energy, such as mitigating the risk of energy intermittency. Unless there is major investment into infrastructure to store energy created by renewables, and enough trust to overcome the potential outcry of the public for relying on such new and unproven technologies, fossil fuel power plants are necessary.

Has the United States investment into renewables since the Great Recession resulted in crowding out? Researchers found evidence of crowding out at high levels of investment in this sector in China (Feifei, et al., 2016). Moreover, a global race to more reliance on solar energy could result in spillover effects from other countries’ investments. If renewable energies are at a point that the private sector investment is enough to support the industry, because there is enough opportunity for profit with little enough risk, government investment is a waste. Especially because the technologies will transfer to the private sector for profit without the taxpayer realizing any profit from the investment besides the positive externality from decreasing carbon emissions. Crowding out in other countries with similar investment in the technology points to the fact that the potential profit from a global energy shift is enough so that the optimum level of investment is made available by the private sector.

Even worse is the antiquated tax preferences made available by the government for domestic oil and gas. These subsidies, as mentioned before, were in response to national security energy concerns, but as the United States is now one of the largest exporters of oil in the world, they are unnecessary and costly. A study by the National Academy of Sciences found that eliminating the tax preferences for domestic oil producers would have no effect on the supply of oil. The cost of these policies “was between $90 and $200 per additional barrel of domestic oil produced”, in addition to the market price of the barrel of oil. Domestic oil producers reported that they would reduce their production by 20%, however a testimony from the CBO doubted this in respect to historical data and trends (Federal Support for Developing, Producing, and Using Fuels and Energy Technologies).

Carbon Sequestration Overview

It is impossible to give an overview of carbon sequestration without doing so in respect to coal. States such as Colorado, Indiana, Iowa, Kentucky, and New Mexico, among others, get more than 75% of their energy from coal, with 13 other states getting between 50-75% of their energy from it. The cost of operating these plants has increased with increasing environmental regulation, however, and it is estimated that 20% of these plants could close by 2020 and be replaced by natural gas as a result (“Capturing CO2”, 2011). In fact, U.S. coal consumption in 2018 was set to be the lowest it has been in 39 years. The fear from this change is an opportunity for votes, resulting in political moves to change policy, and renewing interest in carbon sequestration technologies across the political aisle. Bi-partisan support is crucial because of the costly and risky nature of researching the basic science, and the large amounts of capital necessary to create plants that use these new technologies. For instance, Basin Electric Power Cooperative, after investing $6 million into a coal CCS project, cancelled the project as a result of mounting concerns of the economic viability and changing environmental regulations (“Coal-Fired Power,” 2018).

Another factor motivating the interest in carbon sequestration is the ability to use the recovered particulate to inject into oil fields and boost oil recovery. This application provides an incentive for existing energy producers to benefit from a continued dependence on coal and subsidized carbon capture. Many nascent applications of CCS are hopeful to use the byproducts of the process economically in other ways, however, instead of needing to store them underground, which represents an additional cost. CCS initiatives often tout that it is the only technology boasting the possibility of negative emissions, though current implementations in power plants have not been close to achieving this. Instead, there is evidence that with the more potent methane leaks upstream inherent to natural gas production and use, current technology could result in only a 16% reduction in greenhouse gas emissions if all coal plants were replaced with natural gas. Further technological advancement is necessary to make an impact as we transition from the dirtier alternative of coal, to the cheaper and cleaner natural gas. There is evidence that post-combustion capture of natural gas, a type of carbon capture that does so after the creation of the electricity, faces less technical hurdles than post-combustion capture of coal, because there are less contaminants to filter from the exhaust. Less particulates also mean a healthier environment for inhabitants in surrounding areas, a reason why natural gas plants face less opposition from community members.

Carbon Capture & Storage Viability

Although coal energy maintains a higher global proportion than natural gas, as natural gas production increases across the world, and as more coal plants are retired, natural gas plants could replace them. Whether or not advances in carbon capture and storage for coal will transfer to other fossil fuels, such as natural gas, is a driving question for whether coal carbon capture and storage should be pursued. Additionally, the effect of the existing coal plants before they retire on the environment should be weighed with the cost of developing new CCS technology and retrofitting existing plants with it. One of the drivers behind policy is whether subsidizing a part of a sector is politically viable. There is evidence of bi-partisan support for innovating carbon capture for natural gas, whereas there is evidence that subsidizing coal is a political move to gain votes from key republican states. For instance, a recent bill, the Launching Energy Advancement and Development through Innovations for Natural Gas, is a bi-partisan effort to partner the private sector with national laboratories to advance the technology and provide reliable, cleaner energy (“Cassidy, Colleagues”, 2019).

One of the reasons that carbon capture seems viable is that the companies that extract natural gas from the ground have needed to clean the CO₂ from the natural gas in order to sell it. Therefore, there is some proof of concept for the technology. How to incentivize implementation and development of the technology is another issue. For instance, in the past there have been tax preferences made available for new technologies, and in the case of the ARRA, there were also grants that amounted to cash transfers to firms. There are drawbacks and benefits to market-based policy that taxes carbon and makes carbon sequestration more attractive for firms, or a cap and trade program that would allow the sale and purchase of permits that would allow firms to pollute, incentivizing the new CCS technologies. Additionally, the government could be more heavily involved in the technology with prescriptive policies that mandate technology or amount of pollution, and there are drawbacks and benefits to these types of policies, too.

The government should be instrumental in the creation of these new technologies because without government intervention, there is no incentive to create the technology. Instead of relying solely on a market-based or prescriptive mechanism, the Department of Energy should focus on the development of these riskier endeavors. Renewables have been the focus, whereas CCS subsidies have been introduced as an excuse to subsidize a dying industry for political votes. Most coal plants in the United States were built before 1990, and they are being retired more quickly than expected, not because of increasing environmental concerns, but because of competition from renewables and natural gas. Basic science research and proper government incentives are necessary to bring CCS to the point that the private sector will invest more heavily. Enduring investment into the technology will be a signal to the market that the technology is a worthy investment because of the profits transferred to the private sector from government research and development in the past.

New Energy Culture

Although nuclear energy is the most obvious solution as a technology that solves intermittency issues and provides a gateway to cheap energy security, the salience of danger from this technology, however misleading, makes it a tough sell to policy makers. Natural gas, however, is a symbol of America’s shale boom and independence from traditional energy exporters. “Freedom gas” is a cleaner and more effective policy directive that is not built on an agenda to get re-elected by those who feel helpless and discouraged from the loss of their jobs in an industry where their jobs costed them their lives. Environmentally safe energy independence is increasingly relevant, and to achieve this, subsidizing research and development, coupled with prescriptive policy that encourages private sector innovation, is necessary for CCS technologies.

References

United States, Congress, Subcommittee on Energy Committee on Energy and Commerce, and Terry Dinan. “Federal Support for Developing, Producing, and Using Fuels and Energy Technologies.” Federal Support for Developing, Producing, and Using Fuels and Energy Technologies.

Yu, Feifei, et al. “The Impact of Government Subsidies and Enterprises’ R&D Investment: A Panel Data Study from Renewable Energy in China.” Energy Policy, vol. 89, 2016, pp. 106–113., doi:10.1016/j.enpol.2015.11.009.     

United States, Congress, Sherlock, Molly F. “Energy Tax Policy: Historical Perspectives on and Current Status of Energy Tax Expenditures.” Energy Tax Policy: Historical Perspectives on and Current Status of Energy Tax Expenditures.

Anderson, Glen. “Capturing CO2.” NCSL.org, Mar. 2011, www.ncsl.org/research/energy/capturing-co2.aspx#c.

Shah, Nafi. “Coal-Fired Power Plant with Carbon Capture – Cutting Emissions or Increasing Them? – TexasVox: The Voice of Public Citizen in Texas.” TexasVox, 13 Dec. 2018, www.texasvox.org/coal-fired-power-plant-carbon-capture-cutting-emissions-increasing/.

“Cassidy, Colleagues Introduce Bill to Ensure Reliable, Affordable and Environmentally-Sound Energy Supply | U.S. Senator Bill Cassidy of Louisiana.” Press Release | Press Releases | Newsroom | U.S. Senator Bill Cassidy of Louisiana, 23 May 2019, www.cassidy.senate.gov/newsroom/press-releases/cassidy-colleagues-introduce-bill-to-ensure-reliable-affordable-and-environmentally-sound-energy-supply-.

Vaccine vs. Stimulus

American Congress argues about further stimulus. Will we dole out another $1 trillion or 2, after a $3 trillion dollar stimulus. No big deal, this is about 5-6 times the amount of the cost of the New Deal in today’s dollars. And guess what, we’ve only devoted $10 billion to a vaccine, the CAUSE of the recession. Meanwhile, we’ve pumped money into the economy at an unprecedented scale. In addition to the fiscal stimulus, the Fed has made added another $3 trillion to it’s balance sheet. 

Why are we not investing more into a vaccine? 

The answer is gross. There is a financial incentive to not solving the problem. Emergency provides an opportunity to pillage the society for “special interests”. Perhaps some of our leaders are not capable of such treachery, but to be sure some of them are. Invest just enough to keep those pesky citizens off of our back and fight over where their money goes. Meanwhile, as millions can’t pay their rent the stock market hits an all-time high. At an all-time high because the government bank has created financial entities (they can’t be called companies, you see) that pump money into ETFs (traded on the stock market) at the discretion of a hedge fund. Yes, this is really happening. 

Think very clearly about the financial incentive here

There are many people being paid handsomely by this suffering, and if someone else doesn’t, someone will. This is a terrible moral hazard that no one is talking about.

We needed an excuse to print more money for “deleveraging” from the last leveraging from the last “deleveraging”. Our government needs to take a HELOC on any equity left on the mortgage. 

Maybe…

It is either this awful sort of corruption, or our government and leadership is stupid, inept, incompetent. You decide which is worse.

Welcome to the beginning of a lost decade?

Corona Age Jobs Report

In America, Donald Trump stated that the July jobs report would show a “great number”. At first glance, you might think that the over 1.5 million jobs added back to the economy are a great number, but look a bit closer and you’ll see that most of those added back were from temporary layoffs and stimulus induced government jobs. In fact, that the number of permanent unemployed Americans is actually increasing.

NVIDIA, AMD, & the future (and present) of tech

Nvidia and AMD are companies that create graphics cards, processors, and some other components for computers. Graphics cards have come to the forefront of the “Third Industrial Revolution’ because they do the calculations that make machine learning possible. In this context, Nvidia is the gold standard, and AMD is like silver. 

AMD also make CPU, like Intel, with their line of processors called Ryzen. Never heard of it? Does that make it undervalued, or worthless? You’ve probably heard of Nvidia because that’s what’s in your computer if you have an Apple or Windows GPU. In some cases AMD is equivalent in performance, or better. Certainly, many people consider AMD a better value.

All speculations aside about the differences in the difference between the inherent and perceived value of AMD and Nvidia’s components, let’s talk about the vale of what they are making.

Theoretical Underpinnings of Bullish Sentiment for GPU Market

So let’s get specific about why GPUs are important in the economy today. What sorts of products are they necessary for? To understand this, a good example is the screen that you are looking at. Each one of the pixels that you see in front of you has to be controlled, and a graphics card transmits this information as an instruction onto the screen. 

In a graphics card, each core can do a simple calculation, such as controlling a pixel on a screen or performing a mathematical calculation. The beauty and power from these components (GPU) comes from the way that they work together to perform a greater, and often times extremely complex, task. 

This is much different than a CPU. Consider that, at the low end, an Nvidia GPU will have at least a thousand cores. Compare that to the latest highest end Intel $7k CPU, which has only 24 cores. CPU cores can do many more different things than the cores of GPUs, but because GPU cores are more specialized they can be more quickly or efficient, and there can be more of them used by the computer successfully. 

Now that it’s clear what a GPU is, let’s talk about the applications for the hardware. GPUs are necessary for machine learning, augmented reality, virtual reality, gaming (e-sports), and cryptographic calculations (crypto mining). Let’s break down the value a little more.

Artificial Intelligence, Gaming, & AR/VR in the Workplace

How does breaking down the limits of time and space to tell the future sound? What about abating the risks of superbugs like Covid 19 while maintaining close connections. As in, having a group of co-workers in your living room, and being in their living room, while also being on the plant floor. All this happening while cloud infrastructure is pushing gaming powered by the same GPU’s that are making this possible. Therefore, behemoths are spreading the cost of super-powered (and super profitable?) chips across the population and increasing investment into GPUs. Add 5G into the equation and it looks like investment into GPUs will increase, even as the cost to consumer increases, but probably through a subscription service.

What are the risks, though, especially in the short-term? How do we know that these stocks will go up in the short-term, especially in a hyper-globalized JIT world with fragile supply chains. So what if China got a hold on the new corona virus and they’re ramping production back up if the supply chain has kinks in other places in the world with no backup plan. Are supply chains too fallible at the expense of cutting expenses? There are some new risks that need to be integrated into the supply chain from corona virus or other low probability catastrophic events. These are real risks, especially because in Nvidia’s most recent report they state: 

“We do not directly manufacture semiconductors used for our products. Instead, we utilize a fabless manufacturing strategy, whereby we employ world-class suppliers for all phases of the manufacturing process, including wafer fabrication, assembly, testing, and packaging. This strategy uses the expertise of industry-leading suppliers that are certified by the International Organization for Standardization in such areas as fabrication, assembly, quality control and assurance, reliability, and testing. Additionally, we can avoid many of the significant costs and risks associated with owning and operating manufacturing operations. While we may directly procure certain raw materials used in the production of our products, such as substrates and a variety of components, our suppliers are responsible for procurement of the majority of the raw materials used in the production of our products. As a result, we can focus our resources on product design, additional quality assurance, marketing, and customer support.”

Even if demand increases because of the importance of remote work, remote school, increases in game sales (especially subscription services in this area, with consumers iffy about making big purchases with lower income expectations), will Nvidia be able to source the stuff? Will innovation be stifled by the fact that it does not have it’s necessary building blocks; is AR/VR in the workplace too nascent for white-collar workers to realize that it is what they need? Will investors consider the future income from these possibilities, or is that too Silicon Valley-esque, and they have too bad a hangover from the threat of negative interest rates.

Are we in survival mode, or is it time to find real(ly awesome) solutions? Nvidia has exposure to AI, gaming, VR/AR, driverless cars, and bitcoin. I believe that it is a good bet in the corona economy because remote work is more important, and fiat currency may lose value with unemployment insurance in some cases SIGNIFICANTLY exceeding income from jobs. Will employers find automation solutions previously thought too expensive attractive as workers gain market power and demand wages in excess of what seems to be the emergence of a Universal Basic Income?

Will a check from the government, in fact, solidify income expectations, as opposed to the current belief that job loss will shake consumer confidence, resulting in similar or even increased momentum of money? Inflation could be on the horizon, and one place I would rather not be is in cash because inflation obviously devalues cash. Bitcoin may be a good short-term solution, and Nvidia provides that exposure as well because their equipment can be used to mine the cryptocurrency.

Moreover, with most of it’s supply chain in Asia, where governments have a more tyrannic hold, resulting in ability to quarantine citizens under threat of fines or worse, the supply chain may be surprisingly resilient (that’s the important thing: surprise). Supply chains may not be as nimble as previously thought, but supply is not thought to be the problem. Demand is, and governments are taking care of that by putting money in the hands of people out of work with nothing to do but play video games or work on hobby projects. This, however, is where AMD takes the stage.

AMD’s graphics cards are cheaper than Nvidia’s, but have similar or in some cases better performance, especially when it comes to tasks that don’t require perfect calculations, such as gaming computers. For people working on hobby projects with uncertainty about future income, they might choose AMD over Nvidia to cut costs, as they dabble in their garage building that computer that’s been sitting there for years while they trudged to and from work. While Nvidia’s cards are preferred for industrial applications like AI or AR/VR for Microsoft’s HoloLens, hobbyists will prefer AMD’s GPUs and associated CPUs. The bottom line is these people are going to have to do something while they are cooped up in the house, and people love video games.

However, my bet, and I agree with analysts that Nvidia is better positioned to benefit from the Corona economy, is that we are even going to see increased government investment into a way to leverage technology to make remote work less remote. Increasing innovation in the remote work, remote education, remove everything is now a matter of national security. The technology is increasingly here (5G, AI), but the reason to switch has not been evident until we entered the Coronavirus economy.

The company that most stands to benefit from this hype is Nvidia, but AMD may post strong numbers in the face of a shitty economy.

Simplified Issue Life Insurance

Underwriting for Life Insurance - Simplified Issue vs. Fully Underwritten

Life insurance comes in two categories when it comes to underwriting, simplified issue and fully underwritten. When you are meeting with clients as an agent, or looking for life insurance as a customer, it’s important to be knowledgable about this, because it will ultimately determine the application process, the premium, and the amount of coverage you receive. 

When someone goes through the examination process for a fully underwritten product, that information is added to the MIB. Not the Men In Black. Much less fun or cool. 

The MIB is the Medical Information Bureau, and it is where insurance companies share data about customers with each other. It’s like a credit bureau for life insurance. So yes, going fully underwritten can have lasting consequences, but let’s talk about when it will be appropriate, also. First off, though, a background about what underwriting is.

What is Underwriting

As a life insurance agent, when I think of underwriters, I think of gollums in a cave, hair falling out from all the stress. Pale skin that is oily, staring at their computer screens and the Insurer’s general account muttering “my precious” under their breath. 
 
Groups of gollums meeting together before everyday sharing about the way they rejected potential clients, clapping and laughing. Then one suggests accepting someone for coverage and the smiling and laughing stops. “BUT WHAT ABOUT MY PRECIOUS” the other gollums yell at the gollum suggesting coverage. Is this a realistic view of the underwriting process? Probably.
 
As an insurance customer, you should consider that the underwriters exist in order to make sure that the the insurance company makes money. In today’s low interest rate environment, it can be tough for the investments in the general account to make much of a profit without taking on too much risk. 
 
More and more, insurance companies are arbitrarily turning customers down. As an insurance customer, it’s important to consider that giving more information to the insurance company may result in a WORSE rate. Not only at the insurance company that you applied to, but also at other insurance companies. This is because of the MIB, which is a little bit like a credit report for life insurance companies. Fully underwritten products are necessary in some cases though, so let’s talk more about exactly what they are.

What Are Fully Underwritten Products?

Fully underwritten life insurance products are often-times a lengthy drawn out process. It’s the type of insurance where they send a nurse to collect urine, blood pressure, heart rate, and dig into your health records. It can take anywhere from 6 weeks to 6 months. After all that time, they may then deny the application, and then that information goes onto your record that they share with other insurance companies!
 
That doesn’t sound fun at all, especially if your afraid of needles. There are also horror stories where healthy people get turned down for funky readings. For instance, I know someone who got turned down because they took pre-workout before they peed in the cup. Other common reasons for denial are high HBA1C (diabetes), being overweight, lipids out of wack (problematic blood-work), blood or protein in the urine, or cancer history in the family. 
 
So it’s important to take a long hard think before you decide to have insurance companies digging into your health, and poking around your medical records. People still do it, though. Let’s talk about why.

When Should I Pursue a Fully Underwritten Product?

All that truth about underwriting behind us, the truth is that fully underwritten products are absolutely necessary sometimes, especially in the case where someone is needing lots of coverage. In some cases, specifically when you want a TON of coverage, you may have no choice but to go fully or partially underwritten.
 
Another reason to go fully underwritten is if you are a penny pincher and are in good health. In some cases you’ll get more coverage for less. The problem is that we don’t know when those cases are.
 
That being said, the process can take anywhere from 6 weeks to 6 months. That is plenty of time for a client, or you as the customer, to get cold feet, and then you won’t receive the coverage that you need. To be completely honest, nobody wants to save for the future. The potential to save a couple dollars a month or year is in most cases outweighed by the probability that it will result in a higher rate or no coverage at all.
 
Now that you know what fully underwritten products are, and when they’re a good option, let’s talk about the other option, simplified issue: what it is first, and then when it’s a better option for you.

What is Simplified Issue?

Simplified issue is quick. Simplified issue is good coverage. A lot of people go with simplified issue, and there’s a reason for that. If you fit some qualifications, often times you’ll get immediately approved, and rarely does it take longer than 48 hours from application to hear back. Another great thing about simplified issue is that you aren’t providing a lot of health information to the insurance company that might come back to bite you in the butt. 
 
Arguably, the best part about simplified issue is that there is no medical exam. Furthermore, applicants with pre-existing medical conditions can be approved for coverage. More often than not, the company will have the underwriting criteria right there in front of you, so you can make an informed decision about what options are available. This leads us to our final point, which is something we’ve already touched on: when simplified issue is the best option.

When Should I Pursue a Simplified Issue Product?

Simplified issue is great because you will in some cases know immediately whether or not you receive coverage. There are some drawbacks to simplified issue, such as limits to the amount of coverage, but often times you can get multiple smaller policies from different companies. It’s better for people who need a policy more quickly, who want to get coverage but they’ve been denied before for a particular condition that they have.  

Final Points

Now that you know more about the distinction between simplified issue and fully underwritten, you can decide which one is better for you. It’s pretty simple. If you don’t have any pre-existing conditions and are healthy as a horse, young, and aren’t in urgent need of a policy, but want a lot of coverage, fully underwritten may be a better option for you. On the other hand, most people will prefer simplified issue, because it’s easier and less intrusive.
Illustrate purpose of life insurance in picture

Why Do People Buy Life Insurance? (Updated 2020)

Life insurance is purchased for three reasons.

  1. Estate Creation: from the moment you are protected by a policy, the people you care about will be provided for if you pass away.
  2. Estate Preservation: when estate or death tax must be paid, a life insurance policy can be a way to ensure that you don’t have to sell assets harder to turn into cash, such as a house.
  3.  Protection: when a primary income earner passes away, a life insurance policy can be built to provide enough money to pay for the surviving families’ living expenses.

All of these reasons for purchasing a life insurance policy have the common theme of providing money to the beneficiary of the policy. That is exactly what a beneficiary is: the person, or people, who receive the benefit. On the other hand, the policy owner is the person who pays the premiums, and the insured is the person who is protecting the beneficiary.

Typically, the policy owner and the insured are the same person, but they don’t have to be. When the insured passes away, the beneficiary typically receives the death benefit, or the amount of the policy, tax free. There are some exemptions to this rule, as is typically the case with tax laws (sigh…).

Types of Life Insurance

There are two types of life insurance, term and whole. Term life insurance provides protection for a specified period of time. Whole life insurance will provide a benefit (as long as the policy holder decides to keep paying the premiums, or other exemptions don’t apply), and can be paid out to the policy holder if he or she lives to a certain age, typically 121.

Whol Life Insurance

Whole life insurance policies can accumulate a cash value, which typically amounts to the amount paid in excess of the cost of the insurance and the fees. Also, the amount paid is put in an account and gains interest.

Because life insurance premiums are paid with after tax dollars, the amount of premiums paid is not taxable, but the interest can be. It is typically not taxable if paid to the beneficiary upon death of the policy holder, but if the cash value is withdrawn it may be. It also grows tax deferred in the insurance companies “general account”.

Sometimes, the policy owner will take a loan against the death benefit (usually not exceeding the cash value), which would mean that, although they would pay interest on the loan amount, they would not have to pay taxes on the interest upon receiving the money. If you do purchase a policy, all of the specifics will be explained to you so that you understand.

Indexed Life Insurance Policies

A newer option for life insurance is to index the amount paid to the stock market. The cool thing about these sorts of policies is that, although you can gain when the stock market goes up, you are protected if the stock market goes down.

This may be a good option because the economy has historically gone through economic cycles of expansion and contraction, where the stock market goes up and then it goes down. An example of a contraction would be the Great Recession of 2008. The average length of an economic expansion is 58 months, or just under five years. The United States is currently in the longest expansion in history.

If history is to repeat itself, as it usually does, we could be due for an economic contraction, or recession soon. This means it may be a good time to use an indexed financial product such as an indexed annuity of indexed whole life insurance policy.

The Bottom Line

If you are interested in learning more, please contact us! We are also looking to hire. Please see below channels to contact.

Artificial Intelligence Intuition Header

Artificial Intelligence Neural Networks Intuition Introduction

Intuitively Understanding Machine Learning

Artificial Intelligence. The buzzword if the decade. Some people are scared of it, others are scornful. Populist voices angrily express their fear of being automated or worse deny the possibility. Is it denial or misunderstanding?
 
One thing is for sure: artificial intelligence is misunderstood for good reason. The same mentality from Einstein’s famous quote about quantum mechanics applies: “if you think you understand [artificial intelligence], you don’t understand [artificial intelligence]”. 
 
This is especially true for artificial intelligence that is a “black box”: we actually can’t explain the predictions, but we can measure the accuracy of them. 
 
We can measure the accuracy of a prediction by pretending we don’t know the answer and then comparing the predicted value to the actual value. In order to increase the accuracy of our predicted accuracy, we can split the data up as many different ways we want, training on the one section and testing on the other, ten, twenty, or even a hundred times. This is called cross-validation.
 

Neural networks are famously hard to model. When I say model them, I mean explain why they come up with the prediction that they come up with. This is because they use something called  automated feature selection. This means that the variables that make the prediction are automatically chosen by the neural network from the data.

Each one of these ‘features’ is called a perceptron, and they can be layered, each layer and link between representing the relationship between the features/perceptrons.

These are exactly like the associations that we have baked into our brains, and that’s the analogy to our brains that the “neural network” represents.

Slope Intercept Form (Yawn...) for Neural Networks (Yay!)

Remember slope-intercept form from basic algebra?  y=mx+b shows the relationship between y and x, which are both variables. In this equation, b is the constant
 
*eyes glaze over* – “WAKE UP!”
 
Okay, so now think really hard. We have two variables that we are trying to show a relationship between. Sound important? If we can model the relationship between two variables, we can make predictions and provide insight into why there is a relationship! 
 
So the m in this equation is called the coefficient and it is important because it quantifies the relationship. It allows us to model the relationship! Things get more complicated though, and then much more complicated (we’ll talk in a bit how to use generalize this idea of slop-intercept form to think about neural networks). 
 
Think about adding more variables. Instead of a relationship between two variables, such as height and weight, now we add other features of a person, such as hair color. Some of them won’t have an impact on what we are trying to predict (height), in which case the coefficient will be zero. So then we have multiple m’s/coefficients. 
 
Now’s the kicker. Take each one of those m’s/coefficients and put another equation inside of it, with it’s own m’s/coefficients. Now consider that maybe there’s a relationship between the m’s/coefficients in that m/coefficient and the m’s/coefficients of the other m’s/coefficients. Mmmm.. M&M’s.

Neural Networks Simplified for Intuition

There are many different types of neural networks, and one thing that differentiates them from each other is the relationship between the perceptrons, or the m’s. This is the more simple way to understand them that provides the intuition. When one perceptron’s impact on the prediction is visualized, it seems disjointed and random, but together they make the prediction. 
 
A great example is a number recognition system. AI’s are famously good at image recognition. For example, one of the features might be the way that a four has a horizontal line in the middle, and that’s all. The prediction power comes from the way that this relates to other lines, parts of numbers, or other types of features.
 
Thanks for reading this! Stay tuned and follow us on Twitter or Instagram for more.

Elasticity & Agility on AWS

Value is a Value Prop

Sage Market is about adding value to your business by first applying existing technologies. This article is going to talk about a couple of the value proposition that Amazon Web Service’s technologies offer: agility and elasticity. More importantly it is going to discuss why these value propositions are important. By the time you finish reading this, I hope it will be clear why Sage Market is worth your time.

The plan for Sage Market is to become part of the Amazon Partner Network, among other things. This means Sage Market will be an Amazon affiliate, being knowledgable of the Amazon product catalog and experienced in deploying the solutions. Additionally, it will bring a breadth of knowledge about how to apply technology in other ways to grow and improve the business.

Amazon Products

Amazon Web Services is a suite of tools that allow businesses to take advantage of technology in some important ways. It allows you to serve your customers better because it offers agility and elasticity. Agility means that you can experiment quickly and cheaply. Elasticity means you can scale your business to meet surges in demand that might otherwise cause your system to crash. Let’s talk a little more about what this means, starting with agility.

Agility: Smart R&D

Businesses today face a seemingly insurmountable challenge: innovate or be squashed. You might say to me, “that’s all good and fine, but I’ve been around for 70 years. I have got nothing to worry about. Besides, I couldn’t put people out of work by innovating. That would be heartless.” To this, I shake my head and grimace.
 
Both political parties are growing tired of free trade and globalization, fueled by fear of the masses. They have a secret, though. As populism rises and manufacturing is incentivized in future legislation, state of the art plants will increase production.
 
These plants will, much to the dismay and surprise of the populist movement that hates losing their jobs, use automation and hire a fraction of the workers.

 

There will be new entrants that come into the market and compete with this state of the art capital, even if you don’t. They won’t even have employees that they would lay off with the new technology. They’ll sure have an incentive to automate your manufacturing business cheaply, though.
 
Any incumbent business owner who has benefited from competitive advantage to profit for years should be investigating how the recent tech boom will affect them. If they have even a shade of foresight they will be researching and experimenting with how they can use technological advancement to fend off the future of specialized labor that will be AI.
 
What is the best way to do this? Cheaply and with minimal risk, of course. This is what agility is. It is the ability to experiment with your finger on the pulse of your business, reading and analyzing your data in real time to pivot or embrace whatever it is your are experimenting with.
 
Amazon has tools to optimize this process. Now, agility is important, but how can this be possible? Elasticity and agility are so related it can be confusing to decouple them in the mind.
SAGE logo

Elasticity Universal Truth

Elasticity is being able to react to market activity in real time. It means scaling your activities in direct response to what your customers are doing. This is simply good customer service, but it is also cost effective.

Just as important to the bottom line as increasing sales by being responsive is to minimize costs. It is also great for the environment, so by being responsive to your customer you will save the planet and attract more customers.

Any business savvy individual knows that a dollar saved is a dollar earned. If you are chasing dollars for your business, whether that be for society’s good or to buy a new car to show off to your neighbor, there is no difference between a dollar from cost-cutting or sales-increasing. This is a universal truth.

Get Involved

If you are serious about staying relevant in the changing landscape, it is cheap to get started. I will work with you and create a quote for you and your business for free. If I can’t add value, I would not even think of charging a dime.

Additionally, I am looking for people that are ambitious about applying technology to change the world in a positive way. Sage Market is in it’s infancy, but it has a positive future, just like us. Check out our social media channels, or e-mail us at support@sagemarket.info.

Artificial Intelligence

Artificial intelligence is the primary reason why many jobs are being automated. When the tool becomes so sophisticated that it can do everything we can, at a lower cost, investors or business owners buy the tool instead of paying someone to come work for them. What does this mean for you?

It means that it is likely that there won’t be a job for you in the standard sense of the word. This is true for a large percentage of people because of the powerful tools we have created, but if you act soon you can start building yourself income streams that will last a lifetime if properly managed. The technology we have is powerful, and if you start using it to your advantage, you can increase your earning potential by a ton! Earning money online can be difficult to do without the necessary experience, however, so we offer materials with step by step instructions, simplifying the process and making it possible for you!

Remember, it is a risk free offer (links to explanation of what risk free offer means), which means that you have time to cancel and get a refund. Thank you and good luck!

Donald Trump Proposes Payroll Tax

Donald Trump has proposed that we have a payroll tax increase to decrease the national debt. This after a tax cut for higher earners. It’s not the amount of the tax that matters, as the wealthiest would be less price sensitive, it is that there is a tax cut for the wealthy, and this news drives business investment.

Moreover, a cut in the wages of workers, which is essentially what a payroll tax increase is, economically should not impact the amount of hours worked, and may in fact increase the amount. It depends on if the substitution effect or the income effect is stronger. It makes sense that people making less money would be less responsive to a change in wage, or work more because of a pay cut, because they have bills to pay. This makes it an economically efficient choice. As far as economics, things stop there.

As far as equity goes, there are many opponents. The reason for this is simple and obvious: taxing poorer at a higher percentage of their income. Of course this assumes that you make enough to pay taxes. If you don’t, you get a return. It is the middle class that is getting taxed at a larger percentage, which is probably you, the person reading this.

Theme BCF By aThemeArt - Proudly powered by WordPress .
BACK TO TOP