The risk has increased substantially and the banks that used to be fairly sound and too big to fail are now engaged in trading stocks, derivatives, and insurance. Disaster in the waiting? Maybe, maybe not. But the risk is surely higher.

There was a sell off in the stock market on Thurs going into the long weekend.  But that was on very light volume and the result of a little hedging before a long patriotic, hence higher terrorist potential, weekend.  This next week is going to be a important one.  Earnings will start coming out and as we have not heard too many warnings up until now, the market that has been moving up in anticipation of a second half recovery, will be very interested in hearing what CEO’s have to say about earnings moving forward.  If they are improving and looking up, stocks will continue off but at least not sell off dramatically.  But if, on the other hand, corporate America doesn’t see improvement in earnings over the next 90 to 180 days, stocks could retrace their gains of the last couple of months.

The oracle of omaha is the insurance king. Cash flow is predictable and the odds are in your favor. It’s like being the house in Vegas, you take some hits but in the long run it’s a cash flow machine.

Regarding Gieco and General Re, they are wholly owned subsidiaries of Berkshire Hataway and they don’t have to raise funds in part because their parent company has $27 billion in cash. (nice checking account balance! :-)) They are stock insurance companies with Berkshire owning 100% of the stock. And Berkshire is public so they are not “private” companies. They have all the same reporting requirements as any other subsidiaries and they are included in Berkshire’s annual report.