The insurance king

April 4, 2003 Dr. Douglas Rice Leave a comment

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.

Financial Planning

Social Security Tax

April 3, 2003 Dr. Douglas Rice Leave a comment

Check this math out and see if you agree. The SS tax is 6.2% each so a worker earning $15,000 a year contributes with the employer a total of $1860. And taking 20% of that they would get to invest $372 a year. But they would have to pay a minimum of $50 at Schwab to maintain an account with that low a balance (under $10,000). BTW, it will only take them 20 years to get to the minimum balance to get rid of the charge! So they would actually lose over 13% before they ever got a dime back from investing. I am unsure of who will take a $372 contribution without charging a fee except the US Government. I know I won’t! :-))

Financial Planning

Failure of SS

April 2, 2003 Dr. Douglas Rice Leave a comment

The failure of SS is a given as it begins running a deficit in just 15 years, and faces cash shortfalls of more than $26 trillion. Trillion? Bill Gates can’t even spell Trillion. A trillion here a trillion there, pretty sure it adds up to real money sooner or later!