A Dirty Little Secret About Insurance

When it comes to buying goods, almost everyone would agree that you get more bang for your buck if you buy wholesale instead of retail. Basically you're buying direct; you're cutting out another layer from which a third-party would seek to profit from your purchase.

Simple concept, right? Then why do people still buy insurance from agents rather than buying direct?

Here's the deal: Insurance companies will sell you most types of coverage direct from them. But they prefer you not go about it that way. Why? Because they'd rather you buy through their retailing agent, who is more likely to bring them bunches of other business. Oh sure, it costs you more, but insurers don't want you to know that, because it's more profitable for them to keep their agents happy and bringing them more business.

That's the dirty little secret that you'll never hear. Instead the insurer will tell you that it's important to have a local agent to help you with the purchase, and with claims service, blah blah blah. It's bullshit. Insurance agents don't want to spend time giving you service, they're on to the next sale, that's how they make money. Your claims issues can and will be handled by somebody else in their office, or perhaps a nameless, faceless person at claims headquarters.

Unless the insurer uses a direct-to-consumer model (the most famous is probably Geico), no insurer is going to tell you they'll sell to you direct. But they will, and it will save you a lot of premium dollars to do so - money that might otherwise be paid to the agent for no good reason. And no worries if you have a claim, you'll just end up dealing with the same cliams people you would if you used an agent.

So caveat emptor! If you need to buy insurance for your auto or property, or maybe even medical insurance, do some research and go direct. Your local agent will survive - by selling insurance to the vast majority of people who don't know how this scam really works.

Reasons Why Major League Baseball Sucks Right Now

Don't get me wrong, there are some nice things about baseball, especially Little League and Minor League Baseball. But here's a list - by no means an all-inclusive list - of why Major League Baseball sucks:

It's slow, the games are way too long.

There is no salary cap or effective revenue sharing, so 1) the teams in the biggest cities and media markets make the highest revenue, which they 2) use to get the best players, which means that 3) the same teams are good/bad every year.

No instant replay. And as verified by this year's playoffs, the umpiring is not that great.

It's boring. Incredibly, the post-season is actually more boring than the regular season, because people care more about football in the Fall, and again, it's always the same teams in the post-season.

Three words: Performance enhancing drugs.

Simple Yet Inevitable Wealth Creation

It goes like this.....

Facts:

1. Investing costs money.
2. Most people invest their money in mutual funds, either directly or wrapped in a more costly and not understood insurance or annuity product.
3. Mutual fund managers typically charge fees of 1% or more (deducted from return) for attempting to buy and sell the right securities at the right time.
4. For every security bought, there is a seller who believes exactly the opposite as the buyer at the same price and time; in total, it's a zero sum game if you had no fund fees, but a negative sum game with fund fees.
5. Countless academic studies over the past two decades have proven that no one in the history of investing has been able to outperform the market (net of expenses) over a long period of time by correctly picking securities or timing the market. If someone could do it successfully, they would not be doing it for you.

Conclusions:

6. It's dumb to pay fund managers to do something that has proven to be impossible to do.
7. The best rate of return one can hope for is the broad market return.
8. Investors should try to capture as much of the broad market return as possible.
9. Passive investment funds are the best way to capture the market return because they are the most inexpensive and broadly diversified.
10. Investors should use passive investment management with proper asset allocation.

TA-DA!

Tell Me What You've Actually Done

You live long enough, you meet all kinds of people. These people all have different personalities, some of which you get along with better than others.

I get along with most people, but one of most annoying has to be the person who tries to build their reputation on what they are going to do. Not on what they've done, mind you, but what they presumably will do in the future.

You know the kind. You see them around offices all of the time, especially in the marketing area. Dilbert has been exposing these people for years - and it works so well because they are jokes! (To be fair, I see them in the investing area a lot as well, mostly because they'd be ashamed of their past performance.)

Ideas mean nothing without execution. Words mean nothing without execution. If you want to take credit for ideas or words, you should consider being a full-time blogger, or maybe even a politician! Otherwise, go sit in the corner. I only want to be around people who actually get things done.

Leveraging Twitter

I've been a Twitter-user (http://twitter.com/streffbuddy) for a couple of months now. I say this not to advertise, but to answer all those who simply ask me, and others who use Twitter, "Why?"

Although Twitter markets itself as something that lets others know what you are doing, I've discovered that there are better and more practical applications. Twitter allows people to pass along very brief thoughts and opinions that occur to them at random moments. These might be original, or 're-tweets' that come from other sources.

In a very short time, and while only following a few others on Twitter, I've read a lot of great information and material, much of it very funny, that I never otherwise would have. Most of it is interesting stuff to me, which partly goes to the fact that I'm only going to follow the Tweets of people whom I choose.

In the future I can surely envision using Twitter for business purposes, to remind contacts of what I'm doing or about something newsy in the investment world. In a similar vein, I've used it in the past to let people know that I've made a new post to this blog.

Of course, the catch is to get those people to follow my Tweets. Now that might take some advertising.

Don't Blame The Lunch Ladies

This weekend The Des Moines Register (motto: Pay No Attention to the Tax Behind the Curtain) called out some Iowa school districts for taking a hard line on collecting overdue lunch money. The schools have informed anyone who reaches a certain point on credit that they'll only get a PB sandwich until they get the account up to date.

Even though some public schools have hundreds/thousands of dollars owed them in lunch account receivables, the Register thinks these schools should just keep feeding the kids the hot lunch meal and worry about collecting the money later. EARTH TO REGISTER: Public schools = taxpayer funded - why should taxpayers subsidize, and potentially be on the hook to eat (no pun intended) these overdue bills!?

If we were talking about overdue corporate taxes or income taxes, The Register would be having a fit about them not being timely paid or collected. But with public schools, they either don't make the taxpayer connection, or they think it's OK to spend or forgive any amount without accountability.

As so often is the case, the tax and spenders have it backwards. Collecting the money later is the problem, not the solution. So, you go, lunch ladies! Thanks for your support of Iowa taxpayers!

Taxes And Your Public Library

Generally speaking, we pay too much tax. Income tax, property tax, sales tax, you name it, we pay too much of it. It doesn't take a rocket scientist to figure this out, just pick up the paper any day and you will read about some sort of local, state, or federal goverment fraud and abuse of taxpayer money. Taxpayer money wouldn't be wasted if there wasn't too much of it.

Having said that - and having made it clear that I am nothing if not a warrior for the taxpayer - there are some services for which I don't mind being taxed. Police and fire protection, utilities, that sort of thing. Basically, if we need it to establish justice, ensure domestic tranquility, provide for the common defense, or promote the general welfare, that's cool. Otherwise, we should not be taxed for it.

Which brings me to the topic of public libraries. Now, I don't think public libraries are evil. My family has benefitted in countless ways from the availabily of a nice public library. But let's get real: They are in many ways a multi-million (billion?) dollar taxpayer boondoggle.

Look, we don't need a nice public library in every stinking town. I travel Iowa a lot, and I'm telling you, damn near every little town has at least one bar, one convenience store, and one library. That may seem nice, but the thing of it is, neither the bar nor convenience store are taking money out of people's pockets whether they use them or not. And no - not every suburb in every city needs one either. Ever heard of sharing services?

Also, we don't need public libraries to be everything to everybody. These days they are all apparently required to have computers with internet access, DVD movies, and perhaps even a little coffee shop. What ever happened to just being a quiet place to read or to loan out books? Oh, and they don't need to be housed in multi-million dollar buildings, either.

So where's the outrage for the over-abundance and over-indulgences of these taxpayer funded libraries? I suppose it's a little bit like kicking a cat - while many people may want to do that, it isn't going to be a real popular target with most folks. And let's face it, there are worse expenditures of tax money.

But let's at least be honest - we could find less expensive ways to promote the general welfare.