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Outlook for 2018: Hard Assets: Part I of III
Issue #501, December 18, 2017

More Thoughts on Bitcoin
Issue #500A, December 14, 2017

Fees and Good Relations with Bankers
Issue #500, December 11, 2017

Salvator Mundi
Issue #499A, December 07, 2017

Should You Rent or Own a Home?
Issue #499, December 04, 2017

A Gift Subscription
Issue #Interim Bulletin #498A, December 02, 2017

Stocks vs Real Estate: Asset Allocation: Part II of II
Issue #498, November 27, 2017

When Good Enough is Fine
Issue #497A, November 22, 2017

Stocks vs Real Estate: Asset Allocation. Part I of II
Issue #497, November 20, 2017

The Saudi Arrests and the Perils of Foreign Investing
Issue #496, November 13, 2017

Gambling and Las Vegas
Issue #495, November 06, 2017

Some Tips on Auto Insurance
Issue #494, October 31, 2017

Bitcoin and the Digital (Crypto) Currencies
Issue #493, October 23, 2017

The Coming Bear Market: Part II How to Prepare
Issue #492, October 16, 2017

Some Observations on Cemeteries
Issue #Interim Bulletin #491A, October 12, 2017

The Coming Bear Market: Part I: The Myth of Buy and Hold Forever
Issue #491, October 09, 2017

The Market makes New Highs
Issue #490, October 02, 2017

The Importance of a New High
Issue #489, September 25, 2017

A Little Insurance: Wealth, War and Wisdom
Issue #488, September 18, 2017

Some Observations
Issue #487, September 11, 2017

How to be Successful in Your Career
Issue #486A, September 07, 2017

How NOT to Buy a Home
Issue #486, September 04, 2017

This Week in the Market
Issue #485, August 28, 2017

Is the “Trump Bump” Running Out of Gas?
Issue #484, August 21, 2017

Gold is on the Move
Issue #483, August 14, 2017

The Importance of Estimation
Issue #482, August 07, 2017

Buying Art and Collecting: Part II of II
Issue #481, July 31, 2017

Buying Art and Collecting in General, Part I of II
Issue #480, July 24, 2017

Physicians need to be More Forceful: Follow-up
Issue #479, July 17, 2017

Physicians need to be More Forceful
Issue #478, July 10, 2017

Your First “Real” Investment
Issue #477, July 03, 2017

Leasing a Watch: Don’t
Issue #476, June 26, 2017

The Importance of Your Children having a Job
Issue #475, June 16, 2017

The Problem with Medical Student Debt is—the Med Schools
Issue #474, June 12, 2017

Critters and Varmints in your Home and Yard
Issue #473A, June 07, 2017

Leveraged ETFs
Issue #472, May 29, 2017

Leasing a Vehicle: Don’t!
Issue #471, May 22, 2017

Issue #470, May 15, 2017

More on Buying Jewelry
Issue #469, May 08, 2017

Buying Jewelry: Gold, Diamonds and Pearls
Issue #468, April 30, 2017

Thomas Sowell: Part III of III
Issue #467, April 24, 2017

Thomas Sowell: Pat II of III
Issue #466, April 17, 2017

Live Close to Where You Work
Issue #465, April 10, 2017

Medtronic in Hospital Management
Issue #Interim Bulletin #464A, April 07, 2017

Thomas Sowell: Part I of II
Issue #464, April 03, 2017

A Political Contribution a an Investment: Part II of II
Issue #463, March 27, 2017

A Political Contribution as an Investment: Part I of II
Issue #462, March 20, 2017

Buffett Selling Vacation Home
Issue #461, March 13, 2017

Advanced Placement (AP) ourses
Issue #460, March 06, 2017

The Importance of a Credit History
Issue #459A, March 02, 2017

A Credit Card Scam
Issue #459, February 27, 2017

The Electronic Health Reord
Issue #458, February 20, 2017

Issue #457, February 13, 2017

Platinum and Palladium
Issue #456, February 06, 2017

Economic Outlook for 2017: Part II of II
Issue #455A, February 02, 2017

Economic Outlook for 2017: Part I of II
Issue #455, January 30, 2017

A Story From Vegas
Issue #454A, January 25, 2017

Land Donation Deals and the IRS
Issue #454, January 23, 2017

The Theory of Gambler’s Ruin
Issue #453, January 16, 2017

Student Loans: But Wait, There’s More!
Issue #452, January 13, 2017

A Second Home
Issue #Interim Bulletin #451A, January 04, 2017

The Consumer Confidence Index
Issue #451, January 02, 2017

Social Security
Issue #450, December 26, 2016

My Outlook for 2017: Part II of II
Issue #449, December 19, 2016

My Outlook for 2017: The Market
Issue #448, December 12, 2016

Medicine in 20 Years
Issue #447, December 05, 2016

Higher Interest Rates
Issue #446, November 28, 2016

Trump and the Markets: The Bad and Ugly
Issue #445A, November 23, 2016

Trump and the Markets: The Good
Issue #445, November 21, 2016

Negative Trends: The Suits aren’t Makin’ Steel
Issue #444, November 16, 2016

The New DOJ Fiduciary Rule
Issue #443, November 07, 2016

Barron’s Conference, Part IV of IV
Issue #442, October 31, 2016

Barron’s Conference, Part III of IV
Issue #Interim Bulletin #441A, October 26, 2016

Barron’s Conference, Part II of IV
Issue #441, October 24, 2016

Barron’s Conference, Part I of IV
Issue #440, October 20, 2016

This Newsletter
Issue #439A, October 12, 2016

Memoirs of US Grant: Vol II
Issue #439, October 10, 2016

More Points on Collecting, Investing and the Economy
Issue #Interim Bulletin #438A, October 05, 2016

Personal Memoirs of US Grant
Issue #438, October 03, 2016

Ideas for a High School Part-Time Job
Issue #Interim Bulletin #437A, September 29, 2016

Collecting, Investing, and the Economy
Issue #437, September 26, 2016

Free College
Issue #436A, September 22, 2016

A Military Commitment to Pay for Med School
Issue #436, September 19, 2016

When a CD isn’t a CD
Issue #435, September 12, 2016

I Made a Mistake
Issue #Interim Bulletin #434A, September 07, 2016

What is Your Spare Time Worth?
Issue #434, September 05, 2016

Credit Cards and Bonus/Loyalty Points
Issue #433, August 29, 2016

The Write-off of Student Loans
Issue #Interim Bulletin #432A, August 25, 2016

412 Retirement Plans
Issue #432, August 22, 2016

Join the Club
Issue #Interim Bulletin #431A, August 18, 2016

The Case for Precious Metals and Hard Assets
Issue #431, August 15, 2016

When the US went off the Silver Standard
Issue #430, August 08, 2016

Why NOT to Open a Restaurant
Issue #429, August 01, 2016

Some Tips on Life Insurance
Issue #428, July 25, 2016

More Observations on Negative Interest Rates
Issue #427, July 18, 2016

Issue #426, July 11, 2016

Is a PhD Worth It? Part II of II
Issue #425, July 04, 2016

Is a PhD Worth It? Part I of II
Issue #424, June 27, 2016

Avoid Part-time real Estate Agents
Issue #423, June 20, 2016

Issue #422, June 13, 2016


By Robert M. Doroghazi, M.D., F.A.C.C.

Some Tips on Auto Insurance

Issue #494, October 31, 2017

    I think the big stories of last week were the US Dollar Index breaking above resistance at 94 and the explosion in the big tech stocks (see below).
    But first, let’s talk about car insurance. Although many of these points are quite simple and would seem obvious, there are a few things you probably didn’t know, and I’m confident will save you money.
    Even though your vehicle is 8 years old and worth, if you’re lucky, 25% of what you paid for it, and you haven’t had any tickets or accidents, your insurance premiums haven’t budged, or might even be higher. Before you start blaming the rapacious, heartless insurance companies, consider:
    1) Insurance companies keep the majority of their assets in fixed income. After all, they must be sure they have money available when claims are due. In the not-too-distant past, the 30-year Treasury paid 5%, and corporate bonds even more. The insurance companies have been hurt by the low interest rates. They must make up for this lower investment income somewhere, so they are forced to raise premiums. Some companies have stopped offering annuities because they can’t guarantee even a 3% return. Just one more unintended consequence of the central banks’ low interest rate policies.
    2) The Consumer Price Index (CPI) just keeps going up. 2% per year compounded over 10 years is more than 20%.
    3) Your car is brand new or 10 years old and needs a new fender. The fender and the labor costs the same.
    4) Medical expenses are the same no matter the age of your vehicle, and have also been rising steadily. The severity of accidents has also increased.
    5) The liability component of your insurance is independent of the age of your vehicle.
    6) If your vehicle has minimal resale value, say less than $5,000, you might wish to drop the collision repair component altogether.
    RMD comment: I suggest you increase your deductible to at least $1,000, or even $2,000 or $2,500. Ex: say you have $1,000 deductible and have a fender bender with a bill of $2,000. If it was my fault, I would eat the $1,000 difference so the wreck wouldn’t appear on my driving record. 
    7) The costs to defend against law suits has increased.
    8) With the drop in gas prices and the strong economy, people are driving more. More miles = more accidents = higher premiums for everyone.
    9) More accidents due to distracted driving (texting), esp. among the younger generation. RMD comment: I see many college students on their cell phones while walking across the street, paying no attention to traffic. 
    Credit scores are used in 47 states as a component of your auto insurance premiums. Studies have shown a direct correlation between a person’s credit worthiness and how they will pay their insurance premiums (RMD comment: that should be obvious). Studies have also shown people with a low credit score are not only more prone to accidents, but accidents of greater severity. RMD comment: Not surprising. If you think about it, credit scores are a pretty reasonable approximation of how successful you are in your financial life, and life in general.
    There are a variety of factors at least partially under your control that affect your premiums, including:
    1) Driving record.
    2) Change of address. Some areas have more accidents, thefts, or storms. Hail storms in this area can cost billions. Most insurance policies don’t cover your home for flood damage, but autos are covered, and will probably represent the biggest loses for the insurance companies from the recent Gulf Coast storms.
    3) Adding drivers, esp. young drivers. When your son turns 16, you almost wish you had a girl.
    4) Change in employment, as it relates to miles driven back and forth.
    5) Medical conditions, esp. as you get older, and esp. your vision.
    6) One of the main points of this discussion. Relationships are important. I am a big believer in finding an agent and company you like and sticking with them. Multi-policy discounts can be very substantial. Re: the agent or agency, when you call, you don’t want to have to reintroduce yourself every time. You want them to say “Dr. Doroghazi, what can we do for you today?” And most important: the fact you are dealing with the insurance agent means something bad has happened. You want someone who knows you, who appreciates your many years of business and the referrals you sent them, and is going to work for you and give you every break they can.
    The US Dollar Index broke above the recent resistance at 94. Why? It’s still below the high of about 97 immediately after Trump’s election, but interest rates on the 5, 10 and 30 year Treasuries are all back to the late-November levels. It just seems like everything is clicking right now: the economy is strong, the Republicans might actually pass some significant tax reform and/or tax cuts, and unemployment is low.
    Not surprisingly, the precious metals have been weak. Gold is approaching important support at the $1,230 area.

    You know why the big tech stocks are going crazy? Prior to the Internet, the only institution in the US that had access to every home was the Post Office. Even the phone company didn’t. When I was in grade school (late 50s, early 60s), at least 10% of the kid’s families didn’t have phones, and if you lived in the country, you were on a party line (Diane’s number in rural Nebraska was a long and a short). Now Amazon (AMZN), Google (GOOG), Facebook (FB) and Microsoft (MSFT) have access 24 hrs. a day. 
    I got 138,000 miles from my 1972 Nova (307 cc engine, 3-speed standard transmission on the floor). When I came into practice in 1982, the body had cancer so bad that the nurses wanted to take up a collection for a new paint job. It was in several fender benders that did not affect the drivability. I just kept the checks. In August, 1983, I was finally able to purchase my first new car, a 1983 Buick Regal. You have no idea how proud I was of that car. 
    In several recent newsletters I discussed what you might do to prepare for the next bear market, especially if you are retired (on a fixed income) or anticipating retirement in the near future. I pointed out there are long periods of meager to no returns that can last 5 years or longer. Larry Fink, CEO of Blackrock (BLK), the largest money manager in the world, with $5T under management, commented last week that for the next 5 years or so, returns will be lower than historical standards, in the range of 4-5%.
    RMD comment: Fink is about as establishment as you can get, his opinion carries weight with me. There is a real possibility that the returns of the next 5 years will not be as sweet as the last 5.
    Richard Thaler of the University of Chicago received this year’s Nobel Prize in Economics. His book Misbehaving was the subject of Newsletters #412 and #413 (4/4/16 and 4/11/16). Chicago has dominated the Economics Prize, so I looked forward to reading Chicagonomics: The Evolution of Chicago Free Market Economics (Ebenstein, St. Martin’s Press).
    RMD comment: Can’t finish it. Save your money. In fact, wonder why the U. of Chicago Press was not the publisher. To quote Robert Maynard Hutchins, president of the University of Chicago in the 30s, 40s and 50s, when a student turned in a paper he thought was weak, “It should be cut in half. I’m just not sure which half”.     

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