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Update on fire insurance June 16, 2021

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Once again we come into the fire season and the calls about and for fire insurance policies abound. As an agent and owner of an insurance company, I find homeowners asking good questions and not so good questions, of which some are based on misconceptions about what is going on in the industry as it relates to homeowners policies.

Some time ago most residential homes were covered under one inclusive policy called an HO3 (HO= homeowners).

With the increase in wild fires, many insurance companies took huge losses and over time, some have elected to remove the fire portion of coverages from their policies. They also removed lighting, wind and internal explosion and other related coverages for a variety of reasons.

Insurance companies may still offer coverage for your home, but many have removed the fire and related risks mentioned above.

On rare occasions, an insurance company will still offer the all in one HO3 in fire areas but homeowners won’t know this unless they submit an application. The why or why nots as to why an insurance company may make these rare exceptions have some rhyme and reason to it, but usually that is known only to the insurers.

Nowadays it is common to have a fire policy and what is called a “wrap” policy or better known as a “Difference in Conditions” policy (DIC). The DIC is written by your regular insurer if they decide not to offer you a complete policy (HO3), and then you will likely need a California Fair policy for the fire portion of the coverage.

Cal Fair is not a state agency. It is a group of all the insurers that do business in the State and operate much like the “assigned risk” coverage for bad drivers. Cal Fair is all these insurers grouped together which then share in the losses and gains of the combined policies.

One could argue they may be financially bulletproof, which means unlike some insurance companies that may have gone under due to massive wildfire losses in recent years, Cal Fair may draw on the resources of the combined strength of the entity. They are also covered under the California Insurance Guarantee Association. (https://www.ciga.org/about_ciga.html).

Many of the phone calls I receive complain about Cal Fair and some say they want other options. When asked why, they usually respond, “because they’re too expensive”.

I always respond with the same answer, which is “usually no agent wants to write a Cal Fair policy because its compensation to agencies may not be commensurate with other rates. In addition, if you’re stuck in a hole and only one guy throws you a rope, you don’t complain. Your choices are if you don’t like Cal Fair, don’t get insurance. And when you’re regular insurer does come back to insure fire, you will probably wish you had Cal Fair”.

I say this because I find Cal Fair to be highly regulated, scrutinized and skinny on compensations as mentioned above. Not so with the big insurers in my opinion. So if you think Cal Fair is high, just wait. My opinion again of course.

The trick to navigating all this is getting a responsive agent who will take the time to discuss coverages, limits, deductibles and explain how it all affects your premiums. I can honestly say many customers I talk to tell me horror stories of agents not returning phone calls or not even answering their phones, being rude or short, telling customers they’re just too busy, or out of state cookie-cutter type agencies winging quotes with little discussion to the client.

The best way to make sure you get the right coverage at the right price is to work with an knowledgeable local agent, who will call you back, explain the policies, take the time to make sure all your questions are answered and get you the right limits and deductibles for your situation.

Opinions expressed here are those of Mr. Cuniberti and not those of any bank or investment advisory firm. Nothing stated is meant to insure a guarantee, or to be construed as investment advice. Neither Money Management Radio (“Money Matters”) receive, control, access or monitor client funds, accounts, or portfolios. For a list of the services offered by Mr. Cuniberti, call (530)559-1214. California Insurance License #0L34249 and Medicare Agent approved.

Meme Stocks are on the move again update June 11, 2021

The MEME stocks are on fire again. You remember these. My last article on the MEMES was the called “The Game that is Gamestop”.

The MEME stocks refer to a group of stocks thought to be driven by mostly novice day traders, spurred on by the common thread of social internet bloggings.

Specifically but not limited to Reddit and WallStreetBets, visitors to these and other social media sites communicate with others on the site, and like a stampeding herd of buffalo, once they get started, the “herd” start buying the stock flavor of the day.

A new phenomenon in the world of stock trading, the MEME group is not a concerted group at all. It’s just a whole bunch of people, unrelated by blood or otherwise, all moving without a single directive, but moving in masse nonetheless.

Their unstated but rumored purpose was to burn Wall Street traders who bet against certain stocks, hand them their proverbial monetary heads, and make lots of money in the process.

Called “short sellers”, the understanding of the mechanics of how Wall Street traders bet against a stock can be elusive to some. To keep things simple, just know that Wall Street firms often bet against a stock, hoping it will go down, and making money in the process.

Until a few months ago, there was no one group that might compete with Wall Street. In other words, although other traders could take the opposite bet and take positions on the long side instead (betting the stock goes UP instead of down), there was no one group large enough that could legally pressure a stock in one direction or the other. Although it is illegal to be a concerted group and purposely manipulate a stock up or down, by buying or selling massive amounts, a stock could moved by larger firms.

Enter the MEME traders. Not really an organized group, the sheer numbers of readers and bloggers who had some money and attended the same social media pages would start to buy a stock that a Wall Street group or groups had bet against.

With millions of bloggers all pointed in the same direction, they started initially buying GameStop and AMC Entertainment. There have been other MEME targets as well. Driving these stocks up many times over, the losses to some professionals were massive. As their losses mount, because of the logistics of how the bet is unwound, these firms were forced to BUY the very stock they had bet would go down. This buy back is called a ”short squeeze” and just drives the stock even higher.

The novelty was that the MEME group was widespread, had massive buying power due to their sheer numbers, and since they were only related through the web, the laws concerning illegal stock manipulation did not apply to them.

The MEMES were semi-quiet for a few weeks, as news media and Washington regulators dabbled in discussions about the strange new concern. That was until last week, when the MEME tsunami hit again and GameStop began another ascent. Not to be undone, AMC Entertainment got top honors this time around as it rocketed upwards, climbing upwards of 30% or more in a 24 hour period, and tripling in just a few days. A handful of other stocks were also rumored to be on the hit list of the MEME’s.

The Wall Street crowd, at least some of them, are starting to cry foul, while others claim the MEMES are doing nothing wrong as they are not really a group at all.

Washington loudmouths are also split on their take on the whole thing. The “for the people” claimants are cheering the MEMES on saying “stick it to Wall Street”, while the money from the traders and hedge funds are bending the ears of those politicians susceptible to such things. After all, money and politics do go together on occasion.

To this analyst, it all speaks to just another sign of excessive froth and speculation in the overall markets but I must admit it’s fun to watch. One reason for my amusement is there is so much money being made and lost on this circus, Wall Street pros who normally wouldn’t follow a Facebook type of platform, let alone trade on it, are analyzing the momentum of these massive moves and trading on the coat tails of the MEMES, adding that much more volatility to the action. When the Wall Street trading crowd dip their toes in the proverbial waters, you know there is a lot of money going around.

No one knows whether this thing will end up in court, become a new paradigm in the markets or just fade into oblivion. One thing is for sure however, for now the MEMES have everyone’s attention.

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EDD PAYMENTS CAUSING INFLATION UPDATE MAY 30 2021

EDD PAYMENTS

WHY WORK?

Last week I covered how the Employment Development Department (EDD) and their lucrative bonus payments to the unemployed has essentially made the national $15/hr minimum wage debate a moot point. The other contentious debate, called the “Living Wage” debate, will likely now be turned on its head as the higher wages forced up by EDD payment will result in exposing the vicious cycle of wage push inflation.

Not only the minimum wage debate been obsoleted by the EDD payments, those same payments are now causing even faster inflation in the economy than previously witnessed.

We can see this new “wage push” inflation as businesses, in line with my previous articles, are now, in many instances, offering over $15/hr. to entice potential workers to get off the couch and get back to work.

As inflation takes off, I have seen more and more commentary that the $15 rate, which was previously determined by many to approach the so-called and arbitrary “living wage”, is now insufficient as consumer prices skyrocket. To this analyst, it seemed such a short time ago anything under $15 was considered the minimum “living wage”. Now the $15 rate is considered well below the Living Wage and new figures are being tossed about on public platforms.

There is a reason why what once was determined to be at least close to a sufficient living wage is now quickly being labeled as grossly insufficient.

An economic reality is taking hold. Although higher wages are not the sole cause for higher consumer prices, those higher prices, higher wages coupled with soaring commodity prices, are crippling business balance sheets.

In a free market environment, businesses will always pass increased costs onto the consumer through higher prices and that is happening right now.

Inflation is starting to burn hot if you haven’t notice, which I am sure you have, and that searing inflation is showing up in the government statistics. This in itself some consider a miracle, as many analyst claim government inflation figures understate the real inflation rate. Whatever the truth, the latest inflation data out from Uncle Sam is an annual inflation rate of over 4%. According to some, the rate is even higher.

What happens next is why living wage proponents are calling for even higher wage rates as prices rise. They see the $15 rate, do some quick math, and realize $15 will no longer facilitate a living wage, so the calls go out for an even higher wage.

Many against the very concept of a living wage state it is arbitrary and doesn’t take in geographic considerations. An example would be the cost of living in New York compared to Modesto.

But others claim a more sinister thing is at work here. As wages rise, consumer prices follow. Therefore, with each increase in the wage rate, inflation rises even more, negating the higher wage rates.

Because of this, many argue the living wage debate is a nonsensical argument. Wage inflation will always push consumer costs faster and higher than wage rates.

Since it is an accepted fundamental in the study of economics that wages are a lagging indicator to consumer price inflation and also in its occurrence, the argument is put forth that the “sufficient wage” called for by many can never be reached by mandating wages ever higher. In fact, those mandates may be the cause. Inflation will always “outrun” wages and it is why some find themselves calling for an even higher wage.

Opponents to minimum wage mandates, which include opposing the very concept of a “living wage” (which is an arbitrary opinion depending on whose making the argument), point to the fact that an unmolested capitalistic `system` would correct wage/inflation conflicts. The argument is extended to address the current `system` as one that has been highly manipulated away from capitalism and more towards massive intervention which distorts the checks and balances of a capitalistic system.

No matter which side of the argument ones believes, a true solution to a problem solves the problem. Repeated attempts signify failure. The minimum wage has been raised 22 times to combat inflation and the living wage public commentary is seemingly upping its level in response to the recent inflation. This would lean into the argument that perhaps income inequality is at least partially caused by inflation which in turn owes its persistence to the very wage policies that attempt to correct it.

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Opinions expressed here are those of Mr. Cuniberti and may not reflect those of any media outlet. Mr. Cuniberti holds a degree in Economics from SDSU. For a list of the services offered by Mr. Cuniberti, call (530)559-1214. California Insurance License #0L34249. Medicare Agent approved. Email: news@moneymanagementradio.com. Opinions expressed here are those of Mr. Cuniberti and not those of any bank or investment advisory firm. Nothing stated is meant to insure a guarantee, or to be construed as investment advice. Neither Money Management Radio (“Money Matters”) receive, control, access or monitor client funds, accounts, or portfolios. For a list of the services offered by Mr. Cuniberti, call (530)559-1214. California Insurance License #0L34249 and Medicare Agent approved. Insurance services offered independently through Marc Cuniberti and not affiliated with any RIA firm or entity. Email: news@moneymanagementradio.com.

Bitcoin Troubles My take Upate May 19, 2021

Currency or Con?

With the explosion both in investor interest and price action, crypto currencies is a hot topic. Originally conceived as an alternative currency, Bitcoin was the first digital money to make its debut in 2009. Since then, over 4000 different cyber coins have hit the market. The allure is that it reportedly cannot be manipulated or eliminated by any one person, entity or government. Created and stored in cyber space, the argument appeared to be a valid one.

Since their creation, stories of overnight millionaires abound, and I am hearing more of these rags to riches stories everyday. And it’s not just about making a few bucks. If what I am told is to be believed, ungodly sums of money has been made for more than a few acquaintances.

I have to admit, I can’t say I understand fully how crypto works. I would guess neither do many of its investors.

What I can say is this has all the trappings of a mania. From the buzz, to the quick profits by the inexperienced, to the price charts and right down to the “this time it’s different” story, it reeks of a mania.

Similar to dot.com, real estate and a thousand other “get rich quick” methods and schemes, it has all the classic signs and then some.

I have issues with crypto. I own a small amount through a Wall Street vehicle and not on any phone app. Stories of investors losing passwords or hacked apps resulting in absconded funds abound. One investor profiled in a Wall Street article was locked out of 100 million and only had two chances left to remember his 132-character password before losing this fortune into the black hole of cyberspace.

And no, there is no one you can call. Once it’s locked, it’s essentially gone forever.

Besides the “too good to be true” aspects of all the stories and overnight zillionaires, cyber coin will never, at least in its current form, function as a valid currency.

Currencies must possess a variety of characteristics, among which one of the most important is “store of value”. This means if you take a currency for something real, you must be sure the currency you received maintains the value it had when you took it.

Think Mexican Peso.

No problem you say? It will eventually, if not overnight, skyrocket in price?

A skyrocketing price is not a store of value. Store of value must be in both directions. Which means both the buyer and the seller must not lose value over time in the transaction. Simply put, for every winner in cyber coin, there is a loser. Which is why currencies must be STABLE, and not fluctuate in value and what it can buy.

It’s a hard concept to digest, with most investors thinking they will gladly take a cyber-coin for payment. Ah, but would you pay one out to buy something?

A currency must remain at relatively the same value over time to be a valid receipt of products or services, as that is what a currency is, a receipt of a consistent value.

Cyber-coin is anything but price stable.

A few other things bother me about sinking thousands into cyber-coin.Elon Musk, the maverick founder of Tesla, appeared on Saturday Night live and then two days later tweeted Tesla would no longer accept bitcoin in the foreseeable future. That hammered bitcoin down 12%.I don’t know about you, but I don’t want oodles of my hard-earned money susceptible to obliteration when a single tweet or statement can crash it.

As for being an indestructible cyber space currency no one government can manipulate, governments don’t have be able to “get at it” to eliminate it.

All they have to do is outlaw its use, and/or remove the apps that trade it. Bitcoin crashed 4% when the country of Turkey outlawed its use as payment. They are not the only ones.

The following countries have in some form or another banned, restricted or warned against cyber coin usage: : Kyrgyzstan, Bolivia, Bangladesh, Iran, Nepal, Thailand, India, Denmark and Ecuador.

This list is bound to grow larger as sovereign currencies, the checkbook of governments, are threatened by the use of cyber coin. Just think what would happen to the price if the U.S. or another major super power took similar steps?

No thanks.

Someday cyber-coin may find its rightful place among monetary instruments, but for now, it scares the hell out of me.

Opinions expressed here are those of Mr. Cuniberti and not those of any bank or investment advisory firm. Nothing stated is meant to insure a guarantee, or be construed as investment advice. Neither Money Management Radio receive, control, access or monitor client funds or portfolios. For a list of the services offered by Mr. Cuniberti, call (530)559-1214. California Insurance License #0L34249. Medicare Agent approved

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Investors look for clues as to market direction UPDATE 5 1 2021

Investors looking for clues to market direction

With the stock market seemingly pushing record highs with every passing week, investors and analysts alike are concerned about a coming market correction. Although forecasting absolutes when it comes to stocks is a fool’s errand, investors and financial professionals sniff about looking for clues which might indicate something wicked this way comes. In other words, everyone is looking for the Holy Grail in investing, which is recognizing possible signs a major correction might be in the cards.

When one has been looking at the markets for decades as I have, one does start to notice clues as to when a correction might be manifesting itself. Cataloging what preceded market crashes in the past may give hints as to what may happen in the future.

Although no one can absolutely predict market direction, nevertheless, much like dark clouds MAY precede a rainstorm, markets may tend to exhibit specific signs of stress before sell offs, which often (but not always) signal portfolio risk is on the increase.

Bonds (which are simply IOU’s) tend to move opposite of stocks. This is the reason it is commonplace to have a mix of both in a portfolio. Keeping that in mind, if bond prices start to rise, it may be a signal investors are attempting to mitigate some stock risk for whatever reason. The specific reason is not important and may not even be known. What is important is that investors may be beginning to sense some sort of danger in the market environment and swapping out stocks for bonds.

Consumer staple stocks (the companies that make the basic necessities of life) tend to rise when market risk increases, as investors move toward things that are less discretionary to consumers.

For instance, if times get tough, one may not eat out as often, but still have to buy toilet paper and light bulbs. Companies that make packaged foods and cereal are also thought to be more of a defensive holding when things get dicey. Investors tend to shun the growth stocks in lieu of the old, stodgy type of stocks that have been around for decades making the things people have to buy, instead of things they want to buy.

If stocks fall and then continue to fall over a prolonged period, this can indicate the wind is coming out of market sails and that the momentum may have changed from a previous euphoric period.

Stock of utilities might rise more than normal and fixed income holdings may increase as risk increases. Fixed income refers to preferred stocks, bonds, treasury funds (Government IOU”s) and securities that offer a fixed interest rate of return instead of the allure of a rising stock price. Precious metal prices may also start to rise when intrepid investors get the “willies”.

There are non-stock indicators as well that don’t specifically center around what investors are buying or selling that may also give clues as to investor sentiment.

Interest rates may start to rise indicating money is getting tight as investors are not so eager to lend out their money and are demanding higher interest rates to do so.

There is also are fear and volatility indexes and they may rise prior to market problems.

Contrarian indicators, things that typically occur during market tops, can also signal things have gone too far, too fast.

Margin debt, which is the amount of money borrowed to buy more stock than an investor has money, can reach historically high levels, which may also indicate excessive speculation. This can occur during times of extreme optimism, which can be a precursor to market sell offs.

Although seemingly contrary to common sense, markets tend to reverse down when everyone thinks the market can do nothing but keep going up. Along those same contrarian lines, markets tend to stop falling when everyone is “jumping out the window” sort of speak, which signals investor capitulation and extreme market despair.

In conclusion, although no indicator can forecast market direction with 100% accuracy, there may certain historical events that occur from time to time that may very well signal that the markets are getting ready to change direction, and quite possibly in a very big way.

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Marc is an experienced economic professional.

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