The Demutualization Secret of Credit Unions

You’ve probably encountered the general advice that the luckiest people are the most prepared. One of the basic, ordinary decisions that you make in your life is where to bank. Unless you are affluent, travel a lot, or bounce a lot of checks, most financial institutions offer products and services that are largely indistinguishable from each other. This has been especially true during the 2008-2018 timeframe in which interest rates have been negligible.

I am firm believer that, if you can make modest tweaks to your lifestyle with almost no additional hassle, but it sets you up for the possibility of a significant reward, you should pay attention to those circumstances in life.

There is a strong advantage that comes with doing your bank and credit unions, and that is the possibility of what is called “demutualization.” A demutualization occurs when a member-owned financial institution, such as certain insurance companies … Read the rest of this article!

The Perils Of Too Much Debt

Clarence Saunders—an oft-forgotten early 20th century entrepreneur—is one of the five most important men in the history of American groceries. You could make an argument that he deserves a spot on the list of the top 100 most important businessmen of the entire 20th century.

Saunders revolutionized the grocery store business by recognizing why small-town grocery store chains kept failing.

In the early 1900s, the typical grocery store experience had similarities with visiting a pharmacy today. You would show up at the storefront, present a list of what you needed, a clerk would retrieve the items, and then you would pay the bill or pay it on credit (grocery stores would keep a ledger of amounts owing).

This made it difficult for small-town grocers to earn a profit because the number of clerks required to retrieve objects was high, the non-payment of bills by families paying groceries on … Read the rest of this article!

The Limitations of GEICO’s Liability Risk

The strong blue-chip stocks in the world are generally decentralized holding companies. For instance, when you buy Berkshire Hathaway stock, there are layers of separation between it and GEICO, its most famous insurance subsidiary.

Berkshire Hathaway has a 100% ownership interest in Government Employees Insurance Company, and in turn, this company owns (1) GEICO Indemnity Company; (2) GEICO Casualty Company; (3) GEICO Advantage Insurance Company; (4) GEICO Choice Insurance Company; (5) GEICO Secure Insurance Company; and GEICO County Mutual Insurance Company. That is just on the underwriting side. The sales of GEICO policies occur through GEICO Insurance Agency, Inc., which is 100% owned by Government Employees Insurance Company, which in turn is owned by Berkshire Hathaway, Inc.

Each of these individual smaller companies has its own capitalization structure (i.e. cash and debt with a unique balance sheet), its own management team, and follows its own set of corporate formalities.

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Disinheriting A Spouse: Understanding The Risks

The most interesting estate disputes to observe from afar are those in which those executing a will (called “testators” in legal parlance) decide upon a distribution of assets that is different from what would typically be intended. One of the greatest rights that you as an individual have over the real estate and personal property (including cash and investments) that you acquire throughout your life is the ability to dispose it as you see fit, subject only to your conscience, your state’s spousal support, elective share, and homestead laws (if any), and the prohibitions of your state court due to public policy grounds.

I recently the 1956 New York Court of Appeals case of Brown v. Du Frey, in which Florence Brown executed a will governing about $10,000 in her assets (worth around $100,000 in 2018 dollars) that not only disinherited her spouse Harold in favor of giving funds … Read the rest of this article!

Selling An Excellent Asset

Andrew Cherng, the Chinese immigrant who moved to the United States as a teenager, obtained a degree in Applied Mathematics from the University of Missouri in 1972, and then moved to Los Angeles that same year to help a family member run a restaurant, subsequently obtained an SBA loan and launched the Chinese restaurant Panda Express.

Cherng gained a reputation for his refusal to sell to outside investors, citing a desire to run the business right and not have to answer to the often short-term interests of a shareholder base. That is why Panda Express never had any pink slime episodes.

In several interviews, Cherng has discussed the terms under which he would consider selling his ownership stake in Panda Express. His simple response? “If I could get a valuation on it like Chipotle’s.” At the time, Chipotle was trading for around 55-60x earnings.

There is a lot of wisdom Read the rest of this article!