We could be seeing lower car insurance rates in 2026, Should you hang on to Berkshire Hathaway stock after Warren Buffett leaves? Four-year college degree today does not a guarantee a good job & More

We could be seeing lower car insurance rates in 2026

If you remember going back to 2022, auto insurance companies had to raise their premiums dramatically because of inflation for vehicle parts along with vehicle repair and maintenance. This caused insurance companies to increase their premiums but when states such as California tried to prevent them from increasing the premiums, the insurance company would pull out of the state until the department of insurance would allow them to raise their rates to match the cost of repairs. As we said back then, let the market forces work which brought insurers back into the state and now they are competing for your business. As an example, Allstate Insurance, which tracks their shoppers, said they experienced over a 9% increase from last year of people shopping for insurance. Economists say that over the last 12 months, personal auto insurance was only up 2% as of September, which was a huge decline from the 10% increase the prior year. Auto insurance companies have sharpened their pencils to remain profitable but also kept their customers by either offering lower rates or bundling policies to give consumers a better deal on their home and auto insurance policies. Don’t expect to see your auto insurance drop by 50% but if you shop around, you may get a slightly better deal and you won’t have to be concerned in 2026 about an increase in your auto insurance.

Should you hang on to Berkshire Hathaway stock after Warren Buffett leaves January 1?

On January 1, Warren Buffett will no longer be the CEO of Berkshire Hathaway. The top job will be given to Greg Abel, who has been at Berkshire Hathaway for 25 years. Mr. Buffett, who has been running Berkshire Hathaway for 60 years, says he will still be going into the office every day and will be there to answer any questions if needed. Knowing and seeing how Warren Buffett has acted over many years, he is not one that will voice his opinion unless he is asked. Mr. Buffett owns roughly 14% of the outstanding Berkshire Hathaway shares and that accounts for nearly all of Mr. Buffett’s net worth. Mr. Abel is currently earning around $20 million a year, and I don’t believe Berkshire Hathaway will do as well with him at the helm. I say that for a few reasons. One is that Warren Buffett built street credibility for over 60 years and Greg Abel is virtually unknown on Wall Street. Greg Abel has very strong operational experience and a good financial management background and will likely be a good CEO, but he does not have the professional money management experience to run such a large portfolio. Mr. Buffet gave 10% of the portfolio to be run by Todd Combs and Ted Weschler, whose investment performance has not done that well. Combs has also now taken a job at JPMorgan Chase, so it will be interesting to see how the investment responsibilities shift. Perhaps Mr Abel could hire an outside money manager, but that would be unproven, and I believe it would be risky to bring someone in from the outside. There is talk that Mr. Abel could also pay a dividend and add bonds to the portfolio and make it more like the other insurance companies. If that is the case, the days of the good long-term returns for Berkshire Hathaway are probably in the rearview mirror.

Having a four-year college degree today does not a guarantee a good job

I was surprised to learn that 25% of unemployed Americans are over 25 years old and have a four-year college degree, which is a new record high. It is a competitive market for them and while they should not just give up, they need to work and look extra hard to find a job that pays well. I’d also recommend not to set your expectations too high when it comes to income. The problems they are facing are a slowing job market and employers are being very picky looking for employees that not only have the four-year degree but also have experience to really contribute to the company's bottom line. Artificial intelligence has also taken away some of the starting jobs for these four-year graduates. If you have a junior or senior in high school, you may want to consider a different path than sending them to school for four years and spending all that money because they could just end up working at a job that did not require a four-year degree. If your son or daughter wants to do something in the trade industry, I would highly encourage you not to try to get them to go to college, but to let them follow their passion in that trade. Instead, you could put the money that you would’ve spent on college into an investment for them that they agree not to touch and by the time they’re 40 years old they’ll probably be far ahead of many who obtained a four year degree that did not help them get a high paying job. How far ahead? If you were to spend $50,000 on college, which is probably on the low side but invested that money earning 9% for 20 years would grow to $300,000. If they would wait 40 years that $50,000 would grow to about $1.8 million and provide a nice supplement to their retirement.

Q3 GDP shows the economy is doing more than fine!

We were supposed to get the initial release for Q3 Gross Domestic Product, also known as GDP, October 30th and a second estimate November 26th, but the government shutdown delayed the release until this last week. While it is old data, it does show the economy has been growing at a nice pace this year. Overall, GDP grew at 4.3% in Q3, which was well above the estimate of 3.2%. Consumer spending, which drives about 70% of our economy, grew very nicely in the quarter at 3.5%. Good spending rose 3.1% in the quarter while services spending saw an impressive increase of 3.7%. This is important considering the fact that services make up about 2/3 of consumer spending. This nice increase in spending contributed 2.39% to the headline growth. Private investment in the quarter was subdued as it subtracted 0.02% from the headline number. The volatile change in private inventories category was the main reason for that as it subtracted 0.22% from the headline number. Following last month's reading where private inventories subtracted 3.44% from the headline number, I wouldn't be surprised to see this category benefit the GDP report in Q4. Trade was actually a benefit in the quarter as it appears companies are still working through excess inventory that was brought in earlier this year. Exports rose 8.8%, while imports fell 4.7% in the quarter. This contributed 1.59% to the headline GDP growth. I don't believe trade will be as beneficial to the headline GDP number in future quarters. Government only contributed 0.39% to the headline number. While this report shows the economy and consumer has remained resilient, the concern is does it have an impact on future Fed rate cuts? Given where we are, I just don't see the need for much accommodation from the Federal Reserve in 2026. 

Could we see AI data centers located in space?

When I was a kid back in the 60s, it was a big deal when a rocket went into space. Today not so much as there are over 10,000 satellites in orbit and nearly 4,000 launched each year and climbing. This is why Jeff Bezos, Elon Musk, and others are working on how to get AI data centers into space. It sounds crazy at first, but it is not so far-fetched considering once that a satellite is in orbit it has plenty of power from the sun. Yes, there are other issues such as controlling temperatures for the AI chips and the quick transferring of data back to the planet without long lag times. I do believe this is something that will happen in the future and in 10 years or so there are going to probably be thousands of rockets and satellites going into space on a yearly basis. All this talk about space brings to mind the world's most valuable aerospace and defense firm known as SpaceX, which is valued somewhere around $400 billion. There is talk in 2026 that you could see a public offering raising up to $30 billion. For those investors who have a long time horizon of 10 years and a strong stomach to handle all the volatility, SpaceX might be a great investment for growth investors.

Proof that private funds aren’t worth what management says they are

People often invest in private funds in areas such as equity, real estate, and loans because they don’t like market fluctuation. It’s ironic because they would rather have the manager who is getting paid somewhere around 1.5% for managing the assets come up with a value for those assets. Talk about the fox guarding the henhouse. You see the manager of the fund wants the value high to keep their fees high. We always explain to people the difference between risk and volatility. Remember, volatility is just the up and down movement in the portfolio which means it is not just the downside, but it’s the upside as well. Volatility should not be a problem for the knowledgeable advisor or investor. When looking at volatility versus the lack of liquidity in the private market, to me it's a no brainer that whethering volatility is the better choice. People are now getting a little bit impatient with private investments, and they want to get their money back. They are tired of waiting once a quarter to simply receive a small amount of their investment back. A couple of funds like the Bluerock Private Real Estate fund decided to go public and were surprised to learn that the net asset value of $24.36 a share was well above the market price that was established of $14.70, nearly a 40% drop. Another private fund called FS Specialty Lending that invests in loans had a similar story where they thought their net value was correct at $18.67, but when it went public on the open market, it dropped about 25% to $14. Looking forward, there’s no doubt that other private funds will turn to the public markets to try to make their shareholders happy. This is happening mostly because as returns for private funds and investors take as much of the assets as they can, the fund managers are left with reduced fees because of the smaller amount of assets, and they'll likely decide to end the fight and just list on the public markets. As always, our warning is, if you’re not in private investments, stay away and do not be sold a bill of goods. Stay with public investments and understand that there will always be volatility when there is a public market for your investment.