When I was a kid, which was a long time ago, and something disappointing or unexpected occurred, my dad would say, “It happens.” Meanwhile, I’d change brokers if I were you. I received two nasty calls from your broker, who lambasted me for interfering in his livelihood. He was smoking mad. His language needed cleaning up, and he barked like a rabid dog. I could almost feel his spittle on my face across the phone line. And he called twice in three days. I get nasty calls from angry brokers a few times a year, but his calls really took the cupcake. I guess this ugly bugger has some financial obligations coming due soon and sorely needs that 8 percent commission.
My biggest problem with this annuity is the excessive costs. In my opinion, there are few things on God’s green earth that are worth paying an 8 percent commission for. This annuity isn’t one of them. Meanwhile, the 3.6 percent annual fees that you would pay the insurance company (every year you owned the annuity) for mortality, management of subaccounts, etc., would be disgustingly egregious. Those fees would mean that this annuity would have to earn 11.6 percent to net 8 percent. Not even Warren Buffett can earn 11.6 percent every year. In fact, some years, Warren actually loses money.
UTX recently bought Rockwell Collins for $23 billion, and management is separating its commercial businesses, Otis and Carrier, into independent entities. United Technologies, Otis and Carrier differ in profitability, capital requirements, investment horizon and long-term growth potential, but they all certainly have good merit. And each will be listed on the New York Stock Exchange. The spinoff means that each business will have more focused management and a more dedicated investor base and hence a better opportunity for appreciation. Each of these companies will have investment-grade balance sheets, and the dividend of the three will equal the dividend payout of UTX prior to the spinoff. However, most investors believe that the market values of these three parts will exceed the current market value of UTX.
I understand that there are several companies listed on the NYSE that may make a bid for Otis, which has over $12 billion in revenues. Carrier, with $18 billion in revenues, probably the largest and best-known air conditioning company, could run into antitrust problems if it were to become involved in a merger or buyout. Meanwhile, Rockwell Collins was a $7 billion aerospace, avionics and information technology company. The Rockwell purchase was a hand-in-glove fit. With its jet engines and flight control systems, the new UTX will generate about $47 billion in revenues. And you’ll have 10 wonderful stocks.
