BEWARE THE INVESTMENT SEMINAR

This repeating newspaper ad finally caught my attention: “Are You House Rich and Cash Poor?”  The investment program, offered at a seminar, seemed clear enough.  The homeowner incurs a mortgage loan through the featured Mortgage Consultant and then permits the pre-designated Wealth Strategist to invest that money.

As the ad explained, a justification for borrowing on your personal residence is that “You’re earning nothing on that equity.  You have all that money locked up and you get nothing for it.  It’s just sitting there, virtually unemployed.”

Let me offer a second opinion.  Home equity is not unproductive.  My residence, delightfully free and clear of mortgage, has a potential monthly rental value of, perhaps, $10,000.  I’d need to generate a pile of pre-tax income if I had to rent my own house.  Who sez I’m getting nothing by having it paid-off?

But economics aside, it’s the concept I reject.  It’s unwise to incur a loan on your home, which must be paid, to invest in something that may or may not produce the cash flow to make the payments.  Admittedly, it can be argued that if the investment is a surefire winner that you personally direct, with a return well in excess of the borrowing cost, it might warrant the risk.  In this particular offering, however, you’ll not be in control.  Rather, your fate will be in the hands of a mortgage consultant and a wealth strategist who will explain things as you enjoy a full complementary meal at their “free educational investment seminar.”

As implausible as it may seem, many persons select their investments no more judiciously than by response to mass solicitation advertising.  This is not a winning formula.  Rather, the route to financial independence requires that you scrupulously avoid questionable enterprises, that you know exactly what you’re doing, and that you at least oversee, if not directly control, the substance of your investments.

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If you enjoy this weekly Straight Talk by Al Jacobs, you’re invited to check out my monthly Financial Newsletter, as well as my new book, The Road to Prosperity

Click onto http://www.onthemoneytrail.net/

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DOES MARIJUANA CAUSE ILLNESS?

The pot wars go on as California voters must once again decide if recreational marijuana should be legalized.  One of the uncertainties being debated is whether or not smoking weed is dangerous.  Notably, those opposed to approval contend its use causes lung cancer, just as do cigarettes.  In rebuttal, proponents are sparing no effort, with selected experts weighing in on this particular health concern.  Their consensus: “The cancer link appears increasingly weak, though more research is needed.”

  The argument actually beats about the burning bush.  Although combustion of both pot and tobacco emit some of the same carcinogenic substances, the comparisons end there.  Of particular note is that the quantity of smoke inhaled by the typical cigarette smoker, often a pack or more daily, is infinitely greater than by the marijuana user.  This was one of the factors considered in a 2014 study published in the International Journal of Cancer, which found “little evidence for an increased risk of lung cancer, even among heavy or long-term cannabis smokers.”

There’s another, perhaps even more significant reason, why tobacco is the more potent lung cancer cause.  Because of the soil in which it’s grown, the tobacco leaf contains certain radioactive isotopes, in particular the beta particle emitter lead-210.  When the smoke containing this element—with its half-life of 22.3 years—settles on the lung alveoli, it bombards the nearby tissue with ionizing (cancer causing) radiation for the better part of a half-century.  It’s this, as much as chemical factors, which result in malignancy. 

As the lung cancer debate goes on, little concern is given to what is the far more pertinent health matter: What becomes of a mentality that’s regularly exposed to a brain-scrambling substance?  Just as schoolchildren once labeled ADD were, to their detriment, doped up day after day on Ritalin, might we see—or possibly be seeing—a similar effect with the cannabis users?  If so, voter-approved legalization will merely encourage more Americans to pump increasing quantities of the substance into their heads.  I see no benefit to a nation as its people grow less able to function rationally. 

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If you enjoy this weekly Straight Talk by Al Jacobs, you’re invited to check out my monthly Financial Newsletter, as well as my new book, The Road to Prosperity

Click onto http://www.onthemoneytrail.net/

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THE VALUE OF IMPRISONMENT

A pair of provocatively related news articles aired today.  The first concerns a lawsuit filed by the daughter of a deceased California prison inmate, Hugo Pinell, incarcerated for the past 46 years, who was stabbed to death by another prisoner.  Pinell, a convicted killer, was one of the San Quentin 6 who participated in slitting the throats of San Quentin prison guards during a failed jailbreak attempt in 1971.  His daughter claims he should not have been permitted to associate with the general inmate population, but rather housed permanently in protective custody.

The other article reports on a ruling by Los Angeles County Superior Court Judge William Ryan, denying a request for parole of Leslie Van Houten, one of Charles Manson’s followers.  In 1978, Van Houten was convicted of first degree murder, in that for no particular reason, she put a pillowcase over the head of housewife Rosemary LaBianaca, wrapped a lamp cord around her neck and stabbed her 16 times.  As she later boasted, “stabbing was fun.”  She’s been in prison for nearly 47 years.

This then brings us to the subject of capital punishment, and the perennial question: “What purpose is served by housing incorrigible felons for a lifetime when their quick and unpretentious executions would eliminate any future miseries they may cause?  I’ve heard the arguments, pro and con, which long since passed the realm of rationality: Every life is precious vs. monsters have no place on earth; Everyone is redeemable vs. they’ll never change.  Even biblical enthusiasts are firmly embedded on both sides of the question.  You may endorse Exodus 21: 23 “And if any mischief follow, then thou shalt give life for life” . . . unless you prefer Exodus 20:13 “Thou shalt not kill.”

The law works in strange and mysterious ways.  Although California statute authorizes capital punishment for first degree murder, it’s so infrequently carried out as to be essentially meaningless.  As a one-time supporter of capital punishment, I cannot imagine who is benefited when those so sentenced remain on death row indefinitely, while their multiple appeals are heard and reheard over and over—except, of course, members of the bar who derive a living by processing these endless appeals.  It’s for this reason I now advocate an end to the death penalty.  Instead, those persons convicted of heinous crimes should be imprisoned and fully integrated into the general inmate population.  Only in this way will they most likely receive the punishment they so rightly deserve.

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If you enjoy this weekly Straight Talk by Al Jacobs, you’re invited to check out my monthly Financial Newsletter, as well as my new book, The Road to Prosperity

Click onto http://www.onthemoneytrail.net/

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WELLS FARGO: BUSINESS AS USUAL

The banking business once functioned on the “Law of Threes.”  Depositors received three percent interest on their savings accounts; borrowers paid three plus three percent interest on their loans; bank officials made it to the golf course by three o’clock each day.  Banks generated modest but fair profits.

Times have changed, as the current Wells Fargo exposé demonstrates.  Dating from 2011, thousands of bank employees opened unauthorized accounts for millions of customers.  The holder of a checking account might become the recipient of a savings account, with funds transferred from the checking account without notice.  Additional accounts, many incurring fees for such items as credit cards or Social Security direct deposits, might also be created, often the result of authorization with the customer’s signature forged by the bank employee.  Despite the misfortune afflicting many unaware customers, the bank hierarchy profited nicely from these activities

Who’s to blame?  According to John Stumpf, Wells Fargo’s CEO, 5,300 low level bank employees contrived on their own to engage in these nefarious activities.  When he and executive management learned of this—after the fact, of course—these guilty parties were all fired.  That resolved the problem; no further action is required.

The banker’s official assurances are unlikely to wash.  With the massive sums involved, the illegalities committed and the many parties with vested interests, we may expect a donnybrook.  Mr. Stumpf’s hostile questioning by a U.S. Senate committee was merely the opening round.  Over the weeks and months to come we’ll see the institution of class action lawsuits, the filing of criminal indictments, and all sorts of activities prejudicial to Wells Fargo and its senior executives.  Whether or not the two primary beneficiaries of the illicit operation, Mr. Stumpf, as well as Carrie Tolstedt, the company’s former head of community banking, eventually find themselves behind bars is hard to predict.

I’ll conclude with this final thought: Banking has come to embrace the corporate culture, which leads me to inquire as to exactly why the public corporation exists.  I’ll offer a theory.  It’s my belief the principal reason is to enable its officers, directors and other favored insiders to draw financial benefits from it.  Everything else is incidental.

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If you enjoy this weekly Straight Talk by Al Jacobs, you’re invited to check out my monthly Financial Newsletter, as well as my new book, The Road to Prosperity

Click onto http://www.onthemoneytrail.net/

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