Straight Talk from Al Jacobs

THE AMERICAN DREAM REVISITED

If there’s one habit I’ve indulged in over the years, it’s regularly reading Letters to the Editor in every newspaper I come across. Although many of them are simply tirades of one sort or another, every so often I come across an opinion which causes me to think twice. Several days ago the title of one upset me when it proclaimed: “The American Dream is out of reach.” The text of the letter was more upsetting, bemoaning that “… life should be better and richer and fuller for everyone,” while offering as a solution: “Think twice about who we vote for.”

The phrase, The American Dream, which dates back to James Truslow Adams’ 1931 book, The Epic of America, had come to represent an assurance of the abundance of material goods, and in particular home ownership and a college education for all. To a certain extent I tended to focus in on the concept and realize I’ve lived my life with those values uppermost in my consciousness.

In more recent years the belief that, through hard work and abiding by the rules, the citizen’s material prosperity is guaranteed, has been challenged. Prize-winning journalist Chris Hedges’ 2012 publication, Days of Destruction, Days of Revolt, claims that the dream is a lie, in that American’s jobs, schools and communities will all be sacrificed to the evil of corporate profit.

I’ll give you my opinion. Both sides have it wrong. It’s still possible to enjoy the blessings of this bountiful land. For a person of no more than average ability, willing to work systematically to earn a livelihood, to abide by the fundamental rule that you consistently spend less than you earn, and who refuses to be duped by the hordes of unscrupulous marketing rogues which populate the landscape, a rewarding life is still attainable.

My point: The American Dream is alive and well. Though James Truslow Adams, a freelance author who helped popularize American history, departed this earth almost 70 years ago, his concept that each citizen can attain a certain degree of success in this favored nation is still valid. But be aware that it’s a singular achievement, not a community project. It won’t be collectively handed out; it must be individually earned.

 

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Al Jacobs, a professional investor for nearly a half-

century, issues a monthly newsletter in which he

shares his financial knowledge and experience.

You may view it on http://www.roadwaytoprosperity.com

 

 

 

Straight Talk from Al Jacobs

INVESTORS WANTED: SIMPLETONS ONLY NEED APPLY

The advertisement is certainly impressive; the full page spread literally beckons the viewer to act fast before the opportunity of the century gets away. The offering is the “New California State Silver 100’s” for which “the phone lines are ringing off the hook.” The actual items being marketed are 50 one-ounce silver coins, described as “proof finish,” each commemorating a different state of the union. The price of each coin is $99, which is described as “the state minimum set by the private Federated Mint” – which, understandably, is the firm marketing the coins.

The actual product being promoted is not a single coin at the quoted price, but rather the full 50-coin set. The bonus offered is that select California residents can get 20 of these coins free.” This they describe as “a real steal because it’s saving each California resident over two thousand dollars.” It’s true, of course, that the price of 20 coins at $99 each equals $1,980, so with sales tax included the savings can be said to be “over two thousand dollars.” I’m sure this should induce some persons to do exactly as the ad recommends: “Don’t wait to call. Pick up the phone right now and get as many of the new California State Silver 100’s as you can before they’re all gone.”

Let’s now back up a bit and take a look at this investment opportunity in a more realistic manner. What’s actually being sold and at what price? The collection of coins, which are individually wrapped and packaged in a container the size of large cigar box, contains a total of 50 ounces of silver. Only the silver has value; the packaging is merely a marketing contrivance designed to make the offering seem impressive. Thus, the fundamental question is: What is the market value of 50 ounces of silver? The advertisement appeared 12/21/17; on that date the spot price of an ounce of silver was $16.23. It takes little mathematical skill to determine the 30 coins for which a purchaser pays $99 each costs $2,970. The 50 ounces of silver acquired at $16.23 per ounce represents an actual value of $811.50. This amounts to a markup $2,158.50. It takes a vivid imagination to construe this as an attractive investment

A final comment: There’s nothing unusual about this advertisement. I’ve seen these sorts of offerings over the years, in various forms, over and over. They’re designed to attract the gullible among us, who are unable to fixate on reality. Whether there should be laws to protect the many naïve members of society can be debated.

 

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Al Jacobs, a professional investor for nearly a half-

century, issues a monthly newsletter in which he

shares his financial knowledge and experience.

You may view it on http://www.roadwaytoprosperity.com

Straight Talk from Al Jacobs

 

WHY MANY OF US ARE BROKE

My thanks to “Letters to the editor” writer Bill Spitalnic , of Newport Beach, who posed a question that deserves to be asked – and answered. He first lauds our nation for its prodigious wealth of $97 trillion, next calculates the net worth for the median household as being $78,100, and finally summarizes with the query “Why is it so darn hard at times to make the car payment?” The question is meant to be rhetorical. Every household should be able to meet its expenses with no problem. However, I’ve been told that over 50 percent of Americans cannot come up with $400 if an emergency befalls them. Evidently something is wrong; what might it be?

I have an answer to that question … but first a testimonial. In 1963, after serving more than a dozen years in the U.S. Navy, I settled with my new bride in San Jose, California, where I began a job as a real estate salesman, on commissions only. As our total assets amounted to less than $3,000, my wife needed to find a job – and transportation to get her there. A newspaper ad offered a 1954 Chevrolet for sale at $350. After checking the vehicle out, we negotiated the price down to $300, in cash. Though it was ugly, it ran well and provided the transportation she needed.

Now for my response to the question: Why is it so hard at times to make the car payment? It’s for the same reason so many people cannot comfortably meet financial obligations. It’s that they fail to live by a most basic rule: Arrange your affairs so you regularly spend less than you earn. As for transportation, the motor vehicle constitutes the average American's single most important fixation. There’s no product more forcefully promoted or representing such a substantial portion of disposable income than one's vehicle, and the potential for financial dilemma is all too real. The solution: (1) Don’t buy anything you can’t pay for without borrowings of any sort. (2) If a new car isn’t within your budget, search for a serviceable used one. (3) If continuing to use your present vehicle costs less than buying a replacement, don’t make the change.

A final thought: Despite all the consumer guidance in America, too many people are engaged in thoughtless and self-destructive behavior. How you conduct your affairs as a consumer relates to what’s important in your life. With limited resources, embrace thrift and discipline. As your net worth increases, you may modify your conduct.  But these must be deliberate choices. Don’t let the marketers preempt your decisions.

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Al Jacobs, a professional investor for nearly a half-

century, issues a monthly newsletter in which he

shares his financial knowledge and experience.

 

You may view it on http://www.roadwaytoprospertiy.com

 

Straight Talk from Al Jacobs

 

THE SCOURGE OF INEQUITY

 

A study, recently unveiled, points to racial and ethnic inequity as the major reason California is slipping into decline. The report, released November 14, 2017, by Advancement Project California, a Los Angeles based civil rights group, examines the causes leading to our malaise. John Kim, executive director of the project, contends we must “shake Californians out of their complacency that the state’s progressive political bent and rising multiculturalism is translating into less racial inequity.” He added that as a majority minority state, racial disparity should not be acceptable any more.

Following those philosophical generalities, Mr. Kim becomes specific when he states “We need to create a new coalition where we all work together toward progress and prosperity for all.” That concept is about as close to the workings of the 1924 Soviet collective system as you can get. It’s fascinating anyone can make such a statement, nearly a century later, with a straight face.

One of the more egregious revelations, according to the study, is that “we haven’t made progress in closing gaps in education,” adding that members of certain races “are less likely to have access to good schools.” What this fails to consider is how a school is determined to be “bad.” It’s when its students perform poorly on standardized tests. But this doesn’t necessarily mean the school is bad, but rather that its students display academic deficiency. To blame this on racial inequity thoroughly ignores reality.

Still more evidence of inequity relates to racial disparity in incarceration rates. In Los Angeles City, for example, this is the cause routinely given to explain why ethnic minorities are far more likely to be jailed than whites. However, the fact the city’s 9,843 police officers are 55.2% Hispanic or African American, while only 34.9% are white brings the following presumption into question: Could it be, perhaps, that arrest and incarceration rates are far more dependent upon the personal conduct of those persons being apprehended than is the race or ethnicity of the parties?

A final thought: I’ve long been convinced the sort of societal action normally taken to address inequity has little or nothing to do with actually attacking a problem. Rather, it’s based upon determining who will receive whatever money is thrown toward remedial effort taken. In short, combating inequity is merely a money-making endeavor.

 

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Al Jacobs, a professional investor for nearly a half-

century, issues a monthly newsletter in which he

shares his financial knowledge and experience.

You may view it on http://www.roadwaytoprosperity.com

Straight Talk from Al Jacobs

MORE NONSENSE FROM THE UNITED NATIONS

 

I notice that civil rights and homeless advocates in Orange County, California, in cooperation with the American Civil Liberties Union and the Elder Law and Disability Rights Center, have filed a petition requesting a special United Nations official to declare local governments in the United States to be in violation of international law for having enacted anti-camping ordinances which prohibit the homeless from sleeping in public spaces. The U.N. official, Special Rapporteur Philip Alston, who is currently inspecting Los Angeles, San Francisco and the District of Columbia, among other sites, declared on Wednesday, November 29, 2017, that despite the nation’s wealth, “great poverty and inequality exists in America.”

The event now bedeviling the human rights activists is that a number of communities in Orange County are in the process of cleaning up unsightly homeless encampments which have been threatening the peace and safety of both residents and passersby. Such areas as the grounds surrounding public buildings and the wooded areas adjacent to roads and bicycle paths have become debris-littered and hazardous as more and more transients illegally squat in locations not intended for human habitation. Several times this year county employees have been forced to clear these areas, citing concerns about public safety as well as the safety of the homeless.

Exactly what authority the United Nations possesses over the right of the United States and its governmental subdivisions to enforce its properly enacted laws is beyond my knowledge. If, in fact, that organization is vested with any such powers, then these arrangements should be repudiated at once. And if we, as a participant in this international community of nations, are somehow beholden to abide by the rules and regulations dictated by a majority of its current 193 members, then there’s no rational justification for our being a member. In retrospect, the late Senator Henry Cabot Lodge may have been prophetic when, in 1919, he opposed U.S. entry into the League of Nations.

The article concludes with a statement by Mr. Alston that he plans to present his report on American extreme poverty to the U.N. Human Rights Council in Geneva in June 2018. If it’s extreme poverty which truly concerns him, perhaps he should be touring the nation of Bangladesh, another member of the United Nations, with an average hourly wage for its citizens of 24 cents.

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Al Jacobs, a professional investor for nearly a half-

century, issues a monthly newsletter in which he

shares his financial knowledge and experience.

You may view it on http://www.roadwaytoprosperity.com

I just took my daily 1-hour swim, so to pump oxygen-carrying blood around my body, particularly thru the carotid arteries to my brain. I’m convinced this is one factor in preventing Alzheimer’s disease. So far all’s well; the little gray cells are still working.

Straight Talk from Al Jacobs

RESOLVING THE HOMELESS PROBLEM

According to a recent report, the prestigious beach city of Malibu, northwest of Los Angeles, faces a crisis. For nearly two decades the Malibu United Methodist Church and allied volunteer groups provided food, shelter and other services to the area’s homeless. It appears things are now out of control as these acts of generosity proved to be an attractive draw for displaced persons from more distant locations. And as they increased in number, their conflict with the residents of the community intensified, with a surge in homeless nuisance calls and increasing reports of scattered crimes by transients. City officials are now uncertain what to do as they grapple with the problem.

Perhaps Malibu might profit from an identical situation which faced the Orange County community of Laguna Beach several decades ago. The inducement for an invasion of drifters was the Episcopal Church’s provision of sleeping quarters on their grounds together with the operation of a soup kitchen. It wasn’t long before the city found itself overrun with derelicts. I specifically recall having to step over three idlers as I tried to enter the front door of an art gallery on the Pacific Coast Highway.

As in Malibu, city authorities somewhat tolerated the situation for awhile. What triggered a change was the planting of an explosive device outside the wall of the police chief’s office. Fortunately he wasn’t there when it blew the wall in, but it galvanized the sentiment required to resolve the problem. Within 48 hours the church terminated all eating and sleeping arrangements. In addition, I’m told the police became far less friendly to interlopers. I recall, within a week, a comment attributed to a city councilman, to the effect “… we wish to encourage them to seek more suitable shelter elsewhere.” It was clear the euphemism could be translated to “… we intend to run them out of town.” Apparently the city leaders accomplished what they intended, for within a month there were few, if any, homeless to be seen anywhere.

A final thought: Malibu is free to resolve its problem as it wishes. However, if it chooses to emulate the method used by Laguna Beach, it will most likely succeed. Whether or not this can be said to constitute enlightened public service is irrelevant; it will most likely rid the city of the homeless and satisfy the local residents. Not only are there far worse ways for a municipality to exert its authority, but there’s certainly something to be said in favor of pragmatism.

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Al Jacobs, a professional investor for nearly a half-

century, issues a monthly newsletter in which he

shares his financial knowledge and experience.

You may view it on http://www.roadwaytoprosperity.com

AFFORDABLE HOUSING VERSUS TAX REFORM

The most recent criticism of the ongoing tax reform plan comes from Ray Pearl, Executive Director of the California Housing Consortium, an advocacy group for the creation of affordable housing for low- and moderate-income residents. He maintains the federal GOP tax plan “would take a wrecking ball to the new foundation California has put in place.”

The new foundation he refers to are the State measures enacted over the past several months addressing homelessness. These include Senator Toni Atkins’ SB 2 adding a $75 fee on real estate transactions to raise $250 million to finance low-income housing, Assemblyman Richard Bloom’s AB 1505 allowing cities to force developers to set aside a number of homes in their projects for subsidized residents, together with a $4-billion bond measure to finance affordable housing developments. All were enthusiastically lauded by Governor Brown at the signing ceremony.

In case you wonder how well affordable housing money is spent, Mr. Pearl describes exactly how, as he reports: “In 2016 alone, California created more than 20,600 affordable homes thanks to $2.2 billion worth of federal housing credits and more than $6 billion of private bonds.” His numbers are fascinating; if you divide $8.2 billion by 20,600, you’ll find each affordable unit cost approximately $400,000. If this constitutes “affordable,” I must wonder on which planet Mr. Pearl resides.

Let me inform you of a truly excellent affordable housing plan operating in this country. It’s the Section 8 Housing program in which qualified low-income families occupy commercial rental housing at fair market prices, for which they pay no more than 25 percent of their income, with the government picking up the balance. Instituted in 1965 during the Lyndon Johnson administration, it’s federally funded and locally administered. It works superbly; this is where all low-income housing funds should go.

A final word: The bureaucracy works in strange and mysterious ways, its wonders to perform. Although it continues to throw huge sums of money at every facet of the homeless problem, affordable housing is rarely the result.

THE FACE IN THE MIRROR

Today’s topic is financial advice, but before I say a word on the subject, let me inform you that I’m not—I repeat, not—a financial planner, nor have I ever been one.  And in my lifetime I’ve never hired one.  For the past half-century the investment advice I’ve relied upon comes from the face in my mirror.  Though at times the counsel proved less than astute, one thing I’ve never doubted: The face in the mirror always has my best interests at heart.

As you might guess, I’m inclined to advocate that each of us choose ourselves as financial advisor.  In reality, however, many persons cannot rely upon themselves to oversee their investments.  Whatever reasons may be given, it invariably comes down to a matter of temperament.  Supervising an investment program requires a systematic mindset, a degree of personal discipline, and orientation to detail.  Most certainly it helps to be compulsive.  Individuals lacking these traits, and who normally perform the function badly, are the logical clients for the financial professionals.  It’s from this circumstance that problems arise.

To state it bluntly, few financial advisors will serve you well.  If they’re commission-compensated, expect recommendations which generate for them the largest commissions.  For the fee-based variety, with remuneration dictated by a percentage paid on controlled assets, your counselor will normally endorse whatever results in the maximum dollar value of assets.  And don’t expect enhanced performance because your overseer is licensed, registered or certified.  These devices are mere window-dressing.  Comedian Mel Brooks most accurately described certified: “You’re a nice guy; we like you; you’re certified.”

 I’ll leave you with this final thought: Ideally, your advisor shouldn’t profit unless you do.  However, as members of the advisory trade do not operate this way, there’s usually nowhere else to go.  If you suspect the face in your mirror is not quite up to the task, your best bet is a financially astute friend or relative who provides counsel gratis, often inviting you to join in as a fellow investor.  I’ve involved myself in this fashion for many years and it works well.

 

Al Jacobs, a professional investor for nearly a half-

century, issues a monthly newsletter in which he

shares his financial knowledge and experience.

You may view it on http://www.roadwaytoprosperity.com

WHAT WE BUY - AND WHY

A person's possessions speak volumes on what that individual regards as important. The advertising industry, devoted to identifying what the citizen considers significant, manipulates the market to create those choices. With massive sums to be spent, the competition is as fierce as it is grotesque.

What brand of watch do you wear? Whether a top-of-the-line Rolex, a fashionable Cartier, a respectable Bulova, or an economy Timex, recognize that all are battery-operated, with a similar quartz movement, and none fails to keep excellent time. The day of the mechanical Swiss movement is a thing of the past.  The current models all do a better job than the "precision" pocket watch your Uncle Elmo carried as an engineer on the Lackawanna Railroad. The only justification for a high-priced model is self-image and, let's face it, the illusion of prosperity.

What can be said about wristwatches is equally true about other highly promoted products. These include magazine offerings, timeshare projects, $300 per ounce bottles of perfume, Las Vegas weekend getaways, $1,800 ballpoint pens, and the purchase of lottery tickets, to name just a few. As a rule of thumb, the more overpriced the merchandise, the more innovative its promotion. Perhaps there’s a connection, if only because moderately priced items that reflect honest value incur less sales resistance, so need not be touted with such vigor. Reflect, for a moment, on the recognizable voices and faces that make the outrageous claims. If there is a benefit to this, perhaps it’s that the association of certain marketing celebrities with a product of any sort saves you the effort of analyzing the offering; you may reject it out of hand.

In short, how you conduct your affairs as a consumer relates to what’s important in life. As a person with limited resources, but aspirations for the future, embrace thrift and discipline. As the years pass and your net worth increases, then modify your conduct accordingly, but keep in mind that these be deliberate choices. Don’t let advertising pressures or market manipulators preempt your decisions.  And as a last word, remember this: If a vendor must buy a dozen pages of advertising to say how wonderful its product is, it can’t be.

BABY STEPS INTO REAL ESTATE

Welcome to the magical world of real estate. The first exposure for most of us is the home in which we live.  Perhaps not surprisingly, if a youngster is raised in a rental unit, this becomes a factor in setting a way of life as an adult.  In short, buying, versus renting, can be attitudinal.  Let me express my bias from the onset: The goal is home ownership, and the sooner, the better.  This is important, for the purchase of a first residence is frequently the initial step in wealth building. 

At the very least, the longtime ownership of a home is often a key element in later life independence.  Many a retiree who bought an inexpensive tract house with a minuscule down payment thirty or more years ago, and systematically paid off the mortgage, one installment at a time, is today able to get by with little else than social security.  But for a residence, free of debt, this might not be possible.  There is, however, one element that tends to undermine the outcome.  If over the years there’s serious economic deterioration of the area where the property is located, full benefit may be lost.  Luckily it’s not entirely a crapshoot, but the factors which go into determining the future desirability of a location is beyond the scope of this article.  In the near future I’ll address this subject in detail.

After the home purchase, the next logical real estate investment for many an aspiring entrepreneur is residential rental property.  It’s a business – yes, a business  ̶  which offers many pitfalls.  The principal of Murphy's Law applies: Whatever can go wrong will. And there’s much to go wrong.  Although this is a discouraging aspect of owning rental property, in a perverse sort of way it can be an advantage.  In any potentially profitable enterprise, the field is soon crowded with competition.  If not for the regular aggravation and occasional downright misery, anybody and everybody could handle it with ease.  The downside then becomes an upside; if you plan to enter the field, you must take this attitude.

A final thought: If you develop an interest in the potential that rental real estate offers, there’s a remarkable book you must read.  It’s William Nickerson’s How I Turned $1,000 into a Million in Real Estate in my Spare Time (later editions change a Million to Three Million and thereafter to Five Million).  Though long out of print, used copies can still be found

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Al Jacobs, a professional investor for nearly a half-

century, issues a monthly newsletter in which he

shares his financial knowledge and experience.

You may view it on http://www.roadwaytoprosperity.com

 

LOCATION, LOCATION, LOCATION

Let me share my response the other day to the question of how I select the location of my rental properties.  I prefer an area with total population no less than one million, which limits me to major metropolitan areas.  Consider, for example, the Riverside County area of Southern California.  Though there’s no city there with that population, the smaller communities, mostly contiguous with one another, exceed that count.  In all, the area is a most satisfactory choice.

A second location consideration involves price range, which relates fair market purchase value (FMV) to monthly rental value.  In general, as FMV declines, rental value as a percentage of FMV increases.  A typical example: A 1,200 square foot house purchasable in the city of San Bernardino for $170,000 brings $1,600 per month rental.  A similarly sized house in the city of Cypress, Orange County, sells for $340,000 and rents for $2,400.  An identical house in the city of Huntington Beach, marketing for $500,000, generates $3,200.  These values are shown in the following table.

  Sales Price   Monthly Rental   % Rent to Price

  $  170,000       $ 1,600                   0.94

      340,000          2,400                   0.71

      500,000          3,200                   0.64

From this single criterion, it might seem advisable to seek areas with the lowest property values so to maximize percentage gross rental return.  But with this approach, there’s a problem.  Percentage "gross" return isn’t what you’re after; you really want percentage "net" return.  The fact is, total operating expense as a percentage of rental value generally rises as property value declines.

So, although properties of lowest price range give high percentage gross rentals, the disproportionately greater expenses result in lower net income.  At the other extreme, properties of highest value enjoy the lowest relative expenses, but their low percentage gross rentals suppress net income.  Admittedly, rental units in all price ranges can be satisfactory investments when properly structured and managed, but properties in the middle price range generally deliver the greatest net income per dollar invested.  More specifically, residential rental properties, whether houses or apartments, described disdainfully by the British as "lower middle class," are the most profitable.

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Al Jacobs, a professional investor for nearly a half-

century, issues a monthly newsletter in which he

shares his financial knowledge and experience.

You may view it on http://www.roadwaytoprosperity.com

 

MORTGAGING YOUR HOME

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 predesignated Wealth Strategist to invest that money.

As the ad explained, a justification for borrowing on your personal residence is that “You’re earning a 0% return on that untapped equity. You have all that money locked up and you’re getting absolutely 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 which 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.

 

Al Jacobs, a professional investor for nearly a half-

century, issues a monthly newsletter in which he

shares his financial knowledge and experience.

You may view it on http://www.roadwaytoprosperity.com

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BEWARE OF FREE OFFERS

A few days ago I received a notice from an organization of which I’ve been a member for many years. It said: “As directed by the President, I have upgraded your membership, FREE OF CHARGE. This is a special courtesy to you in recognition of your continued membership.” Acceptance required only my signature on the enclosed acknowledgement. At the risk of looking a gift horse in the mouth, I scrutinized the offering and there, buried in the fine print, I found the hooker – “free of charge” extends only 94 days.  At the end of that time my upgraded membership renews at a newly increased rate unless I specifically instruct otherwise. As for the benefits of the upgraded membership: a few meager tidbits of no particular concern; the annual dues increase: from $69 to $117, up about 70%.

There’s no mystery as to the offer’s intent. It’s a scheme to peddle a grossly overpriced product disguised as a benefit. This artifice, taught in marketing schools throughout the nation, is known as Opt-in/Opt-out marketing. It’s based on the premise that a predetermined portion of persons who accept an initially attractive offer will, if required to perform some function, fail to cancel out when the benefits end. The task of its designers is adjusting the parameters so to predict, within statistical accuracy, what percentage will neglect, for whatever reason, to opt out.

Though I regularly receive such duplicitous offerings from various companies – an even more egregious proposal arrived from a major bank the following day – I don’t normally take offense at deceptive pitches. I fully expect the nation’s financial community to operate in a high-handed manner, almost as a matter of course. My surprise was being treated in this fashion by an organization for which I had regard. However, perhaps it’s to be expected. It appears that as an entity grows in size, the activities of its marketing department become more remote from its fundamental business or service operation. And as these departments tend to hire persons with marketing school degrees, all taught the same techniques, the results are inevitable.

A concluding thought: It’s a hostile world out there, so you must be continually on guard to avoid being ripped off. And above all, be aware that there are no sure guidelines by which to distinguish the good guys from the bad guys.

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THE COST OF COLLEGE

The title of the article couldn’t be ignored: “Who should pay your college bills?” Before I read the very first sentence, I glanced down at author’s credits – Andrew J. Policano, Professor of Economics and former dean at UC Irvine’s School of Business. I had a feeling he and I would be on different tracks.

Dr. Policano quickly assures the reader that, despite the fact higher education is so expensive, the cost of educating a student “has been restrained.” He further states “at the University of California, expenditure per student has fallen by more than 20% since 1991 while tuition has risen … the consequence of decreasing state support for public higher education.” While I struggled to figure out what that meant, I spotted the matter of primary importance: “What’s really at issue isn’t the price but who should pay for it: students, parents or donors.”

From that point on the article became a complex dissertation involving legislative involvement, public university policies, university-designed redistribution programs and the qualm that “tuition is not rising by a large enough amount to replace the significant decreases in state support.”

Though I read through to the end, I never learned who should pay your college bills. For this reason, I’ll offer my opinion – and I’ll not beat about the bush. The student benefiting from the education is the logical payor. If that’s not possible, a devoted parent or other agreeable relative is next on the list. If money is in short supply, a low cost community college should be chosen for the first two years, with a reasonably priced state university chosen for the junior and senior terms. Student loans should be avoided whenever possible, even if it results in a later date graduation than originally intended. And if the student must obtain employment while attending college part time, this is the way it should be.  The key is to obtain the diploma while incurring no loan obligations.

A final thought: Education is more than a university degree. It’s the learning you acquire. After your books have been disposed of, the names of your instructors forgotten, and your framed certificate of completion relegated to a wall at which you seldom glance, the information you acquired which resides in your head is what your schooling was really all about.

 

TWENTY-FIRST CENTURY SCHOOL WARFARE

On Feb 7, 2015, President Donald Trump’s choice for Secretary of Education, Betsy DeVos, was confirmed by the U.S. Senate. With Vice President Mike Pence casting an historic tie-breaking vote, the final tally of 51 to 50 ended an unusually contentious fight over this cabinet post. The largely partisan vote stemmed from Ms. DeVos’ long history of advocacy for charter schools and school vouchers in her home state of Michigan, a pair of programs heavily opposed by the Teachers Unions which are universally supported by the Democratic Party.

During confirmation hearings, Ms. DeVos reiterated support of charter schools with the statement “I am a firm believer that parents should be empowered to choose the learning environment that’s best for each of their individual children.” The following day Eric Heins, president of the California Teachers Association, declared “It’s clear to us: she is an anti-public education activist more interested in funneling public monies into private schools and for-profit charter schools.  She doesn’t value the diversity we celebrate and hold dear here in California.” And upon her confirmation, Randi Weingarten, president of the American Federation of Teachers, said “DeVos shows an antipathy for public schools; a full-throttled embrace of private, for-profit alternatives and a lack of basic understanding of what children need to succeed in school.”

As the participants in the schools wars continue to engage in combat, let me interject a few comments to which both sides would object. I contend neither the public school nor the charter school has a monopoly on educational expertise. In both settings bright students who strive to learn will do well, while those that are dull or who fail to apply themselves will do poorly. Of particular concern to me is the dogmatic belief that how the school hierarchy functions will dictate the scholastic outcome. The implication is clear – and faulty – that learning is something done to the student, not by the student. And finally, I’m appalled that none of the combatants appear to phrase their arguments or address their comments to the very persons on whom education is presumably directed: the students. These appear to be the forgotten ciphers in this never ending battle, who will perform as directed, but enjoy no say in how they’ll be required to learn.

A final thought: I’m convinced the intent of all parties in this fracas is funneling public monies into schools they control. It’s nothing more than a fight over the loot.

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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, Roadway to Prosperity

Click onto http://www.roadwaytoprosperity.com/

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OFF TO THE BEACH - ON THE CHEAP

It appears California’s state legislators are set to zero in on yet another critical problem facing its citizens. The article describes the cauldron of injustice: “Visiting the coast has become too expensive for the average family – A bill aims to lower costs.” Assembly Bill 250’s sponsor, Assemblywoman Lorena Gonzalez (D-San Diego), announced: “I grew up in a working-class family and got to enjoy the beach. There was easy access then. Now people who grow up like I did don’t have that opportunity – it can be cost-prohibitive to enjoy the beach.”

Just like Ms. Gonzalez, I too can recall back to my teenage years when money was hard come by. My job as a drug store soda jerk, paying 67¢ per hour, didn’t enable me to enjoy the high life. As I lived nearly twenty miles from the ocean, the prospect of bicycling there seemed a tough way to go. So, if my friends and I wanted a day at the beach, we figured out how to do it.  The Pacific Electric Red Car tracked line, which rattled noisily along from 1901 until 1953, wasn’t terribly expensive and could get us to Venice or Santa Monica.  As for grub, it was usually a choice between the almost digestible 5¢ hot dogs from a seaside vendor or the brown bag sandwiches we could whip up and take with us.  And a “day at the beach” proved to be exactly that, for we always returned the same day.  The thought of plunking out four hard-earned dollars for a motel room was out of the question.

Today’s poor people are better represented than we were, thanks to the political muscle their champions muster. No need to wait for public transportation; just drive there and enjoy subsidized parking. As for food, with millions of our less advantaged citizens on the California Food Assistance Program (CFPA), there are plenty of the finest delectables to go around. And finally, the trip to the beach needn’t end as the sun goes down. Thanks to Ellie Sanders, Vice Chair of the Coastal Commission, there will be more lower-cost rental accommodations available, as “The commission takes this very seriously because it’s getting difficult for even average families to visit our coast.”

A final comment: Neither my friends nor I ever resented the effort we went to for a day at the beach. None of us looked to someone else to provide us with simple luxuries.  Whether America is a better place today because of the pandering practiced by our elected and appointed officials is questionable.

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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, Roadway to Prosperity

Click onto http://www.roadwaytoprosperity.com/

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THREE CHEERS FOR GOVERNMENT WASTE

The article on government waste by Adam B. Summers, columnist with the Southern California News Group, spells it out clearly: “The federal government wastes taxpayers’ money in thousands of ways, large and small.” Among the examples he gives is the $3.1 billion the Federal Railroad Administration has made available for California’s “doomed” high-speed rail project. He then goes on to describe how the Energy Department has wasted $450 million on a clean energy project, now six years behind schedule, on which ground has yet to be broken.

However, with Mr. Summer’s next revelation, I did a double take. He discloses that the IRS spent $12 million on an archiving system which was never used in any way. The implication is clear; this branch of government is not functioning efficiently. I then scratched my head as I contemplated whether we want this particular governmental organization to be efficient. And more to the point, with the many funded projects which allocate taxpayers’ monies for functions thoroughly antithetical to the desires of most rational persons, perhaps waste is a desirable quality. Consider, for example, a massive federal program established for the purpose of providing every elected official in the nation with a 6-figure lifetime retirement benefit together with full family health care. This is an activity I’d never want to see carried out. In this case, the less efficient the operation, the better for us all.

Let me now share my personal bias on the government’s use of those funds collected from me as a taxpayer.  As long as the money is in my pocket, it’s rightfully mine to spend. Once it passes to the tax collector, it’s rightfully the government’s to spend. For all practical purposes, I have no say in how it’s used. Though I may choose to criticize from afar, there’s nothing much I can do about it. Thus, they may waste it as they wish or apply it effectively if they’re able. But what really matters is that I use whatever money is mine to keep with frugality and discretion. The government may blow what it chooses; it’s far more important that each of us conduct our own financial lives wisely.

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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, Roadway to Prosperity

Click onto http://www.roadwaytoprosperity.com/

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