Straight Talk from Al Jacobs

 

 

ADVICE FROM THE INVESTMENT EXPERTS

Earlier this afternoon, while browsing the Internet, I read a market briefing by reportedly knowledgeable financial advisors describing what investors can do to “shore up some ballast for your portfolio.” Included in the advice was the recommendation to “make sure you own ‘safe’ bonds – like treasury debt, which is considered a safe haven in times of trouble – rather than reaching for low-quality but high-yielding corporate bonds.” A little further into the article was the suggestion you consider “adding commodities to your portfolio as inflation risks rise.” Although many other opportunities were included, those two seemed to be worth a closer look.

A trip to Google reveals what treasury securities yield. One-Year Treasuries now pay 2.01%; Two-Year, 2.25%; Five-Year, 2.65%; Ten-Year, 2.88%. I can calculate how long it will take you to double your money in each instance, but it won’t provide you with much insight, inasmuch as you’ll most likely be aged and senile long before then.

As for commodities, these pretty well fit into the same category as options. They require an intimate knowledge and sophistication possessed by few persons, and contain an element of risk to challenge the seasoned speculator. Perhaps Mr. Thorne, of Kiss Me Kate fame, cornered corn, but most such gamblers end up in the crib.

Let me provide you with a few thoughts. Financial advisors – certified or otherwise – are not in the investment business. Their remuneration is unrelated to an ability to astutely select and recommend securities, and their prosperity is in no way tied to the investment success of their clients. Their sole function is marketing. If they can entice a client to part with money for which they receive a commission or a repetitive override, they’re a winner. If they can’t, they need another job. By contrast, I’m in the investment business. If the assets I acquire, oversee and dispose of do not consistently show a profit, I lose money. My associates – not clients, but rather old friends – are in the boat with me. We prosper together equally or take a beating together, again equally. It’s obviously my intent to select and manage my investments as effectively as I can.

A final thought: Don’t expect to receive much worthwhile advice from securities analysts or reputed investment experts. If they really knew anything, they probably wouldn’t tell you anyway.

Al Jacobs, a professional investor for nearly a half-

century, issues weekly financial articles in which he

shares his financial knowledge and experience.

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

Straight Talk from Al Jacobs

 

THE POT MYSTIQUE

I can’t deny the full page color picture of a somewhat decrepit woman well into her eighties attracted my immediate attention. At the top, in small font, the words: “Recreational cannabis now available in Orange County.” Across the center in large font the message: “Shop. It’s legal.” At the bottom: “MedMen” and an Orange County address. The source of the ad is MedMen Enterprises, the pre-eminent cannabis company in the U.S.

I realize the ad is designed to market its product. What I don’t understand is who the ad is directed toward. Are they after the geriatric group, and if so, are they counting on dementia to be a favorable factor in boosting sales? As an alternative, perhaps they’re zeroing in on persons in their teens and twenties whose parents ignored or abused them, and whose grandmothers stepped in to bring stability into their lives. And finally, perhaps the ad is being promoted as nothing more than a striking novelty to attract attention – as it certainly did in my case.

While we’re on the subject of questioning who’s inclined to purchase and use marijuana because of a particular marketing approach, it seems only reasonable to pose a related question: Why are persons who are presumed to be sane inclined to purchase and use mind-altering drugs of any sort? More to the point, what is it about brain scrambling – whether from cannabis, alcohol or the harder drugs – which appeals to a substantial portion of the population? Is the drug culture in some way related to pleasurable social interaction, or does it merely reflect a society in which many persons are inherently deranged?

Speaking for myself, I enjoy the pleasure of rationality, and prefer being fully lucid at all times. However, here in Southern California it appears I’m becoming more and more in the minority. Although Los Angeles has already issued licenses to nearly 100 marijuana retailers, authorities estimate there are at least double that number operating illegally in the city. By all accounts, there’s no shortage of customers.

I’ll add a final thought: What sort of society have we created when a large portion of its members choose to become stoned on a regular basis? And even more importantly, with this as our present condition, what sort of society will we devolve into?

Al Jacobs, a professional investor for nearly a half-

century, issues weekly financial articles in which he

shares his financial knowledge and experience.

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

Straight Talk from Al Jacobs

SORRY, NO SEMINARS

Not long ago I was asked whether, in addition to issuing articles on financial subjects, I also conduct investment seminars or private consultations. My reflexive response of “No!” wasn’t really very informative; the inquiry deserves a more extensive reply.

I’m in the investment business, not the investment advisory business. The activities I engage in are designed to generate a profit for me, as well as for my associates. Of course there’s nothing improper about this, despite the criticism from a variety of sources likening this attitude to greed or worse, Understandably this is what all businesses should do: make money for the operators of the business. And this is where dispensing investment advice becomes troubling, for seeking profit by advising others how to seek profit involves an inherent conflict of interest.

Consider the advisor who receives a commission for placing a client in a security. You should note there’s an orchestrated crusade by those who identify themselves as fiduciaries to do away with the commission-based practitioner. They contend the selection will not be based upon the soundness of the investment, but rather, the size of the commission. Perhaps this is so in many instances, but even fee-based advisors who receive no such commissions must resist other enticements, as when the advisor counsels a client to float a loan on their personal residence so more funds will be available to be placed with the advisor … I know of a prominent certified financial planner who does exactly this.

I contend an advisor’s recommendation which favors the client over the advisor constitutes an inherent contradiction of human nature. Under even the best of circumstances, any guidance will be colored by the benefit to the advisor. It’s a rare individual who will consistently place a client’s well-being before his or her own. It’s for this reason I choose not to involve myself in this fashion.

I’ll add a final thought to this controversy: In the investment advisory business, when the contest is between human nature and idealized devotion to virtue, human nature invariably wins out. Therefore, thanks for the invitation; though I admit it’s flattering, I’ll be conducting neither seminars nor private consultations.

Al Jacobs, a professional investor for nearly a half-

century, issues weekly financial articles in which he

shares his financial knowledge and experience.

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

Straight Talk from Al Jacobs

THE BULLET TRAIN IS RIGHT ON TRACK

The most recent report by the California High-Speed Rail Authority on California’s bullet train is the cost of laying the first 119 miles of track between Madera and Wasco, in the Central Valley, has risen from $6 billion to $10.6 billion. For those of you who no longer remember, the sponsors who, in 2008, proposed construction of a high-speed train to transport passengers from Los Angeles to San Francisco in two hours and forty minutes, estimated the project would cost $40 billion. We’re now over $68 billion … and still counting.

For the very first time, criticism of the endeavor is bipartisan. On 1/30/18, a 14-member legislative committee unanimously authorized a thorough probe to determine whether the rail project currently makes sense, if it ever did and what to do if and when the money runs out. Nonetheless, the bullet train’s chief champion, Governor Jerry Brown, is still its ardent supporter.

My belief is an intense investigation is unnecessary. Since approval of the $9.95 billion in general obligation bonds by California voters on 11/4/08, the program has proceeded exactly as its backers anticipated. Over the past years untold sums of money have been paid to favored parties for planning, design, studies, environmental reports, acquisitions and the myriad of other boondoggles inherent when government funds flow. Despite a onetime report verifying “... billions of dollars short on funding, with no dedicated revenue stream to support it,” government approval never waivered. In addition, earlier testimony before the California Senate Transportation and Housing Committee was ignored which revealed the rail system would cost substantially more than the $68 billion once envisioned and that if completed, it will likely mirror most other rail systems in the U.S. in that its costs will “. . . eat future generations alive.” Despite its dismal performance, its backers never really displayed much concern.

It’s been clear from the beginning California high-speed rail could never be economically feasible, and all of its supporters, from Governor Brown on down, have known this from the onset. Its promotion will not end because of unfavorable legislative hearings, ominous predictions of disaster, or for any other setback it may experience. As long as there are funds in the till to be passed around, the efforts will continue. Only when all the money is gone will the project end.

Al Jacobs, a professional investor for nearly a half-

century, issues weekly financial articles in which he

shares his financial knowledge and experience.

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