An Asset for the Keeping...and Nurturing!

Recently, a money manager that I otherwise greatly respect, said this rather despairing, if not delusional, statement:

"Ultimately, there may be no such thing as a safe asset anymore and investors may want to take a diversified approach to something as mundane as cash." [Emphasis added] The Rising Dollar Myth by Axel Merk.

 I know what he means, but it reminded me of the fool's remark you may have heard:


"I don't believe a word that anyone says...except my words."

An "asset" either is an asset, that is, it has value, or it isn't...and doesn't.  So whence comes this danger of assets becoming non-assets?  What makes an asset "unsafe"?  Can "cash" be a danger?  To all appearances, it seems Mr. Merk has lost trust even in his "hard currency" views.

In fact, there are two issues here that are being conflated.  The first is the curious deterioration of the value of our money and assets.  And the second is the idea of trust and its relationship to investing and society at large.  For the first issue, I have provided below links to resources that will help you understand the real cause of our economic woes.  However, I first want to address the second and more insidious problem, the idea of saying, "You can trust nothing and no one." 

Let's face it, when it seems that lying and cheating are the order of the day, even we might be tempted to deny such foundational realities as the necessity of trust.   And here I use the word "necessity" in its strict, philosophical sense, that is a condition that must be.

Indeed, trust is so fundamental to society's well being that it is easy to see that if its opposite were to rule, then society would cease to exist...at least any "society" that we would recognize or that would be worthy of the name, society.

Society-Derived from the Latin word "socius" which means ally or friend.

So is there a growing distrust and, if so, what is its cause?  Further, how do we combat it?  Or are we damned to live without allies or the ability to make alliances?

To the first query it is obvious that distrust is on the ascendancy.  Society is breaking down because we no longer trust the people and institutions we heretofore relied upon.  Even more troublesome is that this distrust is justifiable to a point.  In other words, we properly trusted, but the powers-that-be gave us ample reason to trust no more. 


The causes of this are many, varied and complex.  No single, simple answer will suffice, but in the financial world I believe the beginnings of this trouble started with the creation of our dishonest money system.  Just as you would have a healthy skepticism of your neighbors after your house was burglarized, it is natural to
have reservations about your government (or banking/financial institutions) when there is an ongoing theft  being perpetrated against your production and savings through inflation.  [For a full treatment of this scandal, I recommend The Creature From Jekyll Island.]

Similarly, just as your trust in the neighborhood would be resurrected as soon as the burglar was apprehended, I believe we can combat the growing distrust of our societal institutions by ridding ourselves of the dishonest money mechanism, the Federal Reserve.   

And for those who would say that this is whacked out, crazy talk, I can only respond that our Constitution says that our Congress has the power "to coin Money [and] regulate the Value thereof..." not some private, banking cartel.

Until that happens (and we should all join the growing movement to make it happen), we must all be on alert.  However, we should not fall prey to the temptation to go beyond "alert" and move toward distrusting everything and everyone.  For that would be the end of the very thing we truly desire: a peaceful, loving, trustworthy society. 

Instead, we must recognize the dangers around us, form plans that take into account the dishonest money system and prosper with allies worthy of the name.  We may even be called to create the enterprises into which people may place their trust.  Now who can conceive of a more noble mission than that?

Seek out good groups and companies.  Work with people you know and trust.  Oppose those who have shown themselves untrustworthy.  Be honorable in your own business dealings.

In doing this we will maintain the society and the value of the assets we work hard to produce. 

A Simple Recipe for Wealth and Freedom

It is always dangerous to quote someone since one is likely to get labeled with the same calumnies that are heaped upon the principal author.  This is even more the case when one quotes G. K. Chesterton, a writer whose incisive views and powerful reasoning always cause distress (or rapturous joy) in the reader. Chesterton, it might be argued, was the last great writer to both ascertain and articulate the truth about the modern world.  He did this as plainly as he could, but the truth is not always so plain or readily explicable.  Thus, Chesterton became known as the master of the paradox for which he is most loved and reviled...paradoxically!

Today, I will quote at length from Chesterton's essay, The Servile State Again.  Considering the recent revelations about our ever-growing spy-State, I think his warnings about a "gradually solidifying slavery" to be most current and apropos.

Because he is so often MISunderstood, I simply ask that my dear readers keep an open mind and meditate on his reasoning since the evidence of today seems to vindicate his views.

While I will make a few editorial comments within the essay, I will try to keep those interruptions to a minimum.  My additions will be in RED, but let me make one prefatory remark so as not to destroy the continuity of the great first sentence of the quote below.  It would be too great a diversion to try and define exactly what Chesterton means by "Capitalism".  And, in this land that considers itself fiercely capitalistic, it may be off-putting that he is condemning it.  Suffice it to say that he is not opposed to free enterprise. In fact, Chesterton would say that the "capitalist" is.  Rather, he sees a similar danger in the aggregation of wealth as in the aggregation of state power.  If you understand that notion, then you understand Chesterton's "capitalist".

Finally, I will sum up a practical response to Chesterton's conclusion at the end of this blog entry.  Now for a little G. K. Chesterton:


But Prussia is Capitalism; that is, a gradually solidifying slavery; and that majestic unity with which she moves, dragging all the dumb Germanies after her, is due to the fact that her Servile State is complete, while ours is incomplete. There are not mutinies; there are not even mockeries; the voice of national self-criticism has been extinguished forever. [Now if one makes a "national self-criticism", he has to flee to Hong Kong.] For this people is already permanently cloven into a higher and a lower class: in its industry as much as its army. Its employers are, in the strictest and most sinister sense, captains of industry. Its proletariat is, in the truest and most pitiable sense, an army of labour. In that atmosphere masters bear upon them the signs that they are more than men; and to insult an officer is death.

If anyone ask how this extreme and unmistakable subordination of the employed to the employers is brought about, we all know the answer. It is brought about by hunger and hardness of heart, accelerated by a certain kind of legislation [see my last blog here], of which we have had a good deal lately in England, but which was almost invariably borrowed from Prussia. [We have had a good deal here, too.  Think of Social Security and our other retirement plans.] Mr. Herbert Samuel's suggestion that the poor should be able to put their money in little boxes and not be able to get it out again  is a sort of standing symbol of all the rest[IRA? 401(k)?] . I have forgotten how the poor were going to benefit eventually by what is for them indistinguishable from dropping sixpence down a drain. Perhaps they were going to get it back some day; perhaps when they could produce a hundred coupons out of the Daily Citizen; perhaps when they got their hair cut; perhaps when they consented to be inoculated, or trepanned, or circumcised, or something. Germany is full of this sort of legislation; and if you asked an innocent German, who honestly believed in it, what it was, he would answer that it was for the protection of workmen. 

And if you asked again "Their protection from what?" you would have the whole plan and problem of the Servile State plain in front of you. Whatever notion there is, there is no notion whatever of protecting the employed person from his employer. Much less is there any idea of his ever being anywhere except under an employer. Whatever the Capitalist wants he gets. He may have the sense to want washed and well-fed labourers rather than dirty and feeble ones, and the restrictions may happen to exist in the form of laws from the Kaiser [government] or by-laws from the Krupps [corporations]. But the Kaiser will not offend the Krupps, and the Krupps will not offend the Kaiser. Laws of this kind, then, do not attempt to protect workmen against the injustice of the Capitalist as the English Trade Unions did. They do not attempt to protect workmen against the injustice of the State as the mediaeval guilds did. Obviously they cannot protect workmen against the foreign invader--especially when (as in the comic case of Belgium) they are imposed by the foreign invader. What then are such laws designed to protect workmen against? Tigers, rattlesnakes, hyenas? 

Oh, my young friends; oh, my Christian brethren, they are designed to protect this poor person from something which to those of established rank is more horrid than many hyenas. They are designed, my friends, to protect a man from himself--from something that the masters of the earth fear more than famine or war, and which Prussia especially fears as everything fears that which would certainly be its end. They are meant to protect a man against himself--that is, they are meant to protect a man against his manhood. [End of quote].

 Now "them there is fightin' words!"  Is he saying that the modern man has lost his manhood?  That he is a coward?  Perhaps.  But he is most assuredly saying that the modern man has been duped into trading his freedom, his faith, his community and individuality for a paternalistic and enslaving collective that falsely promises a security and prosperity for all. 

So what do we do about these encroachments on our liberty and the sacrifice of our self-reliance?  To keep this a financial commentary rather than a general social one, I will limit my answers to some specific, achievable individual assertions of manhood.

• If you are rightfully indignant about the unjust searches and spying by our federal government, then throw away your cell phone.  Seriously!  Save yourself $40, $50 a hundred bucks a month and be free from spying.
• If you sense the injustice of a government that seizes an entire segment of our economy (Obama-(non)care) with the full complicity of the insurance bureaucrats, then drop out of health insurance and look into alternatives (here are two: 1 and 2) or go with nothing...we're all going to die at some point, right? Here you might save $500 to $1,000 per month, will stop supporting a broken and enslaving system and will assert your self-reliance big time.
• Finally, if Google, Twitter, Facebook and the host of Internet Service Providers are going to destroy your privacy, then cancel your internet service.  Yes, you will lose access to my wise words...what a loss?!?....but with the saved time and money you could get involved with your family, community and church and build a truly free economy and society.

If these ideas cause you fear (admittedly, they do me), then you are beginning to sense the great loss that Chesterton warned us about, the loss of our manhood.   Why do we feel it absolutely necessary to our existence to have a phone, an insurance policy or a computer monitor (that's an interesting word, "monitor")?  And the fact that we do feel this way points indeed to two great truths:

1. The loss of our manhood; and
2. The loss of faith in God.

 Perhaps a few sheer acts of defiance of the dominant propaganda will help melt this "gradually solidifying slavery"!

The State of Corruption

I apologize ahead of time for this somewhat "downer" blog, but today, I am fighting with my own industry and product providers about a new "interpretation of the rules" that could have deleterious effects on my clients.  If we continue to allow the "rules of today" to mean something different tomorrow, then we will soon find that we have no laws, no rules, no society and no order.  God help us if we continue on that path...

I have been inundated lately with news about rules, changes to rules, re-interpretation of rules and how-to articles for protecting oneself from all these RULES.  It is tiresome...and I am just referencing the financial world.  Lord knows what it is like in banking, medicine, education and the other fields of endeavor.

But as bad as the rules and regulations that emanate from our leviathan government are, I do not believe they are the fundamental cause of our decline.  Rather, it is the RULERS and the RULED that continue down this path that are the real culprits in the loss of our peace, prosperity and liberty.  For it is our leaders who perennially legislate, regulate and dictate all of these damnable rules.  And it is us, the falsely-obedient citizen-servant class, who either supinely accept their out-of-bounds mandates or who legalistically escape their purview...for a time...without rightfully contesting their usurpations.

Tacitus said: "The more corrupt the state, the more laws."  If he would have said, "the more corrupt the state, the more PSEUDO-laws," I would have been in 100% agreement with him.  What we suffer under today is not a proliferation of laws properly speaking, but a metastasizing of bureaucracies and errant regulations.

Proper laws establish a moral right and wrong while having a definite beginning and end.  If you are on the "wrong side of the law" you know it!  But rules, regulations and interpretations establish the will of a regulator and, while having a definite beginning, have no end in sight.  You might be on the right side of the "bureau" today, but who knows tomorrow?  It is a bit like playing a game with a guy who makes up the rules as he goes along.  We all know how frustrating that can be.

In short, the government is in a state of corruption.  But notice, Tacitus didn't say "government", he said "state", the body politic and that includes the citizenry.  We, as citizens, share in the responsibility of the corrupt state of our State.  So long as we go along with (or try to navigate through) this unjust growth of "pseudo-laws", allow the usurpation of the limits on governmental power or fail to oppose on principle each abuse of any and all citizens, then we deserve the government we get.

So what can we do?  Admittedly, solutions at any level higher than the family seem bleak.  However, we can start with our family and associate with other good families to begin to repair the cells of the body politic.  Actions we could take are:

• Restoring faith in God and reversing our faith in government or any other creature;
• "Seeking first His Kingdom" rather than anything else, especially "security";
• Getting involved in any level of government (or in other societal institutions) and standing firm against the growth in regulations, bureaus or other misguided attempts at utopia;
• Creating real communities at the local level; and
• Withdrawing from those things that lead us into the "game with the ever-changing rules."  

 As our conditions worsen, we will be called to act in more drastic ways.  Perhaps the best approach we can take at this juncture is to strengthen ourselves now, morally, physically and intellectually, so that we will have the courage, strength and knowledge to do the right thing when the time comes.

In the meantime, let's do what every society has been called upon to do when their societies became corrupt: Repent and pray!

Mortgage Myths and Real World Finance

Perhaps the most important thing to know about finance is what are the unintended consequences of a proposed course of action.  Unfortunately, these are very rarely discussed.  What is discussed, rather, are over-simplified, numerical projections often with faulty inputs to boot. Then, armed with this false information, the consumer draws erroneous conclusions...often with devastating results.  All the while the financial services industry stands by, profiting from the darkened minds of the buying public rather than correcting the faulty notions of their clients.

Now I don't want to join in the chorus of offering over-simplified or faulty projections.  And I have already written on this blog my disdain for the typical "rate of return" discussion.  Finance is more complex than that.  However, to prove my earlier assertions, I do think it will be helpful to make a comparison of two oft-debated courses of action for paying off one's home.  I believe it will be illustrative of both the poor method by which courses of action are proposed and analyzed as well as offer an insight into how real world finance and unintended consequences are the more important issues in making these type decisions.  So please pardon my use of numbers and projections.  I promise to keep them simple, accurate and easily verifiable if you choose to do so.

So first let's state the issue:  Which is better a 30-year mortgage or a 15-year mortgage?  The widely held belief (at least by the number of people I encounter holding it) is this: If you can afford it, a 15-year is better because you will have a lower interest rate, pay less in interest and get out of debt quicker.  All the answers are true, as far as they go, but not dispositive of the issue especially as it pertains to real world finance.  So let's examine the facts in greater detail.

Anyone can go to bankrate.com and find the national averages for 15 and 30 year mortgages and quickly establish that the 15-year rates are better.  As of today, 2.91% for the 15-year term and 3.66% for the 30-year term.  Score "1" for the 15-year mortgage!

Similarly, it is quite easy to run two amortization schedules and see that indeed, less interest in paid on the 15-year mortgage. I ran an imaginary $200,000 loan and found that the 15-year mortgage at 2.91% interest would result in a total cost of $247,054.24, while the 30-year loan at 3.66% interest would result in a total cost of $329,776.06.  Clearly, $47,054.24 in interest is lower than $129,776.06. Score another one for the short-term loan.

Ordinarily, this is where the analysis stops...and hence the faulty conclusion drawn.  Add to this the "fact" that you will get out of debt 15 years faster and the case is a slam dunk.  Or is it?

Not if we take a look at what actually happens to the person who takes this 15-year mortgage.  Remember the conditional statement that prefaced the argument in favor of a 15-year mortgage:  "If you can afford it...."  In fact, the short-term mortgagee is paying a note 49.8% higher than the 30-year borrower, $1,372.52 versus $916.05.  This is a $456.47 per month increase.

But that is not a problem since we assumed the person could pay the higher note.  The real question rather is: Who is more likely to have additional resources to save and invest?  If we assume that these people are of equal means (and we will assume this or the comparison will have no value), then clearly the longer term mortgagee is MORE likely to save money.  This is real world issue number one: People have limited resources and must make the resources stretch to cover multiple items.

So, let's assume that the 30-year borrower does indeed save some money, the $456.47 per month that he is not paying in mortgage expenses.  And let's assume he does this for 15 years at 5%.  How are the two borrowers positioned now?

Well, the 15-year mortgagee just got out of debt by spending $247,054.24.  Let's hope he never hit any bumps in the road and never needed cash along the way since all of his available money was going to pay off debt...and he wouldn't want to incur any others!  

But the 30-year mortgagee over that same time frame would have accumulated $122,632.43.  Yes, he would still be in debt, but throughout the first 15 years of the mortgage he would have had money available for any issue that arose as compared to his counterpart who would not have.  This is a big deal in the real world because it will keep you from getting into a cycle of debt.  That is why I advocate "becoming your own banker", but I digress.

At this point, if we compare net costs, the short term borrower is out $247,054.24, the total cost of the loan, while the long term borrower is out $42,256.57 in net costs (this total is derived from taking his total payments over 15 years, $164,889, and subtracting his accumulated side fund, $122,632.43, but we must recall that he still has outstanding debt which we will address in a moment).  

But now we are starting to see the unintended consequences and real world dilemmas and why they are so important.  In fact, if we revised the mortgage question to more accurately depict the likely outcome of the arrangements, then the "better" of the two choices begins to shift.  For example, if I proposed to you:

Which would you prefer a lesser note that allowed you to save money on the side to create an emergency fund, invest for retirement and handle all future financing needs (this is a biggie because it keeps you from incurring new debts!) OR a higher note that will keep you from saving anything, disallow an emergency fund, may propel you into new debts, but IF IT DOESN'T then you will be debt-free in half the time?  Which would you choose?

It is at this point that the 15-year mortgagee throws out their last hoorah, "But I will be able to save my entire house note after I've paid it off!"  That's true, but rarely done since they are usually further in debt or not disciplined enough to start saving the note...and wasn't the alleged point of the short-term mortgage the thrill of being "debt free" so you could spend all that money!

In any case, let's compare the claims.  So flash forward another 15 years.  The 30-year mortgagee has continued to save his $456.47 per month, but now the 15-year mortgagee got serious and started saving $1,372.52 per month over that same time period.  Both earned the same 5%.  So what are the side funds worth for each person: $382,378.35 for the long-term borrower, $368,731.89 for the short-term borrower.

It is still true that the short-term borrower experienced less costs, around $70,000 less, but the pre-paying of those costs came at a price.  And again, let's pose the mortgage question in a different way and see which one you'd opt for:

Would you rather have:

1. A 30-year note of $1,372.52 with an end value of $382,378.35? (The net effect of the 30-year mortgage); or
2. A 30-year note of $1,372.52 with an end value of $368,731.89?  (The net effect of the 15-year mortgage).

Now be honest!

But what is proposed to me repeatedly is option number "2" despite the poorer performance, the pitfalls along the way and the real world dilemmas that it presents.  But that's the power of bad financial information and the failure to address unintended consequences.

Finally, my experience tells me that the short-term borrower will never achieve even the value specified here ($368k) because they will end up in a cycle of debt that forever prevents them from "saving that house note" once the place is paid off.  On the other hand, it is quite likely that the long-term borrower will both achieve this value ($382k) and exceed it because they have appreciated the value of cash flow, began regular savings early and, if they become their own banker, managed their debt for additional savings.  

The Gift of Giving

Last year I attempted to examine the real reason for the "commercialization" of Christmas.  Today I am going to consider the act of giving and why such a thing makes us happy.

If you plumb the depths of any action or profession, you will always find a great paradox (or several of them) that seems to contradict or nearly negate the value of the thing done.  A simple example: Those who work in medicine know that despite all their efforts for health, the end for each patient is death.

This is not to say that healthcare therefore is useless or should be eliminated, but it does put the total operation in a different perspective. This type of thinking is philosophical, of course, something we have way too little of, which is why our society continues to suffer so deeply on very many fronts.

Well, the financial planning field is no different.  So much of our time is dedicated to saving and security and future goals and wealth....things that the client believes will make them happy (or, at least, feel better).  But each year Christmas comes and offers a corrective to that.  Instead of saving, the person wants to spend.  However, it is not the spending that is satisfying, but rather the satisfaction of another person's needs that brings joy to our hearts.

If anyone ever needed a contrary proof to the proposition that "wealth makes you happy" all he need do is witness one Christmas where someone will spend with reckless abandon in the hope of showing true love to another.  Further, it is not the thing purchased that brings the happiness, but rather the sheer joy of giving.

Why is this?  Perhaps the closest we can come to an answer is to see that in giving we come as close as we will ever be to Him that gave us everything.  I am sure there are other attributes that more closely resemble the divine, but giving, that out-pouring of oneself for another, has to rank up there.

Truly, giving (our ability of self-donation) is a gift itself and is one of the ways we reflect the One who created us.  "Give, and it shall be given to you." Luke 6:38.

Merry Christmas and God bless you!

Silver Bullets, Silver Linings and Silver Savings

At the risk of being misconstrued, I will be short and to the point in this blog: There are no quick fixes to the problems plaguing our society, its government or our economic system.  Just as the sky did not fall in the morning after we re-elected the one who is arguably the worst president in American history, it is equally true that our country would not have seen a revival if we had elected the one who was arguably the worst nominee for that position.  The very idea that we should place that much hope and faith in a man is, well, blasphemous.  In short, there are no silver bullets to kill the hounds haunting our formerly fair land.

But there is a silver lining to this sad state of affairs and our realization of it.  If the problems are so big that not one of us alone could fix it, then it becomes perfectly clear that we must turn to the One who can fix it and then do our simple part in following His will. Fixing America starts with each one of us, our families and our communities.

I have built my financial planning strategies around one simple concept:  Helping to build productive, self-reliant and secure families through sound financial advice.  To me it is just applied common sense, but it does have to be "applied" and it can be tricky to maintain common sense in this increasingly complex world.  But one bit of common sense that perennially rings true to the people I counsel is that we ought always to invest some of our money in "hard assets."  I call them intrinsic worth items since the value, its worth, is IN the item rather than in a piece of paper or some other evidence of value (think of an account statement here).

Of course the most famous intrinsic worth items are gold and silver.  And it is wise to have a portion of your net worth in such things.  What to buy and how much can be debated, but one should never neglect adding to this important wealth preservation tool.

Recently I came across a simple and automated way to build up a personal, hard-currency reserve.  It is called Silver Saver and it allows you to buy silver or gold on a relatively low monthly (or weekly) allotment.  Further, you can take delivery of your metals when your account reaches certain minimums.  I recommend this since I think it is better to have physical possession of your intrinsic worth items rather than relying on being able to get them in more uncertain times.

The negatives of this program are that the premiums are a bit higher when you purchase small amounts (but you can buy larger ones and cut these down) and there are storage fees while the company houses your metal.  Still, for the ease of use and investment, I think Silver Saver is hard to beat.

Finally, and this will help offset some of the higher costs associated with this program, you can share in the profitability of Silver Saver if you share the site with others and they begin purchasing too.  And, yes, I am participating in this "profit from sharing" program, but that is not why I am recommending it.  Rather, I am hoping that all my friends and clients who have yet to take me up on investing in intrinsic worth items will finally begin doing so by taking me up on this easy and valuable program.  Check out Silver Saver by clicking on the hyperlinks above or by going here: https://silversaver.com/share/RYQZA/

Saving in Silver?

www.silversaver.com is an easy way to go!

Is Wealth A Blessing, A Curse Or A Sin?

     Recently a client (and good friend) posed a question to me after hearing a sermon preached on the gospel story of the rich, young man, where Christ tells this man to "go, sell what you have and come follow me."  One of my friend's questions was this: Am I not supposed to save, but instead give everything away?  To put it more generally, what is the nature of wealth and what should be our relation to it?  Is wealth a blessing, a curse or a sin?

     Now just to pose the question presupposes a religious answer.  And knowing that I am NOT a pastor, preacher or spiritual director, gives me great pause in attempting an answer.  So perhaps my first advice to you is to seek your answer from those sources.  Still, because I have been in the financial services industry for years and because I have pondered that same issue and what it means in regards to the work that I do, I will offer my musings on the topic.

      First, contrary to the purveyors of the "prosperity gospel", wealth is not a blessing in the sense that those who are wealthy are favored of God and those who are poor are not.  While it is certainly true that all that we have is a blessing (or gift) from God, this is not the same as to say that those who have more indicates a special relationship with God.  In fact, a better argument can be made for the exact opposite! "Blessed are the poor in spirit: for theirs is the kingdom of heaven." Matthew 5:3.

     No, the entire book of Job teaches us the fallacy of that idea and shows us that the Hebrews made that same fundamental error.  Job, who was wealthy, then poverty stricken (amongst other things) then wealthy again, remained faithful to God, bearing patiently the trials and tribulations of life, knowing that this life is simply a trial and pilgrimage to the next.  But it was his friends and fellow church-goers who showed up to indict Job, when his fortunes turned South.  "You must have done something wrong, sinned and offended God in some way for all this misfortune to have come to you," they said.  The Hebrews of old believed in what today we call the "prosperity gospel," but the book of Job should be our corrective to that.  It also, on the very first line of the first chapter, offers us the key to having a "special relationship with God": "Job...was simple and upright, fearing God, and avoiding evil." Job 1:1.

     Second, wealth can not be considered a curse either.  Job was a man of wealth and praised by God.  Joseph of Arimathea, clearly a friend of Christ, is said to have been wealthy.  History is replete with wealthy individuals making incredible, charitable gifts, establishing hospitals, schools and other works of mercy.  How could they even do this if not from their abundance, from their wealth?  This is not to say that someone of less means can not be charitable, but it is to establish that wealth, in and of itself, is not a curse or an evil and that great things can develop from it.

     Which brings us to our final query: So if wealth is not bad, why did Christ admonish the rich, young man to sell all that he had?  And the answer is quite simple really: Wealth can be bad, can be a temptation and the cause of our damnation IF we are more attached to it (a creature) than to our Creator and thereby refuse the inspirations of God.  

     In the story, the young man claims to have kept the commandments all his life, but still searched for more in the quest for salvation ("All these I have kept from my youth, what is yet wanting to me?" Matthew 19:20).  Christ understood this to mean that God was calling the young man to greater sanctity, in a word, that he had a vocation.  So Christ responded:  "If thou wilt be perfect, go sell what thou hast, and give to the poor, and thou shalt have treasure in heaven: and come follow me." Matthew 19:21.  [Emphasis added].  

     Christ gave the young man one of the evangelical counsels, poverty, because those are the requirements of "perfection" (as best as we can obtain it on this earth).  When "he went away sad: for he had great possessions," Christ knew that God did not have the first place in the young man's heart and said, "Amen, I say to you, that a rich man shall hardly enter into the kingdom of heaven."

     So wealth is not a measure of God's blessing, a curse or a sin (necessarily), but it can be, and often is, the most challenging of temptations to overcome.  "You can not serve God and mammon."  Matthew 6:24.  So let's make the virtues of detachment, liberality and charity regular parts of our financial plan.

Toward A Sound Economy

When most of us hear the word "economy" we think of the national economy...and somewhat despair as we daily witness the news of its perilous state. Things are bad to be sure, however, even on the national level, the fixes are EASY to start if we but had the will to do so. For example, consider this essay on Five Things the Prez Can Do To Save Our Country...then start demanding that he (or your governor...or your mayor.....) do so.

More importantly, though, we need to reclaim that word "economy" and recognize that it is NOT some large, nebulous, mystical thing largely outside of our control, but rather something intimately connected to us and within our power to change.

What is the meaning of the word "economy" after all? Simply put it is the thrifty, frugal and savings-oriented use of money and resources. "Economical" still connotes the essence of the word "economy." Only in a secondary sense does the word "economy" refer to the management of the resources of a community. In short, if you and I practice "home economics" (remember those courses!), then the state will have a sound "economy." Truly it is INDIVIDUAL PRODUCTION and SAVINGS that matter. And that is well within your control.

So many people I counsel today are "salaried with benefits personnel" of a company who live in mortal fear of being laid off due to a downturn in the "economy." At least partly the answer to their fear is for them to become entrepreneurial and economical. By becoming a producer of wealth and a good manager of resources, they will free themselves from the mistaken notion of their dependence on the national "economy" while simultaneously improving it.

Finally, lest I be mistaken, I am not advocating that everyone go out and start a business (necessarily...though that may come), but rather that you start something...anything...that brings real economy right into your back yard. It could be a hobby farm, a specialty service or maybe a lifestyle change, but the point is that you are in control, are only limited by your imagination and will be learning (and teaching) the values of a real economy: hard work, productivity and savings!

For my clients, I advocate having separate, business income as one of four parts to a sound financial plan. Why not go and start your business, back-yard garden, sideline service or helpful hobby today?

The Lucky Prophet...and Profiteering

There's a saying in the investment world that the perma-bears and perma-bulls, that is those who are always predicting a market decline or run-up, are bound to be right every now and then. I guess that's the investment world's variation of: Even a blind pig finds an acorn every now and then OR Even a broken clock is right twice a day.

Still, when someone "predicts" the latest market crash or bull run, we are all supposed to bow down to their infinite wisdom. Generally, I don't. Not because their predictions are not predicated on sound reasoning, but rather because the proximity of their prediction to the actually occurring event is happenstance. No one can predict the future with exactitude.

A logical and sound assessment such as "our current monetary policy will lead to hyper-inflation" is vastly different from the hyperbolic and unfounded statement "the fed will make your money worthless by 2014." And should the second statement come to fruition, it was merely a lucky guess.

Most people know this intuitively, but still fall prey to the sublime and manipulative marketing practices of the financial services industry. For example, I regularly see books for sale or courses promoted with language like: "By the man who successfully predicted the 2008 crash!" Really? Even IF you could show me the person who said the the Dow would lose 30% of its value in 2008, I would still maintain that the prediction had nothing to do with the timing of the event...that it was purely coincidence. (By the way, and proving the point a bit more, the crash actually began in October of 2007 and didn't complete until March of 2009. Where is the person who called that?) Remember, no one can predict the future with exactitude.

Even worse is the climate created by such assertions. I regularly have to remind clients that I can NOT foresee the future. Of course I believe my macro-economic calls of hyper-inflation, market devaluation and other economic woes, but I simply can not say WHEN that will occur. Can I venture a guess? Sure. Should you pack your bags based on that guess....well, you know the answer to that!

Rather we should put our energies to work on productive enterprises and activities where we do have some measure of control and determinable outcomes. By this I mean to discipline ourselves to save and to do so in a protective fashion. You can read how to do that here and here.

Finally, beware the charlatans who claim to have "predicted the crash of 'whenever'" and, for a minimal fee, will tell you how to avoid doomsday! They are liars and are trying to profit from your fear. By the way, why do they want your money if we are going to doomsday anyway?!?

I predict there will be an automobile crash tomorrow in Louisiana. Am I right? Probably 100% accuracy. However, I can not, nor can anyone else, tell you when or which intersection to avoid. But while I will never charge you a fee to advise you to buckle up and drive carefully, some people are not so scrupulous.

Breaking The Bank...And That's You!

In Nelson Nash's book, Becoming Your Own Banker, he mentions 4 "human problems" that would cause the system to fail. Now the "system" was how to grow one's wealth. So who would want that to fail?

Of course the answer is no one, but oddly, many people do indeed fail to increase their savings via personal "banking" because they either lack a true understanding of the nature of finance, disbelieve the "banking" message, refuse to follow the discipline required or fall back into old habits. Now I hate it when that happens, so I am dedicating this blog to addressing that issue.

A quick quiz: What is your greatest asset?

If you said, your house, your retirement account or some other investment, I give you half credit...but 50% is still a failing score!

If you said, your education, your business or your tools of the trade, I give you a C+. You are getting closer to the mark because you recognize PRODUCTION as a prerequisite for wealth and assets.

Now if you said that you and your work is your greatest asset, then move to the head of the class! Your work IS your asset. And the product of your work, usually represented in dollars and cents, is what everyone else is trying to take from you and what you should guard and use on your terms.

Much of modern finance is predicated on the simple idea that the common man (that's you and me) is too lazy and undisciplined to protect himself. That he would rather have discipline imposed on him even if it was detrimental to him and his wealth. Now whether that is a fact of nature or rather that we have been conditioned to be so is irrelevant. What matters is that too many people fit the description and are being enslaved and impoverished needlessly.

Establishing your personal "bank" is only half the problem. You must then, as Nelson Nash says, "use it or lose it." And when should you use it? WHENEVER you expend capital reserves on an item that you would normally finance.

If you do not understand that last sentence, then let me guide you through it with my advice. If you "disbelieve" and think that you don't have to "bank" to get ahead, then all I can suggest is to hit the books again or ask for a refresher course. If you "despise the discipline" that "banking" imposes upon you, then ask yourself how it profits you to have the discipline imposed on you from an outside source...who will gladly relieve you of your money. Finally, if you have a bad habit of making excuses or coming up with rationales that negate the value of "becoming your own bank," then simply accept the fact that you are torpedoing your own future.

Perhaps these are harsh words. But harsh problems require harsh medicine. And my sole goal and purpose is to help you protect your greatest asset and increase the rewards of your labors. Dangers abound that could break the "bank". Let's not let ourselves be one of them.

Bubble-Gum Face and Other Inflation Tragedies

So many of us have done it. Eight years old, half a mouth full of bubble gum and our friend challenges us to a bubble blowing contest: Biggest bubble wins. So there we go, blowing harder and bigger until that bubble is double the size of our head. But still not satisfied, we try that ONE MORE LUNG FULL of air and...POP...we're peeling gum off our face and out of our hair for the next few days!

That's what happens when bubbles over-inflate. But bubbles are not limited to chewing gum. In fact, talk of "bubbles" has reached almost common-place usage in the economic and financial world. And still, like our 8-year old self, we think maybe we can squeeze one more breath in there...

Today, I was reading a report from the good folks at Casey Research, a fine outfit for financial news from the proper perspective. The report was entitled "What Inflation Could Look Like In 2014" and it had some very interesting information. In particular, it made an historical survey of past "inflationary" episodes in our country and found that drastically higher prices usually followed a "benign inflation" within two years. Here are their findings in chart form;

Now the reason I put the word "inflation" in quotation marks above is because I know, as the Casey writer does, that higher prices are NOT inflation, but rather the symptom of an underlying cause. And what is that cause? In two words: monetary debasement.

Monetary debasement (true inflation) always occurs when new money is introduced into the economy without a concomitant increase in productive output. In simpler language, inflation is the increase in the money supply without any increase in goods or services. It is the DEVALUING of every existing dollar. This, necessarily, results in higher prices since it takes more of these lesser valued dollars to buy the same amount of product.

So here's the bad news: We (our country and its leaders) have already inflated wildly. Again, from the Casey report, "the US monetary base stands at $2.72 trillion, a 168% increase since October 2008." Did you catch that? 168% increase in currency in three and a half years! That bubble is mammoth and still we hear talk of "stimulating the economy", "quantitative easing" and "bailouts"...maybe we can blow one more lung full of air in there...??? Rising prices are not an "if", they are a "when". Of course, we have already seen significant increases, but I'm afraid that a four-fold increase in the inflation rate (or more) is very likely in our near-term future.

The good news is we can do something to protect ourselves. Our Casey reporter again has a very nice suggestion: "If 10% of your total investable assets (excluding equity in your primary residence) aren't held in various forms of gold and silver, we think your portfolio is at risk." I would second that motion, but add to it the recommendation I recently made to my clients: Up your "intrinsic worth items" to 15% and diversify in that category. In other words, take 15% of your total net worth and put it into tangible, real, useful assets, including gold and silver, and get learning how to use them.

And, of course, never forget to pray!

Effects of a Dishonest Money System

For this month's blog, I am going to use an excerpt from the book, Money! Questions and Answers by Fr. Charles Coughlin circa 1935.  Chapter VI of this book, Effects of a Dishonest Money System, offers 15 rather chilling prophecies when looked at with the benefit of 75+ years of hindsight.  And while Fr. Coughlin was eventually smeared with the epithet "anti-Semite", I have to wonder if this slander was meted out in retaliation for his exposure of the truth.

In any case if you read his predictions with an open mind, I believe the only conclusion you can draw is that he did approach the truth with amazing accuracy.  And while I have maintained for some time that we are "slaves" to nearly unknown masters, it is good to get confirmation (see predictions 12 and 14 below) from any source.

Finally, though I originally intended to make a running commentary throughout the excerpt, I have decided to let Fr. Coughin's words be read without interruption.  Suffice it to say at the beginning that the best financial plan that any of us can hope for is one that will MITIGATE the "effects of a dishonest money system" rather than eliminate them.  To eliminate them, an honest money system is needed.  Now isn't that a radical idea?!?

Effects of a Dishonest Money System

 What will happen if the present money system is continued and if the present policies endure?
 

1. Private individuals will coin money for their own personal gain.
2. Corporations organized for production, such as automobiles, steel and textiles, will be under the domination of the private money creators.
3. The government itself will be dominated by the money plutocrats.
4. The press, dependent upon advertising received from banker-dominated corporations and commercial houses, will continue to deceive people.
5. The educational system will continue to ostracize the truths of economics from our schools.
6. An un-informed citizenry, forced to work either on the mortgage-controlled farms or in the banker-controlled industries, will receive a less-than-living annual wage.
7. Through the international manipulation of gold and money engineered by a small group of money creators living in each country, wars will continue to ensue.
8. The only prosperity which will come as a breathing spell will be that [false] prosperity enjoyed as we prepare for war and fight the war.  [Bracketed comment added].
9. The issue of non-productive bonds will continue to sap the profits of production through the process of taxation for the benefit of the creators of debt.
10. Those who now condemn loudly the danger of inflation in order to save the present money system are those who are introducing a greater flood of inflation than was ever experienced by any nation in the world.
11. The citizens, weighed down by the unbearable costs of war and depression, will be inclined to blame a democratic form of government and unwittingly relinquish the liberties already won for the bare necessities of life, which the plutocrats will allow them only at the sacrifice of liberty.
12. Dictatorship, be it that of the communist, of the fascist or of the extreme socialist, will necessarily ensue.
13. Christianity, which teaches the principles of social justice and upon which is founded the sovereignty of the Government’s right to coin and regulate the value of money, will be disavowed because Christianity will be blamed for putting war into the world instead of peace, poverty instead of prosperity and hatred instead of love. 
14. The children of future generations shall be the scape-goats whom we are forcing to bear the sins of an unintelligent money system which, anticipating their birth, already has mortgaged their life’s income.
15. Chaos in law, in government and in civilization eventually will result.

 Money! Questions and Answers, Fr. Charles Coughlin, Chapter VI, p. 143-144.

A Gift Exchange

It has become commonplace this time of year to bemoan the "commercialization" of Christmas. This will not be one of those times.

Frankly, it seems that the growth of commercialization (by this I mean the frenetic gift-buying) is nothing more than the effect of a growing loss of our ability to express true love for our families and neighbors. It is the materialist's answer to a spiritual problem. We want to say "I love you" in an easy way, but there is no easy way.

If an exchange of gifts is a means by which we say "I was thinking about you" or "I love you", then I say we need more "commercialization". But the people who decry the gift-buying frenzies of Christmas are not complaining that there is too much love being exchanged, but that there is no love in our gift exchanges. Now that is a different matter altogether.

Unfortunately, the answer usually proferred for the over-commercialization of Christmas is a syrupy sentimentality that is equally vacuous. Somehow baking cookies (weren't those bought too?) and making a home-made card is more "loving" than buying them at Wal-mart. I agree that putting more thought and effort into our gifts is a good thing, but does that necessarily translate into more love being conveyed or that a truer gift is being given?

Now, at this juncture, you might be tempted to call me Scrooge and shout bah humbug at me! But again, I am all for the INCREASE of love as evidenced by the exchanges of gifts. I just contend that neither side of the commercialism debate is really hitting the mark.

The true malady, as I see it, is that none of us are really capable of fully expressing the depth of our love, gratitude and appreciation to those we most want to know it. It is as if we are prisoners of our own thoughts and bodies.

Indeed we are. We all struggle with our own finiteness. We have limited time, limited abilities, limited wealth and other human frailties. And yet, we sense something of the Infinite whenever we experience love. Somehow when we share love, rather than it being divided, it multiplies. Wow!

Sometimes, selfishly, in our quest for that thing that never exhausts itself, we seek the feeling rather than the Cause of that feeling. That is why gift-giving, commercialization or sentimentality finally exhausts itself and rings hollow. It stops becoming about others and, consciously or not, becomes about us.

Christmas is an annual reminder and corrective to us. Christmas is when the Infinite intersected with the finite. Christmas is when Love was Incarnated, took on our flesh (and limitations) and showed us the way to true Love. Christmas is a message of hope and humility. Christmas reminds us that a Savior is born to those who could not save themselves. Christmas is the beginning of the greatest gift exchange of all time:

"Greater love than this no man hath, that he lay down his life for his friends." John 15:13.

Operation Twist...and Shout?

Killing the American economy has proven quite difficult for the liberals, but that hasn't stopped them from trying. And trying some more!

Now it appears that their moronic policies are even threatening what I have described before as "the best place to store money." This week Reuters ran an article about the dangers of Operation Twist and how it is likely to "threaten the earnings of some of the country's largest insurers for years to come."

For those of you who have followed my financial planning advice, you know this is a day that I hoped would never come. But let's also take heart that we have been given this signal to adapt and amend our plan to account for these dangerous developments.

In truth, a plan, even a financial plan, is only as good as the contingencies you build into it. For example, if you had a plan to climb a mountain and didn't have a contingency for downed trees in your path, then you probably would never reach the summit. Further, it would be foolish and inefficient to abandon the plan, return to the base and choose another path...or another mountain! Again, the strength of a plan is its adaptability and its built-in contingencies.

So where does Operation Twist and its repercussions leave us? Well first of all, it is not time to panic and abandon the best place to store money. Insurance companies have proven quite resilient in difficult economic times and I trust they will again. Second, other than the methods we employ, there is no other strategy available out there that combats the insidious and destructive monetary policies impacting us. We must continue using them until the policies are corrected or the money is worthless. Finally, it is clear that an increase in less risky assets are in order so I would suggest to everyone a heavier weighting in Intrinsic Worth Items. A 50 to 100% increase in your current weighting would not be out of line.

And for those of you still trusting solely in the market or the Federal Reserve or the government to keep your financial future bright, think again. Operation Twist might just make you SHOUT!

Is Your Bank Safe?

Note: This is an excerpt from an email that I sent to my clients in September 2008. I post it now as a blog for the simple reason that periodic checks on where you store your money is a prudent thing to do.

This post is NOT intended to scare you or entice a run on the banks. Rather it is some common sense advice based on the adage: An ounce of prevention is worth a pound of cure.

Recently, a market technician that I use suggested that people should check the health of their banks. Since I agree, I am providing you a link to his step-by-step instructions.

And while he uses some strong language, I want to reiterate: Do NOT go into hysterics! I just think that prudence dictates that we seek the best places to store our wealth and if our current location does not measure up, we need to know that and take corrective action.

Of course, things change over time so you might want to set up a reminder to do this once or twice a year. Or, you might also consider putting your wealth in the best place to store money, which I have chronicled here before.

A False "Debt-chotomy" And What To Do About It

I hear a lot of financial advisors recommending to their clients to get out of debt. In years past, though it has been a while, I heard another set of advisors heartily recommending the strategic use of leverage. Apparently the "debt" word had become so distasteful to the general public that the pundits had to come up with a different word, "leverage", to make it sell.

So which is the better way? Who is right, the no-debt crowd or the leverage lot? Well neither actually, but understanding why is no easy task and many Americans still suffer this conundrum for failing to see the actual state of affairs they live under.

In point of fact, we live under a fiscal and monetary regime that is DEBT based. Whether or not you understand the implications of that statement, you must come to understand this: Under the current economic system, you are NEVER out of debt. For practical, theoretical and actual reasons, this is so.

Practically, your next debt is your NEXT emergency or NEXT major purchase. In other words, if you are "debt-free" now, you won't be the moment you encounter an unexpected or large expense. Even IF your emergency fund handles the first misstep, you then have a DEBT to replenish your emergency fund or else you won't be able to handle the next one.

In the theoretical realm, advisors will tell you that if you spend CASH to avoid debt then you have just created a reverse debt. They call it "lost opportunity" and the idea is that the cash you spent (an appreciating asset) to buy an item and avoid debt (usually on depreciating assets) has just lost the opportunity to grow for the rest of your life. Maybe that's why the car dealers are willing to "give" you ZERO percent interest?!? Once they have your capital, they have what matters, the asset, and you have a hunk of junk in a few years!

But the real and most destructive reason that you are never out of debt is this: If you are saving money, you are losing...unless you do it right. You see, when you save money at one percent interest and then experience four percent inflation, you have just gone in reverse by three percent...and that is just using the stated percent of inflation. Many experts think that real inflation is MUCH higher.

The reason you should not try to "get out of debt" OR use "leverage, leverage, leverage" is that neither course will get you where you want or believe you are going! It is a false debt-chotomy...er...dichotomy, a false choice. If you can imagine yourself immersed in a pool, tiring of treading water and desperate to get OUT, the "get out of debt" group is essentially throwing you a towel, which itself is going to get wet, and the "leverage" lovers are advising you to swim to the bottom! Good luck with that!

Sadly, there is no REAL solution under our current monetary system. But you can take on a strategy and technique that will help you harness the power of the debt economy. This is what the "becoming your own banker" system is all about and it is one part of my 4-part process to make you financially healthy.

I hope you will look into becoming your own banker and then begin working to return our country to sound money!

Into Our Own Way...Of Destruction

For all the venom that the modern-day press and "pundits" pour forth upon religion, it sure seems to have well diagnosed the root cause of so many of the ills of society. For example, I read this week in Isaiah 53:6, "All we like sheep have gone astray, every one hath turned aside into his own way."

This turning into our "own way" of which the prophet speaks is nothing more than the simple notion of selfishness. So flash forward from the 8th century B.C. to today and what do we find? A world virtually devoid of sacrifice and selflessness, but rather consumed with envy, hatred, selfishness and destruction. It seems to keep getting worse and worse and worse. Not to be outdone, even American football players, those poor, underprivileged multi-millionaires, are claiming unfair treatment!

Truly it is the "logic" of selfishness. If "what I want" is the guiding principle of existence and if "what I want" is as many of the material goods of the world as I can commandeer, then it only stands to reason that anyone who gets in the way of my acquisitions is an enemy. The theory that this modern, secular world is progressing to an ever more mature and humane society is false. Far from advancing towards graduation, we have regressed to a kindergarten existence with "MINE" the omnipresent battle cry.

We are all infected with it. But the road to recovery can start with as simple a step as giving something up. Better yet, give something away...with love. And for the greatest such gift in history, I suggest that you read the balance of Isaiah chapter 53 for "Surely He hath borne our infirmities and carried our sorrows."

Have a Happy Easter!

The Cure for Materialism

Aristotle said that "happiness is the meaning and the purpose of life, the whole aim and end of human existence." How he deduced this is a rather fascinating study, but that will have to be left for another time.

Still, it remains true that we humans seek happiness, but far too few of us seek TRUE happiness. We are regularly sidetracked with false notions of things that will make us happy. In fact you might say that the whole story of mankind is the record of the wrong roads we've taken seeking happiness and the unhappiness that ensued.

But still we try. And still we fall prey to the siren song of false philosophies. In America, we seek happiness in things, material prosperity, money. As a financial advisor, I guess I ought to be glad about such a state of affairs since it ensures me a job! However, I am not glad, but saddened by it. I am saddened by it each time I counsel a person who sought success through materials only to find that he lost his marriage or children or health in the process.

Perhaps there is hope on the horizon. Recently, the New York Times, under the rather provocative title, But Will It Make You Happy, profiled a young couple that began "downsizing" and eschewing personal belongings so they could get off the "work-spend treadmill." Good for them!

My only caution to them would be this:

The cure for materialism is NOT anti-materialism, but spirituality.

Yes, it is a good start and perfectly fine to deny yourself and renounce material goods so they lose that special appeal to false happiness. It's called detachment and it is a virtue. But happiness is no more guaranteed to the person who has nothing than it is to the person who has everything. This is because happiness does not reside in having but in being.

Detachment encourages the proper order of importance between creature (created things) and Creator. And once our compass is set for that End, then we are well on our way toward true happiness.

What We Can Learn From Leonard...

What if you lived to ripe old age of 107? Would your retirement accounts hold up?

Consider the interesting case of Leonard McCracken who has done just that. Retired for 41 years, he has managed to live on his personal savings, a lifetime annuity and social security. So what can we learn from Leonard?

Well here are his six principles, as spelled out in the article, with my commentary following:

• Thrift. Perhaps Leonard had to be a bit too thrifty because he was not managing his investments well (he didn't have investments), but his wisdom in not "keeping up with the Jones", buying used vehicles and making sure he broke even each month served him well.
• Real Estate Investments. The real point here is that Leonard had a "job" and a second business via his real estate transactions. We would all do well to diversify our income streams too.
• Use Debt Well. Leonard "borrowed as little as possible...and paid it back as quickly as he could." That's really NOT using debt well, but using it sparingly. Sound advice for sure, but just imagine how well he would have done if he understood the concept of "being your own banker."
  
• Work Even When Jobs Are Hard To Find. Leonard was not too proud to take any job to support himself and his family. That is a good work ethic. But the more difficult question is what is one to do if there are no jobs to be had? Clearly we should all be moving toward expanding our skill base, having tools for our trade and practicing the arts of self-sufficiency.
• Save And Invest Conservatively. Leonard touts "CDs and bonds" as safe investments and the reason for his success. However, it is his frugality and thrift that has kept inflation from eating him alive. And while no one would argue against safe investing or cash savings, one better have a mechanism for dealing with the destructive influence of governmental monetary policy (inflation) or be prepared to live much more frugally in the future than Leonard has had to be in the past.
  
• Stay Healthy. Leonard is wise and knows that it is better to have health over wealth any day. Stay healthy, Mr. Leonard, stay healthy!