With This Refund, You Could Buy Salt And Maybe Even 100 Shares of BOREF July 31, 2003February 23, 2017 ‘I GOT MY DUBYA REFUND!’ Mark D Hiatt: ‘I thought you’d want to know: I got paid today – my first check under the new tax plan. Thanks to Dubya rolling back income tax rates, I now make an additional $4.78 per month, *every* month. Now I can afford that extra magazine I’ve always wanted! ($30,000, married with no children, wife works too).’ ☞ No need for sarcasm. Admittedly, it’s not much for you and your wife. But if you were rich, you’d be saving hundreds of thousands or millions of dollars, so it all evens out. SALT Anne Speck: ‘I think the price of salt (per your July 21 column) is only one of many indications that in our day and age, we live like kings. One of the books on my to read list is SALT. I read COD by the same author, and it was excellent.’ (Writes one reader: ‘A talented writer, he manages to make salt suspenseful.’) FREE CREDIT REPORTS Michael Burns: ‘In some states, Massachusetts being one, the credit agencies have to give you one free credit report per year. See the second paragraph of this Massachusetts web page. BOREALIS SPEAKS! Here is the URL: http://www.wallstreetreporter.com/profiles/BorealisExploration.html. Of course, this is not an arm’s length, let alone an adversarial, interview. They pay to be showcased. And, as always, I have to assume the company will fail, simply because the breakthroughs it envisions are staggering. Still, as long-time readers well know, I own a preposterous number of shares, and so I live in hope. ‘If this is class warfare, then my class is winning.’ – Warren Buffett
Your Feedback July 30, 2003January 22, 2017 BEWARE THURSDAY’S MENTION OF FREE CREDIT REPORT Janos Geller: ‘I just wanted to warn you that a quick search on freecreditreport.com (alias consumerinfo.com) on the Better Business Bureau website turned up [a very bad report]. I hope not too many of your readers get burned by this.’ HYDROGEN CARS Robert Brewer: ‘You probably got a ton of responses to Jake’s letter about hydrogen. First, hydrogen has been exonerated in the Hindenburg Disaster (click here or here or here). Second, hydrogen isn’t ‘unstable.’ From what I have read, the danger of explosions from hydrogen-powered vehicles is roughly comparable to that of gasoline-powered vehicles. The problems with hydrogen-powered vehicles are that you need to get the hydrogen from fossil fuels, and that there aren’t zillions of hydrogen stations where you can fuel up your car. This is one reason why hybrid vehicles are so popular: you can use the existing infrastructure.’ ☞ Well, yes – and, soon, fill their tanks with processed turkey offal! (I told one of my more heavily medicated friends about this, describing how you put garbage in at one end and out the other end come oil and distilled water and fertilizer – ‘and M&M’s!’ he interrupted happily, getting into the spirit of it. ‘Yes,’ I confirmed, making a snap decision to go with his flow, ‘and peanut M&M’s.’) Dan Pritts: ‘By focusing on fuel cells to the exclusion of making existing vehicles more efficient (think gasoline/electric hybrids like the Honda Insight or Toyota Prius), our friends in the Bush administration are prolonging our dependence on oil. Hybrids can achieve very significantly better fuel economy than gasoline-only vehicles, TODAY.’ CHEAP SLEEP Sanjeev: ‘Have you people never heard of youth hostels? $8 to $15 a night. Shared common areas with a few amenities and you meet a LOT more, and a lot more interesting people than hotel-ing. The ‘youth’ is not enforced, and this is obviously NOT for everyone.’ THE TRULY FRUGAL TRAVELER Craig: ‘I talked to a man last night who had hiked through Mongolia, who told me the locals take offense if you pitch a tent and prepare a meal. They insist you stay in their homes and eat their meals, free of charge. If you even attempt to set up camp, they’ll come over and wag their fingers and take you to their “ger” (hut) to feed you and give you a place to sleep. Hard to beat for frugal traveling!’ YOUNG REPUBLICANS (from yesterday) Hank Gillette: ‘It must be tough to be a conservative and know that you’ve been on the wrong side of nearly every issue throughout history. As Charles Kuralt said, ‘I think liberalism lives. We have promises to keep. It is liberalism which has animated all the years of my life. What on earth did conservatism ever accomplish for our country?”
TIPS and Other Tips July 29, 2003January 22, 2017 TIPS Readers of this column have done well with 30-year TIPS (Treasury Inflation Protected Securities). This past June 3, with the 30-year 3.375% TIPS at around 123, up more than 23% in a year, I said I was selling some of mine, hoping to buy them back lower. Yesterday, they closed at 111-and-change, so I’ve bought some back. (All this in my tax-free retirement account, which is the best place to own TIPS because of the way they are taxed.) This is not to say they could not go lower. They could and may! But at this price, and if they fall further, I think they again represent a good conservative long-term value. Click here (and scroll down a bit) to see current TIPS prices and yields. (Note that Treasuries are quoted in thirty-seconds of a dollar, so when you see ‘111-08,’ for example, that means ‘111 and eight thirty-seconds,’ or 111-1/4, which means $1112.50 per $1,000 bond. With TIPS it’s actually a little more complicated, because there is also an inflation factor not shown in the quote – plus, as with any bond not in default, accrued interest.) I also wrote about TIPS this past March 31, and updated four other stocks (that comment in black, today’s update in red): Real estate investment trust BF Saul, BFS, first mentioned here at $16.75 on May 3, 2000. It pays $1.56 dividend and was $23.25 or so November 25, up 38% – which is about where it was again this past Friday. I worry about the real estate market, but it still yields 6.6% and I have held much of mine. July 29 update: It closed yesterday up a further 19%-plus-dividend, at $27.65. That still leaves the yield above 5% with a chance for further price appreciation, but I’m selling the shares I have in my tax-sheltered account. Enterprise Production Partners, EPD, then $17.75, now $20.80, up 16% plus a few months of its hefty dividend. July 29 update: It closed yesterday at up a further 5%-plus-dividend, at $21.98. The current dividend rate works out to 6.6%. Ferrell Gas Partners, FGP, then $20.50, just a few cents higher today, which yields better than 9%. July 29 update: It closed yesterday at up a further 11%-plus-dividend, at $22.87. The current dividend rate works out to 8.6%. The Templeton Russia Fund TRF, then $19.60, about a dollar higher today. July 29 update: It closed yesterday up a further 30%, at $26.62. I remain hopeful for the long term, but this may be only because I can pronounce “strogoye pryedupryezhdyeniye.” As always: take these kinds of comments largely for entertainment value. If you ever lost money as a result of this column, I would feel truly rotten. YOUNG REPUBLICANS For Salon’s report from the college Republicans biennial convention, click here. (“As conservatives, we don’t hate America,” Erickson told his young audience. “The life of a liberal is hell. It is not possible to have a debate, a discussion, with someone who at their root, at their core, hates everything this country stands for but doesn’t hate it enough to leave.”)
Alchemy for the New Age July 28, 2003January 22, 2017 Friday‘s link to the story on hydrogen cars yielded two links from you. The first is interesting. But the second – it’s the kind of potentially world-changing great news we optimists live for. HYDROGEN CARS Jake: ‘I don’t understand why the world is so hot about hydrogen fuel cells – a product that’s at least a decade away from being a viable form of transportation, and that uses a highly unstable element for fuel (think Hindenburg) – while ignoring the advantages that zinc-air technology offers. Take a look at this electric vehicle website. Tell me what you think.’ ☞ I am three Ph.D.s shy of being qualified to think anything about this. But others may wish to comment. ALCHEMY FOR THE NEW AGE Matt Madigan: ‘I am alarmed at the current state of our energy policy and dependencies. Perhaps this is a ray of light from the private sector.’ ☞ Yes! I love this! (Not least: ‘If a 175-pound man fell into one end, he would come out the other end as 38 pounds of oil, 7 pounds of gas, and 7 pounds of minerals, as well as 123 pounds of sterilized water.’) If this actually works – and Howard Buffett’s assessment is certainly encouraging – it is American ingenuity at its best and, as I say, truly world-changing. Just one more reason I hope to live forever.
Hydrogen Cars — The Real Energy Story July 25, 2003March 25, 2012 From Time: ‘The best overall fuel economy of 22.1 m.p.g. (for U.S.-made vehicles) was achieved in 1987-88. Aside from an occasional upward tick, that figure has inched steadily downward, to 20.4 m.p.g. last year.’ You want the big picture about an issue crucial to your children’s future? Click here.
Cheap Sleep, Your Credit, Our Candidate July 24, 2003January 22, 2017 CHEAP SLEEP Mindy: ‘My family and I used to sleep in Motel 6’s exclusively, but have since switched to two-star hotels from Priceline because they’re even cheaper. (My frugal brother, however, is still trying to convince me that a $28 hotel stay is extravagant and that I’d be better off in a $12/night campground.)’ CHEAP CREDIT REPORTS David Fischer: ‘You can get a triple merged (all 3 bureaus merged and sorted by account) credit report with credit score from Privacy Guard. You can get a 3 month trial period for $1. Go to Privacyguard.com.’ Bob Fyfe: ‘I just heard an ad on the radio this morning for freecreditreport.com. I have not yet tried it, but apparently you can get a free online Equifax credit report. They’re trying to sell a credit monitoring service and the free report is their hook.’ GENERAL WESLEY CLARK James Papiano: ‘I would be interested to hear your take on whether the Democrat establishment would rally around General Clark as a Presidential candidate. I would much rather have him in the race than on the sidelines. (I have already sent a message expressing this to the General via DraftWesleyClark.com.) So how about it? Does he have a chance of getting the leadership’s support?’ ☞ If General Clark jumps in the race, I expect the leadership would be enthusiastic about his candidacy, just as it is about the others. Republicans tend to be more disciplined in choosing their candidate (unwelcome McCain challenges notwithstanding). Democrats favor — some would say are stuck with — a truly democratic primary process. Hats off to you for being part of it! FOOLISH BUDGET CUTS Monday‘s column questioned the wisdom of cutting taxes for millionaires while also cutting government services. I had wanted to append this, but had already cut deep into your morning, so offer it now: Nicholas Kristof this past Saturday described, among other tight-budget consequences, a 37-year-old epileptic whose $13-a-day medication was eliminated. He ran out of pills in February, had a seizure the following week, and is now in a permanent vegetative state. Apart from the human tragedy, the cost to the taxpayers has thus far been $500,000. It makes you wonder whether tax cuts for the rich are truly the best way to keep America strong and secure. ‘If this is class warfare, then my class is winning.’ – Warren Buffett
Putting Kevin’s Kin Through Kollege July 23, 2003February 23, 2017 Kevin: ‘I have a niece and a nephew (12 and 10). I’d like to help pay for their college education. The deal: They go to college by the time they’re 20 and I’ll kick in a few thousand a year. They skip college and the money is mine. (In other words, they can’t blow it on a fancy car, etc. It’s earmarked specifically for school.) Any suggestions as where to put the money I’ve been saving for them? I’m thinking I-bonds? I’d like to take advantage of any tax breaks, of course. Not being their parent, I’m not sure what’s the best course to follow. Any advice is MUCH appreciated.’ ☞ The estimable Less Antman (as in ‘Ask Less,’ at upper left) replies: Kevin, Andy asked me to tackle this question, and threatened to write about politics for 50 consecutive days if I refused. While you could put the money into a college 529 plan, retaining control and the ability to keep the funds . . . should you withdraw the money for yourself, you would be subject to ordinary income taxes and at least a 10% penalty. This would work out well if they DID go to college (zero taxation of income), but terribly if they didn’t. Since you are only talking about a few thousand a year, the most logical thing to do is simply place the money into stock index funds that remain in your name, bearing miniscule amounts of taxation on the dividends at the current low rates. If they matriculate, you would then gift the shares into custodial accounts for each of them (any one person can currently gift up to $11,000 per calendar year to any other person without having to file a gift tax return), sell the shares under their names in the custodial accounts, and they would only owe taxes at a 10%, 5%, or even 0% rate, depending on the exact year and the subsequent changes in federal tax law. You could then write checks for tuition, room and board, or just hand them the money. If you were absolutely, positively sure you were going to spend this money on qualified college costs (for them or others relatives), you’d use the 529 plan, which should result in zero taxation upon redemption for college. But since you want to have it both ways, you need to accept the compromise and the small taxation that will result at their long-term capital gains rates in the year or years of sale. I-Bonds are a bad idea: the tax-free treatment of them once redeemed only applies to college costs for yourself or a dependent, and these are not your own children, so I presume they are not dependents of yours. You cannot make a gift of I-bonds that are originally in your name to take advantage of their lower tax brackets (you can, of course, buy I-bonds as a gift, but they will be in the name of the kids from the beginning and won’t be reclaimable by you). Furthermore, the eventual taxation of I-bonds will be at ordinary income tax rates. They might be less volatile, but their returns would normally be expected to be far less than that of equities over the time period involved, and even if you don’t believe that, it would be better to buy your interest-bearing investments in tax-sheltered retirement accounts while investing in equities in your taxable accounts (including the ones that are being used to save for the nieces/nephews). You are stuck with SOME taxation if you cannot guarantee the money will be spent on college, but the use of index funds and transfers later will get pretty close. If you have other index funds, you could simply include the sums being set aside for them in the same account. If you prefer separate accounts, TIAA-CREF has an equity index fund which can be started with commitments as small as $50 per month in contributions, and they have an international equity fund which, while not purely an index fund, is indexed for half the portfolio and, therefore, has relatively small turnover and dividend distributions, virtually all of which should qualify for the special dividend rate that has resulted from the recent tax act. Thank you, estimable Less!
Foolish Calculators and Griping GIs July 22, 2003March 28, 2017 FOOLISH CALCULATORS Click here. GRIPING GIs Last week some griping GIs in Falluja told my friend ABC News correspondent Jeffrey Kofman that they were upset about having had their homecoming twice delayed. This got them in very big trouble (and it’s true, a soldier should not go on air calling for the resignation of the Secretary of Defense), and moved the White House to be sure the world knew that Jeffrey is both openly gay and . . . whisper this . . . Canadian. But when the soldiers do get back from Iraq, here (thanks to career Democrat Dave Sirota for compiling this) is what they will find the Bush Administration is proposing to do for them: MASSIVE CUTS TO MILITARY FAMILY HOUSING: Bush’s 2004 budget proposes $1.5 billion in cuts to military family housing. Last year, the government spent $10.7 billion on these priorities, while this year the 2004 Bush budget and GOP bill proposes just under $9.2 billion. This cut affects military housing, barracks, child care centers, schools, hangars and office buildings. House Democrats offered an amendment to reduce the proposed tax cuts to millionaires by $5,000 (they would get $83,000 instead of $88,000) in order to restore $1 billion of these cuts. House Republicans voted it down. [Source] MASSIVE CUTS TO SCHOOLS FOR MILITARY KIDS: President Bush’s 2004 budget proposes to cut $200 million out of Impact Aid – the program that funds schools near military bases. Total funds for the military portion of the program would drop from about $635 million in the current year to about $435 million next year-a cut of more than 30 percent. [Source] REDUCING PAY TO SOLDIERS IN HARMS WAY: According to the Army Times, ‘the administration announced that on Oct. 1 it wants to roll back recent modest increases in monthly imminent-danger pay (from $225 to $150) and family-separation allowance (from $250 to $100) for troops getting shot at in combat zones.’ IGNORING TAX RELIEF FOR SOLDIERS: According to the Washington Post, ‘Bush’s signature on the latest tax cut, which failed to extend a child tax credit to nearly 200,000 low-income military personnel.’ [Source] RAISING PRESCRIPTION DRUG PRICES FOR VETERANS: The House GOP this week passed a White House proposal to charging some veterans enrollment fees of $250 a year and double the amount they now pay for prescription drugs. [Source] OPPOSING LEGISLATION TO MAKE SURE RESERVISTS HAVE HEALTH CARE: ‘Secretary of Defense Donald Rumsfeld sent a letter to House and Senate leaders stating the Bush Administration’s opposition to the TRICARE legislation’ sponsored by Senator Tom Daschle that would prevent thousands of National Guard reservists from potentially being cut off health insurance 30 days after they are deactivated. The legislation is strongly supported by the National Guard Association, Adjutants General Association, Enlisted Association of the National Guard [Source, Source] UNDERFUNDING VETERANS MEDICAL CARE: According to a letter sent to the President by the major veterans groups, Bush’s 2003 budget ‘falls $1.5 billion short’ of adequately funding veterans care. [Independent Budget, 1/7/02]. CUTTING VETERANS OFF MEDICAL CARE: According to the VA Center in Palo Alto, CA, ‘On January 17, 2003, Secretary Principi announced VA was suspending enrollment for new Priority Group 8 veterans …VA has been unable to provide all enrolled veterans with timely access to health care services because of the tremendous growth in the number of veterans seeking VA health care…It is estimated this decision will affect approximately 164,000 veterans nationally for the remainder of this fiscal year.” [Source] All this may seem callous, but, hey – how else to afford massive tax cuts for guys making $86 million a year? “If this is class warfare, then my class is winning.” – Warren Buffett “Even when conservatives have all the marbles, they still act as if they’re under siege. Now that they are under siege, it is no time for them to act as if they’re losing their marbles.” – Maureen Dowd, on the attempt to discredit ABC’s Jeffrey Kofman
Tax Cuts for the Average Joe July 21, 2003February 23, 2017 But first . . . SALT What else is so cheap and delicious? Think about it. And when they say, ‘Back to the salt mines,’ who are all these people working in the salt mines? And if it’s so awful down there, why aren’t they unionized? And now . . . YOUR TAX REFUND If you have dependent children, you will soon be getting $400 from the IRS for each one (unless your wages are too low, in which case, you and your kids will just have to make do). In this same tax-refund vein, there now comes Form 8302. And while it’s not a form I have to fill out, you should take a minute to see whether it applies to you. Click here. 92% TAX CUT FOR THE AVERAGE JOE Kirk Dolan: ‘I wasn’t going to write, but then you mentioned ‘tax cuts for the rich’ again. Am I the only one confused by your stance? Whether I agree or not, at least I understand your reasoning for not wanting tax cuts for people making > $80K. Fine. Let’s talk about the average guy, married, 2 dependent kids, making $40K/year. He will get a 92% tax cut, per an article I sent you from Time Magazine. Question: Do you support this 92% tax cut? If yes, then why have I never seen you write something like this: ‘Although I disagree with everything else Bush has proposed, I certainly support the 92% tax cut for the average Joe?’ If no, then what exactly do you support for Joe? 100% tax cut? No tax cut? Increased taxes?’ ☞ Well, first, as I think I have written on more than one occasion, my problem is absolutely NOT with the tax cuts for the average Joe. Here, for example, my comment from May 6, 2002: My heart leapt when I saw Tim Russert put the Kennedy “tax cut” chart up on his screen on yesterday’s ‘Meet the Press.’ This is exactly what American economic policy should be: 1. Fiscal responsibility – low interest rates – economic growth. 2. Protect Social Security and provide some funds for things like prescription drug assistance to the elderly. 3. How? By adopting this tax plan: FIRST 80% of Americans (those with income up to $72,000 a year): KEEP 100% of the tax cut and make it permanent! NEXT 15% (those of us with income from $72,000 to $147,000 a year): KEEP 99% of the tax cut and make it permanent. (Average annual ‘cost’ to this group in less than originally expected tax cuts: $17.) Subtotal: for 95% of Americans, last year’s tax cuts would be 99% or 100% preserved and made permanent. Since then, we have launched this costly war and slashed taxes on dividends and capital gains. That is the sacrifice those of us rich enough to have appreciable dividends and capital gains have been called upon to make. We’re too old to fight in Iraq, most of us; but at least we get to do something. Someone with, say, $10,000 a year in dividends (you, perhaps?), is called upon to keep an extra $2,460 in the effort to pump up the economy. Someone with $100,000 a year in dividends is called upon to keep an extra $24,600. (The new 15% rate vs. the old Clinton/Gore 39.6% rate.) You may not be able to heft a rifle and pack through scorching desert heat, but at least you can participate in this operation to create jobs (Operation No-Spinach, Just Dessert?). And yes, someone with $100 a year in dividends, like the average Joe, gets the dividend tax cut, too, too! Depending on his tax bracket, he saves either $5 or $10. (If he is in the 10% or 15% bracket, his rate on dividends drops all the way to 5%.) So the average Joe is not forgotten. # [One last thing probably worth noting: If someone’s income tax bill goes down from $1,000 to $80 – a 92% cut – but his family’s share of the National Debt goes up by $5,000 (in large part because of the cost of massive tax cuts for people earning a hundred times more) and his family’s property taxes go up and their school has to double-up on English teachers and the dollar grows weaker . . . it may not be quite the sweet deal it was cracked up to be.] ‘If this is class warfare, then my class is winning.’ – Warren Buffett Tomorrow: Foolish Calculators and Griping GIs
Have a Crazy, Fake, Bi-Partisan Weekend Two Flash Animations for Your Consideration July 18, 2003February 23, 2017 FAKE NEWS John Stewart’s ‘The Daily Show’ – also known as the fake news – is terrific. It’s on Comedy Central a couple of times a day. I have no idea when; I just TiVo it. Highly recommended. FAKE RUSH Apologies to Rush Limbaugh – it seems the Congressional-pension inaccuracies circling the Internet over his name, described Monday, are not his after all. Just another Urban Legend. MORE MEDICAL SAVINGS ACCOUNTS Stephen Gilbert: ‘If you are eligible to open a Medical Insurance Account, you don’t have to go to an ‘MSA insurance company.’ My insurance, in California, is through Blue Shield. They offer a high deductible plan that meets the MSA requirements. Once you have a qualified insurance plan, you can open an MSA account (mine’s at MSA Bank), which is like an IRA but in some ways better: you get to deduct your annual contribution, but need not pay taxes on money withdrawn to pay medical bills. Money in the account grows tax free, and can even be invested in stocks or mutual funds.’ MORE CRAZY HOSPITAL CHARGES Name Withheld: ‘Thought you would enjoy this one. I’ve had 16 chemotherapy sessions. 15 of them were at the oncologist office and cost Blue Cross $1,075 each on a negotiated rate. My doctor went on vacation one week and his patients take their chemo at the local hospital outpatient clinic when he is away. The hospital also has a negotiated rate with Blue Cross — $5,250 for exactly the same procedure! I realize they possibly have higher overhead…but isn’t there something wrong with this picture? If I didn’t have any insurance and had to pay out of pocket, that is a huge differential. Even the car mechanic gives you a good-faith estimate before he starts the work. How can the medical profession always get a blank check? If your medical problem is an emergency, I can see where cost could possibly not be a consideration. But in all other cases? (If you should publish this, please don’t use my name. My friends don’t know how ill I am.)’ CAUTION, RED-STATE DWELLERS: YOU ARE ENTERING THE BLUE ZONE Toby Gottfried: ‘Last Friday‘s column concluded with the question, ‘When are Americans going to come to their senses about their government?’ We can only hope and pray it is during, and not after, the $200 million Republican advertising campaign which is planned for next year to keep them from doing just that.’ Michael Irwin: ‘Neocons were incensed when Clinton did his famous ‘depends what the meaning of is is’ dance, yet Bush is now trying to deny deceiving us in his State of the Union message by his having attributed the Niger uranium story to British intelligence. Let’s see: we should worry about deception in sexual peccadilloes but not in matters of war and peace?’ TODAY’S MOVIES Some of this guy’s animations are too tough for my taste; but this one, about Katherine Harris, and this one, about our commander-in-chief’s own military days . . . well, watch them and decide for yourself. ‘If this is class warfare, then my class is winning.’ – Warren Buffett