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Andrew Tobias

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Andrew Tobias
Andrew Tobias

Money and Other Subjects

501c-6’s (Did You Say SIX-es???)

May 12, 2004January 21, 2017

TIPS CAVEAT

James Karn: ‘I have a problem with your TIPS recommendation. Correct me if I am wrong, but TIPS are tied to the CPI. There is significant debate in the financial community regarding the way the CPI is calculated and whether it accurately measures inflation. In addition, you have the inherent conflict of interest in that the borrower – the US government – is calculating it. Not that the US government would ever mislead the American public (ahem), but anytime two parties are involved in a financial agreement, it would seem prudent that one of them not have the ability to make up the rules as they go along. There is no way I would ever lend money to the US government with a payout based on inflation and let them calculate inflation.’

☞ This was more or less the case James Grant made in that Forbes piece I linked to March 23. (Unfortunately – talk about inflation! – Forbes will now charge you $2.95 to read it.) But over the long run, can Uncle Sam grossly under-report inflation? Against the howls of more and more TIPS owners? And even if so, might TIPS not still outperform traditional bonds?

I’m not saying it’s an unimportant issue; just that it’s probably something to take into account rather than an out-and-out deal-breaker.

THE 501C-6

You probably know that 501c-3’s are non-profit groups to which contributions are tax-deductible. And you may know that non-profits engaged in significant lobbying or political advocacy – and that are, therefore, not deductible – fall under section 501c-4 of the IRS code. In Roman times, there were 501c-1’s and -2’s, but they pertained to gladiator exhibitions and private aqueduct associations, and so no longer apply. In modern America, there are just these two: c-3’s and c-4’s. Like vertebrae. But just as we seem to have discovered a weird new planet – Sedna – so now, out of nowhere, and leapfrogging whatever c-5’s would have been, come 501c-6 organizations.

If the foregoing is not completely accurate (if they had viaducts and aqueducts, what about aeroducts?), click here for the real story. While everyone has been railing against “527s,” the press has given the Republicans a pass on their much more secretive 501c-6’s – at least until now.

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