Author: A.T.

Eric J: “A small part of your March 17 column repeated the Washington DC party line that we have a balanced budget/budget surplus. This is true if you count the Social Security money that is buying US Gov’t bonds as income. Otherwise, I believe that the deficit is still somewhere over $200 billion/year. Who says pyramid schemes are illegal?”

I know. The extra Social Security money being salted away for us Baby Boomers — though it’s more like $100 billion this year than $200 billion, I think — is counted as current revenue. That’s like counting the $1,000 your daughter earned this summer and gave you to invest for her college tuition as if it were income you could use to buy groceries. What are you going to do when it comes time to pay Princeton?

Then again, we “expense” all our capital expenditures, like the money we spend on highways. Highways last more than a year. So in an odd comedy of errors, the two accounting travesties may just balance out.

Still, there’s no question that President Clinton’s idea of using the “surplus” to save Social Security makes sense. In effect what he’s saying is: Right, we shouldn’t spend this surplus (or cut taxes to eliminate it), because we need to salt it away. It’s not really a surplus, it’s money we must save (via paying down the National Debt) for our old age.

And by paying down the debt — buying Treasury bonds (to retire them) rather than selling new ones as we have for so long — we help to damp down interest rates even further. (Did you know that from 1880 to 1965 there was no such thing in this country as a home mortgage at over 6% interest? So today’s low rates are hardly unprecedented — or even all that low by historical standards.) There’s no guarantee of low rates, of course. But with the pricing competition from the much freer trade we’ve seen from NAFTA and GATT in the last few years, with more to come, I hope . . . and with the government going into the debt markets to pay down, rather than add to, its debt . . . you have some hopeful signs.

Tomorrow: And speaking of paying down loans . . .

Yesterday, I said that a recent ad for Strong mutual funds reminded me a little of the way Uri Geller — blindfolded — once drove me through Central Park.

Today, for those of you with a LOT of time to kill, I offer the original story of that ride, as I wrote it for New York Magazine in 1973. (Yes, kids: They had cars, then; they had blindfolds; Nixon was president; the Dow was around a thousand.) To wit:

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Not long ago I was driven part-way through the 79th Street Transverse by a blindfolded young Israeli, Uri Geller, whose alleged psychic powers are the subject of no little controversy these days. Time had called him “A questionable nightclub magician.” He was out to prove otherwise.

For a questionable nightclub magician, if that’s all he is, Geller has come a long way and fooled a lot of people. He is being studied by one of the nation’s largest think tanks; he has recently appeared on the Merv Griffin, Jack Paar, and Johnny Carson shows. [Kids: read “Oprah, Jay Leno, and Charlie Rose.”] One viewer wrote in to Merv Griffin that all the spoons in her home had bent as she watched the show.

I first heard of Uri Geller from an investment-banker friend at Morgan Stanley, who had sat amused but disbelieving in the front row at one of Geller’s demonstrations, while Geller purportedly bent keys without touching them, received telepathic signals, and attempted all manner of other amusing, impossible things. My friend was substantially more impressed, he admitted, by the half- hour film that followed. It had been made by the prestigious Stanford Research Institute, a 2,600-man think tank in Menlo Park, California, two of whose junior members, Dr. Harold Puthoff and Russell Targ, had studied and filmed Geller for five weeks and found no explanation for his seemingly “paranormal” powers. But it was only when my friend returned home, he told me, and put his own key in his own door, that he was really shaken. They key would not fit. It was bent. [So was he, as it turned out. A very nice guy, he nonetheless found himself on the front page of the Wall Street Journal for insider-trading, narrowly missing several years in prison.]

Now Uri Geller was trying to coax me into his VW for a blindfolded drive through city traffic.

“Don’t be frightened,” he kept reassuring me in his nearly perfect English (he also speaks Hebrew, Hungarian, German and Greek), “I can do it!” We compromised. I assumed there would be no pedestrian targets in the Transverse, so I agreed to drive with him there. (“Yes, your honor, I suppose in retrospect it does seem somewhat reckless”)

At the mouth of the Transverse I tied a heavy winter scarf around his eyes. There is no way to see through that scarf. Instead, Geller told me, he would see through my eyes. He has a sort of TV screen in his mind, he says, on which he receives such things.

The first and second times I blindfolded him, he would not drive. He said he wasn’t receiving anything. Was I concentrating on the road? Could I see it clearly? Why was he not getting anything? He was sorry, he said; perhaps it was the light rain that was falling. (I had been told that telepathic signals move sluggishly through humid air.) He removed the blindfold each time, temporarily discouraged, and then, so as not to let me down, resolved to try once more. The third time he decided to give it a go. He went slowly, swerving dangerously — theatrically — from side to side but never so much as to cause me to grab the wheel from him. After negotiating a few curves in the Transverse and making his point, he removed the blindfold and drove the rest of the way on his own eyes.

However the trick was accomplished, it was obviously not done be “seeing through my eyes.” I state that as a prejudice, not as a fact. I imagine that it was not until the third time I blindfolded him that I allowed him some peripheral vision — though I could swear only a man with periscope mouth could have seen anything. What I should have done to justify my skepticism was to keep my eyes closed during that drive. But that would have required a greater passion for the truth than I could muster under the circumstances.

Harold Puthoff, one of the researchers at S.R.I., says he has taken two blindfolded drives with Uri, once using a sweatshirt as a blindfold. Neither drive, of course, constituted what Dr. Puthoff would consider a controlled experiment. Still, he was impressed: Uri drove so fast along those winding roads, Puthoff says, that another car, which was following, could not keep up. Dr. Puthoff explains that some people are extremely good at seeing “through” blindfolds. Unless an opaque bag is placed over the subject’s head and tied at the neck, he says, you can’t be certain that the subject isn’t “cheating.” (That technique of blindfolding has apparently foiled several otherwise supernatural people.) To date, S.R.I. has not done this with Geller.

Geller is, at least, an ingenious showman. I would have come away from his various feats certain there was a simple, logical, rather ordinary explanation that escaped me [David Copperfield, it turns out, uses mirrors! twins! it’s an illusion! — were it not for the seriousness with which the Stanford Research Institute has taken him. Though the Time story, according to Leon Jaroff, who wrote it, was supposed to make S.R.I. look exceedingly foolish, S.R.I., far from retreating from its study of Geller, has quietly resumed work with him.

Geller was brought to the United States by Dr. Andrija Puharich, author of The Sacred Mushroom [in my youth, I did not divulge to the readers of New York, I had sampled a sacred mushroom or two of my own] and Beyond Telepathy, and 85,000 words into a book on Geller. He says that Doubleday, his publisher for the last two books, “sort of freaked” when they got a look at this one, so he is not sure who will publish it. If published, the book may or may not enhance Geller’s already tenuous credibility. “It is a fact,” explains Puharich, “that there is an outer-space intelligence that exists independent of any form we know and that operates through Uri and around Uri. That is the bare truth. My problem is to define this intelligence.” Thus, the book. The book will not try to prove another of his theories — which he says would be very hard to pin down, but which he confirms is, in his mind, at least a serious possibility: namely, that Geller recently managed to avert World War III. “I can’t substantiate that fully,” he says, “because it involves so many people in Washington, Cairo, Tel Aviv, Moscow, and elsewhere. But it seems a good case can be made.” [And however he did it, it seems to be still working.]

For the past year, Geller has lived with Puharich in Ossining, New York, when not out at Stanford. Puharich, who “wouldn’t put [his] seal on anything that wasn’t true,” confirms that Geller often causes things to materialize and that he once journeyed to Brazil via astral projection, while lying on his bed in Ossining, and brought back a 1,000-cruzeiro note. He and Geller were also on a flying saucer together, though Geller has been asked — he won’t say by whom — not to talk about it, presumably for fear of being branded a kook. Nevertheless, “It’s true”, says Geller. S.R.I. spokesman Ronald Deutsch told me that neither he nor the researchers had ever heard the flying- saucer or World War III stories.

Another of Geller’s entourage is former astronaut Edgar Mitchell, who, you may recall, attempted a number of psychic experiments in outer space, with less than spectacular results. Mitchell has often appeared with Uri and was one of the principal financial backers of the S.R.I. film. (S.R.I. has had no financial investment in the Geller research. As with virtually all S.R.I. projects, the work is funded by others.) Mitchell has a book on psychic phenomena coming out next spring from Putnam’s, whose editor-in-chief, William Targ, is the father of Russell Targ, one of the S.R.I. researchers.

Perhaps the most conventional, and most effective, of Geller’s supporters is Judith Skutch, who is president of the Foundation for ParaSensory Investigation, based in her elegant Central Park West apartment. Most of Geller’s private demonstrations have been made there. It is this foundation which has put up $60,000 to pay for S.R.I.’s further study of Geller.

Mrs. Skutch is articulate and energetic, displays no eccentricities herself, and does her best to tone down what she readily admits are Geller’s very showmanlike impulses. Though she may tell you about the time a pat of butter supposedly jumped up from a restaurant table and hit Walter Cronkite on the shoulder as he was considering whether he should agree to meet Geller, she will not ask you to believe that it happened, and she is not sure herself. (The most trusted man in America could not be reached to confirm the butter story; but he is said to have been quite impressed and to have met Geller subsequently.)

Mrs. Skutch claims no psychic powers herself, though her daughter and husband have them, which is how she became interested in the field. Her husband is a broker at Neuberger & Berman, an officer of the Energy Fund and Guardian Fund, and a psychic healer. At present he is working with about a dozen patients. Her not-the-least-bit-spooky daughter, Tammy (by a previous marriage — the power is not inherited), was president of her eighth-grade class at Columbia Grammar last year and has been displaying extraordinary talents since she was two. At the age of eight she was destroying all comers at Scrabble because, according to her mother, she could see the letters even though they were face down. At first, not realizing her opponents were any less fortunate, she could not understand why they picked letters that did not make good words.

As for flying saucers, Mrs. Skutch says: “I don’t know why everyone assumes we are the center of intelligence in the universe. Flying saucers to me make absolute sense.”

Geller now lives in Manhattan, next door to Jascha Katz and Werner Schmidt, who are, in essence, his business managers. “Of course, it’s bigger than that,” confides Schmidt. “We are involved in the whole project. You have talked to Puharich. You know what I mean. We are only systematically preparing the groundwork so far.” Presumably, “the whole project” is to get people to recognize the existence of the higher intelligence which has chosen Uri to make its presence known.

Both Schmidt and Geller are impatient with questions about money. Money isn’t the point when there is something of such vast significance, they say. Yes, Uri gets a $100-a-day honorarium for those days he is working in S.R.I., but that goes quickly. Yes, in Israel he gave some 1,000 performances, but often for as little as $10. He never made much money. Yes, here in America he has had twenty or thirty public performances, at colleges and elsewhere, but the money does not amount to much. “Why do you ask such questions?” they ask.

Geller will be performing at Town Hall on September 25, to a likely sellout crowd of 1,500, at $4, $5, and $6 a seat. A camera setup will project his hands onto a huge screen so that the people in the rear can see. One can imagine how Geller might make a good living giving performances. Right now, “The Amazing” Kreskin is the highest paid psychic-of-sorts around, and he pulls down some $300,000 a year from his television series and performances.

I met with Geller twice at the Skutch apartment. He is good-looking, earnest, 26 years old, stronger than he likes people to think, I think, but not extraordinary. “A dashing young man from Israel,” as Merv Griffin put it. Very salable. We tried a number of experiments, some of which worked, some of which didn’t. One was particularly convincing.

Before I left home, I had drawn a valentine with an arrow through it, placed the drawing in an envelope which I sealed, and placed that envelope in a Manila envelope, which I also sealed. I asked Geller to draw whatever it was I had drawn. He asked me to concentrate on what it was, to see it in my mind, and to try to project it to him. After five minutes of this, he showed me a drawing of a heart with an arrow through it. When we opened the envelopes and he saw he had been right, he was very excited.

Now, the fact is, his performance seemed exactly that — a performance. As though, somehow, he had known all along what was in the envelope but was trying to pretend he did not. And indeed, that may have been — must have been? — the case. But how?

My only rational course of action was to disbelieve my own eyes, so I did. That is, after all, the whole idea of magic tricks: to make you disbelieve your own eyes. Surely others, who would claim no psychic or supernatural powers, could show me equally astounding, inexplicable tricks.

Then they showed me the S.R.I. film.

The experiments shown on the film had been devised and controlled by S.R.I., not by Geller. Here is S.R.I.’s account of three of them:

Picture Drawing Experiment — In this experiment simple pictures were drawn on 3-by-5 cards at a time when Geller was not at S.R.I. The pictures were put into double-sealed envelopes by an outside assistant not associated with the experiment … the subject made seven almost exact reproductions of the target pictures, with no errors.

Hidden Object Experiment — Ten identical aluminum film cans were placed in a row by an outside assistant not associated with the research. The experimenters, who were not aware which can contained the object, would then enter the room with the subject. The subject would either pass his hand over the row of cans or simply look at them. He would then call out the cans he felt confident were empty, and the experimenter would remove them from the row. When only two or three cans remained, the subject would announce which one he thought contained the target object. This task was performed twelve times, without error. The probability that this could have occurred by chance is about one in a trillion.

Dice Box — A double-blind experiment was performed in which a single die was placed in a closed metal box. The box was vigorously shaken by one of the experimenters and placed on a table. The subject would then look at the box without touching it and call out which die face he believed was uppermost. He gave the correct answer each of the eight times the experiment was performed. The probability that this could have occurred by chance is approximately one in a million.

Though the researchers “have no hypothesis at this point as to whether this is a heightened sensitivity of some normal sense, or whether it is some paranormal sense [that Geller has],” and though they feel that the experiments they conducted were virtually “cheat-proof,” they are cautious in their statements throughout, concluding: “What we’ve demonstrated here are the experiments that we performed in the laboratory and should not be interpreted as proof of psychic functioning. Indeed, a film never proves anything. Rather, this film gives us the opportunity to share with the viewer observations of phenomena that in our estimation clearly deserve further study.”

There are two distinctly divided schools of thought about that film: those who are impressed by it and those who are not. Those who are not, I might add, have, by and large, not seen it. Yet that make a convincing case against Geller — and, in the process, S.R.I. — nonetheless.

Had Leon Jaroff held up his Time story a week, he could have seen the film at a Columbia University physics department colloquium. He chose not to. Newsweek‘s science editor, Peter Gwynne, did attend the colloquium and reported on it, without derision, in The New Scientist, concluding: “With a cautious approach of this nature, it could be that parapsychology will finally undergo a genuinely disinterested study of its validity.”

Jaroff says that there has never been a single adequately documented “psychic phenomenon.” Many people believe in things like this, he says, because they “need” to. From the minute he heard about Geller’s supposed powers, he knew Geller had to be a fraud, and set about gathering evidence to support that view.

For one thing, Time cited Geller’s experience in Israel: “At first [1970] he was widely acclaimed; he came under suspicion when a group of psychologists and computer experts from Hebrew University duplicated all of his feats and called him a fraud. Eventually, he left the country in disgrace.”

Benjamin Ron, vice consul for scientific affairs at the Israeli Embassy here, calls that account “very overblown.” No scientific testing on the order of what S.R.I. is doing here was ever done in Israel, Ron says. “There is no question in our minds from a scientist’s point of view that there is something in this guy.”

On the other hand, Professor Kelzon, a physicist at Tel Aviv University and, like many of the people involved in this controversy, an amateur magician, told me that after much observation he was convinced Geller was “an established fraud.” Still, Kelzon admits he never had a chance to do laboratory testing with Geller, as S.R.I. has.

Time editors watched a Geller demonstration in their offices. Unbeknown to Geller, James Randi, a professional magician, was posing as a Time reporter. After Geller left, Randi “duplicated each of his feats, explaining that any magician could perform them.”

Of course, the staunchest Geller believers argue that just because a magician could duplicate Geller’s feats by trickery, it does not necessarily follow that Geller himself uses trickery. Some Geller believers will tell you that, yes, they think he does cheat when he can — it’s in his nature as a showman — but that doesn’t invalidate his other feats, which are genuinely psychic. In other words, until a feat is explained, it is done by supernatural means; thereafter, it becomes a regrettable, but excusable, case of showmanship. As for flying saucers and higher intelligences — is it so surprising that someone who finds himself vested with psychic powers would develop some rather far-out theories? And how do we know there are not flying saucers and higher intelligences?

And what of the film? What does professional magician James Randi have to say about that?

“Scientists are the easiest people to fool,” Randi told me, “because they think logically. Geller knows how they think, and that makes it all the easier to fool them.”

Randi, a self-styled “legitimate charlatan” and a Tonight-show veteran himself, thinks that Geller is a fraud and a liar, and “a very dangerous man.” Not only, says Randi, is he living off the money of people who believe what he says — and life as a psychic phenomenon is not a bad one — he also may lead people looking for things to believe in to change their view of the world and the way they lead their lives, based on false information.

Randi told me how Dunninger, whose television series I vaguely recalled from the fifties, used to go up to people on the street and ask them whether they had any change in their pockets. “Don’t take it out,” he would say. “Just tap your pocket.” The Dunninger would write in a scrap of paper the amount of change he thought they had, put the paper in plain view and move away from it. The people would count their change to see how much they did have, and compare it with what Dunninger had written. It always matched.

Clairvoyance? Neither Dunninger nor Randi will say how the trick was done; but both men disclaim any manner of psychic ability. That trick, one ventures to suspect, could keep the researchers in Menlo Park busy for years.

As for driving blindfolded, Randi just laughed at the simple test Geller had set for himself. He was probably just tilting his head up, Randi said, and looking down the space that such blindfolds often leave between the nose and the cheekbone. I let drop what I knew about blindfolds – that the only foolproof way to stump someone with a blindfold was, as Dr. Puthoff of S.R.I. had suggested to me, to put an opaque bag over his head and tie it at the neck.

Well, get this: Randi showed me newspaper clippings that described a drive he took through Red Bank, New Jersey, to drum up publicity for the local Volvo dealer. With gobs of pizza dough over and around his eyes, a blindfold over the dough, a double-thickness opaque bag over his head and tied at the neck, and a reporter right beside him in the car, he still managed to drive all around town.

How? All Randi will say is that nothing supernatural, or even technological, was involved. “Obviously I could see,” he says dryly. “You can’t drive a car without seeing.”

A trip to Tannen’s Times Square magic shop, which is a trip and a half itself, yields some clues to methods Randi may have used. Page 18 of Burling Hull’s Encyclopedic Dictionary of Mentalism describes the “blindfold street drive” as a good publicity stunt to do for a local car dealer. An outer blindfold (or opaque bag) hides the inner blindfolds from view. That allows the magician either (a) to John-Ehrlichman his eyebrows [kids: oh … forget it], which should lift the inner blindfolds enough to allow some vision; or (b) to move the inner blindfolds out of the way with his hands, under the guise of patting them down to be sure they are on tight. Then all one needs is a trick outer blindfold. Corinda’s Thirteen Steps To Mentalism devotes a chapter to blindfolds (the most elementary technique being the “Downward Glimpse” that Geller may have used in the Transverse). Corinda suggests using an opaque bag that is actually a bag within a bag. “If the head is put into the center bag — because of the double thickness of material all round — nothing can be seen. If the head is placed between bags one and two — so that you get three thicknesses behind the head and only one in front — then you have a reasonable vision if the material is thin enough.”

Having thus boned up a bit in blindfold driving, I asked Geller whether in this particular instance he might not have resorted to trickery. He angrily assured me that his blindfold drive had been genuinely psychic.

And surely the existence of magicians does not of itself preclude the existence of psychics! What about Ted Serios, the psychic who could project pictures in his mind onto film? He was the subject of a briefly best-selling book in 1967, The World of Ted Serios by Dr. Jule Eisenbud.

The trick was done with a tiny lens that had a picture at one end. When placed in front of a camera focused at infinity, that picture would appear on the film or videotape. Randi appeared with Serios on the Today show and duplicated the feat. Like Serios, he merely palmed this small device. After the show, Randi says, Serios told his mentor, Eisenbud, that the jig was up, that his method had been found out. But Eisenbud, says Randi, by now a fervent believer in Serios’s psychic powers, grabbed Serios by the shoulders and said, on the verge of tears: “What do you mean, Ted? You can do it; I know you can!”

And Kreskin? According to a story in The Toronto Star, one of Kreskin’s most common supernatural ploys is to persuade his guests to write on a scrap of paper backstage what it is they will try to send him telepathically during the show, supposedly so that they will see it clearly in their minds and, thus, project it to him more vividly. They then destroy the scrap of paper, but return Kreskin’s magic clipboard, which he gave them to lean on.

I have not seen Kreskin’s magic clipboard; but Tannen’s has them for $7.50. Under the surface is a concealed carbon and a second scrap of paper. Will wonders never cease?

What magicians may resent most about so-called psychics is the easy life they lead. If they can’t make anything happen, they say they are not feeling right. If they can, they attribute it to the supernatural. The cardinal rule for dealing with psychics is, always be nice to them, or else they won’t feel right. Geller’s detractors charge that the S.R.I. researchers were so busy trying to make him feel comfortable, and so anxious to have something come of their experiments that, even if despite themselves, they did not subject Geller to the kind of coldly objective scrutiny they should have.

I began noticing things about Geller’s feats I had missed before:

On the Merv Griffin Show two weeks ago, Geller located the one film can out of ten that contained a hidden object. Naturally, that one can was much heavier than the others, and so, if the tray on which the cans sat were jarred, that one would move differently. I noticed Geller move the tray with his hand and bump the table with his knee several times. Sure enough, he found the right can. In contrast, on the Carson show, he failed at this trick. Carson, once a magician himself, would not let Geller touch the table. He says it was his impression that Geller was stamping his feet very hard in time to the music during a station break, perhaps in hopes of jarring the cans. If so, it didn’t work. Nor did Geller succeed at this on the A.M. New York show. There, on the advice of a magician, large, heavy film canisters had been used in place of the light aluminum cans. These would not move even when jarred. Geller, attempting to eliminate the empties one by one, chose the full one on the second try.

I brought Geller a metal file box with a die inside. If he has one of those new-fangled magic dice that have electronic “read switches” inside, he wasn’t able to substitute it for mine. He failed eight times in a row to predict the roll of the die. He told me he never was any good early in the day. Next he drew a simple shape and tried to “pass” it to me telepathically. By watching his arm motions as he drew, I could tell more or less what he had drawn, and drew likewise. “That’s fantastic,” he said. (Indeed, he may have been truly astounded, though if he was, he was cool enough not to show it.) The second time, I covered my eyes with my hand as he drew, but peeked through my fingers. Again I scored. “Fantastic.” He was hot. Then I drew a few for him, and he scored. “Fantastic.” However, the drawing I had brought with me from home and had sealed in an opaque envelope proved impossible for him to receive. This time I had not let that envelope out of my sight even for a moment, as I realized I had the time we tried it with the valentine.

Then Geller tried to bend a metal spike I had brought; but it simply would not bend. He gave up and I left the room. But Geller called me back after a moment. He wanted to try again. He was holding one end of the spike in his hand. He concentrated, rubbed the spike, asked it to bend — and when he removed his hands it was bent! Either Geller had bent it by thinking very hard, or else he had bent it under his foot when I went out of the room, covered the bend with his hand, and called me back in to try again.

“Our guys are aware that Geller sometimes resorts to magic,” says S.R.I. spokesman Deutsch, “but that doesn’t mean he is not genuine.” As an amateur magician of some proficiency, Russell Targ should have been able to design cheat-proof experiments for Geller, and perhaps did. Even so, Deutsch is quick to say that S.R.I. has made no claims as to any powers Geller may have. “The work to date has been very preliminary. We’ve never ruled out the possibility of his being a fraud.”

Perhaps Geller has performed genuine psychic feats in the laboratory — or something, anyway, beyond mere trickery, that is worth studying. Based on the film, that would certainly seem to be so. More likely, but nearly as incredible, the researchers have been fooled, or they were fibbing — a possibility which only in these days of Clifford Irving, Equity Funding, and the language of Nixspeak would I even dare to suggest.

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This article first appeared in New York magazine and is reproduced with permission.

© 1973 Andrew Tobias

The full-page ad in Money pops nicely: Strong Results puns the headline. (It’s an ad for Strong mutual funds.) What stands out is the block of boldfaced Morningstar stars. Center-stage there are 14 rows with room for a maximum of 5 bold stars on each row. Well, nine of 9 of the 14 rows have stars all the way across, and 5 fall just one star short.

This is some group of funds!

The other thing that pops are the three large bold #1‘s used to describe Strong’s two money market funds.

All 4’s and 5’s in the star department, #1’s in the money rankings department . . . Honey, maybe it’s time we called for a prospectus!

And maybe it is. I’m not suggesting Strong funds — or even the advertising for them — are unusually bad.

What concerns me is that — in this market particularly, when tens of millions of relatively new and unsophisticated investors have gotten into the game — not everyone will smile knowingly and dismiss most of this ad for the technically accurate but misleading hype that it is.

What makes it accurate is the little block of italicized fine print at the bottom. The type is small, none of it boldface, with more than 25 words to the line. (For readability, your newspaper has about 8 words to the line.) The two key pieces of information, naturally, come at the end.

The first: “This is a partial listing [of the Strong funds]. Other funds may have lower ratings.”

Well, and in fact (here’s a surprise) — they do have lower ratings! Morningstar sent me a current table with 24 Strong equity and bond funds. Of these, an impressive nine have 5 stars and five have 4 stars . . . but six have 3 stars (meaning they are about average), three have 2 stars (below average), and 1 has 1 star (the worst possible ranking).

This is still pretty good . . . though it should be noted that doing better than average (as 14 of the 24 funds did) does not necessarily mean doing better than the averages. The average mutual fund, against which the others are assessed in coming up with what is in effect the Morningstar bell curve, is handicapped by commissions, fees and expenses. The averages pay no such charges. Still, Strong’s results were strong.

Which leads me to the second key piece of footnoted information: “From time to time, the Fund’s advisor has waived its management fee and/or absorbed Fund expenses, which has resulted in higher returns and without these waivers the rankings may have been lower.” Of the 14 funds listed in the ad (plus the two #1-ranked money-market funds), 12 had an asterisk pointing to that footnote.

Could this have made a difference in, say, the #1 ranking of the Strong Investors Money Fund — one of the two funds in the box at the top of the ad subheaded: America’s #1 Money Funds? That fund was #1 in yield among 238 General Purpose money market funds against which it was ranked — “for the 7 days ended January 5, 1999” (my italics, not theirs). For just those 7 days? One wonders how it ranked for the previous and following 7 days? And whether the little asterisk may have meant that some fees were waived during that period to make the results look good.

I don’t want to make too much of this. You could do a lot worse than the Strong funds. And I do not envy the copy writer faced with the task of making one or another money market fund seem irresistible. They’re all so much alike (and the ones that do have the highest yield are usually the ones that have just a touch — a smidgen — of extra risk). It’s his job to put the best foot forward. But it’s our job to recognize that most of these critters have more than one foot.

It reminds me of the time Uri Geller drove me through the 79th Street Transverse — across Manhattan’s Central Park — blindfolded. Yes . . . he was blindfolded. Truly! The catch, in this case (because, especially when it comes to blindfolded driving, there’s almost always a catch), is that he could see. Nice guy, that Uri, and talented; but not all he cracked himself up to be.

“Hello, my name is Jason from Stockton, California. I wanted to take the opportunity to send you this e-mail after reading part of your book. I have a huge problem. I am a deaf individual with extremely a lot of bills. I really am trying to make extra income to pay all those off … and also so I can start spending for leisure like vacation (which I haven’t had in 8 years!), buying my dream house, a new car… Right now it’s always bill collectors calling me almost everyday. It’s embarrassing and also very frustrating. I always feel disappointed in myself about the current situation I am in. Sometimes I dream of being rich. I wanted to ask if you would help me out in accomplishing this goal? I am currently 27 years old, single, I work as a mechanic for a truck dealership in the trucking industry … I am very good at what I do, and enjoy it. I spend a lot of my time wrestling (hoping to make the Olympic team this time) and doing restorations on classics (just recently finished a 32 Ford Victoria).

“So what do I need to do? Would you help me a little? The reason why I am asking is I hardly have any extra money that I can use for investing. So basically I am stuck here. I really would appreciate it.”

Sadly, Jason, I have no idea what I could say beyond the 200 pages of my book.

But if the only happy people on this planet are the ones who are rich, we are in deep trouble. (And I can promise you not all rich people are happy.) I would point out that you have a good job that you can take pride in doing well and that you say you enjoy. Right there, you’re ahead of a (sadly) HUGE percentage of the population. Plus you have your sport — so I’d guess you’re in peak health/physical condition. Another thing to be proud of; another blessing to count.

I don’t know enough about your situation, but I would think a good mechanic could more than support himself with no dependents and save enough to quickly get out of debt and then begin saving/investing. And of course it may be that someone else might pay you more, or that you could go into business for yourself — perhaps on the side, at first, working on collectors’ cars and old classics. There must be a market for that kind of expertise. You live vaguely near Hollywood, so how about writing to the Prop Departments of the movie studios and letting them know you can do wonders on the old cars they occasionally use. (Or, failing that, find out the names of the specialty companies from which they rent them.)

Indeed, with the Internet, how about a page of your own that essentially says, “Classic Car Restoration and Repair” — and troll the appropriate sites yourself looking for rich collector customers?

I’m just thinking off the top of my head, based on no actual knowledge of your field (but when has that ever stopped me?). And any kind of entrepreneurship would interfere with your wrestling, and would be complicated by your being deaf. But after you win your gold medal this might make sense (and the medal couldn’t hurt business).

I guess my advice boils down to this: Keep wanting and striving … but c’mon! You’re doing great. And if you have to starve a little to save money and get out of debt, well, that just helps you make weight.

Following up on yesterday’s discussion of this eternal question, Jeff Serenity (well, I’m guessing from his e-address — and hoping! — that’s his last name) notes that the ratio of the S&P 500 to the price of new homes over the past 36 years has never been more favorable for the ‘home’ side of the equation. “In other words,” he says, “it’s never taken so few ‘units’ of the S&P 500 to purchase a new home.”

So maybe this is a better time to buy real estate than stocks (or to buy Japanese stocks than US stocks, but that’s a whole different question/issue). And, Jeff suggests, it could be argued that one way to invest more in real estate, if you can’t actually afford another home, is to pay down a mortgage.

Well, yes and no. You’ve already bought the home; paying down the mortgage will not increase your real estate gains. When you pay it down, it’s not so much like buying more real estate as investing in a bond whose interest rate is precisely identical to the interest rate on your mortgage.

Still, I found the column by Dallas Morning News columnist Scott Burns from which Jeff drew this information to be just as interesting as Jeff did — http://www.scottburns.com/990119tu.htm . Thanks, Jeff! (Seinfeld fans: “Serenity now!”)

Periodically, we take up the question of using spare cash to pay down debt versus putting that same money in the market. See, for example, the March 2, 1999, column in the archive.

I thought this story from Doug Schneller might resonate with some of you as it did with me. Doug writes:

“I graduated from law school (don’t hold it against me) in 1992 with over $78,000 in debt. Being risk-averse, I decided that it was more important to me to be debt-free (especially with no tax deduction on educational loans) than almost anything else. Thus, I began an odyssey (almost finished) of substantially prepaying these loans. In order to get some periodic satisfaction, I tended to try to pay off the smaller loans first (especially when the interest rate was greater), and then move on to the next smallest. I also started to invest in money market and mutual funds (as well as IRA’s and 401(k)’s), but debt reduction has been my biggest concern.

“Had I been investing more in the market and paying down less, I no doubt would have enjoyed greater paper increases in my assets (on a dollar basis, and especially given the tremendous gains since 1993), but I would have had the tremendous psychological burden and uncertainty of debt. I know, in hindsight, that economically I might have been ‘better off’ if I had invested more, especially because I feel I know much more about personal finance. But I don’t think I would change a thing if I had to do it all over again (especially if I didn’t know how good the stock market would be) — psychologically I would rather ‘owe less’ than ‘have more.’ Happily, I have become a disciplined, and regular, saver, so maybe, someday, I will nonetheless ‘have more.'”

Tomorrow: Another reason mortgage prepayments may make sense, even at these low interest rates.

From Neil W: “My wife and I are 50 and didn’t really begin to achieve financial success until our mid-forties. Thus we missed out on the Reagan Era low tax rates and we are scrambling to make up for lots of lost time in saving for retirement. We have been fortunate to benefit from stock options, but that was mainly one grant ending this year and taxes are hitting us hard. By the end of this year, the Clinton tax increase will have cost us about $100,000 in additional taxes. This will force us to retire about three years later (at 60 as opposed to 57). Which leads me to my question: Don’t you find it paradoxical that so much of your ‘job’ work is dedicated to helping people accumulate wealth while your political work aims at electing people who want to take as much wealth away from us as they can get away with? (Full Disclosure: I detest the Right for attempting to control our bodies, but I also detest the Left for attempting to control just about everything else. I am a Libertarian.)”

Well, first I guess I should point out that during the Fifties, when you and I were growing up, the top federal tax rate was 90%. In the Sixties and Seventies, it was 70%. During the Reagan years, the top rate dropped as low as 28% (today, all in, the top rate works out to about 43%), at the same time as the federal tax burden on the average working stiff went up because Social Security taxes went up so much. So the overall federal tax take plummeted if you were making a million bucks a year, but rose significantly if you were making $18,000. The Clinton tax plan reversed some of that. The “earned income credit” for the working poor was increased, and paid for — you’re right — by folks near or at the top of the income pyramid.

It cost me even more than it cost you, but I thought it was fair. I mean, I type my little fingers to the bone. But even though I pay a lot in taxes, I’m not sure the guy who buses my table at the restaurant or the doorman who gets me a cab in the rain or the nurse who changes my sheets (I’m fine, this is just an example) or the teacher who earns $27,000 — all of whom pay far less tax than I do — is really the one with the cushy deal.

But apart from issues of fairness . . . have you calculated how much you’ve saved from lower mortgage rates, etc., brought on by the balanced budget produced in part by the higher taxes? And the rise in stock and bond prices that resulted? Tax rates were lower during the Reagan and Bush years, but the Dow was around 2,500 much of that time.

I appreciate your frustration, but there are other sides to this. Most middle class or wealthy people can hardly say they are poorer as a result of the last several years.

And philosophically, I do believe that the future, in this complex world of ours, “won’t just take care of itself” if everyone were a libertarian and fended for himself. I think there are areas where we serve our own long-term self interest by acting in concert, as a community. Public education, clean drinking water, health insurance for the poor and elderly, Social Security, safety standards, some government sponsored basic research and so forth.

Everyone agrees there’s a lot of bloat in government (if corporate raiders are to be believed, there’s some in private industry, too). Fighting it is a never-ending battle. But one of the achievements the current administration can be proudest of, I think, is all the “reinventing government” that has gone on. When you get into the nuts of bolts of it, you find that much of it is real.

From Bill Frietsch: “Please discuss pros and cons of Master Limited Partnerships such as Lakehead Pipelines (LHP). This seems like an ideal growth and income stock since it’s return is almost 8% and most of that is not taxable. I realize that taxwise, some of the return is considered a return-of-principal which will up the capital gains when sold, but I intend to hang on to it. It propably won’t be sold until my estate is settled and then my heirs won’t have to pay any capital gains. I also realize that the tax reporting is cumbersome, but it seems like the advantages outweigh this disadvantage. Would appreciate your take on this.”

I don’t know anything about Lakeland Pipelines specifically, but I do think master limited partnerships can be interesting. I’ve done well with them myself.

But let me explain some of the shorthand in Bill’s question.

First off, at least under current law, capital gains are not taxed to your heirs when you die. So while it’s a sort of extreme tax-avoidance measure (“I’d rather die than pay 20% of my Yahoo profits to the government!”), it is something to be aware of if you’re hoping to leave money to your kids. (If you’re planning to leave it to charity, it doesn’t matter.)

But that’s true of anything, not just stocks like LHP. Indeed, stocks like LHP are not, as Bill infers, strictly speaking stocks at all, although quite a handful of them trade on the New York Stock Exchange — they are master limited partnerships, and very much like Real Estate Investment Truss in most respects. Basically, they own oil pipelines or timber (or real estate, in the case of REITs) and they pass through to you, the limited partner, almost all their revenue each year. Some of that revenue is considered “a return of capital,” not profit, and so is not subject to current income tax. Instead, if you paid $2,500 for 100 shares at $25, and get $200 back, half of which the general partner informs you is a “return of capital,” you pay tax on only $100 of that $200 — but are supposed to “lower your tax basis” on the purchase from $2,500 to $2,400 . . . and then more in subsequent years as you get more returns of capital . . . so that when you eventually do sell your shares, if you do, you figure the gain or loss not on the original $2,500 you paid, but on your adjusted “basis” at the time of sale. I.e., the gain you pay tax on gets bigger as your basis shrinks.

In theory, this is swell. In the first place, you defer the tax on that $100 (or eliminate it altogether, unless they change the tax law, if you die before you sell it). In the second, you convert what would have been taxed as ordinary income into an ordinarily-more-lightly-taxed capital gain.

In theory. In fact, if you actually did all the accounting for that $100 properly — well, it’s really not worth it. (If you’re buying $2.5 million of this thing, not $2,500, then maybe it’s worth it.) Indeed, I put most of my shares of this kind in my tax-deferred retirement account, to avoid the hassle. And when I’ve owned them outright, I’ve sometimes just ignored the tax advantage and treated the entire dividend as a dividend, rather than deferring the portion that is, technically, a “return of capital.” I don’t know if this is legal, but as it results in a higher, not lower, tax bill, I can’t imagine the IRS will come after me demanding I accept a refund.

(There’s one other nasty tax twist — see below.)

Maybe it’s time I explained what a “return of capital is?”

Nothing’s quite this simple in reality, but say you started a company that did nothing but buy 1000 acres of land at $1,000 an acre that you operated as a camp ground. You had shareholders. And every year, you’d pay out dividends from the profits you made letting folks come pitch their tents and buy bottled water from your little store. (And bug spray! This is your ace in the hole.) But then one year you actually sold 50 acres to some nut who was willing to pay $3,000 an acre to pitch his tent permanently. That’s $150,000, and you distribute it along with the bug spray profits to your partners. But is it all profit? No, $50,000 of it is merely a return of your original capital — the $1,000 an acre you paid for the land.

It gets a lot more complicated with depreciation and depletion and one thing and another I don’t pretend to understand, but as a shareholder in a master limited partnership (MLP) or real estate investment trust (REIT), you will be sent all the information you need to give your accountant to do your taxes.

(The final tax twist, or should I say nightmare, is that even within a tax-deferred retirement plan, certain kinds of income above $1,000, EVEN THOUGH RECEIVED WITHIN THE UMBRELLA OF YOUR IRA OR WHATEVER, are taxable. This is nuts and should be changed, but — and I did not even know about this until after writing this column originally — there’s no arguing with the tax code. The name of this problem, or at least the way you are supposed to knuckle under to it, is Form 990-T — Exempt Organization Business Income Tax Return. If one of your MLP’s paid you more than $1,000 in “income not substantially related to its business purpose,” then you owe tax on the excess, and the trustee of your retirement plan may notify you, as mine did me.)

From Robert Morse: “The auto insurance companies in Masssachusetts in their infinite wisdom have decided that, because they could not get a rate increase of the size they wanted, they should lower the safe driver credit from 15% to 5%. And now they plan on doing away with it completly. I know you had an initiative in Ca. to pay for auto insurance at the gas pump. Since gas is relatively low priced now, this same idea may fly in Massachusetts. We have always had high rates here. Please help, and let me know if there is something I can do here to get the ball rolling.”

Pay-at-the-Pump might be a problem in Massachusetts. Too many people live within a short distance of other states and could just run across the border for gas.

But it would be very easy to solve the problem even without Pay-at-the-Pump, if only the lawyers would allow it. (They won’t.) Namely: just adopt the Michigan law. It’s been working fine for 25 years. People in Michigan have vastly better protection against serious injury than you do, yet pay lower premiums. This is possible because in Michigan the incentives to invent or exaggerate personal injury are removed (which makes a huge difference) and because lawsuits are greatly reduced.

Massachusetts actually has the worst of both worlds. All you need to be able to sue (the “threshold”) is $2,000 in medical expenses and lost wages — which gives people an incentive to build up that much in expenses. An MRI, a series of chiropractic visits . . . it’s not hard to do.

It used to be even lower. From 1971 to 1988, the “threshold” was $500. Then it was raised to $2,000 to try to cut down on all the lawsuits and fake claims. And guess what happened? The following year, the average number of doctor’s and chiropractic visits after an auto accident jumped from 13 to 30.

And still the good people of Masshachusetts, half of whom have PhD’s, haven’t been able to figure out that the personal injury lawyers, who will do anything to avoid going to a pro-consumer Michigan-style system, have bamboozled them on this issue. Understandably, the lawyers want the system just the way it is. It works great — for them. And by and large, they write the laws.

The first set of people I aggravated Tuesday were those of you who get angry when I don’t stick to financial topics.

To them I say — sorry. Read no further. Come back Monday.

The second set were those who thought I was too easy on at least a couple of Republicans. Sure, Senator McCain is a very fine man — and major kudos for his stands on tobacco and campaign finance reform. But, they asked, how about his voting to end a woman’s right to choose? against hiring new teachers and repairing public schools? against the Family Medical Leave Act? against equal rights for gays and lesbians? against the program that’s put nearly 100,000 more cops on the streets?

To them I say — oops! I can see why a lot of people would have problems with that record.

The third set couldn’t understand how I could be such an idiot. In particular on this issue of “diversity.”

Mitchell G: “Why is it that you are logical with money matters, but illogical with politics? Even you must see that your essay was immature and stunted. You wrote — “…you’ve got thirteen white guys.” Why must self-professed minorities see everything through the prism of race? It sadly scatters their position. Racial quotas are wrong. Follow this logic…all men are created equal. No man should have an advantage over the other because of their race, gender, creed, etc… It is just that simple, Andy. Real simple. If you don’t believe that, then by definition, you are a racist, a gender-hater, religion-hater, etc… Which one of those are you? Maybe you are more than one.”

Well, of course, as I said in that column, I don’t believe in quotas. And I sure hope I am not a hater. (I hate waste, but that’s different.) I actually thought I was being not only logical but — well, mathematical. If straight white non-Hispanic gentile males make up 35% of the population, then the chances of all 13 house managers matching that profile, if it were random, works out to one in a million. So was it just coincidence it worked out this way? Is that the logical explanation? Or might it be fair to conclude that the Republican Party does not celebrate diversity with quite the same enthusiasm as the Democratic Party?

Jordan B carries this a step further and makes a valid point: “Understanding that most people are not qualified for the job of House Manager, your calculation does not commensurately reduce the number of straight, non-white people ELIGIBLE for the position. Knowing that you are an intelligent person, I suspect that you have selectively ignored this fact in order to shamelessly further your cause. That’s disappointing.”

In other words, given the pool of congresspersons the Republican leadership had to choose from — where so many of them are straight white non-Hispanic gentile males — the odds of all 13 fitting this profile are nothing like one in a million. Maybe more like one in ten or something. I haven’t done the math.

Jordan is certainly right. (Taken to an exreme, if all congressmen fit this profile, then the odds of all 13 House managers’ matching it would be 100%!) I didn’t selectively ignore this, I just didn’t think of it in this way. My math was reflecting the entire U.S. population, essentially all of whom are eligible, once they turn 25, to serve in the House.

But, OK, then — why do most Republican congresspersons come from that special 35%? Is it really all just superior talent and effort? And in choosing the folks to showcase to the world in this televised trial, why would the Republican leadership choose to go the 100% route?

Democrats make more of an effort to find talented people of all kinds — both because all kinds of people are talented, but also as a way to provide role models and hope and encouragement to people who MAY be black or in wheel chairs or women or Hispanic or Jewish or gay or whatever.

Appropos of which Mike R writes: “Can I ask you a question that I dare not ask in public in this crazy Politically Correct world? Why is “diversity our strength?” Is it Yugoslavia’s strength? How about the Middle East or Central Africa? It seems to me this country has expended tremendous effort, time, and money on affirmative action, sexual harassment, etc. Is diversity good in our military? I guarantee you I would take an all-male force vs. an all-female force. If you watch the NCAA basketball tournament games this weekend, then please tell me where the diversity is on these college teams. Where are the whites and Latinos? Maybe diversity is lacking because the coaches are more concerned with performance than appearances.”

It’s a good honest question. But it has answers. The first thing I guess I’d say is that it is precisely because we don’t want to become a Yugoslavia, riddled with hatred and division and ultimately blowing apart, that we really need to celebrate our differences with humor and love rather than recoil from them with fear and distrust. (And I think we largely do. It’s one of our strengths.) But that isn’t exactly what Mike asked. He probably agrees with that. His question: why do you call diversity a “strength” rather than calling it, say, an “unfortunate handicap” we just need to learn to live with?

But let’s look at it in reverse. Would we be a stronger country if, like Japan, we were almost entirely homogeneous? If we could get rid of the Jews and the Asians, get rid of the blacks and the Latinos, get rid of the gays and the Catholics, get rid of the people in wheel chairs? Would our life be as rich without Michael Jordan? Without Christopher Reeve? Without Gloria Estefan? Would we have been a better nation had we never had a Martin Luther King, Jr.? Would our economy have been quite as successful had Roberto Goizueta not run the Coca Cola Company so brilliantly from 1981 to 1997? Which company would you rather invest in: one that draws from an almost unlimited talent pool, or one that handicaps itself by excluding the talents of certain groups?

Almost everyone agrees there shouldn’t be quotas. If a preponderance of basketball stars are African-American, so long as it’s based on merit, so be it. And we can laugh about it. Anybody see White Men Can’t Jump?

But it would be crazy for the NCAA not to allow white players, and equally crazy, if you ask me, for the military not to welcome women. “Is diversity good in our military?” asks Mike. “I guarantee you I would take an all-male force vs. an all-female force.” Well, so might I — if we had to choose one or the other. But the great thing is, we don’t. We have a wide and broad and wonderfully diverse talent pool to choose from, and this is a great strength. It is also a great pool of material for comedy and laughter . . . and for a shared sense of good fortune, that we live in a country where everyone doesn’t have to be the same to be welcome, to be appreciated, and to fit in.