Author: A.T.

A lot of you have written to ask what ever happened in the “Mr. B” lawsuit. The answer (sorry this won’t mean anything to those I’ve not yet browbeaten into reading my book — hang on, it gets better) is that he asked to settle for $1,200, we said no, and it drags on. But it looks as if Mr. B may have lost interest, now that he sees we’re resolute. It cost him nothing to try, thanks to Legal Aid; it cost us a few thousand dollars in time and legal fees to defend. You know the old gypsy curse: “May you be involved in a lawsuit in which you are in the right.” (Or something like that. Maybe it was Polonius who actually said it. In Danish.)

The point is: I’ve had it easy compared to this story, relayed to me — with admirable calm (I would be going nuts) — by Dan H., one of your fellow readers:

“I hope your landlord travails are going better. I am currently slogging through a difficult eviction. The tenants started out by suing me more than a year ago for breaking a leg on a carpet seam inside the house. When the medical records showed that they had originally claimed that the accident happened outside of the house, their attorney petitioned the court to be able to resign from the case. Yet the case lives on. Meanwhile, failing their first attempt to sue, they stopped paying rent, so I filed for eviction, which they are contesting on the grounds that it is retaliatory for the original suit (not that it could have anything to do with anything like, say, their failure to pay the rent!!). Alas, sometimes life can be rather frustrating.”

Separately, there’s an alleged news item going around cyberspace that I have to assume is a spoof. It concerns a Charlotte, North Carolina, man who “having purchased a case of rare, very expensive cigars, insured them against . . . get this . . . fire.” He smoked them all, then told the insurer he had lost them in “a series of small fires.” The insurance company balked; the man sued — and won. According to the story, rather than endure the time and expense of an appeal, the insurer paid the man $15,000. Then, after he cashed the check, it “had him arrested on 24 counts of arson, for which he was sentenced to 24 consecutive one-year terms.” While this amusing tale is presumably fanciful, tell me this: Is it that much more insane than Dan H.’s saga?

Ah, justice.

“Can I open an IRA for my 4-year-old and 7-year-old sons?” — Marie

Only if they earn the income you use to do it. Are they TV stars? Chimney sweeps? Even so, not all financial institutions will be willing to do this. But some will set up IRAs for minors — so far as I know, it’s completely legal.

“I’ve read a lot about converting existing IRA’s to Roth IRA’s but my question is whether I can convert PART of my IRA (100K of 320K). I’m 62 years old and don’t want to deal with the taxes on the whole amount.” — William F.

Yes, you can convert as little or as much of it as you want.

“Of all that I have read about the pros and cons of switching to a Roth IRA, no one has dealt fully with the transfer of non-deductible contributions previously made to a traditional IRA. Can these funds be moved to a Roth tax-free? If they can, isn’t it a no-brainer that they should be moved (since that would exempt any further taxes on their growth)?” — Paul Kroger

Excellent question. Several of you raised it. Yes, the nondeductible contributions to your traditional IRA are not taxed when withdrawn. So in that sense, if you qualify to move money from a traditional to a Roth IRA, (as you do if your 1998 adjusted gross income will be below $100,000) this would be a no-brainer. You’d be transferring money whose growth would be taxed at withdrawal to a Roth IRA where it can grow forever free of tax. Great!

But the appeal of moving to a Roth IRA will depend on the proportion of nondeductible contributions in your IRA versus deductible contributions and growth.

• If the bulk of your IRA’s value comes from nondeductible contributions — perhaps you just set it up two years ago, contributed $4,000 and now it’s worth $5,629 — then, yes, it’s a no-brainer. Switch to a Roth IRA if you qualify to do so and pay a little tax on the appreciation. (But note that in doing so — even if you’re over 59-1/2 — you begin the 5-year waiting period before which Roth IRA distributions are not tax-free.)

• But what if you had an IRA worth $89,000 of which only $4,000 represents nondeductible contributions (because, say, your income was too high in a couple of years to make a deductible contribution, but you chose to contribute anyway)? Now you’ve got a $4,000 tail wagging an $85,000 dog. In this extreme example, the fact that a tiny proportion of the IRA transfer to a Roth IRA would not be taxed would barely affect your decision at all. It might make sense to switch to a Roth IRA — or it might not. See my earlier comment — but the nondeductible contributions you made would have very little to do with it.

Clearly, the more any transfer to a Roth IRA would be tax-free, because it represented nondeductible contributions, the more reason there would be to make that transfer.

To see what T. Rowe Price has to say about all this, click here. For Vanguard’s analysis, click here. And for its cool on-line IRA analyzer, click here.

[Note: If you don’t transfer your entire IRA over to a Roth IRA, you have to account for the transfer pro-rata. Say you made five nondeductible $2,000 contributions to your traditional IRA, totaling $10,000 . . . but this $10,000, through adroit management and the marvels of a bull market, is now $22,000. If you transfer the full $22,000 to a Roth IRA, you’d pay tax on $12,000. Easy. But if for some reason you transferred only $10,000 of the $22,000, you couldn’t just say it was the nondeductible part, you’d have to work out the proportion of the blend — in this case, 45% was nondeductible contribution, 55% appreciation — and pay tax accordingly.]

Neither a borrower nor a lender be. Simple enough, no? I was so proud for finally realizing it wasn’t Ben Franklin who had said this, as I had long thought — it was Shakespeare.

And then Ed Vosik responded in this space: “It wasn’t Shakespeare. It was Polonius.”

“And here I had thought it was Ben Franklin,” I replied to Ed. “But wait a minute. Did you HEAR him say it? See a tape? How do you know? Anyway: Shakespeare said it, too. And gets extra points for saying it in English. (Non offensorum, amicus Polonius.)”

Now comes Jim Halperin:

“Actually, Shakespeare WROTE it, in Hamlet, in the form of a soliloquy of advice from Polonius to his son.”

And John:

“Polonius spoke Danish and probably would not have understood your apology written in Latin.”

Oy! I feel stupider with each passing day. (I was shocked, in the midst of the Diana tragedy, to learn that the members of the British royal family are German — and astonished to learn I was the only one in the world who didn’t know.) Danish? With a name like Polonius? I give up. Borrow and lend all you like. What do I know.

Soon: Your Feedback on Roth IRAs, Going Postal, Etc.

"I am a young individual starting to get my life on track. I want to start making some real money for the future, so I want to start investing. My knowledge of the stock market is very limited. How do you suggest I get started with a limited amount of money? I know a little about Mutual Funds, however I want to try investing on my own. Do you think this is wise?"

Well, it’s certainly wise to get your life on track and begin investing. Whether it’s wise to compete with experienced investors and professionals when your knowledge is "very limited" is another story. Even a Nobel laureate like Bill Sharpe, one of the great names in the investment world for his work identifying the importance of — and then quantifying — risk-adjusted return, invests much of his own money via index funds. These are funds with very low expenses and low taxable gains because they just buy and hold "the market" as a whole. You (and he) obviously won’t beat the market this way; you’ll trail it by about a quarter of one percent. But you’ll beat most other mutual funds, and most of your friends.

That said, investing on your own can be fun, exciting and profitable (or addictive, self-destructive and money-losing). Millions of us do it, and with the new ultra-low commissions available, the odds are much better than they used to be.

You might want to read books like A Random Walk Down Wall Street (Burton Malkiel) or The Only Investment Guide You’ll Ever Need (me) to get some sense of what you’re getting into. And you might also want to wait a few more weeks for Barron’s annual "Roundtable," which fills the first three or four issues of each new year. There, a dozen of the world’s top money managers describe what they like and hate and why. It’s fascinating reading and will give you more than enough ideas of what to invest in and avoid. You’ll also see how they think and what you’re up against in competing with them.

The good thing about the investment game, unlike many others, let alone Las Vegas, is that in theory everyone can win. Some will do much better than others, but over time everyone can participate in the growth and profitability of the world economy.

Good luck!

Yesterday, I reviewed the pros and cons of the new Roth IRA. You can set one up any time after the first of the year. Today: Who qualifies to contribute to a Roth IRA, and what about switching the money you already have in a traditional IRA into a Roth IRA?

First, the most you can put into a Roth IRA each year (or into a traditional IRA, for that matter) is $2,000 each for you and your spouse (including a nonworking spouse). What’s more, anything you do contribute to an IRA must be from earned income. So if you earn no money in 1998, even though you may have $1 million in dividends and interest, you can’t contribute to an IRA.

Who earns less than $2,000 a year? Well, kids, for one. And if a child or grandchild legitimately earns some money mowing lawns or designing web sites, then he or she should consider sticking that money into a Roth IRA. The case I made for this last year (and my scheme for getting the kid to go along with it) becomes even stronger with a Roth IRA. The money that accumulates over his or her lifetime will be entirely tax-free at withdrawal. A fantastic opportunity.

Unfortunately for high earners, the allowable Roth IRA contribution begins to phase out for single taxpayers with adjusted gross income over $95,000 and phases out completely at $110,000. For those who file jointly, the allowable contribution begins to phase out at $150,000 and is gone completely at $160,000.

Still that leaves most Americans eligible. (Those who are not can still make non-deductible contributions to traditional, taxable-at-withdrawal IRAs. But with the long-term capital gains rate as low as it is, the case for doing so is less compelling than it was.)

(Note that for the traditional, deductible IRA, there is no income test if you are not covered by an employer-sponsored retirement plan. But if you are, eligibility phases out fast: beginning with adjusted gross income of $30,000 for single taxpayers, $50,000 for those filing jointly.)

If you qualify to contribute to a Roth IRA, good for you. As discussed yesterday, you may want to set one up.

Now what about switching the money in your current IRA into a Roth IRA?

This can be done with no penalty, even if you’re not yet 59-1/2. But you can only do it if (a) your adjusted gross income is $100,000 or less, and (b) you pay tax on the money you transfer. If you’re switching $30,000 from a traditional IRA to a Roth IRA, and you’re in the 35% tax bracket (federal and local), that would be $10,500 in tax. For transfers made in 1998 only, the IRS will allow you to pay the tax over four years. (State income tax departments may or may not follow suit. I’m not sure whether that’s been worked out.)

This would make sense if you’re in a low tax bracket now (and would remain in a low bracket even with this added income from the transfer) but you expect to be in a high one when you retire. You’re young, living in a no-tax state now and are in the 15% federal tax bracket. You figure that by the time you retire, all states will have hefty income taxes and you’ll have accumulated enough other investment income to throw you into a high federal tax bracket.

On the other hand, if you’re in a fairly high tax bracket now — or would be if you withdrew $80,000 from your IRA this year! — it makes little sense to do so unless you expect your tax bracket to be high when you retire as well.

[Note: I assume, but do not know, that the states will follow Uncle Sam’s lead in exempting withdrawals from Roth IRAs from tax.]

If you have an IRA, you will be able to make your 1997 contribution as late as April 15 next year, just as you always could. My advice: do this as soon as you can. The earlier you fund any kind of IRA, the longer your money has to work for you.

For your 1998 contribution, and from then on, you will have a choice: Continue with your old IRA, as before, or set up a new one, called a Roth IRA, after William Roth, the senior senator from Delaware, who hatched it. In that case, the old one would continue to grow, but from then on you could split your maximum $2,000 contribution each year over the two of them any way you wanted.

If you have no IRA currently, this is a good time to consider whether you should start one — of either variety. (Or perhaps start yet another new kind of IRA, the education IRA, where the “R” stands not for retirement but for Education. But the limits and laws on that are independent of those for the two retirement IRAs, so let’s just ignore that for now.) Both are great, and there’s no telling for sure which will be better for most people, so don’t let indecision keep you from contributing to one of them. The examples that follow should give you a pretty good idea how to think about this.

The basic difference between the traditional IRA and the new Roth IRA is simple. With the traditional IRA, you get a tax break for your contribution today, but pay taxes on everything you withdraw. With the Roth IRA, you get no tax break now, but so long as it’s been in existence for at least 5 years, every penny you withdraw after age 59-1/2 (and even before 59-1/2 in limited circumstances, such as purchase of a first home) will be tax-free.

Advantages of the Roth IRA:

• Withdrawals are completely tax-free.

• Easier to qualify to contribute to it (see tomorrow’s comment: Who Qualifies).

• You can continue to contribute even after age 70-1/2, if you have earned income, and you need not begin withdrawing money until you’re good and ready — and then, according to any schedule you please. (With a traditional IRA, you must begin withdrawing by April 1 of the year after you reached 70-1/2, and minimums are prescribed by law.) For someone who’s going to live to 100 or beyond, and who may not need the cash right now — or may not even be retired at 70-1/2 (Ronald Reagan certainly wasn’t) — this is welcome flexibility.

Disadvantage of the Roth IRA:

• You don’t get a tax deduction (technically, an “adjustment,” which lowers your taxable income whether you itemize or not) for your contribution.

Basically, which IRA to contribute to in any given year depends on your assumptions about tax rates. If all income were always taxed the same, then a Roth IRA would always make more sense than a traditional one. To see why, let’s pretend all income were always taxed at 50% and all investments grew at 10% a year. Neither is true, but it makes the math easy.

You could put $2,000 into a traditional IRA and get $1,000 “back” in the sense that doing so would lower your tax bill by $1,000.

So now you have both the $2,000 in the IRA and the $1,000 you got back via the tax break, and both are growing at 10% a year . . . except wait! The $1,000 is growing in a regular, taxable account someplace, so it’s really only growing at 5% a year after tax.

After one year, the $2,000 has grown to $2,200 and the tax if you withdrew it would be $1,100. Right? Fifty percent of $2,200. The $1,000 “tax break” money, meanwhile, would have grown at 5% after tax to $1,050 — $50 short of what you need to pay the $1,100 tax. And year after year it gets worse. What you can earn on your “tax break” money, because it’s subject to tax, is always likely to fall short of the rate at which your IRA — and thus your tax bill when you withdraw it — is likely to grow.

Now, you might say: well, what if I could earn 15% on that $1,000 tax break money instead of 10%? And I’d say two things: First, 15% is still only 7.5% after tax in this silly example, so you’d still fall short. Second: if it’s so easy to earn 15% outside of an IRA, why wouldn’t you be earning it inside the IRA as well?

In other words, however fast or slow you can make your money grow, it will always grow faster tax-free than taxable. The “tax break” you get from the traditional IRA will either be frittered away (in which case you really come out behind), or else it will be invested subject to tax, which over the long run will almost surely amount to less than if it had been invested free of tax.

In the real world, though, tax rates are not all the same, and that’s where it gets tricky. Here are two general rules:

• The lower your tax bracket today, the more likely a Roth IRA will be to your advantage.

• The younger you are, the more likely a Roth IRA will be to your advantage.

Say you’re 24, that you qualify to contribute $2,000 to an IRA, and that you can compound your IRA money over a lifetime at 9%. You don’t plan to withdraw the money until age 70. (In the real world, of course, there would be other $2,000s from other years, and you wouldn’t withdraw all the money at once. But let’s just follow this one $2,000 chunk.)

If you are in the 15% bracket today, because you’re a 24-year-old starting out, and you expect to be in more like the 35% bracket when you retire, then the case for the Roth IRA is overwhelming. By foregoing a tiny tax break today — $300 in the case of 15% on a $2,000 contribution — you would save $37,000 in taxes when you went to withdraw that $2,000 — now grown to $105,000 — at age 70. For $300 today to be worth so much — $37,000 — 46 years from now is for it to compound at 11%; i.e., if you had chosen the traditional IRA and gotten your $300 tax break, you’d have had to find a way to make that $300 grow at 11% a year after tax just to break even versus the Roth IRA. And trust me: It is very hard to grow money at 11% after tax. (If it is easy for you, then surely you could also have been growing the IRA at 11% also — in which case your $2,000 would have grown to $243,000 instead of $105,000, and the 35% tax would be $85,000 instead of $37,000, and your pathetic little $300 would have had to grow at 13% after tax, not 11%, to keep pace.)

So if you’re in a low tax bracket now with the prospect of a higher one when you retire, it’s a no-brainer.

But what if you are in the 35% bracket now, between federal and local income taxes, and expect to be in the 15% bracket in retirement? In that case, taking the deduction now would save $700 on your taxes today (35% of the $2,000 contribution). When you withdraw that $2,000 at age 70, it will again have grown to $105,000 using the 9% assumption. Paying 15% of that in tax will cost you $16,000. So which is better: $700 now or $16,000 in 46 years? Well, that $700 would have to grow at 7%, after tax, for it to produce $16,000 after 46 years. So you have to think what you’d do with that $700 today. If you’d spend it on a new suit, forget it! You don’t need a new suit. Or, if you do, you can get a perfectly good one for a heck of a lot less than $700. In any event, a new suit is not going to produce $16,000 for you by the time you turn 70. But even if you were very disciplined and earmarked that $700 specifically to grow to pay taxes on your traditional IRA, the fact is, it’s not easy to beat 7% after taxes over a long period of time. So even in this scenario, the Roth IRA doesn’t look bad.

Now what if we kept everything the same as above but made you 64 instead of 24? You’re still in the 35% bracket, but expect to be in the 15% bracket when you withdraw the money at age 70 (because you’ll be retiring, moving to a no-income-tax state, and getting by on a very low taxable income). In this case, it would be smart to use the traditional IRA rather than a Roth IRA. Why? You save $700 on your 1998 taxes, and six years later, when you withdraw your $3,354 (it’s grown by 9% a year), your tax on it at 15% will only be $503. That $700, meanwhile, has grown to around $1,100 if its growth was subject to just 15% in taxes (or even less if it was all capital gain and thus entirely shielded from tax, and subject to a very light tax when the gain was realized). So why give up what could be $1,100 to save $503 in taxes? You’ve shifted income that would otherwise have been taxed at 35% into income taxed at 15%.

Even if you were 44, given these same assumptions, the Roth IRA doesn’t look great. By age 70, the $2,000 has grown to $18,800 so the 15% tax you avoid is worth $2,800. The $700 you could have saved today with the tax break from the traditional IRA would have had to grow, after tax, at just 5.5% to match that same value. And if you could have found some nice growth stock that rose at 9% a year, you’d be sitting with $6,579, and very nearly that much even after you paid some tiny long-term capital gain tax on it when you sold it. Still: the Roth IRA does at least relieve you of the concern that tax rates will be a lot higher when you withdraw the money. And it also provides you the flexibility and easier accounting referred to above.

It’s easy to see that the Roth IRA will not always make sense. The lower you expect your tax bracket to be at retirement, the less enticing it is. Still, there sure is something nice about “paying” a few hundred bucks (by not getting the tax break) in order to know your $2,000 will grow completely tax-free for decades to come.

Nuances:

• Note the distinction between your marginal tax bracket and your average tax rate. If I pay zero tax on my first $10,000 of income, 15% on my next $10,000, and 35% on my third $10,000 — to take a simple hypothetical example — then my marginal tax bracket is 35%, because on the last dollars I earn, I’m paying 35% in tax. But all told, I’ve earned $30,000 on which my total tax was $5,000, so my average tax rate is 16.7% ($5,000 divided by $30,000). See the difference?

• In most financial decisions — should I buy $25,000 of taxable or tax-free bonds? what does this $1,000 gift to the Salvation Army really cost me after tax? — it’s the marginal tax bracket you should look at. What’s under consideration are relatively few dollars at the margin of your finances: a little more taxable interest income, perhaps; a little more in the way of itemized deductions. And indeed, when you look at the impact of the $2,000 IRA contributions many of us make each year, it’s the marginal tax rate that determines just how big a break we get.

• But when the dollars grow large . . . when it’s not just a small difference at the margin of your finances but a huge chunk of your income that’s at stake, as a $105,000 withdrawal from your retirement plan is likely to seem large 46 years from now . . . you should think more in terms of what you expect your average tax rate to be by then. Sure, some of that $105,000 will be taxed at the top bracket. But much of it may be taxed at a lower bracket or not taxed at all. So even if you expect today’s brackets to remain unchanged (for 46 years? hah!), your average tax rate on withdrawals from your IRA may be a lot lower.

• This distinction further moderates one’s enthusiasm for the Roth IRA. For people with relatively little taxable income at retirement, the savings from the Roth IRA may be quite modest.

• Leave your riskiest investments outside the IRA (of whichever variety). You do that for three reasons. First, some risky investments bomb. Outside an IRA — but not inside — you can take a tax write-off on the clinkers. Second, on the risks that do pay off, taxes can be light anyway because of the favorable long-term capital gains treatment. Third, you’ll have the flexibility to do your charitable giving with appreciated securities instead of cash.

• Ain’t Congress grand? This is the perfect tax break. It actually gets people to pay more tax now, decreasing the deficit, by getting them to forego the traditional $2,000 IRA adjustment . . . and shifts the cost decades into the future, when there will be that much less income available to be taxed . . . leading one to wonder whether tax brackets in the distant future, on the money that is available to be taxed, will be so low after all. This is an argument for choosing the Roth IRA. But . . .

• What if Congress one day abolishes the income tax altogether in favor of, say, a national sales tax? Well then, the traditional IRA might prove to have been the wiser choice after all. You got the tax deduction now and had no tax due on the withdrawals. Personally, I don’t see it happening. But there are going to be an awful lot of retiree voters in a few decades. Maybe they’ll get Congress to abolish the tax on all retirement income.

• What if, strapped for funds, Congress finds some back-door way to tax Roth IRA withdrawals — say, by adding that income into the mix in calculating some modified Alternative Minimum Tax? Well, then, again the Roth folks would have gotten the shaft. They’d have foregone today’s tax break, yet been hit up for taxes tomorrow anyway. I don’t think this is likely either.

For most people, especially today’s low-bracket taxpayers — as well as those likely to spend rather than invest their tax breaks — the Roth IRA is likely to be a good deal.

Tomorrow: Who Does Qualify — and Should You Switch?

Do you know how to run a successful horse insurance business? That is, a life insurance business that insures the lives of horses? The key is to look not into the mouths of the horses, but into, as it were, the mouths of the owners. It turns out that for the most part, horses live more or less normal horsy lives. What you’ve got to watch out for is owners of questionable character. Sometimes, if the horse hasn’t been winning, there’s a fire or an accident. Awful but true.

It was from that simple insight — underwrite the owners, not the horses — that a friend of mine managed to cut rates significantly for the morally sound owners, win much of their business a decade ago, and make himself rich.

Where else can you go for useful advice like this?

Tomorrow: The Roth IRA

Recently I told you about the arrest of two of my employees for cleaning up our little neighborhood. We’d been doing it for quite some time at no cost to the city of Miami. But on Columbus Day, not knowing about the arrangement we had with the local authorities, a police officer arrested my guys, handcuffed them and threw them in jail for felony dumping.

When we left the story, my guys had insisted on pleading not guilty (since they were) even though it meant risking their chance to gain citizenship. Several of you responded very graciously with offers of help, but none was needed.

The good news is that the case was dismissed, we avoided having to pay a $500 fine, and no one has a felony on his record. Our costs amount to little more than $3,000 ($1,000 for the bail bondsman, $1,500 for the lawyer, $160 for our impounded trust, two days’ work lost times two employees and their manager), plus of course the intangibles of the fear and frustration.

Chastened, we are now allowed to go back to our volunteer cleanup efforts.

I had assumed the story would end there. But we made one pretty serious mistake. My manager, Sal, in fighting this, angered the arresting officer by questioning his actions, both at the time and then as the case proceeded.

I don’t want to anger him, so I will call the arresting officer “AO” (for “arresting officer”).

AO, in fairness, knew none of the background of our commitment to the neighborhood. Most people dumping stuff in Miami are doing so to avoid the cost of hauling it off legally. And most people don’t clean the streets of debris on a volunteer basis. We believe AO should have given us the benefit of the doubt, since Sal identified himself as a C.O.P. (citizen on patrol, a group that volunteers its services to assist the police). But no one likes his authority questioned, and one thing led to another.

So here was AO, losing face. The arrest he made was being thrown out, and he was being criticized by us, and perhaps by some of the police we normally work with and to whom we had appealed for help.

Put yourself in his shoes. He wanted to prove we were bad guys after all, or at least cause us some trouble for causing him some trouble. (Though would it be too infantile to point out, as my brother and I used to from the back seat of the station wagon, that “He started it!”?)

In the course of the first arrest, he had determined that one of our two guys — not the one driving — had a suspended driver’s license. (It had been suspended a couple of years earlier for driving under the influence. This is a serious offense, obviously. But all had been well since then, and he would have had his license back had he been able to afford the insurance on his own car.) So on Veterans Day — maybe I should call him Cop Holiday — AO waited and watched until my guy did something very dumb that he was not authorized to do: he drove the truck a half mile from his place to the job site instead of being driven by one of our other guys or riding a bike.

AO pulled him over on the pretext of the crack in our truck’s windshield and the tape on one of the brake lights (though I don’t see why any pretext was needed, since he knew my guy had a suspended license) and “discovered” that he was driving with a suspended license.

Apparently, there is a relatively small fine for doing this, but the AO has the discretion to give a ticket or, in addition, to make an arrest. In this case, of course, he made the arrest. When Sal arrived to try to help, Sal was also arrested for “knowingly permitting an unauthorized driver to drive his vehicle.” This, too, carries a fairly trivial fine but also gives the officer discretion, never mind that Sal maintains, and I believe him, that our guy was not authorized to drive the truck and was cutting a corner.

So my guy and Sal were handcuffed, booked, fingerprinted, and tossed in jail, with the prospect of getting out in a couple of days or else, again, posting bail. Five hours in jail, in a cell with people accused of domestic violence, and another $1,000 for the bail bondsman and another $160 to retrieve the impounded truck, they were out. Presumably, with another set of legal fees my guy will be allowed to pay the fine for driving with a suspended license and Sal will either pay his fine or else we’ll pay a lawyer to help us insist that Sal really hadn’t authorized our guy to drive it until he had his license.

Sal is taking all this well. He has been advised by friends in the police department that there are basically only two choices if a police officer has it in for you: move to another city, or else apologize and completely submit to the police officer on everything, right or wrong. He doesn’t want to move to another city and has invested too much of his life in trying to improve this neighborhood, so his current intention is to go with Plan B.

Yesterday I conveyed Dave Davis’ findings that golfing can be hazardous to your health. I don’t doubt him on this, exactly, though it does remind me of the line that saccharine, as it turns out, — so long maligned — is really only hazardous to your lab rat’s health.

Today I want to tell you the real reason I personally will never play golf again. My apologies to those of you who have already read this: it is lifted from My Vast Fortune. But it comes after the auto insurance reform section, so even if you have gone out and purchased the book (bless your heart), you may have it by your bedstand with a bookmark someplace between the fascinating details of failed auto insurance reform in Hawaii and the fascinating details of failed auto insurance reform in California or Massachusetts. You got bogged down, in other words, like a golfer in the rough.

Anyway, here’s the story. A couple of years ago, I was invited to go golfing with Warren Buffett. Sort of.

More accurately, I was golfing at the invitation of my discount broker. It was the first time in my life I had ever golfed, and the first time in anybody’s life that they’d gone golfing with a discount broker. But this was a special case, and I learned a few things.

The first thing I learned, I guess, was “never go golfing for the first time in your life.” Not that this hadn’t occurred to me in advance.

“I’m sorry,” I said when I was invited. “I’d really love to come, but I can’t.”

“Why not?” asked my host, marveling that I would turn down a chance to hobnob with Buffett and 98 other CEOs, senators, governors and the like.

“I don’t play golf,” I explained.

“Don’t worry! We’re all terrible,” he said.

He meant they had high handicaps, and this was for charity, the Emmy Gifford Children’s Theater, and all in good fun.

“You don’t understand,” I said. “I mean I have literally never played golf in my life. Well, a little miniature golf.”

I play Scrabble. (So does Warren Buffett. I have never played him directly, but for a while there we were both playing Monty, a computerized game, on which he managed to rack up a 687-point score. I know, because he sent me a Polaroid. To save time, he reported, he’d have his secretary keep starting new games until Monty dealt him a seven-letter word.)

“No problem,” my host assured me. And we went back and forth about five times, over a period of several weeks, until against my better judgment, and admittedly eager to make the trip, I gave in.

I could tell these were going to be a score of fearsome foursomes assembling in Omaha, in pedigree if not handicap. Some of them might be lousy golfers, but all, from the sound of it, promised to be heavy hitters. Discount brokers getting no respect, I was the heaviest hitter they could get.

“Buy me the most expensive pair of golf pants you can find,” I e-mailed my secretary. (Back then I had a secretary.)

“Who IS this?” she e-mailed back. (Little as I am known as a golfer, I am that much less well known to be a big spender. But now was not the time to send her rooting around the aisles of K-Mart for golf pants.)

“And a belt and a shirt,” I e-mailed back.

Never mind that these items came to $343.27. Green pants do not a golfer make. Though I sure look like a golfer, leaning on my club next to Warren. I hadn’t needed to buy golf shoes, because one of the little party favors everyone got was a brand new pair (which I now use to tenderize ostrich fillets). We also got our pictures taken. For anyone who still has never heard of Warren Buffett — amazingly, there still are such people — he’s frequently on the cover of business magazines. Stock in his company trades on the New York Stock Exchange around $45,000 a share. Buffett’s a genius, but I’ve always felt the stock’s been a little ahead of itself. I first advised people to buy Berkshire-Hathaway — but only after it fell back a bit — when the stock was $300 a share. It never fell back. I advised much the same thing at $3,000 and then at $30,000. Instead of owning, say, 25 shares I could have purchased for $7,500, and having now $1,075,000 worth, I have a collection of his brilliant annual reports, the Polaroid of his Scrabble game, and this framed photo of him and me leaning on our golf clubs.

During the 18 holes, I asked penetrating questions of my host, the then-president of Accutrade, my Omaha-based discount broker, such as: “Wouldn’t it be a lot easier and more efficient if there were just one bag of clubs on the cart for all four of us?” His eyes widened imperceptibly. “People,” he pointed out slowly, once he began to believe I wasn’t kidding, “come in different heights.”

Oh, I blushed, catching on.

He was stuck with me, because all this had been his bright idea. But the other two members of the foursome, a former senator and a real estate mogul, had a slightly harder time dealing with me, I think (though not nearly so hard a time as our caddie, who emerged from the afternoon scraped, muddy and exhausted), and I was feeling really lousy — until we hit on the idea of playing for money. For me, this made it fun, and improved my concentration. My host and I played “scrambler” — going to whichever of our shots was the better and playing the next one from there — to their “best ball.” If one of them shot a six and the other a five on a particular hole (am I saying this right?), they’d get credit for the five. But sometimes we did better, because usually we just went to my host’s ball, but every once in a while he blew one and I actually got us a little further in the right direction. We had them down $75 at one point.

The real saving grace was that, this event having taken over the entire course for the day, each foursome was quite separate from the others. The only witnesses to my shame were my partners — one of whose fault all this was in the first place — and the caddie. So it was bad, but it could have been worse.

Back in the clubhouse, where all the foursomes converged, everyone was jovially asking everyone else how they had played. The first couple of times I shuffled my feet and stammered something sheepish. Then, I figured, screw it.

“How’d you do, young fella?” some billionaire asked me.

“Best damn golf I ever played.”

“Really?” he said, a bit taken aback.

“Yep,” I said, firmly. “I played the best damn golf of my life today.”

Well, I did.

But this being the kind of line one can get away with only once, it was also the last damn game of golf I ever played.

[Adapted from My Vast Fortune, ©1997 Andrew Tobias.]

When most people think danger, they don’t think golf. They think hang gliding or bullfighting or roller-blading. (If you’re over 40, trust me: roller-blading’s a killer. It turns your wrists into micro-surgeons’ country club memberships.) Golf seems, at first blush, entirely harmless. Yet I had always thought there was something a little sinister about this seemingly sunny game, not least because I could never get my ball past the windmill and into the cup. Well, leave it to faithful reader Dave Davis to come up with the startling details.

“Did you know,” he wrote me recently, “that rabbits dug the first holes in golf?”

This was not one of the startling details. But it caught my attention and I read on:

“More importantly, golf courses — despite their manicured good looks — are among the most toxic environments in the United States. They use more pesticides and other chemicals per acre than farmers do. The high incidence of breast cancer on Long Island — also known as “Lawn Island” — has been linked (no pun intended) to the large number of golf courses there. Can’t imagine why people are attracted to such a deadly sport.”

Encouragingly, Dave reports, there’s a small “green” movement to persuade country clubs to go organic. “But there’s enormous resistance because people want to play on courses like those they see on television. Interestingly enough, the venerable St. Andrews in Scotland, where golf originated, is an organic course.”

I will never play golf again. But the reason for that — which I will reveal tomorrow — has nothing to do with Dave’s concern.