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Why Are Oil Prices So High? Gold Solves the Riddle.

By Logan Flatt, CFA

   As the price of a barrel of crude oil continues to rise unrelentingly past $120 a barrel, one begins to wonder, Is the price of oil primarily rising due to the strong global demand for oil, or due to the U.S. Dollar (USD) falling so much in value?

   One way to solve this riddle is to travel back in time to the 20th Century when after World War II the USD was considered 'as good as gold'¹ because the exchange rate between the USD and gold was fixed by U.S. federal law at 1 USD = 1/35th of an ounce of gold; that is, until President Richard M. Nixon shocked the world by unexpectedly yanking the USD off the gold standard on August 15, 1971. Or, travel even further back to a time centuries ago when men and women the world over used gold as a medium of exchange, a store of value, and a unit of account. Back then, prices of almost all goods and services were quoted in units of gold. Looking at the price of oil from this historical perspective, a new question arises: Would the price of crude oil be rising so much if the world were paying for a barrel of oil with ounces of gold instead of the currently 'goldless' USD?

   Thankfully, we can use readily available historical data on gold, oil, and the U.S. Dollar to answer that question. The key is to transform the data -- and our thinking -- such that one ounce of gold becomes the currency (or, unit of exchange) that anyone could use to buy and sell a barrel of crude oil or to buy and sell the currently 'goldless' U.S. Dollar. Applying this data transformation and then using 1991 as a normalized index point (January 1, 1991 = 100) for both oil and the USD, the graph below uncovers a hidden truth: starting in late 2001 -- around the time of the September 11 terrorist attacks on the U.S. -- anyone could use one ounce of gold to buy an ever-increasing number of U.S. Dollars (the red line), or anyone could use one ounce of gold to buy an ever-decreasing number of barrels of crude oil (the blue line).

Image © 2008 by Prof. Werner Antweiler, University of British Columbia, Vancouver BC, Canada. Used with permission. All rights reserved. Time period shown in diagram: 1/Jan/1991 - 6/May/2008.

   Looking at the graph another way, the red line reveals that an American today is having to spend over 2.4 times the number of U.S. Dollars he had to spend back in 1991 to buy a single ounce of gold (May 7, 2008 = 242). This is confirmed by comparing the USD prices of one ounce of gold in 1991 and today: $362 and $876, respectively.²

   Similarly, the blue line reveals that anyone today using an ounce of gold as a currency can buy only half as much crude oil per ounce of gold as he could in 1991 (May 7, 2008 = 50). In other words, anyone must now use twice as much gold as he could in 1991 to buy one barrel of oil. This is confirmed by comparing the gold ounce prices of one barrel of oil in 1991 and today: 0.06 ounces of gold per barrel and 0.12 ounces of gold per barrel, respectively.³

   So, a barrel of oil has doubled in price in terms of gold ounces since 1991 and, at the same time, an ounce of gold has more than doubled in price in terms of 'goldless' U.S. Dollars. Thus, gold solves the riddle: the price of crude oil is high and rising primarily due to the 'goldless' USD losing its purchasing power, and secondarily due to the strong global demand for oil. As the U.S. Dollar in his pocket becomes increasingly worthless, the average American is forced to cough up more 'goldless' U.S. Dollars to convince a seller of a barrel of oil to make a fair trade. Who can blame the oil seller if she believes "fair" requires ever more increasingly worthless U.S. Dollars to complete the sale of an increasingly demanded barrel of oil?

   Perhaps the riddle that the average American should be trying to solve has less to do with the price of oil going up and more to do with the purchasing power of the USD going down. Perhaps the real questions that Americans should be asking are:

• Why is the USD losing so much purchasing power?
  
  
• Why are our elected representatives in Washington, D.C. failing so badly in their constitutional mandate to provide We the People with a stable currency -- a currency 'as good as gold', or at least a currency actively managed by the Fed to within a tight range of gold prices?
  
  
• Why do We the People continue to elect representatives who think nothing of devaluing our currency through profligate printing and spending, rendering us all poorer and poorer as time goes by?
  
  
• When will We the People say 'enough is enough' and finally elect representatives who will honor their constitutional mandate to provide all Americans with a stable U.S. Dollar?

   Until We the People take action and demand real change in our federal government -- especially its monetary policy (stable dollar) and fiscal policy (balanced budget, lower debt) -- we will continue to watch  in dismay as the price of oil climbs higher and higher on the world market.

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¹In fact, the U.S. Dollar pegged to the gold ounce was considered even better than gold because lenders could charge interest on the gold-backed dollar but they could not charge interest on gold itself.

²Fundamentally, gold did not change at all from 1991 to 2008. Gold always has been and always will be the metallic element found within the Earth's crust that scientists have assigned the chemical symbol Au and atomic number 79. What has changed from 1991 to 2008 is the purchasing power of the USD -- and, as the graph indicates, that power has weakened significantly. Thus, anyone paying in U.S. Dollars must now use many more 'goldless' dollars to buy a single ounce of gold that is precisely the same today as it was 1991.

³Like gold, crude oil is simply earthen material. At base, crude oil is a hydrocarbon, an organic compound consisting of hydrogen (symbol H, atomic number 1) and carbon (symbol C, atomic number 6). However, oil springs forth from the Earth in a variety of different chemical flavors depending on the geology and geography of its source. Some people like it 'sweet', some people like it 'sour'; regardless, crude oil undoubtedly has become a hot commodity since 1991.

Copyright 2008 PowerWealth.com. All rights reserved.

For The Love of Money.

By Logan Flatt, CFA

   One million dollars is a lot of money. Many Americans would love to have $1 million sitting in their bank and brokerage accounts. In fact, according to the 2007 World Wealth Report published by Capgemini and Merrill Lynch, over 2.9 million Americans do have at least $1 million in cash and securities on account today.

   Yet, do Americans really love money? For many, as soon as we get money in our hands, we spend it on some shiny new thing that pleases us, or on some new experience that, for a short while, distracts and entertains us. So, do we love money, or do we love what money enables us to possess and experience?

   Regardless, note what money gives us – freedom, opportunities, security, flexibility, and power – stems not from money’s quantity, but from its quality. It matters not how much money we possess or how impressive the rate at which we bring it home if our money steadily decreases in value over time.

   So, is $1 million really a lot of money? It depends – how fast is the dollar decreasing in value? There’s one simple way to tell: price inflation. As consumer prices increase, a dollar buys less than it used to. Thanks to America’s average annual inflation rate of 2.7% over the past seven years, $1 million in 2000 was worth only $829,864 by the end of 2007. In 2008, inflation has jumped to 4.1%, degrading the dollar faster still.

   What is causing price inflation today? It’s a two-fold problem. First, through deficit spending, the U.S. Congress spends today hundreds of billions of tax dollars borrowed from our future. This acceleration of future tax dollars into the present increases the supply of dollars sloshing around our economy in 2008, increasing demand for – and prices of – goods and services.

   Second, the Federal Reserve swells the U.S. money supply with credit. By lowering short-term interest rates – as it did by 1.25% in January – the Fed encourages banks to loan money to borrowers looking to spend their future earnings today. The result is more dollars sloshing around the economy, further driving up prices of goods and services.

   How can we stop the Federal government’s willful degradation of the U.S. dollar? Vote. Write. Call. Demand that your elected officials in Washington, D.C. practice sound fiscal and monetary policy: a balanced Federal budget each year; a lower Federal debt outstanding; and inflation-fighting (e.g., higher) short-term interest rates.

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NOTE: This article first appeared in the Winter 2008 issue (Volume 6 Issue 1) of The Swan, a publication of the Lake Forest Community Association, Inc., a nonprofit Texas corporation (www.lfhoa.com).

Image above copyright 2006 by Chris Palmer of Huntsville, AL USA. Used with permission. All rights reserved.

Copyright 2008 PowerWealth.com. All rights reserved.

Let's Be Frank, Barney: The Federal Reserve Hurts We The People.

By Logan Flatt, CFA

   In his counterpoint to Massachusetts Congressman Barney Frank's partisan diatribe against America's laissez faire approach to economic growth and its “unacceptable levels of income inequality” (Financial Times, “Why America needs a little less laissez-faire”, January 14), Mr. Jeff Erber made two mistakes that weakened his otherwise spot on argument (Financial Times, Letters, “Government regulation is to blame for mortgage market collapse”, January 17).

   First, Mr. Erber states, "it is far more likely that income inequality is wide because of the current phase of the US economy's business cycle." That’s baloney. Economic gobbledygook is not necessary to explain the broad distribution of household incomes in America. The freedoms enshrined in the U.S. Constitution explain it fully. The Founders and the States did not make "income equality" a founding principle of the United States of America. They also did not require that Americans' incomes be evaluated and judged for “fairness” by political elites in Washington, D.C. earning a cost-of-living-adjusted income of $169,300 per year – that’s in the top 3.2% of all U.S. households per the U.S. Census Bureau – just like Harvard-educated Congressman Frank has earned through good economic times and bad as a career politician free from the tyranny of term limits for the past 27 years. Congressman Frank’s vision of a statist America is indefensible vis-à-vis the fundamental law of the land, through which We the People, among other things, secured the Blessings of Liberty to ourselves and our Posterity. Such Blessings of Liberty include as much – or as little – income as we so freely choose to go out into America’s market economy and earn, thank you very much.

   Second, Mr. Erber states, “In order to stave off inflation, the Federal Reserve lowered the fed funds rate…”. Au contraire, mon frère! From 2000 to 2004, the Federal Reserve lowered its target for the federal funds rate repeatedly in hopes of staving off recession, not inflation. The Fed’s deliberate actions in favor of economic growth injected vast amounts of cheap credit into the U.S. economy which only stoked inflation, as evidenced by the upward trend in the annual rate of inflation from 2002 to today. The Federal Reserve’s cheap credit policy further stoked irrational exuberance in the markets for U.S. mortgages and real estate. Flush with money, urbane financial institutions lent foolishly while naïve borrowers speculated Trumpianly only to default on the “leverage” they never should have borrowed in the first place.

   For his part, Congressman Frank correctly notes that mortgage-backed securities spread the pain of default to other parts of the financial world, but he misdiagnoses the true disease that ails the U.S. economy today. America’s economic problems are not due to market forces, laissez faire economic policies, or clever financial engineering. The pathogen that most afflicts the U.S. economy today is the Federal Reserve, which engages unwarrantably in the central planning of U.S. economic growth. By creating artificial growth instead of vigilantly protecting We the People from the ravages of inflation, the Federal Reserve engorges the U.S. money supply with a debased currency backed by nothing more substantive than the “full faith and credit” of a bloated U.S. federal government beholden to foreign lenders to pay its bills. Next week, We the People as well as Congressman Frank will watch the Federal Reserve continue its brazen destruction of the U.S. dollar by expanding cheap credit throughout America’s economy yet again.

   NOTE: In a surprise move in the early morning of January 22 -- only a few short hours after this essay was completed -- the U.S. Federal Reserve cut its target for the fed funds rate by 75 basis points to 3.50%. The Fed continued its debasement of the U.S. Dollar at its regularly scheduled FOMC meeting on January 30 by cutting its target for the fed funds rate by a further 50 basis points to 3.00%.

   UPDATE: In the afternoon of March 18 the U.S. Federal Reserve yet again cut its target for the fed funds rate by 75 basis points to 2.25%.

   UPDATE: On April 30, the U.S. Federal Reserve once again cut its target for the fed funds rate, lowering it 25 basis points to 2.00%.

Copyright 2008 PowerWealth.com. All rights reserved.

The Choice Is Yours

By Logan Flatt, CFA

    “Money makes the world go ‘round.” Although it is a cliché, I have not found anything in my years so far on planet Earth that seems to suggest otherwise. Money has a powerful influence around the world. People the world over make critical decisions – good or bad – based on money. They also change personal behavior based on money. Money does not have to be present to make people change decisions or behavior. Often, it is the lack of money that most influences how people think or behave.

    On the surface, the process of making money seems mysterious and complex. Don’t be fooled. Making money is simple:

    Sales – Costs = Profit

    That’s not to say, however, that making money is easy – because it’s not.

    In fact, making money is a challenge for most of the 6.6 billion people in this world. Most live in poverty or just above it. However, the 301 million people living and working in the United States of America – who represent less than 5% of the world’s entire population – appear to have mastered the art and science of making money quite well, thank you very much, as evidenced by the U.S.A.’s $13.1 trillion economy – nearly 20% of the world’s entire economic output. No wonder then that the United States of America – with disproportionate economic power given its relatively modest population size – is referred to by many people around the world as “The World’s Superpower.”

 

    What makes money so complicated and so seemingly hard to make? Human beings. You cannot make money in a vacuum. You need to transact with other human beings to make money. That is money’s fundamental purpose – to facilitate the exchange of goods and services among individuals, corporations, and governments. A human being or a group of human beings lies behind each of these economic entities. Now, I am sure that you will agree with me that human beings are highly complex creatures. Moreover, nowhere do human beings get more complex than when they are with – or without – money.

    Pessimists, cynics, and miserablists alike claim, “Money is the root of all evil.” As is typical of their negative, self-defeating ilk, they are wrong. Money is not evil at all. Money is not inherently good either. Money possesses no emotion, no feelings, no thoughts, and no beliefs. Human beings possess these things. Human emotion is the root of all evil (e.g., envy and hate) and of all good (e.g., trust and love). Money is indifferent. Money is innocent.

    Despite its neutrality, money has a special magnetic quality: money is highly attracted to reason. If you are new to the concept of getting ahead financially, you will soon learn that the best way for you to attract more money to your life is to control your own emotions. After all, emotions like fear, greed, anger, hate, envy, and even optimism can quickly lead you into financial trouble. But, to really stake your claim to lots and lots of money, you must learn to cut through the emotional haze created by other human beings with a razor sharp weapon: rational thinking.

    To get ahead financially, you have to concentrate and focus your rational mind on building wealth over the long-term. You must rid yourself of the emotional distractions that keep your mind mired in the short-term and its wealth-depleting temptations. I am not saying that you must ignore everything else in your life to the detriment of your health and those you love. I am not saying focus exclusively on building wealth either. What I am saying is that to truly build wealth for you and your family, you must make a conscious, rational choice today and be committed to your choice going forward.

    Your choice is between Option A and Option B:

    Option A: "I am willing to do what it takes to get ahead financially over the long term."

    OR

    Option B: "I am not willing to do what it takes to get ahead financially over the long term."

    Why are you not getting ahead financially? It is likely you have made the wrong choice between Option A and Option B in the past, or more likely, you have simply neglected to make the choice at all. The point is, you have a choice. And, to get ahead financially, you must make that choice.

    So which do you choose, Option A or Option B? Stop, think for a moment, and make your choice right now.

    (The waiting music from the game show “Jeopardy!” should now be playing in your head).

    OK, you have made your choice, right?

    And, you are firmly committed to that choice from now on, right?

    Congratulations! You are now further ahead financially than perhaps 90% of the American population. Most Americans have not made the choice. They simply fly their financial lives on autopilot every day. However, you are different. You have made the conscious, rational choice. You have made the commitment to yourself. You have officially turned off the autopilot and are now firmly at the controls as you fly through your financial future.

    Now, the Big Question:

    Did you choose Option A or did you choose Option B?

    If you chose Option A, I know PowerWealth.com can help you because you are committed to doing what it takes to get ahead financially over the long term. Please return to PowerWealth.com again and again over the coming months to learn more of the insights I will be sharing with you.

    If you chose Option B, I don’t believe PowerWealth.com can help you much. My insights into building wealth can only help those individuals who are committed to doing what it takes to get ahead financially over the long term. You, unfortunately, have chosen otherwise. Still, I hope you will continue to return to PowerWealth.com. Who knows? You might just learn something new. And, if you ever feel pangs of regret for the choice you have made today, please know that PowerWealth.com will be right here to guide you through the choice again.

    Until next time, be sure to take time out to notice and watch how “money makes the world go ‘round.”

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NOTE: The term "miserablism" is believed to have been first attributed to Neil Tennant in 1990.

Copyright 2007 PowerWealth.com. All rights reserved.

You Don't Own Real Estate. Real Estate Owns You.

By Logan Flatt, CFA

    Many Americans believe that real estate can do no wrong as an asset class upon which they can build wealth. I disagree. Building wealth through real estate depends on your ability to distinguish among the three types of real estate ownership – investment, speculative, and personal. If you don’t know the differences, you may soon discover that you don’t own real estate, real estate owns you.

Investment Real Estate Puts More Cash in Your Pocket Than It Takes Out

    Investment real estate refers to the ownership and operation of income-producing real estate whereby the income generated by the property – usually, rent payments from tenants – more than covers all the costs of owning and operating the property. If the income is high enough to cover all the costs of ownership and operation plus leave cash left over for the property owner, the property is said to be cash flow positive. If the income fails to cover all the costs of ownership and operation, the property is said to be cash flow negative, whereby the property owner must dig into his or her pockets to come up with the cash to pay for the remaining, uncovered costs.

    A bona fide real estate investment puts more cash in your pocket than it takes out, on a repeatable, consistent basis. As such, a cash flow negative investment property is really not much of an investment at all. If you continue to hold on to a cash flow negative investment property out of pride or any other emotional attachment to the property, you are not maintaining an investment; you are maintaining a hobby. A rational real estate investor would put a stop to the repeated, consistent cash drain ASAP. In many cases, it is simply best to swallow your pride and sell a cash flow negative investment property. That way, you can let a new owner cope with the income shortfall each month while you put your sale proceeds to work in a cash flow positive investment property you can find elsewhere.

Speculative Real Estate Is a Bet Against the Odds

    When buying real estate at or near the prevailing market price, many people firmly believe they will make a profit upon the future sale of their real estate. Unfortunately, there is wishful thinking and there is reality. Wishful thinking plays a prominent, defining role in speculative real estate. A new property owner may hope to sell his property at a higher market price in the future, but in reality, he has no idea what the future market price will be. Nobody does – all future market prices are unknown to everyone. That is, until the future arrives.

    In the face of such uncertainty at the time of purchase, all the new property owner  can know is that there are three outcomes for a future market price: significantly lower than, similar to, or significantly higher than the current market price. In other words, unable to know at the time of purchase what future market prices will be, the new property owner has only 1 in 3 outcomes where he can sell his property at a future market price significantly higher than the current market price. If each outcome is equally likely, the new property owner's odds of selling his property at a highly inflated market price are low.

    Unfortunately, the odds of making a profit on a property purchased at the prevailing market price are made even worse by the high transaction costs of buying and selling real estate. Even if a new owner sells his property at the similar future market price, he still loses money thanks to brokers’ commissions, legal fees, and other closing costs incurred to sell the property. He also loses money selling the property at a significantly higher future market price if that future market price is not quite high enough to cover the high transaction costs. Clearly, the odds of making a profit are against those who buy real estate at the prevailing market price and hope to sell later at a higher market price. Such is the nature of speculation and the wishful thinking that leads to it.

Personal Real Estate is Simply a Purchase, Not an Investment

    Personal real estate is real estate you buy primarily because you believe you and your family will enjoy living there. Making money, if at all possible, is secondary. In fact, it is hard to make money with personal real estate. To make it your home, you must take cash out of your pocket each month to finance it, insure it, maintain it, fix it, furnish it, and pay property taxes on it. Unlike investment real estate, your home generates no income to offset these out-of-pocket expenses. So, while you likely derive much pleasure from owning your home, you lose money on it every month. Don’t fool yourself – your home is not an investment. It is simply a purchase.

    Nevertheless, despite draining you of cash every month, owning personal real estate generally beats renting a house, condo, or apartment for an extended period of time. Owning personal real estate gives you at least two options that renting does not. These options provide you with real value.

    First, unlike renting, ownership of personal real estate gives you the option to keep more of your income out of the hands of career federal politicians in Washington, D.C. Current U.S. federal tax laws allow you the opportunity to deduct mortgage interest and local property taxes from your taxable income. This helps reduce your U.S. federal income taxes. So, when you own personal real estate, more of your outgoing cash ends up helping your surrounding community, its schools, and its hospitals instead of largely going to waste in Washington, D.C. This is especially true if the investors in your mortgage are also local and in your community; such investors are more likely to reinvest your interest payments locally as well.

    Second, if you ever have to move due to a job change or relocation, personal real estate ownership gives you the option to hold on to your personal real estate and rent it to tenants after you move out. Exercising this option gives you the opportunity to turn your personal real estate into investment real estate. Of course, exercising this option might not make sense given your personal interests or financial situation at the time of your move, but it is an option you would not have had if you were simply renting the roof over your head. When moving out of a rental unit, despite all the monthly payments you made to your landlord, you walk away with no ownership in any real estate asset whatsoever. The advantage goes to personal real estate ownership.

You Don't Really Own Real Estate If It Can Be Taken Away From You

    The differences among investment, speculative, and personal real estate ownership are clear. However, you don’t really own real estate. You only think you own it. Even if you have paid off your mortgage in full, a county, city, or local public school district can still take your property away from you. Just stop paying the tax bills these governments send you each year and you will quickly discover who really owns your real estate.

    Paying property taxes is all you need to do to keep your real estate out of government hands, right? Sorry, but no. You could pay property tax bills in full year in, year out for decades and still lose your property to eminent domain, whereby a government expropriates your real estate to use it for what it claims to be society’s “greater good” – your personal property rights be damned.

    Clearly, while many Americans believe that real estate can do no wrong as a way to build wealth, it sure is hard to build wealth with real estate when, in so many different ways, you don’t own real estate, real estate owns you.

Copyright 2007 PowerWealth.com. All rights reserved.

Change The Game: Replace Your Credit Score with Your PowerWealth Debit Score™

By Logan Flatt, CFA

    In addition to their income and material possessions, many Americans use their credit scores as a way to evaluate and judge their financial success in life. Through decades of marketing, product innovation, and the passing of personal finance myths from one consumer generation to the next, America’s financial services industry has most of us conditioned to focus our attention on improving the credit scores computed and maintained for each of us by America’s four major credit bureaus, Experian, Equifax, Innovis, and Transunion. Such effective conditioning comes as no surprise – it is, after all, the financial services industry that profits handsomely from us taking out mortgages, using credit cards, obtaining car loans, and otherwise borrowing money for just about anything we want to buy or do to enhance our lifestyles.

Your Credit Score Helps the Financial Services Industry, Not You

    Alas, the more we consumers borrow cash from the financial services industry, the wealthier the industry becomes and the poorer we become. This can readily be seen in the simplest definition of your wealth, which is determined by your net worth:

Your Net Worth = What You Own – What You Owe

    The more you borrow from the financial services industry, the more debts you owe. The more you owe, the lower your net worth sinks toward zero, or even into negative territory. The financial services industry has a net worth too. But, what is true for your net worth is exactly the opposite for the financial services industry’s net worth – the loan you must repay to the industry is an asset the industry owns. The more the industry lends cash to you and other consumers, the more assets the industry owns. The more the industry owns, the higher the industry’s net worth rises.

    From the financial services industry’s perspective, your focus on your credit score is a great thing. Your behavior helps the industry grow wealthier over time. The financial services industry has it good – the product it sells is cash, the price of its product is a given interest rate, the interest payments we make are the industry’s revenues, and thanks to the industry’s unique ability to scale by simply recycling our interest payments into still more revenue-generating product, the industry’s profits are hefty. The industry has made the rules of the game, and the ball used to “win” in that game is your credit score. So, as conditioned, you focus on the ball, trying to move it up the field toward the goal. But, clearly, your behavior – your focus on your credit score – is not such a great thing for you and your family’s wealth. While having ready access to cheap credit can be a good situation in which to be, obsessing about your credit score so that you can borrow more and more from the financial services industry could ultimately preclude you and your family from achieving true financial freedom and security in your lifetime.

Rolling a New Ball into the Game – the PowerWealth Debit Score™

    I submit to you that you and your family don’t have to play the financial service industry’s game. You have a choice. You can change the game. You can freely elect to change your behavior. You can remove your focus on your credit score and, instead, focus your attention and effort on a new score with which you can better evaluate and judge your financial success in life. Herewith, I roll a new ball into the financial service industry’s game: the PowerWealth Debit Score™.

    As you know, your credit score is an indicator of your ability to borrow, and borrowing can be damaging to your wealth. In contrast, your PowerWealth Debit Score is an indicator of your ability to lend, and as you understand from the activities of the financial services industry, lending creates assets – loans – that you can own and use to increase your wealth over time. If one of your goals in life is to build enough wealth for you and your family to achieve true financial freedom and security, doesn’t it just make sense to place more of your focus, time, and effort on improving your PowerWealth Debit Score than on improving your credit score?

Calculating and Interpreting Your PowerWealth Debit Score™

    So, how do you calculate your PowerWealth Debit Score? The proprietary PowerWealth Debit Score™ formula below shows you how:

For a given month, quarter, year, or other period:

PowerWealth Debit Score™ = 1,000 × (Your Free Cash Flow ÷ Your Total Income),

where Your Free Cash Flow ≥ $0

    You can use your calculated PowerWealth Debit Score to fully evaluate and judge your ability to lend cash to others for profit and wealth building. For example, let’s assume that your household’s Total Income is $85,000 per year, and your Free Cash Flow is $8,500 per year (don’t worry – Free Cash Flow is defined in detail below). Using the formula above, your PowerWealth Debit Score would be a 100. Likewise, let’s assume that your monthly Total Income is $4,000, and your Free Cash Flow in a given month is $500; here, your PowerWealth Debit Score for the month would be a 125. Note that if you have no Free Cash Flow or your Free Cash Flow is actually negative (i.e., below $0), your PowerWealth Debit Score is simply a 0.

    Now let’s interpret your PowerWealth Debit Score. Whenever your calculated PowerWealth Debit Score is a 0, your ability to lend money to others is non-existent -- you are not in a good position to be creating loan assets that you can own and use to increase your wealth over time. However, any positive PowerWealth Debit Score suggests that you are in a good position to be creating loan assets to increase your wealth. Furthermore, the higher your PowerWealth Debit Score, the greater your ability to lend money for profit and wealth building. Any PowerWealth Debit Score above a 0 is good. Any score above a 200 is outstanding!

The Critical Role of Free Cash Flow

    Clearly, the key driver to your PowerWealth Debit Score is your Free Cash Flow. As part and parcel to the proprietary PowerWealth Debit Score™ formula above, your Free Cash Flow can be calculated as follows:

For a given month, quarter, year, or other period:

	Your Total Income
−	Your Retirement Account Contribution*
−	Your Health, Life, & Disability Insurance Premium Payments
−	Your Federal & State Income Tax Payments
−	Your Emergency Savings Account Contribution*
−	Your Regular Payments on Mortgages, Loans, and Credit Cards
−	Your Basic Living and Lifestyle Expenses
=	Your Free Cash Flow

*Your contributions to your Retirement Account and your Emergency Savings Account should be made according to how your personal financial adviser has advised you to contribute to these important financial planning accounts.

    Ultimately, your Free Cash Flow can be used for a variety of wealth-building activities, not just for creating loan assets by lending money to others. Other important uses of your Free Cash Flow include paying off credit cards in full, making extra principal payments on mortgages and car loans, fully funding your Retirement Account and Emergency Savings Account, and making equity investments. Each of these other important uses of Free Cash Flow can increase your net worth by reducing what you owe or by increasing what you own, thus helping you build financial freedom and security for your family over time.

    Clearly, using your Free Cash Flow to create loan assets by lending money to others is but one option out of many good ones available to you. A positive PowerWealth Debit Score simply tells you when you have the luxury of taking one or more of these options to pursue an opportunity that could increase your wealth.

Use the PowerWealth Debit Score™ Right Now and Change the Game

    Why not go ahead and start using the PowerWealth Debit Score today? It is a great way to help you evaluate and judge your own financial success. By electing to focus on your PowerWealth Debit Score in lieu of (or, perhaps, in addition to) your credit score, you open up far more opportunities to increase your wealth over time precisely because you are focused on building your wealth rather than on playing the credit game that America’s financial services industry wants you to play. Take action now and change the game – you’ll be glad you did.

Copyright 2007 PowerWealth.com. All rights reserved.

Stop, Thief!: 9 Tips To Stop You From Picking Your Own Pockets.

By Logan Flatt, CFA

    Got money problems? Need help controlling your desire to spend, spend, spend? There are many different ways to insert financial self control into your life. One way that you may not have thought of is to take control of the power that America’s marketers have over you and your desire to spend your hard-earned money needlessly.

    Some of the most talented marketers in the world ply their trade in America every day, crafting TV commercials, radio spots, print ads, billboards, Web ads, direct mail pieces, telemarketing scripts, and other forms of marketing communications to “inform” you about various products and services they want you to buy. If a talented marketer can attract and hold your attention for just a few precious seconds, that marketer can use powerful techniques to tempt you to voluntarily hand over your hard-earned money in exchange for the product or service the marketer has to sell to you. Unfortunately for you, most marketers are really, really good at what they do. They know how to attract your attention and then work their marketing magic on you – possibly without you even realizing it!

    Nonetheless, you are not completely powerless in the marketing game. You can take specific actions to significantly reduce the power that marketers have over you and your desire to spend needlessly. Here are nine tips – some easy, some hard – that can help you insert financial self control into your life by holding America’s extremely talented marketers at bay.

Tip #1: Hide Your Telephone Number

    The best way to put a stop to unwanted telemarketing calls at your home is to pay your local phone company a few extra dollars a month to make your telephone number unlisted and/or unpublished. You can’t receive unwanted telemarketing calls if telemarketers cannot get access to your telephone number.

Tip #2: Register Your Telephone Number

    You can also place your telephone numbers on the Federal Trade Commission’s National Do Not Call Registry. By law, telemarketers must remove your telephone number from their call lists if you are on the federal registry list. If the telemarketers call you anyway, they could be subject to federal penalties. To add your telephone numbers to the Do Not Call Registry, call 1-888-382-1222 or go to www.donotcall.gov.

Tip #3: Mask Your Telephone Number

    Do not give out your real phone number when filling out forms on a company’s website unless you already know in advance that you would like for the company to contact you in an emergency (e.g., so an airline can let you know your flight has been canceled) or to tell you more about a product or service you are considering but want to talk to a company representative about it first (e.g., a used car you saw at a car dealer’s website). Sometimes, an online form will require you to put in a phone number before you can submit the form. What to do? Simply enter your area code and then 555-5555.

Tip #4: Opt-Out Your Credit Report

    If you wish to reduce U.S. Mail solicitations for credit card and insurance offers by companies that target you based on the information contained in your credit reports, there is an opt-out program operated by the four major credit reporting agencies, Equifax, Experian, Innovis, and TransUnion. Once you opt-out, your name stays on a “do not contact” list for five years. There is also a permanent option. For more information, call 1-888-5OPT-OUT or go to www.optoutprescreen.com.

Tip #5: Let Your Preference Be Known

    The Direct Marketing Association also maintains a database of consumers who prefer not to receive U.S. Mail solicitations. DMA members must remove those consumers from their mailing lists. Once registered, your name stays on the list for five years. Send your name, address, and a request that the DMA add you to the opt-out list to:

Mail Preference Service
Direct Marketing Association
P.O. Box 643
Carmel, NY 10512

    Or, for added convenience, you can pay a small fee and do it online at www.dmaconsumers.org.

Tip #6: Flag Your Account

    Do you already do business with a company that continuously sends you offer after offer by U.S. Mail each week – or worse, several times a week? There are many credit card companies out there that do this all the time, sending out credit card offers, convenience checks, and short-term loan offers by the millions each and every week. The easiest way to get them to stop sending offer after offer is to mail a polite letter to the company’s Customer Service or Consumer Relations department simply asking them to put you on a “do not mail” list, if they have one. Be sure to include your account number in the letter so that they know you are an existing customer and can flag your account as being on a “do not mail list.” Do this once, being sure to make a photocopy or two of the signed letter before you mail it. Then, wait at least two months to see if the offers from the company reduce in volume or stop altogether.

    If after two full months the company’s offers keep coming to you at the same rate as before, make your request more serious by writing a new letter addressed to the company’s General Counsel, the attorney the company keeps on staff or on retainer to handle its legal matters. You might be able to find his or her name on the company’s website. If not, just address it to “General Counsel” at the company’s headquarters address. Again, be polite in your letter to the General Counsel, and simply repeat your original request. Be sure to let the General Counsel know that you wrote the company about the request at least two months ago and experienced no change in the number of offers you received each week. For the General Counsel’s convenience, attach a photocopy of your original letter to the new letter. Getting the attention of the company’s attorney should help get you on an internal “do not mail” list at the company.

Tip #7: Monetize Your TV

    You probably think your TV exists primarily to entertain you with your favorite TV shows, but you’re wrong. Your TV exists primarily to allow America’s marketers into your home where they can market products and services to you and your family while you are relaxed, in a safe place, and mentally open to a quick sales pitch. It is no surprise that TV has been the American marketer’s most effective marketing tool for over 50 years.

    How best to cripple the marketing power of TV in your own home and render it useless to marketers? Simply turn off, unplug, and sell your TV sets for cash on craigslist.com, at a pawn shop, or at a local thrift store. Then, add the cash to your savings account or use it to pay down your debts – that’s an instant increase in your financial security. With all your TV sets out of your home, you will never even see all those pesky TV commercials “informing” you about new products and services you don’t really need and tempting you to go out and buy them.

    Yes, at first you will miss your favorite TV shows, but not for long. You’ll soon forget that TV shows even exist because the principle of “out of sight, out of mind” really works. You’ll soon rediscover that there is so much more to life than sitting around on the couch watching the “boob tube.” Yes, your friends, family, and colleagues might think you’re a little strange for not having a TV set in your home and not knowing all the little details about all the latest TV shows they want to talk about, but so what? While they will possess useless TV knowledge and be tempted by hundreds of TV commercials every week, you will soon discover that TV ignorance is wealth-building bliss!

Tip #8: Turn Your Radio Off

    What works for TV also works for radio. The morning drive shows on most major radio stations are designed to hold your attention while the on-air personalities talk about companies’ products and services in a clever, casual way. Take control by turning off the radio and putting in a CD or using an iPod containing your favorite music, audio books, or podcasts. You’ll arrive at work fully entertained and informed, yet none the wiser about what marketers want you to learn from their radio commercials and on-air plugs about products and services you probably don’t really need.

Tip #9: Put Down That Magazine

    Mass media magazines like Cosmopolitan, Men’s Health, People, InStyle, Time, Esquire, Vogue, US Weekly, Money, Sports Illustrated, and others are designed to be helpful to you and the lifestyle you lead. But, they can also leave you feeling insecure or inadequate about yourself as if something were missing from your life. Conveniently, within their very pages are advertisements – designed and paid for by marketers – that feature slick, high-quality photography showing happy, attractive people seemingly without a care in the world enjoying some great product or service that they supposedly just spent hundreds of dollars, maybe even thousands of dollars, to own or experience. Of course, the people in the advertisements are just actors and models, not real people like you, but the advertisements seem to tell your brain that you could be transformed to look and feel just like these shiny, happy people if only you were to plop down hundreds or thousands of your own hard-earned dollars for the same product or service the actors and models are enjoying.

    How can you take control of the power that marketers have over your brain through their picture perfect advertisements? You guessed it – simply choose to not read mass media magazines. “But what about all the great content in those magazines?” you ask. Sure, the content may be fun, informative, and of interest to you. But, think about it: the content is only there to act as bait to get you to spend time with the marketers’ slick advertisements and be tempted to buy products and services that you probably don’t really need in the first place. So, decide which is more important to you: the content in mass media magazines or the contentment that you and your family will enjoy from knowing that you are well on your way to being financially secure thanks to you no longer being tempted by marketers’ slick advertisements in mass media magazines.

Copyright 2007 PowerWealth.com. All rights reserved.

A Simple, 3-Step Program

By Logan Flatt, CFA

    How would you like to live in crushing, abject poverty? Does the idea of living and sleeping on the streets of a major American city sound appealing to you? Would you like to grow old and penniless, spending your final days on this Earth barely getting by on the meager checks sent to you by some large government bureaucracy? Well, my friend, do I have the program for you.

    I call my program "Live to Fail Always." It is a simple, three-step program even you can follow. It is fast and effective. Plus, it is easy to learn. Best of all, you can start applying the program in your own life today! So, are you ready? Are you excited? Alright then, let's get started by taking a look at the first step of this amazing program.

Step #1: Live A Life You Cannot Yet Afford to Live

    This step is so easy. Simply fail to save any money. That's right, spend every penny you earn on living the good life --€“ today. Do you want to own something you just have to have right now? Well, what are you waiting for? Go buy it! After all, it is yours to be had, so why not just have it? The important thing here is to stay in line with the average American who currently saves less than 1% of his or her personal disposable income. Any money you save above 1% is money that you could have spent. So, go spend it.

    Now, to do Step #1 the right way, let me let you in on a little secret: Once you have spent all your income such that you have saved next to nothing, simply borrow money from others so that you can spend even more. At first, borrowing money from others might sound a little challenging. After all, the average American is out there in the economy spending almost every last dime he or she has, so they have no money to lend to you. Well, thankfully, there are companies out there that will give you a little plastic card called a "€˜credit card"€™ that allows you to borrow money from them whenever and wherever you want to spend their money. Just take that little card everywhere you go and charge it up. Don't worry too much about paying back what you borrowed -- you've got all the time in the world to do that.

    If you are lucky, some credit card companies will allow you to borrow money from them for only 18.9% interest and an $85 fee per year. Importantly, be sure to allow the interest charges to roll over from month to month, year after year after year. Let those compounding interest charges work their magic on you. Still, be careful. You only want to charge up your credit card on things that have little to no lasting value after you have paid for them. Services like restaurant dining, airplane travel and professional dry cleaning are safe bets here. You do not want to buy anything that might increase your personal wealth --€“ the value of what you own minus the value of what you owe. Buying and accumulating items that increase your wealth only delays your reaching the pinnacle of this very special program: bankruptcy.

    Bankruptcy occurs when you borrow so much money from others that you cannot go out and earn enough money or pawn enough things you own to pay it all back. In 2006, over 2.0 million Americans reached this pinnacle by filing personal bankruptcy. That is what you and Step #1 are all about: doing exactly what many Americans do, spending all the income you earn plus spending the money you borrow from credit card companies to maintain a certain lifestyle you want to live before you can truly afford to live it. It is an excellent way to fail financially.

Step #2: Fail to Maximize Your Earning Potential

    Be sure to keep your income low. Earning too large of an income only delays your need to borrow from others to outspend your own means. After all, if you make too much money, you might run out of month to spend it all. In that case, you would have to put the remaining money into savings and defer the gratification of spending it all today. This behavior runs counter to the spirit and intent of the program.

    To keep your income low, avoid asking for raises at work or switching jobs to land a higher salary. If you must ask for a raise, try to give your boss little reason for doing so. For example, do not go into your boss'€™ office with a list of new responsibilities that you would be willing to take on to the benefit of the company in exchange for a higher salary. Instead, go into your employee performance review with clear evidence that you merely did what you agreed you would do as part of your employment agreement when you joined the company. Then, defiantly demand a raise without offering to contribute anything beyond what you are currently doing for the company. That should keep the raise to a modest level.

    Whatever you do, don't go off and start to generate a second income from your own business that you start in your spare time. The last thing you want to do is have your own business on the side grow so large that you are making more money from it than you are from your current job. After all, why try to make extra money on the side when you can just borrow the money you need from the credit card companies?

Step #3: Always Pay the U.S. Federal Government First

    Another counter-productive aspect to starting your own business is that it only reduces and delays your income tax payments to the U.S. federal government. When you own your own business, you only pay income taxes on your profits --€“ the amount left over from your sales after you have paid out all of your expenses related to running your business. Since your business' profits will always be less than its sales, you will always pay income taxes based on a smaller dollar amount.

    In contrast, when you work as an employee, you pay income taxes directly on your full salary or wages --€“ in effect, your "sales"€™ from selling your personal time to your employer -- before any related expenses reduce what you pay in income taxes. That way, you will always pay income taxes based on a larger dollar amount. Plus, the U.S. federal government requires your employer to take out your income taxes from your pay check before you can get your hands on your own hard-earned money. Now, that is convenience!

    Finally, as an employee, more of the money you earn goes to the politicians in Washington, D.C. This makes sense: career politicians earning six-figure salaries in our nation's capitol can spend your money much faster than you could ever spend it yourself. It is simply more efficient to give these politicians your money up front. Otherwise, you might be tempted to go out and spend your money on things to improve your own life instead of giving your money to federal politicians for society's "greater good"€™. After all, the politicians in Washington, D.C. feel confident that they know how to spend your hard-earned dollars better than you do. Some examples include, but are not limited to, the failed "War on Poverty"€, the failed "War on Drugs"€, the perpetually bankrupt Amtrak rail service, and other pork barrel projects and federal bureaucracies of little or no value to American society.

Yes, You Can Live to Fail Always!

    Even you can follow this easy, three-step program. In fact, if you think about it, you may be following this program already. How can you tell? Check your savings account balance --€“ how much money do you have tucked away for emergencies and investing? Count the number of credit cards you have --€“ when will you have the balance on each of them paid off? Take a look at your job --€“ when was the last time you asked for an increase in your salary or wages in exchange for an increase in responsibility? Finally, look at your most recent pay stub --€“ do the politicians and government programs in Washington, D.C. really deserve so large a chunk of the money you rightfully earn each month before you can even get your hands on it? If your answers to these questions lead you to feel that you are living a life that you cannot yet afford to live, that you are failing to maximize your earning potential, and that you always seem to be paying the U.S. federal government first, you may have stumbled upon my get-poor-quick program already.

    Nevertheless, is my program right for you? Indeed, it is not for everyone. Some people do not like being poor. Others simply wish they had a lot more money than they do now. How about you? Would you prefer to have more money than you do now? Would you like to be rich beyond your wildest dreams? If so, you are in luck -- you live in the United States of America, the richest country in the history of the world. Unlike in most other countries, opportunities for the average person to get rich are plentiful in America. Real-life, rags-to-riches stories abound. Moreover, financial freedom is a marvelous reality for literally millions of people in America. It could be your reality too.

Yes, You Can Enjoy Financial Freedom!

    Do you want to create a reality of financial freedom for you and those you love? Well then, here is a tip: stop following my get-poor-quick program immediately. Stop living a lifestyle you cannot yet afford to live --€“ cut back on your expenses; save the difference; pay off your debts; invest and hold your money in sound, reasonable investments for the long term. Stop failing to maximize your earning potential --€“ ask for more responsibility at work in exchange for higher pay. Do what it takes to increase the amount of money you bring into your household every month. Try to avoid paying the politicians in Washington, D.C. first --€“ contribute to your 401(k) or comparable retirement program at work that reduces your taxable income today and builds up a portfolio of investments on which you can live later in life. Start that small, profitable business on the side that, unlike a job, enables you to pay taxes on net profits, not gross sales. Write your state'€™s elected officials in the U.S. Senate and the U.S. House of Representatives and tell them you want them to stop wasting so much taxpayer money on unnecessary federal programs so that the budget necessary to run a smaller federal government and the significant taxes they take out of your paycheck every pay period can go down -- way, way down. After all, your elected officials in Washington, D.C. are there to serve you, not the other way around.

    As you stop following my get-poor-quick program, you will see and feel changes in your financial situation. You will see less and less of your hard-earned money going out of your pockets and checking account to be spent on frivolous services and items of little long-term value. You will see more money coming into your household from better pay at work and from the profits of your small, on-the-side business. You will see your credit card balances and car loan balances decrease quickly, all the way down to zero. You will see less and less of your hard-earned money separated from you in the form of federal income taxes. You will see your savings and investment account balances grow nicely, bringing you long-term wealth, stability, and comfort. You will feel infinitely more confident and secure about your financial station in life. You will feel happy and extremely proud of what you have accomplished financially for you and those you love. Moreover, you will be rich -- a little older perhaps --€“ but rich all the same.

Copyright 2007 PowerWealth.com. All rights reserved.

Want To Get Rich? Stop Escaping from Reality.

By Logan Flatt, CFA

    Whether they consciously recognize it or not, many people in America today actively try to avoid dealing with reality. Reality is real life. Oftentimes, real life can be harsh, relentless, and unforgiving. Not surprisingly, many Americans do what they can to escape from reality. Millions of Americans spend many hours each day focused on man-made distractions that take them into an imaginary world far away from reality. Television. Cable. Movie theatres. DVDs. Magazines. Tabloids. Romance novels. Science fiction. Celebrity gossip. Video games. Bingo halls. Casinos. All of these are man-made distractions. All of these figure prominently in the typical American lifestyle. All of these help us make our escape from everyday reality.

    No doubt, slipping off into the distractions of an imaginary world is necessary sometimes. We all need a break. We all need entertainment. We all need to just stop sometimes, sit back, and let imaginary experiences wash over us. So we do. It’s a healthy thing to do. However, like many things in life, too much of a good thing isn’t always good for you. Too much time in Fantasyland causes us to fail to see real life going on around us.

    Building wealth is inextricably linked to reality. One of the reasons so many Americans fail to get ahead financially – despite living in the wealthiest country in the history of the world – is that their minds are not focused enough on the realities of life. Business opportunities, investment opportunities, and pretty much all money making opportunities in America exist because of gaps between the demand for and the supply of real world products and/or services in our free market economy. To take advantage of these opportunities, you have to “be there”, where the action is – in reality.

    The clock is ticking. It never stops. Whenever we elect to hang out in Fantasyland, other people’s minds are working, thinking critically, making breakthroughs, and discovering new methods. Their bodies are active, participating in the real world, responding to actual events, changing with the ebb and flow of reality. In short, while you allow yourself to be seduced by man-made distractions, others in America and around the world are pulling ahead, finding new ways to improve themselves and the lives of those around them. Many of these folks are focused on building wealth and they are out there doing it and getting richer.

    If you want to build wealth in America so that you can achieve financial freedom for you and those you love, you must avoid getting swept up in our National Escape from Reality. Going forward, cut back on the precious time you spend escaping real life: watch less television, watch fewer movies, decide not to care about celebrities and their phony lives, throw away all your mass market magazines, avoid casinos, sell your video game console on eBay, and replace your fiction reading with non-fiction books that will teach you something new and improve your skills. If you will just spend more time appreciating what real life brings to all of us, you’ll be surprised -- wealth will find you.

Copyright 2007 PowerWealth.com. All rights reserved.

To Consume, Save, Invest, or Speculate? That Is The Question.

By Logan Flatt, CFA

    I believe it was Shakespeare who once mused:

        Many Americans know not where their money goes

        To consume, save, invest, or speculate?

        That is the question to be posed

        Before thy money is gone

        To question early in life is to see thy freedom grow

        Save a nickel, a penny more

        To consume, save, invest, or speculate?

        That is the question to explore

        Before thy breath is gone

        To question later in life is to depart ‘mid the poor

    Okay, perhaps Shakespeare never penned such awful poetry, but the message is sound. To consume, save, invest, or speculate? It is an excellent question. Before you answer, consider your options.

You CONSUME when you choose to exchange your money for something of little lasting value.

    We are all consumers. We must buy products and services just to get by. However, consuming destroys our wealth. When we buy a product or service, we shift a bit of our wealth into the pocket of the seller by handing him more dollars than he spent on the product or service he hands over to us. The difference in dollars is the seller’s profit. In exchange, we end up with a product or service worth less than what we just paid the seller for it. Worse, its value falls rather quickly – even down to zero if we consume the product or service in full.

    Profit is not a bad thing. Sellers deserve a profit for providing value to consumers. A bad thing is consumers consuming excessively. Too many Americans today give too many dollars – even dollars borrowed from banks – over to sellers in exchange for products and services of little lasting value. Across billions of transactions each year, sellers collect mounting slices of our wealth. Consumers, in turn, collect mounting piles of worthless objects and wistful memories.

You SAVE when you choose to avoid, reduce, or delay exchanging your money for products and services.

    Many of us are savers. We save money when we keep a little – or a lot – of our cash income in our bank accounts by taking control of our exchanges with sellers. Just because sellers offer us cool, fun, or interesting things doesn’t mean we must possess or experience these things to live a fulfilling life. How many times have you rushed out to see the latest Hollywood movie only to leave the theater thinking, “Well, that was a waste of time and money”? Yet, the time is lost forever and your money is in the pocket of the ticket seller.

    Time and money are essential ingredients to building wealth. While many Americans seek to “get rich quick” with “no money down,” financial freedom begins with our own cash savings and a large dose of patience. Compounding interest, dividends, earnings, and gains from wise investments will, over time, offer us a greater chance at financial freedom than years of playing the lottery ever will.

You INVEST when you choose to exchange your savings for an asset you know is worth far more than its price.

    Some of us are investors. We invest when we exchange our savings for assets worth significantly more than the price we pay for them. Why would someone want to exchange his valuable assets for our smaller cash savings? Time and money. The assets may be valuable because, over time, they are expected to put significant cash flows – dividends, interest payments, royalties, net rental fees, etc. – into the pockets of their owner. However, the owner may not want to wait for time to pass before he can pocket the cash flows himself. Instead, he prefers to pocket our smaller cash savings right now.

    Think of it as paying $10 for a $20 bill. No doubt the $20 bill is worth $20, but the seller’s price is only $10. We pay the seller’s $10 asking price and instantly own an asset worth $20. Such an exchange is how we wisely invest our savings in assets like stocks, royalty trusts, small businesses, and rental properties. If we repeat these exchanges over and over again, we become wealthy. This is how the world’s wealthiest investor, Warren Buffett, invests his billions. How does he find such great deals? Speculators hand them to him.

You SPECULATE when you choose to exchange your savings for an asset you have not reasoned its worth.

    Many of us are speculators. We speculate when we willingly exchange our cash savings for assets the worth of which we do not know. Speculators do not take the time to study an asset and determine its worth. Instead, they just pay the seller’s price and hope that the price will be higher later. Some speculators speculate and make millions. Many, however, lose their sh