Archive for July 2017

Intelligentsia: The Other 1%

Future professor.

Plenty has been written about income and wealth inequality over the last decade. There is another inequality gap expanding even faster than that of income and wealth. The gap between the top 1% and the rest is growing rapidly in this area and it had a direct effect on income and wealth.

I call it intelligentsia. These people are the most educated or learned (there is a difference) and therefore control their ability to grow income and wealth at will. These hyper intelligent people also have greater political influence.

The intelligentsia are the other 1%. Nobody is complaining about their growing gap of knowledge. The reason for this is clear. Anybody who wants to grow their level of knowledge can with few barriers. Because personal responsibility is involved we will never see a rally or protest claiming people are not allowed to learn.

Do not confuse this with formal education. Formal education is expensive which is a serious barrier many people cannot overcome. The intelligentsia know a formal education is only a small part of knowledge and the influence it brings. Most colleges teach nothing about sound investing. As the owner of a tax practice I can assure you colleges are not churning out highly qualified tax professionals. These and other forms of knowledge require a personal commitment to learning.




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Optimism and the Fountain of Youth

When Donald Trump won the Presidency many people were elated. Many more were depressed. Others felt scorn, concern, nervousness, helplessness and betrayal. How could this happen? A man with no political experience and a fire brand built on controversy win the election?

Shortly after the election Warren Buffett was quoted as saying America would be just fine with Trump as President even though Buffett supported Hillary Clinton. He said America has the “secret sauce” to keep the nation strong and growing. It did little to sooth the nerves of people fearful what damage a political unknown could do to the country or the world.

Warren Buffett made a career out of optimism. From an early age he always felt America would keep growing and the standard of living would keep rising. Recently in a Berkshire (a public company he runs) annual report he espoused how good things were. (This was before the election season started.) Buffett outlined how even 2% GDP growth coupled with the low population growth of the U.S. would add 34.4% to real growth over the next generation. This is on top of our already high standard of living.

Where does such optimism originate? Better still, can we have some? Buffett’s optimism has made him one of the richest people to have ever lived. He sees brighter days no matter what the economic conditions.

Today we will discover how and why optimism is the source of all wealth and a virtual fountain of youth. We can have more and live longer. Warren Buffett is pushing against 90 years of age and is spry as ever. He drinks soda and eats junk food every day. If anyone has a secret sauce to happiness, financial independence and long life Buffett is the guy.




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Steal My Stuff, Please, Part 2

Previously our discussion started with a review of Ryan Holiday’s book Perennial Seller. We covered most of the book and I provided enough information for you decide if purchasing the book was worth your hard earned money.

We skipped lightly over the marketing section of the book for a reason. I wanted to share an observation from the book I’ve been making to my clients for years and to encourage you to steal my work. You read that right. Before this post is over I’ll have you feeling good about plagiarizing me into infinity and beyond.

In Perennial Seller Holiday covers marketing well. One area stuck out for me however. Holiday states almost everyone overestimates the value of traditional PR. Not only is it expensive, it doesn’t work. I agree.

For years I have advised business owners about advertising opportunities that come their way. It is rare for these offers to have any real value and in many cases drive zero clients your way while emptying your wallet.

It is so bad that I blanket state all promotions that walk in your door are worthless while promotional idea you personally have enjoy a fighting chance of generating at least a modest profit. The stuff walking in the door comes via a salesperson. Of course they have the best deal ever. I have been warned numerous times over the last three decades I would soon be out of business if I didn’t use their offer. After all these years I am starting to hope they are right. Man’s gotta retire sometime.

What has worked? Well, a lot of my promotional ideas have worked well while costing nothing or nearly so. I walked flyers I printed in my office in the early years of my firm. Gained a large number of individual tax returns in the process and became profitable too.




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Perennial Seller, Part 1

Have you ever wondered why Gone with the Wind and The Wizard of Oz continue to thrill audiences nearly a century later while the box office leader three years ago over Christmas weekend can’t be sold by Wal-Mart for less than a dollar from the remainder bin? Why does The Shawshank Redemption still perform well after more than two decades?

Closer to home, why do some personal finance blogs find a massive and growing audience while others languish? Mr. Money Mustache publishes a few times a month and still generates 5 million pageviews or more per month. What characteristics do perennial sellers have? More important, can we replicate their success?

Last week one of my all-time favorite authors, Ryan Holiday, published Perennial Seller: The Art of Making and Marketing Work that Lasts answering the above questions. Holiday has ample experience to draw from in his work with companies such as Google and cultural icons like Tim Ferris.

You can reinvent the wheel or you can learn from the best. Perennial Seller breaks the process of creating long-term success into four parts: The Creative Process, Positioning, Marketing and Platform. We will touch on each of these before we end with a real world example from our personal finance (PF) community.





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They’re All Dead

OH NO! Look what happened to the Accountant family! Notice the cat at the right edge starting to chew on a carcass. Don’t blame the butler this time; it was the cat!

Recently a post card came in the mail inviting me to attend my 35-year class reunion. The years certainly got behind me fast. My only excuse is that I am having too much fun.

Between the office and home is my gym. Three days a week I lift weights (normally Monday, Wednesday and Friday). Outside the gym I hike, jog, work on the farm, et cetera to keep myself in shape.

A few months ago a high school classmate, Doug Zastrow, joined my gym. It has been a long time since we saw each other and talk fairly regular now, catching up on life in our humble community.

Doug mentioned receiving the class reunion postcard, stating he had no intention of going. I nodded agreement. My argument was I didn’t want to pay $60 for a meal and a few drinks at a country tavern. Doug had a different reason.

Doug named two classmates he chummed with over the years. Both are dead now. We both started counting the number of classmates who had already died. The first victim was a girl who died from a genetic disease followed by a guy from my clique. He died spear fishing on Lake Winnebago with his son. He didn’t vent his ice shanty correctly and died of CO^2 asphyxiation. We kept tallying the numbers. Another died of a genetic disorder, one from cancer, a few accidents, a few heart attacks and even one suicide.

By the time we added all the classmates we know were dead we had reached 20 souls out of a class of 120. There is no doubt we missed a few. People move and word of a death doesn’t always reach my ears. It’s not what I focus on in life.




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How Milking Cows Taught Me to Respect Women

It all went wrong before I ever started. Mrs. Accountant and the junior accountants (I have daughters so I guess they are junettes) carpooled with me to take care of a variety of errands in town. When the family gathers in a confined place the situation turns strange very fast as I start with crazy talk.

For the record I consider myself a bit of a comedian. Not in any professional sense, but I fashion myself as a funny guy. Give me an espresso or two, wait fifteen minutes and watch the fun begin. Once on a roll it is hard to stop the train.

The clan sees me writing a blog so a lot of blog writing is going on around the house. Before long I was coming up with what I considered powerhouse titles to posts when the title of this post popped into my head. Groans echoed around the cabin of the car. I stood my ground. It was funny and I knew it. (It was also clickbait and I knew that too!)

The girls of the household don’t always hold my level of humor in high esteem. It hurts. My feelings are tender. The lack of enthusiasm for my blog title only encouraged me to step up the game a level. I started to flesh out the details of the obvious humor piece. The jokes came fast and furious while I skirted around the implication of the title.

No matter how hard I milked the situation I was cowed. My udderly fantastic jokes fell on deaf ears! How could that be?




Later in the day we stopped at the office. I shared my humor with the team. My spirits found another hoof to stand on as the folks who haunt the halls of my practice found my humor enjoyable. Then it dawned on me I pay these people. They could be humoring me to preserve their paycheck or it could be I hire people as perverted as me. More research was required.

Milking cows teaches us multiple lessons: leadership, respect, love, and even how to raise our children. Learn how milking cows can teach you the most valuable life skills, including building wealth.

Milking cows teaches us multiple lessons: leadership, respect, love, and even how to raise our children. Learn how milking cows can teach you the most valuable life skills, including building wealth.

The last item on the agenda was a visit to the gym. I couldn’t wait to share my humor. But before I had the title out groans pulsed through the crowd. The ladies turned and left with twisted faces; the guys were stunned silent. As hard as it is, I had to put the idea out to pasture.

Busting Tail

If you allow an idea to percolate in my head for a while I sometimes turn a sow’s ear into a coin purse. (My apologies to all the sows reading this blog.) The title is obviously clickbait and I am good with that. It also allows me to share stories from my farming background that help illustrate the issues surrounding financial independence and success. So here goes.

You can learn a lot about a farmer by looking at his cows. Cows are ladies and should be treated as such. They are as soft and tender as any human female. They will love you and trust you as long as it is earned. If you slap your significant other around you get the same response a cow gives when you beat and abuse her.

In the old days before milking parlors were the rage farmers milked cows while they stood in stalls with their heads secured (the cows, not the farmers) in a stanchion. Two rows of cows were secured along either side of a wide walkway.

Cows don’t always want to get milked. Some cows love it; other are a bit more reluctant to getting felt up by a human and have a machine suctioned to their teats. Women.




When a woman refuses to listen, a man has several ways to deal with the situation. You can grab a pipe or hit with the expected results of anger, push-back, animosity and fear. It doesn’t work guys! You can force all you want, but nothing beats voluntary compliance. (Stay with me ladies. Voluntary compliance through deceit is not nice either, but there is a point to this.)

There are other methods to getting a cow in a stanchion. An unruly cow can be pushed. Every farmer knows you can twist a cow’s tail in a loop and push. It causes serious pain for the cow and might be enough to get the cow to walk forward. Of course if you push even a bit too much you break the tail.

You can tell a lot about a farmer by walking into his barn. If his cows all have broken tails you know what’s going on. The farmer thinks he can force his girls into compliance. Hitting and the electric cattle prod are sure to be a part of the torture sessions.

This behavior is cruel and never works. Dumb farmers up the game by breaking the tail multiple times or getting a bigger lead pipe. Thankfully most of these types of farmers are long gone, out of business.

You never treat a lady like that. EVER! And cows are ladies. If you treat your ladies in the barn that way I can only imagine how you treat the lady of the house.

Busted tails are a bad sign! It doesn’t work either. Cows get stubborn and will take the pain before acquiescing. Hence the multiple tail breaks. It also lowers milk production. Happy cows make happy farmers; abused cows make broke farmers.

There is a way to get a cow to do what you want within reason. For that we need to talk numbers.

My Favorite Numbers

Years later we built a milking parlor (1978). (I started milking cows at a young age.) Our parlor was a herringbone style where twelve cows were milked in two rows, six on each side. The cows walked in and stood at a slight angle so the backside of the cow was slightly toward the middle.

The farmer stood in a pit between the rows of cows. The pit was a major improvement over stanchions. No more crouching and kneeling to milk cows. More knees were saved than any other time in history.

The udders were chest height to the farmer in the pit. The udder was washed with warm water and massaged to help the cow relax and drop her milk. A machine with teat cups with pulsing suction extracted the milk. Another tremendous improvement was the automatic takeoff. When the cow was done milking the machine sensed this and automatically stopped the suction and an arm pulled back the milking apparatus.

Holy Cow

Once the cow was milked the farmer’s work was not done. The farmer would apply teat dip to each teat to prevent bacteria from entering the teat, protecting from disease.

The care and treatment of cows is of the highest importance to dairy farmers. Those girls are the entire business. An injured or sick cow meant hard times for the farmer. Treat your girls right and business was good.

Milking parlors increase the number of cows one person could milk. Our simple herringbone style parlor allowed me to milk a couple hundred cows in a few hours versus several people milking 60 cows in the same timeframe.

As the cows waited to be milked they stood in a holding area. As cows were milked and released the holding area needed to shrink to force the cows into the parlor. An electrified bar with chains hanging down were on a trolley controlled from the parlor pit. The farmer hit a button sending an alarm from the electrified chains as the trolley slowly moved forward. I hated the darn thing with a passion.

My favorite cow was Number 34. She was always the second cow in every milking on the south side of the parlor. Her daughter, Number 82, was the last cow milked every time. Both walked in of their own free will.

You see, Number 34 and I had a good working relationship. I would greet her every day with a smile and a hug around the neck. The way she turned her head to hug me back makes me believe she enjoyed our relationship. She was a good cow. I miss her.

Her daughter, Number 82, was just as friendly. Mother and daughter enjoyed more petting and brushing than any two cows I ever saw. Our cows were friendly, but these two were off the scale.

34 was nearly first every milking; 82 was last because she was cleanup crew. I hated the electric chains so I used them seldom. 82 would actually herd the last stragglers in before she stepped in herself to be milked. God, I miss those girls.

Leadership Skills

Remember I said some farmers try to force their cows into compliance? Well, it doesn’t work any better with cows than it does with humans. The preferred method to encourage compliance is bribery with food. To get cows in stanchions a farmer will place food in a bunk in front of the stanchions. It works wonders.

In the parlor there was a place for corn or haylage in each spot the cows stood. Corn is a powerful inducement to get cows to do what you want. I never bribed my girls. They always walked in because they wanted to be milked.

A cow with a full udder must feel uncomfortable. At least it seemed to me by their body language. The only reason a cow will not volunteer for the blessed relief of an empty udder is abuse or fear. Food can get a cow to respond even when afraid, but it is completely unnecessary if you treat the ladies with respect.




My voice was all I needed. “Milking time girls,” is all I needed to say and they came running. If they were out in the pasture I yelled out, “Here, CABAASSSSS!” The high pitched wail was all that was needed to bring the herd running, yes running, to the barn. There is something about a couple hundred cows running straight for you at full speed. A cow weights around 1,500 pounds (680 kilograms) each. Mutual respect is the only reason I felt safe standing my ground while exposed.

My cows knew me and I knew them. Each cow has her own personality. Daily I would walk among the cows as they grazed in the field or roamed the free stall barn, petting them as I went. I knew a cow was sick before she did. I could see it in her body and actions.

Communication was important. My ladies knew my voice and knew it meant safety. They ran to my voice any time of the day. If I walked among them they always gathered around.

There is no doubt my girls knew what I was saying. Sure, they didn’t know the actual words, but they knew the tone. They knew I was going to brush them before I did. The cows would rub against me, careful not to knock me over. I didn’t push them around and they didn’t push me around. Something I was always grateful for. My girls a big!

Milking cows taught me how to treat women (and money). You can’t force either. You might use intimidation or fear to get what you want but it is always a self-defeating activity. My cows wanted to come by me and be milked. Mrs. Accountant loves me and stays by me because she wants to. I can’t force her (or the junettes) to do anything they don’t want to. The relationship is symbiotic.

People try to force money all the time by playing the lottery of day trading. It rarely works. You can start breaking tails to force the issue or bribing with yummy corn. In the end it is the hard way to get anything done.

The only way to financial independence is the same way to treat cows. You spend time at it patiently. You invest daily and allow the investment to yield dividends. When done correctly the cows walk right in to be milked. When done correctly money comes to you without threat or intimidation or forcing of the issue.

Finally, all those years of experience massaging cow udders to please my cows have paid off with Mrs. Accountant. (Sorry. I couldn’t resist at least one joke from the original content.)



I Preempt Our Regular Programming (Can We Talk?)

Sitting in a darkened room at 2 a.m. searching for words to type seems like an adventure for Don Quixote. Will anyone read the post? Will it matter? All questions, and doubts, every blogger faces daily.

Of course we can take solace in our traffic statistics. Numbers keep stair-stepping higher, salving our fragile egos. But each step higher is followed by a slight reduction in traffic before finding a floor, waiting for the next exposure sending traffic another notch higher creating more doubts.

Then we have revenue streams. Young blogs building traffic to acceptable levels see modest income. The heart flutters with delight when a batch of good news arrives. People are “buying” into my ideas. Readers become fans and start their Amazon shopping from the blog and consider affiliates listed or shared as part of a post. A surprise upswing causes the heart to sink when the follow-through is weak.

The comments offer consolation.  Each comment reminds me a reader is engaged. Of all the things a reader can do to remind the blogger he is not alone in the darkened room at 2 a.m. is to comment. The message at least got through far enough to encourage an intelligent response.




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Living with a NIMCRUT

Recently I discussed my net worth and how I went from a poor farm boy to an eight figure net worth. To keep the discussion moving I glossed over a few issues, most notably some of the vehicles I use to invest and protect my net worth from taxation. My sole mention of using trust instruments to protect net worth and save taxes caused several requests to hit my email inbox. People wanted to know more about trusts and how they can be used to super-charge net worth, provide guaranteed income, reduce taxes and protect against lawsuits stealing your hard earned money.

To which I mentally replied, “Is that all?”

A tax discussion on trusts turns into hard core tax planning quickly. Discussing all trusts is beyond the scope of a simple blog post and even beyond the scope of an entire blog. Too many variables are involved. What we can do in a single blog post is cover one trust topic enough to help you decide if it is right for you and get you to the right people to facilitate the process.

Today we will discuss an animal called the net income makeup charitable remainder unitrust, or NIMCRUT. It sounds like a derogatory name you would call someone in the heat of battle. Instead, the NIMCRUT, or even her sister the CRUT, is the perfect tool to get a massive tax break now, avoid paying capital gains on highly appreciated assets, help the charity of your choice and get a nice income stream—some of which might be tax free—for your entire life or a set number of years. Sound like fun? Then read on.

The Problem

Highly appreciated assets face a large capital gains tax rate, currently topping out at 20% for federal, plus more in many states. To make matters worse, the alternative minimum tax is calculated using a 22 ½% capital gains rate.

Moving money from a long-term, highly appreciated asset to a higher income producing asset requires a serious tax haircut. The reason for the transfer of investments frequently revolves around income. The old asset has appreciated several fold, but has a low or no current income distribution. To access your net worth requires sale of a portion of or the entire asset, triggering a taxable event.




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