3 Innovative New Ideas to Solve 3 of our Nation’s Biggest Problems

I usually stick to financial subjects on my blog, but I have had a couple of big ideas rattling around in my head for years, that I wanted to share.  While our politicians and the media concentrate on all of our country’s problems, I like to concentrate on useful solutions.  Below are three simple, straight-forward and easy to implement solutions for three of our nation’s biggest problems.

Independent Investigation of Police Shootings

Officer Involved Shooting

Image by Tony Webster

What: Provide unbiased, independent and thorough investigations of every officer involved shooting or death in custody.

Why: The last thing we need is to vilify police or to make their jobs more difficult or dangerous.  However, it’s increasingly obvious whenever the police investigate themselves, they are rarely found at fault.  The families and the community are angry with the outcome and people are scared of police who are supposed to protect them.

How:  Every time a bank is robbed, the local police secure the scene and the FBI soon arrives to conduct an investigation.  The same should happen for every officer involved shooting or death in custody.  Allowing the police to investigate their own officers is an unconscionable conflict of interest, especially when a death has occurred.  An independent Federal agency should have jurisdiction over these incidents and investigate every case, instead of the local police.

Background: I live in a beach town in a relatively wealthy area of southern California.  There has been one police officer killed by a civilian and two civilians killed by officers.  The officer who was killed is rightfully treated as a hero in our town and we named a park after him.  As for the civilians killed by officers, that’s a completely different story.  The police reports in both officer involved deaths are beyond bizarre.  I love this town and our police, but what happened and what was reported to the public weren’t even remotely close.  The findings from both internal investigations predictably exonerated the officers, even though these two deaths appeared unjustified.  No one was held accountable and the cycle continues.

Bachelor’s Degrees from Community Colleges

What: To provide quality, accredited public college education that is affordable to most Americans.

Why: Tuition has been rising much faster than the rate of inflation for almost four decades.  Currently, only wealthy families can afford public university and middle-class families must take out loans to attend.  The total outstanding student loan debt is well over a trillion dollars and growing.  This is causing massive problems for our economy, since indebted graduates have a difficult time moving out, getting married and buying homes.  Many parents aren’t saving enough for retirement, because they are trying to help fund their children’s education.

Many studies have shown that access to a college education is a big factor in economic disparity.  Those who can afford college will get the high paying professional jobs and those who can’t will get the labor and retail jobs.  This makes it difficult for the poor to move into the middle class.

How: A simple change to the accreditation standards could resolve one of the biggest social and economic problems facing our nation.  Community colleges should be allowed to offer Bachelor’s degrees, in addition to Associate’s degrees.

Community colleges are affordable to almost everyone, without huge loans and obscene tuition.  The quality of education is very good and the professors are more than qualified to teach undergraduate courses.  Students who get an Associate’s degree or meet the transfer requirements should be allowed to finish their bachelor’s degree at their local community college.  This would save students tens of thousands of dollars and eliminate the monopolistic impediment of the university system.  Universities would have to compete with community colleges for undergrad students, which should bring down tuition costs.

Background: My mom was divorced and raised five kids.  She worked her way through community college and then university at night and graduated with honors.  All five of us kids, following her example, worked our way through college with no help, aid, loans or funding.  Four of us have Associate’s degrees and one also has a bachelor’s.  The other has a professional certificate.  I have an Associate’s in computer information management and it has made a huge difference in my career.  I wanted to get a bachelor’s degree, but university was way too expensive to justify, while I was supporting a family of four on my single income.

Public Funding of Alternative Medical Treatments

What: To identify and certify for medical use, cures and treatments that are safe and effective, but not economically viable for development.

Why: Virtually all of the funding for new medical technology is targeted towards synthetic drugs and medical devices that treat the symptoms of common medical problems.  Little money is targeted towards curing or preventing the underlying affliction.  Virtually no money is targeted to studying the health benefits of natural substances, because they can’t be patented.  The result is that patients must take expensive prescription medications indefinitely for most common medical issues.  This benefits the medical industry at the expense of their patients.

How: The Federal government should create a fund of a couple of billion dollars to fund the study and development of alternative forms of medicine and the prevention of common diseases.  Natural substances that are known or suspected of having health benefits should be studied for their effectiveness and certified as a treatment, if found to be safe and effective.  Prevention and cures should be given priority over long-term treatment.  Trial results should be published publicly.

Curing or preventing a single disease, such as cancer or diabetes could save tens of billions of dollars annually, lower health insurance costs and improve the solvency of Medicare.  Even a reduction in the number of strokes, heart attacks or birth defects would make a huge difference in the cost and quality of medical care.

Some priority areas of study would be:

  • Opioid-Free Pain Treatment
  • Reversible Male Birth Control
  • Prevention and Cure of Diabetes
  • Prevention and Cure of Cancer
  • Prevention and Cure of Heart Disease
  • Vaccinations and Cures for AIDS, HSV and other STDs
  • Prevention and Cures for Autism and Downs Syndrome
  • Prevention and Treatments for Mental Health Issues

Background: I work for a medical device company that has participated in two clinical trials.  Passing a clinical trial is a lengthy, arduous, risky and expensive task.  A trial costs millions or even billions of dollars and they often fail.  Medical companies can’t afford clinical trials for cures that have no revenue potential.  That’s why these types of trials must be conducted with public funding.

The Bottom Line

The bottom line is that the world is full of problems and always will be.  One reason most problems continue to exist is because they benefit those who profit from the status quo.  It will take innovative new ideas and a courageous new direction from our leaders to resolve the most challenging problems of our times.

“No problem can be solved from the same level of consciousness that created it.”

– Albert Einstein

Recommended Reading

Budgets are Sexy – Can You Imagine?
Don’t Quit your Day Job – The Earth is Flat
Online Investing AI Blog – Lessons Learned from Big Pharma
Out of your Rut – Never Bankrupt Yourself for a College Education

My Take on the Brexit

So, the votes are in and the dust has settled.  The citizens of England have voted to leave the EU, by a very small margin of 52%.  There are lots of messy details to sort out and the analysts on TV are all buzzing.  I’m a typical American with a limited global perspective, but I do have some opinions I would like to share.

It Could have Easily been Avoided

Brexit Vote Leave Sign

Image by David Holt

The UK had been trying to negotiate with the EU for years on critical issues, such as immigration.  But, the EU not only seemed stiff and inflexible, it turned a deaf ear to the issues and challenges facing the UK.  I don’t know if it was arrogance on the part of the EU or a sense of being repressed by the UK, but it didn’t end amicably for either party.

As an obvious outsider, I believe the Brexit could have been avoided with some basic respect and flexibility from both sides.  I don’t know what pushes leaders into entrenched positions when clearly some compromise is called for.  I do know if you back someone into a corner, the outcome is rarely good.

One of my former co-workers James from England told me years ago, “Once you raise your flag and draw your sword, it’s pretty hard to then back down.”

The Will of the People Really does Matter

In my opinion, the Brexit vote comes down to one thing: sovereignty.

The people of England have a proud culture of rugged individualism.  With popular phrases such as “Carry On” and “Keep a Stiff Upper Lip”, they don’t expect things to be easy.  What they do expect is to have a say in their future.  The step they took yesterday was a vote to regain their sovereignty.  Only time will tell if they made a wise decision.  Will they suffer for their brashness or will they flourish?

America has a similar culture and we are going through our own revolutionary moments right now.  Our government has turned a deaf ear to the problems facing Americans and have instead foisted their hand-picked political lackeys upon us.  But, America isn’t buying it.  We want real changes in our government and we want honest leadership that loves our country.  Instead, we have an arrogant duopoly that is for sale to the highest bidder.  Our vote is coming in November.

The Bottom Line

The bottom line is that freedom comes at a cost.  For the courageous voters of the UK, the cost is economic uncertainty.  Courage is always to be admired and freedom is always to be treasured.  Three cheers for England!

“There is shock, sorrow, anger and fear among people in the EU’s institutions.”

– Mark Mardell

Feedback is Requested

Anyone from Europe, the UK or anywhere else in the world is encouraged to share your opinions in the Comments section below.

Recommended Reading

Financial Samurai – What’s Next After the Brexit?
The Economist – The Brexit Debate
The Telegraph – Glorious Opportunity of Brexit

Fallout from the Panama Papers

A Panamanian legal firm, Mossack Fonseca, was recently hacked and Sunday over 11 million of their confidential documents were posted on the Internet.  This is significant because MF is the fourth largest global asset protection (tax shelter) law firm.  These documents list many of the world’s most wealthy and powerful.

Why this is Such a Big Deal

Panama City

Image by Matthew Straubmuller

Everyone has known for decades the super-rich and politically-connected can move money around the globe, without any tax implications.  Politicians talk about it; books and articles are written about it; but, nothing is being done to stop it.  In fact, many banks and heads of state appear to be creating and using this tax-evasion network.  Whenever any complications arise, laws and tactics are quickly changed to protect the network.

The Facts are Undeniable

Until now, it was easy to gloss over the problem and deny this was happening on such a massive scale.  Now, it’s virtually impossible to deny.  It’s impossible to even downplay the size of the problem.  The working class knows they’ve been paying an unfair share of the global tax burden and now they finally have the ammunition to do something about it.  It will be interesting to see how it affects the elections.

Everyone is Implicated

  • 12 Heads of State
  • 150 Politicians
  • 29 Forbes List Billionaires
  • Dozens of Global Banks
  • FIFA Officials and Players
  • Drug Cartels and Dealers
  • Arms Dealers and Nuclear Proliferators
  • Companies linked to the CIA

The Fallout so Far

  • The president of Iceland has stepped down
  • The President of Argentina is under investigation
  • Vladimir Putin called the leak an American plot
  • The Prime Minister of England is under fire
  • The President of France is under investigation
  • CEO of Austrian Hypo Landesbank stepped down
  • Swiss Federal Police raided the UEFA offices
  • Police in El Salvador raided the local MF office
  • Australia is investigating 800 listed taxpayers
  • China has blocked MF related media and Internet

Evasion in America

There is a curious lack of Americans listed as MF clients.  Does this mean it’s not happening here in the US?  No, it just means Americans don’t move their money through Panama.  There are three key reasons for this:

  1. The Panamanian Free Trade Agreement forces Panama to release information to American authorities.
  2. US law makes it easier to setup shell companies in the Caribbean and other tax havens.
  3. Recent US laws like the Foreign Account Tax Compliance Act (FACTA) make it harder for American citizens to hide their money abroad.

Don’t be surprised to see Americans implicated in future leaks.

The Bottom Line

The bottom line is that transparency is a good thing, unless you are breaking the law.  International law is pretty murky and much of this may be legal, in some countries.  But, evasion and laundering are taking place on a global scale.

“Corruption, money laundering, and tax evasion are global problems, not just challenges for developing countries.”

– Sri Mulyani Indrawati

Recommended Reading

CNN – The Panama Papers: 7 Things to Know
New York Times – The Panama Papers: Here is what we Know
The Guardian – Fallout from the Panama Papers

Robo-Investing is the Next Big Thing

Toy Robot

Image by Randy Chiu

It’s no big secret the financial services industry often takes advantage of retail investors.  High fees, poor performance and a lack of liquidity can be the cost of doing business with a commission-based financial advisor.  They have to get paid and that requires some costly products.

Finally, there is an alternative to hiring a financial planner or choosing your own investments.  For a small fee, you can try robo-investing, also known as automated investment advisory.  It is suddenly all the rage with millions of retail investors, especially Millenials, who seem to trust technology more than people.

Since programming an algorithm is cheaper than hiring lots of financial advisors, there can be significant savings for automated investors.  There can also be a big advantage to automating the entire investment process.  You can set it and forget it, instead of manually rebalancing your portfolio.  There are also automated features for very complex transactions, such as Differentiated Asset Location and Tax-Loss Harvesting.

Disclosure: This is not a paid post. I received no compensation from nor do I have any financial interest in companies profiled in the article. This information is provided objectively for the interest and entertainment of my readers.

The Key Players

Wealthfront – Wealthfront was established in 2011 and has over $2.6 billion under management.  They have quite an array of automated services including Direct Indexing, Differentiated Asset Location and Single Stock Diversification.  Customer assets are held in a brokerage account by Apex Clearing Corporation.  The management fees are .25%, with the first $10,000 managed for free.  The account minimum is $500, which is great for small investors.

Betterment – Betterment was founded in 2010 and has over $1.7 billion under management.  One nice feature of Betterment is individual goal setting.  This is something I did manually for my retirement funds, my house fund and college funds for my kids.  Management fees range from .15-.35%, in three tiers, depending on assets in the account.  There is no account minimum, but you will pay the highest tier fee (.35%) until you have at least $10,000 invested.

Schwab – Charles Schwab has been a champion of small investors for decades.  As one of the early discount brokers, they offered an alternative to pricey brokers on Wall Street, long before you could buy stocks online.  Their Intelligent Portfolios are available to investors with an account minimum of $5,000 and are free of commissions and advisory fees.  Managements fees are generated from the Schwab ETFs and third-party ETFs available in the portfolio.

FutureAdvisor – FutureAdvisor was founded in 2012 and has over $600 million under management.  They don’t hold your assets directly, instead you invest with Fidelity or TD Ameritrade and they manage your accounts.  For some odd reason, people over 68 years old aren’t eligible to invest with FutureAdvisor.  There is no account minimum for the free service, but the premium service requires at least $10,000.  The management fee is a flat .5% of assets.

My Predictions for Robo-Investing

  • Automated investing will continue to grow at a rapid pace.
  • Traditional investment firms will add automated features (like Schwab), in order to attract investors to their funds and ETFs.
  • Automated investing will begin to displace low-end investment advisors.
  • Younger investors will prefer automated investing to managed investing, the same way automatic transmissions have replaced manual gear boxes.

The Bottom Line

The bottom line is that good financial planning requires a lot more than picking a couple of investments and hoping they meet your goals.  If you lack the time and experience to do your own planning, robo-investing may be the solution.

“An investment in knowledge pays the best interest.”

– Benjamin Franklin

Recommended Reading

Barron’s – When Financial Advisors meet their Robo-Rivals
The Simple Dollar – Betterment vs. Wealthfront
Dough Roller – Betterment vs. Wealthfront

My Thoughts on Retirement Planning

I received an email from one of my readers asking me about my thoughts on retirement planning.

“What did you do successfully in your 20s to prepare for retirement?

What you would have done differently to ensure a better financial future?

What would be your ideal retirement plan?”

My ideal retirement plan would be to retire today, but that’s not realistic.  I will very likely retire a millionaire at age 67.  If I run into some money or develop a successful side-gig, I may retire sooner.  I would also love to cut back to 3-4 days a week and semi-retire in my 50s.  Since my house is almost paid off and I love living at the beach, I’ll likely stay here, even though California has high taxes.

What I did Right in my 20s

  • I started investing at age 21.
  • I saved consistently, even with a low income.
  • I did research and learned how to invest.
  • I bought newsletters and found mentors.
  • I wrote down goals and plans to achieve them.
  • I read books and listened to motivational tapes.
  • I followed a career path and chose a great profession.
  • I found side-gigs and invested the extra money.
  • I drove older cars and maintained them myself.
  • I saved for a house and will pay it off before retirement.

What I Would Change if I Could

  • I would have gotten my college degree in my 20s, instead of my 30s.
  • I would have demanded higher pay that was equal to my skills.
  • I carried credit card debt and took out a second to fix up my house.

The Bottom Line

The bottom line is that saving up for retirement isn’t as daunting as some people think.  As long as you start in your 20s, you will have plenty of time to save and invest.  If you wait until your 30s or later, the math becomes a lot more difficult.

“A whole generation of Americans will retire in poverty instead of prosperity, because they simply are not preparing for retirement now.”

– Scott Cook