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The Coming Bear Market: Part II How to Prepare
Issue #492, October 16, 2017

Some Observations on Cemeteries
Issue #Interim Bulletin #491A, October 12, 2017

The Coming Bear Market: Part I: The Myth of Buy and Hold Forever
Issue #491, October 09, 2017

The Market makes New Highs
Issue #490, October 02, 2017

The Importance of a New High
Issue #489, September 25, 2017

A Little Insurance: Wealth, War and Wisdom
Issue #488, September 18, 2017

Some Observations
Issue #487, September 11, 2017

How to be Successful in Your Career
Issue #486A, September 07, 2017

How NOT to Buy a Home
Issue #486, September 04, 2017

This Week in the Market
Issue #485, August 28, 2017

Is the “Trump Bump” Running Out of Gas?
Issue #484, August 21, 2017

Gold is on the Move
Issue #483, August 14, 2017

The Importance of Estimation
Issue #482, August 07, 2017

Buying Art and Collecting: Part II of II
Issue #481, July 31, 2017

Buying Art and Collecting in General, Part I of II
Issue #480, July 24, 2017

Physicians need to be More Forceful: Follow-up
Issue #479, July 17, 2017

Physicians need to be More Forceful
Issue #478, July 10, 2017

Your First “Real” Investment
Issue #477, July 03, 2017

Leasing a Watch: Don’t
Issue #476, June 26, 2017

The Importance of Your Children having a Job
Issue #475, June 16, 2017

The Problem with Medical Student Debt is—the Med Schools
Issue #474, June 12, 2017

Critters and Varmints in your Home and Yard
Issue #473A, June 07, 2017

Leveraged ETFs
Issue #472, May 29, 2017

Leasing a Vehicle: Don’t!
Issue #471, May 22, 2017

Issue #470, May 15, 2017

More on Buying Jewelry
Issue #469, May 08, 2017

Buying Jewelry: Gold, Diamonds and Pearls
Issue #468, April 30, 2017

Thomas Sowell: Part III of III
Issue #467, April 24, 2017

Thomas Sowell: Pat II of III
Issue #466, April 17, 2017

Live Close to Where You Work
Issue #465, April 10, 2017

Medtronic in Hospital Management
Issue #Interim Bulletin #464A, April 07, 2017

Thomas Sowell: Part I of II
Issue #464, April 03, 2017

A Political Contribution a an Investment: Part II of II
Issue #463, March 27, 2017

A Political Contribution as an Investment: Part I of II
Issue #462, March 20, 2017

Buffett Selling Vacation Home
Issue #461, March 13, 2017

Advanced Placement (AP) ourses
Issue #460, March 06, 2017

The Importance of a Credit History
Issue #459A, March 02, 2017

A Credit Card Scam
Issue #459, February 27, 2017

The Electronic Health Reord
Issue #458, February 20, 2017

Issue #457, February 13, 2017

Platinum and Palladium
Issue #456, February 06, 2017

Economic Outlook for 2017: Part II of II
Issue #455A, February 02, 2017

Economic Outlook for 2017: Part I of II
Issue #455, January 30, 2017

A Story From Vegas
Issue #454A, January 25, 2017

Land Donation Deals and the IRS
Issue #454, January 23, 2017

The Theory of Gambler’s Ruin
Issue #453, January 16, 2017

Student Loans: But Wait, There’s More!
Issue #452, January 13, 2017

A Second Home
Issue #Interim Bulletin #451A, January 04, 2017

The Consumer Confidence Index
Issue #451, January 02, 2017

Social Security
Issue #450, December 26, 2016

My Outlook for 2017: Part II of II
Issue #449, December 19, 2016

My Outlook for 2017: The Market
Issue #448, December 12, 2016

Medicine in 20 Years
Issue #447, December 05, 2016

Higher Interest Rates
Issue #446, November 28, 2016

Trump and the Markets: The Bad and Ugly
Issue #445A, November 23, 2016

Trump and the Markets: The Good
Issue #445, November 21, 2016

Negative Trends: The Suits aren’t Makin’ Steel
Issue #444, November 16, 2016

The New DOJ Fiduciary Rule
Issue #443, November 07, 2016

Barron’s Conference, Part IV of IV
Issue #442, October 31, 2016

Barron’s Conference, Part III of IV
Issue #Interim Bulletin #441A, October 26, 2016

Barron’s Conference, Part II of IV
Issue #441, October 24, 2016

Barron’s Conference, Part I of IV
Issue #440, October 20, 2016

This Newsletter
Issue #439A, October 12, 2016

Memoirs of US Grant: Vol II
Issue #439, October 10, 2016

More Points on Collecting, Investing and the Economy
Issue #Interim Bulletin #438A, October 05, 2016

Personal Memoirs of US Grant
Issue #438, October 03, 2016

Ideas for a High School Part-Time Job
Issue #Interim Bulletin #437A, September 29, 2016

Collecting, Investing, and the Economy
Issue #437, September 26, 2016

Free College
Issue #436A, September 22, 2016

A Military Commitment to Pay for Med School
Issue #436, September 19, 2016

When a CD isn’t a CD
Issue #435, September 12, 2016

I Made a Mistake
Issue #Interim Bulletin #434A, September 07, 2016

What is Your Spare Time Worth?
Issue #434, September 05, 2016

Credit Cards and Bonus/Loyalty Points
Issue #433, August 29, 2016

The Write-off of Student Loans
Issue #Interim Bulletin #432A, August 25, 2016

412 Retirement Plans
Issue #432, August 22, 2016

Join the Club
Issue #Interim Bulletin #431A, August 18, 2016

The Case for Precious Metals and Hard Assets
Issue #431, August 15, 2016

When the US went off the Silver Standard
Issue #430, August 08, 2016

Why NOT to Open a Restaurant
Issue #429, August 01, 2016

Some Tips on Life Insurance
Issue #428, July 25, 2016

More Observations on Negative Interest Rates
Issue #427, July 18, 2016

Issue #426, July 11, 2016

Is a PhD Worth It? Part II of II
Issue #425, July 04, 2016

Is a PhD Worth It? Part I of II
Issue #424, June 27, 2016

Avoid Part-time real Estate Agents
Issue #423, June 20, 2016

Issue #422, June 13, 2016

The Problem with Auction Reserves
Issue #421, June 06, 2016

Make Full Use of Your Capital Investments
Issue #420, May 30, 2016

The Fed’s Announcement
Issue #419, May 23, 2016

Quit While You’re Ahead: A True Story
Issue #418, May 16, 2016

The Precious Metals
Issue #417, May 09, 2016

Negative Secular Trends: Part Ii of II
Issue #416, May 02, 2016

Negative Secular Trends: Part I of II
Issue #415, April 25, 2016

Not Winning is not the same as not Losing
Issue #414, April 19, 2016

Behavioral Economics: Part II: Weaknesses
Issue #413, April 11, 2016

Behavioral Economics: Part I: Valid Points
Issue #412, April 04, 2016

The Most Important Books I’ve Read
Issue #411, March 28, 2016

Secret to Success: Take Risks and do Things Differently
Issue #410, March 21, 2016

The Over-Priced Food Presentation Hustle
Issue #409, March 14, 2016


By Robert M. Doroghazi, M.D., F.A.C.C.

A Credit Card Scam

Issue #459, February 27, 2017

    I was going to write about the advantages of your children and grandchildren taking Advanced Placement (AP) courses, but I’ll put that off until next week.
    A long-time Chicago subscriber sent me a note about a credit card scam going around the Midwest, if not nation-wide. It’s pretty slick, so you should know about it. It also allows me to make some general points about phone and email scams.
    Note: they will never ask for your credit card number—they already have it!!
    The person will say their name and that they are calling from the Security and Fraud Dept. of Visa or Master Card. They give their badge number, say your card has been flagged for unusual purchases, and they are calling to verify. They tell you the issuing bank (RMD comment: This helps confirm they are legit). They ask if you purchased an Anti-Telemarketing Device for $497.99 from a company in Arizona. When you say “No”, they say they will credit your account (RMD comment: you’re feeling better all the time. They are clearly out to protect you).
    They say they have been watching this company for some time, and the charges are always from $297-$497: under the $500 level that flags such purchases. Before the next regular statement, you will receive a statement of credit sent to your address at xxx. Is that correct? (RMD comment: They know your address. They are for sure legit).
    They say they will be starting a fraud investigation. If you have any questions, call the 1-800 number on the back of your card, and ask for Security. You will need to refer to a 6-digit security number that they will repeat several times.
    Now: here’s the clincher. They ask if you are still in possession of your card. If so, turn it over and look at the 7 numbers on the back. The first 4 are part of the credit card number (which they already have). The last 3 are the Security numbers (THIS is what they need. Your PIN number). They ask you to read it to them, and then they say “Yes, that is correct. We just needed to verify that the card was not lost or stolen, and is still in your possession”. They thank you, and say “Don’t hesitate to call us back”.
    RMD comment:
    1) this is a comment on human nature. Most crooks are just stupid thugs, with a below average IQ, who are willing to stick a gun in your face or beat you up for 20 bucks. But some terrible people, like Stalin and Putin, or the ones who set up this scam, are extremely intelligent. I read a well-reasoned piece which argued quite convincingly that Hitler was the greatest, most captivating public speaker of the 20th century. I’ve come to the conclusion that there is a morality switch somewhere in the brain that in some people never gets flipped on.
    2) Legitimate entities, from credit card companies, banks, and agencies of all levels of government, such as the IRS, will NEVER initiate contact with you via phone or email. It is always via US Mail.
    3) Never give information over the phone. NEVER! I received a call just last week. “Is this Robert Doroghazi (they actually pronounced my name quite well)?” “Yes”. They said they were from a company that I do business with. “To confirm this is Robert Doroghazi, what is your birthday”? “You tell me and I’ll confirm if it is correct”. Click.
    4) To save money, many legitimate companies (unfortunately) use foreign call centers. In my personal experience, many calls that are clearly scams, use people where English is not their first language (see below). If I can’t understand someone, right or wrong, I hang up.
    5 Always be on your guard. Some crooks are very slick.
    Have you ever wondered how the store knows instantly if your credit card number is legit? In Issue #315 (5/26/14) I reviewed the Luhn Algorithm. I suggest you go to Wikipedia for a detailed discussion. It is simple, but elegant. It’s also impressive that there are people smart enough to think of these things. 
    More wisdom from Warren Buffett.
    Nine years ago Buffett bet $1M that over the course of 10 years (basically, 2 market cycles) a low cost S&P 500 Index Fund would, net of fees, beat a group of hedge funds. He had only 1 taker. With one year to go, the S&P 500 fund has returned a compounded 7.1% annually, compared to 2.2% for the group of hedge funds.
    RMD comment: Trying to beat the market is a zero-sum game. A few geniuses, like Buffett, Peter Lynch, and Scott Black, can. For the average investor, and the average subscriber to this newsletter, stick with Index Funds. It’s not flashy, but remember, the goal of investing is to make money. That will impress people.
    Buffett’s other point is that the active money managers add no value. They get rich while the investor just plods along. See Fred Schwed’s book from 1940, Where are the Customer’s Yachts? At the end of the day, the brokers throw all the money they received into the air. Whatever sticks to the ceiling is the customers’. They keep the rest.
    Buffett also noted that in two of the worst deals he made he used Berkshire stock to fund the purchase. Now he uses mostly or all internally generated cash.
    RMD comment: Although Buffett didn’t borrow the money, he “created” it by issuing stock. The point here is the seductiveness of debt. It allows you to do things you can’t afford. You are circumventing a natural control mechanism.
    A friend recently confided in me that their business is being crushed by debt, and asked for advice (Unfortunately, I didn’t have much that wasn’t obvious). They are a solid, hard-working, totally honest, good person. Debt is a financial 4-letter word. A brave man should not be embarrassed to admit they are afraid of debt. Debt is a slippery slope. Watch out. Remember: no debt, no bankruptcy. You might not have much, you might not have anything, but if you are not in debt, you can’t go bankrupt. 
    Everyone, including me, was talking higher interest rates. Last week, the rate on the German 2-year note hit a record low at (-) 90 basis points (a basis point is 1/100th of a percent). On a 10,000 Euro note, people are paying the German government 90 Euros a year to hold their money. Our interest rates are behaved. The 10-year Treasury is at the bottom of the tight range it’s been in since the election. The interest rate sensitive Utilities have been on fire, and were up 4.07% last week alone.
    RMD comment: the 35-year bull market in bonds is over. Rates will eventually head higher, but they don’t seem ready to yet. Will we see a 2% 10-year Treasury before we see 3? If so, the bond market is saying the economy will soften.
    About a year ago I received a phone call offering me a package to call Europe, especially Hungary, for a discount. I was impressed they knew my name was of Hungarian derivation. I have heard every degree of Hungarian broken English, and this man’s primary language was not Hungarian. Nor was it English. I thought it was probably Hindi.
    I said “Beszel magyarul” (In Hungarian, “Do you speak Hungarian?”). His answer stunned me. “Igen” (“Yes” in Hungarian). I told myself I had no idea what was going on and hung up.   
    I finished Indelible Ink: The Trials of John Peter Zenger and the Birth of America’s Free Press (Kluger, Norton).
    RMD comment: All serious students of American history have read about Jamestown, the Pilgrims, the Salem Witch Trials, and the American Revolution, but not much of what happened in between. The main thrust of this book is the evolution of freedom of the press in America and the beginning of dissatisfaction with the British Crown, but there is also a nice discussion of the political and financial history of New York, New Jersey and Philadelphia from about 1710-1740.
    I don’t mention books just to fill space. Every serious financial publication: The Wall Street Journal, Barron’s, The Economist, has a section devoted to book reviews. I thought one of my better newsletters was “The Most Important Books I’ve Read” (#411, 3/26/16). Knowledge doesn’t just appear in your head, it has to be put there, and the only way to do that is to read. You would be amazed how often subscribers tell me about the books I mention, and their recommendations for what I might read. Smart people are intellectually curious. There is also collateral knowledge: things learned in one area have applications in another. 

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