The Patriots

Every gold investor has their own “gold story” — that pivotal moment in their lives that made them realize the true value of gold. For Olivier Garret, founder and CEO of the Hard Assets Alliance, that story goes all the way back to his grandfather… and the German invasion of France.  Today, he tells that story. - Owen Sullivan

by Olivier Garret

I grew up in a little town in Northern France that, from 1939 to 1945, was occupied by the Nazis.

I hadn’t been born yet at the time, but my mother and her family were forced to live for five long years with two German officers as “guests” in their own home.  My childhood was colored by first-hand stories of life in a Nazi-occupied town.

I heard many stories of scarcity, like that of the nuns in my mother’s school serving rodents and rutabaga for dinner — or that of my grandfather setting up a soup kitchen in his small factory to help feed the families of employees.

But there was one story my mother used to tell me that made me realize the true value of gold and sparked a lifelong appreciation for it.

It revolved around my grandfather, a Swiss immigrant who moved to France in the early 1920s.  He was an electrical technician and entrepreneur. And his arrival in France coincided with the electrification of the country, just as France’s most remote towns and villages were being connected to the grid.

Up until that point, farmers had been working the fields and processing their crops entirely by hand or with the help of animals. Basic machines were powered by cranks, ropes and pulleys or treadmills.

My grandfather, seeing the opportunity, invented an electrical motor that could power many different types of equipment.

Farmers around the country quickly adopted his product and by the late 1920s, he ran a small but successful business, selling his electrical motors and a variety of mostly farm-related equipment. (One of his inventions was a device to automate the ringing of church bells.)

Being Swiss, my grandfather always associated financial security with gold. He used all of his excess savings to buy small Swiss gold coins called Vreneli.

Over the next decade, he accumulated hundreds of them.

The War Begins

In 1939, following Hitler’s invasion of Poland, France declared war on Germany. Within weeks, German tanks were rolling through Flanders into Northern France.

My grandfather decided to take his wife and two daughters south to his mother-in-law’s farm in rural Normandy.

As his wife prepared for their departure, he retrieved his stash of gold coins and headed into the basement.

There he cut lead pipes into five-inch sections and melted one end of the tubes to seal them. After filling the pipes with his gold coins, he sealed the other end and within a couple of hours emerged from the basement with twelve short lead tubes filled with gold and a shovel.

He went out into the yard and buried the pipes with his life’s savings in a deep hole next to a big tree. With the gold safely hidden, the family left their home and joined hundreds of thousands of refugees heading away from the advancing German troops.

In August 1944, the German troops retreated and Paris was liberated by the Allied forces. As France started to heal from the wounds of war, life in the quiet town of Senlis slowly returned to normal.

Many years later, my grandfather fell ill and became bedridden. It was then, near the end of his life, that my grandfather called my mother to his bedside and instructed her to get a shovel, go to the tree and dig up the twelve little gold-filled lead tubes.

After decades underground, the coins were still there, and my grandfather split them between my mom and her sister.

A couple of decades later, my parents decided it was time to pass the gold coins on to their children—and so in 1984, the tubes were opened, revealing their precious contents as shiny and new as when they were first buried.

If my grandfather had kept the money in bank notes instead of investing them in gold coins, the value of the 36,000 French francs would be approximately €3.00 today (by the mid-1980s, the old French francs had lost 99.9% of their purchasing power).

On the other hand, the value of the 480 gold Vrenelis he bought would be approximately €105,600 today (each Vreneli coin contains 5.8 grams of gold).

That was the day I learned the true value of gold.

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This article is published in accordance with a creative commons license here.

by Kansas Policy Institute

June 1 - Wichita - A cost study recommending a school funding increase upwards of $2 billion survived a peer review by a scholar the Legislature hired; but, another respected school finance scholar says cost studies should not be used to set funding levels.

Benjamin Scafadi, Ph.D., a professor of economics and director of the Education Economics Center at Kennesaw State University, says, “cost function studies do not provide valid and reliable estimates of the minimum 'cost' of achieving a given outcome.” 

Knowing the Legislature’s WestEd cost study would define the conversation on education spending and impact further judicial proceedings, Kansas Policy Institute partnered to do an independent peer review with Dr. Scafidi.  His findings disprove the notion that spending more money causes student achievement to improve. 

In response to the Kansas Supreme Court’s recent ruling in the Gannon V case, the Kansas Legislature recently contracted with a vendor conducting a $285,000 study to analyze the “cost” of educating public school students in grades K-12. The Legislature asked the vendor, WestEd, to “estimate the minimum spending required to produce a given outcome within a given educational environment.” WestEd used a “cost function” approach to estimate the costs of providing students in each public school in Kansas with an adequate education. 

Dave Trabert, president of the Kansas Policy Institute, commented, “These cost studies may be done with the best of intentions, but they fail to provide results that are useful in guiding policy decisions. In practice they only take a partial look at one variable – spending – and ignore all other variables that impact learning.”

Scafadi said, “The estimates vary widely and do not track with historical data on spending and achievement.” The review outlined the reasons why supposed “cost” functions do not provide valid and reliable estimates of the minimum “cost” of achieving a given outcome.

“One glaring problem we found with the WestEd study is that researchers do not have access to data on all external factors that impact the cost of educating students.” Trabert said.

Scafidi’s study for Kansas Policy Institute included in its exhaustive review a complete recommendation of best practices that should be performed to “check carefully for robustness and reliability of results.”

His data determined it unreasonable to conclude that giving the Kansas public school system, as currently constituted, a large boost to spending would significantly improve student outcomes.

“Given the vast sums of taxpayer funds at stake, the Kansas Governor, Legislature, and the State Supreme Court should implement the five best practices, as laid out in my review, to discover the truth about the relationship between spending and valuable student outcomes.” Scafadi concluded.

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Editor's Note: Such mathematical games accomplish little more than feed the lawyers who feast on endless court decisions that force the Kansas Legislature to raise taxes violating both the separation of powers and the people's right to determine fiscal policy.

by Allen Williams

Royal Bank of Canada (RBC) is a huge conglomerate featuring global asset management which  “is the asset management division of Royal Bank of Canada” located  in Canada,  the United States, Europe, Asia-Pacific,  Middle East and Africa, Latin American and the Caribbean.   Your investments work hard to build the globalist vision of a new order.

”RBC is the 12th largest bank in the world based on market capitalization and the fifth largest in North America.”  Barron’s notes that RBC Wealth Management is looking to Grow having actively recruited a significant number of high profile investment managers over the last 8 years.

But all is not well in the RBC golden world of investment as RBC is charged with Negligence and Elder Abuse   If you have a few bucks to invest and you’re of retirement age then beware because the wealth management brokerages are going to milk you. What do you mean by that remark you might ask?   Well, older people are prime targets for abuse by investment firms because the money is there and ripe for the taking and seniors tend to be overly trusting.

We’re already seeing evidence of this in RBC’s late December 2017 User Agreement modification. RBC blocks you from viewing your own account unlessl you agree to their terms.

RBC User Agreement, Section 7C:

"IN ADDITION TO AND WITHOUT LIMITING THE FOREGOING, RBC CM SHALL NOT BE LIABLE FOR ANY HARM CAUSED BY THE TRANSMISSION, THROUGH THE PROGRAM, OF A COMPUTER VIRUS OR OTHER COMPUTER CODE OR PROGRAMMING DEVICE THAT MIGHT BE USED TO ACCESS, MODIFY, DELETE, DAMAGE, CORRUPT, DEACTIVATE, DISABLE, DISRUPT OR OTHERWISE IMPEDE IN ANY MANNER THE AVAILABILITY OF THE INFORMATION OR ANY OF YOUR SOFTWARE, HARDWARE, DATA OR PROPERTY."

This statement also removes liability from the transfer of erroneous information from ‘typos’ and other such glitches which may cost you money.  

RBC Capital Markets, LLC
60 South 6th Street
Minneapolis, Minnesota 55402
Attention: Client Support Services, Mail Stop P12
Phone: 1-800-933-9946 (Weekdays 8:00am-10:00pm ET and Saturdays 10:00am-6:00pm ET)

The White law Group reports: “According to The Financial Industry Regulatory Authority, an all-public FINRA arbitration panel has awarded $212,000 to the estate of a former RBC Wealth Management client who had charged the firm with negligence and elder abuse.

"The attorneys of the client, the late Hazel Kitzman, charged that RBC Wealth Management engaged in the unauthorized sale of shares in the client’s account and in the unauthorized transfer of funds from an account at another firm. The attorneys requested compensatory damages of at least $1.5 million, treble  punitive damages and reimbursement of all legal costs, all of which the FINRA panel denied.”

Remember that ‘unauthorized RBC broker activity’ because we’ll see that again shortly. Think this is just sour grapes or a few disgruntled clients? Well, take a look at a host of other complaints as RBC Wealth Management Reviews compiles complaints summed  up nicely by ‘RK’ back  in January of this year with ”..Money sucking leeches. No fiduciary responsibility. Will suck you dry with fees.”

RBC Wealth Management meets that assessment.

Then there’s just the run of the mill abuse like a $140 yearly ‘account’ fee for not buying anything.  Remember interest rates are barely 3% and inflation is currently at 2.1%.  As a big or small investor you pay for not buying the financial investments a brokerage offers, even if you lose return on that investment.    The forced purchase of unwanted goods or services from corporations has become a global hallmark.  This policy causes older investors with smaller portfolios to purchase less desirable investments to keep their accounts from being pillaged by excessive and ruthless fees.

If you’re an elderly or a new retiree investor expect to be milked if you don’t know the ropes.  And, even if you do, the financial industry is structured such that there are no real penalties for fund mismanagement or cheating a client because the account holder must agree upfront to binding arbitration as a condition of getting an account   

Outside a court of law the odds swing dramatically in favor of the brokerage, so do not count on FINRA for any real relief.  The centralized global banking system is designed to extract wealth from the general populace virtually at will simply by changing the prime rate.   Fees for any alleged services are just icing on the cake.

The recent HSBC LIBOR rate fixing scandal illustrates just how easily the banks can cheat people and the Federal Reserve System has demonstrated how well its QE releases can rob the nations’ citizens of their purchasing power. 

These financial conglomerates own the various individual governments around the world and 20 trillion in debt buys a lot of favors.  Then there’s the annual revisions to Brokerage fee policies which can occur after you’ve committed significant resources to the firm.  Remember, whomever controls the money limits your options and ultimately controls you

Be sure and read the fine print in the RBC periodic account updates so you’re not surprised by the latest excursion into your back pocket.

Controlling the investor market is the key to successful brokerages because interest rates are rock bottom low in the public sector.  And, it’s risky for individuals to play the stock market or derivatives in today’s environment.  So offering investments priced slightly above what’s available at the trough guarantees a pool of people with above average financial strength. 

Managing RBC  Investments

Managing a brokerage account at RBC will tax your time as much as if you were actually a broker yourself,  from watching for mistakes in tabulated interest to your accounts to  buying financial instruments that you didn’t want  just to satisfy an order.  Here’s an example of what can happen, even if you watch, from last December as I purchased a financial instrument from BOFI federal through the brokerage:  “I did not authorize a purchase beyond the BOFI investment.  If an additional $2000 worth of BOFI was not available, you should have called me to ask if I wanted to buy something else offering the same terms.  Obviously, you didn't think it was worth asking me what I wanted to do with my own money.”

The RBC Broker’s reason for the snafu? Why a ‘typo’, what else? Note that elderly investors don’t have the time to make up losses from bad deals that their brokerage might recommend like zero coupon J.P. Morgan chase securities which can pay zero interest for months until the consumer price index increases.  

If you have more than one brokerage account, then you must be prepared to buy something within the specified time frame for each account.  If you don’t buy regularly in a calendar year then you pay an ‘inactivity fee’ under the following conditions.

First, investment maturity doesn’t count. If you have an existing security and it matures then you get no credit  for reinvesting that principal with that brokerage.  

Interest from other investments that pay into your brokerage account isn’t activity either, ‘activity’ is only new purchases that lead to the broker making a profit from your account.  So, why keep it there?  Because it will cost you another fee to close the account anywhere from $90.00 upwards. 

Pursuant to the RBC  ‘user agreement’, I bought another financial  instrument in January 2018 with an end of the month settlement date to avoid the penalty ‘for not investing’.  Sounds like the Obamacare penalty, doesn’t it?

I received the RBC purchase confirmation in the mail.  But at the end of January the capital was still in my investment account so the purchase was in doubt as my agreement with the broker stipulated the money was to be transferred after the 26^th of the month. I had to call the broker to discover that they had bought the instrument with their own money. Why?  This is highly irregular. I’ve never had securities bought on credit before without my knowledge and so this experience was of some concern given the wording of their user agreement:  “..until payment is made by you, securities purchases by you or held by us for your account will be or may be hypothecated comingled with securities for other clients. If payment or delivery is not made by the settlement date, we reserve the right without further notice to charge interest on the amount due shown on the face hereof..”

And despite what the brokerage may tell you, there is a good chance that an interest charge will appear on the next statement. Also, guess who will be keeping the interest on the investment until the funds are transferred? So, if you can buy something on credit without client approval, why not double my order as well and hold me liable?

Even RBC’s instrument purchase confirmations are full of additional clauses that work against the account holder.  And there’s no recourse provision in these clauses for RBC negligence when a buy order isn’t executed because the user agreement requires client agreement to binding arbitration instead of a court of law or you don’t get the account.  So to find out what additional fees may have been dumped on you in a given transaction, you must request an explanation in writing or you get nothing: “.this transaction may have incurred other fees..a complete breakdown of fees associated with the transaction  will be provided on your written request..”

In December,of this year I transferred my account to another broker using the RBC system. RBC like many large banks earns its money by gouging clients with outrageous fees as the loan industry is no where near as lucrative. And fees aren't subject to the same scrutiny as loan interest.

I was charged a $125 fee for transferring my holdings to another financial adviser even though the funds remain at RBC. Then I was charged an additional $45.79 for electronic transfer of my records to the other adviser within the same bank.  As RK aptly noted, they are 'money sucking leaches..'

UPDATE 3/6/2019

I discovered that RBC was holding the proceeds from one of my investments, $200 plus a $125 fee.

I immediately sent off a letter of protest to Warren Bischoff, the RBC Complex Director taking issue with the transfer charge on my investments moving within the same bank to another broker. After several weeks of non response from RBC, I wrote a letter of complaint in January of 2019 to both the Financial Industry Regulatory Authority (FINRA) and Comptroller of the Currency (as the latter regulates all foreign banks) to protest this outrageous fee. Shortly after getting my letter off to the regulating agencies, RBC reversed the fee.

After I had contacted FINRA, in early March of 2019 $325 dollars was refunded to my new brokerage account. To date I have not heard from Comptroller of the Currency as apparently this case did not fall under their jurisdiction.

If you’re looking for a place to invest, look well beyond RBC‘s client satisfaction hokum.

by Allen Williams

The lure of municipal bonds as a ‘tax free’ investment can be very appealing, however, it’s the risks that significantly decrease its potential, risks that are never satisfactorily explained by the purveyors of these instruments, other than in ambiguous terms. The claim is that one would require an investment paying 8% to provide the same benefit as a tax free municipal bond, but is that true?

Congress ensures that no one truly attains tax-free status on any investment beyond themselves, despite many statements to the contrary, because of the Alternative Minimum Tax. Government simply adjusts the tax tables and reduces the social security benefit by an equivalent amount for tax-free interest received.

NuVeen offers tax free bond investments in the states of Kansas, Kentucky, Michigan, Missouri, Ohio and Wisconsin. The company offers four basic types of municipal bonds that claim tax-free status. They are ‘A’, ‘B’, ‘C’, and ‘R.’ We will confine discussion here to ‘A’ and ‘B’ bonds. ‘B’ bonds perform nearly identical to ‘A’ bonds but provide slightly less yield because they lack liquidity. Once purchased, they require a holding period before they can be sold. ‘A’ municipal bonds provide a slightly better return than class ‘B’ municipal bonds because the management fee has thus far been less. But, you may expect to pay at least a 4.0% ‘commission’ up front for the privilege of purchasing ‘A’ tax free bonds. The company’s prospectus notes that certain ‘special’ charges may apply when buying $50,000 or more of ‘A’ bonds depending on who offers them and the terms of the fund.

One may expect to pay a monthly management fee anywhere from 0.53% to 0.75% on the gross assets invested to manage the funds, regardless of the type bond purchased or its performance throughout the time of the holding. There is a penalty for selling class ‘B’ bonds ‘too quickly’, thereby depriving the fund manager of his ‘hard earned’ management fee.

A first investment in ‘B’ tax-free municipal bonds was made during the late summer, i.e. Aug. of 1998 through NuVeen Investments or The Boston Group as they are now known. Although the funds were purchased in late August, it was Oct 8^th of that year before the first dividend check was received. It seems that the Capitol One true blue Kansas broker was able to collect the interest on my investment, as the funds were deposited with him for 7 weeks while Nuveen ‘processed’ the new account. When questioned on this, the broker indicated that it was typical because of the high demand for these investments. So, either the broker enhanced his earnings or both he and the company benefited during this time. It’s tantamount to buying a $300,000 house with 20% down and closing several months later. The realtor pockets the interest on your $60,ooo down payment with no credit to you during the wait. And, that’s in addition to the selling commission; it’s one reason why realtors favor substantial down payments.

NuVeen seems to function loosely and haphazardly at best for an investment firm. Reports on the bond funds investment performance tended to skip data such as the dividend rate during the period of interest. Early on, I had been required to garner a signature medallion notarization to buy or sell my bond shares over the telephone, which was done on March 4^th, 2005 in anticipation of divesting some of my holdings. However, on March 23^rd I received a notice from the company that my Telephone privileges had been cancelled.

NuVeen was informed that no one had authority beyond me to cancel since I was the sole owner of the account and had a valid notarization. However, I had to Fax a second copy of the original notarized form (and threaten them) in addition to the one I had already mailed. It was Sept. 22, 2005 before I finally got the company to re-instate the telephone privileges that I had requested in my original March 4^th letter. The broker had apparently acted to thwart my ability to sell without utilizing his services.

The holding period for converting Kansas Class ‘B’ to Class ‘A’ tax-free municipal bonds was changed from 6 to 5 years and then back to 6 years again on little more than company whimsy. Class ‘B’ bond rollovers are automatic after 6 years, whether you want them to or not and whether or not it is favorable to you, the holder. In the former case, it prevented me from divesting some of my holdings for more lucrative financial opportunities because an earlier buyout of Nuveen put me right back in the CDSC band that I was just exiting under the original terms. So, instead of being able to sell at the end of the 6^th year from the original five-year hold, I had to wait until the 7^th year before I could divest.

The ‘tax free’ fund was trading at $10.63 per share in Sept of 1998. Despite some brief upswings, the fund had fallen to $10.54 by the following year and at the end of the 6 year holding period, just before the Fannie Mae and Freddy Mac bankruptcies, had settled in around $10.15 per share. So, what does this translate to in terms of dollars and cents? Well, first let’s calculate the cost of bond conversion. What? You thought they just transferred the shares like you deposit money? Not so, here’s how conversion works on a typical $10,000 class ‘B’ investment purchased at $10.63 per share and now worth $10.44 per share:

940.734 class ‘B’ shares x $10.44/share = $9821.26

Class ‘A’ bonds typically command a higher per share price than ‘B’ bonds largely due to their liquidity. So, you will likely lose shares as well as portfolio value in any bond transitions since there is no set time prior to Dec. 31^st of the last holding year to require the company to effect conversion. It likely won’t be the next business day from the anniversary of purchase as is the case with a bank investment. The transaction is done automatically by the company if the shares have not been divested and you don’t get any options for the time of conversion. So now, class ‘A’ shares at $10.53/share are purchased by the Fund:

$9821.26/10.53 = 932.693 of class ‘A’ shares

In this case, 8.04 shares per $10,000 of investment were lost in the roll over. So, the holder has lost both capital and shares as a result of the ‘B’ to ‘A’ municipal bond conversion. Now, sum the losses for a $100,000 to $250,000 investment in bonds and you’re looking at some serious capital gain losses.

Well just sell off the ‘B’ bonds before they convert and there’s no problem, right? Well that’s not-quite true. A purchaser pays no up front fee to buy class ‘B’ bonds but pays a Contingent Deferred Sales Charge, i.e. CDSC, if they are sold anytime before 6 years and you may expect this requirement to change occasionally in favor of the bond issuer especially after you own the investment.

The CDSC charge is graduated based on the number of years the bond is held as follows: 5% the first year, 4% the second and 3^rd years, 3% the 4^th year, 2% during the 5^th and 1% during the 6^th. So, class ‘B’ bonds must be held 7 years before there is no CDSC sales charge to the holder, assuming the company doesn’t decide to ‘up’ the requirement. Yes, issuers of municipal bonds get to ‘change the rules ‘ after you own the investment due to buyouts and mergers just like banks, except banks usually continue to honor any preexisting CD terms from the financial institution bought. However, investment concerns like NuVeen, dealing in municipal bonds, do not. There is also the problem of declining share worth because bond values fluctuate like stock market shares, so losing $0.50 cents per share on the sellout is of greater concern than paying small CDSC commissions. There is an optimum time to sell.

NuVeen has a history of buyouts since my original 1998 purchase, the most recent is their acquisition by the Boston Group. Buyouts often present a convenient terminus for changing the rules on existing investments. This company has altered dividend quantities, dividend pay out times, the hold time for divesting bonds as well as the holding period for conversion to Class ‘A’ bonds.

Dividends from the fund were initially due on the 4^th of the month but the most recent buyout settled on the 9^th and often was the 11^th before they were actually distributed. It should be noted that there is no penalty to the company, no matter when they make the distribution. The monthly holding time requirement for selling bonds shifted to the 29^th of the month, i.e. if the bonds are sold prior to this date, the holder automatically forfeits the dividend for that month. So, if I held the investment until the 28^th of the month and then sold, I would lose my dividend because its not prorated and the sale was prior to the 29^th. You won’t read this on their website at http://www.Nuveen.com, change notification comes by letter and it can come at anytime.

In November of 2007, I received just such a letter: "We would like to take this opportunity to inform you of a change that will take place regarding your NuVeen investments bond mutual fund dividends. Starting in December of 2007, you can expect to receive your monthly dividend check approximately four days later than you receive that check currently. This change is a result of moving the record date from on or about the 9t^h of each month to three business days prior to the payable date. Moving the record date will allow a larger window during which investments received will be eligible to earn the dividend payable the following month." - Nuveen Investments.

This is pure nonsense. The shift has been made to facilitate the brokerage, first in collection of the monthly management fee and secondly, to accommodate delayed interest payments from the participating states, it gives no benefit whatsoever to the bondholder. The Nuveen letter also fails to note a corresponding shift in the monthly holding time, prior to divesting, as a result of the dividend change.

Tax-free municipal bonds work along the same lines as a ‘slush fund.’ They’re intended to be ready resources for states that can’t manage money. Interestingly enough, both Kansas and Michigan fall into that category with high tax economies and poor growth. States with poor economic policies seek to increase taxes to pay the interest on what they borrow through the sale of bonds. Impoverishment of the citizenry and cheating investors is of no concern to those who hold political office, staying elected is the only objective. Investment firms like NuVeen are ready to capitalize on state's poor fiscal management.

Income tax table adjustments and negotiating lower bond rates are means by which states can ameliorate interest burden and hedge against future operating costs at the expense of taxpayers.

Unlike fixed investments, bond interest rates fluctuate with economic conditions. Bond rates generally fall when the economy is good and increase when it is bad because states are more likely to vorrow during poor economic times. However, Kansas NuVeen municipal bonds ‘went south’ right from the start and were poor performers during the time of my holdings, regardless of the condition of the economy, demonstrating a steady downward trend over a ten-year period.

Figure: Ten Year trend of Bond prices and Dividends for NuVeen Investments

My dividends began at 0.0370 per share initially, dropping to 0.0345 and then to 0.028 per share in April of 2004, a 24% drop in dividend rates in just 6 years. The rate remained at 0.028 through December of 2006. Shares were trading for $10.28 during this same period.

The supposed strength of tax free muni-bonds is the taxes you don’t pay. The NuVeen motto claims, "it’s not what you earn, its what you keep." So how much did I keep due to NuVeen bond fund performance? Well, in 1999 the tax benefit was $152 dollars per 1000 of capital allocated to bonds but by 2006 the savings were down to $101 dollars per 1000. This is a 35.6% drop in tax benefits for capital invested in bonds in addition to the 24% drop in dividend rates during the same period.

It’s an obvious conclusion at this point that the fund is managed for the benefit of the states that sell the bonds.