Is Douglas R. Andrew, author of “Missed Fortune 101,” an incompetent, a bad person–or an alcoholic? A review of this catastrophically bad piece of work.
Review: “Missed Fortune 101″ by Douglas R. Andrew
The mass of evidence in my book, “Drunks, Drugs & Debits: How to Recognize Addicts and Avoid Financial Abuse,” shows that financial abuse–as all thug-like behavior–is usually rooted in alcohol or other-drug addiction. A book advancing ideas that could easily result in financial catastrophe for those who implement its ideas could easily be written by a person with the disease of alcoholism. This is particularly true for someone who should know better.
I have no way of confirming such alcoholism. However, when errors are consistently made with the singular goal of selling the mark on one of two ideas–that only an idiot wouldn’t hock his home to the hilt and invest the proceeds in one investment, universal life insurance–our antennae should go up. When other “mistakes” are made in analysis with the aim of convincing taxpayers they should not only stop investing in retirement plans, but in many cases even withdraw the funds long before the mandatory distribution age and invest the savings or net proceeds in such life insurance, we need to suspect that the underlying motive force could be addiction. Where facts are either omitted or incomplete and a balance of evidence is not provided, there is an underlying tone of dishonesty suggestive of alcoholism. After all, as consistently shown throughout my books, alcohol and other-drug addiction causes egomania, which results in a need to wield power capriciously. Offering financial counsel riddled with errors is one way by which to wield such power.
It is, of course, difficult to diagnose addiction based solely on one’s writings. Most clues identified as such in my book, “How to Spot Hidden Alcoholics: Using Behavioral Clues to Recognize Addiction in its Early Stages,” require actionable misbehaviors. However, several symptoms of addiction can rear their ugly heads in letters, e-mails and books. For example, stories of the grotesque are often thought up by addicts, the evidence for which is found throughout the writings of Edgar Allen Poe and Stephen King. Specific clues that can be used to spot possible addiction in letters, e-mails and on the web include the use of profanities, blaming others for one’s problems, pontification, belittling others, lies and the use of twisted logic. The latter four can be found and the latter two abound in “Missed Fortune 101.”
Examples of pontification include dogmatic and arrogant statements. “There are two ways to handle information: ignore it as false or increase your level of understanding to accommodate new ideas” is both arrogant and belittling. The implication is that we are supposed to accommodate the “new” ideas he is going to present or we are complete idiots. The statement, “I dispelled the myth-conception that you are likely to be in a lower tax bracket when you retire than when employed” is dogmatic. He provides no cites for this or any other assertion in the book.
The idea that “When you pay down your mortgage, you decrease your assets” is, in my opinion, so absurd as to constitute a bald-faced lie. The statement that “non-spouse heirs too often end up with only about 28 percent of the money that was left in their parents’ IRAs and 401(k)s” is also, in my opinion, misleading enough to constitute a lie. The only way for this to occur is by leaving a taxable estate with retirement plan assets. Less than one-half of one percent of all estates are taxable, and only a fraction of those include IRAs and other retirement plans. If that’s what his definition of “too often” is, I’d like to know how tiny a fraction of any subset “a small fraction” would be.
But it is in the use of twisted logic, often by misleading example, in which Mr. Andrew excels. The grandest of these is a comparison chart of one dollar pre-tax and one dollar taxed-as-earned, in which he shows the dollars doubling in each “period”for 20 such “periods,” as if we all can invest this successfully in one lifetime. Turning $1,000 into $1 billion requires 20 doubles, which can be done in a tad under 62 years by those rare individuals earning a consistent 25% per annum. The number of humans who have done this or its equivalent numbers perhaps a few thousand.
More direct uses of twisted logic include his idea that “Qualified [retirement] plans defer taxes, which results in increasing tax liability,” which he says is a bad idea. But think about it (and please bear with the math): you invest $6,000 per year into a qualified plan, which grows to over $1 million after 35 years at his assumed return of 7.75%. If you saved at a marginal tax rate of 33.3% (his often-assumed rate), you saved $69,300 in tax along the way. Continuing to assume a 7.75% return, your $1 million will yield $98,000 per year for 20 years before depletion and you will pay $646,800 in tax on the withdrawals assuming the same 33% tax rate. He decries the fact that you’d pay as much in taxes after barely two years of withdrawals as you would have saved in tax over 35 years of contributions. My first thought is this is a nice problem to have. My second, more reasoned approach, is calculating the growth of $6,000 on an after-tax basis, or $4,000 per year, and even assuming that no tax is paid on the 7.75% yearly earnings, results in about $710,000, which will yield only $66,000 per year over 20 years before being depleted. And the problem with deferring taxes is?
Another classic of many in the annals of twisted logic is his repeated assertion that “Home equity has no rate of return when it is trapped in the house.” This is outright nonsense. The return is whatever you save in interest or in rents. The return on investing funds in houses that are reasonably valued isn’t bad considering it is, except for the potential for declines in their values, risk-free. For example, to the extent you pay principal on a mortgage costing 6.5%, you are investing your savings at exactly that rate. If you own a home worth $180,000 free and clear that would rent for $14,400 per year, assuming that the privilege of ownership costs $6,000 per year in maintenance, replacements, taxes and insurance, your return is 4.7% ($14,400 – $6,000 = $8,400; $8,400/$180,000 = 4.7%). Either rate (6.5% or 4.7%) is infinitely greater than “no” rate of return.
There are numerous other examples of such amazing logic in the full 11-page review on my web site (either http://www.preventragedy.com or www.dougthorburn.com) under “book reviews,” an abbreviated version of which can be found at www.Amazon.com. Douglas R. Andrew is, in my opinion, either incompetent, a fundamentally rotten person, or an alcoholic. To suggest that anyone could write such tripe with a sober mind is, in my view, demeaning. Therefore, we should give Mr. Andrew the benefit of the doubt.