Eminent Domain

I'm sure by now you've read or heard that the U.S. Supreme Court ruled in favor of corporations in the matter of eminent domain. What this ruling means is that McDonalds or Wal-Mart can come to town and if they can prove that they can derive more economic benefit from your property than you can, then they can condemn your property, pay you what they think it is worth and move you out.

Believe me, they will not pay you what you feel it is worth. They will use some smoke and mirror method of valuation, kind of like our government uses when they calculate inflation or cost of living numbers.

It seems that everyone is up in arms over this most recent Supreme Court ruling. In looking at the case, it appears that the court ruling was partially right and a little wrong at the same time.

First of all, the matter of eminent domain is a state matter, not a federal matter. That means that this has to be dealt with at the state level. If you look back in history to the birth of our country, you will see that the states and their constitutions were in place long before the federal government came into being. The only way that the framers of the constitution were able to get the state to ratify the constitution and form the union was by guaranteeing state sovereignty. Had the constitution not contained language to allow succession, the union would have failed. No state would have ratified the constitution. That said, the federal government originally was severely limited in power. We now see that that is not the case. Our wonderful government has figured out all sorts of ways to get around the original wording of the constitution. However, in this case, the Supreme Court is right in deferring to the state decision regarding eminent domain.

There are however two important tests that must be met before a state can condemn and take property from an owner. First, the stated usage of the property must be for public use only. This prevents rich, powerful individuals and corporations from taking property from less fortunate individuals. Second, the state must pay a fair market price for the property. So, if a state determines that they need property for public use, let's say a highway, then they must through generally approved valuation methods, arrive at a fair price for the property. If both of these tests are met, then things would work ok in the real world, but many times, both of these tests are seldom met.

First of all, it is hard to arrive at a value to which both parties agree. What is fair to me may not be fair to you. Maybe your property has been in your family for hundreds of years. In many cases it becomes nearly impossible to place a fair valuation on the property. And don't let anyone tell you that such actions have greater "social value" than the value an individual places on personal property. There is no accurate way to determine social value. There isn't even an accurate way to determine individual value. All value is imputed, that is, it si subjectively determined. There is no objective way to measure value.

Since there is no conceivable scientific way to say which use of a property best benefits society, government cannot determine value. Value has to be determined by the individual. How much will I accept for my property? You will never get an economist or the governments that employ them to admit to this simple fact because to do so would put them all out of business. It would relegate their theories to the trash heap. Think about this, if governments cannot make accurate interpersonal comparisons of value, then how can governments justify or prove any value in taxing wealthy citizens and redistributing that money to the poor? See what I mean? It opens a whole can of worms.

Mad Money

Every now and then when I have a few spare minutes and I'm sitting in front of the television flipping through channels, I run into Mad Money with James Cramer on CNBC. I don't know about you, but I can only take so much of his high-energy hype. Watching Mad Money is like watching CNBC's Market Wrap on steroids. I suppose that the fast, almost frantic pace appeals to generation x'ers who grew up on video games and television advertisements. All I can say is that if you are looking for a few minutes of decompression time after a tough day at the office, Mad Money is not the show to watch.

If you know of James Cramer you will remember that he was a huge cheerleader during the tech stock bubble of the late 90's. During those days he never met a tech stock that he didn't like. If you watch his show today or read any of his articles in the various business publications you will also realize that while he has toned down his excitement about tech stocks, he is still a big believer in Wall Street and owning stocks. He is just a little more cautious in his approach to stock picking.

For myself, I'm afraid that I cannot put much faith in the words of a guy who was pumping tech stocks in 1999. Of course most of CNBC's programming was big time hype in 1999 and still is to some extent.

I did find a recent article by Cramer in the Denver Post to be of interest. Cramer pointed out that there are doomers and gloomers who continually see the end of the financial world bearing down on us. He also makes mention that occasionally they are right and things go badly in the markets, but on the whole, the markets prove those people wrong much of the time.

I believe in this case James Cramer hit the nail on the head. No one knows what the markets are going to do today, tomorrow, or next year. If someone devised some method to accurately predict the direction of the market, you and I wouldn't be able to afford it. Chances are, it would never be for sale. The person who created it would never share. Why would they? They would own the goose that lays the golden egg.

When you read some of the amazing claims being made by people who claim to have found the holy grail of the investment universe and that they are making huge profits with little or no risk, you know that they are selling you a pipe dream. That's why I believe that the best way to invest your retirement funds are by evaluating the overall risk of the market and diversifying in appropriate, uncorrelated asset classes.

Always keep in mind Warren Buffet's two rules of investing: 1. Don't lose money and 2. Don't forget rule number one.

All In The Family

Nearing retirement? Looking for a way to help your grown children purchase their first home? Discouraged about the low interest rates you are earning on your savings? Take heart. There is a way that you can help your children and double your return on your savings.

All around the country, people are loaning money for home purchases to their children in what are called intra-family mortgages. As many empty nesters reach retirement age, they sell larger homes, many of which are paid off, and downsize to smaller more manageable homes or town homes. Because most Americans have enjoyed steadily rising home prices over the past several years, downsizing frees up a lot of cash. Instead of 1 ½ to 2% interest on savings, many people are realizing 4-5% percent by acting as a mortgage company for their grown children.

There are some caveats. First, you need to get everything in writing. The one thing you don’t want to have happen is a strained relationship with family due to a misunderstanding. Fortunately there is a company that specializes in intra-family mortgages and loans. You can visit their website here.

CircleLending provides the necessary structure to make an interfamily mortgage a win-win situation. CircleLending will create a promissory note and mortgage. File with the appropriate governmental agency. Create a loan amortization schedule and handle all payments. They manage the entire process so you don’t have to become a bank or collection agency.

Intra-family mortgages are just one more way that individuals can earn a better interest rate on their money and help a family member at the same time.