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I am a contrarian investor who would like to invest in gold via a
mutual fund. Any recommendations? Might the easing of trade sanctions
against South Africa affect my decision?
Stephen J. Emery
Chesapeake, Va.
As an investment, gold is packed with all the negatives that any
dedicated contrarian craves. Since it tumbled from a high of $875 an
ounce in January 1980, it has hovered in the $350 to $450 range and
was recently trading at an anemic $357. And you can't mine any
glimmer of hope from the recent lifting of trade sanctions either,
since South Africa has been selling its gold all along to nations
that didn't abide by the restrictions. So gold is perfect for you --
unless, that is, you want to make money. Why? Because to stage a
comeback, the metal would have to follow this contrario-scenario: the
post-recession recovery would have to be so strong that inflation
would break out like measles. Then investors would buy gold as a
hedge, and bullion prices would shoot skyward. (I myself think this
possibility is rather remote, but then again I never thought The
Beverly Hillbillies would make it to a second season.) According to
James Stack, editor of InvesTech Market Analyst, a mutual fund
newsletter, you shouldn't do more than nibble at gold now, investing
a total of only 3% to 5% of your holdings in funds like Fidelity
Select-American Gold (3% load; up 43.1% for the five years through
Aug. 1; $1,000 minimum investment; 800-544-8888) or Vanguard
Specialized Gold & Precious Metals (1% back-end load; up 95.4%;
$3,000 minimum investment; 800-662-7447). Increase your stake to 10%
to 20% only if gold breaks beyond $385 an ounce and the capacity
utilization of U.S. factories (a measure of how busy manufacturers
are, published mid-monthly by the Federal Reserve), now 79.7%,
surpasses 81%, signaling that inflation may rise. One caution: gold
funds, which hold the stocks of mining and refining firms, can be two
to three times more volatile than the metal itself. So to survive,
you may need a propensity for low blood pressure as well as a
contrarian philosophy.

Playing lotteries is gambling, not investing, of course. Still,
perhaps you ^ could give me some information on foreign lotteries
that solicit U.S. customers. Over the years, I've gotten mailings
from Canadian and Hong Kong lotteries, and I recently had a letter
from one in Australia. Am I better off playing these or sticking to
state lotteries here in the United States?
James M. Stante
San Diego
I think any lottery is a waste because the odds of hitting the
jackpot are so small -- only one in 23 million on average in the
California State Lottery, for example. But if you insist on playing,
at least stick closer to home. In your state, California, 36 cents of
every dollar you bet pays for education -- an expense that you would
otherwise have to meet through higher taxes (14 cents goes to
administrative costs; the other 50 cents comes back to players in
winnings). Contrast that to the situation Down Under. The Australian
Players Service, which solicited you, is a private firm located in
Queensland that can buy tickets for you in a pool composed of four of
Australia's official state lotteries. That pool returns about 60% of
revenues to winners -- 10 percentage points more than the California
game. But APS pockets some of the loot for expenses and profit -- it
won't say how much -- and you can safely bet that the California
schools don't see a penny. If all that doesn't discourage you, then
ponder your criminal liability. Buying lottery tickets through the
mail violates federal law. And although overworked U.S. Attorneys are
unlikely to indict you, they could if they wanted (penalty: up to two
years in jail and a $1,000 fine). Peter Morgan, a spokesman for APS,
claimed not to know about that U.S. law. He said he would have to
seek some legal advice on the matter. Good idea, mate.

Some years ago, the brokerage industry cut back on issuing stock
and bond certificates to investors and started handling purchases in
book-entry form instead -- meaning that the only proof you owned the
shares was in the brokerage firm's records. Recently, my broker, who
holds some bonds for me in this fashion, threatened to levy a $50
annual service fee on inactive accounts like mine. I tried to close
the account, but the firm said it could not issue me a certificate of
ownership. The only way I could avoid the fee was to move my account
-- still in book-entry form -- to a discount broker that levies no
charge. How can I get proof of ownership so I won't be so vulnerable
to the vicissitudes of brokerage houses?
Millicent F. McCathren
I agree that it is nasty for brokerage firms to insist that almost
all securities be held as book entries and then charge you a $50
inactive-account fee when you could hold the certificates yourself
for zip. But judging by the letters I get from people who have lost
stock and bond certificates, you are probably better off relying on a
broker's storage system than on your own. As to your ownership
question, relax: your purchase confirmation and brokerage statements
are valid legal proof of ownership (if you have misplaced them, ask
for copies). And should your broker go under, the Securities Investor
Protection Corporation, a government-chartered organization,
guarantees individual accounts up to $500,000 (for more about the
SIPC, see Money Update on page 29).

I am writing on behalf of my mother, who has multiple sclerosis
and is confined to a wheelchair. Last May, she bought a van through a
New Mexico company that converts vehicles for the handicapped. The
cost was $19,358 for the van with an additional $14,220 charge for
the modification. As required by law, the company added on $358 in
luxury tax -- 10% of the amount over $30,000. I don't see how this
can possibly be regarded as a luxury. Do we have any recourse?
Kim Pfautz
Not right now. Sure, nobody would argue that a new van for a
handicapped person constitutes a luxury. But the current tax code
requires that you treat the purchase and modification of a vehicle as
one transaction if they occur within six months of each other. The
only potential solution is to put pressure on Congress to change the
luxury tax law, which was passed just last year. Unfortunately, a
proposed amendment to do so is part of a larger Tax Simplification
Act that is stalled in the House Ways and Means Committee, where all
tax legislation must originate. Chances of its emerging this year are
uncertain at best. So, readers, prod your congressmen to fix this
oversight (for which they are partly responsible), and send nagging
letters to Dan Rostenkowski, the chairman of the House Ways and Means
Committee (1102 Longworth House Office Bldg., Washington, D.C.
20515). There is one bright spot you should know about: the pending
bill would be retroactive to Jan. 1, 1991. So your mother may someday
get her money back after all.