Common Sense Economics

Common Sense Economics: Your Money—What It Is and How to Keep It, by John Pugsley, 2nd ed., Costa Mesa, Calif.: Common Sense Press, 1976, 327 pp., $12.50

If there is one overriding impression one gets from this book, it is its clarity and conciseness. Pugsley has put together a remarkably well written treatise on economics and investing for the layman and professional alike.

The chapters on insurance and tax avoidance ideas are especially good. Now, insurance is certainly not a gripping subject by any means, but Pugsley succeeds in presenting his subject matter in such a way that one is compelled to read every word for fear of missing one of his astute observations. He is not one to reiterate or digress too often. His clarity and terse writing style sustain the reader's attention. His discussion of disability insurance, for instance, is enlightening and alone worth the price of the book. Pugsley understands insurance principles and gives us a very useful guide for determining a suitable insurance program.

His section on tax-sheltered investments is prefaced with a discussion of the tax protest "movement." He believes that the "logical protest" of employing legal tax shelters (qualified retirement plans, personal incorporation, and tax-sheltered investments) is better than martyrdom and financial ruin.

The chapter on income taxes also includes a fair amount of type on the investment annuity. I was excited about this investment, too, when I published "Financial Independence and Tax-Sheltered Investments" in the June 1976 issue of REASON. Unfortunately, it was disallowed by an IRS ruling last year.

The introductory chapter is a dissertation on how government intervention mucks up the economy. Nothing new—but well stated. It is integrated with his philosophy that, armed with a clear understanding of finance and economics, and rational investment planning, you can design a strategy to achieve your goals in spite of external forces.

The chapters on plans and strategies incorporate a comprehensive review of virtually every investment known to man. Some are dealt with at length (precious metals and common stocks, for example) while others are peremptorily and unfairly dismissed (real estate). I flatly disagree with Pugsley's comment that "real estate, in general, is one of the most dangerous investments in the US today" (p. 191).

The only other counts against this book are the omissions. The second edition was published in September 1976. Yet, there is no mention of the hottest, new investment vehicle around then—listed stock options on the Chicago Board of Trade. The advent of a standardized secondary market in stock options in 1973 dramatically altered equity investing for speculators and stock investors alike.

A greater oversight, however, was Pugsley's failure to consider the "Tax Reform Act of 1976," which was the most sweeping change in the estate and capital gains tax laws in 20 years. Although it went into effect on January 1, 1977, most of what was to come had been publicized by the time this book went to press. As a result, there are a few inaccuracies in the text, and the Federal Estate Tax Table in the appendix is obsolete.

In any event, this book is well worth reading and referring to from time to time. It is very informative, even enlightening at times. Above all, it will give you sharper focus and a framework for determining your investment strategy in advance.