Astute Investor's Newsletter 4

End of the Month Portfolio: February 28, 2005

Date	Symbol	Name	Cost	Shares	Price	Cost	Valuation	Yield
4 Jul 03	HD	Home Depot	25.88	386.216	40	9995.27	15448.64	54.56%
10 Oct 03	SPF	Standard Pacific	39.92	250.395	80	9995.77	20031.6	100.40%
28 May 04	AET	Aetna Inc.	81.2	123.107	146.02	9996.29	17976.08	79.83%
30 Jun 04	JBHT	JB Hunt Trans.	38.58	259.117	47.19	9996.73	12227.73	22.32%
12 Aug 04	OSK	Oshkosh Truck	49.7	201.152	74.65	9997.25	15016.00	50.20%
31 Aug 04	JKHY	Jack Henry	17.64	566.766	19.85	9997.75	11250.31	12.53%
31 Aug 04	TBL	Timberland Co.	55.15	181.292	69.64	9998.25	12625.17	26.27%
31 Oct 04	AEOS	American Eagle	40.88	244.588	54.13	9998.76	13239.55	32.41%
31 Oct 04	FDX	Fedex Corp	91.12	109.737	97.78	9999.24	10730.08	7.31%
31 Oct 04	HDI	Harley-Davidson	57.57	173.697	61.88	9999.74	10748.37	7.49%
1 Dec 04	BRY	Berry Petroleum	46.3	215.988	61.91	10000.24	13371.82	33.71%
1 Jan 05	CD	Cendant Corp	23.38	427.748	22.12	10000.75	9461.79	-5.39%
1 Jan 05	CMC	Commercial Metals	25.28	395.619	34.8	10001.25	13767.54	37.66%
1 Jan 05	NUE	Nucor Corp.	52.34	191.092	62.34	10001.76	11912.68	19.11%
1 Jan 05	JCP	Penney(J.C.) Co.	41.4	241.601	44.49	10002.28	10748.83	7.46%
1 Jan 05	TPL	Texas Pacific Land	135.05	74.067	139	10002.75	10295.31	2.92%
4 Jan 05	WAG	Walgreen Co.	40.09	249.519	42.83	10003.22	10686.90	6.83%
5 Jan 05	XTO	XTO Energy Inc.	31.92	313.401	45.52	10003.76	14266.01	42.61%
6 Jan 05	KBH	KB Home	100.46	99.584	124.8	10004.21	12428.08	24.23%
31 Jan 05	BBBY	Bed Bath	40.29	248.318	37.52	10004.73	9316.89	-6.88%
Totals:						$200,000.00	$255,549.38	27.77%
						2/28/05

The Astute Investor's Newsletter

March 1, 2005

Despite the market's gyration in February we did quite well. Our portfolio gained 7.52% to end the month at $255,549.38. During the last Wednesday of the month our stop loss order on Home Depot executed at $40.00. Our gain of $5,453.37 is 54.56% for twenty-one months. ValueLine's timeliness rating for Timberland has been lowered to a 3 and this equity has been sold. The gain of $2,626.92 is 26.27% for six months. Now our realized gains in the portfolio are $76,243.98. For February the DJIA gained 2.63% to close at 10766.23 and the S&P 500 gained 1.89% to close at 1203.60. We are doing well.

Our two acquisitions are Florida Rock and Prudential Financial. Here are brief descriptions from Reuters:
Florida Rock Industries, Inc., incorporated in 1945, is principally engaged in three business segments: construction aggregates, concrete products, and cement and calcium products. The construction aggregates segment is engaged in the mining, processing, distribution and sale of sand, gravel and crushed stone. The concrete products segment is engaged in production and sale of ready mix concrete, concrete block, prestressed and precast concrete, as well as sales of other building materials. The cement and calcium products segment is engaged in the production and sale of portland and masonry cement, the importation of cement and slag that are either sold, ground or blended and then sold, and sale of calcium products to the animal feed industries. Substantially all operations are conducted in Florida, Virginia, Georgia, Maryland, Washington D.C., Tennessee, Alabama, North Carolina and Delaware. The Company also has an investment in a crushed stone plant in Charlotte County, New Brunswick, Canada.

Prudential Financial, Inc., incorporated in 1999, and its subsidiaries provide insurance, investment management and other financial products and services to both retail and institutional customers throughout the United States and in over 30 other countries. Principal products and services provided include life insurance, annuities, mutual funds, pension- and retirement-related investments and administration and asset management. In addition, the Company provides securities brokerage services indirectly through a minority ownership in a joint venture. It has organized its principal operations into the Financial Services Businesses and the Closed Block Business. The Financial Services Businesses operate through three operating divisions: Insurance, Investment, and International Insurance and Investments. Businesses that are not sufficiently material to warrant separate disclosure and businesses to be divested are included in Other operations within the Financial Services Businesses. The Closed Block Business, which includes the Closed Block, is managed separately from the Financial Services Businesses. The Closed Block Business was established on December 18, 2001 (the date of demutualization) and includes the Company's in force participating insurance and annuity products and assets that are used for the payment of benefits and policyholder dividends on these products, as well as other assets and equity that support these products and related liabilities. In connection with the demutualization, Prudential has ceased offering these participating products.

Each of the stocks that we are continuing to hold have had their number of shares tinkered with so that when the new stocks are added in our cost basis remains exactly $200,000.00 and the stocks are listed in chronological order. And thus the yield column is directly related to each stock's holding period. It's magic.
We begin March at $247,465.63

Stop loss orders for March: SPF raised to $72, AET raised to $130, JBHT initiated at $45, OSK unchanged at $68, AEOS raised to $48, CMC initiated at $31, and XTO initiated at $40. This will protect most of the gains in these equities. If repacement equities are needed during March the candidates are Coach Inc., SLM Corporation, and NVR, Inc.

Happy investing! Go, capitalism.

Beginning of the Month Portfolio: March 1, 2005

Date	Symbol	Name	Cost	Shares	Price	Cost	Valuation	Yield
10 Oct 03	SPF	Standard Pacific	39.92	250.382	80	9995.25	20030.56	100.40%
28 May 04	AET	Aetna Inc.	81.2	123.1	146.02	9995.72	17975.06	79.83%
30 Jun 04	JBHT	JB Hunt Trans.	38.58	259.104	47.19	9996.23	12227.12	22.32%
12 Aug 04	OSK	Oshkosh Truck	49.7	201.143	74.65	9996.81	15015.32	50.20%
31 Aug 04	JKHY	Jack Henry	17.64	566.738	19.85	9997.26	11249.75	12.53%
31 Oct 04	AEOS	American Eagle	40.88	244.563	54.13	9997.74	13238.2	32.41%
31 Oct 04	FDX	FedexCorp	91.12	109.726	97.78	9998.23	10729.01	7.31%
31 Oct 04	HDI	Harley-Davidson	57.57	173.68	61.88	9998.76	10747.32	7.49%
1 Dec 04	BRY	Berry Petroleum	46.3	215.967	61.91	9999.27	13370.52	33.71%
1 Jan 05	CD	Cendant Corp	23.38	427.705	22.12	9999.74	9460.83	-5.39%
1 Jan 05	CMC	Commercial Metals	25.28	395.579	34.8	10000.24	13766.15	37.66%
1 Jan 05	NUE	Nucor Corp.	52.34	191.073	62.34	10000.76	11911.49	19.11%
1 Jan 05	JCP	Penney(J.C.) Co.	41.4	241.576	44.49	10001.25	10747.72	7.46%
1 Jan 05	TPL	Texas Pacific Land	135.05	74.06	139	10001.80	10294.34	2.92%
4 Jan 05	WAG	WalgreenCo.	40.09	249.495	42.83	10002.25	10685.87	6.83%
5 Jan 05	XTO	XTO Energy Inc.	31.92	313.369	45.52	10002.74	14264.56	42.61%
6 Jan 05	KBH	KB Home	100.46	99.574	124.8	10003.20	12426.84	24.23%
31 Jan 05	BBBY	Bed Bath	40.29	248.294	37.52	10003.77	9315.99	-6.88%
1 Mar 05	FRK	Florida Rock	64.17	155.902	64.17	10004.23	10004.23	0%
1 Mar 05	PRU	Prudential Ins.	57	175.522	57	10004.75	10004.75	0%
Totals:						$200,000.00	$247,465.63	23.73%
						2/1/05

Astute Investor's Newsletter 3

End of the Month Portfolio: January 31, 2005

Date	Symbol	Name	Cost	Shares	Price	Cost	Valuation	Yield
07/04/2003	HD	Home Depot	$25.88	386.216	$41.26	$9,995.27	$15,935.27	59.43%
10/10/2003	SPF	Standard Pacific	$39.92	250.395	$66.53	$9,995.77	$16,658.78	66.66%
05/28/2004	AET	Aetna Inc.	$81.20	123.107	$127.05	$9,996.29	$15,640.74	56.47%
06/30/2004	JBHT	J B Hunt Trans.	$38.58	259.117	$44.12	$9,996.73	$11,432.24	14.36%
08/12/2004	OSK	Oshkosh Truck	$49.70	201.152	$73.39	$9,997.25	$14,762.55	47.67%
08/31/2004	JKHY	Jack Henry	$17.64	566.767	$20.79	$9,997.77	$11,783.09	17.86%
08/31/2004	TBL	Timberland Co.	$55.15	181.292	$65.74	$9,998.25	$11,918.14	19.20%
10/31/2004	AEOS	American Eagle	$40.88	244.588	$50.80	$9,998.76	$12,425.07	24.27%
10/31/2004	FDX	Fedex Corp.	$91.12	109.737	$95.65	$9,999.24	$10,496.34	04.97%
10/31/2004	HDI	Harley-Davidson	$57.57	173.697	$60.11	$9,999.74	$10,440.93	4.41%
12/01/2004	BRY	Berry Petroleum	$46.30	215.988	$54.14	$10,000.24	$11,693.59	16.93%
12/01/2004	CMI	Cummins Engine	$79.62	125.606	$77.67	$10,000.75	$9,755.82	-2.45%
01/01/2005	CD	Cendant Corp.	$23.38	427.769	$23.55	$10,001.24	$10,073.96	0.73%
01/01/2005	CMC	Comm.Metals	$25.28	395.639	$28.90	$10,001.75	$11,433.97	14.32%
01/01/2005	NUE	Nucor Corp.	$52.34	191.101	$56.16	$10,002.23	$10,732.23	7.30%
01/01/2005	JCP	Penney (J.C.)	$41.40	241.612	$42.72	$10,002.74	$10,321.66	3.19%
01/01/2005	TPL	Texas Pacific	$135.05	74.071	$124.50	$10,003.29	$9,221.84	-7.81%
01/04/2005	WAG	Walgreen Co.	$40.09	249.532	$42.61	$10,003.74	$10,632.56	6.29%
01/05/2005	XTO	XTO Energy	$31.92	313.416	$35.91	$10,004.24	$11,254.77	12.50%
01/06/2005	KBH	KB Home	$100.46	99.589	$108.65	$10,004.71	$10,820.34	8.15%
Totals:						$200,000.00	$237,433.89	18.72%
						1/31/05

The Astute Investor’s Newsletter

February 1, 2005

Busy first week of the year with UIC selling on Tuesday (for a gain of $1,250.15 or 12.5% for 2 months), EMN selling on Wednesday (for a gain of $1,031.46 or 10.3% for 6 months), and BDK selling on Thursday (for a gain of $2,726.65 or 27.3% for 5.5 months) when their stop loss orders executed. Now our realized gains in the portfolio are $68,163.69.

When January began the portfolio had a market value of $237,655.12. These three gains essentially reduced this value to $232,646.86 for portfolio tracking purposes. The end-of-the-month market value of $237,678.60 is a modest gain of 2.12%.

By comparison, the DJIA was down 2.7% to close at 10489.94 and the S&P 500 was off 2.53% to close at 1181.27. We beat the market again.

As a result of the end-of-the-month review Cummins Engine is sold as their Value Line timeliness rating has been downgraded to a 3. This means taking a loss of $244.93 for the brief holding period of two months. Now our realized gains in the portfolio are $67,918.76.

The successful election in Iraq gave a nice boost to the market on the last day of January and hopefully that month’s price gyrations are behind us. This introduction of democracy will soon enough be followed with some capitalism. When the tourists and the business persons of the world return to Iraq, then the phrase Mission Accomplished will be completely correct.

The replacement stock is Bed Bath & Beyond. This is a choice that is slightly out of character as they do not pay a dividend. (American Eagle also does not pay a dividend.) Here is the Reuters overview:

Bed Bath & Beyond Inc., incorporated in 1971, operates specialty retail stores in the United States, including Bed Bath & Beyond stores (BBB), Harmon stores and Christmas Tree Shops stores (CTS). BBB stores are almost exclusively of a big box format. BBB offers an assortment of merchandise at everyday low prices that are substantially below regular department store prices and generally comparable to or below department store sale prices. BBB's domestics merchandise line includes items, such as bed linens, bath accessories and kitchen textiles and BBB's home furnishings line includes items, such as cookware, dinnerware, glassware and basic housewares. At February 28, 2004, BBB operated 575 stores in 44 states and one territory. CTS is a retailer of giftware and household items selling an assortment of domestics merchandise and home furnishings at low prices in many categories, including home décor, giftware, housewares, food, paper goods and seasonal products. At February 28, 2004, CTS operated 24 stores in six states. Harmon is a health and beauty care retailer, which operated 30 stores in three states at February 28, 2004.

The Company commenced operations in 1971 with the opening of two stores, one in New York and one in New Jersey. These stores sold primarily bed linens and bath accessories. In 1985, Bed Bath & Beyond introduced its first store carrying a full line of domestic's merchandise and home furnishings. The Company began using the name Bed Bath & Beyond in 1987 in order to reflect the expanded product line offered by its stores and to distinguish its stores from conventional specialty retail stores offering only domestics merchandise or home furnishings. In March 2002, Bed Bath & Beyond entered the health and beauty care market with the acquisition of Harmon and in June 2003, the Company added to its domestic's merchandise and home furnishings market offerings with the acquisition of CTS.

Bed Bath & Beyond has been engaged in an ongoing expansion program involving the opening of new BBB stores and the expansion and relocation of existing BBB stores. In the 12-year period from the beginning of fiscal 1992, to the fiscal year ended February 28, 2004 (fiscal 2003), the BBB chain has grown from 34 stores to 575 stores. Total BBB square footage grew from approximately 917,000 square feet at the beginning of fiscal 1992, to approximately 19,353,000 square feet at the end of fiscal 2003. During fiscal 2003, BBB opened 85 new stores and relocated two stores, which resulted in the addition of approximately 2,098,000 square feet of store space. Harmon has grown from 27 stores, upon acquisition, to 30 stores, with the addition of one store in fiscal 2003, and occupied approximately 204,000 square feet at the end of fiscal 2003. CTS has grown from 23 stores, upon acquisition, to 24 stores, with the addition of one store in fiscal 2003, and occupied approximately 915,000 square feet at the end of fiscal 2003.

BBB's merchandise consists primarily of better quality merchandise typically found at better department stores. For those product lines that have brand names associated with them, BBB generally offers leading brand name merchandise (including Aero, All-Clad, American Pacific, Braun, Calphalon, Cannon, Conair, Croscill, Cuisinart, J.A. Henckels, Homedics, KitchenAid, Krups, Laura Ashley, Lenox, Mikasa, Nambe, Nautica, Nicole Miller, Noritake, Oxo, Portmeirion, Rowenta, Rubbermaid, Springs, Villeroy & Boch, Wamsutta, Wedgewood, Westpoint Stevens and Yankee Candle). BBB, on an ongoing basis, tests new merchandise categories and adjusts the categories of merchandise carried in its stores and may add new departments or adjust the size of existing departments as required.

Most of the stocks that we are continuing to hold have had their number of shares tinkered with so that when the new stocks are added in our cost basis remains exactly $200,000.00 and the stocks are listed in chronological order. And thus the yield column is directly related to each stock’s holding period. It’s magic.

Stop loss orders for February: HD unchanged at 40, SPF raised to 62, AET raised to 120, OSK raised to 68, and AEOS initiated at 46. This will protect most of the gains in these equities. These equities will be considered if replacements are needed during the month: Owens & Minor, Legg Mason, Reebok International, Quanex, and Black & Decker.

Quanex is in the same industry as Nucor so there is the concentration issue and Black & Decker would mean reacquiring a stock that we just (prematurely?) sold.

Happy investing! Go, capitalism.

Beginning of the Month Portfolio: February 1, 2005

Date	Symbol	Name	Cost	Shares	Price	Cost	Valuation	Yield
07/04/2003	HD	Home Depot	$25.88	386.216	$41.26	$9,995.27	$15,935.27	59.43%
10/10/2003	SPF	Standard Pacific	$39.92	250.395	$66.53	$9,995.77	$16,658.78	66.66%
05/28/2004	AET	Aetna Inc	$81.20	123.107	$127.05	$9,996.29	$15,640.74	56.47%
06/30/2004	JBHT	J B Hunt Trans.	$38.58	259.117	$44.12	$9,996.73	$11,432.24	14.36%
08/12/2004	OSK	Oshkosh Truck	$49.70	201.152	$73.39	$9,997.25	$14,762.55	47.67%
08/31/2004	JKHY	Jack Henry	$17.64	566.766	$20.79	$9,997.75	$11,783.07	17.86%
08/31/2004	TBL	Timberland Co.	$55.15	181.292	$65.74	$9,998.25	$11,918.14	19.20%
10/31/2004	AEOS	American Eagle	$40.88	244.588	$50.80	$9,998.76	$12,425.07	24.27%
10/31/2004	FDX	Fedex Corp.	$91.12	109.737	$95.65	$9,999.24	$10,496.34	4.97%
10/31/2004	HDI	Harley-Davidson	$57.57	173.697	$60.11	$9,999.74	$10,440.93	4.41%
12/01/2004	BRY	BerryPetroleum	$46.30	215.988	$54.14	$10,000.24	$11,693.59	16.93%
01/01/2005	CD	Cendant Corp.	$23.38	427.748	$23.55	$10,000.75	$10,073.47	0.73%
01/01/2005	CMC	Comm.Metals	$25.28	395.619	$28.90	$10,001.25	$11,433.39	14.32%
01/01/2005	NUE	Nucor Corp.	$52.34	191.092	$56.16	$10,001.76	$10,731.73	7.30%
01/01/2005	JCP	Penney (J.C.)	$41.40	241.601	$42.72	$10,002.28	$10,321.19	3.19%
01/01/2005	TPL	Texas Pacific	$135.05	74.067	$124.50	$10,002.75	$9,221.34	-7.81%
01/04/2005	WAG	Walgreen Co.	$40.09	249.519	$42.61	$10,003.22	$10,632.56	6.29%
01/05/2005	XTO	XTO Energy	$31.92	313.401	$35.91	$10,003.76	$11,254.23	12.50%
01/06/2005	KBH	KB Home	$100.46	99.584	$108.65	$10,004.21	$10,819.80	8.15%
01/31/2005	BBBY	Bed Bath	$40.29	248.318	$40.29	$10,004.73	$10,004.73
Totals:						$200,000.00	$237,678.60	18.84%
						2/1/05

Astute Investor's Newsletter 2

January 1, 2005

Date	Symbol	Name	Cost	Shares	Price	Cost	Valuation	Yield
4 Jul 03	HD	Home Depot	$ 25.88	386.216	$ 42.74	$ 9,995.27	$ 16506.87	65.15%
10 Oct 03	SPF	Standard Pacific	$ 39.92	250.395	$ 64.14	$ 9,995.77	$ 16060.34	60.67%
28 May 04	AET	Aetna Inc New	$ 81.20	123.107	$ 124.75	$ 9,996.29	$ 15357.60	53.63%
28 May 04	CHD	Church & Dwight	$ 30.27	330.253	$ 33.62	$ 9,996.76	$ 11103.11	11.07%
30 Jun 04	EMN	Eastman Chemical	$ 46.23	216.25	$ 57.73	$ 9,997.24	$ 12484.11	24.88%
30 Jun 04	JBHT	J B Hunt Trans.	$ 38.58	259.143	$ 44.85	$ 9,997.74	$ 11622.56	16.25%
21 Jul 04	HDWR	Headwaters Inc	$ 25.30	395.188	$ 29.50	$ 9,998.26	$ 11658.05	16.60%
22 Jul 04	BDK	Black & Decker	$ 66.00	151.496	$ 88.33	$ 9,998.74	$ 13381.64	33.83%
8 Aug 04	PD	Phelps Dodge	$ 73.04	136.901	$ 90.00	$ 9,999.25	$ 12321.09	23.22%
12 Aug 04	OSK	Oshkosh Truck	$ 49.70	201.202	$ 68.38	$ 9,999.74	$ 13758.19	37.59%
31 Aug 04	JKHY	Jack Henry	$ 17.64	566.908	$ 19.91	$ 10,000.26	$ 11287.14	12.87%
31 Aug 04	TBL	Timberland Co.	$ 55.15	181.337	$ 62.67	$ 10,000.74	$ 11364.39	13.64%
31 Oct 04	AEOS	American Eagle	$ 40.88	244.649	$ 47.10	$ 10,001.25	$ 11522.97	15.22%
31 Oct 04	FDX	Fedex Corp	$ 91.12	109.764	$ 98.49	$ 10,001.70	$ 10810.66	8.09%
31 Oct 04	HDI	Harley-Davidson	$ 57.57	173.741	$ 60.75	$ 10,002.27	$ 10554.77	5.52%
31 Oct 04	NUE	Nucor Corp.	$ 42.23	236.864	$ 50.00	$ 10,002.77	$ 11843.20	18.40%
31 Oct 04	TM	Toyota Motors	$ 77.59	128.924	$ 81.87	$ 10,003.21	$ 10555.01	5.52%
31 Oct 04	UIC	United Industrial	$ 32.00	312.617	$ 38.74	$ 10,003.74	$ 12110.78	21.06%
1 Dec 04	BRY	Berry Petroleum	$ 46.30	216.075	$ 47.70	$ 10,004.27	$ 10306.78	3.02%
1 Dec 04	CMI	Cummins Engine	$ 79.62	125.656	$ 83.79	$ 10,004.73	$ 10528.72	5.24%
Total:						$ 200,000.00	$ 245137.98	22.60%
						12/31/04

For the month of December the DJIA was up 3.40% to close at 10783.01. Our portfolio was slightly better as our equities gained 3.79% to reach $245,137.98.

We began December with ten stop loss orders in place and on the seventh three of them executed: HDWR sold at $29.50 for a gain of $1,659.79 which is 16.6% for 4.5 months, PD sold at $90.00 for a gain of $2,321.84 which is 23.22% for 4 months, and NUE sold at $50.00 for a gain of $1,849.43 which is 18.40% for 5 weeks. Not too bad. With these three additions our realized gains in the portfolio are $61,497.28.

The Value Line ratings for Church & Dwight and for Toyota Motors have been lowered to 3 and these have also been sold: the former for a gain of $1,106.35 which is 11.07% over 7 months and the latter for a gain of $551.80 which is 5.52% over 14 months. Now our realized gains in the portfolio are $63,155.43.

Nucor is still a favored stock and it will be repurchased and returned to the portfolio. The other new additions are Cendant Corp., Commercial Metals Company, J.C. Penney, and Texas Pacific Land Trust.
Cendant Corporation is a global provider of a range of complementary consumer and business services, focusing primarily on travel and real estate services. It operates in the following business segments: Real Estate Services, Hospitality Services, Travel Distribution Services, Vehicle Services and Financial Services. The Real Estate Services segment franchises the real estate brokerage businesses of the Company's three residential and one commercial brands, provides real estate brokerage services under its real estate brands, provides home buyers with mortgages and title insurance, appraisal review and closing services and facilitates employee relocations. The Hospitality Services segment facilitates the sale and development of vacation ownership interests, provides consumer financing to individuals purchasing these interests, facilitates the exchange of vacation ownership interests, franchises the Company's nine lodging brands and markets vacation rental properties in Europe. The Travel Distribution Services segment provides primarily global distribution services for the travel industries and travel agency services. The Vehicle Services segment operates and franchises the Company's vehicle rental brands and provides commercial fleet management and fuel card services. The Financial Services segment provides financial institution enhancement products and insurance-based and loyalty solutions, operates and franchises tax preparation offices and provides a variety of membership programs.

Commercial Metals Company, incorporated in 1946, manufactures, recycles, markets and distributes steel and metal products, and related materials and services through a network of locations located throughout the United States and internationally. The Company's business is organized into five segments: domestic mills, CMC Zawiercie, S.A., domestic fabrication, recycling, and marketing and distribution. The domestic mills segment produces reinforcing bar, angles, flats, small beams, rounds, fence-post sections and other shapes. CMCZ sells rebar primarily to fabricators, distributors and construction companies. The domestic fabrication segment operates facilities that are engaged in the various related aspects of steel fabrication. The recycling segment processes secondary metals, or scrap metals, for use as a raw material by manufacturers of new metal products. The marketing and distribution segment buys and sells primary and secondary metals, fabricated metals and other industrial products.

Nucor Corporation, incorporated in 1958, is engaged in the manufacture and sale of steel and steel products. The Company organizes its business into two segments: steel mills and steel products. Principal products from the steel mills segment are hot-rolled steel (angles, rounds, flats, channels, sheet, wide-flange beams, pilings, billets, blooms, beam blanks and plate) and cold-rolled steel. Principal products from the steel products segment are steel joists and joist girders, steel deck, cold finished steel, steel fasteners, metal building systems and light gauge steel framing. Hot-rolled steel is manufactured principally from scrap, utilizing electric arc furnaces, continuous casting and automated rolling mills. Cold-rolled steel, cold finished steel, steel joists and joist girders and steel fasteners are manufactured by further processing of hot-rolled steel. Steel deck is manufactured from cold-rolled steel.

J. C. Penney Company, Inc., founded in 1902, serves as the holding company for J. C. Penney Corporation, Inc. (JCP). JCP, the wholly owned operating subsidiary of the Company, is a department store, catalog and e-commerce retailer. As of May 1, 2004, JCP operated 1,021 JCPenney department stores throughout the United States and Puerto Rico, and 59 Renner department stores in Brazil. JCPenney Catalog, including e-commerce, is a catalog merchant of general merchandise, and JCPenney.com is an apparel and home furnishings site on the Internet. J. C. Penney Corporation, Inc. is a contributor to JCPenney Afterschool Fund, a charitable organization committed to providing children with after school programs to help them reach their full potential.

Texas Pacific Land Trust (the Trust), incorporated in February 1888, is primarily engaged in managing land in Texas conveyed to the Trust. The Trust holds title to tracts of land in Texas, previously the property of the Texas and Pacific Railway Company. Managing the land includes sales and leases of such land and the retention of oil and gas royalties. The Trust's income is derived primarily from land sales, oil and gas royalties, grazing leases, and interest on investments. During the fiscal year ended December 31, 2004, land sales accounted for 16% of the Company's consolidated revenue while oil and gas royalties accounted for 54%. (This stock was found not in the Value Line Basic Survey, but rather in the Expanded Survey of Small and Mid-Cap companies.)

These five descriptions are from Reuters.

Twelve of the fifteen stocks that we are continuing to hold have had their number of shares tinkered with so that when the new stocks are added in our cost basis remains exactly $200,000.00 and the stocks are listed in chronological order. And thus the yield column is directly related to each stock’s holding period. It’s magic.

The new market value for the portfolio is $237,655.12.

For January there is a new set of stop loss orders: HD will remain to $40, SPF will be raised to $57, BDK will be raised to $84, AET will be raised to $116, EMN will remain at $51, OSK will be raised to $62, and UIC will remain at $36. This will protect most of the gains in these equities.

New feature! Should any of these SLO execute during the month, the following replacement equities will be considered: Beazer Homes, Costco Wholesale, KB Home, Walgreen Co., and/or XTO Energy.

Happy investing! Go, capitalism.

Date	Symbol	Name	Cost	Shares	Price	Cost	Valuation	Yield
4 Jul 03	HD	Home Depot	$ 25.88	386.216	$ 42.74	$ 9,995.27	$ 16,506.87	65.15%
10 Oct 03	SPF	Standard Pacific	$ 39.92	250.395	$ 64.14	$ 9,995.77	$ 16,060.34	60.67%
28 May 04	AET	Aetna Inc New	$ 81.20	123.107	$ 124.75	$ 9,996.29	$ 15,357.60	53.63%
30 Jun 04	EMN	Eastman Chemical	$ 46.23	216.239	$ 57.73	$ 9,996.73	$ 12,483.48	24.88%
30 Jun 04	JBHT	J B Hunt Trans.	$ 38.58	259.13	$ 44.85	$ 9,997.24	$ 11,621.98	16.25%
22 Jul 04	BDK	Black & Decker	$ 66.00	151.481	$ 88.33	$ 9,997.75	$ 13,380.32	33.83%
12 Aug 04	OSK	Oshkosh Truck	$ 49.70	201.172	$ 68.38	$ 9,998.25	$ 13,756.14	37.59%
31 Aug 04	JKHY	Jack Henry	$ 17.64	566.823	$ 19.91	$ 9,998.76	$ 11,285.45	12.87%
31 Aug 04	TBL	Timberland Co.	$ 55.15	181.31	$ 62.67	$ 9,999.25	$ 11,362.70	13.64%
31 Oct 04	AEOS	American Eagle	$ 40.88	244.612	$ 47.10	$ 9,999.74	$ 11,521.23	15.22%
31 Oct 04	FDX	Fedex Corp	$ 91.12	109.748	$ 98.49	$ 10,000.24	$ 10,809.08	8.09%
31 Oct 04	HDI	Harley-Davidson	$ 57.57	173.715	$ 60.75	$ 10,000.77	$ 10,553.19	5.52%
31 Oct 04	UIC	United Industrial	$ 32.00	312.539	$ 38.74	$ 10,001.25	$ 12,107.76	21.06%
1 Dec 04	BRY	Berry Petroleum	$ 46.30	216.021	$ 47.70	$ 10,001.77	$ 10,304.20	3.02%
1 Dec 04	CMI	Cummins Engine	$ 79.62	125.625	$ 83.79	$ 10,002.26	$ 10,526.12	5.24%
1 Jan 05	CD	Cendant Corp	$ 23.38	427.834	$ 23.38	$ 10,002.76	$ 10,002.76	0.00%
1 Jan 05	CMC	Comm. Metals	$ 50.56	197.849	$ 50.56	$ 10,003.25	$ 10,003.25	0.00%
1 Jan 05	NUE	Nucor Corp.	$ 52.34	191.13	$ 52.34	$ 10,003.74	$ 10,003.74	0.00%
1 Jan 05	JCP	J. C. Penney	$ 41.40	241.649	$ 41.40	$ 10,004.27	$ 10,004.27	0.00%
1 Jan 05	TPL	Texas Pacific Land	$ 135.05	74.081	$ 135.05	$ 10,004.64	$ 10,004.64	0.00%
Totals:						$ 200,000.00	$ 237,655.12	18.83%
						1/1/05

Astute Investor's Newsletter 1

December 1, 2004

Date	Symbol	Name	Cost	Shares	Price	Cost	Valuation	Yield
07/04/2003	HD	Home Depot	$ 25.88	386.216	$ 41.75	$ 9,995.27	$ 16,124.52	61.32%
10/10/2003	SPF	Standard Pacific	$ 39.92	250.395	$ 56.01	$ 9,995.77	$ 14,024.62	40.31%
01/31/2004	PFE	Pfizer Inc	$ 35.63	280.557	$ 27.77	$ 9,996.25	$ 7,791.07	-22.06%
03/31/2004	AIG	American Inter.	$ 71.35	140.108	$ 63.35	$ 9,996.71	$ 8,875.84	-11.21%
05/28/2004	AET	Aetna Inc New	$ 81.20	123.119	$ 118.51	$ 9,997.26	$ 14,590.83	45.95%
05/28/2004	CHD	Church & Dwight	$ 30.27	330.286	$ 31.22	$ 9,997.76	$ 10,311.53	3.14%
06/30/2004	EMN	Eastman Chemical	$ 46.23	216.272	$ 54.38	$ 9,998.25	$ 11,760.87	17.63%
06/30/2004	JBHT	Hunt Transport	$ 38.58	259.169	$ 40.20	$ 9,998.74	$ 10,418.59	4.20%
07/21/2004	HDWR	Headwaters Inc	$ 25.30	395.227	$ 32.11	$ 9,999.24	$ 12,690.74	26.92%
07/22/2004	BDK	Black & Decker	$ 66.00	151.511	$ 84.09	$ 9,999.73	$ 12,740.56	27.41%
08/06/2004	PD	Phelps Dodge	$ 73.04	136.915	$ 97.13	$ 10,000.27	$ 13,298.55	32.98%
08/12/2004	OSK	Oshkosh Truck	$ 49.70	201.222	$ 62.82	$ 10,000.73	$ 12,640.77	26.40%
08/31/2004	JKHY	Jack Henry	$ 17.64	566.964	$ 19.28	$ 10,001.24	$ 10,931.07	9.30%
08/31/2004	TBL	Timberland Co.	$ 55.15	181.355	$ 63.33	$ 10,001.73	$ 11,485.21	14.83%
10/31/2004	AEOS	American Eagle	$ 40.88	244.673	$ 41.77	$ 10,002.23	$ 10,219.99	2.18%
10/31/2004	FDX	Fedex Corp	$ 91.12	109.776	$ 95.03	$ 10,002.79	$ 10,432.01	4.29%
10/31/2004	HDI	Harley-Davidson	$ 57.57	173.758	$ 57.82	$ 10,003.25	$ 10,046.69	0.43%
10/31/2004	NUE	Nucor Corp.	$ 42.23	236.887	$ 52.90	$ 10,003.74	$ 12,531.32	25.27%
10/31/2004	TM	Toyota Motor	$ 77.59	128.938	$ 74.71	$ 10,004.30	$ 9,632.96	-3.71%
10/31/2004	UIC	United Industrial	$ 32.00	312.648	$ 39.00	$ 10,004.74	$ 12,193.27	21.88%
Total:						$ 200,000.00	$ 232,741.01	16.37%
						11/30/04

For the month of November the DJIA was up 3.99% to close at 10428.02. Our portfolio was better by one and a half as the equities gained 6.63% to reach $232,741.01.
While Pfizer and AIG remain very strong companies, their stocks are untimely and we will move on with two new investments. A loss of $2,205.18 will be taken on Pfizer and a loss of $1,120.87 on AIG. Our realized gains in the portfolio are now $55,675.22 over the two and a half years that we have been in mythical business.

Continuing to use the Value Line Investment Survey as our primary source, the replacement stocks are Berry Petroleum Company and Cummins Engine Company.

Berry Petroleum Company, incorporated in 1985, is an independent energy company engaged in the production, development, acquisition, exploitation and exploration of crude oil and natural gas. The Company's principal reserves and producing properties are located in the San Joaquin Valley, Los Angeles, Ventura basins in California and the Uinta Basin in northeastern Utah.
In August 2003, Berry completed the acquisition of the Brundage Canyon properties in the Uinta Basin of Utah. This acquisition was financed utilizing the Company's revolving credit facility. As of the year ended December 31, 2003, proved reserves for this property were approximately 9.2 million BOE (barrels of oil equivalent), or 8%, of total reserves. In addition, the Company added to its California assets through the purchase of certain properties in the Poso Creek field in March 2003. This acquisition added approximately 2.5 million BOE of proved reserves.
Berry operates all of its principal oil producing properties. In California, the Midway-Sunset and Placerita fields contain predominantly heavy crude oil that requires heat, supplied in the form of steam and injected into the oil producing formations to reduce the oil viscosity, allowing the oil to flow to the well-bore for production. Berry utilizes cyclic steam and steam flood recovery methods in the Midway-Sunset and Placerita fields, and primary recovery methods at its Montalvo field.

In Utah, the Brundage Canyon field consists of light gravity crude and associated natural gas, produced from a depth of approximately 6,000 feet. Companywide field operations include the initial recovery of the crude oil and its transport, through treating facilities and into storage tanks. Crude oil produced from the Brundage Canyon field is transported by truck, while its gas production, net of field usage, is transported by feeder pipelines to two main shipper pipelines.

Cummins Inc., incorporated in 1919, designs, manufactures, distributes and services diesel and natural gas engines, electric power generation systems and engine-related products, including filtration and emissions solutions, fuel systems, controls and air handling systems. The Company operates four complementary business segments: Engine, Power Generation, Filtration and Other, and International Distributors. The Engine segment produces engines and parts for sale to customers in automotive and various industrial markets. The Power Generation segment is an integrated provider of power systems, selling engines, generator sets and alternators. It also offers rental of power equipment for both standby and prime power uses. The Filtration and Other segment is engaged in the sale of filtration products, exhaust systems and turbochargers. The International Distributor segment includes Company-owned distributorships engaged in the sale of engines, generator sets and service parts, performing service and repair activities on the Company's products and maintaining relationships with various original equipment manufacturers (OEMs). The Company sells its products to OEMs, distributors and other customers worldwide.
(The descriptions of Berry and Cummins are from Reuters.)

Sixteen of the eighteen stocks that we are continuing to hold have had their number of shares tinkered with so that when the new stocks are added in our cost basis remains exactly $200,000.00 and the stocks are listed in chronological order. And thus the yield column is directly related to each stock’s holding period. It’s magic.
The new market value for the portfolio is $236,197.57.

For December there is a new set of stop loss orders: HD will be raised to $40, SPF will be raised to $54, HDWR will be raised to $29.50, BDK will be raised to $80, AET will be set at $110, EMN will be set at $51, PD will be set at $90, OSK will be set at $58, NUE will be set at $50, and UIC will be set at $36. This will protect most of the gains in these equities.

Happy investing! Go, capitalism.

Date	Symbol	Name	Cost	Shares	Price	Cost	Valuation	Yield
07/04/2003	HD	The Home Depot, Inc.	$ 25.88	386.216	$ 42.14	9995.27	16275.14	62.83%
10/10/2003	SPF	Standard Pacific Corp.	$ 39.92	250.395	$ 55.94	9995.77	14007.1	40.13%
05/28/2004	AET	Aetna Inc New	$ 81.20	123.107	$ 117.56	9996.29	14589.41	45.95%
05/28/2004	CHD	Church & Dwight Co., Inc.	$ 30.27	330.253	$ 32.05	9996.76	10310.5	3.14%
06/30/2004	EMN	Eastman Chemical Company	$ 46.23	216.25	$ 54.43	9997.24	11759.68	17.63%
06/30/2004	JBHT	J B Hunt Transport Services	$ 38.58	259.143	$ 40.89	9997.74	10417.55	4.20%
07/21/2004	HDWR	Headwaters Inc	$ 25.30	395.188	$ 30.37	9998.26	12689.49	26.92%
07/22/2004	BDK	THE Black & Decker Corporation	$ 66.00	151.496	$ 85.40	9998.74	12739.3	27.41%
08/06/2004	PD	Phelps Dodge Corporation	$ 73.04	136.901	$ 93.34	9999.25	13297.19	32.98%
08/12/2004	OSK	Oshkosh Truck Corp	$ 49.70	201.202	$ 63.52	9999.74	12639.51	26.40%
08/31/2004	JKHY	Jack Henry & Associates Inc	$ 17.64	566.908	$ 19.42	10000.26	10929.99	9.30%
08/31/2004	TBL	The Timberland Company	$ 55.15	181.337	$ 64.48	10000.74	11484.07	14.83%
10/31/2004	AEOS	American Eagle Outfitters New	$ 40.88	244.649	$ 42.70	10001.25	10218.99	2.18%
10/31/2004	FDX	Fedex Corp	$ 91.12	109.764	$ 97.19	10001.7	10430.87	4.29%
10/31/2004	HDI	Harley-Davidson, Inc.	$ 57.57	173.741	$ 58.09	10002.27	10045.7	0.43%
10/31/2004	NUE	Nucor Corporation	$ 42.23	236.864	$ 50.45	10002.77	12530.11	25.27%
10/31/2004	TM	Toyota Motor Corp	$ 77.59	128.924	$ 75.64	10003.21	9631.91	-3.71%
10/31/2004	UIC	United Industrial Corporation	$ 32.00	312.617	$ 39.40	10003.74	12192.06	21.86%
12/01/2004	BRY	Berry Petroleum Company	$ 46.30	216.075	$ 43.72	10004.27	10004.27	0.00%
12/01/2004	CMI	Cummins Engine Company, Inc.	$ 79.62	125.656	$ 79.60	10004.73	10004.73	0.00%
Totals:						200000	236197.57	18.10%
						12/01/04

The States of California

The state of California's budget deficit is woeful. This deficit is tangible enough and subject to accounting and financial scrutiny. Almost three decades ago the tax revolution began in our state and it is still very much alive. From state to state, every governor that raises taxes is defeated at the next election. Any politician that promises to raise taxes can hardly expect to be elected. The classic example remains the Walter Mondale of 1984. With every choice that the voters are given they select the fiscal conservative. California's budget deficit sent Gray Davis to the sidelines and continues to offer challenges to Governor Schwarzenegger. Sacramento and the legislature are willing to pass the buck and finance the budget deficit (which is inherently a short-term problem) with long-term debt. In the corporate world such mismatching of maturities is very bad business. The voters of California know better and would much rather have the books balanced with spending reductions and the sale of assets. In a year or two budget spending will be corrected and hopefully the necessary political prices paid.

The state of California's public schools is tragic. This far more serious public sector deficit is that of primary and secondary school education. Sometime in the Sixties compromises slipped into this bureaucracy and productivity has been continuing downward every year. One manifestation of this failure to properly educate the next generation of Californians is the growth of the welfare rolls. Certainly everyone on welfare have been denied educational choice and opportunity. The structural breaking point for our society must be approaching. Can the well-educated 10% support themselves and the under-educated 90%? Certainly not. Can the well-educated 90% support themselves and the under-educated 10%? With ease and with unquestioned compassion. The poorly educated eighteen-year-old is a double drain on society: these people will make no tangible contribution to our society, and they will make demands on the productivity of others. These unfortunate societal circumstances have been four decades in the happening. Half a decade is long enough to effect a cure.

Within California there is no official, elected or appointed, who would ever accept responsibility for the education of the six million youngsters in public grade schools and high schools. One quarter of them are below grade level, and the personal and professional liabilities would just be too great. The state of California and the public education bureaucracy take the children from their parents and the tax dollars from almost every person and entity within our borders and return a mostly under-educated result twelve years later. Although the structure of this system has been in place for many decades, now all can see that it does not work very well. Public education is now the poorest investment that the State is making.

Every parent who wishes to withdraw their youngster from the public school system and transfer to a private school should have the State's blessing to do so. According to the Governor's Budget Summary: 2004-05 (page 54) California is spending $9,614.00 on each student for the academic year that is now under way. Even if on some limited basis, these parents should be granted a voucher to better educate their youngster. The same youngster that the State is not responsible for. These vouchers should be valued at $5,000.00 for each of the elementary grades and at $6,000.00 for each of the secondary grades. (In Colorado vouchers start at $5,000.00.) It takes no imagination to believe, if not to hope, that the parents of 500,000 grade schoolers will accept this choice. In doing so they will save California just over $2.3 billion every year. This annuity is renewable, as long as the parents are satisfied with their youngster's performance and with the school's performance. If the school's posted tuition is less than $5,000.00, the voucher will be made out for the lesser value and the State's savings will be slightly greater on the budget side of this equation. This savings will be much greater in terms of having a productive citizenry and in reducing welfare demands. When the first 500,000 high school youngsters are moved by their parents into the private school sector, the State will save $1.8 billion. Again, every year. It would be uncharitable to write in terms of balancing our budget on the backs of these students, who are not even taxpayers or voters. But balancing the budget, and even creating a great surplus, on the shoulders of the parents could happen. Education is their responsibility; this funding choice should be their right.

There are now some 6.2 million youngsters in public education. Presuming that nine out of thirteen youngsters are in the K-8 grades and should all of their parents make this funding election, the State would save $19.8 billion each and every year. Presuming that the remaining four are also moving onto private schooling (which is the aspiration of every parent), the State would save an additional $6.8 billion each and every year. There is no political downside to offering this choice to all of these parents. This is a market-based solution. More spending by the government has never been the solution to the education problem. And certainly not when the budget is crippled with many other examples of profligate spending and when many private schools are doing a good deal more with somewhat less funding.

An extremist would insist that the State close all of its schools and force the parents to accept vouchers. This should never happen.

Taxation equity demands that some consideration be offered to those parents who already have their youngsters in private school, and are saving California at least $9,614.00 every year. (This is about $6.7 billion in aggregate.) The obvious choice is the nonreimbursable tuition tax credits first espoused a few years ago by the Mackinac Center for Public Policy. These should be valued at $3,000.00 per year per youngster for every California parent and grandparent. And to every other California taxpayer should be granted the limited right to invest in a youngster's education. These non-familial credits should start out with a cap of $1,000.00 per year per youngster.

Of course vouchers and credits could be used together. If the parents choose an elementary school where the tuition is $5,900.00, they would pay the $900.00 difference out of their taxes due to Sacramento. (They might even declare more sources of income just to get up to owing this amount.) If the parents and grandparents are not able to come up with this $900.00 tax liability, then they could approach any other California taxpayer and ask them for this contribution. This relative, neighbor, or business entity will not have their tax bill altered in any way; they are just not funding all of it to Sacramento. They will be investing directly in California, and hopefully will want to see the report card. The student will know that there are expectations and that a good deal of moral support is available. Since there are no for-profit schools, the schools would not be able to offer their own tax credits to any worthy student. Hopefully scholarship funds would be available if in fact not enough tax credits can be identified.

Each of these vouchers would be made payable to the parents and to the school. This will greatly minimize fraud by any possible parties. And the schools will be advised that if the youngster and the school part company for any reason, any refund is made payable to the State of California.

While there are many small (and often Christian) grade schools where these vouchers will be gladly accepted, even at $6,000.00 the high school vouchers are probably below the market. Here the parents need for balancing tax credits will be even greater. It must be believed that for every youngster with exceptional promise the parents will be able find the right funding mix.

A few schools will be tempted to raise their fees to the full value of the vouchers. If the market will bear it, this will certainly happen. In no time at all the schools will be competing for the students and the students will be competing for the schools. For well over two hundred years competition and capitalism have done wonders for America. With vouchers and credits, these same forces will do wonders for the future of California.

For the sake of the following examples a state cost figure of $9,614.00 will be used. When primary school vouchers of $5,000.00 have been issued to the parents of 500,000 youngsters, the savings will be $2.3 billion every year. Vouchers are an annuity, and would be renewed each year at the parents' request. There should be no doubt that the parents of at least 500,000 grade schoolers would accept these vouchers in a heartbeat. If an existing empty desk cannot be found, many a new school may be started. (Or a number of public schools could be privatized, if enough parents so wish.) Now look at this $2.3 billion from the revenue side. It would support $3,000.00 credits for over 750,000 youngsters. Today, there are not that many attending private schools in the Golden State. Five-thousand-dollar vouchers for half a million grade schoolers more than balances with credits of three thousand dollars for 750,000 youngsters already in private schools. (And thus no impact on the current budget.) The kids, their families, and the future of California are the winners here. When secondary school vouchers of $6,000.00 have been issued to the parents of 300,000 youngsters, the savings will be $1.08 billion. Again, every year. On the revenue side this would support $3,000.00 credits for 360,000 youngsters. There are 6.2 million youngsters in California public schools. By privatizing public education California will make a fortune. And the legislature may go back to being seasonal.

Apportioning blame for the state of California's budget or for the state of the State's public education is not a constructive step toward a solution. These deeply entrenched deficits bring forth an opportunity for a creative and revolutionary experiment. Within the spirit of President Bush's 'ownership society' the time is now to return California public education to its former eminence. Offer all the schools to the parents and the taxpayers with these vouchers and credits.

They are only a choice. With a few simple changes of the tax code these two deficits can be offset against each other. No responsible person could object to this offer.

Every youngster goes directly to school. Where is the California parent who is allowed to send even one tax dollar directly to that very same school? He and she do not yet exist.

Dennis Duggan McMahon

San Francisco

December 1st, 2004

Schools, not casinos; vouchers, not one-armed bandits; credits, not craps

An Open Letter to Governor Schwarzenegger

Governor Schwarzenegger, tear down these walls

Now there are seven school districts that have been turned over to a state administrator because they are bankrupt. A seasoned bean-counter will be brought in to re-align the debits and the credits. Only expenses can be cut; certainly district revenues cannot be increased in the face of so many failing students. If the parents had any choice at all in where their youngsters go to school or where and how their tax dollars are spent on education, these seven districts would not receive a dime. Or a youngster.

Within the edifice of the California tax code are the walls that separate parents from directly spending their tax dollars on the most important investment of their lifetime, or the lifetime of their children. With a handful of districts fiscally failing (presumably they do not teach math very well), and with essentially every district failing to produce even educated young Californians, this is the summer to re-arrange the educational corridors and hallways. Instead of all those tax dollars going into blind alleys and no-exit tunnels, most of them should have the choice of being spent/invest directly by parents. Private schools succeed because the family's kids and funds go as directly as possible to school. Public education has been failing for a generation as bureaucratic walls deny parents choice at every turn.

Senator Charles Poochigian recently reported that 13,000 public high school students were granted waivers from the basic algebra requirement. These adults-to-be will never even understand the basic math challenges of saving and investing. The state senator also reported that over 160 school districts have failed to ensure math proficiency by graduation. Hopefully the state of California is not condemning most of these youngsters to a lifetime of welfare. This will be far more costly than a good education. The obstacles within the tax code and the twentieth-century funding model for education are gambling away a brighter and more productive future for California.

During your campaign last year you promised to give California back to its citizens. Did you have in mind the state parks? Presumably the California Aqueduct is not burdened with debt. Certainly you were not alluding to the California electrical grid. There are millions of acres of unincorporated land that are free and clear. And no one wants the Department of Motor Vehicles. You could take public education, which a generation ago was certainly an asset, away from the bureaucrats and teachers' unions and offer it to the parents of California. These nearly desperate times call for a daring solution. Offer vouchers to most of the parents of California and credits to all the taxpayers of California. Your re-election will be assured.

Parents of primary graders should be offered vouchers of, say $5,000.00, to leave the public school system and enter the capitalistic arena of private education. Depending upon the accounting values that California uses, this would save our state $2 billion every year for each half million youngsters that make this switch. (A voucher value of $5,000.00 is currently being contested in Colorado; and the savings calculation is based on a California cost number of $9,000.00 per student.) Since everyone should have the right to the best educational opportunities in the marketplace, there would be no conditions or qualifiers: the parents of the first half million to apply get them. (This, of course, would be very democratic.) These vouchers will be an annuity that will save California billions of dollars each year that these youngsters are in school. And maybe hundreds of billions in future welfare payments and lost productivity.

To absolutely minimize fraud, these vouchers should be issued for each semester and should be in the name of the parents and the school of their choice. The schools will need to understand that if the student leaves for any reason and there is to be a tuition refund, this check is to be made out to the State of California. These vouchers will be mailed to the parents and they will deliver them to the schools. Although these parents are not writing out checks, choosing the school and handing over the voucher will engage the whole family in the adventure of education.

For those students in high school, the voucher would be for $6,000.00. For each half million youngsters at this level the state will save $1.5 billion every year. In as little as a year the state's budget will not be balanced. There will be an overflowing surplus. These vouchers will be made out to the student, the parents, and their school of choice. As no one has written before: the more endorsers, the merrier.

There will be some instances, especially at the primary school level, where the voucher may be too much. It will be made out for the new school's published price and even greater savings will accrue to the state of California.

To complement the vouchers, and to offer some tax relief to those parents who are already sending their youngsters to a private school and who are saving the state a few billion dollars in additional education expenses, they should be granted tuition tax credits. This will be a step toward taxation equity. (Following upon the work of the Mackinac Center for Public Policy, every reference here is to nonreimbursable tuition tax credits. Their work may be found at Mackinac.org.) For at least a couple of years these should be valued at $3,000.00 per year per youngster, and parents, grandparents, and legal guardian would be allowed this credit for their direct payments. And since every taxpayer, especially employers, should be able to invest in a well-educated upcoming generation, credits for these other taxpayers would be capped at $1,000.00 per year per youngster. It should be expected that in response to market conditions, the relative values of the vouchers and the credits would be adjusted every few years. As a funding example, if the fortunate parents who have a $5,000.00 voucher chose a school where the tuition is $6,500.00, they could pay the $1,500.00 out of their taxes due to Sacramento. Or they could approach two other taxpayers and ask each of them for $750.00 in funding. This would cost these two taxpayers only the cost of issuing a check; their tax liability would be unchanged. And they would be investing very directly in their community's future.

Within our borders there are 700,000 youngsters in private schools. Their parents are decades overdue this form of tax relief. When the grandparents are included, nearly two million votes may swing on this issue alone. And there are over six million youngsters in California's failing public school system. It is too easy to believe that the parents of a third of them would anxiously grasp at any combination of vouchers and credits. Only a second-millennium tax code and today's Democrat-controller legislature stand in the way. This is an experiment in market-based funding that cannot fail. Capitalism and democracy (and their implied choices) have made America the only superpower. In education parents have the responsibility; let them have this say in how and where these tax dollars are invested.

In a recent article on our budget woes John Fund quotes Carl DeMaio of the Performance Institute: "There should be one point of service for the taxpayer -- one unit, having clear accountability, where the buck stops with them." Where in California do the educational bucks stop? You are responsible for the education of four young Californians. Who is the elected or appointed official who is responsible for the other seven million? Individually and collectively this is just too great a liability. The funding mechanism needs an overhaul. The history of civilization does not provide one example where more bureaucrats or more spending by the government have solved a problem that can well be handled by the interplay of market forces. With vouchers and credits let the parents and the taxpayers solve today's public education crisis. Note that there are no complaints coming from the world of private education. Spending on education by the government has become dysfunctional. With vouchers parents are spending the tax dollars and with credits taxpayers are investing tax dollars even before they are collected.

Let's roll these dice and let the future of California be the winner.

Dennis Duggan McMahon

San Francisco

OurCalifornia.org

July 13, 2004

Dueling Deficits

Governor Arnold Schwarzenegger:

"Secretary of Education Richard Riordan is preparing a major overhaul of state school funding that would bypass local districts and funnel taxpayer dollars directly to school principals."

This is a small step in the right direction. For significant reform take this opportunity and allow some state funds to go directly, and all the way, to the parents. This would mean bypassing more than the local districts. Congress and our own senior U.S. senator have approved vouchers for some 2,000 youngsters in the District of Columbia. The remaining 63,000 young students are stranded without opportunity, and their parents without school choice. A recent article by the Heartland Institute reports that vouchers have been introduced in China, Taiwan, Thailand, and South Africa. Now the Third World is leading us?

You were elected in part because of the budget deficits that had been created by the current legislature and the prior governor. There is also a public education deficit of poor test scores, low graduation rates, and endemic truancy. It has been reported that our state is spending $9,200.00 per youngster, that there are just over seven million in our public grade schools and high schools, and that almost a third of these schools are rated as unsatisfactory by the federal administrators. Now that vouchers have garnered the lowest level of political acceptance, it is your opportunity to present first-in-our-nation funding choices to the parents of California.

Without any qualifications offer vouchers of up to $4,000.00 to those parents who are willing to take their youngster out of public school and transfer to a private school. To absolutely minimize fraud, these vouchers would be made payable to the parents and to the new school of choice. There would be no strings attached. The school would understand that if the student leaves for any reason, if there is to be a refund it goes to the state of California. There would be no 'poverty' requirement regarding the parents and no 'failing' designation attached to the public school the parents wish to leave. Education is primarily the responsibility of the parents. With tax dollars in their hands they will make better choices. There are many private grade schools that charge less than $4,000.00, and they do have space available. For the first year some limitation might be placed on the number of grade school youngsters who would make this switch. It is imaginable that the parents of one million young students would be able to accept this funding choice this calendar year. This alone would save California $5.2 billion, and every year as the vouchers would of course be renewable at the request of the parents. If the private school charges more than $4,000.00, the parents would presumably be on their own. As you well know, the parents of the 700,000 youngsters already in private schools are on their own and receive no tax considerations at all.

The District of Columbia vouchers are set at $7,500.00. With California's current budget constraints and the limitations on our long-term financing, we cannot afford to match this value. At $4,000.00 our grade school vouchers are fairly priced relative to all the parameters. For those youngsters in high school the vouchers would be initially valued at $5,000.00. This is certainly a below-market amount, and those parents in our big cities may be challenged to come up with the difference. Certainly if the school believes that the student has special promise, tuition concessions and scholarship funds will be available. To do the simple math, if the parents of half a million high schoolers accept these vouchers the state will save $2.1 billion every year. This will also be an annuity for California as the vouchers will be renewable at the request of the parents. And to complete the analogy, these vouchers would be made payable to the student, to the parents, and to the new school of choice.

Taxation equity requires that vouchers be complemented by tuition tax credits for those parents who are already avoiding the public school system. A few years ago the Mackinac Center for Public Policy made the point that only nonrefundable tuition tax credits make market sense. For the remainder of these difficult fiscal times, these credits should be set at $3,000.00 per year per youngster for parents and at $1,000.00 per year per youngster for every other California taxpayers. This latter category would certainly include corporations. Those parents (and a few others) who are paying the expenses for these 700,000 youngsters are saving the state of California $6.44 billion every year. Nonrefundable tuition tax credits are owed to these taxpayers. If their youngster's tuition was greater than $3,000.00, these parents could go to any other California taxpayer and ask that person or entity to make a tuition payment of up to $1,000.00. This second taxpayer's tax liability will of course not be changed in the least. This will encourage every business in California to invest in the education of its next generation of hires. A handful of high-tech companies have their office buildings arranged in a campus environment. With the tax incentives of credits and vouchers they could have a school in their midst. Imagine Cisco College Prep, Oracle Junior High, Silicon Graphics Elementary. With this introduction of vouchers and credits there will quickly be an environment where the schools are competing for the students and the students are competing for the schools.

It need not be assumed that over the course of a few years all of the state's public schools would be essentially privatized. But if this should be the wish of the parents, it is certainly not the legislature's place to stand in the way. No elected official or bureaucrat will accept political responsibility for the education of all these children. To push these numbers all the way, however, if this should happen the state would save $25 billion each and every year. The budget deficit is gone and so is the public education deficit. The cost of bureaucracy is high.

Later this year there will be gubernatorial elections in eleven states. The Republican Party may rightfully expect to hold Montana, New Hampshire, North Dakota, Utah, and Vermont. But each of these states has a public education deficit, and parental involvement in the forms of vouchers and credits will help keep these governorships Republican. The Party may pick up relatively Republican Indiana (57% for Mr. Bush in 2000), Missouri (50%), and North Carolina (56%) on this issue on the reform of education funding. Delaware, Washington, and West Virginia have Democratic governors with low approval ratings, and these states do have parents. There are very few societal problems that can be solved with more government spending. And the history of civilization does not record one instance of more government funding solving a public education crisis. Private schools succeed because the parents are paying directly. Give as many parents as possible this choice.

The value of these vouchers and credits may need to be held constant until California returns to fiscal health. But to have a dream, in 2006 the high school vouchers go to $6,000.00 while the grade school vouchers remain at $4,000.00. The nonrefundable tuition tax credits might go to $4,000.00 for parents, $2,000.00 for grandparents (or four other designated relatives), and remain at $1,000.00 for all other taxpayers.

Governor Schwarzenegger, open the door of funding and school choice for the parents of California. If the parents will it, the state of California will save billions of dollars.

Leave No Parents Behind.

Dennis Duggan McMahon

San Francisco

OurCalifornia.org

January 30, 2004