Tuesday, July 12, 2016

SBBI coming back

For never explained reasons, Morningstar discontinued publishing the Ibbotson SBBI Yearbook this year.  When I called them to order my copy and learned this, I said, "I am certainly sorry that Morningstar bought the rights to this book, only to abandon it!"

I was not the only complainer. This email arrived today:

Dear SBBI Customer:When we discontinued the Ibbotson SBBI Classic Yearbook earlier this year, many of you contacted us to express your displeasure about losing this valuable resource. In response to your feedback, we have partnered with Duff & Phelps to continue to make the yearbook available in printed form. 
Duff & Phelps, which will compile the data and produce the book, will distribute the 2016 Stocks, Bonds, Bills, and Inflation (SBBI) Yearbook through Wiley, which publishes its other valuation titles. This book will release in August 2016, and future editions are expected.


I haven't yet decided whether to buy it, or wait for next year's edition.  It also will be distributed through Amazon and others.

Morningstar remains inscrutable.

Thursday, July 07, 2016

Charity Navigator Lists Fake Philanthropies

Directing money to worthy causes draws increasing attention in wealth planning. First step should be to separate the worthwhile charities from the worthless. Charity Navigator has compiled a list of more than 30 fake charities, annotated with suggestions of worthy alternatives.

Sunday, July 03, 2016

Can Robo Advisers Save Investors From Themselves?

Betterment and other online investment services make investing easy. Novice investors define their goals and time frame. The robo adviser puts their money in a mix of ETFs expertly calculated to best meet their needs. Couldn't be simpler: set and forget.

"Forget." That proves to be the hard part. Novices tend to assume investing requires market timing. When Betterment briefly suspended trading during the Brexit market scare, some of its investors were exhibiting distressingly short-term behavior.

"Sell low, buy high." Mutual fund investors lose around 4 percent per year trying to predict swings in stock prices. How can robo advisers help their customers avoid the same fate?


Monday, June 27, 2016

1932: A Bank Advertises Free Investment Adivice

From the January 20, 1932 issue of The New York Times:


The correct advice, of course, would have been "Don't buy, SELL!" After the Crash of '29, the Dow rebounded by 30% in 1930. Then stocks began to slide toward oblivion. By the summer of 1932 the Dow would be 89% below its pre-Crash high. To recover from such a loss, one would have to watch one's portfolio go up by 825%.

Wednesday, June 22, 2016

Monetizing the House, the Old-Fashioned Way

Sarah Purcell's house
When Sarah Wentworth Purcell's husband died in 1776, she became a gentlewoman in reduced circumstances. To generate income she took in roomers.  Today, writes Amy Zipkin in The New York Times, Airbnb and other rental sites enable retirees, predominantly women, to monetize their homes in the same way. (Yes, everything old is new again.)

Short-term rentals generate extra money without requiring the homeowner to take on new debt. No home equity loan. No reverse mortgage. In addition:

Rentals may allow the homeowner to remain in a house tbat's otherwise unjustifiably large for an empty nester. Arranging rentals keeps the homeowner healthily active. And the homeowner meets a stimulating stream of new people, perhaps including visitors from around the world. She might even get to know someone who's about to become famous.

Sarah Purcell did. In 1777 one of her roomers was a Scot waiting for his ship to be built nearby. The ship was the Ranger, and John Paul Jones became our nation's first navel hero.

Sarah's home still stands in Portsmouth, New Hampshire, now known (sorry, Sarah) as the John Paul Jones House.


Wednesday, June 15, 2016

$10 Million is the New $5 Million

If $5 million is the new million, other measures of wealthiness also need adjusting.

Sure enough, this year JP Morgan raised the threshold for obtaining its Private Bank services from $5 million to $10 million. Bessemer Trust and others already have a $10-million minimum.

Most private banking clients at Morgan won't be effected. They have over $10 million. Half have $100 million or more.

Although most of us would happily settle for $10 million, it ranks low on today's wealthiness scale. The average S&P 500 CEO makes more than that every year. Certainly someone who used to have $100 million and lost all but $10 million doesn't feel rich.

Friday, June 10, 2016

A Better Store of Value?


Monets and Warhols stowed in free-port warehouses serve as stores of value for the world's superrich. But where's the fun in owning art you can't look at?  Rare stamps have long served as a superior form of tangible wealth – easy to store, easy to hide, easy to carry across national borders.

Stamps have a parallel quality to fine art," says Charles Hack, who collects both. Like art, rare stamps sometimes have noteworthy provenances.

The inverted Jenny, for example. This now-famous stamp was the Bureau of Printing and Engraving's second attempt to print postage in two colors, The first try hadn't gone well. Printing of the Jenny apparently went better, except for mishaps where the plane was printed upside down.

Colonel Green
Purchased by a prescient collector for face value, a sheet of 100 inverted Jennies passed to Colonel Edward H.R. Green, son of Hetty Green, The Witch of Wall Street. After numbering the stamps in pencil, 1 to 100, the Colonel separated the sheet into 25 sets of four.

In May one of the inverted Jennies sold for $1.35 million. Another, shown above, recently turned up in a stamp collection that an Irishman inherited from his grandfather. Thanks to Green's numbering, it was identified as one of a set of four stolen from an American Philatelic Society convention over 60 years ago.

Instead of a seven-figure bonanza at auction, the Irishman has to settle for a $50,000 reward.

Wednesday, June 08, 2016

Can Wall Street Be Saved From Itself?

Sitting around waiting rooms needn't be time wasted, it's a chance to catch up with last month's magazine articles. Did you miss this Time cover story, based on Rana Foroohar's Makers and Takers: The Rise of Finance and the Fall of American Business? Take a look. We may be hearing some of its themes repeated during the election campaign.

Even staunch believers in unfettered capitalism may nod in agreement with observations such as
An IPO—a mechanism that once meant raising capital to fund new investment—is likely today to mark not the beginning of a new company’s greatness, but the end of it. According to a Stanford University study, innovation tails off by 40% at tech companies after they go public, often because of Wall Street pressure to keep jacking up the stock price, even if it means curbing the entrepreneurial verve that made the company hot in the first place. 

So that's why Yahoo is for sale

Merrill Anderson's corporate website has been hosted by Yahoo ever since we created it. They had a division that catered to small business--they handle our corporate e-mail also.  They generally provided acceptable service.

Until last week.

Our website went down without explanation.  Getting through to a person there takes 2 hours on hold.  Initially they said our site was infected with malware and their engineers were working on it. No explanation as to how they allowed the malware in the first place.  They promised that the site would be back up in 24 hours.

This week the story changed.  They are offering to do nothing at all, we are on our own for finding and removing the malware.

So we're assessing our alternatives.  My understanding is that the small business division we work with was spun off by Yahoo some time ago.  The successor company is obviously interested only in collected fees from existing customers, not expanding or improving the services.  Your suggestions for a successor are welcome.

In the meantime, if you need to learn more about Merrill Anderson's products and services, contact Sirvydas Vebra at svebra@merrillanderson.com, or call us at 203.377.4996.

PS.  Because this blog is hosted by Google, I'm pretty confident that we won't have a problem with it.

Monday, May 30, 2016

Connecticut's Golden Geese Cash In

New Jersey's Tax Problem is that a few taxpayers make so much money they become golden geese – the State treasury can scarcely get along without them.

It's happening in Connecticut, too, as Jim Gust commented.

Bridgewater Associates headquarters, Westport, Connecticut
Connecticut's golden geese include Ray Dalio,. the founder of the world's biggest hedge fund. Last year Bridgwater's chief enjoyed an income of $1.4 billion. Two of his lieutenants each made $250 million.

With immense incomes comes king-size clout. The State of Connecticut has come up with $20 million to discourage Bridgewater Associates from moving out of state.

Tuesday, May 17, 2016

The Case of the Dixfield Cats

In a modest trailer in Dixfield, Maine live a lucky group of homeless cats – lucky because they are looked after by the Dixfield Cat Ladies.

Twelve years ago one of the Cat Ladies died. She left most of her estate, about $150,000, for the creation of a corporation or trust "for the purpose of providing shelter, food and health care for abandoned and unwanted cats in the Town of Dixfield."

Are the Dixfield cats living in luxury and organic catnip? Not yet. Predictably, bequests to animals produce more snarls than purrs.

Wednesday, May 11, 2016

“The Wallaby of Wall Street”

Road Town, Tortola
The Road Town, Tortola, office of Mossack Fonseca, the Panama Papers law firm, served as the registered address for Globe Trade Services, a company set up via instructions from Hong Kong. All shares in Globe were owned by its sole "director," a company with a P.O. address in Belize.

The man behind the curtain? The Australian Wolf of Wall Street.

Jeffrey Revell-Reade specialized in "boiler rooms" selling worthless stocks. He worked his "industrial-strength fraud" via Madrid, routing funds conned from hapless British investors (something like $100 million in total) through Globe.

As investing goes global, so do the hazards. Happily, investors may get some of their money back as Revell-Reade is divested of his yacht, Wimbledon mansion and other assets.

Saturday, May 07, 2016

Jodie Foster Takes On Wall Street's Money Monsters

What if  CNBC's Jim Cramer was good-looking – really good-looking, like  George Clooney?

What if a poor soul who lost big on a stock tip decided to blow Cramer to smithereens? On live TV?

For answers we'll have to check out "Money Monsters," starring Clooney and Julia Roberts and directed by Jody Foster. Jody deems the film major enough to entitle her, after 50 years in show biz, to a gold star. (Yes, 50 years. She started at age 3.)


Saturday, April 30, 2016

New Jersey's Tax Problem

If you owe the bank $100 that's your problem.
If you owe the bank $100 million, that's the bank's problem.  
– J. Paul Getty
 Hedge-fund billionaire David Tepper was the richest taxpayer in New Jersey. He's still rich, but …One Top Taxpayer Moved, and New Jersey Shuddered.

Thursday, April 28, 2016

The falling cost of living

JLM's photo of a flat screen TV in the post below reminded me of this post today from Walt Mossberg, who takes a journal down memory lane, "When gadgets were king."

Mr. Mossberg plucks a few of his gadget reviews from Wall Street Journal in the 1990s to share.  My favorite was the first digital camera in 1991, which could take 32 B&W photos and cost only $995.

How times have changed.

Wednesday, April 27, 2016

Why Do Americans Spend Instead of Save?

In The Atlantic author Neal Gabler riffs on the finding that almost half of all Americans (Gabler included!) would be hard pressed to come up with $400 in an emergency.

Lack of growth in median incomes in recent decades gets blamed for the American lack of saving. In a public radio interview, however, Gabler pointed out that residents of other nations have experienced similar stagnation without drastically reducing their savings rates. Americans seem to be born spenders.

Greater income inequality may be exacerbating the tendency. Knowing we haven't a prayer of keeping up with the billionaires, we try harder to keep up with the Joneses. Renewed growth in household incomes is unlikely to help. Parkinson's law remains firmly in place: Expenditures rise to meet income. 

According to a recent Gallup survey, most Americans say they prefer saving to spending. They're not exactly lying. They really do intend to save their tax refund. If only that 85" LED 2160p Smart 3D 4K Ultra HD TV hadn't gone on sale….


Apparently Prince died without a will

Here's the report that his sister has asked for a special administrator to be appointed for the estate.  She states that she is unaware of any testamentary instruments.  Happily, Prince was already working with Bremer Trust in St. Cloud, MN, so she asked that they be appointed.

With Prince being so intensely private in life, many are surprised that he ignored his estate planning. But did he?  Might he have employed trusts for his wealth management, the terms of which might never be made public?  Might he have concealed these matters from his siblings?  Not impossible, given the friction over the settlement of their father's estate in 2001.

I was going to jump on this story for our publications, but now I think I better wait a bit, to see if there is more to the story.

Monday, April 25, 2016

Let the Fox Guard Your Nest Egg?


"Never let the fox guard the henhouse," the saying goes. American Culture Explained offers this example
“You put your spendthrift brother in charge of managing your inheritance and gave him power of attorney for your account? That is letting the fox guard the henhouse!”
So why is the fox pictured above allowed to guard a nest egg? Because he's the mascot of Middleburg Bank. What grunge is to Seattle, fox chasing is to Middleburg, Virginia. Here's a vintage Sports Illustrated feature from the Camelot era that captures the flavor of the place.

The Middleburg fox popped up today because David Sobel, once expected to succeed Warren Buffet at Berkshire Hathaway, believes the bank is too small (assets of a billion or so) and wants to see it sold.

Will Middleburg's gentry set the hounds on him?

Wednesday, April 20, 2016

High Income? More Tax!

Most Americans think top earners should pay more tax. Even 46 percent of conservatives believe top incomes are under taxed.

Tuesday, April 19, 2016

Gerry Beyer Goes Into "Hotchpot"

In Parade, the Wills, Trusts and Estates Prof introduces laymen like me to "going into hotchpot." That's a procedure for figuring the kids' equitable shares of an estate when they have had unequal advancements.

In non-legal usage, the dictionary explains, hotchpot evolved into hotchpotch and hodgepodge." Hodge" was an English nickname for Roger that came to refer to the "ordinary Joe."

You learn something new every day.

Wednesday, April 13, 2016

Easing the British Death Tax

After World War II the stately homes of England (think Downton Abbey) took a heavy hit from harsh death taxes. Many were dismantled, given to the government or converted into tourist attractions.

By the harsh standards of fifty years ago, today's UK inheritance tax is fairly tepid. By our American standards, it's still oppressive.  We can leave well over $5 million tax free. Brits are limited, at current exchange rate, to about $460,000.

The UK tax picture lightens a little next year, with the addition of a "family home allowance." With two inheritance-tax exemptions plus the new allowance, married couples will be able to leave about $1.4 million tax free.

Monday, April 11, 2016

William Hamilton (1939-2016)

For the low-down on the upper crust, generations of New Yorker readers turned to the cartoons of William Hamilton, who died recently in a car crash near his Kentucky horse farm.

Hamilton's cartoons showed us hedgies (one hedgie to another: "Millions is craft. Billions is art") and the sort of High Net Worthers who see status in alternative investments and immortality in dynasty trusts.

The New Yorker's cartoon editor, Robert Mankoff, assembled a few of his favorite Hamiltons as a tribute, including this one:


The Bell Tolls for Long-Term-Care Insurance

Perhaps the product was doomed from the start. As critics pointed out, people who needed long-term-care insurance couldn't afford it; people rich enough to afford it didn't need it.

And those were the good old days. Most holders of LTC policies have seen their premiums soar. Sales of new policies have plummeted.  In 2002 the number of individual policies sold peaked at 750,000. Last year's sales: 110,000.

As if soaring premiums and severe shrinkage in the number of companies offering policies aren't trouble enough, marketing of long-term-care insurance also has clashed with an opposing concept: Medicaid planning. Why buy a policy to protect yourself against the risk of exhausting your wealth and ending up in a Medicaid-funded nursing home? Medicaid planners  offer techniques for diverting or divesting assets in order to achieve that very result.

Still, LTC insurance and Medicaid planning share the goal of protecting the children's inheritance. Shouldn't the kids be glad to pay their parents' LTC premiums?  The idea hasn't  gained traction.

If the potential costs of long-term care can't be insured against, they must be met through added savings and investment. The job of investing for financial independence only begins with building a source of regular retirement income.

Thursday, April 07, 2016

"The Secret of Wealth"

For no good reason (maybe Siri's looking for a more luxurious lifestyle) my iPad presented me with the results of searching this blog for "the secret of wealth." The posts are worth revisiting. You can read them here.

For those considering dynasty trusts as well as the rest of us, the "secret" is clear: Families can enjoy lasting wealth only if it's replenished from time to time.

Wednesday, April 06, 2016

Long-Term Investors and Short-Haul Stocks

Some companies play for keeps. Others are in it for the short haul. One sign of short-haul companies: a fixation with increasing the market value of their shares every twelve months. One symptom of the fixation: irrational CEO compensation. One symptomatic corporation in the news lately: Valeant

As The New York Times observes, the fixation seems contagious:
Paying a chief executive largely or solely on the basis of stock price performance might seem reckless. It would seem to create incentives for the executive to focus on actions that get impressive results for a year or two, rather than longer-term actions that might yield higher and more sustainable profits.
But placing a heavy emphasis on the share price is a surprisingly common practice — and is supported by influential groups that advise shareholders on how to vote at annual meetings.
Index investors can't avoid short-haul companies. Selective investors can. An advantage?

Thursday, March 31, 2016

The Greatest April Fool That Never Was

April Fool’s Day, 1975
Offices of The Merrill Anderson Company at 100 Park Avenue

The preposterous invitation was addressed to Merrill Anderson's chairman, Earl MacNeill. He raised an eyebrow and handed it to his second in command, Bud Sommer. Bud looked, smiled and handed it to me.

Back in my office I examined the mailing. Ostensibly a new afternoon newspaper was starting up. A Merrill Anderson representative and spouse were cordially invited to learn more about it. On a five-day Bermuda cruise. On the QE2. All expenses paid!

Any temptation to suspend disbelief vanished after a glance at the return address: 90 Park Avenue, the building across the street. From my office window I could see dozens of workers sitting, standing, scurrying about. Which one was the April Fool’s prankster?

Still, no harm in calling their bluff. I RSVP’d to 90 Park.

A few days later came the phone call. There had been a change in plan, a voice said. (That figured. Out with the cruise. In with a free ride on the Staten Island Ferry.)

A change in plan?

Monday, March 28, 2016

At Schwab, Art and Investing Don't Mix

As you read here, artist-investor Sarah Meyohas came up with the idea of trading the stocks of small, thinly-held companies and charting the resulting fluctuations in share price as paintings. She set up a TD Ameritrade account for the project but used her Schwab account for her first painting, Paradise INC. 


Schwab, Felix Salmon reports, was not amused. It has cancelled the artist's account.

Sunday, March 20, 2016

Seinfeld's VWs as Tangible Investments

A good number of classy collectible cars sold for less than their estimates at Gooding's Amelia Island auction. The softening in the market for tangible investments such as art apparently extends to Ferraris as well.

Nevertheless, humble VWs from Jerry Seinfeld's collection did surprisingly well.

For instance, this 1964 Camper (I love it!) sold for $99,000, at the high end of its estimate.


Seinfeld's 1960 Beetle, owned for 30 years by a school teacher and driven for less than 16,000 miles. did even better. Expected to sell for $50,000 or so, it fetched $121,000.


Volkswagens may look out of place among Duesenbergs and Aston Martins, but as this 1966 VW ad says . . .

Friday, March 18, 2016

Should $78 Trillion in IOUs Spook Global Investors?

Is your obedient blogger wrong to find this really scary?
Twenty countries of the Organization for Economic Cooperation and Development have promised their retirees a total $78 trillion, much of it unfunded....
That is close to twice the $44 trillion total national debt of those 20 countries, and the pension obligations are “not on government balance sheets...."

Friday, March 11, 2016

Even if Active Investing Doesn't Pay, We Need It

Fewer than one of five actively managed equity mutual funds did better than comparable index funds over the past ten years. Although results over shorter periods weren't quite so bad. the majority of actively managed funds underperformed. As a result, Jason Swieg reports in the WSJ, some fund managers have thrown in the towel. They're buying a few ETFs rather than assembling portfolios of stocks.

Meanwhile, investors continue flocking to index funds.  Yet as a Cullen Roche column points out, all investors cannot do nothing but index. Active investors and active investment managers are needed to keep the market honest. See also Is Passive Investment Actively Hurting the Economy in The New Yorker. (Are index funds really responsible for the higher fees charged by large banks?)

Inexpensive online investment services based on index funds seem destined to become the basic investment platform for millennials. Even so, as their wealth grows they might enjoy setting up a side account of shares in selected companies, They'll gain the sense of being actual stockholders. And despite returns likely to be sub par, they'll be performing a public service – doing their part to keep stock prices in line with business realities.

If Congress Won't Tax Carried Interest as Income…

. . . maybe New York and neighboring states should pick up the "lost" revenue. By collecting the equivalent of what hedgies save by having the carried-interest portion of their compensation taxed as capital gain, New York State figures it might collect $3.7 billion a year. For New York's ploy to work, neighboring states would have to follow suit. It's suggested that The Merrill Anderson' Company's home state, Connecticut, could collect a half billion or so annually. See New York Challenges a Tax Privilege of the Rich.

Thursday, February 18, 2016

Should Perfect Son Inherit More Than Troublesome Daughter?


From Annie's Mailbox: A couple have two grown children – a perfect son and a troubled daughter who has received significantly more financial aid. Their old wills leave the son 60 percent of their estate and put 40 percent in trust for the daughter.

Their problem, if you can call it that: The couple's net worth has grown to around $12 million.  Penalizing the daughter for the funds expended on her behalf now feels mingy. Should they change their wills?

Yes, Annie's Mailbox advises. Leave the son and daughter equal inheritances.

That's usually good advice. Parents who follow it may earn the gratitude of the beneficiary who would have received more as well as the one who would have received less. Being the favored child can have its downside in later life.

Related post: Why Some Wills Don't Treat Children Equally.

Asset Allocation Takes a One-Two Punch

When professional stock-picking lost credibility, wealth managers turned to asset allocation – the process of dividing client assets between equities and fixed income in proportions appropriate to age and circumstances. (Getting older? Lighten up on stocks.) Target-date funds give investors glide-path investment programs that jettison stocks as they age.

Could it all be a waste of time and money?

David A. Levine, a former chief economist at Sanford C. Bernstein & Company, believes asset allocation is wrong-headed.  In a pair of New York Times columns he delivers the old one two.

ONE
Target-date funds are misguided. Investors should not move out of equities so drastically as they retire. They shouldn't move out at all. Even in retirement, their investment horizons are like the ever-receding horizon confronting a mariner at sea. If you are 99 and investing what soon may be your family's inheritance, you still should be thinking long term.

TWO
The ideal asset allocation for the long-term investor is 100 percent equities. "Both the historical record and logic argue very strongly for stocks over bonds. Yes, stocks are more volatile, but if you recognize that the “investment horizon” is always long and always receding into the future, your best bet is to put virtually all of your liquid assets into the stock market."

Levine makes a point courageous investors might ponder, This doesn't mean advisers should worry about asset allocation going out of style. Marketing of the concept has been so successful that many investors believe asset allocation is designed to increase returns rather than reduce volatility.

Friday, February 12, 2016

The Thoroughly Modern 'Sixties

Technical progress has slowed, some claim. Life around 1910, when many homes still lacked electricity, was primitive compared to the 1960's. Five decades later, we have computers and smartphones, but really, are we living much better than they did in the 'Sixties?

You couldn't Skype in 1966. But as the Bell System boasted, you could talk with most anyone, anywhere, who had a telephone.


Winter recreation? In 1966 the new adult toy of choice was the snowmobile, featured in this Chase Manhattan ad.


All in all, life in 1966 was pretty good, if you didn't mind hippies or second-hand cigarette smoke.