Crowd control

So I stopped by the Apple store at 6:15 this evening, to take a look at the new OS 10.4 Tiger that just went on sale. The store was full, security was directing people to get into a line that stretched down the hall. Could have been 100 or so people waiting in line, and I don't have that kind of patience. I'll look at the software demo another day.

But I can't help but marvel at Apple's success in getting people so excited about a piece of software that, at the end of the day, doesn't do anything! Sure, it's the foundation for the rest of the Mac apps--but those are already working just fine!

What can trust marketers learn from Apple's example?

Carryover basis

Democrats are beginning to play the carryover basis card in their fight to retain the federal estate tax. During the House debate on estate tax repeal, they argued that 7,50o families will gain each year from estate tax repeal, while 71,000 will lose through the elimination of basis step-up. The arguements are outlined in this Washington Post item by Albert Crenshaw.

For a sense of how the public is responding to the debate over death taxes, see this Larry Kudlow post and its associated comments.

Invest in stocks? Beware of saros cyles.

Let workers invest part of what they now pay in Social Security tax. People will gladly accept reduced retirement benefits, say proponents, because they''ll make more money by investing their private accounts in equities.

They could make much, much more money, judging from long-term returns cited by Ben Stein in his Sunday New York Times column. Over 20-year periods from 1871 to 2002, an investor who owned stocks that performed like the S&P 500, reinvested dividends and sat tight would have seen his nest egg grow an average of 600%.

What's more, Stein says, stocks these days are cheap, less expensive than they were five years ago.

But what if stocks remain cheap for years and years to come? That's the fear of those who see 18-year saros cycles echoed in the stock market.

As NASA helpfully explains, saros cycles run for roughly 18 years and relate to the movement of the moon and the recurrence of eclipses. Three saros cyles make one Kondratieff cycle. Astrologers and technical market analysts labor mightily to churn out short-term market forecasts based on these cycles, with predictably mixed results.

Yet in the long run -- well, let's look at the record:

In 1929, prices in the stock market soared sky high, then crashed. Dismal economic times delayed a new bull market until after World War II. Even when the war ended, investors feared a renewed Depression. Stock prices didn't start perking up until 1947. Eighteen years.

From 1947 onward, the bulls stampeded. Yields on risky stocks actually dropped below yields on presumably safer bonds.. People started talking about "growth stocks." By 1965, the Dow had soared to 1,000. Another eighteen years!

It would be a long time before 1,000 on the Dow was seen again. Stock prices seemed to fluctuate endlessly and aimlessly from 1965 through the 1970's. (But if you adjust the stock averages for inflation, you'll see another stock market crash, this time in slow motion.) It wasn't until late 1982 that a new bull market began. Almost eighteen years!

You know the rest of the story. From 1982 onward, the stock market made millions of Americans affluent if not downright rich. The Dow soared past 10,000 and kept on going. The unprecedented party didn't end until the dot.com bubble burst in 2000. Yet another eighteen years!

Will these 18-year cycles persist? Will investors have to wait until 2018 for the next significant bull market? If so, millions of neophyte investors could very well lose their patience and their Social Security money, requiring an eventual Congressional bailout at the expense of American taxpayers.

But not to worry. All this saros-cycle stuff is nonsense, right? Perhaps. But there's a simpler, more plausible explanation for the regularity of the market's long-term ups and downs. The average investor probably starts investing in stocks or stock funds in her late 20s or early 30s and starts moving into bonds when in her 60s. That's just about long enough for two saros cycles, one down, one up.

So maybe it's not the moon, just human nature.

Why can't a man invest more like a woman?

A few men have the patience for investing. Warren Buffett, for instance. He's said that his favorite holding period is forever.

By and large, though, as yet another survey indicates, women are better suited for profitable investing. And they're more likely to seek professional advice.

Are stocks on sale?

As stock prices move lower, one might think that it's a good time for future retirees to add to their nesteggs. That's not the take of the New York Times in Washington Memo: Down Market Casts a Pall on Social Security Plan. Of course, torpedoing personal Social Security accounts has been on the NYTimes agenda all year long.

How does stock market performance affect trust marketing?

Do these numbers add up?

JCX-20-05 breaks down the costs of permanent estate tax repeal, according to the nonpartisan Joint Committee on Taxation. That permanent estate tax repeal could cost $290 billion over 10 years is not too surprising. However, according to the Committee there will be over $8 billion in revenue losses from 2006 to 2010, when H.R. 8 makes no changes to existing tax laws? Could the Committee be using dynamic scoring? Are they predicting a drop in taxable gifts once wealthy people realize that there really won't be a federal estate tax?

Debate the estate tax

With this sort of advocacy for keeping the estate tax, I'm not surprised that the proponents for repeal are doing so well.

Mass affluent?

The April 11, 2005 issue of Investment News noted that

Banks will shift their growth focus for the "mass affluent" market segment to cross-selling products and services to existing clients, from new-client acquisition, according to the "World Retail Banking Report 2005" from Capgemini Group.

The report surveyed 130 banks in 19 countries and defined mass-affluent clients as those with an income of at least $50,000 or investible assets of $100,000 or more.

Where do the mass affluent fit into the trust marketing scheme? Are some trust departments trying to reach this same segment? Are trust departments best positioned to take on the relationship management issues associated with serving the mass affluent market?

A common mistake

In his story on CBS radio reporting that the House of Representatives voted 272 to 162 to make the repeal of the federal estate tax permanent in 2010, the reporter said (this from my memory) "This year a couple can inherit $3 million free of estate tax."

Inherit? Well, the difference between an inheritance tax and the estate tax is confusing to many people, especially as they are both "death taxes" and that phrase has been used as a stand-in for "estate tax." The mix-up seems inevitable. Trouble is, what the reporter needed to say to be accurate couldn't be fit into a radio soundbite. The actual estate tax exemption this year is only $1.5 million. True, with rudimentary estate planning a married couple could double that to $3 million, but they'd also both have to die this year. The odds of that happening are rather low.

If well educated radio reporters can't understand this stuff, can we expect better from trust prospects? What is the best way to illustrate the importance of planning for taxes at death?

Millionaire Women

My assistant Peter just obtained a reviewer's copy of this book, which should provide plenty of grist for future articles. What is the ratio of trust clients, men to women? About 1 to 3? How about prospects?

House votes today?

The House may vote as early as today on estate tax repeal, and there's quite of bit of MSM coverage of possible compromise in the Senate. None of the articles talks about what will happen to carryover basis, however.

What are the odds?

Will the federal estate tax be repealed this year? Or will the Senate force a compromise, say a 15% tax rate and $10 million exemption? Would this certainty be better than being estate-tax free for one year?

Living wills, living trusts

How does public awareness of Terry Schiavo and the renewed interest in living wills translate into a trust marketing opportunity? Or would that be crass?

Are life insurance trusts dead?

A federal district court in Virginia has held that under Maryland law a trust can't have an insurable interest in a person, and so can't own life insurance. Does this render the strategy obsolete?