Farewell to Pontiacs

Before the index fund was a gleam in Jack Bogle's eye, before the Dow hit 1000, GM's Pontiac line offered cars that looked like Chevys with extra chrome. Added horsepower became a lure. And by 1960, this Bonneville Sports Coupe boasted a wide stance (plus an awesome rear window for its time).

Fittingly, perhaps, on this Halloween the Pontiac car line ends it run and becomes a ghost.

Positive Net Worth = “Rich”?

Rich Americans Feel Better Off Yet Remain Wary, reports Reuters. Most expect to retire later than previously planned.

Whoa! The rich don't have to work; they're rich. They work to keep a business growing, or for fun, or to keep busy. Why on earth would they change their retirement plans?

They haven't. As with so many news items about the rich, this one isn't about the rich. It reports a Merrill Lynch survey of people with $250,000 or more in investable assets. A quarter-million or so is a long way from being rich enough for a relationship with Bessemer or Northern – or even with Merrill Lynch's BofA sibling, US Trust.

Interest rates fall well below zero

On yesterday's auction of TIPS, reports the New York Times.

My question, what took them so long?

NFL Players Thrown for Losses

Professional athletes need better investment managers than they sometimes wind up with. Two current examples:

Alex Brown, former Bear now playing for the Saints, is suing his investment advisers for putting him into such blue chips as airplane hangers and variable universal life insurance.

John Elway, the former Denver Broncos quarterback, and his business partner gave $15 million to a hedge-fund manager now accused of running a Ponzi scheme.

Those who play football, basketball or baseball for a living make such big bucks the rest of us don't feel too sorry when they lose millions to financial vultures or mere incompetents. But rich jocks need more financial smarts or more reliable guidance.

For professional athletes "retirement" can be a long, long time.

Hunting for Wealthy Males?

To gain attention from well-heeled men, generations of advertisers have appealed to the hunting instinct.

"Eighteen holes of golf is like sitting in a rocking chair compared with a day's hunt," proclaims this 1931 ad from The Greatest Sporting Goods Store in the World.


Gentlemen hunters may have become more cautious after the Great Depression. The protagonist in this Chase nest egg ad from October, 1960, seeks pheasant, not bear. Still, give him credit for using a muzzle loader.

Remember when fixing Fannie and Freddie would cost $25 billion?

It was July 22, 2008, when I blogged about the absurdly low $25 billion price tag that the CBO had put on bailing out Fannie Mae and Freddie Mac, linking to this NYTimes piece.

I speculated that it would more likely be more than $100 billion.  To date, a net $135 billion has been pumped into the two agencies.  Now we learn that an additional $124 billion may be needed.

Yikes!  That's supposedly a "worst case scenario," and maybe as little as $6 billion more will be required.  However, based upon the track record of the estimators in 2008, it seems just as likely to me that we'll burn through $500 billion before we're done.

The truth about corporate taxes

Google has an effective tax rate of 2.4%, Bloomberg reports. They achieve this with the Double Irish Dutch Sandwich.

Wish I could get that rate, but it's reserved for the truly wealthy.

I've often advocated for lower corporate taxes to improve private sector job creation, but if corporations are already paying almost no tax that would be pointless.

Buy Madoff's Bull?

A lot of investors are sorry they bought Bernie Madoff's bull. Perhaps you'll have better luck with this little bronze. The bull is up for sale November 13, when the U.S. Marshalls auction off 400 Madoff items.

Is America Losing the Wealth Game?

Ten years ago the U.S. ranked number one in average wealth per adult. Today? According to one of the factoids gathered by Michael Snyder and augmented by John Lounsbury at Seeking Alpha, we've fallen to seventh place – behind Switzerland, Australia, Norway and Sweden, among others.

Maybe number seven isn't bad, considering that America's savings rate suggests we prefer poverty to wealth.

Cheerier note: Lounsbury presents data showing we're number one when it comes to low tax rates.

Columbia 17, Princeton 15

Roar, lion, roar! We mentioned the tepid performance of Yale and Harvard's endowments last year, so it's only fair to salute Columbia and Princeton for doing much better.

Note that Princeton's wealth is managed by Andrew Golden, a disciple of Yale's David Swensen.

Remember the tax cut!

The New York Times wonders why no one remembers the big Obama tax cut? You remember, the "Make Work Pay" tax cut?  $400 a year for two years?  Instead of sending everyone a check, as happened in the Bush administration, the withholding tables were adjusted. The theory was that this approach would cause the tax cut to be instantly spent, whereas a "big" check would be saved or used to pay down debt.  Not only do people not give Obama credit for cutting their taxes, according to the Times most people think he has increased taxes!

Whatever.  At the time, I predicted that the tax cut would not be perceived as such. Here's what I wrote:

"Anyway, this is how the credit will look to me. Sometime in about June (why June? no one has said, but most likely IRS is busy until then) my tax withholding will go down by about $13. Yay! Then next January my tax withholding will go up by about $6. That's because next year the same $400 credit will be spread over 12 months instead 7. Crap, that will still feel like a tax increase to me. I will have grown accustomed to that $13 extra. Then in 2011 my withholding will go up again by another $7 as the credit expires—another tax increase."

Although I'd like to tell the Times I told you so, it's not satisfying.

Mortgage Disaster Ahead?

Will all those messed-up mortgages come home to roost in the rafters of the banks that bungled them? Wall Street seems not to think so; a minute ago the DJIA still stood above 11,000.

Maybe Wall Street didn't read The Washington Post headline: Lack of proper mortgage paper trail could leave big banks reeling again.

Beyond sloppy documents, the foreclosure debacle has exposed one of Wall Street's little-known practices: For more than a decade, big lenders sold millions of mortgages around the globe at lightning speed without properly transferring the physical documents that prove who legally owned the loans.

Now, some of the pension systems, hedge funds and other investors that took big losses on the loans are seeking to use this flaw to force banks to compensate them or even invalidate the mortgage trades themselves.

Their collective actions, if successful, could blow a hole through the balance sheets of big banks and raise fundamental questions about the financial system ….

Do we have a new threat to the wealth that wealth managers manage or a false alarm?

This Bear Market is Really Nice

"Rich." "High Net Worth." We toss those terms around as if wealth were stable and easy to value. Ha! Priced Florida condos or Arizona tract houses lately?

Yet if some of yesteryear's six-figure assets are now worth little, items once purchased for a pittance may now represent real money.

Paul Greenwood, who turned a hedge fund into "sort of a Ponzi scheme," spent $3 million of his loot on old teddy bears. Tomorrow Christie's auctions them off, including this distinctive Steiff harlequin bear.

For another glimpse of old stuff that now possesses significant value, see The Telegraph's Rare and Unusual Ephemera for Sale.

Who knew an autographed color photo of Nixon was a collector's item?

Moral: Name an experienced trust bank as your executor. A trust officer will seek the expert advice necessary to determine that your comic book collection is now worth more than your Vegas penthouse.

Revolution, anyone?

Dodd-Frank authorizes the SEC to bar mandatory arbitration in brokerage agreements.

(!)

No word on how soon the rule might be implemented.

Fiduciary duties

I'd love to know the details behind this arbitration award to Larry Hagman concerning Citibank's handling of his trust accounts.

Diabolical, take 2

On September 14, I suggested that, to make it feel more like an actual tax cut, and not just the preservation of the status quo, Congress might let the Bush tax cuts expire and then restore them  about April 15 or so.


According to The Wall Street Journal, the IRS is now gearing up for the the first part of that prediction.

Taxes and Promises, Taxes and Promises

From The Hill's On the Money:

House Majority Leader Steny Hoyer (D-Md.) [has] vowed that extending the current tax brackets for the middle class would be the first order of business when Congress returns in November.

Lawmakers made a similar promise last year when they vowed to fix the estate tax before January ….

What if the lame-duck Congress fails to act on all the tax questions now left dangling in pre-election hot air? By one estimate, the cost to Americans next year could exceed $200 billion.

A Corporate Trustee That Brought Wealth to Life

Change and optimism were in the air half a century ago, in the fall of 1960. Hanover Bank's living trust ad captured the spirit of the time.

“Down With Tax Patents!”

Good news, IMO, from The Hill's On The Money:

Organizations representing a wide array of constituencies have called on Congress to ban tax patents before the end of the year, warning that a failure to do so will inhibit tax preparers from using strategies that could save their clients money.