Monday, February 28, 2011
"Chaloner Arcedeckne." The names cries out to be googled. Turns out the family had Irish roots. "Arcedeckne" is pronounced "Archdeacon."
Chaloner oversaw the family sugar estates in Jamaica through a resident agent, and in the 1780s served as a Member of Parliament. After 1790 he seems to have retired to ceremonial posts, such as High Sheriff of Suffolk. Presumably that left him ample time to admire his paintings.
In July Sotheby's hopes to sell this Guardi for over $30 million.
Now what were you telling your clients about art as investment?
Saturday, February 26, 2011
That's nothing, relatively speaking. Unclaimed property of all sorts, ranging from safe deposit valuables to old paychecks and dividends, adds up to $33 billion or so.
How hard do payers look for potential payees? Not very, judging from this Marketwatch item. With a smidgen of due diligence the Walt Disney Co. might have found an address for Angelina Jolie. Somebody at Apple probably knows Steve Jobs.
Death, followed by amateur executorship, explains why much of the $33 billion in lost property remains unclaimed. A diligent bank executor doesn't work for free, but occasionally a trust department may find as much as it charges.
Know of any good examples? Send them along to Jim Gust.
Friday, February 25, 2011
But he won't get Cefntilla.
Seems a previous Lord Raglan (number three) had disentailed the estate. Therefore the elderly fifth Lord Raglan was free to change his will. Six months before his death last year, He disinherited his nephew Arthur and left Cefntilla to another nephew.
Thursday, February 24, 2011
When someone has a place in Manhattan – the Bronx or Staten Island, too – and homes elsewhere, avoiding New York City income tax calls for careful counting and scheduling. See In City Often? Tax Man Asks Some for Tally.
Fortunately, the Times reports, attorney Timothy Noonan is working on an iPhone app, using GPS, to help his clients monitor their limited allowance of "New York days."
The app could come in handy for state inheritance or estate tax purposes, too. Can't live too much of the year in a high-tax state if one wants to die domiciled in Florida.
Wednesday, February 23, 2011
$1.6 billion is hidden down the back of U. S. sofas.Can't vouch for the statistic. (In the U.K., the comparable sofa treasure is estimated to be the equivalent to $92 million or so.) Still, why quibble over a great attention-grabber?
HSBC is descended from the old Hong Kong and Shanghai Bank, founded in Hong Kong – by a Scot, naturally – in 1865. When the Chinese took over Hong Kong in 1997, HSBC had to reinvent itself. Bolstered by acquisitions including the U.K.'s Midland bank and both Marine Midland and Republic National in the U.S., HSBC now bills itself as "The World's Local Bank."
Check out HSBC's history. And take a look at HSBC Private Banking.
Update: The NY Times reports that Credit Suisse has come under heightened scrutiny of authorities in the United States and Germany over its sale of private banking services that enable tax evasion. The Justice Department has also gone after other banks, the article notes, including "HSBC, one of Britain’s largest lenders, which also offers private banking services in Switzerland and elsewhere."
Tuesday, February 22, 2011
An adviser stalwart enough to stay the course may be worthy. But marketable? Not so much. When investors seek new advisers, they want a new approach. To catch their attention you have to offer one. BNY Mellon's ads in the last two NY Times Sunday Magazines took that tack:
Staying the course is like navigating a new world with an old map.
The only investors staying the course are those with a broken compass.
The only completely consistent people are the dead.
- Sterling's partners: around 18%
- Larry King's accountant: 10-14%
- Unidentified client: 9-12%
- Former Sterling employee investing via 401(k) plan: 12-15%
Hard to tell, even now, which banks, clients, feeders and SEC staffers should have recognized what Madoff was up to. What becomes ever clearer is that few wanted to know.
Monday, February 21, 2011
Sunday, February 20, 2011
Thursday, February 17, 2011
Apple computer already forks over 25% of its considerable profits in taxes. Isn't that enough? Especially when GE only pays 3.6%?
Wednesday, February 16, 2011
Sometimes charts tell visual fibs. Other times they exaggerate unmercifully.
The chart in the Wealth-X survey we mentioned recently, showing segments of the UHNW market, fits the fib category. Perhaps the boss wanted a pie chart but the chart-maker decided an accurate chart wouldn't look good. So he or she winged it. The Wealth-X chart, on the left below, makes the very rich, those with worths above $100 million, look far more plentiful. The chart on the right shows the correct proportions. (Click on the thumbnails for larger images.)
Far more common are charts that wildly exaggerate the price swings of stocks. Professionals understand the custom. But what about the public? Don't the hyped-up charts make the stock market look more like a trip to the casino than an investment milieu?
Random example: At left below is chart of the 12-month performance of Dell from a recent Nightly Business Report. If you're an impressionable young potential investor, wouldn't you think Dell had gone from riches to rags and back again? At right is a rough attempt to show the same chart with a base line of zero. Pretty dull, but more realistic.
We've all learned to be suspicious of the theory that figures don't lie. Be even more wary of charts purporting to illustrate those figures.
Tuesday, February 15, 2011
But in the Byzantine logic of Congressional scoring, this tax increase is scored as a tax cut! It would replace the reversion to the even lower $1 million exemption.
Monday, February 14, 2011
After Earl MacNeill retired from Irving Trust and joined Merrill Anderson, he continued to write a trust periodical for Irving. In print advertising, however, the bank concentrated on commercial services. In 1969, seeking to become a player in mergers and acquisitions, Irving published the amazing ad above.
At the time the artist, Jacqui Morgan, was known for her Electric Circus poster. Commissioning her to do an illustration for a staid old Wall Street bank was a deliberate shocker – as if the Saturday Evening Post decided to buy cover art from Peter Max instead of Norman Rockwell.
Unfortunately, Irving never gained the critical mass to compete with the megabanks. In 1988, after a bitter battle, it was taken over by Bank of New York.
To glimpse the stature Irving enjoyed in earlier times, see the art deco skyscraper at 1 Wall Street that served as its headquarters.
More of Jacqui Morgan's early work can be seen here.
Who's likely to heed that advice?
Good prospects probably share two characteristics:
They're relatively New Money. They can give away chunks of their rapidly expanding businesses (like this family-owned lumber company) without affecting their current income or standard of living.
They're Ultra High Net Worth. Even for someone with $30 million or more, putting aside $3-5 million for younger family members is a pretty big deal.
All told, new money and old, Wealth-X estimates the U.S. contains around 55,000 UHNWIs. Half of them have $30-50 million. Almost another third have $50-100 million.
But as Robert Frank pointed out on Wealth Report, the majority of those 55,000 live in just five states: California, New York, Texas, Florida and Illinois.
Saturday, February 12, 2011
Back in the day, Europeans writing to addresses in the U.S. could enclose these prepaid-reply-postage coupons. Because of inflation after World War I, the cost of purchasing the coupons in Italy was less than their value in U.S. postage. That arbitrage opportunity caught the eye of Charles Ponzi.
Admittedly, Ponzi's scheme ended badly. But Bernie Madoff's secret method for manufacturing steady, above-average returns from stocks and derivatives lacked even a veneer of plausibility. Do we insult the memory of Ponzi by linking his name to Madoff's?
Bring on April, bring on May!
Need an early Spring Break? These two ads from the spring of 1961 may help.
Follow Chase Manhattan, today's JPMorgan, to Jungle Gardens in Louisiana, where only the geese are snowy white.
Better still, let First National City, now Citi, lure you to April in Paris.
Friday, February 11, 2011
Could wealthy investment clients be attracted to networking sites that function as virtual Tiger 21s? What about rich kids?
Citi's giving the rich-kid idea a try. Will a big old bank succeed in convincing children of UHNWIs that absorbing, sharing and discussing financial information is cool?
I believe that $12 billion is significantly more than the amount expected to be collected by the federal estate tax this year and next. My quick search showed that in December 2009 the CBO expected federal estate tax collections of $31.7 billion in 2012 (with the then-scheduled $1 million exemption). The JCT scored the increase to a $5 million exemption as costing $28 billion in 2012, which leaves a net of $3.7 billion to collect.
Think of all the economic activity generated for lawyers and accountants to bring the estate tax down to that $3.7 billion in collections. Do we get a similar bang for our EITC buck?
Does anyone have a better number for projected estate tax revenue?
Thursday, February 10, 2011
Paul Sullivan on investment advisory service for the not so rich.
David Cay Johnston on estate planning in a time of temporary tax laws.
Deborah Jacobs on how non-probate assets can lead to trouble.
Lynnley Browning on a topic I'm not nearly weaalthy enough to have encountered, private placement life insurance.
Wednesday, February 09, 2011
Most of us are paid based on what we produce or, more realistically, what our employers produce. By contrast, Wall Street compensation levels are tied to the nation's overall wealth.•••There's a big difference between annual production and national wealth. In 2007, the year before the crisis, annual production (gross domestic product) equaled almost $14 trillion. In the same year, household wealth was $77 trillion (5.5 times production); that covered the value of homes, vehicles, stocks, bonds and the like ….
People who are trying to protect or expand existing wealth are playing for much higher money stakes than even hardworking and highly skilled producers. That's the main reason they're paid more. Similar percentage changes in production and wealth translate into much larger gains or losses in wealth…. Many lawyers enjoy the same envious position of being paid on the basis of wealth enhancement or protection. They're involved in high-stakes mergers and acquisitions, estate planning, divorces and tax planning. On average, partners in the top 25 law firms earned $1.3 million to $4 million in 2008….
Tuesday, February 08, 2011
Can you imagine today's Boomers identifying with Saxon's gents in suits? Me neither. The Wall Street Journal ($) surveyed ways that business seeks to accommodate the Boomer wave of retirees. Problem: 60-ish Boomers do not wish to be "accommodated." Not surprising. Their show-biz contemporaries include Sly Stallone, Meryl Streep, Steve Martin and Helen Mirren, none of whom look ready for a long-term-care facility.
Boomers nearing retirement are either wealthy or not – and not solely in the sense of net worth. My father had it right: "Your health is your wealth." Assuming good health, many affluent Boomers will keep busy and keep working.
Forbes' Erika Andersen sees Boomers extending their careers, forcing the young to create their own employment. Martin Zwilling sees a different trend: Boomers are Driving a New Entrepreneurship Boom.
Best strategy for young wealth managers? Treat each Boomer retiree as the individual he or she is. And please don't shout or speak slowly unless asked.
Sunday, February 06, 2011
Ronald Reagan, born 100 years ago today, wasn't always an especially popular president, as this column notes. But he was remarkable.
Santa once brought me "The Reagan Diaries." This seemed like a suitable occasion to give them a browse.
In his June 29, 1981 entry, Reagan exulted over the 1981 tax cut legislation: "This on top of the budget victory is the greatest pol. win in half a century."
Four and five years later he expresses dutiful support of the 1986 tax reform legislation, but without enthusiasm.
What struck me as I browsed was how even-handed Reagan was in his comments about the Repubs. and the Dems. in Congress. This was a president, after all, who may have had more lunches with Democrat Tip O'Neill than with Republican leaders. Ron as President did not see himself as a Republican or a Democrat (and he had been both). He saw himself as an American President.
To add a timely note to this otherwise off-topic post, here is what Ronald Reagan wrote in his diary on Tuesday, November 1, 1983:
Last night the Repub. Sen. very irresponsibly refused to pass an increase in the debt ceiling which is necessary if we're to borrow & keep the govt. running. *** I sounded off & told them I'd veto every d--n thing they sent down unless they gave us a clean debt ceiling bill. That ended the meeting.
Friday, February 04, 2011
1. If interest on home mortgage loans were not deductible, only Americans who can pay cash would buy housing. All others would rent.
2. If donations to churches, schools and charities were not deductible, Americans would not support churches, schools and charities.
3. If investors seek high returns every year, with little volatility, fund managers such as Sam Israel and Bernard Madoff can produce them.
Each of those statements is (or was) widely believed by people who chose to believe them, even though they don't make sense.
Home ownership represents security to many; anyway, the same number of dwellings would be built whether owned or rented. Churches, schools and charities receive funding from many who don't give a thought to tax deductions. And those high, always positive investment returns – well, you know what happened there.
See why Jim Gust's post about a new round of tax reform doesn't get my hopes up?
If you insist on allowing hope to triumph over experience, see Seven ways to reform a broken tax system. Then follow the link Don Marron provides and read the historical background compiled by Gene Steuerle, who worked on the 1986 tax reform.
I hate the word "loophole" in the tax context, there are overtones of inadvertence it in. As if Congress didn't know full well that the loophole was being added to the tax code, it was instead discovered by a wily tax lawyer. Not true for nearly all loopholes. I like the new phrase "tax earmarks" even less. "Earmarks" are spending commands inserted into legislation without an opportunity for debate or even a vote. Every "tax earmark" was voted on, even if the members of Congress failed to grasp the significance of the measure.
Still, I favor the underlying concept of a flatter income tax larded with far fewer "incentives" to reward the behavior that Congress approves of.
"[A bank executive] told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme."
The cloud was well-known in June, 2007? So Wall Street was divided between those in the know and those who were clueless? Or was the division between those in the know and those who took pains not to know?
Later in the Times article we glimpse the enormous money movements that seem unremarkable at a big bank. An "unidentified wealthy Chase customer" had introduced Bernie to the bank. In 2001 this customer's account sent Madoff a check for $9 million "on a daily basis." On one day the following year, more than $300 million flowed from Madoff to the customer's account. Remarkably, the cash flow consisted of 318 checks, each made out for exactly $986,301.
Why would some Wall Street bankers wish not to know of Madoff's fraud? The suit by the trustee for Madoff's victims notes that JPMorgan Chase made good money selling derivatives based on Madoff feeder funds.
Sort of like charging for dry cleaning the emperor's new clothes.
Floyd Norris writes, "The evidence in the lawsuit clearly shows that people at JPMorgan Chase saw red flags." But as we learned back in the days of Sam Israel's Bayou funds, some people are color blind.
Thursday, February 03, 2011
Wednesday, February 02, 2011
Fast forward to 1932. Multimillionaire Charles Prescott, age 79, lies dieing in an Erie hospital. Historian Dennis Robinson tells how Prescott apparently seized the moment to make a new will. (A version of Robinson's article appeared in the February 1* Portsmouth Herald.)
Although he survived only a few days at Hamot Hospital, Charles abruptly decided to leave the bulk of his fortune to the Hamot and its sister hospital. His deathbed will was handwritten on a sheet of notepaper -- not by Charles -- and witnessed by his doctor and nurse. In a faint childlike scrawl at the bottom of the page are the letters "C-h-a-r-l" followed by a large "X".
Next to the signature someone has written "his mark". Despite the strange conditions surrounding this will -- which also gave two of Prescott's partners $100,000 each -- it was accepted for probate in Erie Pennsylvania. An earlier will from 1927, granting the bulk of his estate to his sisters in Portsmouth, was thrown out.
Prescott's sisters, Mary and Josie, were not amused. They dispatched a prominent Portsmouth lawyer, Charles Milby Dale, to Erie. Breaking Prescott's will probably wasn't hard: Pennsylvania law specifically barred deathbed wills made in favor of charitable beneficiaries. The Prescott sisters became millionaires.
What did two retired teachers with no visible talent for the high life do with their new fortune? They bought up block after block of dank, disreputable Portsmouth waterfront and razed most of it. Now the area is a waterfront park and entertainment venue that draws tourists from around the world. (Last summer I must have been asked, "Is this the way to Prescott Park?" in at least three foreign accents.)
The philanthropy of the Prescott sisters is remembered with gratitude on the New Hampshire seacoast. Charles provided the wealth; he too deserves to take a bow.
And I'd love to know who appointed or elected that probate judge.
*Whoops! It was the January 31 issue.
The headline spins off from "The New Hampshire Advantage." That term is New Hampshire's way of boasting about its refusal to tax consumer purchases or paychecks.
Is the battle among states to win trust business heating up?
Tuesday, February 01, 2011
Wal-mart pays 34% of profits in taxes, GE just 3.6%. Note that in the accompanying table, those paying high taxes are called "losers" and the tax dodgers are "winners."
Great summation of the problem with the current tax structure.