The High Price of Nice Dinners

After enjoying a free dinner, the WSJ tells us, a retiring tour bus driver bought an annuity. Several years later, after another nice dinner, she paid a heavy penalty to ditch her annuity and invest in a portfolio, including other annuities, pitched by another retirement "adviser."

The DOL effort to impose a fiduciary rule dampened annuity sales for a time. Now the rule is gone, and sales of annuities – some paying 6% commissions – are booming.

The Wealthy Person's Eternal Dilemma

From Fred Schwed's Where are the Customers' Yachts? published over 75 years ago and still timely.

The underlying principle of the genuine investment counsel seems to be sound and important. It is a mundane one, i.e., it has to do with how the counselors are paid off. They receive a stated fee for giving advice; they do not get their pay in commissions or profits on trades, as most brokers and dealers do. Nor are they tempted to sell the client some security which they own and which, by a mischance, no one else at the moment seems to care to buy. Thus a wealthy person may at least feel sure that the advice he gets from investment counsel is sincere, and unbiased by hope of gain of fear of loss. This reduces the wealthy person's problems to two:

(l) Is there such a thing as consistently useful financial advice?

(2) If there is, which investment counselor can supply it?

Five Reasons for a Trust

Estate planning is about more than taxes. Steve Hartnett at the American Academy of Estate Planning Attorneys offers a concise summary of five planning needs that call for a trust.

How Can a Merger Go Wrong? Let Us Count the Ways

Linde AG is combining with Praxair, a merger that should create a worldwide powerhouse in the field of industrial gases and such. Nothing is certain, however, and some unlucky young lawyer must have been tasked with listing all the ways things could go wrong. "And boil it down to one sentence for the press release, OK?"

Here is the sentence:

Factors that could cause actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to: the expected timing and likelihood of the completion of the contemplated business combination, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the contemplated business combination that could reduce anticipated benefits or cause the parties to abandon the transaction; the occurrence of any event, change or other circumstances that could give rise to the termination of the business combination agreement; the ability to successfully complete the proposed business combination and the exchange offer; regulatory or other limitations imposed as a result of the proposed business combination; the success of the business following the proposed business combination; the ability to successfully integrate the Praxair and Linde businesses; risks related to disruption of management time from ongoing business operations due to the proposed business combination; the risk that the announcement or consummation of the proposed business combination could have adverse effects on the market price of Linde’s or Praxair’s common stock or the ability of Linde and Praxair to retain customers, retain or hire key personnel, maintain relationships with their respective suppliers and customers, and on their operating results and businesses generally; the risk that Linde plc may be unable to achieve expected synergies or that it may take longer or be more costly than expected to achieve those synergies; state, provincial, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an effect on rate structure, and affect the speed at and degree to which competition enters the industrial gas, engineering and healthcare industries; outcomes of litigation and regulatory investigations, proceedings or inquiries; the timing and extent of changes in commodity prices, interest rates and foreign currency exchange rates; general economic conditions, including the risk of a prolonged economic slowdown or decline, or the risk of delay in a recovery, which can affect the long-term demand for industrial gas, engineering and healthcare and related services; potential effects arising from terrorist attacks and any consequential or other hostilities; changes in environmental, safety and other laws and regulations; the development of alternative energy resources; results and costs of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings and general market and economic conditions; increases in the cost of goods and services required to complete capital projects; the effects of accounting pronouncements issued periodically by accounting standard-setting bodies; conditions of the debt and capital markets; market acceptance of and continued demand for Linde’s and Praxair’s products and services; changes in tax laws, regulations or interpretations that could increase Praxair’s, Linde’s or Linde plc’s consolidated tax liabilities; and such other factors as are set forth in Linde’s annual and interim financial reports made publicly available and Praxair’s and Linde plc’s public filings made with the SEC from time to time, including but not limited to those described under the headings “Risk Factors” and “Forward-Looking Statements” in Praxair’s Form 10-K for the fiscal year ended December 31, 2017, which are available via the SEC’s Web site at www.sec.gov. 

"The foregoing list of risk factors," the press release warns, "is not exhaustive."

Portrait of a Tax Audit

Printmaker Warrington Colescott died September 10 at the age of 97. according to his NY Times obituary. Known for his biting etchings, Colescott once experienced a tax audit. His painful descent into IRS hell prompted him to create "Inside IRS."

Jeff Bezos Realizes an Impossible Dream

"Finally, to my nephew Harold, who ofttimes said, 'A penny saved is a penny earned,' and who also ofttimes said, 'Gee, Uncle Max, it sure pays to own a Volkswagen,' I leave my entire fortune of one hundred billion dollars."

That's the punchline from "Funeral," one of the coolest TV spots in Doyle Dane Bernbach's legendary ad campaign. In the 1960's one hundred billion dollars represented impossible richness, beyond even the most feverish dreams of avarice.

Half a century later, and with help from inflation, Amazon's Jeff Bezos has more than realized the impossible dream. He tops Forbes' 2018 list of richest Americans with a fortune estimated at one hundred sixty billion.

Watch "Funeral" here. 

Fred Trump's Tax-Averse Estate Planning

Fred Trump in 1950

Seemed like a quiet year for estate planners. With the Trump tax cuts old news, the Heckerling Institute resorted to promos on NPR to drum up business.

But now Heckerling attendees will have plenty to talk about. The New York Times has published a virtually endless study, adorned with audio-visuals, of how Fred Trump passed his real estate fortune to his children, and most especially to his celebrity son, Donald. Hidden gifts! A large GRAT valued for little! An overreaching codicil that Donald tried, unsuccessfully, to attach to Fred Trump's will!

Even in the age of fake news, you can't make this stuff up.