Investing is the Opposite of Sex

For another dose of Scott Adams' irreverent financial commentary, see The Horoscope of Investing. Adams suspects that rebalancing to maintain a fixed asset allocation is mostly make-work for investment advisers. That dastardly thought was roundly rebutted in this comment from MattF:

The basic reasoning behind both dollar-cost-averaging and periodic rebalancing is that, when you do them both, you get a sort of automatic buy-low, sell-high strategy, and you get some medium-term protection from market volatility. In fact, simulations show that DCA actually improves your performance in volatile markets, mainly through buy-low.

Yes-- it's an imperfect, mechanical, and boring strategy …. *** Remember, your financial strategy should strive to be the opposite of sex: if it's exciting, you're doing it badly.

Scott Adams, investment guru

I missed Scott Adams hilarious essay on investing in The Wall Street Journal a week ago.  However, I discovered it tonight because it is still on the most e-mailed list.  Read the whole thing if you have an online WSJ subscription, Scott makes the funny but not entirely illogical case for investing in companies that you hate, such as BP.

What about the alternative investment approaches, such as, for example, technical analysis? I must say Scott's observations  are 100% in harmony with my feelings:

Technical analysis involves studying graphs of stock movement over time as a way to predict future moves. It's a widely used method on Wall Street, and it has exactly the same scientific validity as pretending you are a witch and forecasting market moves from chicken droppings.

The $1 Million Estate Tax Exemption: R.I.P.?

The print version of What an estate Looks Like in the Times didn't reproduce this Jessica Hische illustration in color (who says skulls can't be cute?) but it did include an added subhead:

A billionaire dies, no taxes for the estate. Next year, a $1-million-plus estate gets taxed.

Could that comparison put a little pressure on Congress?

"How can you let estates of a little over a million be taxed in 2011? You didn't bother to tax a billionaire's estate in 2010!"

The Times piece supports Jim Gust's supposition: Senator Kyl's latest potential deal involves an estate tax exemption of $5 million and a tax rate on additional wealth of 35 percent.

Beware! Oil Spill Investment Scams

From Michelle Singletary's The Color of Money column in The Washington Post:

The Securities and Exchange Commission and the Financial Industry Regulatory Authority have issued an investor alert about scams designed to exploit the BP spill.

"The sad thing is people haven't heard the warnings enough, because these scams continue to happen," said John Gannon, FINRA's senior vice president for investor education. "Today, it's the BP oil spill; before, it was Hurricane Katrina. The cover story changes, but the scam is basically the same."

Pump-and-dump schemes aren't the only financial hazard. Singletary adds that donors receiving heart-rending charitable appeals for money to help clean up the spill should investigate before they donate.

Positive Thinking, Depression Style

From the news for June 11, 1931, as reported in The Wall Street Journal and reprised at News from 1930:

T. Watson, IBM pres., speaking to the Financial Advertisers Assoc., calls for more active education on current investment opportunities: "Speaking to you toward the end of this depression we are going through - and in my judgment we are near the end - things generally are showing some improvement. It would help tremendously if the financial advertising profession could devise a plan ... for placing before the public the investment opportunities which exist today."

Life settlements under attack

The Wall Street Journal reports on an interesting case in which a lawyer arranged for $56 million worth of insurance on his own life to be sold to investors for a few hundred thousand dollars.  The investors paid the premiums after the sale. 

Apparently the lawyer's wife was not privy to the deal, because she now insists that the insurance proceeds be paid to the estate, not the investors.  They didn't have an insurable interest, she argues.

However, one litigant has produced some paperwork suggesting that the wife signed off on the transfer of the policy ownership after it was in force for two years. 

Per the Journal, the life settlement industry had been hot about five years ago, but cooled with financial crash in 2008.

Jon Kyl isn't giving up

From today's Tax Notes ($), Jon Kyl has a "compromise" estate tax proposal that may garner 60 votes in the Senate.  Details not released, but it's probably similar to the $5 million exemption in 10 years that was defeated in the House last fall.  Reportedly Kyl will try to attach the measure to a bill providing new tax breaks for small businesses.

My money is on no estate tax action for the rest of this year. I hope that I am wrong.

The Remarkable Rockefellers

Tim Redmond at SFBG picked up on the same nugget I noticed in the Times story on Duncan's tax-free estate.

Back in 1937, the wealth left by John D. Rockefeller was hit by a 70% federal estate tax.

Redmond, who grew up near the Rockefeller estate in Pocantico Hills, observes that Rockefeller's kids seemed to thrive despite their tax-reduced circumstances. (New Roll Royces for their wives every year? Wow!)

How did they do it? The senior Rockefeller presumably spread a little wealth around the family before his death. And some of the kids, including banker David, did pretty well on their own.

Kykuit, the Rockefeller estate in Pocantico Hills
Photo via Wikimedia Commons

Is College Worth the Cost?

Maybe so. Data from Real Time Economics, Wealthy Are the Only Ones Spending.

May unemployment rates

College grads 4.7%

High School grads 10.9%

Less than high school 15%

Still Certain: Death and Taxes

What plans can couples make now to protect their assets? Quite a few, as Forbes' Deborah Jacobs reports in Prepare for the Return of the Estate Tax. Set up life insurance trusts, for instance.

The Duncan estate

We posted on the multi-billion dollar Duncan estate in April. The New York Times catches up today.

People are Driven to Distraction. How Can You Reach Them?

Let us sing the praises of snail mail. Yes, snail mail.

As the Times reported at length, digital gadgets are driving us to distraction. Exhibit A, the entrepreneur so distracted by an unending digital flood of instant messages, chats, posts, tweets and games that he overlooked one of the most important emails of his life. Not for a few hours or overnight. For twelve days!

Bet he would have noticed the handsome offer for his Internet startup if it had arrived by snail mail.

That's certainly how it works in our household. My wife wouldn't think of trying to read all the email offers she receives. But she browses a surprising number of catalogs delivered by our faithful snail. Likewise, often as not I neglect to follow the email link to an online pdf newsletter. But when the snail brings a newsletter, I look at it.

•

The sponsor of this blog has plenty of content for wealth managers to put on the web. But Merrill Anderson's most productive marketing tools continue to be those that arrive … by snail.

A $50 Million Will Battle

"A $50 million will battle that reads like a movie script, with claims of stolen masterpieces, smuggled art, a furtive meeting in Shanghai and old grievances…." Read all about it in Siblings Two Worlds Collide in War Over Chinese Art Trove, a NY Times report on the dizzying accusations and counterclaims surrounding the estate of C. C. Wang, the famed Chinese art scholar who died in 2003 at age 96.

A work from the C. C. Wang collection,
exhibited at The Metropolitan Museum of Art in 1999-2000.

Context on the Euro crisis

I knew the essentials of when George Soros essentially robbed the Bank of England, but this blow-by-blow review reprinted in The Atlantic is fascinating.  Go for the jugular!

I wonder to what extent we can credit currency traders for the  current situation?

Hat tip to the Instapundit.

Tax Complexities for Same-Sex Couples

The Internal Revenue Service has decided same-sex couples in California (and maybe other states) should treat their income as community property, reports The Wall Street Journal: "Couples who are registered as domestic partners in California must combine their income and each report half of it on their separate tax returns."

Note the reference to separate returns. "Same-sex couples, even if they are legally married in their home states, may not file joint federal tax returns. The federal Defense of Marriage Act, passed in 1996, defines marriage as between one man and one woman and bars federal agencies from interpreting it otherwise."

Will estate lawyers and accountants have related complexities to deal with when the federal estate tax revives? Could an "all-to-spouse-or-partner will" have one tax result in California (thanks to community property) and other in Massachusetts (where everything would be taxable in the absence of a marital deduction)?

How $1 Million Could Shrink in 1960

This Hanover Bank ad ran in June 1960. Back then, $1 million was equivalent, in purchasing power, to well over $7 million today.

One million dollars isn't even worth what it used to be a decade ago. If the bad old estate tax reappears as scheduled next year, the $1-million exempt amount needs to be raised to at least $1.25 million to represent the same level of wealth as it did in the year 2000.

Double dips

Just one day before the Dow closed under 10,000, perhaps as a result of another rotten jobs report, Daniel Gross at Slate stated that there is very little  chance of a double dip recession.  Talk about a double dip springs, he argued, from the excessive of optimism of 2007.  Having been stung by that error, now there is an excess of pessimism. 

Liberals saying there's nothing to worry about in the economy?  I'd call that a sell signal.

Why Investors Need Professional Help

Just read a bullish post by Chris Damas and paused to check out his company web site, where I found this timely quote:

Wealth Management Challenge for Al and Tipper?

The Gores' announced separation won't necessarily lead to divorce. But whatever Al and Tipper decide, The Washington Post reports, they have a fortune to split or share.

The importance of centers of influence in trust marketing

A good discussion from the Trust Advisor blog.  Note the issue of the double edged sword.

A Fate Worse than Wealth?

Spotted a striking juxtaposition in the print edition of the Times the other day. Right next to an article on Teaching Values to Children of Wealth ran a report on Students Buried in Debt. The median debt run up by students who borrow to attend private colleges exceeds $20,000. Some owe more than $40,000. One young woman profiled by the Times carries a student-loan load of $97,000. Presumably, she could tell those children of wealth something about the value of a dollar.

Now there's an idea – she might pay down her debt by going to work as a life coach at one of those organizations capitalizing on the trend to "teaching values."

US Trust, for instance. That unit of BofA now offers not wealth management but Worth Management.

Related post: What Children of Wealth Should Know.

Real tax burdens

Via the Tax Prof Blog, the Tax Foundation reports upon projected tax burdens under "pre-Bush," "Bush" and "Obama" tax regimes.  My question: Why isn't "pre-Bush" called "Clinton"?

Note in particular the effective tax rates at various income levels.  The "tax cuts for the rich" don't look nearly so dramatic as many politicians have made them sound. Married couple, two earners, no kids, $500,000 of income. Effective income tax rates:  Clinton, 26.0%, Bush, 24.8%, Obama, 26.1%. 

In fact, the Bush tax cuts for the middle class look rather more dramatic.  Married, one earner, two kids, $50,000 of income. Clinton, 5.7%, Bush, 1.4%, Obama, 0.6%.  That's four percentage points, nearly a 75% reduction, from the Bush tax cuts for this family.

Note that the table does not include the new Medicare taxes on high incomes.

What’s More Important Than Investment Performance?

Tax planning. "If you can save on taxes, that almost means more than any amount of investment performance…." See Barclays Wealth sees scramble on U.S. tax burden.

Speaking of Barclays, see also Wealthy clients looking for plans they can trust:

A report from Barclays Wealth this week found that nearly half of U.S. high-net-worth investors are reviewing their portfolios more than they were before the recession, and nearly a quarter are now spending more than five hours a week actively investing their money.

Beautiful, Beautiful Tax Havens

Taxes are almost certainly rising next year, on both sides of the Atlantic. In aid of wealth managers and their clients, the U.K.'s Telegraph offers this alluring slide show of tax havens.

Shown below, the Channel Islands, where there is no capital gains tax, inheritance tax, gift tax, estate duty, purchase tax (VAT) or wealth tax. Beautiful!

The Nesting Instinct in Trust Advertising

Does an empty nest symbolize last year's investment opportunities to you? It did for Fiduciary Trust Company's copy writer six decades ago:


Later in the 1950's, Chase Manhattan famously focused on what really mattered: not the nest but the nest egg! This example appeared in The New Yorker just fifty years ago.

Times haven't changed much, have they? High on the list of today's wealth-management prospects are empty nesters and people who can afford to mess around with horses.

ABC on Estate Planning

See Estate Planning 101: Inheritance Nightmares Cost Money, Love and the accompanying video clip from ABC News. Which is more painful for family members, taxes or hurt feelings?

When the Financial World Shrank

In 1958 BOAC launched transatlantic jet airliner service. Banks and other businesses started thinking globally. Among the enthusiasts was Irving Trust. The Irving called attention to its global banking aspirations with a series of colorful ads, including this one from just fifty years ago.


Picture similar traditional costumes on children of the world. Disney did, and the result opened in the Pepsi pavilion at the 1964 World's Fair: "It's a small world after all, it's a small world after all . . ."

In today's global village, businesses large and small routinely operate internationally. Yet the financial side of global life remains inefficient, cumbersome and expensive.

How come a credit card issuer considers it business as usual to charge me an extra three percent if I'm rash enough to charge something in pounds or pesos?

How come the Euro Bloc can't seem to keep its act together?

Shouldn't we be able to do better in the 21st century?

Stalled

Senator Jon Kyl thought he had a deal for  an inflation-indexed $5 million estate tax exemption and a 35% tax rate.  After he made the announcement, the Democratic caucus fought back.  Here's today's news, reported by Tax Notes, from Finance Committee Chairman Baucus:

"There's no agreement on the estate tax on either the substance or process. None whatsoever," Baucus told reporters. 

One State's Estate-Tax Quandary

If a state seeks to attract wealthy retirees by repealing the rule against perpetuities, should it now risk repelling them by levying an estate tax?

What about the state's old "sponge" estate tax, designed to soak up the dollars available back when the federal estate tax offered a credit for state taxes paid? Repeal it, or wait to see if the sponge starts working again? That old federal estate tax could return on January 1.

Here three estate planning attorneys discuss such questions as they apply to New Hampshire. Other states presumably face similar quandaries.

A very inconvenient truth

Tax rates don't seem to matter. The tax base doesn't seem to matter. In the modern age, federal receipts don't go higher 20%, writes David Ranson in today's Wall Street Journal. He makes a good case for not taking too seriously the CBO's forecasting for the revenue consequences of tax rate and rule changes.

On the other hand, I expect that some of these changes could the prices of stocks and bonds.

I may need a new approach to headlines

In Taylor Momsen Did Not Write This Headline David Carr discusses the modern evolution of headlines, driven by the imperatives of search engine optimization.

But I am less interested in hits for the sake of  hits, more in getting something valuable from web discourse.  How does that get measured?

Fraud Alert

REAL

FAKE

What will Internet con artists think of next? Investment News reports a fraud alert concerning an SEC soundalike calling itself, among other names, the U.S. Securities Administration.

What happens when a home-buyer tax credit expires?

Mortgage applications fall almost 10%, and prices weaken.

We should not be surprised by this development.

A Bad News, Good News Tax Bill?

If tax legislation goes as planned, couples making more than $250,000 a year will see their income taxes rise when other Bush tax cuts are extended. Senate Finance Chairman Max Baucus (D-Mont.) has in idea for making that income tax hike more palatable, The Hill's On Your Money reports. The extender bill will include a new, gentler federal estate tax. Thus, upper-income taxpayers will no longer face the risk of having their estates chewed up by the harsh old estate tax now scheduled for 2011.

How happy will this make upper-income taxpayers? Outbreaks of dancing in the street seem unlikely.

Michael Crichton‘s Last Best Seller?

At Christie's the Jasper Johns "Flag" painting from the estate of author Michael Crichton sold for $28.6 million. That's a record auction price for a work by Johns.

Related post: Michael Crichton's Art Collection.