Wednesday, July 27, 2011

The Great Communicator

At the risk of repeating myself, here is what President 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.

Tuesday, July 26, 2011

The Nifty Fifties: People's Capitalism

The Advertising Council seems to have invented "People's Capitalism" in the early 1950's, seeking to encourage widespread stock investing. G. Keith Funston of The New York Stock Exchange picked up the ball and ran with it, and in 1956 General Electric jumped on the bandwagon with this ad.

 In 1952 only 6 percent of Americans owned stocks. How is People's Capitalism doing these days? Pretty good, though somewhat slowed by the Great Recession. The exact answer depends on how you define stock investing.

In 2005, according to a Census Bureau estimate, only a third of white Americans, and less than 10 percent of blacks or Hispanics, owned stocks directly on through mutual funds.

From the PBS archives comes a brighter picture. By the end of the 20th century the average American was indeed a capitalist:
Recently Gallup found that 54 percent of Americans own "individual stock, a stock mutual fund or in a self-directed 401(k) or IRA." That's down from 65 percent in 2007, but still a majority. Slightly fewer Americans pay federal income tax.

Who's most likely to own stocks? Gallup found that 87 percent of Americans making over $75,000 own shares. Also, Republicans, men and postgraduates are much more likely to hold stocks or mutual funds than Democrats, women and less-educated people.

Monday, July 25, 2011

Could the Loose Cannons Push America Into Default?

Smash the Ceiling, advises James Surowieki in The New Yorker. Suroweiki sees Congressional votes on increasing the national debt as useless.
One argument you hear for having a debt ceiling is that it’s useful as what the political theorist Jon Elster calls a “precommitment device”—a way of keeping ourselves from acting recklessly in the future, like Ulysses protecting himself from the Sirens by having himself bound to the mast. As precommitment devices go, however, the debt limit is both too weak and too strong. It’s too weak because Congress can simply vote to lift it, as it has done more than seventy times in the past fifty years. But it’s too strong because its negative consequences (default, higher interest rates, financial turmoil) are disastrously out of proportion to the behavior it’s trying to regulate. For the U.S. to default now, when investors are happily lending it money at exceedingly reasonable rates, would be akin to shooting yourself in the head for failing to follow your diet. 
The danger, Surowieki concedes, is that when push comes to shove,  cooler heads don't necessarily prevail. "As the economist Thomas Schelling showed many years ago, 'It does not always help to be, or to be believed to be, fully rational, coolheaded, and in control of oneself' when it comes to brinksmanship."

Sunday, July 24, 2011

Trusts In the News

Not every Sunday does our local paper offer two articles featuring trusts:

Feds want home, say owner hid millions in trust. The IRS wants $1 million in back taxes from a man who changed his name and transferred $4 million to a "Massachusetts special needs trust." Think the ploy will work?

Can you protect assets from in-laws? Elaine Morgillo discusses trusts as a way to protect a child's inheritance from improvident or impermanent spouses. The subject is getting increased attention, especially now that New York has joined the states permitting same-sex marriage. For privacy reasons, Morgillo points out, such trusts are better created via revocable living trust rather than by will: one child need not know that a sibling's inheritance is structured differently.

Wednesday, July 20, 2011

“Greed Is Good” But “Pigs Get Slaughtered”

Lenny Dykstra, the former ballplayer with the Mets and Phillies, reportedly liked to quote from Oliver Stone's "Wall Street." After retiring from baseball he headed up businesses, sold stock picks on Jim Cramer's The Street, launched a magazine and bought an $18.5 million mansion.

Now, after defrauding investors, friends and family, he cannot make bail. The NY Times tells the sad story: The Fall of Lenny Dykstra.

Monday, July 18, 2011

Flight to Quality

Banks zero in on the ultra-rich, those with more than than $1 million in investments. Normally we'd knock that impoverished journalist's conception of "ultra-rich," but the article is better than its headline::
"Every board of directors of every bank in the world wants to focus on wealth management now."
 "We think there are a lot of people who want the convenience of consolidating their affairs in one place."
"One thing the last several years has proven is that a lot of people who want their assets managed want a strong financial institution with…staying power…"

More Inheritances For Saudi Women

Not only is Saudi Arabia the only country in the world where women are forbidden to drive, it is a country where many women lose inheritances to the males in the family. The Saudi Justice Ministry has launched an inheritance program to combat the problem. (Women are already handicapped by Sharia Law, which limits a female child's inheritance to half that of a male child.)

Wednesday, July 13, 2011

Farrah Fawcett's Living Trust

As Jim Gust and I have written countless times, revocable living trusts have their pros and cons.

One pro: Because living trusts avoid probate, they don't go on public record like a will. The terms of the trust usually remain confidential.

One con: Revocable trusts must be funded. Countless revocable trusts prove worthless because they are empty; the trustors never retitled their securities and other assets.

Neither truism seems to apply to Farrah Fawcett's living trust, last amended two years before her death. The trust terms did not remain confidential. You can read them here. And the "Schedule A" that might be expected to detail the assets placed in trust merely says, in effect, "everything." All Fawcett's personal effects, including artworks. All stocks, bonds and mutual funds. All business interests. All real estate.

Is this how revocable trusts work in California? What about other States?

Fawcett's estate planning draws attention because she left her art collection to the University of Texas. That university is now suing Ryan O'Neal,  claiming ownership of both the silk-screen portraits of Fawcett created by Andy Warhol. O'Neal contends that his friend Warhol created one of the portraits for Farrah and the other – which hangs in his bedroom – for him. 

The Auction Houses Were Circling

H/T to Art Market Monitor for calling attention to observations by Alistair Sooke concerning expensive paintings and the people who buy them. He includes this glimpse of auction-house competition from Kate Ganz, the daughter of art collectors Sally and Victor Ganz:
“Right after my mother died – she died second – we were inundated by teams of people from Sotheby’s and Christie’s descending on the house,” Ganz recalls. “That was fairly uncomfortable, but that’s their job. Now it’s all computerised – they have on their computers the 50 most important collectors in the world, how old they are, when they’re going to die, and who’s going to inherit what. As my mother used to say: ‘The vultures are circling’.”


$22 Billion Housing Tax Credit Program Utterly Failed as Economic Policy

In Praise of the Corporate Executor

From Canada's Financial Post: Choosing an executor is more than an honour.
Corporate executors can help the family cope with complex decisions and details reducing the potential for conflict. They could help reduce the liability that an executor may face for wrong decision, and provide access to a dedicated team of professionals for the efficient settlement of the estate, maximizing value for the beneficiaries – which in the end, is what you want most, isn’t it?

Tuesday, July 12, 2011

Thought For the Day

Robert Bridges, A Home Is a Lousy Investment:
The sanctity of mortgage obligations has become the rough moral equivalent of the 55-mile-per-hour speed limit.

Defining the 21st-Century Broker

Merrill Lynch's brokers aren't fiduciaries, but they should push fee-based accounts. Also, they should concentrate on affluent clients, excel at client retention, and cross sell like crazy.

So reports Jennifer Cummings at the Financial Adviser blog.

Monday, July 11, 2011

How to get around campaign finance laws

Pay a gift tax and a generation-skipping transfer tax on excess contributions. That's what Bunny Mellon did after she gave John Edwards $725,000 so that the press would stop harping on the price of his haircuts.  The WSJournal quotes an expert estimate of the combined tax burden at $799,000. 

According to the reports, the fact that Mellon reported the gift and paid the taxes on it may save Edwards in his upcoming trial on campaign finance law violations.  (She had to pay the GST because she's more than 37.5 years older than Edwards.)

Wednesday, July 06, 2011

Unearthing Buried Treasure

Dream of digging up Blackbeard's loot? Or gold left behind by a forgetful conquistador? If they exist, those treasures were buried a mere handful of centuries ago.

On the other side of the pond, Brits can hope for much older finds. This Telegraph slide show depicts some ancient wonders that have been unearthed, including the Roman silver plate below.

Buried treasure is an evocative metaphor. Back in the 20th century, Earl MacNeill wrote one of Merrill Anderson's best-selling booklets on estate-tax planning: "How to Find the Treasure Buried in Your Estate."

Tuesday, July 05, 2011

Who’s Stealthier?

Who disrespects the public more? The private sector or the politicians?

Private sector: Years ago an online brokerage operation promised me free trades for life. Cool! Despite mergers and management changes, I'm still getting commission-free trades. But I began to notice that each trade was costing me a $2 "fee" for processing or whatever. By last year the fee had doubled, to $4 per trade. This year? Six dollars.

Politicians. This morning's news tells us the Democrats still seek to phase out itemized deductions. Republicans will agree to this, the theory goes, because voters won't  notice that the phase-out increases some people's income taxes. The Wall Street Journal terms it A Stealth Tax Hike.

Can we trust anybody these days?