Sunday, September 30, 2012

My Memory of “Punch”

I once met Punch Sulzberger, the long-time publisher of The New York Times. It was no big deal. Here's the comment I posted to his obituary.
After getting out the army in the summer of 1956, I worked in market research. One assignment was to call on New York business leaders and ask them how our airline client could improve its printed flight schedules. 
Business big-shots were more accessible in those days, but I struck out at The New York Times. "You cannot go up to the elder Mr. Sulzberger's office," a gatekeeper told me. He gestured down a hall. "Why don't you talk with young Mr. Sulzberger."
I headed toward the back of the ground floor. The office of young Mr. Sulzberger looked like a small storeroom. He received me graciously, answered my questions, and impressed me as a level-headed sort.
In 1963, when fate propelled him into the publisher's position, I had a hunch he'd do better than people expected.
Always nice to be proved right. 

In Two Years, $20 Billion in Investment Fraud!

These are tough times for investors in need of income. One result, a surge in investment fraud and Ponzi schemes. Federal attorneys are fighting back with regional "investment fraud summits."

Nationwide, federal prosecutors looking at investment cases from the last two years identified 500 prosecutions that targeted 800 defendants and involved more than $20 billion in fraud, according to Connecticut U.S. Attorney David Fein. For two recent examples from Connecticut, see here and here.

Income investors who avoid Ponzi schemes by putting their money in dividend-paying stocks aren't necessarily safe. As this NY Times article notes, "the Federal Reserve and other central banks have been flooding the planet with money." A lot of that cash presumably has been sloshing into the stock market. How deep will the Dow dip when it sloshes out again?

Conscientious investment advisers can't always make their clients rich, but often they can keep them from becoming poor.

A 28% Solution

In The New York Times, University of Chicago professor Richard Thaler proposes tax reform from the top down. He'd tax income exceeding $1 million – including dividends and capital gain – at 28 percent, with no deductions. He also proposes dropping the federal estate tax rate to 28 percent, although he would reduce the current exemption as well.

Could taxes really be reformed starting at the top? In the midst of a presidential election featuring a rich guy running against a richer guy, with billionaires throwing money around trying to influence the result, who can say what's possible?

Friday, September 28, 2012

Intentionally Defective Grantor Trust Makes Headlines!

It takes a celebrity – or in this case, a politician – to put sophisticated trust planning in the spotlight. Estate planners, give three cheers for Mitt Romney's "I Dig It" trust.

If the next wave of tax reform axes I Dig It trusts, would the crackdown really "put an end to much of estate planning as we know it"?

Tuesday, September 25, 2012

Broadway's Biggest Mystery

When clients find equities and bonds boring, advisers may suggest spicing things up with alternative investments: private equity, vintage Aston Martins, one-eighth of a race horse. How about backing a Broadway show?

Amazingly, The New York Times observes, otherwise sane people may think that's a cool idea.
The business of Broadway has always been cloaked in mystery. Most of its 40 theaters are run by three private organizations that operate out of public view. Producers keep deal-making under wraps. The biggest mystery of all is why so many sophisticated investors go along with business-as-usual on Broadway when few shows turn a profit.
The Times article chronicles the troubled effort to bring"Rebecca," a musical that has enjoyed success in Vienna and elsewhere in Europe, to The Big Apple. A scheduled opening last April failed for lack of funding. Miraculously, Paul Abrams, a consultant working out of South Africa, came to the rescue with the promise of $4.5 million. That must have made the show's other investors feel much better.

They don't feel better now. Just before coming up with the money, Mr. Abrams suddenly died. 

Will his estate honor his commitment? Probably not. Turns out there's no evidence of Paul Abram's death and, so far,  little evidence of his existence.

Maybe stocks and bonds aren't so dull.

Private Banks For Name Droppers

Exclusivity. Social status. Along with quality and "overall client experience," those are the criteria Luxury Institute uses to rank the year's top private bank brands. This year's winner, determined by a survey of investors with at least $5 million: Brown Brothers Harriman, followed by Boston Private Bank. Neuberger Berman Private Asset Management and Bessemer Trust.

A year ago different names possessed the snob appeal: Atlantic Trust, Glen Mede Trust and Rockefeller Wealth Management.

(When I was very young, my father used to stop by the Rockefeller office to drop off a bookbinding job or pick up a check. The notion that a family had an office impressed me immensely. In those days the place must have been truly exclusive  – you probably had to marry into it.)

These days, the exclusivity of Rockefeller, Bessemer and other former family offices resides in the eye of the  beholder. Marketingwise, a little snob appeal probably can't hurt. Or could perceived exclusivity impede growth?

Despite their prestige, fiduciary-style wealth managers aren't exactly cornering the high-net-worth market."Morgan Stanley, Merrill Lynch and Wells Fargo are the top three primary wealth managers to the wealthy," Luxury Institute noted last year. More than one third of the multimillionaires surveyed said a full-service broker was their primary adviser.

Sunday, September 23, 2012

"The Lifetime Trust"

[T]he lifetime trust is an excellent tool to reduce creditor, divorce and death tax concerns while positioning an inheritance to be available to provide for one's heirs for the rest of their lives.”

Unclaimed Inheritances

Kudos to Cleveland's Plain Dealer for setting up a searchable database of unclaimed inheritances  in Cuyahoga County.  Wealth managers in other areas where such data are hard to access might burnish their brand by sponsoring similar sites..

Wednesday, September 19, 2012

Forget the Rich. Look For “Core Millionaires”

For tips on gaining wealth-management business by coddling folks with $25 million or more, see How Private Banks Are Luring the Super-Rich. Better yet, take a hint from the article and lower your sights:
So-called 'Core Millionaires', with assets of between $1 million and $10 million, generate investment revenue margins on average two to three times higher than their wealthier counterparts, making greater use of more profitable banking and lending products, a survey by McKinsey estimates.

Thursday, September 13, 2012

Charitable Bequest Wins, 4-6, 7-5, 6-3, 6-4

What with Andy Murray winning Olympic gold and then the U.S. Open, I missed this Wimbledon story about a charitable bequest.

Nick Newlife
Nick Newlife is variously described as a recluse or shut-in. Like tennis fans everywhere, he was dazzled by young Roger Federer when Roger won his first Wimbledon championship in 2003. Nick wagered that Roger would win seven Wimbledons by 2019. Seven!

Federer had won but six Wimbledon championships when Newlife died in 2009. Nick left his estate – apparently consisting largely of betting slips for future wagers – to the charity Oxfam.

When Federer beat Murray to win Wimbledon again this year, Newlife''s bet, at odds of 66 to one, paid off. Oxfam gets about $158,000 to use for its good works.

Nice going, Roger.

Tuesday, September 11, 2012

Rich People Thought For the Day

Average people think MONEY is the root of all evil. 
Rich people believe POVERTY is the root of all evil.

– Steve Siebold, as quoted here.

Monday, September 10, 2012

How bad is the newspaper business?

Revenues (inflation adjusted) have fallen back to the level of 1950.  Adding in online revenue makes a negligible contribution to the industry.

Holy cow!

American Business Creates More Than Jobs

Who says Democrats and Republicans can't agree? Both parties claim they love business owners to death, although Democrats limit their affection to proprietors, partners or stockholders making $250,000 a year or less. Republicans are more inclusive.

Just fifty years ago, business was getting lots of love from a bank. Anyone know why The Bank of New York felt businesses were threatened in 1962? The high taxes of the time? New regulations?

BofNY admired business for creating profits, not jobs. Still, today's political wordsmiths might want to borrow the ad's conclusion.
Our form of government is based on the freedom of the individual – political, religious, intellectual and economic. *** And to the nation which protects his economic freedom, the individual owes the exercise of his fullest energies. The hope of America lies in the vigor and enterprise of each of its citizens.

Saturday, September 08, 2012

“Stop Me Before I Trade Again!” No. 2

John Bogle as quoted in USA Today:
 I was talking about buy and hold to some investment advisers, and one said, "I tell my investors to do this, and the next year, they ask what they should do, and I say, do nothing, and the third year, I say do nothing. The investor says, 'Every year, you tell me to do nothing. What do I need you for?'" And I told them, "You need me to keep you from doing anything."
So how do we convince nervous wealth-holders that successful investing is about as exciting as watching grass grow?

Related Post: "Stop Me Before I Trade Again!"

Sunday, September 02, 2012

A “Sound Service” . . . An “Inquisitive Organization”

These two ads appeared in The New Yorker just fifty years ago, September, 1962.

The U.S. Trust ad, prepared by The Merrill Anderson Co. and intended mainly for newspapers, looks drab compared with First National City's salute to the amazing classical structures of Baalbek.

The copy holds up, however. The headline, dealing with the psychology of investing, attracted considerable attention. Trust companies today continue to help the wealthy get their heads around their money.