Thursday, March 31, 2016

The Greatest April Fool That Never Was

April Fool’s Day, 1975
Offices of The Merrill Anderson Company at 100 Park Avenue

The preposterous invitation was addressed to Merrill Anderson's chairman, Earl MacNeill. He raised an eyebrow and handed it to his second in command, Bud Sommer. Bud looked, smiled and handed it to me.

Back in my office I examined the mailing. Ostensibly a new afternoon newspaper was starting up. A Merrill Anderson representative and spouse were cordially invited to learn more about it. On a five-day Bermuda cruise. On the QE2. All expenses paid!

Any temptation to suspend disbelief vanished after a glance at the return address: 90 Park Avenue, the building across the street. From my office window I could see dozens of workers sitting, standing, scurrying about. Which one was the April Fool’s prankster?

Still, no harm in calling their bluff. I RSVP’d to 90 Park.

A few days later came the phone call. There had been a change in plan, a voice said. (That figured. Out with the cruise. In with a free ride on the Staten Island Ferry.)

A change in plan?

Monday, March 28, 2016

At Schwab, Art and Investing Don't Mix

As you read here, artist-investor Sarah Meyohas came up with the idea of trading the stocks of small, thinly-held companies and charting the resulting fluctuations in share price as paintings. She set up a TD Ameritrade account for the project but used her Schwab account for her first painting, Paradise INC. 

Schwab, Felix Salmon reports, was not amused. It has cancelled the artist's account.

Sunday, March 20, 2016

Seinfeld's VWs as Tangible Investments

A good number of classy collectible cars sold for less than their estimates at Gooding's Amelia Island auction. The softening in the market for tangible investments such as art apparently extends to Ferraris as well.

Nevertheless, humble VWs from Jerry Seinfeld's collection did surprisingly well.

For instance, this 1964 Camper (I love it!) sold for $99,000, at the high end of its estimate.

Seinfeld's 1960 Beetle, owned for 30 years by a school teacher and driven for less than 16,000 miles. did even better. Expected to sell for $50,000 or so, it fetched $121,000.

Volkswagens may look out of place among Duesenbergs and Aston Martins, but as this 1966 VW ad says . . .

Friday, March 18, 2016

Should $78 Trillion in IOUs Spook Global Investors?

Is your obedient blogger wrong to find this really scary?
Twenty countries of the Organization for Economic Cooperation and Development have promised their retirees a total $78 trillion, much of it unfunded....
That is close to twice the $44 trillion total national debt of those 20 countries, and the pension obligations are “not on government balance sheets...."

Friday, March 11, 2016

Even if Active Investing Doesn't Pay, We Need It

Fewer than one of five actively managed equity mutual funds did better than comparable index funds over the past ten years. Although results over shorter periods weren't quite so bad. the majority of actively managed funds underperformed. As a result, Jason Swieg reports in the WSJ, some fund managers have thrown in the towel. They're buying a few ETFs rather than assembling portfolios of stocks.

Meanwhile, investors continue flocking to index funds.  Yet as a Cullen Roche column points out, all investors cannot do nothing but index. Active investors and active investment managers are needed to keep the market honest. See also Is Passive Investment Actively Hurting the Economy in The New Yorker. (Are index funds really responsible for the higher fees charged by large banks?)

Inexpensive online investment services based on index funds seem destined to become the basic investment platform for millennials. Even so, as their wealth grows they might enjoy setting up a side account of shares in selected companies, They'll gain the sense of being actual stockholders. And despite returns likely to be sub par, they'll be performing a public service – doing their part to keep stock prices in line with business realities.

If Congress Won't Tax Carried Interest as Income…

. . . maybe New York and neighboring states should pick up the "lost" revenue. By collecting the equivalent of what hedgies save by having the carried-interest portion of their compensation taxed as capital gain, New York State figures it might collect $3.7 billion a year. For New York's ploy to work, neighboring states would have to follow suit. It's suggested that The Merrill Anderson' Company's home state, Connecticut, could collect a half billion or so annually. See New York Challenges a Tax Privilege of the Rich.