Wednesday, July 27, 2011

Remember When I Said...

I know that I am beginning to sound like a broken record, but I keep finding vindication for items on My Do Not Buy List. This time it relates to Structured Products. I do not like them for a lot of reasons, but the SEC Staff Report gives even more reasons not to buy them. See the SEC Staff Report via this link:

When I have more time, I am going to have to do a follow up Blog article on how many items on My Do Not Buy List have been vindicated by regulator scrutiny or financial media articles. I think it will match up pretty well. In other words, I think we will find that there are good reasons for the items on My Do Not Buy List. In case you missed it, here it is again below:


The following investments are on our Do Not Buy List. Although all of these investments are legal to be sold, it is our opinion, that these investments are not appropriate for most investors. Not all of the investments on the Do Not Buy List have all of these bad characteristics, but they have one or more of them.

The Do Not Buy List and their Bad Characteristics

(The numbers following each item refer to the Bad Characteristics listing below.)

• Private Placements – 1, 2, 3, 5, 6, 7, 8

• Structured Investments – 1, 6, 7, 8

• Non-Publicly Traded REIT’s – 1, 2, 5, 6, 7, 8

• Non-Publicly Traded Limited Partnerships – 1, 2, 5, 6, 7, 8

• Promissory Notes – 1, 2, 3, 4, 5, 6, 7, 8

• Regulation D Offerings – 1, 2, 3, 5, 6, 7, 8

• Exchange Traded Notes (ETN’s) – 1, 6, 7, 9

• Precious Metals – 1, 2, 3, 6, 7, 8

• Floating Rate Bank Loan Mutual Funds – 1, 5, 6, 7, 8

• Consumer Credit Funds – 1, 2, 3, 6, 8

• A Shares Mutual Funds (unless commission waived) – 5, 6, 7, 8

• B Shares Mutual Funds – 1, 5, 6, 7, 8

• C Shares Mutual Funds – 1, 5, 6, 7, 8

• Variable Annuities – 1, 5, 6, 7, 8, 10

Bad Characteristics

1. No liquidity, limited liquidity or penalty for early withdrawal.

2. Not publicly traded.

3. Not regulated.

4. Structured like Ponzi Schemes.

5. Excessive commission charges.

6. Higher risk of principal loss.

7. Excessive expenses and management fees.

8. Aggressively marketed.

9. Unfavorable taxation.

10. No tax deferred benefits if in IRA or Roth IRA.

If you currently own any of these investments, or have questions about them, then please feel free to contact me at 904-262-0888 or via email at

Keeping your informed and as always, at your service.

Thursday, July 21, 2011

The Future of Financial Advice Delivery

There is no idle time as far as I am concerned. I am always reading, researching or writing when I have a little free time. Today is no exception.

I watch what other people and companies are doing to be successful in the financial advice delivery field. There is a very important and significant trend developing. It is still in the early stages, but shows a lot of promise for those smart enough to take advantage. Being one of the first to the market is also important. A case in point: The Mutual Fund Store. Although, I have never been in one of these stores, I understand the concept behind it very well. The founder of this firm had an idea to franchise retail investment advice via his Mutual Fund Store concept. The keys here are the retail store aspect and the franchise aspect which I will get back to in a moment. First we need to take a look at what the big boys are doing today.

Normally, you would not think of financial advice being delivered by a Registered Investment Adviser (like my firm) in a retail store. However, most people have seen Edward Jones, Fidelity, Schwab, Scottrade and TD Ameritrade retail branch offices in their cities. These firms are all brokerage firms and they each have their own niche. These are all my own opinions that follow:

Edward Jones has over 10,000 branch offices I believe. They kind of remind me of when I was in college as a Sigma Alpha Epsilon Fraternity member. We always used to joke, "if you can't go greek, go TKE." The TKE's had a fraternity chapter on every corner it seemed. Edward Jones kind of reminds me of TKE. They offer full service in a retail setting, although you will pay full price in more ways than one.

Fidelity has their own mutual funds with very high management fees by the way and they are a leader in pension plans. They also act as a custodian for Registered Investment Advisers. In addition, they have active trader tools that a lot of traders like. Also, they have really nice retail branch offices, but they are  mostly in high net worth cities.

Schwab is the biggest retail brokerage firm from an assets under management standpoint and they are also the biggest custodian for Registered Investment Advisers. Their branch offices are second to none. Schwab has long sold financial advice to their customers in a retail environment. They have their own mutual funds and ETF's, too.

Scottrade caters to active traders and has recently tried to become a force in the custodian business, too. I believe they have more branch offices across the U.S. than Schwab or Fidelity or TD Ameritrade.

TD Ameritrade is highly regarded as being on the side of Registered Investment Advisers, but like Schwab, they also have retail branch offices where they sell financial advice and encourage active trading.

Enough of my opinions. I need to get to my point on retail financial advice delivery.

I have watched as The Mutual Fund Store has grown from nothing to over $6,000,000,000 in assets in a very short period of time. That is billion with a B. This proves without a shadow of a doubt that financial advice can be delivered in a retail fashion by Registered Investment Advisers.

Recently, Schwab has come out with a new branch office concept where they convince Registered Investment Advisers to become independent branch offices for Schwab. Their plan is to bring on board experienced investment advisers who already know how to add new clients and pair that with the Schwab brand and give them an independent office to attract new customers. I truly believe that this will be hugely successful as they work through the kinks.

The Mutual Fund Store uses Schwab as their custodian, or one of their custodians at least. I cannot help but wonder if Schwab did not see the success that The Mutual Fund Store was having and developed this new retail branch office based on the using Registered Investment Advisers as the branch managers, like The Mutual Fund Store was doing. I bet that I am correct about this fact.

Nevertheless, I see a financial advice delivery trend developing. Registered Investment Advisers delivering financial advice via a retail setting. Today, almost all guys like me are in nice office complexes similar to a lawyer, accountant, or doctor's office. However, I now believe that this may be indeed changing to a retail environment.

Guys like me, however, cannot just go move into a retail strip mall and setup shop. You have to have a concept that matches the retail setting. There needs to be a lot of planning and a neat retail idea.

Speaking of ideas. I do believe I have one! In fact, I am working towards one right now. Of course, I would love to tell you about it, but if I did that, someone might steal my ideas and beat me to the marketplace. So, unfortunately, you are going to have to wait. The good news is that I will keep everyone updated as to my progress via this Blog.

Stay tuned for exciting updates.

Tuesday, July 12, 2011

Derek Jeter May Actually Owe Taxes on Historic Baseball

There was a story out today that Christian Lopez, the guy who caught and returned the ball to Derek Jeter may owe approximately $14,000 in taxes. He apparently received approximately $50,000 in return for the baseball in the way of season tickets at Yankee Stadium, some bats, and other memorabilia. However, in my opinion, Mr. Lopez is getting some bad tax advice, because actually it is Mr. Jeter who may owe the taxes.

Under IRS rules, people are allowed to barter or exchange collectibles. The IRS expects that when two people barter and exchange of collectibles, then the one who has a gain in value has to report that gain on their tax return.

Let us look at this case a little more carefully. In this case, Mr. Lopez caught the ball, therefore he was the rightful owner of it. After the baseball game, Mr. Lopez met Mr. Jeter and gave him the historic baseball. In exchange, Mr. Lopez received several items.

  1. Four Champion Suites tickets for the remainder of the season.
  2. Three autographed baseball bats.
  3. Three autographed baseballs.
  4. Four front row Legends seats for a game at Yankee Stadium.
This was a typical barter transaction that is done in the baseball memorabilia world all the time, albeit with different items being exchanged.

When you really look at this from Mr. Lopez's standpoint, the value of the baseball was probably worth more than the four items received in exchange. If it was worth say $100,000 for example, then Mr. Lopez needs to give Mr. Jeter a 1099 B for the difference in value. According to a New York Times article on this subject, the four items received by Mr. Lopez in exchange from Mr. Jeter was worth approximately $50,000. Therefore, Mr. Lopez could possibly give Mr. Jeter a 1099 B for the $50,000 difference in my example. Also, Mr. Lopez would not owe any taxes. Instead, Mr. Jeter would owe the taxes.

Here is the New York Times article link.

Only if the baseball was valued at less than the items Mr. Lopez received in exchange for the baseball, would he then owe taxes. The Pawn Stars show star, Rick Harrison was quoted as saying that he would have given him roughly $30,000 to $40,000 for the baseball. In this case, if Mr. Lopez sold it outright, then he would owe taxes on whatever he received for the sale. However, a sale never took place. To me, this was clearly a barter exchange of collectibles. Also, I fail to see how Mr. Lopez would owe taxes on this barter exchange, because the baseball would easily be valued at $50,000 or more.

I believe people are jumping the gun a little bit on sticking Mr. Lopez with a tax bill. It is surprising to me that a Derek Jeter fan who is also a tax professional has not offered to step in and help Mr. Lopez file the necessary forms for this barter exchange. Come on people. I cannot be the only one in the country who knows this fact. If you happen to know Mr. Lopez, then maybe you might want to do him a favor and forward him a link to this blog.

I have a Niekro brothers autographed baseball that I might do a barter exchange with Mr. Lopez for one of those Derek Jeter baseballs. I could even throw in a Colorado Silver Bullets women's autographed baseball too. That sounds like a fair barter exchange value for value.

Friday, July 8, 2011

A Contrarian View on High Unemployment

What great timing! The dismal Unemployment numbers dovetail right into this time period when the Obama Administration and Congress are in the middle of negotiations on the debt ceiling. This is absolutely perfect timing to "force" these people to make some significant changes.

Yesterday, I was a little disturbed by some rumors floating around that there will be no legislation done, because there simply is not enough time. The rumor was that they will all agree to something in writing. This is a manipulative tactic in my opinion to get one side or the other to back down. What concerns me about this is that the piece of paper that it would be written on would be technically worthless. The other side could simply exclaim that the terms of the agreement were violated and they are not beholden to it any more. Let us hope this kind of shenanigan does not happen.

I would like to think both sides have their "feets to the fire" now with these dismal Unemployment numbers. Hopefully, we can get some tax simplification legislation passed. In addition, instead of the cuts in Social Security, Medicare and Medicaid, or "throw granny off the cliff" as the Democrats try to claim the Republicans want to do, I would think that they could do things like raise the retirement age and perhaps raise the earning limits for paying into Social Security. The earning limit right now is $106,800. They could easily raise this a little bit and help shore up Social Security. Further, raising the Social Security retirement age a year or two is not going bother anyone. These steps do not entail throwing granny off a cliff, either.

In addition, they may be able to lower corporate tax rates, granted while eliminating loopholes. Further, there may be some risk to personal returns on eliminating some deductions, but this should also tie in with lower tax rates. Regardless of what the Democrats say, lowering tax rates is what will get us out of this economic malaise. We need tax simplification and clarity!

Stay tuned. It is about to get very interesting.

Tuesday, July 5, 2011

Its the Jobs Stupid

One of the Blogs that I follow,, that is fantastic by the way, just published a table of recent Employment Statistics. The table was a comparison from the month when this recession started, December 2007 and the latest month of data, May 2011. These numbers are staggering to say the least.

A few that popped out at me were that on population growth alone, we are down 6.157 million jobs. In December 2007 the unemployment rate was 5.00%. Today it is 9.1%. There are 6.2 million people unemployed for 27 weeks or more as of May 2011. This is in comparison to December 2007 when it was only 1.3 million. That's worth saying again. 6.2 million vs. 1.3 million!

The true unemployment rate is 15.8% today, which includes the Unemployed, the Part-Time for Economic Reasons, the Marginally Attached to the Labor Force and the Discouraged Workers. In December 2007, it was about half that number at 8.8%.

In order to get back to December 2007 levels, we need to add 6.94 million jobs. Not Part-Time for Economic Reasons, not Marginally Attached to the Labor Force, but Full-Time Jobs!

You would think with numbers like these, the Obama Administration and Congress would be burning the midnight oil trying to come up with some solutions. They seem to be squarely focused on kicking the can down the road and going on summer vacations.

The voters really have to clean house in the upcoming 2012 election and also for a long series of elections to come. We need some people who will put America first, rather than those who only care about their own self interests. The only kind of legislation that we are going to see from this group is ideologically correct legislation. In other words, the Democrats will only agree to things that benefit their electability and the same holds true for the Republicans.

No matter what. Get out and Vote!