I attended Bloomberg’s Portfolio Manager Mash-up event this week in New York, and while the buffet line during lunch was outrageous, the quotes that came out of it were great and provide some good lessons for advisors. Here are a few of my favorites:
- From Art Steinmetz, chief investment officer of OppenheimerFunds: “Alternatives are like the Supreme Court’s definition of pornography,” you’ll know it when you see it. Alternatives have always been a good idea, Steinmetz said, but in the last decade, there’s been an increasing focus on non-stock-like assets and anything that doesn’t go down.
- From Alan Gassman, partner with Gassman Law Associates: “If you make more than $250,000, there’s clearly a target on your back,” referring to the new gift, estate and healthcare tax increases. Obama’s healthcare bill would add an additional 3.8 percent tax on income, if that income is not coming in as payroll. “People are going to run for cover from this 3.8 percent tax, but there’s not going to be that many places to hide.” According to Gassman, the tax will likely not apply to municipal bonds, ex-corporation dividends that have active business. You can defer the tax on variable annuities and life insurance. It will apply to any married couple making over $250,000 and single people making over $200,000. “A lot of my clients, who quite candidly, live towards the edge, are not going to be able to make ends meet because of this tax.”
- Stanley Ruchelman, partner at The Ruchelman Law Firm: “In the last few years of George Bush’s administration and clearly in the current administration, we’ve had a Sheriff’s mentality in the Internal Revenue Service. It started with Commissioner Everson, who went around to professional organizations like the tax section of the American Bar Association and spoke about how every tax return preparer, every accountant, every tax lawyer, sold their birthright as professionals by assisting the financial services market to devise sophisticated schemes to defer tax. And he was personally going to go after every one of them. Half the lawyers walked out shell-shocked and couldn’t speak. And you know that’s very difficult, if not unethical, for a lawyer.” According to Ruchelman, that new view is one that mistrusts anyone that has lots of money, that democratization of wealth is somehow bad, and that if you have money and do something outside the U.S., you’re cheating the government. Congress also looks at income taxation as a partnership, much like you would have between you and your clients. “The partnership is you make money, and they get preferred returns. And if you don’t give them the preferred return, they get upset the same way that your partner would if you were a partner in a partnership.”
- Paul Schott Stevens, president and CEO, Investment Company Institute: The SEC’s reform proposals for money market fund are like a game of clue. “It’s death by rope or death by candlestick.” Stevens was referring to the SEC’s two options to reform the money market fund industry, which includes the option to abandon the $1 stable net asset value, or keeping the $1 NAV but requiring money market providers to have a capital reserve.