Arbitration and The Green Machine
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Bingo. I touched on this in my previous post. The tax issue (and lack of reinvestment) kills your return over time in LP. However, buying it on 75% margin improves your IRR. I'm not going to run that, since, well, I just don't care. But suffice it to say that BRK has been a great, very tax-efficient equity investment. And the fact that it doesn't pay a dividend is no big deal since (if you are accumulating instead of spending) Mr. Buffet is reinvesting profits in a much more tax efficient way. Now, if you need those shares for income, it gets a little more dicey. Tough to start liquidating 5 shares of a stock and be efficient about it. LP is a great deal when you are retired and need income.Spiff, my numbers come from taking money out of my pocket and buying the stock. I paid $26,400 for my first share and the current price is in the neighborhood of $143,500 roughly 12 years later. And I haven’t paid a dime in taxes as yet because of it. You can’t make the same claim for your LP.
Therein endeth the lesson.
Bingo. I touched on this in my previous post. The tax issue (and lack of reinvestment) kills your return over time in LP. However, buying it on 75% margin improves your IRR. I'm not going to run that, since, well, I just don't care. But suffice it to say that BRK has been a great, very tax-efficient equity investment. And the fact that it doesn't pay a dividend is no big deal since (if you are accumulating instead of spending) Mr. Buffet is reinvesting profits in a much more tax efficient way. Now, if you need those shares for income, it gets a little more dicey. Tough to start liquidating 5 shares of a stock and be efficient about it. LP is a great deal when you are retired and need income.[/quote] Absolutely correct. However, if the stock is in Mom & Pop's account, living expenses can be taken out, to a degree, as margin loans and a) be repaid with the RMD from the IRA, or b) stock is sold at the death of Mom or Pop and the step up taken. ~Sigh~ I suppose strategies are all out the window when the Dems control both Houses of Congress and the Oval Office.[quote=Philo Kvetch]Spiff, my numbers come from taking money out of my pocket and buying the stock. I paid $26,400 for my first share and the current price is in the neighborhood of $143,500 roughly 12 years later. And I haven’t paid a dime in taxes as yet because of it. You can’t make the same claim for your LP.
Therein endeth the lesson.
[quote=joedabrkr] [quote=Philo Kvetch]
~Sigh~ I suppose strategies are all out the window when the Dems control both Houses of Congress and the Oval Office.[/quote]Now that is a scary issue worthy of some extended discussion on this board, in my opinion. I'd like to know what you(and other wise souls on this board) are doing/considering depending upon how this election goes....or are you not doing anything?
If Billary or Obama wins, we could see some profound changes in our tax structure, and that could affect markets.
Anyone care to start a thread? I'm too lazy....
[/quote] I think this go around, the Dems could send Kermit the Frog to the convention and still win. I think the country is done with Republicans (Bush in particular) for right now. And unfortunately, I think we have to start cashing those low-tax-rate checks. We have been blessed for several years, and taxes can really only go in one direction from here (I suppose). My hope (for the market's sake) is that it is gradual.
I still can’t believe that the choice is going to be McCain vs Hillary or Obama! This is even worse than Carter vs Ford.
Let’s hope for McCain. At least we have a fighting chance that nothing will happen. It would be the best of all worlds.
Except that McCain may move farther to the left and we would see enough votes in Congress to change the tax structure. I I do find it interesting that Joe da broker.... can't find the time to start a thread but has time to comment 4585 times over three years....Maybe Spiff can start it, his numbers aren't far behind! Must have one hellofa recurring revenue book to sustain that much communication. Hey Joe-how about a thread on how YOU conduct business. We could all learn something finally.What does EJ say about the LP and the Pyramid with regard to risk?And incidentally, if I were to put this on the “pyramid”, I would classify it as “aggressive income”. Although with a solid 30 year track record, and no return less than 15% during those 30 years, it’s a pretty solid investment for part of one’s income portfolio.
What does EJ say about the LP and the Pyramid with regard to risk?[/quote] No idea. But by the time you amass a significant enough amount, you probably have a lot of other investments, and it is a small portion of your entire portfolio.[quote=Broker24]And incidentally, if I were to put this on the “pyramid”, I would classify it as “aggressive income”. Although with a solid 30 year track record, and no return less than 15% during those 30 years, it’s a pretty solid investment for part of one’s income portfolio.
What does EJ say about the LP and the Pyramid with regard to risk?[/quote] No idea. But by the time you amass a significant enough amount, you probably have a lot of other investments, and it is a small portion of your entire portfolio.[/quote] This is funny because I remember my RL harping to us about clients that wouldn't diversify their company stock positions because they were in love with their company, while I'm sitting there wondering how he would feel if some newbie investment guy was trying to convince him to unload his GP for diversification, and charge him a 2% rip and reinvestment charge on top of it.[quote=New2EJ&Biz][quote=Broker24]And incidentally, if I were to put this on the “pyramid”, I would classify it as “aggressive income”. Although with a solid 30 year track record, and no return less than 15% during those 30 years, it’s a pretty solid investment for part of one’s income portfolio.
Hi everybody,
I've been with the green machine for two years and I will be leaving the industry and going back to school in January of 2009. However, as the series 7 is my main employable skill, I will probably have to work at a discounter temporarily while I wait for school to start. Will the green machine try to extract training expenses from me, even though I can prove that I am only using my license for temporary employment and that I will leave the industry entirely? I can't think of another job in the mean time that will pay enough to cover the bills. Thank you to anyone who has advice. EDJ1979[quote=edj1979]
Hi everybody,
I’ve been with the green machine for two years and I will be leaving the industry and going back to school in January of 2009. However, as the series 7 is my main employable skill, I will probably have to work at a discounter temporarily while I wait for school to start.
Will the green machine try to extract training expenses from me, even though I can prove that I am only using my license for temporary employment and that I will leave the industry entirely? I can’t think of another job in the mean time that will pay enough to cover the bills.
Thank you to anyone who has advice.
EDJ1979[/quote]
You’re probably fine.
[quote=Broker24][quote=New2EJ&Biz][quote=Broker24]And incidentally, if I were to put this on the “pyramid”, I would classify it as “aggressive income”. Although with a solid 30 year track record, and no return less than 15% during those 30 years, it’s a pretty solid investment for part of one’s income portfolio.
What does EJ say about the LP and the Pyramid with regard to risk?[/quote]
No idea. But by the time you amass a significant enough amount, you probably have a lot of other investments, and it is a small portion of your entire portfolio.[/quote]
This is funny because I remember my RL harping to us about clients that wouldn’t diversify their company stock positions because they were in love with their company, while I’m sitting there wondering how he would feel if some newbie investment guy was trying to convince him to unload his GP for diversification, and charge him a 2% rip and reinvestment charge on top of it.
[/quote]
I would suspect that anyone that is in a RL and GP role already has a substantial portfolio, so diversification is probably not an issue.
Tell that to a new Jones guy when they bring in a client that is high net worth. Even if the client had 5% in a company stock they’d do all they could to get the client to unload it.
Tell that to a new Jones guy when they bring in a client that is high net worth. Even if the client had 5% in a company stock they’d do all they could to get the client to unload it.
Sorry, my point was that the RL/GP probably has a large enough portfolio OTHER than GP shares, that diversification is not an issue. And by that point, they are probably educated well enough to understand the risk they are taking. It's really a moot point.
I understood you the first time. My point was a slam at Jones IRs (especially newbies-but not exclusively) that blindly try and get clients to sell company stock because they've been brainwashed to believe there are NO circumstances where someone should own company stock (regardless of percentage of net worth and tax considerations). Unfortunately it is a side effect of the commission driven environment of Jones that the advisor can only get paid on those dollars if they convince the client to sell. I hope the advisory fee system Jones creates allows the advisor to get paid on in-kind stock deposits to eliminate that conflict.[quote=CIBforeveryone] Tell that to a new Jones guy when they bring in a client that is high net worth. Even if the client had 5% in a company stock they’d do all they could to get the client to unload it.[/quote]
Sorry, my point was that the RL/GP probably has a large enough portfolio OTHER than GP shares, that diversification is not an issue. And by that point, they are probably educated well enough to understand the risk they are taking. It’s really a moot point.
Sorry CIB one of my buddies still at Jones says no individual stocks will be allowed in the Advisory program. But who knows maybe he’s wrong or they’ll change their mind.
I understood you the first time. My point was a slam at Jones IRs (especially newbies-but not exclusively) that blindly try and get clients to sell company stock because they've been brainwashed to believe there are NO circumstances where someone should own company stock (regardless of percentage of net worth and tax considerations). Unfortunately it is a side effect of the commission driven environment of Jones that the advisor can only get paid on those dollars if they convince the client to sell. I hope the advisory fee system Jones creates allows the advisor to get paid on in-kind stock deposits to eliminate that conflict. [/quote] CIB, not sure where you get your info. I have never heard this before. Yes, if someone had 90% of their net worth in company stock, that seems a little absurd, but most of my clients have some level of company stock, which is perfectly acceptable. In fact, this is often a good thing as far as tax planning is concerned. I have used NUA on several occassions, and we have been able to start drawing down on company stock at cap gains rates vs. taking IRA withdrawals (there are several large employers in my area that match in company stock and give RS). I think you are making some rather grand assumptions about that "evil" commission system, and Jones in general. FYI, last time I checked, Jones is not the only firm that uses commissions, and Jones is also not the only firm with advisors that do stupid things for a buck (go back through some of your ACAT's in and review some of the crap that comes over from some "elite" wirehouses - it's not about the firm, it's about the advisor).[quote=Broker24] [quote=CIBforeveryone] Tell that to a new Jones guy when they bring in a client that is high net worth. Even if the client had 5% in a company stock they’d do all they could to get the client to unload it.[/quote]
Sorry, my point was that the RL/GP probably has a large enough portfolio OTHER than GP shares, that diversification is not an issue. And by that point, they are probably educated well enough to understand the risk they are taking. It’s really a moot point.
I too must have missed that particular brainwashing class. Which suprises me, since I used to teach those classes in my former Jones life.
I've had some clients move LARGE stock positions into their Jones accounts and we did have a discussion about owning too much of one thing. It had nothing to do with commissions, rather the risk you take owning having an overconcentration in one stock. Your old company or not, it's too much risk. My dad is a perfect example. He worked for a publicly traded company for 30+ years. Put every dime of his 401K money into company stock. Retired in 1999 with the stock at $55. The evil EDJ broker that I sent him to sold almost all of those shares totaling $566K. I'm POSITIVE she did it ONLY for the commissions. Evil woman! So, let's see what would have happened to dear ol' Dad if that evil woman wouldn't have sold it, instead just transferring in kind. Well, 12 months later that same stock was trading in the mid 20's. Hmmm...seems that evil woman who had been brainwashed by EDJ to sell those shares only for the commission, did my dad a huge favor. She bought him some horrible long bonds that are still paying him over 7%. She bought him some good funds (at NAV) that have done very well. She made sure he was balanced and ready for an eventual downturn in the market. All because EDJ brainwashed her into believing that there are "NO circumstances where someone should own company stock (regardless of percentage of net worth and tax considerations)". A slam back at you CIB, if you AREN'T having those discussions with your clients, instead just simply transferring in that money to a fee based account so you can "get paid on in-kind stock deposits to eliminate that conflict", then I think you are doing your clients a disservice and should revisit your EDJ roots so you can give your clients some good solid advice.Oh how I had to take up for Jones, but when I was at Jones they had CE classes on NUA and they produced a CPA guide on NUA—they even funded several of my client’s non-qualifed stock options so the client would not have to sell them out right away. So Spiff and Broker24, put that in your book–so yes while I was at Jones they encouraged me to do NUA’s and I did several!
It's actually a great concept, though difficult to use (i.e. finding the client with large amounts of highly appreciated company stock, that has a cost basis (some companies don't provide cost on these), and is willing to take some tax hit today for a large benefit tomorrow). BUT, most inexperienced advisors are not trained to look for these opportunities, thus very few advisors are talking to their clients about it.Oh how I had to take up for Jones, but when I was at Jones they had CE classes on NUA and they produced a CPA guide on NUA—they even funded several of my client’s non-qualifed stock options so the client would not have to sell them out right away. So Spiff and Broker24, put that in your book–so yes while I was at Jones they encouraged me to do NUA’s and I did several!