“Trees grow” is an adage that has stuck with me over the past several years.

In a post financial crisis interview, a successful investment manager was talking about his decision to load-up on Citigroup and a handful of other banks in early 2009 when the decision to do so was difficult to say the least.

The manager referenced a professor who shared the trees grow saying with him, and he emphasized the impact that the idea had on his decision to build and maintain significant long positions in banks and other financial services stocks when everyone else was certain the world was coming to an end.

The trees grow idea involves considering fundamental qualities of things—whether trees, people or businesses.

Growing is what trees do—it is intrinsic and central to their nature.

Similarly, productivity and growth are fundamental qualities of business. 

For the most part, people don’t show-up at work each day trying to screw things up.  People generally work very hard to do a good job, and this collective productivity is what moves businesses and the economy ahead over time.  Trees grow is an expression that makes the case for long-term optimism about business, the economy and capital markets.

Anyone who has ever shorted a security is aware of this reality.

Shorting is really hard because at a certain level you are betting against this fundamental characteristic of businesses and economies—people work hard and try to solve rather than create problems.

Businesses are fundamentally productive—otherwise they go away.  As an investor, it is much easier to bet on this notion than to bet against it.

Warren Buffett references the trees grow adage indirectly when he talks about the difficulty of betting against the United States over the past century.  The country and capital markets have continued to grow despite a couple of world wars, Vietnam, Watergate, etc.  Buffett, by the way, is also averse to shorting or betting against securities.

There comes a point, though, when people question whether the non-productive elements in the economy may eclipse the productive aspects—particularly when many non-productive elements are so highly leveraged.

Speculative finance combined with a taxpayer safety net and public sector workers retiring at age 55 with $150,000 lifetime pensions are less than productive examples that serve as current headlines.

Italy has the third largest Read all post…

Thousands of people across the world face the same dilemma: taking on a mortgage in order to keep a roof over their heads. Although it’s for a very good cause, mortgages can be a bit overwhelming for everyday people to keep up with on a consistent basis. Need some good information on getting credits? There is a lot of great information and resources that can have you on the right path toward understanding your mortgage and all of the baggage that can come with having one. So what can you do in order to make your life easier, and what should you know about mortgages as well? You might be surprised to know how easy finding the answer to that may be.

Mortgages can be an interesting thing to find out more about. No matter whom you are, mortgages can be somewhat of an intriguing idea to consider. Though it’s not as fun to actually have to deal with one, they are usually easier to talk about than to deal with. From their purpose, to how much the average monthly payment is, to thinking about how long your mortgage term will be – there is a lot to take into account. Read all post…

Happy Armistice Day, Remembrance Day and Veterans Day.

• 1675 – Gottfried Leibniz demonstrates integral calculus for the first time to find the area under the graph of y = ƒ(x).
• 1918 – World War I: Germany signs an armistice agreement with the Allies in a railroad car in the forest of Compiègne, France. The fighting officially ends at 11:00 (The eleventh hour in the eleventh month on the eleventh day) and this is annually honored with a two-minute silence. The war officially ends on the signing of the Treaty of Versailles on June 28th 1919.
• 1926 – U.S. Route 66 is established.
• 1930 – Patent number US1781541 is awarded to Albert Einstein and Leó Szilárd for their invention, the Einstein refrigerator.

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 authorized portability of the federal estate and gift tax exemption for married couples. This means that if one spouse dies without having used his or her entire exemption, the survivor may use it.

Portability has been widely hailed as a great estate planning benefit. The benefit is that the first spouse to die can leave everything to the survivor rather than having to create a credit shelter trust. 

Our view is that the benefit of portability is overrated; furthermore, it creates a trap for the unwary. We are not advising any of our married clients to plan on using portability.

The foremost reason that we do not favor portability is because the statute that created it also required the law to expire on December 31, 2012. President Obama and many members of Congress have indicated that they would like to extend portability beyond this sunset date; however, we have learned that it is foolhardy to plan on the assumption that future tax laws will be consistent with sensible statements made by politicians. 

Even if portability is made “permanent” by future legislation, there are many pitfalls to using portability. First, there is no inflation adjustment. For example, assume a married man dies this year and leaves his entire $5 million estate to his wife. When the wife dies, she will be able to use her husband’s unused exemption, but without any adjustment for inflation. If the husband had placed the $5 million in a credit shelter trust instead of transferring it to his wife, appreciation of the value of the trust during his wife’s remaining lifetime would have also escaped estate taxes.

The Tennessee inheritance tax exemption is not portable. If you fail to use the exemption in the estate of the first spouse to die, it will be lost forever. This will result in higher Tennessee inheritance taxes for the survivor’s estate.

Those who plan to establish trusts that last for the lifetimes of their children and beyond, are concerned about generation-skipping transfer tax exemption. The GST exemption is not portable. However, if the first to die establishes a trust and allocates GST exemption to the trust, the trust will be exempt from generation-skipping taxes for up to 360 years.

In order to claim portability, the estate of the first spouse to die must file a timely federal estate tax return. I predict that a lot of surviving spouses who are not otherwise required to file an estate tax return will fail to file timely returns in order to claim portability. 

There are numerous portability issues associated with the remarriage of the surviving spouse. It will likely take years for regulations and court cases to fully flesh out these issues. All things considered, we recommend that you disregard portability as a planning tool, at least until the law is made permanent.

There are a few things that a person must take into consideration when using financial planning services in Alabama such as their credit standing, liabilities and assets. These services allow individuals and businesses the opportunity to take charge of their accounts and obtain professional advice on dealing managing issues such as stock options, real estate and even insurance policies. The professional advice offered by financial planners can force us to look at things that we may have been overlooking previously. It’s like having another you, but a “you” that can see clearer and make better financial decisions. There are a number of businesses that offer quality financial planning services to help you get more organized.

By managing your expenses and creating a savings for your retirement funds, you can increase the chances of being able to maximize your cash levels and make better investment decisions. With the help of a qualified professional planner, you can learn to manage your money more effectively. Man Read all post…

After yesterday’s worst trading day in about three months, the markets bounced back slightly today. The Dow Jones gained a little over 100 points, while the Nasdaq only managed to increase by three points. Concerns lessened regarding Europe’s financial situation, despite lots of remaining uncertainty regarding Italy and Greece. Corporate news took focus today, both on the positive and negative sides: Starbucks (SBUX) announced an acquisition and future move into the healthy juice realm, while Disney (DIS) and Cisco (CSCO) both pleased their investors with positive quarterly reports. Disappointing investors was Green Mountain Coffee (GMCR), facing questions and concerns about their accounting practices. Black Friday shopping ads began to be released, kicking off the holiday shopping season.

Word on the Street

• Starbucks (SBUX) announced today their $30 million purchase of juice maker Evolution Fresh, and facing concerns of questionable accounting practices.
• Cisco (CSCO) appears to be on its way to a comeback, sending shares up today on reports of significant growth in some key divisions.
• The euro has continued to perform well, despite the prevalent European financial crisis.

Interesting Tidbits

• The Question That Will Change Your Organization.
• Need more time? Her

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