Fact of the Week:
In February 2020 the median price of an existing home in the US was $270,400 today it is $419,300.
I recently came across this article from the WSJ demonstrating the importance of knowing who your beneficiaries are. It’s worth the read, and could save your family a lot of unnecessary stress and heartache.
His Ex Is Getting His $1 Million Retirement Account. They Broke Up in 1989.
A legal fight over a forgotten form offers a cautionary tale.https://www.wsj.com/personal-finance/inherited-retirement-savings-beneficiary-breakup-divorce-849e3ff2
This reminded me of a similar encounter we had two decades ago regarding a client of ours. We’ll call him “Mr. K.”
From the desk of Mark Boyar (circa 2003):
The Saga of Mr. K.
Mr. K died on September 8th, 2001. We began managing money for him more than two decades prior.
Before retiring, Mr. K was employed by the U.S. Postal Service. Although he never made a great amount of money during his lifetime, he did have the good fortune of inheriting a modest amount of money more than twenty years ago.
Mr. K lived a very frugal life. He had no wife, and only a couple of relatives, from whom he was estranged. He was a real character, as eccentric as they come.
When I say he lived in a modest apartment in the Bronx, I am being kind. He loved to travel but would boast that he would only stay at the least expensive hostels, and always sought to obtain the most inexpensive fares possible. At his insistence, whenever we corresponded with him it had to be on a blank letterhead with no return address on the envelope. He was always fearful that a neighbor would find out that he was a man of considerable means, and that they would rob him.
Although our records go back to 1980, a precursor to our affiliate Boyar Asset Management, began managing Mr. K’s account prior to that date. In any event, his account was worth a modest amount of money in 1980 and by September 30, 2001 it had grown to almost $6.1 million. That $6.1 million figure is after taxes, some of Mr. K’s living expenses, and our fees.
When Mr. K passed away, he was living in a geriatric facility. It took the facility, and the Bronx Public Administrator’s office, more than a couple of weeks to find someone who knew Mr. K. We ended up being that “someone”, and the only reason the public administrator was able to locate us was they happened to find a brokerage confirmation with our name on it… How sad!
Many years ago we sent all of our money management clients a copy of a book written by John Train, entitled “The Money Masters”. After Mr. K completed reading the book, he entered our office unannounced, thanking us for the book, but proclaiming very proudly that after reading a gifted book, he would return the book to the giving party, who should then share it with another person. Furthermore, he professed his love for The New York Public Library, and mentioned he enjoyed spending many many hours at the main branch.
It was precisely at that point in time, knowing that he had no close relatives or friends, I advised him that if he didn’t want his money to escheat to the State (which I knew he didn’t want since he hated paying taxes), he had better have a will drafted. I also suggested that since he enjoyed The New York Public Library so much, he should seriously consider making The Library the sole beneficiary of his estate.
He thought about it for a short period of time before asking us to recommend a lawyer to draft his will. When he heard what the lawyers fee was going to be, he decided to use a lawyer provided for by his union.
When the will was drafted, one of the witnesses to the will was our receptionist, Alice R., and a copy of the will was left with us.
In 1999, a second will was drafted, again by a union attorney. Both wills were identical in nature, with the New York Public Library receiving all of K’s assets.
Here lies the problem – nobody can find the original will. According to New York state law you need the original will, otherwise Mr. K’s assets could theoretically escheat to the state. That point has become moot since two of his long lost relatives have surfaced and have laid claim to the estate.
The court is attempting to reach a compromise – dividing the estate 50% to the library and 50% to the heirs.
We have taken it upon ourselves to protect Mr. K’s wishes. We have written numerous letters to the New York State Attorney General, The Surrogate Court, The Bronx Administrator, and have appeared before surrogate Lee Holtzman on Mr. K’s behalf.
There is no question in our mind that he wanted all his money to go to the New York Public Library. He communicated it to me verbally on a number of occasions, we have copies of two separate wills, each drafted on different dates, both explicitly leaving the money to the New York Public Library… It would be a huge travesty of justice if the New York Public Library doesn’t get all of Mr. K’s money!
Another hearing is scheduled for January. In the meantime: make sure enough people know where your original will is located.
Overview of the Week
During this shortened holiday week, Nvidia surged past Microsoft to claim the title of the world's most valuable company. However, towards the end of the week, on Thursday and Friday, its shares slumped, marking a 4% decline for the week and ending an 8-week winning streak.
In another streak-related note, according to Benzinga, the S&P 500 is currently in its longest stretch without a 2% loss since the Great Recession. The last instance of such a decline occurred 377 sessions ago on February 21, 2023.
This extended period of minimal downturns has naturally fueled bullish sentiment among both professional and amateur investors alike. The latest Bank of America Global Fund Manager survey revealed that investor optimism reached its highest point in 31 months. Moreover, global equity funds saw substantial inflows of $25 billion this week, the largest since March. As a contrarian, however, this widespread bullishness leaves me somewhat nervous.
In case you missed it, we’ve made last year’s Fresh Looks edition available for download. You can find it here:
Notable Reads (and Watches):
Great interview (that I discovered on my friend Joe Koster’s terrific substack, Value Investing World) of Berkshire Hathaway director Ron Olson on how both Warren Buffett and Charlie Munger assess risk, as well as the future of Berkshire Hathaway.
Inside Citigroup’s Most Mysterious Business
https://www.wsj.com/finance/investing/citi-services-investors-day-ad5604f9
One of Citigroup’s oldest businesses is finally ready for its close-up.
For decades, Citi Services has moved money around the world for companies and safeguarded big investor assets. The division, one of five lines of business, makes up half of Citi’s total profit and is crucial to Chief Executive Jane Fraser’s turnaround plan.
Touting these businesses might seem like a no-brainer, but they have long stood in the shadows of pretty much everything else in Citi’s vast portfolio, from credit cards to bond trading.
And what they do isn’t easy to explain. At cocktail parties and investor meetings, executives tended to go with “we oversee the financial pipes,” a tagline Citi is now eager to retire.
Boyar’s Take: Citigroup is by far the cheapest money center bank as measured by book value. The question is, is it cheap for a reason or a bargain hiding in plain sight? This article delves into a unit of Citigroup that many investors overlook yet well-regarded bank analyst Mike Mayo believes is worth $90 billion to $120 billion (Citigroup’s entire market capitalization is ~$115 billion).
Great ‘Bear Market’ in Diversification Haunts Wall Street Pros
https://www.bloomberg.com/news/articles/2024-06-10/great-bear-market-in-diversification-haunts-wall-street-pros
They did everything right — spreading out bets far and wide across bonds and equities in case things went south. Now, after heeding Wall Street’s mantra to diversify for the long haul, these investors are watching with envy as the US stock rally leaves them in the dust yet again.
The numbers are stark. Money managers who obeyed the financial industry’s age-old wisdom to divide investments across markets and geographies are on an epic losing streak versus those who simply bought the S&P 500 and sat still. In one example, out of roughly 370 asset-allocation funds tracked by Morningstar Inc., just one has managed to beat the index since 2009.
It’s been a big lesson in futility, rather than a disaster per se. Diversified portfolios have still managed to return around 6% a year over the stretch, going by a model kept by Cambria Funds. Yet the streak of underperformance is getting historic — and could get worse as the AI-fueled equity melt-up endures. Broadly, diversified portfolios have trailed the US large-cap stock index in 13 of the last 15 years, a stretch seen only once before in almost a century of data, per Cambria.
Boyar’s Take: It does not surprise us that a broadly diversified portfolio has trailed the US large-cap stock index in 13 out of the last 15 years. One of the problems we have with wealth managers is they overdiversify and put their clients in asset classes that over the long run detract from portfolio performance to “smooth out” returns. We subscribe to the Warren Buffett philosophy on diversification where he says, you know, we think diversification is—as practiced generally—makes very little sense for anyone that knows what they’re doing...it is a protection against ignorance.”
The performance noted is from our affiliate, Boyar Asset Management (“BAM”), a registered investment advisor with the SEC. SEC registration is in no way an endorsement on the abilities of BAM by the SEC. Other portfolios managed by BAM in the same strategy may or may not have performed as well as the example cited. Past performance is no indication of future returns. Information on related portfolios is available by BAM upon request.
Important Disclosures. The information herein is provided by Boyar’s Intrinsic Value Research LLC (“Boyar Research”) and: (a) is for general, informational purposes only; (b) is not tailored to the specific investment needs of any specific person or entity; and (c) should not be construed as investment advice. Boyar Research does not offer investment advisory services and is not an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”) or any other regulatory body. Any opinions expressed herein represent current opinions of Boyar Research only, and no representation is made with respect to the accuracy, completeness or timeliness of the information herein. Boyar Research assumes no obligation to update or revise such information. In addition, certain information herein has been provided by and/or is based on third party sources, and, although Boyar Research believes this information to be reliable, Boyar Research has not independently verified such information and is not responsible for third-party errors. You should not assume that any investment discussed herein will be profitable or that any investment decisions in the future will be profitable. Investing in securities involves risk, including the possible loss of principal.
Important Information: Performance Information. Past performance does not guarantee future results. The reports in this sample are for informational purposes only and the performance of the stocks selected is not indicative of the performance of all the stocks profiled in Boyar Research. The performance of the stocks selected and the performance of the stocks in Boyar Research may in fact diverge materially. Additional information regarding the performance of other companies featured in Boyar Research is available from Boyar Research upon request. This information is not a recommendation, or an offer to sell, or a solicitation of any offer to buy, an interest in any security, including an interest in any investment vehicle managed or advised by affiliates of Boyar Research. Any information that may be considered advice concerning a federal tax issue is not intended to be used, and cannot be used, for the purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter discussed herein. Clients of an affiliate of Boyar Research and employees of Boyar Research own shares in Citigroup.