Did you know you can pay for portfolio management software using 12b-1 fees? The quarterly performance reports are, after all, an important component of the ongoing marketing effort to retain your clients. Yeah, I never quite bought that explanation either, but every software company where I’ve been employed had some portion of their revenue coming from advisors using their mutual funds’ 12b-1 fees.

Apparently this is about to change. The SEC is going to revamp the 12b-1 fee structure. From an article in Investment Advisor Magazine:

Eight months after holding a roundtable discussion on its Rule 12b-1, the SEC is planning a “complete overhaul” of the rule, according to SEC Chairman Christopher Cox. Yes, “complete overhaul” are the words Cox used in a speech on February 8 at the SEC Speaks conference in Washington. Cox said that Buddy Donohue, head of the SEC’s Division of Investment Management, is preparing to issue a formal rule proposal sometime this spring.

While the SEC has divulged few details about the changes that are in store, industry officials doubt that any rule would get passed this year since the SEC is down two commissioners and the length of Cox’s stay at the Commission is questionable. But these officials are providing educated guesses about what modifications may be likely.

Excellent article. I’ve long thought this was a fairly straightforward problem, and I’m glad to see it being fixed.

It’s less of an endorsement and more of a desperate plea for Hillary to just go home. After going on record disagreeing with both candidates’ opposition to liberal trade, the Times claims the candidates’ “differences on policy look small and in reality are even smaller.” The Financial Times also recognizes Obama’s great oratory ability and Clinton’s lack of similar ability, calling her speaking style “grating.” Lastly, they point out that her campaign has been “a shambles,” which “does tell you something, especially if [Clinton] is running on a claim of management expertise.”

From the article:

After Tuesday’s vote, the Democrats should move quickly to affirm Mr Obama’s nomination. That is not just because his lead in elected delegates is already unassailable and the contest should be brought to a swift conclusion. It is also because he is, in fact, the better candidate.

The Democratic party has waited an awfully long time for a politician like Barack Obama. Enough already.

Ouch.

This is a bit off-topic for a wealth management blog, except in the sense that it’s Part 2 of my also off-topic “Ron Paul for President” post. After endorsing him here, and paying some $$$ to attend a campaign luncheon, I ended up in a prominent position on the endorsements page of Dr. Paul’s web site. This was due to (1) my last name starting with “A”, and (2) being listed in the “authors & media” category which also starts with “A”.

The Nevada caucus seemed like a pretty big deal. Nevada is now an early primary state so, like New Hampshire and Iowa, we help to “set the political tone of the nation”. It was also one of the few states where Congressman Paul had a shot at winning (he placed second after Mitt Romney). A first place in Nevada could have catapulted him into national prominence and given him a real shot at winning the GOP nomination.

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The editorial staff at Investment News has written a scathing critique of Bush’s 2008 budget. This is the best critical analysis I’ve read yet, and it doesn’t shy away from calling the budget a Big Fat Lie. They estimate the deficit will be at least $550 billion.

In this election year, the country deserves a realistic budget, and President Bush’s proposed budget for fiscal 2009 isn’t it — even though it predicts a deficit of $407 billion.The budget document released last week is just plain dishonest. Let us count the ways.

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Mitt Romney exited the race today. Romney was the highest scoring candidate among investment advisors according to Investment News. The Investment News poll ranked the candidates:

• Romney, 29%
• Obama, 25.6%
• McCain 22.6%
• Clinton 12.4%
• Huckabee 6.4%

While watching week-old Daily Shows on my Tivo, I caught Jon Stewart interviewing CNN’s Personal Finance editor Gerri Willis. He brought her on ostensibly to explain the housing crisis, which she did well. At the end of the interview he tests her general financial knowledge in the guise of “helping him decipher the gibberish on financial programs”. You can tell from her expression and guarded answers that she realizes what he’s doing.

Can you find the problem? (Fast forward to 5:40 if you don’t want to watch the whole thing.)

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I’m not sure if it’s my fascination with Ron Paul’s libertarian campaign, but I’ve become hypersensitive to the budget deficit, fed rates, the declining dollar and rising inflation. I’m seeing fundamental things in our economy that have me worried–I keep my mouth shut because I lack experience in macro economics and I don’t want to misrepresent my expertise. But when I hear “the fed issued another rate cut,” my first though now isn’t about the stock market gain, it’s about the damage we just did by deflating our dollar and widening our import/export gap.

Five years ago, Warren Buffett blew the whistle and nobody listened:

Through the spring of 2002, I had lived nearly 72 years without purchasing a foreign currency. Since then Berkshire has made significant investments in — and today holds — several currencies. I won’t give you particulars; in fact, it is largely irrelevant which currencies they are. What does matter is the underlying point: To hold other currencies is to believe that the dollar will decline.

Buffett turned out to be right:

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The RAND Report is the result of a two-year study on the broker-dealer and advisor industry done by the Securities and Exchange Commission. A few years back somebody got worried that the line between brokers and advisors was getting blurred and asked the SEC to investigate. The SEC’s response was a monster report–219 pages long in its current pre-publication form. I e-mailed it to my Kindle which made it much easier to wade through.

The broker/RIA line wasn’t only getting blurred with clients–at one point, the CFP was seriously considering relinquishing their fiduciary duty, which would have been a big step backwards in the arena of client advocacy and professional responsibility. The RAND report is about RIAs not CFPs but their conclusions probably apply to both designations.

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In Matt’s Ron Paul Endorsement, he subtly mentioned that we are printing money. After a conversation with one of my non-finance friends, it occurred to me that most people don’t realize that we keep printing money.  This friend said that he hadn’t heard about us printing money–surely that would have made the news.

In his Tough Times A’ Coming post, Matt pointed out that the Congressional Budget Office says our federal budget is unsustainable.  I think this is a real recipe for disaster, most people don’t understand how we “print” money and we are in terrible shape with our budget.   So, I decided that I should write a post on how the US government prints money and causes inflation.

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*Updated: Added Fund Raising Graph*

I’m throwing my hat in the ring for dark horse Republican presidential candidate Ron Paul. I did a post last month on Congressman Paul when he raised a record $4.3 million dollars in one day. Since then, I’ve spent a lot of time researching his platform and investigating the feasibility of some of his ideas, like eliminating the Fed, eliminating capital gains tax, and re-legalizing gold as legal tender. It’s radical, but they are legitimate ideas that may fix some of our country’s problems.

There are many reasons to like Dr. Paul. He’s the only Republican anti-war candidate. He has never voted to raise taxes, or voted for an unbalanced budget. He also voted against the Patriot Act, Military Commissions Act, and Iraq invasion. Since this is a blog for wealth managers, I’m going to focus on the fact that he is a respected economist who sits on both the Economic and Financial Services Committees. He is famous for being the only Committee member to ask tough questions of Greenspan and now Bernanke.

I’ll start with the first of two videos, an interview with Ron Paul on CNBC after he interviewed Bernanke on the latest rate cut:

Whether you agree with him or not, when is the last time you heard a presidential candidate speaking intelligently and authoritatively on economic policy?

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