THE SUNDAY TALK SHOWS TILT RIGHT

Even leaving aside Fox, the guests are skewed 58% to 42%. Click here for details.

KOREA

Andy Frank: ‘The Korea Fund you suggested in late 2004 – any thoughts on how far this goes?’

☞ It’s up 79% since then (including dividends), so the easy money has been made.

Also, its discount to net asset value – a ‘cushion’ of sorts when buying a closed-end fund like this – has shrunk from 9% to 2%. You’re still getting $1 of Korean stocks for 98 cents – a little discount. But as I’ve argued, closed-end mutual funds should sell at a discount (probably around 10%, other things being equal), because the management fees eat into the return you’d get if you owned their stocks outright. (Of course, for most of us, assembling a portfolio of Korean stocks is not practical, which is why most people don’t insist on a 10% discount and sometimes even run funds like this to a significant premium – at which point you should certainly consider selling.)

The question is, which stock market – the Korean or the U.S. – will do better going forward. I am no expert in global economics (and they don’t know, either), but I’m inclined to think that – especially when adjusted for relative strength of the two currencies – it makes sense to retain KF for the element of international diversification it gives your portfolio.

I worry that, as we rack up deficits well in excess of half a trillion dollars a year*, we are not likely to see the U.S. dollar strengthen relative to the Korean won. And as our the National Debt rises to $10 trillion by the time the White House changes hands in January 2009 ($8 trillion of that $10 trillion having been racked up by just three of our 43 presidents, Reagan, Bush, and Bush), we are boxing ourselves into an economic corner. Even today, with the debt not yet at $10 trillion and interest rates relatively low, the interest on the Debt is equivalent to 40% of all the personal income taxes we pay each year. The Republicans have set us on a course where that already scary percentage is likely to rise. And then there’s the scary degree to which consumers finance their spending by borrowing against the equity in their homes – which might not keep rising. So I think it’s never smart to keep 100% of one’s money (if one has enough money to talk in the haughty, well-heeled third person this way) in a single country’s stock market, even ours. KF could be a reasonable component of your diversification.

*Remember, the official figures generally don’t include the ‘special’ appropriations for the cost of the war and never include the $200 billion or so we’re borrowing from the Social Security Trust Fund, even though that borrowing is indisputably real.

VICE

J. Duvall: ‘I always enjoyed time spent on our family’s South Texas ranch when I was growing up. It is a great life. It is surprising many, many people aren’t killed hunting. The macho men go out to drink and hunt, shoot anything that moves. They say alcohol keeps them warm as they stalk their prey. At night they continue drinking and play poker until they pass out. I recall after one hunt, my father was sitting on one of those red Coleman ice chests and his deer rifle fell over and somehow killed the ice chest, blew a long hole all along one side. But drunk or sober they always managed to get double the hunting limit and never shot each other. It is very bad form in Texas to shoot your hunting companions.’

☞ OK, that’s not relevant to anything, and certainly not representative of all Texas hunters – but you can’t tell me it’s not colorful. I will slowly wean myself off this story, I promise.

ESTATE TAX

Paul: ‘I’d like to propose a different justification for the inheritance tax. It starts with how people get rich. My belief is that it’s through using public resources, which is not a bad thing. Bill Gates, for example, became rich by hiring tens of thousands of remarkable employees whose educations were directly or indirectly funded by the government. His stock is valuable because the government regulates (somewhat!) the stock market. His intellectual property is valuable because the government enforces his patents and copyrights. His software is standard because the government buys so much of it and everyone who works with the government needs to adopt that standard. You can make a similar case for Donald Trump, Warren Buffett, Oprah Winfrey, and, yes, Andrew Tobias. (Copyright is a very, very good thing.) It’s only possible to get wealthy through massive use of public assets. And that’s a good thing because it creates jobs, homes, technology, food supply, medicine, etc. But it’s also an unspoken obligation to continue the cycle. Bill Gates’ heirs should have no more claim on his billions when he passes than America should.’

PERSONAL SERVICE

Kathi Derevan: ‘Yesterday I needed to have some papers notarized. I went to my branch of Wells Fargo Bank, where I have been a customer for 30+ years (even in their ‘private banking department,’ for what that is worth). [Apparently, not much – A.T.] I waited in line and then told the teller that I need to have a couple of signatures notarized. He asked if they were Wells Fargo documents. No. Well, we don’t do that. Startled, I asked if he knew where I could do it. His supervisor walked over and directed me to a UPS store. I said I knew where the store was, but I had assumed my bank could help me. The supervisor turned away without speaking again.’

☞ Well, perhaps it’s time to switch to Commerce Bank if there’s a branch near you (plug, plug, conflict of interest, conflict of interest, suggested here – CBH – a few months ago). I don’t bank there myself, but I’m told they’re known for their customer service.

Have a great long weekend!

 

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