Many families never talk about money (or sex), seeing the subjects as taboo for discussion between the generations. Schools have taken on the responsibility of teaching sex (although without teaching any of the morals, because that would be judgemental, teaching religion, or old-fashioned), but there is still very little taught in the area of personal finance. Some students – generally the ones who the schools decide won’t be able to understand algebra, and are therefore relegated to “consumer math” – may get some of the very basics on the mechanics of handling money. They get very little good advice on budgeting and investing, however. In fact, they are often taught how to do things like use credit cards and take out consumer loans – the things that many should really avoid.
Our family was somewhat odd in that we were investors, or at least my father was. I remember from the age of nine or ten seeing him at his desk in the corner of our livingroom, a desk lamp shining on the sheets of graph paper where he would dutifully write down the closing prices for his stocks each day. There were no websites to give you stock quotes. He would use the stock tables in the C section of The Wall Street Journal which had listings for the NYSE, the NASDAQ, the American Exchange, and bonds and other investments. He would write down the prices on one sheet and then graph them on the next, making a series of dots for the closing prices with a line connecting them. He would use a four-color ball point pen to plot four stocks on each sheet of paper, each in its own color. Each sheet of graph paper would last for about three months before he would need to start a new sheet.
I got interested in what he was doing and started asking questions. Eventually, at the age of 12, I decided that I wanted to invest the money in my savings account – a grand total of $225 – in stocks and asked him to help me. At that time a savings account would routinely pay 5%, which I thought was the standard rate that such accounts would always pay. I didn’t know that inflation had gotten way out of control under the Carter Administration and that the Federal Reserve has raised interbank interest rates to 18% or more to try to kill the beast that was devouring savings.
My father pulled out his thick binder that held his Value Line Investment Survey as I had seen him do many times before. We went to the back of the index section that had the stocks ranked 1 and 2 for Timeliness, a proprietary measure Value Line uses to rate how they believe stocks will do over the next year. Those with a “1″ are expected to do the best, followed by those with a “2″and so on, down to the 5′s that are expected to lag the pack. He set the criteria to find stocks that had a 1 or 2 for Timeliness and at least a 3 for Safety, another Value Line measure. We searched through and settled on Tucson Electric Power, a utility that provided power for Tucson, Arizona.
The next day he called his broker and placed the order for 15 shares of TEP at $15 per share. I remember how excited I was when the order executed and I was a stockholder. We got a certificate sent to our home and I admired the elaborate art work with a goddess holding bolts of lightning in her hands. It indicated that I was the proud owner of fifteen shares of stock. I folded the certificate and kept it in my top dresser drawer for years until my father decided to take it to the safe deposit box.
My stock did very well, growing from $15 per share to over $75 per share over the next few years. I signed up for the dividend reinvestment program and sent in additional money from time to time to buy more shares directly through the plan, brokerage-fee free. I lost track of the prices I paid and my cost basis, making it so that I could never sell the shares since then I wouldn’t know what my capital gain would be for taxes. I didn’t really care because I would get a dividend check every three months anyway so long as I held onto the shares.
Eventually the company got involved in a scandal. Allegedly the executives were using the revenues from the utility operations to fund highly speculative ventures that looked good on paper but whose true performance was being masked. The price of the stock tumbled quickly after the news came out, falling back to about $20 per share. When I went to college, coincidentally in Tucson, there was a special shareholder meeting to enact a measure that would dilute the shares by issuing a great deal of additional shares in order to pay off creditors. I attended the meeting and heard the complaints from longterm shareholders who held far more shares than me. I held on anyway, partly because I didn’t know my cost basis, and saw the shares drop to less than $2 per share. The dividend was eliminated for several years, but it was eventually restored and grew over the years to a respectable sum.
Along the way through my middle school and high school days I acquired shares in additional companies. Starting from eighth grade I needed to file tax forms. I never actually owed anything, but apparently I was above the threshold where I needed to file anyway just to prove to the IRS that I didn’t owe anything. My family paid an accountant to prepare the forms, so we ended up paying out a couple of hundred dollars each year to file forms that did nothing other than prove we didn’t need to pay taxes. That is one reason I’m a strong advocate of the Fair Tax.
As I got older my father and mother started putting money for my college and my early adult life into a brokerage account for me. My father owned a large number of shares of Citizen Utilities that he transferred to me a little each year under the gift tax exemption. I then sold these shares off and bought other stocks with the money, developing a portfolio of several stocks. This ended up being a bad idea since I then got his cost basis for the shares, which was very low, and therefore owed quite a bit in capital gains taxes when I sold the shares. Actually this might not have been a bad strategy overall since my tax rate was lower than his (I think capital gains were taxed like ordinary income at the time), but it resulted in a net transfer of less money to me. In any case, I was able to pay for college expenses using the portfolio rather than calling home for money each time I needed it.
I also remember in grade school and high school sitting with my father each evening at 5:00 when the Nightly Business Report would come on PBS. We would watch the show for the first 15 minutes as they went over the movements of the Dow and other indices for the day, the closing prices of several large and widely held stocks, and the biggest gainers and losers. Once in a while I would see a stock that I owned rise or fall dramatically. If it did not show up on that segment of the show I would need to wait for the next day to read about the closing prices in The Wall Street Journal from the stock tables.
On Saturdays my father would get his issue of Barrons magazine, the weekly sister publication of The Journal. I enjoyed reading the column by Alan Ableson. He always had a very witty column that lead the magazine, called “Up and Down Wall Street,” that reviewed the happenings for the week. I usually had a dictionary nearby because he would use large words not found in normal newspapers that are dumbed down to a fifth grade level. I found when studying for the SAT that my dad knew every vocabulary word on the list, probably from forty years of reading Barrons. The column was always very depressing; Ableson was the eternal pessimist who could find the dark cloud in any silver lining. I can remember very few times when he didn’t think the market was going to hell in a handbasket. Still, he wrote in such a humorous way you would laugh through the tears.
Sadly my father developed dementia in his later years and became unable to maintain his portfolio. He also became very concerned that he had lost all of his money, apparently a symptom of the disease since I checked on the value of his accounts (for the first time in my life) and saw that he was in fact doing fine. My mother was also unable to manage things, being used to having her husband just take care of the finances, so I obtained power of attorney over the accounts and began to manage them for my parents. At one point I got my own subscription to Value Line but would still periodically flip thorough his old binder when I was home for a visit.
My father eventually suffered a fall, went into a nursing home, and then passed away a couple of years later. My mother subsequently passed about seven years after him. This left me in the oldest generation of our family when I was just in my late thirties. I was certainly able to take care of myself and my own finances by that point, but I miss the connections to our family history that went with them as they left this earth. There are many questions I never asked and now have no way to do so.
About a year ago I was flipping through the channels on a Monday afternoon and saw that the Nightly Business Report was coming on. The white-haired host that I remember was gone, replaced by a tag team of anchors. Still, they followed the familiar format of the show for the most part and I remembered sitting there in our old family room with my father.
Then last year, after not reading Barrons for a while, I picked up a copy and wondered if Alan Ableson was still writing his witty “Up and Down Wall Street” column. I was greeted by a series of remembrances from other columnists from Barrons and elsewhere and an article on the passing of Alan Ableson, who apparently had died during the previous week. I was amazed that he had written that column for so many years, right up to his death and several years after the passing of my father.
With Ableson’s passing, one of the last connections I had with my father was lost. Barrons still has an “Up and Down Wall Street” column, but it lacks Ableson’s humor and eternal pessimism. I still think of my father though each time I pull out my thick binder with The Value Live Investment Survey to find new stock picks. They now have an online version, but I find I like to leaf through the pages in the print edition and look at the price trends. I also like to go to the tables with the high Timeliness stocks in the back even though I rarely find a stock that way anymore.
Just this last week, I received a notice that the holding company which Tucson Electric Power had become, Unisource Energy, had been bought out in an all cash deal and that I need to send in my certificates to get paid for the shares. I guess my plan to keep the shares until I died and enjoy the quarterly dividends all the while so that I would never need to find the cost basis has been foiled. I will probably need to simply set it at zero for many of the shares and pay the extra, unowed taxes since I can’t prove a higher cost basis for many of the shares and it would cost more to track down the basis that I would save.
There is provision in the paperwork that the transfer company sent with the notice of the sale where you can say the certificate is lost, sign a statement to that effect, and forgo$1.80 per share to insure against a certificate being sent in later by another party. Perhaps I’ll do that so that I can keep the certificate I have for 15 shares, purchased at $15 per share. That piece of paper with the goddess holding the lightning bolts is worth a lot more to me than the $27 dollars or so I would give up by holding onto it. It brings back the warm summer afternoon where I searched through Value Line with my father when he was still in his investing prime.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.