Clements flames out spectacularly

As reported earlier, Jonathan Clements, formerly the world's greatest personal finance writer, took a job shilling for Citi's mass-affluent brokerage service:

Now I'm no journalist (see previous post), but I'm pretty sure when someone gives up a job as a columnist for the Wall Street Journal to take what amounts to a glorified PR job for one of the least consumer-friendly banks on the planet, it's all about the money.

So guess what happens when the wheels come off at Citi?

But that was then. In April 2008, I left to join a new Citi venture. (What follows are my views -- not those of Citigroup Inc.) For the past year, I thought I was involved in building a wonderful, customer-friendly business that minimizes conflicts of interest, favors index funds, and helps everyday Americans with their entire financial lives.

It seems that I was sadly mistaken. If the rebuke from Washington is any guide, I have apparently played an integral part in the collapse of the global economy and the financial markets -- and I must be punished.

Should the House bill become law, my bonus will be taxed at up to 90% once my adjusted gross income hits $250,000. The tax will apply to employees of those companies, like Citi, that have received more than $5 billion from the government's financial rescue program. As you might imagine, this is a tad perplexing, given that I've never been involved in lending to subprime mortgage borrowers and, as far as I know, nor have any of the folks I now work with.

In fact, many of the Wall Street executives responsible for today's mess have long since moved on -- and, unless they receive a bonus in 2009, will escape the 90% surtax. Unfair? Indeed, it is. The House bill is akin to, say, penalizing the earnings of today's politicians because their predecessors failed to save us from the current economic debacle.

I realize readers won't be shedding tears -- $250,000 is a decent chunk of change (though, trust me, it doesn't buy that great a lifestyle in New York). Still, the bill could cause financial headaches. Some of my colleagues have already spent their bonus or put a big chunk into their 401(k) plan, so finding the money to pay the 90% tax will be a struggle. Some have total incomes that don't come close to $250,000 -- but they breach that level once their spouse's salary and their investment income are included. The bill could also hurt the economy, encouraging banks to cut back on lending, so they can return their bailout money and protect employees from the surtax.

Yes, that's right, Clements is now afraid that he might get caught up in the special tax on bonuses paid by bailed out banks. You can read his entire rant, courtesy of the Journal.

There were three bits to this tear-stained plea for sympathy that particularly caught my eye:

• "I was involved in building a wonderful, customer-friendly business that minimizes conflicts of interest, favors index funds, and helps everyday Americans with their entire financial lives" Yes, that's right. I went to work for the "special" part of CitiGroup, where they don't charge exorbitant fees, impose default rates on credit cards, or pay terrible rates on savings.
• " I've never been involved in lending to subprime mortgage borrowers and, as far as I know, nor have any of the folks I now work with" Nope. No bad actors in my part of the bank. Must have been some other guy. Face it Jon; you went to work for organized crime. Just because you don't actually have to bury the bodies doesn't give you clean hands.
• "$250,000 is a decent chunk of change (though, trust me, it doesn't buy that great a lifestyle in New York" Yes, that's right. $250,000 isn't really enough to enjoy a good life in New York.

You have to feel sorry for Clements. He thought he was going to have his cake (lots of money) and eat it too (still help ordinary people do well with their money). He kind of flamed out when it turned out he was going to get neither.

Blogging: Why do I write it? Why do you read it?

Exhibitionism.
Voyeurism.

I mean seriously, why would anyone choose to read a blog as opposed to actual, mainstream journalism?

When an actual journalist writes about financial topics, he or she has the experience, education, training, and resources to actually provide accurate information. When a blogger writes about finance -- or anything else -- you get a lot of...blogging.

So why do people read blogs? Because we're curious about people. What they think, how much money they have, what they spend it on. Are they like us?

Why do people write blogs? Because they think they're special. Smarter. Richer. More clever. They're hopelessly gratified when people read their blogs.

Blogging is a way to superficially partake of the rewards earned by actual writers, without needing to do much (any?) of the work.

Anger Issues

Everybody knows that Herbert Hoover and the Republicans caused the great depression when, in the face of a stock market panic and a recession they tightened spending and became fixated on balancing the budget.

Everybody knows (except those same pesky Republicans) that now, since we're so much smarter than we were in 1932, that we're not going to make the same mistakes, not going to cheap out on stimulus, not going to worry about deficit while the house is ON FIRE!

Except that we're all so damned angry about the high-living thieves that got us into this mess that we're happy to cut off our own noses to keep the crooks at AIG from collecting a few million bucks.

It's an odd turn of events that now Barack Obama is trying to tamp down this anger, while in another, most unexpected place, it appears to be blazing out of control:

But the real problem with this plan is that it won’t work. Yes, troubled assets may be somewhat undervalued. But the fact is that financial executives literally bet their banks on the belief that there was no housing bubble, and the related belief that unprecedented levels of household debt were no problem. They lost that bet. And no amount of financial hocus-pocus — for that is what the Geithner plan amounts to — will change that fact.

Paul Krugman, the voice of reason, seems to be so blinded by his anger at the ineptitude on deceit of the banking class, that the only solution he can think of is to actually bankrupt or nationalize these banks.

Yeah sure, the bankers blew it. They really, really blew it. Let's make sure that everybody knows it. That everybody suffers for it.

Maybe the Geithner plan won't work. Maybe it will wind up being a windful for PIMCO (I kind of hope so) and the canniest of the hedge fund operators. Maybe it will be a massive, opaque subsidy for the banks. But what's the alternative?

Are you a real millionaire?

Is your net worth more than a million dollars? Technically, that makes you a millionaire.

But are you the right kind of millionaire? A household net worth of a million dollars or more places you at about the 90th percentile of American households.

But as Wikipedia says, some millionaires are more equal than others:

Recently, there has been some controversy over how to correctly determine a person's status as a millionaire. One of the two most commonly used measurements is net worth, which counts the total value of all property owned by a household minus the household's debts. According to this definition, a household owning an $800k home, $50k of furnishings, two cars worth $60k, a $60k retirement savings account, $45k in mutual funds, and a $325k vacation home with a $250k mortgage, $40k in car loans, and $25k in credit card debt would be worth $1,025,000 and every individual in this household would thus be a millionaire. However, according to the net financial assets measurement used for some specific applications (such as evaluating an investor's expected tolerance for risk for stockbroker ethics), equity in one's principal residence is excluded, as are lifestyle assets, such as the car and furniture. Therefore the above example household would only have net financial assets of $80,000. Another term used is "net investable assets" or working capital. These practitioners may use the term "millionaire" to mean somebody who is free to invest a million units of currency through them as broker. For similar reasons, those who market goods, services, and investments to high net worth individuals are careful to specify a net worth "not counting principal residence." Many other specific definitions may be used, but essentially a millionaire is still somebody in a household with net worth of one million units.

Personally, I prefer the simple net worth definition. Your net worth, regardless of how it is apportioned, reflects your ability to generate, retain, and grow wealth.

I was reminded of this question, of the siren song of having a million dollars in "investable assets," by the impending bankruptcy of Thornburg Mortgage. I wrote about Thornburg a few years ago:

The financial services industry, at least at the high end, isn't really interested in your net worth but your 'investable assets'. (In fact, a common tactic of financial advisers, when confronted with a client or prospective client with a lot of worth tied up in his primary residence, is to suggest that the client take out an interest-only mortgage to free up the value of the house to be managed by the advisor. There's even a mortgage company, Thornburg Mortgage, that makes a specialty of lending through high-end financial advisers. More on this rant at a later date.)

And more recently, when they got into trouble. And now they are days from going belly-up, one more casualty of American optimism married to naked capitalist greed.

The conventional "wisdom", especially among financial advisers, has always been that affluent households should take out as much mortgage debt as they can service with their income, up to the limit for interest deductions of $1,000,000. The loan proceeds should then be invested, because anybody can get a better return on that money than the cost of the mortgage, especially since the government is subsidizing the loan interest. You know, stocks always go up 10% year, houses have never lost value on a national basis year-over-year, all that stuff.

Of course this hasn't worked out so well lately: The house that you secured the mortgage with is worth less, meaning you can't sell or refinance. That high income that you used to service the mortgage has eroded or disappeared. And those investments that you made with the borrowed money have soured.

But it's worked out well for the advisers, who collect their management fees on those "investable assets", never mind where they came from.

Bernanke trying to push a rope up a hill?

My buddy C at work is refinancing his mortgage. Thanks to Ben's plan to have the Fed buy up long Treasuries and Fannie/Freddie debt, 30-year rates are now below 5%.

I asked my friend if he was taking more money out with the refinance. He said that even though the appraisal had come in 30% above what he expected, he was putting money into his house and reducing his mortgage balance. He cited concerns about his job situation as the reason for wanting a smaller monthly payment.

I thought this was a nice in-a-nutshell account of why loose money isn't making much of a difference in consumer spending. There are clearly three things required:

• Banks gotta lend
• Folks gotta borrow
• Folks gotta spend

I think we're all set on the first one, but convincing people that now's a good time to borrow and spend? That's a tough one.

Got it

I have been struggling (ask Mrs. Bluebird) for quite a while with Wal-Mart. I know all the reasons not to shop there, the labor practices, globalization, environmental trashage, etc. But I keep finding myself compelled to return, despite never actually having had a positive experience there.

I needed some diapers and some wipes for the 2-year old, and some AA batteries because the carbon monoxide detector was squawking. There's a Wal-Mart very nearly on my way home.

In the parking lot, a confused looking woman is backing out a parking space. There is a shopping cart attached to the mangled front end of her car. I try to help her, but she roars off, dislodging the cart as she goes. The store smells, not bad exactly, but odd. Some combination of floor wax, overcooked popcorn, and sweat. In the back of the store I find that they do not have size 4 Huggies. The do have 3 different size boxes of wipers, but only the smaller two have marked prices. I lug the bigger box to the price scanner to see if it has the lowest unit price. It does, so it goes into the cart. No diapers, but we can hold out for a few more days. Off to the battery rack. They have expensive batteries (Duracell or Energizer) and cheap batteries (Ray-O-Vac). But there are no AA-sized cheap batteries. I really do need the batteries, since if I don't get the CO detector working, tonight will be the night that the furnace malfunctions and we all die. By now, the smell, the endless stream of slack-jawed, apparently mentally ill patrons, and the prospect of waiting at the registers overwhelms me. I leave.

And off to Target I head, where they have exactly what I want for prices as good or better than Wal-Mart, the store is clean, and the people, well, normal.

I keep thinking -- there's stuff I need, like batteries and diapers and laundry detergent; why not buy it at Wal-Mart and save a little money? Can't I rely on Wal-Mart to provide me these products at the best price? And it's right on the way home!

It turns out for a couple of years now, I personally have been in Wal-Mart's cross-hairs. In 2007, the company revamped its marketing to segment its customers into three groups:

In their first interviews since a management shuffle last month, John Fleming, the new chief merchandising officer, and Stephen Quinn, the new chief marketing officer, said that after a year of intense research, the discount giant is seeing its 200 million customers as belonging to three groups.

There are “brand aspirationals” (people with low incomes who are obsessed with names like KitchenAid), “price-sensitive affluents” (wealthier shoppers who love deals), and “value-price shoppers” (who like low prices and cannot afford much more).

The new categories are significant because for the first time, Wal-Mart thinks it finally understands not just how people shop at its stores, but why they shop the way they do.

And that middle one? The price-sensitive affluents? That's me. Now it all makes sense. The insatiable tug of the big W, followed by the abject despair of actually being there. Check out this hilarious PowerPoint done for Wal-Mart by the best marketing minds of Bentonville.

We start with the overall customer segmentation at Wal-Mart:


Step 1, narrow our focus to the three groups. I guess it doesn't make a lot of sense to market to the Conscientious Objectors in the audience.


Now let's look at our three target groups for a moment. At the bottom, the Price Value Shopper:



Probably most Wal-Mart employees fall into this segment.

Next rung up, the Brand Aspirationals. If I've got the right brand I'll know I've made it (who knew that people aspired to own Kitchen-Aid?)




And then there's me. And they've got me right where they want me. Make me feel smart and savvy and I'll open my wallet for you.



And how best to reach us emotionally needy price-sensitive affluents?



I feel so liberated!

Tigers everywhere

So what do you do when every asset class looks like a bad bet:

• Stocks are still overvalued, with a trailing 10-year P/E of more than 10 (a typical bottom has the ratio closer to 6)
• Government bonds are headed for massive price declines due to huge federal deficits.
• Corporate bonds lie in a minefield littered with upcoming ratings downgrades, defaults, and outright bankruptcies.
• Cash is paying real rates of less than zero, and most forecasts for resurgent inflation in years to come, as we pay off those pesky budget deficits.
• Real-estate remains far from the bottom, with both residential and commercial defaults and foreclosures on the rise.
  

So I'm asking, what do you do?

The missing link

Those titans of capitalism, the editorial page editors at the Wall Street Journal, fulminated at length this morning on the subject of AIG:

President Obama joined yesterday in the clamor of outrage at AIG for paying some $165 million in contractually obligated employee bonuses. He and the rest of the political class thus neatly deflected attention from the larger outrage, which is the five-month Beltway cover-up over who benefited most from the AIG bailout.

Taxpayers have already put up $173 billion, or more than a thousand times the amount of those bonuses, to fund the government's AIG "rescue." This federal takeover, never approved by AIG shareholders, uses the firm as a conduit to bail out other institutions. After months of government stonewalling, on Sunday night AIG officially acknowledged where most of the taxpayer funds have been going.

Much like Claude Rains, they are shocked -- shocked -- to discover that the US Treasury failed to do much of a job keeping track of AIG or what they did with their hundreds of billions in bailout bucks. In particular, they find it unseemly that Goldman Sachs has huge amounts of this money.

Since September 16, AIG has sent $120 billion in cash, collateral and other payouts to banks, municipal governments and other derivative counterparties around the world. This includes at least $20 billion to European banks. The list also includes American charity cases like Goldman Sachs, which received at least $13 billion. This comes after months of claims by Goldman that all of its AIG bets were adequately hedged and that it needed no "bailout." Why take $13 billion then? This needless cover-up is one reason Americans are getting angrier as they wonder if Washington is lying to them about these bailouts.

Of course they omit any mention of who was running the Treasury at the time: Ex-Goldman Sachs CEO Hank Paulson. An innocent oversight, I'm sure.

Feng Shui at the mall

...still hoping for a return to mindless consumption at the local Barnes & Noble...

Buyer's Strike?

I've always had a deeply ambivalent relationship with stuff. I love stuff, computers, cameras, cars, tools, toys, clothes, bikes, books, all of it. I love to shop for it, to buy it, to own it. I also hate stuff. I hate being manipulated by people who sell stuff, I hate spending money on stuff, I hate having to buy stuff to keep my stuff in, and I hate tripping over stuff.

Now seems like a great time to cut back on stuff. Job is uncertain, investments in the tank, etc.

And it may even be fashionable:

Carol Morgan, who teaches law at the University of Georgia and whose husband has a private law practice, said she felt a responsibility to cut needless spending. “That is probably something that is a prudent thing to do in any event, but particularly now I see it as the right thing, as the moral thing to do,” she said, adding that she also hoped to increase her charitable giving. “Before, extravagance and opulence was the aspiration, and if we can replace that with a desire to live more simply — replace that with time with family, or time for spirituality — what a positive outcome to a very negative situation.”

That's what I want. To cut needless spending. And I'm not alone:

The firewall

I'm turning 50 next week, and I work in a field and an industry that has been hard hit by layoffs of late. I'm at the top of my profession, and consequently I make a pretty good salary.

Which means if I'm laid off, it may be a while before I'm working again, and when I do work again, it will likely be for a lower wage.

So what is standing between my family and financial ruin?

• Emergency cash: $55,000 (laddered 6-month CDs and money market)
• Taxable mutual funds, stocks, etc: $5,000
• Unemployment benefits: $41,477 (maximum Mass. benefit times 59 weeks)

That's a total of $101,477. Assuming that Hedonic Adjustment world headquarters requires about $5,000 per month to keep the lights on, that's 20 months.

And that's long enough that I can sleep at night.
__________________________________
A note on the unemployment benefit. I have assumed that I will get the maximum weekly benefit of $628 (less than half my current weekly wage), plus $50 in dependency allowance, plus an extra $25 from the stimulus. With the currently approved extensions, as long as I get sacked before July 1, unemployment benefits last for 59 weeks. Assuming the state unemployment fund doesn't go broke.

Should she walk away?

From the Globe's Real Estate blog (yeah, I know, I trashed it before), a question about whether "Sarah" should walk away from her Marlborough starter castle, now that the reality of living in Marlborough has sunk in.

For the purposes of this post, we shall just call her “Sarah.’’ So Sarah, a marketing executive, and her husband, who works in the high-tech industry, shelled out $370,000 for a three bed, two bath home in 2004 in a new subdivision, just as prices in the Boston area were starting to surge into the stratosphere.

But now Sarah and her husband are full of regrets about their decision to buy a house in Marlborough, where it turns out they are just not happy. The school system is only mediocre, in their view. Both are tired of long commutes to work in Boston, which chews up 40 hours a week of their collective time as a couple.

But with real estate values crashing down all around them, that’s not an option. Foreclosures have begun to pop up in their neighborhood, dragging down prices. A house of the model Sarah and her husband paid $370,000 recently sold for just $229,000 at a foreclosure auction.

I’ll let Sarah describe how she has come to explore what just a few years ago would have seemed unthinkable to her.

“We feel stuck, and helpless even though we did everything right. We are desperate. We really don't think our house will be worth anything in the $300K range ever again, and therefore regardless of when we sell it whether it be now or 7 years from now, we'd have to take a loss.

So our thinking is that if we have to take a loss at some point, why not take the loss now rather than later? We both do not like living in Marlborough, and are OK with losing our equity but to have to lose our equity as well as shell out over 100K out of our own pockets is too much to shallow.”

I used to live in Marlborough, and I certainly have never wanted to move back. I guess it's a reminder not to get swept away by a shiny new prospective purchase.

Flying the flag, more or less, at Wal-Mart

What the Heck is Going On?

Auto sales in February drop 50% year-on-year. We call this 'pent-up undemand'.

Six posts in the space of an hour? On Tuesday nights I go to the library instead of going home.

If you watch no other video tonight, watch this one. Joseph Stiglitz on banks and bankers. An excerpt:

"We exported our deregulatory philosophy; we exported our toxic mortgages - and we thank the rest of the world for buying all our garbage, because if we hadn't, our downturn would be much worse – and now we are exporting our recession, but that simply highlights the fact that we have to look at these problems from a global perspective," he said.

"The system in which the dollar is the reserve currency is a system that has long been recognized to be unsustainable in the long run."

"Part of the problem that the world is facing today is this problem of inequality, but again unless we are very careful, some of the remedies that we are proposing, that are going on now in the advanced industrial countries may exacerbate the problem of inequality."

"We are bailing out American banks, and more accurately, we are bailing out American bankers."

"Fortunately, many of the developing economies did not follow the advice of the United States with respect to deregulation."

"They didn't liberalize their capital markets, they didn't liberalize their financial markets, and so many of them are very thankful that they didn't listen to the American Secretary of the Treasury when he came there and yelled at them for reforms, and the result of that is their financial system is in much better shape."

Oh it feels good to get this all off my chest!

Cheaping Out on Ink Cartridges

Last year I got so disgusted with the crappy Macintosh drivers that HP provided for my multifunction printer, I threw it out. I had a couple of unused ink cartridges left. I took them over to Staples to see if I could return them for credit (did I mention that I save my old credit card receipts like forever?)

Well they gave me my money back, and with that $50 I bought a brand new multifunction printer from Canon. A really nice one, actually. It had an original price of $299, but it was on sale for $100 and there was a $50 mail-in rebate.

Naturally this printer uses coded ink cartridges -- when the chip says they're toast, they're toast. You can't refill them, and you can't get them from anybody but Canon. So, 200 pages worth of Star Wars coloring book art from the internet later, the little "Ink Low" light comes on.

I take the used cartridges down to Staples (they give you $3 credit per cartridge, although they pay out quarterly). I'm thinking, "fair's fair, I'll get the rebate and buy the new ink here." It turns out that they're out of this kind of ink, so I buy some printer paper with my rebate and go shopping for ink (after noting the Staples price).

A little bit of poking reveals that Amazon, of all places, has the best price anywhere -- 30% less than Staples, free shipping, and no sales tax (of course I'll be paying that myself next year).

So that's the maximal cheap-out solution: Buy the ink online at a discount and cash in the empties at Staples. Sweet.

Suddenly Taxing the Rich is OK

It was in the Journal, so it must be true:

WASHINGTON -- President Barack Obama enjoys widespread backing from a frightened American public for his ambitious, front-loaded agenda, a new poll shows.

He is more popular than ever, Americans are hopeful about his leadership, and opposition Republicans are getting drubbed in public opinion, the new Wall Street Journal/NBC News poll finds.

In general, there seems to be an eerie lack of complaining about President Obama's plan to finance his agenda of social programs with tax increases on families earning in excess of $250,000. A Democrat who tried to float a plan like this four years ago would have been pilloried from all sides.

What's happened?

When times were flush, home prices rising, 401(k) plans swelling, we all thought we had a shot at being rich. And it was because we were smart, hard-working, virtuous Americans. And the last thing we wanted was to think that the tax man was going to meet us at the dock when our ship came in.

But now, everything is running away from us. The money is gone, and the worst thing is, there's nothing we can do about it. Get laid off nowadays? No more just hopping over to Monster.com for a quick 15% salary boost. Easy money in real estate?

Being rich is out of reach, and the rich aren't "us" any more, they're "them". So let's hit them up for some cash. Besides, chances are they caused this mess in the first place.

Or, if you're feeling brave, read this one:

So now, at least in Saturday's New York Times, we are in a depression -- maybe not a "great" one, but one that will do for now. This means that unemployment could go over 10 percent and the housing catastrophe will deepen and some major banks will become wards of the government. Europe is scared and Japan is sullen and Russia, which needs $70 oil to break even, is hurting at near $40. This is a very bad time.

A depression, if it amounts to that, is not just an economic crisis. It's a historical mugging. Those of us who have been accustomed to exercising control of our lives are about to undergo an awfully frightening experience. This will hit the young particularly hard. If you asked almost any of them over the last 20 years or so why they did not read a newspaper or, really, care about the news at all, the answer was that news was irrelevant to their lives. It did not matter to them that what was happening in Washington or London or even Baghdad.

Stupidest Personal Finance Column Ever

Courtesy of the Boston Globe:

Regardless of your income, obtaining a significant amount of personal wealth is much easier than most people think. Although winning this week’s Mega Millions jackpot sounds enticing, it is not going to happen. The way to become wealthy is to continually set aside a small amount of money and let it grow. With the help of compounding interest, one is almost guaranteed to become a millionaire using this method. The reason most of us do not succeed using this method of generating wealth is that it takes years and persistent sacrifice. Instead we want instant wealth, something which is very difficult to obtain.

Last week the Governor of Massachusetts proposed raising the gasoline tax. He assured us that it will only cost us an additional cup of coffee every week. Although this may seem like a minor sacrifice, let us consider the cost to a driver over his lifetime.

A friend of mine’s son just received his driver’s license. Let’s call him Winston. I estimate that a cup of coffee costs $2.50 and will go up by three percent each year due to inflation. Assume that Winston does not have to pay the additional $2.50 in gasoline tax per week, and instead sets this money aside into an account earning a ten percent annual return. Over the 60 years or so that Winston drives his car, he will amass approximately $611,000, or well on his way to becoming a millionaire.

I would say that the only thing more unlikely than winning Mass Millions is finding an investment that will pay 10% per year for the next 60 years. The level of cluelessness embodied in this post, coupled with the incoherent sniping about Deval Patrick's proposed gas tax, is simply stunning.

And I would post a comment to that effect, except that the comments link is broken. Oh right. Another round of buyouts must have happened.

Mass Business Supports Tax Hike. On Someone Else

An unholy alliance of Massachusetts business groups and the Massachusetts Taxpayers Foundation are lining up behind the gas tax increase, except they think it should be bigger. Clearly, business is suffering the effects of the Massachusetts infrastructure breakdown (in most towns inside 495 you cannot expand your business without ponying up to improve nearby roads and intersections). And getting their workers to foot the bill in the form of higher gas taxes works great!

So Where did the $3,000,000 Go?

You'll need to be a subscriber for this one, but in At Merrill, Thinning Herd of Brokers Carries On, the Journal talks about Merrill's efforts to retain its high-production brokers. One sample failure:

In one week in late January, Merrill lost several dozen brokers, including a father, son and daughter team whose eldest member, Joel Danishefsky, joined Merrill in 1961. The trio generated $3 million in annual revenue.

So where did that money come from, and where did it go? Well, clearly Merrill customers paid the money, in the form of either brokerage commissions or, more likely these days, a management or wrap fee. Probably a third to a half of the money was returned to the three brokers in the form of commissions and other compensation and the rest was retained by Merrill, and their new masters at Bank of America.

It's easy to see why Merrill wants to hang on to these folks. What's harder to figure out, is why their customers keep forking over this kind of money when the could almost certainly get better returns by simply buying low-cost index funds.