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Is J&J stock a buy? Parking in NYC
BY WARREN BOROSON
NEWJERSEYNEWSROOM.COM
BOROSON ON MONEY
Agatha Christie should be living at this hour. The creator of Hercule Poirot could concoct a terrific detective story about a bunch of greedy Americans who did in their old, wealthy relatives in order to inherit stuff from them.
In the year 2010.
Why 2010?
Because there's no Federal estate tax this year. The offspring could inherit millions upon millions — without the assets they inherit shrinking the least bit owing to Federal estate taxes. Stocks and bonds, cash, houses, jewelry, cars, and so forth.
It's a fluke, of course. Next year, 2011, the Federal estate tax will return. There will then be an exemption of $1 million before Federal estate taxes kick in.
Even so, lots of New Jerseyans may fall prey to the new rule. Seven times as many as in 2009, when the exemption was $3.5 million. After all, many houses owned by New Jerseyans, in case you hadn't noticed, are worth $1 million and up.
No, you can't take it with you. But you CAN do your utmost to see that Uncle Sam keeps his cotton-picking hands off some of the assets you want your heirs to receive.
Let's assume that you and your spouse together have an estate worth $2 million.
One of the first things to do, advises Stuart M. Gladstone, is to make a will. Each spouse might leave everything to the other spouse. And each spouse, ideally, has $1 million of that $2 million in his or her name.
So, next year, if either spouse kicks the bucket, that spouse's $1 million will go to the other spouse — undiminished by Federal estate taxes. Because of the $1 million exemption. Otherwise, the estate would have been subject to enormous estate taxes. (The new tax rate will be 55% for estates above $3 million and 60% for estates above $10 million.)
Of course, New Jersey doesn't want to be left out in the cold. We have an inheritance tax — but close relatives are exempt. Spouse, lineal descendants or ascendants (yes, there is such a word), stepchildren. For more distant relationships, the tax goes up along with the value of the estate, and could be as much as 16% of what the assets were worth at the date of the death.
New Jersey also has an estate tax, with an exemption of $675,000.
When the second spouse dies, perhaps with $2 million, half of that might be subject to estate taxes. (Assuming the exemption amount has remained the same.)
What to do? The surviving spouse can give away some of his or her money — to reduce the estate. Via outright gifts or trusts. Someone can give $13,000 a year to different people without triggering gift taxes.
The gift-tax rate is 35% in 2010, but there's an exemption of $1 million. Someone can make a gift to anyone at all — it doesn't have to go to a close relative. (My address is...)
There are all sorts of other estate-planning techniques designed to keep Uncle Sam's hands off your money. Grantor retained annuity trusts, qualified personal residence trusts, sales to defective grantor trusts, life insurance trusts, charitable lead annuity trusts.
Other changes: higher taxes next year. Long-term capital gains rates return from 15% to 20%; the top income-tax rate returns to 39.6% from 35%.
Gladstone, who's with the firm of Brach Eichler in Roseland, is one of the state's leading authorities on estate planning.
In a talk he gave recently, Gladstone mentioned that some wealthy people don't want to take advantage of beneficial estate-reducing steps — like gifting money to their heirs. Why? The explanation they may give: "I really like being very rich."
Gladstone is a Fellow of the American College of Trust and Estate Counsel. He has been selected as a Best Lawyer and a New Jersey Super Lawyer 2010.
***
J&J: Sell? Buy? Hold?
What to do about Johnson & Johnson, which has been fading?
David G. Dietze, JD, CFA, CFP, president and chief investment strategist at Point View Financial Services in Summit, thinks this may be a good time to buy.
"We are favorably disposed to J&J," he tells me. "It's got world-class management, a well diversified portfolio of businesses in growth areas of the economy, and a global reach.
"Valuations are attractive. For example, the stock's price to earnings multiple is 12.5 relative to the Standard & Poor's 15.7 and its own 16.2 average over the last five years.
"While you wait for capital appreciation, you can enjoy the above average dividend payout, as the stock now boasts a yield of 3.4% versus the S&P's 2.0% average dividend yield.
"J&J is set to buy back some $10 billion worth of its shares, signaling that management sees the shares as undervalued.
"Its business is well diversified over three key sectors: pharma, medical devices and diagnostics, and consumer over-the-counter products. This diversification and focus helps insulate the company from economic volatility, yet these sectors are poised to grow faster than the overall economy as our nation ages.
"Drawbacks? If you are looking for a pure pharma play, there are cheaper world-class companies, like Pfizer and Merck.
"J&J has recently had to recall certain over-the-counter products due to manufacturing defects; while the financial damage is manageable, the reputational tarnish is worrisome.
"The company, of course, is also exposed to regulatory reform and potential controls on its pricing.
"On the pharma front, like all the drug companies, it is exposed to patent expirations. In the device area, its drug eluting stent sales are sliding. And its anemia drug, Procrit, has been linked to side-effects."
***
Before Parking in NYC...
Have you ever looked for a parking garage in New York City, entered one — then walked past a much cheaper place nearby?
Many parking garages don't prominently post their fees. You pull into one — and discover it's $50 for a few hours. And it's not easy to back out then — although I've done it.
My conclusion is: The nearest, most convenient garage almost always charges the most. So, drive around.
Things that have also happened to me:
- Months after parking at a garage in New York, I got a traffic summons in the mail. The attendants had parked my car on the street, not in the garage — apparently because the garage was full. By that time, I didn't remember which garage it was.
- Another time, I left my cellphone in the car. A month later, I found a $42 phone call to Miami on my bill.
- One evening, I returned to the garage — and there was no one there! The door was closed; I knocked and knocked. Finally the attendant returned from his dinner — 30 minutes later.
Anyway, here's good news. Before driving to New York, you can find which garage near where you're going charges the least. You can even make a reservation. I tried it once — and saved $15. And felt real, real proud of myself.
Readers may send financial questions to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
ALSO BY WARREN BOROSON
What it's really like to be retired
Terrific mutual funds — and ghastly ones
How to invest successfully — year after year
You need a lot more than just a will to protect your assets
Good reasons to sell your stocks after a market decline
Investors: Should you sell, buy or sit still?
Consumer Reports: Because you don't always get what you pay for
Where to invest ... if you're worried
Exciting new mutual funds open in New Jersey
A financial planner who is especially good for widows
Johnson & Johnson: A favorite stock of Runnymede Capital
Retirement advice: Tough, straight talk from a retired stock-market analyst
Investment advice: What to buy — and not buy — now
How much money do you need to retire comfortably (part two)?
How much money do you need to retire in N.J.?
How to bypass brokers and buy stocks directly
ETFs: Exchange traded funds are a hot investment
How to buy stocks really, really cheap through DRIPs
A look at the (difficult) economic year ahead
Where to invest your cash right now in 2010
Identifying the worst mistakes investors make
What if you only had one year left to live?
The very best New Jersey muni funds
Is it time to dump New Jersey munis?
A ringing defense of Wall Street's American bankers
Index funds aren't perfect, but ...
Is there a hedge fund in your future?
New Jersey couple considers moving to find a job
Really helpful New Year's financial resolutions
Economist Gary Shilling warns of hard times ahead
How to invest in Israeli stocks
New Jersey high schools will have Muriel Siebert to thank for financial education
Good advice about your 401(k) plan
