Broker Check

August 31, 2015

The Team That Madoff Built

          Meet the Mets! Before they made their long awaited return to the post season, the Mets endured six consecutive losing seasons – tied with the Houston Astros for the longest streak in the major leagues.  The Mets got caught in the Bernie Madoff ponzi scheme and lost almost 500 million dollars from investments and claw backs by the Madoff Trustee.  Faced with these financial constraints that essentially prevented them from spending their way out of the rut by buying expensive free agents, the Mets had no choice but to rebuild a winning team the old-fashioned way: by developing young talent through their farm system.

          It is never a speedy process, and the team’s fans were asked to show nearly a decade’s worth of patience.  The Mets currently have 15 homegrown players; they either drafted or originally signed on their 25 man roster.

Deducting Tickets to Sporting Events

          Amounts paid under an accountable plan for tickets to a sporting event must meet several conditions, in addition to the usual accountable plan requirements, to be deductible as a business expense by the employer.  For an employer to claim a deduction for tickets purchased to a sporting event, Regulation 1.274-2(c) requires the sporting event be directly related to the conduct of business.  This generally requires that the employee actively engage in a business meeting, negotiations, discussions, or other bona fide business transactions during the event on behalf of the employer.

           Substantial distractions at the event may lead the IRS to conclude no business transactions could be conducted there.  Although it might be able to be argued otherwise, general seating at a sporting event often is not conducive to conducting business transactions due to the volume of the audience and the distraction of the event.  Therefore, it is recommended that employees either use a more secluded location without the distraction of general seating or consider documenting business transactions that occurred before or after the sporting event.  Journal of Accountancy September 2015 p. 76.

Will History Repeat or Rhyme?

          We try not to comment on political events, but in the case of the Iranian Agreement, we are making an exception.  This is not being written for or against any political party’s opinion but rather as an American and your financial advisor because in this advisor’s opinion this Agreement is a GAMECHANGER, as the events in 1936 were, and in school, I believe, not enough emphasis was put on discussing the importance of the events of 1936.

          After World War I, Germany’s military forces were reduced to insignificance by the Treaty of Versailles in 1919.  As part of the Treaty, the industrialized Rhineland which included the Ruhr and Saar valleys, were demilitarized which precluded Germany from manufacturing weapons for war.  In 1933, Adolf Hitler seized full power in Germany and by 1936 marched into the Rhineland and remilitarized the area and had the industrial might of Germany directed toward making tanks, planes and other weapons for war.  Hitler, who in his book Mein Kampf declared his intention for world domination, the superiority of the Aryan race and his intention to cleanse Germany of inferior peoples, made good his promises.

          At the time, the largest military force in the world was the French army, which could have stopped Hitler.  But, the French, together with the British led by Prime Minister Baldwin, having both been exhausted by casualty losses in World War I declared that they were unwilling to put any soldiers in harms’ way and stated Germany was entitled to control these lands as THEY WERE GERMAN LANDS ANYWAY.  Two years later, Germany absorbed Austria and Czechoslovakia, and in 1939, invaded Poland leading to World War II and the death of 60,000,000 people.  After the war, the German High Command said that had Britain and France stood up to Hitler when he remilitarized the Rhineland, the German High Command would have removed him from power (and maybe the 60,000,000 lives would have been saved!)

          The Agreement with Iran and the 6 World Powers guarantees that Iran can have nuclear weapons and intercontinental ballistic missiles and other delivery systems if they merely wait 15 years in return for allegedly agreeing not to pursue creating nuclear weapons before then.  The Agreement also does not provide any way to verify that the Iranians are adhering to their side of the bargain.  Additionally, Iran will have all economic sanctions removed which are crippling their economy and will have returned to them billions of dollars of seized assets held in these countries.

          President Obama, who is clearly affected and traumatized by the 6900 military deaths the U.S. has incurred since 9/11, has stated that Iran is ENTITLED TO HAVE NUCLEAR WEAPONS and when they have them, THEY WILL BECOME RESPONSIBLE MEMBERS OF THE WORLD COMMUNITY because the lack of these weapons forces the Iranians to behave as they do, inciting terrorism around the world and having installed proxy governments in Iraq, Lebanon, Yemen, and Syria.

          The Iranians, being Shiites, have declared death to Sunnis and have battled Sunnis for 1300 years, have declared an intention to recreate the Ancient Persian empire, have declared that Israel will cease to exist within 25 years and regularly confront the U.S. on the battlefield through their proxies and declare Death to America, the Great Satan.

          The Saudis have previously contracted with Pakistan to purchase nuclear bombs to confront the Iranians.  The Sunni Saudis, Egyptians, and Turks have also asked the U.S. to start a nuclear program for them.  This will result in a nuclear militarized Middle East.  This, in a sector of the world where suicide bombing is an accepted tactic.

Will History Repeat or Rhyme?

          Why is this important to your portfolio?  Do you think there will be economic consequences if the Iranians bomb Saudi oil fields and eliminate Saudi oil production?  If the Iranians encourage the Shiite minority in Saudi Arabia to sabotage the oil fields and thereby reduce oil production?  Do you think the increased instability in the Middle East will affect stock markets (and your retirement portfolios?)?

          Finally, when the U.S. invaded Iraq in 1992, the U.S. did not face a nuclear deterrent from Iraq because the Israelis had bombed the Osirak nuclear reactor several years prior and had faced worldwide condemnation for that act.  But, in hindsight, the lives of American soldiers were spared because they did not have to face a nuclear threat.  In the future, we will not have that luxury.

          The U.S. is unwilling to confront the Iranians now and declare the Israelis as “terrorists” for not following the American lead.  How many will die in the future because of this Agreement.
           As always, if you have any questions about these or any other matters, do not hesitate to call us.

           Remember, We’re Here For You!