Pimco bondmeister Bill Gross may hate U.S. Treasuries these days, but according to just-released financial disclosure forms, President Obama and First Lady Michelle Obama are rolling in Treasury bills and notes. The First Couple also own plenty of stocks, relying almost entirely on the Vanguard Index 500 mutual fund.
The Obamas reported total financial assets valued between $2.8 million and $11.8 million in 2010. That wide range is a function of the reporting rules that allow public figures to disclose their assets within broad bands, such as $100,001-$250,000 or $1 million-$5 million.
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Beyond the obvious interesting (OK, voyeuristic) aspect of peeking into the President's personal finances, there are actually some pretty good money tips to glean from the Obamas' financial disclosure:
We know the Fed has to raise rates ... eventually. Ben Bernanke might not be ready to raise the federal funds rate just yet, but the Obamas sure seem to be anticipating bond rates heading higher (and thus prices taking a fall). They report having between $1.1 million-$5.25 million invested in Treasury bills and another $1 million to $5 million in Treasury notes. T-bills have a maximum maturity of one year, while T-notes have maturities between 2 and 10 years. There were no longer-term bond holdings listed. Maybe it's just easier and patriotic to stick with Treasuries when you're the Obamas, but if your household taxable income was north of $1.3 million in 2010, as the Obamas' was, you should probably give tax-exempt municipal bonds a look see.
Even presidents need a personal emergency fund. The Obamas reported having between $250,001-$500,000 sitting in a checking account at JP Morgan Chase Private Client Asset Management account. They also stated that they earned less than $1,000 in interest on their checking account. Even if we assume they are closer to the $250,000 side of that range, that amount of interest sounds incredibly low. If the President and First Lady followed the advice of MoneyWatch's Allan Roth, they could have earned triple that amount on their cash.
I may be the leader of the free world, but when it comes to stocks, I invest passively. The Obamas report having between $200,000-$450,000 invested in the Vanguard 500 Index Fund. Clearly the Obamas are hip to cost controls within their own financial lives. The annual expense ratio they pay is 0.06 percent, since with more than $10,000 invested, they qualify for Vanguard's lowest cost Admiral share class. That means they spend about 1 percentage point less a year than do investors in the average stock fund, a huge advantage when you consider that plenty of folks are telling us we'll be lucky to earn 5 or 6 percent a year from stocks in the coming years. Too bad neither the Obama administration nor the folks on Capitol Hill have seen their way to make it law that every 401(k) must offer participants at least one low-cost index fund.
By comparison, Vice President Joe Biden, and his wife Jill are in the active camp when it comes to investing. Their financial disclosure form shows investments valued at between $1,000 and $15,000 in the following funds: Invesco VI Global Health fund, Invesco VI International Growth fund, Dreyfus IP Technology Growth, Janus Aspen Enterprise, Janus Aspen fund, MFS VIT Utilities, Rydex SGI VT Mid Cap Growth, and Rydex SGI VT Small Cap Value. The Bidens also own U.S. and global high yield bonds funds, as well as several whole life insurance policies.
I'm with the Obamas on this one. Indexing, at least as the core of your investment portfolio, is hard to argue against.
I make more from book royalties than from my day job. The president continues to collect royalties from his two mega best-selling books. The financial disclosure form says he pocketed between $1 million and $5 million last year in book royalties for "Dreams from My Father," and between $100,001 to $1 million for "Audacity of Hope" royalties. We know from the Obamas' 2010 tax return the exact royalty haul was $1.57 million. That's nearly four times what he receives for his day job of being President of the United States. In addition to royalties, the Obamas disclosed another $225,000 for a book advance for a yet-to-be published kid-friendly version of "Dreams," and an additional $133,334 advance for his 2010 book "Of Thee I Sing: A Letter to My Daughters" (the Obamas intend to donate all after-tax proceeds from "Of Thee I Sing" to the Fisher House Foundation for a scholarship fund for children of soldiers who were killed or disabled). The Obamas also collected between $1,000 and $2,500 in book royalties from the president's late mother's book, "Surviving Against the Odds: Village Industry in Indonesia." Don't have a New York Times best-seller in you? Well, maybe you can generate some ancillary income from a hobby.
Never turn down a tax break for retirement investing. The president has taken advantage of his self-employed contractor status (as a book author) to invest in a SEP-IRA. According to his latest disclosure, his SEP has $100,000-$250,000 invested in Treasury bills.
We're fine using target funds for Sasha and Malia's 529 college savings accounts. The Obamas report having between $100,000-$250,000 invested for each daughter in the Bright Directions College Savings 529 Plan for the state of Illinois. Assuming that money is eventually used for qualified college expenses, the Obamas will owe no tax on the withdrawals. It's one of the more valuable family tax breaks that has no income limit.The Bright Directions plan, which is run by Oppenheimer, is rated "above average" by Morningstar, though it didn't crack the list of lowest-cost 529s. (Remember, there's no rule you must invest in your state's plan.)
According to the Obamas' financial disclosure, both accounts are invested in the age-based portfolio for 9-12 year olds. The Obamas didn't have to disclose if they opted for the Aggressive, Growth, or Conservative asset allocation within those target funds. With Malia turning 13 this summer, the Obamas will want to make sure they switch her portfolio to the asset allocation model for 13-16 year-olds that will shift more money from stocks to bonds as college grows nearer.
The country has a debt problem, but we're personally debt free. The Bidens reported six different liabilities, with the largest debt a home equity line of credit for $100,000-$250,000 that they took out in 2005. The Obamas, by comparison, had nothing to list under the Liabilities section of the disclosure form. If only our country's balance sheet was so pristine.