What a difference a year makes! Typically I (Tim) try to write one blog a month. This is usually enough to keep you updated about the stock market and important financial matters. Last December the news and markets were so negative, I felt like I needed to write three!
2. Pointed to a JP Morgan prediction of a significant rebound (that turned out to be accurate) in Looking for Good News, and
3. Then called it a Crisis Without a Crisis and detailed the buys we made during the pullback anticipating a rebound.
To be perfectly honest, it’s no fun watching accounts pull back like they did last year. During our Christmas Eve family get together, it was real work to put a smile on. When I try to reassure everyone with those letters, believe me, I’m writing as much to myself as I am to you.
But as you’ve seen on your statements, it paid to not panic, to take the long-term view, and to even have the guts to buy when everyone else is selling. So congratulations for a great year of investing! Let’s enjoy this nice run, but also remember, with a new year will come new challenges.
Looking ahead to 2020, we want to hear from the stock market optimists (the Bulls) and the pessimists (the Bears).
Bull Case
JP Morgan, the same strategists who called the runup this year is back at it. They see stocks 8% higher this time next year and the S&P ending 2020 at 3,400. They cite low inflation and continued low interest rates as the reason, even with uncertainty surrounding the trade war. They point out the large gains this year (about 25% year-to-date) despite the trade headline dominating the headlines.
Here’s an interesting stat: 6 times since 1990, the year following a 20% gain in stocks, the market has responded with an 18% gain on average. Will it happen a seventh time or will it be different this time?
Bear Case
Not so fast, says Ben Levisohn at Barrons.com. Recession is around the corner and no one should get too comfortable. While the economy is growing, it’s not growing enough to weather a financial shock to the economy.
He states, “Even many bulls would agree that an unexpected event that would simply ding an economy growing at 3% to 4% could force one growing at 1% to 2% into recession” – think a deepening trade war or a 2020 election result that disappoints the stock market.
Our Portfolios
To prepare for either case, we’ve gotten a little more conservative in all our accounts. In the Growth Stock portfolio, we’ve taken some gains by selling a few stocks and invested those proceeds in the more stable First Trust Short Maturity FTSM which yields 2.4%/yr. This will help cushion the next pullback and give us some ammunition to buy during the next surprise headline.
We’re also more conservative in our Moderate Low-Cost Funds portfolio by having only 60% or less in stocks right now, while we wait for a pullback in the stock market to buy the Vanguard Global Wellington Fund VGWAX.
We hope everyone has an incredible holiday! In between festivities, myself and the team will be in the office reaching out to clients and wrapping up year-end details like Required Minimum Distributions. Please get ahold of us if we can do anything for you.
This last month has reminded us of why we don’t try to predict which direction the stock market will go. October is typically the worst month of the year and we were anticipating this October would be no different. With seasonal fears, trade disputes ratcheting up, and increasing recession predictions… we hit new highs and they’re continuing to push higher as I write this!
The reason? Things are Not As Bad As Feared. We have a trade war with China that’s not escalating into something worse, an economy that does not appear to be headed for an imminent recession, low unemployment, earnings from companies that are in line with expectations, and a Federal Reserve that lowered rates again.
This has provided a much-welcomed relief rally in the market that may continue until the end of the year. This should be reflected in your October statements.
Aside from some minor tweaks that we’ll discuss in the next section, we’ll likely keep some cash in each portfolio as we await the next news cycle. Issues like the impeachment inquiry and further escalations in the trade war could give us another opportunity to put the cash to work.
Moderate Funds Portfolio
In the moderate funds portfolio, we’re rotating out of some of the existing funds and into some new funds with lower expenses. After evaluating the current funds we use, we found that Vanguard, iShares, and SPDR funds have lower internal expenses. Keeping these internal expenses low will help to increase return over time.
Growth Stock Portfolio
In the growth stock portfolio, we’ve added to a few positions hoping to get a pop on earnings. We bought more in Grand Canyon Education LOPE which reported better than expected earnings, but disappointing news about two partnerships that came to an end. The stock is down on the news, however, we still like them long-term and are hopeful they will raise 2020 guidance next quarter which should help the stock.
We also bought more of a company we’ve liked for a long time, a company we’ve described as the South American Amazon, Mercadolibre MELI. They reported a larger than expected loss this quarter as they invest heavily in marketing the Mercadolibre (similar to Amazon) and Mercadopago (similar to Paypal) names. The stock dropped and we took advantage of the opportunity. They have continued to accelerate their revenue growth now at 70% year over year. No telling what could happen in the short term but we think over 3-5 years this could be our best performer in the portfolio.
All in all, this has been a good year for all investors and we’re hopeful it’ll hold up through the holiday season.
Estate Planning and Taxes
In other news, we’ve recruited an estate planning attorney that does will and trusts, Pam Nicholson, AND a trusted CPA we’ve been using, Virginia Platten, CPA, to move into our building. If anyone is looking for either of those services, please let us know. They’ve both taken great care of the clients we’ve sent them and they are conveniently located in our building now.
If you want to discuss any of this further or have other questions about your financial situation, please don’t hesitate to contact us.
– Bruce Porter & Tim Porter, CFP®
Posted on
7 Deadly Sins of a KAISER PERMANENTE Retirement
KaiPerm Credit Union and SMB Financial have teamed up to provide 30 presentations so far across the Portland, Vancouver, and Salem KP campuses. The next presentations are below:
What You’ll Learn:
Avoiding making mistakes in retirement
How to choose a lump sum or monthly pension option
How much you should be saving
What you should be investing in
How to use Kaiser specific benefits to plan for retirement
How to avoid getting overcharged on investments
Also being offered – FREE Retirement Income Plan!
We’ll teach you how to do your own Retirement Income Plan (see below) in the presentation or, if you’d rather, we’ll do it for you – FOR FREE!
Income Plans use Kaiser specific benefits like Plan A (lump sum or monthly pension), Plan B (Kaiser contributions to Vanguard), the TSA (employee contributions to Vanguard), Senior Advantage Medical benefit, NW Perm benefits (lump sum or monthly benefits and the 401k at Fidelity), Social Security and any other investments.
November:
Monday 18thLongview 10:30-11:30am or 12:00-1:00pm
Monday 25thSalmon Creek 10:30-11:30am or 12:00-1:00pm
December:
Wednesday 4thTualatin 10:30-11:30am or 12:00-1:00pm
Wednesday 11thKPB 10:30-11:30am or 12:00-1:00pm
Monday 16thSunnyside 10:30-11:30am, 12:00-1:00pm, or 4:30-5:30
January:
Wednesday 22ndKPB 10:30-11:30am or 12:00-1:00pm
Look for the emails announcing room location, but until then, please download the pdf below…
Entering fall is always a tumultuous time in the stock market. September and October are historically the most volatile months of the year. Now that September is behind us we see that our Growth Stocks portfolio was down last month a couple of percent, but our Moderate Funds portfolio bucked the trend and ended higher by a few percent. Both are up considerably for the year.
Looking ahead to October, we have some significant financial news happening this week. China and the US are meeting AGAIN to try and hash out a trade agreement. There’s not much optimism a deal will get done so there’s significant upside to the accounts if we get a surprise compromise. If there’s no deal or no path to a deal, there will likely be some volatility as we find out what the next round of tariffs will include.
We’re handling the uncertainty by being prepared for both scenarios. We have significant cash in our portfolios to invest and take advantage in case the market drops, but if we get a surprise agreement, the accounts are mostly invested to capitalize on an upmarket. We’ll have to wait and see how the trade meetings go to determine our next steps.
Other news last week was about trade fees. The brokerage industry is now in a race to zero for stock trading fees. This industry is mostly controlled by Schwab, TD Ameritrade, Fidelity, and ETrade. They had all cut their fees to between $5-$7 per trade a few years ago, but just last week Schwab announced they are cutting their fees to $0 per stock trade.
Thankfully, TD Ameritrade followed suit, so now there are no stock trade fees for any of our clients. Hooray! These weren’t large costs because we don’t trade all that much, but it represents reduced cost to us and our clients which is always welcome. I should point out there are still mutual fund trading fees, however, these are a small portion, like < 10% of our Moderate Funds portfolio.
Since we’re starting a new quarter, earnings season is kicking off and we’re hopeful the companies of the stocks we’re investing in will have better than expected earnings to report. We also stand ready to take advantage if the market pulls back and gives us some opportunities if we get bad trade news. As always, we’ll report back at the end of the month and let you know how things turned out.
Thanks for taking the time to read! Please call or email if we can do anything for you!
Did you hear about the economist that predicted 10 of the last 5 recessions? Well, everyone’s an economist these days with the constant talk of the next dreaded recession. Today we’d like to give some perspective on the topic.
Recessions are as normal to the economy as Winter is to the weather. Every year we know the sun will be replaced with rain and heat with cold. Although a little depressing right now knowing the sun will soon be harder to come by, Winter is perfectly normal. I just need a few more weeks to finish my projects!
Recessions are a little depressing as well. When the economy slows, growth in stocks will be harder to come by. The good news is they don’t happen every year and they don’t last forever. The common definition of a recession: when the economy stops growing and starts shrinking.
Since 1950 our country has gone through 11 recessions lasting on average 11 months in length (see image). This means the sunny days in the economy darken every 6 or so years but have always been followed by more sunshine.
A few of reasons for the obsession this time around: 1) the inverted yield curve (now uninverted) which has been a predictor of recessions in the past, 2) the unusually long period of time since, and the severity of, the last recession in 2009 – which we don’t expect to repeat by the way, and 3) the uncertainty in the global economy from Europe (Germany is already in recession) to China.
The bottom line is we’re certain a recession IS coming in the future, just like I’m certain Winter is coming. The only thing we’re not certain of? Timing. I’m better at predicting the timing of Winter.
To prep for the inevitable slow down, we’ve been trimming some winners, buying investments that should hold up better in a recession and making sure we have plenty of cash to take advantage of the next pullback.
Growth Stocks
Last month we made a few trades in our more aggressive Growth Stock portfolio. We purchased additional shares of Grand Canyon Education LOPE on a headline-driven pullback and then sold once the shares came back up approximately 19%. We also sold Cooper COO, a contact lens business for a gain because we thought it was too overvalued. We used the proceeds of the Cooper sale to fund a position in Silver SLV which is up approximately 10% so far.
Moderate Funds
In the Moderate Funds portfolio, we purchased an investment in Silver SLV for everyone’s account. We bought this investment because Silver and Gold typically do well when interest rates plunge, as they have, and it also does well in uncertain times. One big buy we’d like to make if the market pulls back is in Vanguard’s Global Wellington Fund VGWAX. The Wellington funds are some of Vanguard’s best and have a good 90-year track record.
Conservative
For conservative clients, we still like the Lincoln investment that currently pays either: 3.2% for 5 years OR a gain of up to 7% if the stock market grows or a gain of 0% if the market falls. We also have options that can guarantee income in retirement for those that are interested. Please contact us in you’re interested.
Final Thought
While we do expect another recession someday, there is very little data pointing to a slow down in the next 12 months. Unemployment is near record lows, interest rates are low, and our economy is still growing around 2% per year. But when it does show up, we don’t expect to repeat the severity of 2008-9. That was an unusually deep downturn that was comparable to the wheels coming off the financial system. Instead, our expectation is for something with less declines in the accounts and less overall pain for our clients.
Thank you for taking the time to read. Please let us know if there’s anything we can do to help.
July statements of investment accounts are the best we’ve seen! The S&P 500 stock market peaked on July 26th at approximately 3,027, which is an all-time high. Hooray! However, since then, the market has pulled back some 6%, half of that just today. Can you guess the reason? Trump’s trade war with China.
The President didn’t like the direction of the trade talks last week so he slapped a few more tariffs on our Chinese trading partners until it gets worked out. China’s response? They lowered/manipulated their currency more than ever this morning, which the stock market sees as an escalation in the trade conflict.
This never-ending trade drama continues to be a thorn in the side of the economy and stock market. Bloomberg reported that households are paying $850 more per year on goods from China due to existing tariffs and $350 more will be paid on the tariffs just announced.
Peter Navarro, trade adviser to the President, says it’s “false” that US consumers are bearing the cost. Navarro went on to say on Sunday that China must stop doing these “Seven Deadly Sins” before a new trade agreement can be reached and the tariffs are lifted on Chinese goods imported into our nation.
“Stop stealing our intellectual property, stop forcing technology transfers, stop hacking our computers, stop dumping into our markets and putting our companies out of business, stop state-owned enterprises from heavy subsidies, stop the [importation of] fentanyl [and] stop the currency manipulation,” Navarro told host Chris Wallace on “Fox News Sunday.”
All these issues would be great to resolve, but it may be wishful thinking to think we can tackle them all. We’re concerned the Chinese culture values pride and honor so much so that it won’t allow the leaders of China to be pushed around by our nation into a deal. Even if they wanted to make a deal, they couldn’t because they would end up looking weak and lose the respect of their people.
So, regardless of your opinion of the trade war, we may be living in a world of higher-priced Chinese products until either we get a different direction in the White House, or our companies move manufacturing outside of China.
Portfolios
Portfolios have only had minor changes in the last few months as markets have headed up. Now that we’ve reached a peak and started another decline this last week, we’re interested once again in investing more cash.
Just last week, in our Growth Stock portfolio, we took a scary headline that pushed the online college Grand Canyon Education LOPE down 15% and used that opportunity to buy more shares. We expect this stock to head higher again, and once it does, we will sell the extra shares we purchased.
The Moderate Funds portfolio still has cash from selling the FIrst Trust Internet Fund FDN a few months ago and we look forward to putting that money back to work in a similar fund once we get a more significant pullback.
Summer
Summer has been busy for all of us here as I’m sure it’s been for everyone. Bruce has been busy traveling to Canada in June to visit relatives and to Denali, Alaska last month.
This last weekend marks Jeremiah’s third camping trip this summer with THREE KIDS UNDER THREE YEARS OLD! He’s also looking forward to a trip to California later this summer.
I (Tim) spent some time at the Coast Guard driving boats in Newport and also at a leadership training class in Seattle. My family and I spent a week in Sunriver and I also took my two oldest kids to Three Fingered Jack on a two-night backpacking trip a week ago. My daughter Lucy caught her first fish and my son honed his skills as a seasoned fisherman.
The end of this week Bruce will be flying us to Ashland, OR to hang out with a few hundred attorneys at the annual Oregon Trial Lawyers Association Convention. We’ve been managing investments for the 1200 member association going on 4 years now.
Later in August/September, we’ll continue to crank out our “7 Sins of Retirement Planning” presentations in Salem, Vancouver, and Eugene with Kaiser Permanente. We’ve done over 20 presentations now and all have been very well received and resulted in a significant number of people using us to help them plan their retirement. We’re continually amazed at how genuinely great the people at Kaiser are. We’re thankful for the opportunity through KaiPerm Credit Union to get to work with them.
Please let us know if there’s anything we can do for you. Regardless of where we’re at, we’ll have people in the office to take calls and respond to emails.
What a difference a few months make. Last fall I dropped off our toddler Lucy, at preschool, nervous she wouldn’t make it through the first day without melting down. Today, she ended preschool as a young girl, brave, ready to tackle elementary school, and BIG! Look at the difference in the picture.
This is also how it’s been with the stock market over the same time period. Last fall we were nervous the trade-war with China would ruin everything! Then, we watched the meltdown at the end of last year followed by an incredible recovery as the nervousness subsided. Now, the market is heading down again for THE VERY SAME REASON!
It reminds me of something I read recently. Tim Keller explained a Proverb and had this to say about Wisdom, “Wisdom invites people to learn from her, but she does not do so from the ivory tower, but outside, in the public square and the public places of the city…Wisdom cannot be conveyed by TED talks or executive briefings….Wisdom comes from experience.”
Armed with her latest experience, Lucy is wiser and will do better in kindergarten next year. In the same way, we are wiser and ready to take advantage of this never-ending cycle of trade drama… and random tweets.
Market News
Every month so far this year has seen positive returns, until May. With today’s tweet about new tariffs on Mexico, the market is now down over 6% for the month. Fair warning for your next statement! Year-to-date, however, the stock market is still positive approximately 10.7%.
From our perspective, the main reason the market’s down is because of a failed effort to close a trade deal with China and now rising concerns about other tariff threats on countries closer to home. Other than trade, the economy still appears to be doing ok.
The good news is we sold a few investments that had gains as the market started to get volatile earlier in the month. For people in the Moderate Funds portfolio, we sold First Trust Technology Fund FDN. That fund had a significant gain in the 6 months we owned it and we reinvested that money in short-term bonds.
For the Growth Stock portfolio, we sold 3 stocks: Hasbro HAS, IQVIA Holding IQV, and Facebook FB. We sold these to take some profits, but also to raise cash to be able to reinvest if the market continues to pull back.
The stock market is now down enough where we’re interested in beginning to buy again. Just today I added a small amount to computer chip maker Nvidia NVDA in the Growth portfolio. Also, we’re getting ready to buy Microsoft MSFT as a replacement for Facebook if it drops below $120/share. In the Moderate portfolio, we’re considering buying that same fund, First Trust Tech Fund FDN, so we can try to ride it higher once again. We’d like to see it down a little further before we pull the trigger.
Three events were watching over June and July will determine if the stock market heads lower or bounces back up: the G20 summit, Federal Reserve discussions, and Q2 earnings.
The G20 summit is coming up later in June and the meeting there between the US and China will give us an indication if trade talks will resume between the two countries.
After raising rates starting Dec 16, 2015, the Federal Reserve will be meeting this month to determine if it’s time to begin to CUT rates now. Typically, the Fed cuts rates to spur growth when they see a slowing economy. The general consensus is that they will cut rates at least once this year.
Finally, Q2 earnings reporting will begin in July and that will give us an indication if companies are seeing trouble ahead from tariffs or the rest of the world, which are struggling to grow their economies considerably more than the U.S.
No need to worry if the pullback continues. We have cash available in every portfolio and have our shopping list ready to buy as the market gives us opportunities. Our plan is to buy when the market is approximately 10% down from its top, again at 15% down, and then at 20% down. It worked out well at the end of last year and we’ll look to do the same this year.
I apologize for the long letter! We’ll try and shorten it up and have a few more stories next month:)
SMB News
Another quick reminder, in June some of us will be out. I (Tim) will be doing my 3 weeks (usually only 2 weeks) at the Coast Guard, so I’ll be out most the month, but available by email and back in the office in July. Regardless, we’ll make sure there’s someone in to catch the phones and to handle any issues that come up. Please let us know if we can do anything for you and enjoy the nice weather!
– Bruce Porter & Tim Porter, CFP®
Disclosure: Information on this website is for educational purposes only and not intended as investment planning or advice. There is a risk in investing. Account values can go down and the principal can be lost. Not every investment is appropriate for every investor. Any guarantees mentioned are offered by specific financial institutions and not SMB Financial. Some of the information may be out of date. Please consult your own financial advisor or SMB Financial before acting on any of the information. SMB Financial is affiliated with SMB Financial Services, Inc, a registered investment advisor registered with the SEC. The advisor may not transact business in states where it is not registered, excluded or exempted from registration. Individualized responses to persons that involve either the effecting of transaction in securities or the rendering of personalized investment advice for compensation, will not be made without registration or exemption.
It’s nice to see the sun shine again, on us and especially on the accounts last month. The stock markets are now at their previous highs as fears of a sudden slowdown appear to be in the rearview mirror, but a few concerns still remain.
This afternoon Fed Chairman Jerome Powell stated he was unwilling to cut interest rates at this time. That didn’t help the stock market today because so many were hoping for a rate cut. China trade concerns still linger, but now there’s a report of a deal coming by next Friday. That would be welcome news. Finally, there are concerns related to the 2020 election.
With Biden now officially running there’s no shortage of news of the 20 Democrats campaigning to knock Trump out of the Whitehouse. ONLY eighteen months to go!!! In years past, we’ve downplayed the presidential election as not representing a great impact on the economy or the stock market, but this time feels different.
An example of this is the talk about Healthcare, and specifically the “Medicare for All” position being proposed among several of the Democratic candidates. This has hammered some of the healthcare stocks we own while the general stock market has trended higher.
One of our favorite analysts, Matthew Coffina, CFA from Morningstar, had this to say about the Medicare for All issue, “There are good arguments on both sides of the debate as to whether the U.S. would be better off with a single-payer system. However, as an investor, I’m less interested in what should happen in theory than in what is likely to happen in practice. While Medicare for All would be a potentially catastrophic outcome for private health insurers like Anthem, I still think it’s a very low-probability risk.”
He goes on to say that the biggest impediment to Medicare for All is the cost, citing one “conservative” estimate at $32 Trillion over the next 10 years. To fund that would require doubling the personal income and payroll taxes. While employers would get to eliminate the cost of health care, it’s unclear if the savings would flow to paychecks of employees to help offset higher taxes.
He also mentions that Medicare rates are far below commercial rates and that would bring insurers, hospitals, doctors, pharmaceuticals, etc., out of the woodwork to spend heavily on advertising and lobbying against Medicare for All.
Those powerful interests would be joined by the entire Republican party, which has little incentive to support this type of change. So, Medicare for All probably doesn’t stand a chance unless Democrats win the Presidency, choose a far left candidate like Bernie Sanders in the primary, change the filibuster rules in the Senate, and convince a decent number of moderate Democrats from conservative-leaning states to pass a Medicare for All bill.
Not impossible, but improbable.
In any event, this speculation has been the reason some of the healthcare stocks we all own in our stock portfolio (United Health UNH and Anthem ANTM) have dipped. We actually think this selloff is a great opportunity to buy and will buy more in all accounts if they continue to fall.
SMB News
We’ll all be around the office for the month of May, but starting in June some of us will be out. I (Tim) will be doing my 3 weeks (usually only 2 weeks) at the Coast Guard, so I’ll be out most the month, but available by email and back in the office in July. Regardless, we’ll make sure there’s someone in to catch the phones and to handle any issues that come up. Please let us know if we can do anything for you and enjoy the nice weather!
It’s definitely tax time now. Tax professionals are buried and we’re all holding our breath to see what our tax liability will be. Some are paying less this year but we’re hearing of some highly-paid employees who are getting stuck with higher tax bills. Sorry about that if that’s you.
We need to address a specific tax-related issue for our current clients but we’ll save that riveting discussion for the end of the blog. Before we get to that we thought we’d pass along a little new information we’ve discovered recently about annuities.
Typically, we’ve shied away from annuities with income guarantees because of these poor qualities: terrible investment selection, long surrender charges, and high fees.
After many many years, the insurance companies have finally put their heads together and are starting to address these concerns. I’ve been researching three insurance companies recently, Lincoln, Jackson and Nationwide, and am coming to some interesting conclusions. See below for my thoughts (meant to be educational only):
Investment Selection – Annuities in the past have given only a handful of options. Jackson and Nationwide are offering over 100 funds to choose from now. A big step in the right direction.
Surrender Charges – Because the annuities in the past paid the advisor a large commission, they felt the need to “lockup” the money with charges if a client left early. These new fee-based annuities don’t pay advisors a commission. Therefore, there’s no need for any surrender charge at all on some, and low charges on others.
High Fees – Some income guarantees that annuities offer charge in excess of 3% per year in fees. Contrast that with our average fee of 1% that’s charged on our investment accounts. I’ve calculated these new annuitie’s fees to be as low as 1.5% for Lincoln, and as high as 2.5% per year for Jackson. Still on the higher end, but clients are getting guaranteed income for life for the extra cost.
These are not ideal for every client and should only be used for a portion of anyone’s total portfolio. However, they are starting to get interesting. Contact us if you’d like any more education on these.
Clients with K-1s
Now for tax time! For many years we owned certain stocks that sent our clients a tax form called a K-1. We sold all those for most people last year so we wouldn’t have to continue to deal with the confusion of this additional form. So, fortunately, this is the last time we’ll have to deal with them.
This year TD Ameritrade is sending a letter to all clients that owned any of these stocks in an IRA in 2018. To paraphrase the letter, TD is asking all clients to mail their K-1s to them, so they can determine if an additional form needs to be filed with the IRS. I don’t want to contradict TD Ameritrade and I’m not a tax advisor, so keep that in mind, but to our knowledge, this extra form has never been needed with any client we’ve researched in all the years we’ve owned these.
With that in mind, here are some options on how to proceed:
You can certainly follow TD’s instructions and send the K-1s to them if you have them. That is the safest option.
If you don’t have the K-1s but would like some assurance that once again a form doesn’t need to be filed for you and no tax paid, Jeremiah can look up most K-1s to determine if TD needs to file the form for you (UBTI > $1,000 on all K1s found in the red box of the image). We checked five clients yesterday and no one was even close. It takes about 10 minutes to look each client up and Jeremiah will be in the office Tuesday ready to do this.
Wait for TD Ameritrade to do the work to determine who needs to have the form filed. It is their responsibility to file the form and they have access to these K-1s just like we do.
In the future, we won’t have this issue because we sold the K-1 producing companies in all accounts, with one or two exceptions.
The financial news is giving us a break right now and the stock market and most accounts have been drifting back to where they were in October. We’re thankful for that, but as always, we await the next dramatic headline!
The snow is falling here in Portland this week and stocks are rising! Hooray! After a tough end of the year for 2018, we’re getting some relief as the stock market posted its best January since 1987. With that kind of start, we feel like it’s a great time to catch our breath and prepare for the next chapter.
We’ve already started getting calls on taxes, so we know that’s on everyone’s mind. TD Ameritrade has confirmed all tax info should be out no later than Feb 13th. If for some reason you don’t get that in the mail or lose it, please call us and we can resend it to you after that date.
The other tax news is the new tax law taking effect this year. The changes in the law will yield different results for everyone, but it appears the main benefactors of the tax cut were small business owners and corporations. The corporate tax cut was in part why the stock market was positive in 2017.
Those individuals paying a little more in taxes this year will be those who had a significant amount of itemized deductions in the past. Those have been limited to just a handful now: local taxes capped at $10,000, charitable gifts, and mortgage interest are the big ones that have been left.
With taxes in mind, we thought we’d share a tax tip for the charitable givers and a few other financial planning tips that you may want to consider:
Charitable Giving
If you are the charitable type and know you’ll be giving to a charity this year, there is something you can do to maximize your deduction – gift those dollars from an IRA.
Because the new standard deduction is $24,000 joint and $12,000 single (more if the tax payers are over 65), many people will have a hard time reducing taxes from charitable gifts. When you gift directly from your IRA, you are guaranteed to get the deduction because the distribution from the IRA will not be taxable.
This will have the effect of raising your standard deduction. Call us if you find yourself in this situation so we can help you make a good decision.
Review Risk
After such a bumpy end to the year, now is a good time to review risk tolerances to see if you would rather be more conservative, or more aggressive. No one likes to see accounts go down, but when it causes you to lose sleep it may be time for an adjustment.
Update Beneficiary Designations
This is an easy task that’s often overlooked. When that happens, it can have devastating consequences. We’d be happy to report what your current beneficiaries are and then prepare paperwork to update if necessary.
Organize Your Documents
We’ve recently been making a push to get one of our Allevi-8 Books in everyone’s hand. We’ve heard recently this book has been the catalyst people have needed to get their financial situation together so they can Allevi-8 The Hassle of organizing their estate for their loved ones. They’re available on Amazon.com (search: Allevi-8) now, but free for our clients. If you haven’t received one, please call us so we can get one to you.
SMB Financial News
This year we’ve been settling into our new office in Tigard, where we’ve been for just over a year now. We especially enjoy rolling the Traeger grill out of our garage door and grilling salmon and tri-tip for client lunches. We did this probably 20 times last year. If you haven’t had the chance to come in for lunch, please ask! We love to do it.
Our most recent hire, Jeremiah Forrister, has been with us about a year and a half now and is doing a fantastic job! I’m not sure how we functioned without him. He’s been the lead on administration details and he’s also a licensed advisor looking to grow his own book of clients.
He and his wife also just celebrated their third child, Willow Forrister, last August.
Please congratulate him next time you call in if you haven’t already!
Brian Bradley has now been a part of SMB for four and a half years and he continues to become a vital part of the operations of the firm. Brian has been extremely helpful in putting together complicated financial plans and helping me tackle high level operational tasks that come up. This has made him an invaluable asset to the team.
One thing Brian is celebrating this year is NO MORE KIDS! Brian had his fourth girl, Opal Bradley, a year and half ago and he’s looking forward to keeping the family that size.
Bruce has had a busy year! On September 16, 2018 Bruce married Maiza Fatureto, who is originally from Brazil. They were married in Ashland, OR with a group of friends from Bruce’s flying club. Please congratulate Bruce when you talk with him.
Bruce has also begun to sell some of his half of the business to me (Tim). Ownership now stands at 60% Tim/40% Bruce. With that change Bruce will be in the office less, but has no plans to retire.
Finally, Holly and I (Tim) haven’t had many life changing events this year, but the family is still growing like a weed. Henry (7) is in first grade now and is a champion at math. Lucy (5) started preschool and amazed Holly and I with how quickly and easily she took to it. Penny is now two and a half and is the most gregarious of the three. Our favorite part of watching Penny is when she tries to boss her two older siblings around. It’s hilarious.
The business really has been the thing that’s kept me busy this year. As I step further into the lead role, we’ve been blessed with multiple partnerships that have been incredibly fruitful for us.
We continue to manage money for the Oregon Trial Lawyers Association, and we’re setting up retirement plans for the 1,100 attorneys and firms that are a part of that group. We started a relationship with KaiPerm Credit Union this year and are handling their member’s financial planning and investing needs. That’s led to meetings at each Kaiser Permanente facility here in town, where we do the 7 Deadly Sins of Retirement presentation and have begun to meet with retiring Kaiser employees looking for help with their finances.
Finally, after winning the Enlisted Person of the Year award for the Coast Guard last year, I received a handwritten letter (above) from a retired Admiral to see if I could help the Coast Guard manage their $30 million portfolio! This is a phenomenal opportunity and I’m still working to see how I can assist them, but just the request was such an honor. I’ll keep everyone posted if I make any headway on this.
Needless to say, this has been a busy year and we are so excited for the future of our firm. Thank you for being with us and helping make it so special. We have the best clients of any firm and we love the great relationship we get to have with each one of you.
As always, please let us know if there’s anything we can help you with.
