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Ready to Break Free from Being an Employee?

Welcome to the first edition of The Independent, our new monthly newsletter dedicated to providing Sacramento-area financial advisors with timely and cutting-edge wealth management industry-specific news, content, and information that focuses on the benefits and considerations associated with independence.

Of all the moves made by financial advisors in 2019 – according to industry recruiter Diamond Consultants – only 16% were wirehouse-to-wirehouse transitions. A full 38% chose quasi-independence, and a remarkable 46% went the route of full independence. Wealth and financial advisors know it, and each of the major Wall Street wirehouses do as well. Independence is no longer a trend, but a full-blown movement:

After spending 18 years at a major Wall Street wirehouse, we have been “unshackled” and are fully independent here at Towerpoint Wealth for almost three years now. Releasing The Independent represents another step in the leadership position we have taken in the greater Sacramento-area, educating the financial advisor community on the many facets of becoming independent, as well as managing and operating an independent wealth management practice. And, we are always looking to meet advisors and teams looking to explore independence, and firms looking to gain scale via M&A.

Recognizing that time is valuable and content is king, we will source only the most topical, useful, and interesting stories associated with being a financial advisor in Sacramento for you to peruse once a month.

In the inaugural edition of The Independent you will find:

  • Podcast: Go Independent Without Building It All Yourself
  • Anywhere But Here: Why Wirehouse Advisors Jump to Other Channels
  • Potential Pay Cuts Abound in Wirehouse 2020 Comp Plans
  • Merrill Lynch’s Carrot-and-Stick Grid Cuts Pay for 33% of its Advisors
  • As Wirehouses Change, the Advisor is No Longer King
  • Wells Fargo Doubles Minimum Requirement for Account Fee Waiver
  • The Legal Risks of Failing to Disclose Up-Front Bonuses
  • SEC Charges Sacramento-area Financial Adviser and Radio Host Keith Springer with Fraud

As you know, if it was easy being a financial advisor, everybody would do it, because it is truly a great job. But, understanding how difficult it is to manage our clients, our practices, our emotions, our employers (if you are a “W-2er”), and our professional options, we aim to have The Independent be a small but consistent resource in your busy lives.

We encourage you to forward The Independent to any colleagues of yours who would enjoy or benefit from it, and also encourage you to connect with us on social media – we would like to hear what is on your mind!

  • Please click the “thumbs up” icon on our homepage to join us our community on Facebook:
  • Click HERE to connect with us on LinkedIn 
  • Click HERE to follow us on Twitter 
  • Click HERE to follow us on Instagram 

Finally, if you have feedback or suggestions regarding other interesting local or national topics, please email us at info@towerpointwealth.com. We look forward to being a resource for you and getting to know you better.

Joseph Eschleman, President
Towerpoint Wealth, LLC
Sacramento, CA
Est. 2017

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Can You Keep Your Poise and Tune Out the Noise?

The drumbeat of unnecessary, repetitive, and extraneous information and news (read: noise) will always be a constant part of our lives. The challenge is to define and identify what information is truly meaningful, and what is false or useless, and then how to deposit it into our personal knowledge bank. Finally, and we believe most importantly, is the pursuit and application of wisdom, or the ability to think and act using our knowledge, insight, understanding, and common sense, growing slowly with experience over time.

Instead of being distracted, worried, and reactionary, one of our central goals at Towerpoint Wealth is to help our clients be more confident and purposefulinvestors, which ultimately leads you to gain greater economic peace-of-mind. However, as we are all now acutely aware, the global public health and economic uncertainty surrounding the coronavirus/COVID-19 disease makes the attainment of this economic peace-of-mind a much more difficult endeavor.

Reducing and even flat-out ignoring noise is a difficult thing to do, as it oftentimes is a battle against deeply-entrenched habits. Our smartphones, our friends, and the media are regularly our greatest economic enemies, and at Towerpoint Wealth, we believe that a large part of our legal fiduciary obligation to each of our clients is to help you properly tune out. The discipline needed to filter is one of the primary determinants along the path to successfully building and protecting longer-term wealth. And as we continually nurture our client relationships at TPW, we not only set the expectation that we will be explicitly objective about the importance (or lack thereof) of newsworthy external events and the glut of immediately-available information (even if they may not like what they hear from us), but also act as an “information filter,” taking our knowledge and experience and having it translate into the wisdom our clients desire.

Please do not mistake our commentary about noise as being at all insensitive or tone-deaf to the seriousness of the coronavirus situation. More than 100,000 worldwide infections, and at at least 3,383 confirmed deaths do to COVID-19 are sobering figures, and we recognize there are many unanswered questions about what may lie ahead. Additionally, we certainly do not advocate clients walk around with their head in the sand, as it is important to have an awareness and understanding of what is happening. We simply want to help you avoid and ignore the shorter-term distractions that none of us have any control over. Put differently:

Excellent illustration courtesy of Napkin Finance

As mentioned in the Special Report we issued on February 26 (Coronavirus and the Stock Market Pullback), we firmly believe the US consumer is on solid footing, and will continue to be one of the key drivers of US economic growth in 2020, and that any drop in corporate earnings and economic activity due to the COVID-19 disease will be more than made up for over the remainder of the year. Additionally, we encourage you to click on our March 2020 Monthly Market Commentary found below for our updated outlook and details.

In summary, we think you will enjoy (and ask you to think about) Barry Ritholz’s tongue-in-cheek list below:

What’s Happening at Towerpoint Wealth?

Our esteemed Client Service Specialist, Raquel Jackson, stopped by the office last weekend to do some over-and-above work, and enlisted the help of her three daughters, Zaida (18), Zenia (14), and Daijah (3), while doing so!

Our President, Joseph Eschleman, and Director of Operations, Lori Heppner, enjoyed a delicious lunch together at Tiger on the K Street Mall (now known as “The Kay”).

In addition to filtering information, washing hands, and appreciating the good people we have around us, a number of trending and notable events occurred over the past few weeks:

Lastly and as always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth, and encourage you to reach out to us (info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely complicated place. We are here for you, and look forward to connecting with, helping, and being a direct, fully independent, and objective expert financial resource for you.

– Nathan, Raquel, James, Joseph, Lori, Steve, and Jonathan

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Reflections on the COVID-19 and the Correction

MARCH 2020 MARKET COMMENTARY

Some Reflections and Possible Outcomes with the  S&P 500 Down Seven Sessions in a Row

As this year‘s second month drew to a close on Friday, February 28, the S&P 500 index finished in correction territory at 2,954.22, down 12.8% over the seven consecutive loss-days from its February 19 record high of 3,386.15. All 11 of the S&P 500 industry sectors were showing year-to-date losses, and fully 95% of the S&P 500 companies were down 10% or more from their highs. Flows of capital were instead allocated into perceived safe–haven assets, driving U.S. Treasury two-year yields to 0.878% and 10-year U.S. Treasury yields to a new record low of 1.127%. Even as Federal Reserve Chair Jerome Powell inspired a Friday intraday rally when he indicated that the Fed is prepared to lower interest rates to protect the economy from the spreading economic slowdown, the Chicago Board Options Exchange VIX volatility index spiked to 40.11, its highest close since August 2015, which witnessed three devaluations of the Chinese yuan and a 43% two-month decline in the Shanghai Stock Exchange index. Gold finished at $1,564.10 per troy ounce (+2.9% year to date) and West Texas Intermediate crude oil closed at $44.76 per barrel (-23.1% year to date).

Although the rate of new COVID-19 infections in China has slowed, it should be apparent that a series of rather draconian restrictions (including quarantines, isolation, travel bans, lockdowns, contact tracings, and other strict measures) has been necessary to attempt this within the world’s second largest economy and most populous nation. Such measures have led to harmful consequences for Chinese — and thereby global, due to a much more intertwined worldwide economy than 10-15 years ago — manufacturing, logistics, and just-in-time inventory management (on the supply side) and travel, leisure, bricks-and-mortar commerce, and other forms of economic activity (on the demand-side).

In our opinion, the continuing flight-to-safety decline in bond and money market yields and the further selloff in equity prices is being driven by increasing concerns over the spread of the coronavirus within and between other countries in Asia, the Middle East, and Europe, coupled with emerging realizations that (i) an effective vaccine will take a longer time than generally anticipated to test, develop, and administer; and (ii) it is only a matter of time until the United States experiences outbreaks followed by deleterious effects on individual, corporate, and governmental behavior — producing hitherto unanticipated downward revisions to GDP growth and profit forecasts. For example, on February 27, Goldman Sachs predicted that earnings for S&P 500 companies would show zero growth this year, after earlier predicting that they would increase 5.5%. As of now, our call is for low to mid single-digit S&P 500 earnings growth in 2020, based upon some likely further policy stimulus and more of a V-shaped economic contraction and recovery.

It is important to keep in mind that our cautious and conservative stance (before this market correction in the S&P 500 and other equity indices commenced) has been based upon four main factors, among others: 

  1. lofty price-earnings and price-to-sales valuation levels, many of which were in the 95 to 99th percentile relative to historical experience; 
  2. heavy concentration of market leadership in a limited number of companies (with the top five stocks representing a record 19.0% of the S&P 500 aggregate market capitalization, even higher than the 18.5% previous all-time high, reached at the peak of the 1999 dotcom exuberance);
  3. the more than a decade-long age of the equities price advance and U.S. economic expansion; and 
  4. a significant degree of complacency and nonchalance as evidenced in persistently bullish investor survey readings and low volatility metrics.

For now, we envision three possible scenarios going forward:  

(Base Case, 50-60% probability in our opinion): The following factors: warmer weather; various preventive epidemiological and public health measures; some degree of measured monetary stimulus; and the experienced realization that — even with a possibly high infection rate and quite unpleasant side effects, the coronavirus mortality rate is quite low; leads to a short and meaningful decline in the economy in 2Q20, followed by a similarly rapid recovery, back to or slightly below earlier forecasted levels of economic growth. Cash levels can be slowly and judiciously deployed into diversified portfolios, continuing our emphasis on attractively-valued companies with solid earnings prospects and dividend protection.

(Optimistic Case, 20-25% probability in our opinion): The above scenario occurs but with large scale stimulus measures launched across a broad front to counteract increased worries over the potential negative economic and financial impacts of the spread of the coronavirus globally and in the United States potentially including:

  1. massive monetary, fiscal, and deregulatory stimulus by the Chinese Authorities; 
  2. immense monetary stimulus by the Federal Reserve in the form of swift and larger-than-expected reductions in policy interest rates and a potential resumption of large-scale Quantitative Easing; and 
  3. extensive fiscal stimulus in the form of across-the-board corporate and individual tax cuts and additional federal government spending

These actions are followed by sudden and sharp equity price recoveries, in which we would emphasize technology, consumer discretionary, industrial, materials, and energy companies.

(Unfavorable Case, 15-20% probability in our opinion): High levels of indebtedness, and lingering economic and psychological aftereffects of the coronavirus crisis, lead to a broad decline in hours worked, employment, wage growth, consumer confidence, and personal consumption, bringing on a recession in the second half of 2020, which is exacerbated by late and/or ineffectual policy responses and fears (unfounded, in our view) that it is a replay of the global financial crisis of 2008-2009. In such a scenario, emphasis should be placed on money market instruments, high-quality fixed income securities, and defensive equity industry sectors such as utilities and high-quality companies paying well-protected dividends.

Overall, we stand by our call over the past several months. We have been counseling and continue to counsel diligence, caution, and conservatism — with shorter duration, higher-grade exposure in the fixed income realm, emphasizing high-quality companies whose business results may have been affected by the coronavirus crisis, but whose intrinsic business models remain fundamentally sound, in defensive sectors with reasonable earnings multiples and well-covered dividend support.

 As we did last month, we feature a select group of charts and associated commentary below.

Investment Lessons from a Master

On Saturday, February 22, 2020, Warren Edward Buffett released his annual letter to the shareholders of Berkshire Hathaway, and for the 55 years from 1965 through 2019, the compound annual growth rate in per-share market value of Berkshire was 20.3%, versus 10.0% for the Standard & Poor’s 500 with dividends included and reinvested. This means that an investment of $1,000.00 in the common shares of Berkshire Hathaway on January 1, 1965 was worth $25,978,226.78 on December 31, 2019, compared to $189,059.14 had that same $1,000.00 instead been invested in the S&P 500 with dividends included and reinvested — demonstrating: (i) the immense power of significant differences in compounding rates; and (ii) the massive effects of compounding over long time periods.

Page ten of the 2019 Berkshire Hathaway annual report also lists the 15 common stock investments of Berkshire that at yearend had the largest market value, shown above. It can be seen that over the 55-year lifetime of Berkshire Hathaway under Buffet’s stewardship, the total equity investment portfolio had as of yearend 2019 generated a pretax capital gain of $137.687 billion, of which just five stocks — American Express ($17.6B), Apple ($38.4B), Bank of America ($20.8B), Coca-Cola (also $20.8B), and Wells Fargo ($11.6B) accounted for $109.186 billion. This indicates that 79.3% of the total capital gain in Berkshire Hathaway’s equity investment portfolio over five-and-one-half decades came from five investment ideas, underscoring two of the important precepts espoused in “A Lesson on Elementary Worldly Wisdom,“ Warren Buffett’s partner Charlie Munger’s famous 1994 speech given at the University of Southern California Business School: “Stay within your circle of competence — figure out where you’ve got an edge, some of which you may have been born with, and some of which are slowly developed through disciplined effort.” And “Bet seldom and bet significantly, when markets offer you compelling opportunities.” Recognizing the wisdom of these two principles, for the majority of mainstream investors, we  also emphasize investing in high-quality assets for the long-term rather than attempting to trade in-and-out on a short-term basis. 

Energy Stocks Near Multi-Decade Lows

U.S. energy stocks have recently plummet to their lowest price relative to the Standard & Poor’s 500 in almost 80 years. This underperformance has taken place against the backdrop of: 

  1. elevated coronavirus-related concerns over the 2020 trajectory of global growth (thereby putting downward pressure on demand for energy products); 
  2. an oversupplied worldwide energy market, meaningfully augmented by the significant increases over the past 10 years of U.S. oil and gas output driven by hydraulic fracturing (a well stimulation technique, also known as  “fracking,” in which oil- and gas-bearing rock is fractured by a pressurized liquid); and  
  3. rising antipathy toward hydrocarbon-producing companies and/or divestments of some or all categories of fossil fuel assets by a number of institutional investors, including endowments, foundations, pension funds, and certain large sovereign wealth funds.

Noting the tendency for cyclical rebounds to gradually unfold following such extreme readings in energy stocks’ versus the S&P 500’s relative price performance, we think that value-oriented, somewhat contrarian-minded, mean reversion-aware investors may consider carefully building some exposure to this sector in a disciplined manner, focusing on companies with: 

  1. capital discipline; 
  2. meaningful plans to encompass renewable energy; and 
  3. dividend maintenance strength.

Volatility Spikes

The “VIX” represents  the ticker symbol and the popular name for the Chicago Board Options Exchange’s CBOE Volatility Index, a popular measure of the stock market’s (and financial markets’ more broadly) expectations of volatility as calculated based on S&P 500 index options. The VIX is computed and disseminated on a real-time basis by the CBOE, and is sometimes referred to as the “fear index” or “fear gauge.” Traders on the floor of various options and futures exchanges  have for several years employed a shorthand expression regarding the VIX volatility measure: “When the VIX is low, it’s time to go slow, and when the VIX is high, it’s time to buy.” In other words, a low VIX reading usually indicates a fair degree of investor quiescence, complacency, and nonchalance, and sharply elevated readings generally reflect widespread concern —  sometimes, even panicked selling — associated with equity market washouts that may signal a cyclical bottoming in asset  prices. Mindful of the continuing degree of uncertainty relating to the impact of the coronavirus on the global economy, our recommendation is that investors should remain aware of the VIX level as a general barometer (rather than a precise thermometer) of financial market sentiment, viewing a series of too-low readings with ongoing skepticism and by contrast, considering significantly high readings as potential signposts for adding funds to the equity markets. 

Equity Valuations Still Above Average

The fundamental drivers of all asset prices — including stocks; bonds; real estate; agricultural, industrial, and other commodities; precious metals; and even such asset categories as jewelry, art, and collectibles — are driven by various combinations of: 

  1. fundamental forces (such as earnings, economic trends, and dividend, interest, and rental payments); 
  2. valuation measures (relating prices to revenues, earnings, book values, and other measures); and 
  3. psychological, sentiment, and technical factors (such as surveys of bullish and bearish views, initial public offering and merger and acquisition volume, aggregate trading activity, charts of price trends, new highs compared to new lows in prices, advance-decline lines, and moving-average computations).

While fundamental factors tend to be the preeminent forces on asset prices during extended upward or downward moves, and psychological, sentiment, and technical factors tend to exert a dominant influence at major turning points (with extreme euphoria and optimism characterizing market tops, and extreme despondency and despair characterizing market bottoms), valuation metrics are used as a reality check and to provide useful and much needed historical perspective on asset pricing. Prior to the recent coronavirus-driven changes in equity, fixed income, precious metals, energy, and currency prices, it can be seen from the above table that many valuation measures of the Standard & Poor’s 500 composite index as  of yearend 2019 were registering in the 88th to 99th percentile of their historical valuation readings. Such elevated  valuation measures — including U.S. Market Cap/GDP; Enterprise Value/Sales; Enterprise Value/EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization); Price/Book Value; Cyclically Adjusted P/E; and Forward P/E — have been an important influence on our multi-month message of caution and conservative portfolio positioning. Even though the S&P Earnings Yield (the inverse of the Price/Earnings ratio) minus the 10 year U.S. Treasury yield was only at the 28th percentile (due to ultra-low interest rates), in our view, the recent pullback in most of these valuations still leaves them at well-above-average historical levels and underscores our continued counsel of vigilant, careful, and cautious investment strategy and asset allocation.

Equity Performance in Presidential Election Years

Widespread wisdom concerning U.S. equity market performance in the four years of a presidential term — promulgated among other market prognosticators, by Yale Hirsch in The Stock Trader’s Almanac, with his “Presidential Election Cycle Theory“  — usually holds that: 

  1. the best year is year three; followed by 
  2. year four, as various forms of economic stimulus may be applied in advance of the election itself; 
  3. year one, characterized by the good feelings after a national election; and lastly, 
  4. year two, when the effects are felt of whatever economic and policy “housecleaning” has been effectuated. 

For the 23 presidential election cycles since 1928, the upper panel shows the mean (which is the conventional arithmetic average) and the median (defined as the midpoint) of the S&P 500 average returns in each year of a presidential term. We caution that these outcomes reflect average performance, and a given presidential cycle can deviate, sometimes meaningfully, from the results generated over the past 92 years. This can be seen in the lower panel, which shows the Standard & Poor’s 500 performance for the 42nd, 43rd, 44th, and 45th U.S. presidencies. For example, in year four of President Bush’s second term, the S&P 500 substantially lagged the performance of the other three years, and in both of President Obama’s terms, the first two years produced the best performance. As calendar year 2020 progresses toward Election Day on Tuesday, November 3, we advise to be aware of the psychological and sentiment impact that is likely to be felt on quite a number of industry groups during the upcoming presidential campaign. With corporate taxation, industry dominance, and market power likely subjects of discussion and debate, sectors expected to be in the spotlight include, among others oil, gas, coal, and hydraulic fracturing; pharmaceuticals, biotechnology, and medical devices; and social media and other technology-enabled companies. Investors would be wise to give careful consideration to the intermediate- and longer-term implications of this year’s elections for specific holdings in these and other industries.

Tax Proposals of Presidential Candidates

Regardless of one’s political persuasion and tax bracket, we think it is quite important from an investment standpoint to pay close attention to the likely post-election contours of the top marginal tax rates on labor and investment income. Investor psychology, consumer behavior, and corporate profitability are influenced to a significant degree by the trend and level in federal (as well as state and local) taxes on labor income. In addition, taxes on capital (investment income) affect investment, a major determinative factor influencing productivity growth, and thus, wage growth.

Quite apart from the media and debate attention given to several Democratic presidential candidates’ proposed single-payer health care and wealth taxes, the table to the left sets forth the current federal top marginal tax rates on labor and investment income under current law and also shows the size of the much-less-publicized tax increases on labor and investment income proposed by three of the Democratic presidential candidates. The top marginal federal tax rate on labor is currently 40.2%, (including the 2.9% Medicare tax) with the proposed top marginal tax rate proposed by the three (Buttigieg suspended campaign 3/1/20) cited presidential candidates ranging from 51.8% to 69.2%. The table also shows that the top marginal tax rate on investment income is 23.8%, with the proposed top marginal tax rate proposed by the three cited presidential candidates ranging from 43.4% to 58.2%. Our counsel is to pay particular attention to these and other candidates’ tax proposals, focusing on their impact on corporate, consumer, and investor behavior.

For additional perspective on the evolution and complexity of the U.S. federal tax code, we share the following thoughts:

Approaching the annual April 15 due date for tax filing, we also offer the following reflections relating to the history of federal income taxation and the size of the federal tax code. The United States tax system has evolved through the nation’s history, from an initial revenue-generation reliance on tariffs, with new income taxes and other levies generally introduced during times of war to raise additional revenue, then being allowed to expire once the war was over. In the years after 1900, popular and legislative support began to build for a continual income tax, and in February 1913 the Sixteenth Amendment was ratified to the Constitution, granting Congress the power to collect taxes on personal income. 

According to Thomson Reuters-Refinitiv and Wolters Kluwer CCH (the latter of which has analyzed the federal tax code since 1913), in the first 26 years of the federal income tax, the code only grew from 400 to 504 pages, and even during President Franklin Delano Roosevelt’s New Deal, the tax code came in comfortably under 1,000 pages. Changes implemented during World War II increased the total code (including appendices) to 8,200 pages; by 1984, it had swollen to 26,300 pages, and as of early 2018, several Congressional and media commentators have pointed out that the federal tax code exceeds 80,000 pages. The length of the actual current actual tax code itself runs in the neighborhood of 3,000 pages, with over 75,000 additional pages devoted to the inclusion of: all past tax statutes; Internal Revenue Service regulations and revenue rulings; and annotated case law covering court proceedings surrounding the tax code.

Warm Regards,
Joseph F. Eschleman, CIMA®
President
Towerpoint Wealth, LLC

Disclosures: Towerpoint Wealth is a Registered Investment Advisor. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Towerpoint Wealth and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Towerpoint Wealth unless a client service agreement is in place. No portion of any content within this commentary is to be interpreted as a testimonial or endorsement of Towerpoint Wealth investment advisory services and it is not known whether any clients referenced herein approve of Towerpoint Wealth or its services; nor should it be assumed that any references to our clients are representative of all our clients’ experiences.

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Special Coronavirus Alert – Stock Market Pullback

What happened? A little more than a week ago, on February 19, the S&P 500 closed at a record high of 3,386.16. Yesterday, it closed at 3,128.21, suffering a brutal -7.6%decline in only four days, and turning negative for all of 2020. Since last Wednesday’s high, $2.138 trillion of stock market value has been erased. And we all know the reason why – fears about the current COVID-19 (novel coronavirus) outbreak.

Clearly the spreading virus has sent shockwaves through the global financial markets, as declines of this magnitude are by no means ordinary, especially after the stock market just hit an all-time high. Understandably, all anyone can seem to think about right now are the potential negatives of the coronavirus emerging in the U.S. and in other major economies; however, we are confident that eventually the bad news will give way, positives will emerge, and today’s worst placed fears will not come to fruition. Considerations:

  1. There will ultimately be a vaccine, as there is already a drug that will combat COVID-19 moving toward first phase clinical trials. And as a testament to advances in drug technology, it took only three months in 2020 for this to happen, versus 20 months for SARS back in 2002-2003
  2. According to Worldometer, there have been 30,597 coronavirus cases with an outcome (2,699 deaths and 27,898 recoveries). The total active cases now stand at 49,923, a drop of 15% from the peak on February 17.

While one death is too many, let’s put these numbers into perspective: According to the World Health Organization, just in the US alone for the ’19-’20 Flu season, there have been 15,000,000 flu illnesses, 140,000 hospitalizations, and 8,200 deaths. Imagine if everyone with an internet connection followed the spread of the annual flu, case-by-case, hour-by-hour…

We are by no means cockeyed optimists here at Towerpoint Wealth, and we fully understand that equity markets react unpredictably to the unknown. However, we also recognize that historically, Wall Street’s reaction to epidemics and fast-moving diseases is often short-lived, and we feel that today’s current coronavirus fears will be no different. At Towerpoint Wealth, we believe it is not “if” but “when” the markets recover; and that is likely to be when investors believe the impulse of new coronavirus cases has peaked.

Additionally, we firmly believe the US consumer is on solid footing and will continue to be one of the key drivers of US economic growth in 2020. Some have suggested that the 1918 Spanish Flu, which killed hundreds of thousands in the US, could happen again. And despite the severity of the 1918 event, the relatively small amount of research done on the economic effects of that pandemic indicate that they were short term. We all recognize that the US rebounded from the Spanish Flu when all was said and done, and 2020 is certainly not 1918. Technology and medicine are light years ahead of where they were a century ago, and news today is now instantaneous. We suspect that any drop in corporate earnings and economic activity will be short-lived, and more than made up for over the remainder of the year to come.

Put differently, it is not time to hit the panic button. Stay invested, systematically rebalance your portfolio, remain disciplined and faithful to your plan and investment philosophy.

If after reading this you continue to have concerns, and/or do not currently have a thoughtful financial and investment plan or strategy in place, please message us (info@towerpointwealth.com) to talk further. The world continues to be an extremely complicated place. We are here for you, and look forward to connecting with, helping, and being a direct, fully independent, and objective expert financial resource for you.

– Nathan, Raquel, James, Joseph, Lori, Steve, and Jonathan

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‘Helping You Relax During the Season of Tax’

It’s that tiiiiiime

And while the data is a few years old, the unfortunate message contained below about the six billion (!) hours that Americans spend annually preparing our income taxes still resonates:

With that being said, we can think of no better time of year during which the Towerpoint Wealth mission statement better applies:

Helping you achieve economic peace of mind by properly coordinating all of your financial affairs.

When it comes to doing your taxes, we are here for you. And while we recognize that we cannot completely eliminate the stress associated with preparing your income tax returns, we stand ready to directly interface and work closely with you, and with your tax advisor, to reduce your anxiety and help to make this stressful time of year as bearable as possible.


This edition of Trending Today has been assembled specifically to be a central repository of useful and pertinent income tax resources for you, and we trust you (and/or your tax advisor) will not hesitate to call (916-405-9140) or email (info@towerpointwealth.com) us with any questions, issues, speed-bumps, or problems you may encounter.

Tax Season Officially Begins!

Tax season officially began Monday, January 27th. Below you will find four important tips and resources if you are a client of Towerpoint Wealth, or the tax advisor of one of our clients:

  • The early bird may not get the worm! We advise you to please expect to receive amended 1099’s, and to consider actually filing closer to the April 15, 2020 deadline. We have no control over if, or when, amended 1099’s are issued, but they present a clear problem to those who file early. If you are a “tax early bird,” please click HERE to read about the pitfalls to avoid when filing early.
  • Noting the above, all Charles Schwab 1099’s, as they become available, are downloadable within your online SchwabAlliance client portal, via Schwab’s 1099 Dashboard, which provides a quick, personalized way to view the expected availability dates of 1099 Composite forms for Towerpoint Wealth client accounts that had taxable activity in 2019:

Note: If you do not have access to your online SchwabAlliance client portal, please contact our Director of Client Experience, James Keefe (916-405-9164 | jkeefe@towerpointwealth.com), for assistance.

  • Alternatively, you may enter your Black Diamond secure document vault for immediate access to:
  1. All of your Schwab 1099’s, including any amendments
  2. All of your Schwab/Towerpoint Wealth monthly account statements
  3. Your updated customized comprehensive net worth and portfolio diversification analyses (on a quarterly basis):
  • Our Director of Tax and Financial Planning, Steve Pitchford, stands ready to provide direct assistance and service to both our clients, and their tax advisors, regarding any tax-related question, “speed-bump,” or need. Please do not hesitate to reach out to Steve at any time (916-405-9166 | spitchford@towerpointwealth.com).

Lori Heppner now TPW’s Director of Operations

While she is still and will always be our smart, sweet, sincere, and talented Lori, she is now our Director of Operations instead of our Director of Client Service.

While her myriad responsibilities will remain the same (and thank goodness she puts up with all of us at TPW!), we feel the title Director of Operations more accurately reflects Lori’s role here at the firm. Bottom line, please do not hesitate to reach out to her (916-405-9160 | lheppner@towerpointwealth.com) with any questions or needs.
Coach Wooden’s “Pyramid of Success”

For legendary coach John Wooden, “being at your best when your best was needed” was just as important in the game of life as it was in the game of basketball. Coach Wooden’s Pyramid of Success is his 15 building block initiative in the form of a pyramid.

Just as Coach Wooden will forever be in the sports history books for leading UCLA men’s basketball teams to an unprecedented 10 NCAA Championships in 12 years (1964-75), his Pyramid of Success has set the standard for corporate leaders in the business world and for many of us in the world of life.

Trending Today

In addition to prepping for taxes and reaching for our personal bests, a number of trending and notable events occurred over the past few weeks:

Lastly and as always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth, and encourage you to reach out to us (info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely complicated place. We are here for you, and look forward to connecting with, helping, and being a direct, fully independent, and objective expert financial resource for you.


Nathan, Raquel, Jonathan, Joe, Lori, Steve and James

Towerpoint Wealth No Comments

The Corona Outbreak Causing Your Investments to Ache?

“Red Alert” has been issued by the United States, and the World Health Organization has declared a global health emergency. There have now been almost 9,800 confirmed worldwide cases and 213 deaths stemming from the deadly Coronavirus (as of 9:30PM EST yesterday evening):

Global Health Emergency

The epicenter of the virus is in Wuhan. With a population of more than 11 million people, Wuhan is the most populous city in central China and larger than New York City. And while this extremely dangerous and deadly epidemic has so far gone virtually unchecked, there is hope for containment, as a vaccine is expected to be in a Phase 1 trail within three months, and China is racing to stay ahead of the outbreak by quickly mobilizing and building two 1,000+ bed hospitals in only ten days!

Hospital Breaking Ground
Hospital Breaking Ground in China

Click HERE to spend less than two minutes watching an incredible timelapse video of the rapid non-stop construction of the two Coronavirus hospitals being built, which has already received more than 50 million hits and has been must-see TV for the 45 million Chinese who have been quarantined and confined to their homes.

A number of Towerpoint Wealth clients have asked what this means for the Chinese, U.S., and global economies, the U.S. and global stock markets, and most importantly, their portfolio. And our resounding answer has been “not much.

It is fair to assume there will be shorter term stock market gyrations as news reports discuss the progress, or lack thereof, in producing a vaccine and of containment efforts. However, we also speculate that the U.S. Federal Reserve (“the Fed”) will be monitoring for coronavirus impacts both domestically and globally, and continues to stand ready to be very accommodative with monetary policy. While there will likely be near-term impacts on output, especially in China, other signs from global economies have the Fed cautiously optimistic that growth is returning higher.


Or if you prefer history as a guide, the statistics speak loudly and clearly:

Markets Rebound After Outbreak

Our advice at Towerpoint:

  1. Wash your hands and don’t travel to China
  2. Pay attention to the news but don’t be reactionary to it
  3. Regardless of your personal or financial circumstances, be disciplined in regularly rebalancing your portfolio in the face of negative newspaper headlines
  4. Look in the mirror and ask yourself if you are a short-term trader or a longer-term investor, and then act accordingly
  5. Review the World Events graph below and recognize that the market is usually very resilient both during and after major crises

TPW Says Goodbye to Jim Denny’s

No more giant “hubcap” pancakes. No more Superburger.

Towerpoint Wealth team members were saddened to hear that Jim Denny’s, a true local restaurant icon here in Sacramento, is set to close on February 2 after 85 years (!) in business.

The team was happy for the opportunity to patronize this iconic diner and landmark one last time for breakfast earlier this month!

Jim-Denny's Hamburgers
Sacramento Giant Pancake
Towerpoint Wealth Team Breakfast

Update: Click HERE to read why Jim Denny’s may not be closing!

Kobe Bryant RIP
Whether you loved him or hated him (and there are good reasons for both), Kobe Bryant’s January 26 death shocked the country. He was an NBA superstar, icon, and future Hall of Famer, but more importantly, he was a father and a husband, and it is the loss to his family which hurts those of us at Towerpoint Wealth the most.

We highly encourage you to click HERE and spend 60 seconds to watch Kobe’s emotional and inspiring message to his daughters during his jersey retirement night in Los Angeles.

Kobe Bryant and Daughter
Kobe Bryant Legends Are Forever

What You Should Focus On

Things that Matter vs Things You Can Control

Credit to Carl Edwards at the Behavior | Gap.

Trending Today

In addition to outbreaks, pancakes, and heartaches, a number of trending and notable events occurred over the past few weeks:

Lastly and as always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth, and encourage you to reach out to us (info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely complicated place. We are here for you, and look forward to connecting with, helping, and being a direct, fully independent, and objective expert financial resource for you.


– Joseph, Jonathan, Lori, Nathan, Steve, Raquel, and James

Towerpoint Wealth Team
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Don’t Let the News Confuse (You)

We believe Ghandi was spot-on when he said:

And sometimes, it is important just to slow down, deliberately absorb things, and appreciate what you have. The United States’ latest conflict with Iran and surprise killing of Iranian Major General and second-in-command, Qassem Soleimani, has affected all of us in our personal and professional lives, and has caused a completely unsurprising deluge of bold headlines and provocative stories from the media:

What Stock Market Investors Need to Know About Intensifying U.S.-Iran Tensions

Here’s Why The Stock Market Hit Record New Highs After Trump’s Comments On Iran

Is the U.S. Headed For World War III? Here’s What Experts Say as Twitter Fears the Worst

The insidiousness of today’s 24/7 news cycle can steer even the most objective and rational investor wrong if they are not careful, and we believe there is a very simple lesson that needs to be internalized: You can pay attention and read the headlines, just don’t try to trade them, as smart investors ignore the news.

Even though circumstances may appear to be grave, we recognize how humor helps people cope with conflict, fear, and uncertainty And Gen Z didn’t let us down in the humor department, as the new short-form video app TikTok had 1.6 billion views of videos containing #WWIII and #WW3 hashtags, on top of an uncountable number of World War 3 memes published to the internet:

#WWIII Trends on Social Media Following Soleimani Killing

Perhaps a lighter and more appropriate approach to the media and endless news cycle is to find humor in it, especially in the predictions made by economic and financial talking heads, which never fail to make us laugh. Our recent fave is this worthless quote about what to expect in 2020:

A much more appropriate, salubrious, and blunt quote was made by Malcom Polley, president of Stewart Capital Advisors:

The chart below, which reviews the S&P 500’s performance after various crises since World War II, found that any recovery from a market drop often happened in far less than a year’s time. While what’s past is prologue, we feel the probability is quite high that the current situation in Iran and the Middle East will simply be the next Market Shock Event line item on this list, lending even further support to our “don’t panic” thesis.

Please do not misconstrue the message: these events are serious, important, and carry great geopolitical significance; however, when viewed from an investment and economic lens, they end up being temporary blips on the longer-term radar screen.

TPW Kids!

When the world is rushing by, and we are safe in our homes with our families, it is valuable to remember what is important. We are clearly biased, but the kids in our Towerpoint Wealth family are adorable, no??!!

Millie (7), Claire (4), James Keefe

Joe & Meg Eschleman, Henry (10)

Nathan, Baby Grayson (3 months), Jess

Happiness – Not Fake News

Credit to Carl Edwards at the Behavior | Gap.

Trending Today

In addition to showing appreciation for our families and chuckling through Gen Z internet memes, a number of trending and notable events occurred over the past few weeks:

Lastly and as always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth, and encourage you to reach out to us (info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely complicated place, we are here for you, and look forward to connecting with, helping, and being a direct, fully independent, and objective expert financial resource for you.

– Joseph, Jonathan, Lori, Nathan, Steve, Raquel, and James

Towerpoint Wealth No Comments

Room to Run – There’s Plenty in ’20!

Senescence – the process or condition of deterioration with age.

While logical and sensible when it comes to biology, it is extremely important to understand that senescence is completely irrelevant to economies and to the stock market. Economic expansions do not die from old age, they die from negative shocks. Or put more bluntly by Former Fed Reserve Chair Ben Bernanke, “they get murdered,” usually by central banks like our Federal Reserve tightening the money supply and raising interest rates.

As we head into the new year and as is always the case, there are indicators supporting both sides of the “Will the U.S. economic expansion continue?” question. On the positive: Jobs have increased for 110 straight months (!)wages at every level are growing faster than inflation, and real manufacturing output is at all-time highs. On the negative: GDP growth has slowed to +1.9%the U.S. Treasury yield curve recently inverted (oftentimes a recessionary precursor), and the uncertainty created by U.S. trade disputes and tariffs.

Independent of these pros and cons, at Towerpoint Wealth we feel the most salient economic point heading into 2020 is that many analysts and investors continue to cling to the flawed thinking that expansions have to come to an end because of old age alone. Instead, we encourage you to let other people’s fears be your friend,know that senescence is nonsense when it comes to the economy, and invest with confidence knowing that monetary policy remains very loose and accommodative, both here in the U.S. and globally. Put differently:

TPW Celebrates the Holidays!The TPW family had a blast last week celebrating the holiday season together, first with a round of mini golf at Flatstick Pub, and then at a festive dinner at Echo & Rigin Sacramento’s new Downtown Commons (DOCO)!

We all feel very fortunate in the culture we have created here at Towerpoint Wealth, as not only our TPW team members, but also our valued clients, appreciate the care and the sincerity we put into our work – and also when we let our hair down a little and have fun together!

Mutual Fund Expenses – Not Fake News

Credit to Carl Edwards at the Behavior Gap.

Trending Today

In addition to holiday fun and the inevitability of human (but not economic) aging, a number of trending and notable events occurred over the past few weeks:

Also, we wish you a Happy New Year! We sincerely value our relationships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth. Here’s to a happy, healthy, and prosperous beginning to the Roaring ’20’s – a decade of opportunity and potential!

Lastly and as always, we encourage you to reach out to us (info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely complicated place. We are here for you, and look forward to connecting with, helping, and being a direct, fully independent, and objective expert financial resource for you.


– Joseph, Jonathan, Lori, Nathan, Steve, Raquel, and James

Towerpoint Wealth No Comments

Get the Facts, Save on Tax

Benjamin Franklin sure nailed it when he said the only two certainties in the world are death and taxes. Paying income taxes has been a constant for almost 100 years for Americans, since the 16th Amendment to our Constitution was ratified in 1913. Back then, the top bracket was 7% and lowest bracket was 1%, and only 3% of the population was even subject to paying the “new” income tax!

16th Amendment Page 1 of 1

And while today’s current federal tax rates are not quite as low as they were in 1913, they remain historically very attractive:

Marginal

Independent of how much you may owe to Uncle Sam, virtually all of us are active participants in the “sport” of minimizing our obligation to the IRS (and here in California, the FTB as well), and the month of December is oftentimes a critical one when taking advantage of tax reduction opportunities before the calendar turns to the next tax year.

The Tax Cuts and Jobs Act (TCJA) of 2017, the most sweeping federal tax legislation since the Tax Reform Act of 1986, changed many aspects of tax planning, as lower overall personal income tax rates and a much larger standard deduction justified the reduction of the mortgage interest and state income tax deductions, the elimination of personal exemptions, and the severe limitation of itemized deductions. So, while the passage of the TCJA may have reduced the overall breadth of tax minimization strategies available to most taxpayers, it certainly allowed for the door to remain open for proactive, creative, and opportunistic taxpayers.

Between end-of-year IRA required minimum distributions (RMDs), cash and non-cash charitable giving strategies, Roth IRA conversion opportunities, mutual fund capital gains distributions, tax loss harvesting, IRA qualified charitable distributions (QCDs), “bunching” itemized deductions, maximizing end-of-year 401(k) contributions, as well as a myriad of other opportunities and strategies (please take a few minutes to click on the tiles found under the Towerpoint Wealth Tax Information section below), there will always be many potential tax minimization ideas worth considering, many of which come more into focus in December.

We encourage you to call or email us, and specifically, our own esteemed in-house CPA and Director of Tax (and Financial Planning), Steve Pitchford. Steve is an absolute maven when it comes to understanding and applying these tax reduction and minimization strategies and ideas, and because you are receiving this newsletter, you officially have objective and no-strings-attached access to him and his expertise!

In summary, understanding we can never completely eliminate our obligation to the IRS and other taxing authorities, at Towerpoint Wealth we continue to firmly believe in the importance of tax planning. And in the interests of reducing and minimizing the “necessary evil” of income taxes, we appreciate that proactive tax planning is a central component of any sound wealth management plan, and is a hugely important consideration when working to grow, and protect, one’s net worth and assets.

TPW Running Strong!


26.2!!!!!!!

A HUGE congratulations to our Director of Research and Analytics, Nathan Billigmeier, who last weekend completed the “Fastest Course in the West” – theCalifornia International Marathon!!

Nate At The Finish Line


Napkin Finance Tax Time

Credit to Napkin Finance. Click HERE for taxation details.

Trending Today

In addition to the discipline needed when engaging in end of year tax planning and/or distance running, a number of trending and notable events occurred over the past few weeks

As always, we encourage you to reach out to us (info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely complicated place. We are here for you, and look forward to connecting with, helping, and being a direct, fully independent, and objective expert financial resource for you.

– Joseph, Jonathan, Lori, Nathan, Steve, Raquel, and James

Towerpoint Wealth No Comments

Unlock Your Concentrated Stock

A number of clients earlier this month asked “Where was Trending Today?” We did not release our bi-weekly eNewsletter due to the time commitment associated with our attendance at Charles Schwab’s big IMPACT conference, but are pleased to be back in the saddle with the following important and useful items:

New Concentrated Stock White Paper Published by TPW

Our Director of Tax and Financial Planning, Steve Pitchford, recently completed a white paper for our clients and colleagues, assembling a thorough and comprehensive analysis detailing five effective strategies to help manage the inherent risks and tax consequences associated with owning a concentrated stock position.

If you have accrued a concentrated stock holding (which we define as any investment that represents more than 10% of your overall portfolio), this is a must-read.

Click HERE, or on the first story tile below, to open and review the report.

Eschleman, LaTurner Attend 29th Annual Schwab IMPACT 2019 Conference

It was truly an amazing four days at the 29th annual SchwabIMPACT conference for our President, Joseph Eschleman, and Partner, Wealth Advisor, Jonathan LaTurner.

Joseph and Jon were working to keep their professional saws sharp while soaking in practice management, investing, economic, market, and digital themes at the IMPACT conference. While there, they also enjoyed the company of many innovative and brilliant people (Charles SchwabTim McGrawNicholas BurnsJohn Meacham, and Liz Ann Sonders, to name just a few) and organizations. They even met living legend Keith Hernandez, arguably the best defensive first baseman in MLB history!


The obvious goal of Joseph and Jon’s attendance at IMPACT was continued professional growth and improvement as financial advisors, with the singular focus of helping each client of Towerpoint Wealth efficiently grow and protect their wealth, in the interests of gaining complete financial peace of mind, and, put more simply, to be happy.

Curious about the speakers, information, and content Jon and Joe were immersed in while at IMPACT? Click HERE to see a full agenda for the conference.

Charles Schwab Set to Acquire TD Ameritrade

There is BIG news in the wealth management industry, with potentially BIG benefits for Towerpoint Wealth clients!

As we have trumpeted in the past, we could not be more pleased to be partnered with Charles Schwab as our firm’s primary custodian, and on Thursday, they announced their intent to enact a $26 billion acquisition of TD Ameritrade.

If the deal is approved, it could lead to improved technology and even LOWER fees and investment expenses for our clients. If finalized, it would also cement Schwab’s position as the largest RIA custodian in the industry (by far), holding more than $5 trillion in total assets, with more than half of the assets managed by registered investment advisors like Towerpoint Wealth.


Undoubtedly, it would be a transformative shift in the wealth management landscape. Stay tuned, as we will assuredly be letting clients know about developments as they occur.

TPW CYBERSECURITY UPGRADE – Multi-Factor Authentication Added to Black Diamond

Multi-factor authentication (MFA) is a security enhancement that requires a user to present two pieces of evidence (your credentials) when logging into an account.

We have added MFA into the user experience for the Black Diamond (BD) all-in-one “personal financial dashboard” utilized by Towerpoint Wealth private clients. As most of you are aware, BD allows you to be able to monitor all of your accounts, assets, and liabilities within one singular headache-free platform and online portal, and incorporating MFA into the login process provides clients an important cybersecurity safeguard and additional layer of online protection.

Ever Wondered if You Should Buy or Lease a Car?

Credit to Napkin Finance. Click HERE for buy or lease details.

Trending Today

In addition to corporate acquisitions and mega-conferences, a number of trending and notable events occurred over the past two weeks:

As always, we encourage you to reach out to us (info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely complicated place. We are here for you, and look forward to connecting with, helping, and being a direct, fully independent, and objective expert financial resource for you.

– Joseph, Jonathan, and the entire Towerpoint Wealth team