TPW Trending Today

Bitcoin launched back in 2009. Thirteen years have since gone by, there now exist more than 10,000 new cryptocurrencies, and the global crypto market capitalization tops $2 trillion!

However, as modeled by Larry David’s character in FTX’s hilarious Super Bowl commercial last weekend (look for a link to it later in this newsletter!), there are still plenty of no-coiners who continue to ask “Will crypto crash again?”

Even with the explosive growth referenced above, a healthy amount of skepticism and a fair amount of ignorance about digital assets and cryptocurrencies remain, informally correlated to one’s age and level of interest in technology. What’s keeping people from “buying in” to cryptocurrencies?

• “Blockchain technology seems to be a solution looking for a problem.”
• “Crypto is too complicated for me.”
• “The adoption of crypto has been insufficient.”
• “Using crypto will increase my transaction costs.”

Some people even believe crypto is a trojan horse, sent by radical libertarians to undermine the global financial system! While that last reason may be a bit alarmist, there continue to be those who argue blockchain and crypto may be too disruptive for their own good.

We disagree, and believe that while the journey to mass acceptance may continue to be wild and schizophrenic, that distrust of blockchain technology will ultimately prove to be unwarranted. We believe that the adoption of cryptocurrency will be much like the adoption of any other technology: The rate at which adoption occurs grows gradually, then generally explodes upwards.

Consider the internet thirty years ago. In 1990, only a handful of governments, universities, businesses, and individuals were using the internet. But by the year 2000, everyone had a website. In 2021, consumers spent more than $871 billion online, a 44% increase from 2019, and almost triple the 15.1% increase the previous year.

Remember when the iPhone was invented back in 2007? Smart phones were scarce then. Only a few short years later, and just about everyone had the internet available to them in their pockets and at their fingertips.

We are not doubting that the feel of a crisp $100 bill in your hand is unduplicable, and there will always be demand for fiat currency as long as there are governments. However, we firmly believe that the movement towards a global financial system that removes the control that banks have on money is inevitable. While this evolution will almost assuredly be met with many impediments, obstacles, and outright deterrents (such as the most recent cryptocurrency pullback, that began in early November and ended in late January, causing folks to ask “will crypto crash again?”), global finance is moving away from being centralized (money being held by banks, which have the goal of earning profits) to being decentralized, where blockchain technology eliminates the need to use profit-seeking intermediaries and third-parties to lend, spend, trade, and borrow.

DeFi, as decentralized finance is commonly known, is disruptive. And when something is disruptive, it is confusing, and causes disorder.

Please do not mistake our belief and confidence in the future of crypto, blockchain, and DeFi as being willfully ignorant, as we fully recognize the risks, uncertainties, and pitfalls that exist and will persist for some time. After all, is there anyone who does not believe that centralized financial institutions will fight tooth and nail to protect their primary means of earning profits? There seems to never be a dull moment with crypto!

However, understanding the advancements that need to be made, and the myriad of questions that still need to be answered before crypto is commonly accepted and DeFi trends towards becoming the norm, we believe it is not an if, but a when, finance becomes decentralized.

Will crypto and blockchain adoption perfectly mirror the two aforementioned examples? Probably not, but the similarities are noteworthy and should not be discounted. Will crypto crash again? It’s certainly possible, arguably even probable. But for those who understand, embrace, and adopt cryptocurrency and blockchain as an innovative new financial technology, we believe there are rewards to be had. Will the ride continue to be wild? Absolutely, but we believe it will become less and less wild as adoption increases, skepticism wanes, and use cases increase.

Below are five reasons why we believe crypto is here to stay and not going away!

1. Mainstream awareness: It wasn’t the Super Bowl, it was the Crypto Bowl!

A few short years ago, a number of media outlets including Facebook, Twitter, and Google banned advertisements that had anything to do with digital assets.

Last Sunday, an estimated 112 million viewers tuned in to watch the Rams defeat the Bengals in Super Bowl LVI. And a healthy number of them tuned in more for the halftime show and the commercials than for the game itself. And leading the advertising pack were Binance, FTX, Coinbase, Crypto.com, eToro, and Bitbuy – all cryptocurrency exchanges. And one of the best and funniest commercials of the entire Super Bowl featured the curmudgeonly Larry David, and his dismissal of history’s greatest inventions, including crypto. Click below to watch it!

The overlying point of these advertisers? Play into FOMO (fear of missing out), and don’t listen to Larry! The messaging continues to be clear – we are real companies, real advertisers, we’re here to stay, and we’re mainstream.

2. Rapid growth in mainstream adoption

More than 220 million people now own digital assets, as of June of last year. By some measures, this growth is rising faster than the internet did in its early stages. Trends firmly point to more users, longer holding periods, and growing institutional investment.

Bitcoin is also disrupting traditional payment processes, and is now one of the largest settlement networks in the world. By the end of 2021, the Bitcoin network settled over $13.1 trillion in transactions, up 470% from 2020, representing over half of the US’s GDP for the year, and MORE than what Visa, one of the largest payment processors in the world, settled last year!

3. Demographics – The Great Wealth Transfer

Over $68 trillion (yes, you read that right, trillion) is set to be transferred from the Baby Boomers to Millennials and Gen Xers over the next 25 years. Both Millennials and Gen Xers have a higher level of interest in innovation (read: decentralized finance) and a lower level of trust in traditional institutions (read: centralized finance). Supporting this perspective, 83% of millennial millionaires already own digital assets, a trend we believe is likely to continue as this demographic reaches peak earning and spending years.

Click the video below to learn more:

4. “We’ll just print more (money)”

Governments and central banks around the globe have clearly demonstrated a willingness to provide economic stimulus in the form of bailouts, social spending, and quantitative easing. In the past two years alone, 29% of the current US money supply was created.

The unsurprising result? Monetary, price, and asset INFLATION.

Conversely, bitcoin has programmed scarcity – its supply cannot be manipulated or devalued by fiscal or monetary policy, and provides direct protection from global fiat currency debasement.

5. Bitcoin is sound money

What qualities and characteristics about traditional money and fiat currency are important to us as users? The same ones that bitcoin and other cryptocurrencies exhibit: Portability, security, storability, durability, acceptability, scarcity, divisibility, and fungibility.

All of these qualities allow bitcoin to be used as both a medium of exchange and a store of value.

Throughout history civilizations have used many different mediums of money, including cattle, leather, rocks, squirrels, jewels, wine, and seashells. And before sovereign currencies took hold, gold was the medium of trade for many nations (and to this day still is a very good store of value). As with any new currency, it will take time for cryptocurrency adoption to grow.

Bitcoin is only 12 years old, and many other cryptocurrencies are still in their infancy. However, each day crypto remains accepted, active, secure, and continues to grow in popularity and usage, it will become more and more mainstream. To be clear, bank notes and credit cards were not made for the internet and the digital age we are clearly in – crypto was!

Interested in learning more? Click the image below to read a well-assembled report from Eaglebrook Advisors about the bitcoin market cycle.

And while we don’t expect for you know, understand, and adopt all 10,000 cryptocurrencies, we couldn’t resist sharing the below “primer” with you.

Have you thought but are unsure about integrating crypto into your longer-term investment portfolio? Click HERE to message us, as we welcome opening an objective dialogue with you about the many advantages, disadvantages, risks, and considerations involved.

What is Happening at TPW

Kings win!

Our President, Joseph Eschleman, spent an enjoyable, action-packed, and productive evening last Wednesday at the Golden1 Center, soaking in an upset Kings victory over the Brooklyn Nets, 112-101.

As usual, Joseph mixed some business with pleasure during the game – flanking him in the photo is District 7 Sacramento Councilmember and Super Bowl XIchampion, Rick Jennings II, and one of the top estate planning attorneys in Northern California, Mark Drobny, CEO of Drobny Law Offices.

The entire TPW family was rocking their new company-branded winter vests yesterday at the office.

Everyone is excited at how warm and chic their new Towerpoint Wealth gear is, and a big thanks to FnD Embroidery for helping with the customization and finishing touches!

TPW Taxes – 2022

January 24 marked the official beginning of the 2022 tax season, when the IRS will begin accepting and processing 2021 tax returns. Taxpayers and tax advisors are beginning to clamor for tax information, with the April 18 tax filing deadline only two short months away.

If you are a Towerpoint Wealth client, please expect your Form 1099 Composite any day now, as Charles Schwab has indicated that by mid-February you should have these important tax forms.

TPW News You Can Use

Useful and interesting content we read the past two weeks:

1. Looking for Evidence? Trust Us, Biden Administration Says – Associated Press – 2.5.2022

When President Biden’s administration was asked for evidence to back up dramatic claims about national security developments last week, it demurred with a simple rejoinder: You’ll have to trust us on that.

No, they would not reveal what led them to say they knew that Russia was plotting a false flag operation as a pretext to invade Ukraine. No, they would not explain their confidence that civilian casualties were caused by a suicide bombing rather than U.S. special forces during a raid in Syria.

The lack of transparency strained already depleted reserves of credibility in Washington, a critical resource diminished over the decades by instances of lies, falsehoods, and mistakes on everything from extramarital affairs to the lack of weapons of mass destruction in Iraq.

2. The Craziest Ways Wall Street is Spending This Year’s Record-Setting Bonuses – NY Post – 2.8.2022

Flush Wall Street hotshots blow their record-setting bonuses on cars and caviar.

3. How a Secret Assault Allegation Against an Anchor Upended CNN and Jeff Zucker – NY Times – 2.16.2022

The network’s top-rated host and its president were forced out following ethical lapses, an office romance, and a letter from a lawyer for “Jane Doe.”

Chart / Infographic of the Week

The below illustration from First Trust is an “oldie but goodie.”

While we generally believe that the stock market is very efficient, we also believe that the markets can be quite irrational in certain situations. Of course there are booms and busts.

Accurately predicting the exact days to “go all in” or “go all out” is next to impossible, and if you MISS the best days because you are out, you will pay a steep price! As evidenced by the chart below, we strongly encourage you to be humble when considering the binary decision of “going all in” or “getting completely out,” as the consequences can be devastating if you are wrong!

Quote of Week

If (when?) anyone tries to push or drag you down, just think about this quote from Denzel Washington!

TPW Washington Watch

Congress returned to Washington in 2022 facing a difficult legislative environment. The narrow margins in both chambers were already a huge impediment to passing legislation, but the fact that 2022 is a midterm election year only exacerbates the political tensions.

As a result, 2022 is expected to be relatively light on big legislative initiatives—though the atmosphere could be right for a dormant retirement savings bill to be rekindled. It is also expected to be a big year for regulations, as the administration seeks to use the regulatory process to accomplish some of its priorities away from the gridlock on Capitol Hill.

Click below for an excellent commentary from Charles Schwab that summarizes many of the key issues in Washington that could impact you in the year ahead.

Trending Today

As the 24/7 news cycle churns, twists, and turns, a number of trending and notable events have occurred over the past few weeks:

• Clouded by doping scandals, human rights abuses, and a boycott by US diplomats, record-low ratings for NBC’s coverage of the Beijing Winter Olympics
• Scientists may have cured HIV in a woman for the first time
• Judiciary under the microscope as Congress weighs stock trading ban
• California schools will still require masks inside classrooms, even as mandate ends elsewhere
• NYC Mayor Adams fires 1,430 workers who refused to get a COVD vaccination
• The first free at home COVID tests are arriving from the U.S. government – every home in the US is eligible for four tests
• Former President Trump says filing by Justice Dept. special counsel John Durham proves he was spied on in 2016
• Intel Corp set to acquire Tower Semiconductor Ltd. for $5.4 billion

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. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle

We enjoy social media, and are actively growing our online community!

Follow us on any of these platforms, message us there and let us know your favorite charity. We will happily donate $10 to it!

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If your goal is to successfully build net worth, and you harbor concerns that a market correction (when stocks fall 10% or more from a recent high) is coming, perhaps MAD® Magazine’s Alfred E. Neuman’s catchphrase may be appropriate for you:

Over the course of 67 years, from 1952 until 2018, MAD®  published 550 regular magazine issues, as well as countless reprint “Specials”, original-material paperbacks, reprint compilation books, and other print projects. And during that same time span (while unrelated, of course), the value of the S&P 500 index grew from 23.80 to 2,506.85.

And while our point is not to celebrate Mr. Neuman and his brash and sophomoric antics, if you are at all familiar with the content of MAD® magazine, it is tempting to equate its raw satire and derision with today’s unsettled, unpredictable, and vexing global financial markets and economic environment. And for some, paging through an issue of MAD® might be as objectionable as tolerating the painful and inevitable declines that are inextricably linked to the attractive longer-term growth prospect that owning and investing in equities can provide. There is little doubt in our mind that having a strong stomach is necessary if you truly want to build net worth.

Today’s newsletter is not meant to “talk you off the ledge,” or be a diatribe instructing you to not panic. Frankly, if you are distraught about a four week decline (the length of the pullback so far in 2022), then it may actually clarify for you that owning stocks and investing in the stock market is not going to suit you very well. To quote famed investor and founder of Vanguard, John Bogle:

Additionally, a key element to success when working to build net worth is discipline. It is very important to remember to not think in terms of days, weeks, months, quarters, or even years, but instead, decades:

Fortunately, 2022’s pullback, while uncomfortable and sobering, hasn’t been too scary (not yet, at least) for most investors:

A popular measure of investor nerves is known as the VIX, or the Volatility Index, which projects the volatility of the S&P 500. While the VIX has increased significantly in four weeks, moving from 17.22 (right around its historic average) as of December 31 to 24.83 as of Thursday’s close, it is a far cry from the 80+ readings that it was clocking during the 2008-2009 Global Financial Crisis, or during the beginning of the coronavirus pandemic in March of 2020.

While we believe that working to build net worth is simple, we also understand that it certainly is not easy. And independent of whether or not a market correction is coming, is a head fake, or is already here, below are three important takeaways and reminders that should be internalized in your quest to build net worth:

1. Diversification is your friend when corrections occur and volatility is elevated.

The risk of larger losses is much greater when owning individual stocks, as opposed to owning a more diversified basket of equities, or index fund:

2. Remember, corrections happen (a lot) – on average, once every other year!

It may be tempting to try and stop the bleeding by selling while prices are depressed, but it almost always exacerbates the pain. In order to come out of this ahead, you’d have to precisely and correctly time your exit from AND your re-entry into the market. In other words, you have to be right twice.

Can you 1.) get out at – or close to – the top, and 2.) also then have the intestinal fortitude to buy back in at – or close to – the bottom, when prices are lower but things are even scarier? This is extremely difficult to do once, yet alone regularly, which is a virtual impossibility.

The S&P 500 has experienced ten bear markets of -20%, and 36 corrections of -10% or more since 1950! It is advisable instead of fearing or worrying about them, to be expecting (and embracing) them. This chart shows the peaks and troughs of all corrections from 1950 to 2020. The ones in red are bear markets, those that were over a 20% decline.

3. Lock away the password to your 401(k) and other online accounts, and keep your nose out of them. 

We’re not saying that burying your head in the sand is a good solution, but sometimes, from a behavioral standpoint, intentional ignorance can indeed be bliss. At a minimum, remembering that market and economic events that are occurring today, while important, will ultimately represent just a small “blip on the radar screen” over your entire investing career as you strive to build net worth. As Peter Lynch says:

Yes, inflation is rising, we are still firmly entrenched in the pandemic, there are heightened tensions between Ukraine, Russia, the United States, and NATO, and corporate earnings growth has slowed. All excellent excuses for a shorter-term trader to sell stocks, which clearly has happened so far in 2022. However, longer-term investors should also recognize that there are plenty of excuses to buy stocks, as interest rates are still historically low, real estate values continue to appreciate, the economy (and concurrently, corporate profits) will hopefully grow more rapidly as the omicron variant subsides and people start spending more money, and unemployment and layoffs remain extremely low.

Whether or not you are a believer that a market correction is coming, we encourage you to channel your inner Alfred E. Neuman, and not overthink it! No worry!

Our advice hasn’t wavered: Be patient, be disciplined, be humble about your ability to consistently and accurately predict the future, teach yourself to tolerate (and embrace) corrections, and maintain the resolve and the confidence that the next recovery will happen.

What’s Happening at TPW?

Just out together for a nice lunch, or auditioning for a new job at Il Fornaio??!!

We are hopeful, as are our TPW clients, that our Client Service Specialist, Michelle Venezia, and our Director of Operations, Lori Heppner, aren’t considering a career change!!

Raise your hand if you own appreciated real estate!

If you believe prices might be close to their highs, and that selling your appreciated investment real estate might be a good idea, doing a tax-free 1031 exchange is oftentimes a very attractive option!

If you are considering a 1031, are you familiar with Delaware Statutory Trusts, or DSTs?

Towerpoint Wealth has partnered with a number of leading DST sponsors such as Versity Investments and partners like Brad Davidson (pictured with our President, Joseph Eschleman, CIMA®) to help us help our clients gain exposure to commercial real estate, and its potential diversification, cash flow, and capital appreciation benefits.

Message Us to Learn More

TPW continues to seek innovative products and solutions such as DSTs to empower our clients to capture upside and keep Uncle Sam at bay, despite the uncertain future of real estate values and interest rates.

TPW Taxes – 2022

What exactly is a Form 1099, why can they be so frustrating to process, and how do you manage the problem of receiving an amended 1099 in March or April? (Hint – don’t file your taxes too soon.)

Click the image or button to read the white paper written by Steve Pitchford, our Director of Tax and Financial Planning, about handling the frustrations of Form 1099. Read White paper

TPW News You Can Use

Useful and interesting content we read the past two weeks:

1. Crime, Homelessness, Taxes: Hollywood Big Shots Fleeing L.A. – The Wrap – 1.26.2022

Why are executives and elites becoming disillusioned with Los Angeles? Rising crime, homelessness, and California’s anti-business policies are all cited by Hollywood’s rich and famous.

2. Experts Are Ringing Alarms About Elon Musk’s Brain Implants – The Daily Beast – 1.25.2022

As Elon Musk’s brain-implant startup, Neuralink, gears up for human trials, scientists are worried about the company’s oversight, the potential impact on trial participants, and whether society has meaningfully grappled with the stakes of fusing Big Tech with human brains.

3. 12 Bucket List Hikes in Northern California, One for Every Month of 2022 – 7×7 – 1.24.2022

There aren’t many regions in the U.S., let alone in the world, with the kind of ecological diversity of Northern California. With not one but three national parks in the Sierra Nevada, moody redwood forests, and a dreamy coastline teeming with whales and sea lions, you don’t have to try too hard to find a landscape that inspires.

2022 Market Perspective

In her latest market note, Liz Ann Sonders, Charles Schwab’s chief investment strategist, noted that the stock market’s decline so far in January is “glaring” (and the month isn’t over yet), and she expects the Fed to take note of the weakness and the slowdown in the U.S. economy.

She expects the Fed to start hiking interest rates in March. The uncertainty about the pace and veracity of this shift in policy could add volatility to the stock market. Click the image below to read Smoke on the Water… Fire Down Below for additional insights about Liz Ann’s perspective of 2022.

Chart / Infographic of the Week

Think cryptocurrency and digital assets are a volatile new asset class?

While we do not necessarily disagree, it is important to note that in a long-term study recently done by Van Eck, Associates, more than a quarter of S&P 500 companies had a HIGHER volatility than Bitcoin!

Quote of the Week

The overall return you ultimately earn over a lifetime of investing is largely determined by how you behave (or do not behave) when the market gets wild and crazy, like it is right now. Analogous to being a successful longer-term investor and creator of net worth, Napoleon’s definition of a “military genius” rings true:

The ultimate market irony: All past market declines look like opportunities in hindsight; all future market declines look like risks.

Trending Today

As the 24/7 news cycle churns, twists, and turns, a number of trending and notable events have occurred over the past few weeks:

• The worst January slump for the NASDAQ since 2008
• Boris Johnson’s political future hangs in the balance as the British Prime Minister faces calls to resign over “partygate” revelations
• With the news of Justice Breyer’s retirement, eyes turn to President Biden’s potential replacements
• The NFL Divisional Round – Most exciting weekend of NFL playoff football ever??!!
• President Biden is among other Western leaders preparing for Russian military action in Ukraine
• Pfizer and BioNTech announce plans to test omicron-specific COVID-19 vaccine in adult trials
• Twitter forced 4.7MM Tweet removals that violated Twitter’s rules during the first half of 2021

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. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle

The oldest and still most widely quoted proxy for the U.S. stock market, the Dow Jones Industrial Average (DJIA), or “the Dow” for short, continues to be regularly quoted by news broadcasts, newspapers, and smartphone apps as an indicator of the health (or lack thereof) of the financial markets and U.S. economy.

The Dow history is interesting, as it was created in the late 19th century by Charles Dow, co-founder of Dow Jones & Company and co-founder and editor of the Wall Street Journal (WSJ), and Edward Jones, the WSJ’s other co-founder. It is an index that has gone through 57 different revisions since it was created, and to this day is supposed to encapsulate the overall state of the stock market in a single number.

The composition of the Dow right now is determined by the Index Committee, and is designed to change as the economy changes over time. Initially comprised of 12 of the biggest and most influential companies of the day, the Dow history includes an expansion to 20 companies in 1916; by 1928, it included 30 companies, which continues to be the number tracked today. Any current member of the Dow can be dropped by the Committee if the company is deemed to be less relevant to current economic trends, to be replaced by a new company that the Committee determines to better reflect said trends. The 30 companies that currently comprise the DJIA index, and the year they were added, are as follows:

As the U.S. economy has grown over time, so has the value of the Dow. Below is a graph from FRED (Federal Reserve Economic Data) reflecting how the DJIA has almost tripledover just the past ten years, growing from 12,741.02 on 1/12/2012, to 36,252.02 on 1/11/2022:

Ten years of data not enough for you? Below is a logarithmic chart from Macrotrendsreflecting the Dow history and growth over the past 100 years (the grey bands reflect recessions in the U.S.):

Albeit with regular speed-bumps along the way, the continued and sustained growth of the Dow has been pretty amazing!

Interested in learning more? Click the thumbnail below for a straightforward YouTube video from PBS that discusses everything to do with the Dow right now:

However, for all of its “glory” and history as the best-known and perhaps most widely followed stock market index in the world, is the Dow right now really all it’s cracked up to be? At Towerpoint Wealth, we argue the answer is no, as the index is as flawed today as when it was first calculated on May 26, 1896. The various “warts” of the Dow give us pause, and cause us to discourage our clients from considering it a truly useful proxy and viable resource to rely on.

Here are four specific reasons why we disavow the Dow right now:

1. It is narrow – “only” 30 companies are represented in the index.

Because (in theory) the 30 companies that comprise the Dow Jones Industrial Average (DJIA) index are the largest and most influential in the country, they represent only about 25% of the value of the entire U.S. stock market. However, many experts (ourselves included) feel that because it consists of only 30 large capitalization (“large cap”) U.S. companies, and neglects mid cap and small cap companies, the DJIA index does not properly represent the comprehensive state of the U.S. economy.

2. The Dow is a price-weighted index

An index that is price-weighted means that higher-priced stocks have greater weight and influence on the index compared to lower-priced stocks. On the surface this may seem logical, but the problem is that a higher-priced stock has zero correlation with a higher-value company. Put differently, a $9 stock could have a higher value than a $50 stock, but because the Dow is price-weighted, that doesn’t matter.

In a price-weighted index, a stock that increases from $90 to $100 (an 11% increase) will have the same effect on the value of the overall index as a stock that increases from $10 to $20 (a 100% increase), even though the percentage move for the lower priced stock is far greater than that of the higher-priced stock.

Put differently, a percentage change up or down in the Dow doesn’t necessarily mean that the entire market has gone up or down, or even that the Dow’s 30 companies have collectively gone up or down. The higher-priced stocks contained in the index simply exert a much greater influence on its overall direction and movement.

A prime example of why the price-weighted indexing method doesn’t make logical sense is when an index component undergoes a stock split. Prior to splitting 4-for-1 in August of 2020, Apple was the highest weighted position in the Dow at 11%, but once its stock split, it immediately had much less influence on the Dow, as it dropped to the 18th highest weighted stock in the index. While a stock split obviously does not have any influence nor change the underlying value of a company (it just lowers the share price and increases the amount of shares outstanding), it does change the influence a company has within the price-weighted index it is part of.

3. The Index Committee has only five members, and uses a vague methodology for including a stock in the Dow

Discretion is an integral part of how indices are constituted, and the Dow is certainly no exception. Unlike the S&P 500, which has a long list of eligibility requirements that some big companies can’t meet, the Dow does not have hard-and-fast rules regarding how a stock gains entry to the index. It is not governed by quantitative rules, with S&P Global subjectively stating that “A stock is typically added only if the company has an excellent reputation, demonstrates sustained growth and is of interest to a large number of investors.”

Additionally, on the Dow’s Committee there are only two representatives from the Wall Street Journal and three from S&P Global. Given the cozy size of the Committee, the subjective nature of how the index is constructed, and the sheer size and financial importance of the Dow, any decisions to include or remove companies from the index impact trillions of dollars of investor funds, not to mention the potential retention of institutional investor clients by S&P Global. This can create conflicts of interest, or even opportunities for illegal activity and fraud. Don’t believe us? In September of 2020, James Yang, a member of the Index Committee, was charged with being part of an insider trading scheme leading to more than $900,000 in profits.

4. The Dow right now does not contain some of the largest and most dominant companies in the U.S. economy

Even though they represent well what has become the most dominant sector of the U.S. economy, three of the largest and most influential technology “titans” – Alphabet (formerly Google), Amazon, and Meta Platforms (formerly Facebook), are not part of the Dow. Why? See #2 above – their share prices are too high. While there is nothing fundamentally wrong with these companies, because of the Dow’s price weightings, they won’t be included in the index because they would swamp it due to their high share prices.

The only way the Dow would ever be able to accommodate any of these three stocks is if they went through a stock split, which makes zero sense, as does excluding companies from the Dow who clearly are excellent representatives of the overall United States economy just because their stock prices are too high.

The Dow has been around for 125 years, is not going anywhere, and continues to clearly be in the mind’s eye of investors. However, the four reasons listed above support our belief that it does not accurately represent the market, and just because the Dow right now is an old, familiar, and oft-quoted figure does not make it accurate, and it should not be used as a proxy for investors to gauge the health of our economy or to measure the progress (or lack thereof) of the stock market.

What’s Happening at TPW?

A big thank you and shout-out to two excellent Towerpoint Wealth clients, David Junod and Pauline Lhote, for the very generous and thoughtful sparkling wine holiday gift fromDomaine Chandon!

Now we just have to find an excuse to actually pop a bottle or two and enjoy, rather than just pretending! Cheers!

Just last week, our President, Joseph Eschleman, CIMA®, earned his Certificate in Blockchain and Digital Assets (CBDA) from the Digital Assets Council of Financial Professionals.

The CBDA course is the only cryptocurrency certificate program designed specifically for financial professionals. Graduates of the program have gained the essential knowledge and understanding of blockchain and digital assets, better equipping them to provide investors the expertise and advice they need about this new and transformational asset class.

TPW Taxes – 2022

2022 will assuredly be a different year than 2021, with income taxes no exception. Click the image below to access the 2022 Quick Tax Reference Guide, a practical resource providing a plethora of consolidated and easy-to-understand information to help you make sense of the complex and ever-evolving array of U.S. federal tax rules.

At Towerpoint Wealth, we recognize that income taxes are a “necessary evil” when helping you build and protect your wealth and net worth, but fortunately they can be planned for, managed, and oftentimes minimized!

TPW News You Can Use

Useful and interesting content we read the past two weeks:

1. Desperate No-Vaxxers Paying COVID-Positive People $150 for Dinner and COVID Infection – The Daily Beast – 1.12.2022
   
   A new vaccination mandate in Italy requires everyone over 50 to be vaccinated or pay a hefty fine. Some are opting to pay to get infected with COVID instead.
2. The 2022 NFL Playoffs – Everything You Need to Know – com – 1.9.2022
   
   AFC, NFC, and Super Bowl 2022 schedule. Seedings. TV times, dates, locations. Find everything you need to know about the NFL playoffs here.
3. Hillary 2024? Don’t Rule It Out – The New York Post – 1.12.2022
   
   Could a third time be the charm for Hillary Clinton? That’s the case made by two prominent Democrats who claim a “perfect storm” of President Biden’s plummeting job approval ratings, Vice President Kamala Harris’ own unpopularity, and the commander-in-chief’s advanced age could provide an opening for the former first lady and secretary of state.

Chart/ Infographic of the Week

After a 26.9% gain for the S&P 500 in 2021, many investors are hopeful that 2022 is another strong year for the markets. And while consistently and accurately predicting the future is next to impossible, the chart below from Morningstar gives hope to what the future may have in store for the market this year:

Quote of the Week

Staying positive and keeping a good attitude is key!

Trending Today

As the 24/7 news cycle churns, twists, and turns, a number of trending and notable events have occurred over the past few weeks:

• Microsoft hit by defections as employees move to Facebook parent Meta
• Inflation reaches its highest level since 1982 as consumer prices surge 7.0% over the past year
• San Francisco mayor London Breed announces no new restrictions, says that “we are learning to live with COVID”
• Russia has amassed 100,000 combat-ready troops, tanks, and other military equipment by Ukraine, and NATO is doing what it can to ease tensions
• Rachel Balkovec to be the first woman ever to manage a team affiliated with Major League Baseball
• Oakland students threaten to boycott classes unless school district meets COVID demands
• Sidney Poitier dies at home at the age of 94
• Analysts speculate that oil prices could hit $100 as demand outstrips supply

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. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle

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If your inbox looks anything like ours right now, the last thing you need is a generic 2021 recap or a run-of-the-mill outlook for 2022!

Never inclined to jump on a bandwagon, we’d like to offer you something a bit different, and with that being said, here is what we at Towerpoint Wealth will NOT do in 2022:

1. We will NOT glean our news from TV nor from social media

It takes a herculean effort to source truly objective and reliable news nowadays. And unfortunately, for the most part, stories we see and hear on TV do have some sort of slant or bias, that even extends to the numbers and statistics presented. Everything feels politicized, and it can be extremely difficult to separate fact from fiction, and/or opinion from objectivity.

Are you skeptical or trusting of the news media?

It obviously is important to recognize that news is negative by design, and that impressions and clicks are fast replacing television Nielsen ratings. And understanding that the fight for eyeballs (and concurrently, advertising revenue) is as intense as ever, negative stories have always sold.

What to do? Read the news, don’t watch it on TV. If you are liberal, read conservative sources. And if you are conservative, read liberal sources. Put differently, understand that completely unbiased reporting is challenging even for the most seasoned journalists; look for the whole picture, be mindful of having a “deep bench” of diverse and well-rounded news sources, and do not become pigeon-holed into only reading stories that feel right and feed into your belief system.

We value the importance of having convictions and opinions, but be disciplined enough to have opinions that are formulated from a solid foundation of quality information and sources. Read carefully, and trust cautiously.

2. We, and our clients, will NOT be misled by “lonely numbers”

“The world cannot be understood without numbers. But

the world cannot be understood with numbers alone.”

-Hans Rosling, Factfulness

Numbers and statistics can appear to offer support or even hard proof about a particular issue. However, without a larger context, they can be meaningless or even misleading. The world of wealth management, investing, and economics is awash in numbers and statistics, and we will continue to be mindful and think hard about how to help our clients appropriately interpret and find meaning in them.

Additionally, our clients expect us to be statistically literate, and we acknowledge and embrace the fact that part of our job is to figure out exactly what story the numbers tell, and why it matters. Data is an important tool for allocating capital, developing strategy, and making tactical decisions as circumstances change and evolve, but incomplete or incorrect data can muddy the waters and create a false sense of safety and a false sense of urgency (see number 3 below).

3. We will NOT lose perspective during this, or the next, crisis

Use of the word “crisis” in news stories may be at an all-time high, with reported crises involving:child-care, college dropouts, immigration, the climate, Sudan, homelessness, rural healthcare, Scandinavian money laundering, avocados, the automotive industry, Iran, Moldova, Pakistan, Israeli bacon, Trump’s reelection prospects, and Canadian national unity.

At Towerpoint Wealth, we are attuned to reports, numbers and statistics, but never are we reactionary to the hour-by-hour developments in the economy and financial markets. In the case of a reported crisis, we encourage you to follow our lead. Take a deep breath before hitting the panic button, and try to consider a larger context. There is always a broader, longer-term narrative with every news story.

4. We will NOT take outsized risks in pursuit of outlandish growth

While we faithfully execute on the customized plans we establish in tandem with our clients to compound and grow their net worth and assets, we recognize that protecting that net worth is just as important as aggressively growing it and will only take calculated and justified risks.

The math behind “making up” for investment declines speaks for itself:

If you suffer a 50% loss, you will need to DOUBLE your money to get back to break-even!

We are also quite mindful of the following:

The only thing people hate more than losing money is the person who lost it for them.

5. We will NOT lose confidence in the longer-term health of our country, our society, our government, the American economy and the American dream.

Some argue that the American Dream has become a nightmare. We vehemently disagree. No matter who we are or where we’re from or what we look like or who we love, the American Dream excludes no one. Our core values as a nation are not Republican nor Democrat, not conservative nor liberal, they are American ideologies. And as we head into 2022, we believe that Julian Castro’s quote sums it up well:

What’s Happening at TPW?

A rare photo of the Grinch (aka our Director of Operations, Lori Heppner), sneaking around on Christmas Day!

Our Director of Research and Analytics, Nathan Billigmeier, took his son Ethan to his firstSacramento Kings game last week at the Golden1 Center. The Kings didn’t win, but both dad and son had a great time!

Don and Beth Parvin, two important Towerpoint Wealth clients, were in the office for a review meeting last week, and gifted a sweet throwback Christian Brothers High School winter jacket to our President, Joseph Eschleman, which, though our offices are heated, he just had to try on.

Happy Holidays, Don and Beth – thank you for your generosity!

TPW News You Can Use

Useful and interesting content we read the past two weeks:

1. I Got COVID Three Times 
   – BuzzFeed News – 12.23.2021
   
   Yes, you can get COVID twice, and even more. While this situation is incredibly rare, this is a story of a person who was directly exposed to the virus (or parts of it that trigger an immune reaction), five times. “My antibodies should be as jacked as an Instagram bodybuilder. But apparently, they’re not…”
   
   
2. A-Rod Building Business Empire After Controversial MLB Career 
   – BNNBloomberg – 12.23.2021
   
   Alex Rodriguez had one of the most successful – and controversial – careers in Major League Baseball history. Now eligible for the Hall of Fame, the baseball world continues to weigh his lofty achievements against his sins. However, his goals in business have been as lofty as his athletic endeavors, and his ambitions are accelerating.
   
   
3. Will Apple or Microsoft Hit $3 Trillion Next Year? 10 Tech Predictions for 2022 
   – SeekingAlpha – 12.24.2021
   
   Wall Street has started its annual “look-ahead” predictions for 2022, with Wedbush Securities Dan Ives predicting big growth in the NASDAQ, the metaverse, cybersecurity spending, and the cloud, along with a moderation in the microchip shortage.

Chart/Infographic of the Week

A great legend at Merrill Lynch for several decades, Bob Farrell had a front-row seat to the go-go markets of the late ‘60’s, mid ‘80’s, and late ‘90’s, as well as the brutal bear market of ’73-’74, and also the October of ’87 crash. He was a pioneer in investor sentiment studies and market psychology, and perhaps was most famous for his Ten Rules for Investing, which are still passed around on Wall Street today:

Quote of the Week

Having a strong disdain for the scientific pretensions and formal apparatus of modern economics, and despite his Harvard professorship, John Kenneth Galbraith was never really an economist in the ordinary sense. He believed that the math and numbers-crunching missed the point, and was a full believer in being careful not to fall prey to paralysis by analysis.

Trending Today

As the 24/7 news cycle churns, twists, and turns, a number of trending and notable events have occurred over the past few weeks:

• West Virginia Senator Joe Manchin stops President Biden’s Build Back Better plan in its tracks, and is also invited by Senate Minority Leader Mitch McConnell to join the GOP
• The USFDA authorizes Pfizer’s new pill to treat COVID-19, following the end-of-November approval of Merck’s antiviral COVID-19 drug
• Bloomberg reports that South Africans contracting the omicron variant of COVID-19 are 80% less likely to be hospitalized, according to a study released by the National Institute for Communicable Diseases
• NHL players will not be participating in the 2022 Beijing Olympics due to the recent spread of COVID-19
• Teens build bus stop shelter for 5-year-old wheelchair user, protecting him from harsh weather
• Sacramento’s New Year’s Eve Sky Spectacular will take place in Old Sacramento, with fireworks set for 9:00PM PST
• The CDC shortens COVID-19 quarantine time
• Anthony Fauci says that a domestic travel vaccination rule should be considered

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. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

–  Joseph Eschleman, Jonathan, Steve, Lori, Nathan, and Michelle

We enjoy social media, and are actively growing our online community!

Follow us on any of these platforms, message us there and let us know your favorite charity. We will happily donate $10 to it!

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The Build Back Better Bill tax changes – do you stand to pay MORE, or less?

Will the Build Back Better bill tax changes translate to an unexpected de-facto holiday bonus, or instead, an unwelcome lump of coal? Read on to find out more!

While Build Back Better is a good marketing slogan, it is obviously important to unpack and better understand what this 2,135 page, $1.75 trillion piece of spending and legislation might mean for YOU. What exactly are the key provisions of this signature bill, and importantly, will the proposed Build Back Better Bill tax changes cause you to pay MORE or LESS to Uncle Sam if the proposed legislation passes?

Let’s briefly “unpack” the Build Back Better Act, discuss which provisions are NOW being negotiated in the Senate, and importantly, evaluate the potential Build Back Better bill tax changes, and the tax consequences of what a final package might look like.

First, a brief background. The Build Back Better Act is the third and most economically significant part of President Biden’s Build Back Better Plan. Originally an immense $3.5 trillion social spending package, lawmakers in the House of Representatives have scrambled and negotiated over the past six months, finally ending up here – approving and sending to the Senate a “slimmed-down” (but hardly modest) $1.75 trillion (!) version of the plan. Now, the REAL debate and negotiations begin.

With two noteworthy holdouts…

…Senate Democrats are mostly united in passing this major legislation, but haven’t yet been able to agree on what should be kept and what should be scrapped to obtain the two needed votes from the aforementioned holdouts. On the flip side, and unsurprisingly in today’s partisan political atmosphere, all 50 Senate Republicans are aligned against it.

Now, regardless of whether you are a Democrat or a Republican, and regardless of whether you agree or disagree with the need to pass this IMMENSE bill, at Towerpoint Wealth we believe that it is a when, and not an if, some version of this legislation ultimately DOES pass and become law, even if it isn’t until 2022. And while the final terms are obviously still unclear, the bill is proposing to make MAJOR changes to four main areas:

1. Social services and programs
2. Clean energy
3. Immigration
4. Build Back Better bill tax changes

And as Joe Manchin, Senator from West Virginia and one of the two Democratic holdouts who is squarely in the middle of this debate, said earlier about the bill, “We should be very careful what we do. We get any of these wrong, we’re in trouble.”

If you are interested in a deeper breakdown of the first three areas (as well as Build Back Better tax changes highlighted below), we encourage you to click the thumbnail below and watch our newly-produced educational video:

Today’s Trending Today is specifically focused on the proposed Build Back Better bill tax changes, which would raise a SIGNIFICANT amount of tax revenue from the very wealthy and corporations, and also offer a proposed tax cut for those who live in high income and mostly blue tax states.

The Congressional Budget Office (CBO) estimates the bill will cost a total of almost $1.7 trillion, and add $367 billion to the federal deficit over 10 years. Adding in $207 billion of revenue that is estimated to result from increased tax enforcement in the bill, and the net total increase to the deficit is projected to be $160 billion.

Originally, President Biden’s initial Build Back Better plan was to raise taxes on families earning more than $400,000/year, which would have overturned the Tax Cuts and Jobs Act passed in 2017. However, this provision was dropped in the final version of the bill passed by the House of Representatives on November 19, as holdout Democratic Senator Kyrsten Sinema of Arizona balked at it, saying she wouldn’t accept any additional higher tax rates: not for individuals, not for capital gains, and not for corporations.

Instead, a significant and updated House-passed Build Back Better bill tax change imposes surtaxes on taxpayers with extremely high incomes. When would this surtax kick in? When adjusted gross income eclipses $10 million, a 5% surtax on income would be applied. Additionally, taxpayers would be subject to an additional 3% surtax on any income over $25 million. Clearly these proposed Build Back Better bill tax changes would only be punitive to very high income earners.

Something else to keep in mind – the new surtaxes applicable to the $10 million and $25 million adjusted gross income thresholds INCLUDES capital gains taxes. So, if you have owned highly appreciated securities (think Apple or Tesla or Amazon stock) for a long time, and then sell your shares and realize a large capital gain, that income is also included when calculating whether or not you would be subject to them.

Additionally, another major Build Back Better bill tax change would be to INCREASE the state and local income tax deduction, commonly known as the SALT deduction.

The SALT deduction is a tax deduction that allows taxpayers of high-tax states to deduct local tax payments on their federal tax returns. Before 2017, there was no limitation on the SALT deduction. However, under the Trump administration’s Tax Cuts and Jobs Act, the SALT deduction was CAPPED at $10,000. The Build Back Better bill tax change to SALT proposes a new INCREASED deduction limit of $80,000, benefitting wealthier residents of high-tax blue states like California, New Jersey, and New York.

This change would cost the government $229 billion in revenue, and was not part of Biden’s original BBB plan – it was added later in the House negotiations.

Backdoor Roth IRA conversions, a popular technique oftentimes used to fund a tax-free Roth IRA without being subject to the Roth IRA income limitations, would also be eliminated as another Build Back Better bill tax change.

And lastly, income recognized on cryptocurrency transactions would be subject to 1099 reporting by crypto brokers and custodians.

Here is a visual summary of the Build Back Better bill tax changes:

Head spinning yet? Obviously the myriad of proposed Build Back Better bill tax changes is a lot to keep track of. However, at Towerpoint Wealth, that is exactly what we continue to do on a regular basis.

Considered by some to be the most consequential economic legislation in the past 50 years, negotiations on the Build Back Better bill are far from over. And any tweaks to this massive legislation will then require another vote in the House. However, regardless of how and when this situation plays itself out, we feel it is safe to say that YOU WILL feel the effects of at least one component of the proposed Build Back Better bill tax changes, and encourage you to contact us to have an objective conversation about how you will be positively or negatively affected by the tax changes you will personally see from this bill.

What’s Happening at TPW?

A huge thank you to Ascent Builders for the AMAZING holiday wreath, and perhaps an even better gift, the personal delivery from their esteemed controller, Patty McElwain (holding the wreath and standing next to our phenomenal Client Service Specialist, Michelle Venezia)!

Spreading cheer is an Ascent Builders specialty, and they are a firm we feel very fortunate to have such a long and productive partnership with.

Our President, Joseph Eschleman, spent some time earlier this month celebrating Christmas (yes, that is a Griswold Family Christmas t-shirt he is wearing!) with close Towerpoint Wealth friend and business partner, Niki Dawson. Niki is the President of TaylorMade Web Creations, and she is absolutely amazing if you have any web design and/or digital marketing needs!

Graph of the Week

Tesla’s market value is now more than General Motors, Ford, Volkswagen, and Mercedes-Benz, COMBINED!

The below chart indicates that electric vehicle sales will exceed gas-powered vehicles by 2040 – do you agree? Disagree?

Cartoon of the Week

We came across this gem that provides a different and unique “take” capturing the essence of what perseverance means, and felt compelled to share!

Illustration of the Week

Surprisingly, in the wealth management industry, there are two different standards of care for clients:

1. The fiduciary standard – a legal obligation requiring a financial advisor to act solely in a client’s best interest, 100% of the time, when offering personalized financial advice, counsel, and planning
2. The suitability standard – a much lower legal hurdle to clear than fiduciary, not obligating a financial advisor to put their client’s best interests first, and instead only requires a reasonable belief that a recommendation is “suitable” for a client

While we believe that consumers and clients are harmed with the absence of a uniform fiduciary standard that applies to ALL financial professionals, this is the world we live in. A non-fiduciary is legally allowed to sell you a product or investment that pays the highest commission, as long as it is considered suitable.

If you have an advisor who works for any of these firms, he or she is NOT a fiduciary to you. Conversely, if you are working with an advisor at a fully-independent, SEC-regulated investment advisory firm (such as Towerpoint Wealth), he or she IS a fiduciary to you!

Put differently…

Trending Today

As the 24/7 news cycle churns, twists, and turns, a number of trending and notable events have occurred over the past few weeks:

• Underlining the dramatic surge in infections the country continues to see, the U.K. reported a record number of new daily COVID-19 cases on Wednesday, with 78,610
• The U.S. House of Representatives voted on Tuesday to hold former White House chief of staff Mark Meadows in contempt, over defiance of January 6 Committee subpoena
• Businesses, employers, and universities begin mandating COVID-19 booster shots
• The rematch? Hillary vs. Trump in 2024?
• Steph Curry gives new Rolexes to Draymond Green and Andre Iguodala after sinking his 2,974th career 3-pointer, breaking Ray Allen’s NBA record
• Iconic American musician Bruce Springsteen reportedly sold his full song and publishing catalog to Sony Music for a whopping $500 million
• Hackers linked with governments of China, Iran, North Korea, and Turkey are exploiting a critical flaw in software used by big tech firms around the world

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. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

 Joseph Eschleman, Jonathan, Steve, Lori, Nathan, and Michelle

We love social media, and are always actively growing our social media community!

Follow us on any of these platforms you use, and then message us with your favorite charity, and we will happily donate $10 to it!

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According to a 2021 survey conducted by The Harris Poll, about 26% of Americans say their most trusted source for financial advice is a financial advisor, representing an 18% increase from 2020.

With a direct correlation to the shakeup and uncertainties caused by the COVID-19 pandemic, and the highly unsettled nature of the U.S. economy, financial markets, and politics still existing today, it comes as little surprise to see this increasing trust and confidence in the counsel of financial advisors.

Conversely, it is also interesting to note that the most trusted source of financial advice known as “Yourself” experienced a 33% drop (!) from 30% in 2020 to 20% in 2021.

Ask virtually any financial advisor: The data presented above supports the anecdotal evidence – during periods of high volatility and uncertainty, people tend to become uncertain and trust themselves less when it comes to their finances and investing. Conversely, in periods of low volatility, rising markets, and higher (perceived) certainty, people become overconfident. Or, illustrated differently:

Why do investors feel smarter and more confident when the markets are rising, and dumber and less confident when the markets are declining? One word: emotions. At Towerpoint Wealth, we believe that one of the central qualities of a skilled financial advisor is the ability to help their clients remain objective, avoid overconfidence, or, on the flip side, depression and hopelessness.

There are more than 275,000 licensed professionals in the United States right now that have “Financial Advisor” (or some derivation thereof) on their business card, according to the Bureau of Labor Statistics. And as is true of many professions, there are a myriad of makes, models, specializations, and niches that these advisors fall into. Additionally, these 275K financial advisors represent a varying cross-section of experience, planning, knowledge, and service.

A core philosophy here at Towerpoint Wealth has always been to focus on and place energy into the professional growth and development of our advisors. Our clients deserve and expect us to not only stay sharp in regards to current economic, financial, and investment trends and developments, but also to consistently be “sharpening our professional saws” in the areas of practice management, behavioral finance, client service, and leadership.

To that end, our President, Joseph Eschleman, our Partner, Wealth Advisor, Jonathan LaTurner, and our Director of Research and Analytics, Nathan Billigmeier, traveled to Music City last week for a three-day Investments Forum, hosted by Dynasty Financial Partners. The venue, the lineup of talent, and the level of content were truly amazing, and the TPW colleagues spent an enriching and enjoyable three days sharpening their professional saws at the conference.

The highlights included:

• Managing Diverse Portfolios for Diverse Investors: A responsible investing/ESG “deep dive” with Amanda Baker Kahn from Ethic Investments, along with Michelle Gadsden-Williams from BlackRock and Yasmin Landyfrom Fidelity
• A Fireside Keynote – with the 43rd Governor of Florida, Jeb Bush
• Born to Lead – a CEO Breakfast with NBA Champion Avery Johnson
• Entrepreneurs Building Transformative Companies – with Steve Case, America Online co-founder, and Chairman and CEO of the D.C.-based venture capital firm Revolution
• Uncovering Investment Opportunities Around the Globe – with the legendary Howard Marks, Co-Chairman of Oaktree Capital
• Macro Economics Virtual Fireside Chat – with Liz Ann Sonders, Charles Schwab’s Chief Investment Strategist
• Keynote with Daymond John – the entrepreneurial and life journey of FUBU’s founder and Shark Tank’s one and only!
• A Conversation Like Any Other – with Jim Nantz, legendary CBS Sports commentator

Click the thumbnail below to see the full agenda of speakers, activities, and content that, in addition to some Music City fun during the evenings, kept Joseph, Jonathan, and Nathan moving for three days!!

Steve Case

Photo boxes, clockwise from upper left: 1.) Jim Nantz 2.) Joseph, Nathan, Jonathan at Loser’s Bar and Grill in Nashville 3.) Howard Marks, Daymond John, Liz Ann Sonders

New Towerpoint Wealth White Paper

After focusing on the topic in our 11.9.2021 edition of Trending Today, our Director of Tax and Financial Planning, Steve Pitchford, authored and published the below white paper, focusing on THREE key ideas to potentially reduce the tax “sting” associated with IRA and other tax-deferred retirement account required minimum distributions (RMDs).

Click here to download and read this brand-new report!

Video of the Week

Our President, Joseph Eschleman, CIMA®, was the featured guest on Laurel Sagen and Shasta Escalante’s Heart 2 Biz podcast earlier this month.

Heart 2 Biz is a weekly podcast focused on local Sacramento professionals and entrepreneurs who “pour their hearts into their businesses.” Focused on finding out not only how people are building and running their businesses, but how they are doing so with integrity and heart.

Click below to watch the podcast, and to hear Joseph’s story of how the permanent Pennsylvania-to-California cross-country adventure he took in 1999 helped to shape his heart and him as a person; and, how his evolution from employee to business owner and entrepreneur has molded his character and overall outlook on life. It’s a great (and crazy!) story with plenty of interesting twists and turns, confirming what virtually every Towerpoint Wealth client already knows to be true – that the energy Joseph pours into his client partnerships and into Towerpoint Wealth has a foundation based on both integrity and on heart!

What’s Happening at TPW?

The ladies of Towerpoint Wealth (our Client Service Specialist, Michelle Venezia, and our Director of Operations, Lori Heppner) enjoyed a nice lunch together earlier this week at Il Fornaio in downtown Sacramento, right here on Capitol Mall!

In Denver this past Sunday with two friends, our President, Joseph Eschleman, enjoyed watching his favorite football team, the Philadelphia Eagles, dismantle the hometown Broncos, 30-13!

A happy moment for our Director of Tax and Financial Planning, Steve Pitchford, our Director of Operations, Lori Heppner, and our Director of Research and Analytics, Nathan Billigmeier.

Charts of the Week

Rivian (Nasdaq: RIVN), the newly-public electric vehicle automaker (backed by Amazon) hit a market capitalization of $100 billion earlier this week – and they haven’t (yet) delivered a single vehicle! This is the largest U.S. IPO since 2014, when Alibaba went public, and makes the company bigger than both GM and Ford.

In the eyes of many investors and market pundits, this further cements the idea that traditional automobiles and automobile manufacturers are going the way of the dodo:

Quote of the Week

Excellent philosophy from IBM’s long-time chairman and CEO, Thomas J. Watson…

Cartoon of the Week

In the spirit of what we discussed above about investor (over) confidence, the below cartoon thoughtfully illustrates one of Warren Buffett’s famous quotes:

“You need to divorce your mind from the crowd.”

Trending Today

As the 24/7 news cycle churns, twists, and turns, a number of trending and notable events have occurred over the past few weeks:

• The surface elevation of Folsom Lake is just 370 feet, the lowest level since December 2015, and just 22% full
• Two arrested on the steps of the Kenosha County Courthouse amid deliberations in the Kyle Rittenhouse trial
• The NFL is increasing COVID protocols ahead of Thanksgiving
• An update to the Belarus/Poland border and migrant crisis
• A federal appeals panel on Saturday temporarily blocked a new coronavirus vaccine mandate for large businesses, in a sign that the Biden administration may face an uphill battle in its biggest effort yet to combat the virus among the American work force
• A Boy Scout uses his skills to help rescue a couple and their injured dog on a Hawaii trail
• Taiwan deploys advanced fighter jets amid tensions with China

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. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

We love social media, and are always actively growing our social media community!

Follow us on any of these platforms you use, and then message us with your favorite charity, and we will happily donate $10 to it!

Click HERE to follow Towerpoint Wealth on LinkedIn
Click HERE to follow Towerpoint Wealth on Facebook
Click HERE to follow Towerpoint Wealth on Instagram
Click HERE to follow Towerpoint Wealth on Twitter
Click HERE to follow Towerpoint Wealth YouTube
Click HERE to follow Towerpoint Wealth Podcast A Wealth of Knowledge

How would you like to be FORCED to take extra, unwanted, and unnecessary taxable income that would ADD TO your taxable income for the year and potentially catapult yourself into a higher income tax bracket?

If you are 72 or older and own an IRA or tax-deferred retirement account and receive required minimum distributions (RMDs), this may be happening to you every single year. If you are not yet 72, take this as fair warning – you have time to plan and put some tax saving solutions in place!

Many individuals know well enough that RMD taxes are a “necessary evil” of contributing to, and investing in, retirement accounts such as 401(k)s, IRAs, 403(b)s, etc. However, what investors often fail to realize is that there are impactful and proactive tax planning strategies that can materially lessen the sting of these RMD taxes.

As discussed below, short of enacting a QCD every year for the full amount of your RMD (do the acronyms have your head spinning yet??!!), there is no way to outright avoid paying income taxes on your IRA and retirement account RMDs. However, at Towerpoint Wealth, we are proactive in working with our clients to reduce the pain associated with RMD taxes if and when possible, usually utilizing one or more of the following three planning opportunities, each of which can help:

Tax Saving Solutions

1. Accelerate IRA withdrawals

We get it, as this sounds counterintuitive. Take more money out to save on taxes?? The short answer – yes.

Subject to certain exceptions, age 59 ½ is the first year in which an individual is able to take a distribution from a qualified retirement plan without being subject to a 10% early withdrawal tax penalty.

Consequently, the window of time between age 59 ½ and age 72 becomes an important one for proactive RMD tax planning. By strategically taking distributions from pre-tax qualified retirement accounts between these ages, an individual may be able to lessen their overall lifetime tax liability by reducing future RMDs (and the risk that RMDs may push them into a higher tax bracket) by reducing the retirement account balance.

This strategy becomes particularly opportune for an individual that has retired before age 72, as it often affords the individual the ability to take these taxable distributions in a uniquely low income (and lower income tax) period of time.

2. Execute a Roth conversion

A Roth conversion is a retirement and tax planning strategy whereby an individual transfers, or “converts,” some or all of their pre-tax qualified retirement plan assets from a Traditional IRA into a tax-free Roth IRA.

While ordinary income taxes are owed on any amounts of tax-deferred contributions and earnings that are converted, a Roth conversion, when utilized properly, is a powerful tax planning strategy to reduce a future IRA RMD, and concurrently, RMD taxes, as Roth assets are not subject to required minimum distributions since they generate no tax revenue for the government. Further, Roth conversions also 1) maximize the tax-free growth within a taxpayer’s investment portfolio, 2) provide a hedge against possible future tax rate increase (as Roth retirement accounts are tax-free), and 3) leave a greater tax-free financial legacy to heirs.

3. Use the IRA RMD to make Qualified Charitable Distributions (QCDs)

When an individual becomes subject to an IRA RMD, in lieu of having the IRA distributions go to them, they may consider facilitating a direct transfer from their IRA to one, or more, 501(c)3 charitable organizations (up to $100K annually). This is known as a Qualified Charitable Distribution (QCD).

As long as these distributions are made directly to the charity, they 1) satisfy the RMD and 2) are excluded from taxable income.

This strategy, when executed property, results in a dollar-for-dollar income reduction compared to a “normal” RMD.

Fortunately or unfortunately, there is no magic bullet nor panacea when it comes to RMD taxes and the income tax obligation you will have when taking RMDs. However, we feel that you still have an obligation to be aware and/or mindful of the planning opportunities mentioned above, as potentially reducing your income tax liability is certainly better than paying “full boat” every year!

Video of the Week

As a follow up to the subject focus of our most recent 10.15.2021 Trending Today newsletter, click the thumbnail below to watch the educational video we just produced last week, featuring our President, Joseph Eschleman, as he discusses the THREE key ingredients that are crucial when working to successfully build and protect your wealth, and SEVEN specific long-term investing strategies and philosophies that need to be developed and internalized if you truly want to be a successful long-term investor.

What’s Happening at TPW?

We love and are proud of the work hard, play hard culture we have built here at Towerpoint Wealth, and in the spirit of that philosophy, the TPW family took a ½ day “Teambuilding Tuesday” earlier this week, enjoying lunch together at The Station Public House in Auburn, followed by fun and games (literally!) at Knee Deep Brewing Company!

Our President, Joseph Eschleman, gave two (!) pints of A- last week, with a “Power Red” blood donation at the American Red Cross in Sacramento.

Graph of the Week

There are just under two months left in the year, and from strictly a seasonal perspective, November and December have historically been two of the better months on the calendar. The chart below shows the S&P 500’s performance during the last two months of the year in the post-WWII period. Overall, the median performance has been a gain of +3.72%, with positive returns just over three-quarters of the time (76.3%).

The S&P 500’s 22.6% gain this year is the strongest year-to-date reading through October since 2013. 2021 is just the tenth year since 1928 where the S&P 500 has been up more than 20% YTD through October. In the chart above we have highlighted each of those years in dark blue.

Quote of the Week

It is easy to be an investor when things are relatively “normal” and calm; it becomes much more difficult to be disciplined and stay objective when things get crazy…

Trending Today

As the 24/7 news cycle churns, twists, and turns, a number of trending and notable events have occurred over the past few weeks:

• Republican Glenn Youngkin defeats Democrat Terry McAuliffe in the closely-watched Virginia governor’s race on Tuesday night
• CDC now recommends that children between the ages of 5 and 11 years receive the Pfizer-BioNTech pediatric COVID-19 vaccine
• The Atlanta Braves won their first World Series championship since 1995, hammering the Houston Astros 7-0 on Tuesday night in Game 6
• Amid growing concerns about the technology, Facebook said it will shut down its face-recognition system and delete the faceprints of more than 1 billion people
• Investigation continues into Alec Baldwin’s fatally shooting of cinematographer Halyna Hutchins on a movie set October 21
• World leaders outline climate commitments at COP26 summit
• UK authorizes Merck COVID-19 antiviral pill, the first pill shown to successfully treat COVID-19

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. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle

We think social media is fun, and are always actively growing our social media community!

Follow us on any of these platforms you use, and then message us
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“I’m definitely a long-term investor.”

“I don’t get worried about the negative news headlines.”

“Declines happen – I get it.”

We have heard these lines uttered by the most well-intentioned and intelligent investors time and time again. Sometimes, they hold true to their word. Sometimes, the polar opposite. Saying you are a long-term investor is easy; behaving like a long-term investor is much more difficult, as this is clearly easier said than done. 

Put differently, as the great boxer Mike Tyson said: 

When things are relatively “normal,” investing seems easy. However, when things get (pick your favorite adjective): crazy, volatile, unbelievable, explosive, unpredictable, turbulent, harrowing, and/or unsettling, it becomes much more difficult to tolerate, endure, and absorb a major body blow to your “nest egg” (read: a consequential drop in value). Watching your money SHRINK can be a very emotional and traumatizing experience. And while there is no perfect recipe for becoming a successful long-term investor, at Towerpoint Wealth we believe it all starts with three basic ingredients: 

1. Consistent objectivity
2. Measured behavior
3. Disciplined thinking and execution

In addition to the inherently emotional nature of money, there are a myriad of uncontrollable variables populating the external environment we live in: The movements of the stock market. The vicissitudes of the US and global economy. The fickle nature of the political winds. Increases and declines in interest rates, income taxes, and inflation. Just a few examples from a very lengthy list of items that are out of our control. And while it is human nature for us to think (even to outright believe) that we have some control over many of these things, the truth is, if we want to truly be a successful long-term investor, we must recognize and accept the things we do not control.

At Towerpoint Wealth, we believe that the most successful long-term investors and wealth-creators have a somewhat-unique capability, a skill, that allows them to maintain appropriate perspective, to exhibit a high degree of humility, and to be laser-focused on the bigger picture. Fortunately, this is a skill that can be coached, cultivated, and learned, and is something that we have a relatively high degree of control over.

Long-Term Investor

Let’s make this more tangible – below are seven key principles that, at Towerpoint Wealth, we believe are necessary to be a successful long-term investor:

1. Be humble, be aware of, and accept, things that are out of your control
2. Keep your emotions in check, and be acutely self-aware of the fear and greed that we may feel when considering our finances and investments, especially in periods of extremes
3. Plan to live a long life, which we do have some control over!
4. Einstein was right: The power of compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays
5. Volatility should be expected, embraced, and taken advantage of, not feared nor averted
6. Unless you have the unique ability to consistently AND accurately predict the future, stay properly invested and diversified, regardless of what you believe may happen in the market and in the economy
7. Have a plan and a strategy, and be disciplined in sticking to it, regardless of the things you have no control over

In opining about what we believe it takes to be a successful long-term investor, we would be remiss if we did not directly integrate Warren Buffett’s (aka the “Oracle of Omaha”) wisdom on this subject into this newsletter. Please click below to watch an excellent YouTube video, featuring a 2016 CNBC interview of Warren, where he outlines his FIVE best tips for successful long-term investors:

Do you have a plan to properly manage and coordinate all of your financial affairs and a strategy to grow and protect your wealth and investment portfolio, even during turbulent times?

If so, are you being disciplined in consistently following it? If you have concerns, or simply would like to discuss how you can apply the long-term investment principles discussed above, we welcome having a conversation with you. Contact Towerpoint Wealthalth and message us, as we regularly have no-strings-attached conversations about these issues, and are happy to be an objective resource for you as you begin to consider your personal and financial circumstances further.

What’s Happening at TPW?

Our Director of Research and Analytics, Nathan Billigmeier, took last Friday off to spend time in Wheatland, CA at Bishop’s Pumpkin Farm with his two boys, Ethan and Grayson, specifically helping Grayson celebrate his 2nd birthday!

Our President, Joseph EschlemanJoseph Eschleman, devouring a Philly cheesesteak (the only way a cheesesteak should be ordered, a “wiz, wit”) before jumping on a flight back to Sacramento earlier this month. Fuhgeddaboudit if you think you will find a better cheesesteak than Pat’s!

Graph of the Week

Yikes – inflation is at a 13 year high!

If you have any exposure to bonds in your portfolio, we strongly feel that it is time to take a hard look at:

How you are allocated within bonds

Your exposure to interest rate fluctuations (specifically, to rates going UP) due to inflation

Whether the risk you are taking is appropriate for your set of unique personal and financial circumstances

At Towerpoint Wealth, we have been successfully modeling what the value of a client’s portfolio would look like if interest rates INCREASE by ½, 1, or even 1 ½% over the next year or two. Message us by clicking HERE if you would like this custom analysis done for you.

Cartoon of the Week

Issues with global supply chains will impact the holiday season…

Trending Today

As the 24/7 news cycle churns, twists, and turns, a number of trending and notable events have occurred over the past few weeks:

• Inflation spike! Social Security announces +5.9% COLA for 2022
• The weekend cancellations of more than 2,000 flights were “not a result of Southwest employee demonstrations,” Southwest spokesman Chris Mainz said Monday
• What is this “Squid Game” everyone is talking about? “Squid Game,” is a Netflix drama about adults competing in deadly children’s games for a chance to escape debt
• A two-headed, six-legged baby turtle is thriving at a Massachusetts wildlife center
• A twin-engine Cessna C340 crashed into the residential neighborhood in the San Diego suburb of Santee and destroyed two homes and damaged nearly a dozen more
• DC Comics this week announced that Jon Kent, the son of Clark Kent and Lois Lane, will come out as bisexual
• Treasury Secretary Janet Yellen says there could be shortages of goods and services in the coming months as supply chain issues continue to mount

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. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle

We love social media, and are always actively growing our social media community!

Follow us on any of these platforms you use, and then message
us with your favorite charity, and we will happily donate $10 to it!

Click HERE to follow Towerpoint Wealth on LinkedIn
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Click HERE to follow Towerpoint Wealth on Twitter
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Click HERE to follow Towerpoint Wealth Podcast A Wealth of Knowledge

Lots of talk. Lots of posturing. Lots of sound bites. But not a lot of action (so far, at least). A familiar refrain? It is, when it comes to our elected officials in Washington D.C.

In today’s Trending Today newsletter, we are going to explore the $1.2 trillion bipartisan infrastructure bill, the $3.5 trillion infrastructure plan details, and, perhaps most importantly to investors, the potential federal income tax increases that may occur if and when either, or both, of these massive bills become law.

Legislators are taking a two-step approach in their efforts to pass President Biden’s ambitious jobs and infrastructure program, some provisions being Republican-friendly, and some Democrat-friendly. This two-track plan to pass this legislation works as follows: Put the GOP-friendly items in a $1.2 trillion bipartisan infrastructure bill that could pass on a bipartisan basis, and then put the rest in a much larger $3.5 trillion infrastructure bill that would attempt to pass on a party-line vote, via what is known as budget reconciliation, which only requires a simple majority to pass it.

The $1.2 trillion bipartisan infrastructure bill, known as the Infrastructure Investment and Jobs Act, already passed the Senate by a vote of 69-30 on August 10. Many people have asked: “What is the bipartisan infrastructure bill, and what’s in it?” Focusing on the traditional definition of infrastructure, the bill focuses on roads, bridges, rail, and water. It is truly a monumental measure, with an equally monumental 13 digit price tag!

What’s in the bipartisan infrastructure bill?

However, the bipartisan infrastructure bill cannot become law until it also passes the House of Representatives, and that is where things begin to become tricky.

Speaker of the House Nancy Pelosi promised that the House would vote on the $1.2 trillion bipartisan infrastructure bill yesterday, but that vote was again delayed. The problem? Pelosi faces pressure from progressive Democrats, who say they will not support the “skinny” $1.2 trillion bipartisan infrastructure bill unless the much bigger $3.5 trillion infrastructure bill, focusing on human infrastructure and social spending such as climate change mitigation, increased child care funding, and health care expansions, also moves ahead.

We truly feel it is amazing that we live in a world where spending $1.2 trillion on a bipartisan infrastructure bill is considered “skinny,” but it is when compared to the $3.5 trillion infrastructure bill!

Financing such social programs as universal pre-kindergarten, extended childcare, and expansion of health insurance coverage provided under Obamacare, the $3.5 trillion infrastructure bill, known as the American Families Plan (AFP), it represents the largest expansion of federal spending since the New Deal. And, with this enormous price tag comes the concurrent federal income tax increases to fund it. Here are the potential “highlights”:

• Federal income tax increases – the AFP will restore the 39.6% pre-Trump, pre-Tax Cuts and Jobs Act marginal ordinary income tax rate. This current marginal rate is 37%.
• Multimillionaire excise tax – the AFP places a 3% excise tax on income in excess of $5 million
• Higher corporate tax rates – the corporate tax rate is set to increase form 21% to 26.5%, with a new minimum tax of 16.5% on offshore earnings
• Higher capital gains tax rates – the federal marginal capital gains tax rate for those with incomes higher than $400,000 will increase from 20% to 25%, and will be retroactive to September 13, 2021

And the less-likely but still possible proposals:

• Elimination of the step-up in cost basis upon death
• Limitations on popular tax planning vehicles such as Section 1031 “like-kind” tax-free exchanges and IDC (intangible drilling cost) deductions

Additionally, the following indirect federal income tax increases are in the crosshairs:

• Elimination of Roth IRA conversions for taxpayers filing jointly with incomes over $450,000, and for single taxpayers with incomes over $400,000
• Elimination of “Backdoor” Roth IRA contributions, banned for ALL income levels
• Mandatory taxable drawdowns of large IRAs – contributions to IRAs that have a total value of $10 million or more would be prohibited, IRAs and 401(k)s in excess of $10 million will have required minimum distributions of half of the amount over $10MM, and for retirement accounts over $20 million, everything over $20MM must be distributed immediately

Federal Income Tax Increases Explained

Still confused? Have more questions? Hungry for clear answers? Found below is a simple educational video we just produced, designed to break down the complicated topic of the $1.2 trillion bipartisan infrastructure bill, the $3.5 trillion infrastructure plan details, and the concurrent federal income tax increases that may occur, all specifically arranged in a digestible and easy-to-understand format.

Click HERE to watch the video!

Be sure to also click the SUBSCRIBE button to follow

Towerpoint Wealth on YouTube!

Importantly, and regardless of how things shake out, at Towerpoint Wealth we sincerely believe three things:

1. Taxes will be higher over the next few years, perhaps as early as January of 2022, and perhaps significantly for higher income earners
2. It is very reasonable to assume that this infrastructure legislation, in one way, shape, or form, will become law, and that trillions of dollars will soon be spent by our Federal government
3. The next three months represent the most important tax planning months in recent years, as potential federal income tax increases mentioned above could be effective as soon as 1/1/2022

These tax planning opportunities include:

• Accelerate income into THIS YEAR, and defer tax deductions into future tax years, to leverage today’s low income tax rates and minimize tomorrow’s potential Federal income tax increases
• Utilize a partial, or even full, Roth IRA conversion in 2021, for the same reason mentioned directly above
• Evaluate gifting strategies, such as the utilization of a donor advised fund (DAF), to accelerate (or “bunch”) your charitable contributions to hurdle the standard deduction in 2021

Have a plan, and if you don’t, we encourage you to click HERE to message us and begin to discuss your circumstances further. With the high probability of federal income tax increases occurring in the near future, time is of the essence!

What’s Happening at TPW?

Our always-photogenic Director of Research and Analytics, Nathan Billigmeier, and his beautiful wife Jessica, post together prior to heading into the brand new Safe Credit Union Performing Arts Center in downtown Sacramento to see a stellar performance of Hamilton!

Most of the Towerpoint Wealth family (and extended family!) had a fun day of golf two Monday’s ago, directly supporting the Rotary Club of Arden-Arcade and the Rotary Club of Granite Bay to raise resources and money for homelessness, at-risk youth, and local schools and parks.

It was quite the “Around the World” golf tournament, specifically the craft beer, jello shots, and marshmallow drive on the TPW-hosted 7th hole!

Graph of the Week

Are you a nocoiner, or do you HODL?

A compelling chart below suggests that cryptocurrency does not appear to be going away any time soon!

What do you think is going to happen with crypto? Click HERE to message us and let us know your thoughts!

Trending Today

As the 24/7 news cycle churns, twists, and turns, a number of trending and notable events have occurred over the past few weeks:

• Secret Joe Manchin ‘agreement’ with Chuck Schumer leaves Democrats scrambling
• The US Treasury says that the US and Qatar have issued sanctions against a Hezbollah financing network in the Arabian Peninsula
• Tesla’s “full self-driving” may be says away from sharing the roadways
• The historic Giants/Dodgers 2021 NL West race may be the best of all time
• The Dixie Fire, the largest wildfire in the United States, is now 94% contained
• Joint Chiefs of Staff Chairman General Mark Milley and Defense Secretary Lloyd Austin III testify about US failures in Afghanistan during a Senate Armed Services Committee hearing

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. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle

In the Northern Hemisphere, September (the harvest month) marks the beginning of meteorological autumn, and in many countries, the beginning of the academic year.

In her short poem about the month of September, the Canadian author Lucy Maud Montgomery (best known for her classic children’s novel, Anne of Green Gables) offers a cheerful tribute to the ‘late delight’ of the month:

Lo! a ripe sheaf of many golden days

Gleaned by the year in autumn’s harvest ways

With here and there, blood-tinted as an ember,

Some crimson poppy of a late delight

Atoning in its splendor for the flight

Of summer blooms and joys

This is September

She could be saluting 2021’s cheerfully buoyant year-to-date stock market returns, with the S&P 500 up +20.35% as of Thursday, September 16th.

However, September has historically been a volatile month for stocks, and in the past has ranked as the least promising month of the year, on average, for the S&P 500 index over the 1928-2021 time frame:

Additionally, through September 1st of this year and as depicted by the chart below, the S&P 500 has reached a total of 53 (!) new record closing highs, the fifth highest figure in the past 93 years:

The $64,000 question: Is it reasonable to expect this growth and momentum continue? Here are both sides of the story:

Positive Economic Developments

1. Improving jobs market: After a rolling sequence of shortages in 2021 (including lumber, used cars, ocean shipping capacity, and semiconductors), labor also continues to be in short supply for many companies. This is reflected in the Bureau of Labor Statistics (BLS) report of an increase to 10.1 million job openings (!) as of the last business day in June, the highest EVER figure since job openings began to be tracked in December of 2000.
2. “Goldilocks” labor recovery: While the labor market is improving, it does not appear to be improving at such a rapid extent that the Federal Reserve feels compelled to becomes more aggressive in reducing (or “tapering”) its current level of asset purchases (currently $120 million per month)
3. Services and manufacturing sector expansion: On September 3rd, the Institute for Supply Management (ISM) reported its services index grew for a 15th consecutive month, registering a 61.7 in August after a hitting a record high of 64.1 in July. On September 1, the ISM reported its manufacturing index also grew for 15 consecutive months, with a very good reading of 59.9.
4. Rising home prices: Spurred by extremely low interest rates, an increased ability to work remotely, and low inventories of homes for sale, the median sales price for single-family existing homes was higher year-over-year in 2Q, 2021 for 182 of the 183 metropolitan areas tracked by the National Association of Realtors (NAR). In fact, in 94% of those metropolitan areas, median prices rose by *more than* 10% from a year earlier!
5. Potential for scaled back tax increases: In a September 2 Wall Street Journal op-ed, West Virginia Senator Joe Manchin indicated that he would not support a social infrastructure spending bill anywhere near $3.5 trillion, thus reducing the chances that such a large package would become law and lead to significantly higher taxes
6. Significant individual and institutional investor liquidity: The Investment Company Institute (ICI) reports that as of 9/15, total assets of retail money market funds amounted to $1.43 trillion (!), and total assets of institutional money market funds reached $3.03 trillion. This almost $4.5 trillion of CASH currently sitting on the sidelines represents significant buying power for financial assets
7. Significant corporate liquidity: According to Dow Jones Market Data, cash holdings among S&P 500 companies reached $1.98 trillion on August 9, a more than 30% increase from two years ago at the end of 3Q, 2019 When combined with significant available credit that remains unused, S&P estimates a total of $6.8 trillion of unused cash liquidity is available to the corporate sector as a whole. This liquidity can be used to buy back stock, increase dividends, and pursue strategic capital investments

Please bear in mind, while this is an impressive and robust list, there are also risks and concerns to worry about: Uninspiring retail sales, weakening commodity prices, slower 3rd quarter GDP growth estimates, and declining consumer confidence, to name a few.

However, at Towerpoint Wealth, we believe the most concerning potential headwind comes in the form of high stock valuations, as the S&P 500’s forward price-earnings (P/E) ratio of 21.2x is the highest it has been in two decades!

Although stretched valuations generally do not represent a causal trigger for a stock market correction, at elevated levels (as is presently), they nevertheless can serve investors well as a cautionary warning sign.

While we will always remain humble about our ability to consistently predict the future with accuracy, we do advise clients and friends to heed these high valuations, and to be vigilant in biasing high-quality, “all-weather” assets in their portfolios, especially in light of complacent stock market volatility readings and the long span of time without so much as a 5% market correction.

Confused? Worried? In need of discipline, direction, and/or a plan? Have questions or concerns? Click HERE to contact us for an objective, no-strings-attached conversation about you and your circumstances, as we fully support and echo Warren Buffet’s philosophy:

What’s Happening at TPW?

Our Partner, Wealth Advisor, Jonathan LaTurner, wrapped up an amazing trip to Washington D.C. with his fiancée, Katie McDonald, stopping by 1600 Pennsylvania Avenue and also the Smithsonian’s National Museum of Natural History.

Looks like an awesome tour of our nation’s capital, Jon!

The San Francisco Giants are hot right now (!), and our Director of Tax and Financial Planning, Steve Pitchford, and his partner, Katie, took in an AMAZING extra-innings Giants ‘W’ versus the Dodgers two Fridays ago at Oracle Park! #BeatLA

Illustrations/Graphs of the Week

You cannot keep funds in a retirement account indefinitely, as the government wants their share! Required minimum distributions (RMDs) represent the minimum amount that you must withdraw from your IRA or employer-sponsored retirement plan account each year. With the exception of Roth IRAs and Roth 401(k)s, from which withdrawals occur tax-free and are not required until after the death of the owner, regular RMDs can be a “tax thorn” in the side of many investors who have accumulated wealth in any tax-deferred retirement account.

In addition to the two resources found in the news stories at the bottom of this newsletter (discussing RMDs and QCDs), the table directly below, courtesy of Michael Kitces from Kitces.com, does an excellent job of outlining the various strategies available to reduce, minimize, and delay these pesky mandatory, and taxable, retirement account withdrawals:

Confused? Have questions or concerns? Click HERE to contact us for an objective, no-strings-attached conversation about you and your retirement account circumstances.

Trending Today

As the 24/7 news cycle churns, twists, and turns, there have been a number of trending and notable events that have occurred over the past few weeks:

• Confused by the debate over President Biden’s controversial COVID-19 vaccine booster plan? Click this helpful FactCheck.org explainer.
• Japan condemns North Korea’s ballistic missile launch as “outrageous” and a “threat to the region.“
• President Biden expresses confidence in the chairman of the Joint Chiefs of Staff, General Mark Milley, after calls for his resignation amid revelations that Milley twice called his Chinese counterpart to assure him the US was not going to attack China
• The US and Britain announce a defense deal with Australia, helping the country deploy nuclear-powered submarines to counter China’s influence in the Pacific
• Fires are still burning in Northern California, and Sequoia National Park’s giant trees are at risk
• The Zohra Orchestra, made up entirely of female musicians, has not been able to escape the Taliban’s hostility in Afghanistan
• Police are eager to question fiancée of missing ‘van life’ woman, Gabrielle Petito

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. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle