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What’s the Point? How is it SMART to Be Investing During Inflation? 6.17.2022

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Right now, there are many people saying to themselves “What’s the point?” when thinking about investing during inflation. Does the below photo conjure up familiar feelings right now when checking your accounts?

What’s the Point? How is it SMART to Be Investing During Inflation?

There is no question that today’s market, economic, and political environment is scary, volatile, disconcerting, and our favorite adjective to use, unsettling. Saving and investing during inflation seems to hold no basis in logic, and can feel like throwing good money after bad. And no matter how old you are, there are at least five things going on right now that are affecting how you are thinking about what to do (or not do) with your money, including:

stock market cartoon

Add to this consumer prices rising more than they have in the past 40 years, and these events start to sound like reasons to run. Investing during inflation is emotionally difficult, but extremely important! Don’t use these events as excuses or rationalizations to withdraw, unless you have a magic crystal ball that will accurately predict these two important things.

1. When, exactly, to get out of the stock market, before it assumedly drops more, and

2. When, exactly, to get back in to the stock market, when circumstances are even scarier and prices are lower than they are today

We’ve seen people get #1 right, or #2 right, but rarely does anyone consistently and accurately get both right.

What to do to ensure we are investing during inflation, and not turning our backs?

1. Recognize this is an emotional time, and give yourself space – it’s normal to feel worried, desperate, fearful, anxious, and even angry.

Emotions you cannot control your money Warren Buffet

We are human beings, and we are hard-wired to be emotional. However, at Towerpoint Wealth, we understand that allowing emotions to dictate financial decision-making is the most common and problematic mistake made by many investors. And we also understand that it is immensely detrimental to growing and protecting one’s net worth and assets.

As investors (and humans), we all harbor cognitive biases, and having the fortitude to recognize and not give into our biases is essential.

Wall Street Market Cycle Graph

2. Be humble about your ability to predict the future, and disciplined in systematically rebalancing your portfolio.

Trying to sell right at the top, and buy right at the bottom, is an exercise in futility, and is an expectation that no reasonable investor should harbor. We believe the sooner you recognize that accurately predicting the future is something human beings are not very good at, the better off you will be.

Instead of repeatedly flailing with attempts to time the market and accurately predict the future, have a plan to systematically rebalance your portfolio (we advise semi-annually). This forces you to sell high and buy low, add to areas that are undervalued, and reduce areas that are overvalued. The chart below provides empirical evidence of the benefits of rebalancing.

Benefits of Portfolio Rebalancing Chart

Click the Wealth Management Philosophy thumbnail image below to learn more about exactly how we help our clients build and protect their net worth.

Wealth Management Philosophy

3. If you are working, be disciplined in dollar-cost averaging (DCAing) funds into your portfolio and nest egg while the markets are temporarily weak.

Investing during inflation does not have to be any more complicated or sophisticated than investing during more “normal” times, and this certainly includes being systematic in investing during inflation.

It is important to understand that the key to dollar-cost averaging is NOT timing the market, a concept that can be difficult to internalize! The emotional temptation to terminate a DCA program becomes greater when the value of your accounts are declining, as it feels like you are throwing good money after bad, as we mentioned previously. However, the opposite is actually true, as you are adding more capital to your portfolio when prices are low, therefore building a stronger overall base to your nest egg – it just doesn’t feel very good at the time!

Dollar Averaging

You can also consider value averaging if you and/or your advisor have the time and the expertise.

4. If you are retired, be mindful about where in your portfolio you are withdrawing funds from while the markets are temporarily weak.

Having a plan to derive sustainable retirement income, during both good economic environments and bad, is essential. Follow a systematic retirement income plan like this basic example:

  • Establish a cash and emergency fund (your “feeder” fund) that holds enough cash to cover approximately two years of general lifestyle expenses
  • Regularly backfill your feeder fund with investment income from your investment accounts, i.e. interest and dividends, as well as guaranteed pension and Social Security income
  • Backfill your feeder fund by selling investments that have appreciated when the financial markets are doing well; pause and avoid selling investments at a loss when the markets are temporarily weak and in decline
Cash Emergency Fund Investment Accounts Invest Money

Would you like to discuss specific ideas on where to invest your money during an inflationary environment?

Click here and message Towerpoint Wealth

What’s Happening at TPW?

Today we are excited to welcome Luis Barrera to the Towerpoint Wealth family as our new Marketing Specialist.

We look forward to having Luis apply his marketing skills and experience to help Towerpoint Wealth connect in new ways with new and existing clients.

Click the photo below to learn more about Luis and his background, and be sure to ask him about his two Australian Shepherds, Bella and Blue, in reaching out to him with a warm “welcome aboard!”

Luis apply his marketing skills and experience to help Towerpoint Wealth
Click here and message Luis Barrera Marketing Specialist

A big congratulations to our Director of Research and Analytics, Nathan Billigmeier, for earning his Certificate in Blockchain and Digital Assets from the Digital Assets Council of Financial Professionals just last week!

Certificate in Blockchain and Digital Assets from the Digital Assets Council of Financial Professionals

What else is happening with the Towerpoint Wealth family?

Click Here Follow Instagram

TPW Taxes – 2022

While the IRS has historically provided significant tax breaks to real estate investors, the 2017 Tax Cuts and Jobs Actcreated another avenue of advantage for these investors through the creation of the Opportunity Zone program. By investing in an Opportunity Zone (OZ) through an investment vehicle called a Qualified Opportunity Fund (QOF), investors are provided with a unique opportunity to potentially defer, reduce, and eliminate capital gains taxes!

Click the image below to open and review a well-assembled white paper we recently published on the specifics of Opportunity Zones and Qualified Opportunity Funds, the tax advantages of investing in Qualified Opportunity Funds, as well as other considerations for an investor contemplating a QOF.

Opportunity Zone (OZ) - Qualified Opportunity Fund (QOF)

Curious if you might benefit from an OZ or a QOF in 2022?

Click here and message Towerpoint Wealth Steve Pitchford

TPW News You Can Use

Useful and interesting content we read the past two weeks:

1. The Markets and Households Lose Faith that the Fed Can Handle Inflation – The Washington Post – 6.14.2022

Fed Can Handle Inflation

The Federal Reserve’s missteps in waiting too long to tackle the greatest run-up in prices in four decades has shaken trust across the markets and the American public that it is up to the task of curbing inflation.

2. For Families Deeply Divided, A Summer of Hot Buttons Begins – AP News – 6.16.2022

For families fractured along red house-blue house lines, summer’s slate of reunions, trips and weddings poses another exhausting round of tension at a time of heavy fatigue. Pandemic restrictions have melted away but gun control, the fight for reproductive rights, the Jan. 6 insurrection hearings, who’s to blame for soaring inflation and a range of other issues continue to simmer.

Keep Abortion Legal

For families fractured along red house-blue house lines, summer’s slate of reunions, trips and weddings poses another exhausting round of tension at a time of heavy fatigue. Pandemic restrictions have melted away but gun control, the fight for reproductive rights, the Jan. 6 insurrection hearings, who’s to blame for soaring inflation and a range of other issues continue to simmer.

3. From Great Resignation to Forced Resignation – Tech Companies Shift to Layoffs After a Huge Ramp Up in Hiring – Marketwatch – 6.15.2022

Tech Companies Shift to Layoffs

Thousands of layoffs in the tech sector, compounded by hiring freezes and a slowdown in hiring, highlight the abrupt shift in fortunes over the past several months as a result of rampant inflation, fear of stagflation and recession, supply-chain interruptions, the war in Ukraine, an ailing stock market and other red-alert economic factors.

Chart / Infographics of the Week

The Fed raised rates 75 basis points (3/4 of a point) on Wednesday. This is the biggest rate hike since 1994!

One of the main reasons for the Fed’s hike was the massive increase in consumer inflation projections in the next year.

Fed’s hike was the massive increase in consumer inflation projections
What might this big rate increase mean for you?
Why should you should care?
Click here and message Towerpoint Wealth

TPW Educational Video : Are You Really a Long Term Investor?

An essential, yet frankly sometimes annoying, question to ask in today’s current difficult market environment:

✅ Are you *really* a long-term investor?

Click the thumbnail below to learn what you may be doing wrong

Are you *really* a long-term investor?

Quote of the Week

An excellent quote below from author, entrepreneur, and photographer James Clear. Famous for his #1 NY Times best seller Atomic Habits, Clear focuses on habits, decision-making, and continuous improvement in his work.

James Clear Quote

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

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.

Download Newsletter Towerpoint Wealth

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

Towerpoint Wealth Sacramento Independent Financial Advisor

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!

Click HERE to follow TPW on LinkedIn
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Click HERE to follow TPW on Instagram
Click HERE to follow TPW on Twitter

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Investment Advice from Warren Buffett – Never Bet Against America! 05.05.2022

It is this investment advice from Warren Buffett that has been ubiquitous throughout his storied career:

1. Accurately predicting the stock market is a fool’s game, and
2. Never bet against America!

This image has an empty alt attribute; its file name is TT_5.06_WarrenBuffett_500px-Trending-Today.gif

After two remote pandemic years, an estimated 25,000 Berkshire Hathaway shareholders flocked to Omaha, Nebraska last weekend for the in-person return of the Berkshire Hathaway annual shareholder’s meeting, featuring the omnipresent, dynamic, and larger-than-life 91-year-old Warren Buffett.

Along with his 98-year-old right hand man and long-time sidekick Charlie Munger, the “Oracle of Omaha” presided over a spirited, intellectual, and oftentimes jovial congregation of investors from around the globe. Live-streamed by CNBC, the event had a festival feel to it, and was described as an “opportunity to learn from the masters.” Whitney Tilson, the CEO of Empire Financial Research who has been going to Berkshire’s shareholder meeting for the past 25 years, said that the event is always “intellectually, physically, and emotionally fulfilling.”

Where Warren Buffett invests

Want some investment advice from Warren Buffett? Here are four excellent takeaways from the Berkshire shareholders meeting:

Investment Advice from Warren Buffett

1. Both Buffett and Munger see market volatility and speculative behavior as an opportunity.

Buffett lambasted Wall Street for encouraging speculative behavior in the stock market and effectively turning it into a gambling parlor.

“Wall Street makes money, one way or another, catching the crumbs that fall off of the table of capitalism… They make a lot more money when people are gambling than when they are investing” Buffett said.

However, he then went on to say that the situation can create market dislocations that give Berkshire Hathaway an opportunity. “That’s why markets do crazy things, and occasionally Berkshire gets a chance to do something.”

Warren Buffett said

2.  Buffett’s trick for getting his money’s worth out of the stock market? Not obsessing about finding a perfect time to invest in a stock.

Go ahead and invest, and then observe the market over time to see if you should buy more of that company’s stock. Buffett says that this strategy has a higher chance of return, and it alleviates some of the pressure of predicting the stock market.

If the value of the stock dips after you buy it, and you still believe in the company, he suggests that the shares have become less expensive, so buy more. This is where Warren Buffett invests.

Another billionaire appears to feel the same way:

Elon Musk

3. Buffett prefers “assets with value” over bitcoin.

While bitcoin has steadily been gaining acceptance from the traditional finance and investment world, Buffett is sticking to his skeptical stance on the cryptocurrency.

When asked about bitcoin, Warren Buffett said it is not a productive asset and doesn’t produce anything tangible. He then elaborated and gave a hypothetical answer:

hypothetical answer

In short, bitcoin will not be where Warren Buffett invests.

4. Inflation swindles almost everybody.

From stock and bond investors, to people who stash cash under their couch, inflation hurts many different kinds of investors.

“You print loads of money, and money is going to be worth less,” Warren Buffett said.

Additionally, while he said that he couldn’t, and wouldn’t, predict the trajectory of inflation over the coming months or years (just like he avoids predicting the stock market), he did say that the best protection against inflation is your own personal “earning bar,” as a person’s skills, unlike currency, won’t be taken away and are inflation-proof.

Buffett then summarized: “The best investment by far is anything that develops yourself – and it’s not taxed at all.”

Buffett, Munger, and Berkshire appear to be doing something right, as the S&P 500 has dropped more than almost 14% this year so far, while Berkshire’s stock is up almost 6% year-to-date! We do believe that investment advice from Warren Buffett is worthy of our attention.

Click the image below to watch any part (or all!) of the BRK annual shareholder’s meeting.

Berkshire Hathaway Warren Buffett said

What’s Happening at TPW

It’s a family affair at Towerpoint Wealth!

It felt a little like a Billigmeier family reunion earlier this week, as Marc and Glenda, two good Towerpoint Wealth clients, flanked their son and our Director of Research and Analytics, Nathan Billigmeier, prior to their comprehensive financial, investment, and retirement review meeting.

Both Marc and Glenda are well-versed in Warren Buffett’s philosophies, and know that accurately predicting the stock market is next to impossible. A key factor in their longer-term success is most certainly their humility and their discipline, which are also two foundational TPW wealth-building and wealth-protection ideals.

Warren Buffett philosophies Towerpoint Wealth Client

Our President, Joseph F. Eschleman, CIMA®, and friend of Towerpoint Wealth, John Palombi, put some work in last weekend at the Fair Oaks Sun Run, clocking a quick five miles. Nice work, gentlemen!

John Palombi Joseph Eschleman Fair Oaks Sun Run

TPW Taxes – 2022

Is it full steam ahead for Secure 2.0?

After passing the House in late March by a 414-5 vote, the bipartisan Securing a Strong Retirement Act of 2021 is now awaiting approval by the Senate, with Congress expected to vote on a final measure before the end of 2022.

Providing even more and arguably better opportunities to save for retirement, the passage of Secure 2.0 appears to be more of a ‘when’ than an ‘if’, and as we wait for this legislation to hopefully become law, click the image below to read an excellent overview from Wealth Management.com that discusses five key provisions of the bill:

The Secure Act2.0

TPW News You Can Use

Useful and interesting content we read the past two weeks:

1. What Was the Strategy Behind the Supreme Court Leak?NY Times – 5.4.2022 The leak of a draft Supreme Court decision that would overturn Roe v. Wade is not a surprise, but it is something of a mystery. The mystery: The logic of and strategy behind the leak.

2. The Bottom Line in Ohio? Trump WinsWashington Post – 5.4.2022

Most one-term presidents recede from the political scene, with their party’s voters happy to see them go. But Donald Trump continues to dominate the Republican Party a year and a half after he lost re-election. Tuesday’s Republican Senate primary in Ohio confirmed Trump’s influence, as a Trump-endorsed J.D. Vance won the nomination, with 32 percent of the vote, in a primary that included four other major candidates.

3. A ‘Haven for Criminals’NY Post – 5.4.2022 A NYC subway conductor outraged about attacks on transit riders and his fellow transit workers confronted MTA CEO Janno Lieber during a live radio interview on Wednesday.

TPW Chart of the Week

Rising interest rates are bad for the stock market, right? Not so fast…

While it may have felt that way in April, the illustration below from Nuveen indicates the opposite is actually true!

Note the Average column on the far right: equities have historically performed well through tightening cycles, albeit not without volatility.

Equities Policy Tightens

Do you enjoy predicting the stock market? Do you believe rising interest rates will cause the market to go up, or go down?

Send us a quick message and let us know what you think!

Quote of the Week

“During this time of reopening, we are likely to see some upward pressure on prices… But those pressures are *likely to be temporary* as they are associated with the reopening process.”

Jerome Powell, Chairman of the Federal Reserve April, 2021

Powell Says Factors Driving Inflation

The sardonic truth? Almost a year later, the consumer price index (CPI) is +8.5%, and accelerating.

Here’s the point: predicting the stock market, or inflation, or any future economic occurrence, is next to impossible to consistently (and accurately) do. Be aware but wary of the accuracy of expert predictions, understanding that today’s forgone conclusions are often hindsight’s most embarrassing moments. Those who can mix knowledge with humility are often at a longer-term competitive advantage.

Want further testimony? From August of last year: Why Fed’s Powell Still Thinks High Inflation is ‘Temporary’

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:

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.

Download Newsletter Towerpoint Wealth

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

Towerpoint Wealth Sacramento Independent Financial Advisor

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!

Click HERE to follow TPW on LinkedIn
Click HERE to follow TPW on Facebook
Click HERE to follow TPW on Instagram
Click HERE to follow TPW on Twitter

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Will Homeowners Frown with Housing Prices Going Down? 4.22.2022

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Today’s housing market – it feels to us like we are at a true inflection point right now, and perhaps not a good one.

Clients and colleagues are frequently asking: “Is the housing market in a bubble?” And they are hearing conflicting words from economists:

“Housing starts have historically been unresponsive to changes in mortgage rates in a supply-constrained environment, likely because homebuilders are able to continue building with little fear that homes will sit vacant after completion.” – Ronnie Walker, Goldman Sachs economist
vs.

“We expect the combination of surging mortgage rates and record-high home prices to cause more homebuyers to drop out of the market.” – Daryl Fairweather, Redfin chief economist

Can we expect to see housing prices go down with overall economic growth remaining strong? The housing market does seem to be struggling a bit under the weight of higher interest rates, consistent with Fairweather’s statement above. Don’t let anyone tell you that interest rates don’t matter – they do! The cost of money (read: the interest rate you are charged to borrow) is extremely important, and directly correlated to the overall long-term growth of the housing market!

housing market hold my beer

While still hot, the housing sector seems to be just a touch cooler today when compared to the 2021 market, when over 70% of home listings saw a bidding war!

Existing Housing Sales

We argue how can it not be, understanding US home prices soared by a seemingly unsustainable 18.8% (!) last year.

US Home Price Growth

But housing prices going down? Current “expert” opinion on what happens next is quite varied, and while we are admitted skeptics of expert predictions due to their consistently poor overall track record, the current dichotomy is extreme. 

On one hand, housing “bulls” say:

  • Demand remains strong, with many properties still consistently selling for above asking price.

According to a new report from Redfinsome 5,897 homes nationwide sold for at least $100,000 over (!) asking price at the beginning of 2022, up from 2,241 compared to the same period in 2021.

Housing Prices Going Down
  • There’s no inventory!

Among the 327 housing markets tracked by Zillow, 254 have inventory levels that are down by more than 30%between December 2019 and December 2021. In another 54 housing markets (Miami and Ft. Collins, CO being two), housing inventory is down by over 50% from pre-pandemic levels!

Will Homeowners Frown with Housing Prices Going Down?” - Trending Today - 4.22.2022
  • Buyer urgency has increased.

As interest rates rise, people may push to buy sooner rather than later, anticipating and getting ahead of further rate increases. This could be creating additional temporary demand.

On the other hand, housing “bears” say:

  • We have a “hawkish” Fed. The housing sector is vulnerable to the risk of the Fed orchestrating a “hard landing” with its interest rate hikes, possibly leading to a recession.
Bloomberg Interest Rates
  • Yields/interest rates on 30-year mortgages are surging.

Just last month, the average 30-year mortgage rate was 4.2%. NOW, it is north of 5.3%, the highest it has been since 2009!

Mortgage Rates Daily Index
30 year Fixed Rate Prices
  • Affordability is horrible.

The combination of surging mortgage rates and rapidly increasing home prices translates into even more difficulty for aspiring homebuyers, and many Americans are being priced out of safe and affordable housing.

Housing Affordable Index Housing Market
  • The SPDR® S&P® Homebuilders exchange traded fund (XHB) is out of favor, down nearly 25% year-to-date

XHB seeks to provide exposure to the homebuilders segment of the S&P Total Market Index, which comprises the following sub-industries: Home Building, Building Products, Home Furnishings, Home Improvement Retail, Home Furnishing Retail, and Household Appliances.

Interest-rate sensitive areas of the economy and stock market, like XHB, are portending pain, and less-than-attractive profits, in the housing market.

Homebuilders Index

At Towerpoint Wealth, we do believe we are at an inflection point right now, and that home appreciation may soon begin to slow. However, appreciation that is slowing is still appreciation, and is clearly much better than no growth or, even worse, negative growth.

Put differently, we fully agree with Citi analyst Steve Zaccone’s take:

California housing prices

TPW in the Media

Described as “a human wellbeing and flourishing podcast,” LifeBlood is released daily and features a myriad of different professionals and subject matter experts. Produced and hosted from Scottsdale, AZ by George GrombacherLifeblood featured our President, Joseph Eschleman, earlier this week.

Click the thumbnail below hear what Joe had to say about leading by example, focusing on process and on things you can control, and about his membership, along with Tim Cook, Oprah, and Michelle Obama, in the 4AM club!

Lead By Example LifeBlood Podcast

What is happening at TPW?

Flanked by two beautiful young ladies and outstanding Christian Brothers’ freshmen, our President, Joe Eschleman, was not interviewing for upcoming summer internship positions, but instead chauffeuring his daughter Josephine, and her good friend Bailey, to and from the Crocker Art Museum last week, with a TPW pit-stop mixed in!

Joseph Eschleman & JoJo Eschleman Towerpoint-Wealth

Arches National Park, the world’s largest concentration of natural sandstone arches, is the latest vacation destination for our adversome Director of Tax and Financial Planning, Steve Pitchford!

Nice work, Steve – your affinity for Mother Nature and goal to see all 63 amazing US national parks is ambitious and wonderful, and we are all jealous of your getaway and amazing photos!

Steve Pitchford CPA CFP Financial Planning

What else is happening with the Towerpoint Wealth family? Follow us on Instagram to find out!

Follow Towerpoint Wealth Instagram

TPW Taxes 2022

With the passing of the 2021 income tax filing deadline on Monday (hooray!), myths abound about ways to get information about tax refunds and how to speed one up.

As of the week ending April 1, the IRS said it has sent out more than 63 million refunds worth over $204 billion! The average refund is $3,226.

Click the image below to read an excellent article from ThinkAdvisor that discusses seven common myths about income tax refunds.

1040 Refund Coming

TPW News You Can Use

Useful and interesting content we read the past two weeks:

1. We’re Trader Joe’s Workers, and There are Some Items You Should Never Buy – NY Post – 4.19.2022

Four unnamed workers revealed a list of products that shoppers shouldn’t buy, as well as seasonal items shoppers shouldn’t miss out on, when visiting their local Trader Joe’s store this spring.

2. All Hope Isn’t Lost for Democrats in November – The Hill – 4.5.2022

“We got a story to tell; just got to tell it,” former President Obama replied to a question about Democrats’ chances in the 2022 midterms as he left a news conference with President Biden. I watched the moment on live TV and immediately thought, “Easy for you to say.”

3. A LePen Upset Would Be as Big a Shock to Markets as Brexit – Yahoo! Finance – 4.20.2022

All the polls show French President Emmanuel Macron is likely to win a second term Sunday. But from Citigroup Inc. to asset manager Amundi SA, the warnings are piling up that markets are underestimating the risk of a surprise.

Chart/Infographic of the Week

The National Association of Home Builders (NAHB) Housing Market Index (HMI) in the US fell in April for a *fourth* consecutive month, to reach its lowest point since September of last year. See our commentary above for some of the possible reasons why, as well as NAHB’s Chief Economist Robert Dietz’s quote below:

The housing market faces an inflection point as an unexpectedly quick rise in interest rates, rising home prices, and escalating material costs have significantly decreased housing affordability conditions, particularly in the crucial entry-level market.

housing prices going down housing market

Quote of the Week

Saving money and investing money are two completely different philosophies, and require two completely different mindsets, as the excellent wealth-building and wealth-protection illustration below demonstrates!

invest pessimist optimist

Responsible Investing

Happy Earth Day 2022! Did you know you can align your portfolio with your *personal values*? Yes, you can!

Click the thumbnail below, or visit our responsible investing page to learn more. Please feel free to click HERE and reach out to us with questions.

Does your portfolio reflect your values?

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:

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 (916-405-9140info@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

Towerpoint Wealth Sacramento Independent Financial Advisor
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Feeling Depression About a Possible Recession? 04.08.2022

Top 5 Ways to Recession-Proof Your Portfolio!

Download Newsletter Towerpoint Wealth

Is the United States economy on the verge of slipping into a recession?

Or is the exact opposite happening – is the economy continuing to recover, more robust than it is getting credit for?

Recession Proof | Economy in Recession

A broad measure of the “stock market,” the S&P 500 ended 2021 at 4,766.18. It then proceeded to “correct” down to 4,173.11 on March 14 (click HERE to read our 2.1.2022 commentary about this, Market Correction Is Coming – What, Me Worry?). However, since 3/14, the market has notched an impressive rally, sailing back out of correction territory in less than a month.

So what gives? Are we looking towards an economy in recession, or are we more recession proof than many economists believe?

It should come as no surprise to our clients and to TPW friends and colleagues that we take this volatility with a grain of salt. We pay attention, but rarely react, to these short-term movements. Daily, weekly, and monthly market movements are much more important to, and are scrutinized more closely by, traders and speculators, as opposed to investors interested in taking a disciplined approach to building and protecting wealth. As Warren Buffett said:

Warren Buffet

However, we do seem to be at an odd inflection point in our economy, and unsurprisingly, there is anything but consensus on what happens next.

While the Towerpoint Wealth Investment Committee remains cautiously optimistic and sanguine (a favorite adjective used often in the investment community by analysts and talking heads who want to sound extra intelligent) about the future of the US economy and financial markets, not everyone agrees with us.

BOA and MS Info

While it currently seems fashionable to portray a bearish / negative outlook for the US economy and financial markets, we believe that record corporate profitsplentiful jobssignificant declines in coronavirus caseswage increases, and excess consumer savings will outweigh the economic risks of inflationinterest rate increasesUkraine-Russia geo-political and supply-chain concerns, and potentially higher US federal income taxes.

Oil Housing Covid Graphic

At Towerpoint Wealth, we firmly believe that a possible slowdown does not have to mean recession, and we also firmly believe that when you have an economy in recession, truly, almost by definition, it involves job losses and high unemployment. In today’s environment, it is not hard to see that the absolute opposite is currently true.

Click the thumbnail below to read an excellent report from T. Rowe Price discussing why recession in the US appears unlikely amid our reopening economy.

Market Parallels 1973- Recession Proof

We also believe that Putnam’s graph below, illustrating economic expansions and recessions, and concurrently, bull (rising) and bear (declining) markets, does an excellent job of helping our clients to understand:

  1. Economic expansions (above the line, in green) are much more robust than recessions (below the line, in red)
  2. Over the past 73 years, bull markets have lasted longer (50 months, on average) than bear markets (13 months, on average), and have more than made up for periodic market declines
Putnam Investments - A world of investing

However, at Towerpoint Wealth, we don’t want to say that we have a recession-proof economy – we fully recognize that the risk of a recession is not zero, and that it is important to be mindful of and have a plan to protect against the possibility that the Fed “slams on the brakes” by aggressively increasing interest rates (and concurrently the cost, or “price,” of borrowing money), which would result in a rapid slow-down of our economy.

Market Pricing Total Fed Funds Increase 2022

What to do to recession-proof your portfolio? Read on!

1. Own and have exposure to blue-chip equities (stocks)

Investors almost always find blue chip stocks attractive, but especially during a recession. They typically pay attractive dividends, which provides a tangible return in the form of consistent income. Blue chip stocks also tend to be larger companies with more stable and predictable streams of revenue and profits, which can lessen the impact on the price of a stock during a market pullback or recession.

2. Harness the power of low-correlation investments and alternative diversifiers


Owning or adding to your portfolio investments whose price and value tend to “zig” when more traditional stocks and bonds “zag” can help lower your risk, especially during a recessionary period. Commodities, precious metals, timber, commercial real estate, cryptocurrency and digital assets, hedge funds, private equity and debt, timber, and art are just a few examples of low-correlation investments.

The three D2 of alternative diversifiers

3. Increase your exposure to non-US equities

Owning international stocks is another way to recession-proof your portfolio. While the economies, and stock markets, of the major developed countries and economies around the globe seem to be more correlated than ever before, the discounted valuations, and currencies, that oftentimes can be found within international stock markets can be an excellent hedge against a possible US recession. Additionally, international markets oftentimes offer more exposure to structural growth opportunities than the US market, and can be an excellent hedge against rising inflation here in the US.

4. Cash is (or can be) king!

Cash adds “bubble wrap” to your portfolio, especially during a recession. Having cash allows an investor to further recession proof their portfolio by cushioning against volatility and market declines. Smart investors also can utilize this “dry powder” to take advantage of attractive investment opportunities as they arise during a market pullback or correction, especially if they believe a recession is coming.

Warren Buffet Quote Cash

Cash is considered “oxygen” for a portfolio, as it becomes more and more important to have as temporary market declines occur during a recession. Lastly, while checking, savings, and money market accounts have paid little if any interest over the past few years, things are quickly changing, and as interest rates rise throughout 2022, you should earn higher rates on your cash and money market deposits.

5. Be properly diversified

Through maintaining a portfolio allocation across a diversified group of asset classes, investors can position themselves, and their portfolios, to better weather market and economic volatility. Additionally, being properly diversified allows for the benefits of disciplined portfolio rebalancing, helping an investor to recession proof their portfolio by buying low and selling high when transitioning their portfolio back to its original strategic targets. Plus, who wants all of their eggs in just one or two baskets when a recession is coming? Not us…

What’s Happening at TPW

A BIG congratulations to our Partner, Wealth Advisor, Jonathan LaTurner, and his new bride, Katie McDonald, who tied the knot last week in Tulum, Mexico! We couldn’t be happier for both of them!

And of course our President, Joseph Eschleman, was in attendance to help the happy couple celebrate!

Jonathan W. LaTurner Wedding in Mexico
Jonathan W. LaTurner Wedding in Mexico
Jonathan W. LaTurner & President Joseph Eschleman, CIMA® Wedding in Mexico

It’s not a Happy Friday without a McDonald’s McNuggets Happy Meal!

Ethan, the son of our Director of Research and Analytics, Nathan Billigmeier, keeps getting more and more adorable as the months pass! #heartbreaker

Nathan and Ethan McDonalds

 What else is happening with the Towerpoint Wealth family? Follow us on Facebook to find out!

TPW Taxes – 2022

While here in California, state income tax rates continue to climb, this is not the norm and not the case throughout many parts of the US. A dozen states introduced measures to REDUCE corporate or personal income tax rates last year. Click the two images below to read examples from states that are doing the opposite of what California is doing – cutting the state taxes their residents have to pay.

TPW GA Taxpayers
Georgia lawmakers create flat income tax, cutting taxes by $1 billion
TPW Mississippi House Tax Bill
Mississippi enacts its largest-ever tax cut

We are officially in the Tax Day 2022 “home stretch,” as the filing deadline to submit 2021 tax returns, or an extension to file and pay tax owed, is Monday, April 18. As we have mentioned previously, we welcome and look forward to directly interfacing and collaborating with you, and/or your tax advisor. 

Towerpoint Wealth’s Director of Tax and Financial Planning, Steve Pitchford, CPA, CFP® is our resident tax expert, and we invite you to simply click his image below to reach out to him about any specific income tax-related need, issue, service or document request, or question.

TPW News You Can Use

1. A New COVID Mystery – Why Haven’t Cases Started Rising Again in the US? – NY Times – 4.6.2022

To many people’s surprise, new COVID-19 cases in the US have not begun to rise. Over the past two weeks, they have held roughly steady, falling about 1%, even as the highly contagious BA.2 subvariant of Omicron has become the dominant form of COVID in the US.

2. Making it Rain – Yankees, Mets Both Have the Obscene Payrolls NY Teams Need – NY Post – 4.5.2022

The Mets and the Yankees will combine to spend $532 million on baseball players this year, and if that seems outrageous… well, sure, it probably is.

3. The Remarkable Brain of a Carpet Cleaner Who Speaks 24 Languages – SF Gate – 4.5.2022

Vaughn Smith, a real, live hyperpolyglot (a person who can speak several languages), is fluent in eight languages and conversational in another 25!

Chart / Infographic of the Week

Incremental change – small micro-actions, when done repeatedly, over a long period of time, can cause massive improvements. Also known as baby steps!

Line Chart Improvement

Also, if you haven’t heard, rampant inflation is one of the central reasons that interest rates continue their upwards march, as borrowing for a mortgage has quickly become much more expensive

Mortgage Graph 30 Year Fixed

Quote of the Week

Very consistent with the theme of the Chart/Infographic of the Week found above, we love NBA legend and Hall of Famer Jerry West’s quote and outlook on life found below.

Jerry West Quote

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:

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 (916-405-9140info@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

Towerpoint Wealth Sacramento Independent Financial Advisor

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!

Click HERE to follow TPW on LinkedIn
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The Russia/Ukraine Crisis – An Important Message 03.04.2022

Just over two months ago, markets were at a record high, as healthy data on the US economy signaled continued economic growth on the horizon.

Then, as Vladimir Putin and his Russian military first threatened, and then began, an outright invasion of Ukraine on February 24, world financial markets began a correction and decline. The events of the past week and a half have again reminded us – we live in extremely unsettled and uncertain times.

Click the image below to watch a well-articulated and important message from our President, Joseph Eschleman, as he addresses not only the major implications of the Russia/Ukraine crisis for the financial markets and our economy, but perhaps most importantly, for your portfolio.

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President Joseph Eschleman Featured in Financial Advisor IQ Magazine 02.25.2022

Our President, Joseph F. Eschleman, CIMA®, was recently profiled in Financial Advisor IQ’s February 25 article discussing what clients need to know about Russia’s invasion of Ukraine, the impact these developments may have on investments, and how clients can respond.

Click here to read what he had to say!

How to Optimize Selecting Your Wealth or Financial Advisor? How a Financial Advisor Helps You Protect and Grow Net Worth | Download white paper.

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Market Correction is Coming – What, Me Worry? 02.01.2022

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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:

What Me Worry MAD Magazine Market Correction Is Coming

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.

S&P 500 Graph

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.

Common Correction Pattern

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:

John Bogle Quote

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:

Behavior Gap Graph

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

Fear Index Market Correction Coming Wall Street

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:

Index Fund Chart Build Net Worth

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.

Peak Trough Losses and Chart

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:

Peter Lynch Quote

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 lowreal 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!!

Michelle Lori Towerpoint Wealth Advisor Near Me

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?

If not, click HERE to message us to learn more, as 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.

Brad Davidson and Joseph Eschleman

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

Its Tax Time

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.Read Article

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.Read Article

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.Read Article

2022 Market Perspective

In her latest market note, Liz Ann SondersCharles 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.

Smoke on the Water

Read Article

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!

Bitcoin Seems Less Volatile

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:

Napoleon

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:

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 (916-405-9140info@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

Towerpoint Wealth Sacramento Independent Financial Advisor
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!
Click HERE to follow TPW on LinkedIn
Click HERE to follow TPW on Facebook
Click HERE to follow TPW on Instagram
Click HERE to follow TPW on Twitter