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Questions to Ask if Building Wealth is the Task 05.28.2021

As we sit on the eve of 2021’s Memorial Day Weekend, 73% of those in a Quinnipiac poll said their plans are similar to the ones they had pre-pandemic. The light at the end of the pandemic tunnel is getting brighter and brighter by the day!

building Wealth Questions to Ask

We’re looking at plunging COVID-19 case and death rates and widening vaccination uptake rates here in the United States, in addition to an uptake in exuberance and economic optimism by investors that has driven the stock market to all time highs. And, as is typically true during periods of market extremes, the talking heads, market strategists, investment gurus, and even your brother-in-law Frank seem to have all the answers as to why this is happening, and what lies around the corner. Our advice to you: Ignore this nonsense, and ignore them all.

Rather than become enamored by these predictions and/or fall prey to a well-articulated story spun by a seemingly well-credentialed “expert,” we encourage you to tune out this noise, and not worry nor think too much or too hard about interest rates, cryptocurrencies, inflation, China, large caps and small caps, mask mandates, or the U.S. deficit. Don’t worry about what the “new normal” means, and don’t get too worked up about “getting your share” of the possible American Jobs Plan or the American Families Plan stimulus packages (we’re purposefully not even linking to any of these themes). Instead, let’s channel our energy and attention into things that we have control over.


While we do believe you should always be ready for the unexpected, we also feel it is way more important to understand and internalize a number of foundational investing and wealth building principles. Ask yourself if you can succinctly and confidently answer the following questions:

  • Can I remain objective and rational, and recognize when you are being fearful, greedy, and emotional about your money? Your worst investment enemy is usually found by looking in the mirror. The limbic system is a wonderfully complex set of brain structures that deal with emotions, but activating your fight or flight response in reaction to fear, greed, and anger is not conducive to successful investing or successful longer-term wealth building. 
  • Do I understand that my neighbors, friends, and co-workers are perhaps confused and delusional? Not only do they probably spend too much and boast too much about their portfolio, but the chances their financial decisions are rooted in any of the principles listed here are quite low.
  • Am I trying to simply make money, or am I working to build and protect my wealth? We equate the former to gambling, and the latter to investing. While anything can happen on a daily, weekly, monthly, and even annual basis, we believe your odds of success increase significantly if you establish and follow a disciplined longer-term wealth building plan.
  • What am I doing to proactively insulate my downside from a major catastrophe during a market correction? We believe this is way more important than hitting a home run during a period of market strength. While his two rules are a bit binary, the spirit of Warren Buffett’s quote should resonate:
  • Why am I investing, and do I have a plan? For obvious reasons, it is invaluable to not only think through, articulate, and quantify the goals and vision you have for your and your family’s future, but also to have a methodology for how you attend to your personal financial decision-making. And this methodology will be different than your friend’s, neighbor’s, or co-worker’s, as we all obviously have different things that motivate us and that we ultimately want out of life. This is assuming that your friend, neighbor, or co-worker even has a plan at all.
  • Do I recognize that costs, fees, expenses, and taxes matter? At Towerpoint Wealth, we call them “necessary evils” to helping clients grow and protect their net worth. And while we can never eliminate the drag that costs, fees, expenses, and taxes creates, we certainly can work to identify, and reduce, these friction points.
  • Am I aware that saving money is the single most effective way to build my wealth and to retire? While you need to have balance between saving for tomorrow and living your life today, the capital you spend today is capital no longer available to fund your retirement. Saving money equals peace of mind.

Towerpoint Wealth Turns Four!

On May 26, 2017, with zero clients and $0 in assets under management, we officially launched Towerpoint Wealth. Classified as a “bold,” “risky,” “fearless,” and “courageous” decision by our clients and colleagues, it fortunately turned out to be a prescient and extremely positive one based on the feedback we continue to receive and strategic growth we continue to experience.

Today, we are approaching $350 million in assets under management, and continue to be thrilled to serve YOU, always striving to expand your peace of mind by helping you remove the hassle of properly coordinating your financial affairs.

What’s Happening at TPW?

The Towerpoint Wealth crew recently spent some time in a professional photo shoot with Tim Engle, of Tim Engle Photography – below is one of our favorite shots from the session.

We hold our collective noses to the grindstone at Towerpoint Wealth ~ 97% of the time. However, the culture we have built at the firm is also predicated on spending time outside the office and having fun together as a work family, which is why we regularly schedule fun teambuilding events.

We had an enjoyable “hooky afternoon” earlier this month, pedaling through midtown Sacramento on the Sacramento Brew Bike, with pit stops at Public House DowntownKupros, and The Golden Bear. A well-behaved and fun afternoon!

TPW Service Highlight – RETIREMENT – Building wealth

We only semi-jokingly say that you can retire any time you want, but will you be able to with the lifestyle and income stream you desire?

At Towerpoint Wealth, we believe that everyone deserves a secure retirement, and we stand ready to help you with a myriad of retirement-specific tools and planning considerations. The cornerstone of this process is the development of a customized retirement and financial plan using our modeling software from RightCapital(R).

Click HERE to review a sample customized RightCapital financial plan.

Additional retirement-specific services include sustainable and tax-efficient retirement income planning, “black swan” event planning and modeling, customized Social Security benefit election optimization analysis, corporate pension modeling and optimization, fixed/variable/immediate annuity analysis, and optimal-retirement-age projections.

Chart of the Week

Real estate values continue to be on fire! Click HERE to watch an excellent video in which our President, Joseph Eschleman discusses the white hot Sacramento real estate market with long-time Sacramento realtor, Brian Kassis.

And while there is no question about the tremendous price increases homeowners have experienced over the past year and a half, the chart below makes an interesting comparison between the value of the stock market (using the S&P 500 as a proxy) and the value of residential real estate (using the Case Shiller U.S. National Home Price Index as a proxy) over the past 30 years.

Understanding the importance of owning both real estate AND equities when working to build net worth, and recognizing that people seem to be more relational to the increases in the value of their home, the chart below from Visual Capitalist is an eye-opener!

In addition to home prices going up and U.S. COVID numbers going down, 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.

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

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The American Rescue Plan – Do YOU Qualify for Stimulus? 04.09.21

The American Rescue Plan Act 2021 is a $1.9 trillion COVID-19 economic relief package signed into law by President Biden just a few weeks ago.

Click below to watch our President, Joseph F. Eschleman, CIMA®, outline how & where YOU might qualify for this stimulus.

American Rescue Plan

Another Stimulus Bill Passed: What That Means for You

Wondering how the most recent federal stimulus bill passed by President Biden might benefit you? Hear what the President of Towerpoint Wealth has to say …

There have now been three rounds of stimulus legislated by the United States government in the ongoing effort to provide economic relief to Americans. During the coronavirus pandemic, financial support initially came in the form of an impressive $2.2 trillion Cares Act passed in March of last year. We then witnessed the passage of the Consolidated Appropriations Act this past December, which included another nine hundred billion dollars in COVID-19 stimulus relief.

However, our federal government felt that neither of these packages provided enough economic relief. And in one of his first major moves in office, President Biden signed the $1.9 trillion American Rescue Plan Act just last month. What can be found in this latest stimulus package? And more importantly, how might you benefit from it?

Unemployment Benefits

In addition to what your state pays, President Biden’s $1.9 trillion relief package extends federal unemployment benefits until September 6th, 2021 for an additional $300 per week. The extension of unemployment benefits delivers direct relief to millions of Americans who have lost their jobs in the wake of COVID-19. In addition to the extension, the stimulus package also includes improvements to the unemployment insurance system and additional funding for OSHA to ensure workers’ safety.

Paycheck Protection Program

Many believe that small businesses are the heart of the United States economic engine. In that vein, direct economic support for small businesses was included in the stimulus bill via new funding for the paycheck protection program, commonly known as PTP. This stimulus is directed specifically at our nation’s more than 30 million small businesses, “mom-and-pop” outfits, and nonprofits that provide essential services for our everyday lives. If you own a small business or help to operate a non-profit, it is important that you look into a potentially forgivable paycheck protection program loan.

Stimulus Checks

Eligible American taxpayers will receive direct stimulus payments of $1,400, while families with children will also receive $1,400 per dependent. There are earned income phaseouts for this latest round of direct stimulus, so be sure to check with your CPA or tax advisor to see if you qualify for the child tax credit. Previously, the Child Tax Credit offered eligible families a two thousand dollar tax credit per child under the age of 17.

With the changes made under the new American Rescue Plan Act, the child tax credit is temporarily expanding for 2021. Eligible families may now receive up to $3,600 for children five or under, and up to $3,000 for children aged six to seventeen.

More Testing & Vaccinations

The American Rescue Plan Act also provides $66 billion for COVID-19 vaccination distribution and testing and $360 billion for state and local government assistance. Another $510 million is included for FEMA emergency food and shelter programs that support the homeless and struggling families with shelter and meals, as well as direct rent, mortgage and utilities assistance.

Is your head spinning yet? Too many zeros making your eyes glaze over? Reach out to our experts at Towerpoint Wealth on Facebook, LinkedIn or Instagram. We’ll walk you through how we can help you eliminate the hassle of figuring it all out, and what kind of relief you might qualify for.

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“Will the Big Blue Wave Leave You Money to Save?”

It seems ridiculous in times like these to write a newsletter about finances and money, but we feel it is our responsibility at Towerpoint Wealth to do so, even if only to provide some respite from politics to our growing family of readers and Trending Today subscribers. We have heard from a few clients that, for a number of good reasons, you already feel like this: 

And while we understand that it has been a tumultuous week, let’s not be too quick to throw in the towel on 2021!


2020 ended with a record close for both the the S&P 500 (3,756.07, representing a +16.3% price gain for the year) and the Dow Jones Industrial Average (30,606.48, representing a +7.2% price gain for the year). So far in 2021, equity prices have continued their upward trend, even with concerns including:

  1. The economic implications of the Democratic wins in both Georgia Senate runoff elections and the tumultuous events in our nation’s capital on January 6th
  2. The likely trajectory of a resurgent third coronavirus wave
  3. Expectations of additional public health-driven economic restrictions and/or lockdowns
  4. A deflation of the currently high levels of investor optimism
  5. Growing levels of speculative activity in some quarters of the market (high volumes of options trading, a robust IPO calendar, and the popularity of cryptocurrencies)  
  6. An interval of market consolidation following such an annus mirabilis as investors have experienced over the past 12 months in the financial markets.

While recognizing the cogency and reality of these concerns, at Towerpoint Wealth we have maintained an essentially constructive view of equity prices, based upon the following factors:

  • Continuing monetary stimulus from the Federal Reserve, with ultra-low policy interest rates and $120 billion per month in “Quantitative Easing” money printing, augmented by significant growth in the M-2 money supply, which tends to produce a stimulative environment for consumer prices, GDP, and financial assets (as shown below, over the past year, the U.S. M-2 money supply has increased at +25.2%, the highest rate of growth in four decades!);

Although we believe stock valuations are elevated and investor optimism is high, equity prices were well aware of and already somewhat discounting the possibility of the outcome of the Georgia Senatorial runoff elections tilting Democratic. Additionally, after a possible short-term pullback/correction, the stock market can continue to move higher, with extra caution and care called for, and perhaps even with some cash raised that can stand ready to be invested on a disciplined basis during a market retrenchment.

Implications of the Georgia Senatorial Elections

In our opinion, assuming no defections from party lines, a Democrat-controlled Senate appears likely to produce:

  1. Higher Taxes: Tax increases may not necessarily materialize to the degree that markets may have feared earlier, given that the Senate is likely to feature essentially a 50-50 Democratic-Republican tie — with Vice President-elect Kamala Harris in a position to cast a tie-breaking vote in favor of the Democrats, and with Senator Joseph Manchin III (D, WV) and/or others possibly voting to weaken or reject the tax increases. With some delays and/or dilutions, higher corporate, payroll, income, capital gains, and estate taxes may eventually be on the horizon for many taxpayers (the proposed levies in the Democratic platform amount to $4 trillion, with something in the neighborhood of half that amount deemed likely to be passed). The essential tie in political power in Congress may limit the extent of any changes in tax policy, and an important consideration to be kept in mind is the effective date of any tax increases, including the possible likelihood of retroactivity to January 1st, 2021. 
  2. More Spending: With proposed spending increases amounting to $7 trillion stretched out over a decade, the new Administration favors entitlement expansion, healthcare, climate, and green infrastructure initiatives (to accelerate the use of clean energy in the power sector, building construction, and transit); hiking the minimum hourly wage to $15 (which could support household incomes and augment growth in consumption); housing; education; and infrastructure. President-elect Biden has several times expressed support for drug price reforms. 
  3. Increased Regulation: Through job appointments, executive action, and legislation where feasible, the Biden administration may favor increased restraints on the financial sector and some portions of the healthcare sector, with continued antitrust and market dominance scrutiny applied toward mega-cap technology and social media companies. Statements by President-elect Biden have indicated that his administration might limit pipeline approvals and curtail drilling activity on federal lands.
  4. Spotlight on Relations with the Judiciary: Although we deem such actions unlikely, President-elect Biden may possibly favor certain proposals from within his party to attempt to curtail the Supreme Court’s authority over specific laws by attempting to: (i) impose term limits; (ii) expand the size of the Court; or (iii) through legislative action, divest the Court of its authority over contentious social issues (referred to in academic circles as “jurisdiction stripping”). Any proposed limitation of the Supreme Court’s own powers will very likely spark intense and determined pushback via lawsuits by the Supreme Court as well as by battling parties on either side of the issues involved. 

“Blue Wave” Affected Sectors

Democratic control of the White House, the House of Representatives, and (even if by the narrowest of margins) the Senate (a so-called “blue wave”) could be deemed favorable to large managed-care organizations, renewable energy firms, and the ESG space (companies reflecting and/or supporting Environmental, Social, and Governance initiatives and ideals). Other perceived sectoral beneficiaries of a “blue wave” include, among others: the weakening of the U.S. dollar versus foreign currencies; tax-exempt state and local government municipal bonds; high-yield bonds, small-cap stocks; construction and engineering, manufacturing, materials, industrial machinery, and related firms focusing on the U.S. transportation, maritime, and aviation infrastructure; renewable energy (including wind farms, solar projects, and high-voltage direct current transmission facilities); healthcare equipment and supplies; and cannabis-related companies.

Sectors perceived to be less favorably affected by a slim-margin “blue wave” include: large firms that benefited from the 2017 corporate tax cuts; large-cap pharmaceutical stocks; content liability-protected social network companies (currently shielded by Section 230 of the 1996 Communications Decency Act); dominant technology antitrust targets; the oil and gas sector; tobacco companies; aerospace and defense firms; health insurance companies; student loan servicing companies, asset managers, credit rating firms, and stock exchange operators; precious metals and precious metals mining shares; and labor-intensive enterprises sensitive to minimum wage increases (e.g., retail and grocery companies, restaurant and fast food chains, for-hire ride-sharing companies, and courier and package delivery firms).

What’s Happening at TPW?

Our Director of Research and Analytics, Nathan Billigmeier, and Partner, Wealth Advisor, Jonathan LaTurner, slipped away yesterday to play a round of golf at the #1 public golf course in America, Pebble Beach Golf Links!

Our President, Joseph Eschleman, found a good (albeit chilly) lockdown activity to do with his family last week, watching The Croods: A New Age at the West Wind Drive-In in Sacramento!

TPW Service Highlight – Client Family and Culture

In addition to providing them with the economic peace of mind that comes with the suite of comprehensive wealth management services we provide, as “family members” Towerpoint Wealth clients have also come to expect us to host regular, fun, and unique client appreciation and education events, which we happily deliver on. If you aren’t currently a client, here is what you have been missing out on (!):

Chart of the Week

As mentioned above, the news yesterday of the Democrats taking control of the Senate led investors to believe that the government will boost fiscal stimulus, which would in theory boost consumption and economic growth, and in turn, inflation.

The chart below compares the relative performance of stocks that benefit from inflation (blue) vs. those that benefit from deflation (black).

Trending Today

In addition to history making and money making, a number of trending and notable events have occurred over the past few weeks:

As always, we sincerely value our relationships and partnerships with 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 complicated place, and we are here to help you properly plan for and make sense of it.

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

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No Outcome? No Surprise. No Problem!

We expected it to be this way, right? Historically, the market has always gotten a bit crazy both before, and after, the election:

Since Election Day on Tuesday, the S&P 500 has rallied 4%, and has enjoyed its best start to the month of November ever, up 7.4% in four days.

At Towerpoint Wealth, we believe there are a few reasons for this big jump:

  1. While investors do expect a fiscal stimulus package out of Washington D.C. in the near future, perhaps before January, the size of a deal reached in a divided Congress is likely to be much smaller than it would be under a Democratic-controlled Congress. However, sometimes bad news equals good news on Wall Street, and this had led investors to believe that more pressure will be on the U.S. Federal Reserve (“the Fed”) to pump more funds into the financial system, theoretically supporting stock prices. Just yesterday, Fed Chair Jerome Powell said more stimulus is “absolutely essential” to economic recovery.
  2. Assuming Republicans hold the Senate, the likelihood of significant increases in both regulations and income taxes is significantly decreased.
  3. Interest rate and inflation expectations have recently dropped:
         Interest Rates       
Inflation

Additionally, as the Chart of the Week towards the bottom of this newsletter indicates, gridlock has historically been good for the equity markets. And while ballots are still being tallied, and Arizona, Georgia, Nevada, and Pennsylvania remaining in focus, it does appear that Joe Biden is on the brink of victory, and that we are much closer to having a clear winner, possibly by tomorrow or Sunday. The betting markets on the Presidency sure seem to agree:

There are many reasons for us here at Towerpoint Wealth to be paying close attention to events out of our control, but no reason to be reactionary to any of them. In addition to the recent interest rate and inflation-expectation adjustments, some of the other post-election, split-Congress items bearing scrutiny include:

  1. Renewed weakness in the financial sector
  2. Growth stocks outperforming value stocks
  3. Industrial and materials sector stocks lagging
  4. The volatility of the U.S. dollar
  5. Strengthening emerging market stocks
  6. Continued strengthening of technology sector stocks
  7. Potential weakness in tax-free municipal bond prices
  8. Weakness in healthcare sector stocks
  9. Weakness in renewable energy stocks


All of these moving parts and variables can make it tempting to consider second-guessing your investment strategy and philosophy. The constant struggle between the desire for growth and protection is natural, and the goal of managing a well-diversified portfolio is to be prepared for any market environment or political change.


Ultimately, when we put aside all of those “uncontrollables,” we keep the following graph in focus (hopefully the trend is an obvious one):

What’s Happening at TPW?

The Towerpoint Wealth family enjoyed an afternoon of teambuilding and camaraderie on the Sacramento river earlier this week, taking a quick voyage on the Sacramento Brew Boat up and back to the iconic Virgin Sturgeon restaurant for lunch.

While on their adventure, they also helped our newest family member and wealth advisor, Matt Regan, celebrate his birthday!

TPW Service Highlight – Morningstar Portfolio “Instant X-Ray”

Often enough, clients ask us what stocks they have exposure to within the various mutual funds and exchange traded funds (ETFs) that comprise their portfolio. We now have a sophisticated tool available to us that not only does a deep-dive in evaluating your specific asset allocation and sector weightings, but also the actual individual underlying holdings you have exposure to.

Think you are properly diversified? There is only one way to find out for sure – ask us to run a Morningstar portfolio Instant X-Ray report, and we will dissect your portfolio to uncover concentrated positions, areas of unexpected overlap, and provide detailed insights into your portfolio’s diversification, illuminating what is truly driving your portfolio’s risk and performance.

Chart of the Week

The odds right now seem to favor a Biden presidency, a Republican Senate, and a Democrat House. The chart below, from LPL Financial Research, shows how a split Congress has been historically good for the stock market.

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 complicated place, and we are here to help you properly plan for and make sense of it.

CLICK Here To Download Towerpoint Wealth PDFs

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

Towerpoint Wealth Our Team Sacramento Wealth
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Should We Fret Over the Threat of $27 trillion of U.S. Debt?

$27 trillion. That is where the United States’ current debt load currently stands as of 10:40 a.m. today:

The budget deficit is expected to be $3.3 trillion just for 2020, as the Federal government seeks to provide stimulus to our economy in the face of the COVID-19 crisis. This has added $2 trillion to our national debt, on which in most months we are spending more than $1 billion a day just in interest. 

For perspective, here is a sobering infographic (yes, that is a football field in front of the Statue of Liberty) depicting what $20 trillion looks like. Each pallet, or “brick,” represents $100 million:

Infographic courtesy of www.demoncracy.info

Unless there is some new economic or societal model that none of us are aware of, our country’s debt will almost assuredly never be paid back. Politicians love promising us the world, and when the cash is not there to keep their promises, our government borrows money. Paying back this debt would require making extremely difficult decisions, and concurrently, losing votes. It is much easier to avoid this problem, kick the can down the road, and borrow from our children’s future than responsibly address it.

The politicians’ solution? Inflate our way out of the problem. The path of least resistance is to manufacture (read: print more) money to pay the debt back. By doing so, we are able to meet and satisfy our debt obligations (at least on paper). However, what this means is the holders of U.S. debt will receive back less than they loan in real dollars, as the purchasing power of a dollar declines as inflation occurs.

Most economists agree with and are untroubled by such massive amounts of borrowing, understanding our economy is currently in peril. The national debt was barely a concern when we passed the CARES Act, a cornerstone $2.2 trillion coronavirus economic stimulus bill, almost unanimously in March.

The two major concerns about carrying such a major debt load (higher interest rates and higher inflation) have not yet come to pass, as interest rates are extremely low and inflation remains quite muted. And because of that, our government is able to focus on providing the above-mentioned stimulus to combat the COVID-19 pandemic, and not have our national debt constrain our response. Seeing that we have been “forced” to borrow aggressively, at least we have been able to do so quite cheaply!


Make no mistake about it, questions remain about what the actual impact of this aggressive borrowing and economic stimulus will be. At Towerpoint Wealth, we believe the politics will eventually have to switch towards reining in the deficit. As this occurs, expect potentially massive implications for government spending, focused in areas like pension and medical spending, especially as our economy and our citizens age.


However, while we do feel there may be a transition to and an increased focus on debt reduction here in the United States at some point, the way we see it for the foreseeable future:

  1. The U.S. economic engine will remain a powerful one
  2. The urgency of the COVID-19 crisis will continue to underscore the demand for “safe haven” assets like U.S. Treasurys 
  3. The U.S. dollar will remain the world’s reserve currency
  4. The U.S. Federal Reserve will continue to print vast amounts of money to buy our debt
  5. Once business start to reopen and growth returns to more “normal” levels, tax revenues will increase substantially.

What’s Happening at TPW?

It was great to have a Towerpoint Wealth quorum downtown yesterday, with everyone looking good and dressed nicely to boot!

She said yes!

Our Partner, Wealth Manager, Jonathan LaTurner, *finally* popped the question to his long-time partner, Katie McDonald, while at Carmel by the Sea this past weekend.


A huge congratulations to both Jon and Katie, we can’t wait for your wedding!

TPW Service Highlight – Concentrated Stock Management

Have you amassed personal wealth through equity-based compensation, the inheritance of a large single-stock position, or from receiving stock as part of the sale of a closely-held business? Does this stock represent more than 10 or 15% of your overall portfolio? Do you recognize and are you concerned about the risk that this position may represent to your overall net worth? If the stock has appreciated, are you worried about the potential income and capital gains tax consequences of selling it?

We are experts in helping our clients manage and mitigate the risk and tax consequences of owning a concentrated stock position – click HERE or scroll to the bottom of this newsletter to download the white paper we recently published on this very important issue.

Graph of the Week

Researchers around the world are working around the clock to find a vaccine against COVID-19. In addition to a number of individual companies, the pandemic has created a number of unprecedented public/private partnerships in search of promising vaccine candidates:

  • BioNTech / Pfizer
  • Oxford / AstraZeneca
  • GSK / Sanofi
  • Novavax
  • Gamaleya Research Institute of Epidemiology and Microbiology
  • Moderna
  • Sinovac
  • Janssen
  • Valneva
  • CureVac

Below you will find a chart that outlines these current major partnerships and companies, as well as geographic distribution of the anticipated vaccine.

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 complicated place, and we are here to help you properly plan for and make sense of it.

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

Towerpoint Wealth Team : Sacramento Financial Advisor
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The *Unreal* Real Estate Market of 2020

For a myriad of reasons, 2020 has been both a surreal and unreal year, and the growth in the value of residential real estate is illustrative of that. According to USA Today and the National Association of Realtors (NAR), despite the hard economic times caused by the COVID-19 pandemic, home prices rose in the first quarter of 2020 in 96% of U.S. metro markets. A few of the local Sacramento-area agents we work with have commented that “this [real estate] market is even hotter and crazier than it was at its peak in 2006.

The environment 14 years ago was very different – during the U.S. housing bubble, real estate prices were artificially inflated due to speculative fervor, lax lending standards, and arguably negligent regulations. But when we fast forward to 2020, we find four reasons for this red hot market:

Historically LOW interest rates. Money is extremely “cheap” right now, as interest rates on mortgages continue to hit record lows.

Cheap money is analogous to low interest rates, meaning it doesn’t “cost” much to borrow. Mortgage rate cuts have given house hunters ~ 25% more buying power in less than two years, and that does not appear to be ending soon. The less it costs to borrow, the more a buyer may be inclined to do so when buying a home. Alternatively, the less it costs to borrow, the lower the homebuyer’s monthly mortgage payment. Adding this all up provides major stimulus to and demand for buying real estate.

Urban exodus. Just a few years ago, demand for city living was high, and people were piling into major metropolitan areas throughout the United States; now, the opposite is happening, and they are filing out in favor of suburban life.

Rent decreases are accelerating, as seven of the top ten priciest rental markets saw apartment prices drop 5% over the same time last year. Cultural and social opportunities that often draw people to metropolitan areas have largely shut down due to coronavirus. The perceived health concerns associated with public transportation and dense city living, high city taxes, the safety concerns and stress caused by demonstrations devolving into riots and other increases in crime, the desire for more space, and the ability to work remotely have all created a huge outflux from the cities, and concurrently, an influx of cash that has pushed up real estate prices in the ‘burbs.

Telecommuting / virtual working. Before COVID-19, only about 5% of workers did their jobs remotely. That figure has jumped to nearly half. Google, Twitter, and Facebook have led Silicon Valley in announcing plans to let, or even require, employees to work from home, at least for the next year, if not indefinitely. New York-based financial giants J.P. Morgan and Morgan Stanley have offered their employees a similar option. Telecommuting is no longer a trend, it is a full-blown movement. And that has allowed, or better put, freed people to live where they desire, and not feel geographically-tethered to their job location.

Inventory shortage. There is an imbalance. There are more buyers than sellers. Postponed purchases from March and April due to home-buying restrictions have created intense demand. Families are looking to upgrade, and, understanding we are all spending more time in our homes that before, people simply want more space. There was a nationwide industry shortage even before the pandemic hit, and the COVID-19 crisis has only exacerbated the problem. U.S. home values grew to $256,663 in August, an 0.7% increase from July, the largest increase since 2013, and inventory is 29.4% lower than a year ago! Builders are racing to catch up with demand, and rising prices should encourage more potential sellers to come off of the sidelines and list. But until those things occur, the shortage of inventory will continue to tilt the housing market in favor of sellers. Economics 101: When demand outstrips supply, prices go up.

How long this lasts remains to be seen. At Towerpoint Wealth, we believe that things will only begin to change in the real estate market when the uncertainty surrounding the job market, economy, and COVID-19 epidemic begin to subside.

What’s Happening at TPW?

The TPW crew enjoyed a “robust” teambuilding potluck earlier this week, highlighted by grass fed tri-tip marinated in “The Sauce for All Seasons,” Pearson’s Premium!

Our Partner, Wealth Manager, Jonathan LaTurner, our Director of Research and Analytics, Nathan Billigmeier, our new Wealth Advisor, Matt Regan, and our Director of Tax and Financial Planning, Steve Pitchford, enjoyed an early morning TPW team-building golf outing at William Land Golf Course!

TPW Service Highlight – Roth IRA conversions

While 2020 will rightfully be remembered for the challenging and unprecedented COVID-19 battle we have all been impacted by, at Towerpoint Wealth, we have continued to proactively work with clients to identify economic opportunities presented by the coronavirus crisis. Specifically, we have identified a “silver economic lining” tax planning strategy this year, one that is designed to take advantage of today’s low income tax rates, which we feel are temporary, while at the same time leave our clients better positioned for tomorrow’s higher income tax rates, which we feel are inevitable.

Below you will find 2020: The Perfect Year for a Roth Conversion, our newly-published white paper that discusses what a “Roth conversion” is, who may benefit from a Roth conversion, why 2020 is a potentially great year to do a Roth conversion, and how to utilize important tax planning tools to evaluate this opportunity.

Graph of the Week

While we obviously need to continue to remain disciplined, and understanding there is still more work to be done, the United States COVID-19 hospitalization numbers below, from Bespoke Investment Group, are encouraging. Less than one person per 10,000 population (or less than 100 people per 1MM population) is currently hospitalized with coronavirus.

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 complicated place, and we are here to help you properly plan for and make sense of it.

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

Towerpoint Wealth Team : Sacramento Financial Advisor
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Policy and Portfolio Impact of COVID-19

A Talk with Dr. Ben Bernanke, Former Chairman of the Federal Reserve

Our President, Joseph Eschleman, was recently invited to sit on a conference call led by Ben Bernanke, former Chairman of the Federal Reserve and PIMCO senior advisor. Bernanke discussed why recent policy moves made by the Federal Reserve (“the Fed”) and other central banks will be critical to a more stable future for the global economy and financial markets. Bernanke discussed why given today’s unpredictable environment, policy response must first focus on public health to promote recovery, and should be senior to current economic policy. To be clear, the role of monetary and fiscal policy, while hugely important during this pandemic, is primarily meant to keep things alive and to support the economy during this temporary economic downturn. The Fed has acted with alacrity in this current crisis to help support liquidity in the capital markets, help financial institutions have access to cash, and to keep credit flowing to the real economy. Domestically and globally, recovery will depend on 1.) public health, 2.) science and 3.) the public’s confidence in both. It will likely be slow, and with false starts, and it will assuredly be different across regions, industries, and businesses. And while 2020 will assuredly be a year of severe recession, our hope is that the economy will open up by the latter part of the year, especially as the medical situation improves, with growth prospects for 2021 being significantly better

Current Economic Environment

Bernanke did not waste any time pointing out that we are facing a deep global recession. And while there may be an emotional relationship between the COVID-19 crisis and the 2008 global financial crisis (primarily the stress created by uncertainty and similarities surrounding the extreme market volatility), the chain of causality is quite different. The ’08 recession was caused primarily by financial system dysfunction, which led to economic instability and weakness, while today’s COVID-19 recession has been caused not by problems in our financial system, but instead by a natural disaster bringing the global economy to a near standstill.

The good news is our banking system is strong and healthy, unlike in 2008. Debt issued by major banks and financial institutions has been backstopped by the Fed, and banks today are well-capitalized and a source of economic strength, opposite of the environment during the 2008 recession.

Today, the critical element will be public-health policy response to the pandemic, which is even more important than economic policy. Working towards a vaccine is obviously a critical step to recovery, with the purpose of monetary and fiscal stimulus to keep things alive in the shorter-term until a vaccine is ready and we can begin to get back to life as normal.

Bernanke said to expect the near-term economic numbers to be brutal, with -30% GDP and a double-digit unemployment rate here in the United States over the next few quarters. However, these unprecedented figures are expected to be temporary, and to some extent should be taken with a grain of salt. The key question: How long will the temporary shutdown last? One quarter? Two quarters? All of 2020? Longer? If it lasts through the summer, we could be looking at severe bankruptcies and permanent job losses and layoffs.

The Fed’s Toolkit

Currently, the Fed is operating at an unprecedented scale, and when compared to 2008, has already done much more, and quicker, to provide support to the economy and to the financial system. Current Fed Chair Jay Powell deserves credit for his swift decision-making, as well as his use of the monetary “playbook” that was established during the 2008 financial crisis. The Fed remains the global lender of last resort, and has already taken action to provide $2.3 trillion of loans to support the United States economy. The size of the Fed’s current balance sheet is $6 trillion (and growing), the biggest it has ever been. And while the sheer size of it concerns some economists, Bernanke was quick to point out that the Fed is acting as a lender, and not a grantor, and is lending on a collateralized basis. These loans are self-liquidating, meaning the money the Fed is loaning is being used to buy assets (bonds), which will in turn be used to then pay back the loan when the bonds mature. Over a period of time this will automatically cause the Fed’s balance sheet to shrink to a more normal level.

Additionally, the Fed recognizes that the U.S. dollar is still king, is still viewed as the world’s currency, and that the availability of dollars is critical to maintain global liquidity and to fuel global credit. Demand for dollars is very strong right now, and to satisfy that demand and to provide dollars to foreign central banks, the Fed has also opened dollar swap lines with 14 different foreign central banks, acting as a repo facility for these banks and collecting interest while doing so.

Bernanke also focused on the emergency credit programs originally introduced to deal with the strained credit conditions of the Great Depression, and utilized more recently during the 2008 financial crisis. Section 13(3) was added to the Federal Reserve Act in 1932 to expand the Fed’s lending authority beyond banks, permitting it to extend credit to individuals, partnerships, municipalities, and corporations – a type of “Main Street” lending facility. Credit markets have recently been extremely dysfunctional, and these 13(3) lending facilities have allowed the Fed to backstop the credit markets in a secure manner and reduce overall volatility. The popular Paycheck Protection Program (PPP) is authorized under section 13(3), and a $500 billion municipal liquidity facility has also been established to offer credit to state and local governments.

Monetary Policy

In addition to its lending capacity, the Fed also has monetary policy as ammunition to combat the severe economic slowdown. Short-term interest rates have been cut to zero, and the Fed is buying Treasury and mortgage-backed bonds to provide liquidity to the economy. This extremely loose monetary policy is meant to be a temporary placeholder and create an “economic bridge” until we are out of lockdown and the economy begins to pick up speed. Bernanke expressed concerns that people may start saving more and spending less after we see a loosening of the lockdown, and any additional Fed easing will be based on the pace of the economic recovery. It is going to take a while for the economy to get back on track and up and running again, with things not approaching normal in our economy until at least later 2021 and into 2022.

Negative interest rates were discussed as a possible economic policy tool in some circumstances, but the Fed is not inclined to pursue them over the near term. Why?

1. They have a very limited scope.

2. They may disrupt the money market industry.

3. They are most useful to fight deflation (see Japan in 2016), and the COVID-19 crisis is not deflationary.

4. The Fed is on record as saying they are not willing to consider negative rates.

Fiscal Policy and the Political Environment

The 2020 recession is very different when compared to 2008’s recession. It may sound surprising, but Congress is significantly more bi-partisan about today’s economic crisis than they were in ’08. Today, we are fighting a common problem – the virus; in 2008, the problem was the health of our banks, and bailing out the banks was an extremely unpopular issue. The fiscal response to today’s crisis has been very good, and Bernanke believes we will need more from fiscal policy as the economy begins to open back up. Our fiscal response is a de-facto relief package due to a natural disaster, but absolutely necessary to avoid even greater economic pain.

The United States is fortunate in our capacity to borrow, and demand for Treasuries is very high. The big question of how government can afford all of this stimulus and issue and backstop debt like this is a hugely important one, understanding the CARES Act was funded entirely by debt issuance. Bernanke was quick to note that he has no problems with what the U.S. has done to borrow substantially to stave off this crisis, especially understanding the financial burden of doing so is minimal with interest rates close to zero. Emergencies like the coronavirus pandemic are exactly why the United States has a deep debt capacity, although we certainly do need to do better longer-term planning about the structure of the U.S. budget.

Forward Guidance, Outlook and Recovery

It is clear that the shape, and extent, of the current recession will be directly correlated to the health response to COVID-19. Recovery will be directly correlated to the level of focus, energy, and resources placed on medicine, science, and public health. A vaccine may not be available for 12 to 18 months, and opening up the economy will be a slow and regional process, with false starts a reasonable expectation. How to keep proper distance between workers, and how to regularly test the work force for COVID-19 are key questions that will impact what the recovery will look like, as well as the seasonality of the virus. Hopefully the beginnings of a recovery begin this summer, although it remains to be seen if it will be “V” or “U” shaped, or possibly a more uneven “W” shape. Public confidence is key, as this is obviously a highly uncertain environment that requires caution and care. Bernanke holds hope that 2021 should be significantly better than 2020, as some of this year’s economic figures will be Depression-esque.
However, the Great Depression lasted 12 years, and we are hopeful this recession will be measured in months. And understanding the IMF made huge changes to its global growth expectations for 2020 (from +3% to -3%), their 2021 forecast is for growth of +6%.

The United States is institutionally strong (governors, mayors, CEOs, presidents of universities, etc.), having high levels of diversity and innovation. As a country, we have weathered many other crises in our collective past, each of which was unique in its circumstances and impact, and we are confident that this pandemic will prove to be no different.

How Can We Help?

Joseph F. Eschleman, CIMA®, President, Towerpoint Wealth

At Towerpoint Wealth, we are a fiduciary to you, and embrace the legal obligation we have to act in your best interests 100% of the time. We encourage you to call (916-405-9140) or email (info@towerpointwealth.com) to open an objective dialogue.

Towerpoint Wealth, LLC is a Registered Investment Adviser. This material is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Towerpoint Wealth, LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Towerpoint Wealth, LLC unless a client service agreement is in place.