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Time to Tiptoe Towards That Crypto? 06.18.2021

Whether you are skeptical, cautious, and apathetic, OR enraptured, excited and intrigued by it, crypto has exploded in global popularity over just the past year, and has, to one degree or another, captured the attention of most of the civilized world.

Bitcoin was released as the first decentralized cryptocurrency in 2009, and nine years later, in 2018, the Merriam-Webster Dictionary approved “cryptocurrency” as an official word. While many (ourselves here at Towerpoint Wealth included) believe that crypto is here to stay, there are still plenty of “no-coiners” who feel otherwise:

Many Westerners find it difficult to understand how a 12-year-old digital currency could be safer to hold than the US dollar, which has long been recognized as the reserve currency of the world. However, once you understand that the Federal Reserve, America’s central bank, has inflated the money supply to achieve its macroeconomic goals, it becomes a bit clearer. Note the “infamous” comment made by Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, in a March 22, 2020 interview on CBS’ 60 Minutes:

Do we have your attention now?

Rather than opine on the intrinsic details and inner-workings of crypto, it is important for most investors to note three main takeaways:

  1. Cryptocurrency is a digital, or virtual, asset. Many cryptocurrencies are decentralized and aspire to be a form of money and a medium of exchange
  2. Unlike fiat currencies, most cryptocurrencies operate without government oversight or intervention
  3. Most cryptocurrencies are managed by a large group of network participants, and are secured by advanced cryptography. Explaining the Crypto in Cryptocurrency does an excellent job of explaining cryptography further

Concurrently, the shift to embrace crypto as an investment vehicle is certainly on the rise. According to the Financial Planning Association’s 2021 Trends in Investing Survey, conducted by the Journal of Financial Planning:

  • More than a quarter (26%, to be exact) of financial advisors plan to increase their use or recommendation of cryptocurrencies over the next 12 months
  • Almost half (49%, to be exact) of advisors indicated that clients had asked them about investing in cryptocurrencies over the past six months

Do these two facts alone make crypto “good” or “appropriate” for integration into one’s investment portfolio? Certainly not, but it does speak to the inflection (some may say tipping) point where we find ourselves. El Salvador is pushing to become the first country to adopt bitcoin as legal tender. This feels more like a movement than a trend.

As a brief crypto aside/FYI, the term HODL (hold on for dear life) was coined (yes, pun intended) by a user in an internet bitcoin forum who misspelled “hold,” and now refers to a devout buy-and-hold crypto philosophy. Now you know!

Perhaps next month, Trending Today (TT) should pivot from cryptocurrency and cover NFTs (non-fungible tokens)? Is your head spinning and ready to explode yet? While we are joking about NFTs being the next TT topic, we cite them in light of our dialogue above about cryptocurrency, as NFTs are just another specific example of how quickly our world (both inside and outside the world of finance and investing) is changing. Are these immature assets with room for development? We would argue yes. However, we also argue for (read: encourage) you to be careful about dismissing new technologies too quickly, and to be scrutinous yet open-minded about the speed at which our society is evolving.

Aside #2: If you have three minutes, click HERE to watch an extremely funny (and surprisingly educational) Saturday Night Live skit about NFTs.

Crypto – Join Us for Our Cryptocurrency Webinar!

Bitcoin and Ethereum are two of the most popular of the more than 4,000 different cryptocurrencies in existence as of January 2021. Crypto has exploded in popularity over the past year, and has emerged not only as a new asset class, but also as an alternative store of value – some call it “digital gold.”

Click below to RSVP for this 45-minute educational Zoom webinar, in which Christopher King, CEO and Founder of Eaglebrook Advisors, will discuss the question: “Bitcoin – what is it?” as well as how cryptocurrencies and digital currencies can play an important complementary role within a properly diversified investment portfolio.
Wednesday, June 23
12:00PM – 12:45PM PST
Click HERE to RSVP

For every participating attendee, we will make a $10 donation to the Leukemia and Lymphoma Society – please invite a friend, colleague, or family member to also RSVP with this link!

What’s Happening at TPW?

As a work family, part of the Towerpoint Wealth culture is to regularly volunteer and find opportunities to give back to our community. Earlier this week, in conjunction with the Cathedral of the Blessed Sacrament and with the help of Marilynn Fairgood, the Cathedral’s Brown Bag Lunch program coordinator, we had an opportunity to assemble, and then distribute, sack lunches and other supplies to assist Sacramento’s homeless community.

Unquestionably this was a fulfilling experience for everyone involved, as the sincere gratitude and appreciation we received was both heartwarming and priceless.

Click HERE for an excellent article from KHOU-11 for additional information on how to help and volunteer for the Brown Bag Lunch program.

Chart of the Week – Crypto, Bitcoin

In our opinion, the most effective way to reduce and manage the risk of a properly diversified portfolio is to own various assets and investments with low correlations to each other. Understanding that no one can accurately predict the future performance of any investment, owning low (or even negatively) correlated assets can help mitigate damage during any particular market cycle.

Below is a simple chart (specifically, the darker blue dotted rectangle) that delineates the correlation between Bitcoin and the S&P 500 – at 0.19, this is an attractively low correlation. Put differently, Bitcoin oftentimes zigs when the stock market zags.

In addition to technology’s permeation into finance, 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

Towerpoint Wealth Sacramento Independent Financial Advisor
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What is Cryptocurrency? Why would you want to own it? 06.07.2021

Educational Webinar Event

Date of Event: June 23, 12:00 – 12:45 PM PST

Featured Speaker:  Christopher King, CEO and Founder, Eaglebrook Advisors

Bitcoin and Ethereum are two of the most popular of the more than 4,000 different cryptocurrencies in existence as of January 2021. “Crypto” has exploded in popularity over the past year, and has emerged not only a new asset class, but also as an alternative store of value – some call it “digital gold.” The United States government has dramatically increased the money supply since the beginning of the COVID-19 pandemic last March, which has led to a decrease in the value of the U.S. dollar, and stoking fears of inflation.

Click below to RSVP to this 30-minute educational webinar, in which Christopher King will discuss the question: “Bitcoin – what is it?” as well as how cryptocurrencies and digital currencies can play an important complementary role within a properly-diversified investment portfolio.

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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