Tuesday, December 6, 2016


Picture credit: theenchantedmanor.com
November memories include a completed election season (finally), a continuing softening of bond prices, a rocket ride for small cap prices, a President-elect who continues to defy all convention, and Thanksgiving. 

Turning to public markets first, bond prices, as measured by BLV, were off 6.6% in November, over several concerns, including that the FOMC would begin raising interest rates consistently.  The FOMC meets next week, and the consensus is they will raise rates by at least 0.25%.

Small caps, on the other hand, went straight up, with most indices which track small caps up more than 10%.  VIOO, the Vanguard Small Cap 600 ETF, was up 11.3% in November, while the Russell 2000 was up 11%.

President-elect Trump continues to defy all Presidential convention, making full use of the bully pulpit of the President.  Many cringe in embarrassment, while others cheer him on.  He appears to be more an opportunist than a conservative, though many is the leader who has risen to the occasion, when given the role.  Only time will tell what these next few years will bring.  They will certainly be interesting.

In economic news, the BLS reported the official unemployment rate at 4.6% in November, its lowest level since August 2007.  According to the BLS, November added 178,000 jobs, with a total of 15.6 million new jobs since early 2010.

Picture credit: businessinsider.com
Coke is studying next best steps for growth, as the cultural war on sugary drinks has led to decreased revenue.  Over the years, Coke, aware of these trends, has diversified away from carbonated soft drinks to brands such as Dasani, VitaminWater, MinuteMaid, Honestea and others.  It will no doubt continue this diversification.

Speaking of fascinating cultural trends, Snapchat has introduced its Spectacles, glasses that take short, first person videos, which can be uploaded to its platform.  Retail is $129, with demand causing them to sell for $5000 on eBay.  Of course, I don’t understand which makes me a dinosaur.   

For year-end tax planning, a few thoughts.  On the business side, if you need to buy equipment, buy sooner rather than later, using the available deduction under Sec. 179.  You can also establish a retirement plan for the current tax year, as long as plan documents are signed by December 31.  Funding can take place the sooner of the day the company files its tax return or the filing deadline, including extensions.  

On the personal side, look at several things.  If your employer offers a 401(k), make sure you are maximizing contributions.  The contribution limit for the year is $18,000 or $24,000, if you were 50 or older this year.  Make sure your state taxes paid are at least as much as your anticipated liability, as state taxes paid are a deduction on your federal return.  If you are charitably inclined, you can use a donor-advised fund to increase deductible contributions.  You can choose the final beneficiary of those contributions later. 

We enjoyed Thanksgiving.  It was a combination family reunion for my mother’s side of the family, and a three day Thanksgiving visit.  There were 37 of us on Thanksgiving Day.  On Thursday afternoon, our seven-year-old grandson graduated from a BB gun to a 20 gauge.  My cousin had set up the clay thrower and showed Joseph, our grandson, how to follow and shoot the clay.  Joseph took out a clay on his first shot with a 20 gauge.  That was a highlight.  Enough bragging, though.

As we move into the holiday season, what are you grateful or thankful for?  I was thinking about this the other day.  Here’s a short list.  Send us an email, or post to our blog, at www.centurionag.blogspot.com, and let us know what you are thankful for. 

Good health, the opportunity to be married to my best friend, children and grandchildren who are close both geographically and relationally, work that makes a difference, opportunities to serve and help outside of work, opportunities to travel and see friends and places around the country and world, and things as simple as a hot shower and hot coffee, a home that is warm in winter and cool in summer.  We are grateful for so many things, experiences and people, and to the Giver of all good and perfect gifts.

Picture credit: coniscorner.com
Quote of the week:

“When you rise in the morning, give thanks for the light, for your life, for your strength.  Give thanks for your food, and for the joy of living.  If you see no reason to give thanks, the fault lies in yourself.”


Tuesday, November 22, 2016


It appears that Donald Trump will be sworn in as our 45th president on January 20, 2017.  Trump mastered the art of the sound bite, and along the way, managed to offend many.  What we don’t know is how well, or whether, he will govern.  Only time will tell.

Picture Credit:singhstation.net
From a business and markets perspective though, what can we expect?  The public markets were very volatile between Tuesday evening, the 8th, and the close of the markets on Wednesday, November 9th, with the Dow swinging almost 1000 points.  This is measured by future activity to actual close.  They have, however, had a nice run since the 9th. 

Republicans will control the House, the Senate, and the White House.  Based on this, and comments offered by Mr. Trump during the campaign, we can expect an attempt to overhaul or repeal the Affordable Care Act.  It is possible that corporate tax rates would be reduced from 35% to 15%, and that we could end up with three personal income tax brackets, ranging from 12% to 33%. 

What about budget surpluses and deficits?  The two most recent presidents, George Bush and Barack Obama, added more to the deficit than all previous presidents combined.  Our only budget surplus in recent history came during Bill Clinton’s presidency. 

What about market performance?  Richard Nixon and George W. Bush are the two presidents since 1970 who have presided over losses in the markets, while Bill Clinton and Barack Obama are second and third, behind Gerald Ford, as presidents associated with the highest total gains. 
Picture Credit: morganmckinley.ie

Whether we study personal income tax rates, budget surpluses or deficits, or the performance of the public markets, the inputs are too broad and variable, and the data bits too complex, to draw meaningful conclusions, or to assign specific outcomes across these categories to either party, or to specific presidents. 

From a planning perspective, there are a few considerations.  If we anticipate lower personal income tax rates in 2017, we can bunch deductions. 

Some examples:

You can increase charitable contributions.  If you aren’t sure which organization you want to give to just yet, you can use a donor-advised fund through a community foundation, such as Atlanta Community Foundation, National Christian Foundation, or Northeast Georgia Community Foundation.  You can make the gift to your account at these organizations now, they will issue the charitable gift receipt for 2016, and you can decide the ultimate beneficiary of your gift next year, or later.

You can pay state income taxes ahead.  Any state income taxes paid this year are deducted this year.  While overpayments come back as income next year, the thought is that they may come back in a lower tax bracket.

For those of you whose AGI is north of $250,000, you may want to explore conservation easements.  If you are unfamiliar with them, we would suggest learning and study as the first step.  And we would encourage you to do your homework.

If you have a retirement plan in place for your company, or your employer has a plan in place, maximize available contributions, whether from salary deferrals, or the company checkbook.  Note that 401(k) contributions must be made through payroll deduction.  It isn’t too late to set up a retirement plan for your company, but the deadline is approaching.

On the economic front, October’s inflation report showed an overall increase in the CPI of 0.4%, ahead of the consensus 0.3%.  Higher energy prices seemed to be the driver.  Core CPI, which excludes food and energy (why I don’t know, given how much of most household budgets are allocated to these categories) was up 0.1%. 

Long bond prices are off almost 10% from their late summer highs, as fears of interest rate increases and different administration policies under our new president took hold.  The prospect of higher interest rates and stronger economic growth sent the dollar to a 13-year high against the Euro, with €1 = $1.06 at Friday’s close.

On the bright side, some fascinating statistics regarding progress.

If you had purchased the computing power found in an iPhone 5S in 1991, it would have cost you $3.56 million.  Between 1990 and 2013, maternal mortality worldwide has dropped by almost 50%.  In 1981, 52% of the world lived in “absolute” poverty.  By 2010, this number was down to 21%. 

The election outcome was encouraging to some, and discouraging to others.  What do we do, in the face of such uncertainty?  First, don’t fear or panic.  The sun will come up tomorrow morning, just as it has every day for thousands of years.  Those you love will be as close as a phone call, and there will be the opportunity to engage in something meaningful before the day is over.  In short, life will go on.

Second, market trends are favorable on two fronts.  The first is that the public market enjoys climbing a wall of worry, and there is plenty of worry and concern at the moment.  The second is that the early November to late April time frame is favorable for the stock market, in a way that is statistically significant.  This means the outperformance during this period, compared to the early May to late October time frame, is meaningful enough that it can be measured.

So, stay on plan, stay true to what has worked.  The market will continue to ebb and flow though, given time and diligence on your part, it will reward you well.

Quotes of the week:

“The opposite of play is not work, but depression.”
                                               Dr. Stuart Brown

“The opposite of faith is not doubt, but certainty.”
                                               Anne LaMott

Tuesday, November 1, 2016


During the fourth quarter of each year, the IRS announces the new limits for Defined Contribution Plans and IRAs, as well as COLA adjustments for Social Security and other benefits.  The announcement for the 2017 adjustments has just been released, and is as follows.

Elective deferral and catchup provisions for your 401(k)/403(b) remain unchanged, at $18,000 and $6,000 respectively.  Deferral and catchup provisions for SIMPLE IRAs remain unchanged, at $12,500 and $3,000 respectively.  IRA contributions and catchup provisions remain unchanged, at $5,500 and $100 respectively.

The 415 annual additions limit increases from $53,000 to $54,000, while the annual comp limit increases from $265,000 to $270,000.  The key employee threshold increases from $170,000 to $175,000.  These limits have to do with the amount of compensation taken into account for various maximum benefit calculations.

The Social Security Taxable Wage Base is increasing from $118,500 to $127,200, an increase of $8,700, or 7.3%.  For those of you over the wage base, this will increase your Social Security taxes by $665.55, with your employer kicking in a like amount.

Social security retirement income benefits are increasing by 0.3%, the COLA adjustment made by thehttps://www.ssa.gov/news/press/factsheets/colafacts2017.pdf.
Social Security Administration for 2017.  You can see a full list of the Social Security related adjustments at

On the economic front, inflation, as measured by CPI, was up 0.3% in September, and up 1.5% over the last year.  The election season is almost behind us, eight days from being over as you read this.  One more thing to be thankful for as we head into the holiday season.  Most prognosticators expect the FOMC to raise interest rates in December, and again next year.

In business news, Coke reported earnings that beat analysts’ estimates, though net income for their third quarter was $1.05 billion, compared to $1.45 billion in the previous year.  Snapchat anticipates raising $4 billion in its IPO, putting a value on the company of between $25 billion and $35 billion.

According to Reuters, the current administration wants states to limit non-compete agreements.  We are big fans of the concept of right-to-work.  We do have a preference for the federal government employing its bully pulpit in other ways though, than telling states and companies how to do their jobs.  It’s pretty evident that work freedom is popular.  We have only to look at migration from states who have a strong union or strong non-compete agreement environment, to states where both employers and employees have much freedom to choose how and for whom they work, as well as who, whether, and when they hire and fire.
Craig Warga | Bloomberg | Getty Images
The Sterling Memorial Library on the Yale University campus in New Haven, Connecticut.

Goldman Sachs Q3 earnings were up 58% to $2.1 billion, according to USA Today.  Per share earnings were $4.88, ahead of estimates of $3.83.  According to CNBC, Harvard, MIT, and Stanford led the list of private colleges whose graduates posted the highest earnings, ten years after enrolling.  You can read the story at http://www.cnbc.com/2016/10/18/the-17-private-colleges-where-students-go-on-to-earn-the-most-money.html.

ATT has announced plans to absorb Time Warner for $85 billion, while Delta is expanding the use of RFID luggage tags, in the hopes of reducing its lost luggage costs.

According to the Wall Street Journal, the U.S. is creating startup businesses at historically low rates.  The share of private firms less than a year old has dropped from 12%, during much of the 80’s and 90’s, to less than 8% today.  The share of jobs at such firms has dropped from 4% to 2%.  Those who study such things attribute this trend to increased regulation, more time for companies to reach profitability and exit than some backers are willing to provide, and the fact that boomers are retiring just as millennials are reaching the entrepreneurship age.

Of course, as John Haltiwanger, University of Maryland economist points out, the U.S. is still a robust economy.  The U.S. economy is still more dynamic, more flexible, and more entrepreneurial than almost any other economy on the planet.  The referenced slowdown is only by comparison to what was, not to any other economy.

And now, for a bit of light reading as we wrap up.  According to the police blotter for Flathead County, Montana, a Columbia Falls horse went for a late-night stroll, but was later returned to its owner.  A late afternoon caller said a Martin City dog broke into a rabbit cage and assaulted the occupant.  The rabbit required extensive medical treatment, but is expected to make a full recovery.  Three mules and one horse made a run for it on Edgewood Drive in Whitefish.

A call at 3:17am reported a disturbance at a Kalispell trailer park.  Upon further investigation, a woman there said she had had one glass of wine, and smoked a little weed, so things weren’t going to get physical “yet”.

Quote of the week:

“The marvelous richness of human experience would lose something of rewarding joy if there were no limitations to overcome.  The hilltop hour would not be half so wonderful if there were no dark valleys to traverse.”
                                                                                                                                                                                Helen Keller

Tuesday, October 25, 2016


Public markets will continue to go up and down, businesses will continue to thrive or not based on the relevance of the products and services, and negative headlines will continue to attract viewers and listeners.  This week, let’s talk about something else.
View of tallgrass prairie in wintrer
photo by John Kennington

Clifford was born in November 1913, in a farmhouse built in a pasture of bluestem prairie grass.  He was the youngest boy in a family of eight, seven of whom, in something of a miracle for the times, lived to adulthood.  He rode his pony to town to attend school, played on the high school basketball team, and in 1931, became the first in his family to graduate from high school.

This girl Pauline, they called her Polly, had caught his eye and in December 1933, they married in a small ceremony at his parent’s home.  Between February of 1935 and December 1940 their three children, Joyce, Harvey, and John, were born. 

The Great Depression was a tough time to be getting started in life.  Fortunately for Cliff, his father-in-law, Bill, was a supervisor for the railroad, so Cliff was able to get work to support his family.

In ’43, at the age of 30 and with three children at home, Cliff was drafted, shipped to Ft. Lewis, Washington, and then on to the Philippines.  By 1946 he was home, though during his absence, son Harvey had picked up scarlet fever, which led to rheumatic heart disease.  In 1952, at age 13, Harvey passed, creating a hole that lasted for life.

 Pictures from the family of Orville Presley,
Battery A/124th Field Artillery Battalion
Cliff was my mom’s dad, and one of my heroes in life.  Two stories he shared included one about waking up after falling asleep on the ground in the Philippines, to find a big lizard crawling over him. 

The other story was, during Harvey’s illness, owing money to everyone he knew because Harvey’s medicine took almost his entire paycheck.  After the war, they kept milk cows.  Grandpa would skim the cream, store it in five gallon containers, and then take the cream to town to trade.  On one trip, something spooked the horses, and one of the two containers of cream tipped over.  Grandpa said he cried, as the cream was so valuable to them as a trading commodity.

I could fill a book with the lessons I learned from him, or the things he taught me.  Among the things I learned from him was how to bait and set a fishing hook, how to handle guns, how to pitch horseshoes, how to use power tools and how to make ice cream in a hand cranked ice cream maker.  More though, he taught me how to treat a lady and by example, how to care for family, how to live and finally, how to die.

Many of us have been given the gift of someone like this in our lives, whether a parent, a grandparent, another relative or simply someone who took an interest in us and helped show us the way.  Who were these people for you?  Are they still living, such that you can thank them?  If you haven’t had the gift of someone like this, could you be this person to someone else?

We stand, as John of Salisbury said, on the shoulders of giants and to them we owe a debt of gratitude, for what they have given us and what they have poured into our lives.  It is easy for us, then, to agree with the ancient poet who said, “The boundary lines have fallen for me in pleasant places; surely I have a delightful inheritance.”

Quote of the week:

“It is surmounting difficulties that makes heroes.”
                                                                                                Louis Pasteur

Monday, October 17, 2016

Financial Update October 17, 2016

The story of Bass Pro Shops buying Cabela’s caused me to read more about John Morris, the Bass Pro founder.  Springfield MO is just up the street, 180 miles or so, from where I grew up.  Fresh water fishing is abundant in the lakes, ponds, and coal pits of Southwest Missouri, Northwest Arkansas, Southeast Kansas, and Northeast Oklahoma.   

Those stories of John Morris as a young man brought back many memories from decades ago.  In decades past, coal mining companies in NE Oklahoma would simply dig a hole for the coal beneath the surface, piling the dirt on the ground above.  Once the coal was mined, the pits were left open, and were primarily on private land.  These pits filled with water, and held some of the largest large-mouth base I’ve seen.  These coal pits dotted the landscape and offered excellent fishing.  You simply had to know where they were, and you had to have permission from the landowner to fish the coal pits. 

My cousin Bobby knew where all the coal pits were, and he knew the owners.  He and I spent many summer afternoons in a flat bottom boat, fishing those coal pits.  The memories are hazy at this point, and get better with age.  It seems though, that I recall the sounds of silence, a beautiful golden sun, and the anticipation of the bobber suddenly plunging into the water, as a 5 to 8 lb. large mouth locked on for a snack. 

Those memories are unique to a specific time and place.  But you have your memories of those years, which bring a smile to your face.  What are they?  You are welcome to share them with us, fishing story or otherwise, if you are so inclined, at https://centurionag.blogspot.com/. 

In other news, let’s talk portals, which we referenced in our April update.  Over the years, the transfer of documents has occurred by courier, by U.S. Mail or other post, by fax, and by email attachment.  All of these methods remain available to all of us.  The documents we send to you, and that you send or transfer to us, need to meet two criteria, we believe.  First, transmission needs to be secure.  Second, the transmission tools need to be relevant.   

From a security standpoint, courier and post are the least secure, followed by unsecure email attachments.  Faxes and secured email attachments are more secure.  Portals, with good security protocols, provide the highest level of security, and offer an interface that is familiar to all of us.  

You may always, if you choose, drop information in the mail.  That will remain a tried and true method to get information to us.  When we receive the information, we scan the documents, and shred the hard copies.  We have had a fax number for many years, and will retain it.  We have been using secure file transmission through Sharefile for two or three years, and we will retain the use of Sharefile for secure file transmission for another two or three years. 

Going forward, any communication we prepare for you will be posted to your portal.  For households, this would include documents such as quarterly reports and annual reviews.  The portal could also contain folders for financial statements, tax returns, insurance details, and other documents which touch your finances and our work together.  For non-profits, this would include documents such as quarterly reports, annual reviews, and Investment Policy Statements (IPS).  For plan sponsors, this would include documents such as your Plan Document, Summary Plan Description, Adoption Agreement, IPS (if applicable) Form 5500, our annual review, and committee meeting notes. 

We will also prepare hard copies for any meetings we have with you, until such time as you and we are comfortable reviewing this communication in electronic form.   Note that there will be no “requirement” that you use the portal for document transmission, though we will be promoting its use.  How we receive documents will be left to your discretion, and it is easy for us to manage these documents, regardless of how we receive them.  

Beyond the security of the portal though, is its relevance.  Just about all of us, when we are looking for information, or needing to take action, logon.  Many of us logon to check our bank or other financial institution balance from time to time.  Many of us have also chosen to forego paper statements, instead opting for an email alert that our statements are ready. 

Whether it’s making airline reservations, checking our bank balance, making dinner reservations, receiving results from the doctor, or so many other uses, the first step seems to be entering a pin and password from our smartphone, tablet, laptop, or workstation.  The portal offers the same environment. 

If you have already registered as a portal user, you may access your portal by going to www.centurionag.com, and going to Client Login, at the top right corner of the page.  If you haven’t registered as a portal user yet, let us know, and we will send you the link to do so.  And, this is a collaborative work.  As you use the portal, give us your feedback.  Also, let us know what features you think would be useful, and any feedback about how we structure the sections.  This space is new enough that the vendor partners we use are very receptive to design feedback. 

We look forward to hearing from you. 

Until next month. 

Randy Brunson

For the Centurion Team

Monday, September 12, 2016

Financial Update September 12, 2016

As we write this, the Dow, the S&P 500, and the NASDAQ remain at or near all-time highs.  Of note is that the S&P 500 and NASDAQ are up less than 3%, and the Dow up just 1.4%, since their 2015 highs.

Dividend paying or value oriented stocks, as well as intermediate/long bonds, have been all the rage, in what appears to be a search for yield.  Outside of those investment sectors, the market has not rewarded investors for the volatility they have experienced since last summer.

In business news, Liberty Media, owner of the Atlanta Braves, is purchasing part of the Formula One auto racing league, according to The Guardian.  The Atlanta Journal Constitution says that Delta and its pilots are currently negotiating pay, with Delta offering a 27.3% increase over four years, and the pilots asking for 37.25% over three years.

Software testing firm Mindspark employs autistic adults, paying them between $16 and $30 per hour to work as analysts and senior analysts.  Founder Evan Rochte found that their skills integrated well with those needed in the tech sector.  This according to CNBC.

Legalist, partially funded by Peter Thiel, is a startup based on the model of financing litigation in exchange for a portion of the winnings.  While we haven’t thought through this idea at length, it doesn’t, at first blush, impress us as an especially good idea.

President Obama is calling on U.S. allies to join forces against corporate tax avoidance.  It remains to be seen what cooperation he will get, though most countries are hungry for tax revenue.  Apparently it just won’t do for the sovereign entities of the world to get their financial houses in order.  It’s probably just too much like work.  Seems to be easier to print money, and tax everything that moves, (as well as most of what doesn’t) rather than make the tough decisions to balance budgets, and communicate those decisions to those who keep you in power.  You can read the story regarding Obama’s remarks at http://www.reuters.com/article/us-g20-china-usa-tax-idUSKCN11B1LR.

In economic news, the Congressional Budget Office is revising the FY 2016 budget deficit to $590 Billion.  This is $56 Billion higher than the CBO’s March forecast and represents the first increase relative to economic output since 2009.  This $590 Billion is 3.2% of GDP, and is $152 Billion higher than FY 2015.  GDP in the U.S. is $17.95 Trillion, and U.S. debt stands at $19.47 Trillion.

If current tax law remains unchanged, a substantial assumption going into an election, deficits are projected to increase.  If tax law changes, we predict that deficits are projected to increase.

According to the Labor Department, the U.S. economy added 151,000 jobs in August, down from the 275,000 recorded in July.  This was less than the 175,000 predicted by economists.  The official unemployment rate remained unchanged, at 4.9%.

As you know from reading this commentary, we enjoy keeping up with business and the markets, and taking a skeptical view of government doings and promises.  We don’t view life skeptically though.  In fact, we are grateful for the life we have been given, the relationships that have come our way, and the opportunities in front of us.  I was reminded of this recently, as I was going through some old files.  In one file, I found an article written by David Brooks in April 2010.

In the article, published as an op-ed in the New York Times, Brooks encourages optimism.  At the time, recent polls showed that 60% of Americans felt the country was headed in the wrong direction, that its best days were behind it, a fiscal crisis was unavoidable, and that the political system was dysfunctional.  Our guess is that those percentages haven’t changed much in the last six years.

Brooks goes on to make a case for great optimism, concerning our country and its future.  Friends, I happen to agree.  Sure, the country has its problems.  Think back though, over the conveniences you now enjoy, that weren’t available even fifteen years ago.  And, to the quality of life we enjoy, and the gifts we have each been given.  It is difficult, as we reflect, to be anything but grateful.

We firmly believe that the number and type of opportunities in front of us will continue to increase, and that the best is yet to come.  We trust you feel the same way.  You can read Brooks’ article at http://www.nytimes.com/2010/04/06/opinion/06brooks.html?_r=0.

And now, a few of our favorite quotes.

“Giving money to Congress is like giving whisky and car keys to teenage boys.”

P.J. O’Rourke

“Anyone may so arrange his affairs so that his taxes shall be as low as possible.  He is not bound to choose that pattern which best pays the treasury.  There is not even a patriotic duty to increase ones taxes.”

Judge Learned Hand

“I’ve read so much about the bad effects of drinking and smoking that I’ve decided to give up reading.”

W.C. Fields

Monday, September 5, 2016

Heartbreaks that begets Labor Day
Written by: Randy Brunson

After the Civil War ended, expansion began.  This building out of the west required oil, coal, steel, wood, the products that were made from these materials, and a way to get these products to where they were needed, which was rail.  During this time, some of the great fortunes of the 19th and early 20th century were made, with names such as Vanderbilt in rail, Carnegie in steel, Rockefeller in coal, and JP financing the operations. Other notable names: Yerkes, Stanford, Gould, Mellon, Harriman, Pullman, Frick, Field, Duke, McCormick and Astor. These names owned the enterprises that built the country, and provided its goods and services.

During this time in history, a typical workweek was a twelve-hour day, seven days a week.  There were few laws prohibiting child labor, so child labor was common, and in too many cases, there was a disregard for the physical safety of employees. Immigration from Ireland, Italy, China, and many other countries provided a ready supply of cheap labor, downgrading work conditions even further. The inhumane factors and danger at the work place made unions attractive to employees, which made them very popular and eventually, the power of the unions became dangerous to big businesses.

Fights broke out, ranging from social retaliation through protests and boycotts, to legal retaliations with legislation and lawsuits. Politicians, irritated journalists, lawyers, and influencers began taking sides and confrontation became more and more violent, sometimes even fatal.  As the recognition of employees as individuals grew, cities and states began setting aside the first Monday of September as a holiday for the “workingman.” Congress formalized it as a national holiday in 1894.

Most of us see Labor Day as the end of summer and an opportunity for some R&R. However, do we truly understand the concept of work? We firmly believe that each of us has been created to be productive, to be fruitful, and to multiply.  This means using all we have been given in a way that makes a positive difference. The questions we study are “How do we utilize our time, treasure and talent in a manner that maximizes the return to ourselves and others?” And, “Since we are built and designed to work, how to pursue work with excellence, without having work become our identity?”  We continue to learn, and will let you know what we find.

There is nothing in history, outside the last 150 or so years, that suggests retirement as we have come to understand it in America. Seems to us that retirement as its presented in America is more the creation of Wall Street and Del Webb, than it is anything else.  Our call as individuals is to continually engage. While our roles may change, the opportunity of our lives is to continue to be productive, and to utilize our time, talent, and treasure, in ways that matter.

Wednesday, August 31, 2016


Seems the whole world waited to see what Ms. Yellen would share on Friday morning, when she addressed the august group gathered at Jackson Hole.  As usual for those who serve as Fed chair, her comments were rather muted and opaque.  Markets reacted in kind, doing little.

Those who opine on such matters suggest one or two interest rate increases will show up before year-end.  I’d be surprised though, if any rate increases show up before the general election.

Looking at economic reports, we see that the official CPI was unchanged in July, with energy prices down, and food prices flat.  Excluding food and energy (which make up a significant minority of most household budgets), prices were up 0.9% in July, and up 2.2% over the last twelve months.  The Fed’s target inflation rate is supposedly 2%, before they consider an increase in short-term interest rates.

Treasury and mortgage rates have remained stable for the last few weeks, and the price of oil was up several dollars last week.  That move in oil prices has yet to show up at the pump in a meaningful way.

Last week, we looked at a few elements of Trump’s proposed tax plan.  This week, we take a look at what Clinton is proposing.  Keep in mind that what we wrote last week, and what we write this week, are subject to change anytime either candidate opens his/her mouth, and are certainly subject to all sorts of creativity once Congress starts playtime with said tax proposals.

Regarding personal income taxes, Clinton would increase the number of tax brackets to eight, adding a 43.6% marginal rate, or a 4% surtax, to those incomes of greater than $5 million.  Clinton would also retain the 3.8% surtax on “net investment income”, meaning the top federal rate could reach 47.4%.

Clinton would increase the top rate on capital gains to 47.4%, unless the hold period for the asset was six years.  The 4% surtax on incomes of greater than $5 million would apply, giving a capital gain tax rate of 27.8% on assets held six years or more.  Under Clinton’s tax plan, the benefit of itemized deductions would be limited to 28%.  In 2016, this means that joint filing taxpayers with AGI’s of greater than $231,450 would begin to lose the benefit of itemized deductions.

The Clinton plan would adopt the “Buffett Rule”, meaning that taxpayers with incomes of greater than $1 million would pay a minimum effective rate of 30%.  The estate tax rate would be 45%, and the estate tax exemption would drop from its current $5.45 million to $3.5 million.

Evaluating these changes on tax paying households makes it easier for most of us to breathe.  Until your AGI gets north of $730,000, your tax bill will go up, but will do so only very slightly.  At $730,000 plus, your federal tax bill will go up $80,000.  And, as your income goes up, both the dollars you pay, and the percentage of the dollars you pay, in taxes, increases.  The good news is that, of the 110 million or so households in the U.S., fewer than 1 million of them have incomes at or above this $730,000.

Corporate taxpayers will face an exit tax, if they attempt an inversion.  The attraction of an inversion, meaning relocating your corporate residence to another country, is to escape the onerous U.S. corporate income tax structure.  The U.S. taxes all corporate income which is brought into the country, regardless of where it is earned, whereas most other countries tax corporate income earned just in that country.

Clinton would treat “carried interest” as ordinary income.  Clinton has referenced raising the cap on incomes currently subject to Social Security taxes, but has put nothing in writing. 
What we haven’t discussed, this week or last, is the impact that varying tax rates, at both the household and corporate level, have on the average household in America.  That’s a subject for a different day, if we choose to tackle it at all.  If we jump into the fray, we will include significant supporting references, and encourage you to do your own research.

One more income tax tidbit.  The Tax Foundation, www.taxfoundation.org, has a complete history of U.S. income tax rates available in both nominal and inflation adjusted formats.  In 1913, the first year of the current federal income tax, tax payers with incomes (inflation adjusted to 2013) from $0 to $463,000 paid a tax of 1% of income.  The highest marginal rate in 2013 was 7%, and it applied to (inflation adjusted) incomes of more than $11,595,000.

Note that most of this information comes from The Tax Foundation, and The Tax Policy Institute.  Our encouragement is for you to do your own reading and research, if your tax bill is of interest to you, and track what each of the candidates are both saying and doing.  Taxes are the price we pay for enjoying the privileges of this great land.  Our involvement and engagement as citizens is critical, in order for us to continue to enjoy this great country.

Changing subjects briefly, Pat Gelsinger was a farm boy from Pennsylvania.  In high school, he worked on the family farm, and by his own admission, drifted through school, until he took and aced an electronics technology test.  That experience, the insight he gained, and the decisions he made from it, changed the course of his life.  He worked under Andy Grove at Intel, and is currently CEO of VMware.  It’s a good story, and you can read more of it at http://www.forbes.com/sites/richkarlgaard/2016/06/15/serial-bloomer-pat-gelsinger/#d28502735050.

Quotes of the week:

“The starting point of all achievement is desire.”
                                                                                                Napoleon Hill

“Happiness lies in the joy of achievement and the thrill of creative effort.”

Hillary Clinton photo credit: motherjones.com
Donald Trump photo credit: salon.com
Pat Geslinger photo credit: forbes.com

Tuesday, August 23, 2016


Delta has had an interesting August.  By the time Teresa and I flew to Denver on the 13th, all seemed to be in order, but the week before was a bit trying, for both the company and travelers.  The thousands of cancelled flights have been blamed on a computer outage due to a power module malfunction.  We may never know if this was simply technical failure, or something more sinister.  We are glad though, to have Delta flying again.

Brazil appeared to be financially healthy when it was awarded the Olympic Games, in October 2009.  It has descended into economic instability since (to be polite).  Airbnb has given the Brazilian economy a shot in the arm.  Airbnb estimates that hosts will collect $25 million during the Olympics, from those who choose to bunk in, rather than stay in a hotel.

According to CNN, Twitter has suspended 235,000 accounts associated with terrorism in the last six months, as it works to combat the spread of propaganda by terrorist organizations such as ISIS. Twitter is using a combination of spam-fighting tools, abuse review teams, and partnerships with other organizations, in its efforts.

We have long been fans of Judge Learned Hand.  Judge Hand, who lived from 1872 to 1961, and served on the bench off and on from 1909 until the 1940’s, was a first rate orator and writer, and imminently quotable.  One of our favorite quotes from Judge Hand, in paraphrase, is that “tax evasion is against the law, and should be punished, while tax avoidance is the right, duty, and obligation of every citizen”.  We concur.  To that end, a summary of the candidate’s tax plans.  Trump this week, Clinton next week.

Trump’s ideal tax plan would 1) keep federal revenue stable and growing, 2) include some supply side juice, as in tax benefits that induce capital formation, investment, and hiring, and 3) lower the tax bill for middle income households.  Combining these three objectives into one tax plan is quite the challenge.

The current Trump plan would include individual income tax brackets of 12%, 25%, and 33%, compared to the current seven brackets and a top marginal rate of 39.6%.  His tax plan would quadruple the standard deduction to $25,000 for single filers and $50,000 for joint filers.  This would result in about half the population paying no income tax.

Trump would lower the corporate tax rate to 15%, below the OECD average, which lies somewhere in the mid-twenties.  The revised corporate tax plan also allows full expensing of business investments, instead of the capitalization and amortization over an asset’s useful life, which is current tax law.  This change alone, if enacted, should fuel business growth.  On the downside for business, Trump would eliminate the deferral of taxation of foreign source profits, making them all currently taxable.

Trump’s tax plan will be of special interest to those of you who have an ownership interest in privately held firms, such that company results flow to your personal return, and who can allocate cash flow based to some extent on tax characteristics.  Under the Trump plan, distribution of profits would be taxed at 15%, even though the net business income flows through to your personal return.  Seems to me a powerful incentive to reduce wages, and increase distributions.

At the household level, the Trump plan would expand the tax break for child care expenses, with a goal of making all child care costs tax-deductible.  This would probably have the effect of increasing private school enrollment (and tuition).  He would also do away with the estate, or death tax, and repeal the 3.8% net investment income tax.  There is more, though his tax plan resembles a personal tax wish list for the Donald.
Quotes of the week:

“There is no worse tyranny than to force a man to pay for what he does not want merely because you think it would be good for him.”
                                                                                                                                 Robert Heinlein

“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket, and trying to lift himself up by the handle.”         

                                                                                                                                Winston Churchill

Tuesday, August 16, 2016


picture credit: firstladies.c-span.org

Both John Deere and Caterpillar have forward P/E’s of more than 20.  CAT has a dividend yield of 3.70%, and DE has a dividend yield of more than 3%.  CAT makes outstanding big iron, with a worldwide market, but I’m still impressed that anyone is willing to buy the stock with a forward P/E north of 20.    The hunt for cash flow continues.

On the economic front, last Friday’s jobs report was most excellent, with the BLS reporting 255,000 new jobs in July.  This compares to a census forecast of 175,000 new jobs.  The official unemployment rate stands at 4.9%.

Looking at the jobs report, we see that the private sector added 217,000 jobs, while governments added 38,000.  Average hourly earnings were up 0.3%, bringing the year over year wage gains to 2.6%.  The average work week increased to 34.5 hours, its highest level since December 2015.

The Federal Open Market Committee, headed by Janet Yellen, once again stood on interest rates, though they hinted at a slight rate increase in their September meeting.  Speaking of interest rates, yield on the ten year Treasury note stands at 1.60%.  This helps explain the popularity of CAT, with its yield of 3.70%.

According to a recent report from the U.S. Census Bureau, home ownership is at its lowest level since 1965, coming in at 62.9%.  Of course, ownership is something of a misnomer for those with a mortgage.  If you doubt that, miss four mortgage payments in a row.  That should help bring clarity.

The U.S Bureau of Economic Analysis reports GDP for our economy.  The Commerce Department recently summarized BEA reports, and said that between 1949 and 1990, our economy grew at more than 4% annually.  The 90’s saw average annual growth of 3.6%, 2001 to 2007 saw average annual growth of 2.8%, and 2009 through Q1 2016 saw average annual growth of 2.1%.  The annual growth rate for the second quarter of 2016 was 1.2%.  This is the part where it is very easy to throw darts at an ever increasing legislative and regulatory burden, as the overall costs of government and compliance at all levels continues to pull dollars from productive activity, and dampen economic results.

Two questions come to mind though.  First, is the way GDP calculated accurate, and reflective of our current economy?  I don’t know, but I do know many experienced professionals have offered reasoned opinions, suggesting that the way we evaluate economic health needs to be completely rethought and rebuilt.  Second, does GDP matter, regardless of how it is calculated, when it comes to the financial health of your household or your business?  In almost all cases, the answer is no. 

Government reporting may give us some general guidance about what is going on.  Don’t allow such information to color your outlook about your own life, and your own personal and business prospects.  Those outcomes remain in your hands.

                        Quotes of the week:
“There is an expiry date on blaming your parents for steering you in the wrong direction; the moment you are old enough to take the wheel, responsibility lies with you.”
                                                                                                                                                                                                                              J.K. Rowling
                                                                      photo credit: mollykoe.wordpress.com

“In the long run, we shape our lives, and we shape ourselves.  The process never ends until we die.  And the choices we make are ultimately our own responsibility.”

                                                                                                                                                                                                                                                                                       Eleanor Roosevelt