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