Giving Thanks

Warren Buffett has often cited what he calls “winning the ovarian lottery,” which he feels Americans win the day they are born in the US. In lengthier speeches on the same topic, he cites the many aspects of your life which are determined at birth: the political and economic system you are born into, your health, gender, skin color and your level of intelligence.

While our country is certainly not perfect, we are thankful for its many virtues and the opportunities it has provided to so many of us.

As we will soon celebrate Thanksgiving Day, we hope you appreciate the good fortune that so many of us have, simply by being born and able to live in the US.


We are truly thankful for our clients, who have placed their trust in our firm.

We are very thankful for the referrals that our clients and friends have made, as we have been able to assist their friends and relatives.

We are thankful for the clients who have requested our advice for matters beyond investing and financial planning, such as helping them with life transitions, estate planning, real estate transactions and the sale of businesses.

We are thankful that our clients understand the importance of focusing on their long-term goals, and not on short-term market swings, as this will provide them better long-term investment results.

We are truly thankful and positive, and hope you are as well.

We wish all of you a very Happy Thanksgiving, and hope you are able to share it with those who are most important to you.

Note: As next week is Thanksgiving, there will not be a weekly blog post email next Friday.

Financial and Tax Figures for 2016

As 2016 is nearing, you should be aware of the following financial and tax amounts:

$18,000: amount which can be contributed to most 401(k) and 457 plans for 2016.  If you are older than age 50, you can contribute an additional $6,000 above those levels for 2016.  Both of these are the same as the 2015 contribution limits.

$5,500 and $1,000: maximum amounts which can be contributed to Traditional and Roth IRA accounts for 2016, which are unchanged from 2015.

$5,450,000: the 2016 federal unified credit against the federal estate tax for one person, which is an increase of $20,000 from the 2015 amount of $5,430,000.  For a married couple, $10.9 million of assets can pass estate tax free upon death, if they had not previously used any of their unified credit during their lifetimes.

$14,000: the 2016 annual gift tax exclusion amount, which is unchanged from 2014 and 2015.  This is the amount you can gift to any one individual without affecting your federal estate tax exemption (or unified credit).  If you are married, a couple can give $28,000 to a person.

Zero: the percentage increase in Social Security benefits from 2015 to 2016.  Because the Consumer Price Index, as calculated by the government did not increase form the 3rd quarter, 2014 to 3rd quarter, 2015, there will be no cost of living increase to Social Security recipients for 2016.

$118,500: the maximum amount of wages (or self-employment earnings) subject to the 6.2% Social Security withholding tax.  This amount remains unchanged from 2015, as by law, the wage base must remain the same if there are no COLA benefit increases.

Unlimited: the amount of earnings subject to the 1.45% Medicare tax.

$15,720: the amount a worker under full retirement age can earn, if also collecting Social Security benefits, before Social Security benefits are reduced.  This limit is the same as in 2015, after which benefits are reduced for every $2 earned about this limit.


The October Surprise……and More

October made up for August and September

August was a bad month for stocks, worldwide.  The negative headlines were everywhere.

September was again a bad month for stocks, both in the US and internationally.

When it was least expected, October turned out to be a great month for most stocks indexes, throughout the US and elsewhere.  October’s major indexes gains offset the losses of August and September.

The lesson:  No one can predict when markets will increase or decrease.  By staying invested during the ups and downs, you will benefit over the long term by the positive returns which stocks have provided.

Investing in the New Economy

One of the benefits of our investment approach is that by owning a globally diversified portfolio, with exposure to so many companies and industries, you do not have to try to pick the next hot companies.  You already own them and benefit from their growth.

Ten years ago, I don’t think many people would have accurately predicted that each of the following technology related companies would be among the 10 largest US companies by stock market value:

  • Apple
  • Google (now legally named Alphabet)
  • Microsoft
  • Amazon
  • Facebook

What is the Right Alternative?

The Wall Street Journal has been full of stories and headlines in recent weeks of hedge funds that have vastly underperformed the general markets in the past few months.  Alternative investments, like hedge funds, which try to “outperform the market” or provide downside protection with their “stock picking ability, ” have rarely been able to consistently meet these objectives over the long term or with consistency.

Numerous hedge funds are closing, due to their underperformance and investor discontent.  While the markets may be flat or slightly up for the year, that is much better than the double digits losses many hedge funds are reporting, due to bets they have made on certain companies or sectors, such as energy, commodities or health care.

This example is another way to provide you with confidence in our investment approach of broad global diversification with very low costs.  These hedge funds appeal to large institutions and very wealthy individuals, but come with huge fees (sometimes 2% annually plus 20% of their profits), high turnover and volatile performance.  We know that the slow and steady performance of our investment philosophy will provide you with the best long term investment experience, while diversifying and minimizing your risks.  These factors will enable you and your family to meet your long term goals.

For many reasons, we do not think these types of alternative investments make sense for almost all investors.  The “right alternative” is implementing and sticking to the core investment philosophies which we have discussed in these essays and adhere to on behalf to our clients.