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March 2017 Opening Thoughts

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Here I am deep in tax season surrounded by stacks of paper work. Time for a break and a walk down memory lane. What was I doing 30 years ago? What were you doing 30 years ago?

Well, let me see. Ronald Reagan was our U.S. President. American Music Awards had just gone to Whitney Houston and Lionel Richie. The average cost of a new home was $92,000. The average income per year was $24,350. A gallon of gas was 89 cents and a postage stamp was 24 cents. I was up to my neck in tax work, working for Pisenti & Brinker, CPAs in Santa Rosa. We had just moved the office from County Center Drive up to Round Barn Boulevard. I was working on earning my CPA and CFP designations, simultaneously.

On January 8, 1987 the DOW closed above 2,000 for the first time. This was amazing! I can remember the DOW being at 800 when I was first getting into the investment business in 1978. The growth has been incredible! An online calculator says that the average annual return has been 7.8% over the past 30 years.
img2 You can’t look at this chart of the Dow Jones Industrial Average (next page) and not see the incredible growth that has happened. Sure, there are some down turns here and there. However, the long term is go, go, go.

I never refer to the stock market as “gambling.” I have heard some people refer to it that way, however. They must be thinking of short time periods in the market where they lost money, or were not well diversified and lost on one stock, or perhaps they were day-trading. If I wanted to use “gambling” terms, after looking at this chart, I would say that the “odds are stacked in your favor,” so you should place your “bet,” go “all-in,” and “crack the nut.” (Haha, I had to look those phrases up.)

Obviously, you need to invest for the long term, so that you don’t need to sell and take a loss during a down-turn. You also need to diversify, so that you spread the risk among many stocks—in case one company you’re invested in goes under. And one more thing: it helps to make your “buy and sell” decisions with your “business” head on—don’t get all emotional about it.

So, I don’t get all emotional about it. This is not to say that I don’t take it seriously. Quite the opposite. Being in the business of managing investment portfolios for people makes it serious business for me. I replace emotional involvement with years of experience and a disciplined process for the management of money.

This is going to sound odd, but the truth is, a fair amount of my time is spent managing client behavior around buying and selling investments. Usually, clients have some emotional reason for selling or holding on. Or, it may be some long-held belief that just isn’t accurate. So this is when I interject my even-handed style and decades of experience. Those that have been with me for a long time know this is true.

Uh-oh…I need to get back to tax season. A popular quote from Arthur Godfrey (do you remember him?) always cracks me up: “I’m proud to pay taxes in the United States; the only thing is, I could be just as proud for half the money.”

Sure, everyone wants to cut their tax bill. Some even cheat to do it. But it seems to me, after talking to people for over 30 years while preparing their tax returns, that they don’t mind paying taxes so much—it’s how the government spends the money that they object to.

I wonder what would happen if you could choose, by checking some box on your income tax return, what government spending category you wanted your taxes to go to? This would be a whole new way of voting and we would find out real quick what services the American taxpayers want from their government.

Well, anyway, I do believe Americans are fed up with big government and deeply concerned about the long-term economic health of their country. “Toto, I don’t think we’re in Kansas anymore.” Change is in the air. This being the case, I’m watching for tax legislation which gives rise to new tax planning opportunities and changes in economic conditions which necessitate change in our investment and wealth preservation strategy.

Stick with me and I’ll try to guide you through the changing landscape—with your wealth intact. In addition to this newsletter, we have lots of other resources, on our website, on our blog, in our office – have you checked them out?

Oh, in case you didn’t know…Arthur Godfrey was a radio and television broadcaster and entertainer—very popular in the 50’s and 60’s. (I knew you were wondering….)

And, another tidbit from the archives of 30 years ago…. in 1987, the New York Stock Exchange installed a ladies restroom in the Exchange Luncheon Club. Yes, we baby boomers have seen

Warm regards,  Monty