Investment Newsletter for the end of January, 2019

What a nice month! The profits in January almost made up the entire loss from December. The panic in December was intense. We received several phone calls but almost all of you held tight to the plan. We actually re-balanced and bought more at the depth of the pit. The fear or program trading (or both) were obviously overdone. It did not feel overdone at the time. It felt like disaster. We (Dan and Eli) trust the system (the plan) that we set up more than the fear. We held and you are all winners as a result.

Tax season is upon us. Most of you will have lower taxes this year because of the new tax bills. There are several planning issues to be aware of.

The biggest change for most of you is the huge increase in standard deduction. There is also a $10,000 limit in state tax deductions and an elimination in equity line of credit deductions. As a result, most of you will no longer itemize deductions for federal. Oregon, California, and Arizona clients will still itemize for state. If you have a mortgage on your home, think seriously about paying it down or off if you can. Rental property and business interest are still fully deductible. If you are generous with your charity, think about donating double every other year.

The IRA rules are unchanged. There is a minimum distribution required the year after you are 70.5 years old. We recommend that you start the same year you turn 70.5. If you wait until the next year, you have to do a double distribution. Contribution limits are up a little because of inflation. You still cannot take a distribution until you are 59.5 without a penalty (a few exceptions).

Ok, not a tax issue, but do not buy real estate right now. Wait until the crash and snap up the bargains when everyone says you are stupid. The real estate market rolls over and dies every ten or fifteen years on the west coast and particularly so in Oregon and Washington (and likely Arizona). On a personal level, we are right now accumulating our resources. We will know we are getting close when our real estate agent tax clients take clerical jobs to support themselves and/or when our contractor tax clients are living on their third credit card. Both of those things happened in 2008. Real estate right now is flat but has not yet crashed.

We like real estate as an asset class. Most of you have REIT funds at five or ten percent of the portfolio. It is part of the plan. Our problem is that buying real estate directly is a concentrated position. Risk is very high. If you have a $300,000 rental property and $300,000 in a portfolio, real estate is now half your total wealth, ignoring your house.
We appreciate your business and trust.

Dan and Eli

Investment Fee Schedule

Rate Assets Under Management
1.44% Below $125,000
1.00% Between $125,000 and $750,000
.85% Between $750,000 and $1,250,000
.80% Between $1,250,000 and $1,750,000
.75% Between $1,750,000 and $2,500,000
.70% Between $2,500,000 and $3,250,000
.65% Between $3,250,000 and $4,250,000
.60% Above $4,250,000

A single rate is applied to the whole account. I will waive personal tax return fees for accounts over $1 million. For accounts that are above $5,250,000, we’ll need to discuss a custom rate.

As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. If you want me to write about a particular topic, please contact me. Please contact me if you would like to submit a post to my blog.

If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.

E-Book Download

Questions for the comments

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