Mark on the Markets
June 2024

Classroom Lessons

The stock market is a classroom. And it’s important to find good teachers, study their method, and implement what they teach. Finding successful investors is something that I’m always on the lookout for. Warren Buffett is arguably one of the greatest investors of all times. Buffett is also the chair and CEO of Berkshire Hathaway, a company that he became the controlling shareholder of in the mid-1960s.

I’ve read several books on Buffett, and enjoy his sound, earthy, practical advice. And I’m a student of much of his key investment philosophies:

• Look for securities with prices that are unjustifiably low (not necessarily cheap) based on their intrinsic worth.
• Look at companies individually rather than focusing on the supply-and-demand intricacies of the stock market.
• Always review company performance, debt, and profit margins, and how reliant they are on commodities or other raw material inputs.
• Keep a company if it’s performing well and remains solid. Close the position if the risks begin to outweigh the potential reward.

If we look back two years ago, 2022 was a difficult year for investors, and we recognize that detours on the road to your financial goals are not uncommon. Warren Buffet opined, “Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it's imperative that we rush outdoors carrying washtubs, not teaspoons.”

Our goal is not to time markets, and Buffett would agree. He counsels that “it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” But he recognizes that stocks aren’t immune to significant pullbacks. He would caution that a bear market isn’t the time to bail on stocks. Back in 2013, Buffett penned his 2013 letter to shareholders. He noted, “The goal of the non-professional should not be to pick winners—neither he nor his ‘helpers’ can do that—but should rather be to own a cross-section of businesses that in aggregate are bound to do well.”

The year 2022 may have tried your patience in the stock market, but patient investors were rewarded in 2023. Last year the skies cleared, and those who were invested in that “cross-section of businesses” were handsomely rewarded.

In 2024, a well-diversified portfolio has continued to perform well. But we are also aware that pullbacks can never be discounted. Adhering to a long-term strategy takes discipline. And much like the turtle in the fable of the tortoise and the hare, those who have taken the steady and disciplined road have reaped their rewards. Yet, we understand that the noise from the 24-hour news cycle can throw up roadblocks, even for the most patient investor.

Avoiding distractions, stay focused

1. Skip the fads. Jumping into cryptocurrencies or playing the “meme-stock” game offers the allure of overnight riches. But these trains can turn quickly, and you can end up with big holes in your portfolio that aren’t easily plugged.
   
   
2. We’re human. Humans sometimes let emotions get the best of them. But we caution you to avoid the temptation to move away from stocks in down markets. Conversely, when stocks are surging, avoid going “all in.” We urge you to maintain the appropriate mix of stocks and income-producing investments.
   
   
3. Balance and re-balance and re-balance again. For example, a 70/30 portfolio of stocks and income-producing investments will eventually drift out of alignment. A 70/30 may become 80/20 or 90/10. Make adjustments that re-align your portfolio with your long-term strategy and tolerance for risk. Otherwise, you may find yourself in deeper, riskier waters.
   
   
4. While we encourage you to stay with your plan, no plan is set in concrete. When life changes, let’s make adjustments that mirror your new circumstances.

Mark on the Charts

The S&P 500 powered above 5,200 last month, showing what we expected – we’re still in a bull market. Looking at the long red line, we see we are above support. The question is always whether this area will hold. I always come back to the technical indicators, and the technicals show we’re still in an uptrend.  

The Value Line Geometric Index is back in the top of the channel and are again waiting for a breakout above the redline – the 600 area. This support has been holding strong for two years. A break above 600 will be a strong sign for the broader market. (The Value Line Geometric Index is a broad index of around 1,700 stocks, where each stock is given an equal weight of the index.)

We’ve recently seen the effect of storms and tornadoes, and so far this year, the Federal Emergency Management Agency (FEMA) has issued 25 major disaster declarations in 15 states.

Whether natural or man-made, these disasters can affect taxpayers. For current disaster declarations and information on how declarations are made, see FEMA’s Current Disasters Page.

There are tips that the IRS offers tips which may help taxpayers protect personal financial and tax information in their preparedness planning. Taxpayers are also encouraged to visit Ready.gov, IRS.gov and FEMA.gov for additional disaster information.

Important Documents: Protect & Make Copies

Secure original documents such as tax returns, Social Security cards, marriage certificates, birth certificates and land ownership documents in a waterproof container in a safe space. You should also make copies of these documents and store them in a secondary location such as a safe deposit box or with a trusted person who lives in a different area. A third backup storage option is to save scanned documents on a flash drive for easy portability.

Record of Valuables

A video recording of your high-value items should be made and is as easy as recording the items with your cell phone camera. This list may also help support claims for insurance or tax benefits after a disaster. The IRS disaster loss workbooks in Publication 584, Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property) and Publication 584-B, Business Casualty, Disaster, and Theft Loss Workbook can help you and your business make lists of belongings or business equipment.

Rebuilding Records

If there is a natural disaster, you may be required to reconstructing records tax purposes, claiming federal assistance or insurance reimbursement. Here’s where it’s very important: The more accurately the loss is estimated, the more loan and grant money there may be available. Taxpayers who have lost some or all their records during a disaster should visit IRS’s Reconstructing Records After a Natural Disaster or Casualty Loss webpage as a first step.

Employer Fiduciary Bonds

If there is a natural disaster, it can impact your ability to make timely federal tax deposits for your business. If you are using a payroll service provider, you should check to see if the provider has a fiduciary bond in place that can protect your company in the event of default by the payroll service provider. The IRS produced a note on this for employers to carefully choose their payroll service providers.

IRS Relief After a Disaster

If there is a natural disaster, and if FEMA issues a major disaster or an emergency measures declaration, the IRS may postpone certain tax filing and payment deadlines for taxpayers who reside or have a business in certain counties affected by the disaster. The IRS provides details on states and counties that have been issued relief on the IRS disaster relief page.

Here’s a helpful tip: Taxpayers in the affected areas do not need to call to request this relief. The IRS automatically identifies taxpayers located in the covered disaster area and applies filing and payment relief. Anyone impacted by a disaster can contact the IRS disaster hotline at 866-562-5227 to ask their tax-related questions of an IRS specialist trained to handle disaster-related issues.

And if you are a taxpayer who does not reside or have a business in a covered disaster area but suffered impact from a disaster, you should call 866-562-5227 to find out if you qualify for disaster tax relief or other available options.

Estate Planning

“For everything there is a season, and a time for every matter under the heaven: a time to be born, and a time to die…” Ecclesiastes 3 1-1 

We’ve all read or heard the stories. Someone passes away without a will, and potential heirs sharpen their knives in a free-for-all that can take years to play out in court. The emotional toll is immeasurable, with relationships incurring irreparable harm that can last generations.

Or, as highlighted just a few days ago in the Wall Street Journal, “The Brady Bunch Breaks Down: Estate Fights Tear Stepfamilies Apart—In Standard Estate Plans, a Surviving Spouse Often Has No Legal Obligation to Stepchildren.”

Failure to adequately plan can lead to devastating consequences for blended families.

“The default rules are out of touch with today’s family structures,” according to Danaya Wright, a University of Florida law professor.

In T.V. land, Carol would not forsake Mike’s three boys if her beloved husband passed first. Even their housekeeper Alice, who became part of the family, would have been taken care of.

But T.V. and real life don’t always line up. In today’s world, Greg, Peter, and Bobby could be left high and dry without a concrete written plan. The implications are real and immediate.

Without a will or trust, the state chooses how your estate is divided and who will take care of your minor children.

Only one-third of Americans have a will or a plan to distribute their assets after they die, according to a new survey from Senior Living Referral Service Caring.com.

According to a survey by USLegalWills.com, almost 9% had an out-of-date will, while a staggering 63% had no plan in place. Put another way, over two-thirds of Americans have a big hole in their financial plan. It's crucial not to be part of this statistic!

But you may ask, the wealthy make up a small percentage of those with significant assets, right? The wealthy hire the best and brightest to manage their affairs, right?

Well, not always. One in five Americans with investible assets of $1 million or more don’t have a will, according to a recent Charles Schwab survey.

Legendary talk show host Larry King used a short, handwritten note, with typos, to update his will.

“This is my Last Will & Testament. It should replace all previous writings,” said the letter. “In the event of my death, any day after the above date, I want 100% of my funds to be divided equally among my children Andy, Chaia, Lary Jr Chance & Cannon.”

That’s a recipe for a long and drawn-out court battle.

Whether young or old, the famous have passed on without written plans, including Aretha Franklin, Prince, Michael Jackson, Bob Marley, Jimi Hendrix, Sonny Bono, Kurt Cobain, and Amy Winehouse. Even Abraham Lincoln, who was a lawyer, didn’t have a will.

Valued at $80 million, the fight over Hendrix’s estate lasted over 30 years. Without a clear plan, your heirs could quickly turn to lawyers and the court.

But let’s be clear. Estate planning is not only for the wealthy.

Dying intestate—without a will—will have consequences no matter where you live. How your affairs are settled depends on the state in which you reside.

Stop Procrastinating

If you have recently crafted an estate plan with an estate attorney or have updated your will, hearty congratulations goes out to you. A holistic financial plan includes a plan of succession.

If not, let’s get started!

Estate planning requires us to do something today that hasn’t happened yet.

Without a plan, your loved ones will be forced to guess your intentions against the backdrop of an already difficult situation. Even if potential heirs are on good terms, money has a way of creating divisions.

Key takeaways

• Common estate planning documents include wills, trusts, powers of attorney, and living wills.
• Everyone can benefit from having a will, no matter how small their estate.
• Online estate planning services offer inexpensive basic packages.
• Estate planning attorneys can cost several hundred dollars per hour.
• Estate plans must be updated after significant life events.

What is a Will? It is a legal document stating how you want your executor (the person legally obligated to administer your estate) to distribute your assets after you die.

Your estate will go through probate, the legal process for reviewing the assets of a deceased person and determining who inherits what, whether you have a will or not.

If you have a will, it ensures the executor will honor your wishes.

A will lists your assets, bank and brokerage accounts, property, and more. Without a detailed document, potential heirs may be forced to search for assets spread across states and even countries.

Do you have designated beneficiaries for various accounts, such as IRAs? The beneficiary designation trumps the will.

What is a Living Will? It is written legal instructions stating your preferences for medical care if you are unable to make decisions.

What is a Trust? A trust is a legal contract that allows another person (the trustee) to hold property for you (the grantor).

This is typically so the beneficiaries (individuals or institutions who stand to inherit something) can use the property at some point in the future.

What is a Living Trust? You create a living trust to hold assets before and after your death.

What is a Testamentary Trust? It is a trust created by the will and only becomes effective after the grantor’s death.

Powers of Attorney

A durable power of attorney enables your agent to act on your behalf if you become ill or are unable to make decisions.

For example, a durable financial power of attorney allows your agent to manage your financial affairs if you become incapacitated or are unable to make decisions on your own.

A durable medical power of attorney allows you to appoint someone to make decisions about life-prolonging care, treatment, services and procedures.

DIY hazards

Talking to a representative at Home Depot about your next painting project is commendable. Do-it-yourself (DIY) estate planning is cheap. It’s hard to argue against cheap unless you make unwanted mistakes that invalidate your wishes.

Estate planning is complex, and it helps to have professional advice. Saving a few dollars today can cost your heirs pain and anguish that could have easily been avoided.

Prepare your Heirs

You don’t have to divulge the details, but informing beneficiaries opens the financial lines of communication, reducing the odds of a contested will. In addition, it promotes family unity at a time that can be exceedingly difficult.

Surprises breed resentment, and resentment may lead to unwanted consequences.

We recognize that estate planning is a personal process. In some cases, you may feel overwhelmed, especially if you have a large family, a blended family, or a family that has gone through separations and divorce.

Our objective is to initiate a dialogue, assist you in developing a plan, or motivate you to revise an existing one if the need has arisen.

We are always available to address any questions you may have. And we can connect you with one of the trusted estate attorneys that we often work with.

Failure to act puts your legacy at risk!

Faith-Focused Investing

We’re committed to helping you experience financial contentment and peace through a plan that’s right for you. Part of planning, however, is understanding how you want to live and what you want to do. Whether you want to spend time with family, or volunteer to make the world a better place, we help you prepare to spend your time, talents, and resources on what matters most to you.

Implementing faith-based investing begins just like any other investment management process – we’re looking for great investments!

I hope you’ve found this review to be educational and helpful. Our goal is to be a guide to you as you run the race and keep the faith. 

"There is an appointed time for everything, and a time for every affair under the heavens. A time to give birth, and a time to die; a time to plant, and a time to uproot the plant." Ecclesiastes 3:1-2

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