Word on the Street – October 1st-5th

Word on the Street – October 1st – 5th

A brief conversation with our CIO, Blake Street, CFA, CFP®, on what’s going on in the world today.

We constantly want to deliver more content to our clients and followers on current events, and how we are viewing them from an investment or planning angle.

“Word on the Street” will be a series where I sit down with our Chief Investment Officer, Blake Street, CFA, CFP® to pick his brain on what’s going on in the news and what that means for you.

Here is the conversation I had with him on Friday, October 5th discussing the last couple weeks. Enjoy.

Alright, Blake. Let’s start with the new US trade deal that people are calling NAFTA 2.0. What’s your take and how will this new deal impact investors?

BS: NAFTA 2.0 or more accurately titled the U.S. Mexico Canada Agreement (USMCA) in my opinion is largely underwhelming. At its core, it should bring some manufacturing jobs back to the U.S. from Mexico, but I also expect this to result in increased cost to the end consumer. Considering the United States spends $500 billion a year on autos, cost increases will be noticed.

The reason I’m underwhelmed is the negotiation process wasn’t without collateral damage in trade relations and the ultimate outcomes are incremental at best. Essentially, Canada and Mexico agreed that 75% of parts for cars built for export would be made in North America. This is up from the original agreement of 62.5% under NAFTA. They also agreed that 45% of cars would be built by workers making more than $16 an hour by 2023, this was ultimately targeted at Mexico and should result in rising costs for domestic and imported production. Mexico also agreed to improve labor conditions but enforcement remains vague.

Canada agreed to increase import quotas for U.S. dairy into their market. I’ve seen estimates that this could result in $50-$100 million in activity for American dairy farmers. Not sure this moves the needle, especially in the face of what appears to be a $100-$400 million decline in Chinese imports of American dairy in the coming years.

Additionally, USMCA hasn’t officially been ratified yet. It has only been approved for a vote. If the midterm elections put more Democrats in Congress, then they have the opportunity to deny President Trump the victory of its passing.

We are entering the last quarter of the first year operating under tax reform. Do you think that it has been good or bad for investors?

B.S.: It’s hard to argue that is has been anything but great for investors. Three straight quarters of near-record earnings and US markets are oscillating around record highs. Taxpayers have yet to officially file under the new tax reform, so they have yet to even feel the full benefits.

It will be interesting to see how equity markets react as we get into 2019. The initial thrust of the tax cuts on earnings will wane over time, and it will be interesting to compare year-over-year numbers to post-tax cut figures.

Is there anything people might be surprised about as they go to file?

B.S.: The biggest surprise to most will be the balance between an enhanced and expanded standard deduction, lower marginal rates, and aggressively capped state and local tax deductions. In addition, I expect the 20% pass-through deduction to surprise a lot of folks who don’t know how it works, in both a good and bad way.

How do you feel about Elon Musk and the SEC?

B.S.: He got off way too easy. He should have been stripped of his role as director and CEO in addition to losing his chairman position. His $20 million personal and $20 million corporate fines are a drop in the bucket compared to the market cap of Tesla and the potential money that was lost or made based on his manipulative behavior.

Leaking a takeover bid or the idea of taking a company private should force a stock price to the assumed target price. Any rational CEO would know this ahead of time. He coerced unknowing investors to buy into Tesla based on this information and blew out short positions which seemed to be his intention.

The amount of talk around marijuana stock is at a high again. How should investors approach it, if at all?

B.S.: Personally, it is not a sector I am interested in investing in for myself or for clients as it is still illegal at the federal level. Recent buzz escalated when Tilray, a Canadian pot producer, got approval for a clinical trial to use marijuana in pill form to treat seizures. They had about 10 million in sales last year, and the market cap soared to 15 billion, which is, frankly, absurd. A good piece of that market cap has been given back.

Should it ever become legal at the federal level, I expect a massive influx from titans of industry in alcohol, tobacco, and pharmaceuticals. Production will drive down cost quickly. If we were to invest, we would focus more on the picks and shovels, distribution, and manufacturing perspective. A diversified approach will likely pay as picking the winners of such a rapidly developing space may prove to be very difficult.

What do you find most interesting in the market right now?

B.S.: Emerging Markets.

Interesting response…why?

B.S.: They started the year at low relative valuations even after a monster 2017. As of the end of September, they were at a 20% drawdown from the year’s high. I continue to believe they will be the best place to be over the next 5-10 years for fundamental and demographic reasons. Dollar strength has caused a lot of pain in emerging market currency denominated holdings and the sell-off in emerging market stocks has reached seemingly oversold levels. The pain might not be fully over yet, so a disciplined approach to buying into recent weakness is needed.

The 10 year Treasury closed Friday at 3.23. What are some of your thoughts as rates rise?

B.S.: I believe we’re now 8 Fed Rate hikes in. The consensus seems to be that we are due for 3-4 more. It seems that the market is not fighting back and pushing yields down. It will continue to pay to be nimble, keep durations short, and invest in fixed income asset classes with lower rate sensitivity and look for opportunities abroad.

Do you see any opportunities or concerns with rates increasing?

B.S.: Rising rates have resulted in a strong dollar which puts pressure on emerging market debt causing yield spreads to widen. This has created possible valuation pockets within emerging market debt, and this opportunity should not be entered into lightly.

Concerns: If inflation and yields continue to rise, investors who are accustomed to long-term, stable outcomes will be surprised to find out how volatile bonds can be in a rising rate environment. Going back to 1976, bonds on average have only had 3 negative years. Count 2018 as the fourth. Would a fifth materially change investors perspectives on what bonds mean to portfolios? Or will investors continue to understand bonds importance in a well-diversified portfolio? This creates opportunity and concern.

Any closing remarks?

B.S.: Loss aversion is one of the most basic human tendencies I can think of. In a year where virtually every asset class other than US stocks is in the red, I can see a lot of potentially bad behavior starting to fester. It is important now more than ever that you don’t chase the hot dot. Stick to your plan, stick to your process, even if that means deferring to your advisor.


WSWA Team Compressed-19-squareJoe Occhipinti
Marketing Manager
Warren Street Wealth Advisors

Warren Street Wealth Advisors, a Registered Investment Advisor. The information contained herein does not involve the rendering of personalized investment advice but is limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the strategies or options presented. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss. 

 

When a Windfall Comes Your Way

When a Windfall Comes Your Way

What do you do with big money?

Getting rich quick can be liberating, but it can also be frustrating. Sudden wealth can help you address retirement saving or college funding anxieties, and it may also give you the opportunity to live and work on your terms. On the other hand, you’ll pay more taxes, attract more attention, and maybe even contend with jealousy or envy. You may also deal with grief or stress, as a lump sum may be linked to a death, a divorce, or a pension payout decision.

Windfalls don’t always lead to happy endings. Take the example of Alex and Rhoda Toth, a Florida couple down to their last $25 who hit a lottery jackpot of roughly $13 million in 1990. Their feel-good story ended badly: by 2006, they were bankrupt and facing tax fraud charges. Or Janite Lee, who won $18 million in the Illinois Lottery. Just eight years later, she filed for Chapter 7 bankruptcy; she had $700 to her name and owed $2.5 million to creditors. Windfalls don’t necessarily breed “old money” either – without long-range vision, one generation’s wealth may not transfer to the next. The Williams Group, a California-based wealth coaching firm, recently spent years studying the estate transfers of more than 2,000 high net worth households. It found that 70% of the time, the wealth built by one generation failed to successfully migrate to the next. (1,2)  

What are some wise steps to take when you receive a windfall? What might you do to keep that money in your life and in your family for years to come?

Keep quiet, if you can. If you aren’t in the spotlight, don’t step into it. Who really needs to know about your newfound wealth besides you and your immediate family? The Internal Revenue Service, the financial professionals who you consult or hire, and your attorney. The list needn’t be much longer, and you may want to limit it at that.

What if you can’t? Winning a lottery prize, selling your company, signing a multiyear deal – when your wealth is publicized, expect friends and strangers to come knocking at your door. Be fair, firm, and friendly – and avoid handling the requests, yourself. One generous handout may risk opening the floodgate to others. Let your financial team review appeals for loans, business proposals, and pipe dreams.

Yes, your team. If big money comes your way, you need skilled professionals in your corner – a tax professional, an attorney, and a wealth manager. Ideally, your tax professional is a Certified Public Accountant and tax advisor, your lawyer is an estate planning attorney, and your wealth manager pays attention to tax efficiency.

Think in stages. When a big lump sum enhances your financial standing, you need to think about the immediate future, the near future, and the decades ahead. Many people celebrate their good fortune when they receive sudden wealth and live in the moment, only to wonder years later where that moment went.

In the immediate future, an infusion of wealth may give you some tax dilemmas; it may also require you to reconsider existing beneficiary designations on IRAs, retirement plans, and investment accounts and insurance policies. A will, a trust, an existing estate plan – they may need to be revisited. Resist the temptation to try and grow the newly acquired wealth quickly through aggressive investing.

Now, how about the next few years? Think about what financial independence (or greater financial freedom) means to you. How do you want to spend your time? Should you continue in your present career? Should you stick with your business, or sell or transfer ownership? What kinds of near-term possibilities could this open for you? What are the concrete financial steps that could help you defer or reduce taxes in the next few years? How can risk be sensibly managed as some or all the assets are invested?   

Looking further ahead, tax efficiency can potentially make an enormous difference for that lump sum. You may end up with considerably more money (or considerably less) decades from now due to asset location and other tax factors.

Think about doing nothing for a while. Nothing financially momentous, that is. There’s nothing wrong with that. Sudden, impulsive moves with sudden wealth can backfire.

Welcome the positive financial changes, but don’t change yourself. Remaining true to your morals, ethics, and beliefs will help you stay grounded. Turning to professionals who know how to capably guide that wealth is just as vital.


J Rucci

Justin D. Rucci, CFP®
Wealth Advisor
Warren Street Wealth Advisors

 

 

 

Justin D. Rucci is an Investment Advisor Representative of Warren Street Wealth Advisors, a Registered Investment Advisor. The information contained herein does not involve the rendering of personalized investment advice but is limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the strategies or options presented.

This material was prepared by Marketing Pro, Inc. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals may materially alter the performance, strategy, and results of your portfolio. Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results. Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark. Nothing in this commentary is a solicitation to buy, or sell, any securities, or an attempt to furnish personal investment advice. We may hold securities referenced in the blog and due to the static nature of the content, those securities held may change over time and trades may be contrary to outdated posts.

Citations.

1 – bankrate.com/finance/personal-finance/lottery-winners-who-went-broke-1.aspx#slide=1 [5/23/18]
2 – money.cnn.com/2018/09/10/investing/multi-generation-wealth/index.html [9/10/18]

Rate Watch 2018 – August

Rate Watch 2018 – August – SCE Grandfathered Pension

August’s rate is typically used for Edison’s official grandfathered pension plan interest rate. Where did it land, and how does that impact your pension?

Welcome to another edition of Rate Watch as we track the interest rate that is vital to the grandfathered pension at Southern California Edison.

The most important month of the year for grandfathered pension holders is upon us. August is typically used to set the grandfathered pension interest rate for the following plan year. Let’s take a look at where the rate it at:

These are not current plan rates for Southern California Edison’s pension plan, they are minimum present value third segment rates from the IRS. Official plan rates are derived from the minimum present value segment rates table (https://www.irs.gov/retirement-plans/minimum-present-value-segment-rates). Plan rate changes are made by Southern California Edison on an annual basis.

August came in at 4.46 and 0.10 higher than the current plan rate. Very simply, this means that your lump sum payout value will be higher with the 2018 plan value as opposed to the 2019 value.

Again, simply put, if you are grandfathered and thinking about retiring soon, then it might be in your best interest to retire and take the 2018 value to get a higher lump sum payout.

Since the difference in potential rates is small, the change in value is probably not great enough to heavily influence a decision to retire now or continue working, but it is something that should be capitalized on if retirement is on the horizon.

If you are unsure on how to request your paperwork or the timing to make sure you receive the 2018 pension rate, then contact us for a free retirement consultation, and we can show you how you can retire with confidence.


WSWA Team Compressed-19-squareJoe Occhipinti
Wealth Advisor
Warren Street Wealth Advisors

 

 


Warren Street Wealth Advisors, a Registered Investment Advisor. The information contained herein does not involve the rendering of personalized investment advice but is limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the strategies or options presented. 
Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss. 

 

Case Study: Retire Early, Without Penalty

Case Study – Retire Early, Without Penalty

Learn how we helped a client retire early, without penalty, move out-of-state, and get their desired income level by constructing a strong financial plan.


Blake StreetBlake Street CFA, CFP®
Founding Partner
Chief Investment Officer
Warren Street Wealth Advisors

 

 

Blake Street is an Investment Advisor Representative of Warren Street Wealth Advisors, a Registered Investment Advisor. The information contained herein does not involve the rendering of personalized investment advice but is limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the strategies or options presented.

Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals may materially alter the performance, strategy, and results of your portfolio. Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results. Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark. Nothing in this commentary is a solicitation to buy, or sell, any securities, or an attempt to furnish personal investment advice. We may hold securities referenced in the blog and due to the static nature of the content, those securities held may change over time and trades may be contrary to outdated posts.

 

The Retirement Handbook

The Retirement Handbook

Retirement is coming soon, and you should be excited. However, you might have so many questions and concerns about retirement that you’re more nervous than anything else.

We get it.

At Warren Street Wealth Advisors, we’ve helped countless people, from families to business owners, plan for their retirement and reach their financial goals. We put together this Retirement Handbook to help you on your way to a successful retirement.


 

1. Have a Plan

Nothing else on this list matters if you don’t have a personalized financial plan.

Having a plan not only lays out the destination, but it shows you the steps you need to take along the way. It’s your roadmap to a successful retirement.


 

Schedule a free consultation to talk through your finances and take the first step toward building a confident retirement.

Warren Street Wealth Advisors LLC. is a Registered Investment Advisor. The information posted here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this commentary is a solicitation to buy, or sell, any securities, or an attempt to furnish personal investment advice. We may hold securities referenced in the blog and due to the static nature of content, those securities held may change over time and trades may be contrary to outdated posts.

The Retirement Handbook: Southern California Edison Edition

 

The Retirement Handbook: Southern California Edison Edition

Retirement is just around the corner, and you should be excited. But some of us have many questions and concerns about retirement causing us to feel more nervous than anything else.

We understand these feelings.

At Warren Street Wealth Advisors, we’ve helped hundreds of Southern California Edison retirees navigate this crucial time. In the process, we’ve learned about SCE’s retirement and employee benefits programs inside and out. We’ve put together our Southern California Edison Retirement Handbook as a guide for you.


 

1. Have a Plan

Nothing else on this list matters if you don’t have a personalized financial plan.

A personalized financial plan is the roadmap to your comfortable retirement. You can know your benefits inside-out and be clever about taxes and investments, but if you don’t have a roadmap for navigating your retirement, you’ll never feel confident along the way.


 

Schedule a free consultation to talk through your finances and take the first step toward building a confident retirement.

Warren Street Wealth Advisors LLC. is a Registered Investment Advisor. The information posted here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this commentary is a solicitation to buy, or sell, any securities, or an attempt to furnish personal investment advice. We may hold securities referenced in the blog and due to the static nature of content, those securities held may change over time and trades may be contrary to outdated posts.

Blake Street on All About Your Benjamins

Blake Street on All About Your Benjamins Podcast

Listen to Blake discuss all things esports & gaming for him and Warren Street Wealth.

Blake Street CFA, CFP® was recently asked to join a personal finance podcast to discuss all things esports. From the evolution of the scene, modern sport culture melding with gaming culture, his experiences and how Warren Street helps content creators, industry leaders, and pro players manage their finances.

Listen to the podcast below:


Joe Occhipinti
Wealth Advisor
Warren Street Wealth Advisors

 

 

 

 

Joe Occhipinti is an Investment Advisor Representative of Warren Street Wealth Advisors, a Registered Investment Advisor. Information contained herein does not involve the rendering of personalized investment advice, but is limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the strategies or options presented.

Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals may materially alter the performance, strategy, and results of your portfolio. Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results. Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark. Nothing in this commentary is a solicitation to buy, or sell, any securities, or an attempt to furnish personal investment advice. We may hold securities referenced in the blog and due to the static nature of content, those securities held may change over time and trades may be contrary to outdated posts.

 

The Retirement Handbook: El Segundo Refinery Edition

 

The Retirement Handbook: El Segundo Refinery Edition

Retirement is just around the corner, and you should be excited. But some of us have many questions and concerns about retirement causing us to feel more nervous than anything else.

We understand these feelings.

At Warren Street Wealth Advisors, we’ve helped many El Segundo Refinery employees navigate this crucial and confusing time, so we put together our Retirement Handbook: El Segundo Refinery Edition.


 

1. Have a Plan

Nothing else on this list matters if you don’t have a personalized financial plan.

A personalized financial plan is the roadmap to your comfortable retirement. You can know your benefits inside-out and be clever about taxes and investments, but if you don’t have a roadmap for navigating your retirement, you’ll never feel confident along the way.


 

Schedule a free consultation to talk through your finances and take the first step toward building a confident retirement.

Warren Street Wealth Advisors LLC. is a Registered Investment Advisor. The information posted here represents opinions and is not meant as personal or actionable advice to any  individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this commentary is a solicitation to buy, or sell, any securities, or an attempt to furnish personal investment advice. We may hold securities referenced in the blog and due to the static nature of content, those securities held may change over time and trades may be contrary to outdated posts.

Rate Watch 2018 – July

Rate Watch 2018 – July

We are only a couple month away from the August segment rate announcement. Where could rates land for SCE grandfathered pension holders as we head into the fall?

Welcome to another edition of Rate Watch as we track the interest rate that is vital to the grandfathered pension at Southern California Edison. If you’ve missed any of our previous articles, you can find them here:

Rate Watch 2018 – May & June
Rate Watch 2018 – April
Rate Watch 2018 – March
Rate Watch 2018 – February

June’s posting puts us 2 months away from August’s rate which is typically used by Southern California Edison for the grandfathered pension plan. If you are eyeballing retirement soon, then it is essential to understand where the rate is now and where it could be going. Here is the latest:

chart

*These are not current plan rates for Southern California Edison’s pension plan, they are minimum present value third segment rates from the IRS. Official plan rates are derived from the minimum present value segment rates table (https://www.irs.gov/retirement-plans/minimum-present-value-segment-rates) . Plan rate changes are made by Southern California Edison on an annual basis.

July at 4.60 puts us nearly 25 points above the current plan rate and would drive your current lump sum value down if you took your pension in 2019.

Nominally, nothing has really changed month-to-month, but there has also not been much going on that would drastically press the rates higher over the time period. The most important thing to note would be inflation slowly on the rise as we continue to be in an environment of historically low rates.

For those in the grandfathered pension plan and who believe they are on the brink of retirement, it is more important now than ever to begin putting a plan in place and seeing what your retirement looks like. Knowing how your assets weigh against your liabilities, how much you might need every year in retirement, and if you have the assets to accomplish everything you want are important answers to have before you have your final day of work.

If the official rate was announced today, then it may make sense to take your pension in the current plan year due to the fact that as rates increase, lump sum values decrease.

If you are just unsure of what your retirement looks like, then feel free to contact us for a free phone call or meeting. We have helped 100’s of SCE employees retire and numerous grandfathered pension holders weigh their options out to give themselves the best possible outcome and start to retirement.


WSWA Team Compressed-19-squareJoe Occhipinti
Wealth Advisor
Warren Street Wealth Advisors

 

 


Warren Street Wealth Advisors, a Registered Investment Advisor. Information contained herein does not involve the rendering of personalized investment advice, but is limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the strategies or options presented. 
Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss.