Shaun Scott No Comments

Planning Tiers Critical to Multigenerational Wealth Retention

Managing a productive vegetable garden for longevity is a far more complicated endeavor than most young gardeners understand. Since the four main crop types require different primary nutrients, annual plant rotation must be practiced to deter nutrient depletion. This necessitates an education in companion planting, or the proximate placement of ‘like’ species to save water and space while accessing primary nutrients towards maximum productivity. The nutrient base must still be replenished continually while controlling the PH balance, and a weed control program is required to ensure all fruit feeds the family, not bugs and critters. This is just the beginning of the program!

Building wealth during one’s lifetime, like tending a vegetable garden for a season, is an attainable goal for anyone willing to work hard, spend less than net earnings on subsistence, and invest the difference productively. Retaining wealth multi-generationally, however, like tending a productive garden for a lifetime, is a feat requiring higher levels of planning and is reserved exclusively for the very intentional wealth builder. Consider the four tiers of financial planning critical to multigenerational wealth retention:

  • A Retirement Plan takes every factor into consideration to reveal the extent to which a future retirement is funded and provides specific solutions to resolve projected deficiencies. A sound retirement plan makes conservative assumptions with unknown factors, like future rates of return, tax rates, inflation rates, and increases in Social Security payments. It should be the first plan we construct because higher levels of planning for an estate that will be depleted trying to fund retirement may be a waste of precious resources.

  • An Estate Plan seeks to maximize the efficiency and success with which wealth is distributed at the end of each generation’s earthly habitation. It also expresses the deepest convictions and purposes behind a person’s wealth-building efforts, and as such, once in place will become the guiding, or authoritative plan (read, “Estate Planning is a Vital Family Enterprise”, 7/10/2023). Work with an attorney who specializes in estate planning in your ultimate state of residence, and whom you trust and communicate well with.

  • A Tax Plan, unlike tax preparation or tax management (read “Differentiating Tax Management and Tax Planning”, 5/16/2025), involves the use of special tools to minimize lifetime taxes, or even taxes over multiple generations to complement a family’s multigenerational wealth-building efforts. The thesis behind tax planning is to intentionally pay more taxes in low bracket years (and less taxes in high bracket years), with the goal of never missing a highly beneficial tax maneuver due to ignorance. Tax planning exceeds the habitual minimization of annual taxes in both purpose and effect.

  • A Logistical Income Plan (read, “Planning the Intelligent Income Stream”, 9/20/2024) creatively identifies the right mix of the right income sources at the right time to source retirement income needs most efficiently, and in a manner consistent with one’s retirement, estate, and tax plans; now that is an exciting puzzle to solve!

May we remember to be generous with those in need as we strive to be good stewards with that which Adonai has entrusted to us, Shaun.

“I want to give my children enough money to do something, but not enough to do nothing” ~George Clooney in “The Descendants”

“Wealth gathered hastily will dwindle, but whoever gathers little by little will increase it.” ~Proverbs 13:11

The opinions voiced in this material are general and are not intended to provide specific recommendations.

Shaun Scott No Comments

Differentiating Tax Management and Tax Planning

While mingling at Ed Slott’s Elite IRA Advisor Conference this week, an intrigued gentleman asked me to explain the difference between hiking and climbing. He seemed satisfied with the simple truth that hiking becomes climbing when special tools are required to give the mountaineer a technical advantage to safely ascend otherwise dangerous terrain. This seems to me a good analogy to express the vast difference between tax management, or the rote minimization of taxes every year, which resembles hiking, and tax planning, which involves the use of special tools to minimize lifetime taxes, or even taxes over multiple generations to complement a family’s multigenerational wealth-building efforts, which better resembles climbing. I’d like to peel a layer or two from this onion in an attempt to convince you that tax planning far exceeds tax management in both purpose and effect.

Tax preparation is the simple task of preparing a tax return to be filed, and in our analogy equates to packing the kit for a hike (but does not actually involve hiking or climbing). Many of you have expressed frustration in how seldom your CPA goes beyond preparing your return to offer useful tax counsel. I believe the issue is sufficient to warrant offering such a professional the ultimatum due to the excessive hidden cost of their non-participation. That said, mere tax management may actually be a costly copout masquerading as thinking or wisdom. The vast majority of the financial plans I construct indicate future RMDs will alone push the IRA holder into a higher tax bracket by mid-retirement, which doesn’t even account for the possibility of a future income tax hike! Do you think tax rates might increase when the printing press is removed from the central bank, an event history suggests may be a certainty? How about our unfunded social programs, interest on the national debt and yearly deficits, might these present a need for higher government revenues in your lifetime, or if you are a multigenerational wealth-builder, the lifetimes of your children?

There are important reasons why families that are successful at building and retaining wealth multi-generationally appropriate significant energy and investment towards advanced tax planning, and here are some of the beneficial strategies they utilize:

  • Health Savings Accounts offer the most beneficial tax treatment in the U.S., providing the money is used to cover eligible future medical expenses, combining the tax deductibility of contributions offered by the Traditional IRA with the tax-deferred growth and tax free withdrawals of the Roth IRA.

  • Roth IRAs funded by after-tax contributions, conversions from non-deductible Traditional IRAs (Back Door Roth), or Strategic Roth Conversions during low-bracket years, which offer tax deferred growth and tax-free withdrawals for the lifetime of the account owner (once the 5-year rule is satisfied) AND for 10 additional years for non-eligible designated beneficiaries.

  • Qualified Charitable Distributions (starting at age 701/2) allow for tax-free withdrawals from Traditional IRAs when paid directly to a 501(c)(3) charitable organization, reducing future RMDs which can otherwise push an account holder into a higher bracket and increase both Medicare surcharges and taxes on Social Security payments.

  • Net Unrealized Appreciation (NUA) allows the highly appreciated company stock held in a 401(k) to be taxed as a capital gain instead of as income. Speak with a professional and do not attempt to process this yourself.

  • Section 327 allows surviving spouses to elect to be treated as the deceased employee for the purpose of RMDs, which can meaningfully reduce mandatory taxable distributions.

  • Timing the downsizing of a primary residence around appreciation approaching the capital gain exemption limit ($250,000 for individuals and $500,000 for married couples who co-own and cohabit a home) resets the clock on capital gain exemptions.

  • 1031 and 721 tax-free real estate exchanges defer capital gains taxes on highly appreciated real estate investment properties, and in cases where the account holder dies still owning the UP-REIT, can eradicate them to the next generation due to the step-up in basis.

These are but some of the ways savvy tax planning can reduce the burden of taxes on a family, yet sufficient evidence suggesting the benefits of tax planning far exceed mere tax management. God bless your efforts towards stewardship, Shaun.

“A wise man leaves an inheritance to his children’s children.” ~Proverbs 13:22

The opinions voiced in this material are general and are not intended to provide specific recommendations. The economic forecasts set forth in this commentary may not develop as predicted. Diversification of portfolio holdings does not necessarily protect against loss or guarantee returns.

Shaun Scott No Comments

Robotic Reindustrialization of America

President Trump’s tariffs are a ploy to reduce the U.S. trade imbalance and restore domestic manufacturing, but initiative goals indicate the replacement of tens of millions of foreign production jobs,¹ by a U.S. economy with only 7 million working-age unemployed, and only 2 million receiving benefits.² The extent to which the President will achieve his “re-shoring” goals in four years’ time is still in question, but whether man or machine will perform the vast majority of all new manufacturing jobs in America, is not. Add expensive labor costs and a lack of trade skills to America’s worker shortage problem, and we may have the recipe for a robotics explosion in America.

I know a successful third generation dairy farmer whose boys didn’t want to destroy their knees milking cows just because their ancestors did. Two milking robots later the boys are on the farm with healthy knees, the quality of life seems to be improved for everyone on the farm, the cows are noticeably happier and produce better, and the farm is a more profitable enterprise with a sturdier future, even considering the cost of two robots and a new barn.  This farmer made a wise decision, and his may be a textbook case study for what is about to play out across the U.S. manufacturing sector. Since, as investors, we deal in probabilities not certainties, let’s consider the set-up for this potential opportunity and the associated risks in the hope we can formulate an educated opinion on the matter, and later adopt an investment strategy with it.

The Set-Up

  • The extent to which the Trump Administration can displace foreign manufacturing jobs with American jobs a strong demand will exist for functional automation.

  • Artificial Intelligence (AI) is in place to drive and manage a surge in U.S. manufacturing with greater proficiency than ever.

  • Highly functional and reliable robotic technology is in place and continues to develop.

  • U.S. investors are sitting on $7 Trillion in cash today, a sum capable of fueling a surge in functional automation.³

The Risks for Derailment

  • The Trump administration may fall short of securing anticipated trade deals, reducing the U.S. trade deficit, and reshoring tens of millions of manufacturing jobs, in which case anticipated demand for robots would fall short.

  • Tariff uncertainties may introduce a near-term global recession/bear market that could stifle demand, reduce investment and delay a surge in U.S. robotics manufacturing.

  • AI is in the development stage and lacks the energy infrastructure and energy production necessary to drive and manage an explosion in functional automation.

As you consider what actions this information should invigorate, I suggest:

  • “Think, don’t act” as you do your due diligence, especially since the robotics sector and machinery industry are in bearish mode.⁴

  • Start building a “Watch List” of businesses which dominate robotics production and implementation in America.

  • Remember as you search for industry dominators that capital efficiency and free cash flow matter, especially in a developing industry with a potential recession on the horizon.

  • Follow the tariff story and maintain a thoughtful assessment of the evolving probability Trump can achieve his U.S. manufacturing objectives.

  • Think about how you will raise the necessary cash to capitalize on this investment opportunity, should it fully develop, when the Robotic sector turn bullish.

Think about it, and may the good Lord bless your efforts towards excellence in investing.

Shaun.

“Do you see a man skillful in his work? He will stand before kings; he will not stand before obscure men.” ~Proverbs 22: 29

1,3 TradeSmith Daily, “Made in the USA, But Not by Humans”, April 30, 2025

2 AI Overview, Bureau of Labor Statistics, “US Unemployed”, May 2, 2025

4 Chaikin Analytics, Power Gauge, “BOTZ”, May 2, 2025

The opinions voiced in this material are general and are not intended to provide specific recommendations. The economic forecasts set forth in this commentary may not develop as predicted. Diversification of portfolio holdings does not necessarily protect against loss or guarantee returns.

Shaun Scott No Comments

Portfolio Noncorrelation

When I see a line of climbers standing single file by the hundreds on upper Mt. Everest, I wonder how many would survive a sudden deadly storm. The question then emerges as to how the wonderful solitude and serenity found in navigating God’s remote winter mountain wilderness was lost on so many mountaineers! Concentrated human activity and thinking can also be counterproductive in the financial markets, as the contrarian, Mr. Market, is now demonstrating. What is portfolio noncorrelation, how might an investor prudently apply it, and what might the penalty be for those who don’t as Trump’s tariff policy ushers in a reversion to the mean?

The Context

The bull market which ran from 2022 to the present has been dominated by an extraordinary concentration of returns to a small handful of companies. Howard Marks noted in a recent Memo that, “at the end of November U.S. stocks represented over 70% of the MSCI World Index, the highest percentage since 1970, and the top seven U.S. stocks (‘Mag 7’) were worth a heightened amount relative to the rest of U.S. stocks”.¹

The Disruption

While the last 30 months provided a wonderful ride for investors heavily invested in the ‘Mag 7’, Trump’s Trade Spat has been especially punishing these stocks, and the funds heavily weighted in them. Significant technical damage has occurred, and at a level seldom quickly reversed.

Noncorrelation

Noncorrelation is defined in the modern Merriam-Webster Dictionary as “two samples lacking indication as to the relationship between them”.² Let’s define the noncorrelation of portfolio holdings, then, as a lack of semblance in price action in a particular set of market conditions. This is the intent and purpose of portfolio diversification, to even out price swings in difficult markets, and to minimize solvency risk.

Noncorrelated Investment Options

  • A broad basket of stocks or stock funds can provide a level of noncorrelation among equities, to include businesses of different size, in unrelated industries, and on separate continents. An understanding of how each type of stock generally behaves in various market conditions is advisable.

  • As compared to stocks, bonds offer enhanced income stability, less price volatility, preservation of principle at maturity (providing the issuer doesn’t default), and priority of payment in bankruptcy. Following a few years of miserable relative performance, the environment for bonds seems to be generally favorable today.

  • Cash seems boring and unproductive in a raging bull market, but over the last 50 days has held up far better than most investment options. Wall Street made famous the phrase, “Cash is King in a bear market”, for good reason. Make sure your cash is earning the going rate of interest.

  • Alternatives are investments outside Wall Street’s favored asset classes of stocks, bonds, and cash. The general categories include Real Assets, Private Markets, Hedge Funds, Collectibles, and Structured Products. While it is usually advised that a small portion of an investor’s portfolio be allocated to alternatives, it’s notable the benefits in both return and risk mitigation can outweigh the allocation. Disadvantages can include complexity, illiquidity, higher fees, and accreditation requirements.

Pursuing noncorrelation in one’s investment portfolio today may exceed in wisdom buying the dip on the ‘Mag 7’. When venturing into new investment terrain, do your due diligence and stick with investments you understand.

Think about it, Shaun.

“The investor who loses the least in a bear market wins” ~Anonymous

“A wise man sees trouble coming and hides himself, but the simple go on and suffer for it.” ~Proverbs 22:3

“Give a portion to seven, or even to eight, for you know not what disaster may happen on earth.” ~Ecclesiastes 11:2

1 Oaktree Capital Management, Howard Marks’ Memo, “On Bubble Watch”, January, 2025 2 Merriam-Webster online dictionary, “Noncorrelation”, April 10, 2025

The opinions voiced in this material are general and are not intended to provide specific recommendations. The economic forecasts set forth in this commentary may not develop as predicted. Diversification of portfolio holdings does not necessarily protect against loss or guarantee returns.

Shaun Scott No Comments

Stocks Pricing in ‘Trump Trade Spat’ Uncertainties Mar 28 Written By Shaun Scott

It’s generally advisable for investors to be long-term bullish because the average bull market has lasted longer than the average bear market over time, and because average bull market gains have exceeded average bear market losses. As famed investor, Sir John Templeton, wisely advised, “Never stay bearish too long”. That said, certain drawdowns occur which require heightened capital discipline by the investor, in the absence of which great financial pain may be administered. What are the risks and probabilities of what is now an escalating ‘trade spat’, and how might these risks be mitigated?

The risks include:

  • Widespread fretting over tariff-related uncertainty in impacted industries. This week the Federal Reserve Bank of Dallas shared survey results of 25 American energy companies, every one of which expressed tariff fretting.¹ Following new auto tariffs and the associated drop in stock prices, U.S. auto executives likely joined the gloom this week. Even consumer sentiment is reported to be taking a hit. Universally dismal sentiment can become a self-fulfilling economic prophecy.

  • The immediate inflationary price increases resulting from new tariffs. One energy executive from the Dallas Fed survey said, “The administration’s tariffs immediately increased the cost of our casing and tubing by 25 percent even though inventory costs our pipe brokers less, and U.S. tubular manufacturers immediately raised their prices to reflect the anticipated tariffs on steel”.²

  • Inflationary pressure means higher interest rates, which reduces consumer spending, which lowers economic activity, which reduces corporate earnings and causes job losses. A full-blown trade war can quickly introduce stagflation, or high inflation in a stagnant economy with high unemployment.

  • The S&P 500 entered ‘Trump’s Trade Spat’ from historically lofty valuations and is now pricing-in tariff risks. It’s been reported retail investors, the worst on earth, are ‘buying the dip’ while savvy institutional investors are ‘selling the rally’ hand over fist.³ The S&P 500 is below the 200 DMA and is in a technically vulnerable position.

The probability these risks will derail the economy and introduce a bear market recession are challenging to discern. Will President Trump get the concessions he wants, put a halt on tariffs, and avert a trade war? If not, won’t he look weak and foolish pulling back without benefit? Might he push the issue without resolution, single-handedly ushering in a global bear market recession and causing financial hardship to potentially millions of people?

As investors, it seems to me we’ll be wise to recognize three things: 1) a trade war can potentially burn our economic house down and murder the bull market, 2) this may or may not happen, and 3) market participants are pricing in this new risk.

Prudent responses might include:

  • Focus on high quality businesses least likely to experience tariff-related price increases, and businesses easily able to pass price increases on to consumers.

  • Consider adding an inflation hedge or two to your portfolio.

  • Raise some cash and reduce risk in your portfolio by slimming highly inflated and highly exposed positions.

  • Increase holdings in defensive sectors with lower valuations and more reliable earnings.

  • Place a higher value on income today than the promise of income tomorrow. Reinvest investment income to compound returns over time.

Think about it, Shaun.

“Give a portion to seven, or even to eight, for you know not what disaster may happen on earth”. ~Ecclesiastes 11:2

1,2 Stansberry Research, “The Stansberry Digest”, March 27, 2025

3 Bloomberg, “Retail Investors Are Buying the Dip as Stocks Slide”, March 28, 2025 https://www.bloomberg.com/news/newsletters/2025-03-21/retail-investors-are-buying-the-dip-as-stocks-slide

The opinions voiced in this material are general and are not intended to provide specific recommendations. The economic forecasts set forth in this commentary may not develop as predicted. Dividends are not guaranteed, can stop at any time, and will not necessarily enhance investment performance or returns.

Shaun Scott No Comments

Constructive Factors in the Recent Market Sell-Off

Good can always be found in even the harshest of life’s misfortunes and experiences. While it’s not generally my inclination to see that good, I have faithful friends who routinely point it out. I remember having lunch at Iceberg Lake on Mt. Whitney in 2010, when suddenly before our eyes an avalanche released on the very slope we were to ascend! Moments later, while I was a bit panicked about the possibility other parts of the mountain would start falling off, my climbing buddy shed light on the truth a far lower probability existed for another avalanche to release on our route given the development. This is, in respects, a relevant analogy to the ongoing slide in stock prices, and as a fearful sentiment builds in this market, this may prove a beneficial time to identify the good in it.

  • We remain in a solid ‘earnings-growth’ market. S&P 500 businesses have seen 8% average earnings growth in the last decade, only 7% annually long-term, and yet the forecast for 2025 is 9.5%. Fidelity sees 14% earnings growth ahead and thinks the estimate is too low!¹ A bear market in stocks will not likely accompany such earnings growth.

  • Most measured sell-off’s are corrections (drop of 10%-20%), not bear markets (drop of 20%+), especially during the blow-off tops of highly speculative advancements (AI). Remember, the market is highly contrarian by nature, equipped to inflict the maximum amount of pain on the greatest number of investors possible. It’s also true the financial pain of selling in a bull market that hasn’t yet run its course can exceed that of selling too late in an oncoming bear market.

  • The media sells hysteria, and its reporting does not constitute investment research, but it can be thanked for contributing to what has quickly become the poorest market sentiment since a month before the 2022 bear market bottom,² evidence also suggesting we are in a mere correction.

  • Market declines generally bear broadly lower stock valuations, and lower P/E ratios mean there is less froth built into stock prices, meaning less debris to dodge, like the terrain on a slope following an avalanche.

Just as our best decision from Iceberg Lake clearly was to ascend the already-released hill, wise reactions to the present sell-off might include:

  • Do not panic! When fear is identified immediately take a long walk in nature and think about something entirely different. Do not think about investment decisions until calm is restored.

  • Have your bear market ‘stop-loss’ program in place and rely exclusively on pre-positioned tools, not your emotions or intellect, to instigate action.

  • Focus on high quality businesses with gushing free cash flow and sustainable retained earnings; ride the earnings wave.

  • Don’t approach the slope until the avalanche stops! You don’t need to pinpoint the bottom, but you do need to avoid doubling down before the house burns down, and a full-blown trade war can burn the house down.

May God bless our investing efforts and intentions, Shaun.

“Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal, but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal.  ~Mathew 6:19-21

1 FPA (Financial Planning Association) Live Lunch Presentation, Iron Works, Warwick, RI, January 8, 2025, Fidelity Investments 2025 Outlook

2 Dr. Eifrig’s Health & Wealth Bulletin, “The Market Won’t Stay Down for Long, March 12, 2025

The opinions voiced in this material are general and are not intended to provide specific recommendations. The economic forecasts set forth in this commentary may not develop as predicted.

Shaun Scott No Comments

Trump May Dislodge “U.S. Exceptionalism Trade”

Savvy vegetable gardeners understand the first hard frost is a game changer for the home-grown food plot, introducing a whole new growing environment. Such a shift may be occurring in the global stock market dynamic that has been dominant in recent years. The “U.S. exceptionalism trade”, in which American stocks have soared while global stock prices have remained subdued, has reversed sharply since the swearing in of Donald J. Trump as 47’th President. What force is behind this changing investment theme, and will it continue or reverse?

The consensus opinion suggested President Trump’s business-friendly administration would give further advantage to U.S. stocks over foreign equities. While this thesis may prove true in the longer term, there is a more relevant factor playing out today. The “twin deficit”—the U.S. trade deficit and federal budget deficit—has played a major role in inflating U.S. asset prices. This cycle works by the U.S. borrowing money to purchase foreign goods, with trading partners then reinvesting that money into U.S. assets, fueling stock market growth. Historical trends show that when the twin deficit grows, U.S. stock prices rise, but when it contracts (as in 2022), markets suffer significant declines.¹

The Trump administration’s efforts to reduce both the U.S. trade deficit and federal budget deficit may lead to a decline in high U.S. asset prices in the short-term. While the President’s tariff policy is aimed at upending the trade deficit, a reduction in the federal budget deficit could come from Elon Musk and his “Department of Government Efficiency” (DOGE) implementing significant spending cuts.² The first half of President Trump’s second term may involve the market discovering which of the President’s arguments are negotiation tactics aimed at gaining concessions, and which are convictions he will indeed act on. The universally dismal record of historical tariffs has the financial world hoping Trump’s tariffs are short-lived, and that a full-blown trade war is averted. The issue of whether ‘The Administration’ allows DOGE savings to marginally reduce government deficits or uses it as an opportunity to “give” cash to American consumers (to prevent a reduction in U.S. consumption), is worthy of our attention due to its effect on earnings and stock prices.

While we applaud the reduction of government overspending and waste, we don’t want to be ignorant of the pain the corrective process requires. The savvy gardener is acquainted with the ‘first frost date’ in their respective zone and watches daily temperatures closely as it approaches to ensure a successful transition into the winter gardening season. As investors we want to do the same as we wait for these two issues to play out by:

  • Watching for a market rotation away from U.S. equities.

  • Keeping a short leash on high valuation securities.

  • Staying alert to policy changes that could affect trade and corporate profitability.

Think about it and may God bless your gardening and investing efforts!

Shaun

“Be wise as serpents, and innocent as doves” ~Mathew 10:16

1,2 Porter & Co., The Big Secret on Wall Street, “A One-Two Punch to U.S. Stocks”, February 27, 2025

Shaun Scott No Comments

Wealth-Building & Multigenerational Asset Retention

While the endeavors are in ways dissimilar, successfully planning and surviving a big mountain expedition, and building and multi-generationally retaining a financial estate have much in common. The mountaineer must be conditioned (with strength, endurance, balance, and cold tolerance), equipped (with appropriate clothing and gear, and know how and when to use every item), and familiar with the chosen route (to remain within the skill set, maintain a margin for error, and stay on course). The mountaineer is afforded little tolerance for error, but so is the multigenerational wealth builder! Consider the skills and practices applied in their success:

  • Maintaining a net positive cash flow by working hard, increasing specialization in the chosen field, spending less than earnings, and investing the difference productively is foundational.

  • Effective Asset Management, among other things, requires:

    • Diversification into numerous non-correlated investments. Today 33% of SPY, a popular S&P 500 ETF, is invested in 10 stocks! That’s not diversification, as millions of American investors heavily exposed to this ETF may be about to discover.

    • An understanding we dwell in an inflationary culture, which forces more risk-taking than is natural, a concentration on assets with historical returns exceeding inflation coupled with avoidance of those which haven’t, and judicious risk mitigation strategies to sidestep the occasional meltdown unavoidable to fiscally reckless and heavily indebted societies.

    • Minimization of investment expenses, which directly dilute returns and compound the reduction indefinitely into the future.

  • Advanced Tax Planning, contrary to what most CPA’s suggest, involves:

    • Replacing the idea taxes should be minimized each year, with the more thoughtful idea lifetime taxes should be minimized.

    • Applying the means (Tax Loss Harvesting, Strategic Roth Conversions, QCD’s, CRT’s, etc.) to maximize taxes paid in low bracket years, minimize taxes paid in high bracket years, and prevent (not merely delay) every tax dollar possible.

  • Advanced Estate Planning goes beyond protecting the primary residence, naming trustees and executors, and properly designating beneficiaries, and:

    • Utilizes the lifetime gift tax exemption and GST exclusion.

    • Exploits the “step-up in basis” benefit for eligible assets.

    • Accounts for the possibility the Tax Cuts and Jobs Act of 2017 sunsets on December 31, 2025.

  • Logistical Retirement Income Planning arranges for a passive, sustainable retirement income stream that a) evaluates each possible source, b) meets expenses, c) satisfies Required Minimum Distributions, d) is prudent from an investment perspective, e) is compatible with the long-term tax strategy, and f) doesn’t interfere with the estate plan. What an interesting puzzle!

  • Asset Protection Strategies include the use of trusts, corporations, LLC’s, and liability insurance to isolate and minimize risk exposure with each wealth-building endeavor.

The complexity of both the large mountain expedition and the creation and retention of a financial estate requires a team effort. Both involve risks that must be identified and mitigated, and threaten deadly consequences for incompetence or neglect. Apply a thoughtful, diligent, holistic, and team approach to maximize your probability of success.

God bless your wealth-building and estate retention efforts! Shaun

“A good man leaves an inheritance to his children’s children” ~Proverbs 13:22

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Tariffs

Though an attempt is being made to present the concept in a favorable light, tariffs must be judged by their record. Free and open trade has Biblical roots and is mutually and highly beneficial in many respects, but ‘Protectionism’, a national trade policy seeking to protect domestic manufacturers by imposing tariffs on the imports of foreign producers, grows from the destructive root of subsidization. Voluntary subsidy wastes precious capital, feeds apathy, encourages substandard performance, and stifles creativity and effort. Tying one arm of a superior boxer behind his back is neither a noble, nor a fruitful solution for the inferior boxer, who might otherwise have learned from the beating. What is the record on tariffs and why, as investors, should we think about it?

The long record of tariffs proves that after subsidizing uncompetitive domestic manufacturers, tariffs increase prices, reduce employment, interfere with free-market supply-demand dynamics, and antagonize trading partners (Frederic Bastiat famously recognized that “when goods don’t cross borders, soldiers will”). The record on tariffs is so universally dismal that many on both sides of the aisle understand “A trade war has no winners”. Consider the facts:

  • The nation against which a tariff is applied doesn’t actually pay the tariff, consumers of imported products do in the form of higher prices. A Howard Marks study of President Obama’s 2011 tire tariffs revealed Americans were forced to spend $1.1 billion more on tires to preserve 1,200 domestic jobs, an average cost of $1 million per job, each of which paid $40,000. Marks cited similar results from a study of steel tariffs imposed by President Bush in 2002.¹ Tariffs represent a tax on Americans.

  • The Smoot-Hawley Tariff Act of 1930 triggered the most prominent trade war of the 20’th century. The retaliatory tariffs on U.S. goods caused a 61% plunge in exports by 1933, and a repeal of Smoot-Hawley in 1934. There is widespread agreement among historians and economists the Smoot-Hawley Act and its associated trade war amplified and prolonged the agonies of The Great Depression.²

  • Trade wars produce extensive uncertainty in the global business environment. What company wants to risk capital in a hostile nation that might over-tax its products or nationalize its assets?

President Trump’s tariffs introduce a significant new uncertainty to an expensive stock market and are capable of stoking inflation, ushering in a bear market recession, and/or inciting new military conflicts. It’s noteworthy the President wants lower interest rates, yet imposes inflationary tariffs which may force the Fed to increase rates. It’s also mentionable our Commander in Chief understands tax cuts are good because people and businesses generally make wiser financial decisions than the government, resulting in increased production, jobs, and economic growth, which in turn provides more revenue for the government, yet puzzling he fails to see that government taxes in the form of tariffs won’t produce opposite results.

At minimum we should expect increased volatility in 2025 as a result of the new dynamic.

Think about it, Shaun.

“So Hiram supplied the cedars and evergreens Solomon needed, and Solomon supplied Hiram annually with 20,000 cors of wheat and 20,000 baths of pure olive oil. So the Lord gave Solomon wisdom, and Hiram and Solomon were at peace and made a treaty.”   ~ 1 Kings 5:10-12

 

1 Howard Marks, “Political Reality Meets Economic Reality”, Memo to Oaktree Clients, January 2019

2 Foundation for Economic Education, “The catastrophic results of the Smoot-Hawley Tariff Act of 1929-1930”, December 10, 2016