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Speculating About Presidential Elections is Not Fruitful

So, I’m chatting with a buddy.  We are doing our best to maintain Social Distancing, wearing masks and sincere in our determination to avoid spraying potentially contagious droplets on one another.

My buddy opened up with “I am very worried about the stock market if Joe Biden gets elected”.  (“Market Worry” is not what we want our clients to experience.) Of course, just the day before, a conversation with someone else opened with the same worry about Donald Trump’s potential re-election.

To assist our buddy with calming the ‘Market Worry’ surrounding the upcoming Presidential Election I produced a slide titled ‘Markets Have Rewarded Long-Term Investors Under a Variety of Presidents’.  Upon even cursory examination it is revealed that­­, in spite of whether our President is a Republican or a Democrat, markets have trended up!

For further information – you might enjoy clicking through to this link:

Click Here to read more.

OUR VIEW:  Any prediction that the market will Decline (Or Advance) if a Democrat or Republican is elected is a Speculation with no basis in historical evidence.

My hope is that I was able reduce my buddy’s ‘Market Worry,’ which she cannot control, by pointing out that she has planned for market volatility by controlling what she can control. For retired investors, that could look like setting aside several years of expected ‘Cash Withdrawal Need’ in Short-Term, Investment-Grade, Globally-Diversified Fixed Income.

Think about it: If an investor were to set aside 15 years of spending in Fixed Income at age 65, and let the rest of her portfolio ride in equities, she would not have to worry much about short term stock market volatility. As the enclosed chart indicates, investors have historically had a good shot at positive returns over long periods of time.

My buddy then commented “I Feel Better About Not Outliving My Money”!  Hooray – Mission Accomplished!

Trusting you are living your life well, maintaining Social Distance and, finding comfort in a Purposefully Derived portfolio, I remain

On Behalf of the Firm,

Tom Warburton




Begin with the End in Mind

So, a buddy comes in…actually…our buddy was visiting with us online via GoToMeeting as we at Warburton Capital continue to work remotely and shelter in place to defeat the Coronavirus!

Our buddy had been watching Financial Pornography and heard an “Expert” utter the alarming words “It’s Different This Time”!  Man, oh Man…I really think this “Expert” was dropped on his head before he was a year old.

Personally, I throw up when I hear alarmist statements like “It’s Different This Time”.  The Legendary Investor, Sir John Templeton, once commented that “The Four Most Dangerous Words In Investing Are – It’s Different This Time”!

The crisis du jour may change, but it’s never really different in the marketplace is it?

Investors around the globe meet in the marketplace to exchange securities in pursuit of a profit.  They make their bid/ask offers based on their individual views of all available information, market prices and speculations – Investors Do This Today Just Like Investors Have Done This In The Past!

The varied opinions of investors/traders are very healthy and lead to “Price Discovery”.  When a trade is made – everybody in the entire world knows Just What A Security Is Worth – At That Instant.  Of course, the Efficient Markets Hypothesis has taught us that that Unexpected News in the near (or far distant) future will lead to Securities Having A Different Price On Some Unknowable Date In The Unknowable Future.

Our advice to our buddy went down the road of “Let’s Forget About Forecasting, Let’s Derive A Rational Goal Achieving Plan and Let’s Begin With The End In Mind”!

Thereafter we laid out a 12 Step Program for our buddy – and any of you who would like – to pursue “A Rational Wealth Management Experience”:

  1. Make Your Goal(s) the Centerpiece.
  2. Avoid “Investment Generalists” and engage in Top Down Planning with an Objective Professional who thinks about your wealth beyond, simply, “Your Portfolio”.
  3. Maintain a Long-Term Perspective and Long-Term Discipline.
  4. Globally Diversify Stock and Bond Holdings.
  5. Forget about What Percentage Of Your Investments Should Be In Stocks Or Bonds, rather, Allocate A Purposeful And Necessary Dollar Amount To Fixed Income For Emergencies and/or Lifestyle Funding.
  6. Having funded your Known Spending Needs with Fixed Income, Allocate Surplus Liquidity to Global Equities.
  7. Invest your Fixed Income conservatively (we each take plenty of risk with our Equities – don’t bear a similar risk with Fixed Income) favoring short-term investment grade Bonds.
  8. Over-Weight Equities to Sub-Asset Classes which have exhibited statistically significant broad market out-performance on a risk-adjusted basis.
  9. Invest ONLY in Securities with minimal expenses (Give yourself a “Fair Shake”) and minimal tax ramifications (Why pay unnecessary taxes?).
  10. View short-term markets news as “interesting” but not “useful”.
  11. Ignore the forecasts of the financial media and other speculators.
  12. Sit back and Enjoy Your Life!

Having considered our logic, our buddy sat quietly, appeared to be reflecting, scratched his head a few times, nodded affirmatively and blurted out – “I Get It – Let’s Do It”!

Our buddy is now on the road to deriving, with our collaboration, A Rational Wealth Management Plan designed to achieve his uniquely personal goals with minimal risk.

Our buddy is, also, starting to view the financial market talking heads as Entertainers – which they certainly are!

In closing, I trust you are watching CNBC much like you watch the Weather Channel.  It’s a terrific source of Current Events which we find to be “Interesting”, however, “Not Useful” for Long-Term Goal-Achieving Planning!

I further trust you are not making investment decisions based on the many – and often conflicting – predictions coming out of the mouths of the “so-called” speculating experts.  These folks on Television are experts alright, experts at entertaining us!

Always wishing you well, I remain

On Behalf of the Firm,

Tom Warburton




CARES Act

A CARES Act Overview

We at Warburton Capital were early adopters of the ‘Shelter In Place’ strategy and have been working from our homes for the past 25 days.

We are sad to report that we haven’t seen any of our buddies face-to-face – We miss the interaction – however, we have enjoyed dozens of Video Meetings along with phone calls, emails and text messages!  Please keep the interaction alive and reach out at any time.

The primary topics of buddy conversations have been “the market decline”“The Novel Coronavirus” and “The Coronavirus Aid, Relief and Economic Security Act – aka The CARES Act”.

With much of the country in self-isolation, perhaps you’ve got time to read the entire H.R. 748 Coronavirus Aid, Relief, and Economic Security Act, or CARES Act?

If you’d prefer, here is a summary of many of the key provisions that may apply to you.

In General:

  • Direct Payments/Recovery Rebates: Most Americans can expect to receive rebates from Uncle Sam. Depending on your household income, expect up to $1,200 per adult and $500 per dependent child. To calculate your payment, the Federal government will look at your 2019 Adjusted Gross Income (AGI) if it’s available, or your 2018 AGI if it’s not. However, you’ll receive an extra 2020 tax credit if your 2020 AGI ends up lower than the figure used to calculate your rebate. This Nerd’s Eye View illustration offers a great overview:

From Michael Kitces at Nerd’s Eye View; reprinted with permission.

  • Various Healthcare-Related Incentives: For example, certain over-the-counter medical expenses previously disallowed under some healthcare plans now qualify for coverage. Also, Medicare restrictions have been relaxed for covering telehealth and other services (such as COVID-19 vaccinations, once they’re available). Other details apply.

For Retirees (and Retirement Account Beneficiaries):

  • RMD Relief: Required Minimum Distributions (RMDs) go on a holiday in 2020 for retirees, as well as beneficiaries with inherited retirement accounts. If you’ve not yet taken your 2020 RMD, you do not have to! If you have, please be in touch with us to explore potential solutions.

For Charitable Donors:

  • “Above-The-Line” Charitable Deductions: Deduct up to $300 in 2020 qualified charitable contributions (excluding Donor Advised Funds), even if you are taking a standard deduction.
  • Donate All Of Your 2020 AGI: You can effectively eliminate 2020 taxes owed, and then some, by donating up to, or beyond your AGI. If you donate more than your AGI, you can carry forward the excess up to 5 years. Donor Advised Fund contributions are excluded.

For Business Owners (and Certain Not-for-Profits):

  • Paycheck Protection Program (PPP) is making loans available for qualified businesses and not-for-profits (typically under 500 employees), sole proprietors, and independent contractors. Loans for up to 2.5x monthly payroll, up to $10 million, 2-year maturity, interest rate 1%. Payments are deferred and, if certain employment retention and other requirements are met, the loan may be forgiven.
  • Economic Injury Disaster Loans (EIDLs) of up to $2 million to qualified small businesses and non-profits, “to help overcome the temporary loss of revenue they are experiencing.” Interest rates are under 4%, with potential repayment terms of up to 30 years. Applicants also are eligible for an advance on the loan of up to $10,000. The advance will not need to be repaid, even if the loan is denied.
  • Payroll Tax Credits And Deferrals: For qualified businesses who are not taking a loan.
  • Employee Retention Credit: An additional employee retention credit (as a payroll tax credit), “equal to 50 percent of the qualified wages with respect to each employee of such employer for such calendar quarter.” Excludes businesses receiving PPP loans, and may exclude those who have taken the EIDL loans.
  • Net Operating Loss Rules Relaxed: Carry back 2018–2020 losses up to five years, on up to 100% of taxable income from these same years.
  • Immediate Expensing For Qualified Improvements: Section 168 of the Internal Revenue Code of 1986 is amended to allow immediate expensing rather than multi-year depreciation.
  • Dollars Set Aside For Industry-Specific Relief: Please be in touch for a more detailed discussion if your entity may be eligible for industry-specific relief (e.g., airlines, hospitals and state/local governments).

For Employees/Plan Participants:

  • Retirement Plan Loans And Distributions: Maximum amount increased to $100,000 on up to the entire vested amount for coronavirus-related loans. Delay repayment up to a year for loans taken from March 27–year-end 2020. Distributions described above in In General.
  • Paid Sick Leave: Paid sick leave benefits for COVID-19 victims are described in the separate, March 18 H.R. 6201 Families First Coronavirus Response Act, and are above and beyond any benefits received through the CARES Act. Whether in your role as an employer or an employee, we’re happy to discuss the details with you upon request.

For Employers/Plan Sponsors:

  • Relief For Funding Defined Benefit Plans: Due date for 2020 funding is extended to Jan. 1, 2021. Also, the funding percentage (AFTAP) can be calculated based on your 2019 status.
  • Relief For Facilitating Pre-Retirement Plan Distributions And Expanded Loans: As described above for Employees/Plan Participants, employers “may rely on an employee’s certification that the employee satisfies the conditions” to be eligible for relief. The participant is required to self-certify in writing that they or a direct dependent have been diagnosed, or they have been financially impacted by the pandemic. No additional evidence (such as a doctor’s release) is required.  
  • Potential Extension For Filing Form 5500: While the Dept. of Labor (DOL) has not yet granted an extension, the CARES Act permits the DOL to postpone this filing deadline.
  • Exclude Student Loan Pay-Down Compensation: Through year-end, employers can help employees pay off current educational expenses and/or student loan balances, and exclude up to $5,250 of either kind of payment from their income.

For Unemployed/Laid Off Americans:

  • Increased Unemployment Compensation: Federal funding increases standard unemployment compensation by $600/week, and coverage is extended 13 weeks.
  • Federal Funding Covers First Week Of Unemployment: The one-week waiting period to start collecting benefits is waived.
  • Pandemic Unemployment Assistance: Unemployment coverage is extended to self-employed individuals for up to 39 weeks. Plus, the Act offers incentives for states to establish “short-time compensation programs” for semi-employed individuals.

For Students:

  • Student Loan Payments Deferred To Sept. 30, 2020:  No interest will accrue either. Important: Voluntary payments will continue unless you explicitly pause them. Plus, the deferral period will still count toward any loan forgiveness program you’re in. So, be sure to pause payments if this applies to you, lest you pay on debt that will ultimately be forgiven.
  • Delinquent Debt Collection Suspended Through Sept. 30, 2020: Including wage, tax refund, and other Federal benefit garnishments.
  • Employer-Paid Student Loan Repayments Excluded From 2020 Income: From the date of the CARES Act enactment through year-end, your employer can pay up to $5,250 toward your student debt or your current education without it counting as taxable income to you.
  • Pell Grant Relief: There are several clauses that ease Pell Grant limits, while not eliminating them. It would be best if we go over these with you in person if they may apply to you.

For Estates/Beneficiaries:

  • A Break For “Non-Designated” Beneficiaries: 2020 can be ignored when applying the 5-year rule for “non-designated” beneficiaries with inherited retirement accounts. The 5-Year Rule effectively ends up becoming a 6-Year Rule for current non-designated beneficiaries.

There.  You’re now familiar with much of the critical content of the CARES Act!

Whew – that’s a ton of information. 

That said, given the complexities involved and unprecedented current conditions, there will undoubtedly be updates, clarifications, additions, system glitches, and other adjustments to these summary points. The results could leave a wide gap between intention and reality.

I do want to stress that here at Warburton Capital we are neither CPA’s nor do we practice law.

  • your accountant, and/or estate planning attorney on any details specific to you.

In closing, we’ve enjoyed a lot of interaction with our buddies online and would be pleased to meet with you online as well – or – phone, email or text if you prefer.

Trusting this will find you and yours healthy, sheltered in place and doing your best to defeat the coronavirus, I remain

On behalf of the firm,

Tom Warburton

Reference Materials:




Coronavirus and the Market

What is the impact of Coronavirus on my investments?

The term “novel coronavirus” is so new, some people have apparently wondered whether it is related to Corona beer. (It is not; it’s named after its crown-shaped particles.) And yet, how quickly it has grabbed global headlines. As the viral news has spread, so too has financial uncertainty. What’s going to happen next? Will it further infect our domestic or global economies? In case it does, should you try to shift your investments to remain one step ahead?

Our advice is simple: Do try to avoid this or
any other health risk through good hygiene. Wash your hands. Cover your mouth
when you cough. Eat well, exercise, and get plenty of sleep.

But do not let the
breaking news directly impact your investment strategy.

The keys to following an evidence-based investment strategy
are …

  • Having a globally diversified investment
    portfolio.
  • Structuring your portfolio to capture a measure
    of the market’s expected long-term returns.
  • Tolerating a measure of this sort of risk to
    earn those expected long-term returns.
  • Identifying how much market risk you must expect
    to endure to achieve your personal financial goals and allocating your
    investments accordingly.

In other words, it may feel counterintuitive, but if you
have done the above you have planned for this type of contingency already. In
investing, there are things that you can control, and there are things that you
cannot. The impact of coronavirus to the market is something that we can’t
control; sticking to your plan is.

Admittedly, that’s often easier said than done. Here are a
few reminders on why sticking with an evidence-based investment plan remains
your best financial “treatment.”

“I’m assuming there will be no
apocalypse. And that’s almost always, if not quite always, a good assumption.” —
John
C. Bogle

If you’re not invested, your investments can’t recover. Few
of us make it through our days without enduring the occasional moderate to
severe ailment. Once we recover, it feels so good to be “normal” again, we
often experience a surge of energy. Similarly, markets are going to take a hit
now and then. But with historical evidence as our guide, they’ll also often
recover dramatically and without warning. If you exit the market to avoid the
pain, you’re also quite likely to miss out on portions of the expected gain.

Markets endure. We by no means wish to downplay the
socioeconomic suffering coronavirus has created. But even in relatively recent
memory, we’ve endured similar events – from SARS, to Zika, to Ebola. Each is
terrible, tragic, and frightening as it plays out. But each time, markets have
moved on. Whether coronavirus spreads further or we can quickly tamp it down, overwhelming
historical evidence
suggests capital markets will once again endure.

The risk is already priced in. The latest news on
coronavirus is unfolding far too fast for any one investor to react to it … but
not nearly fast enough to keep up with highly efficient markets. As each new
piece of news is released, markets nearly instantly reflect it in new prices. So,
if you decide to sell your holdings in response to bad news, you’ll do so at a
price already discounted to reflect it. In short, you’ll lock in a loss,
rather than ride out the storm.

Bottom line, market risks come in all shapes and sizes. This
includes the financial and economic repercussions of a widespread virus, be it
real or virtual. While it’s never fun to hunker down and tolerate risks as they
play out, it likely remains your best course of action. Please let us know if
we can help you maintain your investment plan at this time, or judiciously
adjust your plan if you feel it no longer reflects your greater financial
goals.




PRESS RELEASE: Tina Parkhill Elected to Our Board of Directors

Thomas K. Warburton, Chairman of Warburton Capital Management announced the election of Tina Parkhill to our Board of Directors.

As an impassioned community advocate, Tina is heavily involved in a number of non-profits with a focus on the arts, family and children, abuse and recovery and mental health.  Most recently, Tina earned a 2016 Woman of Distinction award given by the Tulsa Business Journal.

Tina serves as board vice president of resource development for Family &
Children’s Services, president-elect of Leadership Tulsa and serves as a board member for both the OSU National Alumni Association and the bArt Center for Music.

She was recently selected as chair-elect for Youth Services 2018 Blank Canvas, served on the executive leadership team for the 2017 American Heart Association’s Heart Ball and the Honorary Event Chair for New Hope Oklahoma’s Mardi Gras fundraising event.

Born and raised in Clayton, New Mexico, Tina moved to Tulsa after graduating from OSU in Stillwater with a BS in Marketing. “My first job out of college was as a field sales representative with Ernest & Julio Gallo,” said Tina. “I really enjoyed the experience because of the formal training and development program which provided accelerated management opportunities.” When asked what she likes about Tulsa, Tina said she loves the philanthropic nature of the community. “We have some of the most generous people, supporting so many deserving causes.”

Tina is the owner of Parkhill’s South Liquors and Wine in Tulsa. Warburton commented, “Like many of our clients, Tina is a business owner and faces the unique challenges of running and growing a business. Her leadership ability, business acumen and visibility in our community position her as an ideal Director to guide our enterprise into the future.

I’m confident Tina will make many positive contributions in actualizing our long-term strategic plans and helping us achieve our Core Value, which is To Help People! Please join me in congratulating Tina and welcoming her to our team.”