Month: May 2021

Prisoners of War

Written by Minich MacGregor Wealth Management on May 28, 2021. Posted in Featured.

Name, rank, service number, and date of birth. That was the only information Donald Cook ever told his captors. Donald Gilbert Cook. Captain, U.S. Marines. August 9, 1934. Even when he was beaten, even when he was starving, even when he was sick, it was all he’d ever say.

But for his comrades, he did so much more.

Name, rank, service number, and date of birth. That was all Lance Sijan’s torturers ever got from him. Lance Peter Sijan. Lieutenant, U.S. Air Force. April 13, 1942. Even with a fractured skull, a broken leg, a mangled hand, and extreme malnutrition, Lance Sijan would say no more.

But for his country, he showed so much more.

Lance Sijan was 25 years old when his plane exploded over North Vietnam. Although he was able to eject, the force was so violent that Sijan was knocked unconscious. When he awoke, he found himself in enemy territory without food or water. He was able to radio for help, but there were too many North Vietnamese forces in the area. Sijan refused to subject other airmen to a dangerous rescue attempt. So, he informed his superiors of his decision to crawl through the thick jungle, hoping to find a safer spot.

Weakened and dehydrated, with multiple broken bones, Sijan was only able to move by sliding along his backside. Despite this, he evaded capture for six weeks, until finally, he was spotted by the North Vietnamese on Christmas Day. But even in captivity, Sijan’s indomitable will could not be broken. He subjugated one of his guards and escaped back into the jungle, only to be recaptured several hours later.

That’s when the torture began.

Name, rank, service number, and date of birth. Already gaunt and maimed, Sijan was interrogated relentlessly. But he never relented. He never divulged any information about himself, his unit, or his mission. Nor did he ever complain to his comrades. As he began slipping in and out of consciousness, he continued to plan future escape attempts. Most important was the standard he set for the other prisoners. Never give up. Never give in. Keep resisting. Keep fighting. Keep serving.

Finally, a few weeks after being captured, Lance Sijan died from pneumonia. But his example endured on, inspiring other prisoners to persevere – and live.

Later that year, Sijan was posthumously promoted to the rank of captain. In 1976, he was awarded the Medal of Honor for his “extraordinary heroism and intrepidity above and beyond the call of duty.”¹

He was only supposed to be in Vietnam for a training mission. But maybe Donald Cook had a premonition he would be captured one day. Maybe that’s why he prepared for it long before it happened.

Cook joined the marines in 1956. A gifted linguist, Cook taught himself Vietnamese and Chinese and made a point of learning how to conduct himself if he were ever captured and interrogated. He even wrote a pamphlet based on the experiences of American POWs during the Korean War and taught resistance techniques to other marines in case they were ever imprisoned.

In 1964, Cook went to Vietnam for a 30-day assignment. But only 18 days after arriving, Cook found himself embroiled in the Battle of Binh Gia. Wounded and captured by the Viet Cong, his superiors thought he was dead and declared him killed in action.

But Cook was very much alive – and about to put his training to use.

First, Cook established himself as the senior officer among nine other POWs, even though he technically wasn’t, knowing this would cause him to be singled out by his captors for especially brutal attention. As the senior officer, he had the authority to demand better food, medicine, and care, which he did so constantly. Often, this only resulted in harsher treatment for himself, but sometimes, his efforts paid off.

Next, Cook began giving away his food and water rations, not to mention what little medicine he had, to prisoners in worse condition. As the prisoners were forcibly marched from one camp to another, Cook personally carried his comrades’ belongings if they were too weak to do so themselves, knowing those same belongings were often what kept the men alive.

As the senior officer, Cook was always first to be interrogated – and first to be punished whenever his fellow POWs resisted. But, drawing on his years of training, Cook never relented. Name, rank, service number, and date of birth. Even when offered the chance to negotiate his own freedom, Cook refused. He would not abandon his post, his duty, his men, or his country.

At one point, his interrogator pushed a pistol against his forehead and threatened to fire. It was probably the only time Cook indulged his captors with a different answer.

“You can’t kill me,” he said. “Only God can decide when I die.”²

His words were prophetic. After over three years in captivity, Cook finally passed away. Not from torture, or starvation, or a Viet Cong bullet, but from malaria. His fellow prisoners, the same men he had inspired, protected, and saved, buried him in the jungle themselves.

Donald Cook was posthumously promoted to colonel and awarded the Medal of Honor “for conspicuous gallantry and intrepidity at the risk of his life above and beyond the call of duty…and for personal valor and an exceptional spirit of loyalty in the face of certain death.”³ Fifteen years later, his daughters found a box containing letters he had written to them before leaving for Vietnam.

“Do what is right and just,” he had written, “no matter what the personal cost.”²

Every Memorial Day, we honor those who died defending our country. Usually, we imagine their valor and sacrifice taking place on the front lines, in the heat of battle, and it often did. Defending a hill, liberating a town, mounting a last, desperate charge – these are feats movies are made of.

But when you walk past the white marble headstones of Arlington National Cemetery, when you read their stories, you learn that sacrifice comes in many forms…and the greatest valor often happened where there was no one to see. Some of the finest heroes our country has ever known were nowhere near the front lines when they died. They were in enemy territory. They were shackled and starving. Sometimes, it would be years before their country would know what happened to them. Sometimes, their bodies never even made it home.

They were prisoners of war. They were heroes.

This Memorial Day, let’s remember them. Let’s honor them.

On behalf of everyone at Minich MacGregor Wealth Management, we wish you a safe and peaceful Memorial Day.

¹ “Lance Sijan”, Wikipedia, accessed May 3, 2021. https://en.wikipedia.org/wiki/Lance_Sijan

² Donald L. Mathis, “Colonel Donald G. Cook, USMC: Faith Without Fear,” American Intelligence Journal, Vol. 35, No. 1, pp.23-28. 2018.

³ “Donald Cook (Medal of Honor)”, Wikipedia, accessed May 4, 2021. https://en.wikipedia.org/wiki/Donald_Cook_(Medal_of_Honor)

2021 Areas of Uncertainty -> Volatility

Written by Minich MacGregor Wealth Management on May 24, 2021. Posted in Minich MacGregor Missive, News.

Everyone knows that April showers bring May flowers. But this year, the saying could be, April tranquility brings May volatility.

Okay, maybe that saying won’t catch on. But still: Up one day, down the next, flat overall — this has been the state of the markets for the last few weeks. The fancy word for this is consolidation. The markets have been on a tear this past year, and now investors are consolidating their gains, waiting to see what happens next. Think of it as a plane in a holding pattern, circling the runway while it waits for a good time to land.

Why this new volatility in the markets? That’s the question many clients have been asking us. Well, volatility is always a product of uncertainty, and there are several areas of uncertainty that investors are dealing with right now. We’ll address a few…

The first area is inflation.

On Wednesday, May 12, most Americans probably woke up and read the news that Ellen DeGeneres was canceling her show. Or maybe they checked the latest sports scores. We enjoy reading this stuff as much as the next person, but, as financial advisors, our morning was spent reading something else: a news release from the Bureau of Labor Statistics revealing the Consumer Price Index for the month of April.

Here’s how it starts:

“The Consumer Price Index for All Urban Consumers increased 0.8% in April on a seasonally adjusted basis after rising 0.6% in March, the US Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 4.2% for seasonal adjustment. This is the largest 12-month increase…since September 2008.”¹

Riveting stuff? Maybe not – but there’s some important information to be found in that paragraph. Here’s what it says in plain English: Inflation is on the rise.

The fact inflation is rising is not a surprise, nor is the reason for it hard to understand. With the worst of the pandemic seemingly behind us, the economy is opening up in a big way. More and more people are going out to eat, visiting theme parks, traveling on airplanes, buying cars, improving their homes, etc. In other words, people are demanding more goods and services.

As we know from the Law of Supply and Demand, when the demand for things outpaces supply, prices go up. With more people are vaccinated, and the CDC recently loosening their mask recommendations, demand has risen sharply over the past few months.

Now, these conditions are all good for economic growth. But for the stock market, there are two issues. The first issue is that this economic growth was largely priced into the markets months ago. Remember, stock market prices reflect what investors anticipate will happen tomorrow more than what’s happening today. Investors expected the economy to grow, so they plowed more money into stocks. Now, the growth is happening, but it’s simply confirmation of what people already expected.

To show you what we mean, here’s a graph of the S&P 500 over the last twelve months.²

So, what’s the next good thing investors can expect? Unknown. That’s the next area of uncertainty. Previously, even when the pandemic was at its worst, investors had a lot to look forward to. A vaccine. Falling case numbers. More government stimulus. But now vaccines are here, case numbers have been falling for months, and there are no more stimulus checks in the offing. It’s like returning from a trip to Disneyland. The kids are exhausted. The parents must return to work. And everyone’s wondering when the next vacation will be.

Until there’s something new to feel excited about, many investors worry there’s a ceiling on how much higher stocks can rise.

Before we go on, let’s return to inflation for a moment. We mentioned there were two issues with economic growth. The second issue is fear. Specifically, fear that the economy will grow too much, too fast.

If the economy grows too quickly, prices will rise across the board and the value of our currency would drop. This, essentially, is inflation: When the general price level rises, a dollar simply pays for less than it used to. That makes it much harder for people to buy the goods and services they need. Or to pay off their debts. It makes it harder for businesses to hire new workers or pay the workers they already have. The upshot? When inflation gets too high, consumer spending plummets, unemployment jumps, and economic booms turn into economic busts.

For investors, the question isn’t about whether inflation will go up. It already is. The question is, will this inflation be temporary, or long-term? The answer will determine how big of a deal it really is.

There’s certainly a good argument that it’s temporary. That’s how the Federal Reserve currently sees it (more on them in just a minute). The thinking is that this inflationary spike is driven by temporary problems related to reopening the economy. As soon as society settles down and regains equilibrium, prices will settle down, too. But we don’t know for sure. It’s not hard to imagine a future where, by the end of the year, the world is still wrestling with the implications of the pandemic. Supply could still be struggling to keep pace with demand. Prices could keep rising. We’re still a long way away from that. But if that is what the future holds, the Federal Reserve would need to do something about it.

And that’s the other area of uncertainty.

You see, the Federal Reserve has what they call a “Dual Mandate”. To put it simply, their mission is to “foster economic conditions that achieve both stable prices [manageable inflation] and maximum sustainable employment.”³

The problem is, it’s not always possible to focus on both goals at once. The Fed must prioritize, and right now, employment is a far higher priority. For the last year, the Fed has helped prop up the economy by buying billions in bonds to keep interest rates low. (Lower interest rates make borrowing less costly, which means businesses and individuals can borrow and spend more, thereby pumping more money into the economy.) But that can’t go on indefinitely. At some point, the Fed must raise rates, especially if inflation keeps rising.

For months, the media has been asking the Fed when they expect to raise rates. For months, the Fed’s answer has been some variation on, “Not until the economy is ready.” Currently, the Fed simply doesn’t see rising inflation as an issue. At least, not compared to the task of getting the economy back to full employment. But for investors who’ve become hooked on the drug of low interest rates, these assurances do little to calm their fears. Why? Well, low interest rates mean that many types of investments, most notably bonds, simply don’t provide the same return on investment as they would in a high-interest rate environment. That drives more and more investors into the stock market to get the returns they need. But what happens when interest rates go up? Consumers and businesses could cut back on spending, which in turn could cause earnings to fall and stock prices to drop.

Rumors persist that the Fed will begin “tapering” their bond-buying sooner rather than later. (This means the Fed will gradually buy less and less in bonds, resulting in a gradual increase in interest rates.) Whenever the headlines even hint at this, the markets tend to spasm. This is the cause behind many of the price swings we’ve seen in recent weeks.

So, that’s the story behind the recent volatility. The question is, what do we do about it?

The first thing we need to do is accept that these areas of uncertainty are likely to persist for some time. In other words, we need to be mentally prepared for a sustained period of consolidation/volatility. If the reverse happens and the markets resume their upward climb? Fantastic! But if not, at least we’ll be prepared.

The second thing to do is remember that we are prepared – for short-term volatility and long-term inflation. If interest rate fears worsen and volatility goes up, we are ready to play defense and move to cash. If there’s a general rise in prices and inflation skyrockets above what the Fed can handle, we don’t have to ride out another market crash like so many investors do. As always, we’ll obey the rules of our strategy and do what the trend dictates. If our technical signals indicate major volatility on the horizon, we’ll act accordingly.

The final thing you can do is let us know if you have any questions or concerns. We’d be happy to speak with you! But in the meantime, keep in mind that while April showers bring May flowers, June sun brings fun! Summer is just around the corner, so go enjoy it. Our team will continue to man the fort around here. If there’s ever any action we need to take, or development you need to know, we will contact you immediately. As always, let us know if there is ever anything we can do for you!

₁ “Consumer Price Index – April 2021,” Bureau of Labor Statistics, May 12, 2021. https://www.bls.gov/news.release/pdf/cpi.pdf

₂ “S&P 500”, Google.com, accessed May 19, 2021.

₃ “The Federal Reserve’s Dual Mandate,” Federal Reserve Bank of Chicago, October 20, 2020. https://www.chicagofed.org/research/dual-mandate/dual-mandate

Inflation – Is the Economy Overheated?

Written by Minich MacGregor Wealth Management on May 20, 2021. Posted in Uncategorized.

How much inflation can the country afford before we’re in trouble?

Let’s discuss.

First, let’s get on the same page about some basics.

If you’ve noticed the price of a thing increasing over time (say, your favorite candy bar or the cost of college tuition), that’s inflation in action.

Economists use the broad increase (or decrease) in prices of goods and services across the country as a measure of economic health.

When inflation is stable and predictable, it’s a sign of a basically healthy, growing economy.

But, high inflation can quickly eat away at the purchasing power of your dollars, indicating that the economy might be overheated.

Deflation, or a decline in prices, can be a warning sign of a shrinking economy.

Recent data highlighted a surprise spike in inflation, indicating that prices increased faster than economists expected last month.¹

Could this be a worrisome sign that the economy is overheated? Could $50 burgers be in our future?

Maybe.

On the other hand, could it be a temporary blip caused by the economy emerging from the pandemic-driven slowdown, complicated by supply chain issues?

Very possible.

Are the headlines catastrophizing?

They usually are.

Let’s look at the data.

The Consumer Price Index (CPI), one of the major indexes economists use to track inflation, showed a surprising spike in April, igniting fears of runaway inflation.

Core CPI (which excludes the highly volatile categories of energy and food) showed a 0.9% increase in April month-over-month and 3.0% year-over-year. That’s much higher than the expected 0.3% and 2.3%, respectively.¹

However, digging a bit deeper, we see that just two categories of goods (used cars and transportation services) accounted for the vast majority of the surge.²

That suggests things like flights and train travel suddenly became more expensive after a year of rock-bottom prices.

Is that runaway inflation or the normalization of prices as the world reopens?

We can’t tell from a single data point, but it’s not unusual to see prices increase in sectors that experienced a severe slowdown last year.

And the jump in used car prices? Well, many folks are turning to the second-hand market right now, in part because new cars are caught up in global supply chain bottlenecks for things like semiconductors and raw materials.³

Inflation is something to keep an eye on, especially in a year when so many of the usual variables have been thrown into flux. An ongoing surge in prices could hurt our wallets as our dollars buy less over time.

However, a single monthly spike following a very weird period for the economy is not cause for alarm yet; we should prepare ourselves for more odd numbers coming out of different parts of the economy in the weeks and months to come.

Shortages of everything from ketchup to gasoline could lead to price increases and fluctuations as supply chains attempt to disentangle from pandemic disruptions.⁴

Should we expect markets to react to inflation (and other) headlines?

A negative market reaction is not surprising after weeks of strong performance. We should expect volatility ahead as we (and the economy) adjust to a post-pandemic world.

Bottom line: Expect the unexpected in 2021.

88% There?

Written by Minich MacGregor Wealth Management on May 10, 2021. Posted in Uncategorized.

Two things to discuss today: the economy (getting better) and taxes (going up?).

Let’s dive in.

The light at the end of the tunnel is getting closer and brighter.

The economy is booming and we’re getting much closer to pre-pandemic levels of economic growth.¹
COVID-19 cases are declining, as the math starts to work for us (instead of against us as it did at the beginning of the pandemic).² As more folks gain immunity, there are fewer ways for the virus to spread.
All U.S. adults are now eligible for a vaccine.³
Restrictions are easing and areas are opening up for travel, meaning we can start planning those missed vacations and seeing loved ones again.

After over a year of uncertainty and dread, the future is looking up.

How are you feeling?

Do you share our optimism?

Things aren’t completely rosy, of course.

Major COVID-19 surges in India and Brazil mean millions are still suffering.⁴

Viral variants mean the pandemic may not be “over” for a long time and we still need to be careful not to undo all our gains.

Many folks are not experiencing the economic recovery and may need years to recover what they have lost.

However, let’s not let the work ahead take away from the progress we’ve made.

Let’s take a deep breath and appreciate how far we’ve come since March 2020.

… Deep Breath …

Now, let’s talk about taxes.

President Biden just unveiled a plan to increase taxes on high earners to pay for economic reforms as part of the American Families Plan.⁵

What’s on the table is likely to change as political wrangling continues, but here are a few things we’ve got to consider so far:

A higher top income tax rate of 39.6% (though it’s not clear yet who falls into that top tax bracket).

Raising the top tax rate on long-term capital gains to 39.6%. With the 3.8% Medicare surtax, that means the highest earners could pay a 43.4% rate on gains.

The elimination of the step-up basis for estates, meaning heirs could get stuck paying taxes on capital gains over $1 million (even if nothing has been sold) when they inherit.

This change could impact folks who, for example, inherit family homes that have appreciated in value. They might want to keep the home, but may not be able to afford the tax bill.

So, should I be worried?

Alert and informed, definitely. Anxious and worried, no.

Here’s why:

This is a proposal. It’s got a long way to go before becoming law and the details may change.

It’s still unclear how much impact these proposed changes will actually have. There are many advanced strategies that can help mitigate the impact of higher taxes. That’s why tax and estate strategies matter so much.

A study done by Wharton Business School suggests that tax mitigation strategies could help avoid 90% of the proposed tax increases on capital gains.⁶

Bottom line, the proposed changes are concerning, especially with so many details left to be determined, but it’s not time to panic.

We’re paying close attention to the process and will be in touch if we feel changes to your strategies are needed.

Have questions? We’re always here. Just email us at yourteam@mmwealth.com or call us at (518) 499-4565.

¹https://www.bbc.com/news/business-56932023

²https://www.cnbc.com/2021/05/02/covid-gottlieb-says-cases-will-decline-vaccinations-monumental-achievement.html

³https://www.nytimes.com/interactive/2021/us/covid-19-vaccine-eligibility.html

⁴https://www.cnn.com/world/live-news/coronavirus-pandemic-vaccine-updates-05-03-21/h_a0cbff31cf1168c6b850625a05a195b7

⁵https://www.cnbc.com/2021/04/29/how-biden-tax-plan-would-hit-the-wealthy.html

⁶https://www.cbsnews.com/news/biden-capital-gains-tax-wealthy/

Chart source: https://www.cnn.com/business/us-economic-recovery-coronavirus (As of April 30, 2021)

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

The White Carnation

Written by Minich MacGregor Wealth Management on May 8, 2021. Posted in Uncategorized.

As you know, Mother’s Day is observed on the second Sunday in May in the U.S. as a day to honor mothers for their contributions to family and society. That includes grandmothers, great-grandmothers, and also women who serve in the role of mothers.

Have you ever wondered how Mother’s Day evolved? The idea originated from mainly two women, Julia Ward Howe and Anna Jarvis.

Julia Ward Howe was a preacher, a reformer, a writer, and a poet in Boston. From around 1870 to 1880 when Julia sponsored a Mother’s Day, she envisioned it as a day of solemn council. Her idea was that women all over the world would meet to discuss the ways to achieve world peace. She wanted them to meet as mothers keeping in mind the main duty of protecting their children.¹

Ann Jarvis, the mother of Anna Jarvis, cared for the wounded on both sides of the conflict during the Civil War. She desired to orchestrate peace between the Union and Confederate mothers by forming a Mother’s Friendship Day.

Anna Jarvis was just 12 in May of 1876 as she listened to her mother’s plea during a Sunday School lesson she was teaching about notable mothers—that someone would one day be the founder of “a memorial mother’s day commemorating motherhood for the matchless service they render to humanity in every field of life.” When Ann passed away in 1905, her daughter was devastated and decided to memorialize her mother by working towards this dream her mother had.

Anna’s campaign began in earnest during 1907 and continued over the next few years writing thousands of letters to prominent figures such as President Teddy Roosevelt, 1908 presidential hopeful William Jennings Bryan, Mark Twain, and former Postmaster General John Wanamaker, about proclaiming an official Mother’s Day.

The very first Mother’s Day Anna organized was at St. Andrew’s Methodist Church in West Virginia in 1908 where her mother had taught Sunday School. She urged sons and daughters to visit their mothers, or at least write a letter home for Mother’s Day. She further gave the counsel, “Live this day as your mother would have you live it.” Her diligence finally paid off, because Anna became the official founder of Mother’s Day in 1948.²

Anna’s vision for Mother’s Day was mostly domestic and sentimental with the mother’s role within the home as the center. Anna declared the official flower of Mother’s Day to be the white carnation because it was her mother’s favorite flower. The carnations were to be worn by sons and daughters to honor their own mothers and to represent the purity of a mother’s love. But she noticed around 4 years after that first Mother’s Day that florists were raising the prices of carnations for Mother’s Day. As white carnations were selling out, florists began promoting the idea to wear red and bright colored flowers in honor of living mothers, and white flowers for deceased moms. Besides that, all kinds of other businesses were using the holiday for financial gain.^{2, 3}

Anna wanted to protect the purity of Mother’s Day to be a national holiday to honor overworked and under-appreciated mothers. She eventually rescinded the carnation as the official emblem in protest. Because she never tried to profit financially from the holiday she founded, she became devoted for 40 years to fight the commercialism that she felt had changed the day. She wanted Mother’s Day “to be a day of sentiment, not profit.” She felt that commercialism was destroying Mother’s Day.³

However, the much-loved tradition of giving Mother’s Day gifts, cards, and flowers did not go away and in fact has grown in popularity through the years. No matter how you plan on celebrating Mother’s Day this year, remember that your expression of love to the mothers in your life, especially your own Mother, is the most important thing you can do of all.

Happy Mother’s Day!