Broker Check

December Newsletter


December 3, 2018


“Worriers’ Support Group”

Worriers take heart!  Today the markets around the world were in rally mode, posting large gains as US and Chinese representatives agreed to work toward a mutually beneficial resolution of the current trade conflicts.  This surge in the stock market follows news last week that moved the markets in positive territory even more dramatically when the Fed hinted that interest rate hikes will slow. Fed Chair, Jerome Powell, appeared to signal that the central bank may be nearing an end to interest rate increases.  In addition to these two market driving events, there is the story concerning oil. 

Oil prices, as an economic signal, may have been misinterpreted over the past few years.   Falling oil prices are not as reliable of an economic signal as they have been in the past. Not all price movements can be attributed to demand as this would ignore the supply side of the story. Worldwide demand remains relatively strong.  Now that the US is one of the largest oil consumers and one of the largest producers of oil (since the shale boom), our production is now driving prices lower.  An abrupt decline in oil prices can create huge savings for consumers and businesses; however, there are adverse effects as well.  Lower prices threaten to wipe out jobs in a high wage industry.

As we head into the final month of 2018, we expect there will be continued market volatility due to a variety of uncertainties.  This year has been a roller coaster ride with some challenging equity returns, especially in the international and global allocation categories.  The alternative equity category is up over six percent for the twelve-month period ended November 30, 2018.  Our domestic portfolio shows a modest one percent gain over that same period.  When the US markets have been up this year, the rise has been due to just five or six technology related stocks representing most of the equity market gains. The larger story is that most stocks have been in negative territory throughout much of this year, which would be more concerning if our portfolio were only positioned to capture growth. The good news is that the portfolio continues to generate significant cash flows which exceed seventy-five percent of the temporary value declines we have seen over the past year.

We need to remember that the portfolio is designed to moderate risk and achieve long-term objectives, which are crucial to success; worrying about short term fluctuations takes away from the “big picture” view.  We only need to look back at the twelve-month period ended November 30, 2017, to realize that markets go through cycles.  Remember our domestic portfolio was up twenty-eight percent and the international portfolio was up over thirty-one percent for that same twelve-month period.  All equity categories combined, advanced on average twenty-two percent.  The total globally diversified portfolio of equities and income allocations was up thirteen and one-half percent for that one-year period.   

It is time, once again to give some thought as to how your income tax liabilities and future retirement security will be impacted by decisions made before year-end. Remember, once these opportunities are gone, they’re gone! Please contact us and your tax professionals to discuss any of the following:

  • If you have a Traditional IRA, it may make sense to convert a portion to a Roth IRA before year-end. Yes, you must pay the tax to do so, but the future benefits can far outweigh the short-term cost.
  • If you have not already done so, please consider making contributions to all, or some, of the tax-advantaged accounts available to you. Clients should give thought to fully funding their Health Savings Accounts (HSAs) and their Roth IRAs as the future benefits can be enormous!
  • If you participate in a company retirement plan (Simple Plan, 401k, or other qualified plan) with a matching contribution you should, at a minimum, contribute enough to the plan to get the “free matching funds”. Contributions from your pay will be tax-deferred.
  • If you have accumulated 2018 capital gains in your taxable account (including estimated capital gains dividends) you may want us to “harvest” some year-end tax losses; please talk this over with your tax advisor as we never want the “tax tail to wag the investment dog!” Please also keep in mind that all dividends and capital gains are tax-advantaged over ordinary types of income.
  • If you want us to provide you or your tax advisor with some year-to-date income and capital gains information for your taxable accounts, please contact us soon so that we can provide the information we have available.

The deadline for Roth conversion forms to be submitted to TD Ameritrade is December 21.  Roth IRAs can be the most efficient type of investment account for long-term retirement planning.  One of the biggest advantages is that the assets grow tax-free if the account is open for five years and you are at least 59 ½ before you begin taking any withdrawals.  There are no required minimum distributions and you can leave money to your heirs tax-free.  There are no age restrictions for contributions, so you can continue to contribute if you have earned income.  A Roth account should generally be the last account you take distributions from to meet your needs in retirement as it continues to grow tax-free forever.

This holiday season, Intelligent Investment Management, LLP will make donations on behalf of all our clients to the following non-profit, local organizations:  The Boys and Girls Club of La Plata County, La Plata Open Space Conservancy, Habitat for Humanity for La Plata County, Project Merry Christmas, Southwest Colorado Volunteers of America and Stillwater Music. Stillwater Music has a concert on Sunday, December 16 called Winter Wonder Bands.  This event highlights all their youth bands and really illustrates how valuable this music program is to the aspiring musicians in our area. We have free tickets for the first lucky clients who contact the office.  

It looks like we may have a white Christmas in the Four Corners this year.  We wish you fun skiing and snowboarding, warm gatherings around the fire and special time spent with family and friends.  Holiday greetings from all of us at Intelligent Investment Management! 


Intelligent Investment Management, LLP