Quote of the Week

“Motivation is what gets you started. Habit is what keeps you going.” – Jim Rohn

Tech Corner

Last week all the major indexes were down slightly. What we are now seeing is a rotation from value investing back towards growth investing. We have been in a value cycle for the last five weeks or so as the S&P 500 and the Dow have outperformed the Nasdaq. Fortunately for us, since we have had a growth bias, our model had a positive week last week.

We are still solidly in Quad II which is growth increasing and inflation increasing. We have exposure to growth and commodities. So far this week, we are in positive territory.

While looking at my emails this morning, I saw an interesting email from the Committee for a Responsible Federal Budget. The email says that the Biden administration will soon introduce a proposal to reduce the tax gap, which is the difference between taxes paid and taxes owed. In other words, this is the money that taxpayers cheat on their taxes.

The plan would provide the IRS with $80 billion to improve tax compliance and include other reforms such as increased information reporting. For way too long, the Federal government has starved the IRS collection arm by cutting auditors and not updating their computer systems. I have read an estimate that for every dollar spent on taxpayer auditing, the IRS collects 8 dollars. Plus, if cheaters know that the IRS is looking for them, they would tend to be much less likely to cheat on their taxes.

If the federal government were to collect all of the taxes owed, we might not be having the battles in Congress to raising taxes.

The plan would provide the IRS with $80 billion to improve tax compliance. The administration estimates their proposal will raise roughly $700 billion on a net basis.

This is a statement from Maya MacGuineas, president of the committee for a Responsible Federal Budget:

Whether you support tax increase or tax cuts, everyone should agree that taxpayers ought to pay what they owe under the law. The federal government loses over $500 billion a year in unpaid taxes, perhaps way more, and it’s long past time to strengthen the integrity of our tax code.

If you pay your taxes according to the rules and your neighbor cheats, that indirectly comes out of your pocket.

Tom’s Thoughts

Being incapacitated is not a pleasant subject but it is one that all of us must face eventually.  The following article from Broadridge is a good summary of what can be done to cope with incapacitation if and when it happens.

Facing the Possibility of Incapacity

Incapacity means that you are either mentally or physically unable to take care of yourself or your day-to-day affairs. Incapacity can result from serious physical injury, mental or physical illness, advancing age, and alcohol or drug abuse.

Incapacity can strike anyone at anytime

Even with today’s medical miracles, it’s a real possibility that you or your spouse could become incapable of handling your own medical or financial affairs. A serious illness or accident can happen suddenly at any age. Advancing age can bring senility, Alzheimer’s disease, or other ailments that affect your ability to make sound decisions about your health, or to pay your bills, write checks, make deposits, sell assets, or otherwise conduct your affairs.

Planning ahead can ensure that your wishes are carried out

Designating one or more individuals to act on your behalf can help ensure that your wishes are carried out if you become incapacitated. Otherwise, a relative or friend must ask the court to appoint a guardian for you, a public procedure that can be emotionally draining, time consuming, and expensive. An attorney can help you prepare legal documents that will give individuals you trust the authority to manage your affairs.

Managing medical decisions with a living will, durable power of attorney for health care, or Do Not Resuscitate order

If you do not authorize someone to make medical decisions for you, medical care providers must prolong your life using artificial means, if necessary. With today’s modern technology, physicians can sustain you for days and weeks (if not months or even years). If you wish to avoid this, you must have an advance medical directive. You may find that one, two, or all three types of advance medical directives are necessary to carry out all of your wishes for medical treatment  (make sure all documents   are consistent).

A living will allows you to approve or decline certain types of medical care, even if you will die as a result of the choice. However, in most states, living wills take effect only under certain circumstances, such as terminal injury or illness. Generally, one can be used only to decline medical treatment that “serves only to postpone the moment of death.” Even in states that do not allow living wills, you might want to have one anyway to serve as evidence of your wishes.

A durable power of attorney for health care (known as a health-care proxy in some states) allows you to appoint a representative to make medical decisions for you. You decide how much power your representative will have.

A Do Not Resuscitate order (DNR) is a doctor’s order that tells all other medical personnel not to perform CPR if you go into cardiac arrest. There are two types of DNRs. One is effective only while you are hospitalized. The other is used while you are outside the hospital.

Managing your property with a living trust, durable power of attorney, or joint ownership

Consider putting in place at least one of the following options to help protect your property in the event you become incapacitated.

You can transfer ownership of your property to a revocable living trust. You name yourself as trustee and retain complete control over your affairs as long as you retain capacity. If you become incapacitated, your successor trustee (the person you named to run the trust if you can’t) automatically steps in and takes over the management of your property. A living trust can survive your death, but it can be expensive to maintain and administer.

A durable power of attorney (DPOA) allows you to authorize someone else to act on your behalf. There are two types of DPOAs: an immediate DPOA, which is effective immediately, and a springing DPOA, which is not effective until you have become incapacitated. A DPOA should be fairly simple and inexpensive to implement. It also ends at your death. A springing DPOA is not permitted in some states, so you’ll want to check with an attorney.

Another option is to hold your property in concert with others. This arrangement may allow someone else to have immediate access to the property and to use it to meet your needs. Joint ownership is simple and inexpensive to implement. However, there are some disadvantages to the joint ownership arrangement. Some examples include (1) your co-owner has immediate access to your property, (2) you lack the ability to direct the co-owner to use the property for your benefit, (3) naming someone who is not your spouse as co-owner may trigger gift tax consequences, and (4) if you die before the other joint owner(s), your property interests will pass to the other owner(s) without regard to your own intentions, which may be different.

Copyright 2021 Broadridge Investor Communication Solutions, Inc

 If you have friends or family in need of financial life planning services,

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These are Larry Lof’s opinions and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.

The S&P 500 is an index of stocks compiled by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. The Index includes a representative sample of 500 leading companies in leading industries of the US economy. Indices mentioned are unmanaged and cannot be invested into directly.

Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price, or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain. The allocation discussed herein is not designed based on the individual needs of any one specific client or investor. In other words, it is not a customized strategy designed on the specific financial circumstances of the client. Please consult an advisor to discuss your individual situation before making any investments decision. Investing in securities involves risk of loss. Further, depending on the different types of investments, there may be varying degrees of risk including loss of original principal.

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