From the Desk of Joe Rollins
No two ways about it - the third quarter of 2024 was an excellent quarter. As was the year ended September 30th, when all major indexes enjoyed double digit returns. Given all the strife currently in the world, it is hard to believe that the U.S. economy continues to remain resilient.
I have many items to discuss in this posting, including the progress in the U.S. economy and where we stand today. Also, I have written often about generational wealth, but it seems to be misunderstood by some people, so I want to further explain what I mean by it. I want to also explain why the markets are more stable than before due to increased participation and the amount of money flowing into it both daily and weekly. It would not be a normal posting if I did not discuss the inefficiencies of the government, and I will give you two examples of such. When discussing the government, I often mention President Ronald Reagan and his famous quote, “The most terrifying words in the English language are I’m from the government, and I’m here to help.”
Before commenting on those interesting items, I must discuss the excellent quarter we just ended. The Standard and Poor’s Index of 500 stocks was up 2.1% in September and was up 5.9% in the third quarter of 2024. Year-to-date, that Index is up 22.1%. The NASDAQ Composite was up 2.7% during September and up 2.7% for the quarter ended September 30th. For the year 2024, that Index is up 21.8% at the end of the quarter. The Dow Jones Industrial Average was up 2% in September and up 8.7% for the third quarter of 2024. That Index is up 13.9% for the year 2024 so far. It is clear from reading these Indexes that the market rally is broadening away from tech into more of the traditional blue chip type stocks. The fact that the Dow Jones Industrial Average outperformed all other major Indices except the small-cap index in the third quarter is telling. I do not believe for a minute that the rally in tech is over, but it is certainly welcoming to see other stocks participate.
Due to falling interest rates, the Bloomberg Barclays Aggregate Bond Index was up 1.4% in September, and up 5.2% for the quarter that ended on September 30th. Year-to-date, in 2024, that Index is up 4.6%, a significant turnaround for performance in bonds. It is remarkable that for the one-year period, the Bond Index is up 11.5%, which is an excellent return, but pales in comparison to the S&P 500 Index, which for the one-year period is up 36.4%. Just so you are not disillusioned and misled by the Bond Index's strong performance, the 15-year return on the Bond Index is 1.4% over the last 15 years compared to the S&P 500 Index, which has returned 14.1%. Therefore, it could easily be said that the S&P 500 Index has performed ten times better than the S&P 500 Bond Index over the last 15 years.
There is new evidence that the “Goldilocks” economy continues to flourish in the United States. Last Friday, the Labor Department announced that there were 254,000 new jobs created during September. That far exceeded any estimate by so-called economists for the month. Even more importantly, they reported 72,000 more jobs than previously reported in July and August, making those months very similar in employment to the strong month of September. Also, they announced that the unemployment rate had dropped to 4.1% at the end of September. All of this is very important since the economy is very dependent on people working, and the fact that employment picked up in September is a very positive sign.
We continue to be in a strange time when it comes to unemployment. As of last Friday, it was announced that there were 8 million jobs available and, in the U.S., there are 6.8 million unemployed. You may recall in my postings that I have previously pointed out that there are two jobs for every other unemployed person in the U.S. That is falling to just over one job but is still extraordinarily strong. Employment in the U.S. could be next to zero if people really wanted a job and were willing to relocate.
As the news on the economy continues to be lackluster, which is a good thing, it was finally announced that the second quarter of 2024 had a GDP growth of 3%, which is excellent. Not too strong, not too cool. The Atlanta Federal Reserve has forecasted that the GDP growth in the fourth quarter of 2024 will be 2.5%. I need to emphasize again that these are the types of numbers we want. We do not want GDP growth to be too low or too high. It needs to be somewhere in the 2.5% range to not create economic imbalances. We want growth, but we want controlled growth. We do not want to make the same mistakes we made previously when trying to create growth by printing money and creating inflation.
There has been a lot of conversation in the financial media about why the U.S. went through such high inflation growth in 2022. You may recall that during COVID, the administration put through numerous spending plans to stimulate the economy. One of those plans was to dump $1.9 trillion into the economy through payments to individuals and favorite political supporters. The only way the government could have created this $1.9 trillion in aid was to print that money. When you print money, basically, you are creating dollars from nothing.
That means more dollars are in circulation seeking the same goods and services. There is no question that this one act contributed mainly to the advent of inflation in 2022 and 2023. No actions by the government are immune to creating problems in the overall economy. If you think inflation has not set in for the long term, just look at this fact. The average price of a new vehicle in the U.S. in September was down 3% from 2023, which is certainly good news. However, the average price of a new vehicle in the United States is up a mind-blowing 29% from 2019. This is a good example for those who think inflation has not impacted on almost anything we purchase.
While the U.S. is enjoying a nice economy at the current time, the rest of the world has not been so lucky. It is particularly true that Europe is slow and has many problems keeping their economy above negative. Also, as we all know, China has suffered serious economic declines and recently provided huge stimulus to jump-start its economy again. View this fact if you want to know exactly how far China has gone to stimulate its economy and use public works to support it. It is estimated that there are 90 million unused but finished empty housing units in China at the current time. As you know, China has built entire cities to keep people busy and not unemployed. However, they have no one who can occupy these units or afford them. It is estimated that these 90 million unused housing units in China could house 270 million people. If you do not believe that China’s problems are severe, you truly do not understand the economics of the government creating jobs for people to create certain products and services that are not needed.
Almost daily, I get the question of what happens when China invades Taiwan against the U.S.’s desire. Roughly 70% of China’s exports make their way to the U.S. one way or another. If China were to invade Taiwan, which is a staunch supporter of the United States, the U.S. would create sanctions on Chinese exports that would essentially destroy their economy. I do not believe for a second that China would be so stupid as to create this self-inflicted wound over the small island of Taiwan.
For the last several postings, I have talked about the flowing down of wealth to future generations. I explained how this is currently occurring in a way unlike anything we’ve ever experienced before. We are seeing daily the transfer of wealth passed down from our generation to the younger generation, which will significantly change how the new generation consumes and retires. As I have pointed out, this is a very good thing if it is controlled, and the younger generation gets good advice. However, I did have some clients raise objections and want to know if I was asking them to do without so that the younger generation could inherit more. Basically, must I suffer so that my children benefit? That is not what I am proposing.
I suggest that if properly invested, almost everyone can create wealth beyond their spending ability. I had one client say to me the other day, “I have been frugal for 50 years of my life; I cannot just change overnight.” And I agree with that philosophy, but you should also spend your money. I am suggesting that there is plenty for you to enjoy retirement and yet pass money along to the next generation. You cannot imagine the benefits of starting a young couple off with a nest egg that they never would have had if not given to them by you.
There are many changes regarding retirement. I see it in our business now, where young people come in and sign up for the 401(k) plan immediately. If there is any resistance to the 401(k) plan, it is by the older generation, not the younger one. They understand that if you begin saving early, you can accumulate wealth for retirement, and even a small contribution today saved for 40 years would be substantial in the future.
You would be surprised how often I hear middle-aged clients complain about how much they contribute to their 401(k). The standard answer I get is they either contribute 4% or 5% based on whatever level their employer matches. It is hard for me to imagine that people could be so naïve. The beauty of a 401(k) is that you can contribute money on a tax-deferred basis, yet you still get to keep the money. Of course, that money is taxable in the future, but it is taxable at the tax rates in the future, which may or may not be as high as the ones today. If you do a time value analysis of those future taxes, you will see that they are minor compared to not contributing to the 401(k) plan and paying the taxes now.
Parents also miss the golden opportunity to create Roth accounts for their children. Creating a Roth account for them is the way to go if you have a child who earns a few thousand dollars in a summer position. Think about the growth that would happen if you contributed $3,000 for an 18-year-old, and they do not touch that money until retirement at age 65. The growth would be exponential, as compared to the initial investment. Parents can teach them the value of investing by starting them early and helping them learn the benefits of future growth.
I see the issue related to 529 educational accounts almost daily. President Obama wanted to curb 529 accounts and focus on the American Opportunity Credit because 529 accounts primarily benefitted those higher on the income scale. I counter to indicate that 529s should be used by everyone, not just the rich. The benefit of accumulating money for future education on a tax-exempt basis is just too good to pass up. Both parents and grandparents should begin contributing to a 529 educational plan at the baby's birth. If you allow money to build up for 18 years tax-exempt, maybe you can alleviate the extraordinarily outrageous cost of college.
The point I am trying to make here is that there are billions of dollars flowing into investments on a daily and weekly basis from all these sources. People are contributing to their 401(k) plans, IRAs, and 529 accounts on a weekly or monthly basis. These billions of dollars flowing into the marketplace increase the opportunity for those stocks. Never in the history of American finance has such a flow of money been available for future appreciation of stocks and bonds.
I thought I would give you a history of investing to illustrate my point. I was around when the first IRA was put into effect in 1974. Virtually everyone viewed it as a skeptical device because many people believed that it was just a scheme by the government to confiscate money from you. It took many years before a significant number of people actually used the IRA.
If you do not believe that IRAs have become successful, all you have to do is look at the amount of money invested in our IRAs today. At the end of the second quarter of 2024, it is estimated that $14.5 trillion was currently invested in IRA accounts. It is also estimated that total retirement assets today are roughly $40 trillion. When you think about the future generation, generational wealth passed down to them is $40 trillion, which will flow down for generations to come. It is not a one-year or two-year flow down. This $40 trillion will be felt for the next decade and passed down to multiple generations in the future. This has never happened in U.S. finance, and it will change everything we know about generational wealth going forward. Do you realize that $6 trillion of cash is now in money market accounts waiting to be invested?
The biggest change in investing and retirement came in 1981 when the IRS proposed the formal rule for a 401(k) plan. I was practicing then, and the skepticism and the adoption of the 401(k) plan was slow. Once again, people did not view it as a viable retirement plan. Prior to that time, the standard retirement vehicle was a Defined Benefit Plan. In a Defined Benefit Plan, money is paid to you in retirement for your lifetime and maybe for the lifetime of your spouse. But when your spouse dies, all that money evaporates. There was no money to pass along to your heirs.
The 401(k) changed that concept. The 401(k) would allow you to contribute to the plan during your lifetime and draw on it in your retirement. But if you died prematurely, this entire amount would flow to the second generation, being your children or grandchildren. So, as the 401(k) plans became popular in 1983, 7.1 million employees participated in a 401(k) plan. But that number grew to 38.9 million in 1993. Suppose you want to know the buying power of 401(k) plans today, in 2019. In that case, it is estimated that 80 million people, or basically one out of every two employed people in the United States, benefit from a 401(k). Currently, $5.7 trillion in assets are contained in those 401(k) plans. As you can see, the growth of these plans has substantially made available new money daily, buying stocks and bonds and supporting the market.
I get many questions about the new election's effect on the U.S. stock market. My answer generally is that it will have little or no long-term impact on the market. You may get a whiplash sell-off or a buy-in opportunity at the election, but it will be short-lived. As illustrated above, the flow of money into the market will stabilize, and over time, this election will have absolutely no effect on long-term results. It is true that the two competing partners for the presidency represent entirely different ideologies and different economic goals. They could not be any further from each other. However, the effect of the market will be minimal and will last only a short period of time before it stabilizes. The thought of trying to cash out before the election and buy back afterward would be deemed to be “market timing,” and we all know that market timing is impossible.
As mentioned, regardless of the outcome I do not anticipate any major long-lasting effect on the market, although both candidates have floated tax trade and spending ideas that I find populist and sometimes bordering on the ridiculous. Both candidates propose cutting taxes, which is alarming, given the huge deficits that the government is running today. There was substantial support for running up deficits during the pandemic a few years ago, but there is no economic justification for deficits today.
Interestingly, neither candidate has even broached the subject of less spending by the government. I would be a true advocate for any candidate who would reduce the size of government and reduce spending. We do not need higher taxes. The deficit this year is $1.8 Trillion. What I think we need is a smaller government. Suppose you can even imagine that the number of people on the government payroll has reached over 23 million Americans now. Roughly 15% of every employee in the United States is employed by the U.S. government. I am sure those numbers go up exponentially for people not employed by the government but supported by the government. I cannot even imagine what 23 million people do that is beneficial for the country.
The federal government just finished its fiscal year, which ended September 30, 2024, and financially it was a total disaster. The deficit for this fiscal year ended at $1.83 trillion. Believe it or not, that is 13% larger deficit than the previous Biden year. What is baffling to virtually everyone is that a considerable amount of this deficit was created when there was no pandemic, financial crisis, or major war involving large U.S. forces. This is an excellent example of the government running amok.
You would be wrong if you think this deficit was due to a lack of tax revenue. Tax revenue actually increased by 11% this fiscal year to $479 billion in virtually every tax category. Individual income taxes were up 11%, and corporate income taxes were up a stunning 26%. But even though tax revenue was up close to half a trillion dollars, the government figured out a way to spend that money and substantially more. The total tally of expenditures by the U.S. government went up 11% from the previous year. Therefore, they spent $699 billion more than the last year for total spending this fiscal year of $6.75 trillion. The sad part of the previous two paragraphs is that neither candidate running for the current office of president has offered any solution to government spending, which is quite unfortunate for us all.
I would love a President who would go in and say it is time to balance the budget; therefore, we must reduce the size of employment in the government. Some of you were not even around when government budgets were in a surplus condition. As recently as President Bill Clinton's administration, there was actually a surplus in the budget. Unlike the multiple trillion-dollar deficits we have today, the government budget was actually in balance. Do I believe that governmental deficits are a long-term harm to the economy? Of course I do. Do I think it is devastating? No, that would not be the case.
Any time you have a government that can print its own money, deficits will never be of concern. However, when printing your own money, you will, by nature, create inflation, and inflation is a hidden tax on us all. While I find the upcoming election interesting, I think the effect on the stock market, whoever wins, will be minimal and I think the government will continue to govern even against our wishes in the future.
However, at some point, some governments are going to have to figure out a way to spend only the money they earn and create less government rather than more. At a deficit of $1.8 trillion this year, I feel as though they are not even trying.
I thought I would give you a couple examples of the inefficiencies of government and how destructive their inefficiencies can be. You may remember that in 2021, the Biden administration passed an infrastructure law for $42.5 billion to expand broadband to underserved, mostly rural communities. Who could have disagreed with this policy? The idea of providing broadband internet to underserved communities can be a tremendous benefit for young kids and for businesses. It could create new jobs, educate children, and accelerate the abilities of these communities to expand and grow. What a wonderful concept that virtually everyone could have supported.
Here we are three years later, in 2024, and you know how many contracts have been made regarding this wonderful service. As of this time, not a single project is underway. It seems that once the government got involved, they put into the contracts a lot of administrative garbage that kept the project from being built. It had to follow Federal labor and employment laws, and many other types of restrictions. This kept people from wanting to work on these projects. Further, they insisted upon this rollout being in fiber broadband cable. As you know from looking at your own community, running fiber cable is expensive and inefficient. Running it to rural areas is almost impossible and very expensive. For less than one-third of the allocated budget, they could have installed Starlink and other wireless carriers that could expand the coverage at a lower cost. Basically, for less than $15 billion, the entire United States could be covered by satellites providing internet access, but three years later, the government plan did not provide any access.
But, if you want a further example, think about the famous 2021 program to build an electric vehicle charging network throughout the United States. In 2021, the government passed a law that would allow EV charging networks to be built throughout the United States at a cost of $7.5 billion. Certainly, if you were going to mandate further EV promotional ideas, you would need more charging stations. Basically, the inability to charge has slowed the growth of EV cars. Only Tesla has a nationwide charging network. Even major car companies now rely on Tesla charging stations to create charging opportunities.
However, everyone rejoiced when the government decided to provide funding to build charging stations throughout the United States in 2021. Here we are three years later, and exactly eight stations have been constructed in six states. The reason more stations have not been built is due to the government's interference in building these stations and the restrictions they put upon them. If, instead of directly overseeing the construction of these charging stations, they turned the money over to private industry to build them, most of the network would be finished by now. These are just two examples of the inefficiencies and everything the government does. The private sector could do all these projects cheaper, faster, and without governmental interference in their completion. In my opinion, the only thing this government does well is the military, and that is only because there is no private sector.
In conclusion, I want to give you the best estate planning advice of all time. Estate planning is going to become particularly important over the next few years. Currently, the estate exclusion is roughly $13.6 million per person. Therefore, a married couple could exclude estate problems worth $27.2 million. After 2025 this exclusion is scheduled to expire and be reduced to $7 million. Therefore, a couple could exclude only $14 million compared to $27 million, a major reduction if Congress doesn’t act.
Everyone should consider estate issues regarding the growth of their assets. Over the last few years, the value of real estate has increased significantly, and of course, the value of your financial assets continues to grow. Many people are now having estate issues that were never there before. If you are not doing gifts of 529 accounts and funding the Roth IRAs of your children, you should be. If you wait to deal with your estate issues in the last years of your life, you may find out there are not enough years left to satisfy and get you below the exemption.
I talk to clients every day about gifting money now to their children. Please reference my comments on generational wealth and helping your heirs today rather than waiting until you die. Make their life a little easier and not affect your own. It seems so simple to me, yet getting clients to give up assets to children is so hard. While it may be hard, I am going to keep trying.
Often, I am asked for the best estate planning. The simple answer is a quite simple plan of action by you. On the day you die, you write a check for the exact amount of all the assets you have left… and it bounces!
As always, the foregoing includes my opinions, assumptions, and forecasts. It is perfectly possible that I am wrong.
Best Regards,
Joe Rollins
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| Rollins & Associates “working 9-5” back in the Fall of 1988 |
I have many items to discuss in this posting, including the progress in the U.S. economy and where we stand today. Also, I have written often about generational wealth, but it seems to be misunderstood by some people, so I want to further explain what I mean by it. I want to also explain why the markets are more stable than before due to increased participation and the amount of money flowing into it both daily and weekly. It would not be a normal posting if I did not discuss the inefficiencies of the government, and I will give you two examples of such. When discussing the government, I often mention President Ronald Reagan and his famous quote, “The most terrifying words in the English language are I’m from the government, and I’m here to help.”
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| Say Cheese! Long-time friends and clients Fred and Janet Bland came by the office to visit! |
Due to falling interest rates, the Bloomberg Barclays Aggregate Bond Index was up 1.4% in September, and up 5.2% for the quarter that ended on September 30th. Year-to-date, in 2024, that Index is up 4.6%, a significant turnaround for performance in bonds. It is remarkable that for the one-year period, the Bond Index is up 11.5%, which is an excellent return, but pales in comparison to the S&P 500 Index, which for the one-year period is up 36.4%. Just so you are not disillusioned and misled by the Bond Index's strong performance, the 15-year return on the Bond Index is 1.4% over the last 15 years compared to the S&P 500 Index, which has returned 14.1%. Therefore, it could easily be said that the S&P 500 Index has performed ten times better than the S&P 500 Bond Index over the last 15 years.
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| Barb + Mia celebrating their 25th on a Royal Caribbean Cruise |
We continue to be in a strange time when it comes to unemployment. As of last Friday, it was announced that there were 8 million jobs available and, in the U.S., there are 6.8 million unemployed. You may recall in my postings that I have previously pointed out that there are two jobs for every other unemployed person in the U.S. That is falling to just over one job but is still extraordinarily strong. Employment in the U.S. could be next to zero if people really wanted a job and were willing to relocate.
 |
| Guess who Reid and Caroline are rooting for? |
There has been a lot of conversation in the financial media about why the U.S. went through such high inflation growth in 2022. You may recall that during COVID, the administration put through numerous spending plans to stimulate the economy. One of those plans was to dump $1.9 trillion into the economy through payments to individuals and favorite political supporters. The only way the government could have created this $1.9 trillion in aid was to print that money. When you print money, basically, you are creating dollars from nothing.
 |
| Barb, Marti and Mia ready to cheer on “the A!” Better luck next year, Braves! |
While the U.S. is enjoying a nice economy at the current time, the rest of the world has not been so lucky. It is particularly true that Europe is slow and has many problems keeping their economy above negative. Also, as we all know, China has suffered serious economic declines and recently provided huge stimulus to jump-start its economy again. View this fact if you want to know exactly how far China has gone to stimulate its economy and use public works to support it. It is estimated that there are 90 million unused but finished empty housing units in China at the current time. As you know, China has built entire cities to keep people busy and not unemployed. However, they have no one who can occupy these units or afford them. It is estimated that these 90 million unused housing units in China could house 270 million people. If you do not believe that China’s problems are severe, you truly do not understand the economics of the government creating jobs for people to create certain products and services that are not needed.
 |
| For DeNay, no road trip is complete without a stop at Buc-ee’s |
For the last several postings, I have talked about the flowing down of wealth to future generations. I explained how this is currently occurring in a way unlike anything we’ve ever experienced before. We are seeing daily the transfer of wealth passed down from our generation to the younger generation, which will significantly change how the new generation consumes and retires. As I have pointed out, this is a very good thing if it is controlled, and the younger generation gets good advice. However, I did have some clients raise objections and want to know if I was asking them to do without so that the younger generation could inherit more. Basically, must I suffer so that my children benefit? That is not what I am proposing.
 |
| Megan feeling at one with the gaming community at DreamHack Atlanta (Georgia World Congress Center) |
There are many changes regarding retirement. I see it in our business now, where young people come in and sign up for the 401(k) plan immediately. If there is any resistance to the 401(k) plan, it is by the older generation, not the younger one. They understand that if you begin saving early, you can accumulate wealth for retirement, and even a small contribution today saved for 40 years would be substantial in the future.
 |
| One happy grandchild – Jim + Patty Radney’s pride + joy made it on Braves Vision! |
Parents also miss the golden opportunity to create Roth accounts for their children. Creating a Roth account for them is the way to go if you have a child who earns a few thousand dollars in a summer position. Think about the growth that would happen if you contributed $3,000 for an 18-year-old, and they do not touch that money until retirement at age 65. The growth would be exponential, as compared to the initial investment. Parents can teach them the value of investing by starting them early and helping them learn the benefits of future growth.
 |
| Mia and Sophia the Sloth in Roatán, Honduras – never letting go! |
The point I am trying to make here is that there are billions of dollars flowing into investments on a daily and weekly basis from all these sources. People are contributing to their 401(k) plans, IRAs, and 529 accounts on a weekly or monthly basis. These billions of dollars flowing into the marketplace increase the opportunity for those stocks. Never in the history of American finance has such a flow of money been available for future appreciation of stocks and bonds.
I thought I would give you a history of investing to illustrate my point. I was around when the first IRA was put into effect in 1974. Virtually everyone viewed it as a skeptical device because many people believed that it was just a scheme by the government to confiscate money from you. It took many years before a significant number of people actually used the IRA.
 |
| Watch out East Atlanta, Harper got her learner’s permit!! Happy belated 15th! |
The biggest change in investing and retirement came in 1981 when the IRS proposed the formal rule for a 401(k) plan. I was practicing then, and the skepticism and the adoption of the 401(k) plan was slow. Once again, people did not view it as a viable retirement plan. Prior to that time, the standard retirement vehicle was a Defined Benefit Plan. In a Defined Benefit Plan, money is paid to you in retirement for your lifetime and maybe for the lifetime of your spouse. But when your spouse dies, all that money evaporates. There was no money to pass along to your heirs.
The 401(k) changed that concept. The 401(k) would allow you to contribute to the plan during your lifetime and draw on it in your retirement. But if you died prematurely, this entire amount would flow to the second generation, being your children or grandchildren. So, as the 401(k) plans became popular in 1983, 7.1 million employees participated in a 401(k) plan. But that number grew to 38.9 million in 1993. Suppose you want to know the buying power of 401(k) plans today, in 2019. In that case, it is estimated that 80 million people, or basically one out of every two employed people in the United States, benefit from a 401(k). Currently, $5.7 trillion in assets are contained in those 401(k) plans. As you can see, the growth of these plans has substantially made available new money daily, buying stocks and bonds and supporting the market.
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| Mia and Barb enjoying a beautiful beach in Cozumel – rough life, ladies! |
As mentioned, regardless of the outcome I do not anticipate any major long-lasting effect on the market, although both candidates have floated tax trade and spending ideas that I find populist and sometimes bordering on the ridiculous. Both candidates propose cutting taxes, which is alarming, given the huge deficits that the government is running today. There was substantial support for running up deficits during the pandemic a few years ago, but there is no economic justification for deficits today.
Interestingly, neither candidate has even broached the subject of less spending by the government. I would be a true advocate for any candidate who would reduce the size of government and reduce spending. We do not need higher taxes. The deficit this year is $1.8 Trillion. What I think we need is a smaller government. Suppose you can even imagine that the number of people on the government payroll has reached over 23 million Americans now. Roughly 15% of every employee in the United States is employed by the U.S. government. I am sure those numbers go up exponentially for people not employed by the government but supported by the government. I cannot even imagine what 23 million people do that is beneficial for the country.
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| Freddie Falcon found some adorable sports fans at Lymphoma + Leukemia Society’s Light the Night |
You would be wrong if you think this deficit was due to a lack of tax revenue. Tax revenue actually increased by 11% this fiscal year to $479 billion in virtually every tax category. Individual income taxes were up 11%, and corporate income taxes were up a stunning 26%. But even though tax revenue was up close to half a trillion dollars, the government figured out a way to spend that money and substantially more. The total tally of expenditures by the U.S. government went up 11% from the previous year. Therefore, they spent $699 billion more than the last year for total spending this fiscal year of $6.75 trillion. The sad part of the previous two paragraphs is that neither candidate running for the current office of president has offered any solution to government spending, which is quite unfortunate for us all.
I would love a President who would go in and say it is time to balance the budget; therefore, we must reduce the size of employment in the government. Some of you were not even around when government budgets were in a surplus condition. As recently as President Bill Clinton's administration, there was actually a surplus in the budget. Unlike the multiple trillion-dollar deficits we have today, the government budget was actually in balance. Do I believe that governmental deficits are a long-term harm to the economy? Of course I do. Do I think it is devastating? No, that would not be the case.
Any time you have a government that can print its own money, deficits will never be of concern. However, when printing your own money, you will, by nature, create inflation, and inflation is a hidden tax on us all. While I find the upcoming election interesting, I think the effect on the stock market, whoever wins, will be minimal and I think the government will continue to govern even against our wishes in the future.
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| Some cute Marti + Mom time at the Melissa Etheridge + Jewel concert (Sweetland Amphitheatre) |
I thought I would give you a couple examples of the inefficiencies of government and how destructive their inefficiencies can be. You may remember that in 2021, the Biden administration passed an infrastructure law for $42.5 billion to expand broadband to underserved, mostly rural communities. Who could have disagreed with this policy? The idea of providing broadband internet to underserved communities can be a tremendous benefit for young kids and for businesses. It could create new jobs, educate children, and accelerate the abilities of these communities to expand and grow. What a wonderful concept that virtually everyone could have supported.
Here we are three years later, in 2024, and you know how many contracts have been made regarding this wonderful service. As of this time, not a single project is underway. It seems that once the government got involved, they put into the contracts a lot of administrative garbage that kept the project from being built. It had to follow Federal labor and employment laws, and many other types of restrictions. This kept people from wanting to work on these projects. Further, they insisted upon this rollout being in fiber broadband cable. As you know from looking at your own community, running fiber cable is expensive and inefficient. Running it to rural areas is almost impossible and very expensive. For less than one-third of the allocated budget, they could have installed Starlink and other wireless carriers that could expand the coverage at a lower cost. Basically, for less than $15 billion, the entire United States could be covered by satellites providing internet access, but three years later, the government plan did not provide any access.
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| You’re never too old to learn something new! Cameron joined the football team post mid-season of his senior year – good luck, kid! |
However, everyone rejoiced when the government decided to provide funding to build charging stations throughout the United States in 2021. Here we are three years later, and exactly eight stations have been constructed in six states. The reason more stations have not been built is due to the government's interference in building these stations and the restrictions they put upon them. If, instead of directly overseeing the construction of these charging stations, they turned the money over to private industry to build them, most of the network would be finished by now. These are just two examples of the inefficiencies and everything the government does. The private sector could do all these projects cheaper, faster, and without governmental interference in their completion. In my opinion, the only thing this government does well is the military, and that is only because there is no private sector.
In conclusion, I want to give you the best estate planning advice of all time. Estate planning is going to become particularly important over the next few years. Currently, the estate exclusion is roughly $13.6 million per person. Therefore, a married couple could exclude estate problems worth $27.2 million. After 2025 this exclusion is scheduled to expire and be reduced to $7 million. Therefore, a couple could exclude only $14 million compared to $27 million, a major reduction if Congress doesn’t act.
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| Nadine + Steve Hooks enjoying retirement! Fun fact, Nadine is a former Rollins’ employee and is pictured along with Joe at the top of the blog |
I talk to clients every day about gifting money now to their children. Please reference my comments on generational wealth and helping your heirs today rather than waiting until you die. Make their life a little easier and not affect your own. It seems so simple to me, yet getting clients to give up assets to children is so hard. While it may be hard, I am going to keep trying.
Often, I am asked for the best estate planning. The simple answer is a quite simple plan of action by you. On the day you die, you write a check for the exact amount of all the assets you have left… and it bounces!
As always, the foregoing includes my opinions, assumptions, and forecasts. It is perfectly possible that I am wrong.
Best Regards,
Joe Rollins
All investments carry a risk of loss, including the possible loss of principal. There is no assurance that any investment will be profitable.
This commentary contains forward-looking statements, which are provided to allow clients and potential clients the opportunity to understand our beliefs and opinions in respect of the future. These statements are not guarantees, and undue reliance should not be placed on them. Forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual results in future periods to differ materially from our expectations. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements.
