MLK Would Have Loved Finland

We hope everyone enjoyed the Martin Luther King, Jr. holiday on Monday. We hope you spent at least a few minutes thinking of Dr. King and his legacy. His stirring words and writings remain as relevant today as they were 50 years when he was alive. I am always moved by his comments, particularly on equality, such as:

  • “We may have all come on different ships, but we’re in the same boat now,”
  • “We must learn to live together as brothers or perish together as fools,”
  • “The time is always right to do what is right,” and
  • “In some not too distant tomorrow the radiant stars of love and brotherhood will shine over our great nation with all their scintillating beauty.”

As I thought about these quotes, it made me think of Finland, recently deemed a “Capitalist Paradise” by the NYT and lauded by the Economist for slashing homelessness while the rest of Europe is “failing.”

As many of you know, my maternal grandmother was Finnish and Elise and I spent a wonderful homecoming in Finland this past summer, meeting relatives and experiencing life first-hand in Finland. Dr. King certainly would have loved a country like Finland that provides a real-life example of a system that works to provide equality and happiness to all.

Finland hasn’t been operating independently all that long. Located between Sweden and Russia, Finland was under Swedish rule from 1250-1809. In 1809 it became a Grand Duchy in the Russian Empire until it declared its independence in 1917. In 1918, Finland experienced the Finnish Civil War; the “whites” were primarily Swedish descendants who were anti-socialists and the “reds” who supported Russian socialism. The whites won and established a republic. World War II saw Finland under attack from Russia and ultimately joining forces with Germany.

After WW II, Finland did not want to become a socialist country. Its capitalists cooperated with government to map out long-term strategies and discussed these plans with unions to get workers on board. Finnish capitalists realized that it would be in their best interests to accept progressive tax hikes. The taxes would help pay for new governmental programs to keep workers and their families healthy, educated and productive. Fast forward to today, the capitalists are still paying higher taxes and outsourcing to the government the responsibility of keeping workers healthy and educated.

The NYT article “A Capitalist Paradise” was authored by a couple who moved from Brooklyn to Helsinki two years ago. Both are US citizens, experienced professionals and enjoyed a privileged life in the States. However, they were both independent consultants with uneven access to health insurance, and major concerns about funding for day-care, and education, including college. What may come as a surprise to some, is that they have experienced since the move an increase in personal freedom.

In Finland, everyone is covered by taxpayer-funded universal health-care that “equals coverage in the U.S. but without piles of confusing paperwork or haggling over huge bills.”   Their child attends a “fabulous, highly professional and ethnically diverse” public day-care that costs about $300 per month. If they stay in Finland, their daughter will attend one of the world’s best K-12 education systems at no cost to them, regardless of the neighborhood they live in. College would also be tuition free.

Many Americans may consider the Finnish system strange, dysfunctional or authoritarian, but Finnish citizens report extraordinarily high levels of life satisfaction. The World Happiness Report announced recently that Finland was the happiest country in the world, for the second year in row, leading Norway, Denmark, Switzerland and Iceland in the poll.

Finland has also become one of the world’s wealthiest countries and, like other Nordic countries, home to many highly successful global companies. A spokesman for JPMorgan Asset Management recently concluded that “The Nordic region is not only ‘just as business friendly as the U.S,’ but also better on key free-market indices, including greater protection of private property, less impact on competition from government controls and more openness to trade and capital flows.” “Furthermore, children in Finland have a much better chance of escaping the economic class of their parents than do children in the U.S.”

Finland’s form of capitalism has worked for businesses and citizens alike. Since Independence, Finland has remained a country and economy committed to free markets, private businesses and capitalism. Its growth has been helped, not hurt, by the nation’s commitment to providing generous and universal public services that support basic human well-being. Finland and the Nordic countries as a whole, including their business elites, have arrived at a simple formula: “Capitalism works better if employees get paid decent wages and are supported by high-quality, democratically accountable public services that enable everyone to live healthy, dignified lives and to enjoy real equality of opportunity for themselves and their children.”

This system works. Over the last 50 years, if you had invested in a portfolio of Nordic equities, you would have earned a higher annual real return than the American stock market according to Credit Suisse research. It’s not a surprise since Nordic companies invest in “long-term stability and human flourishing while maintaining healthy profits.” We made a similar point in our September blog “Reinvent Capitalism?”

Dr. King’s quotes resonate loudly today. We Americans are a country of immigrants- “We came on different ships, but we’re in the same boat now.” In a time of tribal politics- “We must learn to live together as brothers or perish together as fools.” However, since “The time is always right to do what is right,” let’s keep optimistic that “In some not too distant tomorrow the radiant stars of love and brotherhood will shine over our great nation with their scintillating beauty.”

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History of Veterans Day

Happy belated Veterans Day! We hope everyone had a nice and safe Holiday! It is always great to bundle up this time of year and spend time reflecting on the sacrifices these men and women have made for us. As we enter the big holiday season, we should stay conscious of our Veterans while we enjoy time off and celebrate with our families.

My name is Penn Boatwright, and I am the new Client Services Associate for DWM Charleston. I recently graduated from Charleston Southern University with a Marketing degree, and feel so blessed to be a member of the Detterbeck team. I spend my free time dancing, teaching dance classes, volunteering and ‘learning’ to cook. I look forward to meeting some of you face-to-face, but today, I will be discussing the history of Veterans Day!

World War I, back then known as ‘The Great War’, ended on June 28, 1919, when the Treaty of Versailles was signed in France. However, the fighting came to a halt months earlier when an armistice (temporary cessation of hostilities) between the Allied Nations and Germany went into action. This happened on the eleventh hour of the eleventh day of the eleventh month, making November 11 the ‘End of the war, to end all wars.’

In November 1919, President Wilson introduced November 11 as the first celebration of Armistice Day with the following quote: “To us in America, the reflections of Armistice Day will be filled with solemn pride in the heroism of those who died in the country’s service and with gratitude of the victory. Both because of the thing from which it has freed us and because of the opportunity it has given America to show her sympathy with peace and justice in the councils of the nations…’

In 1938, Armistice Day became an official legal holiday dedicated to the cause of world peace, escalating from the original concept of parades and celebrations for the soldiers. The holiday was created to honor the veterans of World War I, but after World War II had required the greatest mobilization of military in US history, Congress amended the act and changed it in 1954 to honor all veterans as “Veterans Day!”

Veterans Day continues to be celebrated on November 11, staying true to the significant date that changed the world back in 1918. It is important we always remember that Veterans Day is a celebration to honor America’s veterans for their sacrifices, brave hearts, and willingness to serve. A BIG THANK YOU TO ALL OF OUR VETERANS!

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Labor Day- A Holiday and a Time to Reflect on the American Dream

Hamdi_Ulukaya.jpgWe hope everyone had a wonderful Labor Day weekend. We certainly did. Labor Day always marks the “unofficial” end of summer. Time for school and work to begin in earnest. It’s also an excellent time to remember the contributions and achievements of American workers and to reflect on their chances of achieving the American Dream, which is “the ideal that every U.S. citizen should have an equal opportunity to achieve success and prosperity through hard work, determination and initiative.”

Last week, I read a very engaging interview in the NYT about Chobani yogurt’s founder, Mr. Hamdi Ulukaya (pictured above) and his quest of the American dream for himself and others.

Hamdi Ulukaya grew up in eastern Turkey with sheep, goats and cows. He and his family spent the spring, summer and fall in the mountains; herding animals and producing yogurt and cheese. They came back to their village in winter time. Hamdi went to a boarding school, but didn’t like it. He left school, got in trouble and then thought he should leave Turkey. A stranger suggested, “Why don’t you go to the United States?” Hamdi wasn’t sure, but decided to take the plunge in 1994, at age 22, and came to America with $3,000 in his pocket.

After several years of university study and odd jobs, in 2002 Mr. Ulukaya was encouraged by his father to start making feta cheese. Years of hard work and struggle ensued with little success. One day, Mr. Ulukaya saw an ad for a fully equipped yogurt plant for sale. Kraft was closing the operation in the dairy region of NY, near where Mr. Ulukaya lived. His attorney checked into it and reported back, “They’re looking for an idiot to unload this on. They probably have environmental issues. And, if they thought yogurt was a good business, they would not be getting out of it.” This was 2005 and at that time Greek yogurt represented about ½ of 1% of the yogurt market.

But, Mr. Ulukaya was convinced he could make it work. He pursued the deal and, on August 17, 2005, he had the “key” to the factory. Today, Greek yogurt is over 50% of the yogurt market. Chobani, which means “shepherd”, went from no sales in 2005 to over $1 billion per year by 2012. It continues to grow as the #1-best-selling Greek yogurt in America. BTW, it’s my favorite.

Chobani started with a few people and now employs thousands. They are known for offering generous wages and benefits and recently gave away equity to its employees. Mr. Ulukaya tells why: “Look, my background is a working-class background. One of my dreams was to make this company a place where everybody’s a partner, and the employees deserved a portion of what they have helped to build. If you make $7 or even $9 per hour, you can’t have a house. You can’t have good food for the kids. Forget vacations.” He continues: “Especially for rural communities, we (the employers) have to start worrying about our own employees, their families and their children’s well-being, and the school, and the firehouse and the baseball field. You have to get involved.”

Chobani needed people for its growth. Coincidentally, at this time people from different parts of the world were being settled in the Utica, NY area near the Chobani plant. Mr. Ulukaya, an immigrant himself, decided to start hiring them: “These are hardworking people-they’ve gone through a lot.” Today roughly 20% (500 to 600 people) of the Chobani workforce are immigrants from 19 different countries. In April 2016, Mr. Ulukaya gave his employees 10% of the shares of Chobani.

Labor Day is a perfect time for a holiday and perfect time to reflect on the American dream. Chobani’s Hamdi Ulukaya is a shining example that the American dream is alive and well. Mr. Ulukaya, now 45 years old, is worth $1.7 billion and is an owner, investor and philanthropist. And, as importantly, Chobani is helping keep the flame of the American Dream alive for its employees; by providing generous wages and benefits, including equity.   All 2,500 Chobani employees, some of them newcomers to the United States from other parts of the world and some whose families have been here for generations, could all celebrate in a very special way on Labor Day. The American dream is alive and well, particularly with entrepreneurs like Hamdi Ulukaya leading the way.

Happy Labor Day: Fun Facts!

Labor Day in the 21st century means time for beaches, BBQ, ballgames and quality time with family and friends. For many, Labor Day signifies the last days of summer. But don’t worry, the official end of summer is September 21st so you still have some time to catch some waves and rays. Although Labor Day always falls on the first Monday of every September, there is a lot more to this holiday weekend than an extra day off from work and great sales. From a survey done by WalletHub, here are 10 facts about Labor Day that you may not know:

  1. 133 million Americans will enjoy a BBQ this Labor Day

 

  1. The average Labor Day shopper will spend $58

 

  1. 25% of Americans plan to get out of town

 

  1. The top three Labor Day destinations include New York City, Chicago, and Las Vegas

 

  1. Labor Day is America’s third favorite holiday behind Christmas/Chanukah and Memorial Day

 

  1. There are approximately 89 running races held over Labor Day weekend

 

  1. The number one hardest working city in America is San Francisco with an 8 hour average work day, and the laziest city in America is Columbia, SC with an average work day of 7.3 hours

 

  1. Labor Day is the unofficial end of hot dog season in America. From Memorial Day to Labor Day there are 818 hot dogs eaten per second

 

  1. Most Americans believe Labor Day is only an American holiday when really it was started in Canada

 

  1. Last but not least, yes, you really can wear white after Labor Day!

From everyone here at DWM, have a great Labor Day Weekend and enjoy some time with the family!

Happy Independence Day!

4th_of_July_Fireworks.jpg

Everyone at DWM hopes you and yours will have an excellent celebration with family and friends on July 4th! Hopefully, there will be family reunions, great food, baseball games, picnics, parades, fireworks and more. Have a wonderful time!

We also hope you take a few minutes to think about why we celebrate July 4th. As many of you recall, Thomas Jefferson was the principal author of the Declaration of Independence, though John Adams, Benjamin Franklin and other members of Congress made 86 changes to the document before it was approved on July 4, 1776.   The Declaration consists of three main parts. First, it declares the rights of citizens. Second, it lists the grievances against England’s King George III. And, third, it makes a formal claim of independence.

The most famous words of the Declaration of Independence are:

“We hold these words to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of happiness.”

These powerful words still apply today. We hope that you, your family and all Americans are enjoying your life, liberty and pursuit of happiness on Independence Day and throughout the entire year!

How Much do You Know About Labor Day?

We are all aware that Labor Day signifies the end of a summer filled with backyard BBQs, family and sunshine. It is the one long weekend of the year when families come together to say goodbye to summer, unwind and prepare for the changing seasons ahead. However, many of us don’t take the time to consider the true origin of Labor Day.

The concept of Labor Day dates back all the way to the Industrial Revolution in the U.S. during the late 1800s. The typical work day was 12 hours long, and the typical work week was seven days. Working conditions were far from ideal, and even children as young as four or five years old were commonly seen working in mills and factories to help their struggling families scrape by.

Many workers began organizing protests and strikes across the U.S. Unfortunately, many of these demonstrations turned violent and, in some cases, deadly. In 1894, Eugene V. Debs, with the support of the American Railroad Union, organized a strike and boycott of the Pullman Palace Car Company in Chicago. This strike effectively crippled all railroad traffic in the U.S., leading then President Grover Cleveland to deploy 12,000 troops to the area to dissolve the strike.

The use of military force on behalf of the U.S. government essentially poured gasoline on the already burning fire of discontent with current labor wages and conditions. Several people were killed during the Pullman strike altercation, and although the strike did come to an end, American workers were still unhappy and began to condemn President Cleveland’s aggressive response.

Meanwhile, union workers in New York City had been organizing and going on strike one day of the year in support of the idea of a national Labor Day that had been circulating around the U.S.

Later in 1894, which happened to be an important election year, President Cleveland decided to implement a nationally recognized annual celebration of American workers to appease his critics – and thus Labor Day as we know it was born.

Fast forward to 2017, where we at Detterbeck Wealth Management are fortunate enough to do what we are passionate about everday in a constructive and collaborative environment. We choose to use this year’s Labor Day as an opportunity to reflect on and appreciate how far the U.S. economy and workforce has come since those historic strikes in 1892.

From everyone here at DWM, have a great Labor Day Weekend and enjoy some time with the family!

Happy Holidays – Lessons from Star Wars

Grandsons Matthew and Henry and I went to the see “Rogue One: A Star Wars Story” yesterday.  With Carrie Fisher (Princess Leia) having passed away in the morning, it was a surreal experience.  Even so, we all loved it.  This is the eighth Star Wars film, all of which have been commercial blockbusters, amassing combined box office earnings of $7 billion.  But did you know that the Star Wars films have also provided some great financial lessons as well? With thanks to wealthmanagement.com for the idea, here are some of the key ones:

There is tremendous power in holistic planning.  Young Luke Skywalker’s advisor Obi Wan Kenobi (“OWK”) taught him that the Force, an energy field created by all living things that binds the galaxy together, is the source of his power. In the same way, a well-developed holistic financial plan can give you tremendous power to meet your goals.  Of course, once implemented, the plan needs regular monitoring and modifications as conditions and goals change.

Stick to the Plan.  Do you remember when Luke was just a neophyte, learning the ways of the Force,  and the skeptical Han Solo, disregarding the advisors like OWK pushed Luke to be a risk-taker, like him?  After Luke got distracted by Solo’s taunts, OWK reminded him to trust his plan instead of making knee-jerk reactions.  While things got rocky along the way, Luke eventually reached his goal- to become a Jedi Knight.  It’s an important lesson.  You need to stick to your plan, particularly with investments.  Trust in your plan and your allocations and focus on long-term goals.

Quick and Easy Leads to the Dark Side. In the 1980s, the Jedi Master Yoda taught Luke about the Dark Side.  Yoda told Luke that chasing instant gratification, like investing heavily in a hot stock, can lead to ruin.   When Luke ignores the advice, he’s almost defeated by Darth Vader.  Yoda reminds us that patience is a key in investing.  At DWM, we firmly believe that you should adopt an appropriate, diversified asset allocation and stay fully invested.  Don’t try to time the markets or chase performance. Stay disciplined.

Value is the key.  Despite his other issues, Han Solo does understand value.  Luke was shocked when Solo initially disclosed his fees to pilot them across the galaxy in the Millennium Falcon.  Luke said he could buy and pilot his own starship for less, but OWK knew expertise can command a fair price and even offered to spend more to ensure results.   Yes, value is the key.  Expertise and honesty command a fair price and offer the best possibilities of helping you get to your lifetime destinations.

Family is everything. In “Star Wars VII: The Force Awakens,” Solo played the role of advisor to next generation heroes Rey and Finn, but was unable to guide his own son Ben. As a result, Ben disregarded Luke Skywalker’s teachings and sought out the advice of Snoke and converted to the dark side, as the evil Kylo Ren. At DWM, our focus is on families.  We do our best to meet, understand and communicate with everyone, sometimes three or four generations, and, as part of our total wealth management service, provide financial assistance to all family members, regardless of the size of their current investment portfolio.

Use a Fiduciary. Along with Yoda’s warning about the quick, easy and seductive dark side, the heroes of Star Wars are frequently working not just for themselves, but in the best interest of the galaxy. General Leia (no longer a princess) formed the Resistance when the First Order rose to power in the ashes of the Empire. The evil First Order did not support plans made in the best interests of the galaxy.  Finn abandoned the First Order after he was asked to attack innocent villagers and used his knowledge to aid the resistance.  Unfortunately, there are many providers in the financial service industry that are part of the quick, easy and seductive dark side.  Align yourself with advisers who are fiduciaries, legally bound to put your interests first, and who are passionate about adding value and helping you reach your goals.

 May the Force Be With You Always!

Father of the American Christmas Card

It’s that time of year again. Time to get together with family, reconnect with old friends and drink eggnog by the fire. Spending time with those important people in your life is nice any time of the year, but it’s always great around the holidays. However, what is one to do about all those wonderful people if you do not get to see them in person? Enter the Christmas card. Christmas cards have become a staple in most households during the holidays and there is a long history behind their success and popularity.
Have you ever wondered how the Christmas card came to be what it is today? Initially produced in 1843 by Sir Henry Cole of Britain as a way to keep in touch with all of his friends and acquaintances, it wasn’t until 20 years later that they became mass produced in the United States by Louis Prang of Boston, MA. Sir Henry Cole’s original card included images of him feeding and clothing the poor with the words “Merry Christmas and Happy New Year” on both sides. He had the same heading of “TO ____,” with the blank spot allowing him to print a different name on each card. Back in the States, the popularity of Louis Prang’s take on the Christmas card grew. Soon people began to collect these and measure how many they received each year. It is for this reason that Louis Prang is considered by many as the “Father of the American Christmas card.”

Christmas cards have indeed grown since their creation in the 1800’s. With 1.6 billion Christmas cards purchased every year, according to the Greeting Card Association, the industry for Christmas cards seems like it may last the test of time. That is, if we don’t all switch over to electronic, emailed cards. However, the ease of electronic greeting cards does not appear to be having a large effect either, as this year Americans will spend on average $30 on Christmas cards, according to a study done by Statista.com. The amount that Americans spend on Christmas cards each year does not even take into account the time and effort that goes into developing the card, and, in some cases, getting the family to stand still long enough to have a picture for your card. However, all the time, effort and money that you put into giving Christmas cards to friends and family is a small price to pay for letting your loved ones know you’re thinking of them during the holiday season.

At DWM we value the importance of family and friends, and we agree that maintaining close relationships is priceless. Connecting with those important people in your life is nice around the holidays, and it’s especially important to us at DWM now and throughout the year. We appreciate keeping in touch with all of you and we wish you a Merry Christmas, a wonderful holiday season, and a happy new year!

Don’t Forget Year-End Tax Planning

Holiday season is here.  Lots to do, including year-end tax planning.  Yes, you need to carve out some time to reduce your 2016 tax bill.  Planning this year could be extremely important.  A tax reform is likely in early 2017 that would reduce income tax rates, increase standard deductions and could reduce the impact of big tax deductions.  The basic strategy is to defer income and accelerate deductions.

Here are some key areas for you to review with your CPA:

Reduce income.  The standard advice of pushing as much income as possible into future years is all the more powerful if tax rates drop.  Small business owners might want to wait until the end of December to bill clients so that related payments are received in January.  They might also buy equipment and place it in service before December 31.  The Section 179 Deduction permits up to $500,000 of business equipment to be written off 100% in year of purchase. The closing of a sale of real estate might be put off until January 2, 2017.  If you are in retirement and living off IRAs, consider deferring taking any more distributions until early 2017.

Retirement Tax Breaks.  If you are contributing to a traditional 401(k) or other retirement plan, considering maximizing it ($18,000 for those under 50 and $24,000 for those 50 and over) with larger deductions on your December paychecks.  Consider maximizing IRAs ($5,500 and $6,500 respectively) even if your contributions are not deductible, as you may want to convert those to Roth IRAs in the future.

Capital Gains and Losses.  Capital gains taxes are likely to be less in future years for higher income American taxpayers under tax reform proposals.  The House GOP plan would revert to an older system that taxes a portion (50%) of investment income at regular rates and excludes the rest.  You and your financial advisor should review your portfolio for all realized and unrealized capital gains and harvest appropriate losses before year-end if you haven’t already done that.

Medical Expenses.   Taxpayers can deduct medical expenses if they amount to 10% of their income or 7.5% for taxpayers 65 and older.  If you’re scheduling an expensive procedure, you might want to get it done and paid in 2016.  Some tax reform proposals eliminate medical expense deductions.  And, even if medical expense deductions remain available, they may not be worth as much in tax savings if your income tax rate goes down.

State and local taxes.  This deduction may be coming to an end.  Already, four million Americans lose this deduction due to the Alternative Minimum Tax (“AMT”). Both the Trump Plan and the Ryan Plan intend to eliminate the AMT.  If so, this deduction could be wiped out.  Hence, if possible, consider paying your property taxes and/or state income taxes in 2016.

Mortgage Interest.  All tax reform proposals have continued to support a mortgage interest deduction.  However, it might make sense to make your January 2017 mortgage payment in December.  The standard deduction is expected to be doubled to $25,000 to $30,000.  If so, fewer taxpayers will itemize.

Charitable Contributions.   The raising of the standard deduction will likely mean fewer taxpayers will get a tax benefit from their charitable contributions.  And, even if they do itemize, their income tax bracket may be reduced going forward.   Therefore, consider contributing both your 2016 amounts and your 2017 charitable contributions by 12/31/16.  Here are three good ways to do this:

    • You can contribute to “Donor-advised” funds this year and get the deduction in 2016 and then make “grants” to charities with these funds as desired in the future.
    • You can contribute appreciated property such as stocks, mutual funds and exchange traded funds to a charity. The taxpayer doesn’t pay the capital gain on the appreciation and gets a full charitable contribution deduction.  And, yes, appreciated property can fund your donor-advised fund.
    • You can make a “Qualified Charitable Distribution” (“QCD”) from your IRA. A QCD allows an IRA owner who is at least age 70 ½ to contribute up to $100,000 to a charity without having to claim the distribution in taxable income.  This is particularly valuable to philanthropic taxpayers who can fulfill their Required Minimum Distributions (“RMDs”) by sending payments directly to the charities of their choice.

Our clients know that at DWM we recommend starting tax planning in April or May, following it up in the fall and finalizing it in December. We don’t prepare tax returns.  We do provide suggestions for reducing taxes.  Helping you minimize your tax bill is part of the value you get with DWM Total Wealth Management.  Please let us know if you have any questions.  Don’t delay!