We look forward to sharing our investment philosophy and current market outlook with you when we meet. In the meantime, here is a look at what we've published in the past.
Our articles
What if the Fed is Right About Inflation?
Medium · September 2020
- Today's high-priced bonds come with significant interest-rate risk. The 10-year Treasury yields 0.65% — only $6,500 of income for every $1 million in your portfolio.
- The Fed is committed to 2% inflation, and announced policy allowing inflation to run “modestly above 2% for some time”. Every 1% increase in the 10-year yield translates to a ~10% loss of market value.
- Meanwhile, in a new era of unconstrained deficit spending, Congress is just getting started: $1 trillion budget deficits at full employment, Medicare and Social Security commitments, and bipartisan support for major new spending.
- If your 60/40 or 40/60 portfolio holds a traditional allocation of longer-term bonds, you are betting against the Fed.
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“I don't know WHEN to buy stocks, but I know WHETHER to buy stocks.” — Warren Buffett
Medium · August 2019
- “We're buying stocks this morning.”
- “…considerably more attractive than fixed-income securities”
- “…stocks generally — they're businesses; they're American businesses: $30 trillion worth of 'em — and they look cheaper than…generally, real estate”
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NASDAQ & Home buying in the SF Bay Area: Don't Bring a Knife to a Gunfight
Medium · August 2018
- Homebuyer? The NASDAQ is the leading indicator to watch: the largest companies in the world by market cap are based in the Bay Area or have a major presence here — and all use equity as a meaningful component of compensation.
- There is no scarcity of additional homebuying pressure: sideline cash, record corporate profitability, and monumental tax reform.
- If you are waiting for other homebuyers to put down their guns, you could be waiting a long time — especially in the San Francisco Bay Area.
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Next 24 hours: make up to 30%+ with this 'trade', after-tax
LinkedIn · December 2017
- At ImpactAdvisor, we'd been busy all week with tax-optimization; the #1 action item was topping up estimated state income taxes before year-end.
- Our clients who took this advice expected to save thousands of dollars, each.
- In some extreme cases, underpaying $10,000 in state income taxes before 2018 meant missing out on $3,900+ in federal tax savings.
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Non-profits Get a Raw Deal in this Tax Bill
LinkedIn · December 2017
- Mainstream philanthropists and non-profit organizations drew the short straw in the 2017 tax bill.
- If you regularly make an impact with philanthropy but otherwise have few deductions, you may have lost your tax deduction from donating — especially if you are married.
- In 2018 the standard deduction became $24K (married) / $12K (single) “just for breathing” — see our donor-advised fund page for the bunching strategy that answers this.
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Will 2018 be the Year of the Crypto Asset Class?
LinkedIn · November 2017
- The unleashing of professional sales & marketing for crypto-based investment products will make 2018 The Year of the Crypto Asset Class.
- It's anyone's guess when and at what level this bubble in bitcoin will burst — the last thing I'd want to be right now is short bitcoin.
- With a good sales & marketing team just about anything can and will be sold; especially a sexy new asset class.
2.5 weeks later BTC had doubled to more than $19,000/BTC — before trading below $7,000/BTC 2.5 months after that.
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Pitfalls of Robotically Investing in Bonds
Medium · August 2017 (2.098% yield)
- 10-year Treasuries are a bad investment right now.
- You can expect to lose value over time, after taxes and inflation.
- Taxes matter; inflation matters.
- A well-constructed investment portfolio needs to take into account current expected real returns and not robotically follow outdated, and thus unrealistic, portfolio-allocation assumptions from a different era.
One year later, the iShares 7–10 year Treasury ETF was trading 5% lower.
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The Highest Tax in the English-Speaking World is in this U.S. State
LinkedIn · February 2017
- When you graduate to investing taxable money — outside of your IRA/401(k) — it's a whole new ball game: taxes matter.
- Californians can give up, in taxes, a third to half or more of each year's interest, realized stock and bond gains, etc.: 'short-term investment income'.
- Only France and Denmark have a higher long-term capital-gains tax than California (of the 35 OECD nations).
- Most investment strategies are optimized on something other than after-tax profit — the same is true of most investment products on the market.
- You can build wealth faster and with less risk by being tax-smart.
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Warren Buffett's Advice on Market-Timing for Investors
LinkedIn · December 2016
- “People that think they can predict the short-term movement of the stock market — or listen to other people who talk about (timing the market) — they are making a big mistake” — Warren Buffett
- Sitting in cash can be, essentially, market-timing.
- Market-timing, as an investment strategy, is a very difficult one to defend — for both amateur and professional investors alike.
- “Trying to time the market” is the #1 mistake to avoid.
- “I have never known anyone who could consistently time the market. And in fact I've never known anyone who knows anyone, who was able to consistently time the market” — Burton Malkiel
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Still Sitting on Cash? Here's the #1 Chart…
LinkedIn · November 2016
- Cash levels in the U.S. are extraordinarily high — still!
- Just focus on the 'cash' buildup and where it is likely to go next.
- Interest on cash deposits — CDs, money market, etc. — does not even keep up with inflation.
- You, quite possibly, could miss the next big run for U.S. stocks as that cash gets invested.
- This unprecedented level of dry powder can help absorb the inevitable shocks to stocks, potentially providing downside protection.
Update: real-time 'cash' as % of GDP: the St. Louis Fed's M2/GDP chart. The dry powder is still there, unlike previous market peaks.
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As quoted in the press
“Benefits to direct indexing: better customization and even greater tax efficiency”
ETF.com · Advisors & ETFs: A Perfect Match? · September 2020
- Jason Escamilla, CEO of ImpactAdvisor, uses ETFs, closed-end funds and mutual funds for part of his business, but his firm specializes in direct indexing.
- There are two benefits to direct indexing: better customization and even greater tax efficiency.
- In a high-tax state such as California, direct indexing makes a big difference.
- The tax benefit of direct indexing is that the software allows for greater ease of rebalancing and tax-loss harvesting, along with minimizing tracking error. But it's not for all clients.
- There are times when ETFs make more sense than direct indexing, such as for younger clients who are just starting to build wealth, or for those whose holdings reside mostly in IRAs.
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“Historical valuation fundamentals are less important than the basic laws of supply and demand”
Bankrate · We're in a recession — will the stock market ever act like it? · June 2020
- “Historical valuation fundamentals are less important than the basic laws of supply and demand, which always prevail, however volatile along the way.”
- Cash on the sidelines is at all-time highs, as everyone else waits for the dip, too — the strategy of waiting may itself be a crowded trade that ends up offering investors only modest returns.
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“Stack the deck in your favor for retirement by having time on your side”
Acorns + CNBC · Making One Smart Move as a New Grad Can Set You Up for Financial Independence · June 2019
- “Time is a special thing…you can stack the deck in your favor for retirement by having time on your side” — putting a long time horizon on your investment planning.
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“This provides a margin of safety or potential for better resale value at some point in the future”
U.S. News · 8 Best Municipal Bond Funds to Buy and Hold · May 2019
- The closed-end fund's 8% discount was greater than its 12-month average discount — “this provides a margin of safety or potential for better resale value at some point in the future.”
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“When you're looking to park taxable cash, there are smarter places than a money market fund”
The Bond Buyer · Municipal Bonds: The Antidote for a Low-SALT Diet · March 2019
- “Municipal bond funds in a high-tax state like California are relatively more desirable after tax reform. Marginal tax rates can be higher and fewer people get hit with AMT.”
- Example: married, two kids, $430,000 of income, no deductions — and after taxes you keep less than 48 cents on the dollar in money market interest/dividends.
- “And don't forget about the Fed's 2% inflation target over time: expect a 2% inflation hit.”
- “A higher-yielding 2.5% money market fund rate does not even beat inflation once you get into a meaningful tax rate. Even in an IRA, you will eventually have to pay the tax man in nearly all scenarios.”
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“With Apple, you have a well-run growth company with extraordinary profit margins at a reasonable valuation”
Kiplinger · 12 Stocks You Should Never Sell · December 2018
- “As a long-term investment, it is further de-risked when you consider the company's demonstrated preference for buying back shares over pursuing low-margin and higher-risk growth.”
- Apple had repurchased nearly $73 billion of its own stock over the prior four quarters.
In 2019 Apple returned 89%, roughly doubling in value one year after this was published.
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Ten years after 2009: the S&P 500 is 4x; international markets have only doubled
Fund Intelligence · December 2018
- Since 2009 “the S&P 500 has roughly quadrupled, while the MSCI All Country World ex-US, measuring international markets, has only doubled.”
- “Meanwhile, the strength of the US dollar this year has been painful for US investors who allocated overseas.”
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“Factor investing essentially distills what's been the largest driver of the performance”
Fund Intelligence · November 2018
- “It's everything that the industry wants: they all want something shiny, something interesting to sell, and this is a cost-efficient way to do it that also works well with the ETF structure.”
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The superior model in high-performance wealth management is 'human + machine'
U.S. News · How AI Will Change Investing · October 2018
- It's not a question of 'human vs. machine'. As with freestyle chess, the superior model is 'human + machine'.
- “Human advisors have a good sense of the value of their client's time and when to make the call.”
- “When tax reform passed last year, days before the year's end, we were able to save our clients thousands of dollars each with tax-smart, last-minute action items. There was no iPhone app making those phone calls.”
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Why 2018 is not like 2008 — we are not always bullish on the market
Bisnow · A Decade After Lehman's Collapse, Some Say It Can Happen Again · September 2018
- “No doubt (in 2008) I was very bearish on the market, launching a short-fund most of 2008.”
- “Today, our economy and corporations are among the most efficient in the world. The number of blatant signs of excess pales by comparison with 10 years ago.”
- “Meanwhile, the social effects from 10 years ago cannot be underestimated…Lehman and Bernie Madoff left individual investors highly skeptical.”
- “The new visceral skepticism today helps keep the industry in check.”
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Sustainable, Social-Impact Investing: Does it Pay?
MassMutual · Using investments to make a difference · July 2018
- “Most investors believe there is a trade-off between one's values and one's investment returns. This is left over from the days of overpriced investment products.”
- “Historically, on average, socially selective funds underperformed the market for the same reason other name-brand, actively managed funds did: high fund expenses.”
- Socially selective funds were a niche market that required a marketing & sales budget to attract investors.
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Leveraged ETFs: “few investment professionals understand the risks over time”
U.S. News · Leveraged ETFs Are a Loser's Game · April 2018
- “Very few investment professionals understand the risks over time, let alone retail investors and people in the media.” These products magnify losses exponentially.
- When you understand the math, leveraged ETFs (e.g. +/−3x) generally perform as expected — the main problem lies in how poorly understood they are, relative to properly executing one's long-term investment strategy.
- The #1 reason these are generally poor long-term investments: daily rebalancing causes a lot of “buy-high, sell-low”. Over time they will tend to lose the battle against volatility.
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“What's your edge over the person selling to you?”
U.S. News · Should I Invest in Bitcoin and Blockchain Technology? · November 2017 (~$6K/BTC)
- “We view crypto-investing as driven by the greater fool theory of investing or speculation, and we genuinely mean that in a bullish way for now.”
- “As an investor, you have to ask yourself, if you are getting into bitcoin today: what's your edge over the person selling to you? Simply looking at a chart showing the price rise is not enough” — for bitcoin or any competitively traded second-hand asset, including shares of publicly traded companies.
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“But it is anybody's guess what inning. It looks to me like we're well ahead of the 7th-inning stretch.”
Forbes · Beware Of The Bitcoin Bubble: Investment and Financial Advisors Warn · November 2017 (~$7K/BTC)
- “The price level and energy usage are unsustainable. There is far better technology emerging to meet the same needs.”
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“Being emotional is not an edge in investing.”
Tearsheet · The Newest Metric for Financial Success: Customers' Emotions · August 2017
- Values-based investments are often driven by emotional responses to causes — emotions and money are inextricably linked.
- For example, an investor may choose not to invest in companies engaged in practices detrimental to the environment.
- But “being emotional is not an edge in investing.”
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