Diversification – March 2013

More Good News

Recently the US Labor Department released the February ‘Jobs’ report and it shed additional positive light on our growing economy. The US private sector added 246,000 new jobs in February while the public sector lost 10,000 leaving a net gain of 236,000…more than anticipated. This helped reduce our nation’s unemployment rate to 7.7% and while that’s not yet the number we want, it’s the lowest level in the last 4 years and definitely heading in the right direction.

A peek at some of the detail shows jobs were created across the economy which we feel is a good sign. We had increases of about 32,000 in health care, 14,000 in manufacturing, 23,700 in retail, 73,000 in professional and business services and even 21,000 in Hollywood. However the sector that we are most pleased with is construction which added about 48,000 jobs in February. About one quarter of the eight million plus jobs that were lost during the recent recession were in construction. It appears that this sector has finally turned the corner. We think this is significant ‘long term’ good news because this industry’s recovery is in its infancy. Recent reports show single family housing starts up about 20% over last year and multi-family construction is up about 34%. We get more good news from housing by looking at prices which continue to trend slightly higher and sales which are rocket-like so far in 2013.

Other positive reports from the labor department show the average hourly wages and weekly earnings are both improving.

OK… ‘big picture’… our economy continues to grow slowly which begs the $64,000 questions…Are share prices getting ahead of themselves? Is now the time to consider being more aggressive or more conservative? We think the answers are ‘no’ and ‘stay the course you’ve set’. Our reasoning is straightforward. 1) the economy and corporate health both continue to improve. 2) It can be difficult to ‘time’ the markets.

However (don’t you hate it when this part comes), remember that in the short run the market is subject to investor emotion which is usually triggered by the latest story. That emotion generally leads to market fluctuations. Sometimes downward fluctuations…AKA corrections! They are normal and expected. It’s simply going to happen. We won’t be surprised and we don’t want you to be surprised. In fact…if they don’t occur…we begin to get a little nervous.

If you’d like to learn a bit more about market corrections, go to http://www.sycamoreweb.com/newsletter/news_091808.html and review our article. This was written in 2008 so the numbers are a bit different today but the basics remain unchanged.

Thanks for your business and trust,


Past performance does not assure future results. Investors cannot invest directly in the stock market indexes such as the S&P 500. Invest return and principal value of an investment will fluctuate. Investor value, when sold, may be worth more or less than their original cost. The material in this presentation is for illustrative purposes and does not reflect any particular investment.

Comments contained above are meant to be generic in nature and are not meant for specific action.

By |2022-07-20T15:43:42-04:00March 19th, 2013|Craig's Commentary 2012|0 Comments

Fiscal Cliff Tax Changes – February 2013

Fiscal Cliff Tax Changes

The ‘fiscal cliff’ brought us a last minute tax law that most investors seem pleased with. During the month of January Sycamore’s Growth and Income composite gained nearly 6%. Your portfolio likely performed about as well. Of course we’re all fully aware that this pace will not continue but it’s a wonderful start for what we feel could be a solid year for share prices. Though the markets have advanced over the last one and twelve months, most of the companies we follow have increased earnings and dividends during that same period so we are still finding many good values.

Turning to the new tax law, just how is it likely to affect you and your investment portfolio(s)?

Income Tax Changes

The top income tax rate for individuals with earned income of over $400,000 and joint filers with income of more than $450,000 will increase from 35% to 39.6%. Additionally these high income taxpayers will see the tax rate on their long term capital gains and qualified dividends raise from 15% to 20%. If you are a single filer earning less than $400,000 or a joint filer earning less than $450,000 these increases will not affect you.

Medicare Tax on Investment Income

Beginning in 2013 there will be an Medicare tax of 3.8 % applied to your ‘net investment income’ if your adjusted gross income exceeds $200,000 for a single filers and $250,000 for joint filers. ‘Net investment income’ includes interest, dividends, royalties, rent, gross income from passive activities, taxable distributions from deferred annuities, and net gain from the sale of stock. This new tax will not apply to distributions from tax deferred retirement accounts such as Ira’s or 401(k) plans. Also, it will not apply to municipal bond interest.

Estate Tax Changes

Here the news is wonderful as the ‘per person’ estate gift tax exemption of $5,100,200 that we had in 2012 has been made permanent. Going forward this amount will be indexed to inflation so for 2013 the exemption amount per individual will be approximately $5,250,000. More good news came in this law when the portability of this exemption between spouses has also been made permanent. This means that if one spouse does not use their $5,250,000 exemption the surviving spouse can add that to their own exemption and allow the couple a total exemption of $10,500,000 for the family. Of course there are still many good reasons to have an estate plan as the maximum estate tax rate has now been raised from 35% to 40%. On balance, we feel that the estate tax provisions in the new tax law will be beneficial for most of us.

Retirement Accounts

If you’re over 70 1/2, are subject to minimum distributions from your IRA or other qualified account(s) and have a charitable streak you will appreciate learning that you can once again make text free distributions from directly from your ‘qualified’ account to charities. The maximum amount you can contribute for any single tax year is $100,000. This provision has been extended only through 2013.

What effect will the new law have on your investment portfolio?

As we look back at previous tax law changes and their effect on share prices, we think the current changes are not significant from an investment perspective. It certainly has not caused us to change our focus or direction when selecting investments for your portfolio(s). In fact, if the performance of the stock market so far this year is an indicator, the law seems to have had at least a short term positive effect. It can be difficult to make the changes needed but if our federal balance sheet where to be balanced and our national debt reduced or eliminated, we think the long term benefit to our economy could be significant and hopefully we would all share through a higher standard of living. It’s likely that more tax changes are on the horizon…stand by.

As always, if you have any questions or comments, please let us know.


Notice Regarding Privacy and Confidentiality: Sycamore Financial Group reserves the right to monitor and review the content of all e-mail communications sent and/or received by its employees.

Comments contained above are meant to be generic in nature and are not meant for specific action.

By |2022-07-20T15:41:31-04:00February 21st, 2013|Craig's Commentary 2012|0 Comments

2012 Review – January 2013

Two thousand and Thirteen! Yes it is…just like that another year has passed! And, we’d like to add, a very good year for share prices. It certainly seemed ‘nip and tuck’ for most of the year but the world did not end. Stories abounded throughout the year…Greece, presidential election, Mayan Calendar, and the “fiscal cliff” were all billed as the ‘big one’ but they were not. We’re beginning to think that some exaggeration may be involved.

The Economy

On a more serious note, the economy continues to grow. It’s certainly still not growing as fast as we would like but none the less we’ve now had 13 consecutive quarters of growth and the words ‘double dip’ are faded from the pundits memories. We continue to create more jobs but not at a clip fast enough to bring the jobless rate down quickly. As we have mentioned before, there are more than a few positive things going on. Interest rates remain very low and the Federal Reserve has indicated that we can expect rates to remain low for the foreseeable future. This should help our housing industry that is finally showing signs of a sustained turn around. Additionally, low interest rates helping anyone who can refinance – from homeowners to corporations and our federal government. Technology is bringing the productivity rate up on a regular basis and while this is not good for the creation of jobs, it travels quickly to the bottom line for corporations.

The Market

The overall market gained about 16% for 2012. This is not stellar but certainly a good solid gain. As we analyze the securities in portfolios that we manage we continue to see solid gains on the earnings and dividend fronts. As more companies have cash available we’re beginning to see a pick-up in mergers, acquisitions, and stock repurchases. While most stocks are no longer the extreme bargains they were in 2009, we continue to see lower than average valuations on the securities that we follow and feel that, barring an unexpected shock to the system, 2013 has the potential to be as good as 2012.


The chart below compares the return of Sycamore’s Growth and Income Composite to the S&P 500 TR index. We feel our strength has been to hold value better than the overall market during declines, so once again we are very pleased with our relative performance during a year where we had better than average returns for the S&P 500 TR. All returns are annualized through 12/31/2012 and gross of management fees.
Sycamore Growth and Income Composite…….14.67….11.33….3.68….8.31
S&P 500…………………………………………………………16.0010.87….1.66….7.10

Comments contained above are meant to be generic in nature and are not meant for specific action.

By |2022-07-20T15:41:59-04:00January 20th, 2013|Craig's Commentary 2012|0 Comments

Indiana Inheritance Tax Repeal

Good news on the tax front if you are an Indiana resident. And better still if you are an Indiana resident’s beneficiary. Indiana’s inheritance tax will be completely repealed by year 2022. Starting in the year 2013, the tax will be reduced by 10% each year until it phases out entirely by 2022.

The current tax rate for Class “A” beneficiaries is from 1% to 10%. Class “A” beneficiaries include parents, children, stepchildren, grandparents, grandchildren, other linear descendants and other lineal ancestors and spouses of children or stepchildren. For these beneficiaries, the exemption has been increased from $100,000 to $250,000.

Class “B” beneficiaries, which include brothers, sisters and lineal descendants of brothers and sisters, currently pay a tax-rate between 7% and 15%. The exemption amount for this group remains at $500.

Class “C” beneficiaries, which include everyone who is not a class “A” or “B” beneficiary, are currently subject to tax rates between 10% and 20%. The exemption for this group remains at $100. This is not a typo. It’s $100. Indiana’s Inheritance Tax law is retroactive to January 1, 2012. Of course, spouses and charities are entirely tax exempt.

Comments contained above are meant to be generic in nature and are not meant for specific action.

By |2022-07-21T12:11:36-04:00October 10th, 2012|Craig's Commentary 2012|0 Comments

What Does A Share of Stock Really Represent? – Fall 2012

Hello from Sycamore,

We strongly encourage our clients to meet with us once a year. We do this for several reasons. Your investment portfolio reflects the short and long-term financial goals you’ve set for yourself. These objectives are a moving target. As you close on one goal and look to the next, we may need to rebalance your portfolio. We are often asked during an annual review whether a portfolio comprised primarily of stock is adequately diversified. This is a very good question.

When you own shares of stock in a company, your investment is with the company represented by the shares you own – not with the stock itself. Here is a simple example. Let’s say that you and I decide to buy a 100-acre farm in Howard County. We could choose many ways to own this farm. We may own it as a partnership, as joint tenants or… we could elect to form a company and issue shares of stock to ourselves that would represent our relative ownership of the farm. We would then be ‘stockholders’ but would we be invested in the ‘stock market’? Well…I guess we could call it that but since our company’s only business is to own 100 acres of farmland in Howard County, you and I as shareholders would actually be invested in farmland. The number of shares we hold (which represent the overall percentage of individual ownership) make distribution calculations simpler at the end of the year. And should the need arise, the shares are also a convenient way to sell some of our farmland to another investor. Bottom line: our money was not invested in stock but in farmland. The stock is simply an easy, and potentially a more liquid way, to own the farm. It’s easy to look through the stock ownership in our farm to the actual business of owning the farmland. This is the same way that we look through the stocks in your portfolio and focus on their business operations.

So… if your portfolio with Sycamore is all or mostly stocks, just what do you own? When we build portfolios from scratch, we generally purchase about 45 or 50 different companies. The percentage of your ownership is represented by the number of shares of stock that you own in each of the companies. But your actual investment is in the operations of the given companies.

We usually spread your total investment over all sectors of the economy. We do not try to guess which sector will be the best performer. Within your portfolio, you will likely own shares in companies that produce basic materials such as chemicals and steel. You may have equity positions in companies that drill for oil or produce electricity. Other companies you hold may produce a wide range of grain products or even soap – staples of modern life. You’ll have shares in companies that own and operate real estate holding, ideally in different regional markets. Additionally, you will likely own some small, medium and large companies.

Our goal is to keep you broadly diversified in all sectors of the economy. It’s the best way we know to fend off the unknown risks that are always coming down the road. In the future when other investors speak of being invested in the stock market…you can correct them.

Running the numbers…

I’d like to leave you with one last thought. Because we are wholly focused on the fundamentals of the companies that you own, we do not pay much attention to the “stock market” as a whole. We asked ourselves several key questions about a company before any recommendation or purchase.

  • Is this company well managed?
  • Does this company make a good product that is needed?
  • Has this company demonstrated consistent growth of dividends and earnings?
  • How much debt does this company carry?

You’ve probably got the picture. We believe that numbers are a better and certainly more objective measure of a company’s potential profitability than a glossy prospectus. A picture may be worth a thousand words, but I’ll take a balance sheet any day of the week. Take it from someone who’s been in the game for nearly 40 years, predicting the U.S. or any international market is a fool’s errand. At Sycamore, we gather data, crunch numbers, draw conclusions and act on the result.

Thanks for your business and trust!

Sycamore Financial Group


Past performance does not assure future results. Investors cannot invest directly in the stock market indexes such as the S&P 500. Invest return and principal value of an investment will fluctuate. Investor value, when sold, may be worth more or less than their original cost. The material in this presentation is for illustrative purposes and does not reflect any particular investment.

By |2022-07-21T12:21:45-04:00October 2nd, 2012|Craig's Commentary 2012|0 Comments

Multi-Taskers from Old

A couple of weeks ago, I began reading Daniel Patrick Forrester’s book, “Consider”. The book tackles the question of how well the average person processes the tremendous amount of data that pours into our conscious mind each day and why we need to actively include periods of reflective thinking in our daily routine. Forrester’s book includes some fascinating information about multi-tasking.

Multi-taskers are in high demand across the board. In fact, the ability to juggle several tasks simultaneously happens to be one trait that successful fry cooks and Fortune 500 CEO’s share. But how well does the average person multi-task? Not well, according to Stanford researcher Richard Nass, who has conducted multiple studies on the topic. While 2.5% of the population can multi-task effectively, the rest of us simply wind up doing two things poorly. My experience has convinced me that I am not one of the lucky 2.5%; I need to concentrate on one task at a time.

About one hour after finishing “Consider”, something interesting happened. I picked up a book that was owned by Susan’s grandmother, Josephine Jack.entitled “1000 Inspirational Things”. (Not my usual read, but it caught my eye that day.) Complied in 1957 by Audrey Stone Morris, this book included the following quote attributed to Syrus on page 13:

“To do two things at once is to do neither.”

After my previous read, I was interested to learn more about this Syrus fellow. Turns out Syrus, who was a favorite of Julius Caesar, made his observation on multitasking in 46 BC. Nothing changes!

Thanks for your business and trust,

Sycamore Financial Group


Past performance does not assure future results. Investors cannot invest directly in the stock market indexes such as the S&P 500. Invest return and principal value of an investment will fluctuate. Investor value, when sold, may be worth more or less than their original cost. The material in this presentation is for illustrative purposes and does not reflect any particular investment.

By |2022-07-21T12:14:33-04:00September 29th, 2012|Craig's Commentary 2012|0 Comments
Go to Top