April’s Path Toward Prosperity

What did you learn?

Are debt levels too high?

Don't end up like Orioles' Chris Davis



The 2018 Tax Season has drawn to a close.  This is the first year people are able to gauge the effects of the new tax law.  The most noticeable changes were the doubling of the standard deduction and the reduction of the state and local tax deduction. It is estimated that over 90% of taxpayers will end up using the standard deduction, which will make life less complicated for them and their tax preparers.  If someone is in the 37% tax bracket, the married standard deduction increase was $11,300.  That could amount to savings of more than $4,000 in taxes.  In addition, some small business owners received a large tax deduction courtesy of the new Qualified Business Income (QBI) deduction.  This could be a major benefit if you own a small business.  All in all, their were many benefits for many people.

However, it could be a negative impact if you dealt with these two scenarios...

  • If you took personal exemptions in the past.  These exemptions in 2017 were $4,050 per exemption.  According to Motley Fool, roughly 140 million taxpayers took exemptions in 2016.  If you took exemptions, in the past, you could end up paying more in taxes in 2018.
  • If you previously itemized deductions and those deductions exceeded the amount of the new standard deduction, then you could end up paying more in taxes in 2018.  This has an outsized impact on High W-2 wage earners in high tax states where you are now capped on state and local tax deductions at $10,000.

The offset is that the tax brackets are now lower and the incomes to stay in those brackets are now higher.  So, even though you may have a higher "taxable income", it is definitely possible your taxes are lower.  When comparing your 2017 and 2018 returns it is important to look not at how much you get back or how much you ended up owing. (that is a withholding decision not a tax decision)  Instead, it is important to look at three things...

  1. Gross Income (All Income combined)
  2. Taxable Income (what you are actually taxed on)
  3. Total Taxes Paid (be sure to include any self-employment taxes)

By comparing these 3 numbers to the previous year, you can get a good idea of your change in tax situation and can begin to plan for 2019.

There are a number of opportunities in this tax code that can be taken advantage of with the right planning.  Check out my blog, seetheforestthroughthetrees.com to learn more.

For instance, in 2019, if you're single with taxable income of $39,375 or less or married filing jointly with taxable income of $78,750 or less, your long-term capital gains are taxed at 0%!  I'm talking mostly to retired individuals here.

Secondly, business owners should do some serious business structure and retirement plan analysis. The benefits of an S Corp structure over an LLC could be very advantageous.  As could the benefits of a solo 401(k) versus a SEP IRA.  I am happy to discuss the benefits, just send me an email.  It's also important to discuss business structure with your tax and legal advisors.



Market pundits and many economists will have us believe that the economy is humming along. Our commander in chief never misses an opportunity to point out on his twitter feed how amazing this economy is doing....but is the wool being pulled over our eyes?

The stock, bond and commodity market bounce in the first quarter of 2019 has taken us back up near spitting distance of the 2018 highs.  The train is speeding along.  All must be well...

As you know, I love statistics and real data, not stories or propaganda.  It appears we may be heading to the first earnings season decline since the 2016 election if the estimates are accurate.  Some analysts call this an "earnings recession".  Meaning, the economy isn't contracting but corporate earnings may be.

What is causing the potential slowdown and is this a potentially bigger problem?

Why did the Fed do an about-face on their interest rate increase plan?

Why did NY Fed President John Williams say last month that the Fed would consider negative interest rates to combat future downturns?

Let's take a look at some data:

  • According to Bloomberg, U.S. Student Loan delinquencies have now hit a record high of $166 billion in Q4 of 2018.
  • The Federal Reserve stated in February that 7 million Americans were more than 90 days behind on auto loan payments.  At 6.36%, this is the highest on record.
  • Edmunds reported that the average interest rate on a new car loan is now the highest level in history.  I am pretty sure this is impacting delinquencies.
  • Total credit card debt rose to a record high of $870 billion in Q4 2018.  This is now higher than the previous peak in Q4 2008.
  • What is even worse is that according to creditcards.com, the national interest rate on new offers is 17.67%, the highest rate since tracking began in 2007.

But, the delinquencies, rising interest rates and record debt levels of individuals aren't the only rising debt levels.  In 2002, the U.S. budget deficit was $158 billion.  in 2019, we are looking at a deficit of $1.1 trillion and we aren't even in a recession!  I was just in NYC and saw one of those national debt counters on the side of a building (44th and 6th Ave.).  It prompted me to google, national debt.  According to TheBalance.com,  In 2002, U.S. National Debt was $6.228 trillion.  Now, it is over $22 trillion!  In 2002, the Fed wasn't creating new currency units electronically.  Now, it is...and it purchased $4 trillion worth of assets with those new currency units.

I am a student of finance and am consistently befuddled by the amount of debt individuals, corporations and our government have amassed in the past decade.

"Eventually, in my opinion, debt will choke off growth as interest payment swallow more and more of consumer incomes, corporate revenues and government tax receipts.  The problem for investors is deciding whether this is around the corner or 10 years into the future..."




In order to build a well-diversified portfolio, you should combine various assets with volatility characteristics that when combined lower the overall volatility of the portfolio.  Diversification is not investing in 10 ETFs or mutual funds with different names.  Diversification is investing in different asset classes that perform differently during different economic environments.

I often use the analogy of a garden. When creating a garden from scratch, you want a combination of flowers and plants that bloom at different times of the year, at different temperatures.  A well thought out portfolio is no different.  Think about the four seasons of the economy.  Ideally, you want a combination of assets that can perform when the economy is growing, contracting, when inflation is high and when there is deflation.  Often this is called an "all weather" approach.

I think this approach should be the starting point from where a portfolio is developed and then customized to your own tolerance for volatility. Unlike Baltimore Oriole, Chris Davis, who just broke the MLB record for most consecutive hitless at-bats, this portfolio doesn't swing for the fences.  It strives to build wealth over time by letting compounding work.  Don't be like this guy.


  • Rather than trying to “beat the market”, focus on beating inflation and the rate on cash.  Plan for safety and liquidity while seeking positive returns.


  • Equity valuations are very rich but masked due to the distortion of the Treasury curve. Volatility is returning to the markets and I think long/short managers are best positioned to capture this volatility by owning companies with strong businesses, barriers to entry, and good valuations and selling short weaker companies with high debt loads that have risen sharply with the broad market rally. I think this strategy of hedged equity may have the potential to produce attractive risk-adjusted returns if and when investors begin to question the valuations of companies. Stock investing involves risk including loss of principal. No strategy ensures success or protects against a loss. Long positions may decline as short positions rise, thereby accelerating potential losses to the investor.


  • Monsoon country investments. Attempting to take advantage of demographic, educational and investment possibilities in the countries surrounding the old spice routes of the Indian Ocean. International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.


  • A potential U.S. infrastructure upgrade cycle may be around the corner. Moving from our current grade of D+ to B would require an investment of $3.6 trillion by 2020.


  • 5G is coming.  What was once a pie in the sky idea is not too far off.  The first wave of testing is complete and buildout is commencing.  Potentially investing in companies who are at the forefront of this major technological shift could be a wise move.


  • Potential food shortages due to inclement weather and higher demand from the emerging Asian middle class could result in a boon to agricultural land and potash fertilizer companies. International and emerging market investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.


  • The rise of E-Commerce has coincided with an increased desire for efficient warehouse distribution real estate. As e-commerce moves toward even faster delivery, positioning of distribution becomes even more important.


  • Precious metals mining companies have been extremely beaten down over the past four years. Mining is an industry that spans hundreds of years. Companies that mine for commodities are often highly cyclical, meaning they have sustained moves both up and down. When investing in the mining space it is important to be a contrarian. Ideally, you would want to accumulate miners when sentiment is poor around them and sell them when sentiment is positive. Historically this has been a good strategy.


No strategy ensures success or protects against a loss.



Colin B. Exelby
Celestial Wealth Management

Important Disclosures
  • The information herein was obtained from various sources and we do not guarantee their accuracy.
  • The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
  • The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
  • No security, financial instrument or derivative is suitable for all investors.
  • In some cases, securities and other financial instruments may be difficult to value or sell and reliable information about the value or risks related to the security or financial instrument may be difficult to obtain.
  • Investors should note that income from such securities and other financial instruments, if any, may fluctuate and that price or value of such securities and instruments may rise or fall and, in some cases, investors may lose their entire principal investment.
  • Past performance is not necessarily a guide to future performance.
  • Levels and basis for taxation may change. Any information relating to the tax status of financial instruments discussed herein is not intended to provide tax advice or to be used by anyone to provide tax advice. Investors are urged to seek tax advice based on their particular circumstances from an independent tax professional.
  • This report may contain links to third-party websites. Celestial Wealth Management. is not responsible for the content of any third-party website or any linked content contained in a third-party website. The content contained on such third-party websites is not part of this report and is not incorporated by reference into this report. The inclusion of a link in this report does not imply any endorsement by or any affiliation with Celestial Wealth Mgmt.
  • The fast pricing swings in commodities and currencies may result in significant volatility in an investor's holdings.
  • There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio.  Diversification does not protect against market risk.
  • Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
  • The prices of small and mid-cap stocks are generally more volatile than large-cap stocks.
  • An investment in Exchange Traded Funds (ETF), structured as a mutual fund or unit investment trust, involves the risk of losing money and should be considered as part of an overall program, not a complete investment program. An investment in ETFs involves additional risks such as not diversified, price volatility, competitive industry pressure, international political and economic developments, possible trading halts, and index tracking errors.
  • High yield/junk bonds (grade BB or below) are not investment grade securities and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.