Letter to Stakeholders, June 2024

Monday, June 10th, 4:32 pm EST. People who follow the stock market closely will mark today as when NVIDIA Corporation – the self-anointed “pioneer of GPU-accelerated computing” issued a “10-for-1 forward stock split.” This means that the price of an individual share is 10 times less (because an investor now has 10 times more shares). It doesn’t mean the value has changed. But whether it’s Nvidia’s stock split news or today’s announcement by Apple Inc. of “Apple Intelligence,” neither may have a greater impact on how we invest your portfolio then our current relationship with China.

June 10, 1971

“The long-range goal of this Administration and of the next one, whatever it may be, must be two things: one, a normalization of the relations between the Government of the United States and the Government of the People’s Republic of China, and two, the ending of the isolation of Mainland China from the world community.”

• President Richard M. Nixon

The World Bank highlights that China’s reforms began – under former President Jimmy Carter – eight years after the above pronouncement by then President Nixon.  The expectation was that the United States would formally recognize the People’s Republic of China (PRC) as the sole legal government of China and would no longer recognize Taiwan’s government (as it had done since 1949). All of these years later, we are still questioning our trade and supply chain with China while trying to navigate "strategic ambiguity" with Taiwan.

Taiwan Economy

The artificial intelligence (AI) boom of the past 18 months – yes, it hasn’t been that long – has largely benefited our largest, US-based technology companies. The aforementioned Nvidia Corporation and Apple Inc. along with Microsoft Corporation are each worth about $3 trillion (with a “T”). Those three companies now comprise about 20% of the S&P 500 index; a 500-company index meant to represent the entire US stock market. Now 20% of it’s value is just three companies. As goes the value of those three companies, so goes the volatility of our markets. A lesser-known, foreign company, based in Taiwan maintains a key to the continued growth of those multi-trillion dollar US companies: Taiwan Semiconductor Mfg. Co. Ltd (TSMC).

TSMC manufactures the microchips (chips) that are designed by Nvidia and sold to Microsoft (and other corporations). Those chips are the lynchpin for the artificial intelligence boom driving our economy. The decades-old debate over independence between the People’s Republic of China (PRC) and the Republic of China (ROC or Taiwan) has directly entangled the US economy. It’s part of why on 60 Minutes our ambassador to China called the relationship “The most important, most competitive and most dangerous.” China’s possible interest in invading Taiwan over its independence is something US Secretary of Commerce says would be “absolutely devastating” because “..the United States buys 92% of its leading edge chips from TSMC.” This is why the Biden Administration made such a push for the CHIPS and Science Act.

In summary when our firm is evaluating your investments, we don’t get too excited about stock splits or new announcements. Our academic thesis for investing is based on the premise that the US economy can be relied upon to rise steadily over the long-term. The issues we watch out for have macroeconomic, long-term effects. Issues that have been built over decades are the ones we monitor for your decades-long investments.    

Stakeholder Spotlight

This month’s spotlight shines on private insurance agent, Nick Kiniry of NFP (an Aon Company). Nick is the latest guest on new “Zoominar” series of strategic partners who serve our clients. We have always been an advocate of serving you with a “team of advisors.” Our goal this year is to make your team more accessible and available. Nick is a leader in the field and connects the issues we see in the news with what’s happening to property and casualty insurance markets. Spoiler Alert: they are not going to "collapse."

On This Thursday  Nick and I will discuss how both climate change and your net worth can affect your premiums, your coverage and how we all manage risk.

Join us.

Jason J. Howell, CFP®, CPWA®, CSRIC®

President

Jason Howell Company is a family wealth management firm that strengthens the finances of families making the transition from first generation success to family wealth. We envision a world where wealthy families give, grow and govern themselves in ways that enrich their local communities. We do this by reducing the fear, isolation and guilt associated with financial success.

Jason J. Howell, CFP®, CPWA®, CSRIC® and Douglas W. Tees, MBA, CFP® CAP®, CBDA  have spent a lot of time in the Washington, DC area, and are aware that many people who are first generation wealth suffer from a kind of "financial imposter syndrome."  Successful entrepreneurs and family businesses are always looking over their shoulder; government contractors worry about the next contract; former Capitol Hill staffers privately wonder if they should "feel bad" for the money they now make. Imposter syndrome is common among people who work for the many corporate headquarters based in this area as well. These feelings get in the way of properly managing family wealth. We empower them to get organized, build a team of advisors and make decisions.

Our typical "first generation wealth" families include dual income parents who work, save and have just the right amount of fun. For long-time, family owned businesses we focus on much family preservation as we do wealth preservation. 

First generation wealth success stories and family business owners realize that they:

• Need to “do something” with the cash in their checking/savings
• Need to eventually diversify their portfolio away from the family business
• Need an investment strategy for “up” and “down” markets
• Need a plan to mitigate market, credit, inflation, and political risks
• Need to start tax planning instead of just tax paying
• Need to be sure they are choosing the right work benefits
• Need to reduce financial miscommunications between family members
• Need to separate business finances from personal finances
• Need to separate family wealth from individual wealth
• Need a plan to provide space for both family and individual philanthropy 
• Need to plan for money while alive and for what happens after death