Tuesday, February 13, 2018

"A 10% correction in the stock market due to the economy being too strong? Let me explain."

From the Desk of Joe Rollins

On the first weekend of February 2018, I fully intended to write this blog and explain how fabulous the month of January had been for the equity markets. Actually, the markets turned in a record performance in January. The Standard & Poor’s 500 index reached all-time highs for each of the first 6 trading days of 2018. You would have to go all the way back to 1964 to witness such a tremendous run and astounding highs for the beginning of a year.

Unfortunately, I was out of town during the first week of February, so I had to delay writing this blog for a week, but what a week it was. In the first 7 trading days of February, the S&P 500 actually fell by 10%. It was not the normal sell-off that you would expect when there are financial difficulties. Based upon the analysis of many market watchers, the sole reason for the huge sell-off was because the economy was financially too strong! I am sure this probably sounds illogical to you, because it certainly does to me; to have a sell-off of this magnitude just because the economy’s growth is actually too good is baffling.

In this blog, I fully intend to explain to you the difference between investing and speculation. I also intend to try to explain how the market can be down over 1,000 points on 2 of the last 7 days without any corresponding negative economic occurrences. In fact, this huge sell-off was accompanied by nothing but excellent financial news. As former Federal Reserve Chairman Alan Greenspan would say, “It’s a conundrum”.

While I plan to cover all of the aspects of this sell-off, as is my habit, I really need to explain how good January was in order to set the picture for the sell-off.

The S&P 500 index was up a sterling 5.7% for the month of January and up 26.4% for the one-year then ended. The NASDAQ Composite, the best performer of the major index, was up 7.4% for the month of January, and 33.4% for the one-year period ended January 31, 2018. The Dow Jones Industrial Average was up 5.9% for the month, and 34.8% for the year ended. Interestingly, the Barclay’s Aggregate Bond index was actually down 1.2% for the month of January and has risen only 1.9% for the one-year period ended January 31, 2018. As I have been writing in these blogs for many years, there is a high likelihood that bonds will continue to underperform given the strong economic growth and the increase in interest rates.


Ava enjoying the beach in St. Petersburg


January was quite an extraordinary month, but then all hell broke loose when the employment numbers for the month of December were announced by the government on February 2, 2018. This was also the day following the announcement of Apple’s quarterly income report. In this report, they announced that their earnings for the fourth quarter of 2017 were the highest quarterly earnings ever recorded in American finance. In addition, they announced ongoing strength in their operations and projected exceptionally high profits for 2018. It may seem very perplexing that the market would sell-off 10% over 7 trading days after both of these excellent economic terms were reported.

I would like to put into context something that is often misunderstood by the average investor. When I ask potential clients how many times the S&P 500 has fallen in the last 15 years, more times than not their answer is at least half. Much to their surprise, the S&P 500 has been up 14 of the 15 previous years. In fact, the S&P 500 has gained 10.1% per year over the last 50 years (1968 to 2017). And this is in spite of the fact that they endured 7 bear markets of a 20% or more decline. Just think about the economics of that statement. Even though the markets went down 7 times over the last 50 years, with a decline of 20% or greater, the market has still gained 10.1% over that time period. That strength is nothing short of incredible.

All of this is based upon an economy that has been subpar in prior years. If the year 2017 is not revised to a growth of at least 3%, which is highly unlikely, then we will have our 12th consecutive year of less than 3% growth in the U.S. economy. This includes the years 2006 to 2017. The current estimation of growth for 2017 is likely to be in the 2.3% to 2.6% range. What is even more remarkable about this fact is that the next longest streak is not 12 consecutive years, but only 4 years of less than 3% growth from 1930 to 1933. For those of you that do not remember those years, that was in the midst of the Great Depression.

In an attempt to try to understand why the markets would sell-off so abruptly in light of such great economic news, you have to play the “what if” game. I believe the traders came to the conclusion that the Federal Reserve would have to step in and substantially increase interest rates in the face of such strong economic growth and higher inflation, with higher interest rates becoming an alternative to stocks which in turn would drive down stock prices. Although there is absolutely no evidence of this, whatsoever, it was apparently enough for traders to bring the markets down. I will later explain how momentum traders work, but first I need to cover the economics of why the assumption that they acted on to bring the markets down borders on the absurd.

For the first time in my recollection, we are in the midst of a worldwide economic move up. China grew at a 6.9% GDP in 2017. Japan, which has suffered through 3-decades of near recession, registered its 7th straight quarter of GDP growth. If 2017 finishes the year up 2.6%, in the U.S., virtually every developed country in the world will be showing economic strength. So, the assumption that the Federal Reserve would be required to increase interest rates is based on the assumption that they could increase interest rates while the rest of the world would sit back and let them do so. Not likely!

As of Friday, February 9, 2018, the 10-year Treasury was yielding 2.85%, which had moved up significantly since the beginning of 2018. However, the German 10-year bond rate is only at 0.784% and the Japanese 10-year bond rate is at 0.066%. Does anyone with any economic training believe that the Federal Reserve could increase interest rates significantly while the rest of the world has significantly lower rates? As you know, money goes where it is treated best. If the U.S. has the highest interest rate in the world, money will flow to the U.S., strengthen the dollar, discourage exports and significantly impact the employment in the U.S. To think the Federal Reserve would make a move that would hurt the U.S. economy is not even plausible.

What do we know about our own U.S. economy? It appears quarterly earnings for 2017 are up 5.5% from 2016. But first we need to understand exactly what we are talking about because corporate earnings for 2018 are forecasted to jump a robust 22.5%. Yes, you are actually reading that number correctly. A 20% increase of corporate earnings in the U.S., but the stock market falls 10%? Of course, much of the expected corporate earnings in the U.S. are due to the significant reduction in income taxes for corporations. However, all the good news has yet to be told. Everywhere you read, corporate America is announcing bonuses for employees due to the tax cuts. The entire world has proposed building plants in the U.S. because of the tax cuts. There is unequivocal evidence that the GDP should be higher in 2018 than 2017 based upon the increase in corporate earnings alone.

There are also other economic indicators that cannot be ignored. The Federal Reserve Bank of Atlanta is now forecasting for the first quarter of 2018 to increase by 4%. This is not someone on T.V. making projections based on wild economic data; this is the actual Federal Reserve Bank of Atlanta. They anticipate strong economic growth in the first quarter of 2018 even though, historically, the first quarter of any year is the worst quarter of the year. There are a lot of reasons why, but the primary reason is the effect that weather has on construction in the U.S. This particular year, bad weather has been a significant negative factor to growth and, therefore, if we actually realize a 4% growth, it will be impressive given the negative economic evidence.

Let’s just say you agree that I have quoted strong economic information for 2018. So why do we still have a 10% sell-off? The first reason is that it has been over 1.5 years since we have even had a 3% correction in the market, let alone even 5%. We have become so used to the market grinding higher on a daily basis that we forget what a minor correction means. You have to have corrections in order to bring new players into the market and as I have quoted often in these pages, you can expect a 10% correction at any time in financial markets. They are not only expected but they are welcomed, as they allow for the process of “bottoming” and the market can move forward.

More than likely, the main reason we saw this significant sell-off over 7 trading days had more to do with true momentum traders and hedge funds than economic reality. It helps to actually understand the mentality of traders to understand why something like this would happen. If you are really interested in the subject, there is a fascinating book written by Michael Lewis titled “Flash Boys: A Wall Street Revolt”. You may know that Michael Lewis is the same author that wrote the best seller “The Big Short” relating to the decline in the real estate markets in 2007 and 2008. Even further ago, he wrote another book based upon economic events called “Liar’s Poker”. Therefore, I believe he is eminently qualified to analyze economic positions and write upon actual evidence rather than concepts.

In the book Flash Boys, he explains that these traders trade on momentum not fundamentals. If the trend is down, they trade down. If the momentum is up they trade up. They do not care what the fundamentals are. You often hear people explaining that the market had been controlled that day by program traders. This is what we mean when we talk about momentum investing vs. financial investing. During this 2-week period, it is almost assured that the momentum traders and the large hedge funds were in coordination in attempting to move the market. Each of these trading techniques requires that they borrow large sums of money from the local banks in order to magnify the movements by selling against sole momentum. Since they do not consider fundamentals, they live under the philosophy that a trend is a trend until the trend is broken.

I am sure some of you reading this will immediately say we should ban these traders because they clearly have a negative effect on your portfolio. I could not disagree more. The reason the market is efficient is because it has liquidity. If you want to sell your stock at any time, day or night, you can do so. You may not get the price you want, but at least you can get your money. There are many markets in the world where there is not a ready market to buy your security. The momentum traders create the liquidity that is critical for investing. You may not like what they do day-in and day-out, but you cannot disagree that they provide a benefit to the market and are therefore needed.

One of the things I noticed this week is that people assume that the sell-off in the market is a lot worse than it actually is. As of February 9, 2018, even though the S&P 500 index was down 7.16% for the month of February, it is actually only down by 1.85% year-to-date. Given the volatility of the market lately, a 2% decline could be either made up entirely or double just in one day of trading.

So, assume that you do not want the volatility of equity investing but rather you prefer the stability of the bond market. In this sell-off there were no prisoners. Everybody went down with the ship. As of that same date, the S&P 500 is now 1.85% and the U.S. Bond Index is down even further at 2%. Therefore, if you chose the conservative nature of bonds as opposed to equities, you would have lost even more. In addition, the international markets also fell by almost the same percentages as the U.S. market. So, the sell-off is worldwide and there are no safe havens, but I guess you could say that is exactly what the momentum seller and hedge funds wanted.

Wine Weekend in St. Petersburg, 2018

Dakota and Joe

Jennifer and Eddie


Danielle and Robby

At Rollins Financial, we promote investing, not speculation. We do not invest in gold, silver or Bitcoin. None of those are even really an asset class, not particularly rare and have no liquidity value. If you bought Bitcoin, just read the horrors of people trying to sell it but cannot create liquidity. We invest in the fundamentals of the stock market going forward and don’t look back at what happened last year or the year before.

I have studied financial markets for close to 40 years and there is absolutely only one slam dunk conclusion you can draw. Recessions bring negative stock market performance. Virtually nothing else will forecast a bad stock market unless there is a forecasted economic recession. There is no evidence whatsoever in any financial matters today that a recession is anywhere in sight.

In fact, quite the opposite is true. As mentioned above, corporate earnings are projected to grow in excess of 20% in 2018. In my personal opinion, that number will be even higher since we do not know the full economic effects of the new tax cuts. The entire world is rushing to build in the United States which will increase employment and it will make wages go up benefitting the average worker. As wages go up and corporate America uses their capital to build plants and equipment, the average worker will benefit from higher wages. In addition, regular GDP growth for 2018 is likely to be 3.5% which would be the highest over the last 12 years.

And the economic future continues to get rosier. This past Friday, the President signed into law an increase in federal spending of over $300 billion dollars for 2018. This increase in federal spending would be for higher military expenditures and infrastructure increases. If you compound the economic growth of this increase, the numbers are quite staggering. Based upon the velocity of money, a $300 billion increase in spending could actually generate a sevenfold increase in GDP of over $2 trillion. I know we are talking about numbers that are hard to even fathom, but to simplify it; a good economy has the potential to get better when federal money is added to the equation.

Let me express two concerns that clients have asked me to expand upon: First, many are concerned that China is buying up all of our U.S. debt and will therefore essentially “control” the U.S. as a large holder of our debt. Therefore, a massive sell-off of Chinese bond holdings would substantially wipe out the U.S. economy. Just so everyone understands, China needs us a lot more than we need China. Without the U.S. buying from China, the Chinese economy would be nothing. In addition, the Chinese have a need to stabilize their currency against the U.S. dollar and they do so by investing in U.S. bonds. It would be financial suicide for China to consider any major liquidation in U.S. treasuries since it would strengthen their own currency making their exports non-competitive. That concern should never affect your economic projections.

Second, while it is true that the large tax decreases will create federal deficits, is it just not possible that economic growth created by this economic stimulus would not increase federal revenues? There are many that are forecasting that if the tax decreases increase GDP by only 0.5% for the next three years, then these tax cuts will in fact pay for themselves. Just the repatriation of funds by U.S. corporations from international banks is already creating potential tax revenue to the U.S. Treasury by over $1 trillion over the next 10 years. The economic news just keeps getting better.

I am giving you a lot of economic numbers and financial circumstances to consider. As I often write in these reports, believe what you know and discount those that forecast negative economic evidence. The three major components that control the market are corporate earnings, interest rates and the economy. This month, going forward, all three are substantially stronger than they have been in years and all are likely to increase the market going forward. Therefore, my advice to investors is basically, do nothing. Yes, we evaluate this every day and may change on a dime if we see something new but at the current time, given the strong economic evidence going forward, no changes are warranted in your portfolios.

As always, the foregoing includes my opinions, assumptions and forecasts. It is perfectly possible that I am wrong.

Best Regards,
Joe Rollins

Wednesday, January 3, 2018

"Yes, Virginia, there is a Santa Claus" - Francis Church, September 21, 1897

From the Desk of Joe Rollins

You are probably wondering why I selected the title above for my year-end blog. I have heard it my entire life, but I never quite found the opportunity to use it in a financial blog. Now I can. Two days before Christmas, our current president, Donald Trump, signed into law one of the most sweeping and, potentially, the most beneficial tax changes in the history of American finance.

In the following commentary, I will hopefully be able to explain to you exactly how the economic benefits that flow from this tax change will affect all of our financial lives going forward. This is a really big deal! Also, I want to reflect on the fact that in 2017 the S&P 500 index had basically a perfect record. This was the first time ever in the history of American finance that the market was up every single month, having no negative months for all of 2017. This is a record that is unparalleled in American investing. You are probably wondering, "How did this happen?"

It might be that we are beginning to witness the start of a few financial golden years in the United States. No longer will corporations be required to relocate outside the United States due to lower tax rates. In fact, they will rush to manufacture in the United States due to the excellent business environment here. In addition, we never believed that we might accomplish energy independence. However, due to technology and the innovation of the oil industry, we are no longer dependent on Middle East oil in the case of a crisis. We have full employment in the United States, interest rates are at historic lows, corporate America is generating more profits than ever and its economy is getting stronger by the day. This might just be a recipe for a few golden years in the U.S.

Ava as flower girl in Carly and Erik's wedding

Crown of Statue of Liberty, November 2017

Snow in Atlanta?!

Before I can get to all of those very important subjects, I need to give you the year-end financial results, which were excellent.

Needless to say, the scorecard for the year 2017 was nothing short of spectacular. As I reflect back on the year, although I had projected a nice increase in the beginning of 2017, I wasn’t even so optimistic as to see this level of returns. For the year 2017, the Standard & Poor’s 500 index was up a sterling 21.8% and has averaged a 5-year return of 15.8%. The NASDQ composite was up 29.7% for 2017 and the 5-year average has been 19.4%. The Dow Jones Industrial average was up 28.1% and has averaged 16.4% over the previous 5-years. Just for a basis of comparison, the Barclay’s aggregate bond index was up 3.3% for 2017 and has averaged 1.9%. It is clear that bonds have not even come close to keeping up with equity investments for the last five years.

The month of December was somewhat odd in that growth actually trailed value investments during the month. The international funds continued to be strong and the bond funds returned almost nothing. While it was a relatively subdued market in December, it ended as one of the most productive markets of all time. If you know anything about the markets, you know that you must be invested when we have excellent years. I have never understood why there is so much money sitting in cash earning exactly zero during these very profitable investing years. Are you one of these investors?

This is what happens in corporate America when you decrease the corporate tax rates from basically 35% to 21%. You can see the positive benefits that this tax cut will have on future earnings. As I have reported so many times in my personal blogs, earnings are by far the most important component of the stock market valuation. After the signing of the new tax bill on the Friday before Christmas, corporate America has been overwhelmingly expressing their satisfaction. This was done in the form of many corporations giving bonuses and salary increases to their employees. Companies were falling all over themselves to explain how they were going to use this tax reduction to benefit America. That, my friend, was exactly the intent of the new administration.

I read so many publications and newsletters that I oftentimes forget exactly where I have read a quote. Many indicate that the approval rating on this tax decrease by Americans was only 30%. Presumption being that 30% of the U.S. population agreed with the tax decrease so therefore 70% either disagreed with it or had no opinion on the subject. But frankly Virginia, if you do not agree with the tax cut then you do not understand Economics 101.

The reason the stock market has been so good in 2017 is very simple. Economics has benefited corporate America and their earnings have gone up. Ever since the election of the new president, the administration has dramatically reduced regulations throughout corporate America. In addition, the economy has greatly improved resulting in higher earnings. Higher earnings support the stock market going higher and as it did in every single month in 2017. Stock market performance is a direct result of higher earnings.

You need to understand basic economics to understand the effects of the tax cut on corporate America. There are so many publications and negative articles written due to the fact that they do not understand how corporate America records their tax provisions. I read the negative reports that say that the average American corporation only pays a tax rate of 21% and therefore this tax decrease will not benefit them. They may have in fact only paid 21%, but they are required to record on their books at the highest statutory rate north of 30%. A 5% return to a company’s bottom line under the old rules will now generate a return of 15% to their bottom line under the new rules. These amounts will be nothing short of staggering and beneficial to these corporations and, therefore, America.

In addition to the wonderful benefits of the corporate tax rates, virtually everyone will receive a reduced tax rate. I recognize that it is impossible to reduce the tax rate of someone who pays no tax, and therefore that argument is completely moot as far as I am concerned. However, when you decrease tax rates among the broad population you will benefit all Americans. Almost universally, this money will be spent creating higher commerce which will create jobs. Jobs create economic activity and therefore a higher standard of living for the general population.

While questionably the deficit is on everyone’s mind as we go forward, I have reviewed the projections and have a high-level of optimism that in fact the deficits may not be nearly as high as projected. If you want to get a real feeling for the plan, you have to understand the difference in economics under the old administration and the new administration. For the 8 years in the previous administration, the GDP averaged 2.1%. Interestingly most of the bad quarters were late in the presidential cycle, not early. This was the lowest GDP growth realized over an 8-year period in America since WWII.

The new administration took office in 2017, and every quarter a GDP growth of 3% or higher has been realized. In fact, going into 2018, the GDP growth is forecasted above 3% in virtually every quarter. If, by chance, these tax decreases could increase economic activity by only 0.5% per year, there is a high likelihood that over the next 10 years, in regards to our $1.5 trillion deficit, these tax cuts could essentially pay for themselves. If you believe that these tax cuts will result in corporate America creating more jobs, paying more dividends or buying back more stock to create value to the average investor then you can certainly see the economic growth increasing significantly going forward. All as a result of the tax cuts.

I also read many articles that take the position that money repatriated from overseas to the U.S. and then spent to pay dividends or to buy back stock is not beneficial. I am just not sure what planet people making that exclamation live on. If money that is sitting idly earning virtually nothing overseas is brought back to the United States with a 15% tax rate, and then the corresponding corporation uses that money wholly to pay dividends and buy back stock, every single leg of that transaction creates income tax to the U.S. government. How anyone under any definition could see that as a negative defies economic reality and basic common sense.

The most interesting financial result is that for the first year in a very long time we are witnessing a world-wide boom in economic activity. The entire world appears to be on the upswing. There is also a high likelihood that during 2018, inflation will pick up which will dramatically increase the value of commodities. This increase in commodities will be a huge boom to the emerging markets that depend upon oil for their wealth. So not only do I expect to see the U.S. economy strong, averaging a GDP of roughly 3.5% for 2018, I expect to see the rest of the world’s economies pick up which will improve the sales of U.S. corporations in all countries around the world. If you review the projection I made at the beginning of this year, I assumed that the S&P 500 would be up 10% in the year 2017. I may have been one of the few forecasters that would even venture a number as high as double digits at the beginning of the year. Fortunately, I was very wrong and the S&P ended up 21.8% - more than double my projection. However, from a strictly arithmetic standpoint, my projection was not very far off. The difference in the projection and the actual was that I projected a multiple of 17.5 times projected earnings in 2017. In fact, the multiple ended up being just north of 20 times and therefore the error in calculation

While you may think a 20 multiple on earnings is excessive given the potential growth of earnings and the expansion of the economy, and interest rates being low for most of 2018, it is not a reach to come to that conclusion. Therefore, my projection for 2018 is based on simple arithmetic. The Standard & Poor’s company has projected earnings of $145 per share on the S&P 500. This projection was not based upon the new tax rates that are currently in existence. Therefore, my estimate is that corporate earnings will go up 17% and, therefore, $169 per share.

In last year’s projection I made an assumption that earnings would grow between a multiple of 17 to 18 and I elected to pick the halfway mark of 17.5. Currently, earnings are at 20 times, but historically that is too high. Using a high but reasonable multiple, given the increase in earnings, I would use an 18 multiple which would project the year-end S&P at 3,042. Using some sort of geopolitical event that might reduce earnings during the year, I will round down to exactly 3,000 since everyone likes rounded numbers. Therefore, the increase in earnings from today’s valuation at 2,673 to exactly 3,000 would mean that the S&P would go up $327 or roughly 12% for the year. To that you would add the dividend ratio of the S&P 500 at roughly 2% for a total of 14%. Therefore, my projection for the S&P 500 going forward for 2018 would be somewhere between 12% and 14%, so for the sake of averages, let’s say a 13% growth for all of 2018.

Yes, it is true I was wrong about 2017 and I hope I am wrong about 2018 in a good way as well. I would much prefer that the return on 2018 be much higher than 13%. However, any high single-digit or low double-digit number would be a welcomed result, after the sterling results we had for 2017. It has been nothing short of a spectacular financial year, and I have nothing but encouraging thoughts going forward. If the tax cut does as I project and the administration continues to keep the government out of business’s way, it could lead to a world-wide economic boom that lasts for 4 to 5 years. We all are hoping so!

As always, the foregoing includes my opinions, assumptions and forecasts. It is perfectly possible that I am wrong.

Best Regards,
Joe Rollins

Tuesday, January 2, 2018

14 out of 15 is not bad; it is great!

From the Desk of Joe Rollins

Every year, I try to give you a scorecard on how the stock market is doing from an investment standpoint. Based on the chart below, the Standard and Poor’s index of 500 stocks has now been up 14 out of the last 15 years. Every day, I am confronted by cynics in the stock market that just cannot believe that the market is real and goes up every year. However, the chart below absolutely proves without exception that if you intend to retire on an income similar to the one you earned during your working years, you must be invested in assets that appreciate like the stock market. As reflected in the chart below, if you had invested $10,000 on January 1, 2003, at the end of December 31, 2017, your investment would be worth $41,309. You do not have to be a rocket scientist to calculate that your original investment of $10,000 was up a cool 313%.


Over and over again, I meet with potential clients who sold all of their investments in 2008 and never reinvested. Their reasons for not reinvesting vary, but almost none of them reflect economic reality. Basically, this chart says that if you had invested in the S&P 500 Index in 2003 and had done nothing whatsoever with your investments, including during the 2008 correction, you would be 313% better for having done so.

I doubt there is a clearer advertisement for investing going forward than the chart above. We are not even talking about actively managed investments here; this is just a passive index of the 500 largest corporations in America. It does not include international investing or even emerging markets, which has the potential in 2018 to be a very strong performer. My goal for sharing this chart is to provide you with information that will allow you to evaluate your investments going forward.

I am sure that you are anxious to hear my year-end evaluation of the stock market and my projections for 2018 but, unfortunately, you will have to wait another 24 hours to read all about it. In the meantime, if you have any questions regarding the numbers reflected in the chart above, please let me know.

As always, the foregoing includes my opinions, assumptions and forecasts. It is perfectly possible that I am wrong.

Best Regards,
Joe Rollins

Wednesday, December 27, 2017

Tax Cuts & Jobs Act

As everyone is aware by now, President Trump signed the tax reform package into law last Friday. While the tax bill contains numerous provisions, we wanted to pass along only a few key items to consider for 2017 and 2018 that may affect some or all of our clients. And you only have a few days of 2017 remaining to take advantage of a few key strategies to wrap up this tax year. Here we go!

• In 2018, the estate tax exemption is jumping from $5.6 million to $11.2 million per person. That is a significant hike and can be transferred to your spouse upon death for a collective estate tax exemption of $22.4 million. Get out there and buy those lottery tickets! The annual gift exclusion will be $15,000 per person per recipient in 2018.

• The standard exemption is almost doubling in 2018. For single filers it will be $12,000 (from $6,350) and for married couples filing jointly it has increased to $24,000 (from $12,700). This increased standard deduction will definitely benefit those of you are that are unable to itemize, but even those of you that used to itemize may find that the new standard deduction is higher than your itemized deductions. If you think you will be using the standard deduction in 2018, you likely will want to accelerate your charitable contributions into 2017 to take advantage of that deduction.

• In 2018, Schedule “A” miscellaneous itemized deductions – typically unreimbursed business expenses for W-2 folks, investment management fees, and tax return preparation expenses, including distributions – are not allowable. Consider pre-paying those business expenses and fees now if you typically receive a deduction for them. Thanks!

• In 2018, Schedule “A” state and local income tax and property tax deductions are limited to $10,000. Therefore, we would encourage all of you to be sure to pay your 4th quarter state estimated tax payments and 2017 property taxes BEFORE the end of 2017. This will at least allow you the benefit of potentially taking advantage of a deduction for these items during 2017. If you still owe Fulton County or City of Atlanta since those property tax bills came out so late this year, pay them now rather than in January. If you escrow those payments, call your mortgage company and request that they be paid now.

• Mortgage interest deductions are limited to $750,000 of principal residence and second home debt. This debt limit was previously $1,000,000 with a home equity line kicker of $100,000. There is no longer a home equity line kicker. Therefore, if your debt is greater than $750,000, you might consider accelerating a mortgage payment or two into 2017 to take advantage of that interest deduction.

• Several of the seven tax brackets have been lowered for 2018. In that regard, we would recommend deferring business income for the next few days if possible. There is also a very complicated pass-through entity business income deduction that may be beneficial for some of you with flow-through entity income.

• The electric car credit expires at the end of 2017. If you are considering a purchase, you have 4 days to complete the sale!

• 529 accounts can now be used to save for elementary, secondary and higher education. Consider making contributions and having family members make contributions. The amounts that you can withdraw for lower level education are limited, so please discuss with us before doing so. Fund your 529’s now!

• There will be no more exemption allowance in 2018. Some of you had this phased out already and are used to not having this exemption allowance, but those of you with children that did not have this phased out will likely see an increased child tax credit. It will double from $1,000 to $2,000 per child under 17 years of age. And it will be available to more filers as the income threshold to receive the credit has increased for joint filers who make up to $400,000.

• Likely a lot less of you will experience the AMT in 2018 when the exemption amounts and the phaseout thresholds have been increased.

• Accelerated bonus expensing of qualified business property purchases has been expanded to 100% of property placed in service through 2022 on new or used property.

• New C Corporation tax rate is a flat rate of 21% in 2018 and no AMT.

The above information constitutes a very limited summary of some of the key provisions in the new tax reform bill along with our recommendations for possible key items to make sure you do over the next few days given the changes. Please contact us directly for questions if you feel you have a specific situation that has not been addressed above. We look forward to working with you during 2018 and wish you all a very happy new year!

Best Regards,
Danielle Van Lear

Friday, December 22, 2017

Happy Holidays from Rollins!


In celebration of the Christmas holiday, the offices of Rollins Financial and Rollins & Van Lear will be closed on Monday, December 25th and Tuesday, December 26th. Our regular office hours will resume on Wednesday, December 27th.

AND, in celebration of the New Year holiday, our offices will be closed on Monday, January 1st but will resume normal office hours on Tuesday, January 2nd.


Joe, Dakota, Ava and Josh

Harper and Lucy, daughters of Eddie and Jennifer Wilcox

Robby, Caroline, Danielle and Reid


If you have a matter that requires immediate attention while our offices are closed, please contact Joe at jrollins@rollinsfinancial.com.

You can also contact Eddie Wilcox at ewilcox@rollinsfinancial.com, Robby Schultz at rschultz@rollinsfinancial.com or Danielle Van Lear at dvanlear@rollinsfinancial.com.

The Partners at Rollins Financial and Rollins & Van Lear wish you a Wonderful Holiday and a very Happy New Year!

Best Personal Regards,
Rollins Financial, Inc.

Tuesday, November 21, 2017

Happy Thanksgiving!

In celebration of the Thanksgiving holiday, the offices of Rollins Financial and Rollins & Van Lear will be closed on Thursday, November 23rd and Friday, November 24th. Our regular office hours will resume on Monday, November 27th at 8:30 a.m.


If you require immediate assistance during this time, please contact Joe Rollins at 404.372.2861 or jrollins@rollinsfinancial.com.

Be safe, have a wonderful thanksgiving and please know we are very thankful for you!

Warm Regards,
The Staff of Rollins Financial