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By Nancy Burner, Esq.

Nancy Burner, Esq.

In December 2017, Congress passed the Tax Cuts and Jobs Act (“TCJA”).  This tax bill was an overhaul of the tax law affecting individuals and businesses in many ways. One of these changes substantially increased the Federal estate tax exemption.  

At the time the law was inked, the Federal Basic Exclusion Amount for an estate was $5.49 million ($5 million, indexed for inflation).  This meant that no taxes would be owed on the estate of a person dying in that year with a taxable estate less than that.  For estates over that amount, the overage was taxed at 40%.

The TCJA stated that for deaths in 2018, the exemption increased to $10 million, indexed for inflation.  Currently, in 2023, the estate tax exemption is $12.92 million.  This is an individual exemption, so a married couple enjoys $25.84 million between them.  

While this increased exemption is helpful for many families, it is not a long-term solution.  The law expanded the exemption but only for a limited period of time.  Barring any action by Congress to extend this further, this and other provisions of the TCJA sunset at the end of 2025.  As a result, where an individual dies on or after January 1, 2026, the exemption will return to the pre-2018 scheme of $5 million, indexed for inflation (likely to be just under $7 million).  For single persons with less than $7 million in assets, and couples with less than $14 million between them, there is no cause for concern when it comes to Federal estate taxes, even after the sunset.

With this looming sunset of the exemption amount, couples and single individuals may be able to take advantage now of the higher exemption amount with proper planning.  An alphabet soup of tools are available including SLATs, GRATs, IDGTS, etc.  The general idea being to remove assets from your taxable estate while you are alive, utilizing your expanded exemption, thus reducing the taxable assets at the time of death and passing more along to your beneficiaries.  There are also planning mechanisms for the charitably inclined that will serve to further reduce one’s taxable estate.

For New Yorkers, the State estate tax, currently $6.58 million, has been the larger concern.  Unlike the Federal, the New York exemption is not “portable” between spouses, meaning that the exemption of the first spouse to die cannot be saved to be used when the second spouse dies. Planning must be done to utilize each spouse’s exemption at the time of their respective deaths. 

Not all planning opportunities will suit your individual circumstances.  Determining the proper estate planning tools will depend upon your family structure, asset structure, and intended beneficiaries.  You should speak with your estate planning attorney today to better plan for tomorrow. 

Nancy Burner, Esq. is the founder and managing partner at Burner Prudenti Law, P.C. with offices located in East Setauket, Westhampton Beach, New York City and East Hampton.

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By Michael Christodoulou

When you retire, you’ll experience many changes — should one of them involve your living arrangements?

The issue of downsizing is one that many retirees will consider. If you have children, and they’ve grown and left the home, you might find yourself with more space than you really need. Of course, this doesn’t necessarily mean you must pack up and scale down yourself. You might love your home and neighborhood and see no reason to go. But if you’re open to a change, you could find that moving to a smaller house, a condo or an apartment may make sense for you.

Let’s consider some of the advantages of downsizing:

You could save money. Moving to a smaller space could lower your utility bills and upkeep costs.

You could save effort. A smaller home will mean less maintenance and cleaning.

You could de-clutter. Over the years, most of us accumulate more possessions than we really need. Downsizing gives you a chance to de-clutter. And you can do some good along the way, too, because many charitable organizations will welcome some of your items.  

You could make money. If you’ve had your home for many years, it’s certainly possible that it’s worth more — perhaps a great deal more — than what you paid for it. So, when you sell it, you could pocket a lot of money — possibly without being taxed on the gains. 

Generally, if you’ve lived in your home for at least two years in the five-year period before you sold it, you can exclude $250,000 of capital gains, if you’re single, or $500,000 if you’re married and file taxes jointly. (You’ll want to consult with your tax advisor, though, before selling your home, to ensure you’re eligible for the exclusion, especially if you do own multiple homes. Issues can arise in connection with determining one’s “primary” residence.)

While downsizing does offer some potentially big benefits, it can also entail some drawbacks. First of all, it’s possible that your home might not be worth as much as you had hoped, which means you won’t clear as much money from the sale as you anticipated. Also, If you still were paying off a mortgage on your bigger home, you may have been deducting the interest payments on your taxes — a deduction that might be reduced or lost to you if you purchase a less-expensive condo or become a renter. 

Besides these financial factors, there’s the ordinary hassle of packing and moving. And if you’re going to a much smaller living space, you may not have much room for family members who want to visit or occasionally spend the night.

So, as you can see, you’ll need to weigh a variety of financial, practical and emotional issues when deciding whether to downsize. And you will also want to communicate your thoughts to grown children or other family members who may someday have reason to be involved in your living space. In short, it’s a big decision — so give it the attention it deserves. 

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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By Michael E. Russell

Michael E. Russell

After many years running the most politically active financial empire, Socialist George Soros is passing the baton of his $27 billion Open Society Foundation to his son, Alex.  

Those of us who cringed at many of George Soros’s comments and investment strategies longed for the day when he would retire. Unfortunately, the elder Soros who contributed unabashedly in excess of $1.5 billion to extreme causes has picked the second youngest of his five children to be the Foundation Chair. Alex will also serve as President of the Soros super PAC and is the only family member on the investment committee for Soros Fund Management, a private investment management firm.  

The younger Soros will now oversee a philanthropic empire, funded from the many billions that George Soros made from finance.  I am sure that many readers are impressed by his financial acumen. However, those of us who worked in the field remember that in 1992 Soros shorted the British Pound and reportedly made a profit of $1 billion dollars.  Unfortunately, he almost broke the Bank of England! A hero to some, certainly not me. I will leave it to the readers to do their own research on the Soros empire. Just trying to get you motivated to see how some people get filthy rich.  

Allow me to mention an investment icon to look up to, Warren Buffett. At 92 years of age, he appears to be as sharp and engaged as ever. Mr. Buffett has been extremely active in the stock market this year, as well as last year, highlighted by the purchase of 25% of Occidental Petroleum. He probably read my article last month about how I felt the Japanese market was undervalued because he now has holdings in five Japanese trading companies worth $20 billion dollars. Once again, another reason to subscribe to TBR News Media. I believe he has done very well on his own without my advice. Buffett’s Apple purchase is now worth more than $165 billion dollars, quite a bit more than the $30 billion he invested. 

In 1965, Warren Buffett took over Berkshire Hathaway. Due to his efforts over the past 58 years, the fund generates $35 billion dollars in annual earnings power. A $20 dollar investment in 1965 is now worth more than $500,000, an incredible $25,000-fold increase. No wonder he calls Berkshire Hathaway his Mona Lisa.

Another financial icon who I admire is Jamie Dimon, the CEO of JP Morgan Chase.  Jamie has few peers in his field. His advice is sought by many world leaders when he travels abroad. JP Morgan Chase is now the country’s top bank, putting distance between itself and Bank of America, the bank that loves charging client fees. 

Jamie has proven to be an exceptional CEO. The bank had a very strong 2022 when it had the highest return on tangible equity among its peers. Dimon avoided huge losses experienced by Bank of America by not investing assets in bonds at historically low rates in 2020 and 2021. JP Morgan stock returned 30% last year, tops among its rivals. Jamie Dimon was the leading advisor to Federal Chair Jerome Powell and Treasury Secretary Janet Yellen. I would have preferred that they had listened to him more often. Hopefully, now they have him on speed dial.

As far as the market — we can look for further rate increases due to continued inflation concerns. For those of us looking for safety, a 5% 2-year Treasury bill looks attractive. My favorite stock, Nvidia, has paused recently closing at $422, up a mere 195% year to date. 

For those of you Crypto folks, Tether’s stablecoin will rake in $6 billion dollars of profits this year. Tether Holdings is the issuer of the largest stable coin which are like crypto cash. Typically, they hold a $1 price backed 1/1 in reserves.  It now has $83 billion dollars in deposits.  With rates increasing, Bitcoin and most of crypto have dropped in value, while Tether has become the world’s most profitable digital asset. It has kept most of its assets in U.S. treasury bills; a 5% return on $83 billion dollars is not chump change.

I hope most readers realize that some things that I write are meant to be tongue in cheek, however not all! Have a wonderful July 4th and God Bless America.

Michael E. Russell retired after 40 years working for various Wall Street firms. All recommendations being made here are not guaranteed and may incur a loss of principal. The opinions and investment recommendations expressed in the column are the author’s own. TBR News Media does not endorse any specific investment advice and urges investors to consult with their financial advisor. 

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Mailbox fishing and check washing, two pernicious crime phenomena, are on the rise.

The United States Postal Inspection Service defines check washing as a scam involving “changing the payee names and often the dollar amounts on checks and fraudulently depositing them.” Often, thieves steal the checks from mailboxes, removing the ink using commonplace chemical agents.

Chelsea Binns, assistant professor at John Jay College of Criminal Justice in New York City, described check washing as an “old school fraud” that is ascending in popularity.

“It is actually the second most common form of consumer fraud right now,” trailing only identity theft, she told TBR News Media in a phone interview.

Carrying out mail theft is relatively simple, Binns noted. Mailbox fishers commonly send a “line” into a post box, often with a sticky end.

“Similar to catching a fish, they’re using these devices and techniques to catch the check out of the mail,” she said.

After stealing the check, criminals can use commonplace chemical agents, such as nail polish remover, to “wash” the stolen checks, removing and changing the payee and amount to suit their preferences. Fraudsters can either cash the check themselves or sell it online in the underground market.

While check fraud is a longstanding practice, the crime has spiked following the COVID-19 pandemic. A February report by the Financial Crimes Enforcement Network indicates mail theft complaints rose 161% between March 2020 and February 2021 compared to the same period over the previous year.

While there have been cases of U.S. postal service employees committing fraud, the report suggested the rise has been driven by non-USPS employees — ranging from rogue individuals to organized criminal operations — carrying out mail thefts.

David Shapiro, a distinguished lecturer at John Jay College, is a fraud risk and financial crimes specialist. Reached by phone, he detailed why these crimes are multiplying regionally and nationally, noting the relative ease with which one can become a check fraudster.

“It’s a low-tech fraud, so it makes it available to so many people,” he said. “Granted, it can get higher tech when you want to expand the network and make it more profitable for organized criminals … but you can enter this business basically as a solo practitioner.”

Compounding this problem is the crime’s profitability, which he indicates has increased considerably due to broader financial trends.

“The number of checks in circulation is way down, but the average value of the checks is way up,” he said. “Now you’re fishing, but you’re not fishing for minnows. You’re fishing for flounders, making it more appealing to the low-tech street thief.”

While much of the national discourse around these crimes centers around security breaches within the postal delivery system, Shapiro regarded the problem primarily as a payment system problem.

“It’s being driven by the banks because the banks are ultimately liable for this kind of thing,” he said. “The customer is not out [of pocket], generally. The fraudster gets away, so basically it’s a bank liability.”

Given the scale and reach of the crime, these losses can compound astronomically. Earlier this year, Randy Hutchinson, president and CEO of the Better Business Bureau of the Mid-South, reported that check washing now accounts for more than $815 million per year in losses to individuals, businesses and financial institutions.

In the face of these challenges, there are tangible ways to protect oneself from mailbox fishing and check washing. Binns advises using a black-ink gel pen when writing out checks.

“That sinks into the check’s fibers, and it can’t be washed,” she said.

The assistant professor also advised against using one’s residential mailbox for check deliveries, and recommended mail with issued checks be taken directly to the post office and handed to a postal worker. She said mailboxes, even those placed outside the post office, are at risk of fishing.

She lastly advised consumers, particularly elders, to explore transitioning to online payment systems, removing the risks associated with paper checks altogether.

“Unfortunately, it’s time for us to change our habits to try to combat this,” Binns concluded.

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By Michael Christodoulou

Most investors are aware of the different types of stocks: big-company, small-company, technology, international and so on. And it may be a good idea to own a mix of these stocks as part of your overall investment portfolio. But the importance of diversification applies to bonds, too — so, how should you go about achieving it?

To begin with, individual bonds fall into three main types: municipal, corporate and government. Within these categories, you’ll find differences in the bonds being issued. For example, government bonds include conventional, fixed-rate Treasury bonds as well as inflation-protected ones, along with bonds issued by government agencies, such as the Federal National Mortgage Association (or Fannie Mae). Corporate bonds are differentiated from each other by several factors, but one important one is the interest rate they pay, which is largely determined by the credit quality of the issuer. (The higher the rating grade — AAA, AA and so on — the lower the interest rate; higher-rated bonds pose less risk to investors and therefore pay less interest.)

Municipal bonds, too, are far from uniform. These bonds are issued by state and local governments to build or improve infrastructure, such as airports, highways, hospitals and schools. Generally, municipal bonds are exempt from federal tax and often state and local taxes, too. However, because of this tax benefit, municipal bonds typically pay lower interest rates than many corporate bonds.

How can you use various types of bonds to build a diversified bond portfolio? One method is to invest in mutual funds that invest primarily in bonds. By owning a mix of corporate, government and municipal bond funds, you can gain exposure to much of the bond world. Be aware, though, that bond funds, like bonds themselves, vary widely in some respects. To illustrate: Some investors may choose a low-risk, low return approach by investing in a bond fund that only owns Treasury securities, while other investors might strive for higher returns — and accept greater risk — by investing in a higher-yield, but riskier bond fund.

But you can also diversify your bond holdings by owning a group of individual bonds with different maturities: short-, intermediate- and long-term. This type of diversification can help protect you against the effects of interest-rate movements, which are a driving force behind the value of your bonds — that is, the amount you could sell them for if you chose to sell them before they matured. When market interest rates rise, the price of your existing, lower-paying bonds will fall, and when rates drop, your bonds will be worth more.

But by building a “ladder” of bonds with varying maturities, you can take advantage of different interest-rate environments. When market rates are rising, you can reinvest your maturing, shorter-term bonds at the new, higher rates. And when market rates are low, you’ll still have your longer-term bonds working for you. (Generally, though not always, longer-term bonds pay higher rates than shorter-term ones.)

A bond ladder should be consistent with your investment objectives, risk tolerance and financial circumstances. But if it’s appropriate for your needs, it could be a valuable tool in diversifying your bond holdings. And while diversification — in either stocks or bonds — can’t always guarantee success or avoid losses, it remains a core principle of successful investing.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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By Aidan Johnson

With ongoing concerns about young adults leaving Long Island, other age demographics may be looking for the escape hatch.

Adults aged 60 and over, who account for roughly 20% of Suffolk County’s population according to a 2022 report from the Suffolk County Office for the Aging, have been feeling the impact of Long Island’s high prices as well.

Eric Stutz, a real estate broker based out of Baldwin who specializes in seniors and estates, said he sees Long Island as below average in being a senior-friendly place.

“I see a lot of my clients are heading to the Southeast, between North Carolina, Tennessee, Florida,” he said in a phone interview. “That seems to be the majority.”

Recently, a pair of Stutz’s clients had to choose between staying on Long Island with two of their children or moving to North Carolina, where their daughter lived.

“It was a tough decision, it took a couple of years,” Stutz said. “But their main reason for moving to North Carolina … was the cost of living on Long Island.”

JoAnn Kullack, the chair of Long Island’s chapter of the Retired Public Employees Association, sees many other senior citizens having to choose between living on Long Island or finding somewhere more affordable.

“Most seniors that I know do complain about the cost of living,” she said.

‘Most seniors that I know do complain about the cost of living.’

— JoAnn Kullack

Kullack believes that one of the big draws of staying on the Island for seniors is the abundance of medical care. Big university hospitals, such as Stony Brook, and the closeness of Manhattan hospitals and specialists offer valid incentives for seniors to want to stay.

“A lot of people that I know want to stay here on Long Island,” due to access to premium health care services, Kullack said. “They don’t wish to leave.” 

Kullack suggested lowering the utility rates could offer much-needed relief to Long Island’s senior citizens. While some programs are available that can assist, she added the qualifications are often unrealistic.

“A lot of people don’t qualify,” the RPEA chair said. “If you have two people in the household, you have to be [only earning] $30,000. How can you live here on that?” 

 “You’re taking into consideration paying taxes, paying for utilities, and even if you have no mortgage on your home, you still have to have enough money for food,” she added.

Town of Brookhaven Councilwoman Jane Bonner (R-Rocky Point) views Long Island as a challenging place to live, especially for those who do not make a lot of money.

“We need to address the high tax rate on Long Island,” she said in a phone interview. “We need to do a better job of taking care of our seniors and veterans. So many of our seniors are house rich and cash poor.”

Long Island can also be tough to navigate for seniors who cannot drive, as there is a lack of adequate public transportation.

“I know myself and my husband do a fair amount of taking our moms to doctor appointments and shopping,” Bonner said, adding, “Transportation services are cut when budgets are tight — bus routes are removed.” 

Brookhaven does have programs aimed at helping seniors who may have trouble with transportation, Bonner explained. Still, the town does seek to assist its aging population where it can. 

“We have our senior clubs, our senior transportation, nutrition at our senior centers and Meals on Wheels. We do our part.”

Bonner added that she wants to see seniors be able to “age in place,” where they want to be, instead of being pushed out.

“That’s what we need because if we can provide resources for our seniors to age in a place where they are most comfortable — in their home. It is more affordable that way than building large-scale senior complexes,” the councilwoman said.

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Over the last ten years, NVIDIA’s shares have risen more than ten thousand percent, the best performance of any company in the S & P 500 over that period.

By Michael E. Russell

Michael E. Russell

As we start off summer with a beautiful Memorial Day weekend I think back to the many sacrifices of the men and women who served in our Armed Forces. They fought to defend our freedom and defeat tyranny all over the globe.  I especially think about my father-in-law, Dr. Sherman Mills, who served in Europe during WWII.  

Dr. Mills was a D-Day surgeon who survived Normandy and the march into Germany. Upon discharge he came home to Long Island and worked as a physician in Port Jefferson, attending to patients in his office, at their homes and at St. Charles and J.T. Mather Memorial Hospital; a man of the greatest generation. Papa, you are missed. 

Well, how is your money doing? For those of you who have followed my articles over the past year, I repeatedly spoke of the company NVIDIA. Ring a bell? NVIDIA invents the GPU and advances in Artificial Intelligence (AI), HPC, gaming, creative design, autonomous vehicles and robotics.  Their stock was trading at $122 on October 14, 2022. It closed this past Friday at $389.46.  This past Wednesday the stock surged by $81, an increase of 29% in one day.

NVIDIA’s remarkable increase in value represents the emergence of a new American corporate giant. Its market value is now more than $1 trillion. It now joins the likes of Apple, Microsoft and Amazon. Over the last ten years, NVIDIA’s shares have risen more than ten thousand percent, the best performance of any company in the S & P 500 over that period. Incredible numbers, but here are some other numbers to look at.

Tesla, at its peak in November 2021, was up 19,000 percent over the prior 10 years.  However, ten thousand percentage points of that gain have disappeared as reality has hit home. NVIDIA, as well as other semi-conductor companies, are in a remarkably lucrative spot in our technology ecosystem.  Their silicon chips are in high demand, whether it be cloud-computing, crypto, or, God help us, AI.  

Is the horse out of the barn or is it still a place to invest? Just remember, pigs get slaughtered. For those of you who own this stock, it may be wise to take some money off the table or put in some stop–losses.  

As I write this it appears that house speaker Kevin McCarthy and President Joe Biden may have a debt ceiling deal after we had to worry about a potential U.S. Treasury default for the first time in history. McCarthy still has to convince the hard-liners in his caucus that this is a viable budget. We will know by June 5th. The American people have been tolerant of the shenanigans of our elected officials in Washington, but a default would be political suicide for many of these clowns!

Back to AI:  the more I learn, the more concern I have. Two weeks ago, Sam Altman, the chief executive of the San Francisco startup OpenAI, testified before members of a Senate sub-committee and spoke to the need for regulating the increasingly powerful AI technology being created by others like Google and Microsoft. In addition, Geoffrey Hinton, who is considered the Artificial Intelligence pioneer, spoke to the inherent dangers of AI. He made many bold statements, including his regrets for his life’s work. Wow! Major concerns include generative AI, which is already a tool for misinformation. He also considers AI a potential risk to all mankind. Stay tuned.  

On a positive note, it appears that the banking fiasco has abated for now. The major money center banks have stabilized the markets by buying up assets of smaller banks. In the meantime, Janet Yellen and Jerome Powell appear to be lost in the forest without a compass.  

Once again readers, if you are looking for stability, Treasury yields on the 2-year bill are approaching 5%. With inflation slowing somewhat, not a bad place to put some money. Until next time.

Michael E. Russell retired after 40 years working for various Wall Street firms. All recommendations being made here are not guaranteed and may incur a loss of principal. The opinions and investment recommendations expressed in the column are the author’s own. TBR News Media does not endorse any specific investment advice and urges investors to consult with their financial advisor. 

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ETFs can diversify your portfolio.

By Michael Christodoulou

Michael Christodoulou

Mutual funds offer investors a chance to own shares in dozens of companies, as well as bonds, government securities and other investments. But you might be able to broaden your portfolio further by owning another type of fund — an exchange-traded fund (ETF).

An ETF, like a mutual fund, can own an array of investments, including stocks, bonds and other securities. Many ETFs are passively managed in that they track the performance of a specific index, such as the S&P 500. In this respect, they differ from most mutual funds, which tend to be actively managed — that is, the fund managers are free to buy and sell individual securities within the fund.

Another difference between ETFs and mutual funds is that ETFs are traded like stocks, so shares are bought and sold throughout the day based on the current market price, whereas mutual funds are traded just once a day, at a price calculated at the end of the trading day. Whether this ability to make intra-day trades is meaningful to you will likely depend on how active you are in managing your own investments.

For some people, the main attraction of ETFs is their tax advantages. Because many ETFs are index funds, they generally do much less buying and selling than actively managed funds — and fewer sales mean fewer taxable capital gains. These ETFs are somewhat similar to index mutual funds, which are also considered to be tax-efficient, as opposed to actively managed funds, which constantly buy and sell investments, passing on taxable capital gains to you throughout the life of the fund. 

Keep in mind, though, that mutual funds that trade frequently may still be appropriate for your financial strategy. While taxes are one element to consider when evaluating mutual funds, or any investment, other factors, such as growth potential and ability to diversify your portfolio, are also important.

ETFs typically also have lower operating costs than mutual funds, resulting in lower overall fees. Part of the reason for these lower costs is that actively managed mutual funds, by definition, usually have larger management teams devoted to researching, buying and selling securities. By contrast, passively managed ETFs may have leaner, less-costly management structures.

But while most ETFs may share the same basic operating model, many types are available. You can invest in equity ETFs, which may track stocks in a particular industry or an index of equities (S&P 500, Dow Jones Industrial Average, and so on), or you can purchase fixed-income ETFs, which invest in bonds. ETFs are also available for currencies and commodities.

Of course, as with all investments, ETF investing does involve risk. Your principal and investment return will fluctuate in value, so when you redeem your ETF, it may be worth more or less than the original investment. Also, liquidity may be an issue. Some ETFs may be more difficult to sell than other investments, which could be a problem if you need the money quickly. And because it’s so easy to move in and out of ETFs, you might be tempted to “overtrade” rather than following an appropriate long-term investment strategy.

A financial professional can evaluate your situation and help you determine whether ETFs are suitable for your needs. At a minimum, they represent another investment opportunity that may prove useful as you work toward your financial goals.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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Daniel R. Liff

Morgan Stanley recently announced that Daniel R. Liff, a Managing Director, Financial Advisor in the Firm’s Hauppauge Wealth Management office and a resident of Setauket, has been named to Forbes Magazine’s 2023 list of Best-in-State Wealth Advisors.

Forbes’ Best-in-State Wealth Advisors list comprises a select group of individuals who have a minimum of seven years of industry experience. The ranking, developed by Forbes’ partner SHOOK Research, is based on an algorithm of qualitative and quantitative data, rating thousands of wealth advisors and weighing factors like revenue trends, AUM, compliance records, industry experience and best practices learned through telephone and in-person interviews. 

“I am pleased that Daniel R. Liff is representing Morgan Stanley,” commented Dino Carfora, Complex Manager of Morgan Stanley’s Hauppauge office. “To be named to this list recognizes Daniel’s professionalism and dedication to the needs of his valued clients.”

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Artificial Intelligence. Pixabay photo

By Michael E. Russell

Michael E. Russell

Two weeks ago I had the scary experience of watching 60 Minutes on CBS. The majority of the telecast pertained to A.I. (artificial intelligence). Scott Pelley of CBS interviewed Google CEO Sandar Pichai. His initial quote was that A.I. “will be as good or as evil as human nature allows.” The revolution, he continued, “is coming faster than one can imagine.”

I realize that my articles should pertain to investing, however, this 60 Minutes segment made me question where we as a society are headed.

Google and Microsoft are investing billions of dollars into A.I. using microchips built by companies such as Nvidia. What CEO Sundar has been doing since 2019 is leading both Google and its parent company Alphabet, valued at $1.3 trillion. Worldwide, Google runs 90% of internet searches and 70% of smartphones. It is presently in a race with Microsoft for A.I. dominance. 

Two months ago Microsoft unveiled its new chatbot. Google responded by releasing its own version named Bard. As the segment continued, we were introduced to Bard by Google Vice President Sissie Hsiao. The first thing that hit me was that Bard does not scroll for answers on the internet like the Google search engine does.

What is confounding is that with microchips built by companies such as Nvidia, they are more than 100 thousand times faster than the human brain. In my case, maybe 250 thousand times faster! 

Bard was asked to summarize the New Testament as a test. It accomplished this in 5 seconds. Using Latin, it took 4 seconds.  I need to sum this up. In 10 years A.I. will impact all aspects of our lives. The revolution in artificial intelligence is in the middle of a raging debate that has people on one side hoping it will save humanity, while others are predicting doom. I believe that we will be having many more conversations in the near future.

Okay folks, where is the economy today?  Well, apparently inflation is still a major factor in our everyday life. The Fed will probably increase rates for a 10th time in less than 2 years.

Having been employed by various Wall Street firms over the past 4 decades, I have learned that high priced analysts have the ability to foresee market direction no better than my grandchildren.

Looking back to May 2011, our savvy elected officials increased our debt-ceiling which led to the first ever downgrade of U.S. debt from its top triple A rating from S&P. This caused a very quick 19% decline in the S&P index.  Sound familiar?

It appears that the only time Capitol Hill tries to solve the debt ceiling impasse is when their own portfolio is affected.

This market rally has been led by chatbot affiliated companies. These stocks have added $1.4 trillion in stock market value this year. Keep in mind that just 6 companies were responsible for almost 60% of S&P gains.  These are the 6 leaders: Microsoft, Alphabet, Amazon, Meta Platform, Salesforce and of course, Nvidia.

In the meantime, the Administration states that inflation has been reined in.  What stores are they shopping in? Here is the data release from Washington. Year over Year changes March 2022-March 2023:

• Food and non-alcoholic beverages up 8.1%

• Bread and cereal products up 10.8%

• Meat and seafood up 4.3%

• Electricity up 15.7%

When 1 pound of hot dogs rises from $3.25 to $7.50, that is not 8.1%. When Froot Loops go from $1.89 to $5.14 we are in trouble. The bureaucrats in D.C. make up numbers worse than George Santos.

On a positive note, the flowers are starting to bloom, the grass is starting to grow and we live in a special place. Of historic significance, we happen to be home to the second oldest active Episcopal Church in the United States. This year Caroline Church in Setauket will be celebrating its 300th anniversary. Congratulations.

Michael E. Russell retired after 40 years working for various Wall Street firms. All recommendations being made here are not guaranteed and may incur a loss of principal. The opinions and investment recommendations expressed in the column are the author’s own. TBR News Media does not endorse any specific investment advice and urges investors to consult with their financial advisor. 

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