Charitable Giving

I had planned to take a break from discussing what’s going on in the markets and the world’s craziness in this quarter’s newsletter and focus instead on charitable giving and some of the charitable activities of White Pine employees.


And then El Salvador decided to try to establish Bitcoin as their national currency and a JPEG file in the form of an NFT sold for more than a Monet painting.

That’s a bit too crazy to let slide without some comment.


Bitcoin is one of many digital currencies. The allure of a digital currency resides in its security in a digital world and in its being outside the control of any national government. Theoretically, it should have a very stable store of value to it as no entity can just print more of it to satisfy a debt payment. While it is possible digital currencies become an important means of transactions in the not-too-distant future, presently it’s the Wild (to put it mildly) West of their existence. It’s difficult to imagine that a digital currency will ever be completely unregulated by the US government (at least for transactions done in the US). As for how much each currency should be worth, well, I have no idea – and neither does anyone else. Bitcoin could be worth about $45,000/coin as it is now. It’s also possible it could be worth $1,000,000/coin or as little as 3 cents/coin. At this point in the game, picking the winner and calculating an intrinsic value for it is nearly impossible. So, it is worth what the next guy buys it for. Interestingly enough, El Salvador giving some legitimacy to the coin sent the price of it down 15% over a three-day period.

The NFT file that sold for nearly $70 million is an even crazier concept. An NFT stands for Non-Fungible Token. That basically means that each NFT is completely unique. The blockchain technology that runs the digital currency Ethereum is used to assure that there can only be one original file associated with each NFT. So, that artwork that sold for $70 million is a one of a kind. Except, the actual file is digital. That means you can copy it and have an exact replica.

This isn’t like a print of a Monet that resembles the original. It will be exact down to the last bit that makes up the file. Only one person can hold the original file, but anyone can hold an exact copy. If you don’t understand why something like that can be sold for $70mm, then I think you understand the concept just fine. I’ve enjoyed the Netflix series, Ozark, so I suppose Marty Byrd could figure out a money laundering use for them. Meanwhile, drug cartels in El Salvador will probably enjoy capitalizing on the anonymity of Bitcoin.


October 2020 - Volunteering with LifeRemodeled

In a few days, White Pine employees and several of our clients will volunteer our time and weed whacking skills to help clean up some of the streets near the Durfee Innovation Society in Detroit. We have volunteered annually in various capacities for Life Remodeled, the organization that puts this together. Life Remodeled partners with the residents of Detroit to build strong communities. Its most recent long-term project involves creating the innovation center at Durfee which provides human services to local residents along with many workforce training opportunities. We have enjoyed working with Life Remodeled.

Last quarter, a few White Pine employees volunteered for Our House and HouseN2Home.  My wife, Laura, volunteers at HouseN2Home, an organization that helps people who are exiting homelessness by using donated furniture and household goods to convert houses into functional, comfortable and inviting homes.  My daughter, Anna, works at Our House. Their mission is to help young people confidently and successfully transition from foster care to adulthood. For their newest program, they’ve leased an old sorority house near Eastern Michigan’s campus.

We, along with many other volunteers from HouseN2Home, spent the day organizing, cleaning, and setting up all the rooms. At the end of the day, the house felt welcoming and warm. Hopefully, its residents, who have previously been battered around by life, will feel like it’s a refuge. Read the full article here.

Charitable Giving Strategies

The market has been very strong for over a decade now with The Great Recession far behind us.  Yet, the recovery hasn’t benefited everyone equally. As such, many of our clients choose to build charitable giving into their financial plans. Volunteering is a great way to help others in our communities, but this isn’t always possible due to physical limitations or time restrictions. Donating cash, however, is always appreciated by these non-profit organizations. While a direct donation is quick, easy, and very helpful, there are strategies that may give you more bang for your charitable buck.

Many organizations accept appreciated securities. They can then sell the security and get full value. If you were to sell that same security to write a check, you would have to pay a capital gains tax on the appreciation. That tax ranges from 15% to 20%. If your income is high enough, there’s an extra 3.8% tax added. Your state may tax it as well (in Michigan, that rate is 4.25%). Finally, if the gain was short-term, you’ll pay ordinary income taxes which could be as high as 37% plus state taxes.

In the last tax bill under the Trump administration, the standard deduction for individuals and families increased dramatically. This increase made it unnecessary for many to itemize deductions. If you don’t itemize, your charitable gift isn’t tax deductible. One strategy used to make your donation tax deductible is to front run several years of giving into one. You can do this by setting up a donor advised fund. Any contributions to the fund are deductible in the year the contribution is made. You can then spread out the distributions of the funds over several years. This allows you to get a big deduction one year, though the next few years you would go back to the standard deduction. The donor advised fund makes it very easy to track your donations. Plus, the sponsor of the fund (we use Schwab) will verify that the charity is in good standing with the IRS.  Another way to ensure you are getting a tax deduction is to contribute to a charity directly from an IRA. While you won’t actually get a deduction on your tax return, the money will come out of the IRA tax-free which is essentially the same thing. You do have to be 70½ years old in order to use this strategy, and there is a $100,000 limit per year.


Next Steps

These are just a few of the basics on charitable giving. We’d be happy to discuss building charitable giving into your financial plan using these techniques. Also, if you’re interested in learning more about some of the charities we talked about in this newsletter as well as about a few others that White Pine employees feel passionate, please go to the web page we created that has links to these organizations. All, I’m sure, would love to connect with you. We’ve found we derive the most meaning and pleasure when we focus our giving on areas about which we are passionate. Perhaps, the same holds true for you.


Anthony J. DiGiovanni, CFA

The Portfolio Dilemma


The Portfolio Dilemma

The stock market continued its march onward and upward during the second quarter.  The US is slowly getting back to normal as the number of vaccinated adults now outnumber the unvaccinated.

The number of daily COVID cases, hospitalizations, and deaths from this virus continue to shrink – though certainly not in other parts of the world like India.  The pent-up demand coupled with an excess supply of stimulus funds, while the world continues to work through spot supply disruptions, has caused prices to rise across a broad spectrum of goods and services.  Interest rates are starting to rise, though they are still historically exceptionally low.  While earnings growth surges as the pandemic wanes, stock valuations remain at high levels.  This isn’t to say the market is in a bubble.  It’s expensive, however so expectations for future returns need to come down.  Low interest rates with a renewed threat of rising inflation in the fixed income markets and lower expectations for stock returns lead to a portfolio dilemma…How can we achieve our growth objectives and balance risk?


Not Your Grandfather’s Portfolio

In the not-so-distant past, a balanced portfolio of 60% stocks and 40% bonds provided a retiree with both good growth prospects from the stock portion of the portfolio as well as stable and consistent returns from bonds.

When stocks ran into trouble, bonds would pick up the slack.  When stocks ran strong,  bonds still provided a relatively high-income stream.  When I began my career in 1989, the 30-yr Treasury yield was around 8%.  The cyclically adjusted price to earnings (CAPE) ratio was around 15.  The CAPE ratio is a pretty good long-term indicator of value in the stock market.  The lower the CAPE, the higher the expected rate of return.  One could reasonably expect about a 10% - 12% return in the stock market over the next decade or so with a CAPE at 15.  In fact, total returns in the stock market have averaged about 10½% since I entered the field.  With these return expectations, retirees could easily withdraw 5% of their assets per year and still expect to see their portfolio value grow in purchasing power.


The investment landscape today is very different.  The 30-yr Treasury yield is presently 2¼%.  The CAPE ratio is sitting at 37.  At that level, one should only expect about a 5% - 7% return on stocks over the next decade.  This makes managing cash flows in retirement much more difficult.  While the bonds may still provide some cushion during market downturns, they’ll fall short in providing a very robust stream of income.  If inflation pressures persist beyond the next year of recovery, investors will lose purchasing power over time holding a large portion of their portfolio in fixed income.

The remedy for this dilemma is diligent planning, methodical diversifying, and a little creative portfolio management.  Modeling your cash flows throughout retirement is a necessary first step in building a successful retirement plan.  Most plans will show that withdrawing much more than 3½% of your portfolio will lead to declining purchasing power over time.  Each plan is different, so it is important to take even this rule of thumb with a grain of salt.

On the portfolio management side, we continue to diversify our clients’ portfolios in the traditional way:  adding international investments in both the developed and emerging economies and other asset classes such as gold.  We also keep exposure to speculative parts of the market to a minimum.  Large growth and some technology companies are starting to fit that description, and we completely stay away from the “meme” stocks (see our last quarterly letter on GameStop).  A good balance between growth and value, US and international, large and small, stocks and (where appropriate) bonds will provide some stability during turbulent times.  Still, low bond and dividend yields limit this strategy’s effectiveness.

Alternative Solutions

We have begun adding alternative investments to client portfolios where appropriate. A very simple definition of alternative investments is securities that aren’t stocks or bonds.

There are a wide range of alternative investments that come in a variety of forms, and all come with different trade-offs.  The most basic type of alternative investment that is available to most investors is an interval fund.  These funds look like mutual funds in your holdings report.  You buy them like you would a mutual fund.  However, you can only sell them at certain intervals – usually quarterly.  Also, the fund company does not have to honor your sale request if there are too many redemptions at once.  This is because these funds typically invest in illiquid assets.

Two such funds we have started adding to portfolios invest in real estate and private loans.  Given the cash flows of these two funds, we have categorized them as alternatives to bonds.  Both have expected returns much higher than what you’d expect from a traditional bond (especially with the Treasury rates as low as they are today).  They also have the added benefit of having some form of inflation protection.  For the real estate fund, this protection comes in the form of the possibility of raising rent rates as inflation rises.  In the private loan portfolio, many of the loans are tied to a floating rate such as the 3-month treasury bill rate.  So, if inflation picks up and rates rise, so too will the income from these loans.  They are riskier than bonds and would most likely not be saleable during major downturns.  Still, taking a long-term view of the portfolio, they can make a lot of sense in today’s environment.

The more common format for alternative investments are partnership agreements.  The investor agrees to invest a certain amount (called a capital commitment) for an extended period (often 6-10 years and sometimes longer), and there is no ability to sell until the agreed upon time passes.  The investor must be either an accredited investor (have a net worth over $1.0mm and/or have income of over $200,000/year for two years) or a qualified purchaser (have investable assets that exceed $5.0mm) depending on the fund.  These drawbacks make them more appropriate for pension funds or endowments but can make sense in certain client portfolios from time to time.  These funds typically have much higher return expectations than what you could get in either stocks or bonds and will frequently give access to areas of the economy that aren’t available to equity investors.  One such example is investing in infrastructure.  Typically, these projects are done at the municipal level with long-term contracts between the city and private companies.  There are no stocks that take advantage of this directly, but there are some alternative investment funds that do.

Credit Where Credit Is Due

There are a wide range of alternative investments that come in a variety of forms, and all come with different trade-offs.

Any security other than a guaranteed US government treasury bill will add risk to the equation.  Risk comes in many forms.  If you buy a longer dated US government note or bond, you take on duration risk.  You are still guaranteed to get your money back and some interest, but you take on the risk that as time goes by, rates may rise and thus you will have missed an opportunity to invest with higher interest.  If you invest in corporate bonds, you take on an additional risk known as credit risk.  The corporation may run into trouble, and there’s no guarantee they’ll pay you back.  With stocks, you take on ownership risk.  Will the managers running the company create value over time?  Did you pay an appropriate price for this value?

Alternative investments add liquidity risk to the equation.  During turbulent times, you won’t be able to liquidate the investment and convert it to cash.  In today’s environment, taking on duration or credit risk provide limited financial benefit, so adding liquidity risk makes sense.  Balance and diversification are still important, so they do have a place in a well thought out portfolio.  For some clients, these risks are inappropriate at any level.  For others, they offer a potential solution to the portfolio dilemma.



Anthony J DiGiovanni, CFA

Generational Differences

Generational Differences

I am a member of Generation X.  Have you ever wondered why a simple letter X represents this generation instead of having a more interesting name like the Silent Generation, Baby Boomers, and Millennials do?

It’s because no defining major event happened during our formative years.  The Vietnam War ended around the time of our birth followed shortly thereafter by the end of the Cold War.  Capital markets were stable and quite profitable from 1982 all the way through to the Millennial generation.  Though the brief war with Iraq caused a recession in 1991, it was minor.  Even the stock market crash of 1987 now looks like a mere blip in the big picture, and even in that year, the market ended in positive territory.

Major global events picked up dramatically once our generation birthed the next generation.

A three-year, grueling bear market followed the Internet Boom of the late 90s.  Terrorists smashed into the Twin Towers and the Pentagon resulting in war with Iraq and Afghanistan. A real estate bubble helped cause the Great Recession.  The unequal recovery from that devastation coupled with the rise of social media cracked open today’s massive political divide.  Then came the pandemic.

The resulting economic turmoil has surpassed the damage done during the entire Great Recession.  In three short weeks last year, the stock market fell 35%, and unemployment skyrocketed.  Gross Domestic Product (GDP) fell at an annualized rate of 31%, the worst reading since the Great Depression.  For comparison purposes, GDP fell at an 8% rate during the Great Recession.  Thousands of businesses have failed.  If not for the tremendous amount of government support, thousands more would have failed, and many more still may.  However, the stock market has strongly rebounded.  Through the first quarter of this year, the major market indices neared their all-time highs.

This isn’t a completely irrational response by the market as many companies did very well during the lockdown period, especially those in technology and those that could easily adapt to a more online world.  Usually, our economy falls into recession only when there are supply and/or demand imbalances created during boom times that need correction.  As we self-induced this recession with mandatory lockdowns, when the lockdowns lift, growth could occur more rapidly than after previous recessions.  Now that vaccines are rolling out in earnest, there is a light at the end of the tunnel.  We’ve seen a rotation in the first quarter away from some of 2020’s big winners in tech towards some of the more cyclically sensitive stocks.

While the market response in general hasn’t been completely irrational, there have certainly been pockets of pure insanity. 

The poster child for this insanity is the market action in the stock of the company Gamestop. Gamestop operates in a declining, some might even say dying, industry.  The company owns retail stores that primarily sell video games.  Modern game consoles, however, no longer need the physical discs to operate their games.  Gamers simply download games from the internet.  Recognizing this, the company has made moves to pivot away from this field.  Still, the type of transformation this company needs to survive, let alone thrive, will take years to implement.  As a result, big hedge funds and institutional managers shorted this stock.  When you short a stock, you are betting the price will fall.

Enter Robinhood and Reddit traders. 

Robinhood is a new, online brokerage firm that caters to the small guy.  Many of these small guys found themselves with stimulus checks, and with much of the country in lockdown, they had fewer places to spend the money.  Many chose to deposit their $1,200 in a new brokerage account. Reddit is a social media message board site.  One of its message boards focuses on day trading.  Active members of this message board are notorious for bragging about their financial blunders, often posting pictures of their most recent failed trades.  My Generation X mind cannot begin to understand the attitude of some of these young whippersnappers.  Anyway, folks on this message board noticed that the number of shares sold short against Gamestop was greater than the number of shares outstanding.  Theoretically, this shouldn’t happen.

Rallying as a mob, they attacked the shorts, and the message board filled up with pictures of Gamestop purchase orders from members’ Robinhood accounts.  As the stock rose, the investors who had shorted the stock started losing money.  To cover their positions, they too needed to buy.  This is called a short squeeze.  At first, the rise was somewhat gradual.  The stock went from $3/share in November to about $17/share in January.  That’s a pretty big move on its own, but the fun was only beginning.  With nobody left selling or shorting, the stock shot up to $438/share!

To put this number in perspective, the market valued this company at well under $1.0 billion back in November.  A $438/share stock price values it at $30.0 billion!  There is no amount of justification, rationalization, or transformation to warrant such a valuation.  The market simply isn’t functioning properly with this stock.  When this is over, the stock will fall back to the single digits or low double digits, and many of these Robinhood millionaires will lose it all.  The best hope for the company is to issue new shares to capitalize on this insanity and help in their transformation, which they indeed intend to do.


Every generation seems to have some craziness to it. 

The current generation has the Robinhood traders bidding up stocks seemingly at random.  There are also pockets of exuberance in many new tech themed areas from electric vehicles to alternative currencies.  The Boomers had the Nifty Fifty.  The Xers had the Internet Boom.  What we can learn from past generations is that there are no sure things.  Yes, some of the Nifty Fifty stocks continue to do well, like Johnson & Johnson and Disney.  Another batch of names are okay investments today, like Coke and Dow.  Then, there are the ones that couldn’t keep up with the times and disappeared, like Kodak and Burroughs.  The same could be said about the Internet Boom.  Microsoft and Qualcomm are still excellent companies.  Cisco and Intel are holding their own.  Lucent and Nokia have all but disappeared.

Our task right now is to steer our clients away from the craziness and continue to invest in the rational parts of the market.  The wind is at investors’ backs as a lot of money is flowing into stocks.  In the first quarter alone, $400B flowed into global equities.  This surpasses the largest amount that has ever flowed into global equities in an entire year ($295B in 2017).  With this much money pouring in, there will undoubtedly be other areas of craziness.  The fear of missing out is a powerful force.  Ultimately, however, experience suggests the best investments will be in good companies with strong balance sheets and decent growth prospects trading at reasonable valuation levels.  Certainly, my fellow Silent Generation and Baby Boom advisors would agree.




Tony DiGiovanni, CFA  Chief Investment Officer

One Day at a Time

Man and woman hands in knitting mittens taking cups of hot drink. Sunny winter forest glade landscape on background

One day at a time. One day at a time. This is what loops through my mind each day. Sometimes, I can only handle one moment at a time, and then I remind myself that if I can manage to string together enough moments during this pandemic, during this extremely trying political environment, during this severe recession, during this period of isolation, I might one day be able to look up and see I’ve come through to the other side. One day at a time.

Remember Back in January of Last Year

when we feared the economy might dip into a mild recession because of the ongoing trade wars with China?

Remember back in January of last year when we feared the economy might dip into a mild recession because of the ongoing trade wars with China? That dreaded prediction looks desirable from where we sit today. A run-of-the-mill economic contraction is child’s play compared to the severity of a pandemic. As awareness of that severity grew in early 2020, panic followed. The markets fell precipitously for three straight weeks. If felt like we were helplessly watching a slow-moving train wreck and wondering if there were any possible way to avert a crash.

Good information was hard to come by; the pandemic revealed a major flaw of our beloved Information Age: misinformation spreads just as easily, and often much more rapidly, as facts do. Our personal browsing choices and favored “news” sources create echo chambers. Once we step off the path of reliable news sources, we sink into a quicksand of sources promoting false or misleading statements. Instead of directing us back onto solid ground, many of our political leaders guided us further into the mire. Making wise choices and doing the right thing can be challenging in the best of times. It is nearly impossible when given inaccurate information. Overwhelmed by the pandemic and exhausted trying to discern reality from fiction, many of us inadvertently outsourced our critical thinking skills and simply accepted what we were told. This didn’t help.


Ultimately, governors across the nation shut down states in an effort to save lives. After agonizing months of stay-at-home orders, the virus retreated. Healthcare workers breathed a sigh of relief, and hospitals returned to running smoothly. The weather started to improve, and we could finally enjoy some normal outside activities. The economic damage, however, was done, and it was extensive, rivaling the early days of the Great Depression. Unemployment skyrocketed at an unprecedented rate. Even during the Great Depression, it took three years for unemployment to jump from just under 10% to 25%. In 2020, it went from 3.5% to 15% overnight! Businesses teetered on the edge of extinction. Life as we knew it simply ceased to exist.


The damage spread far beyond the economy. The political environment turned toxic. Our debates were no longer about a difference of opinion about the role of government in our society. Instead, the other side turned into the embodiment of evil. Compassion, love, and empathy became scarce commodities. Long-term friendships and relationships with family members cracked and sometimes broke. Using the social media vernacular, we unfriended a lot of people. All of this as millions of people tried to cope with being sick, caring for someone with the disease, or grieving for a lost loved one. Nearly three-fourths of Americans know someone who has had COVID-19, and almost half know someone who has been hospitalized or died due to it. Loss is rampant throughout the country.

In Spite of Everything, The Stock Market Ended up for the Year

We wrote in detail about how this happened in our last quarterly report, so I won’t dwell on it here.  Suffice it to say, the markets are forward looking.  This means the market is expecting a very strong recovery in the months ahead.  It fully anticipates the government will create enough economic stimulus to bridge the gap between its current decimated state and its post-pandemic, functional state.

The pandemic will end, most likely some time in 2021.  Before then, we will have to get through the cold winter months with the virus spreading at an accelerated rate.  We’re coming up on the year anniversary of COVID-19 reaching our country.  It has been a very difficult year emotionally, professionally, and personally.  I don’t bring this up to unburden myself at your expense, but rather as an acknowledgement that we suffer in many of the same ways.  I hope all of you have found coping strategies that provide some measure of relief and that you enjoy the invaluable support of loved ones.  If you ever need to talk, even if it isn’t about your portfolio, I’m happy to take your call.

One of my coping strategies is to remind myself of all the good that still exists and happens every day.  Reflecting back on the year, there were plenty of positives to celebrate.  On the professional front, White Pine accelerated its technology deployment.  Stay-at-home orders forced us to work through the kinks of delivering our reports online, and Irene has greatly improved their visual presentation.  Hopefully, everyone now feels comfortable with how they are getting their information.  If not, please give us a call.  Technological changes can be difficult.  The last thing we want is to make reading your reports challenging.

Meetings Have Also Changed


Other than the few months in the summer during which we had the opportunity to meet with a few of you (wearing masks and appropriately spread out in our conference room), we have been forced to conduct our meetings in the virtual world.  While I still prefer face-to-face meetings, all of us have become much more comfortable with meeting online.  For those who live far from our Livonia office, this will be an ongoing option for you even after we return to our new normal.

We also used this challenging time to address more mundane tasks.  We hired a consultant to help ensure we meet or exceed all compliance standards.  As anyone who runs a small business knows, compliance with government regulations can be quite complicated.  The government sets the standards with the intention of protecting consumers, and as we wade through the paperwork, we keep that admirable goal in mind.  Amy is working with Schwab to offer electronic delivery of forms.  This will mostly help new clients, but I’m sure there will be other efficiencies we gain along the way.  The final company change worthy of mention here is that Will is now an owner of White Pine.  This exciting change came as a result of Will’s dedication to clients, his extensive knowledge of the industry, and his strong work ethic.

Personally, a lot has changed in the Past Year

Personally, a lot has changed in the past year.  Our college and grad-school aged children all returned home during the first lockdown.  We went from an empty nest to a full house.  While the taste of empty nesting was sweet, we felt grateful to have most of the kids safe and sound at home during the pandemic.  We’ll get back to empty-nesting soon enough.  Times of crisis do provide opportunities, and all four of our homebound kids made major strides in their schooling and careers, as did the two who live elsewhere.  I’m proud of the two who have continued to do well in their schooling in spite of switching to online learning as well as the four who are using their talents to serve others (one with children in foster care, another with young adults who’ve aged out of foster care, another as an AmeriCorps volunteer, and another as a nurse on her way to being a midwife).  Watching all the kids try to figure out what’s important in life and how to achieve it has been a satisfying part of parenting.

The most exciting news on our front is that our oldest decided it was time to make me a grandfather.  If all goes well, we’ll be vaccinated in time to snuggle our new grandbaby in June.  It’s a long road until then, with COVID fatigue, short days, cold temperatures, and isolation.  Each day feels the same.  I miss seeing my fun coworkers and wonderful clients in person.  I remind myself those interactions will happen again.  We can get through this.  We just need to take this one day at a time.  One day at a time.



Anthony J. DiGiovanni, CFA