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Stephen Zeuthen

Alonso Munoz

When we wrote about the Fed almost exactly two years ago, we observed that Chair Jerome Powell had always been “

.” But now, during an unprecedented era of American exceptionalism, the Fed is stumbling over its own principles, looking into a crystal ball to determine rates rather than responding to the cold, hard facts. The American economy needs The Fed to cut the federal funds rate, and the American people deserve it.

Although the labor market has remained tight, the emerging signs of weakness are becoming hard to ignore (even the “experts” are touting a weakening labor market). As noted by Governor Christopher Waller, private payroll trends are alarming, as June’s ADP report showed a decline of 33,000 jobs, marking the first decrease in over two years. The downward trend is supported by continuing claims data that came in higher than expected in June and rose to levels similar to November 2021, indicating that unemployed workers are struggling to find new jobs.

 Fed would provide relief now, before the cracks of the labor market reach the surface. We believe the downside risk to the labor market presents a stronger risk than the not yet materialized tariff related spike in inflation.

Looking at the other side of the dual mandate, price stability is evident. For the past five months, month-over-month Core CPI inflation has come in lower than the expected 0.3%. Although June year-over-year CPI did come in higher than expected at 2.7%, this was primarily driven higher due to exogenous factors such as high oil prices (Israel-Iran War) during the reporting period.

 Federal Reserve would analyze this data and subsequently lower the federal funds rate. Now, with its disjointed policy-making criteria, the Fed is blinded by the theoretical, and perhaps a little “Inflation Derangement Syndrome”. Although the tariff-related impacts on the American consumer have yet to be determined, as the US inks more key deals with our trading partners ahead of the August 1st deadline, as it did with the EU/Japan/UK/Vietnam/Indonesia, many unanchored inflationary fears will dissipate, bringing a weakening labor market under the microscope of the dual-mandate.

For over a hundred years, this is why the Fed has always been 

. The future is always uncertain, and the Fed is no visionary.

The Fed’s approach has already diverged from the EU and the United Kingdom. The European Central Bank has already cut rates by 2% this year. The Bank of England has cut twice and appears likely to do so again in August. If the US does not follow suit and continues to maintain restrictive interest rates, the Federal Reserve will unnecessarily impede the golden age of American innovation.

The Fed has been wrong before, and we need not look too far into the past. In September 2024, and prior to the election, the Fed cut rates by 50 basis points. In 2020 excessive quantitative easing contributed to rampant inflation, reaching a year-over-year CPI increase of 9.1% in June of 2022. The target federal funds range was 1.50-1.75% in June of 2022, so why is it 4.25-4.50% now, with inflation near 2%?

July’s FOMC meeting that began Tuesday is likely to be just like the last: no change in interest rates and continued reluctancy due to tariff-related uncertainty. The Fed is expected to take an extremely cautious approach to cutting the federal funds rate, “preserving” its political independence as pressure mounts across the political spectrum. Demand for US treasuries has been strong, although any seismic shock in the secondary market could trigger Bond Vigilante induced volatility, causing yields to spike. As a result, the yield curve could steepen, the Dollar, already down ~10% year-to-date, could weaken further, and the government could be left with no choice but to issue debt at higher yields. This would be a problem, to say the least.

The paralyzed, divided, and behind-the-curve Fed has backed itself into a corner. If it cuts prematurely, investors may panic. If it waits longer, lenders will continue to gain at the expense of borrowers, and the everyday American will continue to suffer from high mortgage rates, credit card payments, and student debt. In Q1 2025, credit card delinquencies were above 3%, remaining elevated near post-2008 financial crisis highs. Existing home sales fell 2.7% month-over-month in June, demonstrating that elevated mortgage rates continue to restrict the housing market. As long as interest rates remain high, the Powell pain train will continue.

Continued Claims (Insured Unemployment) (CCSA) | FRED | St. Louis Fed

12-Month Percentage Change, Consumer Price Index

Delinquency Rate on Credit Card Loans, All Commercial Banks (DRCCLACBS) | FRED | St. Louis Fed

US existing home sales hit nine-month low in June | Reuters

By Stephen Zeuthen, Alonso Munoz                                                                                                       …

The Fed: Behind the Curve

Sambhav Bansal

When Sundar Pichai became CEO of Google in 2015 and later Alphabet in 2019, he was hailed as a thoughtful, technically adept leader who could guide the tech giant into its next era. Nearly a decade later, Alphabet’s trajectory under his leadership has raised concerns. Once a beacon of innovation, Alphabet now appears reactive, fragmented, and increasingly reliant on legacy revenue streams. We find ourselves asking: Is Sundar Pichai the right man for the job?

Alphabet has been synonymous with bold bets and moonshots. From Google Search to Android, Gmail to Google Maps, the company’s early years were defined by groundbreaking innovation. Under Pichai, that innovative spirit has felt restrained.

While Alphabet made exciting announcements at their annual developer’s conference “Google I/O 2025” this week, such as the Gemini 2.5 model and Veo video generation, they have largely been overshadowed by the aggressive pace of competitors like OpenAI, Microsoft, and Meta. Microsoft’s integration of OpenAI’s models into its Office suite and Azure cloud platform has positioned it as a leader in enterprise AI, a space Google once dominated.

Despite Pichai’s claims that Google is “shipping faster than ever”, the company’s AI rollout has felt cautious and reactive against an “AI” environment that has developed at breakneck speed. The delayed launch of Bard (now Gemini) compared to ChatGPT is a prime example of a fumbled rollout in a race for AI dominance. While OpenAI captured public imagination, Google hesitated, bogged down by internal debates, risk aversion and a confusing roadmap for product development and rollout.

Even internally, innovation has suffered. The decline of Google’s famed “20% time” policy, once responsible for products like Gmail and AdSense, has stifled creativity. Instead of bold new ideas, Alphabet has leaned heavily on its aging Search and Ads businesses, which still account for much of its revenue.

Google has developed a reputation for abandoning products and services, leaving users stranded and skeptical of investing in its ecosystem.

The list of shuttered products under Pichai’s leadership is staggering: Stadia, Google Glass, Daydream VR, Google Fit, Google Podcasts, and dozens more. Even core services like Google Assistant have seen significant functionality decline. Once a leader in smart home integration, Google Assistant now lags competitors like Amazon Alexa in reliability and ecosystem support.

Consumers who invested hundreds of dollars in Google Assistant-enabled devices for their homes and offices now find themselves with increasingly limited functionality. The upcoming shutdown of Google Fit APIs further illustrates the company’s inability to commit to long-term product support.

This pattern has made users frustrated to the point of making memes: 

Alphabet’s sprawling structure and fragmented priorities have led to a lack of focused execution. While the company continues to experiment with side projects like Project Starline and Google Beam – these initiatives generate minimal revenue and often lack clear paths to profitability.

Meanwhile, Alphabet remains overwhelmingly dependent on its core advertising business. In 2024, over ~75% of Alphabet’s revenue still came from Search and YouTube ads, and ~12% from its cloud business. Despite significant investments in hardware, and AI, these segments have yet to become meaningful profit centers.

Internally, this lack of focus has led to confusion and frustration. This 2021 

 report revealed that many Google executives were disillusioned with Pichai’s slow decision-making and risk-averse style. One example cited was his year-long delay in filling a key leadership role despite having qualified candidates.

The result? A brain drain. Alphabet reportedly lost 36 vice presidents in a single year. While the company still boasts deep technical talent, such turnover at the executive level signals deeper issues with morale and strategic coherence.

Alphabet is also facing unprecedented regulatory scrutiny. The company is currently entangled in multiple antitrust lawsuits in the U.S. and abroad, targeting its dominance in digital advertising, app distribution, and search.

While some level of scrutiny is inevitable for a company of Alphabet’s size, critics argue that Pichai has failed to proactively shape the regulatory narrative. Instead, Alphabet has often appeared on the defensive, reacting to legal challenges rather than leading with a clear vision for responsible tech governance. In contrast, Microsoft has taken a more collaborative approach with regulators, positioning itself as a responsible AI leader. This reactive posture has left Alphabet vulnerable.

Alphabet remains one of the most profitable and influential American companies in the world. Its products are used by billions, and its infrastructure like the new Ironwood TPUs (24x more powerful than the world’s fastest supercomputer, built for AI inferencing) is world-class. But profitability alone is not a measure of visionary leadership.

The question is whether Alphabet is still setting the pace for the tech industry—or merely keeping up.

We believe the company needs a bold, decisive leader who can restore its culture of innovation, rebuild consumer trust, and chart a focused path forward. Visionaries like Demis Hassabis (CEO of DeepMind) or Jeff Dean (Google’s Chief Scientist) may be better suited to lead Alphabet into its next chapter.

Sundar Pichai’s legacy is still being written. But if Alphabet is to reclaim its position at the cutting edge of technology, it may require a change at the top.

By Sambhav Bansal, Alonso Munoz                                                                                                       …

Alphabet, Inc.: Time for a New CEO

Alexander Canacci

We can all remember our final days in uniform: turning in all required equipment, getting pages of signatures from various offices/departments, and numerous briefings with the Transition Assistance Program, but what about that Thrift Savings Plan?

The Thrift Savings Plan (TSP) is a type of Defined Contribution Plan offered to Federal employees that resembles a 401(k) Plan offered by private sector employers.  For those in the U.S. Military, the TSP is now a key component of the retirement benefits offered after service.  The federal government is one of the few employers that still offers a pension to those that serve (both military and civilian) after a minimum of 20 years of service.  This Defined Benefit Plan works in tandem with the TSP offered and has slightly evolved since its inception – specifically in 2018 when the “Blended Retirement System” was fully implemented.

Before the Blended Retirement System (BRS), the previous retirement package offered to retiring service members after 20 years of service consisted of a defined benefit Plan equal to 50% of the base pay  of a retiring service member (an additional 2% added for every additional year of service past 20 years).  During this time, the government did not contribute to the service members’ TSP.  Under the BRS, the Defined Benefit Plan is equal to 40% of the base pay of a retiring service member (an additional 2% added for every additional year of service past 20 years), and now offers the possibility of government contributions to the service member’s TSP.

To offset the reduction in the Defined Benefit Plan, the government automatically contributes 1% of the service member’s salary with a matching opportunity up to an additional 4% (after 24 months of service).  The maximum government contribution is 5% if the service member contributes 5% of their salary, and all government contributions become fully vested after 24 months of service.  Akin to the 401(k), the maximum employee contribution allowed in 2024 is $23,000 with a $7,500 catch up contribution for those over 50 years old.  Contributions to the TSP can be made in a traditional or Roth manner and withdrawals from a TSP can begin at age 59 ½ without incurring penalties.  Of note, all government contributions are made to the servicemember’s traditional TSP account, even if personally elected contributions are made to a Roth TSP account.

The low fees associated with the funds provided are an attractive aspect of the TSP.  As of July 2024, the TSP’s expenses are 99% lower than other investment options. As of the date of this article, all the total expense ratios for available funds are below 0.08%.  There are six different types of funds offered through the TSP, and service members can elect to contribute to an individual fund or a mixture of the funds available.  They are:

L Funds: Target date funds in five-year increments from 2025 to 2070

Another similarity between the TSP and 401(k) has to do with portability.  After leaving the military, servicemembers can transfer part or all of their TSP balance into an Individual Retirement Account (IRA) or an eligible employer Plan (for example, an employer sponsored 401(k)).  While routine contributions to the TSP after leaving service are not allowed, transfers can be made into the TSP both while in and out of service from IRAs or other eligible civilian employer Plans.  An individual’s TSP will remain open after service so long as the balance remains greater than $200.

Out of all the things you have to worry about when you leave our great military, your retirement accounts shouldn’t be one of them. As we are all taught in the service, effective planning is key to mission success!

Thrift Savings Plan (TSP): What Is Is and How It Works

The Blended Retirement System Explained | Military.com

https://www.tsp.gov/tsp-basics/expenses-and-fees/#foot_1

Calculated by averaging the base pay for the last 36 months of service

According to tsp.gov, an official website of the US government

West Point to Wall Street: Understanding Your TSP

Nick Kelly

The news is out! The IRS has increased the 401(k)-contribution amount to $23,500 for 2025, while keeping IRA limits the same.

As we close out a great year, Pensions and Plan Sponsors will start to prepare for 2025, and workers/Plan participants should do the same.

For 401(k) contributions, there will be a slight increase of $500 dollars to a max contribution of $23,500 for participants under 50 years of age. The catch-up contributions will remain unchanged, with participants over 50 years of age able to make a catch-up contribution in the amount of $7,500, however, for individuals aged 60-63, their catch-up contribution (super catch-up contribution) is slightly higher, up to $11,250. Although the increases for 2025 were not large, Plan sponsors and participants should review their 401(k) and benefits for any opportunities to save more for retirement!

: As we look forward to 2026, it’s probable that high-income earners (those with over $145,000+ in wages) will be required to make their catch-up contributions to Roth accounts vs the current choice of Pre-Tax or Roth.

For 2025, the contribution limit to 401(k) Plans has increased to $23,500.

In 2025, the 401(k) catch-up contribution limit for those over 50 will remain $7,500 as in 2024.

However, investors age 60 to 63 can save $11,250 for catch-up contributions based on changes enacted via Secure Act 2.0.

These limits apply to other workplace Plans, including 403(b)s, most 457 plans, along with the federal Thrift Savings Plan.

Individual Retirement Account Contributions

The maximum contribution to IRAs in 2025 is $7,000 – unchanged from 2024.

IRA catch-up contributions for those over 50 years old are also remaining the same at $1,000.

These limits apply to both traditional and Roth IRAs.

New 2025 IRS Retirement Plan Contribution Limits [Including 401(k) & IRA] | White Coat Investor

401(k) catch-up contributions limits 2025

401(k) Contribution Limits for 2025

Blake Fortune

The “business of sports” has become a focal point for investors around the world. From the birth of NIL legislation to the extension of regular season games in the NFL, sports investors are adjusting to new opportunities in this paradigm. Often overlooked, and increasing in popularity, is sports’ private equity. From retail investors to titans of wall street, the concept of investing in sports has generated tremendous demand.

The objective in private equity (PE) is usually to buy, scale, and sell. In many cases PE firms also provide much needed capital through minority transactions to accelerate growth in scalable business. The success of PE transactions is not new to the sports world; however, sports teams across the world and their owners are adapting to this newfound access to capital markets. Whether it’s launching a new team or buying minority stakes in professional sports leagues, the “business of sports” seems to be here to stay.

In recent years, retail investors have gained access to what have traditionally been closed-off investment avenues (PE, hedge funds, special purpose vehicles, private transactions). This newfound access has helped, in some ways, democratize access for retail investors to allocate capital to professional sports teams, bespoke sports investments, and media opportunities. The emergence of online sports betting across the globe has also fueled significant investor interest in the sports world.

Given the mad dash for liquidity across college sports and the emergence of NIL, sponsors of investment vehicles are looking for ways to capitalize on this investor appetite as well as opportunity for exciting investments. We appear to be in the “wild west” phase of retail sports investing, specifically across the NIL medium. However, more mature markets like professional sports leagues are commanding serious interest from top-level investment managers. So, is it worth taking the plunge?


As recently as 2000, professional sports teams would cost you several hundred million dollars. Today, that ticket price starts around a billion (with a B), and that is for an “entry level” team. In the case of the Dallas Cowboys, the franchise is valued at ~10 billion, which creates a very limited pool of buyers, should Jerry Jones wish to sell. This need for liquidity, along with an easily definable revenue stream, makes this sector potentially ripe for investment.


Aside from traditional revenue streams such as ticket and merchandise sales, leagues now have options when it comes to broadcasting and licensing deals.

Amazon and YouTube are driving up the price of broadcasting games and having exclusive rights to certain days (NFL Prime on Thursdays).

Apollo owns Yahoo and is eyeing a bid for sports broadcaster Paramount, who has exclusive rights to NFL, UEFA, NCAA basketball, The Masters, and more.

KKR invested in Skydance Media which is a media/tech company for high-school sports (which is gaining steam country wide as far as NIL legislation is concerned) and invested in sports gambling app FanDuel.


Many sports teams are poorly managed as can be seen in the case of the Oakland Athletics Baseball Club.

Lack of stadium upkeep has been apparent for nearly a decade:

Possum sighting on field with infestation starting in 2014.

Lack of cleanliness across stadium and seating.

The Oakland Athletics just played their final game in Oakland because of poor management.

Like the tech PE/VC boom in the early 2000s, this new sports model will take years to unfold. Across the NCAA, there have been discussions around how PE can play a role in creating a new “super league”. This project, called “Project Rudy” could inject close to $10 billion in private capital. Given the emotional connections between fans and sports teams, PE could be a major disruptor across the professional and college landscape. Only time will tell how large this new asset class can become.

Business-Insider_PE-in-Sports_4.23.24.pdf (redbirdcap.com)

The NFL’s Most Valuable Teams 2024 (forbes.com)

Inside how Oakland A's long tenure in the Bay Area came to an end (sportsbusinessjournal.com)

Business of Sports: A New Field for PE

The U.S. Supreme Court released their decision in Estate of Connelly vs. United States on June 6th, which will have a meaningful impact on the taxation of future buy-sell agreements.

Impact on the taxation of buy-sell agreements – especially when stock redemption buy-sell agreements are funded by life insurance.

Decision allows IRS to tax the buy-sell agreement stock redemption and death benefits.

May also impact income and capital gain taxes related to buy-sell agreements.

Family businesses may have increased IRS scrutiny.

Reminder: Estate tax exemption scheduled to sunset from $13.61 million in 2024 to approximately $7 million in January of 2026, per individual taxpayer.

A well-crafted buy-sell agreement is critical for identifying the terms upon which business ownership interests are transferred following certain triggering events. Such events include an owner’s retirement, passing, disability, divorce, financial troubles, or termination of employment. When properly constructed, a buy-sell agreement can significantly reduce operational friction, minimize potential conflicts, and ensure the long-term success of a business. Alternatively, a poorly written agreement can lead to operational issues or even forced liquidation.

The Supreme Court decision in Estate of Connelly vs. United States demonstrates a change from previous tax guidance regarding stock redemption buy-sell agreements. These agreements, often funded with life insurance, may now face tax implications. In this case, two brothers, both business owners, established a buy-sell agreement dictating that the business would redeem the shares of a deceased owner (a stock redemption buy-sell agreement). To fund this obligation, the business purchased life insurance policies on each owner. When one brother passed in 2013, the business received the insurance payout and used it to purchase the deceased brother’s shares from his estate.

The primary tax question in the Connelly case revolved around the valuation of the deceased owner's shares for estate tax purposes. The Supreme Court addressed two issues in this case:

Whether the value of the deceased owner's shares should include the proceeds from the life insurance policy.

Whether the agreement's requirement of the business to redeem the deceased owner’s shares should be considered a debt that would reduce the value of those shares.

In a shift from previous District Court decisions, the Supreme Court agreed with the IRS, determining that the value of the deceased owner's shares should include the life insurance payout. Furthermore, the redemption obligation did not reduce the shares' value. As a result, the estate had a significantly higher tax liability.

The Connelly decision highlights the necessity of taking both legal and tax considerations into account for buy-sell agreements. Business owners should ensure that their agreements are thoroughly written and legally reviewed to avoid unintended tax consequences. Comprehensive planning can help ensure that buy-sell agreements are written to address a multitude of scenarios and reflect the most up-to-date tax laws and regulations. It is critical to be aware of the tax implications that life insurance proceeds and redemption obligations can have on share valuations for estate tax purposes.

Gift and Estate taxes play a crucial role in the transfer of wealth, which can include money, property, and other assets both during an individual's lifetime and posthumously.

Prior to 2018, the exemption amount for gift and estate taxes was set at $5 million per taxpayer. However, significant changes came into effect with the 2017 Tax Cuts and Jobs Act, which raised this exemption to $13.61 million. This adjustment represents a considerable increase, allowing for greater tax-free transfers of wealth.  It is important to note that starting January 1, 2026, the exemption will revert to its pre-2018 level, adjusted for inflation, which is anticipated to be approximately $7 million per taxpayer.

In November 2019, the IRS issued important guidance concerning the use of the increased exemption during the period from 2018 to 2025. This clarification ensures that individuals making substantial gifts within this timeframe will not face a disadvantage when the exemption decreases in 2026.  Under the clarified regulation, estates have the flexibility to use the higher exemption amount available at the time of the gift or the lower amount applicable at the time of death—whichever is more favorable. This rule effectively preserves the tax benefits for those who engage in significant gift transfers before the exemption reverts. For those considering large gifts, this IRS guidance provides a strategic advantage. As always, careful consideration and consultation with legal and financial advisors is recommended to tailor strategies to individual circumstances.

Estate and Gift Tax FAQs | Internal Revenue Service (irs.gov)

23-146 Connelly v. United States (06/06/2024) (supremecourt.gov)

Buy-Sell Agreements: Need to Know for Business Owners

When starting my Army career with Cadet Basic Training at the United States Military Academy at the age of 18 years old, the last thing on my mind was my finances.  I was more concerned with surviving the rigors of West Point than I was setting up my retirement account or planning for the future. As graduation drew closer, conversations about financial responsibility and budgeting became more frequent with our superior officers. It was clear however, that most of us preparing for military service did not emphasize diligent financial literacy and planning.

Fast forward to my first job in the Army, a Heavy Weapons Platoon Leader stationed in Vicenza, Italy.  A young Soldier sat across from me explaining his financial struggles and asked for recommendations, including basics like opening a bank account and saving for retirement.  This became a common theme.

Assisting my Soldiers with their finances and advising them on programs that they qualified for continued throughout my Army career and grew more complex over time. Although I now spend my time consulting and advising in the private sector, I always look back on my prior experiences to highlight the importance of basic financial knowledge. With that in mind, we wrote a short brief on benefits offered to service members and veterans.

The benefits we discuss are not specific to one branch of service, nor are they reserved specifically for officers or enlisted service members and veterans:

The Blended Retirement System became mandatory for all service members that joined the military from January 2018 forward.  With this new plan, the Department of Defense automatically contributes 1% of the service member’s base pay to their Thrift Savings Plan (TSP) after 60 days of service and will match contributions to the service member’s TSP up to 5% of the respective base pay until the end of their 26th year of service.  While the Blended Retirement System is relatively new, the Thrift Savings Plan became available to service members on October 9th, 2001 with the approval of the National Defense Authorization Act for Fiscal Year 2001.  The TSP is a federally sponsored retirement savings and investment plan that operates similarly to a 401(k) Plan offered by many civilian companies.  Furthermore, participants in the TSP are eligible to roll over distributions to an eligible retirement plan or qualified trust – a great option for veterans that seek another career after exiting the military.  The TSP benefits are offered in addition to the retirement pay provided to service members who have served at least 20 years of active-duty service.  The starting retirement pay is 40% of the service member’s base pay at retirement and an additional 2% of said base pay for every year of active-duty service over 20 years.

Numerous tax benefits exist for both active-duty service members and veterans.  While VA disability payments are not considered taxable income, most military retirement payments are still subject to taxes.  That said, 25 states currently do not tax military retirement payments, with many more only partially taxing military retirement payments.  Furthermore, many states also offer exemptions or deductions for active duty, reserve, and National Guard servicemembers, but these exemptions and deductions vary significantly from state to state.  It is also important to keep in mind that while on active duty, state taxes are paid to the state listed as the service member’s “home of record” (home state at the beginning of service) and not necessarily the state that the service member is currently stationed, unless specifically changed.  Other tax benefits include property tax deductions based on disability rating (state/county/locality dependent) and federal income tax exemptions for service members while deployed to a combat zone recognized by the IRS.

The G.I. Bill is one of the most known benefits veterans and service members utilize during and after their military career.  While the G.I. Bill has seen a few iterations since its inception, the most recent is the “Post 9/11 G.I. Bill” that is available to those who have served on active duty from September 11th, 2001, and on.  This benefit is multi-faceted and provides up to 36 months of financial assistance with tuition, fees, books, and living expenses; and in some instances, these benefits can be transferred to a spouse or children of the service member / veteran.  The financial assistance for tuition is up to $27,120 per academic year based on the program they are enrolled in and percentage of assistance that a veteran or service member has earned.  These eligibility percentages are as follows:

Additional monetary G.I. Bill benefits exist and can include a monthly housing allowance calculated based on the location of the school and up to $1,000 each academic year for books and supplies.  There are also nuanced benefits to the G.I. Bill that are available to individuals with unique situations.  Of the many out there, possibly the most monetarily beneficial is the Yellow Ribbon Program.  The Yellow Ribbon Program is a voluntary program that universities and colleges can elect to participate in and assists with paying tuition for schools that cost more per year than the standard amount provided by the G.I. Bill.  The school and the government come to an agreement as to how much the school will contribute and the government agrees to match said amount.  This amount is different for each school and can differ between the various academic programs offered by said school.  To qualify for the Yellow Ribbon Program, a student must be eligible for 100% of their Post 9/11 G.I. Bill and be enrolled in a full-time academic program.  Other veteran education benefits to consider are tuition discounts for disabled veterans and their spouses/children, the Military Tuition Assistance Program, and the Veteran Readiness and Employment Program (VR&E).

The VA home loan is an excellent financial benefit that can be used multiple times throughout the lifetime of active-duty service members and veterans.  Some of the key benefits of the VA home loan are no downpayment requirement, no requirement for Private Mortgage Insurance (PMI), competitively low interest rates, and limited closing costs.  While utilizing the VA home loan, service members and veterans can also utilize the Interest Rate Reduction Refinance Loan (IRRRL), which helps streamline the refinancing process for lowering interest rates on existing VA home loans.  It is important to keep in mind that service members and veterans can only have one active VA home loan at a time, but once a VA home loan is paid off or refinanced through a traditional mortgage, the VA home loan becomes available for use again.  The VA home loan does include a VA funding fee based on how many times a service member or veteran has used the VA loan and the down payment on the property being purchased.  Additionally, the VA home loan can only be used for purchasing a primary residence, however, it can be used for multi-family units so long as one of said units is being utilized as the primary residence of the service member or veteran.

While on active-duty, service members are eligible for Servicemembers’ Group Life Insurance (SGLI).  This low-premium life insurance policy offers up to $500,000 to any service member that elects to be a part of the program.  A similar policy is extended to the spouses and children of active-duty service members in the form of the Family Servicemembers’ Group Life Insurance (FSGLI) for up to $100,000 for each registered dependent.  As service members transition out of the military, they may find it difficult to obtain life insurance with affordable premiums due to the disabilities incurred through service.  To help mitigate this issue, veterans are eligible for Veterans’ Group Life Insurance (VGLI).  VGLI offers up to $500,000 in life insurance coverage and is available to those veterans who had an SGLI policy prior to separation and enroll within one year and 120 days of separation from the military.  It is also important to note that veterans can convert their VGLI plan into a commercial policy at any time without having to provide proof of good health.

The aforementioned financial benefits are not an exhaustive list of those that are available to veterans and service members, and many more exist at the federal, state, and local levels.  Organizations like the Veterans of Foreign Wars (VFW), Disabled American Veterans (DAV), and the American Legion exist to assist service members and veterans in many ways including navigating transition, education, and retirement benefits.

Serving this country has been one of the most important pillars of my life. From my formative years at the United States Military Academy at West Point, to nearly a decade in the Army across assignments overseas and stateside, it is the ultimate privilege and honor to have done a small part for our great nation.  The team at Hamilton Capital Partners and I would like to extend our upmost gratitude for the sacrifices of all of America’s service members, veterans, and their families.

Military Blended Retirement System 101 | Military OneSource

States that Don't Tax Military Retirement – TurboTax Tax Tips & Videos (intuit.com)

Which states tax my Active Duty or Reserve military pay? | An Official Air Force Benefits Website (af.mil)

Military | Internal Revenue Service (irs.gov)

Yellow Ribbon Program | Veterans Affairs (va.gov)

VA Loans and Investment Property (veteransunited.com)

Veterans’ Group Life Insurance (VGLI) | Veterans Affairs (va.gov)

When starting my Army career with Cadet Basic Training at the United States Military Academy at the age of 18 years old, the last thing on my mind was my finances.  I was more concerned with surviving the rigors of West Point than I was setting up my retirement account or planning for the future. As graduation drew closer, conversations about financial responsibility and budgeting became more frequent with our superior officers. It was clear however, that most of us preparing for military service did not emphasize diligent financial literacy and planning.

West Point to Wall Street – Benefits for Service Members and Veterans

When it comes to retirement plans, we usually refer to either Defined Contribution or Defined Benefit Plans. The most common workplace retirement plan is the Defined Contribution plan. This is your basic 401(k)! As the name suggests, the amount you can “contribute” to the Plan in any given year is “defined”; this is referred to as your deferral. Most modern 401(k) Plans are participant directed, meaning the participant (employee) bears the investment risk, and there is no guarantee as to what the plan will be worth upon retirement. The participant chooses how much they contribute and what to invest in. On an annual basis, the IRS updates the annual contribution limits to these Plans, commonly known as 

The second type of retirement plan is a Defined Benefit Plan. These are your traditional pension plans that usually pay the participant (employee) a certain amount of money upon reaching retirement age or time in-service, thus the benefit is “defined”. In general, employers lean toward defined contribution plans as the burden of how much the employee has for retirement shifts from the employer to the employee. As a result, the traditional “pensions” have fallen out of favor over the years (think- IBM/GM/ FORD/P&G).

Over the last decade, Congress, and the Federal government (alongside industry lobbyists) have made an effort to incentivize SMBs (Small to Medium Sized Businesses) to adopt modern pension Plans for the benefit of both the employer and the employees. With the average U.S worker lagging in “retirement readiness”, these new incentives serve to bridge the gap for many working Americans. These newer plans are referred to as Cash Balance Plans.

: The IRS contribution limits determine how much you can put into the plan every year. In a CB plan, these limits are much higher than what a “defined contribution” plan usually offers. Since the limits are higher, CB plans have the potential for contributions in the six-figure range. Actuarial calculations state that the higher the salary and the older an owner is, the more they can defer to the cash balance annually.

: For business owners running a CB Plan, there’s a significant opportunity for tax deductions and deferrals. Owners of a CB can reduce their taxable income for every dollar contributed to the plan. It’s considered a deduction under the Pension, profit-sharing, etc., plans line on a tax return. Furthermore, CBs are IRS/ERISA qualified plans that offer tax-deferred retirement contributions for owners. In many cases, owners can double or triple their pretax deferrals by sponsoring a CB Plan.

: When the plan closes or when an employee leaves, the vested portion of the account can be rolled over into an IRA or 401(k). Since CB plans typically have higher limits than either of those, a smart investor can effectively increase their 401(k) or IRA contributions above traditional allowances.

: As part of a company’s benefit package to employees, the Cash Balance Plan can prove to be a strategic advantage, especially at small and mid-sized businesses, when recruiting talent and reducing employee attrition.

Cash Balance Plans can be set up in combination with a 401(k). Below is an example of what this looks like in practice:

 The account is credited annually with an employer contribution (

) which is determined by a formula specified in the Plan Document. The amount is typically a percentage of salary, although it may also be a flat dollar amount. In the above example, the owners can contribute 6x more than what only a 401(k) plan would allow for.

: All Plan assets are invested collectively by a plan Trustee and appointed fiduciary in one pooled account.

 When an employee leaves an employer, the vested portion of the account can be taken as a lump sum or rolled over to an IRA.

 Cash Balance Plans are IRS/ERISA qualified Plans, and Plan assets are protected from bankruptcy and lawsuits.

Cash Balance Plans have been around for many years and have experienced renewed popularity among 

 since the passage of Pension Protection Act of 2006 (PPA). Cash Balance Plans are Defined Benefit Plans with more efficient portability, lower risk, and more transparency. Cash Balance Plans help employers control the cost of benefits more so than a traditional Defined Benefit Plan using a uniform benefit formula. When aggregated for testing purposes, a Cash Balance and 401(k) Combination Plan arrangement can provide extreme flexibility in controlling costs and 

t: IRS Approval and recognition of legal status.

: ICR (Interest Crediting Rates) made these Plans even more attractive to employers and business owners.

: This round of regulation added increased investment flexibility and clarified compliance regulations.

6 Assumes a benefit based on 7% of average monthly compensation multiplied by a maximum of ten years of participation, and a Target Normal Cost calculated using mandated segment rates for January 2020.

7 A 3% Safe Harbor Non-Elective employer contribution is allocated to all eligible participants plus a 3% regular employer Profit Sharing allocation to non-owner participants. Complying with Safe Harbor provisions allows the owners to make maximum salary deferrals without failing required non-discrimination testing.

8 Profit Sharing, Safe Harbor, Salary Deferral and Cash Balance allocations are converted to monthly benefits at age 65 (Normal Retirement Age) and aggregated to pass non-discrimination testing.

*This material has been prepared for informational and illustrative purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You or your client should consult your/their own tax, legal, and accounting advisors before engaging in any transaction.

By Alonso Munoz, Sambhav Bansal, Alexander Canacci   When it comes to retirement plans, we usually refer to either Defined Contribution or Defined Benefit Plans

What is a Cash Balance Plan?

Kevin Lee

Since its ETF approval on January 10th, Bitcoin exchange-traded funds have had roughly $25 billion in inflows. Bitcoin (BTC) itself is up 60% year-to-date and has more than tripled in value from a year ago. It’s not just BTC either; Ethereum (ETH) and a range of meme coins have made a resurgence over the past few months as well. The demand for digital assets seems unrelenting, and we’re already past the highs we saw in 2021. So now that anyone can buy BTC through their favorite broker, it’s important to look at why fueling this growth.

A compelling case for including Bitcoin in a portfolio is to treat it as a commodity, particularly as a better alternative to gold. Think about why people invest in gold in the first place. It’s a globally accepted reserve asset without ties to a single government and a crisis commodity for geopolitical risks. From an allocation perspective, gold adds diversification by hedging a portfolio from currency fluctuations. However, gold is heavy and inconvenient to store and transport. Physical bullion has the same liquidity issues as other commodities when needing to be converted into cash. Even paper gold assets have expenses related to their storage and redemption. Now consider Bitcoin. Given its popularity, it’s an accepted store-of-value asset, and since there is a finite amount of bitcoin available to be mined, it’s inflation indifferent. It’s decentralized, so there is no government interference. And lastly, it’s digitalized on the blockchain. There’s 24/7 price discovery, and it’s very easy to hold and trade. There’s no vault or armed security truck that holds BTC, but rather a digital wallet; the key to which is in your head or flash drive (hopefully). It’s quick too; transferring BTC to another wallet is instantaneous, trading American Eagles isn’t. The argument that BTC is the new gold is strong, and markets seem to agree. Below shows the total holding of Gold ETFs (in red) compared to iShares’ BTC ETF market cap (in blue). There’s a notable negative relationship which suggests investors are swapping their allocation from gold to BTC. The aggregate gold market is $15 trillion; a 10% swap would quadruple the inflows we’ve seen this year already.

When you buy Bitcoin, you’re buying into the revolutionary 

, and that’s the future. Who wouldn’t want to be invested in the future? As we increasingly digitalize and decentralize networks to transition the internet on a distributed ledger (dubbed 

), the likely currency to facilitate this will be Bitcoin. It’s all based on reorganization via blockchain, so in that sense, yeah, I’d love to have some BTC. Cash? Pffft, that’s so 2018. In an age with decentralized autonomous organizations, digital deeds, and 

, you can see the need for a currency that keeps up on the same technology. The push for decentralized finance (DeFi) and growing AI adoption is just going to grow the progress toward Web 3.0. It’s not a question of if, but when.

As with any investment, people are in it to make money. Whether anyone cares about the greatness of blockchain technology or its viability to replace gold, BTC is mainly being bought because it’s appreciated more than 1000% over the last 5 years. There’s no cash flow to discount or fundamentals to look at; BTC is worth $70,000 because everyone collectively agrees it is. And we don’t say this to slight the asset. Meme stocks, coins, and arguably even the magnificent 7 stocks trade where they are because of sentiment, which if you guess correctly, generates a lot of Alpha. Believe us, we’d love to have bought BTC 10 years ago in the nascent stages of digital tokens. Of course, in the pursuit of making money, there’s gambling. Now in ETF format, BTC gets the full spa treatment of day traders, Reddit WallStreetBets investors, and zero-day option fanatics. It’s hard to say how much of BTC’s daily volume is made up of this crowd, but demand for BTC is high enough that big sponsors have already stepped in to collect their fees on the trillion-dollar crypto markets. Just this week, ProShares launched a leveraged and short BTC fund with a pricey 133 bps in expenses.

Obviously, none of the above is investment advice, and we’re only explaining the growing interest in BTC from the perspective of professional asset managers. Adoption and price volatility are still the main drawbacks to BTC, and there isn’t a clear answer to how regulation will affect the crypto industry in the near future. In any case, the growing interest in BTC is undeniable, and the argument for cryptocurrencies is already being heard on Wall Street.

Here’s what BlackRock’s Larry Fink had to say earlier this year: “ETFs are step one in the technological revolution in the financial markets. Step two is going to be the tokenization of every financial asset.”

To contact the editor responsible for this story:

Bitcoin ETFs: Should I buy them? Since its ETF approval on January 10th, Bitcoin exchange-traded funds have had roughly $25 billion.

Bitcoin vs Gold

Kelvin Lee

This week marks the end of earnings season for fourth quarter of 2023, and what an earnings season it was! Overall, the S&P 500 beat expectations for a 15th consecutive quarter with 377 of the S&P500 companies beating earnings and revenue estimates. The index’s earnings rose 8.2% from last year, much higher than the expected 1.2%. At the sector level, technology and communications performed best with better-than-expected sales and margins from last year. Obviously, the M7 stocks were the drivers here and the positive price reactions from these mega caps has led the S&P to its all-time high. Short story, things went well, much better than what Wall Street expected. The “pros” were mostly caught off guard coming off negative sentiment stemmed from high interest rates, multiple ongoing wars, and a Biden vs Trump rematch. Here’s some things that caught our attention:
AI Hype? Fact or Fiction

Instead of AI being referenced thousands of times on earnings calls, it was only a few hundred. Companies pulled back from the AI claims that they made last quarter. That’s a relief, since having an intern use Chat GPT probably doesn’t qualify as being AI powered. However, that’s not to say tech companies aren’t spending heavily on AI. Last year’s “Year of Efficiency” helped advance margins, and now, cash is being put to work in increased forecasted capex spending on datacenters and learning models. That’s great news for true AI forward companies like Microsoft and Nvidia on realizing their growth potential. We’re forecasting trillions of dollars to be spent on AI over the next decade and firms at the forefront now still have plenty of runway to grow market share. We are in an amazing time where accelerated computing is decoupling Moore’s Law, and unlike the dot com bubble twenty years ago, earnings are growing in line with expectations.

The Health Care sector recorded the fourth-largest percentage decrease in estimated earnings of all sectors since the start of the quarter. Main concerns we saw here were the growing number of generic competitions from expiring patents and increasing medical care costs for insurers. However, pharmaceuticals with GLP-1 exposure were notable outliers. Eli Lilly and Novo Nordisk are likely to continue to top sales expectations with their rapidly expanding diabetes and obesity franchises. We expect this trend to continue to dominate the Pharma sector for the next few years. Like AI, there’s more demand than supply and a huge unrealized market exists, especially as trials continue to indicate further positive health effects for GLP-1.  We’re also looking forward to some key product approvals in Alzheimer treatments later this year. Eli Lilly’s Donanemab can be another catalyst for growth as legacy products start slowing down.

While the fourth quarter was strong across the board for both consumer staple and discretionary stocks, the outlook for 2024 generally disappointed investors. Continued weakness in China has and will continue to hurt luxury goods providers like Gucci and Hermes who’ve relied on Asia in the past to make up for slower sales in North America. In the U.S., the earnings for food and household product manufacturers are expected to slow as well. Companies like Coke and Proctor & Gamble have raised prices with (and exceeding) inflation, and the inelastic demand for their products resulted in double digit earnings growth over the past two years. Inflation has fallen and high prices are no longer justifiable, as a result, these company’s sales and margins are going to have to take a hit. Great for consumers, not good for shareholders. Retail also forecasted weakness with the likes of Nike, forecasting much lower traffic into their stores this year. The fervid retail sales numbers from last year are set to wane now as shoppers run out of savings.

To contact the author of this story:
Kelvin Lee at kelvin@hamiltoncapllc.com

To contact the editor responsible for this story:
Alonso Munoz at alonso@hamiltoncapllc.com

By Kelvin Lee, Alonso Munoz   Quarter Earnings Wrap Up: This week marks the end of earnings season for fourth quarter of 2023, and what an earnings season it wa

AI Rally Continues

Back in 2021, congress passed the Corporate Transparency Act (CTA) as a response to concerns about money laundering and shell companies. As part of the act, and effective this year on January 1, 2024, is a new reporting requirement for Beneficial Ownership Information (BOI) reports to be filed with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury. In essence, the CTA aims to make business ownership more transparent, and to do this will require another bureaucratic form, on top of the hundred others that business owners already have to fill out. But alas, it does need to be filled out, so below is a brief guide (not legal advice) on how to do it. Here’s the 

Any company considered a “reporting company” which includes corporations, nonprofits, limited liability companies, limited partnerships, business trusts, and entities created filing with a secretary of state. There are some exemptions (which you can find here), but in general, public companies, banks and tax-exempt entities don’t need to file the form since they’re regulated by federal agencies.

FinCEN wants details about “Beneficial Owners”, which are individuals who have significant control over the business or own at least 25% of it. On the form (which you can find 

), you’ll need to report the following about these Beneficial Owners:

– Residential (or sometimes business) physical commercial street address

– An image of an acceptable government-issued ID (e.g., a U.S. passport or state-issued driver’s license)

Companies existing before Jan. 1, 2024, have until Jan. 1, 2025, to file. New companies must report within 90 days of creation (in 2024) or 30 days if formed after Jan. 1, 2025.

Surprise, surprise, charges and penalties. Non-compliance can result in fines up to $10,000 per violation and possible imprisonment. Failure to report updated beneficial ownership information to FinCEN or attempting to provide false or fraudulent beneficial ownership information include civil penalties of up to $500 for each day and imprisonment for up to two years.

Overall, this is a simple form that can be filed online to FinCEN (

). It’s another administrative burden and it’s easy to miss. Don’t let it slip through the cracks. There’s no “street cred” in prison for not filing a BOI report.

By Kelvin Lee, Alonso Munoz   Back in 2021, congress passed the Corporate Transparency Act (CTA) as a response to concerns about money laundering and shell comp

New FinCEN Reporting Requirements

Today, after the bell, we get Nvidia (NYSE: NVDA) earnings. This is it; no other company is going to move markets like NVDA will. The company has risen to the third-largest weighting in the S&P 500, boasting a market cap of more than $1.7 trillion. NVDA is up 40% this year and responsible for a quarter of the gains in the S&P 500. NVDA’s fast ride upward has many skeptics wondering if the company can continue to match its lofty 32x earnings premium valuation. Notably, Cathie Wood’s ARKK innovation fund has sold over a million NVDA shares over the past year, citing that the market is getting ahead of itself with expectations. Now, NVDA earnings are on deck, and those same expectations are being tested. Implied options indicate a 10%+ move in the stock price after release. So, the question is, will that be a 10% move up or a 10% move down?

Of course, up…? Our attitude hasn’t changed one bit since 

. Yes, NVDA stock is relatively expensive to buy, but it’s expensive because you’re getting an exponentially growing firm. Just last quarter, Nvidia's profits hit $9.2 billion, up a ridiculous 1,259% from the prior year, with sales tripling to $18.1 billion. It’s difficult to find a similar growth story out there, and we’re bullish as this trend continues. NVDA certainly is; their guidance this quarter is $20B in sales, which represents a year-over-year growth rate of 427%. No matter what NVIDIA has been trading at, the company has kept its sales multiple in line with its stock price. Whether you like it or not, the next tech wave is AI. Trillions of dollars are being spent on natural language processing, machine learning, virtual assistance, and image recognition models, and NVDA solely holds the keys to the infrastructure needed to run all of it, or most. Chips and data centers are one of the fastest evolving market sectors, and we wouldn’t want to bet against the momentum here.

So, here’s what to watch this afternoon. Analysts expect revenue of $20.4B and net income of $10.8B, about a 200% increase from last year. As mentioned above, these expectations were in NVDA’s guidance last quarter. On specific financials, we’ll be looking at data center revenue. Data centers have been NVDA’s best moneymaker, and we’re eager to see if the company’s prior forecast of a trillion-dollar AI market opportunity can show up in data center sales. We’re hoping to see another 20% growth in data center revenue, and we’re confident that NVDA can deliver. Unlike Cathie Wood, who missed out on more than 200%+ in NVDA gains in just the past 12 months, we think market expectations are fair based on the market opportunity and sector tailwinds. And on the off chance that NVDA does miss? Well, we’re still buyers. Any pullbacks, especially a 10% one, are rare chances to invest in AI for the long term at a “discount”. Historically, NVDA has rebounded from any downward drafts, and as long-term investors, we’re in it for the next 5 years, not just the next 5 days.

Today, after the bell, we get Nvidia (NYSE: NVDA) earnings. This is it; no other company is going to move markets like NVDA will. 

NVDA: Cathie Wood Missed Out!

The financial spotlight this past week has been on New York Community Bank (NYSE: NYCB) with its rather disappointing earnings for Q4 2023. Since reporting last Thursday, NYCB’s share price has tumbled more than 50% (congratulations to any short sellers out there), and the market is having Déjà vu from regional bank collapses last year.

By Kelvin Lee, Alonso Munoz   The financial spotlight this past week has been on New York Community Bank (NYSE: NYCB) with its rather disappointing earnings for

Own the Unknown