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West Oak Capital, LLC
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April 2016

We welcome your call or email if you have any thoughts you would like to discuss.

 
Byron, Lisa, Jerry, Darin and Ian
 
 
“Bring your brooms ‘cause it’s a mess.”
                        ---        Character Marty Huggins in The Campaign
                                    
The 2012 movie, The Campaign, is a crazy, raunchy, vulgar, cringe-worthy comedy about two opposing political candidates who clamor for popularity using tactics that become increasingly outlandish.  It is a disturbingly funny film.  Political events and personalities frequently provide rich material for satire, and this Presidential election is living up to that measure.  It can be entertaining to watch, but is it good for America?
 
The election and resulting policy priorities have the potential to influence our economy.  For a long time, Wall Street advocated for “gridlock” in Washington, suggesting that things would be fine if we just maintain the status quo.  That does not seem to be the case right now.  There are consequential issues that could benefit from the real work of hashing out a good old-fashioned bipartisan compromise.  In particular, we believe reforms in corporate tax rules and immigration could strengthen the U.S. economy by creating more jobs here at home.  
 
When people run into an obstacle, it is only a matter of time before they find a way around it.  The President begins issuing executive orders and empowering federal agencies to take extraordinary measures to pursue political objectives.  Corporations move money and jobs offshore to minimize the impact of taxes and regulations that would otherwise put them at a competitive disadvantage in the global marketplace.  Regulatory uncertainty, capital flight and shortages of skilled labor do not bode well for economic growth. 
 
We have an opportunity to do better.  The time-tested prescription for innovation is relatively simple – bring capital and labor together, and let the magic happen. American companies are sitting on enormous stockpiles of cash, literally trillions of dollars, currently held in foreign accounts because of punitive tax provisions preventing those funds from coming back to the states. An adjustment to our corporate tax laws could make it attractive to repatriate foreign-earned profits back home.  At the same time, American universities are already educating many of the best young minds from around the world.  According to the Institute of International Education, more than 761,000 foreign students are enrolled in U.S. colleges and universities, with roughly 39 percent of those students coming from China or India.  Astoundingly, foreign students will walk away with half of all the master’s and Ph.D. degrees awarded by U.S. schools in computer-related fields.  Rather than train them and send them packing, perhaps we could improve our immigration policies to allow for work visas and a better path to citizenship so that students who graduate from our schools can pursue their well-paying professions here in America.  Even the government would benefit from these reforms, because personal income taxes and payroll taxes generate more than 83 percent of the total federal tax receipts.  More capital and skilled labor in the U.S. translates into more jobs, more consumer spending and more tax dollars to bolster federal and municipal budgets. 
 
Speaking of public policy, there are two prominent changes occurring in the money management industry that will affect investors.  The first is a broad set of new regulations for how cash equivalents are held in client accounts.  We are reviewing these new rules, and you may see adjustments to cash (money market) programs as we work to protect client accounts from the potential for additional “liquidity fees” and “redemption gates” that could impair access to cash under extreme circumstances.  Also, you may read about the new “fiduciary” standard for retirement accounts.  The fiduciary standard requires the firm to place client interests ahead of its own.  It is a higher level of responsibility than the previous “suitability” standard, which only required that investments be suitable to the client’s situation.  This change should have virtually no impact on West Oak Capital, because RIA firms like ours already operate under the fiduciary standard.
 
After a rocky start, stock prices recovered to post modest gains for the recent quarter.  Capital markets have been on a roller coaster since last summer, as global economic activity slowed and oil prices plummeted.  Analysts have trimmed earnings expectations, and even the Federal Reserve has adjusted its plans for raising interest rates.  It appears likely that rates will remain lower for longer than the Fed originally anticipated when they nudged rates upward in December.  That probably cools the dollar’s ascent on foreign exchange, which, along with firming oil prices, could improve the outlook for better corporate earnings reports later this year.  All of these topics appear to be taking a back seat, however, to the riveting drama of our election process.  As they say in the movies, bring your brooms, ‘cause it’s a mess!
 
We welcome your call if you have any questions or topics you would like to discuss. Hopefully, you will have an opportunity to say hello to Ian Brown, who recently joined West Oak Capital after earning his bachelor’s degree in business from California Lutheran University.  We are busy overwhelming him with all the things he needs to learn to be in a position to help clients in the years ahead.
 
 
 


Past performance is not indicative of future results. The information contained in this report is based on internal research derived from various sources and does not purport to be statements of all material facts relating to the items mentioned. The information, while not guaranteed as accuracy or completeness, has been obtained from sources we believe to be reliable. Opinions expressed herein are subject to change without notice.
West Oak Capital, LLC
2801 Townsgate Road, Suite 112
Westlake Village, California 91361
Ph. 805.230.8282, Fax 805.230.8283
www.westoakcap.com
Copyright © 2016 West Oak Capital, LLC, All rights reserved.


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