Pinnacle Trust Blog

by Pinnacle Trust | May 10, 2012

May Joins Pinnacle Trust

Gretta B. May has joined Pinnacle Trust as a Client Services Manager. Gretta received a B.A. in Business Administration with a concentration in Marketing from Piedmont College in Demorest, Georgia.

She is a native of Vicksburg, Mississippi, where she resided until 1998 before relocating to Georgia. Gretta returned to the Magnolia State in 2010 and has worked in sales and management positions in the Metro Jackson area.

Upon graduation from Piedmont College, she worked for the Georgia Chamber of Commerce’s Leadership Georgia Program as an assistant to the Director. Subsequently, she obtained certificates of completion in the fields of civil and domestic mediation from the University of Georgia’s Fanning Institute and completed her practicum with Henning Mediation and Arbitration Service in Alpharetta, Georgia, as well as the Ninth Judicial Administrative District Office of Dispute Resolution in Gainesville, Georgia.

Gretta is a Lifetime member of the Junior Auxiliary of Vicksburg, having served as Secretary to the Board. She has also served as Chairman of the C.E. Mendez, “Too Good for Drugs Program,” and as an elementary school mentor. Gretta was a member of the Fall Committee during the development of JAV’s award-winning cookbook, Ambrosia. An active member of her native community, she served as Food Chairman for the American Heart Association Benefit, Registration Chairman & Food Co-Chairman for the Miss Mississippi Pageant and Secretary for the Warren County Republican Executive Committee. Gretta was an Official Court Reporter for the Ninth Judicial District of Mississippi for over 10 years and a free-lance court reporter for over 12 years. She has served in various supporting roles to the Mississippi Court Reporter’s Association and the Mississippi Judicial College Court Reporter’s Committees.

Beth McGaugh, Pinnacle Trust CFO, said, “We’re excited about having Gretta on board. She will be exceptional in helping us achieve a superior client experience, as well as assisting us with her marketing and planning talents.”

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by Pinnacle Trust | May 10, 2012

Consumer vs. Government Debt

As American consumers have deleveraged, household debt as a percentage of GDP has fallen to its lowest level in six years (blue line, chart below). However, as we have previously discussed, total government debt has risen to levels not seen since the early 50s (blue line, second chart).

Charts courtesy Ned Davis Research

Debt reduction by consumers is being completely offset by the expansion of government debt. Little progress will be made until after the November elections, but eventually, this has to change.

As for stocks, rising optimism and complacency led to a pullback of about –3.5% since early April highs. That optimism has now corrected and investor sentiment is neutral. We remain (mild) cyclical bulls within a secular bear. – Stacey Wall

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Filed under Economic Outlook, Government & Money, Market Update, Stacey Wall Commentary, Stocks

by Pinnacle Trust | May 7, 2012

Pinnacle Trust Welcomes New Family Member

Pinnacle Trust welcomed its newest family member yesterday. Gavin Miles Nelson, son of Jeremy Nelson, Chief Investment Officer, and his wife, Katie, was born at 6:32 pm. Gavin weighs 7 lbs, 15 ounces, and is 21 inches long. Congrats to Jeremy and Katie!

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by Pinnacle Trust | May 3, 2012

Taxes and Spending

The “taxing vs. spending” debate continues in Washington and will do so right through the November election. On one side are those who promote that spending must be slashed to the bone with no tax increases; at the other extreme are those arguing for huge tax increases for the wealthy. This chart is our attempt to put government spending and taxes into a historical context over the past 65 years.

Chart courtesy of Ned Davis Research

When looking at the deficit, our national debt, and the projected entitlement spending for the Baby Boomers, it is hard to make the math work without higher revenues along with reduced spending. Taxes are currently running at 17.1% of GDP (blue line), which is below the historical mean of 18%. The Simpson-Bowles deficit commission argued that we could raise considerable revenues by eliminating most deductions and still cut tax rates. We like this kind of reform because Uncle Sam can both raise revenues AND raise the incentive to produce.

President Obama says the wealthy need to pay their fair share, and something is obviously wrong with the system when Warren Buffett is in a lower tax bracket than his secretary. But the term “wealthy” is a relative term. The top 10% of wage earners in the U.S. already pay 70% of all federal income taxes, so what is their “fair share?” Even more disconcerting is that 48% of workers pay no federal income tax at all. In his State of the Union address earlier this year, President Obama said, “it’s time to apply the same rules from top to bottom.” It’s true that wealthy Americans should pay their fair share, but everyone above the poverty level needs to contribute.

Equally as important, if not more – is that government spending has exploded to 25.5% of our economy (black line). This is due, in part, to cyclical weakness and stimulus spending; but compare 25.5% to the 65-year norm of only 19.6%. The bipartisan deficit commission argued that spending should be reduced to 21% of GDP. That should be our minimum goal. We have to seriously cut government spending and we need to do it now.

If we can get our debt situation under control over the next few years, we believe another secular bull market is a distinct possibility. -Stacey Wall

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Filed under Economic Outlook, Government & Money, Market Update, Stacey Wall Commentary, Stocks, Taxes

by Pinnacle Trust | April 30, 2012

Debt Update

At Pinnacle Trust, we’ve been talking about the debt problem way before talking about the debt problem was cool. Since the early 80s, when the last great secular bull market began for stocks, we have piled up a lot of debt. This chart shows our Total Credit Market Debt as a % of GDP.

As I’ve often said, the biggest problem with debt is that it is a drag to growth. Borrowing often represents consumption today at the expense of future growth (debt service). When you have to spend a big part of your paycheck to service debt, there is less to spend on things that cause the economy to grow. It’s no different for businesses or governments – debt service drains our ability to invest elsewhere. The red line on the chart indicates when debt has been especially high, defined here as when our debt to GDP ratio has been above 270%. During those times, the economy has grown at an average rate of only 3.9% per year. Compare to when debt has been below 160% of GDP (green line) and the economy has grown at an average rate of 7.6% per year. When debt loads get well above the norm, growth rates fall well below average. Our biggest new concern is the massive increase in government debt. We’ll look at private, business and government debt in upcoming posts.

In order for a new secular bull market to begin, the debt structure has to be deflated. For now, we remain mildly bullish, but momentum is waning. – Stacey Wall

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Filed under Economic Outlook, Government & Money, Market Update, Stacey Wall Commentary, Stocks

by ptmarketupdate | April 27, 2012

Weekly Market Update–Good Earnings…. Bad Economy?

According to Thomson Reuters, 57% of S&P 500 companies have reported first quarter earnings. 72.8% beat expectations, while only 17.1% missed expectations. The indexes blended earnings growth rate for Q1, combining actual earnings and expected earnings for those companies that have not yet reported, rose to 7.2% from 6.9%. Even though earnings growth has slowed from the double digit pace of the past few years, the numbers are still solid and demonstrate that corporate America remains on solid footing.

So why the disconnect between corporate America and the economy? Q1 GDP growth came in at a 2.2% annual rate versus expectations of 2.5%. To answer the question, we must look to wage growth and unemployment. Real earnings (factoring in inflation) are contracting at a -0.6% rate. Unemployment remains above 8%. With approximately 70% of the economy being consumer spending, declining real wages and high unemployment make it difficult for the economy to grow. However, from a corporate standpoint, it shows efficiency. Revenues and profits are growing at a faster rate than wages.

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by Pinnacle Trust | April 23, 2012