QUARTERLY

NEWSLETTER

4Q

2019

2398 S Dixie Hwy, Miami, FL 33133 www.TonkinsonFinancial.com T: 866-323-8326 F: 866-610-0042

Do You Remember Your Teachers? ………………… pg. 2

Narrative Economics ………………………………… pg. 2

Social Security’s COLA ……………………………… pg. 2

Consequences of Your Credit Activities ……………. pg. 3

RMD Now Begins At Age 72 ………………………… pg. 3

Trigger Mortis ……………………………………….. pg. 4

Graphing the Markets ……………………………….. pg. 5

Community Events …………………………………… pg. 6

Announcements & Reminders ……………………….. pg. 7

UM vs. FIU Football Game ……………………….…. pg. 8

12/31/19

Aggressive Allocation 9.57% 24.34% 24.34%

Balanced Allocation 7.15% 20.23% 20.23%

Conservative Allocation 4.74% 16.30% 16.30%

S&P 500 TR 12.43% 31.49% 31.49%

Russell 2000 TR 13.18% 25.52% 25.52%

Barclays U.S. Agg Bond TR -0.14% 8.72% 8.72%

MSCI EAFE NR USD 10.55% 22.66% 22.66%

10 year Treasury 1.92% 2.69%

Barclays 1-3m Treasury/Cash 2.20% 2.45%

Price of oil $61.06 $45.33

Real GDP YoY % charge 2.1% 3.0%

U.S. Unemployment Rate 3.5% 3.9%

The aggressive allocation is made up of 50% S&P 500 TR, 8% Russell 2000

TR, 18% Barclays U.S. Agg Bond TR, 22% MSCI EAFE NR USD and 2% cash.

The balanced allocation is made up of 39% S&P 500 TR, 5% Russell 2000

TR, 35% Barclays U.S. Agg Bond TR, 16% MSCI EAFE NR USD and 5% cash.

The conservative allocation is made up of 29% S&P 500 TR, 2% Russell 2000

TR, 53% Barclays U.S. Agg Bond TR, 9% MSCI EAFE NR USD and 7% cash.

All indices are unmanaged and investors cannot actually invest directly into

an index. Unlike investments, indices do not incur management fees, charges,

or expenses. Past performance does not guarantee future results.

─

2019 U.S. stock market

performance was incredible.

When the results are this great,

we tend to project that the

future results will be the same

which is far too optimistic.

Expectations rise faster than market results. Yes, we were

all beneficiaries of unexpected gains.

For 2020, we suggest that you curb your enthusiasm so

that you will not be disappointed.

The global economy is expected to slow down and

despite the outrageous noise from the Presidential

election that will add risk to the market, I anticipate that

the USA will outperform as it did in 2019.

Our strategy to take profits and rebalance the portfolio

such like major institutions occurred 4 times in 2019 and

Backed by a strong consumer, GDP growth continues to

hover near its post-financial crisis average.

Employment trends remained solid with unemployment at

3.5%.

The FOMC cut rates a quarter point in October to 1.50–

1.75%. Rates were left unchanged at the December

meeting.

The Treasury curve experienced a significant steepening.

U.S. equity markets surged higher in Q4, with the S&P 500

up 9.1%, capping off the best year for the Index since 2013.

Growth-oriented sectors such as Information Technology

and Health Care led the market higher in Q4.

Geopolitical tensions eased as the U.S. and China reached

a truce following 20 months of trade negotiations.

Emerging markets rebounded sharply following a

challenging Q3. The MSCI Emerging Markets Index

advanced 11.8%.

2

will continue in 2020. We provide this service to all our

clients regardless of account size which is unique.

The tax cut, which was a short-term economic boost, has

run out of steam but the Federal Reserve cutting rates 3

times in 2019 gave the stimulus to the economy in 2019.

I do not anticipate any lower rates in 2020.

Watching the Rose Parade on TV January 1st

reminds me

of the U.S. expansion since 2009 that this parade is

ending.

The confrontation with China will not go away and

already the stock market has adjusted to the fact that it

is detrimental just as the Federal budget deficit. The

damage is analyzed and quantified to determine the

impact on the economy.

The U.S. government actually creates their own

problems. Richard Nixon in 1972 opened the doors to

China never anticipated that China, 48 years later,

would be such a political and economic challenge to us

now.

The U.S. government has no discipline on how it spends

money so the $1 trillion deficit is business as usual to dig

the hole deeper so our kids will pay for it.

So we do the best we can to keep you out of harm’s way

and hopefully have fun. We will be monitoring your

accounts like we have done for 29 years.

Source: J.P. Morgan 1th

Quarter Guide to the Markets®

─

As time goes by, there are moments when I look back

and remember specific teachers who I still appreciate

their impact on me growing up. In particular, I recall my

elementary school teachers with a high regard.

Do you remember your teachers? I hope that you also

have fond memories of them.

It’s one thing to have knowledge but it is a real skill for

one to teach to a person regardless of age. Knowledge

must be understood in order to be of any value. My

teachers were dedicated to making sure I understood the

subject and it made me enjoy what I learned.

If we have knowledge, we need to share it so that it will

be of value to others.

─

On December 13th

,

Steven, Tom and I had

the pleasure of meeting

Dr. Robert Shiller at the

UM Miami Herbert

Business School. Dr.

Shiller won the Nobel

Memorial Prize in

Economic Sciences and

is the creator of the

Doubleline Shiller

Enhanced CAPE Fund

of which we currently

have $47 million

invested.

Dr. Shiller gave an outstanding presentation on the topic

of narrative economics. The concept is that even if the

“facts” are not valid, people will still believe that they are

true and behave accordingly including how they invest.

What is important to us is the belief.

The amount of noise (spin) based on false news is

deafening.

As fiduciaries, our in-house research relies on objective,

documented core economic results and the numerous

sources we use are cross referenced to determine

validity. With no hidden agenda and no reason to play

favorites in who we invest with, our conclusions will be

either good or bad but it will always be based on truth.

Based on our life experience as money managers, we

know how to manage money when times are bad. Half

the time it will be good but half the time it will be bad.

We provide hands-on, active money management full

time.

─

The Social Security

Administration announced that

benefits and the maximum

amount of wages subject to

payroll tax will increase by 1.6%

in 2020, more than a full

percentage point less than the

2.8% cost of living adjustment (COLA) posted this year.

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It marks the smallest annual increase in Social Security

benefits and payroll taxes since 2017.

The 1.6% COLA will begin with benefits payable to

Social Security beneficiaries in January.

The 1.6% COLA will boost the average Social Security

monthly retirement benefit by about $32. That’s less

than in 2019, when the average Social Security

retirement benefit increased by $39 a month.

The 1.6% COLA in 2020 follows a 2.8% increase in

2019, 2.0% in 2018 and a meager 0.3% in 2017.

There was no COLA in 2016.

The 1.6% COLA for 2020 also affects how much

beneficiaries can earn from a job without jeopardizing

their benefits if they claim Social Security before their full

retirement age. In 2020, individuals will be able to earn

up to $18,240 per year, if they are under full retirement

age for a full year, without forfeiting any benefits. If their

earnings exceed that cap, they will lose $1 in benefits for

every $2 earned over the limit.

The annual COLA also affects how much workers pay in

the FICA taxes that fund Social Security benefits. In

2019, the 6.2% portion of the payroll tax that funds

Social Security applies to the first $132,900 of gross

earnings. The 1.6% COLA will boost the maximum

taxable wages by about $4,800 a year to roughly

$137,700 in 2020.

Many retirees should see a slight increase in their net

Social Security benefits in 2020 even after factoring in

the Medicare Part B premiums, which are usually

deducted directly from Social Security benefits. The latest

Medicare Trustees report projects basic Medicare Part B

premiums will increase by about $8.80 a month. The

official announcement of the 2020 Medicare premiums

will come later this year.

─

The average FICO score is 706.

Most negative information remains on your credit

reports for 7 years.

$8,602 is the average U.S. household credit-card

balance.

The average annual percentage rate on interest

charging credit cards is 17%.

There is around $13.9 trillion in total aggregate U.S.

household debt (as of 2Q19).

There is over $1.48 trillion in student-loan debt

outstanding (as of 2Q19).

─

The Setting Every Community

Up for Retirement Enhancement

(SECURE) Act, which passed in

December 2019, increased the

age at which qualified

retirement account holders

(such as those with a 401K or

IRA) must begin taking their Required Minimum

Distribution (RMD) from age 70½ to 72. The 70½ age

was based on life expectancies in the early 1960s and

had not been updated since. The SECURE Act states this

change applies to account owners who will reach age

70½ on or after January 1, 2020.

Those who reached age 70½ prior to January 1, 2020

are still required to take their RMD in 2020. Failure to

do so results in a 50% penalty of the RMD. If you turned

70½ in 2019 and haven’t taken an RMD, you have until

April 1, 2020 to do so. You will also have to take the

2020 RMD by December 31st

, and every December 31st

thereafter.

The SECURE Act also eliminates the maximum age for

traditional IRA contributions, which was previously

capped at 70½ years old. This benefits those who

continue employment beyond traditional retirement age.

Required minimum distributions have also changed for

non-spousal retirement account inheritors. Under the

current law, beneficiaries who did not inherit their

accounts from a spouse are in some cases allowed to

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withdraw required minimum distributions over their

lifetime, which could be a few years, or a few decades.

The amount of the yearly required minimum distribution

is calculated based several factors, including the year

end value of the account, life expectancy and beneficiary

age.

The SECURE Act requires beneficiaries withdraw all

assets of an inherited account within 10 years. There

are no required minimum distributions within those 10

years, but the entire balance must be distributed after

the 10th year. Since distributions are taxed as income,

this change may increase the tax burden on the

beneficiaries, especially if they are in their prime

earning years and high marginal tax rates.

─

British writer Anthony Horowitz

is a New York Times bestselling

author, whose novels span all

ages and genres. He has

written more than 40 books,

including the bestselling teen

spy series Alex Rider. He has

also written for movies and television series, including

the acclaimed detective show Foyle's War.

He was commissioned by the estate of Ian Fleming, who

was the James Bond creator, to write a continued novel

to the Bond’s series.

Using never-before-published material Horowitz made

an excellent effort to replicate Ian Fleming’s literary style

to write Trigger Mortis as an exhilarating and daredevil

thriller that in the beginning may look like a sequel to

Goldfinger.

The struggle for superiority between the Soviet Union and

the West is escalating. In an attempt to demonstrate their

Soviet engineering supremacy at all cost, Colonel

Gaspanov, the new head of SMERSH plans to sabotage

the international Grand Prix Nürburgring Racing in

Germany. Bond must play a high-speed game of cat and

mouse to stop a ruthless Russian racer, Ian Dimitrov, to

save British racer Lancey Smith.

After a few lessons of car racing, Bond seats in a

Maserati 250F to enter Nürburgring’s race. He does his

best to bring down Dimitrov and save Smith’s life. This is

perhaps one of the most adrenaline charged chapters in

the whole novel. The description of the racetracks, the

crowds in attendance and the tension felt in the air really

make you feel like if you were right there.

However, ruining the car race is only the beginning. The

Russians have additional plans to show their superiority

to secure Soviet victory in the space race now driving the

Cold War. They made a lucrative agreement with South

Korean businessman, Sin Jai-Seong, to sabotage the

space rocket scheduled to be launched in New York

which will bring America to its knees.

An interesting female character in the story is Jeopardy

Lane. A woman with a tough childhood and very unlike

the typical 1950’s sophisticated out-of-this-world women

of previous Bond stories, she resists the charms of 007

for a long time and does stunts like any of the male

heroes.

Supervillain, Sin Jai-Seong, is bad to the bone, sadistic

and eccentric, picking horrible deaths for his enemies

through his modified Hanafuda cards. An orphan of the

Korean War, he is full of resentment and will do anything

to bring America down.

The action moves with high velocity from Britain to

Germany to the United States and back to Britain.

Trigger Mortis refers to a "panic button" that can explode

a malfunctioning rocket before it crashes.

It must have required a great deal of research and study

trying to imitate Ian Fleming’s style or by the same token

of any other writer. Although the novel is a very well

written thriller, there are clear differences not only in

James Bond’s personality but how the world was 50

years ago. For instance, he smoked around 30 cigarettes

a day, which is something that the world has not

approved in the last couple of decades. The women in

the story are more independent, less glamorous and not

so taken aback by 007’s charms. Trigger Mortis is a

great reading regardless whether you are a James Bond

fan or not.

5

─

This is a graph

of the fed funds

rate and the 10-

year treasury,

with monthly

inflation and

long-term consumer price index (CPI).

Which way rates (green line) are trending,

up, down or range-bound? Having the

green line above the orange (fed funds

rate) is a sign of an upward sloping yield

curve. Large spikes in monthly inflation (blue bars) would be cause for concern. In a perfect world, CPI (blue line) would

be smooth and steady.

Over the last year, the Fed cut rates 3 times and rates fell. Inflation was slow and steady. The Fed made only marginal

changes to projections, expecting growth of around 2%, contained inflation and the unemployment rate to stay near

historic lows. Forecasts for the fed funds rate path declined. Fixed income markets saw a sharp turn in sentiment in Q4

that led to a selloff in interest rates and further tightening in credit spreads.

This is a graph of the U.S. Unemployment

rate with its 36-month moving average,

laid over the S&P 500 equity index.

Seeing the unemployment rate stay under

its moving average is a very good sign.

The year started with an unemployment

rate of 3.9% and slowly decreased to

3.5% at the end of the year, a level not

seen since 1969.

This is a look at the S&P 500 and its P/E

Ratios. The CAPE ratio is a Cyclically

Adjusted Price-Earnings ratio. The P/E

Ratio Forward Estimate is uses estimated

net earnings over next 12 months.

Simply looking to see if the multiple is

expanding or contracting and what prices

are doing - uptrend, downtrend or range-

bound? The P/E Ratio forward estimate

tells what the market expects to happen.

-

50

100

150

200

250

300

(4.0)

(2.0)

-

2.0

4.0

6.0

8.0

1/00 1/02 1/04 1/06 1/08 1/10 1/12 1/14 1/16 1/18 1/20

The Fed, Rates, and Inflation

US Monthly Inflation Rate 10 Year Treasury Rate Effective Federal Funds Rate US Consumer Price Index

U.S. Unemployment over S&P500 S&P500

Unemployment Rate

36 per. Mov. Avg. (Unemployment Rate)

18

23

28

33

38

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1/10 1/11 1/12 1/13 1/14 1/15 1/16 1/17 1/18 1/19 1/20

S&P 500 Valuations S&P 500 Level S&P 500 P/E Ratio Forward Estimate S&P 500 CAPE P/E Ratio

6

P/E expanded in 2019; prices accelerated while earnings were mostly flat. The down move in the orange line suggests

that the market is expecting multiple contractions in the coming months. The market rallied higher driven by progress in

U.S.-China trade negotiations, continued accommodative monetary policy, and anemic but better than expected

corporate earnings results which quieted near-term recession concerns.

This graph looks at the relationship

between earnings, U.S. GDP and prices.

Earnings and GDP releases are delayed

quite a bit from what they are reporting

on. This graph shows the relationship

between prices and actual results.

Not all the data is in yet but from what is

available earnings fell while GDP growth

continues to hover near its post-financial

crisis average. The Atlanta Fed estimates

2.3% GDP for Q4. GDP finished Q3 at

2.1%.

. On October 5th

, we were a sponsor for the 7th annual

Athlete Awards Gala for the Special Olympics Florida. All of the revenue raised at

the gala allows Special Olympics Florida to provide year-round sports and medical

care to over 6,000 individuals with Intellectual Disabilities such as Down Syndrome,

Autism and Cerebral Palsy in South Florida, at no cost to our athletes or their

families.

Our very own intern, Gabriela Grace Peters, was presented with the Athlete Leader

of the Year Award. While being a multi-sport athlete, she is a Special Olympics

ambassador, a full time student at FIU majoring in pre-law, working part time at

Tonkinson Financial, and was the state champion in Standup Paddle Board. We are

very proud her.

(5 0.00)

-

50.0 0

100 .00

150 .00

200 .00

250 .00

10.0 0

100 .00

1,00 0.00

10,0 00.00

U.S. GDP and U.S. Equity MarketsGDP TTM (Growth) S&P500Earnings24 per. Mov. Avg. (Earnings)

. On

November 21st

,

we sponsored a

tree at the FIU

2019 Festival of

the Trees. This is a

fundraising event

coordinated by

FIU’s Interior

Architecture

Department and

its advisory board.

. On November

21st

, we were a sponsor

for the 7th

Annual

Woodystock Benefit

Concert. The proceeds of

the event will go to

funding next year’s

Woody packs. The

Woody Pack is a

backpack filled with a

collection of assistive

devices for people with

limited hand function.

7

Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products

and services offered by through CES Insurance Agency. This material is intended for informational/educational purposes only and should not be construed as

investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information

specific to your situation. Past performance does not guarantee future results.

Investing in individual stock involves principal risk – the chance that you won’t get all the money back that you originally invested—market risk, underlying securities

risk, and secondary market price. Talk to your financial advisor before making any investing decisions.

Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is no

guarantee of future results.

Certificates of deposits (CDs) typically offer a fixed rate of return if held to maturity, are generally insured by the FDIC or another government agency, and may impose

a penalty for early withdrawal.

DJ Industrial Average (DJIA): Computed by summing the prices of the stocks of 30 companies and then dividing that total by an adjusted value—one that has been

adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are invested to reflect the actual performance of the

underlying securities. NASDAQ Composite Index: Measures the performance of all issues listed on the NASDAQ Stock Market, except for the rights, warrants, units

and convertible debentures. Barclays Capital Global Aggregate Bond: This index provides a broad-based measure of the global investment-grade, fixed-rate debt

markets. Citigroup 3-month T-Bill: Measures monthly return equivalents of yield averages that are not marked to market. The 3-month Treasury Bill Indexes consist of

the last three 3-month T-Bill issues. MSCI China: This free-float adjusted capitalization-weighted index is designed to measure the performance of China-based

equities. MSCI EAFE (Morgan Stanley Capital International Europe, Australia, Far East): This index is a capitalization-weighted index that tracks the total return of

common stocks in 21 developed-market countries within Europe, Australia and the Far East. MSCI Emerging Markets EMEA: This index captures large and mid-cap

representation across 8 Emerging Markets (EM) countries in Europe, the Middle East and Africa (EMEA). With 139 constituents, the index covers approximately 85%

of the free float-adjusted market capitalization in each country. Russell 2000: This index measures the performance of the 2,000 smallest companies in the Russell

3000 Index. Standard and Poor’s (S&P) 500: This index tracks the performance of 500 widely held, large-capitalization US stocks. S&P Consumer Discretionary: A

market capitalization weighted index that tracks the performance of consumer discretionary companies. S&P Consumer Staples: A market capitalization weighted index

that tracks the performance of consumer staples companies. S&P Energy: A market capitalization weighted index that tracks the performance of energy companies.

S&P Health Care: A market capitalization weighted index that tracks the performance of health care companies. S&P Materials: A market capitalization weighted index

that tracks the performance of materials companies. S&P Technology: A market capitalization weighted index that tracks the performance of technology companies.

S&P Utilities: A market capitalization weighted index that tracks the performance of utility companies.

01/16/2020 Form 5498 For contributions to, and year-end market values of, brokerage retirement

accounts.

01/16/2020 Form 1099-R For distributions from brokerage retirement accounts.

01/25/2020 1099 Consolidated Tax Form

(mailing cycle 1) For accounts holding securities with no anticipated reclassifications.

02/15/2020 1099 Consolidated Tax Form (m.c. 2) For accounts holding securities with income reclassifications to date.

02/29/2020 1099 Consolidated Tax Form (m.c. 3) For accounts holding securities with income reclassifications to date.

03/06/2020 1099 Consolidated Tax Form (m.c. 4) For accounts holding later-issuer reclassifications (e.g., UITs, REITs).

04/15/2020 Filing transactions for 2019 tax year must be completed by this date.

05/06/2020 Follow-up Form 5498 For contributions made between 01/01/2020 and 04/15/2020.

*All dates subject to change

. On December 11th

, we were a sponsor

for the DRI 2019 Empire Ball in New York City. The event

raises funds for the work of the Diabetes Research

Institute.

January 25th –

January 26th

Homestead Rodeo

February 25th DRI Dinner

February 22nd

FNEI For the Love of Learning Gala

February 27th The Woody Foundation Lobster Feast

January 1st New Year’s Day (Banks and Market closed)

January 20th

Martin Luther King Jr Day (Banks and Market

closed)

February 17th

President’s Day (Banks and Bond Market

closed)

Louis and Janet

Didonna

Tom Saul Sarah Deal, Steven and

Jose Otero

Brian Nagy and

Jessica Wade

Bob, Brian and Steven

We had the pleasure of inviting some of our long time clients to watch the UM vs. FIU football game in a suite at the Marlins Park. It was lots of fun with good food, drinks and comfortable seats.

Watching the two local college teams play each other was special. It was our first time that we did this and we hope to do it again.

Thank you to those who made it.

Steven and Rick Margarita, Dean Brian

Schriner and Rick

Ronnie and Bob Kyser Paco Orfila Laura and Gary Doyle Brian Kennedy Sue and Mike Zuccaro

UM vs. FIU Football Game

11/23/2019Marlins Park

8