Many clients have been asking us why the stock market has recovered so strongly when the news concerning the economy and Covid-19 is taking a turn for the worse.  We know the economy has been temporarily crippled, the unemployment rate has skyrocketed and there is civil unrest in many major cities.  The stark truth is that this information is well known in the markets and has already been factored into today’s prices.  What is propping everything up is the fact that the government has printed trillions of dollars and some of this money is leaking into the stock market.  Can anyone remember a time when the government literally printed checks and handed them out to people as if it were Halloween?  Unprecedented.

Recent stock market action reminds me of a period in the 1970’s when the economy and country were also in unrest and there existed a group of stocks called the “nifty fifty”.  The nifty fifty were considered “safe” investments that couldn’t lose much value and should never be sold, only purchased.  Money flowed into this group of stocks in a torrent and drove up the price and valuation of these companies to unprecedented levels.  The same thing happened in the late 1990’s when the internet stocks were on fire and investors wanted in just because they were going up.  Never mind the company fundamentals and whether they even had a sustainable business plan.  Two of the popular stocks in the “nifty fifty” were Polaroid and Xerox, technology leaders of that era.  Both company’s stocks were bid up to unsustainably high levels and when the bubble eventually broke a tremendous amount of value was permanently lost.  In fact, Polaroid eventually filed for bankruptcy many years later and Xerox never reclaimed the glory of the nifty fifty era.

Today’s stock market activity is looking somewhat similar to the nifty fifty era of the 1970’s but would need to be redefined to the nifty five or nifty ten.  Current top technology and E-commerce stocks have garnered quite a bit of attention and money has been pouring into these names causing many to double in price in just the last few months.  The prevailing wisdom is that these stocks are “safe” at any price and will continue to dominate their respective industries for years to come.   This may or may not be the case, but it may be prudent to reduce exposure to some of these names and book profits while we have them in hand.

GSB Wealth Management Welcomes New Colleagues

We’ve been growing!  Since our last communication we’ve added resources so that we can serve our clients better.  When next we meet, don’t be surprised if there are new faces around the table, or on the video call.  Our newest colleagues are:

Anthony Morgillo, CFP, Vice President

Anthony joined us in June and is a Wealth Management Adviser. He has over twenty years of investment experience having most recently been a Financial Solutions Adviser with Merrill Bank of America. Anthony is based in Guilford Savings Bank’s Branford office. He is an experienced financial planner and is prepared to advise our clients on their most complex investing, financial planning, and cash flow needs. He is a member of the firm’s Investment Committee.

Mackenzie Johnston

Mackenzie joined us in April after graduating Magna Cum Laude from the University of New Haven with a B.S. degree in Finance. She is a Wealth Management Analyst and assists the wealth advisers with portfolio analysis, compliance, and client related projects.

Jennifer Ghergurovich

Jennie joined us in May and is a Wealth Management Analyst. She has a B.A. from Boston College where she majored in Russian and International Studies. She is currently remotely pursuing her Master’s degree in Finance at Georgetown University. She has also completed the Chartered Financial Analyst (CFA) program. In her role with GSB Wealth Management she assists the portfolio team with analysis, investment research, and client related projects.


You can see an Adviser in select Guilford Savings Bank Branches

In order to be closer to our clients and the community, GSB Wealth Management advisers are now located in Guilford Savings Bank’s Main Office and Branford locations.

Ted Reagle, Vice President                                             Anthony Morgillo, CFP®, Vice President

Wealth Management Adviser                                        Wealth Management Adviser

One Park Street                                                               61 North Main Street

Guilford, CT  06437                                                       Branford, CT  06405

Direct Phone: 203.458.5414.                                        Direct Phone: 203.204.6630


Introducing GUIL – Our New Robo Advisor Offering

GUIL stands for GUided Investment Launchpad and is an on-line, automated investment platform for investors that may not have the portfolio size or investment complexity that requires a full service GSB Wealth Management relationship. There is no account minimum and you can establish an account in minutes. We invite you to visit to learn more.  Tell your family and friends!

Reminder: IRA Distributions NOT Required in 2020

Even if you are over age 72, you are not required to take a required minimum distribution (RMD) from your IRA account in 2020.  With the passage of the CARES Act in March, providing Americans financial support due to COVID-19, RMDs were made optional this year.  The suspension of the RMDs for 2020 also applies to Inherited IRA accounts.  Please give us a call if you have questions.

Leaving Assets to Heirs

Your estate is a legacy. Here is a checklist to help you make the planning process efficient and effective.

General Considerations

  • Check provisions for your spouse, your dependents, and your financial obligations. Although requirements may vary from state to state, you may have more flexibility for some allocation decisions than for others.
  • Consider the ages of your intended beneficiaries. Minors and disabled heirs may require special guardianship or trust arrangements.
  • Provide for contingencies in case circumstances change. For example, if a primary heir is unwilling or unable to receive the bequest, you could define how that person’s share is to be distributed.
  • Estimate your potential estate, gift or inheritance tax liabilities. The federal estate tax applies to only the largest estates. For an individual, $11.4 million is excluded from tax consideration in 2019, and a surviving spouse may benefit from the couple’s combined exclusion value. But state laws vary widely and, in some cases, can apply to a much wider range of inheritance scenarios. In many states (and for the federal tax), any liability is assessed on the estate itself. But in some states, taxes may be collected directly from the heirs.
  • Address your philanthropic goals. You may be able to use specialized trusts to gain tax advantages while also providing for heirs and for favored charities. For example, you can investigate whether charitable lead trusts or charitable remainder trusts could meet multiple goals for you.


Special Considerations for Different Assets

Shares of a business you own

  • Determine who among your heirs might be most willing and able to take responsibility for the business
  • Consider a system that gives passive shareholders a stake in any potential business profits without actively participating in the business
  • Provide for key employees as well as family members
  • Discuss succession issues with partners or co-owners

An investment portfolio in a taxable account

  • Determine whether the intended heirs could manage their portfolios effectively without professional advice
  • Consider delegating portfolio control to a person or institution able to assume fiduciary responsibilities

Assets in a retirement account

  • Review the beneficiary designations of your retirement accounts to be sure that they are consistent with your intentions. Keep in mind that account beneficiary designations will override any provisions of your will.
  • Consider rolling over employer-sponsored plan assets into one or more IRAs for beneficiaries
  • Weigh the potential benefits of converting a traditional account to a Roth account
  • Assess the tax implications of each potential distribution scenario


Real estate (primary residence and vacation property)

  • Decide whether you want your heirs to share use of the property or just receive the cash equivalent of the property’s estate value
  • Consider how heirs sharing a property can collectively manage the costs of ownership and maintenance
  • Consider how a partner in any joint ownership you set up could leave the partnership in the future
  • Consider alternative provisions for heirs who might have no interest in actively using the property

Personal property with significant financial worth or sentimental value

  • Obtain realistic assessments of current worth for art, antiques or jewelry
  • Determine whether any heir might have significant sentimental interest in any item and provide for those special interests
  • Talk with heirs about ways to apportion unique items
  • Ensure that your executor can locate and gain access to estate documents stored in safes, vaults and safe-deposit boxes


Cybersecurity Risks

Just a reminder to always be aware of any suspicious emails you may receive, as today’s hackers are more sophisticated and posing as though they are from a legitimate email address.  Never click on a link within an email that you are suspicious of, and always give us a call if you have any questions or concerns regarding an email from us.  Please notify us immediately if your computer system has been compromised. We also recommend that you use unique passwords for each website.

As this letter is being penned on this first day of April the sun is shining bright and the temperature is mild, allowing one to get out of the house and take a walk in the neighborhood or in an area park. Given the happenings of the past five or six weeks, for many of us getting outside and enjoying nature is one of the few things we are still able or permitted to do.

This letter will take on a different tone than many letters of the past. We all are very aware that the world changed in dramatic fashion a month or two ago when COVID-19 first started to be taken seriously. A disease that could spread from country to country and change the very way that people conduct their daily lives. The fall out has been massive and fast. U.S. stock markets were hitting new highs as late as February 19th and we were remarking in the shop how two of the largest, well known technology stocks were going up by $5 per share just about every day. The good times were rolling.

Fast forward to the present and the ball game has completely changed. COVID-19 is spreading quickly and is expected to continue to do so until at least mid- April, when the social distancing we have been practicing may start having a positive impact. Even then we won’t know if it is safe to resume some semblance of normal activity. The thought is that warmer weather may slow the disease, but as we speak it is spreading rapidly in Miami where the weather is practically summer- like every day. We also don’t know when a viable vaccine will come to market, but most infectious disease experts opine that a vaccine will likely not be ready for up to a year. Given this backdrop, the S&P 500 stock index dropped a stunning 35% in four short weeks, the largest drop of that magnitude on record for that short of a time frame. Having been caught somewhat flat footed by the 2008-2009 crisis, our government and Federal Reserve moved quickly and crafted a relief package totaling over $2 trillion, as well as cutting short term interest rates back toward zero. This stabilized the market for a few days, but the long- term ramifications of the package are unknown. What we do know is that most local businesses are shuttered and may remain so for months to come. Companies and entire market sectors that were thought to be of quality and well financed may in fact be at risk for their very survival as the future months and weeks elapse. Our country hasn’t encountered anything like this in our lifetimes, unless you are 102 years old. None of us know exactly what our country will look like once we come out the other side. We are likely to look quite different than what we are all used to today. While we can’t predict the long term impacts the virus’ fallout will have on the domestic economy, our equity allocations include a great many of the most well capitalized companies in the world. We feel it’s these types of firms that are best positioned to withstand any period of prolonged economic stress.

I hope we can use the weeks and months ahead to realize how good we have it in the United States of America. To pull together, unite, and all work toward the greater good. Check on a neighbor in need. Contact a friend we haven’t seen or contacted in a while and make sure they are doing ok.

Although it has been around for 10 years already, I’m getting reacquainted with Facetime. If it isn’t on your smart phone’s screen, you can download it from the App Store that also should be on your screen. Even for the technologically challenged like me, it was easy. Tap on the Facetime icon and a list of your contacts should come up. Tap the one you want and in a few seconds your friend’s face should appear, and you are ready to commence your video chat. Another way to connect is via Zoom Video Conferencing or GoToMeeting on your home PC or laptop. If you have a webcam on your computer screen display you are good to go. A great many of us have experienced “Zoom Life” over the past several weeks, whether it’s a virtual business meeting, a “coffee hour” with friends or even a community worship service; we are all doing the best we can to stay in touch and to keep ourselves and our friends and neighbors safe at the same time.

In closing, the weeks ahead are likely to be very difficult for the economy and our financial markets. We are all in this together and will get through this together.

We thank you for the opportunity to work with you over the past years and are honored to be able to do so.

Sincerely, your GSB Wealth Management team.

Happy winter!  No snow in sight and hovering around 50 degrees in January isn’t a bad thing, if only the sun could make an appearance more than once a week.

We have talked in past newsletters about low visibility trying to navigate through the current political and economic environment.  Just to prove everybody wrong, U.S. stock markets had one of their best years in recent memory.   Here is an old axiom that goes like this – “bull markets like to climb a wall of worry”.  I suppose there is enough to worry about to propel the stock market to levels not one market prognosticator saw coming on January 1, 2019.  We enter 2020 with a ton of market momentum behind us and economic fundamentals that appear to be the best in over a decade.  We still sense a good deal of pessimism among individual investors, which may allow the market to move higher in 2020 despite the U.S. taking down the highest Iranian military official, just announced on the news this morning.  Our country’s sabre rattling around the world, whether justified or not, is concerning given many of these countries have nuclear capabilities of some degree.

There are still plenty of risks and worries that could derail markets as we progress through 2020.  One difference from a year ago is that stocks are far higher than they were in January 2019 and are more expensive based on expected earnings.  One year ago we were coming off a bruising market drop in December that shaved 20% off of stock prices.  Market participants were frightened and pessimistic and that may be why stocks performed so well last year – no one thought they would.  Today, our sense is that clients and investors are still somewhat nervous, but stocks are trading off a much higher level.  Translated, there is more downside at these levels if something goes wrong.  An interesting side note is that the largest domestic maker of cell phones dropped 35% in value in the fall of 2018 when the broad market dropped 20%.  Fast forward to today and this huge company has doubled in value from January 2019.  People seem to be blindly piling in because the stock is going up.  If it dropped 35% barely over a year ago it could do so again, or worse.  Our strategy here has always been to build the house (portfolios) correctly the first time, hence the house needs less ongoing maintenance.  You may have noticed over the years that there is not a tremendous amount of activity and trading in GSB Wealth portfolios.  We buy what we feel are high quality assets and tend not to sell unless there is a reason to do so.  Generally, a sale would happen for one of two reasons.  Reason one would be that a stock has appreciated far more than we expected at purchase and for the sake of risk control, we decide to take some of the chips off the table.  Reason two would be that the security isn’t performing as expected so we swap it out for something we feel has more potential.  Rest assured that we are watching developments very closely as we enter 2020.

In December Congress passed and the President signed into law the SECURE Act, the most significant legislation affecting retirement savings plans in the past 13 years.  Several important elements of the new laws are worth reviewing:

  • The age at which IRA owners must begin taking required minimum distributions (RMDs) is increased to 72 from 70 ½ for individuals who attain age 70 ½ in 2020 or later, providing an additional 18-month window for IRA accounts to grow tax-deferred. Individuals who turned 70 ½ in 2019 are required to take RMDs in 2020, however. This change reflects the demographic trend that many people are retiring later in life and living longer.


  • Provided you are working and earning income, an individual may contribute to an IRA (currently capped at $7,000 per year) after the age of 70 ½. Previously, there was no provision to make an IRA contribution beyond this age, even if you were still working.


  • Funds in 529 savings plans may now be used to repay up to $10,000 in student loan debt accounts.


  • Starting in 2020, newly established inherited IRA accounts may need to be withdrawn and taxes paid over the following ten years. Spouses, and beneficiaries that are no more than 10 years younger than the deceased owner, may continue to stretch the distributions over their lifetimes.

It is projected that the SECURE Act will result in 700,000 more American workers saving for retirement.  Small business owners can more easily and less expensively offer retirement plans for workers by banding together in a single 401(k) plan, called Multiple Employer Plans (MEPs).  In addition, the legislation enables more part-time workers to participate in employer retirement plans.

Ted Reagle joined GSB Wealth Management in November as a Wealth Management Advisor.  He brings extensive financial planning experience to the team and looks forward to introducing himself to our clients as opportunities present themselves in the upcoming weeks.

As always, we encourage you to contact us should you have questions or concerns.  We hope you enjoy the balance of the winter.

Sincerely, your GSB Wealth Team

Happy Fall!  I say this as it is over 80 and humid to be followed with temps in the 40’s later tonight.  Only in New England!

We spoke in our last quarterly newsletter about navigating through this economic and political environment like a pilot flying IFR (instrument flight rule) where visibility is low and the pilot can’t see the runway.  Unfortunately, the skies have yet to clear and the fog is even thicker than before.  Adding to the trade war with various overseas nations and the political bickering in Washington is now impeachment proceedings against the President.  Remarkably, the stock market has taken all of this in stride and was up around 18% year-to-date.  The past two days have been a different story.  We mentioned earlier how interest rates have been in a free fall for much of the past several months, at the same time the stock market was hitting new highs.  This seemed a bit peculiar to us as interest rates typically increase when the economy is strong and the stock market hitting new highs.  Economic reports of the past few days are pointing to a weakening economy via contracting industrial production numbers.  This in itself doesn’t necessarily mean anything bad is going to happen.  Industrial production fluctuates month to month based on a number of factors including seasonality, temporary plant shutdowns due to re-tooling/modernization, weather anomalies and other factors.   Having said that, given all of the other worries investors have been fretting over these past few months, the industrial production reading may be giving folks reason to reassess how much risk they are taking within their portfolios.

At GSB Wealth Management we have been assessing these worries and concerns on a daily basis.  Should pessimism start to seep into the markets in the ensuing days/months we may well get a market adjustment similar to that of late 2018.  Many of the excesses seen before major bear markets of the past don’t seem to be prevalent, at the moment.  That doesn’t mean something can’t come out of the clear blue and blindside all of us.  It has happened before.  On the plus side the market doesn’t usually crash when everyone thinks it will crash.  We can tell you from personal experience that many of our clients are on edge, if not downright pessimistic.  There are enough things to worry about to fill a bathtub.  National banks are said to be well capitalized and in sound financial shape.  It was the banking industry’s over exuberance that exacerbated the downturn 11 years ago.  Economic growth continues to muddle along at a comfortable pace; hence the Federal Reserve has seen no need to jack up interest rates to tamp down growth.  Regarding interest rates themselves, they are low enough that they don’t offer much competition for stocks.  Explained – I harken back to 1987 when I was a young man in the CNB trust department with barely three years of experience under my belt.  By August of 1987 the stock market had gained 40% for the year.  Interest rates had been increasing right along with the stock market and a 10- year Treasury Note could be had with a 10% yield to maturity.   My mentor, a more seasoned portfolio manager named Scott, looked over at me and said “Brant, pull some of your client’s money out of stocks and reinvest it in bonds”.  Fortunately, I listened.  When the market crashed a couple of months later, Scott and I were comfortably sitting at our desks while all of the other portfolio managers in the office where huddled around our tiny little quote machine as if the next season of Seinfeld just went on air.  Today’s environment is quite different.  Dividend yields on many blue- chip stocks eclipse the interest rate on the 10- year Treasury Note.

Something we have written about in the past that should be revisited is the phenomenon known as “valuation compression”.   I mention this because if a more pessimistic attitude starts to infiltrate Wall Street, valuation compression could influence many stocks.  All stocks have a valuation, commonly referred to as the price earnings (P/E) ratio.  Simply put, a leading money center bank may sell for $50 per share and have expected per share earnings this year of $5, hence the price earnings ratio is 10.  Some stocks have no price earnings ratio at all because they currently have no earnings to report, think of the ride share companies.  Thinking of a leading spice, seasoning, condiment and hot sauce company we know (we aren’t allowed to mentioned specific names) that five years ago was selling for $70 per share.  They earned $3.50 that year so the P/E ratio was 20, a bit high compared to many other companies but this is a high- quality company, so no worries.  Fast forward to the present.  Wall Street has become quite enamored with our spice maker so the stock sells for $150 per share.  Earnings have advanced nicely over the period and now should come in around $5 this year; hence the P/E ratio has expanded from 20 to 30.  Should investors become more pessimistic, the P/E ratio on our spice maker could fall back to 20, wiping out one third of the stock’s value even though they have done absolutely nothing wrong.  Valuation compression becomes more of a risk in the later stages of common stock bull markets as investors become giddy and bid up prices.  Thinking back to 2009 valuation compression was of little risk.  The stock market was flat on its back and everything was already depressed and compressed.  As usual we will be watching all of the above variables closely.

We are always happy to hear from you should you have any questions or concerns.  Until then we hope 2019 continues to be a prosperous and healthy year.

As a side note, should you change residences and/or telephone numbers please let one of the GSB Wealth team members know.


Your GSB Wealth Management team



Dear client:

We finished the March 31 newsletter with the statement “now is the hardest time to invest”.  We begin the current edition with “now is the hardest time to write a newsletter”.  We will explain in a few minutes!

We all must admit that the stock market can be a confounding creature.  After looking like it was going off a cliff late last year, the S&P 500 has logged a gain of 18% year-to-date.  I can assure you no Wall Street strategist saw this coming!  We all know by now that stocks go up by around 10% per year on average going back a hundred years.  Having said that I have never seen the stock market go up by exactly 10% in any one given year.  As Warren Buffett himself once said “In the short term the market is a voting mechanism; in the long term it is a weighing mechanism”.  With today’s technology millions of investors can vote (trade) by the split second.  Our task at GSB Wealth is to sort through all the short-term noise and separate the wheat from the chaff and not be overly concerned with the day to day wiggles in the stock market.  In earlier newsletters we posited that the current economic expansion and stock bull market might carry on longer than anticipated simply because the economy was so slow to recover after the last recession.  Also be mindful that next year is an election year and the powers to be will likely do whatever is necessary to keep the economy growing and the stock market humming.  You can envision here one of the episodes of the Rocky (a squirrel) & Bullwinkle (a moose) show from the 1960’s where Bullwinkle mimics a magician and tries to pull a rabbit out of his hat, but is first greeted by a bear, followed by a lion, a tiger, then a rhino before he finally gets the rabbit to appear.  It isn’t unfathomable to liken this to our current trade and nuclear negotiations with China and North Korea where after several false starts and a lot of growling a miracle happens and agreements are signed.

We liken navigating through this environment to a pilot who is flying IFR, or instrument flight rule.  The fog is thick and visibility low, so the pilot must use all of his cockpit instruments to negotiate a safe landing.  Makes us all want to harken back to times when the pilot, or investors for that matter, could rely on VFR (visual flight rule) where the skies are fair and the runway can clearly be seen.  What is also puzzling to us is that while the stock market is hitting all- time highs, interest rates have been in a free fall since late in 2018.  Plummeting interest rates are generally incongruous with a stock market hitting all- time highs.  Stocks seem to be indicating that all is well with the economy and that corporate earnings will continue to grow well into next year.  The bond market, on the other hand, is indicating the economy will be slowing down dramatically.  We know that many of the overseas economies have indeed slowed as of late.  Here in the United States all seems solid at the moment.  Perhaps the bond market is sniffing something that is coming down the road, a precursor if you will.  Then again maybe U.S. interest rates are simply converging with the rest of the world.  German interest rates are currently negative, which has never been seen before.  Strange days indeed.

Our well researched investment process her at GSB Wealth should allow us to navigate these murky waters with a minimum of fanfare.  Our individual stock selection process weeds out the weak and shaky and concentrates on what we feel are the finest companies in their respective industries.  Our core holdings share several important characteristics.  Profitability – we like companies that exhibit high returns on invested capital.  Many medical and industrial companies exhibit this while deep cyclicals, think auto and steel companies, do not.  The deep cyclicals must pour mountains of capital into their operation just to keep their doors open.  Free cash flow generation – we are attracted to companies that are solidly free cash flow positive.  What this means is that after a company pays its employees, pays a dividend to its shareholders, and invests in research and development and factory maintenance, there is still a pile of cash leftover.  Free cash flow generation is indicative of a strong company.  That leftover cash can be utilized to further increase the dividend to shareholders, buy back stock or invest in new cutting- edge equipment.  Reasonable levels of debt- we prefer companies that don’t have to constantly tap the debt markets to fund their operations.  When the economy is strong high levels of debt can be adequately serviced.  However, when the tide turns high debt levels can be toxic, as was witnessed in the recession of 2008-2009.

We are always happy to hear from you should you have any questions or concerns.  Until then we hope 2019 continues to be a prosperous and healthy year.


Your GSB Wealth Management team

Dear Client,

Our previous quarterly newsletter written at year end was titled “Welcome to the new reality”, coming hot off the heels of a swooning stock market that cut a quick 20% off the major averages from late September through Christmas Eve.  We discussed four reasons why the environment had changed, from rising interest rates to wage inflation to a change in investor sentiment.  This newsletter could aptly be titled “Spring has sprung” as the stock market has recovered in a “V” formation and is right back up to the levels last witnessed at the high on September 20.  I am sure a lot of you are wondering “what the heck is going on here”.  In our last newsletter we explained how investor sentiment had changed, i.e. not feeling so sure and confident about the market’s future prospects.  It now seems investors are once again throwing caution to the wind.  How fickle they can be.

Our job here at GSB Wealth Management is to cut through all the noise and mis-information we hear in the press and on television every minute of every day and focus on the underlying economic fundamentals.  After cutting through the fog, things in the economics department are looking pretty good.  Let us explain.  One issue we have discussed at length in prior letters is the fact that we are now over 10 years into a stock market recovery that took hold in March 2009, logging a cumulative gain of over 400%, one of the longest and strongest recoveries on record.  The economy has been growing for 10 years straight as well, also one of the longest expansions on record.  One would naturally think we should be nearing the end, poised to fall back into economic recession and a falling stock market.  Not so fast.  The 2009 recession and stock market crash was one of the severest on record, eclipsing anything since 1929 and the few years after that.  Anybody with a house and common stock portfolio or a 401K suffered severe losses, prompting some to call their retirement plan a 201K as the account had been cut in half.  The psychological damage inflicted during that time was severe.  We still run into folks that are still scared, even after a 400% gain in the stock market, looking over their shoulder wondering if another crash is right around the corner.  Many of us remember all the iconic U.S. companies that were taken to their knees in 2009.  Many went bankrupt or had to be bailed out by the U.S. Government, including all the American automakers other than Ford and most of our largest financial institutions.   The emotional scars from that period put a long lasting, if not permanent (at least for this generation) dent in what we refer as “animal instinct”, or the inherent behavior to act aggressively and take risks.  With animal instincts pretty much quashed in the last recession, economic growth was far more subdued coming out the other side than was usual in past recessions.  It was as if folks would rather curl up and hide under a tarp than seize that next attractive business opportunity.

So here we are today, still in a growing economy with low interest rates, low inflation, growing corporate earnings, yet lacking “animal instincts” or undue risk taking that often presages the next downturn.   China’s economy shows evidence of picking up speed and oil prices are slowly creeping upward suggesting somewhat robust global growth.   The aforementioned discussion may well act to prolong The U.S. economic expansion above and beyond anything we have experienced in recent memory.  Technological innovation has acted globally to hold inflation in check.  The U.S. is now energy self-sufficient, something that was only dreamed of just a few short years ago.  The unemployment rate is at a decades low, yet labor force participation is well below prior peaks and this is pulling former retirees and those that were under employed back into the work force.  There are cross currents everywhere, which leads to the old adage “today is always the hardest time to invest”.  Our dogmatic adherence to only the highest quality investments is of great value in times like these.

And in other news:

We are very happy to welcome Will Patterson and Patrick Morris to the team.  Will brings with him many years of experience working with clients in the fields of portfolio management and planning and joins us as a Vice President.  Patrick Morris joins us from Guilford Savings Bank and will be our Office Manager and working with clients.  We also note that Connor Dolan is no longer with us and we wish him the best in his future endeavors.

We are always happy to hear from you should you have any questions or concerns.  Until then we hope 2019 continues to be a prosperous and healthy year.


Your GSB Wealth Management team



Dear client,

All of us at GSB Wealth Management hope you had a great Holiday season and a Happy New Year!  We enter 2019 on a much different stock market trajectory than we have witnessed in much of the past 10 years.  In fact, 2018 is the first year since 2008 that domestic stock markets finished the year in the red.  At first glance it didn’t seem so bad as the S&P 500 stock index and Dow Jones Industrial Average finished the year down from 6% to 8%.  However, the Russell 2000 stock index dropped over 25% from its peak in September to the trough just a couple of weeks ago.  The Russell 2000 index is a much broader representation of the stock market as it represents 2000 companies as opposed to 500 for the S&P index and 30 names for the Dow.  So exactly what is happening may you ask?  We call it “welcome to the new reality”.

Outside of the stock market, reality doesn’t seem too bad.  A good friend of mine is the CFO of a small construction company and when I ran into him last week, he asked me what the heck was going on in the stock market.  Down 500 points several days in a row then up 1000 points the next day.  He tells me his construction business hasn’t been this strong in over a decade.  “Everyone who wants a job has one, wages are going up and I hear on the news that consumer confidence is at a multi decade high”.  To which I replied, exactly!  He paused and looked at me like I was some kind of comedian or something.  He says to me BDubbs (referring to my initials of BW), you do this financial money managing thing for a living and you are telling me the market is wobbling because things are so good?  Have you lost your marbles?  I assured him that was certainly not the case as I explained to him the new reality.   I began by telling him that the stock market is driven by corporate earnings growth and that growth is now coming into question.  He says, “I just told you our business is booming”.  I get that.  Everybody knows that after last year’s corporate tax cut earnings growth was terrific.  That is now in the rear- view mirror.  The new reality is being driven by several factors, all of which are weighing on investor’s minds:  1) Unemployment is at a multi decade low and consumer confidence was recently at a multi decade high.  The stock market tends to struggle after these indicators reach such favorable levels.  2)  Wage growth is accelerating.  Many companies have raised their minimum wage to $15 an hour.  This eats into corporate profitability.  3)  Interest rates have risen at the short end.  Most companies borrow to finance and grow their business.  Paying higher interest rates eats also into profitability.  4)  Political uncertainty – are more tariffs coming?  Are we going to build that wall?  China and North Korea – are our diplomatic relations with our friends and/ or enemies getting worse?  5)  Can the stock market and economy keep growing after ten strong years?  Most of these concerns didn’t exist a few years ago.  They do now.

Getting back to my friend’s construction business.  Assume I am Mr. Market (the stock market) and I am interested in potentially buying the construction firm.  I would have been willing to pay more for it a year or two ago.  Here is why.  A couple of years ago, I estimated after reviewing the books that I could pull out $200,000 to pay myself every year.  For that I am willing to buy the business for $1 million.  Fast forward to today.  I am going to need to finance a portion of the purchase price by borrowing from the bank.  Two years prior I could borrow at 2%.  Now it is going to cost me 4%.  Because of that I am only willing to pay $950,000 for the business.  Now I have been told that all of the office help has been given a raise to $15/hour to keep the staff from defecting to Wal Mart.  That is going to increase my costs so my purchase price drops to $900,000.  I also learned that because of the recent tariffs on wood, steel and aluminum the business costs have gone up by $50,000, so I can now offer to pay only $850,000.  Finally, my confidence in the health of the future economy has cooled.  Where I before thought I could grow the sales of the business to $1.1 million in the first year, now I’m not so sure.  With a slowing economy potentially on the horizon, what if my sales instead drop to $950,000?  That makes me nervous, so I think I will only offer $800,000 for the company.  There you have it.  That is why the average stock has dropped by 20% or so.  This phenomenon is called “valuation compression”, or the willingness to pay less for businesses or for stocks because things have indeed changed.

The key going into 2019 is, has this “valuation compression” run its course or is there more coming?  To this no one knows the answer.  The market has certainly adjusted to the new reality so perhaps the sailing will be smoother as the year unfolds.  At GSB Wealth we have been monitoring the economy and markets closely and have made adjustments where necessary.  Our dogmatic adherence to only the highest quality investments is specifically designed to pull us through periods of turbulence as we are now witnessing.  Great businesses tend to withstand the test of time.

We are always happy to hear from you should you have any questions or concerns.  Until then we hope you enjoy a prosperous and healthy new year.

Your GSB Wealth Management Team





GSB Wealth Management Newsletter, October 1, 2018

*See note at the end re: trade fees

Dear client,

With fall upon us we thought it might be educational to look at the mid term elections coming up in November as well as the gubernatorial election right here in Connecticut.  No, we are not going to talk politics as we are not interested at being the poor old mole in the game whac-a-mole.  However, here locally we will be making a decision as to who is going to run a state that is broken financially and may be headed for far tougher times if the can continues to be kicked down the road.  So far all I have heard in the press is the usual sniping about which guy is the bigger rat and which guy is going to cut taxes more.  One party wants to cut my property taxes by $700.  I think I am going to throw a party.  Last I looked I pay property taxes to my town and not the state so this one has me a bit vexed.  On the other side the guy is going to eliminate the state income tax.  I suppose we don’t need to pay the state police, teachers and firefighters anyway.   If I were running for office I would articulate why the state is in financial difficulty and what steps we need to take to set us on the right track.  Then again, I would have a less than 1% chance of winning as no one wants to hear the truth.  It is fine to cut everyone else’s programs and benefits just don’t cut mine!

On a national level things are just as contentious and divided.  The reason we bring this up is that it makes our jobs as financial advisors that much more challenging.  It is hard enough to try and decipher where the economy is going, where the stock market is heading and where interest rates may end up.  It is harder when we don’t know what rhetoric or hard line language is going to come out of Washington next.  Again, we seek to make no judgements here.  The whac-a-mole concept mentioned earlier is alive and well in the Capitol, so it seems.  There appears to be little compromise, rather an attitude that you either agree with what we are doing, or you’re fired!    We mention all of this because we have spoken to many of you and heard your concerns about these issues (and others), and many wonder why the stock market has done so well.  The reason is that because in the stock market’s eyes, much of this doesn’t matter.   The economy has a mind of its own and cycles from recession and bear market to strong growth and bull market approximately every 10 years.  We are now approaching 10 years in the current growth/ bull market phase.  President Obama was inaugurated January 20, 2009 – almost at the bottom of the worst U.S. recession since the great depression of the 1930’s.  It wasn’t his fault and he benefited from economic growth and a great stock market for the balance of his eight- year term.  President Trump was inaugurated on January 20, 2017, eight years into economic recovery and a strong stock market.  Some would argue he was set to fail coming into office so far into an economic recovery.  The recovery under Obama was relatively slow.  No fault of his own.  He inherited an economy that had been taken to its knees and like the aftermath of the great depression, growth was slow and subdued for many years after.  Trump came in and cut corporate taxes which added fuel to an economic fire that was already starting to burn more brightly.  Such tax cuts are likely to prolong economic recovery beyond the usual 10- year cycle.  At GSB Wealth Management we still feel we are in the late innings of the current cycle and bull market that began in March of 2009.  We also acknowledge that recovery may continue for some time to come.  At the same time, we are starting to see excesses that typically signal that economic contraction may be waiting in the wings.

We have been asked by several clients “how often do you look at my portfolio”?  The answer, literally, is “all of the time”.  We own a concise list of securities in our client accounts.  These securities all have “ticker” symbols that are listed on the quote machines on our desks.  If you own any given stock in your portfolio, you can be assured we know where the price of the stock is at any given minute.  We also conduct our own research so have a firm understanding of that stock’s fundamentals at any given time.  As mentioned in earlier newsletters, GSB Wealth Management invests in the highest quality securities we can find.  We firmly believe this is the best way to grow a client’s portfolio over the long run while at the same time limiting losses when the tide turns.   We are always happy to hear from you should you have any questions or concerns.  Until then we hope you enjoy the fall season.

Your GSB Wealth Management team

*Trade fees – Please note that if your total investment with us is under $1 million, and you are signed up for email delivery of Fidelity’s documents (trade confirms, statements, etc.), Fidelity’s trade fees are $4.95 per trade; otherwise they are $17.95 per trade if you are signed up for paper delivery.  Please notify us at if you would like to change your delivery option.  Total investments of $1 million or more will automatically receive the $4.95 per trade regardless of delivery option.







GSB Wealth Management Quarterly Newsletter 6/30/2018

Our last newsletter started with “Happy Spring” coming out of March after four consecutive Nor’easters and trees and limbs down everywhere.  I was debating whether to start this newsletter with “Happy Summer” but decline to do so after being caught in the May 15 tornado and now suffering 8 consecutive days of insufferable heat where I don’t even want to stick my toe outside.  I was sitting at home yesterday on July 4th and heard on the news that the President tweeted that OPEC should immediately reduce oil prices by 10%.  He must be smarter than I am because I don’t know how to tweet, nor care to look like a bird brain trying to figure it out.  I had my daughter try to explain it to me and I suddenly started to feel bold, technologically speaking.  I decided I was completely capable of posting a selfie of my Snapchat while at the same time tweeting and slinging it to Hulu via my Netflix account.  Let’s see the President do that!  Seriously speaking, I find it curious that we expect to make progress by tweeting threats, whether it be to reduce oil prices by 10% or flogging Harley Davidson because they want to move production overseas.  All due to the tariffs that were recently imposed making Harley’s cost of production prohibitive here in the states.  We spoke to this in our last quarterly letter.  Tariffs do nothing but create spats.  Tit for tat.  You tax my steel and I’ll tax your bourbon.  Manufacturing usually migrates to the lowest cost producer.  First it was Japan in the 70’s followed by Thailand, then Cambodia, then Korea, and now China.  Trying to stop such progression sounds good on paper but is difficult in reality.

Remarkably, the stock market is taking all of this in stride, essentially being about where it started the year despite all of the day to day volatility.  Last year was terrific for stocks so taking a breather for a period of time is actually quite healthy.  The Dow Jones Industrial average has almost quadrupled from its March 2009 low of 6,600, making this one of the most powerful advances in history.  From a duration standpoint this bull market is running at almost nine and a half years, making for one of the longest advances in history.  We spoke in an earlier newsletter to dichotomies in the current economy, from booming RV sales in Elkhart Indiana where assembly lines workers are make over $90,000 per year to other areas in the country where people are struggling just to pay energy and food bills.   Another potential speed bump we are watching closely is what is referred to as the “yield curve”.  We have alluded to the yield curve in past investment letters, but it is worth revisiting again.  Simply put, the yield curve is the difference between long term interest rates (defined as the 10-year US Treasury note currently yielding 2.8%) and short-term interest rates (the 2-year Treasury note yielding 2.6%).  When the economy is healthy and growing soundly the yield curve tends to be fairly steep with the 2-year Treasury note at, say 3% and the 10 year at 6%.  When recession is in the offing the yield curve tends to “invert”, where the 2-year Treasury note actually pays more interest than the 10-year note.  In the past year or so the yield curve has been flattening to where the current difference in yield between the 2-year Treasury note and the 10 year is only .20%.  What this is telling us is that the Federal Reserve feels the economy is strong and may need to be cooled with further short-term interest rate increases.  Conversely, the Fed has little control over long term interest rates.  Long term rates are set by the “market” – investors, economists and market participants.  They are telling us a different story, that the economy is likely to be weaker than people expect in the months ahead.

GSB Wealth is watching this situation carefully.  Should the yield curve “invert” then an economic slowdown, if not outright recession, is likely to follow.  Our disciplined investing and bias toward high quality bonds and stocks will carry us through any potential rocky periods as it has in the past.  The economy is currently firm and corporate earnings have been coming in strong.  We hope this continues, but if it doesn’t please be assured that your GSB Wealth Management team has a firm hand on the tiller.

As always, please contact us with any questions and/or concerns.

Your GSB Wealth Management team.

Dear client:
Recent goings on in Washington and the financial markets remind us (at least those of us who are old enough to remember) of a line in one of John Lennon’s hit songs titled “Nobody Told Me”. The line we refer to is “strange days indeed”. More on that later. The first three months of 2018 has been a wild ride, at least compared to the past few years of relative tranquility in the financial markets. The S&P 500 stock index blasted out of the gates with a 7% gain by the end of January, only to reverse course and give all of the gains up by the end of March. The economy is not to be blamed here as growth has been rather slow and consistent dating all of the way back to 2009 when the recovery first kicked in. Stocks (at least up until a couple of months ago) had been sailing along as well in a remarkably calm fashion and historically low levels of volatility. The winds of change are upon us.
There are many dichotomies happening in an economy that is said to be strong and resilient and poised for further gains. On the plus side, in a large portion of the Midwest companies are struggling to find qualified workers if they can find workers at all. Stories out of Iowa reference manufacturing companies turning away customers due to lack of man power. These companies are willing to pay and train kids right out of high school only to find no takers. Then there is the Recreational Vehicle capital of America, that being Elkhart, Indiana where the unemployment rate is essentially zero. RV sales have blown past the last peak set in 2006 and are over three times the level of sales in 2009. Wages have spiraled to $90,000 for assembly workers and over $100,000 for foreman, a lot of money by northern Indiana standards. Companies are offering signing bonuses for new employees to stay on board. For one month. $85,000 to $95,000 Ford Expeditions and Lincoln Navigators are flying off the lots. Dealers have little or no inventory. On the other hand, a recent study by a very reputable (by our standards) economics think tank paints a far grimmer picture. We all know borrowing, whether corporate, government, or personal has been strong and growing in the recent era of cheap money. Deeper analysis suggests that quite a bit of personal borrowing (think credit card debt) has not been for fancy new cars or to spruce up the house, but to finance purchase of basic essentials – food, energy, health care. This suggests a deeper structural issue where much of the middle class is being stressed just to pay their bills every week. The same study suggests that the U.S. economy cannot tolerate much of an increase in interest rates due to the level of debt already outstanding. Where an increase in rates from say 3% to 6% might not have harmed the economy much 20 years ago, today such an increase might be quite damaging.
Back to Mr. Lennon and another line from his song: “everyone’s a winner and no one seems to lose” harkens to the nice gains in the stock market in recent years and particularly those with an affliction to the largest technology or “FAANG” stocks. The market has been strong and the general economy seems to be in good shape and possibly getting stronger. Recent corporate tax cuts are allowing firms to drop more money to the bottom line without selling a dime more in product or services. But wait a minute, here comes Washington. As this letter is being written more tariffs are being threatened on China, far and above what was proposed just a week or two ago. China will not take this sitting down and will retaliate. None of this is positive. Tariffs do nothing but raise the price of goods and services that Americans use every day. Given the aforementioned stress many households are under to meet their obligations, higher prices are far from welcome. Remember wages are still growing at a fairly slow historical pace and certainly not enough to offset the higher prices that punitive tariffs might produce. Making our jobs here at GSB Wealth tougher is deciphering all of the rhetoric coming out of Washington, not to mention the almost daily barrage of tweets. If I ever get fired I hope it isn’t via a tweet. We are good at analyzing the economy, setting client objectives, valuing individual stocks, etc. What is very difficult is to know whether a misguided tweet may cause the market to gain or drop 1000 points in any given day. That is why GSB Wealth adheres to high quality investments, sets reasonable client objectives, creates a solid long- term plan and sticks to that plan. Survey after survey has shown that trying to ”time” the market i.e. jump out then jump back in, is a losing proposition. Constructing a solid long-term plan with quality investments and sticking to that plan is the best means to an end. That is what we do.
As always, please contact us with any questions and/or concerns.

Your GSB Wealth Management team