George Washington became president with a blank page as a guide. There were no rules; no instructions; no role models; and no guidance. Everything had to be created anew. Further, everything he did would be scrutinized, commented on and emulated and would become a precedent for all time; not only for America but all the other countries seeking freedom, liberty and self-government. And he knew this. He accepted the burden, and then went about creating the executive branch of the government of the United States of America.
For months he carried on his administrative duties without help. The new nation’s debt domestically and to foreigners including interest was a staggering amount and had to be dealt with. Not realized by posterity is that Washington was a meticulous watcher of his money, understood how it flowed, and had a strong antipathy for debt. A major priority was to establish the public credit. His choice of financier Robert Morris as the first Secretary of the Treasury declined but he recommended Alexander Hamilton [who Washington was very well acquainted with] who was offered and accepted the position. Hamilton was nominated on September 11, 1789 along with others for fiscal positions and they were confirmed minutes later – four and a half months after Washington was inaugurated and was working alone. A comment is that everything Hamilton eventually proposed and put into action had the approval, agreement and blessing of Washington. They both saw eye-to-eye on the big picture of establishing the nascent nation’s credit and financial system.
Other initial cabinet members were Secretary of War Henry Knox confirmed with Hamilton, Attorney General Edmund Randolph confirmed Feb 2, 1790, Acting Secretary of State John Jay on Sep 26, 1789 replaced by Thomas Jefferson March 22, 1790. The cabinet is not provided for in the constitution and was created by Washington. The name “cabinet” arose when James Madison described the assemblage as “the President’s cabinet.” Washington tried to choose people from different parts of the country for credibility, balance and support from the citizenry.
Other tasks Washington took on was dealing with the many petitions for federal jobs and pensions, the location and establishment of a Federal City, i.e. Washington, DC, developing and normalizing free and safe commerce and trade between the states and other nations, promoting farm and agriculture development, innovation and invention, encouraging a beginning manufacturing sector, urge the rapid creation of a postal system and post roads and navigable passages to facilitate trade, national communications and political knowledge, to foster business and private investment and forge national unity.
Washington had to figure out how to carve out national responsibilities that did not infringe on states’ rights, deal with Native American affairs, land expansion and wage war to protect territorial rights against foreign nations and forming and maintaining alliances with foreign nations, and the need to travel to all the states to bring a personal message making them feel they are part of the United States.
Washington had an overwhelming responsibility and everything he did was not only for the first time but he also had to think about it having to be done. Washington was a great man and an even greater man than he gets credit for. He created the role of the president of the United States.
For additional information read First Entrepreneur by Edward G. Lengel, a great book.
Friday is Inauguration Day – a day that celebrates our Freedom and Liberty with a peaceful change in leadership. Here are some little known facts you might enjoy reading.
Two presidents were sworn in four times: Franklin D. Roosevelt was elected and inaugurated for four terms. Barack Obama was publicly inaugurated twice plus he had two private ceremonies. At his first inauguration Chief Judge John Roberts flubbed the oath so it was repeated the next night at the White House in a private ceremony. When Obama was inaugurated for his second term, the constitutionally designated day was on a Sunday so the public Inauguration was held on a Monday. Roberts administered the oath privately on the Sunday.
Two presidents that had a fight on Inauguration Day were the outgoing President Truman and the incoming president Eisenhower. There was a bitter campaign particularly when Eisenhower appeared with Senator Joseph McCarthy at a Wisconsin rally. This was after McCarthy attacked General George Marshall and Truman thought Eisenhower should have supported his old friend Marshall, but he did not. Further, Truman thought it was appropriate for Eisenhower’s son to be at his father’s inauguration so he arranged for him to come back from his fighting in Korea. Eisenhower took this as a snub and an attempt to embarrass him, and told this to Truman. Also, the Eisenhowers did not leave their limo the morning of the inauguration to join the Trumans in the White House for the traditional tea. Instead they sat and waited for the Trumans to come to the limo. They did not speak for years – until Kennedy’s funeral when they road together to mourn the young president.
The only past president that swore in a successor was William Howard Taft who was appointed to the Supreme Court as Chief Justice by Harding and served from 1921 to 1930. Taft swore in Coolidge in 1925 and Hoover in 1929.
The president that was sworn in by his father was Calvin Coolidge. His father was a state notary and administered the oath at 2:47 am on Aug 3 in Vermont, a day after President Harding died in San Francisco. To make sure there would be no question about Coolidge’s oath since it was wasn’t administered by a federal judge, he was sworn in secretly on Aug 21 in Washington, DC by Federal Judge Adolph A. Hoehling, Jr. The public was informed about this after Coolidge’s terms as president were completed.
The first “Acting President” that became “President” was John Tyler who was Vice President when President William Henry Harrison died one month after his inauguration after contracting pneumonia when he gave the longest inaugural address in cold weather without a coat or hat to “prove” that he was fit to be president. When Harrison was elected he was 68. Reagan surpassed this and was 69 when inaugurated and Trump will be the oldest president when inaugurated – age 70. When Harrison died Tyler said he would take over as president and be president, not “acting president.” He prevailed and set the precedent that the vice president assumes the presidency upon the death [or resignation] of a president. By the way, Tyler’s political enemies called him “His Accidency.”
The first president that refused to be sworn in on a Sunday was James Monroe and his Vice President for their second terms that expired on March 4, 1821. They were given the oath for their second terms on March 5. This being so, there was no president or vice president from Noon on March 4 through Noon on March 5 so President Pro Tem John Gaillard who was next in line of succession assumed the presidency for that day. A similar claim was made when Zachary Taylor and his vice president refused to be sworn in on a Sunday and waited until Monday, but this time there was no President Pro Tem of the Senate since his term expired on March 4, so no one assumed that position.
There were two presidents at the same time in 1877 when Rutherford B. Hayes wanted to be sworn in on Saturday March 3 and not have to wait until Monday March 5 for the oath. His was a hotly contested election that was only decided by the House of Representatives on March 2. He was afraid the loser would try to have the oath administered on Sunday Mar 4, so he beat him to the altar. President Grant whose term would expire the next day, March 4, permitted this, so both Grant and Hayes were presidents simultaneously. The public inaugural ceremony was held March 5 as scheduled.
Five presidents did not attend their successors’ inaugurations. John Adams, John Quincy Adams and Andrew Johnson were angry at their successors. Woodrow Wilson road to the Capitol with Harding but did not attend the inauguration. Nixon left Washington, DC when he resigned so could not be there when Ford was sworn in.
I hope you enjoyed reading this and learned some things you found interesting.
Free gift: On Friday the Post Office will have a special one day only official postmark for the Inauguration. Email me your postal mailing address (no later than Feb 10) and I will send you a commemorative collectible envelope with that postmark on an appropriately designed envelope with an American flag stamp.
I like preparing and using the year end charts, and find them very helpful when advising clients on long term strategies. After I prepared the charts posted on Jan 5, I thought I would write about the changes but after reviewing them, except for one change, whatever I said in my update blog on January 13, 2015 still applies. You can access it through the archives it if you wish to re-read it. NOTE that I reviewed the chart posted on Jan 5 and made some changes on the S&P 500 PE. I also am showing the PEs rounded but use the two decimals that have been hidden in the file for the calculations, so the percentages might be slightly different than from using the rounded amounts. Further, I am reposting that chart here, and changed it on the original posting.
The one major difference is the increase in the PE ratios of the DJIA and S&P 500. There are many reasons for this and here are some of them.
- The PE represents the end of the year stock value divided by the trailing 12 month earnings. So I took a look at the next year PE estimates. For the DJIA the PE estimate is 18.59 (the 2016 trailing PE was 21.56). For the S&P 500 it is 18.92 compared to 24.82.
- The trailing PE is based on the year end prices divided by the last twelve month’s reported earnings. If there was an upward arc for the year or a strong third and fourth quarter this would indicate a higher projected 2017 earnings making the PE more consistent with prior years.
- Another reason for the high PE could be the anticipation of a corporate tax cut. A drop in the rate from 35% to 20% would result in a direct increase in earnings of 15%.
- Doing some arithmetic applying the tax rate to the current earnings would increase the profits so that the new PE would become about 20. However, please note that many of the large corporations do not pay a 35% corporate tax.
- I am not clear how the reduction of the deferred tax liability would be reported. If as current earnings, this would create a onetime bump up in earnings further reducing the PE.
- Note that there are companies with deferred tax assets rather than liabilities. A rate drop would cause them to have losses – exactly the opposite of what would occur with the reduction of the deferred tax liability.
- If the corporate rate drop spurs business growth there would be still greater profits also dropping the PE.
- High PE ratios signify confidence and optimism while lower ones the opposite. It seems the election of Donald Trump created an aura of confidence driving the market rise.
- Another reason for the high PE could be the drop in profits of a small number of major components of the index. This does not appear to be the case here.
There are other reasons, but I think these provide some insight that using one number as a guide is not sufficient and even when you use any number it needs further understanding and analysis. Also, investing is complicated and thinking that by using a formula or two you can make decisions is not such a sound strategy. Moreover, there are a few “ifs” in what I wrote above and any one can skew the results substantially – in either direction from what you might project.
A “test” of the validity of the stock prices is the dividend yield. This is the year end stock price divided by the previous 12 months cash dividends. These appear consistent with prior years indicating that the stock prices appear reasonable albeit the greater PE than for previous years.
I had a blog scheduled for today on what the investment charts tell us and a second blog for Thursday on measuring your investment performance. I am pushing the chart blog to Thursday and the performance blog until Jan 23. Next week I will write about Presidential Inaugurations. I decided to write today about a fantastic event my firm had last night and wanted to share my excitement about it.
Each year Withum has a State of the Firm (SOTF) meeting where our team members come together to get an update of how we are doing and a look at where we are going and new initiatives. The three hour presentation was presided over by Bill Hagaman, our CEO/Managing Partner. A lot is happening with us and what we are doing is a good model for other growing companies to adapt.
The program began with a first viewing of the new SOTF video. This year’s video dispelled the myth of the green eye shaded pocket saver accountant. It showed many of our staff and partners in various work hard / play hard fun activities. To view the 2½ minute video Click here.
The theme of the program was Strength in Innovation. We are developing innovative initiatives in almost every facet of our practice – in client service, staffing, growth, marketing, administrative and management. Each thing Bill told us about gave eye-opening road maps of where we want to improve or develop toward and why, where we are, where we want to end up and how far we are on the path to innovative growth.
Strength in client service is and has to be our number one objective. To better serve our growing clients our firm has been reconstituted into niche segments and cross niche collaboration. This was started a few years ago and has transformed us into major players in most of the industries we serve. The listing of these niches is many and thorough and can be found on our website, but if you are a client you already know of our strong and deep strength in your industry.
Strength in staffing is always an issue especially with a growing business. One way to handle this is to reduce turnover and increase training and opportunities for growth. To that end we have created a chief talent officer and have established staff level specific training in technical skills and client service. We also just eliminated mandatory nights and weekend work during tax season and substituted a flex time arrangement with annual production benchmarks. In our profession the tax season hours has always been a problem and this new paradigm should remove much of the “boxed in” feeling and create individual empowerment for work scheduling. Of course, client requirements and time deadlines must be respected.
Strength in growth and solutions is something every business should plan for. Growth in revenues, numbers of clients, partners and staff and profits. Bill shared with us, as he does every year, the budget and projections and where we are and how far we are from reaching our pre-set goals and what changes were made from last year’s budget. We are healthily ahead of every target that was set just a year ago and well on our way to a very successful year ahead. Bill also shared a proud graft showing 42 consecutive years of revenue growth.
Strength in marketing is essential for growth, but also to maintain existing business and to spawn organic growth from present clients. It is also necessary to help create and support the existing firm culture. We were introduced to new innovative marketing programs and the media we will be using. Part of the internal marketing is the SOTF event. I must say that I found everything about the program exciting. Further the graphics were out of this world. Our graphic designer – Jin Park – out did herself. Fantastic!
Strength in administrative support is necessary for smooth functioning of any multi office business. A professional service firm has unique issues in that almost any person in the firm can need admin support and can regularly interact with the admin people. I am happy to say that we have our act together in this area with strong people.
Strength in management growth is necessary. We have a restructured management structure with an organization chart that brings forth the best people for each essential function. We also have targets for admitting new partners for the next seven years. This year we will be admitting nine new partners. I am happy and proud to announce that two of the new partners are people I work with in my New Brunswick office. One of whom started with us as an intern and will be our youngest partner; and the other moved to our area with one year experience, so both are home grown. They will join a group of partners where about half started their careers with Withum. To me, this is the best recruiting pitch we can make. There are great and real opportunities here.
Bill presented our annual Strength awards to staff that exhibited extraordinary efforts with great results during the past year and is a highlight to see along with the activities of everyone that was nominated for each award. A client was also invited to speak about the importance of their collaboration with Withum and the benefits we brought to his company and the importance of the work we did in assisting in his company’s successful growth. We do things and we have ways to them, and this client provided the why we do what we do and the collaborative nature of our interactions.
Half of the 800 people at the SOTF event were millennials. We are a young firm with a strong 42 year history. I spoke with and networked with partners and staff from our five New Jersey offices, and our Manhattan, Boston, Philadelphia and Orlando offices. It is amazing how many people you really get to know because of these firm wide events. The event was held at the Liberty Science Center which was closed for our event and we had the museum to ourselves after the dinner that was served, but I spent my time soaking up the camaraderie with my cohorts that I do not see as often as I would like.
There is a lot more, but this is a good place to stop. Thanks for reading this blog and if you have a business, hopefully you can use some of this as a start to develop your innovative initiatives.
These charts continue an annual tradition I started ages ago to use when I do financial planning with clients. The charts show the 10-year annual and cumulative percentage gains or losses of the major stock market indexes, interest rates, currencies and gold. They are provided for illustrative and educational purposes. No recommendations are made or should be inferred from the information presented. Also note that past results are no indicator of future performance.
10 year financial benchmark performance of major stock market indexes, interest rates, currencies and gold
We are at the dawn of a new year. If you made resolutions last year, did you accomplish them or are you repeating them for this year? Are your 2017 resolutions the Same As Last Year – SALY? If so, do something about it. Either make resolutions you can and will achieve or do not make them.
Many of our resolutions are for important things we want to accomplish, yet we push them aside because of the so called exigencies of the moment – of our moments! The reality is that in the previous 365 days you could not find time to do what you thought was important when 2016 began and still feel it is important for 2017. My suggestion – do them! And next year you won’t have to write: SALY!
I have two resolutions that I have been carrying forward for quite a few years. I will get them done this year! For sure!
Here are some things you should consider for the new year.
- Health – One of the biggest causes of unaccomplished financial plans and destroyed savings are health issues. Make good health practices a major part of your plans – and do not push this aside.
- Wedded bliss – Another major cause is a failed marriage – work at yours and do not skip your “date nights.”
- Vacations – Vacations are how you recharge your batteries. No one can keep running continually at a full pace without a break. Use vacations for those breaks – and do not check in with the office. You are on a vacation, and not just working at a different or remote location.
- Don’t gossip – Do not talk about people that are not present. This will cause you anxiety if you said something that you are afraid they will find out about.
- Call your aunt – Calling an aunt or an old friend or their widow every once in a while can’t be too much of a burden and think about the great good you will be doing.
- Manage your taxes – No matter your situation you can keep your taxes at a minimum by sound and regular planning and review.
- Understand your investments – You should never invest in anything that you do not fully understand how you can make or lose money in, and once understanding it, you are willing to accept the possibility of that loss.
- Grandkids – There is a limited period until they grow up. Maximize your time with them and their memories and experiences with you that they could use to grow with.
- Friends – As our old friend Polonius said: Those friends thou hast, and their adoption tried, grapple them to thy soul with hoops of steel.
- Be Grateful – Be mindful that every day is a Blessing.
Addendum to last year’s list of what records you should keep: Keep some documentation of your prior addresses such as a phone or utility bill or a bank statement. If you make a claim to recover escheat funds that predate your present address, proof will need to be provided of your prior residences or office addresses.
Thanks for reading my blogs. Have a Happy and Healthy New Year. Ed Mendlowitz