Carolinas Investment Consulting // Summer 2016 // The Consultant




Dustin Barr, CFA

Being a relatively large independent investment firm has its benefits. From an investment research perspective, one of those advantages is direct access to some of the top minds in the investment industry. We thought it would be fun to highlight some of the most well-known investors who paid us a visit over the last 18 months and share some of their wisdom:

David Rubenstein (Co-Founder of Carlyle Group, Private Equity Investor, and Well Known Philanthropist): Patriotic philanthropy (restoring our country’s historic buildings, artifacts, and documents) can ensure that the general public never forgets the past successes and failures of their ancestors. This brand of philanthropy can serve as an important education to our future generations.

Dave Iben (Founder of Kopernik Capital and Famed Value Investor) Being early on an investment idea isn’t a bad thing at all. When Warren Buffet started his investment firm in 1973, the S&P 500 dropped approximately 30% in just one year. Had you not sold then, but held on to your investment from the bottom in September 1974 to today, you would have received a return of more than 3,000%!

Charles Brandes (Founder of Brandes Investment Partners and Famed Value Investor):

Checking your investment account performance can statistically predict your performance. Those who check their performance daily or monthly have far less of a chance at long-term success than those who do so less frequently. As human beings, our inherent behavioral biases tend to cause investors to be more reactive than they should be, leading to frequent trading and timing miscues.

Steven Romick (Founder of FPA and Famed Value Investors): The greatest edge an investor can have is patience. Volatility is fantastic! Volatility allows patient investors to go shopping at discount prices. Volatility means investors are either scared into or out of something and both scenarios create opportunities for the patient investor.


David A. Perkins, J.D. CPA, CFP®

Some analysts forecast that earnings of S&P 500 companies could increase as much as 18% in 2017 over their 2016 levels (Morgan Stanley, “Buy the Election, Sell the Inauguration”, 1/11/17). Nearly half of that increase comes from the assumption that corporate tax rates will drop substantially in 2017. After all, if a company’s tax rate drops from 35% to 15%, that 20% savings would result in additional corporate profit, all else being equal. The U.S. has not had a permanent change to the corporate tax rate since the Reagan Administration. At that time, the 35% tax rate was one of the lowest in the world. In the 1980s, corporate tax reform took Congress more than two years to pass. While it seems likely that a tax reform bill will become law this year, there is a possibility that the reform and impacts to the new law won’t have a big impact until 2018 or beyond. So what are some of the changes being proposed to reform the corporate tax rules?

Three main ideas have been floated as either campaign promises or proposals from Congress.

The first is simply reducing the tax rate from 35% to 15% (or 20% under different proposals). Since this would cause a significant loss of government tax revenue, deductions and credits would need to be eliminated. One is to eliminate the deduction by companies for interest on their bonds, which could dramatically change the mix between bonds and stocks that companies use, and that is where lobbying and details would get difficult.

The second idea is called repatriation, or bringing back money that companies hold overseas. Currently, companies don’t pay U.S. tax on profits they earn overseas if they keep that money for future reinvestment. They do pay tax in that foreign country, and the average overseas rate is 25% (the U.S.’s 35% corporate tax rate is now among the highest in the world, however, the U.S. offers more deductions than most countries and as a result the average corporation pays a tax rate of approximately 28%; which is still higher than average global tax rates). (JP Morgan, Charts on the Market, Slide 7, 12/31/16). If a company brings the money back to the U.S., they would pay the difference between the U.S.

rate of 35% and the foreign tax they already paid (on average the difference between these rates is 10%). The total amount of funds held overseas represents between $2.5 and $3 trillion. The repatriation proposal suggests a tax holiday that would let companies pay zero tax on funds that are now brought back to the U.S.

The third idea would change the way companies are taxed in an effort to eliminate the incentive to shift profits overseas and force companies to produce more goods in the U.S. This is known as a “border-adjustment system,” which favors exports over imports. For example, if Ford produces the chassis and parts for a Ford Focus in its Mexican factory, and then pays that foreign subsidiary for those goods, it currently is allowed to deduct those costs from its U.S. profit, reducing its taxes. The new proposal would eliminate any deduction for imported goods, effectively imposing a “border tariff” and increasing a company’s U.S. tax. Most major retailers, such as Walmart, buy products made more cheaply overseas and pass those savings on to the U.S. consumer in the form of lower prices. Now they would get no deduction for what accountants call their cost of goods sold. In this scenario, lower margin retailers could see significant tax increases even if the statutory corporate tax rate fell from 35% to 15%.

How a retailer such as Walmart would respond is part of the unforeseeable consequences of making major changes in the structure of the tax code. If they pay higher taxes, what would happen to their employees and customers? If Ford, in the example above, produced the Focus entirely in the U.S., it might employ more U.S. workers and pay lower U.S. taxes, but the overall cost of the car could be much higher. Goldman Sachs lists apparel as the sector with the highest net imports, and therefore most likely to be harmed by the border tax, followed by autos, computers, electrical equipment, primary metals and U.S. toy and game makers (95% of Hasbro’s and Mattel’s toys are made overseas) (Wall Street Journal, “Toy Makers Gird for Tax Code Changes”, 1/11/17).

One way or another, 2017 should prove to be an interesting year for taxes and their impact on corporate profits and the stock market.


The Curtain will rise on a stunning Carolina Theatre renovation

Charlotte’s 1927 Carolina Theatre, a Tryon Street jewel shuttered since 1978, is being restored to its former glory.

What do Bob Hope, Elvis Presley, Katherine Hepburn, Jimmy Stewart, and the longest continuous run (79 weeks!) of The Sound of Music have in common? Each graced the Carolina Theatre stage in its 51 amazing years.

Guess what air conditioning was first called. “Manufactured weather!” The Carolina Theatre, originally a vaudeville theatre and silent movie house, was among the first in the south to offer it.

Chris Gammon, Foundation For The Carolinas President & CEO Michael Marsicano, and George Edmiston discuss the Carolina Theatre campaign

The Foundation For The Carolinas is leading a $44 million campaign to restore the Carolina Theatre to its former grandeur.

When reopened, civic and community programming will be the primary focus, as the theatre will adjoin and extend the spectacular spaces of the Foundation For The Carolinas’ North Tryon Street quarters.

The renovated theatre, to reopen in 2019, will host lectures, symposiums, town hall meetings, and TED talks, as well as film, documentaries, and arts and entertainment.

Recently Carolinas Investment Consulting was approached by The Foundation For The Carolinas to help them finish their campaign. We have decided to make this our community project for 2017.

2017 community project


Want to learn more? Visit


Abby Bennett, CFP

There is a common theme among many financial news outlets today: a new generation of investors.

What characteristics help define this group?

  • Technology-driven
  • Research-oriented
  • Collaborative and innovative

The financial advisory business must adapt to serve this new generation. While that is true, NextGen is nothing new to CIC.

Our firm’s history is written by leaders who have guided clients and their families through decades. Clients have become fixtures in their communities, but more than that, they have become parents and grandparents along the way. Throughout the years, our team has strived to provide the highest level of service to all of our clients, which has required the adoption of newer, better technology and the evolution of our means of communication. Our response to the next generation is no different.

In an industry of aging advisors, the CIC team is a reflection of the growth and change of the investor demographic, which provides the ideas and experience necessary to collaborate and improve.

A product of that collaboration is demonstrated through the implementation of new technology. As clients, or their children, find themselves relocating, so must we expand our reach. Virtual meetings have become quite popular for many. Real-time portfolio reviews, with the addition of interactive financial planning, strengthen our relationships both in the Carolinas and beyond. We endeavor to provide what is best for our clients, regardless of age, location, or preferred method of communicating.

We will continue to invest in new technologies and talented professionals as we navigate the evolution of the investment industry. A new generation may be upon us, but our commitment to our clients, no matter their age or stage of life, will always be a part of our legacy and our future.


We are fortunate to continue to add great young talent to our CIC family. Over the past year we have welcomed Victoria Furr and Justin Louis as Relationship Managers workings with Chris Grogan and George Edmiston, and David Perkins, respectively. Robert Shaw has also joined us in the role of Director of Technology, and Bridget McDermott has joined our Financial Planning team. You can learn more about them and others in CIC’s next generation on our website:

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R. Wade Austin
Oliver R. Cross III
R. Christopher Gammon, CFA, CFP®
Christopher K. Grogan
Thomas E. (Ted) Highsmith
David A. Perkins, J.D., CPA, CFP®
Bryan P. Zeiss
and George H. Edmiston, Jr., President & Founder

Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

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