Happy 4th of July!

We know the past couple of months have been challenging for us all, but hopefully this independence day weekend will help bring some joy into the lives of you and your loved ones. Stay safe and have a great weekend!

As always, we’re here to answer any portfolio questions or discuss your planning needs. Click here to contact us or simply call us at (800) 477-5525 to set up an appointment with one of our investment advisor representatives or financial planners.

Happy Fourth Of July from the Naples Asset Management Company Team!

Client Note June 2020

As we close June and the first half of 2020, financial markets continue their rebound from the first quarter’s corona-crash.  In very volatile markets there will be many “best/worst X since Y”.  The close at 3100 on the SP500 reflects the best quarter in the sp500 since 1987, with a gain of 19.9%.  After a 36% decline off the all-time high and subsequent 40% gain, puts the SP500 at -4% year to date and -9% below the all-time highs.  Our average moderate portfolio gained almost 15% for the quarter and is up 4% on the year.  While further upside is possible but in the short term, US equity markets are in a downtrend since June 23.  On a larger time, frame, we have downtrends since June 8 and off the highs on February 19thGetting over 3200 should open the door towards 3400+, but if we lose the 3000 level, my medium-term outlook will change.  Our individual stocks continue to do very well.

International equities continue to sorely lag US equities.  European shares gained 2.5% on the month, and currently sit at -14% year to date.  Japan gained 1% and China ebbed 1.6% on the month and both fall well short of the SP500 at -7% and -9%, respectively, year to date.  Emerging markets were the winner on the month at +6% but also have made far less progress recovering post-crash, coming in at     -11% year to date. We sold the last bits of emerging and international equities towards the end of the month.

In credit markets, treasuries have dominated over all other areas of the bond markets.  The long bond/20-yr treasury ebbed by 2.25% during the month, is flat for the quarter and up a massive 20% for 2020.  Even with equivalent maturities, treasuries are outpacing investment grade and junk bonds by 5% and 17%(!) respectively.  The investment grade corporate bond etf, LQD is up 5.1% ytd, while junk bond etf, JNK is -7.7% ytd.   This disparity is due to the rapid credit deterioration seen during this severe recession.  Given this, and spike in covid19 cases, its unlikely rates will rise appreciably in the near term.  Our long treasury position was reduced late March at slightly higher prices.

Economic data released in June continue to show improvement over the April/May shutdown (naturally).    The pace at which the economy would rebound after reopening is a hot topic.  We are seeing rapid improvement in some areas but the estimates versus data are showing extremely poor forecasting ability by economists in the short term.  I am watching year over year data to see how much rebound we are getting.  If July and August data show similar growth as May and June, we could see 90% of more of the economy back by Labor Day.  The trend of economic recovery is far more important than the level.  Ideally, we will trend higher and higher until full recovery.   At the end of July, we will get the first read on GDP for the second quarter.  The Atlanta Fed current estimate has risen to   -36%. 

Looking forward, the recent spike in virus cases has opened the door to the risk that the re-opening of the economy will be slowed, as we are more likely to see county or regional shutdowns.  Continued support from the Fed and continuation of stimulus programs are critical.  A bit higher in equities may provide some momentum to get to 3400 and Fed intervention can keep rates low.

Adam Waszkowski, CFA

The Multi-Family Sector and COVID

The multifamily housing sector has experienced robust demand over the last decade but is expected to feel the impact of the COVID-19 pandemic. Tenants may struggle to pay rents due to rising unemployment claims in the United States, among other factors.

On the surface, March 2020 appeared to be a normal month for the multifamily sector with rents growing 2.9 percent on a year-over-year basis and increasing $6 from February 2020.[1] However, as the month progressed, COVID-19 tightened its grip on the U.S. economy and has hit the U.S. job market hard, with more than 30.3 million first-time unemployment claims since March 21, 2020[2]. When it comes to paying for housing, household renters are most vulnerable, as renter median household incomes historically are disproportionately lower than those of homeowners, and renters may lack resources to overcome missed paychecks.

median.household.income-1The positive news as of April, 2020 is that many multifamily renters were still paying rent. A recent National Multifamily Housing Council survey found that 84 percent of apartment households made a full or partial rent payment by April 12, 2020, up 15 percentage points from April 5, 2020.[3] The uncertainty of the pandemic remains unsettling, as the potential for stay-at-home order extensions, increasing unemployment and decreasing renters’ savings are requiring landlords and operators to navigate potential late payments and rent forbearance. Governments at the federal, state and local levels have rolled out moratoriums on eviction and are requiring rent flexibility and forbearance.

The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, was signed into law on March 27, 2020, and provided over $2 trillion in economic relief to provide fast and direct economic assistance for American workers and families, small businesses, with the goal of preserving jobs for American industries. The CARES Act provides expanded unemployment benefits and a one-time stimulus payment to qualifying Americans, which is expected to alleviate some of the strain that multifamily residents may be facing.

Another important policy outlined in the CARES Act provides forbearance of residential mortgage loan payments for multifamily properties with federally backed loans that are experiencing a financial hardship during the COVID-19 emergency. It is no surprise that multifamily borrowers (more than 5 units) may struggle to satisfy their own financial obligations to operate properties, as they are directly affected when tenants face job loss or furloughs and are unable to fulfill rent obligations. This policy also includes renter protections during the forbearance period, which can be as short as 30 days, or extended for up to two 30-day periods upon request by the borrower. During that time, multifamily borrowers may not evict any tenant based on failure to pay rent.[4]

While there are programs in place to assist multifamily renters, borrowers and operators, the bottom lines for apartment owners and operators are expected to be impacted as planned rent increases and value-add projects may be postponed.

Once we return to a more stable environment, multifamily is expected to retain its position as a preferred asset class, as an estimated 35 percent of U.S. households rent.[5] The pandemic has yet to change these fundamentals, as young professionals who were considering purchasing a home are likely delaying that decision for now; however CBRE projects that multifamily fundamentals will take a sharp downturn before rebounding at the beginning of Q4 2020. CBRE projects that overall vacancies will rise 2.7 percent to 6.3 percent by Q3 2020, compared to 3.6 percent in Q3 2019. Average rents are projected to drop 6.7 percent to $1,603 in Q4 2020 compared to $1,717 in Q3 2019.[6] But average rents are expected to recover through 2021, and CBRE expects to see them back at pre-COVID-19 rates by the middle of 2022.


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[1] Yardi National Multifamily Report. March 2020.
[2] https://www.cnn.com/2020/04/30/economy/unemployment-benefits-coronavirus
[3] National Multifamily Housing Council Survey, as reported by Connect. https://www.connect.media/apartment-rent-rolls-post-major-improvement-in-nmhcs-second-weekly-survey/  April 16, 2020.
[4] NCLC.org. Sec. 4023. Forbearance of residential mortgage loan payments for multifamily properties with federally backed loans. March 26, 2020.
[5] US Census Bureau. Quarterly Residential Vacancies and Homeownership, Q1 2020. April 28, 2020.
[6] https://www.cbre.us/research-and-reports/US-MarketFlash-Multifamily-Market-Outlook-Rebound-to-Begin-in-Q4-2020

The views expressed herein are subject to change based upon economic, real estate and other market conditions. These views should not be relied upon for investment advice. Any forward-looking statements are based on information currently available to us and are subject to a number of known and unknown risks, uncertainties and factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.

Important Risk Factors to Consider
Investments in real estate assets are subject to varying degrees of risk and are relatively illiquid. Several factors may adversely affect the financial condition, operating results and value of real estate assets. These factors include, but are not limited to:

  • changes in national, regional and local economic conditions, such as inflation and interest rate fluctuations;
  • local property supply and demand conditions;
  • ability to collect rent from tenants;
  • vacancies or ability to lease on favorable terms;
  • increases in operating costs, including insurance premiums, utilities and real estate taxes;
  • federal, state or local laws and regulations;
  • changing market demographics;
  • economic risks associated with a fluctuating U.S. and world economy;
  • changes in availability and costs of financing; and
  • acts of nature, such as hurricanes, earthquakes, tornadoes or floods

For more information, visit www.dst.investments.

IRS Announces CARES Act RMD Relief

If a retiree took a required minimum distribution but is having second thoughts in the wake of COVID, they are now able to roll it back.

The Internal Revenue Service announced Tuesday that anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts can take advantage of the CARES Act RMD waiver for 2020.

The 60-day rollover period for any RMDs already taken this year has been extended to August 31, 2020, to give taxpayers time to take advantage of this opportunity.

The IRS described the change in Notice 2020-51 (PDF). The Notice also answers questions regarding the waiver of RMDs for 2020 under the Coronavirus Aid, Relief, and Economic Security Act, known as the CARES Act.

The CARES Act enabled any taxpayer with an RMD due in 2020 from a defined-contribution retirement plan, including a 401(k) or 403(b) plan, or an IRA, to skip those RMDs this year. This includes anyone who turned age 70 1/2 in 2019 and would have had to take the first RMD by April 1, 2020. This waiver does not apply to defined-benefit plans.

Exempt from certain rulesIRS Logo

In addition to the rollover opportunity, an IRA owner or beneficiary who has already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by August 31, 2020.

The notice provides that this repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.

The notice provides two sample amendments that employers may adopt to give plan participants and beneficiaries whose RMDs are waived a choice as to whether or not to receive the waived RMD.

The RMD waiver provided by the CARES Act is similar to the 2009 RMD waiver provided by section 201 of the Worker, Retiree, and Employer Recovery Act of 2008.

Understanding Tax-Deferred Exchanges

rainbow over NYCA new education piece designed for Accredited Investors, on Understanding Tax-Deferred Exchanges was released today by DST Investments, LLC.

To view or download, click here.

DST Investments, LLC is a Registered Investment Adviser (RIA) that specializes in only DST Transactions.  DST works to solve portfolio and 1031 business problems, takes a consultative approach to every client engagement, and find actionable solutions that will help the client achieve the best business or portfolio outcome.

Taking a fiduciary approach to DST transactions allows us to pursue a course of action that will better align the interests of the client.   For more information, contact Al DiNicola, MBA  adinicola@dst.investments

Can a Second or Vacation home qualify for 1031 Exchange?

Back in February of 2008, the IRS established guidelines for determining whether a vacation home qualifies for a 1031 Exchange. 

Revenue Procedure 2008-16 sets forth the safe harbor guidelines as follows:


  • The holding period for the vacation home is at least 24 months immediately before the exchange;
  • For each of the two 12-month periods, the vacation home is rented to another person at a fair rental for 14 days or more; and
  • The homeowner limits his use of the vacation home to not more than 14 days or 10% of the number of days during the 12-month period that the vacation home is rented at a fair rental value.


  • The holding period following the exchange is at least 24 months;
  • For each of the two 12-month periods, the vacation home is rented to another person at a fair rental for 14 days or more; and
  • The homeowner limits his use of the vacation home to not more than 14 days or 10% of the number of days during the 12-month period that the vacation home is rented at a fair rental value.

When contemplating an exchange, one of the most common questions real estate investors ask is: Will my mixed-use vacation property be eligible for an exchange?

Thankfully, the answer to this question is “yes.”Instead, like other revenue procedures issued by the IRS, is a guideline intended to supplement the agency’s interpretation of Section 1031.  If taxpayers follow this procedure, the IRS should not challenge the vacation home’s eligibility as relinquished property. Abiding by this document will mean avoiding a legal challenge, but this doesn’t mean going outside the bounds of 2008-16 will necessarily result in a failed transaction.

What Rev. Proc. 2008-16 is saying is that the IRS will not challenge the “holding requirement” of Section 1031 if taxpayers follow its guidelines. The potential issue that could be presented by vacation homes is the holding requirement. That is, there could be a dispute over whether such property satisfies the requirement that relinquished property must be “held for” investment.  If taxpayers disobey Rev. Proc. 2008-16, the holding requirement may still be met, but the issue can only be resolved on a case-by-case basis. It is not a quantitative requirement, as we know, but a qualitative one, and it demands an individualized analysis by the court. The language and appearance of the procedure may seem authoritative, but accountants should be aware that it is not a set of strict rules.

Despite the confusion the above may seem to cause, the guidelines are straightforward: For vacation homes used as relinquished property, taxpayers should own the property for at least 24 months prior to the exchange. For replacement property to be used as a vacation home, it should also be held for a minimum of 24 months.These ownership periods are referred to as “qualifying use” periods, which operate just before the exchange (for relinquished property) or just after it (for replacement property). In other words, if a taxpayer owns a relinquished property vacation home for five years, only the 24 months immediately preceding the exchange constitute the qualifying use period.Taxpayers must rent the home at a fair market value for at least 14 days in each of the two 12-month time segments which make up the 24-month qualifying use period.

Also, their personal use of the home cannot exceed the greater of 14 days or 10 percent of the total days the home is used as a rental during each 12-month segment. These guidelines apply to both relinquished and replacement property. Thus, the IRS is making it clear that the holding requirement will not be contested should these guidelines be observed.DST Investments is a registered investment advisor that specializes in DST 1031 Consulting services. For a complimentary consultation, please visit us at www.DST.investments or email us at support@dst.investments.





DST Investments Launches News Service

DST Investments, a Registered Investment Adviser (RIA) which specializes in only DST transactions launched a dedicated news site to help accredited investors find educational materials and unbiased updates related to the DST Market Landscape.

DST Investments works to solve portfolio and 1031 business problems, as a fiduciary, and takes a consultative approach to those in need of a 1031 or DST transaction.   This allows us them to pursue a course of action that will better align the interests of the client

For more information, contact Al DiNicola, MBA  adinicola@dst.investments  or visit www.DST.investments.


Client Note May 2020

June 1, 2020

Like April, equity markets started the month of May off slowly, but over the past 10 days, the S&P500 has gained roughly 4.5% on the month putting it at -5.7% year to date.    International equity indices gained a bit more for the month but continue to lag the U.S. by a wide margin.     Bonds were generally flat, with junk bonds moving up alongside stocks, while a small move up in interest rates pushed the long bond (TLT) down slightly on the month.   Gold moved up almost 3% on the month, after being up almost 4% mid-month.  And our individual stocks continue to do well, enabling our average moderate portfolio to add just over 3.5% for May and for year to date returns approaching 4%.

Looking ahead, it appears investors are pricing the market in expectation of a solid second half recovery and near full economic recovery into 2021.  While investors have bid up prices in anticipation, there is a loooong way to go to recover from the sinkhole we are in.   Current earnings estimates for second quarter are expected to drop 35%, reflecting a full year estimate of around $100/share of the SP500. If that occurs and the expected earnings bounce in Q3 and Q4, we have a forward Price to Earnings ratio of 30x, which is extremely expensive.  We will see earnings in mid-July; first read on GDP at the end of July; and all the while we will see employment numbers each week.   On going jobless claims have now exceeded 20 million, reflecting an unemployment rate a bit under 15%.   Economic data will remain dire.  The hope is that employment and spending figures rebound rapidly in the coming weeks. 

As mentioned last month, the expectations and sentiment that direct short term prices are well ahead of actual improvements in employment or spending (declining).  We have made significant progress in flattening the curve with the virus.  We have seen stock prices climb dramatically alongside the hope of a rapid economic recovery. However, we are seeing an even more stretched disparity between current prices and reality on the ground.  This does keep markets at risk of wide price vacillations.

Attaining and holding 3000 on the SP500 does allow for further upside in the markets and while I rotate out of individual stocks that have lost their ‘mojo’ (or take profits), there is another handful I am tracking and may show up in portfolios in the coming days.  In my April Observations and Outlook, with tongue firmly in cheek, I outlined a path for stocks to 4000 if the Fed continues to add liquidity/monetize debt. Since that writing, the Fed has covered a quarter of that quantity.  The rise in the Fed balance sheet has paralleled a rise in equity prices. The Fed continues to plan for and express willingness to continue its balance sheet expansion in pursuit of its stated mandates: full employment and stable prices.

Prices across virtually all asset classes remain constructive considering Fed actions and optimism towards renewed economic vigor.  State re-openings have occurred, and the expectations are for rapid improvement in employment and spending.  There is a nascent uptick in the outperformance of equal-weighted and value indexes versus the general market.  This market characteristic often shows up at the beginning of economic expansions and longer bull markets.  June’s economic data and market price action should give us a great deal of insight into the remainder of the year.

Adam Waszkowski, CFA

Honoring Sacrifice

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Since the earliest ceremonies in small American towns following the Civil War, we have gathered on Memorial Day to honor and remember those who made the ultimate sacrifice in service to our nation. As in those early days of laying wreaths and placing flags, our national day of remembrance is often felt most deeply among the families and communities who have personally lost friends and loved ones.

Uncle Hubert 1943Since World War I, more than 645,000 men and women have given their lives in defense of our freedom here at home and around the world. 

This national holiday may also be the unofficial start of the summer season, but all Americans must take a moment to remember the sacrifice of our valiant military service members, first responders and their families. Memorial Day is a day of both celebration and grief, accounting for the honor of our heroes and reflecting on their tragic loss.

This Memorial Day, join us in remembering those who bravely sacrificed their lives for our country, including the many first responders of COVID. 

At NAMCOA we pay tribute to Honor, Duty and Sacrifice.  

Client Note April 2020

Equity markets moved up strongly in April.  The S&P500 moved up 12%, and currently off 3% from the April 29th intraday high.  Gold jumped early in the month, then flat for a gain of 7% in April.  Long treasury bonds moved up in price by 1% but have been on the wane since April 21st.   Most asset classes have been rangebound (+/-3%) since early to mid-April, reflecting a decrease in market momentum.  The average moderate portfolio gained approximately 9% vs the SP500 gains of 12% in April.  Year to date, through April 30, SP500 is off 9.9% while most portfolios are very close to 0% year to date. 

Economic data continues to come in at extremely negative levels.  Auto sales fell by 45% April 2020 vs April 2019.  China, in February saw a 90% drop.  Current market sentiment is bearish and consumer confidence declined from 101 in February to 71 in April.  This is similar to the decline from February 2007 to June 2008 (the month Fannie and Freddie’s first attempted bailout, after losing 50% of their value that month), which saw a decline of 35%.  This could be another reflection on how this recession is being ‘front-loaded’.   We have seen already how GDP and employment has fallen as much as the entire 2008 Great Financial Crisis, but now expect robust rebound by year end.

In light of all this, equity markets have remained buoyant, after the March decline.  This may further indicate the front-loaded- ‘ness’ of this economic period.  And at the root of it all is the expectation that the economy will rebound strongly in the second half and especially in the 4th quarter of 2020.  While GDP estimates for Q2, which will come out at the end of July, range from -10% to -30% (annualized basis), some estimates for Q4 are as high as +20%.    I believe that we are again priced for perfection.  The past few years saw valuations (price to earnings, price to sales, etc.) elevated with expectations of an acceleration in earnings and wages to justify the then-current prices.  Today a significant economic rebound is priced into the market.   If the economy in late May and June isn’t picking up quickly enough it could put pressure on equity prices.  It depends on re-opening the economy and that depends on subduing the pandemic.

We have seen momentum decline recently and thus increases the potential for volatility in equity markets.  If the S&P500 cannot breakout above 3000 in the near term, we’re likely to remain rangebound vacillating +/- 6%.  Bonds and gold are at a point where they are testing support and have the potential to move several percent as well.  If we are to remain rangebound, my preference would be to reduce risk until there is more confidence in further upside.

On a side note, I have significantly reduced the amount of cable and national news I watch on TV.  It’s the same sad and fearful story we’ve heard the past 6 weeks.  I have noticed I feel better doing this.  A client went back north recently and was surprised/disheartened at the difference in the local news in Naples vs the local news in the tri-state area.  Avoiding the bad news TV and enjoying the good news of spending time with family/projects/hobbies/exercise can be an important factor in getting through this time and being ready to embrace the other side of this crisis.

Stay safe and thank you,

Adam Waszkowski, CFA