It’s not exactly a news flash that our country is experiencing one of the most political divisions in history. It seems that every issue, outlook, and opinion is based on partisan politics. Gone are the days of independent thought as a method of arriving at one’s position on a subject.

The other day I was having a conversation with my wife on this very topic that was initiated as a result of my recent vote for our local congressman on my mail-in ballot. Congressman Raul Ruiz is our incumbent representative and he is a democrat. My wife is a Republican and I am an Independent, albeit with a strong Republican bias. My reasons for voting for Mr. Ruiz were based on his record and involvement in our local community as well as his strong commitment to protecting the rights of seniors and veterans.

While my wife agreed with me on the virtues of Congressman Ruiz, she wisely pointed out that above all else, he is still a democrat and unlikely to break party ranks on the larger national issues confronting our population. In other words, politics will prevent him from exercising independent thought if it is not in concert with the democratic majority. Doing so, would brand him as an outcast and likely ostracize him from the ruling class. Furthermore, his chances of reelection would be rendered slim without the support of his Democratic colleagues.

There is nothing on the horizon that suggests that anything will change as the issues dividing the two parties are deep and wide. Unfortunately, it seems that the only time we can come together as a nation is when we are faced with a crisis of the proportions of 911. What a shame!

DRIP, is an acronym for a Dividend Reinvestment Plan. It is a system of automatically reinvesting dividends in additional shares of the same stock in lieu of receiving cash dividends thereby increasing one’s equity in a position over time. It comes in two forms – an authentic DRIP sponsored by the issuing company and a pseudo-DRIP where a brokerage automatically reinvests dividends according to the instructions provided by the investor. This can be an efficient form of commission-free dollar cost averaging using a fixed dollar amount (the dividend) to purchase fewer shares at higher market prices and more shares at lower market prices. For those situations where the goal is to build additional equity and forgo cash dividends, it is a great strategy for traditional equities. However, there are two types of investments where this system is not advisable.

First, employing a DRIP strategy for Master Limited Partnerships (MLPs) is almost always not a good idea and is not a tax efficient strategy for investors that depend on MLP distributions to supplement their income in retirement. Unlike traditional equities, MLP distributions, with few exceptions, are not dividends, but in fact, Return of Capital. When selling traditional dividend paying equities with dividends reinvested in a DRIP, the tax liability will be treated simply as a short term or long term capital gain or loss, computed by the net difference between the purchase price and the selling price. Prior dividends were already taxed in the year that they were received. With MLPs, it’s not that simple.

Due to the treatment of Return of Capital, the cost basis of MLP sales must be reduced by the earlier distributions received for the lots being sold. This will result in an increase in the taxable capital gain at sale beyond the simple difference between the purchase price and selling price. This additional tax liability for sales of MLP units often comes as a surprise to many uninformed investors, thereby wiping out much of the deferred tax benefit enjoyed in earlier years. If the intent of using an MLP DRIP strategy is solely for the benefit of heirs and not for income, then it becomes a reasonable strategy, as the cost basis will be stepped up for them upon the original investor’s death.

Notwithstanding the benefit of a stepped-up basis for heirs, tax efficient MLP cash distributions should, at some point, be spendable and should therefore be taken as cash rather than additional shares. Further, to receive the maximum tax benefit, MLPs should be held in a taxable account as opposed to an IRA or 401K. One risk worth noting is the potential conversion of an MLP to a C-Corp. This conversion will result in a tax trap causing the MLP units to be sold as they are converted to common shares.

The second form of investment that I do not recommend DRIP purchases is preferred shares. Although qualified DRIP plans for preferred shares are not directly available directly from the companies themselves, the process can still be implemented through the reinvestment of dividends per the instructions issued to your broker. Preferred shares are typically issued at a Par value, usually $25.00 with a fixed coupon rate. Most often, they give the issuer the right, but not the obligation, to buy them back at a future specified call date at par. In a stable or declining interest rate environment, the universe of Preferred stocks tend to rise in value, and conversely decline as prevailing interest rates rise. Because the issuer has no obligation to redeem the shares at the call date, they will most likely not do so if rates have risen causing the market price of the issues to fall. On the other hand, if rates decline, causing market prices to rise, there is a good chance that the issuer will exercise its right to redeem preferred shares at par and reissue new shares at lower coupon rates than those redeemed.

The DRIP problem with preferred stocks is this. As shares climb above par in value because rates are rising, then dividends will be reinvested at the higher market prices, not par. By purchasing shares above par value as a result of DRIP instructions, the investor is in effect granting a no cost call option to the issuer to purchase those shares at below their original issuing price, locking in the probability of a principal loss to the investor.

Another factor to consider for any purchase of preferred stocks above par value is the Yield to Call (YTC) of those shares if the company chooses to exercise its redemption option. The coupon rate remains the same at the “when issued” price causing the effective yield on the investor’s purchase of shares above par to decline. For example, consider xyz preferred issued at $25.00 with a $1.50 dividend yielding 6%. If market conditions cause the same shares to rise in value to $28.00 and are purchased at that price either outright or through dividend reinvestment, the $1.50 annual dividend remains the same, but will now have a nominal yield of 5.4% based on the $28.00 purchase price. While a 5.4% yield may be deemed acceptable to the investor, there is a trap looming. If the call date is three years out and the shares are redeemed at par ($25.00), the effective “yield to call” on those shares will be 1.89%, not 6% or 5.4%. Even though a total of $4.50 in dividends were received during the three year period, a principal loss of $3.00 will be incurred as a result of the company’s redemption at par.

“It Was the Best of Times, It Was the Worst of Times” – Charles Dickens; Tale of Two Cities.

To say that the ten-year period between 1965 and 1975 was a defining decade may be one of the understatements of the century. Just as the first of the baby boomers began to graduate from high school in 1964, the era of the “Happy Days” culture was about to become a distant memory. America’s involvement in the Vietnam conflict would forever erase that age of innocence that we enjoyed during the previous ten years as portrayed in everyone’s favorite sitcom by the characters of Richie Cunningham and the Fonz.

If you were an able-bodied young man in that graduating class of 1964, of which I was one, your near-term future would be dictated by the options available because of this conflict. You either secured a college deferment, fled to Canada, or just took your chances on the draft. A fourth option was to enlist in the military service in hopes of landing an assignment to anywhere but Vietnam.

It was in October of 1965 that I enlisted in the U.S. Army for a four-year hitch for that very purpose. However, as things turned out, despite guarantees otherwise, I ended up in Vietnam anyway. I was stationed in a place called Phu Bai, which was located about six miles south of the city of Hue. Hue, which was the northernmost major city in South Vietnam, was the country’s provincial capital until 1945. We were a unit of the Army Security Agency operating under the cover designation of 8^th Radio Research Unit. Phu Bai was also the headquarters of the 3^rd Marine division.

Up until the end of 1967, Hue (pronounced Huway) was largely untouched by the warring parties. That would all change at the beginning of the 1968 lunar new year, aka, Tet on January 30, 1968.

If there was a tipping point in this decade, it could arguably be the North Vietnamese Tet offensive. As chronicled in detail in Mark Bowden’s recent book “Hue 1968”, it was the single bloodiest battle in the entire Vietnam war, brilliantly conceived and concealed by the North Vietnamese planners with secrecy that could rival that of Pearl Harbor. Throughout the conflict, the U.S. military brass continued to discount and dismiss the strength and resolve of the North Vietnamese invaders. U.S. Marine ground forces who were trained for jungle warfare, were now fighting house to house. The battle continued for a month, and ultimately the city was recaptured, only after heavy U.S. and South Vietnamese casualties.

The misguided judgment and bungling of the U.S. command, headed by General William Westmoreland, in managing this conflict sparked a sea change in America’s support of the war. Within 30 days after the end of hostilities in Hue, President Johnson announced that he would not seek reelection. General Westmoreland was summarily relieved of his command. A brand-new counter culture was born in America. In the first six months of 1968, more than 200 demonstrations took place in colleges across the country.

Throughout this period, we endured bell bottom pants, leisure suits, and the Watergate scandal, until the defining decade mercifully came to an end on April 30, 1975 with the end of hostilities in South Vietnam.

Recently, the Trump administration unveiled its self-imposed 100-day deadline broad tax cut plan.  In doing so, Mr. Trump appeared to be thumbing his nose at the two states that overwhelmingly rejected him in the November election – California and New York.  To wit, eliminating the federal deduction for state and local taxes, including property taxes. Because California and New York are among the highest tax states, the pain of this $100 Billion revenue grab will be disproportionally felt by New Yorkers and Californians relative to the rest of the nation. Meanwhile they propose retaining the mortgage interest deduction on mortgages up to $1 Million. Repealing this would most surely upset his political support base.

What is interesting is that it remains a well-guarded secret as to where Mr. Trump calls his home state for tax filing purposes. What do you want to bet that it is Florida and not New York?  Florida has no state income tax. Get the picture?

Then there is the plan to roll back corporate taxes from their current rate of 35% to 15%. This is not as big a deal as it seems. Corporate income taxes only account for around 11% of federal revenue. Contrast that to 80% from individual and payroll taxes. Now here’s the rub. Besides reducing the rate on top earners from 39.6% to 35%, the administration is proposing a pass-through provision. Currently big law firms and hedge funds organized as Limited Liability Companies pass their income through to the individual partners where they pay taxes at their individual income brackets. Now under the new tax cut plan, those partners will pay taxes at the same corporate rate of 15%. So, is it fair for this select group of highly paid individuals to be taxed at 15%, well below the rate of their lower paid employees?

Americans are very resourceful when it comes to avoiding higher taxes. An unintended consequence of this pass-through rule would be for employees in the middle to higher tax brackets to request reclassification to independent contractor status and thereby qualify for the 15% tax rate.

The elephant in the room with respect to corporate taxation is how to deal with the $2.5 Trillion in cash currently parked overseas by U.S. companies led by the likes of Apple, Google, and Microsoft. There has been no clarity provided on this issue. What must be avoided is a repeat of the tax holiday mistake of 2004 when $300 Billion was repatriated from overseas only to be returned to stockholders in the form of dividends and share buy backs. The goal should be to bring this money home for the purposes of growth and expansion to benefit the overall economy such as rebuilding our decaying infrastructure and not just for the benefit of a few elite stockholders.

To the administration’s credit, doubling the standard deduction from $12,700 to $25,400 for joint married filers is probably a good thing for many filers as it relieves them of the arduous task of itemizing.  But, it will likely come at the cost of eliminating the personal exemption of $4,050 for individuals and their dependents which would hurt larger families. The jury is still out on this.

Much remains to be done before this hastily prepared proposal becomes an actual viable plan.

Last Sunday, my Uncle Bill passed away.  Uncle Bill was 88 years old, in failing health, and legally blind.  He knew that it was his time and was in full acceptance of this final stage in the cycle of life. His last years were spent in Ohio under the watchful and caring eye of his beloved daughter, Kimberly. I wasn’t there when he passed, but I am sure that he was feisty till the end.

I suppose most everyone has or had an Uncle Bill in their life.  You know, that special family member that was always a little eccentric, rough around the edges, but someone that you simply adored like no other. My first vivid memories of Uncle Bill were at the age of 4. I lived in a small town just outside of Los Angeles, called Artesia. Artesia in those days was a dairy farming community heavily populated with first and second generation Portuguese. I was the oldest of four kids, which included three younger sisters. Uncle Bill, who was my Mom’s younger brother lived somewhere in East Los Angeles. In those early memories of him, I can still hear his loud booming laugh as he lovingly slapped me around in order to “toughen” me up, as he said. I idolized him. He was my hero.

When Uncle Bill came to visit us in Artesia, it was the equivalent of a trip to Disneyland for me, even though there was no Disneyland in those days. As soon as he arrived, he and I would hop back in his 1946 Ford and head to the corner grocery store to buy an apple pie and ice cream. Let the party begin.

Somewhere between my ages of 5 to 6, Uncle Bill and Aunt Barbara moved to Artesia and bought a house right next door to ours. I’m not sure how long they were there because we moved away first, but it seemed like a long time to a 5 year old. As I recall, I would hang out with Aunt Barbara after school and wait for Uncle Bill to get home from work so that we could “rough-house”.

Uncle Bill was about 6 feet tall and skinny as a rail. I can still picture him as a young twenty something in dirty jeans and a t-shirt.  He always had greasy hands from working on cars. In fact, in his spare bedroom in that Artesia house, I remember spare engine parts scattered all over the floor.  I would sometimes play in that room and pretend to be working on those parts, just like my Uncle Bill.  It was one of those episodes in that sacred room that got me in trouble one day.

It was a few days before Christmas and I was 5 years old. I was at my house and Uncle Bill came over and told me to “get my butt over to his place”. He proceeded to chew me out and demanded to know if I was in his “auto parts bedroom” that day. He told me that if I was, he would have to throw everything away in there and it would be all my fault.  I had no idea why he was so upset nor why he would have to throw everything away.  I was very confused and began crying and ran back to my house. Apparently, there was something in that room that I was not supposed to see.

As it turned out, the thing that I was not supposed to see was my first bicycle that my grandfather had bought me for Christmas. Uncle Bill was the designated assembler and it was his job to make sure it was a surprise. I don’t know how I missed the bike in the room, but seeing the bike under the Christmas tree was truly a surprise.

There were many isolated memories of those Artesia years with Uncle Bill living next door. I think I was about 7 years old when my Dad and Uncle Bill built a wooden patio cover attached to our house. When it was time to paint, I was recruited to help out. Uncle Bill didn’t paint as that was too slow for him, so that job was relegated to my Dad, Mom and me. I can remember being on the top rung of the ladder and leaning backwards to reach a remote area of the structure with my paint brush. My Mom yelled at me to be careful.  My reply was “this is how Uncle Bill would do it”.  I can still remember saying those words.

My parents, Uncle Bill and Aunt Barbara would have adult late night parties under that patio. Maybe it was just one or two but it seemed like more. I can remember getting up early on the morning while my parents were still asleep and sampling the left over Tom Collins cocktails scattered around the patio area.  I recall hearing a story about Uncle Bill getting rowdy at one of those parties and that one time he drank champagne out of my Aunt Maxine’s shoe, much to the anger of her husband, Uncle Gene. Aunt Maxine, who is still alive and well, is my father’s sister.

Uncle Bill had lots of interests.  You might say he was the ultimate jack of all trades. For example, there was the time that I went over to Uncle Bill’s house to discover a baby calf in the back porch area of his house. My job was to feed the calf milk from a bottle. I don’t know what the greater plan was for the calf or if we were going into the dairy business, but that phase passed quickly and no more calves showed up.

Fast forward three years to 1954.  I was 8 years old and we moved away from Artesia and I had to leave my beloved Uncle Bill.  The reasons for the move were not clear to me at the time, but as I would learn later, it was the prelude to the breakup of my parents. Shortly after arriving to our new home which was a second story apartment in Concord, California, we began to see less and less of my father. He spent most of his time with his new girlfriend that he eventually married. We had it pretty rough, moving around a lot during the first year, until we finally settled in a little town called Port Chicago.  Port Chicago was a navy town located on the Suisun Bay about 30 miles from San Francisco. Our family now consisted of me, my 29 year old Mother, and three younger sisters. I was 9 years old and now the man of the family.

It was the summer of 1957 when my Uncle Bill and Aunt Barbara drove up and visited us in Port Chicago. He showed up at our place in a brand new red and white 1957 Corvette – a fitting arrival for this audacious, larger than life personality. After a couple of days, it was decided that I would go back with them and spend the summer back in Artesia. I was elated and little did I know; I would embark on the most hair raising exciting journey of my life.

The distance between Port Chicago and Artesia is about 450 miles. That was before the Interstate 5 days, so the only direct route was Highway 99. Riding with the top down, with me seated in the middle of the two-seater Corvette, we made the trip in 6 hours, which calculated to an average speed of 75 miles per hour – including stops for gas and lunch. There were stretches where we exceeded 100 mph. One can only imagine how thrilling that is to an 11 year old boy. More than once, we eluded the California Highway Patrol, by outrunning them and pulling off the main drag until it was safe to resume. Yes, that was Uncle Bill, and that is a true story.

Uncle Bill worked in construction. He could build or fix anything. That summer of 1957, at 11 years old, I went to work with him every day. We poured cement slabs, installed aluminum awnings and patio covers all over the L.A. area. By the second week he had me installing awnings on my own. “Figure it out kid”, he would say. If I screwed up, he would make me tear it down and start over. Business was good, and he took on a helper.  The three of us would ride together in Uncle Bill’s pickup to the residential job sites and do our thing. We went through two or three helpers that summer. I had become pretty proficient at installing awnings it was my job to train the young adult helpers. They never lasted long as they just couldn’t keep up with Uncle Bill and his 11-year-old nephew.

I can’t remember if I ever got paid for this work, but it didn’t matter. Hanging out with Uncle Bill was an adventure and it was payment enough. Soon the summer was over, and I had to leave Artesia and return to Port Chicago. The train ride back was fun, but nothing like the ride of my life in that red and white ’57 Corvette.

Although we always stayed in touch, I didn’t see that much of Uncle Bill as I moved through my adolescence and high school years. My Mom had remarried and we eventually returned to Southern California, settling in Orange County. In 1965, just a year after graduating from high school, I enlisted in the army. After training, I was sent to Vietnam in 1966. After returning from Vietnam, the next Uncle Bill story begins.

Within days after returning home from Vietnam, I rekindled my love affair with Sandi, who is my wife of 48 years. The story of us getting back together is a long one, but the short version is that we eloped to Las Vegas in September of 1967, much to the dismay and objections of her parents. We were young and in love, but broke as hell and nowhere to live. Further, I still had two years remaining on my army hitch which would be a tour in Taiwan. Who did I turn to? Yes, it was Uncle Bill.

I would only be home for 30 days before I would have to ship out again. Uncle Bill and Aunt Barbara had long since left Artesia and were living in Norco. They happily put us up and I spent much of my remaining time working with Uncle Bill in his construction business.  This time, I did get paid.

So at age 37, Uncle Bill must have mellowed with age from that brash young man that always seemed to throw caution at the wind and reveled in the challenge of outrunning the cops in his Corvette. Well, yes and no.

In the few weeks that we worked together, we had our share of adventures that are still indelibly etched in my mind.  There was the time that we were working at a job in Hemet. Now that I was 21, I was legal to have a beer. We stopped at this roadside bar after work and walked in finding no one in the place. So rather than go somewhere else, Uncle Bill just went behind the bar and drew a pitcher of beer just as if he owned the joint. We drank beer and shot pool for an hour or so, until someone finally showed up. Uncle Bill laid a $10 bill on the bar for the beer we had helped ourselves to.  The bar began to fill up, and before long we were best friends with everyone in the place, mostly red-neck types. We shot pool, made bets and generally raised hell. It wasn’t long before Uncle Bill got too frisky and challenged someone to a fight.  The odds were definitely against us with the red-neck bar patrons easily outnumbering us at least 8 to 1. The wise thing to do was leave.  We did so in haste with someone named Ernie and his buddies chasing us with pool cues.  The reason I know his name was Ernie, is that Uncle Bill returned to this dive after I shipped out and became best buddies with this guy named Ernie. That was Uncle Bill.

After I finished my tour in the army, Sandi and I would see Uncle Bill and Aunt Barbara from time to time. They moved from Norco back to Orange County. Uncle Bill adored Sandi and the feeling became mutual. I can still hear his deep baritone voice repeatedly saying to Sandi – “You’re ‘somethin’ else!”  Sometime in the mid 70’s, Uncle Bill and Aunt Barbara moved to Nevada. We sort of lost touch for a while as families often do.

I think it was the summer of 1983 when Sandi and I drove up to Topaz Nevada to visit Uncle Bill and Aunt Barbara. Our two sons, Mark and Jeff were 15 and 11. Mark had his learners permit and was bragging about how good a driver he was. In typical Uncle Bill fashion, he tossed the keys to his truck to Mark and told him to show us how good he was.

“By myself?” Mark asked.

“That’s right big shot.  Show us what you got.”

We all got a good laugh at watching Mark try to drive the truck while repeatedly popping the clutch and stalling the engine. Not once did Uncle Bill come to his rescue, but Mark eventually figured it out.  That is how Uncle Bill did things.

Jeff, at 11 years old was quite a clothes horse even back then.  I remember Uncle Bill playing rough house with him and teasing him about his pink Izod golf shirt with the alligator logo.

In 1988, Kimberly threw a surprise 60^th birthday party for her Dad, my Uncle Bill. I drove up to Topaz for this, but unfortunately Sandi could not go. His first words after seeing that I was there were “Where’s Sandi?”

So that was and is my Uncle Bill. He was unconventional, brash but had a heart of gold and was larger than life to me. He loved his two kids, Jimmy and Kimberly dearly. I know he loved me and I loved him very much as well. He was “somethin’ else!”

May he rest in peace.

Valley Voice, Feb. 25:

Woody Johnson, Special to The Desert Sun8:15 p.m. PST February 24, 2016