November 11, 2023 | PC Sales, Commercial Real Estate, Growth Companies and 2024 Tax & Retirement Changes

PC Sales
We have seen global shipments of PCs decline to 245 million this year, a drop of nearly 100 million from 2021 when global shipments reached 342 million. You may think that PCs are going to go the way of the dinosaur, but that is not the case. Personal computer companies are preparing new PCs that will begin arriving within the next few months that have AI in them. I’m sure you’ve heard of the CPU, which is the central processing unit, a GPU which is a graphics processing unit and now there is a NPU, which is a neural processing unit. The NPU can process very large data sets efficiently and will pick up most of the AI computing requirements. Just recently, Intel unveiled an AI PC acceleration program which will use AI techniques on such things as content creation, security, audio effects and video collaboration. It is expensive and time consuming to run AI in the cloud which has 1.76 trillion parameters but a PC can be more focused just on certain areas as opposed to the entire universe of AI. Maybe in the next couple years we will see a big boom in PC sales.

 

Commercial Real Estate
I know many people are concerned about commercial real estate, but I believe there are some great opportunities given the extremely negative sentiment. The office sector has been of great concern, but when listening to the conference call for a public REIT we own in the portfolio I remain quite optimistic. The CEO pointed to many major positives including new tenant leasing marking the 11th consecutive quarter at or above pre-COVID levels. Leasing has been extremely strong this year and the company expects to see the highest amount of new tenant leasing since 2016. Retention rates also look good coming in at 70%. Don’t get me wrong there are some definite cracks in the sector, but be careful throwing the baby out with the bathwater. In fact, JLL recently reported that after analyzing its vast data set of office buildings, comprising over 2.7 billion rentable square feet across the top 25 MSAs (Metropolitan statistical area) 50% of the sector's vacancy is concentrated in the bottom 10% of the office stock. I believe the office still has a place in our economy but it is the strong Class A properties that will remain.

 

Growth Companies
People and investors always like the excitement of growth companies with high expectations that they will have great returns. This week the growth company WeWork filed for bankruptcy in New Jersey. This company has never seen a quarterly profit but yet the stock price did reach a high of $130.80, it currently trades for less than a dollar. The big problem with this growth company was excessive expansion which caused excessive losses and rising debt they could not pay. At our firm, Wilsey asset management, I still continue to believe as I have for many, many years we will not invest into or hold a company that has no earnings and high debt. I may have missed some huge gains on a few companies, but I do believe being cautious and not having losses from companies filing bankruptcy is a far better plan for a long-term return and also, I think it is much easier on the emotional side.

 

Financial Planning: 2024 Tax and Retirement Changes
As we get closer to the end of the year, more information is being released about 2024. Each year the IRS adjusts the tax brackets for inflation and in 2024 the increase will be 5.4%. This is a good thing as it allows slightly more of everyone’s taxable income to fall in lower brackets and results in a tax reduction. The standard deduction, which acts as a deductible expense for most taxpayers, is increasing for married couples from $27,700 to $29,200 plus an extra $3,100 if 65 or older. For single filers it is increasing from $13,850 to $14,600 plus $1,950 if over 65. Retirement account contributions are receiving an increase as well as the maximum contribution for employer plans like 401(k)s is increasing from $22,500 to $23,000, plus an extra $7,500 for savers older than 50. IRA contribution limits are increasing from $6,500 to $7,000 plus a $1,000 catch-up contribution for those older than 50. With these upcoming changes everyone should review their income and savings plans for 2024 to make any necessary adjustments.