Harry's Monthly EView

Harry’s Monthly EView

LayLine Asset Management Inc

Harry J. Campbell III, CMT

2/3/26

Contents

Investment Thesis: AI Agents

Investing for Retirement: Accumulation or Retirement Phase

Retirement Topics: Reminder: New Tax Deduction for Seniors.

Investment Thesis: The Communication Economy

 Thesis Statement

The central claim is that Communication, and what develops from it, will be the primary force in the economy, driving growth, structure, diversity, and resiliency in the US economy for a very long time to come.

AI Agents

Early on in the development of the Communication Economy thesis, the concept of communication as an economic widget (generic economic term for a product or service) was a challenge.  However, over the past year advancements in AI (artificial intelligence) / LLM (large language models) has culminated in what is referred to as an AI Agent, a communication widget of sorts, that is rapidly altering the traditional components of running a business.  AI agents (sometimes referred to as Bots and other things) are what we interact with, or in personal terms, to whom we communicate our needs to.  I recently asked Copilot (Microsoft’s AI interface) to build me a discounted cashflow model (fairly complicated financial analysis tool) and it did a very nice job and quickly.  But the unique feature of the encounter came in the form of a conversation (a series of questions, or prompts) about what aspects of the model I wanted to customize for my needs and that based on my comments it suggested some changes and modifications.   

The adoption rates of AI Agents is reported to be less than 20% among major US companies according to some Wall Street estimates.  Companies that have adopted some form of AI in their business have reported on their earnings calls some of their experiences with AI so far.  Here is a summary of the comments from several companies;

• AI handles up to 30% of the coding needs for new products and services.

• A trucking company reported double digit productivity gains using AI agents

• Retailer is using AI to improve pharmacy inventory

• Company reported more than a 30% output increase among some technical employees

• AI agents are handling calls and emails almost perfectly

• Insurance company is using AI to improve risk analysis, shorten lead times, and speed up claims handling time.

It turns out the first of the economic widgets of the Communication Economy are AI Agents.  They are being deployed by companies to help enhance productivity, support employees, and improve customer services.  Things are going to change a lot as we get closer to a 50% adoption level.

Investing for Retirement

Accumulation or Retirement Phase

(Originally published 9/6/16)

As we transition from working for a living to retirement life, we all know we need to adjust to many changes.  When my father retired, mom was heard to say, “I married you for life, not for lunch, find something to do, please.”  For the purposes of this discussion, I’m going focus on the financial change that take place as we move from investing earned income (accumulation phase) to supplementing retirement income (retirement phase).  When earning an income, we strive to add as much as possible to our investment account balance and grow it, accumulating investment assets over our working life.  The accumulation phase of investing runs until we no longer have sufficient earned income to invest.  As we start to withdraw investment income and capital gains to supplement retirement income (social security, pensions), we enter the retirement phase of investing.  We continue to be investors; the emphasis however changes from building to maintaining our investment account balance.

Managing assets in the accumulation phase is as much the same, as it is different than in the retirement phase.  Generally (everyone is different) investors don’t stop being investors when entering the retirement phase, just a change in investment focus.  We might switch from individual small cap stocks to large cap dividend paying stocks or move from a group of individual stocks to a more diversified position like an ETF.  We might increase the portfolio yield (income as a percent of portfolio) by focusing on securities that produce income rather than those that produce capital gains.  We may carry more cash, for opportunities, protection and to cover those expenses that come up from time to time during retirement.  The key is that we remain investors for the rest of our lives and with any luck we will be able to pass our investment account balance to our heirs, providing assets for their accumulation phase.

Retirement Topic

Reminder: New Tax Deduction for Seniors.

The tax bill that was passed by Congress, commonly referred to as the OBBB, includes a new deduction for taxpayers aged 65 and older, seniors, effective for 2025 tax year.  Something to consider, if you pay estimated taxes, it might be worthwhile to consider recalculating estimated taxes for 2026 based on the new senior tax deduction.  As clearly stated in our disclosures, we don’t provide tax advice, having said that, here are the basics:

• A $6,000 deduction is available, starting in 2025, for single seniors with MAGI (modified adjusted gross income) up to $75,000 and a $12,000 ($6,000 * two people) deduction for married seniors with MAGI (modified adjusted gross income) up to $150,000.

• Above those income levels the deduction is phased out and becomes zero at $150,000 for singles and $250,000 for married, filing jointly.

The math to determine the phase out amount for a particular level of income is a little tricky. The phase out is 6% of the MAGI over $75,000 for singles and $150,000 for married couples.  For example, a married couple with a MAGI of $200,000 would be $50,000 over the income limit for the full deduction. The calculation for the reduction in the deduction would be $50,000 ($200,000 - $150,000) 6% 2 (two people) = $6,000.  This leaves the married couple with a $6,000 ($12,000 - $6,000) tax deduction.  For a single senior with a MAGI of $100,000 the calculation for the reduction in the deduction would be $25,000 ($100,000 - $75,000) 6% 1 (one person) = $1,500 leaving a $4,500 ($6,000 - $1,500) deduction.  The deduction is zero above MAGI of $150,000 for singles and MAGI of $250,000 for married couples.

As I said, the math is a little tricky, but it works. Keep in mind this new deduction has a short shelf life, as it ends in 2028.  

Harry’s Monthly EView

LayLine Asset Management Inc

Harry J. Campbell III, CMT

1/6/26

Contents

Investment Thesis: Large Language Models (A.I.)

Investing for Retirement: Tactical and Strategic Investing Revisited

Retirement Topics: RMD Distribution Rates

Investment Thesis: The Communication Economy

Thesis Statement

The central claim is that Communication, and what develops from it, will be the primary force in the economy, driving growth, structure, diversity, and resiliency in the US economy for a very long time to come.

Large Language Models (A.I.)

(Originally Published 2/7/2024)

While this was written almost two years ago, it remains relevant to the investment thesis.

Generative large language models (LLM), commonly referred to as artificial intelligence (A.I.), are the first in what will be a long line of communication revelations that are going to stretch our perceptions of communication.  Just to confuse things a little more, there are also small language models being developed to concentrate on smaller data sets or specific types of results.  So what is a large or small language model and what does it do.  Without being a programmer it’s hard to understand or appreciate the sophistication and mechanics behind the algorithms that drive the models. What is understood is that the algorithms that make up the models are much more efficient then prior algorithms in the processing data, very large quantities of data.  While faster is great, these models process the data in such a way that allows the coded software to generate responses, if you will, conversations.

            Down the road (not that far), the skies the limit in dreaming up applications for large and small language models.  But in the here and now, for most of us, these models offer a new way to search for information on the internet and more importantly, the data is presented in conversation form. Up until recently, most of us would go to a search engine (google, Safari) type in a question and search through all the pages of results to find the answer.  Not all that efficient considering the time necessary to read through all the different search results to find the answer.  Today, simply ask Co-Pilot (Microsoft A.I. companion, their word not mine) or another A.I. app the same question and moments later it spits out an answer, in conversation format.  In the very near future, large language model software and hardware (specific A.I. chips) will be available in smartphones, home computers, and laptops.

In literally every sector of the economy there is race by businesses to implement large and small language models, otherwise be left behind.  Whether it be a bank updating its call center with A.I. so customers can converse with an A.I. voice (rather than going through all those prompts), or a programmer speeding up writing code with an A.I. assistant, or an investment adviser researching GDP and getting a detailed answer (and correct) in seconds.  These language models represent a significant upgrade in how businesses communicate, whether that be with employees, customers, machines, or in operations.  The logical end result will be increases in productivity, at least that’s the theory.

We are in the early stages of implementing these models, and similar to the early days searching the internet, it’s a bit of a challenge.  It’s been reported that large language models can sometimes produce less than stellar results.  I will confirm that it is not that difficult to confuse a large language model and get it to tell you anything, even if it is wrong or completely made up.  Does this mean that these language models are not worth the time and effort to develop, nothing could be further from that. It’s that we need to recognize we are the beginning of a new and revolutionary (the ability to communicate with a machine) form of communication and it’s going to be a challenge adopting to it.

Investing for Retirement

Tactical and Strategic Investing Revisited

In the current investing environment, substantial changes in the structure of the economy will make strategic positions, meant to be held over long periods of time, more of a challenge to hold with rapidly evolving periods of market change.  At the same time, the velocity (speed and direction) of changes will present tactical investing with response challenges (how fast or slow to react).  To help understand what is meant by a “tactical investment” or a “strategic hold”, a reprint of  “Tactical and Strategic” is included to provide some basics for these two investing strategies. 

 Tactical and Strategic

(Originally published 10/15/19)

For this conversation, tactical and strategic are references to how we allocate investment assets in a portfolio and objectives for a portfolio. First, some working definitions.

• Tactical: Smaller (in terms of amount invested and/or the expected time to hold) scale actions implemented to achieve a strategic objective.

• Strategic: Larger (in terms of amount invested and/or the expected time to hold) scale actions designed to achieve specific investment objectives.

One way to look at it, tactical is how we are going to get there, strategic is where we want to get to. These are not static decisions, particularly tactical positioning. When starting out on a road trip, tactically we map out our directions (take 494 to 35W south and so on) to get us to our destination, our strategic objective.  If along the way we hit a detour, our tactical approach must change, however, the destination (strategic objective) does not change. However, if the car breaks down, that might change our final destination.

Tactical investing involves positioning (buying and selling) investments to achieve a desired result in the shorter term (short term can be years in a strategic portfolio with a multi‐decade objective), ultimately contributing to the strategic objective. Tactical investing should be complementary to the strategic objective. Its critical function is to contribute to achieving a stated strategic objective, whether that be to retire in a certain year with a certain amount of assets, or to raise enough capital for a down payment by a certain point in time.

Strategic investing involves positioning (buying and selling) investments to achieve a desired result in the longer‐term, ultimately to serve the long‐term objective. While it may sound familiar, just a difference in time frame, strategic positioning takes patience, time. Strategic positions are typically purchased for the long run. For example, buying a 25‐year Muni bond. The likely intentions are to hold till maturity, 25 years, earn tax free income for those 25 years, and get the principal back at maturity, all of it. A strategic equity position might be a stock held for decades that pays a dividend. If it has appreciated considerably and the company has increased its dividends regularly, the actual dividend yield is much higher than the published yield. Sometimes an inherited position presents a strategic opportunity or a speculative position becomes a strategic position over time.

Strategic and tactical also apply to a portfolio’s overall strategy with the same overriding principal, tactical is a shorter‐term strategy to contribute to achieving the longer‐term strategic objective. There can be more than one strategic objective active at any given time, requiring a multitude of tactical strategies to support and contribute to achieving multiple strategic objectives. Some extremes in the strategies; short‐term equity trading account would be considered purely tactical, and a buy and hold bond portfolio purely strategic. Most investment strategies, however, employee a degree of both tactical and strategic strategies and positioning.

Retirement Topic

RMD Distribution Rates

(Updated 1/6/26)

            When planning for retirement income sources and amounts over time, be aware that the RMD (required minimum distribution) on certain retirement accounts, as a percent of the account, increases over time.  The analysis below is to provide some insight on how the RMD increases as we age.

Age             IRS Distribution Period        RMD Amount            RMD Percent

  73                              26.5                             $3773.59                       3.7%

  83                              17.7                             $5649.71                       5.7%

  93                              10.1                             $9900.99                       9.9%

103                                5.2                           $19230.77                     19.2%

The above example is for an IRA with a value of $100,000.  The calculation is to take the value of the account, that requires an RMD, as of the first of the year and divide it by the IRS Distribution Period from the appropriate IRS table.  I do recommend that you have the custodian of any retirement accounts that require an RMD do the calculations as investors particular situations can make the calculations quite complicated.  The above example used IRS Distribution Period data from Appendix B. Uniform Lifetime Table from IRS Publication 590-B.

Harry’s Monthly EView

LayLine Asset Management Inc

Harry J. Campbell III, CMT

12/2/25

Contents

Investment Thesis: Miscellaneous Observations

Investing for Retirement: Retirement Plan and IRA Update 2026

Retirement Topics: Reminder: New Tax Deduction for Seniors.

Investment Thesis: The Communication Economy

Thesis Statement

The central claim is that Communication, and what develops from it, will be the primary force in the economy, driving growth, structure, diversity, and resiliency in the US economy for a very long time to come.

Miscellaneous Observations

            More appropriately referred to as random thoughts, here are a few as we head towards a new year.

ChatGPT: It’s been three years since ChatGPT was released to the public, kick starting the Communication Economy with speed not seen in prior new economic cycles.  It’s hard to argue against the notion that ChatGPT and its publicly accessible large language models (LLM) is the most transformational new technology since the advent of the internet, smartphones and personal computers. However, all of those transformational cycles mentioned took quite some time and many different paths to develop into the technology we use every day now.  I would expect, based on history, that the same will be true for LLM.

Personal Productivity Gains:  The ability to have same day and short term deliveries is made possible, in large part, by organizations communicating using LLM, both with its employees and its customers.  Companies can update constantly what they have, where it is, its price, style of shipping and so on.  They are able to communicate all that information with all the employees and contractors so they can execute with a quick response time.  On Friday I needed a part to complete a project I was working on.  Instead of getting in the car and driving about 10 miles, one way, to buy the part, I had it delivered for free and it arrived in about two hours.  It would have cost about $10 in car expenses and taken almost an hour to get it, which was time I spent working on the project.  Much more productive experience.  

Positive Jobs Outlook:  There are two, among others, ways to consider how LLM (A.I.) will influence the workforce.  One way is to think of it in terms of how many jobs LLM will replace.  The other is to think about how LLM will be put to work improving the output of existing workers and how many new jobs will be created. When the PC entered the corporate office it was assumed that the secretary was obsolete.  As it turned out companies needed even more people to run the PC and process the data.  The PC data provided companies with valuable operating information, allowing companies to run more efficiently, profitably, allowing companies to hire more people, and so on.  Like the PC, LLM is a tool, a very powerful tool that will alter the way businesses are run.

Investing for Retirement

Retirement Plan and IRA Update 2026

Retirement Plan Update

This is not a complete explanation of the current retirement plan rules, phase-out ranges, catch up options, exceptions, and changes.  Visit IRS.gov, Retirement Plans for a thorough evaluation of specific plan types. 

• For 2026, 401(k), 403(b) and most 457 plans increased the maximum contribution to $24,500, up from $23,500 in 2025.  For individuals 50 and over, the catch up contribution increased from $7,500 to $8,000, for a maximum contribution in 2026 of $32,500, up from $31,000 in 2025.  For individuals aged 60-63 the catch up contribution remains $11,250 for 2026.

• SEP plan contribution limits for 2026 is 25% of earnings up to $72,000, up from $70,000 in 2025.  Compensation limits do apply.

• Solo 401K contributions for 2026 are: employee maximum contribution is $24,500, plus $8,000 in catch up contributions for those 50 and over, and a company contribution equal to 25% of employees compensation or self-employment income.  The maximum is $72,000 plus catch up contributions for 2026.  For those 60-63, the maximum catch up contribution remains $11,250. 

• Simple plans maximum contributions for 2026 is $17,000 up from $16,500 in 2025.  The catch up for those over 50 is $4,000 for 2026, up from $3,500 the prior year. For those 60-63, the special catch up contribution maximum remains $5,250.  Employers contribute either up to a 3% match or 2% nonelective contribution.

IRA Update

While on the topic retirement investing, there is still time to contribute to an IRA or Roth.  April 15^th, 2026 is the deadline (for most of us) for IRA and Roth contributions for 2025.  Having said that here are a couple of notes;

• There is now no age limit on contributing to an IRA or Roth, however there are AGI (adjusted gross income) limits on contributions to either a traditional or Roth IRA.

• There needs to be taxable compensation earned to make contributions.

• You can contribute to both a IRA and a company retirement plan within the contribution limits, adjusted each year.  There are phase-out ranges if married and one spouse is covered by a company retirement plan.

• A Roth needs to be open for five years before tax free gains can be withdrawn.  After the five years and reaching 59 ½, withdrawals can be taken tax free.

• IRA contribution limits for 2026 are $7,500 up from $7,000 for 2025.  If age 50 or older the catch up contribution is $1,100 for 2026, up from $1,000 for 2025.

There are many nuances regarding traditional IRA and Roth.  This is not a complete discussion, just presented to create a little awareness.  For all the details see IRS Publication 590-A for contributions details and 590-B for distribution details.

Retirement Topic

            Reminder: New Tax Deduction for Seniors.

The tax bill that was passed by Congress, commonly referred to as the OBBB, includes a new deduction for taxpayers aged 65 and older, seniors, effective for 2025 tax year.  Something to consider, if you pay estimated taxes, it might be worthwhile to consider recalculating estimated taxes for 2026 based on the new senior tax deduction.  As clearly stated in our disclosures, we don’t provide tax advice, having said that, here are the basics:

• A $6,000 deduction is available, starting in 2025, for single seniors with MAGI (modified adjusted gross income) up to $75,000 and a $12,000 ($6,000 * two people) deduction for married seniors with MAGI (modified adjusted gross income) up to $150,000.

• Above those income levels the deduction is phased out and becomes zero at $150,000 for singles and $250,000 for married, filing jointly.

The math to determine the phase out amount for a particular level of income is a little tricky. The phase out is 6% of the MAGI over $75,000 for singles and $150,000 for married couples.  For example, a married couple with a MAGI of $200,000 would be $50,000 over the income limit for the full deduction. The calculation for the reduction in the deduction would be $50,000 ($200,000 - $150,000) 6% 2 (two people) = $6,000.  This leaves the married couple with a $6,000 ($12,000 - $6,000) tax deduction.  For a single senior with a MAGI of $100,000 the calculation for the reduction in the deduction would be $25,000 ($100,000 - $75,000) 6% 1 (one person) = $1,500 leaving a $4,500 ($6,000 - $1,500) deduction.  The deduction is zero above MAGI of $150,000 for singles and MAGI of $250,000 for married couples.

As I said, the math is a little tricky, but it works. Keep in mind this new deduction has a short shelf life, as it ends in 2028.   

Harry’s Monthly EView

LayLine Asset Management Inc

Harry J. Campbell III, CMT

11/4/25

Contents

Investment Thesis: A.I. Business Models

Investing for Retirement: 4% Rule Update

Retirement Topics: Social Security and Medicare Numbers for 2026

Investment Thesis: The Communication Economy

Thesis Statement

The central claim is that Communication, and what develops from it, will be the primary force in the economy, driving growth, structure, diversity, and resiliency in the US economy for a very long time to come.

A.I. Business Models

            Last month, the topic for the investment thesis was A.I. (artificial intelligence) productivity.  This month we will take a brief look at how A.I. and current business models are developing.  Before moving on a couple of things to keep in mind. When it comes to A.I. business models one can assume several things: the variability of A.I. business models is substantial, the level of A.I. adoption will be highly varied, and a firms ability to change from being a non A.I. driven business model to one driven by A.I. will be quite challenging and the results, success if you will, are to say the least, uncertain. 

Regarding variability of A.I business models, on one extreme is a business model where everything from the ground up is A.I. derived.  The manufacturing process is fully automated, customer contact is directly with A.I., and business operations i.e. accounting, legal etc. are performed exclusively by A.I.  Management is the only business activity that requires human input.  In this model, humans provide the creative input, and everything else needed to run the business is relatively redundant and well suited for A.I..  On the other extreme, A.I. has only a narrow and rather specific function, such as data retrieval and analysis, relating exclusively to assisting humans in accomplishing their current job.  For example in this business model the accounting department will have accountants to provide reports for management and file tax forms, but the corporate data for the accountants is compiled by A.I..  My guess (hard to know the future) is that most companies will fall somewhere in between.

Regarding the challenges of adopting A.I., how does management go about implementing A.I. across a large and diverse business structure with multiple divisions and product lines.  How does a company install A.I. to handle customer calls, but still manage to add a personal touch in customer service?  How does management adopt to the needs of having A.I. compile all the corporate data across multiple divisions and product lines, and still manage accountants who interpret the data for tax and management purposes?  What structures does management need to adopt to manage A.I. across multiple corporate divisions with vastly different operating processes and needs. On the manufacturing floor, what’s the management style needed to manage those who are going to repair and maintain the robotics and how are they going communicate with an A.I. driven robot.  There are many more questions, but I think you get my drift.  It’s going to be a very long learning process, for both humans and A.I..

Probably the most complex attribute for incorporating A.I. into the business model is experience, or a lack thereof.  Companies have decades, some centuries of experience running the business that they can rely on.  A.I. is so new, and yet so transformative, few have the experience to handle what will be a very complicated process taking place in such a short period of time.  The skill set required for this transformation has not been developed, much less tested, to the degree that large multi national companies with 10’s of thousand employees, hundreds of product lines, and operations in many locations require to successfully adopt A.I. across a company.  Challenging is an understatement and the results far from certain.

Investing for Retirement

 4% Rule Update

            It’s not too early to start planning for distributions for income from investment accounts for 2026.  As a note to self, consider putting the 4% needed for the year in a money market account at the beginning of the year just in case the markets are down for the year.  That way you will avoid taking investment principal when it’s lower in value.      

I wrote this the last time the 4% Rule was published.  “Something to keep in mind regarding the so called 4% Rule.  Many investors taking RMD (required minimum distributions) will be required to take more than the 4% suggested by the rule.  For example, the RMD factor for an eighty year old is 20.2, translating to a ~4.95% RMD for the year.  That’s ~20% more income than the 4% rule suggests can be taken.  Taxable accounts have no RMD.  To keep distributions close to 4% on an overall account basis, one can take less than 4% from a taxable account to balance the 4.95% required to be taken from accounts with a RMD.”

4% Rule

(Originally Published 1/5/21)

The financial media is once again obsessed with the so-called “4% rule”.  It suggests how much can be taken from a portfolio each year without depleting its principal.  There is no official 4% rule.  It’s a rule of thumb at best, and it used to be the 5% rule.  There is exhaustive work behind the “rule” which indicates that there has been no historic precedence in US markets where an investor has taken 4% income (before taxes) over long periods of time (decades) and run out of principal.  If it were only so simple.

Before getting to the numbers, let’s look at who promotes the rule, Wall Street.  They have little incentive in promoting any distribution objective, as it reduces AUM (assets under management) and that reduces potential revenues.  When forced to come up with withdrawal advice, it will be conducive to growing an account more slowly, but growing it none-the-less.  By the way, if we make 2% in interest and dividends on a portfolio, investors only need 2% in capital gains to achieve the 4% withdrawal goal.  Long term market growth, by any measure, has exceeded 4% over time on an annual basis, making the 4% rule a fairly low hurdle to climb over.

Back to the numbers.  At the beginning of each year, for many retirees, the question is how much in withdrawals can I take without damaging the underlying principal that produces the income and capital gains to be withdrawn. 

Using 2020 as an example, let’s say a portfolio was up 10% (a 50% growth - 50% income benchmark was up ~ 13% in 2020).  Taking the 4% for income would leave a 6% gain in the portfolio. ($100,000 portfolio gains 10%, that’s $10,000, now take the 4%, $4,000, leaving a gain of $6,000, 6%).  The question is, bank the 6% for future years when the markets performance might be negative, or increase the 4% to 6%, spend a little more and still bank 4% for the future. 

As said, if only that simple. 

Retirement Topic

Social Security and Medicare Numbers for 2026

            The numbers are in. The Social Security COLA (cost of living adjustment) is 2.8% for 2026.  Last year it was 2.5%.  With inflation (the official rate) running at or above ~3% or for the past couple of years, those on Social Security are, and have been, losing ground financially and face a reduction in their standard of living.

            The monthly premium (for most people) for Medicare Part B is going up from $185.00/month in 2025 to $206.50/month for 2026, a $21.50/month increase.  Medicare Part B deductible has increased to $288.00/year, up from $257.00/year for 2025, a $33.00/year increase.  That is a ~12% increase for both Medicare Part B premium and the Part B deductible.

            The average Social Security benefit for all recipients (retired workers, spouses and disabled) as of July 2025 was $1865.00/month.  Using that number, the average Social Security recipient will get a cost of living adjustment of $52.22/month, but their Medicare Part B premium will increase by $21.50/month, netting an increase of $30.72/month, for an actual COLA of 1.6%.  Even if inflation gets down to the FED (federal reserve board) target of 2% in 2026 (certainly not a given) it represents a lower standard of living for the average Social Security recipient over the past couple of years. 

Copyrighted 2026, LayLine Asset Management Inc

CMT: Charter Market Technician