Why in 30 Second?

1.  The Legislative Branch failed to agree on a Fiscal Stimulus Plan over the weekend and it’s leading to another challenging day.  What is Fiscal Stimulus? There are a number of tools available to the Legislative Branch & the White House including but not limited to direct government checks, grants, tax relief, etc.  Unfortunately, the legislative branch continues to squabble between the parties. Usually, I am deaf to it.  However, this is the time when we need our leaders to deliver. They are welcome to tweak as they go ~ with additional corporate restrictions or increased subsidies for ALL Americans, (not just those under $99K) and another increase in the duration of unemployment insurance. Have at it. There is plenty of time next week. But today, passing the stimulus package is needed to calm the waters!
2. James Bullard, the President of the Federal Reserve Bank of St. Louis (1 of the 12 member Federal Banks that make up the Federal Reserve Board), shared his more dire short term predictions and more positive long term predictions this weekend. His short term predictions of 30% Unemployment and a 50% Gross Domestic Product (GDP) fall which translates to $2.5 trillion (yes, trillion) loss in income is more pessimistic than the big banks and economists. What everyone failed to hear was that his forecasts after Q1/Q2 (that duration we talked about yesterday) with Q3 being a “Transitional” quarter and Q4 being a “Boom” quarter.   (Reuters March 22, 2020)That’s a pretty good picture of a Deep V Recovery!
3. Neel Kashkari, the President of the Federal Reserve Bank of Minneapolis spoke on 60 Minutes last night on the Fed’s Quantitative Easing (QE) Program. He was the Assistant Secretary of the Treasury that administered the Troubled Asset Relief Program or TARP during the Financial Crisis so this isn’t his first rodeo! He said SPEED to market was the #1 lesson from ‘09 and #2 was DON’T BE TIMID, the market needs leadership.Thankfully, we continue to see the Chairman, Jerome Powell, doing exactly that!

In the Weeds – 

Why is this so hard and unprecedented?
We are in an exogenous event that we’ve not experienced before. What is an Exogenous Event? You may have heard terms like Black Swan or Exogenous events. They simply refer to surprises or shocks to the cycle. They are outliers in modeling & forecasting. You hear terms like 100 yr Event or 50 yr Flood. I tend to think of exogenous events as something that comes from the outside like a drought, historic flooding, or a pandemic. These surprises frequently trigger events that kick off market sell offs and/or recession or depressions. Welcome to an exogenous event!

Why are people talking about a depression?  With over 100 million American’s in lock down, 30% unemployment is not unrealistic. For context, the Great Depression saw a high of 24.5% unemployment and ‘09 saw a peak of 10.2% .  That is why many economist are calling for special Covid-19 Unemployment Insurance beyond the normal unemployment programs. Yes, this is going to cost us a boat load but let’s stabilize first and then worry about inflation and debt reduction in a Booming Q4. 

What is a nadir? When economist talk about a nadir, they are simply talking about the bottom of the market.  There are a number of technical components that go into calculating a nadir for each of the types of markets. Suffice it to say, we’re not there yet. Again, the thing to remember is that if we have the duration (timeline) of this event correct, the economy will be looking at a pretty fast recovery or return to production. Most markets see a 3 to 5 year return to prior peaks after downturns. That’s why financial advisors say “Sit tight & don’t look at your 401K.”  Most of us fail miserably when we try to “time the market” or sell on the way down and buy when it turns. Sounds easy but it’s not.

On a total geek note: I was very impressed with Neel Kashkari’s new approach to helping the Housing Market and Banks this time through.  Rather than the government taking an ownership stake in the banks as they did in TARP and all the populist views that came from that, the Fed has said they have an unlimited line to buy Mortgage Backed Securities (the bonds that are backed by Freddie Mac / Fannie Mae mortgages, larger “jumbo” mortgages, or non-traditional mortgages). This will allow banks and other institutional investors more liquidity short term, and, ultimately, allow for Mortgage Servicers, (the entities that collect your mortgage money each month) to be more flexible on how they help you if you can’t pay your mortgage.  If the government is the only investor in the bond, they can agree to modify the mortgages which didn’t happen enough in the private mortgage back bonds during the Financial Crisis.

If you or someone you know can’t work because of Covid-19 and needs help – 

1) Call your mortgage servicer immediately.  Ask for a 3 month delay. Ask them to modify the loan so the payments are simply tacked on to the end of the loan. See what they can do. They are trying to figure it out themselves.  DO NOT just stop paying your mortgage, talk to the servicer first. When you stop paying your mortgage without any communication, it will trash your credit for the next 7 years whereas most modifications may not impact your credit.
2) Look up your state’s Unemployment Insurance Program and Qualification. Each state is different and the entire landscape is changing rapidly.  Be prepared to file immediately upon your release.  Don’t wait to complete the paperwork as it’s typically not retroactive, it typically only pays on a go forward basis. 
3) Contact the United Way’s Covid-19 Relief Fund – They have stood up a relief fund to help those who can’t make rent, food and other basic bills.  If you are financially solid, please consider donating to such funds!  

As always: Stay calm, be healthy, be smart about how you spend money, and take the long view on the market.

Please help those in need within your community, practice social distancing even outside, and be your amazing selves! 

As women, we will lead our families, our communities, and our teams calmly through this event! #BeTheCalm #Leadership!!!

If you have any questions or topics of interest, please send them in!

Susie