Saturday, April 4, 2020

2020 CARES Act FAQ's

In March, President Trump signed the Coronavirus Aid, Relief and Economic Security (CARES) Act.

I want to make sure you're aware of the provisions that may benefit you. Below are FAQs related to each of the key portions of the legislation.

Information for Individuals

Information for Small Businesses

Information about Retirement Accounts

Information about the SBA Loans - Paycheck Protection Program 

Friday, July 26, 2019

Are we Due for a Recession?

July 2019 marks the 121st month of the current economic expansion making this the longest in US history or at least for the 150+ years we've measured business cycles. You may hear people talk about being due for a recession. Being due for a recession uses the same logic as being due for a hurricane, tornado, or a significant snowstorm. It suggests that because things have happened with a frequency in the past, they must occur at the same rate in the future. The frequency of past weather events is not part of the current weather forecast, and the frequency of previous recessions is not part of the current economic outlook. Most of the time, the economy is expanding. The last recession, "The Great Recession" lasted 18 months. The ongoing economic expansion has lasted a decade.  To draw another analogy. When you drive a car, you may drive at different speeds. Sometimes you're accelerating; sometimes you're decelerating, but you are moving forward more than you are in reverse. If you are concerned about the economy, let's talk about it. You may have more risk in your portfolio than you are comfortable with.

I've also created a YouTube video to accompany this post. 

Thursday, July 11, 2019

Chairman Powell's Congressional Testimony

Federal Reserve Chairman Jerome Powell concluded his bi-annual report to Congress today as required by the Humphrey-Hawkins Act. His primary concerns were with issues around trade uncertainties, global manufacturing, global growth, and low inflation.

Chairman Powell described the US economy as being in "a very good place." and told Congress, "We want to use our tools to keep it there. It is very important that this expansion continue as long as possible."

In his Senate testimony, Chairman Powell talked about the Fed's concerns about persistently low inflation in the US. Low inflation has been a chronic economic problem in Japan and Europe for decades.  He cited these concerns as a reason for growing support for rate cuts. Cutting interest rates is a tool the Federal Reserve uses to boost inflation. Based on Chairman Powell's testimony, and recent comments from other Fed Governors, Investors believe a July rate cut is nearly guaranteed.

Given the current state of the US economy, it is unclear what effect a rate cut will have. The current unemployment rate is 3.7% and recently ticked up as more people have entered the workforce. Inflation is below the Federal Reserve's 2% target as it has been for some time. A rate cut under these economic conditions demonstrates the weight The Fed places on its inflation target.

Wednesday, July 3, 2019

Market Update 07-03-19 - Markets at New High

The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite indexes all closed at record highs today. We’ve had several weak jobs reports showing that the rate of job growth is slowing. Market participants believe that the slowing pace of job creation gives the Federal Reserve reason to cut interest rates when they meet later this month. Lower interest rates can reduce borrowing costs for businesses and individuals. In theory, this can lead to economic growth. Lowering interest rates is one of the tools the Federal Reserve has used in the past to encourage economic activity and pull the economy out of a recession. It is unclear if lower interest rates will have the same effect when the economy is not in a recession. If the Federal Reserve decides not to cut interest rates as expected, you could see markets reverse course and give back much of the recent gains.

Tuesday, June 25, 2019

The Walt Disney World Barometer - What the Walt Disney World resort can tell us about the economy

The Walt Disney World Barometer

By most estimates’ consumer spending drives more than 70% of the US Economy. This makes the Walt Disney World Resort in Orlando, FL, an excellent barometer of what’s going on with the consumer and implications for US GDP. I have been a Walt Disney World enthusiast most of my life. I’ve watched the resort expand as new parks and attractions have been added, and Disney has grown its inventory of intellectual property. For full disclosure, at the time of publication, I own shares of Walt Disney Company stock and have purchased shares in the accounts of my clients.

Four things make the Walt Disney World resort a great economic barometer.

1.)    Discretionary Expense - Vacations are a discretionary expense. Unlike food, clothing, and paying the utility bills, vacations are a lower financial priority and a luxury for many people.  During times of economic stress, the family vacation is often the first casualty, and rightly so. The advice I give clients, and we use in our own home is to periodically assess all discretionary expenses and decide what needs to be changed or eliminated. During times of economic uncertainty, vacations are a significant budget item that can be cut and have a considerable impact on the family budget. A busy Disney World Resort suggests a healthy consumer.

2.)    Future Expense - Disney World vacations are usually planned far in advance. Looking at crowd levels in the parks, hotels, and restaurants gives us insight into how the consumer feels about their intermediate financial conditions. If a person feels insecure about their job security or their ability to find a job, they are less likely to commit to considerable discretionary future expenses.

3.)    International Audience - Walt Disney World is a global destination. I am always aware of the indications of the number of international visitors. I watch for tour groups whose leaders will carry pennants from their home country. I will quiz the people at the front desk of hotels about their vacancy levels and the percentage of international guests. I listen for the accents of people around me, and much to my wife’s dismay, engage them in conversation to glean insight. The number of international visitors can be an indication of the health of the consumer in other countries. I would also point out that the currency exchange rate between the US Dollar and other currencies also influences tourism.

4.)    Discounts - Disney has their finger on the pulse of the consumer. Watching their marketing, the number and depth of discounts offered can tell us something about the health of the consumer. Walt Disney World is a massive operation. To give some perspective, Walt Disney World is roughly the size of San Francisco. Disney has over 30,000 hotel rooms, over 300 dining outlets, and more than 70,000 employees. In a typical year, over 50M people will visit the Walt Disney World Resort. If Disney anticipates consumer weakness, they are incented to offer discounts to maximize the utilization of their facilities and maintain their workforce.

For a sense of the financial health and attitude of the consumer, there are few better gauges than what’s happening at the Walt Disney World resort. Regardless of when you may be reading this, if you would like to know my take on what Walt Disney World is currently telling us about the economy just ask. I’ve usually been there recently.

For more information on this topic I invite you to watch this 5-minute YouTube video