The coronavirus outbreak has paralyzed the entire world and brought it to a standstill. The government-backed lockdown in the US has compelled businesses to halt their daily operations for an indefinite period. Businesses are now struggling to deal with this sudden economic downturn and, in the process, have ended up making some hard decisions including laying off or furloughing their staff.
This has left a considerable number of people without income. People who have been laid off are in a difficult position: they don’t have money to pay for their monthly expenses. The air of uncertainty across the country – with no definite answer to when the economy can go back to normalcy – has made the matters worse for the majority.
How to Survive Coronavirus Layoffs
People who are missing work because of the COVID-19 virus can access some benefits – including unemployment. President Donald Trump has recently signed a $2 trillion coronavirus relief package to provide some economic relief to hospitals, businesses, workers, and others who are struggling with this global pandemic.
What does it mean to individuals like you who have been recently laid off? This implies that you can apply for state-backed financial assistance. The recently announced relief package also extends to self-employed workers, contractors, and gig economy workers – all of whom have been worse affected by the state-mandated lockdown that was necessary to reduce the strain on the country’s already fragile healthcare system.
How to File For Unemployment
The California Employment Development Department (EDD), in the wake of COVID-19, has waived the one-week waiting period for people disabled or unemployed due to the novel coronavirus. Now people whose working hours have been reduced or whose employer has been shut down or whose healthcare providers says that they are unable to work can file a claim.
If you’re unable to work because you are sick or quarantined, you can file a disability insurance claim. In case you’re unable to work because you have to take care of a relative with COVID-19, you will be allowed to file a paid family leave claim. Workers who have lost their jobs or whose working hours have been reduced can file an unemployment insurance claim.
To file the claim, however, you will have to meet the following requirements:
- You are available for work
- You were laid off with no fault of your own
- You are actively looking for work
- You are physically able to work
- If offered, you will accept work readily
- You are partially – or totally – unemployed
People who are an independent contractor, gig worker, or self-employed, you can file a claim if you meet the following criteria:
- Your past employers contributed on your behalf over the last five to 18 months
- You contributed to unemployment elective coverage
There are also a number of people who are in quarantine, but are not COVID-19 positive. But since these people have faced reduced hours due to the quarantine or are separated from their employers, they can file a claim and claim benefits. It is essential for these workers to proof that they were in quarantine in compliance with a medical professional or local health officer.
People who have been forced to leave work to take care of their children who are now permanently at home due to the closure of schools can also apply for the benefits. EDD representatives will determine your eligibility after scheduling a phone interview with you.
Applying for Small Loans
The economic downturn due to COVID-19 has had devastating effects on the majority including small business owners who have to let go of their employees – with a very heavy heart. However, even after the layoffs and other drastic measures, small businesses still need an influx of cash to keep their businesses afloat – or at least not shut it down permanently.
Keeping the hardships of small business owners in view, Congress has approved a small-business-loan program called the Paycheck Protection Program (PPP) under a $484 billion coronavirus aid package. Applying to the program is quite easy. You can find the application form on the Treasury Department official site. Instead of going in person, you should apply either by phone or online.
Anyone can applying for the PPP plan of they are small or tribal businesses or nonprofit organization as long as they meet the SBA’s standard business-size definition under 501(c)(19). Independent contractors, self-employed individuals, and sole proprietors are also eligible to apply to the program.
As of the writing of this article, there has been quite a few complaints about people still waiting on the status of their application. Due to the COVID-19 outbreak, there has been a high traffic in applications for loans and other kind of financial assistance all of which have caused delays in the approval of applications. Applicants shouldn’t panic and give some time for the organizations working towards providing financial assistance to people.
What Should I Do With My 401(k) Financial Plan?
There has been a significant decline in the amount of contributions made to the 401(k) plan. Many employers are likely to suspend contributions to the workers’ 401(k) plan. In already uncertain and fearful environment, people are contemplating sell off their investments. While this may seem like a prudent decision to make, this isn’t the right time to sell your savings.
What you should do with your 401(k) plan largely depends on your income situation. The best thing in this regard to do will be to talk with your financial advisor who can guide your responsibly. In today’s time of uncertainty and fears, panic is understandable. But don’t let this panic make you take decision that you will regret in the shortest time.
The Final Word
The coronavirus outbreak has resulted in both human and economic losses. The magnitude of destruction caused by this virus has no parallel in the world. With the entire world closed, the flow of cash is also restricted. Thankfully, there are aid packages and financial assistance programs available that will help people deal with the situation fairly well.
“THE JANUARY EFFECT”
Some superstitious investors believe that the future, year-long performance of the Stock Market is predicated on the performance of the first month. Essentially, they believe that if the market is on the up and up during the cold winter days of January, we should expect a positive market with plentiful gains for the rest of the year. 1. Our President Tweeting at 3 o’clock in the morning
2. A trade war with the world
3. China and all of it’s shiftiness
4. A sluggish German AND Chinese economy, two economic powerhouses
5. Corona virus
6. An Election Year
7. Federal Deficit at 23 Trillion, we just added another 6 Trillion with the Tax Cuts
8. Interest Rates
9. Inversion of the Yield Curve
To that, I say one word. I quote my grandmother; “HOGWASH!”
Since the inception of trading, Investors have constantly looked for the closest thing to a “crystal ball.” The truth is, there isn’t one. Looking back at just December 2018, the market took a dive and at the bottom, we were down 20%. The beginning of 2019 lent way to nothing but remarkable growth and an incredible rebound. Ironically, I remember conversations from fellow insiders in the industry who kept telling me, “This is it. This is the beginning of the end. This is the big one. The party is over.” Except it wasn’t. Here we are over a year later and all of the gains we lost with that bear market drop have been recaptured. Why? Artificial stimulation in the economy. There is nowhere else to put your money to get good returns outside of real estate. What other disasters loom in the future that could affect our economy and start a landslide?
TWEETING
Will someone please delete Trump’s Twitter app when he’s not looking? Does everyone in the world have to know everything about his thoughts?! I’ve heard rumors about groups of Russians and Chinese whose only purpose is to sit in a room, wait for his tweet and analyze it. Such is the downfall of wearing your thoughts and emotions on our sleeve…
TRADE WAR
No one wins a trade war. Costs are passed to the consumer. Let’s find another solution here
CHINA
Known to some as “the manufacturing center of the world,” they have been on the verge of a recession for awhile now. There are three things you need to be a successful country with financial stability.
a.) Political Freedom. This gives us the ability to express how we feel and maintain checks and balances on the system.
b.) A free press. The right to expression is everything. This keeps the regulators honest.
c.) Un-corrupt regulators. Stupid or incompetent regulators are okay. Stupid regulators can always be fired and replaced. Just make sure they are free.
China fails at all three.
China is not only suppressing their currency, they have been tampering with the market, their regulators are corrupt, political freedom is non-existent and as we well know. A communistic society does not have freedom of the press.
CORONA VIRUS
When it was announced that the Coronavirus would hit America, the market tanked 1,000 points for the Dow. Election years have been known to be historically flat. Kiss that goodbye.
AN ELECTION YEAR
This is an election year, the year of a lame duck president, “lame duck” meaning he is about to step down. Now that the President has come on the airwaves and recited his successful resume to the world, he in essentially telling people he’s hanging up the title of his Presidency, soon to be planning his next book and book promotion tour. As we look to the media to discover who our next great leader shall be, the last year of a presidential term and the first year of any presidential term always sends the market into volatility as it has for the last several presidents, all the way back to Eisenhower.
FEDERAL DEFICIT
Insert eye rolls here. Yeah, yeah, the US has carried debt way back to it’s inception. Eventually something’s got to be done. This is the highest it’s ever been and not addressing this issue eventually could be disastrous, addressing it could mean a ripple effect in the corporate world.
INTEREST RATES
The Fed tried to raise them in 2018, look what happened in December of that year. Bear Market rash down to 20%. Yes, we’ve recapture those gains, but the Fed can’t keep rates low forever.
INVERSION OF THE YIELD CURVE
Wait, what?! A 2 year note pays more return than a 10 year bond!? Ridiculous. For those of you who believe history repeats itself, this has preceded most of the recessions we’ve had since World War Two. The writing is on the wall. It’s a matter of when, not if. There has been an evolution in investing. You can invest in the market with no downside risk. You can get a buffer and minimize losses while still making gains in the market. I recommend now is the time to start taking precautions and shield your assets in anticipation of the next loss. Bond and bond like instruments are key. Cash will soon be king. As my father used to say, “Use your brain!” There is a reason Warren Buffet has been sitting on Billions of dollars in cash. He knows how over inflated the market is right now. Make a major market correction work for you for once.
“LOTTO CRAZY” (republished from January 2019)
Lotto is on everyone’s mind these days, and with the Lotto topping out at $1.5 billion as of January 13th, and the winning tickets being sold in Chino Hills, California, just a short drive from our residence, everyone is jumping on the band wagon and talking about buying in. While it’s fun to wonder what we would do with these funds, let’s be realistic. What are your odds of really winning the lottery?
1 in 292 MILLION!
That’s like having everyone living in the United States put their name in a hat and hoping yours will be the one they pull out. While some of these proceeds go back into the state and local government programs, too many people are hoping for “easy street” and wasting time, energy and money believing their luck is that better than everyone else’s. This year’s winner said they spent $30,000 on lottery tickets to win! $30,000! WAKE UP! SMELL THE MACCHIATO! While that person undoubtedly got lucky, imagine if they had lost. $30,000 down the drain. And just to piggy back off of that thoughts, let’s ask that person how much they have lost over the course of their lifetime. $30,000 a year x 10 years is $300,000. Taking this yet another step forward, let’s imagine that person plays every year since their working years and spent that religiously and they are now 60 years old! That’s 1.8 million!
Now, let’s look at the flip side. Imagine if that player took $30,000 a year ($2,500/month) and invested it rather than play lotto. Multiply that times thirty years. That’s $900,000. A nice, lifetime lump savings and VERY DOABLE if someone aggressively saved that kind of money by giving up Starbucks, smoking, and lottery ticket spending. Why risk losing that income and gaining nothing when you can invest in a “sure thing” like the stock market over the course of your lifetime. Imagine if we only got 6% return with compounding interest on that (historical performance has hinted you may do better), you’d have $2,686,355.06! I would use the word guarantee but for compliance purposes, let’s hold off on that. No, it’s not $1.5 Billion with a “B,” but hey, that’s how we grow wealth the slow and sure way. And imagine if that’s tax sheltered and/or (gasp) post tax dollars, then you’d really be killing it. That would guarantee you a decent living and a comfortable retirement for you and your loved one. But instead, people would rather play dumb and not think things through, forgetting that they have better chances of getting hit by lighting or getting bit by a shark. As a financial advisor, I have met people who have smaller lotto winnings. I met a couple who won the lotto TWICE! Stranger things have happened. And while these people did beat the odds, the average joe gets caught up in the marketing or the dreams of having an obscene amount of money while in fact, he could be financially secure and know he has a much better certainty he will never get by gambling his future away. Have the “Bird in hand.” Stop gambling and put your money to work for you. Save the gambling for Vegas and focus on an overall better strategy that makes sense. Let us be your financial therapist, keep reading our blog and learn how to invest with intelligence.
CORONA VIRUS UPDATE – The Market Downturn of 2020; A 20% Drop
A lot has happened over the last week, and, as time goes on, things have become more revealing, whether that refers to how the Coronovirus works or how governments seem to be handling the disease. As mentioned in my prior posts, client newsletter and other communications, I’m not worried about the Cornoavirus per say, which has similar mortality rates to that of the typical influenza which hits us each year, but I am very concerned about the ripple effect that has been created based on government response, fear in the media and the general public’s reaction.
Where are we now? After just two weeks of the virus impacting our country, supermarkets have been cleaned out. Certain supplies like toilet paper were the first to go based on rumors and the anticipation of a possible mandatory quarantine. Consumer hoarding of certain household products like meat and canned goods have contributed to this hysteria. It may lead one to think, “Wow, should I be hording these items as well?” This may be as much of a self fulling prophecy as the 80% of algorithmic computer trading that sells off when it reacts to declining markets.
As I write this, market gains have been wiped out to levels we haven’t seen since 2017. Two weeks have wiped out two years of productivity, contributing to the old adage, “The Market takes the stairs up and the elevator down.” Ironically, the market is still considered over inflated based on P&E (Profit to Earnings) ratios and the CAPE index, which measures overall stock values as a whole. Is this a rehash of the events in December of 2018 with that bear market drop and will we see a rebound in a few months? I see it as very different.
Looking at similar events, SARS lasted 6-9 months but was appropriately contained within a reasonable amount of time. That was pretty mild compared to what is going on now. The Spanish Flu in 1918 is probably the closest comparison, that lasted 24 months, although it happened during World War One which makes it more challenging when looking at how the World Wide Economy was affected as a whole. Knowing the Coronavirus has an incubation period where no symptoms are shown, I think this could be more like the Spanish Flu than SARS or even any Swine, Bovine or Bird Virus. From the Wold Health Organization Website: “The ‘incubation period’ means the time between catching the virus and beginning to have symptoms of the disease. Most estimates of the incubation period for COVID-19 range from 1-14 days, most commonly around five days. These estimates will be updated as more data become available.” Which means countless people are walking around with the virus who have no idea they were exposed and/or they are ignoring the fact that they are a risk factor, including our own President. While markets operate 14 to 16 weeks ahead of “real time” I think we’re still looking at prolonged recovery time.
Personally, I think this could be very different than the brief dip in December 2018. Unlike the man made issues in December, which, among other things, were a direct result of rising interest rates (remember those days? it feels like “ancient history” now) and the Trade War. Even with the Trade negotiations with China, I would expect that due to agenda setting and a shift in priorities, the U.S. will probably cut China some “slack” on this due to obvious, recent events. Regardless, the repercussions of the virus are now what have me concerned, not the infection itself.
In just one week, we have seen a shift in our society’s cultural norms. We have gone from a global village to an isolated society sticking to our small, local regions. We now rely on technology to keep us connected. Long lock downs, stadium events without spectators in the seats, cancelled “in person” classes and conferences moving to webinar formats, cancelled travel plans and events, Disneyland shutting down, small business struggling for three weeks or more… all of this leads to a possible slide into a recession as people struggle to make ends meet and figure out where their next paycheck will come from. Those events that move the economy have been temporarily shut down. While some business (i.e. Disneyland, NBA) will keep paying employees regardless, a lot of companies will not. That will have it’s consequences.
Furthermore, when we look to the origin of the disease, China has has a resurgence in the virus. As round two begins, China is much more prepared than other countries, having been ground zero and dealing with the deiase for a much longer time frame. They have had ample opportunity to be able to live with the virus and thus accept it as the “new normal.”
For newer investors and investors sitting on the sidelines with cash who have been sitting on the sidelines, this is a great time, since you are buying at a 20% discount from the height of the market. However, I suspect things may get a lot worse before they get better and for those who are cautious, there may be an even better opportunity down the line once we have more control over the virus and it’s played itself out. If market will trend to a 30-50% low, which I suspect they may, patient investors will get rok bottom sales prices on stocks and clean up over time is taking a “buy and hold” stance.
For younger and aggressive investors who are “letting it ride,” staying the course for the long haul may be your best bet. Ride the coaster, and over time, you will probably be fine. The timeline here being defined as 6 months to a year or two.
While the Stock Market thinks ahead by 14-16 weeks, I don’t think we are out of the woods quite yet. More people will get sick, more will quarantine, even more will lose jobs, quit, or struggle. Quarterly losses will be felt. Time will have to heal this wound. Know you market strategy and stick to it. Have an plan, whether it is to exit, stay the course or double down.