June 25, 2020

The U.S. stock market has been rising steadily, apart from yesterday’s hiccup, for the last couple of weeks, floating at right about where it was before the COVID pandemic began to assert itself on American shores.  We have had stronger-than-expected retail sales, and not quite as many people were unemployed as economists predicted.  The economy is far from robust right now, and a recession formally began in February, yet many are predicting (without actual evidence) that there is “a V-shaped recovery” in our future.

This happy outlook ignores the fact that coronavirus cases are once again on the rise in most states, an estimated 20 million Americans are unemployed, 122,000 U.S. individuals have died from the pandemic, and there is civil unrest in cities and towns throughout the country.  There may be additional lockdown measures if the spike in new cases is not quickly arrested.

So which case should we listen to?  Right now, some economists believe that the only thing keeping business and the economy afloat has been massive amounts of borrowed taxpayer money sent out to the business community, plus equally-massive intervention by the Federal Reserve, which has recently taken the previously-unthinkable step of using its reserves to buy individual corporate bonds.  People who are bullish on the stock market are betting that Congress and the Fed simply will not let stock prices collapse.  People who are bearish believe that companies have become some degree less valuable due to the lost quarter of productivity, earnings and future diminished sales as people have less to spend.  And as those lower earnings reports come out for the next quarter, price/earnings multiples will spike, and you will see headlines about how the stock market is more expensive than it has ever been.

The discouraging truth is that nobody knows which argument is right.  The quiet chatter among financial professionals is the best strategy is to stay the course. We realize the upside does look increasingly fragile.  Without a working crystal ball, there may not be a better long-term strategy than that.

Sincerely,

Edward J. Kohlhepp, Jr., CFP®, MBA

President  

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

Sources:

https://finance.yahoo.com/news/stock-market-news-live-june-16-2020-222206832.html

https://www.washingtonpost.com/business/2020/06/09/what-record-stock-market-gains-tell-us-about-us-economic-recovery-not-much-it-turns-out/

https://www.washingtonpost.com/business/2020/06/09/what-record-stock-market-gains-tell-us-about-us-economic-recovery-not-much-it-turns-out/

https://www.nytimes.com/2020/06/08/business/recession-stock-market-coronavirus.html

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

June 15, 2020

While most of us are distracted by the street protests around the U.S., something similar has been going on in Hong Kong for years, and there are signs that the protesters in the semi-autonomous city are losing in their efforts to stop the communist Chinese regime from taking over.  Most recently, Beijing’s highest representative body in Hong Kong, called the Liaison Office, insisted that it was not subject to Article 22 of the city’s constitution, which guarantees an independent government for the city and the region.  Instead, the Liaison Office asserted that, contrary to the plain text of the city’s constitution, it had “supervisory powers” to administer Hong Kong and its political affairs.

This move could have significant implications for the U.S. economy, because it endangers Hong Kong’s ‘special status’ under U.S. law.  If Hong Kong is no longer an autonomous political and economic entity, then the U.S. could well decide to treat it as simply a part of the Chinese economy—and that would mean an end to Hong Kong’s low preferential tariff rate, reverting it to the trade war tariffs that the U.S. has imposed on China as a whole. 

Today, more than 1,300 American companies have business operations in Hong King, including nearly every major U.S. financial firm.  According to the State Department, roughly 85,000 U.S. citizens live and work in Hong Kong, representing American companies.  If the Trump Administration revokes special status, it could lead to an exodus of those firms, and an expensive relocation to cities like Singapore.  It would also anger the Chinese leadership, and lead to another round of trade wars between the world’s two largest economies.

As always, we wish you all continued health and safety as we progress into the next phases of reopening the country during this pandemic.  Please note that our firm will continue to hold virtual client meetings only in order to prioritize and protect the health of our clients. 

Sincerely,

Edward J. Kohlhepp, Jr., CFP®, MBA
President 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

Please contact us if there is any change in your financial situation, personal situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of your account(s) or modify existing restrictions. 

Sources:

https://www.ft.com/content/bf08a177-9631-48e5-b542-18bf5b15faf4

https://www.reuters.com/article/us-usa-china-hongkong-trade-explainer-idUSKBN22Y22Z?taid=5ec86f64bbdff20001f19406&utm_campaign

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

June 9, 2020

During times of economic crisis we read that the Federal Reserve Board has “cut interest rates,” or “lowered the Fed funds rate.”  But what does that actually mean to you and me?

The chart tells an interesting story; it shows the Fed funds rate—the rate that the Fed charges banks when they take out virtually unlimited short-term loans from the Fed or each other—rising steadily from around 2004 to late 2008.  After the brokerage industry suddenly took the global economy to the edge of bankruptcy, you see the Fed dramatically lowering its discount rates to the banking industry, down to essentially zero for the next eight years.  Then there was a very cautious period when the Fed governors started raising rates, until the COVID-19 virus started tanking the markets.  Now we’re back to zero again.

So the first thing to know is that the banking industry—particularly the banks affiliated with the largest wirehouse firms—can borrow as much money as it wants without paying any interest.  Try to get the same deal from your local bank.

This low discount rate has a number of real-world consequences.  One is that the brokerage and banking firms can lend money at a profit (basically anything above zero percent) to companies that need to borrow.  Theoretically, that will boost the economy.  However, both in 2008-9 and now, banks were leery about lending to businesses in an uncertain economy.  They can still lose money, after all, if the borrower goes bankrupt and defaults on the loan.

For consumers, there are small impacts.  One is that credit card rates are down from a high of 17.85% last July, when the Fed started cutting rates, to a three year low of 16.46% today.  If you think that’s a very incremental decrease compared with the magnitude of the Fed moves, well, you’re right.  And the economic impact is diminished further, since banks are making credit cards much harder to obtain in this uncertain environment.

Finally, mortgage rates are slightly lower today than they were a year ago; Bankrate says that the average 30-year fixed rate is down to 3.55%.  Yet again, however, banks have stopped offering many of their refinancing options due to the shaky economy, making it hard for homeowners to obtain this rate.

We wish you all continued health and safety as we progress into the next phases of reopening the country during this pandemic.  Please note that our firm will continue to hold virtual client meetings only in order to prioritize and protect the health of our clients. 

Sincerely,

Edward J. Kohlhepp, Jr., CFP®, MBA
President 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

Source:

https://snip.ly/yq9gdl#https://www.cnbc.com/2020/04/29/fed-holds-rates-near-zero-heres-what-that-means-for-you.html

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Distributions can be waived in 2020 for Inherited Accounts, 401(k)s, and IRAs.

April 3, 2020

Recently, the $2 trillion “Coronavirus Aid, Relief, and Economic Security” (“CARES”) Act was signed into law. The CARES Act is designed to help those most impacted by the COVID-19 pandemic, while also providing key provisions that may benefit retirees.¹

To put this monumental legislation in perspective, Congress earmarked $800 billion for the Economic Stimulus Act of 2008 during the financial crisis.¹

The CARES Act has far-reaching implications for many. Here are the most important provisions to keep in mind:

Stimulus Check Details. Americans can expect a one-time direct payment of up to $1,200 for individuals (or $2,400 for married couples) with an additional $500 per child under age 17. These payments are based on the 2019 tax returns for those who have filed them and 2018 information if they have not. The amount is reduced if an individual makes more than $75,000 or a couple makes more than $150,000. Those who make more than $99,000 as an individual (or $198,000 as a couple) will not receive a payment.¹

Business Owner Relief.The act also allocates $500 billion for loans, loan guarantees, or investments to businesses, states, and municipalities.¹

Your Inherited 401(k)s.People who have inherited 401(k)s or Individual Retirement Accounts can suspend distributions in 2020. Required distributions don’t apply to people with Roth IRAs; although, they do apply to investors who inherit Roth accounts.²

RMDs Suspended. The CARES Act suspends the minimum required distributions most people must take from 401(k)s and IRAs in 2020. In 2009, Congress passed a similar rule, which gave retirees some flexibility when considering distributions.^2,3

Withdrawal Penalties.Account owners can take a distribution of up to $100,000 from their retirement plan or IRA in 2020, without the 10-percent early withdrawal penalty that normally applies to money taken out before age 59½. But remember, you still owe the tax.⁴

Many businesses and individuals are struggling with the realities that COVID-19 has brought to our communities. The CARES Act, however, may provide some much-needed relief. Contact your financial professional today to see if these special 2020 distribution rules are appropriate for your situation.

Sincerely,

Edward J. Kohlhepp, Jr., CFP®, MBA
President 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Under the CARES act, an accountholder who already took a 2020 distribution has up to 60 days to return the distribution without owing taxes on it. This material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Under the SECURE Act, your required minimum distribution (RMD) must be distributed by the end of the 10th calendar year following the year of the Individual Retirement Account (IRA) owner's death. Penalties may occur for missed RMDs. Any RMDs due for the original owner must be taken by their deadlines to avoid penalties. A surviving spouse of the IRA owner, disabled or chronically ill individuals, individuals who are not more than 10 years younger than the IRA owner, and children of the IRA owner who have not reached the age of majority may have other minimum distribution requirements.

Under the CARES act, an accountholder who already took a 2020 distribution has up to 60 days to return the distribution without owing taxes on it. This material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Under the SECURE Act, in most circumstances, once you reach age 72, you must begin taking required minimum distributions from a Traditional Individual Retirement Account (IRA). Withdrawals from Traditional IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. You may continue to contribute to a Traditional IRA past age 70½ under the SECURE Act, as long as you meet the earned-income requirement.

Accountholders can always withdraw more. But if they take less than the minimum required, they could be subject to a 50% penalty on the amount they should have withdrawn – except for 2020

Citations.

1 - CNBC.com, March 25, 2020.

2 - The Wall Street Journal, March 25, 2020.

3 - The Wall Street Journal, March 25, 2020.

4 - The Wall Street Journal, March 25, 2020.

March 20, 2020

Cyber criminals are capitalizing on the interest and hysteria created by the global Coronavirus/COVID-19 crisis.  Fraudsters do not take time off, in fact, many prey on fear and urgency to fool unsuspecting victims.

Just today, Ed Sr received an attempted ransomware email threatening to “infect your entire family with coronavirus if you do not pay this ransom now!” 

Be on guard for the following:

1. Any message attempting to create a strong sense of urgency to take a particular action.
2. Any message that pressures you to do something.
3. Any website or link that claims to track or map the outbreak.
4. Any domain name (@domainname.com) or web link with any variant of "Coronavirus" or "COVID-19"

Our IT Company has provided us with the following link to check URLs (web address) for signs of suspicious behavior: 

VirusTotal

You can copy and paste the email address from a suspicious email in the Search box.

Many of you have heard about the federal government distributing funds to individuals. There is no plan in place at this moment, but the FTC has issued a warning, please follow this link https://www.consumer.ftc.gov/blog/2020/03/checks-government.
 
Remember the government will not call to ask for your Social Security number, bank account, or credit card number. Anyone who does is a scammer.
 
Here's an awesome summary from Brown University Computing & Information Services, with additional information and links to other authoritative sources: https://it.brown.edu/alerts/read/covid-19-related-phishing-attempts

Additional information can be found here :
https://www.consumer.ftc.gov/features/coronavirus-scams-what-ftc-doing

Be cautious. Be smart.

Your team at Kohlhepp Investment Advisors, Ltd.

Source: EmberIT, Blue Bell Private Wealth Management