Be patient where you sit in the dark, the dawn is coming.
At some point soon, perhaps by the reading of this newsletter, we will be allowed to open the office back up for at least our staff. I’m not sure when we will be allowed to have in person meetings or if we’re comfortable having them right now regardless of what the Governor says. I sent out a survey to most of you last week, and the results really just confirmed what I thought. To start out this newsletter I thought I would go over some of those results and discuss what our office is doing in response to them.
Question 1: When the Commonwealth of Massachusetts allows us to resume in person meetings will you..
Immediately resume in person meetings - 13%
Not resume in person meetings until you are more certain of the safety - 73%
Not resume in person meetings until there is a medical treatment for Covid-19 - 8%
Not resume in person meetings until there is a vaccine for Covid-19 - 5%
Clearly most of you are not comfortable with in-person meetings as 87% want more safety of one kind or another. As I said, this is about what I was expecting so we will be implementing the following policies along those lines. First, we will not be allowing any in person meetings until June 1
st – unless the State of Massachusetts pushes us off even later. We need to get back in our offices and set things up to be able to have those meetings as we’ll discuss in a minute and the availability of some supplies makes it impossible to just start up again right away. In the meantime, and even after June 1
st, we are happy to continue to have meetings over the phone or via Zoom conferences and continue to do paperwork over the Docusign© system. It will be easier to send and receive paper documents once we’re back in the office of course for those who would prefer physical paperwork.
Question 2: What would you expect from a business that decides to resume in person meetings?
No restrictions, meetings as before - 7%
Sanitizer use upon entering the office - 2%
The wearing of face masks during the meeting - 5%
The retention of social distancing - 10%
Some Combination of B, C & D - 77%
As you can see, 93% of the respondents want procedural changes to make in person meetings safer. Frankly myself and my staff want restrictions as well. Therefore, everyone who comes into our offices will be required to sanitize and wear a mask – even if you are just dropping something off, picking something up or doing a quick signature on some paperwork. We of course will also be doing more to disinfect the office, wiping down door knobs, tables, the copy machine etc. after every use. We will try to arrange the conference room to maintain that six-foot separation, but to do so we’ll have to limit the number of people in the meeting to two clients and one advisor. Meetings that include the kids, or the attorney etc. will simply have to be pushed off for the time being if we’re going to do them in person. We could of course meet in person and bring an attorney or accountant in via the phone or Zoom.
A few other survey results in summary. 98% of you are comfortable with review meetings being done remotely, which is great. I do feel you need to have face to face contact for a good relationship but we can get by for a while this way. Also 50% of you feel like you would be comfortable meeting an advisor for the first time remotely – so don’t feel like you can’t send us referrals during this crisis. 80% of you feel the current restrictions were fair and should be continued past the May 18
th date – of course the phase out of the restrictions seem to be doing just that. 98% of you are worried about the economy at least a moderate amount, although 70% haven’t been affected by the economic downturn with the exception of market prices which is to be expected from a client base that leans toward the retired. Finally, 20% of respondents personally know someone who has died of Covid-19, we extend to them our deepest sympathy.
I Made a Video:
There has been a lot of confusion about Required IRA distributions under the CARES Act. I made a short (18 minute) video presentation about this topic. You can view it via the link below and feel free to forward this link to family and friends who may need the information.
The economy turned bad faster than at any point in history. The unemployment rate jumped from under 4% to 14.7% in one month – that’s the highest unemployment rate since the Great Depression, 50% higher than the highest rate during the financial crisis. But because this was caused by the health crisis there is optimism that it will reverse itself as the virus comes under control. We can all argue about the best way to accomplish that goal, but the markets after reacting quickly negative in February have clawed back a good portion of those loses and now stand down only roughly 10% - or what would be a normal correction – yet this is anything but normal. Certainly, a lot of these jobs will come back as the economy recovers so while we may see the June jobs report be as bad or worse than May, we know companies are willing to hire back many of these workers. However, the markets may have overshot the recovery a bit. I wouldn’t be surprise to see another move downward, not as deep as in March but lower than the values now, before we get a more sustained recovery later in the year. Of course, I can’t know this with certainty – if some of these drug treatments that are in trials are dramatically effective or if the virus just fades away with the Summer sun then perhaps the markets are fairly priced. That’s why we don’t try to time this stuff.
But we are watching some interesting things. First, ESG investments. At the same time the Covid-19 crisis hit we had a little economic oil war between Russia and Saudi Arabia that dropped oil prices dramatically and even caused some oil futures contracts to drop into negative territory. ESG investments, being more isolated from that industry, didn't feel the impact. But perhaps there is some indication that long term ESG investments could be another factor, like Value or Quality, that shows positive risk adjusted returns. We don't know if this was a one off or a trend but we'll be doing the analysis.
Then there is investment real estate. Most of the real estate you can invest in through the markets is residential, retail, business and warehouse space. The investments you buy own the properties and you get the rent payments as dividends and the appreciation as capital gains. Just these properties being able to refinance at lower and lower rates have kicked up returns. But what is going to happen to that type of real estate? Is the ability to work from home in many industries going to diminish the business office space market? If people are working from home do they need to live in a $850,000 one bedroom apartment in Brooklyn so they can be close to the office or can they move to a four bedroom house on five acres of land in Rye, Pennsylvania and just brave the three hour drive once a month for the face to face meetings? Same thing for San Francisco, Chicago, London and even Boston. I know there’s a creative energy that comes from being in the same room with other people, we’ve all felt a room change when something good or bad happens on the other side – I don’t know how you duplicate that. But not everybody works in teams and the move toward tele-commuting has been accelerating for the last ten years anyway, perhaps this will accelerate the next ten years into the next 18 months? What does that do to those real estate prices? Probably good for Cape Cod, but potentially bad for Queens. This change isn’t going to happen all at once, especially when people and businesses have leases etc. But it may change the way we look at that sector of the economy.
How are you?
Of course, most of this experience has been terrible. Not getting to hug my mother on Mother’s Day, not getting to meet friends for dinner, cancelled vacations, cancelled graduation events etc. But not all of it has been bad. I’m probably getting more sleep than ever before. While I can’t go to social events I want to attend, I’m not being dragged to the one’s I don’t want to attend. And for me personally, I’ve gotten to spend a lot of time with my oldest daughter, who will hopefully be leaving for college in the Fall – that’s time I never would have gotten during this part of the year and I am grateful for it. I hope you’ve all found some silver linings in these clouds and I hope I have other topics to discuss in the coming months.