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It doesn’t matter if you’re Irish or not when it comes to celebrating St. Patrick’s Day. Teri and Tracey are both Dublin girls and Bob has a bit o' Irish in him as well. So, this holiday holds a special place in our hearts. We hope you had the chance to celebrate in your own special way with a traditional meal, green beer, or simply wearing something green. If we had the choice between Luck and Karma, we’d take Luck every time. AFP wishes you the Luck of the Irish!

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FYI

Tax Filing Deadline Extended & Qualification of Stimulus Payments

For clients impacted by the change in our Money Management Program

U.S. STOCK MARKET –Since 1950, the average bull market (64 months) has lasted more than 4 times as long as the average bear market (15 months). Since 1950, the average bull market has generated a gain of +172%. The average bear market has incurred a loss of 34%. The S&P 500 consists of stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock's weight in the index proportionate to its market value (source: BTN Research).  

THE YEAR AFTER -The S&P 500 has achieved an average annual total return of +14.8% in the calendar year after the 16 down years that have taken place in the stock market over the last 75 calendar years (1945-2019). That result is +3.5 percentage points greater than the entire 75-year average annual return of +11.3% for the index (source: BTN Research). 

 

 “TIME IN” vs. “TIMING” - The split between “up” and “down” time periods for the S&P 500 from 1950 to the end of 2019, i.e., the last 70 years, as measured by: Days: 54% “up” and 46% “down”; Months: 60% up, 40% down; Quarters: 66% up, 34% down; Years: 73% up, 27% down; 5-Year Rolling Time Periods:79% up, 21% down; and finally 10-Year Rolling Time Periods: 89% up, 11% down (source: BTN Research). 

 

BIG GAIN, BIG LOSS - The US stock market has lost $12.1 trillion of value during the 2020 bear market, i.e., from the close of trading on 2/19/20 to the close of trading on Friday 3/20/20. The US stock market peaked at $36.1 trillion, having gained $28.5 trillion during the 2009-20 bull market through 2/19/20 (source: Wilshire). 

MULTIPLIER –Senate Republicans announced on 3/19/20 a stimulus plan that includes $1,200 cash payments to taxpayers. If each taxpayer that received $1,200 had a “marginal propensity to consume” of 60%, the initial taxpayer would save $480 and spend $720, and then in turn the party that received the $720 would save $288 and spend $432, and the next party would save $173 and spend $259, and so on. Ultimately the original $1,200 cash payment would result in $1,800 of economic activity, i.e., $720 + $432 + $259 + . . . (source: BTN Research).  

ALMOST INTEREST-FREE CASH - The Federal Reserve implemented its 2nd emergency rate cut this month last Sunday 3/15/20, effectively pushing short-term interest rates to zero. At the latest emergency meeting, the Fed also cut the reserve requirement for thousands of US depository institutions to zero effective Thursday 3/26/20, i.e., permitting easier lending by banks (source: Federal Reserve). 

SEVEN MONTHS - The worldwide flu outbreak that occurred in the fall of 1918 killed 50 million people globally, including 675,000 Americans. The health crisis was a primary cause of a 7-month recession in the USA that lasted from August 1918 through March 1919 (source: National Bureau of Economic Research).

HIGHER PRICE NEEDED - Saudi Arabia needs to sell oil at $78 a barrel to balance its sovereign budget, while Russia requires a price of $45 a barrel. Brent crude oil, the benchmark for the oil industry outside of the United States, closed last Friday 3/20/20 at $26.98 a barrel(source: International Monetary Fund). 

AT THE PUMP - The national average price of gasoline has decreased for 23 consecutive days between Wednesday 2/26/20 and Friday 3/20/20, falling 30 cents a gallon to $2.17 a gallon (source: AAA). 

BACKING MORTGAGES - Government agencies Fannie Mae and Freddie Mac serve as the financial backstop for $5 trillion of the $10.6 trillion of outstanding mortgage loans nationwide (source: Federal Reserve).  

The 7 Best COVID-19 Resources

We've Discovered So Far



By Jeff Desjardins

Visual Capitalist

With all eyes on the COVID-19 pandemic and how its impact will be felt over the coming weeks and months, people are being bombarded with all kinds of noise and speculation.

Between a deadly virus, looming economic effects, and numerous government shutdowns, it’s clear that a fertile breeding ground has been created for misinformation, rumors, conspiracy theories, hot takes, and other potentially misleading content.

Click here to read more

Since we know you are running out of things to read, we thought we would add a little more for you to take in. This just came out and complements the information above.

COVID-19 Crash: How China’s Economy May Offer a Glimpse of the Future

The Panic of 2020? Oh, I Made a Ton of Money -

and So Did You

Hindsight bias suggests that one day you'll look back on all of this and... lie

By Jason Zweig

The Wall Street Journal

It’s springtime in the year 2030. You’re looking back at the crash of 2020, the devastation it dealt your portfolio and how you behaved as an investor.

What will you say?

If human nature is any guide—and, let’s face it, it is—your accounts of what happened will begin with such words and phrases as “Clearly…” or “It was obvious to me that…” or “Everybody knew that…”

In the future, your memory of the crash of 2020 won’t be a recollection. It will be a reconstruction, built partly from what is happening now and largely from what you learn later about what hasn’t happened yet.

I’m describing hindsight bias—the belief, after something happens, that we foresaw that it would occur.

That intuition keeps you from learning from mistakes, leads you to pay too much attention to unreliable forecasts and makes you mismeasure your tolerance for risk.

Fortunately, you can work around it.

Some commentators have argued that the coronavirus panic is nothing like the financial crisis of 2008 and 2009 because, unlike today, policy makers knew exactly what they were doing back then. That’s nonsense. Monetary and political leaders navigated that time not with foresight but with a jerry-rigged blend of bluffing, analysis, tinkering, bickering, guesswork and luck.

Don’t let yourself be fooled into believing it’s unusual that nobody knows what’s going on right now. The past makes sense only in retrospect, after our minds burnish it to our liking. The present almost always defies our efforts to make sense of it.

In a classic experiment in 1972, researchers asked people to estimate the likelihood that various positive and negative outcomes might result from President Richard Nixon’s upcoming trips to China and Russia that year. We now call those visits “historic” because they thawed decades of hostility between the U.S. and the communist powers. In advance, no one knew whether the trips would accomplish anything.

About two weeks after Nixon’s visits, 71% of people recalled putting higher odds on his success than they had at the time. Four months on, 81% remembered being more sure Nixon would succeed than they had said beforehand.

In short, learning what did happen impedes you from retrieving what you thought would happen.

Children as young as the age of three, asked what’s in a candy box, will say “candy.” Show them it contains pencils instead, then ask what they had thought would be inside—they will say “pencils.”

One week after the verdict in the 1995 murder trial of O.J. Simpson, 58% of people in a study recalled predicting he would be found not guilty; a year afterward, 68% remembered saying he would be acquitted. In fact, only 48% of them had said so before the verdict. Likewise, people distorted the odds they’d placed in advance that President Bill Clinton would be convicted in his 1999 impeachment trial.

In 2002, psychologists asked nearly 1,000 Americans to recall how likely they had expected terrorism-related incidents—and other risky events—to be in the immediate aftermath of Sept. 11, 2001. After a year in which fears had mostly subsided, they remembered being much less pessimistic than they had been at the time.

So that pundit predicting doom on financial television right now will get to say “I told you so” if the economy collapses. But if things improve, he—and his audience—will end up remembering his forecast as sunnier than it was.

“We’re biased to see ourselves in a positive light,” says Deborah Small, a psychologist at the Wharton School at the University of Pennsylvania. “We want to believe that we’re rational and smart. We’ll recall our past actions as more sensible than they were. We also give ourselves too much credit and don’t remember our mistakes as well as we do our successes.”

Sure enough, investors looking back on their own decisions often recall more gains and fewer losses than they racked up in reality.

To combat hindsight bias, tune out economic and financial forecasters who don’t share complete track records of their predictions. (If that leaves you with no one to listen to, well, them’s the breaks.)

Next, track your own forecasts. If, as I have often urged, you kept an investment diary during the financial crisis, go back and read it. How accurately did you predict how far stocks would drop and how long they would take to recover? If you were wrong about the past, how likely are you to be right about the present and the future?

Finally, take what psychologist Daniel Kahneman calls “the outside view.” Rather than try to figure out exactly how bad this crisis will be, look at the broader set of historical precedents.

Since 1929, the S&P 500 has suffered 14 bear markets, defined by S&P Dow Jones Indices as losses of at least 20%. The shortest and shallowest was the 20% drop that lasted less than three months in late 1990. The deepest was the 86.2% collapse from September 1929 to June 1932; the longest, the 60% plunge from March 1937 to April 1942. On average, bear markets lasted 19 months and dealt a 39% loss.

Staring the past honestly in the face, rather than letting your memory play tricks on you, is the best way to form realistic expectations of the future.

What You Need to Know About Payments

By Richard Rubin

The Wall Street Journal

WASHINGTON—In response to the economic fallout of  the coronavirus pandemic , Congress is poised to approve  an economic relief plan  that includes  one-time direct payments  to most households. Here are the key details:

How much money is it?

The plan provides $1,200 for each adult and $500 for each child under 17. A married couple with two children would get $3,400. Most people will receive the money in a payment from the Internal Revenue Service soon.

Who qualifies for the stimulus payments?

The payments go to almost any adult with a Social Security number, as long as they aren’t dependents of someone else. Those adults get the payments for the children in their household.

Payments start phasing out for those with income above $75,000 in adjusted gross income for individuals, $112,500 for heads of household (often single parents) and $150,000 for married couples. The payments start shrinking above those levels.

For those with no children, the benefit disappears at $99,000 for individuals and $198,000 for married couples.

When will the money arrive?

The IRS could start issuing payments  within three weeks , said Treasury Secretary Steven Mnuchin. The agency hasn’t announced a schedule. It will be able to move fastest for people who have filed 2019 tax returns with direct-deposit information and significantly slower for those who will need paper checks.

The IRS will provide updated information   on its website   about the process but is urging people not to call yet.

How does the IRS determine whether you are getting a payment and how much you get?

The government will use 2019 tax returns to set the payment amounts and 2018 tax returns if 2019 isn’t available.

People who haven’t filed tax returns can still file for 2019 to make sure the government has their updated income and bank-account information, as well as 2019 information about recent births, deaths, marriages, divorces and moves. Such changes that happened after 2019 won’t be reflected in the payments, however. Those with low incomes or no income can file tax returns for free using  the IRS’s Free File program .

The IRS also will have the ability to get information from the Social Security Administration about people who get benefits but don’t typically file tax returns. So these people might not need to file tax returns to claim this payment; the IRS will provide more details about the mechanics.

What if I lose a substantial amount of income this year as opposed to 2019?

The advance payments will be determined based on 2019 income—or 2018 income if that is all that is available to IRS—and the final amount of the benefits will be determined based on 2020 income and settled on the 2020 tax return. So people who ultimately qualify for more money than they receive this year—a person whose income drops from $100,000 to $70,000, for example—would get the rest through a larger tax refund or smaller tax payment in early 2021.

But people who ultimately qualify for less money than they got this year—a person whose income rises from $70,000 to $100,000—wouldn’t have to pay it back.

Besides those who make above the income threshold for the payments, is there anyone who doesn’t get a payment?

You must have a Social Security number to get a payment. Also, if you are a dependent on someone else’s tax return and you aren’t a child, you don’t get a payment. That will preclude payments for some elderly adults as well as students over age 16.

Are the payments taxable income?

No. They won’t be considered as income.

What about people who owe money to the IRS for prior years?

Other IRS liabilities won’t come out of the payments and even people who owe back taxes should get the full amount they qualify for.

What about child support?

The normal IRS rules for child support and tax refunds will apply, which means that refunds for people who are behind on those payments may be smaller.

Do children born in 2020 get the payment?

Parents of children born in 2020 won’t get a payment for that child now.

However, assuming they qualify based on their 2020 income, they will get $500 added to their tax refund or subtracted from their income-tax bill when they file their 2020 tax returns in early 2021.

"May you only grow old in the face.

Be treasured and cared for with grace. "

- Irish Blessing



This material is distributed by Alexander Financial Planning, Inc., (AFPI) and is for information purposes only. Although information has been obtained from sources to be reliable, we do not guarantee its accuracy. It is provided with the understanding that no fiduciary relationship exists because of this report. Opinions expressed in this report are not necessarily the opinions of AFPI and are subject to change without notice. AFPI assumes no liability for the interpretation or use of this report. Financial planning, investment conclusions and strategies suggested in this report may not be suitable for all investors and consultation with a qualified advisor is recommended prior to executing any investment strategy. All rights reserved.