The Government Makes It Rain --- Stimulus To the Rescue

Coronavirus Update – Shutdown Has Finally Started

Thanks to the great leadership exhibited from New York, California, and Chicago the nation is slowly shutting down city by city --- and state by state. While unbelievable, this is very necessary to starve the virus. There will be debates on how long and I remind people to look to China’s recovery and the timeline they used. For example, Wuhan the epicenter of this crisis will remove the lockdown on April 8th. SO the reality is the longer the better for the hotspots. Why I demanded leadership --- one voice, one plan. Providing risk consultation to large corporations puts you in a position to see some amazing dynamics. People will not do thing unless they know the order has come from the top…it appears countries are no different. The shutdown should be federal because if we all go into shelter at the same time, you hope we can plan to exit strategically around the same time. Let me give you an example, if you have a missing child, technology (like the Amber Alert) has allowed for us to receive notification all at the same time rather than piecemeal.  This speeds up the likelihood of finding the child much better than sending it to one police department at a time. If the coronavirus shutdown does not come from the top, when one state recovers my question is: “Does that state allow you to travel or accept visitors from states that did not shutdown at all or that shutdown much later than your state did. Essentially this recovery could drag on longer than needed if we cannot move in a cohesive manner as a country. There could be a lack of trust in the air which is why I believe countries like Italy, China, S. Korea and others when into lockdowns all at once. Make It Rain – Last Resort to Inflate the Economy I am hoping for better coordination so we can begin to recover quicker and get the economy going.  The importance of the pillars we work on so hard here is to help you during these exact moments. If you have savings, you have some cushion during these bad times. See these articles, ripped from the news headlines: “Many Americans Biggest Worry is April 1st Rent and Mortgage Payments”  -- Washington Post “Real Estate Billionaire Barrack says Commercial Mortgages on a brink of Collapse” – Bloomberg “Jobless Claims Soar Past 3 Million to Record High” -- CNBC  “Mortgage Rates Surge to Highest Level Since January” – Marketwatch “2 Trillion Dollar Stimulus Package” --- See below These are just a few of the necessary reasons why the Federal Reserve is making it rain. It’s basically a blank check to shore up the economy until we can get a handle on the COVID-19.  Like in 2008, the market has responded with a rally since a “handshake deal” was announced just a few days ago. This rally will likely continue into the actual signing of the bill. Use this an opportune time to trade in the relief rally that is not uncommon. But when the dust settles, I am still not risking my individual retirement account funds at the moment because we know there is more to come. Mortgages need to be paid, the rent is due, businesses are asking for a bailout and jobs are being shuttered. Hopefully all this is temporary but it is a big risk. I don’t see an all clear sign, just yet. Urb Lesson of the Day:  Account Diversification · Savings Accounts – Gets you through the rough patches in life · Investment Accounts – Allows you to take risks when others are NOT – like today · Individual Retirement Accounts – This is truly for your future, why NOT wait for a sign that the recovery is strong

Urbanomics Market Update ~ May 15

Urbanomics Market Update
~the update for people that don’t watch the “stock channel”

GAS, the price of a barrel of oil (better know as gas you put in your car) continues to rise, so this means that the cost you pay at the pump will be rising also. I know you want to know why, and all I can tell you is that has to do with the season, speculation, and investors betting the economy is turning around.

STOCK MARKET, if you had peeked at the stock market you might have seen that it has been doing really well in the last couple of months. If you feel like you missed the party…DON’T. The reasons vary as to why it was moving up rapid (like people spending their tax checks) but it probably won’t continue going up so quickly much more. This is my opinion but the economic data doesn’t lie. The data recently released says:

• Consumers are saving and not spending money
• Housing foreclosures are on the rise again
• Unemployment continues to reach record monthly numbers

WHAT TO EXPECT NEXT, the talk around the investing water coolers is the next shoe to drop is the realization that the Credit Card and Commercial Real Estate industries are hurting. In a nutshell, unemployment is bad for consumers who stop paying their credit card bills and a recession is bad for businesses that stop paying for the buildings they use. Both of these problems affect banks and real estate companies which have hundreds of billions of dollars at risk.

DOES THE STIMULUS WORK, surprisingly the answer might be yes. The stimulus plan appears to be working with estimates stating that roughly a billion dollars a day has been released in the first 80 days, I will let you do the math ($80B). And states representatives have indicated that they are putting the money to work quickly. For example, I was shocked by the potential numbers noted by the state of Texas, which says they estimate that 69,000 jobs will be saved or created through the implementation of stimulus money for transportation projects.

HOUSING, number from two key sources, the National Association of Realtors & RealtyTrac (foreclosure experts) are out.

• Home Prices fell 14% since this time last year (Largest decline ever)
• First-time homebuyers accounted for HALF of all new sales
• “Distressed” (foreclosures and short sales) accounted for HALF of all transactions
• Foreclosures filing up 32% from a year ago (RealtyTrac record)
• 1 in every 374 housing units received a foreclosure notice

Industry Predictions: Housing may not return to normal until 2010, until then BUYERS are running the show

Twist And Shout...

The reason why I call this post twist and shout is because I am definitely about to throw my readers for a twist. The twist goes a little something like this:

I have recommended since last September/October that we MOVE all of our positions into Cash, and Cash-like assets (Treasurys,etc). And I mentioned we would hold those positions until we hit a relevant level that may help form a bottom. At this point, with the new Treasury secretary (Tim Geithner) delivering his plan for the banks TOMORROW...AND the Senate finalizing the vote on the stimulus plan TODAY I am under the assumption, that any hint of news (as minimal as it might be), may cause the market to start rallying in anticipation of both announcements. I would increase your exposure to the market however incrementally. At this point no more that MAYBE 25% of your CASH position should be used to take advantage of this situation.

Now here is the TWIST, I am resigned to say that we are purely taking advantage of what will probably go down as a BEAR MARKET RALLY. This simply means that there are pockets, during an economic downturn where the markets need a breather and goes in the opposite direction. And that direction would be UP.

But this will be short-lived and the hard part to determine is how long this BEAR MARKET RALLY will last. I will go out on a limb and say it the market top 9000 to head for the hills as I believe that it will be trading in a range for a long time. I know I continue to deliver news that you may not want to hear but I believe that once we hit those levels the markets will continue to decline until critical things are addressed such as unemployment, foreclosure, and failing banks.